Agents of Change

This is the outline of a recent presentation to a small business group.


1. We live in an exciting time
of discovery and advancement in our relationship with money,
The advancements over our lifetimes are amazing.

At the time I began studying finance in the early 80s, it was generally believed that fundamental analysis was the way to build fortunes. Facts and data. Cash flow analysis. By the time I finished studying taxation in law school in the 90s, it was widely known that financial structuring and program trading were far more powerful.

An example: Today less than 10% of trading is done by money managers. Over 90% is automated by computers.

SLIDE 2
I left Wall Street’s most powerful investment banking firm 36 years ago this month.

I was turned off by making rich people richer. Making money was ridiculously easy in the ‘go-go 80s’ in the Wolf of Wall Street era, but meaningless. You can say that is the most stupid career move, and many have said that.

I was idealistically convinced that small businesses, families, and communities were the core strength of our world and our economy.

So at a young I established an SEC Registered Investment Advisory firm and published an early stage financial planning letter called “The State Street Journal”. This morphed into an early dot com success and I was able to sell my small company and publications to a publicly traded company.

About the same time I had the wonderful experience of coaching a team that made a mark in sports as one of the NCAA’s dramatic success stories. We set a number of national records; I have no idea if they stand today. What I learned is that individual talent and drive build champions , but that embracing data and statistics within systems builds championship organizations.

What did I (we) learn?

- The investment markets are not about fundamentals. The "widget" economic model we learned is obsolete. The work "widget" has an entirely different meaning today than it did in a 1980s economics book. It's about something else most us cannot even describe.
- Following core values do not translate to financial success. There was not then, and there is not now, a proven model to provide high quality financial advice to middle market Americans.
- Much of our financial success, or lack of it, is not related to our personal actions, but larger economic trends.
- Data is more valuable than personal conviction.

THAT’S NOT WHAT YOU WANTED TO HEAR.

Of course, I don’t mean to exclude the importance of personal actions.

I built a career focused on drawing out these distinctions by addressing our
2. limiting beliefs and self-destructive behaviors.

One example is the general concept of ‘Stress’ itself.
For our whole lives we’ve been told what? “Stress __”. Stress kills. Stress is the silent killer.
Well recent research shows that’s only true if you believe that stress kills.
It turns out that if you believe that you can handle stress, that you perform well under stress, and that stress brings out the best in you and those around you, that isn’t true.

Stress can be good: Here on the bayshore many remember Superstorm Sandy.
It wiped us out financially. I suffered mid six figure losses.
But it pulled the community together. Some of that story was pulled into the recent book “The Drowning of Money Island”.

Pop culture: For much of the recent decades, financial advice focused on positive thinking.
Some of that helps, but much of it is not helpful. Some actually hurts.
What is the #1 strongest data corollary with individual financial success?

CPAs are required to maintain an attitude of professional skepticism.
That sometimes causes us to be cast as ‘buzzkills’ of the business field.
Some would say that professional skepticism is a limiting belief.

I calculated a couple of years ago that if the only thing I did in my work was to prevent my clients from entering into deals that I recognized as losers from the start – simply by exercising professional skepticism – and then we split the resulting savings with them, my firm’s income would triple.

Side note: CPA profession is in trouble. 1 in 7 left the field over the past few years. Average age of firm owners is past planned retirement. Young people are not coming into the industry. I speak at Rowan campus and at a South Jersey high school on behalf of the NJCPA’s outreach efforts.

My main focus for 2023 is addressing misinformation that hurts my clients. I see that as my #1 role. That is shocking when you consider it. A few years ago nobody would have thought that it was the CPA’s role to be the filter of misinformation.

Patricia asked me to cover
top tax mistakes,

- Irrational beliefs: there are very rational ways to solve every tax problem, make sure it doesn't happen again, and gain back by turning the tables and using those same tax laws in your favor. 

- Trust fund and sales tax - Most tax problems won't ruin your life. This is the exception.

- Tax problems don't get better as they age. 

- Belief that refund or tax paid is tied to skill of tax pro 
    ○ We don’t have the time to go into why, but the concept
    ○ Instead, know your goals
    ○ Be clear on your risk tolerance

questions to ask your accountant?

- What’s the agreement? Tax prep vs adviser. -   

- What if we disagree?

- What if you are wrong?

Bibliography

The stockmarket is now run by computers, algorithms and passive managers | The Economist

Anonymous review of “Think and Grow Rich”:
Let’s be honest to ourselves and face the truth: success in business depends on a complex equation with a lot of variants, such as 1) how well your business idea adapts to the powers of supply and demand, which govern (and oppress) contemporary society, 2) where you come from economically to begin with (I’ve seen aromatherapy businesses run by middle-class sons of bitches grow and be more “successful” than neighborhood food establishments run by poor honest people), 3) how much investing capital you have at the time of creating your business, 4) your race, and 5) sheer dumb luck. Quotes like “The starting point of all achievement is DESIRE. Keep this constantly in mind. Weak desire brings weak results, just as a small fire makes a small amount of heat” are ludicrous, absolutely ridiculous and delve into the worst kind of new-agey, self-help bullshitting bullying: victim-blaming. So, if your business is not successful, you are to blame, because you simply failed to desire it enough? Fuck that shit. This book is a perfect example of everything that is wrong in today’s first-world-white-heterosexual-male-dominated economic culture. Tell me that such ideas as “desiring it enough” would work in Somalia, hell, even in Egypt, and then we’ll talk. Don’t waste your time with this codswallop. Read real literature instead: you’ll definitely increase your IQ this way.

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