Monthly Archives

October 2015

Someone asked me about Social Security....

Someone asked me about Social Security….

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“If you could build a startup to replace social security, how would you do it? What do you think the biggest challenges would be?”

There are many problems with the social security system. The most obvious are:

  1. Funding: There’s not enough being put in to match what is coming out. This is a classic example of expenses being higher than revenues. It is partially a result of population and demographic issues. This will be somewhat alleviated by the Millennials, but continue to be exacerbated by the Baby Boomers. It is also partially due to the ineffective and wasteful administrative nature of government.
  2. Return: When I put money into social security I don’t get a rate of return on my money. This is because the government uses social security funds to spend on other things. Also, individuals (or organizations) are not able to invest their social security taxes. The government believes you are too dumb to invest your own money…at least that is what the policy leads me to believe.

So, on to my thoughts on “privatization”.

First, as much of a libertarian as I am, I don’t think it is practical to replace social security with a private enterprise (start-up). That said, I would privatize portions of it (on a fixed fee) and require bidding every five years to insure the money management and disbursements were handled in the most efficient manner possible.

Second, I would make a number of revenue and investment changes. Here they are (open for discussion and critique):

  1. Reduce payroll taxes to 10% total (5% employee and 5% employer). Payroll taxes are currently the most regressive tax in America (other than “sin” taxes), and these taxes are causing an increasing wealth gap and really hurting the lower-middle class. *This helps a number of social issues and will improve the overall economy (see the payroll tax holiday from the previous recession).
  2. Extend the payroll tax and cap the Medicare tax at $1 million of payroll rather than the current limit of $117,000. *This fixes the revenue issue.
  3. Require social security funds and Medicare funds to be set aside and separately managed by independent money management firms and administrators. *This cuts administrative costs (reducing overall expenses) and increases the overall rate of return (boosting revenue.) We should require those firms to manage these funds with 75% short-term bond funds and all other funds in highly liquid index funds with a maximum fee of .35% per year for money management and a max fee of $1.50 per participant for administration. *By the way these companies have the best automated reporting around and this bidding would be incredibly competitive.
  4. Require the government to immediately seed the fund with the amounts needed to fulfill the next 10 years (assuming a 3% rate of return).

That’s it.

Clearly, there are a lot of numbers in this that would have to be run and I am sure my percentages would have to be closely analyzed to insure stability in the system. I am completely flexible around the numbers and percentages as long as the theory remains intact; grow revenues and lower expenses by outsourcing, grow the economy and the base by lowering payroll taxes and simplifying government administration.

What do you guys think?


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The Business Success Pause

The Business Success Pause

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I had a terrible day yesterday.  I have 22 different business activities that I am tracking, and it felt like all of them were doomed.  The pain of anxiety was like a wet towel on a cold morning. With my mind racing, I found it impossible to shake it and get to sleep.

I was in a different time zone, and I couldn’t do anything about these problems until tomorrow.  I had a million answers running through my head.  I had run through the problems, come up with a variety of answers, and none of the thoughts could calm my fear and nervousness.

“Sleep is important.”  I kept telling myself, “I have to speak in the morning for 3 hours.”  Yet, I couldn’t push out my worst fear.  I am failing.  I was panicking, and the latent feelings of impotency had set in like a tick.

Lately, I have been listening on Audible to a fascinating book by Tara Brach, PhD, called, “Radical Acceptance.”  In the book, Dr. Brach describes a Buddhist practice of the “pause.”  I am definitely not going to do it justice, but, in my ordinary mind, it meant when everything around you feels like it is going crazy…don’t go crazy…pause and figure out how you feel, why you feel that way, and then what you should do will come to you.

Now, I’m no Buddhist monk, and I don’t know how to find the answer within myself (although that would be cool).  However, reading this did help me calm down.  I stopped for a few minutes, laid on my back, and closed my eyes.  I felt better after about 10 minutes of doing nothing and trying not to think about the problems.

Then, I got back to work, answered emails and calls for another three hours.  Then, I fell asleep, woke up early, and went back to work.

I put all my current energy and focus into my speaking engagement, and it went well.  I felt a little better.  I got on the phone for the following 6 hours, and I put all my energy and focus fighting the fires that I knew about and attacking new fires that had arisen.  I worked hard, and I did my best.

At the end of the day, I felt better.  In fact, I felt good enough to call it a win.  Most of the things I was worried about either were not as bad as I thought or got better through hard work.

What I Learned:

  • The “pause” helped. I don’t know why, but it worked.
  • Accepting the problems and understanding my fears made me less afraid.
  • For some reason, when I work hard on things, they work out…not always, but most of the time.
  • I am beginning to accept that I am going to fail, and it does not mean that I am a failure. In the immortal words of Dory from Finding Nemo, “Just keep swimming…”


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Working With Auditors

Working With Auditors

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Ok.  I just had a terribly frustrating call with auditors.  On the phone today, it was obvious that these particular auditors have as much personality as processed, American cheese and the same business empathy as a government tax collector.  *Disclaimer – not all auditors have no personality, drive, or compassion.

The Problem:  I am trying to get a CPA Compilation done on a construction company’s most recent financials.  We need this compilation for a $20 million revenue construction company that is in need of a performance bond.  We had a previous bond, but a month ago, we were unexpectedly dropped by our old bonding company that was exiting the marketplace.  Now we need to establish a relationship with the new bonding company so that they can trust us and provide us with a performance bond.  The performance bond is needed to win new construction projects.  Very directly, we cannot take on any new construction projects without this compilation completed.  We have two pending bids that we won but cannot take on without the bond.  We need this bond immediately.

We had an initial call with the Audit Partner performing the compilation to review what information he needed, what was missing from the current financials, what information was missing from the current financials but immaterial, and what I had to do to get him information he needed to complete the compilation on an urgent timeline.  He agreed that if we could get him all of the items on a 26 item list provided by the next day, we could get all of this done within the aggressive one-week time frame needed.  We completed 24 of 26 items in the first day, and completed the last two in the following 12 hours.  I thought we were done.

But, we are now 10 days in, and we just got an updated list of 12 “new” items from the two junior auditors who were assigned to this project.  6 of these new items had already been provided but misplaced by the auditors.  2 of these items were discussed and determined to be non-essential in the initial call.  4 of these items are brand new.  So, I immediately called a meeting to discuss why the compilation was not done and figure out where these new items were coming from.

This call did not go well.  These two junior auditors would provide no insights on how we could quickly resolve the issues.  Their answers sounded like chewing on cardboard.  The conversation went like this:

“Well, we need the detail on this $6,000 item.” They said.

“Is it material in a $20 million company?”  I asked….no answer.

“We also need these new items.”  They said.

“We sent those to you last week.”  I said.  “Oh.”  They replied.

“What about this big item here?”  They asked.

“(Audit partner) told me last week, that you did not need that information to get the compilation done.”  I retorted.

“Oh, I don’t think he would say that.  I can’t believe we wouldn’t need it.”  They stated.

“Well, we are very close to your number, and you can see it by matching the bank statements with the initial balance, but to reconcile those accounts the way you want is going to take at least 4 days of work.  Which, if you had told us was required last week, could have been done, but now, if it is truly required is going to cause us to lose a new construction job.  Which is the revenue we need to be able to pay you.  We need this compilation done yesterday.  You guys don’t seem to understand the urgency, and worse, you are clearly not communicating with (audit partner).”  I complained loudly.

“Oh, well, we will have to talk with (audit partner).  Do you want to talk about the other 4 items?”

I was personally offended by their lack of urgency, empathy, or caring.  Auditors and internal accounting staff should all be on the same team, but we are clearly in an adversarial relationship.

So, I have a call into the audit partner (it went straight to voicemail), and I am going to have to push him hard to get this done.  I am sure we will get it done (with extra cost and stress), but I wish I had done things a bit differently.

Here is what I have learned:

  1. Never hire an auditor on an hourly basis. They will quote you a fixed fee.  Hire them on a fixed fee.  That fixed fee provides them with a bit of additional motivation to get the project done efficiently, accurately, and on time (or better…early).
  2. In an intense situation, work only with the individual who can make decisions. In an urgent audit, make sure the audit partner is on every call so that you can quickly make decisions and avoid the “he said…she said” that simply wastes time and resources.
  3. Define the scope with the audit partner early and, if passed off to more junior staff, reiterate the scope with them prior to moving forward. Organize the communication so that the entire team is on the same page before committing to doing work.
  4. I was in a hurry, and we went with the audit firm that had done the previous audit (thinking we would save time). I did not actively bid out the work.  Note to self:  When you need to move fast…first move slow.

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