How’s Business? How is your Search going?

The wine will be Cabernet by Muirwood, and the music will be “Stressed Out”, by Twenty One Pilots. The wine is what I am drinking tonight. It is in the decent category. The music is more suited for the 22-28 year old crowd but it has a message for everyone. We all wish life was easier.

These two questions are second nature to all people. They are conversation starters. In New York, it is just “How YU Dooooing?”. I know as I have been have been in both situations. In 2009-2012, It seemed I was always looking for a job and was asked “How is your search going?” a bunch of times.  I had been with the same company for 25 years before that so I was looking for a new home. Now, no one wants to be Debbie Downer. So we always give a positive spin on whatever is happening. I remember taking a few glimmers of hope from some recent introduction or some first interview and spinning it into a positive conversation. Now later on in a subsequent job I was given a personality test and one of my weaknesses is I don’t like making people feel uncomfortable. So maybe it is just me. But I just was meeting with and trying to help a CEO in transition and we were comparing blog topics. He totally agreed with me. He always puts on the positive spin. Now it is true you have to have a positive attitude and be ready to go through the up and downs of a job search. But it would be great to respond with “Thanks for asking, I have not found the right role. Do you know of any openings? Can you introduce me to any companies that would need someone like me with my skill set?”

I now own my own company.  So the question has now changed to “How is business?” ‘In my career as a CFO, I worked for 2 turnarounds. I always answered the question from employees of “How are we doing?” with “Fine”. I guess I am not a big believer in the open book philosophy. The guy packing boxes in the warehouse doesn’t need to know that you are scrambling to make payroll that week.

In my new situation, I find myself again giving people a positive spin. But behind the scenes a lot is happening. (I am no different than any other company.) Unless sales are booming, you got worries. My biggest customer was acquired by a larger entity. The people that we have had 15 year relationships with have no more power.  Am I worried, yes? Am I going to show it?No. So I talk about the latest introduction I got or some opportunity that has just opened up. Sound familiar? Now it would be great to respond with “Well, as you know I am trying to double this business so any introductions to IT Directors, commercial real estate people, construction companies and anyone else you think could help me?

To be honest, people are just being nice and I understand that. They are just trying to start a conversation. It is one of those questions you really don’t want an answer to. How are you doing? How are you feeling? Just understand for those in transition, the topic gets personal real quick.

I thought we would be better by now!

The wine will be Joel Gott Cabernet by Trinchero Family Estates, The music will be War by Edwin Star.

I don’t know exactly when this happened but somewhere in my high school years or early college I remember having the thought that man should be continuing to evolve and one day we all would be civilized. It must have come when you had learned enough history to be dangerous and were trying to relate it to your world. We started out as crude hunter gatherers then became clan and tribal groups.  If you think about it, most of history is just a constant list of wars or warring tribes. Most wars have been fought over land, resources and control. Religion has and continues to play a huge part in a great deal of the wars. The Greek Wars, the Roman Empire, Napoleonic Wars, The Boor wars in Africa, the 100 year war in Europe and the Indian wars here in the US. It just goes on, WWI, WWII, Korean, Vietnam and the Gulf Wars. Each one comes with it the tales of horrific atrocities committed on civilians, POWs and the soldiers.  As you studied history you learned about the Crusades, the Spanish Inquisition, the Holocaust and the killing fields of Cambodia.

Somewhere in all that, I started getting philosophical. I remember thinking it can’t get worse.  I have always been a fan of science fiction and I remember thinking man is an animal but over time these animalistic traits will diminish as we get more intelligent. Well, we are now 36 years later (which I now know is a microsecond of time in the scheme of things) and my thought was “I thought we would be better by now”. My philosophy has been to try to leave the earth a better place than it was when you came into this world. Folks, we are as messed up or worse. Look at the drug cartels in Mexico. They were/are torturing and beheading their own or enemies and putting the heads on display to control their people. Al Qaeda and ISIS are using beheadings, honor killings and stoning people to death to do the same. The suicide bomber is indiscriminate in killing men, women and children. They are using the internet to broadcast these killings to us to spread their terror.  I am not including the random acts of violence perpetrated everyday or the senseless mass shootings we seem to have become accustomed to here in the US.

So the conclusion is man is still bad. But look what has transpired in this same period. Man has also invented a multitude of things that have dramatically changed our lives. We have essentially eliminated Polio and Small Pox. Our life expectancy has been extended 10-15 years in that time period. You can connect to and talk to anyone almost anywhere you want. The world of knowledge is at your fingertips (as long as you have a smart phone and WIFI). Music, movies, the arts and medical advancements all give me hope that man may be getting better. Small groups help and feed the homeless. Groups are bringing new technologies to remote places to give them filtered water and solar power. I still have hope for man but it may be a 1000 more years till we see some progress.

Certified

(Pronounced the way bonafide was in the movie “Brother where art Thou”)

(It has been awhile since I posted. Two reasons, 1) this topic just got stuck and 2) the last thing I want to do when I get home is get on a computer. I friend reached out recently and said hey it has been a year.)

The music will be Uptown Funk by Mark Ronson and the wine will be Etude Chardonnay. Although the movie  “Brother where art Thou” has nothing to do with my topic besides providing pronunciation,  if you have not seen it you have missed a truly great movie.

I am having a problem with the word and concept of certified. I am a CPA (Certified Public Accountant). Do we need certifications? Yes, but I think the world has gone crazy with them. Lawyers and doctors are licensed. Accountants get certified. I think what happened was other professions who were not certified and were doing work in other areas wanted the same level of appreciation. So we have Certified Financial Analysis, Certified Financial Planners, Certified Cost Technicians and the list goes on.

Now I don’t want to just pick on the accounting profession. The security world and every other industry got in on this as well. You have the PSP, the CISSP, the CPP and the ISPC to name a few. Google- “list of IT certifications” and you will find the list of certifications that the IT world and every IT vendor have created. To give credence to my claim that we have gone overboard, on that list are 4 titles under “Certified E-Commerce Consultants”.

Now how did this all happen? It is the grown up version of the 11 year old club. You know the one. Well a couple of 11 year old kids form a club which makes them cool. But they don’t let others in so they will feel bad about themselves.  Then they make up an initiation process they force others to go through.

Instead of clubs the adult version is trade associations. These entities take on a life of their own. Once they get created they need to establish rules on how you can enter. This forms committees and rules. Then they can add training programs which you have to pay for. Then they add levels and tests but the ultimate is they begin to require their industry to require the certifications. Plus they go to their customers and say my employees are certified and you should require that. So now everyone in that industry sends their people to get certified. Then they make more money by requiring CPE’s. (Continuing Professional Education)

Now why did I pick this song for this blog? Well, it is a great song. But I like the line “got kiss myself, I’m so pretty”. Bruno Mars is self certifying his looks but I get the feeling he does not need an outside group to confirm his looks.

Fraternities and Policemen

The liquor will be Jack Daniels and the music will be “Somethings Happening Here” by Bruce Springfield. I am veering from my normal pairing of wine to hard liquor in deference to the probable popularity of Jack to these two groups.

These two groups have a lot of negative press recently. Fraternities for racism; police for excessive force during arrests and continuing to shoot unarmed people with a high concentration of black Americans. The common thread here is a lack of leadership and the wrong people setting the rules.

Lets’ take fraternities. I am a member of a national fraternity with 240+ chapters. Each chapter is different and the individual chapter and fraternity system will go cycle up and down in popularity, quality and performance through the years. We had 75-100 members living on campus or in the chapter house at any one time in my four years. My particular chapter celebrated its 100th year anniversary when I was a junior in college. This translates into a strong alumni base and a strong house board. I realized after I graduated that although I am still a member of the fraternity, we give the reputation of the fraternity to the undergraduates of all the chapters. All it takes for the chapter or fraternity to go downhill is for someone or some group to bring shame down upon the group.

How does this happen? It is the unelected leader that causes the problem. It is that one person or small group that come up with the idea that they think is great but it is not. It is the older guy that thinks grabbing some pledges and having them do something that is not allowed to have them earn their way in. Then it gets continued by the group having it done to them because they had to go through it. It becomes the accepted behavior.

How does it happen? When you are 18, a senior in college walks on water. You want to fit in, you want to be part of the group. You are not going to speak up. There is a large amount of group think and peer pressure. I was lucky because the guys 2 years ahead of me had to put up with some stuff they did not want to have repeated. So they cut out a lot of crap that they endured.

Why does it go unnoticed? The national fraternities having leadership training for chapter officers, chapter advisers, alumni groups and regional officials to check in on the chapters. But those advisers can’t be there all the time. Now are the national fraternities catching it and addressing it. Yes, fraternities close several chapters each year based on this kind of behavior. Some very big name schools with strong alumni have lost chapters because the unelected leader(s) took over. The good news is a bad batch of students can cycle through in 2 years and the chapter can return to correct behavior. The bad news is each year you get a new batch of starry eyed freshmen that will need to be trained on what is acceptable and what is not.

Now let’s switch over to policemen. The behavior we are seeing is not in the training manuals. It does not say after the suspect is on the ground with his hands behind is head; to beat the shit out of him. It does not say shoot an unarmed man running away from you. The only reason we are seeing them is because of video recordings. It is the same unelected leader that is creating this atmosphere. These behaviors are being allowed to happen because at sometime they became the accepted practice and you were told as a young police officer to not report it. They even call it to “not cross the blue line”. I also think there is some unofficial training going on teaching what to say when certain events occur. IE”I felt my life was in danger”.

Now here is the other problem. Police don’t turnover in 4 years. They stay in positions for 10-30 years. Our police cannot become the judge and they jury. They are here to arrest people not administer punishment. How do you fix this? The union in NYC took on the Mayor because of comments he made. In Ferguson, the city administration was encouraging certain kind of behavior to collect money. The local prosecutor has to work with these people every day. Politicians need votes and police unions are strong.It is a systemic problem that will require independent oversight. I also think we will need to add criminal punishment for some of this activity. You need to stop the behavior, punish it and publicize that this behavior is not acceptable.

The answer to both problems here are strong leaders who will do the right thing. These can be hard to find.

The TimeShare

Maui Turtle

The wine will be Rock View winery’s Cabernet Reserve, Alexander Valley and the music will be Time in a Bottle by Jim Croce. I have been in 2 timeshares in my life. The first was over 27 years ago in Big Bear. We had just moved out here to California and for some reason we drove up the mountain from Redlands for the presentation. We went through the whole presentation with multiple no’s. It was like a ninja sword fight. For every objection or reason why you did not want to do this they had an answer. Now we just kept saying no. So finally when it was time for us to receive the free gift for attending they brought out the closer. It was Ranger Rick. I swear to you this guy came out in a national park looking ranger uniform. (It was up in the mountains.) This took another series of no’s until finally we were released. From the look on Ranger Rick’s face you would have thought we took away his first borne.

I have avoided every presentation of a time share since. I know they exploded in the 80’s and 90’s. Every hotel chain has got a time share offering. I know lots of people who have gone on cheap vacations and listened to the sales pitch to get the cheap vacation. We did not bite.

Now we roll forward 27 years and I was just in my second time share and I own it. How did it happen? Well, for those who follow my blog, I bought a company this summer. With it came a time share in Maui. Not the biggest asset they had but it was on the books. The original owner bought this unit in 1990 for $21,000. It is now worth $4800-6000. So the decision I made not to buy a timeshare 27 years ago was a good one. So do I like this time share? Well, it made me take a vacation to Maui! The time purchased is Dec.8-15 no matter when it falls. So this year was Monday to Monday. No one had used this week in 15 years. Why? They all had kids and this week is just before the holiday break. Well, my last child is in college and I want to start setting the tone that Mom and Dad have a life. (They did bark. Hey, they said what about us kids. I reminded them that I have no kids, they are all adults now! Bam!)

The unit itself is dated and in Kihei. Single bedroom but with a large living room and lanai. Yes, it is a garden view but who cares. I can walk to the open area near the pool to see the sunset. It is 3 blocks away from Wailea. For those in Southern California, Wailea is like Pelican Hill. Everything is beautiful and planned, no weeds allowed, nothing out of place. Wailea has condos selling for 6 million dollars. If Wailea is Pelican Hill, Kihei is Costa Mesa. You are close to the beach but you are obviously not in Newport.

It was great. Maui in December has perfect weather. We discovered some great beaches, played golf and ate a lot of fresh fish. There is a cove around the corner from Napili bay up past Kaanapali that must have 40 turtles nesting there. At the same time, 80 degrees, palm trees and Christmas decorations do not mix. They try but it is weird. Obviously Santa was created before people discovered tropical islands and the entire southern hemisphere.

But it is another world. The first question is who are these people? I met the guy from Phoenix who arrived November 5th. He has been doing that for 12 years. The retired couple from Switzerland who come to the islands for 7 weeks each year. The guy going back to Alaska after a month. The couples that own sequential weeks. This does not count the Canadians. They are everywhere.

So will I go back? And I am a timesharer? Of course I will. It is free. It gets you to Maui. So hopefully in 20 years someone will blog about how they met a guy who has been coming to his timeshare in Maui in December for 20 years.

So will I go back? And I am a timesharer? Of course I will. It is free. It gets you to Maui. So hopefully in 20 years someone will blog about how they met a guy who has been coming to his timeshare in Maui in December fo.

GET out of your Chair!

No, this is not a blog to make sure you exercise after binge eating on Thanksgiving. The wine will be a Cabernet named Wente from Livermore Valley. I did not know Livermore had a valley but the wine is very good. The music will be “9 to 5” by Dolly Parton.

My saga in getting a SBA loan to buy our business took 102 days after I was told it would be 45. I jumped on every request, paid expediting fees for business valuations and checked in with my banker weekly. Now this bank is one of the largest in the world and banked the company that I was buying AC&C from. I thought by them knowing the entity that things should go smoothly. The problem they said was the forms and requirements of the SBA. This was cited several times during the ordeal.

In the last stage of this process I had to get a life insurance policy listing the bank as assignee. And I also had to get a certificate of insurance from my home owner’s policy listing the bank as additional insured. I used USAA for the life insurance and they knew the form I was requesting. I went through the process of getting it filled out, notarized and sent to the bank. The bank said they can’t accept anyone else’s form. They did not tell me this upfront but only after I spent 2 weeks getting the policy in place. For my home owners I use AAA of California. I asked them for the certificate of insurance and they forwarded their form to this bank. Again the bank said this was not acceptable and needed special wording added.

So now I have spent 2-3 weeks getting these items in place but needed to go back and get special exceptions. Every week after the 45 day point I am trying to get the deal closed. But understand, I am now holding up a deal. The seller is getting frustrated with me. The employees are on pins and needles as this deal gets strung out. So any delay is killing me.

So I jump on the task and start calling USAA and AAA. They both have 800 numbers and each time you get a new person. At USAA, the department that handles this SBA assignment is not connected to the customer service center. Now everyone is very helpful but I am asking for an exception. My point here is I told a woman I needed someone to get out of their chair and move this along. I was polite and she took no offense. She told me that she was going to go talk to a supervisor. She did and we received the bank’s form back in one week after we were told legal would need 3 weeks to review it. (Later we were told by a person at USAA they had been doing this assignment for SBA loans for 5 years and she had never had this problem.)

AAA was a similar story. The standard form was not acceptable. The bank wanted a commercial form but we were dealing with a homeowner policy not a commercial policy. After working through the 800 number system I found a supervisor who actually took their form into word and added the wording this bank/SBA required.

The world needs people who will do the extra step, handle the request that doesn’t quite fit into the process and solve problems. Most people are 9-5ers. (tie into song) They do the job and go home.

I was saved by two people at USAA and AAA that took it upon themselves to get something done. My hat is off to these two companies as they have this kind of attitude in their culture. My banker is not one of these people.

Going All In!

 

I realize it has been a long while since my last blog. Work and life got very busy and the last thing I wanted to do was sit in front of a computer. The wine will be a 2011 Cabernet Sauvignon from DAGLIA Canyon. The music will be Kenny Rogers “The Gambler”. A little warning: This will be more documentarianish than sarcasm.

Well, I am buying a business. My last day of working for someone else was July 31st. The opportunity came up in May to buy the assets of a network cabling and network services business called “American Communications and Cabling” DBA AC&C. Since then I have been working through SBA financing, finding working capital and figuring how I am going to grow this business. The business has been around for 25 years and makes a very good bottom line. But it has not grown.

Why do I say All In? Because with a SBA loan you have everything tied up. They get the business, the house and even your life insurance tied up until the loan is paid off. So while others my age are starting to ease back and enjoy having the kids out of the house I am tying myself up for 10 years of debt. It is alright with me. I have always wanted to run my own show. My role has always been to help the owner or the CEO grow the business. With my recent job changes I realized it was going to be difficult for me to find a place I would be happy. You get spoiled with good bosses, partners and cultures. So now it will be me responsible for setting the tone.

So Why do it? Now you can say “Oh, he is just buying himself a job” which I might be. It hit me one day that as a CFO I would doing the exact same job if I left and went to another company. I would be worrying about inventory accuracy and cash flow with very little control of product direction or sales. I also looked around and see people older than me struggling to find finance and accounting jobs. So I want to control my destiny. This is not my first business I have looked at as I have reviewed over 20 companies in the past 5 years trying to find one to buy.

Why this One? Well, I helped buy it before. In 1999 when I was with NAVCO we bought AC&C. It was going to be a strategic move as the security world moved into the digital age. So I know the people, the product, the problems, etc. The owners of NAVCO are spinning it off so they can focus on security.

Am I the Right guy? Peter Lynch the investing guru once said “Buy a company an idiot can run because someday an idiot will be running it”. I am humble enough to know I might be that idiot. But I have helped companies grow. I know what a half body is in the middle of a state you need to be in because of your largest customer. I know sales cures all evils, you better watch your cash flow and you can’t cut expenses to grow. I like interacting with the customer. I am a collection of 30 years of working and life experience but I feel 35.

Is this the right Time? Well, after December I will be down to one kid in college. I was going to have to work to 70 anyway. At the same time, I could not have done this 5 years ago. I needed to work for the screaming, “passionate” aka angry, dishonest business owner. I needed to work for a dysfunctional run company with a hostile board. I needed to be unemployed so I was forced to go meet 500-1500 people.

So what is Next? Well, I am taking the same approach to job hunting I was taught to grow this company. Every day instead of “Who knows Jeff Kane” it is “Who knows AC&C Network Services?” and for “Who knows I am looking for a job?” is it “Who knows AC&C Network Services is looking for work or for an introduction?”

So what is my 90 second elevator speech? “AC&C Network Services has three main product lines. 1) Being the outsourced IT MAC (moves, adds and changes) department for large multi-site national customers. 2) Pulling cable for California based businesses that are moving or realigning their networks. 3) Providing IP phone systems and network consulting.”

Our tag line: “We Keep Your Lights Blinking”

How can You help? Well we need introductions to people that are connected with companies that are moving or upgrading their computer network or phone system. These would include:

CIOs
CFOs
Director of IT
Facilities managers
Commercial real estate brokers
Interior designers
Architecture firms
Construction Companies
Audio visual or Security companies in need of sub contractors

Thank you.

The problem with Healthcare!

The music will be “Coconut”, by Harry Nilsson. The wine will be the Abbey Ville Chardonnay. I apologize ahead of time for this blog. I could  not find anything fun or sarcastic to say about this topic.

There has been a great deal of talk about the Affordable Care Act otherwise known as Obama Care. Whether you agree with it or not the problems with our healthcare system are not all caused by this legislation. My contention is the problem with our healthcare system is twofold. 1) The user cannot shop for the best price. 2) The average user has no idea how much the system costs.

Let’s talk about the first point. The HMO provides a list of doctors for you to pick from. You go once or twice a year to the doctor. (More if you have kids.) If you are lucky, you know the doctor and have been able to stay with the doctor despite job changes or health care offering changes by your company. If you do have a problem, your doctor starts ordering tests and making referrals. You might think about the proverbial second option but you don’t. You don’t have time. It costs money. You have no idea whether the test the doctor has ordered is necessary or overkill. At the same time you don’t care. You want to be better. And what does it cost you? $20 co-pay per visit? Maybe $40 for a specialist. Now if you are hospitalized, the expenses start piling up real quickly. Do you ask questions? Do you have any idea what you are being charged? No, you get a copy of the bill and you see an insurance adjustment and a net amount due from you. You focus on the net amount to you. The adjustment that the insurance company has negotiated is huge. It appears to have no logic. I pity the people that have not had insurance and try to negotiate with hospitals. From what negotiating spot do you start from? Who is controlling these costs? It is the claims department at the insurance company. They determine what is covered and what rate they will reimburse the service provider. Not the consumer.

Point number two. Unless you are the CFO, CEO or the HR director of your company you really don’t know what is going on with your company’s health costs. Yes, you go to the annual enrollment meeting and they talk about claims rising and the need to be healthy. Then they give you the list of your payroll deductions based on your choices of coverage. The amounts go up but you really don’t why. Did the rates go up or did the company change the percentage they are willing to pay? They seem like they always go up. You go home and discuss it with your spouse and you pick the one that you can afford. After two months you forget about the payroll deduction for health insurance.
Now behind the scenes you have a variety of forces at work. The company can only have one broker shopping your deal in the marketplace. There are a very small number of health insurance providers out there competing for your business. If you have multiple brokers’ shopping your deal, the insurance companies will start giving the same price to everyone. Your company’s employees are part of some insurance pool where all these premiums and claims are being averaged. The larger the pool the better. But your effect on that pool will affect your company’s premiums. Ask AOL how did that announcement go? (I thought we had something called HIPAA that forbid such comments.) We want to provide insurance for everyone but what you don’t realize is the problems in the next cubicle become everyone’s. Younger workers have babies, older workers have more issues. Smokers get cancer. And people have heart attacks. The concept is spread the risk and cover the claims with a larger pool of premiums.

The problem is the person incurring the cost is not the person paying the bill. The other employees, the company and the insurance carrier are paying the bill. I was at black jack table a couple of years ago and a young man joined us and asked if we minded if he smoked. I said something to the effect of “No, but I have a problem paying for your future medical coverage.” I don’t have a cure. The best answer I heard was large deductible plans which put the consumer at the front line of dealing with the costs. But how do we all become an educated medical consumer? My kid breaks an arm; do I shop the cost and get competitive bids from three orthopedic surgeons and hospitals? Do you go on Yelp or Angie’s list to see who is the best heart surgeon in the area?

For those younger than 43, the song is a one hit wonder that came out in 1971. It had a catchy line that is apropos to the topic. You called the doctor and the doctor said…

“Put the lime in the coconut and call me in the morning”.

What do you think is the cure?

A Fork in the Road

I just realized it has been over two months since my last blog. Life has been busy. The ideas are still out there, but the problem is making the time. Music for this will be from the ever popular Australian group the “Hoodoo Gurus” and their song “1000 Miles Away”. I will stick with an Australian theme with the wine. Today’s choice is “Shoofly Chardonnay 2008”.

Now don’t ask how I found the song. I used Google and just came across it. It is not in my ITunes. I will make the tie in later.

A fork in the road. I believe life is one set of a fork in the road after another. It can be the person you dated, the college you choose or the job you took. Sometimes you know you are at one and sometimes you do not. Some you can back track and fix a decision and others you cannot. Even better, sometimes you can jump over to another one and not waste any time but these are rare.

I am at a weird time. I have kids in college, out of college and heading to college. All of them I am trying to give advice on what college, what major and what career. Now I don’t push too hard as I believe they should chase their dreams. We all know we may not actually use our major in the career we choose. For a college graduate, I actually envision their starting point to be one of those huge warehouses with a 100 truck bays or Hong Kong international airport with 747’s headed in every direction. They can go in many directions, fall down and get back up.

But for me, I feel I am at a fork. I was on a super highway until 2009. I knew where the road went, which exit I was going to use and where I was going to end up. That all changed and the paths I have recently taken have not turned out to be the best. Again they were either taken out of necessity or seemed to be the right one at the time. I feel I have been labeled by my career and experience. It hit me at a concert of the Pink Martini that was performing with the Orange County philharmonic orchestra. These people really enjoy what they do. I am not happy in my current role, so I asked myself, what do I really enjoy doing? The answer is travel and golf. Since a PGA career is out of the question, the next best thing would be to put together a travel company focused on planning golf outings around the world. But then reality hits. I got bills, tuition and a retirement to fund. Does my wife really want me away that much? Would I enjoy catering to a bunch of type A executives?

Can I afford to chase my dream? Can I be that selfish? Am I alone at this fork? I don’t think so. I think there is a crowd of people that are in this same spot and don’t know what to do. Why do you think there has been a boom in the career coaching field? People are making money by telling people to chase their dream. It is the how that is hard.

So I don’t have an answer, if you have any advice, toss it back. As for the tie in to the music; here are a couple lines from this song:

“It can be as lonely at the top as at the bottom of that corporate tree”

“Promised to myself someday I’d take the time and try to make sense
Out of all those opportunities I’ve lost from trying to sit on the fence”

The Lottery Ticket

The wine will be a Screaming Eagle Cabernet, Napa Valley and the music will be “Life’s been Good” by the Eagles.

It is Sunday and I have a California lottery ticket worth 33 million. Since I have not looked it up to see if anyone won it, it could be worth 33 million. So the dream is still alive. That is what I realized when I bought the ticket worth 31 million on Monday and it rolled to 33 million on Wednesday. This little piece of paper is hope. We all buy them. Some of us buy them more often than others. I tend to wait till the California lottery gets over 20 million and I have started to skip the Mega multi state lotteries. I don’t need to win 143 million dollars. I would be happy with 33 million.

Now you need understand, I am an accountant and a numbers guy. So when it is 4am and I wake up worrying about job security, college tuition and retirement savings, I will run through the numbers on a lottery win. First thing to know is you want to take the cash value and not take it over 20 years. So you will net around 55% of the 33 million. So you are down to $ 18,150,000. Now you don’t have to pay state taxes but  you will max out on federal taxes and pay the top rate of 39% but since it is 4am let’s call it 40% for the math. The net you will get is ($18,150,000 X .60) is $ 10,890,000. (Now you just paid 8 million in taxes so there has to be a way to set up a charity foundation with a portion of that 8 million, cut your tax bill and do some good with that money. I have not worked that out yet. )

Now the next phase of dreaming is what to pay off, how much to live on, how to invest.  At this level, you are debt free. Take the $890,000 pay off the house, all kid’s student loans, buy new cars, quit your job and go to Hawaii to think about the rest of the questions.

But here is where the dreaming gets cloudy. You have 10 million in the bank. How do you invest it? What is the goal? Can you average 8-10% return? Can you make more? Who do you trust with this kind of money? If you lived on 3%, that would be $25,000 a month. Remember you have no mortgage. What do you do with $25,000 a month? Travel, with whom? All your friends are employed. How much can you travel? Do you move? Do you buy a big house in an expensive neighborhood? Do you tell your friends? Who do you help? Who do you not help? How do you have all this money but teach your kids and their kids a work ethic and morals? What do you do for the next 30 years to keep your brain fresh when you do not have to work? Yes, I have spent way too much time thinking about this at 4am.

We don’t have the answers to these questions since we don’t have that kind of money. Though it would be nice to be given a chance to see how you would answer these questions. Here is my approach as it stands right now. I set up a trust and have the lottery ticket get cashed into that.  I don’t tell anyone we won. I move to a state tax free state like Florida, Nevada or Texas and set up a base. My story line the rest of my life to my neighbors or when I travel is I was an early investor in (pick a high tech company that Google bought recently).  We live well but manage the money to grow it and set it up to minimize estate taxes in the transfer to the next generation. If we can set up a foundation, I have my kids run the foundation to teach them about how to give money for the right cause.

What would you do?

By the way, Screaming Eagle Cabernet is the highest ranked American wine on the top 50 most expensive wines. It is averaging over $2,000 a bottle.