All good

Having just returned from a lovely holiday in St. Lucia, it was time to get down to business: catching up on Better Call Saul. The spin-off and prequel to the series Breaking Bad explores the story of Saul Goodman—from layabout to underworld lawyer.

“Hey man, I didn’t catch your name,” says his new buddy as they stumble out of a bar.

“‘saul good, man.” (Laughter)

They walk down a dark, creepy alley. There’s a wallet on the ground. The mark picks it up. It’s fat with C-notes. Nearby, there’s a man’s body laying among the trash cans. Saul relieves the man of his gold “Rolex”. His pal takes exception to the division of spoils. He gives Saul the stolen cash and tops it with his own in exchange for the timepiece and takes off. Saul and his accomplice split the cash. A garden variety scam. Small beer.

(Where am I going with this…?)

Right. So, I’m also catching up on my financial newspapers. And it comes as a shock to learn that, according to a recent article in The Globe and Mail, the average Canadian needs to save around $4.5 million in order to generate the median income of approximately $74,000 in retirement. The investment portfolio would be split 50-50, stocks and fixed income.

Well, you can imagine the uproar! But before everyone twists her knickers in knots, let’s all take a deep breath. Unless you’re Gwyneth Paltrow and need a solid-gold juicer for power cleanses and a steady supply of snake venom to keep those frownies at bay, most of us will do fine with a lot less. (Also, let’s remember there are company and government pensions.)

I believe what the writer was getting across was, in this low-yield environment, if you want to hum along like the late Dowager Duchess of Devonshire tending to your prize chickens and begonias and not to market gyrations, then, yeah, you need a lot of scratch to sleep tight.

However who says we can’t tap the capital during our lifetimes? Listen, I’m sure there are some very fine people who plan to leave substantial estates to dear family and charities. I doff my hat to them. But there’s no shame in spending your hard-earned, or easily-earned, or not-in-the-least-bit earned money while you still can.

Real-time spending could take many forms: personal spending for amusement and delight, heartfelt bequests, garden-variety charity etc. The point is many people think ‘small beer’ even when they don’t have to. They shortchange themselves of a wealth of pleasurable experiences that will never come again. Is it because they really prefer to live modestly, or in some fantasy realm of “One day I’ll…”; or is it that they mistakenly conflate frugality with moral virtue?

It ain’t that hard to live well. The key is to know how much money you’ve got and where it goes. Then do a rough estimate of your expected lifespan, throw in another 10 years for insurance. Invest conservatively. Don’t be a Nervous Nelly and constantly tweak and second-guess your investments.

Going back to the newspaper article, if you had $4.5 million at 65 and expected to live another 30 years, and if you could get a modest 5% return annually, you could spend approximately $292,731 every year. Lose the beer, order the burgundy.

‘saul good.

 

 

 

 

 

A Matter of Luck

Many years ago, on a blustery December morning, I headed downtown to return some rented videos, (I told you it was long, long time ago!), but got waylaid by a shoe sale. I popped in just long enough to have my knapsack stolen.

As I went to find the mall police to report the theft, I made a mental list of what was missing, in order of importance: Chanel lipstick and face powder, wallet, bus fare, apartment keys… videos! I told the policeman how it happened. “What was in your knapsack?” he asked. “Well, my wallet, keys, bus fare, cosmetics…and some videos.”

His ears perked up. “What kind of videos?” he asked. “Beverly Hillbillies Christmas Special and Petticoat Junction Holiday Special,” I replied. At which point you could tell that he wondered, how amazing it was that I had made it even this far in life. I explained that the videos were rentals and that I was on my way to return them. He took my phone number and said he would call if anything turned up.

At the video store I shared my tale of woe. “Which videos were they?” asked the young man. “We don’t get a lot of requests for those. Just let us know if they turn up.” (Guess what, about 2 years later they did turn up, along with my purple knapsack and wallet. By then the video store had gone out of business and was now Lululemon.)

Well, imagine my surprise when, after all these years, Jed Clampett’s name, patriarch of the Beverly Hillbillies clan, turns up.

CEOs are unlikely to admit their successes are due to luck. But that is exactly what Harold G. Hamm, CEO of Continental Resources, has done. He’s using the ‘Jed Clampett’ divorce defense to argue that only 10-percent of his enormous wealth ($18B) is due to his skill and effort.

Hamm and his wife are in the midst of a divorce battle and he hopes to use the Clampett defense to shield his wealth by saying that the majority of it was due to passive appreciation, e.g. high oil prices beyond his control, and should not be part of divisible assets. This, of course, runs contrary to the idea that CEOs deserve the outsize salaries, options, expense accounts, and other sundries they receive in exchange for services rendered.

Like many people, I, too, believed that those with mighty titles were not like the rest of us toiling in the shadows. However, since moving up the corporate ladder myself and having numerous opportunities to watch these folks up-close-and-personal-like, I’ve come to realize that, while some of them are exceptionally talented, most are average of skill, above-average of luck.

Confirmation bias is the trick of mind that leads us astray. We look for information that confirms what we already believe. So, for example, if we believe that a CEO has above-average skills, we look for signs to confirm it. Excessive pay and benefits are one way we confirm this belief.

I worked in a high-tech company during the big software boom. After a hugely successful IPO the founders became instant multi-millionaires. During a general staff meeting I glanced over at one of the co-founders who also happened to be a senior vice-president of something. She sat on the floor with an unfocused gaze absent-mindedly picking at her bare feet. I figured she must be some kind of genius—her eccentric behavior together with her big job title and wealth assured me of it.

Years later, after the mea culpa cheques had been sent off to the SEC, the now-disgraced founders went their separate ways. The smart ones, including the toe-picking VP, realized that luck, in the form of the software boom, had graced them and that it might only strike once— like the oil that gushed out of Jed Clampett’s yard. Instead of attempting another home-run, she moved to Chianti, Italy and parlayed her creativity and effort into baking and cooking and running a highly-praised hotel, an investment that appears to have paid off handsomely.