Category Archives: Random thoughts – keeping you on your toes

Random thoughts – keeping you on your toes

Breaking Down Taxes

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Taxes are what we pay to our governing body to cover the cost of the provision of common services, common that is to everyone one who comes under the control of that governing body to some extent (in some cases that includes visitors who don’t necessarily pay taxes for services they receive when visiting) .

To make that less general, say you live in a city and there is an elected group (the city counsel) that oversees the cities operation.  That is the governing body.  You pay them to provide and manage the common services for the people living in the city (everyone under the control of that city council).    In this case common services are things like police, recreation centers, parks, etc.

In reality most people are aligned with a number of governing bodies (e.g., cities, provinces, countries)and pay taxes to each in a number of ways and receive different services from each (in some cases overlapping services).

Are Taxes Fair?

If everyone received the same level of service and paid the same amount taxes you could argue this was fair.

However, you could also argue individuals with more resources (i.e., money) should pay more and support the services they use as well as some of the services those with less money use.  This kind of pay what you can afford thinking has a number of supporters who argue it is fairer than equal distribution of cost and usage.

There probably are those who argue the “you should only get what you pay for” approach as being the fairest.  That is if the park cost $100 to build and there are 10 residents they all pay $10 taxes and get to use the park exclusively 10% of the time.   England briefly tried a variation on this approach with a poll or head tax – every man women and child paid the same basic tax.  (no surprise this did not work out well)

And reality strikes home!

Of course in the societies which we live it is not practical to match cost to service received and this is even more complicated by the multiple government jurisdictions we generally support.   So we practice the principle that those who earn more pay a higher percentage of the taxes (theoretically if you earn more you can afford to pay more).

Say you go to out to a restaurant for dinner with your parents.  If your parents pay the bill you get a free meal, odds are though they wanted to pay for you.  I will assume they can afford it and probably wanted to cover your meal cost to help as you have less resources than they do (not because of ability but rather probably due to age, experience and opportunity). They know if the situation was reversed you would pay.

I am not sure those that pay a higher percent of the tax bill giving others a “free meal” want to do it, but the concepts do have some parallels.

And the usual disclaimer and caution

Effective societies operate on the principles of collaboration and charity, not equality (one of the key reasons communism does not work .   The key consideration though is balance.  That is everyone is equal probably does not work but nor does overtaxing those with more resources.  The tax scenario works best if balanced for all parties.

A parting thought (and great book for you to read if you have not already done so)  in the book “Atlas Shrugged” author Ayn Rand creates a world where the differences before those that can and do and those that do not is exaggerated.  Basically balance does not exist those that cannot feed off of those that can.  Those that can succeed drop out of the society, no longer supporting the government (they had enough because the balance was off) and the result – I won’t give away the ending of the book but you can probably guess.

Random thoughts – keeping you on your toes

It’s All About Me!

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From childhood we are all indoctrinated into the cultural group-think of our local civilizations.  We are just part of a whole.  Life is bigger than just us.  Co-operation, collaboration, community behavior respecting others are a key part of all cultures and generally embedded into our upbringing.  This is pretty consistent regardless of what geographic location you grew up in.

I have also read a number of books and articles by behavior psychologists that this community behavior and focus on the value of social groupings is even stronger in females then males.

I wonder though, should it not really be “all about me”.    Respect for others needs is not excluded from this principle.  It does, however; focus on a basic reality of life, we are all individuals.   We all have ego’s and they should not only be respected by others but most importantly by ourselves.

What about me?

I was always partial to to this album track by Quicksilver Messenger Services, a sixties psychedelic rock band with strong ties to the drug culture of the time.   Take a listen.

The song is clearly reflective of North American (perhaps world wide) basic cultural changes that were occurring in the mid to late 1960’s.    The message focuses on the changes in the younger generations thinking and their desire to change culture as they seek to get out from under the thumb of “the man”.   Although the question is posed as “What about me?” the song could be interpreted as “All about me!”

Is that selfish, vain, proud, egotistical, self-centered,  self-serving, self- obsessed; the list goes on and on.  So many words with a negative connotation to describe what is generally very natural and needed behavior, in fact it is not only natural but truly beneficial.  That is to say self-worth is a key underpinning to how successful you are in the journey we call life.

Honestly, should you not most comfortable with your own self.

Clarification and Disclaimer

This post is not a demonstration that I am an uncharitable, opportunistic mercenary. (wow there really are a lot of ways to describe this behavior – none flattering either).

In fact respecting and practicing the basic self intuitive behaviors that support a thriving and effective social environment are not exclusive from being self aware and believing in (and promoting) your own greatness.

Remember being comfortable in ones own skin is far more feasible than being comfortable in the skin of someone else.

Random thoughts – keeping you on your toes

Aspire Against All Odds

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Today a colleague shared  a picture which he called “my special flower”.  Not his wife, daughter or grand child, no it was really his special flower.

 

my special flower

Special because it survived and thrived against all odds.  Arising from a crack in the paving stones of his home driveway the flower is both health and colorful.

And this growth was without nurturing or support , no water or fertilizer, my colleague just let his little flower make it on her own.

What does it take to succeed against all odds?

Despite any outside help this little flower succeeded because it aspired to.  That is, building on a theme from yesterday’s post, the flower practiced the belief that  “If I believe I can, than I can!”

The takeaway here is not the sense of pride my colleague feels for “his little flower” but rather the fact she did it without him.

We do not live and thrive in isolation, we do need support; however, I postulate one of the most important personal value we can practice (if not the most important) is personal accountability.  Regardless of the need for support of others (and most times you really do) the foundation where it all starts is the individual.  You need to believe in yourself, take responsibility for your actions and use this as the springboard for success – bring the other flowers along with you for the ride.

For the greatest success couple your personal accountability with the aspiration to set personal goals and then achieve them (it is you who makes greatness happen not others).

What am I aspiring for?

This is of course a very personal question.  That being said there is a basic methodology you can employ to answer it.

Begin with high level statement of personal purpose, that is a life philosophy.  For example (and I freely admit I borrowed mine from an ancient greek philosopher):

I will live my life to maximize personal pleasure as long as I don’t impede on the personal pleasure of others.

Using this simple statement as a foundation I craft my life around achieving things that make me feel good.  I don’t have or need a bucket list, day by day I live mine.

And so little flower, grow – live long and prosper.

 

 

Random thoughts – keeping you on your toes

Ideas, Innovation and Entrepreneurs

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What are the qualities of a good entrepreneur?   Is it the entrepreneur or the idea that leads to success?

Just to be sure we are thinking of the same definition, here’s a standard one  from dictionary.com:

“A person who organizes and manages any enterprise, especially a business, usually with considerable initiative and risk”

There are many well known and broadly communicated success stories of people who started a business with minimal resources and became huge successes. ( Apple, Microsoft, Blackberry, etc.)

What is not as widely publicized are the  details of the failures – that is to say what was tried and how it failed.  Of course from a big picture perspective  the failure rate for entrepreneurial start-ups is pegged around 90% ish (depending on whose study you read)  so the likelihood of succeeding is known to be low and readily available in public media.  However, the stories of what did people try and why did it not work are usually not the topic of books, articles, talk shows, etc.  (I guess general in our culture failure is not celebrated).

Stories about lack of success are the opposite of the success stories, however, both examples can help understand what kind of skills, values and approaches form the underpinning of successfully building a business.  It would also help put some perspective on how much of success was attributed to good ideas and how much to the entrepreneur themselves.

The athlete model

While I don’t have a bunch of data or reference points proving my own view, I still believe the majority of the success lies with the entrepreneur themselves.

Consider successful athletes at the top of their sports.   Those in the top ten are probably equally skilled and capable but the athlete that rises to the very top succeeds through motivation and drive.  They vision the win and then they win.  Of course this is not an absolute philosophy but I wager that on the whole it the most critical success factor – believe in yourself, don’t doubt, don’t question – just proceed.

My favorite summary of this attitude is the simple quote from the Yoda character in the Star Wars film series – “There is no try, just do or do not. ”

Is there a point to this post?

Today’s message is short, brief and pointed – trust in yourself, if you think you can, then you can!

Random thoughts – keeping you on your toes

Wrong Handed

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Studies show that about 10% of the worlds population is left handed and it is believed that this percentage is relatively constant right back to the stone age based on the study of cave paintings from that period – determining how many are painted by left handed cave men, estimating the population and extrapolating the percentage.

Examination of handedness through time is of course not an exact science with a lot of estimation involved including analysis of ancient artifacts so it is not possible to prove this statement through the ages but statistical science is relatively mature today and 10% is a fair number.

One of my daughters is left handed, as am I, and many years ago she wrote an amusing essay about her handicap – being left-handed.

She had a point.  Given the majority of the population typical uses their right hand predominantly, most simple tools are designed for that orientation –   things like scissors, computer mice, baseball gloves, guitars, even most doors.    Left handed persons are often at a disadvantage.

Studies have shown for example that lefties are more likely to have a fatal car accident in North America because while driving when alarmed by something (typically causing an adrenaline surge the tendency is to pull down on the steering wheel with your dominant hand.  If you are left handed this brings you into the oncoming traffic lane.  Bang, head on collision – more likely to be fatal.

That being said, scientists have also gathered evidence linking left-handedness and intellectual creativity.  Their studies show true left handed persons tend to be more intelligent and eloquent than right handed persons.  Unfortunately most of these studies were conducted by left handed scientists.

And to the point of this post!

I read a fabulous quote the other day that put handedness in perspective for me, and I share it here.  This probably says it all.

“If the left side of the brain controls the right side of your body, and the right side of your brain controls the left side of your body, then left-handed people must be the only ones in their right minds. ”   –  W.C. Fields.

Random thoughts – keeping you on your toes

Provincial Pension Plans – Really

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As some of you will be aware the government of the Province of Ontario is planning to introduce a mandatory pension plan for those that work at companies without a plan or are self employed.

Employees at companies with a pension plan that meet the provinces basic criteria (as to payout amounts on retirement) are exempt from the provincial plan.

The federal government does not support this move and won’t assist with administration of the plan through the current CRA tax collecting processes so Ontario will be up against extra costs to set up and administer their plan.

What does this mean?

Once Ontario’s plan is up and running the Canadian pension landscape will have the following possibilities for individual incomes post retirement (i.e., when you have no income from employment/self employment).  If you don’t stop working for an income these options do not necessarily apply.

Here are the possibilities (assuming other provinces have not followed suite).  (note disability incomes are not considered)

ALL CANADIANS (outside of Ontario)

1)OAS  –   everyone who has lived in Canada more than 10 years

2)CPP –  everyone who earned an income (employed or self employed)

3)Company Pension –  this is selective and will depend on whether you have worked for more than 2 years (vesting period) for a company with a pension plan.  These plans can be defined contribution or defined benefit and have various requirements for contribution during your employment ( from $0, employer contributes everything to a percentage of your income shared with an employer contribution – that could be linked to amount of your contribution or not)

ONTARIAN

Could have all of the above in addition to the following, however, if they do not have 3 above they will at least have the following:

4) OPP  –  you contribute, Ontario contributes if you are not employed in a Company with a pension (so if you switched jobs you could have this income and #3 above)  This applies to self employed as well.

What does this mean/ Do we care?

Quebec has long had very different tax laws around exemptions, contributions and other stuff so a province doing their own thing financially like this is not unique.   The real question is the cost to an Ontarian reasonable versus the benefit.  In other words is there value to this program.  I have read good arguments on both sides.

For me, I consider a retirement planning is a personal obligation and on the whole governments should stay out of it.  (This is probably classified as a conservative view on the political spectrum.)

Random thoughts – keeping you on your toes

“It’s On Sale”

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I experienced one of my pet peeves today, and made a bit of a pest of myself.

I was buying a roll of screening material to use as a replacement for a basement screen that had been shredded by a prairie gopher.   The gopher fell into the window well and could not escape the way it came (falling in) so tried to exit through the window.  The screen was easy work but unfortunately it met it’s match with the glass.   I had to dispose of the body and then of course fix the screen.

Back to my local Canadian Tire store where I was making this purchase I decided to also get another garden gnome.  I collect them and when presented with the opportunity, well you know how it goes. (What are garden’s for if not as homes for gnomes).

When I got to the checkout, the cashier was very friendly and commented how cute the gnome was and that it was too bad they never went on sale.

Pet Peeve time

“I brought it here to pay for it because I want to buy it .   I said.  “If it is not on sale why is it on the shelf”

She laughed ( I guess she did not yet realize how serious I was) ” Oh you can buy it, just not at the sale price”

“If I can buy it and it is on sale, it should be for the price marked on the shelf where I found it”

The cashier got that, oh not another one look and explained ” The sale price is a lower price than the one marked”

“So” said I ” if this product is being sold at a lower price some other time why do I have to pay a higher price now?

I could see the cashier was regretting getting into a conversation with me and wondering what to say when I gave her the easy out, just completing the transaction, thanking her and leaving.

The story has a funny end though, the cashier asked me if I was okay taking my Canadian Tire money electronically.  I said okay and she gave me the card and said I had to register at home on the internet – “You do know what the internet is?” she said.  And I thought bazzinga, she got me back.

Technically Speaking

Everything in the merchants store on display and marked with a price is on sale.  I always struggle when told an item which is in fact “on sale” is not on sale.  Just a pet peeve I guess.

I should note, no need for a rush of comments,  I do understand the commonly understood use of the term “on sale” in context.  Really though we should be more clear using terms like – reduced for quick sale,  price reduced, etc.  Or I guess I should just live with it.  I could tell the cashier at Canadian Tire was not impressed.

Random thoughts – keeping you on your toes

Why Money?

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The basic worth of things is determined by demand (desire to have it), supply (whether it is available) and resources (you have what is required to acquire the thing you want – basically a good or a service).

Believe it or not these 3 simple things are the fundamentals of economies around the world.   We would not be human though if we did not add massive complexity to this.

It all starts with Barter

In the barter world you can substitute goods or services in every category.    For example I desire wheat to make spaghetti (demand).  Wheat is available, lots of farmers have wheat warehoused and just waiting for me (supply).  The farmers don’t have tomatoes but I do (resources.)  Put these three things together and you have a barter transaction.  I give the farmer tomatoes from my home garden (keeping some back for my spaghetti sauce).  The farmer gives me wheat, transaction concluded and everyone gets what they want.  One question about this though is was it a fair trade?

Over time, civilized beings that we are, we substituted the resource part of the barter transaction from a good or service to money.

What is money worth?

Back to my post’s of the last two days,  money’s value is dependent on how much you have (how hard it is to get), how badly you want to use it (desire for a good or service) and how readily the good or service you want can be acquired (is it easy or hard to find).

Basically the value of money is in our heads, collectively, in economic groups, like say a county.  So unlike a real resource used in barter money is only worth what we think it’s worth.

Digression

What I mean by a real resource with real worth is for example; a tomatoes base real worth is that it sustains life.   Money does not do that, if you have money but can’t find tomatoes to buy you will still die, having money or not.

Some basic Economics

If our economic group (our country) decides to put money into the system that usually results in inflation (there are lots of ways to put money into the system – see my earlier post on the fractional reserve system for an example).    That is as more money is available (i.e., resources) we are willing to use that money to get more of what we want and as the ability to acquire more (increasing demand)  tends to limit supply, prices go up.   Also though more hunting/gathering occurs to increase supply to meet the demand.  Positive economic activity rises.

Now reverse this, the supply of money diminishes, less is used to acquire things (i.e., reduced demand) , so less things are produced, economic activity drops, this is often called a recessionary cycle.

This recessionary cycle results in less money overall in the economics group, lower demand, lower prices and this is called deflation.

Usual Disclaimer

These ideas I have been discussing over the last couple of days have been presented in a very simplified format.  My plan is to post on a number of financial concepts and over time build in (build up to) more complex concepts.  I believe simple explanations will help to build a solid framework for these concepts that can be built on.

Please do comment on these posts; questions, challenges are welcome and they will help guide future topics.

 

Random thoughts – keeping you on your toes

Supply and Demand

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Continuing to explore the theme I started yesterday,  about why we pay what we do for things, today we’ll explore the concept of supply and demand and how it affects what things are worth.

My example of a pub lunch that cost $4.00 in 1977 and $15.00 raised the question of why I would be willing to pay so much more some 38 years later, for basically the same thing.  Part of the answer is I could afford it easily.

Another part of the price equation is demand. For the pub owner the more people that want to buy the lunch the more likely he (or she) is to raise the price.  It’s pretty intuitive that demand is linked to price however it really is a complex relationship and demand is driven by far more than just price.

 

Lets Consider Desire (Demand) and Availability (Supply)

In fact if the purchaser has more  funds (e.g., through inflation) they can afford to pay more.  In this case it is possible desire for the product is driving the purchase decision as opposed to cost.  (Think, ” I want it”).   Additionally, as we know, affordability can be enhanced by borrowing, in these cases the purchase ultimately costs more (the interest on the loan) but we get it now and satisfy our desire.  Clearly cost was not the prime factor in the decision.

Desire is also linked to availability.  “It’s the last one I better snap it up regardless of price”  or “There are ton’s of those on the market, no hurry to buy, let’s wait the price will probably go down”

A key to successful product marketing is to raise desire.  That is help you understand the reasons you need a thing – a low price can be one of these reasons.  In conjunction with desire it helps to give impression of urgency (hurry before they are gone).

The underpinning of the purchase though is definitely affordability.  This is why things can cost more, because not only did the price go up but incomes rose as well so we can afford it (inflation affects both cost and revenue).

How about branding?

A product’s brand is just a label for what people think about the product.  That is things like reliability, value, quality.   Consider two automobiles – a Ford and a BMW.  Both are just molded tin on wheels that take you places – basically perform the same function but the brands have very different impressions and these contribute to demand (also the availability of the product from the automakers) and thus drives the price.

What’s Next?

Tomorrow’s  post will continue on this theme focusing on the impacts of deflation and recessions on the pricing, supply and demand.