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    May 2013
    M T W T F S S
    « Apr   Jun »


    What Is Planning For

    Don Shaughnessy

    In simplest terms, planning is to find implementable ways to get what you want, when you want it, with the resources you have available for the purpose. Everything else about planning is just stuff.

    Planning comes in three parts.

    1) Strategic – answers to all the “W” questions. Who, what, where, when and maybe why. perhaps several instances of each. What should always include, “What do I have to get the answers with?”

    2) Tactical – all the “How” questions. The limit here is that not all tactics are necessarily possible for a particular person in a particular time and place.

    3) Logistical – is the to-do list that implements the chosen tactics.

    Planning is the management of the interface between tactics and strategy.

    Strategy includes everything that you might want to achieve. Usually a small part of everything possible. Tactics are the methods you use to achieve goals. Some may not be available for a particular person. Planning occurs in the space where they overlap. The list of things you want matched to techniques you could use to get them.

    Effectiveness is in choosing goals wisely. Efficiency is found in the careful matching of tool to purpose.

    Competent planners should do five things:

    1. Makes sure all the necessary strategic factors have been addressed
    2. Check that conflicts within them have been resolved.
    3. Develop agreement and clarity on policies and priorities
    4. Develop tactical methods that a) address the strategic goals within the policy and priority limits, b) address the goals in a way that reduces the need for resources, or c) address the goals in a way that reduces the time until their achievement given the resource.
    5. Supervise the implementation

    If a client has strategy with no tactic, they have a dream. On the other hand, if they have a tactic with no strategy, they have a good solution to no known problem.

    Logistics is the killer. It is detailed and important and requires specialized skill. Many planners find it boring. Improperly done, the best tactical method attached to the ideal strategic purpose will fail. Find people who do this for a living. Lawyers, accountants, investment advisers, and some others. It is like deciding who should fly the airplane. Pick someone who knows how. A perfect aircraft with a perfect flight plan ends badly with an incompetent pilot. Do-it-yourself is probably stupid.

    Planning and especially financial planning, is like other problem solving methods. Spend the most time understanding the questions and the remainder finding and implementing the answer.

    Good tactics improperly applied are a waste of time and other resources. You do not begin with the answer (tactics) and then look for questions (strategy)

    This is not Jeopardy!

    Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

    Follow on Twitter @DonShaughnessy

    Posted in Decision Making, Personal Finance | Tagged , , , , , , , | Leave a comment | Edit

    Is Capitalism Out of Favour?

    Posted on May 26, 2013 by

    Apple is a bad guy. 1%ers are bad guys. Other people pay too little tax. Money is the root of evil. Stories of how wealth and its accumulation harm us all are on an ever-growing list. Is there a problem, or are people envious, or are the political promise-makers running out of resources?

    The system needs to work or there may not be enough money for everything. The risk of harm to the system seems to be politically driven. It might not work out.

    The alternatives to the current system, socialism and its variants, have defects that are hidden behind the facade of justice.

    • People assume that wealth will exist, but do not specifically indicate where it will come from and why. How do you create wealth without incentives? The risk and effort are still there.
    • There is no failure mechanism that automatically reallocates capital to more productive ventures. There cannot be small failures, because they will be hidden. The result will be that only the failures that cannot be hidden will come to light. All catastrophic.

    We could come here by accident or maybe by carelessness. I would like to think that the required stupidity level is not attainable.

    When governments tinker with money, (inflation, exchange rates) they automatically tinker with the value creating part of the economy. When they tinker with the economy, (preferences, regulations, tax) they automatically tinker with money. There are consequences.

    How much are things worth and in what should I invest my savings become impossible questions when the signals become ambiguous. Inflation makes things counter-intuitive. The citizens and the businesses are left in confusion and it is more deadly to be confused than it is to be wrong. You can stop being wrong.

    Governments tinker because they want change immediately. Many people, including those in the government, do not understand money and its source. Fuzzy ideas of justice preempt logic.

    There is no “Tinkering With The Economy For Dummies” reference book to guide them.

    It has always been that way. John Maynard Keynes seems to have scoped out this problem more than 80 years ago.

    But today we have involved ourselves in a colossal muddle, having blundered in the control of a delicate machine, the working of which we do not understand. The result is that our possibilities of wealth may run to waste for a time — perhaps for a long time.

    (From Essays in Persuasion 1930)

    Strange that governments like some of Keynesian thought while failing to understand the “blundered in the control of” and “do not understand the workings” parts.

    The current plan is to create scapegoats to cover up the muddle. That is political and intended to deflect attention. It is not an answer.

    Capitalism is imperfect. We can fault wealth creators for some things but not everything that is presently fashionable.

    For example tax avoidance. The rich and the corporations pay neither too little nor too much tax. Tax is artificial. It is an arithmetic question and you pay what comes out the end of the calculation. There is no right amount, only a formula. If you want some other answer you need to change the arithmetic and that too will have consequences.

    Taxes are merely a choice of methods available to governments to acquire the money they need to carry out their mandate. If there is not enough money to pay for the mandate, then it would be safer to reduce the spending rather than tinkering with the system of wealth building. Frugality has less bias towards blunder.

    Tax is not an effective methodology to implement social change and to use it so has risks. You cannot be sure ahead of time how the change will affect the “delicate machine.”

    Another tinker, regulation, looks easy but it is harder to estimate the risks and results. Bailouts and handouts and grants are even more difficult than that to estimate.

    All of these distort the wealth building system in ways that are difficult or impossible to assess beforehand. It is especially difficult when many of them are imposed at the same time. The law of unintended consequence rules.

    Capitalism creates value and money stores value. They are intertwined, and that means capitalism going out of favor is an important risk. If it does, the money will disappear soon thereafter.

    Then what?

    Don Shaughnessy is a retired partner in an international accounting firm and is presently with The Protectors Group, a large personal insurance, employee benefits and investment agency in Peterborough Ontario.

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