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Can I Retire? by Mike Piper Reviewed

December 14, 2011 by Lazy Man 8 Comments

I mentioned a couple of days ago that at a conference Mike Piper offered me a copy of his book Can I Retire?. In general, I hate books. I read websites most of the day and when I’m done the last thing I want to do is more reading. However, a couple of things intrigued me about the book – I had met the author and it is 100 pages. The later is perfect for the Lazy Man audience.

I wasn’t necessarily going to review the book, but let me just say the following: I’m sending this to my mother in a few days with a note that simply says, “Read This.” I can’t think of a higher compliment I can give.

The book is geared towards the person approaching retirement age. There’s very little written for someone who is 35 like me, but as Piper mentions when you are far away from retirement there are just too much volatility to consider. However, I wouldn’t have it any other way. The book should be geared to large audience.

Can I Retire is divided into 3 sections and 12 chapters. The sections answer the questions, “How much money will you need to retire?”, “How should I manage my investment portfolio?”, and “How can I best manage taxes in retirement?

The first section was the most interesting for me. Figuring how much money you need to retire is often a very difficult thing. Piper explains why this is with a tremendous example of how even a diversified portfolio could, using past historical returns, have as much as $1,100,000 in it… or as little as $160,000 in it.

One thing that the book explained was where the 4% rule of thumb came from. For those who don’t know about that rule of thumb, check out The 4% Retirement Withdrawal Rule. I had always presumed it came from typical market returns of 7% with inflation eating up 3% of that, leaving 4% as the magic number that “treads water” so to speak. Turns out that there are two entirely different reasons. Want to know them? You’ll have to read the book. I can’t give away the milk for free as they say. If you don’t want to read the book, just go with my explanation – it’s pretty easy to understand and I’m stubbornly sticking to it.

The next section about portfolio management was solid. I agreed with everything except the role that foreign investments should play in a portfolio. He made a case that due to currency risk, there is a chance that your investment in a particular country might not be worth as much when converted into US dollars. That extra volatility is uncertainty that should be minimized. My belief on this is that one should get a very diversified basket of international stocks so your overall currency risk is minimized. If your portfolio is based largely on the US and the US dollar tanks, you will likely experience some difficulty in your planning as well. I believe that more diversification is better. If the US tanks, perhaps the gains in foreign investments and currency will offset that.

The third section covered tax strategy in retirement. I really don’t find retirement tax strategies that interesting (as opposed to the rest of personal finance, which is awesome – no sarcasm). I will say that Piper painted a great picture of how if one can manage expenses in retirement it may be possible to get away with paying very little tax. I hadn’t thought about how in retirement, costs of living might way down (especially if there is no mortgage or rent payment). This means that you might not need to tap those retirement accounts much to cover expenses and hence stay in a low tax bracket.

These are the kinds of things that are interesting to think about with 30 years to spare until I reach retirement age. You’ll find a number of similar cases in the book and for a Kindle price of less than $5, it is probably one of the better investments you can make. Piper is quick to point out that it isn’t meant as a comprehensive resource, but that’s beauty of the book. It gets you started down the path of retirement and it only takes a couple of hours to read.

Update: I forgot to mention that Mike Piper has a great investing blog that has been featured in Money Magazine and many other places. It’s a must-read.

Filed Under: Retirement Tagged With: Book Review

Outliers by Malcolm Gladwell Reviewed

January 23, 2009 by Lazy Man 17 Comments

I don’t read many books. In fact, I only read books when I’m on vacation. They are great for plane rides and relaxing by the beach. During the rest of the year, I prefer to read blogs and other information from the Internet. That is starting to change and it’s all due to one man, Malcolm Gladwell. I probably wouldn’t have read any of his books if I didn’t run out of reading material on my vacation to Thailand. I wondered into a used bookstore store and found his first book The Tipping Point on sale for $5. My wife commented that she has never seen me as excited about reading a book.

The world works in mysterious ways. A couple of weeks after I returned from my trip I received an e-mail from the publisher of his most recent book. They offered to send me a free copy. Suckers! They just lost a sale. So I need to convince two readers to buy Malcolm Gladwell’s Outliers, so that they come ahead. Don’t worry, I’m not keeping track.

What is Outliers about? It’s a study of success. What does it take to be successful? How do you get to be the best of the best? Let’s look at it chapter by chapter.

The Matthew Effect

Malcolm Gladwell doesn’t usually give chapters the most logical names. In this case it’s named after a passage, Matthew 25:29… something that I read roughly 12 times and can’t figure out what it means. Fortunately, it doesn’t matter to understand what Gladwell is trying to say. After reading enough of his books you realize his writing is usually the form of a story or study and a lesson that can be extrapoloated from that.

The first chapter focuses around the seemingly statistical anomaly that the best young Canadian hockey players are almost all born in January. You almost never find a top hockey player born in the last quarter of the year. The explanation turns out to be that that the age cut-off is December 31st. Someone born in January is going to have 10 months of development/practice more than someone born in October. The better players get extra coaching as they are seen as having the best chance at being a star someday. This has a snowball effect. The best players get grouped together in better leagues. The high-level of competition makes each player even better. Lesson: Timing can be critical to an outlier’s success.

My thoughts: Think about it as it may relate to an educational system. It’s pretty much the same way, right? I don’t remember if Gladwell went down that road, but my mind did while ready this.

The 10,000-Hour Rule

This chapter depicts the life stories of some very successful people and how they got that way. Gladwell explains that the Beatles played 10,000 hours in Hamburg, Germany (watch Backbeat for a good movie about the Beatles at this time). He also explains that Bill Joy (founder of Sun Microsystems) and Bill Gates had put in their 10,000 hours of computer work as well. The perception is that they were born with some kind of gift. It’s true that they were extremely talented, but most people ignore the fact that they had opportunity. Other bands may have been as talented as the Beatles, but they didn’t have the clubs Hamburg that made them play all day. Other people may have had the talent of Joy and Gates, but access to computers in their time was extremely limited. Gladwell looks at some of the richest people in history and finds that they often clustered around a certain event. There’s a cluster of richest people around the industrial revolution. There’s another cluster of computer entrepenuers around people born in the mid 1955’s. That put you on target to be age 20 when computers were just getting off the ground. Lesson: Outliers have the opportunity and put in the work to be the best of the best.

My thoughts: I’d rather not put in 10,000 of “work” to be the best. I have too many other things that I want to accomplish. Fortunately, I don’t consider blogging to be “work.” While I’m not quite at my 10,000 hours of blogging/writing, I’m probably upwords of 7,000. I’ll be testing Gladwell soon.

The Trouble with Geniuses, Part I

Gladwell spends this chapter showing that a high IQ is not a ticket for a free ride on the success train. He goes to show that once you reach a certain IQ, you are just as likely as to be successful as someone with a much higher IQ score. There are other factors that may come into play, such as creativity. Give two children a test of how many ways a brick could be used and you’ll find that even if they have the same IQ score, one may come up with a pile more uses than the other. Lesson: High intelligence as measured by IQ tests do not necessarily lead to success.

My thoughts: I guess I should stop carrying around my Mensa card from 2000. Perhaps this is why people exercise all parts of their brains. Note to self: pick up that guitar again.

The Trouble with Geniuses, Part II

In this chapter, Gladwell uses examples of two geniuses who grew up in vastly different environments. It’s very anecdotal, one gets the feeling that the two people are chosen specifically because they are polar opposites. One can still see the point that one raised in wealth and opportunity is more likely to be successful than one raised in poverty. The other point this chapter pushed was that social skills may be the difference in success between two people of high intelligence. Of course social skills are often related to the environment in which one is raised. Lesson: If you want to be successful, be born to a wealthy family and work on your social skills.

My thoughts: None of this hits me as unusual or shocking like many of Gladwell other observations. This is the start of where the book begins to go downhill a little for me. However at this point, I’ve already deemed a great book and anything else I’ve learned is gravy.

The Three Lessons of Joe Flom

Joe Flom was a lawyer in New York City whose success started in the mid 1950s. The three lessons are:

  • Have the right culture – Flom was Jewish and Gladwell makes a strong argument that it played a role in getting him in the right place at the right time.
  • Have demographic luck – Being a lawyer in New York City in the mid 1950s presented one with an opportunity that a lawyer might not have in Bozeman, Montana in 1910.
  • Have the right family history – Gladwell shows that entrepenuers like clothing makers often had children that were lawyers and doctors.

My thoughts: I think this is very much a summary of points that were made previously. The importance of family history was covered in the past chapter. The importance of demographic luck was covered in the 10,000 rule with Bill Gates and Bill Joy. As for having the right culture, I think that overlaps the family history in quite a few ways.

Harlan, Kentucky

Remember the Hatfield and McCoys? That’s the kind of culture that you have in Harlan, Kentucky. People have to fight to protect their land and income. If you don’t defend yourself, someone will think you are weak and steal it. Even though this isn’t the case today, the descendants of that kind of society still exhibit its traits. This is another example of how one is a product of demographics, culture, upbringing, etc. The only new thing this adds is that it persists for generations.

My thoughts: Overall this chapter was a little long to prove what seemed to be a simple point (unless I missed something). Gladwell doesn’t always concern himself with solutions to some of the problems brought up by his findings. However, it would be nice to feel that your potential success doesn’t rely on the environment of your great grandfather.

The Ethnic Theory of Plane Crashes

It’s the late 90’s and Korean Airlines is in trouble – there are statistically far too many crashes. The planes are not of poor quality. It’s the people and the process. It turns out that the Korean culture is that the person with higher authority should not be questioned. If a co-pilot sees a problem, he uses language that tends to point the pilot in the right direction, so that he can “think of it himself.” Where an American co-pilot might say, “We are dangerously low on fuel”, a Korean might have said something like, “This plane is flying light.” The submissive nature in the Korean culture didn’t allow for the balance check that co-pilot was supposed to provide. It would have been better if the co-pilot flew and the pilot directed him when he saw the need. Korean Airlines fixed the problem by changing the culture.

My thoughts: Overall I found this to be one of the strongest chapters in the book. I never new much about plane crashes. I thought they usually occured due to plane malfunction, but it seems to be human error most of the time. It was interesting to learn, once again, how culture can impact success – this way in a different way.

Rice Paddies and Math Tests

Is it a stereotype that Asians are good at math? Or is there something really behind it? It turns out that Asians are better at math. There are a couple of reasons for this. For one, many Asian languages have short, single-syllable numbers that are regular in format. English has irregularities like “thirteen” and “twenty” that must be learned as exceptions. The other is that taking care of rice paddies requires incredible discipline and attention to detail. These are qualities that may impact math skills in a positive way.

Marita’s Bargain

Like most of Malcolm Gladwell’s work, this chapter tells a story to illustrate some particular insight. The finding here is that students from low and middle class families regress in what they’ve learned during the summer break. Children of upper-class families seem to retain the knowledge from the previous year. The difference seems to be that the upper-class families encourage their children to learn more in the summertime. There’s piano classes and computer camp – things like that.

My thoughts: I’ve always heard that the brain is a muscle like any other. It need exercise. I’m not sure if brain tissue really counts as muscle (I’m not up on my anatomy), but I’m willing to overlook technical details. It is a very good insight and one that parents could pick up a lot from.

Epilogue

I didn’t find much, if any value in the epilogue. A lot of it was how the author himself is a product of many of these outlier conditions. It didn’t seem to bring anything new to the table. I would have much rather read a summary of all the discoveries in the book.

Final Thoughts

I think this is a very worthwhile book. It shows the value that timing and culture play in the development of all of us. It helps me understand that being in Silicon Valley may give me opportunities that being in Kansas doesn’t. If we have children, we’ll move to Canada and time them to be born in January so that they can be great hockey stars. (Wait that doesn’t seem, right…) We’ll think a little about school systems and try to have an older child so that he gets a better chance to be more developed and get into the better classes. We’ll teach the child Chinese and make him/her work in rice paddies to encourage the highest of math skills. (Hmmm, again, something seems out of place there…) We’ll encourage learning over the summer break. I have to admit that I don’t know the first thing about parenting, but it really has the wheels turning in my head.

Filed Under: Book Review Tagged With: Book Review, malcolm gladwell, outliers

Get Rich, Stay Rich, Pass It On: A Mini Review

July 16, 2008 by Lazy Man 8 Comments

Catherine S. McBreen and George H. Walper Jr.’s book may be misleading

Every now and again, publishers sense me books to read. More often than not it takes me a long time to read them. I was sent Get Rich, Stay Rich, Pass It On: The Wealth-Accumulation Secrets of America’s Richest Families in May of 2007.

The last couple of days, I carved out a few minutes to look at the book. As I write this I’ve completed on the first 28 pages. This is why I call it a mini review. I wouldn’t normally try to review a book after reading a little more than 15% of it, but this is an exception. The authors have repeated pelted me over the head a hundred times with the same concept… lasting wealth is built through real estate and owning a business that reinvents itself.

Building Wealth Through Real Estate: Is It Really the Answer?

The book takes a historical look at what has worked for the richest families in the past. In just the 28 pages I’ve read, there have been numerous stories about people who have either gotten rich or protected their wealth through real estate. Did we forget about Casey Serin and how he had 8 houses that all foreclosed on him?

I have my own real estate story. I bought a home in the summer of 2004. It’s valued at less 10% of what I paid for it. At the time, I bought it a little below market value – not a great deal, but not the worst one. I don’t mind that it’s valued at less since I continue to rent it out at break even costs. It’s worth noting that it isn’t building me lasting wealth. Perhaps in 30 years when it’s paid off largely through my tenant’s rent it will be worth something. I’ll have spent a good deal of money renovating it though.

I’m not going to say that real estate doesn’t work to build wealth. I think it can, but I’m not necessarily convinced that the historic performance is going to be indicative of future performance. I don’t believe it’s a given that real estate is the key.

I do have to agree on the second point. Constantly reevaluating your business is key. I don’t see this as a big secret. Perhaps reading the rest of the book will flesh out the ideas in this area. If so, it might be worth the $7.00 that Amazon is currently charging for the hardcover version of the book.

Filed Under: Review Tagged With: Book Review, Real Estate, wealth building

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