January 25, 2009

Outliers: Mastery plus Opportunity Trumps Talent

The question is not at what point you're capable of doing your job. The question is at what point you've mastered it.
--- Malcolm Gladwell

If you want to become wealthy instantly with no effort and no-money-down, stick with lottery tickets. Success takes time.

We saw the need to persevere to become the best in the world in The Dip by Seth Godin. In Outliers, Malcolm Gladwell confirms the importance of mastery and adds other elements --- some beyond our control.

Why do a few succeed while most fail? Malcolm explains these statistical "deviants" benefit from their ancestry, their culture and where they live. To this fertile soil add sufficient ability, opportunity and 10,000 hours of deliberate practice.

10,000 Hours!?!

It takes 10 years of extensive practice to excel in anything.
--- Dr. Herbert Simon, Nobel laureate
How do you accumulate 10,000 hours? Over 10 years at three hours a day or 20 hours a week. That's a long time but it's achievable, if you
  • pick something you love
  • meet a threshold of ability (not everyone has the potential to sing, act or kick a football)
  • practice and practice and practice at increasingly higher levels
Notice that we don't need massive innate talent to start. We just need "enough". We get to the finish line through continuous improvement (what Toyota calls kaizen).

  • The Beatles: playing 8 hours a night seven nights a week for years in Hamburg
  • Bill Gates: early unfettered access to time-sharing computers
  • Dustin Hoffman: a 10 year struggle in theatre and film before The Graduate
  • you or people you know?
While working full-time, I devoted 10 years of study (1984-1994) to emerge as a full-fledged actuary with the requisite technical skills. Then came a decade (1995-2005) of mastering corporate skills (managing staff, leading interdepartmental teams, communicating clearly, planning, scheduling, budgeting, resolving conflicts,...). I'm now working outside the puzzle palace, which requires mastery of people skills such as building rapport, listening and problem solving. Each phase had challenges and risks. And rewards.

You or people you know may have paid their dues in similar ways. Paying dues isn't enough.


The world is not fair. It’s always going to provide more opportunities for some than others. --- Malcolm Gladwell
No matter how prepared and driven you are, you need opportunity too. We might be in the wrong place or at the wrong time. Steve Jobs got computer parts from Bill Packard and summer jobs at HP. Do you think that made a difference?

My boss left in 1995. This created a huge, high-profile vacancy --- well beyond my capacity as a brand-new actuary. Fortunately, management gave me this opportunity and coaching. Would I have reported to a Senior Vice President so early otherwise? No way.

What To Expect
If you've read Blink or The Tipping Point, you'll find that Malcolm uses a similar writing style in Outliers. Each book is very entertaining (especially the audiobooks, which he narrates) and shares ideas for us to think about.

Podcast Version


January 17, 2009

Secret 7: The Best Tax Sheltering in Canada

Don't you judge a book by its cover? And title? I picked up The 15 Secrets The Taxman Doesn't Want You To Know by Dwayne Daku at Costco.

The Mysterious Author
Who is the author? An accountant or tax lawyer? There's no biography of Dwayne in the book. Nothing meaningful online either. That's strange. Why hide? Publicity sells more books and boosts credibility.

There are no online reviews of the book either, despite the intriguing title.

Let's look at the suggestions on their own merits. After all, many Canadian financial bloggers are anonymous but have readers.

The Conventional Suggestions
You'll find the usual tax planning ideas like
  • splitting income with a lower income spouse
  • contributing to RRSPs
  • looking at after-tax investment returns
You'll also see newer ideas like the
  • $5,000 Tax-Free Savings Account (TFSA) (see CRA)
  • $500 tax credit for children's fitness (see CRA)
What Is The Best Tax Sheltering?
"... you can shelter your money and let it grow within the RRSP without any tax liabilities until you take the money out ... Life Insurance Tax Shelters ... will not only permit your money to grow tax-free, but if structured properly, will permit you to access the funds without tax ramifications. So instead of just a Tax Deferral you can have Tax-Free money." (pg 63)
This "secret" is cash value life insurance, generally universal life. You've read about the advantages here before
  • tax-sheltered growth
  • tax-free income
  • tax-free death benefit
It's nice to have an outside source agreeing.

Tax Shelter vs Tax Sheltering
Technically, life insurance provides tax sheltering (which is good) but is not a tax shelter (which can lead to extra scrutiny from the tax authorities --- see CRA definition). You'll often see imprecision in common usage. In the book, the chapter is titled "The BEST Tax Shelter".

What About Buy-Term-and-Invest-The-Difference"?
For the first $5,000 you invest each year, you'll probably use the Tax-Free Savings Account. You can cover your insurance needs with term insurance and then invest the rest of the money in a TFSA. However, wealthier Canadians have much larger amounts to invest, which makes life insurance an attractive investment vehicle to consider.

Podcast Version

January 11, 2009

Listen To The First-ever Podcast on Riscario Insider

How can you access blog content in more ways?

Video has too many "moving parts". Quality results require: proper lighting, a clean background (a major hassle), decent (synchronized) sound, a suitable wardrobe (don't ask what I'm wearing right now), looking at the camera, editing, etc. Yikes! I can barely take photographs. You can see the initial (releasable) results on Riscario channel on YouTube

I don't have an iPod and don't listen to podcasts. Maybe you do. I listen to audiobooks daily in the car or at home. 

As an experiment, here is an extended audio version of The 100th Post. Click to listen or download:

What do you think?

January 10, 2009

The 100th Post!

(Feb 2012 update: If you think 100 posts is worth noting, how about 5 years | 500 posts | 250,000 words?)

You don't write because you want to say something, you write because you've got something to say.
--- F. Scott Fitzgerald

This is the 100th post on Riscario Insider! That's nearly two years of writing, one article at a time.

Did you read the very first post: What's In A Name?

We've stayed close to the topic of helping Canadians learn about financial risks and how to reduce them. For variety, we've also looked at ways to improve ourselves --- which indirectly helps us quash our financial risks.

The Lie
We're supposed to write about what we know. I intended to write to help typical Canadians: stagnant family incomes create major financial risks. But how? I primarily help the small sliver of the wealthy. They have different issues. I slowly shifted the focus to wealthy Canadians.

What If You're Not Among The Wealthiest?

Study well what the billionaire does. It may make you a millionaire.
--- John Emmerling
We can learn from those who have what we want. This gets us ready for when we join them, Wealth is more than money. The wealthy think differently. They act differently --- in ways that may not make sense to others.

Want an example? Most of us can use more life insurance and more investments. Street wisdom says buy cheap term insurance and invest separately. Instead, the wealthy pick permanent life insurance because melding protecting with investing releases many tax advantages and saves money. Chocolate and peanut butter are fine apart but wonderful together.

The Future
Thanks for reading. We're getting older and better. As always, your input is welcome and welcomed.


January 5, 2009

Your Favourite Posts of 2008 And More

Welcome to 2009. Let's start the year by looking back at what you read here on Riscario Insider in 2008.

The trends look great. Your visits more than doubled (increased by 2.4 times) and 80.5% of you were new. You stayed 6.0% longer per visit and viewed an average of 1.6 pages each time (an increase of 11.6%). 

The Top 10 Posts
Here's what you read
  1. Does Warren Buffett "Buy Term and Invest The Difference"?
  2. The Friendly Way: Remember The Milk and Everything Else
  3. Should You Switch To An Actuarial Career?
  4. Six Basic Fears From 70 Years Ago [Napoleon Hill]
      (also see The Six Financial Fears of Canadians)
  5. The Problem of "Trapped" Retained Earnings
  6. The Pros and Cons of Financial Leveraging
  7. "10-8" Leveraging: Creating Tax Deductions
  8. Tax Planning: Top Five Insured Strategies
     (also see "10-8" Leveraging: Turbocharging the Top 5 Insured Strategies)
  9. How Much Do You Really Earn?
  10. The Two Drawbacks of Investing in Life Insurance
Other statistics follow.

The Top 5 Countries
You read from 99 countries. Here are the top five. 
  1. Canada: Toronto, Vancouver, Ottawa, Calgary, Edmonton, Winnipeg, Montreal
  2. United States: California, New York, Texas, Illinois, Florida
       (by city: New York, Chicago, Ames, West Hollywood, Brooklyn)
  3. United Kingdom
  4. India
  5. Australia
Source of Traffic
  1. Search Engines: 61% (95% via Google and 3% from Yahoo)
  2. Referring Sites: 24% (StumbleUpon, Thicken My Wallet, Canadian Capitalist, Ellen Roseman)
  3. Direct: 15%
Here are the key words typed into search engines to get here.
  1. riscario
  2. buy term and invest the difference
  3. buy term invest the difference
  4. retained earnings
  5. warren buffett life insurance
  6. six basic fears
Browser used
  • Internet Explorer: 59%
  • Firefox: 34%
  • Safari: 4%
  • Chrome: 2%
Operating System
  • Windows: 91%
  • Macintosh: 7%
  • Linux: 1%
  • iPhone: 0.2%
Screen Resolution
  • 1024 x 768: 35%
  • 1280 x 800: 18%
  • 1280 x 1024: 12%
  • 1440 x 900: 9%
  • 1680 x 1050: 9%
That's probably more than you want to know. Thanks for reading. There's more to come.