REPAIRING YOUR COMPUTER vs. FIXING YOUR FINANCES

Your computer is a box. The innards matter when problems occur in:

• the quality of the components
• the care in the assembly
• the skill in the repairs

The innards matter for your financial purchases too.

A year ago, I bought a ThinkPad W520, “the industry’s fastest and lightest mobile workstation”. These are “pure-bred professional laptops that have earned a reputation for powerful performance” (NotebookCheck.net). Here’s a video tour (YouTube). This class of computer is for “a road-warrior who demands a lot of performance in a mobile package” (StorageReview.com). The main drawback is the price but since when do we really buy on price?

The W520 is easily the best computer I’ve owned. The problem has been the reliability.

Observation: You don’t always get what you expect. In the financial world, you’ll have trouble finding objective reviews for the products or the advisors who sell them.

The Problems

Here are the problems to date

1. The speakers stopped working (workaround: use external speakers)
2. One of the two video cards doesn't work reliably with an external display (workaround: use the high performance video card all the time, which increases heat and hurts battery life)
3. One of the two hard disks crashed (workaround: none)
4. The internal mic array stopped working (workaround: use an external USB microphone)
5. The Pantone color calibrator stopped working (workaround: none, apart from judging color by eye)
6. The light for hard disk activity stopped working (workaround: ignore since the disks still worked)
7. The light for Bluetooth stopped working (workaround: ignore since Bluetooth still worked)

Innards

Since replacement parts can be expensive and repairs slow, I got insurance: a warranty with onsite next-day service.

While watching the repairs, I saw how cheap the innards are and how easily they could be damaged. The keyboard remains the best I've ever used (and a key reason for buying a ThinkPad). However, removing the keyboard to access the innards is a challenge. It's also surprisingly flimsy. I've heard a replacement costs $160, which probably doesn't include installation. The replacement might be refurbished …

Could an average technician do the repairs? I'm not sure. I don't want to take that risk. There’s a surprising variety in the number of screws used. It’s easy to mix them up.

Observation: The innards matter even if you don't seem them or fully understand how they work. Warren Buffett said: “If you don't know jewelry, know the jeweler.” When you're buying financial promises, look for an advisor who's shown they're worthy of your trust.

The Cause

I've got a CTO model, which means Configure To Order. These computers are the most problem prone because each is made one at a time. Quality control is tougher.

When repairs are made, the components could be refurbished. They may not be as reliable as the original ones. Any time a repair takes place, there’s the worry that something else could go wrong.

Observation: If you succumb to the lure of a "unique" financial strategy, you're getting a one-off which may not be built or tested to normal standards. It’s easy to overlook the risk of innovation until problems arise. Who does the design, maintenance and repairs?

Repairs

This last time, I called for service, I was told to go to a depot where there are more diagnostic tools. So much for onsite service I was promised. The first place I phoned didn't answer calls. The second claimed to be too busy. The third did the repairs, which took a day.

The latest problems were caused during the prior repairs. For example, a cable hadn't been reconnected properly.

Observation: An advisor with low skill can cause great harm. A simple mistake in the paperwork may prevent you from getting the results you expected. You may not know how good an advisor you have unless you're able to compare if problems occur. If you get your financial plan, investments and insurance from unrelated advisors in different firms, you have the opportunity to notice differences in performance.

The Biggest Cost

The biggest cost is downtime. I've got a backup computer and backup all files online. That means I've got reasonable access to them but productivity does suffer.

Observation: Problems do occur with products and services. How do you react if they do? If you're less willing to take risk, you may want to pay more than the cheapest price. The margins help cover the cost of service and get you priority in the queue. You may also want a backup plan such as buying products from more than one company and using multiple advisors.

Next Time

I'm hoping there won't be any more problems with my ThinkPad. Everything's fine … until it isn't. I'm glad I had insurance the form of a warranty.

Links

• Is your car built to last?
• Do financial “doctors” make as many mistakes as medical doctors?
• The new prescription for trust
• The risk of financial innovation
• The talent myth-conception
• image courtesy of dinostock

Podcast 179

direct download | Internet Archive page | iTunes

PS I got the insurance extended for two more years

HOW YOUR BRAIN WORKS … AGAINST YOU

Our brain fools us.

Our brains are divided into left and right hemispheres but that's not the right subdivision to ponder anymore. Recent research finds we have two brains. Different terminology gets used. We’ll settle on

1. Fast brain: unconscious, subconscious, nonconscious, primitive, reptilian, instinctive, automatic, emotional
2. Slow brain: conscious, easier for us to direct, reflective, logical

The Problem

The basic problem is that our fast brain jumps to conclusions and our slow brain is lazy. This setup has advantages and consequences. For instance, our fast brain thinks the rustle in the bushes is a lion (or some other predator with sharp teeth) and gets our bodies ready to run. Our slow brain eventually concludes the rustle was more likely the wind or a raccoon. Lions are rare in our urban world.

At any moment, we're only attentive to a smidgeon of what's bombarding our senses. Our focus is like a spotlight, telescope or magnifying glass. We might be looking at the wrong things, which is how magic tricks fool us. Maybe you've seen this basketball test of selective attention (YouTube). What was your reaction the first time?

There’s another complication. Our memory changes each time we recall something. See the forgetting pill erases painful memories forever (Wired, Feb 2012).

Bugs and Milk

Visitors to Disneyland or The Magic Kingdom may recall meeting Bugs Bunny (ABC News). That's impossible because Bugs is from Warner Brothers. The brain was thinking of Mickey Mouse. We'd know that if we thought for a moment. Instead, we're likely to accept our initial thoughts.

If you've got kids, ask them to keep repeating the word "milk". While they are doing this, ask them what a cow drinks. They'll probably say milk because we associate cows with milk. Calves drink milk but cows drink water.

Numbers

We have problems with numbers too. Consider a risk with a probability of 0.001 vs 0.002. Both look small but the second number is double. Express them as one in a thousand and two in a thousand. Now the difference is more apparent (though the risks still seem small).

Would you rather get $100 now or $105 in a month? Growth of 5% in a month is excellent but we might prefer the money today.

If you toss a fair coin 10 times and get 8 heads, what outcome would you expect on the next toss? You know the probability is 50% for either heads or tails but …

We worry about plane crashes when the drive to the airport is the most dangerous part of the trip. The results are the same whether you measure miles travelled, total deaths or the probability of dying.
We don't worry much about the harm we do to our bodies due to a poor diet or a lack of exercise. Irrational but common.

The Point

We are flawed. Businesses use our idiosyncrasies to influence sell us stuff. Our mental foibles get used to get us to do things we might otherwise reject.

What we don't know can be used against us ... and succeed. What we do know can still be used against us ... and succeed.

Books

Our brains don't work the way we think they do. Recent research shows this. Here are some of the better books. They are generally easy to read (though I listened to the audiobooks). The titles are linked to Amazon where you can read reviews.

Must Reads

1. Thinking Fast and Slow by Daniel Kahneman (Wikipedia): wide-ranging, from a Nobel laureate who developed behavioral economics with Amos Taversky; 10 questions with Time (YouTube)
2. The Willpower Instinct by Kelly McGonigal: how to improve your self-control
3. The Hidden Brain by Shankar Vedantam: explores unconscious bias in depth with case studies

Lighter Reads

1. Predictably Irrational (Amazon) and The Upside of Irrationality by Dan Ariely
2. How We Decide by Jonah Lehrer: found guilty of self-plagiarism (Pop Matters, Jul 11, 2012)
3. The Invisible Gorilla by Chris Chabris and Daniel Simons
4. Incognito by David Eagleman

How To Influence

1. Influence by Robert Cialdini: the reference book; universal principles
2. Switch by Chip and Dan Heath: easy to read; lots of examples; summary (YouTube); Dan on why change is hard (YouTube)
3. Drive by Dan Pink: about motivation; live recording from Communitech
4. Buying In by Rob Walker: we want to fit in and be unique; enter murky marketing ("murketing") as used by companies like Red Bull, Psion and Converse
5. Nudge by Richard Thaler and Cass Sunstein: Wikipedia, talk (YouTube)
6. Sway by Ori and Rom Brafman: BNet review (YouTube)

These books are interrelated and different. They are a great way to understand how your brain works … and works against you.

Links

• Is air travel safer than car travel (USA Today)
• Death by the numbers (LA Times, Aug 2007)
• Top 10 ways your brain is sabotaging you (and how to beat it) (Lifehacker)
• Dealing with the staggering cost of dementia
• Fearing the wrong risks (with examples)
• image courtesy of Wikimedia Commons

Podcast 178

direct download | Internet Archive page | iTunes

PS What do you think?

WHEN YOUR ADVISOR IS ON VACATION

When you're away from work, you can hide your absence by checking messages and responding from around the world. If your physical location doesn't matter, you're a step closer to The 4-Hour Workweek, which is better  than the 4-hour night sleep.

Most of us take short breaks of days or weeks. Only three countries have less than 20 paid vacation days per year: Canada, Japan, United States.

There's a downside to remaining connected wile on vacation. You don't get a proper rest from the busy-ness of working life. You need times to disconnect. That's more difficult (and more important)  we're connected with Facebook, Twitter and LinkedIn, Pinterest and the office.

Your Advisor

Absences give a good clue into how well your advisor serves you. When your advisor is inaccessible for days or weeks, do you know in advance?

You may not care ... until the moment you need you help. Consider your doctor or dentist. Where they are doesn't matter until you're sick or experience pain --- or have guests who need immediate treatment.

In contrast, you’ll probably survive if your financial planner is on vacation. Perhaps that’s another reason they’re ranked #5 in the list of best jobs and why advisors become advisors.

Simple Solutions

It's very easy for your advisor to keep you informed of absences in advance. Email works well and is free. Newsletters like (e.g., Marketing Reflections) are even better: they're nicely formatted and let the sender see who's reading them.

Online Calendars

Advisors can also put their calendars online. You won't know specifically what they're doing but you'll know when they're available. That's a nice blend of transparency for you and privacy for them. As a bonus, you'll see how busy your advisors are.

For years, I've used Tungle.me even though RIM bought them in 2011. There are other choices too. My calendar is at tungle.me/ps.

As a side benefit, your advisor with an online calendar could let you book appointments directly. If only doctors would allow this (or have the phones answered promptly).

Advisors who work in large firms face many restrictions and probably can't make their masked calendars available publicly. However, they may have backup in place when they're away. They could at least send email in advance. They probably do internally but that doesn't really help you.

No Vacation

Some advisors who are always available. They’ll take calls when they’re on the golf course, in a restaurant or in a meeting. They might even wear a Bluetooth earplug all day long. These advisors maybe

• unsuccessful: can’t afford a break
• workaholics: can’t take a break

Either way, they'll have difficulty performing well for you if they don’t take time to recharge.

Vacation

There's nothing wrong in taking a vacation. Advisors needn't tell the whole world (especially when working from a home office). What's the harm in them telling you? After all, you pay for the trip.

Links

• The new list of the best and worst jobs
• The 4-Hour workweek interview: part 1, part 2 (Canadian-Money-Advisor.ca, Mar 2010)
• The 4-Hour workweek: How much do you really earn?
• The US is the most overworked developed nationOverworked (20 something finance, Oct 2010) 
• Three tips for holiday spending
• The hidden costs of air travel
• How to visit India
• image courtesy of Christopher Hall

Podcast 177

direct download | Internet Archive page | iTunes

PS Should you tell your advisor when you're away?

UNETHICAL EMAIL? DO ADVISORS PUT THEIR INTERESTS FIRST?

This week, an email from an insurer encouraged advisors to make more money by selling  investments.

The e-mail was titled “Summer Project: 7 Ways to Increase the Value of Your Book and Generate More Revenues.” Let me translate that for you: It’s a suggestion that advisers sell certain products to their clients to generate maximum commission and fee revenue.
--- Unethical email: rogue sales reps or Standard thinking? (Rob Carrick, The Globe & Mail, Jul 4, 2012)

What’s your reaction?

Other Examples

There are lots of attempts to help advisors sell more. Here are recent examples from publications directed at them.

Prospecting: Without a consistently full pipeline, you will struggle to meet your sales targets and goals. You will experience peaks and valleys and a great deal of frustration. Unfortunately, very few companies actually teach salespeople how to prospect effectively. --- 3 Essential Skills Every Salesperson Needs, Part 1 (LifeHealthPro, Jul 5, 2012)

It’s rare a prospect will say, “Stop talking, you’ve convinced me. Where do I sign?” Instead, you’ve got to ask for the business. So how do you do it?
--- 6 Ways To Close A Prospect (Advisor.ca, Jul 3, 2012)

Here are some steps you can take to gain a greater share of wallet from your current clients. --- Gaining New Business From Existing Clients (Investment Executive, Jun 21, 2012)

“An appeal from sales managers: too much money is being left on the table. Cross sell. Build with life insurance and investments and then follow through with living benefits. One sale can lead to another.”
--- Advisors Should Cross-sell More To Ensure Clients Are Fully Protected (The Insurance & Investment Journal, May 2012)

What’s the issue? Advisor need to eat. Everyone does.

The difference lies in the perception. You expect a salesperson to sell you stuff. An advisor? Maybe not. You might think (or hope) that an advisor is on your side but "fiduciary" is the word advisors imply but dare not say.

How Vendors Think

For practical purposes, products from different companies are interchangeable. Since vendors know this, they look for others ways to entice advisors to sell their products.

Perhaps there are ways to help advisors

• make selling simpler (e.g., improve productivity with better point-of-sale material)
• make more sales (e.g., by making new offers to current clients)

A vendor that helps advisors boost their revenues expects more business in return.

How Advisors Think

Advisors who need to show proof of continuing education may go to presentations from vendors because they're usually free. There they'll get information that isn't recorded or on the official slides. That's where money making tips are more likely found. Other places are private meetings, lunches or phone calls. Again, there's no trace of the discussions.

An advisor can't tell what's best for you. That's because the advisor isn't you. We each make our own decisions based on factors that may not make sense to anyone else.

Why wouldn’t a typical advisor push products that pay more or are easier to sell? The advisor is better off financially and you're not much worse off. Besides, you're not forced to buy.

The job of salespeople is to make sales to people. You’re not forced to buy. Before deciding, you can make sure you understand the fine print and get independent advice. Buyer beware.

Links

• Unethical email: Rogue sales reps or Standard insurance thinking (Globe & Mail, Jul 4, 2012)
• Why insurance advisors also sell investments
• Three powerful protectors against corporate misconduct
• What are you doing about your high investment expenses (MERs)?
• The lure of “exclusive” financial strategies
• How advisors fool you (and what you can do)
• The word advisors imply but dare not say
• Where does your advisor get advice?
• image courtesy of Maxim Kulemza

Podcast 176

direct download | Internet Archive page | iTunes

PS  Do you think your advisor puts you first?