Ask Uncle Bill

The Movies And Careers

Getting through Act I is easy.  Most movies can hold your attention for 30 minutes but then the tough sledding starts.  Act II is sixty pages or sixty minutes on the screen.  Act II in careers is usually the twenty years between the first five years of your career and the last ten when you're going down hill.

Act II in a project at work is also the hard part when you are trying to get the stupid thing off the ground.

So think of your career or work project as Act II.  It is where people lose interest and lose their way unless you pay attention. 

The most interesting thing James Hart said at the screenwriting seminar (at least the most interesting to me) was that most screenwriters don't think Act II even needs to be there so they try to get through it as quick as possible.  Whether it is a screenplay, career or project at work; Act II is the long desert to be crossed.

The four parts are

1) Progress and then setback,

2) Top of the mountain where one has a glimpse of success,

3)  Point of no return, followed closely by

4) The plan falls apart.

And all this takes 60 pages.  Or most of the time you have to finish a project.  Or the middle section of your career.

As with any struggle, the secret to winning the stuggle is to confront the parts, break them down into manageable bits and keep failures to a minimum.

Shakespeare said (this is getting a bit deep when I quote Shakespeare) that all of life is but a stage.  We may not be action heroes but the movies do give clues and examples of success in life--rent Wedding Crashers as an example.   

Don't Read This If You Like To Go To The Movies

Hart made a good attempt at telling the audience of screenwriting wannabees that 'structure is easy'.  He likened it to changing a tire which is pretty hard if you've ever had to do it.

What is hard about it (screenwriting, not changing a tire) is the merger of the creative and the flatness, lifeless thing that is the script.  But you can't have one without the other.  Which also makes work so frustrating because the flat, lifeless details keep getting in the way.  The best executives I ever saw were the people that could grasp a concept and see that concept through to reality by 'connecting the dots' and making sure the little things got done. 

A movie is such a thing.  So if you go to the movies just to be entertained, quit reading.  If you want to know how a movie moves its story along, here are the 'signposts' as Hart called them.

1)  Set the world.  The viewer has to know where they are.  In 'Saving Private Ryan' it didn't take long to figure out that it was not going to be a fun day storming the beach.  (If you want to read a horrible script, check out 'Saving Private Ryan.'  To see scripts for free just Google 'screenplays' and a bunch of sites pop up.)

But setting the world is important as many people don't know what their role in an organization is or how they can contribute.  One executive that I felt was great was a master at setting the world--he would grab a marketing guy, a finance guy being me, an operations guy and we would visit a subsidiary.  We would sit in a room and review the plan for the coming year.  None of this the finance guys talk to the finance guys and the marketing guys talk to the marketing guys--we all sat in the room together and molded a plan,  a world , that worked  for everybody.

Setting the world is 5% of the movie, or about 6 minutes of film.

2)  The next step in a movie is The First Opportunity.  The First Opportunity for what?  To put the plan or project into action.  In the 'Wedding Crashers' the first opportunity is the season of weddings.  The two heroes, or scoundrels, look at the calendar and know it is May--spring training time for wedding crashers. 

In careers most people wait for the First Opportunity to find them.  It doesn't happen, you have to go look for the opportunity.  In any organization, there are centers of activity that other people want to get into or think they want to get into.  Look around and try to find the opportunity.  Look at what other people do and see if you can help or even want to do that.  Successful executives have a lot of different jobs--they cultivate first opportunities.

3)  Second Opportunity--one down, one to go.  Most people stop trying when they get the First Opportunity or when the First Opportunity blows up in their face.  Getting things done is an ongoing process which sounds pretty self evident but most people flat out quit.  The second opportunity in 'Little Miss Sunshine' comes after the call from the beauty pageant AND when the father agrees to drive to California.  The drive is the second opportunity.  The second opportunity in business is convincing bosses up the line that you can do the job, again and again.  The second opportunity is an ongoing process.

The fourth signpost is The Visible Tangible Goal.  You set the world, you bounced off a few walls looking for opportunity, you've learned a lot and now you determine the Visible Tangible Goal.  This is no different from your career and something most people never figure out.  They never determine their goal in a job.  They just do their job, they think.  Figure out the goal--it makes the little stuff easier to tolerate and gives meaning to getting up in the morning.

In a movie script that is page 30, thirty minutes into the movie--the end of Act 1.  In a career it should be the first year or two.  Act II tomorrow.

Be Creative

Some people do too much creative stuff and other people don't.  Most business executives don't and most ex-liberal arts grads do.  Being both at various times, an executive and a liberal arts grad, I decided I wasn't doing enough creative stuff so I went to a seminar on screenwriting on Saturday. 

The guy giving the seminar was James V. Hart who actually has been successful at it.  And he is a Fort Worth boy so all the better.  His credits include Hook, A Muppet's Treasure Island and Bram Stocker's Dracula.  Liked Hook, love anything with the Muppets and kind of sat through Dracula. 

But Hart knows his business and he knows his crowd.  The group of 100 included a lot of overweight middle aged women that drove Volvos, a gathering of about 15 teen age boys that want to write anything a lot darker than Spider Man, and a fair number of Nora Ephron wannabees.  Offsetting the middle age women were a fair number of teen age girls that we used to consider 'artistic' in high school and thus to be avoided at all costs. 

Not sure where I fit in but probably didn't so no loss.  But like I said Hart knew his crowd and his business so he started out with what the 'crowd' wanted to hear--why do people go to the movies?  Escape, inspiration, adventure and on and on.  What do you dream about?  This really unlocked the box, had to put my fingers in my ears a couple of times.  Flying--since he wrote Hook flying is pretty big in his world. 

That,  interspersed with some inside stories about Robin William, Francis Ford Coppola, and Steven Spielberg, had the crowd in the palm of his hand.  Which was good because after lunch he was going to lose them and he knew it.  Because that is when the work started.

Because screenwriting (and most things in life) from what I have seen and from what Hart said is hard work, it is structure.  But these people on Saturday and people that want to accomplish things in life but don't, don't want to think about structure.  They just want to be famous.  Or lucky and become famous which leads us to Jack Nickalaus who said "The harder I work, the luckier I get." 

But before we finish up the seminar process tomorrow, some facts about screenwriting and movies that will explain the discussion on structure--

A screenplay is to be no more or less than 120 pages,

That is because a movie, the average movie, is about 2 hours long,

Thus a movie is 120 minutes long and movie making shorthand says each page of a script should equal one minute on the screen thus the 120 pages,

A movie is made up of three acts like a play--the first act is 30 pages, the second act is 60 pages and the last act is 30 pages of script.

So that is the structure of a movie.  Tomorrow we will go over how you do it and, here is the finance lesson, how to adapt the process to your career and your abilities to problem solve.

Thinking Outside The Box

Workers are encouraged to think outside the box and then punished when they do so.  Outside the box thinking is, I guess, the Eureka type of discovery when the light bulb goes off after being struck by lightning and you think up the next great Super Bowl commercial.  That doesn't happen very often, if ever.  Our educational institutions and commercial institutions should teach people how to logically gather information, process it and make decisions.  But we are not taught how to do that so we race around trying to look busy and productive and feeling desperate.

This bit of heavy thinking came as I drove through College Station, home of Texas A&M University,  a few weeks ago.  College campuses always remind me of Doug because Doug did a thinking exercise many years ago that still astounds me for its simplicity and beauty.

College admission procedures back then were not a lot different then now except if you were male and didn't go to college you went to Vietnam so there was a big incentive to get into school.  Plus there weren't junior colleges to fall back on for two more years of extended high school.  You had to get in somewhere and private schools were, as they are now, prohibitively expensive and the use of loans was not acceptable.  Our parents were Great Depression and World War II veterans and borrowing money was just something they didn't do.  You saved for your kids education and you expected them to go to public universities.  The best deal for us was the University of Illinois and everybody knew it.  My father was the Henry Ford of education.  Henry Ford said you could have any color car you wanted as long as it was black.  My dad said you could go anywhere you wanted as long as it was Illinois.

So with the draft board breathing down our necks we started the process.  And as in any group, the herd seperates.  Joe and Frank  and one Steve didn't have the grades or the SAT scores and knew they were headed to Southern Illinois University for drug dealer training.  The other Steve, Lee and I had the grades.  Steve and I barely and Lee no problem as he was a mechanical genius but things didn't work out later for him in life and I learned last year he committed suicide.  I got relatively decent grades through osmosis as I have two older sisters that got really great grades.  One had a 3.9 GPA in high school and she was the dolt.  The other one had a straight 4.0 in high school and then did a repeat in college.  I gave up early trying to match her since the best I could do was tie.

The guy on the bubble was Doug.  Bright guy, decent SAT scores but a bit of an ambition problem early in his high school career.  Nice guy too with an uncanny resemblance to Paul McCartney.  But Doug didn't have the grades. Applied to Illinois and got the academic equivalent of Drop Dead.   But he did have a girlfriend in town that he wanted to keep (we were townies), a strained relationship with his father and wanted to pay most of his own way in school out of pride, and smart enough to realize that a degree from Illinois was worth a lot more than a degree from Southern, Eastern, or Western Illinois university. 

Fall turned into winter and the group was starting to worry about Doug.  Joe and Frank and Steve  were set and Steve 2, Lee and I got our acceptances and immediately stopped doing any work.  Doug wasn't doing much or so we thought and so we worried.   Winter faded into spring and no action until April when Doug announced at lunch that he had been accepted.  Where?  Illinois.  Huh?

Here's how he did it and how great thinking is really just collecting and figuring out the variables.  Doug listed--

girlfriend

strained relationship with father

monetary constraints

added worth of graduating from a Big Ten school like Illinois

and the mention of Big Ten triggered football and basketball in Doug's mind.

Football?  Basketball?  What?  By gathering all the variables in one place the solution to Doug's dilemma presented itself.  Doug realized that Illinois had a bad, but sizeable, athletic program and not all athletes were Rhodes Scholar material.  Where did they put the jocks at Illinois?  In the Physical Education department, of course, so Doug went down to the PE department, mumbled something about wanting to be a coach and got accepted.  Doug went from being the dumbest Liberal Arts applicant to being the smartest PE applicant. 

After a year in PE Doug had the grades to transfer to Liberal Arts.  The last thing I heard he was an artist in New York.

Maybe you don't think what Doug did was all that great but I do because when somebody figures out something I can't figure out, I'm impressed.  And the answer was there all the time--figure out where the jocks go and you're in.  Doug took some time to gather the facts, push them around a little and the solution presented itself.  Most of us are too busy running around trying to be brilliant to just be smart.  Doug was smart. 

Robert Kiyosaki Is Right--Kind Of

His 'Rich Dad, Poor Dad' schtick gets pretty old pretty quick but sometimes the guy makes sense.  I think the main thing that drives me nuts (and why he and Suze have big book contracts and I don't--a bit of writer's envy here perhaps?) is the way he kind of glosses over the hard work.  I always say finance is simple.  It is simple to get rich--spend less than you make.  Simple but a lot of hard work.  Bobby Kiyosaki's path to riches is simple, usually involving real estate, but he, as I said, tends to gloss over the hard work involved.  Which explains the attraction of his books--lay out the premise, tell a bunch of real life anecdotes, smile a lot (this applies to his appearences on PBS of all places), assure everybody that getting rich is easy, put up your feet and count your money.  You can make a lot of money in real estate but you are going to do a lot of work. 

But, like I said, he does make sense sometimes.  Found this article--he is in bold, I'm not.  Let's go through it and look for the hard work.

When I was young, people lived from paycheck to paycheck. Today, it seems like they live from credit card payment to credit card payment.  A bit of an overstatement but Bobby knows you have to grab the reader.

Most of us know that millions of Americans are deeply mired in credit card debt. Many financial experts have said repeatedly, "Get out your scissors and cut up your credit cards." While this may sound like good advice, to me it seems like a painful, short-sighted answer to a more complex problem.  Ok, here Bobby makes the clown with the huge credit card balances feel better about himself/herself.  Nice touch.

That problem is a lack of financial education. Why don't we teach kids about money in school? Rich or poor, smart or not-so-smart, we all use money. Yet, while there are a few schools beginning to offer some financial education, it seems that most educators believe money isn't a subject worthy of the hallowed halls of our learning institutions.  It's not your fault.  You are a victim.  Ok, Bobby, give you this one but maybe parents should have a little impact here as well though in principle I agree that finance should be taught in school.  May have a tough time finding any teachers that know anything about it.

A History of Credit

When I was a kid, there were no credit cards. Instead, retailers offered layaway plans. My mom would go to a store, such as a furniture outlet, choose the sofa she wanted, and put it on layaway. That meant she put a little money down to hold the sofa, and every payday she'd pay a little toward the purchase. When the sofa was paid for in full, she would bring it home.  Ok.

At that time, stores also offered "buy now, pay later" plans. This meant my mom could buy the sofa, sign a payment agreement, and take the sofa home that day.

Today, while a few stores still offer such plans or even variations of them, most people simply put their purchases on a credit card. But credit has been a part of American life even before there were credit cards. 

A Growth Industry

There are many reasons why credit cards have grown in popularity, including these:

• Wall Street has turned debt into an asset.

Today, your friendly banker issues you a credit card. He then sells your debt to a Wall Street firm, which collects your monthly payments at high interest rates -- which is why it's an asset to them.

The minute a Wall Street firm purchases your debt, your bank no longer has it on its financial statement, which then allows the bank to look for more credit card customers. That's one reason why you get so many credit card offers.  Hadn't thought of that.  Well, you learn something every day.

• The purchasing power of the dollar has dropped.

If you've followed these columns, you know that in 1971, President Nixon converted the U.S. dollar from money to a currency. That means the U.S. and other governments can print money faster than you can earn it -- or save it.  Don't totally buy that one.  There have been tons of writing on the causes of inflation and the conversion from the gold standard isn't the only culprit.

In terms of purchasing power, if you earned $50,000 in 1996, you would have to earn $100,000 in 2006 just to stay even. Many people aren't earning more even though prices are rising, so they make up the difference by using their credit cards for everyday purchases.

• When wages go up, so do taxes.

Because the purchasing power of the dollar has dropped, many people work harder, ask for raises, or take on extra work (or a second job) to earn more money. And when they earn more money, they move into higher tax brackets. 

Now here is a great point.  People think of what they make, your salary which is always in pre-tax dollars, but not what they bring home, after tax dollars.  A case in point--when first married my wife worked as she does now and I'm very proud of her.  But she was in teaching which doesn't pay much--better now but not much.  So when she got pregnant and stopped working to stay at home, I flipped out.  How were we going to make it on one salary?  Well, quite nicely actually because our expenses, for a while, went down and our income didn't go down that much because our taxes went down.  Back to Bobby.

Today, the alternative minimum tax (AMT) -- first levied in 1970 as a tax against the rich -- is penalizing the middle class. In many ways, the AMT is a form of double taxation. Many working people are now making more money but taking home less because they pay a higher percentage of taxes.

• The cost of retirement has gone up.

When I was young, many people worked for a company with a pension plan that covered them for as long as they lived. If they didn't have a pension plan, they could count on Social Security and Medicare.

That's all changed. Today, millions of workers need to be able to afford their day-to-day living as well as put enough money aside for when they can no longer work.

A bit of a stretch but we'll let it go.

I Love Credit Cards

Clearly, cutting up credit cards won't address these economic changes or solve America's debt problem.

In the real world, credit cards are essential. It would be extremely difficult to rent a car or make hotel and airline reservations without a credit card. It would also be tough to pick up the tab at a business lunch or shop online without a credit card.  Fine with that.

Personally, I love my credit cards because of the financial freedom they allow me, and my life would come to a grinding halt without them. Ok.

Fight Debt with Debt

This is where things get a little dicey.

Whenever anyone asks me how to solve the credit card problem, I tell them to fight fire with fire -- and debt with debt. The way I solve my increasing needs for cash is to go deeper into debt -- good debt, not bad debt.

For example, I use debt -- which is essentially tax-free money -- to invest in real estate, which in turn increases my cash flow. Not only do I not pay taxes on my debt, I could also pay no taxes (or very little in taxes) on the income from the debt. Hence I earn more but pay less in taxes.  You can make the argument for 'tax free money' but you have to pay it back which you don't with after tax money.

Obviously, in order to do this you need to know how to use debt wisely and responsibly, and must be able to find great investments that increase cash flow. Remember what I said about glossing things over--Bobby can never be accused of not warning you but the warning statement is one line, kind of like on a pack of cigarettes.  And he doesn't tell you "how to use debt wisely and responsibly" or how to "find great investments that increase cash flow."  That is the hard work part and where most people quit.  But I, Uncle Bill, will tell you how.  Case in point-a real estate investment.  1)  Study the market, look at 50 houses.  2)  Find one that nobody wants and has been on the market for a long time.  3)  Find out why nobody wants the property 4)  Fix the reason nobody wants the property 5)  Screen renter's ruthlessly. 6)  After doing that, be ready for getting screwed.  It happens.  Simple, yes.  Hard work--you bet.  Another reason I don't have a big book contract.  Bobby got away with a little disclaimer.  I told the truth, the hard work part that will make you a lot of money but be ready to work for it.

The Root of the Problem

Most financial experts will scoff at my "fight debt with debt" approach. They'll say my advice is based on flawed logic, and it may well be -- for most people. But I ask you to step back and take a look at the world of finance. As I stated earlier, Wall Street is able to take your debt and turn it into their asset. That's what financially smart people do, and it's one example of why rich people get richer.  Can't argue with that.  Smart people also work hard, another reason they get rich.

Unfortunately, most people take bad debt and turn it into horrible debt. This is especially true of poor people and people with bad credit, who have access to only the worst forms of debt and pay the highest interest rates on it.  This is kind of a chicken or the egg thing--are poor people and people with bad credit, poor because they have access only to debt or are they poor because they don't manage their debt wisely?  Either way they are in trouble so don't really see the value of the paragraph.

But their problem isn't credit cards -- it's a lack of financial know-how. And at the root of that lack of knowledge is our school system and its archaic curriculum, which is out of touch with the way people really live.  Full circle--blame it on the school system, you are a victim because you were not taught about APR's in the third grade.  I agree that schools should teach more about personal finance but bet there will still be people with huge credit card balances if they did.

Clearly, advising people to cut up their credit cards won't solve the problem of excessive credit card debt. A pair of scissors won't make anyone financially smarter, but some financial education just might. 

A simple answer and in the most part I agree with Bobby.  But it is not a solution.  Solutions require hard work and getting out of debt is hard work.  Doable but hard.  Another of Bobby's easy answers masks the truth. 

Doomsday Defense 3

Finance is pretty boring, take a break and check out Tom Hanks as James Bond at

http://on-the-scene.blogspot.com/  Somebody went to a lot of work so enjoy it.

Question 3 from Larry Summers-Will the divergence continue?  Just as a refresher the 'divergence' is between the market which did quite well in 2006 and journalists and economists that pretty much thought the world ended, or should have.

The editor at Forbes, Richard Karlgaard, thinks yes.

"Yes.  Unless we get a Democratic President who appeals to the pundits but is smart enough to leave the markets alone.  Think Bill Clinton or John F. Kennedy.  Do you see one on the horizon?  Maybe New Mexico's Governor Bill Richardson.  It's hard to see him breaking through.  Maybe Senator Barack Obama (D-Ill.) if he runs as a centrist.  Or maybe the centrist Republican Rudy Giuliani if he runs as a supply sider. "

Or maybe we should just ignore the whole thing and let the markets do what they will.  Markets work best when left alone.  My biggest fear with politicians is their complete inability to leave things alone.  So the politicians will tinker with the predictable results--markets will get wacky.

But you, people, are lucky because you have long investing years stretching ahead of you.  Take advantage of both the ups and the downs.  Examples in Category 9.

Doomsday Defense 2

Queston 2-- Will the journalists or the investors be proved right about the state of the world?  asks Larry Summers.

The publisher at Forbes, Rich Karlgaard, responds--

"I wouldn't bet too heavily on the journalists."

He then pounces on one journalist that deserves it--Paul Krugman, a Princeton economist and New York Times columnist.  I thought Krugman was pretty bad in print until I caught him on some TV show where he was awful--whiny.  Whiny doesn't make it.  Must be a miserable human being as well since the world he seems to live in is not much improved, if at all, from the Spanish Inquisition.  Karlgaard says pretty much the same thing--

"You'd have no idea the American booms of 1992-2000 and 2002-2006 had occurred if you confined yourself to Krugman's columns, or worse, his books:  The Great Unraveling:  Losing Our Way in the New Century (2003), The Return of Depression Economics (1999), and Peddling Prosperity:  Economic Sense and Nonsense in the Age of Diminished Expectations."

Don't think I'll be going to Amazon to order these any time in the near future. 

I think professors have way to much time on their hands and this makes them grumpy and negative.  Plus the environment they operate in is not healthy.  I was once a TA in grad school and the professors operated as the most political, back stabbing bunch I have ever seen.  And I worked for four multi-nationals.  It was more Jaws than Mr. Chips.

Finally, they know they aren't doing much to improve the world so their reaction is basically negative.  Afraid this goes for most journalists as well since their deep dark secret is the desire to be the next Woodward and Bernstein.  And the only way to do that is uncover some dirty, dark conspiracy so they have the tendency to look for the worst in things.  And usually find it.

There is one way to avoid all this--Don't pay attention.  My first boss when I got out of grad school was a tyrant.  Never satisfied, jumpy, looked like his stomach hurt all the time.  Then he changed.  I don't mean he became lovable, just tolerable.  One of us finally had the nerve to ask about the change.  Said he quit reading the newspaper.  He lived in the outer suburbs with a hour and fifteen minute commute.  He read the paper cover to cover--knew about every murder, rape, burglary, auto accident, and assault in the Greater Chicago area.  Not to mention the Cubs. 

So he quit reading the paper.  Try it.

Doomsday Defense 2

Doomsday Defense

Saw this in Forbes--Pundits vs. the Market

The publisher starts out with a quote from Larry Summers, former Treasury Secretary and Harvard University president who got run out of the place on a rail. "The new year will begin with the greatest divergence for a generation between the general view of global risks as reflected by conventional wisdom and the risks as priced in financial markets. While the commentariat has been more alarmed about the state of the world than the global markets for some years, the gap increased in 2006 as markets became more serene and everyone else grew more anxious. Why the divergence between the headlines and the markets? Will the journalists or the investors be proved right about the state of the world? Or will the divergence continue?"

First, a disclaimer--I heard Larry speak to a small group of us business types when he was Treasury Secretary. My thought was "This guy needs a filter." Larry was pretty full of himself which probably got him in all the trouble at Harvard. Plus he isn't all that easy to understand.

But what he says here is kind of interesting--why are the markets up when, if you pick up a newspaper or listen to an academic, the world is ending.

The publisher at Forbes looks at each of Larry's questions.

1) Why the divergence between the headlines and the markets? The flippant (and probably correct answer) is the current boom has taken place under a Republican administration. The publisher notes that "The commentariat--journalists and academic economists mostly--tend to vote Democratic, and they have been in a sour mood for six years." This guy doesn't pull any punches and he is right.

When was the last time you saw no headline on a newspaper? They got to put something in there so we get plenty of news about job losses at old line manufacturers "but ignore the larger and more diffuse number of jobs created at smaller companies. They fret over trade deficits but fail to mention the flip side of capital surpluses--foreign money pouring into the US, keeping stocks high and borrowing rates low. I don't recall pundits being so relentlessly sour during the Clinton years. Do you?"

His words, not mine.

A second reason for the commentariat (is that a word?) being grumpy according to Forbes--"the academic economists feel their influence waning. If the world's economies run best on a Hayek-Schumpeter- Friedman- Laffer free market model, then economists of the meddling sort have little to do. Except carp." Good point. Imagine your most obnoxious professor and you got these guys--the grumpy guys, not Hayek, Schumpeter, Friedman and Laffer.

The publisher jumps on Joseph Stiglitz, a Columbia professor, who states that "At the root of America's economic problems are measures adopted early in Bush's first term. In particular, the Administration pushed through a tax cut that largely failed to stimulate the economy." Advice to the economic students at Columbia--avoid this guy. If the tax cut didn't goose the economy, what did?

The publisher notes that every nation in the world would love to have our economic 'Problems'--record stock prices, economic growth averaging more than 3%. He doesn't mention record levels of employment but I will.

Question 2 tomorrow.

Doomsday Defense