Fair Value

I am a corporate CPA and heavily involved in the world of revenue recognition. I know, I know...BORING! I can't blame anyone for reacting with that thought. For those outside the curious little world of rev rec it is, no doubt, boring. For those of us inside the asylum, however, life is never boring.

For those on the outside let me give a brief explanation as to why it is never boring, and then I will delve into the specifics of my thoughts for today.

For a company to survive in the long run it must make more money than it spends--no shocker there. Money is made when products and/or services are sold. In order to make a sale a company generally relies on its sales force. Folks who work in sales are paid on a commission model--the more you sell, the more you get paid. Simple enough so far. Well, a company can do all sorts of things with its commission model to incent its sales force to sell various items with more or less fervor. And, as you might expect, in large companies the commission model can become so complex that occasionally situations will arise where it appears the company is actually rewarding behavior that is contrary to the goals of the organization.

Sales folks are not dumb--like you and me they want to get paid as much as possible for the work they do. So they study the sales plan and the commission model and determine the best way to make the most amount of money. With a good commission model that will result in lots of revenue for the company. However, with a suspect commission model that can result in any number of unforeseen outcomes.

On top of all that you get to layer in Generally Accepted Accounting Principles--GAAP. Truth be told, even insiders often have a difficult time navigating the labyrinthine halls of GAAP revenue recognition. There are so many nuances to the guidance and strata to the guidance hierarchy that for those not trained in the craft a herculean effort is required to gain even a rudimentary understanding of the rules.

What this often leads to is a commission model that makes sense to the lay person and seems to have the best interests of the company (and the sales person) at heart. However, rare is the time that those who derive the commission model understand the havoc that GAAP will wreak on the timing of revenue recognition for any given transaction. Thus, a sales person will think she has made a sale that will net her $30,000 in the quarter. All too often, however, GAAP will require a deferral of the revenue for reasons that will seldom make sense to the sales force. So, you have the never ending friction of the sales person wanting to get a pound of flesh from the accountant, and the accountant wanting the sales person to stop being so self centered and ego centric. Good times! So, it's rarely boring.

My thought for the day is that this is troublesome because it frequently leads to the sales force acting against the best interests of the company. For instance, sales person X might sell a product for 100K and recognize an opportunity to sell additional services with that product. So, X dives in deeper, negotiates with the customer and comes away with two additional services deliverables for another 50K. Company is ecstatic. 100K of revenue now (when the product is delivered) and 50K in the future (when the services are delivered). X feels great because instead of netting 10K in the quarter, he is now netting 15K. Customer is happy because the services are value add and will improve their infrastructure and ability to service their own customers in the long run.

Well, not so fast. Depending on the deliverables and numerous company-internal factors, GAAP may require that the 100K of product revenue be deferred until the services are delivered. So, now there is 0K of revenue this quarter and X receives $0 just in time for Christmas. Once X gets his hand slapped like that one time he learns quickly. Next quarter a different customer wants the same 100K product plus 50K of additional services. X says we can give you the product, but the services are out of scope. Why? He wants his comp today. Maybe he has multipliers in the current quarter, maybe he's buying a new home and needs the $ for the down payment. Could be lots of reasons, but the long and the short is that the company just missed out on 50K of additional revenue over time because the compensation plan was not aligned with GAAP and the various types (and combinations) of products and services being sold.

This is a very high level view of the issue. Lots of layers and arguments on both sides of the issue, but suffice to say that it usually ends up being very messy. Believe it or not revenue recognition is quite a fascinating frontier if you are familiar with the issues. Plenty of work to be done here.

Freedom requires religion

I've spent a little time reading comments and blogs regarding Mitt Romney's speech this morning. Let me start by saying that when he finished I turned to my wife and said, "I would be happy to hear that speech from any candidate." As a person of faith, I guess that is easy for me to say. Obviously his speech was very friendly to the religiously-minded and to those who like the idea of religion and faith playing a more prominent role in our society--not government, but society.

What has struck me is the number of individuals commenting or blogging who are concerned or outright threatened by Mitt's statement, "Freedom requires religion." That quote is taken from part of a larger statement--"Freedom requires religion, just as religion requires freedom. Freedom opens the windows of the soul so that man can discover his most profound beliefs and commune with God. Freedom and religion endure together, or perish alone."

Many of the opinions I have seen expressed in the public forum indicate Mitt's statement completely devalues atheists or others who don't practice religion. They make him out to be a dangerous theocrat and/or lunatic who will only advance the cause of the religious right and disregard all others. A few examples from posters at CNN.com:

"Freedom requires religion? Grrrr.....So, the faithless don't deserve freedom?"

"True freedom is freedom from religion. Freedom from believing in magical fairy tales with a happy ending and instead pursuing where we came from without mysticism."

"This guy is the same man as what we already have. Open your eyes! We need someone who will acknowledge that you can believe what you want but who won't push their own view upon us. I AM an atheist but yet I have to listen to someone like Mitt tell me that it's wrong? I find that wrong!"

"'Freedom requires religion.' What a stupid statement. If this man gets elected we can expect more of the same stupidity in the White House that we have now. Just as religion is not required to live a fair and just existence, nor is it required for anything else."

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In my mind these individuals have incorrectly interpreted the point Mitt was making. I don't believe Mitt was referring to individuals. Rather, I believe he was referring to society. Individuals absolutely have the right to choose whether to believe in God and/or hold to the tenets of a religion. If certain individuals choose the path of atheism or of abstaining from organized religion then that is their right, and they should be respected in that right. However, to believe that a free society could operate effectively without religion is folly. Freedom does, indeed, require religion. To cite one example the communist USSR pursued a policy of religious intolerance, and we can all agree that freedom is not one of the adjectives that would be used to describe that society.

The point is that people have to be allowed the right to choose whether religion matters to them, and if it does, they need to be able to choose which religion they prefer to follow. That would include the ability to choose no religion at all. A truly free society--like ours--allows, even encourages, people to make that choice. If religion were not allowed or were discouraged in this country, then we would not be free. The same can be said if religion is forced--such action would destroy freedom.

I believe Mitt understands these things. Freedom requires religion because without that choice it is impossible to say that all members of society are truly free to follow their consciences. So, I applaud Mitt's statement. Perhaps it would have been more palatable if Mitt had said, "Freedom requires religion as well as the opportunity to be unreligious." However, that statement is clunky and doesn't fit with the rest of his speech. The speech was focused on faith and its role in American life. To suddenly turn and throw a sop to the atheists would have been pandering at its worst and would have diluted his message of religious tolerance. A broad mind would accept that religious tolerance as espoused in Mitt's speech includes not only acceptance of many different faiths, but also of those who have no religious faith. To declare otherwise is to simply demonstrate a person's own biases and pre-conceived notions.

It all reminds me of one of my favorite scenes from Dead Poet's Society. Robin Williams takes his students to the courtyard, selects a few and encourages them to go into the middle of the courtyard and do something. Soon, they find themselves marching in unison with the remaining students clapping the time of the march. Williams essentially points out they all fell victims to group think and were willing to be followers rather than leaders and individuals. So, the students then take great pleasure in walking around the courtyard in all sorts bizarre manners. One student, however, simply stands and observes. When Williams asks why, the student responds that he is exercising the right not to walk. Williams commends him by saying that his decision only further serves to illustrate the point.

I believe that is what we can learn from Mitt's speech if we choose to take the broader perspective. Freedom is not all marching in time with one religious dogma. It is having numerous religions--the gait of some of which may be bizarre. Freedom also enables individuals to choose to not participate in religion at all. But it would never force an individual into one camp or the other. A free society absolutely requires religion, but it most certainly does not require everyone to be religious.

Maria?

While I was in California earlier this week Savannah told Brenna that Maddie is our "Maria."

To explain: in our house we enjoy musicals and have found ourselves on a "The Sound of Music" kick lately. One of our favorite songs to listen to is "How do you solve a problem like Maria." Savannah hit the nail on the head with her comparison! If you don't know what I'm talking about, go and listen to the words!

Business Travel

I'm here at the Sun offices in Menlo Park, CA. I have a three-day face-to-face staff meeting, and we've made it through the first day. Staff meetings of this nature are generally a good thing as long as they don't happen too often. I enjoy seeing my colleagues face to face, and there is something invaluable about being in the same room while discussing issues. On the other hand, some of the topics are going to be off-point for some of the participants. So, it's not a perfect use of time, but it's a necessary aspect of being a real team and seeking to improve as a team.

The biggest downside is that it pulls me away from my family. And what a time to leave them. Brenna is feeling pretty good these days, but she still can't do too much as it makes her feel achy and tired. The kids have all taken turns throwing up this last week, and we're just praying that Brenna's turn doesn't arrive while I am gone. What a disaster that would be. Savannah and Hunter are pretty well able to take care of the things they need to, and if it were just them, I wouldn't have too many qualms about being gone. But Maddie is a different story. She is in the button-pushing stage--and I mean that figuratively more than literally. She really enjoys seeing how far she can push her parents--and her sister and brother too, for that matter. It's hard enough when we're both home and feeling well, but with me gone and Brenna not feeling well Savannah and Hunter will really have to take on more responsibility than usual and take care of their sister. They both do a very good job with that in small spurts. We'll see whether they're able to maintain it over the course of a few days. I love them all so much, and it just pleases me to see them help each other.

As for here at work, we went to a Bocce Ball place this evening for our team event. Never done that before, but it was a good time. Highly worthwhile activity. I'm not aware of any such venues in Denver. I'll have to look into that. It would be very fun for a group get together.

It's always strange for me to do that sort of thing in a work setting though, because although I enjoy my work colleagues, I haven't gotten so close to those at Sun that I really consider them hang-out friends. I don't have many of those anyway, so it's a bit of a different situation. I find myself going into recluse mode and feeling eager to get back to the hotel so I can read or just watch TV in peace and solitude. I'm not sure what that says about me, but I do relish those quiet, down times.

Sports

I'm sitting here keeping one eye Game 3 of the World Series. For those who haven't been paying attention, calling the Series so far a mismatch would be an understatement. The Sox have been all over the Rockies, and it's been eye opening to see the disparity--particularly in Game 1 when Beckett took the mound against Francis. Watching the two was like watching a man against a boy. Beckett was far superior and the 13 - 1 result was a fair reflection of the (no) contest.

Regardless, as a Denver resident, it has been an absolute thrill to watch the Rockies over the last month and a half. I've lived hear for about eight years now, and no one has ever talked about the Rockies going to the World Series. It just wasn't something within the realm of possibility, so why bother discussing it? This year didn't seem to be any different. I generally am only a loose follower of MLB and the Rockies. I watched the Rocks struggle through the early part of the season and recognized a team that looked like many of the previous iterations. But, I kept checking the paper every day and saw them hanging around .500 and as we started talking about the wild card and games out, it was simply refreshing to even be able to have those conversations. I figured that was about as good as it got for Denver and the Rockies. Then, the improbable September run started, and it was just a wild ride. I didn't go to any games, so I didn't get to experience the spirit of the ballpark, but it was enjoyable enough for me to allow the newspaper to allow me my voyeur's view of the team. It seemed that the whole city has just been thrilled that baseball is even something to be discussed in late September. Then the Rocks made the play-in game and won in such dramatic fashion. Then they swept the Phillies and the D-backs. It all happened so fast that Denver hadn't been able to formulate the thought the Rocks could go to the Series before the Rocks had actually qualified. The Series so far has been completely disappointing, but the journey to get here has felt like a once-in-a-lifetime experience. Just enjoyable.

Funny I can type so many words about the Rockies and baseball when, if I'm being honest, I must confess that as a general rule neither the sport nor the team interest me all that much. Yes, I am a fan of sports in general, but baseball is pretty far down the pecking order.

So, while I'm here with the computer in front of me, allow me to turn my thoughts to the sport that, surprisingly, has captured the buld of my interest over the last two years or so...soccer.

I served as a missionary for the LDS Church in the England London South Mission from 1993 - 1995. It was a glorious experience for a lot of reasons--most of those reasons related to things of eternal importance, which I hope to discuss more in this space at another time. But, as to a terrestrial reason as to why my mission was glorious is that it was my first exposure to professional soccer. Not that I spent time as a fan--indeed I never went to a game or even watched it on TV. But since the sport was so ubiquitous you couldn't help but develop some small affinity for it. For some reason I latched onto the Arsenal Football Club. When people would ask me who I "supported," I would tell them Arsenal. Mostly because they were a London club, and I liked the name. Ian Wright played for them at the time, and he is the only player whose name I knew.

I returned home from my mission in the fall of 1995 and spent my sports time on basketball, football and baseball, in that order. Soccer was an afterthought, and not a very prevalent one, at that. However, as the years passed and corporations started playing a larger and larger role in American sports and as athletes continuosly made the news for so many wrong reasons, I became more and more disenchanted with the American sports scene. I don't suppose I'll ever stop paying attention to American sports altogether, but I have become tired of how money is the driving factor for everything--from player movement, to timing of games, and especially to atmosphere. Many others have pointed this out in many places, but in general it seems the "common" fan is being priced out in the American sports landscape. At some point that becomes a deterrent. I don't know when, but I feel like I have reached that point. The game is not a game, it's a production. I suppose it was inevitable given the standard of living and amount of discretionary spending in this country, but it's a deterrent to me. So, I suppose subconsciously I started casting about for other sources to sate my sports jones. Enter the beautiful game. I really started to get interested in 2004 when I discovered ESPN2 televised a few select games from the UEFA Champions' League. I watched a few of those games and saw FC Porto defeat AS Monaco to win the CL that year. Given the ease of following leagues anywhere in the world, thanks to the internet, I started taking notice of the English Premier League in general, and Arsenal in particular. I paid token attention during the 04-05 season, and a bit more in 05-06, but I must say that I was an avid follower in 06-07, and that has continued this season.

I recognize that money is also corrupting the European soccer leagues and that corporations are playing a larger and larger role. The one thing I definitely appreciate though is that the fans still seem to hold their proper place. Fans attend the games and create the atmosphere at the games--rather than jumbotrons and piped in music. It seems more real--is that dumb? Perhaps part of it is also the fact that the sport isn't shoved down my throat--as American sports are. If I want to be a fan of soccer I have to work for it, and I enjoy that. While I hope soccer does become more generally accepted here in the US, I don't desire for it to become mainstream.

So, why do I take the time to post this? I have no idea. It's just been on my mind for a while. Why would I start following soccer and even begin playing it? (As a sidenote, I have played soccer probably 12 times in the last two months, and basketball maybe once. I have always been an avid basketball player--with the need to play at least once a week. Soccer has rendered me less interested in playing hoops, and I never saw that coming.) I guess I wanted to remember this phase of my life and record my voice as one who has become disenchanted with the American sports landscape and the reasons for that. We'll see how things progress. Right now, I love following soccer--the EPL in particular. Arsenal plays at Liverpool tomorrow. A huge game, and my DVR is set!

Welfare email string from years ago

Several years ago I had the following email conversation with my dear friend and brother-in-law, Mike Gavin. I respect and value his opinion very much. I did take the liberty of editing out several of our pop culture sidebar conversations.

The string (keep in mind you must read the last email first):

Mike,

Thanks for the comments. The BD's commentary on Ecclesiastes is very helpful. Perhaps I am guilty of "wresting" the scriptures, and, if so, I apologize to all. My intent in using the verse (Jed and I have done this before) is to simply say that there are circumstances beyond our control that factor into our lives. Whether it be from a material standpoint or any other standpoint. This life is fleeting, and I think the Preacher captures it beautifully in this scripture.

None of the above colors my thoughts about the perfect society. We should all be doing more to help those who cannot help themselves. I don't believe the government--whether it be Liberal, Conservative or Alien-led--will ever get us to that perfect society. Therefore, we must do what we can in our individual spheres and look forward to the time when the Lord institutes His perfect society.

I believe that can fit in with your idea of doing things that never were (or were only once). We can each make a tremendous difference--if we have the stomach for it.

To have Enoch's society today would require leadership and a general populace that turns to God in all circumstances. All would have to be humble and willing to bend their will to God's will. Clearly, the US is nowhere near there, nor is it currently heading in the right direction.

I think it's up to individuals to fight the fight.

I hope I'm making sense. These are just some of my random musings.

Incidentally, I believe Bobby Kennedy borrowed that phrase from George Bernard Shaw--we used it all the time on my mission.

Thanks for the thoughts. They're great ones. Again, how do we get there from here?

Jesse




Jesse,

I found myself pondering your last email while sitting in sacrament meeting on Sunday. You quoted a verse from Ecclesiastes:

"I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all." Ecc. 9:11

While reading that, I decided to turn to the Bible dictionary to try to place more context around this fascinating book in the scriptures. Here's what I found (you may already know this):

"The book of Ecclesiastes seems permeated with a pessimistic flavor, but must be read in the light of one of its key phrases: 'under the sun,' meaning 'from a worldly point-of-view.'... Thus, the Preacher laments that as things appear from the point of view of the world, everything is temporary and soon gone - nothing is permanent..."

Then I turned to the book of Moses... to one of those scriptures that puts me in a deep and pensive mood:

Moses 7:18 - "And the Lord called his people Zion, because they were of one heart and one mind, and dwelt in righteousness; and there was no poor among them."

Both scriptures, of course, are true. But the Preacher refers to the world as it is right now, while Moses speaks of the ideal society found among the people of Enoch. This dichotomy brings to mind a wonderful quote from one of my favorite liberals, Bobby Kennedy:

"There are those who look at things the way they are, and ask 'why'... I dream of things that never were and ask 'why not?'"

I would amend this slightly, of course, to reflect the reality that was Enoch and his people... thus, I dream of things that once were and ask "why not again"?

Of course, there are a million reasons "why not," and the question we're still left with is "how do we get from here to there?" I've no idea, but wanted to share this group of muddled thoughts anyway.

Hope you're well.
MG




So, more government = more taxes; less government = fewer taxes. That makes sense. It's probably about as black and white as you can make the issue of taxes. However, the overriding question is still supporting those who do not (for whatever reason) support themselves at this point. State/philanthropic support for those who are incapable; teaching to fish for those who lack
opportunity/knowledge. In my perfect world, the government would not need to be directly involved in either. Philanthropy for the former, independent business ventures (as discussed) for the latter. I know the needs of both groups will not be met in the current system without government intervention. So, how does the government distinguish between the incapable and the capable but uninformed? I know of no good way to do that. And so we have an inflated system of social
welfare. People have seen that it's offered, so they avail themselves of it. And when you're down and out--why not? But then it seems it becomes a crutch. The ideal in the current system is temporary assistance, but even that is loaded with pitfalls. As you've said, Mike, round and round we go...

Back to the tax issue and the interesting thought string of taxes as a cost of doing business related to success or opportunity. There is no such thing as equal success or equal opportunity on a nation-wide scale (thus a flat tax rate because we're all blessed with the same opportunities is ludicrous. A flat tax rate for other reasons is palatable--tithing seems pretty reasonable as does the
fast offerings model for welfare. But people have to believe and want to contribute first). Therefore, any tax system based on opportunity or success will be inherently questionable. It seems, then, that taxes based on success (defined as material wealth in this conversation) is the more logical because it is quantifiable while opportunity is not.

Besides, Gates' billions are not necessarily a direct result of all his hard work, etc. Much of it is due to simple chance/fortune/luck (choose your terminology). I know of many smart, ambitious, hardworking individuals who are not as materially successful as the far less deserving--based on credentials alone. Too many variables are in play.

To take the discussion to the extreme, we can compare it to the atonement. We can work as hard as we want, but without at least some level of good luck, our efforts may not lead to incredible material wealth--even if that is our goal. With salvation, we can work as hard as possible, but qualifying on our own merits will ever elude us. Something has to be there to make up the difference. In the case of the atonement, the difference maker is Christ. In the case of material wealth, the difference maker is luck/fortune/being in the right place at the right time. Many would say that God plays a hand in that as well.

In short, regardless of what we do in our lives, there will always be factors at play that we cannot control. We do all that we can to get to where we want to be and trust to God for the rest.


Ecclesiastes 9:11

I returned, and saw under the sun, that the race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favour to men of skill; but time and chance happeneth to them all.


Don't get me wrong. I believe we get where our efforts take us, but I don't believe that everything a person receives is strictly due to him/herself. There are larger factors at work, and I hope Bill Gates is not too self-congratulatory with his wealth. He has probably worked harder for it than most people in the world would have worked for it, but I'm sure he's not the smartest/hardest working/most capable person going.

Time and chance were on his side in the case of material success. In the case of salvation, "it is by grace that we are saved after all we can do."

Jesse



Jesse,

I knew what you meant.

I read this last night in Newsweek and figured I would pass it along to the two of you. Samuelson frames our recent conversation quite well. Enjoy.

MG

The Rich and Everyone Else
Robert J. Samuelson

IT'S TRUE that the wealthy would receive a huge part of President George W. Bush's proposed tax cut. The top 1 percent would get more than a quarter of the cuts. But it's also true that overtaxing the rich poses dangers. It encourages self-serving and cynical politics. Government is tempted to tax the few and distribute to the many without considering the long-term consequences.
Here are the facts of today's system:

(1) Federal taxes come increasingly from the rich and upper middle class. In 2001, the richest 1 percent of taxpayers (incomes starting at $373,000) paid 25 percent of all taxes, including income and payroll taxes, says the Center for Tax Justice, a liberal group. The share paid by the richest 20 percent (incomes starting at $72,000) was 68 percent. In 1979, these figures were 16 percent and 57 percent. The concentration of taxes mainly reflects a concentration of income. In 2001, the richest 1 percent received 18 percent of income, up from 9 percent in 1979; the share of the richest fifth went from 46 percent to 58 percent. But tax cuts have also favored people in lower brackets. In 2001, the poorest 60 percent of Americans (incomes up to $44,000) paid 14 percent of taxes, down from 22 percent in 1979.

(2) Federal spending has shifted from defense to payments for individuals (Social Security, unemployment insurance, food stamps, Medicare). In 1955, military spending represented 62 percent of the federal budget. Payments for individuals were 21 percent. By 2001, the figures were reversed: defense, 17 percent; payments for individuals, 61 percent.

(3) Not surprisingly, these transfers go heavily to the bottom half of the income spectrum. In 2001, about 60 percent of federal cash payments (retirement, disability, unemployment benefits) went to the poorest 40 percent of Americans, reports the Census Bureau. Noncash programs (food stamps, Medicaid, Medicare, public housing) are similarly skewed. Conventional wisdom holds that the wealthy rule politics through hefty campaign contributions. Not so. If the rich are so powerful, why are they taxed so heavily? Even after Bush's tax cuts, they would still pay most of the taxes. In our democracy, votes count for more--much more--than dollars. Rightly so.

This raises another question: if the rich are so outnumbered, why aren't they taxed even more? The common answer is that Americans don't loathe the rich. People want to become wealthy. They don't want success punished. Wealth is--if legally and ethically earned--seen as a reward for hard work, talent or risk-taking. True. But again, votes count. These values resonate politically because the rich and near-rich vote more than everyone else. In 2000, half of those with incomes under $35,000 voted compared with three quarters of those with incomes exceeding $75,000. The electorate has an upper-middle-class bias.

There is now a consensus that the rich should pay more than the poor and middle class?but not a consensus on how much more. In 1906, Teddy Roosevelt said: "The man of great wealth owes a peculiar obligation to the State, because he derives special advantage from the mere existence of
government." This is the classic case for the progressive income tax?higher rates on higher incomes. Government promotes social stability and protects property; it enables the rich to get rich. Why should the rich get tax relief, ask Bush's critics, when their higher taxes mainly reflect higher incomes? Government should narrow the gap between rich and poor. (There's also an issue of timing. In the boom, some of the rich profited unethically.) Here are competing ideals of tax justice. One says that taxes shouldn't penalize success; the other says people should pay their "fair"
share. The argument is endless, because there is no obvious dividing line between a legitimate levy and confiscation. If redistribution is the government's main purpose, then none of this is a problem. The rich should pay more; the poor should receive more; tax breaks?if affordable?should go to the middle of the middle class. But there is a problem if (as this writer worries) too much redistribution
becomes politically corrupting and economically destructive. Under the guise of "meeting national needs," politics becomes an exercise in buying votes because burdens (mainly taxes) fall narrowly and benefits are spread widely. The economic danger is suffocation under an excess of taxes,
government subsidies and welfare programs. It's insidious because it creeps up slowly over time. Think Europe.

The case for spreading the tax burden more evenly is not to reward or punish. It is to restore political discipline. Politicians and citizens ought to weigh the promised gains of government against the costs. They won't if the direct costs are borne only by a tiny minority. No one then needs to make hard choices. It becomes easy to forget that taxes are the price of government. If people want more (less) of one, they ought to want more (less) of the other. This is an exacting standard that politicians of both parties would gladly evade.

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When I wrote "The poverty level here is much higher than it is there," I meant, of course, that the demarkation line for determining who is living in poverty is much higher here than it is there.

Sorry for the seemingly inane statement.

Jesse




Mike,

I actually remember reading an article or hearing on NPR or gaining the info through some other medium about the small business loans in developing countries. I had forgotten all about it until you mentioned it. I am happy to be proved at least anecdotally wrong that the material rewards are not
available. It's a very encouraging sign, and the prospect of bringing that type of program to urban America is tantalizing if somewhat dubious. In the US, many of the folks in Urbania (?) receive the oft-discussed governmental support. I hazard a guess that similar individuals in developing countries do not receive the same level of support from their government. The poverty level here
is much higher than it is there. I suppose I'm saying that I worry about the number of individuals in Urbania who will go for the program when there is a perpetual "free lunch" available. I'm sure my wording there is extremely unfair, but you get the idea.

Does that mean I think the idea is no good? No. I hope there are many, many people out there who are able to take the opportunity and run with it. I just wonder...

So, I guess I also will be watching the proceedings with interest.

Jesse



Jesse,

Your friend actually copied me on his original email back to you (I was honored to be looped in with such company and have done him the service of copying him on this).

Cost of doing business? Sounds logical... though the point of the "10 guys go out to dinner" anecdote was to highlight that, in our society, the cost of doing business is a function of success, not opportunity. Should the cost of doing business for Gates be higher (on a percentage basis)
than, say, my own cost of doing business? If his tax rate is higher than my own, isn't he essentially being penalized for being smarter / more aggressive / (choose your own adjective) than I am? (That is vintage Rand, by the way).

If we were taxed as a function of opportunity, on the other hand, Bill Gates and I might be looking at paying the same flat tax rate (enter Steve Forbes, stage left). I say that we "might" be taxed at the same rate because taxing citizens as a function of opportunity must surely imply that we all have similar opportunities, similar brain power, similar access to education, etc.. And there's the rub, in its most basic, boiled down, foundational form. I don't know anyone that espouses to the naive
notion that we all come into this world facing the same odds, though many conservatives appear to hold fast to the "pull yourself up by the boot straps" philosophy that does not recognize the plight of the "underpriveleged." And around and around we go...

You made an interesting comment in your last email... "Unfortunately, there's precious little material reward in teaching others to fish..." That got me thinking... I wonder if that's true. Two examples
that call that assumption into question:

1) I can't recall specific data off the top of my head, but there are financial services entities out there in the world that specialize in micro-loans to small businesses in developing nations (it's somewhat
reminiscent of the Perpetual Education Fund, though its focused on commercial loans and operates as a for-profit company). The default rate is shockingly low, the money-lenders are profitable, and small businesses in third world countries are beginning to prosper (slowly). Could that
idea be transplanted to, say, urban communities in the U.S.?

2) That brings me to example #2. Chris Gabrielli is a Boston venture-capitalist whose name you might recognize: he was Shannon O'Brien's running mate in the gubernatorial election here in MA (and now,consequently, a hated foe of Mr. Mitt Romney). Anyway, Chris is doing something really interesting now... he's just started a venture capital firm focused exclusively on early stage companies that promise to employ and educate urban workers. The implicit goal, of course, is to get people off of welfare and into paying, productive jobs. I don't know if the idea has legs, but this is a guy trying to make money off of teaching people to fish... I'll be watching closely.

Food for thought.

MG



So, a person not capable of learning to fish? Definitely state/independent philanthropic support. But, where is the line drawn between incapapble, unwilling and slow learner? I guess that becomes the real issue. And so I suppose we err on the side of conservatism (meaning we completely support a lot of people who fall into the unwilling category, so as to avoid cutting off the incapable). Some might think we should err even more to the side of conservatism, others might think we should cut back on our support.

But the issue for me still remains that we do too little to teach people to fish (those who can learn, anyway). Instead, we've mostly decided to lump the whole into the category of incapable of learning.

Unfortunately, there's precious little material reward in teaching others to fish--whether through state sponsored programs or your own individual efforts. There's limitless satisfaction and pleasure from a personal standpoint, but that doesn't put bread on the table for your own family.

Sticky, sticky stuff.

Jesse




Jesse,

On the economic policy front: You made mention of the old "teach a man to fish" aphorism. It reminded me of a conversation I had recently with a friend of mine here in Boston. We were discussing a topic similar to this one and we reached a point in our conversation where he thought it was necessary to whip that out and share it with me as if I had never heard it before (high UIC rating on that one). At any rate, I left him with the following question: "Are there people in this world that, for one reason or another, cannot learn to fish?" Of course, there are. And then the question becomes, as you and I have pointed out, who takes care of them? And how?

And around and around we go... I just thought carrying the "teach a man to fish" analogy one step further was interesting way to highlight the issue.

MG



Mike,

Your statement below is exactly where I see the issue:

On the flip side, is it really government we want taking care of those who cannot take care of themselves? Who else will? Who else can?

I am not a heartless conservative. I believe the scriptures, and I believe it is up to us to "lift up the hands that hang down." Unfortunately, that is not easy to do. I try to give a fair amount of money to the Church, and I know they do good with it, but beyond that--helping the poor becomes extremely
tough.

It's the whole issue of wanting to teach someone to fish rather than giving that person a fish. How does a person do that? I don't think being a financial analyst at Sun is the best way. However, being a financial analyst at Sun does give me some of the material means to help in a "third-party" type of
way. But providing up-front face time is difficult, indeed.

I don't like the government dictating who gets help and how much, but I'm not sure there is a better way at this point. If we could put the prophet and the might of the Church (and God) behind it, that would certainly be the best solution. But I'm supposing that's not going to happen anytime soon
(though not even the angels in heaven know when the Millennium will arrive). So for now, I try to do what I can in my corner of the world, and settle for getting irritated when the government dictates to me that I should be doing more or less.

I know that's not offering a solution, but it's only because I don't have one.

Jesse



Jesse,

Essentially, that is the premise of Ayn Rand's Atlas Shrugged (which I've just learned from your latest email that you've ordered). What if the proverbial 10th man decided to not show up for dinner? What would the world look like? How long would our economic system persist? How
long would be survive? The answer, of course, is not very long. And Rand proceeds to take simple economics and turn it into a 1200 page moral manifesto about the power of man's mind and his right to all the bounty of his creations.

Back to the tax story... Compelling stuff, actually. The Wall Street Journal's editorial page makes that argument on a weekly basis (literally... they have at least one editorial every week that makes
mention of flaws of the progressive tax system... it's like clockwork).

As a quasi-liberal, I'm left asking the eternal economic questions: What is it that makes the poor... poor? Are they lazy? Some probably are.

But might there be inherent flaws in the system that prevent some people from ever being able to achieve that which they are capable of? Does the progressive tax system penalize the rich? Or does it provide for those who cannot provide for themselves? On the flip side, is it really government we want taking care of those who cannot take care of themselves? Who else will? Who else can?

I'm still trying to sort all of this out myself.... I wonder if its possible, sometimes. Bottom line (for now): I recognize the flaws of the current system.... but all I see in the anecdote below is criticism.

What I'd like to hear is proposals for alternate solutions.


MG



All,

I'm asking for your forgiveness in advance, but I'm in a terribly mischievous mood today. You all are likely too busy to respond anyway. I have no data to backup whether the info is correct, so I guess I'm somewhat irresponsible, but I found it an interesting way to look at the tax cuts other than the ways that are normally presented.

We must need to look at it both ways, because looking at it either way in isolation lends to the "lies, damned lies and statistics..." rathole.

Anyway, good times!

Jesse

------------- Begin Forwarded Message -------------

The Income Tax Story:

Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner.

The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men-the poorest-would pay nothing;
The fifth would pay $1:
The sixth would pay $3;
The seventh $7;
The eighth $12;
The ninth $18.
The tenth man-the richest-would pay $59.

That's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement-until one day, the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20." So now dinner for the ten only cost $80. The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six-the paying customers?

How could they divvy up the $20 windfall so that everyone would get his "fair share?"

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would end up being PAID to eat their meal.

So the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so the fifth man paid nothing, the sixth pitched in $2, the seventh paid $5, the eighth paid $9, the ninth paid $12, leaving the tenth man with a bill of $52 instead of his earlier $59.

Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth. "But he got $7!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got seven times more than me!"

"That's true!" shouted the seventh man.

"Why should he get $7 back when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night he didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They were $52 short!

And that, is how the tax system works.

The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.

Facebook

Within the last couple of weeks I have set up my own Facebook page and found myself interacting with family much more frequently than in the past. I look forward to going on the page and seeing what is happening in the lives of those I love.

I have also enjoyed searching on names of friends I've lost touch with. What a great way to keep in touch. It's non-invasive and and easy. I know I sound completely sophomoric, but I suppose that's basically my state when it comes to utilizing the internet for personal purposes. Anyway, I've been so pleased with the ease and enjoyment of Facebook that it turned my thoughts to my long-neglected blog. Who knows whether I will carve out the time to be more consistent with this blog, but for now I have a desire to write.

So, a couple of things.

First, and most important, today was a bit of a rough day. This past week has been quarter-end close, which means that I worked about 70 hours Mon - Fri. For many people that is probably a normal routine, but for me it is not. I dread these couple of weeks every quarter, and the stress of quarter close generally seems to get the better of me. Couple that with the fact that Brenna is essentially on bed rest currently, and things are stressful in the two dominant portions of my life--family and work. Savannah, Hunter and Madison often are wonderful children, but with their mom not really able to get off the couch and with their dad not home at all during the week, it was difficult for them as well. Despite the amazing help from numerous dear friends in our ward, the house was in a general state of disrepair this morning, and there were many household tasks to be done.

In an effort to cut this entry a bit short, I will sum up by saying that I became very frustrated today and let my anger spill over into the way I spoke to my children. I was unnecessarily loud and harsh. I let my temper get the better of me, and my children had to put up with their dad verbally expressing his displeasure.

Fortunately, I went to Priesthood session this evening, and, as usual, President Hinckley was the concluding speaker. His surprise topic was anger. He admonished the brethren and encouraged us to be in control of our emotions--for the good of those around us and ourselves. He may as well have been speaking directly to me. I came home with a renewed desire to always stay in control and speak kind words. President Hinckley rightly pointed out that the small frustrations that crop up simply aren't worth the long-term ramifications of anger. He also rebutted any possible reference to Christ's anger when cleansing the temple. He indicated the cleansing of the temple was a rebuke rather than an uncontrolled outburst of anger. I suppose right-thinking people could debate that, but I believe President Hinckley is correct. Consequently, I need to improve (as if I didn't already know). My goal is to take it to heart and apply the gospel more fully. Temper and sarcasm have always been regrettable aspects of my personality. But the beautiful thing about the gospel and the atonement is that it allows, in fact it requires, people to change. It always offers hope!

Now that I think about it, I guess I'll stop there for tonight. The other topic I was going to mention is too superficial to include here after what I have written above. I'll come back to it in the future.

Being a husband and dad is the greatest thing in the world. I pray that the Father will work with me to help me become better in both areas.