December 12, 2017

Wealth Matters: What to Do When a Friend Pitches an Investment Idea

“It’s Question 1 at the cocktail party,” he said. “If someone like me doesn’t ask this question, they’re silly.”

Mr. Liss is a founder of Closeline, a nationwide title insurance company. He is wealthy, so people think he has money to invest in their ideas. He has learned that how he responds to them takes more than a little thought.

He said he knew not to turn down a request on the spot. He sees no reason to offend the person and he has had success with investments that have come to him through friends. Yet Mr. Liss has also lost friends and money in investments that fell at his feet, so he has grown more circumspect in the two decades since he started his company.

Others have learned the same lesson. “The first thing I tell clients is, ‘One of the things that happens when you’re successful is somehow, some way, someone is going to ask you for money, and it’s going to be someone you know,’ ” said Jeff Leventhal, a managing director at HighTower Bethesda, who has focused his advisory practice on working with entrepreneurs.

The decision to decline or invest, say those with deep pockets, requires as much an analysis of the offer and the person making it as an assessment of the pain of losing a friend if the investment turns sour.

PARRY THE PITCH Chat Reynders, chief executive of Reynders McVeigh Capital Management, said he had grown cautious of the typical party pitch since the 2008 financial crisis. They seem to be thinner.

“More often than not what you have is a situation where someone is reinventing himself or trying to get their feet beneath them, and they have an idea,” he said. Most times, he said, the person doesn’t understand how hard it will be to bring that idea to fruition.

He speaks from experience. He is now a successful investor in and producer of Imax films like “Whales”and “To the Arctic,” but he had a tough start. “I got the tar beaten out of me,” he said. “The difficulty was in learning what I didn’t know. I learned a lot about how hard it is to be an entrepreneur.”

The one investment in a friend’s idea that still haunts Mr. Liss was far easier to grasp than an Imax movie. It was an investment in a store that sold bedroom furniture for teenagers, and the friend had some experience in retail. Mr. Liss believed in him and trusted that he would treat him well.

“It wasn’t completely harebrained, but looking back, the business was completely weak,” he said. “We lost it all.”

The friendship also ended, but not because of the investment. Mr. Liss said it was his friend’s reaction to failure, which as an entrepreneur he knew was possible.

Then there are pitches that require a stone-faced adviser to hear out, like one for the mobile electrolysis machine. “They would come to your home to conduct electrolysis,” said John P. Rompon, managing partner at McNally Capital. “I get it conceptually, but from a business perspective, that dog don’t hunt.” His firm was charged with letting the person down gently.

DEVELOP A PROCESS Many pitches are for something an investor may actually need. Amy Renkert-Thomas, managing director of Withers Consulting Group, for 12 years ran Ironrock, her family’s paving stone company in Ohio, which was founded in 1866.

When she took over, as a member of the fifth generation to run the company, she found processes in place to evaluate direct pitches for investments. But when an uncle approached her, seeking to sell insurance, it was more difficult.

She said she fell back on the company’s processes to assess all investments. She went with a different insurer, and her uncle understood, she said. More important, he is still happy to see her at Thanksgiving.

“What saves a family is having a policy we follow,” she said. “Most family members are not that offended when you tell them that. If you said, ‘I don’t like you,’ that wouldn’t work as well.”

Drew McMorrow, president of Ballentine Partners, said a strict set of guidelines on when and under what conditions they would make additional investment could also save people from investing more than they wanted. One strategy, he said, was to have all investments pegged to a percentage of what the person could raise from other investors — for example, putting in 20 percent of every outside dollar raised.

Article source: http://www.nytimes.com/2013/08/03/your-money/handling-an-investment-pitch-from-a-friend.html?partner=rss&emc=rss

Chief of Austrian Bank Offers to Resign

Mr. Stepic, one of the longest-serving banking executives in Austria, said in a statement that he had offered to resign because inquiries into his investments and recent news reports about them threatened to damage Raiffeisen’s reputation.

The bank said its board would consider his proposal promptly. Mr. Stepic, who has been with Raiffeisen since the 1970s, will remain chief executive until the board makes a decision.

Mr. Stepic built his reputation in Austria’s banking sector when he started Raiffeisen’s expansion into Eastern Europe, a step that turned a local Austrian lender into one of the biggest banks in the region. Raiffeisen opened its first business in Eastern Europe in 1987, in Hungary, years before the collapse of Communism in 1989.

Raiffeisen now has operations in 17 markets in Central and Eastern Europe, more than 3,000 branches, and 14 million customers. The expansion has been highly profitable for the bank until recently, when rising numbers of bad loans in Eastern Europe weighed on its earnings.

The bank and Austria’s financial market regulator are reviewing the circumstances under which Mr. Stepic bought three apartments in Singapore through investment vehicles set up in Hong Kong and the British Virgin Islands. Mr. Stepic has repeatedly said that these were not “offshore constructions” and that all investments were made with income already taxed in Austria.

But the recent scrutiny added to the pressure on Mr. Stepic from a separate investigation by the Austrian financial regulator into an unpaid loan linked to a real estate deal in Serbia. The investigation was stopped this week when Mr. Stepic showed that he had exited the deal early. In April, Mr. Stepic repaid 2 million euros, or $2.6 million, of his bonus, citing solidarity and respect for employees as he cut jobs and earnings declined.

On Friday, Mr. Stepic said he would resign “out of responsibility for and affinity to this organization.” He said he “became aware that a discussion is under way that threatens to damage” the bank’s image, referring to reports in Austrian newspapers about his property investments in Singapore.

“I have offered my resignation under circumstances I would not have chosen but am aware that I have given my best and have nothing to reproach myself for,” he said.

The bank’s supervisory board said the offer to resign showed Mr. Stepic’s “deep affinity for the company” and that “credit should be given to him taking this difficult decision and so fending off damage for the company’s image.”

Raiffeisen Bank International is the main subsidiary of Raiffeisen Zentralbank. Raiffeisen Bank International encompasses operations beyond Austrian retail banking, including the operations in Eastern Europe, commercial banking and investment banking.

Article source: http://www.nytimes.com/2013/05/25/business/global/chief-of-austrian-bank-offers-to-resign.html?partner=rss&emc=rss

Wealth Matters: Taxes Influence Investment Strategy, and Not Always for the Better

That may not be a good thing for their portfolios.

“Clients are definitely asking, because it’s a real issue in today’s environment,” Michael N. Bapis, a managing director and partner with the Bapis Group at HighTower Advisors, said. “We try to keep them focused on the goals — preserving what they have, capturing some of the upside, limiting the downside. At the end of the day, we can’t change the tax laws.”

When asked about how tax rates would affect an investment, he said his advice was almost always the same. “If it doesn’t make sense for your portfolio, then it doesn’t make sense,” he said, even if there is tax savings. “If it does make sense, regardless of the tax consequences, we’re going to put it in your portfolio.”

Last week, I looked at how the changes to the tax code were affecting how people thought about their estate plan. This week, I’m looking at how tax increases can influence people’s investing behavior.

The tax rates on investments have increased significantly from last year. Depending on a person’s income, taxes on long-term capital gains and dividends are now as high as 23.8 percent, an increase of 59 percent over last year’s rate. Taxes on investments that are held for less than a year that incur short-term capital gains tax or investments subject to income tax rates have increased for top earners by 24 percent, to 43.4 percent (with the Medicare surtax included) from 35 percent.

Those are substantial increases, but focusing on them alone can obscure a fuller analysis of risk. Investors can end up paying no taxes on an investment, but that may be because they lost money on it, or they may pay lots of taxes on a large gain that they might not have achieved otherwise. This is why advisers stress that taxes should not be the first concern when deciding whether to buy — or not buy — an investment.

If there is one investment that has been promoted as great for minimizing taxes and achieving a large gain, it is master limited partnerships. Most are involved in the transportation or storage of oil and natural gas. What makes them appealing, from a tax perspective, is that a large portion of the dividend they pay is treated as a return of principal and is not taxed.

But in the rush for one type of tax savings, investors can end up paying other taxes. Master limited partnerships with pipelines that run through several states can incur state tax bills for investors, though usually only when the income goes above a certain threshold.

The bigger tax concern generally comes when investors sell their partnerships, since the part of the dividend that was not taxed for years reduces the original price of the investment. Greg Reid, a managing director at Salient Partners and chief executive of the firm’s $18 billion master limited partnership business, said an investor who bought a partnership and sold it five to 10 years later could be faced with two types of taxes. The first is income tax, because the original purchase price would have been reduced by the amount of principal returned in the dividends. The second is capital gains tax on the increase in the value of the investment itself.

Another way to look at these partnerships is to consider the solid and increasing dividends they have paid over the last 25 years, often 6 to 7 percent.

“The baby boomers are going to need a lot of income to live,” Mr. Reid said. “M.L.P.’s are particularly great for older people who are retiring. They have a growing income stream.”

As for avoiding high taxes, the solution is to give the partnership to charity or die with it in your estate. Both may be viable options for investors in their 70s and 80s but are probably less attractive to people in their 30s.

Municipal bonds, which have long been attractive to wealthier investors because the interest they pay is not taxed by the federal government, pose a different sort of risk.

Mr. Bapis said he was concerned that investors who were not paying attention to the broader economic news were not aware of the current risks of buying an existing municipal bond. With yields on many municipal bonds extremely low — around 0.75 percent for five-year bonds and 1.74 percent for 10-year bonds, according to Bloomberg — even a small increase in their price, which would cause the yield to go down, would cause a loss of principal.

Article source: http://www.nytimes.com/2013/05/04/your-money/taxes/taxes-influence-investment-strategy-and-not-always-for-the-better.html?partner=rss&emc=rss

Bucks Blog: LearnVest, Merrill Edge and Financial Planning for the Middle Class

Stephany Kirkpatrick, left, and Mina Black of LearnVest.Marilynn K. Yee/The New York TimesStephany Kirkpatrick, left, and Mina Black of LearnVest.

In this weekend’s Your Money column, I return to a topic that I’ve come at in various ways in recent years: The question of how the merely middle class and semi-affluent among us can get good, ethical, reasonably priced financial advice without having to watch our backs and our wallets.

Wealthy people have plenty of people clamoring to help them, and yet they need help the least. Everyone else is all too often left to work with people who say they do financial planning but are, in fact, insurance salesmen or seeking to earn big commissions from mutual fund companies.

LearnVest aims to change that, as I explain in the column, though they cannot yet help you with your investments. Merrill Lynch has its Merrill Edge program, but it’s pretty investment-centered. I was particularly intrigued by LearnVest’s fledgling efforts to help people with basic financial planning by pairing them with a real certified financial planner for a reasonable price.

If you’re tried LearnVest’s program in the time that it’s been open, please tell us about it below. Ditto for those of you who’ve had personal experience with Merrill’s call centers and its Edge program.

Article source: http://feeds.nytimes.com/click.phdo?i=809d3cbbd48e426869ef1101e8c831e5

Bucks Blog: Friday Reading: Good Teachers Have Big Impact Beyond Classroom

January 06

Everyone Should Use the Overnight Test

If someone accidentally sold all of your investments overnight, would you buy the same ones again in the morning? If not, shouldn’t you make changes now?

Article source: http://feeds.nytimes.com/click.phdo?i=54cd996df921f5d7533156949de4bb2d

Bucks Blog: Pose Retirement Questions to a Financial Planner

You can pose your retirement questions to a certified financial planner for free on Wednesday, during two hourlong online sessions run by the National Association of Personal Financial Advisors and Kiplinger.

During the two Web sessions — at 10 a.m. Eastern time, and at 1 p.m. — you can ask your questions and have them answered by a member of the financial advisers group. Members of the association are fee-only financial advisers, meaning they earn fees from their clients only, rather than earning commissions from selling investments or other products.

The event is the second in a series. A transcript of the questions and answers from the previous session in October is available at Kiplinger’s Web site.

To participate, you can visit the Facebook pages of either the association or Kiplinger.

(You can also read questions and answers or submit questions via the association’s or Kiplinger’s Twitter handles, using the #JumpStartRetire hashtag).

If you miss Wednesday’s session, you can try again at another session on Dec. 14.

Kiplinger and the association will also run two day-long “Jump Start Your Retirement Plan” sessions on Jan. 12 and 17.

Article source: http://feeds.nytimes.com/click.phdo?i=ccac619b80a4983f11cbfd8497a7342e

Bucks Blog: A Different Sort of Investment Strategy

In this week’s Wealth Matters column, Paul Sullivan writes about an analysis of over two decades of data on the performance of some 300 mutual funds. The idea was to determine which funds outperformed a benchmark — in this case, the Vanguard S.P. 500 Index Fund — over that time.

What the analysis showed was that the best-performing funds were not necessarily the ones with the lowest fees, the ones run by the best-known managers or the ones focused on any particular strategy. Instead, the funds that focused on small- and midcapitalization stocks (generally defined as companies with market capitalizations of $300 million to $10 billion) performed the best over this period.

While some mutual fund managers may complain about measuring their funds’ performance against the S.P. 500 Index, most investors, for better or worse, gauge their returns and overall financial well-being against one of the major indexes. After all, they care less about how their money is growing and more about whether it is growing.

The firm that ran the study, DAL Investments, uses data like this for its own unique investing style. Its “upgrading” strategy is meant to identify trends early and invest in those funds, regardless of what those trends are.

What is your investing strategy?

Below are the 20 funds that performed best in the analysis. But, as the fund managers themselves would say, past performance is no indication of future returns.

Article source: http://feeds.nytimes.com/click.phdo?i=9cc3e741bcd966292387ae44d6803a6b

Economic View: Too Much Caution Hinders a Turnaround

Fear and anxiety don’t bring out the best in anyone. When normally loving spouses are lost in traffic and late for a flight, their conversation is rarely suitable for young ears, even when the children are in the back seat.

Along with making people irritable, uncertainty can create paralysis. Some animals freeze when they are frightened. Acting like a deer in the headlights can be a good strategy if you are trying not to be seen, but it can get you run over.

In humans, this behavior is illustrated by an experiment conducted by the Princeton psychologist Eldar Shafir. The subjects, who were graduate students, were told about an attractive deal for a spring-break vacation. They could get an especially good price if they bought their tickets now, rather than waiting a week. But, as part of the deal, the students wouldn’t hear the results of an important exam until the discount expired. That uncertainty caused many students to freeze: Although a majority said they intended to take the trip whether or not they passed the exam — either to celebrate their success or recover from failure — they didn’t want to buy the tickets until they found out the results.

I worry that many Americans are now acting like Professor Shafir’s subjects. They know that there are investments they should be making, investments that are currently “on sale,” but they are waiting to see how things shape up before they act.

Congress certainly suffers from this problem. The country has a long list of roads and bridges that are either dangerous or obsolete. We can begin the inevitable process of rebuilding this infrastructure now, when construction costs are low and borrowing costs are essentially zero, or we can wait.

But why wait? Postponing will only make the projects cost more when we finally get around to starting them, and, in the meantime, we risk disaster if one of those bridges fails. Do we think we will no longer need bridges? If Greece defaults, American cars will not suddenly become amphibious.

Congress is not the only place where we can see paralysis. Corporations are hoarding cash at record rates. The Federal Reserve recently reported that nonfinancial companies in the United States were holding more than $2 trillion in cash and other liquid assets — money that is earning next to nothing. A considerable amount of that cash has been accumulated in the last two years — and the totals exclude the substantial sums the companies hold abroad in foreign subsidiaries. Of course, it can be sensible for businesses to have a source of emergency cash, but many appear to be stockpiling so much that it’s hard to imagine what emergency they fear. To cite just one example, Google is holding more than $39 billion in cash.

Google is far from alone. A recent survey of chief financial officers by Duke University reports that 55 percent of them say they won’t begin to deploy cash holdings in the next year. Many say they are waiting for economic uncertainty to decline.

Yet is such caution rational? As a shareholder, I would worry about a company that says it can’t find investments that can reasonably be expected to earn well above the tiny return of its cash.

Investment does not necessarily have to involve increasing capacity. Are there no plants or equipment that need upgrading? No promising research-and-development opportunities to be explored? Not even any parking lots that need to be repaved and painted?

I also do not buy the idea that companies need all this cash for acquisitions. If they really want to buy another business, they can issue stock to do so.

Loosening the purse strings just a little could have big effects on the economy. Suppose that American companies reduced their domestic cash holdings by just 10 percent and invested that $200 billion in productive investments. Using standard assumptions, these investments would spur growth in gross domestic product next year by about 1.3 percent and reduce unemployment by almost 0.7 percent. These investments would also increase tax revenue and generate long-term profits.

Some people contend that uncertainty about government regulation is making businesses cautious, but no solid evidence supports this claim. Corporations always complain about regulators, but the fact is that corporate profits are strong in many sectors. Those piles of cash didn’t come out of thin air.

SOME households are also displaying fearful investment behavior. I’m not referring to those that are struggling with debt and unemployment, but to the segments of our society whose finances have rebounded nicely. These folks are investing in United States Treasuries and money market accounts in record numbers.

If you are among these more fortunate households, you may also be passing up attractive investment opportunities that will earn much more than the 0.01 percent you’re getting from your money market account.

One such opportunity lies in making improvements to your home — assuming, of course, that you aren’t underwater on your mortgage. As a starting point, analyze ways to make your home more energy-efficient. Investing in insulation, windows, heating and air-conditioning and even solar collectors often provides excellent and highly predictable rates of return. Not only will you eventually make money, but you can pat yourself on the back with both hands since you’ll be helping to restart the economy while helping the environment.

Some homeowners are already embracing this idea: one of the economy’s few encouraging signs is that residential remodeling permits were recently up 24 percent over the previous

year.

Sure, there is much to worry about these days. But freezing in place is seldom the right strategy. Personally, I am planning to hire someone to repaint my apartment. What about you? Maybe some new gutters?

Richard H. Thaler is a professor of economics and behavioral science at the Booth School of Business at the University of Chicago.

Article source: http://feeds.nytimes.com/click.phdo?i=4572a09e23b5505af7cddc27a37b743a

You’re the Boss Blog: Fishonomics: How Southfork Kitchen Did This Summer

A striped bass does its part.Chris KoszykA striped bass does its part.

Start-Up Chronicle

Getting a restaurant off the ground.

Let us now praise money. I’d sooner talk religion or politics or New York center fielders, past and present, but we have just finished the high season in the Hamptons and I have money on the mind and money on the table, and some dear readers think that divulging hard numbers will somehow help owners of florist shops in Tallahassee and microbreweries in Oshkosh.

Needless to say, there are smarter investments than a restaurant. Practically all investments are smarter, including florist shops and microbreweries. But I have always thought that if you started off with a socially worthy project, did undue diligence, worked ridiculously hard, hired wisely, found a niche and cashed in some luck chips, the financial issues would take care of themselves. And you would sleep soundly a few hours each night. It is a naïve stance, I know, and it does not always work out — and yet, money means more, and less, when it’s the byproduct of satisfaction, not a goal itself. Who could resist the chance to entertain neighbors, Mother Earth and oneself all at the same time — with the possibility of making money and an eco-statement too? We save the fish, fish save the oceans, oceans save the planet. A triple play! Are we talkin’ baseball yet?

None of this hifalutin stuff, I rush to add, devalues or undermines profit in any way. Nor does it patronize anyone who is in business just for the money — everyone likes money, the more the merrier.

Let us now mince no words. We are in a hole. We might find oil before we find profit. (Olive oil would come in handy.) Let’s review. Instead of opening in the spring or summer of 2010 and squirreling away some nuts for the long, cruel winter, we reversed the process, and not on purpose. Construction was slow, permits were stubborn, time slipped away. (I was a green builder, and I don’t mean that in a good way.)

It would have been counterproductive to open with scant experience last summer; our pretensions and prices allow us but one chance to make a good impression, lest we lose guests permanently. So we limped through the worst part of the business year to get to the best, culling staff and testing dishes, changing public relations firms and prices and pastry chefs. When the summer commenced, we were properly seasoned and ready to roll. We had a small fire in the kitchen wall. We lost Memorial Day weekend and all of June. We focused on the garden and anomie (not anemone). We reopened for July Fourth weekend, just in time to take full advantage of what we had learned over the first nine months — our gestation period.

Now some numbers. Gentlemen, start your calculators.

In July and August, we averaged 90 guests a night, six nights a week, at $100 per person. We took in about a half million dollars in 56 working nights, including one forgettable Thursday and one disruptive visitor named Irene. Had we been open in June, with an additional 24 days, we could have added another $200,000 and wound up at $700,000 for the summer. (For those keeping score at home, all numbers have been rounded off for your convenience and our deniability.)

To cover our expenses for the fire — construction, lost inventory, business interruption — we have asked a pair of insurance companies for $100,000. We had no history to lean on and no archival evidence to corroborate our June traffic, so we estimated the loss and had to wait for July data to submit. When we will receive the checks, and for what amounts, is anyone’s guess; insurance companies are in no rush to pay up.

So before anyone takes anything to the bank, let us remember that a restaurant is working well when working at a 10 percent profit margin. (The National Restaurant Association puts the average margin at 4 to 6 percent.) During a compressed time, a heightened season, productivity climbs, waste diminishes, and that percentage can reach 15. That would put the takeaway at $1,350 a night; had there been no fire, $107,000 might now be sitting in our summer checking account.

Next summer, more people will know us. Next summer, we will be open seven days a week, we will start no fires, invite no hurricanes and maybe do a Sunday brunch. Serving four courses is under consideration. Wine pairings will be expanded. And we will surely know the precise number of staff needed in the front and back. We will do better next summer.

In the meantime, we will stay open until Jan. 2, 2012. All of the diets begun on New Year’s Eve will force the restaurant to tighten its belt. The earth will be frozen and the farmers will be in Florida and families will need time to return Christmas gifts. The staff, having worked summer, fall, Thanksgiving, Christmas and New Year’s, will deserve an extended break.

Arctic char with yuzu emulsion.Chris KoszykArctic char with yuzu emulsion.

When I look around the Hamptons and see boats on the bay, children in schoolyards and fishermen on the shoreline, with mansions in the background, I am more convinced than ever that this community can sustain a sustainable seafood place. Of course, as Chef Joe is fond of saying, sustainability starts at home. We will seek other streams of revenue now, like wedding rehearsals, Christmas parties, perhaps some catering. And while many restaurants have come and gone in the Hamptons, the best ones have, by and large, endured, confirming some ineffable connection between quality and longevity. Not always, no guarantees, but paying attention to every nut and bolt can construct something larger than a mere edifice. We can evolve from brand new to trusted brand.

We will not be in the black come our first anniversary. We are newbies. We have made newbie errors. We have seen fire and rain. We keep in mind that many winning restaurants were slow out of the gate, while many short-lived nags were quick to take the lead. How long does it take to create a culture, to find your rhythm and your audience? Do we get two years? Three? Will the money hold out? The energy? The dedication?

Let us now praise famous men. Neither my accountant nor business manager nor lawyer nor executive chef nor chief tea leaf reader can extrapolate or interpret the accumulated numbers with any conviction. The future is here and yet unknown. We need more data. It arrives nightly and remains shrouded by fog. We feel confident that we are on a right path, buoyed by enthusiasm from critics and guests, but dear readers, you and I will have to wait until the late autumn to harvest the ripe integers, to pore over a year’s worth of ledgers with unjaundiced eye, and then pour a glass of fiesty pinot blanc to drink with the crow — or to crow about the eatery that will be one year old in October.

And then we can sit down and watch Curtis Granderson in the World Series.

Article source: http://feeds.nytimes.com/click.phdo?i=03eefb4e5489cf1fa245e723f7909c17

Bucks: Why Most Investors Don’t Measure Returns Correctly

Carl Richards

Carl Richards is a certified financial planner in Park City, Utah. His sketches are archived here on the Bucks blog and on his personal Web site, BehaviorGap.com.

At least four things make up what I like to call our personal human capital: money, time, skill and energy. But when it comes to investing, we almost always focus on money and ignore the other three.

Last week I saw what can happen when I don’t allocate my own human capital wisely.

I had been spending a lot of time on Twitter, where I was having great conversations that were very helpful for my work. It represented an investment of time that had indeed paid off.

But when I caught myself interrupting a conversation with my 9-year-old son to check if someone had responded to my Twitter message about Wal-Mart, I was reminded that all investments represent a tradeoff. And in this case, the cost of using Twitter to advance my work was clearly too great for me personally.

There’s an old saying that you should take a look at your checkbook and your calendar to see what you really value as opposed to what you say you value, because the calendar and the checkbook never lie.

Dollars and cents are easy to count in the checkbook. Happiness, on the other hand, isn’t a line item in the ledger. It’s much more difficult to say we’re happier today than yesterday because we coached our children’s sports team instead of staying at the office an extra hour. But what about 10 years from now when our children talk about that great summer when you coached their team? Will we regret that lost hour at the office?

It may help to think of life in units—units of time, units of energy and so on. Each day, you take some of your units and exchange them for units of money. You then take those units of money and spend them on something. But every time you exchange a unit, there’s a tradeoff, and we often fail to look past the immediate return to the potential long-term consequences.

Going back to my Twitter dilemma, I still really like using it and believe it’s valuable. But every time I spend time on Twitter, it means I can’t invest those units, my human capital, somewhere else. So I find myself asking much more often, “What do I value more? A random discussion with a stranger or a conversation about the sunset with my 9 year old?”

You can substitute anything for my Twitter example. But the point remains that when it comes to our human capital, we’re not very good at judging the value of the tradeoff or even considering it in the first place.

Last week, on Harvard Business Review’s Web site, Umair Haque pointed out that “The ‘best’ investment you can make isn’t gold. It’s the people you love, the dreams you have, and living a life that matters.”

We live in a world where some ugly things can happen, but amazing things can happen, too. And it’s usually because of people investing something other than money. When tornadoes hit the country earlier this year, the stories that stood out were neighbors helping neighbors.

I didn’t hear one story of a stock portfolio digging someone out of a destroyed house.

Article source: http://feeds.nytimes.com/click.phdo?i=5dfc568e9b271d317be40c6ac4ff153d