Taxes, Taxes, Taxes

I’m quite a bit different than my business-owning peers — I actually don’t mind paying taxes. I get a lot of benefit from those taxes: providing for our common defense, local police and fire protection, and a pretty great infrastructure (by world standards), among many other services that our governments provide.  It is my duty as a citizen to financially support the governments that protect and enable our freedoms.

I feel this way even though those services and those governments should be much more efficient and much less bureaucratic than they are.  So I’m not a typical all-taxes-are-evil type of business owner…

But I hate dealing with taxes.Tax-burden

When I bought this business, I knew that I was going to have to deal more with taxes and payroll issues than when I was an individual employee of a corporation. (Unlike many businesses, we don’t send our payroll or most of our taxes out to other professionals. Yet.)

But I totally underestimated the crushing administrative burden of the variety, frequency, and complexity of tax payments.  Besides dealing with federal, state, and local governments (which I expected), I quickly learned that each entity had many different types of taxes, each with different weekly, monthly, and quarterly schedules, and each out-of-sync with the others.  There were many taxes which we paid and documented on a regular basis which had to be re-documented periodically.  Then, in January, the schedule gets jumbled from every other tax period.  It is needlessly complicated and time-consuming.

Again, I’m a willing taxpayer (although I’d always welcome paying less).  But I don’t want to be a tax expert.  And I don’t want to be forced to hire one.  And I don’t want to spend so much time managing our taxes when it should be spent managing our business…

There must be a simpler way for businesses to contribute to their governments.

A scar upon our city?

I have to admit I wasn’t engaged in the discussions surrounding “the Dame block” and the CentrePointe development in downtown Lexington last year.  I didn’t frequent the places on the block, and I didn’t follow the day-to-day developments as the debate raged about what to do with the block.  I don’t have a sentimental attachment to the issue.

But, today, two aspects of the CentrePointe project have struck me:

  1. The rapidity with which the the Webb Companies razed the buildings, leaving behind a crater of rubble.
  2. The complete lack of any visible activity since.

Only one thing is now missing from the CentrePointe development: Actual development

CentrePitThe Webbs promised Lexington that CentrePointe construction was to begin in December.  Now, a month later, activity is yet to begin.

The company asserts that it is waiting for various state approvals in order to begin construction.  Apparently, some of that includes permission to begin blasting an even-deeper pit for the complex’s parking garage.  (Blasting…  Sets a nice ambiance for downtown businesses like ours.)

This is an extremely poor economic and financial environment for initiating a major real estate development project.  One has to wonder: As the financial system has crumbled faster than the Dame block was demolished, do the Webbs really have the financial horsepower (or backing – they haven’t named their “private backers”) to pull off a project of this magnitude?

One also has to wonder…  Why did they proceed with razing the block if they were (and are) awaiting basic approvals to begin construction?  Prudence would dictate waiting until approvals were in hand.

Finally, one wonders…  Who is accountable for this scar upon our city if, perchance, the unnamed Webb financers do back out?  CentrePit, indeed.

Update, 1/24:  CentrePointe is supposed to house a J.W. Marriott hotel.  This morning, this bit of sunshine from NPR, including the following:

Still, it’s hard for many businesses and people who don’t have the very best credit ratings to get loans.

Arne Sorenson is the chief financial officer of the hotel corporation Marriott International.

“There are clear signs of improvement, I think,” he says, “not withstanding that there is an abhorrence of risk.”

Sorenson says it’s still almost impossible to get funding for new hotels, even for low-risk projects that he says make sense right now. He says banks just aren’t lending enough money. And that hurts the economy.

At Marriott alone, he said, “there are thousands of jobs that are not being created that normally would be created. And that’s entirely due to the lack of credit available to fund new hotel projects.”

[where: E Main St & N Limestone St, Lexington, KY 40507]

When markets don’t work

Michael Lewis and David Einhorn have written the best summary I’ve seen of why the recent financial meltdown happened, in an amazing editorial in the New York Times.  Their very long, very well-done article (Part I and Part II) details both how regulation failed and how it is integral to smoothly functioning markets.

Einhorn is one of the real heroes of this meltdown.  As a brilliant and wrongly-maligned hedge fund manager, he was one of the first and most articulate critics who chronicled the outright fraud, misconduct, willful ignorance, and inbred conspiracy perpetrated by financial companies (like Allied Capital and Lehman Brothers), bond insurers (AMBAC and MBIA), ratings agencies (S&P and Moody’s), and government regulators (SEC, Treasury, and the Fed).

This meltdown (and the hundreds of billions we’re throwing at it) are the results of an unfettered, unregulated, so-called “free” market.  Einhorn and Lewis demonstrate why regulation is necessary to a healthy, functioning marketplace.

Discovery tale: Do you have a Bugatti in the garage?

1937-bugattiThe recent discovery of a classic, rare, and dusty 1937 Bugatti in an old English garage got me thinking.

The Bugatti fits neatly into the popular imagination as a kind of “discovery tale”.  Discovery tales are those romantic, hopeful stories about finding some valuable piece of treasure in an unexpected place.

The discovery tale permeates our culture:

  • The Rembrandt (or Picasso) in the attic
  • The winning Lotto ticket
  • The mid-19th-century stock certificate left by a long-lost aunt
  • The pot of gold at the end of the rainbow
  • The gambler who wins the big jackpot in Vegas
  • The starlet discovered in the drugstore
  • The search for El Dorado
  • Cinderella
  • The Antiques Roadshow

These are all stories built around the discovery tale.  Usually, the tales result in untold millions for the “discoverers”: the family who found the Bugatti will be getting nearly $4.5 million.

It is a compelling story.  Except that it is totally unrealistic.

Don’t get me wrong — I really like these stories, too.  As long as they are treated as fun, fantastical tales.

When the discovery tale becomes a personal strategy for wealth or success, it is a problem.  It is deadly when it becomes a build-it-and-they-will-come business strategy.

It is a problem in two ways.  First, it promotes faith in a highly unlikely outcome.  What do I mean?  Let’s be generous and suppose that there are 100,000 Bugattis (or Rembrandts or jackpots or stock certificates) in the world.  Only a fraction of those Lotto tickets are going to be found in any one year (it took nearly 50 years for the family to find the Bugatti – there’s a reason that such discoveries are so rare and notable).  Again, let’s be generous and assume that 5% of these (5,000 or so) are discovered per year.

At this point, there is literally a one-in-a-million chance that you will be the discoverer of the next Bugatti in 2009.  And that’s after being generous with our assumptions.

If you are now tinkering with the assumptions — “Maybe there are really a million Bugattis and there’s really a 20% chance of finding one…” — please STOP.  It is nice to hope, but it is destructive to manipulate the odds in order to justify hoping.

The second big problem with discovery tale strategies is that they are passive.  Discovery tales encourage waiting and hoping as a substitute for industry and ingenuity.  People put off getting a better job or starting their own business while they wait for “things” to get better or for their lottery ticket to come in.

So am I a total cynic?  No.

Everyone has undiscovered treasure.  But you don’t find it.  You use it.  Your treasure lies in your hands and between your ears.  You are the garage — go make your rare Bugatti.

[where: United Kingdom]

Two ways

There are only two ways to live your life:
One is as if nothing is a miracle;
The other is as if everything is a miracle.
– Albert Einstein

As I see the world through my 2-year-old son’s eyes, I’m constantly reminded of the everyday wonders we sometimes take for granted as adults.  I’ve always liked Einstein’s “two ways” quote, and have tried to maintain a child-like amazement at what I encounter in life.

Jaded people (the “nothing is a miracle” people), frankly, bore me to tears.  It is far too easy – and lazy – to pretend that you’ve been there and done that, and that there is nothing new or wonderful in the world.  Ultimately, that cynical attitude stunts one’s ability to grow, learn, and change.  It isolates jaded people from others.

I was talking (debating, really) with a group of business leaders the other day, and it struck me that there is a nearly identical “two way” attitude division in the business world.

The Lazy Way
Some companies approach their business with a cold, calculating, flinty-eyed precision.  These companies look at business as a pure numbers game.  They often see their customers, suppliers, and employees as opponents or obstacles or dupes to be taken advantage of in their pursuit of the almighty dollar.

They see every relationship as an opportunity to “take” — in fact, “relationship” is seen as a soft, weak, and silly notion which has no place in business.  This is the case among executives at my last company.

In their lazy reliance on numbers, such miserly companies manage for the short term, the “quick fix” — “Let’s make a mint before the customer (or employee or supplier) gets wise to us!”  Eventually, these companies get so disconnected from customers and employees that the dominant day-to-day focus of the organization is on internal politics and positioning.

From my experience, I can tell you that such shrinking companies are miserable places to work, and they ultimately suffer long, slow, painful deaths as customers and employees flee in droves.

The Generous Way
Other companies adopt a fundamentally different philosophy and approach to their business.  They approach business with a spirit of generosity.  They see that building long-term relationships with customers, employees, and community creates both financial and human rewards.  While the numbers might inform their choices, these companies make decisions based on doing the right thing.

“Doing the right thing” shifts the focus from the financial numbers to the human equation. Doing the right thing isn’t easy.  It can be hard work.  It isn’t always profitable.  “Right thing” companies usually grow more slowly than “quick fix” companies (at first).  But they do continue to grow when quick fix companies fade (or implode). They build lasting relationships which sustain them through good times and bad.

The “right thing” companies still pursue profit, but their primary focus is outward: on generous relationships with their customers, their employees, and their communities.  They trust that the profit will follow.

These growing, vibrant, connected companies are engaging and rewarding places to work (and to do business with), and they have long-term employees and customers.

Everything is a Miracle
As the economy weakens, many companies have scrambled back to the quick fix of analyzing cold, hard numbers (and charts and plans) and have abandoned their “soft and fuzzy” relationships with people.  The numbers make them feel safe and precise and comfortable.  But they aren’t any of those things…

They might not know it yet, but they are the walking dead.

The companies who will ultimately thrive in this economy (and who will drive real economic growth) are the ones who continue to connect with their customers, employees, and communities — and who continue to do the right things.

But Albert Einstein could have told you that.  My 2-year-old could have told you that.  It is just that simple.