Ask why…

I used to work for a company in their maintenance facility.  One day my boss called me into his office and said, “You need to take 5-why training.”  “Isn’t that just when you ask why 5 times?”, I replied.  “Yeah, pretty much” was his response.

The 5-why method is a process of drilling down to a root cause.  It is a very simple root cause analysis (and not very powerful) but it’s power is in that it can be used very easily by just about anyone.  Let’s use maintenance as an example.  Say a pump breaks down.

Scenario: Pump Breaks down.

Why?  Mechanical seal failed.  If you stopped at this point, you might simply try to  replace the mechanical seal or blame the manufacturer.  If you continue down with the process you will find…

Why?  Wrong seal used.

Why?  Proper seal not in the warehouse.

Why?  Inventory database not updated

Why?  don’t know…

You can see that the problem has shifted from a mechanical problem to a supply chain management problem.  Drilling down using the 5-why method helped to get to the root cause.  (though there may be further root causes, but we couldn’t find out the answer to this…)

When looking at assessing our wants vs our needs it is important to ask why.  The 5-why serves as an example as to why you shouldn’t stop at the first why.  You need to drill deeper.  If you want to get yourself out of debt, or to improve your money situation, you need to ask why several times.

Scenario 1

I want to buy the newest BMW. Why?

I need car.  Why? And a BMW is one of several cars, why a BMW?

Because I want to ride in style.  Why?

So people will be impressed with me, so I can impress my friends, my parents, so people will think that I’ve “made it”.

This is the point we want to get to.  You have to really look inside yourself and understand why you think you need something.  If it for status, you need to understand why you want that status.  If you have convinced yourself that you do, then can you find another way of attaining that?  Additionally, I’m assuming that being debt free is also important.  So where does this want sit in relation to that want?

The point of this exercise is not to make you stop buying things (though it kind of is).  The point is to get to the root problem as to why you think you need to buy these things.  What purpose are they filling?  Is it for status?  Is it to satisfy a need?

The hard part of this exercise is being honest with yourself.  For this to work, you have to look unflinchingly at the reasons behind your behavior.

Try it.  Ask yourself… why?

Price as a poor indicator of value

There are two ways to look at price as a function of value.  On the one hand, increasing price could be seen as an indicator of increasing value.  On the other hand, one item that performs the same function as another item but is cheaper can be seen as a better value.  Let’s examine the former first.

Axiom: Increasing price is an indicator of increasing value.  (i.e. price ~ value)

When it comes to value, it is very difficult to define what value is.  A Louis Vuitton purse performs the same function as a no-name brand purse, they both carry stuff.  However, one would argue that a Louis Vuitton purse carries a higher fashion status, and thus can add value to your life from a social perspective.  Other than this, I see no value in a Louis Vuitton purse.  Advocates of Louis Vuitton will point to higher quality stitching, to durability etc, but I think this is mostly false.  You can probably get a Louis Vuitton purse before they stamp the LV on it and you will note that it is 90% cheaper.  Same purse, but your friends aren’t as impressed.  Because of branding, increasing price does not equal increasing value.

Axiom: For a similar item of the same function, a lower price indicates higher value.

We could take the same example of the purse but I’d like to use something different.  Too often, and I’ve made this mistake myself, people buy things based solely on price, then are stuck in the cycle of replacing over and over.  I remember buying a pair of cheap jeans for $30.  I probably wore them 10 times before they tore on me.  I then bought a pair of raw denim jeans for $150.  I probably wore these jeans 300 times or more before they tore on me, and I wore them in much higher wear situations than the pair of cheap jeans.  When I’m looking at the store, the cheap jeans cost much less than the raw denim, but from a cost per use perspective, the raw denim jeans were about $0.50/use where the cheap pair were about $3/use.

My point here is that it does not make sense to make decisions on purchases solely on price.  There are many considerations one needs to take into account, like your financial situation, function (status or utility), durability, health etc.

I bring up health because my wife recently bought a travel mug for coffee.  She had her mind made up on a certain type and it was made up of recycled plastic.  When we got to the store, she found another one that was made of glass.  I encouraged her to buy the glass one because glass is inert and thus won’t release any compounds into her coffee.  I think the chances of that happening with the plastic are low, but they are not zero.  We paid more for the glass, but this is where the fuzzy definition of quality (read Zen and the Art of Motorcycle Maintenance) and value come in.

I would also like to point out that while somethings that perform the same function may cost more, they can be infinitely more durable, which means that they are probably more environmentally friendly, since less waste is being generated.

It really depends on why you are buying it.  We are encouraged to buy things so mindlessly.  Before you buy it, wait a second and ask yourself, “Why?”

Happy New Year!

Happy New Year World!  Looking forward to 2015, talking about life, liberty, and freedom.

This year I want to talk about financial freedom, generosity, efficiency and developing ourselves as humans.

Siddhartha went to seek employment from the merchant Kamaswami.  Kamaswami asks him what he trades for nourishment and shelter.  Asks him what he is able to do. Siddhartha replies, “I can think. I can wait. I can fast.”  Kamaswami is surprised and asks what that is good for. Siddhartha again replies.

When a person has nothing to eat, fasting is the smartest thing he can do.  When Siddhartha hadn’t learned to fast, he would have to accept any kind of service before this day is up, whether it may be with you or wherever, because hunger would force him to do so.  After having learned to fast, Siddhartha can wait calmly, he knows no impatience, he knows no emergency, for a long time he can allow hunger to besiege him and can laugh about it.

Kamaswami agreed and asked Siddhartha to read something.  Then he asked him to write something.  Siddhartha wrote, Writing is good, thinking is better.  Being smart is good, being patient is better.

What we need to develop are our muscles.  Physical, mental, spiritual.  These are the human investments that we need to make.  When we learn to live without, and enjoy to live without, then doors open and possibilities abound.  Welcome 2015.

Alberta’s decision to limit striking by public employees – a critique of Bill 45

The government recently passed Bill 45, which in effect limits the ability of Public Sector Employees to strike.  The bill states…

  1. No employee and no trade union or officer or representative of a trade union shall cause or consent to a strike.
  2. No employee and no officer or representative of a trade union shall engage in or continue to engage in any conduct that
    constitutes a strike threat or a strike.
  3. No trade union shall engage in or continue to engage in any conduct that constitutes a strike threat.

You can read the full bill here.

This struck me as odd.  I would have thought that, as a Canadian, the right to strike would be part and parcel of the full rights granted to citizens of this country.  Now, I know that sometimes, with our over-consumption of US television, I get my Canadian and American rights mixed up, and since I don’t want to base my education on a show like Law and Order, I did my own investigation.

I started first by looking up the Canadian Charter of Rights and Freedoms, and was startled to see that the right to strike was not a fundamental right.  I know that charters and constitutions are written vaguely so as to apply as broadly as possible to the many nuances and complexities that arise in life, so perhaps it is not as surprising as I thought.

Canadian law is based on British law, which is a common-law type system, meaning that the law is developed through decisions of courts and tribunals, but include statues enacted by legislative bodies*.  With this in mind, I performed a quick search of the Canadian Supreme court archives to determine whether this Bill was in violation of the Charter and the Constitution.

I only read a couple of judgements but I picked one that, coincidentally enough, was brought forward by the AUPE against the Attorney General of Alberta in 1987.  This also was regarding the right to strike.  The court ruled that the right to strike is not a fundamental right and is not supported by the Charter of Rights and Freedoms.**

4 justices ruled against the AUPE, and 2 dissented.  Justices Beetz, Le Dain and La Forest claimed that the charter does not guarantee the right to strike, and while it does guarantee the right to association, this right cannot be extrapolated to include the right to strike.  I felt their argument pretty weak.

McIntyre had a better argument, I felt.  He stated that the Freedom of association under the Charter means the freedom to engage collectively in those activities which are constitutionally protected for each individual.** He goes on to say that charter allows for the freedom to associate in certain activities that are also protected for individuals acting alone.  The charter does not confer greater rights to groups than it does to individuals.  So, if the right to strike is not granted to an individual, it can be granted to a group either.

Dickson and Wilson dissented.  They argue, that throughout history, the role of association has always been vital as a means of protecting the essential needs and interests of working people and workers have associated to overcome their vulnerability as individuals to the strength of their employers** 

Furthermore, they add that the prohibition of the right to strike of all hospital workers and public service employees was too drastic a measure for achieving the object of protecting essential services. Indeed, without some evidentiary basis, it was neither obvious nor self‑evident that all those employees performed services “whose interruption would endanger the life, personal safety or health of the whole or part of the population”.**

In case you couldn’t tell, I agree with Justices Dickson and Wilson.

The Supreme Court has argued that the right to strike is not a fundamental right.  I can accept this. What I can’t accept though is the blatant conflict of interest that the Government of Alberta (GoA) is working under.  The GoA is both an employer and a legislative authority in this case.  The government should not be making laws that are grant it power as an employer.  If the right to strike is not a fundamental right as the GoA argues, then the government should back legislation that prohibits the right to strike for all employees in the province.  That will never happen, because it would be political suicide.  So, the government limits the rights of its employees, those it has power over, and wins the approval of the electorate so it can claim it is saving money.

But, it is not an impossibility that some large corporation will, in the near future, seek help from the government to limit strikes of its employees (happened with Air Canada), and it can be an easy extension to suggest that we are all essential workers.

Down with BIll 45.



The old eat the young

I recently attended an AUPE union meeting, with a friend of mine who is an AUPE member.  In case you didn’t know, the AUPE is the Alberta Union of Public Employees, the largest union in Alberta and it represents 80,000** workers, mostly public employees (as the name would suggest).

At this union meeting, the union leaders talked about how the government is making changes that affect the ability of employees to strike, which is quite abhorrent, but I haven’t read the bill so I’ll get to that in a later post.  What really set everyone off, though, was that the provincial government is planning to limit the amount it contributes to an employee’s pension.  The pension contribution is currently a percentage of the person’s salary and is split between the employee and the employer (in this case, the provincial government).  What this would do would limit the ability of the union to improve the health of the pension plan by increasing this percentage.

A lot of those who have retired were angry regarding the perception that their pensions might be in jeopardy and asked for solidarity. The union leaders tried to persuade us that the pension was in good fiscal shape and was sustainable and they had a video to prove it.  I was all ears…

… Well, this video just showed a guy (who was actually at the meeting) talking about how the pension is sustainable.  No facts, no figures.  I decided to investigate for myself.

My friend’s pension plan is Public Service Pension Plan (PSPP).  I jumped over there and started to investigate.

The pension was performing well before the market nose dived in 2008.  See the following charts.

pension1For much of the 21st century, assets have remained higher than obligations, but there is an extremely large deficit to overcome now.  Meanwhile, the growth in assets minus the growth in obligations has only recently turned positive and there is no clear trend that it will continue to remain that way.  You would at least want the red line (growth in assets minus growth in obligations) to average around zero, meaning your assets are growing as fast as your obligations.  Since 2000, it has averaged -$181.9 million, a worrying trend.

Using the year 2000 as a base line, it is clear that obligations have grown much faster than assets, and continue to do so on a yearly basis. (see chart below)

pension2PSPP has historically achieved 73%* of its funding from investment returns.  It seems to me that those in the past have under-contributed to their pensions and are expecting those working to make up for the deficit.  The old eat the young.  If solidarity is desired, then it makes sense that those retired would see their pensions reduced (when their investments take a hit) as well as current employees seeing their contributions increase.  After all, we are all in this together.

The PSPP needs 6.3%* in investment gains yearly to achieve their goal, which its master’s have achieved over the last 4 years but not over the last 8.  I think they will be hard pressed to meet that target.  This all assumes that their assessment of life expectancy and age of retirement is correct as well.

Historically there were 4:1 employees to every pensioner in this plan.  Now the ratio is 1:1  That doesn’t sound very sustainable to me.

What are my friend’s options?

a) listen to the AUPE leaders and increase pension contributions and hope that a pension exists when he/she retires

b) quit and pull their money out which endangers the pension even more

c) save and invest and don’t rely on this pension

d) ???

I am not advocating that defined benefit pensions should be abolished.  I think that employers should honor the commitments made to their employees.  However, it is clear to me that the AUPE is not being forthcoming and honest with its current working members, those who it purports to represent.  Rather it appears that they are somewhat deluded by trying to save their own skin, which is not what people are giving them union dues for.

*PSPP 2012 Annual Report

** AUPE website

***All data taken from PSPP 2012 annual report

August – Transporation totals

I spent the month of August logging the kilometres that I traveled.  It was amazing to me to see how quickly using a car, or public transportation, or a plane can quickly dwarf any other distances attempted by using your own power to transport yourself.  I guess at the end of the day, it comes down to what decisions you make when it pertains to travel.
  Here are the totals for the month.  A few plane trips overshadow everything.

Total km traveled – 7951 km

  • Plane 65.8%
  • Car 25.2%
  • Public Transit 3.8%
  • Bicycle 2.5%
  • Motorcycle 2.0%
  • Feet 0.7%

Its amazing to me that I used my bicycle more than my motorcycle.  I usually used the car when I had to take someone else around or I had to pick up something not feasible with a bike or motorbike.  Now, the challenge is to use my bicycle more and more and more, and everything else less and less.