School of Thought

The answers discovered today for yesterday’s questions are guaranteed to be wrong for the new opportunities of tomorrow. So, the secret to Success is to begin with a creative thought and make lots of mistakes!

Creative Brain

Asking the right Question is much more important than having all of the right Answers.

At one time in the recent past, the Question: “What is found at the end of freight trains?” was deserving of the Answer: “Caboose”.

For one generation, that fond memory is now an antique safely archived in Railroad museums.

For our current, high-tech, digital generation, the Text message of curiosity to their friends to ask for an explanation might be in the form of “Cab—what?!?”

Question and Answer

Question: Why then do our formal programs of education test for a finite answer to a limited set of questions?

Answer: It is big business to sell the dysfunctional idea that one person has the answer to another’s question.

As a result, we have several generations of gifted and talented individuals waiting to receive guidance for their lives from a clueless academia. No one has the right answers for anyone, else. At best, our educators might be brave enough to explore what is right for one person, themselves.

It is the height of arrogance for anyone to believe they have all of the answers. The most important facets of life cannot be explained by mere mortals. The answers discovered today for yesterday’s questions are guaranteed to be wrong for the new opportunities of tomorrow.

We Learn By Doing the ABC’s

Since we learn by doing and the fun is in the doing, let’s focus on having fun as we learn. The journey to the choice of our individual destinations begins: right here, right now.

In fact, the secret to asking Questions is inherent in the discipline to practice the ABC‘s.

Attitude:  Whether we think we can, or can’t, we’re right. As a creative genius with an 8th Grade formal education, my Dad believed: “If a man made it, I can fix it.” And, he did. Time after time he accomplished the impossible.

Boundaries: Those are the fine lines defining our growth, to date. They are the demarcation between where we end and another begins. Self-respect runs unabated within. Respect is generously offered to those without. Mutually beneficial transactions occur at the border.

Commitment: Choosing one and foregoing all others is the first step to moving forward. Forsaking the un-chosen focuses all energy on the one most important choice. Whatever you can do, or dream you can, begin it. Boldness has genius, power, and magic in it.

Creative Thoughts Make MISTAKEs

In our human condition, we will make MISTAKEs.

This is the ultimate Question: aM I Seeking To Ask (and) Knock Effectively? Because, a MIS-take is simply a bulls-eye miss of an opportunity we TAKE.

Intelligent people are always ready to learn and their ears are open for Knowledge. To acquire Wisdom is to love oneself and people who cherish Understanding will prosper.

Life is simply an exercise in practice techniques:
» Amateurs practice until they can get it right.
» Masters practice until they can’t get it wrong.

All we do begins with a creative thought!

www.kimfoard.com

Price We Pay

Every business wants to be competitive in the marketplace and they know Price is one measurement of Value, subject to the perception and judgment of Customers.

The Magic FormulaBy eliminating variables, we arrive at one thing certain.

This is a story of three entrepreneurs: Eric the electrician, George the geek, and Lorna the landlord. The mystery for us to solve: Although unrelated by blood and marriage, how can they all have the same big sister, Iris, who requires their support?

Lucky for us; we have The Magic Formula as a guide to the answer. It is available by clicking the image above, or this Link. Much more than a guide, the Magic flows from an awareness of our resource choices: Time and Money.

Eric is an industrious fellow, who has a passion for service. He has completed years of formal training; has worked his way through the ranks of Apprentice, Journeyman, and Master Electrician; and, now wants to live the dream of being his own Boss. Captain of his own ship, Master of his own destiny, a Servant of the people: taking care of his very own Customers.

Since Eric has all of the tools and seed money necessary for starting his Company, there is no need for a Banker, as a partner. Based on the household budget, he knows that his family needs $40,000 per year, after taxes.

As a self-employed individual, he will pay both halves (Employer plus Employee) of Social Security and Medicare taxes, for a combined rate of 15.3% on all net profit of his business. Much trickier are Federal and State income taxes, which are calculated on a progressive scale. At the lower brackets of income and with benefit of tax credits under current law, income taxes are of minimal concern. He anticipates an effective total tax rate of 20%.

In business, Overhead is a gracious way of saying: There is a price for Eric’s dream. Technically, Overhead is the delivery system of value from provider to consumer. For the joy of having that magnetic sign on the side of his truck and walking into his shop each morning to switch on the lights, at a minimum, Eric will pay $60,000 each year.

Now we’re ready to do 4th Grade math. We will simply Add, Subtract, Multiply and Divide.

Because taxes take 20% of Eric’s total Net Profit “pie”, his after tax $40,000 must be 80% of that same pie. Thus, we Divide $40,000 by .80 to know that Eric needs $50,000 of Net Income for the year. To prove that this target is accurate, we double-check the numbers: First, we Multiply $50,000 by .20 to find that, indeed, Taxes are $10,000; then, we Subtract $10,000 from $50,000 to breathe a sigh of relief in knowing Eric has $40,000 for his family.

Before Eric even gets to Net Profit, he must first make Sales to Customers of $60,000 each year, just to cover his Overhead and “keep his lights on”. Therefore, we Add the amount of Net Income ($50,000) to Overhead ($60,000); Eric knows exactly his sales target for the year, which is also a representative value of his time to provide quality services: $110,000.

Remember that needy sister, Iris? Your suspicion is right. Her nickname is IRS, the Internal Revenue Service; the one in need of that $10,000, above!

Now, the fun really begins, because we are to the point of this story: Who pays taxes? Is it, really, Companies and Businesses, as the Governor of the State of Montana believes? What happens when Big Sister decides she “needs” twice the amount of support and will use new tactics to take it?

Let’s answer these questions by reviewing the components of The Magic Formula. Does Eric need $40,000 for his family? Yes. Is the effective tax rate under current law approximately 20% for those in Eric’s income bracket? Yes. Does every business have expenses of Overhead in delivering value to the marketplace? Yes. Since these are all accurate variables, we find ourselves with the ultimate question: From where does the money come? Answer: Customers.

Who are customers? That would be: You and Me.

We pay Eric for the value he provides to us: the value of understanding the dynamics of electricity and how to bring it into our homes for the benefit of our families. He, in turn, shares portions of this Price with Vendors, Government and his Family.

At this point in our story, some may ask the question: “Why doesn’t Eric just keep on working for his current Employer?” For those individuals who are unemployed, the answer is obvious. For the ones still employed, the answer is two-part:

1.) Eric has discovered a better way to light up the lives of Customers, which his current employer is unwilling to accept.

2.) Because of the Universal Financial Principle above, Eric’s base compensation from any company is limited to, approximately, one-third of what he produces for an employer; Taxes and Overhead take the rest.

Prices are not arbitrarily set by businesses. Every business wants to be competitive in the marketplace and they know Price is one measurement of Value, subject to the perception and judgment of Customers.

Now, what happens when big sister, Iris, wants more? Not just a little more, a lot more!  In fact, she wants to double her consumption. Let’s do the math.

Eric still needs $40,000 for his Family and he still has Overhead to pay. So, by using the structure of The Magic Formula, we can solve for the amount of Taxes and the new Price his customers will pay. $40,000 divided by .60 is $66,666 (Net Income) multiplied by .40 is $26,666 (Taxes), which leaves $40,000 for Eric and his family. If all of Eric’s business expenses (Overhead) remain at the $60,000 amount, his Customers will need to pay $126,666 for the value of his services.

From $110,000 to $126,666, we (Customers) pay $16,666, more!

Remember the rest of our cast of characters: George and Lorna? George provides computer services to Eric; and, Lorna provides the building space for his shop. What do you think George and Lorna will be doing to the price of the value they offer to the marketplace?

If they want to stay in business, they will be doing what Eric was forced to do: raise their prices, too. George and Lorna are part of the $60,000 in Overhead that Eric needs to pay each year. When that $60,000 amount increases, who pays? Yes, once again, the answer is: We the People!

This is for certain: We pay a price for everything.

www.kimfoard.com