Liking work, loving to learn

February 12, 2016

Being an independent wealth manager is not all that glamorous, there’s plenty of work involved. Much time has to be devoted to due diligence on investment products that seek to grow a clients’ net worth and insurance programs to protect them from losses. Being an entrepreneur, one must spend time not only working “in” the business, but working “on” the business as well.

I don’t mind hard work and learning. It took me eight years to finish college because, along the way, I had 15 amateur and 38 professional fights. A fighter’s life is not an easy one. You get up and, most mornings, run 4 to 6 miles up and down hills. Afternoons are spent in inner-city gyms jumping rope, punching bags, wrenching incline sit-ups and, best of all, duking it out with some highly skilled boxers.

But it’s not all hard work. There is some glamour as well. I had 13 fights in Madison Square Garden. I fought in London, the Bahamas, Port-of-Spain Trinidad, Las Vegas and many other venues. In 1975, the year that I graduated college, I was rated the #9 heavyweight in the world and #6 in the US.

In a recent interview on WBGO radio, Doug Doyle asked, “How did you have so many tough fights and still look like a handsome guy?” The answer was, “I knew how to duck.” Which is the short answer, but more importantly, as I explained to him, “Boxing is like a roller coaster. It’s fun on the way up, but not on the way down. The people ranked ahead of me in the 1970s were named Ali, Frazier, Norton, Foreman, Lyle, Bonavena, Quarry, Shavers, et. al. I wrote my swan song on the sports page of the New York Times which the editor titled, “How a Young Boxer of 18 Became Old, Tired, and 28.”

So, I like to work and I love to learn. A few weeks ago, I flew to Boston to attend a business coaching seminar sponsored by a life insurance company. There was little product discussion, which would qualify as working “in” your business and, there was a lot of coaching and general information which is working “on” your business. One speaker provided some valuable and entertaining content.

Moshe A. Milevsky, a tenured finance professor at the Schulich School of Business at York University in Toronto was the keynote speaker at the meeting that was attended by more than 300 financial planners from around the country. The title of his talk, borrowed from his new book was, “The Seven Most Important Equations for Your Retirement: How to Use Them and the Stories Behind Them.”

While he was speaking, there was a large screen above him that displayed a complicated calculus equation. Professor Milevsky began, “Towards the end of the 17th century, politicians and bureaucrats in the City of London were facing a problem not unlike the one faced by many aging cities in the early 21st century. For years, they had made promises to pay lifetime pensions to their residents, but hadn’t bothered to properly estimate what those liabilities were currently worth, or how much money to set aside to pay the pensions. In the same vein, insurance companies were offering individual annuities to people of all ages, but were charging them a flat fixed price regardless of how old or how young they were.”

Milevsky continued saying that various kings and queens were in the habit of borrowing money from their loyal subjects with a promise to pay them back with a lifetime pension, but had similarly never bothered to set aside or compute reserves to cover those payments. Does this sound familiar?

The professor then brought up the name of Edmond Halley, yes, the astronomer for whom the comet is named. Halley, who was already known and respected for his work in astronomy, was 35 years old when he tackled the pricing of individual annuities in 1690.

Milevsky speculated as to why a famous astronomer would become interested in working on the morbid problem of determining mortality rates. Perhaps it was because his father, a wealthy aristocrat and businessman, had recently died as a result of the Rye House Plot to kill King Charles II of England.

He next told the story of Lenny who had a friend with a problem. Lenny’s friend had invested some money in a bank in Pisa, Italy that had promised him steady stream of interest at 4% per month. Rather than letting the money sit and grow, Lenny’s friend began withdrawing large and irregular sums of money from the account every few months. To make a long story short, Lenny was approached by the friend and asked how long the money would last.

If this were today, one could take out a calculator and easily make the calculation which is known as a “present value analysis.” But Lenny didn’t have a calculator because this was 800 years ago and his name wasn’t Lenny, it was Leonardo Fibonacci born around 1170. Fibonacci is credited with recognizing that arithmetic with Hindu-Arabic numerals was far simpler and more efficient than were Roman numerals.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for the individual.
Randy Neumann is a financial professional with and securities offered through LPL Financial, member FINRA/SIPC.