Tag Archives: poker

Very interesting article from a counterpoint. The Lottery Class

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I have always believed in counterpoint, or whatever the proper name is. I define it as reading from someone or something that is totally opposite of what I believe in. I do this for a few reasons, first to see where their point has logic so that I don’t become completely one sides. Also to see what is in the mind of the person I may one day debate.

This year, as you know, is a presidential election. I am a republican, I have always voted republican, and I plan to do so. I simply don’t believe that the government should be in our personal lives as much as they are. And every democrat I have ever heard wants the government to have more control, more rules, more of my money, and do more things that I disagree with.

Now that all of this has been said democrats OFTEN come up with interesting points. I have been a subscriber to the MoveOn.org newsletter for over 4 years now, but recently I have have been reading and writing blogs, one that I found early on, and is full of good info is one by Jon Taplin. I will say that most of the time I totally disagree with him. But when he is just stating facts, his facts are very interesting. Today he posted an article about ‘The Lottery Class” You will notice something VERY interesting. The poorest people spend over 5% of their money on the lottery. These people also spend at least 5% of their income on transaction costs that the rest of us usually get for free. I mean, they pay to cash checks, then they pay to buy cashiers checks. Also many of them pay a huge amount of their income to very high, and often abusive fees for borrowing very small amounts of money.

I have never been able to understand the logic that many of these people have. I had a good friend that was like this. Was always borrowing at 20% per month interest rates and such, he never had money and over 10% of his income was going to these things.

About a week ago YouTube featured a video that was made by and about this subject. It was crazy, but so real in the subject matter. Please watch this video. It helped me understand this underbelly of our economy a bit more.

[youtube=http://www.youtube.com/watch?v=iAKJKBCyPUY]

Now what should be done about this. Well first off even if rates were lower these money loaning companies would be still highly profitable. Here in Arizona they are getting ready to regulate these much more. I am PRO government regulation that protects people, I am against government regulation that makes the burden on all of us higher, such as having to file a Tax Return.

Lottery’s are almost always ran by the government and the profits go to the government at the expense of the poor. State and local government have gotten very used to the money they receive from this. (Not to mention the 8% or so that the place selling the ticket gets) Now you should not totally get rid of the lottery because a certain amount of our society will resort to illegal betting to get their fix, but you CAN have the government stop promoting it. They can stop all forms of advertising, they can stop listing the numbers on the news broadcasts. You could also limit the number of places sell it, to say only places that have a liquor license. That would remove the kiosks in the malls. And of course they should remove the automated vending machines that people under 18 use to buy the tickets.

I have not played the lottery in a decade or so, and in my whole life I have spent under $50 on tickets. But the lottery is such a rip off, they only pay back 45% or so of the money to the winners. And even when they do that the government takes 40% of the winnings of major winners in taxes. Basically half of all money spent on lottery tickets is a donation to the government, and comming from the people who can least afford it.

That being said I am not so strict on gambling. Games of skill such as poker are much more fair, you can have a positive expected return based on your skill. And games that payback almost all of what they take in are better, they are more like entertainment. For example craps, if you play the passline, pays back about 98%. So if you bet $10, and do it 100 times (Which would take HOURS), on average you will only lose $20. Sounds like a lot of fun for a small cost. Black jack is about the same if you play correctly. Even slots are MANY times better than the lottery, though MUCH more boring.

In the end people need to think a lot more, keep their eyes and mind open. Too many people walk around, close minded, they do things in the old ways and get the old results. Poverty and being out of control of their life.

How do you value the worth of a company or person?

Business, concepts, Entrepreneurship, Investment, Money, , , , , ,

So I am going to take a break from the series that I am writing because I have a topic that I really want to talk about.  I would love to get some input from my readers, so please leave a comment.

There is a website called Networth IQ, this website is about keeping track of your income, assets and debts.  Then over time you will be able to track how your networth is doing.  When you track something you focus on it more and then it starts to improve.

Now after using the site, I did expect a bit more.  My most valuable asset is my businesses and there is not even a place to enter your business so I put it in other assets.

To point of today’s blog is to ponder the question of how to value a small company.  When you are a public company the value is usually what someone is willing to buy it for.  Of course most companies will really sell for the market cap, this is because many people who hold the stock think it is worth more than the current price of the stock, so if you wanted to buy the entire company you would have to buy these shares at a higher price.  So even this measure of market cap is not a real value.

For me, I own a few companies.  The two with the most real assets are my tile business and my computer business.  The tile business has about 60k worth of inventory at our landed cost, but we have a contract to sell this tile for 150k to a buyer, we also have exclusive import deals and exclusive sales deals that makes our company worth more.  So how do you value this company?  Do you do it on the cost or the sales price.  What about the deals, do they count?

Next is the computer company.   The actual assets of the company are fairly small, this is because the cost of computer hardware always falls so we keep very little in stock, we do have at least 20k tied up in tools, furniture and the computers that we use in the business.  But then we have some very valuable assets.  First we have connections and relationships to great suppliers, built up over a decade.  Next we have over 3000 historic customers, we have over 1000 people on our mailing list and over 400 resellers on our reseller mailing list.  Many of these people will usually call us up when they are ready to get a computer.  We have systems and processes in place that took years to figure out, so that things get done right and the on time.  We have pricing models set up, and vast experience.  Almost all of this is heavily documented.  We have many domain names and websites, together these get about 200-300 unique hits per day.  So how do you value all of these things.  With these things we can design a system and send out a mass email and in a day we will have orders coming in.

Now lets take this same idea to individual people.  People are much like a small business like my computer company.  We have connections, we have systems for getting things done, we have our experiences and mindsets.  You also have your education and knowledge which translates directly into ability to make money.  There are some people who have assets and these assets took a decade or more to get.  While there are others have the tools and knowledge to gain those same huge assets in a very short amount of time, even though they may not currently possess those assets.  So, networth is important but it is not the most important thing.

I think of it like poker.  Good poker players treat the chips in from of them like ammo.  Some times you take risks and it does not work out and you have less ammo.  But good players know how to play, they know how to win because they can read other players, they know things that others don’t.  In the end they usually win, but of course there is always luck and sometimes they fail.  But even when they are down they know how to pop right back up.  The have the connections to get money and the knowledge of what to do with it to earn more. During the game the value of what you have in front of you is not nearly as important as your ability to turn that money into something larger.  But at the end of the game it is the money sitting in front of you that decides if you won or lost.

Networth is much like this, if you want to be the really big winner at the end, sometimes you have to go “All-In” and risk it all for a great return.  Most people play it safe, they never lose big but they also never win big.  And in life the bets are never 50-50, if you know what you are doing most of the time the chances are way in your favor.

Tell me what you think please.