Is debt worth the risk?

It is ironic that we have a government running up billions in debt in a few short years. Ironic because the same government is limiting our ability to borrow for housing by applying rules to reduce the amount of borrowing capacity.

I believe we should lead the way before we criticize our government, but the Boxing Day sales are probably the first chance we get to see that the coming year is going to be no different. 

Each year (and it gets earlier every year), the Boxing Days sales present either year-old products at clear-out prices or products that are marked up sufficiently to allow a Boxing Day sale to not interfere with the bottom line.

Yep, we fall for it every year and black whatever day it is where we are even willing to trample people to death to get the next bargain we can’t afford.

The solution to our limit on how many “deals” we can purchase is to sell us credit. Credit is big business.

Everywhere you go now, whether it is weekly payments to lower the payment number or extended terms (often beyond the usable life of the product), we see forms of credit being marketed to us. Make no joke about it, it is big business.

As the banks pitch the high net worth clients fancy sounding investment opportunities with mediocre returns, you can bet your bottom dollar that if you invest in the scheme a lot of money goes to their credit card clients who gladly thank them with an almost illegal rate of return at close to 30 per cent. 

Yet, just like the government, there is no concern for the consumer… just pay it back later. By then, we will have that corner office, the BMW and a pay cheque to match.

The only problem (almost every time) is when that plan doesn’t work out.

Then, debt is like a disease. It eats away at your very core. It forces you to compromise important decisions. It is no different than any other addiction, and the road to recovery is always long and painful.

If you asked someone who has recovered from significant consumer debt if those purchases were worth it, they will probably tell you “no”. 

Is the government right to make decisions for us? Absolutely not in my mind. At least not until they get their own borrowing house in order and even then, it is nothing that a government should be regulating.

As long as they sell us lottery tickets, why the heck would they be worried about how and why we borrow money? 

In short, the risk of struggling to pay back debt is not worth the benefit of buying a product early.

Take a lesson from your grandparents and save first. The purchase is so much sweeter then.  


Ignorance Is not bliss

You could consider ignorance bliss, but one thing it is not, is a disease.

You might be forgiven for thinking it is when we hear time and again of politicians who are called in front of the ethics commissioner for various wrongdoings.

Ignorance is pure laziness in most respects and, in politics, I would suggest it is even 100 per cent laziness. 

All the guidelines for conduct at a political level are available to every politician. Whether they choose to read them or not is a matter of priority for each individual.

If they choose not to, it is a conscious decision to support the lazy option. 

When I was in municipal politics, it was very clear what was expected of each individual as a councillor, including not accepting Christmas gifts or such from various people who were, or would likely be, transacting some form of business or relationship with the municipality.

When one runs for office, it is incumbent to become familiar with those rules and regulations in order to mitigate potential challenges in the future. 

On one occasion, I called the editor of the local newspaper to advise her that I would be in a conflict of interest at an upcoming vote and explained why.

She was shocked that I would expose myself willingly to what became a front-page story. In reality, the story had its day in the sun and died a quick death because I was doing the right thing.

What is frustrating is that a group of what we would assume are well-educated, bright people lining up at the ethics commissioner's office to get their wrist slapped and, in many instances, “apologizing” publicly to go back and do it again. 

Bottom line, ignorance is laziness not bliss.

Downfall of the middleman

In the Industrial age, it was normal to have a “jobber” running around the world cutting deals with manufacturers on products.

Subsequently, he would move them by the trainload to a wholesaler. That wholesaler would then use regional distribution systems to move the products to a retailer.

All that has largely changed with the advent of the Internet.

Not all industries have adapted to changing demands however.

Having been involved in real estate for approximately 20 years I am more than familiar with the cry of the consumer that realtors gets paid more than their value.

But do they really?

Let me try to explain why your real estate fees are very varied, but also, to some of you, perceived to be high.

Many people may have owned shares in Cendant Corporation, a large organization based in the New York area and owned, among others, by the real estate company known as Coldwell Banker.

Typically, shareholders have a desire for one or perhaps two things:

  • asset appreciation (shareholder value)
  • cash flow (dividends).

The AGM is the place where the shareholders can express their opinion and demand better performance.

Cendant split into four organizations (to serve its shareholders better and reduce conflict), several years ago and the resulting real estate focused corporation, Realogy, now owns several real estate companies, including Coldwell Banker, Century 21 and Sotheby’s. 

If we simply look at Coldwell Banker Real Estate LLC, it is a parent corporation whose shareholder is Realogy. Of course, that shareholder wants to see a profit, so at the AGM, who is shouting the loudest? Realogy of course. They, rightfully, demand performance in terms of shareholder value.

Coldwell Banker Real Estate hence is required to make a profit and so in Canada, we have Coldwell Banker Canada Operations ULC. It is likely mostly owned by Coldwell Banker Real Estate LLC and is essentially required to make a profit or improve its shareholder value to its parent, Coldwell Banker Real Estate LLC.

Now, we already have three required layers of margin… Coldwell Banker in Canada, Coldwell Banker Parent Corporation and Realogy, a public corporation that you may be a shareholder in.

But it does not stop there…

You can, if you choose, buy a franchise in Coldwell Banker Canada (or any of the other real estate offices that Realogy owns for that matter) and start to make profit for yourself. Not forgetting that you owe a sizeable portion of that profit to the Canadian HQ of your chosen brand.

OK, We are up to four. Now the devious and greedy realtors gets involved. 

If there is any concern that realtors are gouging for their services, it is simply a facet of the way the system is set up. If you don’t understand that, read the article again.

If ever you complain about real estate commissions, you had better make sure you don’t own stock in any company that has a real estate corporation as one of its assets because you are in fact a perpetrator.

Additionally, while we are on the subject, if you own shares in an oil company, don’t ever complain to me about the price of gas at the pumps etc., etc.

I know it is confusing, but give the realtors a break. Probably 70 per cent of their efforts are going to making other shareholders money in this archaic consolidation. 

To make matters worse, guess who is on the hook when the shareholders demand that money needs to be saved? The realtors, who will typically get less service for their fees. 

Why write about this today?

Because I think the economic target for 2018 is antiquated layered systems of corporate margin that only serve to provide a service that is burdened with top down fees.

In 2018, one of the biggest things I am excited about is blockchain technology. It may be the solution to monopolistic industries that are protectionist of their systems and services.

If you don’t know what block chain is, I would encourage you to at least do a Google search and get a basic understanding. It will have some impact on the real estate community, but other industries are a much bigger target for blockchain.

While blockchain may not reinvent real estate services it certainly will impact the way we do business and who no longer will make fees along the way.

Happy New Year.


Not Santa-style delivery

It is Christmas (almost). Every post office you go to has a pile of boxes on the counter and an even bigger pile of boxes in the back room.

Our mail boxes are stuffed with notices to go pick up the boxes as soon as possible and I can imagine why. There is a vast amount of cardboard heading to landfills around B.C. at the moment.

When I order online, I always assume when I pay for “delivery to my door” — a contract I am not involved in, since it is between the shipper and the courier company — that I will in fact get a parcel to my door.

It never has been the case with Purolater. The company is largely owned by Canada Post (91 per cent) and to a lesser extent, Kelowna businessman Barry Lapointe (seven per cent). Why our government ever felt it should buy a private courier company, goodness only knows.

Frankly, some good old bureaucratic management is at play — not unlike a nationalized corporation such as Canada Post.

When I lived in Peachland, Purolater was the only company that would not deliver to my door — despite the contract that I agreed to with my supplier.

According to them, I was out of their service area, so why did they agree to do a door-to-door delivery in the first place? The illogical rationale always ticked me off.

If they drove up the Connector and turned left at the Trepanier interchange, they would drive for two kilometres to deliver parcels.

However, turning right and driving one kilometre was out of the service area. Computer program? Administrator in a black suit and tie? Idiot? Who knows? But I thought it would be over when I moved to Kaslo.

Sadly, that was not the case. This Christmas season, I have parcels coming from various parts of the continent. After tracking one of the parcels and seeing projected delivery dates, I was excited. I was even more excited when a local company called me to ask if I would be around on Friday so they could deliver. 

Then Friday came. I received another call. “Where would I like my parcel delivered?" 

My obvious reply was to my house. Apparently that was not an option.

My options were Nelson, a two-hour winter round drive or Balfour, a one-hour winter round drive. Frankly, if I had a private plane, I would rather fly to the provider and pick it up personally.

So here is my thought!

As the company falls into lazy and unproductive habits like “partially delivering parcels to your door” and becomes less consumer centric, disruptors will erase them from the face of the planet.

I am pretty sure I am not the only person who is ticked off by the call from Purolater suggesting my door-to-door delivery is ready to pick up — 80 km away.

More It's All About . . . articles

About the Author

Mark has been an entrepreneur for over forty years. His experience spans many commercial sectors and aspects of business. He was one of the youngest people to be appointed as a Fellow of the prestigious Institute of Sales and Marketing Management before he left the UK in 1988.

His column focuses on ways we can improve on success in our lives. Whether it is business, relationships, or health, Mark has a well-rounded perspective on how to stay focused for growth and development.

His influences come from the various travels he undertakes as an adventurer, philanthropist and keynote speaker. More information can be found on Mark at his website www.markjenningsbates.com

He is a Venture Partner with www.DutchOracle.com a global Alternative Investment company.

Mark Jennings-Bates:
[email protected]

Photo credit: www.SteveAustin.ca 

The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.

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