Category: Personal Finance

The largest auto company in Britain at one time was called the Leyland Motor Corporation which eventually became British Leyland after being nationalised. In 1986 it became Rover Group.

It started in 1896 as the Lancashire Steam Motor Company in the town of Leyland and became Leyland Motors in 1907. The company was quite successful and in the 50’s and 60’s took over quite a few other auto companies.By the 70’s however things weren’t going so well. This paragraph is taken directly from Wikipedia

The BLMC group was difficult to manage because of the many companies under its control, often making similar products. This, and other reasons, led to financial difficulties and in December 1974 British Leyland had to receive a guarantee from the British government.

The Ryder Report was a report created for the British Government in 1975 that recommended bailing out British Leyland with approximately 1.5 billion pounds sterling which was a bit over 1% of GDP at the time. Failure to do so would result in the car company failing and about 1 million workers becoming unemployed. The report also suggested that the company chairman Donald Stokes should be replaced.

Under Thatcher there were more bailouts even though Thatcher herself admitted that the long-time viability of the company was very much in doubt. The market share had fallen from 35% to 16%.

“Closure would have some awful consequences. But we must never give the impression that it was unthinkable. If ever the company and its workforce came to believe that there would be no end to their demands on the public purse.”

Thatcher was skeptical of the ability of management to engineer a turnaround

“BL’s annual plans always forecast major improvement but every year things seemed to get worse…”

Thatcher on yet another cash infusion

“The political realities had to be faced. BL had to be supported … and, most painfully, we provided £900 million.”

Leon Brittan, a top official in the government of Margaret Thatcher

“The lessons of the British experience is don’t throw good money after bad. British Leyland carried on for a few more years, but they’re not there now, are they?”

British Leyland (now called MG Rover) went bankrupt in 2005. In the end most of the original jobs were lost and the only saving grace was that the job losses were spread over 10 years instead of occuring all at once. The cost was $16.5 billion US$ (in today’s dollars).

Summary

The bailout of Leyland was a complete waste of money.  Unfortunately the more I read about the great Canadian and American car bailout, the more I think that the taxpayer is going to get screwed and the jobs will be lost anyway.

Some other articles

Open Market

New York Times

National Post

The Canadian Capitalist recently highlighted two terrific Vanity Fair articles about Bernie Madoff.  For those who weren’t watching CNN or reading papers in December 2008, Mr. Madoff operated an “asset management business” (hedge fund) that was actually the largest ponzi scheme of all time. He took massive amounts of money from rich people, famous people (like Steven Spielberg), and numerous charitable foundations.  Apparently people were desperate to invest in his fund.

The two articles, which details who Bernard Madoff is, as a man, from the perspective of his victims and his employees are great reads (normally the only part of Vanity Fair I’m interested in is the photographs of naked celebrities on the cover).  What surprised me most about him was that, according to these articles, he basically had no personality at all.  To his investors he was smiling, benevolent “uncle Bernie” and to his employees and family he was a bully.  He would be around clubs and organizations where rich people would beg him to take their money, but beyond living “the good life” the guy seems to be more of a shell than anything.  He wasn’t flirtati0us, didn’t take much interest in recreational pursuits (other than apparently cheating at golf according to Donald Trump), wasn’t a big drinker and wasn’t passionate about religion, politics or other topics of interest.  He basically existed to be a blank slate to keep money coming in, and hide what he was doing from regulators.

When this story first broke, I was visiting my parents and we were glued to the TV as more information kept coming out about it.  These articles paint a sadder story of people who have gone from being “ladies who lunch” to having to work (or move in with children) in their golden years.

Some are painting Madoff as a devil who set out to defraud his family, friends and community.  I don’t have anything to base this on, but my feeling is that the whole situation probably evolved gradually.  He might have been running investments profitably at one point (in the 80’s or 90’s is the speculation), got used to being viewed as a “market genius”, took a risk that didn’t pay off, then instead of being upfront, he hid the loss.  Perhaps he was hoping to get back “in the black” then move forward again, or maybe he just couldn’t take the blow to his ego that he’d messed up.  At a certain point he must have thought “I’m never going to be back in the black, but I’m not a young guy, maybe I can keep this under wraps until I die then leave it for other people to unravel”.  One Warren Buffett quote I like is “You only find out who is swimming naked when the tide goes out.”  The recent market drop was the tide that went out and showed that Bernie had been swimming naked.

Some people have compared Madoff to Hitler (many of his investors were rich Jewish families) which is insulting.  Comparing someone who defrauded a bunch of wealthy people to a man who attempted the systematic genocide of a race of people is offensive.  Godwin’s Law certainly applies.

There has been a number of racist perspectives on the whole deal as well.  Some anti-semites have apparently been happy that the whole situation occurred:  both for discrediting Madoff, who is Jewish, and his victims (many of whom are Jews as well and often very committed to philanthropy).  This is a blatantly ugly attitude, however some Jews have also made very racist statements claiming that “it’s especially bad that Madoff did this ‘to his own people'”.  Come on!  There are good people and bad people of all races, genders and religions.  Thinking that someone is going to be a good person because they’re Jewish, or not take advantage of the Jewish community because they’re a Jew is ridiculous and naive.  Madoff is a man who behaved badly.  His ethnic / religious identity has nothing to do with that.

Beyond being more sympathetic to Madoff than most (although I don’t think he’s Hitler or the devil, I do think life imprisonment is probably reasonable), I’m also less sympathetic to his victims than most.  Given, any time you’re robbed it’s bad.  And, it bothers me when people think it’s ok for bad things to happen to rich people because their rich.    A number of investors with Madoff lost EVERYTHING (they gave it all to him and were living off of the returns) and went from being rich to being poor.  Even if these are people who don’t have a lot of experience managing their money, it was pretty stupid of them to put 100% of their money into one investment (no matter how good they thought it was).  People did the same thing with Nortel and with income trusts.  They’re happy to cash the checks in the good times, but start howling when their luck turns.  Grow up!  If you’re retired and don’t have enough investments with ultra-safe, conservative investments (like fixed income) to get you by at a minimum standard of living, then you’re gambling with your future (and shouldn’t get much sympathy if your luck turns).  Madoff was giving consistent returns of 10-12%, which tells anyone with a brain that there’s significant risk there.

That being said, it’s remarkably easy (although crass) to tell people who have lost on investments that they were greedy.  However, Madoff investors who lost it all were being greedy (there, I said it).

What has been your feeling about the whole Madoff situation?  Do you think spending the rest of his life in prision is a reasonable punishment?  Do you believe that he was acting alone?  Should investors be required to return money they withdrew from Madoff before the news broke?

It’s been a while since we did a scam post.  Fake reputation scams happen on-line and off-line and can be one of the toughest frauds to detect or avoid.

On E*Bay it’s well known that malicious users will build up a reputation by selling small, inexpensive items (paperback books are popular) or by running an honest-to-goodness real E*Bay store.  They will follow through with the transactions and get a large amount of positive feedback.  Then they make a number of fraudulent auctions / sales and not fullfill any of them.

One of the worst (or best depending on your perspective) parts of electronic commerce is you can usually abandon an identity.  This allows the scammers to then start doing the exact same thing again under another name.

Off-line a friend of one of my relatives got burned by the real-life version of this.  He ran a computer business, and started doing business with a man for the first time.  They did a sequence of transactions, each larger than the last.  Each time there would be something unusual about the transaction, but it would work out, and he would get paid.

It turned out the con man was feeling him out, determining what he could get away with, and the maximum order size the friend could handle.  Eventually it was time to pull the trigger and the con-man managed to make off with dozens of computers without paying for them.  It destroyed the computer store owner, who abandoned his business (and his marriage) and basically had a nervous breakdown where he wandered the continent sleeping in the back of his SUV.  He was talking at one point about trying to hire a hit man, which luckily friends talked him out of.

Since these sorts of scams work by gaining our trust, there’s no sure-fire way to prevent it other than to be suspicious of everyone (which would cause its own problems).  When the friend who got conned was relating the experience to me, he remembered clearly that with each deal it seemed a bit funny.  It can be a hard thing to say “no” to someone, or to admit that we don’t understand a deal that’s being proposed.  Some people will prey on this reaction to try and take advantage.

When I was trying to rent my condo, a man showed up who was interested in a rent-to-own and we talked about that extensively (he was going to do a sandwich lease where he rents-to-own from me, then rents to his own tenant).  Discussing the details, he was very accommodating (and tried to buy me dinner).  Later, he tried to change elements of the deal that he had previously agreed on.  When I pointed out that what he was saying was different than what he’d previously agreed to, his response was “I have to admit I love the way you think , very detailed too detailed at times , just kidding” (notice that in the same sentence he’s complimenting me, then telling me that I’m “too detailed”).  He told me about 5 times that he didn’t think we should involve lawyers in the transaction (and I told him 5 times that I’d be involving a lawyer in the transaction and encouraged him to do the same).  Throughout our interactions, he also told me repeatedly how much he liked me (while it’s true that I *AM* a very likable guy, it’s just creepy to say it out loud).  I kept asking him questions and he eventually told me it was “none of my business” (when I’d asked him who he was planning to rent to).  This was enough red flags for me at that point that I just killed the deal and kept looking for a normal tenant.  I could be wrong and maybe everything would have worked on with the rent-to-own guy, but I hasn’t regretted for 1 second walking away from it.

Years ago when I went backpacking across Europe an aunt told me to trust my feelings and if I was getting a bad vibe about a person or situation to just leave.  I’ve found it was good advice when traveling, and is probably good advice for business and life as well.  There are times when you’ll be nervous about a deal, just because it’s larger or different than you’re used to.  But if you’re honestly getting a bad vibe about doing business with someone, make sure the safe-guards are in place that they won’t be able to “take the money and run” (and don’t be afraid to just not do business with them if they fight you when you try to put those safe-guards in place).

Have you ever had someone gain your trust, then steal from or defraud you?

Dave Ramsey is a fairly well known personal finance celebrity who is somewhat controversial for his methods. His fans love him and his detractors can’t find anything good to say about him.  He created the Dave Ramsey baby steps and if you really keen – you can attend the Dave Ramsey Financial Peace University. It seems there are large numbers of people either for him or against him.  One of the terms which is often applied (or self-applied) to Ramsey is that of “financial expert”.  This article will take a look at Ramsey’s various methods to determine if that title is accurate or not.

In short I would say that Dave Ramsey is definitely not a financial expert.  His main field of expertise is debt reduction motivation which is he very good at so maybe he should be called a “Debt Reduction Motivational Expert”.  This is not intended to be a criticism since the “financial expert” label implies a high level of knowledge of all things finance which is pretty much impossible for one person.

Dave Ramsey debt reduction snowball method

Ramsey’s “snowball” method is one of his most effective strategies as well as his most controversial.  Basically the idea is that if you have more than one loan – you should pay off the loans in order from smallest to largest in terms of the amount owing and ignore the various interest rates.  Someone who had a car loan of $5,000 at 7% and a credit card debt of $9,000 at 15% should pay off the smaller car loan completely before paying any extra on the credit card loan.
This strategy is purely psychological – it is quicker to pay off the smaller loan and the person trying to get out of debt will be able to experience some debt reduction success which will enable them to then tackle the larger loan.  If they try to pay off the larger loan first they have a higher chance of getting discouraged (because it’s taking longer) and giving up.
Logically the loans should be paid off in order of interest – highest to lowest regardless of the size of the loan.  To do differently will result in higher interest costs.
I’m a pretty numbers-oriented type of guy so there isn’t a chance in hell that I would pay more in interest just for the pleasure of paying of a smaller loan first, but Ramsey’s results speak for themselves – I’ve read about many people who were able to pay off or reduce their debts because of his methods.  Bottom line is that you have to do what works – if the end result is that the debts are paid off (and they stay off) then you’ve won the debt battle.  It’s as simple as that.

Dave Ramsey “gazelle intensity”

Another one of Ramsey’s methods is his attitude toward intensity – he says that if you are going to pay off debt then you have to hate debt and do everything you can to get rid of it.  He calls this “gazelle intensity“.  I didn’t know that gazelles were all that intense but that’s not important.
I can’t argue with this strategy – whether it’s reducing debt, cleaning your house, getting shape or just about anything that is difficult – there just isn’t anything wrong with making it a top priority and getting it done.  Of course you have to be reasonable – eating sub-standard cheap food to save money is not something that a self-respecting gazelle would likely do (intense or otherwise).

Dave Ramsey – “Pay off debt completely before investing”

This rule is so extreme that he even says don’t contribute to a 401k if you get an matching amount from your employer.  This might make sense for someone who is drowning in debt and every penny is important but most people should go for the 401k employer match even if they are trying to reduce their debt.  Once you get a handle on your debts then starting an investment plan is not a bad idea – if you are not quite ready for investing you should still spend some time learning about the basics of investing.

Some would argue that if expected equity returns are higher than your loan interest costs then you should invest before paying off the loan.  However they are ignoring the different risk characteristics of different asset classes (or comparing apples and oranges).  Paying off debt is a guaranteed return like investing in a high interest savings account.  Investing in equities or stocks has a higher risk.  There’s nothing wrong with either of those investment types but you have to consider your financial goals, investment time horizon and risk tolerance when choosing where to put your money.  The other thing to consider is that most unsecured debt probably has a higher interest rate than the expected equity returns anyways (I assume 7% for long term equity returns).

Investment knowledge

This is the area where Dave Ramsey is not very strong – he continues to say that equities will get 12% return which is not very realistic and he makes a lot of basic errors on his radio show.  Another problem is that he recommends using financial advisors who are paying him for the referrals so there is a conflict of interest.  For all the good that Dave does – investment advice is not part of it.

Is Dave Ramsey a financial expert?

Not really – but he has helped a ton of people to manage and reduce their debts so if you need help with debts then he’s a great option.  Just don’t listen to any of his investment advice.

If you want to learn more about Dave Ramsey then go check out Dave Ramsey – Financial guru review.

Photo credit to Durotriges

Money saving tips are something you run across quite frequently if you are browsing in the blogosphere (or talking to my parents).  Whether it’s big savings like negotiation tactics for buying a new car, buying a used baby stroller or small stuff like making your lunch and creative uses for used dryer sheets – everyone has a suggestion for saving money.

Alternative income ideas are also a popular topic on many blogs – starting an online business, filling in surveys for money, freelancing, doing odd jobs around the neighbourhood are some of the suggestions I’ve seen.

The problem with a lot of these ideas for saving money and generating income is that they often involve a fair bit of work for a seemingly small return.  There is no question that you should take a good look at any activities for saving money/generating income with a critical eye and make sure they are worthwhile – you should also try to concentrate on the ones that are likely to be more successful (if you can figure that out).

I wanted to share my ideas on 2 concepts which I think should be utilized when evaluating income or saving opportunities.  These might help motivate you to start doing some of these opportunites if they are more beneficial than initially thought – on the other hand it might get you to reconsider some of the activities you are already doing.

Compare the savings/income with your disposable cash flow – not your gross income

Whenever I hear something like “lowering the temperature of your home by 1 degree in the winter will save you up to $400 per year in heating costs” I always have the same reaction…who cares?  $400 is not a small amount of money but it’s not enough to get me to want to freeze my butt all winter.  Same thing on the income side – if you could spend 20 hours setting up a website that earns 50 cents a day – does that sound like a good deal?  Initially it seems to be a big waste of time.

One of the problems with that reaction is that I’m typically comparing the dollar amount I can save (or earn) with a much larger number like annual family income which might not tell the whole picture.  I think a better approach is to try to estimate your disposable income and compare to that.

If you think about it – gross income is just a theoretical number – once you remove taxes and other contributions you only get paid a portion of your gross income.  Once you then remove all your basic living expenses ie mortgage, insurance, food, gas etc then you might not have much money left over (if any).  For some people the left over money might even be negative (this is not good).

In my opinion you should base your decision on whether to put some effort to save money/earn money on how much impact that money will have on your disposable income because that is the money that you notice.  Someone who has high income and low expenses will have a high level of disposable income and therefore will probably not benefit from spending time on small savings and small income streams.  Many people however, high or low income, often have very little disposable income and any increases will result in a significant improvement in cash flow.

So step 1 is to calculate disposable income – there are different definitions but I’m loosely just trying to calculate how much money you have at the end of the day after all your costs are met.  The amount you save each paycheck plus all completely discretionary expenses (ie nice restaurant dinners) could be assumed to be disposable income because you have a choice about whether it gets spent or not.

Let’s look at an example:

Joe makes $65,000 per year.
Here are some of his costs:

• taxes – $17,500
• mortage – $17,000
• insurance – $2,500
• car payment – $6,000
• bills (heating, phone) – $7600
• property taxes – $3,000
• food  – $4,000
• other  -$5,000

The total expenses for Joe are $62,600 which leaves him with a grand total of $2,400 of disposable income each year.  While this isn’t bad – it sounds a lot less impressive than his $65,000 salary.

So if Joe has the opportunity to save $400 on his heating bill – rather than dismiss the idea because $400 is only a small fraction of his annual salary of $65,000, he should consider that $400 will increase his annual disposable income ($2,400) by almost 17% which might change his thinking on turning down the thermostat.  He might still choose not to change the temperature but at least now he has a better feel for how much effect it will have on his financial situation.

When evaluating the potential savings or income make sure you use the same time periods

In a previous paragraph I mentioned spending 20 hours of effort to build a website which will yield 50 cents per day (after expenses and income tax) without any further effort.  One mistake which I’ve made in the past is to assume that 50 cents is an insignificant amount of money (which it is) and then incorrectly assume that many piles of insignificant sums of money will also add up to an insignificant amount of money.  In some cases that will be true but not always.

In this case the 50 cents per day will add up to $15 per month which sounds a bit better and $180 per year which sounds a lot better.  If we assume this income stream lasts for 5 years the current value of this income stream (assuming 3% inflation) is $824!

So now that we have done that calculation the question is would you put 20 hours effort to earn $824 over the next 5 years?  Depending on your disposable income, available time, your interest in that task and other factors – your answer might be no or it might be yes – but at least now you are analyzing with the right numbers (which look a lot better than the inital numbers).

This also applies to savings – What if Joe has the opportunity to bring his lunch 3 times a week for a saving of $3 per lunch?  $3 isn’t that much when you consider the effort involved in grocery shopping and making the lunch –  but if he calculates an annual saving ($3 each lunch x 3 lunches per week x 50 weeks per year) = $450 per year and compare that to his current disposable income of $2400 – it might not be a bad deal, especially if he combines his lunch making efforts with turning down the heat a bit.  🙂

Alternatively, rather than convert all your alternative income stream and saving amounts to annual figures – you could reduce your annual disposable income figure to monthly, weekly or even daily amounts if that works for you.

Joe might calculate that his disposable income is $6.57 per day so in that context – adding 50 cents per day of income or savings is far more significant than at first glance.

$ per hour – one common approach when evaluating savings or income is to calculate a $ per hour figure for said activity and compare it to your gross hourly wage at your job or some other figure that you deem appropriate.  This isn’t a bad approach but at a minimum you should consider taxes etc ie compare to your net hourly wage in the case of savings.  This is actually the initial approach I use but I combine it with the disposable cash idea.

The way I usually think of the $ per hour analysis is to calculate how much money I can save by doing a task myself (vs hiring someone) divide by the number of hours of my labour which give a dollar amount which I’m basically paying myself.  Since the gross numbers aren’t necessarily all that meaningfull, I find this analysis most useful when comparing to other tasks ie changing my own oil might only pay me $6 per hour whereas replacing a sink faucet might pay me $18 so it’s not hard to see which activity I should do first.

My family loves GICs. As a group we’re pretty risk adverse, with my dad being the “crazy risk taker” for being heavily invested in mutual funds over the years (I think I’ve stolen that mantle from him with my real estate and leveraged dividend ventures however).

Much like mortgages, the posted GIC rates in banks are for suckers. There are some techniques for getting top dollars on your GICs, which I typically assume everyone knows, but figured a post would be useful for those who don’t.

To take a step back, GICs (Guaranteed Investment Certificates) are analogous to CDs (Certificate of Deposit) in the US. You put your money into them for a set period of time (often 3 months – 5 years), it is insured by the government (like a bank account) and you are basically guaranteed to get your principle and the stated interest rate back. Because there’s very little risk, the return is quite meager. However, there are a number of ways to boost that return:

1. Ask. Usually just by asking they’ll increase it by 0.5-0.75%. They’ll be more accommodating if you have more money (sadly, such is life). If you have a wealthier relative and use the same bank / branch as them, often you’ll also get preferential treatment (mention their name)
2. Comparison Shop. Often the newspaper or various internet sites will show the rates, if they’re insured they’re all pretty much equivalent – go with whoever offers the best rate.
3. Haggle – If you want to stick with your home bank, tell them the rate being offered elsewhere and ask them to meet (or beat) it. If they refuse, often when you actually transfer the funds they’ll back down and try to get you to cancel the transfer and reinvest with them (assuming its a sizable amount). Don’t give in:  next time they’ll be more accommodating.

If you put money in a GIC, then need it later, you CAN break it, but there’s a penalty cost involved, and given the low returns this definitely isn’t something you want to do. If you want to have more access to your money (liquidity), you can set up a GIC ladder, which is just breaking a large amount of money into separate GICs maturing at different times. If you need the money, you get access to it sooner, if you don’t you reinvest it.

E.g. say you want to invest $10,000 in a GIC for 5 years. Instead, buy 5 GICs, each for $2,000 maturing at 1 year, 2 years, 3 years, 4 years and 5 years. When the first GIC matures, if you don’t need it reinvest it for 5 years. Now the longest you’ll ever have to wait for money is 365 days (assuming you won’t need more than $2k).

Negatives for GICs include that they’re taxed heavily, and inflation takes a big (hidden) bite out of them.  Personally, I just use a high yield savings account for funds that haven’t been put into a specific investment vehicle yet, which gives me complete liquidity.  But back in the day, before these were available, GICs were a (somewhat) decent alternative.

Ok, I admit that watching slide shows of your Mother-in-law’s old vacations from 50 years ago isn’t for everyone, however recently my wife and I spent a couple of evenings doing exactly that with my mother-in-law.  This frugal tip might be one of the lamest I’ve heard in a while so I will be offended if it doesn’t make the frugal Friday roundup which features posts such as this one.

How did we get into this predicament?

My mother-in-law used to do a lot of traveling in her younger days and took quite a few slides on her trips.  She still has all her slide shows and also owns a pretty cool slide projector and screen.  I have to admit that I really like setting up the screen because I was never one of the lucky kids in grade school who got to help the teacher set the screen up for a movie.

A couple of the slide shows were focused on my wife as a baby and a little girl which was pretty neat to see.  Some other shows had a lot of my wife’s older relatives in Europe – most of whom I had only met in the last 3 or 4 years).Most of them are quite old – 65-85 years old so seeing pictures of them from 40-50 years ago was very interesting.  My mother-in-law will be 80 this year and she had quite a few shots of herself in her 20s.

How do I get in on this exciting new hobby?

Personally I really enjoy watching old fashioned slides but you can accomplish the same effect by hooking your computer up to your digital tv – I don’t have a digital tv myself but I don’t think it is very hard.  Obviously most people don’t have access to slides and projectors so the tv option might be more realistic.  You can also buy digital projectors but they are pretty expensive at $600+.

I think the slide show idea only works if there are slides worth looking at – my MIL took some pretty interesting trips in her youth and took her pictures sparingly so we didn’t have to look at the same photo from 15 different angles.  The other great thing was that my MIL did have a few comments on some slides and trips but she didn’t go on and on about each photo.  It helps if you wait 50 years before doing a slide show of someone’s trip – that way they won’t remember as many details.  🙂

Getting slides digitized.

This isn’t exactly on topic but I got a couple of slides digitized for this post and thought I would share the experience.  Basically I took the slides to a photo stores (Blacks) and they said it would cost $1.99 per slide or $2.99 to make a print.   This seemed a bit odd since it’s far cheaper to order the $1.99 digitizing and then pay the normal $0.30 rate for printing – but it didn’t matter since I wasn’t getting them printed.

I only had a few slides to digitize so I didn’t bother shopping around – however I’m sure if you have more slides to do then it is worthwhile to find a better price.  Another option is to buy a scanner than can handle slides – that option is fairly expensive but if you have enough slides then you will save money.  You can also buy an attachment for your slr camera.  Both options are discussed here.

Similar trips

One of the more interesting slide shows we saw was a trip through Germany that my MIL took in the early 60s.  Germany is a beautiful country and it’s hard not to take some great photos if you are visiting there.  On that trip she went to a lot of the same places that we went to when visiting Germany last year.  One of the great things about Germany and I’m sure this is true of most of Europe and Asia is that there are a lot of old buildings and cities to look at – the churches in particular are very impressive to look at and are quite old – even though some of them were rebuilt after the war.  The Cologne Cathedral is Germany’s best known church but there are at least a half a dozen other churches in the country (and maybe a lot more) that are almost as good (and with less crowds).

Here are two of the destinations on my mother-in-law’s trip in 1961 that we also went to in 2008 – I’ve included photos from her trip as well as ours.

The Rhine

Yes, the famous Rhine River is in Germany and there is a very scenic drive which we loved because the road was right beside the river so there was great scenery all the time plus a plethora of old castles along the river which has historically been one of the more prosperous areas in Europe.  Some of the castles were just ruins and others are very well preserved and some are even hotels.  Here are two photos of the Rhine – one from 2008 and the other from 1961.  Not the same view unfortunately.

Rothenburg Ob Der Tauber

Rothenburg is a fascinating place and very well preserved.  There are lots of little towns in Germany with old buildings and parts of walls remaining that once surrounded the town.  Rothenburg is all old buildings and has its complete fortress wall – parts of which date back to the Roman empire.  If you ever get a chance to see this town then do it – accomodation is a bit more expensive than most small cities but it’s not too bad.  You could easily spend a couple of days there checking out the wall and various buildings.  Here are a couple of photos from the town square.

In the 1961 photo – the building on the left is the City Hall.  In the 2008 photo it’s the building on the right.

This is one of the gates to the city – the only photos we have of exactly the same scene from both trips.

And last, but certainly not least – one last photo of my Mother-in-law – she used to be a nurse in the Canadian Air Force. For some reason I’ve always assumed that everyone in the airforce flies on airplanes all the time but apparently that is not the case. She did however get to go up in a fighter plane and I thought this photo was pretty cool.

I’m always interested in negotiation tactics. Some people recommend things like mirroring the other person’s body positions to create rapport or trying to hypnotize them by using words that sound like other words and nonsense like that. Maybe these things work for some people, but they seem too silly for me to even try them. These techniques should work for anyone (no need for acting abilities, Jedi mind tricks or anything). Although I’ll discuss these in the context of customer service reps (those difficult people you have to call when you get overcharged on a cell phone bill or your Internet service is down), they should be fairly transferable to other contexts.

1. Make it hard for them to say “No” – If you say “Isn’t there any other promotion you could put me on to save me some money? Please?” it’s too easy for them to say “I’m sorry, but no”. You aren’t on Jeopardy, so don’t phrase it as a question. Anything you ask for, make it a statement “I’m not willing to pay more, I want something comparable to the deal I’ve been on for the last 3 months.” They may still say no, but it’ll be a lot harder for them.
2. Keep repeating yourself – It drives me NUTS when people do this to me, so you might luck out and have someone like me on the other end of the line who’ll get frustrated enough that they’ll give you what you want. Remember, they can’t hang up on you. Every time they “explain” their policy or say no, repeat your request. Don’t be a jerk (hear them out when they respond, if you cut them off and get aggressive, they’ll just get aggressive back). Use different words, but keep making the same request:
   • MC: Hi! I got a phone call the other night saying my phone & Internet promotion is ending, which told me to call you to learn about your current promotions.
   • CSR: Yes sir, unfortunately the discounted rate you received for your first year is ending, so after June 1st you’ll be paying $100 / month instead of the $80 you’ve been paying up until now.
   • MC: I see. So what are my options for promotions?
   • CSR: Unfortunately sir the promotions are only for new customers, your rate will be $100 / month.
   • MC: Ok. The message I got said there were other promotions you’d tell me about though. Ideally I’d like something cheaper than the $80 / month I’ve been paying.
   • CSR: Sir, as I just told you, there aren’t any promotions you qualify for.
   • MC: <friendly laugh> well, the computer voice told me something different so I don’t know who to believe. What’s the promotion if I was a new customer?
   • CSR: Still the $80, but unfortunately you don’t qualify for that.
   • MC: So, if I cancel my service then ask you to reconnect me I can get service for $80 / month?
   • CSR: Well sir, you don’t want a service interruption do you?
   • MC: No really, but I’m sure you don’t want to have to send out a technician twice and disconnect me, then reconnect me. For a $240 savings over the next year I’m willing to go without service for a couple of days.
   • CSR: <muttering under his breath about how much he hates me> Ok, I’ve put you in at the new customer rate. Is there anything else I can help you with today?
   • MC: Yes actually…
3. “Shop” reps – This was a clever idea I came across a while ago, but the plan is if you get someone who won’t give you what you’re looking for (after you’ve tried the first two techniques), thank them, hang up, and hit redial. Get a new rep and repeat the process. Reps are given latitude to deal with customers, so if one is being too stubborn, find some else to deal with. I’d personally be in no mood to get back on the phone after I waited in their queue for 20 minutes, then just spent 15 minutes nagging another rep for what I wanted, but when we’re talking about savings like $240 / year, it’s time WELL spent. One way to also justify this to yourself is every call is costing the company money, so it may be an irritation for you to get what you want, but you ARE costing them money at the same time.
   • One idea I had after reading “The 4 Hour Work Week” was to hire an off-shore personal assistant to argue with companies to get your fees reduced. There’s something delightful about the idea of hiring someone in Mumbai (to save you time) to haggle with the people the company has hired in Mumbai (to save them money).
4. Keep records of your conversations – In his new book Ramit Sethi uses this as a way to blow away reps. Every time he calls a service, he keeps a spreadsheet with a record of the date, the name (and ID) of the employee he talks to, and a summary of the conversation. When he goes over his past interactions with the company, reps often realize that he’s there to play ball and give him what he wants. I suspect that getting a rep’s name and ID number at the beginning of the call would also encourage them to do whatever they can to help you.
5. Try non-traditional avenues for contacting the company – Years ago (at the end of 2001) when I had a problem with my Sprint cell phone, I used a service (I can’t remember the name, it may have been Complaints.com) that would post your complaint on-line, help you structure it, plus send it to the head office of the relevant company. They were MUCH more helpful resolving the issue then their service reps had been (even though I’d escalated it to a “manager”). More recently I had problems with Primus, and kept getting the run-around from the off-shore reps. Finally I got frustrated enough that I called their business support line. The woman I talked to initially told me that line was only for business support, but after I told her how much trouble I was having with the residential support line, she fixed things for me.

Some things might work for other people but don’t work for me, including:

1. Getting angry – Customer service reps are humans (for now, I’m sure robots will replace them soon enough). Perhaps justifiably, when you get angry at them, they get angry right back. I think its fair to be frustrated with a company and to be upset, but often the person we’re talking to had NOTHING to do with the problem (and they’re likely to get annoyed if you start barking at them). I think the above approaches are FAR more effective than raising your voice or starting to curse.
2. Threatening to take your business elsewhere – This is something that MAY be effective to work into the conversation (by telling them about competitors’ superior deals or sayings you’re “thinking about leaving”). If you throw down the gauntlet and say “Do X or I’m going to terminate my service”, there’s nowhere to go if they say “we can’t do X”. They’re called you and you either back down (at which point you might as well get off the phone and call back to talk to someone else – it’s clear you’re bluffing), or follow through on your threat (at which point you’re now in the market for a new service provider, I hope they’re better than the old one).
3. Asking to speak to a manager – Apparently reps just hand the phone to the person next to them who pretends to be a manager. I haven’t gotten better responses from anyone I escalated issues to compared to the front line people (other than on tech support calls, the front line people just follow a script and the people they can escalate to are the ones who actually know what they’re doing).

What things have you found work or don’t work for you when negotiating with company reps on the phone?