Sunday 15th May, 2005


The costs of failure

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Money Matters
with Raziah Ahmed

My daughter who returned from Japan recently, was bubbling, (or is it bobbing?) with the amount of time she spent bowing to other people with the words “origato gosai mas” (Japanese for “thank you”). It was a quite a culture shock!

In the West, we don’t bow, we shake hands, and spend endless hours in board rooms and think tanks, strategising on corporate positioning, creating the next wave, and best in class practices, in what I sometimes call “cut-throat capitalism.” Is it any different in our personal planning, in our desire for financial independence?

It must be different, I think, because personal planning is really about personal fulfilment. And corporate planning is more about the “fulfilment” of the pockets of shareholders. It is the raison d’etre for business, but human beings hover in a different personal quest, it is a quest for happiness.

The reality is that easy access to goods and services make us comfortable, and when we are comfortable we get happy. It is also somewhat of a rule of thumb, that the best goods and services are more easily available to the best educated.

In every discipline whether it is financial planning, operations management, marketing, sports, the works, the “informed” starting point is the working of the strategic plan.

Thomas and Strickland, in their book “Crafting and Executing Strategy” say that there are five interrelated tasks in strategic planning. They are: forming a vision, setting objectives, crafting a strategy aligned with desired outcomes, efficient plan execution, and continuous evaluation and improvement. These can certainly be applied to our personal financial agenda.

The Japanese call the process of continuous improvement “Kaizen,” but they also use a more refined expression: takumi, which refers to a broader dimension than quality, a deeper process than education, and a more perfect method than persistence.

The reality is that intricately waived into the whole process of planning is the cost of failure!

The cost of failure is often not considered in personal financial planning. But it exists!

Let us look at the cost of divorce. Divorce is a learning experience, and a number of other things, but it is also a failed marriage.

Aside from the legal fees, the value of the labour of two people to build a home, buy furniture, motorcar, create savings for education, create intangible assets such as insurance etc, is suddenly split into two, and often not equally.

Apart from these external costs, there are internal costs, medical bills—anxiety pills are expensive—disrupted education, loss of self esteem and a host of emotional troubles, which extract a tidy sum from the budget (not accounted for in GDP—gross domestic product), and time away from the job.

Let us examine some external costs. What is the cost of relocating? One partner will have to pay for a new place to live, another set of furniture, TV, DVD, toaster, fridge. One partner may move into a new relationship, more children, pets, and greater expenses.

My point is that that in financial planning we have to factor in the costs of failure, disappointments, and bad deals.

No! You do not have to plan to fail, but may I submit to you: if you fail to plan, we have some Trinidad expressions that will apply: “crapaud smoke you pipe” and “you dogs dead !”

No! I am not an advocate for anyone to hold on to a bad relationship—sometimes you have to just walk away! But I am an advocate to “bowing” to power greater than dimension, deeper than logic, and more perfect than persistence.

—Raziah Ahmed is a registered financial consultant

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