Author: A.T.

From Jim Harbaugh:“I recently encountered another postal nightmare. On 11/3/97 I shipped a one-pound parcel priority mail and insured it for $100.00. The total distance to the addressee was 225 miles. After 3 weeks I called the addressee and they said it had not been received. I took my insured receipt and went to the post office. They won’t talk to you if the interim time is less than 30 days. So on 12/3/97 I went back to the USPS. They wanted me to provide ‘proof’ of what was in the box. That’s a real joke, huh!!! I had to get a picture from a catalog and give it to them. (This really proves something??) They filled out some stupid bureaucratic govt. form and sent it to the addressee, who was supposed to respond. Another 2 1/2 weeks went by. (They didn’t respond). The USPS was asking me to place long distance calls and try to get the addressee to send me a letter or FAX stating they had not received the shipment. I refused to waste my money chasing their problem. They were telling me they would not search their records for a delivery signature until they received something or another 2 or 3 weeks went by. After a little ‘foot stomping,’ they finally sent ‘another govt. form,’ this time for me to send to San Antonio (District Office for the area) asking for them to search their records for signature. That was 1/02/98. This is now 1/13/98 and I have not heard a thing. I have more than $100.00 worth of my time in this, plus postage and insurance costs. If they finally come up with a signature, then I will be in a battle with the addressee. More wasted time and expense. I WILL NEVER SEND ANOTHER INSURED PARCEL VIA THE USPS and I think your audience should be made aware of what they are ‘getting’ if they insure and send via USPS. I have never had anything like this when dealing with Fed-Ex or UPS.”

Well, collecting from UPS ain’t easy either (I tried once) — and of course if word got around that collecting were easy, then up would go the incidence of fraud. So while you are perfectly justified in your frustration — and conclusion — I’d encourage you to consider an even broader rule of personal finance: never buy insurance for a risk you can afford yourself; e.g., a $100 risk.

Far better to set up, in your mind if not in actual fact at the bank, a separate “self-insurance account.” Pay the premiums to yourself. That way, you avoid subsidizing your share of fraudulent claims, your share of administrative costs and overhead (and your share of the insurer’s profit, in the case of a private insurer). Best of all, the adjuster always instantly approves your claim without the slightest hassle — because you’rethe adjuster. You never have to worry that making a claim will make your blood pressure — or your insurance rates — go up.

Two from Jeffrey Schwarz:

Yahoo, the Internet search company, reported that it earned $0.05 a share on a pro-forma basis. What is “pro-forma basis”?

Pro-forma means, essentially, “as if” — e.g., in the case of a merger or prospective merger, the results are issued as if the merger had already taken place, and past results are restated to pretend the merger had been in effect all along. In the case of Yahoo, it might mean “as if all the stock options we’ve granted our management and employees were exercised” (also known as reporting earnings on a “fully diluted basis”). Maybe earnings were $6 million on 100 million shares — 6 cents. But what if there are options outstanding on 20 million additional shares? In that case, one might think of the company, and its $6 million in earnings, as realistically being divided up among 120 million shares — 5 cents each.

Please note: I know nothing about Yahoo specifically, other than how to visit its website, and am just making up these numbers for the sake of illustration. Pro-forma, as it were.

Also: what prevents a company from claiming just about everything it purchases is an “investment” [which it can then capitalize over several years rather than charge to earnings right away], thus lowering expenses and increasing earnings? If a company did that, wouldn’t its earnings look artificially high?

Exactly so. What prevents a company from doing this are the independent auditors, who all attempt to follow GAAP (Generally Accepted Accounting Principles) . . . as well as pressure from Wall Street analysts who look to see how aggressive or conservative the accounting has been. But you’re right: there’s real variation in the “quality of earnings” that companies report . . . it’s important . . . and it takes a careful reading of the footnotes, and sometimes more, to find it. A company that “expenses” all its research and development costs, for example, is being a lot more conservative than one that chooses to “amortize” them off over a period of years. Both approaches can be justified, but in comparing two companies, it’s important to compare accounting practices as well.

One reason many investors give weight to “cash flow per share” as an indicator is that it cuts through all this. “Listen buddy,” cash flow says. “Just tell me how much came in and how much you spent. If you took in $10 million more than you spent, I don’t mind so much that you reported a big loss. And if you spent $10 million more than you took in, I’m a little less excited about the huge profit you reported — GAAP or no GAAP.”

GAAP is actually a very logical, painstakingly worked-out set of principles that in many respects can provide a much more thoughtful picture than simple “cash flow.” A smart investor often looks at both.

So comes in the mail one of the most appealing requests for funds I’ve ever gotten: A brief letter clipped to a clear proposal for a specific project called THE SMILE TRAIN. (Brief, clear and specific: already a plus.)

“Since you’re a big fan of leverage, and ‘bang for your buck,'” ran the letter, “I thought you might appreciate this. We deliver $6 of services for every dollar donated. We have almost a 100% efficacy rate — every child we operate on ends up ‘cured.’ No recidivism, no complications . . . we have the ‘cure,’ we just need the money to distribute it.”

The brochure opens with before-and-after shots of a two-year-old born with a cleft lip and palate. The before photo is hard to look at, and tells you unequivocally this kid faces an impossible obstacle. No way can he be happy and productive or accepted into society looking so terribly disfigured. The after photo shows the same kid, product of what can be as little as 45 minutes in surgery, with a normal, healthy smile.

Operation Smile has performed 40,000 such life-changing operations, but THE SMILE TRAIN is a way to reduce the cost by 85%.

The idea is to raise $30 million to outfit a train with an operating car and a training car and drive it through China for five years. China has millions of kids with this deformity. At every two-week stop, Operation Smile’s volunteers will work side by side with local surgeons and nurses, operating on hundreds of children and teaching the locals how to do it after they leave. When The Smile Train goes on to the next stop, it will leave behind $150,000 worth of operating room equipment and computers. In exchange, the local hospital commits to operate on one indigent child a day, for free. Operation Smile will maintain contact with the hospital, supplying additional support as needed to be sure it can fulfill its commitment.

And the hospital may of course use the equipment for whatever other procedures it sees fit.

After five years, according to the calculations in the brochure, local Chinese surgeons and nurses will be performing 12 times as many surgeries as THE SMILE TRAIN.

If it works in China, the program will be replicated elsewhere.

Rescuing 100,000 kids at a cost of $30 million works out to $300 each. Not too bad. Three subsidiary benefits: (1) the training and equipment remain in place for China to more or less solve this problem, going forward, by itself — so it really rescues far more than 100,000 kids at a cost far lower than $300 each; (2) the training and equipment left behind will doubtless help in other ways, too; (3) what an excellent way to build goodwill between the U.S. and China.

So how to get $30 million? Computer Associates has already given $10 million and some anonymous donor an additional $1 million. Tom Brokaw is in the brochure saying, “The work is real. The results are enduring. The gratification is limitless. I would encourage anyone who cares about children to support this idea and help make it happen.” Colin Powell calls it “a unique idea that makes you feel good about being an American.” George Bush thinks it’s terrific and so does China’s President Jiang Zemin. But the name and face that really struck me was Bill Gates, who says, “it’s an ideal combination of the latest technology and good old-fashioned values like charity, compassion and altruism.”

Maybe Bill was the anonymous million, but here’s my thought. Rather than spend any money trying to raise little bits of money from you and me, why doesn’t Bill just have Microsoft match Computer Associates and then get Disney or Kodak (smile!) to do the rest? Presto, done. No fund-raising costs, no directors of development, no galas, no direct mail solicitations . . . and of course the potential payoff to companies like Microsoft and Disney in a nation of 1.3 billion potential customers would be very large.

I’m not saying you shouldn’t send your own $50 or $300 or $750. By all means — call 888-OP-SMILE or write Operation Smile, 220 Boush St., Norfolk, VA 23510. But c’mon, Bill. If you really believe in it, why not “just do it.” (Hmm — maybe there’s room at this sponsorship table for Nike.) In yesterday’s comment, I suggested the value of cutting out the cost and effort of fund raising by setting up our own “mini-charities.” Well, to a guy with $37 billion, $10 million is mini.

Whoever funds it, it’s a wonderful project.

Technical note: The plug-in RAM-bus of my Java initializer winsocked out after the first try, so I was only able to do this once. But when I did visit www.operationsmile.org the first time, and then clicked Russia in the left margin, and then Before and After at top left, I saw a disfigured child’s face morph into a beautiful smile. Try it, and then tell me you’re not ready to hop on THE SMILE TRAIN.

"I would rather have it said ‘He lived usefully’ than ‘He died rich.’" — Benjamin Franklin (as quoted in the Fall American Benefactor)

So if you have no time to do any more than you’re doing, as is likely, perhaps you’d want to send a check. (Better still, donate appreciated securities held at least a year and a day.)

But where? Any charity will have lots of administrative expenses. That’s largely unavoidable. But it does make you worry.

If you were running a charity and found that for $1 million you could do a mailing that would bring in $1.2 million, would you do it? If not, you’d be losing the chance to net $200,000 for your good work. But if you did go for that $200,000, it would mean that 83% of the money people mailed in went simply to cover the cost of the solicitation itself.

Perhaps in some ways the very best charity, whether incorporated as such or not, is the one that dispenses with the $70,000-a-year development director charged with raising, first, the $70,000 to cover his salary and then the cost of the caterer for the dinner that was necessary to raise the $70,000. Take my friend Joe Cherner. He made a ton of money on Wall Street in his 20’s, left to set up a thing called SmokeFree Educational Services, Inc., and has run it for many years now with mostly his own funds. The administrative salaries of the organization total zero. He and his partner Laurent Seitz work for free. (Obviously, not everyone can afford to do this!) His development director costs nothing, because he doesn’t have one. He calls his friends and sometimes gets us to kick in some dough. Relatively little of his time is focused on raising money. Almost all of it is focused on getting the job done. He’s gotten cigarette ads removed from New York’s buses, subways and sports stadiums; he’s gotten smoking banned from restaurants except near the bar; he’s gotten cigarette vending machines (the easiest way for underage kids to buy smokes) removed from the city except in bars (and even then, they must be a good distance from the door, and within sight of an adult). Whatever you may think of his program, he’s been amazingly effective.

Clearly, not everyone is rich enough to run his own charity, although it does make you think. Is there a "mini-charity" you could run yourself? For example, could you find the right person to provide midnight basketball services (since your own hook shot isn’t what it used to be, and you’d be scared to go into that neighborhood after dark, let alone at midnight) and then provide him with the money for fliers, T-shirts, a couple of basketballs, Gatorade and a trophy?

In such a scheme, you lose the tax deduction that going through an established 501c-3 provides. But then maybe not: You might well be able to do it through the local school or YMCA or community foundation. Let them find the right individual, write the check to them — and then take the tax deduction.

In either event, though, the point is that all your money will go to "the cause," with little or no frictional sales and transaction costs to dilute its impact. Sort of like buying wholesale instead of retail or insisting on a low-expense, no-load mutual fund (or, for that matter, a deep discount broker).

I thought of this recently when I got an appeal for a project that could meaningfully improve 100,000 young lives.

Tomorrow: 100,000 Smiles

“I would rather have it said ‘He lived usefully’ than ‘He died rich.'” — Benjamin Franklin (as quoted in the Fall American Benefactor)

The trick, as I suggested yesterday, is not knowing how to get rich. (Work really hard, save and invest every penny you can, stir and allow to simmer for three decades.) It’s knowing how to live usefully. Franklin did stuff like establish the postal service, advance the study of electricity, launch the country’s first fire insurance association and persuade the French to help America win the Revolutionary War. What are we to do?

For those of us not up to discovering the cure for breast cancer or launching some astonishing new global satellite system, there are, naturally, myriad other opportunities of a scale we can handle. Indeed, there are so many it’s overwhelming.

There are two useful things one can offer: time and money. Next week, a suggestion for your money. Today, a suggestion for your time.

Does your local paper have a weekly feature listing all the local nonprofits in need of volunteers? A sort of Volunteer Help Wanted? If not, why not suggest it to them — or even volunteer to edit it yourself?

And if they do have such a feature, well then, perhaps that’s a place to look for a way to be useful.

Of course, it’s likely you’re already swamped being useful — to your kids, your folks, your neighborhood association, wherever. I don’t have any extra time to be a Big Brother or help some underprivileged kid learn to read, either. (I wish I did.)

But just in case you’re not swamped, there’s a lot that needs doing. Someone of your caliber and goodwill could make Ben Franklin proud.

“I would rather have it said ‘He lived usefully’ than ‘He died rich.'” — Benjamin Franklin (as quoted in the Fall issue of American Benefactor)

Of course, Ben was pretty rich when he said that. But even so, it helps to keep things in perspective. After all, who among us is not richer even than Ben was? We can afford the luxury of staying cool in the summer. What Ben wouldn’t have given for that! We can have hot showers at a moment’s notice. Imagine! Seasick-free trans-Atlantic crossings. (And speedy — eight hours!) Bright light to read by. Rare tropical fruits and juices twelve months a year. All but instant mail and news from around the whole world. Entire symphony orchestras playing in our homes — and carriages — at our whim. Finer medical care than Ben could have dreamt possible. Eyeglasses so small no one can see them (ah, vanity). Zippers. And on and on.

Our homes are not as large as his might have been, and it may be harder for most of us to enjoy the privacy and quiet of a walk in the woods. We are more likely than Ben to have to make our own beds and clean our own floors. But, on balance, few of us would want to trade our trappings of wealth for his.

The trick is not knowing how to get rich. (Work really hard, save and invest every penny you can, stir and allow to simmer for three decades.) It’s knowing how to live usefully. Franklin did stuff like establish the postal service, advance the study of electricity, launch the country’s first fire insurance association, and persuade the French to help America win the Revolutionary War. What are we to do?

Tomorrow: A Couple of Ideas (Meanwhile: If you are required to make quarterly estimated tax payments, don’t forget that today’s the day.)

Gary Santoro: “Drop the whole postal thing. I’m going postal just reading your column!”

Hey, when you’re right, you’re right.

But as I threatened yesterday, I just couldn’t resist one more suggestion — and a tip.

Here’s the tip. Did you know you can call the post office and have them pick up? Not just for Express Mail, but for the $3 Priority Mail also. There’s a $4.95 charge for this, but unlike FedEx, which collects its $3 pickup fee on each of the 30 packages you might hand them — $90 for the visit — the USPS charges that $4.95 just once. The number to call: 800-222-1811. Someone will be out within two hours (or, in my case, two hours and twenty minutes). Just remember to ask him to do you a favor and hand-cancel your package for you when he gets back to the post office. Otherwise — if you used stamps rather than a postage meter and it weighs more than a pound — your package will be returned to you as a security precaution.

Here’s the suggestion. What if the dispatcher at 800-222-1811 had a computer? With Caller ID, it would see who’s calling. Then, if you’ve ever called before, it would know your address automatically. Indeed, the entire pickup could be scheduled without a human, just the way FedEx does it. It would save the customer time; it would save the post office money.

I assume this is someplace on Marvin’s wish-list (Marvin Runyon, Postmaster General).

Marvin?

Here I’ve been complaining about how, when I want to send somebody my book — or anything else weighing more than 16 ounces — I have to take an hour off from work to trot down to the post office and hand it directly to a postal worker. I’m told by my local mail carrier this is not the Postal Service’s idea — it’s an FAA regulation in the wake of the TWA Flight 800 disaster.

Well, having stirred up so much trouble over this (see below), I figured I should do some checking. According to the Department of Transportation, this is not an FAA regulation. Rather, it grew out of Recommendation 3.1 of what was known as the Gore Commission — a White House effort to improve airline safety. In this particular instance, the Commission recommended that the USPS advise its customers that items weighing more than 16 ounces and to be shipped by air would be subject to inspection and examination.

Well, that part is fine. X-ray, sniff, pressurize — do whatever you like to my package if it’s ticking. But no place in the recommendation does it say the post office should require these packages to be banned from the ordinary mail drops. That was the USPS’s idea. And it’s really dumb, because it does nothing for safety, yet wastes a tremendous amount of time.

Here’s how it works today:

You put your book with, say, a $3 Priority Mail stamp into a mailbox — or perhaps into your own mailbox with the flag up. The USPS picks it up, takes it to the post office, sees that it weighs more than 16 ounces, delivers it back to you and then waits for you to come down with it to the post office in person and hand it to a clerk, who stamps it — thump — and tosses it onto the pile to be delivered. That thump may be the security measure: If she/he thumps it and it blows up, they know it’s a bomb. And it’s a deterrent, because you know you’ll be blown up along with the postal worker, hence you’ll decide not to be a terrorist after all.

Here’s how it should work:

The USPS should go back to collecting these packages as it always did. For security purposes, by all means inspect and examine anything above a pound if that will help, just as the Gore Commission recommended. End of discussion.

Can you imagine FedEx or UPS sticking with a customer-unfriendly policy like this so long?

Anyway, here’s what some of you had to say about Going Postal II and its predecessor:

From a postal worker on AOL:

I also work for the United States Postal Service. I am a supervisor in an area we call 010, which is the acceptance area, where we cancel all of those 17 oz. packages/magazines. I couldn’t give a —- what you send through the mail system, but I do. Apparently there wasn’t anyone you knew on TWA 881. We have the FAA inspectors with us during our entire shift and we accept their input. In other words —- OFF! Use FedEx, UPS, or any other blind company that’s just in it for a profit and doesn’t care about the safety of your family. I will still try to.

It was TWA flight 800, not 881, and I actually did know someone on it. But I don’t think allowing me to buy registered postage strips at the post office, as I suggested — showing government ID and maybe even having my picture taken — would jeopardize security or lead to more planes blowing up. Today, I can simply hand my package to a postal clerk with no ID. Why is that safer? “Or,” I asked this gentleman in my reply, “are you just very angry in general?”

He wrote back:

No sir I am not JUST very mad. I am angry with the bad rap the USPS is getting from the 16 oz. rule. I am a front line supervisor, what would probably equate to your boss. As you know, your boss more than likely has no power and just follows guidelines. I am the same. Please take note the USPS employees (and supervisors) are mostly veterans and disabled vets who feel the same. I myself don’t understand taking a package to the counter.

So I faxed Postmaster General Marvin Runyon my suggestion a few weeks ago, following the glowing review of his job performance you may have seen on NBC Nightly News, and feel sure I will get an intelligent response — and the regulation changed — any day.

From Thad Fenton:

My goodness! I’m surprised you received such responses to your ‘Going Postal’ column. I fail to see how standing in line will keep a wacko from dropping off a bomb. And does anyone think that the counter clerk will be able to come up with a police sketch days, weeks, months or years later after a mail bomb tragedy? If the USPS were really serious, they would bomb sniff all packages in the sorting centers regardless of how they were received, and abolish the drop off restriction that needlessly clogs already overcrowded USPS walk-in facilities.

From Karen Moulder:

I am a former USPS employee, having had the good sense to quit my job last June. I just want to comment on the regulations regarding the necessity to have your 16+ oz (stamped) packages hand canceled by a postal clerk. I find it incredible that this is required, when airline food service employees that board these planes have not had to go through any personal security background checks and may board planes without restriction. It seems to me that this is just another lesson in futility. I do like the idea of registered stamps. However, because it makes sense, it will undoubtedly not be implemented. Regarding the term ‘going postal’ — lighten up postal employees! It’s a joke…you know your (sic) not crazy (don’t you?).

From Jeff Borders:

I work for the Post Office, and I couldn’t care less what you think about security measures or standing in line. It seems someone of your caliber would not have to participate in such mundane chores but rather could afford to pay someone to do that for you. Furthermore, I find it hard to believe that your company does not have a postage meter, which allows you to bypass all of this. If you can’t afford these simple luxuries, then I don’t believe I need your investment advise (sic)!

The theory here being that it’s OK needlessly to inconvenience low-income people? (Or that high-income people — like that DuPont guy with the wrestling fetish — don’t occasionally go wacko also?)

From Mike Finnicum:
Could not help but read the responses to your suggestions regarding the Postal Service. I very seldom send emails like this, but I think some people need to get a life! We use FedEx and Airborne a lot because of the lack of real ‘Business Practices’ of the USPO (sic).

From Robert at AOL:

I loved your article on the USPS, and the replies. One other point though. Regardless of our problems we have the greatest mail system in the world, no if, and or buts. The best. I love the USPS. (Try mail in Saudi, or India, or….)

That’s the spirit! And I largely agree. But there’s always room for improvement — even with the United States Postal Service.

Tomorrow: A Useful Tip and Just One More Suggestion

From Dr. Thomas Novinger: “I just wanted to send you a note concerning a check for $1.32 I recently received. I believe that my friends the attorneys at Heffler, Radetich & Saitta sent it to me to make me feel better about the $4000 I lost when Centocor stock crashed a few years ago. The travesty propagated by the legal profession in its efforts to protect us from ourselves and enrich themselves in the process scares and saddens me.

“I know that this issue is near and dear to your heart (I purchased and read your recent book), so I wanted to pass along my little story.

“Where will this litigation nightmare end? My colleagues and I think about being sued every day and to say the least it affects how we interact with our patients and how we manage them. Recently we asked a family to find another practice to care for their children because they are suing us. (We waited 12 months after they filed). Apparently they saw no problem with continuing with the same physicians they were suing. They look upon suing physicians with the same perspective as picking up some groceries after work.

“I’m sorry to digress. I know that medical malpractice reform is a different ball of wax from the securities litigation reform you were attempting in California. But they are all lawyers. And they are significantly affecting how a lot people and things interact today. And not in a positive way.”

Of course, the lawyers would argue — with some justification — that the fear of suits like the one that netted you $1.32 help to keep managements honest. And that the fear of malpractice suits does more to chasten doctors who might otherwise be careless or unprofessional than the medical profession’s own sanction procedures do.

So I don’t agree all lawyers are the same or all legal actions are unwarranted — and I know you don’t either. The problem is finding the right balance. With regard to securities litigation, Congress made a good attempt to restore some sanity to this. It passed overwhelmingly and then overrode a veto to become law. But that still leaves 50 gaping loopholes; namely, taking these actions to state court instead. Our idea in California was to try to restore balance at the state level as well. Not shut these suits off, by any means, but raise the hurdle a bit so that suits without serious grounding are not automatically brought any time there’s an earnings disappointment and a company’s stock tanks. We lost; the lawyers won. What else is new?

Click the hyperlink above for a little more on this if you’re interested.

From Doug Aker: “A lot of talk these days about the new Education IRA’s. My question: Don’t these accounts suffer from the same problem as putting college savings in your child’s name, namely colleges view money in them as 100% directed towards college expenses and you wind up getting less in financial aid? I am beginning to think much of the new tax changes that are supposed to help parents with college expenses are going to wind up hurting them by putting more money in their pockets to spend on college and consequently less financial aid. The change that really scares me is the one that allows parents to withdraw money from traditional IRA’s for college expenses. It used to be that the parents’ retirement money was protected from financial aid calculations. But now, what’s to prevent colleges from forcing parents to withdraw money from their IRA’s to pay for college.”

Good questions. My guess is that funds in an Education IRA, but less likely in retirement IRAs, will have that effect you fear — though this is a judgment call the colleges will have to make. Nothing prevents colleges from considering whatever they want in their calculations. After all, providing financial aid is not a college’s legal obligation. (It’s interesting how people have come to assume that people should not save up for their own kids’ higher education, that they’re entitled to have it subsidized by someone else.)

But for most people, I think this is academic. It’s student loans (and the new higher-education tax breaks and HOPE Scholarships) that will provide the aid, not outright grants. And that part should be unaffected by what you’ve saved.

So save up!