At the end of a meeting with my doctor yesterday, and at the end of a meeting earlier today with a peer I’m getting to know, both said exactly the same phrase, and both said it with pretty much the same kind of this-isn’t-common-and-I-wish-it-were sort of tone in their voices. They both said, this was really fun.

A nice compliment, yes, but not one worthy of a blog post (not to mention that it’s way too self-referential) until I realized that what both of these folks were saying, without knowing it, is, Edward taught you well.

Let me explain.

* * *

I was an unusual law school grad in 1984: I graduated without a job, and with a big desire to pick up roots (L.A. did so not work for me . . . ) and move to SF, to start afresh. Shoulda gone to Hastings, I remember thinking.

In a way I did, because, after getting a small studio apartment in The Tenderloin on Larkin Street and doing some temp work (lotsa stories there . . . ), I went a couple of times each week down the hill to look at Hastings’s job boards.

There I saw a job listing for a position in Pacific Grove, at the very tip of the Monterey Peninsula, touching Pebble Beach and Monterey and just a few miles from Carmel.

I soon found myself moving down there.

* * *

Edward G. Bernstein had been a big-firm lawyer in New York (Shearman and Sterling, if memory serves). He had moved out to Carmel in (I’m guessing a bit here) the 70s and had started up a very successful and highly unusual law practice in, of all things, entertainment law and general transactional work.

I’ll only drop two names here (I’m the one, after all, who felt more at home in SF after one day than I did after three years in Name-Drop-City, a/k/a L.A.). The first is Esalen Institute, one of Edward’s clients. It’s fun to be able to say that, when I was a young lawyer, I had the pleasure from time to time of getting paid to go down to Esalen, in Big Sur, to serve as duh lawyer during their board meetings, after which the tubs and the star lit nights awaited, followed by a dark drive back up the coast late that evening (legal dork aside: coolest client code of all time = SLN for Esalen).

The second is John Branca, who was always a bigtime L.A. entertainment lawyer, but who only got bigger over the years, and came to perhaps his greatest media prominence as the lawyer handling Michael Jackson’s estate (I’ll bet that piece of work has kept a lot of lawyers working, and will continue to do so, for a very long time . . . ).

Edward played ball with people like that all the time. And he did so nestled away inside a big ol’ beautiful Victorian on Lighthouse Ave, in Pacific Grove, just a little ways from Lovers Point. He and Shelley, his secretary (the word we used then) worked downstairs, Edward mostly on the phone and Shelley running the place, while I upstairs wrote contracts and memos (we did no litigation), trying to put together all of Edward’s a-million-miles-a-minute stream of ideas (sometimes having to tell him that two of his ideas couldn’t both fit into one contract, without fear of a matter/anti-matter-like explosion, because not all ideas can fit together within a single deal).

So he had a highly unusual law practice.

* * *

Edward changed me.

I was a pretty confused 20-something kid at the time. I was also impressionable, and, thankfully, a lot of good from Edward rubbed off on me.

Above all, Edward was a fun-ster. He was bigger than life and highly charismatic (it helps in his field) and he invariably had fun. Sure, he would have some off-days, and I saw him angry every once in a while (I did blow things sometimes . . . ), but he also had a basic grin embedded within everything he did — so much so that, somewhere in the span of time between 1984 and 1988, I got a serious dose of fun-ster impressed into my little impressionable self — the grin ended up in me. And it came, I have no doubt, from Edward G. Bernstein. Thank you EGB.

* * *

In 1988, Edward was talking about mostly tapering down his law practice to pursue some other goals of his, while at the same time I was figuring out that, as things stood, my legal knowledge was mostly limited to the rather narrow specialty of knowing-how-to-keep-EGB-happy. Plus, I knew that I really wanted to live in the Little City by the Bay that had drawn me to it ever since I first laid my 17-year-old eyes on it. So there came a time when we agreed it was time to go our separate ways (ok, Ok, OK! I admit it, we were both also getting a bit tired of each other . . . ).

For many years after I would send Edward heartfelt holiday cards, expressing my appreciation for his being a great boss. And, if memory serves, during that time we also got together a few times.

Something like six or eight years ago, though, after writing an email to Edward, I received back from his wife the kind of email you never want to get, which started out by saying, “Oh, John, I’m afraid I have some terrible news for you” and then went on to say that Edward had unexpectedly died a few months earlier. Noooo! was my response — and then some days of feeling very deeply, very profoundly bummed out.

* * *

Please forgive me my trespass into corny triteness, but, looking back at the closing comments of the conversations I mentioned at the start of this piece — the conversation with my doctor yesterday (who had just done some pretty mutually un-fun things to some of the nether parts of my body) and the conversation with a peer a few hours ago — there’s no doubt in my mind that Edward’s grin lives on, in part, within me.

It’s one of my dearest possessions — like the third genie-wish that wishes for three more wishes, it’s the grin that generates all other grins. It’s my Driving Wheel.

It says,

Let’s be sure to have some fun here, shall we?
And pretty much no matter what the context.

That “pretty much” qualifier is in there because putting that grin into the wrong context can cause problems (e.g., do not let it surface when you’ve just been pulled over by a cop for doing in illegal U-turn on Valencia near 25th).

But, other than that, it’s just about always worked for me all these years, and can even help when you first learn that someone you love has passed away.

So thank you, Edward. I think you helped me figure out how to be a whole lot happier over the long-run: having a lot of fun moments has a whole lot to do with it.

* * *

Years ago I tried to track down some of Edward’s immediate family, but came up dry. The Internet has come a long way since then. Stay tuned . . .

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Labor and Capital, and How They’re Taxed

Wednesday, October 3, 2012 at 2pm
By John Friedman

The country, and even some of the globe, waits expectantly for the presidential debate tonight. Afterwards, heads will talk, pundits will opine, spinmeisters will spin, and watercoolers everywhere will be privy to more political comment than usual.

Can everything the presidential election is about be contained within 90 minutes followed by a couple of news cycles?

Clearly not.

But there is a concept that can illuminate much of the whole thing, having to do with the way economies are structured. The concept is that there are two types of economic actors out there, within the economic layer of our lives, each of which inherently embodies economic power; one is labor and the other is capital.

Stereotypically and simplistically, if you’re a working stiff, then your power comes from your ability to toil and endeavor and accomplish, which you can exchange with duh man, who has capital — that’s from whence duh man’s power comes — and who can pay you some capital in exchange for your ability to toil and endeavor and accomplish on duh man’s behalf.

* * *

Now this is not the time or place to delve into economic philosophy (nor am I the one to do it!).

But this is the perfect place to talk about the financial health of all those reading this blog, and to, part and parcel of that conversation, also talk about how our tax code has changed over the last decade.

* * *

Income taxes are all about taxing . . . income. Income, in turn, comes from one of two buckets: some of your income comes in to you as a result of your laboring, and some of your income comes in to you as a result of capital you might have previously acquired over the years (because money tends to beget other, new money).

Most readers are familiar with labor-generated income: for employees, it’s their paycheck, and for self-employeds, it’s the bottom line on their profit & loss statement (more or less . . . ).

From those incomes we all pay income taxes (except Snipes and others of his ilk). Most folks pay income taxes at marginal tax rates of 25 to 28 percent

Two asides: if you don’t know what a marginal tax rate is, why, then, you don’t know The First Thing about taxes. I’ll write that one up one of these days. Also, the all-time greatest source for historical income tax rate data is brought to you by the friendly folks at The Tax Foundation. Please do take a look in there; it is a truly eye-opening experience for a lot of people).

Back in the 90s, some people with high incomes paid income taxes at a marginal tax rate of 39.6%. George Bush’s tax code changes killed that bracket off, and all hell has been breaking out over the last several years about whether that bracket should come back at all and, if so, whether it should apply to lots of folks (those making over $250k per year) or not that many folks (those making over $1 million per year)

And get a load of this: when George Harrison wrote, lamentingly, in the first line of Taxman that he’d gone down to the crossroads to see his taxman, and that the taxman had simply said to George, Here’s one for you, nineteen for me, he was indeed complaining about a 95% marginal tax rate, which the UK did indeed have in the 60s, a time at which we here in the U.S. had already had, for a decade or so, marginal tax rates that topped out at only the paltry, Here’s one for you, ten and a ninth for me, i.e., a marginal income tax rate of 91%.

So that’s labor: on the margin, it’s taxed at 25% or 35% for most folks. Back when, it was taxed on the margin as high as 91%.

* * *

Under our current tax code, capital does better.

Capital-generated income comes in several forms, primarily falling into three camps: there’s (a) dividends, which is the sort of capital-generated income that stocks beget, and then there’s (b) interest, which is the sort of capital-generated income that bonds and bank deposits beget, and then there’s (c) capital gains, which is the sort of capital-generated income that comes from selling an investment for more than you paid for it.

These days dividends and capital gains are, for the most part, taxed at a rate of 15% or less (for low income people, the rate is . . . 0%), while the interest each person receives is taxed at the same rate as the labor-generated income that person receives (that’s right: our current tax code is very churlish towards bond income).

Back in the day, dividends a person received were taxed at the same rate as that person’s labor-generated income was taxed at. And as for taxes on capital gains back then . . . well, that the Cap Gains Tax, as they call it, has been so much of a politcal football slash punching bag for so long that trying to sumamrize recent history of CG taxes would tax both my word limit and your reading limit. Suffice to say that, before 2001, tax rates on capital gains were, for the vast majority of people in the vast majority of circumstances, taxed vastly more than 15%.

* * *

So today we have a system in which a lot of capital-generated income is taxed at 15%, while a lot of labor-generated income is taxed at 25% or more.

And that is how you can end up with really rich people paying far lower tax rates (and here I intentionally leave off the “income” modifier to refer to the overall tax burden a given person pays, including payroll taxes, income taxes, sales taxes, property taxes, fuel taxes, etc., etc., etc.) than just about every other normal person in the country.

These, I do sincerely believe, are facts, based in reality (though filtered, necessarily, through my perceptive apparatii).

* * *

So what’d’ya think of that system?

Once again, gentle reader, I leave this to you as a Rorschach test.

Is this a good system? Does it make sense? Should working stiffs pay higher tax rates than people who are floating their boat off of the capital they’ve accumulated over the years?

And then this: as the debate unfolds tonight, what do you hear each person saying about labor and capital, and does any of it/part of it/all of it make sense?

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The Is Have It

Tuesday, October 2, 2012 at 9am
By John Friedman

Or should I say the “I”s have it?

The phrase Impact Investing is of relatively recent origin. Yesterday I attended an afternoon program about the Is (the eyes?) and learned all about how the older idea of SRI (socially responsible investing) has given way to II (not to be confused with the Roman numeral two) (gee, the two words, impact and investing, work well together, but when abbreviated? Not so much) (and then there’s the great song Is You Is or Is You Ain’t My Baby?, not to mention the greatest is of all).

Time was you could see the program description online at the site of the CFA Society San Francisco, but no longer. Here’s what the main paragraph said:

Over the last few decades, we have witnessed the trillion-dollar growth of Socially Responsible Investing (SRI) and Environmental-Social-Governance (ESG) strategies, which seek to not only provide investors a financial return, but also a social impact. However, the social impact from simply eliminating the bad or sin stocks from a portfolio of public equities is limited. Those investors who seek greater social impact (perhaps, but not necessarily, in exchange for some financial return) have turned to Impact Investing, a young and exponentially growing field spanning many traditional and alternative asset classes, including public and private equities, notes, bonds, and loans. (For example, buying a 3-year UNICEF note paying 4% which UNICEF can use to invest in new sustainable programs.)

A few comments before I ramp-up into a wicked busy day:

1. Portfolio Design. Non-correlated asset classes are the cat’s meow and the bee’s knees when it comes to portfolio design. There is some indication that this asset class might be highly non-correlated, so that, when, say, the sky is falling on every investment class following September the 15th of 2008, impact assets were not.

2. Performance. One dominant point throughout the day: you needn’t give up on performance (risk/reward trade-offs) when going II. In fact, right now there are some nice paying loans in which the II investor (the III?), acting as the bank or micro-financier, is doing a lot better than the market.

3. Dollars Change the World. I’ve always said that every dollar you spend is a vote for the way you want the world to be. Impact Investing can be that writ large.

4. Mostly for the Very Well-to-Do. New investing ideas are always for the big players first/normal folks much later, if at all. Here too, though there is always Kiva et al. (none of which were mentioned yesterday).

5. The Milieu. By its nature, it seems to me, the world and milieu of II is inherently a bit (or a lot) more progressive than the world and milieu of I — of plain ol’ investing. Also, I don’t go to these sorts of programs often, but it looked, via quick gander, that the gender ratio was close to 50/50. A far cry from the old-boy-on-the-golf-course network . . .

6. The II Build-Out. A lot of talented, committed people are working very hard on building out the infrastructure of II. And a lot of them are apt to make a boatload of money doing it.

7. The PF’s BS vs. the PF’s IS (wonky). Very wealthy people often set up private foundations. These things are creatures of the tax code, and are kinda neither fish nor foul, in that they split the difference between a public charity and a family trust. Because of that split, the tax code requires the foundation to each year spend 5% of its net investment assets on something worthy (it’s the tax code, so there are exceptions and complexities I gloss over here, as well as the definition of net investment assets). Back in the day when 5% was below a risk-free rate of return (e.g., the mid-90s), this was tantamount to paying out income; these days it is not. So back then a private foundation could have been invested entirely in conventional assets, and used the income off of those conventional assets to do its worthy activity. But how satisfying is that these days? Not so much, right? So our low interest rate environment may have actually have helped goad on, at least a smidgen, the II push, as foundations look to do good with their balance sheets as well as with their income statements.

* * *

Imagine, if you will, a handful of thousands of progressive, very wealthy folks, atop a well-laid infrastructure, doing good with their money through a new channel that, at least at first, is apt to be about as different from Komen and The American Cancer Society — Big Philanth, let’s call it — as it could be.

It’s another Rorschach test.

What’d’ya see?

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On the Brighter Side of Things

Friday, September 28, 2012 at 10am
By John Friedman

After yesterday’s post on violence, and a friend’s comment about it, how about we now feast on something compelling and uplifting?

Yes: how about something more on the bright side of life?

* * *

Let’s start with the stock market: it’s doubled since March 9, 2009. So, if you’ve been socking away some money every other week during the past three and a half years — like people do when they have a 401k or other auto-invest program running — why, then, you’ve made a lot of money on those sock-aways, maybe something on the order of 50% (very roughly non-calculated). Nice, eh?

Anyone who did so would have (a) invested 94 times during that period, and (b) made money on every single one of those investments (note for the detail oriented: the market is a smidgen off — half a percent or so — from its recent highs, so you could be down on one or two recent transactions, but as for all the rest? Like buttah).

And let’s take that bigger and get a little rahrah: dating back to, I think, November of 2000 (could anything short of war be appreciably worse than a presidential election that for all intents and purposes ended up tied — a coin flip where the coin ended up on its side — and was then called on account of time by a politically divided SCOTUS?) and continuing on, through to the attacks of September the 11th, 2001, and then onto the March 19th, 2003 invasion of Iraq, and then on through to September the 15th of 2008 (the night they drove ol’ Lehman down), and then onto the not-at-all-great Debit Ceiling Debacle, and on and on and on, we, all of us, have been going through, to say the least, a very rough patch.

Yet here we all are and the little spinning, whirring top that is the American economy, by which we all put clothes on our backs and food on our tables, and then ensconce all of that within the warm confines of a happy shelter, keeps on keeping on very nicely, all things considered (to stay uplifting and compelling, for one day, and one day only, I’m ignoring the exceptions!).

And then there’s real estate: it’s looking up and, for a few lucky folks, it’s even back to its 2007 bubble-highs (must . . . ignore . . . exceptions . . . ).

* * *

And then there’s the Bay Area (sorry, readers from afar: I’m going to talk up my hometown and area here). I remember that, when I was very young, I had heard about Silicon Valley, but I didn’t really understand where it was, and that, all of a sudden I at some point realized (we are all so very stupid when we’re young, aren’t we?) that it was just down the street from San Francisco. How nice, I thought, that’s a great thing to have nearby.

That was decades ago. Now that thing has spread itself into the East Bay and up here into the Little City, and to even a bit up north of the city, into Marin and way down south, down 101 some, to where farmland still rules the roost (note well: to-date, Silicon Valley has *not* been spotted spreading to the west, which we around here like to call the Pacific Ocean).

Twitter is moving into Mid-Market. Facebook has taken over the now-fully-fallen Sun campus near the Dumbarton Bridge. Zynga has put up an ugly sign on that ugly building near the 8th Street circle that you can see from the freeway. And then there’s LinkedIn, in Mountain View near Shoreline Amphitheater; it’s the social networking company that, being about business social networking, has an obvious revenue model. And eBay in San Jose keeps on keeping on (oh, if Meg had just bought PayPal the first time she looked at it . . . ).

Closer to home, there’s Genentech, hidden away on the Bay in South City, which has decided, finally, to brand — in an exceedingly exuberant way — its buses that ply the city, taking its folks to and from work at all times of the day and night (due to the nature of this post, I will not criticize the 100% blacked-out, perfectly-clean, always-sinister-looking, often-idling buses with which the other wealthy tech companies foul the city — Grey Poupon, anyone?).

And then there’s Apple in Cupertino. What more need be said about that?

And then there’s Lucas in the Presidio.

Oh, and thinking of all the lusciousness in the Presidio reminds me: nearby there’s also Napa, Sonoma, Marin, the Coast, Big Sur, Carmel, the Sierra . . . and the list just goes on.

And look up: these days there are construction cranes throughout the city — downtown and South of Market and at Mission Bay, as well as, of all places, along the Market Street corridor west of Van Ness, where the concept of urban infill is taking hold bigtime, to take advantage of the Market Street public transpo tunnel.

And then there’s my current fave crane: the one atop the lovely, Roaring-Twenties-era Pacific Telephone building, behind the MOMA, on New Monty. Did a helicopter put it way up there?

And, last but not least, there is the new Bay Bridge that is, after a decade of construction, and nearly 25 years after Loma Prieta got the whole thing rolling, starting to look like a real, honest to goodness, bridge.

It’s a beautiful city in which we live, inside of a wonderful country, residing on a beautiful planet, and, what’s more, we’re all here, enjoying all of it, at the very best time humans have ever known. And I thoroughly believe the same thing will be true tomorrow as well as a year from now and ten years from now: It’s Getting Better All the Time.

We are, all of us, very, very lucky to be alive.

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Violence

Thursday, September 27, 2012 at 9am
By John Friedman

I’m initially going a bit off the financial-health reservation today, to write about something that’s been on my mind since Tuesday night.

But fear not. The last few paragraphs of this piece bring it all on home to the ultimate financial reality each of us faces each and every day: having enough to eat.

* * *

Trending on Twitter right now is the TV show Sons of Anarchy. I will confess, guiltily, that I have followed this show, having watched probably two-thirds of its episodes the last couple of years. It’s the only TV series I’ve watched at all during this time (I am slowly making my way through The Wire on DVD — it’ll take years at the rate I’m going).

I have always felt like a schmo for watching SOA (as they call it online, especially in that place where every character counts). SOA is about a motorcycle club/crime syndicate. People get killed. Fights break out. Drugs get sold. Guns get stolen. Crosses get doubled. Good does not happen.

And, yup, Jax is fun to look at, and Gemma is an amazing acting job, being Peg Bundy, but a decade or two later and a universe or two removed.

All told, there is not a single admirable character in the show. Not a one.

[Writing aside: I’m mostly foregoing links in this piece; I do not wish to support, in even a minor way, the subject matter!]

* * *

SOA is trending right now because the person who played one of its side characters — a character accounting for maybe 0.5% of the show — died yesterday after perhaps killing his landlady and jumping to his death. I kid you not.

SOA has aired two episodes so far this season. I had to look away once during each episode; in the first episode the innocent daughter of an SOA member was put into a pit, doused and then set ablaze as her father watched, this being dad’s punishment for having killed another badguy’s daughter, and in the second episode one of the main characters, the closest to a sympathetic one on the show (but, in the end, still a very violent thug), was beaten to death in a prison, with guards looking on and setting up the encounter itself, after that same badguy (he really loved his daughter, and therefore must kill kill kill) decided that one of the SOA gang members in prison had to die.

* * *

I understand the draw. Drama isn’t about common things; it’s about conflict, character growth, story arcs, life and death, etc. This show has all that (thought I’d argue it’s pretty light on character growth).

But I also think that violence is just plain ol’ bad for people — being in it, for sure, but also being exposed to it, even via fiction, and especially when the exposure is audio-visually mediated, as to truly tweak our main senses.

For sure also, I speak from a time and place where I can be on my mighty-on-high perch, free from almost all (but by no means all) worry of encountering violence.

But I ask you: what do we gain — how do we improve as human beings? — from exposure to violence? Is there any upside to it, other than in some far remove, in which violence is a regular part of our lives, and our continued existences depend on our being able to well-handle it, Hunger Games-like, in which event being de-sensitized to violence would come in right-handy?

But that’s not the world in which the people reading this piece live.

* * *

Now I’m mostly staying away from the life-imitates-art angle here. I’m sure others will jump on that bandwagon plenty. But I do want to say this: most folks who, like me, had to turn away from those two in-your-face violent scenes in the first two episodes of SOA this season, are virtually incapable of unprovoked violence: the response is sinply not present.

Heck, I have mixed feelings when I help the kitty kill a fly.

* * *

And here’s the financial-health tie-in. Violence used to have a very direct economic component to it: that’s how we ate, e.g. we violated the sanctity of another animal so that we could et it, we protected our hunting and gathering grounds by stomping other humans who entered them, etc.

These days, though, almost all of us compete for food in different ways.

I much prefer our current competition . . . but it’s like trees in the Midwest: whatever you grew up with is what you feel most comfortable with. I’m happy to have lived in a time where we competed on smarts and skill and gumption, rather than on muscle and fight and might. Maybe a millennium of millennia from now, people — the universe willing and our violent and thuggish nature having been successfully held in check by gosh only knows what — will look back and wonder how we so ignobly fed ourselves.

Two-days later post-script: today FoxNews had on its live air a car-chase followed by the driver’s real-time-suicide via shot to the head. Live!

So who needs to see daughters burnt alive or Opies bludgeoned to death when you can see the real-thing, real-time. Afterwards, Shep Smith, who apparently egged on his producer to keep the live feed up during his show, apologized, saying

We really messed up. We’re all very sorry. That didn’t belong on television.

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