Rolling Cinnamon

After writing recent posts on the national debt, the meaning of life, and internal psychological sabotage, I was debating what to add to the blog today and decided a little lightness was in order. Heck, economic data isn’t looking very good, I’ve been (rather unsuccessfully) trying to study for Columbia midterms, and with the start of summer we just might all need a little baking love. (This is “Scones and Swaptions,” after all). So today is dedicated to the cinnamon roll.

The thought of baking cinnamon rolls immediately scares off approximately 82% of potential chefs. Add the word “yeast” to the ingredient list and another 5% bail. But really, they’re not so hard to make. Below is a solid, straightforward recipe that claims to mimic Cinnabun (I don’t know about that, but they are tasty).

Cinnamon Rolls of Deliciousness

Ingredients:
DOUGH
1 (1/4 ounce) package dry yeast
1 cup warm milk (105-115 degrees. Don’t boil it!)
1/2 cup white sugar
1/3 cup softened margarine (or butter, I don't think it matters)
1 teaspoon salt
2 eggs
4 cups flour
FILLING
1 cup packed brown sugar
2 1/2 tablespoons cinnamon
1/3 cup margarine, softened
ICING
8 tablespoons margarine
1 1/2 cups powdered sugar
1/4 cup cream cheese
1/2 teaspoon vanilla
1/8 teaspoon salt


Directions:
1. Dissolve yeast in warm milk. (If you’re tempted to eyeball the milk temperature, resist! Yeast needs a precise temperature range to activate without dying… and yes, apparently yeast can “die,” the result being brick-like dough that doesn’t rise).

2. Add sugar, margarine salt, eggs, and flour, mix well. (I usually add the sugar/margarine/salt/eggs with half the flour to the milk/yeast mix using a hand mixer, then hand stir in the remaining flour to avoid over-mixing… or having your handmixer start smoking, which also happened to me once while making cinnamon bread. Oops.)

3. Knead the dough into a large ball, using your hands dusted lightly with flour. (I usually do this for a few minutes (or less if you were using a stand mixer to mix everything), until dough seems sort of elastic and is soft, not sticky).

4. Put in a bowl, cover and let rise in a warm place about 1 hour or until the dough has doubled in size. (A good trick for this is putting the covered bowl in the oven, and adding a pan of boiling water to a separate oven shelf. This keeps the temperature nice and toasty for rising)

5. Roll the dough out on a lightly floured surface, until it is approx 21 inches long by 16 inches wide, approximately 1/4 thick. Preheat oven to 400 degrees.

6. To make filling, combine the brown sugar and cinnamon in a bowl. Spread the softened margarine over the surface of the dough, then sprinkle the brown sugar and cinnamon evenly over the surface. (I usually just melt the margarine for easier spreading. You can also add raisins or nuts here if you like)

7. Starting with the long edge, roll the dough down to the bottom edge. Cut the dough into 1 3/4 inch slices, and place in a lightly greased 9x13 baking pan. (A 12-inch piece of [clean!] dental floss does the slicing trick nicely. Put the floss under the dough roll, coss the floss ends over the top and pull to get a clean slice without squashing anything with a knife).

8. Bake for 10 minutes or until light golden brown. While the rolls are baking combine the icing ingredients and beat well with an electric mixer until fluffy.  When the rolls are done (and still warm), spread generously with icing.

Viola! That wasn’t as bad as you feared, right? The main annoyance here is waiting around for an hour while the dough rises… but warm, delicious cinnamon rolls are worth it in the end!

Decisions, Decisions

Do you swear to tell the truth, the whole truth and nothing but the truth so help you God?

Our society takes truth seriously (or at least we used to). We have sworn testimony, Hippocratic oaths, military service swearing-in (not to be confused with swearing like a sailor). Most people would consider themselves honest, but how truthful are we being to ourselves? 

Behaviorists would answer: Not very.

One of my classes this semester focuses on Leadership & Organizational change, taught by Sheena Iyengar (author of The Art of Choosing). One of our recent lectures focused on the traps of decision making, pushing us to understand the subtle biases that cloud our judgment, even while we are certain of our internal impartiality and honesty. A few of the interesting ones:

1    1. Anchoring/Framing

How a question is phrased changes how we respond to it, because the mind gives disproportionate weight to the first information it receives. Initial impressions “anchor” the mind in a specific place and then alter our perception of what follows.

Example: Amos Tversky performed a study where cancer patients/doctors were asked one of two questions:

A.      Which would you prefer? Surgery where 90% of patients survive surgery and 34% survived for at least 5 years afterwards, or radiation where all patients survived treatment but only 22% were still alive 5 years later

B.      Which would you prefer? Surgery where 10% of patients die during surgery and 66% died within five years, or radiation where 0% died in treatment and 78% died within five years

The information in both scenarios is identical, only the framing of the question changed. Yet those who received question A chose radiation 25% of the time, and those who received question B chose radiation 42% of the time.

Solution: Try rephrasing questions. As Iyengar notes in her book, Roberto Goizueta, Coca-Cola’s CEO in the 1980s, worried that his staff was becoming complacent and unwilling to take big risks because they saw themselves as market leaders of the soda market, with 45% market share. He called in his staff and told them that Coca-Cola only held 2% of the entire liquid market (not just soda). By rephrasing the question, staff were more willing to take risks to grow Coke’s share (and Coke’s stock went from $4.3B in 1981 to $152B in 1997)

      2. Availability

We tend to make snap decisions, and then bias ourselves by cherry-picking from available information to confirm our initial impression (and unconsciously ignoring dissonant information).

Example: Studies have shown that interviewers tend to make a decision about a candidate in the first 60 seconds (plus or minus 30 seconds) of an interview, then their brains spend the rest of the time hearing what they “want” to hear to confirm their decision one way or another. Of course, interviewers honestly believed they waited to make a fair decision until the end of the interview… but if you took clips of interviews and removed the audio, impartial observers could predict by the interviewer’s body language within the first few minutes whether or not the candidate would be hired.

Solution: Try to remove emotion/perception by making evaluations more quantitative. For job interviews, ask candidates how they would respond in business scenarios (business simulation/case interviews are 3 times more likely to predict job performance than “tell me about yourself” interviews). For more general decisions, try pro/con lists weighted by importance.

3. Variety of Choice

We think that more choices make us happier. In fact, our brains behave differently – we are more likely to believe we made the right choice when we had fewer options to choose from.

Example: A group of engineers were given hypothetical project scenarios from their bosses. Managers either gave the engineers 1 choice, 2-3 choices, or 6-8 choices. Instinct tells us the engineers would be happiest with 6-8 choices, right? Nope. In fact, they perceived managers who gave them 6-8 choices as “weak and indecisive.” Managers who gave one choice were thought “overly authoritative” (not surprising – we don’t like total dictators), but managers who gave 2-3 choices were preferred overall – and described as “decisive, impactful.”

Another example is in job searching. MBA candidates who did the most research and went on the most interviews were rewarded with higher salaries than counterparts who went on fewer interviews. But in the long run, those who went on fewer interviews were more likely to feel that they had made the right decision choosing the job they did. They were happier choosing from fewer options.

Solution: Be aware that your brain likes comfortable, safe situations – like choosing between only a couple options. If you are a manager (or parent!) this means giving your charges 2-3 things to pick from. If you are making your own decisions, focus on a handful of options that really interest you - but don't pander to your biases by not researching other possibilities... after all, the job candidates who did more research ended up with higher paying/more prestigious jobs.

Raised to a New Life

Death seems to be rampant this week. It is Holy Week, a time Christians remember and mourn Jesus’ death on the cross. It is also Passover, a time Jews recall their rescue from slavery in Eqypt- a freedom won only after Pharaoh watched every Egyptian firstborn die. More recently agonizing, a friend of mine lost her baby this week. 8 months pregnant, then a lost life. As if she needed more emotional and physical pain, she had to endure the full induced labor experience to deliver the baby, knowing that at its completion she and her husband would only be mourning a lost little girl. Even the weather seems to join in mourning with days of cold, steady drizzle.

In some ways there doesn’t seem to be much to say in this post. I have no solution for present grief; it is not a fictional story line that I can somehow resolve with the right character climax/catharsis. And yet somehow both Christians and Jews are able to look back on a time of death and celebrate rather than mourn. But how?

Part of the story is knowing the ending; to understand that death on Good Friday is followed by new life on Easter Sunday. To remember that death for the Egyptians meant deliverance and freedom for the Jews to a new Promised Land. But even the knowledge of renewed life later cannot (and should not) erase our grief for lost time on Earth. Rather it mutes the extent of our grief, allowing us to shed tears and memories over the graves of loved ones, without becoming lost to raging, inconsolable hopelessness.

For there is hope. Hope that in the short term that we will leave the world a better place behind us through our service and love for others. Hope that our grief will make us more thoughtful towards life, more understanding towards our fellow man. And underneath everything, a foundational belief in the long term that one day death itself will pass away, that evil will lose its grip on the Earth, and that the world will awake to the full glory it was originally intended to have. (See Revelations 21:1-5)

With knowledge of final victory, we mourn for now. But we mourn with perspective, which makes all the difference.

Dostoyevsky, The Brothers Karamazov:

"I believe like a child that suffering will be healed and made up for, that all the humiliating absurdity of human contradictions will vanish like a pitiful mirage, like the despicable fabrication of the impotent and infinitely small Euclidean mind of man, that in the world's finale, at the moment of eternal harmony, something so precious will come to pass that it will suffice for all hearts, for the comforting of all resentments, for the atonement of all the crimes of humanity, for all the blood that they've shed; that it will make it not only possible to forgive but to justify all that has happened."

The Roman Gardener

Our church small group is progressing through a study of Romans, and verse 6:21, “What benefit did you reap at that time from the things you are now ashamed of?,” got me thinking. Paul refers to Christians’ lives before and after believing the gospel, and their new perspective that rendered so many prior goals meaningless. This verse reminded me in a different direction – what do we spent time on now that we will regret looking back on our lives?

I’m not saying we should all go out, quit our jobs, and live our lives sipping margaritas in Tahiti (though given the persistent cold rain in NYC this month, that isn’t sounding so bad). Working diligently and honestly brings a sense of purpose in our lives. But when does the desire for personal gain take over the desire to work honorably? When does pride drive us to worry incessantly about being promoted or finding that key stepping-stone job that will land us the true dream down the road? If life were frozen as it is now, à la Groundhog Day, would you be happy with it? What would you change or keep the same? 

Schools and business struggle to teach ethics effectively for a reason: we humans are terribly short-sighted. We seek short-term gain. Possible long-term consequences seem fuzzy at best – certainly not worth giving up the gain now, our short-term minds whisper. Our politicians do the same, avoiding long-term questions like the national debt (blogged more in-depth here) until a true fiscal crisis threatens to crush us.

So what is the solution? How do we develop the self-awareness to recognize areas where we invest time and emotions in goals that we would look back on 20 years from now and see as empty? The answer to the question posed in Romans springs from another book; 1 Thessalonians 5:21 commands: Test everything. Hold on to the good.

It is our job then to be gardeners of our own souls; trimming back unwanted growth and nurturing the blooms that we want to flourish.

Simplify, Simplify

The sculptor produces the beautiful statue by chipping away such parts of the marble block as are not needed – it is a process of elimination.
Elbert Hubbard

My job offers a variety of training classes (like the one on resolutions, discussed here). Some are business related and some not (I am taking a History of Chocolate class and an Architecture Walking Tour of Park Avenue class later this summer – feel free to be jealous). So far I have enjoyed everything, and this week’s class on Getting Things Done (“GTD”) was no exception. At the surface, the class (and book by the same title) sounded like yet another dull please-just-kill-me-and-put-me-out-of-my-misery business diatribe on efficiency. However, to my surprise, the main message boils down to a thought-provoking dichotomy:

1. Simplicity – is it really necessary?

The first question is simplicity. There is a certain beauty to simplicity that our society has forgotten in its craze to acquire ‘stuff’ – both material items and career status symbols. When measuring success, more stuff is always better – but why is that? Why can’t we ascribe success to a few key things that really matter to us, like strong family relationships? We humans have a tendency to take the simple and make it unnecessarily complex; with that habit comes overburdened schedules and burn-out. The bottom line in GTD is that as things come on our ‘to do’ list radar, decide first if they’re really necessary. If they aren’t part of your core goals, don’t let them clutter up your list (or your life).

2.       2. Actionability – is there anything I can do about it?

The second point is actionability. Take the time to think about whether you can do anything about your goals/tasks… or if you are waiting for someone else… or if it simply isn’t the time and place to do anything. If the first scenario, create one small, concrete next step for yourself. Want to write a novel? Great, but if ‘write a novel’ is sitting on your to-do list, it’s just a huge, intimidating albatross that you’ll never do anything about. Instead, think to a specific next step. Perhaps you should start by taking a writing class, which means you need to find a writing class. So “Google to find writing class” goes on your list.

For goals/tasks where you are waiting on someone else, GTD suggests creating a ‘waiting on’ list that includes who/what you’re waiting on, and what time you expect to hear back. This keeps everything organized, and avoids that nagging feeling that you have to remember everything (or the panic of ‘Oops, I never heard back and I forgot to follow up with them so I missed  the deadline’).

The last scenario is a bit more subtle – those ideas that seem great but just don’t fit right now. Rather than lose track of the goals or chalk them up as impossible, GTD suggests a ‘sometime maybe’ list. Review this list weekly to see if any of the items are feasible to begin working on. If not, no worries; leave them on the list until circumstances change.

Well, that’s about it – GTD in a nutshell. But to borrow from our friend Thoreau, the real message here is: Simplify, simplify

Investment Glossary: A Cruise to Tahiti, Part II

I know you have no doubt been eagerly awaiting Part II of this post since Part I came out. Well, you can stop refreshing your browser every three minutes and breathe a sigh of relief; Part II is here!

Without further ado, a glossary of investment options:

CD (Certificate of Deposit): CDs are typically very straight-forward. The bank sets a rate (floating, meaning it varies with interest rate changes, or fixed) and a maturity (1 year, 5 years, etc). You agree to lock in your moolah. The advantage is ease of use, steady returns, and no broker fees; the disadvantage is your money is very illiquid (you’ll pay penalties to get it out before maturity), and interest payments may stink (like they do right now). Verdict: low risk, low return.

Bonds: When you give someone money for a bond, you are essentially giving a loan to a certain counterparty (or basket of counterparties). The counterparty then pays you interest, and returns your money in full at maturity. This is all hunky-dory, except for Default Risk (i.e. the chance that your counterparty doesn’t pay you back and you’re screwed). Because of this risk, bonds are sold based on credit ratings from AAA (the best) to D (in default). Anything below BBB- is considered a ‘junk’ bond. These low-rated bonds are also called ‘high yield’ bonds because the interest rates are so high. But don’t be fooled by the name; interest rates are high because there’s a good chance the counterparty will never pay the money back. Verdict: Ranges from low risk to very risky depending on the credit rating.

Derivatives: I almost didn’t include this one, since it’s too risky/complex for the average investor, but for the sake of information (and because most people look at my husband blankly when he says he works with derivatives), I’ll discuss them briefly. A derivative is something that behaves according to something else (think back to Calculus here). So a derivative on corn will give you exposure to market gains/losses on corn without having to actually own bushels of corn. You can basically buy a derivative on anything… and despite the bad press, derivatives can help business lower their risk. Let’s say Firm A has a $1M services contract with Firm B. Firm A then buys a $1M derivative that moves opposite to Firm B’s performance. If Firm B goes out of business, Firm A loses its $1M contract, but has protected itself (i.e. “hedged”) and earns $1M from the derivative, essentially breaking even. This can easily go amuck when companies use derivatives for gambling purposes rather than risk hedging. If you don’t believe me, check out Jérôme Kerviel who single-handedly lost $7B in risky derivative bets within Societe General. Verdict: Useful for mitigating risk, but can also be exceptionally risky if used speculatively… leading to big returns or disastrous losses.

ETF (Exchange Traded Funds): These have gotten a lot of buzz in the past couple years. An ETF essentially just tracks a specific fund, like the Spider (ticker: SPY) which tracks the S&P 500. A plus to ETFs is that fees run lower than mutual funds, but they also tend to be riskier since they are more likely to have a narrower focus than a mutual fund. There also isn’t an active manager (which a mutual fund has) to rearrange assets. So if you’re in an energy ETF, you are locked into following that index, whereas an energy-focused mutual fund would have a (theoretically) nimble money manager who could sell oil and buy solar energy if he thought the oil market was tanking. Verdict: Higher risk than a balanced mutual fund, but lower fees and easier direct access (if you want it) to a specific product/market.

IRA (Individual Retirement Account) / 401 (k)/ 403(b): I won’t go into another saving for retirement rant as this was covered in Part I. But strictly in terms of definitions, a 401(k) and IRA are identical concepts (lock away money for retirement), with the only difference being that a 401(k) is run by your employer and often includes employer matching. A 403(b) is the 401(k) equivalent for non-profits. Both 401(k)s and IRAs can either be tax deferred (contributions aren’t taxed now, but contributions + earnings are taxed when withdrawn at retirement) or Roth (contributions are taxed now but contributions + earnings are tax free when withdrawn). Generally the Roth comes out to be a better deal, unless you are in a very high tax bracket now (:: cough:: NYC residents :: cough:: ) or expect to be in a very low tax bracket in retirement. Verdict: A no-brainer if you don’t want to be eating Ramen Noodles six days a week when you’re 80.

Lifetime (or ‘Target Date’) Funds: These handy funds are based on a target date for your retirement (say 2050). Investments are automatically re-allocated based on your time horizon. So young investors’ target date funds are in higher risk investments (stocks), then are re-balanced to less risky ones (bonds, treasuries) as you near retirement. Verdict: Compare fees, but overall it’s a great low-maintenance option for retirement plans.

Money Markets: Highly liquid (though not as liquid as a true cash savings account) short term investments, with interest rates slightly above pure cash. If you think you might need access to the cash soon, go with this option over a CD or mutual fund. Verdict: Low risk (though a bit higher than a CD if counterparties default), moderately low return.

Mutual Funds: Mutual funds are essentially baskets of investments. An easy example is a Blue Chip Mutual Fund, which means you (and say 99 other investors) would put in $100 each and the fund would use the total $100,000 to buy a variety of stocks like Microsoft, GE, etc. Mutual Funds don’t have to be just stocks – they can also include bonds, commodities, and other investments depending on which ones you have signed up for. Many also have specific geographical focuses, so you can choose to invest specifically in domestic/European/emerging markets, etc. Watch out for the fees on these funds as they can vary widely! Verdict: A balanced risk approach to investing, but mind the fees.

Treasuries: Traditionally these were as low-risk as it comes – US Treasuries pay a certain interest rate over a set maturity (a very similar set-up to CDs). The US has never defaulted on debt, so treasuries are considered ‘risk-free.’ Of course, given our current fiscal crisis and ballooning debt, who knows. I can’t imagine the US defaulting on their debt… but then again, if a company ran its finances the way our country runs its budget, it would have gone bankrupt long ago. Verdict: Historically risk-free, low return

There are many more investment types out there, but for the sake of space and boredom levels I’ve just hit the highlights. If you have specific questions on these or other types of investments, leave a comment and I’ll do my best to answer!

A Cruise to Tahiti (bring your dentures)

It has been a crazy couple of years for the economy. The DOW was at 14,000 (in 2007). Then it was a little over 6,000 (in 2009). Now it's hovering around 12,000. Amid the oil scares, gold price spikes, unemployment fluctuations, and general global upheaval there is a lot of confusion about whether or not to invest... and of course (if you choose to), where to put your money.

Let me disclaimer here that I am not a Certified Financial Planner. In other words, I'm spouting off some thoughts as a CPA whose parents started me on a Roth IRA in middle school, but don't follow my advice, lose millions, and then come sue me. I don't have much money to be sued for anyway :o).

That said, I think there is a lot of confusion out there regarding financial planning, especially for my peer age group, which is out of college, and often debating grad schools/new families/buying homes. So what to do first? Pay off student loans? Pre-pay a mortgage? Save for retirement? And how do we create a budget? Below are some thoughts on what to tackle... in order of importance!...

1. Create a budget (easy to do... hard to stick to)
There's a CNBC TV show that I find interesting (although I think I'm one of approximately four total viewers), where a financial adviser named Gail Vaz-Oxlade visits couples in debt and gives them a budget and challenges to complete over the course of one month... if they do, she gives them $5,000 to help pay down their debt. Her whole shtick is that people who struggle to stick to a budget need to learn to live on cash, write everything down and keep budgeted cash in jars (a food jar, a transportation jar, etc) so you can visually see where you stand weekly. My parents actually did something similar with my brother and I when we were younger - we had savings/spending/church jars, each of which received 1/3 of our weekly allowance. The linked site to Gail's blog actually includes a very useful interactive budget worksheet, but the basic idea is that you save a minimum of 10%, and spend no more than 35% on housing, 15% on debt repayment, 15% on transportation, and 25% on "life" (the variable stuff like food/clothing/fun).

So that answers question 1, how much should I put toward student loans/other debt (max of 15% of your income, for those who lost interest and started skimming - you know who you are!) But what if you're not in massive debt and have some cash set aside? What to do with it?

2. Establish a liquid emergency fund. Stash enough away to cover 6 months of expenses - and keep it liquid enough that you can easily get to it in an emergency (i.e. not in stocks!). The recent lay-offs and scary unemployment numbers are enough to drive home to importance of this one.

3. Start saving for retirement I know this one sounds like a bummer (what fun is saving if you don't get to do anything with it for 50 years?!) but starting early here is critical... due to our friend, the strange Compounding of Math. Let's say you save $50,000 and it earns 6% a year. Save it when you're 45 and you'll have $160,356 at retirement. Not bad. Save the same amount at 35 and you'll have $287,175 at retirement. Ooo, sounding better! But wait - save the same amount at age 25 and you'd have $514,286 at retirement! Starting just a few years earlier makes a huge difference in what you'll end up with. And PLEASE PLEASE PLEASE put inenough money into your 401(k) so that you maximize any matching from your employer. It's free money. Enough said.

Roth IRAs are nice options because the earnings is tax free when you withdraw it at retirement. So you pay tax on the original $50,000 you invested, but that extra it earns along the way ($464,286, assuming this blog is rapidly frightening you into saving early for retirement and you opted for our 25 investment age above) is TAX FREE! Nice. Roth 401(k)'s are the same deal - you pay tax on the principle now, but anything it earns along the way is tax free. (If you're wondering what difference a Roth makes (and I'm pretty sure you're not), regular 401(k)s are tax free now to contribute, but principle and earnings are both taxed at retirement).

A scary statistic? Many retirement planners recommend saving 1.5x your annual income by age 35 to consider yourself 'on track' for retirement. But anything is better than nothing!

4. Save for yourself (or your kids)
So you're on a budget, paying down debt, saving for retirement, what now? This is the fun section, saving for yourself! You could start 529 plans for your kid's college (kind of like a Roth, investment growth is tax free if you use it for college expenses)... or that bigger house... or investing to build up a nest egg (mutual funds, money markets, CDs, bonds, treasuries, etc).

What are the different investment options, you say? Well, there's about a 2% chance (if I'm generous) that you've endured all the way to the bottom of this post, so I'll defer that excitement until that glazed look in your eyes fades slightly. Stay tuned for part 2 of the post. In the mean time, happy saving! Perhaps we could all plan now to take a cruise to Tahiti together when we're 80 on that well-saved surplus retirement money? :o)