Attorney Michael de Broglio on: South Africa, Law, Politics, Attorneys, Sport, Photography, Technology, Gadgets, Media, Crime, Road Accidents Fund,
Divorce, Maintenance, Personal Injury, Medical Negligence
Exaggerated asset values and what people are worth
I have recently been reading a book about property and property development and I enjoyed the humour of the author, probably because he is a former attorney. The book, Making it in Real Estate by John McNellis, has much advice that is relevant to businesses other than just property, but I enjoyed what he said about what people are allegedly worth.
We read so often that this person is worth this amount and that person is worth that amount, but what we forget is that it is all based, in most cases, on either a business that they cannot sell or don’t want to sell or on shares that they own in a business. If, for example, your company is listed on the Stock Exchange and you are the CEO of that company, the R500 million worth of shares may not really be worth R500 million. Firstly, you probably have an agreement that says you are not allowed to sell them, or not allowed to sell them until you are no longer the CEO. The board of directors would also look down on you if you try to sell them all, because it would show no confidence in the company, so there is great pressure on you, even if it is not in your contract, not to sell your shares. The other thing is if you actually did go onto the market and try and sell that number of shares, particularly in a smaller company, the panic it would send out in the market would see the share price rocketing down, so you would never be able to sell your shares for the price that they are allegedly “valued” at by today’s market price.
The author says, “Soberly viewed, a financial statement is more daydream than fact. If someone claims he is worth a wildly crazy amount – say a Silicon Value fortune of $300 million – that is lovely reverie, but the chances of that guy actually coming up with $300 million in cash are slim. First, instead of the pipe-dream number he claims on a statement for the illiquid asset that constitutes the vast bulk of his empire, he has to mark that asset down to market, be it stock in a privately held company, timber, a coal mine, whatever. Then, he has to sell it, pay federal and state taxes …”.
This is not to say that the people you read about in the newspapers are not wealthy, but whenever it is business people, the newspapers and all the entities work it out according to the latest share price and that is just a fallacy – the person can never sell all of their shares at the current share price and that relates to all companies – would you be interested in buying Facebook shares if you discovered tomorrow that the seller, and he was selling all of his shares, was Mark Zuckerberg? That is not to say he is not wealthy beyond our wildest dreams – it just means that most of his wealth is tied up in shares that practically speaking he can never sell unless some major company, like Google, buys him out entirely. Generally, when they do a buy-out like that, they don’t necessarily even offer the person the same price that the share is listed for on the Stock Market, because everyone knows that that person cannot sell at that price. So, the next time you read so and so is worth R500 million, or the CEO of a company in South Africa is worth R2 billion, take it with a pinch of salt.
Posted by Michael de Broglio on Wednesday 29-Mar-17
I must say that obviously it is always good to earn money for the work that you do, but my staff and I find it so motivating when clients send us a thank you for handling their claim against the Road Accident Fund. Sometimes the thank you is not well written, but it is from the heart and it is special anyway, and on other occasions we receive beautiful references like the one I have included below in this blog article:
My life has been changed by a motto… “We get results”
When I was involved in a motorbike accident with a broken hip, broken pelvis, multiple broken ribs, injured my lower back and various small injuries, my wife consulted your company and a de Broglio representative visited me at my residence. In your mail you expressed your concerns and how many people perceive attorneys, when people heard that I did not claim directly from the RAF they said I’m silly and referred to attorneys as those people. There is not only a boundless difference between de Broglio attorneys and the rest (those people) but as stated, you get results. Your services gave me time to recuperate, not worrying about the legal process or just leaving it altogether but saved me the headaches that goes with legislation, the court system and needless to say that it is not my field of expertise.
I was bedridden, in pain and looking at my best friend at the time for three months … my bedroom roof, I’m not sure whether it spoke to me from time to time but I’ll blame that on the medicine. When I got stronger I diligently went to all your scheduled appointments, some twice a week. I never missed one appointment and must be honest, I did not expect the results which followed, I received my second pay-out today. I totally commend and agree that de Broglio is not just one of “those” attorneys and as stated in your communication, if people do what is expected of them they will get results. My accident was on the 20th of Jan 2014 and as stated, I already received my second pay-out.
I received claim status updates almost weekly and I’m never in the dark about the process or the status of my claim and talking about sufficiency, de Broglio Attorneys took it even further checking with the HPCSA whether my injuries were serious or not.
I truly thank you and your whole team from my heart for your friendly and professional service. For as long as I live my story and the journey with de Broglio will be spoken of as the finest attorney / client relationship. I would like to once again commend and thank de Broglio’s whole team for an astonishing result in my case against the RAF.
Get Out opens at all Ster Kinekor cinemas this Friday and it is a superb movie. It is currently rated 99% on Rotten Tomatoes and it is a movie that I believe is well worth watching. I am not a big fan of the horror genre, but this one is really a completely different movie.
There is an almost science fiction type of horror to it, but it is a critical commentary on racial relations with a young African American man who has a white girlfriend and he is not really excited about the way white people, in general, treat such couples. I will not go into any more of the twists in the tail, because that will spoil the story, but I do recommend that this is one of those movies that you have not heard much about, but that you do need to see. It is funny, it will get you thinking and it is well acted. As one of the reviews on Rotten Tomatoes says, “Proof that you don’t need stars or special effects to lure an audience… just a fresh idea and a twisted imagination.”
I read recently about colon and rectal cancers rising in young people. Apparently, every generation born since 1950 has seen more and more colon and rectal cancer. People born in 1990 or thereafter have double the risk of colon cancer and quadruple the risk of rectal cancer – but experts do not know why. I would guess it is the junk food industry, but the experts do not know wat the cause is.
They think that other cancers have reduced due to fat people reducing smoking and eating healthier, noting that people who are eating good foods, vegetables, fibre and less red meat have a lower rectal cancer risk. There certainly appears to be some link between the colon cancer and obesity, but the doctors are struggling to work out what exactly the link is, apart from recommending that more people are screened for a colonoscopy.
Posted by Michael de Broglio on Wednesday 22-Mar-17
I am very much in favour of the proposal for a sugary drinks tax. This made world news when the proposal was implemented in New York, but taxes on sugary drinks have been introduced in various forms. Just as taxes on cigarettes have reduced smoking quite considerably and smoking is no longer cool as it once was, the same could apply to sugary drinks.
We have a tremendous obesity problem in South Africa, not to mention diabetes and once again we are paying the hospital bills for the vast majority of people who have to be treated for these conditions and who do not have Medical Aid. People are often in favour of individual freedom and individual rights, but they are not so enthusiastic when they hear that their tax rates have to go up because the Government has to spend so much money on a variety of things, including healthcare. It’s all great until you pay for it – and so many don’t appreciate that everything you get costs! There is no doubt that sugar is an absolute poison and I was interested to read the statistics that the sale of sugary drinks in South Africa grew by over 65% from 2001 to 2015. Where a tax on sugary drinks would be very helpful is that it is often the poorer income earners who suffer the most from obesity and also tend to buy more of these drinks. A tax on sugary drinks pushing up their price will assist as one advertising campaign suggests at the moment, in reducing an unhealthy diet amongst the poorer members of our society.
It was interesting to read of the outbreak, now in South Africa as well, of a worm that is threatening our maize crops. The worm is called the armyworm and is doing tremendous damage to our maize. South Africa is the largest maize producer in Southern Africa and many countries rely on us for food and we are starting to look at a situation where there may be a tremendous maize shortage later this year and that prices will go up. South Africa may well be forced to import maize from elsewhere. It is just a reminder how dependent we are on nature and just a few small things can really devastate an industry – in particular in this case farming which is already fraught with drought, storms, hail and all sorts of other natural issues.
The higher tax for people earning more than R1,5 million predictably came about. Once again, the government was too scared to tackle VAT, which is exactly the area they do need to tackle. Like government employees and taxi owners, VAT has become one of those untouchable subjects. I understand that anybody not earning R1,5 million a year is obviously going to think, “Great, let the rich pay – they can afford to.” I understand that thought process, but the problem with that is, with nobody really complaining about this, it is only the start of what is to come.
One has to think very carefully, although this argument is routinely ignored in failing economies, about chasing away all your successful people and one must not forget that countries like America have a tax rate of 26%. That is not going to help any lawyers in South Africa, but let us take our leading neuro-surgeons or orthopaedic surgeons – they are wanted everywhere, and they can go everywhere and right now we have just put a little bit more disincentive for the leading experts to stay in South Africa because we have just increased their tax a lot more. They have gone from 41% to 45% and although it sounds like it is only 4%, it is effectively a 10% increase for them and means that they will get about 10% less income per month than they used to. It is not something that is going to excite them and I don’t believe that that is the end. We see France with a top tax rate now of 70% and that has already led to many top business people leaving France, and if South Africa continues to increase the tax rates on the wealthy, who are invariably the successful, it will just chase away more of those people.
I am always a firm believer in paying tax and giving your share to society, and I don’t think that people who earn almost nothing should have to pay tax, but it is also not a recipe for success if you decide that 103,000 people in your country earn more than R1,5 million a year and that they will carry the tax burden of the country because you are encouraging those 103,000 people to consider other options.
Do not be surprised of next year you see a further hike in that new wealth tax – not to mention the fact that dividend tax was increased from 15% to 20% and people don’t appreciate that in many businesses, that is how the business owner is paid. A 5% increase does not sound like much, but when you put 5 over 15% it means that that tax has just gone up 33% alone in one year! We already have a lot of disincentives for people to do business in South Africa – BEE, the CCMA and our ridiculous regulations of each and every part of society and we are increasingly targeting the same people – the people who own businesses, who employ people and who generate revenue for the economy and taxes for the Government. We must be very careful how much we slowly throttle them because, while nobody wants lawyers, just about every country is quite happy to take our engineers, our builders, our architects, our doctors, etc just as many years ago we lost a large percentage of our nurses and teachers to Dubai, Australia and the UK.
Posted by Michael de Broglio on Wednesday 15-Mar-17
I read a fascinating article in Fortune magazine recently about growing golf in China. Golf has 24 million players in the USA – almost 8% of the entire USA population play golf and in China, although there are 1 million golfers already, that is only 0,1% of the population. As you can imagine, all the businesses are eyeing the potential growth in China because just to get to the same numbers as in America they would be able to increase their business 80 times. It could be the next big winner for golf and so they are trying everything they can in terms of tournaments in promoting the sport. The problem is that golf is very expensive, particularly in China, and costs way more to play than the average person in China earns.
You are not really going to grow a sport if it is only played by the elite and the other problem is that many crooked deals had become associated with golf courses, in that memberships of golf courses have been given to officials as bribes and many golf courses in China used to allow people to register under fake names. In other words, you could register your golf membership and turn up and play, but you did not have to use your actual real name which made it easy for people, instead of giving bribes, to give people golf memberships. The Chinese government obviously has not looked kindly on that and has to a certain extent clamped down on golf closing hundreds of courses. If you were a member of a course that was closed, well that is just too bad for you and in one case the members have paid $130,000 just to become members and were then told that their club had been closed down by the government!
Obviously, that corruption has nothing to do with the sport itself, and basically they are hoping for a Tiger Woods type athlete to emerge from China because that will certainly assist the game in growing. I guess like everything though, you have to realise that the promotion of a sport or an event is all about business and everybody in golf stands to win in a big way if more people in China will take up the game. By comparison, there are an estimated, depending on who you listen to, 50,000 to 150,000 golfers in South Africa. If you take the higher number of 150,000 people, and compare it to a population of approximately 50 million, you will realise that a far smaller proportion of our population plays golf than even the Chinese do and yet we have produced so many world-class players over the years.
I get asked by people, as if I know the answers, and I certainly don’t, as to what helps with success. I generally think that reading is very helpful, there is so much you can learn from reading, but truthfully I don’t believe there is any substitute for hard work. Those that work harder will normally achieve more than those who are brighter and work less. It is as simple as that. I am still hungry, after many years, for success, and I just keep working hard. Once my office is closed in mid-December I still had banking to do for a number of clients who I wanted to still be paid, even though the money has only came to us from the Road Accident Fund after the closing date of most other firms, and correspondence to attend to, including from one particularly aggressive client.
I am not saying I don’t take a holiday – I do – but the truth is I still see what is going on in my e-mails, I still attend to banking during most of the holiday and I come up with ideas, dictate blogs, e-mails to clients, newsletters, concepts and ideas for brochures, etc. In my spare time I read books about business, productivity, time management, investment, etc. I understand that most people will not find that particularly exciting, but you must understand if that is what you are competing against, it becomes very hard to match or beat that person or company if you are relaxing on the beach while they are putting in the hours. Some people have a capacity for putting in hard work, and not complaining that they are working or thinking that work is something that ends at 5pm.
I don’t think that everybody needs to put in those types of hours – it does not suit everybody and not everybody is after the same level of success or material reward. It probably, based on my own experience, suits those best who see it all as a game or a competition – in other words, have a desire to be the best at something, not because of how much money they will make, or how much money they will get back per hour that they put in, but simply because they want to be the best, they want to beat the competition and they want to be number one. The money will follow, but many people, and I am one of them, are not actually motivated by money as much as we are by wanting to be the best at what we do.
Being the best at what you do, whether it is in cooking, being a mother, being a golfer, or running a personal injury law firm specialising in Road Accident Fund cases, requires you to put in tons and tons of time and anybody who thinks otherwise is a fool and anybody who says otherwise is a liar. There just is no substitute for hard work – regardless of what your passion is. So I guess, that is my answer to what it takes to be successful, although of course spending hundreds of hours doing the same thing that is not working is not going to lead to success. It does still need to be combined with all the other things, including some good business sense, logic and a little dash of luck along the way.
Snap has listed successfully on the Stock Exchange and they are the owners of the app Snapchat. I use Snapchat, and I think it is quite useful for conversations and sending pictures as well as updating a storyline as to what you have been up to, etc. From what I can see more of my staff members are on Instagram than on Snapchat and that is going to be one of the problems faced by Snap.
Instagram is owned by Facebook and they are obviously going to try and tackle, hurt and do everything they can to promote their business ahead of that of Snapchat. Like Twitter, I struggle to see whether money is to be made with Snapchat. That is not to say I don’t like the product, but I just don’t see how you turn a little bit of advertising into a massive revenue stream without irritating everybody and Twitter came to the market with the same high expectations and now any company who has looked into buying Twitter has later pulled out because they cannot see how they are going to make money out of it.
Posted by Michael de Broglio on Wednesday 08-Mar-17
I have always been a fan of Zapiro, I think he is one of South Africa’s rare talents. He is a cartoonist and political commentator via his cartoons of the first order. I always think of him and Johnny Clegg as probably two of our most rare talents in South Africa.
Zapiro’s latest annual Christmas book that he puts out, is titled Dead President Walking and he has Jacob Zuma as a zombie with his eyes popping out marching on the front cover with all the scandals behind him – 783 charges, Gupta’s, Nkandla, Con Court rulings, etc. The book goes up to its last cartoon which was dated 23 September 2016, so it is quite new and it really is in many ways a summary largely of South African politics, although it does have some references to the campaign at the time of the now President Trump. Of course, he is not a Trump fan, and you would never expect him to be. It is wonderful biting commentary on the political situation in South Africa and every member of Parliament should be given a copy for free so that they are reminded as to what they are taking part in and the damage that they continue to inflict on this beautiful country of ours.
There is obviously a lot of news about all the different companies at the moment that are investigating self-driving cars or testing software. What a lot of people don’t appreciate though is that, in today’s data-driven world, Tesla is building an incredible lead over the competition. All of their cars have built-in software that already allows auto-steering, etc, and the cars feed the data back to Tesla. In addition to that, they have an almost background tracking of the cars even when they are not in self-drive mode, allowing them to build up all sorts of data from all of their models out on the road, as to traffic, traffic conditions, roads, etc. No competitor of Tesla has this at the moment – so whether it is Uber or Google testing a few self-driving cars, that is hardly the same as hundreds of thousands of Tesla owners out there logging up the kilometres for Tesla everyday (Tesla sold 80 000 cars during 2016). It is going to give Tesla a huge lead in the self-driving car game and I believe it is going to lead to them even being a very dominant player at some stage or other, or forcing one of the major role-players to buy them out at a steep price. It is certainly one of the shares that I have invested in over the last two years.
Johannesburg based attorney specializing in personal injury matters including Road Accident Fund claims and medical negligence matters. My interests include golf, reading and the internet and the way it is constantly developing. I have a passion for life and a desire for less stress!