Improving Your Business By Lowering the Stress Level

The video below includes information that could be very useful to apply to one’s personal life, but I found the implications for business management more fascinating.

The video mentions specific health problems associated with stress, such as plaque in arteries, shortened telomeres, ineffective immune systems, a tendency to store fat in the abdominal area.  I was aware of these before watching the video, but I was surprised to see that stress is also associated with damage to the hippocampus region of the brain. The research was not described in detail, so I do not know how much evidence there is that stress actually causes the health problems.  It’s conceivable, for example, that people with damaged brains might be less able to cope with life and thus be under more stress than people with healthy brains. The theory that abdominal fat results from high levels of glucocorticoids in the blood was mentioned. Since stress causes the body to shut down all systems not essential for fight-or-flight, it would make sense that the blood flow to the hippocampus region would be reduced when a person is under stress (the hippocampus is responsible for consolidation of short term memory to long-term memory).

The diseases associated with chronic stress clearly result in employee absences from work due to illness.  Less obvious is the cost of stress in terms of lower productivity.

The Whitehall cohorts studies of British civil servants showed a direct correlation between lower hierachical status, stress, poor health and higher mortality.

One of the main causes of  job-related stress is lack of control.  I have found that even highly structured jobs can allow employees some control.  Here are some examples:

  • Allowing employees the maximum flexibility possible in setting their own schedules;
  • Listening carefully to employees’ suggestions for improving the business (employees often have some excellent ideas, so in addition to giving them control over their working lives, you can also improve the way you operate your business)
  • Noticing employee performance and letting them know you appreciate it
  • Basing compensation on performance

Here’s the video:

While browsing through my favorite blogs, I came across an article on a related topic, the effect of happiness on learning and productivity.  This is actually a paleo diet blog, but I never fail to learn something useful about life in general when I visit. There’s an embedded video of a Ted Talk given by Shawn Achor:

Excludable Gifts

This question, in one form or another, comes up often enough that it’s worthwhile to address it here. One of my clients asked:

Is a gift under 13k tax deductible? I was reading the IRS website and I came across that.

Gifts are never tax deductible, unless they are made to a 501(c)(3) charity or similar organization. You can check here to search the IRS’s database for 501(c)(3) organizations:,,id=249767,00.html

The Tax Code specifically excludes gifts from the gross income of the recipient. So if you were to give your child $5000 as a graduation gift, your child does not even have to mention that $5000 when he prepares his tax return.

So what’s with the special treatment of gifts under $13,000 my client saw on the IRS website?

Gifts are not taxable to the recipient, but they are sometimes taxable to the donor. The reason for this is that people used to avoid federal estate taxes by giving everything away on their deathbed. Since the estate tax is calculated as a % of asset owned at death, this strategy worked nicely to lower the estate tax to zero.

To prevent people from escaping estate taxes quite so easily, Congress passed a law that said any gifts given within 3 years of death had to be included in the donor’s estate. So people started making gifts earlier in life. For example, a person could set up a trust and make her grandchildren the beneficiaries. She could then contribute an office building to the trust and thus get the office building out of her estate. As long as the person lived at least 3 more years, the value of the person’s assets was reduced, and therefore the estate tax was reduced.

Congress reacted to this by passing a Unified Estate and Gift Tax. Over the course of his entire lifetime, a person can give up to a million dollars in gifts to recipients other than 501(c)(3) organizations. Gifts in excess of $1 million are taxable. To track the lifetime amount of gifts, a person if required to file a gift tax return every year a gift has been given.

But Congress really didn’t mean to require every birthday and wedding and graduation holiday gift to be reported. So the law exempts gifts of $13,000/year or less per donee. As long as you don’t give more than $13,000 to any one person during any one year, you don’t have to file a gift tax return. The $13,000 per donee exemption is per person, so a husband and wife can together give $26,000 per donee.

One of the ways to transfer a family business to the owner’s children is to give each child stock or LLC ownership units worth $13,000 each year.

To get back to my client’s question: no, you cannot take a deduction for gifts under $13,000; but you can exclude them when you calculate taxable gifts made during the year.

Do People Really Get To Know New People at Networking Events?

Many years ago, when I first started my law/CPA practice, one of the ways I marketed my services was to sell literally door-to-door. I’d stop by a business location and ask to talk to the owner. I never get tired of hearing about all the different ways people think of to make money, and I always enjoyed hearing about how each business was created. I found that people loved talking about their businesses, so it all worked out well. I had a great time doing door-to-door selling, and my prospects had enjoyable conversations. I even picked up a few clients, some of whom are still using my services all these years later.

Another sales tactic I tried was attending “networking” events. I went to a few that were structured events, such as lunches where you’d move from place to place for each course and have somewhat in-depth conversations with random people. I got a couple of clients that way but, all in all, I didn’t find it worth while. The unstructured cocktail party type of networking event was even worse.  My experiences usally went like this: I’d wander around having meaningless conversations with people, gain a collection of business cards that were meaningless afterwards, and either leave, or end up with another lawyer or CPA who didn’t need my services.

Turns out that my experiences with networking events may not have been unusual. Last month, Wired’s Frontal Cortex Blog had an article by Jonah Lehrer, Opposites Don’t Attract (And That’s Bad News). Lehrer describes a 2007 Columbia University study by two psychologists, who hosted a networking event (which they called a “mixer”) and tracked each attendee’s encounters via electronic name tags. They found that, while the attendees did meet a few new people at the event, they tended to engage in long conversations only with people they already knew.

Even more interesting is a study first published last year by Angela J. Bahns, Kate M. Pickett and Christian S. Crandal. They tracked friendships among university students, and found that students at a large school, whose student population included students with diverse backgrounds, tended to choose friends whose backgrounds and opinions were very much like their own. Students at smaller universities were more likely to get to know people unlike themselves, presumably because there were fewer potential friends to choose from.

Lehrer did not discuss online social networks, but the results of the Bahn et al study would lead one to expect that there would be even greater similarities within online groups than within the groups of students at a large university. A 2009 study, Homophily, Cultural Drift, and the Co-Evolution of Cultural Groups, bears this out (homophily is the principal that like attracts like — that is to say, the opposite of the principal that opposites attract.).

These studies are not surprising. It seems quite natural for people to want to hang out with others who share many of their opinions, whose childhoods were similar to their own, who make about the same amount of money, who follow the same sports.  On the other hand, you can learn a lot more from people who are different from you. Also, people who are different from you, who are in different lines of work, are more likely to need your products or services than people just like you.

So is it worth going to networking events if you make a real effort to engage in extended conversations with people who are different from you?  Or more accurately, with groups of  people who are similar to each other but different from you, since people at networking events hang out with people like themselves.  I don’t think it would work. For example, if I go to a networking event and try to hang out with a group of long-haul truck drivers, I’m going to have a difficult time breaking into the conversation. It’s probably going to make them feel uncomfortable having someone there who is not one of them.

Networking events must work for some people, or there wouldn’t be as many networking events as there are. My guess is that they work best for the people who organize them. When you work together with a small group of people to organize an event, you have a situation more like the small universities in the Bhan study — you and your fellow organizers have time to really talk and get to know one another. That’s the lesson I’m taking away from all these studies and my own experiences — don’t attend networking events unless you’re one of the organizers.