Archive for the 'Book Reviews' Category
Monday, November 14th, 2011
The late Randy Pausch became well known as a Carnegie Mellon professor who made a inspirational “last lecture” called Achieving Your Childhood Dreams (over 14 million views) after his diagnosis with pancreatic cancer. He later then wrote a book called The Last Lecture with Jeffrey Zaslow. As a former bestseller, you can now find copies on the cheap. It is a short and worthwhile motivational read. All the quotes are from the book.
Time is all you have. And you may find one day that you have less than you think.
One of the things I think about a lot more these days is legacy. As a human, I think most of us have a desire to outwit our own mortality.
What wisdom would we impart to the world if we knew it was our last chance? If we had to vanish tomorrow, what would we want as our legacy?
I think children help fulfill that need, as they allow a chance for a part of us to live on forever. For him, the Last Lecture itself was a legacy project for his family so that his young kids would know him better when they grew up. He also talked about his professional legacy:
Now a computer science professor at Washington University in St. Louis, Caitlin (oops, I mean, Dr. Kelleher) is developing new systems that revolutionize how young girls get their first programming experiences. [...] (You can keep tabs on their progress at www.alice.org.) Through Alice, millions of kids are going to have incredible fun while learning something hard. They’ll develop skills that could help them achieve their dreams. If I have to die, I am comforted by having Alice as a professional legacy
So his legacy projects were three things: his family itself, something for his family, and something to leave the world a better place. I think this is good framework for creating my own legacy.
Now how did he achieve those childhood dreams, as well as his legacy goals? More or less it was just hard work and persistence. What stood out to me was the idea that some things should be hard to achieve, and if you get it anyway you should be proud of it. Time spent complaining is time wasted.
The brick walls are there for a reason. They’re not there to keep us out. The brick walls are there to give us a chance to show how badly we want something.
…The brick walls are there to stop the people who don’t want it badly enough. They’re there to stop the other people.
Pausch didn’t get there on his own, even with all the hard work. He showed gratitude to his parents, his wife, the professor that got him into grad school after he was rejected, his kids, and many other colleagues.
Wednesday, October 12th, 2011
I’ve enjoyed every Michael Lewis book that I’ve read, from Liar’s Poker to Moneyball to The Blind Side. Reading his writing is as easy as listening to a great storyteller, making the most mundane subjects interesting. I’ve been hearing about his new book Boomerang: Travels in the New Third World, and was surprised learn from Felix Salmon of Reuters that the book is simply a collection of previously written articles from Vanity Fair magazine. Articles that are still available, for free, online!
I looked inside a copy of the book, and it’s true. Amazon reviews confirm it. The articles are the same, word for word. You can even read the only “new” thing, the Preface, online for free at Amazon since it’s the “free first chapter”. I don’t feel bad sharing this, since Vanity Fair paid Lewis good money to write these articles, put them up publicly with ads, and no doubt enjoy the traffic. So if you want to read Boomerang electronically, the Table of Contents of the book is below. I used Instapaper on my iPod Touch and read parts of them while waiting at the doctor’s office.
Preface: The Biggest Short – Amazon book page (“Read first chapter FREE”)
I. Wall Street on the Tundra – Iceland (Partial only, but Archive.org has the entire article. Thanks to reader Travis.)
II. And They Invented Math – Greece
III. Ireland’s Original Sin – Ireland
IV. The Secret Lives of Germans – Germany
V. Too Fat To Fly – California
Warning: Reading this book will make you some combination of scared, angry, and depressed. I’ve only read the Preface, Greece, and California chapters, and I’m already seriously thinking of buying some gold and guns to join my food hoard. I remind myself that Lewis is a gifted storyteller, but some people still disagree with they see as oversimplification and broad stereotyping of cultures. But just going by the hard numbers given, I’m still worried.
* Update: The Iceland article has been changed to only a partial stub at VanityFair.com, pushing you to buy the book “The Hangover” to read the rest. Interesting, the same article recycled in two separate books. The rest of the articles are still up, but I’d print to PDF or similar in case they change them as well. The Iceland article was free to read for years before this book came out, so it’s still out there if you look hard enough. Update 2: A couple of astute readers found saved versions. I recommend visiting this Archive.org link and saving it quickly.
Wednesday, September 7th, 2011
Cheap: The High Cost of Discount Culture by Ellen Ruppel Shell covers a wide variety of topics, but the main idea I got from reading it, was that we are too focused on price, and not enough on value. We have shifted from quality, durability, and craftsmanship towards quantity at the lowest possible price. I previously wrote about how it’s harder to judge quality these days as it relates to Coach Outlet stores. Next time you buy something, think about what you actually know about who made the product, the materials or ingredients used, and how long it will last before you have to buy another one.
Thanks to globalization and a relentless pursuit of efficiency, we now have $1 chicken sandwiches, $5 toasters, and $10 IKEA coffee tables. That saves us money, right? However, also notice that it’s often the crap in our lives that gets a bit cheaper. The real essentials – rent, education, healthcare, gas, never seem to get less expensive. On top of that household wages are stagnant, partially because all the jobs making stuff have gone to the countries with cheapest labor before our workforce has had a chance to learn to do something else. Look at the current unemployment rate. So are we really coming out ahead?
The book includes an interesting history of the evolution of retailing and the creation of the discount superstore. There was a time before Wal-mart when small shops sold specialized products through educated salespeople. Now, everything is propelled by mass advertising everywhere, followed by do-it-yourself shopping. Now, I personally like reading tons of peer reviews on Amazon before buying a product, but you have to admit that the genius of a store like IKEA is that so much of the cost is shifted onto the consumer. We load up the huge boxes onto a shopping cart ourselves, cram it into our car, drive it back home (paying for the gas), and build it ourselves with hours of labor.
There is also the interweaving of behavioral economics topics you may be familiar with by academics like Daniel Kahneman and Dan Ariely. For example, you probably get excited when you buy something marked down 60% at the mall. We’re all genetically wired to get hyped up for that, so it’s not surprising. Well, these days basically everything is marked down. Only 20% of department store merchandise is actually sold at full price. If everyone is getting the same “deal”, is it still a deal or just manipulation?
On a related note, discount stores often tout “everyday low prices”, but they really just try to compete hard on things that we buy most frequently and are most familiar with. Wal-mart actually has higher than average prices on about 1/3rd of its inventory. On the items for which prices are lower, the savings is 37 cents, with about 1/3rd of items carrying a savings of no more than 2 cents. The loss leaders draw us in and make us feel like we’re saving money, but the other things we toss in our basket make the profit.
Although some of these trends are unlikely to be reversed, we should remember that it’s not all about the price tag. An example of how things “should” work is the grocery store Wegman’s, which I am not familiar with but sounds a lot like Trader Joe’s on the West Coast. Locally-sourced products, good wages and benefits for employees, and good service create an atmosphere that is not solely focused on price (although it is still an important component).
Friday, July 29th, 2011
No, this not another book on gratuities and service workers. In the investing world, TIPS stands for Treasury Inflation-Protected Securities, which are bonds issued by the US government that pay interest which is linked to inflation. Inflation is measured by the Consumer Price Index (CPI).
As a greatly simplified example, if you bought a TIPS bond with a real yield of 2% and inflation ends up at 3%, your return would be 5%. If inflation later on jumps to 8%, your return would be then 10%. Most bonds are what we call nominal bonds. They pay a certain interest rate like 5%, regardless of what inflation is. Thus, having such inflation-linkage provides protection against inflation that is higher than expected.
These are just the basics. A cynic would tell you that you don’t hear much about TIPS because they don’t make Wall Street very much money. However, I think they are a critical component of my portfolio. So how should you go about buying them? Enter the book Explore TIPS by the anonymous blogger and former guest poster The Finance Buff. For example, it will show you how to navigate the many different ways you can buy TIPS:
- Via a mutual fund or ETF like VIPSX or TIP
- Via an official auction through TreasuryDirect or a broker
- Via the secondary market, through a broker
As with many things, buying them directly gives you more control, but less convenience. The good thing is that like Treasury bonds, holding a single bond has the same credit risk as holding 100 of them. However, you’ll need to understand things like noncompetitive bids (actually a good thing), yield-to-maturity, and inflation factors.
Even though it’s only about 100 pages long, Explore TIPS definitely comes through as its tagline promises: “A Practical Guide to Investing in Treasury Inflation-Protected Securities”. It may take a while to get through… even I don’t get excited about reading about bonds. Well, maybe a little. Now, you could probably learn most of this stuff on your own if you spent all your time browsing investment forums and the Treasury website, but this tidy reference book will save you loads of time. On Amazon it currently runs $11.96, but you can buy the PDF version for $4.95.
Monday, July 25th, 2011
Earn more, or spend less. That’s what you have to do in achieve financially independence. My own philosophy has been to try and earn more than average, perhaps look about average to casual observers, and spend below average. Now, what if instead you earned about average, but spent way, way below average?
Various studies have shown that with a portfolio of about 60% stocks/40% bonds, you can withdraw 3-4% of your portfolio value each year (inflation-adjusted) and have a 95%+ chance that your money will last a lifetime. Using a 4% rate, that means to retire, you’ll need to save up 25 times your expenses. So if you spend $40,000 a year, you need $1,000,000. By that same math, if you only spend $8,000 a year, you only need $200,000 to retire.
Impossible, you say? Not to Jacob Lund Fisker, author of the book Early Retirement Extreme, who says he lives on about $10k a year and retired by 33. Extreme is a good word for it, though. In the US, the poverty line for a single person is $10,890; for a family of four is $22,350. But that’s how he can make the following claim about his book:
It’s possible to retire and live on invested savings after just five years of full-time work.
Five years?! No, I don’t think he’s crazy. I think it’s awesome that he presents such a different perspective, even if few others can achieve it. He observes that as humans we are more productive than ever, yet we work just as hard or harder than before. The opportunity for early retirement is definitely within grasp in this country.
So how do you manage to lower your expenses to such a level? You’ll likely need to alter your entire philosophy. Living a low-cost, self-sufficient lifestyle must be the end goal, not just a means to an end. If being financially free means driving fancy cars and eating at a new restaurant every night, this will not work for you.
Being Fisker’s ideal “Renaissance man” means going back to when people were mostly generalists (proficient at many things) instead of specialists (exceptional at one thing and outsourcing everything else). It means buying stuff that last forever (high-quality shoes), and learning to fix stuff that doesn’t (darning your own socks). It means not using air conditioning and accepting that sweating also cools you off. It means being willing to bike/run/walk 5 miles to the store instead of jumping in a car. It means living in smaller, more efficient housing that should cost no more than $200-$350 per month per person. It means not paying $100,000 for a college education, but going to a trade school or apprenticeship instead.
Going back to the 4% withdrawal rate. Let’s say your cable bill is $40 a month. That means you would need to save up $12,000 solely to pay for your ongoing cable bill. Is cable TV worth $12,000? Maybe, maybe not. Now do this for all your expenses.
Investing philosophy. Fisker does not like “Buy and Hold” or even low-cost index funds as an investment strategy. However, he does not offer up a satisfying alternative. There are some vague references about how if you devote some time to learning about investments, you’ll be able to earn much better returns. After gathering up clues from the book and his blog, I can only guess that he focuses high dividend stocks that have a very small market cap and thus avoid Wall Street analyst attention (a less efficient market). He doesn’t share actual holdings, so we are unable to follow along or track returns.
Jacob is a Physics PhD and this book is written like a scientific paper or textbook. The text is small, the information is densely packed in, there are lots of footnotes, and it was even written with LaTeX. Much of the same material is available from Jacob’s blog at EarlyRetirementExtreme.com. I recommend reading the archives chronologically from the beginning, especially now because there are few new articles (most are simply randomized re-posts of his old ones and it can get confusing).
In the end, I enjoyed reading this book primarily because it is so “extreme” and thus different from any other book on my nightstand. Even if you don’t adopt his philosophy entirely, it will hopefully make you question some of your current choices. I feel that we need more insight on this side of the spectrum, as opposed to all the attention on the “I sold my company to Google and made a bajillion dollars that’s how I retired early” folks.
Wednesday, June 29th, 2011
Super Freakonomics is the follow-up to the 2005 bestseller, Freakonomics by Levitt and Dubner. This review will not be a summary of all the stories inside, although they are indeed entertaining. Given that they compare Santas and prostitutes, you quickly realize this is no economics textbook. However, I think both books should be required reading for high school students anyway because they teach that economics isn’t just about supply-and-demand curves. Economics is really about how people respond to incentives.
One main lesson is that sometimes you can’t clearly see what incentives people are responding to. When you think it’s just about money, it often isn’t. People respond to the need for sex, praise, love and the desire to avoid shame, judgment, and criticism. For example, why do people give to charity? It’s not just to help others. We do it for the tax break, for recognition in a newsletter or on a plaque, to feel better about ourselves, to avoid guilt, to help guarantee a spot in the afterlife, or simply because somebody important or attractive asked us to.
Or when you think it shouldn’t be about money, it actually is. Not very many people in the U.S. consent to organ donation, even though it could directly save countless lives. Iran compensates people for kidney donations, something that is considered unethical in the U.S. Remember, most people have two kidneys, and can live with one. How many lives could letting money play into this save?
Another worthwhile lesson is to watch out for unforeseen consequences. Here’s another example. The feminist movement resulted in dumber schoolchildren. Early in the last century, teaching was one of the few jobs available to women that didn’t involve cleaning, cooking, or other menial labor. In 1940, 55% of all college-educated females workers in their early 30s were employed as teachers.
As more and more women entered the fields of law, medicine, finance, science, and so on, resulted in a “brain drain” for schoolteachers. There are many excellent teachers still today, but according to cited research the overall teacher skill level and quality of instruction has declined over time. Between 1967 and 1980, U.S. test scores fell by the equivalent of about 1.25 grade levels.
If you liked Freakonomics, you’ll probably like this book. You have to read carefully to separate what “the research says” and the authors’ theories as to the actual reasons why. Again, there weren’t any direct applications to personal finance inside, other than perhaps showing us how pimps provide more value than Realtors. Their chapter on global warming was especially controversial. It’s been out for a while, so it should be easy to find at your local library, and used copies can be found at Half.com or Amazon for about $2 + shipping.
Wednesday, May 18th, 2011
Rework is a book written by the founders of 37Signals, a company that makes online collaboration software like BaseCamp. They also write about running small businesses on their blog Signal vs. Noise. It is readily admitted that this book is a condensed and tightly edited version of topics from their blog. I don’t read their blog regularly, but had heard of it when I came across this book while browsing inside Barnes & Noble.
This is a short book with a casual writing style, complete with about 60 “chapters” that read just like blog posts. Many of the
posts chapters make it a point to contradict common “rules” within the entrepreneurial and/or MBA-driven world. Here are few overall ideas that I noted, which the authors support with their own experiences.
- Don’t learn from your mistakes. Learn from your successes.
- Don’t make your business big. Small is okay.
- Don’t do surveys or market research. Make something you would want to use.
- Don’t wait for perfect to launch. Just make a decision and correct course as needed.
- Don’t make your product do everything, especially if it means you’ll have to do it half-ass. Make it do important things, well.
- Don’t hire based on GPAs or degrees. 90% of Fortune 500 CEOs did not come from an Ivy League for undergrad. The most common undergraduate school among them? University of Wisconsin.
I don’t use any of the 37Signals products, but they have their own niche, and they make what seems like good money at it. I believe their target sweet spot is for people who are self-employed or wish to work in a small but passionate small business that has no intentions of hiring 500+ employees or filing for IPO. This book is not for those with Facebook or Twitter-like aspirations, but if you’re trying for something smaller, I would recommend reading this book.
Wednesday, April 13th, 2011
I recently finished re-reading the updated edition of the popular book The 4-Hour Workweek by Tim Ferriss. I read it quickly when it first came out in 2007 or so, but this time I think was more ready for the message.
In the last lifestyle book I read, The Art of Non-Conformity, the goal was to find a convergence between your work and your passion. Ferriss goes the opposite way and clearly separates them. Forget “dream job”, matching your true dreams with a job is too hard for most people. Instead, the ideal job is the one that gives you enough money in exchange for the least amount of time. Now you can pursue your dreams.
This is a critical difference. The overarching goal is now to create automated income and free up time.
Highlights & Notes
Motivation and getting started. The timing will never be just right. Just go for it and correct course as needed. The price of failure is often low, while the price of never trying is often high.
Creating your own income. Includes various ideas on starting your own business with the goal of high income and low time commitment. Resell someone else’s products. License a product. Create your own product. Physical objects are okay, but informational products are even better if you can pull it off. Ferriss himself made his first big money by selling nutritional supplements using ads in magazines. (Not exactly a product to be proud of, which I guess fits into his point above. Good thing he’s great at marketing.)
Shifting from 9-5. Let’s say you don’t want to quit your current job yet. The goal is again to separate work from time. If you can do the work that you spread out over 40 cubicle hours in just 20 hours at home, that will create a lot of free time for you to start that side business. For some, this may be enough to start pursuing your other dreams. Detailed instructions on how to negotiate a remote-working arrangement, starting with a two-week trial and reaching a full-time remote situation.
Time management. As said elsewhere, it’s critical to stop wasting your time and energy on things are really aren’t important. Being busy is not necessarily the same as being productive. Cut out interruptions, stop time-wasters like checking e-mail all the time, and batch tasks together.
Have others work for you. Hire virtual assistants from India. They aren’t just drones, if you teach them a system and allow them to use their own discretion, they can really remove a lot of your workload. Outsource whatever you can, remember that you’re not trying just to maximize profit.
What if I actually succeed? How will you spend your time? Instead of the potentially vague pursuit of “happiness”, he asks why not simply pursue what excites you and makes you feel alive. Ferriss enjoys “mini-retirements” where he does long-term international traveling. People also tend to find satisfaction with tasks that require continuously learning and/or include helping others.
Even though sometimes I have the urge to go against popular opinion, especially when the author’s primary skill seems to be marketing, I have to say that I really enjoyed reading this book. For me, it provided a good balance of big picture theory and practical advice. As with any book of this type, 99% of the readers won’t be able to actually attain a 4-hour workweek. But in return for ten bucks and a few nights of reading, I definitely felt I got good value.
I would recommend anyone who has the entrepreneurial urge to read this book, and I’m keeping my copy around because the included companies and links are useful for future reference.
Sunday, March 20th, 2011
I’m trying to read more books by other bloggers, and the one I managed to finish first was The Art of Non-Conformity. Based on the writings at eponymous ChrisGuillebeau.com, the book’s tagline is “Set Your Own Rules, Live the Life You Want, and Change the World”. Sounds good, eh?
I’m not sure how I found the site initially, but I remember finding it neat that he resides in my old zip code of 97214. Awesome neighborhood. As you might expect, it is more of a “lifestyle design” book than anything specifically financial.
What do you want from life?
The author’s adventures so far has included going from doing manual labor at FedEx, to selling stuff on eBay, to volunteering with a medical charity in West Africa for four years. He now makes a living as a writer, selling a variety of “unconventional living” eBooks and now this physical one. One of his current big goals is to visit all 192 countries in the world.
A big chunk of the book is about finding what you really want to achieve in life. Instead of trying for less work, why not better work. What do you imagine as your legacy? When trying to figure this one out, Guillebeau pushes you to think openly – take risks and don’t listen to what others say can’t be done. Sprinkled throughout the book are stories about his experiences and those of others who are leading non-traditional lives. Two of my favorite quotes:
Take your dreams seriously.
We tend to overestimate what we can complete in a single day, and underestimate what we can complete over longer periods of time.
Making it happen
How do you create your ideal life? Spend your time towards your real priorities. Stop spending time on busywork or other inefficient activities. Realize that a “Stop-Doing List” is just as helpful as a “To Do” list. Instead of a “work/life balance”, which often works out to be “stop working so much, since you hate it, but enough so you can eat”, why not make your work align with what you want your effect on the world to be?
The author is a strong proponent of self-employment, especially through internet-based businesses that allow you to be location independent. This makes sense, because this is exactly what he has done successfully. However, at times I felt the book was colored a bit too strongly with his own experiences.
One example is how he’s not a big fan of college and graduate degrees, noting repeatedly that 80% of it was a waste of time. (I’d say his eventual occupation and his degree of Masters in International Studies had something to do with it. Many engineers or medical school graduates probably think higher of their education.) School isn’t always the answer, but he really seems to dismiss it too easily because it didn’t help him personally.
I’ve already said this isn’t a financial book, and so don’t be surprised that the section on personal finance is pretty sparse. Most of the advice is of the big-picture variety, and parallels his life advice. Just like you should only spend time towards what you really value, you should spend money happily on what you really value. Don’t spend a dime on the rest. Life experiences are more important than physical stuff.
One interesting idea was his preference for what he calls Income-Based Financial Independence as opposed to Wealth-Based. Basically, he dislikes the traditional goal of having a “Number” of say a million dollars as a goal. Instead, he wishes to create a certain income from work that he likes to do, while also having the freedom and time to do all the other stuff he wants. Somehow he avoids the term “passive income”, but he does tell you to avoid work that simply trades time for money.
By far, the strongest part is the author’s easy and energizing style of writing, which makes adventure seem within grasp to everyone. If you have that little idea in your mind that you want to do something different/drastic/scary, then this book will help push you to take the next step. Cynical readers will just see this as rah-rah impractical dreamy fluff. However, I happen to agree that accomplishing just one bold task can make us feel invincible, propelling us to do more. Hopefully, this review will help you decide if this book is for you.
Monday, January 17th, 2011
If you’re looking for a inspirational book to read for the new year, consider this one, but read on to see if you like what you’ll learn. In Talent Is Overrated, author Geoff Colvin explores what makes world-class performers different from everyone else.
What is the key to great achievement?
- Hard work?, or
- Innate talent?
Talent vs. Practice
One area where we often give the credit to talent to is musicians. Look at the “kid genius” Mozart, who famously composed his first piece at age 5. Well, Mozart started learning music at age 3 from a pushy composer father who loved to teach (and likely helped write many of his early works). He had been working at music for over 10 years by the time he wrote anything that was widely acknowledged to be of special quality.
In a separate study comparing music students enrolled in elite music schools with those in regular public schools, it was found that the average number of practice hours need to reach the same level of skill was the same for all students. Sure, the students in the elite group were often practicing 2 hours a day vs. only 15 minutes a day for the other kids. But no matter how you clocked those hours, quickly or slowly, nobody got there without putting in the same amount of hours.
Next, let’s look at sports and Tiger Woods. Woods was a prodigy, but he was also an only child to a army-trained teacher/father who started him playing golf at a mere 7 months old. He was playing and practicing on a real golf course by the age of two, and throughout his career was known for his intense practice habits.
The fact is, that almost every study that has looked for evidence of the sort of genetic edge that we call “talent”, has failed to find it. Instead, they find that without exception, every single top achiever has put in thousands upon thousands of hours of practice into their field. In addition, the amount of skill is almost directly proportional to the amount of hours put into it. Terms like the “10,000 hour rule” (as noted in the book Outliers) or the similar “10-year rule” have been created to describe how long it takes before true mastery is achieved.
But wait, lots of people do the same thing, every day, for years. Why aren’t they all awesome? Researchers have also found that “practice” is too vague of a word. Instead, what creates excellence has been termed “deliberate practice”. Deliberate practice is not just hitting through a bucket of golf balls every day.
Read the rest of this entry…
Wednesday, December 15th, 2010
I bought The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to Do About It by Michael Gerber at a outdoor market because it was a finance “bestseller” and I’d seen it on a few reading lists. It’s been sitting on my bookshelf since (along with many others…), but once I picked it up and read a chapter, I went ahead and finished over the next two days.
Why Businesses Fail
The “E-Myth” stands for the Entrepreneurial Myth, which I’ll paraphrase as the belief that all a successful business needs is a hardworking, skilled, fearless entrepreneur. When we think successful small business, we think of Bill Gates or Richard Branson of Virgin. Is it really that simple? 40% of small business fail within one year. 80% of them fail within 5 years.
This book states that, in reality, a successful business needs three roles to be fulfilled:
- a technician which understands the technical aspects of the business,
- a manager which plans and organizes, and
- a entrepreneur who provides the vision and energy.
You might think you have all of these characteristics already, but these roles are often in conflict with each other. Most businesses start out with only one role really filled – that of the technician. A plumber starts a plumbing company. A baker starts a bakery. A graphic designer starts a design shop. Usually, the motivation is that they don’t want a boss. The end up have a poorly trained boss – themselves.
When things get hard, usually the technician wins out. The perceived solution is to work harder, do everything by yourself, so that you can “do it right”. This is where many businesses start to fail. Now, if you’re really stubborn and hardworking, you can make this stretch out for a long time. You’ll also be really tired and unhappy.
I actually see this first part of the book as separate from the next part. It teaches you to look at how you are running your businesses. Are some of the roles being too strong, or being neglected? The manager tends to micromanage, and the entrepreneur tends to be the frustrated dreamer.
Okay, so now what? How do you take your business to the next level?
Gerber says to look at the franchise model, and uses McDonald’s as an example. Don’t focus on the fact that you may hate the food there. The true power of McDonald’s is that every single aspect of the business was broken down step-by-step and laid out that a random person off the street could “read the manual” and open up their own McDonald’s restaurant. Where to locate the restaurant. The layout of the kitchen. The menu. How each hamburger is ordered, stored, cooked, assembled, and finally delivered to the customer.
What’s your system? If you were to train a reasonably smart person without any knowledge in your field, how would you break down your business to them? What is the unique value proposition that you offer, and how do you achieve it? What does each roleplayer do? As the saying goes, “Explain it to me like I’m a 10-year old.”
I view this book as “big picture” type of book that will definitely get you thinking differently about your business and business goals. Since it is also relatively short and easy to read, I would recommend it to anyone who wants to work in a small business, or is already working in one. (It’s also really easy to find at the library or used for cheap – try Amazon or Half.com.)
The book is definitely more applicable to a small business where you plan on one day being more “hands off”, like a restaurant, a store selling widgets, or a big design agency. But even for the many people out there who are perfectly happy being a one-person show, you can still apply the concepts of this book. You can break yourself down into what your special roles or tasks are. Write it down. You may not have ever thought of yourself in this way. Then you can focus on those areas, and either get rid of or outsource the tasks that you don’t need.
Now, some critics will call this book common sense from a self-appointed guru. In this way, I feel this book is a bit similar to Rich Dad, Poor Dad by Robert Kiyosaki. I didn’t really like the rest of his books, but the idea that you should buy assets that grow instead of liabilities like cars or gadgets can be helpful. But reading it was definitely a net positive for me, as was reading The E-Myth Revisited. Both are not the best writers out there, but still manage to convey their message.
Monday, October 4th, 2010
Drive. Click. Choke. Empowered. Switch. Bounce. It seems that the short book with the one-word title is very popular these days. Here’s another one: Clutch: Why Some People Excel Under Pressure and Other Don’t, by Paul Sullivan. The book explores stories of people both overcoming and succumbing to extremely stressful situations.
The people profiled include war veterans, actors, and athletes. In particular, five key characteristics of the “clutch” are given:
- the ability to be fully in the present, and
- being driven, whether by fear or desire
What about a financial crisis? Your home value plummets while your mortgage rate jumps, you are suddenly unemployed, or your investments drop drastically in value. How will you respond so that your household survives? Seems a lot different than making a golf swing, but here I tried to summarize the section using the five traits above:
Focus. Take responsibility. Change what you can. Don’t waste time blaming others like the mortgage lenders or the credit card issuers that jacked up your rates.
Discipline. Cut your costs without emotion. Sell liabilities like cars, boats, vacation properties. Walk away from your home mortgage if needed. You should always have enough cash to cover twelve months of your expenses.
Adaptability. What is most important to you? Family? Well, your family will still love you if you live in an apartment and drive a $3,000 car. Learn to live without the rest.
Be in the present. Don’t wait. Don’t think you’ll be bailed out, or something magical will happen. If you rely on hope an sit around waiting for things to improve, you’ll just burn through more of your reserves and end up even worse.
Being driven. Figure out what motivates you. Maybe it is fear of losing it all, or desire for financial freedom.