Archive for 2006
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Robert Kiyosaki’s latest offering is the subject of my second Audiobook posted. I managed half of the book on the plane, finding it a little more challenging than his previous Rich Dad Poor Dad series.
Kiyosaki, the millionaire, has teamed up with Donald Trump, the billonaire to produce “Why we want YOU to be rich”. According to the Amazon blurb, Get a behind-the-scenes peek at Why We Want You to Be Rich in this video interview with Donald Trump and Robert Kiyosaki. They pair talk about their very different backgrounds, their mutual admiration for one another,and how they came up with the idea to write Why We Want You to Be Rich together.
A little background. Kiyosaki has sold over 26 million of the RDPD series globally. The reason for the success is two fold 1) Firstly, Kiyosaki uses the first person storytelling narrative so effective in relaying the “moral” to the reader and 2) Secondly, the books are the “missing link” in our financial education.
You see it’s like this - we go to school, get good grades, progress to university, get a good job, work hard and hopefully by the time we retire had amassed enough $ to start enjoying life. The received wisdom is, however, fatally flawed as we shall find out in Kiyosaki’s collaborative effort with Donald Trump “Why we want you to be rich”.
Unfortunately, Trump’s better at business than he is at teaching business (despite claims to being a “teacher”). Kiyosaki became famous through writing, whereas Trump’s fame enables him to get his books published.
If you can get over the Trump-Kiyosaki mutual appreciation society’s numerous references to the other party, you’ll find the subject matter very interesting.
Kiyosaki puts it like this. The US government’s financial obligations in social security and medicare total more than $71 trillion dollars in 2006. That’s a lot of money. Put it into context, that’s more than the combined values of world’s stock markets. Some liability for the balance sheet.
Well what’s new? We all know most western developed economies live on borrowed money and the PSBR increases daily. What’s new here is the message that the government cannot afford its financial obligations to the growing number of dependants. What this means is the collapse of defined salary pension funds is just the beginning. Today’s pensions are not pensions - they are tax efficient saving schemes - that’s all.
What Kiyosaki & Trump deliver in this book is a reconfirmation of the messages in the RDPD series - that no-one teaches you financial education. Today’s economy moulds its people on the industrial model where lifetime employment, pension schemes and hard work represent the cornerstones of financial security (albeit when you are possibly too old to be able to enjoy it fully).
It’s no coincidence that both men made their money out of real estate. Trump possibly had the more ostentatious of goals of the two (see Trump tower below) - located 73 5th Avenue, New York.
However, although these guys are rich, their success has been based on observing the strategies of the rich rather than middle class. These are:
1) Middle class attempt to grow through ownership. Rich grow financially through control, own very little.
2) Middle class acquire what they think are assets but are in fact actually liabilities. Rich focus on acquiring cash positive assets. As their pay increases, MC buy a larger house (liability), larger cars (liabilities), larger credit facilities on their cards (liabilities).
3) Middle class try to grow financially through salary. Rich do this through OPM (other people’s money). You’ll never get rich on income alone. I found this out some time back. The harder you work, the more tax you pay, and what’s left is easily accounted for by your growing lifestyle requirements. Income should only be seen as a method to fund the acquisition of assets - i.e. things that make money for you whilst you sleep (ah yes - it’s leverage again).
Put into perspective - I work pretty hard like most people, but will make more $ this year through the asset appreciation and cash flow of my real estate portfolio than through my salary. Furthermore if rolled forward, the appreciation is capital gains tax free (Gordon Brown has yet to work out a way to tax debt, so that strategy will be safe for some time to come.) It’s easy money, but like most overnight successes takes a lifetime of work and (effective rather than academic) study to prime the pump.
What they didn’t teach us at school was it’s not how hard you work, but how much value you create that forms the basis of financial growth.
How much value would you place on 5 hours of this kind of financial education?
The prospect of a 13 hour long haul with an infant is surely only savoured by sadists. However, flying Virgin always makes the experience more bearable (see notes below on “What are you?” mind).
I was actually looking forward to the flight this time round. I charged up the Ipod and packed it with “mental protein” to try to make full use of what would be otherwise lost hours.
So, what was on the audio booklist for the flight? For this post, I’m sharing insights into Jack Welch’s autobiography…
Jack Welch - Straight from the Gut. The more I read about Jack, the more I’ve come to admire him. GE was never a sexy prospect, but it’s performance in the 90s despite being a non dot.com stock is nothing short of remarkable. Jack’s philosophy is very simple - “culture matters” and his vision to drive home this message whilst at the same time shed 100,000 jobs has always been a subject of controversy. Welch shared many of the challenges faced by Gerstner in reforming IBM in the 90s. Whilst both were successful, Gerstner dealt with the bureaucracy but failed to address the deeper challenge of people and culture. There are 2 takeaways from the audiobook that I’m putting into daily practise:
1) 95% of your value as a leader is in selecting the right people
2) Getting the right people in the right job is more important than choosing the right strategy
Jack had a reputation for being a toughnosed straightshooter loved by his people and at the same time deferring all the glory to those who made it happen. His role, he describes as being one of managing the corporate culture , setting the tone and supporting his “stars”.
What I found particularly poignant was his closing remarks where he shared his goal for GE - “to create a company where people can stretch beyond their limits” . I love this goal - it’s atypical of the usual management gumf we here - “to be the leading supplier of X by 200X” (who cares?).
It’s refreshing to hear the view of somebody who really knew what he was talking about when he said business was all about people.
The subject of money I find most interesting, because of the role that money plays in our lives. There are many fallacies and myths about money because one cannot separate money from the locus of control, power, politics or self interest.
Certain realizations have helped me better understand what money is, and therefore attract more of it.
The first realization about money is that money is the byproduct of value. The bamboo chair weaver in Bangladesh or the business owner in Europe both share the need to first create value before you can attract money.
The second realization about money is that if you are going to make a lot of money in your life you need to appreciate what it really is – and that is that money is not more than energy. In fact, the root of the word affluence comes from the verb “Aflluer” in French which means “to flow”. Without value, money is unsustainable, because it naturally flows out of your hands and all you there are no really effective ways of storing water without it spoiling.
Deepak Chopra probably best describes money as “blood” – an energy force that is compelled to flow or suffer from coagulation and spoiling. Ask any property investor about the value in keeping the money moving and the danger of “dead money” (i.e. large deposits).
I thought a lot about taxation in my younger years when I was very much into the study of government and economics. The same pound note, dollar bill or Euro could circulate a hundred times in a year and each time create a tax implication for the bearer (for example if it was wages, received income, sales etc). So vibrant financial systems whether on the macro (government) or micro (individuals) remain “vital” through the constant movement of money around the system. Government would earn more through taxation if the money held in a deposit account purchased a house which funded the wages of the real estate agent who then purchased a car with the commission.
Similarly, financial freedom cannot stem from owning the water. One cannot gain freedom from storing the water, for it will spoil or leak. Freedom comes from knowing how to source, not save it.
2 years ago my wife and I visited the Himalayan kingdom of Bhutan. An enduring memory is the white knuckle flight into Paro airport where the runway seems to appear out of nowhere amongst clouds and mountain forest. The short 200 metre dirt stretch of land gives even the most qualified of pilots a matter of only seconds to get the approach right.
Running a business is in many ways similar to flying a plane. You can’t do it properly without the right instruments. McKinsey’s saying “If it’s manageable its measurable” needs to be at the core of all business. Vanish Patel, a property mentor I admire in London, said poignantly about setting my goals “How do you know you’re halfway there?” If a manager is running a until without the numbers, how can he manage effectively? Knowing the numbers at the end of the month like reading the altimeter after you’ve flown into the side of the mountain, is simply too late.
Is the nose of the business pointing up or down? What happens if I pull this lever? And, let’s get first things first – where am I flying to?
When you’re stuck in a mountain airport 5000 metres above sea level surrounded by the beautiful peaks and the rich blue Himalayan sky, you’re grateful you’re not stuck at Gatwick terminal 1 with crowds of holidaymakers slumming it on airport seats, struggling to get their week of sun and beer in Spain. Despite our frustrations, a Druk Air rep quite said that the reason they don’t fly when its cloudy is because “there are rocks in those clouds”. I wasn’t going to argue.
We were wondering how we could raise money for good causes in 2007.We had done the 10k runs in 2005/6, so that was getting a bit routine, so how about climbing a mountain? Hence, the World Forum Group Mount Kenya Challenge was born.
I’m not a gardener, but I spend a lot of my business life growing and nurturing the company. As with the garden there are natural laws that you cant cheat. You always reap what you sow, and as with any garden you have to spend time weeding.
Stephen Covey (in the 7 habits of highly effective people) refers to the Bamboo cane. Growing the cane is not easy. You water and nurture the seed for the first year and no results. Second year, no results. Perhaps it’s dead, a dud seed or you did something wrong? Perhaps you should try another seed or maybe even another plant. After 4 years of watering, the bamboo still shows no results.
In business most people would have given up by this point or worse still buy a ready made plant. On the 5th year, the bamboo break through and grows 20 meters in one year.
You can’t cheat the natural laws. You can’t create a harvest without first tilling the soil, planting and watering. Likewise, you won’t get rich with the magic pill, the short cut, the “next big thing” or “killer application”.
“My main job was developing talent. I was a gardener providing water and other nourishment to our top 750 people. Of course, I had to pull out some weeds, too.” - Jack Welch
Jack Welch was very much a gardener for GE. Each year, Welch would fire the bottom 10% of his managers. He earned a reputation for brutal candor in his meetings with executives. During the early 1980s he was dubbed “Neutron Jack” (in reference to the neutron bomb) for eliminating employees while leaving buildings intact. Sounds brutal, but that was his style – a style that added $400m to the value of GE and earned him Time CEO of the century.
The are some free no-effort aspects of gardening – namely sunshine, but everyone has access to that. How you run the business depends on how you perform the very basics – the nurturing and the weeding. The latter is often the hardest and for many people the inability to weed becomes the inability to get ahead. But, accepting this a natural law within business means approaching the challenge with the bigger picture in mind.
“Weeding is as necessary to agriculture as sowing.” (Gandhi)
Few travelers recall the delights of airplane catering, because there are few. Airplane catering is about fuel rather than food and few travelers expect otherwise. “Oh, I don’t like chicken” I said to the Stewardess. “Why? Are you vegetarian?” she asked puzzled. “No, I don’t eat chicken I said.” From her look I could read her thoughts – “Not another one” she was thinking.
I could have made a protest, “I am a unique individual with unique culinary needs” I could have whined. But, what would that have achieved? The alternative to chicken – was cheese something.
I’ll do without I thought. Maybe I’ll eat the bread roll… Despite the apparent inconveniences, flying is a joy. The excitement that fills me as we fly across the vast open wildernesses of northern Siberia on the way to Asia fills me with wonder. As I stare out the miserly window onto rolling banks of cloud that stretch from Europe to the farthest reaches of the Russian peninsula, the drone of the airplane engines, the rattling of cabin lockers and the white noise fades into obscurity.
We only actually “experience” 3% of the information that is out there. There rest we have to improvise. Similarly, we don’t pay attention to every sensory stimuli that our brain reads. As you read this words, you’re probably most aware of your heartbeat, the feeling of your chair, the background noise and objects that lie all around you.
You can see this filter absent in babies. As they crawl, they are constantly distracted by objects everywhere – a crunchy piece of paper, a noise or that toy they just put down 1 minute ago. Set a baby off on the task of crossing his nursery floor and see how many distraction “pit stops” he makes on the way. In fact, he’ll probably never get there because he lost sight of the original goal.
To get ahead therefore, to make sense of anything, the brain has to filter out noise. I’ve just played with that object so my brain will ignore it until I feel the need to do so again. Similarly, I don’t need to concentrate on the sensation of my heart beating because it’ll carry on beating without my stewardship.
So how do we apply this to people? Applying our filtering technologies neither makes our interaction with people better or worse, it only makes it less costly. The next time you meet a stranger, your filter will actively narrow down the possibilities of outcomes to either tell you to engage or flee. Is this man going to rob me or is he going to help me? These decisions need to be made without engaging the other person, fact finds or being “objective”.
Similarly, we rely on classifying people to make life easier. If you don’t eat meat you’re “vegetarian”. If you don’t eat meat or animal produce you’re “vegan”. What if you eat fish but not other forms of meat? Does that make you a fish-eating vegetarian? What if you don’t each meat or cheese but eat fish, shellfish and sometimes eat eggs? I am often puzzled by the choices airlines offer in selecting your “dietary requirements” on long haul flights. What exactly is a lacto-ovo vegetarian, and who in their right mind would say, “Hi I’m Bill, I’m a Lacto-Ovo Vegetarian”?
But as I said, it makes life easier, not necessarily better.
Likewise, we have the same need to make life easier when understanding the values of others. Are you a Capitalist, Christian, Buddhist or Muslim? If I’m not a Christian, they ask, what am I? More likely, what could I possibly be?
Sometimes life doesn’t fit in the airline dietary requirements boxes because life isn’t about making the choices that the airline sets out for you. Okay, if you’re stuck on a long haul flight, you have to compromise and I’m not going to be the one to storm the cockpit demanding that a box especially for me is appended for the dietary list. I am being realistsic rather.
Our need for identity is based on our need for survival. Who am I exactly? The vast majority of us seek definition through what we are not – i.e. identity through adversity. We are not like those Islamic Fundamentalists, We are not “un-American”, We are not like the Germans etc etc.
Our neurological need for efficiency is not only the basis of our survival but also the root of many of our contemporary challenges. I am Muslim, you are Christian, therefore we are enemies. The same is true of United vs City, Sunni vs Shi’ite, North vs South, Capitalists vs Communists, Black vs White and so on.
By defining and clinging to the self identify we naturally create adversaries in our lives. To be “American” is to not be X,Y,Z etc. By the same token, if you are not “American” you must be “un-American” because there must be a box to put you in.
So in many ways our brain’s very same inbuilt hardwiring and drive for efficiency makes every decision a little easier which takes a degree of effort to reprogram. The stewardess may be a start, but you can do better than argue with her - there’s a world out there.
I’m not listing up a hit list for an anti-immigration soapbox short but the intro to an interesting story about my Polish decorator.
I was letting out a property in Surrey and contacted local tradesmen to tender the decorating work. A number replied, but only one came round the next day. I’ll call him Bog for short – a Polish decorator who unlike the locals actually wanted my business.
Within the week he had me a quote which we agreed and went ahead with the following week. 2 weeks later John (name removed to protect his identity) contacted me to arrange a time to come round to quote me on the decorating work.
A microcosm of globalization in the decorating trade.
Some weeks ago, Radio 5 ran a piece on immigration which invited numerous tradespeople to phone in, complaining about the unfair practices of Polish decorators. They were sleeping “10 to a room” etc etc. How could locals compete with that? Well maybe they could try sleeping 10 to a room I thought?
Immigrations drives growth, drives economies, drives wealth. The Polish decorators will before long be leveraging each other, just as Bog is currently doing.
Bog has a Masters in E-Business from Poland. I wonder how many MSc grads from the UK spend 7 days a week plastering?
Strange that immigration be such a close subject to my heart when I was born in bred in England. However, my parents were from Yorkshire and Glasgow (doesn’t bode well for my sense of generosity) and I have spent most of my working life either working abroad or working with those who were working abroad. One thing I have learned is that in adversity, the human spirit creates resilience and fosters hope.
My grandfather built ships in the Glasgow docks, an area of the world that experienced the first ripples of globalization back in the 60s. He was a working class tradesman, staunch Glaswegian in the Calvinist/Protestant tradition.
When the work dried up, he moved his family to Canada and then the US in search of opportunity. He saw education as the route out of poverty and after a lifetime of service with the docks invested his pension (wisely) in the 80s into telecommunications stocks. “When there is a revolution”, he said to me (despite being just a child), “the first thing they seize is the telecommunications network”.
I guess for somebody who had lived through wartime, the politics of power had provided insights into the economic value of such services. There is are admirable qualitied to be found in all immigrant workforces that we often overlook when “they” steal “our” jobs.
Immigrants have no comfort zone. Their communities are fragmented, family often left behind and language counts for nothing. Their route to success is the hard one – hard work, education, stoic saving and investment. There are no MBA, school tie networks or “friends of father” to pull on to make it work. So it’s no coincidence that these communities produce some of the most successful people in their field. Jack Welch – son of an Irish immigrant. Procter & Gamble – Irish immigrants. Andrew Carnegie – Scottish immigrant. And only now in the UK are we starting to see very successful figures emerge from the Asian community in telecoms and property.
And the next wave? Well Bog has the Masters and is already outsourcing work to other Polish decorators.
Somebody stole the “star” from my Mercedes the other day. It cost 130 pounds to replace from the dealer. 30 pounds for the part, 100 pounds for the labour. It’s not a major problem in the grand scheme of things, it’s just another trip to the dealer.
I always thought that Mercedes would actually make more money if it adopted the business model of Hoover and other vacuum cleaners in the 80s – that is sell the cleaner cheap and make money from the dust bags.
As with mobile phones, Mercedes could give its cars away for free and make all the money from dealer commissions.
Why? Because the Mercedes Benz brand is a falling star. Some time ago, MBZ was widely considered to be the most reliable auto on the market. In fact, there are plenty of old C & E classes still running despite having done in excess of 150,000 miles.
And now? Well, we can’t blame everything on the Daimler-Chrysler merger, but the facts speak for themselves. In the latest Top Gear survey of UK motorists, Mercs ranked 13th in reliability, the lowest of all German manufacturers. So what has happened to Mercedes?
Joplin once sung “Oh Lord, won’t you buy me a Mercedes Benz”, but that was 40 years ago. In the 21st century, we are fortunate to be able the see a fascinating business case study play out. The answer lies in understanding how the Germans and Japanese approach the challenge of producing an automobile.
Germans always built better looking cars than the Japanese. Take one look at the 911 or the SL55 AMG. Few Japanese cars can match the style and elegance. However, few consumers want syle without reliability these days. The days when having a car that started every time was a sign of reliability are long gone.
The competitive landscape has moved on, but the German’s haven’t Take one look at the Top Gear survey and who ranks in the Top 5 most reliable manufacturers – the Japanese. With the exception of Daewoo (Korean), the most reliable manufacturers are all Japanese (Honda, Toyota, Mazda, Daewoo, Lexus). “German manufacturers, once the epitome of solid reliability, remain on the slide, although last year’s most dismal duffer, the moribund Mercedes M-Class, is displaced by no fewer than four fragile French marques.”
The auto industry is a particularly useful case study in generic business practice. There are few real innovations, few diversions from the received wisdom of what a car should be (they mostly have 4 wheels, one steering wheel and between 2 and 7 seats for example).
Most players are global and have access to the required economies of scale and economic resources. Competition, therefore, is about business processes and execution and nobody does that like the Japanese.
Because Mercedes Benz does not embody the spirit of Kaizen – the discipline of constant and never ending improvement that seeks to eradicate waste from production and faults from the final product, the manufacturer has been left behind in the 80s through the gradual compounding of daily improvement by Toyota, Honda et al.
And I’m not soapboxing because I had to fork out 130 pounds for a new “star”. It’s quite inconceivable that a modern car should rust these days, let alone a luxury brand such as the Mercedes S-Class. But it does, and the smaller picture of Mercedes does not bode well for the future.
In one year, I have had to replace the pulley, power steering pump, oil sump, keyless ignition, MAS filter and the steering rack due to “mechanical failure”. The upside of the story is the degree to constant improvement (or Kaizen) can impact our lives.
A 2% improvement a daily basis would result in a doubling of performance in only 36 days – 2% a month in 3 years.
Consider the fates of Mercedes vs Toyota or Honda over 2 decades given such metrics. Mercedes’ decline is vindication of our individual needs to improve, educate and expand our knowledge on a daily basis.
There are many rising stars in the game of business and globalization simply creates a significantly larger playing field. Success requires being one of them, because standing still means like my S-Class, within time you’ll be rusting on the dealer’s forecourt.
“Somewhere, out beyond all ideas of right and wrong-doing there is a field - I’ll meet you there”
(quote from poet Rumi)
“I’m giving up TV” I told the customer service woman at Sky. I don’t think she had that option available on her customer feedback form. The pregnant pause across the telephone line confirmed that perhaps this answer didn’t feature on her flowchart. Perhaps I was one of the 1% of callers who were just plain weird, not adhering to any social script. No amount of special discounts, freebies or niceties were going to get this customer to stay, discard flowchart. Forthwith, my Sky TV subscription was cancelled.
That was 3 years ago, and apart from the World Cup and DVDs, the TV has sat gathering dust on our top floor of our 3 storey house. The aerial socket’s on the ground floor, the TV 2 stories above, hence very poor reception. The TV sits there with a coathanger sticking out the back looking feeling it would be better appreciated in another home. I like it that way, it reminds me of what TV means to me.
TV, newspapers had to go if I was to make room in my life for more books, learning and creative time. You see, one thing I realized some time back was that it’s no good trying to get ahead if we don’t first make a conscious decision to create time to do so. Brian Tracy put me straight some time back with his words “To do more you have to first do less”
Whether its TV or the free Metro newspaper on the London mass transit, media is rarely more than junk media in our modern lives, content that we can absorb to make us feel our life has some activity, some meaning. Ironically, it isn’t necessarily our lives we are living. All advertising, it seems, portrays anything but reality and often seeks to agitate the natural insecurities of “not being enough” in your average consumer.
We have nanotechnology and blackberries, but junk media reminds us that despite all of our historical progress, the human brain is primarily motivated by the need for survival – or as ethnologists would describe it - “fight or flight”. Of course, media is not about telling us how good we or the world is, but reminding us that there lies, around the corner, a force that threatens our security. Just as the saber-tooth tiger lurked in the pumpkin patch, germs multiply on your toilet seat and Domestos will kill “all known gerns”. As it did in the pre-industrial era for firebrand preachers, fear sells kitchen cleaning products, flu vaccinations, defense budgets, pharma stocks and newspapers.
If junk media is to work, we have to believe in the fear – whether that enemy comes in the form of germs, Islamists, acne, not having enough money or immigrants. If I accept junk media into my life, I accept its manifesto – the existence of the concept of rightdoing and wrongdoing, justice and criminality, “them & us”, “the war on terror” and so on. Scanning through the METRO’s headlines today I read with interest “Britain’s MRSA timebomb”, “Soldiers jailed for gun running plot”, “Doctor ‘raped two women in one night’”, “Food bug hits travel bosses at hotel” and then the sublime “Men ‘live longer on four beers a day’.
The METRO is handed out free to all commuters on London’s busy mass transit (The Tube). We read it because it is prescribed to us, without questioning. We all buy into junk media and its concepts of “right and wrong” because we all are unaware of the alternatives. To not watch TV, therefore, is almost anti-social.
Some people are perplexed that I don’t watch or read the news. “How do you know what’s going on in the world?” they ask.