3. SHELF it · Book Review Actions · Book Reviews · Money

BR 135: The Millionaire Teacher by Andrew Hallam

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Category: 3 – SHELF it (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Really good book. This book was recommended to me by one of my favorite authors William J Bernstein when I asked him for Singapore specific investment advice.

A must-read for folks living outside the US looking for solid money and investment advice.

Top 3 Learnings:

1. Live like a millionaire. Millionaires wear cheap watches, buy second hand cars, and live in the suburbs. Real millionaires live frugally and invest wisely.
2. Compound interest is the most important mathematical concept you need to know. The earlier you start investing, the better it is for you as compound interest will take over. Invest in simple plain vanilla index funds (same as Bernstein’s advice.. the value add here is clear steps for folks living in Canada, UK, Australia, and Singapore) and remember that financial service firms are out to eat into your money. Actively managed mutual funds are a no-no.
3. Every generation is gripped by irrational financial madness at some points (the tech bubble being an example). When you see a market behaving irrationally, be fearful. The relationship between the value of a stock and it’s earning is similar to a dog on a leash with it’s master. One can be far ahead of the other for only a short while.

Click here for book notes from the book

2. BUY it! · Book Review Actions · Book Reviews · Money

BR 134: I Will Teach You To Be Rich by Ramit Sethi

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Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Ramit’s book is very US centric but many of the principles hold true wherever you are. I think this book is worth reading because he explains very basic personal money management concepts very well. I liked his no-bullshit approach and his simple-yet-good advice.

Top 3 Learnings:

1. Don’t buy the Dave Ramsey advice of “cancel all your credit cards.” If you are sane about using your credit cards, improving your credit score and credit history can save you 1000s of dollars in terms of better interest rates over a lifetime.

2. The following ratios off your paycheck are healthy –
50-60% Fixed costs – rent, utilities, debts, transport, normal food, health
10% Investment
10% Savings for upcoming expenses vacation, gifts for friends and family
20-30% Guilt free spending

3. Conscious spending is key. Spend on great experiences and never regret.

Book notes.

1. Read ASAP! · Book Review Actions · Book Reviews · Sales

BR 133: To Sell is Human by Daniel H Pink

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Category: 1 – Read ASAP! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Shaped how I think about selling. I’ve been a fan of Dan Pink’s approach of presenting well researched trends with a nice framework and “so what’s”   – ‘A Whole New Mind’ and ‘Drive’ did it well. “To Sell is Human” nails it.

Top 3 Learnings: Selling has moved from the old ABC (Always Be Closing) to the new ABC of Attunement, Buoyancy, and Clarity.

1. Attunement: This section is all about empathy, connection, and most importantly, asking great questions. The main trend here is that we have moved from information asymmetry between buyers and sellers to information symmetry. Buyers now have all the information that sellers have and don’t need sales people in the traditional sense. They need folks who will help them solve their problems.

2. Buoyancy: Recent research points to the important of having a healthy ratio of positive:negative thoughts but not approaching everything by just pumping yourself up. In fact, research shows that interrogative self talk (i.e. asking yourself – can I do it?) works much better.

It also involves learning optimism (Martin Seligman style) and making sure we aren’t knocked out by rejection.

3. Clarity: Clarity of purpose and making it personal are critical. Many many experiments show that an appeal to a deep, intrinsic purpose moves people.

1. Read ASAP! · Book Review Actions · Book Reviews · History · Money

BR 132: The Ascent of Money by Niall Ferguson

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Category: 1 – Read ASAP! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: This is the sort of history book I enjoy. Hot on the heels of “A Splendid Exchange” and “Guns, Germs, and Steel,” this book is fantastic for those interested in understanding the story behind the financial infrastructure that exists today. Given the increasing spotlight on financial instruments (thanks largely to their failure), this is compulsory reading for anyone interested in understanding the real “infrastructure” of our development.

Top 3 learnings:

1. The world would NOT be a better place without our financial evolution. Credit and debit are critical to the growth of economies, businesses, and are the foundation to economic progress. Finance has underlined the big shifts in our societies. For example, the era of colonialism (or the first attempt at globalization) was only made possible by financial innovation – the dutch VOC was the first “public” company with a swath of public shareholders. The British emulated the Dutch and did it better.

2. War is the mother of all things. War was the real reason behind financial innovation. The concept of the bond market was created to fund wars between Italian states, the stock market was invented for better success in colonial wars.. and finance also played it’s part by being the real cause for wartime success and failure. The British triumph against Napoleon and the defeat of the south in  the American civil wars were determined more by financial causes than any other.

3. Credit is critical for growth. The biggest benefit of the modern day financial system is that a larger proportion of the population are able to escape the clutches of loan sharks who charge interest rates upto 11 million percent and thus keep the poor poor.

Book notes here

1. Read ASAP! · Book Review Actions · Book Reviews · Career · Leadership · Philosophy · Self Improvement

BR 131: How will you measure your life? by Clayton Christensen

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Category: 1 – Read ASAP! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: I wish I had gotten to this book sooner. Clayton Christensen has such a thorough and clear thought process that reading this book is like embarking on an interesting intellectual journey with him.

This book is all about “how” to think rather than “what” to do. It has inspired some immediate changes in my life and I’m sure will continue to do so.

I loved it. I’m sure I’ll be sharing stories from the book for a long long time.

Top 3 learnings:

1. Be careful about viewing indiscretions in terms of marginal cost i.e. maybe I’ll do it just this time. You might think you are making allowance for an extenuating circumstance but life is just a series of extenuating circumstances. No athlete starts out with doping in mind.. it happens one bad decision after another. We can’t commit to 99% of an idea. It’s 100% or nothing.

2. Don’t look products as something people buy. Look at them as things people rent to get a job done. Ikea doesn’t win because it has the most amazing furniture. It wins because people hire Ikea for a quick, painless, cost effective way of re-decorating a home.

Similarly, great relationships involve asking yourself – why would my partner hire a husband/wife in this situation? This way, we focus on empathizing with what the other person wants rather than giving them what we think they should want.

3. Be careful about outsourcing your capabilities – Capability = Resources (what) + processes (how) + priorities (why). Dell began outsourcing small parts of manufacturing to Asus.. and 16 years later, Asus was manufacturing the whole computer. Asus soon started it’s own line of computers and Dell could do nothing since it had outsources it’s capabilities.

It’s important to think of this in terms of our kids. If our kids are constantly raised by someone else and learn processes and priorities from someone else, whose kids are they?

Add on Mar 16, 2016: This book changed my life. Up there with Stephen Covey’s 7 Habits.

2. BUY it! · Book Review Actions · Book Reviews · Money

BR 130: The Investors Manifesto by William J Bernstein

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Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: William Bernstein deals with the very basics of investing and dispels some commonly held myths. An excellent book. May not interest everyone but if you are interested in understanding personal finance and investing, it’s a great book.

Top 3 learnings:

1. You don’t invest to get rich, you invest so as to not die poor. Great investments are not risky investments that produce prolific returns. They produce steady returns and avoid worst case scenarios. Of course, you cannot get great returns without great risk.

2. Understanding financial history is critical for a good investor. Long term capital management’s famous failure was because their equation did not take financial history into account.

3. You are your worst enemy. You cannot time the market. Don’t try. And don’t look for patterns in the financial markets. There are none.

—

A collection of other conclusions I put together – if it interests you

A pre condition to being a successful investor is a firm grasp of financial history

– High returns can only be achieved with high risk

– losing money in a bear market is a part of being investor

– study and understand the Gordon equation to calculate real returns

– whenever you buy or sell an individual stock or bond, you are competing against the best in the world

– Stocks: a growth company stock generally pays out less than a collection of bad company stocks

– primary decision as investor is overall mix of stocks and bonds. Diversify diversify.

– focus on the portfolio. Do not pay too much attention to best/worst. They change.

– You are your worst enemy. You cannot time the market. Don’t try.

– Don’t look for patterns in the financial markets. There are none.

– Stock brokers are out to fleece you. It’s the nature of the business

– Mutual funds aren’t different unless they are owned by stakeholders/ are private

– Live as modestly as you can and save as you can for as long as you can

– The best gift to your heirs is not cold hard cash. Rather its the ability to save, spend wisely and invest prudently

– Remember pascal wager – goal of investing is not to get rich but to not die poor

– index fund – consistent 8/10. It will never hit 10/10 but it won’t be a 1/10 either. Returns are proportional to risk…..

– Pro Tip – House: Whenever you go to a realtor, find out what the house rents at and multiply by 150. If you are charged above that, you are paying too much.

3. SHELF it · Book Review Actions · Book Reviews · Career

BR 129: The Start-up of You by Reid Hoffman and Ben Casnocha

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Category: 3 – SHELF it (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Good career book and potentially useful for those reading career books for the first time.

Top 3 Learnings:

1. Follow your passion is bad advice. The biggest reason for following your passion being irrelevant advice in this day and age is that your passion could be for an industry that might not exist in 10 years. The rate at which industries are being disrupted means that, even if it does manage to survive the next ten years, it’s unlikely it’s going to be anywhere as lucrative or attractive as it is now.

2. Who you know is what you know. Reid and Ben argue that the network is truest fastest source of information.When you look at it that way, having a deep network in the field you’d like to be in is critical because news will likely reach you much faster than via conventional sources.
The use for this is with all sorts of career moves of course. You get to hear of job openings before they exist, and so on.

3. Beware keeping optoins open. We’re often told to keep options open but Reid cautions against it. Making a decision may reduce your options in the short run but increases your options in the long run.

There’s never a right time. Even if you make a wrong decision, you can make another decision to correct it.

3. SHELF it · Book Review Actions · Book Reviews · Novel Concepts and Interesting Research · Technology

BR 128: Free by Chris Anderson

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Category: 3 – SHELF it (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Interesting book, especially for those who are interested in the impact of “free” on business and industry.

Top 3 Learnings:

1. The world is moving from scarcity to abundance in most aspects of life. As a result, the structure of the world and business has undergone a fundamental change. A 100 years ago, all the top 100 companies in the world were involved in manufacturing. Now, the percentage is down to 30%.

The moment an industry moves from transmitting atoms (boxes) to bits – free becomes inevitable. So, if the industry is competitive (and we can argue that the Internet has resulted in more competition than ever before), then prices will keep going down till it just covers cost.

2. The important thing for companies is to adapt their business model to incorporate free as an integral part of their model. Free is here to stay.

Examples –

– The popular freemium model wherein businesses give a basic product for free and charge for premium usage

– Microsoft went through the DABDA curve in its reaction to Linux operating systems. While it initially began with the lens of competition, the end result was an acceptance that there is a place for open source in the market. Small companies would rather go open source as its free while big companies would pay money to minimize risk.

– Google’s strategy for information markets – 1) take whatever you are doing, do it for free 2) hook users in and generate scale 3) charge for valuable information Search and Gmail are easy examples. Another such example is Goog-411 – free voice help which is part of Google’s investment into a voice search engine.

– Music – 90% of money is made by bands is in concerts! So digital piracy (or free) helps the band find willing fans

3. The importance of corn – rice, wheat and corn have always been considered the key crops. Rice is high on protein but difficult to grow, wheat is low on protein but easy to grow, and corn is both. Since corn is the most efficient converter of water and sun light into starch, we use corn for more than we can imagine.

More than 25% of the products in a super market are derived from corn. In fact, soaps, shampoos, toothpastes, the boxes they are packed in, and even the compounds that the super markets are built with are  based on corn. A great example of corn power is in a chicken nugget. From the feed of the chicken, to corn oil, to the golden color and smell – nearly every aspect of it is derived from corn.

The big reason corn and food have gotten expensive over the past few years is that corn began being used for the production of ethanol for fuel. This has truly tested the limits of corn.

That was a really cool insight.

(Book notes here)

3. SHELF it · Book Review Actions · Book Reviews · Business

BR 127: The Price Advantage by Walter L Baker, Michael V Marn, Craig C Zawada

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Category: 3 – SHELF it (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: I read this book thanks to preparation for a project at work. Really good book on pricing written by pricing experts from McKinsey & Co. and makes for a good read.

Pricing moonlights as a seemingly boring topic but is at the heart of understanding profit levers in a business.

Top 3 learnings:

1. Pricing is the single most powerful pricing lever in business. A 1% increase in price for an average fortune 500 company results in an 8.4% increase in profit (!) versus a 1% increase in volume (around 3%). If you care about being profitable, you need to care about pricing..

2. There are 4 components to understanding pricing and I’ve tried to describe these in terms of questions you need to ask yourself-

  • Market dynamics: Am I market leader? What sort of pricing conduct does our market have? How can we instituionalize good pricing conduct. (Aggressive price wars result in irreversible negative consequences)
  • Company strategy: What is our pricing strategy? Do we invest in a best-in-class pricing organization and invest in having  great market and industry analytics? Do we understand our position in the industry via value maps?
  • Transactions: Do we monitor how pricing is carried out in practice? Are our sales people watching for profit vs revenue? How does our pocket price distribution look? (Pocket price is the eventual price for a project following all discounts, rebates, etc.)
  • Pricing infrastructure: Do we have IT and enabling systems that support our pricing organization

3. There’s tremendous areas of opportunity in the organization. A few points critical to good pricing are –

  • Solid market information so you understand your cost and benefit in relation to the market
  • Sales data to understand “pocket price” i.e. what is the net price you receive on your products.
  • Pricing infrastructure for your sales team to understand what are good practices and what aren’t
2. BUY it! · Book Review Actions · Book Reviews · Entrepreneurship · Philosophy

BR 126: Anything you want by Derek Sivers

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Category: 2 – BUY it! (All Categories are 1 – Read ASAP!, 2 – BUY it!, 3 – SHELF it, 4 – SOMEDAY it)

Comments: Really simple, quick and breezy read. Again, my rating is likely biased by the fact that I am fully aligned with Derek’s way of looking at the world. He’s another one of those who walks his talk and I find him very inspirational.

Top 3 learnings:

1. REALLY understand what you want. It’s very easy to get caught up in a rat race where you end up chasing things you don’t really want. In Derek’s case, he made many decisions – to give up a large portion of what he made to charity, to not own a house or car.. He realized he’s very happy where is and doesn’t “need” too much more. And, he wanted to stay that way..

My sense here is that we often lose touch with our soul as we grow/progress. Keep checking in with very simple questions – is this what I want? Am I really happy?

2. Small can be brilliant. Derek made CDBaby class by attempting to always keep it small, but world class. The funny paradox – the less you need or aim for money, the more of it comes. (true of many things in life)

3. The best way to delegate is to share your thought process with your team. They need to always know the answer to “What will ___ do?” – not by just cataloguing answers to every possible question but by understanding the principles behind a decision.

Derek did this at CDBaby by getting all his employees together every time they had a question and then answering it by describing the principles and thought process to all. He then made sure they documented the answer.. Over time, the number of questions reduced and new employees had a “hand book” to understand the CDBaby.

A note of caution – delegate but do not abdicate/ delegate but keep control. Derek’s abdication resulted in his employees instituting a profit sharing scheme that went against his principles. A chain of events followed leading to Derek selling CDBaby.