Career Capital Project

The book So Good They Can’t Ignore You talks about the idea of purposeful study and learning. This is one of the most powerful things that came out of that book for me.

With that in mind, I created a new project for myself that I call the Career Capital project. After a light bulb went off in my head and some encouragement from my editor, I thought this blog would provide a great way for me to really focus this new project. I realized that, with my reading lists, I have a built-in and constant store of ideas to learn. I officially have more ideas than I can learn in my lifetime.

But how do I become more purposeful about it? How do I make sure I assimilate all the information that I am taking in, especially the more complex and academic ideas? It’s one thing to read a paragraph slowly to myself in the quiet of my house and think, “Yeah, okay, I get that,” and another for that new idea to impact my decision making when shooting from the hip in a pitch meeting with a potential new client.

To prove you know something, you have to teach it back. They say that any idea you can communicate to a lay person is an idea you have truly mastered. So, I need to practice relaying ideas to other people. “However can I do THAT?” I wonder. If only I had a platform to publish …

Right. You see where this is going.

My idea is to have a “what I learned this week” series. I’ll write down one thing that I found interesting from one of my books, mostly to explain it to myself again. After making sure I understand the idea, I’ll let you know why that idea might be interesting or useful for you.

My reading lists were already built for being purposeful for my own study. The Business Guru reading list was designed specifically to help business owners sort through and distill the ideas that are out there in the world. Economics has always been a passion of mine and underpins everything in the freaking world, so it is always applicable.

What I DID change, however, was my focus. Some of the lists were turned off: History, Physics, Philosophy, High Finance, and General. These are all great lists and things I find interesting but will not help me get better at what I do. At least not right now.

I added a new one: Career Capital. These are books that are all very technical and very focused on a specific task. I want to get more involved with clients who have larger businesses, in operational and strategy ideas, and in valuations and exit planning. I have done this kind of work before, but usually as it presents itself to me. My hope with these guides is to really hone my skills and knowledge to give me the confidence to aggressively pursue that kind of work.

The books are all part of The Economist’s “Guides” series. They are each focused on specific topics. The one I am currently reading is called “The Guide to Economic Indicators.” I am learning all about how GDP, housing starts, unemployment figures, etc. are reported and intended to be used to determine where the economy is going.

So, I am taking the advice that I got from So Good They Can’t Ignore You, and you should, too. Decide what you want to do or be, figure out what skills you need to become that, and start studying. Hopefully, before we know it, we will both be so good they can’t ignore us.

When Someone Says it Better…

Cafe Hayek is an economics blog with a decidely “laissez-faire” tilt that I follow and enjoy a great deal. One of my favorite things about that blog is their quotation of the day, which exposes me to a great many other excellent books, blogs, essays, and videos.

Recently, a quote came up that resonated with me. I wrote a post a while ago entitled Work Makes Wealth. The basic thrust of my post is that no investment will make you wealthy. Investments protect and/or grow wealth, they don’t create it. There is no magic bullet.

I made that point using 576 words.

This guy did it in 28.

So, when someone says it better, give them credit and show it off.

From page six of Edmund Phelps‘s hot-off-the-press Mass Flourishing:

Understanding the modern economies must start with a modern notion: original ideas born of creativity and grounded on the uniqueness of each person’s private knowledge, information, and imagination.

Like I said, the most valuable ideas are hard to replicate. Creating something of value is the only way to accrue more valuable things to yourself.

 

 

 

Luck is Made – Over and Over Again

As we begin to come out the recession, I am noticing a disconnect again. You heard me: End of the recession.

Yes, we are nearing the end of the recession. This does not mean that government policy will not put us back into a quarter of decreasing GDP. This does not mean that anyone who wants a job can get one or that everyone will be getting raises and living the high life.

But we are getting to the point where labor productivity is at very high levels (to get more productivity you have to hire more people). We are getting to the point where the expectation of higher inflation is driving people to seek to earn more than the, well, nothing on their savings in the bank.

But there is another number I have seen that I find interesting. The amount of time that employers are holding a job open is still relatively long. There is something like 5 million job openings and 12 million people looking for jobs. Now, we all know it takes time to interview and hire people, but in some cases the job is being held open for an average of 30 days.

This tells me that the people who are looking for work often don’t have the skills hiring companies are looking for. Remember when I said that people need to be real about the value they add?

The disconnect I am noticing is this. Two years ago, if you said, “Well, with how the economy is …” people would nod knowingly.

But today if you say that, to me it rings false. Why? Because I know lots of hard working people who are having banner years. Making money, starting businesses, and generally kicking butt.

Remember when I said luck is made?

The economy can kick anyone in the ass, it’s true. But the “lucky” ones have gotten it together and are making things happen. So, are you waiting to get lucky? Or are you making it happen?

Productivity & Accounting – Not So Strange Bed Fellows

imagesPeople sometimes wonder why I like productivity so much. “Don’t you just do taxes all day long? How hard is that to organize?” Well besides the obvious answer of “I do lot’s more than taxes”, accounting and productivity actually make perfect sense together. Or, stated better, it should be no surprise that accountants can (and should!) take to productivity systems (dare I say ‘lifestyle’?) so well. Why? It’s simple. Productivity: GTD, OmniFocus, Workflowy, Apps, Pomodoro, Emergent task planner, etc is all about one basic thing: Organizing Information.

 

You have information swirling around your world, your head, your email, etc. Everyone has a system for dealing with this info. Some of us have better systems than others. That is what the “productivity revolution” is all about. How do I handle the giant onslaught of information that comes with living in the modern world?

 

Guess where the first onslaught of critical information and minutia was? Yup. Business. A merchant had money coming in from lots of sources, money going out. Some was owed back to him, some he owed others. He converted money to other assets like inventory. And at the end of the day, he needed to know how much profit he made. A Friar, who was friends with Leonardo da Vinci, invented what we now know as double entry accounting.

 

Accountants are specialists in figuring out where information comes from, where it should go, who will need to use it, and how to make sure no one can tamper with it. Businesses, like most people today, run on information. Without information it is literally impossible to be successful in business. The more control you have over your information, the better your chances of being successful. This can mean a lot of things to lots of people. A Fortune 500 company needs help with internal controls, minimizing malfeasance, and getting critical information to the decision makers. A small business might just need help figuring what information they should be looking at and where it will come from. In both cases, they turn to accountants.

 

I am not sure why so many accountants are not very good at being organized (something about a cobbler’s kids having no shoes?). Or how so few of them really realize all the strategic value that their knowledge has beyond just keeping numbers straight.

 

But it seems obvious to me:

 

Feeling overwhelmed with information? Trying to get a handle on all the information flows in your life?

 

Maybe you just need a better accountant!

 

LIBOR and a Reality Check

A friend asked me what I thought about the LIBOR scandal and specifically, the Tim Geithner quote saying that he had sent “a detailed memo to regulators expressing his concern” some time before the actual scandal came to light. I thought the rest of the world might enjoy hearing my response:

 

I have a couple of thoughts:

On this article specifically, yes this makes perfect sense. Everyone knew that the system was corrupted, or at least corruptible (everyone meaning regulators and governmenty people in the know) but so much was based on it that no one wanted to do anything. In that situation, they likely believed that shaking confidence in the number would likely do as much or more damage than the actual manipulation. So they send “memos” to each other that they can point to when it blows up, which “proves” they were the good guy.

That being said, LIBOR was never designed to be a metric that we base almost all fixed income things on. What the hell does a mortgage in Argentina have to do with what rate London Bankers are offering each other? It is an old system that created decades ago and the designers never dreamed it would be used this way.

No one thought far enough ahead. It seemed like as good a thing as any to use at the time, so they did. And then one day, they woke up and realized they had built a house of cards  and said “well shit, no one sneeze”.

 

Well, someone sneezed.

 

But it illustrates what is something that I tell clients all the time. There are powers that be out there that wield WAY more influence than us mere mortals could ever understand, let alone control. I do not mean in a conspiracy theory kind of way. I just mean that our world is very, very large. And very, very, complex. And the wealth that any one individual (the 1% aside) is basically worth nothing overall. So thinking that you are “in the know” and have the scoop, and aren’t going to get taken for a ride is crap. If George Soros or Warren Buffet want to flatten the price of gold, they can do that. You, however, simply don’t wield that kind of influence. And this is probably good. Our world has built so much wealth by getting very specialized in what we do. So much so, that it is unreasonable to think that you can understand all the ins and outs of everything. If every banker could fix their own car, mechanics wouldn’t be worth much. If every mechanic can do their own investment analysis, bankers wouldn’t be worth much. But they both agree to specialize and understand that, by relying on the other person, they can both produce more value (which means become wealthier).

So all you can do is invest smart, diversify, work hard, and you have a little faith. Trust that there are experts out there who know what they are doing. And that you cannot do everything yourself.

Also, at the end of the day, manipulating LIBOR is still just a shell game. Those who have capital are making money on it. Those that can create value will be compensated for that value. Those that consume less value than they produce will become wealthier. And those rules NEVER change. So blame the capitalists pigs if you want, but at the end of the day, if you are in the same lousy place as you were yesterday, it is (99% of the time) NOT anyone elses’ fault but yours.

 

Influential Books

I was asked a great question by @twestonkendall on twitter the other day. He asked me what the top three business book are that have influenced how I think about business. My first reaction was to refer him to my Guru reading list on my website. But then I thought about it a little more. I created the reading list on my site to offer resources to people running, or thinking of running, small businesses. But I think that Todd was asking a different question. Maybe he wasn’t and I completely misread it, but I thought it had a little different flavor.

 

The books that influenced the way I think are not necessarily books designed as resources for small business owners. So here, in no particular order, are the books that have shaped the way I look at business. I did cheat a little. I made my first list and just couldn’t trim it down to any less than four. So there.

 

E-Myth Revisited By Michael Gerber

This is a great book that really helps to illustrate the difference between the doing the work side of a business and the business side of running a business. A GREAT read for people thinking about running a business.

 

Freakonomics by Steven Levitt and Stephen Dubner

I really loved this book. It is a great showcase of how much of a social science economics really is. A shockingly large number of seemingly irrational actions are explained by the art (and science) of economics. It would serve anyone well to understand this and to keep it in mind.

 

Economics in One Lesson by Henry Hazlitt

A great primer on the more theoretical side of economics. Where Freakonomics shows you how the science can be applied to random, everyday scenarios, this book gives a great primer on most of the major ideas and concepts in economics. A must read for any business person.

 

Syrup by Maxx Barry

This is a fiction book, which might make you wonder why it is on this list. But anyone in business knows that there is one rule. All the best ideas and plans and theories generally don’t survive first contact with the customer. Enter Scat, the main character. His story proves that “fake it until you make it” is perfectly legitimate and is really, at the end of the day, what we are all doing. Sometimes it works out, sometimes it doesn’t. Sometimes it works and then you get screwed. You just never know.

 

So there you go. Obviously nearly every book I have read has influenced me in some way. But these four have had the biggest impact.

 

 

Revolutions

I read an awesome special report in The Economist (it’s on the Guru Reading list, check it out) about 3D Printers and “digital manufacturing”. Now, I am not a trained economist, but I like to consider myself an amateur economist (maybe arm-chair is the better description!) I have talked before about the problems facing America and what needs to be done to fix it. My basic premise is that the current economic malaise won’t be solved, in fact, can’t be solved, without a revolution of some sort. I don’t mean an actual revolution; I mean a revolution in business or way of life.

Business is Simple. And it has the power to change everything. Even more power to change than any amount of individual action or legislation likely could. But business is one of the most misunderstood arts out there. So with that understanding, I thought I would take this chance to explain why a cool machine that can “print” goods could potentially change the world and maintain America’s superpower status.

A 3D printer is a device that makes things by laying down very small amounts of plastic or other materials, layer by layer, until something solid is built. But this article isn’t about 3D printers, per se, it’s about “micromanufacturing”. Micromanufacturing is, according to the Economist (and I concur) or at least could be the next industrial revolution.

Let’s start with some business, shall we? How about the business of manufacturing? Manufacturing has a very simple value chain:

  • Raw Materials –> Ideas & Design –> Physical Manufacturing –> Distribution & Shipping –> Sales and Marketing

Each of these parts is mandatory to the industry that we know as manufacturing.

Raw Materials: is relatively fixed (for our purposes). If you want to make a golf club, a plate, a television, etc., that item is going to need a certain amount of material. Metal, wood, plastic, fabric, etc. All have a cost that is determined by a different value chain.

Ideas and Design: Deciding what to make and how to make it is a very high value, high margin, piece of the puzzle. Just ask Apple. You can almost win on design alone. And a great deal of this work is still done in the US, albeit mostly by graduates and post-graduates, not the people we are trying to create jobs for now.

Physical Manufacturing: This is what most people think of when they think of manufacturing. It requires A LOT of capital (machines, buildings, inventories, etc.). Capital is expensive. It used to be that you had high set-up costs, which encouraged economies of scale. This meant that if I spent a couple million bucks buying and setting up a widget turning machine, I wanted to turn as many widgets as I could to spread the cost of that machine and it’s setup out as much as I possibly can. Depending on the product, labor can be a huge component of this cost as well. This is what drove manufacturing overseas. It was relatively easy to move this piece of the value chain off-shore. And the savings in labor costs outweighed the increased distribution and shipping costs.

Distribution and Shipping: Is also very expensive. And also requires a LOT of capital. Docks, airports, shipping containers, trains, boats, planes, warehouse space, retail space, etc. I reiterate, capital is expensive. Also, the labor costs associated with shipping are relatively fixed as well. At least, it is a piece that cannot be off-shored. You can’t outsource a UPS driver.

Sales and Marketing: Difficult to outsource, but not impossible. A critical part of the value chain. You can have the best mousetrap on earth, but if no one knows about it, or where to buy it, or understands the features and benefits of it, or feel that they NEED a better mousetrap, you won’t sell any.

Why I think 3-D Printers can change everything:

  • Eliminates economies of scale. One machine can be used to make any number of items without any set-up costs (besides the initial purchase). This by itself is a huge advantage. You no longer have to sell millions of units to be profitable. This means that lots of products that were never made because “the market wasn’t big enough” all start becoming viable.

There are several modern trends happening that I think can play on this feature of micromanufacturing:

  • The “etsy” effect –> people like having small batch, unique, and “homemade” goods. Extend that out to other things besides arts and crafts.
  • The “tribe” effect –> people like having things that support whatever group of “cool people” they belong to (or want to belong to).
  • The “mass customization” movement –> everything needs to be unique and custom for people. With no set-up costs, we can easily make custom items one at a time.

America is still the largest market for goods like this, and because of the above effects, the market is the driving force. Whoever can be the first to pick up on the trends, or the first to make those trends, is the most valuable person in the supply chain at this point. Ideas and design becomes even more valuable, therefore, it can support more people. And when we expand the ideas and design and the sales and marketing pieces of the value chain, we create more jobs that cannot be off-shored.

Internet is Knowledge is Power

I saw a great little article, courtesy of Andrew Sullivan. It said that 1 in 5 Americans are not online.

20%.
Holy cow!
Now, I know being a bit of a geek I have a confirmation bias, but I don’t know anyone that is not online.
I’ve always felt that the Internet speeds and costs we experience in the United States is ridiculous. We are a nation of knowledge workers and it is easier to get natural gas to my home then it was to get Internet to my home (and cheaper too!).
What the hell do I need gas for? If the gas and the Internet went off simultaneously at your home, which would you notice first? Right, me too.
if knowledge is power, and the Internet represents the collected knowledge of humanity, and America is falling behind in Internet access, is it any wonder that we are also losing our super power status?
The most interesting part of the article was the characteristics of those not online:
Seniors
Un-Educated
Poorer
Now, I don’t want to get into a causation versus correlation argument but I think it is safe to assume there is at least some sort of connection here. What was even MORE interesting was the reasons these people are not online”
-Too expensive
-Nothing worth accessing
-Don’t have access to a computer
-Too complicated
Are you seeing a “DUH” moment here? Because I am! The poorer, uneducated, and likely under- and unemployed portion of the population (the ones that are the focus of so much legislation to try and create jobs for) don’t have access to, or the training to use, the most powerful force in business in a century.
DUH.
You figure out a way to get free and ubiquitous Wi-Fi that covers 80% of the American population and I can guarantee you that we will not only retain our super power status, but that a new economic revolution would happen.
And we wouldn’t need stupid legislation to create jobs.

Music Notes Online

This post is going to be a slight departure from my usual posts. I had the pleasure of meeting one of the founders of a website called Music Notes. It was started by two teachers looking for a new way to engage kids at the middle school they teach at. They have created an entire library of hip-hop themes songs and videos all about mathematics ranging from pre-algebra to geometry. Check out a couple of the song samples, you will be as impressed as I was!

The reason I say this is a “slight” departure from my usual posts because I do spend quite a bit of time talking about what I refer to as “America Waking Up”. Lamar and his project are a great example of the kind of work and thinking that is changing things for the better. This man teaches math to middle school kids in South Central Los Angeles. The fact that he teaches the subject people like the least, to the kids who are of the age where they hate everyone, in an area that is not known for its high-end educational facilities is amazing enough. The fact that he not only faced this challenge but thought of a creative way to overcome the challenge is even more spectacular. And then he created a website to spread this unique idea to other schools, thereby leveraging the impact of his idea by factors.

Maybe if we could figure out how to make more Lamars, and pay them what they are worth, American students wouldn’t be dead last in the developed world in math and science skills!

I highly encourage you to check out the site and spread the word!

More Kicking in More Pants

This is a follow-up/extension of my last blog post Education and Economics. A couple years ago, a young man named William Kamkwamba received a lot of attention for the very cool windmill he built at his home in Africa. There are a two TED talks featuring him, his first and his second interview. But I think that best interview is the one he did on the Daily Show with Jon Stewart.

 

I want to make some very important points, so we are going to do an interactive type blog post here, ready? Ok, go watch the Jon Stewart video now and remember what the lines are that struck you the most.

 

All Done? Ok, let’s break this thing down. Most people I talk to hear the story and think, ‘oh, how neat! Isn’t he clever’? First things first… if that video doesn’t inspire and also scare the shit out of you, then you missed the point.  I want to walk you through what I think are the most important points/comments that he made.

 

Built a windmill at the age of 14

Ok, we haven’t even started yet and he is already awesome. Can you even get your 14 year old to finish their baking soda volcano for science class without your help? Yes? Great, if they can build by themselves ANYTHING that requires a dynamo, you don’t have to read this blog post.

 

Oh, by the way, he did it during a FAMINE that forced him to drop out of school.

How many of you have had to do ANYTHING while at the same time wondering if your family was going to starve to death? Imagine the kind of dedication, optimism, and perseverance that that would require. It puts the work ethic of nearly every American (myself included!) I have met to shame.

 

He couldn’t read English very well, so he taught himself mostly from the pictures

Really? He taught himself about electromagnetics with pictures? How many college graduates do you know that could do that? This is a guy who had to drop out of school and then decided to go to the lirary to educate himself. How many Americans do you know would voluntarily learn a new skill with no prodding or some sort of bribe? In fact, one of the key drivers of the sustained unemployment is that many of the unemployed have antiquated or non-existent skill sets. And no one can figure how to fix that problem! Really? The US Government can’t figure out how to solve this problem but an African boy with an elementary education did? COME ON PEOPLE!

 

Do you think if you took your 14 year old out of school he would say “I want to learn more, mom! I’m going to the library!”?

 

 

Out of materials he found

Ok, so we forget about the age thing, the famine thing and the lack of education thing (which is a BIG consolation to us). Assume you are pretty clever and dedicated; you have the plans, (which are probably step by step you found on Google, which is cheating, but we will let it slide). Now you have to find the parts. So you go to Amazon, EBay, who knows what else to buy the things you need. Oh wait? No internet? No supplies of any sort? So I have to understand the ideas well enough to look at SCRAPS and find things that will fill the purpose I need. That requires creativity and ingenuity beyond what most of have even dreamt about, I think. And don’t even get me started, on the circuit breaker he built to fix the problem of power surges in his house…

 

The basic story is amazing enough. But after watching it a few times, I started to realize there was an even more amazing thing here than the core story. And it was William’s mentality and belief system. Let’s take a couple quotes and look at them:

 

“At the time I wasn’t reading English very well, so most of the time I was using diagrams”

What he says here is not nearly as amazing to me as what he DOESN’T say. Which is “oh poor me, look how hard this was for me!” He just did what it took to get the job done, and doesn’t think that he should get extra attention stretching himself. What an amazing concept.

 

“Ok, if you are saying I am crazy, then I am crazy. But there is this picture in this book of a windmill and someone, somewhere made it, it didn’t fall out of the sky”

Holy cow. He saw a picture and thought, “If someone else did this then I can too”. Did he ask what supplies, time or education the other person had? NO! If someone else did it, I can to. This reminds me of a phrase that my good friend Patrick uses all the time ‘no excuses, play like a champion!’. We have entire generations people who think nothing of saying “Well I would or could but…insert lame excuses which really boil down to laziness here…

 

“Yes I want to go to college, but I am working on my SATs so I can”

Really? If an American DID pull this off, he would parlay it into a scholarship anywhere. THIS guy, however, doesn’t use take advantage of what he has done and still follows the rules of everyone else to get into college.

 

“I had never seen a computer or heard of the internet… what kind of animal is Google?… ok, let’s Google windmills…. Where was this Google all this time?!”

All I am going to say is: imagine if this kid had had a freaking IPad with 4G.

 

I never get tired of watching this video. It continually amazed me. And here is the connection to my other blog post about how we ruined our country by being spoiled and taking advantage of all the productivity and wealth we have. Think he is an exception? Sure, he probably is. Like, one in a million? Ok. There are 4 BILLION PEOPLE in the developing world. That means there are four thousand more people like him. Think about how many brand new Fortune 500 companies we could get out of that! And that is just the geniuses. Most of us aren’t a genius! So I will give you the benefit of the doubt and assume you are still very special and are 1 in 1,000. That is four MILLION PEOPLE. That could do the same thing you can, if given half a chance (and considering some of them are STARVING, would do it for a whole lot less!).

 

This is like quantum physics. If it doesn’t change the way you see the world, then you simply don’t understand it. So seriously. Watch this video and be afraid, be very afraid. And then start working HARD!