Book Review – Fail Safe Investing
Investment literacy is essential for building and keeping wealth. But for most us the world of investment is “a parallel universe controlled by prophecy, mysterious symbols, obscure cycles, and strange ideas about how human beings behave.” It doesn’t have to be that way; it can be safe and simple is the message that Harry Browne is spreading through this tiny book.
The book encourages a commonsense based, practical approach to building wealth rather than on speculation. So you won’t find any tips about getting rich quickly or retiring in Bahamas.
There are 17 rules in Part I of the book. In Part II, the author provides more information on these 17 rules. For a glimpse into the book, I discuss three such rules.
Rule #1: Build Your Wealth Upon Your Career – I never heard this rule before and if you have not read this book earlier, you wouldn’t have heard it too. The author emphasizes that your career and investment together build a prosperous and secure future. Yes, investing will build wealth but it is your career that gives you the money to invest. So keep your feet on the ground and remember, you got to go to work tomorrow.
Rule #7: Invest Only On a Cash Basis – When you see a ‘golden opportunity’, borrowing money can seem like a smart way to exploit the opportunity. But borrowed money can just easily enlarge your loss as increase your profit.
Rule #11: Build a Bulletproof Portfolio For Protection – This rule is the crux of the book. According to the author, economic circumstances can be broadly classified into prosperity, inflation, recession and deflation. To be protected in all circumstances, there must be at least one investment in the portfolio that responds well to it. The author identifies stocks, bonds, gold and cash as the investment instruments for these economic circumstances. He also proposes an equal distribution of these instruments within the portfolio.
Other rules are as conservative as these. It is better to be conservative and preserve the capital rather than end up in the investment graveyard.
This is one of the book that defines my investment principle (others are about ‘Value Investing’). Because of these simple and safe investment principles, I sleep better at night.
I will finish with the often repeated statement in the book. Whenever someone pressures you to strike while the iron is hot, remember: When in doubt about an investment decision, it is always better to err on the side of safety.
Good luck with your safe investing.
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Top Links For The Week of August 28, 2010
Every week I post a digest of very fine links. Here are the best links I found in the past week:
- Balance satisficing and optimizing : Whether looking for the root causes of your problem or identifying solutions, you must be collectively exhaustive (CE). That means looking for all the possible solutions. That’s fine in theory but in practice, that induces paralysis by analysis. So you need to learn to balance your quest for collective exhaustiveness with practical considerations.
- Sell the problem : Lesson for consultants: No business buys a solution for a problem they don’t have. And a lot of people aren’t willing to embrace that they have a problem unless they also believe that there’s a solution. So you should both sell a problem and hint that there’s a solution that others are using, or is right around the corner.
- 8 Symptoms Of Social Schizophrenia : Companies are establishing a presence in social media to build their online reputation. They establish levels of service in social media that differ significantly from service levels in other channels. Does your company suffer from this ailment?
- Technology Selection and Cultural Fit : The basic question at hand for most technology selection projects really comes down to “‘what do we need and how much is it?”
- The right way to position against competition : How do you cope with competition, incorporating it into your strategy while not letting it consume you?
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Should Books Be Backed By Scientific Research?
Two books that had a profound impact on me are Seven Habits of Highly Effective People by Steven Covey and Tough Minded Optimist by Norman Vincent Peale. But they are not a result of rigorous scientific research.
Similarly, The Monk Who Sold His Ferrari and Tuesdays With Morrie had positive impact in many lives. These two are not based on scientific research either.
I’m sure there are countless other books, which are not based on scientific research but are inspiring millions around the world.
But the academics routinely dismiss such self-help books which are not based on scientific research. Recently I listened to a motivational talk as part of leadership workshop. The speaker, a Ph.D. in Psychology, dismissed these books because they are not based on scientific research.
One might argue that this argument is limited to self-help genre of books publishing industry. Not quite true.
Let us consider that one of the Dabbawalas publish their success story (contrast to a study by Harvard Business School). Would you read it even though it is not based on scientific research?
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Book Review – Making Breakthrough Innovation Happen
Consultants face myriad of business situations, each with myriad of complications. Case studies are the quickest method to be introduced of a situation, it’s complications, and attempted approaches in resolving them. But to be useful, the context of the situation should be relevant. Unfortunately, there aren’t many interesting and engaging case study books in the library of Indian consultants.
Making Breakthrough Innovation Happen by Porus Munshi, of Erehwon Innovation Consulting, fills that void. The book describes how eleven Indians challenged the status quo and pulled off the impossible in their fields. These orbit-shifting innovators, as the author calls them, didn’t raise to international industry standards; they set up new industries. Make no mistake, it is not filled with Ambanis and IT Companies. That would have been a banal collection. Rather this book is an interesting mix of cases from public and private sector; startup and legacy companies; and product and service sector.
Think of some of the questions raised to and by Indian consultants:
Can a filthiest city afflicted by malarial deaths be transformed into second cleanest city in India?
When the Swiss can’t do it, can Indians do it?
In a country filled with licenses and administrative hurdles, can one man create a whole new industry?
This book describes how some Indians answered with an resounding yes to these questions.
In a land of armchair critics, it is heartening to read of Indians who refused to accept status quo, rolled their sleeves and reshaped the situation and in the process, emerged as inspirational leaders.
But the wisdom of these innovators are not limited to Indian context alone. Standardization of medical practices by Arvind Eye Hospitals, Insight Pilgrimage by CavinKare, Fight against dilution of strategy by Chola Vehicle Finance are applicable to every business.
The cases in the book are a testament to the fact that transformation of public sector, innovation in product development and beating international giants in their speciality happen within the geographical boundaries of India.
This book is a must-read for Indian business consultants; for others it will be an inspirational read.
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Top Links And Tweets For The Week of August 21, 2010
Every week I post a digest of very fine links and tweets. Here are the best links I found in the past week:
- Social Entrepreneurship in India–The Complete Guide to Funding, Profitable Sectors [and more] : There is profit at the bottom of the pyramid. This post lists all the various business models employed by social entrepreneurs in India along with the available venture funds for social entrepreneurs.
- How to Walk the Line : Consultants have to walk on a ‘balanced’ line all the time. Here are some of those ‘lines’ from the Million Dollar Consultant, Alan Weiss.
- With Innovation, You Don’t Get Points for Difficulty : The goal of business is to find the quickest, cheapest path to profits. If that involves imitation, then so be it.
- Mind Your OWN Business : We manage ourselves differently when we’re self-employed versus working for a company. What if an employee considers his job as a business rather than just a job? You’ll find yourself energized and with power you didn’t even know you had. It feels much better to be the driver of your career rather than a passenger.
- WebFilings streamlines SEC reporting using Google App Engine : WebFilings is a SaaS solution that dramatically improves the process of developing and filing financial reports with the Securities Exchange Commission (SEC). In this post the founder details the architecture of WebFilings. XBRL will be introduced in India soon and there is a business opportunity in India on this line.
Here are the best tweets of past week:
- Orrin_Woodward: 10% of the people do 90% of the work, but 90% of the people think they are part of the 10%.
- Orrin_Woodward: Will you choose the comfort of mediocrity or the quest for excellence?
- gitomer: The best employee is someone who wants to learn as much as they want to earn. gitomer
- MarkFritz: EARNING THE RIGHTS: The weak want the “rights” before earning it, while the strong would never accept them unless earned.
- MarkFritz: DISCUSS ASSUMPTIONS FIRST: Many problems we face in our key business relationships have roots in different assumptions.