Book Report: Investor's Manifesto

I just finished reading Investor's Manifesto by William Bernstein; this is an incredible guide to retirement and offers unique insights into how to easily plan for a decent retirement. The author has spent a ton of time writing financial books and collaborating with some of the best financial minds out there, and offers an amazingly simple and yet incredibly hard to beat approach to maximizing your stock returns.

A quick recap of the book roughly by chapter:
1) History shows us many financial bubbles. Countless have happened in the past, and undoubtedly more will happen again.
2) The stock market is unpredictable. It's folly to think anyone can consistently time the market or predict the future; chartists, advisors, professionals all cannot repeatedly do this. It's nonsense to think anyone can.
3) A realistic investment goal is simply to match market performance. Index funds are a very cheap and easy way to do this; Vanguard offers many very cheap index funds that very closely mirror various markets (eg. stock market, bonds, international companies, real estate, etc.)
4) The enemy is you. Most often the biggest cause of investment loses come strictly from the investor! People who too closely monitor their finances may commit to the worst financial move: selling low & buying high.
5) Financial companies make a lot of money by taking yours. In the long run, investors are better off avoiding investment professionals and instead simply trying to match market performance.
6) A great formula for investing is: take your age, and buy that % in bonds (eg. a 30 year old holds 30% bonds). Take 100 - your age and invest that % in stocks (eg. a 30 year old invests 70% in stocks) Rebalance this annually to adjust for your changing age and also to move money into the cheapest asset. You can adjust this formula for risk tolerance; if you're more conservative or more aggressive, adjust the percentages accordingly.
7) Keep your investment strategy very simple. You can outperform so many other professional investors this way. The index strategy is the safest/best long term strategy one can realistically count on.

Meat, sickness

US Meat and Poultry Is Widely Contaminated With Drug-Resistant Staph Bacteria, Study Finds
http://www.sciencedaily.com/releases/2011/04/110415083153.htm

I've seen plenty of articles like this about mass produced meat making us sick; I've hardly felt sick at all after 2 years of vegetarianism, and that was after getting sick ALL THE TIME as a carnivore. Could be a coincidence, but I'll continue avoiding meat.

Slax: securely viewing the net

If you're like me at all, you're somewhat fearful of putting your login name & password into financial websites. Even though any respectable website is configured to send that data encrypted (so nobody can steal it while it's sent across the internet,) it's still very possible that the computer you typed that into has been compromised. Yep, even if it's your very own computer that you know well & take immaculately good care of.

If you're at all like me, you occasionally install random patches or software to do all kinds of things. Or, you just surf the net or click links friends email you. All of that can very easily lead to viruses on your computer. And even regularly running virus detection software can't eliminate all nasty viruses. Have you heard of the Zeus virus? This is the scariest virus I've ever heard of; it's ingeniously designed to be easily spread, undetectable by most virus software (eg. Mcafee, Norton, etc.) and guess what it does? It steals your bank account passwords! I would hate to watch my bank account mysteriously drained by something like this. I'm not just trying to make mountains out of molehills; this is a genuine serious issue and has infected millions of computers in the US.

Every once in awhile, I find a new virus on my computer. I consider my computer usage relatively safe, but still this happens. So what can you do to be safe? I've seen a few solutions. First, I'm very inspired by Gmail's 2-factor authentication feature. That's a lot of words that basically mean it doesn't matter if someone steals your login name & password; they still can't login. I can't wait for more financial sites to offer this capability; but knowing the speed at which many large financial institutions operate, my gut feeling is it will be awhile before this happens. Another option I've seen people employ is to have a dedicated computer that is used only for logging into financial sites. This seems a bit extreme to me, but in theory is a bit safer than what most people currently do. Others use Macs or Linux, which have a far lower risk of nasty viruses; this seems a better solution, but again not perfect and doesn't work for me due to some programs I want only being available for PCs. You could partition your hard drive and install a couple operating systems on it; this would work, but is only for the very computer savvy. My recommended solution that even grandma can use: use the free software Slax. Slax is an entire operating system that lives on a CD; I simply burn their software to CD, pop it in my computer's CD tray, and boot up to it for safe & secure internet browsing. I can still run Windows, use all the programs I like, and boot safely into Slax when I want to be extra sure I'm browsing safely. The only risk here is I have to trust the developers who release Slax and believe they haven't distributed something like Zeus on it! I'm hopeful this is not something they have done. And, it does take 5 or so minutes every time I want to switch operating systems. While this isn't a perfect solution, it's a FAR safer one from just logging in via a browser on windows.

So, I highly recommend the very easy to use Slax to anyone who shares my fears. And if you have other creative solutions to this problem, I'd love to hear.

A Taste for the Unordinary

I have always had a unique taste that I've never really been able to adequately describe. Then it hit me recently; I tend to like things that are a bit unordinary, that make you think, and especially when they contradict conventional wisdom. When something meets that last criteria, I go bonkers over whatever that is. Perhaps this fuels my appetite for reading a lot of random things out there :) A few examples I came across of this:

- On average, every year 1,000 people die by a plane crash but 10,000 die from health consequences surrounding plane exhaust.
http://www.aolnews.com/surge-desk/article/planes-dont-kill-people-plane-exhaust-does/19669550

- An alcoholic drink a day ok might not only be okay for pregnant women, but possibly even beneficial:
http://blogs.chron.com/momhouston/2010/10/study_light_drinking_during_pr_1.html

- Twitter predicts the stock market?!? Okay, I'm not so sure if I believe this one, but... somebody does!
http://gizmodo.com/5667682/twitter-can-predict-the-stock-market-six-days-in-advance

Google Reader Play is an awesome site that is full of mind boggling articles like this. I'm not just trying to pitch a product of my employer's, but rather I'm wanting to share something that fascinates me every time I use it and that may be of interest to you. Reader Play lets you leverage the wisdom of the crowds and see what folks on the internet find to be the most intriguing news of the day. I find this a fascinating way to expand my mind and learn all kinds of random new things. This site has quickly been moving up on my most visited sites list, and is a very enjoyable way to spend a few minutes every day. Check it out!

How not to manage people

I recently had a chat with a coworker about management styles and how they can either inspire employees to work hard for their company or do the exact opposite. I'm fortunate to work for a company that many would argue inspires its work force to feel as if each person really makes a difference and desires to contribute to the company. There's a huge difference in being forced to sit at a desk for 40 hours a week and being motivated & driven to want to be there. Driving employees by fear, micromanagement, and prodding is a recipe for disaster. Making employees a part of the company and self-driven to succeed I'd argue is a path to win.

One of the things I've loved most about my job over the last 4+ years is that I've been able to travel to many fortune 500 companies & go inside their offices. I've been able to see how movie studios, car companies, technology manufacturers, banking institutions, and more are run and the dynamic inside. I've seen how their management treats the employees and the effects it has on workforces. It's been an incredible journey and I've been able to learn so much about the inner workings of other companies without having to actually work there. I've witnessed corporate cultures of great motivation and many times of complete discontent.

I'll leave specific company names aside, but talk about a few fascinating observations I've made.

One company runs like a totalitarianism. The owner founded this large company all by himself and wants his wishes and his wishes alone executed. He hires managers from the military as he feels they are trained not to question their superiors; they will blindly take orders from above and execute and will not generate "risky" innovative ideas. Well... this has resulted in a culture of fear and is one that breeds in-fighting, distrust, clawing your way to the top, and generally low morale. The founder wanted a world where only his voice mattered, and a dictatorship he has achieved.

Another company was the epitome of micromanagement. I walked into the office and it literally looked like a college computer science lab. The employees worked in an environment that looked like this:

Instead of small students at the computers, there were adult employees. Computers were smashed together even more closely, and employees looked generally quite miserable. There was practically no room to decorate and make a desk your own, no privacy, no ability to have a private conversation, no collaboration, no care for the individual, and the perfect setup for management to see what every employee worked on at any point in the day. You can bet this environment did not foster innovation or creativity but instead a desire to quit.

A third company I'll mention had the most crazy way of measuring an employee's contributions to the company: by the number of hours spent keeping your seat warm. The company didn't seem to value the actual reason why employees are hired: to produce specific results. Instead, they took every employee in the company and ranked them by the number of hours they worked per week. If the number was under 45, the employee was in the red zone. 45 - 55 was yellow. 55+ was green. I took an informal survey of a few of my peers and asked what kind of employee behavior this would encourage. The answers were all similar: surfing facebook more frequently from work, feeling disgruntled, not wanting to help the company out, and contemplating an exit strategy from the company.

Okay, enough of the depressing stuff. Not all companies are ran this poorly. I've seen some amazing management styles founded on trust, giving employees freedom to get their work done, and measuring results and not hours. It's your ship is an incredible book on effective management techniques and ways to truly motivate people to work together to achieve amazing feats. I highly recommend reading it and I promise you will learn many valuable lessons.

Busy != Productive

Busy != Productive.

(for non-geeks, the "!=" symbol is code meaning "is not equal to")

I spent many years in my career focusing on the wrong thing. I have always considered myself to be a driven person, and as such I felt the need to do something with every minute at work. My background in consulting and also defense largely caused this behavior, since people in these fields are paid hourly (or even in 15 minute increments) and must track where every bit of time goes. When I left these fields, this time tracking characteristic stayed. If I ever had free time at a job, I found myself hungering for any little task to work on where I could make someone happy and keep busy in the process. I never stopped to question if the true outcome of any given task was all that meaningful; I never asked if there was something more impactful I could be doing with my time. All that mattered was I was keeping busy and that at least one person valued the work I was doing. I always figured if a company was paying for my time that it was my responsibility to find ways to contribute with every moment.

Well, the longer I've been in the workforce the more I'm changing my attitude on this topic. I've encountered individuals who were so successful in just a few hours each day or each week that slacking off the rest of the time was okay. It's really a quality vs. quantity thing. In the world of sales, if you are able to drive a ton of revenue in a short period of time, the company is very pleased; exactly how many hours or minutes it took to accomplish that is irrelevant. It's the results that matter, not the number of hours or the sense of keeping busy. One of the most successful sales people I've met didn't work a traditional 40 hours per week and on plenty of occasions just stayed home on normal work days if there weren't significant tasks to work on. And guess what? Nobody cared, not even her manager. The results of her work were so strong that where every minute was spent didn't matter. What made her so effective was that she did the opposite of what I was doing; she tossed aside all the insignificant work and instead only spent time on tasks that largely impacted her goals. She probably worked 25-30 hour weeks and yet was producing far superior results to most peers. While she didn't put in a full 40 hours of work, she was intensely productive in those hours she did put in. Moral of the story: it's not keeping busy that's important; it's the end impact you make that matters.

I've found taking a step back and really evaluating everything you can work on is absolutely essential. Toss out the little stuff - it just doesn't make that much impact or truly matter. Focus on the big issues and make a noticeable impact for the company. I ask myself - in a few years, what will I and teammates recall about my contributions? What will make my resume shine the most? Chances are, the little tasks will be long forgotten and it's those fewer big things that will be remembered and actually matter. Not to mention it's those bigger tasks that will drive the business forward in measurable ways. Sure, this is common sense. But I do believe it takes a very talented person to be able to identify the unimportant time sucks, toss them aside, and be able to focus on the things that really matter.

On the topic of time management, Getting Things Done is a very popular book around my workplace. This book has a lot of great tips on how to get the most out of your limited time and how to maximize your productivity & impact on the business. If you're interested in becoming a more effective worker, I highly recommend giving this book a read.

The Power of LinkedIn

A coworker of mine has inspired me to dust off my old blog and try publishing some learnings from the adventures of my career.

Today I want to write about the power of LinkedIn. I've found it to be quite useful for a few specific situations, and hopefully I'll have a reader who gets some value from these learnings. LinkedIn is funny as it's so similar to other social networks like Facebook in the way you find and establish connections between people, however it's so very different in that I've never seen it used for hanging out with friends and instead I've only seen it used for professional networking. (It's a fascinating story from a product perspective of how each of these services position themselves for these two very distinct purposes, but that's an entire separate topic for another time.)

I've heard from some friends that they spent a ton of time developing a LinkedIn network and NEVER found any reason to use it. Well, I've found a couple of good uses and here I am sharing.

The primarily use I've seen is in job recruiting. Many employers like to believe they've hired smart people, and that those smart people must know other smart people. I've seen a number of colleagues (myself included) use LinkedIn to advertise job openings at their companies. The WSJ recently reported that about half of all jobs are filled by those that are known to the employer. Thus, LinkedIn is a clear winner for trying to find good people or trying to find a job.

The second use I've found is in connecting people to people. My first full time job was for a startup dot com company. Unfortunately, we all know the dot com boom went bust in not too much time and so I haven't worked there for nearly a decade. But, I still keep in touch with the founder of that company; he continues to innovate in the online world and occasionally has the need to reach out to large online companies like Facebook, AOL, MySpace etc. While I don't have terribly close friends at all these large internet companies, I've come to find I'm usually just one person away from such contacts. Meaning, some of my LinkedIn colleagues know employees of these companies and are very willing to make an introduction. I was actually surprised to find out just how few people there are between myself and very powerful executives from large internet companies. It's a small world out there; having that common contact who is willing to make a warm introduction can go a long way towards having that target person open up to you.

One of the best things I've learned from the last 4+ years working in a sales organization is the amazing the power of relationships. If my former boss were to attempt to reach out directly to these large internet companies cold, he quite possibly would have had a lot of trouble getting through. But a warm welcome & introduction can go a long way.

So, make sure you're on Linked-in, develop an extensive network, continually add people as you meet them, and use those connections!