Monthly Archives: September 2014

Social and Financial Benefits of Home Onwership are Overstated

Social and Financial Benefits of Home Onwership are Overstated

For many, owning a house isn’t the right lifestyle or financial choice.

Financial Reasons Not to Buy a Home

Median wealth in the Untied States plummeted dramatically over the years 2007 to 2010, and by 2010 was at its lowest level since 1969. This was as direct result of the policy of encouraging the middle class to take a highly levered position in housing.

Even if you consider down-payment you’ve made for your home as an investment, housing returned 0.4% per year from 1890 to 2004. Not to mention of the 2-3% closing costs, which typically consist of lawyers, title insurance, and moving costs. And then there’s 4-6% in fees to the real estate agent when you sell. In addition to the low appreciation of house prices in most markets around the United States, your investment in your home suffers from some structural constraints:

  • The investment is illiquid: you cannot cash out whenever you want.
  • The investment involves high leverage for most people because they have to borrow a lot of money.
  • The investment offers no diversification in financial holdings. For most people, a house is by far the principal holding in their portfolio. This significantly exceeds the 10% of net worth limit suggested for diversification of portfolios. If you examined middle half percent of the wealth distribution, the gross value of homes accounted for 65 percent of individual’s wealth. American households would be at an advantage if their savings were in diversified asset portfolios.

Maintenance and Lifestyle Choices

Regardless of how you keep up your home, you’re going to have to fix lots of things. In a substantial lifespan of your house, everything is going to break. From mowing the lawn to fixing plumbing to getting rid of mildew, either get down on your hands and knees and fix everything that’s broken or needs preventive maintenance, and/or open up your checkbook to repairmen and the supplies. Not to mention of the diminished rest and relaxation time.

Posted in Investing and Finance

Southwest Airlines’ Brilliant Marketing

Southwest Airlines' Brilliant Marketing

More than anything, Southwest Airlines deserves credit for its exceptional marketing strategy. For decades, Southwest Airlines has convinced American consumers that it have the lowest fares, which is hardly ever the case. Southwest’s average fares have outpaced the industry by 12% since 2009.

Nevertheless, I hear repeatedly “I need a cheap last minute ticket; I suppose I’ll try Southwest Airlines.” Being able to create that perception among consumers is invaluable.

Southwest Airlines began service in June 1971 with the objective of stimulating demand through low fares and, in forty years, has become the largest domestic airline in the United States. Southwest Airlines used to be cheaper when they first started out but currently many of their flights cost more than the other airlines. Many attentive customers do not consider Southwest Airlines a discount airline anymore.

Southwest Airlines gained a low-cost advantage by flying one aircraft type on a point-to-point network to less congested secondary airports. This enabled the airline to maximize aircraft utilization and employee productivity. It’s simple fare structure allowed customers to purchase and alter their travel plans more easily than with legacy carriers. Another distinctive competitive advantage that Southwest enjoyed for years was a hedged fuel position that was the envy of the industry. Over the last decade, Southwest has lost this particular cost advantage, and has generated results that have more closely mimicked those of legacy carriers.

Southwest Airlines No Longer Low-Cost Airline

Moreover, Southwest is no longer the lowest-cost provider that it used to be, even not including fuel costs, as measured by costs per available seat mile excluding fuel expenses. Competition and surging fuel prices proved that Southwest’s low-cost advantages were merely temporary. Over the years, competitors like Alaska Airlines, Spirit Airlines, Allegiant, and JetBlue have entered the fray and mimicked this strategy.

Over the last decade, three distinctive business models have emerged in the US airline industry: (1) global network airlines, (2) hybrid airlines, and (3) ultra low-cost airlines. Southwest Airlines has purposely avoided identifying itself with a specific strategy. Instead, the airline has chosen to persist amplifying its maverick low-fare image.

Southwest Airlines revealed a modern new look

Southwest Airlines revealed a modern new look and logo on Monday. Gary Kelly, Southwest Airlines CEO said, “our collective heartbeat is stronger and healthier than ever, and that’s because of the warmth, the compassion, and the smiles of our People … The Heart emblazoned on our aircraft, and within our new look, symbolizes our commitment that we’ll remain true to our core values as we set our sights on the future.”

Posted in Airlines and Airliners Business and Strategy

The Three Stages of a Bull Market

The Three Stages of a Bull Market

Legendary global investment strategists Barton Michael Biggs (1932–2012,) money manager at Morgan Stanley and founder of Traxis Partners, said “A bull market is like sex. It feels best just before it ends.”

Renowned investor Howard Stanley Marks (b1946) of Citibank, TCW Group, and Oaktree Capital Management identified three stages of a bull market:

Fortunately, one of the most valuable lessons of my career came in the early 1970s, when I learned about the three stages of a bull market: the first, when a few forward-looking people begin to believe things will get better, the second when most investors realize improvement is actually underway, and the third, when everyone’s sure things will get better forever.

Celebrated investor and philanthropist John Templeton, acknowledged that “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria.”

Recommended Reading

Posted in Investing and Finance

How to Prepare Yourself for Future Opportunities

How to Prepare Yourself for Future Opportunities

Chance favors the prepared mind. “The prepared mind” is the characteristic of leaders who are outstanding in their talent to perceive, make sense, decide and act across a complex set of conditions. We also believe that “the prepared mind” is not a matter of chance. It is a matter of intentional preparation that requires developing eight mental skills regardless of your role.

How will you prepare for your tomorrow?

  1. You need the skill of observing because your world is more competitive. Execution-driven leaders often become so consumed by the pressures of running their projects and their organizations that they never pause to take a look at what’s going on around them. You may have mastered the core capabilities of your profession, and yet new technology might make these capabilities obsolete. List the capabilities you need to develop. Find a meaningful unifying purpose.
  2. You need the skill of reasoning because you need to reevaluate your assumptions. Data are useless without the skills to analyze them, reason, and make meaning of them. For example, are you thinking big enough? Take your situation and think bigger. Reasoning can complement problem-solving skills that you already have with a methodical approach to use with moral, ethical, organizational, or technical problems.
  3. You need the skill of imagining because you need alternatives to keep yourself sharp. Imagination is not a trait that we inherit in our genes or a blessing bestowed by the angels. It’s a skill. Be curious about everything—the world is full of amazing wonders for you to learn about. Creativity is at the heart of innovation. To improve this skill, list three combinations that would create something new and useful for you. Name one thing that you think you are too old to start. Are you really too old?
  4. You need the skill of challenging because expertise breeds conservatism. Challenging a group’s willingness to go with the first right answer can be major barrier to unleashing full creative potential. To improve the skill of challenging, list the constraints imposed on you. Who has already dealt with them? What did they do? What could you do?
  5. You need the skill of learning because new opportunities abound. Improved learning skills—concentrating, reading, and listening, remembering, using time, and more—are directly useful and will continue to pay dividends for a long time. What don’t you know that you should? List technologies, practices, or events that might provide insight. Learn about the future by studying some history. Also, list some mistakes or failures from your past. What did you learn from them?
  6. You need the skill of deciding because every decision has consequences, and no decision is a decision. Every solution brings about its own set of new problems. No leader knows enough about the future to make the most favorable decision every time, but it’s better to set a clear direction today and confront problems that crop up tomorrow. It’s not being afraid to fail; and if you do, identify it quickly and more ahead fast so no momentum is lost.
  7. You need the skill of enabling because all of us are smarter than any one of us, and “they” need the knowledge, means, and opportunity to help you reach your goals. Who needs your help, and how can they help you? Provide opportunities—delegate. Ensure that outcomes, actions and questions are properly recorded and actioned, and appropriately dealt with afterwards.
  8. You need the skill of reflecting because you learn more from understanding the reasons for your success and failure than you do from studying someone else’s best practices. Take a current problem and list possible answers. Now think like a beginner by asking dumb questions. Reflect on those questions and answers. The greatest strength of reflective leaders is their thoughtful and attentive nature, which means tremendous persistence to listen and take in information, the ability to connect the dots and garner eye-opening insights, and deep trust in their instinct, creativity, and thinking process.

Many leaders seem so besieged with their current workload that telling they prepare for the future may seem unreasonable. By preparing today to meet tomorrow’s challenges, they can set in motion a new leadership paradigm, one that will help leaders better cope with today.

Prepare your mind and then use your mind wisely. Leaders who focus on those eight basics will be prepared to encounter the unknowable challenges that lie ahead.

Posted in Education and Career Life Hacks and Productivity Management and Leadership

Round-up of Advice from 25 Entrepreneurs Who Changed Business as We Knew It

Entrepreneurial Lessons from World Changers

John A. Byrne What would it take for us, as individuals, to pursue entrepreneurism and be world changers? That’s the principal focus in John Byrne’s compilation, “World Changers: 25 Entrepreneurs Who Changed Business as We Knew It.” Through discussions with 25 entrepreneurs and selections from their published interviews, John Byrne pieces together an inspirational book of stories of entrepreneurism and fascinating insights into what it takes to succeed as entrepreneurs.

I want this book to be both a meditation on entrepreneurship and an inspiration for those who want to create something meaningful on their own. The goal is to bring that person’s experience and wisdom to these pages for the benefit of others—to inspire, to motivate, to learn, to achieve.

Throughout the book, Byrne focuses on weaving a strand of common characteristics of entrepreneurs detailed in 25 of this blog’s articles. Here are five greatest common denominators and lessons for world changers in the making:

  • Start with a purpose and establish a direction.
  • Entrepreneurship is about having an idea and the courage to pursue it
  • Challenge the status quo, start with a small idea, and grow with it as the idea evolves.
  • Accept that risk comes with success.
  • Pursue opportunities where everyone else sees problems.

Entrepreneurial Lessons from 25 World Changers

Related Reading: Forbes Greatest Business Stories of All Time

In “Forbes Greatest Business Stories of All Time,” historian and journalist Daniel Gross has produced a compendium of profiles of American industrialists that is extraordinarily revealing, particularly engaging, and delightfully inspiring. Outlining evolution of American business history, Daniel examines biographical information within an historical context. Rockefeller created the modern corporation and its vast business interests, Ray Kroc invented assembly line fast food, Financier J P Morgan saved the United States’ financial system, and Henry Ford mass-produced automobiles for affordable personal transportation. The key take-away: valuable business strategy, operations management, and marketing concepts from the leaders of industry.

Posted in Business and Strategy Leaders and Innovators Management and Leadership

Advice to Entrepreneurs: EBX Group’s Eike Batista on Starting Small and Thinking Long-Term

Entrepreneurs are a distinctive group of people and they possess special characteristics that help them succeed, make a lasting impact, and change the world. Here is advice from Eike Batista on starting small and thinking long-term. Eike Batista is the chairman of EBX Group, the conglomerate consisting of oil and gas, mining, energy, logistics, shipbuilding and electricity business units.

  • Eike Batista, chairman of EBX Group You need to have this drive towards financial independence. This was a driver for me, a big one. I simply didn’t want to get money from my parents any more. That was very powerful.
  • Then I would advise people to leave their comfort zone.
  • Stress or pressure is important. Stress can destroy some people, and certain dosages I think it’s extremely welcome. It tests you, and prepares you for taking bigger challenges. Entrepreneurs also need to take a long-term view. People that have quality take 3 to 5 years to be built. In my business, they can’t think in the short term because this is that tropical mentality. This country’s abundance has not helped investors or entrepreneurs to think long-term. My advice to young people is to start small and think long-term.

Source: “World Changers: 25 Entrepreneurs Who Changed Business as We Knew It” by John A. Byrne. John Byrne, a former editor at BusinessWeek and Fast Company magazines, co-authored Jack: Straight from the Gut with Jack Welch, former General Electric Chairman and CEO. In “World Changers,” John Byrne recounts discussions with and words of wisdom from 25 entrepreneurs who have changed the world—people like Microsoft’s Bill Gates, Virgin Group’s Richard Branson, and Grameen Bank’s Muhammad Yunus. John Byrne deduces that the three essential characteristics that help entrepreneurs succeed are the ability to see opportunities where everyone else sees problems, problem with authority and status-quo, and an astounding ability to live with risk and the prospect of failure.

Recommended Reading

Posted in Business and Strategy Leaders and Innovators Management and Leadership

Self-Assessment Quiz: Ten Signs You are Not a Good Leader

Ten Signs You are Not a Good Leader

The best leaders have an internal locus of control–they believe they can fix whatever is wrong, even their own leadership characteristics. The best way to find out how you are doing as a leader is to step back and ask a few questions. This self-assessment process can help you work through leadership challenges or fine-tune your leadership style.

  • As a leader, are you are not willing to fail?
  • As a leader, do you talk more than you listen?
  • As a leader, do you develop people and produce other leaders?
  • As a leader, do you micro-manage (that’s management not leadership?)
  • As a leader, are you insecure or threatened by someone that you lead?
  • As a leader, are you not willing to follow (as in servant leadership) and learn from those you lead?
  • As a leader, do you focus on pleasing people and pandering to people’s whims and fancies? Are you consumed with whether or not you look good to your superiors?
  • As a leader, do you genuinely care about the people you lead or have difficulty getting people to follow?
  • As a leader, do you have a tendency to make the wrong decision because of the fear of fall-out from making the right decision?
  • As a leader, do you dream about being like so and so, instead of being the best you can be?
Posted in Management and Leadership