Showing posts with label business books. Show all posts
Showing posts with label business books. Show all posts

Saturday, October 30, 2010

Fortune's smartest business books

I came across this while looking up some background for an upcoming post and clicked the link mostly of a sense of morbid curiosity (cynical people should generally avoid the business section of their neighborhood book store), but I was very pleasantly surprised.

Covers everything from Wealth of Nations to Blackhawk Down. Definitely worth a browse.

Wednesday, July 14, 2010

The best way to get rich is to sell books to gullible people

I sometimes wonder how much the current crisis was acerbated by bad advice from financial gurus on TV, advice that has changed amazingly little. Here's a recent example from David Bach (author of Start Late, Finish Rich and endless variations):

The best type of debt is debt that builds wealth over the long run, and the
No. 1 example of that is mortgage debt.

"Home values have increased an average of 6.5 percent a year over the past 30 years," says Bach. "So when you borrow to buy a home, chances are that's good debt. You'll build value."

Bach heavily promotes the idea of homeownership, saying that everyone needs to own where they live. "About 40 percent of Americans are renters," says Bach, "and the fastest way to wealth in America is buying where you live."

Bach cites some shocking numbers to back this up. "The average renter has a median net worth of $4,000, and the average homeowner has a median net worth of about $150,000."

...

One of the reasons so many Americans seem mired in bad debt (Bach reports that the average American carries approximately $8,400 in credit card debt) is that financial education is pratically (sic) nonexistent. "This type of commonsense stuff isn't taught in school," says Bach, "and most Americans don't realize how bad high-rate credit cards are hurting them."



Bach has been doling out this same advice complete with the same net worth statistic (apparently included under the assumption that schools didn't teach statistics either) for about a decade*. It is slightly more sound now than it was five years ago, but it is still not what you'd call good.

This ground has been covered before (notably by Felix Salmon) but just to recap:

1. Home ownership is not a particularly good investment either in terms of returns. It's bad in terms of liquidity and horrible in terms of diversification;

2. Analyses purporting to show the amount saved by owning vs. renting almost always overlook the direct and indirect costs associated with suburban commuting.

3. Home ownership makes it difficult for workers to go where the jobs are. This has economic consequences on the national level, but it's on the individual level that this can turn into a real horror show. Housing prices, liquidity and employment are all correlated by region.




*In Start Late, Finish Rich, Bach says "you cannot get rich being a renter."

Friday, July 2, 2010

Charms and Mogul Dust

The recent discussion of Seth Godin (see here, here and here) got me thinking about how far business gurus will go out their way to build an association with the fabulously successful, even when that success is built on incredible talent and/or luck and could not possibly be applicable to a general audience. Godin does it with Dylan, probably the most influential songwriter of the second half of the Twentieth Century. Another popular example is Michael Jordan, quite possibly the greatest basketball player ever.

There is really no way to draw a useful analogy between the careers of Dylan and Jordan and what the rest of us face, but of course, that's not the point. The gurus use these men in their examples for the same reason that our ancestors would dress up like bears and growl and snarl at each other around the campfire. It's a primitive but still appealing magic of association and imitation.

Eating a box of Wheaties with Derek Jeter on the front will not raise your batting average, wearing a LeBron James jersey will not help your jump shot and trying a career move just because it worked for Dylan or Jordan will probably turn out to be a bad idea.

Wednesday, June 30, 2010

Bob Dylan, the Monkees and the flooded landscape analogy

Seth Godin's comments on Bob Dylan and the Monkees (which comes to us via Gelman via DeWitt via Tinkers via Evers via Chance) got me thinking about fitness landscapes. Here's the quote:
Let me first describe a distinction between the Monkees and Bob Dylan. Bob Dylan gets laughed or booed off the stage every ten years, whether he wants to or not. He got booed off the stage when he went electric and again when he went gospel, and most recently with his horrendous Christmas album. The Monkees never get booed off stage, because the Monkees play "Last Train to Clarksville" exactly the same way they did it 30 or 40 years ago. Here's the thing: Bob Dylan keeps selling out stadiums and no one goes to see the Monkees, because the Monkees aren't doing anything worth noticing. There are people who have succeeded who just keep playing the same song over and over again, whatever that is that they do.
Think of a musician's career as a landscape where creative decisions like repertory, genre, style, arrangements give the location and concert sales are the fitness function. (see here and here for previous posts on landscapes)

In Godin's example, the Monkees have stuck very close to a local maxima that has sank over the years (the sticking close part doesn't actually match reality all that well -- Mike Nesmith had a run of innovative and interesting projects in the early days of music video -- but for the sake of the post let's overlook that part). Any small to moderate change in repertory or arrangement or style would move them to a lower point on the landscape.

I think I may be stealing this from Stuart Kuafmann, but let's flesh out the metaphor a bit and add water. Our landscape dwellers can travel freely on dry land but they can only swim very short distances. Exactly how does this relate to our real life example? Remember that altitude in our landscape corresponds to ticket sales. In order to stay viable, ticket sales for a touring act have to stay above a certain level. If the sales fall below that level, the act loses bookings and can no longer cover its expenses. Of course, like any other business, the act can run at a loss for a while (swim) but that's obviously not a long term solution.

Godin suggest that a willingness to, in our analogy, move to another optima is the key to success. Dylan made the move and thrived. The Monkees stayed put and whithered. But how comparable were the two situations?

Dylan had a steady source of income from other artists covering his songs. In landscape terms, he was a good swimmer (of course, so was Nesmith who got a tiny check every time you used that little Liquid Paper brush). More importantly, Dylan didn't have that far to swim. He might not even have needed to get wet. At least a portion of Dylan's fan base were going to stay with him no matter where he went on the musical landscape and given his reputation (and phenomenal talent, though I'm trying to leave that out of the discussion), there was a maxima waiting for him at pretty much every genre and subgenre of popular music. Those moves might not have been as artistically or commercially successful as the ones he made but Dylan was going to remain viable no matter where he went.

What about about the Monkees? Musically they weren't a bad line-up. Dolenz was a veteran child actor, Jones was a Tony nominee for Oliver! and Tork and Nesmith were both accomplished musicians. Highly successful careers have certainly been built on less, but what did their career landscape look like? Compared to Dylan's collection of tightly-packed peaks, the Monkees had a lonely island surrounded by what looked like a large and empty ocean. The vast majority of their fan base was location specific. When they moved away from that location they hit deep water very quickly.

It is, of course, possible that the group could have focused on coming up with new songs and a new sound with the hope of finding a new audience. This is a dynamic landscape, and where the artist chooses to go is one of the factors that affects it. There might not be a concert market for the Monkees playing new grass or thrash metal now but that doesn't mean there won't be one in the future. Sometimes, by playing music no one wants to hear, you can create a demand for that music. To return to the landscape analogy, treading water in one spot can cause an island to rise up beneath you. It has been known to happen but it's probably not something you want to count on.

In the case of the Monkees, the water-treading strategy would be particularly risky since their reputation is likely to work against them if they try something radically new. This is probably why Nesmith chose to use his own much less well known name for the Grammy-winning Elephant Parts rather than trying to sell it as a Monkees project.

Which brings us back to Mr. Godin and the advice books he and other business gurus dump on the market every year. These books gush out at such a rate that there are actually companies that put out fifteen page versions so that executives can at least give the impression that they have read the latest releases. The Dylan/Monkees example is sadly representative. It takes one of business gurus' favorite truisms (take risks, i.e. move out of your comfort zone, i.e. they laughed at Henry Ford), bills it as a fundamental key to fabulous success (fabulous as in fabled as in obviously untrue) then backs it up with an irrelevant but impressive sounding example.

Godin is telling businesses to be like Bob Dylan and to make radical moves that may piss off your customers and invite scorn and mockery. The trouble is very few businesses are Dylan-at-Newport. The majority are the Monkees-at-the-state-fair. They have something they do reasonably well. If they stick close to their local maxima they can turn a decent profit and have a pretty good run. If they follow Mr. Godin's advice they will sink like a cinder block and never be heard from again.