The More You Give The More You Get – A Life Truth

Back in December 2014 I received one of the best gifts I could have ever imagined from my team.  They gave me a gift card to KIVA.  If you are not familiar with Kiva, it is a non-profit organization with a mission to connect people through lending to alleviate poverty.  Kiva does this by leveraging the internet and a worldwide network of micro-finance institutions, allowing individuals to lend as little as $25 to help create opportunity around the world. Since Kiva was founded in 2005 here are some statistics that give you a sense of their scale:

  • 1,255,618 Kiva lenders
  • $666,141,075 in loans
  • 98.79% repayment rate
  • 100% of every dollar is loaned out
  • 289 Field Partners
  • 0% is charged in interest to the Field Partners (loan administer)
  • 450 volunteers around the world
  • 85 different countries

Kiva in essence  envision a world where all people – even in the most remote areas of the globe – hold the power to create opportunity for themselves and others.  They do this by providing safe, affordable access to capital to those in need which helps people create better lives for themselves and their families.

This is a good example of where giving has multiple benefits,  and where it helps to create sustainability and growth for individuals, economies and societies.

So this evening, I selected four different loan programs to allocate the resources I received.  Each of these individuals and groups are quite courageous in their endeavors.  While there are many strategies and approaches, I focused my loans:

1) on growing a business – as that is a way to create long term sustainability

2) on organizations that provide entrepreneurial support to the borrowers – as that is key to business growth

3) on vulnerable groups in vulnerable areas – the definition of underserved by any measure and

4) on Field Partner organizations that help educate the borrowers on finances and savings.

I am looking forward to following the progress, individual efforts and the program overall.  This was by far one of the most thoughtful, beautiful and best gifts I could have ever received.  Helping others in a way that is empowering and encouraging of so many skills is gratifying.  While I loaned a gift this evening to four groups of individuals, I received something far greater in return.  The more I gave this evening the more fulfilled and excited I became.  My team and I are helping others fulfill their dreams for their families, their communities and themselves.  And with a 98.79% repayment rate, the cycle will start all over again.  How wonderful is that!

So to my team – Thank you for your generosity and creativeness in finding such a wonderful program.  I pray these individuals receive all of life’s blessings…good health, good fortune and the ability to create the world they imagine full of endless possibilities.

Career Advice You Wish You Had Received

I have been asked to participate in a panel discussion on Career Advice I wish I had Known Earlier On. I am looking forward to this panel discussion.  I will share the results of the session and post my thoughts on the subject after the meeting (it is being held in early March 2015, so stay tuned!).

In the meantime, here is a short video on the subject of Career Advice and areas to focus on.  I am in total agreement with the speaker and it is the focus of my mentor sessions I have conducted over the last five years.  Take a listen, I would be interested if you had an ah-ha moment?

With so much change occurring: Heighten Globalization, Technology Disruptions, Economic Deleveraging, Improved Longevity, and Geo Political Shifts, it is important to be highly aware of our environments including the businesses we work in, the communities we live in and the societies we are a part of.

If we just focus on understanding the business environment we live and operate in, you will see having a broad and deep perspective of the business, strategic and competitive landscapes will give you a significant and sustainable advantage.  You will see the shifts before they occur, you will help prepare for the changes that are coming and you will help your leadership execute on the strategy.

So be resilient.  Be aware, informed, and be flexible to handle any future.  This means being aware and informed of your business is the necessary first step to become resilient, contributing and around for the long term.

The $6.6 Trillion Dollar Gap

Tomorrow marks the 40th Anniversary of The Employee Retirement Income Security Act (ERISA) that was enacted on September 2, 1974.  The history behind ERISA is quite interesting.  At that time pensions were popular yet there was not a lot of rules in place and enough situations occurred that required legislation to be enacted.  Back then, it was thought that between pensions, social security and personal savings, this three legs of a stool would be enough to fund a person’s retirement.  Today, we know that pensions have diminished with only 20% of employees in the private sector having a pension.  Social security obligations are becoming more challenged with the Social Security Administration estimating the program can pay all promised benefits until 2033 after which point the reserves will be depleted and on going social security payroll taxes will only cover 77% of benefits.  Couple these two with the fact that individuals do not save enough either because they do not have the means, the know-how or I would dare to say the discipline you can see that individual action is needed.  The Center for Retirement Research at Boston College estimates that our nation’s “retirement income deficit” – the gap between the pension and retirement savings that American households have today versus what they should have today to maintain their standard of living in retirement – is $6.6 Trillion Dollars.  Yikes!

So this message is not for the several millions of Americans with income that is barely able to meet the demands of the basic living standards.  I am really addressing the folks who do have the means but maybe not the know-how or the discipline.  With some small changes in spending and saving habits, results will happen and that will create momentum to continue making even bigger changes.  That is how we close the gap….smalls steps at a time.

Check out my first infographic on the subject:

https://magic.piktochart.com/output/2633209-1974-vs-2014

Barron’s: Accounting Games Companies Play

Barron's (newspaper)
Barron’s (newspaper) (Photo credit: Wikipedia)

Each Saturday morning I look forward to my electronic copy of Barron’s.  It is to those who enjoy a morning cup of coffee and the paper my equivalent enjoyment.

Barron’s offers a section called “other voices” which is the ability for others to write a 1000 word essay or less with their thought provoking views.  This week Jack Adamo wrote a piece on adjusted earnings versus GAAP.  How should investors view “adjusted earnings?”

While I don’t know Jack Adamo, I can say that now days there are so many adjustments, for pension funding, mergers & acquisitions, stock compensation, severance adjustments, asset write-offs, restructuring, etc. In this fast past business environment, there are far too many of these to say that they are extraordinary.

In fact,  as I look at companies and their financial discipline, I am looking five plus years back keeping all of these adjustments included in the calculation.  It is part of the business of being an investor and owner.  As I tell my team, if we have to use “yeah, but” to explain things then we have lost the reader or listener.  As for investments, I want to keep my world as simple as I can.  In my view, a true restructure, asset write-down are decisions that were made some time back that are now having a negative consequence.  We should all be held to our decisions….both the excellent ones and the not so good ones.  Excluding what we don’t like and including what we do seems to be quite difficult for an investor to keep things straight.  I don’t know about you, but I am trying to figure out how to keep things simple.

In my view, while GAAP is not perfect at least it is consistent across the board and I can simply adjust for the known GAAP deficiencies instead of all the one-timers across the companies I am invested in.  To be clear, I invest in good well run companies with strong managers that think long term.  So this is not a knock on my investments or the CEO’s that run these companies.

Measuring short-term vs. long term results tends to produce tendencies and “one-timers” exclusion could be tenancies in this business.  As Investors we just have to be mindful of that.

One of the books on my list of reads this year:

Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports

by Howard Schilit and Jeremy Perler.

I know what you are thinking….but investing and reading are my Saturday cups of coffee.

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Top Five Wealth Building Factors

Net worth of the United States by sector as a ...
Net worth of the United States by sector as a fraction of GDP 1960-2008 (Photo credit: Wikipedia)

Today I found this Survey $25 Million Plus Investors 2012 by Spectrum Groups.  The site had some good insights that I would like to share plus I added my two cents.  Here are their top five factors:

5)  In the Right Place at the Right Time

Being in the right place at the right time.  For large investors of $25M or more, being at the right place at the right time was more important to frugality.  My two cents: Being at the right place happens probably more than you think.  Are you reading up on what is going on in the world?  Do you associate with similarly situated and minded folks as your aspiration and your interest?    I do agree being frugal is important…no doubt.  Living below your means is how you take some income and convert it into investments.  This is how you create momentum and with momentum comes the ability to cease an opportunity when the right one shows up.

4)  Taking Risk

Ah…the difference between high net worth and ultra-high net worth is the latter ranks taking risker higher than those with with investments less than $25M.  Do you know your risk tolerance level?  That is going to be important if you are going to leverage risk into your investment strategy.

3)  Smart Investing

In a recent study by Spectrum Group, millionaires, regardless of level agreed Smart Investing was the third most important factor. From my perspective, allocating your resources into asset classes and vehicles is such a critical decisions that requires thorough analysis and consideration.  If someone tells you it is a good thing and yet you know nothing about it….run away from yourself and your tendencies to give your money to someone else to invest.  Knowledge is Power and being knowledgeable about your money and investments is how you win.

2)  Education

Higher Education and Advanced Education is an important factor.  I would add to this category that we should include daily reading materials on global/geopolitical, political, and economics in order to stay knowledgeable.

1)  Hard Work

Millionaires, regardless of level, credit their wealth to hard work.  I do think, also, the harder your work the luckier you get which loops #1 to #5.

And for me, I have added an extra one…number zero, where it all begins.

0)  All People can Make Money, it Takes a GENIUS to Keep It!

Be strategic on what you make, how you spend it and what you invest in.  Live below what you need, and be respectful of the economy, it can get shaky and you have to be ready for what it will bring you.

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Warren Buffett – Value Strategy on Purchases

I am listening to an audio of the life of Warren Buffett called The Snowball. Interesting observations so far (half way through the audio book). While these are not overt observations depicted in the book, you can draw the conclusions.

For most folks, their home is where a majority of their wealth is resides. At the time Warren and his wife Suzy purchased their home where he still lives today, he called it a “Folly” understanding that his $100K investment was really a $1M in 30 years. How many of us think of our purchases of cars, homes, shoes, and vices as opportunity costs of what it could be worth in 5,10, 20 or 30 years? Something to think about when you are wanting that new car right after you got done paying off your last car payment.

My second observation is: Those with the most information and knowledge along with a humble disposition will win out over those that are ill informed and/or without humility. Today as back then, Warren reads feverishly reports about his businesses along with possible opportunities presented. How much have you read about the investments you are invested in (401K, IRA, Investment Account)? I have started this process myself. It is definitely a lot of time and effort; however anything worth having requires work…and the harder your work the luckier you get.

My third and by far the most cementing observation is it is better to invest in the “really good” at a fair price than the “really good price” for the fairly good. This applies whether you are talking about buying a business, a home, stock in a business, employees or a product/service. My experience as it relates to hiring employees is to focus on the talent and what their capabilities are in the future and not necessarily their current skills if they are less experienced. If they are more experienced, I am willing to pay more for the experience so we can yield greater results more effectively and efficiently. The saying you get what you pay for…is so true.

We can create our own wealth by taking some tips from Warren Buffett. The Less You Buy, the More You Have.

Internal Controls and Accountability – Corporate Culture Necessities

UBS Investment Bank's Offices at 299 Park Avenue
Image via Wikipedia

This week another “what is going on” happened in the financial industry.  This time it is UBS and 31-year-old UBS trader Kweku Adoboli who is accused of rogue trading with estimated losses now closer to $2.3B.  The activity had been occurring for the last three years but according to UBS it just recently uncovered the activity.  Sadly, this comes just a few years after the financial crisis of 2008 and UBS’ commitment to improve risk-controls and management system after it had a $50B write-down.

Accountability and risk management were areas of opportunity for UBS back in 2008 and part of the commitment Oswald Grübel, CEO made when he joined in 2009 to improve the risk management.  Fast-forward to September 2011, and apparently the culture is deeply rooted with folks who are working against the mantra of improved operations and risk management or so it seems.

UBS’ story is too familiar to those following the market, corporate culture and the financial industry.  In fact UBS’s story is eerily similar to Société Générale SA and Jérôme Kerviel, who racked up a $7.2B loss doing the EXACT same thing.  Kerviel was accused of making fake trades to hide his losses and repeatedly deleted those trades just before inspections, re-entering them afterward.

If you read Kerviel’s and the Soc Gen story, Kerviel will tell you that his leadership knew what was going on and he alleges even helped circumvent the system controls to allow him to make incredibly large trades given his previous successes.  Others were also involved, knew what was going on and in fact left the business shortly after the discovery.  Regulators on the Soc Gen case, The Bank of France, made 17 routine on-site investigations of Soc Gen in the two years prior to Kerviel’s capture and did not detect the matter.

So what is the answer to protect business owners, investors, customers and employees?  First off businesses today are operating in a much more complex environment and with a weaker economy.  When knowledge and money are scarce, we see the true ethical fabric of people and corporate cultures.

Knowing that we have complex and fast-paced environments, and financially weaker economics, we have to acknowledge that financial controls, IT security, risk management and a “do the right thing” culture are critical to ensuring protection of economic value.

As leaders, I would recommend the following to help create a culture of accountability and oversight:

1)  Automation of controls is good but it alone will not do it.  Human observation is critical to catch activity when systems do not.  In the cases I have been involved in; it was the person who has a funny feeling that triggered the review.

2)  Instill in all levels of management the understanding and expectation of risk management as part of their core responsibilities.

3)  View new processes, systems, people selection all with the eye of risk avoidance.  How can we ensure our data is protected, our systems are secure, our people support a culture of taking care of each other, the investors, the customers and the broader economic community?

4)  If you find a flaw, promote it, tell others so they know how it happened, how it was fixed, and that leadership is always on the lookout for other errors.

  1. If it is a system error, do a full sweep of the systems to inventory and determine if others are out there.
  2. If personnel related, investigate how rooted the infraction is on the culture.  Usually people cannot commit a crime alone…typically there are others who at least know about it if not participated in the act.  Determine the depth and breadth of the web of knowledge.

UBS, the world’s largest private wealth manager said no client’s positions were compromised.  However its reputation has been seriously harmed and with their letter to clients this weekend they attempt to provide some assurances “We fully understand this incident has caused you concern.  We too are very disappointed, and we assure you that UBS is taking the matter extremely seriously.”

Well, what about the letter to its shareholders that lost $2B in operating income, or the 3,500 employee force reduction announced in August with a value of $2B which will appear to cover the loss or the broader market that is teetering in its confidence of the financial industry and market in general?

This was not a single person acting alone in a cone.  Several people either activity or passively through lack of controls and accountability played a role in the situation.

We as leaders of companies must understand we are all connected…when we create an environment of strength, values, sustainability and corporate citizenry then we create our own destiny of greatness.  Looking away is not an option for us.  If internal controls and accountability are not on your short list as a leader….this is your wake up call to make some changes.  Too many people are counting on us.

 

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Learn from History: Transparency in Corporate Culture is Essential

Enron Complex in Houston Texas
Image via Wikipedia

I am watching a rerun of “Enron: Smartest Guys in the Room“.  Had the Stockholders had transparency into the company, the corporate culture and the legacy of leadership decisions, things would have been different.  A sad story of how so many people on the inside knew or sensed much but said little until it was too late.

If you own a business, share your culture, your decisions and your stories with your employees, your clients and your stockholders.  If you want a legacy and long term success, this is the only way to go…like any relationship…Trust is Essential.

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Corporate Culture and Steve Jobs. It is a Company Valuation Discussion.

Image representing Steve Jobs as depicted in C...
Image via CrunchBase

Steve Jobs announced his resignation and CEO replacement this week.  The market flurried on the news, articles and cable segments were plentiful on Job’s revolution of the world, his greatness, his attention to detail, how round two leadership differed from round one and whether Tim Cook could sustain the innovation and therefore the stock profitability.  Because of the news, and the market’s speculation of the future, the stock price fluctuated.

While the SEC, the Accounting Standards Board and the public expect greater transparency on the financials, this is a perfect example of where further modernization of transparent data is needed.  The data I am talking about is Corporate Culture.  What is the real corporate culture of a company?  Behind the curtains in the offices, cubicles, conference rooms and break rooms, what do we see and feel if we were employed?  Does the executive leadership down to middle managers think about creating unanticipated needs?  Do employees each feel their job has meaning, and they are curators for society creating imaginative and innovative items that will simplify people’s lives?  Are people rewarded because of not only successes but also the advice/counsel of failures through offering lessons learned?  Has leadership not only established its values but live them every day?

We are talking simple yet life altering values that make sense to everyone on the team; the words/phrase that are heartfelt and have a real connection to the team (exclusion of canned/stock words).  Corporate Culture includes leadership that shares his/her intelligence and understands its greatest creation is the team that can then imagine, create, care for and give back.  The daily belief that teams that works and plays together stays together.  Moreover, the practice of creating and sustaining relationships are key both inside and outside the company.

The stock market this week speculated whether the rein of Apple was coming to an end.  Sure, they have items in the pipeline so they still have the tail they could ride for a while.  The question that writers and business news broadcasters were asking indirectly and some directly…Was Steve Jobs the only creative sustaining genius in the room?  Were others mere followers of his vision?  I sure hope not.  That would mean the weight of the company rested solely on him.  Given the depth and breadth of Apple’s presence in the world, that would be awfully herculean of Steve Jobs and would have been an unsustainable tenure.  To ask such a question would underestimate the power of team…the Apple team.

Instead, the question the market should be asking is what is the culture of Apple?  How deeply ingrained is the culture?  How deep is their bench of employees technically, creatively and aesthetically on and off the court?  Is Tim Cook the right person to nurture the culture to not only sustain it but also grow it to a better version of itself?

The biggest question of all we should be asking ourselves is why do we not know the answer to these questions?  Why have we not broken into the thick steel vault of Corporate Culture?  Why do we not include in company and market valuation the corporate culture aspect more directly? We look at current leaders, financials, pipeline, past performance, changes in market conditions, ratios, strategy, etc for valuation.  I would propose that these elements are important in valuation; however, corporate culture is the thread that runs through them all.  It is hard to measure, because it is enigmatic…hard to define and for many hard to create, grow and transform.

When people figure out Corporate Culture is the only transformative value creator, then valuing a company will come down to those that have a good culture versus those that do not.  When looking at good cultures, then it will be which ones do shareholders believe in and more align with their values.  After all, shareholders are a part of the team.  Their contribution is not time, energy or creativity…they are contributing their hard earned dollars and trust into the team and the culture.

Want to value a company whether as a shareholder, partner or sole owner for buying or selling purposes?  Top of mind in your valuation calculation…corporate culture.  Companies that develop an amazing culture and then proudly let others know about it, will create, hold and grow more value.

As for Apple, I don’t have firsthand knowledge of their culture but I can think of 356 Billion reasons why we should know in great detail.

Your voice matters and I would love to hear what you think.

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