EclecticLip

For the book club, a decision was made to ease into the new year (at the time, 2011 was a then-new year) with a book on finances.  If for no other reason that a lot of people get stressed about money ’round the time Christmas bills arrive, and stressed employees aren’t productive employees.

J.D. Roth’s Your Money: the missing manual was chosen, because it seemed humbler (and correspondingly less hyperbolic) than other personal-finance books on the shelves.  One highlight of the book was the discussion about the hedonic treadmill, which explains why — unless you start off in abject poverty — more money doesn’t tend to make you happier.  It was refreshing to see this covered in a personal finance book, given that the book’s reading demographic probably consists of people who think having more money will, indeed, make them happier.    Another was the suggestion to make budgets simple enough that they can be followed — this spoke to me, as my own budgeting efforts have usually failed because they were so ambitiously detailed, they got too cumbersome to track.

As always, if you enjoyed the summary, please consider supporting the author by purchasing a copy of the book. 

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Your Money - the missing manual

The Corporate Lattice was chosen as the book club’s thirtieth book, in recognition of the fact that the “corporate ladder” is a poor metaphor for a companies of relatively stable size.  The situation is different for rapidly growing companies, who might need an ever-enlarging cadre of managers or directors to oversee burgeoning work teams. 

It was also recommended by a colleague who found the book useful on her return from maternity leave on a part-time basis.  Her limited availability meant she had to find a role which didn’t build directly on her career to that point, so the lattice metaphor may have helped in showing that a career move couldn’t just be “up” or “down” but sideways as well.

As a soon-to-be-father, it was surprising to find that the authors’ research found more men reporting work-life conflict than women — perhaps because companies have come to accomodate mothers’ scheduling needs, but have not yet come to appreciate the impacts of children on fathers’ availability.  Some of the book’s conclusions seemed to overreach as well, as captured in the “side notes” at the end of each chapter summary. 

As always, if you enjoyed the summary, please consider supporting the authors by purchasing a copy of the book. 

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The Corporate Lattice (summary)

Given the overriding importance of data presentation (read graphing skills) to the effectiveness of the modern “knowledge worker” it was decided that the book club would cover a book on that very subject.

Stephen Few’s Show Me The Numbers was chosen after a review of reviews (a meta-review?) on Amazon, which seemed to suggest that Edward Tufte (the giant of the field) might not be the best read for business-centric readers tied to Microsoft Excel.  Key points that stood out from the rest of the text included the “4 chunk rule” (describing the maximum limit of themes or aggregations of data people can process at a time) and the fact that when it comes to graphs, it’s the shape of the data that counts.  Not the particular values.  (If the values are critical… the data should be presented as a table!)

This review is the first (thus far at least) to be summarized in two files — a Word document and a PowerPoint slide deck — due to the benefit not just of explaining what the text was saying, but showing it visually as well.

As always, if you find the review to be useful, please consider supporting the author by purchasing the book. 

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Show Me The Numbers (summary)

Show Me The Numbers (PPT)

(originally written Jan 25)

I’m in training pretty much the whole week — which fact one of my horoscopes must’ve predicted.  I mean, there are so many of them floating out there, that one of them must’ve been right!

 

The past couple days covered FMEA, an engineering topic so obscure I’ll give the unabbreviated name (Failure Modes and Effects Analysis) and immediately move the story forward.  We were fortunate to have had a great teacher — a grizzled veteran of industry who tossed out great one-liners such as:

 

"an FMEA without action [items] is called Charmin — because if you print it on softer paper, THEN it has a function"

         (Charmin is a brand of what polite butlers would refer to as ‘bathroom tissue’)

 

"product development is a failure factory"

 

          ….as well as the sentence clause,

" — not that it ever happens here — "

 

delivered each time he described a wince-worthy product development process which had indeed, never happened here. 

 

He also described how a good FMEA meeting ideally comprises the design engineer, a reliability engineer, a facilitator, and a fourth engineer playing the role of "The Opposer".  (Or as they say in the Biblical Hebrew, "Satan".    )

 

 

It turns out this fellow was a co-op student at Ford when FMEA’s were brought there in the 1970’s, due to the tendency of the Ford Pinto to explode in rear-end collisions, as a $4-per-vehicle fix was deemed too expensive.  Though to be fair, that doesn’t account for inflation; according to an unverified internet source, such a fix would cost a whopping $20 today.  That totally changed your perspective, didn’t it? 

 

In crisis, Ford brought in experts from NASA — which had regrettably extensive experience with exploding products — who brought in this FMEA technique.  So, as our teacher wryly noted, FMEA’s are actually rocket science, ported over from the Space Program which invented them.  The very Space Program which employed a colleague on an unsuccessful Mars Lander.  (Not the one which missed the planet; the other one, which stopped phoning home.)

 

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Come to think of it, it’s turning out to be quite the lesson week for me.  At the weekend gold show — bereft of decent freebies, apart from some USB drives — the busiest company booth was from some no-name junior exploration company (read "investing lottery-ticket") which had set up a big-screen TV, broadcasting the big Packers-Bears NFL game.  During commercial breaks, the marketing rep would mute the screen and begin a spiel about how "today’s game is brought to you by XYZ Resources; we have millions in cash flow, hot properties, and you need to buy our stock" — though better-finessed than my paraphrase.  They even had a functioning popcorn-maker to feed the crowd.  Pure genius.  Pity his company has a snowball’s chance in hell.  

 

Then there was the fellow I bumped into, wearing a suit; made of brown corduroy.  See, lessons all around! 

(originally written Jan 17; posted Jan 23 as part of some backfill) 

Now that the Globe and Mail’s GlobeInvestor site has mutual fund performance data for calendar 2010, I decided to check in on ubiquitous business-channel commentator and investment guru Dennis Gartman’s performance this year.  As you may recall, his ETF (exchange traded fund — basically, a mutual fund that trades as a stock) did rather poorly last year.  Outperformed by 98.3% of mutual funds (!) in calendar 2009, I calculated his SAT-equivalent score to be 288.

This is based on the assumption that SAT scores follow a normal distribution, and are scored such that the median (50th percentile) scores 500, with each standard deviation representing 100 points.  As such, scoring in this system would look like:

• 99.8th percentile: 800    (top 0.2%)
• 98th percentile:    700    (top 2%)
• 84th percentile:    600    (top 16%)
• 50th percentile:    500
• 16th percentile:    400    (bottom 16%)
•   2nd percentile:   300    (bottom 2%)
•   0th percentile:    200    (bottom 0.2%)

The good news is that Dennis did much better than last year; indeed, his shareholders actually made money! 

The bad news is that his 3.8% return for shareholders put him in the 18th percentile.  That is, 82% of mutual funds beat him.  (9452 of the 11577 GlobeInvestor tracked.) 

As such, his SAT-equivalent score for 2010 is…  410.
 

At this time I should note that investments are a poor reflection of a person’s financial prowess — last I checked, Mr. Gartman convinces people to pay $400/month for his advice, despite his track record!  Clearly, he’s got amazing skills.  Or at least, chutzpah.  …can you imagine how much he’d charge if he actually outperformed the market? 

Further context:

- half of all mutual funds tracked by GlobeInvestor gained 8% or more in 2010 (SAT-equivalent of 500).

- the Toronto Stock Exchange Index gained 14.2%, which would’ve placed it among the top 16% of mutual funds (1810 / 11577).  This is consistent with the rule-of-thumb that only 20% of mutual funds beat the index in any given year.

- because his ETF started at $10 in 2009 and stood at about $9.33 at end-2010, Gartman’s investors lost about 7% in a two-year period during which the TSX index rose 46% (from 9234 to 13530; and that doesn’t include dividends).  So over the past two years, the Gartman portfolio has underperformed the index by 50%!  Though a pecuniary pundit of Mr. Gartman’s self-assurance would surely dismiss that as a temporary underperformance of “only” 50%. 

A long-time proponent of the “A3″ reporting format (which aims to summarize a problem and its solution in a roughly 11″ x17″ sheet of paper) it was a delight to cover Understanding A3 Thinking in the book club. 

Having authored some epic reports and PowerPoint slide decks in my time, the prospect of condensing findings into a single – albeit large – sheet of paper, immediately piqued my interest.  It also brought to mind the quotation by Antoine de Saint-Exupery:

Perfection is achieved, not when there is noting more to add, but when there is nothing more to take away.
 

Consider that it’s standard form to report out insights in essay format, with complete sentences; this is as inefficient as incandescent lighting.  In Edison’s invention, only a few percent of the energy output is light (the rest is waste heat).  In a technical report I’d be surprised if more than 20% of the words relate to the discoveries; I’d bet most of the words are “filler” required to make the communication of information, conform to grammatical rules. 

While Understanding A3 Thinking did cover the guidelines Toyota uses for A3 reports (e.g. emphasizing visual methods, instead of verbal methods, for explanation) it suggested the overarching value was to ingrain rigorous problem-solving discipline in the employees.  Over the course of the problem-solving, engineers submit A3’s to their supervisors and other senior staff, who provide guidance and suggestions, both on problem-solving approach and data presentation. 

As such, by the time an A3 report is finished, it will have gone through extensive “peer review” (or “superiors’ review”) which helps improve the quality of the findings, the presentation, and the problem-solving skills of the author — who may in turn pass these best practises to future junior employees.
As always, if you enjoy the book summary, please consider supporting the authors by purchasing a copy. 

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Understanding A3 Thinking - summary

Hmm… life’s busy-ness sure didn’t return to normal, there…

Anyways, here’s the 27th book we covered in the work business book club: Financial Intelligence.  It was chosen because of the feeling that a little financial literacy could probably go a long way for engineers and other technical types.  The fact that the question “what’s EBITDA?” recurs in all of our business-update meetings also played a role. 

One of the books requiring a longer summary (which clocks in at 12 pages!) the biggest takeaway for the reviewer was that accounting is an exact science… based on rough assumptions.  I didn’t appreciate the challenges involved in trying to represent a company’s financial situation, when any number of line items may need:

• to be amortized / depreciated (e.g. capital costs for equipment, where you might need to estimate how long equipment will last before obsolescence)
• to be matched with corresponding revenues or expenses  (e.g. travelling and other costs for salespeople should be reported only when a sale is actually made, or the customer definitely spurns you)

As always, if you find the summary useful, please consider supporting the authors by purchasing the book. 

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Financial Intelligence - summary

[originally written July 28.  Posted Nov 18.] 

While stuck, iPodless, in a near-interminable supermarket lineup the other week, I swallowed my dignity and perused the celebrity magazines near the cash register.  And you know what?  They’re actually pretty good!  While I’m veering into fiction, the fashionista in line behind me complimented me on my Vibram Five Finger shoes — the first footwear I ever bought to make a fashion misstatement.  I’m planning to take casual Fridays to the next level. 

Read the rest of this entry »

(originally written Nov 2; posted Nov 16) 

It looks like the Democrats are going to get clobbered in next week’s tomorrow’s today’s US elections.  Economic malaise tends to do this to governing parties, which is one reason currency devaluation is the policy-du-jour: if country A can make its currency cheaper, it becomes more competitive and can export goods (and unemployment!) to countries B, C and D, whose currencies remain more expensive.  It’s this kind of race to the bottom which has given gold aficionados their current decade in the sun.  Of course, though Hemingway never lived to write about it, the sun also sets… 

The Tea Party’s emergence has been an interesting but predictable phenomenon.  The stagnation in American incomes for the past generation has finally hit a boiling point (what took so long?).  Increased prosperity has largely been confined to the top 1% — and even then mainly the top 0.1% — of income earners in the population; those nice folks whose job titles begin with “Chief” and end with “Officer”. 

In many cases, union-busting concessions levied in the name of improving competitiveness went straight into C-suite compensation: “trickle-up economics”, as it were.  I don’t have the American numbers handy, but here are some Canadian ones.  Perhaps one day, left-leaning parties will realize that they’ll get more support if they confine talk of tax increases to the very, very topmost folks.  Noblesse oblige, and all that.

Read the rest of this entry »

Hmm… missed out a few weeks there.  Life’s busy-ness has only now returned to normalcy. 

Getting to Yes was chosen as the book club’s 26th volume because it deals with negotiations, which, like it or not, play a pivotal role in business.  It was expected that book club members’ careers would benefit from knowing a bit about negotiating, whether they were arranging supplier pricing, defining multi-firm partnerships, or in particular, agitating for higher pay & benefits. 

The book’s emphatic message that negotiators should focus on interests instead of positions, was probably the main takeaway — the one-sentence summary.  One book club member did offer that the BATNA concept was most pivotal in their own supplier dealings.  In short, he found it difficult working with suppliers who had a strong BATNA (Best Alternative To Negotiated Agreement)… because the status quo worked well enough for them; they had no driving incentive to negotiate a new arrangement.

As always, if you enjoy the book summary, please consider supporting the authors by purchasing a copy of the book. 

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Getting to Yes (summary)