Learning is a Journey Not a Destination

“Experience is the best teacher, but a fool will learn from no other.” - Benjamin Franklin (American Statesman, Scientist, Philosopher, Printer, Writer and Inventor. 1706-1790)

Here is an awesome post from a new blog I have been reading lately called Six Pixels of Separation. The post is on the importance of learning from everything! I think it ties in nicely with the BadskiBlog theme of a fairly average cranium looking to expand. I know that my blogs I follow list is getting fairly ridiculous but there is a lot of good stuff out there and I have to show the love. Here are some excerpts of the quality advice from the post above.

Last week, there was a Blog post here titled, 10 New Business Books Worth Checking Out. As I was sorting through which books to list, it was interesting to read the reviews surrounding these titles (both on the book retail websites and on Blogs, Twitter feeds, etc...). You could tell which reviewers were regular people (the silent majority, the mass population, etc...) and which were the ones who were neck-deep into New Media (those with their own Blogs, thousands of followers on Twitter, etc...). It should come as no shock, that when it comes to Bloggers we like to eat our own. We're quick to judge, comment and attack, but in seeing countless semi-nice reviews with lines like, "there is nothing new in this book" or "I didn't really learn anything I didn't already know," it wound up becoming somewhat comical.

The real experts, the ones who really are superstars don't do this.

After spending countless years in the music industry, it was plain as day who would be a successful artist/musician and who would disappear quickly into obscurity. The real geniuses, the real experts and the real artists were the ones who knew this one golden rule: you can learn something new from anyone at any time. The trick is in leaving yourself open to this experience. The trick is in always being a student.

Taking Good From The Bad: The Emergence of Entrepreneur MBA's

During the recession of the last year or so all the chicken little's have been screaming that the sky is falling. It was supposedly the end of the world that the market took a dive. I must admit that things get a little scary when banks start failing, and even scarier when we as taxpayers are left to foot the bill while the government cherry picks which companies are "too big to fail" and which aren't. However I have written before that not only are economic downturns a perpetual reality but that they are a necessity. Not only did the recession present one of the greatest buying opportunities of our time, but it also has changed behaviors on a grand scale that would not have changed without of little push from market forces (hint: consumer debt, lending practices, etc.). However, not all the fallout from the downturn is arm twisting change. I found this article in BusinessWeek regarding the increase in start up companies coming out of MBA programs.

Business schools have quietly become the back door to starting your own business. Once considered merely the hallway to a high-salaried career with an investment banking or consulting firm, business schools are now drawing attention from those
tinkering in their garages and hoping to find the next big thing. Through virtual and traditional business incubators, business schools are helping students launch startups with everything from fund-raising and networking to finding office space and interns.

Innovation and entrepreneurship have always been the driving force behind the small business fueled American growth. It is great to see that a positive outcome can come from such a seemingly negative financial period. These incubators and business plan competitions that are springing up at campuses nationwide are really cool. When I was taking an innovations class
at the United States Air Force Academy (yes, even they are teaching innovation) we had the CEO of an incubator in Boulder come and talk about what they do and it was really impressive. They also talked about the business plan competitions and a few groups even went and participated. I tend not to regret too many things in life but I really wish I would have sucked it up and participated in one of those competitions. I did get the chance to do a mock competition where prominent startup figures in the area came to our department and served as judges alongside faculty as guest judges which served as our final grade in the class. Great experience that I am sure it magnified tremendously with the opportunity to actually carry out your business plan and even be given money to make it happen.

"Rather than creating the next generation of employees, we want to create the next generation of employers," says Ted Zoller, associate professor and executive director of the Center for Entrepreneurship at the UNC Kenan-Flagler Business School.

As bonuses disappear and pink slips fly in increasing numbers, entrepreneurship-the nitty-gritty kind where men and women with dreams roll up their sleeves, get their hands dirty, and work hard to make something of nothing-is becoming the new MBA lifestyle. Business schools are impressing upon students that taking on this new ideology behooves all MBAs, even those
in traditional industries. "Entrepreneur is not just a job title," says Arthur A. Boni, director of the Donald H. Jones Center for Entrepreneurship at Tepper. "It's a way of thinking and acting. All people are required to innovate, whether in a startup or a big company. Especially in a recession, everybody needs to be more innovative."

Well said. In the new era of business where the possibilities for exploiting and creating new markets are seemingly endless, there is so much more to getting a first class business education than accounting and organizational culture. It is great to see that although the last year has been painful for many, it is in fact bettering the future of the way we do business.

Personal MBA Update - How To Read A Financial Report

How to Read A Financial Report by John A. Tracy – Accounting sounds about as fun as watching infomercials, but I must say that I didn’t struggle getting through this book. In fact I spent most of the book thinking that I could have learned more from this book than my college accounting courses. Instead of focusing on computing missing data from a balance sheet the book focused on the most valuable thing regarding being able to read statements; being able to see how they are interconnected. Much like a foreign language, I am sure that I will forget many of the lessons of this book if I do not use them on a daily basis. However I think that I will be much more adept at intuitively following data from the income statement all the way through to the statement of cash flows, and in doing so will be able to draw conclusions about the financial condition of a business. The book wasn’t very long which helped make it an easy read. But it was the fact that it had a great number of simple example statements that always focused on how the statements work together that made it a very useful book. Another book down on my Personal MBA journey that I would definitely recommend to anyone seeking a life in the business world. One thing I learned in sports is to always focus on the fundamentals no matter how far along you go, and there is nothing more fundamental in business than understanding the basic language of business known as financial accounting.

Lurking somewhere amidst all the figures in a financial report is vitally important information about where a company has been and where it is headed. But without a guide to isolate and interpret those numbers, the dizzying array of columns and rows doesn't add up to a hill of beans. That's why thousands of professionals and savvy individuals have referred to this bestselling resource that shows anyone how to make sense of all those numbers. If you're someone who works with financial reports or needs to understand them-but have neither the time nor the need for an in-depth knowledge of accounting-this book will help you cut through the maze of accounting information to find out what those numbers really mean. It steers you quickly and painlessly through the basic accounting concepts and line-by-line explanations of the basic financial statement. Complete with a visual guide that leads you through the intricacies of financial reporting, How to Read a Financial Report shows you how the three essential parts of every financial report-the balance sheet, the income statement, and the cash flow statement-fit together and what it all means to you and your company. Updated throughout, this new edition addresses the many changes in the financial world in the past few years, including new pronouncements of the Financial Accounting Standards Board, new income tax laws, and emerging financial reporting problems. Also, all exhibits have been made easier to
follow.

Here are my notes from the book. As I stated before they would be a lot more beneficial if they had the actual example statements and illustrations included but I guess you will just have to go read the book!

Starting with Cash Flows:
- Cash inflows and outflows are the heartbeat of every business
- 2 groups of cash flows: 1. Cash flows of making profit (inflows from sales and outflows from expenses) 2. Cash flows of the business (raising capital, investing capital, distributing profits)
- 2 most important things a cash flow summary won’t tell you: 1. The profit earned for the period 2. The financial condition of the business
- Accrual based accounting recognizes receivables from sales on credit and liabilities for unpaid expenses to determine profit measure for that period

Introducing the Balance Sheet and Income Statement:
- The financial condition of a company is communicated in an accounting report called the balance sheet and profit performance is presented in the income statement
- Income statement summarizes revenue and expenses for a period of time
- The balance sheets liabilities have first claim on assets that’s why they are listed above owners equity
- Balance sheet is prepared on the last day of the income statement period

Profit Isn’t Everything:
- Prevent cash shortages that cause default on liabilities
- Threefold: 1. Earning profit 2. Controlling assets and liabilities 3. Preventing cash outs
- The balance sheet, income statement, and statement of cash flows are all interconnected and in order to effectively manage the business you must understand how they work together

Sales Revenue and Accounts Receivable:
- Extending credit to customers creates a cash inflow lag. The accounts receivable balance is the amount of this lag
- You have fast slow and average payoff times with credit. The average sales credit period determines the size of accounts receivable
- Exhibit page 26
- Accounts turnover ratio page 30 is most meaningful when used to determine how long it takes to turn receivables into cash
- If you turnover into cash faster it is less you have to borrow at 8% or the owners could have invested less. Capital has a COST!

Cost of Goods Sold and Inventory:
- Gross margin is the starting point for earning adequate bottom line profit
- Sell products for enough gross margin so all other business expenses can be covered and still have a remainder for profit
- Inventory holding period determines the size of inventory relative to annual costs of goods sold

Inventory and Accounts Payable:
- none

Operating Expenses and Accounts Payable:
- Some operating expenses have to be recorded before they are paid
- Examples on page 44

Operating Expenses and Prepaid Expenses:
- Example of prepaid expense is insurance premium
- Used to show prepaid expense but delay recording it in expenses

Long Term Operating Assets: Depreciation and Amortization Expense:
- Financial accounting doesn’t just keep track of expenses it is concerned with correct timing of expenses
- Matching expenses with sales revenue
- Matching expenses with the correct period
- Depreciation in financial accounting means cost allocation
- Leased assets are not reported
- Accounting for fixed assets does not attempt to record changes in current replacement costs. It is a cost recovery based method not mark to market
- There are many reasons to pay more for a company than the sum of its identifiable assets. The excess is called goodwill.
- Writing off intangible assets is called Amortization

Accruing Unpaid Operating Expenses and Interest Expense:
- Notes payable pay interest where accounts payable do not

Income Tax and Income Tax Payable:
- Tax not paid from prior year goes on balance sheet as a payable liability

Net Income and Retained Earnings: Earnings Per Share:
- Retained earnings is the cumulative result of all the years it has been in business minus dividends
- Many people think it is an asset or even cash. This is not true cash is also reported in the balance sheet
- Only public companies must report EPS

Cash Flow From Profit and Loss:
- Why doesn’t profit equal cash flow?
- Business managers have double duty: earn a profit and convert profit into cash as soon as possible
- 8 changes in operating assets and liabilities that determine cash flow from profit for year: 1. Accounts receivable 2. Inventory 3. Prepaid expenses 4. Depreciation 5. Amortization 6. Accounts payable 7. Accrued expense 8. Income tax payable
- Cash flow adjustments to net income: Increase in operating assets cause decrease in cash flow from profit and decreases in operating assets cause increases in cash flow from profit. Increases in operating liabilities help cash flow from profit. Decreases in operating liabilities decrease cash flow from profit
- Profit generates cash flow, cash flow doesn’t generate profit

Cash flows from Investing and Financing Activities:
- Capital expenditures area a bet on the future

Growth, Decline, and Cash Flow:
- 3 major pieces to cash flow: Depreciation and amortization, operating assets, operating liabilities
- Growth doesn’t instantly boost cash flow

Footnotes, The Fine Print in Financial Reports:
- Footnotes are an essential supplement to financial statements
- Managers have to decide how much to disclose in footnotes above minimum standards

CPA’s Audits and Audit Failures:
- Financial Statements can be misleading for two major reasons: 1. Honest mistakes 2. Deliberate dishonesty
- Audits done by independent CPAs are supposed to prevent this
- Audits add credibility but it is an opinion so be careful!
- You want a clean unqualified audit
- qualified is good except for…..
- Adverse opinion is that the statement is misleading
- CPA may also withdraw

Choosing Accounting Methods and Quality of Earnings:
- 6 basic steps in the accounting process of a business:
1. Identify and analyze all transactions and operations during the period
2. Determine the correct accounting according to GAAP
3. Record the transactions, operations, and development
4. At the end of the period assemble the accounts for sales, revenue, expenses, assets, liabilities, and owners equity making sure they’re up to date and accurate
5. Prepare financial statements for period with footnotes
6. Distribute to those entitled a copy
- Once a business chooses an accounting method it cannot flip-flop
- Managers can massage the numbers by timing things like expenditures
- Cooking the books means sales revenue is recorded when no sales were made
- Quality of earnings refers to the quality of accounting methods to record profit
- Look to cash flows because it is the hardest to manipulate

Making and Changing Accounting Standards:
- Financial statement users are interested in 3 main things: 1. Profit or loss performance 2. Financial condition particularly the solvency 3. Capitalization structure or ownership structure
- Recording stock options can cause many problems. It is a big debate whether or not to record them

Cost of Goods Sold Conundrum:
- 3 methods: 1. Average cost method 2. LIFO method 3. FIFO method
- The 3 methods affect inventory and most importantly gross margins

Depreciation Dilemmas:
- Accelerated deductions have higher depreciation and therefore lower taxes in the early years
- Accelerated depreciation coupled with shorter depreciation schedules than actual useful life encourages capital investment
- Accelerated or straight line method
- Chart comparisons on page 165
- Only straight line is used for Amortization

Ratios for Creditors and Investors:
- Current ratio is used to test short term liability paying ability of a business
- Current ratio = total current assets/total current liabilities
- Should be 2 to 1 or higher
- The acid test ratio or quick ratio only includes cash and liquid assets
- Quick ratio = cash +accounts receivable/total current liabilities
- Should be 1 to 1 or higher
- Debt to equity ratio measures how prudently they are using their debt
- Debt to equity = liabilities/stockholder equity
- Most below a 1 to 1 ratio
- Times interest earned ratio is the ability to pay interest from earnings
- Times interest earned ratio = operating earnings/interest expense
- Should be higher than a 1 to 1
- Return on sales ratio = net income/sales revenue
- Profit divided by capital invested is ROI
- Net income by owners equity is ROE
- Operating earnings by assets is ROA
- Net income for common stockholders/Total number of outstanding shares = EPS
- Earnings yield and market cap
- Earnings yield is reciprocal of P/E ratio is a E/P = EPS/Price
- Market value X outstanding shares = market capitalization

A Look Inside Management Accounting:
- Internal accounting or managerial accounting is wide open without many rules
- Helps to determine variables and ways to reach goals

A Few Parting Comments:
- Are financial statements reliable and trustworthy? Yes most are.
- Are some misleading and fraudulent? Yes unfortunately.
- Is it worth your time to read statements and compute ratios? Doubtful. Market prices reflect all publicly available information.
- Why read them then? To know what you are getting into.
- Is there any quick litmus test? Yes. Percent increase/decrease in sales revenue and test that vs. bottom line profit.
- Do conservative accounting methods cause conservative market values? No not necessarily
- Do financial statements report the truth the whole truth and nothing but the truth? With regards to profit yes. Disclosure…..no.
- Does a financial report explain the basic profit making strategy? Not really.
- Do financial statements report the value of the business? No it doesn’t report what it should be on the auction block.
- Should financial statements be taken at face value when buying a business? No a lot more goes into it.

Obama's War and The Fixer

Obama’s War. The title I imagine is very controversial to some, I know it piqued my interest since we have been at war for 8 years, the majority of which he was not Commander in Chief. Although I think that the title is more a realization that no matter what happened in the past the war is now in the hands of our Commander in Chief and therefore he is ultimately responsible to devise a strategy that ends the conflict. I must say I was pleasantly surprised that despite what many would consider a controversial title the documentary was objective, insightful, and very daring both in the footage obtained in harm’s way and daring via the questions asked of the true key players in Operation Enduring Freedom. Fellow classmate and blogger Cameron Schaefer provides some very well written and intelligent discussion on his blog, and recently I have adopted him as a pseudo information funnel regarding our nation’s war strategy (or lack thereof depending on your view). He highly recommended Obama’s War and I must thank him for doing so. The documentary coupled with my watching Charlie Wilson’s War last week have, sadly I must admit, greatly expanded my awareness of not only how we got into the crisis at hand, but the immense difficulties we face strategically moving forward. Below is the summary of the 55 minute masterpiece concocted by PBS. I like my adopted Afghanistan Guru friend highly recommend watching this show, especially if you are currently serving and will likely be headed over there.

In Obama's War, veteran correspondent Martin Smith travels across Afghanistan and Pakistan to see first-hand how the president's new strategy is taking shape, delivering vivid, on-the-ground reporting from this eight-year-old war's many fronts. Through interviews with top generals, diplomats and government officials, Smith also reports the internal debates over President Obama's grand attempt to combat terrorism at its roots.

"What we found on the ground was a huge exercise in nation building," says Smith. "The concept's become a bit of a dirty word, but that's what this is. We started with the goal of eliminating Al Qaeda, and now we've wound up with the immense task of re-engineering two nations."

The brunt of the work is falling on rank-and-file soldiers, and nowhere is it more difficult than in the dusty, unforgiving landscape of Helmand province, the Taliban stronghold in southern Afghanistan, where FRONTLINE embedded with Echo Company, 2nd Battalion, 8th Marine Regiment. Since the Marines' arrival in July, Helmand has become the most lethal battlefield in Afghanistan. But FRONTLINE found the Marines trying to act as armed diplomats, attempting to build the necessary trust for badly needed economic development.

"It's trying to change the culture of the organization," Gen. Stanley McChrystal, the top commander in Afghanistan, tells FRONTLINE of the administration's plan. "At the end of the day, our best counterinsurgents are going to be young sergeants who just have an ability to deal with people. We've got to give them the flexibility to make decisions."

Even as American soldiers struggle to make progress in Afghanistan village by village, equally vexing challenges remain across the border in Pakistan. "In Afghanistan we know what to do; we just don't know if we have the resources or the time available to do it," David Kilcullen, a leading counterinsurgency expert, tells FRONTLINE. "The problem in Pakistan is we're not really sure what to do."

When FRONTLINE confronts the Pakistani army about its reluctance to take out key Taliban leaders, the military's chief spokesman, Gen. Athar Abbas, argues that the accusations are misplaced. There is no truth, he claims, that insurgents stage attacks on American forces from the Pakistani side of the border. "They operate from Afghanistan. If somebody claims that everything is happening from this side of the border, I am sorry, this is misplaced, and we refute it."

Barred from sending troops across the border, the United States is left with few good options. No quick fix will solve Pakistan. "If we have a strategy in Pakistan," says George Packer, a staff writer at The New Yorker, "it's to build up the civilian government to the point where it can be a kind of counterbalance to the military and begin to reorient their own sense of their destiny. Is that even thinkable for a foreign power to do? Even as I say it, I think, why do we think we could even begin to accomplish that?"

CLICK HERE TO WATCH "OBAMA'S WAR"

Update: After I originally drafted this post I watch and HBO on demand documentary entitled "Fixer." A fixer is an individual who facilitates interaction between journalists and those they are out to capture on film. In this case the fixer was a twenty four year old Afghan named Ajmal. The documentary shows Ajmal and his American journalist counterpart interviewing Taliban members, corrupt Afghan elected officials, and terrified commoners. Between the candid glimpses of daily Afghan life and the candid real discussion of the fixer and journalist it is an incredibly powerful documentary for those interested in what is going on overseas. The documentary eventually shifts to tell how Ajmal along with an Italian journalist were captured by the Taliban. The Taliban (alleged by many including the makers of this documentary to be puppets of Pakistan) eventually negotiate a release with Karzai. While the Italian is celebrating his return Ajmal is never actually released and is eventually murdered by decapitation. The film shows Ajmal's father and his disgust for his government. He is appalled that Karzai would negotiate with terrorists to release a foreigner while they sit idly by while his son whose rights the government has sworn to protect are violated. The true value of the film, like Obama's War above, is the illustration of the difficult political interactions of all the players besides the Taliban. Ajmal in a very powerful scene in the film is lecturing his elder American journalist, who is supposed to be an expert on the conflict, that this is not a war against the Taliban. Ajmal states that it is an "international war." Pakistan, the US, and Afghanistan are deeply intertwined in every consequence of this conflict and to see it unfold with Ajmal's tale as a backdrop is truly incredible. I have included a trailer below.

The Dollar And The Gun

You are in a conversation with an acquaintance. The conversation turns to politics. You make it clear you are for capitalism, laissez-faire capitalism. Eloquently, you explain the case for capitalism in terms of man’s rights, the banning of physical force and the limitation of government to the function of protecting individual freedom. It seems clear, simple, unanswerable.

But instead of seeing the “light-bulb look” on the face of your acquaintance, you see shock, bewilderment, antagonism. At the first opportunity, he rushes to object:

"But government has to protect helpless consumers from the power wielded by huge multinational corporations.”

Or: “Freedom is impossible under strict capitalism: people must have jobs in order to live, and they are therefore forced to accept the employer’s terms.”

Or: “In a complex industrial society such as ours, government planning must replace the anarchy of the marketplace.”

Does any of this sound familiar? It is a battle that is all but new. In fact it represents the fictional battle that ensues throughout one of the greatest pieces of literature ever written (my opinion). The literature I am speaking of is Atlas Shrugged by Ayn Rand. The book is controversial, however in my opinion I think that if you put your philosophical beliefs aside you will appreciate the mastery with which Rand has interwoven politics, business, philosophy, love, religion, etc all within an amazingly entertaining fictional tale.

I recently began following The Ayn Rand Center on Twitter which posts publications in line with Rand's philosophy. One that I read the other day was entitled "The Dollar and the Gun." It was written by Harry Binswanger as published in Why Businessmen Need Philosophy back in 1983. The work centers on many of the central premises of Atlas Shrugged, specifically the distinction between economic and political power.

"Political power” refers to the power of government. The special nature of that power is what differentiates government from all other social institutions. That which makes government government, its essential attribute, is its monopoly on the use of physical force. Only a government can make laws—i.e., rules of social conduct backed up by physical force. A “government” lacking the power to use force is not a government at all, but some sort of ugly pretense, like the United Nations.

A non-governmental organization can make rules, pass resolutions, etc., but these are not laws precisely because they cannot be enforced on those who choose not to deal with that organization. The penalty for breaking the rules of e.g., a fraternal organization is expulsion from the association. The penalty for breaking the law is fines, imprisonment, and ultimately, death. The symbol of political power is a gun.

A proper government points that gun only at those who violate individual rights, to answer the physical force they have initiated, but it is a gun nonetheless.

Economic power, on the other hand, is the ability to produce material values and offer them for sale. E.g., the power of Big Oil is the power to discover, drill and bring to market a large amount of oil. Economic power lies in assets—i.e., the factors of production, the inventory and the cash possessed by businesses. The symbol of economic power is the dollar.

A business can only make you an offer, thereby expanding the possibilities open to you. The alternative a business presents you with in a free market is: “Increase your well-being by trading with us, or go your own way.” The alternative a government, or any force-user, presents you with is: “Do as we order, or forfeit your liberty, property or life.”

As Ayn Rand wrote, “economic power is exercised by means of a positive, by offering men a reward, an incentive, a payment, a value; political power is exercised by means of a negative, by the threat of punishment, injury, imprisonment, destruction. The businessman’s tool is values; the bureaucrat’s tool is fear.” (Capitalism: The Unknown Ideal, p. 48)

Whether you agree wholeheartedly or are completely opposed to the above line of thinking, the argument should be had. As I was reading through a second time I came across the excerpt below.

In today’s depressed economy where “obscene profits” have turned into (lovely?) losses, the anti-business theme is being played in a new key: the target has shifted to foreign businesses. The equation of the dollar and the gun remains, however. To wit: “Senator Paul Tsongas (D-Massachusetts) believes that the hightechnology challenge from Japan is as serious to the United States’ long-term security as the defense threat posed by the Soviet Union.” (Infoworld, May 30, 1983)

The Soviet Union threatens us with nuclear annihilation. The Japanese “threaten” us with the opportunity to buy cheap, reliable computer parts.

One could point out that the law of comparative advantage, a cornerstone of economic science, dictates that one country’s superior productive ability can only benefit all those with whom it trades; that if Japanese firms can produce computer parts at lower cost than U.S. firms can, then our firms will necessarily have a comparative advantage in some other area of production; that any government intervention to protect some U.S. firms from foreign competition sacrifices other U.S. firms and the public at large to inefficiency, lowering our standard of living. But all this would be lost on the kind of mentality that equates imports with bombs.

Does that sound familiar? It should. Because we aren't far off from the same situation today. Just replace Japan's cheap products with China and add in cheap labor from India and it is one and the same. I really enjoyed the way in which the author employed a Socratic method-esque approach to debating common accusations against capitalism.

It is true that laws protecting rights are a precondition for the production of wealth, but a precondition of production is not production. In enforcing proper laws, the government does not produce anything—it merely protects the productive activities performed by private individuals. Guns cannot create wealth. When a policeman prevents a mugger from stealing your wallet, no value is created; you are left intact, but no better off.

The absence of a loss is not a gain. Ignoring that simple fact is involved in the attempt to portray the government’s gun as a positive, creative factor. For instance, tax relief is viewed as if it were government encouragement. In reality, tax breaks for schools, churches, homeowners, etc., are reduced penalties, not support. But socialist Michael Harrington writes:

The Internal Revenue Code is a perverse welfare system that hands out $77 billion a year, primarily to the rich. The special treatment accorded to capital gains results in an annual government benefit of $14 billion for high rollers on the stock exchange. (Saturday Review, November 1972)

Harrington equates being forced to surrender to the IRS one quarter of your earnings (the tax rate for capital gains), with being given a positive benefit by the government. After all, the IRS could have taken it all.

Just as the absence of a loss is not a gain, so the absence of a gain is not a loss. When government handouts are reduced, that is not “balancing the budget on the backs of the poor”—it is a reduction in the extent to which the poor are balanced on the backs of the rest of us.

And:

I will conclude with another scenario. Imagine that you survive a shipwreck and have to steer your lifeboat to one of two desert islands where you will have to remain for several years. On each island there is one inhabitant. The western island is the property of a retired multi-millionaire, who lives there in high luxury, with a mansion, two swimming pools and all the accoutrements of great wealth. The eastern island is inhabited by a propertyless beachcomber who lives in rags and eats whatever fruit and fish he can scrounge up. Let’s add that the millionaire is an egoist and strict capitalist, while the beachcomber is a saint of altruism who will gladly share his mud hut with you. Would you, or anyone, head east to escape being “exploited” by the millionaire’s economic power?

As I said earlier, you may not agree with the premise of the writing but I definitely recommend reading the article in its entirety here. I would love to hear comments as this is a polarizing topic amongst many.

Personal MBA Update - Ready, Fire, Aim

The Personal MBA Update - Ready, Fire, Aim by Michael Masterson: This book was awesome. Plain and simple. It was one of the best books I have read on the topic of entrepreneurship. It wasn't just a touchy feely go out and do it type book. The book had great lessons and practical advice on how to best achieve entrepreneurial success, not just as a start up but as you mature your business. I particularly like the books focus on selling, marketing, and strategies for increasing profits. I found myself testing my own random business ideas against the criteria and recipes for success of this book to see if I truly have good ideas and more importantly if the ideas have the potential to make money. For me I felt as though I took more out of the first stage entrepreneur advice, but that is probably because that is the stage I am trying to reach. I think that the book could prove valuable to business owners and executives alike as it also offers practical advice for those seeking to grow their business and move it into the next stage of business maturity. This is one of those books that I may not remember all the great lessons packed inside, but when I go to start a business the book will be one of the first resources I grab to ensure that I am focusing my efforts for success.

Whether you're thinking about starting a new business or growing an existing one, Ready, Fire, Aim has what you need to succeed in your entrepreneurial endeavors. In it, Masterson shares the knowledge he has gained from creating and expanding numerous businesses and outlines a focused strategy for guiding a small business through the four stages of entrepreneurial growth. Along the way, Masterson teaches you the different skills needed in order to excel in this dynamic environment.

While some of the concepts covered may seem novel, all of them have been proven to work time and again. Among other things, you'll discover:

Why selling is your first business priority and the one thing you should never stop doing

The handful of numbers that are critical to every business

When to cut your losses short and when to let your winners run

The front-end/back-end method of doubling profits easily

Why having a Plan B is as important as Plan A, and when and how to create it

The difference between pushers, thinkers, organizers, and sellers, and how to attract the ones you need for your business

Over the course of his remarkably successful career, Michael Masterson has helped start and develop dozens of multimillion-dollar businesses, including one whose revenues exceeded $135 million and another still growing at $300 million. Now, with Ready, Fire, Aim, he'll show you how to make your way to the top by designing powerful marketing campaigns that will regularly outsell your competitors; implementing innovative operational procedures that will reduce costs and hassles; and using the revolutionary power of the Internet to reduce customer complaints and increase profits.

To start and grow multimillion-dollar businesses over and over again you have to master certain skills. Ready, Fire, Aim reveals what those skills are and shows you how to quickly master them. Filled with in-depth insights and expert advice, this remarkable guide for entrepreneurs gives you a blueprint for business and financial success that will allow you to enjoy life to its fullest.

Here are my notes from the book:

Part I: Being all that you can be
Introduction: The very best job in the world:
- Three most important decisions in life are 1. what you do 2. where you do it 3. with whom you do it Plus #4 when you work and when you don't
- no consideration is more important that who you work with

Getting to the next level:
- The four stages of business development: 1. Starting out zero to $1M 2. Fast growth 1 to $10M 3. Adolescent stage 10 to $50M 4. Maturing state 50 to $300M
- Stage I:
main problem - you don't really know what you are doing
main challenge - making the first profitable sale
main opportunity - achieving a minimum critical mass of customers
- Stage 2:
main problem - you are only breaking even or losing money
main challenge - creating many additional profitable products quickly
main opportunity - increasing cash flow and becoming profitable
- Stage 3:
main problem - your systems are strained and customers are noticing
main challenge - turning the chaos into order
main opportunity - learning how to establish useful protocols and manage processes and procedures
- Stage 4:
main problem - sales slow down or stall
main challenge - becoming entrepreneurial again
main opportunity - getting the business to run itself

Why Employee Size Matters:
- 4 Stages: 1-7-49-344 Employees

Becoming a five star business genius:
- For a business to grow to $100M-$300M it must be good if not great in these areas: 1. coming up with new and useful product ideas 2. selling those products profitably 3. managing processes and procedures efficiently 4. finding great employees to do the work 5. getting people, procedures, products, and promotions going
- To successfully start a business all you need is to 1. know how to make a sale 2. be able to put that sales process into action
- Natural inclinations of an entrepreneur: 1. They are attracted to challenges 2. they enjoy being in leadership roles 3. they are passionate about their ideas
- Natural skill of entrepreneurs: 1. well organized 2. good analytical thinkers 3. they are good at sales 4. good at taking initiative
1. coming up with ideas
2. selling products
3. managing systems
4. developing superstars
5. taking action

Part II: Stage One: Infancy
The supremacy of selling:
- without sales it is very hard to sustain an ongoing business
- Jim Koch and the Sam Adams story
- 4 aspects of entrepreneurial success: 1. A seller: someone to market the product 2. An improver: someone to improve the product 3. An organizer: someone to make sure things flow smoothly 4. A pusher: someone to get people to do what they are supposed to do
- Priorities should be:
1. selling 2. pushing 3. improving 4. organizing
- There is a direct relationship between the success of a business at any given time and the percentage of its capital, temporal, and intellectual resources that are devoted to selling
- Stage I business priorities: 1. get the product ready enough to sell it but don't worry about perfecting it 2. sell it 3. then if it sells make it better
- Making the first sale is critical for two reasons: 1. you need to create cash flow to keep your business going 2. you will never know whether your unique selling proposition (USP) is good until you test it in the marketplace
- The sooner you learn the answer the better and less costly!

Your optimum selling strategy and the 4 fundamental secrets of selling your first product:
- Your optimum selling strategy (OSS): 1. Where are you going to find your customers? 2. What product will you sell them first? 3. How much will you charge for it? 4. How will you convince them to buy it?
- Best advice: Do what everyone else is doing! In the beginning at least.
- How to pick a start up product: 1. What products are hot? 2. Determine if your product fits that trend 3. If yes you are set to go if not go to 4 & 5. 4. Come up with me too product versions of several hot products 5. Improve them in some way by adding features or benefits the originals lack.

Mastering the copy side of selling:
- 4 marketing concepts: 1. The difference between needs and wants 2. Difference between features and benefits 3. How to establish a unique selling proposition (USP) 4. How to sell the USP
- USP: 1. Make it some way better 2. Make it seem better
- quote page 100
- 3 aspects of a solid USP: 1. The appearance of uniqueness 2. The big promise 3. Specific claims 4. Proof of those claims
- advertising cheat sheet on page 107

Secondary yet important priorities for stage one businesses:
- Mentoring and being mentored
- Teaching your team
- Setting business targets
- Page 117 last paragraph

A quick review of the problems, challenges, and opportunities faced by the stage one entrepreneur:
- Don’t waste your time on corporate marketing, sell your product not your company
- Don’t waste your money on invisible (to your customers) business extras like office space, furnishing, equipment and the like
- Don’t be misled by phony business experts
- Be proud of your business acumen not arrogant about your business ideas
- Ask advice from smart people
- Don’t ever believe you know more than the market
- Make sales your company’s top priority
- Learn everything you can about sales and marketing
- Discover the optimum selling strategy
- Understand how pricing and other aspects affect sales
- Give you marketing team one and a critical mass of qualified customers
- If possible use direct mail or email to discover OSS
- In testing price to determine OSS favor the down side
- Don’t invest a lot of inventory before you have figured out OSS

Stage II Childhood:
From $1M to $10M and beyond:
- “Innovation distinguishes between a leader and a follower,” – Steve Jobs
- If you get caught in stage I you have a self employment company vs. equity business
- Every time your business changes so must its leader – YOU
- Most companies that go from 1M to 10M do so within 5 years. Why so quickly? Because they made the fundamental change from 1 product to marketing many products.
- Aggressive proliferation of new products
- The primary factor in stage II growth is the development and marketing of new products. The faster you can develop and sell those new products the fast your business will grow
- Front end sales come from those people who have never bought anything before
- Back end sales come from existing customers
- The purpose of front end is to get a new customer the back end is to produce a profit
- Axiom page 144

Innovation is the key to second stage growth:
- Innovation is rarely new its noticing trends and getting ahead of them to create the tipping point
1. The secret to breaking into new markets or reviving a flagging business is to create tipping point products
2. The secret to creating them is to find hot products in rising markets and come up with some way to make them new and different
3. You can make lots of money on the back end with ordinary products as long as you sell them to existing customers
- quote pg 154 at bottom
- New product ideas: work as a member of a team. Don’t fly solo
- Formula of creative brainstorming:
1. A quorum of three: 2 is better than one 3 is better than 2
2. A maximum of 8: there is a limit to the number of people who can effectively operate
3. A limit of time: Parkinson’s law
4. Established goals: what is your specific objective
5. High standards: keep asking how can we improve upon that?
6. A code of equality
7. Strict rules: a. specific suggestions b. no specific criticism c. be positive d. encourage the weak and cut the windbags short
8. A culture of creativity
- Magic Product cube: cubes have 3 dimensions 1. Price – inexpensive, moderate, expensive 2. Product type – golf clubs, golf paraphernalia, golf balls 3. USP – you have 3 golf pros who will endorse you Tiger etc. This means you have 3X3 or 27 possible products
- The 24 hr rule for preserving the inspiration of genius 1. The entire brainstorming session must be tape recorded 2. When a tipping point idea is suggested a short advertising piece must be written in 24 hrs.

Speed:
- When innovation and speed are combined the results can be astonishing
- 80% of G=IV2 where G= second stage growth I= innovation V= velocity
- Axiom page 168
- Innovators should be passionate about: love good ideas, hate sluggishness, enjoy the process
- “money loves speed”
- Accelerated failure and ready fire aim
- By accelerating failure we can accelerate success. Over time increase success vs. failure
- 8 guidelines to speed up implementation of good ideas: 1. Explain the key concepts 2. Support management 3. Walk the walk 4. Establish parameters 5. Get agreement 6. Accelerate gradually 7. Provide support as you go 8. Follow the program

Getting Ready:
- Ready questions: 1. Do I have a good idea 2. Does it feel like it will work? 3. Are my sales targets real? 4. Can I afford to test the idea? 5. Do I know the basic tasks that need to be done? 6. Do I have the people who can do them? 7. Do I have plan B an exit plan in case my good idea is a bad one?
- quote 183
- gut instincts are really subconscious suggestions that arise from all the patterns we’ve observed. They will tell us more than we can logically know because they represent more information that our brains can logically process.
1. Ask yourself how much it will logically cost to make the product come to life. Take that and double it
2. Figure out how many units it will sell and cut it in half
- Ready Aim Fire business proposal pg 193

What are you waiting for? Get started already:
- 2 reasons most good ideas never get implemented: 1. A desire for perfection 2. Little chores

Aiming the product:
- Ready aim fire ultimately results in higher quality products because there is less money and time wasted on features, mechanisms, and details that customers don’t really care about
- Fewer resources at the ready stage means more available at the aim stage
- A tale of incremental degradation – the candy example page 210
- Business people fall into two categories. Those who believe the universe is limited and disconnected and those who believe its unlimited and interconnected. One hoards and one expands.
- The golden rule or the rule of gold
- Remember that most of your profits will come from back end products which means the easiest way to grow your company is to develop long term relationships with customers and good products
- If it ain't broke….fix it. By broke I mean sales. Trash ones that don’t sell and fix the ones that do sell.

Aiming the Marketing Part I:
- Step I: Exercising the righteous demons
- Myth 1: it is good to sell things that people need, like grain and milk, but it is bad to sell things that people don’t need like TIVOs and gambling vacations
- Reality: More than 90% of what people buy is based on wants not needs
- Myth 2: It is good to sell things as long as you don’t charge much more than they are worth
- Reality: What does value really mean?
- Myth 3: It is good to make good things better but it is bad to sell them
- Reality: Give me a break
- “Don’t be ashamed of doing to thy neighbor which you secretly want done to you.” Golden rule of Marketing Genius is treat your customer as you want to be treated.
- Step 2: Shooting revenues through the roof with 3 basic approaches:
1. You can sell the product to more people
2. You can get your customers to buy more products
3. You can charge more for the products you sell
- Customer service made easy and profitable:
1. Knowing what customers really want
2. Finding out how you can do that for them
3. Talking to them about what you are happy to do
- Step 3: A crash course in sales and marketing
1. Your customers don’t care about you or your business. They are about themselves
2. A small portion of your customer base is giving you the lion’s share of profits
3. Understand why your customers buy from you
a. to feel good about themselves
b. to solve a problem
4. Almost every sales transaction begins with the process of generating leads
5. Learn multichannel marketing
6. Follow the golden rule of marketing genius: treat your customers as you want to be treated
7. Understand the secret of the four legged stool:
a. the big idea b. the big benefit c. the big promise d. proof
8. Understand that customer complaints and objections are the key to selling better
9. Maintain a “no dead end” policy regarding your products. Every sale is a link in a system of links that go on forever
10. Take advantage of customer inertia. Establish a bill til forbid relationship
11. Understand the 80/20 rule
12. Understand the USP of each product
13. Every product line needs its own branding
14. Never lose your marketing edge
15. understand the secret of the core complex. Think of your customers personality as an onion
16. Practice reciprocity with your customers
17. Understand that intimacy is the key to a customer’s lifetime value to your business
18. Be confident and enthusiastic when you sell
19. Don’t push or bribe your customers
20. Develop and mature a marketing culture that emphasizes 3 sentiments: providing benefits to the customer is the heart of product development, providing value is the heart of sales transactions, sincerity is the heart of all communications.

Aiming the Marketing Part 2:
- Understand the buying frenzy
- Increase your profits by stimulating your customers natural wants and turning them into a buying frenzy
- If you convince a customer to buy when they need it you have a loyal customer but if you can persuade him to buy every time that he wants it then you have a human ATM.
- The Law: The likelihood of a customer buying a product is inversely related to his need for it.
- The Corollary: The less a customer needs a product the more likely they are going to buy it.
- 3 factors that stimulate buying frenzies: 1. Feeling like I have more money than I need 2. Being exposed to psychologically effective selling signals 3. Good feeling from buying.

Ready Fire Aim in action:
- various stories

A quick review of the problems, challenges and opportunities faced by the stage 2 entrepreneur:
- Pages 272-277

Making the Stage III Transformation:
- In stage II new employees are added by subordinates creating a communication gap for the first time.
- Corporate execs are different than you but you need them because you can’t change your company without them
- The rule of 3! Each manager should be required to give you only 3 numbers month
- 1. Change yourself. 2. Change or hire great people to run your business

Change into a Corporate Leader:
- Six skills for a Stage 3 business: 1. Controlling operations 2. Managing your managers 3. Communicating your vision 4. Networking for joint ventures 5. Negotiating deals 6. Being good at hiring

Filling your Stage III business with stars and superstars:
- Myths and realities:
- Myth: Employees need job descriptions to know the scope of their responsibilities
- Reality: Job descriptions are not necessary
- Myth: Employees are always motivated by money
- Reality: Money isn’t even the second most important motivating force
- Myth: To win loyalty you must make them owners
- Reality: Most don’t want to be business owners
- Myth: Flat organizations create happier and more effective employees
- Reality: Employees like hierarchy
- Myth: Make work fun by filling it with amusements
- Reality: Fun comes from good work not from distractions
- Myth: A good boss is a sensitive boss willing to respond to personal problems
- Reality: Mixing business with friendship is always a bad idea
- Myth: A good boss listens to employee complaints and responds to them
- Reality: Some complaints are better ignored

Bottlenecks, Bureaucracy, and Politics:
- Terms page 322
- Ostensibly politics and business have the same purpose: go make the world a better place. But their methodology is different. Politicians don’t start doing good until they get their power. Business people can’t get their profits until they do their good.
- Quote pg 332

A quick review of the problems, challenges, and opportunities faced by the Stage III entrepreneur:
- Pages 334-337

Part Five: Stage IIII Adulthood
The last big change:
- Opportunities: 1. Selling your business privately 2. Bringing it public 3. Stepping back and becoming chairman of the board
- Role I: The employer role
- Role 2: The manager
- Role 3: The business builder
- Role 4: The wealth builder

Acting as your company’s main investor:
- Bottom line page 356

The Problem With Political Talking Points

Political talking points are more prevalent now than ever before. And with our heightened technological fluency and decreased attention span I imagine we will likely continue down that path. I found an article a while back that illustrates what damage can be done in an industry that I am quite familiar with; government acquisition.

The acquisition reform legislation passed by Congress is forcing major defense companies to sell subsidiaries so they don’t fall afoul of new restrictions forbidding manufacturers from owning companies that advise the government about acquisitions.

The most glaring example appears to be the pending sale by Northrop Grumman of TASC, a company with some 5,000 employees who provide the military and, especially, the intelligence community with technical advice on acquisitions and operations.

Loren Thompson, a defense analyst at the Lexington Institute, just said “yes” when I asked him if the TASC sale is largely being driven by language in the Weapons Systems Acquisition Reform Act drafted by Sens. Carl Levin and John McCain, the chairman and ranking member of the Senate Armed Services Committee. Several experienced space acquisition experts said independently that the TASC sale was being driven by the bill. The relevant text can be found in Section 207 of the bill, which requires the creation of regulations forbidding “organizational conflicts of interest.”

The long and short of it is that congress doesn't want large defense contractors advising the government on requirements while also profiting from the sale of weapons systems to satisfy those requirements. Sounds great right? Especially at a time when our national debt is higher than ever and we are spending such a large portion of our budget on defense. Not only does it sound great but it sounds a hell of a lot better when structured as a political talking point. When framed from a congressman, the tale is often told that the altruistic public servant is battling the large evil defense contractor in an effort to salvage taxpayer dollars that are greedily being hoarded. This is where those talking points can lead to legislation that gets us into trouble.

“You could get an ethically pristine arrangement that is bound to end in disaster,” with broad and ethically driven acquisition reform, Thompson said.

Thompson added that there are so few companies that know much about the technologies and operations of the NRO that restrictions could end up depriving the country of even the semblance of competition. “The problem with any one-size-fits-all approach to acquisition reform is that it leaves so little leeway for individual cases. In the case of the NRO there are only a handful of companies who understand reconnaissance satellites well, so if you start arbitrarily excluding players from the process due to conflicts that could have the unexpected result of creating monopolies,” he said.

Since Boeing’s disastrous management of the Future Imagery Architecture program, the NRO’s business has reverted to the companies that traditionally dominated the contracts issued by the Chantilly, Va. agency, leaving the industrial base there even smaller than it had been.

In addition to the possible creation of monopolies of crucial technologies, the new law may also dry up something that mey be even more precious, the experts say. That is the expertise possessed by companies such as TASC in helping ensure the government buys what it needs, builds it well and gets what it pays for. The government has largely lost the rare expertise needed to assess and analyze the acquisition of highly complex satellite systems, industry and government experts say.

The situation above is the problem with political talking points. "We need Acquisition reform!" However the problem is never as easy as the politicians package it to be. Then a "solution" creates so many second and third order consequences that a year down the road the government will legislate the other direction making efficient and timely acquisition impossible for the front line workers. Check out the Federal Acquisition Regulation (FAR) if you need proof. I am all for creating a set of rules and boundaries that encourage integrity within business, but we cannot just use a political talking point as the basis for the entire problem. If we do then we will continue to get "solutions" that open the door for new and unforeseen problems as a result of the legislation.

The major weapons systems that the big players in the defense industry are designing are incredibly complex. The companies have incredible amounts of expertise and float an immense amount of capital investment and infrastructure in order to support what our country needs for defense. Those demands and barriers to entry have already limited the amount of competition available to design a new aircraft for instance. If Thompson's prediction of even more limited competition comes true you can bet that costs to procure what the war fighter demands will increase dramatically. Which obviously is the exact opposite intention of the talking point. I know I fell into the trap of listening to digestible sound bites especially around election time, but the problems that are being legislated are often much deeper than the talking point used to deliver them.

How Do You Kill Email? Just Wave...

What is extremely difficult to describe, ethereal, innovative and on your doorstep? Well according to Lars and Jens Rasmussen the answer is Google Wave, the new product from google that is going to "kill email as we know it." The Danish brothers are the creators of what we know today as Google Maps. After their first huge success they set out to do something even more remarkable, and from the sounds of this story I think they may be on the right track.

In theory, the idea for Wave is simple. It's e-mail updated for the Internet age, Jens says.

E-mail as we know it is based on the snail-mail format: you send a message; your friend receives it. Wave makes mail collaborative and instant. When you type a message to a friend, he or she sees what you're typing as you type it. You can jump in and start drafting a reply before the initial message is complete. Wave also lets users collaborate on editable documents, called Wikis, share photos, update blogs, set appointments and chat in big groups. You can add conference calls to a Wave. A translation function called Rosy will translate chat messages between languages as you write.

Pretty cool and crazy stuff. Not too far away from computers being holograms displayed in mid air that operate on brain wave frequencies right? Seriously though I feel like this is a turning point in my life. Up until now I have grown up with most technologies or at least unaware of their impact on the world. Some are pretty cool and impressive. Mass cell phone usage has been pretty sweet. Obviously the Internet is a beauty. But this journey towards new ways of communication is the first time in my life that I have been aware of an innovation of this magnitude (cue all the examples I am overlooking in the comments section) that will affect the way people across the world communicate. I want to make sure that with things like this I stay current and quasi knowledgeable so that I don’t end up like many people today who can’t even use a computer. I feel like once you start to get behind, catching up is extremely difficult.

Regardless of whether you are into this kind of stuff the story of these two brothers is pretty impressive. They have an awesome theory of how they are going to maintain that start up style hunger to achieve that they had with what eventually became Google Maps. Now that they work for Google they were paranoid that their changed surroundings and life situations would limit their ability to create another successful innovation.

When the dotcom bubble burst in the early 2000s, the Rasmussen brothers were laid off within weeks of each other, both from a company called Digital Fountain.

There were virtually no jobs to look for in technology. So the brothers cashed in one of their pensions, sapped bank accounts and put their lives on the line to chase a kooky idea Jens had about map-making on the Internet.

Without the risk and the pressure, they wouldn't have been able to do it, the brothers said.

"I do believe that you can achieve more if you're willing to take risks," Lars said in a recent phone interview. "There's almost a total correlation between the amount of risk you're willing to take and then the amount of stuff you then potentially can get done."

The Rasmussen brothers have done their best to recreate the high-stakes situation that produced Google Maps.
They wanted to make a stress incubator, to start a fire under their team that would propel its creativity to new heights.
This was their formula:

• Google Wave would operate as a start-up company within the corporate giant of Google.

• The 60-person Wave team would be based in Sydney, Australia, far away from Google's corporate headquarters in Mountain View, California.

• Google employees who wanted to work on Wave would have to take a risk to join the brothers, a diluted version of what the Rasmussen's faced when they started Google Maps. The team took cuts to their bonus pay, with the hopes of a big payout if Wave were to succeed.

• And their project would be secret. The rest of Google's project files, codes and other documents are accessible to anyone in the company. Not Wave's.

The Rasmussen's felt good about their recipe for success through risk-taking. But it also made them more nervous. Along the way, they found another form of motivation: the fear of failure.

Their journey is pretty inspiring and the product, if it can live up to the concept, will be pretty incredible as well. Definitely worth the read. You can check out the full article here. Or if you really have time you can check out the official website with an intense full length video of the actual demonstration delivered by the brothers here.

We Can't All Be Right; So What Works? More Super Freakonomics Debate, Trolls, And Creation

After I wrote the post on the Super Freakonomics controversy regarding global warming/climate change, the controversy actually grew larger. Most notably when economist and NY Times columnist Paul Krugman got involved. I have included the second rebuttal by the Super Freakonomics team and I find it quite interesting how they are dealing with their critics criticisms. In fact they aren’t really arguing with their critics at all. They are merely outlining more definitively on the issues and more importantly what issue they are actually examining.

We are answering a different question than our critics.

Our question, at noted above, is what is the cheapest, fastest way to quickly cool the Earth. Like every question we tackle in Freakonomics and SuperFreakonomics, we approach the question like economists, using data and logic to conclude that the answer to that question is geo-engineering. Not coincidentally, almost every economist who has asked the same question has come to the same conclusion, including Martin Weitzman and the economists at the Copenhagen Consensus.

But that is not the question that Al Gore and the climate scientists are trying to answer. The sorts of questions they tend to ask are “What is the ‘right’ amount of carbon to emit?” or “Is it moral for this generation to put carbon into the air when future generations will pay the price?” or “What are the responsibilities of humankind to the planet?”

Unlike the question that we are asking — How can we most efficiently cool the Earth fast? — the types of questions that environmentalists are trying to answer mix together both scientific issues and moral/ethical issues. If you have any doubts about this, watch Al Gore’s movie, in which he says explicitly that reducing carbon emissions is not a political issue, but a moral issue.

That is why someone like Ken Caldeira can agree with the facts presented in our chapter, say that the chapter is written in good faith, but still disagree with the conclusion that geoengineering is the answer. It is because the question Ken Caldeira is trying to answer is not the question we are trying to answer. The same is true of our critics. But instead of just making this simple point — that we are asking different questions — the critics have either intentionally or unintentionally confused the issues by making all sorts of extraneous arguments.

I do not mean to imply that the question we answer in the book is the most important question. It may be that the questions that environmentalists are trying to ask are more important and more interesting, but that certainly does not mean that we don’t want to know the answer to our question, a question that the environmentalists don’t bother to ask very often because they are focused on their more philosophical questions.

So for all the blogosphere shouting against our chapter, I have to be honest and say that I just don’t get it. I can’t understand why any environmentalist who really cares about the Earth’s future could say with a straight face that geoengineering doesn’t deserve a seat at the table as the global-warming debate heats up.

This is why I have always been interested in economics. Especially the economics of social issues. I definitely have an idealist side to me. Being an optimist by nature I have a predisposition to strive for the way things should be. Although I am proud of that quality, it can be a dangerous trait as you are susceptible to having the blinders on. Economists are important because they study the science of incentives. Their study is the study of creating action. I read another extremely insightful post (as always) from Seth Godin regarding what he calls “trolls.” Here is what he had to say about trolls:

Trolls
Lots of things about work are hard. Dealing with trolls is one of them. Trolls are critics who gain perverse pleasure in relentlessly tearing you and your ideas down. Here's the thing(s):

1. trolls will always be trolling
2. critics rarely create
3. they live in a tiny echo chamber, ignored by everyone except the trolled and the other trolls
4. professionals (that's you) get paid to ignore them. It's part of your job.

"Can't please everyone," isn't just an aphorism, it's the secret of being remarkable.

I love number 2. Critics rarely create. I am not advocating abandoning debate and philosophical exploration. However there are times, as illustrated by the Super Freakonomics crew controversy, where it may be more important to stop debating what is right and start creating what will work. I am not saying stop moral debates, however each side of any issue feels that they are right. We cannot all be right, especially if we are on opposite ends of the spectrum. So there are times where maybe we should move onto agreeing on what can work....and what can work now. If you think this only applies to global warming you are wrong. Look at all the politically significant and unfortunately politically stagnant issues that consistently arise in Washington. Just a thought….

Trip Summary: From One Portland To The Other

Last weekend the in laws came into town and we all made the short trek up to Portland Maine. I have to say that I didn’t expect to love Portland Maine, especially since I am from Portland Oregon and think it’s the best city ever, but I really did love it. Having just done some brief research on the city I discovered that it has won numerous awards so I shouldn’t have been too surprised. Normally I dont place much merit in those types of awards but I must say that with my experience in Portland I can truly say that most of those awards are warranted.

Ranked as Bon Appétit magazine's America's Foodiest Small Town (2009).[11]
Ranked #1 on Forbes.com America's Most Livable Cities (2009).[12]
Ranked #6 on Relocate America's Top 10 Places to Live in 2007.[13]
Ranked #12 in the world by Frommer's in its list of Top Travel Destinations for 2007.[14]
Ranked #20 in Inc. Magazine 2006 Boom Town List of Hottest Cities for Entrepreneurs.
Ranked #7 on the 2005 list of the 100 Best Art Towns in America. (The Countryman Press, April 2005)

Despite the cold, the city was very walkable. The old city section of town was a particular favorite with bars and restaraunts and shops galore. The town has a very old colonial feel that feels a little more European that any city in the US I have been to thus far. It was very charming. Not a typical word in my vocabulary but its really the only word that fits. Portland was one of those places where you feel an aura radiating from it. Almost like you are transformed to a different era. We did a lot of wandering and just taking the city in which made for a relaxing weekend. We went lobstering which was quite the experience. On the way out of town we stopped in at the Portland Headlight which was the total cliche lighthouse but it was pretty beautiful. All and all I ate more lobster and fried food that I have in the last 5 years combined, had some great beers in some great pubs, listened to some good music, and had a great time taking in a very unique American city. My wife's family and I had a great time and I will definitely be heading back up to Portland in the future. Below are some pictures, videos (sideways rookie film job on my phone), and links to some of the sights I recommend hitting if you ever travel there.

Portland Headlight
1000 Shore Road
Cape Elizabeth, ME
04107
(207) 799-2661
Email cephl@aol.com
http://www.portlandheadlight.com/

Lucky Catch Cruises
170 Commercial St
Phone: 761-0941
Web: www.luckycatch.com
1 1/2 hour lobstering excursions from Memorial Day to Columbus Day. Pull traps near lighthouses & seals.

Bull Feeney's
375 Fore St
Phone: 773-7210
Web: www.bullfeeneys.com
An Irish pub & restaurant dedicated to the immigrant families who built today's Portland.

Portland Harbor Hotel
468 Fore St
207.775.9090
www.portlandharborhotel.com
Experience Old Port charm, distinctive details & impeccable service

Three Dollar Dewey's
241 Commercial St
Phone: 772-3310
Web: www.3dollardeweys.com
Portland's original alehouse. 36 Draft beers & 42 bottles. Reasonably priced pub fare. Free popcorn!

Portland Lobster Co
180 Commercial St
Phone: 775-2112
Web: www.portlandlobsterco.com
Enjoy Maine's best lobster roll, lobster dinners, fried clams, beer & wine on our large deck!

Fore Street Restaurant
288 Fore St.
Phone: 775-2717
Web: www.forestreet.biz
Offering peasant style American food cooking in the heat of live wood fire ovens.

Novare Res Bier Cafe
4 Canal Plaza
Phone: 761-2437
Web: novareresbiercafe.com
Bier Cafe. Great selection, huge outdoor deck.

Braving The Storm: Screw Financial Experts, Stay The Course

I was perusing through Yahoo Finance while eating my lunch today and wasn’t really paying that much attention to what I was looking at. As I was skimming the headlines I almost started laughing at what I saw. Here are some headlines that I found all on the same site! Disclaimer: This post is not to bash Yahoo Finance. I like Yahoo Finance. It is merely to prove a point.

Stocks Rise as Profits at Banks Provide Boost- AP

23 states report higher unemployment in September- AP

Oil falls to around $78 as inventories weigh- Reuters

The Days Of 'Buy and Hold' Are Over, says John Mauldin- Tech

John Mauldin: Tax Hikes Will Kill the 'Recovery’, Which Isn’t Real Anyway- Tech Ticker

Housing Prices: Expected to Drop More in the Next Year?

Stimulus Push Is On, Even If It Isn't Called That

Recovery in Luxury Goods Still Out of Reach

Holiday Shopping Season Gets Early Start

Foreclosure Epidemic Reaching More Expensive Homes

Is the economy recovering? Recovered? Slumping? A Farce? Are we on the brink of another crash? With headlines like the ones above who knows what to believe? With an onslaught of daily information more prevalent now than in any time in history it is important to filter through the minutia to take what information you need while trashing the rest. Do I read articles like the ones above? Yes. But I do so more to stay familiar with the general positions of the articles than I do to develop an investing strategy. If you cannot brave the storm of financial and investing information that is thrown your way it is easy, as illustrated by the headlines above, to run in 50 different directions at once without accomplishing the life goals that are the reason you are investing in the first place. Here are a few things that I try to remind myself when I am doubting my strategy, feeling restless, feeling impatient, etc.:

1. Remember your life goals – You should already be enjoying your life. You should also want to make it better. You should be investing to make your ideal vision of life a reality and to secure your financial future. If your vision of a great life is based on values and those values are aligned more on the family, friends, experiences side of the house as opposed to the Lamborghini, having six pools, and a castle side then you don’t need to drastically earn massive amounts of wealth tomorrow. Live your life today and make gradual improvements over time with your financial decisions furthering those goals.

2. Think long term – Massive amounts of wealth are rarely made over night. Those that are made overnight are even more rarely made in the market. Chances are that person is not going to be you. A long term consistent approach to building wealth is never dead (as claimed above) because as investment vehicles, strategies, and laws change, a long term investment horizon can absorb the unforeseen consequences of the changes and will likely beat many of the speculators on the way back up. Time and asset allocation are the biggest determinations of success that you have. Run any compounding interest model and be amazed at the power of time! Besides all that, long term investing is a hell of a lot more relaxing.

3. You only suffer losses when you sell – When you operate on a long term investing horizon it’s much more difficult to pull the trigger at the wrong time. If you don’t like your unrealized gains just wait longer. When you operate your investment scope on days your time frame to make a wise decision (or to guess wisely) is measured in minutes or seconds. When you operate in terms of decades your time frame to make wise decisions is measured in days, months or even years. By stretching the scope of your vision you have effectively error proofed your decision making ability. And if you do make a decision that looks bad in hindsight you likely are only cutting into unrealized gains and not original principle.

4. Building wealth isn’t always sexy – An average person can accumulate large amounts of money over time simply by investing in a total market index fund or a life cycle fund. Will you outperform the market? No. Will you be able to talk hot stock tips with your neighbor? No. Will your life resemble a scene out of Boiler Room? No. Should you give a shit? NO! Who cares. Investing is the one ‘sport’ where being average, as in mirroring the market, will put you ahead of a great deal of investors whose potential gains are getting chipped away through fees, emotional decisions, and the next big fool proof investing strategy that doesn’t work. Don’t compete against others, compete against the goals you have set for your life.

Super Freakonomics Book Causing Stir In The Global Warming Debate

The next edition of Freakonomics, appropriately titled Super Freakonomics, tackles a polarizing issue known affectionately to many as climate change. Before the book has even hit the shelves it is causing a stir surrounding the evaluation of climate change and our role in dealing with the realities and myths regarding the environmental subject. Interestingly it seems as though the book doesn’t necessarily take an “anti-climate change” stance, yet environmental advocacy groups and bloggers are lambasting the book as entirely false or moreover, libelous (here are a few samples from metalfilter). I have included a few interesting excerpts below, but it would do you well to read the entire passage here. I can empathize with both sides of the climate change argument and feel as though, like most arguments, the truth likely falls somewhere in the middle. I tend to feel that we should err on the side of caution due to the implications of mother nature’s retaliation if the climate change naysayers are wrong. With that being said I recognize the difficulties associated with combating climate change no matter how substantiated or unsubstantiated the claims may be. The article highlights perhaps the most unfortunate reality surrounding global warming in that “pollution is an externality – that is, the people who generate pollution generally don’t pay the cost of their actions and therefore don’t have strong incentives to pollute less.” Where ever you fall on the spectrum of belief, exposure to contrary beliefs and arguments is rarely a negative thing. I, for one, am looking forward to the second Freakonomics book and the quest for truth and solutions surrounding the environmental health of our world.

Here is a brief passage about the overall premise of the chapter and the controversy it is causing:

Our global-warming chapter has several sections. We discuss how it’s a very hard problem to solve since pollution is an externality – that is, the people who generate pollution generally don’t pay the cost of their actions and therefore don’t have strong incentives to pollute less. We discuss how even the most sophisticated climate models are limited in their ability to predict the future, and we discuss the large measure of uncertainty in this realm, given that global climate is such a complex and dynamic system. We discuss some of the commonly held misperceptions about climate and energy, including the fact that the historic relationship between global temperature and atmospheric carbon dioxide is more complicated than is generally thought.

The real purpose of the chapter is figuring out how to cool the Earth if indeed it becomes catastrophically warmer. (That is the “global cooling” in our subtitle. If someone interprets our brief mention of the global-cooling scare of the 1970’s as an assertion of “a scientific consensus that the planet was cooling,” that feels like a willful misreading.) To think we are “deniers,” would obviate the chapter’s central point: if we weren’t convinced that global warming was worth worrying about, we wouldn’t have written a chapter about proposed solutions.

I found this passage very interesting in that it discussed something that you rarely hear; a potential solution if we are in fact past the point of no return in the global warming battle:

The most controversial of these solutions – a “stratoshield” — involves the controlled injection of sulfur dioxide into the stratosphere to cool ground temperatures, which mimics the natural cooling effects of a big volcanic eruption like Mount Pinatubo. This sort of “geoengineering” solution is intensely disliked within environmental circles, and we discuss the reasons why. And we discuss why, if global warming gets worse, it might still be a good idea to consider further research on the stratoshield. We also discuss a much more environmentally friendly anti-warming solution from I.V. that uses salt-sea spray to increase cloud reflectivity.

We describe how when Caldeira first heard about the stratoshield from Lowell Wood, another I.V. scientist, he “disliked the concept” but nevertheless “ran a climate model to test Wood’s claims.” Furthermore: “his model backed up Wood’s claims that geoengineering could stabilize the climate even in the face of a large spike in atmospheric carbon dioxide, and he wrote a paper saying so. Caldeira, the most reluctant geoengineer imaginable, became a convert — willing, at least, to explore the idea.”

That is why Caldeira was in the room with his I.V. colleagues that day – talking to us, exploring the idea – and that is one reason that we gave as much credence to I.V.’s climate and geoengineering proposals as we did: because Ken Caldeira is not a climate-change-denying know-nothing, but quite the opposite. Because even though Caldeira would like to see us become a zero-carbon society, he seemed to agree with Nathan Myhrvold’s assessment that if global warming is as real a problem as they think it may be, then an overreliance on carbon mitigation may be “too little, too late, and too optimistic.”

How could a devoted environmentalist who wants a zero-carbon society believe this? Because, as we wrote (with input from Caldeira), “the half-life of atmospheric carbon dioxide is roughly one hundred years, and some of it remains in the atmosphere for thousands of years. So even if humankind immediately stopped burning all fossil fuel, the existing carbon dioxide would remain in the atmosphere for several generations.”

And the closing argument:

Levitt and I – and Nathan Myhrvold, and maybe even Ken Caldeira – look forward to debating the content of the chapter itself, the actual ideas and conclusions.

Will a lot of people argue with them? Absolutely. Some critics claim that we are too pessimistic about carbon mitigation, that we understate the probability of catastrophic climate change, that we are wrong to write that “the movement to stop global warming has taken on the feel of a religion.” Fair enough: we will debate those issues.

"Desire Spiral" - Thoughts On Ambition, Success, and Burnout

Lately I have not really felt myself. Most times throughout the day I feel normal, but in the past month or two I have been plagued by intermittent down spells. Those who know me personally know that I am generally positive and upbeat so these little down moods got me a little worried. I have been doing my best to do some self reflection and soul searching to see what the source is and after a few weeks I think I am narrowing in on some causes. I am self diagnosing my ailment as “desire spiral.”

At about age 11 I knew that I wanted to dedicate my life to the great game of hockey. I wanted to earn a division I scholarship and play college hockey. I have spoken about how I probably should have set my sights higher on BadskiBlog before, but regardless I have no regrets. From that age forward I did whatever it took to achieve my dream. I sacrificed a lot and put in an extraordinary amount of hours driving towards that goal. The experience of setting a long term goal and achieving it taught me a lot. However, I was obviously unprepared to parallel those lessons over to my life after hockey.

I have remained driven in my post competitive hockey life but my focus has changed, broadened and become less concrete in terms of a defined end state. I now focus my efforts on things like career progression, self education, different ventures, my marriage, etc. All of these things (and more) are important to me, however unlike my hockey career there isn’t a destination in mind. I have general ideas of how I want all of these things to culminate into the life I want to live, yet I feel as though having an end state in each is self limiting. I don’t want to put the blinders on to opportunities that arise. I have experienced enough in my life to know that life doesn’t care about your plans. Life is like a tree; as you grow you branch out in the general direction you intended but often split off into a pseudo representation of your original idea. Needless to say, not having a relatively linear goal track like my athletic career has been hard for me. Which is what I believe is leading me to suffer from “desire spiral”

Desire spiral is the second and third order consequences that arise from being driven to achieve. I know I want to be successful. I know I need to work hard to achieve my goals and to progress as a person. But this desire often leads me to feel frustrated, down, restless, and often times less confident in my abilities than when I was just trucking along as an athlete seeing where the world would take me. Desire spiral is similar to the library syndrome, in that you don’t know how much you don’t know until you begin to learn. Desire spiral is you don’t know how much you can improve until you begin the journey of self improvement.

So how can you combat desire spiral? When I came across this article on Zen Habits that offers some great advice for combating burnout, which is very applicable and somewhat parallel to the symptoms of desire spiral. Below are a few highlights that I stole from the piece. These are only tiny excerpts and the full post has more in depth analysis of each recommendation. If you are interested the full post can be found here.

1. Achieve in increments. When you only focus on a big goal someday, it’s easy to get burned out by the daily grind. It’s like driving toward a mountain in the distance. You can drive for hours, but the mountain doesn’t seem to get any closer. And spinning your wheels gets real tiring real fast.

4. Define success realistically. There’s absolutely nothing wrong with having big dreams and big ambitions. But if you’re constantly frustrated by a lack of progress, it might be time to take a step back and examine your goals. Are they achievable? Are you holding yourself to a reasonable timeline?

6. Take it slow(er). The world tells us to rush things: “Get there faster. Make money quicker. Retire sooner.” And while these things aren’t necessarily bad, they can easily get us in over our heads. If you’re feeling burned out and overwhelmed, it’s time to slow down.

10. Create outlets. If you’re a person of diverse interests (and really, who isn’t?), it’s likely that you have several very different goals and ideas bouncing around in your head at any given time. These ideas need outlets. If you hold them inside, they’ll eventually start interfering with your focus and creating unnecessary frustration, leading to burnout.

In other words, I think it’s okay – healthy, even – to start a few side projects as outlets for creative energy. Just make sure that you keep your priorities straight and your side projects fun. If these side projects become sources of stress, cut them out immediately.

I would add a few more to the already great list of recommendations:

1. Exercise - Never doubt the connection between body and mind. Whenever I am suffering from a bout with desire spiral I can always combat it with a great workout. Not only does it provide some alone time to collect your thoughts but your physical exertion eases some of the stress that your mind may be feeling. Everything seems more achievable after a workout.

2. Break bread (and bottles) with those you care about - Remember you should already be living the life you want to live. "Content but never satisfied" is the phrase I often repeat to myself. Its a little mantra of sorts that I created to remind me that the time is now. You should love your life but always striving to make it better. So if you are obsessed with success in terms of future achievements you are wrong. You are trying to better the already good life you have built for yourself. Just don’t let the “never satisfied overpower the content." That mentality is one of the root causes of desire spiral. Every time I go out and have dinner and a few drinks with the people I care about or talk to my family back home I know that in the grand scheme of things I am alright. I realize that I have it pretty damn good so I should relax and enjoy the ride a bit.

Great Viral Marketing And A Few Good Laughs - Guitar Hero Video

When you think of cat like screams, a few sweaty bodies, horribly odd & contorted body motions, smeared makeup, and loud evil music, there are plenty of thoughts that come to mind. A video games with plastic instruments isn't necessarily the first scene that comes to mind. But the odd description above is quite typical of any group of people shredding their hearts out while playing Guitar Hero or Rock Band, and anyone who has participated in a living room jam session can attest to the games fun and addictive qualities. The concept of the game is remarkable enough to spread sales through word of mouth, but as all great marketers do the makers of Guitar hero are looking to get the word out through multichannel marketing. When I came across this beauty video I couldn't help but think that there is a little of this music nerd in all of us. I think the video below is a great example of what internet/viral/whatever you want to call it marketing should be all about. Not only does the clip have an ethos, eliciting a feeling that there is a little rock star in all of us, but it is funny as hell and likely to be emailed to friends and family, talked about in the office, or posted on blogs. The story screams that no matter how much we have repressed our inner rock demons the Guitar Hero gift from the rock Gods is the way to unleash the fury within. Even if you don't know much about music or have never considered yourself to be a musical person the message is loud and clear in this video. I love how they narrate via cheesy 80's power ballad in the background similar to the hugely successful "real men of genius" series by Bud Lite. My favorite part though is when he signs the ladies rack at work...classic! Enjoy the presentation and I would love to hear some comments on this video and how it does or does not do it for you from a marketing or a comedy standpoint.

30 Under 30 America's Coolest Young Entrepreneurs

Recession? What recession? You'd think the events of the past year would have curbed Generation Y's enthusiasm for the always-uncertain entrepreneurial life, but you'd never know it by looking at this year's 30 Under 30 list. It's a dynamic group of self-starters that has managed to raise money, launch new products, build new technologies, and tap into underserved markets. And they've done it with relentless enthusiasm and resiliency.

Inc. Magazine has released its 30 under 30 America's Coolest Entrepreneurs and I have brought it to you right here at BadskiBlog. Some of these business models are pretty cool, some underwhelm me; it looks like ALL are successful. Inc. Magazine does the 30 under 30 America’s Coolest Entrepreneurs every year and regardless of whether or not you agree with all their picks there are some valuable lessons to be learned. One of the things I liked this year was the emphasis on teamwork and partnering. Coming up a hockey guy I love the team environment. In fact the older I get it seems the more paralyzed I am by working alone. I just don’t see the value in working alone. It’s not realistic and more importantly it's not fun. I don’t feel any shame in reaching out for help and some of my finest life achievements come from standing on the backs of my teammates.

Every year, our 30 Under 30 list is populated by a number of companies that were started by partners. But this year, more than two-thirds of the entrepreneurs we feature launched their ventures with one or more co-founders. Curiously, I came up with almost the same number when I surveyed the people I interviewed for my new book, Upstarts! How GenY Entrepreneurs Are Rocking the World of Business. Sixty-four percent had started their companies with partners. So what's going on here?

Generation Y seems to thrive on teamwork and to crave social interaction, so it's no wonder that solo founders are less common than partnerships. But it's not just that these young entrepreneurs want company -- many seem to know what they don't know and are not a bit afraid to acknowledge the gaps in their skill sets. And if those gaps can be filled by a childhood friend, a classmate, or a spouse, so much the better.

Here is a slideshow detailing all the business models for these young entrepreneurs. I love looking at profiles like this because it helps me to see patterns in how successful entrepreneurs built their visions. Even if I would never create a new vintage clothing line or a bottle cap accessory business, I can still learn from their business model and experiences. I am huge fan of IdeaPaint. What a great business model. Simple yet worth talking about. I think the possibilities for markets are virtually endless as well. I can see everyone from coaches to music producers using this simple yet innovative product. Their website is amazing as well. They present their product in a manner that would make Steve Jobs or Garr Reynolds proud.

Another cool slideshow feature Inc. did this year was provide advice from the young entrepreneurs. BadskiBlog readers know my love for quotes and my propensity to latch on to any snippet of advice. So this section was great for me. Although the advice is fairly generic, it is like anything else in the sense that the masters of any skill or profession never take the basics for granted. Quotes are typically targeting the fundamentals of life, or lessons that a broad audience can and should learn from. Generic or not I like reading these types of quotes.

Stick With It

"Start-ups don't die, they commit suicide. In other words, 90 percent of start-ups fail because the founders get bored, discouraged, or something else, and they move on to other things, not because of some catastrophe. No matter how dark it is today, things will always better tomorrow."

-- Justin Kan, Justin.TV