The Business of Life

For Love or Money

Douglas J Utberg — Fri, 03 Sep 2010 18:30:49 +0000

Issue #108: For Love or Money

One of the things that have been debated for a very long time is whether people act out of personal conviction (for love) or because of incentives and opportunity for gain (for money). The answer to this question has a tremendous impact on our personal, professional, and financial lives. Most of us tend to think that our personal lives are exclusively based on personal motivations (love) and that our professional and financial lives are based on rational decisions (money). The truth is that these two forces mix and meld in everything that we do. Understanding the way that they work can help each of us to live more complete and fulfilled lives.

The first circle of understanding when it comes to the relationship between love and money is the realization that the two are linked. Most people will not work for free in a job, even if they love it very much. Conversely, there is also a point where additional money fails to produce additional motivation. The key to understanding this trade-off is the notion of a non-linear relationship. In other words, money motivates up to a point and then begins to lose its power. Similarly, doing something that you love only becomes motivating after your monetary needs have been met.

It is frequently noted that “money can’t buy happiness” and we wholeheartedly agree. However, the lack of money will generate a large amount of unhappiness. Thus, money is not something that makes you happy in and of itself, but something that allows you the freedom to do the things that make you truly happy. Similarly, pursuing a personal passion such as music, writing, or athletics may not produce much if any income. Because of this, it is necessary to satisfy your monetary needs so that your passion can be pursued in your leisure time. Furthermore, our ability to help others is frequently constrained by our financial resources. Each person has a limited amount of time in the day and good intentions won’t even buy a cup of stale coffee. To the extent that our non-monetary desires to help make the world a better place come to the forefront of our mind, it must necessarily trigger a monetary desire to generate resources that can be dedicated to said charitable cause.

The way that this relates to our personal lives involves many layers. Nobody will argue that lots of money is necessary to have a happy and fulfilled life. However, if every evening meal becomes an argument over how the months bills will be paid, it will be extremely difficult to achieve happiness or fulfillment. When there is only one cookie left, my goal is not to ensure that it goes to whomever is the highest bidder between my spouse and children. My goal is to do my best so that everybody in my family is satisfied. Incidentally, this is one of the reasons why family business dealings frequently encounter so much difficulty. When the non-monetary world of family that is driven by love and affection is forced into the monetary world of business where costs and profits must be monitored meticulously, there is tremendous room for strife and misunderstanding.

Another iteration of this phenomenon plays out in the workplace. Many people say that they value autonomy and interesting work as the reasons why they stay at their current job. However, students graduating from college frequently cite compensation as their primary goal when looking for employment. So how do these two notions intersect? Compensation is what attracts people to join a company, and is also the primary incentive for them to stay. However, compensation alone will only inspire people to work hard enough to avoid being fired. (Promotions also matter, but they tend to come less frequently as an employee rises in the ranks) The thing that inspires people to do more than the minimum is a feeling of autonomy, interest in their work, and meaningful things to work on.

When dealing in the arena of investments and financial decisions, most of our decisions are rational and calculated. However, the whole reason why we make these calculated investment decisions is so that we will have sufficient financial resources in the future to care for ourselves and our family. In this way, the monetary means of investments ultimately serve a non-monetary end of providing for our family, enjoying the things that make us happy, and achieving financial security.

Ultimately, there will always be a cross-over between monetary and non-monetary motivations. Love and Money are both necessary for a complete and fulfilling life. The secret to happiness is not the pursuit of one to the exclusion of the other, but creating a healthy balance between the two. In this way, we can achieve ever greater success in our personal, professional, and financial lives.

“No one would remember the Good Samaritan if he’d only had good intentions; he had money as well.“

Margaret Thatcher

At the Margin

Douglas J Utberg — Fri, 27 Aug 2010 18:50:04 +0000

Issue #107: At the Margin

One of the most prescient concepts in economics is the notion that “all changes occur at the margins”. Expressed another way, this means that when things change, it happens in small incremental movements. One of the commonly cited axioms of economics is that “rational people think at the margin”. What this means is that our decisions should be framed in the context of what impacts our next action or decision, and ignore costs that are sunk or decisions that have already been made.

The importance of this concept comes into play when making both personal and financial decisions. When deciding whether to fix an old car that has broken down, the only factors relevant to the decision should be the facts at hand. It does not matter how much money you have already spent to fix the car . . . it only matters what you do with the current situation. (Note that from a financial perspective, it is optimal to repair your existing automobile unless the cost of repairs exceeds the value of your car in reasonable working order. The decision to get rid of your old car and buy a new one is almost never financial optimal. This doesn’t mean that you should never get a new car, only that the purchase is a ‘lifestyle’ decision and not a ‘financial’ one.)

The inevitable result of thinking ‘at the margin’ is a narrowing of focus onto the decisions and opportunities at hand instead of dwelling on mistakes and missed opportunities of the past or fantasizing about expected opportunities in the future. The only time that anybody ever has to act is now. The past is gone, and the future has not yet come. Action must always occur in the present tense. This is not a renouncement of the benefits that come from planning for the future, but a realization that the future is built on many successive decisions, and that each decision we make builds the road for future decisions.

By zeroing-in on the decisions that you can influence today, it will create a remarkable degree of emotional freedom. This liberation will come when you are no longer shackled by old decisions and no longer nervous about what will come in the future. The future is and has always been uncertain. However, people who have grown accustomed to making rational decisions develop the confidence that they can adapt to whatever future situations unfold. The most important thing is to use the information and resources at hand to make the best decisions possible. This crystallizes a seemingly infinite number of possible future options into one decision . . . your next one. The result of that decision will set the stage for future decisions, but so will external events that are beyond your control.

The single area where most people run into trouble is that they under-estimate the extent to which their future will be shaped by things that they do not control. Thinking about the unknown is inherently frightening, because we cannot plan for something we do not know will happen. However, the unknown should not be allowed to become a crutch that scares us into inaction, but should also be appropriately heeded so that actions are not taken that greatly depend on a specific future outcome that is far from guaranteed.

The extent to which we can control our lives always is, always has been, and always will be at the margins. We can influence small iterative changes that compound over time to produce tremendous results. On balance, it is best if our actions create outcomes that are robust or adaptable to future changes in the marketplace. While we may not know what these changes will be, we can be confident in our ability to adapt to them. By shifting our focus to present things that happen ‘at the margin’ it will allow us to enhance our circle of influence by improving the effectiveness of our decision making.

“Anything you read can influence your work, so I try to read good stuff.“

S. E. Hinton

Automotive Prison?

Douglas J Utberg — Fri, 27 Aug 2010 07:19:15 +0000

When many young people endeavor to purchase their first automobile, they face a wide variety of choices. One of the choices available is to lease or buy. If buying, you can purchase the automobile with cash or finance it. It is highly important to make the right decisions when purchasing a car, since the wrong move can turn that shiny new street cruiser into an automotive prison that locks up your financial resources for years on end.

Most people who are deciding how to purchase a car on paper will reply that it is best to buy with cash. This is certainly true for people who have enough disposable cash to buy their cars outright, but what about people who need to finance? The first and most important point of consideration is to make certain that you are not buying more car than you can afford. One rule that many people support is called the 20/4/10 rule. Namely that if you are financing a car, put 20% down, finance it for 4 year or less, and make sure the payments do not exceed 10% of your income. This will ensure that you have positive equity when you drive the car off the lot, which can prove very important if the car is wrecked or stolen.

There are many traps that people can get themselves into with automobiles:

Lease Trap: Leasing a car sounds great at the beginning, but you rarely get a good deal on the price and there are typically fees and charges that are due when your lease matures. If you do not have the cash to ‘buy out’ the lease at its expiration, the nice people at the dealership will be happy to ‘bury’ the charges you owe them into a new lease.
Dealer Financing Trap: Many dealers attract buyers with 100% financing, zero percent interest, easy qualifying, or some other gimmick. All of this sounds great and induces many people to buy cars at or near the full retail price. (When you are being financed by the dealer, you have very little power to negotiate a lower price) However, if something happens to the car, your insurance will reimburse based on market value, which will most likely be less than your car is worth. Now you have a bill that is due for the remainder between the price you paid and the car’s value when it was wrecked or stolen and that beautiful financing has suddenly evaporated.
Friends and Relatives Trap: This one almost goes without saying, but great danger can lurk when you purchase an automobile from friends or family. Before engaging in this sort of transaction, make sure to have the car checked by a competent mechanic or mentally prepare yourself to potentially absorb some unexpected expenses without complaining.

The optimal situation for a person who must finance is to arrange for their financing ahead of time. This allows them to walk into a dealership knowing exactly how much car they can afford to buy, exactly what the rate will be, and exactly what the payments will end up at for a given price level. This allows you to negotiate the ‘price’ instead of the ‘payment’ with the sales representative. If the best deal they can offer isn’t to your liking, you have the power to walk out and go somewhere else because your financing is not captive to one particular dealer. Even if the rate you get from the bank is higher than the one offered by the dealer, you will have the ability to negotiate down the price and reduce your risk of loss if the car is damaged or stolen.

In the end, it is highly important to avoid turning our car into an automotive prison. By planning ahead and making prudent decisions, this goal can be easily accomplished while walking down the path of financial success.

Stock Market Blues

Douglas J Utberg — Fri, 27 Aug 2010 00:10:55 +0000

As this post is being published, the Dow Jones Industrial Average has closed below 10,000 placing an exclamation point on what many people fear to be a foreboding of future economic sluggishness or even the dreaded ‘double dip recession’. Throughout 2010, the stock market has been abnormally volatile, with no clear up or down trend. This phenomenon demonstrates the extent to which the financial marketplace is uncertain about both future economic prospects and the actions that the government and federal reserve may (or may not) take to help (or harm) the economy.

Dow Jones market value trend from WSJ

In addition to all of these market concerns over economic fundamentals, there is an additional specter facing investors. Unless congress acts in the remaining sessions before the end of 2010, federal taxes on long-term capital gains will increase from 15% to 20% in 2011. It is important to note that this is not a “5% increase in capital gains taxes” as some on the left attempt to characterize the initiative . . . it is a 33% increase in taxes on capital gains. (5% tax increase divided by a 15% current tax rate = 33% increase)

Unless action is taken to address this problem soon, there is likely to be a large amount of investors who sell their stocks and mutual funds to lock-in their gains at the current favorable tax rates. As this unfolds, it may push the stock market into a temporary downward spiral where people taking gains push down the value, which compels more people to capture gains before the value goes down even more. When this phenomenon combines with the generally unpredictable nature of government action, it could create the conditions for a second recessionary dip.

Action Item: Consider diversifying some of your stock market assets into cash so that you have capital available for strategic buying opportunities that emerge if an investor sell-off to lock in profits at favorable tax rates pushes the stock market value below a level that reasonably represents its underlying fundamentals.

Is the Stock Market Ship going to Sink?

Douglas J Utberg — Fri, 20 Aug 2010 18:45:59 +0000

Issue #106: Is the Stock Market Ship going to Sink?

As the year 2010 approaches its fourth quarter, there is a significant likelihood that anticipated 2011 fiscal policies will impact financial markets. The S&P 500 has recently leveled off from a precipitous drop after the financial crisis of 2008 and retreated from its 2010 peak of just over $1,200 that was achieved in advance of fears over a systemic debt crisis in the European Union. Implicit within the current market valuation is an assumption for future growth in earnings per share.

By comparing the current market value for the S&P 500 index of nearly $1,100 with the next four quarters of forecasted earnings per share for the index, it results in a forecasted P/E ratio between 15.0 and 15.5, assuming the forecasted earning growth unfolds as anticipated. Unfortunately, there are many factors currently in play that will make those growth targets difficult to achieve.

At Business of Life LLC, we believe that the stock market is poised for a sharp downward correction in the second half of 2010. This prediction is based on multiple factors that span fiscal, political, and fundamental weaknesses in the prospects for future growth of corporate profitability. Our reasoning forecast of a downward correction in 2010 is based on the following factors:

The long-term capital gains tax rate will increase from 15% to 20% on January 1st, 2011. This will prompt many individuals and fund managers to capture gains achieved since the post-crisis lows at the more favorable current tax rate. As the end of the calendar year approaches, investors will need to anticipate when the sell-off to lock-in gains will begin or risk being caught in the depressed prices that result from multiple simultaneous sales orders.
Scheduled tax increases for 2011 will directly impact the disposable income for the top 53% of income earners. Since ~71% of US GDP is comprised of consumption spending, it naturally follows that a reduction in disposable income will result in a spending compression. This is reinforced by the tight lending environment that is making it more difficult for people to acquire credit for the purpose of financing consumption spending.
The government “deficit reduction commission” is scheduled to report after the mid-term elections in November. The motivation for this timing is clearly to avoid burdening incumbent politicians with the bad press that accompanies likely recommendations for reductions in spending and increased taxes. Both of these actions will have a negative impact on corporate profitability.
Persistent high unemployment will make it difficult to retain past levels of profitability that have been based on stimulus and subsidies from the government. As government entities retreat from these programs because of large debt burdens and low tax revenues, corporate profits are likely to be impacted.

The combination of these factors create a high probability of volatility in the stock market as 2010 draws to a close and 2011 unfolds. Investors who have diversified into cash are expected to have ‘value buy’ opportunities in the coming months when reactions to economic news or strategic selling drives down the index values below the levels justified by fundamentals. However, the stresses on future corporate profitability makes this strategic buying a more appropriate long-term strategy, since the regression back to fundamentals may be interrupted by erratic government policy and further difficulty with European nations attempting to climb out from underneath their sovereign debt burden.

On balance, the overall stock market presents a favorable value at an S&P 500 value near $1,000. Volatility in advance of expected tax increases are likely to present multiple opportunities for strategic buying at attractive prices. The attractive returns previously realized by ‘buy and hold’ investors have dissipated in recent years as the market has descended into a seemingly permanent state of volatility. In this environment, strategic value buying appears to be a more beneficial strategy.

Recommendation for Action: Begin diversifying your funds before the correction in advance of higher capital gain taxes begins. It would also be advisable to either hold onto your capital in the form of cash or money market funds if it is in an IRA or diversify into income properties if the capital is not constrained by a retirement account. This will allow you to either capture the anticipated market correction and buy-in at lower prices or purchase income properties at the current low rates and suppressed prices while locking in a 30-year fixed rate loan.

“Anybody who plays the stock market not as an insider is like a man buying cows in the moonlight.“

Daniel Drew

Creating Wealth on your Current Income

Douglas J Utberg — Fri, 13 Aug 2010 19:26:46 +0000

Issue #105: Creating Wealth on your Current Income

When most people think of “creating wealth” it conjures up grandiose mental pictures of fabulous riches and exotic celebrities. However, the term “wealth” simply refers to owning valuable assets. There is no particular reason why normal, regular people cannot create wealth using nothing more than their current income and intelligent decisions. The principal barrier to achieving this goal is a mindset many people hold that “It takes money to make money” and that they do not have enough capital to begin making money. However, there are two problems with this excuse. The first is that there has never been a time in the history of mankind where it was easier for a person of limited means to create wealth because of technology. The second is that people who discipline themselves can slowly accumulate capital reserves until they have enough saved up to begin making money.

Let’s begin with the first notion that there has never been a better time to create wealth. Consider the fact that the internet now allows people of very modest means to acquire the same information as wealthy investment houses. This technology for information and communication allows investors to find deals, establish relationships with business partners, and manage a portfolio of business and investment interests while living somewhere different from where their business is taking place. By learning how to leverage the advantages of technology, it can allow you to build a lifetime of scalable wealth.

Now we get to the problem of not having capital for investment. It is certainly true that some people can simply draw from a trust fund to invest, but most of us need to save before we can invest. This is where normal people possess true power to influence their financial future. In the short-term, most of us do not have much influence over our income. What we earn is more or less, what we earn. However, we have tremendous influence over how much we spend. By becoming disciplined and always spending less than we earn, it will result in the perpetual building of capital for investment. It is important to note that we should spend less than we earn and not earn more than we spend. The importance of this perspective is that our earnings should rise before our spending does. Some people spend based on their expectations of future income. This is a near-certain recipe for excessive debt and financial difficulty.

The way that everyday people can create tremendous wealth is by becoming educated in the fundamentals of business and investment success, spending in a disciplined manner for the purpose of building investment capital, and then prudently investing their capital. As time goes by, the returns from your investment can be re-invested to continue driving the total value of your wealth upward on a compounding growth trajectory. Eventually, the growth and income from your business and investment interests will exceed the amount of savings you add each year from living within your means. When your wealth grows to a sufficient size, it will generate annual returns that exceed your yearly spending. This is a point that many refer to as ‘financial freedom’ since you have the ability to live from the returns on your investments and no longer need to work at a job for your livelihood. (You may still choose to work, but it will be a choice and not something that is done out of necessity)

Consider that every wealth legacy started in this fashion. At some point, there was somebody who made sacrifices to fund investments or build a business. Their successes were only possible because of the discipline to sacrifice for the sake of future benefit. In many cases, this has created a wealth legacy that benefited future generations in both their family and the world at large from the many charitable contributions that have come from wealthy families over the years.

There is a great temptation by many people to exclusively look at the symbols of wealth and not the source. Large homes, flashy cars and trendy clothes are what wealth enable you to purchase, but the fundamental basis of all wealth comes from discipline, sacrifice, intelligent decisions, and prudent investment choices. By mastering these fundamental principles, you will be able to create a legacy of wealth for yourself and for future generations. There has never been a better time to create wealth than right now, so take action today and reap the benefits tomorrow.

“Wealth is the product of man’s capacity to think.“

Ayn Rand

Fragility and Robustness

Douglas J Utberg — Fri, 06 Aug 2010 18:37:19 +0000

Issue #104: Fragility and Robustness

The financial crisis of 2008 has brought the impacts of debt and uncertainty into focus for many people (who are not not part of the government). The key to understanding bubbles and the recent financial crisis are the concepts of fragility and robustness. For the purpose of our analysis is to analyze the difference between these two concepts and examine how they apply to our personal, professional, and financial life.

Simply defined, fragility means that something is weak and prone to breaking. This is the term that many use to describe the impact of debt leverage on the financial markets and overall economy. The general impact of debt or leverage is that it amplifies both returns and losses. If you borrow $100,000 at 5% interest and invest it to earn 10%, you have just earned $5,000 with zero invested capital. Your return on investment is infinity. On the other hand, if you lose 10%, you will have lost $10,000 plus the $5,000 of interest expense. This adds up to a total of $15,000 in losses that you may not have enough money to pay. This is the reason why debt contributes to fragility. It amplifies gains, but places you subject to crippling losses. An example of fragility in our personal life is using debt to live beyond your means or financing a home that you cannot afford. Even the slightest hiccup in your economic situation will create a downward-spiral that eventually destroys your credit and your finances.

On the other end of the spectrum is robustness. In simple terms, being robust means that you can adapt to changing situations without undue difficulty. The far extreme of robustness is to purchase everything with cash. A more measure example would be to modulate your spending by your income or to ‘live withing your means’ at all times. A famous way of communicating this concept is to ‘spend less than you earn’ and not to ‘earn more than you spend’. The importance of this distinction is that modulating spending by your earnings requires that you produce first before consuming. On the other hand, spending before you produce means that you will always be seeking the next ‘big deal’ that will help to pay for money that has already been spent. This is a prime way that people become subject to scams and shady deals.

The importance of these concepts is not to say we should pursue one or the other, but that they represent a continuum. Many people can realize tremendous benefits by analyzing where they stand on this scale, and determine to pursue an optimal balance. Some people and organizations (such as the government) use debt as a method for living beyond their ability to produce without any clear notion of how those future debts will be retired. (In the case of the government, debt retirement is most likely to happen through inflation) This extreme fragility subjects you to tremendous volatility if anything happens outside of our expectations. On the other hand, the pursuit of extreme robustness can leave considerable opportunity for gain on the table. The least volatile investments are typically the ones that produce the lowest rates of return. Debt that is used to purchase an income producing asset can be very beneficial if the asset produces positive net cash flow. In this way, you can ‘outsource’ the payment of your debt to the asset that has been financed.

Ultimately, it is important to understand that the future is necessarily uncertain. Nobody knows for sure when the next boom or bust will occur. Creating a lifetime of wealth and happiness requires that we find the optimal balance of fragility and robustness in our personal, professional, and financial lives. Overall, things that are efficient for wealth creation tend to be fragile and things that are inefficient for wealth creating tend to be robust.

This concept is equally true for business as well. Businesses with high variable costs, or high capital costs tend to be fragile since they require either stable prices or large volumes to be profitable. This types of business is easier to start and grow, but is very fragile against economic disruptions. Conversely, you may have a scalable business (Frequently in the information marketing or publishing segments) where both fixed and variable costs are low. In this model, it is extremely difficult to gain traction in the marketplace because of intense competition, but there are tremendous gains that can be achieved and the business is insulated against cost increases or volume disruptions creating a downward spiral.

In the end, each of us need to find our own balance of fragility and robustness. The importance of this analysis is less about arriving at one particular answer and more about going through a thorough and honest self-analysis. For people whose life is overly fragile, changes must be made to bring about more robustness. For people who have been overly conservative for the sake of robustness, it may be rational to take more measured risks for the sake of capturing opportunity. As with all things, the choice is up to you.

“We tend to treat our knowledge as personal property to be protected and defended. It is an ornament that allows us to rise in the pecking order…we take what we know a little too seriously.“

Nassim Nicholas Taleb

Your Most Important Decision

Douglas J Utberg — Fri, 30 Jul 2010 18:37:11 +0000

Issue #103: Your Most Important Decision

As we go through life, there are many decisions that we will make. Some of these decisions have a greater impact than others, but there is a single decision that frequently has a greater impact than most other decisions combined. This monumental decision is the selection of a spouse to be your partner in life, or possibly a decision to be permanently single. Either decision will have an extremely profound impact to the remainder of your life, and should be made with a significant degree of consideration.

This is complicated by the fact that our character and personality are in a perpetual state of change. The person who we are at 21 is different than who we are at 31, who is different than we are at 41, who is different than we are at 51. It is most certainly true that a good marriage can be the greatest of all experiences, but it is also true that a bad marriage can be among the worst. The inherent difficult of creating a fulfilling marriage comes from the fact that it is not always clear how the character and personality of each person will develop. In some cases, both people will develop together. In other cases, one will develop while the other desires for things to stay the same. In a few cases, both people will develop but they develop in different directions. In all cases, it is more difficult to anticipate the future than most people imagine.

On the other hand, the window for marrying and raising a family does not last indefinitely. It is important to keep all of your goals and ambitions in perspective so that imprudent decisions are not made by either rushing into relationships or avoiding them entirely. In all cases, it is important to be flexible and supportive of the person with whom you decide to dedicate the remainder of your life. By making the decision to spend the rest of our life with one person, we are implicitly deciding to make sacrifices for the purpose of facilitating a happy and fulfilling relationship. Sometimes people exhibit a resistance to making these sacrifices, which frequently influences their partner to avoid making sacrifices themselves and can plunge the relationship into a self-defeating spiral.

In the end, marriage is a critical decision that requires considerable commitment for success to be achieved. In this way, it is similar to (albeit vastly more important than) a business venture. Nobody realistically expects to enter into business with half-hearted effort and achieve success. People starting a business expect to invest many years of hard work in exchange for long-term success. However, there appear to be a disturbingly large number of people who enter into their marriages with the expectation that a minimal level of effort will be sufficient to create success. By approaching the most important decision of your life with even greater resolve than that of a business entrepreneur, it will cultivate the seeds of success for both you and your family.

“The bonds of matrimony are like any other bonds – they mature slowly.“

Peter DeVries

Assembling Success

Douglas J Utberg — Fri, 23 Jul 2010 18:30:45 +0000

Issue #102: Assembling Success

To people who have attempted business or investment ventures, they quickly discover that simply doing what everybody else does is a recipe for mediocrity. Both the business and investment world are very competitive. Simply handing your money to a stock broker cannot be expected to generate exceptional returns, because every other broker is working to find great deals for their clients while yours is trying to find one for you. This results in competition for deals that quickly dissipates opportunities for exceptional gains. Similarly, opening a business that is similar to other businesses in the community can only be expected to produce average results, since you will be splitting the customers interested in your products and services with all of the other businesses in the local area.

To achieve exceptional success, we must assemble different pieces of value together and create a new investment or business. We like to call this process “assemblation” and are looking toward this as a way to create differentiation. As an investor, we practice assemblation by finding combining value drivers similar to the way that a baker combines ingredients. When creating a business, there is more value to be found from a ‘complete solution’ than for simply providing a part of what you clients need. When creating a real estate deal, there is more value to be found by coordinating the purchase of a distressed property, rehabilitating the property, and marketing it to tenants than simply buying one that is rent-ready.

Once the power of assemblation is fully internalized, it becomes immediately apparent that we must find ways to create more value in all that we do if we seek to be successful. Even people who work a traditional job can practice assemblation in their career. Most people who work in a particular job have a defined job scope and set of responsibilities that they are paid to perform. Unfortunately, very few seek out ways to deliver value above and beyond that which is defined in their job scope. By bringing-in new ideas and using your job scope to create more value for your employer, it will increase the importance of your services as an employee.

Thus, astute investors and businesspeople use the principles of assemblation to assess every opportunity that they see. A property is not viewed for what it is, but what it could be. A new business is not evaluated based on how many other people are doing the same thing, but on how the current industry can be improved by assembling pieces of value into a complete solution. An employee should not analyze a job based solely on how much they will get paid, but on how much they can learn, and how much they can grow. By practicing the art of assemblation, it changes out viewpoint on all things that we experience in our life. It takes emphasis away from ‘how can I do my job’ to ‘how can I create value’ . . . this distinction is very important for people that want to create a lifetime of success through assemblation.

Another extension of the assemblation principle is to actively avoid situations where you cannot create value in favor of situations where you can. For investors, this means to seek ‘deals’ where you are a part of creating value instead of ceding control to an investment manager. If investing in the stock market, assemblation means to seek opportunities for providing needed capital to small businesses or investing in market indexes instead of trying to piggyback on fund managers. If investing in real estate, assemblation means finding low priced properties and improving them so that they can be rented to tenants instead of simply trying to ‘flip’ properties without adding any value. If job shopping, you can practice assemblation by looking for opportunities with ‘head room’ for growth of your job scope.

In the end, our world is quickly evolving into one where success is only available to those who practice excellence. The days of expecting success after ‘serving your time’ are long past. We must assemble success if we wish to enjoy a comfortable life and retirement. We must practice assemblation in our business and investing activities to create value that others have left out. By mastering this art, it will place you in the top tier of achievers, and place you at the precipice of success.

“Great thoughts speak only to the thoughtful mind, but great actions speak to all mankind.“

Theodore Roosevelt

Your Helping Hand

Douglas J Utberg — Fri, 16 Jul 2010 18:36:35 +0000

Issue #101: Your Helping Hand

It is certainly true that many people need a helping hand at some point in their life, but this week I was thinking about where to find a helping hand with your personal success. Not surprisingly, the answer to this question is that your helping hand is attached to the end of your arm. This is not to say that you cannot receive help from others, or that you should not accept help if it is offered. What we must all eventually come to terms with is the fact that we cannot stake the entire course of our future on the chance that other people will come to the rescue and elevate us to financial success.

To many people, this statement is no more than revealing the obvious. To others, it seems somewhat reasonable, and for some it is a complete reversal in the course of their life. The reason for this is because of a ‘culture of dependence’ that has emerged from increased government involvement in the economy. Every time that the source of our wellbeing shifts from our own efforts to the whims of company/union bosses or politicians, it erodes a small part of our independence. Each additional step of dependence is a deeper level of control that is placed over us by the entities on whom we depend. Thus, by losing influence over the course and flow of our financial wellbeing it leaves us subject to the ebbs and flows of fate. By relinquishing control over our lives, it places us at the mercy of chance.

For people who seek to regain control over their lives, it is critically important to build our own castle of success instead of waiting for somebody else to grant us an invitation into theirs. This is not to say that people should not ever seek any type of help or assistance. To the contrary, success frequently requires the building of a ‘master-mind’ coalition that creates the ideas, systems, and business models of success. However, there is a critical difference between working with a group of people in a voluntary manner where both sides benefit and monolithic dependence on a government forces you into their system and extracts taxes using the same force.

Ultimately, it holds true that progress and success can only come from creating things and ideas of value. Dependence does not create anything . . . it simply shifts resources from one person to another while the government gains power over your life. For all people that aspire to success, focus must firmly shift toward creating things of value. For all people that are holding onto promises from government officials or union bosses for their future prosperity, consider that these entities can only distribute resources by taking them away from somebody else. This does not create anything . . . quite to the contrary, it destroys resources by reducing incentives to produce. Because of this, the pool of resources available for distribution are necessarily limited. This will place everybody who depends on the government for their prosperity in the middle of a very long line. When the resources run out, the dependent class will have no recourse, but to accept a lower standard of living.

In the end, your helping hand is truly attached to the end of your arm. Taking ownership of your life and success is the only way that any of us can hope to build the kind of prosperity that will endure across multiple generations and withstand the foolishness of politicians. Take the reigns of your future into your hands today.