DISASTER-PROOF YOUR LIFE: THE FIRST RULE FOR FINANCIAL SUCCESS FROM @PreetBanerjee

“Most people don't want to learn and read about money but we must to a certain extent.” — Preet Banerjee

Preet Banerjeee quit his job the day after we first met. That’s coincidence. He was an investment advisor for a bank and I did advanced marketing for a life insurance company. We also met just before he started writing for The Globe and Mail, while he was filming Million Dollar Neighborhood, and other times too. He’s followed a squiggly career path.

The financial sector is filled with two kinds of people: salespeople (know how to sell) and technicians (understand what’s being sold). Preet stands apart. He’s very likable. Even better, he has a deep insider understanding of how the financial sector works, provides objective advice and says what needs to be said.

Preet spoke at Rotman about his new book. I already read and recommended Stop Over-Thinking Your Money: The Five Simple Rules of Financial Success (review on GoodReads). I attended to support him. The quotes in this post are from his live talk and have been lightly edited for readability.

Rule #1: Disaster-proof Your Life

“The risk of running out of money is important and something you need to address. But if retirement is potentially 40 years away, there are a lot of risks that exist between now and then. Your future income is your single biggest asset.. Protecting it is one of the most important things you can do.

What are all the different ways you can lose that income?

1. If you die, clearly you're not going to have any income and your family's lifestyle may be put in jeopardy
2. If you become disabled, you're going to lose your future income
3. If you lose your job, you're going to lose your income"

How true. 

1. Life Insurance

“Life insurance is boring if you are not in the industry. Even if you're in the industry it's pretty boring.”

I find insurance exciting, but I’m an actuary. What else provides a predictable lump sum tax-free at an unpredictable time of need? That’s peace of mind. I designed products, helped advisors sell them and use that insider knowledge to help the public review their protection.

We’ve changed. We understand the consequences of dying with financial obligations remaining but don’t always prepare. Term life insurance is inexpensive but life-changing events no longer trigger insurance purchases. For instance, the birth of a child creates expensive responsibilities. Yet 60% of parents don’t get life insurance within two years of their family addition. Does that surprise you? Maybe there are challenges affording the insurance.

If you’re single and without dependents, you might think you don’t need life insurance (but read this). Regardless, you likely agree you need insurance to replace your income if you become disabled.

2. Disability insurance

Disability insurance is complicated (see the guide to disability insurance, which includes links to an article and video by Preet). If you work for a company, you may think you have proper coverage. How do you know? Products are complex and life insurance literacy remains low.

How do you do you gauge

• the stinginess of the definitions
• the generosity of the benefits
• the quality of the guarantees

At work, you’re stuck with group coverage, one of the two types of insurance you can’t own. That puts you at risk because your employer has full control and likely wants to reduce expenses.

Your benefits aren’t guaranteed even if you pay part of the cost. Remember Nortel? The long-term disability insurance covered 50% of pre-disability income. Would that be enough? Many employees didn’t think so and topped up coverage to 70%. Unfortunately, Nortel went bankrupt leaving the 357 disabled with only 35% of their expected benefits. Could you live on that? How would you feel knowing that lawyers and other professionals have already received over $1 billion in windup fees?

If the Nortel employees got independent advice, they might have purchased personal disability insurance that Assuris guarantees will pay at least 85% of the promised benefits if a member insurer goes bankrupt.

If you’re self-employed, don’t you need disability insurance too?

3. Job Loss Insurance

You can’t buy job loss insurance. That doesn’t stop you from taking precautions to bulletproof your career, following the eight steps to getting a job today or taking a Krypton course.

You can self-insure against job loss by establishing an emergency fund once you decide on the right size. Yet 45% of Canadians have no savings for emergencies. How’s that for optimism?

Act

Knowing isn’t doing.

Disaster-proofing your life isn't glamorous. The process takes time. Preet tells readers to get started by contacting suitable advisors immediately: “Put down the book and book the appointment. You do not know when these [unpredictable] things could happen. Do it. Get the ball rolling.”

An author telling us to stop reading? At least Preet didn’t tell us to leave his talk. That’s advice we would have ignored. What advice will you act on?

Links

• Preet Banerjee: website, blog, book (Amazon.ca)
• Book review on Goodreads
• Income replacement: A guide to disability insurance
• Two types of insurance you may have but cannot own
• Oblivion: what happens if my life insurance company dies?
• How to afford the insurance you need
• Tips for first-time life insurance buyers
• Test your insurance literacy

PS Stop reading this post and get Preet’s book. It’s an easy read.

THE WEALTHY BARBER RETURNS WITH MORE WISDOM

My parents gave me a copy of The Wealthy Barber around the time I started working. I couldn’t read it. The story got in the way. Besides, there’s wisdom everywhere if we’re willing to listen. Why place more credence on what a celebrity says? We can learn from a real barber and other people we know and meet.

David Chilton wrote The Wealthy Barber Returns, which dispenses with the barber. I bought the book shortly after its release and deferred reading it until now. I wish I hadn’t delayed. The new book is well worth reading.

David has a deep understanding of the financial world. More important, he understands the irrational ways we behave. Most important, he’s funny. Very funny. What a powerful and useful combination.

This post features selected experts from the book.

Financial Marketing

One of the biggest reasons that it’s so difficult to save is that … almost everyone wants you to spend as much as possible … our instant-gratification-oriented minds aren’t putting up much resistance … There are really only three Canadians who want you to set aside some money — your future you, your financial advisor and me.

A new study from the US government’s Consumer Financial Protection Bureau (CFPB) finds that 25 times more is spent on financial marketing than  financial education. In the US, that’s about $17 billion on marketing versus $0.7 billion on education. If the marketing didn’t work, would the companies spend the money?

Unfortunately, the financial sector is the least trusted in the world according this year’s Edelman Trust Barometer. What’s good for the industry is bad for us. Education and changes in behaviour are the antidotes.

Peer Pressure

It’s hard to overstate the impact our “reference groups” have on our spending decisions. We consciously and unconsciously take in their consumption cues. Their lifestyles intoxicate us and when partnered with the great enabler — easy credit — lead us to act richer than we are, “act” obviously being the key word.

The antidote is to “expand your reference group as much as possible … not only to include the less fortunate throughout the world, but also to encompass those who have gone before us … Many Canadians are completely out of touch with how much our lives have improved over time.”

David says that "when people ask you to do something, you’ll have to reply, ‘I can’t afford it’ … We can’t possibly d o and buy everything we want. There’s no shame in that. Accept it.”

He’s right but can you resist? I prefer the terminology “I choose not to” because there are things I can afford but which aren’t good value. I don’t often say this out loud but think it to myself.

As a vegetarian, eating out has a lousy ROI when the bill is split evenly. Buffets are the same way. My next one is $26 per person plus beverages. There’s no way to get my money’s worth (without gaining weight).

Conflicts of Interest

"I phoned the loan officer. I asked him, point-blank, why he gave a huge line of credit to a customer who hadn’t requested it and who had admitted that she has a significant spending issue. His answer was succinct, honest and illuminating.

“It’s my job,” he said. Banks are a business and, like all businesses, they sell something … it’s no longer only about providing credit to those who need it, now it’s also about convincing people they should want it. 

That young loan officer had a true conflict of interest … what was best for the client and what was best for his employer weren’t aligned. He went with the paycheque and it’s hard to blame him.

Too few realize that they receive financial advice which doesn’t put their interests first. More financial education would help.

Investing

To outperform the market’s return, you have to outperform the majority of others who are also trying to outperform the market’s return … When you hand over your hard-earned savings to a professional money manager you deem smarter than yourself, be careful … it’s irrelevant if he or she is smarter than you. Instead, what matters is whether he or she is smarter than most of the other people who are smarter than you … we can’t all outperform. We need a bunch of underperformers to balance the scale.

We can’t beat (or cheat) the math of markets but “it’s estimated that Canadians do, in fact, try to beat the market with well over 80 percent of their stock-market money.”

What Are You Paying Your Advisor?

The financial-advice business must be the only business in the world where most customers aren’t told what they’ve received or how much they’ve paid for it. Performance and costs matter. But to evaluate them, you need to know them.

Do you ask what you’re paying?

There’s another problem I see almost as much as bad advice — no advice. I’m very frustrated by the number of people I meet who are paying advisors handsomely through their mutual-funds’ MERs, yet almost never hear from them … … we have a wacky number of financial products in Canada that are too expensive by any common-sense measure. For example, I see some mutual funds with MERs in the area of three percent. Anybody who thinks that’s a fair deal for clients has a fundamental misunderstanding of arithmetic, markets’ returns or both

Do you get value for what you’re paying? If not, consider other options. If you need help understanding, consider hiring an independent fee-only advisor.

David leaves us with hope.

Over the next few years, the costs of financial products and financial advice are going to go down significantly. Competition is heating up and consumers are becoming better educated — a powerful combination.

You don’t have to wait. Get better educated today.

Links

• David Chilton: wealthybarber.com and @wealthy_barber
• If you have/had/want money, read Pound Foolish
• CPFB study underscores need for financial literacy (Accounting Web, Dec 2, 2013)
• Do your advisors help with your financial literacy?
• Will you have financial freedom at 35, 55 or 75?
• How would Mike Holmes fix the financial sector?
• Do you have a financial dream or a financial nightmare?
• How to tell if your advisor is independent
• Do advisors put their interests first?
• What does your advisor drive?
• 12 timeless tips for wise shopping
• Why we get bad advice
• image courtesy of Colin Jones

Podcast 249

[instead of using Audacity, created with Cyberlink AudioDirect 4 for the first time; using M4a instead of MP3]

direct download | Internet Archive page | iTunes

PS If you already have The Wealthy Barber Returns, maybe it’s time to re-read it?

HOW TO PROTECT YOUR MONEY FROM GOLIATH

Once you understand that Goliath is much weaker than you think he is, and David has superior technology, then you say: why do we tell the story the way we do?
--- Malcolm Gladwell, TED Talks Q&A

Do you remember the tale of David and Goliath? That’s the title of Malcolm Gladwell’s new book. He shared his interpretation at TED@250.
There are lessons for you and your money.

Goliath

The financial sector is huge, powerful and the least trusted in the world. We're still recovering from the harm caused by the 2008 financial meltdown. There are lots of examples of misdeeds in Pound Foolish (Helaine Olen), Fight Back (Ellen Roseman) and @trustandyou.

David Then

David took a stand against Goliath in hand-to-hand combat when all others cowered with fear. The match looked unfair.

Goliath had size, strength, experience and armor. David didn't. In a conventional battle, Goliath had the clear advantage. David changed those strengths into weaknesses. He turned his own speed and nimbleness into advantages. He used his slingshot to down Goliath from a safe distance. The battle was unfair ... to Goliath.

David Now

You are nimble. You have a weapon more powerful than sticks, stones and slingshots. You have social media. You have access to the world from your smartphone wherever you go (though mind the roaming rates!). You can attack Goliath anytime you see misconduct using text, photos, audio or video.

Goliath has trouble responding in a quick, caring and believable way. Employees are often restricted or prevented from using social media. For instance, Air Canada lost a dog and internally planned to “just ignore” the media attention, hoping the story would fade away (like RBC-iGate did).

David fought alone. Your weapon is even more powerful because you can mobilize others. Even total strangers can help as your word spreads. Thanks hashtags, retweets, Likes and +1s.

Your Ultimate Weapon

Your ultimate weapon is your money. You alone can decide to

• support banks with low (or no) service charges and fees
• question advice from your advisors
• deal with better people and better companies

Unless you take action, you help Goliath grow stronger. You must give incentives to force change. You must be willing to move your business. You might even need to admit that you made mistakes.

Your Successes

You do make a difference. Here are examples:

• Rogers gave mobile customers a credit for the latest service outage (perhaps worth $18 million). This seems to be a first.
• Apple reversed a decision to leave a rating system which measures the environmental impact of their products.
• Starbucks stopped colouring Frappuccinos with bug extract

There's less need to fear Goliath. We're connected. We’re stronger. We’re more resourceful. We vote with our wallets and feet. We're winning … unless we stay silent.

Links

• David, Goliath and the appeal of the underdog: a Q&A with Malcolm Gladwell on this often-misunderstood story (TED Blog, Sep 2013)
• How to beat Goliath with your marketing
• If you have/had/want money, read Pound Foolish
• Fight Back against corporate trickery with Ellen Roseman’s insider tips
• We're easy to fool (with examples)
• Case study: seller beware vs buyer beware
• Handcuffed: comparing mobile phones and life insurance
• image courtesy of Wikipedia

Podcast 241

direct download | Internet Archive page | iTunes

PS Support those who support you

FIGHT BACK AGAINST CORPORATE TRICKERY WITH ELLEN ROSEMAN’S INSIDER TIPS

Fight Back; 81 Ways to Help You Save Money and Protect Yourself from Corporate Trickery is a tough book to read. It's filled with example after example after example of businesses behaving badly  towards their own customers. Unfortunately, this isn’t a work of fiction.

Author Ellen Roseman has an unusually good sense of what goes on in real life. She’s a consumer advocate for readers of The Toronto Star and her On Your Side blog.

Repeat When Necessary

My brain gets overwhelmed when shown 81 ways of doing anything. I start looking for patterns and principles that usually work. Here are five steps to fight corporate bullies:

1. Read before you sign (and ask questions)
2. Keep records (including steps you taken with the company)
3. Follow up
4. Stay calm (and polite)
5. Be persistent

The first step is a big problem. Who reads before they sign? The terms and conditions are difficult to read and understand. They might change later. Take-it-or-leave-it. Even worse than fine print is what’s left out. You can’t evaluate what’s missing unless you know what ought to be there. Even a pizza flyer isn’t straightforward. At least you’re not signing a multiyear contract with cancellation penalties.

More Is Less

Fight Back has multiple authors and 81 tips. Both lead to some overlap. Sometimes I felt I was reading what I’d already read. Though, that helps show how widespread basic problems are.

Perhaps Ellen means for us to read the section that matters to us at the time. For instance if your current concern is your high phone bill, you don't need to read tips on fighting your bank just yet. Perhaps you use the book as a reference.

Very Different

Normally, a business wants you to keep you as a customer since that’s more lucrative than finding a replacement. When new customers are enticed with incentives, they are less profitable. Maybe they’ll leave when the normal terms take effect. Your “loyalty” (or inertia) gives you leverage — if you ask.

Life and health insurance is very different (and outside the scope of Ellen’s book). If you cancel your coverage, the insurer makes money. That's because you've been paying premiums and didn't get any back (though you did have peace of mind). New products come with new conditions and higher rates.

With offerings like banking and Internet service, you experience what you're buying regularly. You can detect changes in performance and price. Even if you don’t, others might. That’s an advantage of buying a commodity-like offering. Combined voices are more powerful when singing in harmony. Social media spreads outrage quickly, which helps get results. Look at what we’ve achieved as Internet users through OpenMedia.ca.

With insurance, you get the financial benefits at the time of the claim ... which may never happen. If you cancel your coverage, you may face big penalties (much larger than for mobile phone contracts). If you buy again, count on paying more since you're older. Depending on your health and finances, you might not even qualify.

With insurance, the key is getting your claim paid, should you have one. You increase your odds with the right purchase since changes may not be possible later.  Each life/health insurance case is unique and subject to privacy issues. It's difficult to show widespread problems and get mass support. In many ways, you’re on your own.

Imagine

Imagine living in a world of trust where the sellers put our best interests first. Until then, buyer beware. Thanks to Ellen, for fighting on our behalf for years and now giving us tools to fight back on our own.

Links

• Ellen Roseman: website and Fight Back launch article
• Ellen Roseman makes financial basics lively
• The dread of going to the bank for a loan
• Interview: Fighting Back on CBC Radio (Mary Ito, Feb 23, 2013)
• Interview: Fighting Back on WhereDoesAllMyMoneyGo.com (Preet Banerjee, Jan 25, 2013)
• If you have/had/want money, read Pound Foolish
• Three keys to getting your insurance claim paid
• Check your pizza literacy
• Worse than fine print
• The word advisors imply ... but dare not say
• Three powerful protectors against corporate misconduct

Podcast 209

direct download | Internet Archive page | iTunes

PS How do you fight back?

IF YOU HAVE/HAD/WANT MONEY, READ ‘POUND FOOLISH’

I wasn't expecting much from Pound Foolish: exposing the dark side of the personal finance industry (Amazon link).

I saw a video interview (which I can’t find) and felt author Helaine Olen was sensationalizing to sell more copies. She was picking on easy, obvious targets like Robert Kiyosaki (did he really have a Rich Dad?)  and David Bach (the latte factor guy who's bad at math). I didn't disagree with her conclusions or assessments but wasn't expecting much more than a book that seeks fame by attacking the well known with sizzle.

Look Closely

To my surprise, Pound Foolish is well researched and contains valuable insights into the world of personal finance.

Have societal issues contributed to the way we are? After all, previous generations seemed to do well financially — even on one income. Are we really that ignorant? Do we really overspend? Or has the world changed in ways that work against us.

Our financial options have become much more complex. We bear more risks (remember defined benefit pensions and job security?). The changes happened quickly ... faster than many can adapt.

You may have sensed something basic isn’t right. Recall the words of Morpheus in The Matrix:

“You've felt it your entire life, that there's something wrong with the world. You don't know what it is, but it's there, like a splinter in your mind, driving you mad … [The Matrix] is the world that has been pulled over your eyes to blind you from the truth.”

This book helps you see what the problems might be and why we can’t easily solve them.

To use terminology from The Seven Habits of Highly Effective People, I’ve avoided talking about the circle of concern, preferring to focus on what we can do ourselves. our the circle of influence.

Are Financial Literacy Initiatives Genuine?

Seventy percent of profits in the credit card industry come from people who do not pay off their bills in full every month. Why would the financial services sector support something that has the ability to significantly impact their bottom line for the worse unless they either believed it was not a real threat or believed it to be a lesser threat to their profits than government regulation? — Pound Foolish

The author asks whether the financial sector wants us to be financially literate since that would hurt their profits. Picture Sylvester and friends looking after caged Tweety birds like us. Here are related posts:

• What are you doing about your high investment expenses?
• Do your advisors help with your financial literacy?
• The cost of getting advice from your banker
• Three reasons financial literacy eludes us

Your Views

You may not agree with everything Helaine says or appreciate her use of unnecessarily complicated words like “éminence grise” and "solipsistically". There is also unneeded profanity. Continue reading because Helaine paints an overall picture that’s worth seeing.

Lessons And Reminders

In the world of finance, do not assume that people helping you have your best interests at heart or genuine skill. If you're dealing with a friend or family member, you may actually be at a bigger risk than if dealing with a stranger. When you’re confused or think you’re getting solid advice, you’re more vulnerable. That's just life. Hasn't it always been so?

The author is not totally altruistic in writing her book. However she does say things that are worth our attention. I'm curious to see what she does next. Identifying problems is important. So is helping people with the solutions. Even if there aren't any easy ones.

Links

• Helaine OIen’s website
• The dark side of personal finance (Jonathan Chevreau, Jan 2013)
• Why dumping your coffee habit isn’t the best savings plan (Business Insider, Dec 2012)
• Ghastly gurus (The Economist, Jan 2013)
• Review of Pound Foolish (BusinessWeek, Jan 2013)
• How the personal finance industry preys on the public (ThinkProgress, Feb 2013)
• Why financial literacy fails (Time, Mar 2013) (new)
• image courtesy of chimicherrychonga

Podcast 207

direct download | Internet Archive page | iTunes

PS I taut I taw a puddy tat

LISTENING TO WHAT THE DOG SAW [MALCOLM GLADWELL]

Christmas 2009 is coming. Look! Here's a new book from Malcolm Gladwell!

Wait ... hold on … it's just a compilation of his articles from The New Yorker. Skip it. You can read them free online. There isn’t even a dog on the cover.

That was my first impression of Malcolm's new book What the Dog Saw. Instead of a “real” book, Malcolm was taking the easy route and recycling for the holiday book buyers --- or so I thought.

I’ve enjoyed Malcolm’s previous books: The Tipping Point, Blink and Outliers. He even grew up in Canada, a nice bonus. Even so, I never read his New Yorker articles. I tried once but they're too long to read online and I don't get the magazine. It's wasteful to print according to the warnings on the bottom of some e-mails these days.

Besides, I don't like reading books but I love listening, especially to the author. Audiobooks are more engaging and portable. You feel the author is talking to you, which is much more personal than reading printed words (even on an iPad). Malcolm’s one of the best, along with Douglas Adams, Seth Godin, Neil Gaiman, Zig Ziglar, Richard Branson, Jeffrey Gitomer and Michael Gerber. How often do you see those names in the same sentence?

The Magic

Months passed before I got the audio book. I was hooked within minutes. The length --- 10 CDs --- is perfect for a road trip, which is how we listened.

“Mustard now comes in dozens of varieties. Why has ketchup stayed the same?”
--- Malcolm Gladwell, The Ketchup Conundrum

Each story is mesmerizing. Malcolm has the rare knack of combining disparate ideas into something unique. You experience a similar sense of discovery with Connections by James Burke. Malcolm’s writing grips you even when he's talking about hair colour, Enron or intellectual property rights.

Prior Insights

Malcolm does more than entertain you. You learn about the world and yourself. Each book changed how I think.

Outliers (2008) added the lens of the 10,000 hour rule, which I didn’t realize applied to my life. Success comes not from innate talent but from years of long arduous practice. That’s uplifting except for the get-rich-quick crowd.

Blink (2005) focuses on the power of snap judgements. Sometimes we’re remarkably perceptive. Other times we stick to erroneous preconceived ideas. Awareness of the process reminds us of biases. That helps us and let’s us harness the power of first impressions for our benefit (even when we’re not there). His article The New-Boy Network seems to be the seed of Blink.

The Tipping Point (2000) shows how a few can create unstoppable momentum. That’s inspiring. You can create change within your own sphere and perhaps beyond. Malcolm also talks about the importance of mavens (experts you trust), connectors (who spread the message to people who may never meet) and salesmen (who motivate to action).

How To

Malcolm doesn’t write “How To” guides but you can extract valuable lessons through introspection. Plutarch said “Know how to listen, and you will profit even from those who talk badly.” Imagine the possibilities from listening to someone who speaks exceptionally well.

If you're new to Malcolm, What The Dog Saw makes a great introduction. If you're familiar with him but sceptical about this book, don’t worry. If you haven’t heard Malcolm read before, the variety makes this book a wonderful introduction.

In What the Dog Saw, the biggest revelation came from Open Secrets, which explains the difference between a puzzle and a mystery. They’re not synonyms. If you're solving a puzzle, you want more and more data. In contrast, you solve a mystery by identifying the few right clues and deducing. That’s a useful new lens.

If you like thinking without getting bored, listen or read Malcolm.

Links

• Reviews of What The Dog Saw (amazon.com) [not an affiliate link]
• Open Secrets: Enron, intelligence and the perils of too much information (Malcolm Gladwell)
• The New-Boy Network: what do job interviews really tell us?  (Malcolm Gladwell)
• Outliers: mastery plus opportunity trumps talent
• Know your strength for more success: Are you a maven, connector or salesman? (Stepcase Lifehack)
• How to make better first impressions

Podcast Episode 62 (4:50)

direct download | Internet Archive page

PS You can find more Malcolm at gladwell.com.

"The Snowball" rolls into Warren Buffett

How much do you know about Warren Buffett's life? My family knew primarily of his staggering wealth. We knew little about his older business partner, Charlie Munger, or Astrid, the companion his wife Susie found for him.

In The Snowball: Warren Buffett and the Business of Life, Alice Schroeder paints a captivating, detailed portrait of the man and key people in his life. The audiobook read by Kirsten Potter runs 37 hours and took three months to finish. This extended listening enhanced the experience and made Warren feel like a part of our lives.

Biographies provide valuable insights into interesting lives. Warren authorized this one and participated. Does that mean the whole story is rosy? No. If there were two conflicting views of a happening, he asked that the less flattering version be used. Alice reveals many blemishes in her quest to help us understand him.

Much of Warren's appeal comes from his wealth. As a person, he's unusual. He brought Moody's manuals on his honeymoon. He doesn't eat a balanced diet and doesn't like to try new food. He neglected his family. He doesn't live a lavish life.

He made investment mistakes over the years. For example, he bought shares in waning textile company Berkshire Hathaway and had an agreement to sell them for $11.50. When the deal got changed to $11.375, he bought the company in retaliation and to his detriment.

Born At An Early Age

Warren focused on making money during childhood. At age 6, he started selling chewing gum. He got inspired by a book called A Thousand Ways To Make $1,000. That's $1,000,000. While in high school, he earned more than his teachers by delivering newspapers. He understood that a dollar today multiplies over the years through the magic of compound interest. This made him reluctant to spend. This made him reluctant to donate until his death, since he wanted to leave a larger sum.

Warren recognized the role luck played. He knew his life would have been very different if he were born at another time or in another country. He wanted to help others who were not as lucky at the Ovarian Lottery. He preferred giving advice over money.

Warren improved over the years. He made the world better for small investors. He supported Main St over Wall St. His actions encouraged better corporate governance. He stuck to his principles for decades.

Legacy

Warren helped make the world better. What more can you ask? He's changed the world of philanthropy. He doesn't want his name on buildings or scholarships the way many others do. He's happy to donate to The Bill and Melinda Gates Foundation with the stipulation that his annual contributions be spent that year.

The Snowball won't make you a billionaire but you will be richer. Highly recommended (especially the unabridged audiobook).

Links

• Warren Buffett's Tough Career Choice: Actuary or Billionaire?
• A Thousand Ways To Make $1,000 (Motley Fool)
• How Warren Buffett Made His First Dime (Parade, Alice Schroeder)
• Does Warren Buffett "Buy Term and Invest the Difference"? (most read post of 2008)
• Does billionaire Seymour Schulich help you "Get Smarter"?
• Richard Branson: When Your Servant is Your Master

Podcast (13:04)

Bonus: includes interviews with Jeevan and Sharmila, who also listened to the full 37 hour audiobook.

direct MP3 download | Internet Archive page

Does billionaire Seymour Schulich help you "Get Smarter"?

The sequel to Bruce Willis' Die Hard is Die Harder. So isn't Get Smarter the sequel to Get Smart, the 2008 movie that grossed $230 million US? Maybe you're old enough to remember the 1960s TV show about inane spy Maxwell Smart.

Get Smarter isn't a movie. Get Smarter isn't about improving your memory or intelligence. Get Smarter is a 2007 book with lessons for business and life from a wealthy Canadian. Seymour Schulich, then a 67 year old billionaire, targeted the 20-40 crowd. 

Canada now has 18 of the world's 793 billionaires according to Forbes (in $US): ranging from David Thomson & family with $13B to Michael Lee-Chin with $1.0B.

You probably got lots of free, unsolicited advice from "wise elders" like your parents. You can get more from self-help books. If you think that wealthier means wiser, you can read books by or about billionaires like Richard Branson, Donald Trump, T Boone Pickens, Bill Gates and Warren Buffett. Does the world need one more?

Schulich Who?

You can find out more about Seymour Schulich on Wikipedia. Although a billionaire, Schulich got support (money?) from the 

• Canadian Council for the Arts
• the Ontario Arts Council
• the Ontario Book Initiative
• the federal Book Publishing Industry Development Program
  

Was this taxpayer support really needed?

There are oddities you rarely find in a book. For instance, how long has Schulich been married? The Introduction says 38 years but the dust jacket says 37. If you forget an entire 365 days, would your spouse keep you until the next anniversary?

Here's another. The Introduction says that many books have "two or three main ideas" but Schulich wants readers to get "twenty to thirty ideas". Quantity over quality? The back cover quotes a reader who finds that most books have "two or three usable ideas" but this book has "twenty to twenty-five great insights". How convenient. This is similar to the odd self-promotion for Daniel Gross' Dumb Money.

You'll find incomplete statements that beg questions. Schulich says he drove the same car for 11 years but doesn't say what car. If it's a Honda Civic, kudos to him. If it's a Rolls Royce or Maybach, shouldn't it last? Does he have only one car? Is he usually driven by a chauffeur, which means he drives little? He also says he's lived in the same house for 30 years but maybe it's a magnificent mansion that's continually renovated. We don't know. Maybe he has multiple properties.

The government involvement and oddities made me cringe. Attention to detail and authenticity are keys to credibility. For your benefit, I read the entire book but skimmed Appendices II - IV. 

Lessons Learned

You'll find valuable lessons in Get Smarter. The cartoons are nice. The chapters are short and easy to read. 

Here are nine points that stood out

1. know your edge: as Seth Godin says in The Dip, "Average people are in the majority, but they're not in demand."
2. use reciprocity, the first of Robert Cialdini's six universal principles of influence
   
3. you won't get truly wealthy if you're paid for your hours rather than your results: read Timothy Ferriss' thoughts on how much you really earn
4. inflation erodes the buying power of your savings but helps you as a borrower: lock in your debt for years when rates are low
   
5. there are no overnight successes: read Outliers by Malcolm Gladwell to understand the importance of the "10,000 hour rule" 
6. be the promoter (and contract-writer), not the promotee
7. givers set limits because takers won't
8. the United States has 5% of the world's population but 70% of the lawyers; these lawyers take 3% of the GNP while the profits of the S&P 500 companies total 6% of the GNP
9. "Fusion power will power all cars electrically and power all homes."

If you're ages 20-40 and haven't read many books, you may find that Schulich shares many treasures. If you want to benefit from government support too, get smart: get Get Smarter from your library. If you want a laugh, watch Get Smart. The movie's funny and so is the TV show. 

Links

• Seymour Schulich biography (Wikipedia)
• Get Smarter website (www.gettingsmarter.ca); out of date
  
• Get Smart (2008) movie (IMDB)
• Get Smart (1965) TV series (IMDB)
• Richard Branson: When Your Servant Is Your Master
• Warren Buffett's Tough Career Choice
• Your Life Expectancy Exceeds 1 Billion Seconds
• The World's Billionaires (Forbes, Mar 2009)

Podcast

direct download | Internet Archive page

Outliers: Mastery plus Opportunity Trumps Talent

The question is not at what point you're capable of doing your job. The question is at what point you've mastered it.
--- Malcolm Gladwell

If you want to become wealthy instantly with no effort and no-money-down, stick with lottery tickets. Success takes time.

We saw the need to persevere to become the best in the world in The Dip by Seth Godin. In Outliers, Malcolm Gladwell confirms the importance of mastery and adds other elements --- some beyond our control.

Why do a few succeed while most fail? Malcolm explains these statistical "deviants" benefit from their ancestry, their culture and where they live. To this fertile soil add sufficient ability, opportunity and 10,000 hours of deliberate practice.

10,000 Hours!?!

It takes 10 years of extensive practice to excel in anything.
--- Dr. Herbert Simon, Nobel laureate

How do you accumulate 10,000 hours? Over 10 years at three hours a day or 20 hours a week. That's a long time but it's achievable, if you

• pick something you love
  
• meet a threshold of ability (not everyone has the potential to sing, act or kick a football)
  
• practice and practice and practice at increasingly higher levels
  

Notice that we don't need massive innate talent to start. We just need "enough". We get to the finish line through continuous improvement (what Toyota calls kaizen).

Examples

• The Beatles: playing 8 hours a night seven nights a week for years in Hamburg
• Bill Gates: early unfettered access to time-sharing computers
• Dustin Hoffman: a 10 year struggle in theatre and film before The Graduate
• you or people you know?
  

While working full-time, I devoted 10 years of study (1984-1994) to emerge as a full-fledged actuary with the requisite technical skills. Then came a decade (1995-2005) of mastering corporate skills (managing staff, leading interdepartmental teams, communicating clearly, planning, scheduling, budgeting, resolving conflicts,...). I'm now working outside the puzzle palace, which requires mastery of people skills such as building rapport, listening and problem solving. Each phase had challenges and risks. And rewards.

You or people you know may have paid their dues in similar ways. Paying dues isn't enough.

Opportunity

The world is not fair. It’s always going to provide more opportunities for some than others. --- Malcolm Gladwell

No matter how prepared and driven you are, you need opportunity too. We might be in the wrong place or at the wrong time. Steve Jobs got computer parts from Bill Packard and summer jobs at HP. Do you think that made a difference?

My boss left in 1995. This created a huge, high-profile vacancy --- well beyond my capacity as a brand-new actuary. Fortunately, management gave me this opportunity and coaching. Would I have reported to a Senior Vice President so early otherwise? No way.

What To Expect
If you've read Blink or The Tipping Point, you'll find that Malcolm uses a similar writing style in Outliers. Each book is very entertaining (especially the audiobooks, which he narrates) and shares ideas for us to think about.

Links

• Malcolm Gladwell's website (gladwell.com)
• Outliers: The Story of Success (amazon.com)
• Outliers: An Issue of Semantics (whakate.com)
• How To Be Good (Thicken My Wallet); also discusses Talent Is Overrated by Geoff Colvin, senior editor of Fortune
• Wise Guy (The Independent UK); refers to Malcolm's Canadian upbringing
• 10,000 Hours (Seth Godin)
• Peak Performance: Why Records Fail (New York Times)
• The talent MYTHconception (new)
  

Podcast Version


download