Archive for the 'Business' Category

I read an interesting theory the other day in an investment guide by Jason Kelly. He sites a 1979 study by Daniel Kahneman and Amos Tversky that looked at the following scenario…

Subjects were told to choose between these two prospects…

Prospect 1: A 100 percent chance of losing $3000
Prospect 2: An 80 percent chance of losing $4000, but a 20 percent chance of losing nothing.

Which would you choose? In the study, 92 percent of the prospects chose prospect 2. The chance of losing nothing, even though it was improbable, was compelling enough to risk losing even more. Prospect one, however, is likely to lose less.

This is an interesting finding and one that contrasts with…

Subjects were then told to choose between these two options:

Prospect 1: A 100 percent chance of gaining $3000
Prospect 2: An 80 percent chance of gaining $4000, but a 20 percent chance of gaining nothing.

Which would you choose? In the study, 80 percent of the subjects chose prospect 1. The guarantee of gaining something was more appealing than the prospect of gaining more. Prospect 2, however, is likely to gain more.

In conclusion the study found that people hate risk when it threatens gains, but they love risk when it could prevent losses. In fact Kahneman & Tversky found that… “loss is painful, on average twice as painful as gain is pleasurable in matters financial.”

This study has wide implications to the whole idea of risk and personal development.

• It helps explain why people stay in dead end jobs instead of taking a risk to find a better one.
• It helps explain why it is hard to get people to speak in in front of an audience and improve their public speaking, when the risk of embarrassment is so high
• It helps to explain why people try to win back their losses in gambling.

This also has some interesting implications for dieting. From the findings it would seem that it would be better to focus on the health benefits of a diet (averting health problems and possible loss of life) versus the gain of a smaller waistline.

One of the conclusions I have come to in this scenario is to ask the negative question that we looked at in our post on risk…

1. What is the worst thing that can happen if I don’t take this risk
2. What is the best thing that can happen if I don’t take this risk

This may help us see that the actual risk might be higher if we don’t do something than if we do.

Something to think about…

In our last post we looked at buried treasure, those personal talents that may be hidden or suppressed in our lives. The first step to find our treasure is to find out who we are.

To find out the “who” we can look at three areas.

1. We need to take a look at our strengths and our personality
2. We need to look at our mission field. Who we can help, train, or mentor. Who are our customers, clients, or students?
3. We need to look at our mentors. People that can help us grow and succeed.

In number one above, there are tests that can help us get a picture of who we are. The first one I would suggest is the Strengths 2.0 test by the Gallup organization.

Currently the best way to take this test is to purchase the book, Strengths Finder 2.0 by Tom Rath. This book includes a membership card in the back that allows you to login to their web site and take the test. The test takes under 30 minutes and will highlight your top five strengths.

This test is highly informative and each of the strengths is outlined in the book. The book will give you a good starting point to build on your strong areas.

It’s also a good idea to take a personality test of some type. I like the Meyers-Briggs test, but there are many to choose from. Many of these tests can be done online for little or no charge. The most complete way to do this is to pick up a book such as What Type Am I by Renee Baron, which includes the Meyers-Briggs test and informative follow-up material.

Once you have taken the tests it great to write down the results on paper. Make a list of your top five strengths and your four quadrant personality type.

In number two it’s nice to make a list of people that you know, clients that you have, and create a comprehensive database list. A good exercise is to take your strengths list and look how you would be able to help or teach the people on this form. Web sites such as LinkedIn and others provide a good way to keep track of these acquaintances and track their talents and strengths.

In number three above, it can be helpful to identify mentors in different strength areas of your life. According to the strengths finder book, it is easier to improve your skills by focusing on your strengths than your weaknesses. If you identify people who share your strengths, you can easily collaborate and grow by sharing information.

As you explore the different areas of your personal talents, it is helpful to keep a journal and track your progress. We’ll dig a little deeper in the chest tomorrow…

In the book of Matthew in the Bible, Jesus tells his disciples a parable about a man going on a journey. This man entrusts his servants with “talents” before he leaves.

1. To the first servant he gives five talents
2. To the second servant he gives two talents
3. To the third servant he gives one talent

A talent in those days was a considerable sum of money, worth thousands of dollars in today’s economy.

In Matthew 25- Jesus relates their actions…

The man who had received the five talents went at once and put his money to work and gained five more.  So also, the one with the two talents gained two more.  But the man who had received the one talent went off, dug a hole in the ground and hid his master’s money.

After a long time, the master of those servants returned and settled accounts with them. It is interesting to note the rewards of their actions…

The man who had received the five talents brought the other five.  “Master,” he said, “you entrusted me with five talents.  See, I have gained five more.”

His master replied, “Well done, good and faithful servant!  You have been faithful with a few things; I will put you in charge of many things.  Come and share your master’s happiness!”

The man with the two talents also came.  “Master,” he said, “you entrusted me with two talents; see, I have gained two more.”

His master replied, “Well done, good and faithful servant!  You have been faithful with a few things; I will put you in charge of many things.  Come and share your master’s happiness!”

Then the man who had received the one talent came.  “Master,” he said, “I knew that you are a hard man, harvesting where you have not sown and gathering where you have not scattered seed.  So I was afraid and went out and hid your talent in the ground.  See, here is what belongs to you.”

His master replied, “You wicked, lazy servant!  So you knew that I harvest where I have not sown and gather where I have not scattered seed?  Well then, you should have put my money on deposit with the bankers, so that when I returned I would have received it back with interest.

“Take the talent from him and give it to the one who has the ten talents.  For everyone who has will be given more, and he will have an abundance.  Whoever does not have, even what he has will be taken from him.  And throw that worthless servant outside, into the darkness, where there will be weeping and gnashing of teeth.”

Matthew 25:14-30 (NIV)

While there is great significance in this parable from a spiritual and moral sense, it is interesting to view this in the concept of our personal talents. We all have talents, but like the third servant, many of them may be covered up or buried deep in the ground.

From a personal development viewpoint, we may have considerable buried treasure in our lives, just waiting to be dug up and opened. As in the parable above…

• If we uncover our talents and invest them wisely, there will be a considerable reward.
• If we do nothing with them, one day we may be called to account for them and find that difficult consequences await.

This parable hits home with me in various ways. From a career standpoint, I have found that there are many talents that are needed for today’s modern workplace. One simple example comes back to me almost everyday.

I took Microsoft Word, Excel, and Powerpoint classes back in the late 1990’s. I didn’t realize the importance of the classes at the time, but they have been incredibly helpful over the years.

Just knowing how to setup a graph in Excel or create an outline in Word, have been very useful on my job. I use them almost every day.

I can’t tell you how many people that I work with struggle with Powerpoint presentations. I am often called in at the last moment to get a presentation going or to get the computer to communicate with the projector.

Using our talents can have a profound effect on our lives. Instead of just letting our lives move aimlessly along, if we develop our talents, we can move ahead in a successful and deliberate manner. We can turn these individual talents into an incredible treasure.

For many of us this personal treasure can be explored by looking into seven different areas… and asking some direct questions…

Who
1. Who am I and what are my strengths?
2. Who are my customers/clients?
3. Who are my mentors?

What
1. What great thing would I do if I knew I could not fail?
2. What small things can I learn that will help me along the way?

Where
1. Where do I work?
2. Where is my mission field?
3. Where am I going?

When
1. When will I start?
2. When will I finish?
3. When is success?

How
1. How will I get there?
2. 12 month, One Year, and Three Year Goals

Why
1. Why am I doing this?
2. What is my purpose?

Risk
1. What is the best thing that can happen if I do this?
2. What is the worst thing that can happen if I do this?
3. What is the best thing that can happen if I don’t do this?
4. What is the worst thing that can happen if I don’t do this?

Answering these questions can take some doing. First we have to find and dig up our treasure chest. Then we have to unlock it and discover the hidden talents. Then comes the fun part… once the talents have been cleaned up and polished, we get to spend our treasure. With our new found talents it might be a business, a new job, or a mission trip to a far off land. The possibilities are endless.

Are you ready to find your treasure?

Back in the late 90’s housing prices started to rise at a significant rate here in the United States. From California to Maine prices were going up at a steady clip. Housing had finally climbed out of a long recession and the future looked bright.

As we came into the new millennium, prices kept going, fueled this time by ever lower interest rates. Suddenly we were seeing home prices go through the roof. The previous year’s $200,000 dollar house was now over $300,000.

As prices rose, lenders were in a frenzy to keep up. Suddenly the average Joe wasn’t able to qualify anymore. Something had to happen to keep this incredible momentum going.

Lenders came out with all sorts of programs, from interest only loans to adjustable loans with a teaser introductory rate. The housing market continued its rapid climb. As the average price climbed over $400,000 in some of the hotter markets there was suddenly some additional problems getting people qualified.

Enter the interest only, subprime adjustable loan with a teaser introductory rate. This baby had it all! Almost anyone could qualify for this 1% introductory rate. In most cases this rate would last at least 6 months or a year… enough time for housing prices to rise again.

The lenders didn’t mind that most of their borrowers could not possibly qualify for this loan amount with a standard 30 year loan… hey prices were going up like a rocket. With the skyrocketing prices, if the customer couldn’t pay, they would just foreclose and make even more money.

Unfortunately the bubble burst in 2005-2006 as interest rates started to climb and previous buyers were starting to have problems paying back their loans.

Home buyers had bought a payment, and now that payment was going through the roof. Unfortunately for the buyers, that house with the $2000/month payment was now a house with a $3000/month payment. That $500,000 dollar house didn’t look so good anymore and was almost impossible to sell.

The buyers market dried up quickly and home prices started a steady decline. This started a snowball effect that rippled through the stock market as the subprime lenders found themselves with a mass of defaulting loans. Stock prices on companies that had provided these loans dropped like a rock.

But the pain didn’t stop there. Local and state governments that were used to the property tax windfalls that these high home prices had produced, were now seeing their coffers beginning to empty. New homes weren’t selling and local school districts were not getting their developer fees.

The snowball continues to roll with state governors (such as Arnold Schwarzenegger) announcing 10% or higher cuts in the state budget for education and needed services.

It’s interesting that allowing such unrealistic loans caused so much pain. Should we ban such loans in the future or will they come back again as the economy improves? Will we continue to sacrifice long term stability for short term profit?

We saw what happened in the late 1990’s with the herd mentality and the IPO’s of one Internet company after the other driving up stock prices. This time around it was the herd driving housing prices through the roof.

An interesting book on the subject is The Wisdom of Crowds by James Surowiecki. The crowd mentality in this case surely comes into question, as buyers were led into an unforeseen situation where costs went up and equity prices came down.

Unfortunately many people will lose their homes and others will be out of jobs because of this phenomenon. It really brings up the question… should you follow the crowd?

It’s an interesting fact that when people want to buy something they follow the crowd. They line up to buy the latest gadget from Apple, buy the latest clothes at the Macy’s, and rush to buy a new home when the prices are skyrocketing.

In the last few months the stock market has dropped dramatically and there is talk of a recession in the air. The price of homes have dropped to levels not seen in four or five years. New cars and trucks have incredible incentives. Yet people aren’t buying.

Why aren’t homes that were priced over $500,000 a short while back not selling at $300,000? Surely this same home is much more of a value now and the resulting property taxes are much lower. Why is the new home sales office empty when there were people camped out at the same office just a few short years ago?

It is an interesting dichotomy that sometimes people buy when things are overpriced and turn away in droves when they are a bargain. Why were people willing to pay $200 a share for Apple stock just a few months ago and now are having trouble buying the same stock for $130?

If we take a step back from the hype and marketing frenzy, there are some incredible bargains to be had. And the good thing is they are many different products available if we are willing to look.

The secret is timing… Buy incredible products, services, or stocks when no one else wants them. Since most things go in cycles, what is down now may surely go back up. Just be sure to buy quality.

Here are some examples of great deals that are available on a regular basis.

1. Cars: Why buy a new car when you can buy a quality used one a year old for an average savings of $5000? You still have the manufacturers warranty to fix any problems you may have and no one will really know the difference once it is in your driveway.
2. Homes: Home prices go in cycles. Just look back in history and you’ll see home prices complete a cycle in about 6-7 years. Buy at the bottom of the cycle and you’ll save tens of thousands of dollars.
3. Stocks: Stock prices go up and down at the whim of Mr. Market. The secret… Buy great companies at bargain prices. An interesting book on the subject is Rule #1 Investing by Phil Town. Phil will show you how to figure the “sticker price” of a company and then plan a strategy to buy it when it’s 50% off.
4. Outlet Malls: They have all the designer clothes that were super expensive just a few months ago at amazing prices. Shop here on holiday weekends and you may save even more. If you get on the mailing lists of the popular stores, you’ll routinely receive coupons in the mail for even better savings.
5. Celebrate Christmas on New Year’s: Can you imagine how much money you would save if you celebrated Christmas a week late? You can buy all the Holiday items at 50-70 percent off the day after Christmas including the tree. You’ll also save enormous amounts of money buying gifts in the after Christmas sales. Hey… you probably get New Year’s off anyway.

These are just some ideas to help you save a lot of money. And we shouldn’t forget the best shopping day of the year, Black Friday (The Friday after thanksgiving) where stores give things away under their cost just to get you in the doors (You will have to stand in line though).

I would love to hear of bargains that you have found!

Facts are everywhere. We have facts about almost every conceivable thing in existence. Facts may have names, numbers, and numerous bullet points. Facts fill volumes of dictionaries and encyclopedias. And there is one thing that all facts have in common…

Facts by themselves are boring!

Fill any Powerpoint presentation with bullet points of facts and you’ll likely put your audience asleep. Blog about facts and your readers may not make it to the end of your post. Strike up a fact filled conversation and watch the eyes glaze over.

In your next speech, just give them the facts and you’ll probably find that your only audience member that is left awake is Joe Friday. And you’ll also find one other important thing…

Facts are not memorable!

When you just present a list of data, most people cannot remember it. You’ll be lucky if your intended recipient can remember the first item on the list. That is because…

Facts are inherently slippery.

The bigger the numbers and the longer the names, the harder it will be to remember the items. Facts are like teflon to our minds… they just don’t stick.

In business, sales, and in most any conversation we all have facts that we would like to convey in a memorable way. We want to get our fact filled ideas across.

So how can we do this?

Here are three trios that I think may help to get your points across.

The Three C’s: Contrast, Context, and Comparison

Contrast: When you look at a square of yellow by itself it’s just that… a square of yellow. But if we surround our square of yellow with a black color, our eyes suddenly see the contrast and the yellow pops.

Context: When you take similar items and add something dissimilar you have taken something out of context. This item sticks out and is quickly recognizable.

Comparison: When you have data by itself it usually doesn’t mean much. But when you can compare your data with other data in a graph or other comparison format, your data really stands out.

The Three P’s: Picture, Presentation, & Performance

Picture: They say a picture is worth a thousand words. Frame your facts with pictures and people will be able to SEE what your facts are all about.

Presentation: Present your facts in an interesting way using graphics, icons, and pictures for added emphasis. Add emotional pictures to draw people into your story.

Performance: When you take your facts, weave them into a story, and present them in a live performance, you’ll bring your audience into the story and make the facts come alive. This performance can be a speech, a play, or even a business simulation.

The Three S’s: Stories, Surprise, & Strategy

Stories: Tell a story… make a point! Stories are inherently powerful tools for making your ideas stick. People remember stories, especially if you add word pictures and emotion. Powerful stories are like duct tape for your facts. They will stick!

Surprise: Add the element of surprise to your facts. Find things that don’t add up or are intriging. The element of surprise is a powerful way to keep your audience on the edge of their seats. Unfortunately, surprise only works once, so make sure to keep it a secret until your are ready to reveal it.

Strategy: Tie your facts together into a purposeful strategy. Paint the vision and the path for your audience and they will come along for the journey. A great strategy is inherently interesting.

Take these ideas and use them together to take your boring facts and make them memorable. Outline a strategy, add contrast and surprise and put your audience into a compelling drama. Tie this together with a compelling performance and your next presentation will surely be a memorable one.

For a compelling read on this subject, be sure to pick up a copy of Made to Stick, by Chip and Dan Heath.

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