Category Archives: Economics
If you haven’t seen the CNBC show “The Profit” then you absolutely must. Marcus Lemonis is a business genius and he is learning and becoming smarter every single day with every single new deal he makes. The show’s basic premise is that Marcus comes and visits a potential business and determines if he can make a deal with the owners to become and active investor in the company and teach them how to become very profitable.
Since discovering this show I have absolutely fallen in love with it. This guy actually has my dream job. Part of the reason I chose the jobs that I did over the years was to expose myself to multiple different industries. To learn how they work, and to satisfy my deep curiosity for how a variety of businesses operate and become successful.
My dad is a sales guy through and through. He left the coal mines to strike out on his own because he just couldn’t take being in the mines anymore. He wanted to determine his destiny and knew the sales path was it. As long as he believed in the product he knew he could sale it. Recently one of my dad’s friends mentioned that my dad could sell ice to an eskimo. It is kind of a compliment to someone’s sales ability to say that, but I know my dad could never really sell anything he didn’t believe in and people respect him for it and trust him deeply.
Since I was a teenager I have been influenced by my dad immensely and have sought out other experienced business men and women that I could learn from. If I wasn’t making connections with business owners I was reading about them. I’ve read business classics such as Think and Grow Rich by Napoleon Hill and The Richest Man in Babylon by George Clason to more modern books such as The Millionaire Next Door, and hundreds if not thousands of others. For all intensive purposes I am one of the world’s experts on business without having ever actually started my own business. I say that not to puff myself up with pride, but to actually berate myself for waiting forever to start my own business to put all I know to the test.
The truth of the matter is that some people are just born to lead. They have to do their own thing. They must be in charge and they must determine their destiny. And most importantly, they must be in control.
That is one of the constant themes in the show. These business owners are full of pride, both to their benefit and to their detriment, the classic double edged sword. Marcus himself is a so called “Type A” personality. Someone who needs to be in charge, and wants it done his way. As I watch the show I see it over and over again. Will the prideful business owner let their pride fall down and allow Marcus to call the shots, or will they let their pride keep them from turning their business into something really great?
Which brings up one of the greatest lessons I have ever learned in the business world. It is repeated in all the business literature over and over and yet I really don’t believe people really get it. The ability to lead is also the ability to follow. To learn to lead one must first learn how to follow. Over and over again it is repeated and falls on mostly deaf ears.
Marcus focuses on three things: people, process, and product. Out of the three, people is far and above the most important thing. Yet you can have great people and still get the product and process wrong. That is the opportunity Marcus looks for. The chance to work with great people and improve their product and process by investing his money into the business to change it for the better.
I think we can all recognize that people is the most important thing. Think about your years as an employee or even a business owner. Some of us have left great jobs that had horrible bosses. And some of us have stayed in horrible jobs because we worked for great people. Business owners number one complaint is that they can never find good people to work for them. And as my dad always said, “All business is people business”.
So where do we go from here? I am still thinking about why I haven’t started my own business. My excuse is that I haven’t found a good idea, but I have tons of ideas. Perhaps my excuse is that no idea is good enough. Or that I might be happier just being an employee. It has worked this long. Why not just keep progressing in my career, and keep jumping to different industries when I get bored?
Maybe my biggest fear is that I would get stuck in something I would come to hate. However, I do think that is just another excuse. I am trying to cross a bridge I haven’t even come to yet.
At the end of the day, I pretty much have no choice but to do it. I have spent the better part of my life, starting as a teenager, studying what it takes to be a successful entrepreneur. I am more prepared than practically any other business owner that starts a business. Another lesson is that a leader has a strong proclivity for action even without a lot of information to go on. I suffer from the classic “analysis paralysis” disease.
The time has never been more ripe then now. I just need to take the leap. Starting a business will certainly be the biggest personal development course I could ever take in my life. It will certainly be eye opening and help show me what I am really made of. It is my greatest challenge yet, and there really is nothing to it but to do it.
This has been an idea brewing in a lot of people’s heads lately. These two movements just seem to come together naturally.
And I am excited to say that today two of the leaders of their respective movements came together to talk about how these two huge ideas merge.
Jack Spirko hosted Robb Wolf on his Survival Podcast and it was a great show. Here is the link…
They start out with some of the low level stuff and get to the “30,000 feet level” pretty quick, as Robb puts it.
I love thinking about how we can make our lives healthy and sustainable. And I think these two big concepts get the majority of things right.
We are all still learning how to best optimize our lives, but I think anyone can benefit from learning about these two big concepts. Enjoy!
The U.S. Congress sets a federal budget every year in the trillions of dollars. Few people know how much money that is so we created a breakdown of federal spending in simple terms. Let’s put the 2011 federal budget into perspective:
· U.S.income: $2,170,000,000,000
· Federal budget: $3,820,000,000,000
· New debt: $ 1,650,000,000,000
· National debt: $14,271,000,000,000
· Recent budget cut: $ 38,500,000,000 (about 1 percent of the budget)
It helps to think about these numbers in terms that we can relate to. Let’s remove eight zeros from these numbers and pretend this is the household budget for the fictitious Jones family.
· Total annual income for the Jones family: $21,700
· Amount of money the Jones family spent: $38,200
· Amount of new debt added to the credit card: $16,500
· Outstanding balance on the credit card: $142,710
· Amount cut from the budget: $385
Credit: DAVID THOMAS
Chief Executive Officer
Equitas Capital Advisors LLC
August 2nd 2011 just became a significant day in U.S. history. The day that the U.S. Congress and the President decided to make a hard deadline for coming to an agreement on a spending bill.
Unfortunately I fear that this will be more business as usual in Washington.
We failed to see any type of balanced budget amendment. However, it seems good that any increases in the debt ceiling are now linked to similar spending cuts.
The problem is that they created a significant loophole for the President to increase the debt ceiling without Congress approval if they fail to come to a compromise on a budget by the end of next year.
As I said before in Will The U.S. Ever Pay Off Its Debt, I fear that the U.S. will keep increasing the size of their debt hoping that inflation will help to mitigate some of the downside of that debt.
And we will all be poorer because of it. Especially the poor and middle class, but nearly everyone will suffer from it in the future.
Here’s to hoping we get our strategic finances figured out, and position ourselves for a better future…
What many people have been talking about for years is finally making the mainstream press. Politicians are starting to talk about it. Michael Moore even made a movie about it…
Debt is power for the one who loans the money, not the debtor.
Any debtor that can not pay back their debts will eventually go bankrupt. The trend for many years has been that the U.S. pays past debts by creating new debts. Will this game continue as it has? It’s probably not sustainable, but so far it has worked. What you need to be afraid of is not how it will stop working, but when…
The answer is that the U.S. does…
Currently the U.S. holds about 50% of its own Treasuries to help pay for entitlement programs such as Social Security and Medicare.
Foreign Governments, with Japan and China being the largest, own about 25%.
Institutional and Individual investors make up the the other 25%, with U.S. state and local governments making up the majority.
With governments owning most of the U.S. debt, why should it be such an issue? Why is it such an issue that foreign governments own so many U.S. Treasury bonds?
Ask yourself why they buy them in the first place and you will have your answer…
They buy them so that they will have a secure revenue stream in the future. If returns are guaranteed then governments are better able to budget in the future. They will better be able to still provide government services even if their tax revenues go down.
This is why China doesn’t want to let their currency inflate against the dollar and why the U.S. wants it so badly. All their investment in U.S. Treasuries won’t count for much if they make less than what their inflation rate is.
So why does the U.S. sell so many Treasuries?
For the opposite reason from why other government buy them. Because they don’t currently have enough tax revenue to pay for everything they want. (i.e. a large technologically sophisticated military, big government pensions and payrolls, social security/medicare allowances, etc.)
The U.S. federal government is betting on inflation, while other governments are betting against it. If the dollar continues to inflate then U.S. debt will be washed away. All those dollars of debt will seem small years from now as inflation grows. (Think of the cost of goods 50 years ago…)
Maybe other governments aren’t necessarily betting against inflation. They are betting that the interest rate they get on their loaned money would at least beat inflation. (i.e. They get an interest rate of 4% while inflation stays at 3% or less.)
In the end, the debtor always loses…
By taking on so much debt the government almost forces itself to cause inflation as best they can. They continue to borrow money, dump it into the economy in the form of stimulus, keep interest rates low, and everything else within their power to do, just to keep inflation going, so they can keep borrowing more.
It is a cycle that is hard to escape without changing the whole system.
“Why pay for something now, that you can pay for later?” Simple and easy, yet morally wrong, is the way I would put it.
So will the U.S. ever pay off it’s debt?
The short answer is… No, not in total.
The long answer is… Yes, if it want to keep paying for all the government services that it provides.
Many people think that we are near our max on the credit card, and spending has to be cut. The question is, will our leaders have the fortitude to make those cuts now, or will they be forced to in the future?
Or, will inflation save the day? And we can keep spending like none of this matters?
I fear it’s the third idea that is in too many of our leaders heads. And its a risk I wouldn’t want to take. Would you?
Our leaders are hoping that the American culture will continue to support that idea, and so far it has. People keep spending with no end in sight.
Money is power.
And he who has the money makes the rules.
Fun times for us all to be living in. Wouldn’t you agree?
The saga continues…
Weakening the dollar here causes inflation to happen abroad as investment money flows out of the U.S. and into China.
That’s the news over at Sovereign Man in his article also named Bernanke’s Inflation is Fueling a Bubble in Asia.
Real Estate prices are soaring and getting past the point of profitability. Rents simply aren’t keeping up.
These and other indicators are signs of a coming bubble.
Many other nations are also manipulating their currency to keep it from rising so fast against the dollar, and causing prices to soar on all things, including commodities.
All of this continues to amaze me as I think about just how interconnected the world economy is, and how much we rely on each other.
It also makes me think about how I can best prepare for the future. Where my money should be invested. And what skills I should gain as we continue on into this future we are putting together.
To QE or not to QE, that is the question…
As many of you know the U.S. Federal Reserve has been kicking around the idea of doing a second round of Quantitative Easing… Scratch that… Its a done deal…
In simple terms, this just means increasing the money supply so as to artificially create inflation. This is one of the main weapons the Fed has to use in a deflationary environment…
In an inflationary environment the Fed often raises interest rates to help slow inflation. By raising interest rates they make it less preferable for businesses to borrow and thereby artificially slow growth.
Currently, we have interest rates that are practically ZERO and we are still precariously close to a deflationary environment. Why? It’s not that people can’t borrow, its that they don’t want to…
When we have high inflation it encourages people to borrow more because they can pay of the debt in the future when their money is worth more. When there is deflation it destroys people with debt because the money they have now is worth less then when they originally borrowed it. They essentially are losing money on the deal, regardless of the interest rate they borrowed at.
Think about it. If you borrow money at 4% and inflation is moving along at 3-4% then inflation quickly overcomes anything you might lose through paying the interest. Assuming you are still making money at today’s inflated rates.
“Deflation benefits low debt consumers and those on fixed incomes, because they receive a fixed number of dollars but can buy more with each dollar.” – InflationData.com
All these things go hand in hand…
U.S. citizens went from a negative savings rate to a savings rate as high as 6% because they were hedging their bets against inflation. If you have high inflation it makes no sense to save money that will simply be worth less in the years to come. However, if deflation is occurring the money you save now will be worth more in the years to come.
Back to QE2… Why is it happening? What does our government have? LOTS of debt! What environment benefits debtors the most? An inflationary environment. What does QE do? It puts more money into the money supply thereby creating artificial inflationary pressures. Therefore, it is pretty safe to say, the U.S. will continue to do everything it can to create inflation.
Now let’s look at China real quick…
They don’t want to let their currency appreciate. Why? They are the savers of the world. They will benefit more by keeping their money supply where it is at rather then letting it appreciate. All the money they have saved and invested will be worth less if their currency becomes inflated.
It is a financial war that is going on not unlike the Cold War. Except this time it is a war over who has the most money stockpiled rather then nuclear arms. The U.S. has always won this game by creating inflation. Will China bend to their will or try to play the game on their own terms?
Time will tell, but for now, I would certainly say that inflation will continue and we should plan for it…
This may offend some people, but I don’t know how important intellectual property is these days. Or even if it ever was that important…
You invent a product, design, process, etc. and spend a lot of time and money getting it patented. Then you make a few bucks on it, and if it is even remotely successful, you have to spend a whole lot more time and money to protect your patent.
Meanwhile, people who make and market a slightly different product are making a killing without all the extra costs. They are producing it faster and cheaper then you ever could. It’s the continuing story of business everywhere… “Inventors make the product, Distributors make the the profit.” Just think of Amazon or Ebay…
This story is really playing out in China…
I just read an article over @ Sovereign Man entitled “Can Your IPhone Do This?“. It talks about how China continues to take technology and make it better….
Direct Quote: “This is a central theme among Asia’s technology developers. They start with a basic idea (like supercomputers, military aircraft, or mobile phones), analyze what the foreign companies are doing well, figure out how to make it better, and eliminate any dependency on western suppliers.”
Some of the best products are made from people who don’t care about gaining a patent and maximizing the profit they can ring out of it. Think Open Office, the free option that replaces Microsoft Office…
If you have a business that innovates you should definitely be watching the news on China and take some pointers from them. Whether you like it or not, the profits will flow to those who keep producing. Not those who rest on their laurels…
Three most important things needed for success…
Of the three, the most important is Integrity, because you really don’t want to do business with someone who is intelligent, energetic, but lacking integrity.
Warren really just spews wisdom… (Hope you don’t mind the word picture) 😉
Some good points…
1. More money doesn’t do much. Warren lives much like we live even though he is much richer.
2. Take a job that you would take even if you were independently wealthy.
3. Warren likes businesses he can understand… which narrows it down about 90%
4. If you are right about WHAT, then you don’t have to focus too much on the WHEN.
I have to admit I am an information junkie. I love to read anything and everything. A lot of it ends up being entertainment, a lot of it is worthless, and perhaps less than 1% is useful.
I just read an article called “Why I Threw Away Thousands of Dollars of Information Products”
Bud’s main point in the article is that information overload breeds inaction.
He couldn’t be more right…
You see I’ve spent a lot of time reading anything I could get my hands on about business… and economics… and psychology… and investing… and this… and that… and …. It gets tiresome after awhile. And after a bit it becomes a pointless waste of time when you think about how much of that information I am actually making use of.
“Reading, after a certain age, diverts the mind too much from its creative pursuits. Any man who reads too much and uses his own brain too little falls into lazy habits of thinking.” – Albert Einstein
I think I may be reaching that certain age… Some of what I read sounds exactly like what I have already read in the past… This is why I believe reading the classics will always be best…
The best thing for any business or person to do is to find what works and stick with it. Pursue it relentlessly. When it stops working find what else will work in it’s place. This is where you will search for new information, but once you find it, you just continue to execute and create until the cows come home.
“Everybody gets so much information all day long that they lose their common sense. ” – Gertrude Stein