And this is how it starts…
At a party given by a billionaire on Shelter Island, Kurt Vonnegut informs his pal, Joseph Heller, that their host, a hedge fund manager, had made more money in a single day than Heller had earned from his wildly popular novel Catch-22 over its whole history. Heller responds, “Yes, but I have something he will never have … enough.”
Bogle in a commencement speech at Georgetown University in May 2007. You can’t do better than this in defining YOLO…
No matter what career you choose, do your best to hold high its traditional professional values, now swiftly eroding, in which serving the client is always the highest priority. And don’t ignore the greater good of your community, your nation and your world. As William Penn pointed out, “We pass through this world but once, so do now any good you can do, and show now any kindness you can show, for we shall not pass this way again.”
Why Wall Street is so despised…
I am reminded of a story, perhaps apocryphal, I recently read about an investment banker addressing his colleagues after the collapse in the mortgage-backed bond market. “I have bad news and good news. The bad news is that we lost a ton of money. The good news is that none of it was ours.” This story provides yet one more reminder that, for the most part, what is good for the financial industry is bad for you.
Adhering to the tried and true standards of sound money management as described by Benjamin Graham in the Financial Analysts Journal of May-June 1963…
It is my basic thesis – for the future as for the past – that an intelligent and well-trained financial analyst can do a useful job as portfolio adviser for many different kinds of people, and thus amply justify his existence. Also I claim he can do this by adhering to relatively simple principles of sound investment; e.g., a proper balance between bonds and stocks; proper diversification; selection of a representative list; discouragement of speculative operations not suited for the client’s financial position or temperament – and for this he does not need to be a wizard in picking winners from the stock list or in foretelling market movements.
John Maynard Keynes on the difference between investing and speculating…
Keynes defined investment – he called it “enterprise” – as “forecasting the prospective yield of an asset over its entire life.” He defined speculation as “the activity of forecasting the market.”
“When enterprise becomes a mere bubble on a whirlpool of speculation [and] the capital development of a country becomes a by-product of the activities of a casino, the job of capitalism is likely to be ill-done.”
Warren Buffett on what an investment earns vs. what a business earns…
“The most that owners in the aggregate can earn between now and Judgement Day is what their business in the aggregate earns.”
“When the stock temporarily over-performs or under-performs the business, a limited number of shareholders-either sellers or buyers-receive out-sized benefits at the expense of those they trade with. [But] over time, the aggregate gains made by Berkshire shareholders must of necessity match the business gains of the company.”
On pro-forma earnings…
A ghastly formulation that makes new use (or, again, abuse) of a once-respectable term – that report corporate results net of unpleasant developments. Such “no bad stuff” calculations are one more step in the wrong direction. Even auditor-certified earnings have come under doubt, as the number of corporate earnings restatements has soared nearly 18-fold – from 90 in 1997 to 1,577 in 2006. Does that sound like punctilious corporate financial reporting? Hardly. Indeed, it sounds like precisely the opposite.
Our financial system has, in substance challenged our corporations to produce earnings growth that is, in truth, unsustainable. When corporations fail to meet their numeric targets the hard way – over the long term, by raising productivity; by improving old products and creating new ones; by providing services on a more friendly, more timely, and more efficient basis; and by challenging the people of the organization to work more effectively together (and those are the ways that our best corporations achieve success) – they are compelled to do it in other ways; ways that often subtract value from you, from me, and from society.
Companies that trust vs. companies that count. Bogle on the culture at Vanguard…
Our strategy arose from a conviction that the best corporate growth comes from putting the horse of doing things for clients ahead of the cart of earnings targets. Growth must be organic, rather than forced.
“For god’s sake, let’s always keep Vanguard a place where judgement has at least a fighting chance to triumph over process.”
Bill George, former chief of medical technology pioneer Medtronic on trust…
“Trust is everything, because success depends upon customers’ trust in the products they buy, employees’ trust in their leaders, investors’ trust in those who invest for them and the publics’ trust in capitalism…If you do not have integrity, no one will trust you, nor should they.”
The implications of not acting like true owners…
When investors are focused, not on the intrinsic value of the corporation, but on the price of its stock, assuming some responsibility for corporate governance is the first casualty. Why be concerned with proxy voting, for example, if you may not even be holding the shares a year later?
And so in the recent era, negligence and profusion have prevailed among our corporate directors and our money managers, even to the point of an almost complete disregard of their duty and responsibility to the corporations’ owners. Too few seem adequately aware of the lack of the “anxious vigilance” over other people’s money that once defined professional conduct. To paraphrase Upton Sinclair: “It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it.”
Difference between a manager and a leader by Prof. Warren Bennis…
- The manager administers; the leader innovates.
- The manager is a copy; the leader is an original.
- The manager maintains; the leader develops.
- The manager focuses on systems and structure; the leader focuses on people.
- The manager relies on control; the leader inspires trust.
- The manager has a short-range view; the leader has a long-range perspective.
- The manager asks how and when; the leader asks what and why.
- The manager has his or her eye always on the bottom line; the leader’s eye is on the horizon.
- The manager imitates; the leader originates.
- The manager accepts the status quo; the leader challenges it.
- The manager is the classic good soldier; the leader is his or her own person.
- The manager does things right; the leader does the right thing.
Rules for building a great organization…
- Make Caring the Soul of the Organization –
– Mutual respect from the highest to humblest amongst us.
– Opportunities for career growth, participation, and innovation.
- Forget About Employees – To me, an employee suggested someone who came in each day at nine, left promptly at five, did what he was told, kept her mouth shut, and got paid, just like clockwork, when the workweek ended. A crew member, while it may sound sort of, well, corny, suggested to me an excited, motivated, committed – yes, caring – person who was part of a crew in which we all worked together on a worthwhile voyage, part of a chain that could be no stronger than its weakest link. That’s the kind of crew I wanted to lead, one linked together, each dependent on the other.
- Set High Standards and Values – and stick to them – “Do what’s right. If you’re not sure, ask your boss.” Why so? Because as I’ve said a thousand times: “Good ethics is good business.”
- Talk the Talk. Repeat the Values Endlessly – Building a great organization demands finding the right words to communicate the best ideas and the highest ideals, words that convey purpose and passion and vision.
- Walk the Walk. Actions Speak Louder Than Words –
– Whether manager or leader, there are few more self-defeating courses of action than “talking the talk” without “walking the walk.” So whatever you preach, you’d darn well better practice.
– But there’s another aspect to walking the walk – its literal meaning. Walk around your company, or department, or unit, or group. Personal visibility is one of the key elements of leadership, and it doesn’t happen when you’re sitting behind your desk.
- Don’t Overmanage.
- Recognize Individual Achievement.
- A Reminder – Loyalty Is a Two-Way Street.
– Lead and Manage for the Long Term –
– “Once you decide whether you expect to be in business for a short time or a long time, most of the right decisions are easy.”
- Press On, Regardless – Words from President Calvin Coolidge: Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan “Press on” has solved, and always will solve, the problems of the human race.
Joseph Schumpeter in his Theory of Economic Development, written nearly a century ago, on the description of a true entrepreneur…
- The joy of creating, of getting things done, of simply exercising one’s energy and ingenuity, and
- The will to conquer: the impulse to fight,…to succeed for the sake, not of the fruits of success, but of success itself.
On choosing a career…
No career is the right career if it is undertaken solely to get rich, or to gain public fame, or to throw one’s weight around. Nor is it the right career if it is undertaken to meet the expectations of others. And no success is the right success if it is achieved at society’s expense. The proper measure? Your own expectations, and making the most of your talents.
David Brooks on the stark financial polarization in our country…
On the one hand, there is the investor class. It has tax-deferred savings plans, as well as an army of financial advisers. [On the other hand,] there is the lottery class, people with little access to 401(k)s or financial planning but plenty of access to payday lenders, credit cards and lottery agents. … The loosening of financial inhibition has meant more options for the well-educated but more temptation and chaos for the most vulnerable. Social norms, the invisible threads that guide behavior, have deteriorated. Over the past years, Americans have been more socially conscious about protecting the environment and inhaling tobacco. They have become less socially conscious about money and debt.
More from this amazing little book at https://www.amazon.com/Enough-True-Measures-Money-Business/dp/0470524235.