All about Work and All about Money – (An Introduction)

Some of you know that I have been planning for a while to write a book (or two) about work and money. I want to write about how to work well, so that we can become happier and more fulfilled in our work. I want to tell about how to get enough money to live well, and how to save and invest it wisely.

Not everyone will want to read my books, but there not many people who lack interest in work and money. You may rightly ask if there is anything more to be said after so many books have already been written on these subjects. My answer is that many people do not succeed in terms of enjoying their work, even if they earn plenty of money and rise to positions of importance. Few people know enough about their work and money to use it to full advantage in their own life, and also in their family and community. Some people even suspect that money is mostly evil and that work is essentially organized to frustrate you (which is an understandable viewpoint).

You might also ask about my qualifications to write about these big subjects. I could mention a Harvard degree; years spent working in big banks and on Wall Street in New York, in Frankfurt, Germany, in Vancouver, Canada, and elsewhere. Furthermore, I have managed during my career to earn lots of money and to rise through the ranks to become a chief financial officer, a chief operating officer, and a chief executive officer of two public companies in Canada. I have been responsible at various times for managing groups of employees ranging from a dozen, 500 and up to 15,000 people reporting to me, directly or indirectly.

But my biggest qualification to write on these topics comes from a lifetime of survival in the school of hard knocks. Hopefully, by reading what I have experienced, you might avoid some difficulties and achieve your goals and ambitions more quickly.

These books will contain occasional anecdotes about the pinnacles of finance and corporate life but they will be more about the every-day work that most of us do. Right now, in my retirement, my work is gardening, managing a construction project, and cooking meals for those who live here or visit us. My career also began at simple level: working on a farm, and in carpentry, masonry and other basic jobs. In many ways, the most important aspects of our jobs are similar, whatever our job and function.

In the world of work and money we all experience failures, big and small. In recent years I have spent some time helping street people, the homeless, and chronically unemployed people. There seems to be very little I can do for them compared to their enormous needs. But if they had perhaps known the right things about work and money early in their lives, I believe some of these unfortunate people might have avoided extreme poverty and wrenching disappointments.

I am trying to write for a large cross section of people in various types of jobs, those with little or lots of money. The issues and questions are similar, whether we work on a high-up level or in a more “ordinary job”.

Until I get ready to publish my books, there will be no tight outline of the topics – sorry for the disorganization! If you want to correspond with me, please write an email to paul.wagler@gmail.com. I would appreciate your comments, questions and feedback!

Meanwhile, enjoy your work and save some money!

Building Yourself a New House

I have dreamed since childhood – as you may have also – of building a house of my own design. It would incorporate everything I could imagine wanting in a house and it would reflect my unique personality.

Like most childhood dreams, this one got delayed many decades until my wife and I retired. Then, feeling well-off, we embarked on this dream. We hired an inspired architect, gave him our long wish list and eventually got back some exquisite drawings. We didn’t take much time to reflect on these architectural plans since we had planned a 3 week vacation to Egypt and Israel.

When we got back, the new house was just getting started. The first difficulty was digging out the basement. We live at the bottom of a mountain. It turned out that a few feet below the surface of our hillside lay impenetrable bedrock which had to be blasted out. Since there is only one qualified blaster working on the Sunshine Coast of British Columbia, we waited quite a while to start the excavation. We watched endless truckloads of rock and dirt getting hauled away, since our large house also had a large terrace to excavate.

The next surprise was finding out that our house would feature a number of concrete pillars, which looked like small copies of the stone pillars we had seen during our Middle Eastern trip. Being unable to fully comprehend architectural drawings, this important detail had escaped us in our hurry to leave for our vacation. Although the concrete itself was not expensive, the intricate construction of these lovely pillars added considerable expense and delayed the project for several months.

Once the concrete was all poured for the foundation, we finally realized just how big this new house would actually be. Friends joked that it looked like a small shopping mall or perhaps Taj McWagler. Although partly delighted by this immense and lovely edifice, I felt a sharp pain on my right hip where I keep my wallet. The house was far more expensive than we had planned. It does contain a swimming pool, hot tub, spacious bedrooms, a soaring great-room and a perfect kitchen, but the price has reduced our retirement nest egg.

I tell you all these details not only for a laugh at my expense, but because I found that many other people have gone through a similar experience.

So if you ever get tempted to build The Perfect Nest, here are a few pointers:

• Even if you are financially savvy, it will likely cost a lot more than you think (particularly if it is custom designed by an architect.) You could avoid both the agony and the ecstasy by using a standard design where you can change only a few of the design details.
  
  
• Building a house usually takes much longer than you think to finish.
  
  
• Every new wish you incorporate will add substantially to the total price.
  
  
• There are hundreds of decisions to be made in a custom house, which cause a lot of anxiety. Doing it after you retire would be a good idea, since it can become a half-time job or more.
  
  
• This dream project may leave you house-rich and cash-poor.

That said, we have nearly achieved our dream house and will be moving in by the end of this year. For us, it has been a great experience, even though we don’t feel as financially well-off as we did before the house started. However, we look forward to enjoying many happy years together with friends and family in our new home!

Surviving Politics in the Workplace

Although I am now happily retired and can eat my dinner on a sundeck overlooking the Pacific Ocean as a majestic eagle soars overhead, I still occasionally have disquieting dreams at night that remind me of the intense struggles I experienced at work. The most powerful dreams are reminders of the heavy stress from brutal politics during my days as a rising manager and later as a CFO and CEO. Memories of Machiavellian plotting for my downfall come back so vividly that it seems just like yesterday.

These days I sometimes meet with people going through similar struggles in their workplace. Whether you work for a small business, a large corporation, or a government or educational system, the struggles at work are similar. I want to provide encouragement so that you can survive these challenging times and succeed in your career, but not to minimize the intensity of the struggles you may be going through at times.

Every job (with more than one self-employed person) has its politics. People compete at work for pay and promotion. Employees vie for the attention of the boss. There are rumours and intrigues nearly every day in the workplace. There are insiders who seem to be getting ahead and outsiders who are feeling upset and isolated.

Politics operate at every level of the workplace, whether or not you are aware and noticing. (Actually, ignoring the politics most of the time is good idea, if you can do it.) At the higher levels of organizations the politics get even more intense. Some managers are being promoted and their pay is increasing rapidly, while others are losing out for reasons they can barely understand. Ethics are sometimes conspicuous by their absence.

Much of politics has to do with the boss and/or the organizational hierarchy. Aggressive employees are constantly seeking greater authority and pay. They often help topple vulnerable managers. Sometimes it seems like the same behaviour as seen in a wolf pack.

The culture of each workplace is unique; however, each workplace has many elements in common with other organizations. The personality of the CEO or boss determines much of the culture, but there are other influences as well, particularly when there are outside owners or a long history. There are some companies with a relatively good working environment, and other workplaces are so negative that survival seems especially hard; however, most working environments are a mixture of both healthy and less healthy elements.

Other articles have been written on this subject, but I want to give you my observations of how to survive in this world of uncertainties:

• Concentrate on doing your job well above all
  
  
• Never speak disrespectfully about your boss or your organization to anyone, no matter what your private opinion may be. If you have nothing positive that you can articulate, it is better to say nothing about them.
  
  
• Take time to chat with people briefly when they are friendly, but avoid becoming part of a gossip network.
  
  
• Learn to get along with bosses and coworkers with a minimum of conflict
  
  
• Be helpful to everyone to the extent that you can manage it (but beware of people dumping their work on you)
  
  
• Be a friend to everyone you work with, but don’t become particularly friendly with one or two persons (even the boss) at the expense of others
  
  
• Be prepared for lots of ups and downs in your popularity and reputation, even when you are doing a good job
  
  
• Make sure that you maintain a strong emotional life with friends and family outside of your workplace
  
  

• Counter the job stress by eating well, getting enough rest and setting aside time for recreation.
  
  

• Remember that you can influence everyone around you for the better if you conduct yourself well. You will be noticed.

Trying to find a job without any politics will succeed only if there are no humans working there. Politics can become intense and demoralizing at times, but if you try hard, you can succeed and enjoy your work despite the office politics.

The worst of workplace politics usually comes out during times of major organizational change or when there is new leadership. Fortunately, these intense moments do not last long. There are long periods when the politics subside to a minor distraction. During these times the more positive aspects of the workplace are more noticeable.

My waking memories of work are mostly quite positive: office parties, wonderful friendships that have lasted longer than the job, chances to learn and travel, and many other wonderful things that happen at work. I don’t know why my dreams reflect the extreme negative experiences – perhaps it is like war; no matter how long the peacetime, the memories of conflict remain.

Social Skills and Relationship Skills

Our world is mesmerized by appearance: the handsome movie star, the glamorous actress, the one-liner politician, and all of the trendy and beautiful people – they look out at us from every magazine and from every screen. When we meet them occasionally in real life we are tempted to accept them at face value.

In business, social skills seem to mark the highly successful person. We envy someone who can walk into a room, figure out who is important, and is able to make just the right comments instinctively. They can tell stories and jokes with aplomb, they go to the right restaurants and resorts, and they are usually in the know about most popular topics.

But in my long business experience, social skills are often not enough to go the full distance. Obviously, social skills are a real asset in sales and in management. They can facilitate effective presentations for technical experts. But entertainment skills without real substance in building long term relationships don’t work for very long.

Those with the best social skills often burn out early. They often go from one position to another and change employers frequently. They may promise too much and deliver too little. They don’t always wear well. People with social skills alone lose their credibility over time.

The missing ingredient for successfully working with people in the long term is relationship skills: the ability to build and maintain important relationships for many years with the people who matter most, whether inside or outside of an organization. I have worked with highly successful people who were deficient in their social skills, but nonetheless had remarkable relationship skills.

Obviously, having strong technical, financial or other specialized business skills also makes a big difference in building business relationships. But apart from knowledge and expertise, there are other ingredients to building effective relationships:

• Commitment to building relationships People are the most important ingredient in any business, so they must always have first priority. People are more important even than projects or profits, since there are no major accomplishments possible without developing effective relationships. Commitment means spending time with people and regularly calling or visiting key people that you don’t see in the normal course.
  
  
• Integrity In the long run, if you are not trustworthy, your relationships will fail. And if you waste your time developing relationships with others who lack any integrity, you will be disappointed!
  
  
• A long term focus Relationships take lots of time to develop. A powerful presentation without much follow up will never suffice to gain a really important relationship. Tending relationships is like growing plants – they require constant care and attention to flourish. (However, too much attention is invasive and will be unwelcome.)
  
  
• Selectivity You need to choose carefully with whom to invest yourself in relationships, since they require much continuing effort. Obviously, you can have numerous light relationships with a low level of activity and commitment, but key relationships need more focused involvement.
  
  
• Empathic listening Listening attentively to others is the key to understanding them and to ultimately delivering to them what they seek. We all gravitate to those who are sympathetic and understanding of our own needs.
  
  
• Reciprocity Relationships ultimately need to be based on mutual satisfaction, although at times, one party may be delivering much more than the other. If you invest in a relationship, you can eventually make legitimate requests from that person.
  
  
• Focus on others more than self Those with social skills alone usually fail: they are so impressed with themselves that they are not truly impressed with other people; before long this becomes all too apparent.
  
  
• Loyalty People can not be fooled about whether you are loyal and reliable, or just opportunistic and fickle. Maximising short term profits in a business relationship often prevents you from developing a more valuable longer term relationship.
  
  
• Offering value We offer value on both a personal and on a business level. Few customers or associates are fooled about those who manipulate and exploit, rather than delivering solid value.
  
  
• Sincerity and candor Social skills often depend on adopting a persona or image that is not authentic. Real relationships require honesty, vulnerability and self-disclosure.
  
  

Relationship skills obviously apply to other dimensions of our lives beyond business. Strong relationships help develop family and community. The best business environments are those which seem like family or community, where all can share in the success of the enterprise.

A leader with high relationship skills creates powerful morale which ensures the success of their enterprise. A glamorous personality is far less important for long term success. Social skills are only valuable in business when they are employed as a tool for developing lasting relationships.

Finding Sound Economic Advice

One of the hazards of managing your money and planning your career is that finding good economic advice is almost impossible.

You can’t trust economic forecasts. Economists are good at providing data and charts, but their forecasts should not be taken seriously for two reasons:

• Economists are typically employed by governments or commercial organizations, which have agendas quite different from neutral economic analysis. In particular, overly optimistic forecasts are used by financial institutions to get you to invest money where they will be able to collect high fees.
  
  
• Furthermore, economic models are fundamentally incapable of predicting the future, because economics is not a science; at best, economists might be able to tell you approximately where the economy is now and to predict a continuation of recent trends.

Even worse, you can’t trust the governments who collect and interpret the raw economic data which economists use in their models. Governments believe that their job is to keep the population happy and optimistic, so they continuously revise their data systems to make the statistics seem more pleasant.

Check out John Williams’ Shadow Government Statistics (http://www.shadowstats.com/cgi-bin/sgs?) He says:

Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting. We offer an exposé of the problems within the reporting system, and an assessment of underlying economic reality.

I do not endorse this newsletter (nor do I endorse any other source), but it is a sobering contrast to official data. Most likely, John Williams overstates his points somewhat, but his fundamental conclusions are absolutely in the right direction. He believes that inflation is much worse than reported; that government deficits are worse; that economic growth is lower, if not negative; and, that money supply growth is far higher than claimed.

The recent euphoria in the global stock markets seems mostly a result of low interest rates and rapid growth in the supply of money. The American Government has been pouring out cheap money at rock bottom interest rates in order to prevent an economic meltdown. However other governments around the world are now tightening credit to tame inflation, but I wonder if global inflation isn’t already beyond control by such modest tightening.

So my outlook is much darker than that of official forecasts. I am gradually selling all the stock I plan to dispose during this boom cycle. Not that I am predicting all gloom and doom, like some soothsayers. But the immediate future is clouded by the spectre of rising inflation which will likely drive up interest rates and bring down stocks, real estate and economic growth.

I am not trying to set my self up as a new financial forecast guru; I assure you that I have no crystal ball at my desk. However, my lifetime experiences of studying at Harvard, working as a banker on Wall Street, and later as a corporate executive, cause me to doubt governments and economists. Their motives are rarely just to provide objective advice, but rather to soothe and to encourage.

Not everything is dark and gloomy in the economy, but there are major warning signs. Inflation scares me. Just look at how drastically prices have jumped for gasoline, houses, commodities, and for many other products in recent years.

Sound financial management pays off in the long run. Do not get further into debt. Do not buy real estate with little money down. Do not buy stocks with borrowed money. Do not assume that your income will always rise faster than your expenses.

And be careful of following the crowd in economic matters – they could be quite wrong. I hardly know where you can find sound economic advice in a field of so many commercial and political motives. Maybe you might just have to think for yourself!

(As a footnote, several points in my December 7, 2006 blog Investment 102: Stocks have now been confirmed by a major financial study at the University of Toronto. After analyzing the performance of a broad spectrum of mutual funds, they found that they generally perform noticeably worse than the general stock market, because of the exorbitant fees charged by the mutual fund industry; this is exacerbated when investors switch from one mutual fund to another, vainly trying to find the best mutual fund. These professors found that investing in stock market indexes with very minimal fees would have served most investors far better. They have confirmed what I told you in December. Thank God, there are a few objective souls out there providing helpful economic information in a sea of financial misinformation!)

Luck, Skill and Big Fortunes

In 1991, I met Torben Karlshoej, the founder of Teekay Shipping, which is now a global shipping empire with billions in revenue, assets and company value. Mr. Karlshoej was an unforgettable character who would take many pages to describe. I will just say that his private yacht was a converted freighter which I saw at anchor from my small 36’ power boat. His dinghy was likely larger than my whole boat.

Mr. Karlshoej founded his company in 1973 when he arrived in L.A. from New York with only a few dollars in his pocket. But he had several things of great value: he had worked in the ship chartering business, so he knew the shipping industry better than most. He had incredible drive and determination and worked truly around the clock. But he had a final gift which made the big difference: his timing was impeccable. There had just been a major setback for the global shipping industry in the early 1970’s and most people were pulling back. He saw the opportunity to expand and to buy or charter ships at rock bottom prices, which later soared in value. In 20 years, he became a global shipping magnate, starting from nothing. His luck, skill and timing brought him enormous wealth.

I have had the good fortune in my banking career to meet many other successful entrepreneurs: some worth millions, others worth tens of millions, a few with hundreds of millions, and a handful of genuine billionaires. (I mention Mr. Karlshoej by name, since he tragically died a year after I met him. I do not like to write about business people by name who are still alive, since I respect their privacy.)

I have witnessed first-hand what a top international banker told me as a young man: it takes both good luck and great skill for big-time success in business. Some people believe that luck alone can get you there. That is rarely true. I met someone who won $8 million in a lottery, but if he was a typical winner, a few decades later he would have very little left. The same is true for inherited wealth; it rarely lasts more than 2 generations, if that long.

In my experience, the successful business people were incredibly skilled, but that alone did not account for their success. They also needed timing, lucky breaks, and other fortuitous factors on their side.

Similarly, I could begin to describe the skill-set that it takes to become a great entrepreneur. Determination is crucial, together with discipline, financial shrewdness, marketing savvy, technical smarts, access to capital, industry knowledge, willingness to take big risks, and sometimes ruthlessness. (I personally would rather die a pauper than to lie, cheat and steal; but unquestionably, a shrewd entrepreneur needs to make very hard decisions.)

But sometimes misfortune can also play a role in our success. I suffered from Polio at age 5, which left me severely crippled for a few years. Although I gradually recovered and now enjoy comparatively good health, my childhood illness put me into hospital for a year and left me unable to compete in sports. Consequently, I became a voracious reader, which accounts for my exceptional academic performance and a scholarship to Harvard. Obviously, I also had a good attitude towards my misfortune, or I would not have used it as a stepping stone to a successful career.

But life is much more than about making big fortunes. When Mr. Karlshoej died suddenly in his early 50’s, I felt very sad for him. Although he made it to the big times, he didn’t live long enough to fully enjoy it.

My advice to those seeking a fortune is don’t try too awfully hard. You can never achieve it by determination alone. Unless the wind of providence is blowing in your sails, you will likely be part of the 99% who tried and failed, rather than the 1% who makes it big. And enjoying life is even more important than financial success!

ABC’s for Success – final installment

Hope is a priceless gift. If you can hold on firmly to hope in the worst of situations, your career has a real future. Always keep your hopes high, but keep your short-term expectations low.

Hurry is usually unnecessary, when you are headed in the right direction. Hurry may bring disaster if you are going the wrong way. Just keep up a steady pace in your work – that is better than hurry. Work is a long distance race. Learning to pace yourself is a key job skill.

Limitations – everyone has personal limitations; we never have all of the skills, training and ability which are needed in our work. These limitations may be physical, mental, or due to lack of motivation and determination. You and I need to overcome our limitations, every day, in order to become the best that we can be. Blaming others is just an excuse – we can usually accomplish what we really want to do, regardless of the external obstacles or our own internal limitations.

Pay Work is about much more than just your pay. Obviously, you need money, and pay ought to be fairly allocated. However, when you concentrate on doing your job well, your pay usually sorts itself out in due course. You may not get your full rewards immediately, which can be discouraging. It takes considerable time for your organization to realize how well you work and for your pay to therefore increase. But if you concentrate on doing great work, your financial future will be assured

Punctuality is evidence of commitment, right attitude, and good planning. If you fill your schedule too full, it will get out of control; every thing will become late, including you.

Self-reliance and Independence – Learn to become independent at work and to rely on your own resources most of the time. That doesn’t mean that you should not ask for help, but don’t become dependent on a friend, or boss, or on an organization. Sooner or later, they will let you down, because nobody else can look after you all of the time. You must do it yourself.

Stress is inevitable at work. Moderate stress is healthy and motivational. However, too much stress is a killer. Stress can gradually build up and accumulate until it becomes truly overwhelming. It can rob you of both your physical health and your emotional health. Learn to reduce work stress by relaxation, recreation, time away from work, by taking mental breaks, and by getting more exercise. Your work life depends on managing your stress levels.

“Unemployable” is a term which might apply to you due to your age, your race, religion or health, which are not your fault. However, most people become unemployable due to their negative attitudes, their poor work habits and/or unrealistic job expectations. People of any age or background can usually find work if they have a wonderful attitude, good work habits, and the willingness to take any reasonable job offered to them, however menial. Those people may start low, but they will eventually rise to greater success. However, people who complain constantly, who do poor work, who are habitually late, who can’t get along with their bosses or fellow workers, and who do not deliver what they promise, will find themselves out of work indefinitely. Become employable! It is mostly up to you.

Training your thoughts seems almost impossible, but it is crucial for success in work. What you read, what media you watch and listen to, forms much of the input for your thoughts. Mental discipline requires the same dedication as physical training, but the benefits are even greater. Observing your thoughts and slowing them down helps to achieve control. Meditation and prayer are means of training your mind, as are reading, music, science, academic study, and gardening, to name a few activities which are good for your mind. Watch and guide your thoughts carefully. They determine who you are and what you will become.

Working well in difficult circumstances is a real challenge, but it is something we face during much of our lives. We cannot change these difficult circumstances quickly, but with courage and determination, we can adapt ourselves quickly to make the best of the situation.

Those who have the gift of positive thinking are able to see hope and opportunity when people all around them are giving up in despair. Overcoming difficult circumstances makes us stronger and more capable for other challenges. Those who overcome challenges again and again rise up to become heroes, artists and leaders.

Yielding is a sign of grace, intelligence and maturity. There are definitely important matters where we need to hold our ground at all costs, but for small matters yielding is generally advisable to avoid conflict and bad relationships.

Job Transitions

Most people – myself included – have very short memories. When the weather is nice outside, they can hardly remember the cold, heat or rain they suffered from quite recently.

Job change and job transition are as unavoidable as changes in the weather. This is true even if you have been working for many years in the same organization. Even the most stable jobs are subject to sudden, unexpected change. This is not a reason to panic, but to stay alert.

Here are just a few of the many reasons you could suddenly lose your job:

• Sales are going down for you company
• Your company isn’t making enough profit
• The management of your company decides to go in a new direction
• Your plant or division of the company is not staying competitive
• A financial crisis occurs outside of your company
• Your company is sold or merged
• You get a new boss
• You are in conflict with co-workers
• You are getting older
• You gradually lose interest in your job

I am not writing this to scare you, but to prepare you for what most people face, sooner or later, at your job. No job is secure for life.

There is little advantage to worry about your job, but giving it careful attention and thought occasionally is helpful. It helps to anticipate job changes before they come and to prepare in advance for likely job transitions. In particular, that means saving money, living frugally, and avoiding too much debt; that way, you can survive times of unemployment.

It is also useful to note what is going on around you. Is your area at work being reorganized? Is it growing or shrinking? Are sales increasing or decreasing. Are there plenty of orders? Often, you can sense when changes are coming to your employment, whether good or bad.

But other times, change comes quite unexpectedly, like a swift storm. Suddenly, everything you thought was permanent gets blown away. Being prepared helps you survive, but it may not be easy.

During difficult times keep your mind calm and think carefully. Spend time with friends and advisors. Get outside and walk around. Don’t just crawl into a hole and hope it will all go away. How well you can manage job transitions will significantly influence your future life.

Finding new jobs is easy at times – if you are young and the economy is booming. But as you grow older, jobs become harder to find. If you have worked in a very good job you may need to accept a lower position for a time and build your career back up gradually as you become known and accepted in a new organization. It is difficult to be graceful under such circumstances, but necessary.

Above all, accept full responsibility for managing your own career and your own future. Bad bosses and bad employers are all over the place; finding good ones is very hard. Most employers are half-good at best. But you can survive in that environment if you are determined and don’t spend your energies on complaining.

I suggest 3 things:

1. Build up enough savings that you can survive for 6 – 12 months of unemployment. That is hard to do, but necessary. No matter how well you work or how stable your company seems, you can never be sure to keep your job. Getting out of debt and building up savings is hugely important.
   
   
   
2. Always think about what other jobs you could find if this one ends. You need to be ready to find a new job all throughout your working life. You next job might be much better, or much worse than your current job. You might need to move, or to work in a new field with job retraining.
   
   
   
3. Don’t ever take your job for granted; you need to prove your value each day and each year.

Most of us do better than the worst that we fear in bleak moments, but not as good as we may hope at optimistic times. My mantra is “keep your expectations low, but also keep your hopes high”. In the short run, things often go worse than we expect, but when we work diligently to improve our situation, things can gradually change for the better. Staying cheerful and determined helps us to weather any storm.

Bankers and Entrepreneurs

My working career has been spent working as a commercial banker and later as an entrepreneur (someone who starts up new businesses and makes them grow). Bankers and entrepreneurs represent two fundamental dimensions of the business world.

Many years ago, I was struck by the remark of a major bank president, who said that all businesses, big and small, have 50% of their elements in common: they all have owners; bankers; customers; employees; suppliers; competitors; lawyers; assets; an office, shop, or store; inventory; receivables; accounting; a supply of capital; etc.

Businesses get started by entrepreneurs (even if they don’t know this word). And most businesses usually need other people’s money to grow, which they mostly get from their banker.

Let me start first with bankers and how they think and operate. Bankers use other people’s money which they get as deposits. They lend this money to businesses at a higher interest rate then they pay for deposits. This interest spread is their income, which pays for operating their bank.

Imagine that a banker takes $50,000 of capital and then matches it with $950,000 of deposits; so 95% of the money loaned out belongs to depositors, who must be repaid, no matter what. So bankers are concerned above all about keeping the risk very low for all loans.

The entrepreneur starting out in business usually has very little money, unless they inherit a lot. So they must “beg, borrow or steal” enough money to get their new business going. The entrepreneur typically goes to the bank, hoping to get a bit more money to get the business up and running. But the banker says: “NO. Come back once your business is successful and I will be happy to lend you some money”. So entrepreneurs and bankers mistrust each other from the start, and their relationship rarely gets any better.

The only way they can get along is to understand each other very well. The banker must keep risk very low, because it is other people’s money being loaned out. A depositor expects zero risk. So the banker cannot afford to make many mistakes. That attitude causes entrepreneurs to think of bankers as being uncaring and unintelligent.

Entrepreneurs by contrast take enormous risks. They put every thing they own on the line to support their new business concept. If it succeeds, they hope to get back 10 times or 100 times their investment. They often go broke, or nearly broke. They live on the edge. They become incredibly resourceful.

I have oversimplified the banker and the entrepreneur types to make it easier to understand how they operate. But in a 25 year career as a banker to both small businesses and to some very large businesses, I have seen these fundamental patterns occur again and again.

I also have had a career as an entrepreneur, first working on several small businesses while I was still a banker, and then later working as a CFO to several major entrepreneurs, where I was a risk partner in the business.

Our economy needs bankers who keep risks low and don’t get swept away by the temptation to take bigger risks to earn quicker profits. Due to economic cycles and other unpredictable events, it is very hard for bankers to make loans which are going to be repaid in full. Bankers are not paid to think like entrepreneurs.

Equally, our economy needs great entrepreneurs who are the backbone of economic growth. Most entrepreneurs will never make much money; they are lucky if they don’t go broke and stay broke. But for those who eventually succeed, their huge rewards are fairly earned. They sometimes get paid well for taking the big risks.

Although bankers must keep their risks low and entrepreneurs necessarily need to take enormous risks, they have one thing in common: they both need to be exceptionally good at calculating risks in order to succeed. Surprisingly, some of the best entrepreneurs are those who have been originally trained as bankers.

(There are other sources of capital for entrepreneurs, beyond conventional bankers. I will write later about venture capital, investment banking, and the role of capital in company growth.)

A Hard Rain's A-Gonna Fall

Bob Dylan, the poet and singer, often captured economic reality in his metaphors better than thousands of economic analysts. He understood storms of all kinds when he sang:

And it's a hard, and it's a hard, it's a hard, it's a hard,
And it's a hard rain's a-gonna fall.

Here were some of the news headlines from March 2007:

• World stock drop hits second week
• U.S. Stock-Index Futures Slide; GM, Wal-Mart Drop After Asia, Europe Slump U.S. stock-index futures tumbled after shares in Europe and Asia extended a global selloff that wiped out $1.5 trillion in world market value last week
• Mortgage Crisis Spirals, and Casualties Mount

A few weeks after these headlines, the world markets recovered and everyone quickly forgot about their fears of the economy going into free fall. They returned to complacency. But they shouldn’t.

Sooner or later, we will see fierce worldwide economic storms that make the Indonesian Tsunami and Hurricane Katrina seem like small local incidents. At some point in the coming years or decades, stock markets will likely plunge around the world in dismaying amounts. Potentially we could see 20%, 40% or even 60% of equity values wiped out in a very short time. And nobody will know the date or the year of this disaster until afterwards, because that is the way it is with the biggest storms.

This has happened before and it will happen again. My father lived through the Great Depression of the 1930’s and that event was etched into his mental wiring. It is likely that this giant economic storm was also the largest cause of World War II where tens of millions of people died all around the world.

No one can adequately explain the cause of economic calamities. They are partly caused by physical realities, like energy shortage, wars, and other natural disasters. They are also caused by speculative build-up of markets to unhealthy levels, which makes a collapse a near certainty. They are caused by enormous debt loads by consumers, companies and governments that prove unsustainable. Finally, there is a psychological element where euphoria can turn overnight into nightmarish fears.

When I was a student at Harvard, and soon after as a manager on Wall Street, I was told that these economic disasters would never happen again, due to rapid progress in economic knowledge and monetary management by central banks. My teachers and bosses were unfortunately overconfident and mistaken. Several major recessions have occurred throughout my working life, and none of them has been expected by the experts.

It was helpful decades later to hear someone of the stature of Allan Greenspan, the former Chairman of the US Federal Reserve Bank publicly acknowledge that central banks and economists live in the dark like the rest of us when it comes to predicting the economy. At best, they examine trends and potential scenarios to get some sense of the direction of the wind.

So, don’t ever leave yourself vulnerable by betting everything you own on the assumption that markets will always go up. You might be right for a year or two, but dead wrong later. Remember the thousands of technology millionaires that lost everything when the NASDAQ market collapsed by over 75% at the end of the 1990’s. A few cashed out in time, but most believed that this new easy money would last indefinitely.

So I return to Bob Dylan, who describes this well:

And what did you hear, my blue-eyed son?
And what did you hear, my darling young one?
I heard the sound of a thunder, it roared out a warnin',
Heard the roar of a wave that could drown the whole world,
Heard one hundred drummers whose hands were a-blazin',
Heard ten thousand whisperin' and nobody listenin',
Heard one person starve, I heard many people laughin',
Heard the song of a poet who died in the gutter,
Heard the sound of a clown who cried in the alley,
And it's a hard, and it's a hard, it's a hard, it's a hard,
And it's a hard rain's a-gonna fall.

Climbing the Career Ladder to a Decent Job

One of the most frustrating challenges is finding a job that pays you enough to live. For some people the challenge is just getting any job at all. For others it is going from a good job to an even better job. However in this post, I will focus on progressing to a job beyond the most basic wage level. This is the first step in climbing the career ladder to a better economic future.

Obviously, there is a great deal more to job satisfaction than how much you get paid. However if you are making only McDonalds-level wages, there is almost no money left over after paying for rent, food and clothes. It is hard to find job satisfaction when you are poor.

These low paying jobs are often called “McJobs”, because they are the most typical job at McDonalds Restaurants, one of the world’s largest employers. McDonalds sell cheap food and pay cheap wages. But so many companies are now using the McDonalds formula of paying low wages and hiring mostly unskilled workers that some experts believe that McJobs are the wave of the future. McJobs are everywhere – in schools, retail stores, manufacturing, service industries, almost any where you look. So getting paid more than McJob wages is the most basic challenge for many people.

Surprisingly, people with McJobs are often intelligent, hard-working and well educated. They often have amazing skills as well. But in the job market, they find that their particular creative skills are not in much demand. They may have university education in liberal arts or science. They may be talented in music, art, sports, or in countless other ways, but find that these talents matter little to prospective employers.

So what should you do?

Get training for skilled jobs. This is usually done by a combination of technical programs in schools, colleges or universities, and on-the-job apprenticeships. Research to find out which skills are in demand is essential. Check with government offices for advice. Ask everyone you know where the better jobs are in your local area. You might even need to move to find them. You might consider training in construction, plumbing, electronics, accounting, sales, etc.

Find employers who don’t structure their organizations like McDonalds. There are entire businesses that are run like McDonalds where most people are paid very low wages. Avoid those employers completely, if you can. Small local companies often pay better wages than giant global firms. Find out about the wage structure before you start working for an organization.

Think long term. Finding a better job in just a few weeks or months is often impossible. But if you develop a sound strategy of getting both important skills and relevant job experience, you can eventually make progress. McJobs may actually provide you with very good training, providing you use it as a stepping stone to a higher level job and don’t stay stuck in this type of organization.

Find Job Counselors or Mentors to advise you. Often you will know people who have excellent jobs and knowledge about the economy who can advise you what steps are required to advance.

Take responsibility for your own success. People who blame the government or aggressively criticize their current employer will rarely get beyond just talking and complaining. You must take the initiative and accept full responsibility for your own future. Your success is not determined by the obstacles in your path; it depends almost entirely on you.

You must also present yourself positively at all times. Negative thinking patterns, attitudes, or a less than positive style of dress and mannerisms can often discourage friends or acquaintances from recommending you for jobs they are aware of. Try to be positive 24/7.

Develop your people skills and your social network. Getting good jobs often depends on who you know and how well you can present yourself. Stay in contact with many people, because often that is a better way to find job opportunities than through newspapers or the internet.

Finally, make your career your top personal priority – not just until you get a job, but throughout your entire working career. Getting a better job is only the first step to career success. Often, your job will come to an end for reasons other than your own performance. You should constantly improve your skills and experience to be ready for the next opportunity.

Life in the working world is tough, unless you are determined and very well prepared. But with patience, imagination and hard work, you can succeed!

More ABC’s For Success

Ambition is like spice in your job. Too little ambition produces a very dull career, while too much can leave you with an upset stomach, due to needless worry and stress. Ambition needs to be combined with Patience and Determination, like three essential spices for a wonderful dish.

Daily habits determine most of our success or failure in work. Not that we can ever rely on habits alone – we also need flexibility, creativity and innovation. But there are certain qualities of character which must become regular and habitual. We work steadily toward a goal; each day requires fresh effort and determination, but it builds upon hundreds of past days of commitment. Success is cumulative. It is the sum of all previous efforts carried forward with fresh determination at every step. Such a force is unstoppable!

Debt is a big trap for the unsuspecting. Avoid borrowing for any reason other than for the purchase of a home. Don’t use credit cards unless you can pay them off every month – otherwise tear them up and throw them out. Debt will keep you poor forever.

Discipline is doing the things you don’t like, but which really need to be done; and also, avoiding the things you strongly want, but which would be bad for you. Success is inevitable for those who make self-discipline a daily habit. There is no progress in life for those who lack self-discipline.

Dissipation is spending personal resources without thought of replenishment. This may involve spending our money, our energy, health, reputation or friendships. Discipline is nourishment and building up of all our resources. We either save up, or else we exhaust our resources and spend ourselves into oblivion.

Failure is just unfinished success in many cases. People abandon jobs or careers when they become too difficult, but if they would persevere in the same direction for 5 – 10 years, they might find the pot of gold at the end of the rainbow. Most of the successful people I have met had to endure hardship for a long while before they achieved great success.

Flexibility is a wonderful quality of both body and mind. When someone puts an obstacle into my path, it is usually better to find a way to get around it than trying to push the obstacle aside. There are many different ways to accomplish my purpose – but I need a flexible mind to find alternatives when my plan is thwarted.

Good jobs, bad jobs Most of us find ourselves in bad jobs at some time. It isn’t always possible to change jobs quickly. But we can bring a positive attitude to any job, if we are fully determined. That can help change a bad job into a better job, and sometimes even into a good job. It is not wrong to leave a bad job, but that is often impossible in the short run. By transforming ourselves gradually from the inside out, we can learn to succeed in all circumstances. Adversity builds strong character!

(Please see my October 29 post for the previous list of ABC’s for Success)

Take Care!

I find that I frequently sign off an email or end a phone conversation with the phrase Take Care, which has become a sign-off for many people at the end of their communications.

What I am wishing for the person I am speaking with is safety, caution and active guarding against misfortune.

On the positive side, I also use these words to mean take care of your health, of your family, your finances, your job, and of your life. That means nourishing them, building them up, developing them and giving them your full attention.

At this time of the year in northern climates, I find taking care of our bodies is one of the biggest challenges. In the past few months many of my family and friends have suffered colds, flues, and other health concerns.

It is January, and at 60 years of age, I am restarting the annual battle of diet and exercise to bring my body back into fighting trim.

Having survived many difficulties in my career, in my travels, and particularly with my health, I am ever more keenly aware of how easy it is to neglect proper care of my body.

Most of us know almost everything we need to know about caring for our bodies:

• Get regular daily exercise, or at least 3 times per week
• Eat lots of fresh fruits and vegetables and whole grains
• Avoid too much red meat, fats and processed foods
• Avoid smoking, and go very light with any drugs or alcohol
• Get plenty of sleep and take a few naps on weekends to restore your strength; take one day off per week to relax
• Keep your thoughts and emotions positive; avoid worry and negative emotions
• Don’t overwork or run your body down too far!

I could go on. Most of us know what we should do to take care of our bodies – we just don’t put it into practice consistently enough. That may work adequately in our youth, but poor habits in younger years turn all too quickly into significant health concerns by middle age. As I am now at retirement age, it is sad to see many friends who have virtually ruined their health through lifetime neglect.

Good physical health is as important for people doing desk work as it is for those doing physical labour, if not more so. Clear thinking is nearly impossible when our bodies run down.

So why do we take chances with our physical health? Why do we over-work, lose sleep, over-eat, and party too much? I can’t answer that question for you. I am still trying to understand myself better.

But don’t be surprised if you sometimes hear me say

Take Care!