The Little Book That Beats the Market, continued

The moral of the story is that buying stocks that have a high return on capital investment (in other words if you can set up a gum store for $400,000 and make $200,000 in revenue on that store in one year--which is 50% return on capital), AND that have a high earnings yield (meaning that if you spending $10 to make something, and you can sell it for $20 you have a 100% margin), then you will always do well, especially if those stocks belong to companies with a high capitalization to start with. Joel Greenblatt provides lots of stories, statistics, and history to prove his point, and he even provides a website so that other people can test it for themselves. That website is www.magicformulainvesting.com. Check it out.

The Little Book That Beats the Market, by Joel Greenblatt

What a fun little book! Addressed to a 12-year old, it makes market analysis and investing seem actually understandable. I'm only half-way through but I feel I've already learned a great deal. A friend lent it to me, and it was given to her by a wealthy couple who are nearby neighbors. If you want to explain investing to your teenagers or college students, this is a great book.

Jane Eyre, by Charlotte Bronte

What impressed me most about this classic was the diamond-like clarity of the main character's mind. She had a clarity of mind and independence of thought that most would consider impossible for the young girl she represented. The main characters were very strong minded, even bullies in their mental intensity. Edward Rochester, who is the love of Jane, is very unlovable to anyone else because of this intensity of thought and feeling that would embarrass those interested only in social niceties. St. John River, her rescuer, employer, cousin and would-be husband, had a different sort of mental clarity that was blind to the sensibilities of others, and severe in its one-pointed devotion to the goal of his missionary vocation, which was both admirable and cruel.

I would say at the end I felt entranced by this novel, which I couldn't put down, and with the unusual settings, characters, and plot. I don't remember ever reading this book before--I thought I'd read it in High School, but evidently not. It does remind me a little of Wuthering Heights, with its melodrama, storms, ghosts and superstitions. The language was a little difficult. There are still some terms I have to look up, and some passages of French and German I could not decipher clearly. But they didn't detract from the story, and only enhanced the impression of the education of the times.

I highly recommend it to anyone with a few hours here and there to spare.

Social Intelligence, by Karl Albrecht, continued

I was listening to the news and a recent strategy by utility companies is to put on people's bills how well they're conserving energy compared to their neighbors, which caused a huge uproar in the Northwest. Well, in Social Intelligence, Karl Albrecht has a section on peer pressure, especially in regard to the behavior of teenagers. We are very susceptible to peer pressure in our lives, being the social animals that we are, so its important for parents to understand how to deal effectively with their teenagers. It quotes from some very interesting books on how best to handle your teenager who is under tremendous pressure and stress from peers. It doesn't help to ignore that pressure, but its best to acknowledge it up front, help your young person see things in a little better perspective, and give them the confidence to deal with it in a more detached way. Teenagers have extreme emotions, not just because of hormonal changes, but because of inexperience. They can use the help of adults if we give it to them the right way--not by hammering them over the head with it, but if we acknowledge who they are and talk to them with some respect and kindness about what they're living through.

A book he mentions with admiration is The Nurture Assumption, by Judith Rich Harris, who says that teenagers occupy a subculture with its own rules, and this is why children grow up with the language of their peers, not their parents. As with any subculture, our children have a world and a set of rules of their own, and our best bet is to recognize this, and provide our perspective in a dispassionate way.

My approach to the teenage years was to pass no judgments but to introduce my kids to the black and white perspective of astrology. It helps tremendously to have a chart with symbols on it that you can point to and say "you're going through a Saturn transit." Its not you, its just the passing planets. So we had a secret language together and it helped a lot.

This Longing, continued

So, Rumi was born in Konya, Turkey, but moved to Kabul, Afghanistan at a fairly young age. His stories and poetry paint a picture of a time of world trade moving through Afghanistan, tolerance for Christians and Jews in a Muslim country, and a high status for all women. At that time there were slaves, but even slaves were relatively free. It was an open-minded and interesting time in many ways.

He used the symbolism of birds often, birds as a soul, a caged soul, caged in the body, looking for liberation. That symbolism is still used today, for example this excerpt from a more recent publication:

"Grace and Effort are the two wings of the Bird of the Soul as it flies to the higher regions."

In the teaching story I read, a merchant is traveling to a distant country and asks his friends, relatives, and his parrot, what they would like. After getting lists of various material gifts from his friends and relatives, the parrot tells him that he wants him to ask any parrots he meets in this foreign country for advice. The merchant, after finishing his trading and preparing to return, buys the gifts requested, and then asks a group of parrots for advice for his parrot. Surprisingly, one of the parrots immediately falls dead to the ground. After the merchant returns home, his parrot asks what the other parrots had told him. He said he received no advice, but that one of the parrots had immediately fallen to its death. Upon hearing this, his parrot also suddenly died. Thinking it odd and feeling greatly concerned, the merchant opened the cage that held the parrot. The parrot immediately flew to its freedom, only returning to tell the merchant that it is only by dying to this world that one can become free.

I know, an obvious spiritual analogy, but Rumi knew that stories would stick in our minds much better than admonition and dogma.

This Longing, Jalalladin Rumi, translated by Coleman Barks

While waiting for a phone call in my little library on Sunday, I picked up "This Longing", excerpts from the Masnavi, a 6-volume set of verses by a famous sufi poet, Maulana Rum, or Rumi. Maulana is teacher or professor, Rum means from the town of Rum, and the given name is Jalalladin. He lived from 1203 to 1263 in Turkey. His own Master or Spiritual Guide was Shams Tabriz. He was a mystic and so he would not accept donations from others, and had to make his own living. Very fortunately for us, he made his living by writing poetry, and "teaching stories." I was savoring a teaching story.

Before I go into that, I must say that although others don't like Coleman Barks, I think he's the best, based only on my enjoyment of the poems and stories he has translated.

More later...

Palestine: Peace Not Apartheid, by Jimmy Carter

I read this when it first came out, but it seems very timely now to revisit. I had been under the impression that the Clinton administration had tried earnestly to resolve the Israeli-Palestinian conflict, but the book made it clear that there has been no real attempt on the part of the United States to help the Palestinians since the inception of the conflict. I would say that Bush's statement that a Palestinian State was the presumptive goal of any talks was probably the most effective help the Palestinians have ever received from a US President (and I don't like Bush). The book makes the case that "an ounce of prevention is worth a pound of cure." That if we or the Israelis had simply paved some roads, built some schools, and kept the lights on, Hamas wouldn't have had a chance to rise to power. As it is, asking the Palestinians to control Hamas is like asking your next door neighbor to go stop the Mafia. Death would have been the immediate result.

The Palestinians are flat on their backs, with no power, literally and figuratively. To use a military solution only, when a social solution is what's so obviously needed is just so Middle Eastern.

One of the things Karl Albrecht points out in both of the books I've read recently is that if women have no power in the situation, no innovation, no creativity, and no lasting organization can exist. Israel allows women power if they become very masculine, but they don't allow women who are feminine to have a say, and it amounts to the same thing as if there were no women in power. The Middle East is plagued with this problem, and there will be no sustainable countries there until that changes.

Social Intelligence, by Karl Albrecht

After reading Outliers (see below), I decided to explore the Karl Albrecht books he referenced: Social Intelligence, Practical Intelligence, and the Powers of Minds at Work (on Organizational Intelligence). Last night I read Social Intelligence, which describes S.P.A.C.E.: Situational intelligence, Presence, Authenticity, Clarity, and Empathy. Situational refers to context. You wouldn't yell in a Cathedral, and you wouldn't whisper in a night club. Its about appropriate action in context. Presence has to do with the sense you create as you enter a room by your words and posture--gravitas or flightiness; confidence or insecurity; humility or arrogance. He recommends watching a videotape of yourself or listening to a tape. His example of authenticity is Popeye ("I yam what I yam and that's all what I yam.") Like the genie said in Aladdin, "Be yourself." Evidently, its not so easy. Clarity is basically using simple words and sentences, just trying to be clear, not obfuscating (hiding the subject) with the big words. Empathy is connecting to people. All of these things can be developed and honed with practice and experience, but it takes paying attention. Learn from those you admire who excel in those categories. Its really not that hard to figure out, but a lot of people don't grow up with people who can give them these skills. Those who do have a big advantage--one of the points in Outliers. But the skills can be learned once we're aware of them, and we want to. That's very hopeful.

I will say that, depending on where you're starting, it might be more helpful to read Tongue Fu! by Sam Horn. That's a great little book. A friend of mine told me she'd just bought 3 copies for her children. Its got lots of practical techniques for dealing with difficult people and emotions, and its a fun and easy book to read.

I just got Jane Eyre for the book club, so I'll probably be posting about that soon.

The Power of Minds at Work:

This is a powerful book and I will make some significant changes to the way I manage people in my company because of it. Of the 7 categories of Organizational Intelligence he covers Performance Pressure is the one where I fall down, oddly, because its the one I care about the most. But his comments about managers being afraid to manage people hit home. I have to create a more supportive environment for all the people in the company, not just a few.

Aside from that, though, his perspective on past management trends and fads was really valuable, because it includes advice on what works and what needs to be avoided, including the consultants who tend to promote a particular prescription regardless of the diagnosis. We've used consultants quite a bit, and although I think we're better for it, we spent a lot of money on a prescription that was probably over the top for our level of development, but it will stand us in good stead going forward so I don't regret it.

One of his many pearls of wisdom was: don't make big changes unnecessarily. You don't have a successful program for change unless people perceive it as a real need. It seems basic, but some people think that just shaking things up is good for people. It isn't.

If you have an entrepreneurial bent or you would like to work within your own company to make it better, this is a great place to start.