The Other Side of Life 24/7: 06/09/10

Wednesday, June 9, 2010

Anger in Alabama Over the Gulf Oil Spill (VIDEO)

What we who love the Gulf Coast had feared - oil hitting Gulf Shores and Orange Beach, Alabama. The red flags are out, nd the residents are lashing-out at BP - watch the NBC News story:

Visit msnbc.com for breaking news, world news, and news about the economy

Hoping for the best, but the evidence is not good!

David

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The Mr. Potato Head Elvis: This will be as Huge as Elvis Was at the End!

For all you collectors and/or Elvis lovers out there, this will be a must on your shopping list. This will be released just in time for the "Elvis Death Anniversary" in August. See:

http://www.msnbc.msn.com/id/37591725/ns/business-consumer_news/

Start forming the line at Wal-Mart...

David

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Gulf Oil Spill Dive: Reporter Takes A Dip Without Hazmat Suit (VIDEO)

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Unbelievable - and BP and Tony Hayward still deny those underwater plumes! Great reporting, but next time, please wear appropriate protective gear! there is indeed a very fine line between bravery and stupidity!

Read the Article at HuffingtonPost

For all - to get the full impact - both read his account on HuffPo and view the YouTube clip from the AP! The clean-up story is Silkwood-like amazing! No need to try that hard - or risk your life - for a TV reporting Emmy!

David http://wyld-business.blogspot.com/

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Tony Hayward: A Tribute To Inane Remarks (VIDEO)

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As a resident of the Gulf Coast, we all can not emphasize how important it is to get these images out and burn them into the minds of all as to just how serious this situation is for the ecology and the economy of our entire region - from Texas to Florida. The more creative ways we can juxtapose the stunning reality with the blinders BP has on itself (and is trying to impose Soviet-style on the media) - the better. Great work NRDC! Share this video with all your friends!

Read the Article at HuffingtonPost

David http://wyld-side.blogspot.com/

The Spill, The Scandal and the President | Rolling Stone

This is a very, very interesting critique of the Administration's response to the BP oil spill disaster from Tim Dickinson of Rolling Stone magazine. A very long piece (get a fresh cup of coffee for this one), but well worth reading - makes one want to grab your pitchfork!

Read
The Spill, The Scandal and the President | Rolling Stone Politics

David

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Summary and Review of Crush It! by Gary Vaynerchuk

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Originally published Summary and Review of Crush It! by Gary Vaynerchuk

This book summary and review of Crush It! was prepared by Megan Broom while an Accounting student in the College of Business at Southeastern Louisiana University.

Executive Summary

The author of Crush It!, Gary Vaynerchuk, has a goal to help other entrepreneurs become their own boss and have fun doing it. According to him we are who are DNA says we are. Our DNA determines our passion and the things we love. Gary thinks each individual should cash in on their passion. In other words let your passions make you a success.

The author shared his success by sharing his three rules: “Love your family, work super hard, and live your passion.” After a person realizes what their passion is they can put their knowledge of that passion to work. Gary was born in the Soviet Union and came to America when he was three years old. His father, who was going to work with relatives, found himself with no job when his uncle passed away before he arrived in America. His uncle’s family owned a liquor store and agreed to let him work there as a stock boy. Eventually, His dad became manager and co-owner of the store. At sixteen Gary worked bagging ice for $2.00 an hour.

When Gary went away to college he learned about the Internet and has since been called a Social Media Guru. Using the Internet Gary increased his family’s income to a twenty million dollar business within four years. Using his knowledge plus his accomplishments he tries to teach others how to be successful using their passion.

In his book Crush It! Gary explains within each of us our DNA determines our brand and our passion. Following these will help us to develop our own unique style. After discovering what your passion is become knowledgeable about it; learn all you can and then go out and sell yourself. The fastest way to spread news in today’s society is using the Internet. This provides each one of us a way to sell ourselves so that we are able to eventually quit our jobs and become self sufficient doing a job we love involving the passion that is deep inside of us.

Now that you have decided what you are going to sell get out and sell it! First, you have to share yourself with others, so that they are aware of your knowledge. The fastest ways to do this is to use technology and get hooked up with popular websites like Facebook, Twitter, and Tumblr. Using the Internet’s social marketing network allows a person to talk and convince others about their passion. This opens up a new highway for the entrepreneur to sell themselves.

After, the decision is made on what you want to sell; in Gary’s case it was to increase his family’s wine business, next take the appropriate steps and spend the money where it will count. Do not be stingy with the money when hiring a web designer. This is one place Gary encourages a person NOT to save money. You are known by your website! If you plan on using video media then invest in a video camera, a flip camera is easy to use and gets the job done. When posting the video to sites, like Youtube.com, be professional, and be careful with the background.

Another way to boost your income is to have a link on your website that will lead consumers to another website that sells goods. Anytime a customer buys off that website you will receive a commission without having to do any extra work.

Gary stresses a final thought to all who want to be entrepreneurs. With today’s environment rapidly changing if your plans are not working rethink the way things are presented on the social media. While on your way of becoming an entrepreneurs be aware and alert to the changing economy.

The Ten Things Managers Need to Know from Crush It!

1. An important fact that carries through the whole book was, “you got to be you” (p. 16). You need to know who you are and what you want to achieve so you can go out to accomplish your goal.

2. All managers need to know that they need to start planning their future now. If they are not happy in their present job before they get bogged down in it, they need to find something that they will be happy doing.

3. When trying to convince others about your passion make sure you have researched and know the facts about your passion. Be an expert in what you are trying to sell.

4. Not only do you need to respect the customers, you need to respect yourself and, “Don’t lie to yourself” (p. 51).

5. In today’s society there are many ways to reach out to consumers. Be careful when choosing the correct medium. Information can be presented either through video, audio, written media, or a combination of the three.

6. When presenting your passion to others make sure that you know yourself. What Gary means when he says this is, are you the type of person to be in front of the camera, or are you more comfortable expressing yourself in written words, or presenting it on air. (p. 54)

7. Using the Internet in the 21st century there are different websites that help you spread the word. Some of the more familiar sites can be used for social marketing are: Tumbler, Facebook, Twitter, and YouTube.

8. Don’t be afraid to spend the money to invest in the things you need to succeed. When Gary says, “Invest the important stuff” he’s suggesting that you spend money on what you need whether it be a mic, video camera, or flip camera. (p. 86)

9. A business is not built overnight; it takes time so be patient and that will be the secret to your success.

10. Finally, a word from Mr. Vaynerchuk, “be ready to adapt” (p. 120). To achieve your full potential you have to be aware of the changing environment and be flexible to change with it.

Full Summary of Crush It!

I. Passion is Everything

Gary Vaynerchuk, the author of Crush It! states that not only is passion everything, but if you are willing to do everything you will be able to live on your own terms. Gary tells the secret to achieving the goal of making everything happen in life is by living by three rules: love your family, work super hard, and live your passion. His success is measured by how happy he is in his life, and not by how big his business is or the money he has made. The author explains his idea of what live your passion means. To him if you can get up to go to work without realizing how many hours you put in, and you do not need a vacation because your work is playing and you are relaxed then you are making money while living your passion.

In this book Mr. Vaynerchuk tells step by step what to do to make the Internet a networking tool work for you. With the world changing with the way people are communicating technology is playing a bigger part in the business world. The social media, Facebook, Twitter, Tumblr, YouTube, makes it easier for customers to communicate. The Internet has made a big difference in the way business is done. With using today’s social media the only investment needed is the time it takes on the sites and with companies willing to pay money Gary thinks that they could spend their money on your ideas. The author believes that there is room for everyone to be successful in the business world. His formula, “Social Media=Business Period” (p. 11).

II. Success is in your DNA

In chapter two, Gary Vaynerchuk gives his background and how his marketing has brought his family’s Shopper’s Discount Liquors from a four million dollar business to a fifty million dollar business in eight years. He feels that it is very important that a person is who he is. Gary was a little boy of three years old when his family came to America from Belarus, Soviet Union. The family came expecting to work with an uncle who had come earlier to America. But, after his uncle died unexpectedly his family allowed them to stay with them until they could find an apartment. Things started going from bad to worse for them within a matter of a few weeks. Gary’s grandmother was mugged and his dad lost his work as a construction worker. Fortunately, the uncle’s family owned a liquor store and gave Gary’s dad a job as a stock boy. Eventually his dad became manager and co-owner of the store. At sixteen Gary went into the family business starting out making $2.00 an hour for bagging ice.

In 1995, while in college Gary was introduced to the Internet. Then and there he decided he was going to use the Internet to increase the family income. Finally, in June of 1997 the Winelibrary.com was launched. Four years later he had a twenty million dollar business. Gary was an over achiever who was not content and he tried to strive for more. So in February 2006 he launched the Wine Library TV to sell wine online.

III. Build Your Personal Brand

“Developing your personal brand is key to monetizing your passion online” (p. 28). What makes you unique is your own style; you are selling yourself by video, podcast or blog. In the past people were able to be successful through advertisements on television, radio, newspapers or magazine, but with using the Internet people are now able to sell themselves at a lower cost. The first thing you need to do is to sell yourself. People need to know that not only do you know what you are talking about but, also be honest and trustworthy in all that you say and do make sure you are yourself. Be yourself.

With the use of Internet or word of mouth means a whole new thing. When someone tells something through a blog it is out there for thousands of people to read and to share with others. An example that Gary used in the book was; a cat breeder who needed to get out the word about her Siamese cats and within ten minutes the news had reached over thousands of people for free. No cost advertisement is the way to go.

IV. A Whole New World

Mr. Vaynerchuk predicts that what is in the future will change the way business is done. Businesses are changing for example; as newspapers are going out of business, people are now reading about the news online. This opens up a new highway for advertisers. Eventually the middleman will be gone, and since all businesses depend on the interaction of people Gary believes everyone right now should start planning their future by your own personal brand. In other words, “you should aim to leave your job and grow your own brand and business.”

V. Create Great Content

With developing your own personal brand and the use of the internet’s social marketing network a person can talk about and convince others about their passion. First, and far most is the content and the knowledge they posses about their passion. Read up on your passion; know what you want to sell others. After that is done start the research, look through all resources to find as much information on your topic. To share the gained information consider doing it in story form. Gary states his attention is held if he obtains new knowledge through stories.

The next important step to take is to choose how you want to present the knowledge of your passion to others, “choose your medium carefully” (p. 53). Are you the type to be in front of a camera or express yourself better in print?

VI. Choose Your Platform

Gary dedicates this chapter to different types of media. Remember there are three forms of media to present the information. Information can be presented in media, video, audio or a combination of the three. Gary believes video is the most affective. With today’s technology and the ability to post blogs it makes it easier for people to locate the blogs posted by business people. People will want to do business with you after reviewing your knowledge on your blogs.

The most popular blog in Gary’s opinion is Tumblr. Tumblr is easy to use and the design of the site is simple. In addition to that the domain name is posted for free. Another advantage to Tumblr is the easy way to respond to a blog, just hit a, “re-blog” button (p. 63).

Another social networking site is Facebook. This site is a fast-growing website that attracts people of all ages. After setting up the account you will have a fan page. Using this fan page you are able to email all of your friends your ideas in one shot. It also allows your friends to interact with you.

“Twitter allows the consumer to tell every person in his world what he thinks is cool or crappy or interesting” (p. 71). This social networking site is beneficial. First, people can respond to your tweet by re-tweets. Second, it allows consumers to have a closer relationship with companies. Third, it allows you to keep up with your competitors. Fourth, it lets you have an open conversation. Fifth, it helps spread the word. One thing to remember about Twitter is that it is a free way to communicate, and a low cost to advertise.

Two types of video media are YouTube and Ustream.tv. These videos allow you to advertise your company online in a video form. These two popular sites allow the opportunity for one to show others their passion first hand. The presentation that is made in a predetermined topic allows the presenter to control your message.

VII. Keep it Real….Very Real

It is very important to be yourself especially when working in front of a camera, and the video will later be put on the web. As an entrepreneur starts out one of the most important things to do is, “invest in the important stuff” (p. 86). According to Mr. Vaynerchuk in order to be successful one must not only have the passion but all, “work the social networking tools to the max” (p. 88). A person who has less knowledge and poor skills can still make more than you if they are willing to put forth more effort. In order to win and be successful devote oneself to the work. Your hard work will pay off eventually but patience is a must. As you start earning make sure you pay yourself last. “Before you invest in yourself, you have to invest in your long-term future” (p. 92).

VIII. Create Community: Digging Your Internet Trench

The first step is to start your own website to sell and inform others of your passion. In order to build an online community talking with others must take place. After Gary tapes an episode he explains how he stays up for hours researching what others are saying and thinking. As he reads he leaves comments on their website.

The author says to start out first, set up a blog and release it through a site similar to YouTube. Then stay on the net and search every comment that people have made on the topic you are discussing. After finding the comments make sure you post comments on them. Have readers join your Facebook, twitter, and email accounts. They will share your knowledge with others who too will join in on your community. Gary said make sure you celebrate even if you have only one person commenting on your video.

IX. The Best Marketing Strategy Ever

This one word chapter is not only short, but also simple. This chapter just says CARE.

X. Make the World Listen

Using Accounting as an example the author showed how to apply his theory of taking your passion and making it work. First, go online and buy your name with both dot com and dot TV. Next, start a blog with an account that will support your domain. Then spend the money to hire a web designer. Do not be cheap on this part of the plan; it will pay off. Make a video to post on a video blog. Create a facebook account and share yourself. Let everyone know how knowledgeable you are about accounting. Post changes in taxes and give advice away to your readers, and keep searching and posting. On your page make sure you have a button for viewers to contact you.

XI. Start Monetizing

By now you have made yourself known to searchers of the net. Keep your social media going and improving your skills. Add income to your account by having companies advertise on your site. Check out the site by Google called Ad Sense.

Now that you have your income coming in supplement it with speaking engagements. Start out by offering for free your knowledgeable services at conventions and then be patient and wait for them to want to hire you as a speaking consultant.

Another way to boost your income is to have a link on your website that will lead consumers to another website that sells goods. Anytime a customer buys off that website you will receive a commission without having to do any extra work.

If you have an ability to come with new ideas to increase your income is to, “Develop a product to sell” (p. 113). Being creative can pay off with making products and putting your logon on it with your blog name and address.

XII. Roll With It

The author wants to make sure his readers realize that even though he states to be committed and to go for your goal, being reasonable and knowing if things are not working be willing to change. Gary believes some entrepreneurs are not successful because they can not change. With today’s environment rapidly changing if your plans are not working rethink the way things are presented on the social media.

Sometimes there are videos put on the social media that could hurt your business. As the business entrepreneur you have to be ready to, “put out fires” (p. 121). Be ready to address any unjustified comments made about your site before a lot of damage can be done. Since, there is no one to stop some one of posting their opinions all business personal need to stay up-to-date with what is being said in relation to what is occurring in the public.

XIII. Legacy is Greater Than Currency

Today, with videos and blogs everyone is in the public eye. Sharing your blessings is an opportunity, and when things go wrong everyone will know. As the author states, “think through the consequences of every business decision” (p. 128). A good business man is able to visualize and think in long term.

Working toward achieving one hundred percent happiness is the aim of living your passion. Mr. Vaynerchuk believes leaving a legacy is more important so he is very conscious about corresponding with each person who writes to him. He believes that every person, “deserves respect and attention” (p. 130). Giving respect to your audience will give them the attention they need and keep them coming back.

XIV. Conclusion

In conclusion Gary Vaynerchuk wants to stress to the reader that with the world changing use this book only as an outline to follow. By the time Crush It! Is in print and has been read the world has changed.

Gary’s final word to his reader is, “true success-financial, personal, and professional-lies above all in loving your family, working hard, and living your passion” (p. 134).

Personal Insights

Why I think:

· With business conditions today, what the author wrote is – or is no longer true – because:

When reading this book I would say that if the economic conditions in this world were not in a mild depression many people would be able to learn a valuable lesson. Even though, this book was written during tough times some people who read this book may benefit from the knowledge gained in their present job. Or they may slowly start up another business in their spare time in which this business revolves around their favorite hobby. With technology and ease of mass communications Mr. Vaynerchuk was correct when he mention that stating ideas they could be shared to many in minutes.

· If I were the author of the book, I would have done these three things differently:

1. If I were the author I would have included graphs or charts to support my findings.

2. I would have given details how to use the social networks he suggested. He gave information of what is on the site, but I did not understand it fully.

3. If I have been the author I would have had interviews asking people their opinions of the different types of websites and their passions. I would also want to ask the people what is their opinion of the topic I was trying to inform them about.

· Reading this book made me think differently about the topic in these ways:

1. After reading the book, I looked at my passion and thought about ways I could share my knowledge.

2. This book made me think differently about how internet is used as a social media business instead of just away of keeping in touch with friends.

3. I also stopped to look at myself to consider what type of social media would be the best for me. Since, I am not one that likes to be in front of a camera I think I would be better presenting information through print or audio.

· I’ll apply what I’ve learned in this book in my career by:

1. I will look closer into my passions to make sure they overlap with my career.

2. Remembering his three rules: love your family, work super hard, and live your passion will help me stay on track.

3. By being flexible and willing to change with the changing society.

· Here is a sampling of what others have said about the book and its author:

While reading the reviews I was able to find many people that were able to enjoy and learn from this book while others doubted if it was true with what Mr. Vaynerchuk was writing. A few of the writers of the reviews did say that when reading this book they were able to gain new knowledge that the reader did not even know about it. It is agreed by a number of the reviews that the book, “Crush It!” was able to teach many people about how to use a person’s hobby and turn it into a growing business. One of my favorite quotes from the reviews is by Rachel Wharton from the NY Daily News and she says, “The most endearing piece of Vaynerchuk’s persona is the part where he tells you not to be afraid to speak your mind, to go ahead and drink what you like.”

Even though Mr. Vaynerchuk’s book did get many excellent reviews there were a few where the review was negative. One of the most prominent negative reviews that I found was by Julie in which it was located on Amazon.com. As she is saying she believes that Mr. Vaynercuk’s book falls into the category of this, “book was written because someone has gotten rich doing something.” While the book was read by many and with everyone having their own opinion I can understand while some people thought it was an ingenious way to make money and others thought it was a rip off of their money.

Bibliography

Crush it!-press and reviews. (n.d.). Retrieved from http://crushitbook.com/crush-it-press-and-reviews/.

S.C.Y., J. (2009, October 16). “I wanted to like it, But…” Retrieved from http://www.amazon.com/review/R3BNS1SYRL9X80.

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Contact Info: To contact the author of this “Summary and Review of Crush It!” please email Megan.Broom@selu.edu.

David C. Wyld (dwyld@selu.edu) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/.

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Summary and Review of The Tipping Point - How Little Things Can Make a Big Difference by Malcolm Gladwell

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This summary was prepared by Lisa Patti, while majoring in Business Administration in the College of Business at Southeastern Louisiana University.

EXECUTIVE SUMMARY

The Tipping Point is the biography of a simple idea and how little things can make a big difference causing a “tip” in a circumstance. The Tipping Point is one dramatic moment in an epidemic when everything can change all at once. Malcolm Gladwell begins with the example of “Hush Puppies” shoes and also speaks of the fall of crime in New York. One may stop to wonder how these two very different examples share a basic underlying pattern. They both exhibit contagious behavior and in each case little changes caused big effects.

Gladwell speaks of three rules of epidemics: Law of Few, The Stickiness Factor and the Power of Context. In the first rule, Law of Few, he illustrates certain type of people who help tip the scales. These are connectors, mavens and salesman. He gives an example of a famous connector, Paul Revere, which was a most surprising story. In introducing the next rule, the Stickiness factor, Gladwell uses Sesame Street and Blues Clues to exhibit repetition as a learning tool in the youth of today. The third rule, The Power of Context, touched on the crime rate of New York City. A little gesture such as cleaning graffiti off the subway walls helped to reduce crime in the area. He introduced the “Broken Glass Theory” depicting that unchecked signs of deterioration in a neighborhood or community could result in a declining quality of living. If a window is broken or left un-repaired, people walking by will conclude that no one cares or no one is in charge. This could lead to an epidemic of crime. Gladwell mentioned the magic number of 150. Groups of 150 display levels of intimacy and efficiency. Groups larger than this size tend to be toxic. This strategy of smaller groups is found in many corporations’ organizational structures today.

Gladwell introduces several case studies throughout the book. Airwalk shoes, teenage smoking and breast cancer awareness to name a few.

The Tipping Point is a magic moment when an idea, trend or social behavior crosses a threshold, tips and spreads like wildfire. It’s a book about change. In particular, it’s a book that presents a new way of understanding why change so often happens as quickly and as unexpectedly as it does. The Tipping Point is an examination of the social epidemics that surround us.

Full Summary of The Tipping Point: How Little Things Can Make a Big Difference

The book, The Tipping Point, How Little Things Can Make a Big Difference by Malcolm Gladwell identifies and explains mechanisms which cause certain trends to “tip” and take hold and others to fail. Gladwell portrays examples from marketing, medicine, literature, politics, and other spheres that show basic moves and conditions that can transform a small change into a huge awakening. In the beginning of his book, Gladwell uses an example of “Hush Puppies” shoes and how a handful of hipsters in Manhattan started wearing the shoes and caused a shift in sales. It took a group of “opinion makers” to wear the shoes; other saw them and copied the style. After a few fashion designers used them, “Hush Puppies” reached the “tipping point”; causing this brand of shoe to take off in sales and till today still exits in stores everywhere.

Gladwell identifies how epidemics are started. He assesses that most trends and styles are born and spread according to certain types of transmission and also in conveying certain style and ideas. Gladwell introduces three rules of epidemics; the Law of the Few, the Stickiness Factor and the Power of Content. The tipping points that transform a phenomenon into an influential trend require a certain type of people. The success to any kind of social epidemic is dependent on the involvement of people with a particular and rare set of social gift. Those particular people make things happen. They are usually energetic, connected, knowledgeable, persuasive and influential among their peers. They are connectors, mavens, and salesman. Connectors are individuals who have many ties with people. They have a special gift for bringing the world together. They tend to be outgoing and helpful. They are the kind of people to know when you need a job because they know somebody who knows somebody. A famous connector he uses as an example was Paul Revere and his ride warning the patriots, “The British are coming”. This was an example of a word of mouth epidemic. People knew and trusted Paul Revere. They believed him and followed his warnings. At the very same time, William Dawes, also rode warning people of the same thing. No one listened to Mr. Dawes because he was not as well known as Paul Revere. His message did not stick like Paul Revere’s historical message.

Gladwell then speaks about mavens. The word Maven comes from the Yiddish and it means one who accumulates knowledge. Mavens are people who have a strong desire to help other consumers by helping them make decisions. They are information specialist. To be a maven is to be a teacher. Mavens are information brokers, sharing and trading what they know. They are also avid readers of “Consumer Reports”. Mavens have the knowledge and the social skills to start word-of-mouth epidemics, but don’t how to pass it along. The third type of person is the salesman who twists arms and motivates people into to actions. Great salesmen have the ability to enter into an arrangement, establish themselves quickly and proceed rapidly to sell items. Salesmen have skills to persuade us when we are unconvinced of what we are hearing and they are critical to the tipping of word-of-mouth epidemics.

As the book continues on, Gladwell introduces an important factor in tipping items. This is called the “stickiness”. Stickiness is a specific factor quality of a message that makes something memorable and grabs people’s imagination. The Stickiness factor states there are specific ways of making a contagious message memorable. These are simple changes of the presentation of structuring of information that can make a big difference in how much of an impact it makes. An example of the stickiness factor is the children’s show, Sesame Street. The makers of Sesame Street use this repetitive factor to teach kids with rhymes and rhythms. The same teaching segment of the show is presented throughout the week repetitively before a new concept is introduced. This method helps children understand and comprehend by using visual-blending exercises. One example of this showed segments that teach children that reading consists of blending together distinct sounds. In one, “Hug”, a female Muppet, approaches the word HUG in the center of the screen. She stands behind the H, sounding it out carefully, and then moves to the U, and then the G. She does it again, moving from left to right, pronouncing each letter separately, before putting the sounds together to say “hug”. As she does, the Muppet Herry Monster enters and repeats the words as well. The segment ends with the Herry Monster hugging the delighted little girl Muppet. The legacy of Sesame Street was if you paid careful attention to the structure and format of your material, you could enhance, “stickiness”. Sesame Street today is watched by children all over the world in an effort to better prepare them in their future education.

Another aspect of mechanisms that cause trends to “tip” into mass productivity is the next term Gladwell points out, the Power of Context. When environmental conditions are introduced and are not right, it is not likely that the tipping point will occur. Gladwell speaks of the rapid decline in violent crime rates that occurred in 1990’s in New York City. He acknowledged a variety of factors that played a role in the decline. One instance was the removal of graffiti from the subway areas. With a clean environment, crime rate began to decline. Criminologists James Q. Wilson and George Kelling developed the “Broken Window theory”. This theory basically proposed that crime was the natural result of a disorder. If unchecked signs of deterioration in a neighborhood or community were seen by all, this could result in a declining quality of living. If a window is broken or left un-repaired, people walking by will conclude that no one cares or no one is in charge. In the cities, graffiti was equivalent of broken windows which initiated more serious crimes. This is an epidemic theory of crime. Crime is contagious and can start with a broken window or graffiti and spread through an entire community. Cities began the clean up which allowed other factors like the decline in crack cocaine use and the again of the population to gradually tip into a major decline in the crime rate.

Gladwell also mentioned for a trend to tip, you need a large number of people to embrace it. Certain sizes and types can also achieve a tipping point. In the novel, “Divine Secrets of the Ya-Ya Sisterhood” appealed strongly to middle-aged women in Northern California. These women were able to push the book into a national success. These women related their own experiences to the book and through word of mouth caused the novel to become a best seller. This book was an emotionally sophisticated character-driven, multi-layered novel that expressed reflection and much discussion in book groups. The novel became a social experience, a conversational piece and tipped into a larger word of mouth epidemic. The lesson of the Ya-Ya Sisterhood states that the small close knit groups have the power to magnify the epidemic of a message or idea.

In continuing discussion on group size, Gladwell introduces his theory of the magic of the number of 150. Group sizes play a large part in tipping scales. He refers to 150 as the magic number of a group size. This group size displays levels of intimacy and efficiency. Groups larger than this size tend to be more toxic. With a smaller group, you can become comfortable and rely on the other members to exhibit qualities of accuracy. Many corporations today use this factor as a foundation for their organization structure.

In the case study sections in this book, Gladwell discusses the rise and decline of the Airwalk shoe. It was originally geared toward skateboards in Southern California. It obtained national recognition through advertising techniques that portrayed“coolness” about them. By using fad styling in their shoes, Airwalks were able to create a product that was always right on target and exactly what the public wanted. The advertising agency came up with a series of dramatic images, single photographs showing the Airwalk user relating to his shoes in some weird way. In one, a young man is wearing an Airwalk shoe on his head, with laces hanging down like braids, as his laces are being cut by a barber. The ads were put on billboards and in “wild postings” on construction-site walls and in alternative magazines. As Airwalks grew, the advertising company went into television. The strength of the Airwalks advertising campaign was in more than the look of their work. Airwalk tipped because its advertising was founded very explicitly on the principles of epidemic transmission.

Gladwell touches on the Translation Factor. Translator takes ideas and information from a highly specialized world and translates them into a language the rest of us can understand. The most sophisticated analysis of the process of translation comes from the study of rumors. As we remember the child’s game of starting a rumor and as it is communicated to each person it is heightened and exaggerated totally changing the initial comment. In a rumor, there are three directions that are followed. The story is first leveled. Details that are essential for understanding the true meaning of the incident are left out. Then the rumor/story is sharpened. The details that remain were made more specific. Finally, a process of assimilation takes place; the story was changed so it made sense to those spreading the rumor. What mavens, connectors and salesmen do to an idea in order to make it contagious is to alter it in a way that specific details are dropped and others are exaggerated so that the message itself comes to acquire a deeper meaning; thus causing a “tip”.

Gladwell used the spread of teenage smoking as another example of the tipping point. Once again he reiterates the idea of “coolness” of smoking which causes a teenager to start smoking. He also noted that making smoking sound dangerous and rebellious appeals to teenagers. Larger advertising companies continuously pump money into campaigns enticing teenagers. Many teenagers end up continuing their cigarette experiment until they get hooked. The smoking experience is so memorable and powerful that they cannot stop smoking. The habit “sticks”. Telling teenagers about the health risks of smoking; “It makes you wrinkle”, “It can give you lung cancer and you can die”, doesn’t matter to them in the least. It is exciting, mysterious, dangerous and cool and especially frowned upon by their parents; all the elements to make teenagers want to smoke more. Emotional problems such as low self-esteem, unhealthy and unhappy home life, depression could lead to smoking in the first place among these teens.

Another important example of the concept of tipping was a nurse named Georgia Sadler who began a campaign to increase knowledge and awareness of breast cancer and diabetes in a black community in San Diego. She moved her campaign from churches to beauty salons. Women would sometimes spend two to eight hours having their hair braided. Stylist form bonds with their customers so she initiated the stylist to present a constant cycle of new information and gossipy tidbits on breast cancer awareness and diabetes into the salons. She wrote material up in large print and put it on laminated sheets. She set up evaluation programs to find out if it was working and if she was changing attitudes to get women to have mammograms and diabetes testing. Her program worked. She tipped the scales in her quest to help these women.

In conclusion, the first lesson of the Tipping Point is starting epidemics requires concentrating resources on a few key areas. The Law of the Few says that connectors, mavens, and salesman are responsible for starting work of mouth epidemics. There are times when we need a convenient shortcut; a way to make a lot out of a little, and that is what Tipping Points in the end are all about. There is difficulty in the world of the Tipping Point as hopefulness as well. By controlling a group size, we can improve its interest to new ideas. By repetitive presentation of information, we can improve its stickiness. Tipping points are a reaffirmation of the potential for charge and the power of intelligent action. The world around us seems like an immovable place, but with the slightest push – it can be tipped.

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To contact the author of this summary/review, please email Lisa Patti at Lisa.Patti@selu.edu.

David C. Wyld (dwyld@selu.edu) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/.

Originally published February 28, 2010 at Bookstove

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Summary and Review of The Bogleheads’ Guide to Investing

Cover of The Bogleheads' Guide to Investing

Summary and Review of The Bogleheads’ Guide to Investing
Published on February 12, 2010 by David C. Wyld Southeastern Louisiana University in Investing
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This summary was prepared by Jason Chigoy while a finance major in the College of Business at Southeastern Louisiana University.

Summary of The Bogleheads’ Guide to Investing

The Bogleheads’ Guide to Investing was set up in two parts, “Essentials of Successful Investing” and “Follow-Through Strategies to Keep You on Target.” There were 23 chapters in the book and I like the way the book was set up and the flow was very well put together. The book is written by three authors, Taylor Larimore, Mel Lindauer and Michael LeBoeuf. They are part of a group of people such as investors, lawyers, doctors, teachers, waiters and average joe’s that call themselves Bogleheads’. They get the name bogleheads’ from a man named John C. “Jack” Bogle. He is the founder and retired chairman of the Vanguard Group and has devoted his life to helping investors with their investing decisions. As well as teaching them how to invest, he created a family of low-cost mutual funds that Jack has been tirelessly advocating for individual investors. The three authors have over a century of investing experience between them. They have since, in a way, devoted part of their lives to helping others reach their investing goals. They each spend several hours a day on Moringstar.com Vanguard Diehard Forum answering questions for free.
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The book begins with a brief description about how the Bogleheads’ were started. After a decade-plus of existence, they moved from a loose association of investors to a web site by Morningstar, identified there as “Vanguard Diehards.” More than 25,000 visitors are recorded daily. After a few well known investors and writers who followed Jack Bogle’s investment advice invited Jack to Miami to meet. They called this meeting Diehards I. Some 20 investors who had never met one another before quickly became friends. The following year, the group met in Valley Forge, called “Diehards II” and met with 40 Bogleheads and from there it flourished. The book talks mostly about how to save you earnings and how to invest them correctly. It seems to be revolving around retirement and living a happy and financial free retirement. They also discuss the types of stock and bond options offered through the Vanguard Group with low-fees and proven track record returns.

Chapter one discusses choosing a sound financial lifestyle. Each chapter starts off with an interesting quote usually pertaining to what the chapter is discussing. This one is no different and I find the quote sort of funny, “Drive-in banks were established so most of the cars today could see their real owners.” The very first statistic that they tell in the book is very disturbing to me,

“It’s an old statistic that has held very consistent over time. Take 100 young Americans starting out at age 25. By age 65, one will be rich and four will be financially independent. The remaining 95 will reach the traditional retirement age unable to self-sustain the lifestyle to which they have become accustomed.”

It describes that without government programs such as Social Security, Medicare, and Medicaid many people would literally starve. They expect that as soon as the baby boomers begin to retire and start collecting the government handouts, they will go broke. The first chapter tries to help the reader figure out what kind of financial lifestyle you live, from Betty Borrower to Chad Consumer to finally Ken Keeper. They describe the differences in all three and how they feel that the borrowers and the consumers have a bad view on how to life financially by taking on too much debt and spending all their paycheck after their bills are paid. The keepers live in their means and don’t finance many possessions they can’t afford to pay off and invest 10% of their paycheck first before paying themselves. They tell you three steps to take before you start investing. First, leave the paycheck mentality and go to the net worth mentality. Second, pay off credit card and high-interest debt. Third, start an emergency fund.

Chapter two is about starting early and investing regularly. The magic is compounding. The rule of 72 is extremely simple: To find out how many years it would take for an investment to double in value, divide 72 by the annual rate of return. An investment that returns 9% doubles every 8 years because of the magic of compounding. For someone to have $1 million at the age 65 and with an 8% annual return they would need to invest the amount shown in the table just one time at that certain age. This table shows the amount after expenses and taxes and what the power of compounding can do to our investments. Here is another example of how starting early is extremely beneficial:

“At age 25, Eric Early invests $4,000 per year in a Roth IRA for 10 years and stops investing. His total investment is $40,000 Larry Lately makes yearly deposits of $4,000 in his Roth IRA starting at age 35 for 30 years. His total investment is $120,000. Assuming both portfolios earn 8 percent average annual return, at age 65, Eric’s IRA will be worth $629,741, but Larry’s IRA will be worth only $489,383. By starting out 10 years earlier and making one third of the investment, Eric ends up with 29 percent more.”

Age

Investment

15

$ 21,321.23

20

31,327.88

25

46,030.93

30

67,634.54

35

99,377.33

40

146,017.90

45

214,548.21

50

315,241.70

55

463,193.49

60

680,583.20

An interesting point made in this chapter is that the authors say to “Pay Yourself First”. The earlier you start investing, the sooner you can reach your financial freedom. The authors discuss making smarting purchasing decisions. They explain that buying a 2-3 year old car is a smarter investment that buying a brand new car because a cars main depreciation is the first few years of its life.

Chapter three begins with talking about knowing what your buying, part one. This chapter talks about different types of Stocks and bonds. Chapter three goes into detail about all of these types of investments. Stocks are a representation of an ownership interest in a corporation. Each stock share is actually a small fraction of its business to each person who buys the stock. Bonds are actually lending a specific amount of money to the issuer of the bond. You receive a return on your investment that is the bond’s yield to maturity and the return of the face value of the bond at a specific date, known as maturity date. There are also Treasury issues that are considered the safest bond investments since they are backed by the faith and credit of the U.S. government. T-bills, T-notes, T-bonds, Treasury Inflation Indexed Securities, Treasury Inflation-Protected Securities, U.S. Savings Bonds are all forms of bonds that the U.S. government sells. You might be wondering how much you should invest in bonds and Mr. Bogle suggests that you should own your age in bonds as a good starting point. I should have 25 percent of my investments in bonds.

Chapter four is very much like chapter three; however it talks about mutual funds, Exchange-Traded Funds (ETFs), and annuities. Mutual Funds pool lots of money from many investors to buy securities. There are different types of mutual funds such as equity mutual funds that invest in stocks, bond funds that invest in bonds, and hybrid/balanced funds that invest in both stocks and bonds. There are 10 strong reasons/advantages of investing in mutual funds. The ten are as listed, diversification, Professional management, low minimums, no-load or commissions, liquidity, automatic reinvestment, convenience, customer service, variety and communication and record keeping. An annuity is an investment with an insurance wrapper. There are a few different types of annuities. There are fixed, variable and immediate. Exchange-Traded Funds are mutual funds that trade like stocks on an exchange.

Chapter five talks about preserving you buying power with inflation-protected bonds and it starts off telling us that in chapter two we learned about how the power of compounding can work for us. But it can also work against us when it comes to inflation. “An inflation rate of 3 percent means that when a 25-year old investor retires in 40 years, she’ll need $3,262 to buy the same basket of goods and services that she can buy for $1,000 today.” Just imagine that if you were to keep $1,000 in a cookie jar for 40 years and then take it out and try to use it. You wouldn’t be able to buy anything close to what you thought it would. The big problem most people have understanding what real return is. Real return is the amount we have left after we subtract inflation form our rate of return. The U.S. treasury offers two choices that help fight inflation; I bonds and Treasury Inflation Indexed Securities (TIPS). The I bond works by two components, first there is a fixed rate on the bond when you purchase it that keeps the amount over and above inflation. Second is the variable inflation-adjustment rate that is recalculated and announced twice a year annually. TIPS are the same in that respect, but are purchased at Treasury auctions, in the secondary market.

Chapter six was the one I was hoping to tell me the best information. However, there is no formula to tell the investor how much they need to save for retirement. There are a lot of factors that can help us figure out the amount we need to accumulate to achieve our dream retirement: For starters, we need to save, the more the better. Next, our current age because this will help determine how many years we have to save and invest. Next, the hard one, how many years we’ll have to live off our retirement account, based on our life expectancy. Another is whether we plan to leave an estate, or if we will simply want to make sure that we don’t run out of money before we run out of breath. Another thing is a source of income in retirement and finally the rate of return on our investments. One of the toughest things to determine is our life expectancy. We would like to know when we will meet our maker so we will know how much we need to save up to that day. There is a saying in finance; a perfect investor will have the last check he ever writes to bounce. They discuss a few internet websites that have financial calculators to calculate your current portfolio, annual contributions and you’re expected total value at retirement and many more. Those can be located at www.bloomberg.com, www.bankrate.com, www.callan.com.

The next chapter talks about keeping it simple. The authors are all members of the Vanguard group and talk very highly about the Vanguard Index 500. It seeks to replicate the return of the S&P 500. They show lots of statistics for and against the index and it always seems to outperform the other index. The Vanguard Index 500 has outperformed the top 3 index by an average of 3 to 5 percent on a consistent basis. They are very firm advocates of investing regularly and over a long period of time. The do not believe in getting rich quick investing.

Chapter eight is all about Asset Allocation. Just like diversification, they want you to have stocks, bonds and cash. While you are getting your assets allocated, you need to figure out your risk tolerance. Knowing your risk tolerance is a very important aspect of investing. They have a chart in the book that shows he maximum decline based on allocation. This chart shows the maximum decline that would have occurred during the 2000 to 2002 bear market. It is made up of two Vanguard funds, Vanguard’s Total Stock Market Index Fund and Vanguard’s Total Bond Market Index Fund. This shows why nearly every portfolio should contain an allocation to bonds. Deciding on your risk tolerance and your asset allocation for your long-term portfolio is the most important portfolio decision you will make.

Allocation

Total Gain or Loss

Ending Value of $1,000

100% Total Stock Market

-37%

$628

80% Stocks / 20% Bonds

-26%

$742

60% Stocks / 40% Bonds

-13%

$870

40% Stocks / 60% Bonds

+1%

$1,011

20% Stocks / 80% Bonds

+17%

$1,165

100% Total Bond Market

+33%

$1,335

Cost matters. That is the theme of chapter nine. They are very stern on explaining that cost matters and you should keep them as low as possible. They have it estimated that the total cost in the U.S. equity market is about $300 billion annually. These consist of brokerage commissions, customer fees, legal fees, marketing expenditures, sales load, advisory fees, and transaction costs. Taxes are not included in these figures. Many investor pay front-end sales commission (load) when they purchase funds share. For example if you pay a 5% front-end load from a $10,000 investment, you are only getting $950 invested. If after a year you see your funds have had a 10% return and think that you just made $1,000 your wrong. You only made $950. Back-end loads are exactly what they sound like; they take their commission when you take your money out. There are no-load mutual funds, but those have purchase, exchange, account, redemption, management 12b-1 and other expenses tied into them. They highly recommend anyone getting ready to invest money to do their homework and find what the lowest cost to them is.

The next two chapters talk about taxes and how they affect you investment, from bonds to stocks to IRA’s. They explain in mostly about IRA’s and Roth IRA’s. A traditional IRA is a personal savings plan that gives you some advantages with your taxes while saving for your retirement. They don’t get taxed until you withdraw your money. There are limits to how much you are allowed to contribute. The maximum limit for a single individual to contribute to an IRA in 2005 is generally the smaller of $4,000 or your taxable compensation for that year. When you reach 50, you are allowed to invest $4,500. There is a 10% tax penalty for withdrawing money from a traditional IRA if the distribution takes place before you are 59 ½ years old. Roth IRA’s, like traditional IRA
’s is also a personal savings plan but it operates in reverse. While IRA’s contributions are tax deductible, Roth IRA’s are not. One of the reasons that people prefer a Roth IRA over a traditional one is because you may expect your future tax rate to be higher. Also Roth IRA’s are worth more from a tax stand point. There is no penalty on early withdrawal of your contributions. Withdrawals are not reported as income. There is a way that the owners of a traditional IRA can convert to a Roth IRA if they meet two requirements: One, their adjusted gross income is not more than $100,000. Two, you are not a married individual filing a separate return.

Chapter twelve starts off with another quote I found funny. It is by Warren Buffet, “Diversification is a protection against ignorance.” When it comes to investing, the old saying goes, “Don’t put all your eggs in one basket.” Millions of investors put all of their money in the latest and hottest dot.com stock that “couldn’t fail.” Most of them did eventually fail. They lost everything when the market nosedived in 2002. Diversification offers two big benefits to investors. First, it helps reduce the risk of having “all your eggs in one basket.” And second, you can increase your market return at the same time.

The next chapter was very brief and talked about not being a performance chaser and trying to time the market. They are firm advocates on staying the course in a well organized index fund. They used a great example of how the news tries to sell anything they can to the public:

In August 2003, Mr. Fabian confidently announced to Chuck Jaffee on CBS Marketwatch that he could produce a 100 percent return in 365 days using a turbocharged version on the system he sells investors. To prove that his market timing system worked, Fabian publicly invested $500,000 of his own money using the system. Big mistake! Unfortunately for Fabian, his $500,000 investment subsequently lost $192,000, and he was unable to hide that fact from readers…. One of the primary reasons we’re writing this book is to ensure that your lessons about investing will be much less expensive.

Trading Strategy

Turnover

Returns

Most Active Trader

258%

11.4%

Average Trader

76%

16.4%

Buy and Hold

2%

18.5%

They again prove their point about staying the course and not being an active trader. It the following graph, it shows the research results from two professors at the University of California. They did a study of 66,400 investors from the year 1991 through 1997 to see how trading affected those investors’ returns. The buy and hold traders beat the most active traders by a whopping 7.1% a year. Warren Buffet said it well when he said, “Inactivity strikes us as intelligent behavior.”

Savvy ways to invest for college, I wish my mom would of read this. This chapter shows so methods for saving for your college educations. I am glad mine will hopefully be over this Saturday unless graduate school calls later! The statistics show that a high school degree would have a lifetime earnings of $1,000,000. Associate degree would have a lifetime earnings of $1,600,000 and a Masters degree would have earned $2,500,000. Education pays in the long run. The authors give a website called www.saveingforcollege.com that has lots of free information on various college savings plans. The authors have discussed personal savings, custodial accounts (UGMA & UTMA) and U.S. Savings Bonds, IRA withdrawals and Coverdell Educational Savings Accounts (Educational IRAs or ESA). UTMA and UGMA’s are very dangerous things to give to your children. There are certain rules and laws with them that the initial giver of the account didn’t take into consideration. First the child gains full control of the account automatically at either the age of 18 or 21. At this point, they can spend it on anything they want like a car, TV or motorcycle and there is nothing you can do about it. The ESA are just like the UGMA and UTMA’s but they are tax free as long as they proceeds go to any qualified educational expense. I plan on using this when I have kids and decide to start saving for them unless something better comes out by then.

How to manage windfalls successfully? A windfall is an inheritance, settlement, sale, bonus, retirement or really any money that wasn’t originally accounted for. NBC reported that more than 70% of lottery winners use all the money they won in less than 3 years. They advise to deposit the money somewhere and leave it for 6 months to think of what to do with it the smart way. They say put a small portion aside to treat yourself to something you always wanted but to invest the rest.

Chapter sixteen starts off with a quote from one of the authors, Michael LeBoeuf, “I helped put two children through Harvard-my broker’s children.” They basically say that anyone that has the willpower to invest their money has the will power to learn and do it themselves. It is not hard, a little research and self learning can save thousands of dollars of your money that should be invested and not in the brokers pockets.

Part II of the book is a follow up on the first part. Chapters seventeen through twenty three reassure what the first part has gone over. Tracking
your progress and making sure you know where your money is at all times. They talk about tuning out the “noise” which the media is selling quick rich schemes and hot stocks. There are things the investment media don’t want us to know. Three things that make effective investing incredibility simple: Create a simple, diversified asset allocation plan, Invest a part of each paycheck in a low-cost, no-load index fund and check your investment periodically and stay the course. They say you should never invest with your emotions. When the market is down, most average people with life savings and retirements invested get nervous and withdraw their money for a huge loss instead of staying the course and letting it bounce back. They also talk about having your money last longer than you do and leaving your heirs with a check, not a bill. The main thing is living in your means and not over doing it.

Finally, they say “You can do it” and the bogleheads will help. This final quote really means a lot to me when I read it and really for anyone who has made mistakes in the past, whether it is in finance or in life in general. Carl Bard puts it nicely, “Though no one can go back and make a brand new start, anyone can start from now and make a brand new ending.” I really feel this book is giving me a new outlook on my financial future. They talk about what we have learned in the book and how the bogleheads want to help. They are a large group of people from all walks of life that have a common interest in investing and retiring sooner than later and enjoying every day of it. They give the website where the Vanguard Diehards Forum is at. Www.morningstar.com. There is so much information at this website and hundreds of people that love to help beginning and experienced investors reach their goals. In closing, they reiterate STAY THE COURSE. If you get lost, we are here to help!

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To contact the author of this summary/review, please email Jason Chigoy at Chigoyboy33@yahoo.com.

David C. Wyld (dwyld@selu.edu) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/.

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RefBan

Wednesday, June 9, 2010

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