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Archive for the 'Business' Category

Thursday, July 21st, 2016

M. Pilar Opazo at elBulli

Appetite for Innovation

This week, our featured book is Appetite for Innovation: Creativity and Change at elBulli, by M. Pilar Opazo. Today, we are excited to present a slideshow of photographs taken by Opazo in her time researching elBulli on site at the restaurant itself and at the elBulli test kitchen.

Don’t forget to enter our book giveaway for a chance to win a free copy of Appetite for Innovation!

Wednesday, July 20th, 2016

Organizational Creativity and Radical Innovation

Appetite for Innovation

“The research for Appetite for Innovation was conducted when Adria’s organization was undergoing its most profound transformation, from a restaurant to a research center for innovation, “elBulli foundation”. The book, therefore, takes advantage of this unique moment in time to retrace the story of a restaurant that became a legend and to explore underlying factors that led to its reinvention in 2011 into a seemingly unparalleled organizational model.” — M. Pilar Opazo

This week, our featured book is Appetite for Innovation: Creativity and Change at elBulli, by M. Pilar Opazo. Today, we are happy to crosspost a short article by Opazo, originally posted at orgtheory.net, that contextualizes her book within the field of sociology.

Don’t forget to enter our book giveaway for a chance to win a free copy of Appetite for Innovation!

How is it possible for an organization to systematically enact changes in the larger system of which it is part? Using Ferran Adria’s iconic restaurant “elBulli” as an example of organizational creativity and radical innovation, Appetite for Innovation examines how Adria’s organization was able to systematically produce breakthroughs of knowledge within its field and, ultimately, to stabilize a new genre or paradigm in cuisine – the often called “experimental,” “molecular,” or “techno-emotional” culinary movement.

Recognized as the most influential restaurant in the world, elBulli has been at the forefront of the revolution that has inspired the gastronomic avant-garde worldwide. With a voracious appetite for innovation, year after year, Adrià and his team have broken through with new ingredients, combinations, culinary concepts and techniques that have transformed our way of understanding food and the development of creativity in haute cuisine.

Appetite for Innovation is an organizational study of the system of innovation behind Adrià’s successful organization. It reveals key mechanisms that explain the organization’s ability to continuously devise, implement and legitimate innovative ideas within its field and beyond. Based on exclusive access to meetings, observations, and interviews with renowned professionals of the contemporary gastronomic field, the book reveals how a culture for change was developed within the organization; how new communities were attracted to the organization’s work and helped to perpetuate its practice, and how the organization and its leader’s charisma and reputation were built and maintained over time. The book draws on examples from other fields, including art, science, music, theatre and literature to explore the research’s potential to inform practices of innovation and creativity in multiple kinds of organizations and industries.

The research for Appetite for Innovation was conducted when Adria’s organization was undergoing its most profound transformation, from a restaurant to a research center for innovation, “elBulli foundation”. The book, therefore, takes advantage of this unique moment in time to retrace the story of a restaurant that became a legend and to explore underlying factors that led to its reinvention in 2011 into a seemingly unparalleled organizational model.

Appetite for Innovation is primarily intended to reach and be used by academic and professionals from the fields of innovation and organizations studies. It is also directed towards a non-specialist readership interested in the topics of innovation and creativity in general. In order to engage a wider audience and show the fascinating world of chefs and the inner-workings of high-end restaurants, the book is filled with photographs of dishes, creative processes and team’s dynamics within haute cuisine kitchens and culinary labs. It also includes numerous diagrams and graphs that illustrate the practices enacted by the elBulli organization to sustain innovation, and the networks of relationships that it developed over time. Each chapter opens with an iconic recipe created by elBulli as a way of illustrating the book’s central arguments and key turning points that enable the organization to gain a strategic position within its field and become successful.

You can read the post in its entirety at orgtheory.net.

Tuesday, July 19th, 2016

Introducing “Appetite for Innovation”

Appetite for Innovation

“Months prior to my visit to elBulli in 2011, Adrià had announced the transformation of his mysterious restaurant into a think tank of creativity, which would reopen in 2015. Yet, when reading about elBulli’s reinvention from my office at Columbia University, I had realized that there was something puzzling about this new organization too. Despite my efforts, I hadn’t been able to understand what the elBulli Foundation was going to be about—an interesting fact in itself. And when searching the Internet, I had come across the vast amount of historical records and detailed accounts of elBulli’s creations, which, for the most part, were made available by the organization itself.” — M. Pilar Opazo

This week, our featured book is Appetite for Innovation: Creativity and Change at elBulli, by M. Pilar Opazo. To start the week’s feature, we are happy to present Opazo’s Introduction, in which she explains how she first encountered elBulli and Ferran Adrià, and what she hopes people will take away from her book.

Don’t forget to enter our book giveaway for a chance to win a free copy of Appetite for Innovation!

Monday, July 18th, 2016

Book Giveaway! Appetite for Innovation: Creativity and Change at elBulli

Appetite for Innovation

“Opazo has written a fascinating organizational and business analysis of the restaurant and, in the process, produced an insightful account of how a culture of innovation can be achieved and sustained.” — Forbes.com

This week, our featured book is Appetite for Innovation: Creativity and Change at elBulli, by M. Pilar Opazo. Throughout the week, we will be featuring content about the book and its author on our blog as well as on our Twitter feed and our Facebook page.

We are also offering a FREE copy of Appetite for Innovation. To enter our book giveaway, simply fill out the form below with your name and preferred mailing address. We will randomly select our winners on Friday, July 22nd at 1:00 pm. Good luck, and spread the word!

Friday, July 1st, 2016

A Media Roundup for “The Evolution of Money”

The Evolution of Money

“The reason I think we need a new theory of money is because traditional theories either emphasise one side of money only (such as bullionism vs chartalism) or more or less ignore its properties altogether (like mainstream economics). And they take the relationship with number for granted, which I think is a mistake. It is the most obvious feature of money, and in many ways the most important.” — David Orrell

This week, our featured book is The Evolution of Money, by David Orrell and Roman Chlupatý. For our final post of the week, we’ve collected a number of the best articles and interviews by and about David Orrell, Roman Chlupatý, and The Evolution of Money.

First, you can read an adapted excerpt from The Evolution of Money at Evonomics:

Environmental conflict is therefore hardwired into the design of our monetary system—built for funding wars with kings and empires and now, as Klein documents, with the planet (one that, if it continues, the planet will win—it’s bigger). Dazzling us with number, it distracts us from the costs. This, rather than ideology, is why the GDP produced in a city like Beijing is booming, but people are leaving because they can’t breathe the air (and why, a little late, the National Congress of the Communist Party wrote the goal of an “ecological civilization” into its constitution in 2012). Like a toxic algal bloom on a lake, the economy is doing fine, but it is asphyxiating everything around it.

99Bitcoins has a great interview with David Orrell on cryptocurrency:

“The reason I think we need a new theory of money is because traditional theories either emphasise one side of money only (such as bullionism vs chartalism) or more or less ignore its properties altogether (like mainstream economics). And they take the relationship with number for granted, which I think is a mistake. It is the most obvious feature of money, and in many ways the most important.” — David Orrell

Adbusters featured “The True Value of Money,” an article by David Orrell:

A peculiar feature of orthodox economics is that money is treated as an inert medium of exchange, with no special properties of its own. As a result, money is largely excluded from macroeconomic models, which is one reason the financial crisis of 2007/8 was not predicted (it involved money). In many respects, when viewed through the lens of quantum physics, money behaves a lot like matter – and acknowledging that behavior promises to do to economics what quanta did for physics.

(more…)

Thursday, June 30th, 2016

Why Money Is Undermining Our Financial System

The Evolution of Money

“And this is exactly where the current problem lies: central banks – and their peers, commercial banks – still operate in a one-dimensional universe where readiness to spend has been muted. On the one hand, we now have those who have, who are thus trustworthy and who can therefore reach into the honeypot of cheap credit. But these largely own what they want and who instead of spending on things invest – thus the asset bubble and also the increasing gap between rich and poor. On the other, we have those who want to spend but don’t have the means or access to credit.” — Roman Chlupatý

This week, our featured book is The Evolution of Money, by David Orrell and Roman Chlupatý. Today, we are happy to present an interview with Roman Chlupatý from Euronews, in which Chlupatý explains why we live in “a world where one of a few certainties is that while we don’t know when the next [economic] crisis will come, we know for sure that it will.” Watch the video or read the text in full below.

We live in a time of great monetary abnormality. Not only are the European Central Bank and the Bank of Japan prescribing negative interest rates to prop up their failing economies but the Swedish central monetary authority is doing the same – despite the fact that its national economy is growing at a solid rate. And as if this were not enough, the Fed’s Janet Yellen, who was expected to increase rates three to five times this year on her quest for normalcy, has mentioned earlier this year that negative rates in the US – meaning banks charging interest from those depositing money with them – are still a possibility.

What does this mean? Seven and a half years after the so-called crisis broke out with the collapse of investment bank Lehmann Brothers, old recipes and ways of thinking are out of breath. They certainly did help to avert the worst – just imagine what would for instance have happened in the UK if ATMs had stopped giving out cash, a situation that was mere hours away – but they did so at the cost of a 57 trillion dollar-increase in debt, as consultancy McKinsey points out, and at the cost of inflating speculative bubbles all around. (more…)

Wednesday, June 29th, 2016

The Changing Faces of Money

The Evolution of Money

“Indeed, one of the things holding back the adoption of cybercurrencies including bitcoin is that they do not conform with traditional ideas about money. But is the problem with bitcoin, or have our ideas about money failed to keep up with its evolution?” — David Orrell

This week, our featured book is The Evolution of Money, by David Orrell and Roman Chlupatý. In “The Changing Faces of Money,” David Orrell looks at the rise of cybercurrencies and what they can tell us about what money actually is.

The Changing Faces of Money
By David Orrell

The question, “what is money?” is one that never seems to go away. Were medieval bills of exchange money? How about fiat currencies? Its latest manifestation tends to focus on cybercurrencies such as bitcoin – are they as good as regular coins?

To some techno-enthusiasts the answer is a resounding yes, but to many people it is less clear. This skepticism was captured by former Federal Reserve chairman Alan Greenspan, who once told Bloomberg, “I do not understand where the backing of bitcoin is coming from. There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it’s a government or an individual.”

Indeed, one of the things holding back the adoption of cybercurrencies including bitcoin is that they do not conform with traditional ideas about money. But is the problem with bitcoin, or have our ideas about money failed to keep up with its evolution? (more…)

Tuesday, June 28th, 2016

The Evolution of Money: Origins

The Evolution of Money

“Money has been one of mankind’s most successful inventions (it is no coincidence that to “coin” means to “invent”). Indeed, it is one of the things that best expresses our humanity.” — David Orrell and Roman Chlupatý

This week, our featured book is The Evolution of Money, by David Orrell and Roman Chlupatý. To start the week’s feature, we are happy to present an excerpt from “Origins,” the first chapter of The Evolution of Money.

Monday, June 27th, 2016

Book Giveaway! The Evolution of Money, by David Orrell and Roman Chlupatý

The Evolution of Money

“Even though money is something we all use every day, talking about it, defining it, and explaining are extremely arcane things to do. The tone is important, and The Evolution of Money goes about its task in a readable, breezy style that does not become glib.” — Paul Vigna, coauthor of The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order

This week, our featured book is The Evolution of Money, by David Orrell and Roman Chlupatý. Throughout the week, we will be featuring content about the book and its authors on our blog as well as on our Twitter feed and our Facebook page.

We are also offering a FREE copy of The Evolution of Money. To enter our book giveaway, simply fill out the form below with your name and preferred mailing address. We will randomly select our winners on Friday, July 1st at 1:00 pm. Good luck, and spread the word!

Friday, May 27th, 2016

Can Business Help Stop Global Warming and the Other Four Horsemen? — Daniel Callahan

The Five Horsmen, Daniel Callahan

“If my other four horsemen can learn anything from the success of the Paris agreement for global warming, it may be that success is possible with the following approach: work diplomatically to gain the cooperation of industry, regardless of how obstructionist it has been in the past; intensify efforts to find technological pathways that work while also lowering prices; develop citizens’ groups at the local level and broader grassroots social movements to break through the barrier that too often succeeds in raising interest and concern but fails to generate action and legislative attention; if there are real dangers and hazards, do not hesitate to evoke them (but do not exaggerate); and, most of all, don’t give up. The problems of the five horsemen are most likely chronic, to be lived with and combatted simultaneously. That can be done.”—Daniel Callahan, The Five Horsemen of the Modern World: Climate, Food, Water, Disease, and Obesity

We conclude our week-long focus on Daniel Callahan’s book, The Five Horsemen of the Modern World: Climate, Food, Water, Disease, and Obesity with a list of organizations and business-led initiatives that are working to solve the key problems affecting today’s world. As Callahan argues in the final chapter of his book after decades of causing many of these problems, businesses are now increasingly active in trying to combat them. Most of these companies and industry partnerships are focused on ending global warming but the organizations at the bottom are concerned the other issues Callahan discusses in his book. Here is Callahan’s list:

* GreenBiz Group: large-membership group with annual detailed re­ports on global industry and environment efforts
* Risky Business Project: a potent group of U.S. business leaders working to get business to prepare for global warming
* The New Climate Economy: an international group of economists aim­ing to achieve lasting economic growth while also attacking the risks of climate change
* UN Global Compact: UN-business partnerships with voluntary corpo­rate responsibility
* The International Business Leader’s Forum (UK): founded by the prince of Wales to focus on the role of business in society, embracing social responsibility as “core business”
* World Economic Forum: producing studies and reports and holding an annual meeting in Davos combining economic growth and risk of global warming
* The Climate Group and the CDP (formerly known as the Carbon Dis­closure Project): formed RE100 with the aim of getting 100 companies to pledge to switch to 100% renewables
* New York Declaration on Forests: thirty-four companies pledged to cut deforestation
* Business for Innovative Climate & Energy Policy (BICEP): twenty-nine consumer businesses that have the goal of getting widespread U.S. bi­partisan energy and climate legislation; its 2013 Climate Declaration gained 800 companies and had 1,000 signatories by September 8, 2014, just before New York climate week and march
* World Business Council for Sustainable Development (WBCSD): a CEO-led organization of companies working to create a “sustainable” future for business
* United States Climate Action Partnership (USCAP): business and envi­ronmental organizations to get national legislation to require signifi­cant emission reductions
* The B-Team: not-for-profit organized “to catalyze a better way of do­ing business for the well-being of people and the planet”
* The Divest-Invest Campaign: led by the Wallace Global Fund to pledge divestment from fossil fuel stocks and move money into clean energy investments; announced gaining 800 global investors with combined assets of $50 billion by 2014, and aiming for $150 billion by 2015
* We Mean Business: a coalition of organizations working with the world’s influential businesses and investors to accelerate the transition to a low carbon economy

Here are a few examples pertinent to the other four horsemen. There are not as many organizations doing for four of the horsemen what busi­ness is doing for global warming:

* Anheuser-Busch: SmartBarley benchmarking to improve crop yield through better water efficiency
* Sustainable Agriculture Guiding Principles: Coca-Cola, requiring its supply-chain members to practice these principles to maintain farm­lands and communities
* Coca-Cola: with Nature Conservancy and World Wildlife Founda­tion, collecting water fees from companies operating in the develop­ing world to restore natural ecosystems
* Better Cotton Initiative: founded by partnership between World Wild­life Fund and IKEA to address water-gobbling cotton production
* WATERisLIFE: the Drinkable Book holding twenty filter pages, each capable of filtering up to 100 liters of water at a cost of about 10 cents per page
* Global Alliance for Clean Cookstoves: partnering 1,000 groups with 45 national governments to built a sustainable market for clean cooking solutions
* Healthy Weight Commitment Foundation: a CEO-led partnership to reduce obesity, comprising more than 250 active corporations and nonprofits

Thursday, April 7th, 2016

Lessons from Google and Columbia’s CMO Academy

The Digital Transformation Playbook

“As the media available to customers proliferates, effective targeting is absolutely critical. Your message matters; but increasingly, who you reach is the difference between success and failure. In the digital era, targeting is fundamentally different than the traditional world of media buying. Marketers must shift from the old thinking of audiences (based on demographic fictions, e.g. ‘fashion-savvy, 25-40 year old, urban mothers’) towards addressing specific customers based on their actual behaviors.” — David L. Rogers

This week, our featured book is The Digital Transformation Playbook: Rethink Your Business for the Digital Age, by David L. Rogers. In today’s post, crossposted from David Rogers’s blog, Rogers details seven important lessons learned from Google/Columbia Business School’s recent “CMO Academy.”

Don’t forget to enter our book giveaway for a chance to win a free copy!

Lessons from Google and Columbia’s CMO Academy
David L. Rogers

What are the challenges that today’s Chief Marketing Officers face as they manage a changing role and rising expectations in a world shaped by digital technologies? I got to discuss this question with a hundred CMOs of North American companies recently, while teaching a joint Google/Columbia Business School program, our first-ever “CMO Academy.” The invited executives from the US, Canada, and Mexico represented a diverse range of industries from fashion to financial services, and hospitality to healthcare.

Below are seven lessons that emerged through two days of case studies, interactive presentations, and hands-on problem solving with this group. (more…)

Wednesday, April 6th, 2016

Build Platforms, Not Just Products

The Digital Transformation Playbook

“Airbnb is an example of a platform—a class of businesses that are rethinking which competitive assets need to be owned by a firm (e.g., rental properties and trained service staff) and which can be managed through new kinds of external relationships. These platform businesses are part of a broad transformation of the domain of competition and the relationships between firms.” — David L. Rogers

This week, our featured book is The Digital Transformation Playbook: Rethink Your Business for the Digital Age, by David L. Rogers. In today’s post, excerpted from the third chapter of The Digital Transformation Playbook, Rogers delves into the story of Airbnb to provide an introduction to the rise of “platform businesses” in the digital age.

Don’t forget to enter our book giveaway for a chance to win a free copy!

Build Platforms, Not Just Products
David L. Rogers

In 2007, two recent graduates of the Rhode Island School of Design, Brian Chesky and Joe Gebbia, were struggling to pay the rent on their apartment in San Francisco. When they heard that the city’s hotels were fully booked during an upcoming design conference, they had an entrepreneurial idea: Why not rent out a bit of their space? They bought three airbeds (inflatable mattresses), put up a website, and, within six days, found three guest lodgers. Each one paid $80 a night. “As we were waving these people goodbye, Joe and I looked at each other and thought, there’s got to be a bigger idea here,” Chesky said. By the following year, they had teamed up with another friend, computer science graduate Nathan Blecharczyk, and started a business that they later named Airbnb.

By 2015, Airbnb had served 25 million travelers, providing them with lodging in over 190 countries around the world. But it doesn’t look like a typical global corporation in the business of providing lodging and hospitality. Instead of building hotels and hiring employees to serve customers, the three founders built a platform that brings together two distinct types of people: hosts with homes to rent (whether a spare room or their whole home while they are away) and travelers who are looking for someplace to stay. The company has minimal assets. In fact, it doesn’t own a single rental property. Yet it can offer travelers their choice of more than 1 million listings, ranging from a sofa or tiny guest room up to an actual castle (more than 600 are available to rent). The company takes a cut of the rental fee on each transaction. (more…)

Tuesday, April 5th, 2016

The Five Domains of Digital Transformation

The Digital Transformation Playbook

“[D]igital technologies are redefining many of the underlying principles of strategy and changing the rules by which companies must operate in order to succeed. Many old constraints have been lifted, and new possibilities are now available. Companies that were established before the Internet need to realize that many of their fundamental assumptions must now be updated.” — David L. Rogers

This week, our featured book is The Digital Transformation Playbook: Rethink Your Business for the Digital Age, by David L. Rogers. Today, we are happy to present an excerpt from the first chapter, “The Five Domains of Digital Transformation,” in which Rogers introduces the five key domains of strategy that digital forces are reshaping.

Don’t forget to enter our book giveaway for a chance to win a free copy!

Monday, April 4th, 2016

Book Giveaway! The Digital Transformation Playbook, by David L. Rogers

The Digital Transformation Playbook

“In this indispensable (and highly readable) guide, Rogers shares what we can learn from today’s greatest digital innovators. Packed with illuminating case studies and practical tools, The Digital Transformation Playbook maps out clear strategies for thriving in the digital age. Don’t start a business without it.” — Neil Blumenthal, cofounder and co-CEO, Warby Parker

This week, our featured book is The Digital Transformation Playbook: Rethink Your Business for the Digital Age, by David L. Rogers. Throughout the week, we will be featuring content about the book and its author on our blog as well as on our Twitter feed and our Facebook page.

We are also offering a FREE copy of The Digital Transformation Playbook. To enter our book giveaway, simply fill out the form below with your name and preferred mailing address. We will randomly select our winners on Friday, April 8th at 1:00 pm. Good luck, and spread the word!

Friday, February 19th, 2016

The First Financial Commandment for the 21st Century: “Thou Shalt Not Plead Total Investment Ignorance”

Investment: A History

“If people knew their history, they would marvel at the sheer range of investment opportunities now available to them. The idea that investing has become democratic probably feels alien to most people, but investing is extremely democratic today compared to past eras. So it is incumbent on the average person to learn enough to be his or her own best advocate in taking advantage of all this new-found opportunity.” — Norton Reamer

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. For the final post of the week’s feature, Reamer and Downing explain their first financial commandment for today’s investors: “Though Shalt Not Plead Total Investment Ignorance!”

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

The First Financial Commandment for the 21st Century: “Thou Shalt Not Plead Total Investment Ignorance”

For thousands of years, the only people who qualified as “investors” were wealthy and politically connected landowners. Investment opportunities were few and accessible only to the elite. Yet in the blink of an eye, historically speaking, that world has been replaced by one full of investment opportunities for “everyman,” from stocks and bonds, to mutual funds, to life insurance, to pension plans, to real estate, and many other vehicles for investment.

“If people knew their history, they would marvel at the sheer range of investment opportunities now available to them,” says Norton Reamer, co-author of Investment: A History. Reamer is also the founder of United Asset Management and former CEO of Putnam Investments. “The idea that investing has become democratic probably feels alien to most people, but investing is extremely democratic today compared to past eras. So it is incumbent on the average person to learn enough to be his or her own best advocate in taking advantage of all this new-found opportunity.” (more…)

Friday, February 19th, 2016

Moments in Investing History You’ve Never Heard Of

Investment: A History

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. Today, on the final day of the feature, we are happy to present a short series of Youtube videos produced by the Investment: A History team that take a closer look at turning points in the history of investing that may not be as well-known as they should be. You can see all these videos and more on the Investment: A History Youtube channel!

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage!

When Social Security Almost Wasn’t

(more…)

Thursday, February 18th, 2016

Savvy Investors Look Back at the History of Investment for Lessons for 2016

Investment: A History

“The key is that successful investors throughout history have stuck to a few basic principles. As complex as investing can be, it is, at the same time, possible to avoid some obvious mistakes.” — Norton Reamer

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. As they explain in today’s post, Reamer and Downing wrote Investment: A History in part to provide investors with a historical perspective that could help them find smarter ways to invest.

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

New Year’s Resolution for Savvy Investors: Look Back at The History of Investment for Lessons for 2016

Thinking about how to improve your portfolio in 2016? Don’t forget the last three thousand.

A healthy understanding of investment history is a true bonus for investors – lay and professional alike – to avoid pitfalls and to be the best advocates for their own financial interests. Whether it’s running a personal retirement account or a university endowment, ancient history has lessons for portfolios today.

That’s according to Norton Reamer and Jesse Downing, co-authors of Investment: A History. Reamer is also the founder of United Asset Management and former CEO of Putnam Investments, and Downing is an investment professional in Boston. The book traces the history of investment, from the ancient world to the present day, and draws lessons for today’s investors at all levels.

Reamer and Downing note that for thousands of years, the only people who qualified as “investors” were wealthy and politically connected landowners. Yet in the blink of an eye, historically speaking, that world has been replaced by one full of investment opportunities for average people – stocks and bonds, mutual funds, life insurance, pensions and real estate.

“The key is that successful investors throughout history have stuck to a few basic principles,” says Reamer. “As complex as investing can be, it is, at the same time, possible to avoid some obvious mistakes.”

Reamer and Downing have identified four guideposts that can help investors in 2016:

1. Focus on what’s “real” – Don’t get distracted by the form of an investment (e.g., a stock certificate or a bond note). Make sure you understand the real asset behind the piece of paper, such as the company behind the stock you are buying, or the public works project issuing the bond. When buying a mutual fund or other packaged investment the same rule applies: make sure you understand the fund manager’s criteria for buying and selling securities in the portfolio. Focusing on what’s “real” should always be the priority.

2. Focus on fundamental “value” – In its simplest form, the value of an investment today is determined by the present value of its future cash generation – that is, the future cash that the investment will produce over its lifetime. Don’t be distracted by market gyrations. Take a long-term perspective and understand that markets go up and down, often for reasons other than fundamental value. Investors often forget this basic rule and allow emotion to guide their decisions – and make mistakes as a result.

3. Consider the intelligent use of leverage – Excessive leverage is dangerous, but most of the great fortunes in history were built using moderate and smart amounts of leverage. For example, a home mortgage is a sensible form of leverage for most families. On the other hand, taking out a second mortgage to fund a speculative investment is probably foolhardy.

4. Allocate your capital – Every investment is an “allocation” of capital. That is, it’s a choice between competing priorities and opportunities. Make informed, deliberate choices and tradeoffs as you decide where to put your money – especially when the choice is between saving, spending, and investing. Think through your needs. Do your best to be accountable to yourself. Set some objectives and stick to them.

“Investment is one of humanity’s most fundamental activities, and in the modern world it’s open to more people than ever before,” adds Downing. “We encourage everyone to learn some basic investment principles and take full advantage of this unprecedented opportunity.”

Thursday, February 18th, 2016

Five Archetypal Investing Mistakes That Have Bedeviled Investors Through the Ages

Investment: A History

“Decade after decade, we see markets collapse and fortunes vanish for the same basic reasons. Most of the time the root cause is not some complex technical error. It’s just some new flavor of poor judgment.” — Norton Reamer

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. In today’s post, Reamer and Downing break down the five investing mistakes that they see repeated again and again throughout the history of investing.

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

Five Archetypal Investing Mistakes Have Bedeviled Investors Through the Ages

For thousands of years, investors have been making the same mistakes over and over. So true financial literacy should include not just understanding the history of investment successes, but also investing failures. Unfortunately, the recent history of the financial crisis and Great Recession indicate that many investors—even professionals—have not learned those lessons.

“Decade after decade, we see markets collapse and fortunes vanish for the same basic reasons,” says Norton Reamer, co-author of the new book, Investment: A History (Columbia Business School Publishing, February 2016). “Most of the time the root cause is not some complex technical error. It’s just some new flavor of poor judgment.” Reamer is the founder of United Asset Management and Asset Management Finance, and he is the former CEO of Putnam Investments. His co-author, Jesse Downing, is an investment professional in Boston.

Mistake #1: Not diversifying enough

“In plain language, diversification means not putting all your eggs in one basket,” says Reamer. “One of the biggest advancements of the last few hundred years has been the ability to truly diversify one’s investments. Diversification is what makes modern investment portfolios tick.”

As a historical reference point, Reamer points to 14th-century Italy, before there was such a concept as “too big to fail.” Two major Florentine banking houses, the Bardi and the Peruzzi, poured a great deal of their capital into the wartime exploits of England’s King Edward III. When Edward defaulted, both banks failed.

According to Reamer, the goal of diversification is to ensure that even if one asset in the portfolio is underperforming, other assets are still potentially delivering gains. Both the Bible and Shakespeare reference diversification, and despite how ancient the wisdom may be, it can be hard to follow. Many homeowners have a significant portion of their wealth tied up in a single asset, such as a home, company-granted stock, or even a single asset class. To weather the inevitable vagaries of the market, one must diversify. (more…)

Wednesday, February 17th, 2016

The Investment Challenge

Investment: A History

“This book is not about how to manage investments; rather, as a history of investment and the activities related to it over the centuries, it adds vital perspective to issues in investment management. It traces the development of investment from the earliest civilizations where agricultural land, lending, and trade activities were the economic foundation; to the creation of basic financial, collective, and charitable investment forms; and through the innovation of a vast array of specialized vehicles and funds extending into the twenty-first century.” — Norton Reamer and Jesse Downing

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. Today, we are happy to present an excerpt from “The Investment Challenge,” Reamer and Downing’s Introduction to Investment: A History.

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

Tuesday, February 16th, 2016

A conversation with Norton Reamer and Jesse Downing, authors of “Investment: A History”

Investment: A History

“[T]he basic principles of investing are timeless, even as the economic and social stakes grow higher. The challenge will be to harness all that increasing sophistication to further push the democratization of investment, and in that regard we are optimists.” — Norton Reamer and Jesse Downing

This week, our featured book is Investment: A History, by Norton Reamer and Jesse Downing. In the first post of the week’s feature, we are happy to present an interview with Reamer and Downing in which they discuss their goals for the book, important changes in the history of investing, and what the future holds for investors.

Don’t forget to enter our book giveaway for a chance to win a free copy of Investment: A History! You can also learn more about the book and its authors on the Investment: A History webpage and Youtube channel!

What will readers find in Investment: A History?

The book explains key elements in the long history of investment. Each chapter includes important stories and lessons that are intended to illustrate crucial dimensions of the investment world, as they have developed over the centuries. Our goal is to increase understanding of the investment practices and opportunities of today by understanding the history of investing.

In broad scope, what are the most important findings in the book?

Most people will be surprised to find out how remarkably uncomplicated it is to be a sensible investor, and in that regard we identified four basic investing principles. First, look at every investment as “real.” That is, when you invest, you own the underlying asset—e.g., with stocks you are buying a piece of a corporation. Don’t be distracted by the paper form of the investment. Understand the basics of whatever entity you are buying.

Second, it’s all about fundamental value, where “value” is determined by the value today of future cash flows that the investment may produce over its lifetime. Third, intelligent use of financial leverage is a legitimate tool for investors; in fact, it has helped build most of the great fortunes of history. Of course, excessive leverage can be extremely dangerous because all leverage will multiply returns—either positively or negatively. Finally, the most basic management skill is resource allocation: i.e., the effective allocation of capital and human resources.

Investing did not always exist in its current form. What were the precursors to the current investment landscape?

With ancient and pre-modern investment, we emphasize three areas: the basic investment vehicles of early history; the extreme inequality in the distribution of investment opportunity and benefit; and the surprising sophistication of some early investment vehicles, strategies, and purposes.

We believe that, to grasp the reality and significance of investment as a fundamental human activity, it’s necessary to begin in ancient times and understand the roles of agricultural land, lending and trade in the ancient world. At the same time, it is important to acknowledge that by today’s standards, it took an astonishing amount of wealth and power to even qualify to be an ‘investor.’ Finally, we felt it was essential to understand that in some respects—despite a lack of investment diversity and the absence of equality—investment even in those early days had features that were remarkably sophisticated and prescient. (more…)