Archive for July, 2009

Overcome America’s Fixation with Experts: Ignore Them and Become One

Posted By damien on July 30th, 2009

trust meCurrently reading I Will Teach You To Be Rich by Ramit Sethi.  I know the title sounds gimmicky, like it was written by a used car salesman, but Ramit is LEGIT.  I haven’t been so excited while reading a book in a long time.  Ramit’s book is based on his blog of the same name, where he teaches 20-somethings about personal finance.  His money automation and investment strategies line up with my own, and I’ll write more on these later.

This post will focus on a topic that both Ramit and others like Tim Ferriss talk about: the myth of the expert.  America loves experts, we want someone to trust, someone to explain things to us so we don’t have to think for ourselves.  But many experts are full of bull and Ramit has a great story to illustrate:

In 2001, Frederich Brochet, a researcher at the University of Bordeaux, ran a study that sent shock waves through the wine industry.  Determined to understand how wine drinkers decided which wines they liked, he invited fifty-seven recognized experts to evaluate two wines, one red, one white.

After tasting the two wines, the experts described the red wine as intense, deep, and spicy—words commonly used to describe red wines.  The white was described in equally standard terms: lively, fresh, and floral.  But what none of these experts picked up on was that the two wines were exactly the same wine.  Even more damning, the wines were actually both white wine—the “red wine” had been colored with food coloring.

Wow, I don’t know anything about wine, but if a self-professed expert can’t deliver results, then he/she loses my respect.  And that’s what being an expert comes down to: delivering expert-level results.  Ramit says that financial experts have not been delivering results in America.  His targets for derision are the “talking heads” in the financial media and investment fund managers:

The media feeds off every little market fluctuation.  On one day, the pundits are spreading gloom and doom about a multi-hundred-point loss in the market.  Then, three days later, the front page is filled with images of hope and unicorns as the market climbs 500 points.  It’s riveting to watch, but step back and ask yourself, “Am I learning anything from this?”

[Fund] managers chase the latest hot stock, confident in their abilities to spot something that millions of others have not.  What’s more, they also demand extraordinary compensation.  Get this: In 2006, the average Goldman Sachs employee made $622,000.  That’s not a typo—it’s the average amount Goldman employees made with a salary and bonuses.  Despite this astronomical compensation, fund managers from all companies still fail to beat the market 75 percent of the time.

Ramit showed me that I don’t need these experts to invest my money for me.  Put simply, fund managers cannot consistently beat the market.  So, you can invest with a managed fund, get a decent return, and lose any advantage over an index fund with the 1-2% (or higher) expense ratio.  Or, choose the less sexy road, invest in a non-managed index fund, get a decent return, and keep your money with lower expense ratios.  I choose to avoid the self-proclaimed experts and be master of my own fate.

Get Ramit’s book because he’s an expert that delivers results; he’ll show you how to become financially secure.

Bonus: How to Become an Expert

I have already written about Tim Ferriss’s productivity and time-management tactics; another big idea in his book is how to become a (perceived) expert in your field very quickly.  Here are a few of his tips:

  1. Read 3 top selling books on your topic (Then record what you’ve learned, maybe in a blog?)
  2. Join 2 or 3 related trade organizations (Search online for your field + organization, club, or group.)
  3. Give one free 3 hour seminar at the closest well-known university (Record it, you could use it later.)
  4. Give 2 free seminars at branches of two well-known big companies such as AT&T or IBM (Reference your seminar at the university to get your foot in the door.)
  5. Offer to write 1 or 2 articles for trade organizations (Maybe by re-purposing material from step 2.)

So, in conclusion, Americans love experts, but some are frauds.  Ignore the fakes and become one that delivers results.

Posted in Business, Selp Improvement
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Extreme Productivity: The Low-Information Diet

Posted By damien on July 23rd, 2009

newspaperThe 4-Hour Workweek by Timothy Ferriss is a manifesto for the “New Rich”, as the author calls them, “those who abandon the deferred life plan [see my post here] and create luxury lifestyles in the present using the currency of the New Rich: time and mobility.”  Tim spends much of the book telling us how to leverage those two (time and mobility).  In a previous post, I discussed two tactics for increasing time, the 80/20 rule and Parkinson’s Law.

This post will discuss another productivity tactic; what Tim calls the “Low-Information Diet”:

Just as modern man consumes both too many calories and calories of no nutritional value, information workers eat data both in excess and from the wrong sources.

Lifestyle design is based on massive action–output.  Increased output necessitates decreased input.  Most information is time-consuming, negative, irrelevant to your goals, and outside of your influence.  I challenge you to look at whatever you read or watched today and tell me that it wasn’t at least two of the four.

Tim encourages readers to go on a one-week media fast.  Avoid any media that falls into at least two of the categories above.  Limit information consumption to data that is needed to accomplish your goals.  So, how does Tim stay a responsible citizen if he doesn’t read the news?

His idea here is truly brilliant.  He says to ask others to inform him on the news.  To learn about day-to-day news, use it as an ice-breaker with strangers. It’s a great conversation starter.  Say to someone, “I wasn’t able to read the paper this morning, what’s happening in the world today?”

For more important issues, like presidential elections and other things that you have a responsibility for and will affect you, Tim says to have a network of trusted information providers:

I let other dependable people synthesize hundreds of hours and thousands of pages of media for me.  It [is] like having dozens of personal information assistants, and I [don't] have to pay them a single cent.

Remember, the goal with lifestyle design is to increase your productive output.  One of the best ways to increase output is by decreasing useless inputs.  I know I use the media to waste time every day.  I’ll check my feed reader and Drudge Report every few hours, just to see what’s new.  After reading this book, I limit it to mornings and evenings, never during the day.  I’m sure Tim would prefer that I read the news even less.  But it’s a hard addiction to break!

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Retirement Reconsidered

Posted By damien on July 20th, 2009

retirementMore from Timothy Ferriss and The 4-Hour Workweek.  Tim is pretty averse to the idea of retirement at the end of your life.  He calls it the “deferred life plan”, with derision.  His alternative is mini-retirements throughout life.  I’ll let him explain:

If I offered you $10,000,000 to work 24 hours a day for 15 years and then retire, would you do it?  Of course not–you could’t.  It is unsustainable, just as what most define as a career: doing the same thing for 8+ hours per day until you break down or have enough cash to permanently stop.

How else can my 30-year-old friends all look like a cross between Donald Trump and Joan Rivers?  It’s horrendous–premature aging fueled by triple bypass frappucinos and impossible workloads.

Alternating periods of activity and rest is necessary to survive, let alone thrive.  Capacity, interest, and mental endurance all wax and wane.  Plan accordingly.

Tim advocates mini-retirements, short (1-3 month) periods of rest and personal pursuits to break up your work.  Why wait until you’re old and crusty to enjoy life?  Tim spends much of the rest of the book explaining how to make these mini-retirements work.

The New Rich aims to distribute “mini-retirements” throughout life instead of hoarding the recovery and enjoyment for the fool’s gold of retirement.  By working only when you are most effective, life is both more producitve and more enjoyable.  It’s the perfect example of having your cake and eating it too.

I would love to make these mini-retirements a part of my life–who wouldn’t!  I know that, like Tim says, my interests and passions wax and wane.  By working around those fluctuating energies, I am able to be more productive in life and not force unnatural activities.  Read the book to find out how to make these mini-retirements a reality for you.

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Don’t Manage Time, Eliminate It

Posted By damien on July 18th, 2009

hourglassTimothy Ferriss is the MAN.  Just finished The 4-Hour Workweek for the second time. Yes, it’s so good that I read it twice. Tim is a proponent of what he calls Lifestyle Design, which in a nutshell means:
Defining the life you want to have
Eliminating the excess
Automating your moneymaking operations
Liberating yourself from geographic barriers; having the freedom to travel as you please

There are loads of good ideas in this book, and in this post I’ll focus on what Tim says about eliminating the excess by doing two things: following the 80/20 rule and obeying Parkinson’s Law.

The 80/20 Rule

This rule is also known as Pareto’s Law, as it was researched and coined by Vilfredo Pareto, an Italian sociologist. He noticed that often in life, be it economics, plant production, or human interactions, that 20% of the inputs made 80% of the results.  For example, he observed that 20% of his bean plants produced 80% of the beans.

Pareto’s Law can be summarized as follows: 80% of the outputs result from 20% of the inputs.  Alternative ways to phrase this, depending on the context, include:
80% of the results come from 20% of the effort and time.
80% of the company profits come from 20% of the products and customers.
80% of all stock market gains are realized by 20% of the investors and 20% of an individual portfolio.

So, what does this have to do with you and me? Tim gives us some questions to apply the principle to ourselves:

1. Which 20% of sources are causing 80% of my problems and unhappiness?
2. Which 20% of sources are resulting in 80% of my desired outcomes and happiness?

Here’s the idea: cut the 20% that cause the most problems and focus on the 20% that give the most benefit.

Parkinson’s Law

Tim says, referring to work:

Since we have 8 hours to fill, we fill 8 hours.  If we had 15, we would fill 15.  If we had an emergency and need to suddenly leave work in 2 hours but have pending deadlines, we miraculously complete those assignments in 2 hours.

What Tim is saying here is that we fill out the time we are given to accomplish a task.  Parkinson’s law states just that: a task swells in “importance and complexity in relation to the time allotted for its completion.”  In fact, the longer we give ourselves for a task, the more time we have to stress over it and make it a bigger deal in our minds.  This, in turn, takes a toll on performance.  Tim sums it up like this:

The end product of the shorter deadline is almost inevitably of equal or higher quality due to greater focus.

So, to increase productivity, a mix of the two laws is in order.  Focus on the fewest tasks that produce the greatest results and set short, clear deadlines to accomplish them.  This stuff really works, I’ve been implementing it the past week and have been much more productive.

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What is Job Security?

Posted By damien on July 13th, 2009

joblessJust finished 48 Days to the Work You Love by Dan Miller. The author is a career coach and his book is all about finding your “calling” in life, meaning finding the work God meant for you to do.  I found the majority of the book to be not-so-useful generalities such as, “find a good work/life balance” and “don’t get a job just for the money”.

I did, however, love the chapter on entrepreneurship.  The author had some ideas about traditional work that I have heard before, but really enjoyed the way Dan Miller said them:

Making the shift from a paycheck mentality to making it on your own can be exhilarating and intimidating at the same time.  Pushing off from the shore without being able to see the desired port can seem to be a very rsiky proposition.  Yet we know that in today’s workplace, staying with a company can also be risky.  Just recently I met with a gentleman, who after 32 years of faithful service with Texaco, was told his services were no longer needed.  And at 57 years old, he was not ready or prepared to retire.

Another man at 46 years old, after 17 years of rising responsibility with Texas Instruments, was told he had 60 days to find something else to do.  Did they think they had security? Certainly!  But what is security? General Douglas MacArthur defined security as “one’s ability to produce.”  Your security is determined by your ability to define what it is you do that has value.  The clearer you can be on what it is you do well and what provides value for someone else, the more security you have.

Back in the day, the road to success was all about getting a job with a big corporation, where you received a good salary, health insurance, and guaranteed employment until you retire and collect your sweet pension.  Today, whole branches and divisions (hundreds of jobs) are terminated with the swipe of a pen.  Your security can no longer come from the company you work for.

Dave Ramsey is a financial guru who compares job security to being a caveman.  Job security, Dave says, is being able to kill something for dinner and drag it home to the family.  I like that mentality.  We need to put our trust in our abilities to produce and provide, rather than hope the company we work for doesn’t “downsize”, “restructure”, or whatever you want to call getting fired.

Posted in Business, Selp Improvement
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Tools of Influence: Social Proof

Posted By damien on July 8th, 2009

crowdAnother big idea from Influence: The Psychology of Persuasion by Robert Cialdini:

Remember, the book is about ways that people successfully get others to do what they want. One of my favorite principles, because once explained it was so clear to me, was what the author calls “social proof”:

“It states that one means we use to determine what is correct is to find out what other people think is correct.  The principle applies especially to the way we decide what constitutes correct behavior.  We view a behavior as more correct in a given situation to the degree that we see others performing it.”

Now, using social proof as a way to make decisions has served us humans well for thousands of years.  We will make fewer mistakes in life by doing what the majority of others have done.  Learn the easy way, from others mistakes; or the hard way, from our own.  Social proof is such an integral part of our decision-making process that the less scrupulous among us use it to their advantage.

A few examples:

  • Laugh tracks: From the book: “Experiments have found that the use of canned merriment causes an audience to laugh longer and more often when humorous material is presented and to rate the material as funnier.” Wow.
  • Tip jars: Bartenders, street performers, church ushers and pretty much anyone with a tip jar will “salt” the jar with a few dollars to simulate tips being left by previous patrons.
  • Ringers: Evangelical preachers like Billy Graham and Benny Hinn have people planted at their events who come forth at scheduled times to give donations or witness.
  • Product claims: Advertisers love to say their product is the “fastest-growing” or “largest-selling” to create the impression that everyone else is buying their stuff.

As we see, others will exploit the principle of social proof whenever they can.  Remember that social proof is an integral part of our decision-making process, so don’t totally disregard it.  Just keep a lookout for frauds!

Posted in Interpersonal Skills, Selp Improvement
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