You Are Viewing Business

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!

Posted in Business, Selp Improvement
Comments (0)

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.

Posted in Business
Comments (0)

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.

Posted in Business, Selp Improvement
Comments (0)

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
Comments (0)

Millionaires Realize Less Income

Posted By damien on May 15th, 2009

taxesMore from The Millionaire Next Door: Following the statistic I pointed out in the last post, “[The average millionaire's] total annual realized income is less than 7% of their wealth”, I wanted to post an excerpt from the book that elaborates on why they realize so little of their income. It’s a lengthy passage, but learning and applying the principle taught in it will save you lots of money and teach you one of the “secrets” of the wealthy.

The typical millionaire in our surveys has a total annual realized income of less than 7 percent of his wealth. This means that less than 7 percent of his wealth is subject to some form of income tax…Millionaires know that the more they spend, the more income they must realize. The more they realize, the more they must allocate for income taxes. So millionaires and those who will likely become affluent in the future adhere to an important rule:

To build wealth, minimize your realized (taxable) income

and maximize your unrealized income

(wealth/capital appreciation without cash flow)

Income tax is the single largest annual expenditure for most households. It is a tax on income, not on wealth and not on the appreciation of wealth if this appreciation is not realized; that is, if it does not generate cash flow.

What is the message? Even many high-income-producing households are asset poor. One reason is that they maximize their realized incomes, often to support high-consumption lifestyles…It takes much discipline to become affluent. We have interviewed many people worth $2 or $3 million who have total realized annual household incomes of less than $80,000.

How much does the typical American household realize in income each year?…nearly the equivalent of 90 percent of its net worth. The result is that the typical household in America pays the equivalent of more than 10 percent of its wealth in income taxes each year. How about the millionaires whom we surveyed? On average, their annual income tax bill is an amount equal to only a bit over 2 percent of their wealth. That is one of the reasons they remain financially independent.

So, to recap: income tax is a major expense for the average American household. Millionaires reduce the amount they pay be directing their money into investments, rather than consumption, and live off less. Their money is then able to earn interest and grow their personal wealth rather than the government’s.

Posted in Building Wealth, Business
Comments (0)

Portrait of a Millionaire

Posted By damien on May 6th, 2009

keyJust finished The Millionaire Next Door, an interesting book about a study done to find the “average” millionaire. The authors (Thomas Stanley and William Danko) set out to discover what the average millionaire really looks like, as opposed to the opulent playboys that the media tells us they are. Their findings reinforce the good, old-fashioned qualities of frugality, hard work, responsibility and fidelity.

Here are a few of the (more interesting) attributes the authors list as a “portrait” of the average millionaire:

  • A 57 year-old male, married with three children. About 70% of them earn 80% or more of their household’s income.
  • About 20% are retired, and of the working, 2/3 are self-employed.
  • Many of their businesses could be classified as dull or normal: contractors, rice farmers, owners of mobile-home parks, owners of janitorial services, pest controllers, coin and stamp dealers.
  • Their total annual realized income is less than 7% of their wealth (net worth), meaning that they live on less than 7% of their wealth. (Now that’s frugal!)
  • About 80% are first-generation affluent (self-made millionaires, not inheritors of wealth).
  • Only 17% of them ever attended private elementary or high school, but 55% of their children do.

The book contains many more generalizations about the wealthy, but these were some that I found most interesting. I thought that many of the millionaires would be in flashy sectors of the economy, such as lawyers, physicians, stock brokers and the like. But they aren’t. (This study was done in 1996, so some of the data may have changed since then.) In fact, the authors call these types under-accumulators of wealth because they should be wealthy (high-income) but for some reason they aren’t.

The main reason the authors found for the under-accumulation of wealth in these high-earners is that they don’t play good defense. They earn lots (good offense) and they spend lots (bad defense). Why do people in flashier occupations spend more than the millionaires in dull sectors? Because it’s part of the image that comes with their occupation. To be seen as a successful lawyer, they have to have a large house. If they have a large house they have to have nice cars to park in front of it. If they live in a nice neighborhood then their neighbors send their kids to private school, so they have to send theirs as well. Their employment creates a cycle and culture of consumption.

The truly rich, those who play a good offense (high income) as well as a good defense (frugal, thrifty) are often business owners in dull sectors. Being in these less-flashy markets, their peers are less flashy. The owner of a janitorial service does not have to wear a $3,000 suit to work. In fact, if he did, many of his employees might feel he is not paying them enough or that he is a “snob” of a boss. It will have the opposite effect for his image because he is in a blue-collar environment.

Interesting stuff, and very different from what the media tells us about the wealthy.

Posted in Building Wealth, Business
Comments (0)
Older Entries
Newer Entries
Get Adobe Flash playerPlugin by wpburn.com wordpress themes