Posts from — March 2008

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Lately my wife and I have noticed that our 7-week old daughter Malone is starting to outgrow some of her newborn clothes. Suddenly, the jumpsuits that once enveloped her are now uncomfortably tight. Of course this is nothing surprising, from the moment they are born babies grow…its healthy. If she wasn’t growing that there would be a problem. A lack of growth indicates sickness and if not corrected, death. Thankfully, she’s growing like a weed.

But, growth is not just for babies. While most of us finally stop our physical growth in our late teens and early twenties, other areas of growth ie. mental, spiritual, emotional, relational must still occur if one hopes to live their best life. Just as a baby ceasing to grow would indicate sickness, so too with an adult ceasing to grow in any of these areas. Simply put, if you’re not growing, you’re dying.

In thinking about all of this I am reminded of a great saying I have heard a few times and something I’ve made into sort of a personal motto, “You’ll be the same person a year from now except for the books you read, the places you go and the people you meet.” To me these represent the primary ways that one continues to grow in life. Here’s why:

Books - Johannes Gutenberg, a German goldsmith and printer, invented movable type printing in the mid-15th century ushering in a revolution in the way that information and ideas were shared. Books brought about the democratization of information allowing people all over the world to learn things about people, places and things they had never seen or experienced. The same is true today.

Books allow us to travel, meet new people, walk ancient battle grounds and learn from a Nobel prize winner, all without leaving the comfort of our favorite recliner. Ideas have consequences, they shape how we view the world and interact within it. Books are essentially idea transporters that help us grow. Read, read, read.

Travel - The longer one lives life the more one realizes that they are just a small piece in a very large masterpiece. The way things are done in middle America is not necessarily the way things are done in the other 99% of the world, this can be a startling revelation to some. It is possible to learn a lot about different cultures through book, but nothing compares to immersing yourself. Eating new food, learning new languages, hearing different viewpoints are all growth experiences that make travel so incredible.

During my time at the Air Force Academy I had the opportunity to go to Mexico, Morocco, Germany, Thailand and South Korea. Each of these places taught me something unique and helped me grow in a different way. Without these trips, I can tell you without a doubt, that my worldview would be extremely limited and incomplete. More than anything, traveling has taught me that life is not about me.

People - Most often, the primary influences in our lives are friends and family. The people we choose to associate with are the people who have our ear, our minds and our hearts. My friend Aaron likes to say, “Show me your friends and I’ll show you your future.” Look around at your friends, are they the people you want to become? Since people are such big influences, it makes sense that a big part of growing is continuing to meet new ones and more important than just meeting people, meeting the right people.

For me, one of the best and most unexpected part of blogging has been meeting so many motivated, quality people. Through comments, blog carnivals and various social media sites I have had the pleasure of meeting people from incredibly diverse backgrounds. Connecting with these people has taught me a great deal, not just about blogging, but about things like personal finance, personal development, social entrepreneurship, and the health care industry .

Obviously not everyone has the time or desire to blog, but the important thing is to constantly put yourself in positions where you will be able to meet new, quality people. Go to church, attend the symphony, volunteer, or join a book club. The method doesn’t matter as much as the end result, growth.

Warren Buffett is to investing what Michael Jordan is to basketball with one twist, Buffett hasn’t retired. For those of you finding yourself confused and humming “Margaritaville,” here’s Buffett’s bio. I could write for hours on this blog about why I prefer certain investment strategies over others or why I’m a huge “Random Walk” fan, but at the end of the day it is much better to hear from someone who has mastered their craft.

Last month Buffett talked to a group of students from UT Austin and Emory about investing, life, leadership and other topics. What can I say, the man is incredible. I remember first being introduced to him in my Personal Finance class by my professor Lt Col Steve Fraser and his partner in crime Lt Col Jim Parco (at the time just lowly Majors). They would annually take the class to the Berkshire Hathaway shareholder’s meeting in Omaha, NE…or as they liked to refer to it, “Woodstock for Investors.”

Since that class I have always kept an eye and ear open to anything coming from Buffett so today I share some of my favorite pieces from his recent Q&A session, the full transcript is here:

On diversification:

I have 2 views on diversification. If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. The economy will do fine over time. Make sure you don’t buy at the wrong price or the wrong time. That’s what most people should do, buy a cheap index fund and slowly dollar cost average into it. If you try to be just a little bit smart, spending an hour a week investing, you’re liable to be really dumb.

On happiness and love:

I won the ovarian lottery the day I was born and so did all of you. We’re all successful, intelligent, educated. To focus on what you don’t have is a terrible mistake. With the gifts all of us have, if you are unhappy, it’s your own fault.

I know a woman in her 80’s, a Polish Jew woman forced into a concentration camp with her family but not all of them came out. She says, “I am slow to make friends because when I look at people, I have one question in mind; would they hide me?”

The most powerful force in the world is unconditional love. To horde it is a terrible mistake in life. The more you try to give it away, the more you get it back. At an individual level, it’s important to make sure that for the people that count to you, you count to them.

On humility and personal influences:

I was lucky to have the right heroes. Tell me who your heroes are and I’ll tell you how you’ll turn out to be. One of your most important jobs in life will be raising your children. They will learn more from you than they will in graduate school. My father was a huge influence, and later on Graham came along. I was also never let down by my heroes.

On the current credit crisis and economy:

What we are seeing is a huge repricing and evaluation of risk, correcting for problems of the past. I don’t know of good credit propositions that are going unfulfilled. There’s lots of cheap credit for sensible deals, which I don’t define as anything that happened over the last 12, 18 months. A lot of things that didn’t make sense are being washed out of the system. It is painful for bad decisions. Comparatively, this is not a credit crunch. In 1982 the prime rate was 22% and money was very expensive. In the late 60’s, we made a sound deal there wasn’t any money to be had. That’s not the case now. The Fed has opened the window, and rates are down. It doesn’t mean there won’t be a major recession.

On individual investors finding opportunities in a market dominated by institutions and hedge funds:

Markets are efficient most of the time about most things. But for these opportunities, nobody will tell you about them. They won’t be on CNBC and they won’t be in brokerage reports. You have to go find them yourself. In 1951, after I graduated from school, I used Moody’s and S&P manuals as my sources of information. I went through them page by page. I was like a basketball coach looking for 7-footers. I still have to find out if he’s coordinated, and can stay in school. But if someone comes up to me that’s 5’6” and says, “Wait ‘til you see me handle the ball”, I say “No thanks”. On page 1443 of Moody’s, I found Western Insurance Securities. It had earned $21.66 per share 2 years ago, and earned $29.09 last year. Over the past year the stock was selling for between $3 and $13 per share. I still had to do the work to make sure the earnings were valid. The markets will get it right eventually. But they are there. You don’t have to find too many. Finding 10 of these opportunities in your lifetime will make you so rich. But you can’t be wrong. You can’t have any zeroes. A list of big numbers multiplied by zero will equal zero. You can’t go back to “Go”.

On picking the top contemporary investors:

I know guys who can make 50% a year with $5 million, but not with $1 billion. The problem with guys that do well is they attract so much money that it neutralizes their advantage. It’s hard to identify them, and even harder to make a deal to keep them from attracting other capital. It’s like betting on a 12 year old horse that won at 3 years old. It’s also important to avoid managers who use leverage. It’s the reason that investors with 160 IQs flame out.

On positioning yourself to deserve success:

Keeping score is terrible in marriage and terrible in business. I put myself in the seller’s shoes. With most humans there is a great desire to reciprocate. If you do something for them, they will do 2X for you. How rare is it to work during lunch hours and be the first one there in the morning. You’ll get noticed if you do something extra. It’s good to have a willingness to pitch in when you aren’t going to get credit for it.

On corporate tax rates and national debt:

Relative to GDP, government taxation is 18.5% and spending is 20%, so we borrow the balance. The national debt should not be a scary topic and the fact that it’s gone up is fine as long as it’s proportional to GDP. Where do we get that 18.5%? There’s 2.7 trillion in government revenues. 2.2 trillion comes from individuals, and less than 1% of that comes from the estate tax. 1.1 trillion comes from income taxes, with payroll taxes consisting of 900 billion, but it’s capped at the first $100,000 of salary. We want a tax system that encourages greater prosperity, but it needs to take care of the family.