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The Snowball: Warren Buffett and the Business of Life
The Snowball: Warren Buffett and the Business of Life
Price: £7.80

3 of 3 people found the following review helpful
5.0 out of 5 stars Long... but magnificent., 9 Feb. 2013
If you're a fan of either Buffett's performance as a businessman, or of his aphorisms and lessons - or both - you're going to have to get used to one thing: there's a difference between what he says and what he does.

That's not a criticism - he describes his success as being the result of a few simple investment ideas and doing what he enjoys, but almost nobody has been able to replicate what he does. What he says is what he knows is best for who he's reaching out to (or teaching) - it can't be what he does, or it would be easy to replicate.

Alice Schroeder's authorised autobiography gives you a much, much better look at what he does than any previous Buffett book has (and there are literally dozens) in chronicling the complicated personal and business career of a giant.

He was a businessman from the start, selling chewing gum at 6, before moving up to cans of Coke, newspapers and weighing machines. He also learnt very young to get someone else to do the work for him, and for his capital and the allocation of it to be his leverage. By 15, he'd invested with his father in a hardware store.

He was a broker for a time until Benjamin Graham retired - but didn't like the fact you got paid for activity, not success. He was one of the very first hedge funders - taking 25% of the profits and reinvesting them in his own funds until the share market opportunities became harder to find, and buying companies outright was more lucrative.

The book details the "worst deal he ever made" - buying Berkshire Hathaway. It also runs through plenty of other bumps and bruises along the way that everyone has, his just being public, including a stint as the head of Salomon Brothers, strikes at the Buffalo News, and a series of insurance company mishaps.

All the great stories are in there: Charlie Munger, cocoa arbitrage, Blue Chip Stamps, American Express, Sees Candy, GEICO, the newspapers, Nebraska Furniture Mart, the insurance float, LCTM.

But, as the title alludes, nothing stopped the snowball rolling down the hill gathering money. A depression baby, he never overpaid a penny for anything. He never used any debt to leverage a purchase. Partly because of the price paid and the equity level, he never had a big loser. The other key to the snowball? In all the buying - it was always about money for him, not ego. That essence clarified all the decision making down to one thing: would he make money from it?

The story throughout is an amazing one if you've got an interest in business or investing. It's your best chance of seeing what he does - all the other Buffett books except American Capitalist are about what he says. It's long, but 5 stars.

Mcdonalds: behind the Arches
Mcdonalds: behind the Arches
by John F. Love
Edition: Paperback
Price: £12.04

1 of 1 people found the following review helpful
5.0 out of 5 stars Awesome - great story., 4 Feb. 2013
"McDonalds: Behind the Arches" is about as good a business book as I've ever read. It covers small business, entrepreneurship, reactions to changes in markets, capital allocation and global growth.

In telling the story, author Lowe hits at crucial point as to why McDonalds as a franchise succeeded so strongly for so long, and why so many other franchise systems fail or have failed: the franchisors and/or franchisees see it as a system to make money. The initial McDonalds franchise arrangement was so weighted towards the franchisee (a 1.9% franchise fee) that the only way for the franchisor (Ray Kroc) to succeed was to make the success of his franchisees his own aim.

Most people know the basics of the story - the McDonalds were two brothers who refurbished their successful diner for self-service and speed at low prices. Many an attempt was made by the brothers and other to franchise the idea. The man who sold them their milkshake machine, Kroc, finally made it a success.

Kroc's franchising approach was the same as his selling approach: he tried to find ways to make his customers successful with his product. His notion of fair and balanced franchise partnership was what made McDonalds a success nation- and ultimately world-wide. He figured his franchisees were his customers, and that he had to build loyalty with them. If they failed, he failed.

Elsewhere, then and now, franchisors make their money before the franchisee does via large up-front fees (for one site or for territories), or by supplying equipment and fit-outs at huge mark-ups. Kroc didn't take a salary from McDonald's for the first 8 years (he lived on a part-time salary from Multimixer) and refused to take rebates from suppliers, insisting they pass the savings on to the franchisees. He also wouldn't sell territories - just one franchise at a time.

If you've ever looked at buying a franchise, you won't find too many of those things in place - probably a fair reason why not too many survive too long.

The company struggled to survive for many year, until Harry Sonneborn (the finance man) found a way to make money that was aligned with the franchisees. Independent franchisees' biggest obstacle was getting a lease. McDonalds set up a real estate business - they would acquire the lease at fixed rent for 20 years at favourable terms, then sub-lease it at 40% markup or 5% of sales, whichever was higher. Since the 5% of sales had the potential to be infinitely higher, it maintained the focus of McDonalds on the revenue of its stores.

Unfortunately, this one's not available as an e-book/Kindle book. Well worth the buy - one of the best business books you'll ever read.

The Commodities Investor: A beginner's guide to diversifying your portfolio with commodities: A Practical Guide to Making Money from the Commodities Supercycle
The Commodities Investor: A beginner's guide to diversifying your portfolio with commodities: A Practical Guide to Making Money from the Commodities Supercycle
Price: £0.60

0 of 1 people found the following review helpful
5.0 out of 5 stars Great summary of the commodities market, 4 Feb. 2013
The full, laborious title is: The Commodities Investor: A beginner's guide to diversifying your portfolio with commodities: A Practical Guide to Making Money from the Commodities Supercycle.

That pain aside, Philip Scott has made a comprehensive and easy to read summary of the commodity investor's marketplace. Every commodity spent the last decade outperforming the FTSE100, but was even more volatile. The fundamental investment case is still there: the world's population is growing, and it's becoming more wealthy (particularly the BRICs), buying and using more and more of the basic commodities - energy, metals and grains. Any investment you make will be affected by commodity prices, whether or not you invest directly in them.

Scott breaks each commodity down into performance, demand factors, supply factors, overall outlook and how to buy (ETFs, funds, or direct investments). If you're a share investor, you may not want to endure the volatility of commodity prices, but the book is well worth a review and some notes, because input costs are going to continue to affect not just mining and energy shares, but the market as a whole as we move ahead in this decade.

Great book - I really rate the readability of it.

Sweet Revenge: The Intimate Life of Simon Cowell
Sweet Revenge: The Intimate Life of Simon Cowell
by Tom Bower
Edition: Paperback
Price: £8.99

4.0 out of 5 stars Good, honest bigraphy., 4 Feb. 2013
This book's pretty far from my usual subject matter, and despite his shows making me want to jump through a plate glass window, I had some interest in what had made Simon Cowell increasingly successful over time.

A few things that stand out about Cowell:
DRIVE: As you might guess from the title, Bower points to revenge on Simon Fuller as the source of Cowell's drive. But it was in evidence before that (once he found something he enjoyed in life) and revenge only gets you so far. Cowell himself claims his drive comes from money. But that only gets you so far as well. Cowell is relentlessly competitive, and a perfectionist in improving his shows.
A MENTOR: Cowell was given a piece of advice early on from his father. `Spot people who can teach you and stick to those you can learn from.' He came across a few, but his boom years who mentored by billionaire retailer Philip Green - who effectively became his manager.
PRAGMATISM: Cowell continually shows a willingness to evolve and make practical changes to every element of his career direction, shows.... And his involvement with various people. Some of this seems ruthless - some would term it pragmatic; depends on where your line is.

Bower's a really good biographer, and the book is written in his traditional style - if you've read Eccleston, Brown, Branson, Maxwell, etc, you'll recognise it. I found it a pretty good book, pretty easy to read. Got a lot out of Cowell's success, particularly the last decade as he's evolved into a professional. Give it a crack.

Get Out While You Can - Escape The Rat Race
Get Out While You Can - Escape The Rat Race
by George Marshall
Edition: Paperback

2 of 3 people found the following review helpful
4.0 out of 5 stars Half the Book is Absolutely Perfect, 4 Feb. 2013
In the vein of "The 4 Hour Workweek", Get Out While You Can is a book encouraging you not to continue as a wage slave, and to find a way to make yourself multiple revenue streams.

Much like 4 Hour, it has an long-winded way of making that point, with a range of fables and examples. I found that lot a bit painful (or too long), but you'll get the point he's trying to make.

But where it does get enjoyable and practical is when it moves on to his particular method of leaving the rat race: building and selling, and selling through, websites. As well as explaining the theory behind it, he very comprehensively explains each aspect of the process, from buying domain names and hosting, to dropcatching, ad methods - even how to pretty up your website with paid themes. (Note - I followed none of the tips to pretty up this website).

For that reason, I think it's a really good book. If I went round again, I'd start at Kindle location 1530.

I'll save you the suspense - if this couple of paragraphs floats your boat, the book's worth a read. After this, it's all practical, step-by-step stuff. If it doesn't, pass on it.

"My Aim: One Pound a Day
The route I have chosen is to not to sell my time by the hour, but to ensure that the hours that I work make me money via multiple revenue streams for days, weeks, even years, to come.
We should be doing what movie stars do. Do an hour's work and then allow that hour's work to make us money for days, weeks, months, years to come. We can't all be movie stars unfortunately, but thanks to the Information Age, anyone who can turn on a computer can put their time to work for them.
I aim to make £1 a day. But whatever I do to make that £1 will make me that £1 not just once, but every day for a year with little or no additional effort. Finding a way to make £1 a day is £365 for the next year. Starting from zero, that will accumulate £66,795 by the end of the year. A year later, that first year will be accumulating £133,225 (without counting year 2). To earn a million pounds a year, the target would need to be £4 a day.

Here's an Example of How I Make My £1 a Day
I make money online by gathering information (anything from news of a sale at M&S to why dogs eat grass), making that information available via simple websites, and then monetising those websites.
Using one of my websites (which I bought the domain for and built myself), I'm going to write a review of a gadget with the hope people read the review and go on to buy the gadget. I have no interest in stocking, selling or distributing the gadget.
The gadget retails for £50, and I am paid 10% commission for each one sold via my website's like to the merchant's website. One sale every 5 days will earn £1 a day (73 a year).
Hundreds of companies, big and small, pay that commission. Finding them is as easy as visiting a handful of websites that act as middle men between merchants and affiliates.
No guarantee I'll make a sale every 5 days - so I might write other reviews over a day for my websites; 8 reviews working to earn that £1 a day. As well as the gadget review, I might spend a few extra minutes adding Google AdSense to the page, and possibly banner ads as well. Or links to similar pages I had created earlier. I could spend an hour looking for domain names to register, either to develop myself at some point or to sell on to someone else, or look up domain names that have not been renewed. I may spend a day turning a one page website into a ten page website - looking for information for articles and products I can sell.

The aim is to build a snowball - every page I add to a website, adds value by attracting new visitors, who might visit other pages and buy products I wrote about a day, week or year ago.
I don't have to process the order, take payment, manufacture or deliver the gadget, or deal with customer service related issues. My job is done when the review is finished and on my website. I don't need to be at my computer during office hours. I don't need to be on the end of a phone. I can stop and start again later. I can be anywhere in the world with an internet connection."
Comment Comment (1) | Permalink | Most recent comment: Jun 1, 2013 11:38 AM BST

The 4-Hour Work Week: Escape the 9-5, Live Anywhere and Join the New Rich
The 4-Hour Work Week: Escape the 9-5, Live Anywhere and Join the New Rich
by Timothy Ferriss
Edition: Paperback
Price: £8.39

0 of 1 people found the following review helpful
4.0 out of 5 stars Very Clever - Practical Use is On You., 4 Feb. 2013
Tim Ferriss's best-selling book has a bit of good and terrible about it.

There's a fair bit of fluffy, change-your-life rah-rah stuff - not that I disagree with it, it's just that, unfortunately, it doesn't seem as though printing that stuff in a book actually makes anyone change their lives. ("What would you do if there was no way you could fail!"). It does make the book a bit harder to read though.

There's also the observation that if a man earns pounds, and spends pesos, he's got a better lifestyle. None of that stuff appealed to me too much. I'm more an Anthony Holden man myself: "the man who's tired of London is tired of life". Plus I can't cook, dance, or do yoga.

What is useful, enjoyable to read and thought-provoking, are some of the practical ideas and concepts he works through: saying "no" more, using the 80/20 and Parkinson principles, managing timewasters and empowering people in business.

He also lays out his plan for selling products online and outsourcing the production and distribution. E-commerce has changed a bit since the writing, but the principle and his concepts are very valid. That's a very thought-provoking theme of the book.

If you flick over the dribble without it bothering you too much, it's a good read for under a tenner. If you take nothing else away, get into the Pareto (80/20) Principle.

The Ten Roads to Riches: The Ways the Wealthy Got There (And How You Can Too!) (Fisher Investments Press)
The Ten Roads to Riches: The Ways the Wealthy Got There (And How You Can Too!) (Fisher Investments Press)
Price: £10.15

2 of 2 people found the following review helpful
4.0 out of 5 stars Great Thought Process & Very Good Read, 4 Feb. 2013
Ken Fisher is an investment analyst, and the head of Fisher Investments, a US money manager with $41b in 38,000 customer accounts. He's been called the largest wealth manager in the US.

His father was Philip Fisher, the investor and author who wrote the work "Common Stocks and Uncommon Profits" (the top of any Buffett list), making the term "scuttlebutt" famous in finance.

Ken's done OK on his own though as an investor and a writer - he's worth $1.7b and on the Forbes list of 400 richest Americans. He also writes a monthly column in Forbes magazine, has written seven books, and has written research papers on behavioural finance.

Probably his best book is 10 Roads to Riches. It's a quite insightful list of the ten basic ways you can get rich, with a pretty fair rundown in each chapter of the pros and cons of each.

The 10 are:
1. Start a successful business - the richest road.
2. Become CEO of an existing firm and juice it - a very mechanical function.
3. Hitch to a successful visionary's wagon and ride along.
4. Turn celebrity into wealth (or wealth into celebrity) - then more wealth.
5. Marry well.
6. Steal it, legally - sue in every loophole you can find.
7. Capitalise on "OPM" (other people's money) - where most of the mega-rich are.
8. Invent a future revenue stream - regardless of whether you're an inventor.
9. Trump the land barons - monetise unrealised real estate wealth.
10. Go down the road more travelled - save hard, and invest well forever.

He makes a pretty fair statement - that to make $30m in your lifetime isn't that hard (relatively) as an entrepreneur or business owner, notwithstanding the disadvantages he describes of being the head of a business. His margins and PE ratios are on the high side, but....

His example: build a not-so huge business that, in 10 years, grows to $15m in revenue.
A 10% profit margin should mean $1.5m in annual profits. If it's worth 20 times earnings, there's $30m in enterprise value.
At that point, you should know whether it's scalable or not - if it is, you could be very wealthy. If not, sell and collect the $30m. Retire, pick another road, or start again.

I strongly recommend the book - he's a bit of a waffler as a writer, but it's a very insightful book, particularly in terms of the negatives of each of the ten roads. Hopefully, you'll at least come out of it with a fair assessment of the path you might want to take.

The 100 Best Stocks to Buy in 2013
The 100 Best Stocks to Buy in 2013
Price: £9.49

4.0 out of 5 stars An annual purchase for me., 4 Feb. 2013
I get this book's annual every year when it comes out, mainly for the research it does on US stocks, even though they're all large cap. Sanders and Bobo* do a good job of running down the Reasons to Buy and For Caution on 100 stocks, lay out the prior financial year, and a table of the past 10 years results. They also tag them depending on your preference - some are favoured for consistency and dividends; others for conservative or aggressive growth.
(*Not a ventriloquist act).

Good book if you're into US shares; less than the price of one share commission.

Here's some highlights:

* They're big on three broad areas: of the 100, 48 come from the Energy & Utilities (13), Industrials & Materials (20), and Health Care (15) industries. Generally, those stocks are the safer, dividend producing, conservative investments, and all (largely) well-driven by the structures of the USA.
* 20 Consumer Staples and Transport companies - driven by the engine of 300 daily US consumers.
Only three financials: two of the greats, Wells Fargo and Visa, plus Cincinnati Financial. Very different from 5 and 10 years ago.
* Nine real champions made the list: AAPL, CL, COST, IBM, NKE, MCD, SBUX, V, WFC.
* Worth checking out as well if they're off your radar: AGN, ADM, BBBY, CMCSA, FICO, FMC, GWW, MOS, PDCO, PLL, ROST, TSCO, TWX, WHR.

King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone
King of Capital: The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone
Price: £7.37

1 of 1 people found the following review helpful
4.0 out of 5 stars Great book on Private Equity/Ventrue Capital & LBOs, 4 Feb. 2013
King of Capital, about Blackstone Capital, and it's head, Steve Schwarzman, is a great read - very underrated.

Schwarzman was at Lehman's in the 80s during the first LBO boom and formed Blackstone as a part M&A boutique, part buyout shop, with a partner in 1985. Getting business was tough at the start, before a huge run of successes applying the LBO formula, often in partnership with a customer, supplier or someone with a strategic interest in the target.

The S&L crisis and two credit crunches in the 90s stalled the debt available for periods, they occasionally didn't get the management-led improvements they sought from businesses. 2/3 of the investments Blackstone made in 2000 at the height of the market were wipeouts. (The same pattern replicated itself in 2007 when the credit markets crashed and the economy collapsed).

But the company is still worth $22b today, and the formula applied since the 80s is broadly the same, albeit improved.

And that's the interest part of the book - the mechanics and financial engineering of LBOs and private equity. If you're ever looking for investment, it pays to know what drives your buyer and what model he's got to meet.

The Mechanics of an LBO
* The buyout firm put down raised equity as a down-payment on the purchase of the target company. But the company, not the buyout firm, will borrow money. Hence buyout investors look for companies that a) produce enough cash to cover the interest on the debt, and b) are likely to increase in value. The nearest analogy is an income property where the rent covers the mortgage and expenses.
* LBO's also enjoy a generous tax break. They deduct the interest on their debt as a business expense. In most companies, this is a small percentage of earnings, but in a highly leverage buyout, the deduction can match or exceed the income, meaning the company pays little or no income tax. This amounts to a huge subsidy from the taxpayer for this form of corporate finance.
* Gibson Greeting Cards (owners of Garfield) was bought in 1982 for $80m, with just $1m of equity. At that level, they don't stand to lose much if the company fails, but can make many times their investment if they sold out at a higher price. 16 months later, the company was IPO'd for $290m. It was a great deal anyway: without leverage, they'd have made 3 times their money. With leverage, they made $210m, a 200 fold profit.
* Those are the keys: Find a cash-positive business that can be used to pay the interest. Use leverage to minimise the equity required, which multiplies the return on equity. You don't use the business to disburse profits pre-sale (although probably paying tax-deductible "management fees"), you make your money on the sale.

The Three Ways to Make Money
1. Use cash flow of the business to pay down debt, so that the sale proceeds flow to the buyer.
2. Boost cash flow through revenue increases, cost cuts or a combination to increase the cash flow and the value when the business is sold.
3. Pay down substantial debt, and reborrow against cash flow to pay the buyers a dividend.
* If you can harness buying at a low valuation (part of the economic cycle), and selling at a high valuation, whilst improving the cash flow used to make that valuation, you can make exponential returns - especially with leverage. If the reverse happens, you're in real trouble.

The Finances of their Business
* Blackstone collected 1.5% of the money raised every year, regardless of how much had been put to work. They also take 20% of the gains on investments when they're sold. In addition, companies reimburse them for the costs of analysis, plus banking and legal fees. Their initial aim was $1b in funding, averaging $250m in profits a year (25% return): $325m + fees over 5 years.

Price: £4.31

3.0 out of 5 stars Action-oriented - not bad., 4 Feb. 2013
This review is from: Tycoon (Kindle Edition)
Despite the hideous persona he displays on Dragons Den, and the nitwit title of the book, "Tycoon" is actually pretty good - it wasn't at all what I expected.

He keeps to a minimal amount of waffle about his own general awesomeness, and the book has some very useful and step-by-step practical guides to creating ideas for your own business, preparing it early-stage, seeking (and pitching) for investment, writing a business plan, and running it as you get going.

If you've got an entrepreneurial idea, or you're going through seeking some investment, it's well worth picking up, and a real easy read. He used to keep the guts of the guides on his website, but only his 10 Golden Rules are left on there now.

Very action-oriented. Good book for a budding entrepreneur.... if not a tycoon.

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