Have you ever finished a book, put it down and said “wow”? I’ve read a lot of books (my husband says I’m obsessed) but some really stand out from the rest. They reveal new possibilities and different ways to view the world. Personally I enjoy a good exciting story, but lately I’ve become drawn to books that broaden my knowledge of business. Here are a few books that were game-changers for me. They reshaped my thinking about business and economics.
The 4-Hour Work Week
Tim Ferriss has a great voice both in his writing and podcasts. He’s relentlessly curious across a wide range of interests. I read this book years ago, but it still stands out in my mind. It basically inspired my entrepreneurial journey. This book guides you through steps to become a member of the “New Rich (NR)” as he calls them. These people design their lives to maximize time and mobility using the “DEAL” approach:
- Definition: You define your ideal life based on excitement and dream fulfillment, then take steps to realize these dreams.
- Elimination: You eliminate tasks to shorten your work time and focus on the most important tasks.
- Automation: You automate work by delegating to remote executive assistants.
- Liberation: You develop products that generate cash without consuming time. This allows you to liberate yourself from your hands-on job, so you can take mini-retirements and fulfill your dreams.
Ferriss stresses that life exists to be enjoyed and it is important to feel good about yourself through a focus on continual learning and service to others.
Take away Messages:
- Make your dreams of travel and adventure into reality by following specific steps.
- Efficiency and effectiveness are your friends.
- Don’t be afraid to delegate.
- Enjoy life through learning and service!
Rich Dad Poor Dad
Robert Kiyosaki has a flare for teaching financial concepts in a clear and simple way. He compares the approaches of his two dads:
- Rich dad, a childhood friend’s father who was successful in business
- Poor dad: his academic but impoverished birth father
You can’t help but feel bad for his birth father, but it does help to illustrate the financial lessons of his book.
One of the most powerful lessons was his definition of assets and liabilities. According to rich dad, assets put money in your pocket, while liabilities take money away. So for example, you might think of your house an asset, when it is actually a liability – it costs you money to keep and maintain. Similarly, when you work for someone else, you can get stuck paying for increasing expenses rather than building your own business and passive income through assets such as rental properties and investments.
Kiyosaki also emphasizes gaining financial education so you can be bold in recognizing opportunities. Most people, he argues, have limited financial success because they play it too safe. Rich dad emphasizes that you need to overcome fear to become wealthy. Rich dad also emphasizes that failures can be an inspiration for future successes. By educating yourself, you can reduce your risk when developing assets. You can also learn through teaching others and sharing your knowledge.
Take away Messages:
- Acquire income-generating assets.
- Keep expenses low and reduce liabilities.
- Develop your financial intelligence.
- Don’t play it too safe.
- Teach and you will receive.
The Demographic Cliff
This book really hit home. It was the first book that forced me to look at how economic cycles – once just abstract concepts – really impact our personal lives and businesses. Like many of you I personally experienced the repercussions of the dot.com bust in 2001 (which cost me my job at a startup) and the global financial crisis of 2008 (which reduced the value of my investments). I had never before considered how demographics shape consumer spending patterns, which in turn influence the broader economy. (Demographics are the statics about the characteristics of a population, like age and gender). Harry Dent Jr. outlines at how much money people spend at different ages and what they spend it on. I discovered that these patterns mirrored my own life.
Dent also talks about the cyclical pattern of economic bubble growth and bursts, and how these patterns help spur innovation and progress. He also explains about different overlapping cycles like commodity cycles, generational spending wave cycles and geopolitical cycles – and how things go very bad or very good when these cycles align. Unfortunately it looks like these cycles are aligning downwards in the near future. There is hope though – Dent suggests some areas of opportunity based on demographics and trends in customization and personal service. He also warns about how government intervention can shift the market’s natural cycles, suppressing innovation. I did question some of Dent’s conclusions, but overall I found his description of demographic trends, economic cycles and bubbles really fascinating.
Take away Messages:
- Demographic trends influence consumer spending patterns.
- The market is cyclical. Bubbles form and burst back to near previous levels. Progress does not follow a straight line.
- Natural market cycles are healthy for innovation and progress, but government intervention can shift these cycles.
- Knowledge of demographic trends and market cycles can help guide your business decisions. There are always sectors growing despite the overall economy.
The Road to Ruin
Jim Rickards, like Harry Dent Jr., warns of an impending financial crisis and explains influences on financial markets. Rickards and Dent differ in their approaches – Rickards uses behavioral economics, complexity theory and causal probability to reach his conclusions. Dent on the other hand follows demographic trends and economic cycles. Rickards also warns that governments can freeze the financial system when there is a broad crisis in the financial system and take away many citizens’ rights. Unfortunately, as financial markets grow, so do the risks of both large crises and more frequent smaller damaging events. Rickards recommends that individuals invest in physical assets such as land, gold, art and cash to weather the impending storm.
I found that even though some of his claims sound extreme, Rickards has the credentials and the background as a financial industry insider to make me pay attention to his cautionary advice.
Take away Messages:
- Markets are complex systems rather than the equilibrium systems we are used to. Critical events can trigger a chain reaction.
- Financial liquidity and personal freedoms can be reduced in times of crisis.
- Follow the wisdom of “old money” to preserve wealth through diversification into asset classes such as land, art, gold, a family business and cash for necessities.
Overall, the message that I take from these books is that to be more successful and get through any financial crisis, each of us must:
- Take charge of our own financial futures.
- Build a solid base of assets to weather the ups and downs of economic cycles, and to take control of our destinies.
- Learn about business and finance, because learning is essential to joining the ranks of the wealthy. (Reading some or all of these books is a great way to do that!)
- Find opportunity by taking calculated risks. Taking better, calculated risks require better knowledge of finance.
- Focus on businesses that enable more free time for fun, exploration and service to others.