Monthly Archives: July 2015

Random thoughts – keeping you on your toes

The Art of War

1 Comment

Today’s post are some high level thoughts about an intriguing ancient Chinese text.  Amazing the level of logic, understanding and awareness within the human race over 1500 years ago.

My intent is more to titillate and get you interested in the book, not explain it to you.   Just the basic book on the original Art of War text is 40 pages or so and a couple of hours read.  There is some cool knowledge within the text, well worth exploring

What is it?

This is an ancient Chinese book often attributed to General Sun Tzu as author, thought to be written in mid 500 AD.  Scholars are divided on whether there were multiple authors and if the text began even earlier in the Han era (early to mid 200 AD).  Even the lifetime and events of Sun Tzu are unclear with the time period and accomplishments of his life (his bio) constantly being researched and defined.

This blog is about the text.  Given the original text is an ancient dialect it’s impossible to have an exact English translation.  That being said, the power in the text is the philosophical base of the content (however accurately translated).   Many argue that the text well fit’s the modern world not as a Philosophy of war but more a tombe on managing conflicts and winning (not necessarily a physical  battle but rather an objective)

So What’s in it for me?

Like most things you get out of it what you put into it.  Basically it is a set of ideas constructed as rules.  The practice of which helps you improve the likelihood of achieving your personal objectives.

A couple of my favorite thoughts, these are paraphrased not quotes (my strategic/philosophical interpretation in brackets). There are more than 10 of these rules in the book:

  • don’t engage in battle unless you know you are going to win (select objectives where chance of success is high).
  • know your enemy  (understand how the opponent thinks and reacts)

So how do I get started?

The first step obviously is to get a translation and read it – there are many of these with different interpretations and suggestions on how to practice the “rules”.

I have read several of these books and ultimately in my view the book you want is one that is a short simple direct translation (as direct as possible anyway given best English translation of ancient writings from China in 4th century). What I mean is you don’t necessarily needs the self help authors interpretations – try your own.

The beauty of the books is the fact it is really comprised of simple rules that work.  Some will resonate with you more than others.  (I mentioned a few of my favorites above).  Pick the things that map to your personal value system, practice them and it is likely you will get results.

 

Random thoughts – keeping you on your toes

Venture Capital

2 Comments

I don’t intend to get bogged down in a financial theme with my ongoing blogs, however a discussion I had today about Coursera (a company that provides access to MOOC’s – massively open online courses) triggered a discourse about venture capitalists, so it’s on my mind and it is interesting (“Interesting to whom?” says my significant other)

What is it?

Say I have some money I want to invest.  Standard investment vehicles options include, of course, equity, fixed income, real estate, mutual funds/ETF’s,  etc.  I could also take the entrepreneur route and use my capital to fund my great idea; my venture so to speak.  Or, I can take the lazy person’s way out and back some other entrepreneur’s great venture.  This is not really less work as I would need to do due diligence  to mitigate the risk my capital was being subjected too and probably provide some sage advice and wisdom (to help ensure my capital was used wisely.)  Ultimately I would get some ownership piece  of the venture  (i.e., shares representing my % stake) or perhaps a royalty arrangement.  As the business grows and makes money and becomes more valuable I can return my capital and make a profit from either ongoing dividends (or royalties) or sale of my stake  for more than I invested.

How about an example?

First comes the idea (and of course it is someones idea and they have the desire, motivation and skills to execute it).  For example, a takeout restaurant that sells shoes on the side – combining a healthy lifestyle with good food (very trendy in today’s market) We could call it Wok with Steve.  Anyway, lease, lease hold improvements, furnishing, kitchen equipment, professional consulting (lawyers- yuk)  etc, all cost $100,000.  Based on a solid business plan (remember this is just a mythical example) positive cash flow won’t be realized for six months.  Given the first six months of operation will cost $50,000 – food stock (leveraged), salaries etc. the minimum start up is $150.000.  So our trusty entrepreneur sells the venture capitalist on his idea (using of course his fabulous business plan) and gives him 60% of the company for $150,000.  Even though our trendy entrepreneur put in no capital he gets 40% of the company for the idea and all the hard start up work.    Our fearless venture capitalist has studied the business plan and is convinced his 60% share can be sold via IPO (initial purchase offering) or back to the entrepreneur or maybe a competitor for $300,000 in 2 years.  This of course is based on the revenue projections, business growth, contained expenses and so on.  So our friendly venture capitalist makes a 50% a year return on his money, of course there is some risk (or a lot of risk).  And let’s not forget our business owner, with a stake worth $200,000 for all his hard work.

So how do I get started?

Well there is “Dragon’s Den”.  Or perhaps you can think of the next face-book or you-tube idea, the dollar figures for that kind of venture are much greater than my example – start-up challenges probably greater too.  Venture capitalist’s will salivate and line up to give you money.

Or perhaps you could be like Vancouver entrepreneur Marcus Frind who stared “Plenty of Fish” on line dating service in 2004, with no venture capital.  He just grew the business reinvesting the profits ($ten million annual profit by 2008 while working 10 hours a week).  So come 2015 and he owns the company (no venture capitalist involved) and decides to get his investment back (whatever 10 hours a week is worth).  Match.com purchases it from him for $575 million.  Not a bad return on his part for 11 years work.  I guess this might make you think about doing it without venture capital (beyond your own that is)

Random thoughts – keeping you on your toes

Value Investing

Leave a comment

What is it

When you buy something, say a pair of jeans, you use what you know to assign a value.  For example brand new levis 407 boot cut might be worth $80 to you.  When you see them on sale in Winner’s for $50 the purchase seems like a good value.  Given it would be hard to find a pair for less than say $70 the price for that design, quality and brand leads to the value decision.   Purchasing equity in a company is basically the same thing.  The cost per share is just an indication of the value of the equivalent piece of company represented by 1 share.

How about an example?

Let’s say kerrzone.com has issued 1 share (and one share only).  If kerzone’s equipment and other real assets were estimated to  worth $10,000 and the share was being sold for just $1000, there would be a strong argument that this was a great value investment.  Arguably you could buy the share and sell all the assets and make $9000 clear just like that.  The caveat of course is the worth of the assets – could they really be sold for the stated $10,000?  What if the sale price was actually $100, whoops!

Remember in the real world the company’s value is complicated by things like intangible assets (intellectual property, worth of the brand, future profit growth, etc)

So how do I pick these value investments?

Talk about a loaded question.  If there were a simple answer investors in the equity market would all be doing fine.  The short answer is hard work – analysis.  There is no other way and there is no exact process or method to say the analysis is sure fire.  That being said though there are plenty of examples where hard work has gotten results – more so that where luck has succeeded. 

MORE TO COME

In future posts I will share some of the analysis methods that work, why they work and most importantly proof that they work.

Random thoughts – keeping you on your toes

Let the musing begin

5 Comments

Getting Started – in the beginning …..
I have been thinking about blogging for some time. Recently I purchased a new NAS (network attached storage). These days NAS is a bit of a misnomer as the hardware and included software do a lot more than just storage management. In my case I have created a number of virtual servers both Windows and Linux O/S based to back up existing hardware servers I have. As well I have multiple web servers, therefore can publish multiple web sites.

To keep a long story short it is easy to install MySQL and WordPress, so I did and hence the blog.

And what are going to blog about? (asked my significant other)
As the title says, I plan to muse about nothing (very Seinfield ish) in a humorous way (remember humor is in the eye of the beholder)

TODAY’S MUSING

Bought a new suit today – first in ten years. Last time I wore a suit was for a security conference at CSIS headquarters in 2012.

It was a very pleasant shopping experience, basically buying a single suit for a single purpose at a “mom and pop” shop. No Moore’s or Tip Top tailors for me this time- thank- you very much.

That’s it for today’s rumination but as the terminator say’s “I’ll be back”