Sino Hero Foods Ltd

The other day I was invited to a ' wealth creation' seminar. The speaker was a 'Guru type' and his message was that he believed in ' abundance' and how all of us should be swimming in abundance  of wealth, health and happiness.  I wondered if we both did live in the same world. And finally his pitch was as expected coaxing us poor souls to come home to Mama and hand over our hard earned wealth to his firm so obviously THEY could charge us big fat Asset management fees and then they could indeed live in abundance of our wealth and be happy !

Fact is, we are constantly bombarded with massive advertising from financial services firms about wealth management strategies and serious financial types on TV talking up ' long term' wealth creation strategies and how to invest like.... you guessed it Warren Buffett ( I always wondered how all the financial experts are disciples of Warren Buffet and yet the massive financial collapse happened in 2008)!!  What is even more striking is how the same financial firms that brought about the financial crisis are now back to telling us to let the ' professionals(them) manage your wealth and pretending nothing ever happened.

Upon some thought, I realised that if one were to look at the past decade, the reality has been more about massive wealth destruction rather than wealth creation. The giant honey trap has been laid out to entice common people to actively engage in one form of gambling to another whether the internet stocks bubble or the USA housing bubble, Dubai, Greece and the financial advisers favourite child-stocks for the so called long run. Fact is the Dow Jones a decade ago was about 14000 points and is now struggling at barely 10,000 while the Japanese Nikkei index was at about 40,000 over 20 years ago and is now struggling at 10, 000 which is down 75 %.  So yes by any measures 10 years for the Dow and 20 years for the Nikkei is a long term frame. While the common folks have seen their 401K's decimated, the financial firms have still picked up their asset management fees for the past 10 -20 years. Great job if you can get it for sure !

Another point that is not highlighted enough is how seriously once mightly corporations have been totally discredited and bankrupted. AIG made ENRON look 'well 'mis'managed' and countries like Greece cooking their books over years make Iceland's banks look like the role model of fiscal conservatism. Not a day passes without another new fraud or insider trading scam with some hedge fund or financier or corporate big wig. No wonder such massive wealth destruction has happened right in front of our eyes. No amount of painstaking research or financial knowledge can help when the game being played is advanced financial book cooking ! When the game is unfair, there is no fair game to be played.

I think today the most important skill we should try teach ourselves is financial literacy from a real world perspective. I do not mean just what conventional finance 101 teaches us like studying balance sheets and P/E (price to earnings) ratios (too much financial crookery is mainstream as we have all seen) but more from a pragmatic and sometimes even cynical perspective with the key point being after every financial advertisement or sales pitch do ask yourself - who gains ? Its after all your hard earned money and you have to use strict risk management principles to judge whom you give it to or maybe manage it yourself (yes it can be done despite what 'professional' managers tell you.If you are smart enough to earn it, you sure can teach yourself how to keep it) One rule that has almost always worked for me is that hot investment themes are inversely proportional to subsequent asset performance. Easier said than done but who ever coined the term' easy money' probably never made any money themselves as  that concept just doesn't exist.

As an entrepreneur, the most valuable lesson one learns is to deal with reality and learn from the school of hard knocks and the big lesson of todays world is we are totally on our own. Despite what the experts say, putting your money in the bank yielding negligible interest over the past decade would have been one of the best investments and would have outperformed some of the most highly paid stock pickers that we have to put up with everyday on TV especially adjusted for volatility and risk.  After all return of capital is what matters rather than negative return on capital that has been delivered due to a toxic combination of gross mismanagement, outright fraud and good old fashioned incompetence on behalf of the people we are 'trained to ' trust' with our life's savings.

Sometimes as they say, it is not the deals we do but  rather the ones that we do not do that are the best ones. Buyer beware !

Posted by SAMIR_13 at 11:36 PM | Permalink | Comments (4) | TrackBacks (0)

I get asked all too often this question especially so nowadays particularly from senior corporate executives on whether they should start their own business.

Most of the times my answer is a blatant NO ! This often surprises people as they assume that being an entrepreneur I would be more encouraging and upbeat about prospects for would be entrepreneurs.

If you are one of those looking to start your own venture, the problems I usually highlight are ;

1. People want to start businesses for all the wrong reasons: Some want to work for themselves and not for anyone else (without considering that not getting a steady paycheck starts to hurt sooner than they think) Also, remember, learn to follow before you wish to command. If you have authority issues like lots of entrepreneurs do, make sure to remind yourself you now answer to not one boss but to multiple bosses like investors, customers, logistics guys (yes), cleaning staff in addition to oneself ! Plus now its all on your time and money so no more ' the boss doesn't get it' story. Trust me I miss my ex-boss sometimes and you will too. Life's not much fun when you are out of escuses !

2. Some cant stand the bureaucracy  while others cant stand being forced to do boring mundane work like accounting, bookeeping or putting up with difficult customers. Guess what? Welcome to the real world of Entrepreneurship ! You have to be prepared to do everything and anything to keep the ship afloat and mostly it will be without the help of the large corporate machine that some ex-senior executives are used to. Difficult customers are the norm rather than the exception especially in a new business as you are no longer 'protected' by the benign corporate umbrella. I was speaking to a senior corporate executive who started his business and now has to make sales pitches to his previous company which include setting up appointments for hour long power point presentations and Q @ A sessions from the same junior guys he helped train. Ouch that hurts ! So you need to check in your ego before even considering starting your business.  .

3. Learn to respect the little guys : Remember the accountant or shipping clerk you never knew existed? Well he'll have to be your new best friend if you wish to get any real work done in a timely and professional manner and actually get paid. 'Team' now doesnt mean top guys going out for all night drinks but rather you sitting with the back office guys sorting out the accounts and the logistics and the brand campaign that doesnt sound quite right despite the hours clicking away. You ready for that ? 

4. Risk vs Rewards : This is particularly relevant for senior corporate executives considering a jump to entrepreneurship. Sometimes it is easy to lose perspecitve on how HARD life on the outside track really is. No more business class travel, no housing or kids education allowance, no company car and driver, no expensing posh meals and above all no more guaranteed bonuses and stock options. Are you ready for this ? And more importantly is this a rational decision to give all this up. Reality is that in the past  decade corporate salaries, bonuses and stock options have balooned to such an extent especially in developing countries like India and China that it is very difficult in the best of circumstances to ever make that same amount in a start up business. Make sure you account correctly for the REAL costs of chasing the dream and not end in the nightmare of harsh reality if it doesnt quite work out.

5. Its very lonely out there : One of the best advise I got when starting my business was to be prepared for a long winding path of loneliness. No more corporate team building sessions or office gossip by the coffee machine or even the hourly 'strategy' sessions. Its amazing how the phone slowly stops ringing once you step out of the corporate world. Make sure you have an adequate support group of fellow entrepreneurs, friends and family just to bounce ideas off and keep your sanity. There will be moments of self doubt and then there will be even more moments of even greater self doubt. Do you have the inner confidence to stay the course ? And more importantly is it worthwhile to stay the course? What is the end game ? When do you call it  cutting losses as a smart strategy and when is it called being a LOSER ?

6. They myth of going back or ' Plan B : A lot of would be entrepreneurs from a corporate background rationalize that if all else fails they can always slot back into their previous roles. Trust me it is'nt quite that simple. There are only few limited senior roles and they arent being kept warm just so that you can be welcomed back once you've done ' your own thing' while your collegues have been slogging away in the corporate grind.  Also the problem with ' Plan B' is that you think you have a safety net so you do not give it your best shot in Plan A i.e making the business work and going all out to make it happen. Business is a highly competitive sport and you cant win if you are fighting the guys who are hungrier than you and more motivated and more passionate that you as they do not have Plan B in their gameplan !

If you still want to go out on your own, wish you all the best ! May the best man (or woman ) win !

Posted by SAMIR_13 at 03:53 PM | Permalink | Comments (3) | TrackBacks (0)