Made to Stick - Chip & Dan Heath, Arrow Books

Made to Stick: Why some ideas take hold and others come unstuck – Chip and Dan Heath

Several bloggers have mentioned this book as something amazing. I bought it over a year ago to find out what all the fuss was about. It ended up piling dust until now. Something else was always more important.

What an idiot I was!

This book complements the ever so great “The Tipping Point” book from Malcolm Gladwell. In his book Gladwell talks about “The Stickiness Factor” needed to cause a social epidemic. Chip and Dan Heath go beyond that, trying to identify the traits needed to create a message that “sticks”.

To quote the authors, by “stick” they mean that our ideas are understood and remembered and have a lasting impact – they change audience’s opinions or behavior.

I love the fact that the book and the advice are very tangible. The authors have used their research about the “stickiness”-traits to create a checklist for improving the stickiness of the message called SUCCESs. The structure of the book follows this checklist to explain you each trait thoroughly:

• Simple – Stripping the ideas to their core helps you to define what is it that you should say
• Unexpected – Surprising people helps to grab their attention and makes them focus on your ideas
• Concrete – Avoiding abstract ideas in favor of clear-cut images makes you ideas easier to understand and to remember
• Credible – Building the authority or credentials behind the ideas makes them more believable and forces you point through
• Emotional – Tapping into peoples emotions can make them care about your ideas and to feel passionate about them
• Stories – Telling stories gives people means to act according to your ideas

This is a checklist to go through whenever you are trying to convey an idea to others. It helps to determine how likely it is that it sticks and will have an effect on your audience. If you achieve only few or none of these traits, you should really consider revising your message.

The book is fun to read, the message is very powerful and it gives you clear advice on how you could use these findings in your own life. I strongly believe that communication skills and ability to drive your ideas through are one of the main keys to success in life both personally and financially.

Personally, I plan to frame the SUCCESs checklist and place it on my desk as a reminder for myself.

I can highly recommend the book!

The book “Made to Stick” is available for example from Amazon.com and Amazon.co.uk.

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He has done an awesome job in reviewing hundreds of books through the years – all reviews are available in his blog. He was one of the persons inspiring me to start my own blog about business books and gave me great tips about books to read.

Recently he run into a problem that there simply were not enough new books for him to keep up the pace of one review per week. I know the feeling, as if you concentrate on certain niche in books, the themes and solutions offered start repeating themselves after a certain while. This is why I keep the scope in my own blog a bit wider.

However as a parting gift, Trent boiled down his long experience reviewing books about personal finance (and career) into a list of “Ten Personal Finance and Career Books You Should Read”. These are books that really struck a chord and made him think.

These books are:

1. Your Money or Your Life by Joe Dominguez and Vicki Robin
2. The Total Money Makeover by David Ramsey
3. Never Eat Alone by Keith Ferrazzi and Tahl Raz
4. Born to Buy by Juliet Schor
5. Confessions of a Public Speaker by Scott Berkun
6. The Bogleheads’ Guide to Investing by T. Larimore, M. Lindauer, and M. LeBoeuf
7. Getting Things Done by David Allen
8. EntreLeadership by David Ramsey
9. Raising Financially Fit Kids by Joline Godfrey
10. The Millionaire Next Door by Thomas Stanley and William Danko

According to Trent, “if you read these ten books, you’ll have a much deeper view of your money, your career, and the financial world around you.” I have read two of them, The Millionaire Next Door (see my own review) and Never Eat Alone and I have one of them in my bookshelf waiting to be read. So I am definitely on my way there. =)

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The McKinsey Way - Ethan M. Rasiel, McGraw-Hill

The McKinsey Way: Using the Techniques of the World’s Top Strategic Consultants to Help You and Your Business – Ethan M. Rasiel

Recently I started in my last position in my company’s graduate program. I was positioned to work in one of our business development departments at the HQ, also known as our “in-house consulting agency”. Most of my colleagues are ex-consultants e.g. from McKinsey and Booz&Co.

“The McKinsey Way” caught my eye during the autumn. With my new assignment at work, dibbing into the wisdom of the world’s top foremost consultants seemed like a great idea.

”The McKinsey Way” is a book based on the experiences and the learning’s of the old McKinsey consultants. The book tries to boil those learnings down to easily digestible “bullet points” – brief analysis of how to use them to solve your own business problems.

The book is divided into five chapters. Three first ones concentrate on the methods how the McKinsey consultants structure the business problems, how they solve the problems and how they sell their solutions to the problems to others. Two last ones focus on the insights of McKinsey consultants during and after their time at McKinsey:

1. McKinsey way of thinking about business problems – How to structure a business problem and form a proper hypothesis
2. McKinsey way of working to solve business problems – How to create a team, doing the research and dealing with arising problems
3. McKinsey way of selling solutions – How to keep everyone heading towards the same direction
4. Surviving at McKinsey – How to manage in a high pressure environment with long work hours and a little time for yourself
5. Life after McKinsey – What insights do the consultants have looking back

To me it seems the book gives a pretty good overall view of the world of consultants and the methods they hold dear. I keep seeing this advice at use every day at my work.

For example in my new position at the business development function at my company, the first thing my boss asked me was if I am familiar with the concept of MECE. To my delight I had just read “The McKinsey Way” where it was referred as the “sine qua non of the problem solving process at McKinsey”. Each issue related to your business problem should be Mutually Exclusive but Collectively Exhaustive. See the following illustrative chart for further explanation:

While you get a good picture of the life of consultants, that is as far as the book goes. I was very disappointed to see that most of the advice on the book was based on just a common sense of working efficiently and well structured. When the book had something more to offer, it did not dig deeper in to the subject.

“The McKinsey Way” is written clearly and it is easy to read, but it never really offered any “oh, I see!” moments to me. If you want to learn more about consulting (and maybe even consider to work in that field), I am sure you would benefit from reading this book. Otherwise I would look for something else.

The book “The McKinsey Way” is available for example from Amazon.com and Amazon.co.uk.

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Warren Buffet and the Interpretation of Financial Statements - Mary Buffet & David Clark - Simon & Schuster UK Ltd

Warren Buffett and the Interpretation of Financial Statements: The Search for the Company with a Durable Competitive Advantage – Mary Buffet and David Clark

I usually buy books after I have done some research on them. This little book caught my eye in the bookstore as I was looking for a book for a reference about financial statements. Without thinking, I just decided to buy it.

Even though it looked promising as such, I ended up being disappointed. Instead of being a reference quide to cryptical financial ratios like ROI or ROE, this book is focused on a very small niche:

”How to find out if a company has a durable competitive advantage using the data from the financial statements”

In its small niche the book is performing ok. It is pretty clear, easy to read and the advice seems to be grounded on a sound basis. The book is divided into the  following:

• Income statement
• Balance sheet
• Cash Flow statement

The authors walk you through these line by line and analyze their importance for the durable competitive advantage. I have the feeling that I got pretty good idea what to look for when I am reading through the financial statements.

It is important to note that using the advice in this book will just help you to indentify if a company might have a durable competitive advantage. I would suggest to combine it with other methods of analysis to increase the chances of being right.

The only real complaint I have is that somehow I feel that this book could have worked even better A4 or A3 checklist. Maybe that would have been hard to sell with the 10 € price tag though.

Even though the book is titled ”Warren Buffet and the Interpretation of Financial Statements” his role is to be just an example. It is one way of doing these kind of books and not necessarily a bad one. I just have to say that the way the authors keep talking about ”Warren this and that” in third person is pretty damn annoying.

As a final statement I would say that the book is mainly for those people who are interested in Warren Buffet and/or his investment style and have already read some books about these. For other people looking for more generic advice about interpretation of financial statements or investing, I would suggest looking further.

The book “Warren Buffett and the Interpretation of Financial Statements” is available for example from Amazon.com and Amazon.co.uk.

If you buy the book trough the links in this article, bookstore pays small commission for the owner of this blog. This doesn’t cost you anything, but it supports the blog.

Luckily (or sadly) most of us bloggers tend to love making lists.

I noticed few days ago that J.D.Roth from Get Rich Slowly published an awesome list called “The Best Books About Money”. There he lists his favorite books in different categories like investing, debt, personal finance and so on.

He has also done a review of most of them, which makes this list much more useful and trustworthy than the average lists of “10-best-books-I-have-not-read-but-will-suggest-to-you-anyway”.

Worth taking a look at!

The Elements of Investing – Burton G. Malkiel, Charles D. Ellis

I have read Burton Malkiel’s classic ”A Random Walk Down Wall Street” before. Therefore I had high expectations for this book as well. I believe I should start with a warning.  ”The Elements of Investing” is indeed good, but for very different reasons.

Where ”A Random Walk Down Wall Street” is long, detailed and somewhat advanced, ”The Elements of Investing” is short, precise and clearly aimed for beginners in investing.

The book is divided into five chapters. They talk about saving, indexes, diversifying, avoiding blunders and about keeping it simple.

The saving is the backbone of your financial success. If you have nothing saved, you have nothing to invest. In this chapter the authors stress the importance of a sustainable lifestyle. In short, keep your costs lower than your earnings and you automatically accumulate money.

Both Burton Malkiel and Charles Ellis are strong supporters of the efficient market hypothesis. Therefore the book focuses mostly on the index investing. It walks you through the basics of the efficient market hypothesis and why the indexing is so effective.  In the last chapter you will also get some suggestions of possible indexes and EFTs to invest on.

The chapter on diversifying looks into reducing the risk through time and geography. Age long advice still holds true – do not put all your eggs in the same basket. Index investing offers you an easy way to diversify with low costs. And as an investor you should love the low costs.

Authors also outline the most common mistakes made by the investors. The chapter about avoiding blunders lists things like overconfidence, going along with the crowd and trying to time the market. We are all humans and therefore make mistakes. But by knowing the common ones gives you a change to pull ahead.

“The Elements of Investing” is really easy and fast to read. As one anonymous commenter in the web put it: ”This book could be a summary of Malkiel’s previous books”. This is a book I would happily suggest to anyone new to investing.

However even though the book is fairly basic, it can surprise you.

The idea behind the dollar cost averaging is to diversify in time aiming to buy more when the stocks are down and to buy less when the stocks are up. I have read about the concept several times before, but as usual had not really understood what it means.

The book did a magnificent job explaining it to me through an illustrative case (p. 63) in the chapter about diversifying. You aim to save and invest 1000€ per year for 5 years. Would you prefer volatile market or steadily rising market?

Intuitively many of us would prefer the rising market. In the end the market is 40% up from where you started! That must be good, right?

WRONG.

In this case study the person who bought shares from the volatile market ended up with 60.48 shares worth 6 048 € (60.48 x 100€). The one who bought the shares from the rising market bought 42.25 shares worth 5 915€. That is a total of 14.5 % more in earnings.

Just like cars, you would like to buy stocks on sale. Volatile market gives you a chance to do this. This is something most of the people do not understand.

Professional investors are not interested about the stability and growing markets. They dream about volatility and market crashes, because that is where the BIG money is made. (Like a recent example of “the trader on the BBC” shows)

Whatever we might think about it, this is how the game is played. And if you understand it, you are already a step ahead of most of the players. This is the most important learning from ”The Elements of Investing” for me.

The book “The Elements of Investing” is available for example from Amazon.com and from Amazon.co.uk.

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Steve Blank has a solution for you!

Steve Blank – A former serial entrepreneur and a professor (teaching entrepreneurhip at Stanford University and several others) visited Finland last week. This awesome event was arranged by Aalto Entrepreneurship Society. Even though I was not there, I am under impression that his visit had quite an impact. You can learn more about the visit from here.

What caught my eye was that Steve recommended several different books during his visit. Especially interesting to me were his ”top three picks to start your E-education”:

• Business Model Generation – Alexander Osterwalder
• Four Steps to the Epiphany – Steve Blank
• The Lean Startup – Eric Ries.

For some reason none of these had caught my eye before. Now these went straight to my own shopping list. You can see the full list of books suggested by him during the event in Finland here, compiled by the AaltoES.

Also for those interested, Steve has an awesome (but very extensive) list of ”Books for Startups” on his own website.

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I Will Teach You to Be Rich - Ramit Sethi, Hodder & Stoughton

I Will Teach You To Be Rich – Ramit Sethi

Ramit Sethi has been a great inspiration for me. He has found his own special niche in personal finance literature by focusing on psychology behind the money, big wins and earning more.

The name of the book is controversial for many reasons. It easily makes people “judge the book by its cover” without actually ever reading it. I encountered this often when I suggested Ramit’s website to others: “It must be a scam!”.

This is true with many business books, but not all of them. I claim that “I Will Teach You To Be Rich” is pure gold. While reading the book, I jotted down five reasons that make it so special for me.

1. Ramit’s background is in psychology – This has lead to a refreshing approach to money and personal finance. It is one thing to give advice and a completely different thing if people act on that advice. The book teaches you how to use psychology to force you to save. Ramit often uses budgeting as an example of such useless advice that people do not act on.
   (Authors note: I calculate my spending regularly and budget my money, so this has not been a problem. However his non-traditional angle to personal finance is still really amusing.)
2. Focus on automation – People are by default lazy. This is why traditional personal finance advice is not that effective. The book helps you to build an automated system to manage your money. After you set it up you can take a step back and relax. It does the work for you.
   (Authors note: Done this, it works great! I have several accounts for saving, investing and spending. My paycheck is automatically divided between those.)
3. The idea about conscious spending – It is okay to spend money on things you love as long as you have achieved your goals in saving and investing.
   (Authors note: Done this too. I used to feel guilty after spending for something not necessary. Now I have a certain amount of “guilt free” money each month designated for fun. )
4. Less talking, more action – Ramit stresses the importance of taking action. Many people just read and read but never get anything done. Analysis paralysis is a serious disease in the information society. The book is divided into six week long chapters with action points after each one of them. They follow each other in sensible order starting from the basics and advancing to more difficult aspects of personal finance.
   (Authors note: I used to be the guy who was all about talk and never ended up doing anything. After I found Ramit’s blog I have gradually learned to cut the bullshit and take action. I fail a lot, but at least I can say I have tried.)
5. Earning more – Traditional personal finance advice mostly concentrates on saving, budgeting and in general being frugal. The I Will Teach You To Be Rich shows you another path. Saving can only take you so far, but there are no limitations on how much more you can earn. Ramit has later taken this idea much further in the Earn1K course. (Authors note: This area I have yet to explore in depth.)

Ramit’s book is not for everyone. The title of the book could scare you off. You either love or hate the carefree and cocky writing style. He is clearly focused on younger audience and is not afraid to admit it. And finally as he offers very specific advice, some of it could be useless for you.

Personally, there are only few other business books that I could recommend more. This book, if any, has the potential of making you rich.

You can have a look at Ramit’s I Will Teach You To Be Rich blog for free here.

The book “I Will Teach You To Be Rich” is available for example from Amazon.com and Amazon.co.uk.

If you buy the book trough the links in this article, bookstore pays small commission for the owner of this blog. This doesn’t cost you anything, but it supports the blog.

Recently I have been looking more closely my old notes about investing literature.

When I was a student there were no leftovers in the end of the month. However my situation has changed and I am now a full time employee. I am finally in a situation in my life where I can set some money aside to investments. It seems therefore sensible to start thinking about saving and investing.

Even though I used to be broke while I was a student, I was always curious about investing. I have read several books about it in Finnish (reviewed one here last year: Paras sijoitus: Itsepuolustusopas sijoittajille) and few slightly more advanced ones in English.

Now while I was skimming through material about it, I noticed that last week Trent from the Simple Dollar posted a great post about “Useful Resources for Learning about Investing”.

There he highlights where you should not start learning and where you should. He suggests there several good printable and online resources to look at. They are fairly basic but should be a great way to start learning.

I am personally especially curious about “The Bogleheads’ Guide to Investing” mentioned there. It has been suggested in several places alongside “The Richest Man in Babylon” as a great book to learn investing. I have to see if I can get my hands on them later.

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The Millionaire Next Door: The Surprising Secrets of America’s Wealthy – Thomas J. Stanley, William D. Danko, Pocket Books

The Millionaire Next Door: The Surprising Secrets of America’s Wealthy – Thomas J. Stanley, William D. Danko

The book Millionaire Next Door by Thomas J. Stanley and William D. Danko is something very often referred by the Personal Finance bloggers and writers around the net. And there is a good reason for it.

People whom are looking for advice in personal finance often hope to become wealthy, millionaires even. However it is important to understand what is it that you are aiming for.

The Millionaire Next Door digs deep into this subject. Authors aim to show how is your everyday average millionaire. What they do, what do they drive, how do they invest and so on. As it turns out the image that so many of us have about the millionaires is plain wrong.

The book claims that this is due to the “big hat no cattle” syndrome. We perceive the wealthy to be the ones with expensive cars, watches and houses. However it is our definition of wealth that fails us. These people have the “big hat”, but “no cattle”.

After an extensive research made by the authors they were able to conclude “7 common denominators among those who successfully build wealth”:

1. They live well below their means
2. They allocate their time, energy and money efficiently, in ways conducive to building wealth
3. They believe that financial independence is more important than displaying high social status
4. Their parents did not provide economic outpatient care
5. Their adult children are economically self-sufficient
6. They are proficient in targeting market opportunities
7. They chose the right occupation

In the book each one of these factors have been built into a chapter of their own. Through the analysis of these denominators you have an unique opportunity to see how do millionaires think and behave.

The Millionaire Next Door has been criticized that the advice given is  too obvious and the book is therefore worthless. I can just say that this is silly (and stupid) and to point these people towards a recent post by J.D. Roth in the Get Rich Slowly.

The financial advice is not the core of this book. It is the revelation based on extensive studies that our perception of the wealth and the wealthy is misleading.

The Millionaire Next Door shows us that becoming wealthy is possible. However on average it is not the life with expensive suits, fast cars and gold watches as many would imagine. It is a question of sacrifice, discipline and trade-offs. In the society where materialism and hyper consumption is nearly considered a norm, it is good to ask: “Do I have what it takes?”

If you are looking for a clear cut financial advice, there are better books out there for you. But if you are interested in personal finance, building wealth and/or achieving financial independence, the Millionaire Next Door is definitely worth a read.

For those who have already familiar with the Millionaire Next Door, Thomas J. Stanley has written several books with the same theme. For example Marketing to the Affluent and Stop Acting Rich: …And Start Living Like A Real Millionaire, both available as paperbacks from Amazon. I have no experience of these  myself though.

The book The Millionaire Next Door: Surprising Secrets of America’s Wealthy is available for example from Amazon.com and Amazon.co.uk.

If you buy the book trough the links in this article, bookstore pays small commission for the owner of this blog. This doesn’t cost you anything, but it supports the blog.