Hopefully, we’ll all find time over the summer to relax and reflect on our world, both personal and professional. That might include opening up our otherwise overworked minds to “works of art” in the world of business literature.

The following books are some of my favourites and were chosen to provide a variety of information, insight and inspiration. There are a couple of classics (The Intelligent Investor and Buffett) that have been around forever, but they’re well worth revisiting. Two others (Blue Ocean Strategy and Good to Great) are destined to become classics. The other (The Cutting Edge in Financial Services) is less well known but no less important.

Enjoy.



The Intelligent Investor:
A book of practical counsel

By Benjamin Graham; Harper Business, $25

Almost 75 years ago, Benjamin Graham and his partner, David Dodd, wrote an impressively dull book simply entitled Security Analysis that still stands as the quint-essential work that established stock and bond analysis as a profession.

In 1949, Graham wrote a shorter version for non-professional investors and called it The Intelligent Investor, which, despite having some of the same insomnia-curing capabilities, is as widely sought after as its parent. It is essential reading for anyone who is serious about applying discipline rather than emotion to security selection.

Graham is the acknowledged father of “value investing” — buying stocks that are selling for less than their “book” or “true” value, and holding them until the market recognizes that value.

Note, however, that Graham does not believe all bargain-priced stocks represent good investments. They also have to have a wide margin of safety before he commits to them. And the narrower the gap between value and price, the less attractive the stock.

The Intelligent Investor has stood the test of time because its approach is simple, unquestionably effective and, most important, proven by the immense wealth accumulated by many of its disciples, the best known of whom is Warren Buffett, the subject of the review that follows.

Buffett: The making of an American capitalist

By Roger Lowenstein; Main Street Books, $19

At the time of writing, a single share of Berkshire Hathaway Inc. traded on the New York Stock Exchange for about US$108,000. Add the “B” shares at US$3,600 each, and the total market capitalization of the company rises to more than US$320 billion (160 of 180 countries in the world have a gross domestic product smaller than that).

How does a company get to such an exalted place in the world of investing? The answer lies in the discipline and principles of Warren Buffett, the man who has been leading the company since 1962.

The legendary “sage from Omaha” is the most widely recognized pupil of Benjamin Graham. Unlike many investment gurus, Buffett has made it clear that relatively small-time investors can learn his techniques of identifying “cigar butt” companies with lousy financials but a “couple of useful puffs” left in them.

In his early days as a portfolio manager, Buffett did not make it easy for his fundholders or himself. Investors could contribute or withdraw only once a year, and they received no details of the fund’s holdings (to avoid interference). Buffett’s fees were based on performance, and he reinvested most of his earnings back into the fund, a strategy that has made him the second-wealthiest person in the world today (after his bridge partner, you know who).

This biography provides an interesting “nerd makes good” story that details how, at age 14, Buffett parlayed his paper route earnings into farmland, which he rented out, and a pinball machine repair business that, by age 19, endowed him with $9,800, which is the source of every dollar he has earned since. Happily, the book also portrays the genius as the man that he is — dedicated, disciplined and determined, yet humble and, above all, honest.



The Cutting Edge in Financial Services

By Bob Veres; National Underwriter Co., $45

The Cutting Edge in Financial Services may be the most relevant book you will read in some time; it is Bob Veres’ advice on how to manage the challenges you, as a financial advisor, will face in the future.

Here’s what Veres predicts for advisors:

> In addition to managing assets and risk, advisors will help clients with “life planning” and the “new retirement.” “Psychware” tools will be used with as much skill as planners use planning software today.

@page_break@> Quality of life is more important than having the largest practice in town. Fees dominate commissions, allowing advisors to control how time is spent.

> Asset management includes distribution planning, the better to provide clients with sufficient assets to fund their extended lifespan and long-term care needs.

> Marketing is accomplished by helping people solve their problems so they enthusiastically tell others about you. Living up to a mission statement that says just that is key.

The four basic business models:

> The Advisor As Physician: Clients get a “checkup” for a fee. A licensed representative, who is not the planner, fills “prescriptions.”

> The Advisor As Wealth Manager: For an annual fee, clients get a number of themed meetings (retirement, investment planning, etc.)

> The Ensemble Firm: Clients are not clients of any particular planner. The partner/owner best qualified provides each service.

> The Virtual Office: Advisors have few, if any, staff. Paraplanning, performance analysis, asset allocation, reporting, etc. are outsourced.



Good to Great: Why some companies make the leap … and others don’t

By Jim Collins; Harper Collins Canada, $21.89

Jim Collins calls his second major book a “prequel” to his hugely successful Built To Last (1997), which, while impressive, dealt with companies that were already great. For those companies struggling to get beyond being good, as opposed to those trying to hold on to greatness, Good To Great has what you need.

Collins documents 11 companies that qualify as having moved from “good to great” according to the following criteria: cumulative stock returns at or below the general market for at least 15 years, punctuated by a transition point, then cumulative returns at least three times the market over the next 15 years. Having identified these firms, he then examines the transition point to see what characteristics the “good to great” companies had that their competitors did not, as well as what they didn’t have that their counterparts did.

Collins identifies six concepts as being critical to the transition:

• Level 5 leadership

• first who, then what

• confront the brutal facts

• the “hedgehog” concept

• a culture of discipline

• technology accelerators.

Collins also challenges the notion that “people are your most important asset” and postulates instead that “the right people are.” His best-known philosophy is that it’s more important to “get the right people in the right seats on the bus” and then see where the bus goes than it is to figure out where you want to go and then attempting to find the right people to get you there.

Good to Great is packed with data, leading-edge thinking and clear examples that should have every leader of any business, large or small, plotting how he or she can move their organizations from good to great.

Blue Ocean Strategy: How to create
uncontested market space and make
the competition irrelevant

By W. Chan Kim and Renee Mauborgne; McGraw-Hill Europe; $26.43

Every so often, a trendy new catchphrase works its way into the business lexicon. “Blue ocean strategy” is such a catchphrase, coined by the authors to describe how success comes not from battling competitors in a bloody red ocean of rivalry, but from creating “blue oceans” — untapped new markets ripe for growth.

The authors detail several key principles for devising your own blue ocean strategy:

> Reconstruct your “market boundaries” by thinking of new ways to repackage your product to add value and attract new customers.

> Focus on the big picture by basing your growth on strategies that create powerful leaps in value.

> Find “non-customers” by learning why consumers choose not to purchase your product.

> Determine if your strategy is commercially viable.

The most oft-cited example of a successful application of a blue ocean strategy is Cirque du Soleil, which stopped trying to cut the costs of running a circus and, instead, devoted its strategy to increasing value.

Cirque du Soleil eliminated star performers, animal shows and multiple show arenas because its research indicated that these features didn’t increase ticket sales; they only increased operating costs. What did increase sales was raising the uniqueness of the product by creating distinctive Vegas-style acts that gave consumers a new and enticing reason to attend the circus.

Cirque du Soleil also created intellectual themes by adding a dramatic storyline to the show, and varied performances so each show contained a new theme, music and dance. These steps created a new experience for customers and attracted a new generation of circus-goers. They also have made Cirque du Soleil massively successful.

Finally, the four main hurdles faced by any company contemplating change are: convincing others of the need for change; dealing with limited resources; fighting lack of motivation; and dealing with organizational politics.

These are the key items for which you need to plan when building your execution strategy. IE