Cuba: Finally...Business May Start to Boom

Raul Castro, Fidel's brother, is making changes in Cuba. He is lifting bans on buying electronics equipment, on buying and selling homes and cars, on using tourist hotels and is allowing open access to cellphones. Farmers are being allowed to till unused land for a profit. This is a move toward freeing up commercial markets.

It's just a few steps so far, but Raul just took office. If he continues, some economists say, it could spark an explosive growth in the Cuban economy. It's conceivable that it could grow the way China and Russia have been growing lately - which is to say 200 times faster than the U.S.
The New York Times recently said that Raul is following the Chinese model, where economic and commercial freedoms are allowed within a mantle of authoritarian political control. If that's so, that should be plenty of opportunity for enterprising foreigners who want to take advantage of the coming growth.

I spent a week in Cuba during the Carter administration, when travel bans were briefly lifted. I was impressed by how resourceful the Cubans were, how they loved their old American cars, how well they dressed their children, how busy the museums were and how well the different ethnicities seemed to get along. This is a culture that is begging for economic freedom, I thought back then. It looks like that freedom is finally underway. That means that in the next ten years there may be hundreds of million-dollar business opportunities for enterprising Cubans and foreigners who get in while the getting is good. The Chinese are already there and waiting. So too are many European businesses, which have been in Cuba since the U.S. pulled out. Getting in early will be nearly impossible for Americans because of the laws that restrict them from going there or doing business with them (talk about commercial freedom!) are lifted. File under Squashed Opportunities for Now.

Read more!

posted by M. Masterson @ 11:20 AM, ,

Book Review: The Black Swan by Nassim Nicholas Taleb

For Nassim Nicholas Taleb, a black swan is a social or economic or cultural event that has three characteristics:

1. It is unpredictable

2. It has a massive impact

3. It is explained as being predictable after it surprises everybody

Three things to say about Taleb:
One thing to remember about the book: Taleb's fundamental thesis - that the most important social or even personal events are unpredictable - is just plain wrong. The truth is that most progress occurs when people follow their experience-based instincts which are confirmed by facts. That's how science works. That's why wealthy people keep on getting wealthy.

Taleb's logic is this: If a great negative event, like 9/11, could have been predicted it would have been prevented. But the facts contradict Taleb's logic. Pearl Harbor was predicted. So, actually, was 9/11. So were all the stock market crashes he claims were unpredictable. Each of these events was foreseen by people using a combination of insight and common sense to draw conclusions about the future. But these people were ignored.

So the question is not why can't we predict "surprising major events" but why do we ignore warnings when they are given?

Taleb says, "What you don't know is far more relevant than what you do know," but this is just seductive poppycock. He cites two examples: September 11 and the "secret recipe to making a killing in the restaurant business." Of the former he says that had we known we would have prevented it; of the latter, "if it were known…then someone next door would have already come up with the idea and it would have become generic. The next killing in the restaurant industry needs to be an idea that is not easily conceived of by the current population of restaurateurs."

Again, reality refutes Taleb's theory: There are, in fact, secrets to running successful restaurants. People who run successful restaurant chains know them. How do you explain the fact that these chain restaurants are successful time and time again in all sorts of different markets? And, in fact, there are different secrets. There is one secret to run a successful Houston's and another to run a successful Applebee's and another to run a successful Don Schula's Steak House. There are universal secrets and particular ones. Each restaurateur knows them. That is why they continue to be successful.

This is not true of the person who opens one restaurant and succeeds. He may or may not understand the secrets he needs to know. So many people who own a single, successful restaurant fail when they try a second. Those people were lucky in their first success. But they don't disprove knowledge or the predictability of knowledge. They merely show what we already know: that sometimes people succeed out of sheer luck.

Redeeming Pleasures: Notwithstanding its critical weakness (that its theme is just plain wrong), the book does have some mitigating pleasures:

Read more!

posted by M. Masterson @ 9:25 AM, ,

Thoughts and Conclusions about Wealth

Historically speaking there are three ways wealth was created: plundering, taxation and commerce. The first two involve force. Only the third operates freely.

In ETR Monday, I wrote about some of the wealth-building habits billionaires share. Habits anyone can develop. Here is some interesting background on five of the U.S.'s wealthiest:

1. John D. Rockefeller (1839 - 1937) was the wealthiest American who ever lived. He started off in the grocery business in Cleveland, sold his operation and went into the emerging industry of oil. Along with his partner, Henry Flagler, he started Standard Oil. His great success came from developing his business monopolistically by controlling the railroads, production and refinement as well as exploration. In today's dollars, Rockefeller was worth around $318 billion.

2. Andrew Carnegie (1835 -1919) began as a bobbin boy in a textile mill in Pennsylvania. He became rich by working his way up the iron and steel business in order to build railroads. He understood very early that the industrial revolution was going to change everything in America. He was quick to recognize that steel was a better product than iron and invested in steel. He put his steel company to work building railroads and then as the railroad expansion was coming to an end he started promoting and selling steel beams for city skyscrapers. In today's dollars, Carnegie was worth just shy of $300 billion.

3. Cornelius Vanderbilt (1794 -1877) built steamboats to ferry people and goods along rivers and the coastline of northeastern America. He was also a railroad builder and at one time owned the route between New York and Chicago. Like Rockefeller and Astor, Vanderbilt was skillful at controlling all the major aspects that affected his core business. He didn't want to be dependent on suppliers and so developed his own supply companies to control price and supply. His net worth in today's dollars would be nearly $170 billion.

4. John Jacob Astor (1763 -1848) was America's first millionaire. By today's standards he was worth $115 billion. He made his money as a trader - first of fur and then of liquor, opium, and tea - from the end of the American Revolution until the middle of the nineteenth century. His skill: he was a great investor in businesses, diversifying his interests and getting in and out of businesses when economics mandated.

5. Warren Buffett (1930), CEO of Berkshire Hathaway, made his money as a stock market investor. Just this year - with a net worth of about $62 billion - he surpassed Bill Gates as the richest person in the world. According to Forbes, Buffett filed his first tax return as a 13-year-old. He has since adhered to value investing principles, sticking with companies that have good fundamentals. That means he thinks in the long term and doesn't get caught up in the "hot" trend. In 1955, Buffett took over Berkshire Hathaway - originally a textile firm - and has built it into a major holding company with investments in insurance, food, jewelry, utilities, and more.

Read more!

posted by M. Masterson @ 9:30 AM, ,

Impressions of Holland

The first time I visited Amsterdam was in 1977, just after I had spent two years in Chad as a Peace Corps volunteer. I hadn't been there since. What impressions I had from my first trip were small: clean, orderly streets; handsome people; good food and the astonishing sight of ladies in underwear in the red light district.

Nothing I experienced on my most recent trip (just last month) contradicted those impressions: Amsterdam is one of the cleanest and most orderly in the world. The food, though not gourmet, is amenable to US tastes. The red light district is just as amazing as it ever was and a refutation to those who believe that prostitution demoralizes culture.

Other impressions:

Read more!

posted by M. Masterson @ 4:41 PM, ,

How Much Editing Is Needed? Is Publishing a Ready, Fire, Aim Endeavor?

I sent a note to Charlie Byrne and Jason Holland about installing more layers of editing in ETR's books and courses.

Here's what ETR's editorial protocol for its daily e-zine looks like: Every essay and article is reviewed and critiqued at least twice: first by Charlie and Suzanne Richardson who look for weaknesses in the "big idea" and then by Judith Strauss who edits for style and usage. Sometimes Charlie asks for my thoughts as well.

But because we are pressed for time, we often do less editing when we publish books and courses. In fact, we need to do more.

This thought occurred to me recently. A few weeks ago, we published an essay on "my early morning routine," (which is meant to be a chapter of a new book I'm writing: How to Master Plan Your New Life. By Wednesday of that week, we had a half dozen letters from readers who had questions and objections to what I'd said. I answered those questions and we're running the responses in ETR. But I realized that we should also include the questions and answers in the book or emend that chapter to include them - or otherwise we will leave our book readers unsatisfied.

So I emailed a note to the editorial team, saying:

Guys: We should talk about the editorial process in general...there are two kinds of editing all our stuff should have...maybe three...

Draft 1: Critical review of the big idea by someone smart....and knowledgeable...maybe Charlie

Draft 2: Review for quality of content by an expert

Draft 2 or 3: CUBA review (Confusing, Unbelievable, Boring, Awkward)

Draft 3 or 4: Spelling, punctuation, grammar

Our products would benefit from a better editing system


It occurs to me that some people might look at what I'm doing and say: "By adding these extra layers of editing, you are going to make publishing too expensive and slow. You are the king of ready, fire, aim. Why are you advocating so much aiming?"

Fair question. I'm asking it of myself as I write this.

But I can think of two quick responses. First, at ETR our writing is our product. To stay ahead of the competition we have to continuously improve our products. There is no contradiction between ready, fire, aim and continuously improving products. In fact, I talk about the need for this continuous improvement in my book Ready, Fire, Aim.

Ready, fire, aim is about priorities and cash flow in starting and growing a small business. Incremental product augmentation is a perfectly compliant principle with ready, fire, aim.

That's one response. The other is this: In devising these extra editorial processes, we need to find a way to make them inexpensive and fast. Because when it comes to creative production, speed is a critical component. (Another principle explained in detail in Ready, Fire, Aim.)

I can think of ways of streamlining these procedures and making them less costly.

  1. The first review focuses on the "lead" paragraphs of every chapter or lesson. That is, on the big idea. This could be done even before the chapter was written. Charlie could ask for a precis of each chapter be written - 200 words or so - that articulates the "big idea." He could review and comment on those very quickly - 15 minutes per chapter. By critiquing the big idea early - before the chapter/lesson is actually written, we reduce the amount of time it will take them to write each chapter/lesson.

  2. The expert review could be shortened and made less expensive by sending out the chapter with a simple questionnaire: we could figure out three or four key questions that would identify whether anything big was wrong or missing.

  3. The CUBA process - pinpointing copy that is confusing, unbelievable, boring, or awkward - is already efficient. (And this will be carefully explained in the book I'm doing on editing copy with Mike Palmer.)

  4. The final editing process is already very efficient. Judith's job should be easier in the future because the editorial will be stronger.

These are my preliminary thoughts on the subject. Charlie and Jason will have their ideas. As will MaryEllen. At the end I'm sure we will come up with something that ensures that all ETR courses, programs, and books are better edited than anything else in the marketplace.

Read more!

posted by M. Masterson @ 4:02 PM, ,

The Recession: How Long and How Strong?

We were at a patisserie in Tribecca. It's me, AS (a restaurateur), JF and ES (executives with large companies), and AE (an attorney). We were talking about the recession, comparing it to other recent recessions.

"The last recession, in 2002, was relatively mild," AS pointed out.

"But that was before the real estate market fell apart," AE said.

"And before the dollar started tumbling," JF added.

"And before inflation reared its head," I said.

"When you think about all that it seems much more ominous. Yet even today in the newspapers half the articles I read were still asking the question: is there a recession at all?"

"It's crazy," I said.

"You can see it even in my restaurant," AS said. "My best customers are coming in less frequently. And overall the tabs are getting smaller."

"The cost of gasoline is making everything more expensive," JF said. "My company is having a tough time holding profit margins at respectable levels. It's getting tougher every day."

"It's inflation. It's debt. And it's the collapse of the dollar," I said. "A triple whammy. It will be hard to imagine that the recession won't get worse."

"I agree," ES said, "Yet nobody in the mainstream press seems too concerned. In fact, lots of people are saying that everything will be fine in a year or two. Nobody agrees, not even the experts. For us, all this disagreement makes it difficult to write business plans and schedule acquisitions."

"Everybody in my industry is worried," JF admitted. "There will be jobs lost. This is not a time you want to be out there looking."


"AE doesn't have to worry," AS said. "Lawyers and bankers always make money. The worse things get, the better the lawyers will do."

Nobody argued with that.

"This war has cost us three trillion dollars," AS said. "Three trillion dollars we didn't have to begin with."

"Our competitors, like China and Japan, have been bailing us out," JF said. "They've been buying dollars and getting punished for doing so. But this is only a temporary fix and it's only scratching the surface. I don't know how long it will be before the give up."

"It's true," I said. "It's just a surface fix. I read something the other day that blew my mind. David Walker, the former Comptroller General of the United States, said that the government has incurred a $53 trillion debt for future Social Security and Medicare benefits. He said that figure is up from $20 million at the start of this decade. What's worse is that it is rising by $2 million to $3 million a year."

"Fifty three trillion dollars? Are you sure it wasn't 53 billion?" AS wanted to know.

"I'm sure," I told them, but I could see they didn't believe me.

"One thing is certain," AE said. "It's going to get worse before it gets better. I read that almost 3 million American homeowners were behind on their mortgages at the end of last year. And another million were listed ‘at risk' of imminent foreclosure, according to the Mortgage Bankers Association."

"Most of those people are holding mortgages that are larger than the value of the houses," ES pointed out.

"Which means they have no vested interest in the houses," AS said. "It's cheaper to let them go."

"When you have no skin in the game, it's easy to quit," ES said.

Again, nobody argued with that point.

Read more!

posted by M. Masterson @ 5:13 PM, ,

The Growing Wealth Gap...Incorrigible People and the Arithmetic of Wealth

Here are some notes from this week's reading. Periodically, I plan on posting similar notes. They are short. They are sometimes cryptic. And they are not fully thought out. But they might provide some useful ideas to the motivated ETR reader. Some of them will emerge as essays, briefs or blogs in the future.

Read more!

posted by M. Masterson @ 3:54 PM, ,