SOPHISTICATED FINANCE

Financial Modeling Workshop Miami May 11

I will be doing a workshop for the FIU Pino Entrepreneurship Center on May 11. The workshop focuses on how to build financial models, including an introduction to some advanced Excel commands that make building models easier. This workshop begins where my workshop on business concept development and growth drivers ends. There is an exercise that develops the logic of model building, a digital handout of a linked income statement, balance sheet and cash flow model and a handout of the advanced excel commands.

More details on the workshop are here. Proceeds go to the Pino Center at FIU. If you would like to see a previous presentation, look here. Very practical, little theory, informal style.

Disclosure: I am a member of the Board of Directors of the Pino Entrepreneurship Center.

Related articles

• Miami-Pino Spring Entrepreneurship Workshop Series (sophisticatedfinance.typepad.com)
• Upcoming FIU Workshop--Financial Plans (sophisticatedfinance.typepad.com)

Thoughts on Humility

Gaston Acurio at Madrid Fusion 2006 (Photo credit: Wikipedia)

On a recent flight all my electronic devices needed a charge so I read the American Way magazine in Spanish. One story featured renown Peruvian chef Gaston Acurio. When asked to what he attributed his success, he said humility. Humility enabled him to objectively evaluate the results of his cooking and spot the errors.

This point struck a cord because the night before I heard Mohammed Yunus speak at the Hult Global Case Challenge in New York. As a Nobel Prize winner and probably the inventor of social entrepreneurship, the man has some accomplishments to tout. However, the most noticeable quality about Professor Unus is his humility. In a thirty minute speech he never used the word "I" to describe his accomplishments in Bangladesh.

Unus sounded very much like Albert Einstein. I have been reading the arts and letters (not the physics) of this very accomplished thinker. The book is titled Ideas and Opinions. One consistent theme in Einstein's writings and speeches is the fun he poked at organizations (and himself) that gave him awards. Again, humility comes through as one of the strongest messages.

In the matter of 24 hours I have three great examples of world class practioners, all in very different disciplines, but all demonstrating the value of humility. I suspect that you do not become humble after you become world class, but rather humility facilitates world class work. By not being so self-centered you have an easier time to spot your errors (Acurio) and you probably devote more time to your work and less to self-promotion. 

Another benefit of humility is you worry less. All of the students presenting at the Hult Case Challenge were jazzed up and very nervous. Not uncommon at a big event with many people presenting. In a perfect world maybe they were so excited because they did not want to fail their team members, but I suspect that there is another reason. They were all worried about looking bad in front of the audience. Humble people do not worry about such matters and just do the best they can.

Want to worry less. Be more humble.

Related articles

• Humility and Anxiety (memoirandremains.wordpress.com)

Thoughts from a Day at MIT

Schopenhauer, not Christensen from Wikipedia

Clayton Christensen, the well known HBS professor, once said that MIT has the highest density of creativity on the planet. Every time I spend a day at MIT I come to the same conclusion. Two observations inspired by things at MIT last week:

1. In the early days of artificial intelligence (AI) the focus was on the algorithms as the means to make AI productive. This approach proved only marginally effective and AI adoption grew slowly. Recently with the improvement in large database infrastructure and the exponential growth in digital data, researchers have realized that it was the lack of data rather than immature algorithms that was holding back the growth in AI. There are many implications to the accelerating use of AI. One that intrigues me is that computers will increasingly identify the "value" in the data and that this value will be commercialized and subsequently marginalized much faster. Therefore, the opportunity to create large value will increasingly come from outside the bounds of current knowledge, outside the data set. While this has always been true, the easier opportunities in the existing data may quickly be disappearing.
2. Arthur Schopenhauer, the well known 19th century German philosopher, said that music and art make physical the emotions. In most real time digital media one of the challenges is interpreting the emotions and changes in emotional state of the other party. Researchers at the MIT Media Lab are developing sensors to capture and communicate changes in emotion from all parts of the body. Their most well known demonstration is their opera, "Death and the Powers". A possible commercialization of the technology would be for Skype participants to wear sensors during a call. 

Wonder if Schopenhauer would have received a Ph.D from MIT?

 

5 More Productivity Tips

Inc. Magazine had a very good article on how to improve productivity, based on the characteristics of successful people. The characteristics of these productive people were:

• They have a life. Taking breaks to do non-work things gives one a chance to refresh and exposes you to new problems and solutions that can be used in the work environment.
• They take breaks. Constant work depletes ones mental capabilities. Periodic breaks in long projects gives you a chance to refresh the mind and body.
• They have worked in different industries.  Variety in work experience may allow one to bring proven techniques from one industry to problems in another industry.
• They have great outside collaborators.  Once again, networking is critically important. These friends bring fresh ideas to problems and may lead to quicker solutions.

 All of this is good advice, but I thought I would share a few of my own tips:

1.  One-hour meetings. I rarely have meetings for more than one hour. Most adults cannot maintain focus for more than an hour. If properly prepared with documents circulated in advance, 95 percent of matters can be well discussed and solutions arrived at in an hour.
2. Do important things at your best time of the day. Most of us have a biorhythm that makes us an early morning person or a night owl. Learn which you are and do the most demanding tasks during the best period of the day for you.
3. Understand if you should be listening or talking. In most interactions I try to initially set up the purpose of the call/meeting so the time is effectively used and then I basically listen. Give people a chance to talk after setting the objectives and things move more quickly. 
4. State the solution first.  Most people give way too much background in person before they present the solution. Present the solution and then two or three bullet points to support the conclusion. Most people have a lot of background on the matter discussed and can quickly determine if the proposed solution is correct. If the matter is very complex send a short memo or email in advance that outlines the complexity but remember to state your conclusion. You may be able to skip the meeting if the conclusion is accepted based on the writing.
5. Learn to write. Many people are afraid of writing and consequently lose a lot of time preparing to write. Remember this simple rule:

 

•  
  •  
    • Tell them what you are going to say
    • Say it
    • Tell them what you said

Put the energy and time into outlining what you are going to say (the first part of the rule). It's easy to write after you outline the topics.

 

I do not pretend to be a productivity expert, but I have a fairly full schedule between OLPC, consulting, teaching, blogging, book writing, 3-4 workshops and speeches per month and the 4-5 startups and students I typically mentor. In the fall it will be a bit busier when I start teaching a second course at FIU. Always be working on techniques to be more productive. That may be the best tip I can offer.

Image credit: followsteph.com

The Economist Wrong About OLPC in Peru

In a recent article The Economist magazine reviewed the results of an Inter-American Development Bank report on the OLPC project in Peru. While known for its insightful writing, in this case The Economist missed the point. While correctly pointing out that math and language skills showed no noticeable improvement after the children started using their XO laptop, The Economist missed the most important point. In Peru children showed a marked improvement in cognitive skills.

Cognitive skills are important as evidenced by their inclusion in the international PISA tests, which are the bench mark for measuring educational effectiveness worldwide. PISA describes cognitive skills in their 2003 Evaluation Framework as follows:

"Problem solving is an individual's capacity to use cognitive processes to confront and resolve real, cross-disciplinary situations where the solution path is not immediately obvious and where the literacy domains or curricular areas that might be applicable are not within a single domain of mathematics, science or reading." 

Cognitive skills are the higher order skills required to properly process information, evaluate the information in terms of critical thinking and draw original, creative conclusions. While math and language skills may have been of paramount importance in the industrial age, many commentators have identified cognitive skills as critical for success in the digital age of the 21st century.

The 21st century will be a period of individual empowerment with much less reliance on corporate infrastructures and other traditional institutions. The successful individuals will be masters of creating original content, packaging it in multiple forms and marketing it globally. While traditional industries such as agriculture and manufacturing will still make a significant contribution to the world economy, the new opportunities from the digital age will make an increasing economic contribution. However, this contribution is much more likely to come at the individual level rather than through institutions.

Perhaps The Economist needs to update its business model for the 21st century. Then, perhaps The Economist will realize the really meaningful results from the increase in the cognitive skills of the children in Peru. As OLPC is always quick to point out, the children do not need to learn computing but rather learn through the computer. The children of Peru in their environment of limited resources and undertrained teachers have learned the most important skills--cognitive skills. Now we just need for The Economist to recognize it. 

 

Why We Should All Appreciate Women...More

 "Considering that women birthed every prophet from Moses to Buddha to Krishna to Jesus to Mohammed -- suckled them, nursed them when they were sick, believed in them when everyone else said they were nuts, you'd think we'd get a little more respect."

Kavita Ramdas quoted in Big Think

I Need to Rent an Alligator

I had to wait until after April Fools Day to make this post. Otherwise everybody would have thought it was a joke, but I am serious about this. I need to rent an alligator. This is not a variation on "time sharing dogs"--I promise. Here is the story.

A young woman approached me for advice on starting a new business. She wants to be a mammal trainer--dogs, cats, etc. She tells me that she has experience training whales, dolphins, lizards and alligators. I politely ask her if she has a video showing her training alligators. She says no and now you know why I need to rent an alligator. What better way to promote a new business than a video of a ferocious alligator being trained by a young blond woman.

For those of you have read SF for a long time, you should be asking yourself "where's the large market opportunity" in mammal training. The idea I gave her is that she should work toward developing a reality TV series where she trains a different, preferably ferocious animal each week. With all the tie ins such a series could grow into a significant media company.

If anybody wants to see the trainer, her picture is below with a killer whale. If anybody has an alligator to rent, please contact me.

 

Related articles

• Alligator Round-Up Under Way In Southeastern Missouri (fox2now.com)

A Simple Rule for Entrepreneurs

My good friend @Yaquesita, also known as @OLPC_Mexico in another life we share, sent me this article "A Good Mentor Will Tell It Like It Is". The required features in a mentor really highlighted the typical weaknesses in entrepreneurs that need to be addressed:

• "Most entrepreneurs have lots of ideas. Some can be put into practice easily, but others will be off-the-wall and need refinement to implement"
• "Entrepreneurs tend to be driven by the crisis of the moment. As such, it is easy to neglect the real priorities of growing the business"
• Entrepreneurs have a constant stream of ideas, but the resources available set the agenda
• Entrepreneurs need to expand their networks in order to efficiently access the best resources to address an issue
• Entrepreneurs tend to become so immersed in their business that they tend not to take the time to reflect and plan

Constant crisis and no time to reflect on the customer, business and revenue growth are two sides of the same problem. Good entrepreneurs always find time to think and plan. If you are unable to tell the difference between a real crisis and the problem of the moment, you should consider this simple rule:

If it does not affect the customer or cash flow, ignore it. 

Leaders who focus on the correct issues and set proper priorities have many fewer employee issues, which is why I have omitted employees from the rule. However, employee morale and development should be the third priority.

Related articles

• 10 Things Entrepreneurs Can Learn from Children (grasshopper.com)

Strategic Events in Myanmar

Strait of Malacca (Photo credit: Wikipedia)

In Robert Kaplan's very well done book, Monsoon, the author discusses the strategic importance of the Indian Ocean in the next fifty years. The basic idea is that the entire flow of natural resources from Africa to satisfy demand in India and China must cross the Indian Ocean. For the goods to reach China they must pass through the Straits of Malacca near Singapore (shown to the right), which is a potential choke point of strategic importance. Kaplan speculates that China will make significant investment in Myanmar, Thailand or Malaysia to create an alternative to the sea route through the Straits of Malacca.

This story in Big Think suggests that Myanmar (formerly Burma) may be the site of such investment. The Chinese are investing in a port project in Dawei shown below and a new road north to the Chinese border. 

Image credit: Wikipedia

Related articles

• China wants sanctions lifted on Myanmar following election (ctv.ca)
• Rewarding Myanmar reform‚ US to relax sanctions (thehimalayantimes.com)

Classroom Etiquette

Today's post was inspired by this story from Inside Higher Ed, "U. of Ottawa Profs Want Right to Ban Laptops". 

Many university professors ban the use of laptops and cell phones in class. The apparent logic is to prevent the students from being distracted. Presumably the students will take notes on paper.

I use a completely different approach. I have no policies in my classroom, except that I stop conversations between students if it is disrupting the class or annoying me. Why do I have such a laissez faire attitude?

The answer is simple. It is my job to keep the students engaged with the material. If I do not engage the students I have failed as the teacher. To keep the students engaged or entertained I use videos, discuss blog posts, tell alot of stories and use humor as much as possible. I also always take a break of ten minutes in my 2 hour and 50 minute class. Most people cannot concentrate for more than 60-90 minutes without a break to refresh.

I do have certain advantages which make my "no policies" approach work:

1. I teach an interesting subject--entrepreneurship
2. My course is not required, so everybody elected to be in the course
3. I am a native English speaker, which makes it easier for the estimated 90% of students that are not native English speakers (two non-native speakers talking to each other can be a challenge)
4. I have personal stories to illustrate almost every point I teach

I use to feel guilty about how much fun I had teaching. Then a friend from MIT told me that teachers have to be showmen. Showmen don't worry about laptops or cell phones.

Slowdown

Tony Schwartz had a good post on HBR Blog Network, "Slow Down, You Move Too Fast". Two excerpts are worth noting:

"Speed is the enemy of depth, nuance, subtlety, attention to detail, reflection, learning, and rich relationships — the enemy of much, in short, that makes life worth living. "

"Speed is a source of stimulation and fleeting pleasure. Slowing down is a route to depth, more enduring satisfaction, and to excellence."

The complete article is here.

Creativity and Failure

Marvin Minsky at the KI 2006 artificial intelligence conference in Bremen (Photo credit: Wikipedia)

I have never thought of myself as creative. I am not a designer or developer, whether it be software, music, poetry or new devices. However, I am a student of the creative process and a big believer that techniques, such as heuristics, can be used to help creativity. Relax the Assumption is such a technique.

I have also found that many great thinkers were students of creativity, such as these comments from Marvin Minsky, a legendary MIT professor. Thoughts on the creative process from three other notable thinkers, Hamming, Austin and Munger, are here, here and here.

To substitute for creativity, I use an iterative process. In other words, I keep trying solutions until I find a satisfactory solution. The use of heuristics and other techniques makes the iterative process more efficient. The iterative process requires doggedness, a willingness to not give up, and it works for me most of the time. What I have learned over time is that when I cannot find a solution to a problem I usually have the problem framed incorrectly. Re-thinking the problem, rather than continuing to look for a solution, usually does the trick. 

So rather than trying to be "creative", find your own process for how to solve problems and believe in the process so you have the determination to see it through to the end.

Just saw this quote from Jonah Lerner on Mashable.com from a very good article on creativity:

"Because innovation is hard. If it were easy to invent an idea, that idea would already exist. Creative success is not about the avoidance of failure. It’s about failing as fast as possible, going through endless iterations until the idea is perfect."

Access to Ideas

It is well documented that new information is being created at the fastest pace in history. For much of history new information was developed at a pace where it was comparatively easy to disseminate the new ideas to students.

Today curating information is a challenge for which there are yet no really effective tools. Curators, such as text book writers, have a much greater challenge and responsibility. Abusing this responsibility has always been a problem (e.g. Japanese textbooks on WWII). As information proliferates the tendency toward abuse probably increases either purposefully or by accident. Given the power of lobbyists in Washington and at the state level, particularly in education matters, one becomes even more concerned about selective presentation of information.

The solution may be to give the students more autonomy in shaping their reading and experiences. Tools for students such as computers and Internet connectivity provide the access in real time to information. Learning to tell "truth from fiction" and critical thinking are important life skills and probably increasingly important in this age of Twitter, Google search and open access to government information. Teachers would become the guides to this student process of discovery.

This post was inspired by a quote from Seymour Papert in the Daily Papert:

“I do not suppose that all children were ever given full access to the ideas of any society. But at least in times of slower change, an equilibrium could be maintained between what society needed its members to know and the learning opportunities it offered (deliberately or mostly not) to its children. Since there is no reason to suppose that this is true today, and since, in any case, it is no longer acceptable that blind social forces be allowed to assign stations in life through differences in access to learning, deliberate effort is needed to bring to children knowledge that was not intended for them. School, even at its best, is too sluggish and timid to do this.”

Papert, S. (1993) The Children’s Machine: Rethinking School in the Age of the Computer. NY: Basic Books. Page 180.

This quote from Friedrich Hayek's the Fatal Conceit appears to support the same point:

"Life exists only so long as it provides for its own continuance.  Whatever men live for, today most live only because of the market order.  We have become civilized by the increase of our numbers just as civilization made that increase possible: we can be few and savage, or many and civilized.  If reduced to its population of ten thousand years ago, mankind could not preserve civilization.  Indeed, even if knowledge already gained were preserved in libraries, men could make little use of it without numbers sufficient to fill the jobs demanded for extensive specialization and division of labour." Source: cafehayek.com

Yet another thought on the same theme comes from Harvard Business Review in the article "Are You Learning as Fast as the World is Changing?".

Tablet Tip for Sales People

I give alot of presentations and about half of them are sales presentations. With the popularity of Powerpoint, everybody expects to sit in a room and watch the projected information. With the advent of the iPad I have abandoned projectors in sales presentations in favor of sitting next to the decisionmaker and showing them the iPad screen. Anybody else in the room can look over my shoulder.

The great advantage of using the iPad this way is that you establish a very personal connection with the audience when everybody huddles around the device. Establishing that personal connection increases trust and credibility and there is an inherent openness through close physical proximity. Also, there is much less tendency for confrontation because most people need distance to argue. 

Of course, in such a setting the content becomes even more important. Good presentations today use large images and very little text. This approach is particularly important when the audience is sitting next to you. Nobody expects a lecture from somebody sitting next to them showing them pictures. 

Also remember that in such a setting the presentation needs to be shorter. People get uncomfortable sitting close to strangers for too long. 

I do not know if this technique works for selling enterprise software, but it works for any product where the customer is emotionally engaged.

Image credit: Amillionlives.net