When a book is recommended by Warren Buffett, Bill Gates and Jack Welch it may be a huge mistake to not have read the book.
Why does it matter
Donald Keough who worked in The Coca-Cola Company for close to 40 years and retired from the post of president and CEO has written this book. Keough, instead of detailing a “To Do List” as a successful business, he rather set the tone by detailing Ten Commandments For Business Failure. So if you read this you are sure to know what could go wrong? Why, How and when businesses fail.
- Quit Taking Risks
2) BE INFLEXIBLE
3) ISOLATE YOURSELF
4) ASSUME INFALLIBILITY
5) PLAY THE GAME CLOSE TO THE FOUL LINE
6) DON’T TAKE THE TIME TO THINK
7) Put All Your Faith In Experts And Outside Consultants
8) Love Your Beauracracy
9) Send Mixed Messages
Keough dwells on clarity of thoughts, which is visible across the value chain in which the business is operating. Keough noted that “Sending mixed or confused messages to your employees or your customers will jeopardize your competitive position, and result in failure”
10) Be Afraid Of The Future
11) Lose Your Passion For Work – For Life
Templeton believed that the market is not like a casino, it provides an opportunity to buy and own businesses. And when we own businesses, we actually want to see them growing over a period of time rather than trading them every now and then just because of fluctuation in prices and other factors which may or may not have bearing on real returns that could be generated over the longer period of time. Trading and speculation will not only consume huge commission, taxes and your mental temperament but in the long run it could also disappoint in terms of returns if it is not your cup of tea. There are very few peoples or rather less than 5% per cent of the people who have successfully made money through trading or speculating in the stocks. Trading seems to be the easiest way to make fastest money but in reality for most of us it is opposite.
One of the Wall Street legend Lucien Hooper once said that “What always impresses me,” he wrote, “is how much better the relaxed, long-term owners of stock do with their portfolios than the traders do with their switching of inventory. The relaxed investor is usually better informed and more understanding of essential values; he is more patient and less emotional; he pays smaller capital gains taxes; he does not incur unnecessary brokerage commissions; and he avoids behaving like Cassius by ‘thinking too much’.”
John Templeton Rule No 3: Remain Flexible and open-minded
Opportunities knock the door of those who have open mind because irrespective of the market conditions, those who are eagerly looking for the investment ideas and are open to listen there is enough room or scope for generating exceptional returns and beat the rest of the markets.
Here is one famous quote of Templeton “If you want to have a better performance than the crowd, you must do things differently from the crowd.”
Exceptional thinking, thinking ahead and thinking differently than what the rest of the crowd is thinking is crucial for making exceptional returns in the markets. Unfortunately most of the time most market participants think in the same way, the mood of crowd swing like a pendulum. However for those who do not always swing with the pendulum, it could be a huge opportunity to buy at the lowest point and sell at the highest point. If an investor has an open mind opportunities knock from different directions. Sometime buying cyclical stocks or buying defensives could give a huge advantage in the market whereas at other occasions sitting in defensives could help. When markets are up and there are not many opportunities to invest it might be wise just sit on cash.
Investors with a flexible mind frame can make more informed and desired decision in a given situation. Many time investors fear to sell their stocks when markets are high. However those who are flexible can easily move in cash or debt if the situation arises. In markets nothing is sure, companies and industries come and go as the fundamentals and perception change which we have already seen during the period of 2008 and 2009 when the lot many hot sector and companies disappointed investors as they fell miserably post the market crash. However investors having flexible thinking will constantly watch these factors and if the situations warrant they are ready to take losses. If investment arguments change over the period of time investors should have the ability and flexibility to change view.
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This article is supposed to have kick-started the passive investing movement which continues even today. It is a study that is famous among the investors and many of them including the names of world’s renowned value investor Howard Marks has recommended this as must read. This study revolves around and uncover several myths about active and passive investing. Howard Marks quoted that this shaped his thinking about investing.
Charles D. Ellis has done a lot of work on the subject of active and passive investing and proved several of his finding scientifically. Charles served as an investing consultant to large institutional investors, governments and wealthy families. He has authored over 17 books and hundreds of articles for various magazines.
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