Entrepreneurship | wealthymatters

On Why Money Management Is a Great Business

March 4, 2011 1 Comment

Using the checklist found here at https://wealthymatters.com/2011/03/01/the-perfect-business/ it’s easy to see why money management is a great business to be in:

1.High profitability. Costs are low .It is possible to operate a money management business out of your home and it’s possible to manage with very few employees.Plus the fees are guranteed and high.

2.High returns on capital. It costs almost nothing to get into the money management business, growth requires little capital, and there’s virtually no cap ex.

3.An enormous moat. In this area, money management businesses don’t look so attractive, as there are almost no barriers to entry. On the other hand, a talented money manager is very rare and having one onboard vastly improves the competitive position of any money management business.

The Perfect Business

March 1, 2011 3 Comments

The best and easiest way to make money either as a businessperson or an investor is to get hold of an as near to perfect business as possible.The best businesses have the following features:

High profitability. If the business provides customers a product or service they need or want very much, and only this business can provide it, and there are few substitutes available then this firm can charge a premium price far above the costs it incurs.
High returns on capital. A business with high margins ceases to be very attractive if it is very capital intensive and requires massive amounts of capital to launch and/or remain in business. The greatest businesses require little or no money to start, can grow without major additions of capital, and do not require much maintenance cap ex.
An enormous moat. To ensure high margins and return on capital in the future it’s critical for a business to have major competitive advantages that are unlikely to dissipate over time. The key here is lack of change .Rapid change as in the hi- tech sector,benefits consumers but is very bad for investors. To quote Warren Buffett, “We see change as the enemy of investments… so we look for absence of change. We don’t like to lose money. Capitalism is pretty brutal. We look for mundane products that everyone needs…. I guarantee that Coke, Wrigley’s , and Gillette will dominate. The Internet won’t change what brands people like.”
Profitable reinvestment opportunities. The greatest businesses can reinvest their robust free cash flows back into the business at equally high rates of return on capital. Consider this: Warren Buffett has often lamented the fact that See’s Candies has never been able to expand much beyond its historical West Coast markets. It’s a fabulous company and was one of his best acquisitions ever, but the inability to reinvest its free cash flows back into growing its operations makes it an inferior business to, say, Wrigley, which has been able to grow globally over the years. Read more of this post

Filed under Entrepreneurship, Paper Assets, Theory, Tool Kit Tagged with accounts payable, accounts receivable, businessperson, cap ex, capital intensive, Cash Conversion Cycle, cash flow, Coke, competitive advantage, entrepreneur, free cash flows, gillette, growth, inventory, Investor, Perfect Business, postaday2011, profitability, RandomBlog2011, Return on Capital, See's Candies, Warren Buffet Quotes, Warren Buffett, Wrigley's

Zhang Yin

February 25, 2011 8 Comments

Below is an inspiring story of a truly extraordinary woman.I found the original post here : http://invincibleprobity.wordpress.com/2011/02/24/the-american-spirit-now-comes-from-china/

The story is a must read for entrepreneurs and would be entrepreneurs, women and anyone interested in a human interest story.

When I have some down time I usually hang out at my home in the Rocky Mountains of northwest Montana, USA. This is a wonderful place of very few people and lots of big mountains and beautiful scenery. It’s a special region of rivers and streams and lakes … and billions of trees. As opposed to the eastern part of this huge state, where agriculture and cattle reign, northwest Montana has long depended on its biggest industry – timber and wood products. But this industry, faced with steadily increasing restrictions on logging in our national forests and steadily rising competition from cheaper products from overseas, has been in slow decline for the past forty years. It seems like another small lumber mill that had been around for a century is closed down every few months.

In 2009 even big corporate mills started closing. One of these was the Smerfit-Stone Container mill in Frenchtown near Missoula. A second Smerfit-Stone container mill also filed for bankruptcy in Canada at the same time, and Smerfit-Stone mills in Arizona and Quebec had closed earlier. The company naturally cited “the unprecedented global economic recession [which] has weakened demand for packaging”, but a major portion of the truth has been left out of the Smerfit-Stone rationalizing, including the fact that it had failed to upgrade its equipment to meet modern advanced capabilities and had retained its dependence on expensive freshly logged timber to manufacture its cardboard containers. This is another American industry that has long been locked in the past while taking profits for today and failing to improve its competitiveness in the arena for tomorrow.

Like so many American industries that were forged by great visionaries of the past, the American wood products industry is a microcosm of the nation as a whole over the past forty years. It all seems like an ingrained resistance by today’s Americans to learn the lessons of generations that went before. If perhaps not for Americans, however, the Greatest Generation definitely did set an indelible example for others. Read more of this post

Filed under Entrepreneurship Tagged with America Chung Nam inc, Arizona, billionaire, Brazil, Cheung Yan, Chinese, Chinese Billionaire, Cultural Revolution, Dongguan, entrepreneur, Frenchtown Missoula, Hong Kong, Los Angeles, Ming Chung Liu, Montana, Nine Dragons Paper Trading Company, paper, paper mills, paper products, Quebec, Shenzhen, Smerfit-Stone Container, Taiwan, US, wealthiest self made woman in the world, woman entrepreneur, Zhang Yin

Psychology of Wealth

February 24, 2011 1 Comment

The question why some people accumulate substantial wealth and others struggle so much in this field has attracted the attention of quite a few psychologists.There have been many studies to correlate various personality traits and behaviour patterns, cognitive patterns , self motivation habits, moods and emotional behaviours and social behaviours with the wealth a person accumulates.

The results of these studies have been used to construct the various quizzes here http://www.marketpsych.com/personality_test.php .They are free and a pretty good way to get to know both one’s strengths and weaknesses as an entrepreneur , investor and/or speculator.

Taking these tests is a great way to get to know the strengths we can play to and the weaknesses to guard against.The results sheets also have many good psychological tips to work around our individual weaknesses.

Filed under Entrepreneurship, Paper Assets, Theory, Tool Kit Tagged with behaviours, cognitive patterns, emotional behaviours, entrepreneur, Investor, moods, personality traits, postaday2011, psychology, psychology of wealth, quiz, RandomBlog2011, self motivation, Speculator, tests, wealth

Cold Steel

February 18, 2011 4 Comments

wealthymatters.com

‘Cold Steel’ is a mesmerising read.It is a narration of the takeover battle waged by Lakshmi Narayan Mittal against the management of Arcelor to emerge as the Emperor of Steel.

In 2006, the two largest steel-producers in the world-Arcelor and Mittal Steel, are in the middle of a bitter battle for total market domination

At first Lakshmi Mittal proposes a friendly merger with rival Arcelor, a pan-European company whose interested parties include the governments of Spain, Luxembourg and Belgium.

Arcelor’s mercurial CEO, Frenchman Guy Dollé, firmly refuses,using intemperate language.To quote,“The answer is clearly no…There are two categories of steel. There is premium-quality steel and there is commodity steel. It’s like, there’s perfume, that Arcelor specialises in, and then there’s a sort of eau de cologne which is Mittal’s domain… a lot more technology and grey matter goes into each tonne we sell.” ….. “Part of Mittal’s offer consists, if you’ll excuse the expression, of monnaie de singe.”(literally meaning “monkey money” or “funny money” or tainted money).These same words come back to haunt him later.

The refusal sets the scene for a massive hostile takeover involving billions of dollars of finance and government and shareholder manoeuvring. The corporate battle that ensues takes on epic proportions and becomes one of the world’s biggest and most hard-fought industry takeovers of recent years. It sends shockwaves through the political corridors of Europe, excites the world’s financial markets, enriches thirty hedge funds and transformes the global steel industry.The participants come from many different continents and include six billionaires, many of the world’s top investment bankers (interestingly with two brothers, pitted against each other, one working for Goldman Sachs and the other for Morgan Stanley),top law firms and public relations outfits , presidents , prime ministers and politicians occupying the highest positions in the current and emerging superpowers. Read more of this post