Robert T. Kiyosaki

According to Robert T. Kiyosaki, there is only one rule in wealth creation. Kiyosaki's Rule One is that "You must know the difference between an asset and a liability, and buy assets. If you want to be rich, this is all you need to know. An asset is something that puts money in my pocket. An liability is something that takes money out of my pocket."

Buy assets

For many years I refused to read Kiyosaki's books. I just didn't like the concept and the way his books were advertised. Somehow, I didn't like "Rich dad, Poor dad"-idea. Finally, after many recommendations, I decided to give a go and picked up some of his book from the library. I still don't like the way the books are written, I mean the concept of having rich dad and poor dad giving advice how to live a life. Anyway, I still can recommend at some point to read one book from Kiyosaki. One is enough (Either Rich dad, poor dad or Cashflow recommended) because it seems that the story is mostly the same in all his books. You can describe his main idea in one picture, which is above. The picture presents a kind of personal financial statement. The idea is to buy assets, because they create income and avoid liablilities, because they create expenses. The reason why most people can't do this is that they don't know what the assets are.

According to Kiyosaki, the Real assets are:

1. Businesses that do not require my presence. I own them, but they are managed and run by other people. If I have to work there, it's not a business. It becomes my job.
2. Stocks
3. Bonds
4. Mutual funds
5. Income-generating real estate
6. Notes
7. Royalties from intellectual property such as music, scripts, patents
8. Anything else that has value, produces income or appreciates and has a ready market

House is not an asset

Instead of buying assets people buy liabilities like a house or a car. You take a loan, buy a big house and pay your salary for the bank. In Kiyosaki's listing a house is not an asset, because it doesn't generate cash flow. For Kiyosaki "A bigger home means bigger expenses, and the cash flow keeps going out through the expense. When I want a bigger house, I first buy assets that will generate the cash flow to pay for the house."

Rat Race

He also talks about Rat Race describing how most of the people live: "Most people have a price. And they have a price because of human emotions named fear and greed. First, the fear of being without money motivates us to work hard, and then once we get that paycheck, greed or desire starts us thinking about all the wonderful things money can buy. The pattern of get up, go to work, pay bills, get up, go to work, pay bills... is then set up. Their lives are then run forever by two emotions, fear and greed. Offer them more money, and they continue the cycle by also increasing their spending. This is what I call the Rat Race."

Financial IQ and management skills

Kiyosaki also calls for financial IQ. Financial IQ is made up of knowledge from four areas of expertise:

1. Accounting: Accounting is financial literacy. A vital skill if you want to build an empire. The more money you are responsible for, the more accuracy is required, or the house comes tumbling down. This is the left brain side, or the details. Financial literacy is the ability to read and understand financial statements. This ability allows you to identify the strengths and weaknesses of any business.
2. Investing: Investing is the science of money making money. This involves strategies and formulas. This is the right brain side, or the creative side.
3. Understanding markets: This is the science of supply and demand. There is a need to know the technical aspects of the market, which is emotion driven. The other market factor is the fundamental or the economic sense of an investment.
4. The Law: For instance, utilizing a corporation wrapped around the technical skills of accounting, investing and markets can aid explosive growth. An individual with the knowledge of the tax advantages and protection provided by a corporation can get rich so much faster than someone who is an empolyee or a small-business sole proprietor.

According to Kiyosaki, the main management skills needed for success are:

1. The management of cash flow
2. The management of systems (including yourself and time with family)
3. The management of people

Some quotations of Robert T. Kiyosaki

Kiyosaki's way to express thing is quite black and white. Anyway, I personally like his style as being a bit provocative and express things as simple as possible. Here are some quotations picked up from his books:

• The lack of money is the root of all evil.
• There is a difference between being poor and being broke. Broke is temporary, poor is eternal.
• I don't work for money. Money works for me.
• If you don't first handle fear and desire, and you get rich, you'll only be a high-paid slave.
• Money without financial intelligence is money soon gone. A fool and his money is one big party.
• High emotions tend to lower financial intelligence.
• If you want to be rich, you need to be financially literate.
• Accounting is possibly the most boring subject in the world. It also could be the most confusing. But if you want to be rich, long term, it could be the most important subject.
• In accounting, it's not the numbers, but what the numbers are telling you. It's just like words. It's not the words, but the story the words are telling you.
• Wealth is person's ability to survive so many number of days forward.
• If you don't love your asset, you don't take care of it. Acquire assets that you love.
• Rich people buy luxuries last while the poor and middle class often buy luxuries first.
• Land was wealth 300 years ago. So the person who owned the land owned the wealth. Then, it was factories and production, and America rose to dominance. The industrialist owned the wealth. Today, it is information. And the person who has the most timely information owns the wealth.
• Many rich families lose their assets in the next generation simply because there is no one trained to be a good steward over their assets.

David Rubenstein

In Fortune (April 2010) there was an excellent interview of David Rubenstein, the co-founder, CEO and President of Carlyle Group, one of the World's premier private equity firms. Carlyle Group has an astonishing track record with it's investments: since its launch in 1987 it has average return of 30 % a year. Carlyles business model demands hard work because it makes a lot of small deals instead of few big ones. At the moment the Company owns 231 companies around the World - either controlling stakes or partial stakes.

Here are some points of his interview:

• Investments in the U.S. vs abroad: Carlyle is investing at the moment as much in the U.S. as other countries. According to Rubenstein "China, India and Brazil are unrivaled opportunities for private equity. But the U.S. is still a place where you have the greatest rule of law, the greatest transparency, the greatest governance, the greatest chief executives to run these companies. So it' a terrific place to invest. But you have to remember that growth won't be very good, and therefore you should be adjust your pricing to reflect that".
• China: Rubenstein regards China as the single most attractive place in the world to invest at the moment. "For 15 of the last 18 centuries, China was the biggest economy in the world. It went down in the 1700s as Europe came up, and the U.S. has been the biggest economy sinice 1870. Probably in 2035 China will pass the U.S again. It will be the biggest economy in the world and it will go way past the U.S. and India. Given the growth, the size, the opportunities, I don't think there's any other place in the world that can match it. For example, about 30 % of the Chines economy is focused on consumer spending. In U.S. economy it's about 70 %. China will build its domestic consumer spending, and that will produce a lot of opportunities to produce products for these consumers.
• Managing portfolio companies: "Private equity didn't have a very good reputation for managing its portfolio companies in the early years. It was thought that we just leveraged companies up and let a manager depend on GDP growth to exit and make a good return. Now private equity firms are spending enormous time bringing people like former IBM CEO Lou Gerstner or former GE CEO Jach Welch. People who have a lot of management skills are increasingly bringing a lot of more value-added operational skills to these companies. We recognize that we have to make these companies more efficient, and we're doing so."
• Difference in private equity ownership: "The concept behind private equity, a very novel idea, is that you buy a company and then make the manager an owner. Many of these people were just division managers with modest salaries. Now they're owners, and all of a sudden they think of way to make efficiencies that they didn't think of before. Also, by operating in a private setting, not worrying about public quarterly returns, you can get people to think about a longer-term investment in a company and do things you wouldn't if you were a public company. But the most important thing we add is a sense that there are ways to make companies more efficient, and get management and employees to focus together by making them all owners. In fact employees typically own a fair amount of the companies that we invest in."
• About CEO compensation compared to public companies: "People can make more money in private equity if they perform. If you don't perform, you can lose money".
• Career tips: "I don't think you can plan your career... Doing what you love is really important... Getting along with people is essential. You can't make other people do things. You've got to persuade them. You' re really persuading people through writing and oral communications. So learning how to communicate, is very important. And I think people should recognize that intelligence is helpful, but if you're too smart, you might outwit yourself. I don't think geniuses necessarily do as well in business as people who are reasonably intelligent."

I quess still the most famous quotation from Rubenstein is of his speech at Harvard Business School while speaking about the buyout bubble:

"I analogize private equity to sex... You realize there were certain things you shouldn't do, but the urge is there and you can't resist"

Hyvä hallitustyö

Tänään on aika aloittaa pitkään hehkutettu sarja suomalaisten hallitustyöskentelykirjojen läpikäymiseksi. Ensimmäisenä estraadille nostetaan Juhani Erman, Tommi Rasilan ja Olli V. Virtasen teos Hyvä hallitustyö.

Tausta

Erman, Rasilan ja Virtasen yhteistyössä kauppakamarin ja Hallitusammattilaiset ry:n kanssa julkaisema teos on 2009 ilmestyneenä tuoretta tuotantoa. Se toimii luonnollisena jatkeena Tampereen kauppakamarista liikkeelle lähteneelle HHJ-konseptille (Hyväksytty Hallituksen Jäsen) ja pyrkii vastaamaan ennen kaikkea pk-yritysten kasvavaan tarpeeseen kehittää hallitustyöskentelyään. Valtakunnalliseksi levinnyt HHJ-konsepti pitää sisällään hallitustyötä käsittelevät HHJ-kurssit, "hallitustyöskentelyn ajokorttiin" oikeuttavan HHJ-tutkinnon, omaa osaamistaan pk-yritysten hallituksiin tarjoavista henkilöistä koostuvan HHJ-hallitusjäsenpankin sekä tutkinnon suorittaneiden yhteisen verkoston eli HHJ-alumnin. Itse suoritin HHJ-kurssin ja tutkinnon vuonna 2008 ja voin suositella sitä asiasta kiinnostuneille.

Kohderyhmä ja rakenne

Kuten kirjoittajat toteavat, "kirja on tarkoitettu sekä kertomaan perusasiat hallitustyöstä ensimmäiseen hallituspaikkaansa menevälle että kulkemaan mukana kokeneempien hallitustyöskentelijöiden salkuissa. Liitteineen kirja toimii hyvänä hakuteoksena silloin kun läsnäolijoiden tietämys tai muisti ei ylety kaikkiin hallitustyön yksityiskohtiin." Tämä on osuvasti sanottu, sillä juuri tämän tehtävän teos täyttää. Kohderyhmänä on selkeästi hallitustaipaleensa aloittelijat, joille hallitustyötä on pyritty avaamaan mahdollisimman yksinkertaisesti.

Kirjan painopiste on hallitustyön juridiikassa. Se tukeutuu voimakkaasti sekä osakeyhtiölakiin että listaamattomien yhtiöiden hallinnoinnin kehittäminen, corporate governance-suositukseen kertoen näiden kahden keskeisen ohjelähteen sisällön ymmärrettävällä tavalla. Kerronnassa käydään läpi perustilanteet menemättä tarkemmin erikoistapaukiin. Kirjoittajat ovat myös jättäneet omat kokemuksensa ja käytännön vinkkinsä vähemmälle, joten hallitustyöskentelyn säännökset tuntevalle tämä perusteos ei tarjoa juurikaan uutta asiaa.

Liitteille on kirjassa annettu runsaasti tilaa, sillä 161 sivuisesta opuksesta yli puolet on liitteitä. Tämä on tehty tarkoituksella, koska ohuena opuksena kirja toimii täten hyvänä muistivihkona hallitustyöskentelyn keskeisimpiin säännöksiin.

Omistajastrategiasta

Henkilökohtaisesti kirjan mielenkiintoisinta antia oli kappale omistajastrategiasta. Omistajastrategiasta on Suomessa kirjoitettu erittäin vähän ja sen merkityksen ymmärtäminen on vielä lapsen kengissä. Koska aihe on keskeinen osa tutkimustani, on tässä poimittuna kirjoittajien näkemys omistajastrategiasta:

"Oli sukupolvi tai yrityksen omistajarakenne mikä tahansa on oleellisen tärkeää selvittää omistajastrategia. Mitä omistajat yritykseltään oikein haluavat - kasvua, listautumista, arvonnousua vai tasaista osinkotuottoa? Entä mikä on heidän hyväksymänsä riskitaso yrityksen toiminnassa? Vasta kun omistajastrategia on selvillä, voidaan tehdä varsinainen liiketoimintastrategia, muutenhan ollaan kuin alus keskellä merta hyvässä vauhdissa, mutta ilman tietoa mihin satamaan ollaan menossa.

Omistajien tahtotilan selvittäminen ei aina ole yksioikoista, eikä suuressa pörssiyrityksessä välttämättä edes mahdollista. Asia ei kuitenkaan ole niin ongelmallinen kuin sen saattaisi kuvitella olevan: ellei omistajien tahtoa suoraan saada selville, on hallituksen itse muodostettava omistajastrategia. Hallituksen jäsenethän ovat omistajien itselleen valitsemia edustajia, joiden hallintaan yhtiö on jätetty. Kuka siis voisi määritellä paremmin omistajien tahdon kuin he?

Samoin kuin liiketoimintastrategian, omistajastrategian tulee olla sellainen, että kaikki hallituksen jäsenet voivat olla sen takana. Yksinkertaisimmillaan omistajastrategia on muutaman lauseen mittainen ja kertoo, mikä on yhtiön olemassaolon tarkoitus. Se on siis hyvin lähellä missiota ja visiota, mutta pyrkii kuvaamaan nimenomaan omistajien tahtotilaa, toimien näin pohjana missiolle ja visiolle sekä niitä toteuttamaan luotavalle liiketoimintastrategialle."

Poimintoja kirjasta

• Hallituksella on kaksi perustehtävää, strateginen ohjaus ja valvontatehtävät.
• Hallituksen jäsenten tehtävä on edistää omistajien etuja yhtiössä. Yksinkertaisimmillaan nämä edut ovat voiton tuottaminen pitkällä aikavälillä ja osakkeen arvon kasvattaminen.
• Hyvä hallitus tietää, mikä on omistajien tahto, omistajastrategia. Määriteltyään sen pohjalta yrityksen arvot, mission ja vision, hyvä hallitus pystyy luomaan omistajien tahdon toteuttavan liiketoimintastrategian.
• Hallituksen päätöksenteossa osakeomistuksella ei ole merkitystä vaan hallituksen päätökseksi tulee nimenomaan hallitusten jäsenten enemmistön mielipide.
• Poissaolevien hallituksen jäsenten suhde tehtyihin päätöksiin on sinänsä selkeä: hallituksella on kollektiivinen vastuu eli kaikki hallituksen jäsenet ovat vastuussa päätöksistä, olivat he paikalla tai eivät.
• Melko yleinen nyrkkisääntö on se, että hallituksen jäsenen vuosipalkkio on yhtä suuri kuin toimitusjohtajan kuukausipalkka ilman muuttuvia lisiä.
• Hallituksen toimintaa jäntevöittää, jos kokousten sisältöä ohjaamaan laaditaan edes yksinkertainen vuosikello, jonka mukaan tietyt kokoukset teemoitetaan.
• "Ensimmäinen sukupolvi rakentaa, toinen säilyttää, kolmas tuhoaa." - Vanha perheyrityssanonta

Neti Neti - Managing Myself

Today's post is a link. I had a great pleasure to be interviewed by my namesake and a close friend of mine Tero Isokauppila in his excellent Self-Leadership blog Neti Neti. As you might have noticed we share ideas through our blogs. For those who haven't found Tero's Neti Neti blog yet, I highly recommend to pay a visit. It's simply the best Self-Leadership blog I know and contains a lot of interesting material around the theme.

To Neti Neti Blog.