Book List

A good business book is a rare find.

Many business books are nothing more than the authors vain attempt to publish something or almost anything. Others are so limited in their application so as have a very narrow value.

On the otherhand, a good business book is one that enlightens, inspires and gives additional insight into common problems. The solutions given have specific relevance to the problem at hand, but also has a broader application to a wide range of issues.

The following book list is a list of just such books. It is a personal list. It is by no means a list of every business book that I have read. It is however a list of the very best books that I have read. I find these books to provide a basic education as well as a guide to timely business problems and opportunities.

A good book is very rare find.

The Book List

The E Myth, Gerber
The Richest Man in Babylon, Clawson
The Innovator’s Dilemma, Christensen
Seeing What Comes Next, Christensen
Management, Drucker
The Definitive Drucker, Edersheim
Extraordinary Popular Delusions and the Madness of Crowds, Mackay
The Little Red Book of Selling, Gitomer
The Art of War, Sun Tzu
Skunk Works, Janos & Rich
Getting to Yes, Fisher & Ury
The Strategy of Conflict, Schelling
Good to Great, Collins
The Goal
Sea Biscuit
Rich Dad, Poor Dad
Leadership and the Art of Self-deception, Warner
One up on Wall Street, Lynch
Clockspeed, Fine
Wealth of Nations, Smith
How to work a Room, RoAne
The Passion of Success, Peters
In Search of Excellence, Peters & Waterman
My Life in Advertising, Hopkins
Scientific Advertising, Hopkins
The Business of Science, Ramo
Winning through Intimidation, Ringer
Management by Objectives, Odiorne
The Game of Work, Coonradt
The Palace Thief, Canin
People Skills, Bolton

Biographies or Autobiographies

Armand Hammer, Lyndon
John Pierpont Morgan
- The Magnificent Morgan
- J.P. Morgan, Jackson
- House of Morgan
- The Great J.P. Morgan, Allen
Andrew Carnegie
Henry Clay Frick
Rockefeller
- Titan
- The Rockefeller Century
Steel Titan, The Life of Charles M. Schwab, Hessen
Marriott
How to be Rich, Getty

Does it have MULTIPLES ?

As I teach students how to develop a winning business strategy, I introduce the topic of multiples.

In order for a business to be successful, successful beyond the job stage, that business must have structured itself so as to take advantage of multiples. Multiples is simply that process by which a company is able to increase unit sales without a significant or corresponding increase in overhead and with perhaps a slight decrease in unit variable costs.

Now, this definition is awkward at best!

What I am talking about is structuring the company so that if we hit a home run, we can take advantage of it. We are looking for ways in which we can ramp up rapidly or increase our sales if demand increases unexpectedly.

Let me give you a few examples.

A rock & roll band has huge fixed cost when ever they go on the road. The multiple is not achieved by giving more concerts; the multiple is achieved in being able to sell more tickets to each individual concert. Each ticket sold, after overhead has been covered has a dramatic effect on the bottom line. The ticket sales are multiples; they are an increase in unit sales without a significant increase in overhead. Variable cost at a concert is almost none existent.

The stage company that the rock & roll band hires to set up the stage lighting and sound, on the other had has no multiples. Each concert, each job requires a certain amount of direct labor. While the stage hands may become more efficient as they become more experienced, this benefit is small. In order to increase their sales and therefore their profits the staging company must just set up more concerts which comes with an almost direct increase in both overhead and variable costs.

A unique example of multiples is the “Blue Man Group.” While most performing artists whether they are comics, singers, or entertainers must actually show up in person to perform. The Blue Man Group has developed a performance style that allows them to farm out the performance to trained gymnasts. The Blue Man Group is a style of performance. As a result, the Blue Man Group is able to hire and train several performing groups that may or may not perform on different stages in different parts of the world. It is entirely possible to have a BMG in Las Vegas and London performing simultaneously.

A body and fender shop may not be able to increase profits by increasing the through put of damaged automobiles being repaired. There is a limit as to how high you can mark up the labor rate of your employees. However, multiples are achieved when the body and fender shop recognizes that profits on the mark up of body panels and light assemblies require little labor to install. In recognizing of this, the body and fender shop begin to adjust their bids to select those automobiles that have a higher percentage of bolt on parts that need to be replaced and a lower level of sand and paint work.

For centuries it has been correctly said that there is no money in teaching. The reason for this is that teaching has no multiples. A teacher must be in front of the classroom instructing students and school districts are loathed to increase classroom size. However, as soon as the classroom size limit is lifted teaching begins to have multiples.

I am not suggesting that we increase classroom size in our public school system. I am suggesting that teaching can be very profitable as soon as you recognize the principle of multiple. You can teach in several ways that begin to be very profitable.

Video tape your presentation and place it in the internet.

Give your instruction as a seminar to a paying public.

In doing this you begin to have multiples. After covering your initial overhead, the incremental increase in cost of delivering the course in minor compared to the increased sales revenue each time the course is purchased.

Generally we could say that multiples are difficult to achieve with custom work or where there is a direct one to one relationship with labor. Multiples are achieved when the work can be easily and cheaply duplicated.

Entrepreneurial Risk

The words entrepreneurial and risk seem almost synonymous. Today’s media and an ever present hope that kissing a frog will produce a prince, we have come to believe that in order to be Entrepreneurial one needs to accept and embrace risk. In fact, we often assume that the more risk that we take on, the more entrepreneurial that we are.

The reality may be quite different. Entrepreneurial and risk may not be a synonymous, they may be polar opposites. While I have no doubt that some entrepreneurs are risk seekers, I am equally certain that most successful entrepreneurs are risk avoiders. In fact there is a large body of evidence that most entrepreneurs became entrepreneurial in order to minimize risk rather than to increase it.

What do I mean by this?

Conventional wisdom indicates that there is a relationship between risk and reward. We are taught from a very early age that if there is nothing ventured there is nothing gained, that it takes money to make money. While each of these statements may be true in some cases, they certainly are not true in all cases or even in the majority of cases.

Some risky ventures have absolutely no chance of success. They are doomed from the very beginning. They are so blatantly absurd that no right minded individual would engage in such risky behavior. Where the chance for success is so minute and the potential reward is so limited, the scheme is a complete waste of time and effort. Yet, some fool will follow such an entrepreneurial venture based solely on the notion that the greater the risk the greater the reward. In reality a truer statement would be: The greater the risk, the greater the potential reward, and even this is not true most of the time.

Peter Drucker, a nationally revered authority on management and creativity relates the following experience on the subject.

A year or two ago I attended a university symposium on entrepreneurship at which a number of psychologists spoke. Although their papers disagreed on everything else, they all talked of the “entrepreneurial personality,” which was characterized by a propensity for risk-taking.

A well-known and successful innovator and entrepreneur who had built a process based innovation into a substantial world wide business in the space of 25 years was then asked to comment. He said: “I find myself baffled by your papers. I think I know as many successful innovators and entrepreneurs as anyone, beginning with myself. I have never come across an “entrepreneurial personality.” The successful ones I know all have, however, one thing and only one thing in common: they are not ‘risk takers.’ They try to define the risks they have to take and to minimize them as much as possible. Otherwise none of us could have succeeded. As for myself, if I had wanted to be a risk taker I would have gone into real-estate or commodity trading, or I would have become a professional painter my mother wanted me to be.”

This jibes with my own experience. I, too, know a good many successful innovators and entrepreneurs. Not one of them has a propensity for risk-taking.

The popular picture of innovators - half pop psychology half Hollywood - makes them look like a cross between Superman and the Knights of the Roundtable. Alas most of them in real life are unromantic figures, and much more likely to spend hours on cash flow projections than to dash off looking for risks. Of course innovation is risky. But so is stepping into the car to drive to the supermarket for loaf of bread. All economic activity is by definition “high risk.” And defending yesterday - that is, not innovating - is far more risky than making tomorrow. The innovators that I know are successful to the extent to which they define risks and confined them. They are successful to the extent to which they systematically analyze the sources of innovation opportunity, then pinpoints the opportunity and exploit it. Whether opportunities of small and clearly definable risks such as exploiting the unexpected or the process need, or opportunities of much greater but still definable risk, as in knowledge base innovation. Successful innovators are conservative. They have to be. They are not risk focused they are opportunity focused.[1]

I do not dispute that in some areas of business, perhaps corporate bonds or some other financial instruments that I have not explored; there may be a closer relationship between risk and the potential reward. However, this I know that in entrepreneurship, in starting and managing a small, medium or even large business, risk alone, is rarely the harbinger of high returns.

I am not suggesting that we avoid all risk; I am not suggesting that we only seek the safety of the tried and the true. I am suggesting that in business we should be seeking to understand the risk, and by understanding risk, find ways to minimize it. That by seeking to understand and minimize risk, we actually increase our chances of success and increase the range our financial gain.

As you embark on the challenge of starting your own business, or as you think of leaving what you think is security of corporate employment, let’s leave the false impression that entrepreneurship must involve outsized risk.

I am suggesting that in small business and entrepreneurial pursuits there is absolutely no relationship between risk and reward.

That many opportunities exist with high risks also have low potential rewards. That just as many if not more opportunities with low risks have high potential reward. If this is the case, and my experience tells me that it is the case, why would one seek high risk, low reward opportunities? It makes no sense.

I believe and I will show you how by understanding risk and minimizing it rather than seeking it out, you can actually enhance your financial outcomes. How you can actually make more money, with greater security by minimizing your risk exposure.

But first we must understand the difference between risk and uncertainty.
[1] Innovation & Entrepreneurship by Peter F. Drucker, Collins Press p139-140

What is the role of the Entrepreneur?

I often ask my students, what is the role of management?

Those students that have listened and have mastered the short answers to almost every question will answer correctly as follows:

“The role of management is to allocate recourses.” Or

“The role of management is to maximize shareholder value.”

Both answers are correct, as both answers have at their center - corporate resources. If management is to allocate resources it must do it in such a way as to maximize shareholder value.

What are the resources of the enterprise or the corporation? The answers are many and varied.
1. Capital
2. Inventory
3. Personnel
4. Physical Assets such as Buildings, equipment, tools and raw materials.

The list can be quite long

But, where did these resources come from? Did they just appear out of thin air?

This simple question is often is met with a blank stare, an indication that few have ever questioned where recourses were, before they were part of the enterprise or corporation. Clearly they were somewhere.

Where were they?

The answer is simple.
Before these resources were part of their current enterprise they belonged to someone else and were being underutilized. These resources were not being used to their highest potential. In real estate terms, this is called the “highest and best use.” We see this everywhere. It may be an employee that has skills that are not being used by the company. It may be a product that could be modified and sold to a different market. It may be an entire company that is poorly run and yet with a change in management, the company has the potential of significantly higher returns.

An entrepreneur recognized and envisioned a higher use for these resources.

There simply is not a company, corporation, or enterprise of any kind that was not started by an entrepreneur. No company has as its beginning corporate "spontaneous generation." Each company that exists today, each and every company, enterprise or co op, regardless of its size, had at its beginning an entrepreneur.

Some of these entrepreneurs may not see their role in the creation of the company, other may not view themselves as the creator, but, non the less, someone stepped forward and got the company going.

While the role of the Entrepreneur is widely misunderstood in society as a risk all promoter, or as a naive geek who quite by accident has a thriving business. The actual role of the entrepreneur is quite different.

The role of the Entrepreneur is to be that spark that ignites a idea into a working plan; the courage to lend his/her personal reputation to give life to the enterprise, the ablity to gather resources and increase their values.

After the entreprenuer, the baby is born, and then management takes over.