Persuasion

For our Leading People and Organizations class we were assigned a paper by Robert Cialdini. Here's an 11 minute video that summarizes some of his research on the art and psychology of persuasion presented in the paper. It's worth a watch.

San Antonio Financial Planning Days

The Certified Financial Planner Board of Standards, in conjunction with some other great organizations, is putting on a Financial Planning Days event in San Antonio this Saturday, Oct. 12. I'm excited to be one of the CFPs ® that will be participating. There is no cost and the event is open to the public. This is an opportunity to meet with Financial Planners with no strings attached (volunteers are not even allowed to give you their business card!). There will be one-on-one consultations available as well as classes dealing with various financial topics.

Check out the details below and come visit us this Saturday from 9-2.

2013 Volunteer News Release

Dan Pink on Motivation

I haven't posted as much lately as MBA school has been a little more time-consuming than I thought (although I'd say within one standard deviation of the expected mean for the average time I thought I'd be spending--there's my plug for our Statistics class) ;)

Here's a very intriguing video our professor for Leading People and Organizations played for us. The class discussion centered around motivating employees--pay and other intangibles that motivate us to work. Bottom line: money only goes so far in motivating employees. If money is your only motivator, you're gonna have problems. In other words, there have to be more motivating factors. Employees must receive enough compensation to make compensation a non-issue so that people find their work rewarding for reasons that transcend monetary compensation. This also comes from  Harvard Business Review's "Six Dangerous Myths About Pay" by Jeffrey Pfeffer (more on that to come).

This video, a whiteboard animation adapted from a TED talk (I believe), sums up our discussion from some thoughts from Dan Pink.

Austin Intensive Highlights

The Evening MBA cohort at the University of Texas at Austin's McComb's School of Business kicks off their academic year with the Austin Intensive--a four-day weekend jam-packed with classes. learning activities, team building exercises and, of course, a lot of fun. This was my first Austin Intensive so I wanted to post a few highlights.

Texas Army Leadership Challenge

I think I've got to start with the coolest activity of the weekend, the Texas Army Leadership Challenge! Bright and early Saturday morning Major Travis Habhab of the US Army led us through two leadership training exercises. We were divided into groups of about 10 people. The classes of '16, '15, and '14 were all mixed together. My group was first tasked with a planning scenario. Each of us represented a different interested party in planning the security logistics for an upcoming event. For example, I represented the Austin Police Department, while others represented a private security firm, event organizers, etc. The goal was to align our competing interests and priorities and come up with a solid plan to brief the "mayor" in an hour's time. During that time, Captain Jackson, with his Army Special Forces background, stressed the team by pulling our team members out, turning out the lights, making last minute changes to the objective and so forth. He, along with one of his colleagues, was observing how we reacted and how we exercised under duress. After the activity we had the chance to get some one-on-one feedback. What a great opportunity--to get personal feedback from someone who had spent years in the Special Forces.

My key take aways from the planning portion were:

1. Sometimes you have to step up and lead
2. When there's no clear chain of command or leadership structure it makes it more difficult to get things done
3. You need to be able to communicate clearly and concisely. I have a tendency towards circumlocution which can be counterproductive at times.
4. Most importantly, every single person needs to have a clear understanding of the objective and what the non-negotiables are.

Next was the obstacle course! Not going to lie, that was pretty fun, although it was more physically challenging that I thought it'd be. The objective was to get every single member of the group, along with a "victim" on a stretcher, through the obstacle course as fast as possible. My team ran a great time but we were hit with a few penalties. Here's a low-quality photo of the course...I haven't been able to find a better one.

My key take aways from the obstacle course:

1. Again, clear, concise communication makes decision making more efficient.
2. Strategy. Before we actually started we had he chance to see the course and as a team we discussed a strategy which helped tremendously.
3. The importance of flexibility and adaptability. There were things in the course that demanded we modify our tactics within our strategy to more efficiently cope with an obstacle. Sometimes in life you've got to change things up.

After each group had the opportunity to complete both activities and get some personalized feedback, we regrouped and Majore Habhab lead us through an "After Action Review" or "AAR." We discussed what we had experienced and learned. My key take away from that was the importance of an After Action Review, or to analyze your performance, what went right and what you can improve upon. I have found this to be extremely useful.

Saturday Night

After the leadership challenge we spent a few hours in class learning how to analyze a case. That was very interesting. I'm not sure anybody anticipated how detailed and deep we were going to go with that.

After class we headed over the the McCombs Red Zone in the Darrell K. Royal stadium. It was fun to mix and mingle. Most of us stayed until something like 10pm making new friends.

Change Management Learning and Simulation

Sunday morning met us with some discussion and learning about managing and leading organizations through change. There was this SIM sort of game that simulated an organization experiencing significant problems. The challenge was to first, recognize the core problems. Second, identify those within the organization who had identified the key issues (we could conduct interviews of everyone in the organization). Then we had to come up with a strategy on how to get at least 60% buy-in from those within the organization. Our team was very successful for at least a few reasons:

1. We divided up the tasks to make most efficient use of our limited time. We had two members of our group writing down each and every tactic we could use and placing it tentatively on a timeline. The remaining two of us conducted the interviews.

2. Cooperation. We didn't have anyone dominate or try to strong-arm. But, at the same time, everybody spoke up. There was one decision where most of us were in agreement but the young lady in our group had the guts to point out different option. We ultimately went with her recommendation which I think brought us closer to the goal.

3. Trust. Since each of us had sort of specialized in certain tasks, we were relying on the thoroughness and judgement of another,

In the end, our team reached our goal of 60% buy-in and we did it under time and under budget!

Sunday Night

Sunday we had another dinner party. We sat in groups based on who our mentor is. My group, naturally, consisted of folks coming from San Antonio. After dinner they had karaoke and an open bar, which was a big hit. Many from my table actually went to Mass and were kind enough to let me go with them. Most of you know I'm Mormon, but my grandmother is Catholic so I've been to Mass several times before. It felt good going to Mass, especially since I didn't have a chance to go to church Sunday morning. I really like how we sang a lot of hymns. One thing that stood out to me was the singing by the choir a verse from Hebrews 12:

5 And ye have forgotten the exhortation which speaketh unto you as unto children, My son, despise not thou the chastening of the Lord, nor faint when thou art rebuked of him:

 6 For whom the Lord loveth he ^achasteneth, and scourgeth every son whom he receiveth.

 7 If ye ^aendure ^bchastening, God dealeth with you as with ^csons; for what son is he whom the father chasteneth not?

It was nice to share that moment with my MBA colleagues. If any of you know me and would like to know more about my faith or come to a Mormon function, let me know or message me and I'd be happy to oblige.

Here's most of the folks that were at my table.

  

Monday--Personality Types/Myers-Briggs

Monday started off strong as we learned about personality types. We each took a Myers-Briggs Type Indicator and then we spent the rest of the day learning about our types and how to leverage that to build teams, work with others, and help us lead. It was a lot of GREAT info. By the end of the afternoon it felt like a marathon. I think we were all very tired by the end of the session. It's interesting to note that I had taken a Myers-Briggs indicator about 15 years ago and the one I took this weekend came up with nearly identical results. I see the benefit of using these types to better understand others and what makes them tick.

All in all it was a fantastic weekend spent with a lot of smart, engaged, and amazing folks. I look forward to the next three years!

HBR: "Change Through Persuasion" by David A. Garvin and Michael A. Roberto

This was assigned reading for an MBA class at UT Austin.

Highlights:
Paul Levy leads Beth Israel Deaconess Hospital from red to black while exceeding expectations.

Two parts to the turnaround process: 1) Develop Plan, 2) Implement Plan [Dr. Stephen R Covey would call this the Mental Creation and the Physical Creation respectively.]

Four phases of persuasion campaign:
1. Convince employees that radical change is necessary and show why the new direction is the right one
2. Position and frame, gather feedback and announce final plan
3. Manage employee mood through constant communication
4 reinforce new behaviors to prevent backsliding

Although the article doesn't reference Kotter's "Leading Change" and his 8 steps, Levy's actions definitely do highlight the 8 steps. However, the one thing I didn't see was any mention of a "guiding coalition" that Kotter would recommend.

A few bullet points

• Clear, concise vision –bold and compelling
• Prepare the soil for change
• Differentiate from past plans
• Convince people their organization is truly on its deathbed and quick, radical change is necessary
• Gain mandate for change
• Frequent communication – don't sugarcoat; balance negative with realistic hope and vision of future
• Change and reinforce behavior, not just thinking

Questions I have:
What about less than "massive" change? What if your organization is not on its deathbed?

What if you've already started to change? Is it too late to go back and start over Russian Mark

This is only one case. Where else has this been tried? With the strategy and tactics have had the same result within another organization?

Harvard Business Review--"Leading Change: Why Transformation Efforts Fail" by John P. Kotter

This is a Harvard Business Review article I had to read for class. I will give a quick summary of this interesting article--maybe my MBA colleagues will find it helpful.

Kotter argues there are eight steps to leading change in an organization. It is critical to execute each step correctly, in order, and at the right time.
The eight steps are:
1. Establish a sense of urgency
2. Form a powerful guiding coalition
3. Create a vision
4. Communicate the vision (use every vehicle available)
5. Empower others to act on the vision (remove barriers to change)
6. Plan for and create short-term wins
7. Consolidate improvements and produce more change (don't celebrate victory too early)
8. Institutionalize new approaches

Here are a few take aways from the article:

• Organizations must change from time to time
• There is a process (see the eight steps above) for change that must be respected
• More than 50% of companies fail at step 1
• The top of the organization must be on board
• About 75% of management's buy in is critical mass for change
• The guiding coalition must be the right size and be powerful (power is not just titles)
• The vision must be simple and concise enough to explain in under five minutes
• Leadership needs to be seen living the changes

Questions I had:

• How big of a "transformation" are we talking about? Is it necessary to go through this process for every little change?
• What are the most effective ways to gauge buy-in from managers and others that will be impacted?
• What if you are working within a restricted framework to be able to form your coalition or remove barriers to change? (i.e. volunteer organizations where you can't oust someone or a situation where you are assigned a team with very little opportunity to change)
• How do you prevent your change initiative from being co-opted by other projects or changes?

Translation vs. Interpretation. Internationalization and Localization.

Here we discuss four concepts related to the translation industry. Here is a quick written summary of this four minute video.

Translation and interpretation are two different things. Translation is written communication. Interpretation is oral communication. Some argue that they are still really the same thing, but if writing/reading and speaking were the same thing we wouldn't have different words to describe different functions.

Internationalization is essentially preparing a message or document in such a way as to make it language and cultural neutral so that when it goes to its target audience or market it is easy to customize. For example, if a transnational organization is preparing a document to go to various other countries, it would be more efficient to prepare the first document in a way that would minimize colloquialisms and cultural references unique to one target audience so that it is easier to customize to the other local target audiences.

Localization is essentially customizing the message or document for the local audience. The question to ask when reviewing the final localized document is, "does it feel natural?" For example, if an organization is localizing a document for an American audience, does the document "feel" American? Or does it feel like a translation? Normally you would use images, phrases, and cultural references that appeal to the target audience.

Internationalization and localization go hand in hand. The work of internationalization makes localization much easier and efficient.

Measuring Risk: Standard Deviation and Beta (featuring r-squared)

In previous posts we learned about investment risk and I promised we would later tackle ways to actually measure that risk. Two of the most common ways to measure investment risk are standard deviation and Beta.

Standard Deviation

Standard deviation measures how much an investment varies from its "normal" (mean) return. At the risk of over-simplifying it, I will give an analogy. Think of a roller coaster. Standard deviation would measure the ups and downs and loopty-doops. So, back to investments. If you're comparing two stocks, let's say stock A and sock B.

We'll say stock A has a normal (mean) return of 7% and a standard deviation of 9%. That would mean that in a normal distribution we would expect  stock A to fall between -2% and 16% roughly two times out of three.

Now, let's look at stock B. Stock B also has a mean return of 7% but a standard deviation of 14%. That would mean that in the same two out of three times we would see the stock fall somewhere between -7% and 21%.

You can see from this little example that, although the two stocks had the same average (mean) return, stock B's returns varied more, which would make stock B more risky, ceteris parabis.

Beta

Beta is like your neighbors the Jones--it defines its value by comparing it to another. Whereas standard deviation can tell you something about an individual investment in and of itself, Beta gets its meaning only by comparing it to another investment or benchmark. Beta's starting value is 1. Beta of 1 would mean the two investments we are comparing would be expected to move in tandem. A beta of less than one, .5 let's say, would mean the investment would be expected to increase or decrease by half as much. For example, stock A has a beta of .75 compared to the S&P 500 index. The index goes up 8%, we would expect stock A to go up only 6%. The index goes down 12%,. we would see sock A go down only 9%. The same concept holds for beta greater than one: the stock B with its beta of 1.5 would increase or decrease by 50% more than its benchmark. Beta can also be less than zero, indicating an inverse relationship. A negative Beta would mean the investment would move in the opposite direction compared to its benchmark. Beta ranges -1 to 1.

So what's a good beta? It depends on your goals. If you are more aggressive than the benchmark you're using (like an index) then a Beta >1 could be good. Conversely, if you are more conservative than the benchmark than Beta <1 might be better. Generally speaking we want the lowest Beta we can get without sacrificing returns. In practical terms, Beta is almost always used to compare an investment (stock, mutual fund, etc.) to "the market" by using broad-based indexes as proxies for the market.

Since Beta defines its value by comparing it to something else, like an index as a benchmark, the comparison has to make sense. Enter: r-squared.

R-squared (correlation coefficient)

This is not a measure of risk but rather a measure to tells us about the comparison we are making between investments. In practical terms it tells you how diversified your portfolio is. Let's say your investment has an r-squared value of .9 compared to the S&P 500. That would mean that your investment is highly correlated to the index and roughly 90% of it's variability would be connected to the benchmark. In other words, the two things you are comparing are similar enough to allow beta to do its work.

Standard Deviation or Beta?

In short, r-squared helps you determine whether standard deviation or beta is a more useful measure of risk.
Generally speaking, if your r-squared is greater than .7, then Beta becomes a useful measure of risk. If r-squared is less than .7, standard deviation would probably be a better measure. Both standard deviation and Beta will make a reappearance when we learn about risk-adjusted return and we'll use both to determine if we are getting paid for the risk we're taking.

Take a Look

Next time you look at your investments take a moment to find out the standard deviation and Beta of your positions. If you have mutual funds, including funds in your 401k, the calculation of Beta and standard deviation will be done for you and they will normally give you information on the benchmark. 

Covey's the 8th Habit--Chapters 4 & 5

Part 1: Find Your Voice

Chapter 4

This chapter is about what Dr. Covey calls our “birth gifts.” Our three most important birth gifts are:
1) our freedom and power to choose
2) natural laws and principles
3) our four intelligences/capacities


Our power to choose

Probably the most oft-repeated theme with Covey is our power to make choices and create our future. On page 42 he says, “Between stimulus and response there is a space. In that space lies our freedom and power to choose our response. In those choices lie our growth and our happiness.”


Natural laws or principles

Dr. Covey explains that principles are 1) universal, 2) timeless, 3) inarguable. I happen to strongly agree with him that there are in fact universal and timeless principles that exist and govern the consequences of our choices. The challenge then, is to recognize principles and align our lives with them.

Our four intelligences/capacities

Covey explains that our four intelligences are:
1) mental intelligence
2) physical intelligence
3) emotional intelligence
4) spiritual intelligence



Chapter 5

Covey explains that all great achievers have simply greatly expanded their four natives human intelligences and that the highest manifestations our vision, discipline, passion, conscience related to the mental, physical, emotional, and spiritual intelligences respectively.

Vision is the idea that all things are created twice: first, mentally; second, physically. Dr. Covey likens this to a blueprint of the house or musical notes in a score just waiting to be played, which I found to be a very effective analogy.

Discipline is making the vision reality – the execution and making it all happen.

Passion is sort of the “fire within.” It is the excitement, the drive, the determination, and emotional connection to our life’s work.

Conscience is really the glue that holds all of the intelligences and manifestations of those intelligences together. “It is the moral law within.”




“Voice” lies at the nexus of talent, need, passion, conscience. I really like the four questions he suggests on page 86.
1) What need do I sense (in my family, and my community, in the organization I work for)?
2) Do I possess a true talent that, if disciplined and applied, can meet the need?
3) Does the opportunity to meet that need tap into my passion?
4) Does my conscience inspire me to take action and become involved?

Covey's The 8th Habit--Chapters 1-3

Watch my Video Blog Post about this

I am currently reading Dr. Stephen R Covey’s book The 8^th Habit: From Effectiveness to Greatness. In the third chapter he suggests that we teach and share as we go. That interested me because that’s the primary purpose of this blog, to teach and share what I learn as I go.

In this first post I would like to summarize the first three chapters. Chapter 1, “The Pain”, Chapter 2, “The Problem”, Chapter 3 “The solution.”

Chapter 1, “The Pain”

I think this chapter can be summarized by a question Dr. Covey would often ask his audiences. He would ask his large audiences “How many agree that the vast majority of the workforce in your organization possesses far more talent, intelligence, capability and creativity than their present jobs require or even allow?” He then goes on to give some facts and figures that can be best be summarized with the following quotation: “If, say, a soccer team had these same scores, only four of the 11 players on the field would know which goal is there’s. Only two of the 11 would care. Only two of the 11 would know what position they play and know exactly what they are supposed to do. And all but two players would, in some way, be competing against their own team members rather than the opponent.”

Dr. Covey then goes on to explain what voice is. Voice is, “unique personal significance… Lies at the nexus of talent, passion, need, conscience.”

Chapter 2, “The Problem”

This chapter is fairly simple. The basic idea is that we’ve inherited business and managerial tactics from the industrial age where we tend to manage people as things while neglecting the whole person. Dr. Covey argues that we need to view people as multidimensional wherein we have for components represented by the mind the heart the spirit and the body which represent our basic needs as individuals. The most thought-provoking idea for me came on page 22 where Covey talks about organizations inspiring their people to “volunteer their highest talents and contributions.”

Chapter 3, “The Solution”

In this chapter Covey invites us to 1) find our voice, and 2) inspire others to find their voice. In my mind voice is that which truly inspires us and pushes us to volunteer our best efforts and to use our highest talents to make the greatest contribution. And that, I presume, is what the rest of the book is about.

The Wall Street Journal Promotion

Call me old school but I'm a sucker for getting the good ol' fashioned news paper delivered to my doorstep, especially the Wall Street Journal. I also love having access to all the online content in English and Spanish...I've been using it to advance my studies in Spanish.

I read the Journal daily and in future posts I'll likely share insights I gather from my readings.

They have a deal right now where you get 3 months of print and online access for $25. So, for about the price of a book, you get the print version six days a week, plus 24/7 access to the online content in multiple languages. Just wanted to pass this on.

Also, if you happen to buy the 3-month deal, I get a $25 Amazon.com gift card :)

Here's the link:  http://refer.wsj.com/a/clk/1nwZrs    

Español:

Puede que soy viejito pero me encanta recibir el periódico, especialmente The Wall Street Journal. Lo hallo muy interesante y útil ya que me dan acceso al contenido de su sitio web en inglés y español (hay otros idiomas también).

Leo The Journal a diario y en el futuro compartiré ideas que encuentro de mi lectura.

Tienen una promoción de tres meses por $25. Recibe la versión tradicional los 6 días de la semana en casa y acceso al contenido del sitio web las 24 horas en varios idiomas. Nada más quería mencionar la promoción por si acaso es fanático del Journal como yo lo soy.

Además, si se inscribe me dan una tarjeta para amazon.com :)

Aquí es el enlace: http://refer.wsj.com/a/clk/1nwZrs

Riesgo de Inversión: Escoja Su Riesgo

Al hablar con inversionistas, a menudo me declaran que quieren una inversión sin riesgo. Sin embargo, no existe inversión sin riesgo (pero sí hay algunas inversiones que se aproximan inversión sin riesgo, y quizás trataremos eso en otra sesión).


Hablemos entonces de riesgos en términos generales.


1. Riesgo de Inflación/Poder de Adquisitivo
1. La inflación efectua los resultados de una empresa ya que tienen que batallar contra las fuerzas de la inflación
2. Afecta el poder adquisitivo de sus ganancias (por ejemplo, ya que el costo de los bienes y servicios aumenta, las ganancias reales van a ser menos de las ganancias nominales).
2. Riesgo de Interés
1. Riesgo de Precio—al cambiar las tasas de interés, cambia la valuación de sus inversiones.
2. Riesgo de Tasa de Reinversión—en un momento futuro cuando se pague el interés o el principal las tasas de interés pueden ser diferentes.
3. Riesgo de Negocio (riesgo asistemático)—afectan su inversión factores que afectan la empresa misma. Se puede reducir o eliminar este riesgo por medio de la diversificación.
4. Riesgo de Finanza—el grado que una empresa usa deuda para financiar sus operaciones aumenta la variabilidad del rendimiento.
5.  Riesgo de Incumplimiento—la impresa en la cual ha invertido puede fallar en sus obligaciones.
6. Riesgo de Liquidez—el tiempo que lleva a convertir su activo en efectivo sin reducir el precio.
7. Riesgo de Comerciabilidad—la facilidad de vender el activo por su precio al mercado.
8. Riesgo Político—las guerras, disputas laborales, inestabilidad política ponen a riesgo su inversión.
9. Riesgo Soberano—el riesgo de que el gobierno en que ha invertido falla de pagar como lo prometió. Parecido al riesgo de incumplimiento.
10. Riesgo de Tipo de Cambio—al cambiar el tipo de cambio entre las monedas puede afectar su inversión.
11. Riesgo de los Impuestos—las leyes que rigen los impuestos cambian a menudo que también pone a riesgo sus inversiones.
12. Riesgo de Gerente de Inversiones—aplica si su inversión está en manos de alguien que hace decisiones por usted, ya sea un fondo mutual de inversión u otro tipo de inversión así.
13. Riesgo de Añadir—hay inversiones que requieren un compromiso de más inversiones en el futuro, que sería en sí un riesgo.
14. Riesgo Físico—aplica a inversiones que tiene a mano, como por ejemplo, si tiene los certificados de las acciones en mano, efectivo, oro físico en su posesión, etc. que se pueden perder, dañar, o robar.


Puntos sobresalientes
1. No hay inversión libre de riesgo el cien por ciento.
2. Al invertir hay que entender los riesgos y manejarlos de forma prudente.


Práctica: revise sus inversiones, dondequiera que se encuentren, y analice a cuales riesgos están sujetos. 

Investment Risk: Pick Your Poison

In talking with investors, often I hear the response, “I don’t wanna take any risk.” However, what they sometimes overlook is that there’s really no such thing as a “risk-free” investment (although there are some things that come pretty close that act as proxy, which we may talk about another time).

So let’s talk about risk in general terms.

1. Inflation/Purchasing Power Risk
1. Inflation can impact the performance of the actual businesses we invest in as they have to battle inflationary forces.
2. Impacts the purchasing power of your return (i.e. costs of goods of services increase, after-inflation (“real”) rate of return will be less than your nominal return).
2. Interest Risk
1. Price Risk—when interests change, the assessed value of investments change.
2. Reinvestment Rate Risk—the principal or interest paid out in the future, interest rates could be different.
3. Business Risk (unsystematic risk)—your investment could be affected by the individual business you invest in. This risk can normally be diversified away.
4. Financial Risk—the more debt a business uses to finance its operations, the greater the variability in the returns, putting your investment at greater risk.
5. Default Risk—the company you invest in could default on its obligations to pay you, the investor.
6. Liquidity Risk—how quickly you can convert an asset to cash with little or no price concession.
7. Marketability Risk—ease of selling an asset for its fair market value.
8. Political—political instability, wars, trade disputes, etc. can put your investment at risk.
9. Sovereign Risk—the risk a government may not make good on its promises to pay investors as promised (similar to default risk).
10. Exchange Rate Risk—fluctuating currency exchange rates could put your investment at risk.
11. Tax Risk—the ever-changing tax landscape will always pose some risk to your investments
12. Investment Manager Risk—applicable mostly to managed investments like mutual funds. The money manager potentially adds an additional element of risk.
13. Additional Commitment Risk—what happens if your investment requires additional commitment.
14. Physical—I put this on here as it applies to physical possession of investments, like cash on hand, physical stock certificates, physical gold, etc. that those investments could be lost, stolen or damaged.

Key take-aways:

1. No investment is really without risk
2. Investing is about understanding the risks and managing them wisely

Action: take a look at your holdings and see what risks each might be subject to.

This will be a forum for me to develop my communication skills as well as to sharpen my skills in Financial Planning, Business, and Translation and Languages. The plan is to start this month in a video blog format.