The Amateur Financier

I’m going to take a little detour from the discussions of money to talk about one of my other passions: books.  Yes, as you might guess from my (ideally) weekly book reviews, I enjoy reading and find it quite beneficial.  I’ve yet to read a book that didn’t provide me with some benefit, from learning something new to providing entertainment.

Thus, I read this list of the Ten Most Harmful Books of the past two centuries with great curiousity.  What books could be so bad as to receive marks as the worst in recent history from a panel of conservative leaders and thinkers?  Well, let’s find out.

The List (Summarized)

The first three entries (The Communist Manifesto, Mein Kampf, and Quotations From General Mao Zedong) are fairly solid entries; being associated with the Soviet Union, Nazi Germany, and Communist China (back in its prime) are enough to get bad marks from most anyone, regardless of their political leaning.

The Kinsey Report (also known as Sexual Behavior in the Human Male) comes in at number four, with much less justification (the list goes from books that were linked to mass murder and exile to one that ‘gave a scientific gloss to promiscuity and deviancy’.)  The fifth book, Democracy and Education, continues the trend denouncing the book more for the behavior of its author (John Dewey) than the content of the book (which, as Blog Critic notes, is mainly about the advantages of teaching students how to think, rather than strictly focusing on memorizing facts).  Book six gets back to Marx with Das Capital, (which is one of the founding documents of the socialist movement, for all the good and bad that has come from that), while book seven criticizes Betty Friedan’s The Feminine Mystique, which, to go back to Blog Critic:

While Betty Friedan was quite militant by today’s standards — as almost all pioneers are — the only way one can say this book was harmful is if one also argues that it was okay to force women into subservient, gender-defined social roles. Friedan, whatever her faults or excesses, laid the groundwork for today’s society, in which women are (horrors!!) allowed to choose their own lives and career paths. How terrible.

Book eight continues the trend, taking down The Course of Positive Philosophy for its promotion of the idea that man, through observation alone, could determine how things ought to be.  Book nine hits Nietzsche, with his Beyond Good and Evil, which denounces belief in God as a weakness and the ‘Will to Power’, where the strong men would dominate and overpower the weaker people in society (an actual, legitimate example of a book that should be on the list).  The list rounds out with The General Theory of Employment, Interest, and Money from Keynes, for its arguments about the need for government expansion to counteract a declining job market.

There’s a list of Honorable Mentions that follows the main list, hitting just about every other book that would raise conservative ire, from Unsafe at Any Speed by Ralph Nader to Silent Spring by Rachael Carson.  My personal favorite is On the Origin of Species by Charles Darwin; it’s hard to argue that a book that provides the theoretical underpinnings of understanding antibiotic resistance and viral activity, among other important biological functions, did more harm than good for the human race.

My Complaints with the List

As you might have guessed by now, I have a few qualms with this list.  First, there’s the huge conservative bias. Yes, yes, I know; a list on a conservative site, generated by conservative experts, written for a conservative audience, happens to include some books that only a conservative could hate…big shocker.  A liberal ‘Most Harmful Book List’ (which I have not located anywhere, but would be curious to read) would likely be just as biased, including books by Ayn Rand and William F. Buckley.  I just wish the list included more books that could be objectively shown as damaging and fewer that simply happened to disagree with conservative orthodoxy.  On the subject of objectively damaging…

My second qualm is that there’s not an objective method to determine the most harmful book.  The list goes from genocide and mass killing inspiring works to human sexuality and feminism without missing a beat.  As with any list based on a survey (particularly one that only surveys a particular segment of the population), it’s full of books that simply raise the dander of the reviewers, rather than actually causing harm.

My third (and by far the biggest) problem with this list, though, is the entire concept of a ‘harmful’ book.  Regardless of where you fall on the political spectrum, it’s hopefully apparent that people acting on the ideas in books (and frequently, twisting or otherwise MIS-using those ideas to suit their own purposes) that cause real-life damage, not the books themselves.  To paraphrase the NRA, ‘books don’t kill people, people who read books and draw homicidal conclusions kill people.’

The Communist Manifesto didn’t create the Soviet Gulags, The Kinsey Report didn’t force anyone in the decades since to become a deviant, and The Feminine Mystique didn’t destroy family values.  At most, they inspired people to take action on their own (whether that action was good or bad); it was the action-takers who should be held responsible for the negative actions in history, not the books.  Even the Bible could be seen as the ’cause’ of numerous negative events throughout history, from the Inquisition to witch trials to modern day family planning clinic bombings; just as we don’t talk about banning the Bible to avoid future negative influence, we shouldn’t ban any of the books on this list to avoid the ‘harm’ that they could cause in the future.

That’s the whole reason I decided to write this article, to point out that no books should be banned due to ‘harmful’ ideas.  Instead, reading, understanding, and learning as much as possible about other views, including those we don’t believe in, should be our goal.  (It’s apparently a goal for Human Events, as well; they include links to Amazon for all the Most Harmful books on their list.)  How else can we refute those ideas that we don’t accept, or defend our own ideas, if we don’t learn as much as we can about every idea?

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There aren’t that many economists who become celebrities; there’s something about the profession (or perhaps the people who gravitate to the profession) that keeps them from achieving the same level of almost certain celebrity as, say, athletes or actors.  One of the exceptions to this rule is Malcolm Gladwell, who has a tendency to write interesting and thought provoking books that get people talking (and sometimes end with him on a Talk Show).

The first of these books is The Tipping Point, a look at how relatively small changes can have a disproportionately large effect.  It’s a somewhat counter-intuitive to us, since we tend to believe that small changes cause small effects; that is, that the effect should be proportionate to the cause, but that’s not always the case.  Does a deeper look at this phenomenon lead to a more thorough understanding of the world around us?  Let’s find out.

Summary

The Tipping Point starts with several examples of the disproportionate behavior noted, such as the sudden rise in popularity of Hush Puppies in the mid-nineties and the sharp decline in New York City crime rates around the same time.  These examples serve to demonstrate the point that changes, even big, drastic changes, can occur quickly in response to changing external circumstances.  The first chapter introduces the three laws that govern these behavioral ‘epidemics’: the Law of the Few, the Stickiness Factor, and the Power of Context, followed by a quick introduction to what each of these concepts mean.

The second chapter goes further in depth on the Law of the Few, explaining exactly what types of people you need to reach a tipping point.  There are Connectors, those people who bridge the gap between different disparate groups, the types who can link different people together and spread word of a new trend from one social group to another.  Then there are Mavens, the people who accumulate information about a particular subject and take delight in passing their knowledge on.  Finally, the Salespeople are the ones who convince others to take action, changing our behavior in some way in response to this new information.  All these people have their roles in reaching the tipping point in a social epidemic.

The third chapter covers the Stickiness Factor, how much information stays with us, and uses children’s shows like Sesame Street as prime examples.  Much research was done in the way that toddlers pay attention in order to determine what types of imagery and story lines ’stuck’ in the children’s minds.  They also discovered the importance of repetition in making a message stick.

The fourth chapter starts to cover the Power of Context, the importance of having the right setting for a particular message to tip.  It covers New York City crime levels, and how, by focusing on changing small things like the level of graffiti in the city and fare-jumping, it was possible to change the context in which crimes were being committed and actually drive down the crime rate.  In the same way, contexts that allow (or even encourage) cheating in a classroom setting have more incidents of cheating than those that don’t; the students themselves didn’t change, but how much cheating occurred did change.

The fifth chapter looks closer at the type of groups in which we associate ourselves, noting that humans, in general, have about 150 reasonably close acquaintances.  Beyond that number, we simply don’t have the mental space left to form a genuine connection with the hundreds upon hundreds of other people we meet everyday.  It’s also linked to the idea of transactive memory, the concept thatwhile I may not know a particular fact, I know where (or who) has that fact, thus allowing me to essentially boost my memory power using external sources (such as having my fiancee remember much of our social circle).

The sixth chapter provides several examples of how all these factors come together to cause certain situations to tip.  It covers everything from the spread of a story of Japanese spies (really, a Chinese tourist) during WWII to the effects of a needle exchange program in Baltimore to show how, when everything is aligned right, circumstances can ‘tip’ to help spread a social epidemic.  Chapter seven is another collection of case studies, this time focusing on how to stop social epidemics from tipping.  It covers cases as diverse as suicide in Micronesia to teen smoking here in the United States.

The eighth chapter wraps up the book, drawing some conclusions about how to create a situation that will lead to tipping (or stop a situation that seems to be tipping).  The key, as Gladwell notes, is focusing on a relatively small, narrow set of changes and building up from there.  The afterword covers some of the real world effects of the book, such as a program to help libraries in New York state that was inspired by the content of the book, as well as further examples of where situations tipped.  It also discusses the ‘fax effect’, that methods of communication become more valuable as they link more and more people (so the first fax machine became much more valuable when the second was purchased, and the third, and so on).

Pros

-Thought Provoking: As mentioned already, thinking in terms of tipping points and small changes leading to big results is not the way we normally look at the world, and doing so gives us a different perspective on life.  You’ll think about the root causes of the big events you see and read about in a different way, and it might just help you to understand the world a bit better.

-Well Sourced: Gladwell draws on a huge number of resources to make his conclusions, demonstrating the numerous circumstances that illustrate the ideas developed in the book, showing how everything from the American Revolution to modern day sales campaigns can be seen as part of various social epidemics.  The examples cited in this review cover only a small part of the numerous areas from which he pulled together interesting data.

-Entertaining: While the topic he’s discussing is rather abstract and hard to grasp, Gladwell manages to make a book that’s fun to read, as well as being informative.  From learning about all the testing that went into Sesame Street to seeing how researchers are trying to make a less addictive cigarette, there’s lots of interesting anecdotes that pepper this book.

Cons

-Not a How-To: I suppose this would be a conditional con, depending on your desired goal.  Still, if you’re hoping to cause something to ‘tip’ in your own life (personal or professional), there’s not much in the way of specific instructions.  You’ll learn about Mavens, Connectors and Salespeople, for example, but the amount of information on how to find them is rather lacking.  The same goes for much of the rest of the material; you’re not going to have much luck if you’re hoping for a step by step guide to make your own venture sticky.

-Somewhat Complex Narrative: In the course of the book, Gladwell will go from one example to another, tying in multiple situations before showing how they all fit together.  Add in the fact that many of these examples are from psychological or sociological tests that are rather complex in and of themselves, and it can sometimes be easy to lose track of the point that is being made.

Overall

The Tipping Point is a very interesting book that will, if you can ignore the cliche, change the way you look at the world.  While it can be a bit hard to follow at some points, it’s overall a very interesting and entertaining guide to how situations can ‘tip’ from relatively small changes, and what that means for all of us.

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(Note: The author of this book, J. Steve Miller, provided me with two copies to review and give away.  I’ve tried not to let that fact influence my review, but in the spirit of full disclosure, I felt it was important to let you know the whole truth.  Now, onto the review!)

Enjoy Your Money! is rather different from the average personal finance book.  Rather than a dry guide to what you should and shouldn’t do with your money, it’s a story of a diverse group of teenagers (The Counterculture Club), their somewhat eccentric adviser Mrs. Kramer, and how they learned to manage their money and their lives during their teen years.  Could their experiences help you to learn how to enjoy your money?  Let’s find out!

Characters

Given the number of people who come and go in the book, as well as my troubles keeping characters straight without a playbill, I figured I should start things off by listing the people mentioned in the book, along with some defining characteristics.  The first four are the members of the Counterculture Club (hereafter called the CC, so I can save some time typing), while the others are the various people they meet with during the course of their club meetings:

James: African-American member of the club, hard working and eager to get ahead.  Also, likes cars, a lot.

Antonio: Laid-back Hispanic guy, likes the outdoors and physical fitness.  Not a morning person.

Amy: Atypical blonde girl, both smart and into punk and goth fashion.  Good at math, and rather flirtatious.

Akashi: Bold, assertive Asian girl who bristles whenever anyone implies that she should be good at math.  Would rather play video games than study.

Mrs. Kramer: Adviser to the CC, Social Studies (and Personal Finance) teacher whose thrift and good investing allowed her to accumulate a small fortune while doing what she loved.

Larry: Waiter at the restaurant where the CC met (and had their reunion), his questions led to the flashbacks that make up the book.

Hash Brown: Mrs. Kramer’s old friend and frequent co-investor; owns the restaurant where the club’s meetings took place.

Travis: Country boy and real estate investor.  Owns a number of hound dogs and loves working on his trucks.

Carmen: James’ sister and a single mother; loves to save money while shopping using her ‘Blitz Shopping’ technique.

Summary

The book starts with a scene of Antonio helping a Down’s syndrome boy mountain climb, then getting such a rush he decides to call a reunion of the CC.  They all meet a few months later at Hash Brown’s restaurant, and their chatting and stories of their successes in life caused Larry their waiter to ask about how they all became (in his eyes) so successful in their lives.  They all agree to tell them how they learned.

Flashback to high school for the CC members.  Amy, Akashi, James, and Antonio are all serving In School Suspension for a variety of offenses, and while waiting for the supervising teacher to arrive, get talking about the subject of money (and the poor money management skills exhibited by the adults in their lives).  Asking the coach in charge of watching them for help, he directs them to Mrs. Kramer, who tells them how she accumulated more than half a million dollars toward an early retirement and agrees to teach them over a series of breakfasts (as long as they pay to cover the breakfast costs).  Viola, the CC is formed!

The rest of the book is laid out in the series of breakfasts that the club attends, each devoted to a different aspect of money management and personal finance.  The first breakfast sets the stage for the group to understand money.  Mrs. Kramer passes out a list of facts about Americans and money (mostly emphasizing how sad a state the average American is in, money wise) and shares the story of Oseola McCarty, a washer woman who managed to accumulate more than a quarter million dollars through diligent savings and ended up giving most of it away.  The chapter ends (as with every chapter) with discussion questions and a guide to other sources of information.

The second breakfast starts with Akashi and Antonio setting up a date (without Antonio having much say in the matter…) and then discusses the power of compound interest.  Starting with the story of Warren Buffet (who better to exemplify the ideal investor?), the group then spends most of the breakfast discovering the power of multiplication when it comes to their finances, and how a relatively small investment can grow to great sizes with enough time.  The group reflects on compound interest and its ability to make wealth (or debts) grow.

The third breakfast begins with Akashi and Antonio reflecting on their date, before introducing Hash Brown and having him describe some of the mistakes he’s made with investing in the past.  There’s quite a few examples of where you can go wrong investing in stocks (trying to pick the ‘right’ individual stock or investing before building an emergency fund), scaring most of the CC members away from stock investing (and really, investing period).

Breakfast number four starts with problems developing between Akashi and Antonio, with Akashi thinking that Amy is trying to steal Antonio.  Mrs. Kramer tells them to leave all the emotions outside, before calling them in.  After hearing that the teens are worried about investing, she tells about inflation and how NOT investing will ensure that their money loses value.  Hash Brown and Mrs. Kramer then explain how the safest and easiest way to invest their money is through mutual funds, particularly index funds, making sure to hold an array of US stock, foreign stock, and bond funds (after building a sizable emergency fund, of course).  Dollar cost averaging and rebalancing are also discussed.

We meet up with Travis during the fifth breakfast.  He shares how he started by buying cars and trucks that were in need of repair and fixing them up to resell them, and how he moved from there to doing the same with real estate.  He shares some advice on investing and other money management tips to prepare for a recession or depression, and then reluctantly shares his net worth.  The chapter ends with Amy flirting with him pretty aggressively.

Breakfast six is a bit different, to say the least.  Mrs. Kramer gets abducted by a homeless man (apparently her brother, who had fallen on hard times), the CC follows in a high speed chase with James at the wheel, and after drawing the attention of the cops, manage to get things squared away.  The events also led Akashi to a closer connection to Mrs. Kramer, one that helped her get her life squared away.

After all that excitement, the seventh breakfast seems a bit uneventful by comparison.  It gets into the importance of saving (and brings Carmen into the group).  Mrs. Kramer brings up the point that most millionaires, contrary to popular belief, live fairly modest lifestyles, investing and saving money rather than spending it on the appearance of wealth.  The group takes some time to look over James’ spending habits, and finds ways to save a great deal of money by cutting down his fast food and gas spending (to help him save for a spoiler).

Breakfast number eight has Carmen taking the lead, with the CC going on a field trip to the local store and learning how to save on their shopping.  Carmen passes on much of her hard-earned saving knowledge, from using generics and comparing the price ‘per ounce’ to get the best deal to stocking up on non-perishable items when there’s a great deal (all part of her ‘Blitz Shopping’ methods).  She also manages to tease James quite a bit about stool softeners.  Breakfast nine continues the savings spree, this time looking at savings on cars.  James, the resident car expert, takes the lead, showing ways to spend little or no money on cars over your lifetime.  (The latter methods included walking, public transportation, using company cars, or buying, repairing and using cars before reselling them.)  There’s also tips on how to cut down gas expenses and other costs of owning cars, as well.

Breakfast ten covers houses and real estate (after a brief discussion where James shares how much he wants a Porsche).  There’s quite a few suggestions that get bandied about by the CC and Mrs. Kramer on how to spend less (up to fifty percent less) when purchasing a house, from getting a bargain on the purchase price to getting a shorter term lease (and paying it off ahead of time, if possible).  Breakfast eleven is a rather long one, covering many of the mistakes people make with money that can derail their financial plans.  The list includes everything from abusing drugs and alcohol and abusing credit cards to gambling and trying to get rich quick.

Breakfast twelve kicks off the ‘Making Money’ part of the book, focusing on finding your dream job.  You start by knowing yourself (what you’re good at and enjoy doing), know the job market, and learn how to get a job (particularly the importance of getting job leads from friends and family).  The thirteenth breakfast continues the job thought process, telling you how to excel at your job.  It stresses the importance of social and life skills over intelligence and encourages you to work to build a team to compensate for your weaknesses, as well as working on relational skills.

Breakfast fourteen is all about investing in your mind, building your mental repertoire.  Most of the lessons are shown through the example of Sam Walton (Wal-Mart Founder), from working around your weaknesses and building on your strengths to learning from every source possible (books, employees, competitors, your mistakes, etc.).

Breakfast fifteen is all about finding happiness in the right places.  (Side Note: every chapter begins with a quote, usually related to the material within.  This chapter starts with one from “Weird Al” Yankovic’s song ‘Everything You Know Is Wrong’, which makes me happy.  That is all.)  The rest of the breakfast goes through some of the ways to make sure you lead a happy life, including helping others, not envying others, and immersing yourself in something you love.  It ends with Mrs. Kramer giving back all the money she collected for the breakfasts (with interest), giving the CC members a head start on saving and investing.

The book’s Epilogue covers where they are now.  Larry (our waiter/story instigator) was put in charge of Hash Brown’s restaurant, paid off his credit cards, and settled down with one of the waitresses.  Carmen was ‘discovered’ thanks to her Blitz Shopping techniques, and got a spot on the a shopping network.  James got a job at a Porsche dealership, made retirement by age of 45 (which, if I understand the time line of this book, would be around the year 2030…), and after a nasty divorce, fell in love with a fellow volunteer at a soup kitchen.  Antonio leads extreme wilderness adventures for troubled teens, Akashi started a clothing store that made the Fortune 500 (and married Antonio after popping the question), and Amy does market research for Akashi, counsels troubled teens and plays in a punk bank.  She also ended up marrying Travis after he proposed at a Dairy Queen.  Mrs. Kramer, after a short stint in an assisted living center, ended up touring the world with Hash Brown, both well over the age of eighty.  The book ends with some example budget sheets.

Pros

-Good Introduction to Personal Finance: This book is quite thorough in covering the myriad aspects of money management, from investing to giving to charity.  It covers much of the math and other tricky aspects of personal finance well, with clear and understandable explanations.  It’s easy to understand, even if you’re not a financial wunderkind.

-Excellently Sourced Information: One of the things that I liked most about this book was the amount of supporting material provided.  It references some of the masters of financial information, from Warren Buffet to Sam Walton, and provides a healthy list of references at the end for support.  Each chapter also ends with a list of sources for further information about the topics covered.

-A Unique Personal Finance Book…: This book stands out from most other personal finance books I’ve read due to the narrative form it takes.  Rather than reading like a money text book, it feels more like a fiction book (with a strong personal finance angle).  It’s hard not to see some of yourself in the characters included (I especially like Akashi; it’s hard for me to resist a girl whose biggest indulgence is Final Fantasy video games).

Cons

-…But Possibly Too Different For Some: If you get a lot out of traditional personal finance books, you probably won’t care for this book.  As with anything, different people respond to different methods of learning; perhaps a less narrative method suits you better.  Different strokes for different folks, and all that.

-Not Much Depth: As the expression goes, this book is ‘a mile wide and an inch deep’.  While it provides a decent introduction to investing, saving, and spending smart, there’s a great deal of material about these subjects that doesn’t get covered.  It’s a decent introduction, but doesn’t do more than scratch the surface for most of the covered subjects.

-Some Odd Narrative Twists: It’s not often I find myself in a position to critique a book with a plot line, but given the narrative nature of this book, I feel I should address it.  There are some aspects of the storyline that seem a bit implausible (see the kidnapping/car chase scene in breakfast six), and everyone’s happy ending seems a bit, well, too easily wrapped up (to say nothing of the fact that, as mentioned, James’ ending seems to take place well into the future, if the time frame presented in the book is accurate).  Admittedly, it’s a personal finance book, and the narrative is arguably secondary to the personal finance information, but it’s still weird at times.

Overall

Enjoy Your Money! is a pretty solid introduction to personal finance, investing and saving.  The narrative style is an interesting change, and might appeal to you (or someone you’d like to know more about money) even if other personal finance books haven’t done the trick.  It provides an alternative view on how to share basic personal information, which merits a decent read through, particularly if you’re a teenager trying to get a handle on your personal finances.

Giveaway!

Alright, I’ve been talking long enough; now is the time you’ve been waiting for, the giveaway!  As mention, J. Steve Miller gave me two copies of this book, and now I’m going to give them away to two lucky readers!

To enter, all you need to do is leave a comment here, telling me which character in the book seems most like you.  Think that Amy sounds like your type of girl?  Share James’ car addiction (and possible time traveling abilities)?  Are you like me and think that Akashi sounds like a fun (albeit gamer nerdy) girl?  Let me know what you think, and you’ll get a chance to win a copy of this book.

I’ll choose two respondents at random on June 15th; be sure to put down a choice before then for a chance to win!  P.S.  To find out more about the book, either check out the Amazon reviews, or see the press page for an author interview, free chapters, reviews, etc.

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Ah, the FairTax.  It seems I just can’t get away from writing about it in one form or another.  If you’ve never heard of it, I’ve already covered many of the most salient points when I first wrote about it.  Lately, I’ve gotten more jaded about the whole concept, and wrote about several of the flaws with the FairTax, at least in its current form.

Perhaps it’s fate, then, that I stumbled across FairTax: The Truth.  With a subtitle of ‘Answering the Critics’, it seems practically designed to quell the growing suspicions I have about the FairTax.  Will it leave me ready to take up the cause again, or leave me flat?  Let’s find out!

Summary

FairTax: The Truth starts, appropriately enough, with the history of the FairTax.  The preface details its genesis as an attempt by three Texas businessmen to find a way to improve the nation, focusing on improving the horrendous tax code we currently have in place, and growing into a mass movement.  The introduction continues on the theme of building support and the impact of the FairTax, as well as presenting several of the broad details of the Fair Tax plan.

The first chapter, entitled ‘The Ball is Rolling,’ provides a short summary of some of the many people who support changing the tax code to a FairTax system, from the various television personalities who support the change to anecdotes of ordinary citizens going far out of their way to support the tax.  The second chapter attempts to explain the authors’ devotion to the cause, providing some of the positive results expected from adopting the FairTax as well as why they personally feel so strongly about it (mainly having to do with the expansion of the role of the federal government, as well as the larger amount of taxes required to fund it).

The third chapter covers some of the economic reasons to support the FairTax, in particular the positive effects it would have on businesses in the United States.  According to the many studies cited, the FairTax would increase the number of jobs in the US (as companies would relocate their workers here), increase the amount the government takes in via taxes (by increasing the tax base and encouraging economic growth) and help solve any Social Security shortfalls (by changing the method of funding).  The fourth chapter provides evidence of the growing trend around the world of lowering tax rates (particularly corporate tax rates) and switching from taxing income to taxing consumption (mostly via a VAT, value-added tax), and imploring the US to take the lead via the FairTax.

The fifth chapter covers some of the advantages of the FairTax.  It frames the advantages in terms of some of the most contentious issues currently facing the country, like immigration, and provides ways in which the FairTax would improve the situation.  For immigration, it notes that much resentment is based on immigrants not contributing to the system, which would change under the FairTax system (since every purchase would send taxes off to the federal government).

Chapter six attempts to debunk some of the myths about the FairTax.  It notes that such a tax would add transparency to the tax system, decrease the chances of further tax increases, and likely boost employee earnings and/or decrease prices (depending on whether companies affected choose to pass their savings onto workers or consumers).

Chapter seven looks at how to view some of the criticisms of the FairTax, particularly through the ideals of simplicity and fairness.  Chapter eight covers some of the critics of the FairTax, and divides them into two categories: those who have a vested interest in the current tax system (from Realtors to insurance companies) and those who have a different political agenda (particularly those who think the tax code should be used for more than just raising funds for the government).  Chapter nine covers some of the criticisms that are barely worth mentioning, such as the FairTax not reducing government spending, not reducing the average American’s tax burden, and being a front for Scientologist’s attempts to eliminate the IRS (yes, that is actually in the book).

The tenth chapter is the real meat of the book, the worthwhile criticisms.  It starts with over six pages on that most frequent criticism of the FairTax, whether it’s 23% or 30%, and goes on to address issues such as whether the tax would provide enough funds for the government to work (the answer provided: yes), whether taxing services (as required under the FairTax for the provided rates to work) could be successful (answer: yes) and whether taxing the government for the goods and services it provides could actually work (apparently, it’s needed to keep the government from having an unfair advantage over private industry).  There’s quite a few other issues addressed, from mortgage interest deductions to charities to progressive taxation, all of which are addressed with multi-page responses (which I don’t have the space to reiterate here).

Chapter eleven discusses many of the people who have led the grassroots campaign to bring the FairTax to national attention.  Chapter twelve is a bit of a thought experiment, asking you to imagine yourself having lived under the FairTax system your whole life (which functions exactly as its supporters claim), and then being asked by a politician to consider switching over to the current system of taxes that exists in the United States, and wonders whether anyone would actually do so.  The book ends with an appendix discussing the Presidential Advisory Panel on Tax Reform, and particularly its (mostly negative) comments on the FairTax (and consumption taxes in general).

Pros

-Easy to Read: As the authors commented in their first chapter, most books on taxes and tax reform tend to be dense, nearly unreadable tomes.  FairTax: The Truth is very conversationally written, in a fairly easy to understand manner.  You can get a good idea of what the FairTax is all about, and have many of your potential questions answered.

-Well-Cited: One thing that always convinces me of a particular position is having facts, figures, and studies to back up that position.  This book has those in spades, citing dozens of studies done by various groups and individuals about the impact of the FairTax on many aspects of life.  It all adds up to a very compelling argument in favor of the FairTax.

-Fairly Persuasive: As you might guess, the overall effect of the book is to make the reader much more enthusiastic about the FairTax.  Most critics should find reasonable answers to their qualms, supporters should find more data to back up their position, and politicians can find justification for supporting the FairTax, all within the confines of this book.

Cons

-Not Every Criticism Addressed: As thorough as the book attempts to be in silencing critics of the FairTax, there are still criticisms that go unanswered.  Many of the issues I brought up in my own post about the flaws are not addressed, from handling the distinction between new goods, used goods, and business goods to how foreign countries will react to the FairTax.  That last point seems especially inexplicable, given that one of the major advantages of the FairTax, according to its supporters, is how much stronger it will make the US in terms of drawing foreign jobs to its shores; it seems hard to imagine that foreign countries will not react in some way that will likely nullify that advantage, at least.  (One caveat: I haven’t read The FairTax Book yet, so perhaps all my qualms have already been addressed in such detail that Mssrs Boortz and Linder did not feel it was necessary to reiterate.  If so, my apologies; although, posting the answers to these criticisms prominently on the FairTax website would help to silence myself and other critics.)

-Some Mistaken Arguments: There are several arguments made in the course of the book that upon closely inspection, fail to hold water.  Some are merely overtaken by events; claiming that the Bush tax cuts caused the economy to boom was a reasonable argument back in late 2007, for example.  Other mistakes are less easily waved away; one in particular is claiming conflating the average and marginal tax rates in the current tax system.  Given the amount of time and effort spent defending the FairTax rate as accurate, it seems like a double standard to then claim that the ‘average’ American in the 25% tax bracket pays 25% of his income toward income taxes (then adding the pay roll taxes, both the individual and corporate shares, onto that amount).

-Decided Conservative Bent: It’s hard not to notice while reading this book that the authors are a Libertarian radio talk show host and a Republican Congressman.  From minor points (the occasional joke at a Democratic lawmaker’s expense) to major ones (implying that the Democrats (and anyone who would support a progressive tax system) are communists), the book is definitely not meant for those on the left side of the aisle.  (Full Disclosure: I’m a registered Democrat, and I was less inclined to support the FairTax after reading this book.)

Overall

FairTax: The Truth is a mixed bag.  If you are generally supportive of the FairTax, have some questions about it you’d like to learn answers to, and are conservative leaning, it makes a decent read.  If you’re more liberal-leaning and support a progressive tax system (particularly if you’re thin skinned), it’s probably better to avoid this book; it definitely isn’t for you.

(Note to the Authors: if you happen to read this review, don’t take it that I’m opposed to the FairTax; I actually think it could be a good idea.  A little less venom toward the left (if you’re hoping to change a decades old approach to taxation, you could use all the help you can get, particularly if you also want to repeal the Sixteenth Amendment) and answers to a few more criticisms (both mine and those of other organizations like FactCheck.org) and the third FairTax book would make a lot more converts.)

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A major problem with most business books (from the view of the average worker) is that they are aimed at executives and managers.  The books discuss a lot about how to motivate workers, improve their effectiveness, and generally get them to work longer and harder for less pay (and frequently, with less of them doing the work).  This is a great goal for managers, but not exactly the top priority of most employees.

Enter The Joy of Work.  Scott Adams (the author of Dilbert) writes a book squarely aimed at the average cubicle dwelling office worker, designed to help them maximize their happiness at work.  Does it have useful applications to the real world, or should we leave it to Dilbert and his cubicle dwelling brethren?

Summary

The Joy of Work starts with a chapter aptly entitled ‘The Joy of Work’, wherein Scott Adams espouses his theory that happiness creates money.  Happier people get better jobs, are more willing to take smart risks, and even appear smarter.  Thus, the goal for workers should be to maximize their happiness, for all the intangible benefits (plus, it does feel rather good).

The second chapter is devoted to handling a major obstacle to employee happiness: your boss.  Depending on your particular boss type (whether they are capable or incompetent, harmless or evil), there are different basic strategies to use, from avoidance or refocusing their attention to upwardly delegating tasks.  There’s also a section on how to avoid having your work being measured, so as to escape the trap of having your progress checked against your goals.

The third chapter is about reverse telecommuting, the process of doing personal work at home.  It starts by stressing the importance of an unmonitored internet connection, and provides a number of ways to either sleep during business hours or accomplish personal work when your company expects you to be working (like writing a novel one paragraph at a time, then emailing them to yourself throughout the business day).  The chapter ends with a list of inventions that cubicle dwellers could use, such as an in-cube motion detector.

The next two chapters are about having fun at the expense of your office mates.  Chapter four includes ways of laughing at the problems of your coworkers, from starting false rumors (about the boss hiring a nail stylist as your new boss) to the joy of being sarcastic.  Chapter five takes it even further, providing a list of possible office pranks (most sent in by readers); if you want to embarrass your coworkers, particularly if you have a decent knowledge of computer programming, there’s plenty of joke fodder to be found.

Chapter six discusses how to survive meetings, from bringing in a Game Boy (disguised as a PDA) to embarrassing the presenter by raising annoying (and difficult to research) issues.  Chapter seven provides ways of dealing with your coworkers, by bossing them around or using the power of an office move to your advantage.  It ends with a handy list of logical errors, called ‘You Are Wrong Because’, providing a number of ways people come to incorrect conclusions.  (My personal favorite is ‘Faulty Pattern Recognition-Example: His last six wives were murdered mysteriously.  I hope to be wife number seven.’)

Chapter eight is the longest chapter in the book, about bringing humor and creativity to your job.  It provides some methods of managing your creativity, rather than your time (by leaving yourself some free time when you are at your most creative, for example).  It also provides many of Adams’ methods of creating humor, particularly his “Two of Six” rule; all humor uses at least two of the six dimensions of cuteness, meanness, bizarreness, recognizability, naughtiness and cleverness.  Find ways to combine them, and you’ll instantly create humor.

Chapter nine covers different methods of handling critics, depending on whether they are contrarians, sadists, nuts, or have valid criticisms (as Adams calls them, bastards).  The major method of avoiding criticism he provides is to recognize the proximity of your comments; it doesn’t matter what you meant, but rather, how people interpret your meaning on the basis of the context.  The chapter ends with Adams sharing the story of how he was criticized by Norman Soloman for being anti-worker (as a result of a quote taken out of context), and how he got back by, well, mocking Norman Soloman in The Joy of Work (as well as a snarky comic or two).

Chapter ten covers the downside of applying the methods in the book, namely that in spite of being a semi-famous (in his words) comic strip writer, Adams spends most of his life cleaning cat related stains out of his ‘white’ carpet and avoiding people who try to send him things.  The paperback edition ends with an afterword, telling of the death of one of his cats, and stressing how having a pet can make your life better.

Pros

-Very Funny: As you might guess for a guy who writes a daily comic strip for a living, Adams has quite a way with words.  His advice, even when ludicrously impractical, unethical, or illegal, is hilariously witty and quite well written.  There will definitely be some recognition of people you know (and possibly people you work for) in the course of this book.

-Decent Guide to Office Pranks: If you’re in an office where you don’t need to worry that one wrong step will lead to you being unemployed, there are plenty of light-hearted pranks listed here that you could try.  Even if you (like me) are more likely to be a victim rather than a puller of these pranks, knowing about them makes it that much easier to avoid falling for them.

-Some Good Advice: While most of the suggestions in the book would, if implemented, get you ‘fired, sued, or beaten’ (in Adams’ own words), there are some good points made at times, as well.  His advice on creating humor and allowing yourself time to be creative is actually applicable and well worth trying to apply.  (His ‘You Are Wrong Because’ list could also serve as the crash course in logic that so many people seem to need.)

Cons

-Could Cause Your Coworkers to Hate You: If you actually do much of what is listed in the first two thirds of the book, from turning your boss on your coworkers to pulling pranks, you’re likely to cause your coworkers to resent or even hate you.  You can’t really blame them, if you’re taking advice from a book subtitled ‘Dilbert’s Guide to Finding Happiness at the Expense of Your Co-workers’.  At best, expect to have some pranks pulled on you in turn; at worst, there’s the possibility for punishments from your boss.  Speaking of your boss…

-Could Get You Fired: With a general theme of minimizing how much useful work you do, keeping your boss from giving you any real assignments, and using office time to do personal work, there’s a good chance following the advice contained within could get you canned.  Even Adams recommends only following the advice when the job market is strong; if it’s too easy for your boss to have you replaced, any advantages to making you happier at work will quickly disappear if you lose your job.

-Most Applicable for Office Workers: Even if you can ignore the risks from angering your coworkers and boss, there’s still the issue that most of the ‘advice’ provided only works if you have access to a computer, a phone, and a host of victims within hearing (or peeking over cubicle walls) range.  In other words, if you work in a cubicle.  Otherwise, there’s not too much advice in here you’ll be able to apply, at least during work hours.

Conclusion

If you are a fan of Dilbert and want some thoughts on creating humor and managing creativity, The Joy of Work is definitely a good read.  Just don’t follow much of the advice on boss managing, pranks, and reverse telecommuting unless you have a really relaxed corporate culture (or simply want to be fired).  But if you do, be sure to let Scott Adams know for the next edition of his book.

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(Warning: This article (and for that matter, the book it’s reviewing) makes fairly frequent use of the word bull**** (without the apostrophes) as well as other terminology that you may find offensive.  If you would be offended by such terms, I suggest you vacate the blog entry now.  If not, then welcome!  Please feel free to read on.)

Office speak, corporatese, and other forms of weasel-words are prevalent in the modern office environment.  Whether to spare feelings (see ‘downsizing’ as opposed to ‘firing’), to disguise true intentions (again, see ‘downsizing’), or simply the result of trying to keep up with the company down the street in terms of utter incomprehensibility to outsiders or other plain thinking people (did I mention ‘downsizing’?), an unusual vocabulary dominates the modern corporate landscape.  How can you even figure out if you’re being insulted or complimented with all the slang being tossed around?

Enter The Dictionary of Bull****.  A compendium of useful (and too often over-used words) for surviving in the modern corporation, there’s plenty of information to be found.  Just about every word you’ve heard hurled around by a middle manager (or mentioned in a Dilbert (c) strip, if you’re lucky enough to not be a cog in a large corporate machine) is included, complete with a snarky definition.  Is it a useful resource or just a waste of time?  Let’s read on and see!

Summary

Most of the book is laid out in dictionary style, covering various buzzwords in alphabetical order.  While fitting for a book with ‘dictionary’ in the title, it makes for a rather boring chapter by chapter summary (’After the As, the next chapter covered words that begin with a B’), instead we’re going to look at several example definitions to show you what sort of snarky (that’s snide and sarcastic, by the way) definitions you’re going to encounter:

Accountancy: the art of lying, in a dull manner, using lots of numbers and charts

Blog: 1. an acronym for Boring Loser Of Grand-design

Customer: 1. pleb, idiot

E-tailer: 2. a cutesy reworking of ‘retailer’ in time honored e-fashion

Guesstimate: 1. a half-assed estimate

Homer, to pull a: to succeed in spite of being a complete idiot, derived from the exploits of animated TV star Homer Simpson.

Key: 2. of a person or element of a project or process: eminently dispensable, often forgotten.

Layoff: 2. firing people

Out of the Loop: 1. uninvolved 2. shut out 3. excluded 4. shunned 5. unloved

Quality Control: The process of ensuring that all products are manufactured to an acceptable standard; the process of filtering out obvious errors of judgment (rarely successful).

Runaround: See Wild Goose Chase

Staff Reduction: mass firing

User-centric: Impossible to use

Wild Goose Chase: See Runaround

Zoo, the: 1. What the sales team call the creative team, 2. What the creative team call the sales team, 3. What the production department call the entire company

Alright, that’s enough to give you a good taste.  Scattered throughout the definitions are a few boxes allowing you to create your own Bullshit Job Titles by choosing one word from each of three columns (giving results like ‘Principle Quality Liaison’).  Immediately after the definitions are a series of Bullshit Builders, which allow you to build your own bullshit sentences in much the same way.

The book ends with a series of short essays (no longer than five pages, at most) about different areas of bullshit.  There’s a chapter on sales bullshit, designed to help you thwart those people trying to sell you the latest and greatest devices.  There’s an example of mission statement bullshit that manages to use almost every buzzword from the dictionary part of the book.

The chapter on interviewing manages to mix some helpful advice in with the humor(good for anyone who actually intends to go on an interview).  There’s a chapter on how people bullshit with their bodies (and how you can bullshit back), and the book concludes with a chapter about how retailers attempt to bullshit you.

Pros

-Pretty Darn Funny: Most of the entries in this ‘dictionary’ are pretty hilarious, and it’s great fun to read through them, seeing which you’ve heard before and what they mean. (Hopefully, you heard them through comics or stories, rather than through your boss…)

-Decent Definitions: Once you get done having a chuckle at the definitions, you can stop and realize that it’s actually pretty accurate.  Most of the entries, while aiming to be funny first and foremost, give you a good idea of what the term actually means.  For terms with multiple definitions, there’s a tendency to give a straight definition for number 1 and joking definitions for the subsequent numbers.

Cons

-Pretty Offensive: Even getting aside the frequent use of the term ‘bullshit’ (and similar words), many of the definitions and other material ends up being rather derogatory to one group or another.  Just in the ones I provided, there are insults to accountants, bloggers (over two full pages of blog related terms are mocked), QC workers, salespeople, and retailers.  If you have a thin skin and an office job, there’s a good chance you’ll be offended before the book is over.

-Somewhat Soul-crushing: I’ll be completely up front: this is a very dark humor book. If you are in a job where these terms are tossed around regularly, this book is a bit like salt for the wound.  Even if you aren’t in such a job, it’s still a bit depressing to think about how many people have to deal with the stuff mentioned in this book everyday.

Conclusion

The Dictionary of Bull**** could be a good book for you if you don’t mind a bit of dark, dry British humor to go with your job.  It provides some fairly solid definitions with plenty of laughs (hopefully, not at your own expense) along the way.  Just one last thing: if your job sounds too much like this book, you might want to consider a career change.

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There are few more seminal figures in the field of economics than Adam Smith.  His book, An Inquiry into the Causes and Nature of the Wealth of Nations (hereafter referred to as ‘The Wealth of Nations’, so I don’t get carpal tunnel from repeatedly typing that name) is considered one of the first (if not THE first) book on economics, and originated concepts as diverse as the advantage of the division of labor to the ‘invisible hand of the market’ (Smith’s own term, by the way).  The Wealth of Nations is a true economic classic, and well worth a read.

Unfortunately, it’s also over 900 pages long, with a tendency to digress (there’s a 67 page digression on the history of silver prices, for example), making it a rather hard book for modern readers to get through. That’s where On The Wealth of Nations from P.J. O’Rourke comes in; you can get an understanding of the text without having to read through it yourself.  (Consider it a funnier, more snarky version of Cliff Notes(R).)  Does O’Rourke do justice to Smith and help you to understand The Wealth of Nations?  We’ll just have to find out.

Summary

Chapter one presents the start of the analysis of The Wealth of Nations.  Smith’s work emphasizes three individual prerogatives: the pursuit of self-interest, the division of labor, and the freedom of trade.  Pursuing our self-interest and desires causes us to want more than we could produce by ourselves, which drives freedom of trade, which allows labor to be divided, which allows specialization and creation of more objects that are desired by others, gradually leading to the betterment of all society.  Further points made by Smith include the fact that coercion from outside forces destroys the benefits of free trade, and that preserving the order of society is more important than the relief of misery.

The second chapter is aptly titled, ‘Why is The Wealth of Nations So Damn Long?’  The short answer is due to a combination of social pressure towards long books, the fact that economics was a new field and Smith had to explain every term he used, and that Smith frequently digressed (a 67 page digression on the history of silver prices is mentioned several times in the book).  The third chapter provides an overview of Smith’s first book, The Theory of Moral Sentiments, which is about how moral systems arise.  In it, Smith postulates the existence of an ‘Impartial Spectator’, the brain’s moral center, which seeks ‘to protect the weak, to curb the violent, and to chastise the guilty.’  This view of morality informs and shapes Smith’s economic writing in The Wealth of Nations.

Chapter four gets into the evaluation of The Wealth of Nations proper, starting with the first book, which looks into how wealth is produced and distributed.  It starts with an explanation of how humans are uniquely helpless, relying on the cooperation of many to sustain ourselves.  It goes on to discuss how property rights derive from the ownership of our labor and the products thereof and how humans specialize to maximize our productivity.  It also mentions the importance of specialization in increasing output and the (hopefully obvious) realization that price is what someone is willing to pay for something.

The fifth chapter covers the second book, a commentary on economics directed at the powerful in society.  Smith maintained that money was imaginary (albeit, not in so many words), that banks should work to render capital active and productive, and that there was great importance to regulating banks.  He also made many of the arguments for and against fiat currency (paper money not backed by gold or any other physical asset; it’s also the current form of every major currency on the Earth), back when such a thing was nearly unthinkable.  Chapter six finishes off the second book, providing some of Smith’s lessons on economic planning, including the government being a service to the need to control public spending.

Book three (and chapter seven) serve to cover an abbreviated economic history of the Western world, from the fall of the Roman empire to the situation Smith faced in the eighteenth century.  One of the more impressive stories is how feudalism was undermined.  Free traders (called burghers) grew in power and influence by giving the nobles fixed yearly tributes in exchange for freedom (the tributes, being fixed, would decrease in real worth every year), played the king and nobles off each other to keep either group from getting too powerful, and finally, created opulent items that led the nobles to spend more on baubles than on keeping their legions supplied.

Chapter eight is about political economy (the subject of Smith’s fourth book), which O’Rourke applies in particular to China and its current relationship with the United States.  The main points made by both men are that global trade is a net plus for all involved parties, the balance of trade is always good (assuming no coercion, each side is getting something that they want), and that tariffs, however well intentioned, will end up hurting the working class most.  Much of the remaining part of the fourth book (and chapter nine) are primarily attacks on the physiocrats, an economic theory (arguably, the first economic theory) that was popular in France during Smith’s time.  The major qualm Smith had with them was a love of the theory, the need for a broad, overarching theory that covered everything.

Chapter ten covers the last part of book four, Smith’s thoughts on the events occurring in America at the time (let it be noted that The Wealth of Nations was published in 1776, an interesting year for Americans).  Smith predicted the future of British-American relations as being very close due to a shared language and history, even following the revolution.  His suggestions to Great Britain included either simply giving America independence, or forming a combined government with them (neither option was followed, as any student of American history could tell you).  Let it be noted that Smith (himself a Scot) was not a great fan of America; he considered the colonists a group of skinflints who didn’t contribute to the cost of their own protection.

Chapter eleven covers Smith’s attempts at delving into public policy.  He touches on number of government policies, from the qualifications to be in government (Smith favored those with ’superiority of birth’) to tax policy (he favored property taxes and a progressive tax policy, as well as a surcharge on anyone serving in government) to national debt (he considered it a public outrage).  Chapter twelve covers more of Smith’s political views, which was to be the subject of his third, never published book.  Other than a need for some government to protect property, it’s difficult to discern how Smith would have suggested structuring a government, as his previous statements on the issue of government hadn’t been overly clear, and at times were downright conflicting.

The last few chapters take a closer look at Smith himself.  Chapter thirteen reveals him to be a rather upstanding, not particularly quarrelsome fellow.  Never married, well-thought of by many of his contemporaries (an impressive group including statesmen, philosophers, and nobles), and beloved by his students when he was a teacher; he wouldn’t be a likely subject for a tell-all biography.  Chapter fourteen covers Smith’s religious beliefs; if anything, that’s an even more inscrutable subject.  Smith seems to have been a good Christian (at a time when many of the intellectuals with whom he was acquainted were Deists), but other than that, he was quite disinterested in metaphysics and seemed skeptical of most belief systems, including skepticism.  The book concludes with an appendix of Smith quotations applied to modern phenomena like caring and celebrities, with much of O’Rourke’s usual wit and intelligence.

Pros

-Very Readable: Not to speak ill of the dead (particularly when the dead have been as important to revolutionizing economics as Adam Smith), but attempting to get through his works can be a major undertaking, at least to modern readers.  O’Rourke has a tendency toward semi-obscure and highly literate references, but most of them will at least make sense to a modern reader.  The overall book is fairly light and entertaining fare, at least for an economics text.

-Well Researched: O’Rourke does a very good job of understanding not only Smith’s text, but also putting it into the context of the time Smith lived and wrote.  While much of Smith’s work applies as readily today as during the late eighteenth century, O’Rourke helps to illustrate how Smith’s vision would apply to our more modern world.

-Funny; Very, Very Funny: As I’ve noted in my past review of O’Rourke’s work, he’s pretty darn funny, even when discussing dry economic data.  Add in the fact that Smith has a decent sense of wit (if a dry, Scottish sort of wit) about him, and the book becomes much more humorous than the typical economics fare.

Cons

-Not Quite as Good as The Wealth of Nations: This isn’t Smith’s original 900 page tome, nor is it a Cliff’s Notes (R) version either.  Instead, it’ll give you a general idea of Smith’s meaning in a creative, funny wrapper.  Consider it a primer, rather than a substitute.

-Gets Off Track at Times: While the bulk of the book is a thorough review of The Wealth of Nations and the important points thereof, O’Rourke does digress himself from time to time (although, not for 67 pages at a stretch).  In particular, the chapters on Adam Smith’s personal life don’t add much to the discussion of his writing (especially with some of O’Rourke’s added innuendo); a decent understanding of the work can be had by stopping at the twelfth chapter.

Overall

On The Wealth of Nations is, as mentioned, not a substitute for reading Smith’s work itself, so if you have a test on The Wealth of Nations, you’ll need to go through it on your own.  On the other hand, if you’re simply trying to get a better feel for Smith, his most famous work, and some of the thoughts he had that are still a major part of economics discussions today, this makes a decent primer.  Just remember that O’Rourke isn’t Smith, and that his opinions on the work don’t represent Smith’s opinions (however hilarious O’Rourke might be).

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Ah, Robert Kiyosaki.  You make some excellent points, but also raise more than a few questions in my mind.  Your first book in the Rich Dad(R) series, Rich Dad, Poor Dad, was one of the first personal finance books that I ever encountered, both setting me on the path to understanding my finances and making me think I needed a second opinion.  The second book, Rich Dad’s Cashflow Quadrant, seems to be an improvement, but was still a far cry from the detailed advice in most other personal finance books.

Which brings us to the third book in the series, Rich Dad’s Guide to Investing.  There’s certainly plenty of ground that could be covered in a book that claims to tell you what the Rich invest in.  Does it end the initial trilogy with a bang, or a whimper?  We’ll have to read on to find out.

Summary

The book starts with an introduction that brings up the 90/10 rule of money; 90% of the wealth is controlled by 10% of the people in the world.  He also explains his belief that in order to invest, you need to know about business.  The first phase of the book covers the mental preparation to be an investors.  The first chapter covers a story when Kiyosaki returned home from Vietnam, how he wanted to invest with his ‘Rich Dad’, but was unable because he didn’t meet the financial qualifications to do so.  He noted that he had much work to do to become an investor, starting with mentally preparing himself to be an investor.

The second chapter covers preparing a foundation of wealth.  It sets up the preparation that needs to go into the mental aspect of creating wealth.  The next sixteen chapters cover individual lessons an investor needs to learn.  These lessons are as follows:

1. There are three choices for reasons to invest: to be secure, to be comfortable, or to be rich.
2. You can see a world with too much money, if you shift away from thinking of money as scarce.
3. Investing is confusing to most people because there are many different goals, different products, and different techniques.
4. Investing is a plan, not a particular product; getting attached to a particular investing procedure will only limit your options.
5. You can plan to be rich or poor, and your financial plan will determine where you end up.
6. Getting Rich is Automatic, if you have a good plan and stick to it.
7. Finding the right plan takes some deep thought, careful consideration, and a good financial team.
8. Deciding now what you’ll be when you grow up, and keep expanding the goals for your life.
9. Whether you want to be secure, comfortable, or rich, your plan will have its own costs and expenses.
10. Investing isn’t risky, if you can invest from the inside.
11. Which side of the table you sit on, whether you are a business owner or an employee, will determine your level of success.
12. There are several basic rules of investing.  Knowing the type of income you’re working toward (earned, portfolio, or passive), converting your earned income into passive and portfolio, knowing that you (the investor) are the asset or liability, and having the ability to evaluate risk and reward.
13. You can reduce the risk level of your investments by increasing your financial literacy, such as learning to read income statements.
14. Some basics of financial literacy include focusing on cash flow, know the government rules (and that they can change), and that it takes two financial statements to see the whole picture (one from the payer, one from the payee).
15. Mistakes can lead to good results, if you learn from them.
16. There are many ways to become rich, all of which have a price.

Chapter nineteen again covers the 90/10 riddle, how you can acquire money making assets without spending your own money?  The answer, as expressed in chapter twenty, is to turn great ideas into profits by creating assets.  This is also the first chapter of Phase Two, which asks what type of investor you want to become.

Chapter twenty-one introduces the five categories of investors according to Rich Dad, which are covered in the next several chapters.  The first is the accredited investor, someone who has $200,000 in income ($300,000 for a couple) or a net worth of $1,000,000, and is accredited by the SEC, but may not have any skills or talent at investing.  The next is the qualified investor, who understands fundamental and technical investing, has education, and is generally confident.  Then, there’s the sophisticated investor, who has knowledge of the different laws and knows about the different types of legal entities.  The inside investor is someone who owns at least 10% of the outstanding shares of a company.  Finally, there’s the ultimate investor, someone who starts a company, takes it public, and sells shares in it.

Chapter twenty-seven is about how to get rich quick, by taking advantage of the tax laws in the B quadrant.  Then is the chapter on keeping your day job and becoming rich, by starting a business part time, emphasizing the need for business skills over needing a great product.  Finally in this section, chapter twenty-nine stresses the importance of simply getting started with your business plan.

Phase Three is about building a strong business.  First, there are answers to the question of why you should build a business.  Chapter thirty suggests that three possible reasons are to generate excess cash flow, to sell it, or to take it public.

Chapter thirty-one introduces the B-I Triangle (that’s business and investing triangle, by the way).  The three parts that make up the surrounding area are the mission, team, and leadership, the three elements needed to make functional business.  The next several chapters cover the five elements in the middle of the triangle: cash flow management, communication management, systems management, legal management, and product management.  Each one (save product management) provides a list of the many sub-elements of that aspect of creating a business.

Phase Four asks, who is a sophisticated investor?  Chapter thirty-seven covers how the sophisticated investor thinks, including the ten investor controls.  Some of these controls include controls over yourself, over income/expense and asset/liability ratios, over taxes, and over the entity, timing and characteristics of your company.  Chapter thirty-seven includes information on analyzing investments, including information on financial ratios and performing due diligence on companies in which you invest.

The ultimate investor makes a reappearance in chapter thirty-nine, with Kiyosaki sharing how he took his company public, and passes on a story of his friend Peter taking a company public on the Canadian Stock exchange.  Chapter forty provides some reasons why you would want to take a company public, as well as possible sources of funding before and after going public.  Chapter forty-one ends this section with a discussion of how rich people can go bankrupt, pointing out a few problems they might face, from not knowing how to handle their wealth to not having the experience needed to preserve it.

Phase five is about giving it back, and has only one chapter, entitled ‘Are You Ready to Give Back’?  The whole thing is the story of Kiyosaki’s encounter with a friend who was convinced that rich people cause problems in the world, but was convinced of how generous the wealthy people can be when it comes to giving money back to charity by the design of Kiyosaki’s game.  The book concludes that the world is changing, presenting a great deal more opportunity to those who are prepared.

Pros

-Interesting Perspective: It’s not the normal view of investing, but that’s not necessarily a bad thing.  If you’re interested in creating a business as a way of bringing some other income, it’s certainly an interesting book to get some perspective on what is involved.

-Encouraging: As always, Kiyosaki is nothing if not encouraging to his readers.  If you are interested in starting a business of your own, reading through this book could be a good way to find inspiration and get some generally good (if overly generalized) advice.

Cons

-Second Verse, Same as the First: If you read the first two Rich Dad books, you’ve already got a pretty good idea of what material is in the first phase of this book (which makes up the first third of the book).  The material is still fairly sound, if broadly drawn, but it continues Kiyosaki’s trend of repeating himself in his follow-up books.

-Not Really an Investment Book…But Not Really About Starting a Business, Either: In the minds of most people, starting a business and taking it public (the main ‘investment’ covered in this book) is not actually an investment, at all.  But the book doesn’t really provide instructions on how to start and grow a business, either.   There’s not even much instruction on how to take your company public, arguably the major thrust of the book.

-General Lack of Detail: Continuing on the last point, there’s not much helpful detail in this book, at all.  This is most apparent in the B-I Triangle related chapters; there are lists of things that need to be done to create and build your company, ranging from setting up daily office operations to handling legal issues, but no instruction provided on how to do any of it.  If you need something more than a checklist (and if you’re hoping to start a company you can go public with, you will), you’re going to need another book, or more likely, several.

Overall

If you’re looking for a bit of encouragement to start your own business, with plenty of folksy stories along the way, Rich Dad’s Guide to Investing might be a good book for you.  However, it’s far from the only book you’re going to need, and frankly, you can do without this book, since there’s little in the way of solid information to be found.  Just skip it, unless you’re a huge Kiyosaki fan and have to have all his works.

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I am a science fiction geek, I am the first to admit this.  I’ve been this way all my life; some of my favorite books and shows as a child were all sci fi or fantasy based.  Since I’m a nerd as well as a geek, I was usually reading a bit above my age level, as well.  One of the authors I particularly liked was Isaac Asimov.

I was recently re-reading Earth is Room Enough, a collection of his stories that, as you might guess, all took place on Earth.  The book was published in 1957, and most of the stories are set in early to mid twenty-first century America.  (Hey, that’d be us)  Of course, it’s a twenty-first century that doesn’t look much like ours; computers run nearly everything, with most people working to service them or feed in information, robots are starting to be integrated into the home, and mammoth corporations have merged with the government to completely dominate most people’s lives (alright, this one isn’t that far off).

Reading through all these stories, you get a fair idea of what the future was expected to look like, at least through Asimov’s eyes.  Looking at what he got wrong can give us an idea of how to avoid making false predictions as we look to the future.  Here are a few things to avoid when you try to think about life fifty years or so in the future:

1) Assume that society will be the same, and only the technology will change – Reading through Asimov’s work, you’d think that the fifties never ended, even though technology has gotten much more advanced.  The women in the stories are housewives or secretaries, the children are all raised by loving parents (and teaching robots) and the technology to record dreams existed for decades before anyone thought to record a pornographic one.  (No, really: that’s a major plot point in one story.)  I’d go into details about the apparent lack of inflation over the past half century, but you get the point.

Now, of course, it would have been hard to predict things like the feminist movement and the rise of divorce (to say nothing of the spread of porn) back in the fifties, when these stories were written.  In the same way, trying to predict today what society will look like by the 2060s is nigh impossible.  About the only thing we can say for certain is that things will (probably) be much different than they are right now; in what way, even the best science fiction writer couldn’t guess.

2) Technology development will continue as it has in the past – Ladies and Gentlemen, meet the Multivac.  A massive (10 sq. miles, according to one story) computer buried underground that is the linchpin of the entire future society, doing everything from finding out the true source of all the jokes in the world (hint: it’s an alien experiment) to extrapolating the voting pattern of a nation from the reactions of one man in 2008.  (Always a man; there’s that old fashioned attitude again.)  A perfectly reasonable prediction based on the state of computer science in the 1950s (at least, the giant, insanely powerful computer bit; the joke and voting thing was just story-telling tomfoolery).

Obviously, that’s not how it happened.  The development of the Internet has spread out computing power, cell phones (which I doubt Asimov ever imagined) have more memory than thousands of fifties era computers that filled entire rooms, and elections still require all of us (or as many as possible) to go to the polling place.  (Heck, we barely seem to be able to make a computer that counts the votes right, let alone extrapolates votes from one person to everyone else in the country.)  The point being: assuming that current traits will continue unabated is wrong.

3) People will fundamentally change: Before you think I’m beating up on Asimov for not knowing what the future would really be like (I’m not; I’m a huge fan, hence this post), let me assure you that he knew people.  The first story in this book, The Dead Past, shows some of his understanding in action.  The nutshell version of this story is that a group of academics, after being stonewalled by a government bureaucracy preventing access to a chronoscope (a device for looking into the past), end up discovering an alternative method to build one, one that can be easily replicated for home use.  (Still taking up nearly a whole room; Asimov was big on, well, big computers.)

In a disturbing (or oddly hilarious, if you have an odd sense of humor) twist, it turns out that the government wasn’t just arbitrarily suppressing this technology for nefarious purposes; they knew that if the technology got out, people wouldn’t use it for research into the long gone past (in this case, the range was limited to 125 years; given that the story was set around 2050, this puts the furthest into the past it can see at the mid-1920s), instead, people would use it to spy on their friends, relatively and neighbors.  It ends with the government agent in charge of suppressing this technology saying “Happy goldfish bowl to you, to me, to everyone, and may each of you fry in hell forever. Arrest rescinded.”

There is an unfortunate tendency for humans to use technology to satisfy their basest desires, indulging their greed, lust, and yes, nosiness when possible.  Almost every prediction Asimov made for how the chronoscope was being used, to spy on spouses, track celebrities, even viewing people at night, has been brought to life through one technology or another.

The Ultimate Lesson

Does all of this mean that it’s pointless to read through old science fiction, or any science fiction at all?  If almost every prediction that’s made turns out be false (and even ones that are mostly correct, like the increasing control of government and corporations over our lives, are subverted in fiction), why both reading them?

Simply this: science fiction and other ‘What If?’ stories help to expand our minds to the possibilities around us.  If we speculate on what might happen as we become more reliant on technology, we can see some of the pitfalls and (hopefully) avoid them.  If we take the trends of today and exaggerate them or follow them to their (il)logical end points, we can see if that’s truly the path we wish to follow.  In this way, looking at the future, or even what writers of the past thought would be here in the present, can give us more insight into who we are, and perhaps we wish to go as a society.

All of that, plus they are pretty amusing to read, even today.

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Whistles blow, car horns honk, things get thrown around the room and screams echo throughout the room.  The sounds of bulls, bears, and pigs are heard on a frequent basis.  Occasionally, even the sounds of ghosts are heard in the distance.  Is this a sign of the Apocalypse?

No, it’s Mad Money, the investing show from Jim Cramer.  If you ever felt the urge to go behind the scenes of this madness, you can read Jim Cramer’s Mad Money to get an even deeper understanding of the show, as well as Jim Cramer’s broader investment strategy.  Is the book a ‘Buy, Buy, Buy!’, as Cramer’s sound effect board would say?  We’ll have to look closer to find out

Summary

Jim Cramer’s Mad Money is a stock investing book, pure and simple.  The introduction plays up the book as a follow up to Jim Cramer’s Real Money, his first investing book.  It’s designed to share many of the lessons that Cramer learned in his first year or so of running his Mad Money show, in all its crazy glory.

The first three chapters are all about how to buy a stock, Mad Money style.  The first chapter is about knowing yourself and your goals.  Cramer makes the point that different people, at different stages of life, can invest in different ways; when you’re younger, you can afford to take more risks with your money.  The chapter stresses four different aspects that will determine how much (if anything) you should invest in stocks: your age, income, personality, and priorities.

The second chapter is all about doing your homework, at least one hour per week per stock that you own (or want to own), according to Cramer.  He has five areas you need to cover before you buy a stock: how the company makes money, the sector of the market it is in and how that sector has performed, the stock’s performance, how the competition is doing, and looking at the company’s balance sheet.  Chapter three is where you finally buy the stock; always using limit orders (where you set the price you’re going to pay for the stock) and buying a little bit at a time.  Once you buy the stocks, though, the homework has to continue, at one hour per week.

Chapter four looks at the other side of the coin, how to sell the stocks when the time comes.  Cramer provides a number of suggestions for when to sell (no hard and fast rules, as he acknowledges that everyone is different and has different needs).  One suggestion is to sell enough to get the amount of the stock you own back to the dollar amount you initially invested.  Another one is to set a target price you expect the price to hit, and sell when it reaches that price.

Chapters five and six cover the ‘Lightening Round’, the part of Mad Money where Cramer takes phone calls and provides a buy, sell, or hold verdict on a particular stock after just a short period time to consider them.  Chapter five details much of the thought process he goes through during that time, and shares the three dirty secrets he uses to do it every night.  (They aren’t that secret; he (a) has lots of experience, (b) really enjoys stocks, and (c) finds it easier than it looks.)

Chapter six covers how to do the same type of quick analysis yourself (the ‘Lightening Round Home Game’).  It’s a three step process; first, know what sectors (and subsectors) there are, then, form an opinion on each one (whether the automobile sector is going up or down, for example), and lastly, rank the top few stocks (’best in breed’) in each sector.  That way, when you’re asked about a particular stock, you have a ready rubric to help you decide whether it’s a buy or a sell.

Chapter seven covers what to look for in the interviews that Cramer does with CEOs and CFOs.  Depending on how they react (and in particular, how open they are about their company, even if it is currently going through tough times), there’s apparently a lot of information that can be gleaned from these interviews, even if SEC regulations prevent them from revealing anything not disclosed to other investors via public notices.

Chapter eight is a compilation of some of the mistakes that Cramer has made on his show, and the lessons he’s learned from them.  Some of these lessons include how to do the right type of homework (if you’re planning to buy and then sell in the short term, you shouldn’t be looking at the longer term prospects for the company, and vis versa) and that commodities companies are not interchangable, even though their products are identical.  In the same vein, chapter nine covers some of the lessons gleaned from his successes; some examples include to watch what the Street (that is, big mutual and hedge funds on Wall Street) does and mirror that unless you have good reason to think that they’re wrong, and not to be snob and consider all investment ideas, even those that come from an average middle-class life.

The last few chapters go into more depth on the show itself; chapter ten covers how Cramer chooses the stocks that are to be featured on his show, including watching what his charity fund invests in and paying attention to what he likes and dislikes on the show itself.  Chapter eleven covers many of the aspects of the show itself, from his trademark ‘Boo-yahs’ to the sounds on his sound board and what he intends them all to mean.  The book ends with a worksheet to evaluate stocks (a la Chapter two) and a revised guide to cyclical investing (which he introduced in Real Money).

Pros

-Intelligent and Insightful: Although you might not guess it from watching the show, there is in fact a method (and a rather impressive one) behind what Cramer says and does in the course of his broadcast.  He emphasizes the importance of doing thorough research before making a stock investment and knowing how to read through the information provided by companies.  If you followhis techniques, you should have more success in stock investing than if you merely follow stock tips (including, interestingly enough, the tips on Mad Money).

-Stresses the Importance of Research: Almost everywhere you turn in the book, you’ll find Cramer hammering home the need to do research before and after any stock purchase.  A repeated refrain throughout the book is the need for at least one hour of research per held stock per week to keep up on the changes with the company or the stock that might change its prospects.  Add in the warning against buying a stock recommended on his show (or any show) in the first twenty-four hours, and you have a surprisingly sedate argument for a calm, methodical investment method from a guy most famous for almost literally bouncing off the walls on screen.

-Entertaining: Probably not a surprise, the book is rather amusing, even laugh-out-loud funny at times.  Even when discussing things like P/E and PEG ratios he manages to be more entertaining than many personal financial writers are while trying to make jokes.  It makes the book a rather quick moving read, as well as a general pleasure.

Cons

-Aimed at Mad Money Fans: If you haven’t ever watched Cramer’s CNBC show, much of the book will make little sense.  After the first four chapters (which are fairly useful regardless of how much CNBC you view), the book pretty much turns into all Mad Money, all the time.  The last few chapters in particular are less investment advice, more behind the scenes.  If you’re not a fan, much of the book will seem rather unhelpful.

-Lots of Information, Without Much Explanation: The parts that do focus on investing directly (rather than Mad Money) are useful, but in his attempt to give you all the information you need for investing in a few chapters, Cramer sometimes makes his book nigh incomprehensible.  This is most notable in chapter two, where you get a flash lesson in cash flow statements and balance sheets.  It took several read-through to get everything that Cramer was trying to illustrate (and I write about this stuff for my blog).

-Focuses on Short(er) Term Trading: While Cramer doesn’t explicitly recommend day-trading (and chides people for doing so), he does tend focus on short term investing, holding stocks for months or even mere weeks, to say nothing of buying stocks in small portions over a period of time.  While this can be profitable (Cramer himself is proof of this), for many people it can lead to excessive buying and selling.  If you can keep up the research that Cramer recommends, it can work out, but otherwise, it just adds to your costs.  (Plus, as you’re probably aware, in the mutual fund world, indexes are more profitable than actively managed funds for exactly this reason.)

Conclusion

If you’re a huge fan of Mad Money and want to learn how to play along at home in a smart manner, Jim Cramer’s Mad Money might be right for you.  If you’re simply interested in learning how to buy and sell individual stocks, you’re probably much better off with Jim Cramer’s Real Money, which provides more information for the first time stock investor (and less promotion for the show).  If you’re not interested in individual stocks at all, Jim Cramer’s books, while still interesting, probably aren’t the best for you.

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