Ideas on how to become rich - How to become a billionaire, part 5

Ideas on how to become rich - How to become a billionaire, part 5

So far, we have examined the basic principles of how to become a billionaire and we have also examined various companies that made a lot of money, and how they did in, in terms of their history and what they do to make money, and what they did in their rise to eminence. In this post on how to become a billionaire, we will be examining the history of Ford and General Motors. The resources for this research came from Forbes.com, Wikipedia as well as newspaper resources on the rich and famous. A quick reminder - my research methodology for the topic on "how to become a billionaire" was simply to see how we can emulate billionaires and billion-dollar companies and businesses, and the research methodology for my past few posts have been documented here:

Ideas on how to become rich: research methodology for the billionaire series

Without further ado, the history of Ford and GM, for you to glean insights into the power and virtue of making and creating great and powerful businesses that can generate income and huge amounts of earnings for shareholders and managers alike.

Case study: History of GM and ideas on how to become rich

General Motors was founded on Wednesday, September 16, 1908 in Flint, Michigan, as a holding company for Buick, then controlled by William C. Durant, and acquired Oldsmobile later that year. The next year, Durant brought in Cadillac, Elmore, Oakland and several others. In 1909, General Motors acquired the Reliance Motor Truck Company of Owosso, Michigan, and the Rapid Motor Vehicle Company of Pontiac, Michigan, the predecessors of GMC Truck. Durant lost control of GM in 1910 to a bankers’ trust, because of the large amount of debt taken on in its acquisitions around $1 million.

Durant left the firm and helped establish the Chevrolet Motor Company in 1911 with brothers Gaston and Louis Chevrolet. After a brilliant stock buy back campaign, he returned to head GM in 1916, with the backing of Pierre S. du Pont. Chevrolet entered the General Motors fold in 1917; its first GM car was 1918's Chevrolet 490. Du Pont removed Durant from management in 1920, and various Du Pont interests held large or controlling share holdings until about 1950.

In 1918 GM purchased the McLaughlin Motor Car Company of Oshawa, Ontario, Canada, manufacturer of the McLaughlin-Buick automobile, and renamed it General Motors of Canada Ltd., with R.S. "Colonel Sam" McLaughlin as its first president. In 1925, GM bought Vauxhall Motors of England, and then in 1929 went on to acquire an 80% stake in German automobile manufacturer Adam Opel AG. Two years later this was increased to 100% and the company remains the core of GM Europe to this day.

GM surpassed Ford Motor Company in the late 1920s thanks to the leadership of Alfred Sloan. While Ford continued to refine the manufacturing process to reduce cost, Sloan was inventing new ways of managing a complex worldwide organization, while paying special attention to consumer demands. Car buyers no longer wanted the cheapest and most basic model; they wanted style, power, and prestige, which GM offered them. Thanks to consumer financing, easy monthly payments allowed far more people to buy GM cars, while Ford was moralistically opposed to credit. Guess which idea was better for making money?

During the 1920s and 1930s, General Motors assumed control of the Yellow Coach bus company, and helped create Greyhound bus lines. They replaced intercity train transport with buses, and established subsidiary companies to buy out streetcar companies and replace the rail-based services as well with buses. GM formed United Cities Motor Transit in 1932.

In 1930, GM also began its foray into aircraft design and manufacturing by buying Fokker Aircraft Corp of America and Berliner-Joyce Aircraft, merging them into General Aviation Manufacturing Corporation. Through a stock exchange GM took controlling interest in North American Aviation and merged it with its General Aviation division in 1933, but retaining the name North American Aviation. In 1948, GM divested NAA as a public company, never to have a major interest in the aircraft manufacturing industry again.

General Motors bought the internal combustion engine inside the railcar builder Electro-Motive Corporation and its engine supplier Winton Engine in 1930, renaming both as the General Motors Electro-Motive Division. Over the next twenty years, diesel-powered locomotives — the majority built by GM — largely replaced other forms of traction on American railroads. Electro-Motive was sold in early 2005.

General Motors produced vast quantities of armaments, vehicles, and aircraft during World War II for both Allied and Axis customers, and made a lot of money. By the spring of 1939, the German Government had assumed day-to-day control of American owned factories in Germany, but decided against nationalizing them. During the war, the U.S. auto companies continued to be concerned Nazi Germany would nationalize American-owned factories.

GM's William P. Knudson served as head of U.S. wartime production for President Franklin Roosevelt, who called Detroit as the Arsenal of Democracy. The General Motors UK division, Vauxhall Motors, manufactured the Churchill tank series for the Allies. The Vauxhall Churchill tanks were instrumental in the UK campaigns in North Africa. Bedford Vehicles manufactured logistics vehicles for the UK military, all important in the UK's land campaigns.

Nevertheless, while General Motors has claimed its German (Opel) operations were outside its control during World War II, this assertion appears to be contradicted by available evidence. General Motors was not just a car company that happened to have factories in Germany; GM management from the top down had extensive connections with the NSDAP, both on a business and personal level. American GM Vice President (later Colonel) Graeme K. Howard was a committed Nazi, and expressed such views in his book, America and a New World Order. Adolf Hitler awarded GM boss James D. Mooney the Order of Merit of the Golden Eagle for his services to Nazi Germany. General Motors’ internal documents show a clear strategy to profit from their German military contracts even after Germany declared war against America. Defending the German investment strategy as “highly profitable” and making a lot of money, Alfred P. Sloan told shareholders in 1939 GM’s continued industrial production for the Nazi government was merely sound business practice.

At one point GM had become the largest corporation registered in the United States, in terms of its revenues as a percent of GDP. In 1953, Charles Erwin Wilson, then GM president, was named by Eisenhower as Secretary of Defense. When he was asked during the hearings before the Senate Armed Services Committee if as secretary of defense he could make a decision adverse to the interests of General Motors, Wilson answered affirmatively but added that he could not conceive of such a situation "because for years I thought what was good for the country was good for General Motors and vice versa". Later this statement was often misquoted, suggesting that Wilson had said simply, "What's good for General Motors is good for the country." At the time, GM was one of the largest employers in the world – only Soviet state industries employed more people. In 1955, General Motors became the first American corporation to pay taxes of over $1,000 million. Now one can guess how much money that corporation made, if the money it made allowed it to pay that much in taxes!


Case study: History of Ford and ideas on how to become rich

Ford was launched in a converted factory in 1903 with $28,000 in cash from twelve investors, most notably John and Horace Dodge, who would later found the Dodge Brothers Motor Vehicle Company. Henry Ford was 40 years old when he founded the Ford Motor Company, which would go on to become one of the largest and most profitable companies in the world, as well as being one of the few to survive the Great Depression. The largest family-controlled company in the world, the Ford Motor Company has been in continuous family control for over 100 years.

During its early years, the company produced a range of vehicles designated, chronologically, from the Model A in 1903 to the Model S in 1908. That year, Henry Ford introduced the Model T. Earlier models were produced at a rate of only a few a day at a rented factory on Mack Avenue in Detroit, Michigan with groups of two or three men working on each car from components made to order by other companies. The first Model Ts were built at the Piquette Road Manufacturing Plant, the first company-owned factory. In its first full year of production, 1909, about 18,000 Model Ts were built. By 1913, the company had developed all of the basic techniques of the assembly line and mass production. Ford introduced the world's first moving assembly line that year, which reduced chassis assembly time.

These innovations were hard on employees, and turnover of workers was very high, while increased productivity actually reduced labour demand. Turnover meant delays and extra costs of training, and use of slow workers. In January 1914, Ford solved the employee turnover problem by doubling pay to $5 a day, cutting shifts from nine hours to an eight hour day for a 5 day work week (which also increased sales; a line worker could buy a T with under four months' pay), and instituting hiring practices that identified the best workers, including disabled people considered unemployable by other firms. Employee turnover plunged, productivity soared, and with it, the cost per vehicle plummeted. The increase in wages led to Ford making more money. Ford cut prices again and again and invented the system of franchised dealers who were loyal to his brand name. He made yet more money. Wall Street had disagreed with Ford's generous labour practices when he began paying workers enough to buy the products they made.

While Ford attained "international" status in 1904 with the founding of Ford of Canada, it was in 1911 that it began to rapidly expand overseas, with the opening of assembly plants in England and France, followed by Denmark (1923), Germany (1925) and Austria (1925) and also in Australia (1925) as a subsidiary of Ford of Canada. By the end of 1919, Ford was producing 50 percent of all cars in the United States, and 40% of all British ones; by 1920, half of all cars in the U.S. were Model Ts. The assembly line transformed the industry; soon, companies without it risked bankruptcy.

In 1915, Henry Ford went on a peace mission to Europe aboard a ship, joining other pacifists in efforts to stop World War I. This led to an increase in his personal popularity. Ford would subsequently go on to support the war effort with the Model T becoming the underpinnings for Allied military vehicles.

In 1919, Edsel Ford succeeded his father as president of the company, although Henry still kept a hand in management. Although prices were kept low through highly efficient engineering, the company used an old-fashioned personalized management system, and neglected consumer demand for improved vehicles. So, while four wheel brakes were invented by Arrol-Johnson (and were used on the 1909 Argyll), they did not appear on a Ford until 1927. Ford steadily lost market share to GM and Chrysler, as these and other domestic and foreign competitors began offering fresher automobiles with more innovative features and luxury options. GM had a range of models from relatively cheap to luxury, tapping all price points in the spectrum, while less wealthy people purchased used Model Ts. The competitors also opened up new markets by extending credit for purchases, so consumers could buy these expensive automobiles with monthly payments. Ford initially resisted this approach, insisting such debts would ultimately hurt the consumer and the general economy. Ford eventually relented and started offering the same terms in December 1927, when Ford unveiled the redesigned Model A, and retired the Model T after producing 15 million units.

On February 4, 1922 Ford expanded its reach into the luxury auto market through its acquisition of the Lincoln Motor Company, named for Abraham Lincoln whom Henry Ford admired, and the Mercury division was established in 1938 to serve the mid-price auto market. Ford Motor Company built the largest museum of American History in 1928, The Henry Ford. Henry Ford would go on to acquire Abraham Lincoln's chair, which he was assassinated in, from the owners of the Ford Theatre.Abraham Lincoln's chair would be displayed along with John F. Kennedy's Lincoln limousine in the Henry Ford Museum & Greenfield Village in Dearborn, known today as The Henry Ford. Kennedy's limousine was leased to the White House by Ford. President Franklin Roosevelt referred to Detroit as the "Arsenal of Democracy." The Ford Motor Company played a pivotal role in the allied victory during World War I and World War II. As a pacifist, Henry Ford had said war was a waste of time, and did not want to profit from it. He was concerned the Nazis during the 1930s might nationalize his factories in Germany. During the Great Depression Ford's wages may have seemed great to his employees but many of the rules of the factories were very harsh and strict. Those were tense times for American companies doing business in Europe. In the spring of 1939, the Nazis assumed day to day control of Ford factories in Germany.

With Europe under siege, Henry Ford's genius would be turned to mass production for the war effort. After Bantam invented the Jeep, the War Department handed production over to Ford. When Consolidated Aircraft could at most build one B-24 Liberator a day, Ford would show the world how to produce one an hour, at a peak of 600 per month in 24 hour shifts. The specially-designed Willow Run plant broke ground in April 1941. Edsel Ford, under severe stress, died in the Spring of 1943 of stomach cancer, prompting his grieving father to resume day-to-day control of Ford. Mass production of the B-24 began by August 1943.

At the behest of Edsel Ford's widow Eleanor and Henry's wife Clara, Henry Ford would make his oldest grandson, Henry Ford II, President of Ford Motor Company. Henry Ford II served as President from 1945–1960, and as Chairman and CEO from 1960–1980. "Hank the Deuce" led Ford to become a publicly traded corporation in 1956. However, the Ford family maintains about 40 percent controlling interest in the company, through a series of Special Class B preferred stocks. In 1947, Henry Ford passed away. Perhaps an estimated 7 million people mourned his death.

In 1946 Robert McNamara joined Ford Motor Company as manager of planning and financial analysis. He advanced rapidly through a series of top-level management positions to the presidency of Ford on 9 November 1960, one day after John F. Kennedy's election. The first company head selected outside the Ford family, McNamara had gained the favor of Henry Ford II, and had aided in Ford's expansion and success in the postwar period. Less than five weeks after becoming president at Ford, he accepted Kennedy's invitation to join his cabinet, as Secretary of Defense.

Lee Iacocca was involved with the design of several successful Ford automobiles, most notably the Ford Mustang. He was also the "moving force," as one court put it, behind the notorious Ford Pinto. He promoted other ideas which did not reach the marketplace as Ford products. Eventually, he became the president of the Ford Motor Company, but he clashed with Henry Ford II and ultimately, on July 13, 1978, he was famously fired by Henry II, despite Ford posting a $2.2 billion dollar profit for the year. In 1979 Phil Caldwell became Chairman, succeeded in 1985 by Don Petersen. Harold Poling served as Chairman and CEO from 1990-1993. Alex Trotman was Chairman and CEO from 1993-1998, and Jacques Nasser served at the helm from 1999-2001. Henry Ford's great-grandson, William Clay Ford Jr., is the company's current Chairman of the Board and was CEO until September 5, 2006, when he named Alan Mulally from Boeing as his successor. As of 2006, the Ford family owns about 5 percent of Ford's shares and controls about 40 percent of the voting power through a separate class of stock.

(The latest before the recession of late 2008) In December 2006, Ford announced that it would mortgage all assets, including factories and equipment, office property, intellectual property, and its stakes in subsidiaries, to raise $23.4 billion in cash – the need to raise huge sums of money. The secured credit line is expected to finance product development during the restructuring through 2009, as the company expects to burn through $17 billion in cash before turning a profit and making money in future. The action was unprecedented in the company's 103 year history.


What can we learn from the history of these two major companies that have made money and lost money, and still managed to become major billion dollar companies? These are good questions that we should ask ourselves.

More to come in the next post on Ideas on How to Become Rich, stay tuned! Cheers.

Ideas on how to become rich!

Ideas on how to become rich - How to become a billionaire, part 4

Ideas on how to become rich - How to become a billionaire, part 4

In the previous post, I explored how Sam Walton made his money and became very rich. In this post, I will be exploring two individuals who have been instrumental in helping make the world digitalised and in the process have made a lot of money and have become incredibly rich.

This article here examines Google, using Wikipedia as well as news reports as sources. First, we shall be looking at Google in general, although I suspect that many people already know how Google makes money and what the company does and such. Secondly, we shall be looking at the founders and their lives, and how they founded the company. In particular, Page and Brin.

However, in this case study on how to become a billionaire, I will not be giving any answers or giving any personal opinions or recommendations on how to become rich or how to become a billionaire - you can read the information below in the case study and figure out for yourself what it was that made these two individuals very rich and how they did, and you should be constantly asking yourself what ideas and what lessons can be take away from them? The theme of course is "how to become rich". Remember to ask yourself such questions as we explore this case study of Google - one of the best and biggest companies on earth currently.

Case study: Larry Page and Sergey Brin and their company, Google
Materials taken from Wikipedia, online sources, as well as newspaper reports, dated before 2008

What is Google? - a basic primer and basic introduction

Google Inc. is an American public corporation, earning revenue from advertising related to its Internet search, e-mail, online mapping, office productivity, social networking, and video sharing services as well as selling advertising-free versions of the same technologies.

Google was co-founded by Larry Page and Sergey Brin while they were students at Stanford University and the company was first incorporated as a privately held company on 4 September 1998. The initial public offering took place on 19 August 2004, raising US$1.67 billion, making it worth US$23 billion. Google has continued its growth through a series of new product developments, acquisitions, and partnerships.

Google began in January 1996, as a research project by Larry Page, who was soon joined by Sergey Brin, two Ph.D. students at Stanford University in California. They hypothesized that a search engine that analyzed the relationships between websites would produce better ranking of results than existing techniques, which ranked results according to the number of times the search term appeared on a page. Their search engine was originally nicknamed "BackRub" because the system checked backlinks to estimate the importance of a site.

Convinced that the pages with the most links to them from other highly relevant web pages must be the most relevant pages associated with the search, Page and Brin tested their thesis as part of their studies, and laid the foundation for their search engine. The domain google.com was registered on 15 September 1997, and the company was incorporated as Google Inc. on 4 September 1998 at a friend's garage in Menlo Park, California. The total initial investment raised for the new company amounted to almost US$1.1 million.

In March 1999, the company moved into offices in Palo Alto, home to several other noted Silicon Valley technology startups. After quickly outgrowing two other sites, the company leased a complex of buildings in Mountain View at 1600 Amphitheatre Parkway from Silicon Graphics (SGI) in 2003. The company has remained at this location ever since, and the complex has since come to be known as the Googleplex. In 2006, Google bought the property from SGI for US$319 million.

The Google search engine attracted a loyal following among the growing number of Internet users, who liked its simple design and useful results. In 2000, Google began selling advertisements associated with search keywords. The ads were text-based to maintain an uncluttered page design and to maximize page loading speed. Keywords were sold based on a combination of price bid and clickthroughs, with bidding starting at US$.05 per click. This model of selling keyword advertising was pioneered by Goto.com (later renamed Overture Services, before being acquired by Yahoo! and rebranded as Yahoo! Search Marketing). Goto.com was an Idealab spin off created by Bill Gross, and was the first company to successfully provide a pay-for-placement search service. Overture Services later sued Google over alleged infringements of Overture's pay-per-click and bidding patents by Google's AdWords service. The case was settled out of court, with Google agreeing to issue shares of common stock to Yahoo! in exchange for a perpetual license. Thus, while many of its dot-com rivals failed in the new Internet marketplace, Google quietly rose in stature while generating revenue.

Google has created services and tools for the general public and business environment alike; including Web applications, advertising networks and solutions for businesses.

What are some of the money earners for this big company? They are:

How to become rich: Advertising

99% of Google's revenue is derived from its advertising programs. For the 2006 fiscal year, the company reported US$10.492 billion in total advertising revenues and only US$112 million in licensing and other revenues. Google is able to precisely track users' interests across affiliated sites using DoubleClick technology and Google Analytics. Google's advertisements carry a lower price tag when their human ad-rating team working around the world believes the ads improve the company's user experience. Google AdWords allows Web advertisers to display advertisements in Google's search results and the Google Content Network, through either a cost-per-click or cost-per-view scheme. Google AdSense website owners can also display adverts on their own site, and earn money every time ads are clicked.

How to become rich: Software

The Google web search engine is the company's most popular service. As of August 2007, Google is the most used search engine on the web with a 53.6% market share, ahead of Yahoo! (19.9%) and Live Search (12.9%). Google indexes billions of Web pages, so that users can search for the information they desire, through the use of keywords and operators, although at any given time it will only return a maximum of 1,000 results for any specific search query. Google has also employed the Web Search technology into other search services, including Image Search, Google News, the price comparison site Google Product Search, the interactive Usenet archive Google Groups, Google Maps, and more.

In 2004, Google launched its own free web-based e-mail service, known as Gmail. Gmail features conversation view, spam-filtering technology, capability to use Google technology to search e-mail. The service generates revenue by displaying advertisements and links from the AdWords service that are tailored to the choice of the user and/or content of the e-mail messages displayed on screen.

In early 2006, the company launched Google Video, which not only allows users to search and view freely available videos but also offers users and media publishers the ability to publish their content, including television shows on CBS, NBA basketball games, and music videos.

Google has also developed several desktop applications, including Google Desktop, Picasa, SketchUp and Google Earth, an interactive mapping program powered by satellite and aerial imagery that covers the vast majority of the planet. Google Earth is generally considered to be remarkably accurate and extremely detailed. Many major cities have such detailed images that one can zoom in close enough to see vehicles and pedestrians clearly. Consequently, there have been some concerns about national security implications; contention is that the software can be used to pinpoint with near-precision accuracy the physical location of critical infrastructure, commercial and residential buildings, bases, government agencies, and so on. However, the satellite images are not necessarily frequently updated, and all of them are available at no charge through other products and even government sources; the software simply makes accessing the information easier. A number of Indian state governments have raised concerns about the security risks posed by geographic details provided by Google Earth's satellite imaging.

Google has promoted their products in various ways. In London, Google Space was set-up in Heathrow Airport, showcasing several products, including Gmail, Google Earth and Picasa. Also, a similar page was launched for American college students, under the name College Life, Powered by Google.

How to become rich: The founders:

Larry Page is the son of the late Dr. Carl Victor Page, a professor of computer science and artificial intelligence at Michigan State University and one of the University of Michigan's first computer science Ph.D graduates, and Gloria Page, a computer programming teacher at Michigan State University. He is also the brother of Carl Victor Page, Jr. a co-founder of eGroups, later sold to Yahoo! for approximately half a billion dollars. Page attended a Montessori school in Lansing, Michigan, and graduated from East Lansing High School. Page holds a Bachelor of Science degree in computer engineering from the University of Michigan with honors and a Masters degree in Computer Science from Stanford University. At University of Michigan, Page was a member of the solar car team and served as the president of the HKN. After enrolling for a Ph.D. program in computer science at Stanford University, Page was in search for a dissertation theme and decided to explore the mathematical properties of the World Wide Web, understanding its link structure as a huge graph. His supervisor Terry Winograd agreed and Page focused on the problem of finding out which web pages link to a given page, considering the number and nature of such backlinks to be valuable information about that page. In his research project, nicknamed "BackRub," he was soon joined by Sergey Brin, a fellow Stanford Ph.D. student and close friend, whom he had first met in the summer of 1995 in a group of potential new students which Brin had volunteered to show around the campus. To convert the backlink data gathered by BackRub's web crawler into a measure of importance for a given web page, Brin and Page developed the PageRank algorithm, and realized that it could be used to build a search engine far superior to existing ones. In August 1996 the initial version of Google was made available, still on the Stanford Web site.In 1998, Brin and Page founded Google, Inc. Page ran Google as co-president with Brin until 2001 when they hired Eric Schmidt to become Chairman and CEO of Google. According to the 2006 edition of Forbes, Page had an estimated net worth of $18.5 Billion, placing him at rank 26 on Forbes's list of the richest persons in the world, together with Brin.

Sergei Brin was born in Moscow, in the Soviet Union to a Jewish family. According to Google lore, Page and Brin "were not terribly fond of each other when they first met as Stanford University graduate students in computer science in 1995." They soon found a common interest: retrieving relevant information from large data sets. Together, the pair authored what is widely considered their seminal contribution, a paper entitled "The Anatomy of a Large-Scale Hypertextual Web Search Engine." The paper has since gone on to become the tenth-most accessed scientific paper at Stanford University. Brin has appeared on television shows and many documentaries, including Charlie Rose, CNBC, and CNN. In 2004, he and Larry Page were named "Persons of the Week" by ABC World News Tonight. In January 2005 Sergey Brin was nominated to be one of the World Economic Forum's "Young Global Leaders." In 2007, Brin was cited by PC World as #1 on a list of the "50 most important people on the Web," along with Larry Page and Google CEO Eric Schmidt. He is also an investor in Tesla Motors, which is developing the Tesla Roadster, a 250-mile range battery electric vehicle.


You've been reading ideas on how to become rich from Google, and the founders Page and Brin. What ideas have you learnt on how to become rich and how to become a billionaire? These are the central questions that you may wish to ask yourself and remind yourself of.

More to come in future posts here on my ideas blog, where I explore various ideas on how to become rich, and in this series, how to become a billionaire in particular. Thanks for reading and cheers!

Ideas on how to become rich!

Ideas on how to become rich - How to become a billionaire, part 3

Ideas on how to become rich - How to become a billionaire, part 3

Case study of Wal-Mart - also known as Walmart

and

Case study of entrepreneur and billionaire Sam Walton

A brief history of Walmart and its founder, entrepreneur Sam Walton, current as at 2007/2008, thanks to Wikipedia as well as newspaper reports:

Sam Walton, a businessman/entrepreneur from Arkansas, began his retail career when he started work on June 3, 1940, at a J.C. Penney store in Des Moines, Iowa where he remained for 18 months. In 1945, he met Butler Brothers, a regional retailer that owned a chain of stores called Ben Franklin and that offered him one in Newport, Arkansas.

Walton could neither come to agreement on the existing store's lease renewal nor find a new location in Newport. Instead, the intrepid entrepreneur opened a new Ben Franklin franchise in Bentonville, Arkansas, but called it "Walton's Five and Dime." There this powerful entrepreneur achieved higher sales volume by marking up slightly less than most competitors.

On July 2, 1962, Walton opened the first Wal-Mart Discount City store. Within five years, the company expanded to 24 stores across Arkansas and reached $12.6 million in sales. In 1968, it opened its first stores outside Arkansas.

The company was incorporated as Wal-Mart Stores, Inc. on October 31, 1969. In 1970, it opened its home office and first distribution centre in Bentonville, Arkansas. It had 38 stores operating with 1,500 employees and sales of $44.2 million. It began trading stock as a publicly-held company on October 1, 1972, and was soon listed on the New York Stock Exchange. The first stock split occurred in May 1971 at a market price of $47. By this time, Wal-Mart was operating in five states: Arkansas, Kansas, Louisiana, Missouri, and Oklahoma; it entered Tennessee in 1973 and Kentucky and Mississippi in 1974.

During the 1980s, Wal-Mart continued to grow rapidly, and by its 25th anniversary in 1987 there were 1,198 stores with sales of $15.9 billion and 200,000 associates. In 1988, Sam Walton stepped down as CEO and was replaced by David Glass. Walton remained as Chairman of the Board, and the company also rearranged key personnel in senior positions.

Sam Walton may have stepped down, but Wal-Mart went on and on. Apparently from strength to strength, making more and more money and exapanding and expanding!

In 1988, the first Wal-Mart Supercenter opened in Washington, Missouri. Thanks to its superstores, it surpassed Toys "R" Us in toy sales in the late 1990s. The company also opened overseas stores, entering South America in 1995 with stores in Argentina and Brazil; and Europe in 1999, buying ASDA in the UK for $10 billion.

In 1998, Wal-Mart entered the grocery business, introducing the "Neighbourhood Market" concept with three stores in Arkansas. In 2000, H. Lee Scott became President and CEO, and Wal-Mart's sales increased to $165 billion. In 2002, it was listed for the first time as America's largest corporation on the Fortune 500 list.

In 2005, Wal-Mart had $312.4 billion in sales, more than 6,200 facilities around the world—including 3,800 stores in the United States and 2,800 elsewhere, employing more than 1.6 million "associates" worldwide.

In October 2005, Wal-Mart announced it would implement several environmental measures to increase energy efficiency. The primary goals included spending $500 million a year to increase fuel efficiency in Wal-Mart’s truck fleet by 25% over three years and double it within ten, reduce greenhouse gas emissions by 20% in seven years, reduce energy use at stores by 30%, and cut solid waste from U.S. stores and Sam’s Clubs by 25% in three years. CEO Lee Scott said that Wal-Mart's goal was to be a "good steward for the environment" and ultimately use only renewable energy sources and produce zero waste. Despite much criticism of its environmental record, Wal-Mart took a few steps in a positive direction, which included becoming the biggest seller of organic milk and the biggest buyer of organic cotton in the world, as well as reducing packaging and energy costs. Wal-Mart also spent nearly a year working with outside consultants to discover the company's total environmental impact and find where they could improve. They discovered, for example, that by eliminating excess packaging on their toy line Kid Connection, they could save $2.4 million a year in shipping costs, 3,800 trees, and a million barrels of oil.

In March 2006, Wal-Mart sought to appeal to a more affluent demographic. The company launched a new supercenter concept in Plano, Texas, intended to compete against stores seen as more upscale and appealing, such as Target. The new store has wood floors, wider aisles, a sushi bar, a coffee/sandwich shop with free Wi-Fi Internet access, and more expensive beers, wines, electronics, and other goods. The exterior has a green background behind the Wal-Mart letters, similar to Wal-Mart Neighborhood Markets, instead of the blue previously used at supercenters.


This brief history of Walmart already teaches us key lessons on how to become billionaires and how to become rich. Look at the key steps that Sam Walton and his future entrepreneurial successors did (the key points of the historical case study that I made out in bold, because those were the key learning points and key learning ideas of how to become a billionaire and to build a billion-dollar company):

Sam Walton achieved higher sales volume by marking up slightly less than most of his competitors - simple but effective initial idea

Walmart began trading stock as a publicly-held company on October 1, 1972, and was soon listed on the New York Stock Exchange - listing the company was one of the key steps on the way to financial success

Wal-Mart continued to grow rapidly and continued to expand, expand, expand - this was one of the critical factors in making the company billions of dollars

The company also opened overseas stores - therefore it is clear that overseas expansion and internationalisation or international trade is key and very important in building a billion dollar enterprise

Wal-Mart announced it would implement several environmental measures to increase energy efficiency - that was both cost effective and environmentally minded - and thus killed two birds with one stone, metaphorically, on the road to success and billions of dollars, to use an extended mixed metaphor

Wal-Mart sought to appeal to a more affluent demographic - one of the key ideas of becoming rich is to appeal to people who have the money, who make money and are willing to spend money - this was not a key step in the building of a billion dollar business, because the business was already successful appealing to a less wealthy crowd from the beginning though - nonetheless, even though Sam Walton made his billions and became a billlionaire but appealing to the masses and selling at low margins, it is undeniable that appealing to people who possess the money is important in becoming rich.


This case study you have been reading here on my ideas site was on Sam Walton, and Wal-Mart/ Walmart. Thanks for reading this case study on how to become a billionaire, and there will be other posts to come on this topic. Stay here, thank you very much! Cheers.

Ideas on how to become rich!

Ideas on how to become rich - How to become a billionaire, part 2

Ideas on how to become rich - How to become a billionaire, part 2

Welcome to the series here on my site that explores how to become a billionaire. In the previous post here on how to become a billionaire, I listed out my methodology and exploration method of this very interesting topic, and here in this post I will be giving the general lessons that we can learn from billionaires and how we can follow these ideas. In other words, this is a very general summary of how to become a billionaire and become very rich.

In the previous post, I explained the methodology, in future posts I shall show various examples of companies that made their owners billionaires and explore those ideas. In this post, generalisms - to the extent that generalisms can be true, since they differ from case to case. Here's a summary of "how to become a billionaire"... ...

Summary and general points on how to become rich the way billionaires made their money

1. Usually the starting point is a great idea or a great concept, and usually that has nothing to do with making money initially, but providing a service or some product that is needed or will soon be needed. This means that sometimes the starting point to becoming rich is a great idea or a great concept, and that idea or concept translates into money much later.

2. If not a great idea, then it usually turns out to be that the person who eventually became very rich started working very hard and very young. Most millionaires and some billionaires became rich this way, working their way up the corporate ladder. This seems to be a very common way of becoming a billionaire eventually anyways. Getting promoted and getting various higher paying positions and eventually the CEO position is one key way of becoming a billionaire.

3. The company gets listed on the stock exchange. This is the one single point that we will take as given, for reasons explained in my previous post.

The learning point from point number 3 is that "how to become a billionaire" can be expressed as "get your company listed and hope that it becomes very big and expands, along with your paycheck and along with your stocks".

That's why the next few posts will deal with looking at various case studies of billionaires and their companies, and mostly focuses on the companies that make the billionaires possible. In other words, the businesses. The various businesses that took different routes, but ended up rich and prosperous and made their shareholders rich and in some cases billionaires.

4. The company expands by wise strategic moves and by excellent leadership - or in some cases luck and fortune. This differs from company to company and in some cases mergers and acquisitions are the order of the day, whereas in some other cases some companies do not merge with other companies but instead expand their range and power via products and reach. Some conduct international trade, and some discovered the internet, and some make their money BECAUSE of the internet. More on that interesting and very obvious story later.

5. The billionaires in question become very rich because of their control of a great company that makes a lot of money.

That's it. It is simple but true.


This also shows you that the best way to become a billionaire or to become fabulously rich is to have stocks. Either you have a great idea that turns into a money making company that is listed and you have lots of company stock as well as ownership of a such a money making and great business ; or you have to have wise investment strategies that enable you to buy other people's companies in which those great ideas make money for their shareholders (including yourself). Therefore, as many pundits have concluded, and it is rather clear to me, ownership of stocks, and in particular well performing stocks, is the key here to becoming very rich. If you own the company, well and good and you have the potential to become a billionaire. If you don't own the company, then you have to buy little parts of it, but you can still become very rich, so there aren't any worries there if you are astute, well researched and clever.

Now you have it - the secrets of becoming a billionaire and very wealthy. It all seems very simple in theory.

The devil of course is in the details, and more important company analysis to come here in future posts! Stay tuned here for more, cheers, and thanks for reading.

Note and disclaimer:

Note here that my analyses in both the previous post and this one both do not cover:

people who became billionaires by inheritance,
lawsuits,
marrying a rich person who already happened to be one,
foundations that already possess such wealth,
national leaders/ sovereigns/ kings, among other wealthy people.

If you want to become a billionaire via those means, then it might work for you. This site explores ideas of how to become rich and these ideas in the posts to come are workable and tried and tested ideas rather than those that depend on fortune - marrying rich, being born rich, and the like. Thanks for the understanding.

Ideas on how to become rich

Ideas on how to become rich - How to become a billionaire, part 1

Ideas on how to become rich - How to become a billionaire, part 1

Welcome to this series on my ideas on how to become rich site. This series on my site is about how to become a billionaire, as promised earlier. I have done research into this field and will simplify my analysis and share some ideas about this topic. Then after this series, I should be writing more about investment and finance as usual, and probably have a series on how to make money on the stock market by borrowing ideas from fund manager Peter Lynch and his book "One Up on Wall Street", but that's all in the works and in the future. This series here is about "how to become a billionaire".

First up, my research methodology for researching on this important topic: regarding how to become a billionaire, the most obvious way seemed to me to have a look at Forbes list of billionaires and see how they made their money, where they got their sources on income and the like. And it shouldn't strike you as new or special or something innovative that all of them made their money in some field or other, and they are all billionaires because their companies are listed. Therefore, the question "how to become a billionaire" can be easily answered as "get listed on the stock market and do well there" (and with tongue in cheek, of course get listed on the stock market and do well there but not in a recession - get listed and make money when the stock market is doing well!). Clearly the direct correlation is between being a billionaire and having lots of stock, either in your own company or in Warren Buffett's case, in other companies. Thus this is not the answer we are looking for. We can definitely become billionaires if we have stocks in the right company and/or we own companies that are very successful, and we have stocks in those companies.

The focus will be on the fields that the billionaires are working in, what they do, and how they earn their money - because ultimately the stock price follows their companies' incomes and revenues. This is the main focus of "how to become a billionaire" - the ways in which the rich and famous earn their money, and how their companies made them rich.

Therefore the next step was for me to take a list of billionaires that I wanted to emulate and then observed how they made their money, and that was the basis of my case studies. However, in the case studies, those were rich men, and with the exceptions of Trump and Buffett, none of the others were billionaires, although they were millionaires. To summarise, in this series I correct my former case studies and now make instead a summary and a collation of various billionaires, but not on the billionaires themselves but on the way in which they made their money - in other words, their companies and what they did.

In summary: I will be writing on "how to become a billionaire". I looked at the list of billionaires and selected a few to research on. The focus was not on their stock price but instead on the ways and ideas in which they made their money and how their companies developed.

Some of the richest men and women got their money through court cases, lawsuits, and via inheritance. Those will not be considered here in my ideas site.

The billionaires that I looked at were:

Sam Walton of Wal Mart
Brin and Page of Google
(I got all their information off the internet, and as to the validity, well, I consulted Wikipedia... of all things)
Sergei Popov
Roman Abramovich - you all know this guy if you watch football, and by football I of course am referring to the English Premier League football!
Warren Buffett
Donald Trump

as well as
Jack Welch
Henry Ford
Thomas Edison - believe it or not!
among others

Therefore the main companies that we will be looking at are:

Wal Mart
Google
Berkshire Hathaway
Ford
General Motors
General Electric

We will learn how to become a billionaire from these companies and their founders, and basically this series is a case study series not of people and not of rich people, but superrich people and superrich and huge companies. In these times of 2008 and rapid economic change and problems in the international economy, it is important to learn what is timeless and what does not change - namely the skills of how to make money, the ideas behind the companies that make money, and the history of how some companies made it big and what we can learn from that. More to come here on my site on Ideas on how to become rich! Stay tuned, thanks for reading.

Ideas on how to become rich!

Ideas on how to become rich - Some Great Ideas by Jack Welch

Ideas on how to become rich - Some Great Ideas by Jack Welch

I have been busy with my Economics examinations and have not had much time to blog, but I received a very nice email from someone who had some interesting tips and ideas on wealth and money making, because she read a book by Jack Welch. Thus my post for today is "Some Great Ideas by Jack Welch" on how to become rich and successful. A short introduction to Jack Welch in case you aren't sure who he is or in case you wish to have a reminder:

John Francis Jack Welch was former Chairman and CEO of General Electric and is incredibly rich and wealthy, having successfully managed GE from 1981 to 2001. He is known for his uncanny business acumen and his wise business strategies that have done very well.

Here is the contribution by Sally, and here is what she wrote to me (edited):

Some great ideas by Jack Welch

"I am in SIM reading this book by Jack Welch and these are some of the tips which I thought I would like to share with you:

a) invest in people
people matter in our lives, value good friends and people

b) dominate your market or get out
This is like what you said to me and sounds exactly like the advice you gave to me! This is a good idea.

c) never sit still - we have to be relentless and restless because sitting on our butts, we cannot achieve anything great.... and the ship can only sail when it leaves the port of safety. This is a good idea as well!

d) one should also think service - according to Welch, one should also know how to provide good service and in particular better service, better than someone else... because people remember your service after the product is gone and waned.

e) forget the past and move on to the future -- what is gone is gone, the most important thing is to harness energy for the future because that is where we can embrace the new and look forward to new things and new money making opportunities and ideas.

f) learn and lead - life is about learning everyday, and life is also about leadership. We should learn new things every day and learn how to be leaders!

g) no bull - do not bullshit , be honest and straightforward - this is typical Jack Welch!

h) kill bureaucracy

i) stick around - be persevering and persistent, for money making opportunities and new ideas are always around the corner, and finally

j) manage the corner store - look out for things that seem insignificant and keep track of what is going on... I realise that I have to make sure that I am keeping abreast of what is going on around me. That's all I have to share regarding Jack Welch and his great ideas.

All these tips from Jack Welch of GE"

Thanks to Sally for her invaluable contribution to my ideas on how to become rich site! Thanks for reading and more important posts here on finance, investment and money making ideas to come soon. Thanks and cheers!

Ideas on how to become rich

Special series - how to survive a recession, part 4

Special series - how to survive a recession, part 4

I have written several articles on how to survive a recession here on my ideas on how to become rich site. You can navigate to the articles on how to survive a recession here:

Special series - how to survive a recession, part 1
Special series - how to survive a recession, part 2
Special series - how to survive a recession, part 3

In this post I shall be dealing with ideas on how to survive a recession if you happen to be hard hit by a recession. The first and most important idea is that prevention is always better than cure, and that sound financial planning and sound savings plans should have been the most important thing before any recession strikes, or for that matter, before any depression strikes (where a depression is basically a worse and prolonged version of a recession).

The question is: how do you survive a recession if you happen to be hard hit by one? Here are some practical ideas on how to survive a recession if you happen to be hard hit by one... good luck!

1. Education is important. Get more education and more skills.

There are many types of education, some professional and some academic. Now is the chance for you to pursue higher education or some form of learning where you can acquire new skills and new abilities that can be applied to finding and maintaining a job. The key fact is that in the 21st century, earning money will be tied to knowing skills and knowledge that can help you make money and help you work better. Education is more important than ever before to help you make money, and people who skip school or have not attained education are more likely to suffer from structural unemployment. That is not a palatable fact, but it is true that to earn money in the new knowledge based economy that is globalised, knowledge, education and skills are key critical factors to earning money and making a living.

With respect to financial education, sites like mine provide ideas, and you can actually get financial certification that will put you in good stead when the economy recovers. Try an MBA, or an accountancy degree, or some other financial certification such as an ACCA, CFA, CPA and the like, as these financial certifications will be very useful to you, job-wise as well as financial knowledge-wise. Prevention is always better than cure, and therefore not getting into a bad situation in a recession is always a good idea.

2. Adjust your expectations, in terms of job scope, salary and wages. Try out for other jobs, maybe even lower paying ones.

Usually recessions lead to massive unemployment because people get laid off. The thing is that if you happen to lose your job, that is not the end of the world, because you can find a new job - if you are willing to take the hit on the income and willing to work longer hours for lower wages. The question is how to survive a recession, remember? Hard work, lowered and adjusted expectations, and the willingness to adapt to the changing economic conditions - all are the necessary things to do.

3. The most important thing of all that you must do in a recession - tighten your belt!

The most important thing to do during a recession is to make the necessary reductions in expenditure, which basically means that you have to spend less. Spend less, spend less! You can spend more when the economy recovers and when you have a high paying job. The reality is that sometimes people are forced to do things out of necessity, and surely a recession is one of the biggest factors forcing people to spend less money, which they should during a recession.

Some financial advisors have even suggested cutting up credit cards and downsizing or even moving to smaller homes and selling home objects, although that might be very extremist. Just reduce expenditure, and there should be no need to go to such extreme lengths. If you need the money, however, then there might be no choice and you would have to bite the proverbial (financial) bullet.

The basic key and basic strategy for surviving a recession is therefore to reduce costs and try to increase income, if one has been laid off and has lost a high paying job. Maxim to live by during a recession - attempt to reduce costs and maximise income!

In the final analysis, more research is needed. My website helps people by giving financial education, investment schools of thought and their analysis, and investment knowledge, as well as ideas on various ways of making lots of money and becoming rich. I have come to the conclusion of the series on how to survive a recession, because ultimately this is not the focus of my site, and my site is basically about how to make money and how to become rich, and is mainly about ideas and education in investment, financial education and other such stuff. Recessions are not my cup of tea, because as I've mentioned prevention is better than cure.

Thanks for reading, take care, and all the best. More to come on my website on finance and making money so as to become rich! Thanks.

Ideas on how to become rich!

Special series - how to survive a recession, part 3

Special series - how to survive a recession, part 3

Welcome back to my series on how to survive a recession here on my Ideas on how to become rich site. In the first post here on my site I wrote about the orgins of the 2008 financial crisis, which can be seen to have had long rooted causes and goes back many years. In the second post here on my site I wrote about the various past depressions (a depression is a longer and more series recession) and also on several key terms and key terminology for the current economic and financial crisis.

You can conveniently and quickly view the articles that I wrote earlier quickly using these convenient links here:

Special series - how to survive a recession, part 1
Special series - how to survive a recession, part 2

In this post, I will be writing about the various assets that you can put your money in - that is to say, while the world/ your local economy/ your regional economy is in recession, what should you do with your money? Basically I am asking the question "how do I survive a recession" and answering it with another further and related question: "where do I put my money during a recession and how do I survive it without losing any more of my funds?"

From the Straits Times, here are the 10 safest to most dangerous investments you can make - financial instruments that you may want to consider to take you through a recession. Note that I do not deal with psychology and with how to cope with losing money and psychological aspects of recessions and depressions, with emotions and all that. My goal is far more limited and has to do with looking at financial outcomes, financial reasons, financial causes of recessions and what I can do with money, what I can do with other people's money, what I can do while the world is reeling from the 2008 crisis and other questions of this nature. That is the fundamental reason why this article on how to survive a recession basically deals with giving 10 financial instruments/ means and investments for you to make a choice. Where should you put your money? That is the question. In future posts here on this site, the special series will also deal with (theoretically) things you can do to cope and survive a recession if you have been hard hit.

Safest to riskiest investments/ financial devices etc

1. Money
2. Bank deposits
3. Money market funds
4. Bonds
5. Unit trusts
6. Equities/ Shares
7. Complex structured products
8. Futures
9. Forex
10. Hedge funds

(Straits Times, 28th Sep 2008)


Safest to riskiest investments/ financial devices/ holdings

1. Money

This is the most liquid form to hold, and in a recession might be one of the best ideas since stock markets go down in a recession. This form is liquid and can be easily converted from asset to asset, and can tide you over rainy days. However, do bear in mind that money diminshes in value due to inflation and also there is no way that you can make money from money without interest or investment. Thus, money is liquid and useful in a recession but loses its value to inflation and does not earn you a return.

2. Bank deposits

This gives you peace of mind as well as some minute, low interest rate, so bank deposits basically are good for you in a recession. In Singapore as well as in many countries in the world, your bank deposits should be guaranteed, at least up to a certain sum of money. However, if there is a run on the banks in a recession, then you stand to lose your money - or part of your money if the money is not entirely guaranteed. Also, it is possible that inflation may be higher than the little bank deposit interest rate. So while in a recession bank deposits and cash are very safe and very liquid, they also do have their cons, but in a recession you might be safer holding these two very safe forms of money.

3. Money market funds

These rank a bit riskier than money and deposits in a recession, and while these are basically stable and low risk investments, there may be a risk of default when borrowers do not pay back the loans owed and hence the money market funds which lent those borrowers money might lose some money. A money market fund is basically an investment into short term instruments and debt securities, and sometimes government bonds. You can place your money in money market funds for some time and these should be overall quite safe in a recession.

4. Bonds

These are rather safe investments - bonds are basically fixed income instruments where governments and companies raise funds by borrowing money. These are basically debts.

The returns may not keep place with inflation in a recession, and also there is the risk of default, so do stand warned. This is more risky than money market funds which are diversified.

5. Unit trusts

Your investments will be managed by professionals, you can get high returns sometimes, there is diversification; however, in a recession, these are many risks and sometimes you may not get your capital back. Unit trusts (or mutual funds) are only good for new investors or people who have little knowledge of the stock market. In good times, a lot of money can be made, but in a recession lots of money can be lost and your capital and principal may not make it back.

6. Equities/ Shares

If you are Warren Buffett, or for that matter any savvy investor and wise man, this might be a very good option for you, in a recession or not. However, in a recession this may not necessarily be a very good idea unless you have an appetite for risk and you really know what you are doing.

7. Complex structured products

High risk products which give you potentially high returns, but they have complex underlying mechanisms which may not be fully understood by investors - therefore a very risky investment to place a lot of money in a recession.

8. Futures

There are low transaction costs, low outlay with the potential to make a lot of money and become rich, but just as there is potential in making a lot of money, there is a possibility of losing a lot of money as well. Derivatives are usually only for professionals or very savvy and intelligent investors, and even then, in a recession these are very unsafe.

9. Forex

You can generate and make a lot of money in good times and in also still make money in bad times with forex trading and there are many pros and cons discussed here: visit these links here to see what I have written on forex here (a summary page to access links to forex articles here on my finance and investment site).

However there is a need for intensive research, this may be rather dangerous, constant monitoring is needed, and forex is usually only for pros and savvy investors with an appetite for risk.

10. Hedge funds

You can make a lot of money here, but you can also lose a lot of money. You depend on the fund manager here and then again, in a recession this might not be a very good idea. This according to the Singapore news is the worst and most risky investment in a recession, and I must say that I agree. Only investors with a lot of money to risk should do this in a recession, and there must be a ability to wait for the economy to recover. This is the most risky investment when compared to the rest above.

That was a lot of analysis and it deserves a close attention and serious reading. Hope that gave you a better idea of what to expect in terms of investment and money during a recession. More to come on my site on this special series on how to survive a recession!

Thanks for reading, cheers.

Ideas on how to become rich!

Special series - how to survive a recession, part 2

Special series - how to survive a recession, part 2

Financial education here on Ideas on how to become rich!

This is my second instalment in my series on how to survive a recession, or more accurately, what can we learn from a recession and what can we do during one so that we can make money or prevent the loss of money. I do the research and present it on my site so that you can learn and benefit from financial education and so that your investments will be well informed such that you make money whenever you can and avoid losing money if possible. Here are some information and word definitions related to recessions - but in particular, these are about the great stock market crashes of the last 100 years and the words associated with the latest stock market crash in 2008.

(All investment/ stock market/ news information from the Straits Times in Singapore)

First and foremost, a recession is a period of falling economic growth, and a depression is a period of prolonged and powerful recession.

These were the great stock market crashes of the last 100 years:

1929 Great depression - which lasted until the Second World War

1973 The oil shock - which had to do with OPEC, the Yom Kippur War and much more which I will discuss in future posts in future here on my site

1987 Black Monday - a fall in the stock market when confidence plummeted

1997 the Asian Financial Crisis - the crisis caused by currency speculation, and spooked investors, and this was the particular stock market crisis I said earlier that caused American investors to criticise Asian markets - and Asians were even criticised about their political systems (but the problem is that there should be blaming here or there, because all economic systems have their own inherent pros and cons, their own inherent good parts and bad parts, financially speaking)

2001: 9/11 and the Dot Com bubble bursting - we all know this one because it was both a political crisis and also an economic crisis

2008 The current Credit Crisis which will surely go down in history - so in a sense here we are, and here I am, writing about future economic history.

The central question of "how to survive a recession" is rather simple to answer, if one takes a sufficiently long term view - all the recessions mentioned above and all the stock market crises ultimately recovered, because the business cycle operates in such a way that there will ultimately be recovery.

This second part relates to terms and words that you need to know if you wish to understand the global crisis further.

securitisation - banks securitise loans by making them into "investments" which are then sold to third parties, rather than the usual practice of banks holding mortgages

mortgage backed securities - the basis of the 2008 financial crisis, these repackaged home loans are the IOUs that third party investors bought (see earlier term for a better financial understanding)

credit default swaps - these are basically insurance policies that companies and investors bought to protect themselves from the default of the securities - the buyers of these swaps make regular payments to a swap seller, usually an insurer, in exchange for a payout when there is a default (the economic problem with AIG becomes very clear when you realise that it was such companies like AIG selling credit default swaps from banks and other investment banks so that the risks would be lower for those investment banks - but all the risks went to AIG instead)

collateralised debt obligations (CDOs/ or toxic debt) - these are like mortgaged backed securities, but instead of mortgages, these are made up of differnt types of assets, including commercial property and bons (CDOs and mortgage backed securities are some of the instruments that people call toxic debt, because of obvious reasons)

leveraging/ gearing (in Singapore we say gearing instead of leveraging, but the two terms are synonymous) - basically this is using OPM (other people's money) - the degree to which a company or an investor is using borrowed money, and the problem with gearing is that, while it is very useful on the upswing and can make you a lot of money, the converse is also true that it is not useful on the downswing and can lose you a lot of money since it works the other way as well

deleveraging - what is happening now (in 2008), as banks and companies have to put up more collateral and reduce their debt levels by selling their assets and raising capital

libor/ silbor - the london interbank overnight rate and the singapore interbank overnight rate respectively (basically, the rates that banks charge when they lend money to one another, be it in London or Singapore) - the process works the same way in the USA, in a similar manner

treasuries - treasury bonds, notes and bills - these are government bonds issued by the USA Treasury Department. These are seen as the ultimate safe haven investments because they are denominated in US dollars, backed by the US government and are very stable

derivatives - these are a class of investments that derive (hence derivatives) their value from another underlying asset, such as company stocks, allowing investors to profit from movements in the stock price without owning the stock - basically investors can take bets on anything from interest rates to stock prices

short selling - when an investor sells a financial instrument that he doesn't own, in the hope that he can buy it back later at a lower price and earning a profit - short sellers usually borrow stock to make good their promises - currently short selling has been banned in many countries because they are exacerbating the financial crisis by making it worse

hedge funds - these are private, barely regulated investment funds that manage assets using high risk high return strategies, and they often leverage / gear to get bigger returns, and they usually even engage in short selling - doing anything to make money.

In summary, here I've shown you a list of the several stock market crashes and important dates that you need to know in your financial education, and also you now know more words and ideas associated with the current stock market crashes worldwide and the recession worldwide, in 2008. One key idea is still that prevention is better than cure, and the thing about most of the financial instruments that have caused problems is that to prevent yourself from losing money, you should always be aware of the pitfalls of what you buy. Simply and beautifully put: "Rule No. 1: Don't lose money. Rule No. 2: Don't forget rule no. 1." Knowledge and more research is key and very important to surviving a recession and a stock market crash.

In my next post, I will share ideas on what to do with your cash and your money if you are afraid of the current economic crisis, by showing you options in which to place your money. The current recession caused by the financial crisis worldwide has not prevented Warren Buffett from investing in the stock market, because to him the prices of most companies has gone down and now he can acquire many good companies at cheap prices.

Ideas on how to become rich!

Special series - how to survive a recession, part 1

Special series on ideas on how to become rich - how to survive a recession, part 1

This is a special series only for this month on my Ideas on how to become rich website. The thing is that my site focuses on ideas on how to make money, case studies on rich people and their ideas, investment ideas and investment knowledge, education with respect to finance, business and entrepreneurship, and the like. Yet there has been no mention of a recession, so I've decided that it's high time that I wrote about recessions and how to survive them.

Actually there are many caveats that I have to state categorically first before delving into the topic on how to survive a recession. The first is that there are many ways of surviving a recession and that there is no one single way of surviving a recession. The second is that sometimes, it is hard to say whether one can or cannot survive a recession, because a recession sometimes makes it hard to know whether or not you will be the one affected when all along you've been fine in your job or in your career. The thing is that the title of the post "how to survive a recession" is actually wrong, because the idea is still that prevention is better than cure. Fourth, the post here on "how to survive a recession" is actually better labelled "what to do with your money during a recession, and in particular this particular recession that the world is facing". Having stated all those caveats, this post and the next post is a foray into the world situation standing as at October 2008, and the collapse of world financial markets and financial institutions in the USA.

The world is in recession at the moment due to the global financial crisis that started in the USA. In my opinion this still highlights the importance of a financial education and the usefulness of blogs like mine where people learn about investment, business, money, financial education and finances in general. How did the world financial crisis of 2008 come about? Here is a summary for those who need a look into the crisis.

In the USA, prior to 2008, there had always been a double deficit of the budget deficit and the current account deficit in the balance of payments. This is the long term factor. The more intermediate factor was the subprime crisis in the USA, which basically worked as follows: many people in the USA borrowed money to buy houses, and normally the mortgages would be held by US banks. However, the thing is that some of the loans were made at subprime (hence "sub and prime- subprime") rates to borrowers who really had no real long term ability to pay back. What the banks did was that they decided to finance all the risks by securitising, which is a fancy way of saying that they passed the risks all to other bank customers - the US banks made the loans that they made out to others into securities and other bank financial instruments, and sold them as "investments" to customers. This made the banks safer in the sense that they did not hold the risks - their customers did. Did I also mention, that property prices went down even though the customers expected prices to continue rising? In economics, after a boom usually comes a bust - after a bull market, there usually comes along a bear market, and that is precisely what happened. People borrowed money to buy houses that they could not afford and the prices of those houses went down, while other people made investments into houses that people could not afford. A recipe for disaster, but that was only the intermediate factor.

The immediate trigger for the crisis, at least in my own personal opinion, and I am an economist by academic training, was the collapse of the Lehman brothers which was not supported (rather, bailed out of their liquidity problems) by the US government. In a nutshell, the US government did not bail out this ailing giant, and that was when the whole problem started. AIG started having problems a while later, and then the whole of the western capitalist system that had criticised communism and criticised "Asian values" and Confucian values as leading to economic disaster also fell ill; in short, capitalism, American style, is also prone to problems and illnesses just the same as communist economic systems and Asian economic systems. Understanding that economic systems in the world all have their own problems and their own pros and cons is already a key step into financial education (i.e. there are many ways to skin a cat, if you get the drift).

The final point to note is that the crisis spread all around the world because suddenly there was a run on banks and a general fall in stock market confidence worldwide. People yanked their money out of stock markets and financial instruments and started putting their money under their pillows. As you should know, the rapid decrease in the supply of money (this is simple demand and supply analysis) soon led to liquidity problems because banks and other financial companies (and companies in general) could not rely on stock markets to raise funds, which in turn affected their investments and even day to day operations, while at the same time, stock prices came crashing down.

I am writing this article in October 2008, and this is one of the biggest world economic crises that I have seen in ages. Yet, this is not the first time that the world has faced such a problem. By now we should be able to overcome such problems because we have seen recession after recession and learnt key facts and key ideas about economics and how markets work. Yet people don't seem to have learnt much and there is still much room for learning and improvement. Do stick here with my site and learn more about recessions as I seek to explore the topic on "how to survive a recession", a key skill that we will need as recessions come and go often in the world economy, and learning about them may give us ideas on how to become rich despite the fact that others are finding money hard to earn.

I don't purport to know all the answers, but let's have a look into recessions, ideas and concepts on "how to survive a recession" in general, and perhaps we can glean some important insights into how to make money when others don't and how to avoid losing money. In addition, we can also attempt to learn about the various options that we have for investment and the various options we have for surviving a recession. Some ideas will be general, and some ideas will be specific, so learn what you must and glean the ideas if you need them. Cheers and thanks for reading!

Ideas on how to become rich!

Case study: Anthony Robbins, part 2

Case study: Anthony Robbins, part 2

This is my last post in my case study series for now. In future case studies, I may research and write about Bill Gates and other millionaires and billionaires, and I even intend to write an article on how to become a billionaire, based on my research here on my ideas site.

This article is about the psychological side to what Anthony Robbins talks about and how we can adapt his ideas and what he does to our use, which is making money and becoming rich.

The key difference between quotes by people like Warren Buffett and quotes by Anthony Robbins is that Anthony Robbins' quotes are mainly psychological and mainly rhetoric meant for motivation and self motivation purposes. Warren Buffett quotations, on the other hand, have some use in terms of what they teach in terms of logic, in terms of real ideas on how to make money, and in terms of real principles of finance and principles of how to make money on the stock market, as well as the occasional quip here and there. Therefore, the only real use for Anthony Robbins for our purposes for making money is to see what he does and to answer the question if what he does is replicable for us or not.

That is not to say that Anthony Robbins' psychological motivation and the good words that he has are not useful; they are - it's just that between such words and the quotes from a wise man who invests in the stock market, you would probably want to choose the man who knows how to make money.

I have already written some of the psychological and motivational quotes from Anthony Robbins in my earlier post, and here are some more famous quotes from Anthony Robbins that have inspired me psychologically. Bear in mind that these are good pieces of advice in their own right, but we shall not focus on them; we shall just read them then go on to analyse what he does in terms of how he makes his money and how we can learn to become rich.

Setting goals is the first step in turning the invisible into the visible.

Most people fail in life because they major in minor things.

Once you have mastered time, you will understand how true it is that most people overestimate what they can accomplish in a year -- and underestimate what they can achieve in a decade!

Most people have no idea of the giant capacity we can immediately command when we focus all of our resources on mastering a single area of our lives.

It's in your moments of decision that your destiny is shaped.

Quality questions create a quality life. Successful people ask better questions, and as a result, they get better answers.

Whatever happens, take responsibility.

Your life changes the moment you make a new, congruent, and committed decision.

Beliefs have the power to create and the power to destroy. Human beings have the awesome ability to take any experience of their lives and create a meaning that disempowers them or one that can literally save their lives.

Having dealt with the psychological part, the next question is what tangible lessons can we learn from Anthony Robbins? This site is all about ideas on how to become rich and ideas on making money, after all. How can he teach us to make money and become rich?

1. Motivational seminars are low cost events that can have the potential to make a lot of money. Yet it seems that you need to be already recognised or have the potential to be recognised, before this is a good option for you to make your money from this kind of thing. You will also need skills and abilities to convince people to come to your seminars and to listen to what you have to say, and above all, feel that their money has been well spent on your advice and motivational ideas.

2. Writing books on motivation may turn out to be a more important and better way of making money, because this one does not require you to be recognised first, if you are a good writer and you can find a good and reputable publisher. Yet it also seems to me that if you want to become rich doing this, you may need to write many books and ultimately you face the same dilemma that you need to be famous in order to make more money. That is, you can make some money from writing motivational books. But the real money in it is not from writing motivational books and being unrecognised, but rather in writing motivational books then becoming very recognised and then from there branching out into motivational talks and other such stuff. Then, and only then, will future books earn you a lot of income. Therefore, the fame factor still comes into play when writing books to make money.

3. NLP. This is actually a very controversial field, and I even have written entire articles about it elsewhere. It plays almost no role in our study because we are now ignoring the psychological part of making money and looking into how we can actually, tangibly, make money and become rich using Anthony Robbins' ideas.

4. Acting. Above all, Anthony Robbins is a performer and an actor. He can make money doing this but this might not be a good idea for most of us and the majority of us will never be famous actors or performers. Yet this does not rule out the fact that one or two of you readers may become famous actors or performers or even famous TV personalities. Anthony Robbins is basically teaching us to leverage on our strengths to make money.

In conclusion, here are the aspects of money making that really matter - the ideas on how to become rich that we have extracted from Anthony Robbins' ideas:

1. Motivational seminars are low cost events that have the potential to make a money. Yet you need to be already recognised or have the potential to be recognised.

2. Writing books on motivation may turn out to be a more important and better way of making money, because this one does not require you to be recognised first, if you are a good writer and you can find a good and reputable publisher. Yet it also seems to me that if you want to become rich doing this, you may need to write many books and ultimately you face the same dilemma that you need to be famous in order to make more money. Therefore, the fame factor still comes into play when writing books to make money.

3. NLP. This is actually a very controversial field, and I even have written entire articles about it elsewhere.

4. Acting. Above all, Anthony Robbins is a performer and an actor. Anthony Robbins is basically teaching us to leverage on our strengths to make money.

Thanks for reading and there will be more finance articles coming in future posts here on my site on Ideas on how to become rich. Recently in Sep and Oct 2008, with economic conditions worldwide becoming bad, with subprime in the USA and a crisis of confidence in banking worldwide, there is an even more pressing need to be financially educated and wise with money and investments, so I will try my best to educate, share ideas, teach and suggest. Stay tuned for more here on my great site! Thank you.

Ideas on how to become rich!

Case Study: Anthony Robbins, part 1

Case Study: Anthony Robbins, part 1

Welcome to my case study on Anthony Robbins and how to make money and become rich by studying what he does. Some of my friends have asked me why is it I haven't written anything about Bill Gates, Larry Ellison and the other more famous/ "common"/ established billionaires, who have definitely got skills in making money, but have instead chosen to focus on several other people instead. Well, here's a couple of justifications before I write on Anthony Robbins and how he makes his money.

Firstly, I am definitely going to write about Bill Gates and other billionaires, and indeed I am going to attempt to write an article here on my Ideas on How to Become Rich site on "How to become a billionaire", but that will be in another post. That will be an epic post, and it will be good, trust me!

Secondly, these people I have chosen for my case studies are all special in their own way. Warren Buffett is a billionaire, but he is quite unlike other billionaires. He makes money in a special and unique way that should be analysed and read seriously, and I have done that. If you have learnt anything and taken away some knowledge and absorbed some materials for your own good, then that's great and I have achieved some measure of financial education. Trump is also a billionaire, and his area is in real estate, as well as other fields in which he makes money and we can learn from those fields. Kiyosaki is someone who is not that rich but has made it, and he makes money in a manner different from the other two while espousing quite unique views (true or not, depends on which of my analyses you believe - the pro Kiyosaki, or the anti-Kiyosaki).

So having said that, this will be the last post in this series of case studies, and I will resume the series later. I will be writing about financial topics, finance and other financial matters and of course the theme is still on how to become rich and how to make money.

Without further ado: Anthony Robbins, part 1

Anthony Robbins is not that famous worldwide, and he is not as rich as Bill Gates or Warren Buffett, but he is quite recognised in his field and he makes a lot of money doing the following:

writing about self motivation and self actualisation, speaking about the same topic, and acting.

Basically, Anthony Robbins makes his money from motivational seminars and motivational books. And he makes a lot of money.

I first came across when I read his famous book called Awaken the Giant Within. Basically he is a famous person because of his emphasis on NLP, but there has been a huge debate whether or not he has made the field his own and incorporated his own thinking and ideas into the field, but that is not of our concern. We are only concerned about what he says about making money and becoming rich, and we are also concerned about how he makes his money and how we can learn from his example. What can we learn about money from his ideas, as well as from his actual actions?

The key point is that he has become very rich writing and speaking about motivation to lots of people, and basically he is a life coach, life trainer, personal coach, motivational speaker, or even less charitably, a spin doctor. I will talk a bit about Anthony Robbins here first, and in the next post I will give my analysis. Right now, this is what you need to know about Anthony Robbins and his ideas:

Anthony Robbins believes that you need to condition yourself to thinking big and thinking rich, and by doing so you will become rich. For instance, he has a personal programme to coach people called Personal Power that argues that people can be conditioned into becoming positive thinkers, and that your life can be changed by yourself.

Here are some of the famous quotes that I managed to find:

How am I going to live today in order to create the tomorrow I'm committed to?

Using the power of decision gives you the capacity to get past any excuse to change any and every part of your life in an instant.

If you want to be successful, find someone who has achieved the results you want and copy what they do and you'll achieve the same results.

Most people have no idea of the giant capacity we can immediately command when we focus all of our resources on mastering a single area of our lives.

Remember, a real decision is measured by the fact that you've taken new action. If there's no action, you haven't truly decided.

The higher your energy level, the more efficient your body... The more efficient your body, the better you feel and the more you will use your talent to produce outstanding results.

The truth is that we can learn to condition our minds, bodies, and emotions to link pain or pleasure to whatever we choose. By changing what we link pain and pleasure to, we will instantly change our behaviors.

One can see immediately to answer the question on how to become rich, Anthony Robbins goes for action, conditioning and positive thinking. These are the key ideas for him on how to become rich and make money: by changing your psychological attitude and your perspectives. The question you must ask is that do action, conditioning and positive thinking play an important role in making money or are they part of a larger framework?

In my next post on Anthony Robbins, where I analyse what he has spoken about, I will deal with the psychological part on how to become rich that Anthony Robbins has suggested, and I will also deal with learning and adopting his ideas for our use.

Cheers and thanks for reading!

Ideas on how to get rich!