This week my travels took me to an art show  – partly it was a fundraiser and partly it was for social reasons. While the intent was not to buy art, it was to help the cause of the evening. In these types of events, there are show stoppers where everyone is suppose to be in awe of what a designer did. While it is very possible to respect the talent, the time, the energy, sometimes asking yourself do you want to see that piece everyday limits the desire to bid on the item. One of the show stoppers took the designer 8 hours to put together which meant another 20 hours to figure out the concept and the rough drafts. Remembering in most art galleries, there is a 3 second rule, in that the average person will spend looking at the art. If they like it, they will linger more and if they love it they will come back to determine why. It means many creative people have many possible strikes against them before they start as they attempt to show it to the right person in the right time in the right moment that is good for that person.

Linking to dividend paying stocks, part of your research is the history of paying dividends and ideally rising levels and you will find there are many fine companies operating. Depending on your expectations you will need to narrow the stocks down to the sectors which you can easily follow. Then pick a company or companies and both dividends and capital gains will enrich you which could allow you spend money on art.

There are more questions than answers, till the next time – to raising questions

For the past few weeks, part of the weekly shopping stops was to look at running shoes. Last fall a pair were bought at a deep discount ( a bargain at the time) and before Christmas the seams were coming apart. By March, the seams were only good if the land was dry and given in the northeast we are finally moving into spring, the shoes had very limited value. Over the years, the styles of running shoes have rapidly evolve to be part fashion and part usage. How much you wish to spend is another part of the equation. A desire for a pair of basic runners with all the wonderful air features was what I was searching for. A determination of price or how much should the total bill be was quickly a concern. Running shoes can be relatively inexpensive but they seem to quickly jump over $100 a pair; although many stores have a special or one coming up.  After a few weeks of looking, a pair of running shoes was found with the desired features at a price point that was considered good (and yes they were on sale).

Linking to dividend paying stocks, similarly with investments taking your time to see the many options that are available is very important. It is also important to determine what features you wish by checking out the marketplace. After you have done your research, a stock can be bought for all the right reasons – in this case the recommendation is does it pays a dividend? Doing it for the right reasons, on your own time, leads to better results.

There are more questions than answers, till the next time – to raising questions.

While most people are good, if you look around you will find someone who is not good. The ones who are not good come from both the rural and urban areas, the goulish ones seemed odd, but outwardly they seemed like nice, quiet people. In the book, Villains, Scoundrels and Rogues by Paul Martin, Prometheus Books, Amherst, NY, 2014 the stories outlined some crimes against people in terms of multiple murders, some crimes against humanity – slave owners; eugenics and sterilization; and hucksters. The hucksters is the interest of blog. One of the huckster was the Yellow Kid Weil who looked upon crimes as opportunities to teach the avaricious a lesson. Every victim of one of my schemes had larceny in his heart. An honest man would have no part of any of my schemes. They all wanted something for nothing.  The problem for the victims was even if they suspected a fraud, it was hard to explain to authorities they were suppose to get rich with an inside deal, which is illegal to do in the first place.

Linking to dividend paying stocks, one method not to be fleeced is buying profitable companies which return a dividend. In this fashion you can research the number of years of returning a dividend; you can research why the company is expected to pay again the following year (its strategic advantages) and be certain you will be paid. Over time the share price and the dividend will provide a better than average return and you will have your cake and eat it to and its all legal.

There are more questions than answers, till the next time – to raising questions.

The last few blog posts have been about growth and to make changes in a company needs senior management approval. It makes life much easier if senior management actually wishes to make changes. If they do not, you will have to learn how to pick your spots while you either move up or wait for the management to change. If you decide to pick your spots, Rocking the Boat by Debra Meyerson, Havard Business Press, Boston, 2008 is a good book to read as the subtitle is How to Effect Change Without Making Trouble. The idea is you enjoy what you do and want to keep your job but move the organization to something better than it is.

The steps are essentially how to negotiate whatever you want, except in a medium size or large business, processes often move at their pace. Which means having an ear to the environment of the organization. It also means figuring out how to remain true to yourself; how to turn personal threats into opportunities; how to broaden the impact and leveraging small wins into bigger results. Organizations all evolve through many different decisions, some people are better managers, some are bad managers but they were promoted and if you work for them, you likely still want to work for the company and the first method to rock the boat is stay employed. The second method is to get promoted and be a good manager of people. Often times middle management can have the greatest effect because they manage people well and by managing them well can adapt some corporate rules to fit into people’s lives. The adaption will then be noticed by others and soon it will be the new normal, but it starts will people being true to how they are. We are all individuals, but come to work for an organization, some of that individual we leave at home, some of it we bring to the organization.

In many instances the answers which are never black or white, come to how hard should your push? The factors are:

1. Timing – is it a good time to take a risk and pose a challenge?

2. Stakes – is this a fight worth fighting for? how high are the stakes?

3. Likelihood of Success – how promising are the hoped-for results? will people learn?

4. Options – are there better alternative responses to those that oppose a risk to you? are there better ways which you have not explored – committees?

5. Consequences of failure – what are the worst outcomes? do you expect to be promoted? will it happen after the push back?

6. Personal association – why this issue? can you find a third party to help?

7. Doability – does a response feel doable? what outcome do you want?

The above are generic to typical negotiations, the key is to have actually thought about the results and consequences before hand. Many people tend to try to rock the boat, but they have not thought of the consequences and end up marginalized. If you are going to change something or work on something being changed, what outcome you have in mind is a very good first consideration and the outcome has to be in the language or those who you wish to change. An example is you might think of personal reason, the other person thinks does it cost the company money or bring in more profits if you change something? The other person also thinks that going through the ranks to where they are, life had many sacrifices which you do not know about.

Linking to dividend paying stocks, similar to things in life, when you buy company shares at some point time you may run into someone who works at the company. Sometimes it is one of the reason you bought the stock. You have an opportunity to ask on a more regular basis about the person’s work and actively listen. One of the many things is asking about how change works in the organization.

There are more questions than answers, till the next time – to raising questions

According to the book Every Business is a Growth Business by Ram Charan & Noel Tichy, Times Business, NY, 1998. the authors believe there is room to grow in every business. The last portion of the book is a handbook to begin the process for you to examine your company and where it can grow. As a profitable sustaining business you are good at something, better than the rest, which means if desired you could extend your abilities to beyond what you are doing. Most companies are very good at the basic aspect of their business, they may not be so good at the other aspects to run the business and that is where the abilities of your company can be used to solve the needs. Can the pond be bigger? When you see the pond can be bigger, are you willing to make it bigger?

Sometimes the answer is no for example a  number of years ago, the author worked for a medium sized business which owned what its customers thought were 3 competing businesses. The customers would switch some of their purchasing between the 3, never knowing the ownership structure. The owners had little reason to innovate or to grow for they were satisfied with what they had.   Another company which I worked for had some of the best assets in the business, but very little desire to exploit them or use them to meet their customers needs. The company had very loyal and wealthy customers, but with a management structure in which any change needed senior vice president approval and they were content to rest of the laurels of the past. The business was profitable, but it could easily had been a leader; in the end, it was sold to a bigger institution.

The above are examples of before any company can decide it wants to grow the leadership must want to lead. In many cases, the leaders say they wish to grow but the internal rules of the company highly suggest that is not what they want. For example, part of innovation is getting it wrong, but the key is to start small, do pilot projects and scale up. In some companies they are adverse to getting it wrong so not doing or only doing innovation at the margin makes a longer career.  If the company decides it wants to grow 4 questions must be answered and worked on.

1. what existing customers believe about the company and its products.

2. what employees think of the company.

3. the company’s real competitive position

4. whether the company was generating enough cash from operations.

Often what people on the outside think and what people in the inside think are two different answers. Bringing them to one answer is the challenge of the leadership.

Linking to dividend paying stocks, companies which pay dividends have a existing profitable market share which is great. The challenge is to maintain it while a great many things change in the marketplace. If the company is not trying for growth but is happy to sit on its past, then the competition will rise up and take its profitable operations for they will offer better. Only if the company is a monopoly and highly regulated one, even though, there are methods around those companies. As a shareholder you need to see the company growing or be prepared to sell your shares.

There are more questions than answers, till the next time – to raising questions

Continuing with the growth theme – at some point in time, the business will be seen as a mature one, where it seems the object is to fight over 5% of the market.  Does that mean the business stops growing? or does it mean there is still room to grow? According to the book Every Business is a Growth Business by Ram Charan & Noel Tichy, Times Business, NY, 1998. the authors believe there is room to grow in every business. They believe if your business is not growing sustainably and profitability, it is dying. The four principles to growing every business are: 1. believe and act on the idea there is no such thing as a mature business. 2. the company’s growth is profitable, sustainable, and capital efficient. 3. companies grow because growth is in the corporate mindset created by the companies leaders. and 4. the mindset starts at the top but must reach the bottom or is at all levels.

Why is this important is one critical aspect of judging a company is the company’s leaders to deliver a profitable sustainable growth.

The crucial points from this book are:

1. There is no such thing as a mature business.  What is your water?

How does it start? the first aspect is looking at the pond you are in, how do you define it? A wonderful example is Coca-Cola. In the 1990’s, the company had a 35% market share which was profitable. However the President Roberto Goizueta asked a question of its executives. What is the average per capita daily consumption of fluids by the world’s 4 billion people? The answer is 64 ounces. What is the daily consumption of Coke? The answer was less than 2 ounces. The competition was not Pepsi, but water. If the competition is water, Coke is a small fish in a big pond, and there were more things that can be done. Coke began its transformation and has continually raised its dividend.

2. Not all growth is good. Good growth is sustainable, profitable and capital efficient. There has been many companies that have increased their revenues because that is what leadership were paying for. In the most recent case of mortgage backed securities, the more that were packaged and sold, the more the financial institutions made. The problem was the quality of the mortgages rapidly decreased and there was no money to repay the mortgages. However before that happen financial institutions were booking profits on revenues and trying to get the mortgages off their books. Unfortunately most ended holding great amounts of mortgage back securities which were written off or not profitable.

3. Growth is a mentality created by a company’s leadership. Leaders must believe and infect the rest of the organization. Change will be tough, but change can be wonderful. In the book, Citibank changed its focus to be the banker of choice or do multiple transactions for its target market. To do this reorganization and the ability to bring in expertise to help their clients and gain the ability to do multiple transactions took time and effort to do, Once it started the pond grew in size.

4. Balanced growth is the key to prosperity in the 21st century. In the end your customers come to you to fill a need. If you focus of solving needs, products and services will come. The four paths are A existing customers with existing needs; B new customers with existing needs; C new customers with new needs and D existing customers with new needs. The challenge is to evolve with your customers and satisfy their continuing needs as the world around them changes.

5. Growing is less risky than not growing. If you are constantly cost cutting, being defensive you will not be satisfying the people in the company or the customers and both will begin to look and go elsewhere.

Linking to dividend paying stocks, often companies that pay dividends are in businesses that have been defined as mature for there are fewer competitors in what is considered an existing pie. The competition is to gain a slightly bigger piece of the pie, but can the pie or pond be enlarged? As a shareholder you want to know what does the leadership of the company think about the pie and its opportunities. Then other decisions can be made.

There are more questions than answers, till the next time – to raising questions

The economies of the world have taken a battering and many scaled down to survive, but the times are changing to back to normal and growth should be on your mind. Partly because the weather is changing and the wonderful season of spring is near when plants make their dramatic growth spurts to get through the sunny months of summer. In terms of business According to a Les Mack on the Inc website (you can watch the video) all business are either in the growth or decline stage. The goal of every business is to sell to a profitable, sustainable market.

Step 1 – start a business for a very specific thing in a profitable, sustainable market. If you do this you have a business, if not it is a hobby. This is the reason why 80% of new businesses fail, they do not have a profitable sustainable business.

Step 2 is fun. You have found the profitable, sustainable business and you sell more. The answer to everything is to sell more and it is relatively easy. At this stage the person who had the vision to start the business and the employees (operators to get it done) are in synch. They can handle the problems and enjoy working together.

Stage 3 is white water.  The business is becoming complex and layers of management develop because the business is becoming complex. The improvisation of the past does not cut it anymore because systems and processes are needed to operate the business. It should be noted visionaries tend not to like systems; processors do not like improv.

Stage 4 is predictable success. The growth of the company means the company needs to hire another senior manager who will predictably not know the visionary but will be great with systems. This will cause conflict between the visionary and the earlier people who may not have the title but have the relationship between each other to solve problems.  There are two possible pathways at this stage – scale up or do not scale up. Scale up means to go regional or national in scope. Not to scale up means to stay more local, each has its plus and minus points or there is no right answer.

Stage 5 is treadmill. This means as the company goes further more systems and processing is done.

Stage 6 is the big rut. The company drifts for a long time because it has lost the ability to self diagnosis.

Stage 7 is the death rattle. Eventually the company goes out of business and its assets are sold off.

Linking to dividend paying stocks, most of the time the companies are in the stage 4 area because they have a profitable sustainable market which allows the company to generate cash flow to pay back the investors. Start ups are about stage one companies, mature companies must pay attention to start ups because the visionaries see market opportunities everywhere. Mature companies are very good at protecting their turf which is good for dividend holders and that is why mature companies buy start ups – they are not very good at start ups because of the processes and systems in place or bureaucracy to run the company smoothly. One of the things you should look for in your company is what companies have they bought.

There are more questions than answers, till the next time – to raising questions.

Although the rules were different, than they are now, it is interesting to note Mr. Carnegie’s investment strategies which were outlined in the book Andrew Carnegie by David Nasaw, Penguin Press, New York, 2006

Only invest in companies you have investigated yourself

Only invest in companies which you have insider knowledge

Only invest in companies that sell goods or services for which demand is growing

Never invest as an individual but as a group with trusted associates who together will own a controlling or dominant interest in the company.

The above can be easily translated into before investing do your homework or investing takes time. You have many biases and interests, stick to those areas for not only will you be informed, you will stay informed and be able to answer why this company? Investing in growing companies is sometimes easier than companies that need to be turned around. Investing with a group whether it is a formal mutual fund, semi-formal one, but people you know and can banter ideas around with.

When Mr. Carnegie merged his steel company into US Steel, he was very wealthy and his aim in life was to give the money away. He decided to invest in libraries, partly because when he was young there was very few and he enjoyed reading. He gave money to his home town – where he spent time as a youth, and where the steel plants were in Pittsburgh as well as to national interests. He often gave money as seed money, with the expectation the trustees would operate and grow the funds. Many teachers in the US have a pension in the TIAA CREF fund, Mr. Carnegie seeded this pension fund. As well as a number of other Carnegie Endowments for peace, science and music.

Linking to dividend paying stocks, the dividends can be used for reinvesting into more investments, some can be used for expenses and some can be used to give back to your community to reflect your interests. To give back, it is highly useful to be able to count on income or dividends every year. When Mr. Carnegie was giving money away at $15 to 20 million a year, he was also earning a similar amount so he had a lifetime of giving money away.

There are more questions than answers, till the next time – to raising questions

At the turn of last century, Andrew Carnegie was the richest man in the US with the bulk of his fortune coming from Carnegie Steel which was merged into US Steel. You may also know his name through the free library buildings he gave. Mr. Carnegie originally worked for a railway and was able to be a position where he was included in insider purchases. When the railway boom was on, the method to make the greatest amount of money was first the the railway bonds were sold. Second, the insiders had the contract to build the railway in which the money raised included a significant portion for the insiders. Third, when the railway was finished, most of the time the railway bonds decreased in value as there was little traffic. Eventually the lines were consolidated and then money was to be made for monopolies were set up. As an insider, Mr. Carnegie moved from being involved in the railway to being a supplier for the railway. First he was involved with an oil company, then a supplier of iron rails. It was in this phase which he learned about steel making and soon had the best steel plant in the US to make steel rails; for the railway companies changed to steel rails as they are durable. When the boom of railway building slowing down, Mr. Carnegie moved to plate steel and uses for ship building, bridge building and eventually automobiles. The merger into US Steel was worth today’s $ 150 billion.

Mr. Carnegie’s first investment was in oil wells in Pennsylvania and discover the wonders of receiving a dividend payment. He was hooked on capitalism and receiving dividends..

Although the rules were different, than they are now, it is interesting to note Mr. Carnegie’s investment strategies which were outlined in the book Andrew Carnegie by David Nasaw, Penguin Press, New York, 2006

Only invest in companies you have investigated yourself

Only invest in companies which you have insider knowledge

Only invest in companies that sell goods or services for which demand is growing

Never invest as an individual but as a group with trusted associates who together will own a controlling or dominant interest in the company.

The rules of investing have changed and insider information is used for short term gains, however investing in long term, means you have to continuing be aware of the industry although there are simple measures such as asking is the dividend safe? will it continue to be paid? Rather than insider information, one should say informed which means keeping abreast of the trends and developments in the company.

There are more questions than answers, till the next time – to raising questions.