Investment Strategy

My Investment Strategy needs updating after reading the book " What I Learnt  Losing A Million Dollars".

1. Position Limits

No More Than 25k in a single stock.
 This is a very strict rule which need to be followed; No amount of promise of stock can break this rule.
2. All these Orders Are Placed On entry-- 10k is your current market.
- 15k  buy order @ 25% less than the 1st buy.
 

3. Holding Period
- Minimum of 1 year.
- This is a strict rule, no amount of valuation will let you change your rule.


Stock Selection Checklist-

1. Working Capital Trend or NPA\NPL trend positive.
 2. Discount to Tangible Book Value
 3. Percent away from 52 week lows 
 4. Business should be #1, #2 or #3 in market share.

5. Power of customer should not be huge.

Risk Management

I have read writings of Gerald Loeb, Jesse Livermore, Max Gunther, Nassim Taleb, Peter Lynch, Warren Buffet etc. on position sizing, loss cutting and various other risk management strategies and found many of them contradictory and unclear.
 In this blog I point out what each one said and then give my take on this-

Cutting Your Loses Early and Don't Average Down-
 This is probably one of the most controversial rules out there.

• Buffet and Lynch basically advocate averaging down because of their value bent. If you think a stock is valuable $10 per share and when at $5 it should be of greater value all else remaining equal. If you don't average down then you need to sell the stock ASAP. Buffet says that you should have the stomach to take a 50% loss on your investment and not throw in the towel.

• Loeb\Livermore\Taleb advocate using stop losses and getting out of bad situations early. 

• Taleb makes an interesting point which contradicts his stop loss rule  which is - "The markets will follow the path to hurt the highest number of hedgers. The best hedges are those you alone put on". What this means is that if most people use stop loses to hedge their positions then most of the time stop loses will be triggered irrespective of the direction of the stock.Now you could argue that stop loses are not hedging but my take is any loss minimization program is a hedge. 
• My take: Automatic stop loses means that market maker will constantly trigger  your stop loses because of the hedging rule by Taleb. My take is Lynch\Buffet have the best rule for success with some caveats. You need to understand the business thoroughly before you average down. Companies with debt coming due or companies needing more cash means that you are at the mercy of others.

Invest Only In Things You Understand-

• Taleb,  Buffet and  Peter Lynch argue for that but for different reasons. Buffet\Lynch think that you invest in businesses not stocks and more you understand what you buy better you are. Taleb argues that price action on instruments you trade need to be understood.
• Livermore\Loeb are a pure macrotrader where he says that in a bull market all things on up and in a bear market all things go down. You need to worry about the larger trend\general conditions and  not about individual fluctuations.

Position sizing-
Buffet\Lynch\Gunther all advise on holding max 5 holdings. Any thing more you are diversifying for the sake of diversifying anything less you are increasing your risk. Market risk cannot be eliminated but firm risk can be reduced by diversification.


Buy and Hold-

• Lynch\Buffet all want you to hold for the long run disregarding the recession.
• Livermore wants you to hold until bull market ends.
• Gunther wants you to take profits quickly.
  

Zurich Axioms - Max Gunther

I got hold of this lovely book by Max Gunther. These are basically axioms about investing and risk taking.

First Axiom: On Risk
If you are not worried enough you are not risking enough.
My experience is that whatever you are buying should sound awful. You just need to be the last man standing, if you have some people standing with you then you are taking a big risk.
If you are not worried about your investments then your investment has not bottomed and has lot more to fall.
HE also says everything is speculation and there is no difference between investing and gambling.

How To Get Lucky In Life!

This post is from the excellent book: How to Get Lucky: 13 techniques for discovering and taking advantage of life's good breaks.


Here are his 13 tips to turn your luck around:

The First Technique: Making the Luck/Planning (skills) Distinction

When a desired outcome is brought about by luck, you must acknowledge that fact.
 If you confuse luck with planning, you will all but guarantee that your luck, in the long run, will be bad.
This is a very common problem in financial markets and business where distinction of luck and skills is non existent. So people gloat over success when they were plain lucky and luck runs out after a few innings.


The Second Technique: Finding the Fast Flow
Go where events flow fastest, surround yourself with a churning mass of people and things will happen.
It doesn''t matter if you are a quiet person; all you need to do is meet a lot of people and let them know who you are. Then they will direct opportunities your way.
Put in a different way try different things and get exposed a lot.


The Third Technique: Risk Spooning

There are two ways to be an almost sure loser in life.
One is to take risks that are out of proportion to the rewards being sought. The other is to take no risks at all. Lucky people, characteristically, avoid both extremes.
So basically take bets which are in your favor but don't leverage yourself, so you need to have the staying power.



The Fourth Technique: Run Cutting
Always assume that a run of luck is going to be short, never try to ride a run to its peak. You will virtually always be right as the law of averages is heavily on your side.
If you have good profits on your investments expecting the same investment to outperform is foolhardy.




The Fifth Technique: Luck Selection
Is there some likelihood that the problems with your investment - whether it be time, money or love - will go away? Do you have some realistic hope of fixing them? If so, you should stay aboard. If not, you should get out and look for better luck elsewhere.
Basically cut your loses when you look at insurmountable odds. Do not have cavalier attitude.


The Sixth Technique: The Zigzag Path
Despite what many people think the path to success is rarely a straight line. Lucky men and women, on the whole, are not straight-line strugglers. They not only allow themselves to be distracted, they invite distraction. A plan should be used as a guide only and if something better comes along the plan should be discarded immediately without regret.


The Seventh Technique: Constructive Super naturalism
Not because it makes you more lucky but because it helps you make impossible choices. Sometimes there is no rational choice to make, yet the worst reaction is to do nothing.
A supernatural belief can enable people to get into a potentially winning position simply by helping them make choices.


The Eighth Technique: Worst-Case Analysis
Lucky people, as a breed, tend to be pessimistic. Optimism means expecting the best, but good luck involves knowing how you will handle the worst.

The Ninth Technique: The Closed Mouth
Talk can tie you up and lock you in positions that seem right today but may be wrong tomorrow. Avoid unnecessary talk about your problems, plans and feelings. When there is no good reason to say something, say nothing.

The Tenth Technique: Recognising a Nonlesson
There are experiences in life that seem to be lessons but aren''t. Recognise when something was just bad luck and move on.

The Eleventh Technique: Accepting an Unfair Universe
All of us, the good, the bad and the in-between, are all equally likely to realize our fondest dreams or contract cancer.


The Twelfth Technique: The Juggling Act
The more activities you have going the greater the likelihood that something good will happen.

The Thirteenth Technique: Destiny Pairing

This is someone who is someone who changes your luck over a long term. This person is not necessarily a romantic partner and is usually just found by blind luck but it can help if you are actively looking.

Busy Professional's Optimized Diet and Exercise Plan

In this modern age we are all very busy with our professional life and family life. We have no time for exercise or in following a structured diet plan.

As we grow older we pack in few extra pounds and go on crash diets as if those can save us from anything.
The ideal scenario is to follow a diet/exercise plan  which fits into our busy lifestyle and can be followed without compromising work/personal life balance.

I call this the  Busy Professional's Optimized Diet and Exercise  Plan and here are the basic 5 rules-

1. Exercise during Lunch or Early Mornings:  

Exercise at Lunch time for 40 minutes, try doing this 4-5 times a week, this works great for Night Owls like me. For people who can get up early  in the mornings you can switch the time slots. Combine cardio and weight exercises,  run for 15 minutes and weight lift for 25 minute . Try isolating  each muscle group everyday like  Chest/Triceps, Back and Biceps, Legs and Shoulders such that those muscles are sore after workout. Take off during weekends by spending  time with your families and giving your muscles time  to rest and regenerate.

2.  Natural Diet for Breakfast and Lunch:
Only eat fruits and vegetables during the day. Start with 2 cups of Skim Milk and instant coffee and a banana for your morning commute. Apple/Carrot/Cucumber/Banana for the lunch after your workout. This regiment frees up your dinners to spend time with  your families and enjoy a non-guilty meal. This regiment  eliminates planning for lunch except for visiting grocery store once a week and prevents you from indulgences during the day.

3. Stay Away From Alcohol:
Alcohol is poison period, irrespective what pseudo medical establishment says about its benefits. It changes the brain chemistry and when times are tough  people tend to self medicate with Alcohol. It eats away your brain neurons and affects your sleep pattern. Final problem is it packs empty calories which adds up to the meal you are eating.

4. Stay Away From Sugar/Deserts
Sugar is basically glucose and pure source of energy. After dinner  your stomach is already filled with Calories that you dont need to add glucose to the mix. There are no beneficial effects of taking sugar.  Refined Sugar (White) does not contain any Vitamins or minerals needed for your body. Sugar like alcohol affects brain chemistry by giving you a buzz but at the end of the day it is use less.

5. Stay Away From Snacks
Snacks which most of them are fried in oil are  packed with fat calories and salt similar to sugar do not contain any essential nutrients.  On top of it all it can lead to a glaring addiction of munching on something all the time. A small packet of chips can pack in 500 fat calories and 1 hour of running burns 500 calories.

What are the results of this plan: 

This plan definitely works at-least for me whenever I have been on it 100%. I dramatically lose weight in the initial stages. You could also be on it partially but that will only be partially effective and sometimes could just maintain your existing weight. Unfortunately 3,4,5 are the most important and maximum results can only be gained by following all the rules.
The name of the game is discipline and commitment you show will give you results.

What are the advantages-

- Balances work life and personal life, so you do not have sacrifice a lot to lose weight.

- Very Cheap to maintain, a gym membership and $10 per week on buying groceries is all it takes.

- Very intuitive and easy to follow. There are no complex rules and  dos/donts behind it.
 - No need for supplements, there is no evidence supplements work in a pill form anyway. You are getting most of the nutrients you need  with your  natural diet.

Review of Good Boss Bad Boss

http://www.amazon.com/exec/obidos/ASIN/0446556084

 Professor Sutton has finally written a practical book about managing in the work place. Being a Purdue MBA grad I can vouch that the current MBA curriculum have overt theory and does not contain practical advise.

This  books contains gems like the list below which can be  readily applied in your next meeting.

12 Things Good Bosses Believe

 

1. I have a flawed and incomplete understanding of what it feels like to work for me.
   2. My success — and that of my people — depends largely on being the master of obvious and mundane things, not on magical, obscure, or breakthrough ideas or methods.
   3. Having ambitious and well-defined goals is important, but it is useless to think about them much. My job is to focus on the small wins that enable my people to make a little progress every day.
   4. One of the most important, and most difficult, parts of my job is to strike the delicate balance between being too assertive and not assertive enough.
   5. My job is to serve as a human shield, to protect my people from external intrusions, distractions, and idiocy of every stripe — and to avoid imposing my own idiocy on them as well.
   6. I strive to be confident enough to convince people that I am in charge, but humble enough to realize that I am often going to be wrong.
   7. I aim to fight as if I am right, and listen as if I am wrong — and to teach my people to do the same thing.
   8. One of the best tests of my leadership — and my organization — is "what happens after people make a mistake?"
   9. Innovation is crucial to every team and organization. So my job is to encourage my people to generate and test all kinds of new ideas. But it is also my job to help them kill off all the bad ideas we generate, and most of the good ideas, too.
  10. Bad is stronger than good. It is more important to eliminate the negative than to accentuate the positive.
  11. How I do things is as important as what I do.
  12. Because I wield power over others, I am at great risk of acting like an insensitive jerk — and not realizing it.

Fox vs Hedgehogs

Finally I hit the Holy grail of decision making when I accidentally listened to dr. Phil Tetlock give a presentation at fora.tv.

http://fora.tv/2007/01/26/Why_Foxes_Are_Better_Forecasters_Than_Hedgehogs


If are very interested like me in psychology of decision making then this is a great presentation. Iam a big fan of Nassim Taleb but unfortunately Taleb teaches about uncertainties but not how to deal with uncertainties except to say be safe and don't take risk.

Phil classifies people into two different categories Foxes and hedgehogs.

Hedgehogs are the visionaries and have one main theme in life or in markets or in politics.
Some Examples of hedgehog thinking are-

- We are going to see massive  deflation and Dow will fall below 5000.
- we are going to see hyper inflation and  gold is going to hit $5000 and oil $200 a barrel.
-USA has seen its final moments and is going to disintegrate.
- China is going to have revolution and communists will be thrown out.

Hedgehogs get married to their positions and can never change, even when their positions don't happen. They justify it by saying that it will happen in the long run.



 Foxes  take best of many worlds

- They do not have any entrenched positions but combine many positions.
- They change their positions  quite often when presented evidence.

Here are the results-


Foxes on average are better decision makers than hedgehogs
Foxes do not get as much attention like hedgehogs.
When hedgehogs are right they have fame come along with it.
Hedgehogs do not  even do better than basic computer algorithm.

Review: The Invisible Gorilla: And Other Ways Our Intuitions Deceive Us

This is a fun book to read and eye opener to many people. If you have been reading about behavioral economics then it is not as new. Some illusions are useful and other are just page fillers.



Chapter 1 - Illusion of Attention, or, the belief that we are attentive to much more than we actually are at any given moment.

• What the authors mean here is that we only pay attention to things we expect to see.
• In case of driving pay extra attention to the unknown.
  

Chapter 2 - Illusion of Memory, or, the illusion that our memories are much more exact than they are.

Chapter 3 - Illusion of Confidence, or, the illusion that confidence (in others) is a good sign of competence.

• This is one of the best illusions people fall for easily whether when interviewing people or in a business meeting or at college campus.
• Most extroverted people show more confidence than introverted people. Does that confidence lead to competence?
• Statistically Extroverted people and introverted people show the same amount of competence in accomplishing a task.
  

Chapter 4 - Illusion of Knowledge, or, the illusion that we have detailed knowledge about many things that, in fact, we only have vague knowledge of.



Chapter 5 - Illusion of Cause, or, the illusion that two things happening sequentially necessarily signifies cause/effect relationship.

• This illusion is mostly seen in financial markets.
• Most important thing to remember is correlation does not mean causality. Economic variables can show correlation for long periods of time before they break and it could be merely coincidental that they behaved that way.
  

Chapter 6 - Illusion of Potential, or, the illusion that in every human, there is a vast array of untapped potential waiting to come out (if only we learn to use more of our brains, listen to Mozart, "train our brains" etc.)

• Most of the brain improvements techniques like playing Video Games, Chess or solving cross word puzzles statistically have proven not to improve the brain.
• People who are good at Chess naturally have good IQs but you cannot say that their Chess game improved their IQ.
• Physical Exercise improves brain more than any of the other activities.
  

Review of Fooled By randomness!

Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

http://www.amazon.com/Fooled-Randomness-Hidden-Chance-Markets/dp/1400067936/ref=ntt_at_ep_dpt_2



I enjoyed this book and kudos to Taleb for making such a dry subject very interesting.

I prefer this book over the Black Swan since this book attacks all uncertainties in life than Black Swan which is focused on just one type of uncertainty.

My biggest beef is when Taleb proudly proclaims - "Instead of immediate philosophizing and working at McDonald's, he went to work as a trader to become financially secure"

Now Taleb is it not the whole idea of your book that many people are stuck in dead end jobs, suffer misfortunes or experience bad health just because of pure randomness in life in-spite of their best efforts and advises people to practice stoicism?

It looks like you did not follow your own advice by deterministically trying pursue illusory financial freedom at the same time making fun of Carlos and John who were trying to do the same.

My personal experience has been you need to have personal conviction about your positions in order to make money in the markets. Yes you could go wrong and lose your ass as happened to Carlos and John. But even the most successful investors/traders like Warren Buffet and George Soros had personal conviction. Do you really think Soros bet billions against the British Pound without personal conviction that he is going to make a profit?

Taleb is right on one aspect which is we need to have an open mind and review ones position constantly but not having personal conviction on your position is a sure way for mediocrity.

Peter Lynch clearly put it - "Show me a trader who always has a 10% stop loss and I will show you a portfolio with 10% loss"

New Way To Look At Equity Options

Equity Options consist of basically Call Options and Put Options-

Imagine Deutche Bank DB is selling at $60 per share today May 22nd.

Call options gives us the right to buy a stock at a specific price and a specific time.
DB call to buy @ 65 is selling for $1.65 expires on June 18th, 2010.

Put Options gives us the right to sell a stock at a specific price and at a specific time
DB puts to sell @ 55 is selling at $2.55 expires on June 18th, 2010.

Let us go back and look at various usages of options-

1. Buy Insurance on your portfolio.

2. Sell Insurance for the portfolio.

3. Speculate on movement of the stock with very less cash on hand.

Halo Effect

This book makes a mockery of the Self Help Business Books and one size fits all formula for business success. In particular goes after Built to last and in search of excellence.

Basic premise of the book is that good results from a company creates a Halo effect which causes the managers to attribute many factors for its success after the fact.

It is a chicken and a egg problem. Did the factors cause success or the success created these factors?

Author intelligently argues that a companies success causes the factors to be generated since the these companies regress after sometime.

Success can be caused by multitude of factors-
1. Positive Business Cycle
2. Chance Innovation
3. Being at the Right place at the right time
4. Leadership, employees and HRM


On a well documented statistically significant study- Culture, Leadership, employees and HRM contribute to about 10% of the company's performance.


Here are some of the well documented Delusions-

1. Halo Effect:
tending of analysis of a company to reflect only the overall results
Tendency to look at a company's overall performance and make attributions about its culture, leadership, values, and more.


2. Correlation and Causality:
the lack of proof of causality in many situations
Two things may be correlated, but we may not know which one causes which.

3. Single Explanations:
one factor is unlikely to be the reason for success or failure
Many studies show that a particular factor leads to improved performance. But since many of these factors are highly correlated, the effect of each one is usually less than suggested.

4. Connecting the Winning Dots:
problems with only considering "winners"
If we pick a number of successful companies and search for what they have in common, we'll never isolate the reasons for their success, because we have no way of comparing them with less successful companies.

5. Rigorous Research:
mistaking large volumes of data for good data
If the data aren't of good quality, the data size and research methodology don't matter.
6. Lasting Success:
most companies trend to the mean eventually
Almost all high-performing companies regress over time. The promise of a blueprint for lasting success is attractive but unrealistic.

7. Absolute Performance:
companies can do well and still fail if a competitor does better
Company performance is relative, not absolute. A company can improve and fall further behind its rivals at the same time.

8. The Wrong End of the Stick:
successful companies may do various things but that does not mean that doing those things will make you successful
It may be true that successful companies often pursued highly focused strategies, but highly focused strategies do not necessarily lead to success.

9. Organizational Physics:
business organizations are just not that predictable
Company performance doesn't obey immutable laws of nature and can't be predicted with the accuracy of science - despite our desire for certainty and order.

Insights From Behavioral Finance

Insights From Behavioral Finance


Most common biases which have been unearthed by Behavioral Finance Experts are as follows-

1. Over Confidence
- We attribute our skills for our success but blame others for our failures.
- Over trading when we are successful and extreme caution when we lose money.
- Over concentrate into a single stock or few stocks
- Overconfident investor is only a trade away from a very humbling wake-up call.
- Good amount of skepticism is needed for every position.

2. Selling Winners and Keeping Losers (Prospect Theory)
- A loss is two times more painful than a gain
- So we don't like taking loses even when we have made mistakes about prospects of a company.
- On the other end taking profits makes us feel better so we sell winners prematurely.

3. Herding
- One of the most important words of Sir John Templeton, "This time it is different is one of the most expensive words in the English Language"
- when bubbles form or when stock becomes a darling people just herd into it.
- Obviously it is dangerous to prick a bubble, any one who shorted Nasdaq stocks in 1999- 2000 was out of the market.

4. Hindsight Bias
- People think they could have predicted an event after the fact it has occurred.

5. Survivorship Bias
People only look at the survivors to theorize from the result they never look the prople who have been dead and are not included in the statistic.

25 insightful investment sayings from legendary investor Warren Buffett:

25 insightful investment sayings from legendary investor Warren Buffett:


1. "Rule No.1: Never lose money. Rule No.2: Never forget rule No.1"

2. "In a bull market, one must avoid the error of the preening duck that quacks boastfully after a torrential rainstorm, thinking that its paddling skills have caused it to rise in the world. A right-thinking duck would instead compare its position after the downpour to that of the other ducks on the pond."

3. "The fact that people will be full of greed, fear or folly is predictable. The sequence is not predictable."

4. "Be fearful when others are greedy. Be greedy when others are fearful."

5. "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

6. "When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is usually the reputation of the business that remains intact."

7. “You only find out who is swimming naked when the tide goes out.”

8. "Risk comes from not knowing what you're doing."

9. "If I was running $1 million today, or $10 million for that matter, I'd be fully invested. Anyone who says that size does not hurt investment performanc e is selling. The highest rates of return I've ever achieved were in the 1950s. I killed the Dow. You ought to see the numbers. But I was investing peanuts then. It's a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that."

10. "Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down."

11. "I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will."

12. "Price is what you pay. Value is what you get."

13. "I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over."

14. "If a business does well, the stock eventually follows."

15. "Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it."

16. "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well."

17. "The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderell a at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future — will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands."

18. "Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks."

Innovation Strategies

Innovation Strategies
When talking about Innovation Strategies, I mean by how do we get new products and services implemented in our companies.
How do we come up with new ideas,
How do we validate new ideas and make sure it makes sense.
This concept is not for design design teams or just senior management but critical for your engineers and middle management.



1. Customer Shadowing
- Understand client work requirements, why are they doing certain items, what are they trying to accomplish those tasks.
- Understand how they are going about doing it. Eg - What are their work flows.
- Identify areas of improvement, this could be both product and service oriented improvement.
- Product oriented improvements are basically either productivity improvements, new data collection mechanisms and archival mechanisms. application of technology .
- Service Oriented improvements are new services your company can offer in a cost effective manner such that can improve client
[ Most importantly sales people get involved in this innovation process because they provide market intelligence. This type of innovation is very incremental. This has maximum payback since you are not venturing into the unknown space]


2. Rapid Prototyping

- Prototype new ideas continuously
- Implementing by Experimenting
- Prototypes should be small
-Prototypes should be easy to produce
[This innovation has a lot of risk and payback because you are venturing into the unknown. Prototyping minimizes risk but still this innovation method can be used to leap frog the competition.]



3. Pattern matching other Industries
- Study successful companies in other industries
-Understand their processes and produucts.
- Find if there are patterns you can emulate in your industry.
[This is the most overlooked part of innovation circle, when we do Pattern matching the ideas generated already are in place in other industries and they work. What you will have to do is to bring them over and vet them properly to make sure they fit.]

Sales Process

Sales Process

Well defined sales process helps the sales person stream line his activities such that it acts as a road map to every opportunity possible. It makes the sales repeatable such that the once you have a successful process in place you can just repeat the process for 90% of the situations. This also helps Sales Managers to train new Sales Executives such that they can up and running in a short span of time.

There are three major steps in your Sales Process-

PROSPECTING
A lead comes from a marketing campaign or you are browsing a trade magazine and you find a prospect in your area whom you can contact to get more business.

First and Foremost you need to have a confident script which would do the following -

Cold Calling Strategy
- Introduce yourself and the company you work for in a clear manner that the prospect understands
- Provide a gist problems you normally solve for a client like theirs.
- Provide a list of associations or other clients he is working in his area.
- Schedule an appointment for a later date to go over the challenges the client faces.

Eg-
"Good Morning Tim,
- My name Jay Balapa, I am calling from Advanced Technologies Group, Inc. and I work as the the Director of Enterprise Solutions . We are in the business of assisting health care facilities similar like yours in Planning, Compliance and management of buildings.
- In your area we are privileged to have Northwestern Memorial Hospital and Rush Presbyterian as our clients.
- Iam calling in to see if there is an opportunity for us help you overcome your challenges and provide a solution which meets your needs.
-Can we schedule a follow up conference call such that I can better understand your operations and see if there is an oppurtunity for us to work together."










If there is a lead from a Marketing














Discussion

Proposal

Implementation

Economic Indicators

1. Yield Curve

To draw the yield curve plot the 3 month treasury bill, 10 year bond and 30 year bond.
Normal yield is curve is upward slopping since the bond investors want higher yield for a 30 year duration instead of 3 month.

What is an inverted yield curve, it means 30 year rates fall below the 3 months rates it means that long term investors are indicating the economy is going to cool down in the future or a recssion is in the cards.

2. Average number of initial applications for unemployment insurance


The increase in this number indicates bad for the economy but decrease creates an upcoming bull market.

3. Michigan Consumer Sentiment Index

Shows how the consumer sentiment decrease would be bad for the market in general.

4. S&P 500 50 day moving average

This is a good indicator because it gives you all the above trends priced in if the S&P 500 goes below 50 dma a good place to get out of equities and start shorting stocks.

Influence - How to increase your influence on everyday conversations

1. Reciprocity

- When you expect a favor from others you will have to do them a favor first. Once the favor is done make sure that you diplomatically let them know that " Hey if I was in the same position wont you do that for me".

2. Bigger Request Followed By Smaller Request

When you are asking a request always start with a large request which will most probably be rejected. Immediately follow that request with a smaller one without wasting any time.

3. Scarcity
People want what they cannot have. When you present Idea to some one, you need to let them know that there is something about this idea which cannot be had anywhere else unless they move in your direction.

4. Presenting an idea showing gain or Showing a Loss First
People are motivated by the idea of losing something more than gaining something. So always show what they would lose by not following what you are saying

5. Information
When there is a new Information supporting your position it is always better to get on the phone and tout the savings to your clients.

6. Establishing Credibility
When you are speaking as an expert trying to establish credibility before a crowd who does not know you. You need first tout your credentials and then explain the knowledge you have got.

7. Presenting Arguments -
Before presenting strongest arguments for the choice you are recommending always present a argument against the choice. Showing that you are knowledgeable and fair. Then present one you want them to take.

8. Public Commitment
People always will stick to public commitment they made either in words or in writing for any situation. If you want them to commit to a action in the future, always request them for explicit commitment instead of implicit commitment.

9. Consensus
People always make decisions on how others similar to them are doing ( Power of the crowd).
When you present ideas always bring in associations how you are helping oethers.

10. Liking
We like those who are like us. We like those who do things like us. We like those who work in a cooperative way to achieve success.





Further Reading - Influence by Cialdini

Economic Theory

Relationship between Science - Fact - Theory

Science is the process of organizing, collecting and explaining facts.

Fact is something group of people agree upon.

There are infinite amount of facts.

Interrelationship of two facts is called theory.






1. Scarcity and Economic Costs


What is Competitive Advantage?

What is asolute Advantage?

What

Problems of empirical Verification - Environment cannot be controlled.

2. Gains to Specialization and Exchange

Production Possibility Frontier


A graph of production possibilities is called Production Possibility Frontier.

The production possibility frontier defines various production opportunities available open to an individual or an economy given full employment resources and existing technology.

Marginal Cost of a good or activity is the amount of other goods that must be foregone to obtain one or more unit of the good.

Comparitive Advantage and Gains to Trade

Absolute Advantage - If an individual can produce more than others in the same time or produce the same in less time.

Comparative Advantage - An Individual has an comparative advantage if he can produce goods at a lower cost than others.

Gains to Specialization in Production and Exchange

By Concentrating ones own production by Comparitive advantage and exchanging the production with least comparitive advantage one would achieeve production Efficiency.

Production Efficiency is achieved at least cost.

The entire process of Economic Growth is essentially a process of pushing outward the boundaries set by the production possibility frontier.

Production Possibility Curve cannot answer-
What it is to be produced and who receives the outpu.

Software Development Life Cycle Process

This blog is a basic summary of the SDLC models and what goes inside them.

On 30,000 foot level they are typically two models which philosophically differentiate they are as follows-

1. Water Fall Model

2. Iterative Development - You can group (Agile Development, Xtreme Programming, Test Driven Development, Scrum) which are just variations of iterative development into this. We will provide the subtle differences in thew process as we move into those areas.




1.Water Fall Model
This is a model which teaches up front design. You are required to complete each phase before moving onto the next phase. Basic Phases of this model are as follows-

a. Requirements specification
You will have to do a detailed Requirements analysis like creating Vision and Scope Document, Use Case Document and Software Requirements Specification Document.

I have an entire blog which talks about RA process.


b. Design Phase

You will have an

• Application Diagram (Diagramming each substem components like Windows DLL/WebService/Web Application),
  
• Logical Data center Diagram(This goes into how the application components are going to be deployed).
• Class Diagram (Create Visual Studio Solution, Create Sub Projects, Create Classes, Create tiers like Business Layer, Data Layer etc)
• Database Design Document, Stored Procedures
  

c. Development

• Create a Task List of all activities
• Assign the task list to team members with the schedule of completion.
• Unit Tests have to be created and Development has to begin.
  

There is a separate blog on Project managements.

d. Testing and debugging (AKA validation)

• start the usability testing.
• Smoke and mirrors testing
  

e. Installation

• Istallation requirements document will have to be created and sent to the installation team.
• Installation program will be created incase of a shrink wrapped application.
• If not the IT will have to follow the installation document and install the solution.
  

f. Maintenance

• Bug determined after release are fixed in this phase.
• Additional requirements ofter overlooked are taken care here.

Advantages-

• Works best for small projects.

• Each Phase you have set of of deliverables which have to produced.

Disadvantages-

• Excessively wastage of time in the Requirements Analysis Phase and Design Phase. 1/3rd of the project is done before we move out of this phase.

• Changes might kill this project

2. Iterative Development

Iterative development is basically Waterfall model with faster cycles. You attack a problem in a piecemeal manner.

You have 4-6 week cycles you run through the cycles very fast. Then outcome is a production level code in the end of 6 weeks.

Xtreme Programming has the concept of Pair Programming which is great for medium sized development teams. For Small teams 3-6 it is better to have the Lead Engineer as the dedicated Pair Programmer,
Test Driven Development- Is a subset of XP with unit tests written before development.
SCRUM- Underlying concept is cycles- Teams are split into - 30 day cycle, Sub divided into 7day cycle and further divided into 1 day cycle.
Entire Team meets every 30 days and comes up with things to do for that month. Sub groups meet every week and comes up with things to do for that week. This extends to the day.

Water Fall Model

Basic Tenets of Waterfall model are as follows-

1. Requirements specification
2. Design
3. Development
4. Integration
5. Testing and debugging (AKA validation)
6. Installation
7. Maintenance

This is the central idea behind Big Design Up Front (BDUF) and the waterfall model - time spent early on making sure that requirements and design are absolutely correct will save you much time and effort later. Thus, the thinking of those who follow the waterfall process goes, one should make sure that each phase is 100% complete and absolutely correct before proceeding to the next phase of program creation.

Program requirements should be set in stone before design is started (otherwise work put into a design based on "incorrect" requirements is wasted); the program's design should be perfect before people begin work on implementing the design (otherwise they are implementing the "wrong" design and their work is wasted), etc.

Requirements defect that is left undetected until construction or maintenance will cost 50 to 200 times as much to fix as it would have cost to fix at requirements time.") To take an extreme example, if a program design turns out to be impossible to implement, it is easier to fix the design at the design stage than to realize months later, when program components are being integrated, that all the work done so far has to be scrapped because of a broken design.