Simple Common Sense: Simple strategies for a well-run life
When I failed the QE in 1962, I desperately needed motivation to re-write. I found two others in my position: we worked out a strategy and focused for four months on executing it. The rest is history (Motivate, strategise, execute). I played professional soccer for Boksburg. Our training regime involved running around the field week in and week out.
On weekends we were expected to win matches. We then consulted a coach from the UK who presented motivational sessions and explained strategies for winning games. He trained us with a ball at our feet and the forwards spent hours shooting at the goals. Goals win matches. (Motivate, strategise, execute). When I started training candidates who had previously failed the CA qualifying examination, I found that most had prepared for previous exams by reading questions and editing answers.
The objective in an exam is to score marks under stress conditions. To achieve this, it is essential to train by writing exams under simulated examination conditions and performing post-mortems on the attempts. We need to identify the knowledge required and the way examiners mark the scripts. One candidate failed the QE four times because he thought that the examiners only marked the workings, not the final answer! The results of those who prepared by writing simulated exams far exceeded the examination averages. (Motivate, strategise, execute). My present mission is to educate people on how to create, build and maintain a store of wealth by investing on the JSE. I have spent nine years researching, experimenting and making and rectifying mistakes in this field.
In the past five years 1 800 people have participated in my programme. The biggest obstacles I face are:
Apathy – (a lack of motivation), i.e. an attitude of “tomorrow will take care of itself”. Few have worked out what they need when they cease earning a living. Ignorance – the lack of knowledge and a strategy to achieve their goals. I get frustrated with comments like “The JSE is just another Ponzi scheme” or “Money market is your safest investment” (there is a 100% chance of you losing due to the ravages of inflation) or “I am not prepared to pay the taxes levied on investments in JSE equity shares” (15% withholding tax and 13% capital gains tax) or “I can get a return of 20% p.m. by investing in the xxx scheme (scam!)”.
Arrogance – being the attitude of ignoring irrefutable evidence that a certain strategy works, but rather sticking to conventional wisdom, e.g. RAs.
During the past year I monitored and measured the performances of 50 investment portfolios totalling more than R230 million. I learnt many lessons from the successes of, and the mistakes made by, these investors (it is always cheaper to learn from the mistakes of others).
I could also share some incredible success and disaster stories to motivate you to get into a savings and investment programme,
but the 500 word limit for this article doesn’t allow. If you would like to learn from the ‘school fees’ incurred by others (no charge and no obligation) pay www.mafiabuzz.co.za a visit and follow the instructions to download the stories. Disclosure: Although this is my website, I am now semi-retired, so am not looking for business! ❐
Author: Charles Hattingh CA(SA), Chartered Financial Analyst, is the Managing Member of PC Finance Research cc
Black swans ahoy! Inductive versus deductive reasoning, as swans swim serenely on…
All swans are white. That, anyway, was the unassailable presumption in Europe until the late 17th century, when a Dutch mariner reported sightings of black swans near what is now Perth in Western Australia. The news must have come as something of a surprise. Black swans had previously been considered to be such an utter impossibility that referring to them as ‘rare’ was, at the time, a popular way of expressing ironical understatement.
This amusing anecdote of historical short-sightedness has become a rich source of literary, philosophical and financial metaphor. Most recently, Nassim Taleb made the bird famous in his 2007 bestseller, in which he defines a black swan event as an unexpected occurrence which, in hindsight, was entirely predictable. The global financial crisis is an excellent example. It caught almost everyone by surprise, but this has not prevented pundits from coming up with a flood of subsequent explanations about exactly why we should all have seen it coming.
A much older use of the black swan story is in illustrating the shortcomings of inductive reasoning. Anyone who says that all swans are white, because every swan he had ever seen was white, is applying induction. Similarly, someone who argues that all mammals give birth to live young, simply on the basis of extrapolation from personal past observations, has made an inductive inference. The problem, of course, with making generalizations about the future on the basis of specific past experience is that it takes only one contrary observation (a black swan, or a mammalian but egg laying platypus) to render the statement invalid.
The other main form of argument is deduction, in which statements move logically from general initial propositions to a specific conclusion. In deductive reasoning, if the premises are true, then the conclusion is guaranteed to be, too. It may not be possible to make a sound deductive case about the colour of swans, or mammalian live birth. However, it is easy to conclude, deductively and validly, that if all birds are animals, and if swans are birds, then all swans are animals. It may seem that deduction is inherently superior to induction. However, both have their place in academic research and the advancement of knowledge.
And inductive reasoning is indispensable in our daily lives. I may, for example, have no valid deductive basis on which to conclude that it is safe for me to eat the apple in front of me, but my inductive intuition tells me that I have eaten many apples
before, and therefore I will be fine this time too.
Author: Mark Bunting CA(SA), CFA, is an associate Professor of Finance at Rhodes University
5 steps to your ‘Portfolio Life’
“Call it a clan, call it a network, call it a family: whatever you call it, whoever you are, you need one.” Jane Howard, novelist.
Networking is the most important strategy and action in your business, yet is probably the most disliked and least planned. With a functioning network, any business or self-branding can be taken to the next level.
To explore this topic I attended a speed networking seminar ran by Helen Nicholson, South Africa’s networking guru. The goal was to find a recipe to become a great networker. Research shows that networkers who believe they are great at it, actually aren’t. Others, like maybe you, who feel you’re not, are great networkers in training. It’s about mastering the cornerstones, having a strategy and following through – exercise that networking muscle.
There are four key cornerstones to successful networking:
1) Having a “What I can do for you” attitude
This is the ability to actively listen in a conversation and see the opportunities of business synergy and to action them. Always remember how you can help them!
2) Buying yourself first
You first buy into someone because of that person – and only then their product. If you believe in yourself and your product, you are able to offer something that people want to buy. At that point the law of reciprocity takes over. And it keeps on giving….
3) Following through
Research tells us that there is but a 3% follow-through rate on attending seminars and meeting people. Ensure you are always part of the 3% or even better, improve the statistics and influence those around you to do the same.
4) Thanking people
When you have benefitted from a connection or network, always thank the parties involved. It is quite remarkable what a small “thank you” does for the development of long-term growth in your networks.
The goal is clear. Which strategies could bring you closer to being a great networker? These include: Well-crafted business cards; Working your charm; Mastering the art of conversation; Killer “elevator speech”; Working the room.
A great goal and even greater strategies. Now, the next step is to challenge yourself into action. Getting a professional coach
or a person to keep you accountable will secure success. ❐
Author: Stanford Payne CA(SA) is an ICF Accredited Executive and Business Coach.
Into Africa? Then up your game
Africa is bursting with opportunities – if you plan your path through the obstacles.
Africa is a popular place to be right now – and looking at the growth prospects of the world’s developed economies over the next three years, it’s no wonder. If the multinationals are going to make their targets, they will need to venture beyond familiar markets into burgeoning economies like Ghana, Nigeria and Kenya. It’s true that doing business in Africa brings challenges,
including unfamiliar business practices, legislation differences and red tape.
Flights are few and unreliable, internet connectivity is slow or non-existent and it can be expensive. But the opportunities that come along with these challenges are immense.
The bigger the current deficit, the more work there is to be done. The rewards for doing the work are not just financial – there is great satisfaction in developing innovative ways to meet new challenges and entering into exciting new partnerships. It certainly puts new life into the tried and tested environments you have historically worked in. Meeting the challenges can also help to make your business more efficient.
When the client is in Accra rather than Sandton, returning to fine tune an implementation or retrain a client is not an option. The pressures of working at long distance with limited connectivity are forcing many companies
to look at how they can make their implementations more efficient. Careful advance planning and rigorous triple-checking are indispensable to this process. If the client isn’t ready for the consulting team when it arrives, or if they aren’t able to finish
the entire job in a single trip, the budget gets blown out of the water.
It also helps to be more systematic about the sales process, scheduling multiple appointments per trip and making as much use of remote meeting technology as possible. Webbased demos and screen sharing are powerful tools that deserve more use.
Ultimately, the needs of the market in the rest of Africa will probably drive South African software companies to deliver more cloud-based services. And here the constraints will deliver another gift: delivering cloud services to places where bandwidth is limited, expensive and unreliable is not a small challenge. Meeting that challenge will require innovation and ingenuity that will never be demanded from those working in a bandwidth glut – and that again will bring new opportunities in its wake. ❐
Author: Kevin Phillips CA(SA) is the Managing Director of Idu Software.
Accountants, step up into the spotlight
Is the financial bottom line being blurred by social and environmental integration? Only accountancy can bring it all back into focus.
On 26 February 2013 the GRI’s Focal Point in Africa was launched at an all-day conference held at the JSE. So, you may ask, what is the GRI? In essence, the GRI (Global Reporting Initiative) is a universally recognised set of guidelines for how organisations should report on the governance, social, environmental and economic impacts of their operations.
Alongside the integrated reporting standards being released by South Africa’s Integrated Reporting Committee (IRC) and the International Integrated Reporting Committee (IIRC), both chaired by ex-Justice Mervyn King (the architect of King III), the GRI is being used as a baseline in the annual reports of a fast-growing number of listed companies.
Establishing a GRI Focal Point in Johannesburg was due recognition for South Africa’s corporate reporting reputation, but what saved me from nodding off on a sweltering afternoon was King’s call to action for accountants to drive the introduction of sustainability into companies. And we’re not just talking about the sustainability relating to company impacts on the broader environment and society, but how these directly link into the medium and long term sustainability of companies themselves. King observed that the bigger firms don’t just employ accountants; they also hire environmental scientists and other skills that support accountants in fleshing out the bigger picture.
King’s key point was that, as valuable as these supporting skills are, no-one understands the numbers as accountants do. The accountancy profession must now engage the duty of integrating company viability – short, medium and long – with its broader responsibility of impacting positively on society and the environment, or at least balancing its impacts against the real value it creates.
The noble principles of future business conduct and viability being laid down by integrated reporting and the GRI can’t be authentically implemented until quantified into universal data sets that organisations around the world can utilise to ensure apples are compared with apples, and oranges with oranges.
As accountancy has responded time and again over the centuries to develop number-crunching systems that enumerated the needs of ever more complex financing, again the gauntlet is thrown down – challenging the profession to assemble into numbers how the Sustainability Age of business will be calculated. King equipped that movies have been made about lawyers, scientists, journalists, cops and schoolteachers – but never accountants.
Step away from the grey suits and step up to the plate. Accountants, it’s your turn on centre stage. ❐
Author: Clive Lotter is an Integrated Reporting Consultant and writer of Annual reports for listed companies.
Gaining work through your Agenda
Steps to improving client service. This article highlights how to make client meetings more effective.
You should have a targeted number of meetings for 2013. The next step is to contact your top 30 clients before their year-ends and arrange to meet with them. Once meetings are agreed, send agendas that cover their year-end planning, including agreements on dates when they will have their accounting records ready for you.
Include a series of questions that will give you opportunities to discuss their futures, for example:
• What do the next 12 months look like? (Do you have profit and/or cash flow projections?)
• What is the greatest challenge?
• What are you seeking to do differently?
• What KPIs are you monitoring? (If none, help them identify some.)
• How is the business currently performing? (Do they require management accounts?)
• What threats do you face?
• How else can we better serve you?
Be sure to ask the clients if there is anything they wish to exclude from the agenda or add to it. In this way you gain permission to walk through your agenda and discuss what additional services they may require. An agenda respects your client in that you have sought and gained the right to explore areas other than compliance. Further, an agenda provides an opportunity to expand the scope of your service as you seek to increase the space you occupy in your client’s life.
Incidentally, one question you should slip in towards the end is: “Do you know anyone you could refer me to?” If they do, make sure you secure permission and contact information. Client service tip: Many accountants make the mistake of giving away too much advice.
Remember, a pre year-end meeting is a compliance meeting, so do not over-advise, but use the occasion to set up a subsequent advisory meeting and be sure to agree a cost for this service. In my seminars I encourage those attending to talk less, unleash the power of questions and invest more time in listening. Questions should act as a searchlight seeking out areas where advice is required. They also act as seeds and if you sow them at the right time they will produce service opportunities that will enable you to grow your client relationship.
For example: Questions that might be asked to point towards your client’s need for planning over the next two to five years:
• Where do you see yourself/your business in the future?
• How do you see the business growing?
• What opportunities do you see in the future?
• Have you considered what you would do if you were not running the business?
Action challenge: Like an actor who learns lines before a play, could you learn 20 great questions you can ask when onstage with your clients? ❐
Author: Mark Lloydbottom is an author and consultant at Mark Lloydbottom Consulting.