Friday, August 24, 2018
Thursday, August 23, 2018
Think and Grow Rich
Think
and Grow Rich Summary
Think and Grow Rich is one of the
books I have seen most often on the recommended reading list of people in the
present day who have achieved great things. The book was written at the
commission of Andrew Carnegie and based on interviews of 500 of those who
history now remembers as the greatest men of the early 20th century, including
Henry Ford, J.P. Morgan, John D. Rockefeller, Alexander Graham Bell, Thomas
Edison, Theodore Roosevelt, Wilbur Wright, and W. Howard Taft. First published
in 1937, it has now sold more than 70 million copies, giving it the distinction
of being the all-time bestseller in the personal success category.
I’m going to warn you: this is one
of the weirder books that I’ve read. However, given the pedigree of those on
whose advice this book was based, as well as those in today’s age who have
recommended the book, I was careful not to dismiss anything out of hand. I
certainly don’t agree with everything, but it stands to reason that uncommon success
must come from uncommon thoughts and actions. If some of this advice seems a
little “out there,” or too intangible, nebulous, and ephemeral to be useful,
remember who it’s coming from, and suspend judgment until you’ve tested it for
yourself.
Desire: The Starting Point of All Achievement
It may be stating the obvious, but
growing rich starts with the desire to do so. The desire discussed here is not
simply wishing, but is an intense, burning obsession, which must be coupled
with both a plan and persistence in sticking to the plan. The author presents a
six-part method to ensure that this is the type of desire you are starting
with:
- Fix in your mind the exact amount of money you desire.
- Determine exactly what you intend to give for this money.
- Establish a definite date by which you intend to acquire this money.
- Create a definite plan to acquire the money, and take the first step immediately.
- Put the four items above into a clear, concise sentence describing each part.
- Read the statement aloud twice daily, in the morning and at night.
Of course, the subconscious mind
must believe that something is possible in order to act on it. Faith is an
interesting concept, but in this context the author defines it as “a state of
mind which may be induced, or created, by affirmation or repeated instructions
to the subconscious mind, through the principle of autosuggestion.” He goes on
to assert, “Repetition of affirmation of orders to your subconscious mind is
the only known method of voluntary development of the emotion of faith.” It is
by this practice that you can convince your subconscious mind to “translate
that impulse into its physical equivalent, by the most practical procedure
available.”
The author attributes both good and
ill fortune to this practice. In other words, someone who lets himself believe
negative things has communicated to his subconscious to act upon those negative
beliefs and translate them into reality. Someone who neglects this practice,
and allows his subconscious to go where it will, risks being set up for failure
by the operation of the subconscious that will continue regardless.
If you’re like me you’re getting
pretty skeptical at this point, so let me illustrate with a practical example
from outside the book. It has been well established that consciously choosing
to exhibit confident body language when you are in fact not feeling confident
will actually make you confident. Various experiments
have shown the natural mechanics of this process, with the release or
inhibition of certain neurochemicals (testosterone, cortisol, etc.). The point,
however, is that a conscious choice influences your subconscious, which in turn
directly and immediately causes a change in outcomes in the external world.
The author recommends “deceiving” your
subconscious in a similar way – by acting as if you have already achieved
whatever it is you are instructing your subconscious mind to do.
3.
Autosuggestion: The Medium for Influencing the Subconscious Mind
This is another one of those words
that probably sounded strange to Napoleon Hill’s contemporaries, and definitely
sounds strange in the 21st century. Simply put, autosuggestion is the practice
of communicating to yourself using your conscious mind for the purpose of
convincing your subconscious. As humans, we can exercise complete control over
what reaches our subconscious mind (through our five senses), but most people
don’t often exercise that control.
The author asserts that exercising
this control requires both conscious attention, and the mixing of emotion (a
word the author uses interchangeably with “belief” or “faith”) with what you
tell yourself. He presents repetitive visualization as the best method of
accomplishing this mixture – actually picturing the appearance of a specific
amount of money, consistently over time. Eventually, this will cue your
subconscious to “hand over” specific plans to begin to make it happen.
The author recommends that twice a
day, morning and night, you close your eyes, say out loud the amount of money
you intend to obtain, when you intend to obtain it, and how (in general terms)
you intend to obtain it. In addition, he contends you must write this statement
down, place it where you will see it in the morning and at night, and commit it
to memory.
This is the core of the book:
combining desire with faith to successfully auto-suggest achievements to your
subconscious mind. The ensuing chapters consist of various tools for
successfully applying this practice.
4.
Specialized Knowledge: Personal Experiences or Observations
In this chapter, the author finally
makes a down-to-earth assertion – that general knowledge itself is useless in
accumulating wealth. You must have specific knowledge and skills (how to fix a
leaky faucet, diagnose a disease, build a financial model, etc.) in order to
add value and be paid for it. While this is a commonly misunderstood principle,
it should be evident to anyone that general education does not correlate with
wealth; instead, specific knowledge applied to specific tasks is what actually
leads to money. This is one of the central themes of one of the other classic
books about wealth, Rich Dad Poor Dad: What The Rich Teach Their Kids About
Money That the Poor and Middle Class Do Not!
In Rich Dad Poor Dad, author Robert Kiyosaki
contrasts in detail his highly educated but monetarily poor father with his
best friend’s dad, who lacked distinguished formal education but spent his life
building specialized knowledge and growing rich in the process.
Of course, you don’t necessarily
need to have the specific knowledge in your own head; you could also simply
make sure to have access to those who do. However you gain access to
specialized knowledge, the application of imagination to that knowledge is what
leads to the ideas that in turn lead to wealth.
Mr. Hill separates imagination into
two conceptual types: synthetic imagination, which simply rearranges existing
ideas into new concepts, and creative imagination, which creates something from
nothing. Transforming desire into money requires specific plans,
which come most often through synthetic imagination. The author scoffs at the
idea that riches come from hard work; more often, he contends, riches of great
quantity have come “in response to definite demands, based upon the application
of definite principles… when a creator of ideas and a seller of ideas got
together and worked in harmony.” The ideas that come from imagination are the
forces that cause things to come into being. You must add imagination to
specialized knowledge to grow rich.
I’d recommend you check out James Altucher’s Daily Practice
for a more detailed guide on how to exercise your “idea muscle” and become an
idea machine.
This sixth step toward riches
requires an alliance with a group of people for the purpose of carrying out
your plans – the “master mind” that will be discussed later in further detail.
To succeed, you must be sure to compensate these individuals in some manner,
meet with them at least twice a week, and maintain harmony with each individual
in the group. Faultless plans are essential for the growing of riches, and only
the abilities and imaginations of multiple individuals will allow the creation
of plans that are perfect, or as near so as possible.
This process of planning must be
continuous and persistent, since failure will often come before success despite
your best efforts. You must select individuals who are likewise persistent. In
addition, you must develop the qualities of a leader if you expect to lead such
individuals in any endeavor.
This is the lengthiest chapter of
the book, and in order to avoid getting lost in the details I will refrain from
listing the 11 qualities of leaders that Mr. Hill presents, as well as his 10
major causes of leadership failure, 30 causes of failure in life in general,
and 28 questions you should be asking yourself annually to gauge your progress.
There are any number of insights within this list, but nothing monumental that
isn’t already discussed by other authors on the subject of success. The
takeaway here is that you should be in the regular practice of considering these
matters and creating organized plans to address them.
Decision: The Mastery of Procrastination
However, one cause of failure stood
out to the author above all others in his analysis of successful and
unsuccessful people: the lack of decision. He claims that without exception,
all successful people have the habit of making decisions promptly, and of
changing them slowly. People who have no desire of their own are heavily
influenced by the opinions of others, and are not likely to succeed. Great
accomplishments come from courageous decisions.
The ability to decide quickly comes
from knowing what it is you want, and it is that ability that defines leaders.
As the author states, “The world has the habit of making room for the man whose
words and actions show that he knows where he is going.”
Persistence: The Sustained Effort Necessary to Induce Faith
The addition of willpower to desire
is the basis of persistence, which must be applied to the other principles in
this book in order to grow rich. Persistence is a state of mind that can be
cultivated by having definiteness of purpose, desire, self-reliance,
definiteness of plans, accurate knowledge, cooperation, willpower, and habit.
Power of the Master Mind: The Driving Force
In this chapter, Mr. Hill delves
further into the necessity and power of the master mind discussed earlier,
discussing both the economic and “psychic” features of having such a group of
individuals to support you. The economic is simple; as discussed earlier, the
combination of experience and brainpower is a serious economic advantage.
However, despite the pages devoted to discussing the psychic feature of the
master mind, that particular component is more difficult to pin down.
I’m personally skeptical of the
author’s discussion of how “the spiritual units of energy of each mind form an
affinity,” and I’m unable to translate the concept in a way that reconciles
with modern scientific and psychological understanding, as I have been able to
do with earlier concepts. However, there are abundant examples of the master
mind at work, from the earliest annals of history, to the founding fathers of
America, to the PayPal mafia of modern times, which illustrate the phenomenon
that Mr. Hill attempted to describe.
The Mystery of Sex Transmutation
Just when you thought it couldn’t
get any weirder, this chapter takes the prize for most bizarre title. Actually,
the concept is fairly simple: because sexual desire is the most powerful human
desire, the exercising of willpower to redirect this compulsion from physical
expression to another productive purpose or creative outlet is an extremely
powerful tool. As the author puts it, “When driven by this desire, men develop
keenness of imagination, courage, will-power, persistence, and creative ability
unknown to them at other times.”
Without specifying any names, the
book asserts that certain men of great accomplishment credit the ability to
exercise “sex transmutation” for their success. I’ll leave you to ponder the
awkwardness, political incorrectness, and veracity of this concept without
further comment.
The Subconscious Mind: The Connecting Link
Specifically addressing the central
subject of this book, the author reminds us that directing the subconscious
mind via the other principles discussed throughout this book is something that
can be done only through habit. To grow rich, you must continually draw upon
the positive emotions, rather than allow your mind to dwell on the negative
ones. Faith cannot coexist with fear.
The Brain: A Broadcasting and Receiving Station for Thought
In this chapter, Mr. Hill reiterates
the principles discussed earlier from the perspective of the brain’s role in
the process, but doesn’t offer much useful material not previously discussed.
Given science’s limited knowledge of the brain in the 1930’s, this is to be
expected.
The Sixth Sense: The Door to the Temple of Wisdom
The sixth sense is defined as “that
portion of the subconscious mind which has been referred to as the Creative
Imagination,” through which “you will be warned of impending dangers in time to
avoid them, and notified of opportunities in time to embrace them.” The
author’s flowery language about the “Universal Mind” and “Infinite
Intelligence” is probably best summed up as what we call intuition.
Mr. Hill then goes on to describe a thought exercise that
takes the concept of visualization a step further. Immediately before going to
sleep, he closes his eyes and pictures a council of advisors, which for him
consists of men such as Emerson, Paine, Edison, Darwin, Lincoln, Burbank, Napoleon,
Ford, and Carnegie. He has selected each man for a particular trait that he
desires to imitate, and acts as the chairman of this invisible council.
The book describes the imaginary interactions among the
various counselors in great detail, which gives the impression that the author
takes this exercise very seriously. He maintains that this practice is the best
way to channel the sixth sense because of the way in which it impresses the
subconscious (via the auto-suggestion principle discussed earlier) with certain
characteristics that he wishes to emulate.
Because faith cannot coexist with
fear, one must master fear to grow rich. The author divides fear into six
types, which in order of prevalence are the fears of poverty, criticism, ill
health, loss of love, old age, and death. Because fear is a state of mind, and
because you have control over your states of mind, you can choose to exercise
your will and banish fear, worry, negativity, and alibis that we use to excuse
failure or lack of action (if I only had a better education, or more time, or
more money, etc.).
Conclusion
Believe it or not, I’ve actually
filtered out a good deal of the crazier elements contained within this book.
Hopefully this has had the effect of providing a summary of useful practical
steps, but you may want to read the book for yourself to see what you can glean
from some of the more outlandish content. (Napoleon actually suggests you read
the book in full at least three times.)
While I may not consider all of Mr.
Hill’s conjecture and embellishment to be valid in light of modern scientific
knowledge, I believe there is enormous value in the key principle of the power
of the subconscious mind. Since the writing of this book, science has confirmed
the author’s claim that the subconscious mind directs far more of our life than
we realize. To my knowledge, the practical steps in this book for harnessing
that power are the best available.
Magic Formula Investing
MAGIC FORMULA INVESTING
Discipline in Investment
Having a disciplined investment strategy differentiates the professional from the do-it-yourself investor. An investment strategy does not have to be complicated. If you were to sum up Warren Buffett's investing strategy it might be to "buy good businesses at a fair price with the intention of holding them forever." An investment strategy helps provide focus and ensures emotions are held in check when making decisions. Having an investment strategy for both asset mix and security will provide discipline to be a successful investor over the long term. In this article, we will look at different investment strategies and how you can pick the right one for you.
Margin of Safety
• The difference between the intrinsic value of the share and the market price of the share
• To buy the shares at the cheaper price
• Cheaper price doesn’t mean the shares are performing shares
Safety Margin
• Avoid investing your entire sum in a single purchase; make multiple purchases at various prices.
• At least 30% of your entire investment should be kept as safety margin
www.magicformulainvesting.com
• Establish a minimum market capitalization (usually greater than $50 million).
• Exclude utility and financial stocks.
• Exclude foreign companies (American Depositary Receipts).
• Determine company’s earnings yield
• Determine company’s return on capital
• Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital (ranked as percentages).
• Invest in 20–30 highest ranked companies, accumulating 2–3 positions per month over a 12-month period.
• Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark.
• Continue over a long-term (5–10+ year) period.
Indian market
• Select companies above market cap of 20000 crore only
• Remove financial stocks
• Determine company’s earnings yield
• Determine company’s return on capital
• Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital
1. ROCE = EBIT/ (Net Working Capital+ Fixed Asset)
2. Earnings Yield= EBIT/ EV
Enterprise Value (EV)=
(Share price * No. of shares) + (Short term debt + Leases + Long term Debt + Preferred Stock - Casnking of Stocks:
Comparison of Index Returns and Joel’s Portfolio returns:
Year Index Returns Joel’s Returns
2011 25.06 33.36
2012 -2.99 27.62
2013 12.54 47.23
2014 -3.39 -2.52
2015 10.95 18.99
2016 -0.99 -9.69
2017 7.25 16.63
Discipline in Investment
Having a disciplined investment strategy differentiates the professional from the do-it-yourself investor. An investment strategy does not have to be complicated. If you were to sum up Warren Buffett's investing strategy it might be to "buy good businesses at a fair price with the intention of holding them forever." An investment strategy helps provide focus and ensures emotions are held in check when making decisions. Having an investment strategy for both asset mix and security will provide discipline to be a successful investor over the long term. In this article, we will look at different investment strategies and how you can pick the right one for you.
Margin of Safety
• The difference between the intrinsic value of the share and the market price of the share
• To buy the shares at the cheaper price
• Cheaper price doesn’t mean the shares are performing shares
Safety Margin
• Avoid investing your entire sum in a single purchase; make multiple purchases at various prices.
• At least 30% of your entire investment should be kept as safety margin
www.magicformulainvesting.com
• Establish a minimum market capitalization (usually greater than $50 million).
• Exclude utility and financial stocks.
• Exclude foreign companies (American Depositary Receipts).
• Determine company’s earnings yield
• Determine company’s return on capital
• Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital (ranked as percentages).
• Invest in 20–30 highest ranked companies, accumulating 2–3 positions per month over a 12-month period.
• Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark.
• Continue over a long-term (5–10+ year) period.
Indian market
• Select companies above market cap of 20000 crore only
• Remove financial stocks
• Determine company’s earnings yield
• Determine company’s return on capital
• Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital
1. ROCE = EBIT/ (Net Working Capital+ Fixed Asset)
2. Earnings Yield= EBIT/ EV
Enterprise Value (EV)=
(Share price * No. of shares) + (Short term debt + Leases + Long term Debt + Preferred Stock - Casnking of Stocks:
Year Index Returns Joel’s Returns
2011 25.06 33.36
2012 -2.99 27.62
2013 12.54 47.23
2014 -3.39 -2.52
2015 10.95 18.99
2016 -0.99 -9.69
2017 7.25 16.63
|
Company Name
|
EBIT
Rs.(in Crs)
|
NWC Rs.(in
Crs)
|
NFA Rs.(in
Crs)
|
ROC
|
Score
|
EV Rs.(in
Crs)
|
EY
|
Score
|
MCAP Rs.(in
Crs)
|
Total Score
|
Rank
|
|
ABB
India Ltd.
|
4191
|
2144
|
1322
|
1.209175
|
4
|
21429
|
0.19557609
|
1
|
30,585.80
|
5
|
1
|
|
Bajaj
Auto Ltd.
|
5691
|
1665
|
2077
|
1.520844
|
3
|
68928
|
0.08256442
|
6
|
81,725.93
|
9
|
2
|
|
Cadila
Healthcare Ltd.
|
2777
|
1003
|
2452
|
0.803763
|
8
|
33326
|
0.08332833
|
5
|
53,807.91
|
13
|
3
|
|
Glenmark
Pharmaceuticals Ltd.
|
1879
|
1806
|
1701
|
0.535786
|
11
|
23113
|
0.08129624
|
7
|
17,693.35
|
18
|
4
|
|
Bajaj
Finance Ltd.
|
4952
|
7473
|
287
|
0.638144
|
9
|
72801
|
0.06802104
|
10
|
77,025.83
|
19
|
5
|
|
Bharat
Petroleum Corporation Ltd.
|
13067
|
-3623
|
36085
|
0.402532
|
17
|
76835
|
0.17006573
|
2
|
91,217.08
|
19
|
6
|
|
Adani
Ports and Special Economic Zone Ltd.
|
4264
|
-565
|
9376
|
0.483941
|
13
|
63744
|
0.06689257
|
11
|
75,682.93
|
24
|
7
|
|
Ashok
Leyland Ltd.
|
2275
|
81
|
5129
|
0.43666
|
16
|
31308
|
0.07266513
|
8
|
27,026.55
|
24
|
8
|
|
Britannia
Industries Ltd.
|
1233
|
75
|
713
|
1.564721
|
2
|
32082
|
0.03843277
|
23
|
43,803.42
|
25
|
9
|
|
Eicher
Motors Ltd.
|
1924
|
-22
|
959
|
2.053362
|
1
|
51961
|
0.03702777
|
24
|
73,921.27
|
25
|
10
|
|
Colgate
Palmolive (India) Ltd.
|
1010
|
-62
|
1086
|
0.986328
|
6
|
22222
|
0.04545045
|
20
|
30,225.76
|
26
|
11
|
|
Bharti
Airtel Ltd.
|
23809
|
-16486
|
95611
|
0.300904
|
25
|
182616
|
0.1303774
|
3
|
146,384.79
|
28
|
12
|
|
Aurobindo
Pharma Ltd.
|
2635
|
2442
|
3310
|
0.458102
|
14
|
46175
|
0.05706551
|
15
|
39,385.94
|
29
|
13
|
|
Bharat
Heavy Electricals Ltd.
|
1995
|
7033
|
1388
|
0.236908
|
27
|
21936
|
0.09094639
|
4
|
33,042.60
|
31
|
14
|
|
Container
Corporation of India Ltd.
|
1462
|
262
|
3824
|
0.357807
|
20
|
23398
|
0.06248397
|
12
|
28,373.62
|
32
|
15
|
|
Dabur
India Ltd.
|
1329
|
479
|
715
|
1.113065
|
5
|
43860
|
0.03030096
|
27
|
51,048.86
|
32
|
16
|
|
HCL
Technologies Ltd.
|
6246
|
12986
|
3655
|
0.375338
|
19
|
106192
|
0.05881799
|
13
|
121,540.55
|
32
|
17
|
|
GlaxoSmithkline
Consumer Healthcare Ltd.
|
1133
|
1941
|
537
|
0.457224
|
15
|
22668
|
0.04998235
|
19
|
22,608.22
|
34
|
18
|
|
Godrej
Consumer Products Ltd.
|
1040
|
15
|
1242
|
0.827367
|
7
|
46820
|
0.02221273
|
29
|
65,173.97
|
36
|
19
|
|
Bosch
Ltd.
|
2266
|
3080
|
1286
|
0.519011
|
12
|
63459
|
0.03570809
|
25
|
72,625.63
|
37
|
20
|
|
Asian
Paints Ltd.
|
3017
|
2554
|
2824
|
0.560989
|
10
|
102581
|
0.0294109
|
28
|
110686
|
38
|
21
|
|
Ambuja
Cements Ltd.
|
2259
|
498
|
6298
|
0.332401
|
23
|
40667
|
0.05554873
|
16
|
48,310.75
|
39
|
22
|
|
DLF
Ltd.
|
1918
|
12101
|
4099
|
0.118395
|
31
|
27813
|
0.06896056
|
9
|
34,261.78
|
40
|
23
|
|
ACC
Ltd.
|
1430
|
54
|
7723
|
0.183876
|
29
|
24747
|
0.05778478
|
14
|
30729
|
43
|
24
|
|
Cipla
Ltd.
|
2312
|
3382
|
4396
|
0.297249
|
26
|
42228
|
0.0547504
|
17
|
43,538.21
|
43
|
25
|
|
Cummins
India Ltd.
|
1011
|
1109
|
1808
|
0.346589
|
21
|
23254
|
0.04347639
|
22
|
25,166.99
|
43
|
26
|
|
Bharti
Infratel Ltd.
|
3151
|
3252
|
6263
|
0.331161
|
24
|
69336
|
0.04544537
|
21
|
68,833.17
|
45
|
27
|
|
Dr.
Reddy's Laboratories Ltd.
|
2679
|
12579
|
5044
|
0.152017
|
30
|
53591
|
0.04998974
|
18
|
43,833.12
|
48
|
28
|
|
Glaxosmithkline
Pharmaceuticals Ltd.
|
600
|
1093
|
471
|
0.383632
|
18
|
30860
|
0.01944264
|
30
|
20,970.35
|
48
|
29
|
|
Bajaj
Finserv Ltd.
|
197
|
502
|
76
|
0.34083
|
22
|
26888
|
0.00732669
|
31
|
65,264.72
|
53
|
30
|
|
Emami
Ltd.
|
700
|
1694
|
2002
|
0.189394
|
28
|
21713
|
0.03223875
|
26
|
24,744.01
|
54
|
31
|
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