Monday, November 23, 2009

Seven Ingredients of Success

Recently I was reading a passage from Tom Morris’ Wisdom Institute that outlined the Seven Degrees of achievement. They include: Conception, Confidence, Concentration, Consistency, Commitment, Character, and Capacity

The art of successful achievement requires that we focus our energies toward favorable outcomes by living in accordance with seven universal conditions for positive achievement. In times of change, uncertainty, doubt, and turmoil you need to use these seven Cs constantly and relentlessly, as individuals and teams. A summary of each is listed below

A clear CONCEPTION of what we want, a true and obtainable vision, and a goal clearly imagined and a passion easily followed.

If you do not know where you are going, you will most likely end up there. Setting a goal is often difficult when the world around you is rapidly changing or in a state of flux, but it is the most important thing you can do if you ever hope to truly be successful. A disciplined use of our intellects and imaginations to envision where will we be in the future will enable us to move forward productively as great problem solvers and creative examples to others.

A strong CONFIDENCE that we can attain our goal and a willingness to continue in order make it through.

In situations of uncertainty or tremendous change, the first thing most people lose is their inner sense of confidence and their will to continue. Confidence is a state of mind and depends on your attitude and, as such, is within your control. Our confidence can be aided by how we think, talk, and act. In order to see your goal through to the end, you it to yourself, as well as to those around us, to keep going and maintain your confidence. Confidence is contagious and can drive success in surprising ways.

A focused CONCENTRATION on what it takes to keep going and reach the goal.

More people fail not because they are not talented, but because the take their eye off the ball. Concentration and the ability to narrow your focus is what will allow us to harness our strengths and abilities. You need to focus and refocus yourself in times of uncertainty and upheaval, and concentrate your thought and energy on what is required each day for the outcomes you seek.

A stubborn CONSISTENCY in pursuing your vision and never giving up.

Consistency does not mean doing things the way they have always done, but keeping your actions in line with our highest goals and deepest values. In this way, consistency is more like integrity. The most powerful adaptation requires this kind of consistency as you adjust to new realities.

An emotional COMMITMENT to the importance of what you doing in order to feed your passion.

Passion fuels excellence, and commitment fuels passion. Without an emotional commitment to your work, and to the team around you, you can easily find that unexpected change or bump in the road saps your strength. People will be fickle, let you down, and discourage you everyday. They will say “It can’t be done.” A commitment of the heart will energize you to get past these naysayers and allow you to do great things in new ways.

A good CHARACTER to guide you when you are tempted to deviate allow you to keep on a proper course.

Character in all things counts! Change often calls for compromise, but never for a compromise of character or integrity. The stronger your core values and character is, the better you will weather any storm. Practicing ethics and integrity matters in all endeavors your do, both large and small.

The CAPACITY to expand and enjoy the journey along the way.

If you can laugh at the absurdities life often throws at us, and find aspects of our work to enjoy during even trying times, you can achieve creative, lasting results. A cheerful capacity will allow you to expand the six abilities listed above. Nothing can withstand the onslaught of laughter!

By practicing the overall art of change each day – following the simple requirements of self-control, positive action, and ongoing achievement – you can position yourself to make the most of any change that comes your way. We are the masters of our destiny if we can master adaptation.

The wisdom of the past can guide us reliably into creating the future we want and deserve. If you use these seven attributes every day, you can best live the adventures you are here in this world to have, and can attain forms of success that will sometimes surprise not only ourselves even more than it bewilders our neighbors.

Thursday, November 19, 2009

Money and Velocity

Almost 9 months ago the government pumped in $757 Billion, that is right Billion, into the economy, but for some reason, they still do not realize that what they did, though noble, was not the most effect way of stimulating the economy. Why? It is because they do not understand the power of money’s momentum. Essentially, the faster money flows, the stronger you economy. Why? Well, as money moves through the system, its “effect” in multiplied by the number of times it exchanges hands. This velocity of money actually makes it seem like there is more money in the system than there actually is, or that the multiplicative effect of the existing money is greater as the velocity increases.

Back in school, I learned a few interesting equations about how velocity effects things. These include momentum, kinetic energy, and finally Einstein’s equation of relativity. To review these equations are:

momentum = mass * velocity

Kinetic Energy (KE)
KE = ½ mv
2 (where m=mass and v=velocity)

Finally, we all know the formula that Einstein came up to describe his theory of relativity, e=mc2 where “e” is energy, “m” is for mass and “c” is the speed of light.

While most economist focus on the “supply” of money in the form of M1, M2, and M3, in terms of the health of the economy, I really believe it is the velocity (or exchange per day, week, month, etc.) that have a much more profound effect on our present state of affairs.

Traditionally, money supply is defined in terms of M1, M2 and M3 and the definitions as Released by Fred (Federal Reserve Economic Data @ St. Louis) are listed below:

The terms M1, M2, M3 refer to the monetary aggregates. For quite some time it was thought that there was a perfect one to one relationship between these numbers and the rates of inflation. Recently this relationship seems to have broken down, and the money supply numbers have lost some of their appeal to market participants. It is still important to watch for strong growth in the money supply which might lead to inflationary pressures as money inflates aggregate demand.

M1: Technically defined this is the sum of: the tender that is held outside banks, travelers checks, checking accounts (but not demand deposits), minus the amount of money in the Federal Reserve float.

M2: The sum of: M1, savings deposits (this would include money market accounts from which no checks can be written), small denomination time deposits (where small is less than $100,000), retirement accounts.

M3: M2 plus the large time deposits (for any of you with more than $100,000 deposits you add to this...). Eurodollar deposits, dollars held at foreign offices of U.S. banks, and institutional money market funds.

While these are great indicators to show where money is being used, they are not the best in determining the health of the economy.

The main reason why the stimulus is NOT working is because the powers that be are not focusing on generating enough velocity of money. The reason why our economy went into a tailspin after the financial bailout was that the velocity of money in the hands of consumers went almost to one. This in turn made everyone “feel” poorer because know the multiplicative effect of money essentially was one. In addition, I have developed a formula for what I believe is a good indicator of how the velocity of money affects the strength of the economy below:


Where “E” stands for the economic health, “M” is the money supply, “k” is a constant yet to be determined, and “v” is the number of turns of money per month with its minimum being 1. Looking at this equations (which is similar to the formula for kinetic energy and Einstein’s theory of relativity equation), as “v” approaches 1, the strength of the economy becomes directly proportional to the total amount of money in the system.

In contrast, as you increase the velocity of money, its effect is exponential. As an example, if you can make the number of turns “v” increase to 4, then the multiplicative effect of that velocity is a 16 times increase.

This equation is valid more for M1. With M2 and M3, “v” tends to stand around 1 or 2. The only place where v increases to a more robust number is with M1. So, when the Government poured $757 Billion dollars to expand M2, they did very little in expanding the “effect” of the money they placed into the economy. In contrast, if they had focused on putting the money directing to consumers (M1), they might have had to put in far less money ($40 Billion) to get the same effect, or if the put in $700 Billion into M1, we would probably already be out of the Great Recession.

I am shocked that no one has brought this obviously glaring “miss” in the Stimulus Package, but then again, it seems like they all had their own agendas.