Friday, 11 July 2014

Taking on Risk

Last week I wrote about the recent Goldman Sachs scandal and the lawsuit the SEC is bringing against Goldman. This week I want to explain why firms like Goldman would commit fraud. This week I want to talk about risk and reward.

When I was a kid, there was a popular game called RISK. The game is set in the Napoleonic era, and you control an army and a section of the board. The goal of the game is simple: world domination. It’s a game without mercy and requires high intelligence and much planning. It’s not a game for suckers.

Over last decade, Wall Street has been playing their own version of the game RISK—and though the stakes are higher, the strategies are the same. The source of all this risk? Trading.

In Conspiracy of the Rich: The 8 New Rules of Money, I wrote about how those who play by the old rules of money—go to school, get a job, buy a house, save money, and invest in a diversified portfolio of stocks, bonds, and mutual funds—are playing to lose. This is especially true when it comes to investing for retirement in the stock market and Wall Street’s financial vehicles.

Those who invest for their retirement in the stock market and financial vehicles made by Wall Street firms are betting on the market rising in value. They are investing for capital gains instead of cash flow. The problem is that the true money is made in trading—in the sell, not the hold. In fact, traders need the middle class to invest for the long term so that they can cash in on their financial ignorance through trades—often highly complex trades that take advantage of market swings and that require a high financial intelligence.

All the major Wall Street financial firms understand that the real money is made in short-term trading, not in long-term investment. And the reality is that the higher the risk, the bigger the return. In fact, until recently the potential returns were so high that the big firms were willing to risk it all for the big payoff. In a recent article in TIME Magazine, “The Case Against Goldman Sachs”, Stephen Gandel writes: “‘With a trader, the goal of every minute of every day is to make money,’ says Philipp Meyer, who worked for UBS as a trader in the late 1990s and early 2000s before going on to write about his time there. ‘So if running the economy off the cliff makes you money, you will do it, and you will do it every day of every week.’”

Of course, when I say that big firms like Goldman are willing to risk it all to make a killing in trading, I don’t mean they were willing to risk all they have…I mean they’re willing to risk all you have. These big firms are not just experts in trading, but they’re also experts in hedging those trades. The true victims are rarely the firms themselves—or the executives and traders collecting big bonuses—but rather good, hard-working investors with little intelligence.

The recent lawsuit against Goldman only exists because the SEC thinks that Goldman hedged unfairly—not because they wiped others out. In reality, most people and organizations are just pawns for the big Wall Street firms in a much larger game of RISK—trading edition. I’m not saying that is right or wrong, but it is reality.

The TIME article goes on to say: “In 1998, the year before Goldman went public, just 28% of its revenue came from trading and principal investments. By 2009, it was 76%.” And quoting a former Wall Street executive, "The industry became so heavily weighted toward risk, it just made sense to let the traders run things." The traders are in control on Wall Street—and they love the trading game of RISK.

According to the RISK product website, the following are some suggested strategies to be a winner at the board game of RISK. The rules are very similar to the ones for the trading game of RISK played on Wall Street.

Focus on the goal and the objective

In the board game of RISK, the goal is total world domination, no mercy.

The goal is the same in Wall Street trading. This is not a charity game. It’s a chew ‘em up and spit ‘em out, high stakes game where the winners win big and losers are toast.

You must grow to win

In the board game of RISK, you must grow a large army and accumulate large capital to conquer the world.

In the trading game of RISK, you must also grow large. By doing so, you earn friends in the government who will overlook your unfair advantage, and you gain insider access to make smart financial moves powered by knowledge while the little guys go down in flames.

Make large attacks

Making small attacks in the board game of RISK is worthless. You need to make big, large scale attacks to win. The risk is higher, but the payoff is worth it.

In the trading game of RISK the rule is the same. Small trades with little risk are worthless. Why? Because traders make money in the form of bonuses based on the size of the trade. As the Time article states: “As with everything else on Wall Street, the rise of the CDO had to do with bonus checks. Traders' pay was based not just on how much money they made for the firm but on the size of the bet.” In other words, traders have financial incentive to take bigger risks and are discouraged from playing it safe.

Don’t hesitate to eliminate a player from the game

When you’re playing the board game of RISK, there’s no room for mercy. Whether it’s your best friend from childhood or a random stranger, you have to treat all opponents the same—you have to take them out whenever you have the chance.

The same holds true on Wall Street. As the old adage goes, “There are no victims on Wall Street, just fools.” Traders are merciless and will sacrifice you, me, the whole economy to make a buck for themselves and for their firm. They don’t have your best interests at heart—they have theirs.

Know the map

The game of RISK website says this about the game: “New players are fresh meat with huge egos.” I translate that as, “People who don’t know the rules of the game will be eaten alive.”

The same holds true for the trading game of RISK. Those who have a low financial intelligence, who live by the old rules of money, will be eaten alive by the traders on Wall Street.

I want to see you win. In order to do so, you must understand the rules of the game. The only way to understand the rules is to increase your financial IQ. For instance, now that you know the rules of Wall Street, you can begin to learn how to play by those rules. That may mean learning how to be a trader. Rich Dad offers classes on technical trading and expert coaching on trading through our Rich Dad Education and Rich Dad Coaching programs. You may want to take advantage of those resources in the “Coaching and Education” section of this website.

I encourage you to stop playing by the old rules of money, and to instead educate yourself financially. Understand that the only person who can save you financially—is you. You can’t rely on the other players because their objective is to win—at the cost of you losing. You must rely on yourself and your mind. That’s why I preach that Knowledge is the New Money. You can only win if you understand how to play.

Thursday, 10 July 2014

7 Ways to Get People to Take You Seriously


7 Ways to Get People to Take You Seriously

If you're going to get anything done in business, you need people to respect you. 

But when you're young for your position, new to an industry, or a woman in a male-dominated field, for example, getting others to listen to your ideas can be difficult. 

After looking at the research on social perception and relationship building, we identified the following strategies for instantly getting respect. 

1. Let people talk about themselves. 

People spend 60% of their conversations talking about themselves. 

It feels good: Harvard researchers have found that talking about yourself activates the same brain regions as sex, cocaine, and a good meal. 

"Activation of this system when discussing the self suggests that self-disclosure like other more traditionally recognized stimuli, may be inherently pleasurable," Scientific American reports, "and that people may be motivated to talk about themselves more than other topics." 

Research shows that when people disclose information about themselves, they like each other more. It's also the primary way to form social bonds, or another way of saying it helps earn their respect.  

2. Win people over with the first introduction. 

Esquire's Tom Chiarella perfectly captures how to make a great first impression. He writes: 

On the street, in the lobby, square your shoulders to people you meet. Make a handshake matter — eye contact, good grip, elbow erring toward a right angle. Do not pump the hand, unless the other person is insistent on just that. Then pump the hell out of their hand. Smile. If you can't smile, you can't be gracious. You aren't some dopey English butler. You are you.

Why is this important? Because paying full attention to someone is a way of showing respect, and social science confirms that we get respect when we give respect. Add that to the list of reasons that conscientiousness predicts success. 

3. Keep your posture open and upright. 

Posture can influence the way others see you and the way you feel. Researchers have found that keeping your shoulders open and arms wide — a classic power pose — activates your hormone system in a way that makes you feel and look more confident and capable. 

The same logic carries over to the way you sit. If you're scrunched over your laptop, you won't feel very bold, but if you're sitting at a large desk, you'll feel more assertive. 

"If you take an expansive pose, it can actually lead to power," MIT professor Andy Yap tells Business Insider

4. Be way more prepared than you think you need to be. 

"Ignorance is one of the professional world's least respectable traits — if not the worst," Roberto Rocha writes at AskMen. "If you want your ideas to count, be better informed than everyone else."

So if you have a big pitch or meeting coming up, know exactly what message you want to communicate. Anticipate the objections your boss could have to whatever it is you're pitching. Not only will your ideas be stronger but you'll feel more confident presenting them. 

5. Know what's going on in the world. 

"Be up to speed on changes in your industry so you can speak about them intelligently," says Roberta Matuson. The "Suddenly in Charge" author recommends reading business news daily "so you can speak intelligently on business matters." 

Further, strategic-marketing consultant Noah Fleming encourages a wider information diet by keeping up with tech, sports, and pop culture. (To hack your reading habits, read this.) The idea is to have a broad foundation of knowledge to draw from.

"You should be able to discuss, debate, and offer opinion across a number of different areas," Fleming says. "Serious people have strong opinions! You're taken seriously when you have and offer your opinions." 

6. You need to be both humble and confident.

Venture capitalist Anthony K. Tjan says that respect requires a balance of humility and confidence.

"You need enough self-confidence to command the respect of others, but that needs to be counter-balanced with knowing that there is much you simply don't know," he writes. "Humility is the path towards earning respect, while self-confidence is the path towards commanding it." 

With that balance comes not only respect, he says, but also intellectual curiosity and optimism. 

7. Don't let verbal tics undermine your authority.

If you say a statement with the intonation of a question, that's called "upspeak." It happens when you end your sentences with a higher pitch than they began with and makes you sound as if you're unsure of what you're saying. 

In a recent survey, 85% of 700 professionals said upspeak is a sign of insecurity, while 57% think that upspeak makes people sound less credible.  

"The numbers speak for themselves," says strategy consultant Bernard Marr. "Upspeak has no place at work. If you would like a thriving career, then simply don't do it!" 

This story originally appeared on Business Insider

21 people listening
PeterMiddletonFlorenceMGenevieveBrunetMikeRoberts2xpez2000
 
Tabitha Yanette
from Facebook
rite sunsay!loli gave up after 1 day pd 4 a month classes nd uniform...but i left n neva went back tai chi n burbank,ca i lived n n.h.nd saw the sign o the x...or daily news,i bought both but mrsed ur letter..oops!oh my!but les not quit! i love it nd im the princess in my hood cle girls r seen but not heard this is life not private scol,if i gotta deal u draw!black jack/jokers no good out!
FlorenceM
I must say, a lot of people write about this topic but this one has a fresh kick to it. It's so relevant!
Rod
"Don't be a dopey English Butler" We all have one over here you know. : )
Darrin Cassidy
from Facebook
I think generally there is more pressure on women to meet a certain "presentation standard", while men can be slobs and that's ok. It's not fair, but the bar to a degree has been set high by media photoshop resulting in unrealistic expectation for women to be head turners that knock it out of the ball park...
Laura Napolitano
from Facebook
I hate to admit this, dropping 80 pounds would help in my case -- I noticed since I gained a bunch of weight, people treat you much differently compared to a more "conventionally attractive" person. Not sure if it's the same for men. Appearance seems to be a way of getting someone to take you more seriously.
MikeRoberts2
I think that fit people of both genders get taken more seriously...unless you are super-buff...then they think you're a meathead.

xpez2000
this is true. But if you are smart and you are the boss or you own the company than it doesnt matter.
View Comments (26)

5 Ways to Get More Respect at Work


5 Ways to Get More Respect at Work
Image credit: Shutterstock












“Respect your efforts, respect yourself.  Self-respect leads to self-discipline. When you have both firmly under your belt, that’s real power.” Clint Eastwood.  

Seemingly this formula worked well for Clint Eastwood in his career and if you want to be better respected at your job, it can work for you too.

Take a moment to conjure up what work would be like if your colleagues, bosses, subordinates and clients treated you more respectfully.  Do you envision more money?  Do you envision more fulfilling relationships with these individuals?

1. Define your values.
People follow strength and competency.  Think about what makes you a better, stronger person.  Write down those aspects you would like to move towards and a few things you would like to move away from.  Simply listing these items can provide tremendous momentum toward or away from each value.

2. Discover your passion.
It helps a great deal to get where you want to be if the you have passion for the actual journey it takes to reach your end goal. Passionate employees tend to deepen their involvement around the office and, thus gain a significant amount of respect and friendship from others.

Related: Respect, Power, Family Pride: How Do You Define Success?

3. Know your purpose.
Corporate America is a tough place. It will lead you through twists, turns and disappointments.  If your purpose is, say, to service your clients better than any other firm, then keep your eye on the ball.  The resiliency and positive attitude will quickly be realized by those around you.

4. Envision what the future is going to be like.
Start to take some time and envision what it is going to be like when you do hit the pinnacle of getting more respect, friendship and success around the office.  Practice makes perfect.  To best achieve this, take a few deep breaths, get the negative thoughts out of your mind and begin to make it a mental reality.

5. Stop monologuing and start taking interest.
You ever notice that when you look at a picture with multiple people in it, you always look at yourself first? Human beings (inside the office, outside the office – wherever) are highly self-involved. They are flattered and respond better to you as a leader and an individual when you stop focusing on yourself and begin to take a genuine interest in them.

Taking these steps isn’t easy, but think of it as training yourself for a better life. There is a pertinent story I read a few weeks ago about a Navy Seal who, when he jumped out of an airplane, found that his parachute wouldn’t open.

He described what saved him and eventually got it opened was his extensive training, which allowed him to remain focused. It won’t happen tomorrow or a week from now and maybe not even in a month, but with extensive training on yourself and your interaction with others, you will become better respected both professionally and personally.