This book offers lots of good advises on running a “small” business based on their experience running a small 16-person company called 37 signals. This book is a quick read since it’s got artworks/drawings almost every three pages or so; they surely spice things up a bit. Some of the advises are just common sense but some go against the grain the common beliefs for which they offer good arguments.

The advises stand out for me are:
1. The “real” world may not be real. Don’t use it to justify for not trying starting your company.
2. Learn from your success and do it better rather than learn from your or others’ mistakes. Failure is not a prerequisite for success. “Evolution doesn’t linger on past failures, it’s always building upon what worked.”
3. On planning: it’s all guesswork. “Working without a plan may seem scare. But blindly following a plan that has no relationship with the reality is even scarier.”
4. On growth and size: “Small is not just a stepping-stone. Small is a great destination in itself… Anyone who runs a business that’s sustainable and profitable, whether it’s big or small should be proud.”
5. Be a starter (not entrepreneur). You just need an idea, a touch of confidence and a push to get started.
6. Make a dent on universe: If you want to do something, do something that matters.
7. Scratch your own itch: Make something you want to use.
8. Draw a line on the sand: “When you don’t know what you believe, everything becomes an argument. Everything is debatable.”
9. Don’t look for outside money for the following reasons: a. you give up control, b. “cashing out” begins to trump building a quality business. c. spending other people’s money is addictive. d. you have no leverage. e. customers move down the totem pole, f. raising money is incredibly distracting.
10. Start a business, not a startup. “A business without a a path to profit isn’t a business, it’s a hobby.”
11. Embrace constraints. Use them to force creativity.
12. You’re better off with a kick-ass half than a half-asses whole. Start chopping.
13. Be a curator: Stick to what’s truly essential.
14. Focus on what won’t change. Things that people are going to want today and ten years from now.
15. Don’t get obsessed over tools.
16. Sell your by-products.
17. Reasons to quit: Ask yourself: Why are you doing this? What problems are you solving? Is it actually useful? Are you adding value? Will this change behavior? Is there an easier way? What could you be doing instead? Is it really worth it?
18. Find a judo solution – one that delivers maximum efficiency with minimum effort.
19. Make tiny decisions so you can afford to change.
20. Don’t copy, be influenced.
21. De-commoditize your product. Make you part of your product or service. Make it something no one else can offer.
22. Pick a fight with your competitors. Taking a stand always stand out.
23. Under-do your competition. Do less than your competitors to beat them.
24. Say no by default. Don’t believe that “customer is always right” stuff.
25. Let your customers outgrow you. You can’t be everything to everyone. Companies need to be true to a type of customer more than a specific individual customer with changing needs.
26. Build an audience. Lucky companies have fans. Share information that’s valuable and you’ll slowly build a loyal audience.
27. Out-teach your competition: Teach and you’ll form a bond you just don’t get from traditional marketing tactics. Great chefs give away recipes in cookbooks.
28. Get behind the scenes. Give people a backstage pass to show how your business works. They’ll develop a deeper level of understanding and appreciation for what you do.
29. Emulate drug dealers. Make your product so good, so addictive that giving customers a small, free taste makes them come back for more.
30. Everything is marketing. It’s the sum total of everything you do.
31. On hiring: Do it yourself first. Hire to kill pain. If you lose people, don’t replace him/her immediately. Pass on great people you don’t need. Hire slowly to avoid winding up at a cocktail party of strangers.
32. On resume: check the cover letter and trust your gut reaction.
33. With a small team, everyone must work, not delegate work.
34. Higher great writers. Great writers know how to communicate.
35. Own your bad news. It’s better be you who’s telling the bad news.
36. Put everyone on the front line. No one should be shielded from criticism.
37. You don’t create a culture, it’s a by-product of consistent behavior.
38. Decisions are temporary. The ability to change course is one of the big advantages of being small.
39. Policies are organizational scar tissue – codified overreactions to situations that are unlikely to happen again or collective punishment for the misdeeds of an individual.
40. Writing for one and sound like you. Think of one person to write email to.
41. Be aware of the 4-letter words: need, can’t, easy, and ASAP.
42. Inspiration is perishable. Grab it and put it to work on ideas that are immortal.

This is a reasonable good listen, though it’s hard to follow exactly on audiobook with so many details and there is no book version. This was more a coaching seminar than a book. Summary is below:

“Hidden” from the non-academic world. There were shrunk down to 7 to be achievable within the shortest amount of time. Criteria: can survive in 7 days in a strange city. Motivation: a compelling reason why – reason – will – and emotion: determined, disturbed (arouse). Deconstruct and Re-construct.

1. Reason why – big enough reason to change (not enough to appeal to emotion). Facts gives us the reason to justify our decision – reality check. Head can’t go with the heart without reason – rationalization. Disturbing questions to ask – use logic to create cognitive dissonance – demolish old beliefs. Exercises: track a journal of reality. Practice shift to long-term goal – zoom in/out. Taking elevator of emotion down: take note of the emotions. Track the opportunity costs of taking no actions – danger of being naive.

2. Changing the belief, attitude (expectation, and value). If we don’t expect success, we’re not getting it. “Impossible is over-rated.” “Change your though and you change the world.” Have I tied my top goals to my believes and values? 3 Kinds of beliefs: probability, social (expectation of others), and ability (our capability to actually achieve our outcome. Realistic feasible plan helps to increase the probability. Detailed plan, scenario analysis help with the ability belief.

6-5-4 strategies: 6 major world views: (Types of Men) aesthetic, life philosophy, reason (hunger for intellectual knowledge) power (personal power), practical, humanatarin. 5 motives behind motivation: who (social), what (sub goals), when and where, why, how. 4 motivation environments: dominant, inducement ,submission and compliant. 1. adventurer, 2. motivator (needs recognition), 3. harmonizer (needs appreciation and control), 4. planner (needs security, definition and follow instructions).

8-step processes:
1. Uncovering your unconscious limiting beliefs – belief assessment – Aristotle treatment. Limiting beliefs: in terms of permanent or temporary. Pervasiveness (universal or specific), hopeless or hopeful. Ask yourself: “What would you lose or what could go wrong if you get what you want?” “What sort of negative things would they say about you if you get what you wanted?” ” What prevents things from changing?” “What blockages cause things to stay the same old ways?” “What past experiences could be spilling over to your presence and future?” “What things are stopping you from getting what you want?” “What appears to be almost impossible to get what you want?” “What seems to always prevent you from reaching your outcomes?” “What are things that would never change for you?” “What the skills or abilities that would prevent you from reaching your outcome?”
2. putting the limiting beliefs to a logical format: premise-> Conclusion.
In view of this fact ______, I conclude that _____.
If _____, then ______.
Because _______, as a result _________.
For the following reasons _______ , consequently _____ .
If we assume ______ , then we can infer ______ .
Since ______ , leads to the ________ .
Assuming that _______ , proves that _________ .
3. re-frame the limiting belief.
4. belief assess. Probability: This goal seems impossible ___ because ____. What could have been if it’s easy? Social: Relation impact? Because? What voice? Ability: What ability do you lack? I need the following skills _____? Decision making process: What assumption am I making? What are my options? What criteria? How do I make progress?
Success language declaration: Base on the probability, I will _________. Based on my positive support system, I will ________. Based on my partnership _____. Based on my detailed plan, I will _____.
5. paradigm shift: What __ , if ___, then ___. What is my current belief. But if it’s possible, then ____.
6. Align your personality.
7. Align with you top two attitudes.
8. Increase your desire to achieve your goals. Crank up the meaning purpose 100 times. What would you have to lose in the attitudes? Visualize a short movie in 30 days in the following areas: beliefs, emotions, social, spiritual, financial, habits, will power, thinking, focus.

3. Clear focus on key issues: Pull, intentionality, effortlessness. Intention is a powerful predictor. Narrow cast – seeing opportunities that others do not see. Do I easily get distracted from my goals? We are what we focus on all day long. Am I following through on my goals? Train our mind to not see the distractions – pure motive (what you’re becoming not just wealth). Baseball analogy: Clear focus on 1st base, beliefs on 2nd base, attitudes on 3rd base, actions on home plate.

4. Spiritual/religion: lots of religion stuff here. Don’t be overly self-reliant. This is a stretch. Be – Do – Have. Who do I need to become in order to be happy?
8 steps: 1. incorporate opportunities to your goal each day, 2. use pre-rehearsal to set your intention strongly, 3. put out reminder to remind you of your intentions to your goals, 4. pick the right people to train you on your goals, 5. determine your core surrender issue and resolve it (fear of control, social rejection, confrontation, unknown and undefined), 6. reflect the metaphor of raising the sail and let the wind carries you, 7. think of the archetypes of gods and confessions daily (journaling), 8. think through stages of moral.

4. Warrior’s Edge Resistance to temptation. Absence of wanting – negation. Maintain your inner drive by ignoring instead of fighting, when facing difficulty. Watch comedy or humor daily.

5. Behavior Congruent: Use music, smell, touch, exercises, laughter and etc. 4-step STOP process: 1). Startle (disrupt, shock, surprise, grab attention, “warning,” “news alert”). 2). Triggering & Transfer (dis-engage, move and engage: attach a strong biological/philosophical driver, like drinking, waking up, to your higher intention). 3). Originality and ROI: reward seeking (feel pleasure & satisfied). What can do I to add something new/innovative to my process? Why is it better? Which one offers the best ROI? 4). Power and Purpose: being soulful, selfless mission, have a problem to solve, not self-conscious ego. Learn Viola Spolin’s acting techniques. Be well disciplined & being honest to all people. Exercises: Teach and mentor someone, assemble peer groups.

6, 7. Some thing to die for and something to live for: “The biggest problem you have is that you don’t have a bigger problem.” How true! Create a genuine mission, something outside of yourselves to live for and die for.

I picked this book up immediately after seeing Phil Town’s appearance in NBC’s Millionaire show. He’s got a pretty good story of how he turned rich from being a river guide, taught by this guy “Wolf.” Basically, his approach is of the value investing but he made it simpler for lay persons and an experienced investor like me. I definitely would love to spend no more than a few minutes watching over stocks. Of course, Rule #1 is “Don’t lose money” or invest with certainty – buying a wonderful business at an attractive price. In essence, be a good shopper.

The author did a comparison against other types of investments to arrive at the advantage of having 15% return with stocks. I believe the author overlooked the benefits of real estate w.r.t. the tax treatments and tax-free cash flow. But I agreed with him that liquidity of stocks with 15% compounded growth rate are pretty good. The trick is to keep it at 15% or more. That’s the tough part. Another lesson learned from the book is the important of the ROIC growth, not the nominal equity value. “The equity growth rate for any business is defined by growing surpluses, and surpluses are what a business makes that’s valuable… Surpluses gives a business the cash to grow, which is why businesses typically growth at about the rate that their surplus grows, i.e. the equity growth rate.”

I think this book beats all the MBA business classes I have taken. Well worth the time. A quick summary below:

Four simple steps:
1. Find a wonderful business.
2. Know what it’s worth as a business.
3. Buy it at 50 percent off.
4. Repeat until very rich.

The definition of a “wonderful” business: 4 M’s
1. Meaning to you. Buy it only if you’d be willing to make this business the sole financial support of your family for the next 100 years. Become a business owner, not just a stock investor. Employ 10-10 Rule. “I won’t own this business for ten minutes unless I’m willing to own it for ten years.” Start with the intersections of the three circles of your Passion, Talent, and Money.

2. Moat (wider the better and sustainable): “durable competitive advantage that protects it from attached, like a moat protects a castle.” Five types of moats: a. Brand: a product you’re willing to pay more for because you trust it. b. Secret: a business that has a patent or trade secret that makes direct competition illegal or very difficult. c. Toll: a business with exclusive control of a market – giving it the ability to collect a “toll” from anyone needing that service or product. d. Switching: a business that’s so much a part of your life that switching isn’t worth the trouble. e: Price: a business that can price products so low no one can compete. The Big Five (must be >= 10%/year for 10 years): 1. ROIC (return on invested capital). 2. Sales growth rate. 3. Earning per share (EPS) growth rate. 4. Equity, or book value per share (BVPS), growth rate, 5. Free cash flow (FCF) growth rate. Rule on debt: if it can pay off debt within 3 years by dividing total long-term debt by current free cash flow.

3. Management (great ones)
Look for CEO’s of the following qualities: 1. Owner-oriented and 2. Drive: look for BAG (big audacious goals), check insider trading, look at CEO compensation,

4. Margin of safety (MOS).
Get a dollar of value for only 50 cents.
Calculate the sticker price with the following 4 numbers: 1. current EPS (TTM EPS: trailing twelve-month EPS), 2. Estimated (future) EPS growth rate (using past equity growth rate), 3. Estimated future PE (2x growth rate, worst of default & historical), and 4. Minimum acceptable rate of return from this investment: 15% of Rule #1 investors.

Future PE * Future EPS = Future sticker price. divide by 4 (15% return for 10 years) to get to today’s price.
Divide by 2 again to get to the MOS price. In other words, divide the future sticker price by 8 to get to a reasonable purchase price.

Trading Tools
1. MACD (Moving Average Convergence Divergence): Consisting of slow EMA (exponential moving average: 26-day), fast EMA (12-day), and a trigger/signal EMA (9-day). Use a more responsive model (8-17-9) MACD.
2. Stochastics: Based on Dr. Lane’s research (how the current closing price sit between the high/low range over 14 trading days). Used to identify overbought (above 80%) and oversold condition (below 20%). MSN link here. Buy line crosses up, buy. Buy line crosses down, sell. The author recommends using 14-trading-day for the first number and 5-day for the trigger point. Crosses up through the 20th percentile, it’s a positive signal and when it crossed down through the 80th percentile it’s a negative signal.
3. Moving averages: Author recommends 10-day moving averages for earlier signal. When the price line crosses above the moving average line, buy. When the price line crosses below the moving average line, sell.

When all three signals are saying “buy,” it’s time to get in. When all three are saying “sell,” it’s time to get out.

On “Eliminating the Barriers” chapter:
Advise on debts: don’t take on debt unless the interest rate of the debt is less the 1/3 of the your expected rate of return. And the debt can be paid off within a year.