Not Quite Money: Five Nutshell Reviews Of Interesting Books That Can Be Applied To Personal Finance

Lately, I’ve been listening to a number of business books on my morning and evening commutes and also on some weekend trips. These books aren’t directly connected to personal finance, but I’ve found that time and time again the basic principles that the good business books describe valuable ideas that are quite applicable to personal finance.

So, without further ado, here are five snapshot reviews of business books I’ve read (or heard) in the last few months.

Michael Lewis

Moneyball is basically the story of an evolution (some say revolution) in how baseball teams are constructed. Rather than focusing on the best home run hitters, the Oakland Athletics and their general manager, Billy Beane, bought inexpensive players who excelled in other areas of the game, uncovered by statistical analysis. The result is that Oakland, with one of the tiniest payrolls in baseball, manages to be highly competitive year in and year out. What can this book teach us?

Moneyball in your pocket The entire book is about maximizing a budget by not doing things the way everyone else is doing them. The A’s win by doing things differently, by focusing on traits that other teams simply overlook. In other words, you can win by being frugal – think different about how you’re spending your money. You might not necessarily need a home run when a single will do.

Before investing in prospects, do your research Much of the book focuses on the 2002 Major League Baseball draft, in which the Oakland A’s drafted a bunch of players that left the other teams completely baffled: who were these guys? What they were was bargains – they signed inexpensive contracts with Oakland and wound up at least as successful as the expensive draft classes of other teams. If you’re looking to invest, look for bargains: mutual funds with low expense ratios, individual stocks that have a clearly low forward P/E ratio compared to their competitors, and so forth.

Jack Welch

Jack Welch became a business legend because of his turnaround of GE while he was CEO. He did it by basically cutting away anything that wasn’t successful, but treating the success stories very well. Winning is Welch’s book on management, where he espouses his management philosophies. My personal feeling is that business types laud Jack Welch too highly, but I do give him credit for being amazingly successful. What can this book teach us?

20-70-10 One major tenet of the Welch management philosophy is the 20-70-10 rule. Basically, all employees are put into three groups: the excellent 20%, the middling 70%, and the bottom 10%. If you’re in the bottom 10%, you’re fired, period. It’s pretty harsh, but it’s a brilliant way to strip fat out of your finances: every year, evaluate your spending over a month, determine the bottom 10%, and simply eliminate that spending from your life. What 10% is really not needed in your life?

Be first or second or don’t bother. If you’re going to spend money on something, why buy something cheap? Save up your nickels and dimes and buy something that’s quality. For example, a set of cheap pots and pans for your kitchen will only be a frustration and a net loss in the long run, so save up now and invest in something great that will last.

Built to LastBuilt to Last
Jim Collins

This book basically debunks most of the commonly-held business bromides about what makes a company a long term success through numerical analysis and also specific examples. For example, it smashes to bits the idea that “visionary” companies require a great charismatic and visionary leader. While this may have worked for GM (see Winning, above), it’s far from the rule in corporate America. What can this book teach us?

You don’t have to be a brilliant financial planner. The goal of getting ahead is a great one, but some people think that it requires brilliance or “gazelle intensity.” The truth is that the biggest personal finance successes are the people who find lots of small things that work for them; the little things add up to big things. They also discard things that simply don’t work.

There isn’t always a “correct” answer. Quite often, I’ll evaluate some financial topic on this site and some readers will loudly disagree with me. That’s because in many situations there is no true correct answer. People can debate fifteen and thirty year mortgages until the sun goes down; both have certain advantages and certain drawbacks, and it depends on the person to decide which one works better for their life situation.

The Tipping PointThe Tipping Point
Malcolm Gladwell

I found this one particularly interesting to me as a blogger, as the entire book is about the point at which an idea begins to snowball. Gladwell’s idea is that it’s usually a small group of enthusiastic followers that take you to that tipping point where an idea or a product really begin to take off. What can this book teach us?

Networking works. Everyone’s heard of Paul Revere and his midnight ride, but have you heard of William Dawes? He was also out riding around in the countryside on that fateful first night of the Revolutionary War, but he wasn’t nearly as successful as Revere. Why? He didn’t know who to contact, so he failed simply because he hadn’t networked well. Every connection you can make with another person may help you in the long run in some fashion, so don’t hesitate to meet people and interact with them.

What are you doing with your career? Are you doing something profound that really makes you feel valuable, as though you could change the world (or at least play a part in a world-changing event)? Everyone has the power to change the world, to tip something; you just need to figure out what drives you deep inside, because that’s the area where you’ll likely change the world – and potentially make a lot of money.

The Audacity of HopeThe Audacity of Hope
Barack Obama

This book basically outlines Obama’s political philosophy and stance on various issues, but it also paints a pretty strong picture of the current state of American politics, and it’s a sad one, indeed. What could this book possibly have to say about personal finance?

When dealing with finances and the people in your life, don’t be afraid to compromise. Compromise is sometimes an inevitable part of life, and no matter how much you believe you’re right, even if you can prove you’re right, there are times where compromise is the best solution. This is especially true when discussing finances with your spouse, as you may have different beliefs, different approaches, and different dreams. Talk about all of these things and see what you can learn about each other before you make a major decision that you’re not both on board for.

You need to balance the books or else you’ll collapse in the long run. This is true whether you’re looking at a government, at a business, or at your own pocket: debt is not a healthy long-term option because you have chosen not to invest in yourself but instead invest in others. Whenever you let a debt go unpaid and build up interest, your future becomes just a little bit dimmer. Before you can really move forward, you need to pay down or eliminate your debts, above all.

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