Bad Entrepreneur

I have grappled quite a bit with this concept of social entrepreneurship this year and finding ways to invest in social projects and I think I have found a method I’m comfortable with / excited about.

There are 2 main issues for me.

Hand-outs are not an answer:

Yes charity has its place and one has to believe that in most cases it gets used for its intended purpose. However a community that grows up on hand-outs doesn’t develop – it repeats a cycle. The problem with this – if an individual “gives” R100, R100 is consumed – it doesn’t kick on and generate R110. In theory education should be different because you equip somebody with a skill and this they should be able to carry with them down the line, go to university, get a job etc. etc. My experience this year is that this isn’t always the case.

Where is the (social) dividend?

Call me a cold-hearted capitalist but I want to see a return on my investment. Nedbank has just listed a “green” Exchange Traded Fund (ETF) and they went and back-tested the performance of the companies in its index versus less “green” businesses and sure enough those in the index outperformed those out of it. Note I said “green” versus “socially responsible” because the companies in the JSEs’ Socially Responsible Index (SRI) haven’t done well relative to their peers. For this reason I want projects that show me something tangible. This problem is exacerbated because I have battled to find a way for retail investors to invest in socially responsible initiatives. Until now.

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I have used a bit of this December period to catch up on some reading and my latest book is another pearler from Michael Lewis called Boomerang: The Meltdown Tour.

Before you get me wrong – I am pretty bullish about 2012… (what’s the point of being bearish and a pessimist?!)  but I quite enjoy Lewis’ writing style and I don’t mind a healthy dose of reality from time to time.

Personally I think this is his best book yet and what I really enjoyed about it is that it has a very “real” feel to it as it centres around the debt crisis in Europe. Lewis went to places like Iceland, Ireland, Greece and Germany to try and unpack how it was possible that we ended up in crisis situation we are in now.

Sometimes the truth is stranger than fiction… Did you know that Alcoa (the world’s largest aluminium producer) had to commission a government official in Iceland to certify that the land that they wanted to build on was “elf-free” ? (Yes I literally mean that they needed a certificate that said that elves don’t inhabit the land).

What about the Greek monks who exchanged a worthless lake for prime real-estate?

It’s all in there and I laughed the whole way through. Brilliant read and I thoroughly recommend it to anybody who has an interest in finance.

You can buy it online from Kalahari by clicking HERE

 Synopsis for the book is as below:

Having made the U.S. financial crisis comprehensible for us all in The Big Short , Michael Lewis realised that he hadn’t begun to get grips with the full story. How exactly had it come to hit the rest of the world in the face too? Just how broke are we really? Boomerang is a tragi-comic romp across Europe, in which Lewis gives full vent to his storytelling genius. The cheap credit that rolled across the planet between 2002 and 2008 was more than a simple financial phenomenon: it was temptation, offering entire societies the chance to reveal aspects of their characters they could not normally afford to indulge. Icelanders wanted to stop fishing and become investment bankers. The Greeks wanted to turn their country into a pinata stuffed with cash and allow as many citizens as possible to take a whack. The Irish wanted to stop being Irish. The Germans wanted to be even more German. Michael Lewis’ investigation of bubbles across Europe is brilliantly, sadly hilarious. He also turns a merciless eye on America: on California, the epicentre of world consumption, where we see that a final reckoning awaits the most avaricious of nations too. This is the ultimate book of our times. It’s time to brace ourselves for impact and, with Michael Lewis, to laugh out loud while we’re doing it.

Irrespective of whether you are an optimist or a pessimist, you are bound to find at least 10 ideas for your money in the latest edition of Finweek

The Finweek 2012 Money Edition, which hits shelves on Friday, combines a number of stock picks, trading tips and personal finance activities that ordinary South Africans can apply to their money. The tips come from a mixture of award-winning financial journalists, respected industry professionals and up-and-coming young professionals.

“Previously Finweek has had quite a big emphasis on picking shares into a new year but the reality is that South Africans just don’t have extra money to be dabbling in the market at the moment and many are rather focusing on tidying up their personal finances, investing in products like unit trusts or exchange traded funds and focusing on their careers or even their small businesses so this is the angle we’ve taken this year,” says Finweek editor Marc Ashton.

Ashton adds that with nearly 10 million people under some form of debt review, 2012 is likely to be a year where the focus is on personal responsibility and control of individual’s finances.

Finweek is available in stores on a Friday or available in digital format from www.mysubs.co.za:

Finweek English Digital Format

Finweek Afrikaans Digital Format

I must confess I don’t normally read parenting books so this is not the kind of book I would actively go out and look for.

My argument is that I actually received a “Professional Parenting certificate” when I was going through the process of adopting one of my kids, so I’ve got the piece of paper to say that I now know best…. or at least that is what I tell my kids.

Having said that this “Battle Hymn of the Tiger Mother” had created quite a lot of controversy in the US when it came out and I was quite keen to see what the fuss was about.

Basically the author Amy Chua takes a look at the contrasting ways that Chinese and “Western” parents raise their kids. For instance where Western parents are satisfied with “B’s”, Chinese parents are unhappy if their kids are not achieving “A’s” and dominating in the classrooms. Where American kids are allowed to express themselves and learn back-chat from television, the same behaviour would never be condoned by the “Tiger Mothers”.

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Leading South African financial news publication Finweek and business development and acceleration firm Aurik have joined forces to promote entrepreneurship in South Africa.

Up for grabs are 10 entrepreneurship bursaries – each valued at R250000 – for promising Gauteng entrepreneurs who are serious about growing their businesses. The bursaries involve expert business development tools and skills and have a focus on doubling the businesses revenue over a two year period.

The progress of the finalists is to be tracked through Finweek and there will be regularly feedback through the print, online and entrepreneur events.

“I don’t believe that we as South Africans celebrate our entrepreneurs enough. If they are the answer to job creation and innovation, something we witness daily, then surely we should celebrate them?” says Aurik CEO Pavlo Phitidis.
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Leading South African financial publication Finweek has upped the ante in the local business reporting space as it brings readers exclusive access to Harvard Business Review content in its weekly magazine.

“There is a lot of focus on South Africa becoming more competitive and adopting world-beating standards and being able to bring cutting-edge content like this to our readers is a clear win for us,” says Editor Marc Ashton.

The addition of this new content reflects the early stages of a repositioning of Finweek to incorporate broader management related issues. With a re-launch due out in October 2011, there are a number of initiatives planned for this brand.

“We have enjoyed great success when it comes to reporting in the investment space, and the Harvard content helps us lift our game in new areas,” concludes Ashton.

Finweek is available in stores on a Friday or can be downloaded to tablet devices from Zinio.com.

I am a sucker for the stockmarket and when you get to read books from people who have been right in the thick of things then you will have me hooked.

That is why I love the Michael Lewis books. He’s an ex-trader for one of the big investment banks who has subsequently turned journalist and now reports on the industry. I read one of his other books “Panic” a while back but have been meaning to read “Liars Poker” for ages.

The way Lewis talks about ego-driven 26 year old kids shuffling billions of dollars around the world and screwing clients left, right and centre will make a lot of people rethink their views on the stockmarket and the “gurus” who supposedly operate in it.

The synopsis for the book reads:

Michael Lewis was fresh out of Princeton and the London School of Economics when he landed a job at Salomon Brothers, one of Wall Street’s premier investment firms. During the next three years, Lewis rose from callow trainee to bond salesman, raking in millions for the firm and cashing in on a modern-day gold rush. Liar’s Poker is the culmination of those heady, frenzied years-a behind-the-scenes look at a unique and turbulent time in American business. From the frat-boy camaraderie of the forty-first-floor trading room to the killer instinct that made ambitious young men gamble everything on a high-stakes game of bluffing and deception, here is Michael Lewis’s knowing and hilarious insider’s account of an unprecedented era of greed, gluttony, and outrageous fortune.

You can order the book online from Kalahari by clicking HERE.

As some of you may know Finweek is now available on the Zinio platform, meaning that if you have an iPad you can get the magazine delivered straight to your tablet. No more looking around in the shops for the mag or subscriptions which don’t arrive – it is there as it comes out.

However I find South Africans always very hesitant to try out something new so I am going to dangle a carrot to ensure I get some decent feedback.

1. First up – an investment in a Finweek subscription is a REAL investment. We won every single major financial journalism award in 2011. When it comes to informing around money and investments, Finweek is the place to go.

2. An investment of R60 a month for cutting edge content is hard to ignore.

3. If you take a subscription to Zinio – either a single issue or an annual one – and give me feedback via the blog / e-mail before 15 August I will put your name into a hat and draw a winner for a prize. Will dig something out of the prize cupboard shortly and update the blog post.

For those who are interested, this weeks cover story is on investing in offshore technology companies specifically in the social networking space and it was quite a lot of fun to put together so go and get your subscription in.

Some instructions below on how to get signed up:

Not familiar with Zinio? They are the world’s largest newsstand and bookstore and offer more than a mobile reading application. Zinio has expertly created digital editions of the magazines we love, and delivers the exact same material we get in print‚ plus exclusive features like interactive graphics and videos for your iPad, iPhone, laptop and Android.

Basically, you can purchase Finweek or any of your favourite magazines and read it on the screen of your choice. Zinio is great because it also allows you easy and affordable access to international content.

On the SA Zinio website (http://za.zinio.com) you will find Finweek in the News section under business news. You have several purchasing options, from a single issue of the magazine to a full annual digital subscription (50 issues) for only R 782.89. If you prefer the Afrikaans edition of the magazine it is also available digitally. The registration process on the website in straightforward and only takes 3 minutes.

Making the online purchase is just as simple and convenient: add the item to your basket and then proceed to checkout. It is literally a matter of seconds before you receive your digital issue of the magazine in your inbox. Click on the cover of your magazine and let the reading begin!

You can e-mail me at marca@fin24.com with feedback.

Earlier today I was having a disagreement with somebody on whether a job is privilege or not. I think this is an important question to answer considering the view that small business and entrepreneurship will be the vehicles through which the country tackles unemployment.

My argument is pretty simple: In a country of 40% real unemployment, those who have a job are lucky. In fact I would go so far as to say they are privileged to have their jobs.

The counter argument is that a job is simply an exchange of services for money. The bigger part of this counter argument is that profit led decisions have meant that jobs are hurting the country as a whole.

According to the dictionary definition a privilege is defined as: “a right, immunity, or benefit enjoyed only by a person beyond the advantages of most” … I would assume that a job falls into this category?

It is pretty well documented that small businesses don’t hire people because of prohibitive labour legislation in South Africa. The laws protect employees who believe they “deserve” a salary and that it is the business owners job to make sure there is money in the bank to pay salaries each month. Those who rush off to the CCMA every time they think they have been short-changed are contributing to the problem and making sure that there is one less incentive to add to your workforce.
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Starting a small business can be one of the worst decisions that a person can ever make.

Considering how much time I spend talking up entrepreneurship, it is a pretty negative way to kickoff this blog post, but the reality is that people quickly get sucked up in the “nice” side of entrepreneurship and miss the brutal reality.
Every few weeks we are brought businesses and business plans to assess. If we think they are viable we will put together funding proposals and then take them through to funders and if we successfully raise some money we take a %.

We charge a bit for assessing the business idea, doing some interviews and writing up a report at the end of the process. Invariably there are sour grapes when we get to the end of the process and say that in our opinion the idea is not fundable. This then leads to e-mails going backwards and forwards and us being told we “don’t understand”.

I’m the first to stick my hand up and say we may look a gift horse in the mouth but there are some things which really jump out at us.

Red flags for us are typically:

• No experience / contacts in the industry they want to start a business
• Disproportionately high dependence on salaries
• People looking to do it on their own, rather than willing to work as part of a team bringing a mix of skills to the party
• An entrepreneur who wants to be “the boss” and needs a funder to fund the actual business / product development. IE they can’t do the things they want to deliver but believe that money will make them something they are not
• No willingness to bootstrap
• Too many “ideas” and not enough “revenue”

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