We all know how difficult it is to get predictions right.  And even when the forecaster is extremely knowledgeable about the topic—maybe even the world’s leading expert—the prediction is often wrong.  Why does that happen?

In a great post about predictions, Phil Birnbaum notes, “The problem is that no matter how much you know about the price of oil, it’s random enough that the spread of outcomes is really, really wide: much wider than the effects of any knowledge you bring to the problem.” (The emphasis is mine.)  In other words, the standard deviation around the mean is so huge that getting it right is simply a matter of luck.

Rather than rely on prediction (luck), we rely on our systematic process to guide our investment decisions.  A systematic process is not always correct either, of course, but the decisions are made on the basis of data rather than relying on luck.

(Thanks to John Lewis for the article reference.)

—-this article originally appeared 9/23/2009.  The spread of outcomes in any situation is really, really wide, and it seems especially so when politics are heavily involved in markets.  The range of outcomes for the peripheral European debt problem, for example, is mind-boggling.  You’re better off sticking to the data than going with an unreliable forecast.

Source - Systematic Relative Strength

Donald S. Christiansen, University of Washington sports psychology consultant, lists characteristics of “peak performance,” sometimes called “the zone.”

The athlete is:

1. physically relaxed
2. mentally calm
3. focused
4. alert
5. confident
6. in control
7. positive
8. feeling enjoyment
9. feeling effortless
10. on “automatic”
11. focused on the present moment

In 1989, Wendell Berry delivered a Commencement Address at the College of the Atlantic in Bar Harbor, Maine that included not Ten Commandments but ten hopes.

1. Beware the justice of Nature.
2. Understand that there can be no successful human economy apart from Nature or in defiance of Nature.
3. Understand that no amount of education can overcome the innate limits of human intelligence and responsibility. We are not smart enough or conscious enough or alert enough to work responsibly on a gigantic scale.
4. In making things always bigger and more centralized, we make them both more vulnerable in themselves and more dangerous to everything else. Learn, therefore, to prefer small-scale elegance and generosity to large-scale greed, crudity, and glamour.
5. Make a home. Help to make a community. Be loyal to what you have made.
6. Put the interest of the community first.
7. Love your neighbors–not the neighbors you pick out, but the ones you have.
8. Love this miraculous world that we did not make, that is a gift to us.
9. As far as you are able make your lives dependent upon your local place, neighborhood, and household–which thrive by care and generosity–and independent of the industrial economy, which thrives by damage.
10. Find work, if you can, that does no damage. Enjoy your work. Work well.

Source: Scott Walters - Theatre Ideas

Click on the image above to see the last 200 Years That Changed the World.

Source: GapMinder.org.

Personal income in China has risen significantly in the last thirty years. The sleeping giant stirs.

Hopefully China will avoid many of the consequences of growth that plague the developed nations of the West.

Source: GapMinder.org.

Apple is a world leader in innovation, starting with the Macintosh, iPod, iTunes, iPhone, and now the iPad. The company manages and exceeds client expectations. Great businesses realize their future is innovation and remaining a leader is dependent upon exceeding expectation.

For more information see SixthSense.

What are you doing today to innovate and how are you exceeding client expectations?

By Om Malik from On Business

Jobs on Solving Hard Problems

The best ideas win here at Apple. We have healthy debates in this company. We debate how to tie shoe laces and we even debate about what great is. We’re an engineering company, we think like engineers and scientists, and we think it’s the right way to solve real, hard problems. We try to have our cake and eat it too, we try to have great design and great performance. If you look at our products, that’s what we deliver. We are working really hard and we can’t run really faster. There are cars in the parking lots at all hours, people have cots in the office.

Lesson #1: Hard problems are solved by hard work and no compromises.

Jobs on Software & Apple’s Edge

When someone owns a primary technology and you use it, they are eventually going to beat you on it. In the computer business, we quickly realized that we didn’t have to make processors and hard drives. Instead it was the software that was the most important thing. We are pretty good at making software for iPods, PCS and the cloud and making them work together. And while others like Palm pioneered, we knew software was the primary technology for the phone business. We brought that software to the phone business in a way we’d never seen before. One of the things we did was make the process of updating your software an order of magnitude easier than it was before. We can frictionlessly distribute those updates… everybody’s copying Apple now, but we’re the first to do that in a practical way.

Lesson #2: Knowing your core competence and building on it is key to success.

Jobs on Customers

We care about every user and we are not going to stop till every customer is happy. When you love your customers, nothing is off the table. But we want to be data driven. There are some things we know that we did learn here. One thing is how much we love our customers and how we are going to take care of them. And when we succeed users reward us by staying our users. That is what drives us. When people are criticizing us, we take it very personally. When users have a problem, it is our problem. We were stunned and upset and embarrassed by the Consumer Reports stuff, and the reason we didn’t say more is because we didn’t know enough. If we’d have done this event a week and a half ago, we wouldn’t have had half the data we have today. We take care of our customers. We appreciate them and we don’t take them for granted. I get a lot of email, and my address is out there. I can’t reply to all of these emails but I reply to some because they’re our customers, and I want to communicate with them.

Lesson#3: Regardless of your business, it is always has been, and will always be, about happiness of the customers.

Jobs on Investors

There are some customers who are happy. There are some customers who are not happy. And I apologize to them and we try and make them happy. We want investors who are in it for the long haul and are for the character of the company, not investors who just saw some news cross the wire and invested in the stock. (This was in response to a question regarding if he would apologize to investors who lost money as the stock declined.)

Lesson #4: Paying attention to short-term thinking (and thinkers) is only going to keep you relevant for a short time.

A coaching client asked me this week to discuss my thoughts on social prospecting. This is a delicate subject because you do not want to be labeled a “networker” which is synonymous with “always selling” and becomes a fast track ticket to the “Black List.”

When asked about what you do for a living you should have an effective Elevator Script which results in the person saying “tell me more.” But what do you do when you are in a social setting and no one inquires about your job and you look around the room at all these great prospects.

First ask yourself, why are you there? Was the purpose to prospect, if not maybe you should stop trying to sell and just enjoy the company and conversation. If your purpose was to prospect, then you should ask yourself whether the other’s expectations are to be solicited. If not maybe you should amend your purpose.

Too many sales people join organizations solely to find prospects and they are soon identified by the group and “Black Listed.” If you join a group, be there for the purpose of the group. Be there because you believe in what they are trying to do, if not leave.

As I mentioned in an earlier post clients and advocated first need to like us before they trust us. If you want to work with your social contacts, be likable and participate in the activities because you believe in them. If they like you they will trust you. Then when they ask what you do, you are prepared with your Elevator Script.

Nobody wants to deal with the fact that many people who are investing have no way of achieving their retirement dreams. Every investor expects to retire. When they invested $25,000 into that mutual fund and the advisor collected their commission or fee, there existed the expectation of being retireable. The reality is very different.

Without analysis of what it will require for a couple to retire, investing become a futile attempt to appease unrealistic expectations. The client assumes retireability and the advisor ignores the reality and maintains the false expectation. This relationship has to change. Advisors must require the analysis up front before any investment and honestly explain what contributions will be required yearly to achieve retireabilty. A systematic investment plan must be put in place at the start to remove any false expectations that will become a liability for both the client and the advisor in the future.

Each year the expectations need to be reviewed in light of the circumstances surrounding a couples life. Windfalls, salary increases, and new opportunities can shorten their retirement date. Market corrections, layoffs, or large purchases can increase the time required to retire.

Because of these factors, retireabilty is a dynamic factor and needs to be monitored yearly. Making a goal to retire every client early is worthy, yet requires effort and diligence. Using an annual review to access retireability and incorporating a systematic investment plan can help any client achieve the dreams they desire.

One important aspect of your ability to retire is the need for a clear vision of your desired future, a life dream. For most this is a faded, out of focus, black and white photography of the future. It needs to be a wide screen BlueRay movie with surround sound, clear, crisp, and with brilliant detail.

Since most couples do not have a clear vision of their future, their advisors should facilitate creating this dream by asking provocative questions. Because how can a couple hope to have the life they desire in the future if they do not know what it will look like? How can you invest for an unknown future?

The following questions may help create your dream future:

Ask your self these questions to clarify your vision of a compelling future:

- What have you always wanted to do, but have not yet done?

- When you and your spouse were dating, what did you talk about doing together that life interrupted?

- What is a dream you had when you were in school that is unfulfilled?

- Where have you always wanted to visit, but circumstances held you back?

- What did you want to do with your children, but they grew up too fast and you would like to do it with your grandchildren?

- What was your favorite day in your past and what made it so?

- If you could do or be anything in the world, what would it be?

These questions will help fuel your imagination and remembrance of things past. Remember the following quote.

“Anything the mind can conceive and believe it can achieve.” - Napoleon Hill

Do not let your current situation hold you back from pursuing your dreams. Why wait till retirement to live your dreams, start living in retirement now.

In this rare video by Napoleon Hill, he shares one of the great secrets of creating a successful future.

No matter what business you are in, everyone wants to maintain and enhance their lifestyle throughout their lifetime. This basic desire is forgotten many times when clients visit their financial advisor. The products and services offered by the advisor are insignificant if this primary concern is overlooked. Why is the most important financial concept rarely discussed?

What is retireability? Some say they have no desire to retire or do not believe they will ever be able to retire because of the difficulties in the economy. Retireability is not just a state of mind of wanting to retire, it is also a capability of having the resources to fund that desire.

“Anything the mind can conceive and believe, it can achieve.”

-Napoleon Hill

Though many would like to retire, most do not know what is required. This is where many people prematurely jump into a financial plan. Analysis of what you have is the last step in determining your Retireability Factor.

First, your advisor needs to know you. What is your purpose in life, what is important to you, what challenges are you facing now, what opportunities would you pursue if those challenges disappeared, what are you passionate about? These questions help your advisor know you. They need to understand your life story because without it how can they know what is important to you?

Second, your advisor needs to know where you want to go. What is your life dream, the vision of your future you and your spouse discussed when you were just dating? Too often this is a black and white, out of focus picture of the future. It needs to be a widescreen BlueRay movie with surround sound. The more we are able to visualize our future the faster it becomes a reality. Make sure your advisor helps you clearly define your dream for the future. A clear vision of your future becomes the catalyst for making it a reality.

Third, now you will need to determine why this dream is truly important. Is this dream necessary or just a nice idea? Unless your dream is vital you will not put the required motivation behind it to make it a reality. So take a moment and consider why this dream is necessary for you to achieve.

Fourth, at this point your advisor should ask when do you want to make this a reality? Too often we push our retirement into the distant future, when most of us can start to retire now. Why not start doing now what you want to do in the future? How many people do you know delayed their desires until retirement only to miss their dreams because of health concerns or an early death? This is unfortunate because everyone can start to retire now. By making your retirement urgent you can enjoy now what many will wait for and lose.

Fifth, now comes the difficult question, how do we make this a reality? If your advisor knows who you are and where you want to go and you believe this is truly important and you would rather start sooner than later, then they will be able to do the analysis necessary to create a plan of action to make this dream a reality. Too often this analysis is attempted before these questions are asked and answered. The result is clients are unprepared. These questions set the stage for the last step.

Sixth, and finally. After the important questions are answered and understood, both you and your advisor can go through the analysis necessary to build a bridge to where you want to go. Now your advisor can ask what do you have and it will have a context and can be used in the analysis to determine how to build your action plan to take you from where you are to where you want to be in the future.

Too often advisors start off talking about the money and then never get back to asking you about your life. This results is prescriptions being written before proper examination and diagnosis has occurred. In the health care industry this is called “malpractice”.

This conversation creates a different result. These six questions, asked in this order will assist both you and your advisor in creating a compelling future, and building a road map to achieve your dreams.

This conversation is not a fifteen minute meet and greet. To do this properly you and your advisor should set aside a couple of hours. You can not tell your story in a few minutes and your vision needs to be more than a vague concept.

If your advisor is not doing this with you, find someone. If they will not take the lead, then require them to slow down and listen to you first, before they try to give you a solution.

We will talk more about the “retireability factor” in the coming weeks. If you find the information helpful send it to someone you value.

Shirley Anderson sent me a link today to an article about Studs Terkel, Chicago author and commentator. He is the author of Hard Times: An Oral History of the Great Depression and numerous other books. At age 96 he has a message for all of us. Read the article at:
http://www.aarpmagazine.org/money/fear_economy_studs_terkel.html

This is a great message to pass on to family, friends, and clients.

Investing is counter intuitive. One of the great counter intuitive investors is Warren Buffett. Read his letter to the New York Times here.

Forwarding this letter to clients might be a good way to comfort them in these difficult times.

On page 167 of my book *[Attract Clients: A Financial Advisor’s Guide to Building and Running a Practice](http://www.amazon.com/gp/redirect.html?ie=UTF8&location=http%3A%2F%2Fwww.amazon.com%2Fgp%2Fproduct%2F0978062442%2Fsr%3D1-1%2Fqid%3D1152791900%3Fie%3DUTF8%26s%3Dbooks&tag=lloydwilliams-20&linkCode=ur2&camp=1789&creative=9325)* is an article titled *Nine Ways to Say Thank You*.

The worksheet can be downloaded [here](http://www.lloydwilliamsinc.com/wp-content/uploads/nine_ways_to_say_ty.pdf). In the comments below tell us how you say thank you to your administrative professionals.

>Things I learned from my horse trainers #42: practice saying, “Hmmmm… how interesting.” Say it when you’re frustrated. Say it when you’re mad. Most importantly, say it before you say or do anything else (including hit the “send” or “post” button).

>It should be the first thing out of your mouth when things go wrong—or don’t meet your expectations—because:

>1) It inserts a pause and gives you a moment to think before you react.

>2) It keeps you from taking things too personally
If someone calls you an idiot (or worse) saying “hmmm…how interesting…” changes your reaction from purely emotional to more curious and detached.

>3) It helps you ask more questions instead of jump to conclusions.
With horses, the main goal of the “how interesting” technique is to keep you from losing patience and blaming the horse. If you say “how interesting,” it helps you explore reasons, including what your own role in this might be. It makes problems feel more like puzzles.