How The Laws of Wealth Can Improve Your Management Game

I was looking for some summer reading.  Something that would challenge me, inspire me, and help me continue on my path to being a better leader.  Mission accomplished!

3d-bookWhether you’ve been a long-time reader, know me personally, or are just finding this blog, you’ll find that I am someone who likes to look to industries outside of the traditional HR arena when it comes to learning how to be a better leader.  For example, I’ve gravitated to science and design as places to look for inspiration on creating better leadership practices or people-relations experiences.  Additionally, as someone who has held high level HR positions that tied closely to the CFO and finance teams in organizations, the role of understanding the impact of finance on the people practices is equally important.

With that in mind, I found a new resource from the finance world for leaders and managers to use in their day-to-day people management.  To be clear and upfront, this is in no way a paid endorsement and I did not receive anything “free” in order to make this recommendation.  The source I’m sharing today is a new book by author Dr. Daniel Crosby.  If you’re not familiar with him yet, you should be.  Dr. Crosby’s book The Laws of Wealth is not only helpful as an individual striving to have better understanding of your personal finances and approach.  It’s a source that has components that can be used in managing people.

Dr. Crosby shares chapters dedicated to specific steps the reader can take to have a better approach to financial self-management.  These same steps can be applied to your role as a leader or manager trying to manage yourself and your team.   Let me share a few examples from Dr. Crosby:

  • You control what matters most- Over the last 20 years, the market has returned an average of 8.25% per annum, but the average investor has gotten just over 4% of that. The highs and lows of the market may be out of your hands, but how you choose to behave is within your power, and is just as important a driver of returns.
  • You cannot do this alone- Most people understandably assume that the greatest value offered by a financial advisor is, well, financial advice. Not so. Vanguard’s “Advisor’s Alpha” study shows that working with an advisor provides around 300 basis points of outperformance and that fully half of that value comes from behavioral coaching. Morningstar, Aon Hewitt, and Envestnet all have similar studies showing that hand holding trumps stock-picking when it comes to optimizing returns.
  • Trouble is opportunity- We are all familiar with the Oracle of Omaha’s admonition to be “greedy when others are fearful and fearful when others are greedy,” yet so few of us manage to successfully view a downturn as the opportunity it truly is. There is true joy (and riches) to be had in financial schadenfreude, so commit yourself to continue investing and even upping your savings when times are bad.
  • You are not special- Robert Shiller is fond of saying that “This time it’s different” is the most dangerous phrase in investing. While mania can carry a market for a time, the truth about what works long-term on Wall Street is pretty boring (think paying a fair price for a profitable company) and is unlikely to fundamentally change.
  • Forecasting is for weathermen- Famed contrarian David Dreman found that from 1973 to 1993, of the 78,695 estimates he looked at, there was a 1 in 170 chance that analyst projections would fall within plus or minus 5% of the actual number. The smartest people in the world don’t bother with the crystal ball. Said JP Morgan of the market’s future trajectory, “It will fluctuate.”

His themes of how we are not always in control as leaders, how we have to rely on others to be successful and have optimal results, how trouble is inevitable and the importance of managing well in a downturn, that we are not special and thus learn from each other, and that looking constantly into a crystal ball instead of real life is not the best way are all themes that hit home for me.

If those examples ring true for you, pick up The Laws of Wealth today.  Who knew that a finance-focused book could become the best summer reading you’ve had?  For more information, you can follow Dr. Crosby on Twitter @danielcrosby or find resources on his site Nocturne Capital.