Book Review

Book Review: Outliers by Malcolm Gladwell

I first heard about Malcolm Gladwell’s new book, “Outliers: The Story of Success” about a month ago and was delighted that he was putting out a new book. I was wildly enthusiastic about “Blink” and “The Tipping Point” and after reading an extract online I couldn’t wait. By a happy coincidence, a friend gave me an early Christmas gift, and it was Outliers!

In “Blink” Gladwell looked at very fast cognition (things your brain processes in the blink of an eye). In “The Tipping Point” he looked at what led to ideas propagating and spreading through society (why some take off and why some die). In this book he looks at incredibly successful people (they’re the outliers) and argues that there’s more behind their success than the myth society tells us about them (that they’re naturally brilliant & gifted).

As with all of Gladwell’s work, he’s a delight to read. He takes an interesting idea, chews away at it, and presents his thoughts, building a surprising, yet plausible, model around them. In “Freakanomics” they debunked one of the big ideas he argued for in “The Tipping Point”, so that’s the one danger of Gladwell’s work: he’s very persuasive, even when he’s wrong.

The idea behind this work is that people who are great at something (we’re talking world class talent) are great primarily because of the time they’ve invested, rather than an inherent ability. A certain threshold of “raw ability” is necessary (which is lower than you’d think), but beyond that it’s often luck whether they managed to accumulate the time required to become world-class. The time investment, he argues, that’s needed is 10,000 hours, and its often circumstance that determines whether someone who has the interest to invest that amount of time is also given the opportunity.

He gives examples supporting this from violinists at an elite Berlin music academy, Canadian hockey players, high-tech entrepreneurs, and the Beatles (apparently they’re some minstrels from England achieved a bit of fame a long time ago).

Following up on the lucky circumstances, he also builds the case that even a small lucky break early on compounds as someone who has shown an “early aptitude” is given more opportunities, which leads to an increase in aptitude, in a reinforcing cycle until they accumulate the hours to become good or extraordinary at something. He argues that the reason Chinese people are often good at math is because Mandarin has a cleaner, more regular syntax for naming numbers. This gives young Chinese students a leg up when they first start learning math, and they’re able to build on this lead (and have a positive first experience with the subject).

He presents counter examples of Lewis Terman’s study of high IQ students (they tracked the top 1% of the top 1%) in California, who didn’t really amount to much as a group (and even within the group, socio-economic status was a better indicator of success than their IQ). Terman’s study rejected two boys as not smart enough to participate who went on to win Nobel prizes.

The take-aways from the book were that if you want to be really good at something, you’ve got to put in the time (along with meeting SOME requirements, you’ll never play in the NBA if you 5’3). You’re fooling yourself if you think you’ll just naturally be world class at something. The trick is to keep practising, and the people who will excel are those who find the motivation to keep at it. If you want to excel in your profession, put in the time at the activities that are important to it. If you want to learn a new skill, put in the hours of study and practising. There’s no royal road to excellence.

I highly recommend putting this book on your Christmas (or Hanukkah, or winter’s solstice) list. Its a fun, fast read.

I kept wondering if he’d mention an age limit, but he didn’t, so maybe it’s still possible for me to get cracking on my 10,000 hours and win a gold metal in Olympic gymnastics!

Book Review

Smart Couples Finish Rich – Book Review

This concludes the “Smart Couples Finish Rich” book review. Let me know if you have any thoughts on this book.

Chapter 4 – The Latte factor. This is the famous advice from the Automatic Millionaire where he basically says that cutting out a daily latte will increase your retirement savings by a huge amount – using a 12% return in his example doesn’t hurt either.

Most of us think that small expenditures don’t matter but his point is that they add up to a significant amount. Mainly he suggests replacing small expenditures with cheaper substitutes that usually involve more labour and time. For example instead of a latte & muffin at Starbucks, you can have coffee at home and an apple. Instead of buying snacks at work – bring them from home. Lunch – you should brown bag three times a week and dinners are much cheaper if you are not eating in a restaurant or taking out. Obviously if you get most of your meals outside the home this will involve a major lifestyle change but the rewards can be great. Bach suggests keeping track of your spending for seven days in order to add up the costs of all the small expenditures and eating out.

Chapter 5 – Build your retirement basket and pay yourself first. Good advice about contributing to your rrsp through a workplace savings plan where you can prevent the income tax from being deducted from the income you are going to contribute to the rrsp. His rule is save 10% of gross income to avoid struggling when you retire. He says you should save 20% to be ‘really rich’. And start early. His investment advice is not that great which is not surprising considering he’s a financial advisor. He suggests investing in mutual funds and not once does he mention costs or cheaper alternatives. He uses an 11% return for equities in his examples which is just not realistic. He also uses another financial adviser tactic which is to emphasize maxing out contributions to your rrsp without considering that maybe a couple’s debt might be more pressing. He says you have to invest at least part of your rrsp in equities which is good advice.

Chapter 6 – Build your security basket. He suggests having at least three months worth of expenses in cash – look for higher interest and no more than 24 months worth of expenses. 24 months? By the time I could save that much, my retirement would be half over :). Some great suggestions about setting up a will. Get adequate life insurance. His estimate for life insurance was interesting – figure out the expenses of the survivors and buy coverage for 6-20 years depending on things like how old you are, how much debt you have etc. He suggests that term life is the best type of insurance which most of the pf world would agree with.

Chapter 7 – Build your dream basket. This section basically says to sit down with your partner and think about dreams that you can do together. I’m assuming this includes individual pursuits as well since I’m not sure my partner is interested in going heli-snowboarding. 🙂

His investment advice is quite good here, he talks about index funds and ETFs and DRIPs. Not sure why he didn’t mention them before.

Chapter 8 – He lists 10 of the biggest mistakes that couples make – usual stuff – start investing late, over spending, blah, blah, blah.

Chapter 9 – Increase your income by 10% in 9 weeks (why not 10 weeks)?

I thought this advice was really dumb, however his advice about cleaning up your office and house and organizing everything properly is good. Some good career advice about putting yourself out there and seeing what your market value is, in order to make sure that you are not underpaid.

All in all I would definitely recommend this book or the Automatic Millionaire since that apparently is the exact same book.

Book Review

The Lazy Investor

I read and enjoyed “Stop Working” by Derek Foster some time ago, and was excited when I heard he had a new book (“The Lazy Investor”) coming out. After visiting Mike on Friday night, I drank all his beer and took the copy that he’d won (when you let Mr. Cheap come to your house that’s par for the course).

Lazy Investor main points

My take away points from “Stop Working” were

  1. Dividends are a more reliable, consistent way to make money off of stocks rather then trying to time buying and selling.
  2. Blue chip companies with long histories of uninterrupted, increasing dividend payments can replace income.
  3. The tax efficiencies of Canadian dividends make them very attractive while building and living off of your investment income.


What the book was about

Although it was quick, fun read, I definitely enjoyed his first book more. This one read like a series of well thought-out blog posts (perhaps a “best of” collection) then a book with a consistent theme.

It covers:

  • How to setup DRIPs.
  • General ideas about investing in stocks.
  • Specific ideas about investing in stocks (including a short list of Canadian companies to consider buying).
  • Investing in American companies.
  • Teaching your kids about investing.
  • Whether you should pay for a child’s university education.

All interesting stuff, but I had expected a bit more of a unifying idea behind the book which wasn’t really there (it was broken into 2 sections, basically: how to invest and how to teach your kids how to invest).This book, like his first, is targeted to the beginner investor, and perhaps *I’m* different rather than this book being weaker than the first (against my best efforts I may have learned a couple things over the last few months). It’s a easy read and it may (bundled with “Stop Working”) be a good text for someone trying to figure out the basics of investing in the stock market (or looking for a straightforward approach to achieving an early retirement). Unfortunately I don’t think you’ll find many radical new ideas in it.

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Book Review

The Investment Zoo by Stephen Jarislowsky

It always bugs me having junk around in my life. In my youth I was quite a “book horder”, and have forced myself to keep the number of books I own to a minimum (my new trick is unless I *LOVE* a book, I try to give it away to someone who’ll enjoy it). I find it hard to get rid of books that were given to me as a gift, but I definitely accumulate them if I let myself.

I just got a Toronto library card and am kicking myself for not having got one sooner. It’s a perfect compromise of being able to get books I want to read, for a low price (Mr. Cheap likes free!) and I can give it back to the library and get it out of my life after I’ve read it. I’m pretty sure there’s even a way to get the library to bring in books you want to read (I haven’t figured out this process for the Toronto library yet, but I’m sure it’s there).

I’ve been meaning to read Investment Zoo since a few of my fellow PF bloggers made reference to it, and I finally bit the bullet, got a library card, and tore through this very readable book.

Overall the book was interesting, although I found it unfortunately a little light on specifics. A big chunk is devoted to Jarislowsky’s life, which while interesting, seemed to go beyond his stated purpose of “why the reader should listen to him”. I think a page or two would have been enough for that, and he could have written up his recollections of doing well in school and whatnot in a separate biography.

Another chunk which was interesting, but of limited value to me, was advocating getting to know senior management in the companies you invest in. Unfortunately, I think the chance of Rothman’s giving me a personal tour and answering my questions when I was debating putting $5K into their stock is pretty slim. I think if I was to do this every time I was thinking about purchasing stock it would become VERY hard for me to have any diversification at all. I think he could have put this into a another separate book targeting money managers.

I think he had some excellent thoughts on financial planners and mutual funds. I liked what he had to say about dividend paying, blue-chip stocks (it certainly reassured me about my strategy). I was also happy that he gave a nod to tobacco and explained why litigation worries were unfounded (his thinking is that any legal expense will be passed along to the consumer – since tobacco is an inelastic good).

Jarislowsky’s thinking about living below your means and intelligently giving money away were both interesting. I loved his idea of purchasing university chairs and getting matching funds from the university and the government as the best “bang for your buck” with charitable giving. One of the things that has kept me away from charitable giving is that I really feel the only “value for money” is that I’d feel good about myself for giving (and the non-profit would promptly squander whatever I’d given them on administrative costs). I’ve been VERY unimpressed with everyone I’ve ever met who works in the non-profit sector, they’re definitely not the type of people I want to give money too (bloody socialists). Education, however, is something I passionately believe in. A friend is hoping to go to Africa and set up a school in a few years time, and that seems like something I could get behind (and would be more affordable then a $1M university chair which is a little out of my budget right now).

I’m reading (and enjoying) “The Intelligent Investor” right now. Investment Zoo was a FAR easier and faster read. If you’re looking for light PF reading, I’d recommend it.

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