ramcem

"SAVING IS SIN, SPENDING IS VIRTUE"


Japanese save a lot. They do not spend much. Also Japan exports far more than it imports. Has an annual trade surplus of over $100 billions, Yet Japanese economy is considered weak, even collapsing.

Americans spend, save little. Also US imports more than it exports. Has an annual trade deficit of over $400 billion. Yet, the American economy is considered strong and trusted to get stronger.

But where from do Americans get money to spend? They borrow from Japan, China and even India. Virtually others save for the US to spend. Global savings are mostly invested in US, in dollars. India itself keeps its foreign currency assets of over $50 billions in US securities. China has sunk over $160 billion in US securities. Japan's stakes in US securities is in trillions. Result: The US has taken over $5 trillion from the world.

So, as the world saves for the US, Americans spend freely. Today, to keep the US consumption going, that is for the US economy to work, other countries have to remit $180 billion every quarter, that is $2 billion a day, to the US! Otherwise the US economy would go for a six. So will the global economy. The result will be no different if US consumers begin consuming less.

A Chinese economist asked a neat question. Who has invested more, US in China, or China in US?

The US has invested in China less than half of what China has invested in US. The same is the case with India. We have invested in US over $50 billion. But the US has invested less than $20 billion in India. Why the world is after US?

The secret lies in the American spending, that they hardly save. In fact they use their credit cards to spend their future income. That the US spends is what makes it attractive to export to the US. So US imports more than what it exports year after year. The result: The world is dependent on US consumption for its growth.

By its deepening culture of consumption, the US has habituated the world to feed on US consumption. But as the US needs money to finance its consumption, the world provides the money. It's like a shopkeeper providing the money to a customer so that the customer keeps buying from the shop. The customer will not buy, the shop won't have business, unless the shopkeeper funds him. The US is like the lucky customer. And the world is like the helpless shopkeeper financier. Who is America's biggest shopkeeper financier? Japan of course. Yet its Japan which is regarded as weak. Modern economists complain that Japanese do not spend, so they do not grow.

To force the Japanese to spend, the Japanese government exerted it self. Reduced the savings rates, even charged the savers. Even then the Japanese did not spend (habits don't change, even with taxes, do they?). Their traditional postal savings alone is over$1.2 trillions, about three times the Indian GDP. Thus, savings, far from being the strength of Japan, has become its pain.

Hence, what is the lesson?

That is, a nation cannot grow unless the people spend, not save. Not just spend, but borrow and spend. Dr. Jagdish Bhagwati, the famous Indian-born economist in the US, told Manmohan Singh that Indians wastefully save. Ask them to spend, on imported cars and, seriously, even on cosmetics! This will put India on a growth curve.

"Saving is sin, and spending is virtue."

Before you follow this neo economics, get some fools to save so that you can borrow from them and spend. This is what US has successfully done in last few decades.

ramcem

Unseen Employer: Government Taxes

All forms of taxes are matters of public policy. The rich must pay the government, who holds the money temporarily. In return, the government redistributes it to the poor directly through welfare scheme or indirectly through the improvement of infrastructure. Therefore, it is only right that the rich pays more taxes as compared to the poor. The income tax laws of most countries are progressive in nature. This would mean that the more you earn, the higher the extra dollar will be taxed.

The rich do not pay as much taxes as the poor. In fact, the rich have the government to subsidize their expenes whenever they spend. That is why the rich gets richer and the poor gets poorer.

For all employees, their income is subjected to taxes. Their after-tax income is their disposable income that is the money available for spending. For employers, their income less their spending is their profit. This represents that their net income is taxable. Let us illustate this point with an example.

An employee earns $100,000, subjected to an average tax rate of 20%. His disposable income is $80,000 and he uses $50,000 to buy his car. He has a balance of $30,000.

An employer earns revenue of $100,000 and he spends $50,000 to buy a car for his personal use under his company's account. The company net profit is $50,000, subjected to a tax of 20%. He has a balance of $40,000. The rich pay $10,000 less in tax as compared to the poor. Isn't it amazing?

The poor buys a property and takes up a loan. The interest payment can be as high as 200% of the total loan taken up over a 30 year period. The installment payments are not tax deductible. The rich can own a company and buy a property through the company. The loans taken up for the purchase of the property are considered as debts that are tax deductible. The poor pay for interest in mortgage and is not deductible. The rich pays for the mortgage interest through a corporation, is tax deductible. Once again, the rich becomes richer and the poor becomes poorer.

In fact, it is the poor that subsidize the taxes of the rich.

~Mr Peter Tan
Author of f.Q. i.Q.

lynex

interesting... thanks for sharing

restless

nice. new perspective for spending

ramcem

Fathers Know Best
Rich Dad, Poor Dad mogul Robert Kiyosaki shares the financial insights he learned from his two "fathers."
November 1, 2000


If you've seen him on Oprah, attended one of his standing-room-only seminars or read one of his bestsellers, you know Robert Kiyosaki's message. The investment guru -- whose Rich Dad, Poor Dad: What the Rich Teach Their Kids About Money That the Poor and Middle Class Do Not! has spawned book sequels, games and tapes -- believes that since the tax laws are biased in favor of business, the best way to succeed is to own a business, or several of them.

Kiyosaki's insights (and the roots of his Rich Dad, Poor Dad empire) spring, in part, from the experiences of his father, his so-called poor Dad. The elder Kiyosaki was unsophisticated financially; when he lost his politically appointed job at age 52, he had little to show for his years of hard work.

Kiyosaki's "rich Dad" was his best friend's father, who taught him money lessons that rich kids learn at home, not in school. One "rich" insight, he says, is that -- contrary to conventional wisdom -- a good education and a good job are not the path to wealth and financial independence. In other words, it's the rare jobholder who becomes rich.

"It's really hard to invest if you're an employee," he says. "First, the government takes 65% of your money. How do you get ahead that way? The only way is to work harder. Then the pressure is on to buy a bigger house and get further in debt. That's insanity."

To escape the cycle of job and financial insecurity, Kiyosaki preaches the virtue of financial literacy. He urges people to become familiar with balance sheets and income statements. Then he advocates investing in quality assets based on your own research. When possible, he recommends owning businesses formed as personal corporations in order to exploit the tax laws and acquire assets.

"Both employees and the self-employed work, get taxed on gross income, pay living expenses and then try to invest what's left over -- which usually is nothing," Kiyosaki says. "But the rich work for their own personal corporations, spend like crazy on their corporations' behalf, benefit personally and then get taxed on what's left over."

In Kiyosaki's view, company savings and retirement plans aren't the route to independence, either. That's because the mutual funds, individual securities and bonds that comprise the investments of these plans are "sanitized" investments, in his words, which provide just modest appreciation potential yet carry not insignificant risk. In his opinion, most of today's individual retirement account mutual fund shares are going to be worth far less in the near future when the mass of baby boomers start to draw down their retirement accounts.

"And if there is a crash, their plans could be wiped out," he says.

But Kiyosaki himself probably will be fine. He is a one-man conglomerate who generates $5 million a year in revenue, and has been an accredited investor and a sophisticated investor for most of his adult life. He currently operates seven businesses including a private equity fund, a publishing operation and corporations that own apartments and office buildings in the United States and overseas. Seven years ago, when he was 47, he says he reached a point where he no longer had to work.

Kiyosaki has plenty of words of wisdom for financial advisers. For starters, he advises brokers to target the rich, not the middle class. He goes on from there:


What are a good broker's best traits?

Brokers who do the best job are those who understand their clients' portfolios. They call you up when you lose money. The best brokers are actually teachers, not salespeople. They educate you, not just try to sell you things. Of course, brokers often worry that they'll spend time educating a client only to have that client leave.


What are brokers doing wrong?

First off, a lot of people like me have a problem that most brokers don't know how to solve. My problem is having too much money. Most brokers don't realize that this is really a big problem for entrepreneurs.

For example, I have a friend who owns 25 car washes. He pays himself $100,000 a month in salary -- that's $1.2 million a year-just from that dinky business. His problem is retained earnings; the government forces him to move his money. As a broker, you just can't try to sell him something. What you're trying to sell doesn't solve his problems.

An ex-cop I know owns a car repossession company. He does "hook-and-go." He has an exclusive contract with five insurance companies, and now he's going national. A broker who can understand tax and funding law will be his friend and will be able to solve his problem.

Another friend just sold his company for $12 million net after tax. He put that in a bank money-market account. He says everyone who calls wants to sell him something rather than help him with cash management.

These problems are what I call "diseases of the rich." People who own corporations understand that if they don't spend their pretax money to buy assets, the government is just going to tax it away. The rich get richer because the government almost forces them to reinvest their money.

Let's say I have $1 million sitting in my business. If I reinvest it in a business, the Internal Revenue Service will let me keep my money. In fact, I recently had to submit a business plan to the IRS showing how I'm going to invest $1 million to build a Web site. If I hadn't had an investment purpose for my money, the government would have taxed it. But most brokers fail to solve this problem because they think like salespeople, not businesspeople. That's why the rich must find brokers who can help them keep moving their money; who understand more than just buying and selling securities. These brokers have to understand the problem of having too much money.

But most brokers probably would say they already "think like a businessperson." What do you mean by the term?

Most brokers only focus on the paper side of investments. To be a businessperson, you have to understand other asset classes like businesses, real estate and paper investments. That's what makes you rich. Brokers need to understand how all three assets interrelate, and then learn how to use them to help their clients become sophisticated investors. That's being a businessperson, not a salesperson.

Brokers who make a lot of money understand that corporate and tax laws are written for the entrepreneur, the risk-taker. Two of the most influential laws were the 1943 Current Tax Payment Act, which allows Uncle Sam to take taxes out of our paychecks before we even get them, and the 1986 tax reforms, which took away C corporation tax advantages from self-employed professionals such as lawyers and doctors.

If brokers understood that laws are written for business owners, they would use the laws themselves. But most brokers don't because they think like a self-employed worker or an employee. And that's why they can't talk to me: They're broke. My best friend's father, my "rich Dad," used to tell me that the reason brokers are called "brokers" is because they're broker than you are.


But not every broker can be an entrepreneur or serve entrepreneurs. Don't you think there are great opportunities to serve other high-net-worth clients?

There's a difference between a high-net-worth individual and an entrepreneur. Their problems are not the same. Let's say I work for General Motors and earn $2 million a year. There's not much I can do as an investor. The government is going to take most of it. There's not much you as a broker can sell such an employee or a self-employed person because the government already beat you to the commissions. But an entrepreneur making $2 million has a lot more he can do and a lot more he can buy from you. Entrepreneurs are allowed to invest more tax-free. Most entrepreneurs are making so much money they don't know what to do with it.

The broker has to know which entrepreneurial problem he or she wants to specialize in. What you should be looking for is the rich entrepreneur who has money problems and needs to invest quickly. This is a niche where you can get rich.

ramcem

What if a broker doesn't have the expertise you're talking about?

A broker shouldn't act like a member of a labor union and hang out only with other brokers. She must think like a businessperson and hang out with other professionals. Each broker needs to have a team that includes an accountant, a tax attorney, a banker, an insurance agent and a financial planner.

My own father, my "poor Dad," made business decisions on his own, with the pile of bills. The worst investors are those who think they can invest on their own. And that's why they lose.

My "rich Dad" said that investing is a team sport. Once a month, he gathered the best team possible at his restaurant to do an audit on his financial portfolio. There were two or three stockbrokers with different perspectives on the market, his tax attorney, a tax accountant, a corporate accountant, a corporate attorney and his bankers. Sometimes as many as 15 people took part. It was like a football huddle for two or three hours. They all looked forward to it because they got to meet other professionals. And the net result is that all of them got rich because they got information that came from different disciplines.


Tell us about your relationship with your brokers.

I love my brokers. I have six, and three of them -- the ones at PaineWebber, Morgan Stanley Dean Witter and Salomon Smith Barney -- are generally part of my team. We're the Club. They always call me up about deals. But it's private equity stuff. I do most of my stock investing in initial public offering companies, because that's where the money's made. My closest broker is with PaineWebber. He looks at my businesses and positions them to go public. We go over numbers, strategies and audits, and what makes my company attractive.


What makes this broker so special?

We help each other get rich. I can't talk to most brokers about real estate because they're just salesmen. But my PaineWebber broker understands my business inside and out, so he's always looking for ways I can convert earned income into passive income and portfolio income. Recently, he knew I had to move a chunk of money before my corporate tax time, so he helped me find a million-dollar office building in Scottsdale, Ariz., that I bought. By buying real estate, I'm able to take my earned income and put it into another corporation that owns my real estate. That company rents the office to another of my businesses. That way, I convert earned income from one corporate body to passive income in another corporate body. If I had put that earned income into the stock market, my shares would have to appreciate by 30% to earn the same after-tax return I get just by breaking even in real estate.

A broker needs to understand corporate law in order to give the entrepreneur more options. While I may not make as much as someone like Jack Welch of General Electric, I have more control over my money, as do most entrepreneurs. When you're an employee, a W-2er, your single largest expense is your tax. There's not much a broker can sell the employee and self-employed person because the government already took its cut. But if you're selling to a guy who's truly an entrepreneur, there's a lot that you can sell him. I'm constantly trying to move my money before the government gets it. So as a broker, what you're looking for is the rich entrepreneur who has money problems and needs to invest quickly, like I had to at tax time. For instance, where an employee can move only $2,000 into an IRA, the business owner can move unlimited pretax dollars into retirement plans, especially if they're over 50 years old.


Do you do any trading on your own?

I think do-it-yourself trading is stupid. I'm not a day-trader. I pay my broker a lot of money because he's close to the market every day. In real estate, a broker-less transaction is called a "For Sale By Owner." I don't do those because they're a waste of my time. I have only so many brain cells.


What's your outlook for the stock market?

The market is going to crash between 2008 and 2010 because baby boomers will start to retire. Money will move out of the United States, but Asia will start to take off. That's why I'm in Asia through the small businesses I've invested in and through the real estate I lease.

The good news is that U.S. small-cap stocks will take off, but that won't help most people who are counting on their IRAs as nest eggs. Most people are basing the value of their IRA mutual funds on a very inflated stock market. These people may be worth a lot today, but let's see what they have in 2010.

-Tony Chapelle

ramcem

Dear all,

An article which I got in year 2001. No matter where you are, Gary, I appreciate this post of yours...

~Ramcem

++++++++++++++++++++++++++++++

My goal and vision in life


In 1997, I was admitted into the Engineering Faculty in the National University of Singapore (NUS). I was 21 then. My mentality was that the pot of gold at the end of the rainbow was the most important, and that the journey itself was insignificant. As an example, I thought that in college the utmost importance was the degree itself. University life and the process of learning was not important. Since then my views on life as well as many others have drastically changed. It is only now that I realized the journey is the most important. The endpoint is secondary.

I chose engineering as my training with no special motivation, apart from the fact that the starting paycheck of this profession is one of the fattest.

In the same year my aim was to score well so that I will be able to receive my first class honors at the end of my four year stay. This requires me to mindlessly work hard at something that does not interest me. In simple terms, it was a torture.

In 1998, I had a feeling the direction I charted for myself was wrong, as if something was amiss and my drive towards my pot of gold was weak.

In 1999 I had the luxury of meeting up with an old friend and exchanged viewpoints in life with him. It was until then that I had a glimpse as to where I should be going. Working for life and spending whatever I earn with little or no savings was meek. This is not the life I want, but then the question remains as "where should I be going?"

In 2000, while on my Industrial Attachment, I was fortunate enough to befriend several colleagues, whom I usually refer to as "top-class people". It was these very people who changed my life views. On top of that, I was also greatly inspired by an author named Robert Kiyosaki, whom imparted his practical and usable knowledge of finance and investing to me via the greatest invention of men, books. To every other person, investing is a skill they must learn if they want to live a life of security and comfort, especially in the Information Age that we are in now. Of course I am excluding the very rich. But to me, finance and investing are my previously unraveled interest, now uncovered and is a realm where my heart can lead with infinite drive and power

My goal is to retire by the age of 30 and to dedicate my life to my interests, which are actually quite a spread. My interests include finance and investing, computer gaming, traditional chinese medicine and charity. Some people may misinterpret me by questioning the irony of retiring and then doing many other things. My definition of retirement is that it enables you to do whatever you wish to do without worrying about your bread and butter. To some it may mean financial independence or even financial freedom. It does not, however, mean not working and staying at home.

My vision is for my skills of investing to be profound enough for me to be secure, without the worry of my bread and butter, and my skills of traditional chinese medicine to be proficient enough for me to do charitable deeds to the general public. As for computer gaming, well let's just say that it is a habit I cannot manage to kick.

Regards,

Gary

"The reasonable person accepts the world it is. The unreasonable person insists on changing the world to suit his own requirements. This is why all progress depends upon the unreasonable person."

~Anonymous

"To be able to stand in the midst of darkness and live as though all about you is light, is the final test of the human spirit."

"The soul of man is immortal, and its future is the future of a thing whose growth and splendour have no limit."

stevedino

erm well hmmm interesting ...

lynex

interesting...thanks for sharing again..:biggrin4:

ramcem

Dear all,

I hereby attach a summary interview between Larry Holmes and Dr. Marc Faber, an economist.

Interesting article.

~Ramcem

++++++++++++++++++++++++++++++++++++++

I had the pleasure of listening to an online interview with Marc Faber this weekend. Here are some of the main points that he made...

1. There are two types of growth - growth through investment and growth through borrowing. The US has been financing growth through borrowing for quite some time now. Growth through borrowing is not sustainable.

2. There is a huge pool of money sloshing around the world, greatly expanded in recent years because of the policy of the world's central banks to increase the money supply (which created the stock market bubble of the 90's). But even though the central banks can inflate the money supply, they have no control over what kind of assets money flows into.

3. There is a major shift occurring from financial assets (stocks, bonds) to hard assets (raw materials, commodities, natural resources). It's a trend that will continue for several years to come as the US dollar weakens.

4. Contrary to what some think, we don't necessarily have a bubble in real estate right now. But we do have a bubble in the borrowing to purchase real estate.

5. Major investment themes are not widely recognized until they are well along the way. Once they are widely recognized as being good investments, the theme is close to running its course.

6. Once a bubble bursts, people keep hoping that the market will recover (US stocks, for example). But it won't recover because money is flowing into other undervalued assets.

7. The US has depended on foreign investments in recent years. In the future, the appetite for foreign investors to invest in US equities will not be as strong as in the past.

8. There are 3.6 billion people in Asia. It's the largest physical market in the world. As their standard of living increases, they will need more commodities (oil, coffee, cocoa, sugar, cotton, you name it).

9. The CRB (Commodity Research Bureau) index is up 25% in the last twelve months. It's the beginning of a major bull market. Over the next ten years, you will see much higher commodity prices.

10. China has a per capita consumption of oil of just one barrel. The per capita consumption of oil in the US is 22 barrels. In Latin America, the per capital consumption of oil is 4 barrels. China is not likely to consume oil the way the US does, but it is reasonable to think that they will consume oil at the rate of Latin America. When it happens, oil prices will go significantly higher.

11. Today, the capitalization of the Chinese stock market is tiny in comparison to the US market. But in ten years, the capitalization of the Chinese stock market may be bigger than the capitalization of the US stock market.

12. Changes in the next five or ten years will be absolutely mind boggling.

Like I've been emphasizing, and will continue to emphasize, successful investing will require an entirely different mindset than what most investors are used to. But those who are able to make the transition will be richly rewarded. I closely monitor the commodity markets for opportunities. Right now, I think that the commercial positions according to the latest Commitments of Traders reports indicate that we will have better opportunities to invest in commodities and hard assets down the road.

The best thing you can do right now is to prepare to invest. Here are some things that I think you should be doing in today's economic environment...

Reduce personal debt - This is not a good time to be in debt. If you have credit card debt, pay it off. If you're contributing to a 401(k) plan, and you have significant bad debt like credit card debt and/or installment debt, you may want to stop contributing to your 401 (k). Unless your plan will let you invest in bear mutual funds, emerging market funds, or commodity funds, then I doubt that you have many investment choices that will do well in the future. You're probably better off directing that money toward getting out of debt.

Mortgage debt - If you haven't refinanced in the last couple of years, consider doing so. Interest rates are low now, but I don't think that they will remain low. Also, if you have more house than you need, think of downsizing while the housing market is still strong. How secure is your job? What would happen if you or your spouse lost a job? Could you still afford the payment?

I'm not suggesting that you get out of real estate. If your payment is easy for you to make, and you think your job is going to be there, then you're OK. But if your job is not secure (not many are), and you're heavily mortgaged, then you have reason to be concerned.

Cash reserves - If you don't have debt problems, this is a good time to build your cash reserves. It's from your cash reserves that you're going to be able to take advantage of the exciting investment opportunities that are sure to come. There is little more frustrating than seeing a great investment opportunity and not having the cash to take advantage of it (I know, I've been there). Save at least 10% of whatever you earn and live off the rest. If you don't think you can save that much, cut expenses. You simply must learn to "pay yourself first."

Start a business - If you're not already a business owner, consider starting some kind of part-time business. It will give you additional security and another stream of income. As Robert Kiyosaki says, it's all about cash flow. Use the cash flow from your business to invest.

"The reasonable person accepts the world it is. The unreasonable person insists on changing the world to suit his own requirements. This is why all progress depends upon the unreasonable person."

~Anonymous

"To be able to stand in the midst of darkness and live as though all about you is light, is the final test of the human spirit."

"The soul of man is immortal, and its future is the future of a thing whose growth and splendour have no limit."

ramcem

MR. COFFEE. The man behind the $4.75 Frappuccino makes the 500.
by Cora Daniels


Howard Schultz is blushing. Having just heard that Starbucks, the coffee empire he built, is making its debut on the FORTUNE 500 list this year, the normally unflappable Schultz grins, his eyes dart down, and he gets teenage pink. “Imagine that, he said to himself, as if surprised. A moment later Schultz snaps back into corporate-chairman mode. “It would be very arrogant to sit here and say that ten years ago we thought we would be on the FORTUNE 500. But we dreamed from day one and dreamed very big.”

The Starbucks story epitomizes “imagine that” in every sense. When the company went public 11 years ago, it had just 165 stores clustered around Seattle and in neighboring states. At that time, coffee was a 50-cent morning habit, and your local diner was the pusher of choice. Skeptics ridiculed the idea of $3 coffee as a West Coast yuppie fad.

Today the company, which does not franchise, has over 6,000 stores in more than 30 countries, with three new stores opening every day. Critics on Wall Street give Starbucks two more years before the market here at home is saturated. Schultz, sitting impatiently in his office with its unscenic views of the Port of Seattle train tracks, scoffs at that interpretation. "Those who talk about saturation obviously doesn't understand our business strategy." he says.

The strategy is simple: Blanket an area completely, even if the stores cannibalize one another's business. A new store will often capture about 30% of the sales of a nearby Starbucks, but the company considers that a good thing: The Starbucks-everywhere approach cuts down on delivery and management costs, shortens customer lines at individual stores, and increase foot traffic for all the stores in an area. Last week 20 million people bought a cup of coffee at a Starbucks. A typical customer stops by 18 times a month; no American retailer has a higher frequency of customer visits. Sales have climbed an average of 20% a year since the company went public. Even in a down economy, when other retailers have taken a beating, Starbucks store traffic has risen between 6% and 8% a year. Perhaps even more notable is the fact that Starbucks has managed to generate those kind of numbers with virtually no marketing, spending just 1% of its annual revenues on advertising. (Retailers usually spend 10% or so of revenues on ads.)

Despite the buzz, Starbucks has captured just 7% of the coffee-drinking market in the US and less than 1% abroad. Yes, the market is that grande - coffee is the second most consumed drink in the world, after water. (Schultz himself is a five-cup-a-day man, beginning with an espresso macchiato at home, followed by a double-short 2% latte on his way back to the office.) The goal is to have a minimum of 10,000 Starbucks worldwide by 2005. Starbucks opened its first international store six years ago, in Japan; there are now 1,460 stores outside the US scattered around Europe, the Pacific Rim, the Middle East and Mexico. That leaves lots of room for growth. "Internationally, we are in our infancy," says Schultz, who took on the role of chief global strategist two years ago. He says he wants to see a Starbucks in every country in the world, although there's one country he really wants: Italy.

Americans hawking espresson in Tuscany may sound about as promising as Italians selling BBQ in Texas, but Italy - motherland of damn good coffee - holds a special place in the heart of this chief global strategist. It was during a trip to Italy in 1983, when Schultz was in Milan sipping his first latte, that he conceived Starbucks as we know it today. Back then, Starbucks was a local chain in Seattle. It was known for its high-quality coffee, but it had only six stores, which sold just beans - no espresso, no Toffee Nut Creme. Frappuccions, no read-made coffee, period. But Schultz, the marketing executive for the small company returned form Milan determinned to create an American version of the Italian coffee bar. Four years later, at the age of 34, he raised $4 million and bought out the owners of Starbucks, who wanted to stick with beans. Schultz's Americanized coffee-bar idea soon took off, a commodity became a cultural icon. Proof of icon status: Playboy magazine is currently working on a Women of Starbucks issue.

Along the way, Starbucks created an industry. When the company began its massive expansion in the early 1990s, the U.S. had about 200 coffeehouses - places where coffee was actually the main event, not an aside - according to the Speciallity Coffee Association. Today, there are 14,400 which means the majority of the coffeehouses are not Starbucks but mom-and-pops that bloomed after the dawn of the $3 coffee era. "We changed the way people live their lives, what they do when they get up in the morning, how they reward themselves, and where they meet, "says Starbucks veteran Orin Smith, who helped Schultz take the company public and is now its CEO. "That's more important to me than just building a company."

Schultz says his goal was less to make Starbucks a FORTUNE 500 behemoth than to build the kind of company he wished his father could have worked for. Fred Schultz, who never graduated from high school, had a series of hard, low-paying jobs - from factory worker to truck driver - with few rewards and no benefits. "My father was a broken-down blue-collar worker," says Schultz. "He was not valued and not respected, and it made him very bitter and angry. I wanted Starbucks to become a company that didn't leave anyone behind." Today even part-timer get benefits such as health coverage and stock options.

At the end of a day of chatting, Schultz scolds, "We haven't talk about the quality of coffee." He grants FORTUNE permission to visit the Starbucks roasting plant - the first time the media have been allowed inside - to see first-hand what it takes to make high-quality coffee. Although we're sworn to secrecy, we're not giving anything away when we say that Starbuck taste is all about the second pop. The company roasts its coffee longer, past the first pop, which is the signal to stop for most coffeemakers."

It took about a decade for Starbucks to become a FORTUNE 500 company. Ten years from now, Schultz says, he has a much shorter list in mind: "We want to become one of the most respected and recognized brands in the world." Like what, for example? "Like Coke," he says. Imagine that.

"The reasonable person accepts the world it is. The unreasonable person insists on changing the world to suit his own requirements. This is why all progress depends upon the unreasonable person."

~Anonymous

"To be able to stand in the midst of darkness and live as though all about you is light, is the final test of the human spirit."

"The soul of man is immortal, and its future is the future of a thing whose growth and splendour have no limit."

funnysnow

someone spend on me.. =D

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ronaldng

wow, interesting.. thanks for the post

ramcem

You are welcomed.

Telling stories to emphasis certain lessons are one of the best way to teach using real life case studies and examples.

Entrepreneurship in Singapore is only at elementary stages as we've been too sheltered by the government for over 40 years. So I hope I can do my part to society by imparting important skills to the public.

If there are any questions in areas such as capital raising, structuring of deals etc., I would try to my best to help.

~Ramcem

"The reasonable person accepts the world it is. The unreasonable person insists on changing the world to suit his own requirements. This is why all progress depends upon the unreasonable person."

~Anonymous

"To be able to stand in the midst of darkness and live as though all about you is light, is the final test of the human spirit."

"The soul of man is immortal, and its future is the future of a thing whose growth and splendour have no limit."

ramcem

An article in year 2003..

For those who think setting up a business is easy and it just takes an honour degree to succeed, think again. For every successful example you see, there are 99 that tried and perish..

Enjoy reading.

~Ramcem


A dream to be a brand like SIA

Much has been said about Ms Olivia Lum, chief executive of Hyflux Ltd, a listed water-treatment company. But do you know where her entrepreneurial streak comes from? What does it take for a poor orphan girl to become a $70-million woman?

By Susan Long


CALL her Lady Luck. Ms Olivia Lum is one woman you would not want to play poker with.

Only recently, the chief executive of Hyflux was hailed as an entrepreneurial success story by her hero, Senior Minister Lee Kuan Yew.

When she took her water-treatment company public early last year, it coincided with a spirited market rally which saw its issue price of 32 cents surging by three times.

Overnight, the IPO queen became a multi-millionairess.

Defying recessionary gravity, Hyflux's net profit shot up by 16 per cent to $7.4 million last year, with higher expectations of growth this year.

To cap it all, she was appointed recently by Prime Minister Goh Chok Tong as Singapore's representative to the Apec Business Advisory Council.

The international council provides business advice and feedback to Asia-Pacific Economic Cooperation forum leaders.

At 41, Ms Lum is reportedly worth some $70 million.

Still single, she lives in a 4,000-sq-ft, triple-storey, semi-detached house in the Thomson area with a maid, a Samoyed called Snowy, two rabbits and three parrots.

With heightened publicity of late, much of it focusing on her net worth, she is asked the inevitable question: Has she received any attractive suits?

'I think not many men dare to propose,' she answers straight up. 'It's not easy to have a girlfriend like me. I'm a very focused workaholic.'

If she has no time for boyfriends, it is because she is blissfully married to her work.

'Work is my hobby. Even on Sundays, I enjoy doing it,' says the petite woman who has pounded the 12-hour-workday treadmill for as long as she can remember.

Her only indulgence is shopping for Prada and other designer togs and careening around in her black Mercedes-Benz E240 to check out new restaurants.

The head of this self-confessed 'pressure cooker' boss is screwed on tight. She harbours few illusions. Her secret of success is simple, uncompromisingly old economy, and summed up in one word: Sacrifice.

She scoffs at the many 'grand' misconceptions about entrepreneurship out there. 'A lot of people are seduced by the glamour of being their own boss, pursuing their own ideas and making big money. That's only one part of the story.

'You have to overcome a lot of other things. It is very tiring, humbling and all about sacrifice,' she says during an interview at her no-frills, fluorescent-lit Changi South office.

Often asked what it takes to go it alone, she has a stock reply for aspiring entrepreneurs:

'Are you willing to sacrifice time and, if need be, travel far away from Singapore, suffer in the cold, be with people you don't like and bring yourself to a low level, to convince buyers?'

Her frank assessment is that few Singaporeans, especially highly-paid middle managers, will make the cut.

'Most will tell you they want to work 9 am to 5 pm, no entertainment after-hours, that their family is their first priority. But in business, there is no pre-programmed routine. Especially the first few years, it is make or break.

'Unlike entering a job, you cannot negotiate with your boss that you are not willing to travel or work weekends.

'When you have to pay bills and worry about surviving the next month, you have no negotiation power whatsoever,' she says.

Her story begins with what most people would call lucklessness.

The setting is the languid town of Kampar in Perak. She was an orphan, adopted by an old woman she called grandmother, who spent her remaining days squandering her savings at the mahjong table.

At night, little Olivia's nightmares were not of phantom ghosts but of losing home and hearth and sleeping on the roadside.

At nine, her worst fears were realised when by yet another poor hand, their terrace house was finally lost. They had to move to a small wooden house and let the maid go.

It was then that she decided to sell everything in sight - from home-made ice lollies to denim jeans - to earn her own dough.

'Seeing Grandma gamble away her money, I wanted to do something. Otherwise, I didn't know where we would end up,' she recalls.

So, daily, she lugged four loaves of kaya and peanut-butter sandwiches to her school canteen and sold them at five sen a slice during recess time.

Sometimes, she skipped school and hitched a ride to far-flung plantations to buy cheap papayas or guavas. These, she sliced and hawked on the streets downtown.

Even the dolls, chocolates and other birthday gifts she received from her grandmother's friends were not spared. She repacked and sold them to her schoolmates.

'I had no toys of my own,' she says almost proudly. 'My joy and delight in receiving gifts was not to play with them - I had something to sell.'

She grew up fiercely independent, signing her own report card from Primary 1 to 6.

'I was brought up alone, so I explored my own ideas and talked to myself. My grandmother was illiterate so I decided most things myself. My teachers used to remark: 'Your parent's signature has improved over the years'.'

By the time she was in secondary school, she had progressed to selling insurance policies. She remembers ironing a RM5 note - her biggest sales commission ever then - and preserving it lovingly within the pages of a book, which she often flipped just to relive the 'enjoyment of looking at the money I had earned'.

Early on, she realised that sales suited her personality and she set her sights on building a business.

'What I liked was that I could do it quickly there and then and see tangible results. It was satisfying. The more I sold, the more I understood people and the human dynamics of pleasing customers, what they really wanted and needed,' she says.

'This dream never died - selling was my link with the business world.'

At 16, the straight-A student was advised by her teachers to further her education and prospects in Singapore.

So she bade Grandma a teary farewell, journeyed to Singapore, rented a cheap Chinatown room with three female construction workers and enrolled at Tiong Bahru Secondary School.

She paid her own way by giving tuition after classes on weekdays and peddling everything from souvenirs to smoke detectors on weekends.

On top of that, she scored 6 As and 2 Bs for her O levels and secured a place in Hwa Chong Junior College.

Then began one of the darkest chapters of her life. Her beloved Grandma died of tuberculosis when she was sitting for her A-level biology paper.

She found herself blinded by tears halfway into the examination. Her answer sheet was soaked.

Somehow, she managed to steel herself and did well enough to read applied chemistry - because it was 'industrial-related' and sounded 'useful' - at National University of Singapore. But even then, she was dead set on running her own show.

'I did my degree not to gain knowledge or work for someone else in case I failed in business - I did it so that I could put BSc down on my company name card,' she says matter-of-factly. (A statement I truly agree... )

She paid her fees by operating two canteens at construction sites in Katong and Bukit Timah and rushing there every day after lectures to help serve hungry workers.

"The reasonable person accepts the world it is. The unreasonable person insists on changing the world to suit his own requirements. This is why all progress depends upon the unreasonable person."

~Anonymous

"To be able to stand in the midst of darkness and live as though all about you is light, is the final test of the human spirit."

"The soul of man is immortal, and its future is the future of a thing whose growth and splendour have no limit."