Banks prefer bad debt, why is that?

First some definitions:

  • Bad debt is debt that was incurred for a liability, for example, buying cars, throwing a party, buying a boat, going on a trip.
  • Good debt is debt that is used to buy a producing asset. Debt used to start a business that is producing profit, buy a property that produces rent, etc.

I once asked a bank for a loan. The loan would have been given to me on the basis of my salary, track record in earning money, credit report, and current affordability level. Still they asked me what I was planning on doing with the money and I told them I was planning on investing them in one of my business and on that basis the told me that I was rejected because they don’t do business loans. Mind you, I wasn’t asking for one, I was asking for a personal loan.

Naively hoping to still qualify I explained that my business was buying property abroad and that it was a really good deal. Their answer was that I should talk to the mortgage department because they don’t do loans to buy property because then the property could be mortgaged and lost and they are left with nothing (nothing except every single payment coming out of my salary, mind you).

When I talked to the mortgage department they told me what I expected: they can’t offer mortgages abroad.

Later on I went to the same bank, I asked for the same amount and I told them I was planning on blowing it all out on a party. They said yes. Now that I was planning on just spending it on one single event of which no good financial outcome could come out, my salary was good enough for them to say yes to the loan. I asked what if I wanted to spend it on a highly depreciating asset, like a car, and they also said yes.

It seems like banks prefer you to have bad debt, than good debt. I don’t know why it should matter one way or another if the collateral is the salary, not the asset, but if it matters, why does it matter in the wrong direction?

Book Review: Small Giants by Bo Burlingham

519jtUnq-eL._SX324_BO1,204,203,200_I’m glad I read the 10th Anniversary Edition of the book because I think the extra chapters or modifications make for a much different book. Throughout the book, as he was describing what the small giants do to be giants, without disparaging what they do, I was thinking: “that only works if your profit margins are big, very big”. The new chapters follows up on some companies and what happened to them when those margins become smaller. Long story short: it’s not pretty.

The range of covered companies surprised me. I knew this was not about big companies, so, no Apples, Googles, Microsofts or Facebooks. But still, the range of employee size was from 1, yes, 1, a single person company, to a over-1000 employee company. It’s clear that towards the extreme of the scale, many of the ideas and principles don’t work as well and it might be a stretch to call them small giants but it is exactly that that makes them interesting on this book as it shows the boundaries you could expect if you try to create a small giant.

Reading this book made me think that maybe I don’t want my own companies to be small giants. Maybe I want one of my companies to be one but not the others, I’m not sure yet. I personally don’t think there’s anything wrong with or without being a small giant but if you expect your company to behave like one when it’s not, you’ll be thoroughly disappointing; and for me, that’s the big lesson.

★★★☆☆

Buy Small Giants  in USA
Buy Small Giants in the UK
Buy Small Giants in Canada

 

 

Book Review: The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War by Robert J. Gordon

the-rise-and-fall-of-american-growth-2I read it as an audiobook and it doesn’t make a good one. It’s full of figures, numbers, charts, diagrams, etc which get lost in the audio version. This might cause a bias on my review.

The book feels thoroughly researched. I caught a couple of small errors but most time when I thought “What about this or that” the book answered my objection a couple or paragraphs earlier.

The first two parts cycle between a dry list of numbers and little stories or descriptions that are very interesting. It is, as the title suggest, very American centric but every now and then it compares USA with Europe.

The last part is different, specially the last two or three chapters, which talk about the present and the future. I was heavily entrenched in what this books call techno-optimisim. Techno-optimists believe progress is happening and it will accelerate. AI will solve all problems and destroy all jobs. We also believe robots are the biggest source of unemployment today. This book made me challenge these assumptions. I’m not sure what to believe. Some of the conclusions that you may arrive at from the information here can be very xenophobic/protectionist.

The postscript, America’s Growth Achievement and the Path Ahead is great and concise. I think it should be mandatory reading to be a politician of any kind. Actually, the US should elect Robert J. Gordon as their president.

★★★★☆

Buy The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War in USA
Buy The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War in UK
Buy The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil Warin Canada

Book Review: Shoe Dog: A Memoir by the Creator of NIKE by Phil Knight

71KkAKYWcuLI always saw Nike as this faceless, soulless multinational corporation. I never thought it’s origin was not dissimilar to Apple’s: they were rebels. They fought tooth and nail against incredibly bad odds and prevailed. This book eradicated my dislike for this company.

★★★☆☆

Buy Shoe Dog: A Memoir by the Creator of NIKE in USA
Buy Shoe Dog: A Memoir by the Creator of NIKE in the UK
Buy Shoe Dog: A Memoir by the Creator of NIKE in Canada

Book Review: Profit First: A Simple System To Transform Any Business From A Cash-Eating Monster To A Money-Making Machine by Mike Michalowicz

71VbPsg3rfL._SL1500_Definitely interesting and a recommended read for any small business owner. I listened to the audio-book and it was compelling enough that I bought the hard-cover to give it a second read and look at the charts and tables.

Profit first is essentially taking the profit out of revenue before your company eats it away. Obviously there’s a lot of nuances and techniques to make it work and that’s what the book explores and exposes.

★★★★☆

Buy Profit First: A Simple System To Transform Any Business From A Cash-Eating Monster To A Money-Making Machine in USA
Buy Profit First: A Simple System To Transform Any Business From A Cash-Eating Monster To A Money-Making Machine in UK
Buy Profit First: A Simple System To Transform Any Business From A Cash-Eating Monster To A Money-Making Machine in Canada

 

Book Review: Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012 by Carol J. Loomis

tap-dancing-to-work-warren-buffett-on-practically-everything-original-imaearwszgsgegyjIt was OK. Because it’s a series of articles and not a real biography, there’s no cohesion. I think the biggest problem with this book is how boring the subject matter is.

Warren Buffet is obviously smart and a book trying to figure out how he does what he does could be interesting, but otherwise, from the outside, his life is quite boring (which I bet correlates with his happiness).

He didn’t seem to start dirt poor, just average. There was no drama. There was no losses to nothing and miraculous recovery. There was nothing more than a steady stream of rational decisions and a pile of money that grew to amazing proportions. Even then, Warren Buffet kept a supremely ordinary life, which makes me wonder why some rich people need so much protection and Warren Buffet doesn’t.

★★★☆☆

Buy Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012 in USA Buy Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012 in UK
Buy Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012 in Canada

An idea for a cinema company

I doubt any cinemas are going to implement this, because like airlines and banks, they seem to be very bad at making software. Nothing surprising there.

A few months ago I was searching for a room in London. There are about 4 big sites to do that, so I posted ads on all of them, and searched on all of them. Only one provided a web application that allowed me to see whether I contacted someone already or whether I marked a flat as not-suitable. It made searching so much easier that soon I was using that and only that site. The ads weren’t better per se, but the software was.

I like going to the movies with friends but I dread having to organize it. It’s such a pain because you have to balance the available time of each people, the timetable of the cinema, the shows in which there are still good seats, the fact that the seats might be going unavailable, and handling the money (I tend to pick the cool but expensive theaters).

If I was in charge of a cinema, I would make a built-in Doodle. Doodle is an awesome application that helps you organize an event. You select all the desirable dates and times, invite the people, and they respond yes or no to each slot. At the end you pick one and go for it. I thought of setting up a Doodle to organize going to see The Dark Knight, but I ended just picking a date and time that was convenient for me and inviting people. It didn’t work.

The built-in Doodle could work like this:

  1. I go to the cinemas website.
  2. I buy my ticket.
  3. I pick all the shows I can go to.
  4. Set a deadline (maybe, optional).
  5. I send the invite to all the people that might want to join me.

Notice that I paid for my ticket before picking the date and time. I’m not sure whether that’s a good idea, I would be okay with that but maybe not everybody. What do you think?

Then each person that I invited goes to the web site and:

  1. Look at all the dates and times I and others picked.
  2. Buy their ticket or tickets.
  3. Pick the dates and times they can.

Once everybody is in or I’m done waiting, I pick a day and time and I get all the seats assigned together in one action (even though the action of committing to the movie was individual and asynchronous). For those that didn’t get a ticket or those that changed their mind, they get their money back and/or the option to arrange the same movie, another day, with some of the same group and/or adding other people to it.

For the cinema it’s a revenue booster. It makes it easier for people to commit to going to the cinema. And even people than don’t manage to go one day are compeled to go another because they already paid.

Build it with nice Facebook and Twitter integration and that’s it, you’ll be the most popular cinema in town.

What is a "startup project"?

I’m (hopefully) creating a term: “startup project”. A startup project is a project done on the side, not setting up a company, with or without partners, with the intention of one day becoming a startup.

I don’t have a startup, but I have many startup projects. Many silly little ideas with great aspirations. I need a term to separate that from non-startup project (like writing free software or build a house for the dog).

My startup projects are:

Many of them are dead or inactive. With .gitignore and .hgignore I believe I’m already getting as many visits as I possible can and it’s not that many (understandably, it’s extremely nichy).

RadioControlPedia is there, providing the information it has and open to anyone to contribute. I have some plans for it in the future but for now, I’m putting my time in other ideas. I really want to stay away from content for now.

Restraq and Hear a Blog deserve posts of their own, so wait for it.

Meanwhile, what do you think about the term “startup project”?

Idea: selling beauty products for males online

The beauty industry is made by women, for women. They learn everything very young and for most of them, it’s just natural. For most males it’s intimidating and confusing.

I had a very hilarious episode when I asked for “a beauty product” and my wife was tanding next to me and even though I was dead clear that it was me asking for a product for me, the sales rep would not speak to me. She directed all her answers to my wife, she was looking at her, almost ignoring me, while my wife never said a single word.

Anyway, I had an idea how to sell those kind of products to males. First, you have to do it online, because apparently males are more comfortable buying online and they are definitely not comfortable buying retail beauty products. Second, you have to make it simple, because we don’t know anything about it.

To make it simple my idea is this: you take a picture of yourself, or a couple, specifically of the problem you want to fix and upload it. Five minutes later you get a list of products that you could use for that. Boom! Sale guaranteed!

My idea got validated

Some time ago I had an idea for a web application. That idea was essentially Gist. I couldn’t convince people to go after it, thankfully because I wouldn’t like to compete with a Brad Feld backed company. It’s nice to see that the idea was good, as Gist got bought by RIM. Congratulations Gist!