December 12, 2006 – This year’s Nobel Peace Prize winner, Muhammed Yunus, is worth writing about because he gave the world a model through his concept of microcredit and his founding of Grameen Bank to transform a group of people, the world’s poor, from an “un-bankable” sector to not only a “bankable” sector but a profitable sector. Today, in developing and developed countries alike, banks in 100 different countries, including even those in the United States, are using Muhammed’s concept of microcredit to reach out and help the world’s rural and urban poor while still managing to run a viable business model. Muhammed proved that the concept of CSR (Corporate Social Responsibility) was not only feasible but also sustainable.
In the U.S., American Apparel in the garment industry and COSTCO in the retail industry have proven that a CSR model can be highly profitable. Both companies have been growing at among the fastest rates in revenues and market share among their peers for the last five years though both offer employees wages that are multiples higher than their larger more well known competitors such as Wal-Mart and the Gap.
In light of one of my recent blog entries about the ever increasing disparity of wealth that is burgeoning as the economy becomes more globalized, it is ironic that Yunus should win the nobel prize this year. “You cannot go on having absurd amounts of wealth when other people have problems of survival,” Muhammed said. “If you can bring an end to poverty, at least from an economic point of view, you can have a more livable situation between very rich people and very poor people, very rich countries and very poor countries. That’s our basic ingredient for peace.” Muhammed and the companies mentioned above were successful because they shunned traditional business models and traditional thinking for visionary thinking based on concepts that everyone else believed would fail. Muhammed’s microcredit model has resulted in loans as small as $9 to help poor people break their cycle of poverty.
In building wealth, thinking in a similar fashion to Nobel Prize Winner Muhammed will get you far. Many people are too afraid to challenge the beliefs accepted for the last fifty years. People are told that diversification and Modern Portfolio Theory is the only way they should allocate their investment portfolio, so they blindly follow it. They are fed all kinds of graphs and statistics produced by the investment industry that support these beliefs so they never, not for even one second, question the validity of these arguments. This is akin to how the tobacco industry in the 60’s hired doctors to produce studies that “proved” smoking cigarettes was not harmful.
If the “experts” tell us something, it must be true, right? From observing mass, popular behavior, I’ve always believed that if fine restaurants in Monaco, Paris and Beverly Hills started selling opossum at outrageous prices, that although people might be disgusted at first, it would eventually evolve into a delicacy like caviar and foie gras. If this sounds too far-fetched to be true, this is the exact story of the lobster. A hundred years ago, lobster was viewed as a dirty, ocean floor scavenger that was not fit for consumption. It sold for dirt-cheap prices, was used for fertilizer, and even the poorest of the poor in the U.S. bargained with their employers to receive lobster no more than three times a week.
Over decades, as changing supply-demand inputs changed the attractiveness of lobster as a food source, somehow the price of lobster rose from $4 a plate (in today’s dollars) to $35-$50 a plate. And with lobster’s soaring prices, the perception of lobster drastically changed from a food rejected by the poorest of the poor to one embraced by high society. Though not as drastic as the lobster, hamburgers experienced a similar evolution in perception. Decades ago, hamburgers were made from scraps of meat left over from the prime cuts consumed by the rich. Therefore, hamburgers were viewed as food not fit for consumption except for the poor. When fast food chains commoditized the hamburger, they successfully changed its perception from a food for poor people to food for the entire family.
Why am I telling you this?
To demonstrate how easily and blindly corporations are able to get people to accept neatly packaged concepts. Even in the world of consumer goods, if Fendi or Louis Vuitton one day ended up in Target or K-Mart stores, they would lose their “prestige” premium overnight, even though it would still be the exact same product. This happened to Japanese brand Alba Rosa, a clothing line that was worn by every kogaru girl in the upscale, haute couture central Shibuya prefecture in the early 2000’s.
At the peak of its popularity, in 2004, Alba Rosa had over 60 stores stocking its merchandise in Japan, sales of over 6 billion yen and profits of over 900 million yen. When Senta males (persons that embrace outrageous fashion styles, often wearing plastic clothing, inappropriate accessories and bright day glo colors) started wearing Alba Rosa, they literally killed the brand in less than a year. Alba Rosa went from 6 billion yen in sales to closing their doors just 8 months later. According to some Japanese clothing stores that heavily stocked Alba Rosa, after Alba Rosa suffered a rapid crash and burn, many Japanese girls turned to the more conservative Burberry label.
I relay this story to again demonstrate how quickly people turn to trends in almost all aspects of life — food, clothing, luxury goods. It doesn’t matter. Smart marketing companies can convince the masses to believe anything they want. And that’s what makes investment firms even more brilliant. They have convinced the masses to buy in to one singular concept of investing for over half a century now all over the world — diversification and Modern Portfolio Theory. To find out why they have invested so much money and time to brainwash the masses to believe in this concept just visit our online campus and download our free 85-page ebook “Build Wealth, Not Dreams.”
However, one thing is certain. To build wealth, you will have to abandon almost every single concept propagated by the investment industry over the last fifty years. They don’t work and they aren’t designed to maximize your returns. You have to be willing to challenge traditionally accepted concepts, pursue revolutionary concepts and strategies that technology has made available today, and evolve in your thinking. Think different, as Apple would say.
As I explained in a blog post just a couple of days ago, the largest investment firms are incorporating evolving technology today to save themselves hundreds of millions of dollars in commissions. They could also use evolving technology to significantly increase your returns, but they won’t. To do so would require too large an investment on their behalf and massive training costs to re-train tens of thousands of financial consultants around the world. The part about learning how to utilize the changing information technology landscape to repeatedly identify brilliant investment opportunities, the part about daring to reject conventional investment strategies and to think differently- these parts are up to you.
In the end, by taking the road less traveled, the one that Muhammed Yunus took, you will learn to build wealth more quickly than 99% of all other investors.
__________________
J.S. Kim is the founder and Managing Director of maalamalama, a comprehensive online investment course that uses novel, proprietary advanced wealth planning techniques and the long tail of investing to identify low-risk, high-reward investment opportunities that seek to yield 25% or greater annual returns.
