I was in the left lane of the exit ramp, stopped at the light. Next to me was a guy with a sign “stranded, hungry, please help.” I felt a bit awkward. It is hard for me not to help someone who asks for it, but I have gotten tired of people begging.
After I got going again I drove past a gas station. In front of the gas station were a couple of men, I am assuming they were Mexican, hoping someone would come by and offer them some work.
I think beggars will make me feel less awkward in the future.
I will also remember this story next time I have to listen to some blowhard complaining about illegal immigrants. They are illegal because our laws are written by idiots.
Thursday, June 29, 2006
Tuesday, June 13, 2006
Don't Take Investment Advice
“What do you think about [insert company name here]? I have been watching it for a couple of weeks and it has gone up 40%.”
“I wouldn’t go near it. But that doesn’t mean that it won’t go up.”
I don’t say that.
“Is the company making any money?”
“Did you notice that the number of shares has been increasing by 6% per year?”
No one thinks to look at the number of shares outstanding. When they do, it doesn’t take long to realize that if it goes up the value of each share goes down by about the same amount.
I highlight the points that I think are important, and let people decide for themselves.
A couple of times though, I have crossed the line and made recommendations to people. It would be bad enough if I only did it when asked, but there have been times when I have been so excited about an investment that I brought the subject up.
It is wrong for me to make recommendations because it is always wrong to take recommendations. I mean that. It is always wrong to make investment decisions based on recommendations.
Let’s assume that the guy giving the advice knows what he is talking about. Things change all the time. New information can cause the advisor to change his mind. Is he going to track down everyone he talked to and let them know?
One thing I have seen happen is for a person to buy, see the stock go down and sell, figuring the advice was bad. Then the stock goes back up, and the person buys back in, figuring the advice was right after all. The advisor looks smart, and the advisee can’t figure out why he is “right” and yet his account balance shrinks.
There are lots of reasons to buy a stock. It is a lot harder to know when to sell. When buying the thinking is “The company is going to….” The thought process on selling is more like “What if the share price…”
The short answer to knowing when to sell is that you sell when the reason for owning the stock is no longer valid.
That is hard enough to determine when you know the reason for buying; it is not possible when you don’t have a reason.
Investing is the opposite of Lake Wobegon. Over the long term, most people are below average. It is a peculiarity of Wall Street vocabulary that makes average returns less than the average’s return.
The average’s return, as it is defined on Wall Street is the return earned by a particular basket of stocks without transaction costs or tax bills.
People who hold the average portfolio do slightly worse than the average because they either have to pay the expenses of the person managing it, or pay transaction costs to keep up with the periodic changes to the “average” portfolio if they manage it themselves.
People who do not have one of the model portfolios are attempting to beat the averages. As a group, the return for each investor, on average, is ___________. After filling in the blank, deduct transaction costs.
Some people do outperform the averages. Some even do it over the long term. There are two kinds of people who do. The first are people who succeed from dumb luck. Those choosing to implement the dumb luck strategy should play the lottery; the payouts are higher.
The second group of people who outperform the market over the long term are those who have a winning investment strategy and adhere to it.
If you have a strategy that you expect will substantially outperform the market, have at it. If you don’t, admit it. Until you develop a market beating strategy, the best strategy is to come as close as you can to the market average.
Index funds are a type of investment where the managers try to copy an average, realizing that trying to outperform the market is more likely to increase expenses than returns. For someone who wants to invest, but does not have a strategy for choosing individual investments, index funds are usually going to provide the best returns over time.
That still leaves the investor with important questions to answer, such as “Do I want to invest in stocks at all? How much of my life savings do I want in stocks? Do I want to invest in big companies, small companies or both? Do I want to invest in foreign or domestic markets?” Just about every answer will have an index that tracks it, and a fund that implements it.
One final note of caution: Stock brokers are dangerous. There are those that give sound advice and can provide guidance in making investment decisions, but I don’t know how to identify them based on a soliciting phone call. They are salesmen, not investment advisors.
Stock brokers get paid a commission when their customers make stock transactions. Investment returns go down as the number of transactions goes up. I am not about to say that every broker is trying make money by giving bad advice. I am saying that every broker working on commission has a compensation package that gives him the wrong incentives.
“I wouldn’t go near it. But that doesn’t mean that it won’t go up.”
I don’t say that.
“Is the company making any money?”
“Did you notice that the number of shares has been increasing by 6% per year?”
No one thinks to look at the number of shares outstanding. When they do, it doesn’t take long to realize that if it goes up the value of each share goes down by about the same amount.
I highlight the points that I think are important, and let people decide for themselves.
A couple of times though, I have crossed the line and made recommendations to people. It would be bad enough if I only did it when asked, but there have been times when I have been so excited about an investment that I brought the subject up.
It is wrong for me to make recommendations because it is always wrong to take recommendations. I mean that. It is always wrong to make investment decisions based on recommendations.
Let’s assume that the guy giving the advice knows what he is talking about. Things change all the time. New information can cause the advisor to change his mind. Is he going to track down everyone he talked to and let them know?
One thing I have seen happen is for a person to buy, see the stock go down and sell, figuring the advice was bad. Then the stock goes back up, and the person buys back in, figuring the advice was right after all. The advisor looks smart, and the advisee can’t figure out why he is “right” and yet his account balance shrinks.
There are lots of reasons to buy a stock. It is a lot harder to know when to sell. When buying the thinking is “The company is going to….” The thought process on selling is more like “What if the share price…”
The short answer to knowing when to sell is that you sell when the reason for owning the stock is no longer valid.
That is hard enough to determine when you know the reason for buying; it is not possible when you don’t have a reason.
Investing is the opposite of Lake Wobegon. Over the long term, most people are below average. It is a peculiarity of Wall Street vocabulary that makes average returns less than the average’s return.
The average’s return, as it is defined on Wall Street is the return earned by a particular basket of stocks without transaction costs or tax bills.
People who hold the average portfolio do slightly worse than the average because they either have to pay the expenses of the person managing it, or pay transaction costs to keep up with the periodic changes to the “average” portfolio if they manage it themselves.
People who do not have one of the model portfolios are attempting to beat the averages. As a group, the return for each investor, on average, is ___________. After filling in the blank, deduct transaction costs.
Some people do outperform the averages. Some even do it over the long term. There are two kinds of people who do. The first are people who succeed from dumb luck. Those choosing to implement the dumb luck strategy should play the lottery; the payouts are higher.
The second group of people who outperform the market over the long term are those who have a winning investment strategy and adhere to it.
If you have a strategy that you expect will substantially outperform the market, have at it. If you don’t, admit it. Until you develop a market beating strategy, the best strategy is to come as close as you can to the market average.
Index funds are a type of investment where the managers try to copy an average, realizing that trying to outperform the market is more likely to increase expenses than returns. For someone who wants to invest, but does not have a strategy for choosing individual investments, index funds are usually going to provide the best returns over time.
That still leaves the investor with important questions to answer, such as “Do I want to invest in stocks at all? How much of my life savings do I want in stocks? Do I want to invest in big companies, small companies or both? Do I want to invest in foreign or domestic markets?” Just about every answer will have an index that tracks it, and a fund that implements it.
One final note of caution: Stock brokers are dangerous. There are those that give sound advice and can provide guidance in making investment decisions, but I don’t know how to identify them based on a soliciting phone call. They are salesmen, not investment advisors.
Stock brokers get paid a commission when their customers make stock transactions. Investment returns go down as the number of transactions goes up. I am not about to say that every broker is trying make money by giving bad advice. I am saying that every broker working on commission has a compensation package that gives him the wrong incentives.
Saturday, June 03, 2006
Doing the Little Things Wrong: Microsoft’s customer service
A company in a competitive environment cannot thrive without the support of its customers.
To make customers happy requires great products and great customer service. Great customer service is made up of lots of little things. There are many little things that other companies do right that Microsoft does wrong.
Over the past few months I have encountered Microsoft’s customer service several times, and nearly all were disappointing. I did not set out to find problems with the company. As you will see below, in a couple of cases I tried to give business to Microsoft that would have been easy to give to others. I am a shareholder of Microsoft, and I would like to give them my business whenever I can.
Answer the right question
Microsoft’s website provides a good comparison of the different versions of Visual Studio, and after determining which version is best, the web site offers to help find where to buy it. Clicking on “Locate a reseller” will provide a list of every retailer that sells any Microsoft products. Rather than making me read through the dozens of retailers that sell any Microsoft product, they could just tell me the couple that sell Visual Studio.
Provide updates for books
Microsoft Press publishes a book called Programming Indigo, the only book available on the Windows Communication Foundation. Because the book is based on a very early beta version, a lot of its examples no longer work. The download page for the book continues to provide only the old version of the examples.
Deal with customer problems
I used the Microsoft Certified Professional logo builder to create a file in the format the site’s documentation recommends for printing. The file generated appeared to contain no image. I sent an e-mail to MCP support, explaining my problem, and listing the programs I had used to try to view the file. Someone from the site responded, asking for more information. I wrote back with the answers, but I never heard from MCP help again. The printer was waiting on me, so I could not follow up and had to settle for a lower quality file format.
Anticipate customer wants
Microsoft is trying to compete with Google selling online advertising. Google offers a program called “Google AdSense” which allows people to host ads selected by Google on their web pages. I could not find any indication on the MSN website that Microsoft offered a similar service. I sent the question to one of the contact e-mail addresses for MSN, they suggested I contact some other department, and I let the matter drop.
There may be good reasons for not offering such a program at Microsoft, but there is no excuse for not having a response for people who want to advertise for them, especially when their chief competitor in that market has such a program.
Take suggestions from customers
I have an idea for a new software product. I searched all over Microsoft.com for a place to give them my suggestion. None of the categories under the “contact us” section seemed to apply, and I don’t remember which one I chose. I did get a response, but all it did was suggest that I submit the suggestion to another department, and gave me their web address. I was not able to find an e-mail address for that department.
Summary of problems
Microsoft has failed to anticipate some pretty obvious customer needs, like current information on a product they are changing or the availability of services similar to those offered by their competitors. They have not made it easy for people to make suggestions or to allow customers to collaborate with the company. Some e-mails went unanswered, and others were answered only with “talk to someone else.”
One ray of hope
I did have one interaction with Microsoft where the company’s performance was excellent. The MSDN Library has an in-work version of the documentation of the Windows Communication Foundation. Because the documentation is still being created, much of what is there is incomplete. I did find an example though, that had some syntax errors, and I decided to report them.
On every page in the MSDN Library there is a link to report problems. I very quickly got a reply from someone on the documentation team thanking me for my report, agreeing with my diagnosis and telling me that the problem would be fixed shortly.
Conclusion
Microsoft is a generally a well run company. They are good at setting targets and measuring progress. They need to apply that ability to their customer service.
As their competition increases, Microsoft needs to generate customer satisfaction and take advantage of customer collaboration if their future is going to be anywhere near as successful as their past.
To make customers happy requires great products and great customer service. Great customer service is made up of lots of little things. There are many little things that other companies do right that Microsoft does wrong.
Over the past few months I have encountered Microsoft’s customer service several times, and nearly all were disappointing. I did not set out to find problems with the company. As you will see below, in a couple of cases I tried to give business to Microsoft that would have been easy to give to others. I am a shareholder of Microsoft, and I would like to give them my business whenever I can.
Answer the right question
Microsoft’s website provides a good comparison of the different versions of Visual Studio, and after determining which version is best, the web site offers to help find where to buy it. Clicking on “Locate a reseller” will provide a list of every retailer that sells any Microsoft products. Rather than making me read through the dozens of retailers that sell any Microsoft product, they could just tell me the couple that sell Visual Studio.
Provide updates for books
Microsoft Press publishes a book called Programming Indigo, the only book available on the Windows Communication Foundation. Because the book is based on a very early beta version, a lot of its examples no longer work. The download page for the book continues to provide only the old version of the examples.
Deal with customer problems
I used the Microsoft Certified Professional logo builder to create a file in the format the site’s documentation recommends for printing. The file generated appeared to contain no image. I sent an e-mail to MCP support, explaining my problem, and listing the programs I had used to try to view the file. Someone from the site responded, asking for more information. I wrote back with the answers, but I never heard from MCP help again. The printer was waiting on me, so I could not follow up and had to settle for a lower quality file format.
Anticipate customer wants
Microsoft is trying to compete with Google selling online advertising. Google offers a program called “Google AdSense” which allows people to host ads selected by Google on their web pages. I could not find any indication on the MSN website that Microsoft offered a similar service. I sent the question to one of the contact e-mail addresses for MSN, they suggested I contact some other department, and I let the matter drop.
There may be good reasons for not offering such a program at Microsoft, but there is no excuse for not having a response for people who want to advertise for them, especially when their chief competitor in that market has such a program.
Take suggestions from customers
I have an idea for a new software product. I searched all over Microsoft.com for a place to give them my suggestion. None of the categories under the “contact us” section seemed to apply, and I don’t remember which one I chose. I did get a response, but all it did was suggest that I submit the suggestion to another department, and gave me their web address. I was not able to find an e-mail address for that department.
Summary of problems
Microsoft has failed to anticipate some pretty obvious customer needs, like current information on a product they are changing or the availability of services similar to those offered by their competitors. They have not made it easy for people to make suggestions or to allow customers to collaborate with the company. Some e-mails went unanswered, and others were answered only with “talk to someone else.”
One ray of hope
I did have one interaction with Microsoft where the company’s performance was excellent. The MSDN Library has an in-work version of the documentation of the Windows Communication Foundation. Because the documentation is still being created, much of what is there is incomplete. I did find an example though, that had some syntax errors, and I decided to report them.
On every page in the MSDN Library there is a link to report problems. I very quickly got a reply from someone on the documentation team thanking me for my report, agreeing with my diagnosis and telling me that the problem would be fixed shortly.
Conclusion
Microsoft is a generally a well run company. They are good at setting targets and measuring progress. They need to apply that ability to their customer service.
As their competition increases, Microsoft needs to generate customer satisfaction and take advantage of customer collaboration if their future is going to be anywhere near as successful as their past.
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