The Innovator's Dilemma is a great book by Clayton M. Christensen. The central theme of the book is that unless specific measures are taken, disruptive innovation causes highly successful businesses to fail. This is not because they are badly managed or are technically incompetent, but because they get pressurized by their existing customers and investors to not commit the resources to the innovation. The markets for disruptive innovation are emerging, low margin, unpredictable and can not contribute substantially to the bottom line of large companies. It also becomes a conflict of values problem for the current cash-cow products and the new innovation. The solution is to form a completely new organization with new management and values and let it grow and gradually shift focus to the new organization.
The book also gives good examples of Computer systems manufactures - mainframe to minicomputers to personal desktop systems, Printer manufacturers - Dot-Matrix vs Laser vs inkjet, Departmental stores to Discount stores.
A very good read.
Update: (2005/06/27) [Here is a link to IT conversation talk with Clayton Christensen](http://www.itconversations.com/shows/detail135.html "IT Conversations")
The Automatic Millionaire (by David Bach) is a little book telling a simple and automatic formula to become a millionaire. It talks about saving money (by sacrificing costly lattes, cigarrettes etc. if needed), effects of compounding (really dumbs down the argument).
Here is a brief sumary of the book:
* Save at least a few dollars a day. ($5 saved every day and invested will become $948,611 in 40 years)
* Learn to pay yourself first.
* Make everything automatic (by setting up automatic payroll deductions, setting up 401k etc.) Plan for saving from 5-20 % of pretax income in a pretax account (401k/403b/IRA/Roth IRA). Maximize employee matching dollars.
* Set up "rainy day" fund, automate the process. Set aside the money for at least 3 months (upto 6-12 months) of all living expenses. Invest it money market/ savings bond.
* Buy a home and plan on repaying it early by methods like biweekly payments, extra principal payments each month.
* Become debt free - pay off all loans, credit cards, automobiles.
* Automatic tithing - set up regular donations to charity.
Currently the following books are on my reading shelf:
How To Make Money In Stocks: A Winning System in Good Times or Bad is written by William J. O'Neil, who is the founder of Investor's Business Daily. In addition to pitching IBD (which is good BTW), he outlines his method of picking the winning stocks to the acronym CAN-SLIM.
C = Current Quarterly Earnings per Share. (The absoulute number not the growth percentage) The more the better. The earnings should be consistently increasing on log scale year-over-year and they should increase with the sales growth.
Current quarterly earnings per share should be up a major percentage-at least 25% to 50% or more-over the same quarter the previous year. The best companies might show earnings up 100% to 500% or more!
A=Annual Earnings Increases 25-50% or more growth rate. Check earning stability in past three years. Ignore P/E ratio.
Concentrate on stocks with proven records of significant earnings growth in each of the last three years plus strong recent quarterly improvements.
Search for companies that have developed important new products/services, or benefited from new management or new industry conditions. Then buy their stcks when they are emerging from price consolidation patterns and are close to, or actually making, new price highs.
S=Supply and Demand. Look for companies with less number of outstanding shares, enterpreneurial management rather than caretakers, no excessive stock splits, companies buying back shares in open market, low corporate debt/equity ratio.
Any size capitalization stock can be bought under the CANSLIM method, but small-cap stocks will be substantially more volatile, both on upside and downside. From time to time, the market will shift its emphasis from small to large caps and vice versa. Companies buying back their stock in the open market and companies showing stock ownership by management are preferred.
L=Leader or Laggard. Buy among top two or three stocks in a group. Use relative strength to seperate leaders (>80) from laggards.
It seldom pays to invest in laggard stocks, even if they look tantalizing cheap. Look for, and confine your purchase to, market leaders.
I=Institutional Sponsorship: Follow the leaders. Look for >10 quality institutional owners. (IBD sponsorship rating A). Avoid "overowned by institutions" stocks.
Only buy stocks that have at least a few institutional sponsors with better-than-average recent performance records, and invest in stocks showing an increasing total number of institutional owners in recent quarters.
M=Market Direction. Even good quality stocks will go down when overall market direction is downwards. Look for movement in S&P 500, DJIA, Nasdaq Composite indices. Don't be blinded by the myth surrounding "Long-Term Investing".
The key to staying on top of the stock market is not predicting or knowing what the market is going to do, but knowing what the market has actually done recently and what it is currently doing.
In an Uncertain World by Robert E. Rubin and Jacob Weisberg.
Autobiographical book by Robert Rubin which sketeches his early years, a long career with Goldman Sachs, White House, The Treasury.
(to be resumed after my India trip)
I just finished "What CEO..." and it's filled with countless little gems in very easy to understand terms. Dr. Ram Charan grew up watching the footwear shop of his parents and teaches us the core nucleus of all successful businesses: Cash generation, margin, velocity, return on assets, growth, and customers. The concepts are illustrated by examples from the perspective of street vendor.