Global Citizen International

A great quote from Warren Buffett goes: "I'm a better investor because I'm a businessman, and I'm a better businessman because I'm a better investor." So let me tell you how to be a better investor by being better at business.

Business knowledge varies among these three kinds of people:

Non-Investors: They expect that someone (such as their parents, their kids, a spouse, a company, or the government) will take care of them when their working days are over.
Passive Investors: They turn their money over to someone or some organization, such as a mutual fund, to manage. It's the passive investor who tends to believe the financial planners' mantra of "work hard, save money, get out of debt, invest for the long term, and diversify."
Active Investors: These people tend to manage their own portfolios and assets, as well as hand-picking their advisors, who are not brokers or sales people. To be a successful active investor requires a higher financial IQ, more real world entrepreneurial business experience, and a very smart advisory team.

For non-investors and passive investors, investing is risky. The main reason is because these two groups of people have no control over the investments they're involved in. While active investors know there's risk, they also realize that the greater the control they have, the less the risk.

Getting a Grip on Business

What do I mean by control? Let me illustrate using the example of driving a car. To be a safe driver, there are six basic controls we all must have:

Steering wheel
Gas pedal
Brakes
Gear shift
Driver's education/license
Insurance

You wouldn't drive a car if you didn't have any one of the above controls. Yet, when it comes to investing, this is what most people do -- they invest without having any influence over the six basic controls of investing or a business:

Income
Expenses
Asset value
Liabilities
Financial education/management
Insurance

The reason Warren Buffett says he's a better investor is because he's a businessman who has control of those six levers of a business. In other words, he can tell how good an investment is by how well management manipulates these basic controls. In most of his investments, Buffett doesn't just buy an equity position, he does his best to buy control of the business.

A good business person wants control over their business. For example, if sales are down and expenses are up, a good business person knows what to do to correct the situation. In my real estate investments, as soon as interest rates began to drop around 2000, our team immediately refinanced our debt (liabilities) on our properties, which reduced expenses, increased income, and boosted the intrinsic asset value of the property.

When I invest in real estate, I have lots of insurance. If a building burns or a tenant falls, I have insurance to cover those risks. A mutual fund has no insurance. That is why $7 trillion to $9 trillion were lost when the market crashed in 2000. Today, in spite of not having any insurance against losses, millions of employees happily deposit their money in their 401(k).

Know What You're Doing

The bad news for most non-investors and passive investors is they pick investments that don't welcome investor control. In fact, most non-investors and passive investors invest in the riskiest of all investments -- savings, stocks, bonds, and mutual funds -- all dangerous picks since investors lack control.

Ask yourself these questions:

Do you have control over the dollar's fluctuation in value?
Can you get Bill Gates to reduce Microsoft's expenses or replace its new marketing team?
Do you have any control over interest rates?
Do you know your mutual-fund manager personally?

While I do have some money in stocks, bonds, and mutual funds, most of my resources are in investments I control.

Even worse, most financial advisors -- be they stock brokers, financial planners, or corporate investment advisors -- don't have any control, either. In other words, asking most financial advisors for investment advice is like a asking a taxi driver who's driving a car without a steering wheel, gas pedal, brakes, or insurance to take you to the airport.

That's why investing is risky for most non-investors and passive investors. As Warren Buffett says, "Risk comes from not knowing what you're doing."

Mississippi rocks the boat with bold coastal designs By Blair Kamin Tribune architecture critic
Tue Oct 18, 9:40 AM ET

Outside the gaudy, 12-story Isle of Capri casino and hotel, the signs linger of Hurricane Katrina's devastating wrath: mammoth casino barges shoved across a highway, the foundations of stately waterfront houses the storm rubbed out like an eraser from the sky.

Inside the casino, though, the scene was one of frenzied optimism: A room filled with architects from Illinois and elsewhere around the country, sketching a new future for the Mississippi Gulf Coast from morning till caffeine-wired midnight. Not the sophisticated planning effort you'd expect from the nation's poorest state.

"We can dream," said former Netscape CEO and Mississippi native Jim Barksdale, head of the governor's Commission on Recovery, Rebuilding and Renewal, which is backed by Mississippi Gov. Haley Barbour.

On Monday, just one week after arriving here, the designers and their outspoken leader, Miami-based architect Andres Duany, unveiled the fruits of their brainstorming sessions as Barbour and Barksdale looked on: Detailed plans for 11 cities and towns along an 80-mile stretch of coastline. There, Katrina battered thousands of properties, creating in some places a virtual clean slate.

The plans take advantage of that opportunity, presenting a bold antidote to the suburban sprawl that laid waste to Mississippi's front-porch culture and once-bustling downtowns long before the hurricane hit. They represent the latest shot fired by Duany and the organization he helped found, the Chicago-based Congress for the New Urbanism, at the strip malls, office parks and housing subdivisions the New Urbanists believe are despoiling the American landscape.

"This [region] was being eaten up by sprawl, not only the land but the cities," said Duany, 56, best known for co-designing the idyllic Florida Panhandle town of Seaside, which is the model for the compact, walkable neighborhoods the New Urbanists prefer to car-dominated suburbia.

No one but a cockeyed optimist expects the plans to be built just as the architects, planners, traffic engineers and other New Urbanist experts drew them. They have no statutory authority and likely will require extensive modifications to building codes, as well as millions of dollars in public and private investment.

Illuminating the choices

"Local people have to make the decision," Barbour said Monday. "The purpose of this commission is not to impose decisions on you. It's to illuminate the choices."

Nevertheless, the plans represent a clear signal that Mississippi intends not only to rebuild, but also to do things differently than before. Whether different will be better is a matter of debate.

Even before the end of the planning session, known as the Mississippi Renewal Forum, Eric Owen Moss, director of the Southern California Institute of Architecture, infuriated participants by telling The Washington Post that the New Urbanists would deliver a "canned response" to rebuilding the Mississippi coastline and that their traditional designs would appeal "to a kind of anachronistic Mississippi that yearns for the good old days of the Old South as slow and balanced and pleasing and breezy, and each person knew his or her role."

"How does he know? What does he know?" Barksdale snapped in an interview Sunday. "I thought it was a mean-spirited thing for him to say that we all want to go back and own slaves."

Sitting in the Bimini Bay Ballroom of the Isle of Capri, about 100 New Urbanists from around the country joined the planning effort with 130 local architects and officials. Leading them was Duany, the movement's general.

After fanning out Thursday to the 11 cities and towns--Waveland, Bay St. Louis, Pass Christian, Long Beach, Gulfport, Biloxi, D'Iberville, Ocean Springs, Gautier, Moss Point and Pascagoulaand meeting the residents who remain, the designers started their day-and-night sketching sessions, which are known as "charrettes," a word derived from the French word for "little cart." At the Ecoles des Beaux Arts in 19th Century Paris, professors would collect final drawings from students with little carts.

By Saturday, the architects were lining the ballroom's walls with preliminary sketches and presenting them to local officials who asked pointed questions but seemed, by and large, to like what they saw.

A team of regional planners suggested turning an old CSX railroad track to the north of the coastline into a light-rail line and parklike boulevard. That would let people take mass transit to their jobs in cities such as Biloxi and Gulfport and would relieve traffic-choked U.S. Highway 90 along the coast.

For Biloxi, the designers advocated tearing down an elevated highway and replacing it with a ground-level boulevard that would feed traffic into the depressed downtown business district instead of bypassing it. They also would return two-way traffic to the downtown's forlorn pedestrian mall and encourage casinos, the engine of the city's economy, to have shops that face the street rather than turning inward, as suburban malls do.

Katrina isn't the only culprit

"We're not picking up after Katrina. We're picking up after urban planning disasters," said Pasadena, Calif., architect Elizabeth Moule, a member of the Biloxi planning team. "We're helping this town recover from the hurricane of the last 30 years."

As they designed, the planners were forced to improvise, reacting Saturday to the release of Federal Emergency Management Agency flood advisory maps, which suggest that new buildings along the coast may have to be dramatically higher than those that were destroyed by the storm.

The planning team for tiny Waveland, where Katrina destroyed nearly all the main street business district south of the railroad tracks, quickly adjusted its plans, discarding a design that would have rebuilt the street where it used to be. Instead, the designers shifted the district 1,000 feet farther away from the gulf's threatening waters. At the tail end of their street, they inserted farmers market stalls and other open structures that could have water run through them without destroying them.

Along Biloxi's coastline of sandy white beaches, the architects ignored the vision of those who would keep the waterfront purely natural. Instead, across from the beach, they designed tiers of townhouses atop concrete parking garages that they expect to better weather future storms.

"There's a plot in charrettes," said Duany, who has conducted hundreds of them for New Urbanist towns, though never one of this size and scope. "There's the Thursday Night Massacre [when architects are forced to adjust to requirements they hadn't anticipated]. You pick yourself up. Eventually, you prevail."

Whether the New Urbanists will prevail will begin to become clear Tuesday when developers, who along with casino owners were excluded from the brainstorming sessions, get a first-hand look at the plans.

Even if the New Urbanists get their way, they--or, rather, some of the people who live here--may well face the problem of unintended consequences.

Seaside has proved so popular in the marketplace that it's become a victim of its own success. The poor and middle-class families have been priced out. Along the Mississippi coast, if a light-rail line were built and neighborhoods along the tracks gentrified, the poor black families that live there now could be displaced.

"That's what really plagues the New Urbanism--[the rap] that it's for wealthy folks," said Emily Talen, a professor of urban planning at the University of Illinois at Urbana-Champaign who was at the sessions. "We have to make sure it doesn't happen here."

---------- bkamin@tribune.com http://www.chicagotribune.com/?track=yahoolinkbox

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