As much learning as there is to be gained at the Wharton Leadership Conferences (see my blog post of June 17th below), not all of it is one way — dispensed from the podium outward.

A few conferences ago, I was sitting nearby a fellow participant. We may have exchanged a few pleasantries at some point — program leader Mike Useem favors having all the attendees get up from their seats and do a 360 turn of hellos right at the beginning of the day. But any exchange was inconsequential. Until, that is, late in the afternoon session. Here is what transpired.

Sitting in the same row of seats, we listened to a CEO of a venture-backed company give a presentation on his leadership of the firm. Conditions in his industry were tough at that time — tough as in fairly dire. His leadership mostly had to do with keeping the firm afloat.

In the CEO’s telling, there came a point when there was no way to avoid it — he was going to have to suck it up and ask his venture backers for more funding. He didn’t want to do it. He really did not want to do it. He sweated and fretted about it for days on end. If he could have found any way out of having to make that request, he would have jumped at it with alacrity. Alas, a cash call was the only option for salvation. With fear and trembling, he reached out to the moneymen.

And guess what? They said okay. They didn’t say,”No problem,” but they didn’t carve a pound of flesh off the CEO’s hide. He got his needed extra funding, and all was well with the world and, eventually, the business. He lived to tell the tale at Wharton.
Here is where the real learning from that CEO’s story came for me. This fellow near me looked over at me and said, “It just goes to show — you have to give someone the opportunity to say ‘Yes.’ ”

What a lesson in leadership. For anyone. At any level of the organization. And in life itself. Give someone the opportunity to say “Yes.”

For the record, I came to learn that this wise commentator was Alan Berson, an executive and leadership coach with his firm Pulse Point Coaching.

James Kristie is the editor and associate publisher of Directors & Boards, a quarterly journal and a monthly online newsletter (the e-Briefing) of high-level leadership, governance, finance, legal, and strategic issues. He has been editor since 1981, and associate publisher since 1991. Directors & Boards has as its primary readership public-company directors, chairmen, CEOs, and other senior management and board advisers.

More of James Kristie’s wonderful writing can be found at http://jameskristie.blogspot.com/

One of the great things about my job is that each day I get to dip my toe into a new world. With every story I cover, I meet new and often interesting people and for just a few hours, I get to live in their world. This week I spent time with author and blogster Kristen Hagopian. She wrote the book Brilliant Frugal Living. She is a whirlwind. Funny and non-stop with the snappy dialogue. But Kristen’s genius is living frugally. She gave up her $50K job when she had kids, after she and her husband decided to make one paycheck work. Instead of sulking about what she had to give up, Kristen is joyful about each dollar she saves.

The day I spent with her she took me to her secret weapon grocery store, BB’s in Morgantown, PA. BB’s sells overstock and damaged products from the big grocers. It was a delight finding high quality organic and other top quality products for literally next to nothing. But it was even more fun watching Kristen come to life as we stumbled upon organic dark chocolate bars, usually 3 or 4 dollars a piece for 25-cents. She momentarily forgot about our shoot and grabbed the stack. This catch wasn’t going to anyone else.

The same day she snagged a $70 Little Tykes desk for her daughter for $20, thanks to craigslist. The beauty of Kristen’s lifestyle is not just consuming cheaply, it is about using what you have and thinking things through before you spend money. Those things ultimately reduce the quantity and increase the quality, of what she and her family consume. Keep your eye on LiveWellHD.com to fin out when my stories with Kristen will air. In the meantime check out her blog at HTTP://BRILLIANTFRUGALLIVING.WORDPRESS.COM/

Mary Caraccioli: The last decade has been this period of bubbles and busts. Have these cycles changed your investment philosophy at all?
Steve Forbes: I think it underscores that you cannot do, what they call, rearview mirror investing. And that is assume that was is in the present is going to be in the future, or what is past is going to be in the future. I remember in the 1990’s the average return on a stock was 11.x% but between the mid-1960s and the early-1980s stocks actually in the real term went down 60 or 70%. Then you have this enormous surge upwards. Where in a period of 20 year, something like the Dow went up almost 15 fold.
So a lot of volatility. And in terms of investment strategy, you have to learn to be disciplined. Everyone says they are a disciplined investor until the market goes down. Then it’s “It’s too late to get out” or the market surges and it’s “oh is it too late to get in.” You see that attitude this year. “oh I’ll wait for the next turn then I’ll be sure to get in.” You get whipsawed. For younger people, the key thing is Mary, they put in a certain amount each month into several low expense mutual funds and keep doing it and don’t get caught up on the day-today.
And in terms of strategy…yes you have to be diversified around the world with companies that have a good overseas presence. The dollar is in one of these weak periods. So you have to be diversified, but don’t over manage it. But if you don’t have time to do it, go with the mutual fund…let others babysit your money for you.
MC: How do you structure your own personal investing? Are you more aggressive than the average person or are you more conservative?
Forbes: It’s probably aggressive in the sense that most of my assets are in company. So if that does well, I’ll do well. If not, what I do on the side isn’t going to much help me. So yes. But I do also have life insurance which is probably the most conservative investment you can have. But with a good company, it doesn’t look so bad in the last two or three years. So there’s balance, but I do like mutual funds again because if you are going to do individual securities you have to have time to really examine the thing. And if you don’t, don’t do yourself a disservice. Get someone with brains to do it for you
MC: Makes sense. So you like managed mutual funds as opposed to index funds, that are not actively managed.
Forbes: Yes and sometimes if you think there is a certain sector, you can try to get and exchange traded fund or an index fund to cover it. That’s fine. But in terms of the market as a whole, realize that you are not going to beat it. And also have a realistic expectation of what it is you want. Everyone wants capital gains, but what is your time horizon. What is your true tolerance? And then you can go beyond equities and take bonds.
Who ever would have thought two years ago that treasuries would be given at fantastic returns. That you could buy a thirty year treasury at a time when the dollar is going be weakened and you get a positive return. That’s the kind of crazy environment we’re in. But you’ve got to be ready for it.
MC: Being ready for it means that you don’t have the knee jerk reaction. It’s about essentially getting a plan and sticking to it. When do you get off of that plan and say, I’m going to divert from this. It’s obviously not to the news of the day, right?
Forbes: Right and it depends on where the money is. If it’s a 401k or an IRA and you’ve followed the rules of fiduciary responsibility to yourself, that is you’ve diversified, and not put too many eggs in one basket as they say, then you can ride a storm through. If you’re not going to need the money for a few years, ride the storm through.
And you saw that very graphically after the huge hit from late 2007 to early 2009, where a typical stock went down 60%. A lot of people got out. They said I can’t afford this. I can’t stomach this. I gotta put some stock on the side. Then March comes around and you have a huge snap back on the market. Now the same thing happened in the 30’s. Even though it was a dreadful decade, a horrible decade economically, you saw these real whipsaws. Same thing in the 70’s. 75, 76 fantastic for the market, even though it was a dreadful decade.
So yeah, especially for retirement, don’t try to hit homeruns. There was a money manager in Connecticut years ago that said “For certain kinds of money play it like you should tennis.” You like to play tennis Mary. And he advised, “realize you are not going to be playing Wimbledon. ” And a sensible tennis player focuses on just get the ball over the net. Leave the fancy stuff to others. Just get the ball over the net. Same thing with investing…just get the ball over the net and you will do just fine.
MC: So when the market goes down a lot of people get in that mode that they want to play catch up. But that’s where you can get yourself into a trap, because that’s taking you off your plan for the wrong reason.
Forbes: Yes and simple things. The miracle of compound interest does work if you let it. Dollar cost averaging, and that is so simple. That is, especially if you are a little younger. When a market goes down, that is your opportunity, because if you are putting in a certain amount of money, a hundred or two-hundred a month you’re in effect buying more shares. So when the thing comes back you will get a much bigger hit.
Reinvesting dividends and basic things like that. Again…stay away from the cocktail chatter. Don’t think of yourself as a Goldman-Sachs executive, you’re going to make $100 million. No, if you get that mentality, you are just going to frustrate yourself, and hurt yourself.
MC: That’s right, because it really is about your personal situation in the long run. And it’s hard sometimes to tune everybody else out and to tune out all of the noise. There is a ton of noise out there. But it really is an understanding of what your needs are.
Forbes: And if you at parties, and if we get in an environment again, which we might someday if you live long enough, where people start to boast about what investment genius’s they are. You are going to participate by citing the example of some others. “Oh yeah. Ed at the office, what a jerk, but he really hit a homerun on that.” Fine so you can participate in the conversation. You have to try to go out there and it the homerun. Let others try to swing. Most of the time they’ll strike out. They won’t tell you.
MC: And you know we have seen this cycle over and over again, where it’s the paper boy, the dentist and everyone giving you stock tips. That’s pretty much the call to get out right? When everybody else is telling you to buy. That’s when you bolt or at least have some sort of conservative position.
Forbes: Or the recent housing bubble when everyone becomes a real estate tycoon. You know something is probably wrong. And of you have that urge to be mad, to do crazy things, have a certain portfolio and money where you can play with it. But don’t do it in your IRA. Don’t do it in your 401k. those are things that you just want to be able to sleep on. If you lose your mad money fine, but your not jeopardizing something fundamental in the future. And as you get older, again, be disciplined on your retirement. Jack Bogle, created Vanguard, his rule of thumb is your age. If you’re 50, half of your investment, 50% of your investments should be in bonds, short term instruments. 60, 60%. So if something goes wrong with equity markets or the bond markets you have cover.
MC: And that I think is the best rule of thumb is to know that you have the conservative investment for a reason. If you have to take distribution on it, cash it in…you cash in the conservative investment. You don’t worry about if the stocks are up or down. If you they are down you can hopefully hold until they come back up again. You’re not forced to sell in a time you don’t want to. And I think that’s where people think well it’s just because bonds have a certain return. It’s gives you an out if you need money.
Forbes: And as you get older you have to look at things like annuities. Again, you don’t put everything in an annuity. You have to look at expenses. And a lot of them hit you pretty hard on expenses, so you have to do some basic homework. But having an annuity is not sexy, but it does give you some balance and a bit of an anchor if the storms rise up. And so be true to yourself and be realistic about what are you cash needs? The worst thing that can happen, and people went through it, and they are going to go through it again is…the market goes down and you need to raise cash.
It is a hideous feeling and you feel bad doing it. Then when the market comes back you say “oh my God I missed it” and you’re tempted to do something you shouldn’t do.

MC: The biggest knock to Wall Street…and as you know when everybody is getting rich no one is complaining about Wall Street, but when everybody is loosing money that is when they are complaining. The concern that I hear so often is that it is not just that they are doing something and are getting paid handsomely for it…it’s they are inventing the rules as they go and they have that unfair advantage. And therefore, when they fail, they should have been allowed to fail. Then there is this bailout where the small business man can’t be bailed out. And while the government did what it had to do in a tough situation, we didn’t want a global meltdown, there seems to be a lack of fairness in how the big banks are treated that they have unfair advantage. When the times are good, they make lots of money, but when times are bad — they don’t fail, they get bailed out.
Forbes: Well, they could not have done what they did, if the government hadn’t done what it did in printing the money or guaranteed the kind of paper that no banker would tolerate. And normally with a mortgage, you put 20% down. The government said 0% down. Well, don’t be surprised you are going to get some problems. Ignore somebody’s income, well that is something that you wouldn’t normally do. So…
MC: But where is the accountability?
Forbes: Well the accountability is…one, the government’s got to do its part. But having created the problem, then don’t compound it. Yes, we had to take emergency measures last fall, but that did not mean that the government had to come up with this too big to fail doctrine, which takes a handful of banks and makes them bigger…guarantees their paper in the marketplace to the disadvantage of somebody else. That’s profoundly wrong.
And there are some who see it. Paul Volker, former head of the Federal Reserve, now in his 80’s said this is ridiculous. This is distorting the system. So no…no too big to fail doctrine. And if that means you are not going to be able to make an acquisition because the government is not going to back stop you then so be it. So yes, the government has made it worse guaranteeing a lot of paper it shouldn’t have guaranteed and continuing to do so. Too big to fail…so if you are a certain size, government’s going to always be there to make sure you are alive. Whereas somebody else who is smaller…well sorry. No, stop it.
It’s like a natural disaster. A hurricane comes along, so you throw in the food, throw in the water, throw in the medicine, throw in the temporary shelter. Then you pull back as people start to get back on they feet. You don’t do it permanently. Well government’s got to pull back on that and too big to fail…is one of the biggest mistakes of this administration is going along with the too big to fail doctrine. No. You’ve got to know if something goes wrong, if the government won’t let the system collapse, but you as an entity will face the music broken up. And if that means creating a special bankruptcy law for financial institutions…You create it. But you don’t say…you’re too big to fail. No way.
MC: Any predictions for 2010?
Forbes: I think we’ll have some growth in 2010, but it is going to be a turbulent year. The dollar I think will be strengthened. Not because Washington suddenly sees the light, but the markets are going to force it. And so it is going to be a better year than 2009. But it should have been a much better year. So if the government immediately stabilized the dollar…oh that would go a long ways. Realizing healthcare with these 2000 page long bills…start over. Try to get some true entrepreneurship where people can create more healthcare.
You know in any other market…if there is a demand. If people want more software, Silicone Valley will turn out more software. Software writers will turn it out. Why can’t you have an environment where you do the same thing in healthcare and make it more affordable? As you did with cell phones. 20 years ago, these things were as big as shoe boxes, clunky. Hard to work. Today they are sleek, small, and everyone has them, even in the furthest reaches of Congo and Haiti…India. People do have their cell phones. So that’s the kind of environment we should encourage.
So 2010, better than 2009, or better than the fall of 2008, but it could be better. Like in sports…it’s like a ball player. Instead of hitting .150 he gets it up to .225. Better, but hey how about .300, .350.

When I first met Jackie O’Neil in 2006, I was blown away by her understanding of green building. She built two net zero energy homes (for herself and her sister) and was able to do it for the price of non-green new home. So when I planned to stop by her amazing house recently, I was expecting to feel a little envious, but I wasn’t expecting any new surprises. And yes, jealous I was. She has a gorgeous home with all the ammenities and she has no utility bills– in fact she gets paid by the power company because she generates so much energy with her solar panels — she can sell the electricity to the power company!

But that was not the surprising part– I knew that from my last visit. What blew me away is where the real energy savings comes in — its not necessarily the solar panels or the geo-thermal heating unit. They are great but they don’t even factor into the majority of the energy savimgs. What Jackie learned and what she is happy to share — si that 80% of the energy savings comes from the passive stuff. Where are the windows– how well insulated is the house.

The way Jackie summed it up is like this 80% of the energy savings comes from the passive stuff– the things you will have any way. The last 20% of savings comes from the big ticket items– like the solar panels and geo-thermal HVAC.  So what can you take away from that. here are a few things to think about when creating your own master plan for energy savings.

DO THE CHEAP STUFF FIRST.

- REPLACE YOUR LIGHT BULBS WITH CFL BULBS.

- MAKE SURE ALL THE DRAFTY LEAKS IN YOUR HOME ARE SEALED. THEN STEP UP YOUR INSULATION.

-AFTER THAT THINK ABOUT YOUR SYSTEMS. DON’T BE IN A RUSH TO REPLACE THEM UNTIL IT IS ABSOLUTELY NECESSARY.

ALL OF THESE THINGS CAN HAVE A GREAT IMPACT ON YOUR MONTHLY BILLS. BEFORE YOU SPEND ON  THE BIG TICKET ITEMS– THINK ABOUT HOW THEY FIT INTO YOUR HOME’S ENTIRE ENERGY STRATEGY.. INCLUDING HOW LONG YOU PLAN TO BE IN YOUR HOME.THEY SHOULD BE THE “LAST” PURCHASES YOU MAKE.

HAVING A MORE ENERGY EFFECIENT HOME WILL NOT ONLY SAVE YOU MONEY EACH MONTH– IT WILL MAKE YOUR HOME MORE APPEALING TO POTENTIAL BUYERS– IF YOU CHOSE TO PUT IT ON THE MARKET.

For more tips see my new story on green building on the LiveWell HD TV network. For local listings visit: http://www.livewellhd.com/feature?id=6775183

Richard Caruso has won a few accolades in his day– including Entrepreneur of the Year. For anyone who has a terminal case of intellectual curiosity– his story is for you. Thanks for visiting! -Mary

Commodities Guru Jim Rogers tells me why he moved his family full time to Asia. His timing was great. He sold his mansion on Riverside Drive at the price peak of NYC real estate. Jim’s children have had Mandarin speaking nannies from the time they were born. His eldest daughter is in grade school in Singapore and is fluent in Mandarin.

All Aboard the Bolt Bus in rainy NYC

Lucky me– I live within one day’s drive of 25% of the nations’ population. It can be a convenience for sure, but living along the I-95 corridor is no picnic if you actually have to drive it. I can name all of the usual suspects for traffic jams– the ones in Connecticut (which are the most irritating), the DC traps and the North and South Jersey mile markers of misery.  As a result, I have learned to love Amtrak over the years. Yes it is expensive and that makes the occassional delays seem worse than they really are.  But the rails have been kinder to me than the road, so I have been a loyal Amtrak patron despite the fat fares.

When the economy nosedived after last year’s financial shock, I, like most of my fellow Americans, became a little more of a tight wad. I have cut out a lot of my unnecessary spending and have tried to be smarter and more strategic with my personal finances.  That is where the Bolt comes in. It is a bus (yes a lowly bus) that offers service from Boston to DC and all points in between for unbelievably cheap rates- generally $10 to $15 each way. Considering the cheap seats on Amtrak run me between 45 and 90 bucks each way, (the first class Acela is even more) I had to give the Bolt a try.

Here is my Bolt Bus review: The buses are new, clean and comfortable, with wifi and electrical outlets at each seat. Most of the fleet is made up of 2008 model year motor coaches and the fellow passengers are generally professionals or students. Missing was the bus depot and the riff-raff and idling fumes that come with bus stations in every city. The Bolt picks up and drops off at convenient on street locations.

All this is great, but the real test for me was time. Traffic can kill a packed schedule. I got a pretty realistic taste on my Tuesday morning rush hour trip north to New York. An accident in New Jersey followed the typical script; The Bolt Bus was parked on the NJ Turnpike for a solid hour (This is where I regretted not having my laptop and started wondering why Apple doesn’t make a netbook). My iphone and all its apps (especially text) saved me from a panic attack. We were an hour late getting to the stop in Manhattan. I had budgeted time for delays and was OK.

The return trip made me rethink the convenience of the on street passenger loading. You need to be at the stop 15 minutes before departure to secure your seat. This is kind of a joke. They don’t open the bus doors to greet you until about 5 or 10 minutes before the departure time. I showed up early and waited in the rain. The boarding could have been smoother. The people who showed up last pushed forward to the front of the line. Not necessary; if you have a ticket you get a seat on the Bolt. With Amtrak if you had a ticket and the train was oversold, you could ride, but possibly with no seat. The return trip was fast and smooth.

Final judgement: I would take it again- with my laptop. There is the occasional loud talker (except in the quiet car, Amtrak has the same problem), the rain, the morning delay, but nothing truly awful. The reality is in this economy, the Bolt Bus does what Amtrak does between Boston and DC for a lot less. If your schedule is really tight, I would opt for the train- it is faster and less likely to come to a grinding halt during rush hour. But if you have a little wiggle room  and the fare is coming out of your pocket– then I suggest you consider it. What you save on a roundtrip is a dinner out, or that week’s contribution to the 529 plan.

The NJ Turnpike (aka parking lot) during the Tuesday Am rush

For more information on the Bolt and Amtrak here are links to their websites.

www.boltbus.com

www.amtrak.com

www.megabus.com offers one way fares in the same coverage area for about the same price as the Bolt Bus. I have not tried it, but it may be another option for you.