What Warren Buffett Can Teach Us About Eliminating Risk

This post was originally featured on ScoreNYC

Warren Buffett, also known as The Oracle of Omaha, has been a shining example of investing and business acumen since he became a billionaire nearly three decades ago. There’s a multitude of lessons to be gleaned from his career, but perhaps most inspiring (and applicable across disciplines) is Buffett’s approach to risk. It’s a philosophy that has served him and his firm Berkshire Hathaway well throughout the years, and encompasses a few key points.

For Buffett and Berkshire Hathaway, risk is a four-letter word. That doesn’t mean that certain deals or investments are risky based strictly on their own merits. Rather, according to Buffett, risk is something that you either create or eliminate on your own through research and due diligence. As he famously summed it up, “risk comes from not knowing what you’re doing.”

We can eliminate risk, according to Buffett, strictly through our own preparation. This means resisting the allure of fast-rising bubbles, or propositions that carry a slight chance of getting huge with better odds of cratering out. For many, this requires a change in how we look at risks in investment. It’s less a dangerous entity to be fearful of than an unmapped territory, worth traversing but only with the right equipment.

Know the Worst Case Scenario

One prominent school of evolutionary thought proposes that species thrive due to an understanding of potential risks, and a thoughtful use of this instinct will serve you well in investing. Buffett’s primary criteria, before getting to the real research, is determining the likelihood of catastrophic failure in the investment you’re considering. Even if the ceiling is high, a low floor means that it’s not a chance worth taking.

A practical approach to investment demands such a measured stance. Some investors are in it for the thrill, but those ups and downs are no way to sustain a portfolio, especially one as consistently profitable as Buffett’s. We hold on to negative memories more than positive onesfor a reason: they reduce our chance of getting burned again. One advantage we have over our primitive ancestors? We can do our research.

Expand Your Circle of Competence

The ability to find a safe investment comes from your own knowledge, what Buffett calls your “circle of competence.” Thinking about investing in something new and exciting, like cryptocurrency? Unless you’re versed in volatile internet-based entities, it’s probably best to stay away. As Buffett likes to say “never invest in a business you don’t understand.”

That’s not to say that investment opportunities are a series of tantalizing items labeled “do not touch.” on the contrary, expanding your circle of competence is a primary component investment success. No investor is an instant expert, but building up your knowledge incrementally and organically not only makes you a more well-rounded investor, it sets you up to expand your portfolio as the years go by.

Be Ready to Miss Out on Opportunities

Risk avoidance is often a matter of knowing when to pull the trigger on a deal, and when to let it pass. Think of a professional poker game, the ones you see late at night on ESPN. These high-rolling players fold on the majority of hands, only playing in when they know they’ve got something worth bringing to the table. In investing, Buffett advocates for a similar approach.

A lot of investment opportunities might look enticing, but remember that without the right cards in hand, you’re exposing yourself to unwelcome danger. It’s best to err on the side of caution when you’re dealing with your investment dollar. There are always going to be opportunities, and it’s more about finding the right one for your knowledge than jumping on the same train that everyone else is getting on

Buffett’s refreshing candor about his bets that didn’t pay off illustrates how much success in investment is predicated on a healthy amount of failure. That’s the risk we take everyday, and an unavoidable part of doing business. Everyone faces failure at some point in business and in life. There will be an element of risk and failure in every step you take, especially in investing. You just need to be willing to learn from them.

In short, Buffett’s risk strategy amounts to this: apply a strong deal of hard work and common sense and more often than not, you’ll be able to identify which investments are worth making and which aren’t. This simple approach shouldn’t be too surprising to those familiar with the investment giant’s down-home image, but as is usual with Buffett, a great deal of hard-earned wisdom lies beneath these simple words.

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All Entrepreneurs Face Failure But the Successful Ones Didn’t Quit

This post was originally featured on Entrepreneur
Fear of failure is natural. In entrepreneurship, overcoming your fears is essential.

Everybody enjoys a success story. Vicariously living out our fantasies through those who achieved success gives us hope it will happen to us. But, listening to these stories doesn’t do us any favors because those tales aren’t the whole picture: the struggles, the tough breaks, the defeats that set the stage for the eventual big win.

The fact is, while there are an infinite number of ways that successful entrepreneursmake their money, there’s only one thing they all have in common: failure.

There’s no shortage of examples of great successes who had to struggle before they became the winners we now know them as. Oscar-winner Steven Spielberg was rejected from U.S.C film school. Thomas Edison went through thousands of prototypes before perfecting his light bulb. “Colonel” Harland Sanders didn’t hit it big with KFC until he was 68 years old.

Even Bill Gates, maybe the most successful businessman in history, didn’t rocket straight to the top with Microsoft. It’s not a well-known fact that his first company, called Traf-O-Data, was an early attempt at using computerized data to improve traffic surveys for municipal governments. Gates and his partners spent countless hours refining their hardware and working out all the details to make the business work. But, when it came time to wow the county officials who would be their customers, the machine was a bust.

Gates and his number two, Paul Allen, were certainly discouraged but ended up being better suited for their real business revolution that was yet to come. To hear Allen tell the story: “even though Traf-O-Data wasn’t a roaring success, it was seminal in preparing us to make Microsoft’s first product a couple of years later. We taught ourselves to simulate how microprocessors work using DEC computers, so we could develop software even before our machine was built.”

That valuable experience in development led to the founding of the software company that would make them both multi-billionaires.

Now, this certainly doesn’t mean that failure is a guarantee of future success. If that were the case, private jets would outnumber commercial ones. What failure is, for the lucky ones, is a stepping stone to greater things. By refusing to let it define you, and learning from the experience, you give yourself the wisdom to make big things happen for yourself going forward.

One thing failure gives you is a picture of the other side of trying. As you’re getting ready to make your move, that unknown looms large. Once you’ve failed, as long as you’re still standing on both feet, you’re better off knowing that what hasn’t killed you has only made you stronger. Every successful business story starts out with failing. In doing so, you’re in good company.

When you do get moving, you’ll be better off with the knowledge gained from your endeavor. Life is a constant process of learning, and it’s a well-worn cliche that you learn more from mistakes than successes because it’s true. Seize the opportunity by taking a good, hard look at where you went wrong.

Failing hurts, that’s no secret. Even after reaching the heights of success, the failures that come are difficult as any. But, like a wound that heals itself, you end up with a thicker skin once the pain subsides. Being ready to weather every new storm means holding onto the lessons from the ones that have hit you already.

Your character is defined by your response to adversity. Since failure is a fact of life, there are ways to deal with it so you’ll be able to overcome the setback. It’s a process that can take some time, but responding healthily to lost opportunities is the only way to get back on track. Whether it’s your family, good friends, a favorite book or place to visit, let yourself recharge with familiar comforts. Then, get back out of your comfort zone. This resilience is a requirement for entrepreneurial success.

First, remember that failure doesn’t have to leave a permanent stain you unless you let it. Every future opportunity is a potential win, and you’ll only truly be a failure if you stop trying. Losing out will hurt, but the best salve is to get back to working on that next project. Hang onto the lessons and the knowledge gained, but forget about the pain.

Don’t fool yourself — this failure might not be your last. Embrace it. Risk, after all, is part and parcel of the entrepreneurial experience. When you’ve eliminated your fear of failure, you’ve given yourself the best possible tool for getting to where you want to be. Failing isn’t the destiny of a certain kind of person. Failing is just a byproduct of trying.

I’ll finish by telling you about one of the greatest successes who ever lived: baseball’s best hitter, Ted Williams. He retired with a lifetime .344 batting average, attaining over 2,600 hits in a 19-year career even while missing three years of his athletic prime to serve in World War II and another two years as a combat pilot in the Korean War. With a bit of well-earned humility, the Hall of Famer regarded by most as the greatest to ever swing a bat summed it all up by saying “baseball is the only field of endeavor where a man can succeed three times out of ten and be considered a good performer.”

So just remember this: even the best baseball hitter in history failed 70 percent of the time he stepped up to the plate. So go ahead and take your swings; it’s what the greats do.

If You’re Not Going Solar, Ask Yourself Why

This post was originally featured on ScoreNYC

If you told every business owner in the largest market in the country that they could reduce long-term expenses, improve their company’s image, and take advantage of cutting-edge technology to improve the environment with one simple conversion, you’d probably be hard-pressed to hear the word “no.”

Which is why it’s a little surprising that New York’s skyscrapers aren’t dotted with solar arrays by now. Sure, solar power has been more widely adopted than ever before, but too many business owners are hesitating, despite the fact that solar energy represents the ultimate win-win-win scenario, benefitting not only businesses but also customers and the world at large.

Looking at the wider picture, the solar industry is amid a nationwide surge. The installation of solar panels nearly doubled from 2015 to 2016, making it the United States’ number-one new energy source in the latter year.

Cities were at the forefront of that growth — the top 20 metropolitan areas for solar power churn out as much as the entire country did in 2010 — and New York was indeed a strong participant in that group. It ranked seventh for total installed panels in the nation, according to a report by Environment New York, a statewide advocacy organization, ahead of such places as San Antonio, Las Vegas, and San Francisco.

New York, which had five solar installers in 2005, had 55 by 2015, according to the city’s Economic Development Corporation. More impressively, the number of residential solar projects went from 186 in 2011 to more than 5,300 in 2016.

New York’s solar renaissance has been fueled in part by the initiatives of Governor Andrew Cuomo and Mayor Bill de Blasio. Cuomo mandated two years ago that half of the state’s power come from solar, wind, hydroelectric or other renewable sources by 2030, while de Blasio is aiming to cut the city’s greenhouse gas emissions by 80% by 2050.

According to a 2014 report in the New York Times, de Blasio’s goal is in line with the United Nations’ target for developed countries, in an attempt to curtail the effects of climate change. He went so far as to tell the Times that there is “a moral imperative” to act, while making reference to Hurricane Sandy, a 2012 storm that led to 44 deaths and $19 billion in damage to the city.

He has since unveiled a 3,152-panel rooftop solar installation in the Brooklyn Navy Yard, and hopes to generate 100 megawatts of renewable energy on public buildings by 2023. That will not come without cost — it is estimated that it could run as much as $1 billion for all public buildings to be retrofitted with solar panels — but it bears repeating that the technology ultimately pays for itself.

As great as the city’s progress is in the solar realm, far more could be done. One study showed that 66% of New York’s rooftops could be used to harness the power of the sun, and that those panels could provide half of the city’s electricity needs at peak periods. The potential savings are mind-boggling.

There are many other places where far more could be done. While San Diego is №1 on the list of solar cities, just 14% of its small-building solar capacity is being realized. And California legislators have mandated that half of the state’s electricity comes from renewable sources by 2030; currently it’s about one-fourth, according to a Los Angeles Times report.

Nationwide, the solar market nearly doubled its annual record in 2016, and for the first time since 2011, non-residential installation growth outpaced residential installations. Such businesses as Walmart, Costco, IKEA and FedExare at the forefront of the solar business trend, and that pattern is likely to become more widespread.

That, coupled with a boom that could see as many as 3.8 million homesequipped with solar panels in 2020 (up from 30,000 in 2006), figures to make the U.S. a major player on the world’s solar stage. A federal study revealed that if solar panels were installed on every roof in America, they would supply 39% of the total power used in the U.S.

Unfortunately, startup costs are the major factor preventing more residences and businesses from going solar. It is estimated that it can run between $20,000 and $50,000 to install a residential system, and while there is the specter of a rollback of federal alternative-energy incentives under the current presidential administration, city and state programs can foot a sizable portion of the bill.

New York, for instance, offers loan financing for residential, small-commercial and commercial projects through NY-Sun. Residential and small-commercial customers can finance up to $25,000 with a repayment period as long as 15 years. Commercial borrowers may finance up to 100% of any-sized solar projects; the interest rate ranges from 4% to 6.5%. NY-Sun also extends reduced installation costs to borrowers across any of these three categories.

And once more, there are savings on the back end. Solar-powered homes reportedly have cut monthly bills by as much as 85%, and it is estimated that solar energy’s ROI beats the stock market in more than 25 states, including New York.

There is, at least, far less red tape to cut through than there once was. The permit-approval process for a solar system, once as long as two years, has now been reduced to a few days. With the other steps — planning, inspection, etc. — the entire installation can take roughly a month, depending on the financing process.

And at that point, the utility company changes your electrical meter over, and it starts rolling backwards — a magical (not to mention profitable) thing.

This isn’t just pure speculation — in fact, I’ve enjoyed the benefits firsthand. We first installed solar panels in my building, Midtown’s Atelier, in 2011, making it the tallest residential solar installation in the United States. At that point the system generated roughly 10% of the building’s energy and cut utility costs by about $120,000 a year.

We earned back the initial investment in the solar panels in a matter of months, then added additional panels over the next five years, slicing utility costs even more. We were, as a result, able to reinvest those savings back into the building, adding an ice skating rink among other amenities.

Then there are the environmental benefits. Solar panels are virtually noiseless. The only pollution they produce is during the construction process, and that pales in comparison to that which is generated by other forms of energy. After installation, they produce no greenhouse gases.

Looking long-term, there’s no reason for business owners not to throw considerable heft into solar conversion. It’s not only a better deal for the environment, it’s a boon for the bottom line.

Homeless Youth — The Invisible Problem

The years between age 18 and 25 are often thought of as the defining times of our lives. These are the years when young people begin to find their place in the world, whether in education, meaningful employment, or starting their own families.

Sadly, there’s an overlooked cohort of this age group who are simply struggling to survive. Among the stories of exciting new opportunities for young people, recently released studies by the University of Chicago have found that one in ten young peoplenationwide experienced some degree of homelessness in 2016.

It’s a damning statement about the state of the fight against homelessness when the most vulnerable, our young people, are subjected to such unfavorable life conditions. As we’ve seen previously, a disconcerting number of grade school children here in New York City suffer under the same unfortunate circumstances.

These findings, as one University of Chicago researcher points out, challenge the popular image of homelessness. As tempting as it may be for some to think that it’s the result of poor choices or upbringing, the hard facts show that this severe poverty can strike even the most innocent, in varying degrees.

So, what are we to do? Surely, these numbers should be shocking enough to spur major action to fight this problem. Unfortunately, that help has traditionally been slow to enact. It would seem that action from the top needs to happen, and soon. I know I’m not alone in hoping these recent shocking numbers will have that effect.

For those city, state and federal leaders whose policies can make a real impact, the fact that ten percent of our youth have lived in such conditions should serve as a wakeup call. Let us not forget, whether rich or poor, this younger generation comprises our nation’s future. If we can make this future a brighter one for our youngest and most vulnerable, we make it a brighter one for all.

This article was originally published on DanNeiditch.org

4 Business Ideas Anyone Can Try

This post was originally featured on ScoreNYC

A lot of folks have the entrepreneurial spirit. Yet many never see it through.

According to a Gallup survey, potential entrepreneurs don’t take the plunge for a variety of reasons. They worry about a steady income, lack personal savings, or fear failure. A staggering 49% say they don’t start a companybecause they don’t know where to start.

What can address these concerns is a way to start small and generate reliable income. Here’s a list of low-barrier to entry business ideas that can prove fruitful with the right plan.

1. Online retailer

By starting on third-party platforms, you can bring in revenue immediately — without having to exhaust time and resources on building a website, marketing products, managing logistics, etc. Start with a product you know well and grow in a manner that’s profitable and sustainable.

There are lots of retailer websites out there, from platforms for creative merchants like Etsy to mammoth marketplaces selling everything under the sun like Amazon and Alibaba. Choose one that aligns with your product category and fits your budget (some sites have expensive fees).

For instance, if you want to start selling niche items or refurbished goods, eBay is a great choice. It’s also inexpensive to launch a store, as long as you can find the funds to buy the products you hope to sell. Just pay attention to costs. As Aron Hsiao, a long-time eBay seller and former eBay employee, notes, “use the eBay Fee Illustrator calculator to determine which store level is best for your business” and stay updated on fees and expenses (they change).

2. Tutoring service

Starting a tutoring service comes with basically no initial expenses if you do it entirely online. Marketing in the local community is inexpensive as well, especially if you make use of free classifieds, bulletin board locations, and your personal network.

You can make good money, too. According to a Care.com report, professional tutors typically earn between $20-$85 per hour, with rates varying due to location, subject/field, frequency of sessions, etc. Don’t set your asking rate too low, and you should be able to negotiate a fee that brings you in solid hourly pay.

So, where should you start? Finding students in your area is a great idea. You can expand your potential client base by using sites like Wyzant (good for academic subjects) and TakeLessons.com (good for music, hobbies, and art).

3. Handyman business

Why not monetize your ability to build and fix things? The only upfront expenses are your tools, which you may already have, and marketing costs.

Before you start a handyman service, be sure to get proper licensing, as it will give you credibility and legal protection. As HomeAdvisor advises, if you’re going to be doing HVAC, electrical, remodeling, or plumbing work, having a license is absolutely advised. For work like lawn-care, window cleaning, and trash removal, licensing isn’t necessary.

To get the word out in an affordable way, utilize the power of word-of-mouth among your friends and family, advertise for free on CraigsList, and post signs and business cards around your community. Signing up for membership on a site like Angie’s List may cost a little, but it gives you access to more potential customers and the backing of a reputable company, making it easier to build your brand and expand your business.

4. Driving service

If you like cruising around town in an automobile, why not make a living out of it? If you already have your own vehicle, you can get started right away.

With companies like Uber and Lyft, you can work as an independent contractor and not have to worry about finding clientele. Considering the average Uber driver makes around $30 per hour, you can do alright out there on the road. If you learn some tricks of the game, you can even do much better than alright. The blog, Six Figure Drivers, teaches drivers how to maximize earning by taking advantage of sign up bonuses and referrals and driving during busy nights and holidays, which is when incentives are offered. Also, the guides even show how to use data and analytics to find out where demand for drivers is highest in your town and what routes yield the most profits.

Once you start making good income, you could consider officially starting your own driving business as well. For example, running a party bus service can be lucrative (and fun). Just make sure you have proper licensing and insurance.

Consider all your options

If you think about it, lots of businesses don’t really cost that much to start and you can make money right away. For instance, any of the following services just require a computer and internet connection:

  • Copywriting
  • SEO consulting
  • Social media marketing
  • Web design and development
  • Technical support
  • Virtual Assistant
  • Tax preparation
  • Blogging
  • Photography (need a camera!)
  • Artist

In conclusion, the point is this: Think about your talents, passions, and interests, as well as what can reliably generate income. Be willing to compromise a little at the start — and you’ll be able to get your first business up and running. Then, you’ll be on your way to becoming a full-fledged entrepreneur.

The Four Most Useful Apps For Real Estate Agents

As a real estate agent, staying organized can sometimes be extremely difficult. With multiple clients and lots of documents to keep track of it can all get overwhelming very quickly. Luckily, today we have technology that can help us stay organized and make our life easier.

DocuSign

Having a countless number of papers and constantly needing other people’s signatures can be a nuisance. With Docusign, you can access all of your documents in a secure location on any device. It is a fast, simple and secure way to upload documents and send them to a specific recipient. If you need someone to sign the document, you can highlight the required fields they need to fill out. Then, with either your mouse or finger, you can add your actual signature to the document. It is also extremely easy to keep track of all of your documents. If you receive a new document you get an email notification, everyone who has access to the document is alerted when it is finished being filled out and signed by all parties, and all documents are saved electronically for your records. DocuSign works with other apps that you might already use such as Microsoft, Google, Apple, and many more.

Vert

Real Estate agents deal with a lot of different metrics such as size, weight, volume, length, and even sometimes currency. Vert is an all-in-one converter that makes calculations simple and quick. It has every single unit that you will ever need pre-loaded into the app. Its user-friendly interface makes it simple to accurately calculate any conversion in a matter of seconds.

Dropbox

With Dropbox you can store documents, pictures, videos, etc. in the cloud and access them anywhere. Since it works on basically every device you will never forget a document at home or in the office again. The simple interface allows you to create folders so that all of your documents are in order. Additionally, you are able to share anything in your Dropbox with other people. Instead of trying to find a file on your phone in an email that you can’t locate, you can simply open up Dropbox and find everything to be extremely organized. The app is free for up to 2GB, but they do have premium plans available for purchase.

Cam Scanner

Instead of running to your office or panicky asking a coworker for help if you forgot to scan a file, you can use Cam Scanner to scan documents directly from your mobile device. The scan from your mobile device even looks like a real scan. In addition to scanning documents on the go, you can also store and organize documents on the app.

Five Types of New York City Real Estate You Should Buy Today

Highly transparent and under-leveraged, the New York real estate market is one of the most stable in the world. If you are looking to make a savvy investment, now is a great time to beat rising property values—which are expected to increase by as much as 20 percent over the next three years—to secure real estate that will generate returns for years to come.

Traditionally, investors looked for opportunities in the affluent suburbs of Long Island and New Jersey, but growth in those areas has become stagnate. But today, we look to Queens, Brooklyn, Bronx, and Hudson County, which are areas that are growing rapidly thanks to new job opportunities, especially in healthcare.

Healthcare jobs are growing by five percent per year—twice as fast as finance, the region’s primary economic and population driver—and account for 84 percent of New York City’s total population growth between 2015 and 2016. The rapid growth has increased New York’s population to a record high of 8,550,405 and shows no signs of slowing.

Here are the five most promising investment opportunities in the New York real estate sector to keep up with growth and changing demographics.

1. Apartment Buildings

As high home prices continue to rise and the city’s population continues to grow, a majority of New York residents are being driven into apartment building rentals located in Manhattan, Queens, Brooklyn, the Bronx, and Hudson County. Therefore, apartment buildings purchased at the right price today can be a very lucrative investment.

Moreover, high proportions of immigrants—40 percent in Hudson County and Brooklyn and 50 percent in Queens—create a large spread of incomes that create all kinds of opportunities for purchasing apartment buildings that cater to different income brackets.

2. Single-family Homes to be converted into Multiple Units

Because home prices are high compared to rents, pure single-family rentals are not likely to be lucrative investments, unless you’re looking to invest in a special area or are driven by other special circumstances. However, the high home prices that are driving people into renting can be lucrative if you’re able to purchase and refashion a single-family home into one featuring multiple units.

3. Retail Stores

Recent population increases in Brooklyn, and especially in Queens, have not been matched by the availability of new stores. In addition, the Bronx is underserved by new stores. Because healthcare jobs are growing and generating lower-, middle-, and higher-tier income across the city, retail stores are a reasonably safe investment.

4. Office Buildings

The same healthcare sector growth that is creating a need for new apartment buildings and stores, is also generating the need for new office space. Although millions of square feet of new office space are already under construction in Queens and Brooklyn, there is presently no indication that demand in those boroughs will slow even as the new planned office towers take shape. In fact, the office booms in these boroughs signal a healthy long-term future for New York’s overall economy.

Office space in Manhattan may also be a good investment, as Manhattan is still the center of the New York office world. Although 20 million additional square feet of office space are being constructed in Manhattan and are expected to be available by 2021, the number of new offices is insufficient to meet the demand from a booming economy. Nevertheless, reports have not accounted for additional space that is to be provided by new World Trade Center Towers, and the future absorption rate for new office space is unclear.

5. Mortgages and Construction Loans

Rising home prices will keep equity rising, too, making mortgages a sound investment. Although there is always some risk of default, that risk is just about average right now because rising home prices are in balance with incomes.

Alternatively, but in the same vein, construction loans will also go up with only an average risk of default, making them another prudent investment. Ingo Winzer, contributor toForbes and president of Local Market Monitor—which has followed real estate dynamics since 1989 in over 300 communities—predicts 45,000 new houses and 70,000 apartments will be constructed in Queens over the next three years. Brooklyn will only see 40,000 new homes constructed, but 110,000 new apartments. The Bronx will likely experience modest new home construction but is expected to grow by 60,000 new apartments.

The idea that New York real estate is out-of-reach for those looking for sound investments may be closer to reach than many would think. The worst thing to do when thinking of buying real estate is to wait — especially in the ever-booming New York City.