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My new iPhone Application has been launched to the App Store. This one is a word game where you have to identify words in a stream of characters that scrolls progressively faster across the screen. Pretty fun!
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Are you a WordSpy??? Then prove it!

WordSpy is a fun word game where you must find hidden words which are embedded in scrolling text across the screen. As you find more words, the scrolling gets faster and faster adding to the difficulty.

There are several levels that you can play

• Easy – One row of scrolling letters with one hidden word
• Medium – Two rows of scrolling letters with one hidden word in one of the rows
• Hard – Three rows of scrolling letters with one hidden word in one of the rows
• Super-Hard – Three rows of scrolling letters with THREE hidden words total (one in each row). You have to find them all!

There are over 25,000 words included in WordSpy, so you are sure to have plenty of hours of entertainment.

If you are a word lover, looking to find new words, studying for verbal exams, or are looking for some fun and educational entertainment, then WordSpy is for you! If nothing else, you are sure to learn some new words.

For each word that you correctly identify, the words will scroll slightly faster. For each word that you miss, the words will scroll slower. You get three misses before the game is over.

Challenge friends to see who can get the high score!

WordSpy in the App Store

My third iPhone Application has been launched to the App Store. This one is a ‘facial recognition’ application where you can pre-configure the results to prank your friends. I tried this on a bunch of buddies this weekend, and had the app return ‘Beetlejuice’ from the Howard Stern show for one of them…got a ton of laughs out of that one!!!

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Prank your friends with LookAlike! The ‘facial recognition’ application that allows you to make your friends ‘Look Like’ anyone!

LookAlike is a great way to play a Prank on your friends and get a bunch of laughs in the process. You can take their picture with the iPhone, and LookAlike will pretend to ‘process’ their facial features, looking for a matching person that they look like…The trick is that you are allowed to configure what the resulting match will be before hand!

Here’s how the application works:

1. Double-tapping any of the hidden buttons in the four corners of the screen will allow you to configure the resulting person for that corner.
2. Single-tapping any of the hidden corner buttons will ‘activate’ that corner. The person configured in that corner will be the result of the next LookAlike analysis.
3. Take a picture and begin the analysis…
4. LookAlike will then take several seconds while it pretends to analyze the face of your friend, then it will indicate that your friend’s face matched to the person that you setup for that corner.
5. A few seconds later, LookAlike will show the image of that person from Google Images (which you can also configure by scrolling to the image you want to use)

You can configure multiple corners, and prank multiple friends in a row for more realistic results! If you make a few of the results believable, and the last result absolutely ridiculous, your friends will be rolling on the floor laughing!

I have tried this on many of my friends, and I have had them all laughing hysterically at the results. Try it today!

Images by Vincent Boiteau (www.studio.es) — used with permission and remixed by Zach Poley

LookAlike in the App Store

My second iPhone Application has been launched to the App Store. This one was a collaboration with a friend (Jeff Serpas) who wanted to make a simple learning tool for pilots in training. Here are the details.

Timed Turns  A common challenge for instrument students is often timed turns.  Timed turns require the pilot to turn the airplane left or right a given number of degrees to a new heading using only the turn coordinator, compass, and clock.  The stress created by the simulated instrument failures while under the hood can make doing simple math in your head very difficult.  This flash card trainer will allow you to practice timed turns arithmetic while on the ground so that the mental calculations become more routine and familiar.  Although there will be many things to worry about the day of your checkride, the arithmetic required to accomplish timed turns should not be one of them. 

Buy this Timed Turns flash card trainer and build your confidence today! This application is geared towards IFR pilots and students, pilots in training, etc.

Features of Timed Turns include:

• Randomized calculation questions
• Swipe to transition or click a button to transition to the next question
• Automatic transition after revealing the answer
• Timer to show how long each question is taking you

Timed Turns in the App Store

I just recently launched my first iPhone Application to the App Store! Here are the details, and please comment with any feedback that you have!

TimeTrak is a simple and elegant time tracking utility to help you stay organized. A perfect solution for consultants, physical therapists, contractors, or anyone else who has to keep a precise running log of their activities! At the end of the day, with the push of a button, you can have all of your time tracking information emailed to you!

TimeTrak lets you track your tasks like a stop watch. When you start a new task, you simply specify the start time of the task and the tag for the activity. While the task is running, you will see a real-time counter showing the duration time of the activity. When you are done with the task, you simply press a button to end it, and the information is saved. When you are ready to store your task information somewhere else, you can email all the data to yourself right from the application!

You can even use TimeTrak as a calendar, as it allows you to enter tasks that you have scheduled for the future.

In addition to task entry, TimeTrak has multiple ways that you can view your data, including a summary view mode (grouped into future tasks, tasks in the last 24 hours, task in the last week, and older tasks), and a view by date mode. TimeTrak enables you to add, update, and edit the tag of the tasks simply and easily with the swipe or push of a finger.

Here is a list of the great functionality you will get with TimeTrak

• Stop-watch style time tracking with sleek user interface
• View your data either by day or in a summary view. Easily scroll through all of your tasks.
• Email all of your tasks to yourself. You can either email all individual tasks (tag, date, and duration), or you can group by the date and tag
• All previously used tags for your activities are saved for easy entry later. This is great for when you perform the same tasks more than once
• Edit / Delete your tasks right from the views described above
• You have the option to automatically delete your emailed tasks upon application re-start (it will ‘clean up’ your previously emailed tasks)
• An ‘email icon’ is shown on each task row that has been emailed to you. This will make it easier to manage your tasks that you have already emailed.

This application is made for one thing –tracking your time — and it does it very well! If you need a simply utility to track your time, then TimeTrak is for you!

icons created by Joseph Wain / glyphish.com
main graphics created by Zach Poley

TimeTrak in the App Store

When I started using Twitter, I was excited. I saw it as a great medium to share information with other people who share the same interests as you. My usage has since tapered off, and I started thinking about why this is. To me, it seems that there are problems with how users can measure their ’success on Twitter’. Users seem to measure their success based on their number of Tweets and their follower count. This leads to some incredibly annoying behavior, which has, in my opinion, significantly weakened the value of Twitter. Here are my biggest pet peeves with regards to Twitter usage:

Using it as a popularity contest

Who cares how many people follow you??…yet I always see messages like  ‘I’m about to get my 100th follower’ or ‘whoever is my 1000th follower I will RT you’ — really? This is just noise, and does nothing productive. To me, the value in people following you is that you get to see what they are up to. It is likely they followed you because you have some common interest, and when they follow you, you have the opportunity to see what their spin is on that common interest. I have seen other users talk about / try to boost their follower to following ratio. Clearly, you must be really awesome if a lot of people are listening to you, but you don’t listen to very many people…clearly..

Using it to generate noise

I cannot believe how much noise is on Twitter. I only follow ~50 people as of now, and there’s still too many Tweets to manage. I see Twitter as a great opportunity to share, but people need to use some restraint. This includes:  1. Not sharing what you have for dinner every day 2. Not sharing when you go to the store and what you bought 3. Not sharing when you woke up or went to bed, etc. etc.  As a general rule for restraint, ask yourself — if someone else sent this Tweet, would I care? — if the answer is no, maybe you should think twice. In my opinion, Tweeting about everything really degrades the value of Twitter.

I always see messages like ‘about to make my 1000th Tweet, how should I use it?’ To me, this is ridiculous — you are congratulating yourself on making more noise on Twitter. Unfortunately, follower count and number of tweets are the only real subjective measurements that Twitter has….so people tend to measure themselves based on it

Complaining That People Unfollow You

This is not middle school. If you get unfollowed, it just means that person doesn’t see value in what you’re saying. No big deal — if you were walking down the street, yelled out some random information, and no one turned to acknowledge you, would you be pissed? No, you wouldn’t…so don’t be pissed on Twitter. No joke, I read a Tweet where the user was debating not patronizing a store anymore because the owner unfollowed them. Wow…just wow.

Promoting your ‘new blog post’ or new website tons of times

Okay – We get it, you wrote a new blog post. I totally respect Tweeting about it once or twice (as I do as well when I make a new post). But making 10-20 Tweets about it is ridiculous. If people care what you’re saying, they will find a way to find your content….you do not have to spam them. Unfortunately, the reason why people do it is that there is so much noise in the first place

Having conversations that no one cares about

People getting into conversations (non DM) on Twitter that aren’t interesting to anyone besides the two involved users gets annoying very quickly. Take it somewhere else (that is, unless other people are likely to care about it)

Anyway, enough complaining for the day. I am sure that I am guilty of at least one behavior described above at one point or another — the problem is that seeing the behavior in other users will just reinforce the legitimacy of your behavior — a never-ending cycle.  There are numerous other problems I see, but I believe there are a few easy things that Twitter can do to help resolve the problems, and enable users to extract the most value out of their service. Don’t get me wrong — I believe Twitter is in the process of revolutionizing the sharing of information — I just think there’s a few kinks to iron out. Now that Twitter is really hitting a tipping point, these kinks are becoming more and more obvious. For my next post, I think I’ll talk about some ideas I have on how Twitter can solve some of these issues.

People have told me that it isn’t easy to keep up a blog. Now I know what they mean! Somehow, I’ve gone an entire month without posting anything — time seems to have flown by! I will try to be better at this, and post here at least 1 time a week (2 may have been a bit of an ambitious start)

I’m already halfway through this semester’s UIUC course (CS 433 – Computer System Organization), and that has been taking up a bunch of my time – I wasn’t too crazy about taking the course (given that I am more of a software guy), but it is a requirement for graduation.

Needless to say, the class has been awesome so far! The material is both interesting and challenging. Currently, we are learning about different software and hardware solutions to improve processors — there’s some really interesting stuff in this domain!

At a high level, the course has brought me to two conclusions with regards to developing software:

• Choose clarity over optimization, because the lower levels will help you with the optimization anyway – Here, I am talking about the ’small’ optimizations that people tend to make in code that can make the code very unclear (large scale optimizations involving architecture, etc. are still absolutely necessary). One of my least favorites of this is caching a calculated value when the calculation takes a very short amount of time. If the calculation is easy, just do it every time in a method! The overhead of managing the cached value, knowing when it is stale, etc. is not worth it!
• The impact of optimization from single Processor improvements (Pipelining optimizations, dual issue, Branch predication schemes, clock speed, etc.) is slowly fading, as is evidenced by the recent explosion of multi-core systems.  Squeezing in a few more instructions in a clock cycle is not going to cut it anymore. This is quite interesting, as now the burden for optimization will shift to the developer.  We will have to spend some effort to plan our software such that we are effectively utilizing the multiple available processors! This could mean a paradigm shift in how software is developed to run on the multi-cores.

There’s actually some pretty good quotes out there with regards to Software Optimization that I’ll leave you with. Print these, put them in your cube, and look at them next time you want to do something stupid for optimization’s sake:

“Rule 1: Don’t do it….. Rule 2: (for experts only) Don’t do it yet” – M.A. Jackson

“More computing sins are committed in the name of efficiency (without necessarily achieving it) than for any other single reason – including blind stupidity.” - W.A. Wulf

“Optimization is non-optimal” – Me

Anyway, that’s it for now.  For my next blog article, I am thinking about discussing the pitfalls of unit testing. Sound interesting?

A few weeks ago, my trash can broke. It’s one of those where you press a foot pedal and the top opens up. A small pin that connected the foot pedal to the mechanism that holds the top open had snapped. I figured that it was the end of the trash can, and I would just have to get a new one. Before I ran out to the store, I quickly checked the website to see if I could order a replacement part – It turns out that I could…and it was free…and it was shipped to me… free, arriving within a week! In a world filled with terrible customer service, I was astonished by how great the service was from SimpleHuman . Here is the text of the email I received from them:

Thank you for your inquiry and apologize for any difficulties you are experiencing with your can. It sounds like you need a new hinge pin. We have changed the material of the hinge pin from plastic to metal to prevent future breakage. We will be glad to send you that part free of charge. Please allow 5-7 business days for the delivery of your replacement hinge pin. Your order will be shipped via USPS to the address you provided on the online form. You will also receive a confirmation email when your order has been processed and shipped.

At simplehuman, we stand behind our products 100% and are working to offer the best possible service. We hope that our products can continue to serve you well for the years ahead.

Is this for real? Yes it is, and it made me happy enough to take the time and write a blog post about it. Several things about this experience are interesting to me. For one, this is an incredibly cheap way for them to make their customers happy. The replacement part probably costs less than $5 to produce, and the postage to ship it to me was under $2. There are obviously other costs associated, but overall it is very cheap. This great service directly affected the opinions of only 1 person (myself) — however, I would argue that given the increasing reach and ease of adoption of social media tools (Twitter, etc.), customer service (both poor and great) can have dramatic effects on a large set of potential customers. It’s no secret that people like to complain about customer service when it is horrible — we’ve all heard our friend’s stories of 2-hour support calls, or being transferred to 8 different people in 6 different countries while just trying to get a simple question answered. But I believe it is so easy now to contribute content socially via Twitter and other tools, that consumers will actually be willing to rave about good customer service as well — and this will impact the purchasing behaviors of others.

Knowing this, some companies will be able to use top-notch customer service to their advantage and as a viable advertising alternative to flashy, expensive ads through normal media streams (my guess is that SimpleHuman doesn’t have a huge advertising budget). After only being on Twitter for a few weeks, I’ve seen my fair share of Tweets in the form of ‘Wow, X company is great because they did Y’ , or ‘Excited for my morning cup of coffee at Z, I love that place!’ — I think these types of social micro-advertisements generated by consumers will start to carry more weight, particularly as social media goes mainstream.

On the other hand, there are plenty of negative micro-rants out there (e.g. ‘<Insert Company Here> sucks because <Insert Reason>’ is a good template) — and companies will have to find a way to mitigate the risks of these attacks destroying their reputations. Some companies have already figured this out…

There are many companies on Twitter who actively respond to customer complaints and recommendations. In this BusinessWeek article, some companies noted as being on Twitter include Dell, GM, JetBlue, and Whole Foods.  There are also several documented examples of consumers receiving almost immediate customer service after posting negative comments on Twitter (one person notes being contacted immediately by a Customer Service representative after posting a comment about a software problem).  I did a quick search on Google and found many other intriguing avenues for consumers to get customer service in a relatively effortless and ’social’ way. One of the more interesting sites I came across was GetSatisfaction.com , a site that aims to remove the boundaries between people and companies to form a mutually beneficial relationship without the typical customer-service hula-hoops (’press 1 for help with your <X>)

This brings me to the three main points I want to make:

• Consumer-driven micro-advertising in social media is real – If you are a company and you haven’t started managing your online reputation in social media yet, do it now…before it’s too late. Twitter is hitting its Tipping Point – I challenge you to search Twitter for any major company name – Tweets will show up! (to test this theory, I just searched for CarMax, first entry I saw:  “bluedogexpress: Carmax offered way below KBB.com fair price.”  — See what I mean? You can use this media avenue to your advantage — or if you ignore it, it can explode in your face.
  
• Opportunities exist to help big companies deal with social media, and they will be profitable - This is new stuff, and it’s only going to get bigger. Companies will need help in getting this right, as managing online reputation can be a delicate challenge — I see ‘Social Media Consultant’ as a potentially popular and profitable job title in the next few years — so study up.
  
• You have the power to make companies better – When you call a company and complain, they don’t have a big incentive to respond. When you (constructively) criticize companies through social media outlets, and thousands of other people see it – companies have a huge incentive to respond. Use this to your advantage.

So whether you own a company, work in advertising / marketing, or are simply a consumer of goods — the game is changing all around. How will you use it to your advantage?

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• Dell cozies up to its Twitter followers (news.cnet.com)
• Twitter To Start Charging Companies For Having An Account? (techcrunch.com)
• Twitter promotions can add up to millions (news.cnet.com)

Ok, I admit it…this may qualify as the nerdiest / lamest name for a blog post…ever…in the history of the blogosphere…but hear me out on this one, because I’m going to make a point that might help you focus your energies in work and life to achieve more with the same amount of effort.

I recently started the 7th course in my Masters – Computer Science Program through the University of Illnois’ I2CS distance learning program.  I didn’t plan very well, and I’m down to my final 2 required courses…of course I save the most dreaded courses for last. I’m a Software guy, so the prospect of taking Computer System Organization is a bit scary – and that is what I am taking this semester. I’m not completely lost yet (but it is only the 3rd week of class, so there’s still time), and the material actually is quite interesting so far.

In the last class, we learned about Amdahl’s Law , which is essentially a formula that allows you to calculate the expected benefit of making a specific performance optimization to a computer system.

As a quick example, lets say you have a system and you want to make it faster. You determine that you can make 50% of the system work 2 times faster. According to Amdahl’s law, this improvement will improve the overall efficiency of the system by about 33%.  The formula for the performance improvement is:

Speedup =    1  / [ (1 - p) + (p / s)]

Where p represents the percentage of the process you sped up (50% in our example), and s represents how many times faster you made that percentage of the process (2 in our example).

Amdahl’s law at it’s basics is a very simple rule that can give you a good picture of how much you can improve a process – It can guide you in understanding if improving the process by a certain factor is worth the effort. What is interesting is what happens when you look at cases where you focus on optimizing portions of a process to a very high level – for example, making 10% of the process work 100 times faster. Let’s quickly run this calculation:

Speedup = 1 / [(1-0.1) + (0.1/100)] = 10.99% improvement

To go even further, what if we make 10% of the process work 1 million times faster?:

Speedup (with 1 million times faster for 10% of the process) = 1 / [(1-0.1) + (0.1/1000000)] = 11.11% improvement

Really? So we spent all the effort in making it 1 million times faster instead of 100 times faster, and all we got was making the total process just 0.12% better? Seems kind of pointless to make all that effort huh?

What if, instead of trying to optimize the heck out of 10% of the process, we tried to slightly optimize 15% of the process. So, we will try to speed up 15% of the process by just 5 times. What does that give us?

Speedup (with 5 times faster for 15% of the process) = 1 / [(1-0.15) + (0.15/5)] = 13.64%

Whoa…so we were able to get a better overall improvement by focusing on 15% of the process instead of 10% of the process, even though we only improved that 15% of the process by 5 times (compared to 1 million times for 10% of the process).  What this is telling me is that in CS, it is better to focus on improving a larger section of a process by a smaller amount then it is to focus on improving a smaller section of a process by a much much larger amount.

Interesting stuff, but maybe not that interesting unless you’re trying to optimize some piece of hardware or software, which you probably are not. But I believe that this same idea can potentially help you be more productive / more efficient in your life.

Being a perfectionist is often considered to be a good trait to have in the business world…but there is a limit. Time is valuable, and if you spend too much time making some specific thing ‘too perfect’  (in Amdahl’s law, optimizing a very small portion of the process to a very high degree), then you lose time that you could potentially spend adding value to something else (in Amdahl’s law, focusing on another chunk of the overall process). I’m not arguing here that you should give a half-hearted effort on your tasks…I’m just saying that sometimes 90% on task A is good enough, and your time is better spent moving on to task B.

If you’re anything like me, it is all too easy to fall into the mindset that it must be ‘100% perfect’ (or ‘completely optimized’) before you stop working and move on to the next task – next time you find yourself falling into this trap, remember the simple formula above – sometimes it’s best to accept the 90% and move on to the next task …  squeezing the last bit of value out of the almost-perfectly optimized / completed task is a deceiving — it may not be as valuable as it may seem!

I was searching around yesterday for a Mac Book Pro, and made the ever-so tempting mistake of clicking on the following Google Ads Result, “86% off a Mac Book Pro?” — I am not stupid — I know that when things are too good to be true, they are not true — but somehow my curiosity overpowered my rationality, and I clicked the link. What I found was a site so devious, so tricky, so evil, yet so potentially profitable (and ‘I think’ legal), that I could only wish that I had thought of the business model first. The site is Swoopo.com — an auction site with an evil, evil twist that preys on human irrationality to make a ridiculous amount of money. Here is how it works:

• Users can bid on items, but they don’t bid by specifying a price…they use a ‘bid’ that they have purchased
• ‘Bids’ can be purchased for 75 cents each
• Each time a user ‘bids’, two things happen: 1. The final cost of the item to the winning bidder is increased by a fixed amount (e.g. 15 cents) 2. The auction end time gets extended by a fixed amount of time (e.g. 20 seconds)
• The last person to ‘bid’ on an item before the auction expires is the winner, and must pay the total price of the item (e.g. the total number of bids multiplied by the fixed price amount increase noted above).

This is a little complicated, but here’s an example. Lets say that I purchased 100 ‘bids’ for a total cost of $75 dollars. The Mac Book Pro auction that I am checking out has a current price of $100 and a current time left of 10 seconds. I decide to use one of my bids on the item, and now I am the ‘current winner’. Because of my bid, the price of the MBP has increased to $100 + $0.15 = $100.15, and the auction now is over in 10+20 = 30 seconds…of course, other people are going to ‘bid’ against me, but lets say I spend a few hours checking the auction, and use all my bids….and I am somehow, beyond my wildest imagination, the last bidder. I have won the auction! Now, if the final price of the computer is $300, and I have spent $75 on the 100 bids, then I have bought a MBP for $375. Sweet! So Swoopo must not be making too much money right??? Wrong. They have made money…a lot of money — In fact, on this auction for a Mac Book Pro, I calculate that they have made almost 20 thousand dollars…

If you do the math on the above MBP auction….

• There have been 25,529 bids. This auction is a ‘penny auction’ meaning that each bid only increases the final cost of the item by a penny, so $255.29 indicates 25,529 bids. At 75 cents a pop, this is $19,146.75
• The final cost for the winner is $255.29
• Adding the two costs above, we are very close to a total profit of 20 thousand dollars!!!

But what’s that you say? The cost is spread across so many users that it doesn’t matter to any individual? One would hope so, but look at the poor winner of the auction. He has bid a total of 2872 times!! At 75 cents a pop, this is already over 2 grand for something that costs $1299 retail. To add insult to injury, he still has to shell out the $255.29 to purchase the computer.

So how does this business model work? How are people this stupid? And why didn’t I come up with this? Well, I can’t answer the last question, but I will try to answer the first two:

Although the business model may be new, the concept behind it is not. In fact, it is a published economic game / theory known as Dollar Auction. It exploits flaws in the calculations of expected value for a given game. At a high level, this model seems to work because

• It exploits a human irrationality where individuals think they will be the one who bids last – Everyone thinks they’re lucky once in a while…but really…do you think there aren’t 100s of other people out there thinking that they’ll bid last too? Thinking it to be true will not make it true…but it will make Swoopo a lot of money
• It exploits the sunk cost fallacy - If I keep bidding on an item, I will become tied to that item, thinking that since I have spent money by bidding so many times on the item, I must win it at all costs…even if economically it isn’t the right think to do (e.g. guy who won the Mac Book Pro Auction)
• It isn’t transparent – To an average Joe, it isn’t obvious what is going on. On EBay it is easy to see how much you will pay for the item, and understand how much the seller is making. On Swoopo, it isn’t transparent…and people will keep the bidding coming.
• It is like gambling – Why do people go to the casino? Obviously, not to make money — unless they’re kidding themselves or are playing Poker. People probably get the same rush from this site as they may get from putting it all on Red. There’s a chance to win at a small cost, many times over.

Anyway, that’s all I got on this site…what do you guys think? Should this be legal? Is it gambling? Are there any other sites out there that have wacky business models? I want to know about them!…I can’t say that I’m not jealous – the idea is simple and profitable – what else can you ask for?

I know what I am going to do next – search google for ‘economics irrational behavior’, and try to develop a business model around the results. Or maybe I’ll go back and re-read Nudge or Predictably Irrational , and see how to profit from human economical irrational decisions… is this an awful thought? Or is this just business as usual?

Related articles by Zemanta

• Evil Business Models: Turning The Dollar Auction Into A Profit Center
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Over the last 5 years since I began working full-time, I have developed a strong interest in investing in the stock market. I started investing in mutual funds, and gradually started investing in individual stocks. I even helped to form a (now defunct) Investment Club in order to learn more about investing in stocks with other young professionals who shared the same interest. What drew me to investing was the same things that drew me to playing Poker – in investing, you can use your analytical thinking skills, math prowess, and intuition to have an advantage over the competition, and make a lot of money….and in hindsight, it is ridiculous that a part of me actually thought it was as easy as that.

As I started to have more income available for investing, I started steering away from mutual funds, and started loading up on individual stocks. At one point, I owned ~15-20 different individual stocks. In hindsight, this is too many stocks for me to properly follow on a weekly basis – I didn’t have enough time to perform the necessary research into the stocks to understand if I should buy, sell or hold them. Even if I did have enough time, I didn’t have the proper knowledge to understand if I should buy, sell, or hold them— this was not investing, this was speculating.

I saw a lot of my picks do fairly well, and so I continued to pick new ones. My sense of performance was most definitely skewed though, as I never took the time to reasonably evaluate my performance against the industry benchmarks or indexes – all I saw was the positive gains, and that was good enough for me to ‘think’ that my picks were paying off. Then, you know what happened next…

Slowly and steadily, I saw a lot of my gains erode….some seemingly much faster than the market index. Then in 2008, I saw my gains erode quite quickly. Two of my picks were down more than 95%!!! So what did this cause me to do? Did I immediately re-evaluate my holdings, and try to understand where I went wrong? Did I admit to myself that some of my picks were bad, and then go out to try to find the real values in this market using fundamental analysis rather than speculation? No, what I did was absolutely nothing! I was like a deer caught in headlights – I found myself wanting to simply ignore the situation entirely, and let the stock market run its course on my hobby of speculation. When talking to some of my friends, they have had the exact same reaction to the markets lately…it’s better just not to look.

I regularly follow PFBlog, a personal finance blog whose author has a goal of hitting a million before 36. He had regular, very interesting posts…until about the middle of 2008, and then all the posts abruptly stopped. It seemed that he was having the same sort of ‘deer caught in headlights’ behavior that I was having – his holdings were heavily weighted towards financial stocks, so he probably took a large hit. He recently started posting again, and one of his recent posts really struck a chord for me. In the post, he reveals the lessons he learned from his individual stock picking:

“In retrospect, the biggest lesson I learned from loading more and more financial stocks between 2007 and 2008 is: I acted blindly. With 60-hour work weeks, I should have known that I cannot dedicate enough time to study each company and keep track of all developments.”

He publicly admitted his mistakes, and made a plan for his investments to get back on the right track – He sold all of his individual stocks except Berkshire Hathaway, and plans to invest in mutual funds using an automatic investment plan.

I am using this blog post to do the same thing that he did — Admit my investing mistakes, and make a plan to change them — My basic plans are similar to the author of PFBlog. They are:

Invest in mutual / index funds using an automatic investment plan – My wife and I have made a big push to automate most of our other finances (bills, savings account, etc.) We plan to automate our investing in the same way.

Simplify mutual fund / index fund holdings – It is important to follow your mutual fund holdings on a regular basis. Maybe not with the same rigor as your stock holdings, but you need to know when one of the apples in your basket turns bad…and if you have a lot of apples, one could stick around with bruises for a long time. We had a bunch of mutual funds (15-20), and we have started to scale this down to a few index funds and between 5-10 mutual funds – this will keep things a lot simpler.

Hold only 2-5 individual stocks at any time, and do the due diligence in researching them – This was my biggest problem. Why did I own so many individual stocks? There were a lot of factors, but I am committing to owning only a few going forward. As far as ‘due diligence’ research — I have a lot to learn, and I can’t tell you exactly what ‘due diligence’ research means, but I can surely tell you what it does not mean — It means not speculating like I was doing previously. As far as learning about the necessary research, there are several books on my bookshelf that I have read and have found to be valuable in growing my ability to evaluate stocks. The books are:

• The Warren Buffet Way – Robert G. Hagstrom
• One up on Wall Street – Peter Lynch
• Common Stocks and Uncommon Profits – Phillip A. Fisher
• You can be a Stock Market Genius – Joel Greenblat

Do you have additional recommendations for good investing books?

So that’s it, my personal finance confessions and my resolutions to fix them all in one blog post. One thing I can certainly say is that I find myself fortunate to experience this type of financial crisis this early in my investing career. Every generation will go through them, some more than one, some more severe than others, but it will surely happen to everyone. Having it happen at an early age has allowed me to start learning the tough financial lessons
without suffering a huge amount of losses — this will surely help me make more prudent financial decisions in the future.

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