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Managers Need to Relearn How Interest Rates Work

Harvard Business Review

With cost of capital this low, many managers have paid scant attention to the time value of money — an essential concept in doing financial analysis. In the United States, short-term interest rates have been near zero for most of the last 15 years.

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Entrepreneurship Suffers When Well-Paid Jobs Are Plentiful

The Horizons Tracker

It’s a situation chronicled in a recent paper from Wharton, which highlights how in recent years high-skilled graduates have discovered that they can earn more in salaried jobs than they could by starting their own business. This would have less of an impact on higher-skilled entrepreneurs, for whom the decline has been most pronounced.

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20 Quotes From The Daily Drucker

Six Disciplines

Listening (the first competence of leadership) is not a skill, it is a discipline. Until a business returns a profit that is greater than its cost of capital, it does not create wealth -- it destroys it. All you have to do is keep your mouth shut. It is easy to look good in a boom. Luck never built a business.

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The Complexity of Business Communication

CoachStation

Compare Michael Porter’s competitive advantage definition: “Competitive advantage, sustainable or not, exists when a company makes economic rents, that is, their earnings exceed their costs (including cost of capital).” Develop skills in story-telling and influence differently.

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Untangling Skill and Luck

Harvard Business Review

The outcomes for many activities in life — including sports, business, and investing — combine skill and luck. When we enjoy a good outcome due to luck, we are naturally inclined to chalk up our success to skill. Similarly, if we suffer an adverse outcome because of poor skill, we blame our bad luck.

Skills 15
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CEOs Don’t Care Enough About Capital Allocation

Harvard Business Review

” A quarter century later, not much seems to have changed: fewer than five out of the 100 CEOs on HBR’s 2014 list of best-performing CEOs even mention “return on capital” on their official biography — and none of those five lead companies listed in the Dow Jones Industrial Average (DJIA) or in the EuroStoxx50.

CEO 8
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What’s Driving Superstar Companies, Industries, and Cities

Harvard Business Review

To analyze the superstar dynamics of firms, our metric was economic profit, a measure of a firm’s profit above and beyond opportunity cost. (To To do this, we take the firm’s returns, deduct the cost of capital, and multiply by the firm’s total invested capital.)