Into the world of the professional investor

Some of the most important building blocks for building an entrepreneurial strategy I discovered immediately after the time I spent studying marketing. It came not from the marketing books, nor even from marketing, but, from the environment they took me into - the world of finance and investment.

After studying in the library, I thought I'd try my hand at being a marketing consultant. Looking through newspaper advertisements I began to telephone the advertisers to see if anyone needed marketing assistance. Almost straight away I got a positive response. It was from a company advertising a correspondence course to teach people the art of investment. They told me that they were looking for help because their current advertising wasn't working.

I visited the company, which was located in the heart of the City of London, just around the corner from the London Stock Exchange. They were a firm of investment advisors, managing investment portfolios for various clients. It was explained to me that

making a profit on the course was not important as the main aim was that it should be a way of attracting new clients and establishing the credibility of the firm to handle client investment portfolios.

In those days, it was an original strategy. Today, it is the most common form of marketing on the web: establishing an extensive knowledge base to generate interest and give credibility to a service or product. It is highly effective.

The head of the investment firm explained to me that although they weren't looking for a profit from the course they didn't want it to cost them any money. Their current problem was that it was costing money, because the cost of advertising the course was very much more than they were getting from the sales.

Even applying my limited, recent text book marketing knowledge, the solution was obvious: either the advertising had to be better or the price of the product had to go up. I suggested both approaches although as far as I could judge the advertising was reasonably sound and unlikely to offer much improvement. This left a price hike as the only real possibility for making the venture viable enough to pay for itself.

As it had been a marketing ploy, the course had been designed to sell for a very low price. Unfortunately, this limited them to producing a very insubstantial product. I explained that if they were going to raise the price to cover the advertising costs they would have to improve the product - otherwise they wouldn't be giving good value. They could see the sense in this because the last thing they wanted was for the course to advertise the fact that they didn't give good value.

My ball park assessment was that by the time they had paid for improving and supplying the course the price would have to increase five fold. Although somewhat shocked, they agreed with my text book solution. I then offered to set out the structure for a new course and they committed to arranging for it to be rewritten.

After the meeting, I went to Foyles, then London's largest book shop, and bought a fully comprehensive selection of books on investment. From just the chapter headings, I could get a pretty good idea as to how such a course on investment should be structured. I then divided this up into twelve lessons and proposed that it be sold as a twelve week course - sending out a new lesson each week..

This was agreed and I got busy on the advertising that necessitated the reading some of the investment books. These I found fascinating reading. They caught my imagination. Here was a whole world of new concepts which I had never encountered before. I had been vaguely aware of interest and compound interest; I'd known how to calculate probabilities and take risks. What I hadn't been aware of was that these elements could be intricately linked to create powerful strategies to bring order to the uncertainties involved in the world of finance and investment.

I'd always considered the world of banking, insurance and investment to be areas of conservatism, safety and security. I hadn't any idea that this appearance was a mask: a façade that covered a boiling cauldron of chaotic change and uncertainty. It was simply the strategies of the investors, the brokers and the bankers that made it seem as if the worlds of banking, finance and investment were reasonable under control. These strategies were coping with chaos, uncertainty and competition: exactly the conditions prevailing in e-business and e-commerce today.

After about two months, the new lessons for the investment course started to come in. To my horror, they were really badly written. The writers included a university professor, teachers and financial journalist, but, the work was just not useable. They were providing only information and practically nothing that could in any way be described as a strategy that could help an investor to make investment decisions.

We had a meeting to try to decide what to do at which I proposed that I should take on the writing of the course myself. They were a little taken aback by this because they knew I hardly knew the difference between a stock or share, let alone how to invest. I then explained that for this purpose I could probably write a course better than an experienced investor. I was interested in the subject, I wanted to learn about it; writing would be a reflection of my learning process. In this way, I could write from the point of view of the student because I'd be one of them.

They saw the logic in this approach and as they were at hand to answer questions and give any assistance that might be needed I was given the go ahead to start writing the course. This writing was monitored using four readers to read through each lesson as it was being written.

As it worked out, the course was a major success; it even got onto the London Stock Exchange's list of recommended courses. For me, personally, it provided an opportunity to spend a year in a totally different world: the world of investment and finance. More importantly, it enabled me to learn and understand the concepts that constitute the cornerstones of financial decision making. I learned how these were used as the fundamental elements in all investment strategies used by professional investors, brokers and bankers.

The key concepts I found to be: compound interest, discounting and risk spreading. These lead to the essential techniques for converting capital values into incomes (and the converse, incomes into capital values). Getting to grips with the essence of these concepts leads to the understanding of anything to do with finance and investment. As I was to realise later, these concepts also underpin all business decision making.

More importantly, from the point of view of this book, these fundamental concepts of the traditional industrial age also apply in the new environment of the Internet. They are the "Lego blocks" that can provide a bed-rock foundation from which to produce imaginative strategies on the fly, to compete intelligently in the rapidly changing world of e-business and e-commerce