{"product_id":"wealth-creation-isbn-9780470488683","title":"Wealth Creation","description":"Wealth creation insights by the creator of the company life-cycle framework known as the CFROI valuation model.  \u003cp\u003eInvestors searching for companies whose future profitability will far exceed that implied in current stock prices, those in business making decisions to improve company performance, and politicians crafting legislation-all use some form of a wealth creation framework.\u003c\/p\u003e \u003cp\u003eIn this book, author Bartley Madden addresses how to think about the complex dynamics in generating wealth and the practical benefits to be gained from upgrading one's wealth creation framework. Throughout these pages, Madden shares six critical insights:\u003c\/p\u003e \u003cul\u003e \u003cli\u003eA \u003cb\u003esystems mindset\u003c\/b\u003e focuses not so much on the individual pieces of a system, but on how all the pieces work together to achieve the goal envisioned for the system. The systems way of thinking described in \u003ci\u003eWealth Creation\u003c\/i\u003e helps to avoid unintended, bad consequences, and to generate insights for leveraging change that produces big gains in wealth\u003c\/li\u003e \u003cli\u003e \u003cp\u003eEconomic systems -- the rules and relationships that exist to create wealth by delivering value to customers -- are devilishly complex and therefore solving economic problems requires extensive knowledge. Seen in this light\u003cb\u003e, knowledge growth and wealth creation are two sides of the same coin\u003c\/b\u003e.\u003c\/p\u003e \u003c\/li\u003e \u003cli\u003eA prerequisite to making better buy\/hold\/sell investment decisions and business judgments is an improved understanding of how wealth is created. An especially useful approach described in this book is to connect business firms' financial performance to stock prices via the \u003cb\u003efirms' competitive life-cycle framework\u003c\/b\u003e\n\u003c\/li\u003e \u003cli\u003eA deeper understanding of business firms makes it plain that \u003cb\u003ecustomers,\u003c\/b\u003e \u003cb\u003eemployees, and shareholders have\u003c\/b\u003e \u003cb\u003emutual, long-term interests\u003c\/b\u003e. In other words, a free-market system geared to serving customers through competition is a system in which participants share the wealth that is jointly created\u003c\/li\u003e \u003cli\u003eThere is a huge opportunity for sustained, higher economic growth through voluntary initiatives by the private sector. One initiative involves an accelerated implementation of \u003cb\u003elean management\u003c\/b\u003e, which was pioneered by Toyota. This is a systems approach that continually purges waste and optimizes the use of resources in delivering value to customers\u003c\/li\u003e \u003cli\u003eThe other initiative concerns \u003cb\u003eimproved corporate governance\u003c\/b\u003e. The wealth creation principles discussed in this book offer a blueprint for boards of directors to vastly improve how they fulfill their responsibility to shareholders, and in so doing, improve the performance of corporate America\u003c\/li\u003e \u003c\/ul\u003e \u003cp\u003eThese ideas have taken shape as a natural outgrowth of a commercial research program that began in 1969 at Callard, Madden \u0026amp; Associates focused on how to value business firms. It produced the CFROI (cash-flow-return-on-investment) metric and its related life-cycle valuation model. This work was further advanced at HOLT Value Associates, which was later acquired by Credit Suisse in 2002. Credit Suisse HOLT continues the research to improve the valuation tools and related global database that analyzes 20,000 companies in over 60 countries. This system is used by a large number of institutional money management firms worldwide in order to make better investment decisions.\u003c\/p\u003e \u003cp\u003ePreface xi\u003c\/p\u003e \u003cp\u003eAcknowledgments xvii\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 1 A Systems Mindset 1\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eHow We Know What We Think We Know 2\u003c\/p\u003e \u003cp\u003eThe PAK (Perceiving-Acting-Knowing) Loop 3\u003c\/p\u003e \u003cp\u003ePurposes 3\u003c\/p\u003e \u003cp\u003ePerceptions 4\u003c\/p\u003e \u003cp\u003eCause and Effect 6\u003c\/p\u003e \u003cp\u003eActions and Consequences 7\u003c\/p\u003e \u003cp\u003eFeedback 8\u003c\/p\u003e \u003cp\u003eKnowledge Base 9\u003c\/p\u003e \u003cp\u003eExamples of Systems Thinking and Problem Solving 10\u003c\/p\u003e \u003cp\u003eHigh-Reliability Organizations 10\u003c\/p\u003e \u003cp\u003eEli Goldratt, Business Theorist 12\u003c\/p\u003e \u003cp\u003eColonel John Boyd, Military Theorist 14\u003c\/p\u003e \u003cp\u003eCorrelation, Causality, and Control Systems 15\u003c\/p\u003e \u003cp\u003eSummary of Key Ideas 17\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 2 The Wealth-Creation System 19\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eThe Perception of Free-Market Capitalism 20\u003c\/p\u003e \u003cp\u003eThe Housing and Credit Crisis of 2008–2009 21\u003c\/p\u003e \u003cp\u003eGovernment Regulation and Unknown Risks 25\u003c\/p\u003e \u003cp\u003eThe Standard of Living 28\u003c\/p\u003e \u003cp\u003eSummary of Key Ideas 33\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 3 The Ideal Free-Market System 35\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eComponents of a Free-Market System 36\u003c\/p\u003e \u003cp\u003eConsumer Wealth, Producer Wealth, and Competition 39\u003c\/p\u003e \u003cp\u003eEfficiently Providing What Consumers Want 41\u003c\/p\u003e \u003cp\u003eSummary of Key Ideas 43\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 4 The Competitive Life-Cycle View of the Firm 45\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eCompetitive Life-Cycle Framework 45\u003c\/p\u003e \u003cp\u003eFirms’ Competitive Life Cycles and Dynamism 47\u003c\/p\u003e \u003cp\u003eCompany Examples 51\u003c\/p\u003e \u003cp\u003eEastman Kodak 53\u003c\/p\u003e \u003cp\u003eIBM 55\u003c\/p\u003e \u003cp\u003eDigital Equipment 58\u003c\/p\u003e \u003cp\u003eApple 59\u003c\/p\u003e \u003cp\u003eBethlehem Steel 62\u003c\/p\u003e \u003cp\u003eNucor 63\u003c\/p\u003e \u003cp\u003eKmart 67\u003c\/p\u003e \u003cp\u003eMedtronic 69\u003c\/p\u003e \u003cp\u003eWalgreen Company 71\u003c\/p\u003e \u003cp\u003eDonaldson Company 73\u003c\/p\u003e \u003cp\u003eLife-Cycle Observations 75\u003c\/p\u003e \u003cp\u003eSummary of Key Ideas 76\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 5 The Life-Cycle Valuation Model as a Total System 79\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eEfficient Markets versus Behavioral Finance 80\u003c\/p\u003e \u003cp\u003eValuation Model Principles 81\u003c\/p\u003e \u003cp\u003eMeasurement Units 86\u003c\/p\u003e \u003cp\u003eForward-Looking, Market-Derived Discount Rates 89\u003c\/p\u003e \u003cp\u003eProblems with CAPM Cost of Capital 91\u003c\/p\u003e \u003cp\u003eImproving the Valuation Process 93\u003c\/p\u003e \u003cp\u003eInvestor Expectations: The Wal-Mart Example 96\u003c\/p\u003e \u003cp\u003eCritical Accounting Issues 99\u003c\/p\u003e \u003cp\u003eReply to Critics 102\u003c\/p\u003e \u003cp\u003eSummary of Key Ideas 104\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 6 Business Firms as Lean, Value-Added Systems 107\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eLean Thinking and PAK Loop Components 108\u003c\/p\u003e \u003cp\u003eKnowledge Base 108\u003c\/p\u003e \u003cp\u003ePurposes 111\u003c\/p\u003e \u003cp\u003ePerceptions 113\u003c\/p\u003e \u003cp\u003eCause and Effect 114\u003c\/p\u003e \u003cp\u003eActions and Consequences 115\u003c\/p\u003e \u003cp\u003eFeedback 116\u003c\/p\u003e \u003cp\u003eA Lean Transformation Example: Danaher 118\u003c\/p\u003e \u003cp\u003eSummary of Key Ideas 121\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 7 Corporate Governance 123\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eA Systems View for Corporate Governance 123\u003c\/p\u003e \u003cp\u003eCorporate Governance Needs Repair 124\u003c\/p\u003e \u003cp\u003eA Standard of Performance for Boards 127\u003c\/p\u003e \u003cp\u003eA Successful Cultural Transformation Example: Eisai Co., Ltd. 128\u003c\/p\u003e \u003cp\u003eShareholder Value Review 130\u003c\/p\u003e \u003cp\u003eValuation Model Selection 133\u003c\/p\u003e \u003cp\u003eValue-Relevant Track Records 135\u003c\/p\u003e \u003cp\u003eBusiness Unit Analyses 137\u003c\/p\u003e \u003cp\u003eReply to SVR Objections 138\u003c\/p\u003e \u003cp\u003eSVR as an Evolutionary Process 140\u003c\/p\u003e \u003cp\u003eSummary of Key Ideas 141\u003c\/p\u003e \u003cp\u003e\u003cb\u003eCHAPTER 8 Concluding Thoughts 143\u003c\/b\u003e\u003c\/p\u003e \u003cp\u003eBenefits for Public Policy Makers 144\u003c\/p\u003e \u003cp\u003eBenefits for Business Managers 146\u003c\/p\u003e \u003cp\u003eBenefits for Investors 148\u003c\/p\u003e \u003cp\u003eNotes 153\u003c\/p\u003e \u003cp\u003eReferences 159\u003c\/p\u003e \u003cp\u003eAbout the Author 167\u003c\/p\u003e \u003cp\u003eIndex 169\u003c\/p\u003e \u003cp\u003e\u003cb\u003eBARTLEY J. MADDEN \u003c\/b\u003eis an independent researcher whose current focus is on market-based solutions to public policy issues, including FDA reform and corporate governance. In 1969, Madden cofounded Callard, Madden \u0026amp; Associates, where his research was instrumental in developing the CFROI (cash-flow-return-on-investment) valuation model that has become an integral part of the investment process for many large money management firms. He later managed portfolios for Harbor Capital Advisors. In the early 1990s, Madden joined HOLT Value Associates, a firm created to commercialize the CFROI valuation model worldwide.  Madden retired in 2003 as a managing director of Credit Suisse, which acquired HOLT. He is the author of \u003ci\u003eCFROI Valuation: A Total System Approach to Valuing the Firm.\u003c\/i\u003e\u003c\/p\u003e  \u003cp\u003eThe \u003ci\u003ecompetitive life-cycle framework\u003c\/i\u003e—and its relation to stock valuation—is based on the premise that competition and capital flows operate over the longer term to force a firm’s economic returns toward the cost of capital. In short, the pattern of a firm’s economic returns and reinvestment rates reflects an unending struggle between managerial skill and competition over time. The life-cycle framework, as explained in this book, provides an insightful and intuitive way to understand levels and changes in stock prices over time. It is widely used by institutional money managers in order to make better investment decisions.\u003c\/p\u003e \u003cp\u003eThroughout the book, the common thread is a \u003ci\u003esystems mindset\u003c\/i\u003e for understanding societal attitudes and institutions that hinder or promote wealth creation and the complex activities of business firms in efficiently meeting customer needs.  Such a mindset focuses attention on the underlying processes and related incentives that drive the overall system results, and especially on the importance of continual firm-wide learning to improve those processes. \u003c\/p\u003e\u003cp\u003eThe life-cycle framework provides a unique lens for seeing through a firm’s short-term financial results to better gauge likely long-term wealth creation or destruction. Company examples showcase the analytical usefulness of life-cycle track records and present a bottom-up view of how—in a free-market economy—customers, employees, and shareholders have mutual, long-term interests. \u003c\/p\u003e\u003cp\u003eMadden details opportunities for higher, sustainable economic growth through voluntary, private sector initiatives. As to improved management, he analyzes both the difficulty in duplicating \u003ci\u003elean principles\u003c\/i\u003e pioneered by Toyota and the related potential for sustained competitive advantage. As to improved \u003ci\u003ecorporate governance\u003c\/i\u003e, he describes a novel approach for boards of directors to ensure that management follows a wealth creation path.\u003c\/p\u003e","brand":"Wiley","offers":[{"title":"Default Title","offer_id":47990470443237,"sku":"NP9780470488683","price":75.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780470488683.jpg?v=1761787956","url":"https:\/\/k12savings.com\/es\/products\/wealth-creation-isbn-9780470488683","provider":"K12savings","version":"1.0","type":"link"}