Against the Grain: How to Succeed in Business by Peddling Heresy [NOOK Book]


Success does not come easily in the world of business, especially if you choose to challenge some of the most widely held beliefs in modern finance. Nobody knows this better than Joel Stern -- a man who swam against the strong current of conventional financial dogma and ended up revolutionizing the way CEOs and money managers value and measure performance. By maintaining a steadfast belief in his concept of Economic Value Added (EVA) and convincing individuals, institutions, and companies of its validity, Stern ...
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Against the Grain: How to Succeed in Business by Peddling Heresy

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Success does not come easily in the world of business, especially if you choose to challenge some of the most widely held beliefs in modern finance. Nobody knows this better than Joel Stern -- a man who swam against the strong current of conventional financial dogma and ended up revolutionizing the way CEOs and money managers value and measure performance. By maintaining a steadfast belief in his concept of Economic Value Added (EVA) and convincing individuals, institutions, and companies of its validity, Stern has become a catalyst for change in the world of finance. He has also become the man who made EVA the most insightful measure of today's corporate performance. In Against the Grain: How to Succeed in Business by Peddling Heresy, Stern shares for the first time, not only the story of how EVA swept the corporate world, but the story behind the story -- the intellectual underpinnings of EVA, how he and his colleagues at Stern Stewart & Co. promoted the concept, won its initial acceptance by major corporations, and later turned the concept into a revolution that has continued to grip the worlds of business and finance.

But Against the Grain is about more than Joel Stern's achievements in shaping economic thought and financial practices. This absorbing business memoir is about the life challenges of an incredibly driven individual. Through fascinating anecdotes and vignettes, you'll get an up-close look at Joel Stern the person and the professional -- from growing up in a middle-class Jewish family in New York City to attending graduate classes with Myron Scholes and learning from teachers such as Merton Miller and Milton Friedman. You'll also see how dogged determination and an unwavering belief in his ideas led to the creation of Stern Stewart & Co. -- a world-class consulting firm with offices on five continents. It takes confidence and skill to buck the trend, and Joel Stern has a lot of both. In this unique story of a business heretic and his concept of EVA, you'll find out what motivated Stern to proclaim "earnings per share don't count" and how he went about proving it to the world.

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Editorial Reviews

From the Publisher
It seems like an easy option to read a business autobiographyrather than a self-improving book on the workings of companies ormarkets.
The attraction is that it may be a more palatable way to pick upbusiness tips, and has lengthy theories presented in pottedform.
Both are true of Joel Stern's memoir, Against the Grain: How tosucceed in business by peddling heresy. The emphasis here is onpeddling, and he is proud of it. "I dash about to sell ideas," hewrites in a section on "serious" jet-setting. Not long before his61st birthday he visited 12 cities, "some more than once", on fourcontinents in 27 days.
Of course, the book also sells Stern Stewart & Co, thefinancial consulting firm he founded in 1982, which has developedand popularized the concept of EVA - economic value added - "theprofit that results after deducting the cost of all capitalinvested in the firm".
Such peddling of his firm is sometimes irksome, but Stern Stewart'stheories on how to measure profit and wealth created forshareholders remain a healthy antidote to earnings per share.Simila rly, Stern's skepticism about share options as a form ofremuneration rings true - as well as providing the backdrop for hissales pitch on EVA-related incentives.
But the main interest of Stern himself lies in his unusualcombination of academic, entrepreneur and salesman. Teaching hasalways been an important part of his career and, even if youdisagree with him, he makes you think.
The academic side blossomed at the University of Chicago graduatebusiness school. He was drawn there by Milton Friedman's bookCapitalism and Freedom, which prompted a Damascene conversion tofree markets. There he lived through a revolution in financialtheory led by the likes of Merton Miller, Nobel Prize winningeconomist.
Aware of his lack of economics training, he kept piping up withquestions. Finally Miller snapped and suggested he visit the dean'soffice: "There will be a derringer in the file for you. Please keeppulling the trigger until something exciting happens."
Stern stuck at the financial theory. And he did so on limitedmeans, which prompted his first entrepreneurial burst. As anorthodox Jew, he could not eat in the student mess. Hisself-catering demanded a fridge, which he bought for Dollars 38 andthen rented out to fellow students at Dollars 12 per half shelf perquarter, grossing Dollars 432 a year. "With that towering return oninvestment, I was convinced that the free enterprise system workedjust fine."
He started work at Chase Manhattan Bank and joined the corporatefinancial research team, where he developed his disdain forconventional accounting and worked on free cash flow analysis. Herailed against such gimmicks as "smoothing out" earnings, arguingthat it was not so easy to fool the market.
When set loose on clients, he insisted a fee was charged for theanalytical service. Giving it away would devalue it - a view thatequity researchers in the 1990s would have done better to abideby.
Stern broke away, with some colleagues and backing from a client.Ron Palamara, of Anacomp, asked what the new business was worth."Dollars 10m," Stern replied - it sounded like a "nice roundnumber". Palamara bought a 50 per cent stake.
Bennett Stewart, another graduate of the University of Chicago, isthe firm's other leading light. Stern had recruited him to theChase team via an interview that involved debating financial theoryin a car wash.
Stern's autobiography is short, with the story of the man and thefirm taking up a mere 142 pages. The personal side includes hisreligious devotion and love affairs with South Africa, libertarianpolitics and a woman he bumped into on a flight to Phoenix. Theseleaven the mix, although the reader will occasionally ask himselfhow much he cares.
The final two sections of the book include a question and answersession on such topics as corporate greed and business ethics, anda selection of articles comprising useful short lectures oncorporate finance and efficient market theory.
Stern describes himself as a missionary. The term is apt because herealizes that good ideas are worth nothing if they are notpublished and pushed. Like this zealous role model, he can beirritating - but he is, above all, stimulating. (FinancialTimes, November 13, 2003)

“…he is above all,stimulating…”(Financial Times, 13 November 2003)

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Product Details

  • ISBN-13: 9781118160794
  • Publisher: Wiley
  • Publication date: 7/11/2011
  • Sold by: Barnes & Noble
  • Format: eBook
  • Edition number: 1
  • Pages: 240
  • File size: 468 KB

Meet the Author

JOEL M. STERN has been the managing partner of Stern Stewart& Co. since its founding in 1982 and was coauthor of The EVAChallenge: Implementing Value-Added Change in an Organization(Wiley). He currently serves on the faculties of five graduatebusiness schools. A widely published writer, Mr. Stern has been afinancial policy columnist for the Financial Times and the SundayTimes of London. A recognized authority on financial economics,corporate performance measurement, corporate valuation, andincentive compensation, he is a leading advocate of the concept ofshareholder value.

IRWIN ROSS was retained to assist in the writing of TheEVA Challenge with Joel Stern and John Shiely. In addition to thiswidely popular treatise, he has written several other books, amongthem The Loneliest Campaign: The Truman Victory of 1948, The ImageMerchants, and Shady Business: Confronting Corporate Corruption. Heis a former roving editor of Reader’s Digest and over theyears has written for a variety of other magazines, includingFortune and Harper’s, as well as Stern Stewart’sEVAngelist.

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Table of Contents

Ch. 1 The Great Break 1
Ch. 2 Beginnings 9
Ch. 3 Rebel Banker 23
Ch. 4 A Letter from Oppenheimer 49
Ch. 5 On Our Own 63
Ch. 6 How We Grew 77
Ch. 7 The Key Role of Incentives 91
Ch. 8 The Missionary Way of Life 99
Ch. 9 Dispatches from the Sales Front 123
Ch. 10 As for the Future 133
Ch. 11 The Credo of a Radical Free Marketeer 143
App Heresies That Have Stood the Test of Time 169
App Let's Abandon Earnings per Share 171
App Some Thinking to Do 178
App What if Capital Markets are "Efficient"? 181
App Fewer Analysts, Please: Why People Believe Capital Markets Are "Inefficient"! 184
App Are "Technicians" an Endangered Species? 187
App Are "Fundamental" Security Analysts Necessary? 192
App Companies Should Avoid Sharp Swings in Dividends 197
App Why Dividends Do Not Matter 201
App Risk Matters 204
Acknowledgments 207
Index 211
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