Have you ever observed a baby as they crawled all over the ground? They put things in their mouths and shake different toys and all sorts of things a grown adult would not think to do. Now, I'm not telling you to act like a baby — unless that's your thing.
I'm telling you that babies experiment without the fear of failing. They have no idea what the outcome of their endeavors are going to be. That's the true definition of experimenting. And it's what we should all strive to be more like — especially when it comes to business.
Take Paul Misener, Amazon's vice president for global innovation policy and communications, for example. In the speech Misener gave to Retail Week's London tech conference, the one thing he really wanted to get out there was "the importance of failure in any sort of innovation."
He goes on to say that it's important to fail because failures are what we learn from. Take for example, Amazon's early trial and errors — Auctions and zShops were both failures, but led to the eventual success of the Amazon marketplace.
Now, unlike my example of the baby, Misener gave an example of a science experiment, "You weren't doing an experiment, you were just rehashing an experiment that was done decades, maybe centuries ago. If you're worried about the outcome being exactly what you hope it is, then you're not experimenting."
You might be wondering, well yeah, this is probably easy for a big company to say now that it's worth billions of dollars. In fact, Amazon founder and CEO Jeff Bezos recently passed Bill Gates as the richest man in the world.
Jeff Bezos briefly dethrones Bill Gates as world's richest person
Just over two decades ago Jeff Bezos started Amazon from his garage. Today, he's neck and neck with Bill Gates for the position of richest person in the world, according to Forbes and Bloomberg.
But, it didn't start out that way. Amazon wasn't always a billion dollar company. Bezos got to the top because he wasn't afraid to try new innovations — especially ones that his competitors wouldn't try. We've all seen the new eBay commercials that look like they're trying to copy Amazon.
If you're also trying to hold on to past decisions and instant gratification, you also might be looking at success wrong. Instead, look at things you need to give up to reach your long-term success goal.
So, if your business is stuck in a rut, listen to Misener. Try experimenting with a new direction that you have no idea where it'll end up. If it succeeds, great, but if it fails, even better. Eventually, you'll be so well versed in the act of failing that you'll fail quietly and subtly.
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When you take out a loan for a car, charge something to your credit card, or get a personal line of credit, there is going to be an interest rate that applies to your loan.
A lot of different factors go into what you will be charged, including your own personal credit score. But even those with flawless credit still see a minimum charge that they can't get around. That all goes back to the Federal Funds Rate.
One thing consumers rarely realize is that all of our banks are lending money to each other every night. Banks are legally required to maintain a certain percentage of their deposits in non-interest-bearing accounts at the Federal Reserve to ensure they have enough money to cover any withdrawals that may unexpectedly come up. However, deposits can fluctuate and it's very common for some banks to exceed the requirement on certain days while some fall short. In cases like this, banks actually lend each other money to ensure they meet the minimum balance. It's a bit hard to imagine these multibillion-dollar financial institutions needing to borrow money to tide them over for a bit, but it happens every single night at the Federal Reserve. It's also a nice deal for those with balances above the reserve balance requirement to earn a bit of money with cash that would normally just be sitting there.
The Federal Reserve
The exact interest rate the banks will charge each other is a matter of negotiation between them, but the Federal Open Market Committee (FOMC) (the arm of the Federal Reserve that sets monetary policy) meets eight times a year to set a target rate. They evaluate a multitude of economic indicators including unemployment, inflation, and consumer confidence to decide the best rate to keep the country in business. The weighted average of all interest rates across these interbank loans is the effective federal funds rate.
This rate has a huge impact on the economy overall as well as your personal finances. The federal funds rate is essentially the cheapest money available to a bank and that feeds into all of the other loans they make. Banks will add a slight upcharge to the rate set by the Fed to determine what is the lowest interest that they will announce for their most creditworthy customers, also known as the prime rate. If you have a variable interest rate loan (very common with credit cards and some student loans), it's likely that the interest rate you pay is a set percentage on top of that prime rate that your lender is paying. That's why in times of low interest rates (it was set at 0% during the Great Recession), a lot of borrowers should go for fixed interest rate loans that won't increase. However, if the federal funds rate was relatively high (it went up to 20% in the early 1980's), a variable interest rate loan may be a better decision as you would be charged less interest should the rate drop without the need to refinance.
The federal funds rate also has a major impact on your investment portfolio. The stock market reacts very strongly to any changes in interest rates from the Federal Reserve, as a lower rate makes it cheaper for companies to borrow and reinvest while a higher rate may restrict capital and slow short-term growth. If you have a significant portion of your investments in equities, a small change in the federal funds rate can have a large impact on your net worth.
Whether you're leaving a job involuntarily, departing for something new, or just want to prepare for the unknown, it is smart to understand all your options regarding your 401k.
Frugal gifting often gets a bad reputation. However, this shopping method does not make you cheap — it makes you practical. Frugal gifts often avoid waste and overspending and can be just as meaningful (if not more so) as any other present.
With the National Retail Federation predicting each consumer this holiday season to spend upwards of $1,000 on holiday gifts amidst an economic recession —this year might be the perfect time to reconsider your spending budget. We've formulated the ultimate list of frugal gift-giving ideas to get you started.