Wealth creation insights by the creator of the company life-cycleframework known as the CFROI valuation model. Investors searching for companies whose future profitabilitywill far exceed that implied in current stock prices, those inbusiness making decisions to improve company performance, andpoliticians crafting legislation-all use some form of a wealthcreation framework. In this book, author Bartley Madden addresses how to think aboutthe complex dynamics in generating wealth and the practicalbenefits to be gained from upgrading one's wealth creationframework. Throughout these pages, Madden shares six criticalinsights: * A systems mindset focuses not so much on the individualpieces of a system, but on how all the pieces work together toachieve the goal envisioned for the system. The systems way ofthinking described in Wealth Creation helps to avoidunintended, bad consequences, and to generate insights forleveraging change that produces big gains in wealth * Economic systems -- the rules and relationships that exist tocreate wealth by delivering value to customers -- are devilishlycomplex and therefore solving economic problems requires extensiveknowledge.
Seen in this light, knowledge growth and wealthcreation are two sides of the same coin. * A prerequisite to making better buy/hold/sell investmentdecisions and business judgments is an improved understanding ofhow wealth is created. An especially useful approach described inthis book is to connect business firms' financial performance tostock prices via the firms' competitive life-cycleframework * A deeper understanding of business firms makes it plain thatcustomers, employees, and shareholders havemutual, long-term interests. In other words, a free-marketsystem geared to serving customers through competition is a systemin which participants share the wealth that is jointly created * There is a huge opportunity for sustained, higher economicgrowth through voluntary initiatives by the private sector. Oneinitiative involves an accelerated implementation of leanmanagement, which was pioneered by Toyota. This is a systemsapproach that continually purges waste and optimizes the use ofresources in delivering value to customers * The other initiative concerns improved corporategovernance.
The wealth creation principles discussed in thisbook offer a blueprint for boards of directors to vastly improvehow they fulfill their responsibility to shareholders, and in sodoing, improve the performance of corporate America These ideas have taken shape as a natural outgrowth of acommercial research program that began in 1969 at Callard, Madden& Associates focused on how to value business firms. Itproduced the CFROI (cash-flow-return-on-investment) metric and itsrelated life-cycle valuation model. This work was further advancedat HOLT Value Associates, which was later acquired by Credit Suissein 2002. Credit Suisse HOLT continues the research to improve thevaluation tools and related global database that analyzes 20,000companies in over 60 countries. This system is used by a largenumber of institutional money management firms worldwide in orderto make better investment decisions.
Bartley J. Madden is 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 & 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 CFROI Valuation: A Total System Approach to Valuing the Firm.