One Sentence Summary: A classic book that should be read by all professionals regardless of their title and hopefully it'll result in the reduction of those who strive for mediocrity in individual and organizational performance.
One Sentence Summary: A microscope into the fascinating and inspiring life of Richard Branson with major business themes on decentralized organizations, necessity of autonomy in any organization, not giving up control, never-forgetting profitability as a startup and protecting the down-side.
One Sentence Summary:
Narrative read on learning to apply judgment, no matter how irrational, and identifying purpose behind any action.
Below are notes I've taken while reading the book. This is not a comprehensive summary but thoughts and ideas I've found valuable. I recommend reading these notes after you've read the book first to compare our thoughts. I can't stop you if you don't want to so I guess you can use the below as an idea of what you may get out of the book yourself if you read it... though if it ain't clear it's cause you didn't listen to me.
Food for Thought
First flight was on December 17, 1903. It has only been 100 years since people have been able to freely explore the world.
Apple has been able to challenge the computer industry, small electronics industry, music industry, mobile phone industry and the entertainment world in general. It has evolved from a computer desktop company to a luxury brand company that is focused on cellphones. That in itself is a highly unusual feat that is seldom appreciated.
"In nearly every circumstance, the companies that are forced to treat their products as commodities brought it upon themselves."
Most companies don't know why their customers are their customers. Consequently they don't know why employees would choose them. With both the case, the won't know how to attract and retain customers and employees.
Loyalty and repeat business are different things. One needs to be won, the other can be manipulated
"Only companies that act like commodities are the ones who wake up every day with the challenge of how to differentiate. Companies and organizations with a clear sense of WHY never worry about it." Plays on the adage of "what do you do better or cheaper than the competition?"
"If people made only rational decisions, and did all the research before making a purchase, no one would ever buy a Mac." -> It's not that Apple has "best-quality/product/feature/service/price". The loyalty comes from the deeply personal place of what Apple is for them. It's always about what the customers feels personally, not about Apple. People then just rationalize the purchase reason with the Neocortex. No data can discuss this. It's qualitative. - pg. 63
"Differentiation happens in WHY and HOW you do it." -> Delta and United tried copying Southwest's model but they failed because all they copied was the HOW. The What turned out to be very different results.
The company may have a clear WHY. But the customer will choose the company for how he interprets the WHY to his own life. NOT because he interprets the Why the same way the CEO does.
"The goal of business should not be to do business with anyone who simply wants what you have. It should be to focus on the people who believe what you believe." -> Should always have a win-win relationship. It also means, it's okay to fire bad-fit clients because they will only give short-term gain for long-term pain. pg. 80
Being customer focused is good. But focus on service to your loyal customers and fire those who shouldn't be your customers. Southwest Airlines is customer focused but they focus on employees first, then customers.
"Employees come first and if employees are treated right, they treat the outside world right, the outside world uses the company's product again, and that makes the shareholders happy. That really is the way that it works and it's not a conundrum at all." - Herb Kelleher, CEO of Southwest Airlines
Decentralization works as an organization grows because you start letting people implement their own "why" and "how". This is imperative for an organization to succeed because it not only develops new leaders but continues to build trust internally. Decentralization is the way to create one team, centralization is just one person.
You can't just copy what top companies just "do" as part of their processes. You have to let it grow organically focusing on the core of the business and what the business is trying to achieve. Just copying the How and What is hollow and unsustainable. Need purpose. So don't blindly follow. Think first as to why what others do may work for you.
Sam Walton didn't invent the low cost model. What he did well was investing in his people, trusting them and he was rewarded in return.
Jim Senegal drew a salary of $430,000 at Costco and Sal Walton drew no more than $350,000 per year. Leaders set the tone of the company. Costco also paid 40% above average wage compared to competitors and that led to 5x lower turnover than competitors.
Leaders inspire people to act by giving them a sense of belonging + purpose.
"It is not the systems that fail but the ability to maintain them."
Golden Circle framework is Why, then How, then What. Most go opposite. But start with Why. Why you get out of bed, Why you are doing the what, and Why people should even care. Starting with Why is how you communicate from the inside to out. The What is the tangible proof (fact/data) of the Why (the belief). People buy the Why, not the What.
Humans love to belong. Koreans in Korea don't all love each other but when they leave Korea and go to a foreign country they gather up and form a community and everyone becomes friends automatically. It's natural.
Limbic bran is the reptilian part that makes emotional decisions. It is then rationalized by the Neocortex which is the language processing area. Limbic makes the decision and Neocortex explains why with facts/data/rationalization.
"When you force people to make decisions with only the rational part of their brain, they almost invariably end up "overthinking." These rational decisions tend to take longer to make, says Richard Restak, and can often be of lower quality. ~ gut decisions, tend to be faster, higher-quality decisions." - pg 57
"If we were all rational, there would be no small businesses, there would be no exploration, there would be very little innovation and there would be no great leaders to inspire all those things." -> The idea of leaving home, leaving safety, taking risks, are all considered irrational by society. It's all gut that makes people do it and that is driven by the limbic brain with a rationalizing neocortex. pg. 62
The WHY builds the brand as a symbol. No one notices the number of Dell PCs open in a cafe. But they are notice the glowing apples.
"Trust is a feeling, not a rational experience." -> You can't pre-meditatively calculate for it. It builds because you earned it.
People don't follow an influencer for the influencer's passion and beliefs. They do it because the influencer resonates with their own passion and beliefs in their own interpreted way.
Illogical actions and beliefs of the status quo are not based on stupidity but rather ignorance of the alternative. Providing new information and perspectives may be the important solution to letting people slowly make the shift until the majority adopts a new status quo due to the proverbial weakness of FOMO.
Staying cognizant of your Why will keep you from making short-term decisions that give immediate pleasure but are not in-line with your Why, which is long term in nature.
Trust is not rational
"Great leaders are those who trust their gut. They are those who understand the art before the science. They win hearts before minds. They are the ones who start with WHY." -pg. 60
"I can make a decision with 30% of the information," said former secretary of state Colin Powell. "Anything more than 80% is too much." -> There is always a degree of certainty required with decision making but it's never absolute. It is more so the case that making decisions based on facts but are against our gut make end to poor outcomes.
Achievement is the milestone you hit, like a goal. Success is a state of being where you wake up pursuing Why you do What you do. Success comes about from designing the right system and you need achievement as feedback for whether the system is working.
"When you compete against everyone else, no one wants to help you. But when you compete against yourself, everyone wants to help you."
"Leadership requires two things: a vision of the world that does not yet exist and the ability to communicate it."
"For values or guiding principles to be truly effective they have to be verbs. It's not "integrity," it's "always do the right thing." -> Build systems and adhere to them with discipline to make the WHY work. These will require short-term costs and investments for long-term gain.
"Only way people will know what you believe is the things you say and do." -> Why is internal. The How is the process. The What is the result from both.
Continental airline's Gordon Bethune focused on setting a goal that was measurable and controllable by the employees. One of them was the on-time rate of planes. This cost approx. $5MM if the planes were late and when he got everyone focused on improving this, he would also reward all employees with a separate cheque for the benefit the company received from improving the on-time rate. I found having a separate tangible cheque as being quite significant.
When hiring, hire those that believe in the same WHY. Even the job ad should say WHY and not WHAT.
"As Herb Kelleher, founder of Southwest Airlines, famously said, "You don't hire for skills, you hire for attitude. You can always teach skills."" -> Southwest focused on understanding why people were such good fits and developing a system to find more of them.
I believe organization hierarchy should be project dependent with leaders/managers selected from within by the project participants. The salaries and pay should be based on the amount of value they add to the company, not what they did prior to.
"I didn't find a way to make a light bulb, I found a thousand ways how not to make one." - Thomas Edison
"Remove the net and he will only do the safe tricks, the ones he knows he can land." -> In reference to a trapeze artist practicing tricks. It's true. I will only try setting a new PR in training if I know I have a spotter there who can bail me out if I were to fail. But having a safety net makes a huge psychological difference in taking risks. This is especially the case in situations where you not attempting it won't result in any negative outcome to others and yourself. In cases where the inaction results in an adverse outcome, then the fear of failing in taking the risk can be a motivator
"Only when individuals can trust the culture or organization will they take personal risks in order to advance that culture or organization as a whole." -> FYI, take care of your people first!
"What's the difference between Sir Richard Branson's personality and Virgin's personality? Nothing. As a company grows, the CEO's job is to personify the WHY."
Honore Construction requires strict clock in and clock out time. Like Basecamp, a constrained working model focuses on employee effectiveness and wasted time has hence dropped to a minimum.
Leadership changes should be viewed as a succession and not replacement of the old leader. Successions should come organically from within by someone who already embraces the Why.
One Sentence Summary:
Fun introductory read exploring the foundation of human motivation with numerous studies to shed light on the author's perspectives and provide you with a toolkit to design organizations
Below are notes I've taken while reading the book. This is not a comprehensive summary but thoughts and ideas I've found valuable. I recommend reading these notes after you've read the book first to compare our thoughts. I can't stop you if you don't want to so I guess you can use the below as an idea of what you may get out of the book yourself if you read it... though if it ain't clear it's cause you didn't listen to me.
Food for Thought
Dr. Edward Deci's study found that individual's who were given a reward for a task they didn't get a reward for before ended up spending less time doing the task. Indicative of the fact that when a monetary reward is attached to something people will only do a task up to the point the reward will be provided and no more.
Only contingent rewards ("If-Then" rewards) had a negative effect on motivation due to forfeiture of autonomy as someone else giving a reward for a certain amount of performance resulted in loss of control over a personal situation per a study by Mark Lepper and David Greene. This would be reflective in companies that give performance pay. I believe setting out a set salary and having a company profit sharing that is transparent would be much more ideal.
"Intrinsic motivation = Drive to do something because it is 1) interesting, 2) challenging, and 3) absorbing - is essential for high levels of creativity"
Britain found out people would not give as much blood if they paid instead of asking for donations. Extrinsic motivators were weaker than intrinsic. Humans have an inner altruistic component. Number reduced by 50% in same experiment done in Sweden.
Introduction of monetary punishment for parents who came to pick up children late resulted in more parents coming late because now it was an externally driven transaction compared to an internally driven effort to be punctual.
"Short-term price crowds out the long-term learning." Instead of short-term rewards, just set really easy and achievable goals to build momentum of habit setting. Paying people to create a habit produces results in short term but it never lasts if incentives are removed.
Deeper motivation elements = autonomy, mastery, purpose
Type I (intrinsically-motivated) motivators are: freedom, challenge, purpose of the undertaking. Money and recognition do matter for Type I too. But once you reach fair and adequate pay, you can take the money off the table and Type I's can focus on the main motivators. For Type X (extrinsically motivated) the money IS the table - Chapter 3
"Type I behaviour emerges when people have autonomy over the four T's: their task, their time, their technique and their team."
"Nothing is more important to my success than controlling my schedule." - Scott Adams, Creator of Dilbert
Best predictor of success is "grit" = the perseverance and passion for long-term goals
"Being a professional is doing the things you love to do, on the days you don't feel like doing them." - Julius Erving , Basketball Hall of Fame. -> It is as if he pulled the lines straight out of Steven Pressfield's book
"Hire good people, and leave them alone." - William McKnight, CEO of 3M
Mayo clinic would let doctors spend 1 day a week to focus on a part of their job of their choosing based on what was most meaningful for them and that reduced their burnout and emotional/physical exhaustian rate. -> Chapter 6
"What if we flipped our thinking - and designed our workplace policies for the 85% rather than the 15%?" -> 100%. Most companies have policies and best practices and rules all tailored to guide or stop the bottom performers but that mindset of bringing the organization's speed down to the bottom performers will only slow down the entire train. The organization should be catered to the top performers to enable them and assume good faith in all employees instead of distrust. A document filled with policies shows nothing but distrust.
Assume people want to do good work. Because then you will treat them like they want to do good work. Then you will realize you should let them focus on doing the work itself rather than the time it takes them to do the work. This should probably result in abolishing billable hours in professional services firms as a measure of employee performance. - Chapter 4
"In the long run, innovation is cheap. Mediocrity is expensive - and autonomy can be the antidote." - Tom Kelley, IDEO General Manager
Howard Hughes Medical Institute model: 1) Tolerate early failure, 2) reward long-term success, 3) give great freedom to experiment
"Management isn't the solution; it's the problem." -> Lessen the gap between the leaders and employees. Decentralize. - Chapter 4
To allow for heuristic employees to be creative an environment where they are not rushed with financial incentives is required. I think this is why artists who make their craft a profession start disliking it because they feel stress from the tie of financial reward and performance. Sam Glucksberg's candle test resulted in individuals getting more narrow focused and less creative when incentives were provided for more money for faster speed.
"Rewards and punishments can give rise to cheating, addiction, and dangerously myopic thinking."
"Best use of money as a motivator is to pay people enough to take the issue of money off the table."
Food for Thought
Economics is not the study of money. It's the study of behaviour
"In a curious way, age is simpler than youth, for it has so many fewer options." - Stanley Kunitz, U.S poet laureate
"What you decide not to do is probably more important than what you decide to do." - Tom Peters, management guru
Stefan Sagmeister, designer, Takes a year off every 7 years. He does it to give his body and mind a rest and think of new ideas and expand his creativity. He often says the ideas he develops in the 1 year off generate income for his next 7 years. This takes lot's of saving and planning on his part to allow for this. But this seems to be key. Taking mini-retirements consistently to recharge your mind and body. Also, plan for it in advance so you are forced to live that life that you dream of.
"There is no reason to believe any longer that only irrelevant 'play' can be enjoyed, while the serious business of life must be borne as a burdensome cross. Once we realize that the boundaries between work and play are artificial, we can take matters in hand and begin the difficult task of making life more livable." - Mihaly Csikszentmihalyi
"Left to their own devices, Csikzentmihalyi says, children seek out flow with the inevitability of a natural law. So should we all." -> This is why it is valuable to reflect to your childhood for pattern analysis on what you loved to do. -> Chapter 5
One Sentence Summary:
The perfect book to help you get your head out of your ass, and then finally you off your ass to finally commit to pursuing that thing you know you should be doing but have chosen not to by making up all the self-deprecating and societal-blaming bull shit you feed yourself.
Below are notes I've taken while reading the book. This is not a comprehensive summary but thoughts and ideas I've found valuable. I recommend reading these notes after you've read the book first to compare our thoughts. I can't stop you if you don't want to so I guess you can use the below as an idea of what you may get out of the book yourself if you read it... though if it ain't clear it's cause you didn't listen to me.
The voice in your head stopping you from living the life you dream is "resistance." It's not easy to defeat resistance. If it was then there would be no need for alcohol, junk food, tobacco, drugs and even therapists. He refers to how Hitler was in Fine Arts school and Architecture school in Vienna but resistance beat him, hence: "it was easier for Hitler to start World War II than it was for him to face a blank square of canvas."
Most people realize resistance and face it after having faced death once. I think that is why there is tremendous importance in embracing death and actually accepting that fate of yours. Because only then can you clearly see the resistance blocking you from being the person you truly desire to be.
Book One: Resistance. Defining the Enemy
"Resistance is always lying and always full of shit." -> All your bullshit excuses of inaction
"The more important a call or action is to our soul's evolution, the more Resistance we will feel towards pursuing it." -> Nothing worth having comes easy. So ask yourself "what is the thing you constantly dream of but never inch closer to pursuing?" That is probably what your priority should be.
You have to fight resistance every day. It's a new battle today and a new one tomorrow.
Resistance plays for keeps = Resistance wins when dreams remain just dreams. That is a life unfulfilled.
Resistance feeds on fear so you must first learn to overcome it by defining the fear down to its first principles and realizing it is never a permanent negative impact.
Resistance will be only triggered when we are looking to do that which is worthy of our time and will bring us genuine excitement.
"Don't open that bag of wind." -> Odysseus was close to his homeland when the crew opened a bag of wind that shouldn't have been opened and it sent them years away from home. Resistance will be make a final assault when you think you are at the finish line so build systems to prepare for it and don't let up. It's like how you first overcome resistance to start a project and then you never end up finishing it because you got hit by resistance.
"The best and only thing that one artist can do for another is to serve as an example and an inspiration." -> It's hard enough trying to fight personal resistance, you can' be thinking about playing hero to save everyone. The service you can do is act as the icon to inspire.
"I'm going to start tomorrow." -> No. Fuck you, start now.
"It's easier to get busted in the bedroom with the faculty chairman's wife than it is to finish that dissertation on the metaphysics of motley in the novellas of Joseph Conrad" -> Even forms of sex, and pleasures may not actually be love or lust but Resistance in action. That is why it feels so hollow for you. You'd rather do something completely stupid and damaging than do something that is good for you.
"'Am I really a writer? Am I really an artist?' chances are you are. The counterfeit innovator is wildly self-confident. The real one is scared to death." -> I needed to hear this to fight all the self-doubt that's been brewing within myself. Thanks for the confidence.
"The more scared we are of a work or calling , the more sure we can be that we have to do it."
"Resistance presents us with a series of plausible, rational justifications for why we shouldn't do our work" -> The reasons can actually be legitimate. Some may be forced rationalization, which may make it easier to laugh at and toss aside as an excuse. But a legitimate reason may make you pause and think harder about what you are about to do. However, that too doesn't mean shit. For if you continue to choose to be held down by a plausible and rational justification to not do something you will never be able to push past any boundary and resistance will ultimately win. You have to be willing to blow past rationalization.
You can make all kinds of fucking excuses but people before you have done more with even more obstacles and resistance. Heck, women have been giving birth without the beauty of modern medtech for 50 million years. What bitchass reason of yours can withstand a woman shooting a person out of her with the risk of a painful death.
Book 2: Combating Resistance. Turning Pro
"The amateur is a weekend warrior. The professional is there 7 days a week. The professional loves it so much he dedicates his life to it. He commits full-time." -> It's not just some hobby. To truly be passionate in something you have to love it so much that you show up to master it every day. Something you do on the weekends on the side just for fun with the fear that if you start earning money from doing it once you try to be pro at it means you're more afraid of finding out that which you thought you loved turns out not to have been as big a passion. Because if trying to earn money from it to do more of it makes you dislike it then you probably were mistaken about it in the first place.
You don't wait to work until inspiration hits you. You show up everyday to do your craft. Only when you consistently show up will inspiration attend your party. It's about showing up every day, showing up no matter what, staying committed for the long haul, having real stakes on the line, being compensated for your labor, you can laugh at what you do, you look to master the technique, and you get real world validation for the work you produce. It's about consistently staying committed to grow and work on your craft no matter what. You don't over-identify with it. You can complain and talk shit about the difficulty of achieving mastery. It's supposed to be a struggle.
"So you're taking a few blows. That's the price for being in the arena and not on the sidelines."
"The more you love your art/calling/enterprise, the more important its accomplishment is to the evolution of your soul, the more you will fear it and the more Resistance you will experience facing it." -> It's going to be so much harder than being a weekend warrior but the payoff for each accomplishment and win you get will be so much sweeter. No weekend warrior will be able to relate or experience that.
There are no fear-less warriors. Just those who act in the face of it.
"The field is level, the professional understands, only in heaven," -> There is no fair fight. Also, nothing will go according to plan.
"The professional cannot take rejection personally because to do so reinforces Resistance." -> ugh, I know this but it's just so hard.
"The professional self-validates." -> Focus on the process. That which you can control. Stick to the internal scorecard to measure constant growth. Don't get married to a feedback or result. They are just guides and single data points. Their only value is in helping you grow and learn.
It's always better to be stomped in the arena than be looking onwards from the stands. Spectators are those who've given into resistance and have chosen to live off the superficial view of those living the life they desire. Sometimes those in the arena can play the role of inspiring spectators to join the arena. To do that, the artist must still focus on his own battles.
"The professional learns to recognize envy-driven criticism and to take it for what it is: the supreme compliment. The critic hates most that which he would have done himself if he had had the guts." -> The critic is a gutless pro. They will always be unhappy someone is doing the things they were too afraid to do.
Build a team. If you want to scale.
Don't be afraid of continuous career changes for it's the required process to continuously reinvent yourself. It only means you are growing.
Be the corporation of yourself. It will help you become less subjective, take blows less personally but also be able to charge objectively like a business. Also, actually "being" the professional you intend to be is an essential mindset shift that can help you battle resistance.
"We make up our mind to view ourselves as pros and we do it. Simple as that."
Book 3: Beyond Resistance. The Higher Realm.
If you finish your craft. Great, quickly celebrate then get back to work.
"This alone is denied to God: the power to undo the past." -> time.
"Whatever you can do, or dream you can, begin it. Boldness has genius, magic, and power in it. Begin it now." - W.H. Murray -> Seems boldness and courage gone sour will look like foolishness in hindsight but gone well will seem as genius.
Psychologist Tom Laughlin works with cancer patients and he discusses how people who find out they have terminal cancer immediately shift their focus from the "ego" that makes them do the things that don't actually mean much to them to their "self", the intrinsic motivators that are real. He then discusses how those who choose to go do the activities and pursuits that they've always wanted actually go through remissions at times as well. I think there is validity here. I do believe that cancer may have been created in the body not from bad luck but actually from living a life so miserable you've verbally said you felt like dying or constantly thought about it. I think constantly reinforcing that thought practically wired your body and brain to create cancer to allow you to die faster. Then once you realize this you go seek what you dreamed of doing. When you do this you love life and you want to live. You say this aloud and think it daily and this makes the brain tell the body to put the cancer into remission. Like this the mind and body are connected. I truly believe this.
"We lose friends. But we find friends too, in places we never thought to look. And they're better friends, truer friends. And we're better and truer to them." -> You will outgrow your friends. You will naturally gravitate to others that have similar beliefs and values as yourself and be not afraid of it but actually seek it out. Make it a purposeful effort to surround yourself with a group that can support you in your growth, not keep you in the status quo or take you down the path you don't care for.
Focus on the intersection of passion and strengths. Only thing stopping you are the rules and stigma built up by the people before you and if they are majority they should be ignored.
"If we were born to overthrow the order of ignorance and injustice of the world, it's our job to realize it and get down to business." -> Took me by surprise. It so closely resembled what I believe my mission in life to be.
"We thrash around, flashing our badges of status (Hey, how do you like my Lincoln Navigator?) and wondering why nobody gives a shit." -> This kind of shit only works in small hierarchies. In the small groups that care. That's why people gravitate to niches. You find a small pond and try to be a big fish in that pond because it's too hard to play hierarchy in a massive scale. This also made me think about how the value of a "brand" is only relevant to a niche. Afterwards, it spreads to the rims around that niche. So if you want others to appreciate the career capital you've built, then you're better off showing it off to those who are part of your niche and understand the hierarchy you played in. For you'll both have similar ideas of the journey and effort and value of what you've earned.
Think territorial. Not hierarchical. Find your niche. Find it by trusting on doing what you want. Do what excites and interests you. If it doesn't, it probably won't achieve the success you want. Let your limbic brain guide you and no need to rationalize it, it's all bullshit anyways. Just think of rationalizing how you'll break the rules and constraints set by people before you and around you.
You turn something into a territory by putting in the work. Then the territory will give back to you with a place that sustains you. It's how I feel in conversations about career and learning, at the gym, analyzing businesses and people.
Think of creating good art for the sake of creating good art. For creating good art you can actually be proud of. Not for it's financial gain or for ego that feeds from the external. It's like a parent raising a child. You don't give birth to one thinking about all the things it could do for you.
"If I were the last person on earth, would I still do it? So, if you'd still pursue that activity, congratulations. You're doing it territorially." -> You have to get the sustenance from doing the act itself and not from the impression it makes on others. Intrinsic vs extrinsic. You know if your work is terriotorial instead of hierarchical if you would go to that place if you were freaked out. Would I show up to the gym even if I was the last person on earth? Yep.
One Sentence Summary: Exceptionally motivating and inspiring guidebook to put your life into perspective through the lives of countless high-performers whilst even providing you with ways to get closer to the folks you connected with most.
One Sentence Summary:
The memoir of an esteemed novelist whose pragmatic view of running and how it has become a pillar for his success in his career.
On long-term projects he stopped at the point where he could write more. The purpose was to be able to continue the rhythm for the next day. The idea of continuing the momentum
"So, at 36 miles per week, I cover 156 miles every month, which for me is my standard for serious running. ~ In other words, six miles a day, six days a week." -> I see this as another example of a high performer breaking large scary tasks down into the smallest forms and executing on it. pg. 7
He has been running for 23 years and has competed in 1 marathon every year. Making it 23 marathons. He believes running has been the most helpful and meaningful habit he has developed and I'd agree in saying that is what I feel with powerlifting as well.
"Beating somebody else just doesn't do it for me" -> Competitive doesn't mean that you must like "winning" or "beating" other people. I think the world puts people who love competition in a pedestal and those that don't as weak. i think I love the competition of powerlifting because it is all about self-improvement. A form of internal competition. pg. 9
Cities morph around rivers. Rivers themselves remain unaltered.
Haruki owned a bar for 10 years. It was a coffee shop by day and a Jazz bar by night. Beauty. He attributes does tough 10 years of working 100+ hours a week as being material in giving him the experience needed to write novels later on. I do thoroughly believe that a writer will only be able to produce captivating writing only after he's "done things".
"-this is my first experience growing old, and the emotions I'm having, too, are all first-time feelings." -> Everyone is making shit up as they go. Think about this when you hear advice from people. They've only been 28 once and they are 40 for the first time. pg 18
"Emotional hurt is the price a person has to pay in order to be independent." -> pg.19
Haruki about running: "-this is a pretty wonderful thing. No matter what anybody else says" -> Remember, fuck what others think. Think for yourself and stay true to that. No one else is going to live your life for you. pg. 23
At 29. "And pretty much out of the blue I got the idea to write a novel" -> Your career isn't what you decided to do at 22. It will take many different swings. As long as you embrace that journey and know that each decision is in YOUR best interest. It will work out. pg. 27
"If I wanted to have a long life as a novelist, I needed to find a way to keep fit and maintain a healthy weight" -> why he started running. Born from an enjoyment of writing to begin with. pg. 33
"I got up before 5am and went to bed before 10pm" -> his new life as an author. Sounds like my life. pg. 36
Haruki doesn't do any more work at the end of the day. He uses it to relax. It's a function of learning to prioritize the 2 essential resources of our life. Time and Energy. Allocating it correctly for yourself is a skill that should be learned by a certain age for longevity and prosperity of your life.
People naturally continue to do things they like. They tend to keep that up if it's an activity they really care for. So to even build a habit. You must truly want it with your own motivation behind it. Without it. You won't give a shit.
"The most important thing we ever learn in school is the fact that the most important things can't be learned in school" -> pg. 45
"It's a pretty thing, the wall separating healthy confidence and unhealthy pride" -> The importance in mastery of why masters always have the mindset of a student. pg. 54
To build habits, you have to carefully increase the load, step by step. You have to take your time and do it in stages. If the loading halts for a few days then you lose the consistency to continue onwards so must start from the earlier stages. This is the process Haruki uses to describe developing the appetite for distance running. But I see it as a process applicable in building any form of sustainable habit.
"I generally concentrate on work for 3-4 hours every morning. I sit at my desk and focus totally on what I'm writing. I don't see anything else, I don't think about anything else." -> forced deep work. Always required to accomplish anything meaningful. pg. 77
Haruki speaks of 2 Olympic level runners. They were Olympic hopefuls that ran on the same running path as him. He didn't see them one day. Found out both died in a car crash. Both had also recently gotten married too. Death doesn't wait for noone. One may see this as "what is the point then of working hard to maybe get into the Olympics when you can die". One may see it as "At least they enjoyed their life up to that point focusing on what they loved". I agree with the latter. I also believe people who think the former are people who actually never experienced any form of activity they truly enjoyed and did for themselves.
"If you're going to while away the years, it's far better to live them with clear goals and fully alive than in a fog, and I believe running helps you do that. Exerting yourself to the fullest within your individual limits; That's the essence of running, and a metaphor for life - and for me, for writing as well" -> When you find you want to push yourself so hard to get better at something, you may have found something worth doing with your life. pg 83
Not a book note but as I read this chapter a guy in a coffee shop asks me which Murakami I am reading. It's continued reinforcement of my belief that many individuals actually enjoy reading and not all of us are wasting lives behind social media.
Haruki doesn't fit the stereotypical 'degenerate' image of an author that is common in Japan. For this he has faced societal judgment. They say "he's no artist" for to be an artist you can't be as well kept and disciplined as he. But he ignores them. he just keeps on running. Doing his thing. For someone so successful to not be considered an artist by those who haven't accomplished half the things he has must be frustrating. But he seems to have built up a stronger reliance on his internal scorecard to block this out and that is admirable indeed.
"No matter how slow I might run, I wasn't about to walk. That was the rule. Break one of my rules once, and I'm bound to break many more" -> It's easier to stick to your principles 100% of the time than doing it 99% of the time. pg. 111
A refreshing thought of passion is the loss of love for it. Haruki describes how he has actually lost the love for running for some time after poor experiences in the marathon. I think this makes sense. You can't love something constantly all the time. You can love it on average more than other things. I think that is what separates passion from other activities. But seeing his struggle, it reminds of my loss of love for powerlifting and I think that is all okay.
"One day, out of the blue, I wanted to write a novel. And one day, out of the blue, I started to run - simply because I wanted to. I've always done whatever I felt like doing in life." -> It's so simple. What is the point of living life if you are not going to do what you want to do. I fundamentally believe if people choose to do things they truly want then they will figure out a way to adjust their lives to it. I think finances can be solved. Anyone who disagrees just has a boatload of excuses and an unfulfilled life to support that. pg. 150
"~ sometimes taking time is actually a shortcut" -> It may seem slow at first. But that is the short term view. Over a long term, you were going much faster than everyone else. pg. 161
"It doesn't matter how old I get, but as long as I continue to live I'll always discover something new about myself. No matter how long you stand there examining yourself naked before a mirror, you'll never see reflected what's inside" -> No time is wasted time. With each passage of time you have the opportunity to reflect and that is why you journal. Capture the constant learnings. pg. 163
"Whether it's good for anything or not, cool or totally uncool, in the final analysis what's most important is what you can't see but can feel in your heart. ~ even activities that appear fruitless don't necessarily end up so" -> Humans are extremely poor forecasters. Even forecasting what you do will be of value can be incorrect, even if it is obvious. The only true thing that you can right about is in doing things you genuinely love and feel value for. Then the rest will work itself out on whether it benefits society etc.. pg. 172
"I'll age one more year, and probably finish another novel. One by one, I'll face the tasks before me and complete them as best I can" -> Just tackle everything one at a time. It will seem slow. But it actually isn't. pg. 173
This is what Haruki envisions for his gravestone:
1949 - 20**
Writer (and Runner)
At Least He Never Walked.
What will yours say?
One Sentence Summary:
Detailed yet easy read on the inner workings of Basecamp, one of the first 100% remote bootstrapped software companies, that can be applied for any entrepreneur
37signals was the first company. It was a web design consulting firm. They developed Basecamp to solve an internal project management problem. But their clients wanted it and soon that tool became the company itself. Same story as Hootsuite, social media consulting company that developed an internal tool customers ended up wanting more of. My belief that a sustainable and valuable company that I will enjoy the process of making must be born from "scratching my own itch" stands.
Learning from successes is MORE valuable than failures. "When something succeeds, you know what worked - and you can do it again". A HBS study found successful entrepreneurs have 34% future success rate. Compared to people who have failed and/or are starting from scratch who both have the same 23% success rate. Success breeds success and that is what counts. Don't overvalue failures.
Don't overemphasize planning. My POV is to limit yourself down to a small number of goals (4 or less) and just focus on running with those. Everything else is a distraction
Big isn't always better. It has to fit the business model of a company. If growing was always the best, then why doesn't Harvard or Stanford take thousands more every year with campuses all over the world? Understanding why you are growing and the purpose of it is important.
"Workaholics aren't heroes. They don't save the day, they just use it up. The real hero is already home because she figured out a faster way to get things done" -> It's the quality of your hours. Most people can get a phenomenal amount done in 8hrs of pure concentration. Most are just shitty at using their time. pg 26
"Everyone should be encouraged to start his own business, not just some rare breed that self-identifies as entrepreneurs" -> Don't we all want control over our lives? pg 28
Though, when building a business/product don't make a me-too. Make something where your customers will MISS IT if it no longer was in service. Something that genuinely improves the quality of life.
Story of Vic Firth, drumstick maker is fascinating. Scratches his own itch. Makes amazing drumsticks. Now dominates a niche with 62% market share. The value of making yourself "customer of one" is that you can assess what you made quickly and directly.
"Don't let yourself off the hook with excuses. It's entirely your responsibility to make your dreams come true" -> You will make time. If you actually want something bad enough you will make the time regardless of other obligations. This is actually a way to test how much you really want something. pg 40-41
"When you don't know what you believe, everything becomes an argument. Everything is debatable. But when you stand for something, decisions are obvious." -> Hence the value of having guiding principles and visions to help build out your mental model. Without it, you will be lost in the desert. Build your compass. This also means you will say no to many things that may seem interesting or tempting. pg 44.
"Act like an actual business and you'll have a much better shot at succeeding" + "A business without a path to profit isn't a business, it's a hobby" -> Especially important, if I want to bootstrap my business, is how would I generate a profit. pg 56
"Building to flip is building to flop" -> So many wantrepreneurs I speak with are focused on the exit strategy. The big acquisition payday. Then what? If the point of starting and running a business isn't because you enjoy it, then you shouldn't start at all. Not like you'd succeed without that love for running one. pg 59
"Constraints are advantages in disguise. Limited resources force you to make do with what you've got" -> Force yourself to get creative with limited capital, time (i.e. deadlines). Even limiting features and functionalities to the simplest and bare forms is important. pg 67
Focusing on constraints leads to the idea of cutting out 'good' stuff to focus on delivering the great stuff. Cut out the fat (and your amibitions) and just focus on delivering the great essentials. Fancy steak restaurants make you buy the sides separately on top of the steak. Just focus on the steak, not having great sides too. Ignore the details and get the outline done. Iterate after feedback #agile.
Question to help narrow in on your MVP: "If I took this away, would what I'm selling still exist?"
"Decide and move forward" -> Only way to build momentum. You make a mistake? That's okay, you can correct it. pg 77
"The core of your business should be built around things that won't change. Things that people are going to want today and ten years from now" -> People/Culture of the business comes to mind as the core internal foundation. This is also the mindset for investing in companies as well: what is the core value proposition the company is providing its customers? For Amazon it's the convenience of fast shipping with the ease of having everything I want in 1 place. pg 85
Always look to sell everything you've put time into. Even selling the process. Basecamp used to blog about how to run a company based on their philosophy. That became a book they started selling. There are many things I've done I could write about or sell. It's a matter of putting it all online. As Derek Sivers says "if it's not online you didn't do it".
"Is it really worth it?" -> Should be the cornerstone question before making any decision. Understanding what upside you are deciding to choose for and what you will forego is important. It is important to decide first but you still want to make sure the decision has been thought through for value. pg 103
Productivity requires ALONE TIME. This means NO INTERRUPTIONS or DISTRACTIONS. Focus on CREATING this space by waking up early or setting time blocks. That is why your environment is so important. Focus on stretching out these alone blocks for as long as possible. Constant distractions can hinder your progress.
Think judo technique. Most out of doing least. 80/20. Go for simple, barebone non-glamour. Focus on making actual progress, not the illusion of it through fancy processes and long hours.
"The longer something takes, the less likely it is that you're going to finish it" -> So break it down. Pick enough low hanging fruits and you'll have enough to open up a market stand. But you need the constant stream of quick wins to build momentum. Try to ask yourself what you can do in 2 weeks. pg 115
SLEEP -> "What distinguishes people who are ten times more effective than the norm is NOT that they work ten times as hard; it's that they use their creativity to come up with solutions that require one-tenth of the effort. Without sleep, you stop coming up with those one-tenth solutions -> Find the key questions that need to be addressed for everything. pg. 121
Humans are terrible at forecasting. Ergo, break project timelines down into smaller chunks. A unique thought Jason had here was to change one 12-week project into 12 one-week projects. Mindblown. Then further looking down on 30 hour tasks as 6-10 hour chunks by breaking them down even more. It's about breaking tasks down so that you can deal with them quickly. Have a small to-do list for the week and have it be easily knocked out for the day
A line from Paul Graham hits me here: Do something you love doing that others hate doing. It's about putting yourself into the product to make it a unique thing no one else can offer. Zappos had amazing customer service where the reps were empowered. "Pour yourself into your product and everything around your product too: how you sell it, how you support it, how you explain it, and how you deliver it". I think this becomes part of the story you'd be selling, as well as, the culture you would be shaping.
"Underdo your competition" -> If you just try to outdo your competition by matching how much they spend, the number of features they have etc.. then you become a defensive company that chooses to follow instead of lead. pg 144
No is the default. It's either a "Hell Yes" or "no". Ignore pleasing the minority at the cost of the majority. Just recommend your competitor to those minority customers. Everyone will still have a win-win that way. If you can't love your product, you won't be able to believe in it, ergo won't be able to convince customers about it.
If customers want a key feature. They will constantly ask you for it, so no need to write every single feedback down. Just focus on the ones that keep on repeating.
"Build an audience" -> Share valuable information in any medium you want to build an audience. That is the "sustainably captive customer base". pg.171
Out Teach > Out Spend your competition.
Chefs make cookbooks of their recipes. But they have no fear of a customer reading it and ousting them. Because he knows once you read about his moves you are effectively playing his game, not your own. Same with business. Share everything you know. Use it to build the story and teach. pg. 177
"Marketing is not a department" -> Everything everyone in the company does will effectively translate as marketing for the company. Customer service is marketing, answering the phone or email is marketing. Your entire website is marketing. It's a mindset shift to install in your company culture for sure. pg. 193
"Trade the dream of overnight success for slow, measured growth. Start building your audience today. Start getting people interested in what you have to say. And then keep at it. In a few years, you too will get to chuckle when people discuss your "overnight" success" - pg. 197
Hire only when necessary after you've done everything you could. You should be running a business you love being a part of running so hiring to constantly shirk duties isn't a viable long term strategy. Only hire when you need to.
Hire slowly. I'd rather run an intimate dinner party than a club.
Resumes = ignore it. Cover letter. if the first paragraph sucks, the second has to work that much harder. pg. 211
"How long someone's been doing it is overrated. What matters is how well they've been doing it" -> I agree. 2 or 5 years doesn't mean much. Rather it sometimes shows you are average and complacent as fuck. Instead of trying to accomplish the 2 year stint in 6 months.
"Clear writing is a sign of clear thinking". pg. 222
"Culture is the by-product of consistent behaviour" -> So, habits. A system of habits actually. pg. 249
Build a rockstar environment by focusing on trust, autonomy and responsibility. You develop them by giving people the privacy, workspace and tools they need. Use an environment to create rock stars, not try to fill your company with a hodge podge of them.
"When everything constantly needs approval, you create a culture of nonthinkers" -> Banks and government organizations. Creating boundaries of requiring approval may actually make them want to test boundaries and abuse it as a way of rebelling out. Effectively, you treat them like teens and they will become teens. pg. 255
"You shouldn't expect the job to be someone's entire life - at least not if you want to keep them around for a long time" -> it's about BETTER hours, NOT MORE. Force people out by 5. Create these constraints so they think about maximizing their time for full effectiveness. If not you'll have people just drag out hours that hurt themselves and the company. This is how mediocrity will brew slowly. pg. 258
"Policies are organizational scar tissue" pg. 260
The four letter words never to use: need, must, can't, easy, just, only and fast pg. 265
"Inspiration is perishable" -> ideas are immortal but inspiration is not. If you are inspired to do something... you have to do it now!! When you are inspired it will multiply your productivity. But you must execute on your inspiration before you can unlock its wondrous powers. Too many people just put it off and it just dies. That's why all the people in their corporate jobs just have the ideas left with them. But they've pushed of the inspirations long enough that many will die with regrets of not executing on it. pg. 271
One Sentence Summary:
- Case studies of 9 historic compounding companies with a focus on the leader of the business and their emphasis on the people operations that make up the business
"We each live with a 'windshield' of people in front of us; one of the keys to igniting your motivation is to fill your windshield with vivid images of your future self, and to stare at them every day.." pg viii -> Plays on the five closest people strategy by Jim Rohn. It's the same for your heroes. You need not need to meet them directly and talk to them. Just constantly study them.
Chapter 1: Henry Wellcome - Burroughs Wellcome & Co.
Burroughs started first in a market with no competition. Being first in a new category seems essential. Henry Wellcome was 26 when he joined. But at this point Wellcome was already the top salesman for McKesson and he could negotiate to sell their products in Britain's untapped market as part of Burroughs' company. The leverage you can pull when you focused on being so good at your craft that they cannot ignore you. Given such leverage Wellcome also bargained for an equal control in the company. Control is essential - pg 7
"I regard our business as in its infancy" - Henry Wellcome on losing money to the widow of Burroughs upon his death and sale of his equity stake. It was $15MM in today's money. But what you need in the leader of the company is the vision and mindset to think big. No need for detailed plans but a north star to guide your journey is key. Silas Burroughs did not have the same time horizons nor the integrity required to be a great partner. Imperative to only partner with those you like, rust, respect and have similar time horizons! - pg 11
Exceptional care in each hire is important for a company. People are investments just like with stocks. Looking at stocks as just tickers is the same as looking at people you hie as just "numbers in the system". Each person you hire is an allocation of capital with hopes he/she will provide high ROI. Fundamental analysis on people are key too! Wellcome learned this through practice but he had a belief in finding and appointing the best people - pg 15
Wellcome's ability to attract and "motivate" the best talent has been a key asset in combination with the leader's vision. A thought I have here is for software companies, if they can attract then retain the best talent wouldn't their SG&A cost be lower than one that is just going on hiring sprees for it's inability to retain?
Chapter 2: Clessie Cummins - Cummins Engine Company
"Many successful investments take longer than we originally expect." -> Hence why you need the facts to give you the conviction to hold longer when you are tested. pg 26
"Great ideas are born out of frustration, not greed." -> important to keep in mind for those who want to start a company for some "get rick quick" scheme. It's the idea of scratching your own itch. An itch is frustrating and annoying and you want to fix it. Companies like Basecamp and Hootsuite were results of those who were born from scratching an itch. By scratching an itch you are guaranteed a customer of 1. pg 28
Cummins created the diesel engine every truck driver wanted (the end customer). Incumbent truck manufacturers fought them and disallowed dealers to retrofit their trucks with the engine. But given the superior product, the truck drivers just bought the original trucks and had them retrofitted themselves. Eventually the dealers would become part of the distribution network. A comp advantage is created when you do something BETTER or CHEAPER. This case it was BETTER. But it was also CHEAPER for the customers. Win-Win. pg 30
"We should consider production to the point where we feel that we can make a profit every year, both good and bad - in other words we must establish a governor that will keep us from swinging, in the boom years, and still produce enough business to keep us going through the dark years" -> Controlled growth is key. Always think about sustainable cashflow to keep the lights on with the option of swinging for the fences. If you focus on your niche and specialize you should be able to control your growth. Don't just diversify. It's called DIWORSEIFICATION! pg 31
Setting up a culture with a "win-win" principle for all relationships is important. Employee/employer, customer/company etc... For a strong culture can be a form of competitive advantage inherently built into the business model for that is the result of the actions created by people living and breathing that culture. pg 35
Chapter 3: Peter Kiewit - Peter Kiewit Sons' Inc.
"You could canvass the world, recruiting the top picks from Stanford, Harvard - you name it - and you would never replicate the magic and success that is the culture of the Kiewit company" - Warren Buffett -> Buffett has analyzed thousands of companies. I believe him when he says you can't just replicate culture. It must organically form within. It must be deliberate. pg 39
"Younger Peter would later cite this one experience, and the lesson, to remind his workers at PKS to never be satisfied with the status quo" -> Referring to competitors who got fat and lazy and soon stopped existing. Many also just get too big to even move (i.e. banks). But the mindset to instill the desire to be ANYTHING BUT average is key. pg 45
The early executive team had all put in the hours starting out at the construction site and worked their way up to become VPs. This method of developing talent internally has been key for PKS. I think this is commonly missing in many organizations where they forego the long-term investment in growth of talent for short term fill-up of needs. That's a fast way to erode culture. pg 48
A culture of high performance is not socialist. It doesn't mean you don't fire anyone for feel good reasons. If someone is a poor performer who is not adding value to the company, eliminating the fat is important. pg 49
"One of the traits of intelligent fanatics is to create and lead a decentralized, flat organization" -> leaders must first delegate and learn to give trust first if they hope to ever get any back from their employees. pg 51
"PKS offices never had an employee's name or title on the door" -> creating an environment where the leadership exists through respect. pg 52
"The stock of several of our major competitors . . . we make more than they do, and we think one of the reasons is that all of our stock is owned by employees - people who are actively engaged in furthering the interests of our company - Peter Kiewit" -> It's harder to find any better form of incentive alignment than direct ownership in the company. Without equity in the company it's hard to ask your employees to even think like owners. And most likely the ones who are owners will do whatever they can for he well-being of the company. pg 55
"Only active employees could own stock in PKS. Once those employees became inactive, the company would repurchase their shares at the going rate" -> Similar to Mawer and also... mind blanking but there is a successful VC firm that competes with KKR that does the same thing. There is no reason for people who are no longer part of the company's operations to feed off the success achieved by the ones who still help it run. Peter Kiewit eventually sold his ownership to 40-45% of his employees and reduced his control down to 40%. That is what a people leader does. He also imposed limits to executives where they could only collectively own 20% so that lower level employees could buy more. But he was smart to make sure he maintained control as no employee other than he was allowed to have more than 10% ownership. pg 57
"If you are looking ahead one year, you should plant rice. If you are looking ahead 20 years, you should plant trees. But if you are looking ahead to a longer, indefinite period, you should spend your time growing people." Like stocks, pick great people who have the ability to generate wealth for the business over time. Then you get the right people in the right spots. Like portfolio construction. pg 58
"Peter would say that managers of every level of the company needed to be training and developing those at the next level down and he would tell us that we would not be expected to be promoted unless we trained our replacement" -> crucial to build this culture of organic mentorship to transfer the culture from top-down. Even mentoring the young gives the seniors a greater sense of ownership + the mentees will develop senses of loyalty. pg 60
Chapter 4: Roger Milliken - Milliken & Company
"Culture is everything - Chris DeSoiza, head of research" pg 65.
Seth Milliken, founder, was multi-faceted in that he was an investor who owned multiple assets like railroads and properties and he used his investing background as a great capital allocator to operate a business and use skills of capital allocation to people. pg 66
Strong desires for lifelong learning seem to be a key requirement to be an intelligent fanatic. pg 68
Milliken moved his textile business to focus on high-value niche products. Seems to be a common theme for small profitable businesses to focus on high-end niches. Playing on the human desires for luxury items and desire for quality. People also inherently like spending more money on a type of good because it makes them happier with the purchase. It's a form of self-confirming bias that they made the right choice in spending lot's of money on this expensive good because it must be worth it given the price. g 69
A decentralized operation here too with autonomy given to employees. This empowers them. But it doesn't leave them leaderless. A leader cannot abdicate his position for he must still help guide the team. They build on an internal intrinsic motivating system by recognizing scientists for patents they individually created. They also filled 95% of openings internally, how else will you promote loyalty? This may also force the company to rethink their growth. Forcibly growing slowly instead of just for growths sake. Most companies don't even know who they need and what they are even looking for when hiring externally anyway. pg 72
Let your employees figure out the How to the problem. Give them the autonomy. Build a culture where you at 88 can plan for its next 100 years. This can only work if you've built a system where you have effectively put yourself out of a job. pg 80
Chapter 5: Hank Rowan - Inductotherm Corporation
"What Foley was proposing was that I leave a steady, rewarding job with prestige and promise and gamble my future and my family's on starting up a new company, with no outside capitalization, to compete against the world's leader in the business, a company that had a 40-year head start - Hank Rowan when starting Inductotherm" -> Now Hank started slowly via moonlighting. He had already planted the seed and continued watering it slowly. Hank ass eventually pushed to start his own when his company hired an outsider with more experience for a position Hank wanted to be promoted to. Turns out that external candidate with more experience was not good enough for Inductotherm dominated them soon after. pg 84 - 91
"Success breeds complacency in any human endeavor" -> same for companies too. But this may be the value of maintaining a stoic mindset to life. To always have a PHD mindset = Poor, Hungry, Driven. A lack of resources in a company is also great because this constraint FORCED Inductotherm to innovate. pg 93
"Fill the other guy's basket to the brim - Andrew Carnegie, win-win situations are the only relationships that last" -> Another common trend in sustainable great businesses. You think win-win in every relationship (internal + external). That must also be why the "shared economies of scale" model adopted by Amazon, Ocado, Zooplus make the company so valuable. pg 96
Chapter 6: Jack Henry & Jerry Hall - Jack Henry & Associates
The companies origin was as a side project. A common theme I find. Rarely do entrepreneurs go all-in at the start. They all start as side projects until they get too big and require full attention to become meaningful. Jack Henry was also an accountant when he started. Comrade. pg 106
JHA offered the best software + service (i.e. something they did better than the competition) to the financial services industry (i.e. a niche market). JHA's motto is to " Do the right thing, Do whatever it takes, Have Fun". Too many people forget to HAVE FUN! Without Fun what is the POINT!? pg 109
JHA focused on creating an environment at their campus. They have a full experience set for the customer who will experience top service and cleanliness once getting on the corporate plane, ride to the campus, and walking around the office. It's part of the story. It's part of the experience. It's like going into an Apple store. Whenever you are selling something the story is key. Joe G, co-founder of Airbnb, also discussed about when he started his first venture the story was 50% of what he was selling. pg 110
When JHA was in a crisis all executives took a material pay cut of 25% and suspended incentive pay. Nucor did the same and Ken Iverson cut his own salary by 75%. The focus was not on penalizing your family, your employees, by firing them but more going through the crisis together as a company. This is crucial. Leaders have to lead by action. The executives should always be the ones to take the big pay cuts because their pay cut will make the material difference to the company and that will be of value to the company in the long run. Management MUST cut salaries first. pg 112
"Intelligent fanatics often choose the far less popular, boring industries and niches, where there is less competition. JHA created its own market and stuck to the sleepy banking industry" pg 114.
JHA made sure that when they acquired companies the acquired employees would feel that they were gaining. They would give them cash bonuses as an example. For companies that are focused on acquiring businesses their strategy on integrating such companies it would be important. pg 116
JHA went further with making their employees act like owners. On top of letting them own equity in the company, they were all provided the company's financials. This isn't common and even for non-stock holders this is an important cultural strategy of transparency that is required to show trust. You have to earn trust from your employees and this is an amazing way. They also paid out bonuses quarterly. I've heard of some small investment banks doing this and I think it's an effective way to help your employees. Cashflow is king after all. Annual bonuses are just a way for companies who are scared of their weak cultures lack of ability to maintain employees. pg 119
When Jack and Jerry stepped down, JHA was led by Mike Henry and Mike Wallace. They were both with JHA for the majority of their careers and were raised in the same culture and thus were able to preserve it. I would view the entrance of an outsider CEO to signify the potential erosion of the existing culture of a company or it may indicate a lack of any durable culture to begin with. Jack and Jerry would sell their 54% ownership stake, cutting it by half so the new leaders would think like owners. Like Peter Kiewit, a sell down of the equity for those no longer involved in the operations of the business will be essential to keep the operators of the company motivated with the right incentives. pg 122
32 year compound annual growth rate of 19.3%, up to 2017. Amazing. The ROIC trend looks beautiful
Chapter 7: Harold & Dan Leever - MacDermid Inc.
"We will be a highly principled, disciplined, per share focused, cash flow organism - Dan Leever" pg 132
Dan Leever build out a decentralized model where the international units operated with their own strategic business units. This allowed them to be small, loosely organized, minimally controlled and fast reacting units throughout the various regions. This is the model that CSU adopted to their great success. When Dan became CEO he formed 13 units and each unit leader got to be an entrepreneur who had a small base to grow his or her own business. This is an amazing model for motivation. This let's each business model attack a small niche. pg 132
Harold focused on keeping the organization lean. They were judicious with hiring people and did not grow for growth's sale. This limited them from firing people, which would damage morale and culture. pg 133
"One of the most important jobs of a leader is to put people into the jobs most suited to their abilities" -> The true leader of a company is the one that sets the culture and performs capital allocation of personnel. pg 134
"Responsibility = Accountability = Ownership - Pat Summitt. And a sense of ownership is the most powerful weapon a team or organization can have" -> As Stephen Covey said "Accountability breeds response-ability". Give them ownership, make them accountable and then they will learn to be responsible! pg 135
Even at 2500 employees they could maintain the culture because when split into the units each unit was small enough to probably maintain the culture. Also, Dan would actually be able to tell a personal story of each employee that made it past 5 years in the company and that was celebrated. This kind of acknowledgment is so important. pg 136
Dan was influenced by an investor called Tom Smith, who introduced him to Warren Buffett and Henry Singleton. It's this circle of intelligent fanatics helping each other. This is such an amazing fact of how great leaders who strive for the same things will end up uniting and making each other stronger in the process. Dan learned the value of stock repurchases and ignored all the idiots who complained about an illiquid stock. Beauty. pg 138
Dan met Emerson Kampen, CEO of Great Lakes Chemical, and commented on how despite having $100MM in cash flow they had conference rooms running on 15 minute timers to turn the light off. The offices were very spartan with minimal wasted furniture. It seems the stoic and spartan aspect of intelligent fanatics is prevalent everywhere. pg 139
"Our progress and your progress, our company's long-term advantage and your long-term advantage, lie in human resources. Other advantages that come about from technological improvement , the opening of new markets, lower costs, all prove to be relatively short run. So, it is the initiative, the will and the motivation people bring to their work that we have to rely upon for survival and growth. - Harold Leever" -> it seems that any advantage in a business model of dominating a niche or doing an activity so much better or cheaper can only be sustained by the people. Why don't people consider this in business school?? pg 141.
"By doing the LBO, I lost control of the future. I could have done all kinds of thins - recaps, other things like that - that could have accomplished the same thing without losing control" -> Never give up control. A common and crucial theme in running a sustainable business. Let's be honest here, most private equity funds don't care to keep he business alive for decades when their funds need a pay out in 5 years. pg 142
Chapter 8: Bob Johnson - Black Entertainment Television
Bob Johnson was an operator partnered by John Malone. John Malone had the 30% of compounded returns over 25 years by partnering with intelligent fanatics and letting them run their business. Decentralized operations at its finest.
Johnson focused on dominating a niche by producing low-cost programming aimed at the African-American demographic. Eventually he would go onto showing music videos on TV, something that was foreign at the time. Something else of note is that he built BET while moonlighting as a lobbyist. Focusing on niche, Creating your own category, Turning the moonlighting side project to a major enterprise = All common patterns.
"Working at BET provided these young employees with far greater responsibility than they could get at other companies" -> little experience can actually be asset to innovation. I mean, when do you actually see big consulting firms innovate. Assigning responsibility gave the employees for intrinsic incentives and that fostered huge growth for BET. "Johnson would give his young employees both stock and intrinsic ownership of their projects" pg 155
"Quality leaders with sustainable cultures are often found eating among their frontline employees, learning as much as they can" -> amen. pg 160
Chapter 9: Dr. Devi Shetty - Narayana Health
Narayana charged less than half of what most surgeries in India cost. This allowed them to serve the large volume of poorer individuals who now could get the surgeries they needed. This is effectively the "Shared economies of scale" model Amazon uses. You gain scale efficiency and you lower prices from that efficiency to benefit your customers. Since you reward them, they will reward you with higher captivity.
"Your rank in the school and academic performance has nothing to do with how good or bad of a doctor you are going to be" -> It seems to be applicable in every single profession and just in life. pg 169
"Not surprisingly, the Mayo brothers also initially acquired heir skill through volume. They learned that the best surgeon of their time, without exception, developed their abilities in charity service, not in private practice. The key that charity work provided was volume of patients. The brothers would not find such opportunities in Rochester, Minnesota, so they went to a nearby state hospital for the insane, which housed more than a thousand patients." -> 1) They first looked at those you were at the path they wanted to get to and identified how they got there. 2) Then they utilized deliberate practice to arrive at their long term goal. 3) They ignored the external noise of prestige and short-term high pay for going into private practice. pg 172
"When you tell yourself there is no money, your brain starts working. An amazing opportunity comes to you" -> Dr. Shetty on the power of constraints. Puts perspective to all those excuses focused on limited capital. pg 173
"The longevity of the Mayo Clinic can be attributed to their training programs. Investing in training results in easy succession planning and a steady way to ensure the culture of an institution isn't eroded over time. These training programs cost money and most private hospitals don't invest in them, but they make a lot of sense for us in the long term. For everyone else, it's much easier to poach our nurses or doctors" -> By focusing on training your employees for continuous succession you are in effect telling them you want them to stay. If you don't, then you are expecting turnover. A focus on succession planning breeds loyalty. pg 179
"In contrast to other hospitals in India, where doctors get a wage plus a cut of the surgery fees NH pays a slightly higher fixed salary and that is it" -> Measured incentives can actually narrow people's focus. Having a financial incentive @ the end actually leads to poor performance per Daniel Pink's citations in Drive. You pay them for their work but rather give them ownership to incentivize them to think for the longevity of the company. pg 181
"You must be a lazy man if it takes you 10 hours to do a day's work. What I do is get good men, and I never give them orders. My directions seldom go beyond suggestions. Here in the morning I get reports from them. Within an hour I have disposed of everything, sent out all my suggestions, the day's work is done, and I am ready to go out and enjoy myself." -> Andrew Carnegie on running his business. This is pure gold. The focus is on human capital. Hire the right people and give them responsibility, accountability, autonomy and control. That is all you need to give them. Be the leader that tells them the what needs to be done but not the "how" it needs to be done. That is what it means to be a manager. It's something Clayton Christensen said is one of the most valuable professions if done right. pg 186
"In investing or business, what has worked in the past will not work again in the exact same fashion" -> Steal from your heroes but you'll have to put in your own style to be someone. pg 190
Your work is not a means to an end. Not some sort of prison or thing you must do to attain freedom. That is, if you're passionate about it.
There are no boundaries between work and time since your work is personal.
"The grown-up world is where talent goes to die", pg X -> Can taste the morbid tone. Its odd how people try to distinguish certain acts as "adulting" or "growing up" when it's just kids learning to take on responsibilities. They seem to just need an excuse for poor ability in taking on responsibility effectively and thus use the excuse of "being a grown-up" when what seems to be indicative is that the folks I've met (people past their 50s) are nothing more than aged kids
"It didn't make sense to me: If you like to do multiple things, I though, why wouldn't you?" | "I can't write code, yet I get to help move such fields as robotics forward by advising companies on their marketing strategies" - pg Xiii -> It's true. No one seems to be asking that question or if they do ask that question, no one is actually looking for an answer. You can have it all, just do it one at a time. Don't think in just first-level thinking (i.e. to be in tech I must know code). Find the meet-point of your skills and what a company needs.
"It is an amazing feeling when you don't really care if it's a weekend or not" - pg Xiii -> Larry Smith on his passion and life. Passion is something you cannot stop thinking about
Part 1 - Finding Your Passion
"Typical jobs now involve wages that barely rise, workloads that leave nothing but the scraps of a personal life, and stress that grows daily. The odds of finding a "good" career are fading fast - and all because of economic competition" - pg11 -> As more of those that lack resilience flock to the place most traveled, the competitive pressures increase. With such increase effective out-performance will be close to null, with any that do shine being the result of largely wasted time and effort. The end result is just a mediocre army.
"Can you create any significant degree of credible edge without a passionate interest in the work itself?" pg 14 -> No. The kid who lives and breathes this shit will eat you up. So move on. Without an edge, out performance will be slim. With no out performance, what's the point of doing it?
Perseverance is seen positively. Yet, a common case for its misuse seem to reside in people falling for the sunk cost fallacy. Those who commit to a certain career field end up sticking with it and pursue it just to finish what they started. Perseverance... or more so persistence in this case, is actually based on a reason of fear and false obligation compared pursuit for pure love of the field.
What's hot now will not be hot tomorrow. Any particular skill set can become obsolete with no notice. Competition isn't going to come give you a forewarning so you can prepare. Naive. Too many career coaches only know to give advice for the moment and not a lifetime
"I need to remind them that when we look at the history of occupations, we used to see constant change. Now we see accelerating change. So do we ignore our history or try to deny it? This much is clear for sure: if we tell the young to pick a skill for a great career, we must be prepared to answer when they ask "which skill?" And, as I hope you see now, we simply cannot" pg 29
"Really strong students choose the most competitive programs to apply to, not because they care about the subject but because they naively assume that, if the admission standards are the highest, the job opportunities must be the best." pg31 -> Put this way, it sounds so stupid. I fell for this foolish social marketing stunt where it is driven by external glorifying factors. All ego + insecurity. The confident know they can get in. The smart then choose to fight the downhill battle. Because what general will put his best soldiers through an uphill battle. Short-term pain for long-term gain. I think it's a matter of difficulty but selecting best programs don't really have short term pain. Because it's easy to justify your choices, there is no explanation required for your actions. You aren't doing something non-consensus. SO it's the path of ease in the social psychology perspective
For everything you invest. Time, effort, money. Ask if you achieved the best result. If not, you failed.
"While the "ordinary" come in vanilla, the stars come in many flavors. To begin with, the exceptional tend to have broader domain knowledge...... They have read more extensively and they have more opinions about their field" pg 35 -> Create your own flavour. There is no getting around it. You must be a learning machine that can compound knowledge. Always goes back to Mungerisms.
Characteristics of the exceptional: i) broad domain knowledge ii) mental flexibility iii) engrossed in anything new and creative iv) passionate interest
Passion isn't just some spark. Get the facts! Know what you're pursuing. Work with the available data. A test to see if you've found it: "Do you think you would do it even if you won the lottery and didn't have to work?" Coherence in your emotional + logical self is required.
Be a thoughtful tourist. You can't see all the attractions so plan according to what you want to see and take the time you need to reach the final destination. A common advice I hear from those who've reached the top of their field is to take it slow and don't rush.
- How do you spend your free time, what types of books do you gravitate toward?
- What kind of subjects do you talk to friends about most and enjoy?
- What personal projects do you embark on?
- Common case is passion is attached to a kind of work rather than a specific occupation
- Stop, research, talk to more people
- Have you researched all options in this field to move on?
- Sample (not deep dive) via reading. Look at all angles. Read in opposite spectrums
- Talk to more people, more diverse backgrounds
- Dig into rationale of choice. Ask "WHY?" Why do it this way, why not the other way, why not do something different now etc... The more the WHY the more engaged, the more telling of a potential interest area.
- separate passion vs. interest, not going to marry your partner cause they are interesting.
- passion = cannot stop thinking about it + don't want to stop
- Do you want to learn enough about an area that you are fascinated by? Would you want to teach it to yourself or others? -> way to test if passion or interest.
- Don't settle on one. Keep looking for more. If the first was a true love, you'll back to her.
- If you have many, then combine. Make it the "top 25% in 3 areas to make own category" approach
"Recognize the minds natural tendency to resolve painful uncertainty by rushing to judgment" pg 61 -> Being decisive without proper thought is just being fearful and masking it. Learn to be really patient, then be decisive. It's not the duration but the intensity that matter in finding your passion.. but it applied to many other things too. The whole "2 years at a job" seems such a foolish prerogative that has no logical basis for achievement. If it takes you 2 years then my take is you lacked the intensity and ambition for yourself and was just complacent and lazy.
"No one else is doing it" pg79 -> key. That which no one else does but you think should be done. That is where opportunity exists. What is the point of doing something everyone else is.
Planning: "Did his plan have the flexibility to accommodate a change or evolution of his interests? Did it describe how he would distinguish himself from his classmates? Did it describe how he was going to choose and reach out to priority employers? Did it accommodate the possibility of grad school? What benchmarks was he using to decide if his plan was on track? How would he respond to graduating in a recession and finding no jobs available?" pg81 -> The point of plans is to eliminate single-sources of failure. Because nothing ever goes according to plan. So what Plan B, C and D? Plan for a tragedy. If it doesn't happen you are lucky. If it does, then nothing new.
Part 2 - Creating Your Career Plan
Be precise enough with your goals (i.e. not achieving happiness) but also have a broad range (i.e. don't pinpoint to 1 company). Rank your goals on what are non-negotiable and what you can be flexible on. Distinguishing between hygiene factors and true motivating factors would also be something to consider in my opinion.
Identify barriers to what would you want to achieve. Then rethink the conventional barrier and create the role as your passion will not fit established occupations. Whatever you choose should meet your high-priority goals.
Passion in an area leads to the desire to acquire skills. I agree with this on the the sequence of development. Without a destination, you do not know what you are preparing for.
"Toe the line; Follow the leader; If it ain't broke, don't fix it - all are examples of conventional thought hiding within cliches." pg 111 -> You must throw out the conventional thought to foster creativity. As the Mcdonald's CEO said, patents are not a competitive advantage but rather your mind's ability to be innovative is. For your competitors cannot see what you are cooking up in your mind. This puts into context who can ACTUALLY be innovative. Big companies can't. Because the bigger they are the less risk they are willing to take since they have more to lose. Yet, innovation requires large risk as you must be unconventional. Big consulting firms saying innovation is an oxymoron in itself.
The value of learning history is not to copy what has been done but use what has been done as the benchmark to build out more!
A proxy for finding out what you truly care about may be represented in whether you make time to do it. Because if you love doing something so much, I'd expect you to make time for it. When someone tells me "how do you have the time?", "Oh I don't have time for that" when it comes to reading or powerlifting I just know that is not something they care for. Which results in the true statement of I don't have time for that. Which is also the excuse the weak minded make for something they should be doing as well.
Innovating is a means to creating your edge. It is muchhh easier to innovate when you are in an area you actually love rather than something you don't care too much for. It's also hard to sell yourself if you don't believe in what you can offer.
"The truth is, successful ventures and successful careers are much closer together" pg 131 -> Anyone who seeks to have a great career is an entrepreneur. Your career is the 'venture of you' and you are the entrepreneur that is forming it. If not, then you are letting others dictate your career.
Your personal pitch should be distinctive. 'what do you do that other people don't?' From such an activity what is the result. It is that result that should trigger a further discussion of 'How?' It is the claim you make that sets you apart from others. The result is a 'body of work', not something that could be a singular project. Because that is how you know the other person was listening to you. Let their interests fit YOUR criteria, not you MEET THEIRS. After a well scripted pitch, prepare to show what you've done. After all, talk is cheap.
"Great careers are driven by the innovations that arise from passion" pg 141
Executing on your career plan requires constant benchmarks to re-evaluate your plan. For this you need both constancy of purpose and flexibility in execution and planning. This is required to be proactive instead of reactive. Learn to stop, then think and then act. 3 questions to consider in light of new information (pg 147):
- Would this revision move me closer to my overriding goal of a great career? -> assess each new fact and see if it can materially impact your journey or is it some lateral you're getting sidetracked by
- If a new choice is tangibly closer to your goal, will it involve a loss of time that will reduce your advantage? -> Real important to understand whether you'd be moving forward.
- Will this revision limit my options? -> maintain flexibility
Any revision you choose to take one should be analyzed clearly. With full knowledge of the effects (positives outdoing the negatives materially) you can proceed to make change to a plan.
Part 3 - Confronting Fears and Excuses
Differentiating between reasons and excuses is important. Reasons are carefully thought out and supported by facts. Excuses are just deferral tactics to mask what is essentially fear. But no one wants to accept cowardice so they adamantly try to validate excuses. You have to be honest with yourself on what is truly a valid reason and what is not. Thus, reasons can change once the underlying facts change. If your mind doesn't change when facts change, that is utter foolishness.
"A reason becomes an excuse as soon as it stops thought and action" pg 156
Fear of the unknowable. I think it is innately human to favour certainty and predictability. This is probably why many want to work for large + established brand name firms. More know-ability.
"We continue to wish each other good luck for every possible occasion, from exams to job interviews to investments. We go so far as to wish highly trained Olympic athletes good luck. Perhaps you might conclude that this incessant wishing of good luck is no more than a social convention. But conventions reflect a widespread societal belief" pg 158 -> There is constant debate on luck vs. skill. Think Maubossin's research does an excellent job in distilling that and giving perspective. I fundamentally believe the skilled make their own luck. No luck can replace decades of deliberate practice. It's just many hold onto luck because they are too afraid and lazy to ever put in the decades of work
"I find it insulting - to call someone "lucky" because she has a job she loves, or a strong marriage, or a winning edge is to say that she somehow didn't earn it. Only the unprepared need luck." pg 159 -> amen
Harland Sanders started KFC at 65. It's never too late. It's just another excuse. All choices are yours to make.
Nothing is a fair fight. Too many love to sit and complain about losing out on the ovarian lottery. But for fucks sakes, if you were born in an english-speaking environment you beat out most of the world. Not to mention all the sperms you out swam. As Bill Gates put it, it's not your fault if you were born poor but it is if you die poor. You can either choose to fight through obstacles and learn resiliency and train yourself to get stronger or just be a complaining loser. People shouldn't even be worrying about the competition when they haven't even gotten themselves figured out.
There should always be a reason for why you enjoy doing something. It's not to just "pass the time". Because you are just passing the time waiting for death then. If you really wanted to die that fast you could make it happen. So, there must be an inherent reason to why you enjoy any activity. Think about it, accept it, and actually live it out.
"We live in the Age of Victimization. We are all victims now. There are so many victims, in fact, it's hard to find the oppressors" pg 167 -> Makes sense, since anyone who has a different viewpoint will offend someone and automatically that creates more victims. More so when the victims all stick to the conventional view point and get hurt by being called out on it, instead of acknowledging their choice.
"Great family and great career are not mutually exclusive endeavors" pg 171 -> in fact, I think that is required for success. Just based on my personal values. I think too may use family as an excuse to not achieve anything and just decide to complain about their own mediocrity. Family can be a reason to create certain limitations but once you've validated the reasons you can always work around them. You are your biggest obstacle.
"A career is great when it offers satisfying work, impact on the world, a dependable and adequate income, and personal freedom" pg 172 -> Larry Smith's definition of a great career. Agreed. Freedom, autonomy, control, cash flow (not sudden blow up gains!), motivating work and value add to society
Workings moms = good, because daughters are more educated, and likely to be in supervisory roles with higher income than daughters of stay-at-home mothers. Sons of stay-at-home mothers spend more time on childcare and housework as adults. All would be considered progress for society as people can become closer to self-sustainability. I had considered being a full-time parent to be an option and a valid, almost required one at that. But something to consider when the time comes is on whether I truly love childcare. For if I do not, it will become a chore and salt the parent-child relationship early. I do believe just because you are a parent it does not put your family or child in the center of your world, rather it becomes a choice. As a parent, a key duty to your kid would be to also be a career role model for em.
A strategy to a great career is to develop an edge. Like in investing, your edge is what gives you or the investment merit. If you get to the point that you are so valuable to any organization, you will hold more sway in how you want to structure your role in the company. Though, this isn't commonly the case because many firms tend to overwork their best till they break and quit. But maybe that just means they didn't have ENOUGH of an edge. They were good, just not great. But to create an edge you must counterbalance. So the notion of balancing work and life is contrary to a great career. A great career will require an edge, which will require large investment of effort + time, which will result in a need to counterbalance life and work. All for control.
"Nature does not follow a single pathway; Neither should man" pg 177 -> Nothing is linear. It's rather the illusion of linearity that is prominent
"If a young man in love rejects his girlfriend because of a job opportunity in another country, I don't that's wise either" - pg177 -> Struck a chord with me. It was not a win-win for our relationship. It was not a win-win in my work/life coherency spectrum either. I was only able to realize the importance of this after experiencing it.
Remember that creativity lives on the edge of conventionalism. Life is closer to being 50 shades of grey rather than black or white. An oversimplified fad of "binary-thinking" is upon us but fight for the spectrum.
"Take no risk so you can guarantee you will do nothing" pg 179
Bring your work home. Not literally but involve your loved ones in the thing you are spending 1/3 of your life doing. It can help bring perspective to yourself and actually allows for a stronger relationship where they feel more connected with you. Whether you love or hate what you do. Talking about it with your family at home can actually get feedback to problem solve or celebrate together.
"Do you want to know intimately the people you love, or might come to love? Talking and partying with them will get you only so far, and many people indeed get no farther than this. But when you work together with someone, you really learn who they are" pg 187 -> Would believe that is why school friends and work colleagues you've been in the trenches with seem so close and last so long
A potential test on verifying a passion area may to be to speak with those who already seem to be in their passion area and ask them why they love it, what activity puts them into flow state. Listen to what they say and see if that excites you. Most won't say "it's cause I'm good at it or it's interesting", those people may not actually be in their passion area themselves.
"Finally, there's a category of jobs with no apparent prospect of employment. These are the Outlandish Jobs, the jobs that make people laugh, perhaps, when you tell them what you're interested in doing. These are the jobs that, if you pull them off, people are fascinated. These are the jobs that convince people that anything is possible" pg 192 -> Foundation of such roles are measurable and have leverage
It's not about entering a crowded field with the sole strategy of working hard. Anyone can just work hard. First you have to devise a plan. A plan that is actionable but a plan that can also provide you with feedback along the way to constantly iterate when necessary. Quitting and writing full-time with no plan is just a gamble, not a plan. If entering a crowded field with a plan, be creative. Look at where you can add value. If everyone is looking at the same thing, then there are plenty who can add value. Where is the intersection of where no one is doing something that only you can do? Where can you create a category of one?
Look from the shoes of your customer. See in the context of what others would pay for your work you deem a passion. Know your own value, the value you can provide to others but also what that value would be worth to them.
Find the most important question in the field/areas you're interested in. Pick the one that is hardest. Now try to solve it.
"If your passion is not connected to an occupation, you need to consider whether you are ready for the life of an entrepreneur. If you aren't, then you search for another passion" pg 206 -> If what you want is to make a living off of an unusual activity you have to connect with enough of those people who value it and share your enthusiasm to form a viable business. Don't do what is obvious. Greatest returns can be found where there is no consensus. Though be honest on your risk appetite and don't fight the gravity problem if it isn't in you to take on the entrepreneurial path.
"There is never just one way, position, situation, or employer. Look resourcefully and creatively for your passion and a decent income" pg 207 -> never neglect cash flow. But be flexible and creative with your plan.
Fear can paralyze us. To fight fear try to understand what your fear is. Boil it down to its First Principles. Once you can understand the fear, you can manage it by taking action to bypass the root of the fear. That is using fact + reason.
One fear is the fear of wasted time. To limit this, think of the shortest possible time to any attempt (i.e. create a minimally viable product asap). It's the idea commonly adopted as the "fail fast" rule. But it's more "get valuable feedback fast so if you should succeed you have direction, and if you fail then you didn't lose much time". If you need guidance ask people who've already achieved what you want. It's about getting valuable feedback asap. Would also help to determine what would be considered a point of failure for you ahead of time as a benchmark.
Try to make each action you take an optimal one. Think about how you can kill two birds with one stone. Don't assume you can't hit two birds with one stone. Test out such assumptions to prove them wrong. Larry Smith calls this "parallel processing". Try to bridge multiple passion areas to create your own pathway. Larry Smith loves architecture, economics, and teaching. So he found a way to teach the economics of architecture to architects at the university level.
Find people who've already achieved what you want so that you may have role models. Having such reference points from those with similar backgrounds as you gives you a way to put forms of fear and doubt into perspective.
"Big companies have reorgs and layoffs all the time - just because they've been around for years doesn't mean that you will be around with them for years. And pay is only higher if you look at it through a very short-term lens" pg 223
"In the long term, pursuing his passion, not immediate income, would best secure his employment and earning power." pg 224 -> I fundamentally believe that if you do something you love it will feel like play. So your form of 'deliberate practice' will be more effective than it will be for others doing the same thing as you but don't actually love it. It may also mean that I am more optimistic on the abilities of humans than some people are of for themselves.
"This should be the greatest fear for all of us: failing to achieve the highest use of our talent" pg 227
"The greatest benefit of having to justify your choice to others is that you come to fully understand your own choice" pg 239 -> It's a form of talk therapy that I personally found extremely valuable in even going through my own ideas. Have honest discussions with the people you trust and they will bring out your fears and when you can justify your choices despite that, you understand how misbegotten some of your fears actually are.
The more radical your idea the more you will have to constantly prototype to turn the idea over and over again. This also means you will have constant moments of doubt for being so unconventional. To fight this you will need to have constant dialogues with yourself (i.e. through affirmation) to confirm your passion, your plan and the end direction you are journeying toward. Try to visualize what your great career will look like.
Two barriers to entry: When the product is truly unique, or you can do it for cheaper than the rest
Truly unique products: brand, reputation (add desirability like denomination of origin i.e. Bordeaux wine), governments, network effects
Cost: economies of scale (spread through - R&D, purchasing, manufacturing, marketing, distribution), market niche (relative size >absolute size)
MES - minimum efficient scale: the optimal volume you need to achieve lowest cost
Large companies don't necessarily have scale but diseconomies of scale because they aren't as efficient. Coordination + management costs run high
For a company to earn return above cost of capital, the business industry must be imperfect. So that the business can make something better or cheaper in a sustainable way. Generally, you want high barriers to entry and low barriers to exit (you want it to be easy for your competitors to quit instead of sticking around. ex. McK, BCG)
Don't look at MES for the business. Look at MES for each activity! designing is different from assembling vehicles
For each profitable activity look deeper to analyze what the "uncopiable singularity" that makes this activity is
Any conceptual activity that is separable from the rest is like owning a separate business (i.e. restaurant owner is a property owner and food service owner. Because the restaurant being in that location is the opportunity cost of not renting it out for income)
4 steps to industry analysis: 1) Determination of the basic activities 2) Analysis of each one of those activities 3) Positioning of the different actors 4) Possible evolution of the activities
Strategy - the art of earning money in a sustainable fashion
Profitability of company changes when rules change. One of following: 1) technological change (lowering of cost to do things will increase MES, which reduces max number of competitors in industry and only the fast ones can survive to set up new barriers), changes in regulation, changes in demand (demand alone is meaningless without barriers because competitors can whittle margins to nothing)
Assessing vertical integration - does act carrying out 2 activities under 1 company i) decrease costs or ii) increase quality perceived by clients? Just accumulating activities is like adding businesses for diversifications sake. No value
Many times, we see companies with many activities, but that is because they had 1 activity that was highly profitable and sustainable, and all the other activities are surrounding it!
Vert integration doesn’t make sense if it is to just lower costs to avoid margins of supplier. I have to make some element of overall cost disappear, it has to completely eliminate an activity(business) from integration
Understand that depending on the business the company should have a tendency towards centralization and towards localization. Ex. airplane companies don't need to be localized but they need to have centralized ops. Food companies need to be localized and decentralized ops. where as telecom companies need to be centralized but also localized
Strategic logic: a business is good precisely because it is difficult to enter, thus purchase prices will reflect that. And generally, if it is easy to enter, it probably is not a good business
"Put all your eggs in one basket and watch it closely" - specialized company has much less operational risk than a diversified company since management will know the corp strat for it. It is only one business remember!
Criteria for successful merger - i) it must follow strategic logic ii) there must be clear authority from the beginning iii) price must include possibility of synergies being much lower than forecast and they may be achieved with a delay up to two years
The market leader is not the largest but the one that has the highest profitability. A competitor's acquisition should not be a threat if it will only increase the headache for management
Companies can buy sales, profits and volume. BUT they CANNOT buy profitability! Generally buying a profitable business will be very expensive and it won't be profitable in the beginning
Strategic thinking - 1) which customer need or segment need is not satisfied or sufficiently served well? What is the criteria for demand 5-10 years out? 2) what strategies are capable of responding to demand in value creative way through entry barriers
Page 48 - Left brain focused people scored better on IQ tests but had difficulty adjusting to the real world. Strained marriages, high frustrations, job results below expectations were all part of the problem. They tended to "analyze" rather than "sense" and competed rather than use teamwork
HBS study found Baker Scholars, the top 5% of graduating class, earned average salary below the norm for their class
Whole brained approach: i) Preparation: "doing homework", researching and planning with left-hemisphere ii) incubate: sleep on it, take a walk and reflect with right hemisphere as left brain idles and emits alpha waves iii) Illuminate with left verbalizing intuitive understanding to right. iv) verify: left brain confirms validity of discovery. This is Graham Wallas' whole brained approach. left, right, both and left
Page 71 - early identification of issues can be summarized by the effect of time. If identified early, it will be an opportunity decision but as time persists it will become a problem decision until at every end it becomes a crisis decision. This is like when doctors find cancer late. This is because of left-brain dominance. right side is used to sense and see and feel for the subtle clues to notice things missed by the left. But left dominated professionals like investors and doctors will miss the subtleties that bring out the creativity
Page 87 - Importance of detecting trends before events can be quantified: The more accurately we can get the picture from minimal information, the better equipped we will be. This will allow for faster detection of trends
Page 103 - Jim Rogers took 10-20 major positions over the 10 years at the fund with Soros. They were all investing plays focused on playing changes in major trends
Page 107 - Roy Neuberger: rarely can securities be valued correctly at over 15x earnings. because rarely is there any clear prospect that a company's earnings will grow sufficiently in the future to make it worth that price
Page 109 - Like poker. Think about what the hidden down cards are. Everyone knows the flop. Also try to anticipate what the other is holding by their actions
Page 116 - Investment success does not belong to those with the "magic formula" but to those with the courage of their own wisdom
Page 120 - Yang: specialized mind, usually male. Yin: generalized thinking, usually woman. So, combining these two aspects is what creates the attraction. People tend to marry their opposite. And this creates harmony. This will also be required in investing as well.
Page 123 - Dr. Henry Mintzberg of McGill investigated how top management operated. Executive decision makers were found to dislike written communication and long step-by-step tasks. They thrived on disorder, ambiguity and frequent interruptions. They clearly were right-brained with appreciation for "sensing". It seems it is more a work of society disguising management as a science instead of the artform that makes it intuitive and emotional (what is actually is)
Page 138 - Don't rush. sleep on your decision. Take a wait and see attitude. Also, don't be afraid to act on relatively few major insights like Rogers. But the insights better be material and be backed with logic. “the resistance to premature closure, as it is dubbed, is the phenomenon in which an individual does not rush into develop a POV but rather is content to wait and see"
Page 131 - the Herrmann indicator test. Experiment with taking this in the future for personna type.
Always remain flexible and think on capitalizing on the right times in the market
Scuttlebutt with vendors, customers, research scientists, university profs, government people, competitors
Think about industry tailwinds, they create the growth opportunity
"Fortunate because they were able" companies learned to "pivot" due to solid management allocating capital. As investors are we not also capital allocators? Like in Outsiders, many companies generated greater wealth for investors by having great capital allocators. I think this applies to top investors who are great because they are also great capital allocators as much as they are great analysts. You can find the best companies via analysis, but poor capital allocation can hinder such performance
Outstanding management continues to be an important factor in industries that are subject to technological change. management that is alert to the change and how they handle the matter is reflective of their competence
Find the LT catalyst - Like Jim Rogers does. Find the LT fundamental theme and invest around it, Idea of tailwind again
Look for segments to see which one is more profitable. Overall profit margins may be weak but if you look at the different segments it my show indicators of improvement
When looking at a stock universe.. maybe look @ the glassdoor ranking and consolidate that PM, ROIC etc.. Maybe also look for companies with low ROIC in CAPIQ but is actually a diamond in the ruff. - thoughts from identifying personnel relations in company
"Management will bring outsiders into anything other than starting jobs only if there is no possibility of finding anyone within the organization who can be promoted to the position"
"Young growth stock offer by far the greatest possibility of gain"
So, when finding these growth companies, it may make sense to ignore ... or not rely too much on the financial metrics because you want them to be focused on growing. Companies focused on growing may not show the nice fundamentals because the moat activity may be hidden, and you can't find it without doing serious digging
Remember - you aren't looking for some mediocre 60% return. you want to find a multi-bagger. That is how you win. You find a wealth creator that can become a multibagger because we buy it at the right price and because of its growth potential
Selling at the top is still trying to predict when the "top" is. You don't know!
it's like applying the "drift performance" theory by JA. Letting the winners ride along had the best outperformance. Understand that you can be totally wrong on valuation and that you don't know. If it rides up don't trim it and let it become overweight.
"Don't disturb a position that is going to be worth a great deal more later"
Element of Noah's Ark. you have a duopoly. A has achieved 30% of ROIC and 30% operating margins. B is half of that. but they are duopoly. So, you factor in that as a possibility for B. No. That doesn't work like that. It's not apple to apple. They are in fundamentally different scenarios.
"If the job has been correctly done when a common stock is purchased, the time to sell it is - almost never" --> natural selection in portfolio
What are everyone's perspective on dividends?
How about companies you think people will miss + notice if they no longer existed? --> something ingrained into the lines of people
"The fallacy in their reasoning lies in the assumption that 5 years from now XYZ will be selling on the same PE ratio as will the avg Dow Jones stock with which they compare it"
· if the company continues to grow and double its earnings by the 5 years time it will be selling at an even higher PE ratio, not the same ratio it is selling at now. So, people think the PE is discounting future growth earnings... but you don't know... if it continues to grow then it may not be discounting future earnings but actually presenting a normal P/E ratio for the kind of company it is... because not all companies should have the same PE ratio. There will be premiums applied to better companies and that should be reflected.
· Example for above: Swedish construction companies look cheap on PE... but consider the context of environment. construction companies have low P/E in the best of times.. they are actually better off being bought at high P/Es
High or low PE at face value is not as important as the underlying story. Why is it high now? Is it discounting future growth? then maybe bargain but it is accounting for historic unsustainable growth then it may be overvalued
Remember there is no rule saying stocks should be at a "X" level of PE
That is why valuation with a range is key. It is also why......... maybe he can look at a range via PE as well.... to fight the psychological bias
Like Einhorn says. You're not on a journey to find something cheap. You are looking for mispricing first. Then you see if the mispricing is wrong
Thought on the overall chapter is why don't we use the drift theory from JA. and let the performance determine the weight instead of cutting the winner?
Are we not doing the clients a disfavour by putting in our own psychological biases when the back testing has proven we were wrong? We might be thinking we are doing risk management, but it could all just be human nonsense
"Usually a very long list of securities is not a sign of the brilliant investor, but of one who is unsure of himself" - I wonder what Peter Lynch would say to that
"He should take extreme care to own not the most, but the best" - So why not let the outstanding companies run out through natural selection?
Why do we trim? because everyone else probably trims. Why don't we let our portfolios run wild? because no one else does it. We are following the herd just like that. - it brings around the point that I actually do think we have an overconfidence that we are different from the other market participants. But I think certain things we do with our portfolio shows that we are not.
Contrasting the notion of "you can't time" the market with "you can't know the exact value of the stock". We accept the valuation critique, so we use a range. Why don't we also accept the timing and use a range. And try to understand the fundamentals impacting a certain industry
Remember that the market will move wit popular news. When they hear news of a high-flying CEO come into a company then they will overreact. If it is a nobody, then they will underreact. So, consider all these and base investing timing there as well
Fisher's Method of finding stocks - Talk to people in his circle of acquaintances for ideas - 13Fs, Pabrai's cloner effect
^ considers that one must have humility to be able to admit there are smarter people who would've found great ideas.
"What is necessary is to get the right answer a large proportion of the very small number of times actual purchases are made"
There is no set ROIC that is ultimate. Differences in time and impacts of industry and certain distortions of when companies make expenditures can distort the ROIC. It's also like considering each company has a different WACC, so the hurdles are all different. a 7% ROIC business could be fantastic if it's sustainable hurdle is only a couple percent. It tends to be relative and not absolute.
· Charlie Munger does say that over time the business will provide a return close to its return on invested capital. but I think he wasn't speaking in strict absolute terms
PM = safety of investment, ROIC = profitability of investment
Thus PM + ROIC is important
1) business has subscription like model that makes it uneconomical for a competitor to displace them
2) business must have reputation of quality + reliability = brand factor
3) quality aspect is amplified in business where an error in quality can cause major harm and inconvenience to customers (i.e. transdigm, kerry)
4) competitors are serving market only in a minor segment of market, in essence a monopoly, so business is unanimously the defacto supplier in market mind
5) cost of product is small part of total cost of operations
Business with PM consistently 2-3% of sales greater than that of the next best competitor is sufficient to ensure quite outstanding investment = Thought is now around that the difference doesn't have to be large. People think large PM difference is better but that means more competition can come in.. slight difference may signal a barrier
"if the fundamentals are genuinely strong, these companies will in time increase earnings not only enough to justify present prices but to justify considerably higher prices" ~ works for our A2s
"those who sell such stocks to wait for a more suitable time to buy back these same shares seldom attain their objective" ~ human psychology on it is harder to buy something after you sell and it goes up in price, even if the fundamentals may have changed
Price of stock is blend of: 1) attractiveness of common stock as a whole 2) attractiveness of the industry company is in 3) attractiveness of the company itself
"Conservative investor must be aware of the nature of the current financial-community appraisal of any industry in which he is interested"
· it is a way of timing the trend - understanding the market behaviour is important. Step back from the analysis to see the play around the industry to see if there is a tailwind or if it is favourable for mispricing
"Investor can best determine which stocks are importantly undervalued or overvalued by a shrewd determination of the degree to which the real facts concerning any particular company present an investment situation significantly better or significantly worse than that painted by the current financial image of that company" - > market overreacts, then you know it is under the radar of the people.
"The further into the future profits will continue to grow, the higher the PE ratio an investor can afford to pay" - don't be afraid of the high PE, only if the growth makes no sense
"In downward markets, a change for the worse in the financial community's image of a company gets accepted far more quickly than a change for the better. Just the opposite is true in rising markets" -> Momentum of the tide going out
3-year minimum hold period
"Never promote someone who hasn't made some bad mistakes, because if you do, you are promoting someone who has never done anything" - Could be a management question on "what was the biggest mistake you made in operating and capital allocation"?
Fisher favours holding and not selling and trying to time and sell at a top. over time buying and holding works out. Unless the fundamentals are grossly impacted and no longer in line with the thesis then it shouldn't be sold
Definition of barrier to entry vs. competitive advantage -> Are they truly different things?
Would think a barrier acts to stop new players from coming in but a competitive advantage would act as a method for the incumbent to retain its high ROIC/profitability in the industry it has a barrier in. SO, barrier blocks entrants then comp adv keeps incumbents at bay
Local + specific comp adv => Naver, Topdanmark
Prediction: world goes more global -> service industries become more important and manufacturing less so. Rationale: Services are consumed locally whereas manufacturing can be globalized for lower cost
3 kinds of comp adv: supply (cheap irrelevant of size), demand (unique/better), economies of scale (cheaper on fixed basis)
List of competitors not short + manageable = no genuine barrier
"Barriers to entry, not differentiation by itself, that creates strategic opportunities" -> differentiation alone becomes a commodity i.e. Richemont --> brands are commodities but the barrier is watch making activity itself?
Differentiated products are harder than pure commodities to find operational efficiency in. 1) commodity -> efficiency in controlling production cost only 2) differentiated -> efficiency in production cost + successful marketing
High barriers to exit impair profitability of industry and those even with comp adv
Rule of thumb: "If last firm in always has advantage, there are, by definition, no barriers to entry and no sustainable excess returns"
Customer captivity + economies of scale = strongest competitive adv
Technology cost savings (i.e. ERP) would be short term and eventually get competed away -> unless they have scale to protect it but with supply adv alone I see it as being hard
Low cost inputs are only advantage when you stay within the localized zone where that is applicable
Customer captivity: 1) habit -> preferred -> frequent + virtually automatic purchase -> value prop is that customers like the product 2) switching cost -> the higher the customization the more pain when switching -> the longer it takes to get familiar with the more customization -> think of the sunk cost fallacy of personal time in thinking about the switching cost -> standardization leads to lower switching costs (i.e. credit card, banking, out-of-box ERPs) 3) search cost -> like switching but it is also a pain to find an alternative
Innovation is key -> once you have scale -> spread out R&D costs -> increase innovation -> virtuous cycle of increasing advantage over others
Customer captivity - unique/better economies of scale - cheaper combined is best but captivity > scale Q: Ask management what customer captivity level is
Economies of scale must be defended constantly - especially market is growing. scale results from share of existing market -> relative share size NOT overall size is what is important
Market grows -> VC increases -> not good for scale
Assessing scale: 1) compare FC/Sales between competitors 2) as market grows the sales/FC ratio will decline -> see if the difference between the competitors decrease. Decrease shows weakening of scale
Identify scale: 1) local (geography) + niche market (product) + FC is substantial
Ask management: on scale of 1-10 how painful is it for customers to switch? Ask management: Ability to increase prices
Search cost component = high added value (Microsoft) + complexity (Kerry) + significance (emotional/sentimental)
Multi-bagger scenario: market served by many small players + significant FC (i.e. real estate) i.e. Tsuruha + Couche tard
Rapid market growth -> noncaptive customer growth -> provide scale for new entrants Verdict = NOT ALWAYS GOOD
Attractive niche model = customer captivity (pricing power) + small size relative to fixed cost + no dominant competitor (market size) + extendable at edge = think local!
Mental Model: 1) Ask management: Nestle Q + historic mkt share shift (if leader changes frequent then not sustainable) 2) Analyze ROIC/CFROI over years for profitability 3) Why + how? -> niche mkt + low cost/better product 4) good management? -> capital allocation (can’t copy = unique to mgr.) + op efficiency (can be copied)
Market share change of 5% plus may show no barrier and <2% may mean barrier
Product classification: 1) Is it a luxury product people will trade up to? (Prada) 2) Is it a lower/poor product people want to upscale from? (H&M) 3) Are there global alternatives? (Korean coke)