anyone in the middle. Walmart is just an amalgamation
amalgamation
of ideas from other places. If we look
at if you look at a company like Starbucks,
Starbucks,
we think of Starbucks as innovative, but
actually what Howard Schultz did is he
saw a concept in Italy and his idea was
that I think this is work in the US,
right? And so he cloned he cloned that
idea from Italy and brought that coffee
shop experience to the US. If you are a
great cloner,
you will be 90% ahead or 95% of the rest
of humanity. Now
another mental model humans have this perspective
perspective
that starting a business
is risky. In reality entrepreneurs do
not take risk. They do everything in
their power to minimize risk. And in
many cases when they embark on a
business the risk approaches zero. What
is extremely risky is a 9 to-ive job
because we have one life,
right? And it goes away and you may not
get to do what's in your heart. You may
not get your music out, right? And so
getting our music out is really
important. So, so this notion which is
drilled into us that if you're an
entrepreneur, you're taking risk really
kind of does a big disservice to most
humans. And if if humans understood that
if I embark on a business, I can do it
in a format where the risk is zero or
close to zero and I can clone an
existing business.
Right now you've combined two mental models
models
and we can start adding more to them.
But two has become 11. 1 plus 1 has
already become 11. It's nonlinear. And
why is it that why is why am I saying
that entrepreneurs do not take risk? So
if I take my own case as an example and
I can give you a hundred cases like that
but if I take my own case as an example
I was working 9 to5 at a company and I
had a business idea my employer expected
me to work 40 hours a week right there's
168 hours in the week so I felt like
there must be at least another 30 40
hours there that could work
on my startup.
>> Could you show me this in context of
>> right? So if we look at our whole week
for example these beautifully arranged
Legos if I take one of these blocks of
Legos. So each one of those blocks in
there is 2 hours. So 8 hours a day. We
sleeping 8 hours a day right?
>> And uh and we're doing that 7 days a
week. Right? So basically we've got 7
days a week, 8 hours a day we're
sleeping. The blue Legos are showing our
40 hours a week. Uh 8 hours a day, 5
days a week we're working. Right? Then
we get to
other, you know, uh preparing dinner and
showering, shaving, getting ready,
whatever else. So that's about 4 hours a
day on the weekdays, which is uh
including commute time, and about 8
hours a day on the weekend. Then we get
to free time, you know, social media and
watching Netflix and hanging out with
friends, going for dinner. And we've got
quite a bit. We've got about 4 hours a
day of doing that and about 8 hours a
day on the weekends. So this is kind of
typical what a typical week for most
people would look like. Right
>> now, when you're starting a business,
the important thing is don't shut off
the cash flow. Some other yo-yo is
paying your rent and some other yo-yo is
paying your groceries. So, we don't want
to rock the boat, but we're going to
make one change to blue,
>> which is the amount of hours I'm working
for my 9 to5.
>> Now, before I started my startup, um I
used to get top reviews as an employee.
uh you know I was very focused on doing
a great job for my employer allin right
the day I decided I'm going to run do my
startup I decided I need to be just
above firing level my performance needs
to be just good enough so they don't can
me but nothing beyond that because I
need all my energy to go into my startup
so that's the only tweak I'm making is
the blue stays but we're not doing extra
blues like we were doing before. Right.
>> And blue for anybody that doesn't can't
see because you're listening on audio is work.
work.
>> Exactly. Yeah. Blue is work. Exactly.
Now, when we embark on a startup,
we should never do a startup to make
money. It's the worst reason to start a
company. The purpose of business is not
to make money.
The purpose of business is to deliver an
incredible product or service to humanity.
humanity.
If you do that, the money is a side
effect. It'll happen. We don't need to
focus on it. So, what we are looking for
is do we have a product or a service
that we are thinking about that we could
bring into this world that is going to
improve the world in some way? How do I
know if it's a good idea?
>> Whatever idea you have come up with is
not going to work. Okay?
Okay?
Because you came up with it in an ivory
tower between your ears. Okay? And
that's not really a great place to find
great ideas.
What's going to happen is we're going to
be doing what I call rapid prototyping
which is we take this idea and show
humans what it is and when you show it
to humans you will get feedback. So I'll
I'll I'll um maybe I'll just give it in
more practical terms.
uh when I was um uh when I was starting
my first business uh it was going to be
a IT services business okay information
technology services and I was going to
be providing these services to very
large businesses companies that are you
know billion dollars or more in in
earnings or cash flows. Um, I was in a
meeting with a a senior IT guy at a very
large bank in Chicago
and I was going through my PowerPoint
deck with them.
I came to the 10th slide,
said my spiel, went to slide 11. So the
boss who was sitting in the meeting
said, "Go back to slide 10."
So I went back to slide 10 again gave my
speech that I had for slide 10 and took
it to 11. He said go back to slide 10
and do not change the slide.
I don't have an interest in any other
slide. Okay. So I took it back to slide
10 and all he wanted to talk about was
what was on slide 10. My deck was
talking about
seven things we could do. Slide 10 was
one of those seven.
It was an extreme pain point for him. He
needed help on that one thing. He didn't
need help on all the other riff raff
stuff I was talking about. So when
you're doing a startup,
you have to be listening very carefully.
Your customers or potential customers
will tell you exactly what you need to
do. Whatever you came up with may be 80%
right or 70% right or 40% right, but
your customer will tell you what is 100% right.
right.
>> Okay? Because that's a real pain point.
So I went back and thought about it and
I realized that his pain point and I
could see it was a severe pain point
because he gave me a purchase order at
the end of that meeting um was going to
be a pain point for a lot of people. So
I went back I took slide 10 blew it up
into 20 slides and that became the deck.
Okay. Everything else got thrown out
right now. I couldn't have done that
without him.
My brain is too small to have figured
that out. So, anytime you're doing a
startup of any kind and you have a
prototype or a early product or
something going on,
your users are going to tell you exactly
what tweak they want.
>> You've just reminded me of a
conversation I had this morning.
>> Okay. Yeah, where I interviewed someone
because much of what you're saying is
orientated towards startups, but it's
actually every single day of everyone's
life because I interviewed someone this
morning for a really critical role in
the company. And this person has spent
20 years at one of the biggest companies
in the world. And when I was doing the
interview, she was telling me about lots
of things she's done in those 20 years.
And I was just trying to get to this one
thing. Can you put on events? And she
was telling me about this and that and
the other thing and this and this and
the other thing. And I was just actually
I'd only come to this interview to
figure out if she could do put on big
scale events. So we spent of an hour
conversation. We spent 55 minutes
talking about a bunch of things I wasn't
interested in. And actually as you were
speaking I was going you know what she
could have done at the start of that
conversation. She could have gone
Stephen can I ask you one question? What
is the what are you looking for from
this person?
>> And if and then I would have gone I just
want someone that can put an event and
then the next 55 minutes could have been
persuading me that she can do that.
>> Sure. And it just applies to what you
just said there. How could you of the as
the saleserson that day in that meeting
with what you know now, how could you
have done a better job without going
through all of those slides?
>> Well, I think what what I would do now
if I were doing something like that is
that my my radar
on listening would be 10x.
You know, we don't learn when we speak. M
M
>> we learn when we listen. So I would
really be trying to talk less and
extract more.
>> And um I wouldn't even rely so much on
slides. I'd like to really try to bring
them in into what they are trying to
say. and uh and and so basically in uh
if if you study if you study businesses
you know ventureback non-benture back
whatever this is a very common thing
there are almost no businesses
who end up with the business model that
was originally conceived I mean that
just is would be such an anomaly it's
really the interplay between the
founding team and the early customers
which really leads to taking this wet
clay and making into something that
people want,
>> you know, and so you know, if you think
of something like uh Google Glass, you
know, when they came up with those
glasses that they thought the whole
world was going to wear. >> Yeah.
>> Yeah.
>> So, it didn't work. Well, why didn't it
work? Well, the reason it didn't work is
you're talking about something extremely
personal. Okay? Like for example,
Wrigley's chewing gum. Okay. My mouth is
a very personal space. I'm not going to
put Gloss Chewing gum in there.
>> What's chewing gum? >> Exactly.
>> Exactly.
>> Okay. Yeah.
>> You're not going to put some brand
that's half the price of Wrigley's. >> Yeah.
>> Yeah.
>> In there. Because you don't want to go
there. That's not of interest to you. So
when we wear glasses or sunglasses or
anything we wear, that's very personal.
So the the ergonomics and the human
factors are very important if it's
slightly off. Now Meta is trying to do
the same thing. But they went to RayBan,
right? They did a JV with Rayban.
Those glasses look like normal glasses. >> Mhm.
>> Mhm.
>> I think there's a higher chance.
>> Well, I've got some. We used them. Yeah.
>> You don't have any Google Glass?
>> No, no, no, no, no. I mean, I think they
they cut the project, didn't they?
Google. So, so what I'm trying to say is
that we we have to pay very close
attention to the customer. Uh I mean
Steve Jobs was right. The customer
doesn't know what he wants. Okay. But if
you put it in front of them, then they
can now tweak and tell you exactly what
they want.
>> Right. So, so that and that's another
mental model which is now we get to the
third model which is that you're not
smart enough if whatever founding team
you have is not smart enough to figure
out what people want. Period. So you
have to have very good listening skills
and you have to be have the flexibility
to and again when you're listening
separate the signal from the noise right
take in what is real signal and ex leave
out what is the noise and then you're
starting to get down a path which is
going to make more sense.
>> The other thing that's kind of a model
maybe woven into there was this idea of
just like attention to detail. I'm not
even sure if that's a model, but when
you told me about the Walmart founders
laying between the aisles to measure the
exact centimeter of length, the model
there for me was just like precision and detail.
detail.
>> It's a game of inches. I mean, what I'm
saying is that uh when when Sam Walton
was trying to figure out the name of the
company, one of the reasons he went with
Walmart was it was seven letters and he
was looking at the cost of putting up signage
signage
in his stores and he was trying to come
up with a name with the fewest letters
because it costs less.
>> Okay. And so I mean cost
cost sensitivity is all over the place
in Walmart, right? I mean that's just
front and center with what they do,
right? They just really squeeze blood
out of a rock, you know? So basically, I
mean, I think that was and that's the
reason why they became so successful.
One of the things you can always control
in business is your cost. you you may
not be able to control your margins and
selling prices and a lot of other things
but you can always control cost so
that's another model where you have to
have discipline
>> you have to have very strong discipline
on the cost side if you look at
something like LVMH you know uh the guy
who runs it I mean he's in luxury goods
he's in high-end
>> LVMH make Louis Vuitton and
>> yeah yeah I mean everything you know is
you know they've ten over Tiffany's
everyone. Um, but when you look at how
the company is run, it's very tight.
He spends money on the best real estate
because that's important. But the deals
he negotiates on those real estate is
mind-blowing, you know. So, it's it's a
very tightlyun operation on a product
category that doesn't necessarily need
it. M
>> but that's why they that's why he's
become the wealthiest guy in Europe
>> because that mentality will then apply
to every decision. >> Absolutely.
>> Absolutely.
>> And if you apply it to 100 things, it
does matter.
>> Oh, it does matter big time. Yes.
>> So I have these yellow blocks here which
represent working hours working on your
own business. Yes.
>> So show me how you would take some of
these blocks away. >> Yes.
>> Yes.
>> And introduce hours working on your own business.
business.
>> Yeah. So basically it's it's really
quite simple. Well, we're not really not
going to mess with our sleep cycles.
We're going to leave that alone.
>> Sleep staying the same.
>> And uh we we need our blue, which is our
work work space 40 hours. We need that
to continue. One of the changes we're
going to make is we're going to live
close to work. So, we're going to cut
down commute time as much as we can. >> Okay?
>> Okay?
>> Because every hour matters, okay? So,
the area that we're going to focus on is
the free time. Okay? And the reason why
taking out the free time is not a
problem is because what we are embarking
on like we just discussed is not about
making money. Is getting our music out.
>> Getting our music out. What do you mean
by that?
>> Which means that we have something in us
that we know the world needs and we want
to bring it to that world. We want to
bring it to the world and because we
want to bring it to the world, it's not
work. I think the audience might be
challenging themselves in their head and
saying, "But I love my the thing I do
for work. I'm I'm one of maybe the rarer
group of people that I get to work with
puppies every day and I love that."
Yeah. So, I think that I think this is
not for everyone. So, I think you have
to ask yourself who you are. If you are
truly excited about your 9-to-five job
and what you're spending your main
working main waking hours on, awesome.
That's great. I mean, everyone's not
going to be an entrepreneur. Everyone's
not going to have a startup. Everyone
they they may be getting their music out
in a different way on someone else's
platform, which is perfectly fine. And
but but if if that is not you, where
when you go to work, you're not super
excited to get up in the in the morning
and you're not tap dancing to work every
day. If that's not happening, then
there's something wrong. And you have to
ask yourself well is there something
else that is that you're passionate
about that you want to do and this is
not something that should take a lot of
effort. So if you go back and look at
for example Bill Gates and Paul Allen,
right? I mean, Bill Gates is at Harvard
and he sees a magazine which shows a
very early personal computer and he
realizes that there's a paradigm shift
and he realizes that he needs to be part
of it and Paul Allen is the one who sent
him that magazine and he told Bill, "We
got to go do this now. This is our time
now." And for Bill, it was a very easy decision.
decision.
Very easy decision. Very difficult for
his parents. His parents were in shock
that he's going to abandon his uh
degree. And you know, he he told his
parents, "Don't worry about it. I'm
going to come back and I'll finish the
degree." And several decades later,
Harvard gave him an honorary day. and
his parents were in the audience and he
told them, "I told you I'd come back,
finish it off." Right?
>> I put some numbers to this. 12% of
people according to the stats that are
listening right now are explicitly
unsatisfied with their job, which means
they hate it. 85% of workers globally
are disengaged, meaning they're not
fully invested or happy at work. So,
it's a huge number of people. More than
half of the US workers are at least
somewhat satisfied, but engagement
remains worryingly low. So if we look at
that 85% number, 85% of workers globally
are disengaged,
meaning not fully invested or happy at
work. So it's really those >> sure
>> sure
>> people and and the thing is it's not
it's not just enough to be unhappy at
work. That's one piece of it. the the
unhappiness can be a symptom and uh one
of the one of the causes can be that you
have a different calling in life and you
are not following following your
calling. Now
sometimes for someone like Bill Gates
for example and Paul Allen they figured
out their calling and they just went
right for many of us it may not be that
easy. So what we have to do is we have to
to
um try a few things. You know you try on
different shoes to see what fits. And so
you know have some thought experiments.
Talk to your friends. You know say okay
you know I'm a UPS driver. this is what
I do and I really like playing the
guitar or I like to make these art
figurines or something at home and
whatever else, right? So, you have to
figure out what your calling is and I'm
probably not the best person to tell you
how to figure out what the calling is.
Maybe another guest of yours can can uh
can help them with that.
>> Do you think everyone has a calling?
Yeah, I mean I think I think we are all
unique children of God and I think we
uh we all have some music we want to get
out and uh knowing what that is and
getting it out may not be the easiest
thing but it's a worthwhile journey to
try to get there. Right? So, we can't do
this just because we're dissatisfied and
we can't do this just because we want to
make money and get rich. We've got to
have something that we think the world
would be interested in. And
you know, in my case, I I'd gone through
this uh
session with a couple of industrial
psychologists and they told me, "Monish,
you like to play games. You're a game
player." And actually, they couldn't be
more accurate. So when I was doing my startup,
startup,
um I'm I'm a numbers guy and a math guy.
So I actually like that. So what I used
to do is because I had no money, I used
to send 200 letters a week to these
senior IT people at 200 different
companies. But what I did is so all
these people I was sending this letter
to, they had a gatekeeper, some
secretary etc. whose job was to not let
anything through. And my whole purpose
was I need this letter to get through.
It needs to get through the gatekeeper.
So I was using mailmerge which was mass-
prodducing these letters. But there was
a customization the mail word where if
person some person's name was David
Smith. It said dear Dave. Okay. And then
throughout the letter it talked Dave.
Dave's name came up like three four
times. When assistant got the letter she
couldn't tell whether I know Dave or not
>> because you used his shortened name.
>> His shortened name. And she doesn't want
to throw a letter that somebody that he
knows. So the letter would go through
>> enough times. Right now what I also did
is one week after those letters were delivered
delivered
I called I made 200 calls. I called all
200 people and basically if I got
voicemail, left a message, whatever else
right now they have entered the
salesunnel. Okay. So Dave Smith is in
the salesunnel. If I get no response
from Dave Smith, after one week there's
one more call. Then the calls start
getting spaced out double time. 2 weeks
out, then four weeks out, then 8 weeks
out, then 16 weeks out. But Dave never
leaves that funnel. Okay? Until he tells
me, "Do not bother me anymore and I have
no interest," they're going to stay in
that funnel. So the second week I send
out another 200 letters, make another
200 calls, right? And now I've got the
first week, second week. So you can see
as time goes on, I'm calling non-stop,
>> right? Because this thing is
>> But what I was tracking, because I'm a
math guy, what I was tracking is, okay,
these 200 letters went out. How many
people did I get any kind of positive
response from? Right? because not
everyone's telling me to get lost. Okay.
And how many meetings am I having? And
what is the ratio of calls to meetings,
meetings to close, etc. And
my ticket size of the item I was selling
was very large, hundreds of thousands of
dollars. Right?
9 months after doing this where now
let's go back here. So we're going to
take our free time. So what I'm trying
to describe is that what I'm doing is
actually more exciting than the orange.
The yellow is more exciting than the
orange. So basically
>> what is the yellow?
>> The yellow is our startup.
>> So that's working on your startup.
>> So on on the weekends I'm going to do 10
hours a day because I'm not working,
right? And on the weekdays, I'm going to
do four hours a day because I've got
other things to do because I have a job
and whatever else is going on. So
there's my weekdays,
5 days there where I'm putting in 4
hours a day and then I'm putting in 10
hours on the weekend. And the free time,
this is not as exciting as pounding Dave.
Dave.
Pounding Dave continuously till he says
either get off my back or here's your
purchase order is very exciting. It's
way more exciting than playing some
social media or watching Netflix or
whatever else
>> which is what people currently do with
their free time.
>> So one of your one of the litmus tests
of whether
you need to you should be doing a
startup or not is yellow
needs to be more exciting than orange.
Your startup needs to be more exciting
than your free time.
>> Netflix should be so painfully boring
for you and going on Facebook or
Instagram whatever should be very boring
for you
>> compared to
>> this is exciting
>> compared to building your company. >> Yes.
>> So you know um the Pink Floyd song, we
don't need no education. >> Yeah.
>> Yeah.
>> We don't need no thought control.
>> Yeah. We don't need none of this. This
is so useless. You understand how
useless this is? Yellow is where it's
at. It's not It's not the orange stuff.
We don't need this. Thank you, Stephen.
>> So, we don't need any free time.
>> This is better than free time.
>> Building your business.
>> You're having an orgasm every hour.
>> So, what can you what what can be better
than this? Much of what I do here when
I'm having these conversations is I'm
trying to put myself in the shoes of the
person who is currently sat in a in a
nineto-five job and they've got an idea
and their idea is isn't really hasn't
really gone anywhere yet necessarily and
the the pressure they're feeling in
their lives is is probably now a
financial one like they want financial
freedom. They want more optionality in
their lives to be able to go on holiday,
make more choices and have more freedom.
If you're that person, um what are the
mental models that we haven't discussed
yet that you need to be thinking about
to get from zero to one?
>> So, one of the things to keep in mind is
that we live in a world now where most
things that you would want to do in
terms of starting a business are not
capital intensive.
>> What does that mean?
>> Doesn't take much money. In fact, what's
been happening over time is startups
need less and less and less money
because they need more and more and more
brain power, right? So, the good news is that
that
a gating factor is not that you need
money. When when I started my business,
I took on I signed up for every credit
card that would come to me. So, I had
70,000 in unused credit lines in
probably a dozen Visa and Mastercards,
right? I had about $30,000 in my
retirement account, my 401k, which I
also took out. I said 25, I can make
that up later, right? So, basically, I
had $100,000 of capital and uh that
100,000 got used because once I got
going, I needed working capital and so
on. And but then the business was the
business was actually cash flow
positive. 9 months after I was doing this,
this,
I was able to get rid of this.
So after 9 months, my business was producing
producing
enough cash flow that I went and
resigned. Okay. And uh yeah, we can we
can put that in here as well. So what
happened is that I went to my boss and
his boss and basically told them that I'm
I'm
started a business. it's not competitive
with the company and I'm going to be
leaving in 2 weeks and this is my two
weeks notice and basically that was that
right and you know they they sat me down
and said you know monish we were so
confused for the last 9 months because
we met several times because we saw big
drop off in your performance but it was
never so low that we wanted to fire you.
I said, "Exactly. That was exactly what
I was trying to do. I was trying to say
just above firing level." He said,
"Well, you mastered it because we we met
several times, but we couldn't get rid
of you." So, they what they told me is
they said, "Look, when your business fails,
fails,
not if your business fails. When your
business fails, please come back. We'll
give you more money. You're going to get
a promotion, and we'd love to have you back."
back."
I could immediately come back. So I said
I got one free shot. >> Yeah.
>> Yeah.
>> Where I leave my job, I go,
>> I do this thing and if it doesn't work,
I'm back to almost exactly where I was.
Almost no change. Right.
>> Amazon's type one, type two decision-m.
>> Yeah. And so, and this is not just me.
What risk did Bill Gates take? Okay.
Bill Gates, what is his value as a
Harvard freshman in the job market?
Zero. Okay. He nobody would pay him
anything. And he could come back anytime
and finished a degree. So let's say he
went to New Mexico, things didn't work
out. He's got wealthy parents in
Seattle. Okay? He just comes back,
graduates a year later, and he goes on.
So what was the risk? There was no risk.
And if you study entrepreneur after
entrepreneur after entrepreneur, what
you're going to find, so if we look at
Sir Richard Branson,
he wants to start an airline. Okay? Now,
to start the airline, you need a jumbo 747
747
that costs like 150 million.
>> The plane.
>> The plane, right? That's some serious money.
money.
Richard Branson got Virgin Atlantic off
the ground with zero and with zero risk.
So here's what he did. You replace
capital with creative thinking. So he
which is directory assistance in
Seattle, Washington, and he asked for
the phone number for Boeing. Okay. So he
calls the main Boeing switchboard.
>> Boeing sell the planes, right?
>> Yeah. Boeing makes the 747. So he calls
the main switchboard of Boeing, giant
huge company, and says, "Uh, I'd like to
lease a jumbo." And they hang up on him.
Okay. He calls about 30 times. And they
keep hanging up. And finally, they get
tired of his calls and the lady says,
"Let me put you in touch with somebody
who's in charge of leasing and they can
tell you to get lost." Okay. So she
transfers him to a person who's actually
leasing jumbos and this person tells
Richard says look Mr. Branson in every
country we have one customer and in the
UK that is the British that is British
Airways so we have nothing to talk
about. So he says well just humor me for
a second. He said, "If British Airways
called you and said that they wanted to
lease a old used jumbo, do you have one
lying around?" So the guy says, "As a
matter of fact, we do, but that's
academic." He says, "Well, what would
you lease it to British Airways for?"
Just since we're having a conversation,
what ended up happening is Boeing leased
him that jumbo. And the reason they
leased him that jumbo is they had one
just sitting around. So they didn't
really have any risk because they said
the moment the guy doesn't make any
payments, we're going to pull the plane,
>> right? So now when you have an airline,
you sell all the seats 4 months in
advance. The cash has already come in.
You pay for the fuel 30 days after the
plane lands and you pay for the lease
after the plane lands. You don't need
any capital.
Virgin Atlantic got off the ground with
zero capital. Okay. Now if you can start
an airline with needs a jumbo with zero
capital, you can start any business with
zero capital. Okay. So, so basically
when you look at business after business
after business, all of them what they do
is they start small, they're embionic,
they minimize risk, they get a few
customers and then after that they just
roll with the customers, right? And then
that's how they get going. So,
so the important thing is that when we
take the blue out, when blue is no
longer here,
>> which is work,
>> which work is gone, yellow is going to
almost double or triple because this is
where all the orgasmic activity is.
>> So, we move the work, we quit the 9
toive job and we move that time over to work.
work.
>> I was I I was working on my startup like
from 7:00 to 9:00 in the morning and
then I would come back 6:00 p.m. and
work till 10 or 12:00 in the evening.
when you had a job?
>> When I had my job and then I'd work on
the weekends and I was so desperate to
just go full-time into it because I just
said, "If you just let me go full-time,
I can tear it up." And that's exactly
what happened. I mean, we in about five
first year we did 400,000 revenue,
second year 1.4 million, third year 3
million, and by the sixth or seventh
year we were at about 15 17 million. It
just grew because basically then I had
no shackles on me, you know, I could
just go full out, right? And the engine
I knew all the statistics of these
letters, so many calls, so many this, so
much this means this and all of that
>> and uh it works. So and and if if it
doesn't work, you can go back to your 9
to5 and give it another shot, you know.
So you actually could do this a few
times. I think that's a really
unappreciated framework as you call it
or mental model which is because you
said you sent 200 letters. I so many
times kids come up to me in the street
and they say look I've been looking for
a job. I've sent six emails. >> Yeah.
>> Yeah.
>> And they go no one's got back to me. >> Yeah.
>> Yeah.
>> And you can see that it's hit their
confidence and now they've actually
arrived at the conclusion that getting a
job is like harder and possible cuz they
sense six. >> Yeah.
>> Yeah.
>> Now when I interview people like you
they all give me much bigger numbers.
they say 200, 300, 5, you know, and
there's something in this sort of law of
averages which is just like just take
more swings, you know, you see it in
like cricket.
>> My my daughter when she was uh
graduating from Berkeley came to me and
I was really surprised. She said, I want
to work at a hedge fund. And so I I said
okay. And her degree was not in
business. So she was not a natural
candidate to be even considered. I said,
uh, can you make a list of every hedge
fund in New York and LA and put it in Excel,
Excel,
managing partner's name, address? Now,
we don't know people's email addresses,
but we know everyone's mailing address.
Okay. The mailing address is a public
piece of data.
>> The address,
>> the address is easy. Yeah. Right. And I
I said that uh so she she got a list of
about 1,200
funds in LA and New York. And I said,
"What you're going to do is uh you're
going to ask for the job, but you're
going to have two pages behind that
giving them a stock tip. You're going to
give them a pitch that you have written
up of a company that if they invest in,
they're likely to make money." We sent
the 1200 letters, physical letters,
okay? all physical letters, no email,
right? And um there's a 85 year old guy
in New York who gets the letter. He's
retired. The fund doesn't exist. It
shouldn't have been on the list,
whatever. But he has a friend in LA. He
says, "Hey, Jamie, weren't aren't you
looking for an analyst?" And this girl,
she seems to have the perfect kind of
background. and she ends up with a
higher salary than anyone who went to
Berkeley business school with a much
higher GPA than hers. I was thinking about
about
what you're saying um and I made a video
the other day which I think is somewhat
relevant where I was trying to describe
to people how to send a message to
someone in a way that creates impact and
the framework that I came up with which
I'll I'll we'll animate on the screen
but is basically so this axis here is
the signal versus noise of the channel
you're using. Mhm.
>> So a high signal channel is one where it
gets past the PA. >> Mhm.
>> Mhm.
>> It's less saturated, less busy. A high
noise channel, which is the opposite,
would be sending an email to the like
press at your company.com's email. So
like everyone goes through that path and
it doesn't get doesn't get to the
person. And then the other axis is
basically the emotional impact of the message.
message. >> Yeah.
>> Yeah.
>> So high emotional impact is doing what
you said, put a stock tip in there,
you're going to stand out, they're going
to think you're a little bit strange. or
what you said about like shortening the
name that creates more emotional
resonance and then low would just be
>> AI slop copy and paste jargon and really
like the most successful messages are up here.
here. >> Absolutely.
>> Absolutely.
>> High like high signal channel high
emotionally resonant. >> Absolutely.
>> Absolutely.
>> But what h ends up happening is people
send loads of messages down here and
then they get depressed and demotivated
so no one's going back to me.
>> Yeah. Like Michael Jordan used to say
you miss every shot you don't take.
>> Yeah. Yeah. Yeah. So basically it is I
mean I think one of the things about
entrepreneurs is that you need to have resilience.
resilience.
Um like for me for me what the data I
was looking for is that if I send 5,000
letters okay which takes 25 weeks 6 months
months
how many meetings does that end up in?
If that ends up with 10 meetings or 20 meetings,
meetings,
well, now I have my number, right? And
then the second part is the meeting to
close ratio, right? And so to me as a
math guy, I I was just interested to
know that it's not zero.
>> Okay, I just want to make sure and I
could see very quickly it was not zero.
Literally within first two, three months
I could see it's not zero.
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I think one of the the most formative
experiences you can give your children,
which I got at 16 through through 16 to
19 years old, which is what I did, was
working in cold teley sales. So my job
at 16 years old, was to call people at
9:00 p.m. cold and try and get them to
buy windows and doors. And it taught me
the exact lesson you're describing,
which is yes, 80% of people tell you to off.
off.
>> 98% say that, but doesn't matter.
>> I always say like 80 80% told me to
off. 15% said it in a nice way. And then
5% were at least receptive to what I had
to say.
>> Maybe 1% close, but when you understand
that, you think of life through that lens.
lens.
>> And actually, Stephen, I had the almost
same experience. So my father was an
entrepreneur. He was really smart at
identifying what I call offering gaps,
like things that should exist in the
world but didn't. And he would get these
businesses off the ground with no money.
I saw him do it repeatedly. His downfall
was he was very aggressive in growing
the businesses. And so they didn't have
staying power. There was almost no
equity, always very levered. So I he
went bankrupt eight or nine times,
right? Repeatedly.
When I was um when I was about 11 or 12
years old, my brother and I, we were
like his board of directors, okay?
Because he had nobody else. The three of
us would sit down at night to figure out
how to make the business last for one
more day. Okay? Everything's caving in,
the creditors are caving in, the
business is collapsing. How do we make
it work for one more day? And then the
next night we'd get together and how do
we make get it work for one more day
again? Right
at 16 and I don't know why my dad did
this but I'm so grateful that he did. He
was at that time he had a gold jewelry
factory in Dubai and he was going cold
calling in person to jewelry shops to
buy his jewelry that he was
manufacturing. So he took me with him on
many of these trips and I was 16 just
like you, right? So we would uh take the
taxi from Dubai to Abu Dhabi and now
there's all these gold shops.
He doesn't know any of them, right? And
he's going one after the other after the
other after the other. And I would be
stunned that
fifth shop he makes a sale.
>> Yeah. And it's a very small sale because
he has no trust and all that, but he's
made the sale. Then I noticed that after
3 months, we go back to that same shop.
We made the little sale to the guy
brings out tea. He there's a there's a
lot of chemistry, bigger order, and then
I saw the orders increase, right? And
then he's continuing to do that. And I I
went with him to DohaQatar
uh Qatar and again the same thing. It
was like, you know, I saw how those
doors opened
>> and I saw how it didn't matter to him
when they closed. That was irrelevant to
him. You know,
>> really interesting new way to think
about it because what you're saying
there is actually when you get that one,
yes, it's actually a seed that's being
planted that can grow into something.
>> We just care about the ratio and the
number. Okay. So, what effort did it
take? Like I was saying, if I send 5,000
letters and I get 20 meetings,
that's awesome. >> Mhm.
>> Mhm.
>> I mean, that's a fantastic ratio because
one sale is going to get me about
200,000 or 300,000. It's a significant
amount, right? I mean, so that I don't
need large numbers and
>> but the lifetime value of that,
>> it's huge. Yeah. Yeah. I mean I mean uh
these uh these relationships I got then
they're still with me,
>> you know, so it's uh it's it's like
forever. Here's a philosophical way to
think about that for just everybody,
which is you can remember probably
conversations you had in your life that
you thought were totally
inconsequential, but then 8 years later
that seed became a business
relationship. The example I always give
is when I was 14, I applied for the
apprentice. They did this like junior
apprentice on the BBC. And it's a long
story, 35,000 kids in London and across
the UK applying. I met a kid in the line
while I was queuing up for my audition.
and he said to me, "Oh, my dad runs this
um $500 million company." And I was
like, "Yeah, whatever." Like not
interested. I went through the
auditions. I didn't and didn't end up
getting on in the show for whatever
reason. But then I ended up cuz we were
waiting in the queue that day. I was
really nice to this kid and I added him
on Facebook. 5 years later, I get a
message on Facebook. Hey, 5 years later,
although I didn't get on the show, which
would have got me about $25,000
investment in my company if I'd won. 5
years later, I'm working on a startup.
That kid from the line says, "Hey, um,
my dad has sold his business for a
billion dollars and I've been watching
you on Facebook for the last five years.
My dad would love to meet you." It was
an Indian family, the Alawalias. They
had sold a business called Euro Car
Parts. They took me to London when I was
literally so broke. I was like
shoplifting food to feed myself. And his
dad invested double what I would have
won on the show into my business. Um and
I and that always reminded me that like
every conversation that I have is like
planting a seed that at any point in my life
life >> sure
>> sure
>> could turn into something
>> like you know
>> I mean you know um I always bring up
Adam Grant's book uh uh givers and
takers. I don't know if you've seen that
all humans on the planet fall into one
of three categories. They are either a
giver or a taker or a matcher.
Okay, these are there are no other
categories of humans. Just these are the
three categories. Now the matchers
are relatively simple to understand.
Their mental framework is if Steven does
me a favor, I'm going to try to do
something similar for him. You know, one
to one. They can do matching in the math
in their heads. The takers
who you don't have anything to ever do
with are trying to scam and screw
everyone and always take and never give.
Okay? The takers basically go nowhere.
Okay? And if you have any takers in your
life, get rid of them. Okay? Now, the
givers, what the givers do is the givers
um are not focused on what comes back to them.
them.
They just want to help you. They want to
help humanity.
And what ends up happening is the
universe conspires to help them.
>> So the givers
become the most successful.
Everyone is trying to give to them even
though they're not asking for it. So basically
basically
when we and that's the book that Adam
Graham Grant wrote givers and takers is
one of the mental models. This is a
great mental model to have is to be a
giver. Don't play math games, you know,
always try to make sure the other guy
gets the better end of the deal and just
keep going through your life that way
and that goodwill will compound and it
will take care of itself.
>> And the time horizon, you don't worry
about the time horizon.
>> You're not doing it for getting
something back. That's the key. You're
not doing any mathematics like I'm going
to do. You're not calculating. I'm going
to do this so XYZ happens. You're just
doing it. End of story. I was sat with
my girlfriend last night. She runs a
breath work business. So, she's
essentially a soloreneur. Um, and she's
at that point where she's trying to
scale. In fact, I just meet so many I
think actually ran a survey before and
the vast majority of business owners are
in that theme category, that small small
sort of business category. It's the back
startups are the backbone of our
economy. But they they come to me with
the same problem which is maybe I
started as an individual. I've got high
demand and now I'm a bottleneck and I
don't know how to get out of being like
a freelancer. How does the freelancer
become an agency? And the thing I was
chatting to my girlfriend about last
night was um
the steps she hasn't taken yet is to
hire someone exceptional. And so many
founders come to me, these early stage
founders, they're like, uh, like I I my
customers like me, I do it better. I
don't trust anybody. I I wondered if you
had like a mental model for thinking about
about
>> the the thing is, so if you look at
people like Elon Musk and Steve Jobs,
they believe their number one job is recruiting.
recruiting.
The first 3,000 people who joined SpaceX
all personally interviewed by Elon.
Just think about that. Those are 3,000
hires. Think about the number of
interviews to get the 3,000 hires. Okay? He
He
did not believe there was any other way.
And what Steve Jobs used to say is that
A players
want to work with A players.
The moment you start introducing B players,
players,
B players will hire B and C players.
They will never hire an A player. So
your downhill the journeys already
started the moment you get a B player.
And so as an entrepreneur,
you know, we have a lot of demands on
our time, right? But recruiting
has to be at the top and you've got to
be willing to spend inordinate amounts
of time on recruiting. Okay? And um
there's, you know, there are tools that
you can use. We use uh there's a company
called Caliper. we use for
pre-employment testing.
And the thing is that between the
genetics of a human and the first 5
years of their life experience, who they
are, their traits are hardcoded.
That is not going to change from 5 to
95. Okay? So it's not like you're going
to change a human. Human is the way they
are. Okay? Now, these pre-employment
testing tests can get you data that
you're not going to get in an interview.
>> One of my companies I'm building at the
moment is called cultureest.com.
It's exactly this. >> Okay.
>> Okay. >> Um
>> Um
I mean, you're just like preaching
preaching to the choir here.
>> But what I'm saying is that
>> it we need to get really good at recruiting.
recruiting.
>> Yeah. It's it's my absolute absolute
obsession. And what I found out is that
funnily enough from doing these culture
tests. So I've I've culture tested tens
of thousands of people in the general
population now. And the shocking part
was just to give you some context on
what it does. It benchmarks our best
performing people and how they make
their decisions. The assumption here is
that culture isn't the thing you come up
with at the offsite. Culture is how you
would behave on Christmas Eve when you
get a text message from a client. Like
what you do there is your company
culture. So it basically creates these
questions which simulate optimal culture in that team and it puts you in that
in that team and it puts you in that scenario and says what do you do? This
scenario and says what do you do? This is probably a good point to talk to you
is probably a good point to talk to you guys about culture test.com which is the
guys about culture test.com which is the website we're about to launch for anyone
website we're about to launch for anyone who has the responsibility of hiring
who has the responsibility of hiring someone which is probably everybody
someone which is probably everybody listening. One bad hire can destroy your
listening. One bad hire can destroy your entire company. So, we made
entire company. So, we made cultureest.com
cultureest.com so that you guys at home can spot those
so that you guys at home can spot those red flags and avoid those hires that
red flags and avoid those hires that might be the end of your business.
might be the end of your business. Culture Test will make you your own
Culture Test will make you your own personalized culture test so that you
personalized culture test so that you can screen every single person that
can screen every single person that wants to be in your team and your
wants to be in your team and your current team members and people that
current team members and people that have left to see how they align. Just go
have left to see how they align. Just go to cultureest.com
to cultureest.com and put your email address in and the
and put your email address in and the minute we launch, I'm going to send you
minute we launch, I'm going to send you an email so you can try it before
an email so you can try it before anybody else. So recruiting is really
anybody else. So recruiting is really important and I think the other thing is
important and I think the other thing is uh we're willing to hire people who may
uh we're willing to hire people who may not do things as well as we do but
not do things as well as we do but actually also what I've also found is I
actually also what I've also found is I have so many people on my team who are
have so many people on my team who are better than me.
better than me. >> You know they're better at many of these
>> You know they're better at many of these things because it's not my natural bent
things because it's not my natural bent to do those jobs. Mhm.
to do those jobs. Mhm. >> So that's really when you get a huge
>> So that's really when you get a huge bang for the buck is you end up with
bang for the buck is you end up with team players that are way better than
team players that are way better than you.
you. >> How do you think about firing people?
>> How do you think about firing people? Because this is the other thing I hear
Because this is the other thing I hear from founders.
from founders. >> Hire slow, fire fast.
>> Founders really struggle with the fire fast thing
fast thing >> and uh
>> and uh it is very important
it is very important to fire fast. I think fire fast is more
to fire fast. I think fire fast is more important than high or slow
important than high or slow and you're doing the person a a service
and you're doing the person a a service because they may be exceptional in
because they may be exceptional in another role at another place. So you
another role at another place. So you are helping them
are helping them try to find that
try to find that >> and you're helping your other team
>> and you're helping your other team members.
members. >> If I was trying to work for your
>> If I was trying to work for your companies, what is the one
companies, what is the one non-negotiable? Like what is the trait
non-negotiable? Like what is the trait that I would demonstrate where you would
that I would demonstrate where you would immediately not even consider me?
immediately not even consider me? >> The most important is integrity.
>> The most important is integrity. >> You know, I mean
>> You know, I mean we we want three traits, right? We want
we we want three traits, right? We want intelligence,
intelligence, we want integrity, and we want
we want integrity, and we want willingness to work hard, right? And
willingness to work hard, right? And none of these three are really
none of these three are really negotiable.
negotiable. >> And what does integrity mean in your
>> And what does integrity mean in your definition?
definition? >> Well, it's absolute honesty is pretty
>> Well, it's absolute honesty is pretty simple. You know, it's black and white.
simple. You know, it's black and white. and you conduct yourself with the
and you conduct yourself with the highest levels of ethical standards.
highest levels of ethical standards. So on all fronts when you're dealing
So on all fronts when you're dealing with a customer or internally or
with a customer or internally or externally, it's the moral standards
externally, it's the moral standards need to be very high.
need to be very high. >> When you think about your wealth, how
>> When you think about your wealth, how much of it has come from building
much of it has come from building businesses versus being a great investor
businesses versus being a great investor of the capital that you manage to make
of the capital that you manage to make from those businesses?
from those businesses? >> I think currently most has come from the
>> I think currently most has come from the investing side. You're very well known
investing side. You're very well known for being a really excellent investor
for being a really excellent investor over many many many many many years.
over many many many many many years. I'll put a graph on the screen that I
I'll put a graph on the screen that I found which I think shows the returns of
found which I think shows the returns of your investment strategy versus the the
your investment strategy versus the the Dow Jones. This graph, have you seen
Dow Jones. This graph, have you seen that one before?
that one before? >> I haven't seen it this way, but people
>> I haven't seen it this way, but people put up all kinds of things. Yeah.
put up all kinds of things. Yeah. >> I mean, all this says is that you're
>> I mean, all this says is that you're extremely good at investing. So, I want
extremely good at investing. So, I want to know if I if I'm in starting my
to know if I if I'm in starting my investing career. I'm working in a
investing career. I'm working in a nineto-five job at the moment. I've got
nineto-five job at the moment. I've got a couple of thousand dollars in my my
a couple of thousand dollars in my my bank account. How should I be thinking
bank account. How should I be thinking about investing? Should I be investing?
about investing? Should I be investing? So,
So, there are um
there are um there are three things that matter
there are three things that matter in terms of getting a great outcome with
in terms of getting a great outcome with investing.
investing. um starting capital, how much the amount
um starting capital, how much the amount you start with,
you start with, length of the runway, how long are you
length of the runway, how long are you going to invest the money
going to invest the money >> and the rate of return.
>> and the rate of return. Okay. So before I answer your question,
Okay. So before I answer your question, I want to tell you a story. So and this
I want to tell you a story. So and this is a true story.
is a true story. Um, in 1623
Um, in 1623 in New York, the Native American Indians
in New York, the Native American Indians in New York who owned the island of
in New York who owned the island of Manhattan, the Dutch settlers wanted to
Manhattan, the Dutch settlers wanted to buy the island. And so they went to the
buy the island. And so they went to the Indians and said, "We'd like to buy the
Indians and said, "We'd like to buy the island of Manhattan, great natural
island of Manhattan, great natural harbors. It can be a great place for
harbors. It can be a great place for us." And the Indians and the Dutch
us." And the Indians and the Dutch reached an agreement to sell the island
reached an agreement to sell the island of Manhattan for $23.
of Manhattan for $23. And when people hear that, they think,
And when people hear that, they think, "Oh, the Indians got taken." You know, I
"Oh, the Indians got taken." You know, I don't know of Manhattan for $23 is
don't know of Manhattan for $23 is ridiculous. But let's say let's say the
ridiculous. But let's say let's say the Indians had a trust officer who they
Indians had a trust officer who they said invest this $23 for the benefit of
said invest this $23 for the benefit of the tribe and try to do a decent job.
the tribe and try to do a decent job. Right now there's something known as the
Right now there's something known as the rule of 72.
rule of 72. And the rule of 72 is a is a very
And the rule of 72 is a is a very important rule and I wish they would
important rule and I wish they would teach it more in high schools and
teach it more in high schools and elementary school. It tells us how long
elementary school. It tells us how long it takes money to double. And it's a
it takes money to double. And it's a kind of a mathematical hack. So for
kind of a mathematical hack. So for example,
example, if I'm going to get a 7% return and I do
if I'm going to get a 7% return and I do 72 / 7, that's approximately 10.
72 / 7, that's approximately 10. And at the 7% return, it's going to take
And at the 7% return, it's going to take 10 years for the money to double. 7%
10 years for the money to double. 7% compounded will take 10 years. If I have
compounded will take 10 years. If I have a 10% return,
a 10% return, it will take 7 years. 72 divided by 10
it will take 7 years. 72 divided by 10 is 7. If I have a 15% return, it will
is 7. If I have a 15% return, it will take 5 years. 72 divided by 15 is five
take 5 years. 72 divided by 15 is five approximately.
approximately. And if I have a 20% return, it'll take
And if I have a 20% return, it'll take three and a half years. So this rule of
three and a half years. So this rule of 72 is a nice hack. And it's very
72 is a nice hack. And it's very important to know how long money takes
important to know how long money takes to double because then we can start
to double because then we can start doing a lot of math in our heads. So
doing a lot of math in our heads. So when we look at these Indians with the
when we look at these Indians with the $23 if they were getting a 77% return
$23 if they were getting a 77% return it would become $46 in 10 years and then
it would become $46 in 10 years and then it would become $92 in 20 years and $184
it would become $92 in 20 years and $184 in 30 years so on. Now if you go 100
in 30 years so on. Now if you go 100 years
years right it's 10 periods of 10
right it's 10 periods of 10 and 10 periods of 10 is 2 ^ of 10
and 10 periods of 10 is 2 ^ of 10 and 2 ^ of 10 is 1,024.
and 2 ^ of 10 is 1,024. So we throw away the 24 because we don't
So we throw away the 24 because we don't want to complicate the math. So at 7%
want to complicate the math. So at 7% for a 100 years you would have a
for a 100 years you would have a thousand times what we started with. And
thousand times what we started with. And this is why because compounding becomes
this is why because compounding becomes nonlinear. People have a hard time
nonlinear. People have a hard time getting their hands around it. So
getting their hands around it. So >> nonlinear meaning
>> nonlinear meaning >> it's not going up in a straight curve.
>> it's not going up in a straight curve. It's going up in a
It's going up in a >> hockey stick.
>> hockey stick. >> Hockey stick club. Yeah. So in 1723 the
>> Hockey stick club. Yeah. So in 1723 the Indians would have 23,000. It would have
Indians would have 23,000. It would have gone up a,000. And then if they continue
gone up a,000. And then if they continue at the 7% in 1823 they would have 23
at the 7% in 1823 they would have 23 million.
million. And in 1923 they would have 23 billion.
And in 1923 they would have 23 billion. And in 2023 they'd have 23 trillion.
And in 2023 they'd have 23 trillion. >> Okay. Now the entire wealth of every
>> Okay. Now the entire wealth of every man, woman, and child in the United
man, woman, and child in the United States is 150 trillion.
States is 150 trillion. 16th of that is not
16th of that is not undeveloped land in Manhattan. So if the
undeveloped land in Manhattan. So if the Indians had invested at 7% a year for
Indians had invested at 7% a year for the last 400 years,
the last 400 years, they would have more money than owning
they would have more money than owning the land.
the land. >> So they were not taken. They were given
>> So they were not taken. They were given a fair deal, but they just didn't have a
a fair deal, but they just didn't have a good trust officer who could actually
good trust officer who could actually make it happen for them. So the
make it happen for them. So the magic of compounding is that we started
magic of compounding is that we started with $23
with $23 and we end up with 23 trillion without
and we end up with 23 trillion without having a great rate of return. It's just
having a great rate of return. It's just an okay 7% is just okay. It's not great.
an okay 7% is just okay. It's not great. It's not bad, but it's okay. Now if you
It's not bad, but it's okay. Now if you go back a 100 years, so we started at
go back a 100 years, so we started at 1623. Go back 100 years to 1523.
1623. Go back 100 years to 1523. We had 2,300 cents in 1623.
We had 2,300 cents in 1623. >> 2,300 cents.
>> 2,300 cents. >> $23 is 2,300 cents.
>> $23 is 2,300 cents. >> Oh, okay. If they had got it
>> Oh, okay. If they had got it >> just converted to cents instead of
>> just converted to cents instead of dollars, right?
dollars, right? >> Now, if you make it 1,000th of that,
>> Now, if you make it 1,000th of that, >> so just so I'm clear here. So, if you're
>> so just so I'm clear here. So, if you're saying if you went back a 100 years from
saying if you went back a 100 years from that point and you gave them just 23
that point and you gave them just 23 cents,
cents, >> if you gave them two cents,
>> if you gave them two cents, >> if you gave them two cents,
>> if you gave them two cents, >> 2.3 cents to be exact, but if you just
>> 2.3 cents to be exact, but if you just gave them two cents,
gave them two cents, >> Yeah.
>> Yeah. >> 100 years later that would be $20.
>> 100 years later that would be $20. >> If you gave them 2.3 cents, 100 years
>> If you gave them 2.3 cents, 100 years later, they'd be $23 and now it would be
later, they'd be $23 and now it would be the 23 trillion. Right? So what I'm
the 23 trillion. Right? So what I'm trying to say is that
trying to say is that if the runway is long enough, the
if the runway is long enough, the starting capital doesn't matter.
starting capital doesn't matter. Even the rate of return doesn't matter
Even the rate of return doesn't matter if the runway is long enough. Now so
if the runway is long enough. Now so when people are thinking about
when people are thinking about investing,
investing, they have to keep a few things in mind.
they have to keep a few things in mind. The first thing is spend less than you
The first thing is spend less than you earn.
earn. So, always try to save the first dollar
So, always try to save the first dollar rather than the last dollar. So, if you
rather than the last dollar. So, if you are making $50,000 a year, put 5,000
are making $50,000 a year, put 5,000 into savings to start with and then do
into savings to start with and then do the rest of your expenses after that.
the rest of your expenses after that. Now, it's very important when we saw
Now, it's very important when we saw with this example, you start young.
with this example, you start young. So when people start working at 22 or 23
So when people start working at 22 or 23 whenever they start working they have to
whenever they start working they have to be saving then because that early money
be saving then because that early money at 22 can compound for 50 years
at 22 can compound for 50 years and that's what we want. So we don't
and that's what we want. So we don't need to do heroic things with finding
need to do heroic things with finding the next Nvidia or whatever else. We can
the next Nvidia or whatever else. We can just put it into an index. And the
just put it into an index. And the important thing is spend less than you
important thing is spend less than you earn and keep putting that 5 7 10,000
earn and keep putting that 5 7 10,000 every year into the savings. Don't go
every year into the savings. Don't go have a vacation in Hawaii with it. Let
have a vacation in Hawaii with it. Let it keep compounding and just put it into
it keep compounding and just put it into a broad index and we don't really care.
a broad index and we don't really care. >> So for someone who has never invested
>> So for someone who has never invested before, yeah,
before, yeah, >> which would probably be the majority of
>> which would probably be the majority of the audience, how do we simplify even
the audience, how do we simplify even further in terms of just put it in an
further in terms of just put it in an index? What does that mean? So
index? What does that mean? So basically,
basically, you could open an account at Fidelity or
you could open an account at Fidelity or Interactive Brokers or Robin Hood, any
Interactive Brokers or Robin Hood, any of these places. You could open a
of these places. You could open a brokerage account for very little money.
brokerage account for very little money. >> And there's lots of them in every
>> And there's lots of them in every country.
country. >> Yeah. And then you could just uh
>> Yeah. And then you could just uh ask them to give to buy you the S&P 500
ask them to give to buy you the S&P 500 index, for example, and they will get
index, for example, and they will get you invested in that. And the S&P 500 is
you invested in that. And the S&P 500 is basically the top 500 companies.
basically the top 500 companies. >> It's the Yeah. the 500 dominant
>> It's the Yeah. the 500 dominant businesses in the US like Nvidia's in
businesses in the US like Nvidia's in there and Microsoft and Apple and so on.
there and Microsoft and Apple and so on. >> And you're going to get your 10% a year
>> And you're going to get your 10% a year if it if the trend holds over the last
if it if the trend holds over the last century.
century. >> The S&P has plenty of periods where it
>> The S&P has plenty of periods where it does nothing.
does nothing. Uh it's somewhat overheated right now.
Uh it's somewhat overheated right now. Uh but I think if you have a long enough
Uh but I think if you have a long enough to time horizon and you're dollar cost
to time horizon and you're dollar cost averaging in it's perfectly okay. Uh
averaging in it's perfectly okay. Uh what you could also do as an alternative
what you could also do as an alternative is buy Burkshire Hathaway. So that's a
is buy Burkshire Hathaway. So that's a stock BRKB. So you could again tell
stock BRKB. So you could again tell these people that just put it into
these people that just put it into Burkshshire Hathaway. It's like an index
Burkshshire Hathaway. It's like an index and and again it's like set it and
and and again it's like set it and forget it. You don't need to think about
forget it. You don't need to think about the investing side. You focus on yellow.
the investing side. You focus on yellow. Okay. and uh keep putting this little
Okay. and uh keep putting this little money away on the side and it's going to
money away on the side and it's going to compound. And so at 18,
compound. And so at 18, if you put away $5,000
if you put away $5,000 and you fast forward to when you're 68,
and you fast forward to when you're 68, 50 years later, right now, if if you got
50 years later, right now, if if you got a
a 10% return on that money,
10% return on that money, >> every year,
>> every year, >> let's say, every seven years it would
>> let's say, every seven years it would double.
double. Okay. 72 / 10 is 7. 50 years is 7
Okay. 72 / 10 is 7. 50 years is 7 doubles. 7 * 7 is 49.
doubles. 7 * 7 is 49. And
And 2 ^ of 7 is 128.
2 ^ of 7 is 128. Okay? So, we can throw away the 28. Keep
Okay? So, we can throw away the 28. Keep it simple.
it simple. You're going to have 100 times what you
You're going to have 100 times what you started with. So, the 5,000 at 18 is
started with. So, the 5,000 at 18 is going to be 500,000.
going to be 500,000. Okay, at 19, if you put money away,
Okay, at 19, if you put money away, that's another 500,000.
that's another 500,000. 20, you might have 10,000 you can put
20, you might have 10,000 you can put in. So, you can start seeing that over a
in. So, you can start seeing that over a lifetime,
lifetime, you know, you're going to be having too
you know, you're going to be having too much money.
>> As you might have been able to tell, I'm absolutely fascinated by the psychology
absolutely fascinated by the psychology behind high performing sports teams. I
behind high performing sports teams. I think it started with my love for Sir
think it started with my love for Sir Alex Ferguson as a Manchester United
Alex Ferguson as a Manchester United fan. So, when I was told about a new
fan. So, when I was told about a new Netflix series that covers the rise of
Netflix series that covers the rise of the Dallas Cowboys, it immediately
the Dallas Cowboys, it immediately piqued my interest. And this isn't
piqued my interest. And this isn't because I'm mad about American football.
because I'm mad about American football. I'm not. I don't even watch it. But I do
I'm not. I don't even watch it. But I do know about the Dallas Cowboys. And for a
know about the Dallas Cowboys. And for a lot of Texans, they're much more than a
lot of Texans, they're much more than a sports team. I watched this series and
sports team. I watched this series and it is absolutely
it is absolutely brilliant. It centers on Jerry Jones, an
brilliant. It centers on Jerry Jones, an oil businessman with no football
oil businessman with no football background who bought the Cowboys in the
background who bought the Cowboys in the late 80s and transformed them into the
late 80s and transformed them into the most valuable sports franchise in the
most valuable sports franchise in the world. It's all about how one guy
world. It's all about how one guy assembled a powerhouse team in the 1990s
assembled a powerhouse team in the 1990s made up of legendary players and coaches
made up of legendary players and coaches and through fearless decision-making led
and through fearless decision-making led his team to three Super Bowl victories.
his team to three Super Bowl victories. And I really enjoyed it and I think you
And I really enjoyed it and I think you might too. Check out America's Team, The
might too. Check out America's Team, The Gambler and His Cowboys, which is
Gambler and His Cowboys, which is streaming right now only on Netflix, and
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And I'm so honored that once again a company I own can sponsor my podcast.
company I own can sponsor my podcast. You've been referred to as the the Dando
You've been referred to as the the Dando Investor. And uh I've I've got a book
Investor. And uh I've I've got a book here which you wrote called the Dando
here which you wrote called the Dando Investor. What what what does this word
Investor. What what what does this word dando mean and why do they call you the
dando mean and why do they call you the dando investor? Dhando is actually a
dando investor? Dhando is actually a word from Gujarat which is on the on the
word from Gujarat which is on the on the western coast of India where Gandhi came
western coast of India where Gandhi came from. They are extremely astute business
from. They are extremely astute business people and dando if you translate it
people and dando if you translate it directly in Gujarati
directly in Gujarati it means business
it means business but it doesn't really mean business.
but it doesn't really mean business. What it means is it's a way of doing
What it means is it's a way of doing business
business where the downside is non-existent.
We already discussed how Mr. Branson is a dando investor. He had no downside.
is a dando investor. He had no downside. Uh Mr. Gates was a dando investor. He
Uh Mr. Gates was a dando investor. He had no downside. Mr. Walton was a dando
had no downside. Mr. Walton was a dando investor. They had no downside. So all
investor. They had no downside. So all of these people embarked on businesses,
of these people embarked on businesses, built huge fortunes
built huge fortunes without taking risk. And so the dando
without taking risk. And so the dando investor was written from the
investor was written from the perspective of how can we minimize risk
perspective of how can we minimize risk while keeping the returns intact.
while keeping the returns intact. >> You use this example of the Patels.
>> You use this example of the Patels. >> Mhm.
>> Mhm. >> What is what is that story?
>> What is what is that story? >> The Patels uh went to Uganda
>> The Patels uh went to Uganda more than 100 years ago. Maybe close to
more than 100 years ago. Maybe close to 130 years ago.
130 years ago. >> It was a family. It's a ethnic group,
>> It was a family. It's a ethnic group, okay, in India.
okay, in India. >> And so this ethnic group came to Uganda
>> And so this ethnic group came to Uganda to build the railroad. And
to build the railroad. And but they're very savvy business people.
but they're very savvy business people. And over the course of the last 100 odd
And over the course of the last 100 odd years uh when they were in Uganda
years uh when they were in Uganda through their dando methods of doing
through their dando methods of doing business they became very successful
business they became very successful entrepreneurs
entrepreneurs and they controlled large parts of the
and they controlled large parts of the Ugandan economy and Idi came to power in
Ugandan economy and Idi came to power in Uganda in the 1970s
Uganda in the 1970s and he said Africa is for Africans. So
and he said Africa is for Africans. So what he did is he threw all the Patels
what he did is he threw all the Patels out and he nationalized all their
out and he nationalized all their assets.
assets. So now the Patels
So now the Patels were stateless.
were stateless. The US took them in, the UK took them
The US took them in, the UK took them in, Canada took some of them in. And
in, Canada took some of them in. And when they landed in the US, they
when they landed in the US, they basically really didn't have any skills
basically really didn't have any skills that would allow them to get good jobs,
that would allow them to get good jobs, white collar jobs in the US. And
white collar jobs in the US. And what a few of them started to do was
what a few of them started to do was they realized
they realized that if they bought a motel, a small 10
that if they bought a motel, a small 10 or 20 room motel,
or 20 room motel, uh the family could live in one or two
uh the family could live in one or two of the rooms and they could use the
of the rooms and they could use the money they got out and get a bank loan
money they got out and get a bank loan and run the motel. Now motel are very
and run the motel. Now motel are very labor intensive businesses. So what they
labor intensive businesses. So what they did is when a patel took over a motel,
did is when a patel took over a motel, they fired all the staff and the family
they fired all the staff and the family took over all the jobs, you know, the
took over all the jobs, you know, the cleaning and front desk and everything
cleaning and front desk and everything else, right? And the Patels are
else, right? And the Patels are vegetarians and they are very they live
vegetarians and they are very they live a very simple life. So when a Patel took
a very simple life. So when a Patel took over a motel in an area, what they were
over a motel in an area, what they were able to do is they were able to undercut
able to do is they were able to undercut the prices of all the other motel in the
the prices of all the other motel in the area because they have no labor. They
area because they have no labor. They have no payroll. They have no workers
have no payroll. They have no workers comp, none of those things. And so they
comp, none of those things. And so they were if everyone else is charging $25 a
were if everyone else is charging $25 a night, they're charging, you know, 19 a
night, they're charging, you know, 19 a night. So the occupancy was higher than
night. So the occupancy was higher than everyone else. And they saved their
everyone else. And they saved their money. And then what they would do is
money. And then what they would do is buy the next motel, send the nephew to
buy the next motel, send the nephew to run it, and then buy the next motel. And
run it, and then buy the next motel. And this started happening in the early '7s.
this started happening in the early '7s. And when you fast forward to today,
And when you fast forward to today, 80% of all the motel in the US are in
80% of all the motel in the US are in the Patel ownership.
the Patel ownership. 80%. So the Patels make up.1%
80%. So the Patels make up.1% [Music]
[Music] of the US population.
of the US population. Indians make up about little over 1%
Indians make up about little over 1% maybe 1.2 1.3%.
maybe 1.2 1.3%. Just onetenth of that is the Patels. And
Just onetenth of that is the Patels. And this.1% population
this.1% population is controlling 80% of the motel in the
is controlling 80% of the motel in the country. And um
country. And um it's because of the Dando way.
it's because of the Dando way. >> So if I want to steal from the Dando
>> So if I want to steal from the Dando way, you told me it's good to be a
way, you told me it's good to be a copier. Um what are the principles of
copier. Um what are the principles of the Dando way that I need to be thinking
the Dando way that I need to be thinking about? Cuz you I think there was was
about? Cuz you I think there was was there nine? Yeah, there was nine
there nine? Yeah, there was nine principles in total in the book.
principles in total in the book. >> Well, the most important one is heads I
>> Well, the most important one is heads I win, tails I don't lose much.
win, tails I don't lose much. Everything we discuss today, Stephen, is
Everything we discuss today, Stephen, is heads I win, tails I don't lose much.
heads I win, tails I don't lose much. When I started my business,
When I started my business, when Bill Gates started, when Sam Walton
when Bill Gates started, when Sam Walton started, when Richard Branson started,
started, when Richard Branson started, that was the formula.
that was the formula. If they won, they would win big. And if
If they won, they would win big. And if they lost, they'd lose nothing. So
they lost, they'd lose nothing. So everything has to be in business
everything has to be in business about risk reduction. Everything has to
about risk reduction. Everything has to be about free lunches. We love free
be about free lunches. We love free lunches. Okay. So, we always have to
lunches. Okay. So, we always have to think about how do we get this done
think about how do we get this done without capital, without risk. Free
without capital, without risk. Free lunches. Do you think there's an
lunches. Do you think there's an opportunity for people because
opportunity for people because everybody's at the moment thinking about
everybody's at the moment thinking about AI and technology and these like really
AI and technology and these like really advanced um new innovations as an
advanced um new innovations as an opportunity but does that create an
opportunity but does that create an opportunity in the boring in the motel
opportunity in the boring in the motel in the laundry mat?
in the laundry mat? >> Yeah. So you know the reality is so
>> Yeah. So you know the reality is so entrepreneurship is not studied much in
entrepreneurship is not studied much in business schools because there's nobody
business schools because there's nobody going to give you consulting project for
going to give you consulting project for studying entrepreneurs.
studying entrepreneurs. If we really study startups in the US or
If we really study startups in the US or actually anywhere in the world, 99.99%
actually anywhere in the world, 99.99% of startups are non venturebacked.
of startups are non venturebacked. >> What What does that mean?
>> What What does that mean? >> What I what I mean by that is those are
>> What I what I mean by that is those are your laundromat, your Chinese
your laundromat, your Chinese restaurant,
restaurant, your you know eBay seller, whatever,
your you know eBay seller, whatever, Amazon seller, so on, right? The small
Amazon seller, so on, right? The small businesses.
businesses. None of those companies were formed
None of those companies were formed because of venture capital. So the media
because of venture capital. So the media focuses on all the venture capital le
focuses on all the venture capital le businesses. And so people think that oh
businesses. And so people think that oh if I have to do a startup I got to do
if I have to do a startup I got to do something in technology. Well that's
something in technology. Well that's like onetenth of 1% or less. You can
like onetenth of 1% or less. You can ignore it. You don't need to really
ignore it. You don't need to really worry about it. Uh the important thing
worry about it. Uh the important thing is to be an observer
is to be an observer and to look at uh what what uh my dad
and to look at uh what what uh my dad would call offering gaps. So let me
would call offering gaps. So let me explain an offering gap, right? So let's
explain an offering gap, right? So let's say
say there's a town, let's call it town A.
there's a town, let's call it town A. Town A. There's a barber shop in town A.
Town A. There's a barber shop in town A. Okay? Okay. And the barbers,
Okay? Okay. And the barbers, one of many barbers doing well, etc.
one of many barbers doing well, etc. There's another town about 30 mi away,
There's another town about 30 mi away, town B, which also has barbers. They're
town B, which also has barbers. They're also doing fine.
also doing fine. There's a new township coming up in the
There's a new township coming up in the middle of these two towns called Town C.
middle of these two towns called Town C. Town C doesn't have much of a
Town C doesn't have much of a population, but it's growing fast.
population, but it's growing fast. So, the barber in town A goes to see
So, the barber in town A goes to see what the all the hoopla or town C is all
what the all the hoopla or town C is all about. So he makes a takes a trip there,
about. So he makes a takes a trip there, sees that there's some increase in
sees that there's some increase in population. People are moving in and he
population. People are moving in and he notices there's no barber shops. Why
notices there's no barber shops. Why would there be any barber shops? Because
would there be any barber shops? Because it's brand new, right? So he's thinking,
it's brand new, right? So he's thinking, how do I do this without taking risk?
how do I do this without taking risk? And what he does is he rents a subleas
And what he does is he rents a subleas leases a small storefront,
leases a small storefront, buys some used barber equipment, and
buys some used barber equipment, and then decides that one day a week he's
then decides that one day a week he's going to go into that town and cut hair
going to go into that town and cut hair every Wednesday and puts up a note board
every Wednesday and puts up a note board saying, "I'm available Wednesdays."
saying, "I'm available Wednesdays." And what happens is people start coming
And what happens is people start coming in.
in. They come in because they have no
They come in because they have no choice. if you don't go to this barber,
choice. if you don't go to this barber, you got to spend half an hour driving to
you got to spend half an hour driving to one of those two towns. Now, he normally
one of those two towns. Now, he normally charges 30 bucks for a haircut.
charges 30 bucks for a haircut. But here, he doesn't need to charge 30
But here, he doesn't need to charge 30 because there's an opportunity cost of
because there's an opportunity cost of the time you're saving. So, he can
the time you're saving. So, he can charge 45.
charge 45. So, he's charging 45 over here and then
So, he's charging 45 over here and then when he's in his own town, he's charging
when he's in his own town, he's charging 30. Now, what he what he notices is
30. Now, what he what he notices is Wednesdays are filled up. So, he says
Wednesdays are filled up. So, he says Tuesday and Wednesday. Okay? And
Tuesday and Wednesday. Okay? And gradually what ends up happening is that
gradually what ends up happening is that that business
that business is full-time
is full-time and he's making 45 bucks an hour per
and he's making 45 bucks an hour per haircut.
haircut. >> Mhm.
>> Mhm. >> But the nature of capitalism is more
>> But the nature of capitalism is more barbers are going to show up. So the
barbers are going to show up. So the second barber comes in, the third barber
second barber comes in, the third barber comes in, eventually the haircut there
comes in, eventually the haircut there is going to be 30 bucks. It's going to
is going to be 30 bucks. It's going to neutralize. But in the meanwhile, he's
neutralize. But in the meanwhile, he's doubled his business.
doubled his business. >> Mhm.
>> Mhm. >> Right.
>> Right. What risk did he take? So going into
What risk did he take? So going into Town C was addressing an opportunity
Town C was addressing an opportunity gap. When Howard Schulz started
gap. When Howard Schulz started Starbucks,
Starbucks, he saw an offering gap. He thought that
he saw an offering gap. He thought that what Italians love about cafes
what Italians love about cafes might be what Americans love too.
might be what Americans love too. It didn't exist, right? And he went and
It didn't exist, right? And he went and did it. you know that barber that moves
did it. you know that barber that moves into town C first and they're really
into town C first and they're really having a great time because there's no
having a great time because there's no competition. One of your points when
competition. One of your points when you're talking about the Dando method is
you're talking about the Dando method is this idea of creating a durable moat.
this idea of creating a durable moat. It's point four of the nine.
It's point four of the nine. >> So, so sometimes what happens is that
>> So, so sometimes what happens is that you start a business every business
you start a business every business starts off without a moat.
starts off without a moat. >> What is a moat?
>> What is a moat? >> We have a castle.
>> We have a castle. a knight in charge of the castle to keep
a knight in charge of the castle to keep the invaders away. And one of the ways
the invaders away. And one of the ways to keep the invaders away is you put a
to keep the invaders away is you put a motor water around the castle. So when
motor water around the castle. So when you put a motor water around the castle,
you put a motor water around the castle, it makes it harder for anyone to take
it makes it harder for anyone to take the castle.
the castle. >> And a business with a moat around it is
>> And a business with a moat around it is a business that competitors
a business that competitors will have a difficult time take business
will have a difficult time take business away from. So what can happen with our
away from. So what can happen with our barber in town C? Humans are creatures
barber in town C? Humans are creatures of habits. We don't like to change our
of habits. We don't like to change our barber every month. We like the same
barber every month. We like the same barber. So if he's competent and good,
barber. So if he's competent and good, what's going to end up happening is that
what's going to end up happening is that his client base will stay with him. What
his client base will stay with him. What about loyalty points? I was just struck
about loyalty points? I was just struck the other day when I was shopping in LA
the other day when I was shopping in LA at Airwan, which is a supermarket here
at Airwan, which is a supermarket here in LA, and I someone had recommended to
in LA, and I someone had recommended to me on the plane, which actually goes to
me on the plane, which actually goes to your point about actually give a great
your point about actually give a great product because an airline hostess on my
product because an airline hostess on my flight over here went, "Oh, you're um
flight over here went, "Oh, you're um you're on keto diet. You need to go
you're on keto diet. You need to go check out Air1." I got to So, that's the
check out Air1." I got to So, that's the recommendation
recommendation >> that's 10x more powerful than any ad or
>> that's 10x more powerful than any ad or anything else they could drive.
anything else they could drive. >> And I went there.
>> And I went there. >> Yeah.
>> Yeah. >> When I landed cuz I needed a supermarket
>> When I landed cuz I needed a supermarket and didn't know the place. But then
and didn't know the place. But then interestingly, when I was at the
interestingly, when I was at the checkout yesterday after my second
checkout yesterday after my second visit, the lady at the checkout goes,
visit, the lady at the checkout goes, "Hey, are you are you an Air1 member?"
"Hey, are you are you an Air1 member?" And I was like, "Air1 member?" And she
And I was like, "Air1 member?" And she was, "It does cost." She went, she was
was, "It does cost." She went, she was honest. She went, "It costs money, but
honest. She went, "It costs money, but here's what you get." She goes, "On this
here's what you get." She goes, "On this order today, you would have got 10% off
order today, you would have got 10% off this entire order. It's expensive one."
this entire order. It's expensive one." And she goes, "And we give you a drink
And she goes, "And we give you a drink every month." She listed all the things
every month." She listed all the things off.
off. >> I signed up and bought the membership
>> I signed up and bought the membership tow. I tell you now,
tow. I tell you now, >> I'm not going anywhere else.
>> I'm not going anywhere else. I don't know what it is, but now that
I don't know what it is, but now that I'm a member and I have the app, I'm not
I'm a member and I have the app, I'm not going anywhere else.
going anywhere else. >> Well, that's now that's the hack that
>> Well, that's now that's the hack that Amazon did, right? With Prime and um
Amazon did, right? With Prime and um two or three years ago, I was uh I was
two or three years ago, I was uh I was seated at dinner next to Bill Gates. You
seated at dinner next to Bill Gates. You know, my middle name is Forest Gump.
know, my middle name is Forest Gump. These things happen once in a while. And
These things happen once in a while. And Bill is Bill is describing to me how the
Bill is Bill is describing to me how the business model of Costco and the
business model of Costco and the business model of Amazon is illegal.
business model of Amazon is illegal. Okay. So I said, "Why is it illegal?" He
Okay. So I said, "Why is it illegal?" He said, "When you when you put a
said, "When you when you put a membership fee,
membership fee, what what you're doing to the consumer
what what you're doing to the consumer is you're locking them in." Mhm.
is you're locking them in." Mhm. >> Which means the consumer is no longer
>> Which means the consumer is no longer going after the lowest price because
going after the lowest price because they the distortion in their behavior.
they the distortion in their behavior. >> Yeah.
>> Yeah. >> Okay. So now the FTC doesn't believe
>> Okay. So now the FTC doesn't believe it's illegal, but Bill Gates does. And I
it's illegal, but Bill Gates does. And I was just thinking, well, that's because
was just thinking, well, that's because you're competitive with Amazon,
you're competitive with Amazon, >> you know.
>> you know. >> Yeah. Yeah.
>> Yeah. Yeah. >> That Prime thing with Amazon is super
>> That Prime thing with Amazon is super smart.
smart. >> Yeah. And and that was taken from
>> Yeah. And and that was taken from Costco.
Costco. >> Oh, okay. you know, but basically, yeah,
>> Oh, okay. you know, but basically, yeah, the lock in lock in is very powerful.
the lock in lock in is very powerful. >> One company I wanted to talk to you
>> One company I wanted to talk to you about was Apple because Apple, I find,
about was Apple because Apple, I find, is a really interesting company. You
is a really interesting company. You talked about being a copycat, kind of
talked about being a copycat, kind of arriving later to the party with new
arriving later to the party with new things.
things. They've kind of been a story of both
They've kind of been a story of both sides of the equation. They've been
sides of the equation. They've been innovative, it seems, especially under
innovative, it seems, especially under Steve Jobs. And more recently,
Steve Jobs. And more recently, >> I mean, they were like copying other
>> I mean, they were like copying other people, but now I'm not even sure what
people, but now I'm not even sure what they are. Well, so Apple is a very
they are. Well, so Apple is a very unusual company in that everything
unusual company in that everything emanated from one guy.
emanated from one guy. >> Okay? And that one guy has been gone for
>> Okay? And that one guy has been gone for a long time. And if you look at Apple,
a long time. And if you look at Apple, basically nothing new has come out since
basically nothing new has come out since he left.
he left. We don't have a Steve Jobs at Apple. We
We don't have a Steve Jobs at Apple. We And and the same thing happened at
And and the same thing happened at Disney. you know, they had to buy Pixar
Disney. you know, they had to buy Pixar because there was no Disney anymore. Mr.
because there was no Disney anymore. Mr. Disney was gone. And so Apple actually I
Disney was gone. And so Apple actually I I find
I find somewhat risky
somewhat risky >> as an investment.
>> as an investment. >> Yes. Because if the form factor So
>> Yes. Because if the form factor So currently humans walk around with a
currently humans walk around with a brick in their pockets or in their
brick in their pockets or in their hands,
hands, at some point that form factor is going
at some point that form factor is going to change. It may be integrated into
to change. It may be integrated into something we wear or some other more
something we wear or some other more ergonomic situation
ergonomic situation that may or may not be Apple. And in
that may or may not be Apple. And in fact, more likely not to be Apple. It's
fact, more likely not to be Apple. It's probably some guy in a garage somewhere.
probably some guy in a garage somewhere. And so if they are smart enough to find
And so if they are smart enough to find the guy in the garage early enough and
the guy in the garage early enough and buy them, they're okay. And bring them
buy them, they're okay. And bring them in as the next street jobs, that's okay.
in as the next street jobs, that's okay. But even there the odds are low.
But even there the odds are low. >> What does this say to you about
>> What does this say to you about founders?
founders? The specialness of founders. Are they a
The specialness of founders. Are they a unique animal or can you swap them out
unique animal or can you swap them out and still be tremendously successful?
and still be tremendously successful? >> Well, I would I would say that
>> Well, I would I would say that there's
there's there are a lot of elements of luck. So,
there are a lot of elements of luck. So, first of all, founders are all great at
first of all, founders are all great at what I call offering gaps, right? They
what I call offering gaps, right? They find something that the world doesn't
find something that the world doesn't have that needs etc and they go after
have that needs etc and they go after it.
it. Sometimes what happens with the offering
Sometimes what happens with the offering gaps is a moat gets built right someone
gaps is a moat gets built right someone starts Visa it becomes a multi company
starts Visa it becomes a multi company or American Express and so on and it
or American Express and so on and it perseveres and scales
perseveres and scales >> like Apple with their ecosystem their
>> like Apple with their ecosystem their closed ecosystem
closed ecosystem >> but
>> but 100% of businesses
100% of businesses eventually will go to zero
eventually will go to zero and so it very well could be that a
and so it very well could be that a business could last for 50, 100, 200
business could last for 50, 100, 200 years, 150 years
years, 150 years uh could last well past the founders's
uh could last well past the founders's lifetime.
lifetime. Those are businesses which were built
Those are businesses which were built with a lot of principles and a lot of
with a lot of principles and a lot of great core values. You know the founder
great core values. You know the founder of IKEA,
of IKEA, every decision he took was with a 500y
every decision he took was with a 500y year view.
year view. How many businesses think with a 500y
How many businesses think with a 500y year view?
year view? and
and IKEA, you know, I was I was uh studying
IKEA, you know, I was I was uh studying IKEA. Some very remarkable things about
IKEA. Some very remarkable things about it. First of all, he never ever took
it. First of all, he never ever took debt. Every single store they built,
debt. Every single store they built, they built out of retained earnings and
they built out of retained earnings and cash. He never took debt. And I've
cash. He never took debt. And I've studied business failure quite a bit.
studied business failure quite a bit. The single biggest reason why businesses
The single biggest reason why businesses fail is leverage. They owe people money
fail is leverage. They owe people money and they can't pay it back and that
and they can't pay it back and that they're gone. So IKEA has never taken
they're gone. So IKEA has never taken debt. If you never take debt as a
debt. If you never take debt as a retailer, you're going to grow slower,
retailer, you're going to grow slower, right? You got to keep uh kind of
right? You got to keep uh kind of bringing in the cash, but it's a very
bringing in the cash, but it's a very solid foundation
solid foundation because
because it's it's on a rock solid balance sheet.
it's it's on a rock solid balance sheet. >> Mhm.
>> Mhm. >> And and such. And um his second
>> And and such. And um his second principle was
principle was no two IKEA stores can be the same. So
no two IKEA stores can be the same. So what he said is that whenever we opening
what he said is that whenever we opening a new IKEA store, there has to be some
a new IKEA store, there has to be some innovation
innovation that is going into that store that does
that is going into that store that does not exist in our previous stores because
not exist in our previous stores because he says that if I don't keep innovating,
he says that if I don't keep innovating, I'm done. And so if we don't notice it
I'm done. And so if we don't notice it because we think all the IKEAs are the
because we think all the IKEAs are the same, but actually if you study them and
same, but actually if you study them and look at when they were when they were
look at when they were when they were built, etc., you start seeing these
built, etc., you start seeing these these incremental changes that they're
these incremental changes that they're making.
making. >> That's a really interesting idea that I
>> That's a really interesting idea that I could implement into everything that I
could implement into everything that I do, which is just making sure that every
do, which is just making sure that every podcast I do,
podcast I do, >> there's one new experiment or innovation
>> there's one new experiment or innovation or every piece of work you do, whatever
or every piece of work you do, whatever team you're in is just to run out one
team you're in is just to run out one experiment in every Absolutely. But you
experiment in every Absolutely. But you have to make it measurable, right? or
have to make it measurable, right? or else it's not a
else it's not a >> experiment. So, um you also talk about
>> experiment. So, um you also talk about making fewer big infrequent bets.
making fewer big infrequent bets. >> Who who's that relevant for and in what
>> Who who's that relevant for and in what context?
context? >> So,
>> So, one of the things that Warren Buffett
one of the things that Warren Buffett says, he says that you get a punch card
says, he says that you get a punch card which you can punch 20 times in your
which you can punch 20 times in your lifetime and each time you buy a stock,
lifetime and each time you buy a stock, it's one punch that's gone. So what what
it's one punch that's gone. So what what Warren is saying is
Warren is saying is if there was a rule which said that you
if there was a rule which said that you cannot buy more than 20 stocks in your
cannot buy more than 20 stocks in your whole life,
whole life, what would happen is you would be very
what would happen is you would be very thoughtful
thoughtful about what you bought. Okay? And chances
about what you bought. Okay? And chances are those decisions might be good
are those decisions might be good decisions because uh you only have 19
decisions because uh you only have 19 left and then you only have 18 left etc.
left and then you only have 18 left etc. So
in in venture investing, a very small sliver of companies that
a very small sliver of companies that venture capitalists invests in do well,
venture capitalists invests in do well, right? There's a high high burnout rate.
right? There's a high high burnout rate. And if you look at the stock market,
And if you look at the stock market, 4% of listed companies
4% of listed companies generate 90% of the return.
generate 90% of the return. So most companies that we may think
So most companies that we may think about investing in are likely not to do
about investing in are likely not to do well
well >> for us. It's a 96% odds
>> for us. It's a 96% odds that that's why the index is so
that that's why the index is so important is when you buy the index
important is when you buy the index you bought that 4%.
you bought that 4%. And if you go pick stocks
And if you go pick stocks you have one in 25 chance of getting one
you have one in 25 chance of getting one of those 4% there. You said earlier the
of those 4% there. You said earlier the punch card analogy of 20 things in the
punch card analogy of 20 things in the punch card. You got to pick 20 in your
punch card. You got to pick 20 in your life. If you only had three or three to
life. If you only had three or three to five things that you you would bet or
five things that you you would bet or back now,
back now, >> which I think is actually kind of what
>> which I think is actually kind of what you do, what would those things be?
you do, what would those things be? >> Well, I mean, uh, so I'm trying to
>> Well, I mean, uh, so I'm trying to resist going to specific names.
resist going to specific names. >> Yeah.
>> Yeah. >> Because I think that would hurt people
>> Because I think that would hurt people more than help people.
more than help people. >> Okay, that's fair. What I would prefer
>> Okay, that's fair. What I would prefer that people do is focus on the other two
that people do is focus on the other two variables, which is the amount you're
variables, which is the amount you're saving and the length of the runway and
saving and the length of the runway and focus on the index.
focus on the index. So I I I think that it's it's kind of
So I I I think that it's it's kind of like saying I want to be a great AI
like saying I want to be a great AI developer because it's the way it be.
developer because it's the way it be. Well, to be a great AI developer is
Well, to be a great AI developer is going to take time. It's just the nature
going to take time. It's just the nature of the situation. What do you think
of the situation. What do you think about these people that day trade?
about these people that day trade? Because so many young people,
Because so many young people, specifically men, are being sucked in by
specifically men, are being sucked in by these adverts that you can day trade
these adverts that you can day trade your way to wealth.
your way to wealth. >> It's not good. I think I think it's um
>> It's not good. I think I think it's um the broker is going to make all the
the broker is going to make all the money. Robin Hood will do well,
money. Robin Hood will do well, not you.
not you. >> Do you think anyone can make loads of
>> Do you think anyone can make loads of money as a long-term day trader?
money as a long-term day trader? >> I look at it this way. If you study the
>> I look at it this way. If you study the Forbes 400, the 400 richest people in
Forbes 400, the 400 richest people in the U, in the world, in the world
the U, in the world, in the world actually,
actually, I don't see any day traders in there.
I don't see any day traders in there. >> One of the last things I want to speak
>> One of the last things I want to speak to you about is this idea of um circling
to you about is this idea of um circling the wagons.
the wagons. >> Yes.
>> Yes. >> What does circling the wagons mean?
>> What does circling the wagons mean? Warren Buffett
Warren Buffett um said that over a
um said that over a 50-year period of running Burkshshire
50-year period of running Burkshshire Hathaway,
Hathaway, he's made hundreds of investments
he's made hundreds of investments and only 12
and only 12 have move the needle for Burkshire
have move the needle for Burkshire Hathaway. So it's the same 3 or 4% rule
Hathaway. So it's the same 3 or 4% rule where if we say that Warren made
where if we say that Warren made 300 investments, he probably made more
300 investments, he probably made more than 300 but let's say he made 300
than 300 but let's say he made 300 decisions
decisions only 12 have resulted in what we see as
only 12 have resulted in what we see as Burkshshire Hathway today. And the
Burkshshire Hathway today. And the important thing was not
important thing was not the buy decision on those 12.
the buy decision on those 12. The important thing was never selling
The important thing was never selling them.
them. So,
So, circle the wagons is a term that comes
circle the wagons is a term that comes from
from the 19th century when these pioneers
the 19th century when these pioneers were moving west, the wagon trails
were moving west, the wagon trails moving west and the native Indians would
moving west and the native Indians would attack or bandits would attack these
attack or bandits would attack these wagon trails. So, what they would do is
wagon trails. So, what they would do is they would put themselves in a circle.
they would put themselves in a circle. Mhm.
Mhm. >> They would circle the wagons, then
>> They would circle the wagons, then defend that circle as best they could
defend that circle as best they could with their guns and so on, but the
with their guns and so on, but the wagons being circled was the best
wagons being circled was the best possible possible way of trying to face
possible possible way of trying to face off that attack.
off that attack. >> So in effect, they circle the wagons
>> So in effect, they circle the wagons around the crown jewel. So when I'm
around the crown jewel. So when I'm talking about circular wagons, what I'm
talking about circular wagons, what I'm saying is that in a lifetime of
saying is that in a lifetime of investing, there are very few times when
investing, there are very few times when you're going to actually have a huge
you're going to actually have a huge multibagger.
multibagger. >> What's that?
>> What's that? >> A big big winner. You know, something
>> A big big winner. You know, something that goes up 10x, 50x, 100x.
that goes up 10x, 50x, 100x. And what you want to do is you want to
And what you want to do is you want to effectively circle the wagons around
effectively circle the wagons around that idea so it doesn't get sold.
that idea so it doesn't get sold. So
So we are not going to know before we
we are not going to know before we invest
invest whether something is going to be a
whether something is going to be a multibagger or not. But we may figure it
multibagger or not. But we may figure it out after we own it.
out after we own it. >> So after we we only going to know a
>> So after we we only going to know a business after we own it. We're not
business after we own it. We're not going to know it before we own it. After
going to know it before we own it. After we own it, we may understand the
we own it, we may understand the business well enough to know that this
business well enough to know that this is a great business. And when we figure
is a great business. And when we figure out it's a great business,
out it's a great business, you don't want to sell that.
you don't want to sell that. >> When I meet people like you, I I'm
>> When I meet people like you, I I'm always so inspired because we spend a
always so inspired because we spend a lot of time thinking about the wins, the
lot of time thinking about the wins, the great decisions. We've talked about
great decisions. We've talked about that. I've shown you the graph of your
that. I've shown you the graph of your great decisions. What is the worst ever
great decisions. What is the worst ever decision you made in terms of financial
decision you made in terms of financial performance?
performance? >> Well, I've had so many zeros.
>> Well, I've had so many zeros. So, I mean, uh
So, I mean, uh >> or the one that got away.
>> or the one that got away. >> I mean, yeah. I mean so the there's
>> I mean, yeah. I mean so the there's mistakes of commission which is uh
mistakes of commission which is uh things going to zero and there's
things going to zero and there's mistakes of omission. The mistakes of
mistakes of omission. The mistakes of omission are
omission are far
far um far worse. Okay. So the biggest
um far worse. Okay. So the biggest mistakes I have made aren't the ones
mistakes I have made aren't the ones that have gone to zero. The biggest
that have gone to zero. The biggest mistakes I've made are the ones that I
mistakes I've made are the ones that I sold and I shouldn't have. Where I
sold and I shouldn't have. Where I should have circled the wagons and I
should have circled the wagons and I didn't.
didn't. and those have been very costly.
and those have been very costly. >> Give me one example.
>> Give me one example. >> Well, so I think this was in about 13
>> Well, so I think this was in about 13 years back 2012. I invested in uh
years back 2012. I invested in uh company called Fear Chrysler
company called Fear Chrysler Automobiles. Um basically it was uh
Automobiles. Um basically it was uh coming out of bankruptcy after the
coming out of bankruptcy after the financial crisis. They had gotten rid of
financial crisis. They had gotten rid of all that debt and everything and the
all that debt and everything and the stock was very cheap. It was about5 or 6
stock was very cheap. It was about5 or 6 billion uh that you could buy the whole
billion uh that you could buy the whole business. One of the things I didn't pay
business. One of the things I didn't pay too much attention to at the time was
too much attention to at the time was that 80% of Ferrari was inside Fiat
that 80% of Ferrari was inside Fiat Chrysler and they owned Ferrari 80% of
Chrysler and they owned Ferrari 80% of it and um but they had many other assets
it and um but they had many other assets which I like. They had the Ram trucks
which I like. They had the Ram trucks and Jeep and Maserati and so on. And
and Jeep and Maserati and so on. And when I looked at the business, I thought
when I looked at the business, I thought the business was worth many times the
the business was worth many times the five or six billion even ignoring
five or six billion even ignoring Ferrari. And I was right. So in the end,
Ferrari. And I was right. So in the end, I made several times my money.
I made several times my money. And in 2017 or 2018, they took Ferrari
And in 2017 or 2018, they took Ferrari public. So they actually then listed the
public. So they actually then listed the company. And um it looked like that they
company. And um it looked like that they had captured all the value and so I sold
had captured all the value and so I sold I used to own approximately
I used to own approximately 1% of Ferrari as part of that purchase
1% of Ferrari as part of that purchase that I had made.
that I had made. So 80% of Ferrari was in this $5 billion
So 80% of Ferrari was in this $5 billion company. Ferrari now has a market cap of
company. Ferrari now has a market cap of almost a hundred billion.
almost a hundred billion. And I
And I would have about a billion more
would have about a billion more if I had not done that stupid thing. So
if I had not done that stupid thing. So I I made a couple of hundred million on
I I made a couple of hundred million on this whole thing, but it would have been
this whole thing, but it would have been a lot more. And all I needed to do was
a lot more. And all I needed to do was just not sell it.
just not sell it. >> Do you deal in crypto at all? Do you
>> Do you deal in crypto at all? Do you invest?
invest? >> No, it's outside my competence. I don't
>> No, it's outside my competence. I don't understand it. I was going to say one of
understand it. I was going to say one of the things I notic about you that's
the things I notic about you that's quite rare for someone that deals in
quite rare for someone that deals in bees, billions, is you have a smile on
bees, billions, is you have a smile on your face. You seem like a really
your face. You seem like a really genuinely happy person.
genuinely happy person. >> Well, what would be the point of the
>> Well, what would be the point of the bees without being happy?
bees without being happy? >> Well, a lot of people aren't as as you
>> Well, a lot of people aren't as as you know.
know. >> Well, then they've lost their way
>> Well, then they've lost their way somewhere.
somewhere. I mean, on a daily basis, I specifically
I mean, on a daily basis, I specifically ask myself, how do I want to spend
ask myself, how do I want to spend today? And I focus on spending it not
today? And I focus on spending it not with the focus on maximizing money. I
with the focus on maximizing money. I focus it with maximizing what Monish
focus it with maximizing what Monish loves.
loves. And that changes all the time. But
And that changes all the time. But that's the way it is. You know
that's the way it is. You know >> what is that?
>> what is that? >> Well, currently it's golf.
>> Well, currently it's golf. Like one of the things I really
Like one of the things I really struggled with today was there wasn't
struggled with today was there wasn't going to be any golf. So I said it's
going to be any golf. So I said it's either Steven or golf. Should I go to
either Steven or golf. Should I go to Steven or should I go for golf? I said,
Steven or should I go for golf? I said, you know what? Give the arms a rest.
>> Let's go meet Stephen. >> I'm glad you did. We have a You probably
>> I'm glad you did. We have a You probably just answer this question. We have a
just answer this question. We have a tradition where the last guest leaves a
tradition where the last guest leaves a question for the next not knowing who
question for the next not knowing who they're leaving it for. And the question
they're leaving it for. And the question left for you is if you could go anywhere
left for you is if you could go anywhere right now instantly, where would you go?
right now instantly, where would you go? >> I'd go to the golf course.
>> I'd go to the golf course. >> Thank you so much for everything that
>> Thank you so much for everything that you do. so incredibly important and I
you do. so incredibly important and I now know why you're why people love
now know why you're why people love listening to you and learning from you
listening to you and learning from you and it's because you have this most
and it's because you have this most remarkable ability to tell deeply
remarkable ability to tell deeply engaging stories. Thank you so much.
engaging stories. Thank you so much. This has always blown my mind a little
This has always blown my mind a little bit. 53% of you that listen to the show
bit. 53% of you that listen to the show regularly haven't yet subscribed to the
regularly haven't yet subscribed to the show. So, could I ask you for a favor?
show. So, could I ask you for a favor? If you like the show and you like what
If you like the show and you like what we do here and you want to support us,
we do here and you want to support us, the free simple way that you can do just
the free simple way that you can do just that is by hitting the subscribe button.
that is by hitting the subscribe button. And my commitment to you is if you do
And my commitment to you is if you do that, then I'll do everything in my
that, then I'll do everything in my power. me and my team to make sure that
power. me and my team to make sure that this show is better for you every single
this show is better for you every single week. We'll listen to your feedback.
week. We'll listen to your feedback. We'll find the guests that you want me
We'll find the guests that you want me to speak to and we'll continue to do
to speak to and we'll continue to do what we do. Thank you so much.
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