The Many Paths To Wealth

My profession gives me an opportunity to meet wealthy people and get a ring side view of their journey. Reading about the life stories of these people also gives good insights. Its fascinating to see that each individual’s relationship with their wealth is unique and they use it in the way they best see fit. Understanding how wealth gets created is equally interesting. Some of the many ways are -  

Building and scaling the business

Investing – value, growth, seed and venture

ESOP – stock options of management teams which reward them for the growth of the business

Real Estate

Commodities

Managing other people’s money

Marrying into money

Inheritance

Sale of business

Being at the pinnacle of your profession or unbeatable in your craft

Speculation and Leverage

While building and scaling business is the most common theme, speculation and leverage is extremely rare. Businesses are as varied as they come, some supply to the government and some stay away from them, some are necessities and some luxuries, some are basic and some complicated, some are mature and some evolving, some professionally run and some by families and extended families, most domestic some multinational. Some cyclical and some secular. Some capital intensive and some capital light. Some sell to businesses and some to consumers. Some can’t run without machines and some without people. 

Wealth can also be spiritual, once you have it ,material wealth does not matter so much. There are many ways to material wealth and some rules to stay wealthy – following asset allocation as per your profile, respecting risk and staying within your means. Similarly, there are many ways to heaven but only one way of staying there. Doing good and being good which also happens to be the basic tenet of humanity.

Stay blessed and since the festive season is here, do spread the cheer around :-)

The Legend Of Elon Musk

I think it is possible for ordinary people to choose to be extraordinary – Elon Musk

Musk was in the news recently as he became the second richest man on the planet with a net worth of 128 bn USD. 70% of the gains in his net worth came in 2020. Its cool to be the in striking distance of the title of the richest man in the world. It’s even cooler to be the only second entrepreneur in silicon valley to create three companies with a market cap of $1 billion or more with PayPal, Tesla and SpaceX. But for me it is coolest to have the character of Iron Man partially modeled on you. All this while you are still below 50 years of age. Let’s take a better look at this real life iron man.  

Musk was born on June 28, 1971, in Pretoria, South Africa. The eldest of 3 children, Musk was so lost in his daydreams about inventions that his parents and doctors ordered a test to check his hearing. He was introduced to computers when he was 10 with the Commodore VIC-20. His parents also separated around the same time. He quickly learned how to program and at the age of 12 sold a game called Blastar to Spectravideo for $500. In 1989 he moved to Canada to attend Queen’s University and obtained his Canadian citizenship that year. In 1992 he moved to USA to study business and physics at the University of Pennsylvania. He graduated with an undergraduate degree in economics and stayed for a second bachelor’s degree in physics. After leaving Penn, Musk headed to Stanford University in California to pursue a PhD in energy physics. However he dropped out after just two days to launch his first company, Zip2 Corporation in 1995. Musk became a U.S. citizen in 2002

Grand visions are common but execution is where the good gets separated from great. This is where Musk excels. He has been able to create fabulous companies in totally different areas. What he has achieved involves dedicated teams of extremely talented people working in harmony to execute his vision. This is his edge. The sheer range of the areas which he has disrupted is mind boggling – finance, mobility, energy, space travel and AI. Let’s look at the history of the various companies he started -    

Zip2 Corporation – 1995 sold to Compaq in 1999 for $307 million in cash and $34 million in stock

PayPal – 1999 sold to EBAY in 2001 for $1.5 billion in cash

SpaceX – 2002 – Lower the price of space launches by reusing rockets, Offer satellite internet for sparsely populated regions. Only private company to have taken astronauts to the International Space Station for NASA

Tesla – 2003 – Build the coolest and lowest cost electric vehicle, Autonomous Cars, More efficient batteries. Highest valued car company in the world.

Solar City – Aug 2016 - Solar Roof, more efficient solar panels. Now a part of Tesla.

The Boring Company, Hyperloop – Jan 2017 – reduce tunneling costs, build alternate transportation infrastructure, Increase the range of people staying away from work places, reduce freight costs. Working on projects for a couple of US cities.

AI and Neuralink – Creating the best AI system in the world, reducing the cost of effective prosthesis, allow enhancement of human capabilities, better modelling of brain – machine interaction   

Musk has had his fair share of challenges. A difficult childhood, being fired as a CEO of his own company (PayPal). His personal life has been in the news with 3 divorces. The biggest test came in 2008 when a struggling Tesla nearly collapsed during the financial crisis. When Tesla needed cash to fund the Model S, Musk chose to bankrupt himself — giving up the all money he had rather than let it die. Tesla had multiple problems of scaling up production (demand for Tesla cars was never an issue). SpaceX had multiple problems starting with Russia refusing to sell rockets to Musk and multiple rocket launch failures each costing millions of dollars. His tweets also got him into trouble with the US regulators. However he persisted and seems to have learnt from his mistakes.   

Musk has a relentless work ethic (100 hour work weeks are common) and a single minded vision. He is also self-taught, reading up on the various projects he is working on to develop a deep understanding of the subject. “(Physics is) a good framework for thinking,” he says “Boil things down to their fundamental truths and reason up from there.” He is also a difficult boss.

The legend of Musk is in tackling giant problems and solving them, again and again. The legend of Musk is not retiring on his pile of cash but being true to his core where he is an entrepreneur who is always creating companies and scaling them up. The legend of musk is in 100% skin in the game. The legend of Musk is in the big impact he is having in inspiring fellow billionaires and ordinary folk to dream of audacious things. So the next time someone tells you “its not rocket science” be aware that even if it was rocket science smart people with dedication will figure it out.

For those still wondering, the first silicon valley entrepreneur to start 3 billion dollar companies was Jim Clark. There is a brilliant book by Michael Lewis on the man – The New New Thing. Do check it out.

Source –

https://www.biography.com/business-figure/elon-musk

The (Anti) Social Media?

Crazy people don’t know they are crazy. I know I am crazy therefore I am not crazy. Isn’t that crazy – Captain Jack Sparrow

Last week brought good news on the breakthrough on the Covid vaccine and the concern that a part of the western world may choose not to get vaccinated. Turns out that there is a segment of the population that believes that all kinds of vaccination is bad and have even chosen not to get their kids vaccinated, with bad outcomes. There is an audience for all kinds of conspiracy theories out there. The world is flat. Corporates are run by pedophiles. Climate change is a hoax. Moon landing never happened. Society always had people who were at the extremes but now every view gets expressed and finds an audience in this strange yet wonderful place called the social media.

Depending on your views and preferences, your media feeds will show you more and more links of what you have previously liked. Let’s say I am a Trump supporter and I like pages that glorify him. I will start seeing more and more pages that say good things about Trump. So when I come across people who don’t share the same views on Trump, I can’t believe how can they be so stupid. Turns out the other camp, because they believe otherwise, only see links that reinforces their belief of how bad Trump is, thanks to the same algorithms. That is how algorithms work and that is why they are so dangerous. The supporters of Trump feel he is god like. Those who don’t like him see the devil in him. Both these camps can’t believe that the other side is no naïve and end up thinking that they have an ulterior motive. The middle ground gets lost and people move towards extremes. Thank (blame?) the social media.

This trend is also getting accelerated due to multiple factors. Most of us find it very difficult to listen to an opposite view, hence avoid it. Social media allows one to find like minded people across the world to create large communities. Large communities lead to feedback loops and mob psychology if the belief is that you are in danger or under attack (think hyper nationalism, anti immigration). Social media leads to amplification of these fringe views leading to concern in the majority about the proliferation of the fringes. Sensationalism by Media also does not help – many times the headlines are totally different from the spirit of the article – radical headlines make for more clicks and viral stories.

Thankfully democracies have woken up to the manipulation of voters and the power that these platforms exert over their users. Social media allows each individual to view the world through their own lens. This leads to distortion as everyone is viewing the same thing differently and amplifies our own thoughts. The system of auto feeds reinforces our biases. If we let someone else make the choices for us, when the someone else is a programme, the end result can be dangerous. While I am totally for auto recommendations of which series or movies we should watch next (although recommendation of friends are better) auto feeds on social media is something that we need to be wary of. These programmes also get coloured by the biases of their creators. Some biases we are aware of, most biases we are not.

Thanks to the lock down we have moved to online consumption of daily news. One way to break this echo chamber could be to read whatever you find interesting across varies subjects instead of letting the news agency show you news according to your “preferences”. Other way could be to follow/interact with people who have a different view and being tolerant of those views. I am sure we will find a way to deal with this. Being aware of a problem is the first step in solving it.

Ask The Expert?

The trouble with the world is that the stupid are cocksure and the intelligent full of doubt – Bertrand Russell

The last month was full of noise around the US elections. The expectation was a clean Biden win. The final result seems much closer. This was not the only major event that has not gone as per expectations. Some more to consider –

Trump got elected

Brexit happened

Covid predictions and their flip flops

World oil demand was supposed to outstrip oil supply in 2000’s

War ravaged Japan and Germany were not supposed to come back from ruins so soon

World was also supposed to run out of food in 1960’s

The most widely held and tracked large stocks see wild swings on result days

You see the world of making predictions is full of pitfalls. Experts are supposed to know. We depend on their knowledge and feedback. Maths and Physics are comparatively straightforward – the equations produce the same results every time. However in most other fields the outcome is based on everything else being the same. The problem is that everything else is never the same. It may be similar but not the same and there is a big difference between the two. That why history rhymes and does not repeat.

Very often the outcomes are a range of probabilities. Probabilities are never 0 or 100 and the range between those numbers is wide enough to have a huge impact on the end result. Behavioral science is not an exact science. Behaviours change. Sentiments change. Breakthroughs happen to solve impossible looking problems.

The noise around events will only increase with each passing day so how can one be better prepared? Part of the solution is having an open mind and a flexible approach, helps in re-calibrating our views when required. Part is acknowledging that one will never fully know. Part is assigning realistic probabilities. With experience one starts planning for a range of outcomes so that even the worst case is not unexpected or ruinous.

In reality, no one knows, for sure. Keeps things interesting 😊

How Is Your Relationship With Money?

Things that have never happened before happen all the time – Scott Sagan

A book review this time – The Psychology Of Money by Morgan Housel. It is the only book I have read twice, just because I enjoyed it so much and there was so much wisdom in it. Must read for everyone. Let’s look at three stories from the book (out of many) that really appealed to me and I hope will be of interest to you as well.

Story 1 -

Ronald James Read was an American philanthropist, investor, janitor and a gas station attendant. He fixed cars at a gas station for 25 years and swept floors at JC Penny for 17 years. He died in 2014, aged 92 with a net worth of more than $8 million leaving $2 mn for his stepkids and $6 mn for charity. A fortune made with meagre savings put into blue chip stocks and being patient.

Richard Fuscone was a Haward educated MBA at Merrill Lynch and was so successful that he retired at 40 to become a philanthropist and was on the “40 under 40” list. In the 2008 crisis high personal debt and illiquid assets made him bankrupt.

Ronald Read was patient, Richard Fuscone was in a hurry. That is all it took to eclipse the massive education and experience gap between the two. Only in investing outcomes can a janitor beat the most qualified people. Financial success is not an outcome of hard science but a soft skill, where how you behave is more important that what you know. Luck plays a large part in the final outcome as well.

When things are going well, realise it is not as good as you think. You are not invincible and if you acknowledge that luck brought you success then you also have to believe that lucks’s cousin risk is around the corner and can turn your story around as quickly.

Failure is a lousy teacher too as it seduces smart people into thinking their decisions were terrible when sometimes they just reflect the unforgiving realities of risk. The trick when dealing with failure is arranging your financial life in a way that a bad investment here and a missed goal there won’t wipe you out and you can keep playing the game until the odds fall in your favor.

The correct lesson to learn from surprises is that the world is full of surprises – Daniel Kahneman

Story 2 -

Investment duo of Warren Buffett and Charlie Munger was actually a trio 40 years ago – Rick Guerin was the third partner. In words of Warren what happened to Rick “Charlie and I always knew that we would become incredibly wealthy. We were not in a hurry to get wealthy, we knew it would happen. Rick was just as smart as us, but he was in a hurry.” What happened was that in the 1973-74 downturn Rick was levered with margin loans. And the stock market went down almost 70% in those two years so he got margin calls. He sold his Berkshire stock to Warren at under $40 a share. Rick was forced to sell as he was levered. Taleb puts it brilliantly. Having an edge and surviving are two different things – the first requires the second. You need to avoid ruin. At all costs.  

Success is a lousy teacher. It seduces smart people into thinking they can’t lose – Bill Gates

Story 3 -

December 29^th, 2008. Wall Street Journal front page. Russian professor Igor Panarin.

Around the end of June 2010 or early July the US will break into six pieces – with Alaska reverting to Russian control, California will revert back to form the nucleus of the “Californian Republic” and will be part of China or under Chinese influence. Texans will be a part of the “Texan Republic” a cluster of states that will go to Mexico or fall under Mexican influence. Washington DC and New York will be a part of the “Atlantic America” that may join the EU. Canada will grab a group of northern states.

This was at the height of the financial crisis and only in these times a story like this could appear at the front page of the most prestigious financial newspaper in the world. Pessimism just sounds smarter and more plausible than optimism. Tell someone that everything will be great and they will shrug you off or offer a skeptical eye. Tell someone they are in danger and you have their undivided attention. Assuming that something ugly will stay ugly is an easy forecast to make. And its persuasive since it does not require imagining the world changing. But problems correct and people adapt. Threats incentivise solutions in equal magnitude. That is a common plot of economic history that is too easily forgotten by pessimists who think in straight lines.

Progress happens too slowly to notice. Setbacks happen too quickly to ignore.

The psychology of money is actually our psychology, which is shaped by many things including our personalities, past experiences, relationships, outlook of the future and hence as unique as our fingerprints. Like our other important relationships, our relationship with money is never perfect and evolves with us and (hopefully) gets better with time.

The Powerful Banker

A light hearted satrical this time. A work of fiction. Any resemblance to a living person is purely coincidental. 

Pessimism is logical, cold and calculating. Optimism is warm and uplifting, a leap of faith. Pragmatism is nuanced. Choose well.

Now lets get to business. This powerful banker. Lets call him Mr U. You think of him when you think of investments. The complete man. The consummate relationship guy. Everyone who knows him knows that he knows everything. Even he knows that he knows everything. That has made him the richest banker not only in the milky way, but the entire universe.

Bankers are conservative. He is a super banker. So that makes him super conservative. We all know the story of the bunny that kept telling everyone that the sky is falling. Well Mr U can play that role very well, but he will be the lion in this story and not the bunny, as he is the king of this jungle. The lord of the rings.

He is called upon to fix broken things. He is tasked with fixing a big problem but has made little progress in over two years. Maybe there is too much on his plate. Maybe things are so broken that they cannot be fixed. Maybe the longer things remain broken the better for him. The one eyed king in the kingdom of the blind is still a king.

He can take on the regulator and emerge victorious. His investor calls start with a grim reminder of how bad the situation in his home country is and how his empire is the shining example of exemplary work. Either he believes only he has the foresight to see these things, or only he has the guts to say these things, or only he can say publicly what others say privately. Anyways he has been saying all this for so long that he is hoping all these come true. You see the longer you keep repeating yourself the more you reinforce your own beliefs.

The last time he was so confident was in 2008 after the Lehman collapse. All his PMS were on record cash and did magnificently while the markets melted. The strategies remained liquid (reference stock market meltdown) and missed the big rally of 2009 so badly that the schemes had to be wound down. In 2008 you were driving a car. Now you are driving a bus. Your organisation size and stature have changed and you need to change as well.

In Dangal before the final bout the encouraging words of Mr Phogat to his daughter were “if you win tomorrow, you will become an example (misaal). And examples are never forgotten, they are always given as a reference”

JP Morgan became JP Morgan when he displayed his grit and character in tough times, standing up to deliver when times were the toughest. That is why he is still considered the greatest. Otherwise all bankers think they are the centre of the universe and are forgotten as soon as they retire. Hope is a good thing. Don’t take it away from people, if you can’t give it to them. You are in a country which is marching towards its “tryst with destiny.” Do not make fools of people who have taken risks by starting a business or taking a mortgage or any other loan. Everyone does well if the country prospers. We should keep our worst fears to ourselves and not make grand business plans around the possibilities of the nightmares coming true. Maybe the sky will fall. Maybe the world will come to an end. After all, we are all dead in the long run. But when that time comes, you may not be happy to say “I told you so”.

Mr U is also a gifted cricketer. When destiny gave him a full toss, he ducked as if it was a hand grenade. Not everyone is lucky to have a second chance. There are still some balls to go and the innings are in your hands. So play well. And if you can’t let others come and steady the innings.

There is still time to become a misaal. Grab it with both hands, while destiny is still kind. There is a big difference between intelligence and wisdom. Choose well.

The Devils Advocate

Real risk is what remains unknown after everything known has been considered.

The world respects the intelligence agencies of Israel. Their country is surrounded by people who hate them (India comes a close second in neighborhood hostility) but Israel has prospered with help of its intelligence agencies and their bold actions.

Things were very different years ago. In 1973 Israel was attacked simultaneously by its neighbors and was taken by surprise. In spite of having a lot of actionable intelligence that the attack would happen the decision makers did not take any action. Israel did win the war and then went on to find out why all the intelligence was ignored. The culprit was Group Think. All the people in the decision making group, in spite of acknowledging the intelligence reports, chose to ignore them only to be surprised later. This led to the principal of the Tenth Man or Devils Advocate. The logic is that if 9 people of the group agree on something, the tenth man has to compulsorily take an opposite view and point to loopholes so that all angles can be discussed and a better decision can be taken.

What Am I Missing Here?

Is a good question to keep asking to keep us alert, even paranoid. Being aware of the fact that there is always the unknowable and unforeseen that will disrupt the best plans will help us create better plans with higher margins of safety. History teaches us that trying to be efficient in everything is futile. Margin of safety is a cost until it becomes a life saver. That is why plan B and Plan C are as important as Plan A, which will work most of the time but some times back up will need to be called.

Why is dissent so difficult? Dissenters get labelled and ousted. Conformity kept us in tribes and safe in groups. Being contrarian is painful most of the time. The label of Devils Advocate itself has negativity attached to it.

If everyone agrees with us on something, we need to find dissenters and then listen to them or become one ourselves. It is very difficult to acknowledge a counter view and even more difficult to act on it. It is best to keep an open mind and listen to potential problem areas one may have overlooked, so that the plan can become better.

It Is equally important to come to a decision and once done, the group should whole heartedly back it. Dissenting and agreeing should not become political tools to win points or settle scores. Ideally, the devils advocate should try to see all the follies and the overlooked aspects and then get aligned to the final decision of the group. The idea is to make the final decision stronger and not sabotage it. Real sabotage is in seeing the folly and not pointing it out.

Find time to relax

Don’t underestimate the value of doing nothing – Winnie the pooh

It is important to work hard but it is equally important to rest, relax and recover from hard work so that we are ready for it the next day. All of us want to be productive, efficient and do more in less time. Nothing wrong in that. However we need to understand that even machines have a scheduled downtime and we need the same.

It was easier pre Covid to plan for downtime. When WFH started it looked like a lot of downtime. Now we have got into a zone where there is a lot of work and a loss of sense of weekdays and weekends. Earlier one could “switch off” as there was office and home. Now homes have become offices so the boundary has blurred. With many establishments still closed, activities like dining out and movie watching which were downtime earlier are now out of bounds. Vacations are out too. Being holed up at home has also increased screen time in a big way. Hence downtime has become even more important.    

Downtime is more relevant for a break for the mind rather than the body. The body rejuvenates itself in sleep. It’s the mind that needs some time off. A full-throttle lifestyle can chisel away at productivity, creativity, and happiness, says Stew Friedman, Ph.D., the director of the Wharton Work/Life Integration Project at the University of Pennsylvania and the author of Leading the Life You Want. "The mind needs rest," he says. "Research shows that after you take a mental time-out, you are better at creative thinking and coming up with solutions and new ideas, and you feel more content."                

Some ideas to get it done –

Non demanding tasks like gardening, doing dishes (WFH special) allows your mind to relax

Yoga, walk in the park, jog, swim or any other mild physical activity

Anything that you like to do – read, going to the movies, playing a musical instrument or with your kids and pets, sketching, painting  

There should be only one rule for the downtime – ignore your phone. Checking social media does not count as downtime!!

It’s ironical – the busier we are, the more downtime we need. As the rested fields give the best crops, the rested mind brings more productivity. Do more by doing slightly less.

Sources –

https://www.shape.com/lifestyle/mind-and-body/why-its-important-schedule-more-downtime-your-brain

https://claritychi.com/the-importance-of-downtime/

When Nature Inspires

We have a symbiotic relationship with nature. Not only does it provide for us but also inspires us. People find answers when they are in the lap of nature. Creative people swear by it. Apart from the indirect inspiration by being in nature, there are many examples where we have taken direct inspiration from animals around us. After all, nature has been solving problems for millions of years and only the best ideas thrive in the natural world. Let us look at some of them.

Woodpeckers inspired better black boxes that survive mechanical shocks that come with airplane crashes

Kingfisher inspired scientists in Japan when they were struggling to deal with the sonic boom (which leads to noise pollution) caused by the high speed of the bullet train

Mosquitoes are inspiring us to make pain free (almost) injections

Camouflage techniques

Termite colonies on efficient heat distribution and ventilation in dense populations

The fins of humpback whales helped us design efficient turbines and pumps

Velcro was inspired by tiny hooks on the burrs surface that latch on to any surface

Bird safe glass that was inspired from the spider’s web

Fireflies inspired brighter LED bulbs

The ability of mussels to attach themselves on wet surfaces inspired a better adhesive

Humming Birds are inspiring better helicopter technology

Butterfly wings are inspiring anti counterfeit technology which is better than holograms

Camel toes are inspiring better tyres for use in sand and on Mars  

The shark skin and its ability to stay clean inspired better ships

The most popular story has been how birds have always fascinated us and inspired us to take flight.

There is a very good podcast from BBC – 30 animals that made us smarter with many more amazing examples like these.

It is said that if you want a better answer, you need to ask a better question. We should also add that we need to look around us, not only for inspiration but for the solutions to our problems as well.

Sources –

https://www.bbc.co.uk/sounds/play/p0731jmf

https://www.popularmechanics.com/science/animals/g28912650/animal-inspired-technologies/

The Gospel Of Wealth

 This is the amazing story of Andrew Carnegie (1835 – 1919), one of the four “robber barons” of the USA and the richest man in the world at that time. His autobiography was written over a century ago but makes for a fascinating read even today as the basic principles on which he built his business are even more relevant now.

He lived the classic American dream – a poor immigrant who went on to become an industrialist with passion, hard work and risk taking. His empire was in steel, railroads and construction. By education he only went to school for a couple of years but he rode the waves of modern technologies of his times – telegraph, mining (coal and oil), construction (railroads and bridges) and iron and steel.

Its fascinating to read about Carnegie’s journey. Most of his ventures were partnerships with like minded people who were forward looking, experimental in their approach and were specialists in their fields. They were the first ones to back the modern Bessemer furnaces from England (which only a century ago was the Industrial capital of the world). They had modern book keeping in their factories that allowed them to keep a track of the cost of goods being produced on an (almost) real time basis. Till then most of the steel industry did not know the status of their P&L till the books got tallies at the end of the year. They had a system where workers were rewarded for suggestions in process improvement and some of them rose to the level of partners and plant managers. Most importantly, they developed a process of determining the level of ferrous content in the ore using chemistry and began paying mine owners accordingly. As things were, some mines who had a very high iron content did not produce good results if treated normally and hence found no takers. Carnegie steel works was able to modify their process in such a way that they could use this better ore and pay a lesser price for it as no other mill would buy the ore (thinking it was inferior) and produce the best steel in the world at the lowest cost. The sellers were thankful to them for being the only buyers of their ore and the Carnegie mills enjoyed this arbitrage for a long time. They were backward integrated by owing the coal mines, railroads and ships from transportation of their goods.

Most importantly was his fixation for a solid balance sheet and staying away from projects where the margin of safety was low. The economic and stock market cycles were vicious a century ago (central banks were yet to discover their true power) and the reason Carnegie always had funding available was his fixation on the solidity of their balance sheet. There is a mention in a couple of places in their following the “spirit of the law” and not just “letter of the law” and avoid “cuteness” so that the business had a rock solid reputation. Because of his reputation he also underwrote a number of public issues of stocks and bonds as capital was getting raised to establish large industries.

The best part – The Gospel Of Wealth. He exited the business at the age of 65 (to a JP Morgan controlled entity, another “robber baron”) and focussed the rest of his life in giving away all his wealth. Libraries (2800 approx) and public places were the favourite subjects of their attention along with universities (Carnegie Mellon). Many trusts were also established – the one to support teachers post retirement was close to his heart. What stood out for me was the “heroes fund” that he set up with an objective of helping the families of people who lose their lives in a heroic act that they could have chosen to be a bystander in. Marvellous isin’t it?

He travelled the world and had a great equation with his workers, although he is also infamous for one of the big strikes that took place in one of their plants. He had a big social circle and also was an advisor to politicians on matters of foreign affairs. The book also details the role that parents can play in shaping their children and how his life was shaped by the people around him.

If you are looking for some inspiration you will definitely find it in the life of Andrew Carnegie beautifully captured in his autobiography and Gospel of Wealth. He was the original “Man Of Steel”  (sorry Superman).

Circle Of Competence

Let us keep our minds open, by all means, as long as that means keeping our sense of perspective and seeking an understanding of the forces which mould the world. But don’t keep your minds so open that your brains fall out! There are still things in this world which are true and things which are false; acts which are right and acts which are wrong, even if there are statesmen who hide their designs under the cloak of high-sounding phrases.

Walter Kotschnig

When facts change I change my mind. What do you do sir?

John Maynard Keynes

Let’s start with the most successful investor of our times - Warren Buffett. He is a legendary value investor, an icon and role model for his wisdom, philanthropy and simple lifestyle. He owns Berkshire Hathway which is the holding company for all his investments. Since 2002 the S&P 500 has outperformed Berkshire stock by 2% annualised, in spite of him being very active in the 2008 financial crisis and in spite of 20% of his portfolio being Apple which was bought only 4 years ago (stock is more than 3X in last 4 years). One thing explains the underperformance to a large extent – the absence of technology stocks in the portfolio. Warren became legendary by avoiding tech stocks leading to the dot com crash of 2000 He has continued to avoid technology as the tech giants became more and more ingrained into our daily lives over the last twenty years. There is a link in the sources below for a brilliant article on the subject.

Buffett is public about technology being a hole in his “circle of competence” What makes this even more striking is that Bill Gates is one of Buffetts close buddies. Let us see some successful examples of managements expanding their circle of competence -    

TCS for TATA

UltraTech for Birla

HDFC group successfully seeding and then building several large businesses

WIPRO would still be in the vanaspati business if it had not transformed itself into a software powerhouse

Ajay Piramal from Textiles to Pharma to Financial Services

Reliance from petrochemicals to telecom

Berkershire itself was originally a textile company

Google from search to android to maps to autonomous vehicles to AI

Edelweiss from Investment Bank to Broking to NBFC to ARC to Wealth and Asset Management

To be fair, there are numerous examples of disastrous diversifications and conglomerates becoming too big and unwieldly to manage, but that does not take anything away from the fact that one of the best ways to successfully manage atrophy is to continuously expand your circle of competence.  

We start with some basic ideas and a limited world view. With time if the view does not expand enough to challenge the prevailing conventional wisdom, we have done disservice to ourselves. How can one expand the circle of competence – organically through lifelong learning or inorganically by hiring and empowering competent people. The distinction between the “hype around the shiny new thing” and a new mega trend is indeed difficult to make.     

It is certain that the world will be very different in the next 10, 20, 50, 100 years. The longer the time period the greater the change. However in day to day the world seems the same with minor changes year on year. That is why it becomes important to keep the core principles intact and be flexible about most things. The core principles should not become the excuse not to change. The other certainty is that only those who are able to constantly able to expand their circle of competence will thrive.

Source -

https://marker.medium.com/has-warren-buffett-lost-his-touch-5d1b48f6a5cf

Consistently Mediocre or One Time Brilliant

Grab all the opportunities, especially the ones that were missed the first time around. Not everyone gets a second chance.

Bollywood quiz – remember Uttam Singh? He was the music director of the musical Dil To Pagal Hai. Ismail Darbar? He was the music director of Hum Dil De Chuke Sanam. These movies had one of the most melodious songs of those times and topped the charts in the year of their release 1997 and 1999 respectively. But the music directors are now (almost) forgotten. Not because of some lobby or conspiracy theory but because they faded away having done their best work in those movies. Perhaps full credit should go to their respective directors who could inspire and extract the best work from their team members.

I am sure all of us can think of many sportsmen, actors, businessmen, authors, creative people and others who had great “promise” but could not deliver to that promise. Only a few people have in them that allows them to keep pushing the boundaries and get better and better with time, while most find it very difficult to recreate their own best work? All the devotion of a lifetime distilled into one work which is so sublime that it can never be touched again. Or the blessings of the craft that were yours to command that get taken away from you? Perhaps the skill was a finite resource that got extinguished in the pursuit of perfection, instead of the infinite reservoir that we all desire it to be.

Those who are consistent become great. Those who keep getting better with time become immortal. But is it better to be consistently mediocre than flash in the pan brilliant? I would pick brilliant every time. Only with the benefit of hindsight do we have the ability to see which was our best work. Till then its best to keep trying to be better every day, even if slightly better than yesterday. It all adds up into what we understand better as compounding.

Mediocre or brilliant is not a function of your circumstances and benchmarks. If you were a very good wicketkeeper when Dhoni was around, you did not stand a chance to be in the Indian team, unless MSD was injured. So you waited to shine in the IPL or other formats. Here the context of brilliant is functioning at the best of your abilities and then continuously expanding the limits. Similarly mediocre is not about feeling small if compared to a very high benchmark but working well within your abilities without trying to expand the limits.

Our work in this world is the memorial that we build, for us to look back with satisfaction (and hopefully pride) and for others to admire. It can indeed be wonderful with dedication and sincere effort!!

Paying It Forward

No act of kindness, no matter how small, is ever wasted.

The Silicon Valley has been the hub of entrepreneurial activity and at the forefront of innovations that have taken the world by storm over the past 25 years. While there are many factors (talent, capital, technology, head start) that have contributed to the mega success of the valley, I kept coming across “paying it forward” in the interviews of the super successful valley people. Let’s see what it means and how it has played a large role in shaping up the culture of the valley.

The Oxford English Dictionary defines it as to respond to a person's kindness to oneself by being kind to someone else. To pay it forward means that instead of paying someone back for a good deed, you do a good deed for someone else. There is also a book and movie by the same name.

The most famous story is of Intel CEO Robert Noyce agreeing to meet and coach a wannabe entrepreneur Steve Jobs in 1975. “Bob Noyce took me under his wing, I was young, in my twenties. He was in his early fifties. He tried to give me the lay of the land, give me a perspective that I could only partially understand,” Jobs said, “You can’t really understand what is going on now unless you understand what came before” As Mark Zuckerberg was struggling in his early days as an entrepreneur he turned to Steve Jobs for advise and Steve obliged. Paying it forward.

Fairchild Semiconductor was possibly the first success story of the valley, what is unique was that their employees would not hesitate to show up at their competition to help when called to solve a technical difficulty. What is entrepreneurship if not the burning desire to help others, including your competition. This may be what makes silicon valley tick. The valley works on network. No one can build a solid network without paying it forward, without the willingness to help others.    

             

Another way to think about it can be Gratitude. It inspires kindness connection, strengthening social ties and making one happy.

We also see similar examples in the Marwari and Jain communities where the senior and successful help the young entrepreneurs of the community get started with capital and good advise. May the tribe of people who keep paying it forward keep growing!!

The age of the Sociopath

Imagine an egoist whose only mission in life is to be successful. Super successful. Lots of money and power. All his actions are taken to serve that very purpose. That is the sole reason of his existence. No right or wrong – everything that furthers his self-interest is right. People are resources and hence expendable in the journey. So are relationships. Moral choices are also easy to make using the same rules – whatever that helps you get closer to your goal. Everything is at stake to achieve the goal. Whosoever suffers in the process is collateral damage. He is the one who wants all the success at any cost without any thought about the society. It is a pretty disturbing personality and I would recommend such a person to take help to get over the condition. I am sure most of us will avoid such a person professionally, socially and any other ally (pun intended).    

Now replace the person in the above with a corporate.

Read the above again, for better effect.

As it turns out, the very personal traits that will put off most people even when reading about it seem to be totally acceptable if it were to be exhibited by a corporate. There is also an added advantage - The corporate can exist forever. What we humans can only dream of - immortality.

You want to use all resources to become bigger without caring for other stakeholders or society in general? Sure.

You want to pay your employees/vendors/suppliers less and less and keep everything for yourself? Sure.

You want to use the flimsiest excuse to inflict pain on the very people who support you every day? Yes of course.

You pay lip service to important causes and exhibit good corporate citizenship only on paper? Sure we in a polluting industry but we will reduce our emissions by half by 2050. Applause.

The bigger issue is how we as a society react to this behavior. Stock prices go up when layoffs and salary cuts are announced. What sort of behavior are we encouraging? The current ESG and other matrices fall way short of what is required to be done. It is important for us as a society and consumers to reward the correct corporate behavior.  Because we ultimately get what we deserve. We should try to deserve better.

Is this the age of the sociopath? I hope not.

PS – the image is a result of google search for “centre of the universe”