Mohnish Pabrai (Billionaire Investor): The $100 Investment Hack That's Disappearing Fast! The Fastest Way To Financial Freedom!

0:00 Why do they go either down to investor? It's a way of doing business and making money without taking risk. Like for example, Mr. Gates, Mr. Walter, Mr Branson, all of these people follow these simple mental models. So if they won, they would win big. And if they lost, they'd lose nothing. So I want to know everything. Okay, let's talk with this. Monish Pabry is the self-made millionaire who built one of the most respected investment firms in the world, managing over a billion dollars. And now he's giving us the simple tools and frameworks to create life-changing wealth. If humans understood that if I embark on a business in a format where the risk is close to zero, more people would do it. And that's what this mental model would do. For example, cloning. We are taught if you want to start a business, you need to come up with something new. But actually, if you are a great cloner, you will be 90% ahead of the rest of humanity. And in fact, everything that Microsoft has done well has come from hopping someone on the outside. And then there's time. When you're starting a business, don't quit the day job because some other yo yo is paying your rent.

1:07 But it does mean that you need to find time to work on your business. But I will show you the perfect way to allocate your time. And that's not all. There's models like low hanging fruit, skin in the game, givers versus takers, and the circle of competence. And I'll I'll explain all of them. Investing. You're very well known for being an excellent investor. There are three things that matter with investing. And there's also something known as the rule of seventy two. But I wish they would teach it more in high school. And it tells us how long it takes money to double. Now this is exciting. Just give me thirty seconds of your time. Two things I wanted to say. The first thing is a huge thank you for listening and tuning into the show week after week. It means the world to all of us, and this really is a dream that we absolutely never had and couldn't have imagined getting to this place. But secondly, it's a dream where we feel like we're only just getting started.

2:01 And if you enjoy what we do here, please join the twenty four percent of people that listen to this podcast regularly and follow us on this app. Here's a promise I'm gonna make to you. I'm gonna do everything in my power to make this show as good as I can now and into the future. We're gonna deliver the guest that you want me to speak to, and we're gonna continue to keep doing all of the things you love about the show. Thank you. Uh Munish.

2:28 Brian. With the work that you do. And the sort of public educating that you've done More recently in your career. What is the message you're trying to convey, if you had to summarize that message, and exactly who are you trying to convey it to?

2:43 It really depends on Oh What message? There are uh A few different mental models.

2:52 that I figured out Over the last few decades. When you have uh Kind of clarity on these mental models and especially when you can start overlay them.

3:04 That's when you get one plus one becomes eleven. And uh so these mental models are not all in the same direction or in the same genre. So just to pause there for a second. So the the the word mental models means It's basically a framework for thinking. Yes. So one framework for thinking is this idea of cloning. Yes. Um as one such example. Yes.

3:28 Let's take the mental model of cloning. Cloning. Cloning, right? So Um w what we are taught is that if you want to start a business you need to come up with something new.

3:42 Something that hasn't been done before. But the reality is that the world will very easily accept three of the same thing. Or five of the same thing. And usually it is an advantage.

3:56 To Look at something that already exists. And say Can Another one of those exist, for example, or can I take

4:06 what's there and tweak it a little bit. So there's something peculiar in the human psyche, maybe going back into our history and our ancestral Ве хюман Look down upon cloning.

4:20 But if you look at it so for example Two of the greatest cloners, I think, in human history. were Bill Gates And Sam Walton. Now

4:30 We think of Bill Gates as an innovator. And we think Sam Balton created Walmart, which was also new. But actually дебот Me two models. And

4:42 Microsoft would not have existed. Without being a great cloner. So when we look at um Microsoft Word. It came from word perfect.

4:53 Which was a competitor. Took out. Uh we look at Excel, it came from Lotus. Uh we look at Bing. Came from Google and you know what Bing is, but it's not Google.

5:06 Everything that Microsoft has done well at. has come from copying someone on the outside. And when we look at Sam Walton. Was You know, the Walton family if you

5:19 It's the richest family in the world. It's richer than Uh Elon and everyone. And Sam Walton, by his own admission, would tell you that he has no original ideas.

5:32 So originally Walmart cloned fears and came out. For my international listeners, these are two big Supermarket chains. Yeah, and they're both gone. The

5:43 The and in fact Walmart buried them. And um And Sam Walton. Was one of the most intense cloners ever.

5:53 So if he was driving on vacation with his family And he's passing some retail store. he would tell his family to stay in the car. And he would go in the store. Just to check it out.

6:05 And he said that there is there's no human who has lived in history. Or will live in the future. who has visited more retail stores. Then he has.

6:17 Uh one time there was a manager of his and he would go in with his managers to these stores. Retail is one of the most transparent businesses. You can go into your competitor's store. And you'll figure out the entire business model in ten minutes. You don't need to talk to them. Okay, it's beautiful. So he went into this retail store, the manager says to him, Oh, what a terrible operation. The the whole store was topsy turkeys really bad.

6:41 And Sam says to him, Yeah, but did you see the candle display? The candle display was fantastic. So Sam felt that he could learn from anyone. It didn't matter if you were a useless operator or a great operator or whatever, anyone in the middle. Walmart is just an amalgamation.

6:59 of ideas from other places. If we look at If you look at a company like Starbucks We think of Starbucks as innovative. But

7:08 Actually what Hard Schul today is He saw a concept in Italy. And his idea was that I think this is the work in the US. Right. And so he cloned

7:20 He cloned that idea from Italy and brought That coffee shop. experience to the US. If you are a great cloner. You will be ninety percent ahead or ninety five percent of the rest of humanity.

7:36 Now Another mental model. Humans have this Perspective. That

7:44 Starting a business. Is risky. In reality, the Entrepreneurs do not take risk. They do everything in their power.

7:56 To minimize risk. And in many cases when they embark on a business The risk approaches zero. What is extremely risky is a nine to five job.

8:10 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

8:25 which is drilled into us that If you're an entrepreneur, you're Taking risk. really kind of does a big disservice. To

8:35 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.

8:50 Right. Combined two mental models. And We can start adding more to them. Two has become eleven. One plus one has already become eleven. It's nonlinear.

9:03 And Why is it That Why is why am I saying that entrepreneurs do not take risk.

9:12 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 Nine to five at a company. And I had a business idea.

9:28 My employer expected me to work forty hours a week. Right. There's a hundred and sixty eight hours. In the week.

9:38 So I felt like There must be at least another thirty, forty hours that I could work. On my startup. Could you show me this in context? Right. So if we look at our whole week, for example, these beautifully arranged Lego's if I take One of these

9:56 So each one of those blocks in there is two hours. So eight hours a day. We are sleeping eight hours a day. Right. And uh and we're doing that seven days a week, right? So basically We've got

10:10 Seven days a week, eight hours a day. We are sleeping. The blue Lego's are Show our forty hours a week. Uh eight hours a day, five days a week we're working.

10:21 Right. Then we get to Other, you know. Uh preparing dinner and showering, shaving. Getting ready, whatever else.

10:33 So that's about Four hours a day. on the weekdays, which is uh including commute time. And about eight 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

10:49 Quite a bit. We got about four hours a day of doing that. and about eight hours a day on the weekends. So this is kinda typical what a typical week for most people would look like. Right. Now When you're starting a business, the important thing

11:05 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 gonna make one change to blue. Which is the amount of hours I'm working for my nine to five.

11:22 Before I started my startup Um I used to get top reviews as an employee. Uh you know.

11:31 I was very focused on doing a great job for my employer, all in, right? The day I decided I'm gonna run do my startup. I decided I need to be just above firing level. My performance needs to be just good enough.

11:46 So they don't Can be. But nothing beyond that. Because I need all my energy So that's the only tweak I'm making is the blue stays

11:57 But we're not doing extra blues like we were doing before, right? And I believe for anybody that doesn't can't see because you're listening on audio is work. Exactly. Yeah. Blue as work, exactly. No.

12:10 When we embark on a startup. We should never do a startup. To make money. The worst reason. To start a company.

12:20 The purpose of business is not to make money. The purpose of business is to deliver an incredible product or service to humanity. If you do that The money is a side effect.

12:36 It'll happen. We don't need to focus on it. So What we are looking for is Do we have

12:44 a product or a service that we're 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.

13:01 Okay. Because you came up with it in an ivory tower. Between your years. Okay. And that's not really a great place.

13:12 What's gonna happen is We are going to be doing what I call rapid prototyping. Which is We take this idea from

13:22 And Show humans. What it is. And when you show it to humans you will get feedback.

13:30 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.

13:43 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

13:57 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 tenth slide. Said my spiel. Went to slide eleven.

14:14 So the boss who was sitting in the meeting said, Go back to slide ten. So I went back to slide ten again gave my speech. That I had for slight ten and took it to eleven. He said Go back to slide ten.

14:28 And do not Change the slight. I don't have an interest in any other slide. Okay, so I took it back to slide ten. And

14:40 All he wanted to talk about was what was on slide ten. My deck was talking about Seven things we could do. Slide ten was one of those seven. It was an

14:54 Extreme pain point for him. He needed help. On that one thing. He didn't need help on All the other rifra stuff I was talking about.

15:05 So When you're doing a startup. You have to be listening very carefully. your c customers or potential customers.

15:18 will tell you exactly what you need to do. Whatever you came up with maybe eighty percent right or seventy percent right or forty percent right. But your customer will tell you what is a hundred percent right. Okay, because that's a real pain point. So I went back and thought about it.

15:36 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.

15:49 So I went back. I took slide ten. blew it up into twenty slides. And that became the deck.

15:59 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 any time you're doing a start up of any kind

16:14 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. 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.

16:39 And this person has spent twenty 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 during 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 act 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 fifty five minutes talking about a bunch of things I wasn't interested in. And actually as you were speaking, I was going, Do you know what she could have done at the start of that conversation? She could have gone, Steven, can I ask you one question? What is the m what are you looking for from from this person?

17:15 And if and then I would have gone, I just want someone that can put an event. And then the next fifty five 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 salesperson 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

17:40 My radar. On listening. Would be ten X. You know, we don't learn when we speak. We learn when we listen. So

17:52 I would really be trying to talk less and Extract more. Mm and um I won't even rely so much on slides. I'd like to Really try to bring them in into Into what they are trying to say.

18:07 And uh And and so basically in uh if if you study if you study businesses, you know, venture back, non bencher 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.

18:31 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

18:45 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 gonna wear. 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.

19:03 Okay, like for example, release chewing gum. Okay. My mouth is a very personal space. I'm not gonna put glots chewing gum. in there.

19:14 What's called during them? Exactly. brand that's half the price of Rigley's. 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

19:31 That's very personal. So Though you the ergonomics and the human factors are very important. If it's slightly off now Meta.

19:42 is trying to do the same thing. But they went to Raban. Right, did the J Vreamand. Those glasses look like normal glasses. I think there's a higher chance.

19:54 Well I've got some. Okay, used them, yeah. You don't have any Google Class. No. I think they cut the project, didn't they? Yeah. 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

20:22 Uh now we're 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

20:38 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.

20:53 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 the model, but when you told me about the Walmart found us laying between the aisles to measure the exact centimeter of length. Yeah. The model there for me was just Like precision and detail.

21:10 It's a game of inches. I mean what I'm saying is that uh When When

21:17 Sam Balten 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 he was looking at the cost of putting up signage

21:31 stores and he was trying to come up with a name with the fewest letters because it cost less. Okay. And so I mean

21:43 Cost Cost sensitivity is All over the place in Walmart. I mean that's just front and center with what they do, right? They're 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.

22:02 is your costs. you you may not be able to control your margins and selling prices and a lot of other things, but you can always control costs. 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 L V M H, you know

22:20 Uh the guy who runs it. I mean He's in luxury goods. He's in high end. L V Hmick, Louis Vuitton and Yeah, yeah, yeah. I mean everything, you know.

22:32 They've Taken away with Tiffany than everyone. Um But when you look at how the company is run, it's very tight. He spends money on the best real estate.

22:45 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 tightly run operation. On

22:56 A product a category that doesn't necessarily need it. 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. And if you apply it to a hundred things, it does matter. Oh it does matter, big time. Yes. So I have these Yellow blocks here. Which represent working

23:16 I was working on your own business. Yes. So show me how you would take some of these blocks away. Yes. And Introduce hours working on your own business. Yeah, so basically it's it's really quite simple. We're n really not gonna mess with our sleep cycles. We're gonna leave that alone. Sleep staying the same. And uh we we need our blue which is our work workspace uh

23:37 Forty hours. We need that to continue. One of the changes we're gonna make is we're gonna live close to work. So we're gonna cut down commute time as much as we can. Okay. Because every hour matters. Okay, so the area that we're gonna focus on

23:52 is the free time. Okay. is not a problem. is because what we are embarking on, like we just discussed, is not about making money.

24:04 It's getting our music out. Getting on music out. What do you mean by that? We Have something in us. That we know the world needs.

24:14 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 themselves in the head and saying But I love my

24:27 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.

24:36 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 nine to five job and what you're spending your Main working uh main

24:49 Waking hours on. Awesome. That's great. I mean, everyone's not gonna be an entrepreneur, everyone's not gonna have a start up, everyone They are they may be getting their music out in a different way.

25:01 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 m 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

25:23 is that you're passionate about. And this is not something that Should take a lot of Effort.

25:32 So If you go back. And look at for example Bill Gates and Paul Allen. Right. I mean, Bill Gates is at Harvard.

25:43 And he sees uh magazine which shows a very early Personal computer. And he realizes that there's a paradigm shift. And he realizes that

25:56 He needs to be part of it. And Paul Allen is the one who sent him that magazine and We gotta go do this.

26:06 Now. This is our time now. And for Bill It was a very easy decision. Very easy decision. Very difficult for his parents. His parents were in shock that he's

26:19 gonna abandon. his uh degree and you know, he he told his parents Don't worry about it. I'm gonna 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.

26:38 Twelve percent of people. according to the stats that are listening right now, are explicitly unsatisfied with their job, which means they hate it. Eighty five percent 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

27:00 remains worryingly low. So if we look at that eighty five percent number, eighty-five percent of workers globally are disengaged. meaning not fully invested or happy at work. So it's really those Sure. And and The thing is it's not it's not just enough to be

27:17 Unhappy at work. That's one piece of it. I uh the the unhappiness can be a symptom. And uh one of the One of the Causes can be.

27:30 That You have a different calling in life. And you are not following following your calling. No. Sometimes for someone like Bill Gates, for example, and Paul Allen, they figure out their calling.

27:43 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

27:53 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

28:07 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

28:23 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

28:39 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

28:52 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 gotta have something that we

29:07 think the world would be interested in. And uh You know, in my case I'd I'd gone through this uh session with a couple of industrial psychologists and they told me More if you like to play games.

29:22 You're a game player. And actually they Couldn't be more accurate. So When I was

29:28 Doing my startup. Um I'm I'm a Numbers guy and uh math guy, so I actually like that.

29:37 So What I used to do Is Because I had no money. I used to send

29:44 Two hundred letters a week. to the senior IT people. at two hundred different companies. But what I did is so all these people I was sending this letter to. They had a gatekeeper. Some secretary, et cetera, who's

29:58 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

30:09 I was using MailMerge, which was math producing these letters, but there was a Customization, the male word w 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 the assistant got the letter, she couldn't tell

30:30 Whether I know Dave or not. Because he used his shortened name name and she doesn't want to throw a letter that uh somebody that he knows. So the letter would go through. Enough times, right? Now what I also did is

30:45 One week after those letters were delivered. I called. I made two hundred calls. I called all two hundred people.

30:54 And basically if I got voicemail, left a message, whatever else, right? Now they have entered the sales funnel. Okay, so Dave Smith is in the sales funnel. If I get no response from Dave Smith

31:08 After one week there's one more call. Then the calls start getting spaced out. double time, two weeks out, then four weeks out, then eight weeks out, then sixteen weeks out. But Dave never leaves that funnel.

31:24 Okay. Until he tells me Do not bother me anymore. And I have no interest.

31:32 They're gonna stay in that funnel. So the second week I send out another two hundred letters. Make another two hundred calls. Right. And now I've got the First week, second week.

31:43 So you can see as time goes on I'm calling nonstop. Right. But What I was tracking

31:53 Because I'm a math guy. What I was tracking is okay, these two hundred 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

32:10 Calls to meetings. Meetings to close, et cetera. And my ticket size of the item I was selling was very large, hundreds of thousands of dollars. Right.

32:21 Nine months after doing this, Where Now let's go back here. So we're gonna take our free time. So what I've tried to describe is that what I'm doing is actually more exciting than the orange. The yellow.

32:37 Is more exciting. than the orange. So basically What is the yellow? The yellow is our startup. So on on the weekends

32:49 I'm going to do ten hours a day because I'm not working. Right. And on the weekdays I'm gonna 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. Five days there when I'm putting in four hours a day.

33:08 And then I'm putting in ten hours on the weekend. And This is not as exciting. As pounding Dave. Pounding Dave continuously till he says, Either get off my back or here's your

33:24 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.

33:36 So One of your one of the litmus tests of whether you need to you should be doing a start up or not. Is yellow. Needs to be more exciting. Than orange.

33:49 Your start up needs to be more exciting than your free time. Painfully boring for you. And Going on Facebook or Instagram or whatever should be very boring for you. Compared to This is exciting. Compared to building your company. Yes.

34:11 So you know um the Pink Floyd's Song. We don't need no education. We don't need no thought control. Yeah. We don't need none of this.

34:20 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, Steven. So we don't need any free time. This is better than free time.

34:35 Building your business. You're having an orgasm every hour. So what can you what what can be better than this? Uh much of what I do here when I'm

34:46 having these conversations is I'm trying to put myself in the shoes of the person who is currently sat in a in a nine to five job and they've 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 isn't 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

35:18 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

35:34 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 A gating factor.

35:47 is not that you need money. When when I started my business I I signed up for every credit card that would come to me.

35:57 So I had seventy thousand in unused credit lines. And of probably a dozen VSA and Mastercards, right? I had about thirty thousand dollars in my retirement account, my four oh one K, which I also took out and said twenty five, I can make that up later. Right. So basically at a hundred thousand dollars of capital.

36:15 And uh That hundred thousand 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. Nine months after I was doing this I was able to get rid of this.

36:33 So after nine months my business was producing Enough cash flow. That I went. And resigned. Okay.

36:43 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 Um

36:56 Started a business, it's not competitive with the company and I'm gonna be leaving in two 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.

37:10 We were so confused for the last nine 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.

37:24 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. Not if your business fails. When your business fails.

37:44 Please come back. We'll give you more money. You're going to get a promotion. And we'd love to have you back. I could immediately come back. So I said I got one free shot.

37:56 Yeah. 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? I'm type one, type two decision making. Yeah. And so

38:10 And this is not just me. What risk does Bill Gates take? Okay, Bill Gates, what is his value As a Harvard freshmen in the job market. Зіро

38:23 Okay. He nobody would pay him anything. And He could come back any time and finish that degree. So let's say he went to New Mexico.

38:32 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.

38:44 And if you study entrepreneur after entrepreneur after entrepreneur, what you're gonna find So if we look at Sir Richard Branson. He wants to Start an airline.

38:57 Okay. Now to start the airline you need a jumbo seven four seven. that costs like a hundred and fifty million. The plane. The plane, right? That's some serious money.

39:08 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.

39:20 So he calls Two or six. five one two one two, 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 seven for seven. So he calls the main switchboard a Boeing giant, huge company.

39:43 And says, Uh, I'd like to lease a jumbo. And They hang up on him. Okay. He calls about thirty times.

39:52 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 transferred them to a person who's

40:09 actually leasing jumbos. This person tells Richard. says look, Mr. Branson. In every country. We have one customer.

40:19 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 Avis called you and said that they wanted to lease A old used jumbo. Do you have one lying around?

40:35 So the guy said 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.

40:49 And the reason they least in the jumbo is they had no 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 gonna pull the plane. Right. So now When you have an airline you sell all the seats four months in advance.

41:05 The cash has already come in. You pay for the fuel thirty 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

41:19 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

41:33 When you look at business after business after business All of them what they do is they start small They're embryonic. 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.

41:49 So So the important thing is that When we Take the blue out when blue is no longer here. Which is work. Yellow is gonna almost double or triple because

42:02 This is where all the orgasmic activity is. We quit the nine to five job and we move that time over to work on the start time. I I was working on my startup like from seven to nine in the morning. And then I would come back six PM and work till ten or twelve 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. Because I just said if you just let me go full time. I can tear it up.

42:30 And that's exactly what happened. I mean we In about five first year we did four hundred thousand revenue, second year one point four million, third year three million, and by the sixth or seventh year we were at about Fifteen, seventeen million. It just grew because basically then I had no shackles on me.

42:48 You know, I could just go full out. Right, and the engine. I uh 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 nine to five and give it another shot, you know? So you actually could do this a few times.

43:12 framework as you call it or mental model, which is 'Cause you said you sent two hundred 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. And they go, No one's got back to me.

43:25 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. 'Cause they sent six. Yeah. Now when I interview people like you, they all give me much bigger numbers. They say two hundred, three hundred, five you know. And there's something in this sort of law of averages. Which is just like Just take more swings. My my daughter, when she was uh graduating from Berkeley

43:49 I want to work at a hedge fund and so I th 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.

44:07 And Put it in Excel. Managing partner's name, address. We don't know people's Email addresses.

44:17 But we know everyone's mailing address. Okay, the mailing address is a public piece of data. The address is easy. Yeah. Right? And I I said that uh so she she got a list of about

44:30 twelve hundred. funds in LA and New York. And I said what you're gonna do is Uh you're gonna ask for the job but you're gonna have two pages behind that giving them a stock tip. You're gonna give them a

44:44 Of a company that if they invest in They're likely to make money. We sent the twelve hundred letters physical letters. Okay. All physical letters, no email, right?

44:58 And um There's a eighty five 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, won't aren't you looking for an analyst And this girl she seems to have the perfect kind of background and

45:17 She ends up With a higher salary. Then anyone who went to Berkeley. Business school. With a much higher GPA than hers.

45:28 I was thinking 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.

45:40 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.

45:51 is the signal versus noise of the channel you're using. So A high signal channel is one where It gets past the PA. Mm-hmm. It's Less saturated, less busy.

46:02 A high noise channel, which is the opposite, would be sending a an email to the like Press at your company dot com Z. 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. Yeah. So high emotional impact is doing what you said, put a stock tip in there, you're gonna stand out, they're gonna 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.

46:33 Absolutely. Like high signal channel, high emotionally resonant. Absolutely. But what h ends up happening is people send loads of messages down here. And then they get depressed and demotivated and say no one's getting back to me. Yeah. Like Michael Jordan used to say You miss every shot you don't take.

46:49 Yeah. Yeah. Yeah. So basically it is I i I mean I think one of the things about entrepreneurs is that you need to have resilience Um

47:01 Like for me For me What The data I was looking for Is that

47:08 If I send five thousand letters. Okay, which takes twenty five weeks. Six months. How many Meetings does that

47:19 end up in. Ten meetings or twenty meetings. Well now I have my number, right? And then the second part is the meeting to close ratio. Right.

47:31 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 the first two, three months I could say it's not zero.

47:46 Every business needs a competitive edge. And if you're great at hiring, that edge should probably be your people. The A players you bring in, and I don't just mean your full time team, but your freelance support too. If you feel like your talent isn't quite cutting it, then I want you to take another look at our sponsor, Fiverr Pro. Fiverr Pro is Fiverr's premium offering. Where every freelancer is hand vetted, so you're guaranteed top quality every single time. What's brilliant about Fiverr Pro is that you're picking from very experienced talent in marketing, web, app development, AI, and seven hundred and fifty other categories. And these are people that can swoop in and lead the more complex projects that your team might not be capable of handling yet. And because it's a personalized service, a Fiverr Pro hiring expert will find the help your business needs for you. They'll hire them and manage your outsourced projects end to end too. And if you're not happy with your freelancer's work, then you get your money back. They are that confident in their talent. So to give it a shot, head to Fiverr.com slash diary and for ten percent off your first order, use code diary. I think one of the the most formative experiences you can give your children, which I got

48:50 At sixteen, three through sixteen to nineteen years old, which is what I did, was working in cold telescales. So my job at sixteen years old was to call people at nine PM cold. And try and get them to buy windows and doors. And it taught me the exact lesson you're describing, which is yes, eighty percent of people tell you. Of course. Ninety eight percent say that. But it doesn't matter. I always say eighty eighty percent told me to fuck off. Fifteen percent said it in a nice way. And then five percent were at least receptive to what I had to say. Yeah. Maybe one percent close. But when you understand that, you think of life through that lens.

49:24 And actually Steven, I had uh almost the 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.

49:43 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 When bankruptcy Eight or nine times.

49:56 Right, repeatedly. When I was um When I was about eleven or twelve 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

50:10 to figure out how to make the business last for one more day. Okay, everything's caving in, the creditors are craving in, the business is collapsing. How do we make it? Work for one more day. And then the next night we'd get together.

50:24 And how do we may get it work for one more day again, right? At sixteen, 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

50:40 going cold calling. in person to jewelry shops to buy his jewellery that he was manufacturing. So he took me with him on many of these trips. I and I was sixteen, just like you, right? So we would uh Take the taxi from Dubai to Abu Dhabi.

50:57 And now there's all these Cold shops. He doesn't know any of them. Right. And he's going one after the other after the other after the other.

51:07 And I would Be stunned. That Fifth shop. He makes a sale.

51:14 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 three months we go back to that same shop. We made the little sale too. The guy brings out tea. There's a there's a lot of chemistry. Bigger order.

51:31 And then I saw the orders increase, right? And then he's continuing to do that. I I went with him to Doha Qatar. 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.

51:51 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.

52:00 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 five thousand letters and I get twenty meetings It's awesome. Mm. I mean that's a fantastic ratio because

52:17 one sale is going to get me about two hundred thousand or three hundred thousand. It's a significant amount, right? I mean, so that I don't need large numbers. And But the lifetime value of that'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

52:42 You can remember probably conversations you had in your life that you thought were totally inconsequential, but then Eight 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. Uh thirty five thousand 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

53:09 $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 'Cause we were waiting in the queue that day. I was really nice to this kid and I added him on Facebook. Five years later. I get a message on Facebook.

53:26 Hey, uh five years later, although I didn't get on the show, which would have got me about twenty five thousand dollars investment in my company if I'd won. Five years later, I'm working on a start up. 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 uh an Indian family, the Alowalias.

53:48 They'd 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

54:02 That I have is like planting a seed that at any point in my life. Sure. Well, 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.

54:21 They're Either a giver. Or a taker. Or a matcher. Okay. These are there are no other categories of humans. There's just these other three categories.

54:33 Now The matters are relatively simple to understand. They're mental framework is.

54:41 If Stephen does me a favor. I'm gonna try to do something similar for him. You know, one to one. They can do matching in the math in the heads. The takers who you don't have anything to ever do with are

54:55 Trying to Scam and screw everyone. And Always take. And never give.

55:02 Okay. The takers basically go nowhere. Okay, and if you have any takers in your life, get rid of them. Okay. Now the givers

55:11 What the givers do is the givers Um are not focused on what comes back to them. They just want to help you. They want to help humanity.

55:23 And What ends up happening is The universe conspires to help them. Mm-hmm. So the givers

55:31 Become the more successful. Everyone is trying to give to them even though they're not asking for it.

55:41 So basically When we and that's the book that Adam Grand Grant wrote, Giver Than Takers. Is one of the mental models which this is a great mental model to have is to be a giver. Don't play math games, you know.

55:57 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.

56:09 And It will take care of itself. And a 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 gonna do you're not calculating.

56:22 I'm gonna do this so XYZ happens. You're just doing it. End of story. I was that with my girlfriend last night.

56:31 She runs a breathwork business, so she's essentially a solo printer. Um and she's at that point where she's trying to scale. In fact, I just meet so many on I think I d we actually ran a survey before. And the vast majority of business owners are in that SME 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.

56:57 And I don't know how to get out of being like a freelancer. How does the freelancer become an agency? And the the thing I was chatting to my girlfriend about last night was um The steps she hasn't taken yet. Is higher. Someone

57:11 Exceptional. And so many founders come to me, these early stage founders are like Uh Like I I my customers like me, I do it better, I don't trust anybody. I I wondered if you had a like a mental model for thinking about the The thing is so if you look at people like Elon Musk and Steve Jobs,

57:30 They believe their number one job. is recruiting. The first three thousand people who joined SpaceX. All personally interviewed by Elon.

57:43 Just think about that. Those are three thousand hires. Think about the number of interviews. Okay. He

57:55 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.

58:08 The moment you start introducing B players B players will hire B and C players. They will never hire an A player. So your downhill d journey's already started. The moment you get a B player.

58:23 And so As an entrepreneur You know, we have a lot of demands on our time. Right. But recruiting

58:34 has to be at the top. And you've got to be willing to spend inordinate amounts of time. On recruiting. Okay.

58:44 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 five years of the life experience

59:02 Who they are. Their traits. are hard coded. That is not gonna change from five to ninety five. Okay.

59:12 So it's not like you're gonna change a human. Human is the way they are. Okay. Now These Pre employment testing. Pass.

59:21 can get you data that you're not gonna get in an interview. One of my companies I'm building at the moment is called CulturTest dot com. It's exactly this. Um I mean you're just like preaching preaching to the choir here.

59:36 It was the meaning. 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 kind of culture tests 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 off site. Culture is how you would behave. On Christmas Eve.

1:00:04 When you get a text message from a client. Like what you do there. So it basically creates these questions Which simulate optimal culture in that team.

1:00:15 And it puts you in that scenario and says, What do you do? This is probably a good point to talk to you guys about CulturTest.com, which is the website we're about to launch for anyone who has the responsibility of hiring someone, which is probably everybody listening. One bad hire can destroy your entire company. So we made culturetest.com so that you guys at home can spot those red flags. and avoid those hires that might be the end of your business. Culture Test will make you your own personalized culture test so that you can screen every single person that wants to be in your team. and your current team members and people that have left to see how they align, just go to culturetest.com and put your email address in. And the minute we launch, I'm gonna send you an email so you can try it before anybody else. So recruiting is really important. And I think the other thing is

1:01:01 Uh We're willing to Hire people. who may not do things as well as we do. But actually also what I've also found is I have So many people on my team.

1:01:13 Who are better than me. You know, they're better at many of these things because it's not my natural bent. So That's really when you get a huge bang for the buck. is you end up with team players that are way better than you.

1:01:29 How do you think about firing? 'Cause this is the other thing I need from founders. Fire fast. Founders really struggle with the Fire Fast thing. And uh

1:01:44 It is very important. To fire fast. I think fire fast is more important than higher slow. And you're doing the person a service. Because they may be exceptional in another role.

1:02:00 At another place. So You are Helping them. Try to find that.

1:02:09 And you're helping your other team members. If I was w trying to work for your companies, It what is the one non negotiable? Like what is the trait that I would demonstrate where you would immediately not even consider me? The most important is integrity.

1:02:24 Mm-hmm. You know, I mean We we want three traits, right? We want intelligence We want integrity and we want Willingness to work hard. Right. And none of these three are really negotiable.

1:02:39 And what does integrity mean in your definition? Well, it's absolute honesty is pretty simple. You know, it's black and white. And you can conduct yourself with the highest levels of ethical standards. So on all fronts when you're dealing with a c customer or

1:02:55 Internally or externally it's The moral standards need to be very high. When you think about your wealth, how much of it has come from building businesses versus being a great investor of the capital that you manage to make from those businesses. I think currently most has come from

1:03:14 The investing side. You're very well known for being a really excellent investor. Over many, many, many, many, many years. I'll put a graph on the screen that I found, which I think shows the returns of your investment strategy versus the

1:03:29 The Dow Jones, this graph, have you seen that one before? I haven't seen it this way, but people put up all kinds of things, yeah. I mean, all this says is that you're extremely good at investing. So I wanna know. If only

1:03:41 Starting my investing career. I'm working in a nine to five job at the moment. I've got a couple of thousand dollars in my my bank account. How should I be thinking about investing? Should I be investing? So There are um There are three things that matter.

1:04:01 In terms of getting a great outcome. with investing. Um Starting capital.

1:04:08 How much the amount you start with? Length of the runway. How long? Are you gonna invest the money? Mm.

1:04:17 And the rate of return. Okay, so Before I answer your question. I wanna Tell you a story.

1:04:27 So And this is a true story. Um in sixteen twenty three In New York. The

1:04:38 native American Indians in New York who owned the island of Manhattan. the Dut settlers wanted to buy the island. And so they went to the Indians and said, We'd like to buy the island of Manhattan great natural harbour. harbors it can be a great place for Us.

1:04:55 And The Indians and the Dutch reached an agreement to sell the island of Manhattan for twenty three dollars. And When people hear that

1:05:06 They think oh the Indians got taken. You know. Mm, I don't know, Manhattan for twenty three dollars is ridiculous. But Let's say

1:05:15 Let's say the Indians had a trust officer who they said Invest this twenty three dollars for the benefit of the tribe. And try to do a decent job. Right.

1:05:26 Now There's something known as the rule of seventy two. And the rule of seventy two is a is a very important rule and I wish they would Teach it more in high school than

1:05:38 elementary school. It tells us how long it takes money to double. And it's a kind of a mathematical hack. So for example If I'm going to get a seven percent return. And I do seventy two divide by seven. That's approximately ten.

1:05:55 And At the seven percent return, it's gonna take ten years for the money to double. Seven percent compounded will take ten years. If I have a ten percent return It will take seven years.

1:06:08 Seventy two divided by ten is seven. If I have a fifteen percent return It will take five years. Seventy two divided by fifteen is five, approximately. And if I have a twenty percent return

1:06:20 Three and a half years. So this rule of seventy two is a nice hack. And it's very important to know how long money takes to double because then we can start doing a lot of math in our heads. So

1:06:33 When we look at these Indians with the twenty three dollars, if they were getting a seven Seven percent return. it would become forty six dollars in ten years. And then it will become ninety two dollars in twenty years. And

1:06:47 Hundred and eighty four dollars in Thirty years, isn't it? Thought. No If you go a hundred years.

1:06:56 Right? It's ten periods of ten. And ten periods of ten is still two to the power of ten. And two to the power of ten is one thousand twenty four. So we throw away the twenty four because we don't want to complicate the math.

1:07:12 So Uh Seven percent. For a hundred years. you would have a thousand times what we started with.

1:07:21 And this is why Because compounding becomes nonlinear, people have a hard time getting their hands around it. So nonlinear meaning It's not going up in a straight curve. It's going up in a Hockey stick, club, yeah. So In seventeen twenty three the Indians would have twenty three thousand.

1:07:39 It would have gone up a thousand. And then if they continue at the seven percent in eighteen twenty three, they would have twenty three million. And in nineteen twenty three they would have twenty three billion. And in twenty twenty three

1:07:56 They'd have twenty three trillion. Mm. Okay. Now the entire wealth of every man, woman and child in the United States is one fifty trillion. One sixth of that Is not

1:08:10 undeveloped land in Manhattan. So if the Indians had invested at seven percent a year for the last four hundred years. they would have more money than owning the land. So they were not taken. They were given

1:08:26 A fair deal. But they just didn't have a good trust officer who could actually make it happen for them. So The Magic of compounding.

1:08:37 is that we started with twenty three dollars. And we end up with twenty three trillion. Without having a great rate of return. It's just an okay seven percent is just okay. It's not great. It's not bad, but it's okay. Now if you go back a hundred years, so we started at sixteen twenty three, go back a hundred years to fifteen twenty three.

1:08:58 We had twenty three hundred cents. In sixteen twenty three. Twenty three hundred cents. Twenty three dollars is twenty three hundred cents. Oh okay, if if they'd got it. Just converted to cents instead of dollars, right? Now if you

1:09:12 Make it one thousandth of that. So just so I'm clear here, so if you're saying if you went back a hundred years from That point. And you gave them just twenty-three cents. If you gave them two cents. If you give them two cents. But if you just gave them two cents. A hundred years later there will be twenty dollars.

1:09:32 If you gave them two point three cents. A hundred years later there'd be twenty three dollars and now it would be The twenty three trillion. Right. So What I'm trying to say is that

1:09:44 If the runway is long enough. The starting capital doesn't matter. Even the rate of return doesn't matter. If the runway is long enough. When people are thinking about investing

1:09:58 They have to keep a few things in mind. The first thing is spend less than you are. So Always try to

1:10:07 Save the first dollar. Rather than the last dollar. So if you I'm making Fifty thousand dollars a year, put five thousand to savings to start with, and then

1:10:19 Do the rest of the expenses after that. Now It's very important when we saw with this example you start young. So when people start working at twenty two or twenty three, whenever they start working, They have to be saving then.

1:10:35 Because that early money At twenty two. can compound for fifty years. And that's what we want. So we don't need to do Heroic things.

1:10:47 with finding the next Nvidia or whatever else. We can just put it into an index. And The important thing is spend less than you earn and keep putting that five, seven, ten thousand. Every year.

1:11:00 into the savings. Don't go Have a vacation in Hawaii with it. Let it keep compounding. And just put it into a broad index. And we don't really care. So for someone who has never invested before. Yeah. Which would probably be the majority of the audience. How do we simplify even further in terms of just put it in an index? What does that mean? So basically

1:11:23 You could Open an account at Fidelity or Interactive Brokers or Robin Hood. any of these places. You could open a brokerage account for Very little money.

1:11:34 And there's lots of them in every country. Yeah. And then uh you could just uh Ask them. to buy you the S P five hundred index, for example. And

1:11:46 They will get you Invested in that. And the S P five hundred is basically the top five hundred companies. It's the yeah, the five hundred dominant businesses in the US. Like Nvidia's in there and Microsoft and Apple and so on. And you're gonna get your ten percent a year.

1:12:04 If it if the trend holds over the last century. The S P has plenty of periods where it does nothing. Uh it's somewhat overheated right now. Uh, but I think if you have a long enough terminal timeer rather than your dollar cost averaging in, it's perfectly okay. Uh what you could also do as an alternative

1:12:24 is by Boksha Hathaway. So that's a stock B R K B. So you could again tell these people that Just put it into Bhaksha Hathaway. It's like an index. And

1:12:35 And again it's like set it and forget it. You don't need to think about the investing side. You Focus on yellow. Okay, and uh keep putting this little money away on the side. And it's gonna compound until At eighteen

1:12:50 If you put away five thousand dollars. And You fast forward to when you're sixty eight. Fifty. Right.

1:12:59 No If if you got a Ten percent return on that money. Every yeah. Let's say.

1:13:08 Every seven years it would double. Okay, seventy two divided by ten is seven. Fifty years. Is seven doubles. Seven times seven is forty nine.

1:13:21 And Two to the power of seven. is one twenty eight. Okay. So

1:13:30 We can throw away the twenty eight. Keep it simple. You're gonna have a hundred times what you started with. So the five thousand at eighteen is going to be five hundred thousand. Okay. At nineteen, if you put money away, that's another five hundred thousand.

1:13:47 Twenty You might have ten thousand you can put in. So you can start seeing that over a lifetime You know, you're gonna be Having too much money.

1:13:58 Yeah. As you might have been able to tell. I'm absolutely fascinated by the psychology behind high performing sports teams. I think it started with my love for Sir Alex Ferguson as a Manchester Unit fan. So when I was told about a new Netflix series that covers the rise of the Dallas Cowboys, it immediately piqued my interest. And this isn't because I'm mad about American football. I'm not. I don't even watch it.

1:14:21 But I do know about the Dallas Cowboys, and for a lot of Texans, they're much more than a sports team. I watched this series and it is absolutely Brilliant. It centers on Jerry Jones, an oil businessman with no football background, who bought the Cowboys in the late 80s and transformed them into the most valuable sports franchise in the world. It's all about how one guy assembled a powerhouse team in the 1990s made up of legendary players and coaches. and through fearless decision making led his team to three Super Bowl victories. And I really enjoyed it. And I think you might too. Check out America's Team. The Gambler and His Cowboys, which is streaming right now only on Netflix. And they now sponsor this podcast.

1:15:04 I've just invested millions into this and become a co-owner of the company. It's a company called Ketone IQ. And the story is quite interesting. I started talking about ketosis on this podcast and the fact that I'm very low carb, very, very low sugar, and my body produces ketones, which have made me incredibly focused. Have improved my endurance, have improved my mood, and have made me more capable at doing what I do here. And because I was talking about it on the podcast, a couple of weeks later, these showed up on my desk in my HQ in London, these little shots. And oh my God. The impact this had on my ability to articulate myself, on my focus, on my workouts, on my mood, on stopping me crashing throughout the day was so profound that I reached out to the founders of the company, and now I'm a co-owner of this business. I highly, highly recommend you look into this. I highly recommend you look at the science behind the product. If you want to try it for yourself, visit ketone.com slash Steven for thirty percent off your subscription order. And you'll also get a free gift with your second shipment. That's ketone. Dot com slash

1:16:06 Steven. And I'm so honoured that once again a company I own can sponsor my podcast. You've been referred to as the the Dando Investor. And Mm-hmm. I've

1:16:16 I've got a book here, which you wrote. Called The Dando Investor. What what W what does this word dando mean? And why do they call you the dando investor?

1:16:26 Thando is actually a word from Gujrat, which is on the on the western coast of India where Gandhi came from, they're extremely astute business people. And Dando If you translate it directly in Gujarati,

1:16:43 It means business. But it doesn't really mean business. What it means is it's a way of doing business. Where The downside is non existent. We already

1:16:57 Disgust. How Mr Branson is a dando investor. He had no downside. Uh Mr. Gates was a Dandu investor, he had no downside. Mr. Walton was a dandhu investor, had no downside. So

1:17:13 All of these people embarked on businesses. built huge fortunes. Without taking risk. And so the Dando Investor was written from the perspective of

1:17:25 How can we minimize risk? While keeping the returns intact. Use this example of the Patels. Mm-hmm. What is what is that story? The Patel uh

1:17:38 Went to Uganda. More than a hundred years ago, maybe close to a hundred and th Thirty years ago. It was a family? It's uh ethnic group in India. And so this ethnic group came to Uganda to build the railroad. And

1:17:56 But they're very savvy. Bizas people. And Over the course of the last hundred odd years, uh when they were in Uganda through their dando methods of doing business, they became very successful entrepreneurs

1:18:13 And they controlled large parts of the Ugandan economy. And Idi Amin came to power in Uganda in the nineteen seventies. And He said Africa is for Africans.

1:18:27 So what he did is He threw all the patels out. And he nationalized all their assets. So now the patels were stateless.

1:18:39 The US took them in? The UK took them in. Canada took some of them in. And when they landed in the US they basically really didn't have any skills. that would allow them to get good jobs, white collar jobs in the US.

1:18:55 And What a few of them started to do was They realize That if they bought a motel.

1:19:05 a small ten or twenty room motel. Uh the family could live in one or two of the rooms. And They could use the money they got out and Get a bank loan.

1:19:18 and run the motel. Now motels are very labor intensive businesses. So what they did is when a patel took over a motel They fired all the staff. Mm-hmm. And the family took over all the jobs, you know that Cleaning and front desk and everything else, right?

1:19:35 And the patels Are vegetarians. And they are very thick. They l they live a very simple life. So

1:19:43 When a patel took over a motel in an area What they were able to do is they were able to undercut the prices of all the other motels in the area because they have no labour. They have no payroll. They have no workers' call. None of those things.

1:19:59 And so they were if everyone else is charging twenty five dollars a night, they're charging, you know, nineteen a night. So the occupancy was higher than everyone else. And they save their money. And then what they would do is Buy the next motel.

1:20:13 Send the nephew to run it. And then buy the next motel. And this started happening in the early seventies, and when you fast forward to today. Eighty percent of all the motels In the US.

1:20:29 are under patel ownership. Eighty percent. So The Patels make up Point one percent

1:20:39 of the US population. Indians make up about Little over one percent, maybe one point two, one point three percent. Just one tenth of that is the Patels. And this point one percent population.

1:20:53 is controlling. eighty percent of the motels in the country. And um It's because of the Dando way. So if I want to steal from the Dando Way, you told me it's good to be a copier. Um what are the principles of the Dando Way that I need to be thinking about?'Cause you I think there was

1:21:14 Was then nine? Yeah, there was nine principles in total in the book. Well, the most important one is heads I win. I don't lose much. Everything we discussed today, Stephen.

1:21:29 Is heads I win, tails I don't lose much. When I started my business When Bill Gates started. When Sam Walton started, when Richard Branson started. That was the formula.

1:21:43 If they won They would win big. And if they lost, they'd lose nothing. So Everything has to be in business.

1:21:52 about risk reduction. Everything has to be about free lunches. We love free lunches. Okay, so We always have to think about How do we get this done?

1:22:04 Without capital, without risk, free lunches. Do you think there's an opportunity for people,'cause everybody's at the moment thinking about AI and technology and these like really advanced, um new innovations as an opportunity, but does that create an opportunity in the boring? And uh Motel.

1:22:23 And uh Lawn tree Matt. Yeah, so you know The reality is so entrepreneurship is not studied much in business schools because there's nobody gonna give you a consulting project for Studying entrepreneurs.

1:22:37 If we really study startups In the US or actually anywhere in the world. Ninety nine point nine nine percent of startups A non venture backed. Wh what does that mean?

1:22:54 Your Chinese restaurant. Your you know, eBay seller. whatever, Amazon sellers, so on right? The small businesses. None of those companies were

1:23:06 form because of venture capital. So The media focuses on all the venture capital led businesses. And so people think that oh if I have to do a startup I gotta do something in technology.

1:23:20 Well that's like one tenth of one percent or less. You can ignore it. You don't need to really worry about it. Uh The important thing.

1:23:29 is to be an observer. and to look at uh what what uh my dad would call offering gaps. So let me explain an offering gap. Right. So Let's say

1:23:44 There's a town we let's call it town A. Towney. They're the barber shop in town, eh? Okay, and the barbers One of many barbers doing well, etcetera.

1:23:57 There's another town about thirty miles away, town B. Which also has barbers, they're also doing fine. There's a new township coming up in the middle of these two towns called Town C. Townshee doesn't have much of a population. But it's growing fast.

1:24:15 So the barber in town eh goes to see what the all the hoopla about town sea is all about. Sweet. makes a takes a trip there, sees that there's some increase in population, people are moving in, and he notices There's no barbershops.

1:24:30 Why would there be any barbershops? Because it's brand new. Right. So he's thinking How do I do this without taking risk?

1:24:39 He rents uh Sub lease is a small Storefront. Buy some used Barber equipment.

1:24:48 And then decides that one day a week he's gonna go into that town. and cut hair every Wednesday. It puts up a note. bored saying'em. Available Wednesdays.

1:24:59 And What happens is People start coming in. They come in because they have no choice. If you don't go to this barber you've got to spend half an hour driving to one of the other two towns. Now

1:25:12 He normally charges thirty bucks for a haircut. But here's He doesn't need to charge thirdly. Because there's an opportunity cost of the time you're saving. So He can charge forty five.

1:25:25 So He's charging forty five over here, and then when he's in his own town, he's charging thirty. Now what he already noticed is Wednesdays are filled up. So he says Tuesday and Wednesday. Okay, and Gradually what ends up happening is that that business

1:25:42 Is full time. And he's making forty five bucks an hour. Per hectart. Mm. But the nature of capitalism is

1:25:51 More barbers are gonna show up. So the second barber comes in, the third barber comes in. Eventually the haircut there is gonna be thirty bucks. It's gonna neutralized. But in the meanwhile

1:26:03 He's doubled his business. Mm-hmm. Right. What risk did you take? So Going into Town C

1:26:12 was addressing an opportunity gap. When Howard Schultz started Starbucks. He saw an offering gap. Italians love about cafes.

1:26:27 might be what Americans love too. Didn't exist, right? And He went and did it. Knew that barber that moves into town C first.

1:26:37 And they're really having a great time because there's no competition. One of your points when you're talking about the Dundee method is this idea of creating a durable moat. It's point four of the nine. So so sometimes what happens is That You start a business, every business starts off without a moat. What is a moat?

1:26:59 We have a castle. A knight in charge of the castle? To keep the invaders away. And one of the ways to keep the invaders away is you put a motor water around the castle. So

1:27:13 When you put a motor water around the castle, it makes it harder. For anyone to take the castle. Mm. And a business with a moat around it. is a business that competitors

1:27:25 will have a difficult time take bus taking business away from so what can happen with our barber in town C? Humans are creatures of habits. We don't like to change our barber every month. We like the same barber. So if he's competent and good

1:27:42 what's going to end up happening is that his client base will stay with him. What about loyalty points? I was just struck the other day when I was shopping in LA at Air one? Which is a supermarket here in LA. And I'd someone had recommended it to me on the plane, which actually goes to your point about actually give a great product.'Cause an airline hostess on my flight over here went, Oh, you're um you're on Keto Diet, you need to go check out Air One. I got to so that's the recommendation And that's Gen X more powerful than any ad or anything else they could drive. And I went there.

1:28:09 Yeah. When I landed'cause I needed a supermarket and didn't know the place. But then interestingly, when I was at the checkout yesterday, after my second visit, the lady at the checkout goes, Hey, are you are you an I one member? I was like every one member. And she was it w it does cost, she went, she was honest, she went costs money, but here's what you get. She goes, On this order today, you would have got ten percent off this entire order. As expensive her one. And she goes, And we give you a drink and she listed all the things off. I signed up and bought the membership to E1. I tell you now. I'm not going anywhere else. I don't know what it is. But now that I'm a member and I have the app.

1:28:43 I'm not going anywhere else. Well, that's now that's the hack that Amazon did, right? With Prime. And Um Two or three years ago I was uh I was seated at dinner next to Bill Gates.

1:28:57 You know, my middle name is Forrest Camp. These things happen once in a while. And Bill is Bill is describing to me.

1:29:06 How The business model of Costco. And the business model of Amazon. Is illegal. Okay. So I said

1:29:13 Why is it illegal? He said. When you When you Put a membership fee. What what you're doing to the consumer is you're locking them in.

1:29:23 Which means the consumer is no longer Going after the lowest price. Because they're the distortion in their behavior. Yeah. Okay. So now The FTC doesn't believe it's illegal, but Bill Gates does. And I was just thinking, Well, that's because you're competitive with Amazon.

1:29:42 You know? That prime thing with Amazon is super smart. Yeah, and and that was taken from Costco. Oh okay. But basically yeah, the lock in Lock in is very powerful.

1:29:55 What one company I wanted to talk to you about was Apple. Because Apple, I find, is a really interesting company. You you talked about being a copycat. kind of arriving later to the party with new things. They've kind of been a story of both sides of the equation. They've been innovative, it seems, especially under Steve Jobs. And more recently I mean they were like copying other people, but now I'm not even sure what they are.

1:30:17 Well so Apple is a very unusual company in that Everything emanated from one guy. Mm. Okay.

1:30:26 And that one guy has been gone for a long time. And if you look at Apple Basically nothing new has come out. Since he left. We don't have a Steve Jobs at Apple.

1:30:40 Be And and the same thing happened at Disney. You know, they had to buy Pixar. Because there was no Disney anymore. Mr Disney was gone. And so

1:30:51 Apple actually I I find somewhat risky. As an investment. Yes, because

1:31:01 If the form factor so currently humans walk around the brick in their pockets or in their hands. At some point that form factor is gonna change. It may be integrated into something we wear or some other more ergonomic situation.

1:31:20 That may or may not be Apple. And in fact more likely not to be Apple. It's probably some guy in a garage somewhere. And so if they are smart enough to Find the guy in the garage early enough and buy them, they're okay.

1:31:35 And bring them in as the next chief jobs, that's okay. But Even there the odds are low. What does this say to you about founders? The specialness of founders. Are they a unique

1:31:49 Animal. Or can you swap them out and still be tremendously successful. Well I would I would say that There's There are a lot of elements of luck.

1:32:02 So first of all, founders are all great at what I call offering gaps, right? They find something that the world doesn't have that needs, et cetera, and they go after it. Sometimes what happens with the offering gaps is a moat gets built. Right. Someone starts Visa, it becomes a m Moti company or American Express and so on. And the and it Perseveres than Scales. Like Apple with their ecosystem, their closed ecosystem. But

1:32:30 One hundred percent of businesses eventually will go to zero. And so Mm. very well could be that a business could last for fifty, hundred, two hundred years, one fifty years.

1:32:45 Uh could last well past the founder's lifetime. Those are businesses which were built with a lot of principles and lot of co great core values. You know the founder of IKEA. Every decision he took was with a five hundred year view.

1:33:03 How many businesses think with a five hundred year view? And IKEA, you know, I was I was uh studying Ikea, some very remarkable things about it. First of all He never ever took debt. Every single store they built.

1:33:20 They built out of retained earnings and cash. He never took debt. And I've studied business failure quite a bit, the single biggest reason why businesses fail. is leverage. They owe people money. And they can't pay it back.

1:33:33 And that they're gone. So IKEA has never taken debt. If you never take debt of the retailer, you're gonna grow slower. Right.

1:33:43 Yeah. uh kind of bringing in the cash. But It's a very solid foundation. Because

1:33:52 It's It's on a rock solid balance sheet. Mm-hmm. And and such. And um His second principle was

1:34:02 No two IKS stores. Can be the same. So what he said is that whenever we're opening a new Ikea store. There has to be some innovation. that is going into that store.

1:34:16 That does not exist in our previous stores. Because he says that if I don't Keep innovating. I'm done. And so if we don't notice it because we think all the IKEAs are the same.

1:34:30 But actually if you study them and look at when they were when they were built, et cetera, you start seeing these these incremental changes that they're making. That's a really interesting idea that I could implement. into everything that I do, which is just making sure that every podcast I do there's one new experiment or innovation or every piece of work you do, whatever team you're in, is just to run out one experiment and every but you have to make it measurable, right? Or else it's not a

1:34:56 Experiment. So Um you you also talk about making fewer big infrequent bets. Yeah. Who's that relevant for and in what context? So One of the things that Warren Buffett says, he says that

1:35:10 You get a punch card. Which you can punch twenty times in your lifetime. And each time you buy a stock It's one punch that's gone. So what what Warren is saying is If there were a rule which said

1:35:25 that you cannot buy more than twenty stocks in your whole life. What would happen is You'll be very thoughtful. about what you bought. Okay, and uh chances are those decisions might be good decisions because

1:35:41 Uh You only have nineteen left. And then you only have eighteen left, et cetera. So In v in venture investing.

1:35:53 A very small sliver of companies that Venture capitalists invest in. Do well. Right. High born out rate.

1:36:03 And if we look at the stock market. Four percent of listed companies generate ninety percent of the return. So most companies that we may think about investing in.

1:36:19 are likely not to do well. For us. It's a ninety six percent odds. That that's why the index is so important. Is when you buy the index You bought that four percent.

1:36:33 And if you go Pick stocks. You are one in twenty five chance. Of getting it one of those four percent. You said earlier the punch card analogy of twenty things in the punch card, you gotta pick twenty in your life. If you only had three or four

1:36:48 Three to five things that you you would bet or back now. Which I think is actually kinda what you do, what would those things be? Well, I mean Uh so I'm

1:36:59 Trying to resist Going to specific names. Yeah. Because I think that would hurt people more than help people. Okay, that's fair. would prefer that people do. is

1:37:12 focus on the other two variables, which is The amount you're saving. And the length of the runway and focus on the index. So I I I think that it's it's kinda like

1:37:25 Thing I want to be a great AI developer because it's the way it we will. To be a great AI developer is going to take time. It's just the nature of the situation. What do you think about these people that day trade?'Cause so many young people, specifically men, are being sucked in by these adverts that you can day trade your way to wealth. It's not good.

1:37:46 I think I think it's um The broker's gonna make all the money. Robin Hood will do well. Not you. Do you think anyone can make loads of money as a long term day trader?

1:38:00 I look at it this way. If you study the Forbes four hundred. the four hundred richest people in the U in the w in the world, actually. I don't see any day traders in there.

1:38:15 One of the last things I want to speak to you about is this idea of um Circling the wagons. Yes. What does circling the wagons mean?

1:38:25 Warren Buffett Um Said that Over um Yeah.

1:38:31 Fifty uh Period of running Boksha Hathaway. He's made hundreds of investments. And

1:38:41 Only twelve. Have moved the needle for Boksha Hathaway. So It's the same three or four percent rule. Where

1:38:52 If we say that Warren made three hundred investments. He probably made more than three hundred, but let's say he made three hundred decisions. Only twelve. have resulted in

1:39:06 what we see as Bhaksha Hathaway today. And The important thing was not The buy decision on those twelve. The important thing was never selling them.

1:39:20 So Circle the wagons is a term that comes from the nineteenth century when These pioneers were moving west. Yeah.

1:39:34 And the native Indians were attacked. Or bandits would attack these wagon trails. So what they would do is they would Put themselves in a circle.

1:39:45 Mm. They would circle the wagons. Then Defend. that circle as best they could with their guns and so on. But the wagons being circled was the best.

1:39:56 possible possible way. of trying to face off that attack. So In effect they circle the wagons around the cro Crown Jewel. So when I'm talking about circle the wagons, what I'm saying is that In a lifetime of investing

1:40:11 There are very few times when you're going to actually have A huge multi bagger. What's that? A big w big winner. You know, something that goes up ten X, fifty X, hundred X. And what you want to do is you want to

1:40:27 circle the wagons around that idea so It doesn't get sold. So We are not going to know

1:40:37 Before we invest. Whether something is going to be a multi bagger or not. But we may figure it out after we own it. Mm-hmm. So After we o we're only going to know a business after we own it. We're not going to know it before we own it. After we own it.

1:40:54 We may understand the business well enough to know that this is a great business. And when we figure out it's a great business. You don't want to sell that. When I meet people like you, I I'm also inspired because we spend a lot of time thinking about the wins, the great decisions. We've talked about that. I've shown you the graph of your great decisions. What is the worst ever decision you made in terms of financial performance? Well

1:41:16 I've had so many zeros. I mean Yeah, I mean so the there's mistakes of commission. Which is uh things going to zero. And there's mistakes of omission.

1:41:31 The mistakes of omission. Are Far. Um Far worse. Okay. So the biggest mistakes I've made aren't the ones that have gone to zero.

1:41:43 The biggest mistakes I've made are the ones that I sold and I shouldn't have. Where I should have circled the wagons and I didn't. And those have been very costly. Give me one example. Well so of I think this was in about thirteen years back, two thousand twelve. I invested in uh

1:42:01 Company called Fear Chrysler Automobiles. Um Basically it was uh coming out of bankruptcy after The financial crisis that Gotten rid of all that debt and everything and the

1:42:12 Stock was very cheap. It was about five or six billion dollars. Uh That you could buy the whole business. One of the things I didn't pay too much attention to at the time was that eighty percent of Ferrari was inside Fiat Chrysler.

1:42:27 And They won't Ferrari. Eighty percent of it. And um

1:42:33 But they had many other assets which I like. They had the ram trucks and Jeep and Maserati and so on. And When I looked at the business I thought the business was worth many times the five or six billion. Even

1:42:49 Ignoring Ferrari. And I was right. So In the end I made several times my money. And in twenty seventeen or twenty eighteen they took Ferrari public.

1:43:01 So they actually then listed the company. And um Yeah. They had captured all the value and so I sold

1:43:12 I used to own Approximately one percent of Ferrari. As part of that. But just that I had made.

1:43:21 So Eighty percent of Ferrari was in this five billion dollar company. Ferrari now has a market cap of almost a hundred billion. And I

1:43:33 would have about a billion more. If I had not done that stupid thing. So I I made a Couple of hundred million on this whole thing. But it would have been a lot more. And all I needed to do was just not sell it. Do you deal in crypto at all?

1:43:50 Do you know? My competence. I don't understand it. I was gonna say one of the things I noticed about you that's quite rare, it for someone that deals in bees. billions is you have a smile on your face. You seem like a really genuinely happy person. Well

1:44:04 What would be the point of the bees without being happy? Well a lot of people aren't, as you as you know. Well then they've lost their way somewhere. I mean Uh on a daily basis I specifically asked myself

1:44:18 How do I want to spend today? And I focus on spending it not with the focus on maximizing money. I focus it with maximizing what Monish loves. And that changes all the time, but that's the way it is, you know. Well, currently it's golf.

1:44:36 Like one of the things I really struggled with Today. Was There wasn't gonna be any golf. So I said it's either Stephen or Golf.

1:44:46 Should I go to Steven or should I go for golf? I said, You know what? Give the arms a rest. Let's go meet Steven. I'm glad you did. We have a you probably just answered this question. We have a tradition where the last guest leaves a question for the next, not knowing who they're leaving it for. And the question left for you is if you could go anywhere right now, instantly, where would you go? I'd go to the golf course. Thank you so much. Well, everything that you do. It's so incredibly important. And I now know why you're why people love listening to you and learning from you. And it's because you have this most remarkable ability to tell deeply engaging stories. Thank you so much.

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