Todd Combsalways a pleasure to to participate in any way I can and work with Thai have a lot of respect poai I love the mission like my my hero Charlie Munger says that a place like Costco has done a lot more good in the world than even the Rockefeller foundation and and the reason he says that if you really dissect that statement is entrepreneurs and Entrepreneurship is really what makes the wheel turn and it's really what leads to what is eventually a lot of good for society from jobs to growth and everything and it all starts with an entrepreneur dreaming an impossible dream and since that is at the essence of what Tai cares about and Tai focuses on it's easy to love Tai so that's great what I'm going to do today is hopefully I have some I have some thoughts I'd like to share with you and and hopefully we'll have time to to hear from you and
Otherwe'll have time to to hear from you and maybe get your questions and comments and such on the subject at hand so we're going to talk about something I usually don't talk about which is sales and marketing and like many of you in the room I'm an engineer and and I trained as an engineer and when I went through undergraduate as an engineer I looked at these marketing majors with a jundas ey and and basically my take at the time was that this is all fluffy stuff and it's really easy stuff and these guys aren't really doing the real hard work like real men do engineering and all those sorts of kind of perspectives and very early in my early 20s I happened to read a book and I'll mention a few books today and I have a actually a list I'll hand out so you don't need to write down the names of the books I'm mentioning I'll give it to you all in a piece of
QuestionerI'll give it to you all in a piece of paper if you care to go through some of them this would have been like mid 80s and I read a book called marketing high technology by this guy called William Davido and he's now a venture capitalist in Silicon Valley very prominent for more Davido Ventures but at that time he was he was originally head of R&D at Intel and then they had moved him from head of R&D to head of marketing at Intel and he wrote this book after he had done a few years of running marketing for Intel and there's a couple of things he mentioned in the book that really stood out for me and one of the first things he said was that marketing is an exact science and it is almost as exact a science as physics and obviously that destroyed a lot of kind of preconceived notions I had about the way I thought about marketing and then he went went
Questionerabout marketing and then he went went about marketing and then he went went about talking about what he called the about talking about what he called the about talking about what he called the laws of marketing which in many ways he laws of marketing which in many ways he laws of marketing which in many ways he thinks of as the laws of physics so just thinks of as the laws of physics so just thinks of as the laws of physics so just to take a step back and this is 101 to take a step back and this is 101 to take a step back and this is 101 marketing and sales are two completely marketing and sales are two completely marketing and sales are two completely different things and I'll talk about different things and I'll talk about different things and I'll talk about sales a little later on but first I want sales a little later on but first I want sales a little later on but first I want to talk about marketing and then we'll to talk about marketing and then we'll to talk about marketing and then we'll dovetail into sale and of course there dovetail into sale and of course there dovetail into sale and of course there is some overlap but they are I think of is some overlap but they are I think of is some overlap but they are I think of them as very different them as very different them as very different Endeavors and and so I was intrigued Endeavors and and so I was intrigued Endeavors and and so I was intrigued with the way Davido Wasing talking about with the way Davido Wasing talking about with the way Davido Wasing talking about these laws of marketing for example one these laws of marketing for example one these laws of marketing for example one of his laws was that if you look at any of his laws was that if you look at any of his laws was that if you look at any Market any product any Market there will Market any product any Market there will Market any product any Market there will typically be three or four players at typically be three or four players at typically be three or four players at the most that control 80% of that the most that control 80% of that the most that control 80% of that market and it could be making airplanes market and it could be making airplanes market and it could be making airplanes or it could be making hair clips you can or it could be making hair clips you can or it could be making hair clips you can pretty much go across the board it could pretty much go across the board it could
Questionerpretty much go across the board it could be making software anything you want andbe making software anything you want andbe making software anything you want and and I found that stunning and if youand I found that stunning and if youand I found that stunning and if you invert that so one of my heroes Charlieinvert that so one of my heroes Charlieinvert that so one of my heroes Charlie monger say every time you encountermonger say every time you encountermonger say every time you encounter something always invert the logic to trysomething always invert the logic to trysomething always invert the logic to try to get some other place so if you invertto get some other place so if you invertto get some other place so if you invert that principle first of all if you agreethat principle first of all if you agreethat principle first of all if you agree with the principle then you know thenwith the principle then you know thenwith the principle then you know then the inversion would be that if you'rethe inversion would be that if you'rethe inversion would be that if you're starting a business and you say thatstarting a business and you say thatstarting a business and you say that this is a$1 billion market and I justthis is a$1 billion market and I justthis is a$1 billion market and I just need 10% of it and I'll be a billionneed 10% of it and I'll be a billionneed 10% of it and I'll be a billion dollar company right there you're ofdollar company right there you're ofdollar company right there you're off because the inversion would be that ifbecause the inversion would be that ifbecause the inversion would be that if you're you're going after a market youryou're you're going after a market youryou're you're going after a market your approach has to be how do I get 60% ofapproach has to be how do I get 60% ofapproach has to be how do I get 60% of that market and so if you're startingthat market and so if you're startingthat market and so if you're starting point is that I'm going to take 2% ofpoint is that I'm going to take 2% ofpoint is that I'm going to take 2% of this Market or 5% of this Market whatthis Market or 5% of this Market whatthis Market or 5% of this Market what you have not done is you have notyou have not done is you have notyou have not done is you have not segmented that market properly and thatsegmented that market properly and thatsegmented that market properly and that is a fatal flaw so the first thing you
Otheris a fatal flaw so the first thing you ought to do is Define the market that you're going after and after you've defined it if you don't get to very clear-cut game plan to get 50 60% market share then don't even try because either you have not done your job correctly or you don't have anything to offer that is going to be that compelling to people so this is one one example of what David was talking about and and then I read actually a set of three books written by the same authors and the funny thing about these books is all my marketing lessons which I still use today were all from these books in the 70s and 80s and I'm sure there's a bunch of newer one now but I don't have those names to share with you because I'm locked into these core principles but another set of three books was written by these two guys Miller and Hyman and so the names of those books
OtherHyman and so the names of those books were strategic selling conceptual selling and successful large account management and of course even though the term selling is in those books a large part of it has to do with marketing not so much about selling I'll get to selling later so between Davido and these Miller Heyman books I got a very solid education that marketing is not fluff it's really a set of very core rules and if you violate those rules that would be like a physicist who claims that there's no gravity so the physicist can claim there's no gravity but gravity is going to affect him okay so you can think that there's no gravity or it works a certain way or it works in Reverse but all of those things are going to come bite you so you really cannot ignore these core rules of marketing and if you don't want to ignore them you at least have to know
Otherignore them you at least have to know them right it's hard to ignore something if you don't even know what it is so you have to know these rules and I would say probably 90 95% of entrepreneurs who get going do not understand these rules and therefore the result is predictable they're going to hit a brick wall pretty soon and such the rules are very important the second is that the stronger the market the weaker the sales engine can be okay I do not consider myself a good salesman I consider myself a poor salesman I consider myself a pretty strong marketing person and so if you have done your marketing homework you can be a leper and make sales and a standing example of that is someone in front of you because basically my my approach to sales would be 18 ° approach to your traditional Yus car salesman smoing model and golf courses and all that none of that is of
Othercourses and all that none of that is of much interest to me so the stronger the marketing the less important the sales engine becomes so it is very important in my opinion to spend incredible amounts of time on the marketing aspect of the business because if you don't spend that time on that aspect of it you will spend 50x that time on the sales end and hit your head against a brick wall and that's no fun it's not fun to hit your head against a brick wall so it's good not to go there so I just feel the stronger the marketing the weaker the sales now the other aspect is that most things that people come up with that they want to pitch to the world some basic rules Charlie munger's rule do not try to sell something that you wouldn't buy yourself okay so if you don't truly think it's something that you would yourself be a customer of
Questioneryou would yourself be a customer of don't try to pitch don't be a used car don't try to pitch don't be a used car don't try to pitch don't be a used car salesman so please make sure that salesman so please make sure that salesman so please make sure that whatever you're trying to come up with whatever you're trying to come up with whatever you're trying to come up with is compelling enough that you would is compelling enough that you would is compelling enough that you would yourself deeply be deeply interested in yourself deeply be deeply interested in yourself deeply be deeply interested in buying that product about I would say 16 buying that product about I would say 16 buying that product about I would say 16 or 17 years ago I read a book called or 17 years ago I read a book called or 17 years ago I read a book called power versus force it was written by power versus force it was written by power versus force it was written by this guy David Hawkins and when I've this guy David Hawkins and when I've this guy David Hawkins and when I've referred this book to friends of mine I referred this book to friends of mine I referred this book to friends of mine I get two kinds of get two kinds of get two kinds of reactions either either they are ready reactions either either they are ready reactions either either they are ready to throw it back at me on my face and to throw it back at me on my face and to throw it back at me on my face and hope it really hurts hope it really hurts hope it really hurts me or they love the book okay I don't me or they love the book okay I don't me or they love the book okay I don't have people in the middle who say ah it have people in the middle who say ah it have people in the middle who say ah it was okay I never get that I get extreme was okay I never get that I get extreme was okay I never get that I get extreme reactions and I'm sure when you read the reactions and I'm sure when you read the reactions and I'm sure when you read the book If you decide to read it you'll book If you decide to read it you'll book If you decide to read it you'll have either one reaction where you'll have either one reaction where you'll have either one reaction where you'll embrace it or another reaction say this embrace it or another reaction say this embrace it or another reaction say this is such a bunch of nonsense okay so is such a bunch of nonsense okay so is such a bunch of nonsense okay so please bear with me and just dive in and
Otherplease bear with me and just dive in and accept it okay so David Hawkins is not a marketing guy he's a new age Guru who hangs out in one of these new age places in Arizona with a ponytail and all and it's actually somewhat spiritual book and his thesis on that book is that if I lie to you and in your conscious State you do not know that I'm lying to you in your subconscious you do and for most humans for All Humans there's a pipe a Communications highway or at least a one lane Highway that is going between your subconscious and your conscious and because of all the gunk the world throws at us as we are going growing up for most of us humans that pipe is almost completely clogged okay so whatever your subconscious is trying to send as a message to you to your conscious brain is barely able to get through and usually it gets through in some mumbled
Otherusually it gets through in some mumbled jumbled way there are certain humans for whom that pipe is less clogged than others and the less the clogging that you have the better judge of human nature and better judge of the world you're going to be I believe that people like Warren Buffett and jolly buer have significantly less clogged pipes than most most of the rest of us I believe someone like Gandhi had almost a completely unclogged pipe and such so what David Hawkins said is that most of us if someone's lying to you at the subconscious level this guy is just feeding me a line okay but and when your subconscious is trying to transmit that message to the conscious part to tell you get away from this idiot it can't get through okay but what happens is a little bit of the signal for most of us does get through and the little bit of
Otherdoes get through and the little bit of the signal what is telling you is youthe signal what is telling you is youthe signal what is telling you is you somehow feel that you don't feel thatsomehow feel that you don't feel thatsomehow feel that you don't feel that good being around that person okay yougood being around that person okay yougood being around that person okay you may not know why you don't feel goodmay not know why you don't feel goodmay not know why you don't feel good about being around that person and likeabout being around that person and likeabout being around that person and like for example the classic Yar salesman youfor example the classic Yar salesman youfor example the classic Yar salesman you really don't crave to be around thatreally don't crave to be around thatreally don't crave to be around that person and you can't pinpoint which partperson and you can't pinpoint which partperson and you can't pinpoint which part of his pitch is a lie but you generallyof his pitch is a lie but you generallyof his pitch is a lie but you generally don't want to be around that okay and ifdon't want to be around that okay and ifdon't want to be around that okay and if you invert it which is what Hawkins doesyou invert it which is what Hawkins doesyou invert it which is what Hawkins does which is if someone is absolutelywhich is if someone is absolutelywhich is if someone is absolutely truthful to you all the timetruthful to you all the timetruthful to you all the time you want to be as close to that personyou want to be as close to that personyou want to be as close to that person as much of the time as you can and soas much of the time as you can and soas much of the time as you can and so Hawkins came up with what he calls theseHawkins came up with what he calls theseHawkins came up with what he calls these attractor fields and he put a bunch ofattractor fields and he put a bunch ofattractor fields and he put a bunch of math in the book as well putting a likemath in the book as well putting a likemath in the book as well putting a like a log scale on different attractivea log scale on different attractivea log scale on different attractive fields which is probably where I losefields which is probably where I losefields which is probably where I lose some of my rational friends when theysome of my rational friends when theysome of my rational friends when they read the book so what he said is that
Questionerread the book so what he said is that humans have different levels of attractor fields that they emit okay the most the more truth ful you are the stronger those attractor feels the more slimy Yar salesman you are then you're just like repelling people they don't want to be around you and you're trying to chase them down and get them around you and so for example he put someone like Jesus right at the absolute top top of the attractor Fields absolute truth he put Gandhi I think probably one whole log level down below Jesus and then he put all kinds of the other great people the king and others up there Warren Buffett probably he's a capitalist so he's not quite like Gandhi but he'd be somewhere up there right you have to give a discount to capus and such but basically he'd be up there that's why people want to and that's why there's 40,000 people who
Otherthat's why there's 40,000 people who show up in Omaha every year because it's those attractor fields at work and so these attractor Fields work but Hawkins went further and what he said is that if I lie to you okay and we put these Kinesiology sensors on you not on me on you that sensor is going to pick up changes in your muscles which your subconscious is feeding into which will basically say you're being lied to okay I don't know I've never tested that I don't know whether that part of his thesis works or not probably another reason why I lose my rational friends and but let's assume whether it works or not bottom line is if I lie to you just leave it at that your conscious knows and that's the end of it now what happens is that when you take that in the context of marketing which is where I overate this and in fact a great example of I I'm pretty sure the people
CharlieI'm pretty sure the people at Proctor and Gamble have never read Hawkins because the company predates Hawkins but PNG has a principle they have a principle that they will never Market anything unless whatever they are saying is true and it is genuinely an improvement so whatever they're pitching has to be true what PNG has found probably over 100 Years of history of marketing everything and they're the gods of marketing is you cannot in effect put lipstick on a pig okay so if you have a substandard product and dress it up what happens is the human attractor Fields just see straight through that and those products don't do well okay so what PNG has found is that if you're pitching some kind of detergent that is better than than other detergents it better be better okay otherwise it just doesn't work and so the attractor I would say that someone
Otherthe attractor I would say that someone like PNG really understands that at the core and I think they may not realize it but they really are playing off Hawkin so when you look at this in the context of our discussion today which is on marketing number one please don't go out to the world with anything that is not earth shadowing okay so if you don't have a compelling value proposition there is no point pitching that because it's going to fall flat because you're going to it's going to fail that getting 60% market share right so first of all whatever product or service you're coming out with has to have a compelling value proposition and whatever that value proposition is has to be real and truthful so you can't just fake it and say oh this is what we do and have some glitzy marketing message around it it will in the end fail so very important I think to keep
Otherfail so very important I think to keep the Hawkins message in mind and keep it absolutely truthful and it is not easy to come up with compelling things that the world needs that's not an easy exercise but like Monger says why should it be easy to get rich so if it is not easy to come up with these things no problem just spend more time with the drawing board and eventually you'll figure it out now let's say you have come up with a compelling value proposition let's say you are absolutely truthful you truly understand it and your pitch is truthful and all of that what I have found is that is that basically you come up with and you've come up with it in your lab and thinking about it talk to a few friends looks great it's the service of product looks great the real litmus test of that is when you put it in front of customers right so when you go out and make your
Questionerright so when you go out and make your pitch or create an ad or whatever else and a very important thing for a entrepreneur to do is when they put that out there be very pay a lot of close attention to the feedback you get from the people who are listening to the pitch and this is very important at the front end because what is probably the case is that whatever you came up with is off base it's not exactly what your Market wants and I'll give you a example there's a friend of mine in Chicago and he started this company called install shield and many of you might be familiar with the company when you're installing different Windows products install Shield comes up and VES basically was like I think 19 years old or something when he came up with install shield and he said he went to a trade show he was going to go to a trade show some software tool straight
Othertrade show some software tool straight show and he was trying to do a whole bunch of different things he was trying to do Google Maps 30 30 30 years ago when there was no way that the Computing could could support that sort of thing but he went to a straight show and he had created this kind of trade show booth with the different products and he had seven products seven different tools that he was pitching and it wasn't balancing on that Booth because he wanted to put four bullets on one side and four bullets on the other and he was like four and three so he was like it was really bothering him and so as an afterthought this little tool he had was just to install software for installing software was his eighth bullet he just put that in the end as a bottom the eighth bullet was install software installation tool and throughout the
Questionerinstallation tool and throughout the whole week was goes I think like couple of days he was at this trade show booth and all these people are coming by and all this stuff going on and there was a guy across the aisle from him who spent two days looking at those eight things because he he was in the software business and after two days he came up to and said you know that product I have an interest in that product and this product did not exist it was in V's mind and so this was one of the only leads he picked up at the show so he went back and created the product and gave it to the guy and then he found that other people wanted it and so on so forth okay so bottom line is that if you study startups you will find over and over that what actually works is not what you actually came up with what actually worked is that some tangent or some kind
Questionerworked is that some tangent or some kind of you you mentioned something to aof you you mentioned something to aof you you mentioned something to a customer passing and then they grab oncustomer passing and then they grab oncustomer passing and then they grab on to that say I want that and you say ohto that say I want that and you say ohto that say I want that and you say oh he's unusual he wants the unusual thinghe's unusual he wants the unusual thinghe's unusual he wants the unusual thing I'll still keep my core pitch no whatI'll still keep my core pitch no whatI'll still keep my core pitch no what you really have to do is pay reallyyou really have to do is pay reallyyou really have to do is pay really close attention to what is going on andclose attention to what is going on andclose attention to what is going on and I'll give you an example of that which II'll give you an example of that which II'll give you an example of that which I justjustjust encountered a few hours ago so I am inencountered a few hours ago so I am inencountered a few hours ago so I am in the process of raising a fund it's justthe process of raising a fund it's justthe process of raising a fund it's just going to finish in two days but I'mgoing to finish in two days but I'mgoing to finish in two days but I'm process raising a fund to basically buyprocess raising a fund to basically buyprocess raising a fund to basically buy an insurance company and anyway it wasan insurance company and anyway it wasan insurance company and anyway it was the first time in my life that I had tothe first time in my life that I had tothe first time in my life that I had to raise is like about 150 million in araise is like about 150 million in araise is like about 150 million in a short period of time about 6 weeks I'veshort period of time about 6 weeks I'veshort period of time about 6 weeks I've never done that before and I never knewnever done that before and I never knewnever done that before and I never knew I didn't know whether I could do it orI didn't know whether I could do it orI didn't know whether I could do it or not and looks like we'll be overnot and looks like we'll be overnot and looks like we'll be over subscribed which is great and the bestsubscribed which is great and the bestsubscribed which is great and the best part of the over subscription is I neverpart of the over subscription is I never
Questionerpart of the over subscription is I never left herbine and the investors are fromleft herbine and the investors are fromleft herbine and the investors are from all over the world and because I toldall over the world and because I toldall over the world and because I told you I'm like the leper in terms of salesyou I'm like the leper in terms of salesyou I'm like the leper in terms of sales I just wanted to make sure my marketingI just wanted to make sure my marketingI just wanted to make sure my marketing was done right and then everything elsewas done right and then everything elsewas done right and then everything else works so I was looking today at the listworks so I was looking today at the listworks so I was looking today at the list of investors who have committed toof investors who have committed toof investors who have committed to coming into this venturecoming into this venturecoming into this venture and what surprised me was that 50% ofand what surprised me was that 50% ofand what surprised me was that 50% of that list is Indians from all over thethat list is Indians from all over thethat list is Indians from all over the place okay now Indians make up whatplace okay now Indians make up whatplace okay now Indians make up what 2% 2% right they make up 2% of the2% 2% right they make up 2% of the2% 2% right they make up 2% of the country and statistically you not expectcountry and statistically you not expectcountry and statistically you not expect that 2% of the country is becoming 50%that 2% of the country is becoming 50%that 2% of the country is becoming 50% of my fund R I actually did not Pitch itof my fund R I actually did not Pitch itof my fund R I actually did not Pitch it I did not Pitch it specifically toI did not Pitch it specifically toI did not Pitch it specifically to Indians I just pitched it across theIndians I just pitched it across theIndians I just pitched it across the board now if I was really good about theboard now if I was really good about theboard now if I was really good about the marketing engine what I I wouldmarketing engine what I I wouldmarketing engine what I I would understand is you the next time I'munderstand is you the next time I'munderstand is you the next time I'm doing this to pay more attention to thatdoing this to pay more attention to thatdoing this to pay more attention to that right to pay more attention to that
Questionerright to pay more attention to that demographic and to hone a message that's honed into that demographic somewhat more because clearly I'm tapping into something which is statistically significant and so these are the things you got to pay attention to which is that you are not going to have the right idea to start with your idea may be 70% right or 60% right or 10% right but if you listen carefully to what your customers say you'll be able to adjust it so a very good book on this front is the book called It's called the origin and evolution of new businesses written by IIT grad and Harvard Business School grad Amar B and I've become actually friends with Amar since I read the book and so what Amar did is he's a professor now at Colombia I think he spent about 10 years not 10 years he spent a few years interviewing Inc 500 CEOs and the Inc 500 list comes
QuestionerInc 500 CEOs and the Inc 500 list comes out every year it's the list of 500 fastest growing private companies in the US so what he did is his perspective was that Business Schools spend a lot of time studying large businesses they do not spend time studying entrepreneurship and his perspective was I really want to understand how and what goes on as the formation of a company and so he said why don't I talk to these Inc 500 CEOs ask them a bunch of questions interview them and see from a academic point of view if there are common themes that emerge from all these discussions which can serve as a blueprint of what are great things to do and not to do when you start and so I think that's a fantastic book to read because there's incredible research that went in but it's also a very funny book and there are incredible commonality amongst these diverse range of investors
Questioneramongst these diverse range of investors in completely different Industries who did this exact same thing so for example one thing I did in my first business when I started transe is I had two business cards one of my business cards said president and CEO which I never used my second business card said vice president marketing is the only card I used okay and I was at that time pitching IT services to basically you would say companies north of a nor of 500 million or a billion in sales large businesses many times they were Fortune 500 companies so when I went to meet these companies my thinking was that if I say I'm the president CEO it makes the company look small right if I say vice president marketing they say oh he looks pretty impressive and he must work for some impressive people and must be larger organization and that sort of
Otherlarger organization and that sort of thing and the funny thing is when I read amar's book half the entrepreneurs did that okay and I did that because this made logical sense to me a lot of the Entre rurs did that the other thing they did was they put international in the names of the companies they put Global in the names of the companies they put all these different things in the name of the companies to make it look larger right all these things to make it look larger and so these these people had not talked to each other to come up with it they had come up with it independently and what I found interesting the way when Amar did the analysis is now you could when you were starting a business you could read the book look at this list of things that all these guys did and try to incorporate those because those worked all those guys were successful
Othersuccessful and they built large businesses and the other thing that comes up which is outside the subject of the discussion we're having today is is they were basically Arbitrage players and so what I mean by Arbitrage players is that I just told you that don't go out till you have a compelling value proposition compelling value propositions I let's let me rephrase that enduring comparing value propositions like for example the iPhone we're not going to come up with that I'm sorry folks maybe one or two of you can but I certainly can't and most of you probably can't either so hard to come up with enduring competitive value propositions that are just Earth shattering right but Arbitrage oriented value proposition so to give you an example one of the entrepreneurs that interviewed had started this company called compulink in Florida so this guy
Questionercalled compulink in Florida so this guy had finished high school he went into the army the Army trained him in being like a Communications tech basically doing all this Communications gear and after 2 years he had enough of the Army and the Buzz Cuts and all that and he quit and he didn't have much money he had a very small studio apartment in Florida and he's trying to figure out what to do and in his apartment the way it was set up there was a long distance between his computer and his printer about 20 ft so he needed a really long cable between the computer and printer so so you went to the local computer store you again this is probably early 80s no internet nothing you went to the local store computer store and basically said hey I'm looking for such and such type of cable at this length and at that time these cables were not standardized
Othertime these cables were not standardized right so every vendor was doing its own right so every vendor was doing its own right so every vendor was doing its own cables and own proprietary stuff so you cables and own proprietary stuff so you cables and own proprietary stuff so you had to get exactly that printer and that had to get exactly that printer and that had to get exactly that printer and that computer connecting and all that the computer connecting and all that the computer connecting and all that the computer store owner told him look I computer store owner told him look I computer store owner told him look I don't have that kind of cable I get don't have that kind of cable I get don't have that kind of cable I get these requests all the time but I can these requests all the time but I can these requests all the time but I can tell you that you can just Daisy change tell you that you can just Daisy change tell you that you can just Daisy change six of these and that'll get you your 20 six of these and that'll get you your 20 six of these and that'll get you your 20 ft and it's more expensive but you can ft and it's more expensive but you can ft and it's more expensive but you can do that so this guy in the Army knew how do that so this guy in the Army knew how do that so this guy in the Army knew how to make cables that's one of the things to make cables that's one of the things to make cables that's one of the things he had picked up so he flipped the he had picked up so he flipped the he had picked up so he flipped the question to the store owner he said hey question to the store owner he said hey question to the store owner he said hey look what if somebody gave you all these look what if somebody gave you all these look what if somebody gave you all these missing lengths of cables that you don't missing lengths of cables that you don't missing lengths of cables that you don't have and you just sell them because what have and you just sell them because what have and you just sell them because what you're proposing to me is so expensive you're proposing to me is so expensive you're proposing to me is so expensive and ridiculous that makes no sense so and ridiculous that makes no sense so and ridiculous that makes no sense so the guy said look I want branded stuff I the guy said look I want branded stuff I the guy said look I want branded stuff I don't want do some mishmash stuff so
Otherdon't want do some mishmash stuff so then the guy said would you put it on sale on consignment so he said oh on consignment you mean you're going to put your inventory in my store he said yeah sure no problem put it there so he made a kind of a matrix of all the different interfaces and all the missing cable links and then he went to work in his apartment and made these cables and then he put it in the store and then he went to talk to all the other computer store who up and down the close to Florida and had all these stores carrying his cables and he had super normal profits because the pricing was set to be slightly less than this daisy chain thing but what would happen is that after about a few months the manufacturer or some branded cable guy would come up with that cable length better packaging better brand and then the store owner would say I don't need
Otherthe store owner would say I don't need this anymore okay take your Riff Raff out of here so he was making supern normal profits but he made it for a short time so he had a competitive Advantage but it was not enduring but what he did is he was nimbler than everybody else because he was small he continuously kept track of what is coming out what interfaces are coming out what lengths are missing and he just stayed one step ahead and just continued to come up with products just three four months before the rest of the guys caught up with him and then finally that business evolved to the point where he went from making cables to installing large scale cable installations for Fortune 500 Fortune 1,000 companies and now that business has 100 people okay so that was a case of not an enduring comparative brandage of not an enduring comparative brandage just going just hopping from one to the
Otherjust going just hopping from one to the other till finally he found a Services piece and then the services piece worked and he scaled the services piece and such anyway I think amar's book is fantastic on that front so what you really have to do is keep your year very close to the ground and really listen especially the early days really listen to what your customers are saying because they will basically tell you exactly the way you need to point the company and if you don't listen to them tone deaf then again you're going to hit your your head against a brick wall so I want to talk about another Charlie manga calls these mental models I'll talk about a n model which is not it's more broader than just marketing but I think it applies very much to marketing there it was this management Guru who was at McKenzie in the 70s and 80s Tom Peters
QuestionerMcKenzie in the 70s and 80s Tom Peters and he wrote a bunch of best selling books if you're my age you probably have read some of these books in search of Excellence a passion for excellence and so on he was like the Jim colins of the 70s and 80s wonderful writer did a lot of good work on looking at different companies large companies and why did did well and so on and I remember in one of the Tom Peters books he gave a story and I really found this story really hard to believe I said this cannot be the way the world works so what Tom said is that and he said this was a true story he said that there were these two gas stations at this busy intersection in California and they were both self- served gas stations and at that time for those of you who are older than the time when you just put your credit card in and out of the machine you to actually
Questionerand out of the machine you to actually go into the store to pay if you remember that one of the owners of the gas station would come out every hour and a half pick a random car and tell the guy listen sit in the car I'll give you a full syrup so you would pump the gas clean the windshield check the oil just do everything and at no charge right and the guy across the street could clearly see what is going on and his perspective was that this is stupid it's self- serve Why do you want to give full serve on self serve because you're never going to make the money on that and you can't do it for everyone what's the point of doing this for this random people because the other people are not getting serviced over time what started happening is the guy who was providing the extra service once in a while was getting more business more cars were going to his gas station which is the
Othergoing to his gas station which is the guy across the street and even after the guy across the street saw a drop in business and it was clearly visible to him why his business has has dropped he did not make a change to his motor Sandy and then Tom Peters says that you can sit down with your most direct competitors and you can lay out all your competitive advantages and your hidden Trade Secrets and everything just lay it all out and they will listen to you they might be intrigued but there will be no Behavior change okay so I said this is ridiculous how can this be true how can you in a capitalist society when someone is showing you something that would make you more money and more successful you choose to ignore it and again I was in my mid-20s when this happened I had actually started my IT services business at the time and so I said
Otherat the time at the time and so I saidat the time at the time and so I said what I'm going to dowhat I'm going to dowhat I'm going to do is I'm going to prove Tom Peter'sis I'm going to prove Tom Peter'sis I'm going to prove Tom Peter's wrong right and I'm going to prove Tomwrong right and I'm going to prove Tomwrong right and I'm going to prove Tom Peter's wrong in two different ways thePeter's wrong in two different ways thePeter's wrong in two different ways the first way I'm going to prove him wrongfirst way I'm going to prove him wrongfirst way I'm going to prove him wrong is I'm going to copy anything fromis I'm going to copy anything fromis I'm going to copy anything from anyone that Ianyone that Ianyone that I find is interesting and sensible even iffind is interesting and sensible even iffind is interesting and sensible even if every bone my body is fighting that forevery bone my body is fighting that forevery bone my body is fighting that for whatever reason the Tom is talking aboutwhatever reason the Tom is talking aboutwhatever reason the Tom is talking about okay so I said first of all I'm going tookay so I said first of all I'm going tookay so I said first of all I'm going to clone good practices and good ideasclone good practices and good ideasclone good practices and good ideas wherever I see them and the second iswherever I see them and the second iswherever I see them and the second is I'm going to test in the real world ifI'm going to test in the real world ifI'm going to test in the real world if this is exactly how people act in the itthis is exactly how people act in the itthis is exactly how people act in the it business the industry at that time wasbusiness the industry at that time wasbusiness the industry at that time was growing so fast that we had lots ofgrowing so fast that we had lots ofgrowing so fast that we had lots of turnover we had lots of young ambitiousturnover we had lots of young ambitiousturnover we had lots of young ambitious kids working for us and they used to getkids working for us and they used to getkids working for us and they used to get job offers all the time 20 30% raisesjob offers all the time 20 30% raisesjob offers all the time 20 30% raises and all these things and many of themand all these things and many of themand all these things and many of them wanted to set up their own it businesswanted to set up their own it business
Otherwanted to set up their own it business and compete with us and so on so veryand compete with us and so on so veryand compete with us and so on so very often someone would come into my officeoften someone would come into my officeoften someone would come into my office look at their shoes and turning thelook at their shoes and turning thelook at their shoes and turning the resignation okay and then when I ask himresignation okay and then when I ask himresignation okay and then when I ask him what he was going to do usually againwhat he was going to do usually againwhat he was going to do usually again looking at the shoes he would basicallylooking at the shoes he would basicallylooking at the shoes he would basically say I'm going to compete with you okaysay I'm going to compete with you okaysay I'm going to compete with you okay and at that point I felt and this isand at that point I felt and this isand at that point I felt and this is something I've always felt right fromsomething I've always felt right fromsomething I've always felt right from the time I heard about Bill Davido forthe time I heard about Bill Davido forthe time I heard about Bill Davido for me marketing and all these things areme marketing and all these things areme marketing and all these things are all about really an academic Pursuitall about really an academic Pursuitall about really an academic Pursuit the fact that we make money and all thatthe fact that we make money and all thatthe fact that we make money and all that is just a side effect so I was into thisis just a side effect so I was into thisis just a side effect so I was into this pursue of proving Tom Peters wrong I didpursue of proving Tom Peters wrong I didpursue of proving Tom Peters wrong I did not really care about any negativenot really care about any negativenot really care about any negative impacts on the business or cash flowsimpacts on the business or cash flowsimpacts on the business or cash flows anything so I said that's great ifanything so I said that's great ifanything so I said that's great if you're going to business competing withyou're going to business competing withyou're going to business competing with us is there anything I can do to helpus is there anything I can do to helpus is there anything I can do to help you is there I said if you want to sityou is there I said if you want to sityou is there I said if you want to sit down I can lay out all my Trade Secrets
Otherdown I can lay out all my Trade Secrets okay and so these guys first thought that I was either kidding with them or lost my mind or whatever else and I'm not getting angry or anything so I said you please sit down and I explain every possible thing I could about the way I went about getting clients segmenting finding the business all these different things right and then i' sit back and observe when they set up their business what and how they were proceeding not one of them followed anything I told them okay and I said my God Tom Peters is so and that's a stunning to me because I wasn't bullshitting them I was actually laying out everything black and white everything down and maybe they didn't trust me I don't know okay but it was pretty apparent that what I was telling them was maybe that the power versus Force they could have they should have
OtherForce they could have they should have known from the subconscious there was no coming to them okay but maybe the pipe completely clogged who knows but they never did none of them followed anything I told them okay and so I I discovered that basically there's a small portion of humans who have this cloning Gene who are willing to basically say I am stupid the rest of the world is smarter than me I will learn from the rest of the world because to really being a cloner what I've understood is it's a exercise in humility right because you're basically saying everyone else is better than me and I have no problem with meeting everyone else is better than me because they are and and also because I'm a Shameless cloner you know what's wrong with cloning with no one else does so what I found is I found that cloning is incredibly powerful
Othercloning is incredibly powerful because so few people are willing to do it right they're just not willing to go there and so there's a number of facets to cloning okay so what I try to do is anytime I saw people in the industry or outside the industry do anything that impressed me or made me look up and say oh that's something good and all that I remember like for example one time I got a letter from my Law Firm in this big brown manila envelope and the label they had used was a very nice elegant label large label firm name written nicely and it was larger than most labels I had seen and I cloned that I said you know what we'll do whenever we send out stuff we're going to use this large label and I've used it all the companies from then till now okay so that's an example of I've continued to look for small things big things that I can clone so when you're when you're
Othercan clone so when you're when you're looking at this enduring comparative advantage there are two facets to it one facet is that you come up with something like our Cable Guy where he's coming up with cable lengths and you're just trying to be three months ahead of the rest of the pack and he has some sort of advantage for some time but also what you need to do in parallel with that is build Advantage One tiny piece at a time so every little best practice or every little thing that you see if you incorporate over time it will expand into something meaningful and it's just small pieces like for example anytime we hire employees in any of my firms or even in India when we hire at dsh we run a test which is a which is which a company in New Jersey came up with it's called caliper and it basically gives you a personality profile on the person it also has a
Otherprofile on the person it also has a profile on the person it also has a facet of it which is an i Q test facet of it which is an i Q test facet of it which is an i Q test oriented so we can also see how smart oriented so we can also see how smart oriented so we can also see how smart they are but that company basically gets they are but that company basically gets they are but that company basically gets a job description from us so if it's a a job description from us so if it's a a job description from us so if it's a sales job they know what that means if sales job they know what that means if sales job they know what that means if it's a administrative job if it's a job it's a administrative job if it's a job it's a administrative job if it's a job with high attention detail Etc and they with high attention detail Etc and they with high attention detail Etc and they overlay that with the personality overlay that with the personality overlay that with the personality profile and and they basically give us a profile and and they basically give us a profile and and they basically give us a report which tells us they come up with report which tells us they come up with report which tells us they come up with three rankings which is matched person three rankings which is matched person three rankings which is matched person is matched to the job or match is matched to the job or match is matched to the job or match reservations or don't go there reservations or don't go there reservations or don't go there okay and what I've learned is okay and what I've learned is okay and what I've learned is that if they ever say don't go there that if they ever say don't go there that if they ever say don't go there don't worry about how much you like the don't worry about how much you like the don't worry about how much you like the person don't hire the person okay now person don't hire the person okay now person don't hire the person okay now that that testing cost us about $400 that that testing cost us about $400 that that testing cost us about $400 each time we do that and one of the most each time we do that and one of the most each time we do that and one of the most expensive things that can happen to a expensive things that can happen to a expensive things that can happen to a company is bad hires very expensive you company is bad hires very expensive you company is bad hires very expensive you have bad hires and so we we will I don't
Otherhave bad hires and so we we will I don't even hire interns without running through the test in fact I got an email last night from our from our group in India and they were saying that one of our alums they wanted to hire him for 3 months he's free for three months it's only 15,000 rupees a month 45,000 rupees over three months what about what that's about $800 or so my suggestion to was them was run caliper even though it's a 50% overhead of what we're going to pay just don't want to deal with 3 months of someone who's a misfit and you can't tell that in interview mentioned this to me many years ago and I Incorporated this many time I mention it to so many CEOs I meet they don't incorporate because the cloning Gene is missing sorry to say so cloning has many facets to it I continuously look for things that other businesses other companies are doing
Questionerbusinesses other companies are doing which I like and I try to see is there something that I can incorporate my entire livelihood now is based on cloning P funds was cloned from the buffet Partnerships and again what happened to the buffet Partnerships the most just to tell you how amazing and bewildering the world is the most successful set of hedge funds ever run in the history of hedge funds from 1956 to 1969 really well-run everything else and then this massive industry takes place and then from 1969 when Buffett shut the head fund to 1999 when I was thinking of cloning him 30 years 30 years in a capitalist Society where everyone is clearly aware of what he did and what the results were and all that I could find nobody who cloned that model is incredible it's an amazing model and so I said okay I understand why no one clone it because
Questionerunderstand why no one clone it because Tom Peters said that and I've seen it so Tom Peters said that and I've seen it so Tom Peters said that and I've seen it so I said I will clone it I was put on this I said I will clone it I was put on this I said I will clone it I was put on this Earth to clone it and we cloned it and Earth to clone it and we cloned it and Earth to clone it and we cloned it and my family has a significantly higher net my family has a significantly higher net my family has a significantly higher net worth because I did that God bless worth because I did that God bless worth because I did that God bless cloning now I'm in the process of buying cloning now I'm in the process of buying cloning now I'm in the process of buying an insurance company why am I buying an insurance company why am I buying an insurance company why am I buying insurance company because that's the insurance company because that's the insurance company because that's the model bua haway used I don't need to model bua haway used I don't need to model bua haway used I don't need to come up with ideas on my own I can just come up with ideas on my own I can just come up with ideas on my own I can just clone those ideas so it works so I think clone those ideas so it works so I think clone those ideas so it works so I think that's cloning is very important that's cloning is very important that's cloning is very important important another thing I wanted to talk important another thing I wanted to talk important another thing I wanted to talk about is that this this aspect of about is that this this aspect of about is that this this aspect of copying best ideas from anywhere you copying best ideas from anywhere you copying best ideas from anywhere you find them so when I was growing up in find them so when I was growing up in find them so when I was growing up in Mumbai in the 70s you really didn't get Mumbai in the 70s you really didn't get Mumbai in the 70s you really didn't get any junk mail right in India there was any junk mail right in India there was any junk mail right in India there was no such thing as junk mail at the time no such thing as junk mail at the time no such thing as junk mail at the time if you got a letter which was if you got a letter which was if you got a letter which was handwritten or something it was really handwritten or something it was really handwritten or something it was really cared about you and wrote this letter
Othercared about you and wrote this letter and I remember that in a typical day we'd get two or three letters a bill and something else nothing much but every year at Diwali time they would be card that would show up and this card would be from this jeweler in New Delhi we were living in Mumbai so this new jeweler in New Delhi was sending us this card and it was multani Jewelers I never heard of these people and every year was the same kind of card it was signed by these two or three brothers and so I think when I was 10 or 11 years old I asked my parents who are these people who are these mulani Jewelers and so they said oh when we got married we bought our wedding jewelry from there so that's and so what the I thought about that I said the wedding took place and now there's going to be no transaction for a while this card keeps coming and
Otherfor a while this card keeps coming and what took me a while to understand is that what they were doing was very smart first of all India hardly had any junk mail so if someone send a card like that to you it has value and I clearly noticed it and the second is that your these transactions when you have these weddings and such for the Jeweler is a massive transaction right so a given family will really show up at the Jeweler every 15 or 20 or 25 years for a major purchase and then they'll be going dormant for another 10 15 years so what you really have to do is you have to build brand so they think of you right and so I said wow this is very good these guys are basically just sending this one rupee card and over 20 years is 20 rupees and you feel good about them right and I cloned that and so what I did is right from the time I started running my first business we send
Questionerrunning my first business we send greeting cards and then I realized some place where someone had written that humans love to look at other humans and actually what humans love the most is to look at themselves okay and in fact they did this is in Facebook they've actually done the analysis the most that people look at is their own pictures okay that is a number one thing who looks at their pictures the most in Facebook raise your hand not this crowd come on okay so people love to look at their own pictures but if they can't look at their own pictures they want to look at other people's pictures okay and you see this in a baby baby's N9 months old to eight months old if you make high contact with a baby it'll make eye contact with a baby it'll make eye contact with you baby's a program to look at other people okay they love to look at other people okay they love to look at people so humans love to look at
Otherlook at people so humans love to look at other human so I used to first clone multani Jewelers just by sending a Christmas card with some Christmas tree on the cover some something like that then I read this thing about hum look at hum I said no we'll change it to a family picture and then this is before it became in to send family pictures and then we started doing that and in the meantime what has happened is that people have moved from sending cards out to doing it online but that's stupid because online really doesn't have the same impacts and so the good news is US Postal Service mail volumes are going down and the amount I use a US Postal Service is just keeps going up okay because now fewer cards show up at people's doorsteps and especially if they have pictures in them they like to look at those pictures you get my card D do you like
Otherpictures you get my card D do you like to look at it great all right there youto look at it great all right there youto look at it great all right there you go all right thank you thank you for thego all right thank you thank you for thego all right thank you thank you for the plug allplug allplug all
Other[Laughter][Laughter][Laughter]
Otherright all right that's good okay thereright all right that's good okay thereright all right that's good okay there you go I haven't even sent it to youyou go I haven't even sent it to youyou go I haven't even sent it to you
Other[Laughter][Laughter][Laughter]
Othermaybe we'll add you to the list allmaybe we'll add you to the list allmaybe we'll add you to the list all right okay so anyway the pictures forright okay so anyway the pictures forright okay so anyway the pictures for example as people stop sending thingsexample as people stop sending thingsexample as people stop sending things physically I'm just increasing that sophysically I'm just increasing that sophysically I'm just increasing that so what I one of the things I found iswhat I one of the things I found iswhat I one of the things I found is that since I don't like to spend a lotthat since I don't like to spend a lotthat since I don't like to spend a lot of time meeting humans interacting withof time meeting humans interacting withof time meeting humans interacting with them all the sales stuff and all that Ithem all the sales stuff and all that Ithem all the sales stuff and all that I created backend stuff that is going tocreated backend stuff that is going tocreated backend stuff that is going to to be robust so the greeting cards isto be robust so the greeting cards isto be robust so the greeting cards is one piece of that right another piece ofone piece of that right another piece ofone piece of that right another piece of that is there's this book by what's thethat is there's this book by what's thethat is there's this book by what's the name of the author the guy who wrotename of the author the guy who wrotename of the author the guy who wrote influence what's the name of the guyinfluence what's the name of the guyinfluence what's the name of the guy yeah cini Robert seini it's a great bookyeah cini Robert seini it's a great bookyeah cini Robert seini it's a great book influence the psychology of persuasioninfluence the psychology of persuasioninfluence the psychology of persuasion and and I've gotten to know Robert since
Questionerand and I've gotten to know Robert since then great guy so se de then great guy so se de then great guy so se de basically said that he gave a story and basically said that he gave a story and basically said that he gave a story and it's a true story and this was before it's a true story and this was before it's a true story and this was before 911 when you went to when you arrived at 911 when you went to when you arrived at 911 when you went to when you arrived at the flight it used to be you used to be the flight it used to be you used to be the flight it used to be you used to be able to go right up the gate to meet able to go right up the gate to meet able to go right up the gate to meet someone right before all hell broke someone right before all hell broke someone right before all hell broke loose and they stopped doing all that so loose and they stopped doing all that so loose and they stopped doing all that so he was talking about in the 70s for he was talking about in the 70s for he was talking about in the 70s for example in California there'd be the example in California there'd be the example in California there'd be the Moonis at the airports in the har Moonis at the airports in the har Moonis at the airports in the har Krishna robes and all that and they'd be Krishna robes and all that and they'd be Krishna robes and all that and they'd be looking as people are coming off an looking as people are coming off an looking as people are coming off an airplane at this kind of well-dressed airplane at this kind of well-dressed airplane at this kind of well-dressed businessman okay and when they found A businessman okay and when they found A businessman okay and when they found A well-dressed businessman come off the well-dressed businessman come off the well-dressed businessman come off the plane the Mooney with attach himself to plane the Mooney with attach himself to plane the Mooney with attach himself to the businessman and start walking with the businessman and start walking with the businessman and start walking with him and say Sir isn't it a beautiful day him and say Sir isn't it a beautiful day him and say Sir isn't it a beautiful day isn't it a wonderful day this is such a isn't it a wonderful day this is such a isn't it a wonderful day this is such a nice sunny day I want you to have this nice sunny day I want you to have this nice sunny day I want you to have this flower and the businessman he has no
Otherflower and the businessman he has noflower and the businessman he has no interest in the Mooney he has nointerest in the Mooney he has nointerest in the Mooney he has no interest in a flower none of that okayinterest in a flower none of that okayinterest in a flower none of that okay he's just trying to get away from thehe's just trying to get away from thehe's just trying to get away from the guy with the guy is keeping up with himguy with the guy is keeping up with himguy with the guy is keeping up with him right and so he keeps saying sir I justright and so he keeps saying sir I justright and so he keeps saying sir I just wanted to have the flow I'm not askingwanted to have the flow I'm not askingwanted to have the flow I'm not asking for anything I just like you I like thefor anything I just like you I like thefor anything I just like you I like the day I want to give a fellow human aday I want to give a fellow human aday I want to give a fellow human a flower once in a while every eighth orflower once in a while every eighth orflower once in a while every eighth or 10th guy will take the flower just to10th guy will take the flower just to10th guy will take the flower just to get rid of the guy and the moment heget rid of the guy and the moment heget rid of the guy and the moment he takes the the flower what happens is nowtakes the the flower what happens is nowtakes the the flower what happens is now you've created anyou've created anyou've created an obligation okay because you tookobligation okay because you tookobligation okay because you took somebody you took something for me sosomebody you took something for me sosomebody you took something for me so clearly there's an obligation so usuallyclearly there's an obligation so usuallyclearly there's an obligation so usually he reach into his pocket pull out ahe reach into his pocket pull out ahe reach into his pocket pull out a couple of dollars give it to the guy andcouple of dollars give it to the guy andcouple of dollars give it to the guy and then first dumpster there goes thethen first dumpster there goes thethen first dumpster there goes the flower and the Moone is about 10 stepsflower and the Moone is about 10 stepsflower and the Moone is about 10 steps behind picking up the flower as soon asbehind picking up the flower as soon asbehind picking up the flower as soon as it's dumped go for the next victim okay
Otherit's dumped go for the next victim okay
Otherand se de said that humans BAS basically and this is probably going back into our genetic history I don't know Tony how much time do we have are we okay okay fine just when we have about 20 25 minutes maybe then we can open up in case people want to have questions but anyway so what shini said is that if you go back into human evolutionary history people go hunting and let's say I go hunting I bring down this big beast okay and there's no Refrigeration so how do I store the meat that my family is not going to eat the way I store it in my neighbor's belly okay so I come back with a big beast invite everybody to say hey guys party time okay feed everybody okay because there's nothing else I can do because it's going to spoil otherwise right so you feed everyone and what happens is we've been built to remember
Otherhappens is we've been built to remember Hey Joe fed me really well three weeks ago and when I bring down the big beast I'm going to call Joe but the reciprocation memory that we have as humans is somewhat flawed it does not have a calibration engine so if I do you a favor all that you're able to remember is that I did you a favor you feel good about me and that's about the end of it you really are not able to calibrate the degree of the flavor and say oh he did this for me so I can do this exact thing for you and of course the the Shyer salesman of the world have learned how to take advantage of that so one of the things I used cini's this Distortion with reciprocation when I got P funds going was that anytime we sent a potential investor package people requested a package we could send everything as a PDF we never sent anything other the PDF
OtherPDF we never sent anything other the PDF we sent a physical package okay and thewe sent a physical package okay and thewe sent a physical package okay and the physical package had a very nice $50physical package had a very nice $50physical package had a very nice $50 cross pen in it and now the guy got thecross pen in it and now the guy got thecross pen in it and now the guy got the flower at 100% hit rate unlike theflower at 100% hit rate unlike theflower at 100% hit rate unlike the Mooney who may have had a 10% hit rateMooney who may have had a 10% hit rateMooney who may have had a 10% hit rate he didn't ask for the pen but the penhe didn't ask for the pen but the penhe didn't ask for the pen but the pen arrived in the mailbox and maybe one inarrived in the mailbox and maybe one inarrived in the mailbox and maybe one in 200 people would actually go through the200 people would actually go through the200 people would actually go through the trouble of returning the pen for me okaytrouble of returning the pen for me okaytrouble of returning the pen for me okay they saying that I really don't wantthey saying that I really don't wantthey saying that I really don't want this obligation thing going on here'sthis obligation thing going on here'sthis obligation thing going on here's your pen back returning the pen is notyour pen back returning the pen is notyour pen back returning the pen is not as easy as dealing with the Mooneyas easy as dealing with the Mooneyas easy as dealing with the Mooney because you got to do all kinds ofbecause you got to do all kinds ofbecause you got to do all kinds of ristics to send that pen back but 99% orristics to send that pen back but 99% orristics to send that pen back but 99% or more have kept the pen and some portionmore have kept the pen and some portionmore have kept the pen and some portion of them invest in P funds but the onesof them invest in P funds but the onesof them invest in P funds but the ones who don't invest what happens is numberwho don't invest what happens is numberwho don't invest what happens is number one they feel good aboutone they feel good aboutone they feel good about Mish right because they have a nice penMish right because they have a nice penMish right because they have a nice pen they the brain says he's a good guythey the brain says he's a good guythey the brain says he's a good guy right and number two they feel some kind
Otherright and number two they feel some kind of obligation right and the obligation is very simple I give you a $50 pen you can send a million dollar wire and we're even because I did you a favor and then you did me a favor and we shared our meat it's all fine right and that works right and we've sent a lot of cross pens out and and that works out fine so what I'm trying to say that you know you can pick up ideas from anywhere when you read the book origin evolution new businesses pick up lots of ideas from there that's good you can pick them up anywhere there's a I used to read I used to read ink magazine I haven't read ink magazine in a while but every issue I look through very carefully to find small things that other entrepreneurs other businesses were doing that I could incorporate and it's really that these smaller things that you put together
Questionersmaller things that you put together that as you total them up they end up becoming significant in totality so I would say that that's some of the things I wanted to share with you basically that number one don't try to sell anything that you wouldn't buy yourself like I said and the sales side like I said if your marketing engines are strong we didn't go a lot into sales but the marketing engine is strong you don't really need a strong sales engine and some of the things I've always kept in mind about sales is that it used to be that if you were going to meet a customer who was out of town let's say you're going to fly you're selling some high-end product you're going to fly to meet somebody it used to be probably 20 years ago that was at least $1,000 cost between flights and everything else it might be similar or more now but then there's a huge time
Othermore now but then there's a huge time sync as well it blows a day or two of your time so even if you go to meet someone in town if I went to even citos or some place to meet someone it is going to blow about half my day between the planning for it and going and meeting and coming back at 3 4 hours at a minimum gone and that is a very high price to pay in my opinion for a sales call and so I'm first of all what I've done for myself is one is I don't like to do things that I don't like to do and so if this thing is not going to be intellectually stimulating or something I'd rather not go make the sales call and so what I said is we can set it up so that the back end is powerful enough that you eliminate that that front end requirement and like I said like for example this time we raised this capital I only made one visit to a person who
QuestionerI only made one visit to a person who was in Irvine to their office mainlywas in Irvine to their office mainlywas in Irvine to their office mainly because I actually wanted to see hisbecause I actually wanted to see hisbecause I actually wanted to see his office he was he had been telling me tooffice he was he had been telling me tooffice he was he had been telling me to come and see it for a while but and thatcome and see it for a while but and thatcome and see it for a while but and that was pretty quick 15 minute commutes bothwas pretty quick 15 minute commutes bothwas pretty quick 15 minute commutes both ways and such so pretty easy but neverways and such so pretty easy but neverways and such so pretty easy but never offered to go meet anyone else and I didoffered to go meet anyone else and I didoffered to go meet anyone else and I did a lot of phone calls but those are mucha lot of phone calls but those are mucha lot of phone calls but those are much less costly so I would just say thatless costly so I would just say thatless costly so I would just say that when you're trying to do your pitcheswhen you're trying to do your pitcheswhen you're trying to do your pitches and different things like that you wantand different things like that you wantand different things like that you want to be cognizant of the fact that anytimeto be cognizant of the fact that anytimeto be cognizant of the fact that anytime you're doing live meetings it'syou're doing live meetings it'syou're doing live meetings it's incredibly expensive and the second isincredibly expensive and the second isincredibly expensive and the second is that if the marketing message is notthat if the marketing message is notthat if the marketing message is not strong and button down that live meetingstrong and button down that live meetingstrong and button down that live meeting is not going be very fruitful so you'reis not going be very fruitful so you'reis not going be very fruitful so you're better off you're better off having abetter off you're better off having abetter off you're better off having a much stronger message where you can getmuch stronger message where you can getmuch stronger message where you can get things done the Amazon way where youthings done the Amazon way where youthings done the Amazon way where you there's not even a phone number you canthere's not even a phone number you can
Otherthere's not even a phone number you can call All Digital so that's great but
Otherwith that I'll maybe if you have questions or comments and we'll go to
Otherwhenever Tony tells me we got to
Other[Applause]
Warrenso that was wonderful I was watching fascinated myself
Otheryeah we can hand these out you can just these are just the list of books I mentioned
Warrenyeah sure let's take a few questions and I'm sure by the end of the evening be here had a question
Questioneryes
Questionerhuman us and it's been proven a lot of s that whenever you something you're always going to be if you want to start something let's say copy Coca-Cola they'll always be ahead of you whether it's in price Advantage eies me
OtherSams always well say that some of the most
Warrenokay so let me just repeat the question for the benefit of the video your your question is that cloning you're behind the eight ball you're basically coping someone and so how can you really gain
Questionersomeone and so how can you really gain ananan advantage frog yeah unless you Le frogadvantage frog yeah unless you Le frogadvantage frog yeah unless you Le frog so let's actually look at some realso let's actually look at some realso let's actually look at some real world cases some of the largestworld cases some of the largestworld cases some of the largest companies on the planet are clonedcompanies on the planet are clonedcompanies on the planet are cloned businesses Microsoft is a clonedbusinesses Microsoft is a clonedbusinesses Microsoft is a cloned business they have spent tens ofbusiness they have spent tens ofbusiness they have spent tens of billions of dollars probably spendingbillions of dollars probably spendingbillions of dollars probably spending tens of billion dollars every year andtens of billion dollars every year andtens of billion dollars every year and the only thing that make money arethe only thing that make money arethe only thing that make money are office so word is cloned from Wordoffice so word is cloned from Wordoffice so word is cloned from Word Perfect Excel is Clon from Lotus andPerfect Excel is Clon from Lotus andPerfect Excel is Clon from Lotus and there of money from Quicken not eventhere of money from Quicken not eventhere of money from Quicken not even that good and Bing the full form of Bingthat good and Bing the full form of Bingthat good and Bing the full form of Bing is but it's not Google so Bing isis but it's not Google so Bing isis but it's not Google so Bing is cloning Google and you just go on on andcloning Google and you just go on on andcloning Google and you just go on on and on and they're not even a good cloner iton and they're not even a good cloner iton and they're not even a good cloner it takes about five six seven versions fortakes about five six seven versions fortakes about five six seven versions for them to get it right and still theythem to get it right and still theythem to get it right and still they built a great business if you look atbuilt a great business if you look atbuilt a great business if you look at someone like Walmart Sam Walton thesomeone like Walmart Sam Walton thesomeone like Walmart Sam Walton the cloner he spent an incredible amount ofcloner he spent an incredible amount ofcloner he spent an incredible amount of time in his comparative stores and in
Questionertime in his comparative stores and in fact if you read his bi autobiography made in America it will just show you that for the first 20 years of Walmart's existence Walmart had no new ideas the only thing that they did different was they went into small towns but they pretty much copied the SE Sears and Kmart model so they had a slight tweak to the other models Coca-Cola look at pepsy right highly successful they cloned it so actually I think cloning is very powerful because there is room for more than one and what is actually going to end up happening is that even if you clone something in the end you're going to put your stamp on it and when you put your stamp on it it is that small bit that's slightly off that makes it unique so when Walmart for example cloned Sears the piece that Walmart brought in is an incredible discipline on cost they if
Questionerincredible discipline on cost they if they would be going to for a trip to New York four of them are staying in the same hotel room and no one at Walmart ever flies anything but coach if they're using a private plane which now they do they cannot use it unless the Planes full so they have all these rules about about the way they run their thing Incredible cost discipline which seers and Kmart did not have so what is going to happen is if you start with cloning what you're going to end up with is going to be cloning with your own aspect of nuance to it which is going to give you an advantage I can say Bri funds clone Buffett first of all there's only one born Buffett but there's many aspects of what I did probably when you drill down is different from the way Buffett did it and so it's going to end up being different so I would say that
Questionerup being different so I would say that people will say that this will not work because it already exists but many versions of the same thing can make it yeah many years ago you were Bing on auction to have a l B buffet and you own that auction you went at a lunch with him what can you tell us from their experience what did you learn what was your impression from that
Ted Weschleryes sir sure yeah I had lunch with Buffett in 2008 and my family was with me my wife and daughters which was a lot of fun and one of my friends as well and it was a great experience actually we spent about 3 hours having in fact Warren told us when we started that the lunch could go on for as long as we wanted there was no time limit we could ask him anything and within about 15 minutes of us starting to talk to him you felt like you were talking to your grandfather he made sure that you didn't think you were
Othermade sure that you didn't think you were talking to Warren Buffett we covered many different subjects I think many of the things we covered were Pro are probably in the public domain if you read about Buffett it will come up but what what I found very helpful first of all my interest in doing the lunch was really to pay a guru D I mean cloning left Center making all this money how do I thank him there was a lunch of a way to thank him so I told him right up front this I'm just very grateful for what you did very thankful for you and all of that so that's what I wanted to really cover but one of the things that was helpful during the lunch is it calibrated for me what were things that were very important to warn the core principles that are front and center for example one of the first things he mentioned is that there are two ways you
Questionermentioned is that there are two ways you can live your life he says you can live your life by what he called an inner scorecard which is you judge internally how well you're doing at something and the other way you can live your life is by an outer scorecard which is you look at the world and the way they think about you is the way you judge yourself and he said the correct way to live your life is with an inner score card so he went ahead and said would you prefer to be the best lover in the world but known as the worst or would you prefer to be the worst lover in the world but known as the best and so he said if you know how to answer that question you've got it mailed and so what I so first of all I think that the inner scorecard versus outer scorecard is an incredibly important mental model to keep in mind is always try to do things that you think at the core are the right
Otherthat you think at the core are the right thing to do regardless whether the world agrees with you or not very few humans are willing to do that people care about what the world thinks Warren actually does not care what the world thinks and if you think if you look at many aspects of his life life he had a wife and he had a mistress at the same time and the wife approved of the mistress in fact the wife gave him the mistress okay and no one raises an eyebrow about it and he never cared about what the world thought about it and someone went once asked him about this whole triangular Arrangement and his perspective his answer was there are three people affected by it none of whom have a problem with it okay so that's ultimate in a scorecard it doesn't really care about what the world says but go ahead
Questionerin the early days yeah so the question is you know I'm saying that listen to
Otheris you know I'm saying that listen to your customers then I'm also saying don't meet them I would I would say that let me let me preface that in the early days please spend incredible amounts of time with your customers right I would say that's a very valid point so the question is that we may not be able picking up Market movements or signals if we are sitting in our Ivory Tower and not meeting anyone my perspective is that you can actually pick up data from multiple sources and I feel the most let me put it the worst possible way to pick up data the least efficient channel to pick up data is talking to another human that is the worst way to educate yourself in my opinion the best way to educate yourself is read a book okay so me from my point of view I think in terms of density of knowledge going into your brain reading is the best way to do that the lowest
Questioneris the best way to do that the lowest level of doing that is meeting someone because all the banter and everything else going on and then the sales and all of that there's at the end of the day there's very little Essence that comes out so I would say early days yeah absolutely Max time subsequent ly you have to figure out a way where you're bringing in data that is important so you don't miss Market signals but I would say a lot of that you would do much better by being a voracious reader versus being a voracious meter of people so reading has probably get you much further along on that on that curve yeah sorry you can keep sitting I would like to have your opinion I got one product which is a patented product it has to do with what you call to mouthwash Whitening Gel and we come up with the product and ready go to the market and some advisor say unless you
Questionermarket and some advisor say unless you perfectly don't go to market so the question is by the time you are ready there is always something new and new so what is your take on that one if you wait forever taking a lot of so the question is you mentioned that you have a patented product and advisor say that don't go to market unless it's absolutely perfect but that's a moving Target we'll have a seat so my answer is
Otherthat there are 100 ways that things can be successful so you can be like Steve Jobs and you can wait till things absolutely perfect and just keep working on them till you think you're satisfied and that works or you can be at Bill Gates like Bill Gates and send everything Half Baked to the market and that worked also so the nature of capitalism is that you don't have one particular way that is probably going to be the only way it works my personal
Otherbe the only way it works my personal bias would be to put out something that's as close to Perfection as possible so you yourself feel good about it but I would say this is a gut call look at it whether at what point do you feel it's an incredible product and you can go out and you can come out with version 2.0 after a year or something but if you feel it's there and it's incredible go for it but I think if you have reservations then I would say keep it in the lab for a little longer but there multiple ways to skin the skin the skin the cat said you feel good about using it yourself absolutely it out absolutely yourself absolutely it out absolutely
Questionerthat's the key you have to love it yeah yeah okay sure how much time do we have yeah okay sure how much time do we have Tony we have time time okay good all Tony we have time time okay good all right so the question is on mental right so the question is on mental models and how do you pick stocks and models and how do you pick stocks and how do I pick stocks and so on let me how do I pick stocks and so on let me answer your question the following way
Questioneranswer your question the following way so let's say that you have 80 IQ and youso let's say that you have 80 IQ and youso let's say that you have 80 IQ and you come to me and say look I'm not verycome to me and say look I'm not verycome to me and say look I'm not very smart but I want to do the best I can insmart but I want to do the best I can insmart but I want to do the best I can in the market so how should I go aboutthe market so how should I go aboutthe market so how should I go about managing my portfolio so I said atiq wemanaging my portfolio so I said atiq wemanaging my portfolio so I said atiq we can work with an ATI buy an index fundcan work with an ATI buy an index fundcan work with an ATI buy an index fund buy the S&P 500 Index cost average everybuy the S&P 500 Index cost average everybuy the S&P 500 Index cost average every paycheck maybe 15% over a lifetimepaycheck maybe 15% over a lifetimepaycheck maybe 15% over a lifetime you're going to wake up at 70 and beyou're going to wake up at 70 and beyou're going to wake up at 70 and be rich the seven figures for sure now yourich the seven figures for sure now yourich the seven figures for sure now you say to me that I have a 90 IQ I'm muchsay to me that I have a 90 IQ I'm muchsay to me that I have a 90 IQ I'm much smarter than the 80 IQ guy can I dosmarter than the 80 IQ guy can I dosmarter than the 80 IQ guy can I do better and I would say to you of coursebetter and I would say to you of coursebetter and I would say to you of course we have more to work with 90 IQ we canwe have more to work with 90 IQ we canwe have more to work with 90 IQ we can definitely do better buy bsha haway okaydefinitely do better buy bsha haway okaydefinitely do better buy bsha haway okay so probably you'll beat the S&P 500so probably you'll beat the S&P 500so probably you'll beat the S&P 500 Index better again dollar cost averageIndex better again dollar cost averageIndex better again dollar cost average and put some money from every paycheckand put some money from every paycheckand put some money from every paycheck and you're done then the 100 IQ guyand you're done then the 100 IQ guyand you're done then the 100 IQ guy comes to me and say look I'm better thancomes to me and say look I'm better thancomes to me and say look I'm better than these smart these guys I'm 100 IQ can Ithese smart these guys I'm 100 IQ can Ithese smart these guys I'm 100 IQ can I do better than that I say 100 IQ of
Questionerdo better than that I say 100 IQ of course we can work with that and we can course we can work with that and we can course we can work with that and we can do some more things with that so of do some more things with that so of do some more things with that so of course we can do better there were these course we can do better there were these course we can do better there were these two professors business school two professors business school two professors business school professors one of the one of at Ohio professors one of the one of at Ohio professors one of the one of at Ohio State and one was at the University of State and one was at the University of State and one was at the University of Nevada and they did a study over 30 Nevada and they did a study over 30 Nevada and they did a study over 30 years years years 19 I think 1976 to 2006 and they studied 19 I think 1976 to 2006 and they studied 19 I think 1976 to 2006 and they studied that if you bought a stock that Warren that if you bought a stock that Warren that if you bought a stock that Warren Buffett bought and you bought bought it Buffett bought and you bought bought it Buffett bought and you bought bought it after it was publicly known that he had after it was publicly known that he had after it was publicly known that he had bought it and you bought it on the last bought it and you bought it on the last bought it and you bought it on the last day of the month that it was publicly day of the month that it was publicly day of the month that it was publicly known that he had bought it and you known that he had bought it and you known that he had bought it and you found the worst broker on the planet who found the worst broker on the planet who found the worst broker on the planet who charged you the highest price on that charged you the highest price on that charged you the highest price on that last day of the month to give you that last day of the month to give you that last day of the month to give you that stock and you bought it at that high stock and you bought it at that high stock and you bought it at that high price in the last day and you sold it price in the last day and you sold it price in the last day and you sold it when Buffett started to sell again when Buffett started to sell again when Buffett started to sell again publicly known again last day of the publicly known again last day of the
Questionerpublicly known again last day of the month found the worst broker sold it at the lowest price in the last day of the month you beat the SNP over 30 years by 115% a year okay you did 21.5% annualized if you followed that approach okay now if you are beating the S&P 500 by three percentage points a year you're like one in 200 if you as you get to 5 percentage point 7 percentage point 10 percentage points out performance it's 1 in thousands so that is incredible performance for having to work 15 it's a month because whole month you can be in Goa or Aspen or wherever enjoying life then last day of the month you come back and say Google God Google did Buffett do anything this month any disclosure anything happened God Google will tell you anything happened you say oh he bought IBM okay worst broker give me the high price today for IBM okay and then
Otherhigh price today for IBM okay and then go back to your your skiing activitiesgo back to your your skiing activitiesgo back to your your skiing activities what else you doing till the next monthwhat else you doing till the next monthwhat else you doing till the next month okayokayokay now let's say say someone has 110 IQ andnow let's say say someone has 110 IQ andnow let's say say someone has 110 IQ and says to me look I'm better than thesesays to me look I'm better than thesesays to me look I'm better than these other guys I'm 110 IQ can I do betterother guys I'm 110 IQ can I do betterother guys I'm 110 IQ can I do better than that and it's not easy to do betterthan that and it's not easy to do betterthan that and it's not easy to do better than 11 and a half% a year but then Ithan 11 and a half% a year but then Ithan 11 and a half% a year but then I would say do something like what I dowould say do something like what I dowould say do something like what I do which is be a Shameless cloner there arewhich is be a Shameless cloner there arewhich is be a Shameless cloner there are two ways you can do bowling if you go totwo ways you can do bowling if you go totwo ways you can do bowling if you go to a bowling alley right one is you cana bowling alley right one is you cana bowling alley right one is you can bowl with bumpers and the other is youbowl with bumpers and the other is youbowl with bumpers and the other is you can bowl without bumpers right you cancan bowl without bumpers right you cancan bowl without bumpers right you can put the things so you have no gut ballsput the things so you have no gut ballsput the things so you have no gut balls or you can have gut balls all the timeor you can have gut balls all the timeor you can have gut balls all the time so if I told you that what matters isso if I told you that what matters isso if I told you that what matters is the score at the end not whether you usethe score at the end not whether you usethe score at the end not whether you use bumpers or not would you prefer to bowlbumpers or not would you prefer to bowlbumpers or not would you prefer to bowl with bumpers or withoutwith bumpers or withoutwith bumpers or without bumpers with bumpers is it more fun tobumpers with bumpers is it more fun tobumpers with bumpers is it more fun to bowl withbowl withbowl with bumpers yes score is going to bebumpers yes score is going to be
Otherbumpers yes score is going to be [Laughter][Laughter][Laughter] higher I love bowling with bumpers so if you are one of the don't want to bowl with bumpers guy then you're also the kind of guy who probably doesn't want to clone okay so bowling with bumpers is fantastic always bowl with bumpers turn those bumpers on okay so anyway so when you bowl with bumpers which is what I'm doing with what if you look at punds portfolio almost the entire portfolio is stock picks by some other great investor I have no original ideas okay so I just just look at what some other smart person is doing seeing if I can understand what they've done and then buy the same thing and the incredible nature of this wonderful country is I get paid for doing that okay which and get paid really well to do that but don't tell my investors okay they think I'm actually working hard are we recording this so basically bowl with
Warrenrecording this so basically bowl with bumpers so I would say that you can go pretty far along as an investor just by doing mindless clothing in fact someone just set up an ETF right someone set up an ETF for the first time which is the cloning ETF all this time I was talking that there's no fund that does cloning some ETF I don't know what it's called have you looked at it yeah so there's a cloning ETF apparently it has great performance it's looking at all these I don't know what they'll do in the future disclaimer no idea that might be a good place to start or you could do just what those two professors said just 15 minutes a month and that's it so
QuestionerI'm sorry to disappoint
Warrenyou between us girls I have one share so I'm legal to go to the meeting there have been times in the past where I've had significant Holdings of burshire so question was how much
Questionerof burshire so question was how much of burshire do I own and I own one share but yeah at times when it has been cheaper I bought more of it I think owning burshire is a great choice and Simple Choice you have no taxes to be paid or any of that till you sell it's great but some folks may think they can do better than that but thank you so much that was an incredible so really excited you come don't mind stay back it's great to see you all thanks very and see you
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