Peter Thiel and Warren Buffett Have Interestingly Similar Views

This weekend I finished reading Peter Thiel’s Zero to One: Notes on Startups, or How to Build the Future  which debuted this past week.  It was a great read utilizing interesting methods to deliver his message whether philosophical, Shakespearian or contrarian.  I would recommend folks reads it and consider the messages being delivered.  Interestingly, I found several of Thiel’s messages to be consistent with those espoused by value investors such as Warren Buffet and Charlie Munger which was quite fascinating given that value investors and venture capital guys are not considered to run in similar circles.

What became evident in my observations are the views and thoughts of Thiel are similar to Buffett/Munger while the delivery is far different between the sets of individuals.  What that tells me is that Thiel is right, there are not a lot of things most people do not know.  Those original discoveries are harder to harvest and require a lot of research and development.  However what is most fascinating and original is how Thiel delivered his messages in quite an intellectual and complex way that on the surface makes the views seem more unique and original.

Below are some comparisons I noticed which I think speaks to the universality of  the topics by two very different sets of individuals and their invest “styles”.

Topic Thiel Buffett/Munger
Monopolies Thiel suggests monopolies are good for businesses to gain earnings power. Perhaps good for society if earnings are reinvested to produce “zero to one” and therefore valuable products and services. Buffett suggests investing in companies with Wide-Moats, large Barriers to Entry, large Economies of Scale and where regulatory or government limits the licensing of businesses and therefore new entrants. These are analogous to what Thiel more blatantly calls monopolies.
Competition Competition is not good for businesses as companies in essence fight their way down to zero earnings. Management’s attention is removed from creating true differentiation and new categories of products and services. Growth is extremely hard to predict and therefore should not have much value when estimating a value of a business. The higher the growth in a sector the greater the possibility of new entrants which will increase competition and reduce earnings and margins. Therefore when valuing companies, little to no value should be placed on growth. At the end of the day, it is hard to know which companies will survive the competition.
Diversification Unlike other venture funds, Thiel focusing on selecting few venture investments and selecting only those that he believes have the potential to return 100% of the total fund investment (not just the single venture investment). The size of the position has to be significant enough that an outsized return will in fact have an outsized impact on the total fund. While diversification is known as a measure to reduce risk, Buffett has claimed if you were only given 20 investments to make in your entire life, you would be extremely selective of those investments through significant independent research and due diligence. Thiel suggests the same thing looking for zero to one businesses and not incremental businesses when making his selection.
Incrementalism The real value is creating something from nothing. Creating the Nth of something is really incrementalism.   Growth through globalization is incrementalism at its core. One of Munger’s great lines is “efficiency is lack of imagination”.   Efficiency and incrementalism I think go hand in hand and it is true that it is the lack of imagination of something new and not experienced previously.
Founder and Team Selection Selecting people you would enjoy working with and who have similar intellectual curiosity, mathematical skills, etc. will help to create a sustaining work environment filled with long hours. This really speaks to the culture at its core which is critical to the startup strategy. Buffett selects companies with good management in place and are well run.   While he has recently ventured into turnarounds via his partnership with 3G, generally speaking he is about good management and solid companies. By way of example, you can see his recent re-affirmations with Benjamin Mooring’s independent dealers as an example of his commitment to cultivating a strong culture that is collaborative and not antagonistic.
Long Term View According to Thiel, long-term planning is often undervalued by people’s indefinite short-term world. There are 10 references to long-term planning and thinking in his book. The longer term the view, the more focused individuals will be on long-term challenges and opportunities of a business. Buffet’s investment strategy is a long-term owner of businesses so market gyrations do not impact his decision.  As well, Buffett is a big proponent of allocating capital to its best and highest use.  Taking a long-term view of where to allocate capital evident via his purchase of Burlington Northern and NV Energy which were bought during down periods when others did not see the longer term prospects in these two sectors.

I think there are several ways to be success in business and I do not agree 100% with Thiel’s views on topics such as equity compensation, homogenous teams, etc.  However as he likes to say in his talks, there are nuances and I find that true when it comes to equity compensation and homogenous teams.  It’s those nuances that make the discussion interesting.

 

Corporate Culture and Steve Jobs. It is a Company Valuation Discussion.

Image representing Steve Jobs as depicted in C...
Image via CrunchBase

Steve Jobs announced his resignation and CEO replacement this week.  The market flurried on the news, articles and cable segments were plentiful on Job’s revolution of the world, his greatness, his attention to detail, how round two leadership differed from round one and whether Tim Cook could sustain the innovation and therefore the stock profitability.  Because of the news, and the market’s speculation of the future, the stock price fluctuated.

While the SEC, the Accounting Standards Board and the public expect greater transparency on the financials, this is a perfect example of where further modernization of transparent data is needed.  The data I am talking about is Corporate Culture.  What is the real corporate culture of a company?  Behind the curtains in the offices, cubicles, conference rooms and break rooms, what do we see and feel if we were employed?  Does the executive leadership down to middle managers think about creating unanticipated needs?  Do employees each feel their job has meaning, and they are curators for society creating imaginative and innovative items that will simplify people’s lives?  Are people rewarded because of not only successes but also the advice/counsel of failures through offering lessons learned?  Has leadership not only established its values but live them every day?

We are talking simple yet life altering values that make sense to everyone on the team; the words/phrase that are heartfelt and have a real connection to the team (exclusion of canned/stock words).  Corporate Culture includes leadership that shares his/her intelligence and understands its greatest creation is the team that can then imagine, create, care for and give back.  The daily belief that teams that works and plays together stays together.  Moreover, the practice of creating and sustaining relationships are key both inside and outside the company.

The stock market this week speculated whether the rein of Apple was coming to an end.  Sure, they have items in the pipeline so they still have the tail they could ride for a while.  The question that writers and business news broadcasters were asking indirectly and some directly…Was Steve Jobs the only creative sustaining genius in the room?  Were others mere followers of his vision?  I sure hope not.  That would mean the weight of the company rested solely on him.  Given the depth and breadth of Apple’s presence in the world, that would be awfully herculean of Steve Jobs and would have been an unsustainable tenure.  To ask such a question would underestimate the power of team…the Apple team.

Instead, the question the market should be asking is what is the culture of Apple?  How deeply ingrained is the culture?  How deep is their bench of employees technically, creatively and aesthetically on and off the court?  Is Tim Cook the right person to nurture the culture to not only sustain it but also grow it to a better version of itself?

The biggest question of all we should be asking ourselves is why do we not know the answer to these questions?  Why have we not broken into the thick steel vault of Corporate Culture?  Why do we not include in company and market valuation the corporate culture aspect more directly? We look at current leaders, financials, pipeline, past performance, changes in market conditions, ratios, strategy, etc for valuation.  I would propose that these elements are important in valuation; however, corporate culture is the thread that runs through them all.  It is hard to measure, because it is enigmatic…hard to define and for many hard to create, grow and transform.

When people figure out Corporate Culture is the only transformative value creator, then valuing a company will come down to those that have a good culture versus those that do not.  When looking at good cultures, then it will be which ones do shareholders believe in and more align with their values.  After all, shareholders are a part of the team.  Their contribution is not time, energy or creativity…they are contributing their hard earned dollars and trust into the team and the culture.

Want to value a company whether as a shareholder, partner or sole owner for buying or selling purposes?  Top of mind in your valuation calculation…corporate culture.  Companies that develop an amazing culture and then proudly let others know about it, will create, hold and grow more value.

As for Apple, I don’t have firsthand knowledge of their culture but I can think of 356 Billion reasons why we should know in great detail.

Your voice matters and I would love to hear what you think.

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Be Successful in 2020? Expect to be a Writer, a Mentor and always a Futurist

CaptureWant to succeed in business?  By 2020, I predict we are all going to be measured, in some degree, by how much we share our knowledge with others in personal and written form, how many people we help in their business life and how we educate and empower.  I predict:

1)  Professor’s transition from lecturers to facilitators of the geniuses of their students.  Professors knowledge and ability to research will be more critical than ever, however research life cycles will shorten dramatically.  Research will come from the students so having the right population will be key.  Selection of a course will move from a class topic to an end result both for the student and the professor.

2)  Class cost will vary on who is taking the course with you.  The more experienced the students the more they have to bring to the table.  Therefore for younger less experienced students that want the inside information, they will have to pay a premium.  Conversely, those with advanced experience will pay less and be given special benefits such access to mentor and supporter opportunities of less experienced individuals.  Classes that are 100% lecture oriented will be migrated to a free service.  One-way communication of topics will be helpful to learn the history or fundamentals in order to participate in conversational learning.

3)  Business leadership will include not only the ability to influence, to lead and create value and vision but it will also include the ability to create a legacy for themselves which will include who they have mentored, supported, advocated and promoted.  A new question will be “how many people have you developed and promoted?”

4)  Corporate education, training and corporate universities will be part of the portfolio of “must haves” to compete for top talent.  Curriculum will be more advanced than general topics and the frequency similar to strategy meetings.  New candidates will ask to see the Company’s curriculum and understand the education strategy and tactics before they make a decision.

5)  Leaders in business will be expected to write articles, be thought leaders in their space, and help others through creative content.  Leaders will be judged on how freely they share their knowledge and how they empower others.

6)  Online education will be social and collaborative affecting almost all of our human senses.  Online tools will include movie elements such as music, suspense, mystery, love, action and sadness.  The duration will be in the form of short film and the style will be interactive.

7)  Lines will be completed blurred between education and entertainment.  People’s awards such as Emmy, People’s Choice, and new awards will be given to companies, universities and people who produce award winning “edutainment” content that is impactful.

So what do you do today if this is the future?  Start moving your thinking, your leadership and your company in this direction. Be a Writer, a Mentor and a Futurist if you want to be successful.  People like pioneers who see it first, go there first and bring others with them.

Your thoughts matter, what do you think?

Politically Correct…Not Us.

No political correctness
Image via Wikipedia

Tim, one of your employees, comes into your office full of “you know what the problem is”…his saying for just about every issue he has uncovered.  He has done it enough that you know it is his “go-to-line”.  You think to yourself, “wow he has superhero vision, since he sees all the problems of the world.  Why can’t he come in and tell me what problems he has solved?”  Instead, what you actually say is: “what’s going on?”

Then there is Betty who says, “it will never work” to just about every suggestion or new idea to improve the process.  She spends her time campaigning to anyone who will listen to her complaints.  You think to yourself “ if she would spend this much time and energy searching for solutions instead of just complaining about the problem, we would be miles ahead of the competition.”  What you actually say is: “now Betty, we have to think positive here.”

Or Frank, the Sales VP who is the fair-weather leader…always critical of new trends until everyone else on the Facebook community or the Google search universe says it is a hit.  He then converts with not so much as an acknowledgement of his previously strong opposition.  You think to yourself, “hmmmm…Really…what was that?  Wasn’t HE the one that said ‘this thing won’t catch on’?”  What you actually say is “Frank that is a great idea, I am glad we are going to implement it.”

Have you seen anyone like this?  Your answer has to be “yes”.  We have all been on either side of this type of conversation at some point in our lives.  We are all blessed with at least one person whose anchor is negative, uninspiring and unimaginative.  And we all know people who keep their opinions to themselves to the detriment of the team.

It is not surprising to me that, as leaders, we all have people who are disconnected from themselves and their greater inner positive power.  But what is surprising to me is despite how much leaders really do care about their employees they do not always say the words that are rolling around in their head, heart and soul.  Somehow we have this notion is it better to be politically correct, hold back the truth, maybe even lie with a smile, and keep our brilliance in our own heads rather than to share it.

With our friends and loved ones, we feel the freedom to share our opinions and thoughts.  Political correctness goes out the window.  We want the honest truth to keep us grounded, help us grow, and garner varying perspective.

Next time your employee or leader makes some comments that are less than flattering and you feel so inspired, ask, “Hey, would you be open to some advice?”  Most people appreciate that you asked first and then you can proceed only if you are under the impression they are willing to be open and receive the advice.  Asking first will actually make a difference.

So to Tim, Betty and Frank, here is what I would say to them if they were open to advice:

“Tim, what I like about you is your ability to identify problems.  I would encourage you to come to me with your success stories of how you solved them.  Now, if it is something big I need to know about, please flag the problem early, however if not, feel free to solve it and then share your success stories with me.  Success stories are infectious you know”.

“Betty, you have been here for 15 years.  You have seen this organization grow and change.  Your work has contributed to our team’s success.  In recent months I have sensed a change of heart.  How are you feeling and what is going on? [Pause for her response]  I am going to ask for your support of our new initiative as a veteran of the organization.  If you can focus your energy on making the project and the team a success, we have a real chance at this.  Do you recognize the power for good you have here?  I guess my question to you is ‘are you using it’?”

“Frank….[LOL]…now wasn’t it you who said this social media thing was just a fad?  I am glad we are going to get a Facebook company page.  With 700 million users, there is a real opportunity to be where people are at in a cost efficient way.”

When dealing with tough conversations, be honest and truthful in an inspiring, kind and impactful way.  If being honest is not politically correct, then it is not for us.  As leaders, we have a higher calling and duty for our team.

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The Day You Get Promoted by Election

Imagine the Day When Your Promotion is not by your boss or what others leaders have heard about you and your past performance.  Instead, you are promoted based on an election of the people you will be managing in a team environment.  They pick you based on what they thought of your past performance, previous results and accomplishments, intelligence, vision, drive, relationships with the team members, inspirational and motivational skills and your genuine interest and past successes developing others.

It is not too far in the distant future that leaders will not be selected any longer by a select group of who you know and who knows your work but rather by a communal review and election.  Everyone wants the winning team, the winning track record for success and soon it will move from the childhood line up of where some fortunate individual gets to pick the team and the selectee just hopes the right leader picks them first and they go early in the draft otherwise it tells others they weren’t their first choice.

Although the economy maybe still limping into recovery, I submit that we as leaders not be fooled and recognize our teammates are sizing up their accomplishments and options.  When the time is right and someone is ready to jump in first, we will see a shift in how we select team members.  We will move in the direction of a democracy of where we as leaders are selected based on our performance, our values, our vision of the future of the organization and our track record for success.

The same will hold true for those members being selected for a team.  The days of where folks get paid to do a job will move away and instead we will have people who are paid to deliver objectives and selection to teams are communal and by leaders AND peers.  Teams and leaders will have less and less bench-warmers and more team members who have siginificant clock time.  Teams will move to compensation on objectives and more importantly results.  Even further in the future I could see compensation of a team to be more communal and based on a meritocracy.  Imagine, your teammates and members determine your pay.  I know it is a little out there but it will happen.  There are already people talking about ways to change the management paradigm.  Check out Management Exchange, a community of like-minded leaders who are looking to change today how we manage.

Although technology and this new age of innovation in everything from consumer products to management are changing how we live and work in the world, I still see that real and meaningful connections is the secret sauce to success.  This means the teams/companies that win BIG in the marketplace will be the ones that care first.  They will care first about their teams who in turn care about the consumers.  We, as humans, are always generous to those who think of us, take care of us and show us they love us.  Consumers will be generous to teams that care about them and that will result in better results for the owners of the companies.

Who will be the owners of the companies?  I am not sure it will be the structure we have today.  Having skin in the game is an age-old life truth.  Those that are invested are more interested in the success.  Giving team members ownership interest in the team that ties directly to their short term and long-term results in a real and sizeable way is what help create the connection between the team and the results.  Loose ties through 401(k)s may still exist but they will do so more for altruistic means sake and not as a direct measure to tie to performance.  By getting those that have no real interest and steel glad ties in the success of teams/companies/objectives is part of the new world order.  Unconnected and uninterested money managers will not be part of the long-term equation.  Frankly, having more skin in the game would have made a difference and perhaps prevented the near precipitous of the recent financial crisis.  We as human have the innate ability to survive and getting the layers out of successes for a company and therefore our future, ensures those survival skills are closer to the ground and always sensing.

I am excited at all the possibilities of where we are going.  I would just encourage everyone to be ready and understand that we can’t look back at what was and wish it could be again.  We have to enjoy what is occurring today and be prepared through constant development of ourselves and our relationships and experiences so we are ready for tomorrow.

Respectful Opinions Speaks Volumes about Yourself

n response to some blog banter, I felt inspired or maybe it was compelled to respond.  For all of us who get nay sayers or maybe even worse outwardly critical and destructive comments, keep the below words of support in your heart when you hear their comments.

“Max, You will have many folks over your lifetime that will say things to you loudly or softly against your vision and your purpose.  None of us get out of this world without carrying things…in the case of vision and goodness comes those that criticize and belittle.  Having knowledge means you must share and that is what I believe you were doing in your post.  A confident person can see it for what it is and for what it is not without distain.  If someone doesn’t agree with your thoughts and comments, they are entitled to voice their opinion respectfully.  They should not be respectful because of who they speak to but they should be respectful of themselves and how they demonstrate themselves to others and the world.

I would encourage you to continue your journey.  Only you are called from within to the journey you are on.  We all have our own journey to greatness if we are herculean enough to look within.

Every Dream Every Action Every Word Resides Within You

http://www.huffingtonpost.com/russell-simmons/confessions-of-a-serial-e_b_870799.html

Russell, I appreciate your words of wisdom and inspiration.  Success requires tenacity and to some extend a deaf ear to those that wish to see only the negative and not the possible.  Keep giving the message and pushing people out of their comfort zone.  Having met many people over the years that are out there living their dream, big or small, I realize it comes from within.  The spirit to win, to make a difference, to have meaning and purpose in your life, to have hope, to have grace, to have love, to be generous and give back and to have morals, principles and values that drive you to dream a bigger dream and share it with the world is all within each and everyone one of us.  It  requires work, overcoming cynicism and skeptics and it requires standing still to hear what calls us.

For all those that repudiate I say to you: Stand Still and hear what is inside your amazing heart, mind and spirit.  Whatever is in your heart, soul and mind is unique to only you and only in this moment and in this lifetime.  Whatever you speak comes from within you.  Whatever you become is a manifestation of what is within you.  Be the best version of yourself and do good with what you are.  Life has a way of giving you back with dividends what you give in the world.  Be Amazing.

Be Accountable to Each Other. Dismiss Cynicism

“The problems of the world cannot possibly be solved by skeptics or cynics whose horizons are limited by the obvious realities. We need men who can dream of things that never were.”
– John F. Kennedy

It is unfortunate that we do not yet see what must be clear before real change will happen. By taking from others, regardless of who they are, it affects us all. We are all connected in this world. When we all do well, we prosper together, when we don’t we suffer together. If we want greatness, hold ourselves and each other accountable. Build a world we want, in our personal lives and in our business. Treat each other with the respect you crave and need and we can accomplish profound greatness.

Sure there is will instances when folks fall, we are human, but I believe in the beauty that all good is possible when we are centered on that goal. I encourage you to not look at what is wrong and jump on the band wagon but rather encourage and innovate to create a better business environment. Cynics are a dime a dozen…and I know we are not pedestrian.