In this episode of The Business of Everything with Manoj, Manoj and Chris discuss how to minimize risk, how reframing questions leads to real solutions and what past failures taught him about listening to consumers
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00:00Welcome to the next in a series of podcasts
00:03about the business of everything with Manoj.
00:06This is the question and answer podcast series
00:08with answers from Manoj Bhargava,
00:10the man who built 5-Hour Energy
00:12and two other billion dollar companies.
00:14One thing we haven't talked about yet
00:21is you've done a lot of this yourself,
00:24but you had to hire employees.
00:26What is your rule?
00:27I understand you've got a great rule for hiring employees.
00:32Well, there's a bunch of stuff, simple stuff.
00:37And that is, do they care?
00:41Okay.
00:42Number one, do they care?
00:44I found people who are geniuses, but don't care.
00:48I'd rather not have them.
00:50Call them prima donnas or whatever.
00:52They're the gift to humanity.
00:55And I found out if you really care about it,
01:01your brain works really well.
01:04You don't care about it.
01:05If you're not at home here,
01:06if you don't consider this your home,
01:08what are you doing here?
01:09If you don't enjoy it, don't be here.
01:13So there's a bunch of stuff like that,
01:15but I wanna get back to what this podcast is about.
01:20So what we're gonna do is sort of have people send questions,
01:25whether it's through YouTube
01:27or through the website or whatever.
01:30And those that I know about,
01:35every aspect of, most aspects of business.
01:37There's some, obviously I don't have a clue,
01:40in which case I won't take those questions.
01:43But most everything, the business within a business.
01:48Business within a business.
01:49In other words, it's the same thing.
01:52It's hiring, and you say, well, how do you?
01:55That's business within a business of hiring, right?
01:58So there's a ton of things, accounting, hiring, lawyers.
02:02There's so many things that the government,
02:06all that stuff is in there.
02:08So questions about process of business,
02:12how do you run it?
02:13Here's a problem.
02:14Here's what do you think I should do?
02:16Love to hear those.
02:17And then we'll, every week we'll pick a bunch of questions
02:21that are hopefully relevant to more than just one person,
02:25and then answer that.
02:27And the really big thing is how to think about something.
02:32How to, what's the actual-
02:34What do you mean by how to think about something?
02:36For example, a lot of stuff is,
02:41the question is wrong.
02:43Okay.
02:44Right, I'll give you an example.
02:46Oh yeah, I gave this in one speech.
02:48So, let's say you have a bunch of MBA students here, right?
02:53And then you say to them, here's a problem.
02:57I wanna dig a hole that's 10 by 20,
03:00and, or 10 by 200, eight foot deep.
03:04Okay.
03:06How do I do it?
03:06What bulldozers do I use?
03:08What kind of shovels, how many people?
03:11What's the timetable?
03:13All of that stuff.
03:14And they're working away all these little numbers
03:16everywhere and finding out.
03:20When the real question somebody should ask is,
03:22why dig a hole?
03:24Right?
03:26And what's the purpose of the hole?
03:28Exactly.
03:29So they get involved in things which are the wrong question.
03:33Interesting.
03:34Or it's a symptom.
03:37How do you mean?
03:38For example, I'll give you an example, another example.
03:41So let's say I'm hungry.
03:43Okay.
03:44So I say, well, how do I address that?
03:47Do I, you know, self-control, self-discipline and say,
03:52okay, no, I can handle this.
03:55I can not be hungry.
03:56Or I exercise, or I distract myself,
03:59or I take drugs to not be hungry, you know.
04:03Or I could say, how about some food?
04:07Right?
04:10So the issue isn't really hunger.
04:13The issue is food.
04:14Okay.
04:15I see what you mean.
04:16So you're working on the wrong stuff.
04:19And the right kind of food.
04:20Yeah.
04:21And what kind of food?
04:22The issue.
04:23In other words, you ended up with the wrong question.
04:26Right.
04:26You needed to be over here and you ended up over here,
04:30which is the wrong one.
04:31And it's done all of the time in business I've seen.
04:34That they don't really understand the question.
04:35They ask a question and they're asking the wrong question.
04:39Because somebody taught me a long time ago
04:41that normally the answer is in the question.
04:45Interesting.
04:46I'll get into that later, deeper.
04:50But so there's that.
04:51So if people send questions,
04:53I'd be happy to give some of my advice.
04:56Now, take it or don't take it,
04:58but it'll be different probably.
05:01It won't be an MBA speak or a professor speak.
05:04Does it have to be in a certain industry
05:06or can it be you're open to anything?
05:08Well, I've got three different businesses.
05:10Well, I've got more than three businesses.
05:11I got nine businesses, but three are,
05:14they're completely in different industries.
05:16Most of the stuff isn't about which industry.
05:19Now there's some knowledge you have to have of the industry,
05:23but most of the innovative stuff that's been done
05:29has been done from people outside any industry.
05:33They come in from the outside and they do it better.
05:36They came up with something.
05:39Sometimes they're called, you know, heretics sometimes,
05:44you know, like in science, they're called heretics.
05:47And then everybody says, oh, well,
05:49of course they were right.
05:50Right.
05:51So there's a lot of that going on.
05:54And the shameful part is so much of the stuff
05:57is really simple, but people guide them wrong.
06:01Interesting.
06:02Right, I'll give you another example,
06:05which we'll take questions on if people wanna send them.
06:08The other example is everybody, not everybody,
06:11but a huge number of people have investments, right?
06:18So, but they all, who do they get that information from
06:24on investments?
06:25So it would be their friends, right?
06:29Friends and relatives.
06:30And then you've got experts, which are God help us.
06:34Right.
06:39They don't even know.
06:40I mean, first of all, let's say investments.
06:42Okay, so I'm gonna make an investment.
06:45What is the first purpose of investment?
06:49If I asked somebody and I did ask a couple of people,
06:51well, it's, you know, it's to make money.
06:55I said, no, no, no, no, no, no, no.
06:57The first purposes of investment is not to lose money.
07:02And they go, oh, well, yeah, of course.
07:04That's a good one.
07:05No, it's a wrong way to look at it.
07:06Because if you start with don't lose money,
07:11you would do things differently.
07:13Very differently, I imagine.
07:14Yeah, then an investment also is misconstrued all the time.
07:20I mean, to me, there's three levels.
07:23One is investment, one is speculation,
07:25and the third is gambling.
07:27And they're all called investment.
07:30The thing is first to understand it, to say, okay,
07:33you know, this part of my stuff, it's just gambling.
07:37You wanna gamble some money?
07:38That's your call, but you should know what it is.
07:41Right, and call it.
07:42It shouldn't be, yeah, it should be, you realize,
07:44it's like my $25,000.
07:45Right, exactly.
07:46That was entirely gambling.
07:47I didn't realize it then, I thought it was investing.
07:50But afterwards, I realized, nah, that was gambling.
07:55And that's okay, but you should just know what it is
07:58and then treat it that way.
08:00So there's fundamentals of it.
08:03And when you realize that the first part
08:06is not losing money, the biggest thing you need
08:09to understand about it is where's the risk, right?
08:14Because it makes you go, oh, I shouldn't lose money.
08:17What would cause me to lose money?
08:19Right, exactly.
08:21And how do you determine that risk, right?
08:23So if people wanna send questions on that to say,
08:28okay, I'm gonna do this, what's the risk, right?
08:33I won't mention names, but I had a friend of mine
08:36who, very smart guy, very smart guy,
08:40invested in this battery thing for cars.
08:45And then he talked to me a week later and he says,
08:49well, you wanna invest in that?
08:51And I go, well, here's the reasons I won't, right?
08:56First of all, batteries, let's say you have a,
09:01now, this is against everything that's going on right now.
09:03So you may disagree, that's okay, go ahead.
09:08To me, it's like, I look at fundamentals and go,
09:11okay, what's the problem here?
09:14Because if you go blindfolded across the highway,
09:19the chances are you'll be fine.
09:21Because there's very few cars coming in that highway.
09:25But you're taking a lot of risk.
09:28I mean, people say, well, that's really a little risk
09:29because there's not any cars on that highway.
09:32But really, you wanna try that?
09:35So to me, it was like, first, batteries degrade.
09:40That is the most expensive thing in a car, it degrades.
09:44So when it degrades and it goes to zero,
09:45what's the resale value?
09:50You're gonna have to buy the most expensive thing
09:53to put it back in.
09:54And now you got an old chassis.
09:57An old car with a new battery.
09:58Old car with a new battery that costs
10:00almost as much as a new car.
10:02I know a guy who bought a car from Tesla, apparently.
10:07And it was one of the first.
10:09And then the batteries went.
10:12So he goes, can I get a new battery?
10:14Well, sure, here's a zillion dollars,
10:16give me that much money.
10:18He was so mad, he got a little emotional.
10:23He went to the firing range, put the car over there.
10:27And blew it.
10:29And also, the batteries are quite flammable.
10:33And he found that out.
10:34Well, no, he knew that.
10:36So to me, there's another problem,
10:39is that down the road the insurance guys
10:40are gonna say the risk of a battery,
10:44even though it's one out of a thousand maybe,
10:47but when it hits, whatever's around it is gone.
10:52Whether it's your house, whether it's a building,
10:56whether it's other cars, it's gone.
11:00So somebody someday is gonna realize,
11:02I'm sorry, there's no insurance.
11:03Your insurance goes through the roof.
11:04Your insurance is gonna cost more than your car.
11:07And these guys will get to it.
11:08Right now it's very popular to be electric.
11:11And I think electric car is a great idea.
11:15I just don't think they're there yet.
11:18Some technologies are further down the road.
11:21Do you want people to write in
11:23and bring you new technologies?
11:26How do you think you can be the most helpful
11:29in answering their questions?
11:30Yeah, no, I mean, look, anything that you can do
11:36is in your business or in the investment side
11:43that you think, here's a question.
11:44Why should I do this?
11:45Why should I not do it?
11:46Okay, but it's not just consumer products.
11:49No, no, it's anything at all.
11:51Because the assessment of risk,
11:54of looking at something and determining where the risk is,
11:58is everything.
12:00It's not something, it's everything, right?
12:02So there's some questions that say,
12:04well, look, I'm investing in this or that,
12:07or a bunch of friends get together and they say,
12:10well, let's buy this restaurant or open a restaurant, right?
12:16Well, what are the risks?
12:17Or there's a business for sale, a guy's retiring.
12:21It's HVAC business or something.
12:24And it's got this, should I do it?
12:27Well, how do you determine the risks?
12:30That's kind of what I do, that's my job.
12:33It's to say, the foolish part of,
12:37there's a myth that you should be a risk taker.
12:41That's completely idiotic, okay?
12:45Because what you should be is a risk minimizer, right?
12:51Okay.
12:52Right?
12:52How do I not take risk?
12:54How do I get to somebody else?
12:56Maybe somebody else should take risk.
12:58For example, I mean,
12:59there's so many ways to mitigate risk.
13:02Let's say you're gonna open a restaurant.
13:03Yeah, you have the money and you know how to cook.
13:06Well, that gets you 5% of the way there, right?
13:11So, but you don't know the management and all that stuff.
13:14So how to mitigate risk?
13:17Work for somebody else who's got a restaurant.
13:20Try it for a while.
13:21Six months.
13:21See what all the messes are.
13:23See what the good stuff is.
13:25Learn on their dime, their risk.
13:28That's great advice.
13:30It's sort of that part of it to say,
13:33okay, learn before.
13:35Learning mitigates risk, you know, lowers risk.
13:38So in every business, everything you invest in,
13:41whether it's stocks, bonds, or whatever it is,
13:46you gotta look at the risk.
13:48And the second thing that at least I do,
13:50which I don't know of anybody else who does it,
13:53it says, okay, this investment is good, right?
13:57And people go, oh, it's good.
13:58And I go, yeah, it's good.
14:01The question I always ask it, is there something better?
14:06Right?
14:07And then in our companies, I go,
14:09okay, you want money for this.
14:11Is there something better that you can use,
14:13that you get the money to go towards?
14:15Opportunity costs.
14:1760, 70% of the time, people go, yeah,
14:20there's something better.
14:22And I go, then why should we do that?
14:23Just because it's good doesn't mean it should be better.
14:26Or better in a way, what's better?
14:28More money?
14:31Or is it the bigger part, which is less risky?
14:35Right?
14:36So, I mean, I made a joke at one, you know,
14:40I was kind of joking around, but not really.
14:42And I said, you know, if you're a risk taker,
14:46if you don't start a business,
14:47you're just gonna hurt people.
14:48You know, you'll hire all these people
14:50and then they'll be gone.
14:51Because you're a risk taker.
14:53You know, it's not something you should be proud of.
14:57It should be like, okay, how do I make it without risk?
15:01You know, how do I make it with minimal risk?
15:05And that is defined so many different ways.
15:10Cause I know people tell me all the time,
15:11since I started these new companies all over the place,
15:14they say, oh, you're a risk taker.
15:15I go, no, no.
15:17What I do is say, okay,
15:20and I'm gonna spend this much on something new
15:25that is, you could say is risky.
15:28But if it doesn't work, you know, I'm not homeless.
15:33And how long will you give an investment,
15:36we'll call it that, to show you that it works
15:39or doesn't work?
15:40What's a fair timeframe to do that?
15:44It's all different.
15:45I mean, really it's, there's not a cookie cutter answer.
15:48It's really needs to be.
15:51I would imagine yours is pretty short.
15:53Probably not more than a couple of years.
15:55You're not, well, you're not like a 10 year kind of guy
15:58and let's see if it works.
16:00Well, in some things I am actually.
16:01Okay.
16:03So one of the things I am, I know that is stubborn, right?
16:09So if I think something is right to do,
16:14I'll keep doing it, right?
16:16And if on the other hand, there are other things
16:19that are my, some of my flops that you go out there
16:24and then you find out the consumer says, nah, don't want it.
16:28And then you go, okay, I'm done, I'm out.
16:31Okay.
16:32So that could be really quick.
16:34For example, I'll give you an example
16:35of one of my dumb things that I did, failures anyway.
16:39So we came up with this bar, it tasted really good, right?
16:44And if you ate it before your meal,
16:48it would fill up your stomach.
16:49So you'd eat less and lose weight.
16:51It'd be huge.
16:53Consumers would love it.
16:54That's what I thought.
16:55Right?
16:57So however you think your idea is brilliant or great,
17:03the consumer has a habit of kicking you in the teeth.
17:09Very fickle.
17:10Right?
17:11They go, how did that product fail?
17:12What caused that failure?
17:14And that's why I realized post-failure
17:16was that we like eating.
17:20Okay.
17:20Eating is our biggest form of entertainment.
17:23If you think about it, right?
17:25I mean, we go out to restaurants.
17:28That's one of our biggest forms of entertainment.
17:31Whatever food we eat, we do it because it's fun.
17:34It's entertaining.
17:36Yeah.
17:36Don't tell me to eat less.
17:38Everybody says eat less, of course.
17:41Very few people really make that discipline.
17:45So most of us are like, no, no, I like eating.
17:49So you're taking away my entertainment.
17:51Right.
17:52So it was a total flop.
17:55I think the audience would be interested in knowing,
17:59can you take us back to how you came to the United States?
18:03Sure.
18:06Well, my father came here first
18:08and was doing his PhD
18:11at University of Pennsylvania in Philadelphia.
18:13Okay.
18:16So slowly we all came over.
18:17This was back in the 60s, late 60s.
18:21And this is from Lucknow, India?
18:23Yeah, it was from India.
18:24And then we came over.
18:26We were actually quite wealthy there,
18:27but you weren't allowed to take any money.
18:31Out.
18:32Out.
18:33So there was a huge control of currency.
18:35You couldn't take it.
18:37You were actually allowed $8.
18:39Oh, Jesus.
18:41So then we borrowed money from other people and so on.
18:43And we were quite wealthy there.
18:46And then we ended up here.
18:47We ended up in an apartment that was $80,
18:51including utilities.
18:54Very humbling, very quickly.
18:55It was great fun.
18:57We enjoyed it.
18:57All of us were enjoying it.
18:58It was my brother and sister and me.
19:00I was the oldest.
19:01And then, so I went to the school
19:04and then we moved to the suburbs a little bit.
19:09Not high-end suburbs.
19:11It was sort of-
19:11Suburbs of Philadelphia?
19:13Yeah, working class neighborhood.
19:15So I went to school there for a bit.
19:17And I thought, for example, they put me in Algebra 1.
19:24And then a week later, they put me in Algebra 2.
19:26A week later, they put me in Algebra 3.
19:28And I went to the counselor and I said,
19:30I said, look, is there a better school around here?
19:34Which was, I'm sure at that time,
19:37I didn't really think about that.
19:39It was insulting.
19:41But-
19:42It also says a lot for the India's education system.
19:44No, it just was, you know, whatever.
19:48It could have been just you.
19:50No, no, just get lucky.
19:51You know, you're good at math, that's just luck.
19:54Okay.
19:55So then he says, yeah, there's a school
19:58called the Hill School in Pennsylvania,
20:01one of the top prep schools in the country.
20:03Okay.
20:04So I-
20:05How'd you get in there with no money?
20:08Well, basically I called them up, you know.
20:11You called them?
20:12I called them.
20:13I love it.
20:13I'm in 10th grade, I called them.
20:15So I said, you know, I called the admissions office
20:18and I said, you know, I'd like to get admission.
20:21And they were like, who the hell are you?
20:26I said, I'm a 10th grade student.
20:28In Philadelphia.
20:30And they were like-
20:31So?
20:32No, this is not how it works.
20:34This is a prep school, high end, blah, blah, blah.
20:38And so I think they just didn't know what to do.
20:41So I said, I'd like to come in and talk to you.
20:43Okay.
20:45So I went there with my parents.
20:47And they said, okay.
20:47They said, okay.
20:48You know, they didn't know what to do actually.
20:50I think they just wanted to be polite.
20:54And they kind of looking at me when I get there,
20:56looking at me like, this kid just got off the boat
20:58and he thinks he's going to be in a nice way.
21:01I mean, they weren't, they weren't, they were,
21:03you could tell they were kind of a little condescending.
21:06And they were like, you know-
21:08This is not how it works.
21:09This is not how it works.
21:10This is a very hard school, very difficult school.
21:13In those days, it was in the early days,
21:15it was kind of a back door to Yale.
21:17Okay.
21:18So three quarters of the class went to Yale.
21:20Okay.
21:21So they were, so they said, look,
21:25I'm sure you're a smart guy, kid and blah, blah, blah,
21:28but this is a very difficult school
21:30and you should really try to stay where you are.
21:34So me not being, you know-
21:37PC.
21:38A PC or fairly stubborn, even at that age.
21:41Well, so I said, all right, give me a test.
21:43It's so difficult.
21:45So they go, I could, I could tell they were thinking,
21:50oh, this is a good way to get rid of this guy, this kid.
21:53So they gave me a test.
21:55It was an IQ test or whatever it was.
21:57I don't remember, but it was some test anyway.
22:02So I took the test.
22:03It was like 15, 20 minutes.
22:04And then they took it back and they graded it or whatever.
22:09And they came back and they go, okay, you got admission.
22:13You're kidding.
22:14Yeah, just like that.
22:15And how about finances?
22:16No, then I said, well, I don't have any money.
22:20So they went back into the office.
22:25They came out like 10 minutes later and said, okay,
22:27we're going to give you a full scholarship,
22:29including room and board, everything.
22:30Wow.
22:31All of it.
22:32Wow.
22:33So I go, okay, that sounds good.
22:36Doesn't this happen to every 10th grader in Philadelphia?
22:39Right.
22:40So, I mean, I didn't realize so much later
22:42that what a crazy thing that was to do, but we did it.
22:47So I ended up at, after that, I ended up at Princeton
22:50and all these people were, I mean,
22:53some of the richest people in the world
22:54were some of my friends.
22:56And I thought, they're coming to me for advice.
22:59There's something wrong here.
23:00I'm already ahead of them.
23:02And I'm going to school, doing all of this
23:03so I can get a great job, live in the suburbs
23:06and be somewhat well-to-do.
23:09Right.
23:11And the first year I realized, I don't care.
23:14I don't want to be wealthy.
23:17I don't care.
23:20And so I,
23:24my first thing was to, even at that time,
23:26it was to say, but what is the question?
23:30Okay.
23:31For life.
23:32What is the question?
23:34And you weren't going to get that answered at Princeton.
23:36Right.
23:37I mean, look, it's a good school.
23:38There's no doubt.
23:39They called me much later and,
23:41because there was an interview and I left,
23:45they thought I was insulting them.
23:46And I wasn't.
23:47I said, look, it was worth a year.
23:49I mean, for me, it wasn't worth four years.
23:53So I said, look, I got something out of it for a year.
23:57And after that, I became,
23:58I went a student in another area entirely.
24:01I won't get into it in detail,
24:03but I became kind of a monk for 12 years.
24:06What kind of learnings, not in detail,
24:10but what kind of takeaways do you have?
24:13Or what did you learn for those 12 years?
24:17That's very unusual for people.
24:18And a lot of people don't know what that whole process is
24:22and what it involves.
24:23Well, it's definitely different.
24:27And the real education there is sort of
24:32education of fundamentals.
24:34Okay.
24:35Right?
24:36So it's sort of, what is life about?
24:37You know, how do you live it?
24:39What is the right question?
24:40You know, those are the big things
24:42that they don't teach you in any school.
24:44Right.
24:45And it was a lot tougher
24:47than both Hill School and Princeton.
24:49Really?
24:50Oh yeah, it was pretty tough.
24:54And then people asked me, well, why'd you leave?
24:56I said, look, I left, but I'm still doing the same thing.
25:01All of my money is going to do, you know,
25:04to serve those who are at the bottom.
25:06So I don't want to get into it
25:09because it's not a subject of this podcast.
25:11Of this podcast, okay.
25:12So yeah, what I do with kind of my money is,
25:16you know, not really anybody's business,
25:18but really in the short form, I give it all.
25:25I don't have a very many hobbies at all.
25:28I don't want multiple homes.
25:29I don't want yachts.
25:30I don't want to go to the moon.
25:32I don't want any of that stuff.
25:33You know, my most expensive hobby is playing tennis.
25:36So it's not, you know, well, actually that's not,
25:39the most expensive hobby is to give money away,
25:42to do things which are going to benefit the bottom third.
25:46Most people don't realize how hard that is to do.
25:49It's much harder than that.
25:50Yeah, yeah, yeah.
25:52It is, it is.
25:53So, you know.
25:54As it relates to the business of everything,
25:56we're not talking about religion or any of that.
26:00Where do you think the people that will write in,
26:04where are you expecting most of the questions to come from?
26:08Like, what are some of the dumbest things
26:10you've ever done?
26:12Well, what's less, that's too long a list.
26:20But look, a lot of times what's written in the journals
26:25or what's taught is, it's just not true.
26:31And it's the wrong direction.
26:32Okay.
26:33Everybody will tell you, especially writers.
26:36Give me an example.
26:38Like, journalists will write about, business writers
26:40will write about, oh, we have to have technology
26:42and you should have the best computers and so on.
26:44Okay.
26:45And they're, well, this is people that are writing
26:49that have never run a business, right?
26:51So they're all about popular things,
26:54like technology and all that stuff.
26:56Meanwhile, business is kind of really simple.
27:01You buy low and you sell high.
27:03If you go the other way around,
27:06you're not gonna have a business for too long, right?
27:09What does it take to do that?
27:10What does it take to minimize risk?
27:14Buy low, sell high, it's a, no, there's some details to it.
27:18So in other words, your costs better be lower
27:21than what you're selling it for, right?
27:23You won't be in business long without that.
27:25Exactly, people think that.
27:27And there's a bunch of rules that are about startups,
27:30so on.
27:31Somebody said that the first rule of business
27:34is don't lose money.
27:36Actually, no.
27:38The first rule of business is do not run out of cash.
27:42You can run out of profit, you can't run out of cash.
27:46So-
27:47Right, and you can get cash different ways.
27:48It's not just profit.
27:50Right.
27:51You can borrow.
27:52Right, I mean, I don't wanna go to the extreme
27:53of the Bay Area, you know, where they make their money
27:57from their investors rather than from their customers.
28:01There's a huge number of businesses
28:03that have turned into making money from investors,
28:07which, you know, we're in the Midwest,
28:10so we think, you know, sort of businesses
28:13when you actually have profit,
28:16then you're qualified to be called a business.
28:19Not you keep losing money and your valuation goes up.
28:24Right.
28:25I gave a speech in the Bay Area one time years ago
28:28and I said, so, you know, we're very different Midwest
28:32and you guys come up with valuation based on,
28:34you get together and you go, what do you think?
28:37What's it worth?
28:39First guy says, a billion dollars.
28:42Second guy says, no, you know,
28:44I bet you it's worth three billion.
28:46And let's, you know, and you're talking about,
28:48okay, fine, two billion.
28:50And this is a company that's not making money yet.
28:52It just pulled out of thin air, right?
28:55Oh, valuation.
28:56So it became very fashionable to have valuations,
29:00but no money.
29:02And so valuation means that somebody will invest
29:05at a ridiculous number and, you know,
29:10the company will be very popular.
29:12Everybody says so.
29:14And then you go and you wait a while
29:16and then business goes this way
29:18because the fundamentals aren't there.
29:21There's a lot of things that are fundamentals
29:24that if I spoke against some of them right now,
29:26people would, you know, be very upset.
29:30But, you know, but then after the fact,
29:33then they go, oh yeah, of course that was it.
29:35Yeah, it's easy now.
29:37Yeah, the fundamentals are, if they're missing somewhere,
29:41it's, you'll do fine short term
29:45because you'll get money from somewhere else.
29:47And as long as you have cash, everything is wonderful.
29:50Right.
29:51Right, you can spend,
29:53and there's so many companies,
29:53even around here where we are,
29:56is, you know, these guys across the street,
30:01electric, new car company,
30:04bam, they bought,
30:09they got all these a hundred engineers
30:11and then they bought enough furniture
30:13for like 300 engineers.
30:15Yes.
30:16And then didn't go anywhere.
30:20So we bought the, actually bought,
30:21this is how I know is we bought the building
30:23for pretty cheap.
30:24And we treat it as a furniture store
30:28because there's so much furniture in there.
30:31It's brand new that, you know,
30:34because nobody's money.
30:35They just go get it from somebody else,
30:37which is, I'm not even blaming them.
30:39I mean, if you can do it and the investors
30:41are sort of dumb enough to put the money in,
30:44go ahead.
30:45Right.
30:46You know, I mean, you know, it's a,
30:47you know, it's a, you can put the show on,
30:50you know.
30:51Right.
30:52In the old days, it used to be,
30:53it used to quote, okay, this guy's like P.T. Barnum.
30:56For most young people,
30:57they don't know who P.T. Barnum was.
30:58Oh no, it's great.
31:00Yeah.
31:00But he was, he was the circus guy.
31:04Right.
31:05Right.
31:06And he had his famous quotes,
31:08which was, there's a sucker born every day,
31:12you know, and you take advantage of that,
31:15which to me, it's like,
31:20fundamentals are gone
31:21and you base your judgments on emotion.
31:27And the biggest influence on us isn't our teachers,
31:32isn't, it's our friends.
31:36Okay.
31:38In everything.
31:39What are our friends doing?
31:41We're going to do that.
31:42Right.
31:43I mean, it starts when you're in kindergarten.
31:45Oh yeah.
31:45The clothes we wear, the sports we play.
31:48That's right.
31:49Or event activities we like to follow.
31:52So kindergarten, you start, you go,
31:54the kids are doing it.
31:55I got to do that.
31:56I have to do this toy.
31:57I have to do this toy.
31:58And then you get teenagers,
32:00you have to get up to teenagers
32:01and they all think they're smarter than everybody else
32:03because they convince each other that we're the smartest.
32:09So, and then we go older and we think we're past that.
32:12We're not.
32:14We end up doing what everybody else thinks.
32:17You know, there's so many companies that I'm looking at,
32:20I'm going, are you guys kidding?
32:23And all the big guys are all investing in it.
32:26Oh, sure.
32:27And why?
32:29Because everybody else is.
32:32And that justifies, stop looking at the fundamentals.
32:36So if you want to have a business,
32:37you want to invest and keep your money for one
32:42and then do well, be successful,
32:45you have to look at the fundamentals.
32:48And those are, they're kind of boring in some respect
32:52in the sense that they're not like,
32:54oh my God, NVIDIA is going to go through,
32:58you know, through the roof everywhere.
32:59No, for a short time.
33:00Oh yeah.
33:01No, it did great.
33:03But then you look at it and go, wait, wait, wait, wait,
33:07you know, technology always has a high risk factor.
33:11Now, to me, these other guys, you know,
33:13like Facebook and Google,
33:15they're really not technology companies.
33:17They're advertising, they're a media company.
33:21One of the things that you'd mentioned previously
33:24that I thought was pretty funny
33:27that I think everybody would love to hear about,
33:29can you talk about your stamp that says useless?
33:33So what I do at times is somebody will come up
33:39with a project, right?
33:41And they'll go, you know, we need to fund this
33:45and here's a great project.
33:47So I look at it and go, okay, tell me, how's this useful?
33:53How is it useful to the business?
33:55What does it do?
33:57And if it's not useful, it better be entertaining.
34:02Because-
34:03Because the alternative is useless.
34:04Yeah, or it goes into the third bucket, which is useless.
34:08So, you know, useless is two things, useless.
34:13In other words, it has no use.
34:14Right.
34:16And so we have a few of these things
34:19which are really makes your head work,
34:23your common sense trigger, right?
34:26So, because otherwise you get emotional about it.
34:30Instead of you say, okay, tell me how is it useful?
34:33What is it going to do?
34:35It's got to be useful for the business, right?
34:38Can you give me an example of something that's useless
34:41or that you did that you figured out?
34:44Oh my God, most things are useless.
34:47If I got into that, oh my God,
34:49that stuff that large companies do that's useless,
34:51the list is larger than the useful list by far.
34:56But they do them because they-
34:57Why?
34:58Because they did them last year.
34:59Nobody thinks about it.
35:00Right.
35:01And we'll get into some of those things sort of.
35:03Okay.
35:04Because this list goes on and on and on.
35:06Oh yeah.
35:06How much useless things you do.
35:09And they do them entirely because they did them yesterday.
35:13Yeah.
35:14I mean, we have a bunch of rules.
35:16I've got my-
35:17I want to ask you about one rule
35:19because it's so applicable to everything that you do
35:24and people don't know it.
35:26Oh, my prime directive?
35:28Your prime directive.
35:29Please share your prime directive with the audience.
35:33So, I always tell people that, look,
35:36here's my prime directive,
35:38which is really that two words are stolen out of Star Trek.
35:41And that is no aggravation.
35:43Mm-hmm.
35:44Right?
35:45So, I tell people, whether you're employee,
35:48customer, vendor, whoever you are,
35:51if you aggravate me, if you aggravate us, you're out.
35:56I don't care where you are.
35:58And people go, well, you can't do that.
36:00Customers can aggravate all the time.
36:03You go, no, it's not true.
36:05Not true at all.
36:06So, I actually, we live it.
36:09You know, we sort of...
36:14So, what I've found is anything that aggravates
36:18takes up 90% of your head, right?
36:22And it's usually 2% of the usefulness, right?
36:26So, I said, if I get rid of that,
36:29the biggest thing I have is, hopefully,
36:31my decision-making, my head,
36:32my concentration on doing things which are other.
36:35That's the only thing you can control, actually.
36:37That's right.
36:38You can't control the other person.
36:39Right.
36:40You can only control the way you address it.
36:41Right, no, but if your head
36:42is entirely taken up with aggravation,
36:45because, you know, it's like a thorn.
36:48You know, it may be tiny, but you're...
36:52All-consuming.
36:53It's all-consuming.
36:54Same with aggravation.
36:55Right.
36:56So, there's a person, and every day you talk about,
36:58oh, God, that person is this and that, you know.
37:01Or this customer is this, you know.
37:03Or this vendor is, you know, look, he's late,
37:04he's doing this.
37:06If he's aggravating, look to get rid of him.
37:10You know, and people say,
37:11well, you can't do that with employees.
37:13Well, I look at it this way.
37:16One of the things that my rules is,
37:18what I do is, most of business is really,
37:20in the end, it's psychology also.
37:23So, I found out, when I'm sitting across from somebody,
37:27what I think, nobody cares about.
37:31In other words, I think what I think.
37:33I don't know.
37:34Everybody's thinking about themselves.
37:35Exactly.
37:36The person across the way from me
37:37is thinking about themselves.
37:38Right.
37:39They're not thinking about what I want.
37:41In fact, nobody in the world,
37:43including, you know, when I go home,
37:46nobody cares what I want or what I think.
37:49Especially sometimes.
37:51Especially at home.
37:52At least in mine.
37:54So, it's to look at it from their point of view.
37:59So, sometimes people stay in a company, and they shouldn't.
38:05And they know that.
38:06But inertia, they can't get out of it, you know?
38:10And to me, it's like, if you're not happy here,
38:13what are you doing here?
38:15Right.
38:15Especially in the United States, where there's always work.
38:18Well, one example that I've always,
38:20that was shared with me many years ago was,
38:23we're all in a rowboat.
38:24We're all rowing in the same direction.
38:26If somebody is not rowing,
38:28or rowing in a backwards direction,
38:30they need to get out of the boat.
38:32Because we all need to move forward.
38:35And that's kind of what aggravation is, too.
38:38You're getting rid of the aggravation
38:39so that you can all move forward.
38:40Exactly.
38:41And it really makes a big difference.
38:43Yeah, it does.
38:44It does.
38:45It's actually a rule that if you keep thinking about it,
38:47you go deeper and deeper into it,
38:49and you go, oh my God, this, and this, and this.
38:53And it really frees up your most important asset,
38:58which is your head.
39:01And the head of your senior staff.
39:05True.
39:06They're all dealing with, let's get this business going,
39:09or let's do this thing, which is important,
39:11or which is fun.
39:12Not the area of, this is a problem.
39:15Actually, in a way, what I'm saying is not really original.
39:21No, no, people have described it differently,
39:23in different words, but same exact, yeah.
39:26Well, for example, I'll give you who really came,
39:30one of the, in my mind,
39:32maybe the only good business writer ever.
39:34Okay.
39:35It was a guy named Peter Drucker.
39:37Okay.
39:38Wrote books in the 60s.
39:40Mm-hmm.
39:41He was-
39:42Time management and things like that.
39:43He wrote the effective executive
39:45managing and terminalist times.
39:47He was sort of the Mickey Mantle of business.
39:51Business writing, business books.
39:52Business writing, business thinking.
39:54Yeah.
39:55The funny part was, he was a natural.
39:58He was not, he didn't really run a business.
40:01And yet, what he thought, what his thoughts were,
40:05could really only be understood by those who did business.
40:08Okay.
40:09And one of his sayings, I always remember,
40:11is feed the opportunities, starve the problems.
40:15Boy, that's a very effective comment.
40:18Right.
40:19So what happens, you have this little fire
40:21going on over here.
40:21Right.
40:22A little annoying stuff over here.
40:23All your brain, everything is going towards that.
40:25All your resources are going towards that.
40:28Meanwhile, there's opportunity here
40:29to sell this huge customer, or sell this great product,
40:33or build this great product.
40:35You're paying 5%, 10% resources to that.
40:40And most of it's going to their little problem.
40:43So it's a really tough, in a way, it's hard to do.
40:46Because when a problem happens,
40:49it's usually screaming at you.
40:52The squeaky wheel kind of concept.
40:53Yeah, the squeaky wheel.
40:55Every time it does it, it's annoying.
40:59And it's hard to say, okay, I don't care.
41:01Yes, it's going to cost me something.
41:03I don't care.
41:04I'm going to do where the opportunity is.
41:06I'm going to go where the opportunity is.
41:10And that's a principle.
41:12That's actually something that...
41:14Yeah, it sounds like you could apply that
41:16to investing activities, management activities.
41:20It's not just related to...
41:23Oh no, it's everything.
41:25Look at large company CEOs.
41:29I won't get into the detail of that too much.
41:32Because those are such easy targets.
41:35But they'll have meetings scheduled
41:38for the next three months.
41:41Which means almost all of them are internal.
41:45And if you bring an opportunity,
41:49the response from them or their team will be,
41:53I'm sorry, he's tied up for the next three months.
41:55I'm sorry, so what?
41:58You don't have any time for opportunities?
42:00But you have time for all this other little meetings
42:04and paper pushing and all this stuff that is meetings.
42:12And they think that's really important.
42:14I'm not saying it's not important,
42:16but opportunities are always more important.
42:20And they'll put less and less time into that.
42:23So that's a great, that brings up a great point.
42:26What kind of a schedule do you have?
42:27How many meetings do you have a day?
42:30Well, it's mine is kind of different.
42:31I sell in the bullpen.
42:32So I don't have a executive offices or anything like that.
42:37People just walk in at times.
42:38And most of the time...
42:39How long are your meetings?
42:41Well, sometimes it's like a minute or two.
42:43Yeah.
42:44Because mostly they're not really...
42:45You don't need to schedule them is what you're saying.
42:47You're wasting time to schedule.
42:49Yeah, most of the time it's just nonsense.
42:51Most of the time it's like this.
42:53Can I do this?
42:54Yeah, it's pretty obvious.
42:56Go.
42:57So, because I'm an old guy, so I don't type much.
43:01So people used to say, people first come in and they go,
43:05and they'll send me a message and I'll go, okay.
43:09And first they go, does he actually mean that?
43:15What does he actually mean?
43:16Why is it only so short?
43:19I go, if it's okay, then go.
43:21It's okay.
43:22Yeah.
43:23Or I'll put, go.
43:25And they're just asking permission
43:28for something that's obvious.
43:30Otherwise people schedule a meeting
43:33and you have all these people who feel bad
43:35if you don't invite them.
43:36I mean, there's corporate nonsense.
43:38Yeah, the guy invited last time, but not this time.
43:40Does that mean he's mad at me?
43:42Sure.
43:43Exactly.
43:43There's a lot of just completely...
43:46You can't make this stuff up.
43:47It's hilarious.
43:49Another thing you do that is literally hilarious to me,
43:53and it took me a while to get used to it, is job titles.
43:59Oh yeah.
43:59What's everybody's job title at your company?
44:03Well, internally, everybody's title is project manager.
44:06Project manager.
44:07You have a project and you manage it.
44:10That's it.
44:12For external purposes.
44:13We all may have, everybody may have a title.
44:16You're head of marketing or whatever.
44:18Yeah, or El Supremo.
44:20I don't care.
44:22Your majesty.
44:24But for external purposes, you have to,
44:26because they think they want to deal
44:28with somebody important.
44:29So there's times when I made somebody
44:32a director of something for a day.
44:36It's kind of like a joke.
44:37It's the work, guys.
44:39It's not the title.
44:41And if you're looking for title upgrades, go to a bank.
44:44You're at the wrong place, yeah.
44:45No, go to a bank.
44:46Yes.
44:47I can't argue with you.
44:49You could be a teller and next thing you know,
44:50you're assistant associate vice president.
44:54And they've got a million vice presidents in the bank.
44:56Exactly.
44:57And they just get more and more, you know,
45:00this title creep.
45:03It's funny, but it's also destructive.
45:06Okay.
45:07Because then people are chasing titles.
45:12Right?
45:13In our company, nobody cares.
45:16Because there's nothing to chase.
45:17There's nothing to chase.
45:18You know?
45:20You know, there are companies
45:21where they chase better furniture.
45:23You know, they chase, how many tiles do I have?
45:26Oh, I used to count ceiling tiles a long time ago.
45:29Ceiling tiles.
45:30Ceiling tile game.
45:31You know, if you were a senior vice president
45:34or if you were an executive senior vice president,
45:38you had different number of tiles in it.
45:40Really?
45:41You're sitting around counting tiles now?
45:44Here's one that I knew about
45:46that was hilarious in the old days.
45:48There was a big insurance company and they were my customers.
45:53And this guy got assigned this office.
45:58So he was a level, whatever, six, right?
46:03So level six, you got wall-to-wall carpeting.
46:06Oh, okay.
46:07So it was wall-to-wall carpeting for him.
46:09Brand new, everything, wall-to-wall carpeting.
46:11Then they moved him.
46:13And they said, no, no, you're not gonna be in this office
46:16and you're gonna be in the other office.
46:19So the new guy that's coming in there is a level five
46:24and he doesn't get wall-to-wall carpet.
46:26So they had to take the carpeting out?
46:27No, no.
46:28They cut a foot all the way around the carpet
46:33because he doesn't qualify for wall-to-wall carpeting.
46:38The number of silly things that happen
46:39in these companies is astounding.
46:43The time they waste on things which are,
46:47well, this is the fun part is gonna be in this podcast
46:51is I'll pick one at a time over the months, whatever years,
46:55because there's no end to it.
46:57Then people, of course, hopefully will send stuff
46:59that they go, okay, here's another one.
47:01Let's have a meeting on whether we should have
47:04the temperature at 72 or 71 degrees,
47:09because we will save anybody doing that.
47:15And so we go, no, I said, what's the point of this meeting?
47:19It should be really quick, right?
47:22So there's not, the corporate stuff is there's no end
47:25to the jokes you could do.
47:28And if you look from outside, it looks hilarious,
47:32but all the people within it, very serious about it.
47:37You know, it's just.
47:37Oh, and they prepare for it.
47:39Air for it, you know.
47:40Sometimes they're flying from another city
47:43to be part of that meeting.
47:45Oh yeah, oh yeah, they have to be there.
47:47And then some of that stuff is like,
47:51I mean, I tell people, what are you, five years old?
47:53You know, it's like that.
47:55They have these PowerPoints.
47:58Oh God.
47:59So I've interviewed people and they've said,
48:03you know, I spent 35% of my time creating PowerPoints.
48:07So I'm like, when do you actually do your work?
48:12It was, oh no, I have to present to the board
48:14and this board and this committee.
48:16And so I have to do my PowerPoint.
48:17And it has to have certain arrows in a certain fashion.
48:20Yeah, right.
48:20I'm not gonna tell you what company was describing that.
48:23Boxes have to look like this.
48:24Exactly.
48:25You're like, oh my God.
48:26And my response to one of the executives was,
48:30you guys five years old, you need pictures?
48:34You can't just read stuff anymore.
48:35You gotta have pictures with arrows and graphs
48:38and circles with little pies and stuff.
48:41Yeah.
48:41Where are you going with this?
48:43So what I did was I say, PowerPoints internally are illegal.
48:49So we made it so that, no, nobody internal gets a PowerPoint.
48:53Now, customers still demand it?
48:55Fine.
48:56Fine.
48:57That's a customer.
48:58We gotta do what their requirements are.
49:00But internally, to waste time on,
49:03I said, what I really like is bullet points
49:07and no more than one page.
49:10You can have backup, but it can't be more
49:12than the guts of whatever you're trying to tell me
49:15should be one page.
49:17Because one of the things I've found
49:19is if you have something good to say,
49:22you can say it in one page.
49:23And if you're sort of making excuse for your failure,
49:28oh my God, you get a really thick memo.
49:30But this is why I didn't.
49:33You did something one time that I will never forget.
49:37You wrote a page, this is regarding banking,
49:42on how you manage the risks in the company on one page.
49:48And I remember the banks all looking at it the first time
49:51and saying, I've never seen anybody do that.
49:55And you literally, it was the essence
49:57of what they were underwriting, if you will, or preparing.
50:01And nobody does that.
50:04They don't, here are your risks.
50:07And here's how I mitigated them.
50:08Oh, one of the major investors,
50:11I won't name the name, but 100 billion.
50:16They actually kept it.
50:17Oh, really?
50:18As an example of how something should be written.
50:22Because, I mean, my perception was, what does a bank want?
50:27They want their money back.
50:28That's right.
50:29They want the interest, but they want their money back.
50:31What would cause them not to get their money back
50:33is the only thing they should be concerned with.
50:38And it's not like that.
50:40Kind of works like that, but you're right.
50:43We're gonna have fun making fun of banks, too.
50:45Because they also have their stuff that they do it.
50:48And you shake your head and you go, are you kidding?
50:51Right.
50:53Makes no sense that they do it.
50:54And it's regimented.
50:57It's like, this is how we look at things.
50:59The next poor sucker that comes up learns the same thing.
51:04And so, you know, I like this area
51:07because it's just, there's no end to this stuff.
51:10And they don't change.
51:12They continue to do it.
51:13No, no, no.
51:14It's very hard to feel sorry for the bank.
51:16There's Banker, there's Wall Street.
51:19So we've, as you know, we've done bond offerings,
51:23we've done syndicated offerings.
51:26So we kind of know everybody,
51:29how they are and how they behave.
51:33And I'm not, once in a while I'll say the name,
51:36but mostly I don't.
51:37Just tell them that the entire industry is like that.
51:41And some of it is just, you know, silly.
51:45You know, some of it, it's such traditional stuff
51:49that they won't look at the common sense portion of it.
51:54This Q&A podcast will cover investing do's and don'ts,
51:58any other business questions,
52:00and the victim of the week,
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52:06or just the absurdity of business practices and myths.
52:10Please send in your questions
52:12because where else are you gonna get frank answers
52:15from a serial entrepreneur and billionaire?
52:18And don't forget to send those questions
52:19to businesswithmanoj.com.