trying to make sense of it all
Vista Verde Partners, the investment group focused on Costa Rica real estate I co-founded last year, was recently profiled on alternative investments blog, PERE. I have to say I was pretty shocked when the reporter called me to ask a few questions about the company. Unfortunately the article is behind a registration wall (free, but annoying), but you can read our recap over at the Vista Verde Partners blog (which is rarely updated).
End of shamless plug…
Ok I’ll admit the Warren Buffett posts are probably getting a little old, unfortunately fascination of the moment. There are many reasons to admire and respect a man like Warren Buffett (the man is the self made richest person on the planet and he did give away more than 85% of his net worth to the Bill and Melinda Gates foundation), but the thing I admire most about him is that he’s one of those few who found and followed their passion. Or to put it into Warren’s words, he “tap dances to work everyday.”It may be a pipe dream but somewhere in the last 3 years of my life, I’ve convinced myself that there is some sort of path in life I can take that will “click” for me. I don’t want to come across sounding mystical, like there’s some powerful force guiding me towards “my thing,” because I don’t believe that. I just believe that we can find work that touches who we are at the deepest level, work that energizes us, and pulls out the most amazing parts of our being. This is the work that you would probably do for free, but ironically the one where you have the most financial opportunity. This seems to be the case for Warren Buffett. It has never been about money or fame for him. He just was fortunate to discover early on that everything about investing clicked with who he is. A quote from a class discussion Buffett with some students at Emory:
I enjoy what I do, I tap dance to work every day. I work with people I love, doing what I love. The only thing I would pay to get rid of is firing people. I spend my time thinking about the future, not the past. The future is exciting. As Bertrand Russell says, “Success is getting what you want, happiness is wanting what you get.” I won the ovarian lottery the day I was born and so did all of you. We’re all successful, intelligent, educated. To focus on what you don’t have is a terrible mistake. With the gifts all of us have, if you are unhappy, it’s your own fault.
I’m amazed by his gratitude for his life. You don’t have to be a billionaire by the way to be so lucky (won the ovarian lottery…great). Another great quote showing his humility and gratitude:
I had nothing to do with my own success. My father was a securities broker and after the Great Crash, he had no one to call. Consequently, I was born in 1930 in the United States during the time of one of the greatest capital markets. I was born with the wiring for capital asset allocation. I had the right wiring at the right time. Temperament is a large part of my wiring. I was naturally good at it, and I used some feedback to develop it better. There is nothing to be arrogant about. Gates says if I had been born earlier, I would’ve been some animal’s lunch. I can’t run, I can’t climb. I’d be talking about allocating capital and the animal would think, “Those are the kind that taste the best.”
I also love this quote:
“I have so much fun that it’s not work. I get to do what I want, where I want – on a boat, wherever.”
It sounds to me that Buffett would agree with the notion that the best investment you could ultimately make is in yourself. Take the time and spend the money to really find the path that works for you. It may take a few stops and starts, but the pursuit is worth it.
The reviews are not good, but I have to say like where they are going here. Not so much for the consumer side of things (all of the ideas on there are fairly obvious…free drink on my birthday, free drinks for every 10 coffees, etc), but because of the new Partner only idea section. As a starbucks shareholder (don’t worry, I am a recent shareholder so I missed out on the -50% performance over the last 12 months), I’ve been reading Starbucks Gossip for the last few weeks to get an inside glimpse at operations. The site is basically a Starbucks Barista community and through the comments I have see countless good ideas from employees on how to cut down on waste, increase customer satisfaction and quality, as well as improve sales. I, for one, think the potential benefits of tapping the wisdom of frontline people far outweighs the costs of setting up the site. I’m a big believer in Howard Schultz, and I think he’s made the right move here.
I finally sat down and took some time to read through Warren Buffett’s annual letter to shareholders for 2007 (released a few weeks ago). As always Warren teaches and shares so much about life and business. I’ve really become a big fan of his after reading R0ger Lowenstein’s book: Buffett: The making of an American Capitalist. Warren is not perfect, but his passion for what he does really excites and inspires me. He’s been quoted so many times as saying that he “tap dances to work.” It may sound too good to be true, but just do a youtube search for Warren Buffett, and you’ll see the man truly loves what he does. He always seems like a kid in a candy store, whether talking to shareholders or meeting a high ranking government official. I really admire people who have found and chosen to follow their internal compass. Buffett is one of those people.
Anyway, his 2007 letter is full of good info and I’d highly recommend you read it yourself. I’ve included some good bits of info and quotes below.
My favorite quote:
At 84 and 77, Charlie and I remain lucky beyond our dreams. We were born in America; had
terrific parents who saw that we got good educations; have enjoyed wonderful families and great health;
and came equipped with a “business” gene that allows us to prosper in a manner hugely disproportionate to
that experienced by many people who contribute as much or more to our society’s well-being. Moreover,
we have long had jobs that we love, in which we are helped in countless ways by talented and cheerful
associates. Every day is exciting to us; no wonder we tap-dance to work.
Others:
on protective moats:
A truly great business must have an enduring “moat” that protects excellent returns on invested
capital. The dynamics of capitalism guarantee that competitors will repeatedly assault any business
“castle” that is earning high returns. Therefore a formidable barrier such as a company’s being the low-
cost producer (GEICO, Costco) or possessing a powerful world-wide brand (Coca-Cola, Gillette, American
Express) is essential for sustained success. Business history is filled with “Roman Candles,” companies
whose moats proved illusory and were soon crossed.Our criterion of “enduring” causes us to rule out companies in industries prone to rapid and
continuous change. Though capitalism’s “creative destruction” is highly beneficial for society, it precludes
investment certainty. A moat that must be continuously rebuilt will eventually be no moat at all.Additionally, this criterion eliminates the business whose success depends on having a great
manager. Of course, a terrific CEO is a huge asset for any enterprise, and at Berkshire we have an
abundance of these managers. Their abilities have created billions of dollars of value that would never
have materialized if typical CEOs had been running their businesses.But if a business requires a superstar to produce great results, the business itself cannot be deemed
great. A medical partnership led by your area’s premier brain surgeon may enjoy outsized and growing
earnings, but that tells little about its future. The partnership’s moat will go when the surgeon goes. You
can count, though, on the moat of the Mayo Clinic to endure, even though you can’t name its CEO.***on reinvesting profits:
There’s no rule that you have to invest money where you’ve earned it. Indeed, it’s often a mistake to do so: Truly great businesses, earning huge returns on tangible assets, can’t for any extended period reinvest a large
portion of their earnings internally at high rates of return.**capital stream
It’s far better to have an ever-increasing stream of earnings with virtually no
major capital requirements. Ask Microsoft or Google.**worst sort of businesses:
The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.** three types of businesses:
To sum up, think of three types of “savings accounts.” The great one pays an extraordinarily high
interest rate that will rise as the years pass. The good one pays an attractive rate of interest that will be
earned also on deposits that are added. Finally, the gruesome account both pays an inadequate interest rate
and requires you to keep adding money at those disappointing returns.
-I like option 1***Admit and analyze your mistakes for future growth opportunities. Mistakes are part of success and they are a certainty: To date, Dexter is the worst deal that I’ve made. But I’ll make more mistakes in the future – you
can bet on that. A line from Bobby Bare’s country song explains what too often happens with acquisitions:
“I’ve never gone to bed with an ugly woman, but I’ve sure woke up with a few.”***On hiring:
An aside: Charlie and I are not big fans of resumes. Instead, we focus on brains, passion and
integrity. Another of our great managers is Cathy Baron Tamraz, who has significantly increased
Business Wire’s earnings since we purchased it early in 2006. She is an owner’s dream. It is
positively dangerous to stand between Cathy and a business prospect. Cathy, it should be noted,
began her career as a cab driver.***on investing
it is interesting that he doesn’t really care about the stock price of where the company is trading or where he bought it. He is actually concerned with his % ownership of the business and what the business is worth. He is not concerned about share price growth, but instead on company earnings growth (per share). How he evaluates them:
I should emphasize that we do not measure the progress of our investments by what their market
prices do during any given year. Rather, we evaluate their performance by the two methods we apply to the
businesses we own. The first test is improvement in earnings, with our making due allowance for industry
conditions. The second test, more subjective, is whether their “moats” – a metaphor for the superiorities
they possess that make life difficult for their competitors – have widened during the year. All of the “big
four” scored positively on that test.***On US dollar:
The U.S. dollar weakened further in 2007 against major currencies, and it’s no mystery why:
Americans like buying products made elsewhere more than the rest of the world likes buying products
made in the U.S. Inevitably, that causes America to ship about $2 billion of IOUs and assets daily to the
rest of the world. And over time, that puts pressure on the dollar.**currencies
At Berkshire we held only one direct currency position during 2007. That was in – hold your
breath – the Brazilian real.**on expected returns
I should mention that people who expect to earn 10% annually from equities during this century –
envisioning that 2% of that will come from dividends and 8% from price appreciation – are implicitly
forecasting a level of about 24,000,000 on the Dow by 2100. If your adviser talks to you about double-
digit returns from equities, explain this math to him – not that it will faze him. Many helpers are apparently
direct descendants of the queen in Alice in Wonderland, who said: “Why, sometimes I’ve believed as many
as six impossible things before breakfast.” Beware the glib helper who fills your head with fantasies while
he fills his pockets with fees.
I finally got around to finishing the The Winning Investment Habits of Warren Buffett and George Soros as recommended by Ryan Allis way back when. It’s an interesting and fairly simple read (despite being huge) with a lot of fantastic insights for anyone looking to spend a little more time managing their investments (it’s a really hard time to do that, I know). There are a lot of practical tips in the book, and Ryan did an excellent job covering them in his post above, but I found some core life lessons in their winning habits as well. I’ve re-posted them below (these are my personal notes, so I apologize if they don’t make sense).
These guys stay within themselves. The book talks about the “loser” investor as one who is constantly adjusting their techniques based on the last story they heard. I’ve realized that when you don’t take the time to think about and find what you enjoy and are good at analyzing in the investment world, you tend to jump from one person’s ideas to another. The same is true in life I believe. I think it is why so many of those get rich infomercials work so well. It’s hitting people who have no idea what their core strengths and passions are, and aren’t seeing any good results in their current approach (most likely based on something someone else told them) so they are so willing to buy another idea, especially when it is presented so well. These guys (Buffett an Soros) have found the shoes they are comfortable in and they STICK to them, knowing that is where they are happiest, most comfortable and ultimately most successful. I will say though that the personal criteria for living for everyone always borrows from others ideas, the key is to borrow from those that you can truly make your own and not from those you hope you can absorb.
(”Learning to Swim,” on flickr by sposta via CC - You can’t learn to swim until you jump in)
I feel like everyone I speak to these days has at least a “project or two,” they are working on. By project I mean they have something they are at least thinking about that hopefully could someday become a real working business that they would own and operate. At the moment, I certainly consider myself part of this group, and sometimes it’s really sort of depressing. I know so many of these “projects,” will never even see the light of day, and of those that do even fewer will ever get far enough to be considered a business. This seemingly harsh reality begs the internal question “Why am I any different?”
I think that more and more people from my generation are at least thinking about heading down the entrepreneurial path. The so called millenials have grown up with access to unlimited information across an unlimited spectrum of niches. We’ve been empowered to go out and learn about anything and everything we’re interested in with ease. We’ve also had front row seats to rise of the “young entrepreneur.” We’ve heard so much about people out of high school and college creating companies that are phenomenal successes. We idolize these people yet we also can’t help but ask “why not me?” This question is precisely why we are so fascinated with them. I’ve asked myself that question for at least 10 years now, going way back to my high school days where I became obsessed with the business world via the stock market (dotcom days, ah what a time to start investing!). Why couldn’t I potentially take my part in the American dream? It’s cheaper than ever to start a business. All the information, contacts, and products you may need are seconds away in a Google search. From the outside perspective the only thing that stands between you and your dream life/job is a smart programming partner and a few months (NOTE: most of the people I talk to are trying to create some sort of web focused business, so they need someone with programming skills). And that is why I think there are so many of us out there with projects.
But if projects are so easy to start, why aren’t more projects becoming working, real life businesses? Because I think very few project starters have the capability to start a business. Most of us want to learn to swim by merely dipping our toes in the water. We think we can expose ourself to gain without risking any of the potential failure, but the truth is the lessons from failure are what create opportunity for success. If you don’t attempt to swim by getting in the pool, you’ll never feel the struggle that is growth, the struggle that is learning. And very few people are prepared for a struggle.
I find comfort in that. Don’t get me wrong, I love the explosion in entrepreneurial mindset in this city and this country. I love that at least in our heads more and more us believe we are capable of doing something big on our own. We all benefit from this because the tinkering of potential entrepreneurs and current entrepreneurs is what pushes growth and innovation throughout. This constant push to create is what created the great environment we are in today. But now I’m seeing what separates someone building a project and someone building a company, and I have to really respect and admire the courage in the creators. Great things happen to those of us who are willing to put ourselves out there. I mean to really put yourself out there for something you believe in. “Putting yourself out there,” obviously has different meanings for different people, and you know ultimately what that means for you, but this is the only place where your “project” becomes a potential business.
For me I believe this means to stop hiding in confusion (I’m not quite sure what to work on),pick a path, and declare it to the world. For me putting myself out there isn’t about money because I’ve never been afraid to put money on the line (thanks to my days dotcom investing and bootstrapping a business in college by the nifty credit card balance transfer trick). My “putting myself out there,” is more about exposing myself completely to the criticism of others. I get out there by speaking up with my ideas, sharing them with as many people as I can, reaching to any and all who may be able to help, and learning from the feedback. Only by challenging myself to expose ideas to others, with a firm voice behind it, can I learn to swim (that’s part of the reason I’ve been blogging more lately..it’s amazing how much more you can write when you write what you’re truly thinking / feeling) and move my project on to a company.
How do you put yourself out there?
(via mecredis on flickr under cc)
As I was sitting eating lunch and thinking about my last post I had somewhat of a revelation. I really don’t like work.
Looking back on my first business, Enviar, I didn’t start that as a business. I really started that with the approach of “this puzzle looks fun.” It was more like I see this piece and I see this piece, and I see that no one else is putting them together but if I do I win (and get paid). So I tried it, and it worked, so I tried it again and worked…and off it went. I gained momentum, I gained contacts in the industry, and I made some money, all while solving these puzzles. But something happened along the way…Some sort of pressure started coming in. I guess it was the “shoulds.”
Somewhere along the way I started saying “well you should do this,” and you “should be doing that.” And suddenly it didn’t feel like a puzzle anymore, it started to feel like work. I guess I define work as stuff you HAVE to do that isn’t fun, and that is how this started to feel. But coupled with the shoulds (I should keep working on this), I stuck with it. I told myself I have to work to make this work, and I should not stop. This is when I started hitting coffee shops for “work.” After all, you can’t do work at home and you’re supposed to be doing work at least from 8am to 5pm. Somewhere along the way this rule became ingrained in me. I’m supposed to be working from 8am to 5pm, no exceptions. So ever since then I’ve made it a habit to do work at that time, and usually most of it at a coffee shop (because again, work needs a “formal” place).
But the interesting thing for me looking back is I can now see where things went awry. I started treating everything like work (which I hate) instead of like a game/puzzle (which I love), and you can get a lot further in life when each day is another exciting puzzle instead of just another day at work.
How can you make today a game?
I have a new dog (puppy really, she’s about a year) and she’s great.
Anyway there are a lot of dogs in my building and it’s been great talking with my neighbors as we all head out on our morning and evening walks. I never realized how great a connector dogs can be. I’ve talked to more people in the last 2 weeks than I probably did in the last 6 months. But they haven’t all been good conversations.
Yesterday evening while heading out for my night time walk, I held the door to the entrance of my building for an older woman who is a resident (I had never seen her before though). While stretching to hold the door for her and control the dog, Izzy (the dog) decided to relieve herself in my building lobby instead of outside. The woman saw this and seemed to be ok with it, sort of looking disgusted but laughing. I apologized and told her I would clean it up. No big deal.
Today around the same time I took Izzy for her evening walk. Again on my way out the front door one of my older building residents, who is in a wheelchair, was at the door. I again stretched to hold the door open for him, and again Izzy relieved herself at the door, although this time outside on the sidewalk directly in front of my building. As I stood there and talked a minute with my neighbor in the wheelchair, the older woman from last night came home. While opening the door she talked very loudly to herself (indirectly aimed at me)…”this is ridiculous, he can’t even control his dog…first inside yesterday and now he lets her pee on the door today. Just ridiculous. Give me a break!” I tried to explain but she was in the door, and I was pissed. And embarrassed.
How come this bothered me so much? It was an accident. I’m as considerate as any other resident in this building. I’m clean, I’ll even clean trash in the lobby that is not mine. I don’t steal papers, I’m courteous, and I have very good dog manners. I didn’t intentionally let this dog pee near the door. It was an accident of circumstance. Why did this seem to bother me so much?
If you are someone who cares a lot what others think, this city will be tough for you. There are so many people with so many crazy rules and life regulations (as my friend Jerry would say they are all carrying around “their own bag of shit.”), you are bound to, at one point, rub someone the wrong way. That’s just how it works. So if you let yourself get all whacked out of sorts by all the comments and opinions of others, you’ll lose your mind. It’s a lesson for life we learn early: “sticks and stones….words will never hurt me.” So true. All you can do is live by the rules that feel right to you, don’t worry about breaking the rules of everyone else.
As I was getting ready to leave my apartment this morning, I suddenly thought to myself: What’s motivating me to do what I’m about to do today? There’s a lot of potential answers to that question, some that are “noble,” such as “I’m determined to take one step closer to making the world a better place,” or “I’ll make my vision more of a reality today,” and then there are the seemingly more likely answers: (based on fear) “I need to start generating more income today,” “I need to figure out a way to make more money today,” “I need to connect with someone who gets me closer to making more money today…” You see the theme there. It’s not that I’m money hungry, but the truth is those are all driven by fear. But even those are not the “right,” answers to this question for me.
The easiest way to see your driving motivation is to see what you do each day, and how you feel about doing it. If you go to a job everyday that feels terrible, you may be motivated more out of fear that you can’t find any other sources of income, aren’t good enough to find the right job for you, or you’re afraid of putting yourself out there. Or maybe you’re motivated by your kids, and your drive to provide and care for them. Motivation are neither good nor bad, they just are. This morning I realized a key motivator for me ultimately is to avoid rejection (as you can tell by this post, I’m working through it). That is, I try to frame my days in such a way that I encounter as few opportunities for rejection as possible. And if I do hit points of rejection they are easy to take, such as email rejections. The interesting thing is that part of my work to avoid rejection, that is social rejection following the “what do you do,” cocktail question, is to go out and do seemingly scary things. I connect with all sorts of interesting people, put my money on the line, expose my ideas to incredibly smart and talented people, all so I have something I can say I do that doesn’t draw scary reactions. So I walk this tight rope, carefully balancing myself in a place where rejection is unlikely.
I want to be careful here so that I’m not beating myself up for beating myself up, but it’s a powerful revelation to see emotionally what drives you day in and day out. As an entrepreneur, rejection is a big part of your growth and discovery process. Rejection is what forces you to challenge where you are and what you’re trying to accomplish. It forces growth and change. It’s a very good thing. So by understanding what my motivation is, I can understand that twinge of discomfort within when I move myself into “dangerous” situations. My body knows the rules, it knows what it is trying to protect me from, and it’s giving me all the signs to get out of what I’m doing. I’m heading for rejection. But this is in finding where the growth occurs. I once heard that feeling uncomfortable means you have an opportunity to grow. Things seem hard? You are growing. So ultimately it’s about finding your current source of motivation, determining whether or not that serves your life goals, and then figuring out how best to use your current motivation to grow, learn, and create a new driver that serves you.
(shot at sunset in Guanacaste, Costa Rica…beautiful place)
It’s been awhile since I last posted to this blog. It’s not because I’ve been particularly busy, it’s just that I fell out of that “blogging state of mind,” where you can constantly see blog worthy topics in your day to day life.
Anyway, those of you who know me and have followed this blog know that over the last almost 2 years now, since my mom passed away, I’ve really been spending a lot of time thinking about “my purpose.” After my mom passed away, it really became important for me to do things that had a deeper meaning, a deeper connection to who I am and what I have to offer, than just to do things for the sake of being busy. I put myself in between quite a rock and a hard place: I wouldn’t act unless there was meaning, and I couldn’t find meaning if I wasn’t acting. I guess this was just my route through the “dark, dark wood.”
The “dark, dark, wood,” is that very confusing, self journey that we all go through at some point or another in our lives. If you’ve ever asked “what am I doing with my life.” or “how can I be happy?” Then you most likely have spent some time here, but believe it or not, it’s a very good thing. It’s your time spent there where you dig deep within, asking key questions about who you are, what drives you, what pleases you, what triggers anger, sadness, action. It’s the place where you can really learn who you are. I’ve spent a lot of time there over the last few years. I want to be clear that I have been pretty happy over this time, actually very happy. I just always felt an itch of confusion about my life that I’ve been working through. An itch that led me to really ask “what should I do next?”
I was fortunate that itch led me to ask a lot of powerful questions, and to seek advice from some very smart people. That itch led me to the place where I am now: a moment of clarity. I know what I want to do next. I want to focus on inspiring others to go into the “dark, dark wood,” and come out on the other side with the same sense of empowerment and clarity I feel now.
So with that said, the question is: Where do I begin? How do I build a sustainable (and profitable) enterprise around solving this problem for others? How have people answered the question “what should I do with my life,” in the past? How can I make it better. It’s all a complicated puzzle that I look forward to trying to solve…
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