More on this book
Community
Kindle Notes & Highlights
“First, for seventy-seven years now, I’ve tried to go to bed a little smarter than I woke up. Constant improvement is the only way to succeed. It makes what is difficult to achieve become inevitable. Success is a few simple disciplines, practiced daily. Failure is simply a few errors in judgment, repeated daily.”
“Second, the most important decision I ever made was choosing whom to marry. Nothing will have a bigger impact on your life than your spouse. I got very lucky in this department. Keep your eyes wide open before you get married...”
“Then keep them a little closed after you ...
This highlight has been truncated due to consecutive passage length restrictions.
“There are three qualities you want: integrity, intelligence, and energy. If you don’t have the first, the other two can kill you. If you hire someone without integrity, you really want them to be dumb and lazy.”
“It is remarkable how much long-term advantage I’ve found by trying to be consistently not stupid. You should try it sometime. Instead of aiming to be very intelligent, just don’t be a dumbass. If you avoid most of the big mistakes, you don’t have to be that smart to succeed.”
It’s a simple recipe: consistently spend less than you earn. Automatically tuck away ten percent of whatever you make. You don’t even have to be an investment genius with that ten percent. You will have a staggering amount of money by the time you’re my age with even a modest level of compounding.
“I’m referring to your body. Barring some miraculous advances in medicine, you’re only going to get one body in this lifetime. Don’t crash it. Take it in for regular maintenance. Give it premium fuel. Don’t let it just sit in the driveway and rot. Wash it and wax it, metaphorically speaking... but also literally if that’s what floats your boat.”
‘What’s the one thing I could work on today that if I did a good job, it would make everything else easier, or maybe even unnecessary?’ Keep four hours carved out of your calendar to work on that one answer. Make it sacred time with no interruptions. Put everything else away, including your phone and whatnot. Focus deeply during that four-hour stretch at making progress on your most important thing. I can guarantee you a huge advantage in life if you do this. Unfair even. Most people overestimate what they can get done in a day, but radically underestimate what they can get done in a
...more
“Read a damn book once in awhile. You’ll be the better for it, and maybe we won’t have a world full of dumbasses.”
“Throughout your life, you should follow your own inner scorecard. What does that mean? Don’t spend a lot of time worrying about what other people think of you. Progress is only accomplished by those who are stubborn and a little weird. It’s easier said than done, but if you stay true to your own principles and follow your own inner scorecard, it’s your best shot at happiness.
How much money should you leave your kids? “I like Warren Buffett’s thoughts on this: you should leave your children enough to where they can afford to do anything. But not so much that they can afford to do nothing. You want to avoid a Vanderbilt situation where wealth ruins your offspring.”
take action. Perfect is the enemy of good enough. Yes, it’s important to make decisions supported by data, but realize you’re never going to have all the numbers to feel completely confident. You still have to move forward at some point. There are very few decisions you can’t undo, so just making a decision and being willing to change keeps you moving forward.”
Every day, in countless ways, the competitive position of each of our businesses grows either weaker or stronger. If we are delighting customers, eliminating unnecessary costs and improving our products and services, we gain strength. But if we treat customers with indifference or tolerate bloat, our businesses will wither. On a daily basis, the effects of our actions are imperceptible; cumulatively, though, their consequences are enormous. When our long-term competitive position improves as a result of these almost unnoticeable actions, we describe the phenomenon as “widening the moat.”
...more
“We can’t be too radical with any changes, especially if they go against our brand. A brand is like a promise of a specific experience. If we were to make big changes, it’d be confusing for our customers.
“Wow, so one percent better is a thirty-seven x and one percent worse knocks you down to three percent?
“Here’s the filter we use: Will this expense go toward delighting our customer? If the answer is no, then we’re ruthless about cutting it. We call these non-strategic expenses because they don’t advance our strategy of making the customer happy. We’ve found these expenses to be like fingernails; they always need trimming.”
“We also have something we call strategic expenses. These expenses advance our strategy of delighting the customer. For strategic expenses, we seek to outspend the competition by a long shot. Strategic expenses build a moat around our castle so the customer only wants to do business with us. We aren’t afraid to spend in those categories. We view them as investing in the happiness of our customers.”
“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.”
“In general,” Mr. X continued, “there are three ways to make the brand triangle bigger. Be the cheapest. Be the most convenient. Or be the best. Good companies aim for at least one of those objectives. Great companies find a way to achieve two. Doing all three is a rarity.”
For instance, what if you’re in the steel industry and the product you sell is a commodity? Meaning the steel you make is identical to the steel everyone else makes. How would you move the straws?”
More businesses are providing a commodity than they realize.
In the long run, everything is a toaster.
You only have to answer yes to one question: If you wanted to, could you raise prices and not lose customers?
“There are many commodity businesses that make a great profit because they are the lowest cost provider in their industry. They know they can’t do much to change value and price, so they become demons on lowering costs. It’s important to be strategic about where you are pressing your advantage.
You either have to be the lowest cost producer or build up a brand that lets you charge more if you want to earn higher returns.”
“I’d agree, and because of that we are relentless with managing our costs. It’s our primary area of focus. But we also strive to differentiate ourselves with a great customer experience.
“I’d modify that to say the customer’s experience is always right. We look for ways to lower our expenses, but we do think there are some costs we incur that move the Value straw enough to justify the resources.
“It looks like there’s a trade-off between profit and brand. When the Price straw is near the Cost straw, there isn’t much profit, but there’s a lot of brand.”
“The more profit a company generates, the more attention they draw to themselves. Competition, government regulators, even customers who might start to suspect they might be getting overcharged. True monopolies try to downplay their dominance and avoid looking greedy. Like slow-playing a winning hand in poker.”
“What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom.”
“No man ever steps in the same river twice, for it's not the same river and he's not the same man.”
“You can use these straws to look at a business on a per unit basis at the individual transaction level. Say a customer buying one hamburger. You can look at it on the single store level in the case of one Cootie unit selling five hundred thousand hamburgers per year. Or you can also look at the entire Cootie enterprise selling hundreds of millions of hamburgers across the whole system.”
“Good, we can imagine our business at the various levels: the individual, the family, or the kingdom,”
By the way, this concept of spreading fixed costs is referred to as operational leverage or economies of scale.”
“Your fixed costs now have to be spread over a smaller pool of customers, so they go up on a per-customer basis. You not only lose the margin of the additional burger you might have sold. You accelerate toward declining profitability with each tick down in same store sales.”
“The fancy term is called network effects. Each unit you add at the individual level increases the value for everyone at the global network level. So you bump up everyone’s Value straw at a faster rate than the costs grow. That’s a pretty neat way to widen the gap between Value and Price, huh?”
The best one I’ve found so far to produce a single number is a method called Net Promoter Score.
The nines and tens are loyal, enthusiastic fans. They tell everyone they know and buy more as repeat customers. They’re the lifeblood of any business. We can’t get enough of them.”
“Yes, into the next bucket go the sevens and eights. They’re mildly satisfied. They aren’t unhappy, but they aren’t spreading the word about us either. And if they are, they aren’t exactly glowing. They’re more likely to be wooed away by a competitor.”
“The last bucket are the zero through six scores. They’re the detractors. They spread negative word of mouth and are quick to leave if they think another company can do a better job. We try to avoid creating these, as they can be really damaging.” “The haters,” I said.
“Anyway, after we get this simple number from the customer and put them into the three buckets, we then ask them an open-ended ‘Why?’
“We take the percentage who voted either nine or ten, then subtract the percentage who voted zero through six. We throw out the lukewarm sevens and eights. That number is the Net Promoter Score as we measure it.”
-- "While deals often fail in practice, they never fail in projections." -- “The higher return a business earns on the capital that is invested in the business, the more cash it is producing and the more value is being created.” -- “Growth can destroy value if it requires cash inputs in the early years of a project or enterprise that exceed the discounted value of the cash that those assets will generate in later years. Growth is simply a component--usually a plus, sometimes a minus--in the value equation.”
it’s a fool’s errand to believe that you can be good at everything,”
All financial assets can be made economic equals: “It applies to outlays for farms, oil royalties, bonds, stocks, lottery tickets, and manufacturing plants. And neither the advent of the steam engine, the harnessing of electricity nor the creation of the automobile changed the formula one iota--nor will the Internet. Just insert the correct numbers, and you can rank the attractiveness of all possible uses of capital throughout the universe.” -- Warren Buffett “In the real world, you uncover an opportunity, and then you compare other opportunities with that. And you only invest in the most
...more
‘debt financing.’
‘equity financing,’”
“Businesses in industries with both substantial over-capacity and a ‘commodity’ product are prime candidates for profit troubles. Over-capacity may eventually self-correct, either as capacity shrinks or demand expands. Unfortunately for the participants, such corrections often are long delayed. When they finally occur, the rebound to prosperity frequently produces a pervasive enthusiasm for expansion that, within a few years, again creates over-capacity and a new profitless environment. In other words, nothing fails like success.”
“We do have a few advantages, perhaps the greatest being that we don't have a strategic plan. Thus we feel no need to proceed in an ordained direction (a course leading almost invariably to silly purchase prices) but can instead simply decide what makes sense for our owners. In doing that, we always mentally compare any move we are contemplating with dozens of other opportunities open to us, including the purchase of small pieces of the best businesses in the world via the stock market. Our practice of making this comparison--acquisitions against passive investments--is a discipline that
...more
“Start with the customer and work backwards.” -- Jeff Bezos
