The Rebel Allocator

by Jacob Taylor

Thoreau said that the price of anything is the amount of life you exchange for it.

“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.

Here’s what my strategy would be if I were you: we each only have twenty-four hours in a day, no matter what’s in our bank account. What we focus on is what differentiates us. Every morning, ask yourself this question: ‘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.

Most people overestimate what they can get done in a day, but radically underestimate what they can get done in a month… in a year… in a decade, with four hours of dedicated work. You could goof off the rest of the day and still run circles around your peers. At least that’s been my experience.”

“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.

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.”

Here’s what you’re probably learning in business school: Revenue minus expenses equals profits. Sounds sensible, right?” He paused for the group of nodding heads. “Well, it’s not! It is completely backwards. It should be taught: Revenue minus PROFITS equal expenses.”

“Humans evolved in a linear environment, so we’re not wired to appreciate the power of compounding.

“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.”

More businesses are providing a commodity than they realize. There’s a saying: In the long run, everything is a toaster. Meaning, it’s very hard to create and maintain a differentiated product for a long time. There’s simply too much competition vying to scratch our subjective human itches. It’s just a matter of time before you get disrupted.”

“The problem is, humans aren’t always logical. Our brains evolved for survival, not necessarily logic.

As you give people more choices, it gets harder for them to make a decision. They start to feel overwhelmed.”

“You never know the fight someone else is struggling with. You don’t know their circumstances, so be careful with your judgments.

“The other point of this story is that life can be damned unfair.

“Never trust pitch books put together by investment bankers. It’s funny--they can give you precise numbers for what a business will earn ten years into the future, but they can’t tell you what their own business will earn next month.

CEOs are herd animals. They travel in packs and emulate each other, including when it comes to M&

“Paying a dividend should be the last resort for a rebel allocator. It’s like a confession that they have a lack of attractive ideas.

Successful capital allocation means converting inputs like money, materials, energy, ideas, human effort, into more valuable outputs.

Capital is whatever bits, atoms, or energy that are available to eventually produce something that delights a customer.

Capital is mostly fixed and sunk, so it’s vitally important that it’s deployed wisely. Misallocated capital is of no use to anyone. It is a loss to the entrepreneur, the investor, and the consumer.”