Success Book Reviews: Ray Dalio's "Principles"

How do you become a billionaire? Solving one important problem at a time. That is one of the messages I take from one of the most unique “Success Books” I have ever read, billionaire Ray Daio’s Principles. The PDF is, apparently, freely available ( I don’t know if this has changed or will change)

The more I delve into the science of personal achievement, the more I am amazed at the incredible wealth of information that has been made freely available by successful people, such as Charlie Munger (billionaire), Charles Koch (billionaire) and many others. We are truly living in a wondrous age where such masters are eager to part with their secrets.

Why would these guys do such things? Why would they part with such life-changing information, passing it on to  the rest of us at zero or trivial cost? They are certainly not dumb. On reason could be that they may welcome the compounding effect that their works produce. In other words, if a billionaire writes a book that stimulates others to be entrepreneurial, visionary, productive, disciplined, etc, this could, eventually, have a significantly positive effect on the environment that the billionaire himself live in. For instance, hugely successful investor Monish Pabrai, took his idol, Warren Buffett to a $650,000 lunch, using profits accumulated by emulating Buffet (the money went to a charity Buffett favors). Great link about it here.

 Ray Dalio built and runs the largest hedge fund in the world (as of 2010), Bridgewater, managing, at the time of this writing, over $90 billion in assets. He wrote the Principles as a management document. Apparently the principles are “fractal” in that they worked for him, as the head of Bridgewater, and they work at all levels beneath him in the organization he created. So the incentive is clear in this case.

 His Principles range from the general and universal, down to the incredibly specific. What is the key to building such a might organization as Bridgewater?  An unflinching acceptance of reality, and the refusal to tolerate problems (also termed “badness”).   Consider this: where might the tolerances be more lax? Building a skyscraper or building an investment company? I would have to answer “probably the latter”.  Maybe that’s why very few skyscrapers fall down, and so many organizations do.  Dalio’s tolerances, in my opinion, are much closer to engineering /architectural tolerances, than a “soft”, “people-oriented” business tolerances.

Dalio has assembled a far-reaching exhaustive roup of rules designed to unmask “badness”. One of the reasons may be that people are not girders. They don’t come in standard sizes and specifications. Girders don’t have hidden agendas, egos, laziness, or lack of motivation. People, of course, do. So Dalio provides some methods to cut through the foibles of individual human behavior in order for the group to function as (in his term) a “machine”.

In the books and interviews I have read, it has seemed to me that many successful men such as Jamie Dimon, Bill Gates, and Jack Welch, have that same characteristic. Small, nagging problems, often related to peoples’ underperformance,  just cannot be tolerated because they have  a “multiplier effect”; perhaps similar to a bunch of rivets in a suspension bridge , if each rivet is just a little under “spec” , the sum total could be catastrophic.

One of Dalio’s tools for rooting out problems seems simple: an “issues log”.  Once you keep careful track of issues, you are well on the way to solving them. Simple? Maybe. Butt is the first time I encountered such a tool, and I am a bbig fan of success tools.  I have kept lists of goals, I have lists of visualizations, affirmations, etc, but I have never kept a separate “issues” log. But, when  you think of it, how else can you continually improve the purity of the outputs of your efforts?

Dalio also uses his incisive drive for clarity to make sure we separate functions (such as issue drilldown vs problem solving) so as not to muddy the waters when optimizing the organization

There is lots more  in the Principles. These principles demand courage. Personal courage. They demand faith that huge results come from facing every aspect of reality, working with it, and improving your results as quickly as possible.

This may be the most outstanding document of its kind, ever. I think it is a life-changing read.

Success book Reviews; Thomas Stanley "Stop acting Rich"

Thomas Stanley , best-selling author of The Millionaire Next Door has added a fascinating new work to his paradigm-shifting catalog of research on the wealthy. It is Stanley who taught us that the rich often live frugal lives, buying Sears suits instead of Armani, and driving Chevrolets instead of Bentley. He continues that superb research here. From watches to wines, the millionaires just don't fit "central casting". They buy inexpensive brands, drink inexpensive alcohol and live in inexpensive houses.

Stanley also introduces a "glittering rich" category . He suggests that many non-rich "aspirationals" spend their money imitating the extremely successful decamillionaires, who actually can afford the high-priced brands, which few "garden variety" millionaires would ever touch.

Over and over Stanley shows us how deluded we are in our consumption-oriented lifestyles. The people we are imitating are often laughing at us...all the way to the bank. Their bank, that is.

Success Book Reviews: Pete Peterson, American Dreamer

What a life. In The Education of an American Dreamer Pete Peterson, billionaire founder of the Blackstone group and one of the most successful leaders ever in business and government, has given us a fast-paced look at a dynamic career. Hugely successful at a young age, in both advertising and also as the very young CEO of Bell and Howell, he moved on to Washington (Secretary of Commerce), Lehman Brothers, and, eventually private equity firm Blackstone. Along the way he was tapped to run numerous foundations, and later set up several himself. The book moves quickly, and , as an autobiography, it is sometimes difficult to get beyond the surface to the “WHY”…how did such success came so easily to this individual? I picked up a few principles as I read, and was gratified to see that, at the end of the book, Peterson himself dubbed them to be part of his key success factors.

First, it is important to note a bit of what Peterson might call “dumb luck”. Like Warren Buffett and Alan Greenspan, Peterson was spared military service and as such got a head start in university environments that were somewhat depleted of competition. A lot of bright young males were busy fighting in WWII and Korea while Peterson, Greenspan, Buffett, and others were already finishing business school.

But there was a lot more than luck involved in Peterson’s career. Peterson developed two key success factors early, perhaps partially due to his MBA work at the University of Chicago: he had an analytical bent, and an interest in communicating his ideas. It is interesting to note that, around the time of his attendance at U of C, economics was undergoing a transformation from a more “literary” to a “quantitative” discipline. And, in his early work at McCann Erickson, the advertising agency, he did much the same: he became a champion of research, as well as an expert at making that research client-centric. As far as communicating, it is interesting to note that the young Alan Greenspan, while immersed in his studies of American business statistics, was, like Peterson, eager to communicate the ideas he was uncovering. Both men strove to reach a wider audience through speaking and writing articles. Buffett also strove to teach.

Another two success characteristics are, interestingly, also highlighted as success drivers in Thomas Scwheich’s informative book Staying Power : a relaxed attitude toward career “pre-planning”, and a willingness to lead an “un-balanced”, career-centric lifestyle. Schweich’s interviews with successful people echo what Peterson also claims to be a key principle: avoid a restrictive set of career goals: “follow your bliss”. As far as the consequences of imbalance are concerned, Peterson suffers two divorces , most likely related to his career focus. In my own life, I’d tend to agree with the “work ethic” approach: “work/life balance” is not conducive to high achievement. That’s just the way it is.

I won’t reveal all of Peterson’s “lessons learned”, but I will mention that Peterson appears to be quite comfortable among all sorts of people, something we introverts envy. As I think back and wonder how his interpersonal skills might have developed, I focus on his many years of working in his father’s café. I wonder if being around so many different types of people at such a young age perhaps enabled the development of self-confidence. It’s one thing to be a great student (which he was) , and altogether another thing to be at ease and unafraid among the mighty of the earth (Rockefeller, Kissinger, etc.). Perhaps it all started at his dad’s café in Nebraska.

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Success Book Reviews: Benton's "Executive Charisma" Part 2

This is Part 2 of my review of D. A. Benton’s Executive Charisma: Six Steps to Mastering the Art of Leadership. Part 1 is here.

Benton has enumerated “The Sacred Six” components of Executive Charisma:

1. Be the first to initiate
2. Expect and give acceptance to maintain self-esteem
3. Ask questions, and ask favors
4. Stand tall, straight, and smile
5. Be human, humorous, and hands on
6. Slow down, shut up and listen

A few personal reactions to her concepts follow.

Be the first to initiate
In my acquaintance with successful people, this was probably the very greatest difference between them and a typical person. I would go so far as to say that the more often you initiate, and the more significant the goals, the greater chance you will have in personal success. Successful people think in terms of big dreams. They go where they have to go, meet the people they have to meet, and take continuous action in the direction of their goals. They do not wait for others to approve. If they move one inch ahead of the pack every day, because of a propensity to initiate, that adds up to miles ahead over the years.

Be human, humorous, and hands-on
There were two or three great leaders I enjoyed being around in a crisis. They always knew how to lighten the emotional burden when things got tough. They never took a situation, or themselves, too seriously. By behaving in this way, they drew good people around them. Since people enjoyed their company, they got good advice, good mentoring, advance information that was helpful to the business, and, of course, were able to bring in a lot of business. Now, being an enjoyable person does not mean they were not, to use the rest of Benton’s phrase, “hands-on”. I remember several instances in my career as a music arranger and producer, when extremely high-ranking executives would work with me well into the night (or the next morning!!!) on a project, adjusting it down to the very finest details. These people were truly gifted: they are as hard-working as they were likable, and these qualities brought them outstanding (and much-deserved) success.


Expect and give acceptance to maintain self-esteem
I suspect that this point is the “secret ingredient” that underlies the success of so many truly outstanding people. In my work with some top people, I never felt I was being demeaned as a person, even if my work was being criticized. Also, I am astounded at how often these highly successful people used praise to initiate a meeting, and how often I was treated as a knowledgeable expert first, and as part of a results-oriented project second.. Not that I wasn’t an expert, but these people went out of their way to “put me in the room”. At the table. They knew that they needed great input from everyone around them, and the only way to get it was to make them feel comfortable, and on an equal footing.

The rest of Benton’s “Sacred Six” are equally important. Her book is loaded with examples and “how-to’s”. As I often do with inspiring books, I took the time to make an outline of the whole book so that I can refer to it easily in the future. And, speaking of the future, if you want to have one in business or in life, you should read this book.

Success Book Review: D. A. Benton "Executive Charisma"

D.A. Benton is an internationally recognized speaker, coach, author and consultant. She is an expert on executive skills, image, presentation, and effectiveness. Her wonderful book, Executive Charisma: Six Steps to Mastering the Art of Leadership is a cornucopia of secrets about successful leadership behavior. Although I am not now part of a large organization, I certainly wish I had read it during the years I was interfacing with executives at billion-dollar companies. As I think back to those who rose to great heights, and as I watch high-ranking leaders on television, the crucial principles that Benton elucidates in “Executive Charisma” leap out in strong relief. If one could master even one of her “Sacred Six” principles, it would probably make a huge positive change in their career. Master all six…and it’s a home run. But, there is no single moment of mastery. As Benton repeatedly reminds the reader: mastering her principles is a lifelong, vere-ending task.

Benton's "Sacred Six":
1. Be the first to initiate
2. Expect and give acceptance to maintain self-esteem
3. Ask questions, and ask favors
4. Stand tall, straight, and smile
5. Be human, humorous, and hands on
6. Slow down, shut up and listen

In my next post I will discuss a few of her concepts in more detail.

New On My Reading List: Pete Peterson, Billionaire

Pete Peterson, legendary American businessman, public servant, co-founder of the Blackstone Group, and billionaire, has written an extraordinary autobiography. I am in the midst of reading it and hope to review it shortly. It has a lot in common with other biographies of World war II vintage titans, like Warren Buffett and Alan Greenspan. More to come.

Success Books: Soon To be Reviewed

My reading is getting ahead of my reviewing. Here are two books I've enjoyed recently, and hope to review shortly:

Hugely true, honest, and practical.
















I tried the exercises in this book and found they had an effect. Luck is not magic (at least not PURE magic). More in my upcoming review.

New On My Reading List

David Swensen taught a generation of portfolio managers how to achieve decades of market-beating returns, yet, to this day, no one seems to be able to catch up to the brilliant chief of Yale's Endowment. A generous gift to investors everywhere from one of the greatest minds in the history of the field.

New on My Reading List

I am loving this multi-biography of the elite group of Jewish Hungarian physicists who changed the world of twentieth century science. Why don't people also mention that this unusual line of brilliant scientists has continued into the 21st century, including Microsoft's Charles Simonyi , and Intel's Andrew Grove?

Success Book Reviews: Michalko's "Cracking Creativity"

Imagine having Albert Einstein or Leonardo DaVinci around to help out when you are stuck on a problem. Or perhaps Steve Jobs, or T.S. Eliot. Or maybe Thomas Edison or Nikola Tesla to offer a different point of view when you were stuck looking for a solution. Michael Michalko’s Cracking Creativity: The Secrets of Creative Genius may be the next best thing to “channeling” these great minds.

Michalko’s research has broken down a lot of the “mystery” surrounding the production of new and brilliant insights, solutions, and models. He puts these techniques into our hands in great profusion. Like a “tool chest of the mind”, I think someone would be hard-pressed NOT to generate a wealth of ideas and solutions once they started using these remarkable tools.

So, what do geniuses do that we can emulate to solve our problems and deliver new breakthroughs in our own lives.? First and foremost, think in terms of “a lot”. Whether it is a lot of approaches to the problem, a lot of potential solutions, a lot of subcategories of the problem, or drawing from a lot of different fields, geniuses always generate a lot of output, and then cull the best solutions from that output. Call it “divergent/convergent” thinking if you will. Instead of a “Eureka” moment, think in terms of hundreds of small-caps “eureka’s”.

Problem Statement Techniques
Michalko starts here, and urges us to restate the problem from as many perspectives and levels as possible. Use different descriptions, levels of abstraction, alternate wordings, questions, etc. Sometimes this technique alone may even solve the problem

Diagrams and Graphics
Michalko makes a good case that , during the Renaissance, human productivity improved dramatically as scientists and thinkers began to use graphic representations of their concepts. Michalko presents several techniques for diagramming problems that can shed a while new light on sub-problems, systems, interrelationships, and cause-effect chains.

Idea Generation
For most of us, idea generation is not a “process” but a more-or-less haphazard act. Reading Michalko, it becomes clear that, with Michalko’s techniques, most of us could produce ideas in much larger quantities, and with much more diversity, thereby allowing us a much larger field to select from as we develop the most important ideas.. A few of Michalko’ insights:

Geniuses produce quantity first, deferring judgment to a later stage of the process

Geniuses continue to elaborate on ideas, allowing many variations and improvements to take place

Geniuses work at improving different parts of an idea

Geniuses keep accurate records of their ideas

Geniuses search for unusual “triggers” for ideas: different fields, random words, fantasy, “what if” scenarios, abstractions, and “creative accidents” all contribute to the creation of new solutions and concepts

Collaboration
Geniuses often work with multiple great minds in non-judgmental ways. This process similar to Napoleon Hill’s “Master Mind” concept, allows multiple perspectives, and multiple lines of thought, to intersect in powerful ways.

So...does this stuff work? For me, absolutely. I tried using a few of Michalko’s concepts in my ongoing work developing a particular style of trading system. Within one evening, I could see that the results would produce a system approximately 6 times as effective as the previous version of the system, and, furthermore, that the algorithm generated would be applicable to other trading systems as well.

Be ready for lightning to strike when you use the techniques of Cracking Creativity.

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Success Book Reviews: "Rich Like Them"

Ryan D’Agostino’s Rich Like Them: My Door-to-Door Search for the Secrets of Wealth in America's Richest Neighborhoods is a modern-day echo of one of the world’s greatest success books, Napoleon Hill’s Think and Grow Rich! In that classic, Hill describes a 20-year project which he undertook at the behest of steel magnate Andrew Carnegie, to interview the world’s most successful men, Men like Henry Ford, Theodore Roosevelt and Thomas Edison. While I am unaware that concrete evidence exists of Hill’s project, it certainly very well may have taken place. One thing is for sure, Ryan D’Agostino undertook a very similar project. He literally knocked on doors in America’s richest neighborhoods and flat-out asked the occupants of these mansions how they got rich. This then is the “real deal”: actual interview data on how folks get rich and successful in modern-day America.

Here are a few of the success characteristics of these achievers.

Find something you are willing to do for 20 years or more
This may be the central tenet in the book. It is consistent with wealth-building practices of all the “greats”, from Warren Buffett to Steve Martin. Wealth is built over time. Long periods of time doing valuable things. I can’t recall one interviewee in the book who made their money in “one shot”.

Whether it’s deal-making, shrimp-shelling, art gallery ownership or entrepreneurship, the rich people in D’Agostino’s book derive their wealth from many, many repeated transactions. You have to have something, some talent, product, asset or process to sell, and then you have to have the love, or drive, or fascination to do it over and over again. There are no one-hit wonders. Many of D’Agostio’s subjects repeatedly state that, currently, they don’t need the money: they have more than enough money to live comfortably. They do their work because they love it.

Search for and seize opportunity
As in Carr’s How to Attract Good Luck, the successful people of this nation keep their eyes open. They pay attention to their instincts and know, or sense, when an opportunity is unusual.


Consider Real Estate
It is somewhat of a truism that an inordinate number of personal fortunes have been built in this country on real estate. The subjects of D’Agostino’s inquiry are no exception. The rich seem to start accumulating real estate early in their lives, and buy and sell properties regularly. There are two key reasons why this strategy may work: First, the government actively supports home ownership. Mortgage interest deductions, government-backed mortgage entities, etc all exist to foster home ownership which, in turn, fosters industries, trades, and professions of all kinds. Secondly, the leverage available in real estate is often double (or more) than the leverage available in, say, the stock market. You can “play a bigger game” in real estate. In other words, it’s easier to get rich by pyramiding your winnings.

Find a compatible life partner and pick good parents
This trait is not overtly mentioned by D’Agostino, but a careful reading of the text suggests a lot of evidence in its favor. Of course, you can’t pick your parents, however, my offhand guess is that the majority of D’Agostino’s subjects had excellent relationships with their fathers and/or their spouses. Good families that transmit good values to their kids can produce richer kids. It may not be an accident that, besides being great at math when they were young, both Alan Greenspan and Warren Buffet had stockbrokers as fathers. Similarly, you can’t keep a lot of wealth if you’re divorcing all the time. A lot of D’Agostino’s subjects seem to be stable, long-married couples with kids.

Summing up, take the advice of Ryan D’Agostino’s subjects. Start Early. Take reasonable risk. Stay married. Stay the course. And buy real estate. Oh, and read Rich Like Them. It's great.

New On My Reading List

Great book. I'll be reviewing it soon.

Steve Martin Part 2

In my last post I discussed Steve Martin’s Born Standing Up: A Comic's Life with, as usual, an eye for catching those traits which matched those of high achievers in other fields. Besides the ones mentioned, here are a few more

Debt aversion
Steve Martin avoided debt, and paid for everything with cash. Truly high achievers accumulate assets first, spend later. Warren Buffett, spent very little on his house, car, clothes, etc., till long after he had hit billionaire status. Sandy Weill and former protégé Jamie Dimon believed in a “fortress balance sheet” where assets could more than cover liabilities.

The "Snowball" Concept
Of course, the recent landmark biography of Warren Buffett is called The Snowball. Just what is the snowball? I call it a compounding effect created by applying a successful, self-reinforcing process at larger and larger scales. In other words, a key aptitude or competence can naturally unfold and expand. With Warren Buffett it was perceiving and unlocking value. With Sandy Weill it was, among other things, the ability to motivate brokers and efficiently manage a back office. The trick is to find a particular competence that can be “scaled up”. With Steve Martin it was a combination of his outstanding writing, performing skills as well as the easy, comfortable friendships he made and kept over a lifetime that helped him transition from the “low capitalization” world of standup comedy to the “high capitalization” world of movies.

Serenity of achievement
This isn’t really an achievement factor, but I want to note delightful couple of passages in Steve Martin’s books, right after several career breakthroughs, in which he describes a state of serene calm. I have felt this state of “post achievement” bliss a couple of times in my life. There is, at this moment, a sense of self-trust, a harmony between the potential you worked to develop and the actuality of an achievement that occurred, that s an almost mystical moment. You are doing “what you were meant to do”. There is an assurance, a stillness. You are “in flow”. Anyway, it was gratifying to hear it described so beautifully by the great Steve Martin.

I wish this state upon each and every reader at least once in their life.

Success Book Review: Steve Martin: "Born Standing Up"

Steve Martin’s Born Standing Up: A Comic's Life, an autobiographical memoir, is, first, and foremost, a masterpiece. Secondly, it is an authoritative summation of the success principles that appear over and over on this blog. Touchingly written, honest, funny, sad, and inspiring, it's just plain great literature. Anyone who has watched Martin’s brilliant work, especially his stand up work in the 70’s, will be a customer for this book. I, for one, have always wondered what lurked behind the madman/self-parodying/ always-delightful exterior. While we don’t get every last scandalous juicy detail, we get the important bits to piece together the puzzle.

But, beyond that, the book illustrates another point: whether you’re a golf pro/tycoon like Greg Norman, a chess master, like Josh Waitzkin, or a standup comedian, there are common traits and characteristics of many achievers. Startlingly, Steve Martin is, in this respect, amazingly congruent with other high achievers in the manner in which he exemplifies these principles Throughout the course of this blog, I have assembled the success principles I have derived from many outstanding achievers, coaches, and researchers. Here are a few common threads that unite Steve Martin with a host of other successful achievers.

10 Years to Mastery
Frequently in his book the figure of ten years comes up. Ten years between starting his true career till worldwide fame and fortune arrived. It turns out that much research (here and here) has been done on expert performance and, you guessed it, 10 years to mastery is about right. Many a child “prodigy” has, in fact, been hard at work on piano, math, chess, gymnastics, etc for at least 10 years. In fact, Martin’s narrative adds an exclamation point to that research, because we see it is no less true in madcap comedy routines than it is in quantum physics Nobel Laureates.

Deliberate Practice
This is the addendum to “10 years to mastery”. You need to add “deliberate practice”: focused review and improvement of your performance in your key success areas. You can’t just go through the motions. You have to think about what it is you need to do to get better. Steve Martin took plenty of notes after his performances, and, later on, also recorded his act for further review.

Creative inspiration,+knowledge-seeking followed by highly specified activities
This paradigm works everywhere from the Toyota shop floor, to my own previous specialty (commercial music), my current field (coding trading systems), and straight on to Steve Martin’s brilliant career achievement. You have to constantly invent, or search for, ideas on how to get the job done, and then tightly specify the actions needed to implement those ideas. Steve Martin mentions speaking his lines while, at the same time, mentally “living in the future", of his next move, his next prop, his next joke. He also mentions a tighter and tighter focus on “precision”, to the microscopic level: the movement of a finger could make or break a joke, as he tells it. Again, his journey illuminates these qualities, and we can see how they might apply to a baseball pitcher, a race car driver, an Olympic diver, etc.

One more note: mere ideas without precision execution will lead to mediocrity or failure, as does repetitive execution without a constant source of new inputs (either from internal or external sources of creativity).

Networking and Likability
While networking and likability are not mentioned per se in Steve Martin’s book, it is clear that he was able to find, keep, and utilize his excellent relationships with others to move forward in his career. He had long, multi-year relationships with theaters and clubs where he could practice his craft. Friends offered to manage him. Ex-girlfriends got him work. He often sought and received excellent advice from other comics, and even, on occasion, used others’ material, with their permission. You cannot do this without being likable, without building and maintaining your network. I get the impression that people naturally gravitated to this well-spoken, good-looking, freethinking and talented guy. He may not have needed to concentrate very much on this aspect of success, but it is clear he was great at it.

Mental Models
Steve Martin was driven to educate himself. Logic, art history, poetry, and philosophy are only a few of the areas he consciously turned to. Charlie Munger has frequently mentioned having a suite of “mental models” for taking in reality through different perspectives. Martin’s book is loaded with analogies to art. And it is clear that he uses his highly developed mind to “think about what he is doing”. Much as 20th century artists and musicians used “classical” forms and ideas to frame, or "set up" their excursions into new territory, Steve Martin's comedy is “referential”: it is “meta-comedy”, or, comedy about a guy doing comedy. This comes, in part, from having developed mental models to view and re-frame experience.

Success comes on the far side of failure
As Ben Stein puts it, you just have to “stay at the table “ till you win, hopefully enjoying yourself in the process. Just before his biggest breakthrough, when he went from a live audience of 90 to an audience of 40,000, Steve Martin was nearly broke. Reality , and success in particular, is not linear. Breakthroughs can happen right after the most disheartening turn of events. You cannot really put a time limit on success, because things have to “lime up” just right, even though the groundwork may have been laid years before.

The key point is this: Steve Martin is probably the most famous standup comedian ever. And I , for one, have a huge respect for that one-in-a million gift. But , for the rest of us, it is instructive that, as Lee Trevino once said: “The harder I practice, the luckier I get”. The success principles illustrated by Martin’s meteoric rise to fame (preceded by a mere 10 – 20 years of performing!!!) are actually applicable to success in many areas. His book, besides being a piece of sheer beauty, can help bring out the “star” shining in each of us.

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New On My Reading List

I am currently reading "Cracking Creativity" by Michael Michalko. Outstanding collection of creativity-enhancing techniques. I hope to post a full review soon. The book illuminate the techinques of the world's great geniuses (Einstein, DaVinci , et al), and goes on to present a dazzling collection of very usable techniques for idea generaton, problem-framing, and problem solving.

Success Book Reviews: Warren Buffett and "The Snowball" Part 4

This is part 4 of a “review” of Alice Schroeder’s remarkable biography of Warren Buffett, "The Snowball”. Actually, this topic would be better categorized as part of my Success Secrets category, since, as always on this blog, my goal is to elucidate the behaviors, disciplines, and mental models of the most successful people. Part 1 is here. Part 2 is here. Part 3 is here.

Buffett Secret # 6 Stick to your Circle of Competence
Both Buffett and his lifelong sidekick Charlie Munger, arguably two of the smartest business minds on the planet, repeatedly emphasize that they themselves stick to a very few investment methodologies, and only work in business lines that they understand thoroughly. Why would they admit this? Why would this be important to know? Well, firstly, it takes years and years to be good at something. Trying to be good at too many things is not going to work. Also, simple business concepts are going to be easier to apply broadly than complex business concepts. Market dominance, for instance, is a simple concept . Semantic Web Asynchronous Transfer, for instance, is a complex concept.

Secondly, there are very few “snowballs” out there (meaning, a line of activity that produces consistent results that work repeatedly, and can be compounded over decades). So, if there is a line of activity that seems to be accumulating results in a “snowball-like” manner, you use that information to stick to what you are doing, rather than succumb to boredom or “master of the universe syndrome” and veer off-course.

Thirdly, you are less likely to be deceived by others if you thoroughly understand the potential of a business. This understanding is easier to achieve if you limit your "circle of competence" to simple businesses, as Buffett does. You can then bid intelligently, and to recognize when something is “too good to be true”. You thus avoid many meltdowns and bad decisions.

Buffett Secret #7: Focus for a lifetime
Buffett’s own description of his main “secret”, according to Alice Schroeder, is “focus”. You must be drawn obsessively to you main pursuit. It must dominate your waking and sleeping hours. "Love", "passion", "obsession", while not exactly the right words, convey the feeling of someone in the grip of a “virtuous circle”, where what he does not only works, but brings out the best in a person, and also captivates him, urging him higher and higher. Often, this type of success allows others to follow along and succeed as well. Berkshire stock turned many an average investor into a multi-multi-millionaire.

But focus is different from “focus for a lifetime” just as a driveway is different from an interstate. Do you have something that will keep you fascinated for decades? That makes you “skip to work” in the morning, as Buffet claims he does? Does the concept drive you to gain knowledge, hone skills, ask questions, and be the type of person that other people love to do business with? Will it make you the kind of person people feel safe with? Confident with? Sure of? Focus for a lifetime can, indeed, be the crowning achievement of a lifetime.

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Success Book Reviews: Warren Buffett and "The Snowball" Part 3

This is part 3 of a “review” of Alice Schroeder’s remarkable biography of Warren Buffett, "The Snowball”. Actually, this topic would be better categorized as part of my Success Secrets category, since, as always on this blog, my goal is to elucidate the behaviours, disciplines, and metal models of the most successful people. Part 1 is here. Part 2 is here. We continue...

Buffett Secret # 3: Hire or acquire skill sets that are lacking
One of the startling revelations (to me , at least) in the book was the fact that Buffett took the Dale Carnegie course. My image of Buffett, before this book, was that of a brilliant analytical individual whose insights into corporate structure and value allowed him to buy companies cheaply. While that is absolutely true, it turns out that it frequently took a lot of interpersonal skills to buy the kind of assets he was seeking, especially if these assets were not publicly available. This is one of the areas where interpersonal skills are required. Another is in encouraging and “firing up” your employees to consistently perform at their highest level ( a fact that Jack Welch also addresses in a video I posted recently).

What Buffett and Welch reveal to us is that you ignore the human component of your business at your peril.

Sometimes you hire, rather than acquire, the lacking skill sets. To improve the results of his insurance businesses, Buffett hired the outstanding Ajit Jain. Jain proved to be such an outstanding risk manager that his name is bandied about as a successor to Buffett himself at Berkshire Hathaway.

Buffett Secret # 4: Keep Expenses low. Stay away from “Glamour”
Buffett never maxed out on fancy homes, fancy cars, fancy hobbies, or fancy possessions. Now, we can never know exactly how much of this is actually true, but we do know, from Schroeder, that Buffett basically maintained a singe residence, a home in Omaha, Nebraska, for the whole of his working life. This is a far cry from the deca-million-dollar Manhattan condos maintained by lavish-spending CEOs. Similarly, Buffett often bought into “low-glamour” businesses such as flooring, metal fabricators, shoes and furniture. Why? Because the cash flows from the businesses were cheaper than cash flows of more glamourous businesses. Also, because he candidly admitted that he didn’t understand high tech. While Buffett could match brains with highest of high-tech CEOSs, my own guess is that, to Buffett, the long-term value of the cash-flow stream of a high-ech business is more difficult to predict than the long term value of massively scaled business based on serving a huge and slowly-changing need. Coffee roasters instead of Javascript, as it were.

Buffett Secret # 5: Find a Supportive Mate
Buffett, always a keen scout of talent, picked Suzie to be his wife. N Suzie he found a woman who was willing to allow Buffett the time and mental tranquility to achieve his full potential. In my own experience, I have seen the demands of family, often channeled through the society’s pop-psychology lens, stifle nascent potential, in the interests of fulfilling dubious “needs” (such as consumer goods, fine houses, “work/life balance”) . Truly great careers, and great achievements , need decades to come to their full fruition, and the achiever needs supportive people around hm, to “wall off” distractions, provide empathy and understanding, and to provide approval and comfort during rough times. A tranquil marriage, free of divorce or major psychological upheavals, has to have been the greatest success secret of all

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Success Book Reviews: Warren Buffett and "The Snowball", Part 2

This is part 2 of a “review” of Alice Schroeder’s remarkable biography of Warren Buffett, "The Snowball”. Part 1 is here. I put the term “review” in quotes because what I have bee trying to do on this blog is abstract the qualities that generate personal success and achievement, whether from biographies, websites, etc. As such, I tend to look at the material I am reviewing with a view towards gaining a glimpse at the successful practices of our highest achievers, and, if possible, cross-referencing these characteristics with those of other achievers I have discussed on this blog.

Here are a few of the success secrets that Buffett seems to have practiced, some of which appear in the biographies of other successful people

Buffett Secret # 1: Go to New York

What? What kind of Success Secret is that??? Actually, Woody Allen got it half right. He said “The Secret of Success is Just Showing Up”. What he might have added is “ Just Showing Up In New York City”. Several of the outstanding successes chronicled in this blog have passed through and “caught fire” in New York City: Andy Grove, Sandy Weill, and Allen Greenspan are three of them. All four (Buffett included) had transformative experiences in Post W.W. II New York City. And they are only four of millions who “got their shot” in New York (others included me, and my father). The broader rule is phrased as: “Go where there is a ‘critical mass’ of knowledge or activity in your field”. Ben Stein also mentions this Success Secret in his beautifully written “How Successful People Win”. You grow corn in Iowa and make chips in Silicon Valley NOT THE OTHER WAY AROUND. We view Warren Buffett as basically a Nebraskan. Thanks to Schroeder, we see…not so. Besides his formative experiences studying and working for Value Investing dean Benjamin Graham, Buffett traveled to New York countless times on business for decades. Often times he did it “on the cheap”, rooming with relatives or friends, or in inexpensive hotels. But Go he did.

Buffett Secret #2: Go Wherever You need to go to do business or gain knowledge

Knowledge is often not nearby nor easily obtained. Buffett went far into the countryside to many a rural business to assess its value prospects. In his early years he also managed to track down other businessmen who were already assembling collections of businesses, as he wished to do, and sit down with them for talks. Always, always he would ask questions, and, because he schooled himself in interpersonal skills, he got the answers he needed to make buy/sell decisions. I was struck by what, at least to me, seemed to be a key difference between Buffet and another Titan, Alan Greenspan, who seemed to spend more time in the New York/Washington corridor. One difference between he men, it seemed to me, was that Buffett had “ownership money” on the line. He was actually buying things, as opposed to Greenspan’s early career, as a consultant. Buffett needed to examine each prospective business purchase as with a jeweler’s loupe. The tiniest asterisk in a corporate report might mean an hours long interrogating of target management. As such, Buffet had to be “present” in intellect and in physically Being There. Greenspan, on the other hand, was gifted with a broad, big-idea view, and thus tasked himself with assembling masses of smaller details into a larger tapestry, initially for his consulting clients, later for the Federal Reserve.

The key point is, “getting from, here to there” requires an enormous expenditure of energy. A bias for activity, and enough assertiveness to get the data, confront (or cajole) when (absolutely) necessary. You can’t do it from behind a desk, and, usually, not (solely) in your own backyard.

More Success Secrets of Buffett’s “Snowball” in upcoming posts.

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Success Book Reviews: Warren Buffett and "The Snowball" Part 1

Alice Schroeder has written a monumental, authorized biography of Warren Buffett. The amazing Buffett is often classed as the world’s richest man. His public image, as a smiling, relaxed, avuncular presence would lead one to ask “Is that all it takes to become the world’s richest man?” Thankfully, the answer is “no”. It appears that what it took for Warren Buffett to succeed was very much what it takes for all of us to succeed, and, for vast success, none of the skills needed for success can be omitted from one’s personal “portfolio” of skills.

What surprised me most about the book was the “disconnect” between the Warren Buffet I thought I understood and the Warren Buffet of Schroeder’s book. I had an image of Buffett as a brainy, savvy stock investor, basically picking businesses by their balance sheets, buying stock when it was cheap, and leaving management alone, as he sat in his Omaha office contemplating his next share purchase. What I learned was that Buffett was no “shrinking violet”, but was hugely proactive, a determined networker, and that he learned to become an absolute master at recruiting others to achieve what he desired to achieve. He has actively sought opportunities to teach, speak, and associate with other prominent and successful people. This side of him goes far beyond the pure “investor” side. As a matter of fact, many investors with similar approaches (the members of Buffett’s “Graham and Doddsville”) succeeded admirably without the need for the limelight.


What is the Snowball?

Perhaps the most prominent feature of Buffett’s career is the Snowball itself. The Snowball is the difference between success and massive success. It is a skill, a goal, a process, and an achievement, all “rolled up” in one, and it is the Snowball itself I want to discuss here.

The Snowball is a compounding effect created by applying a successful, self-reinforcing process at larger and larger scales. Because it is a compounding effect, the process needs to be maintained with as little disruption as possible, for as long a time span as possible.

Bufett's “Snowball” could be defined as the purchase of underpriced cash-flow streams, combined with the re-deployment of those cash flows toward the purchase of future cash flow streams.

This blog has previously examined other Snowball effects, such as the career of Citigroup chairman Sandy Weill and golfer Greg Norman.

In Weill’s case, the competencies used to create the Snowball included brokerage management skills, especially back-office management and balance sheet survivability. In Norman’s case, it was exploitation of a personal brand into wider and wider arenas.

All three, Weill, Buffet, and Norman needed to be skilled at projecting personal presence in order to move to higher and higher levels of leverage (i.e. bigger and bigger businesses). In at least one case, Buffett’s, he consciously took Dale Carnegie classes to improve his abilities in this area.


What does it take to build the Snowball?

First and foremost, a core skill set and a passion derived from success utilizing the skill set. Buffet had a passion for “the business of business” since his first paper route. He came to learn that his love for the details of business could produce increasing success.

Because larger and larger scale is needed, delegation skills become important

Because increasing the span of the business is important, the ability to appreciate the differences, as well as the similarities, of the next acquisition is important.

The ability to scale attention span is important: sometimes a wide-ranging view of a business, sometimes weekly sales figures of a branch network, even product-by product scrutiny. Sometimes you're studying yearly sales in the billions, sometimes one-cent price-increases.

Because the span of the pursuit continues to increase, delegation skills are important. The ability to “size up” a manager becomes a required skill. Since all-too-human people are involved, there is always a chance for error and errors often occur.

Because Buffet’s core competence is, basically, purchasing underpriced cash-flow streams, it is important to have the interpersonal skills to persuade owners of those streams to sell to him at a price he considers valuable. These skills can be “good cop” skills, or “bad cop” skills.

Because the compounding effect takes decades to mature, personal passion and willingness to stick to routine, and maintain consistent analytical rigor is crucial.


I’ll continue my discussion of The Snowball in a future post.

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Success Book Reviews: 3 Quick Takes

I took the audio versions of Fox's book and Pickens' book along on a recent car trip across country. Fox's book was a truly outstanding and exhaustive treatment of client service, promotion, and self-management techniques, clearly written by a master. I found the sheer volume of ideas to be indicative of an incredible generosity. Fox is clearly a master and an insider, and this book is the next best thing to a world-class course in "How to Make The Sale Happen", with a minor in "How Not to Look Like An Idiot In Business".




Pickens' life end exploits are hugely entertaining. In one sense, his life reflects a habit of thinking big, learned at an early age,which, by its very nature, produced knock-on effects throughout his career. That lesson alone was worth the price of the book.








I have just begin to read Buffet's book, and I'm loving it. There are fascinating parallels with Alan Greenspan in some facets of Buffett's early development, notably facility and interest in data and statistics, while Buffett's Omaha-based practical streak added a penchant for making money and salesmanship, which led in a different direction. I plan on further comments at a later date.