Mohnish Pabrai: FASTEST Way To Financial Freedom! Proven Playbook For Quitting Your 9-5 In 9 Months!

Why do they call you the Dhandho. Investor? It's a way of doing business. and making money without taking risk. Like for example, Mr. Gates, Mr. Walton, Mr. Branson, all of these people. followed these simple mental models. So, if they won, they would win big. And if. they lost, they'd lose nothing. So, I. want to know everything. Okay, let's. start with this. Mohnish Pabrai is the. self-made millionaire who built one of. the most respected investment firms in. the world, managing over a billion. dollars. And now, he's giving us the. simple tools and frameworks to create.

life-changing wealth. If humans. understood that if I embark on a. business in a format where the risk is. close to zero, more people would do it. And that's what these mental models do. For example, cloning. We are taught, if. you want to start a business, you need. to come up with something new. But. actually, if you are a great cloner, you. will be 90% ahead of the rest of. humanity. And in fact, everything that. Microsoft has done well at has come from. copying someone on the outside. And.

then, there's time. When you're starting. a business, don't quit the day job. because some other yo-yo is paying your. rent. But it does mean that you need to. find time to work on your business. But. I will show you the perfect way to. allocate your time. And that's not all. There's models like low-hanging fruit, skin in the game, givers versus takers, and the circle of competence. And I'll. I'll explain all of them. What about. investing? Cuz you're very well known. for being an excellent investor. There. are three things that matter with. investing. And there's also something.

known as the rule of 72, but I wish they. would teach it more in high school. And. it tells us how long it takes money to. double. Now, this is exciting. I see messages all the time in the. comment section that some of you didn't. realize you didn't subscribe. So, if you. could do me a favor and double-check if. you're a subscriber to this channel, that would be tremendously appreciated. It's the simple, it's the free thing. that anybody that watches this show. frequently can do to help us here to. keep everything going in this show in. the trajectory it's on. So, please do.

double check if you subscribed and thank. you so much because in a strange way you. are you're part of our history and. you're on this journey with us and I. appreciate you for that. So, yeah, thank. you. Mohnish Pabrai, with the work that you do and the sort. of public educating that you've done. more recently in your career, what is the message you're trying to. convey? If you had to summarize that. message and exactly who you're trying to. convey it to?

It really depends on. uh. what message. There are uh a few different mental. models that I've figured out. over the last few decades. When you have. uh you know, clarity on these mental. models and especially. when you can start overlaying them, that's when you get 1 + 1 becomes 11. And uh so, these mental models are not. all in the same direction or in the same.

genre. So, just to pause there for a. second. So, the the word mental models. Yeah. >> means it's basically a framework for. thinking. >> Yes. >> So, one framework for thinking is this. idea of cloning. >> Yes. >> um as one such example. Yes. Let's take. the mental model of cloning. Cloning. >> Cloning, right? So, um. what we are taught is that if you want. to start a business, you need to come up with something new. Something that hasn't been done before.

But, the reality is that the world will. very easily accept three of the same. thing. or five of the same thing. And usually. it is an advantage. to look at something that already exists. and say, "Can. another one of those exist?" For. example, or can I take what's there and. tweak it a little bit? So, there's. something peculiar in the human psyche, maybe going back into our history and.

our ancestral evolution, where humans look down upon cloning. But, if you look at it, so for example, two of the greatest cloners, I think, in. human history, were Bill Gates and Sam Walton. Now, we think of Bill Gates as an. innovator. And we think Sam Walton created Walmart, which was also new. But, actually, they're both me-too models. And. Microsoft would not have existed.

without being a great cloner. So, when we look at um Microsoft Word, it came from WordPerfect. Which was a. company. >> Which a competitor that he took out. Uh we look at Excel, it came from Lotus. Uh we look at Bing, came from Google. And you know what Bing is, but it's not. Google. Everything that Microsoft has done well. at. has come from copying someone on the. outside.

And when we look at Sam Walton, who's, you know, the Walton family, if you. pull them all together, it's the richest family in the world. It's richer than. uh Elon and everyone. And Sam Walton, by his own admission, would tell you that he has no original. ideas. So, originally, Walmart. cloned Sears and Kmart. For my. international listeners, these are two. big supermarket chains. >> Yeah, and they're both gone. They're.

They're And in fact, Walmart buried. them. And um. and Sam Walton. was one of the most intense cloners. ever. So, if he was driving on vacation with. his family, and he's passing some retail store, he. would tell his family to stay in the car. and he would go in the store just to. check it out. And he said that there is. there is no human who has lived in. history or will live in the future.

who has visited more retail stores than. he has. One time there was a manager of his and. he would go in with his managers to. these stores. Retail is one of the most. transparent businesses. You can go into. your competitor's store and you'll. figure out the entire business model in. 10 minutes. You don't need to talk to. them. Okay, it's beautiful. So, he went. into this retail store and the manager. says to him, "Oh, what a terrible. operation. The the whole store was. topsy-turvy. It's really bad." And Sam. says to him, "Yeah, but did you see the.

candle display?". The candle display was fantastic. So, Sam felt that he could learn from. anyone. It didn't matter if you were a useless. operator or a great operator or. whatever, anyone in the middle. Walmart. is just an amalgamation. of ideas from other places. If we look. at If you look at a company like. Starbucks, we think of Starbucks as innovative, but. actually what Howard Schultz did is. he saw a concept in Italy.

and his idea was that I think this is. work in the US, right? And so, he cloned. he cloned that idea from Italy and. brought that coffee shop experience to. the US. If you are a great cloner, you will be. 90% ahead or 95% of the rest of. humanity. Now, another mental model, humans have this. perspective.

that starting a business. is risky. In reality, entrepreneurs do. not take risk. They do everything in their power to. minimize risk. And in many cases, when. they embark on a business, the risk approaches zero. What is extremely risky. is a 9:00 to 5:00 job. Because we have one life.

Right? And it goes away. And you may not. get to do what's in your heart. You may. not get your music out. Right? And so, getting our music out is really. important. So, so this notion, which is drilled into. us, that. if you're an entrepreneur, you're taking. risk, really kind of does a big. disservice. to. most humans. And if if humans understood. that if I embark on a business, I can do. it in a format where the risk is zero or.

close to zero. And I can clone an existing business. Right? Now you've. combined two mental models. And we can start adding more to them. But two has become 11. 1 + 1 has already. become 11. It's non-linear. And. why is it. that why is why am I saying. that entrepreneurs do not take risk? So,

if I take my own case as an example, and. I can give you 100 cases like that, but. if I take my own case as an example, I was working. 9:00 to 5:00 at a company. And I had a business idea. My employer expected me to work 40 hours. a week, right? There's 168 hours in the week. So, I. felt like there must be at least another. 30 40 hours that I could work.

on my startup. Could you show me this in. context? >> Right. So, if you look at our whole. week, for example, these beautifully. arranged LEGOs. If I take one of these. blocks of LEGOs, so each one of those. blocks in there is 2 hours. So, 8 hours. a day, we're sleeping 8 hours a day, right? And uh and we're doing that 7. days a week, right? So, basically we've. got 7 days a week, 8 hours a day, we're. sleeping.

The blue LEGOs are showing our 40 hours. a week. Uh 8 hours a day, 5 days a week, we're. working, right? Then we get to. other, you know, uh preparing dinner and showering, shaving, getting ready, whatever else. So, that's about 4 hours a day on the. weekdays, which is including commute. time. And about 8 hours a day on the weekend. Then we get to free time, you know,

social media and watching Netflix and. hanging out with friends, going for. dinner. And we've got. quite a bit. We've got about 4 hours a. day of doing that. And about 8 hours a. day on the weekend. So, this is kind of. typical what a typical week for most. people would look like, right? Mhm. Now, when you're starting a business, the. important thing. is don't shut off the cash flow. Some other yo-yo is paying your rent. And some other yo-yo is paying your.

groceries. So, we don't want to rock the. boat. But we're going to make one change to. blue. Which is the amount of hours I'm. working for my 9-5. >> Now, before I started my startup, um I. used to. get top reviews as an employee. Uh you know, I was very focused on doing a great job. for my employer, all in, right? The day I decided I'm going to run do my. startup, I decided I need to be just. above firing level. My performance needs to be just good.

enough. so they don't can me. But nothing beyond that because I need. all my energy to go into my startup. So. that's the only tweak I'm making is the. blue stays, but we're not doing extra. blues like we were doing before, right? And blue for anybody that doesn't can't. see cuz you're listening on audio is. work. Exactly. Yeah. Blue is work, exactly. Now. when we embark on a startup,

we should never do a startup to make. money. It's the worst reason. to start a company. The purpose of business is not to make. money. The purpose of business is to deliver. an incredible product or service to. humanity. If you do that, the money is a side. effect. It'll happen. We don't need to focus on. it. So what we are looking for is.

do we have a product or a service that. we're thinking about that we could bring. into this world. that is going to improve the world in. some way. How do I know if it's a good. idea? Whatever idea you have come up with. is not going to work. Okay? Because you came up with it in an ivory. tower between your ears. Okay? And that's not really a great. place to find great ideas.

What's going to happen is we're going to. be doing what I call rapid prototyping, which is we take this idea. and show humans what it is. And when you. show it to humans, you will get. feedback. So I'll I'll I'll. um maybe I'll just give it in more. practical terms. Uh. when I was um. uh when I was starting my first. business, uh it was going to be a IT. services business. Okay, information.

technology services. And I was going to. be providing these services to very. large businesses. Companies that are, you know, billion. dollars or more in in earnings or cash. flows. Um, I was in a meeting with a, uh, senior IT. guy at a very large bank in Chicago. And I was going through my PowerPoint. deck with them. I came to the 10th slide, said my spiel, went to slide 11.

So, the boss who was sitting in the. meeting said, "Go back to slide 10.". So, I went back to slide 10, again gave. my speech that I had for slide 10, and. took it to 11. He said, "Go back to slide 10, and do not change. the slide. I don't have an interest in any other. slide. Okay? So, I took it back to slide 10. And all he wanted to talk about was what. was on slide 10.

My deck was talking about. seven things we could do. Slide 10 was one of those seven. It was an extreme pain point for him. He needed help on that one thing. He didn't need help on all the other. riffraff stuff I was talking about. So, when you're doing a startup, you have to be. listening very carefully.

Your customers or potential customers. will tell you exactly what you need to. do. Whatever you came up with maybe 80%. right or 70% right or 40% right, but. your customer will tell you what is 100%. right. Okay, because that's a real pain. point. So, I went back and thought about. it. and I realized that his pain point. and I could see it was a severe pain. point because he gave me a purchase.

order at the end of that meeting. Um was going to be a pain point for a. lot of people. So, I went back. I took slide 10, blew it up into 20 slides, and that. became the deck. Okay, everything else got thrown out. Right now, I couldn't have done that. without him. My brain is too small to have figured. that out. So, anytime you're doing a. startup of any kind.

and you have a prototype or a early. product or something going on, your users are going to tell you exactly. what. tweak they want. You've just reminded me. of a conversation I had this morning. Okay. Where I interviewed someone. because much of what you're saying is. orientated towards startups, but it's. actually every single day of everyone's. life because I interviewed someone this. morning for a really critical role in. the company. And this person has spent. 20 years at one of the biggest companies. in the world. And.

when I was doing the interview, she was. telling me about lots of things she's. done during those 20 years. And I was. just trying to get to this one thing, can you put on events? And she was. telling me about this and that and the. other thing and this and this and the. other thing. And I was just actually I'd. only come to this interview to figure. out if she could do put on big scale. events. So, we spent over an hour. conversation. We spent 55 minutes. talking about a bunch of things I wasn't. interested in. And actually as she was. speaking, I was going, "Do you know what. she could have done at the start of that. conversation? She could have gone, 'Steven, can I ask you one question? What is the What are you looking for.

from from this person?'" And if And then. I would have gone, "I just want someone. that can put on events." And then the. next 55 minutes could have been. persuading me that she can do that. Sure. And it just applies to what you. just said there. How could you of this. as the sales person that day in that. meeting, with what you know now, how could you. have done a better job without going. through all of those slides? Well, I think what what I would do now. if I were doing something like that is. that my my radar. on listening would be 10x.

You know, we don't learn when we speak. We learn when we listen. So, I would. really be trying to talk less and. extract more. Mhm. And I wouldn't even. rely so much on slides. I'd like to. really try to bring them in into into. what they are trying to say. And uh. And and so, basically in uh if if you. study if you study businesses, you know,

venture back, non-venture back, whatever, this is a very. common thing. There are almost no. businesses. who end up with the business model that. was originally conceived. I mean, that. just is would be such an anomaly. It's really the interplay between the. founding team and the early customers, which really leads to taking this wet. clay. and making into something that people.

want. >> Mhm. You know, and so, you know, if you think. of something like Google Glass, you. know, when they came up with those. glasses that they thought the whole. world was going to wear. Yeah. So, it didn't work. Well, why didn't it work? Well, the reason it didn't work is. you're talking about something extremely. personal. Okay? Like, for example, Wrigley's chewing gum. Okay? My mouth is a very personal space. I'm not going to put Glotz chewing gum.

in there. What's Glotz chewing gum? Exactly. >> Okay. Okay? Yeah. You're not going to. put some brand that's half the price of. Wrigley's in there. Because you don't want to go there. That's not of interest to you. So, when. we wear glasses or sunglasses or. anything we wear, that's very personal. So, the the ergonomics and the human. factors are very important. If it's. slightly off, now. Meta. is trying to do the same thing. But,

they went to Ray-Ban. Right? They did a JV with Ray-Ban. Those glasses look like normal glasses. Mhm. I think there's a higher chance. Well, I've got some. I used them, yeah. You don't have any. Google Glass. No, no, no, no. I think they they cut the project, didn't they? Yeah. So, so what I'm. trying to say is that we we have to pay. very close attention to the customer. Uh. I mean, Steve Jobs was right. The. customer doesn't know what he wants. Okay? But, if you put it in front of.

them, then they can now tweak and tell you. exactly what they want. Right? So, so. that and that's another mental model, which is uh now we get to the third. model, which is that you're not smart. enough. If whatever founding team you. have is not smart enough to figure out. what people want. Period. So, you have. to have very good listening skills. And you have to be have the flexibility. to and again, when you're listening, separate the signal from the noise. Right? Take in what is real signal.

and. leave out what is the noise. And then. you're starting to get down a path which. is going to make more sense. The other kind of a model maybe woven. into there was this idea of just like. attention to detail. I'm not even sure. if that's a model, but when you told me. about the Walmart founders laying. between the aisles to measure the exact. centimeter of length. The model there. for me was just like precision and. detail. It's a game of inches. I mean, what I'm.

saying is that. uh when. when Sam Walton was. trying to figure out the name of the. company. One of the reasons he went with Walmart. was it was seven letters. And he was looking at the cost of. putting up signage. in stores, and he was trying to come up. with a name with the fewest letters. because it cost less. Okay? And so, I mean.

cost. cost sensitivity is all over the place. in Walmart. Right? I mean, that's just. front and center with what they do, right? I mean, they just really squeeze. blood out of a rock, you know? So, basically, I mean, I think that was and. that's the reason why they became so. successful. One of the things you can. always control in business is your. costs. You You may not be able to. control your margins and selling prices. and a lot of other things, but you can. always control costs. So, that's another. model where you have to have discipline.

You have to have very strong discipline. on the cost side. If you look at. something like LVMH, you know, the guy who runs it, I mean, he's in luxury goods. He's in high-end. LVMH make Louis Vuitton and. >> Yeah, yeah, yeah. I mean, everything, you know? It's you know, they've taken. over Tiffany's and everyone. Um. but when you look at how the company is. run, it's very tight. He spends money on the best real estate.

because that's important. But the deals. he negotiates on those real estate is. mind-blowing. You know? So, it's it's a. very tightly run operation. on a product category that doesn't. necessarily need it. Hm. But that's why. they That's why he's become the. wealthiest guy in Europe. Because that. mentality will then apply to every. decision. >> Absolutely. >> And if you apply it to 100 things, it. does matter. >> Oh, it does matter big time. Yes. So, I. have these.

yellow blocks here which represent. working hours working on your own. business. So show me how you would take. some of these blocks away Yes. and. introduce hours working on your own. business. Yeah, so basically it's it's. really quite simple. We're not really. not going to mess with our sleep cycles. We're going to leave that alone. Sleep. staying the same. And we we need our. blue, which is our work work space 40. hours. We need that to continue. One of the changes we're going to make. is we're going to live close to work. So.

we're going to cut down commute time as. much as we can. Okay. Because every hour. matters. Okay, so the area that we're. going to focus on. is the free time. Okay. And the reason. why taking out the free time. is not a problem is because what we are. embarking on, like we just discussed, is. not about making money. is getting our music out. Getting our. music out. What do you mean by that? Which means that we. have something in us that we know the.

world needs. And we want to bring it to that world. We want to bring it to the world. And. because we want to bring it to the world. it's not work. I think the audience. might be challenging themselves in the. head and saying but I love my the thing. I do for work. I'm I'm one of maybe the rarer group of. people that I get to work with puppies. every day. And I love that. Yeah, so I think that I. think this is not for everyone. So I think you have to ask yourself who. you are. If you are truly excited about.

your 9-to-5 job and what you're spending. your main working main waking hours on. awesome. That's great. I mean, everyone's not. going to be an entrepreneur. Everyone's. not going to have a startup. Everyone. they they may be getting their music out. in a different way on someone else's. platform, which is perfectly fine. And. but but if if that is not you, where. when you go to work, you're not super. excited to get up in the in the morning. and you're not tap dancing to work every.

day. If that's not happening, then. there's something wrong. And you have to. ask yourself, well, is there something else that is that. you're passionate about, that you want. to do? And this is not something that should. take a lot of. effort. So, if we go back. and look at, for example, Bill Gates and. Paul Allen, right? I mean, Bill Gates is. at Harvard.

and he sees. a magazine which shows a very early. personal computer. and he realizes that there's a paradigm. shift. And he realizes that he needs to be part. of it. And Paul Allen is the one who sent him. that magazine and he told Bill, "We got to go do this. Now, this is our. time." Now, and for Bill, it was a very easy decision. Very easy decision, very.

difficult for his parents. His parents. were in shock that he's going to abandon. his degree. And, you know, he he told. his parents, "Don't worry about it. I'm going to come back and I'll finish. the degree.". And several decades later, Harvard gave. him an honorary degree. And his parents were in the audience and. he told them, "I told you I'd come back. and finish it off, right?" So, let's put. some numbers to this. 12% of people,

according to the stats that are. listening right now, are explicitly. unsatisfied with their job, which means. they hate it. 85% of workers globally. are disengaged, meaning they're not. fully invested or happy at work. So, it's a huge number of people. More than. half of the US workers are at least. somewhat satisfied, but engagement. remains worryingly low. So, So, we look. at that 85% number, 85% of workers. globally are disengaged, meaning not fully invested or happy at. work. So, it's really those Sure. people.

And and the thing is it's not it's not. just enough to be unhappy at work. That's one piece of it. I. The unhappiness can be a symptom. And one of the. one of the. causes can be. that you have a different calling in. life. And you are not following following your. calling. Now, sometimes for someone like Bill Gates, for example, and Paul Allen, they. figured out their calling.

And they just went, right? For many of us, it may not be that easy. So, what we have to do is we have to. um. try a few things. You know, you try on. different shoes to see what fits. And so, you know, have some thought experiments, talk to your friends, you know, say, "Okay, you know, I'm a UPS driver. This is what I do. And.

I really like playing the guitar, or I. like to make these art figurines or. something at home, whatever else, right? So, you have to figure out. what your calling is. And. I'm probably not the best person to tell. you how to figure out what the calling. is. Maybe another guest of yours can can. can help them with that. Do you think. everyone has a calling? Yeah, I mean, I think I think we are all. unique children of God. And I think we.

uh we all have some music we want to get. out. And. uh. knowing what that is and getting it out. may not be the easiest thing, but it's a. worthwhile journey. to try to get there. Right? So, we can't do this just because we're. dissatisfied, and we can't do this just. because we want to make money and get. rich. We've got to have something that. we think the world would be interested. in. And. you know, in my case, I I'd gone through.

this uh. session with a couple of industrial. psychologists, and they told me, "Monish, you like to play games. You're. a game player." And actually, they. couldn't be more accurate. So, when I was doing my startup, um. I'm I'm a numbers guy and a math guy, so. I actually like that. So, what I used to. do is. because I had no money,

I used to send 200 letters a week to the. senior IT people. at 200 different companies. But what I. did is, so all these people I was. sending this letter to, they had a gatekeeper, some secretary. etc., whose job was to not let anything. through. And my whole purpose was I need this. letter to get through. It needs to get through the gatekeeper. So, I was using mail merge, which was. mass producing these letters, but there.

was a. customization the mail merge where if. person some person name was David Smith, it said, "Dear Dave." Okay? And then. throughout the letter, it talked Dave. Dave's name came up like three four. times. When the assistant got the. letter, she couldn't tell whether I know. Dave or not. Because you used his. shortened name. >> His shortened name, and she doesn't want. to throw a letter that is somebody that. he knows. So, the letter would go through. Mhm. enough times, right? Now, what I.

also did is uh 1 week after those. letters were delivered, I called I made 200 calls. I called all. 200 people. And basically, if I got voicemail, left. a message, whatever else, right? Now. they have entered the sales funnel. Okay, so. Dave Smith is in the sales funnel. If I get no response from Dave Smith. after 1 week there's one more call. Then the calls start getting spaced out.

double time, 2 weeks out, then 4 weeks. out, then 8 weeks out, then 16 weeks. out, but. Dave never leaves that funnel. Okay, until he tells me. "Do not bother me anymore. and I have no interest." They're going. to stay in that funnel. So the second. week I send out another 200 letters, make another 200 calls, right? And now. I've got the first week, second week. So.

you can see as time goes on. I'm calling nonstop, right? Because this. thing is. but what I was tracking. because I'm a math guy, what I was. tracking is, "Okay, these 200 letters. went out. How many people did I get any. kind of positive response from?" Right? Because not everyone's telling me to get. lost. Okay? And how many meetings am I. having? And what is the ratio of calls to. meetings, meetings to close, etc. And.

my ticket size of the item I was selling. was very large, hundreds of thousands of. dollars, right? 9 months after doing this, where now. let's go back here. So we're going to. take our free time. So what I've tried. to describe is that what I'm doing. is actually more exciting than the. orange. The yellow. is more exciting. than the orange. So basically we are.

>> The yellow is our startup. So that's. working on your startup. >> So on on the weekends. I'm going to do 10 hours a day because. I'm not working, right? And on the weekdays, I'm going to do 4. hours a day because I've got other. things to do. Because I have a job and whatever else. is going on. So, there's my weekdays. 5 days there when I'm putting in 4 hours. a day. And then I'm putting in 10 hours on the. weekend. And the free time,

this is not as exciting. as pounding Dave. Pounding Dave continuously till he says. either get off my back or here's your. purchase order. is very exciting. It's way more exciting than playing some. social media or watching Netflix or. whatever else. Which is what people. currently do with their free time. >> Right. So, one of your one of the litmus. test of whether. you need to you should be doing a.

startup or not is yellow. needs to be more exciting than orange. Your startup needs to be more exciting. than your free time. >> should be so painfully boring for you. And going on Facebook or Instagram or. whatever should be very boring for you. Compared to This is exciting. Compared. to building your company. Yes. So, you know, um the Pink Floyd's song,

"We don't need no education." Yeah. "We. don't need no thought control." Yeah. We. don't need none of this. This is so useless. You understand how. useless this is? Yellow is where it's. at. It's not It's not with the orange stuff. You don't need this. Thank you. See you. So, we don't need any free time. This is better than free time. Building. your business. You having an orgasm. every hour. So, what can you What can be better than.

this? Much of what I do here when I'm having. these conversations is I'm trying to put. myself in the shoes of the person who is. currently sat in a in a 9-5 job and. they've they've got an idea and their. idea is isn't really hasn't really gone. anywhere yet necessarily and the the. pressure they're feeling in their lives. is is probably now a financial one. Like. they want financial freedom. They want. more optionality in their lives to be. able to go on holiday, make more choices. and have more freedom. If you're that. person, um, what are the mental models that we. haven't discussed yet that you need to.

be thinking about to get from zero to. one? So one of the things to keep in. mind is that we live in a world now. where most things that you would want to. do in terms of starting a business. are not capital intensive. What does. that mean? Doesn't take much money. In fact, what's been happening over time. is startups need less and less and less. money because they need more and more. and more brainpower. Right? So the good news is.

that. a gating factor. is not that you need money. When when I started my business, I took. on. I signed up for every credit card that. would come to me. So I had 70,000 in. unused credit lines. in a probably a dozen Visa and. MasterCards, right? I had about $30,000 in my retirement. account, my 401k, which I also took out. at like 25, I can make that up later, right? So basically I had $100,000 of.

capital. And. that 100,000 got used because once I got. going, I needed working capital and so. on. And but then the business was the. business was actually cash flow positive. 9 months after I was doing this, I was able to get rid of this. So after 9 months, my business was. producing. enough cash flow. that I went and resigned. Okay? And uh yeah, we can we can put.

that in here as well. So, what happened. is that. I went to my boss and his boss and. basically told them that. I'm. started a business. It's not competitive. with the company and. I'm going to be leaving in 2 weeks and. this is my two weeks notice. And. basically, that was that, right? And. you know, they they sat me down and. said, "You know, Monish, we were so confused for the last 9. months.

because. we met several times because we saw big. drop-off in your performance. But it was never so low that we wanted. to fire you." I said, "Exactly. That was exactly what I was trying to. do. I was trying to stay just above. firing level." He said, "Well, you. mastered it because we we met several. times, but we couldn't get rid of you.". So, they what they told me is. they said, "Look, when your business. fails, not if your business fails, when your.

business fails, please come back. We'll give you more money. You're going to get a promotion. And we'd love to have you back.". I could immediately come back. So, I. said, "I got one free shot Yeah. where I. leave my job, I go, I do this thing, and if it doesn't work, I'm back to almost exactly where I was. Almost no change, right? >> type one, type two decision making. Yeah. Yeah. And so, and this is not just. me. What risk does Bill Gates take?

Okay, Bill Gates, what is his value. as a Harvard freshman in the job market? Zero. Okay? He Nobody would pay him. anything. And he could come back anytime and. finish that degree. So, let's say he. went to New Mexico. Things didn't work. out. He's got wealthy parents in. Seattle, okay? He just comes back, graduates a year later, and he goes on. So, what was the risk? There was no.

risk. And if you study entrepreneur. after entrepreneur after entrepreneur, what you're going to find So, if we look. at Sir Richard Branson, he wants to start an airline. Okay? Now, to start the airline, you. need a jumbo 747. That costs like 150 million. The plane? The plane, right? That's some serious. money. Richard Branson got Virgin Atlantic off. the ground with zero.

And with zero risk. So, here's what he. did. You replace capital with creative. thinking. So, he calls. 206-555-1212, which is directory assistance in. Seattle, Washington. And he asks for the phone number for. Boeing. Okay? So, he calls the main. Boeing switchboard. >> Boeing sell the planes, right? Yeah, Boeing makes the 747. So, he calls the. main switchboard of Boeing, giant huge. company,

and says, "Uh I'd like to lease a jumbo.". And they hang up on him. Okay? He calls about 30 times, and they keep. hanging up. And finally, they get tired. of his calls, and the lady says, "Let me. put you in touch with somebody who's in. charge of leasing, and they can tell you. to get lost." Okay? So, she transfers. him to a person who's. actually leasing jumbos. This person tells Richard, says, "Look,

Mr. Branson, in every country, we have. one customer. And in the UK, that is the British that. is British Airways. So, we have nothing. to talk about." So, he said, "Well, just. humor me for a second." He said, "If. British Airways called you and said that. they wanted to lease. a old used jumbo. Do you have one lying around? So, the. guy said as a matter of fact we do, but. that's academic. He says, well, what would you lease it. to British Airways for just since we're.

having a conversation. What ended up happening is. Boeing leased him that jumbo. And the reason they leased him that. jumbo is they had one just sitting. around. So, they didn't really have any risk. because they said the moment the guy. doesn't make any payments, we're going. to pull the plane. Mhm. >> Right? So, now when you have an airline, you sell all the seats 4 months in. advance. The cash has already come in. You pay for the fuel 30 days after the. plane lands and you pay for the lease. after the plane lands.

You don't need any capital. Virgin Atlantic got off the ground with. zero capital. Okay, now if you can start an airline. which needs a jumbo with zero capital, you can start any business with zero. capital. Okay? So, so basically. when you look at business after business. after business, all of them what they do is they start. small, they're embryonic, they minimize. risk, they get a few customers, and then.

after they just roll with the customers, right? And then that's how they get. going. So, so the important thing is that when we. take the blue out, when blue is no. longer here, Which is what? >> with the work is gone, yellow's going to. almost double or triple because this is. where all the orgasmic activity is. So, we move the work, we quit the 9-5 job. and we move that time over to work on. our startup time. >> I was working on my startup like from. 7:00 to 9:00 in the morning, and then I.

would come back 6:00 p.m. and work till. 10:00 or 12:00 in the evening. When you. had a job. >> When I had my job, and then I'd work on. the weekends. And I was so desperate. to just go full-time into it because I. just said if you just let me go full. time, I can tear it up. And that's exactly. what happened. I mean, we. in about five first year we did 400,000. revenue, second year 1.4 million, third. year 3 million, and by the 6th or 7th. year we were at about 15, 17 million. It.

just grew because basically then I had. no shackles on me. You know, I could just go full out, right? And the engine I I knew all the. statistics of these letters, so many. calls, so many this, so much this means. this and all of that. And uh it works. So, and and if if it doesn't work, you can. go back to your 9:00 to 5:00 and give it. another shot, you know? So, you actually. could do this a few times. I think. that's a really unappreciated framework, as you call it, or mental model, which.

is. cuz you said you sent 200 letters. I So. many times kids come up to me in the. street and they say, "Look, I've been. looking for a job. I've sent. six emails." Yeah. And they go, "No. one's got back to me." Yeah. And you can. see that it's hit hit their confidence. And now they've actually arrived at the. conclusion that getting a job is like. harder or impossible cuz they sent six. Now, when I interview people like you, they all give me much bigger numbers. They say 200, 300, five, you know? And there's something in this sort of. law of averages, which is just like just take more.

swings. You know, you see it in like. cricket. >> My my daughter, when she was graduating. from Berkeley, came to me and I was. really surprised. She said, "I want to. work at a hedge fund." And so I I said, "Okay." And her degree was not in. business. So, she was not a natural. candidate to be even considered. I said, "Uh can you make a list. of every hedge fund in New York and LA. and put it in Excel, managing partner's name, address." Now,

we don't know people's email addresses, but we know everyone's mailing address. Okay, the mailing address is a public. piece of data. The address. The address. is easy, right? And I I said that uh so she she got a. list of about. 1,200. funds in LA and New York. And I said. what you're going to do is. uh you're going to ask for the job, but. you're going to have two pages behind. that giving them a stock tip.

You're going to give them a pitch that. you have written up of a company that if. they invest in. they're likely to make money. We sent the 1,200 letters, physical. letters, okay? All physical letters, no. email, right? And um. there's a 85-year-old guy in New York. who gets the letter. He's retired, the. fund doesn't exist, it shouldn't have. been on the list, whatever. But he has a. friend in LA. He says, "Hey Jamie, why. don't aren't you looking for an. analyst?". And this girl, she seems to have the.

perfect kind of background. And she ends. up with a higher salary. than anyone who went to Berkeley. business school. with a much higher GPA than hers. I was thinking about. what you're saying um and I made a video. the other day which I think is somewhat. relevant where I was trying to describe. to people how to send a message to. someone. in a way that creates impact. And the.

framework that I came up with, which. I'll I'll well animate on the screen, but is basically. so this axis here is the signal versus. noise of the channel you're using. Mhm. So a high signal channel is one where it. gets past the PA. Mhm. It's less. saturated, less busy. A high noise channel, which is the. opposite, would be sending a an email to. the like press@yourcompany.com's. email. So like everyone goes through. that path and it doesn't get doesn't get. to the person. And then the other axis.

is basically the emotional impact of the. message. >> Yeah. So, high emotional impact is doing. what you said, put a stock tip in there, you're going to stand out, they're going. to think you're a little bit strange, or. what you said about like shortening the. name, that creates more emotional. resonance. And then low would just be. Yeah. AI slop, copy and paste jargon. And really like the most successful. messages are up here. Absolutely. >> High like high signal channel, high. emotionally resonant. Absolutely. But. what happens is people send loads of. messages down here. and then they get depressed and. demotivated and say no one's getting.

back to me. >> Yeah. Like Michael Jordan used to say, you. miss every shot you don't take. Yeah. Yeah. Yeah. So, basically, it is. I mean, I think one of the things about. entrepreneurs is that you need to have. resilience. Um. like for me. for me, what the data I was looking for. is that. if I send 5,000 letters, okay, which. takes 25 weeks, 6 months,

how many. meetings does that. end up in? If that ends up with. 10 meetings or 20 meetings, well, now I have my number, right? And. then the second part is the meeting to. close ratio, right? And so, to me as a. math guy, I I was just interested to know that. it's not zero. Okay, I just want to make. sure. And I could see very quickly it was not. zero. Literally within the first 2 3.

months I could see it's not zero. Every business needs a competitive edge, and if you're great at hiring, that edge. should probably be your people, the A. players you bring in. And I don't just. mean your full-time team, but your. freelance support, too. If you feel like. your talent isn't quite cutting it, then. I want you to take another look at our. sponsor, Fiverr Pro. Fiverr Pro is. Fiverr's premium offering, where every. freelancer is hand-vetted, so you're. guaranteed top quality every single. time. What's brilliant about Fiverr Pro. is that you're picking from a very.

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code diary. I think one of the the most formative. experiences you can give your children, which I got at 16, through through 16 to. 19 years old, which is what I did, was. working in cold tele sales. So, my job at 16 years old was to call. people at 9:00 p.m. cold and try and get. them to buy windows and doors. And it. taught me the exact lesson you're. describing, which is yes, 80% of people. tell you to off. 98% say no, but it. doesn't matter. I always say like 80 80%. told me to off. 15% said it in a.

nice way, and then 5% were at least. receptive to what I had to say. Yeah. Maybe 1% close, but when you understand. that, you think of life through that. lens. And actually, Stephen I had the almost. same experience. So, my father was an entrepreneur. He was. really smart at identifying what I call. offering gaps, like things that should. exist in the world, but didn't. And he would get these businesses off. the ground with no money. I saw him do. it repeatedly.

His downfall was he was very aggressive. in growing the businesses. And so, they. didn't have staying power. There was. almost no equity, always very leveraged. So, I he went bankrupt eight or nine. times, right? Repeatedly. When I was um. when I was about 11 or 12 years old, my. brother and I, we were like his board of directors, okay? Because he had nobody else. The three of us would sit down at night. to figure out how to make the business. last for one more day.

Okay, everything's caving in, the. creditors are craving in, the business. is collapsing. How do we make it. work for one more day? And then the next night we'd get. together and how do we get it work for. one more day again, right? At 16, and I don't know why my dad did. this, but I'm so grateful that he did. He was at that time he had a gold. jewelry factory in Dubai. And he was. going cold calling.

in person to jewelry shops to buy his. jewelry that he was manufacturing. So he took me with him on many of these. trips. And I was 16 just like you, right? So we would. take the taxi from Dubai to Abu Dhabi. And now there's all these. gold shops. He doesn't know any of them, right? And. he's going one after the other after the. other after the other. And I would be stunned that. fifth shop he makes a sale. Yeah. And.

it's a very small sale because he has no. trust and all that, but he's made the. sale. Then I noticed that after 3 months we go. back to that same shop we made the. little sale to. The guy brings out tea. He there's a there's a lot of chemistry, bigger order. And then I saw the orders increase, right? And then he's continuing to do. that. I I went with him to Doha, Qatar. Uh Qatar. And again, the same thing. It. was like, you know, I saw how those doors opened. Mhm. And I.

saw how it didn't matter to him when. they closed. That was irrelevant to him. You know? Really interesting new way to. think about it because what you're. saying there is actually, when you get. that one yes, it's actually a seed. that's being planted that can grow into. something We just care about the ratio. and the number. Okay, so what effort did. it take? Like I was saying, if I send. 5,000 letters and I get 20 meetings,

it's awesome. Mhm. I mean, that's a. fantastic ratio because one sale is. going to get me about 200,000 or. 300,000. It's a significant amount, right? I mean, so that I don't need. large numbers. And But the lifetime. value of that can huge. Yeah, yeah. I. mean, I mean, uh these uh these relationships I got. then, they're still with me. Mhm. You. know, so it's uh it's it's like forever. Here's a philosophical way to think. about that for just everybody, which is. you can remember probably conversations.

you had in your life that you thought. were totally inconsequential, but then 8. years later, that seed became a business. relationship. The example I always give. is when I was 14, I applied for The. Apprentice. They did this like junior. apprentice on the BBC. And it's a long. story. 35,000 kids in London and across. the UK applying. I met a kid in the line. while I was queuing up for my audition, and he said to me, "Oh, my dad runs this. um. 500 million-dollar company." And I was. like, "Yeah, whatever. Like, not. interested." I went through the.

auditions. I didn't end didn't end up. getting on in the show for whatever. reason, but then I ended up cuz we were waiting. in the queue that day, I was really nice. to this kid and I added him on Facebook. 5 years later, I get a message on. Facebook. Hey, 5 years later, although I. didn't get on the show, which would have. got me about $25,000 investment in my. company if I'd won, 5 years later, I'm working on a startup. That kid from the line says, "Hey, um my. dad has sold his business for a billion. dollars, and I've been watching you on. Facebook for the last 5 years. My dad.

would love to meet you." It was a an. Indian family, the Aluwalias. They'd. sold a business called Euro Car Parts. They took me to London when I was. literally so broke I was like. shoplifting food to feed myself. And his. dad invested double what I would have. won on the show into my business. Um and. I would and that always reminded me that. like every conversation. that I have is like planting a seed that. at any point in my life Sure. could turn. into something. Well, I mean, you know, um I always bring up. Adam Grant's book uh.

Givers and Takers. I don't know if. you've seen that. All humans on the planet fall into one. of three categories. They are either a giver. or a taker. or a matcher. Okay? These are There are no other. categories of humans. There's just these. are the three categories. Now, the matchers. are relatively simple to understand. Their. mental framework is. if Stephen does me a favor.

I'm going to try to do something similar. for him. You know, one-to-one. They can do the. matching in the math in their heads. The takers. who you don't have anything to ever do. with are trying to scam and screw. everyone. And always take and never give. Okay? The takers basically go nowhere. Okay? And if you have any takers in your life, get rid of them. Okay? Now, the givers. what the givers do is the givers.

um are not focused on what comes back to. them. They just want to help you. They want to help humanity. And what end up happening is. the universe conspires to help them. Mhm. So, the givers. become the most successful. Everyone is trying to give to them. even though they're not asking for it. So, basically.

when we and that's the book that Adam. Grant Grant wrote, Givers and Takers, is. one of the mental models with is a great. mental model to have, is to be a giver. Don't play math games, you know, always. try to make sure the other guy gets the. better end of the deal. And just keep going through your life. that way, and that goodwill. will compound. And it will take care of itself. And the time horizon, you don't worry.

about the time horizon. >> You're not doing it for getting. something back. That's the key. You're. not doing any mathematics, like I'm. going to do you're not calculating. I'm going to do this so XYZ happens. You're just doing it, end of story. I was sat with my girlfriend last night. She runs a breath work business, so. she's essentially a solopreneur. Um, and she's at that point where she's. trying to scale. In fact, I just meet so. many I think I I actually ran a survey. before. And the vast majority of.

business owners are in that SME. category, that small small sort of. business category. The back startups are. the backbone of our economy, but they. they come to me with the same problem, which is. maybe I started as an individual, I've. got high demand, and now I'm a. bottleneck. And I don't know how to get. out of being like a freelancer. How does. the freelancer become an agency? And the. the thing I was chatting to my. girlfriend about last night was um. the step she hasn't taken yet is to hire. someone exceptional.

And so many founders come to me, these. early stage founders are like. like I I I my customers like me, I do it. better, I don't trust anybody. I I. wondered if you had a like a mental. model for thinking about. >> the thing is, so if you look at people. like Elon Musk and Steve Jobs, they believe their number one job is. recruiting. The first 3,000 people who joined SpaceX. all personally interviewed by Elon.

Just think about that. Those are 3,000. hires. Think about the number of interviews to. get the 3,000 hires, okay? He. did not believe there was any other way. And. what Steve Jobs used to say is that. A players. want to work with A players. The moment you start introducing B. players, B players will hire B and C players.

They will never hire an A player. So, your downhill the journey's already. started the moment you get a B player. And so, as an entrepreneur, you know, we have a lot of demands on. our time, right? But, recruiting. has to be at the top. And you've got to be willing to spend. inordinate amounts of time. on recruiting.

Okay? And um. There's you know, there are tools that. you can use. We use uh There's a company. called Caliper we use for pre-employment. testing. And the thing is that. between the genetics of a human and the. first five years of the life experience, who they are, their traits are hard-coded. That is not going to change from 5 to. 95, okay? So, it's not like you're going.

to change a human. Human is the way they. are, okay? Now, these pre-employment. testing tests. can get you data that you're not going. to get in an interview. One of my companies I'm building at the. moment is called culturetest.com. It's exactly this. Okay. Um. I mean, you're just like preaching. preaching to the choir here. >> But, what I'm saying is that It It was. the most. >> we need to get really good at. recruiting. Yeah, it's my absolute. absolute obsession. And what I found out.

is that, funnily enough, from doing. these culture tests. So, I've kind of. culture tested tens of thousands of. people in the general population now. And the shocking part was, just to give. you some context on what it does, it. benchmarks our best-performing people. and how they make their decisions. The. assumption here is that culture isn't. the thing you come up with at the. offsite. Culture is how you would behave. on Christmas Eve when you get a text. message from a client. Like, what you do. there is your company culture. Basically, it creates these questions. which simulate optimal culture in that.

team. And it puts you in that scenario and. says, "What do you do?". This is probably a good point to talk to. you guys about culturetest.com, which is. the website we're about to launch for. anyone who has the responsibility of. hiring someone, which is probably. everybody listening. One bad hire can. destroy your entire company. So, we made. culturetest.com. so that you guys at home can spot those. red flags and avoid those hires that. might be the end of your business. Culture Test will make you your own. personalized culture test so that you. can screen every single person that.

wants to be in your team and your. current team members and people that. have left to see how they align. Just go. to culturetest.com. and put your email address in. And the. minute we launch, I'm going to send you. an email so you can try it before. anybody else. So, recruiting is really important. And. I think the other thing is uh. we're willing to. hire people. who may not do things as well as we do. But actually also what I have also found. is I have so many people on my team who.

are better than me. You know, they're better at many of. these things because it's not my natural. bent to do those jobs. So, that's really. when you get a huge bang for the buck. is you end up with team players that are. way better than you. How do you think about firing people? Cuz this is the other thing I've found. is slow, fire fast. Founders really struggle with the fire. fast thing. And uh.

it is very important. to fire fast. I think fire fast is more important than. hire slow. And you're doing the person a a service. because they may be exceptional in. another role. at another place. So, you are helping them. try to find that. If. >> And you're helping your other team. members. If I was trying to work for your.

companies, it what is the one. non-negotiable? Like what is the trait. that I would demonstrate where you would. immediately not even consider me? The most important is integrity. Mhm. You know, I mean. we we want three traits, right? We want. intelligence, we want integrity, and we want. willingness to work hard. Right? And none of these three are. really negotiable. And what does. integrity mean in your definition? Well, it's absolute honesty. It's pretty.

simple. You know, it's black and white. And you conduct yourself with the. highest level of ethical standards. So, on all fronts, when you're dealing. with a customer or. internally or externally, it's the moral. standards need to be very high. When you think about your wealth, how. much of it has come from building. businesses versus being a great investor. of the capital that you managed to make. from those businesses? I think currently most has come from.

the investing side. You're very well known for being a. really excellent investor over many many. many many many years. I'll put a graph on the screen that I. found which I think shows. the returns of your investment strategy. versus the the Dow Jones. This graph, Have you seen that one before? I haven't seen it this way, but people. put up all kinds of things. Yeah. I. mean, all this says is that you're. extremely good at investing. So, I want to know if I if I'm in. starting my investing career, I'm.

working in a 9-5 job at the moment. I've. got a couple of thousand dollars in my. my bank account. How should I be. thinking about investing? Should I be. investing? So, there are um. there are three things that matter. in terms of getting a great outcome with. investing. Um. starting capital, how much the amount you start with, length of the runway,

how long. are you going to invest the money, Mhm. and the rate of return. Okay, so. before I answer your question, I want to. tell you a story. So, and this is a true story. Um in 1623, in New York, the. Native American Indians in New York who. owned the island of Manhattan,

the Dutch settlers wanted to buy the. island. And so, they went to the Indians and. said, "We'd like to buy the island of. Manhattan. Great natural. harbors. It can be a great place for. us.". And the Indians and the Dutch reached an. agreement to sell the island of. Manhattan for $23. And when people hear that, they think, "Oh, the Indians got taken.". You know, island of Manhattan for $23 is. ridiculous.

But, let's say. let's say the Indians had a trust. officer who they said, "Invest this $23. for the benefit of the tribe. and try to do a decent job, right? Now, there's something known as the rule of. 72. And the rule of 72 is a is a very. important rule and I wish they would. teach it more in high schools and. elementary school. It tells us how long it takes money to.

double and it's a kind of a mathematical. hack. So, for example, if I'm going to get a 7% return. and I do 72 / 7, that's approximately 10. And at the 7% return, it's going to take. 10 years for the money to double. 7%. compounded will take 10 years. If I have a 10% return, it will take 7 years. 72 / 10 is 7. If I have a 15% return,

it will take 5 years. 72 / 15 is 5, approximately. And if I have a 20% return, it'll take 3. and 1/2 years. So, this rule of 72 is a nice hack and. it's very important to know how long. money takes to double because then we. can start doing a lot of math in our. heads. So, when we look at these Indians with. the $23, if they were getting a 7 7%. return, it would become $46 in 10 years.

And then it would become $92. in 20 years. And. $184 in 30 years. and so on. Now, if you go 100 years, right? It's 10 periods of 10. And 10 periods of 10 is 2 to the power. of 10. And 2 to the power of 10 is 1,024. So, we throw away the 24 because we. don't want to complicate the math. So,

at 7%. for 100 years, you would have 1,000 times what you. started with. And this is why because compounding. becomes non-linear, people have a hard. time getting their hands around it. So, Non-linear meaning? It's not going up in. a straight curve. It's going up in a. Hockey stick. >> Hockey stick club, yeah. So, in 1723, the Indians would have 23,000. It had gone up a thousand. And then if they continue at the 7% in.

1823, they would have 23 million. And in 1923, they would have 23 billion. And in 2023, they'd have 23 trillion. Okay? Now, the entire wealth of every man, woman, and child in the United States is 150. trillion. 1/6 of that is not. undeveloped land in Manhattan.

So, if the Indians had invested at 7% a. year for the last 400 years, they would have more money than owning. the land. So, they were not taken. They were given a fair deal. But they just didn't have a good trust. officer who could actually make it. happen for them. So, the. magic of compounding. is that we started with $23. And we end up with 23 trillion.

Without having a great rate of return. It's just an okay 7% is just okay. It's. not great. It's not bad, but it's okay. Now, if you go back a hundred years. So, we started at 1623, go back a hundred. years to 1523. We had 2300 cents in 1623. 2300 cents? $23 is 2300 cents. >> Oh, okay. If If they'd got it Just. convert it to cents instead of dollars, right? Now, if you. make it 1/1000 of that. So, just so I'm.

clear here. So, if you're saying if you. went back 100 years from that point and. you gave them just 23 cents. >> If you gave them 2 cents. If you gave. them 2 cents. 2.3 cents to be exact. But, if you just gave them 2 cents Yeah. 100 years later, they would be $20. If you gave them 2.3 cents, 100 years. later they'd be $23 and now it would be. the 23 trillion, right? So, what I'm trying to say is that.

if the runway is long enough, the starting capital doesn't matter. Even the rate of return doesn't matter. If the runway is long enough. Now, so. when people are thinking about. investing, they have to keep a few things in mind. The first thing is spend less than you. earn. So, always try to. save the first dollar rather than the. last dollar. So, if you are making $50,000 a year,

put 5,000 into savings to start with and. then. do the rest of your expenses after that. Now, it's very important when we saw with. this example, you start young. So, when people start working at 22 or. 23, whenever they start working, they have to be saving then. Because that early money at 22. can compound for 50 years. And that's what we want. So, we don't.

need to do heroic things. with finding the next Nvidea or whatever. else. We can just put it into an index. and the important thing is spend less. than you earn and keep putting that 5, 7, 10,000 every year. into the savings. Don't go have a. vacation on Hawaii with it. Let it keep compounding and just put it. into a broad index. and we don't really. So, for someone who has never invested.

before, Yeah. >> which would probably be the majority of. the audience, how do we simplify even. further in terms of just put it in an. index? What does that mean? So, basically, you could open an account at. Fidelity or Interactive Brokers or. Robinhood, any of these places. You. could open a brokerage account for very. little money. And there's lots of them. in every country. Yeah, and then you. could just uh. ask them to give to buy you the S&P 500.

index, for example. And they will get. you invested in that. >> And the S&P 500 is basically the top 500. companies in. >> It's the Yeah, the 500 dominant. businesses in the US. Like Nvidia's in there and Microsoft and. Apple and so on. And you're going to get. your 10% a year if it if the trend holds. over the last century. The S&P has. plenty of periods where it does nothing. Uh it's somewhat overheated right now.

Uh but I think if you have a long enough. time of time horizon and you're dollar. cost averaging in, it's perfectly okay. Uh. what you could also do as an alternative. is buy Berkshire Hathaway. So, that's a stock, BRKB. So, you could. again tell these people that just put it. into Berkshire Hathaway. It's like an. index. And And again, it's like set it and. forget it. You don't need to think about. the investing side. You. focus on yellow, okay? And keep putting this little money.

away on the side, and it's going to compound. And so, at. 18, if you put away $5,000, and you fast forward to when you're 68, 50 years later, right? Now, if if you got a. 10% return on that money. Every year? Let's say. Every 7 years it would double. Okay, 72 / 10 is 7.

50 years. is seven doubles. 7 * 7 is 49. And. 2 to the power of 7. is 128. Okay. So, we can throw away the 28. Keep it. simple. You're going to have 100 times what you. started with. So, the 5,000 at 18 is going to be. 500,000. Okay.

At 19, if you put money away, that's. another 500,000. 20, you might have 10,000 you can put. in. So, you can start seeing that over a. lifetime, you know, you're going to be. having too much money. As you might have been able to tell, I'm. absolutely fascinated by the psychology. behind high-performing sports teams. I. think it started with my love for Sir. Alex Ferguson as a Manchester United. fan. So, when I was told about a new. Netflix series that covers the rise of.

the Dallas Cowboys, it immediately. piqued my interest. And this isn't. because I'm mad about American football. I'm not. I don't even watch it. But I do. know about the Dallas Cowboys, and for a. lot of Texans, they're much more than a. sports team. I watched this series, and. it is absolutely. brilliant. It centers on Jerry Jones, an. oil businessman with no football. background, who bought the Cowboys in. the late '80s and transformed them into. the most valuable sports franchise in. the world. It's all about how one guy. assembled a powerhouse team in the 1990s.

made up of legendary players and. coaches, and through fearless. decision-making led his team to three. Super Bowl victories. And I really. enjoyed it, and I think you might, too. Check out America's Team: The Gambler. and His Cowboys, which is streaming. right now only on Netflix. And they now. sponsor this podcast. I've just invested millions into this. and become a co-owner of the company. It's a company called KetoneIQ. And the story is quite interesting. I. started talking about ketosis on this.

podcast and the fact that I'm very low. carb, very very low sugar, and my body. produces ketones which have made me. incredibly focused, have improved my. endurance, have improved my mood, and. have made me more capable at doing what. I do here. And because I was talking. about it on the podcast, a couple of. weeks later, these showed up on my desk. in my HQ in London. These little shots. And oh my god, the impact this had on my. ability to articulate myself, on my. focus, on my workouts, on my mood, on. stopping me crashing throughout the day.

was so profound that I reached out to. the founders of the company, and now I'm. a co-owner of this business. I highly. highly recommend you look into this. I. highly recommend you look at the science. behind the product. If you want to try. it for yourself, visit ketone.com/steven. for 30% off your subscription order. And. you'll also get a free gift with your. second shipment. That's. ketone.com/steven. And I'm so honored that once again a. company I own can sponsor my podcast. You've been referred to as the the.

Dhandho investor. And uh I've I've got a. book here which you wrote called. the Dhandho investor. What what. What does this word Dhandho mean? And. why do they call you the Dhandho. investor? Dhandho is actually a word from Gujarat, which is on the on the western coast of. India, where Gandhi came from. They're. extremely astute business people. And. Dhandho, if you translate it directly in. Gujarati,

it means business. But it doesn't really mean business. What it means is it's a way of doing. business. where. the downside is non-existent. We already discussed how Mr. Branson. is a Dhandho investor. He had no downside. Uh. Mr. Gates was a Dhandho investor. He had. no downside. Mr. Walton was a Dhandho. investor. They had no downside. So, all.

of these people embarked on businesses, built huge fortunes. without taking risk. And so, the Dhandho. investor was written from the. perspective of. how can we minimize risk. while keeping the returns intact. You. use this example of the Patels. Mhm. What is What is that story? The Patels. uh. went to Uganda. more than 100 years ago, maybe close to.

130 years ago. It was a family? It's a. ethnic group in India. >> And so, this ethnic group came to Uganda. to build the railroad. And. but they're very savvy business people. And. over the course of the last 100 odd. years, uh when they were in Uganda, through their Dhandho methods of doing. business, they became very successful. entrepreneurs.

And they controlled large parts of the. Ugandan economy. And Idi Amin came to. power in Uganda in the 1970s. And he said Africa is for Africans. So, what he did is he threw all the. Patels out. And he nationalized all their assets. So, now the Patels. were stateless. The US took them in. The UK took some in. Canada took some of.

them in. And when they landed in the US, they. basically really didn't have any skills. that would allow them to get good jobs, white-collar jobs in the US. And. what a few of them started to do was. they realized. that if they bought a motel. a small 10 or 20 room motel. uh the family could live in one or two. of the rooms and.

they could use the money they got out. and get a bank loan. And run the motel. Now, motels are very. labor-intensive businesses. So, what. they did is when a Patel took over a. motel. they fired all the staff. And the family took over all the jobs, you know, the cleaning and front desk. and everything else, right? And the Patels are vegetarians. and they have very they live they live a. very simple life. So,

when a Patel took over a motel in an. area, what they were able to do is they. were able to undercut the prices. of all the other motels in the area. because they have no labor. They have no payroll, they have no. workers' comp, none of those things. And so, they were if everyone else is. charging $25 a night, they're charging, you know, 19 a night. So, their. occupancy was higher than everyone else. And they saved their money and then what. they would do is buy the next motel.

Send the nephew to run it. And then buy the next motel. And this started happening in the early. '70s and when you fast forward to today. 80% of all the motels in the US. are under Patel ownership. 80%. So, the Patels make up. .1%. of the US population. Indians make up about.

little over 1%. Maybe 1.2, 1.3%. Just 1/10 of that is the Patels. And. this 0.1% population. is controlling 80% of the motels in the. country. And um. it's because of the Dhandho way. So, if I want to steal from the Dhandho. way, you told me it's good to be a. copier. Um what are the principles of the. Dhandho way that I need to be thinking. about? Cuz I think there was.

Was there nine? Yeah, there was nine. principles in total in the book. >> Well, the most important one is heads I. win, tails I don't lose much. Everything we discussed today, Stephen, is heads I win, tails I don't lose much. When I started my business, when Bill Gates started, when Sam Walton. started, and when Richard Branson. started, that was the formula.

If they won, they would win big. And if. they lost, they'd lose nothing. So, everything has to be in business. about risk reduction. Everything has to be about free lunches. We love free lunches. Okay, so we always. have to think about how do we get this. done. without capital, without risk, free. lunches. Do you think there's an opportunity for. people, cuz everybody's at the moment. thinking about AI and technology and.

these like really advanced um. new innovations as an opportunity, but. does that create an opportunity in the. boring? In the motel? In the laundry mat? Yeah, so, you know, the reality is so. entrepreneurship is not studied much in. business schools because there's nobody. going to give you a consulting project. for. studying entrepreneurs. If we really study startups. in the US or actually anywhere in the. world,

99.99%. of startups. are non-venture backed. What What does that mean? What I What I. mean by that is those are your. laundromat, your Chinese restaurant, your. you know, eBay seller, whatever, Amazon seller, so on, right? The small businesses. None of those companies were. formed because of venture capital. So, the media focuses on all the venture. capital-led businesses.

And so, people think that oh, if I have. to do a startup, I got to do something. in technology. Well, that's like 1/10 of 1% or less. You can ignore it. You don't need to. really worry about it. Uh. the important thing. is to be an observer. and to look at uh what what uh my dad. would call offering gaps. So, let me explain an offering gap, right? So,

let's say. there's a town We Let's call it town A. Town A, there's a barber shop in town A. Okay, and the barber's. one of many barbers doing well, etc. There's another town about 30 miles. away, town B, which also has barbers. They're also doing fine. There's a new township coming up in the. middle of these two towns called town C. Town C doesn't have much of a. population, but it's growing fast.

So, the barber in town A goes to see. what the all the hoopla about town C is. all about. So, he makes a takes a trip. there, sees that there's some increase. in population, people are moving in, and. he notices. there's no barber shops. Why would there be any barber shop? Because it's brand new, right? So, he's thinking, how do I do this. without taking risk?". And what he does is he rents a. subleases a small storefront,

buys some used barber equipment, and then decides that one day a week. he's going to go into that town and cut. hair every Wednesday. He puts up a note board saying, "I'm. available Wednesdays.". And. what happens is. people start coming in. They come in because they have no. choice. If you don't go to this barber, you're going to spend half an hour. driving to one of the other two towns. Now, he normally charges 30 bucks for a.

haircut. But here, he doesn't need to charge 30. because there's an opportunity cost of. the time you're saving. So, he can. charge 45. So, he's charging 45 over here, and then. when he's in his own town, he's charging. 30. Now, what he what he notices is. Wednesdays are filled up. So, he says, "Tuesday and Wednesday.". Okay, and gradually what ends up. happening is that that business. is full-time,

and he's making 45 bucks an hour per. haircut. But the nature of capitalism is more. barbers are going to show up. So, the second barber comes in, the. third barber comes in. Eventually, the. haircut there is going to be 30 bucks. It's going to neutralize. But in the. meanwhile, he's doubled his business. Right? What risk did he take? So, going into town C was addressing an.

opportunity gap. When Howard Schultz started Starbucks, he saw an offering gap. He thought that what. Italians love about cafes. might be what Americans love, too. Didn't exist, right? And he went and did it. You know that. barber that moves into town C first and. they're really having a great time. because there's no competition. One of your points when you're talking. about the Dandam method is this idea of.

creating a durable moat. It's point four. of the nine. So So sometimes what. happens is. that. you start a business. Every business. starts off without a moat. What is a moat? We have a castle. A knight in charge of the castle. to keep the invaders away. And one of. the ways to keep the invaders away is. you put a moat of water around the. castle.

So when you put a moat of water around. the castle, it makes it harder for. anyone to take the castle. And a business with a moat around it is. a business that competitors. will have a difficult time take this. taking business away from. So what can. happen with our barber in town C? Humans are creatures of habits. We don't like to change our barber every. month. We like the same barber. So if he's competent and good, what's going to end up happening is that.

his client base will stay with him. What. about loyalty points? I was just struck. the other day when I was shopping in LA. at Erewhon, which is a supermarket here. in LA, and I had someone who'd. recommended to me on the plane, which. actually goes to your point about. actually give a great product cuz an. airline hostess on my flight over here. went, "Oh, you're you're on keto diet. You need to go check out Erewhon." I got. to So that's the recommendation. >> 10x more powerful than any ad or. anything else they could run. >> And I went there Yeah. when I landed cuz. I needed a supermarket and didn't know. the place. But then interestingly, what.

I was at the checkout yesterday after my. second visit, the lady at the checkout. goes, "Hey, are you are you an Erewhon. member?" And I was like, "Erewhon. member?" And she was it does cost She. went She was honest. She went, "It costs. money, but here's what you get. She goes. on this order today, you would have got. 10% off this entire order. It's. expensive that one. And she goes, and we. give you a drink every month. She listed. all the things off. I signed up and bought the membership to. L1. I tell you now, I'm not going anywhere else. I don't know what it is, but now that. I'm a member and I have the app, I'm not.

going anywhere else. Well, that's Now, that's the hack that Amazon did, right? With Prime. And um. two or three years ago, I was uh I was. seated at dinner next to Bill Gates. You. know, my middle name is Forrest Gump. These things happen once in a while. And Bill is Bill is describing to me how. the business model of Costco. and the business model of Amazon is. illegal. Okay? So, I said, "Why is it.

illegal?" He said, "When you. When you put a membership fee, what what you're doing to the consumer. is you're locking them in. Mhm. Which means the consumer is no. longer going after the lowest price. because there is a distortion in their. behavior." Yeah. Okay? So, now the FTC. doesn't believe it's illegal, but Bill. Gates does. And I was just thinking, "Well, that's because you're competitive. with Amazon." Mhm. You know? Yeah, yeah,

yeah. That Prime thing with Amazon is super. smart. >> Yeah, and and that was taken from. Costco. Oh, okay. I get it. >> But basically, yeah, the lock-in. lock-in is very powerful. What one company I wanted to talk to you. about was Apple. Because Apple I find is a really. interesting company. You You talked. about being a copycat, kind of arriving. later to the party with new things. They've kind of been a story of both. sides of the equation. They've been. innovative, it seems, especially under. Steve Jobs. And more recently,

I mean, they were like copying other. people, but now I'm not even sure what. they are. Well, so Apple is a very. unusual company in that. everything emanated from one guy. Mhm. Okay. And that one guy has been gone for a. long time. And if you look at Apple, basically nothing new has come out. since he left. We don't have a Steve Jobs at Apple. We. And and the same thing happened at.

Disney. You know, they had to buy Pixar. because there was no Disney anymore. Mr. Disney was gone. And so, Apple actually I I find. somewhat risky. As an investment? Yes, because. if the form factor, so currently humans. walk around with a brick in their. pockets or in their hands. At some point that form factor is going. to change. It may be integrated into.

something we wear or some other more. ergonomic. situation. That may or may not be Apple. And in fact, more likely not to be. Apple. It's probably some guy in a. garage somewhere. And so, if they are smart enough to. find the guy in the garage early enough. and buy them, they're okay. And bring them in as the next Steve. Jobs, that's okay. But. even there the odds are low. What does this say to you about.

founders? The specialness of founders. Are they a. unique animal? Or can you swap them out and still be. tremendously successful? Well, I would I. would say that. there's. there are a lot of elements of luck. So, first of all, founders are all great. at what I call offering gaps, right? They find something that the world. doesn't have, that needs, etc. and they. go after it. Sometimes what happens with these.

offering gaps is a moat gets built. Right? Someone starts Visa, it becomes a. multi company or American Express and so. on. And and it. perseveres and scales. Like Apple with. their ecosystem, the closed ecosystem. But. 100% of businesses. eventually will go to zero. And so. it very well could be that a business. could last for 50, 100, 200 years, 150.

years. Uh could last well past the founder's. lifetime. Those are businesses which were built. with a lot of principles and lot of core. great core values. You know, the founder. of IKEA. every decision he took. was with a 500-year view. How many businesses think with a. 500-year view? And. IKEA, you know, I was I was uh studying. IKEA. Some very remarkable things about.

it. First of all. he never ever took debt. Every single store they built, they. built out of retained earnings and cash. He never took debt. And I've studied business failure quite. a bit. The single biggest reason why. businesses fail is leverage. They owe people money and they can't pay. it back and then they're gone. So. IKEA has never taken debt. If you never take debt as a retailer, you're going to grow slower. All right?

You're going to keep. uh kind of bringing in the cash, but. it's a very solid foundation. Because. it's it's on a rock solid balance sheet. Mhm. And and such. And um. his second principle was. no two IKEA stores can be the same. So, what he said is that whenever we are. opening a new IKEA store, there has to be some innovation.

that is going into that store. that does not exist in our previous. stores. Because he says that if I don't keep. innovating, I'm done. And so if you don't notice it because we. think all the IKEA's are the same, but actually if you study them and look. at when they were when they were built, etc., you start seeing these. these incremental changes that they're. making. That's a really interesting idea. that I can implement. into everything that I do, which is just.

make sure that every podcast I do, there's one new experiment or innovation. or every piece of work you do, whatever. team you're in, is just to run out one. experiment and every. >> Absolutely. But you have to make it. measurable, right? Or else it's not a. experiment. So. And you also talk about making fewer big. infrequent bets. Yes. Who who's that relevant for and in. what context? So. one of the things that Warren Buffett. says, he says that you got a punch card. which you can punch 20 times in your.

lifetime. And each time you buy a stock, it's one punch that's gone. So what what. Warren is saying is. if there was a rule which said. that you cannot buy more than 20 stocks. in your whole life, what would happen is you'd be very. thoughtful. about what you bought. Okay, and chances are those decisions. might be good decisions because. uh you only have 19 left and then you.

only have 18 left, etc. So. in in venture investing, a very small sliver of companies that. venture capitalists invest in. do well. Right? There's a high. high burnout rate. And if we look at the stock market, 4% of listed companies. generate 90% of the return.

So, most. companies that we may think about. investing in. are likely not to do well. for us. It's a 96% odds. that that's why the index is so. important. Is when you buy the index, you bought that 4%. And if you go pick stocks, you have one in 25 chance of getting it. one of those 4%. You said earlier the.

punch card analogy of 20 things in the. punch card. You got to pick 20 in your. life. If you only had three of three to. five things that you you would bet or. back now, which I think is actually kind of what. you do, what would those things be? Well, I mean, uh so. I'm trying to resist going to specific. big names. >> Yeah. Because I think that would hurt. people more than help people. Okay, I. mean, it's fair. What I. would prefer that people do is focus on.

the other two variables, which is. the amount you're saving and the length. of the runway and focus on the index. So, I I I think that it's it's kind of. like saying, I want to be a great AI. developer because it's the way it will. to be a great AI developer is going to. take time. It does the nature of the situation. What do you think about these people. that day trade? Cuz so many young. people, specifically men, are being. sucked in by these adverts that you can.

day trade your way to wealth. It's not. good. I think I think it's uh. the broker's going to make all the. money. Robinhood will do well. Not you. Do you think anyone can make loads of. money as a long-term day trader? I look at it this way, if you study the. Forbes 400, the 400 richest people in. the in the in the world actually, I don't see any day traders in there.

One of the last things I want to speak. to you about is this idea of um. circling the wagons. Yes. What does. circling the wagons mean? Warren Buffett. um said that over um. 50-year. period of running Berkshire Hathaway, he's made hundreds of investments. And only 12.

have moved the needle for Berkshire. Hathaway. So, it's the same three or four percent rule. where. if we say that Warren made. 300 investments, he probably made more. than 300, but let's say he made 300. decisions. Only 12. have resulted in. what we see as Berkshire Hathaway today. And the important thing was not.

the buy decision on those 12. The important thing was never selling. them. So, circle the wagons is a term that comes. from. the 19th century when these pioneers. were moving west, the wagon trails. moving west, and the native Indians would attack or. bandits would attack these wagon trails. So, what they would do is they would put.

themselves in a circle. Mhm. They would. circle the wagons, then defend that. circle as best they could with their. guns and so on. But the wagons being. circled was the best possible possible. way of trying to face off that attack. So, in effect, they circle the wagons around. the Crown Jewels. So, when I'm talking. about circle the wagons, what I'm saying. is that. in a lifetime of investing, there are very few times when you're.

going to actually have. a huge multibagger. What's that? A big. big winner. You know, something that goes up 10x, 50x, 100x. And what you want to do is you want to. effectively circle the wagons around. that idea, so it doesn't get sold. So, we are not going to know. before we invest. whether something is going to be a. multibagger or not.

But, we may figure it out after we own. it. Mhm. So, after we we're only going to know a. business after we own it. We're not. going to know it before we own it. After. we own it, we may understand the business well. enough to know that this is a great. business. And when we figure out it's a. great business, you don't want to sell that. When I meet people like you, I I'm. always so inspired because we spend a. lot of time thinking about the wins, the. great decisions. We've talked about. that. I've shown you the graph of your. great decisions. What is the worst ever.

decision you made in terms of financial. performance? Well, I've had so many. zeros. I mean, uh Or the one that got away. I. mean, uh. Yeah. so there are there's mistakes of. commission, which is uh. things going to zero. And there's mistakes of omission. The. mistakes of omission are. far. um far worse. Okay? So, the biggest mistakes I have. made aren't the ones that have gone to. zero.

The biggest mistakes I've made are the. ones that I sold and I shouldn't have. Where I should have circled the wagons. and I didn't. And those have been very costly. Give me. one example. Well, so of I think this was in about 13. years back, 2012. I invested in uh. company called Fiat Chrysler. Automobiles. Um. basically it was uh coming out of. bankruptcy after. the financial crisis. They'd gotten rid. of all that debt and everything and the.

stock was very cheap. It was about 5 or. 6 billion dollars. Uh. the you could buy the whole business. One of the things I didn't pay too much. attention to at the time was that 80% of. Ferrari. was inside Fiat Chrysler. And they owned Ferrari, 80% of it. And. um. but they had many other assets which are. like they had the RAM trucks and Jeep. and. Maserati and so on. And. when I looked at the business, I thought.

the business was worth many times the 5. or 6 billion. Even ignoring Ferrari. And I was right. So, in the end, I made. several times my money. And in 2017 or 2018, they took Ferrari. public. So, they actually then listed. the company. And. um. it looked like that they had captured. all the value and so I sold. I used to.

own approximately. 1% of Ferrari as part of that purchase. that I'd made. So, 80% of Ferrari was in this 5. billion-dollar company. Ferrari now has. a market cap of almost 100 billion. And I. would have about a billion more. if I had not done that stupid thing. So, I I made a. couple of hundred million on this whole. thing, but it would have been a lot.

more. And all I needed to do was just. not sell it. Do you deal in crypto at all? Do you. invest? It's outside my competence. I don't. understand it. >> I was going to say, one of the things I. notice about you that's quite rare for. someone that deals in bees, billions, is. you have a smile on your face. You seem like a really genuinely happy. person. Well, what would be the point of the. bees without being happy? A lot of. people aren't, as you know. Well, then. they've lost their way somewhere.

I mean. on a daily basis, I specifically ask. myself, how do I want to spend today? And I focus on spending it not with the. focus on maximizing money. I focus it with maximizing what Monish. loves. And that changes all the time, but. that's the way it is, you know. What is. that? Well, currently it's golf. Like one of the things I really. struggled with today. was there wasn't going to be any golf.

So, I said, it's either Steven or golf. Should I go to Steven or should I go for. golf? I said, you know what? Give the. arms a rest. Let's go meet Steven. I'm glad you did. We have a Oh, you probably just answered. this question. We have a tradition where. the last guest leaves a question for the. next, not knowing who they're leaving it. for. And the question left for you is, if you could go anywhere right now, instantly, where would you go? I'd go to the golf course. Thank you so.

much. Oh, it's my pleasure. >> everything that you do. It's so. incredibly important, and I now know why. you're why people love listening to you. and learning from you, and it's because. you have this most remarkable ability to. tell deeply engaging stories. Thank you. so much. This has always blown my mind a little. bit. 53% of you that listen to this show. regularly haven't yet subscribed to this. show. So, could I ask you for a favor? If you like this show and you like what. we do here and you want to support us, the free, simple way that you can do. just that is by hitting the subscribe. button. And my commitment to you is if.

you do that, then I'll do everything in. my power, me and my team, to make sure. that this show is better for you every. single week. We'll listen to your. feedback. We'll find the guests that you. want me to speak to. And we'll continue. to do what we do. Thank you so much.