Prinsip Sukses Mohnish Pabrai

in reality entrepreneurs do everything they can to minimize risk the first thing you want to do is define the market that you're going after that it's not the size of the circle that matters but knowing its boundaries so if you don't truly think it's something that you would yourself be a customer off don't try to pitch it the single biggest advantage a value investor has is not IQ it's patience and waiting avoid the use of spreadsheets and avoid precision thinking and that's no fun it's not fun to hit your head against a brick wall so what you want is a business that has a deep moat with lots of piranhas in it and that's getting deeper by the day I'm flexible I think it's very important in investing to be a learning machine pay a lot of close attention to the feedback you get from the people who are listening to the pitch he's an Indian American investor businessman and philanthropist he sold his company Transtech Inc in 2000 for twenty million dollars today he is a managing partner of pub rye investment funds he's Mohnish Pabrai and here are his top ten rules for success people think that entrepreneurs take risk and they get rewarded because they take risk in reality entrepreneurs do everything they can to minimize risk they are not interested in taking risk they want free lunches and they go after free lunches and so if you study on any number of entrepreneurs from Ray Kroc - you know herb Schultz at Starbucks and - even even Buffett and Munger and so on what you'll find is that they have repeatedly made bets which are low risk bets which have high return possibilities so they're not going high risk high return they're going low risk high return and even with Bill Gates for example the total amount of capital that ever went into Microsoft was less than fifty thousand between the time it started and today that's the total amount of capital that went into the company so Microsoft you cannot say was a high risk venture because they no capital deployed but it had high uncertainty bill gates could have gone bankrupt or Bill Gates could have ended up the wealthiest person on the Forbes 400 and he ended up at the extreme end of the bell curve and that's fine but he did not take risk to get there he was comfortable with uncertainty so entrepreneurs are great at dealing with uncertainty and also very good at minimizing risk that's the classic great entrepreneur if you look at any market any product any market they will typically be three or four players at the most that control 80% of that market and it could be making airplanes or it could be making you know hair clips you can pretty much go across the board it could be making software anything you want and and you know I found that stunning you know and and if you invert that so one of my heroes Charlie Munger says you know every time you encounter something always invert the logic to try to get some other place so if you invert that principle first of all if you agree with the principle then you know then the inversion would be that if you're starting a business and you say that this is a ten billion dollar market and I just need 10% of it and I'll be a billion dollar company well right there you're off because the inversion would be that if you're going after a market you're your approach has to be how do I get sixty percent of that market and so if your starting point is that I'm going to take two percent of this market or five percent of this market what you have not done is you have not segmented that market properly and that is a fatal flaw so the first thing you want to do is define the market that you're going after and after you've defined it if you don't get to very clear-cut game plan to get 50 60 percent market share then don't even try because either you have not done job correctly or you don't have anything to offer that is going to be that compelling to people I think another another very important straight for successful investing is to stay within your circle of competence so I think Buffett always says that it's not the size of the circle that matters but knowing its boundaries it's absolutely critical and you know Charlie Munger talks about that he gives a couple examples one is he says that if in a small town you bought the McDonald's franchise you bought the Ford dealership Ford dealership gas station not so good and gas station we leave the Patels low-cost operations okay and then then you want the best class a office building and you want the best residential building right so if you've got these four assets and you don't need to own them completely you could own 20% of each of them right so his perspective was that if in Peoria Illinois you own these four assets and you just sat on them for your whole life you would end up probably quite wealthy and so if you think about it from a you know Modern Portfolio theory point of view you would say well you're not diversified everything's in one geography etcetera etcetera yeah but the odds I'd broadly still work out and in fact he has a friend here in near Stanford John Arriaga who all he did was bought real estate within a mile of the Stanford campus and you know I think Arriaga the billionaire and so you know what is their Yeager circle of competence you know it's this small so the size of the circle is not relevant staying inside the circle is very fundamental do not try to sell something that you wouldn't buy yourself okay so if you don't truly think it's something that you would yourself be a customer of don't try to pitch it you know don't be a used-car salesman so please make sure that whatever you're trying to come up with is compelling enough that you would yourself deeply be deeply interested in buying that product so you know charlie munger likes to say that you don't make money when you buy stocks and you don't make money when you sell stocks you make money by waiting and so the biggest the single biggest advantage a value investor has is not IQ it's patience and waiting waiting for the right pitch and waiting for many years for the right pitch so what's that saying of Pascale that you like about just certainly yeah all man's misery stemmed from his inability to sit in a room alone and do nothing and all I'd like to do to adapt Pascal is all investment managers misery's stem from the interpreter tea to sit alone in a room and do nothing the way the way to really look at investing is that when when you look at again a business like Google or Microsoft or Berkshire you really have to put yourself in the shoes of the people running the business and you have to ask yourself how do they run the business do they run it through a set of spreadsheets or how do they run it and I and I would bet that most of these businesses are run in a manner where the founders or CEOs are really looking at kind of three to five variables that dominate most of the their thinking and outcome and direction and so as an investor you've got to hone in on those same variables so if you can get to the same variables if you want to invest in Microsoft you can get to the same variables that Satya Nadella is using and if you and Google you get to the same variables that Larry and Sergey are using then you're getting very close to trying to figure out what the business might do and and from there you can extrapolate whether it's under priced or fairly priced and so on so that's what I would suggest is avoid the use of spreadsheets and avoid precision thinking the stronger the marketing the weaker the sales engine can be okay so I do not consider myself a good salesman I consider myself a poor salesman I consider myself a pretty strong marketing person and so if you have done your marketing homework you can be a leper and make sales and a standing example of that is someone in front of you because basically my my approach to sales would be you know 180 degrees opposed to your traditional used car salesman schmoozing model and golf courses and all that you know none of that is of much interest to me so the stronger the marketing the less important to sales engine become so it is very important in my opinion to spend incredible amounts of time on the marketing aspect of the business because if you don't spend that time on that aspect of it you will spend 50x at that time on the sales end and hit your head against a brick wall and that's no fun it's not fun to hit your head against a brick wall so it's good not to go there so so I just feel the stronger the marketing the weak of the sales now quickly define moats in terms of a business that keeps competition away well you know if you talk to Michael Porter he would give you five books on what is meant by you know strategy and competitive advantage and durable competitive advantage and if you talk to Warren and Charlie they will just say it's a moat and they'd break it down to one one word but basically it's the ability of a business to have some type of and some type of an enduring competitive advantage that allows it to earn a better than average rate of return over an extended period of time and so some businesses have narrow moat some have broad modes some have modes that are deep but get filled up pretty quickly so what you want is a business that has a deep moat with lots of piranhas in it and that's getting deeper by the day that's that's a great business I'm flexible I think it's very important in investing to be a learning machine and to have flexibility and to be willing to look at the the opportunity set and decide whether you need to do anything at all or what is the best thing you can do based on the available opportunities let's say you have come up with a compelling value proposition let's say you're absolutely truthful you truly understand it and your pitch is truthful and all of that what I have found is that is that basically whatever you come up with and you know you've come up with it in your lab and thinking about it talk of friends looks great it's the service of product looks great the real litmus test of that is when you put it in front of customers right so when you go out and make your page you create an ad or whatever else and a very very important thing for a entrepreneur to do is when they put that out there be very very pay a lot of close attention to the feedback you get from the people who are listening to the pitch and this is very important at the front end because what is probably the case is that whatever you came up with is off base it's not exactly what your market yawns and you know I'll give you example there's a friend of mine in Chicago and he started this company called InstallShield and many of you might be familiar with a company and you're installing different windows products installed she'll comes up and we're ish basically was like I think 19 years old or something when he came up with installed shield and he said you know he went to a trade show he was going to go to a trade show some software tools trade show and he was turned to a whole bunch of different things he was rented with Google Maps 30 30 years ago you know when there was no way that the computing could could support that sort of thing but he went illustrate you and he had created this kind of you know tradeshow booth with the different products and he had seven products seven different tools that he was pitching and it wasn't balancing on that booth he wanted to put four bullets on one side and four bullets on the other and he was like four and three so he was it was really bothering him and so as an afterthought this little tool he had was just to install software for installing software was his eighth bullet he just put that in the end at the bottom the eight ball it was installed software installation tool and throughout the whole week was goes I think a couple of days ago that this trade show booth all these people are coming by and all the stuff going on and there was a guy across the aisle from him who spent two days looking at those eight pins because he he was in the software business and after two days he came up to and said you know that product I have an interest in that product and this product did not exist it was in voracious mind and so this was one of the only leads he picked up at the show so he went back and created the product and gave it to the guy and then he found that other people wanted it and so on so forth okay so bottom line is that as you study if you study startups you will find over and over that what actually works is not what you actually came up with what actually worked is again on some tangent or some kind of UX you mentioned something to a customer and passing and then they grab on to that day you know I want that you say oh he's unusual he wants a usual thing I should keep a core pitch know what you really have to do is pay really close attention to what is going on thank you so much for watching I made this video because Caesar V asked me to so if there's a famous entrepreneur that you want me to profile next leave it in the comments below and I'll see what I can do I'd also love to know which of the top ten rules had the biggest impact on you and why leave it in the comments I'll join the discussion thank you so much for watching continue to believe and I'll see you soon

in reality entrepreneurs do everything they can to minimize risk the first thing you want to do is define the market that you&#39;re going after that it&#39;s not the size of the circle that matters but knowing its boundaries so if you don&#39;t truly think it&#39;s something that you would yourself be a customer off don&#39;t try to pitch it the single biggest advantage a value investor has is not IQ it&#39;s patience and waiting avoid the use of spreadsheets and avoid precision thinking and that&#39;s no fun it&#39;s not fun to hit your head against a brick wall so what you want is a business that has a deep moat with lots of piranhas in it and that&#39;s getting deeper by the day I&#39;m flexible I think it&#39;s very important in investing to be a learning machine pay a lot of close attention to the feedback you get from the people who are listening to the pitch he&#39;s an Indian American investor businessman and philanthropist he sold his company Transtech Inc in 2000 for twenty million dollars today he is a managing partner of pub rye investment funds he&#39;s Mohnish Pabrai and here are his top ten rules for success people think that entrepreneurs take risk and they get rewarded because they take risk in reality entrepreneurs do everything they can to minimize risk they are not interested in taking risk they want free lunches and they go after free lunches and so if you study on any number of entrepreneurs from Ray Kroc - you know herb Schultz at Starbucks and - even even Buffett and Munger and so on what you&#39;ll find is that they have repeatedly made bets which are low risk bets which have high return possibilities so they&#39;re not going high risk high return they&#39;re going low risk high return and even with Bill Gates for example the total amount of capital that ever went into Microsoft was less than fifty thousand between the time it started and today that&#39;s the total amount of capital that went into the company so Microsoft you cannot say was a high risk venture because they no capital deployed but it had high uncertainty bill gates could have gone bankrupt or Bill Gates could have ended up the wealthiest person on the Forbes 400 and he ended up at the extreme end of the bell curve and that&#39;s fine but he did not take risk to get there he was comfortable with uncertainty so entrepreneurs are great at dealing with uncertainty and also very good at minimizing risk that&#39;s the classic great entrepreneur if you look at any market any product any market they will typically be three or four players at the most that control 80% of that market and it could be making airplanes or it could be making you know hair clips you can pretty much go across the board it could be making software anything you want and and you know I found that stunning you know and and if you invert that so one of my heroes Charlie Munger says you know every time you encounter something always invert the logic to try to get some other place so if you invert that principle first of all if you agree with the principle then you know then the inversion would be that if you&#39;re starting a business and you say that this is a ten billion dollar market and I just need 10% of it and I&#39;ll be a billion dollar company well right there you&#39;re off because the inversion would be that if you&#39;re going after a market you&#39;re your approach has to be how do I get sixty percent of that market and so if your starting point is that I&#39;m going to take two percent of this market or five percent of this market what you have not done is you have not segmented that market properly and that is a fatal flaw so the first thing you want to do is define the market that you&#39;re going after and after you&#39;ve defined it if you don&#39;t get to very clear-cut game plan to get 50 60 percent market share then don&#39;t even try because either you have not done job correctly or you don&#39;t have anything to offer that is going to be that compelling to people I think another another very important straight for successful investing is to stay within your circle of competence so I think Buffett always says that it&#39;s not the size of the circle that matters but knowing its boundaries it&#39;s absolutely critical and you know Charlie Munger talks about that he gives a couple examples one is he says that if in a small town you bought the McDonald&#39;s franchise you bought the Ford dealership Ford dealership gas station not so good and gas station we leave the Patels low-cost operations okay and then then you want the best class a office building and you want the best residential building right so if you&#39;ve got these four assets and you don&#39;t need to own them completely you could own 20% of each of them right so his perspective was that if in Peoria Illinois you own these four assets and you just sat on them for your whole life you would end up probably quite wealthy and so if you think about it from a you know Modern Portfolio theory point of view you would say well you&#39;re not diversified everything&#39;s in one geography etcetera etcetera yeah but the odds I&#39;d broadly still work out and in fact he has a friend here in near Stanford John Arriaga who all he did was bought real estate within a mile of the Stanford campus and you know I think Arriaga the billionaire and so you know what is their Yeager circle of competence you know it&#39;s this small so the size of the circle is not relevant staying inside the circle is very fundamental do not try to sell something that you wouldn&#39;t buy yourself okay so if you don&#39;t truly think it&#39;s something that you would yourself be a customer of don&#39;t try to pitch it you know don&#39;t be a used-car salesman so please make sure that whatever you&#39;re trying to come up with is compelling enough that you would yourself deeply be deeply interested in buying that product so you know charlie munger likes to say that you don&#39;t make money when you buy stocks and you don&#39;t make money when you sell stocks you make money by waiting and so the biggest the single biggest advantage a value investor has is not IQ it&#39;s patience and waiting waiting for the right pitch and waiting for many years for the right pitch so what&#39;s that saying of Pascale that you like about just certainly yeah all man&#39;s misery stemmed from his inability to sit in a room alone and do nothing and all I&#39;d like to do to adapt Pascal is all investment managers misery&#39;s stem from the interpreter tea to sit alone in a room and do nothing the way the way to really look at investing is that when when you look at again a business like Google or Microsoft or Berkshire you really have to put yourself in the shoes of the people running the business and you have to ask yourself how do they run the business do they run it through a set of spreadsheets or how do they run it and I and I would bet that most of these businesses are run in a manner where the founders or CEOs are really looking at kind of three to five variables that dominate most of the their thinking and outcome and direction and so as an investor you&#39;ve got to hone in on those same variables so if you can get to the same variables if you want to invest in Microsoft you can get to the same variables that Satya Nadella is using and if you and Google you get to the same variables that Larry and Sergey are using then you&#39;re getting very close to trying to figure out what the business might do and and from there you can extrapolate whether it&#39;s under priced or fairly priced and so on so that&#39;s what I would suggest is avoid the use of spreadsheets and avoid precision thinking the stronger the marketing the weaker the sales engine can be okay so I do not consider myself a good salesman I consider myself a poor salesman I consider myself a pretty strong marketing person and so if you have done your marketing homework you can be a leper and make sales and a standing example of that is someone in front of you because basically my my approach to sales would be you know 180 degrees opposed to your traditional used car salesman schmoozing model and golf courses and all that you know none of that is of much interest to me so the stronger the marketing the less important to sales engine become so it is very important in my opinion to spend incredible amounts of time on the marketing aspect of the business because if you don&#39;t spend that time on that aspect of it you will spend 50x at that time on the sales end and hit your head against a brick wall and that&#39;s no fun it&#39;s not fun to hit your head against a brick wall so it&#39;s good not to go there so so I just feel the stronger the marketing the weak of the sales now quickly define moats in terms of a business that keeps competition away well you know if you talk to Michael Porter he would give you five books on what is meant by you know strategy and competitive advantage and durable competitive advantage and if you talk to Warren and Charlie they will just say it&#39;s a moat and they&#39;d break it down to one one word but basically it&#39;s the ability of a business to have some type of and some type of an enduring competitive advantage that allows it to earn a better than average rate of return over an extended period of time and so some businesses have narrow moat some have broad modes some have modes that are deep but get filled up pretty quickly so what you want is a business that has a deep moat with lots of piranhas in it and that&#39;s getting deeper by the day that&#39;s that&#39;s a great business I&#39;m flexible I think it&#39;s very important in investing to be a learning machine and to have flexibility and to be willing to look at the the opportunity set and decide whether you need to do anything at all or what is the best thing you can do based on the available opportunities let&#39;s say you have come up with a compelling value proposition let&#39;s say you&#39;re absolutely truthful you truly understand it and your pitch is truthful and all of that what I have found is that is that basically whatever you come up with and you know you&#39;ve come up with it in your lab and thinking about it talk of friends looks great it&#39;s the service of product looks great the real litmus test of that is when you put it in front of customers right so when you go out and make your page you create an ad or whatever else and a very very important thing for a entrepreneur to do is when they put that out there be very very pay a lot of close attention to the feedback you get from the people who are listening to the pitch and this is very important at the front end because what is probably the case is that whatever you came up with is off base it&#39;s not exactly what your market yawns and you know I&#39;ll give you example there&#39;s a friend of mine in Chicago and he started this company called InstallShield and many of you might be familiar with a company and you&#39;re installing different windows products installed she&#39;ll comes up and we&#39;re ish basically was like I think 19 years old or something when he came up with installed shield and he said you know he went to a trade show he was going to go to a trade show some software tools trade show and he was turned to a whole bunch of different things he was rented with Google Maps 30 30 years ago you know when there was no way that the computing could could support that sort of thing but he went illustrate you and he had created this kind of you know tradeshow booth with the different products and he had seven products seven different tools that he was pitching and it wasn&#39;t balancing on that booth he wanted to put four bullets on one side and four bullets on the other and he was like four and three so he was it was really bothering him and so as an afterthought this little tool he had was just to install software for installing software was his eighth bullet he just put that in the end at the bottom the eight ball it was installed software installation tool and throughout the whole week was goes I think a couple of days ago that this trade show booth all these people are coming by and all the stuff going on and there was a guy across the aisle from him who spent two days looking at those eight pins because he he was in the software business and after two days he came up to and said you know that product I have an interest in that product and this product did not exist it was in voracious mind and so this was one of the only leads he picked up at the show so he went back and created the product and gave it to the guy and then he found that other people wanted it and so on so forth okay so bottom line is that as you study if you study startups you will find over and over that what actually works is not what you actually came up with what actually worked is again on some tangent or some kind of UX you mentioned something to a customer and passing and then they grab on to that day you know I want that you say oh he&#39;s unusual he wants a usual thing I should keep a core pitch know what you really have to do is pay really close attention to what is going on thank you so much for watching I made this video because Caesar V asked me to so if there&#39;s a famous entrepreneur that you want me to profile next leave it in the comments below and I&#39;ll see what I can do I&#39;d also love to know which of the top ten rules had the biggest impact on you and why leave it in the comments I&#39;ll join the discussion thank you so much for watching continue to believe and I&#39;ll see you soon

Transcript for:Prinsip Sukses Mohnish Pabrai

Transcript for:
Prinsip Sukses Mohnish Pabrai