Preston Pysh 11:22
Yeah, that’s a, that’s an interesting idea. And I, I know whenever I read that, I wasn’t like–huh! That’s…I had to think about that for a little bit.

Hari Ramachandra 11:31
You’re right. And, and also, he talks about the psychology behind competition; why human psychology is set up in…kind of gonna push us towards competition. It’s like the crowd-like behavior. And when I was reading about this, I felt no, a lot of these has been spoken by Buffett, and Munger, and many of our value investors from a long time. And that’s contrarianism again. You know, the lemminglike behavior of human beings, where we all share the same idea, whether it’s in investing or in Silicon Valley. In fact, Elon Musk once famously said that “In The Valley, a lot of great minds are chasing small ideas.” One example is how many photo sharing apps do you need? But the (*inaudible*) smart engineers doing that. And in the same context about competition, he also talks about the buzzword: “disruption.” Now everybody wants to be a disruptive company. And Peter says, “That’s actually bad. It says you don’t want to start your bearing breaking things. Rather, you want to focus on building things. By saying you’re disruptive, you’re attracting fierce competition.” So that was very interesting for me, and a lot of things that like it of goes against the conventional wisdom. One other point that I would like to highlight before I end is the interview question that he likes to ask anyone who he meets as an entrepreneur is that: Tell me something that is true that almost nobody agrees upon with you? That was a fascinating question. In fact, I kept thinking about it. After I read the book; to explore why not something that nobody else would agree upon with me. And I would, I would be interested to, you know, like to discuss with you, and get to know your thoughts as well about that question.

Preston Pysh 13:33
So it’s funny, you brought that up because that was the next thing I was going to talk about as soon as you’re done because this was really kind of one of the biggest things in the book that, that whenever I heard that I was like–because I listened to the audiobook of it, and whenever as I was driving in my car, and I heard that question, I was like–”Wow, I don’t know how I’d answer that!” You know, and, and the question in the book was; it went like this: when Peter teal interviews anybody that he’s getting ready to hire, he asked them, “What unique truth do they know that very few people agree upon?” And so I, I heard that question. And I was like, “Man, I don’t really know how to answer that.” But that’s a fantastic question because it goes totally in theme with what Hari was talking about is how how much of a contrarian, Peter Thiel is, and that he wants to know that one nugget that you know that no one else agrees on, and then he wants to dissect it and understand why you have that opinion. Because if you can give him a good reason why you have that opinion, he might try to exploit it, and turn it into some type of business, or something that he can offer to society if he can illuminate that truth that, oh, maybe only, you know because he knows that there’s an enormous market there that can be capitalized on. And it’s just, I mean, it was really probably the neatest thing I think I found in the book was that specific question that he asked people when he interviews them. Stig, do you have any comment on that one?

Stig Brodersen 14:55
No, I’m pretty sure that he would never offer me a job. I couldn’t, I couldn’t come up with anything.

Preston Pysh 15:01
I would have given him the worst answer ever. But it really kind of shows you how smart Peter is in that, I mean, this is, this is a person who’s extremely intelligent, and kind of looks at the world in a completely different point of view. I mean, he really does look at things in inverse, and then tries to, you know, figure out if there’s any truth there. And I find that really interesting. I was reading in Buffett’s shareholder letters. I can’t remember what year it was. I would say it was probably like the late 80s, maybe early 90s or something like that shareholder letter, and he talks about this mathematician. Whenever you’re ever trying to solve a very difficult problem, his solution was to always invert the result, and you’ll find the solution. And I just really kind of find that in total harmony with Peter Thiel’s book, and, and the questions that he asked, and the way things he–the way he laid things out. I just found it really ironic and kind of interesting.

Hari Ramachandra 15:57
Yeah, I think you and I found that fascinating the way Peter deal with things, and a lot of what Munger and Buffett have been writing about her are very similar.

Preston Pysh 16:09
Oh, yeah. Yep, totally agree. So…okay, so that kind of covers our highlights of what we liked about the book. But let’s go around the horn, and ask what we didn’t like about the book, or maybe something that we didn’t completely agree with, or kind of maybe just saw it from a different angle. So Hari, we’ll start with you first on this one if that’s all right, and you can highlight something that maybe you didn’t like.

Hari Ramachandra 16:32
Sure. One of the things that I wouldn’t say I disagreed, but I can open up kept thinking about after I read the book was his discussion about the role of luck and the importance of planning. In fact, he even quotes some of the famous billionaires including Warren Buffett, and Jeff Bezos, and Bill Gates, who all attributed much of their success to luck. Warren Buffett has famously said that he won the ovarian lottery because of the fact that he was born as a white, Caucasian male in the United States during 1950s. Had it been any other thing like he says, like if I were born in Bangladesh during the same time, I wouldn’t have accomplished what I’ve done because of the system. Now, Peter Thiel disagrees with that. And argues that you can plan your success. That I found to have kind of, you know, lack of evidence, in the sense, that he misses the context in which Buffett is talking about. There are certain things that you can plan about. Plan like, you know, plan your business. Plan your daily activities. You can’t plan where you’re born.

Preston Pysh 17:52
Yeah.

Hari Ramachandra 17:53
And I think that–I don’t think Buffett is against planning, but Peter takes it out of context in the book.

Preston Pysh 18:04
So, yeah. And I think I agree with you on that. I think that, you know, when you look at everyone’s situation. What you’re born into plays an enormous impact of how difficult it is for you to achieve at the same level as other people. I totally agree with that. I think that that is due with a little bit of luck. But with that said, I, I do agree with Peter in that I feel like anybody could accomplish whatever it is that they’re setting forth or whatever they’re putting their goals towards. It’s just a matter of how much more of an uphill climb do they have to have because of where they might have started in that process. So it’s kind of interesting. I agree and I disagree all at the same time. Go ahead, Hari.

Hari Ramachandra 18:45
So (*inaudible*)…you’d wonder a good point. And even about planning, he says you can plan your success. And he also gives a good examples of startups–both his and his co-founders–which succeeded because they had a good plan. And in one of the chapters–and, I believe it’s in your executive summary, too–he lays out all the things that you should think about before you start a company. And, and then it flies against what Munger has talked about in some of his talks, where he says, “We never have a master plan. We make the best use of the situation as we go…as it goes.” Because according to Munger, it is dangerous to have a plan because you get attached to your plan, and you lose sight of the reality of things.

Preston Pysh 19:38
I’m sorry to interrupt you, Hari. I, I totally agree with that idea of you have to make decisions in time right now as you’re going through, and in it–you know, kind of contradicts is we’re telling people, “Hey, you can plan.” And Peter’s, you know, book says, “You can plan toward something.” But at the same time, you see people like Charles Koch. We’re reading a book on Charles Koch right now, and one of his biggest things is you have to be flexible. You have to be able to make decisions right now based on the other experiences in your, in your opportunity cost that’s associated with use (*inaudible*) here. Charlie Munger say that all the time. You hear Buffett say that all the time; about opportunity cost time right now. Making decisions is one of the most important things that you can, you know, understand as an investor in order to take advantage of the most lucrative opportunities as they’re presented.

Hari Ramachandra 20:28
And that’s a good point, Preston. And in fact, I read this book by Reid Hoffman. In his book, The Startup of You. He talks about not just having one plan, but he says you should have Plan A, B, C, and D. And this is kind of, you know, the middle ground between Peter Thiel and the other version, where you should never have a plan; wherein you’re not married to one plan, but you know Plan A fails, you have Plan B to fall upon. So he, he says that not just entrepreneurs or businesses, but even everyday professionals should have multiple plans, so that they’re not surprised if something goes wrong.

Preston Pysh 21:12
Absolutely. And just so everyone knows Reid Hoffman, who Hari’s referring to, was one of the co-founders of PayPal with Peter Thiel. And now is the, the founder of LinkedIn. Also, another billionaire; part of what they call the “PayPal Mafia.” It’s a bunch of people that all co-founded PayPal that are now billionaires like Elon Musk is another one in that organization. Okay, let’s go to Stig. And, Stig, go ahead and highlight something that you–did you have anything else you wanted to piggyback on what we were just discussing?

Stig Brodersen 21:40
Oh, nothing to add. That was, that was great, guys! Some really, really high-level thinking. I think that, that the thing that I thought about is, probably not as high-level, but I was actually a bit provoked already like 10 seconds in the book, I think it was. It was already in the preface. And that was, this whole idea about you need to come up with something new. It was–it was not enough, but to be successful if you just improve something; if you just improve best practices. That was not the way to think. You should think of groundbreaking new technology. And I think that–well, I understand where he’s coming from. And he’s also a tech guy. I’m not saying there’s anything wrong with it, but I, I think it’s also important to say to everyone out there that is not billionaires, and sure that includes myself–that you can achieve greater success by improving existing practices. If, if you are, if you can come up with something that can, say save the cost of making tin cans by 10%. You’re probably going to be the millionaire pretty, pretty fast. And I think that’s, that’s something that he’s, he’s completely missing. Looking at a guy like Warren Buffett, he really started–Warren Buffett, and he started with books and started with people that influenced him. Warren Buffett didn’t invent something. He didn’t come up with anything groundbreaking. He actually did what other people said. And perhaps he, he made it 10% better or 5% better. But, but that was his thing. Warren Buffett is not original. He’s not unique in, in the sense that he’s a learning machine.

Preston Pysh 23:19
So you stole mine, Stig.

Stig Brodersen 23:23
Sorry about that, Preston.

Preston Pysh 23:23
No, that’s all right. I mean, I totally agree with you. You know, whenever I was looking at the different parts of the book, the thing that really kind of popped out at me is: What’s wrong with taking a product that already exists and making it better for society? I, I think that he was kind of looking at it maybe in a more extreme fashion of if, you know, perfect example that I think of whenever I think of like extreme competition is car sales like if you own a car dealership. There’s so many of them throughout the US, and they’re all competing, and then, what, what the result of that is, is that the margins from a business owner’s perspective, the margins become razor thin, and it’s just fierce competition, and there’s so much blood in the water. So it’s hard to be extremely profitable in that. And the only way that you can is if you just continue to own yet another car dealership and another car dealership until the, the size of the enterprise is the real value. And so, I, I think that there’s two ways to look at it. You can look at fierce competition, or you can look at something that has a little bit of competition, and you’re improving in it, and making it better for society. And I think that for a lot of people that maybe want to start their own business–that’s probably the best place for them to start–is being in something that’s not fierce competition, but a little competition; and improve the product in the way that they know how; and they get their feet wet being a business owner and can kind of understand how the whole process works, and then maybe they step into the next realm. And you got to understand, Peter Thiel, he’s a multibillionaire. After he, after he sold PayPal, he was a billionaire at that point, and it was easy for him to go and, and slide into this company, Palantir, and some of the other ventures because he had an enormous amount of capital in order to do these extreme type business ventures that most people don’t have that, you know? They’re just not in that position to, to start off that way. So I think that, you know, in general, the book is fantastic because it makes you start thinking about things in a little bit of a different perspective. But I think in certain spots, maybe it might be a little bit extreme because of his own personal experiences and the way that he saw things. So Hari, I saw you had something you wanted to add.

Hari Ramachandra 25:23
Stig, you and I felt the same way, while I was reading the initial chapter. But as I…read through the book, I think one thing we should keep in mind is to put Peter Thiel in the context of Silicon Valley and technology. A lot of his advice is focused towards the tech entrepreneurs. And as Kristen mentioned during the beginning of the show, this book came out of his class in Stanford; aimed towards entrepreneurs who are in the technology business. And I would, I would take his advice in that context. It doesn’t apply to every business. In fact, he says cloning is bad, but if you see a lot of industries, cloners are more successful than inventors. But in this particular book, his audience, I see, are tech entrepreneurs. And his advice for them is start new markets. Don’t compete with the Googles and the Facebooks of the world.

Preston Pysh 26:29
No, I think you got a good point, Hari. In that, I think it is pointed a lot of his comments are pointing towards Silicon Valley and not really business in America in general. But Stig I saw you had something you wanted to say.

Stig Brodersen 26:42
Yeah! And you’re definitely right, Hari. I think, I think that was actually on, on purpose that you started to, I don’t know, provoke, or what else you would call it in the, in the preface. Because he says something like if you want to be the next Bill Gates, you will not invent Microsoft. If you want to be the next Mark Zuckerberg, you shouldn’t start up a social network. And then he says, “You shouldn’t learn from them. You should start something new.” And I was like, “Wow, I would really like to learn a lot like one-on-one with both Bill Gates and Mark Zuckerberg.” But, but perhaps you’re right, perhaps I was just thinking too much in terms of my own world. My own investing world was–nothing was new, not in terms of Silicon Valley. And that’s probably, I mean, that’s, that’s why we’re so happy that you’re here today, Hari. Because you, you have a background in LinkedIn and you are stationed in San Francisco, so it might be easier for you to pick this apart.

Preston Pysh 27:39
Okay, so at this point, Stig and I want to go ahead and transition into answering one of the questions that one of our listeners had submitted to our show. And this one comes from Jonathan Owen in Japan, and here’s his question.

Jonathan Owen 27:52
Hi, Preston! Hi, Stig! I enjoy listening to your podcasts on my train commute to work in Tokyo. And I just want to say how much I’m enjoying tuning in. So my question relates to Warren Buffett’s rule about holding for the long term in order to avoid accruing tax charges. There are some governments though that provide tax-free ways for their citizens to invest in the stock market, therefore eradicating this tax consideration. I know that the UK and Japan have some such tax-free accounts. So my question is: If in an ideal world, there was no such thing as capital gains tax, will the article of Omaha’s rule on holding for the very long term still be a relevant and useful guide to follow?

Preston Pysh 28:43
All right, Jonathan! Fantastic question. This is a very thoughtful question. Stig already has something prepared, so, Stig, go ahead, and fire away, and answer Jonathan’s question.

Stig Brodersen 28:52
So Jonathan, first of all, I’m really envious, you know? I would look at in Denmark and I pay 43% capital gains tax. So that was actually the first thing I thought about, when I heard your question. But to get serious, I would say that I would probably still in a non-tax world look at holding stocks forever, or at least for a very long time. However, the argument is definitely less strong than it was before. And the reason for that really relates to timing because the reason why we want to hold on to, to stocks for the long run is not only to avoid taxes, it’s also because it’s an outstanding company that will return a lot of profit back to you as a shareholder. So the soon as you enter a game where you have to switch between stocks, and even if there’s no taxes, that’s simply just a much harder game than finding very good stocks and holding them for a long time. I don’t know if you have anything to add there, Preston.

Preston Pysh 29:50
So this is what I would say Stig. So I think if you’re looking at it purely from a swappable–if you want to swap from one asset to the other asset, and you’re not going to pay any capital gains or any friction to do that–I mean, have at it! You can be able to, to swap from one to the next as much as you want. But I think Buffett’s rule, it definitely equates to one of the main reasons he has that rule is because of that, that friction of swapping. But I think the other reason–which is the second part of why Buffett has that rule–is because Buffett knows that finding a great business: a business that has great management; has great fundamentals; has a great product and service that has a competitive edge. It’s hard to find. There’s, there’s very few businesses out there that really kind of fit that category that they have a truly strong competitive advantage. So I think Buffett’s way of looking at it is if you find that business that has that competitive advantage; that has the large margins; that doesn’t have a lot of debt; has great management, that’s probably not something that you want to get rid of, yes? Something you’re going to want to hold for the long haul. And whenever you find that business, let’s say that it does start having poor performance down the road, it’s going to be something that’s going to be more gradual, and something that you can transition out of slowly, opposed to abruptly. And I think that that’s kind of how I–I guess that’s why he has the rule. You got to find a business that you could own forever because you’re looking for those qualities. You’re looking for those pieces that would have each one of those elements in it. And I think that that’s really kind of the essence, and the true root cause of Buffett’s reason for having that rule. So, Jonathan, really appreciate the question. We’re going to send you a free signed copy of our book, the Warren Buffett Accounting Book, and we hope to have a lot more questions in the future. So if you have a great question like Jonathan’s, be sure to go to our website, or you can type in asktheinvestors.com, and record your question in there, and we’ll play it live on the Air if it’s a great question. So I just want to throw out to all the listeners that Stig and I are typing up executive summaries on every book that we read, and we’re going to be doing a book every other week. So if you’re interested in receiving a copy of our executive summary, where we’re outlining chapter by chapter what we took away from this particular book and any book that we do in the future, feel free to go to our reading list, which is Preston and Stig’s Investing Book Club. It’s right there on our webpage. And you can see all the books that we’re reading. You can download our executive summaries. And if you sign up on our mailing list, we’ll send these out every two weeks. It’s usually about three to five pages, four to five pages typed up, written notes. So if you end up reading the book, fantastic! You can kind of use that as study notes as you’re going through it. And if you don’t read it, it’s a good way to execute your 80/20 principle of, you know, spending 20% of your time getting 80% of the results. Go ahead in, in reviewing the study notes that we typed up. So, we’d also like to thank our guest, Hari Ramachandra, for joining us today. Hari’s from the website: bitsbusiness.com. So if you’d like to check out his blog, he’d love to have you over there. And he, he puts out some fantastic articles and reviews, so I would highly recommend that blog, and it’s, it’s a place where Stig and I go in there and read everything that Hari writes. So we can’t promote that highly enough ’cause he’s a fantastic writer and really has some great insights as you can see from this interview. So that’s all we have. Hari, do you have anything you wanted to add?

Hari Ramachandra 33:11
That’s it, Preston! Thanks for having me on the show, and I look forward to your executive summaries.

Preston Pysh 33:17
All right! Thanks, Hari. Okay, so really appreciate everybody tuning in this week. I really hope you liked our summary of Zero to One. Make sure you sign up on our mailing list if you’d like to receive our executive summary of that and any executive summaries that we do of books into the future. The next book that we’re reading is The Science of Success by Charles Koch, who’s a billionaire worth about $43 billion. Very interesting read. I highly recommend people go out there and kind of read that before our next episode if you want to join us and follow along. Really appreciate everyone joining us, and we’ll see you next week!

So one of the things that Stig and I are very strict about is not endorsing any kind of service or product that we don’t personally use ourselves. So with that said, we give our full endorsement of our sponsor’s content realvisiontv.com. Real Vision is a site that Stig and I personally use ourselves, and it has had a profound impact on the way that we view the financial markets. One of the most important things a person can do is seek the knowledge of highly successful investors and business leaders, and more importantly, understand their thought process and how they make decisions. And with Real Vision, you get exclusive and in-depth interviews and presentations from the world’s sharpest independent analysts, fund managers, geopolitical strategists, economists, and investors, all in the same place. And right now because you’re listening to this show, we have a special offer for everyone in the TIP community. If you go to realvisiontv.com, and put in our special offer code: T-I-P, which stands for The Investor’s Podcast, you get 10% off your subscription to Real Vision TV. And if you’re not sure if you want to get a subscription to the site without seeing the videos and content first, we completely understand that. That’s why Real Vision is offering the TIP community a free week trial to see if you like their service. So trust me, you cannot afford to ignore the value that Real Vision creates with these in-depth, full length interviews from famous investors like Kyle Bass, Jim Rogers, Tim Ferriss, and many more. The people being interviewed often have a net worth far exceeding hundreds of millions of dollars, and watching Real Vision is like being able to sit in the corner of a room, and listen to a conversation that you’re not supposed to have access to. So don’t pass up this amazing offer to tap into the world’s smartest investors all in one place. And go to realvisiontv.com. Don’t forget, use the discount code: T-I-P, for your free week and 10% discount, today.

Outro 35:42
Thanks for listening to The Investor’s Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www.theinvestorspodcast.com. Submit your questions or request guest appearance to The Investor’s Podcast by going to www.asktheinvestors.com. If your question is answered during the show, you will receive a free autographed copy of the Warren Buffett Accounting Book. This podcast is for entertainment purposes only. This material is copyrighted by the TIP Network and must have written approval before a commercial application.