REWORK: Back to basics in business.

Photo credit: dansays

Jason Fried, co-founder of 37signals just gave a great presentation at SXSW about their new book, REWORK.

REWORK is a short, snappy and refreshing look at the fundamentals of business. Jason advocates a return to the basics. Don’t be a startup entrepreneur, instead, start a business. Make money from the start.

When starting out:

– remember that all planning is guesswork; accept it and don’t stress about getting it all right on day one

– focus on doing a great job, not on growth for growth’s sake. Your business will find the right size, which means it may not become a billion dollar enterprise oneday.

– stand for something and have a point of view. By doing so decision-making becomes much easier.

– create the type of company where people believe your apology (and when you do have to apologise, be real)

– what is the core of your product (if you run a hot dog stand your core product is the hot dog itself)

– say no to more things than you say yes to. e.g. The key to a great museum is the stuff that’s been left out.

When you are up and running:

– what is the sawdust of your product? (The byproduct) Can you use your knowledge, or some other spin-off to write a book, start a must-see blog or speak at conferences. (to generate additional sales revenue!)

– don’t obsess on your competitors. Just stay focused on building a great product of your own.

On the day to day issues:

– let people work without interruption. Collaboration is not the same as interruption!

– don’t limit yourself geographically when hiring. Choose the best people for the job, regardless of their location

Finally, on productivity:

“Long lists are worse than no lists at all”.

I like that last one a lot.

You can buy Jason Fried’s book, REWORK on Amazon.

Nuggets from Buffett

Photo credit: bunnicula

It’s that time of year, when Warren Buffett publishes his annual letter to shareholders of Berkshire Hathaway. It’s required reading for anyone operating, or interested in business.

Amongst this year’s gems include:

“Are we supposed to applaud because the dog that fouls our lawn is a Chihuahua rather than a Saint Bernard?”

If you want to find out what he’s talking about download the shareholder letter on trhe Berkshire Hathaway website for free.

More seriously, on the opportunities that have presented themselves since the credit crunch, this stood out:

“We’ve put a lot of money to work during the chaos of the last two years. It’s been an ideal period for investors: A climate of fear is their best friend. Those who invest only when commentators are upbeat end up paying a heavy price for meaningless reassurance. In the end, what counts in investing is what you pay for a business – through the purchase of a small piece of it in the stock market – and what that business earns in the succeeding decade or two.”

Since I became a Berkshire shareholder I’ve travelled to Omaha twice and met Buffett himself, and last year even had a brief chat with Bill Gates, a long time friend, and board colleague of Buffett.

A hat tip to Richard Emanuel who first made me aware of Buffet’s annual letter, for which I will be forever in his debt!

First hand: the wisdom of Warren Buffett

Photo Credit: *Jimmy

The BBC aired an informative and entertaining profile tonight of Warren Buffett, “The World’s Greatest Money Maker: Evan Davis meets Warren Buffett“, hopefully spreading his name to more Brits; the average person here has no idea who he is, despite him being wealthier than the GDP of half the World’s countries and usually coming top of the World’s rich list! When I met Evan Davis he mentioned that he had just 5 minutes with Buffett, but that’s not stopped him presenting a thorough profile and insight by combining research and interviews with others close to Buffett, including with Bill Gates.

Evan describes Buffett by saying:

“He really is different to the other super-rich… uniquely clever, funny and generous”.

This is the man that’s lived in the same house for the last 50 years, (currently worth around $700,000), on a regular street in Omaha in America’s mid-west and drives a beat up old car with the licence plate “THRIFTY”. I’ve been to the Berkshire Hathaway annual shareholder meeting for the past two years, met both Warren Buffett and Bill Gates in the process and learnt a lot from the wisdom of Warren Buffett by reading his shareholder letters and attending the day-long Q&A at the gigantic stadium where the AGM is held.

Questions from the audience of around 30,000 attending what has become known as “Woodstock for capitalists” cover a wide range of topics including business, religion, the environment and tips for a successful life. Buffett is always interesting and frequently entertaining. The fellow attendees are all delighted to be there and I have met some wonderfully friendly Nebraskans who are all delighted at the influx of visitors in this weekend, the highlight of the Omaha calendar. If you are at all interested in business or investing I do recommend going at least once to this unique event. (See “how to attend” at the bottom of this article).

Buffett’s approach to investing in businesses is first and foremost about investing in things he understands, “stay within your circle of competence” and these guidelines:

• Businesses with a durable competitive advantage through a strong brand (protective moat)
• Management integrity, passion for the business and talent (doing business with people he likes, trusts and admires)
• Paying a sensible price for the business

At this year’s meeting he brought up that he doesn’t have either a calculator or a computer on his desk, quite simply, “if the calculation needs so much accuracy that you need to use a computer, then don’t invest”; it should be obvious whether a company is worth investing in or not. He further explained, the key to successful investing is strong emotional stability, not skill or high IQ; in fact it’s dangerous to be too smart! An IQ of 120 is just fine; anything above that and you’re too clever for your own good.

For more lessons on life, business and investing a great free starting point is the website of Berkshire Hathaway where you can download all the annual shareholder letters.

My favourite Buffett quotes:

“Price is what you pay, value is what you get.”

“Time is the friend of the wonderful company, the enemy of the mediocre.”

“It’s better to hang out with people better than you. Pick the associates whose behaviour is better than yours and you’ll drift in that direction.”

“It takes twenty years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”

“There seems to be some perverse human characteristic that likes to make easy things difficult.”

“You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.”

“Only when the tide goes out do you discover who’s been swimming naked.”

“If you let yourself be undisciplined on the small things, you will probably be undisciplined on the large things as well.”

“The smarter side to take in a bidding war is often the losing side.”

“No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.”

“When proper temperament joins with proper intellectual framework, then you get rational behaviour.”

“Success is having people love you that you want to have love you.”

Charlie Munger is equally as erudite, but somewhat taciturn:

“Acquire worldly wisdom and adjust your behaviour accordingly. If your new behaviour gives you a little temporary unpopularity with your peer group…. then to hell with them.”

“I sometimes tell my friends, I’m doing the best I can. But I’ve never grown old before, I’m doing it for the first time and I’m not sure I’ll do it right.”

How to attend the Berkshire Hathaway annual shareholder meeting:

Anyone can attend by one of two routes that I know of:

1. Becoming a shareholder in Berkshire Hathaway
2. If you are in business for yourself attend the Entrepreneurs’ Organization event which is held to coincide with the shareholder meeting. This year it included a behind the scenes tour at one of Berkshire’s businesses, the Nebraska Furniture Mart and a talk by Bob Prosen.

Startup Bootcamp at MIT

Photo: Dan Bricklin, founder: Visicalc

Photo credit: uploaded by rhizop

I attended an amazing event in Cambridge, Massachusetts last week designed to educate and encourage new startup ventures. It took place on Columbus Day, a national holiday but that did not discourage hundreds of keen attendees who turned up for this all day event.

The photo on the right is of arguably the most famous of the speakers, the man who invented the “first killer app“, the electronic spreadsheet Visicalc. This helped establish Apple who sold millions of their Apple II on the back of that one  software title alone.

The speakers:

1. Adam Smith, Founder, Xobni
2. Alexis Ohanian, Co-Founder, Reddit
3. Ken Zolot, Founder, MIT Innovations Teams & Heartland Robotics
4. Dan Theobald, Founder, Vecna
5. Kyle, Vogt, Founder, Justin.TV
6. Angus Davis, Founder, Tellme
7. Hemant Taneja, Founder, Sunborne Energy, Managing Director, General Catalyst Partners
8. Dharmesh Shah, Founder, HubSpot
9. Robin Chase, Founder, Zipcar
10. Dan Bricklin, Creator, VisiCalc
11. Aaron Swartz, Founder Infogami
12. Drew Houston, Founder, Dropbox

There’s a number of very good notes about this elsewhere on the web, so I will simply provide links to those:

• Summary by Adam Marcus
• Notes by Nick Plante (with additional comments  by me)
• Bullet points by Jason Evanish

My key take away was how impressive the enthusiasm and passion exhibited here was; nothing like I have seen at home. The US leads the way for technology ventures for a reason!

For more history and lessons about technology startups I can endorse the recommendation made by a couple of the speakers of the book “Founders at work” which details the struggles and eventual success of companies like Hotmail, Apple, Adobe, Tivo, RIM and others.

Richard Farleigh – the chess playing dragon

Earlier this week I saw Richard Farleigh, one of the previous stars of Dragons’ Den, speaking at Clydebank College and giving a brief run down of his life,  approach to investments and some of his successes and failures. His talk was memorable for his simple insights, not just because of the rather incongruous sight of a tanned Australian in this run down part of the West of Scotland!

Farleigh had a troubled childhood, taken into foster care at a young age – he was from a huge family and from a very tough sheepshearing background. Luckily Richard is really, really smart – and became a chess champion as a teenager. His first insight – unlike in chess, where you can play all the right moves and never lose, in business, you can still lose even if you do everything right. There is an element of randomness. That’s why it can be dangerous to listen to every successful and prominent entrepreneur – what worked for Richard Branson isn’t going to work for everyone else. And as another former Dragon, Doug Richard pointed out to me, survivor bias makes sure you don’t get to hear from those who tread the same path but failed.

So, as someone with over 70 investments how does Farleigh assess the winners from the losers?

First he looks for the essence of the business and tries to boil it down to the simplest concept, or equation. By saying that is what he is looking for suggests to me that a lot of businesses who approach him for financial backing are not able to communicate that to him. How many times have you seen people on Dragons’ Den who simply cannot explain what their product or service even is, never mind explain what the business model is and the likely return on investment?

Farleigh’s second investing rule is that a quality management team is more important than the product. The best product will fail with weak management, and a strong management can make almost anything work. After cutting his teeth in angel investing and building up his experience Farleigh changed from backing products to backing people.

The attributes he’s looking for in people: drive, passion, nous and commitment.

Finally, back to the metaphor with board games, he accepts that due to that degree of randomness he simply doesn’t get it right all the time.

If you want to know more about Richard Farleigh’s approach, his book, Taming the Lion has 100 investing secrets. More info at www.farleigh.com

What entrepreneurs can learn from sportsmen

My first blog post, and an unlikely subject for me as someone who really has very little interest in sport. However, I am obsessed about what makes a successful entrepreneur and what I learnt tonight from Sir Jackie Stewart crystallised something I had already worked out: the qualities which make someone excel in sport bring great success when applied in business.

Jackie is a world-wide motor sport legend, but has been incredibly successful in business too. Which was harder for Jackie? Sport – because, quite simply, if you’re not number one you’re a nobody. Your business can still be top 10 in the rankings and be a massive success, but unless you’re first in the world of sport you’re a failure.

Think of an average sportsman, think of all the preparation and practise he puts in before an event – the days of football players turning up before a match and having a quick stretch to prepare are long gone. But how many people in business do nothing more than a quick stretch to prepare for a big meeting?

To succeed in sport you have to focus then practise and prepare.

It’s the same in business. The most impressive candidates I have interviewed for jobs in the last year all had a professional sporting background and now it’s something I will actively look for. They understand focus, determination and (depending on the sport) team-work in spades.