While global Alpha and its investors suffered major losses, and investors in securities underwritten by the firm experienced seriously disappointing performance, the firm and its own investors enjoyed the substantial profits Goldman Sachs produced by taking an astute and almost unique short position in the subprime mortgage market. While some would question whether the firm did not have an overarching fiduciary responsibility to all clients and customers to share its expertise across all three areas, senior management was and is clear: Each business unit is responsible and accountable for doing its best to complete the mission of that particular business – period. No business is its brother’s keeper. Each tub on its own bottom.
The Partnership, The Making of Goldman Sachs, p.677
Buffett made his offer “Berkshire is ready to invest $5 billion today in a 10 percent preferred stock convertible at $110 with warrants to buy an additional $5 billion of common stock at $115 per share.” Buffett knew how important his investment would be and, having had real difficulties with his prior investment in Salomon Brothers, knew what term he wanted. Those terms included a unique provision: Each of the four senior executives of Goldman Sachs must sign a pledge that they and their families would not sell any shares of Goldman Sachs stock before Buffett sold his. The details were spelled out to Viniar in a late morning half-hour phone call that ended at noon. Buffett’s offer was firm until four that afternoon. So Goldman Sachs’ leadership had just four hours to decide.
They didn’t need four hours. Even with the personal lock-in provision, the answer was clear to everyone by three. Viniar called Buffett. “Sorry, Mr. Buffett is not available. He is away from the office and cannot be disturbed.” It was two O’clock in Omaha — and Buffett was still at lunch with his grandchildren.
At 3:30 Eastern Standard Time, Buffett called Viniar back. Goldman Sachs, without question, accepted Berkshire Hathaway’s terms. Done deal.
The Partnership, The Making of Goldman Sachs, p.699
As Blankfein and his colleagues looked around the carnage on Wall Street, a few remarkable realities came into focus: Goldman Sachs was strong. It had more capital than it needed – and even more than it could put to use – and it had great liquidity. Even more important for Goldman Sachs’ long term strategy, every one of its competitors would be significantly less powerful. Lehman Brothers had been broken up and parts had gone into Barclays Bank. This would make Barclays stronger, but would it ever be as strong as Lehman Brothers had been? Merrill Lynch’s organization had been damaged and it had surely lost or would lose some of its best customers and its best businesspeople. Citigroup (including Salomon Bothers and Smith Barney) would mostly do “commodity” investment banking now. Its aspiration to be a formidable investment bank was, for now, just that – and aspiration. UBS, Credit Suisse, and Deutsche Bank would all refocus on their commercial banking business. Even Morgan Stanly was unsettled. Did it really intend to make a major commitment, as announced, to retail banking? Its leadership seemed uncertain about its basic strategy, which was surely not a good thing in such challenging times. Blankfien sees Goldman Sachs in good position to compete with commercial banks in providing credit.
The Partnership, The Making of Goldman Sachs, p.702
But Keynes was right too: ”Markets can remain irrational longer than you can remain solvent.”
The Partnership, The Making of Goldman Sachs, p.606
Stunning as it is that it took the firm’s management long decades to “get it” about investment management, GSAM’s history provides a crucial illustration of Goldman Sachs’s unrelenting “try and try and try again” approach to building each of it’s many enterprise businesses: Select one or two very able, very ambitious and promising, but not yet proven young stars. Point to a fair hill and say, “Congratulations! You are the Chosen One who can find a way to capture that hill. It will be hard – maybe very hard – but the firm expects great things of you. We know you can do it. Now, get going and… take… that… hill!” When success is achieved, congratulations are given to the successful young stars – and so is another, even more challenging hill. If success is not achieved, the firm selects another one or two very able, very ambitious and promising, but not yet proven young stars. If success is again not achieved, the firm simply selects yet another one or two very able, very ambitious and promising young stars to take the hill. Eventually, the hill gets taken.
The Partnership, The Making of Goldman Sachs, p.622
One of Paulson’s great advantages in life is that he is always learning – partly through continuous observation of others, partly because he takes criticism easily with no defenses or resistance, and never personally. A weakness is that he is almost oblivious to office politics and for years had to fight the urge to speak his mind immediately, without caution or consideration.
The Partnership, The Making of Goldman Sachs, p.643
Paulson was a serious student of leaders, seeking to understand why some were so much more effective than others: “The more I observed the most effective leaders, the more I became convinced that the key is to have the right people in your own organization working for you and with you.” Within Goldman Sachs, he soon earned a reputation for having the best people working with him to serve his clients, and for identifying outstanding talent early.
The Partnership, The Making of Goldman Sachs, p.644
The concept of leadership at Goldman Sachs has changed completely over the past fifty years. Sidney Weinberg was a leader, but in many ways his firm was a proprietorship. While Gus Levy insistently expected many people to do all they could do to build the business, there was no question that he was the leader – in overall pace and direction and on dozens of transactions every day. Whitehead and Weinberg pushed decision responsibility and accountability out to the unit heads. Rubin and Freidman matched even more widely distributed authority and responsibility with centralized accountability to the management committee. Paulson continued the multiplication of decision-making leaders and increased the coordination of operating units through centralized disciplines: risk controls, business planning, and performance measurement at increasing numbers of smaller and smaller, more agile units that were closer to particular markets.
The Partnership, The Making of Goldman Sachs, p.648
As Bob Steel explains, “First-person singular is only used to describe a mistake, not an accomplishment. It may sound silly but little things like that are quite significant. I’ve never heard a boss at Goldman Sachs say, ‘I just did this.’ If I ever did, I’d be embarrassed.”
Paulson remembers getting his first Goldman Sachs memo back from Jim Gorter. “Good memo!” was written at the top – and every “I” was crossed out in favor of “we.”
The Partnership, The Making of Goldman Sachs, p.659
There are only four ways to gain and keep a significant competitive advantage: more effective recruiting, a stronger culture, a better strategy, and greater intensity of commitment.
The Partnership, The Making of Goldman Sachs, p.554
In the late 1950s and early 1960s, few Wall Street firms interviewed MBAs, so Goldman Sachs had little direct competition. Determined to develop intense commitment within the Goldman Sachs system, Whitehead recruited “intensity” people who gave out clear signs of hungering for achievement. Selection was to be based on three equally weighted criteria: one-third on intelligence as measured by grades and SAT scores, one-third on leadership as shown by roles in extracurricular organizations, and one-third on ambition to achieve.
The Partnership, The Making of Goldman Sachs, p.558
On purpose, the firm’s offer was – in comparison to today’s $150,000-plus offers – stunningly small at $3,600, even if adjusted for inflation. Whitehead was determined never to pay more than other companies and preferred to be known to pay less, because if the firm could get the best for less, that sent a message that there must be something special about Goldman Sachs.
The Partnership, The Making of Goldman Sachs, p.558
Goldman Sachs doesn’t look for top-quartile –- or even top-decile – MBAs. Convinced that over the long term there is inevitably a major difference between the top 5 percent and the second 5 percent, the firm focuses on recruiting the very best young professionals, selecting carefully for such characteristics as leadership, drive, and appetite for hard work. Starting with the 5 percent most qualified and capable, the firm proceeds to sort out the most effective team-playing contributors – initially through fifteen to thirty interviews and then through actual work experience and direct observation to find the very best 1 or 2 percent.
The Partnership, The Making of Goldman Sachs, p.559
Always stressing the long-term opportunity of a career with Goldman Sachs, the firm wanted recruits to weigh other factors, believing that those who accept jobs because of salary were more inclined to leave later for a higher offer from somewhere else. The worst thing the firm could do was hire someone, train him for a few years, and then have him go elsewhere for more money.
The Partnership, The Making of Goldman Sachs, p.561
As J.P. Morgan famously observed, “A man always has two reasons for doing anything thing: a good reason and a real reason.”
The Partnership, The Making of Goldman Sachs, p.577
Risk arbitrage is based on the simple idea that if there are two market prices for the same thing or two equivalent things, they will converge at some points as though pulled together by a rubber band. Arbitrageurs take disciplined actions to create profits by capturing differences in prices for the same item in different markets or of different but interchangeable items in the same market. The price differences they exploit are caused by market inefficiencies or mistakes caused by imbalances of supply and demand due to differences between uncertainty and risk, which differ in ways only experts usually care about. Arbitrageurs increase market efficiency and – indirectly and unintentionally, as Adam Smith famously explained in The Wealth of Nations – they increase the consistency and fairness of markets and therefore the confidence investors have in markets; that helps improve overall economic performance. Arbitrageurs are working in free, competitive markets that are open to everyone, so to earn profits they need to see what others do not see, to see more clearly than others do, or to take actions others would not have considered.
The Partnership, The Making of Goldman Sachs, p.464
Insurance companies earn profits by making a market between an individual’s uncertainty and a population’s true risk.
The Partnership, The Making of Goldman Sachs, p.465
Three factors are crucial for success in arbitrage: extraordinary, unemotional rationality or objectivity in all decisions and actions; superior access to information; and the ability to understand that information and the ability to think unconventionally and rigorously about it.
The Partnership, The Making of Goldman Sachs, p.466
The facts are king. You always start with the facts – all the facts you can possibly get – and then you develop a logical line of reasoning or argument, and then – and only then – do you develop a opinion. Opinions always come last. Facts, analysis, and logic matter. Ego has no role in analysis or in developing an opinion. Age and experience do not matter – once you’re on the team.
The Partnership, The Making of Goldman Sachs, p.475
Fife explains, “Leaders should always set the bar high – very high – and then find the way to meet that standard. Trust and consistent execution make you the preferred supplier. Any compromise on standards, and you’re sowing the seeds of your own destruction.”
The Partnership, The Making of Goldman Sachs, p.516
“I learned a long time ago that when somebody spits in your face, if you’re really any good, you do three things: One, declare it must have been a rain drop. Two, wipe it off. And three, renew your determination and commitment.”
The Partnership, The Making of Goldman Sachs, p.530
The CFO of Vickers told a partner, “If a British merchant banker were up all night working to complete a transaction, he would never tell anyone for fear he would look inadequately skillful. But if an American pulled an all-nighter, he would make certain to tell me – as proof of his commitment.”
The Partnership, The Making of Goldman Sachs, p.344
Thornton explains:”In a situation like this, at the very beginning, you, as an individual, are the ‘brand’.” You have nothing to carry you and nothing to fall back on. Going from an initial meeting and general discussion to specific, nuanced advice that is listened to and accepted is a transformation that’s completely dependent on you – what you say and do, how you develop each relationship, how you build up the prospect’s confidence – not just in your firm, not just in your advice, but in you. And that confidence has to be strong enough to prevail against the tide of general opinion and natural resistance to change, which is particularly strong in major financial transactions.
The Partnership, The Making of Goldman Sachs, p.344
By not taking credit, you become more effective. If you do right by people, they win and you win. Frank, always go out of your way to share credit.
The Partnership, The Making of Goldman Sachs, p.378
When Brosens had first been put in charge of arbitrage, he had one exciting talent in the division – Eric Mindich, a man in his early twenties whom he wanted to put in charge of risk arbitrage for the firm’s own account. Silfen and Zuckerberg wondered about assigning so much responsibility to such a young star. “Last year was a tough year in arbitrage. Shouldn’t you focus more on this area yourself?”
“I believe with a hundred percent of his time, he can do better than I can do with forty percent of my time.”
Rubin joined in: “Age is irrelevant. By expending his responsibilities now, you may keep a real star that you might otherwise lose.”
Mindich soon became the youngest-ever partner of Goldman Sachs, at age twenty-seven.
The Partnership, The Making of Goldman Sachs, p.378
Rubin and Friedman were right about the risk that being wisely conservative can deteriorate into defensive caution and about the importance of the firm’s becoming more aggressive. John Whitehead had seen it, and it was an important factor in his decision to retire. But the obvious irony was that the cautious, conservative style Rubin and Friedman found so constraining had been at the core of the strong, team-centered culture, the reputation of integrity at every level, the consistent service to corporate and institutional clients, the strong earnings and solid financials, the persistent and skillful recruiting, the superior management, and the consistently disciplined execution upon which their more aggressive business strategies could now build.
The Partnership, The Making of Goldman Sachs, p.381
“What’s so fair about keeping tired older partners when that means blocking the best young people and violating our commitment to meritocracy?”
The Partnership, The Making of Goldman Sachs, p.385
“It’s harder to get a good idea accepted than it is to get a good idea.”
The Partnership, The Making of Goldman Sachs, p.392
The problem Cooperman faced – in addition to the constrains imposed by the firm – was that while long-term investing is in theory what mutual-fund is all about, in practice, short-term performance dominates mutual-fund sales, particularly for organizations that are new to the business.
The Partnership, The Making of Goldman Sachs, p.429
… the real test of a risk-control system would be that it caught not only what you would not expect, but also what you would have thought not possible.
The Partnership, The Making of Goldman Sachs, p.460
While some other banking firms tried to manage and control with top-down rules, a rules-based management couldn’t possibly keep up with the speed of change in the securities business and couldn’t penetrate the complexities of many different lines of business in many different markets to address specific situations where value-based decisions might be needed. With a principles-base management, responsibility for decisions is pushed down to the men and women on the firing line. Since they know the concepts of the Principles and they know the detailed realities of their specific business, they can be held accountable for knowing and doing the right things in the right way.
The Partnership, The Making of Goldman Sachs, p.188
“Assuring professional ethics are really lived by is a bit like being a zoo-keeper,” says partner Roy Smith. “You need lions and tigers to have a really good zoo, but you must keep them under control – or reasonably so.”
The Partnership, The Making of Goldman Sachs, p.197
“The two Johns saw nothing at all wrong with people working very hard and carrying a heavy load," recalls partner Roy Smith. “They were convinced it was better for you to carry more work responsibility – perhaps half again more than you normal capacity – because that meant you accumulated more experience and you would learn more and know more. You’d advance up the learning curve more swiftly and get to a higher level of performance.”
The Partnership, The Making of Goldman Sachs, p.202
Each Analyst was expected and challenged to be an entrepreneur. For example, Joe Ellis made himself the leading retailing analyst on Wall Street. “We began the idea of conducting field trips for institutional analysts to visit retailers back in 1984,” recalls Ellis. ”Now other firms do similar things.”
The Partnership, The Making of Goldman Sachs, p.289
The Analyst’s job is hard and requires many different skills. As Ellis says, “ You have to be very good on financial analysis and on interviewing and on business judgment and market judgment and able to work effectively with institutional investors and the sales force and with corporate executives and investment bankers. It’s complicated. And it’s very hard to serve all of them really well.”
The Partnership, The Making of Goldman Sachs, p.291
Weinberg never took himself too seriously. “The boss needs to lose arguments – not all arguments, but enough to keep everybody honest and responsible for clear thinking. You can’t micromanage this business from headquarters.” About innovative ideas, of which there are great many, he tended to be conservative. But if the young bucks were pressing hard, he liked to give way, saying, “I’m just an old guy, so I don’t know all the ins and outs if this new stuff, so if you’re sure it’s right, let’s go!” He could then observing with a knowing smile, “I can’t lose now, If I was right, they’ll soon be saying, ‘Jesus, maybe the old guy knows the score,’ and if they are right, they’ll feel really good about themselves – and will work even harder.”
The Partnership, The Making of Goldman Sachs, p.301
Weinberg kept a plaque inherited from his father that enumerated the many setbacks suffered by Abraham Lincoln on his way to becoming a great president, with the message that enormous success does not come without setbacks.
The Partnership, The Making of Goldman Sachs, p.303
With Whitehead’s persistent and cautious “prune losers, feed winners” style of management, the whole IBS [Investment Banking Service] organization became constructively infected with commitment: first to specific actions and transactions and later to an overall strategy – and eventually to a firmwide culture and x commitment to a new, organized way of doing business.
- The Partnership: The Making of Goldman Sachs, p.161
As George Doty observed: “Goldman Sachs’s new business development organization was by no means an overnight success. For several years, it was a money loser. That’s one of the main reasons other firms did not duplicate it. Who wants to duplicate an experiment that is a radical departure from the tried and proven, and doesn’t seem to be working all that well?” It would take ten years and several false starts before Whitehead’s innovation worked out.
- The Partnership: The Making of Goldman Sachs, p.163
Whitehead’s IBS organizational structure also made it possible for Goldman Sachs to follow a low-risk and high-impact “fast follower” strategy on new products and services. Let other firms be first with new ideas, absorbing the costs and pains of being on the “bleeding edge” of innovation. Study what worked and improve it if possible, sort quickly through more than a thousand client relationships to select the most likely prospects for the new services; then, using IBS as the delivery system, take the transaction specialist to all the most promising prospects; and finally, by outselling the innovating competitor, come from behind quickly to do the most business and become the recognized experts in the new service.
- The Partnership: The Making of Goldman Sachs, p.175
In sustained pursuit of his strategic goals, Whitehead combined disciplined planning with reserved affability. He was quite unconcerned about being demanding of others. Smoothly rational rather than emotional, he never fraternized with the troops or had pals within the firm. Respected, but not loved or even particularly well liked, and often considered aloof from the others, who regularly socialized together, Whitehead was called, behind his back, the great white shark. He never cajoled or coddled and could be hard on investment bankers who sought praise or had a high need of ego celebration. Whitehead calmly obliged conformance in large matters and small.
- The Partnership: The Making of Goldman Sachs, p.179
Whitehead not only designed and staffed his productive organization, he made it work, saying to one banker after another, “You can do it,” and always clearly implying, “and if I hold you to it, you will do it.” “John was almost regal in the way he acted,” says Smith. “I never met anyone else like that in my life. It’s really quite amazing. He tells you exactly what he wants you to do; gives you the clear understanding you have no alternative and must do it; then proceeds to encourage you to believe you might very well be able to do it; and then continues on to give you the feeling you might even enjoy doing it, particularly if you commit your every effort to be sure you’ll succeed.”
- The Partnership: The Making of Goldman Sachs, p.180
If Goldman Sachs wanted to get into a business, it preferred to give the challenge to some of its own most promising young people. “When, as we rarely did, we decided to go outside the firm for talent, we avoided hiring whole groups or teams. Instead, we would identify the very best people, get to know them well, and bring them over individually. These new individuals would learn the Goldman Sachs culture and either blend into the firm or they would not make it at Goldman Sachs. We always tried to be creative with the new techniques and new financial products, but I never thought we had to be first with everything. I was perfectly happy to have another firm be first with a new idea because I was confident that with our superior marketing organization, we would improve the product and then achieve dominance through distribution, while those other firms put their reputation at risk if it didn’t work. We control our growth rather tightly so things don’t get away from us.”
- The Partnership: The Making of Goldman Sachs, p.180
Weinberg’s stated secret of success: “Love of hard work, no fear of tackling anything – and like every minute of if.” He didn’t mention intimidation, but others certainly would.
- Partnership: The Making of Goldman Sachs, p 33
Since most of the people working at Goldman Sachs had no family wealth, they knew they’d have to work hard to make it, and as outsiders they had little to lose by taking risks or being “different”.
- Partnership: The Making of Goldman Sachs, p 77
When it became time in 1969 for Weinberg to turn over operations to a successor, Levy had to be made managing partner of Goldman Sachs. As the major rainmaker who commanded great personal loyalty within the firm, he was the obvious choice as the firm’s leader for a simple, compelling reason: He was already leading.
- Partnership: The Making of Goldman Sachs, p 79
… There was no idle chatter with Gus, ever. “ When he asked questions, Levy wanted answers that were short, direct, and specific. He abhorred ambivalence and uncertainty. When one of his colleagues offered tentatively, “We may be able to do something that may help,” Levy cut him off: “May is just a month between April and June. It has no place here at Goldman Sachs.”
- Partnership: The Making of Goldman Sachs, p 81
Leadership authority and power in Goldman Sachs, as in all Wall Street firms, has to be earned over and over again every time the leader gets challenged – just as a male lion has to keep defending his pride of lionesses.
- Partnership: The Making of Goldman Sachs, p 95
Menshel hired salesmen carefully. His screening criteria were always the same: Candidates had to be very presentable and very bright. If a candidate made it past the first round, judgments centered on one key driver: How hungry was he, how much did he need to succeed? Having some family money –- in the sixties, still the first screening criterion at most firms – was not a positive at all: It was a real negative. Menshel wanted driven people, because he wanted a driven sales organization that would accept his strict discipline.
- Partnership: The Making of Goldman Sachs, p 123
Speaking of Levy, Young, and their sales team, Al Feld says, “They weren’t gods; they were only human. But when push came to shove, they were always do what wasreallyright.” Leaders are known by two things: the people they hire and bring together and the beliefs they hold to when they really have to choose. You only know what a person really believes in when he chooses to do something even though it costs him –- because he really believes it’s the right thing to do.
- Partnership: The Making of Goldman Sachs, p 124
“In evaluating leaders,” says Dick Menshel, “the central question has to be ‘Who made a difference?’ and on the criterion, Gus Levy stands out as a real innovator in developing the business of block trading.” Levy and his key lieutenants had that unstoppable drive to build a major, very profitable business, and they build the organization that would do it.
本週 MBA Monday Series,Fred Wilson 為我們解釋了「貨幣的時間價值 (the time value of money,)」,以及折現率還有利率 (discount rate / interest rate) 的組成。貨幣的時間價值可以說是所有財務學的基本觀念,任何人將這個觀念融入任督二脈後,對機會成本、沉沒成本的認知會有更深刻的體驗。修煉完成後,世界觀也會隨之改變。
The Startup Visa Act of 2010 would create a two year visa for immigrant entrepreneurs who are able to raise a minimum of $250,000, with $100,000 coming from a qualified U.S. angel or venture investor. After two years, if the immigrant entrepreneur is able to create five or more jobs (not including their children or spouse), attract an additional $1 million in investment, or produce $1 million in revenues, he or she will become a legal resident.(source)
美國民主黨國會議員 John Kerry 以及共和黨國會議員 Richard Lugar 日前提出一個新的移民創業法案:1) 找到至少 $250,000 美元資金挹注,其中 $100,000 美元來自美國天使投資人或創投,就能申請 2 年期限的居留 Visa。2) 兩年後,如果這名海外創業家能至少創造 5 個工作機會 (不含小孩與配偶),並且 a) 獲得額外一百萬美金資本挹注,或 b) 公司營收達一百萬美金,就能成為美國公民。
也許有人會說:陳少白這個角色很不負責任,真自私,文人專送別人去慷慨赴義。我則要說,歧視文人,才是現代社會最大的問題。追求實際,取笑理想,也是現代社會之所以平凡人充斥的原因。在太平盛事大家講求什麼?講求生活 (請稍歇會兒,跟著 Steve Jobs 一起歌頌 life style)、講求享樂,而給你們生活,給你們享樂的,就是商人。也就是說,現代社會講求重商主義,士農工商,很遺憾,請反過來寫。平民百姓的認知中,現代文人若不是窩在學校教書,就是在淌在政治圈裡搞利益輸送。前者是不經世事的井底之蛙,後者是掠奪民脂民膏的米蟲。
There is a big hurdle here that Steve Jobs has not faced even with his other successes, which is this is the first time he is going to have to make a market for a size and type of product that has simply not existed or not succeeded before.
說得含蓄點,就是大眾只對「貼近自己」、「容易理解」的創新有感覺,有反應,有記憶。至於讓 fortune 500 企業 LOB 效率增加 75% 的創新?讓 fortune 500 企業 IT 總支出減少 75% 的創新?省省吧,大眾沒興趣,別期望這些創新會有 pop momentum。
你不會因為 Apple 遲遲無法開發出適合企業使用的 mail server 就罵它不創新,不會因為 Google 遲遲尚未進軍 ERP 市場就罵它不創新。所以拿 lack of consumer technology innovation 來 challenge 當前將經營重心放在 enterprise technology innovation 的公司,有失公允。如果你是見識的菁英,如果你是有見識的記者,你會如何看待?
Given two similar rewards humans show a preference for one that arrives sooner rather than later. Humans are said to discount the value of the later reward, by a factor that increases with the length of the delay. In behavioral economics, hyperbolic discounting is a particular mathematical model thought to approximate this discounting process; that is, it models how humans actually make such valuations. Hyperbolic discounting is sharply different in form than exponential discounting, a rational function used in finance used in the analysis of choice over time. Hyperbolic discounting has been observed in humans and animals.(source)
人在市場中的行為有時候相當地動物本能。
In hyperbolic discounting, valuations fall very rapidly for small delay periods, but then fall slowly for longer delay periods. This contrasts with exponential discounting, in which valuation falls by a constant factor per unit delay, regardless of the total length of the delay. The standard experiment used to reveal a test subject’s discounting curve is to ask: "Would you prefer A today or B tomorrow?" and then, "Would you prefer A or B in one year, or in one year and one day?" (source)
A subject using hyperbolic discounting reveal a strong tendency to make choices that are inconsistent over time. In other words, they make choices today that their future self would prefer not to make, despite using the same reasoning. This dynamic inconsistency[2] happens because hyperbolic discounts value future rewards much more than exponential discounting. (source)
The Lehmans liked to described themselves as merchants of money, intermediaries between men who wanted to produce goods and men looking for something to do with their surplus funds.
- Charles Ellis, The Partnership, The Making of Goldman Sachs, p.18
A truly professional firm has certain characteristics: The most capable professionals agree it is the best firm to work for and that it recruits and keeps the best people. The most discriminating and significant clients agree that the firm consistently delivers the best service value. And the great firms are, sometimes grudgingly, recognized by competitors as the real leaders in their field over many years. On occasion, challenger firms rise to prominence – usually on the strength of one existing and compelling service capability – but do not sustain excellence.
- Charles Ellis, The Partnership, The Making of Goldman Sachs, Introduction, p.10
Recruit the best people 是不夠的,keep the best people 才是關鍵。公司文化、獎勵制度、發展空間都要有辦法留下這些人。不然何必幫競爭對手養兵呢?
記得去年回顧 AllTHingsD Bill Gates 和 Steve Jobs 同台對談,Gates 提到消費性電子產品會從 dedicated purposed 匯聚成 general purposed;我心得則是,消費性電產品會在 general & dedicated purpose 之間來回循環演化,像鐘擺一樣,兩極都有個磁場,把創新的趨勢吸引過去,這個磁場,我們叫它市場力量。不過最早發表這個看法的,是我們的老祖宗,陳壽,他在三國誌就預見:天下大勢,合久必分,分久必合。
Apple 從 dedicated purpose 產品東山再起 (a.k.a. iPod),到現在 iPad 搶盡媒體風采,Jobs Co.想往 general purpose device 發展的痕跡越來越明顯,iPad 也顯然被賦予了 multiple function 的期望。那麼,我們有沒有想過一個問題:比 iPad 大台的,叫做筆電或桌機,被拿來當 general purpose device 使用;比 iPad 小台的,叫做 smartphone,也逐漸被拿來當 general purpose device 使用。那 iPad 到底要如何在夾縫中生存呢?
iPad 如果把 OS X 裝進去,會咬到 Mac 的市場;做陽春一點兒,會咬到 iPhone / iPod Touch / iPod 市場。只做 e-reader,只做 gaming device,或只做 web browsing device,又不符合 Apple 的 content platform (paid + ads) + apps ecosystem 策略。做廣還是做深?這間公司到底如何定位自己呢?
But note this important fact: The true investor scarcely ever is forced to sell his shares, and at all other times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons’ mistakes of judgment.
- Benjamin Graham, The Intelligent Investor, p.203
A fourth business rule is more positive: “Have the courage of your knowledge and experience. If you have formed a conclusion from the facts and you know your judgment is sound, act on it – even though others may hesitate or differ.” ( You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right. ) Similarly, in the world of securities, courage becomes a supreme virtue after adequate knowledge and a tested judgment are at hand.
- Benjamin Graham, The Intelligent Investor, p.524
I like the subscription model the FT has been using for some time now.I may get the exact details wrong but its the idea that’s important anyway. You can visit the ft.com domain something like nine times per month for free. They cookie you and when you stop by the tenth time in a month, they ask you to pay. And many do. (昨天 NT Times 也宣佈採用這種模式)
This model recognizes a few fundamental facts about the internet. First, you need to make your content available for search engines and social media linking….
The other thing I like about the FT’s model is that its an elegant implementation of freemium. The best freemium models allow anyone to use the service for free and then convert the most serious/frequent/power users to paying customers…. (source)
難得看到一篇批判 Google / Nexus One 的文章。十五年來,雖然資訊載體的形式一直推陳出新,但人受到媒體的影響程度 (或控制程度) 也同步加深。除了少數菁英,一般人不願或不配或無法成為能「獨立思考的考動物」。媒體 (as a whole) 會繼續扮演老大哥的角色,只是老大哥會逐漸把權利下放給你我身邊的堂主。
所以,有沒有想過,the power of media v.s. the superior product portfolio,你心目中的企業品牌,有多少成份是靠前者建立起來的,有多少是靠後者?
每年 Forbes 都會公佈一份 Midas List ,榜上列出當年 ”the best dealmakers in high-tech and life science venture capital.”。KPCB 的 John Doerr 拿下 2008 年第一名,07, 06 年則排名第二,僅次於 Sequoia Capital 的 Michael Moritz。John Doerr 目前也是 Google 和 Amazon 的董事會成員:
Eric Schmidt calls John "one of Google’s best board members." And Jeff Bezos says, "Doerr (and Kleiner) is the center of gravity in the Internet.(source)
2009 年 7 月他到 Standford 商學院演講,主題為“Entrepreneurs as ‘Missionaries’ 但內容其實是圍繞在 Green Tech / Health / Education。最後保留十分鐘和台下同學分享 career advise。說真的,這類勵志內容人人都會講,聽得人也常覺得順耳好理解,(因為你早就知道了),不過我相信 John Doerr 還是會幫忙過濾幾個比較有用的 practical wisdom。
身為一名 arguably the best VC in silicon valley, John Doerr 仍不忘和台下的 Standford MBAs 建立關係。最後一張 slide,他推薦了四本書,還表示:如果有任何 idea,或畢業後想到 start-up / venture-backed companies 工作,歡迎寫信給我。如果你也在信裡面分享三本你最喜歡的書,我會把這份投影片寄給你。
其中 Startup. A Silicon Valley Adventure 這本書是由 GO Corp. 創辦人親自撰寫,講的是這間紅及一時的公司,由盛而衰最終失敗的歷史。GO Corp. 在 1987 年就提出了手持式平板電腦的願景,比 Apple 的 Newton 還早。只是中間經歷過大大小小的問題 (too early? poor execution? too much money? 看了才知道),最後還是於 1994 年走上關門一途。有趣的是,John Doerr 也自嘲說這也是一本關於他投資失敗的故事。
谷歌霹靂火繼續上演。WSJ 提到 CEO Eric Schmidt 支持 Google 繼續留在中國市場,但 Sergey Brin 則是堅持不能繼續向中國妥協。(推測多少和他小時候生活在蘇聯的背景有關)。看到一位網友認為,Google 就是因為 “startup mentality”,才會做出這麼「幼稚」的決定。如果換成 IBM 或 Microsoft 等 “matured” 之流,一定會選擇在檯面下把事情橋定。
差在哪裡?Google 是一間屬於創辦人的公司。IBM 和 Microsoft 是一間屬於管理階層的公司。
好在我們還有一間市值超國 1800 億美金的幼稚公司,仍然保有 “startup mentality”。站在股東立場,我不贊同 Google 片面撤出中國市場。股東,就是要賺錢。但今天如果我是創辦人,我也會希望能 leverage 這個位置的力量,做一點除了賺錢之外,有理想的事。
■ Investment Case: In our view, Google is attempting to balance the business opportunity in China vs. its view on the larger issue of "freedom of speech" and appears willing to sacrifice the former for the latter on principle.
■ Catalysts: In the near term, a possible withdrawal from the China market would have a fairly negligible impact on Google’s financials. We estimate that GOOG has ~30% share in China and that China accounts for ~1.5% of Google’s revenues. However, in this scenario, the longer term risk is that Google cedes too much market share in China to competitors, which it may find difficult to recoup, thus limiting its long run opportunity in the high growth Chinese market, both in core search as well as mobile.
■ Valuation: While our target price is essentially in line with current trading levels, we believe our target price reflects the potential for near term weakness on the China news. However, we maintain our Outperform rating as we do not view Google’s exit from China as a fait d’accompli and believe there is room for GOOG to work out a mutually beneficial arrangement with the Chinese government given political sensitivities.
今早看到新聞,Google 表示為了人權和言論自由 (a.k.a. no more search results censoring / filtering),「考慮」終止在中國的營運。「激活點」是上個月源自中國的駭客攻擊事件,駭客鎖定的目標又恰好是中國人權鬥士們的帳號。無獨有偶,美國其他大企業也遭到類似攻擊。
In mid-December, we detected a highly sophisticated and targeted attack on our corporate infrastructure originating from China that resulted in the theft of intellectual property from Google.
…we have discovered that at least twenty other large companies from a wide range of businesses–including the Internet, finance, technology, media and chemical sectors–have been similarly targeted.
…we have evidence to suggest that a primary goal of the attackers was accessing the Gmail accounts of Chinese human rights activists.
These attacks and the surveillance they have uncovered–combined with the attempts over the past year to further limit free speech on the web–have led us to conclude that we should review the feasibility of our business operations in China. We have decided we are no longer willing to continue censoring our results on Google.cn, and so over the next few weeks we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.
每個人看待這件事的角度不同。人權對我來說還好,我更關心如果 Google 真的 shutdown 中國 office,會對投資人造成何種程度的信心衝擊,及其後對財報的影響。記得李開復老師在自傳中提到,2006 年創建 Google.cn,過了很長一段時間才損益兩平,在他離開前,已經開始獲利。照「只賺一點點錢」來看,如果結束中國營運,清算掉資產,說不定短期還能提高 EPS?不過長期來看,少了中國市場,總是醜事一樁。畢竟流失人才,鞏固 Baidu 獨大的局面,都不是 Google 願意面對的。
相信高盛的 James Mitchell 會在這兩天為我們帶來深入的 financial implication analysis。
ps. 這篇 PR 看起來也像是想藉由網路輿論,引發外界重視,來產生和中國談判的籌碼 (over the next few weeks)。時間點選得也不錯。保留空間讓 Nexus-one 新聞燒一陣子。
MIT Sloan 學院的學生前幾天揪團到 Seattle 和 Silicon Valley 的知名科技公司參訪,也為之後的 summer intern 做準備。有些公司熱情款待這些同學,有些則是撳撳蔡蔡。Microsoft 看來是有用心在款待這些 MBAs:
… it sounds like the Redmond company has MBA internship slots open in product planning and product management, in its Server and Tools division, and others. And it certainly knew how to put on a show for the visiting students. “Microsoft was super interesting,” Wepfer says. “They took us through their ‘home of the future.’” (One other perk: Bill Gates used to have a gathering at his house for all the summer interns; now Steve Ballmer does it.)
On the plus side, several students singled out Microsoft, saying it “works really hard” to sponsor international students [Visas]. (source)
我準備來好好研究 Goldman Sachs 的 corporate history。研讀的磚塊書叫做: The Partnership: The Making of Goldman Sachs 。這類書籍的作者通常是記者或學者居多,遇到不用功的,怎麼看都不覺得有搔到癢處。好在本書作者 Charles D. Ellis 是位貨真價值的內線人事,他為 GS 提供顧問服務的資歷超過 30 年,也和歷代重要合夥人有不錯的交情。我想內容的 insight 應該是掛保證了,如果還能以中立的眼光來看待 GS 曾經做對和做錯的事,那就值得真情推薦。
我看書通常不喜歡先看書評,總覺得會減低閱讀樂趣。然而路過 NY Times 的 Sunday Book Review,還是給它喵了幾眼。我試著努力滑過 spoiler ,但其中這段讓我停了幾秒:
… as he explains in his preface, he started out believing that Goldman Sachs had become Wall Street’s strongest and most enduring player because it had a better way of doing things.
His mission: to figure out Goldman’s edge. Success, he concludes, started with hiring ambitious people from working-class backgrounds. If their parents were postal clerks or groundskeepers, they were likely to work relentlessly to secure a better life — and help Goldman amass profits in the process.(source)
高盛James Mitchell 燒燙燙的報告又出爐了。本回和同事 Robert Chen ( following HTC ) 討論後,認為 2010 全年 GOOG 能賣出 3 百 50 萬支 Nexus One,為營收帶來 9% 挹注, 0 – 2% EBIT 成長,但平均每支 Nexus One 和 HTC 拆帳後,恐怕只賺 55 元美金左右,大約是 10% 毛利率。所以跳進硬體遊戲,短期會衝擊到財報 margin。長期來看,則還是有助於 mobile ads/apps 策略布局。
VOLUME: We estimate Google may sell 3.5 mn Nexus Ones in 2010, based on first-year sales for other HTC Android models of 1.5-4.0 mn; we adjust up for Google’s brand and down for limited availability in retail outlets.
REVENUE: 3.5 mn units at $530 per unit add $1.9 bn, or 9%, to Google’s 2010 net revenue. Google will book the full unit sales price (including carrier subsidy on locked phones) to its “licensing and other” line item.
MARGIN: We estimate HTC’s component cost at $300 per unit, boosted by the OLED screen and CPU. We assume HTC bears warranty, after-sale service, & R&D expenses of $50, and retains a $75 profit. We estimate Google’s R&D & marketing expenses at $50 or more, for a margin to Google of up to $55 per unit, or up to 10%, and a boost to Google’s EBIT of up to $190 mn, or 0%-2%.
…like to talk about the 1/3, 1/3, 1/3 model in which 1/3 of the investments are wipeouts, 1/3 return capital but are underperformers, and 1/3 are winners that produce all of the returns. When you have an investment flow dynamic where the early rounds require very small amounts of capital but the later rounds in the winners can require a lot of capital (which is very much the case in the internet/web sector), then it behooves you to make lots of small investments, see which ones become the big winners, and then go "all in" on the winners.
The challenge all of this presents is how a VC should allocate his/her time. You can spend the majority of time hunting for deals (planting seeds) or you can spend the majority of your time working with the portfolio companies (tending the crop). Not all of the portfolio companies need a VC’s help. Many entrepreneurs are highly self sufficient. That’s a good thing. But every entrepreneur can use some help now and then and some need a lot. And the best VCs make it a point to be there when the entrepreneur needs you. And that is time consuming. It’s very time consuming if you have ten or more portfolio companies and you make it a point to be a "valued added" VC. (source)
現在 Google Ads 在使用者心目中就是「有點干擾,又不會太干擾」的平衡狀態。所以動手安裝外掛的心理成本仍然高於維持現狀。
所以就如同原文結尾說的;
Extensions like his, he said, will make “every one else change their ways, to make ads more useful. Everyone wins, that’s competition. The ideal result would be to retire this extension because the entire Web was covered with ads that people loved and no one wanted to block them.”
又一次集中投資寡占避險的價值體現。你無法預測未來市場走向,但你知道 mobile ads will be the next big thing。那怎麼辦?只好把市場上可能的 player 都撿到籃子裡。不管他們怎麼戰,你只需要搬張折凳泡杯茶,好好欣賞台上的 M&A 戲碼,因為,不論結局如何,你都會是贏家。
昨天晚上 MSN 彈出一個提示視窗,說我收到一封 INSEAD Knowledge 的信,說真的,我還從來沒打開過這些高級學府寄來的「廣告信」。昨天大概是起了念,就決定開來看看。嗯,還不錯,這是篇類似電子報的信件,裡面收錄上一季 INSEAD Knowledge top 10 文章精選。這些文章都是由 INSEAD 的學者教授們發表。我點了其中一篇 “why MBAs should not sign the HBS oath”,講得是為了不要讓金童們再搞出一波金融海嘯,前陣子哈佛商學院發起了一個簽署運動,鼓吹優球全球頂尖 MBA 學生都要簽署這份「I’ll do no evil」誓言書。而 INSEAD 這位教授發表了一篇論述,站在反對立場。先講幾個發現這封信的感想:
1. 讓大學加入市場競爭機制果真是好事
2. 連 INSEAD 這種等級的學校都要發電子報來吸引一流學生了,台灣的頂尖學校在幹嘛
3. 教授沒有想像中那麼沒料,至少比成天「見微知著」的部落客好多了
The MBA Oath 原文如下
THE MBA OATH
As a manager, my purpose is to serve the greater good by bringing people and resources together to create value that no single individual can create alone. Therefore I will seek a course that enhances the value my enterprise can create for society over the long term.I recognize my decisions can have far-reaching consequences that affect the well-being of individuals inside and outside my enterprise, today and in the future. As I reconcile the interests of different constituencies, I will face choices that are not easy for me and others.
Therefore I promise:
I will act with utmost integrity and pursue my work in an ethical manner.
I will safeguard the interests of my shareholders, co-workers, customers and the society in which we operate.
I will manage my enterprise in good faith, guarding against decisions and behavior that advance my own narrow ambitions but harm the enterprise and the societies it serves.
I will understand and uphold, both in letter and in spirit, the laws and contracts governing my own conduct and that of my enterprise.
I will take responsibility for my actions, and I will represent the performance and risks of my enterprise accurately and honestly.
I will develop both myself and other managers under my supervision so that the profession continues to grow and contribute to the well-being of society.
I will strive to create sustainable economic, social, and environmental prosperity worldwide.
I will be accountable to my peers and they will be accountable to me for living by this oath.
This oath I make freely, and upon my honor.
INSEAD 教授 Theo Vermaelen 反對的立論有三點:
1. Some parts of the pledge are inconsistent with fiduciary duties and ethical standards.
2. The oath is a misplaced response to the financial crisis.
3. I don’t believe in pledges as an instrument to guide people’s behaviour.
In many countries, board members and, as a consequence, managers have a fiduciary duty to maximise the wealth of shareholders. Even in countries where the corporate governance code is promoting maximising stakeholder value, none of these codes would accept that managers promote “social and environmental prosperity worldwide” as the HBS oath does.
I believe it is unethical to raise money from shareholders without telling them in advance that you are going to pursue causes that are destroying shareholder value. If you want to pursue other objectives, then you should tell them in advance, so that investors can incorporate these goals into stock prices, or simply refuse to buy the company stock.
First, Rene Stulz and Rudiger Fahlenbrach (“Bank CEO Incentives and the Credit Crisis” working paper, Ohio State University, 2009) show that banks where the CEO held a lot of stock were also the banks with the biggest losses. So they were not losing other people’s money, they lost their own money. They apparently believed in their strategy.
People are not driven by pledges, but they are driven by incentives.
Signing the oath doesn’t cost anything and therefore not a credible commitment.
The current debate should focus on how to improve corporate governance and how to design compensation contracts that are maximising shareholder value, rather than profits, earnings per share, return on equity or other non risk-adjusted short-term measures of performance.
The HBS school oath aims to achieve exactly the opposite. It pushes the stakeholder value maximisation idea to its extreme by including the whole world as a stakeholder.
I would propose the following:
“I pledge to maximise the wealth of the people who pay my salary, i.e. the shareholders, unless the shareholders tell me in advance that they want me to do something else. I will do my best to learn how to do this by taking the relevant courses”
Fred Wilson 列出了 2010 他和 Union Square Ventures 的合夥人可能會投資的領域: mobile、gaming、commerce/currency、cloud platforms/APIs、eduction/energy/environment.
前天和朋友吃飯,我們也討論到各自看好的領域:mobile commerce、customized content distribution app。也覺得就 consumer Internet market 來說,台灣生態不適合開發 utility 類型的 web services / mobile apps,比較適合開發 content 層級的 application。
好在這個世界上有 broadband Inetnet + video streaming technology。當然,對我來說,沒有佳句摘要,就不算是吸收了一場完整的演講:
Announcer: …wealth is not about the money you amass, but the number of lives you enrich.
Gates: I was a huge beneficiary of this country’s unique willingness to take risk on a young person. And, you know, I got to hire people who were older. I got to sell to people who were older. And it was kind of a dream come true.
Buffett: Last September, only the government could have saved things. The whole world wanted to deleverage. And they were deleveraging under conditions of extreme haste and with guns to their head in some cases. And the only entity that could possibly leverage up at the same time that everybody else wanted to deleverage was the Federal government.
Gates: And business schools play a role in training people to think about value, leadership. There’s wonderful skills that are taught at great schools like this. And so the fact that, yes, we have had a crisis and we have dropped back, maybe we wasted two or three years net because of the things that were done wrong, that doesn’t say that business schools aren’t performing a great service, you know. The case studies of this crisis will be taught here for decades to come.
Buffett: The wonderful thing about it is in this country, is you can succeed magnificently with ethics. It’s not a hindrance. It’s a help sometimes.It’s a neutral sometimes. But it’s not a hindrance at all. And to cut corners, you know, everybody here has a wonderful future. I mean, this is an economy you’re going into that is so much — [APPLAUSE] If you look back on the 19th Century, we had seven great bank panics. If you look back at the 20th Century, we had the Great Depression and world wars and flu epidemics. This country doesn’t avoid problems. It just solves them. And in the next 100 years, our machine will sputter again, you know. Maybe 15 years will be so-so years, but there will be 85 great years. And during the 20th Century the Dow went from 66 to 11,400, so this is fertile soil that you’re working in and there’s no reasons to cut corners.
Buffett: I had a professor, Ben Graham, I offered to go to work for him for nothing. He said, "You’re overpriced." Nonetheless, I went into the business. [APPLAUSE] I will guarantee, you will do well at whatever turns you on.
Buffett: I don’t like to sound, you know, like a mortician during an epidemic or anything, but last fall was really quite exciting for me. [LAUGHTER] I don’t wish it on anybody, but there were things being offered. There are opportunities for us to do things that didn’t exist a year or two earlier. So I really don’t — I don’t want to be in a position where I am leveraged or something of the sort that does keep me up at night. I did not worry about the ultimate survival of our economic system. We were messed up. Wasn’t any question about that. But the plants haven’t gone away. The cornfields haven’t gone away. The talent of the American people hasn’t gone away. The innovativeness of the next Bill Gates hasn’t gone away. This country was going to do fine. I knew that. We just had to get things straightened out. And we’re well on the way to having that happen.
Buffett: …if you had a wonderful farm and you knew the next 50 years there would be five droughts but there would be 45 good years, I mean, you would not become paralyzed thinking about the five drought years. You would recognize that you’ve got a system that works very well over time, and that’s our American economic system.
Buffett: Let me give you an illustration. I bought my first stock in 1942. I was 11. I had been dillydallying up until then. I got serious. [LAUGHTER] What do you think the best year for the market has been since 1942? Best calendar year from 1942 to the present time. Well, there’s no reason for you to know the answer. The answer is 1954. In 1954, the Dow … dividends was up 50%. Now if you look at 1954, we were in a recession a good bit of that time. The recession started in July of ‘53. Unemployment peaked in September of ‘54. So until November of ‘54 you hadn’t seen an uptick in the employment figure. And the unemployment figure more than doubled during that period. It was the best year there was for the market. So it’s a terrible mistake to look at what’s going on in the economy today and then decide whether to buy or sell stocks based on it. You should decide whether to buy or sell stocks based on how much you’re getting for your money, long-term value you’re getting for your money at any given time. And next week doesn’t make any difference because next week, next week is going to be a week further away. And the important thing is to have the right long-term outlook, evaluate the businesses you are buying. And then a terrible market or a terrible economy is your friend. I don’t care, in making a purchase of the Burlington Northern, I don’t care whether next week, or next month or even next year there is a big revival in car loadings or any of that sort of thing. A period like this gives me a chance to do things. It’s silly to wait. I wrote an article. If you wait until you see the robin, spring will be over.
Buffett: [APPLAUSE] But let me add one point because — to the MBA situation. Right now, I would pay $100,000 for 10% of the future earnings of any of you. So anybody that wants to see me after this is over — [LAUGHTER] [APPLAUSE] If that’s true, you are a million-dollar asset right now, right, if 10% of you is worth 100,000? You could improve — many of you, and I certainly could have when I got out, just in terms of learning communication skills. You know, it’s not something that is taught. I actually went to a Dale Carnegie course later on in terms of public speaking. But if you improve your value 50% by having better communication skills, that’s another $500,000 in terms of capital value. See me after the class and I’ll pay you 150-thousand. [APPLAUSE]
Gates: But I think I’d pick his desire to teach, his desire to teach things that are complex and put them in a simple form so that people can understand and get the benefit of all his experience, all his models of how the world works. He loves to teach. And he does it meeting with students. He does it in his annual newsletter. He does it when he’s talking to me on the phone. It’s a real gift that I admire incredibly.
Buffett: First of all, I’d say marry the right person. [LAUGHTER] And I’m serious about that. [APPLAUSE] It will make more difference in your life. It will change your aspiration, all kind of things. It’s enormously important who you marry.… And then also go to work, if possible, for an organization or an individual that you admire. I mean I offered to go to work for Ben Graham because there was nobody I admired more in the business than him. I didn’t care what he paid me. When he finally did hire me in 1954, I moved from Omaha to New York and I didn’t know what I was getting paid until I got my first paycheck. But I knew I wanted to work for Ben Graham. And I knew I would jump out of bed every morning and be excited about what I would do and I would go home at night smarter than I was in the morning. Go to work at a job that turns you on and a person that turns you on and institution. [APPLAUSE]
Buffett: The one thing I will tell you is the worst investment you can have is cash. Everybody is talking about cash being king and all that sort of thing. Most of you don’t look like you are overburdened with cash anyway. [LAUGHTER] Cash is going to become worth less over time. But good businesses are going to become worth more over time. And you don’t want to pay too much for them so you have to have some discipline about what you pay. But the thing to do is find a good business and stick with it.
Buffett: Don’t pass up something that’s attractive today because you think you will find something way more attractive tomorrow.
Buffett: But every year don’t measure it by the earnings in the quarter that year. Measure it by whether the moat around that business, what gives it competitive advantage over time has widened or narrowed. If you keep doing that for 100 years, it’s going to work out very well. Then I tell them basically if the reason for doing something is everybody else is doing it, it’s not good enough. If you have to use that as a reason, forget it. You don’t have a good reason for doing something. Never use that.
Buffett: It’s always interesting when Bill and I appear together, they don’t figure they can do what Bill does, but they know they can do what I do. [LAUGHTER] [APPLAUSE] …
Buffett: And then basically I didn’t listen to anybody else. I just look in the mirror every morning and the mirror always agrees with me. And I go out and do what I believe I should be doing. And I’m not influenced by what other people think.
Gates: Well, we talked about some of the basics, having great people around you, reading a lot, thinking long-term. I also think, though, there become a few magic moments where you have to have confidence in yourself. You know, Warren when he set off on his own, he could have gone and taken a job as an analyst somewhere. But he knew that he had the skill, that he was going to raise money and have his own partnership. When I dropped out of Harvard and said to my friends, ‘Come work for me,’ there was a certain kind of brass self-confidence in that. You have a few moments like that where trusting yourself and saying yes, this can come together — you have to seize on those because not many come along.
Gates: Well, they [Google] have some of the same problems we had. [LAUGHTER] [APPLAUSE] It’s another fine competitor. They are hiring a lot of smart people. They have gotten into the lead position in search, which is incredibly profitable to be number one in that. They may get a little competition as time goes forward. But they are a great example of what can happen, you know, two young guys who got together, pursued an idea and created a success that’s absolutely gigantic. And we all, you know, hopefully use search engines, maybe a variety. [LAUGHTER] And we benefit from that.
Buffett: … Well, that’s 50 years of preparation and five (minutes) of decision making. [APPLAUSE]