I recently had the opportunity to attend a talk in one of my classes from real estate billionaire Tom Barrack who runs Colony Capital. His “path” through life has been absolutely non-linear — he started out as a lawyer at a traditional law firm, went broke in Saudi Arabia, found himself in Haiti doing energy deals, before bouncing around in various roles around the US, and somehow ending up as a real estate investor. Now he runs one of the largest private equity real estate firms in the world.
What’d I take away from his talk? The importance of pushing through comfort zones. He emphasized throughout his talk to us how important it is to constantly push yourself beyond what you are comfortable doing. That’s how he ended up pursuing opportunities all around the world. And, as he explained, that’s what he uses as his test for making business decisions where he is in unexplored territory. As always, that’s easier said than done.
Most high achievers grow up with constant external positive reinforcement of their success. When you got an “A” your math test and your teacher gave you a sticker or your parents put the test on the fridge — such actions condition high achievers from a young age to value extrinsic motivation. Furthermore, high achievers develop an avoidance of failure. It’s too easy to stay in a comfort zone and continue achieving without much risk.
What Tom Barrack emphasized is something I have tried to incorporate more into my life in the past few years, although his talk really underlined to me just how important it is. Last year, I signed up for an extremely quantitative class filled with engineers, statistics, and math majors. My initial reaction was one of fear of failure. I wanted to drop the class within 2 weeks because I felt that the material was way above my head and that I could not keep up with other students in the class. But my father convinced me to stick to the class. He put everything in perspective for me: I would just have to work harder than everyone and that I have never in my life backed down from a challenge. Why should I back down now? It made me realize how easy it is to avoid challenges — it’s so much easier to stick to the formula that works. But I faced that class head on and ended up with one of the highest grades in the class. All because I pushed through my comfort zone.
Another recent example came to me in squash, which I only started playing about 2 months ago. I’ve been playing a lot lately, and usually with players who are undoubtedly more experienced than I. I have forced myself to constantly play with people who are better. I get destroyed match after match after match. But I push through it and my game has improved dramatically in the past few weeks. I recently tweeted my approach to squash, which I believe applies to a lot of other things:
If you want to be the best, play with the best…embrace the competition
My serve and court game is decent, but my return game is awful. So what do I do? I always let my opponent serve so that I am constantly under fire and forced to practice my awful return. And it has definitely strengthened my return game.
Basically, I think comfort levels serve as an amazing gut check. Anytime you feel uncomfortable trying something new or difficult — it means that you have to push through it and force yourself to embrace whatever comes your way.
There exist, on a simplified level, two main types of operators in the business world: 1) entities or people who have capital and want to put it to work and 2) entities or people who put that capital to work. Basically, Type 1 has money and Type 2 needs money to run a business, which should generate returns for Type 1. Again, I am grossly generalizing here, but it illustrates a few points.
Until recently, I had only thought of myself as interested in a Type 2 role (running a business), but the current state of the world has opened my eyes to the importance of Type 1.
In a boom, money is loose and easy to find. Capital in essence, becomes a commodity. If you are running a business as a Type 2 at a successful level, everyone is competing over you; everyone wants to invest in your business and put their money to work. Also, in a boom, business is generally good and it’s easier to find customers, charge customers, and ultimately make money. So during boom times, it puts you in a power position to be an entrepreneur putting Type 1 money to work.
In a bust, money is tight and hard to find. Capital is now a rarity. If you have capital (Type 1), everyone is competing over you. Business operators want you to invest in their company. They are willing to take lower valuations and worse terms just for some cash. It’s also harder to run a business when the economy is struggling; customers are harder to find, customers demand better pricing, and everyone tightens up. In such a state of the world, Type 1 sits in the power position.
I constantly hear how right now is the best time to start a business. Conventional wisdom today, at times, feels like it is purposefully contrarian. While right now is a good time to start businesses, especially in areas where incumbents are struggling or out of business, I think it’s a mistake to ignore the importance of having capital.
Right now, to me, seems like a better time to be investing in undervalued assets, investing in startups at low valuations, and putting money to work on much better terms than seen in a long time.
The conclusion is then fairly self-explanatory: I’d rather invest in many businesses at the bottom for cheap than start one business at the bottom. I’d rather operate a business in a boom than invest in businesses at boom prices. In a boom, entrepreneurs are in power. In a bust, capital holders are in power. Be in the power position.
I spent two weeks in August travelling out to Los Angeles, California and Alaska. I had never been to either one before and I spent about a week in each place.
Reflections on Los Angeles:
1) The city is very spread out and decentralized. I spent the first two months of summer living in New York. Los Angeles is eseentially a flattened out New York. So you have the same amenities and offerings, just spread out over a larger area. Just takes getting used to the fact that everything is spread out.
2) There is lots of distressed real estate and it will come back. California had a huge real estate bubble crash. Being on the ground in LA gave me the opportunity to see first hand the condition of the real estate market. There is going to be lots of opportunity in California real estate in the next few years. Having spent time in Dubai (which also had a huge real estate crash), I saw that LA has real fundamental demand for goods and services. Dubai was just built on nothing. Check out this graphic from RealtyTrac which does a good job of showing a snapshot of real estate in California.
California Foreclosures
3) California has water problems. I went to a sushi restaurant and I noticed the following sign posted around the restaurant:
Water Problems
I’ve never seen a sign like that, but it makes sense given the water conservation efforts underway in California.
4) The city is littered with seekers of fame. If I were to generalize about cities I’ve spent time in, I would say New York: Money, Washington DC: Power, and now Los Angeles: Fame. That’s not necessarily bad or good, that’s just how I see it. The culture of Los Angeles seems very predicated on status and fame.
5) The food is out of this world. It should be no surprise given the ethnic diversity found in California, that the food is amazing. I don’t need to say much more.
6) Public transportation is not part of the equation. This summer I took the metro or a bus all over New York. It was so easy and convenient. In LA, that doesn’t appear to be the case.
Reflections on Alaska:
Alaska was absolutely gorgeous. I spent about a week out in the middle of no where (which was a nice break from the buzzing of the BlackBerry) and I got to truly enjoy the outdoors. I’ve enjoyed fishing ever since I can remember, and Alaskan fishing was a true pleasure.
One of the biggest things I learned on this trip was about an environmental issue called the Pebble Mine Project. In a nutshell, the proposed project is to build a open pit copper mine in Bristol Bay which experts estimate has about $500 billion in copper deposits. Bristol Bay is home to some of the largest salmon runs in the world and provides about $300 million in revenue for the local fisherman. This proposed mine, which would be among the largest ever built, poses a significant threat to the entire ecosystem in the area because there is virtually no way to safegaurd the water, air, and land against a mine of this size. I can’t say I’m the biggest environmentalist in the world, but there’s something indescribable and beautiful about the nature of Alaska. It would be a shame to see it destroyed. My friend Kiley has a more in depth post on the issue of the ongoing Pebble Mine Project.
I would love to spend more time in Alaska. Here’s a few pictures from my trip:
I have participated in a fantasy football league with my high school friends since 2003. We are now entering year 7. (I posted about my 2008 team here.) We have a trophy that we engrave each year with the winner. I have one engraving on that trophy in the past 6 years, which I’m proud of. Although I was out in California during the draft, I was able to draft via phone through a proxy who was present at the live draft. I’m really happy with the team I ended up with. Just last season we shifted to a keeper league, which adds a nice element to the mix. In a keeper league, you get to keep players for next season in exchange for next season’s draft picks. It promotes you taking agressive risks on young players with high potential for the next year.
Here’s the team I ended up with:
QB (start 1): Ben Roethlisberger, Jake Delhomme
WR (start 3): Steve Smith (on the Panthers), Chad Ochocinco, Roy Williams, Chris Chambers, Earl Bennett
RB (start 2): Clinton Portis, Kevin Smith, Jamal Lewis, Cedric Benson, Ricky Williams, Michael Bush, Peyton Hills
TE (start 1): Dallas Clark
I’m really excited about my team. At RB, I have 4 guys (Portis, Smith, Lewis, Benson) who are undisputed starters on their teams and the other 3 guys are all very capable backups who could shine if given the starting opportunity. I’m really confident in my WRs, and I’m looking for a big time bounceback for Chad Ochocinco. I’ve been following him on Twitter and he’s got me sold that this will be a big year for him. I’m only half joking. Chambers can put up huge numbers on occassion and I’m hoping Bennett hooks up with Cutler to rekindle the magic they shared in college. I’m confident that Dallas Clark will put up top TE numbers. The only position I’m worried about is at QB. I’m not sold on Big Ben or Jake Delhomme. Neither of them consistently put up big numbers at QB. Luckily, my league doesn’t give too many points at the QB position, but it’s still nice to get good numbers out of that position.
Last year I finished second. The goal, as always, is to win it all this year.
This one comes from the legendary billionaire Paul Tudor Jones; he is considered one of the greatest traders of all time and runs one of the oldest hedge funds in the world. I just started reading “Market Wizards” by Jack D. Schwager. The book consists of in depth interviews with some of the top investors/traders of 1980s. This quote comes from an interview with Paul Tudor Jones:
“Don’t be a hero. Don’t have an ego. Always question yourself and your ability. Don’t ever feel that you are very good. The second you do, you are dead.”
These words apply to many things beyond just investing. Beautiful and simple.
I got into a discussion with a colleague of mine about media and reporting. I made an off handed comment about how I trust bloggers more than the mainstream media TV News Networks like CNN, FoxNews, CNBC, etc. When he pushed me to back up my statement, I came up with several conclusions. Plenty has been written talking about why new media is disrupting the old newspaper and TV network models, so I won’t rehash that. What I just want to touch on is why I fundamentally trust blogs more than the mainstream media.
1) Blogging is much more of a meritocracy. There are over a hundred millions blogs in existence (indexed since 2002). New blogs crop up everyday. In contrast, the major news networks all remain the same. The hosts are nearly the same (sometimes they rotate between networks). With blogging, new blogs shoot up out of nowhere and gain large followings in a relatively short period of time. A recent example of this is the financial blog ZeroHedge, which started a few months back as a hosted blogspot domain and has now grown into one of the edgiest financial blogs in the world. The mainstream media loves to point to the fact that anyone can start a blog as a way to question the credibility of bloggers. The problem with this argument is that they fail to realize no one continues to read bad bloggers. If you are not providing great content and value, people won’t read what you have. It’s as simple as that
2) The feedback is real, unfiltered, and instantaneous. The people on TV News Networks have no real resistance to what they are saying. Sure, they bring on people to “debate” them, but there is very little discord on the air. All the voices sound the same. Blogs have a simple thing called comments. Although some sites limit the comments on their posts, most sites allow uncensored and raw comments. This means that bloggers with large followings can’t get away with just saying unfounded opinions. Anyone who spews out garbage will get RIPPED APART in comments. It’s as simple as that. I would love to see these TV News Hosts attempt to handle the feedback that bloggers get on a daily basis. They couldn’t handle it. They are not used to anyone seriously challenging what they say.
3) Bloggers have nothing to lose. Whereas the major TV networks are owned by the same handful of big companies, the blogosphere constantly gives rise to new voices who are unafraid to push the envelope. It is precisely because anyone can start a blog that bloggers are FEARLESS of what they say. Blogs really are too small to fail and that makes them an incredible source of groundbreaking ideas/news. Sure, blogs can often overstep the lines of reality, but I think we’ve seen in the past year that so canmainstream media. I love reading a blog that consistently pushes the envelope because they are unafraid of disrupting the status quo. This is how truth and ideas are born.
With that, I would like to leave you with one of my ultimate favorite clips of one of my favorite personalities: Jon Stewart. He is brilliant, sharp, witty, and always pushing the boundaries. Ironically enough, this comedian, as of today’s Time Pollis the MOST TRUSTED NEWSCASTER IN AMERICA. Let that sink in for a moment.
This is a clip of him coming onto CNN’s Crossfire and absolutely ripping them apart for their failure to truly do their responsability of delivering real discourse. His apperance on the show led to the cancellation of the show (after having run for 12 years) and the termination of Tucker Carlson’s contract with CNN.
A lot of people in the hedge fund and real estate industries feel that the future is bleak for investors, speculators and bettors. If you talk to them, you’ll hear about how the “golden” years of making money are gone and how the government will continue to bring on regulations.
For an entrepreneur, it’s important to make an attempt at drowning out the noise and really focusing in on opportunity. I see massive opportunities in hedge funds and real estate investing in the coming years.
First off, the space is a lot less crowded. For example, in a June 16 Bloomberg article, Hedge Fund Research reports that of 9,500 funds in existence around this time last year, 1,200 have closed. So for every investment, there are now less people looking at it. That inherently creates opportunity.
Secondly, and perhaps more importantly, we must look at the players remaining. The average hedge fund lost 19% in 2008, which is the worst year on record since the dataset began tracking in 1990. So of the remaining players, they are now increasingly risk averse. The name of the game is to survive. That’s healthy and appropriate. But it also means that such a recent memory of a near fatal experience can impede the investing decisions of people who made it through the blood shed of 2008.
Thirdly, we must look at history. Investors and market speculators have existed in some form or another since the ancient days of Aristotle in Greece. There have always been bubbles and crashes. Booms and busts. Today is no different. There will be more bubbles in our lifetime. And there will be more crashes as well. Many things come into existence through booms and trends. It is part of our human nature.
And so, I have no doubt in my mind that the future looks very bright for investors. New markets will come. The players will change, but the golden rule will always be the same: buy low, sell high.
I’ve been crazy busy as of late and have had little time to sit down for a meaningful blog post. I’ve also been way more active on Twitter, which is easier and quicker than blogging and way more interactive.
Fortunately, I can be lazy and link to someone else’s writing. My friend Kiley Austin-Young wrote 2 excellent posts recently, which I’d like to share. Kiley has been trading stocks and working at StockTwits (a Twitter based stock community).
The first post is called “On Stops, Sex, & Speculation.” This piece is more philosophical in nature and deals with the emotions/decisions one faces when speculating and or gambling on anything in life. I think this post does a great job of laying out the spectrum of emotions one faces in a life based on risk taking. This really extends to anything from start-ups to poker to trading to relationships. The ups and the downs come unexpectedly, and they’re often hard to recover from. That’s why risk management is vital.
The second post is called “Commission Catastrophe.” This piece is more technical in nature and details just how hard it is to overcome the broker fees in day trading to actually come out ahead. Kiley details his first hand experiences of trading and the role that commissions play. This reminds me of poker — where the “rake” (commission for the casino/house) can really put a huge dent in your winnings. Often, the difference between just staying in the game and calling it quits is the hard line imposed by the rake.
Everyone always talks about how the model for education in America is “broken.” While I completely agree with this statement, I’ve yet to see a proposal that offers a real solution. The other day, my friend Avinash sent me a cool New York Times article about a new charter school in New York. The article, entitled “Next Test – Value of $125,000-a-Year Teachers”, talks about a new school in New York with “superstar” teachers. For example, the Phys Ed teacher is Kobe Bryant’s former personal trainer. I wish I had that kind of gym teacher in middle school. The point of the school is really an experiment to test what drives success in the classroom:
[the school is] premised on the theory that excellent teachers — and not revolutionary technology, talented principals or small class size — are the critical ingredient for success.
Here is what the teachers were selected on:
The eight winning candidates, he said, have some common traits, like a high “engagement factor,” as measured by the portion of a given time frame during which students seem so focused that they almost forget they are in class. They were expert at redirecting potential troublemakers, a crucial skill for middle school teachers. And they possessed a contagious enthusiasm
There have always been different theories on success in the classroom. What really struck me about this school is that it has a completely contrarian approach: the teachers get paid more, the class sizes are bigger, the teachers work a lot more, and there is no safety net for teachers.
To make ends meet, teachers will hold responsibilities usually shouldered by other staff members, like assistant principals (there will be none). There will be no deans, substitute teachers (except for extended leaves) or teacher coaches. Teachers will work longer hours and more days, and have 30 pupils, about 6 more than the typical New York City fifth-grade class.
Teachers will not have the same retirement benefits as members of the city’s teachers’ union. And they can be fired at will.
This school basically cuts out any excess in the system. The best teachers should get paid a lot and in return a lot should be expected of them. In a sense, this school provides for a market for good teachers. I think an economic model to solve education in America could create significant change. People commonly bring up that teachers don’t get paid much, so there’s not an incentive for people to work in teaching. Imagine if being a teacher paid as much as traditionally highly paid professions like being a lawyer or an investment banker (pre-2008) or a doctor. I have no doubt in my mind that we could develop generations of extremely talented teachers.
The key is incentives. And as of today, it’s very hard to attract the best in the world to teach the next generations of America. That needs to change.
Being a means to someone else’s end. This is an issue that I have faced and one that often comes up when I talk to entrepreneurs who are looking for advice. Now to a certain degree, most things in business are simply a means to an end. For example, on a basic level, when an investor invests in a company, that company is a means to the end of making money for the investor. In that case though, the interests are very clear and hopefully on the same path between the entrepreneur and the investor.
What I think is problematic for many entrepreneurs is when they face a 3rd party who has interests that only align partially. For example, you are the CEO of Startup Company XYZ that designs, manufactures, and sells a special widget. Big Company ABC comes to you with a deal to use your manufacturing facilities to design and manufacture a new type of widget which they will sell. A lot of startups get approached by big companies who want to “outsource” things to them. Do not do this deal. It’s obviously a great deal for Company ABC to skip the design and manufacturing stages by outsourcing it to you and, but this deal leaves you stretched thin and unfocused. Your Startup Company XYZ needs to stay focused on your widget, not on someone else’s widget.
These people want to bend your will to match theirs. That’s why it’s so important to know what you want and go for it. Otherwise, it’s too easy for others to come in and use you for their own purposes. It’s very rare that the interests of both parties align perfectly. When you are at risk of becoming a means to someone else’s end and that end is not what you ultimately want, run the other way. Fast.
Now that I finally have my own laptop (after going almost 2 months without my own computer), I have had to deal with the typical issues like re-installing old programs and clearing my e-mail Inbox. Although I used a public computer to check through my e-mails, I still had an Inbox with 600 unread e-mails. I typically like to clear my Inbox and I decided that I’d invest the time now to save myself time later.
When going through my unread e-mails, I noticed a few trends and decided to setup filters in Gmail to better process my incoming e-mail. I quickly noticed that all e-mails basically fall into “auto-generated” and “personal” e-mails. Basically, “personal” e-mails are any e-mail where someone has to manually e-mail you and often the e-mail is intended for just you or at most a few other people. “Auto-generated” e-mails come from websites I have accounts on or groups I’ve signed up for. My ultimate goal was to create an Inbox where I would only get personal e-mails. These are usually the e-mails that require my immediate attention as I prefer to reply fairly quickly to e-mails. Here’s what I came up with:
1) Some websites/groups send me a lot of e-mail that I don’t read often
I found that sites like Staples, Amazon, Uloop, Skydeck, Mint, and others send me frequent updates. I very rarely read those, but sometimes I do and I don’t want to delete them all. So I setup Gmail filters to filter them into a separate folder that I can check infrequently. This way I can search through them at any time or retrieve them if needed at a later date.
2) Some websites/groups send me a lot of e-mail that I read consistently
A few sites like Facebook and Twitter, send out many notifications and I usually will read these. I still don’t want them clogging up my Inbox, as these notifications are not always that important. For sites like these, I setup individual folders that get filtered e-mails. For example, Facebook e-mails all go into a Facebook folder, etc. This also includes all of the school e-mails I get from Penn and Wharton. I want to stay informed of on campus events and school news, but I don’t always need to see this right away.
3) Some websites/groups send me e-mail that I never read
This was the easiest to deal with. I have signed up for websites in the past that I no longer use and listservs that I no longer read. For these, I simply setup auto-delete filters so I will never even see their e-mails. This was my favorite part and it will surely clear a lot of “noise” out of my Inbox.
4) Personal e-mails get lost in the shuffle
These are the most important for me. I noticed more than a few personal e-mails that I had missed or replied slowly too because they were in the middle of a bunch of other e-mails. These e-mails are now the only e-mails that touch my Inbox.
Overall, I spent a few hours setting up all the filters and clearing through my Inbox. In the end I am left with a system that should hold fairly well for the foreseeable future and help me keep my e-mail organized.
Since I started this blog nearly two years ago in July 2007, I have not had a month go by without blogging. I usually try to blog once a week on average and I’m posting this as a recap of the past month — a month during which I did not post a single entry to this blog.
This past month, I’ve had a lot to blog about, but my computer broke and I’ve had to resort to a new lifestyle. I actually delayed getting my computer fixed because I wanted to experiment life without a computer. It’s been very interesting to say the least. My cell phone has limited Internet and e-mail capabilities, SMS texting, and AIM capability, but no attachment ability or complex Internet access.Without a computer, I can only use public computers and I have to plan out my usage ahead of time.
The great part of this is that I spend WAY LESS time on a computer in a typical day and usually go over all of my e-mails and TO-DO items in one sitting. This has made me extremely efficient. The only way to really get an instant guaranteed hold of me is through phone calls — I don’t think I realized how little time I spend actually talking on the phone and instead through Twitter/Gchat/e-mail/AIM/SMS texting etc. The personal touch of a phone call is not to be underestimated.
The downside is that this makes it harder to blog something right away when it is fresh in my mind or to write draft blog posts for writing out in full at a later time. Also, my Twitter usage has shifted to my mobile device, which allows me to Tweet easily, but makes it harder for me to interact with others because I don’t get a constant stream of updates to my mobile phone (it’s not a Blackberry or an iPhone.) Also, I don’t always like my delayed ability to respond to e-mails — I try to respond to e-mails as fast as possible usually. Lastly, not having a computer makes it hard for last minute information gathering (i.e. directions, weather, etc.) or sending off some quick attachment via e-mail.
I think I’ll get my laptop fixed soon or get a new one altogether. But this experiment has definitely shown me the value of not being constantly connected by having a portable laptop. The efficiency losses have not been that bad, but the ability to have lots of interaction and the ability to be very flexible is a significant cost.
P.S. I hope to put up slides and video from my talk for PSL’s Entrepreneurs Unplugged shortly. If you missed the talk, you can get a recorded version from USTREAM here:
Philly Startup Leaders has invited me to be the lead off speaker for their new “Entrepreneur Unplugged” speaker series. I’ll share my experiences and lessons learned along the way in building my startup. Here are the full details:
PSL’s newest event series Entrepreneur Unplugged will extend the spirit of Founder Factory by bringing successful Entrepreneurs “on stage” to share their personal stories of risk taking and decision making. The format will be a 30 minute presentation followed by question and answer. The series will be streamed live, recorded and distributed online.
We’re proud to have Boris Silver open the series and share his experiences with his startup, Sport Interactiva, which provided fantasy sports games to over 1 million users on social networks. Boris took a leave of absence from the University of Pennsylvania to grow the business full-time and navigated a successful exit just 9 months later. Thanks to our friends at the University of Arts for providing an absolutely amazing venue to showcase the series. The series continues on 6/17 and 8/19 at the same time and place.
When: April 22, 7pm
Where: University of the Arts, Hamilton Hall (map)
I spent my spring break trip as part of a group of Wharton students sent to Dubai from March 6 – 15 to meet with the key companies in the United Arab Emirates, to attend the Wharton Global Alumni Forum, and to experience the culture of the UAE. The United Arab Emirates consists of seven independent city-states: Abu Dhabi, Dubai, Sharjah, Umm al-Qaiwain, Fujairah, Ajman and Ra’s al-Khaimah.
So I definitely want to start out by thanking Wharton, the companies I met with, the government of the UAE, the Wharton Alumni, and the trip organizers for hosting me and providing such incredible experiences.
I kept a journal for the length of the trip to keep track of my thoughts, experiences, and questions along the way.
I wasn’t really sure how to write a single post re-capping the entire trip and there are so many things I want to talk about.
Wharton arranged some phenomenal meetings with the CEOs and management of 3 large companies in the UAE. This post will highlight the three companies that we had official visits with. I’ll outline some insights/thoughts I had on the country/region/people in a later post. >> Continue Reading This Post >>
I’m going to post a longer Dubai entry soon and figure out a way to easily share all the photos from the trip, but I wanted to post a quote that really stuck with me. I was having a long chat with a CEO at the Wharton Global Alumni Forum about his work in the Middle East and discussing various topics with him on life, business, etc. For some quick background, he is an Arabic born entrepreneur who founded and now runs a multi-billion dollar company in the gulf coast and he’s well in his fifties. We touched on the subject of globalization and language learning:
When I was young like you, in my 20s, I learned English from scratch because my masters in the West spoke it. But, you see, I have new masters in the East and they speak Mandarin. So I will learn Mandarin everyday.
I think this quote really touched me for three reasons. Most obviously because I like language learning. Secondly because it just reinforces the shift in power from the West to the East. But most importantly this quote really struck me as beautiful because of who was saying it and the way in which he said it. It was absolutely humbling to hear such a man use the word “master” (not once, but twice) and equally humbling to know that even at his age and level of wealth he is working so hard to constantly improve.
I’m leaving today for Dubai, so if you’re around and want to connect drop me a line. I’ll be at the Wharton Global Alumni Forum on March 11-12. The theme of the Forum is “At the Crossroads for Global Economic Change.” I’ll post more about the trip later, but I’m particularly interested to see the economic difficulties first hand. The Economist had some news about the trouble that Dubai is facing financially. I’m thinking this will finally be my excuse to sign up for Flickr and take lots of photos. Be back soon.
Hearing Professor Linneman (considered one of the top experts in the world on Real Estate) give a guest lecture for my Real Estate Finance class was an amazing experience. Professor Linneman derided the massive use of leverage among many real estate developers and pointed out, “ask any Wharton kid how to increase returns and they’ll all tell you the same thing — increase leverage and borrow more!” [loosely quoted]. Beyond being incredibly entertaining and very blunt, Professor Linneman really drove home the problems that you may face when you expose yourself through even conventionally “reasonable” lerverage when facing awful credit conditions. >> Continue Reading This Post >>
This should be a short note, but I was thinking about the idea of long term business partners and relationships in general. I came to the conclusion that the truest test of a relationship is going through failure together with someone else. I think if a relationship can survive mutual failure, it is not only stronger as a result, but it should be reasonable to conclude that the relationship can achieve mutual success on a higher level. So I come to the conclusion that if you want to work someone to succeed in something, take a moment to think through the relationship surviving failure. If you can run through a burning house tied together, you will have no problem winning together.
Recently, Chipotle opened up at a new location on UPenn’s campus. Qdoba has been at Penn for as long as most people here can remember and there’s never been a real serious challenge to Qdoba’s Mexican Grill store. Until now. Chipotle has been a smash hit by all empirical evidence and they’re showing what true customer service is all about. I’m not surprised that I got an e-mail from Qdoba the other day telling me I can “buy 1 get 1 free” for any burrito at their on-campus location. In fact, just the other night two of my friends were discussing this coupon and decided they’d rather pay full price at Chipotle than split the cost of one burrito at Qdoba. Go figure.
But I wanted to bring forth an empirical example of why I think Chipotle is going to crush and destroy Qdoba. Beyond the fact that their burritos taste better and that their menu is more simply designed. I want to talk customer service. What makes it easy to compare is that I know of the same exact situation, which was handled differently at both places.
Customer Service at Qdoba
Two of my friends went to Qdoba while a third went to the nearby Greek Lady. The third friend joined the first two at Qdoba after they had all received their respective meals. He was quickly told that he couldn’t eat there because only Qdoba customers were allowed. That makes sense in theory, but fails in practice because:
1) The Qdoba store was pretty much empty
2) His friends were paying customers at Qdoba and he was joining them
Customer Service at Chipotle
This past week, I went to the new Jimmy John’s which is a few doors down from Chipotle. Two of my buddies were at Chipotle, but I had eaten there for the past 4 days and didn’t want to make it my 5th day. So I decided to mix things up with some Jimmy John’s. I joined them shortly after at Chipotle and sat down with them in the middle of a really crowded store. The manager at the cash register watched me walk in with Jimmy John’s in hand. She smiled and didn’t say a word. Someone even came over to our table and wiped it down before we started it eating. They didn’t say a word about my Jimmy John’s sandwich either. In fact, the manager even gave us free soda cups.
Conclusion
Beyond the obvious incredible taste of Chipotle, they are going to win because they care about the important things — like not annoying loyal customers who may not choose them on a particular day. Qdoba is completely empty everyday I walk by there and I fully expect that trend to continue.
The book chronicles David Einhorn’s drawn out battle against Allied Capital, a company that David Einhorn publicly shorted. What starts out as small balance sheet discrepancies turns into a drawn out investigation which results in mountains of evidence of fraud in Allied Capital subsidiaries, government (SEC) incompetency, and an alarming vilification of short sellers. The book is really one mans journey for truth and fairness. In fact, he donates all of the book profits and all proceeds from the short sale of Allied Capital to charity.
It’s truly scary to read about how failure riddled the SEC is, how Allied Capital was able to lure away government lawyers to work for them as lobbyists, how Allied Capital management consistently showed a disregard for the truth and refused to own up to mistakes/problems. Allied Capital even wire tapped David Einhorn’s phones! The sell-side analysts show a complete disregard for mounting evidence against Allied Capital and constantly shove their “buy ratings” to anyone who will listen. I think the part that really got me was the lack of serious investigations at the SEC and the rampant bureaucracy at other government branches involved in the book. He also writes about the financial media’s lack of concern for the truth. Basically, he shows the world the true dark side to the financial world.
This book reads like a detective mystery book. Only it’s all real and backed up with loads of publicly available documentation. It’s a fantastic insight into the hedge fund world, Wall Street, and the government. And best of all the book proceeds and the killing that he made from shorting this fraud of a company are going to fund some great causes.
Posted by Boris M. Silver 
Posted by Boris M. Silver 
Posted by Boris M. Silver 
