Success – the stupidest word in the world

I fucking hate the word “success”. And any deviation of it. “Successful”.

“He’s so successful.

“What are the secrets of your success?”

“Nothing can stop me from your dreams of success.”

“I have dreams of wild success and retiring at 40.”

“I interview successful people to learn their tricks.”

All of this is bullshit. It’s all misguided.

By what measure is success defined?

A stupid rhetoric question that I know the answer to it. Rich, fame, adulation, status, etc.

Everybody seems to think that once you get A, B and C to happen, everything will be great. So all I do is work to get A, B and C to happen – then life all works out magically.

Life sucks now but I’ll block all that out now to get A, B and C to happen. Then –

No more worrying. Fulfilment. Roll Credits. Done.

Agassi’s autobiography Open should be required reading for anyone who’s ever had any of the above thoughts. Especially young people.

Dream big, but realising them isn’t your key to happiness.

Happiness is appreciating the present. Not some future circumstance that you can’t control and have no idea of.

Agassi was miserable throughout his life. Despite all his success in tennis. His lack of childhood resembles Michael Jackson’s – something he admits in the book.

Whatever feeling of victory in tennis he has quickly disappears. He feels nothing. His Wimbledon victory. His Olympics victory. Countless others.

All of this a path he took, or was ordered to take, and all it did was make him feel empty.

 

 

 

 

What do Warren Buffett and Peter Thiel NOT have in common?

Below is a summary of Warren Buffett’s Principles and Rules from Warren Buffett Accounting Book. This book is the best book I’ve read on reading / understanding financial statements.

I finally think I understand the three statements –  and I’ve done an MBA. The book provides the perfect balance of simplicity without being condescending – a difficult feat, especially in finance literature.

Buffett’s Principles of Valuing Companies:

Principle 1: Vigilant Leaders
Rule 1 Low Debt
Rule 2 High Current Ratio
Rule 3 Strong & Consistent Return on Equity
Rule 4 Management based on Long Term Goals
Principle 2: Long Term Prospects
Rule 1 Company Must Have Persistent Products
Rule 2 Minimise Taxes
Principle 3: A Company Must Be Stable & Understandable
Rule 1 Stable Book Value Growth from Owner’s Earnings
Rule 2 Sustainable Competitive Advantage (“Moat”)
Principle 4: Buy at Attractive Prices
Rule 1 High Margin of Safety
Rule 2 Low Price to Earnings Ratio
Rule 3 Low Price to Book Ratio
Rule 4 Set a Safe Discount Rate
Rule 5 Buy Undervalued Stocks

Contrast these rules to Peter Thiel’s Zero To One, a book which covers tech investments – something that until recently Buffett wouldn’t touch.

Thiel’s summary quote on tech investments: “Most of a tech company’s value will come at least 10 to 15 years in the future. Thiel’s valuation rests on his “11 Key Questions to ask” one of which is “Durability” i.e. Will your market position be defensible 10 and 20 years into the future?

So using the model above, could you successfully value a tech company?

No. Why? Two major metric cannot be determined – Revenue and Free Cash Flow.

To place Thiel’s theories over Buffett’s Principles above, here’s where it falls over:

Principle 1 Rule 3 : Strong & Consistent Return on Equity (ROE)

  • No historical data available!

Principle 3 Rule 1 : Stable Book Value Growth from Owner’s Earnings

  • No historical data available!

You also can’t calculate:

Principle 4 Rule 5: Buy Undervalued Stock

This Rule is based on a Discounted Cash Flow Model. Determining this rests on working out the historical free cash flow (FCF) rate.

The best that Thiel’s model provides is a good assessment of the “Discount Perpetuity Cash Flow”

An understanding of past earnings and future earnings is so critical in investing.

Peter Lynch, one of my favourite investor’s says in One Up On Wall Street “If you can follow only one bit of data, follow the earnings – assuming the company in question has earnings…. sooner or later earnings make or break an investment in equities.”

Happy hunting.

3 Things Australian Companies Needs To Do To Attract Chinese Investment

Australia has a golden opportunity. A historic chance to be a global trade leader when the very concept is under strain in many parts of the world. China is at an unprecedented phase of outbound investment. For Australia, this is big news. As the Foreign Investment Review Board reports, Chinese investment planned $46 Billion of investment into Australia in 2015, twice that of 2014. Australian companies in the property, agribusiness, energy and healthcare sectors among many others have a unique chance to benefit for many years from this new phase of China’s development. But Australia must not fall into the trap of being enticed by numbers like these without realising the changes required to successfully attract Chinese clients.

Most companies tend to overestimate the short term and underestimate the long term when it comes to doing business with China. Dazzling market potential figures spur on China Strategies, which are too often eventually withdrawn for many reasons – frustrated shareholders, confusing business practices, ever-changing rules. It’s no surprise that many major companies give up ambitions on growing business in the country.

So what chance do Australian businesses have in engaging with China as they invest globally? Thankfully, the task is easier than it looks. There are three things that Australian businesses need to do:

  1. Sell Expertise,  Not Products
  2. Manage Pipelines
  3. See A Bigger Picture

1. Sell Expertise, Not Products

The real value that Australian companies are selling is not the product or service they provide. They are selling “Doing Business in Australia”. Doing business in China is a huge challenge – working in a completely foreign environment can be disorientating. By the same token, incoming Chinese investors have limited knowledge of the rules, regulations and processes that would seem perfectly normal to Australians.

My Chinese clients have entered Australia only in the past three to four years – some only within the last year. When I took away assumptions of what they knew about doing business here, I was in a position to teach them something valuable. Explaining how my industry worked in Australia and providing them with unique insights helped them to understand why certain things happened here, and what they needed to change in their approach.

The best part is that Chinese investors are eager to learn, and are very good listeners. Australian businesses can therefore become a valued partner from the start of new Chinese clients’ journey outward. This should be considered in their initial approaches – invite Chinese clients to seminars in their field, present research pieces, foster introductions to industry heavyweights. All these things will prove that companies have something greater to sell.

2. Manage The Pipeline

Decision making processes at Chinese companies are usually consensus driven. A chain of stakeholders within many horizontal divisions of a company must be engaged before a decision is reached.

Chinese companies investing in Australia have even more stakeholders to satisfy – the divisional teams in China headquarters and their local subsidiaries in Australia.

My first step when engaging Chinese companies is to understand concisely what the process is at a target company. This has varied from firm to firm, depending on whether the company is private, public or state-owned. To achieve this I have relied upon active representation in China, who have not only has informed me of the company’s decision making process, but also reported on changes regularly within the company.

At a recent Q&A Session of the Australia China Business Council, Chinese business experts from agencies Fluid, Protocol and The China Way stressed that the Chinese market changes drastically every six months. They prescribe that current representation in China is critical to conduct business with Chinese companies.

Australian businesses must build an infrastructure to accommodate this. Having touch points and regular communications between the deal source in China and the target country representatives will minimise lost opportunities.

3. See A Bigger Picture

This all may seem a tall order for an Australian companies. All of this requires a lot of work, co-ordination and unique new skills to effectively engage this segment. It may be easier to stick to current expertise with existing clients, where results are more predictable.
But would they be turning back on a single investment opportunity or something much bigger?  My Chinese clients have huge projects they are planning, and incredible ambitions in Australia. They are at their infancy in their foray into foreign markets, and this is the start of a long term series of investments. For me, this is too big an opportunity to miss.
Australian businesses should map out precisely what the target company’s ambitions are. This is often not self-evident – it will come only once trust is built with the client. More often than not, the ambitions will be very impressive and lead to greater opportunities. Being at the start of the journey with Chinese companies and providing value beyond products and services will be remembered.
By using simple virtues of patience and understanding, Australian businesses can not only capitalise but rise to a greater purpose in the world. Australia is one of the top destinations of Chinese outbound investment. Let’s not waste the opportunity.
Charlie McDonald is a Business Development Manager, focusing on outbound Chinese companies and investors. He can be reached at charles.h.mcdonald@gmail.com

One quick use of Cialdini’s “Influence” Principle in Work

Here is a quick application of Robert Cialdini’s Influence book that you can apply to your job today.

I’ve in found people in projects forget / change their story to what’s been decided, and try to blame other parties. Happens all the time.

Ever heard “I never agreed to that!” or “What are we trying to achieve here?” or “No – what I WANTED you to do is…”

You’ll learn very quickly that people love to pass the blame at work, and here’s one way around it:

After each meeting, write down the key points decided. Circulate these to all parties (or just the one person if it’s a 1 on 1).

Then in the next meeting with the team, bring up the points.

Now, if they try to say “I never agreed to that!” or “What are we trying to achieve here?” or “No – what I WANTED you to do is…”, bring up the sent email and date and points decided upon.

If they value being perceived as consistent, they’ll not have a leg to stand on.

You’ll influence them to move the project forward as planned.

What important truth do very few people agree with you on?

This is a question Peter Thiel asks in job interviews. I’ve just read it in his book Zero To One which I’ve just started.

Here’s my quick answer, without the luxury of deep consideration and thought via time that always gives better answers:

That short term planning yields the best results for companies.

Being adaptable to new insights and information will always reign over a structured plan.

 

 

Three Quick Lessons If You’re Doing Business With China – From Hank Paulson’s “Dealing With China”

I recently read “Dealing With China” By Henry “Hank” Paulson – a fantastic read that I’d go as far to say is essential reading for anyone wanting to do business in China.

I’ve read a million “How To Do Business In China” books. Most I’ve found either too anecdotal or too theoretical. Paulson’s book’s strength is in its ability to draw lessons from (very high level) deals with which he’s driven in China.

There are a few lessons I’ve learned which I’ve adopted into my negotiations with Chinese counterparts (an essential part of my position)

Decision Processes Involve Many

Spread your efforts wide. Paulson found this the hard way with his early Shanglong deal. As he says, “…many officials could approve a deal, but it took only one well-placed official in a consensus-ruled system to kill it”

I’ve found that actively managing relationships in Australia and China is critical. All needs need to be met by each division in each country. Failing to do this will make your efforts fall flat in a second.

Uncover Hidden Reasons

This is tricky. Hank Paulson found that until getting an accurate gauge of what China was after as a country, and how that could apply to what he was doing, his efforts might fall flat. He worked at a level where he needed contacts that understood the higher priorities of China’s leaders and the policies that were being put in place.

Vice Premier Zhu Rongyi was pivotal in brand new IPOs. He wanted Bank of China to have a successful IPO. Having a successful IPO specifically on the New York Stock Exchange held little value. Paulson changed his approach when he realised this underlying motivation.

Although not quite to that level, I’ve found that by uncovering KPIs, reasons and motivations of my Chinese counterparts, I’ve achieved a lot more, and got much better traction with my deals.

How do you do this? Get to know your client in informal settings. Take them to dinner, to banquets. You won’t get the hidden reasons in a couple of meetings at their office.

Patience

It’s a cliche yes,  but patience is the key. Paulson’s take on China is that it does need to change a lot about its policies and practices, but as Westerners, we need to be patient. This is a country that did not have the industrial revolution. It is a country that has been an economic miracle. If the country comes to a halt, China will fall over pretty quickly, and we need to acknowledge this.

I’ve often been frustrated that things for me haven’t happened as quick as I’ve liked. I’ve wanted the whole deal at the start and come back with nothing more than vague next steps. But being patient, being a good listener, being a good supplier to the Chinese reaps rewards eventually.

I’m convinced that Western business is what can do for them whereas China is about who you are for them. Best friends aren’t formed overnight. Build relationships – it will one day be worth it.