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Below is the visual library for all the books I have summarized
To access the searchable library, click here

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9900241KHCQnx1EL._SX331_BO1,204,203,200_ 51aUygppA+L._SX331_BO1,204,203,200_ 51cx5AfHpZL._SX337_BO1,204,203,200_ 51ETE8NqvcL._SX330_BO1,204,203,200_ 51kbKLCazgL._SX327_BO1,204,203,200_ 51XkLHJz++L._SY344_BO1,204,203,200_ 71ahJkud8uL 71X3Y9yRtlL 81wBzBcSclL 857333 littlebets  prophet-cover_1_op_397x548 Screen-Shot-2015-09-14-at-2.22.25-PMreagan-151fc0+DDh9L._SY344_BO1,204,203,200_ 51iuMfmHHHL._SY344_BO1,204,203,200_ 51tkKRzS5YL._SX329_BO1,204,203,200_ 51xrAg9mceL._SX331_BO1,204,203,200_ FINDING-ULTRA-COVER-FINAL1  TheBoysintheBoat9780812993257 How_We_Decide_cover  OmnivoresDilemma_full  brothers k Happiness-Hypothesis unbroken-crjpg-ce0987f837463333  mans_search_for_meaning  simplicity  9781571745712 81B9+kACYLL BotanyofDesire_full 300x300 cn_image.size.swerve-book rise of superman  year-without-pants-752x1128  getting to yes 51V38NLW5zL._SY344_BO1,204,203,200_ TheIntelligentInvestor 51XcaFJirNL._SY344_BO1,204,203,200_ Jesus  BP Diet  Zorba_book Flowers for Algernon  1776 Auto of Black Hawk Genghis Khan Making Onward God Delusion Moonwalking_with_einstein Stroke of Insight Einstein Isaacson Siddhartha Titan fooling super brain Lila Meditations Fahrenheit 451  On the Road   Cooked On the Shortness of Life What every body is saying Aleph Animal Farm Sports Gene Love WinsBorn to Run  Emotional Intelligence Cool Tools Sun also rises Inutition Pumps  Moby Dick  Free to Choose  Power of Positive Thinking Experiments with Truth Vagabonding Slaughterhouse Five Aristotle in Outline the social animal_3.indd Cat's Cradle Thinking Fast and Slow  The Alchemist  Walden  Art of War  The Charisma Myth  Flatland  Mr. Feynman Money master the game 51qwpkjNP7L._SY344_BO1,204,203,200_  7126 41ry6MoUc3L._SX331_BO1,204,203,200_ 51JNMx5G3iL._SY344_BO1,204,203,200_Berkshire 51K28NKVF3L._SY344_BO1,204,203,200_ 1984-by-opallynn-d4lnuoh 6596 17184 cover2 cvr9781451695182_9781451695182_hr Mastery_Cover movieposter PicofDorianGray-728143 Rye_catcher subliminal_seduction  TheJungleSinclair  The-Richest-Man-In-Babylon-George-Clason Continue reading

Built From Scratch: How a Couple of Regular Guys Grew the Home Depot From Nothing to $30 Billion by Bernie Marcus and Arthur Blank

Summary
  1. The history and philosophy of The Home Depot from the founders themselves
Key Takeaways
  1. Goal of this book is to share what is learnable and shareable for their next generation of leadership as well as for other entrepreneurs
  2. Have to formalize and deeply instill the company‘s values from every level of the company from the bottom up to the top in order to stand a chance
  3. Early Days
    1. Marcus and Blank met while working at a hardware store called Handy Dan’s, based in Los Angeles. Ken Langone learned about the business and after talking to Blank and seeing how great of an operator he was and seeing how cheaply it traded, he started buying every share he possibly could. This worked out really well for him and he learned how good of an operator Blank and Marcus were and how great their business model for a future concept, The Home Depot, truly was. He would become a co-founder of The Home Depot in the future
    2. Pat Farrah operated a store in Canada and eventually beat Blank and Marcus to the punch by starting his own hardware megastore. However, he had no systems or financial plans in place and eventually he partnered with them in order to save his company and they started The Home Depot together
    3. Although they were desperate for cash in the beginning, they turned away several prominent investors because they didn’t believe they shared their values or would be good partners (Ross Perot)
    4. If a founder saw somebody leaving the store empty-handed they would pursue them to their car asked them what they were searching for and if they didn’t carry it they would say that they actually did and it were simply out of stock. Later, they would go buy the product the customer was searching for and hand deliver it to the their home and then start carrying that piece of merchandise in their stores
    5. Build in margin for error by having more capital then you think you’ll need and invest and resources before you need them so that you’re not scrambling and always try to hire someone who is over experienced for their initial position so that they aren’t always in fifth gear, have excess capacity and balance, can always take on new projects and tasks, and more
  4. Business model:
    1. From the beginning they focused on price, selection and customer service. They’d buy direct from distributors so they could charge customers less and they’d have more selection and count on increased volume to make up for it. Nobody understood this concept for a long time
      1. Excellent customer service
      2. Taking care of our people
      3. Building strong relationships
      4. Respect for all people
      5. Entrepreneurial spirit
      6. Doing the right thing
      7. Giving back
      8. Creating shareholder value
    2. Management principles: we are not that smart, we know we’re not that smart, and therefore have to be deeply involved and listen attentively
    3. 14 management principles
      1. The invisible fence – being decentralized allows us to be close to the customers and access the best knowledge in the field
      2. The 3 Bundles – non-negotiables, the entrepreneurial bundle, complete autonomy to make own decisions
      3. Hire people who are overqualified with a view toward growth in the future
      4. Have a financial conscience
      5. One-man shows don’t cut it with us – teach others as much as possible
      6. How would you like your eggs? – communication is vital and must let company know the logic behind our actions
      7. Bernie’s Test – eye contact, if the associates in new stores recognize him they have to first look him in the eye and this is vital for good customer service
      8. Gonna go ’round in circles – 360 feedback
      9. Establish ties that bind, and strengthen them – communication, trust, trips/events to build trust amongst senior ranks
      10. Shut up and show them what you want – sometimes best method of teaching is by doing and leading by example
      11. Kill bureaucracy
      12. Hire the best
      13. The inverted pyramid – the associates at the stores are the most important (after customers)
      14. Respect for the individual – top leaders have to be on the same page
    4. In every situation, aim to always surround yourself with people who are better and smarter than you are
    5. There is nothing like applying yourself fully
    6. They wanted the cash registers near the front so people walking in could see all the action and all orders went through the big front doors so people could see the big items leaving and that contractors paid the same price as customers. They wanted it to look like a warehouse and not a retail store. They wanted people to be amazed by the inventory and filled the store with empty boxes so it looked like they had even more than they really did. Nobody understood the one stop shopping idea at first and they were short on customers the first several months
    7. They put the lumber at the back of the stores so that customers had to hunt for it and stumble across all the accessories that they didn’t know they needed
    8. Pricing is one of the hardest yet most important aspects of any business
    9. Management lives what they preached. The tone was set at the top and carried through to every employee. They all had a great understanding of the culture and had real ownership over their individual stores
    10. Common sense was an overriding factor in their values
    11. The key is not to make a sale. The key is to cultivate the customer. They would rather show them how to fix the broken sink for $1 than sell them a new sink for $200
    12. During their opening an expansion into Florida they took a popular local magazine and highlighted everything that they carried. They also showed that they discounted all those items at 20% and had even more selection at even better prices
    13. The Home Depot has an inverted management structure. They have so many more sales associates than any other position and these are the people who interact with the customers every day, and because of this they have an intimate knowledge of customer needs and pain points so they responsibility and decisions down to them as much as possible.
    14. The single biggest reason for their success is how they treat their associates who in turn can do whatever they think is right to take care of their customers. Treat employees right, treat customers right and you’ll have all the business you need.
    15. Because they hire the best of it in the industry, they tend to pay higher than average wage and on top of that they give all salaried people the opportunity to become owners of the company through equity which they can buy at a 15% discount to the public. And, on top of that, they’re given more room to grow, to be entrepreneurial and are treated better there than anywhere else. So, why would they ever leave? Most don’t. Turnover at The Home Depot after one year is very low which is extraordinary for the home improvement business. If people make it for a year, they tend to stay because they can really see themselves building a career there.
    16. It is all about trust. With the right knowledge and shared values you can trust the lowest, newest person to make decisions to help care for the customer and this creates more customer loyalty and a better experience that could ever be dictated from one person at the top
    17. The future CFO was digging through the trash to see what they were throwing out and determined that much of it could simply be discounted and put on the shop floor because of some configuration but this turned a lot of trash and wasted money into new assets
    18. At the beginning their people were working too hard but not too smart so they created a new dictate that no employee was allowed to work past midnight and no more than 55 hours per week. If you’re not smart about it, a motivated team can fly right into the sun and having a more balanced life will, in the long term, give you better results than burning your people out
    19. It took a lot of focus and effort to establish the culture and make sure that new hires who came from competitors with different cultures understood how the Home Depot is run, how to care for customers, how to make it look like a warehouse and not a retail shop, and much more
    20. Good associates can come from anywhere and one successful outreach they had was with senior citizens. Nobody else would hire them but when the Home Depot did these people were so ecstatic that they would teach the new hires and work harder than almost anybody else
    21. The Home Depot gave out badges to people who got excellent customer service reviews so that they could place them on their aprons for all to see.
    22. As they grew and matured they had to change from a rowdy group of gunslingers who drank a lot into a more refined family-oriented culture where everyone felt comfortable
    23. Any senior-level person who was hired had to work in the store in order to get a feel for the products the customers the customer service and more even lawyers had to do this
    24. You have to look beyond the financials and metrics and to the person. You have to treat people as they’d want to be treated
    25. Sam Walton was a friendly competitor and convinced Blank and Marcus to switch from occasional fire sales to everyday low pricing. This was a tough change for managers to stomach because the spike after sales was an adrenaline rush but the consistency and trust established with everyday low prices brought a better mix of sales and more stable sales
    26. Essence of keeping the company great is it’s nonstop reinvention. If you’re in constant motion (in the right direction) nobody can catch you. Cannot stay still for any length of time
    27. The Home Depot build good relationships with their suppliers and not paying them in 30 days or even 15 days as usual but it five days and sometimes even overnight
    28. They are very weary of acquisitions but they did acquire the Home Depot of Canada and in order to bring everybody onto the same page, they did an exchange program where the Canadians went to some American stores for several months and vice versa
    29. Another key was understanding the vendors, what they wanted and what motivated them
    30. Store walks keep people deeply fluent on the business and visits are required – not only of senior executives but for board members as well
    31. Created a direct line to the highest ranking people for serious customer complaints under the fake name of Ben Hill. This allowed the senior executives to keep their finger on the pulse and the store managers know that they’d have to deal with them directly if a customer called and complained to this number
    32. Only become your best self with competition and if they didn’t have any direct external competitors in a region, they’d find a way to make a competitor internally. They sometime release ads just to rally the troops
    33. Uncertainty is a huge portion of many failures and is a breakdown of internal communications
    34. Bureaucracy is not questioning stupid things and just taking them for granted. People become scared to make decisions because they’re afraid to make mistakes so they start calling meetings and putting off decisions and actions for as long as they can
    35. Whatever you give to the community, you’ll get back ten fold
    36. There were many copycat Home Depots but none of them truly understood the culture, customer focus, and employee focus that Blank and Marcus had so were never truly able to compete. Can copy nearly everything except for culture. Execution above everything else
Summary
  1. An excellent book with a ton of operational, business, and philosophical gems. You get a great feel for how deeply the founders care about their people and their customers and that formula has led to a culture which seems impossible to steal and duplicate

River Out of Eden: A Darwinian View of Life by Richard Dawkins

Summary
  1. “The universe has created an ability to self-replicate using the surrounding materials to make exact copies of itself, including replicas of such minor flaws in copying as may occasionally arise. What follows is what we call life. Never were so many facts explained by so few assumptions. Not only does Darwinian Theory command superabundant power to explain. Its economy in doing so has a sinewy elegance, a poetic beauty that outclasses even the most haunting of the world’s origin myths. One of my purposes in writing this book has been to accord due recognition to the inspirational quality of our modern understanding of Darwinian life. There is more poetry in Mitochondrial Eve than in her mythological namesake…Another of my purposes is to convince my readers that “ways of making a living” is synonymous with “ways of passing DNA-coded texts on to the future.” My “river” is a river of DNA, flowing and branching through geological time, and the metaphor of steep banks confining each species’ genetic games turns out to be a surprisingly powerful and helpful explanatory device.”
Key Takeaways
  1. The river = a river of information through time, DNA
  2. It is obvious but not a single of our ancestors died in infancy as they were able to pass along genes that helped them survive. We all inherit all our genes from an unbroken line of successful ancestors. The world becomes full of organism that have what it takes to become ancestors
  3. Genes do not improve in using, they are just passed on, unchanged except for very rare random errors. It is not success that makes good genes. It is good genes that make success, and nothing an individual does during its lifetime has any effect whatever upon its genes.
  4. Genes can buy their way through the sieve, not only by assisting their own body to become an ancestor but by assisting the body of a relation to become an ancestor
  5. To be good at surviving, a gene must be good at working together with the other genes in the same species – the same river. To survive in the long run, a gene must be a good companion. It must do well in the company of, or against the background of, the other genes in the same river. Genes of another species are in a different river. They do not have to get on well together – not in the same sense, anyway – for they do not have to share the same bodies
    1. A biological reasoning and example as to why cooperation is the highest form of competition
  6. Bauplan = blueprint, or a fundamental body plan (Dawkins argues against this as it can lead to errors in thinking as changes in species are subtle)
  7. Genes as digital information
    1. Pulse Code Modulation – The transmission of genes is well-nigh perfect even if the transmission along the line is poor. The discrete levels are set far enough apart so that random fluctuations can never be misinterpreted by the receiving instrument as the wrong level. This is the great virtue of digital codes, and it is why audio and video systems – and information technology generally – are increasingly going digital…After Watson and Crick, we know that genes themselves, within their minute internal structure, are long strings of pure digital information. What is more, they are truly digital, in the full and strong sense of computers and compact disks, not in the weak sense of the nervous system. The genetic code is not a binary code as in computers, nor an eight-level code as in some phone systems, but a quaternary code, with four symbols. The machine code of the genes is uncannily computer like…Up until 1953 it was still possible to believe that there was something fundamentally and irreducibly mysterious in living protoplasm. No longer
    2. Genes are pure information – information that can be encoded, recoded and decoded, without any degradation or change of meaning. Pure information can be copied and, since it is digital information, the fidelity of the copying can be immense. DNA characters are copied with an accuracy that rivals anything modern engineers can do. They are copied down generations, with just enough occasional errors to introduce variety. Among this variety, those coded combinations that become more numerous in the world will obviously and automatically be the ones that, when decoded and obeyed inside bodies, make those bodies take active steps to preserve and propagate those same DNA messages. We – and that means all living things – are survival machines programmed to propagate the digital database that did the programming. Darwinism is now seen to be the survival of the survivors at the level of pure, digital code.
    3. DNA, seen in this light, becomes tempting to liken to a family Bible
  8. Mitochondria ideal for dating common ancestry within a species because, besides mutations, they’re identical and come from one common mother
  9. Supernormal stimulus – a stimulus even more effective than the real thing
  10. Eyes have evolved in different species and in different ways dozens of times. Dragonflies see completely differently than humans
  11. Sphexish – Hofstadter’s word for inflexible, mindless behavior
  12. Do good by stealth – a key feature of evolution is its gradualness
  13. Nature is not cruel, only pitilessly indifferent. We humans have purpose on the brain. We find it hard to look at anything without wondering what it is “for, what the motive for it is, or the purpose behind it. When the obsession with purpose becomes pathological it is called paranoia – reading malevolent purpose into what is actually random bad luck. But this is just an exaggerated form of a nearly universal delusion. Show us almost any object or process, and it is hard for us to resist the “why” question – the “what is it for?” question. Beware this “purpose fallacy” – the “as if designed” assumption.
  14. Utility function – maximize happiness for the greatest number. In nature, DNA survival is being maximized, not happiness. God’s Utility Function seldom turns out to be the greatest good for the greatest number. God’s Utility Function betrays its origins in an uncoordinated scramble for selfish gain. Group welfare is always a fortuitous consequence, not a primary drive. That is the meaning of the “selfish gene.”
  15. Henry Ford illuminated on this Utility Function when it is reported that Ford once “commissioned a survey of the car scrapyards of America to find out if there were parts of the Model T which never failed. His inspectors came back with reports of almost every kind of breakdown: ales, brakes, pistons – all were liable to go wrong. But they drew attention to one notable exception, the kingpins of the scraped cars invariably had years of life left in them. With ruthless logic Ford concluded that the kingpins on the Model T were too good for their job and ordered that in the future they should be made to an inferior specification.” This may seem counterintuitive in some respects but in nature, as in cars, it is possible for a component of an animal to be too good, and we should expect natural selection to favor a lessening of quality up to, but not beyond, a point of balance with the quality of the other components of the body. More precisely, natural selection will favor a leveling out of quality in both the downward and upward directions, until a proper balance is struck over all parts of the body.
  16. In nature, often come across physiological changes with changes in hierarchy. Female blue-headed wrasse quickly become a bright-colored male if his place needs to be taken once he dies
  17. Information Bomb – there is another type of explosion a star can sustain. Instead of “going supernova” it “goes information.” The explosion begins more slowly than a supernova and takes incomparably longer to build up. We can call it an information bomb or, a replication bomb, or life. We humans are an extremely important manifestation of the replication bomb, because it is through us – through our brains, our symbolic culture and our technology – that the explosion may proceed to the next stage and reverberate through deep space. The triggering event of a replication bomb is the spontaneous arising of self-replicating yet variable entities. The reason self-replication is a potentially explosive phenomenon is the same as for any explosion: exponential growth. The more you have, the more you get
  18. Success is simply synonymous with frequency in circulation
  19. Language is the networking system by which brains exchange information with sufficient intimacy to allow the development of a cooperative technology. Cooperative technology, beginning with the imitative development of stone tools and proceeding through the ages of metal-smelting, wheeled vehicles, steam power and now electronics, has many of the attributes of an explosion in its own right, and its initiation therefore deserves a title, the Cooperative Technology Threshold. Indeed, it is possible that human culture has fostered a genuinely new replication bomb, with a new kind of self-replicating entity – the meme, as I have called it in The Selfish Gene – proliferating and Darwinizing in a river of culture.
What I got out of it
  1. The analogy of DNA as pure, digital information is helpful as is the idea of information bombs

Energy and Civilization: A History by Vaclav Smil

Summary
  1. A comprehensive account of how energy has shaped society throughout history, from pre-agricultural foraging societies through today’s fossil fuel–driven civilization.
Key Takeaways
  1. Energy is the only universal form of currency. It must be transformed in order to get anything done. Although the concept is universal, defining what energy is has proven hard. Matter is energy at rest, it can take many forms, and can’t be destroyed
  2. The entire flow of history can be seen as the desire for control of more versatile and condensed field of energy and converting it faster and with more efficiency to light, heat or motion
  3. Human bipedalism, ability to throw and hunt and make fire and to harvest nutrient dense foods, allowed for our ancestors to grow in size, strength, and brain power. We were able to spread to new areas and adapt thanks to these tools. Our ability to run long distances and perspire turned us into diurnal hunters who could chase big animals down due to overheating and exhaustion
  4. Agriculture and domestication of plants and animals obviously had huge impacts on how we lived, ate, traveled, and even how our bodies functioned. All animal meats and mushrooms have complete proteins but most cereals do not
  5. There are three steps in the agricultural revolution: the use of animals which helps eliminate the most difficult jobs, freeing up time to pursue other activities or simply make the work easier for the us; fertilization and irrigation which helps the whole process become more efficient; broader array of crops which helps make the whole process more productive and robust
  6. Energy use per person has gone down and become more efficient, also needing less economic growth to reach prosperous levels
  7. Increasing energy use is only linearly correlated at early stages of introduction with diminishing returns once most of the population gets the basics
  8. Search for new more and better energy sources has led towards innovation, globalization, change in social hierarchy, spread of wealth, and much more
What I got out of it
  1. An incredibly detailed and in depth look at the evolution of energy from hand tools to weapons to steam and internal combustion engines to nuclear power plants to forms of transportation. Their role, how they’ve shaped our lives and how they came to be

Good Profit: How Creating Value for Others Built One of the World’s Most Successful Companies by Charles G. Koch

Summary
  1. Charles Koch describes his management philosophy, Market Based Management, how it has evolved over time, and how it has been put to use at Koch Industries. MBM emphasizes Principled Entrepreneurship over corporate welfare, virtue over talent, challenge over hierarchy, comparative advantage over job title, and rewards for long-term value creation over managing to budgets.
Key Takeaways
  1. Market Based Management
    1. Charles’ goal when he was young was to discover the principles that best enable people to flourish as they live and work together. He grouped his findings into what is now known as MBM. MBM is a reality based tools that helps employees problem solve without explicitly being told what to do and this requires a simple structure that is deeply understood by all. It’s goal is to create spontaneous order by providing a simplified set of guiding principles and mental models to guide their behaviors and decisions.
    2. The system must be set up so that everyone knows what the right thing to do is and wants to do it, without overly detailed explanations or rules. Enlightened-self interest gets people to do the right thing for others as it also helps themselves
    3. MBM prompts us to focus on understanding consumers’ unmet needs and finding ways to satisfy them. We strive to do this faster and better than existing and potential competitors. This requires that we continuously improve our existing capabilities, such as sales, marketing, operations, distribution, finance, technology, and R&D
    4. MBM guiding principles – integrity, compliance, value creation, customer focus, knowledge, change, respect, fulfillment.
    5. Companies must realize they are not competing just on price and output of existing products. They have to relentlessly strive to come up with new and better products and produce them more efficiently than the alternatives. They also need to constantly improve the way they’re organized, so they can innovate and eliminate waste better than their competitors. This is what MBM enables Koch to do.
    6. No one can decide which products and services a customer values better than the customer. Dedicating ourselves to satisfying what she values is showing respect for her. This is what generates good profit. Bad profit comes from disrespecting customers by making them subsidize our business with their tax dollars and higher prices, siphoning away the good profit other companies could have earned
    7. Over time, we have made changes, not only to our vision, but to our entire approach to recruitment and management, our internships, university relationships, junior military outreach, trade school relationships, compensation system, opportunity origination networks, methods for achieving environmental and safety excellence, and MBM training and application programs.
    8. MBM strives to create a spontaneous order of self-actualizing people by hiring, retaining, and motivating those who internalize and exemplify all ten Guiding Principles – those with integrity and humility who want to create real value. Toward this end, it’s important for leaders to understand the potential and the subjective values of their employees. This is impossible without establishing open and honest communication in order to know employees well enough on a personal level to do so. For some employees, non-financial incentives – such as being praised for a job well done – can be as important as financial incentives. But care must be taken to ensure that such praise is truly earned
    9. MBM is broken down into five core areas including vision, virtues and talents, knowledge process, decision rights, and incentives. These five areas lead to emergent effects as the whole is greater than sum of its parts and become mutually reinforcing. This is a never ending process of learning and improvement and just like the Red Queen Effect, stasis equals death. Even successful companies struggle to keep up because, given human nature, we all tend to become complacent, self-protective, and less innovative as we succeed. It can be far more difficult to overcome success than adversity. I think often about a lesson my father impressed on me at an early age: “Often adversity is a blessing in disguise and is certainly the greatest character builder”
      1. Vision
        1. Determining where and how the organization can create the greatest long-term value. Koch’s is different than most as its focused on value creation and people, not product, industry, profit, or anything else. Koch must create real, sustainable value for its customers, for society, and for itself. It can only do so by inspiring and attracting customers, suppliers, and partners.
        2. Having a clear vision is critical to attracting the best talent. Understanding what a business is trying to achieve and how it creates value not only enables employees to focus and prioritize, it helps them develop and find fulfillment. Having a shared vision guides the development of roles, responsibilities, and expectations. That’s why getting the vision right, helping employees (especially leaders) internalize it, and updating it as often as necessary is essential. Because the future is unknown and unknowable, a company’s vision needs to be open-ended and to embrace creative destruction on a fundamental level. In our experience, a company tends to be better served when it is capability-focused rather than industry-focused. The breadth of a company’s vision should vary with the breadth of its capabilities. At the same time, a business must have a vision specific enough to guide its strategies, decision making, allocation of resources, and the roles, responsibilities, and expectations of all employees. Each vision also needs to be aspirational in order to expand the thinking of leaders and employees through the organization.
        3. Koch underscores that in order to achieve long-term success a business cannot rely on short-term profits but must accept the necessity of what economist Schumpeter calls “creative destruction.” This means that a firm must innovate at least as quickly as its most effective competitor. Building on these insights, Koch explains that at the heart of MBM is the understanding that the role of business is to help people improve their lives by providing products and services they value more highly than their alternatives, and to do so while consuming fewer resources.
        4. Koch’s vision is its north star and acts as a strategic guide which is constant and ever changing and drives the innovation culture and values of the organization
        5. Koch’s vision:
          1. Remain family owned, well-diversified, stable and financially conservative
          2. Grow organically faster than inflation, and achieve additional growth through acquisitions.
          3. Be an employer of choice through extensive team member development and engagement activities
          4. Have our portfolio businesses recognized as “best in class” within their respective industries
          5. Be model corporate citizens in the communities we call home
      2. ​Virtue and Talents
        1. Helping ensure that people with the right values, skills and capabilities are hired, retained and developed
        2. The company has a list of ten “Guiding Principles,” which include integrity, compliance, value creation, Principled Entrepreneurship, customer focus, knowledge, change, humility, respect, and fulfillment. Interviews are based around these traits and open-ended questions are used to discern a candidate’s probability of success in demonstrating the desired traits. Once interviews are completed, a challenge session among the recruiter, interviewers, and hiring manager is held to ensure the best knowledge is shared when making a hiring determination. Employee referrals have resulted in some of our best hires and we have also developed strategic relationships with external sources, including search firms familiar with MBM and our Guiding Principles. We invest heavily in college recruiting efforts and a well-developed internship program
        3. No matter how difficult the role is to fill, it is critical that we not lower our standards. A bad hiring decision is much more costly in many, many ways than is the delay in finding the right candidate
        4. There are many different kinds of intelligence and they should all be taken into account: interpersonal, intrapersonal, linguistic, logical-mathematical, spatial, naturalist, bodily-kinesthetic, and musical
      3. ​Knowledge Processes
        1. ​Creating, acquiring, sharing and applying relevant knowledge, and measuring and tracking profitability
        2. Knowing why something is profitable is often as valuable as knowing what is profitable.
        3. Benchmarking involves identifying, understanding, and adopting superior practices from anywhere in the world – internally, competitors, great businesses in any field.
      4. ​​​Decision Rights
        1. ​Ensuring the right people are in the right roles with the right authority to make decisions and holding them accountable. This should demonstrate an employee’s comparative advantages.
        2. The bestowal of decision rights upon an individual, moreover, should not be predicated upon that individual’s position in the corporate hierarchy.
        3. Many of the things that go wrong or opportunities that go unrealized in business are a result of the tragedy of the commons – shared areas with unclear (or nonexistent) demarcation of responsibilities. At Koch, we use decision rights to replicate the benefits and responsibilities of property rights in society. Just as we think of employees as entrepreneurs at Koch, we think of decision rights as property rights in the organization. Unless people have clearly defined areas of responsibility, it’s difficult – if not impossible – to elicit beneficial proactive behavior, or to hold people accountable when things go wrong. When no one has clear ownership of a resource, no one can be help responsible for its efficient use. In MBM, decision rights are synonymous with authority. If you have the decision rights to decide something, not only do you have the authority to decide it; you are responsible and accountable for it. ​
        4. Decision rights should reflect an employee’s demonstrated comparative advantages. An employee’s comparative advantages are evident in those activities for which she can create the greatest value compared to the opportunity cost of her time. When these are optimized among a group, the value it creates is maximized. Employees who focus on their comparative advantages and consistently make good decisions will have expanding decision rights, regardless of their role or position in the organization. Understanding and applying this concept – that the person with the comparative advantage to make that decision well (not necessarily the highest-ranking person) should be the decision maker – leads to greater value creation.
        5. Competitively advantaged innovation requires working on the best opportunities, establishing a clear owner, having the right people in the right roles, effectively experimenting, rapidly and efficiently scaling up, and finding the balance between short and longer-term disruptive innovations. In other words, the very nature of innovation requires a dynamic approach to decision rights, with frequent reviews and adjustments. ​
      5. Incentives
        1. The first goal of incentives is to harmonize the interests of the individual with those of the company. This reinforces our individual employee’s desire to do the right thing and help the company prosper. Second, compensation should be consistent with the notion that no two employees are alike; thus, their compensation can vary considerably depending on the value of their contributions. As a result of difference in vision, desire, values, and ability, people vary in the advantage they take of the nearly limitless opportunities to create value. This is why two employees performing similar roles may well be compensated differently. Third, no limit should be put on an employee’s compensation, so employees will not put a limit on the value they create. Finally, incentives should be structured in such a way that the company can effectively attract, motivate, and retain principle entrepreneurs
        2. Rewarding people according to the value they create for the organization. There are several tools to accomplish this, including base pay adjustments, annual incentive compensation, spot bonuses, deferred compensation, and other incentives. A key role of managers is to retain and motivate employees who are adding superior value. By paying for value created, we help ensure the firm’s competitiveness
        3. Important to align incentives across business units so that there is no in-fighting
        4. The value of missed opportunities and avoidance of errors should also try to be estimated and included. Makes opportunity cost tangible by taking missed opportunities into account with bonuses and salaries
        5. Koch advises entrepreneurs to stay private no matter how big their company gets
        6. Incentives are incredibly important. Koch incentivizes its employees by paying on marginal contribution and value created in their unit and then based on their contribution. It will never be perfect but it must be directionally correct and the reasoning behind it must be explained as well. Must signal what is valued most highly and doing so in a principled manner. Must be financial and non-financial – meaning, challenge, competition, praise, belief in the mission, being part of a successful team, personal growth
        7. Incentives are as important for external counter parties such as customers, suppliers, contractors, shareholders, distributors, agents, trading partners, former industry employees, specialists, universities, technology developers, consultants, communities, and governments. Aligning incentives with performance is almost always effective but must take these external parties into account too. Must understand what each values and deliver on it. Communities want a good neighbor, who takes care of the area, protects the environment, operates safely, and provides good jobs
        8. Budgets are often useless and sometimes counterproductive if they perverse behavior through misaligned incentives
        9. Framework for determining incentive pay (never perfect but directionally correct and must be explained to the employee)
          1. Determine the value created by the employee’s business unit, facility, or service group to Koch, considering current earnings and return on capital, change in capabilities, competitive position, and the risk-adjusted value of innovations and growth initiatives – that is, the prospect for future earnings
          2. After thoroughly assessing all the employee’s contributions to the value the unit created (positive and negative), we compare this to the contribution necessary for her base compensation. To the extent that her contribution exceeds this amount, we award a bonus or other incentive compensation based on that difference
          3. Deductions are taken for any compliance or EH&S problems to which the employee has contributed. If such problems are serious enough, they could wipe out the employee’s entire award. Additions to, or subtractions from, the employee’s compensation will also be made if she has had a significant positive (or negative) effect on the unit’s culture
    10. Good Profit
      1. ​Good Profit is about providing value to the customer while also benefiting society and comes from Principled Entrepreneurship: creating superior value while using fewer resources and always acting lawfully and with integrity. It comes from contributing something to society. This is the vision of Market Based Management which Charles Koch began developing in the ’60s. It takes a win-win framework and allows Koch Industries to adapt and deal with change more effectively than others. They have prospered through the years with no government aid or external help because their focus is always on producing value. MBM, while simple, is not easy. The whole organization must understand the principles so deeply that they can adapt to any problems or circumstances
      2. Good Profit is what follows when long-term value is generated for customers, employers, shareholders, and society. MBM generates Good Profit
      3. Good Profit 101: providing the best hassle-free service to our clients at the lowest cost to them and attracting the best employees based on the opportunities we offered. Our goal was – and still is – to be the counterparty of choice to our customers, vendors, communities, and employees
      4. The most reliable signal that a business is using reality-grounded mental models and providing service that customers truly value is a profit made over time under beneficial rules of just conduct
      5. Opportunity Cost – the true cost of any activity is the highest-value activity forgone
      6. Subjective Value – At Koch we also urge our salespeople to understand each customer’s subjective values and tailor the way we deal with them accordingly. Many public companies value steady, predictable earnings more than larger (on average) earnings that are more volatile, since steady earnings tend to result in a higher stock price. Because of this difference in subjective values between us and our customers, it can be mutually beneficial for us to absorb the price risk in our contracts, and for them to compensate us for it. Koch is always willing to do this kind of win-win business. Listen to partners particular needs and design structures that suit both parties well. Strive for speed, certainty, confidentiality, efficient and responsive deal screening, and to concede terms that are important to the seller but not as important to Koch.
    11. 8 steps in the Decision Making Framework
      1. Briefly describe the authority being requested
      2. Give the background and a summary of the value proposition
      3. Outline the objective with the strategic fit
      4. Prepare an economic summary with a base case, as well as other plausible scenarios that could make the project much better or worse
      5. Identify the key value drivers
      6. Describe the key risks and mitigants
      7. List the alternatives considered and why the one shown is best
      8. Project the timeline for future steps
        1. Decision traps – overconfidence, framing, anchoring, status quo bias, sunk costs, information / confirmation bias, confusing random events with patterns, allowing a leader’s past rejections to stop the consideration of good future opportunities, conservatism trap
    12. Ludwig von Mises (Human Action) was a big influence in Koch’s philosophy and management style (as was Polanyi’s Republic of Science)
      1. The more books I read, the more passionately I embraced the truth that widespread human well-being demands a system that clearly defines and protects private property rights, allows people to speak freely without intimidation or legal repercussions, refrains from interference with private parties’ agreements and exchanges, and allows human action – rather than arbitrary notions about how much things “should” cost – to guide prices. Allowing people the freedom to pursue their own interests (within the limits of just conduct) is the best and only sustainable way to achieve societal progress. For individuals to develop and have a chance at happiness, they must be free to make their own choices and mistakes, rather than be forced to accept choices made for them by others. As I digested this and went about my business, it dawned on me that these principles are fundamental to the well-being not only of societies – as I learned through my interdisciplinary studies – but also of organizations, which are essentially small societies. When encountering a challenge at work (such as sunk cost or competitive disadvantage), I began responding with the principles of a free society in mind. And sure enough, one concept at a time, I saw that that the principles that worked in society also worked in an organization.
      2. As a young man Charles spent his nights in Wichita Kansas reading every subject trying to understand what principle allows people to flourish. He took ideas from all disciplines such as physics and Newton’s Third Law of Motion regarding reciprocation. Came to understand that organizations are like miniature societies and what would benefit society at large would also benefit organizations
    13. Experimental Discovery > A Grand Plan
      1. ​Must have an experimental discovery mindset rather than a grand plan mindset. Must also know when you are experimenting and bet accordingly. The point is that progress – whether in business, an economy, or science – comes through experimentation and failure. Those who favor a “grand plan” over experimentation fail to understand the role that failed experiments play in creating progress in society. Failures quickly and efficiently signal what doesn’t work, minimizing waste and redirecting scarce resources to what does work. A market economy is an experimental discovery process, in which business failures are inevitable and any attempt to eliminate them only ensures even greater failures. For experimental discovery to work, we have to not only design experiments properly but also recognize when we are experimenting so we can limit the bet accordingly. Koch companies have suffered whenever we forgot we were experimenting and made bets as if the risks were small when they were not.
      2. Smith and Hayek demonstrated that prosperity can take place only through spontaneous order, an order that results from unscripted human action, not human design.
      3. The process of discovery begins when we observe, often vaguely, a gap between what is and what could be. Our intuition tells us something better is just beyond the range of our mind’s eye. To build a culture of discovery, we must encourage, not discourage, the passionate pursuit of hunches (no matter the origin!).
    14. Metrics
      1. Knowing why something is profitable is often as valuable as knowing what is profitable. For this reason, a business must also develop measures that help it understand the drivers of profitability. Prices and profit and loss tell us what people value and the best methods and resources to satisfy those values. They are also the primary indicators of whether we are doing the right thing as a company. In a true market economy, one in which prices are allowed to freely adjust, profit and loss is the market’s objective measure of the value a business is contributing to society. To succeed, a business must not only develop profit and loss measures, but also determine their underlying drivers, in order to understand what is adding value, what is not, and why. This knowledge informs its vision and strategies, leads to innovations, creates opportunities to eliminate waste, and guides continuous improvement
      2. The most valuable measures keep us on track in advancing our vision by enabling us to identify opportunities and problems, and by stimulating innovations,
      3. A successful organization should measure – and do its best to understand – the profitability (and profitability drivers) of its assets, products, strategies, customers, agreements, and employees, and anything else for which it is practical to do so
      4. When measuring, accuracy should always be emphasized over precision. As we use the terms, accuracy is the degree of correctness that creates value. Precision goes beyond that, to near perfection. Perfection, thus, is thus the enemy of progress
      5. Most decisions should be made using marginal analysis. This requires understanding the difference between costs and benefits that are marginal and those that are not, such as sunk costs. Only by making decisions on the appropriate margin will a business consistently enhance its profitability and eliminate waste. That margin will vary enormously depending on the decision.
    15. Other
      1. ​Charles father, Fred, founded what would later become Koch Industries. When Charles joined in 1961 it had a net worth of about $21 million and as of 2015 the number has reached an approximate $100 billion. Father always stressed integrity, humility, character and the fact that adversity is the best way to improve your character and to learn. His father put them to work full-time when he was young following that his son would never become a country club bum
      2. Since Charles took over, they have reinvested 90% if their profits and aim to double profits every 6 years (~12% annual growth)
      3. Their strong balance sheet insured their suppliers that they would pay in full and promptly. Their goal was always to be the counterparty of choice
      4. Corporate welfare is damaging because it limits competition, innovation, and customer options
      5. Koch makes acquisitions when they can provide additional value through their internal capabilities, can improve existing businesses or provide new platforms for growth. I often think of what we do as bricklaying. Or perhaps more precisely, stonemasonry. Once a stone has been carefully selected and set, it shapes a new space in which the mason can set yet another well chosen stone. Each stone is different, but they all fit together to create a framework that is mutually reinforcing
      6. Getting the right people was Charles’ main focus from day one
      7. Creative destruction, while painful for some, is a net positive for society while corporate welfare is a net negative
      8. The man who understands principles can apply his own methods, the man who tries methods, ignoring principles, is sure to have trouble
      9. Deciding the order in which to do things can be just as important in deciding what to do. Three step process: quantify, simplify, prioritize
      10. Hiring, retaining, teaching, and inspiring people is one of the most important functions of the organization. You should aim to always hire virtuous people regardless of open positions. Coach employees to be the best that they can and consider moving them around within the company if their skills aren’t lined up with their role
      11. Avoid entering into partnerships without an exit mechanism
      12. The apprentice model has been extremely effective at teaching newer hires. There are 4 stages – I do, you watch; I do, you help; you do, I help; you do, I watch
      13. Every organization has its own culture. If that culture is not created consciously and purposively, it will degenerate into a cult of personality or an anything goes environment. You can never think of yourself as too big or too good to fail. Koch’s culture comes from the framework of the free society, where innovation and productivity thrive – to the degree that the framework is upheld. The second category is the theories of philosophers and psychologists whose behavioral prescriptions strike me as refreshingly reality-based – thinkers such as Hayek, Polanyi, and Maslow. The third is my own life experience, which was spent working with all different kinds of people.
What I got out of it
  1. An amazing look into what has turned Koch from a $21m operation in the ’60s to an over $100b organization today. Simple (but not easy) principles which are scale invariant, win-win, sustainable, and adaptable. An organization is a mini free-society and what works at the largest level of society, works just as well at the level of organizations. Treat people as they want to be treated, be trusting, reward people for the value they create

Cable Cowboy: John Malone and the Rise of the Modern Cable Business by Mark Robichaux

Summary
  1. Malone is considered the grandfather of the cable industry but many also saw him as a rapacious, Machiavellian bully. He skated close to securities laws violations and extracted a price for the progress he offered, much like industrial powers Andrew Carnegie or JP Morgan before him. He had the power to decide which cable networks survived, he defied regulators, and he crushed competitors. And all of this he did brazenly.
Key Takeaways
  1. Instead of taking a cushy job, Malone chose hardship and a pay cut to join TCI, an obscure company that had lurched from crisis to crisis for the preceding 20 years. Bob Magness, a former cottonseed salesman and cattle rancher used a wobbly foundation of brinkmanship, bald faced gambles, and abundant debt to build TCI into the fourth largest cable provider in the US. Malone had picked TCI because Magness, fatigued and running out of luck, was ready to relinquish power and let a new man run the entire show – and because, if Malone could make it work, he might become extremely wealthy. TCI, which had become a publicly owned company in 1970, might be a diamond in the rough. “I can’t pay you very much, but you’ve got a great future here if you can create it,” Magness told Malone. Malone was more of a treasurer than the president his first few years at TCI – fending off lenders, raising money, talking to analysts, and more.
  2. Malone started at TCI and helped make it a powerhouse through acquisitions and financial engineering. The structures of the dals were exotic, and his financial alchemy often befuddled Wall St. and investors. The flurry of complex mergers, acquisitions, stock dividends and spin-offs clouded the picture of the company’s true performance, which was phenomenal by one measure that counts in almost all business: shareholder value. A single share of TCI, purchased at the 1974 low of 75 cents was worth $4,184 by the end of 1997 – a 5578 fold increase. His shareholders got very rich alongside Malone. For Malone, it was a noble, if not moral achievement, the fruit of his enormous capacity to deduce and strategize
  3. Magness was a master at reading people – he got Malone on board by playing to his desire for control over his future and freedom to lead. His wife was also an astute business partner, cotton raiser and learned to listen rather than talk – reading what a person wanted in every negotiation
  4. Learned of cable antenna TV (CATV) and started it in Memphis, Texas. If pulled off, he would be able to charge his neighbors a monthly fee for the television service – which he would get free of charge, basically pirating the programming from the TV stations themselves without paying a cent. He directed the construction, climbing the poles himself to string wire, while Betsy deciphered the finances and took service calls at the kitchen table. He invested everything he had, and still he had to go into debt. He sold this operation a few years later at a handsome profit. Tax laws made it attractive to reinvest as cable operators could gradually write off the cost of their systems over a number of years, allowing them to reduce the leftover profits they reported as earnings and thereby sheltering a healthy cash flow from taxation. And once they had written off most of the value of a cable system’s assets, they could sell it to a new owner, who could begin the tax-eluding depreciation cycle all over again.
    1. Don’t need to be a genius if you can see and place yourself ahead of a wave
  5. Magness never wrote a memo but the headquarters in Bozeman were Spartan and this frugality never left Magness or Malone. By the mid-1960s, Bob Magness had realized the potential of community antenna to fill a vast need; he likened cable to the oil rush days in his native Oklahoma and Texas. It was genius, really, to anyone who took the time to figure it out. Cable TV systems generated bundles of cash from installation charges and monthly service fees. Most of the money was plowed back into the companies, with hardly anything going to pay dividends to shareholders. This high cash flow could service an immense amount of debt, which was used to buy more systems. The companies paid hardly any taxes because of the high depreciation on the equipment – the average cable system enjoyed a profit margin of 57%, far better than most businesses. Because of this structure, and the tax incentives, TCI had to keep expanding, no matter what, buying up new cable companies to start the write-off process anew and build cash flows. To fund TCI’s expansion, Malone courted companies with capital to invest and an abiding interest in cable – but no expertise. Malone used different classes of shares with differing voting rights. A standing joke around TCI was that if TCI ever did report a large profit, Malone would fire the accountants. Malone had to “teach” the street what was really important – there is a big difference between creating wealth and reporting income. A focus on cash flow rather than reported income was hard for most to accept and was controversial for decades but those who invested alongside Malone would come to benefit greatly. He always pushed a long-term mindset and time horizon.
  6. The next step from owning cable that delivered the programming, was to own a piece of the cable channels themselves, thereby sharing in a whole extra upside. This way, TCI could own both the pipe and the water flowing through it. Vertical integrating of companies would become an awesomely powerful and controversial tool in building TCI. TCI came to own parts of BET, MTV, the Discovery Channel, and many more
  7. Malone was able to be patient when things got too expensive, building up cash reserves, making smaller acquisitions, and waiting for prices to normalize after the buying frenzy dried up.
  8. Malone’s father was gone a lot, had very high expectations for John and John wanted to prove himself and gain his acceptance. He did this in school (especially math), through track and field, and other entrepreneurial adventures. His father always recommended “guessing at the answers” before he saw them. Guess before you figure them out helped him develop an intuition and make split second decisions and was an important weapon of his – allowing him to “see” the answers before others did.
  9. Malone worked for Bell Labs out of school and focused on economic modeling and proposed that AT&T to shift its debt-to-equity ratio, taking on more debt and buying back its own stock in the market
  10. When Malone moved to McKinsey, he started by interviewing everyone from the senior ranks to the new hires. What works? What doesn’t? How would you fix it? Over time, Malone found that if he interviewed 30 people or so and listened intently, themes would emerge. The best ideas were sometimes hidden, or they were lost on senior executives. By laying the patterns bare, studying in detail the disparate parts – not unlike disassembling a radio – he learned how big corporations don’t work. It was not rocket science, Malone realized, you simply take the best ideas from anyone who has them, polish tem, and serve them up to the chairperson. His mind was like a spread of glue – it held fast any concept or pattern it encountered.
  11. Main rule he ruled at McKinsey: listen intently
  12. Always ask the question, “if not..?”
  13. Loyalty is more important than anything else
  14. Malone’s strategy was simple: get bigger
  15. Malone, like Magness, didn’t believe in memos. No paper passed from his desk to his underlings. No executive sought to curry favor or engage in the sort of Kremlinesque politics that caused ulcers in so many midlevel executives. Communication was direct, effective, and efficient. Every Monday morning, Malone sat with his closest executives at a broad round table, to figure out a way to squeeze more out of TCIs growing cable kingdom.
  16. The TCI men were cable cowboys. Though the term was repeated in derision by the bankers and politicians who coined it, the TCI team wore the nickname like a badge
  17. Malone liked to use naval metaphors, such as bulkheads, to describe the setup. Large ships are designed to withstand battle damage because they have watertight bulkheads, separate and self-contained compartments that can be sealed off to prevent an injured vessel from capsizing. You can take a torpedo in any one part and still stay afloat. With each new system he bought the debt was secured by a TCI subsidiary, not by the parent company. So, if the cable system defaulted on a loan, only one subsidiary would be threatened. Another way Malone eased risk was to spread it out among an ever-broadening array of partners, thereby protecting TCI and enhancing its influence in the industry at the same time. Aside from the cable systems that were wholly owned by TCI, the company was a minority partners in more than 35 cable companies, all of which got the same price breaks in programming that TCI got – which amounted to as much as a 30% discount.
  18. Importance of courage
    1. In the early days, TCI was struggling financially and Malone met with the main lenders to ask them to bring down the interest rates because of the healthy cash flows. They countered instead by proposing to raise the rates and Malone told them they could have the keys and raise if the interest rates if they thought they could run the company better than he. They backed down and gave TCI some room to breathe
    2. Malone avoided acquiring at sky high prices during bubbles but once it burst, scooped in with a vengeance. Malone relished the role of bargain hunter amid the spoils of bad deals made by his competitors. Was able to wait without tiring of waiting
    3. Later on, Malone and Magness cut several deals that allowed executives to own cable systems privately, then eventually turn them over to TCI. For Malone, it was a way not only of compensating his top employees as the values grew but, more importantly, to teach them. “Guys will understand a cable system a hell of a lot better if they have skin in the game.” Critics may have judged the deal as enriching insiders, but Malone paid little attention. Malone’s attitude was: you don’t like the way we reward management? Don’t buy the stock
    4. By 1986, TCI was beginning to run the way Malone had wanted it to run – highly decentralized. He had cut the company into 6 separate operating divisions, each nearly autonomous, with its own accounting and engineering departments. When you’ve got it running right, when you’ve got it decentralized, when you’ve got it structured properly, it’s like flying the most powerful fighter jet in the world
    5. One of the hallmarks of Malone’s management style was to leave the founder in charge. If you buy a property and find a manager motivated by ownership in the company, keep him or her in power and trust him or her implicitly
    6. Forget about earnings: what you really want is appreciating assets. You want to own as much of that asset as you can; then you want to finance it as efficiently as possible. And above all else, make sure that the deals you do avoid as much in taxes as legally possible. And then some.
    7. Never sacrifice convictions  at whims of others, no matter what the price
    8. Instead of high salaries, paid in equity which helped align incentives
    9. The idea, Malone liked to think, was to collaborate with your enemies – especially your enemies – to avoid the large and costly fight of real competition. It’s like mutually assured destruction: both sides could really hurt the other if they did something really stupid. We have to treat each other with civility to avoid all-out nuclear war.
  19. Redstone’s motto: content is king
  20. Tough times in the industry created incredibly tight bonds among the people at TCI
  21. Cable franchise essentially a legal right to a local monopoly
  22. The Cable Communications Act of 1984, the first national legislation establishing government authority over cable TV, ushered in a new era of growth, opening up financial markets, programming ideas, and billions of dollars in untapped revenue to cable. The law also kept the giant phone companies at bay, forbidding them from owning cable systems in their service areas. Incredible bidding wars ensued between cable operators and telcos. While cable had a fatter pipe, phone companies could offer cable firms badly needed capital and world-class expertise in switched, two-way communications. The first big move by a Bell came just two weeks after Malone made his 500-channel pledge. Both cable and telcos wanted to deploy similar technology but over separate sets of wires: cable companies over their thick coaxial cable lines and telcos over their twisted-pair copper networks. Coaxial cables offered orders of magnitude more data to be sent than the high speed lines of phone companies.
  23. “Malone is the kind of guy you want to run through walls for”
  24. “I’d gladly give my life to save his” – Ted Turner
  25. Used scale, penetration to get discounts and ownership of channels. The more horses Malone bet on, the likelier his chances of winning – BET, MTV, QVC, CVN. By 1988, TCI generated $850m in cash. Though it had no earnings, it had more cash flow than ABC, CBS, and NBC combined.
  26. Malone’s incredible commitment and focus had a massive strain on his family life. He also made enemies because he was seen as a bully, as taking a disproportionate share of the wealth he created, was unrepentant and unabashed about his and TCI’s clout
  27. Set up Liberty to prevent regulation, anti-trust, but also to make him very rich as he had 20% ownership. Used tracking stocks often – an interest in the earnings of the company but don’t own the underlying assets.
  28. After the 1992 regulation, Malone came up with the “500 channel” vision and interactive TV
  29. Maine and his boat were Malone’s retreat. Escape is necessary. Getting away gives you a new perspective and makes you more human. When you’re running a large corporation, you’re not able to show your human side all that much. It’s just not productive.
  30. Don’t chase too many rabbits simultaneously – know your main goals and focus on them intently until you reach them or find a more important goal to focus on
  31. Malone believes his greatest weakness was allowing his loyalty to get ahead of performance.
  32. One of the TCI insider’s favorite analogies for TCI’s problems was that TCI was a gas station company acting like a pipeline company. Pipelines deliver fuel in bulk. But gas stations sell it to retail customers, a far more service-oriented business. Customer service would win the day, and no one could argue that TCI didn’t need to pay more attention to its customers. Running a pipeline business is a pretty easy business – you just turn on a pump. Running gas stations is a really hard business. Hindrey wanted to put marketing and purchasing decisions back in the hands of local operators. You market from the bottom up, and not from the top down. What works in Bozeman doesn’t work in Birmingham. He also demanded to see copies of customer complaints for weeks at a time
  33. In June 1997, Bill Gates became cable’s savior in one simple, decisive move: he had shocked Wall St. by having Microsoft invest $1b in cash in Comcast at the behest of Brian Roberts. Until then, cable had been left for dead; the reregulation effort had crimped cash flow, the industry faced huge investment to go fully interactive, and cable stocks were near all-time lows. Suddenly everyone wanted to know the answer to the question: just what does Bill Gates know that we don’t? Gates had bought on the cheap and though he would be involved in the coming years, Malone and others were careful not to let Microsoft get too ingrained by having their software become the default on cable top boxes.
  34. Malone had a “3-D chess” type of mind – truly has the hologram in the head
  35. If you can get scale economics, you can get the costs down. If you get the costs down, you get the scale economics. It becomes a self-fulfilling prophecy. If you get the scale economics you can develop applications that are really important to a lot of people. If you can get applications that are important to people, you get people to buy the boxes, and you’ll get more scale economics
  36. Malone almost always reached out directly to deal. He would pick up the phone and reach out to the other side and look for the common ground where he could put together a mutually agreeable deal – win/win
  37. Malone Family Foundation – to promote the secondary and liberal arts education of the most able young men and women of our society and train such individuals as future leaders of society; acquire and preserve land and open space, preserving forever Nature’s natural and pristine beauty
  38. Malone was a man who was fiercely proud of what he had accomplished. A man who believed that wealth creation was a noble, moral achievement and believed the definition was not freedom from obligation, but freedom to choose which of those obligations to take on, which roles to play in business and in life.
  39. TCI made wealth not by pretending to be the best cable operator but through investments and complex financial engineering.
  40. Once TCI was sold to AT&T, Malone wanted to created separate stocks for the stable, dividend paying business and the more growth-oriented businesses. He wanted, as Jack Welch had done at GE, to create autonomous units with a total delegation of operational parameters within budgeting controls. If you do these things, you’ll have a great company and you will maximize shareholder value. Malone had pulled off one of the largest sales in the history of telecommunications and the IRS had to treat it as a tax-free stock merger. Basically, Malone had exchanged his personals take of $1.7b in TCI and Liberty for $2.4b in AT&T and Liberty stock. Malone always paid as little in taxes and as late as possible. It is my job to save as much of shareholder’s money as I can
  41. Later, Malone got into raising cattle. He loved the inherent efficiencies in hybrid vigor, the known improvements in growth or yield in one generation of hybrids over their parents. The idea is to have a 1,000 pound cow producing a 550 pound calf at weaning. She is more efficient. The smaller the cow, the less grass she eats. If you get a 2,000 pound cow producing a 300 pound weaning calf, you are doing it the wrong way. He also bought a ton of land and the basic idea was to own land in pretty places that haven’t been ruined yet and to not develop it. The elements of success in cable could also be applied to buying land: scale, timing, and efficiency. Almost all of the land and ranch purchases by Malone had a single element in common: conservation easements, which allow landowners to take charitable tax deductions if they opt to never develop a property.
What I got out of it
  1. The innovation, courage, focus, and hard work Malone exhibits in building up his empire was fun to read about. How he was able to stay ahead of the game, know what the important things were and focus heavily on those, and waiting for the right time to pounce are all admirable. His hard-nosed, no bs fashion earned him many enemies and run-ins with government regulation

Tiger Woods by Armen Keteyian, Jeff Benedict

Summary
  1. A deep look into Tiger’s history, family, career and lifestyle, helping us understand how someone can become so dominant in their sport and some of the costs it takes to get there
Key Takeaways
  1. Tiger’s parents guarded him fiercely when he was young. Tiger spent more time alone practicing or watching TV than playing with others. Family and golf was everything. He was always painfully shy, very secretive and protective of his privacy but his whole demeanor and confidence changed when he got a club in his hands
  2. Tiger’s nickname came from one of Earl’s friends in the army
  3. Tiger values privacy and loyalty more than anything
  4. Tiger’s father had abused and cheated on his wife. Tiger’s mom was strict and threatened to beat him if he ever hurt her reputation as a mother. She told him to go for the throat in competition or else people will come back and “beat his ass”. It was education before play and was told to always respect his elders
  5. Earl was married with three children when he went on tour in Thailand and met Koditta. After Tiger, Koditta could not have any other kids and committed herself fully to teaching and caring for her son. By then Tiger was 2, he was already practicing at least 2 hours per day. He was on talk shows and did interviews since this tender age. Earl helped his son get every advantage a country club kid gets and more – private lessons, custom made clubs, sports psychologists without having to pay for it because of Tiger’s skill. Earl even used psychological warfare training he learned in the military on Tiger to prepare him for anything he might face on the course
  6. Tiger had arguably the best amateur career in history and became a pro after his sophomore year at Stanford when he won his third US Open amateur championship. His start as a pro was no different, winning 2 if his first 7 tournaments
  7. Tiger was thrust on the national stage at such a young age but still had to mature and learn a lot emotionally. While Tiger found more balance after his first couple years on the tour, it shows how athletic success often overshadows character flaws
  8. What drives tiger? Never being satisfied. This brings restlessness and total perfection. He wanted total control over every area of his life
  9. Tiger had just won the Masters but wasn’t satisfied. He saw videos of his swing and wanted to completely revamp it. It would take him nearly two years to master the new swing and win again. Nobody else has taken a step down from the top to fix their swing in what would be best for the long term like Tiger did in this situation. He lost some length but gained a lot more control and repeatability.
  10. Nobody had his ability to execute difficult shots and to deal with he mental side of the game like he did
  11. Tiger developed a love for the ocean and scuba diving and learned how to control his breathing and heart rate through stressful dives which translated to his golf game
  12. When Tiger got famous he got even meaner. Power corrupts. He started spending a lot of time in Vegas and with Charles Barkley and Michel Jordan. Jordan, maybe the only other athlete who could compare to Tiger’s dominance and fame, exerted a lot of influence over the younger Tiger. Tiger was gambling more, became rude with the press and became more entitled and a bigger jerk
  13. Tiger hit a drought from 2002-2004 and fired most of his crew who had been with him for years. Hank Haney was his new coach and Elin was now in his life
  14. His emotional detachment was part of his formula for success.  No matter how well he played, there was always better. Tiger was able to compartmentalize life like nobody else and somehow managed to play his best golf while the rest of his life was falling apart. He needed adrenaline and an outlet and found this through golf, navy seals training and women
  15. An affair was covered up in 2007 but in 2009 the story finally broke and all of Tiger’s infidelities became world known. Tiger stepped away from golf for nearly 2 years got treatment for sex addiction and to try to repair things with his wife but eventually she determined that she wanted a divorce
  16. Today, Tiger is back on tour but not nearly the force he once was. He is also in chronic pain as he has worn out his back and his knees. Although he hasn’t been able to reach the same level as before, this process humanized him and allowed him to enjoy the game and relate to fans like never before
What I got out of it
  1. Had heard about Tiger’s dedication to golf before but this book made me appreciate it at an even deeper level. He was raised to be the best ever and was wholly consumed. It helped him reach his goal but it also distorted his personality and sense of reality. Book ends on a positive note with Tiger becoming more human and relatable after the scandal, although he may never reach his dominant self again due to age, injury, and maybe a change of mindset/priorities

How Doctors Think by Jerome Groopman

Summary
  1. This book is about what goes on in a doctor’s mind as he or she treats a patient. Knowing this and what is the most effective language to use, patients can truly become a partner of their doctor, arriving at faster and more accurate diagnoses
Key Takeaways
  1. William Osler is the father of patient centered medicine – being the first to understand and preach the importance of bedside manners
  2. How a doctor asks and responds to questions is key to making a patient feel safe and allowing them the space to open up and engage
  3. It is very important to keep a log of your mistakes and to revisit them often, keeping them top of mind and hopefully learning from that mistake so a similar one doesn’t happen again
  4. Heuristics are necessary but we must know which shortcuts we are using and how we are feeling so that we don’t develop blind spots or let our biases become too strong
  5. Most medical errors are not technical but errors in thinking, often stemming from a lack of awareness about how one feels
  6. Humans tend to overweight things which agree with and fulfill their current beliefs and desires
  7. The secret for caring for the patient is to care about the patient. This sounds silly and redundant but it is harder than it sounds because if you care too much it can impair your judgement but if you care too little you miss out on one of the most important aspects of being a healer
  8. If in a situation where you are very close to your doctor, worth saying how much you appreciate their level of care but also reassure hem that you want the honest truth and to do what’s best, even if it’s hard
  9. In an unusual situation, never accept “we see this sometimes.” Keep digging and asking questions
  10. Also ask, “What other body parts could be causing my symptoms?
  11. There will always be incomplete evidence but keep questioning doctors and their diagnoses, avoiding “diagnosis momentum” where things go unquestioned even if the situation is very unsure
  12. You need to know not only what people know but how they know it
  13. One size fits all scenarios rarely are the answer. Each person’s body and context need to be adjusted to
  14. Make sure incentives are aligned. Prescription drugs, surgeries and other expensive therapies are often pushed on customers even when not needed or appropriate. Ask how time tested the procedure it is, how common it is, if it’s standard, etc.
  15. Doctors have to figure out the right path as best as possible and then find ways to get the patient to agree with that decision. You can not force or coerce patients to do something they’re uncomfortable with just because you think it’s the right way
  16. Often the doctor is more important than the hospital
  17. Is there anything that doesn’t fit?
  18. Is it possible I have more than one problem?
  19. Great doctors will think of lateral networks and non-medical reasons why treatments may be failing
  20. Today’s structure forces many doctors to try to get through as many patients as possible in a day but good thinking takes time. Find a doctor who will give you the time you need
  21. At the end of the day, medicine has to be a blend of science and soul
What I got out of it
  1. A good read into understanding a doctors world, their training, thought processes, common errors and how to best communicate in order to reach the best path to wellness

The Way of Zen by Alan Watts

Summary
  1. Alan Watts introduces Zen Buddhism to a western audience by discussing zen’s history, the principles and practices, za-zen meditations, koans, and how to incorporate into your life
Key Takeaways
  1. The western mind attaches the idea of “self” more closely to what he or she has done or was than who they currently are
  2. Must learn how to combine peripheral with linear thinking. The hunch with rationality, trusting our gut and the feel of the situation as much as what we rationally know about it
  3. The minute nirvana becomes a desire, it becomes Sankara (suffering). Real nirvana cannot be conceived.
  4. One has to know in one’s bones that there is nothing to be grasped. There is no way to enlightenment that requires any force. Must surrender completely
  5. Everything is relative, non dual. Things can only exist in relation to others. Only when we begin classifying things does duality arise
  6. All beings are endowed with a Buddha nature. We simply forget it. There is nothing to achieve, we just need to go back to our original state. To seek Buddhahood is to deny you already have it
  7. The contemplation and distinction between right and wrong is a common sickness of the mind
What I got out of it
  1. A thorough and informative history of zen and a good overview of the main themes, terms, and characters

The Farmer From Merna: A Biography of George J. Mecherle and a History of the State Farm Insurance Companies of Bloomington, Illinois by Karl Schriftgeisser

Summary

  1. The life of George Mecherle and his founding of State Farm Insurance

Key Takeaways

  1. Mecherle’s ancestors were German farmers and immigrated to America, eventually settling down in Bloomington, IN. The rule of George’s household was integrity. It was their duty to become trusted members of the community. George showed early signs of being sharp, independent, a leader, a potential baseball star, a “doer” in whatever he was responsible for
  2. George was not content to do things one way just because that was the way his father, or anybody else, did them. He was always studying and reading about what the other fellows had done
  3. Left a couple jobs just because he didn’t like how his bosses ran the business. He wanted to use skills, his farmer mindset, and his connections to form a statewide auto insurance to the farmers of the state of Illinois, at rates which they could afford. He worked tirelessly to bring his farmers the lowest rates that could possibly be justified. George became so obsessed with his idea that he eventually became a “pest”, wanting to discuss all aspects of insurance with anybody that would hear him out.
  4. There were three provisions that were fundamental foundation-stones of State Farm which were diametrically opposed to the standard methods of automobile insurance: the clauses setting up the membership fee, the premium deposit, and the six-month term of insurance. The membership fee exempted people from further membership fees for similar vehicles. The premium deposit got the customers to lower their risk profile as they had some skin in the game. The six-month term of insurance allowed State Farm to adjust rates as needed, this allowed them to be more adaptive than other insurance companies who only adjusted annually
  5. Insurance was the third largest industry in the US in 1921
  6. He had, and this was what counted most of all, the faith and encouragement of his wife
  7. Mecherle had the ingenious idea of installing a theft and movable object collision clause which said that the policyholder would pay for anything less than $10 and State Farm would pay for anything above $10. It was his theory that if a farmer had to pay for minor repairs he would be more careful with his automobile. It also would save the company from a flood of petty claims each time a member scraped a fender or dented a mudguard
  8. From the very beginning, the agency force was the heart of the company. People who are “more than order takers, for the selling of our insurance requires a man of ability to create a demand, sell the insurance, take the application, and complete the whole deal in one call if he hopes to make a success of this business. These men seem to be a rare article.”
  9. In the early days, George sent out a list of 14 questions which helped him determine pretty accurately how the idea was being received around the state
    1. Don’t you think our proposition the best insurance plan for farmers that you have seen?
    2. What did your board of directors think of it?
    3. Would you like to save your friends and the members of your Farm Mutual Ins. Co. some money?
    4. Would you like to make some money for yourself
    5. Are your Farm Mutual members satisfied with Old Line or Reciprocal rates and their method of settling claims?
    6. Would you endorse our proposition if you found, after a thorough investigation, that it was worth of your endorsement?
    7. Will you write to Mr. SB Mason for his opinion of our proposition?
    8. Will you write for information concerning us?
    9. Will you write to Prairie Farm about our proposition?
    10. Did you see our advertisement in the April 29th issue of the Prairie Farm?
    11. How does the fact that Mr. JW Coale wrote 32 applications in two and one half days appeal to you?
    12. How much time could you devote to selling our insurance?
    13. If you had the time to devote to our proposition, could you do as well or better than Mr. Coale?
    14. How soon would you like to have our Special man spend a few days with you to explain the plan to your neighbors?
  10. Great companies always look different
    1. “During the years of its growth to the commanding position of the largest automobile insurance company in the US, the secret of State Farm’s success was a continual source of puzzlement to the insurance fraternity. The incontrovertible figures of its annual statements proved that it was a financial success, and the findings of the examiners for the insurance departments of the various states in which it was licensed to operate revealed no flaws in its method of doing business. But questions were forever being asked. What was the secret formula that allowed this company, almost alone of all automobile insurance companies, to undersell the market and still show such amazingly large figures on the right side of the ledgers? How did it actually work? One obvious answer to the first question was the organizational genius of the “super-salesman” who was at the head of all its operations. In George Mecherle, who had come to the business at a time in life when most men have long since reached the peak of their ability, State Farm owned a chief executive of exceptional talents. He had been at the forefront of every progressive move the company had made, and as the years went by he had chosen those capable associates who had worked so well under his all-seeing direction. Especially in the early years was it true in his case, as Emerson said in a rather larger conception that, “an institution is the lengthened shadow of one man.” But there was really more to it than that. There was, for one thing, the philosophy underlying the institution that was his lengthened shadow. State Farm was different than anything that had preceded it but, paradoxically, there was little that was original in its plan.”
    2. No companies previously had attempted to establish a basis for selective risks, based on geography, age, etc. By taking this information into account, State Farm was able to operate for nearly 40% less than its stock competitors. They charged its members every six-months which was easier for most people at that time to financially handle than the lump sum annual payment other companies required. They also required a smaller unearned premium reserve. And an inadequate, or excessive rate, could be corrected at the end of six months rather than waiting until the end of the year.
    3. Another feature that contributed to operational economy was the issuing of policies by the home office rather than by the agent in the field. Relieved of this clerical work, or of the expensive necessity of hiring someone to do the work for him, the agent could concentrate on selling. Since his income depended on sales, he could afford to work for less than the agent who had to keep an office force.
    4. State Farm policies, once written, were not rewritten and replaced each policy term. This greatly saved expense, work, and time. The same policy remained outstanding until the policyholder bought a new car – and, in those days of agricultural uncertainty, the farmer did not turn in his old Ford or Chevrolet for a new car each year, by any means – or made a major move or change of coverage. This feature was borrowed from the standard practice of life and accident companies; but it had never previously been tried out in automobile insurance companies before
    5. Also borrowed – this time from mail order houses – was another feature, one never before used in automobile insurance but one that had been found efficient in the operation of many accident and health and several life companies. This was the system of billing and collecting renewal premiums by the home office, or by branch offices after they were established. This relieved the agent of the task of collecting renewals, and thus obviated the necessity of compensating him for such collections. This, of course, resulted in a material saving in expense for State Farm, which was passed on to the policyholders. Agents were, however, paid fees and expenses for adjusting losses. This, at first, was on a per diem and mileage basis, but later was changed to a percentage of the premiums, largely for ease of administration.
    6. All premiums had to be paid in cash in advance, avoiding the expenses of establishing a credit system
    7. The most novel feature of the State Farm plan was the lifetime membership fee system. Any person who joined State Farm did so for life, or at least for as long a part of his life as he remained a “good risk.” His membership did not cease even if he should allow a policy to lapse for some time. State Farm’s advantage was that it charged the member the cost of solicitation and the sale of the insurance policy only once. Since State Farm renewal policies contained no provision for new business costs, this factor alone provided a large part of the price advantage which State Farm enjoyed over its competitors. This membership fee, it is interesting to note, was not a premium. It was, instead, an admission and inspection fee. It was not returnable. For this reason, no unearned premium reserve was set up on it. This allowed the company to not be burdened with reserves, typically a big issue for new businesses. But, in this case, new business was paid for by the new clients. The phenomenal growth rate of State Farm could not have been realized without this innovation, and yet the very plan that made this growth possible also provided a price advantage to create this growth
    8. The 80-20 plan was adopted from other insurance companies, where the policyholder assumes 20% of the risk and the insurance company 80%. The sound psychology of this lay in the fact that it gave the policyholder an interest in keeping his losses to a minimum
    9. Mecherle devised a system of classing all automobiles by list price into seven classes, from A to G, rather than having hundreds of different rates for each car. This system was easy to understand and to apply. In the first agent’s manual – a masterpiece of simplicity there was an uncomplicated formula by which anyone could readily determine the amount of insurance that could be written on any car, whether new or old.
    10. Another saving for the policyholder came about through lower average losses resulting from the careful selection of business. The restriction of those eligible to membership in State Farm, and such clauses as the drunken driver clause, not only appealed to farmers, with their more rigid code of morals, but also saved the company money.
    11. There existed no contractual obligation on the part of the company to pay any dividend to the policyholder at the end of the term. This system had the merit of favoring the continuing policyholders and discouraging lapses, much after the system of surrender charges generally in use in life insurance companies
    12. All of these economies, acting together, enabled State Farm to do business in the early days for nearly 40% less than the stock companies!
  11. Created an internal publication to get new policies and any other information across to the nation-wide network of agents and offices. It was directed mostly to the agents and sent them the company message, the news of what the various state agencies were doing, the pertinent facts, figures, and news of the entire organization. It was also a medium for the expression of George Mecherle’s messages – his inspiring talks.
  12. The goal had always been to build an honest insurance company, one focused on service and square dealing, giving to each member equal and just consideration; and to build the organization grounded on the principles of true equality and right-dealing as between men
  13. Even through the Great Depression State Farm continued to grow, thriving in tough times. “We have truly learned that what we really keep is what we give and that the returns are immediate. Therefore, under this new philosophy, the standard of success will eventually be the measure of service given.
  14. The service fee bonus gave each agent an opportunity to participate in that underwriting profit in his respective state in an amount not exceeding 25% of his annual service fee compensation, provided his own business was also profitable. It not only augmented the agents’ income but also provided an incentive for each agent to use care in the selection of drivers to be insured and to render efficient claim service. In placing a bonus fee along with the service fee it makes every agent careful of his record; if an agent secures unprofitable business it puts him on the spot as far as the rest of the agents in that state are concerned
  15. Mecherle was adept at picking high level employees. He demanded and got the same loyalty to the company which he himself gave. He established an esprit de corps that was remarkable and that left its imprint on the organization long after it had grown beyond his wildest imaginings. Most of the roots of the company came back to loyalty – loyalty to State Farm and loyalty to the “Chief”. In the eyes of most people the man and the institution were inseparable
  16. The paternalism of George Mecherle evolved into a scientifically controlled welfare program that approached its human problems on five fronts: physical welfare; financial welfare; morale of the workers; training and education of those who chose to make State Farm a career; other problems not connected with the others
  17. State Farm was the height of enlightened industrialism. The steadiness of employment, the lack of “unrest” among the employees, is traceable in good measure to this system. In a larger city, with more diversified amusements and cultural interests, it might not be as necessary to all concerned as it is in the flat prairie city of Bloomington where, without this self-interested setup, boredom could well result
  18. If needed to shrink, they would wait for employees to retire and then not replace them. “We have a responsibility to our present force. We wouldn’t do anything that would break that loyalty. The big factor in productivity is morale.
    1. Left a red rose on the desk of all employees on their birthdays
    2. Handed out pins denoting length of service in ceremonious presentations. Today, there are also cash bonuses for five-year periods, ranging from five to thirty years’ service
    3. Held “Coke parties” on each floor whenever an employee passes a ten-year service milestone, and all employees who have been with the company for fifteen or more years are honored annually at a special dinner party
  19. “As we have become more independent, we are becoming more conservatively minded. This – I am satisfied – is natural, and comes from maturity. It should be our greatest desire to build for permanency on a sound business policy rather than to attempt too great a volume from this time on.”
    1. Permanency through honesty 
  20. “Our plan is very simple when boiled down to its essence. It will consist primarily in establishing a contact and working agreement between local banks and our agents, so that the bank will finance the purchase of automobiles for deserving policyholders and will accept our policy, with proper safeguards on the loan. Such a plan, when carried to its utmost possibilities, will open the door to a vast new field of business, in view of the fact that two out of three sales of new and used cars are one deferred payment basis. Furthermore, we will be able to retain many policies which we are now losing when the policyholder trades in his old car one new one and finances the deal.
  21. As State Farm was not a factory, they could not be “converted” during WWII. Others said that they should focus on other lines but Mecherle turned a deaf ear. State Farm might lose as much as half its business, he stated firmly, but it would come out of the war as clean as a hound’s tooth and without resorting to diversification. This long-term mindset would pay off only years later when massive pent up demand for new cars, repairs, insurance, and more would be let loose once the war was over
  22. One of the keys to the growth was the fact that since establishment, State Farm paid losses promptly and satisfactorily. In the long run, Mecherle felt, this may have been the greatest factor – this and the confidence of the agency force in the company management
  23. When George was beginning to step away from the business he asked, “The only thing I insist upon is that you do not depart from the membership plan, the continuous policy, the six-month’s premium, and the happiness of our agency force. Those are fundamental. Beyond them there are no restrictions. So, go to it.” He would step away from the business, allowing the new generation to lead but still kept every detail of the business at his fingertips. He kept the facts and figures of State Farm up to the very last minute in his worn loose-leaf books. He knew what was going on in every department. In spite of the growth of State Farm, he still kept his interest in the individual welfare of the staff, and knew the names and personal histories of an incredibly large number of them.
  24. The secret to his success – “A man has to live and sleep with his business if he wants to make a go of it. You have to take it home with you at night, so you can lie there in the darkness and figure out what you can do to improve it. In fact, you have to become sort of a ‘nut’ about it, so that you become so enthused that you will bore your friends talking about it. You have to become a one-man crusade.”
  25. Good character above all else
  26. “An institution is the lengthened shadow of one man.” – Emerson
  27. The greatest troubles we have are what we bring on ourselves
  28. Remember this: every man who accomplishes anything worthwhile in this life will leave behind him many temples still unfinished when he departs this life
  29. From his associates on every level he demanded three things: willingness to work hard, faith in the organization, loyalty to the “spirit” of State Farm. Few were those who did not give him all three in good measure. In return he gave to his associates what he demanded from them. He was no swivel-chair commander, but the hardest worker of them all. His faith in the high purposes of State Farm as an organization dedicated to the service of its members was all-absorbing. And his loyalty to the men and women who were loyal to him and his ideals was legendary
  30. “Things do not happen – they are brought about by careful planning, diligence, application, and direction. The tiny seed planted in the year 1922, which has been nurtured by the sunlight of agency devotion and sustained by the life-giving waters of policyholder persistency, has grown in root and branch – spreading a mantle of service and protection throughout the nation – until today the ripened fruit of its many branches is falling as a benediction into the lives, homes, and hearts of our people.”

What I got out of it

  1. Slow book at times but learned a lot about the George Mecherle and the “honest-first” business he created. There are timeless business and overall life principles that we could all learn from and incorporate into our jobs and lives

No Way to Run a Railroad: The Untold Story of the Penn Central Crisis by Stephen Salsbury

Summary
  1. Behind the scenes look at what really happened in the collapse of one of America’s largest business failures, the bankruptcy of Penn Central in 1970. Because railroads are America’s oldest large scale business, organizations observing what has happened to them has great value in understanding fundamental issues facing American businesses in the 1980s.
Key Takeaways
  1. David Bevan, CFO, warned the chief executives of the merging companies, the Pennsylvania and the New York Central, of many of the troubles which eventually came to fruition. The leaders did not fully appreciate the terrible result from the inadequately planned merger and huge capital expenditures involved
  2. This greatest bankruptcy in world history, one that lead to government entrance into what had previously been a privately owned industry, illustrates ills to which very large corporations are sometimes prone: ineffective top managers, unchecked by knowledgeable representatives of stockholders on the Board of Directors; lack of proper information through accounting of what was going on in the operations; government interference with corporate efforts to find new avenues to profit; and over optimism regarding future expenses in relation to sales
  3. Railroads in the early to mid 1900s had become slow, bureaucratic, and became less profitable because of it. Some suggested that new technology and business practices were the way to go but others saw mergers as the solution to all problems. However, they did not associate mergers with any managerial reforms
  4. Reasons for failure: managerial structure and practices were backward when compared to other large American enterprises; no planning before the merger at crucial operating or managerial levels; it failed operationally; top management rejected advanced planning and modern concepts of business management (budgeting and forward financial planning); diversification did not cause the bankruptcy
  5. Railroads were innovative and revolutionary when they first began, from finance and cost accounting methods, to trade unions, to creating legal corporate entities, to new managerial styles, but they began to ossify in the mid 1900s. Because the capital requirements were so large they cannot be financed as the textile industry had been, by single individuals or small group, and needed investment bankers, stock exchanges and even a financial press. They fostered all these things
  6. One of the mistakes made by the Penn Central top management, which escalated operational confusion, was the failure to decide whether to operate the consolidated railroad on a centralized or decentralized basis
  7. Due to monopoly concerns, railroads were often hindered from investing or helping build other transportation industries. The Pennsylvania was instrumental in founding the predecessor of TWA but was not allowed to move much further than that.
  8. Bevan, Saunders and Perlman were not able to work together effectively although they had great pedigrees and track records. The differing opinions on innovation versus lowering capital expenditures were too great and none realized how small their margin for error truly was. The current management was reluctant to change their managerial and financial/accounting practices and the only thing more painful than changing is the pain that comes from not changing
  9. Railroads most efficient at moving bulky, low value commodities great distances and worst in light weight, high value products. The expansion of trucks and roads ate away at the transportation of high value products from rails
  10. Railroad’s meager earnings and high operating costs meant the stock market weren’t a great option so if they wanted money, they had to sell bonds or issue equipment trusts. Their debt grew to all time highs and low operating profits made paying them off increasingly difficult and any long term planning or investing very hard to do. Bevan had a very tough time in reducing the Pennsylvania’s debts and updating its accounting and managerial practices
  11. After the collapse, Bevan was made the scapegoat and his ties with an investment fund he founded with others called Penphil and his association with Executive Jet Aviation were studied but in the end he was not deemed to have done any wrong
What I got out of it
  1. The Penn Central was the largest business failure in the US up to that time. In retrospect, it is clear that it had very poor returns relative to the industry and coupled with inadequate cash and large debt loads, it’s bankruptcy should not have been a total surprise. Different approaches to management (centralized vs decentralized), top officials leaving, government favoring other modes of transportation, accounting and data processing taken from Bevan and given to Perlman, breakdown of reliable information about the general state of the railroad, there was no margin for error and Saunders (the CEO) never appreciated that fact fully, all contributed to its downfall