The Most Important Insight(s)

Whether students are ready or not, teachers appear everywhere.

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Last week, someone asked me about the most valuable insight I had gleaned from my work. This set my mind running off in all directions. First off, I'm bad at picking favorites. Some people enjoy debating the best investor, athlete, entrepreneur, company, rapper, Marvel movie, you name it. I dread the question. Too subjective. Impossible to even nail down the criteria.

Take a topic I’ve been thinking about: the most successful, career-making investments/deals. By what measure? Total profits? IRR? Money multiple? Difficulty/ingenuity? Courage/conviction (size of bet relative to portfolio)? As I wrote in Predators, I want to pay more attention to context and conditions. What is more impressive: someone bootstrapping their way to a billion dollars or someone turning a modest family business into the world’s largest fortune?

With low interest rates and much more competitive markets, how does one compare a track record generated today to, say, the early Buffett Partnership? My point is that there is a lot to quibble about and the answer, to me, is usually “it depends.” But also “who cares.” You’re better off spending your time learning or doing rather than obsessing with rankings.

But that sounded like a cop-out answer to my friend’s question. Because there were lessons, tons of them. And I figured that after writing this newsletter for a year and with 3,000+ amazing and curious subscribers, this would be a good time to recap and give you all some late-summer reading.

First, I’m going to recap a few painful lessons from my own journey. Then I will recap my key takeaways from some of the major profiles I’ve shared.

Before I do that: thank you to all of you. Thank you for reading, for sharing my work, and for reaching out with ideas and feedback. I’m especially grateful to all my paid subscribers who support my work. And a special shoutout to the founding members.

My own journey

Unfortunately, what I perceive as a valuable insight may seem completely trivial to you. I don’t have access to a fountain with universal truth that I can share. What I think of as wisdom is probably mostly a reflection of my own journey and struggles.

That said, I’ve made plenty of mistakes and learned things the hard way. Perhaps you find some of that helpful. Or at least entertaining.

If there is a common thread, it revolves around striving for greater self-awareness. Without it you’re lost. I mean, I was – and still am. What do you want out of life? What truly matters to you? What do you believe is true? What are your values and biases? What games should you play and what should you avoid? I think of it as a balance of between exploration and reflection. Go out and try, experiment, do things. Stir up the pot. Observe what happens. See how you react. See if you find something that interests you, a thread that you can follow.

There were times in my life when I closed my eyes and ears to what was happening and to myself. That’s when things got pretty dark, and quickly.

In Divorce, Denial, Dissonance Reduction I wrote about a moment of complete denial and lack of self-awareness. I pretended that everything was fine when nothing was. My resentment tainted all areas of my life. I lost friends, money, and got emotionally invested in a redemption fantasy.

When my Wall Street career was on autopilot to nowhere, I was the monkey with a fistful of salt. I couldn’t let go of the tiny amount of financial security and status I had. Too much ego invested. Too scary.

I hit the wall attempting the impossible – joining a startup hedge fund to work on business development. Building a new fund is hard but not impossible - people have done it. But I was a complete misfit for the role. An unforced error. But hey, at least writing about it allowed me to kick off a controversy.😄

Another key lesson revolved around opening up and sharing more of my life. I’m still proud of writing The Beauty of Vulnerability, a personal piece about infatuation heartbreak. The pain didn’t go away (I don’t care to admit this but I still miss her). But sharing turned a painful moment into a catalyst to connect with old and new friends on a deeper level. It showed me what I had been missing in my life.

Moving on held another lesson on ego: accepting rejection. I had a hard time with rejection. What did her rejection say about me? This was a knot I couldn’t unravel in my own head. But again, talking it through with friends from all walks of life eventually helped me cut through it.

A final and enduring lesson from this broken relationship: try to identify and fill the major voids in your life. Otherwise you risk trying to fill them through others again and again.

What to do with all these mistakes? Buffett, Munger, and Cialdini teach us to use mistakes to our advantage: to learn and establish credibility. Kirk Kerkorian (much as I love his story) taught me that even billionaires can be oblivious to their own flaws and repeat mistakes trying to regain past glory.

Learning the lesson is one thing. But changing your thinking, your values, your attention, your behavior – truly changing your life is hard. And change doesn’t happen in isolation. You’re continuously being affected by your environment, whether through the games you’re playing or mimesis. In the Scarcity Struggle I wrote about Ben Horowitz’s “anti-hater/anti-jealous mindset” and the importance of game selection. Look for positive sum “infinite games” (or metagames), if only to counterbalance zero-sum games you’re playing at work. Always remember, “Life is barely long enough to get good at one thing. Be careful what you get good at.”

Lastly, I try to think about my life in terms of the hero’s journey and finding my own adventure. Every journey shapes and changes you. Paul Tudor Jones once commented that the volatile commodities markets of the 70s allowed him to “experience repeated bull and bear markets across a variety of different instruments.” Losing his stake “a couple of times,” taught him “risk control and risk management” and “a healthy dose of fear and respect for Mr. Market.”

It’s important to go out and explore and make the mistakes that allow us to grow. As to the most valuable insight - it’s the one you need to hear now. And nobody knows what that is because you’re the only one who can tell when something resonates in that special way. When you feel that slight tug and you know there is an uncomfortable but important truth to be learned.

But enough about me. Ready or not, meet some new teachers.

Meet the teachers

“There are thousands of years of history in which lots and lots of very smart people worked very hard and ran all kinds of experiments on inventing new technologies, or creating new businesses, or new ways to manage or new ways to lead or all kinds of things. At some point, somebody put them down in a book, and for very little money and for a few hours of time, you can literally learn from somebody's accumulated experience.” Marc Andreessen

Reginald Lewis: Lewis might be the most inspiring yet tragic story I’ve profiled. Lewis was grinding away for decades before he finally caught a break. But just when he reached the top, he passed away. His story is a testament to the power of persistence. At the same time, it highlights the sacrifice of time and relationships. And that there is no guarantee that one will be able to enjoy the fruits of their hard work.

“I was no overnight success. It took 25 years of hard work to get to where I am. That’s what everyone has missed.”

“People who get their thrills from talking about big deals end up not doing them. The fewer words, the better. It's action that counts, not words. That's the cardinal rule of deal-making.”

Paul Tudor Jones: I am fascinated by macro traders because, compared to fundamental investors, they can’t afford much of an ego at work. They know the market is bigger and can swallow them whole. Risk control and accepting mistakes quickly are table stakes. Traders like Paul Tudor Jones strike me as ‘zen’ and I find lessons about investing and life in their stories. I wrote about Jones’s shorting the Japanese bubble and to me it is a metaphor for dogged pursuit until the right moment arises.

“Don’t be a hero. Don’t have an ego.” Paul Tudor Jones

If I was coaching investors or founders, I’d make them study Barry Diller and how he built and led organizations revolving around talent and ideas - from TV networks and movie studies to home shopping and the Internet. He’s one of the best yet least understood owner-operators out there.

Barry Diller’s beginner’s mind: It is rare to find Diller’s thirst for learning and courage to start from scratch in a new industry, late in life.

“The course of my life has been curiosity and serendipity. I didn't have a single thought in my head other than, I don't know what this is, but I'm fascinated by it and I want to learn it.” Barry Diller

“People get stuck as they get older. Our minds are sort of electrochemical computers. Your thoughts construct patterns like scaffolding in your mind. You are really etching chemical patterns. In most cases, people get stuck in those patterns, just like grooves in a record, and they never get out of them. It’s rare that you see an artist in his 30s or 40s able to really contribute something amazing. Of course, there are some people who are innately curious, forever little kids in their awe of life, but they’re rare.” Steve Jobs

Barry Diller’s Roots: Diller’s career unfolded at lightning speed. He moved from a talent agency into TV, on to head a major Hollywood studio, before building the Fox network for Rupert Murdoch. Giving his young executives responsibility quickly has been one of the most enduring lessons of his career.

“I got hired with no experience, no nothing, somebody just took the flyer, as they say. So I have always believed to hire people, bring people into your organization who are young, and who are inexperienced for the job that you give them. And sometimes that works, and sometimes that doesn't work.”

Barry Diller’s System of Discovery, Debate, and Development: This is my deep dive into Diller’s system of building a machine that combines high-conviction ideas with talent. Stories from his diaspora (people like Michael Eisner, Jeffrey Katzenberg, Dara Khosrowshahi) highlight how he relishes “creative conflict” and advocacy. It’s a system worth studying for organization allocating resources to ideas – whether that’s investing capital or building products.

“If you hire people at senior positions, you are a failure.” “I would say that my preferred method is not to ever hire outside your company for senior positions.”

“Dara Khosrowshahi was at Allen and Company as a junior analyst, he came to us as a junior analyst. What we did is we made him CFO—he had no experience, he didn't know what a CFO was—of a division, and he just kept going from there.”

“I have Barry to thank for pretty much everything in my professional career.” Khosrowshahi

“I started as Barry’s gofer. In retrospect, Barry was the most important mentor of my career. Over seven or eight years he put me in almost every area of the business. I was in marketing, distribution, international, negative pickups, and business affairs. I think it was deliberate: he was training me for someday actually becoming the head. When they made me president of the studio, I had already worked in all the key areas.” Jeffrey Katzenberg

“Your job is to go out and find ideas that interest you, that you love— not like—that you love sufficiently to put your career on the line, to have a level of passion to want to make something and to have the courage of your convictions.”

“Rarely in business do you ever get enough facts to make a decision that's got a factual basis. It's usually a minute or a mile short. It means [the solution is] not obvious. The process of doing that, for me at least, is filled with creative conflict.”

“Any meeting that Barry and Michael [Eisner] were in, you could sell tickets to. It was unbelievable how they would scream and yell and fight with each other. And they could walk away and there was no residual negativity from the meeting.”

“One quality above all others that Diller demanded of his executives: a sense of passion for any idea or product they were trying to sell to him.  If the executive wasn’t willing to kick and scream and demonstrate his or her passion, the project was as good as dead.”

George Soros and Steve Jobs: Reflexivity is a key concept to understand markets. Financial markets it occurs when investors’ misperception affects fundamentals and reinforces a trend. Soros used it profitably trade the growth and implosion of bubbles. Steve Jobs used the same feedback loop between perception and reality to create value at Apple: he leveraged Xerox’s desire to make a pre-IPO investment in Apple to get access to the secrets of their PARC research facility

“A boom/bust process occurs only when market prices find a way to influence the so-called fundamentals that are supposed to be reflected in market prices." George Soros

“In [Jobs’s] presence, reality is malleable. He can convince anyone of practically anything. It wears off when he’s not around, but it makes it hard to have realistic schedules.”

Bernard Arnault is a great example of someone who was able to both conquer and rule. In the Rise of Arnault I laid out the ingenious deals that gave him control of LVMH. In Arnault: Empire Builder I showed that unlike some other takeover operators, Arnault found a cohesive long-term strategy and compounded his capital long-term.

“In business the secret is to seize opportunities.”

"If you control your factories, you control your quality; if you control your distribution, you control your image."

John Elkann is no rags-to-riches story. The quiet Elkann had to step into the storm when his family faced a succession crisis. He illustrates how we can go our own way within the constraints of family legacy.

“My life was always about being confronted with an environment where you had to adapt.”

Jeffrey Yass and Susquehanna: This is the story of scrappy outsiders building an under the radar trading empire with street smarts, math chops, and passion for gambling and games. You don’t have to be Jim Simons with an army of PHDs to excel at trading. But you have to be fiercely focused on edge.

“The beautiful thing about the market is that it's a poker table with unlimited seats. If you think you can beat me, there's a seat open. If you won't to take the seat, I don't care what you think.”

“All of sports betting, all of playing poker, and all of options trading is making sure you’re betting against someone you’re smarter than. If you’re not asking yourself, am I the sucker, or am I the [bait], you get arrogant and you get crushed.”

How Craig McCaw Pioneered the Wireless Age: Yes, McCaw was an important entrepreneur who recognized the opportunity in wireless spectrum, went all-in, and made a national wireless network a reality. But what I enjoyed most about his story was his self-awareness. The fact that he didn’t hide his weaknesses but assembled a team that balanced them out.

“You learn and you see an opportunity - a gap between what is and what should be. If one thinks in anthropological terms, if you go towards what should be, then eventually things will get there and you just have to work out the timing.

“I think I had trouble fitting as a dyslexic. I don’t think like other people, so I don’t fit very well in a clique. As a result of that I have trouble quantifying people as directly as others. I look at their ideas, rather than at them so much as individuals… if you pass autonomy as far down in any grouping of people as you can, you will get extraordinary results if you ask for a lot. The greatest burden you can put on someone is trust.”

Dan Gilbert: Gilbert made a fortune by making the slow and cumbersome mortgage process simpler and faster for the consumer. As Bezos said: “people do more of what’s convenient and friction-free.” And in this case, they are happy to work with Gilbert’s Rocket Mortgage. I love his operating philosophy which encourages people to take action, to experiment, and take responsibility. Gilbert is also a savvy contrarian investor who made a fortune betting on Detroit in its darkest hour.

“Innovation is rewarded. Execution is worshipped.”

“If a company does thousands of little things better than anyone else, they become nearly impossible to imitate.”

Den Fujita: Fujita proved that you only need one good insight which you can apply over and over in different industries. He started by importing foreign brands to feed appetite of post-war Japan’s rising consumer class. This made him spot his big opportunity: to build McDonald’s Japan into a powerhouse by making it Japanese. He repeated this formula in areas like Toys ’R’ Us, shopping centers, and fitness centers.

Boone Pickens: Pickens taught me about navigating the commodity cycle and adapting to the opportunity set. He always found a new idea and was able to raise capital: he drilled for oil all over the world, he took over companies for their undervalued oil reserves, and his raids triggered some of the 80s largest takeovers. After going bust he rose again with a hedge fund and clean energy projects. This man had the spirit to always keep going.

“Looking back, it seems as though I have spent my whole life raising money for a deal.”

“I started with a good education, $2,500 in capital, and an opportunity to do something—the sky was the limit, and fortunately the same opportunity still exists.”

Finally, if you’re in the mood to reflect on the pursuit of wealth: The stories of self-made fortunes can be ambiguous, their protagonists can turn out to be predators or icons, depending on what you focus on. But to understand the rich tapestry of life we have to make every effort to look behind the curtain. In business this means breaking through the façade of great fortunes.

“The things we admire in men, kindness and generosity, openness, honesty, understanding and feeling are the concomitants of failure in our system. All those traits we detest, sharpness, greed, acquisitiveness, meanness, egotism and self-interest are the traits of success. And while men admire the quality of the first, they love the produce of the second.” John Steinbeck

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