Warren Buffett


Bill Gates reveals his top six books for 2014

7:00PM | Wednesday, 16 July

He might be the world’s richest person, but did you know Bill Gates is an avid reader?   The billionaire co-founder of Microsoft releases a list of six recommended books at the start of each US summer. And his endorsements have weight: the books climb up the bestseller charts as soon as Gates reveals his picks via his blog.   While the six books Gates has picked this year are not all manuals for business—there’s a debut novel by a Melbourne author on the list—taken together they give some insights into the mind of one the most successful businessmen of recent times.   Here’s Bill Gates’ annual summer reading list:   Business Adventures by John Brooks Gates says his close friend Warren Buffett first recommended this book to him in 1991, “and it’s still the best business book I’ve ever read”.   “Even though Brooks wrote more than four decades ago, he offers sharp insights into timeless fundamentals of business, like the challenge of building a large organisation, hiring people with the right skills, and listening to customers’ feedback,” says Gates.   “He is also a masterful storyteller, peppering his articles with compelling portraits of everyone from General Electric executives to the founder of Piggly Wiggly groceries … I wish all business writing were half as good.”   While you won’t find a hard copy of Brooks’ book in your local bookshop as it is out of print, the e-book version is readily available.   Stress Test by Timothy F Geithner Gates says it’s ironic that Timothy F Geithner, who was accused of lacking in communication skills during his tenure as the US Treasury Secretary, has written such a good book.   “Geithner paints a compelling human portrait of what it was like to be fighting a global financial meltdown while at the same time fighting critics inside and outside the administration as well as his own severe guilt over his near-total absence from his family,” says Gates.   But despite the ugliness of “the politics of fighting financial crises”, Gates says if more people read about the background of financial crises, it just might make a difference next time around.   The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism by Doris Kearns Goodwin Gates says he read a lot about US President Theodore Roosevelt last year, but Goodwin’s book is a standout.   What interests him most about this biography is the central question: How does social change happen?   “Can it be driven by a single inspirational leader, or do other factors have to lay the groundwork first?” asks Gates. While some leaders can make a difference on their own, Gates says Roosevelt’s political reforms only really took off once he had the support of others, including members of the media.     The Rosie Project by Graeme Simsion   It’s high praise for debut Melbourne author and former data modeller Graeme Simsion to make Gates’ list with his tale of a genetics professor with Asperger’s Syndrome on the lookout for a wife.   “It’s one of the most enjoyable novels I’ve read in a long time,” says Gates. “I started it myself at 11pm one Saturday and stayed up with it until three the next morning … It’s a funny and profound book about being comfortable with who you are and what you’re good at.”   Simsion’s book has been published and translated in more than 30 markets since its publication in Australia in early 2013, and the author has a sequel, The Rosie Effect, on the way this September.   The Sixth Extinction: An Unnatural History by Elizabeth Kolbert   Gates’ views on climate change are well-documented, and in the past he has spoken out about the dangers of global warming as well as invested in potential climate solutions. So it’s no surprise that one of the books on his list would be about environmental challenges.   “Natural scientists posit that there have been five extinction events in the Earth’s history … and Kolbert makes a compelling case that human activity is leading to the sixth,” says Gates.   “Unlike a lot of people who write about the environment, Kolbert doesn’t resort to hype. She just lays out the facts and wraps them in memorable anecdotes. It’s a sobering but engaging and informative read.”   Reinventing American Health Care: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System by Ezekiel J Emanuel   Emanuel is one of the architects of the Affordable Care Act, also known as Obamacare, and Gates recommends this book to “anyone involved in the debate over health care, no matter what their point of view is”.   “Although he was deeply involved in its creation, Emanuel is good about making it clear when he’s educating you about the history of health care and when he’s advocating for his ideas,” says Gates. “And unlike a lot of experts, he’s willing to make predictions about how health care will change in coming years.”   This article originally appeared on SmartCompany.

Want to invest? There’s an app for that

5:07AM | Thursday, 29 May

Sharemarket information app StockLight, inspired by Benjamin Graham’s classic investor book The Intelligent Investor, is exceeding its founder’s expectations just a year after launch.   Founder Jason Kotchoff says the StockLight app, available on Android and iOS, has had over 18,000 downloads. It allows investors to track the stocks of their choice and provides information on stock prices, dividend rates and qualitative research.   It’s aimed at a growing number of older Australians with self-managed superannuation funds as well as young professionals just entering the world of investing.   Kotchoff says the StockLight differs from similar apps by offering more detailed analytics and a partnership with premium investment analysis service Intelligent Investor.   “We recently launched some new filtering tools in the app and they allow a user to rank stock on the Australian Stock Exchange based on price-earnings ratio, dividend yield and StockLight ratios,’’ he says.   “It’s stuff that a retail audience in Australia hasn’t had access to.   “In addition if a company you’re following has a price sensitive announcement, that PDF will be delivered straight to your phone with a push notification.”   The app was developed after Kotchoff read Benjamin Graham’s The Intelligent Investor – a book lauded by Warren Buffett as a must read for investors – and realised much of its advice could be automated.   “It offers how you can invest using all these fundamental techniques, which involve a lot of calculations from balance sheet data from publicly listed companies,’’ Kotchoff says.   “I thought a lot of this could be automated, so I went about writing software that would benefit me personally, creating these ratios that would benefit me personally.   “I’ve been working very hard on bringing those ratios into a stockmarket app, so the app itself has 10 ratios for 2000 different companies on the ASX that are a calculated on a rolling basis.”   StockLight is currently generating revenue based on a freemium model.   It offers information from selected industries for free, but information for other industries must be unlocked through an in-app purchase.   “Money is one of the things we considered from day one, it’s an important thing all startups should be thinking about,’’ Kotchoff says.   “What we figured out was there are avenues to generate revenue, one was in-app purchases, and for an app I think it’s really important you have a free download.   “In-app purchases with a freemium model are something that’s a lot more accessible to people.   “So one revenue driver for us is we have in-app purchases, we give away functionality for free to some extent, but charge for continued usage.   “The other revenue stream is we’ve developed a relationship with Intelligent Investor whereby their product, a premium advisory service that costs up to $800 a year, has a free two-week trial with StockLight.   “If a StockLight user converts to a paid member of Intelligent Investor we get a commission.”   Kotchoff says in less than a year StockLight has led to a 25% increase in new business leads for Intelligent Investor.   “It’s absolutely exceeding expectations for them, we’re responsible for a ton of their new business,” he says.   The company has had interest from investors, but Kotchoff says it’ll only make the move when it feels it’s the right match.   “The technical team for StockLight want to try and maintain ownership for now, until we can find investors well suited to our own business,’’ he says.   “We’re not in the game to make money for the sake of it. We want to take smart money.”

The physics of startup financing

5:50AM | Monday, 5 May

There is a fundamental paradox in the startup world: A lot more founders try to raise money than successfully do.   But for those that do, they raise on incredibly friendly valuation terms relative to other areas of the business world. The reason is growth and it’s useful to apply the metaphors of physics to understand why.   (For those not afflicted by tl;dr, read Paul Graham’s essay on growth.)   One of the most unanswerable questions I get as an investor is “what do my metrics need to be to raise a Series A?”   I can give a guide on numbers but the reality is that the static one dimensional numbers ($100k MRR, 1m MAU or whatever the most important metric for the business is) are only half the story.   I’ll use the three simple concepts of physics – distance, velocity and acceleration – and use a SaaS business and monthly recurring revenue (MRR) to explain why.   A common piece of advice, like I said earlier, is that you need $100k MRR to raise a Series A ($5-10m) in today’s market. But the problem with that simple answer is that it’s not about the $100k figure (the distance in this analogy) nor even about how quickly MRR is growing (velocity), it’s about how quickly the change in MRR is growing (acceleration).   Stay with me. If you have a startup which grows to $100k MRR by adding $2k MRR each month for 50 months (4+ years), you are unlikely to be able to raise a Series A. If the $2k MRR you are adding doesn’t itself grow ever bigger (acceleration), the business is not a great candidate for venture financing.   On the other end of the scale, backing out a few numbers, we can see ZenPayroll skipped right past the Series A and raised $20m from Andreessen Horowitz and General Catalyst at the time they had roughly $60k MRR (take the $400m payroll vanity metric, which would translate into roughly 8000 employees or 1000 businesses, who would pay roughly $60,000 a month according to their pricing page). You can bet that the revenue would have grown incredibly quickly, the change in MRR (acceleration) was off the charts and they had really happy customers with incredibly small churn rates.   That last part is incredibly important. There have been plenty of mobile games companies with short engagement curves, ad networks that were artificially inflating their growth by doing uneconomic partnership deals and local deals companies growing revenue at the expense of their customers’ viability.   So the first step investors tackle is evaluating the foundation of the building (how engaged and happy are the customers, how often do they use the product, how rarely do they unsubscribe from it etc.) and then they bet on the law of compounding growth (Warren Buffett attributes the lack of appreciation of compound growth as one of three reasons for his wealth) and hang on for a long period of time.   The rate of growth really matters a lot: 40% compounded over 10 time periods is 29X from where you started, compared to the 6x that 20% compounded over the same period is. Acceleration let’s you keep that rate of growth. And it’s all about the acceleration, not the distance.   Niki Scevak is a managing director of Blackbird Ventures. This post originally appeared on the Blackbird Ventures blog.

THE NEWS WRAP: Rio Tinto reports $US2.99 billion loss for 2012

3:49AM | Friday, 15 March

Mining giant Rio Tinto has reported a $US2.99 billion loss for 2012, with chief executive Sam Walsh admitting the mining giant has demonstrated “poor judgement” in the past.

THE NEWS WRAP: Gates richest American for 19th consecutive year

9:18PM | Wednesday, 19 September

Microsoft founder Bill Gates has been named by Forbes as the richest American for the 19th year in a row, accumulating a fortune of $66 billion, up $7 billion on last year.

Five leading entrepreneurs’ worst stuff-ups

8:45AM | Tuesday, 7 August

Having a big name involved in your start-up is likely to draw investor and media attention to your business, but it’s unlikely to sustain it in the long term.

Thinking is my business… and business is good!

7:45AM | Tuesday, 31 July

One of the first questions I ask a client who wants to sell their business is “Do you think for a living?”

Buffett awards Berkshire Hathaway stock to young entrepreneurs

7:07AM | Monday, 16 July

Billionaire speculator Warren Buffett has given away $13,000 worth of highly-prized shares in his company, Berkshire Hathaway, to a group of budding entrepreneurs aged under 16.

Meet the CEO who hires entrepreneurs, not employees

7:23AM | Friday, 6 July

If you were the founder of a $150 million revenue IT business with a cushy market position, it would be tempting to kick back and enjoy your success.

10 essential entrepreneurial videos

1:13AM | Tuesday, 8 January

This article first appeared June 15th, 2012.   There’s nothing quite like seeing entrepreneurship in action. A business’ facts and figures may catch the eye, but it’s not until you see the founder talk about their idea that it truly comes to life and fires the imagination.

THE NEWS WRAP: US publisher John Wiley & Sons in Bittorrent legal fight

4:21PM | Wednesday, 18 April

Shadow treasurer Joe Hockey has predicted an end to the culture of “entitlement” within western countries, claiming that it is financially unsustainable.

Don’t spend it before you get it

9:07PM | Sunday, 11 September

For the past two months I have been actively working on obtaining funding for Roboinvest from investors in New York.  We have almost closed the round, but it’s not officially closed until the documents have been signed and the money is in the bank.

Onto the next Jobs

8:45AM | Thursday, 25 August

The business world may be awash with the news of Steve Jobs’ exit as CEO of Apple, but Weekend Reads is always looking for the next big thing rather than pondering on the past.

Hold a Warren Buffett-style lunch

6:24AM | Tuesday, 14 June

An anonymous bidder has just paid more than $2.6 million for lunch with Warren Buffett, a record price that will see the US charity Glide Foundation enjoy another big funding boost.

THE NEWS WRAP: Budget forcasts 500,000 new jobs: Swan

5:45PM | Sunday, 1 May

The Federal Budget will forecast an extra 500,000 jobs will be created over the next two years, treasurer Wayne Swan has revealed.

THE NEWS WRAP: Bank of Japan injects an extra $84 billion into the marketplace

3:17AM | Tuesday, 15 March

The Bank of Japan has again intervened to prop up the nation’s financial system, pumping an extra 7 trillion yen, or $84 billion, into the marketplace. 

THE NEWS WRAP: Tax Commissioner pledges to crack down on tax cheats

2:37PM | Sunday, 27 February

Rising company profits at a time of falling tax revenues could indicate a “fragility” in the corporate tax system, the Tax Commissioner has admitted.

NEWS WRAP: Telstra unveils details on its tablet

12:04AM | Monday, 6 December

Telstra has released more details of its T-Tab tablet device. The tablet is set to significantly undercut Apple’s iPad with a price of $299. However, the device will be tied to the Telstra network.

Five ways to boost your sales

4:53AM | Friday, 27 April

No matter how good your start-up idea is, if you can’t sell the product or service that it provides you won’t be troubling the Forbes Rich List.

THE NEWS WRAP: Warren Buffett rules out chance of a “double dip” recession in the US

12:16AM | Monday, 6 December

The Australian Securities and Investments Commission could be stripped of its role overseeing liquidators, under reforms proposed by the Senate.