Sunday, February 25, 2018

Book Review: Free Capital

“Free Capital” by Guy Thomas is a collection of biographical sketches of twelve individual investors who have made a living exclusively out of investing in the stock markets. The individuals have varying academic backgrounds and previous job profiles – usually unrelated to investing or fund management, and at some stage in their life have given up regular day jobs opting instead to focus exclusively on investing to make a living. All of them have exceptional track records and have built a fortune from modest beginnings.

The term “Free Capital” here refers to the corpus of savings the individuals have started with, essentially what is left over out of regular income such as salary after meeting day to day living expenses. Many of the individuals have chosen to remain anonymous in the book, with the author using dummy names instead.

Individuals who gave up day jobs to become full time investors

All of the investors have taken a different path to success. There are some who make broad macro calls such as on cyclical industries or commodity prices. Others use a bottom up approach, studying company fundamentals to exploit gaps between price and value. Some are day traders, investing for periods from just a few minutes to a few hours, while there are others who take upto 25 percent stakes in their target companies and put pressure on the managements to change course and create value. To each, his own. The book amply demonstrates that when it comes to investing, there is no One Way that is the Right Way to success. You have to choose what suits your style and temperament, and evolve over a period of time.

Despite these differences in investing styles, it is interesting to see some common patterns emerge from the profiles of these investors. There are similarities in personality traits and even personal backgrounds in many – though not all – cases.

This is not a typical investment book, though there surely are many nuggets of investing wisdom. The book does not seek to teach how to invest, or provide a roadmap for making successful investments.  The book narrates the personal stories of profiled individuals, as brought out from their own detailed interviews and the author’s external research on them. Free Capital is a small book that you can easily finish off in a few sittings.

If you are looking for an inspiration in your investing journey, this book will do the job.

Sunday, January 28, 2018

The Everything Store: Jeff Bezos and the Age of Amazon

Every company claims it is customer centric, but have you ever seen a CEO keep an empty chair at management meetings to represent the customer?

Welcome to Amazon, and the cult of Jeff Bezos. 

“The Everything Store: Jeff Bezos and the Age of Amazon” by Brad Stone is an extremely well researched, almost biographical account of, and its founder Jeff Bezos. Aided by dozens of interviews (including some with Bezos himself) with former and current employees, suppliers, competitors, friends and relatives, family members, teachers and almost anyone who came in contact with him, the author has built an in-depth profile of Amazon and its legendary founder Jeff Bezos. The author traces the journey of Amazon right from the birth of the idea in the mid-1990s and takes the reader, often in excruciating detail till where it stood when the book was published in 2013.

The origin
It was 1994 and those were early days of the Internet. But Bezos was quick to see its potential. The idea of Amazon was simple – an internet company that served as an intermediary between customers and manufacturers, and sold every type of product all over the world. Throwing away his lucrative Wall Street job, Bezos swooped down on the opportunity and set up Starting out first with selling books, Amazon soon spread itself to other categories. And the rest – as they say – is history.

The book gives a deep insight into Amazon and its founder Jeff Bezos

Bezos is Amazon. Amazon is Bezos.
Bezos’ overwhelming personality is stamped all over Amazon. The story develops as a compendium of countless narratives from people who had close encounters with Bezos and brings out vividly his extraordinary personality and management style. Exceptional intelligence, competitive spirit, a volcanic temper, ruthless combative approach, an almost limitless capacity to put in hard effort and an outlandish ambition (Bezos is also “working to lower the cost of space flight to build a future where we humans can explore the solar system firsthand and in person”, by the way) - this is what defines Bezos. The book portrays him as an extremely difficult micromanager to work for, setting very high standards that others struggle to meet. Bezos’ personality style has ensured a ‘confrontationist’ culture at Amazon. Bezos abhors social cohesion – the natural impulse to seek consensus.  Yet, the author says, former Amazon employees often consider their days at Amazon the most productive time of their career. “Colleagues were smart, work culture was challenging and there were constant opportunities for learning” says one of them.

Customer First
How did Amazon manage to grow at such a breakneck speed? How did Amazon succeed where others didn’t? Bezos realized that e-Commerce had the potential to understand its customers in a way brick & mortar merchants can never do. “We are genuinely customer centric, genuinely long term oriented and genuinely like to invent”, Bezos is quoted in the book as saying, building Amazon on the edifice of a few clearly defined and religiously followed founding principles – customer obsession, frugality, bias for action, ownership, a high bar for talent and innovation. Among this, extreme customer centricity comes out repeatedly as the single most defining character that distinguishes Amazon from others.  “There are two kinds of retailers – those who work to figure out how to charge more, and those who try to figure out how to charge less. We are in the second category. Period.”

Tech, not Retail
Bezos visualizes Amazon as a technology company, not a retailer. A key element of Amazon’s success has been Bezos’ constant focus on innovation. Negative reviews, referral fees, platform services, the Amazon Marketplace – Amazon claims many a firsts to its credit, though it was not the only or even the first online bookstore to start operations. Complex algorithms studying customer behavior, calculating cheapest & fastest shipping routes, crawling the web to keep a tab on competitor prices – all have played a crucial role in Amazon’s success. Yet, Bezos struggled to present Amazon as a technology company pioneering e-Commerce until much later when businesses like the Cloud and Kindle came along. With Cloud, Bezos dreamt of ‘a student in a dorm room having at his disposal the same infrastructure as the largest companies in the world’. And true to it, it facilitated the creation of thousands of internet startups, pulling out the tech sector from a post depression in the early 2000s.

A must read
As I write this review in early 2018, Jeff Bezos has already surpassed the likes of Bill Gates and Warren Buffet to become the richest man in the world. And while the others may well be past their prime, the Amazon story has only just begun.

Saturday, December 9, 2017

Book review: Hit Refresh

Can elephants dance? Satya Nadella, only the 3rd CEO in Microsoft’s history certainly thinks so, as he narrates the story of how he is trying to inject new life into Microsoft’s soul.

Once nearly synonymous with personal computing, Microsoft lost its mojo in the last decade as mobile phones literally gatecrashed into our lives and became the primary channel to access everything from music to internet. Many had written off Microsoft at this stage, but Satya narrates how he is breathing new life into the company, changing attitudes and bringing in new paradigms.

Microsoft, is changing, and making the world an even better place for us

The book starts on a personal note as the author traces his origins from childhood in the small towns of India to his entry into Microsoft headquarters in Seattle in the early 1990s and his eventual rise to the top in 2014. The author is modest in often acknowledging the role of luck in his success, pointing out how he always found himself at the right place at the right time. Son of a civil servant, the author narrates his fascination for cricket and early leadership lessons he took from the game. There are stories from the ups & downs in his personal life, like meeting the love of his life, and the trying circumstances surrounding the birth of the first child. 

This is a book about transformation, one that is taking place within him and also within the company. What was the situation at Microsoft when Satya took over? What did he inherit? And what is it that he wants to change? Trying to bring about culture change in such a big organization is not easy, it is a painfully slow grind but the author’s efforts have slowly started showing results. There is now a renewed growth mindset. Several key events and decisions, such as the launch of Windows 10, learnings from the Nokia acquisition and corporate dispute with Samsung etc. are described, giving an insight into the author’s personality and working style. The author shows how his seemingly unconventional decisions to partner arch-rivals such as Apple or Google have paid off. Surprisingly, even in this dispassionate world of coding and corporate strategy, Empathy keeps repeating itself.

And thankfully, the book doesn’t end here!

In the latter sections, the author takes a deep dive into technologies of the future, and how Microsoft is “trying to imagine a better future for everyone”. It is this that I liked the most. The author writes about three things Microsoft is betting on – Mixed Reality, Artificial Intelligence and Quantum Computing. What are they? What can they do? And where are we – the human race - heading? These are topics not just for the geeks. The author shows how these technologies will become essential tools in everything we do – from education to medicine, or help us fight cancer or global warming. Going beyond pure computing, technologies of the future will not only help us see, hear and analyze, but also “make us feel”. Does this mean machines will eventually ‘take over’ - as some fear? Or will they only augment human capabilities to make this world an even better place for all of us? It is this ‘Human vs. Machines’ OR ‘Human + Machines’ debate that is currently the rage the world over, and the author assures us there is nothing to fear from the future.

In recent times, the growth of technology has also thrown up difficult issues surrounding privacy, security and free speech. The author discusses delicate issues such as privacy of user data and government surveillance, the dilemma between privacy vs. security, individual freedom and liberty vs. public safety. The author rues that laws always lag technological changes, causing friction between Regulation and the Corporation. The role of companies in modern society is also discussed.

As they say, ultimately the best way to predict the future is to invent it. And that is what Microsoft is doing. 

Do give this book a read – it did change my perception of Microsoft, and our future - for the better.