Life Lessons from Warren Buffett Letter and Seth Godin's Linchpin

I am an avid fan of Warren Buffett letters, and today is my lucky day because we have a new annual letter. And it comes with not just the update for the year but for the benefit of the new shareholders (due to partial stock deal in acquiring the Rail company) - a nice introduction and summary of how Berkshire operates.

I am neither a multi-million dollar investor (yet!) nor an investment guru so I read these letters for two reasons - learning how to think about your business (or business unit for some of us), and personal life lessons. I am also reading Seth Godin's latest amazing book Linchpin that asks a very simple question - Are you Indispensable? And while the two - Warren Buffett's shareholder letter and Seth Godin's book are on very different topics - I think there is a common underlying life lesson.

 Let me share my key takeaways from this year's letter in light of Linchpin:

How We Measure Our Selves: Intrinsic or Market Value?

Warren Buffett and his team evaluated several metrics and settled on one. Here is what he has to say:

Our metrics for evaluating our managerial performance are displayed on the facing page. From the start, Charlie and I have believed in having a rational and unbending standard for measuring what we have – or have not – accomplished. That keeps us from the temptation of seeing where the arrow of performance lands and then painting the bull’s eye around it.

This question is equally important in our personal and professional lives. How do you measure your success? Here are some choices:

• What car you drive? This one has an obvious appeal - everyone can see it and its hard to lie about it. However, just like a stock price that barely reflects the fundamentals - the car you drive says more about the size of your ego (and I am not going there), your inability to understand depreciating versus appreciating assets, or just taste. A fabulous car that makes you feel good when you drive or pick up your date can be a good thing - but has almost nothing to do with - how much money you make or how wealthy you are or even how interesting a person you are. It actually reflects how much you are willing to spend and how wealthy you want to appear and how boring you would be if you had a Geo Metro. This one was easy, let's talk about some hard questions.
• What is your job title? Are you indispensable? I love getting promoted as much as the next guy but I learned a lesson many years ago that this again is an outcome that you have little control over - like the buy/sell decision by a Wall St. investor who just got money selling derivatives to a loser and wanted to 'buy something' or the investor who got a margin call and had to 'sell something'. In many companies, the promotions and titles are like that - in good years, we 'promote people' and in bad years, we have to 'trim'. If you let the management decide how you perceive your intrinsic value, you are going to be giddy when you should probably be scared and vice-versa. A much better question is - What value do I add? - and how can I measure it. In fact, job titles and roles are a limiting constraint that you want to break out of. Just because someone calls you a sales engineer doesn't mean that you can't build a super cool real world application or actually make a sale or help product team decide the next big thing. Superstars do what excites them, and then titles and rewards follow. I have seen this happen too many times in my 12 years of working life. As Seth Godin says in Linchpin, his latest book - Are you Indispensable? And if not, what's holding you back - and job title is a really poor excuse.
• Why don't they pay me right? Everyone feels underpaid. And some are actually underpaid relative to the market, the contributions, and the skill set. But this is a wrong metric again - you should be optimizing for the net present value of all future earnings - and not this year's paycheck. If job A allows you to launch a (database) company's SaaS strategy for ISVs but pays less than many other jobs - you should still take that job because over the rest of your life path A will end up helping you make more. This is something very few people realize. As Linchpin author, Seth Godin says in his book-
  

  "You weren't born to be a cog in the giant industrial machine. You were trained to become a cog.
  There's an alternative available to you."

  and adds..
  
  

  "Do not internalize the industrial model. You are not one of the myriad interchangeable pieces, but a unique human being, and if you've got something to say, say it, and think well of yourself while you're learning to say it better. 

  - David Mamet"

I don't want to be a cog no matter how amazing the machine is. Do you?

What We Don't Do?

I am sure we have all read 100s of articles and books on deciding what not to do is as important as choosing what to do. In fact, what not to do turns out to be much more critical. But we as humans are really bad at NOT doing. I devoted an entire post to the topic of "Wisdom of Not". In this year's (FY 2009) letter Warren Buffett writes:

Long ago, Charlie laid out his strongest ambition: “All I want to know is where I’m going to die, so I’ll never go there.” That bit of wisdom was inspired by Jacobi, the great Prussian mathematician, who counseled “Invert, always invert” as an aid to solving difficult problems.

Think about it. And let's see how we can apply his wisdom to our lives:

• Best at Something. Don't Take That Job or Buy That House: Warren says 'Charlie and I avoid businesses whose futures we can’t evaluate, no matter how exciting their products may be.' When evaluating your life choices, don't do something unless you understand it - better, you grok it. If you lived through the dot-com boom and bought stock in TheGlobe.com and Exodus because your neighbor told you or worse, your neighbor bought it, got rich and tried to hide it from you and then you caught on and bought it!! Then, you probably learned your lesson. For others, the home buying market may have been the teachable moment - as they say it.
  
  We are ALL 'best at something' - Seth Godin points out that if you narrow your niche enough you can find out that while you may not be the best businessman (Warren took that title) or best Golf player (Tiger took that one and the waitress home) - you can often find that you are probably the best Thai food restaurant south of Market Street or the best tool for building web pages that do only one thing (Postlets).
  
• Don't become dependent on the kindness of strangers: Warren Buffett says - 'We will never become dependent on the kindness of strangers'. I would add relatives and friends too. And for businesses these days, you can barely rely on bankers leave alone strangers. This means be a thoughtful spender (I didn't say frugal), invest if you can and make lots and lots of trusted relationships where you give. Strangers, distant relatives and surface-level friends may not be there for you when you need them but people that you were good to will often be there.
  

That's enough food for thought for a day's blog post. The Warren Buffett letter and Seth Godin's book have 100s of such insights if you look for them and have the right attitude towards it. Try it, and let me know what you think.

And don't be a stranger. Click on the link on my blog site to subscribe - and leave me a comment.

Days of Our Lives - On IIT Life, Indian Education, and Geekdom

Like to wish all my readers, a very warm happy holidays and merry Christmas. I don't watch a lot of Bollywood cinema but yesterday I went with friends to go see 3 Idiots - a movie about lives of 3 engineering college students during the four years in school and then the life afterwards. Having spent my formative 4 years at IIT Kharagpur, the oldest and best (in my completely biased and probably untrue opinion since they are all awesome) of the Indian Institutes of Technology - I was transported back more than a decade in time.

Scene from movie 3 Idiots (courtesy: www.santabanta.com)

Let me summarize what I learned from the movie about how life and aspirations are evolving in India, the effects of the global pipes (Cisco calls it the Human Network), and what this should mean for education here in my adopted country USA (or the country that adopted me!).


Geeks are Cool (in India)
While people definitely look upto the likes of Bill Gates, Jeff Bezos and Sergey & Brin, there are no 'highest grossing' Hollywood movies depicting the lives of MIT or Stanford college students. The college movies that do well here are movies about getting laid, smoking weed or Spring Breaks. I enjoy those movies too, and there is the occasional 'Good Will Hunting'. But all in all, the celebrated lifestyle is that of either the rich or the jock. This means if I am a kid growing up, I want to be cool - and the route to being cool is to chase money & fame, not invention and entrepreneurship. The heroes in India are no longer the Bollywood stars (only), the younger generation looks up to the engineer entrepreneurs like Nandan Nilekani of Infosys. As Wall St Journal commented recently - 

Twenty years ago, no one could have imagined that four of the 10 richest chief executives in the world could be Indian. But Forbes recently released a top-10 list showing how much India has changed. Lakshmi Mittal, the steel tycoon, was ranked second, followed by Mukesh Ambani (sixth), Anil Ambani (seventh) and Azim Premji (ninth); Warren Buffett came in first.

and -

The heroes of the old India were film stars, cricket players and, perhaps, freedom fighters and politicians. The heroes of the new India include businessmen. In 2003, when MTV India held a poll among its predominantly young viewers to pick the Icon of the Year, Anil Ambani won. The people he beat included filmstar Shah Rukh Khan and cricket hero Sachin Tendulkar.

This transformation was clear in the movie. The "hero" of the movie was a kid who enjoyed learning for learning's sake - to discover & invent, despised learning by rote - the curse of India education for decades, and goes on to teach kids. And yes, he gets the girl (the one in the orange Sari above).


Education, Education, Education
Nandan Nilekani talks about this at length in his book Imagining India - that India has a demographic dividend but for it to pay off, the country must invest in education. Whether the government is doing this well or not, the individuals definitely are. As the over-the-top melodramatic scenes depicted with tongue-in-cheek humor in the movie show, the 3 kids come from diverse economic backgrounds with the 2 poorest coming from families where there biggest (and probably only investment) is in the future of their kids. This is true in America too - I know of several families where college education is where all the savings go. But in India, 2 trends have made this remarkable - 15 years ago, most colleges were government run and so you either got in (1 in 1000) or you had to go attend a lame school teaching you curricula that was relevant 30 years ago. Today, there are private schools that will cost you an arm and a leg but teach you what you want to learn - computers, telco, management skills - and in English. 


The aspirations have changed too. In two ways, with a diverse (and somewhat less noticed in the west) economy - Indian students no longer are confined to careers in medicine and engineering but can go be newscasters, photographers, animators, storytellers ... and earn a decent living doing that. Secondly, the poorer sections of the society are no longer willing to live with words like fate & destiny but are doing all they can to change it - by sending their kids to the best schools they can afford - which is far worse than most schools here but better than no education at all.


Family and Friends
Christmas is a great time to reflect on the year gone by, and as I watched this movie with a group of closest friends - I felt blessed and grateful. I remembered my IIT buddies from days at Kharagpur (India) where we had little in terms of conventional comforts - 100 degrees heat in summer was common with no air-conditioning (except in computer labs), erratic water supply, and dorm food nightmares. But we had friends, lots and lots of them. The bonds we formed are till this day some of the closest.


So as I close out this year, I am thankful to IIT for the education it gave me, the friends I found there, the friendships and hospitality of my adopted country (thank you North Carolina and California) ... and to my mentors. One of these days, I will write a post about the 7 mentors that changed my life. 


Till then, go get yourself a (subtitled in English) copy of 3 Idiots (Netflix queue), or better still go watch it (with subtitles) at a movie theater near you.

Imagining India with Nilekani of Infosys

I am on a 2 week annual vacation to India. I have often written about seismic changes in Indian reality, realty and perceptions. On this trip, I came across Nandan Nilekani's book - Imagining India. A thick tome but a book that captures how India has transformed, is transforming and the challenges and opportunities for its future transformation. Anyone looking to understand India must read this book.

I am not going to try to summarize the book but here are some key points that touched me and where I agree with him almost entirely:

The Demographic Advantage
Growing up in India, you were deluged with the message - India is overcrowded and getting worse - and that the reason we could not get a telephone connection in time (it literally took months if not years) was because there were too many people; the reason our roads were always poor was because there were too many people; the reason only 1 in 1000 people could get into an engineering school of choice was because there were too many people. And the solution was to prevent "The Population Bomb" from exploding. This did not make sense to me as I saw crowded cities like Delhi and Bombay offer better lifestyle than my grandparent's villages in Himalayan foothills. And, from the limited exposure to foreign media - I could see that places like Japan and New York had more people per square mile but did not have starving populations. Something was wrong with the picture.

In reality, the problem was not population but the system governing the population - a thinly veiled socialist rule that tried to optimize our lives every 5 years in the famous five year plans.  Nothing much changed except the face of the politician that claimed to be solving all of our problems through the magic of socialism while fighting off evil capitalism and foreign hand in trade. This translated into very tangible effects on me and my family's middle-class existence:

• No Books: While we were upper middle class by Indian standards, I distinctly remember that while I went to the best Indian private schools (some Catholic schools, some private run) - our textbooks were rather poor. And for a nerdy kid like me wanting to learn about everything from gravity to super nova, the only books I could lay my hands on were highly subsidized Russian books sold at Russian book fairs.
• No Car: Our first car was a Fiat (that was based on a 1950's design) bought my father in 1988 for what was at that time his one year's salary. Imagine that - it would be the equivalent of an upper middle-class American paying $100,000 for a 2009 model car based on a 1960's design. 
• No Phones: When I went to undergraduate school 2000 miles from my hometown (like going from East Coast to West Coast for college), I had no communication with my family for entire semesters except a solitary phone call from a manned phone booth. These phone booths usually had 2 hour long lines and a 10 minute call could cost you hundreds of rupees. 

I can go on and on about lack of basic medical care facilities that nearly killed me while studying at India's premier engineering school, or 'express' trains that took 28 hours to traverse 1500 kms with average delays of 4 to 12 hours.

Things are Better

Today, everything has changed and while India is far from perfect (or even functional) - its like India went from a 1900s America to 1950s America in 15 years in stead of 50. That's quite an achievement.

This transformation is creating massive opportunities at the bottom of the pyramid. These range from somewhat well-known $2,000 Tata car to small innovations like single use shampoo packets that cost $0.10 (ten cents). The impact of a ten cent shampoo or detergent for cleaning clothes is not to be underestimated. It transforms lives by giving the poor dignity.

Telco

If I had to pick two industries that have transformed the most and probably had the greatest impact on lives of people - it would be telecom and banking.

India went from 5 million in 1991 (mostly landlines) to over 500 million telephones (mostly mobile). In a nation of about 1 billion people, that means teledensity increased 100x. While these statistics are amazing, the impact on people's lives is even more so.

My Neighborhood Electrician 

Everytime my Dad needed an electrician for an odd job around the house, till 10 to 15 years ago - he would walk over to the neighborhood shopkeeper that sold and repaired transistor radios and televisions and had a few people on his payroll. He would dispatch one of his men and collect the fees from my Dad. The electrician that actually fixed the wiring or repaired our television (yes, the socialist era TVs needed fixing on a regular basis) would get to keep a very small percentage of the fees.

Today, the electrician does not work for the middleman. He has more than one mobile phone and we simply dial him directly. He shows up promptly, charges us a more reasonable fee and gets to keep all of it. This has at least 3 beneficial effects:

1. No middleman means he gets to keep 100% of revenue and not 20% to 50%. This essentially at least doubles his income.
2. Being able to respond to calls while working, he claims he now visits 2 to 4 times more customers a day. 
3. We, the customers, get immediate and personalized service which is greatly more accountable.

So, the electrician that was making about $25 to $50 per month now makes $500 to $1000.

All of this is changing millions of lives. Watch Hans Rosling's TED India talk to see how rapidly this change is happening.

And watch the following video to see India's glorious technological past - water harvesting techniques perfected hundreds of years ago showcasing great engineering feats.

Weird Myths in Business - Guest Post by Steve Greene

One of the reasons its fun to work at salesforce.com is the extremely creative, talented people that are willing to question absurdities that other companies quietly accept.

Steve Greene, a colleague and our vice president of program management and Agile development put together some myths that many of us are easily led into believing. See how many you believe. I found out that I was behaving like I believed in a few. 

View more presentations from Steve Greene.

Windows 7 Year Gap and Why They Can't Catch Up

Finally, Windows 7 is out and reviews are mixed but better than Vista - generally seen as vast improvement over Vista (which was accepted by Steve Ballmer as work in progress or worse). But this is not what this post is about. Even if Microsoft built products that were really good with killer features, it would still lag behind many competitors by up to 7 years.

The problem is Cloud Computing. If you look at some of the features Microsoft plans to release with Microsoft Outlook 2010 next year, they are pretty cool - conversations like GMail, search like Xobni, etc. Pretty awesome stuff. But when will users get to see this new product on their work and home computers - at least 3 or 4 years out. And so, if Microsoft recognized a killer feature like 'converstaions' in Gmail, and decided to add it to the product last year (2008), the product will be released in 2010 and by the time people replace their PCs and corporations adopt the latest as 'standard' - it will be 2013 to 2015 for many. Many of us are still running Windows XP  8 years after release (released 2001) even on new machines.

This is a huge problem for Microsoft. And why can't they break out of it? The one time selling model which collects all license fee upfront. Ideally, Microsoft would keep enhancing its products continuously offering new features (like cloud vendors of today do) enhancing the customer experience and keeping it fresh. But then no one would upgrade. So you are stuck 'creating demand' for your product upgrade by lagging behind. It works when you are the only game in town, and everyone else is bound by the same rules. Enter Cloud Computing.

Cool Outlook 2010 Search Feature: Too late to catch up with GMail?

Imagine if your existing Outlook started supporting faster search or conversations - wouldn't that change your perception of the products and the company?

So here is the conundrum for Microsoft - even if they respond to consumer demands and push out great features, they will still lag cloud computing vendors by 7 years. May be that's why they call it Window 7 - it has features that are frankly 7 years too late!

And this problem is not limited to Microsoft. Oracle and SAP face the same challenge from cloud vendors like Salesforce.com, Taleo, Omniture, SuccessFactors,etc. Fusion has been half-way done since 2006, and there are no signs of when customers will actually get to buy and implement - and then the users will finally see features like integrated search and analytics.

What do you think?

Update: Vinnie asks is Microsoft is winning the battle and losing the war, along similar lines.