The Billion Dollar Secret

by Rafael Badziag

  Decide on which of the things you don’t do.

  — Michał Sołowow #BillionDollarGoldNuggets

  Chip Wilson reflects about his focus every day.

  I really have no problem letting stuff go that isn’t working. I’m talking day-to-day type of thing. I go into the business every day, and I go, “If I was to compete against myself, how would I do that?” That helps me prioritize what it is that needs to occur and helps me drop things that aren’t important that maybe people think are important, and move into things that are important.

  If you cannot understand something, then you simply shouldn’t do it.

  — Michał Sołowow #BillionDollarGoldNuggets

  Cho Tak Wong learned that you should focus on what you are good at in the 1990s when his company started to prepare for the IPO. His company almost went bankrupt, because despite his lack of expertise in development, he built an industrial village for the local government and got caught in the crisis of 1994.

  I spent many, many years to restructure and to deal with all the losses. And I learned through these things that if any company wants to be successful, it needs to be a professional company. You have to do extremely good work. Do not diversify. Be good at what you do, focus on it, and be very strong in it, then you can become big.

  5. Leverage Your Time and Energy

  Realize that you have a limited amount of time and energy every day. You can’t scale your own work. That’s why time management and productivity strategies work only to an extent. As your company grows, they quickly lose steam and become the bottleneck. That’s where leverage comes in. You can leverage time, energy, skill, and even finances by getting help from other people.

  Be good at what you do, focus on it, and be very strong in it, then you can become big.

  — Cho Tak Wong #BillionDollarGoldNuggets

  Jack Cowin explains:

  You have to get into a business where you can put a multiple on what the earnings are rather than personal exertion. I say to people, do not be a dentist. They say, “What do you mean?” I say, when a dentist is not drilling teeth, he’s not making any money. It’s all built on his ability to drill teeth. Get into something where there’s no eighth day of the week, there’s no 25th hour of the day. Get into something where you can leverage your time and energy by being able to have other people work with you and for you.

  You have to be able to put a leverage on what you earn rather than personal exertion. Do not be in the personal exertion business. You have to be able to get some leverage on your time and energy.

  6. Measure Everything You Do

  Whatever you measure gets done. That’s why it’s important to measure everything you do in business.

  A champion of efficiency for me is Frank Hasenfratz. His Linamar has roughly double the profitability compared to other auto parts manufacturers. Frank’s life motto is, “Measure everything you do.”

  He introduced in his factories a never-ending measurement and cost improvement process that is performed by the Cost Attack Team (CAT) led by him personally.

  The most important for me is that we measure everything. From Day 1, I measured everything. If I can do that in 1 minute and 20 seconds, how can we do it better? Not that you work harder, but a better way.

  For instance, when we do a CAT, there’s a short guy, and the night shift is a tall guy. Now, what kind of table do you put in front of him? You put a table that the tall guy bends down all the time, the short guy can’t reach it. Why not make a table that’s adjustable? Nobody thinks of that. “This is a factory; why do you want to do that?” Yeah, it costs a little more. But think about it. That short guy doesn’t have to step on a stool.

  Frank was a competitive rower in his youth. When I asked him what he learned in sports for business, he answered:

  You must time everything, you must measure everything, and you’ve got to be disciplined. You cannot row in a rowing team without being disciplined and being a team player. Even if you’re a leader, you have to be a team leader. And why would you want to get into a race and not measure how well you do? Business is like that. Measure, measure, measure.

  For instance, I measure how many strokes I need to shave. It looks like you don’t measure, because you’ve got a beard. [laughs] But I measure.

  I couldn’t believe it and asked him how many strokes he needed.

  I needed 78 strokes to shave. But now I’m a few years older, my face is bigger and I have more wrinkles. I’m going close to 83, 84.

  I asked, “And time? Do you measure it as well?”

  Of course, I measure it. It’s about two-and-a-half minutes. It takes me 15 minutes to shower and shave. And I’m right on time, all the time, because I measure it.

  Measure everything you do.

  — Frank Hasenfratz #BillionDollarGoldNuggets

  Work Smart

  It’s not only about working hard, it’s also about working smart. My interviewees shared with me some of the efficiency tools that they apply.

  Get on Top of the Emails

  Billionaires, like each of us, have to cope with the never-ending influx of emails. Some of them have developed explicit strategies to cope with them.

  Mohed Altrad manages over 200 companies. Nevertheless, when I wrote him an email, I was getting an answer within an hour or two. Surprised by that, I asked him how he manages his mailbox.

  I see something like 300 emails a day, which is really huge. If I don’t treat them, I have a problem the day after. Most of them, fortunately, I have to transfer to somebody else. I go through them very quickly, but nevertheless you still have something like 5% or 10% of the emails. I have to treat them. Every two hours I look at my folder and see what’s urgent, what’s not urgent, what needs to be transferred. For instance, for yourself, I know it’s important for you, so I try to consider it as priority. I treated it as such.

  Similarly, Manny Stul surprised me with his quick answers.

  I try to do stuff in sequence. Like emails, I try to answer the most recent emails first rather than the other way around. Sometimes you can get a chain of emails, like several people, and I want to be talking about the last result. You can make a comment on something or give advice, but there’s been 10 more emails since in the same day that there’s more information that’s come in that’s relevant.

  So I always try to go top-down. That’s the wrong way, normally the way people do, but that’s certainly the way I do answer my emails. That why I’m always up-to-date with what’s happening. I try to keep on top of my emails, which is the reason why I work at night.

  Interestingly enough, both Mohed Altrad and Manny Stul became World Entrepreneurs of the Year (in different years). Their email processing strategy is apparently a sign of their excellent skill at structuring their world and their work.

  Replicate What Works

  If you find a way of doing things that works especially well, do it again and again, as many times as you can. Replicate this method to take the most advantage of it. This is how Frank Stronach went up from 1 factory to over 400 factories.

  When I started out, I hired somebody that was my foreman. After two years I asked him, “How come you’re so different?” He said he’s thinking of starting his own factory. So I said to him, “Let’s talk tomorrow.” At that time, I had already some money in the bank. So the next day, I went to him. I said, “Look, why don’t we open up a new factory. I pay the initial cost. You own one-third; I own two-thirds. You have a base salary, no more overtime. At the end of the year, we take equal out, one-third, two-thirds, leave some of the profit for growth.” He said, “Do you mean it?” I said, “Yes,” and we went to a lawyer and we signed. [laughs] Then I took the next foreman, and the next foreman, and the next foreman. All of a sudden, we have over 400 factories now.

  Keep It Simple

  But Frank Stronach is also the master of simplicity. Keep things simple. Reduce complexity as much as possible. This increases efficiency. When I asked him about his success se
cret, he answered:

  Keep it simple. Don’t make it too complicated. We are so big, I have 25 lawyers in my department. They gave me a 100-page contract. I said, “Write me down the same thing in 25 pages.”

  Use the Force of the Current

  Dilip Shanghvi recommends to flow with the current, to take advantage of its force, instead of expending your force against it.

  If you are flowing with the current, the force required to move is very little. If you’re flowing against the direction, you will need a lot of force. I am a strong believer in finding a way to minimize effort-to-output ratio. If you put X amount of effort, and if you get 10X amount of output, that’s a much better solution than when you put X amount of effort and get 1X amount of output.

  Apply the Maximum Velocity Principle

  If you wonder how billionaires manage to grow their companies so fast, to create unimaginable value within decades when others would need millennia, this principle is the answer.

  Sergey Galitskiy explains how it works:

  I always think, I took maximum risk in my life. Although, as time goes by, when you get older, everybody including myself wants to take less risk. It needs the sum of accumulated experience and intellect to understand how much risk you can actually take on. That’s what I call preparedness for the business. Give the thread the most strain without breaking it. That’s how you achieve the maximum velocity.

  For example, in the first five to seven years we didn’t make any money, but we were opening new branches. And every month we would open P and L Statements, and we were scared to see that it would be either loss or zero, but we continued to open new branches. But I was only 25, 27 back then.

  Give the thread the most strain without breaking it. That’s how you achieve the maximum velocity.

  — Sergey Galitskiy #BillionDollarGoldNuggets

  What about you, dear reader? How F.A.S.T. are you? How efficient are you in your execution? Do you set goals and plan regularly? Do you prioritize and focus? How do you leverage your time and energy? Do you measure everything you do? Do you work smart? Only by doing this do you stand a chance of reaching billions.

  - Drifters have ideas, but they can’t execute them.

  - Millionaires execute their ideas, but they aren’t efficient in doing so.

  - Billionaires execute their ideas efficiently; they are fast and focused.

  For more stories on this topic, go to:

  http://TheBillionDollarSecret.com/resources

  CHAPTER 16

  Be Smart with Money

  Frugality includes all the other virtues.

  —Cicero

  There is a huge misconception that most people have about billionaires and money. They think billionaires sit on mountains of money and don’t do anything but invent new ways of spending it. Nothing could be further from the truth. In the introduction, I explained that keeping $1 billion in cash would cause up to a $135,000 opportunity cost each and every day. It just doesn’t make sense. Almost all of the wealth billionaires own is in the companies they own, in the stock of other companies, in real estate and other assets.

  Billionaires don’t see money as something to spend on themselves. Money is there to invest and create. It is a form of universal energy in business that allows them to make things happen, to turn their visions into reality.

  The Right Attitude

  Naveen Jain thinks of himself as a trustee of his money rather than the owner.

  There is an extremely interesting way of looking at success in life.

  I was at this event where there was some really smart group of people and I’m walking and I say, “Hello. How are you?” And the guy responded back said, “Well, I am depressed.” I’m already five feet out, really, you don’t expect someone to answer that question other than “Fine, thank you. How are you?” [laughs] So when someone answered that, you take five steps back and say, “Oh, I’m so sorry. What happened?” And the person says, it was just when the crash happened, and he said, “I lost half my money in the stock market and I’m not feeling good.” It was in the 2008 crash.

  I took a deep breath and I said, “Well, money does not belong to you. Anyway, you are simply a trustee of God’s kindness. And God still believes in you because he still left half with you, and he expects you to do something good with his trust. And as a trustee you are not giving him the kindness that he is giving you. You’re not going out and using that to help other people. And if he didn’t believe in you, he would have taken it all. So he still believes in you to leave with a half. And hope you will go and do something with it. And then he may come back and say, you know what? You’re a good trustee, he’ll give you more.”

  He looks at me funny and he says, “Why do you believe God has anything to do with it?” And I said, “Well, have you tried being kind to people and tried just using as if it’s not about money, it’s about genuinely wanting to help people? And see the kind of kindness you get in that and maybe God might even be kind to you.”

  I left and I met him, three, four years later. And I said, “How are you?” And he said, “I do remember and I’m doing really, really well.” And I said, “Oh, how so?” He said, “Not only I’m happy but I made everything back that I have lost.” And I said, “What had changed?” And he says, “My outlook on life had changed. I no longer worry about when I talk to people what they want. I want to help them just like you said. And it’s amazing how much happier I am and how much more money I have.”

  On TV you hear the stories of lavish billionaire lifestyles filled with luxury and extravagance. In reality, many self-made billionaires are modest and frugal in their private lives.

  Frank Hasenfratz doesn’t need much for himself. “I eat a cheese sandwich a day and a Diet Coke. Most days, that’s what I do. My requirements are not excessive. I don’t think I changed much since I was 10 years old.”

  Peter Hargreaves, the founder of Hargreaves Lansdown, learned to be extremely careful with money from this father.

  My father had a small business. He was brought up in very austere times. People weren’t wealthy, especially after the Second World War. This country was bankrupt for many years, and so were almost every country in Europe. And my father was exceptionally careful with money. I saw how careful he was, and I saw how each week, he put so much money away for the gas bill, so much money for electricity, etc., and it brings business to the very basic level.

  Peter applies extreme frugality in his business. There are no company cars in his company, and privately he was driving an eight-year-old Toyota Prius when I interviewed him in Bristol. He passed his modesty on to his children.

  I’m very proud of my two children, and the reason I’m so proud of them is they’re completely untouched by the money. They are two normal, natural children who live very modest lives. My daughter had a year’s placement in London, and she had a flat in London, and she used to go walk behind me, switching the lights off if I left them on because she had to pay the electricity bill.

  They drive very modest cars; they both have a car that’s seven years old. They both have quite modest flats. And if they go on holiday, they go with their mates, and they go to the back of the plane. By the way, because I live 10 minutes from Bristol airport, it is so much easier to fly budget airlines from Bristol; we fly budget airlines in preference to driving the two hours to Heathrow.

  Peter told me a story that he once went to Zara in Mallorca and bought a pair of shoes from the counter with a discount.

  They were about 35 Euros, these shoes. And I still love them to this day. I’ve worn them for 10 years, and it’s still my favorite pair of shoes, and clean and polished. They look like new. I bet they’re the only pair that are still in existence of that shoe that they made.

  But probably the most humble of all my interviewees is Narayana Murthy, the founder of Infosys, one of the largest software companies in the world. He still lives in the modest three-bedroom apartment in Bangalore that he moved into with his wife wh
en he founded his company.

  Lirio Parisotto knows Narayana because they were competing the same year for the World Entrepreneur of the Year Award. At the gala event, there is a dress code requiring you to wear a tuxedo. Narayana Murthy won the competition and became the World Entrepreneur of the Year 2003, but, as Lirio told me, he was the only man not wearing a tuxedo. Narayana said he didn’t own one since he didn’t really need it. He wore just a regular suit.

  Narayana told me the only luxury he allowed himself were books.

  This is not exactly the type of spending habits you would expect from somebody with a net worth of over $2 billion, would you?

  Learn How to Handle Money

  If you don’t know how to handle money, you can’t succeed in business. Learn about money and finance.

  A good exercise in handling money is keeping track of your personal spending.

  Hüsnü Özyegin, now the wealthiest self-made man in Turkey, developed a budgeting habit early in his life, and he used bookkeeping and money-handling skills later at the university.

  I became treasurer of the fraternity. I used to keep the books of the fraternity, and they paid me $80 a month, which was pretty good money for me. So summer jobs, winter jobs. I kept a record of every penny I spent. I still have that columnar notebook that shows it. I kept records of everything.

  Hüsnü brings out his old columnar notebook and reads: “Scrapbook, $3. Notebooks, $1.75.” His script is very precise. “Carbon paper, plastics for campaign. I used to run for office. You see, $2. Homecoming. Gillette shaving, $1.55. Mail Christmas cards, $1.96. Lottery for house dance, $1. After I had some money, I started dating girls. Date with Sally, $2.15. Even Socks, $1.79. Shoes, $11.95. Everything was cheap in those days.”