Jinesh Dedhia - Life is Simple - Blog

The World As I See It - An Essay by Einstein

2010-12-25T21:59:00.000-08:00

Source: http://www.aip.org/history/einstein/essay.htm

"My political ideal is democracy. Let every man be respected as an individual and no man idolized. It is an irony of fate that I myself have been the recipient of excessive admiration and reverence from my fellow-beings, through no fault, and no merit, of my own. The cause of this may well be the desire, unattainable for many, to understand the few ideas to which I have with my feeble powers attained through ceaseless struggle. I am quite aware that for any organization to reach its goals, one man must do the thinking and directing and generally bear the responsibility. But the led must not be coerced, they must be able to choose their leader. In my opinion, an autocratic system of coercion soon degenerates; force attracts men of low morality... The really valuable thing in the pageant of human life seems to me not the political state, but the creative, sentient individual, the personality; it alone creates the noble and the sublime, while the herd as such remains dull in thought and dull in feeling.

"This topic brings me to that worst outcrop of herd life, the military system, which I abhor... This plague-spot of civilization ought to be abolished with all possible speed. Heroism on command, senseless violence, and all the loathsome nonsense that goes by the name of patriotism -- how passionately I hate them!

"The most beautiful experience we can have is the mysterious. It is the fundamental emotion that stands at the cradle of true art and true science. Whoever does not know it and can no longer wonder, no longer marvel, is as good as dead, and his eyes are dimmed. It was the experience of mystery -- even if mixed with fear -- that engendered religion. A knowledge of the existence of something we cannot penetrate, our perceptions of the profoundest reason and the most radiant beauty, which only in their most primitive forms are accessible to our minds: it is this knowledge and this emotion that constitute true religiosity. In this sense, and only this sense, I am a deeply religious man... I am satisfied with the mystery of life's eternity and with a knowledge, a sense, of the marvelous structure of existence -- as well as the humble attempt to understand even a tiny portion of the Reason that manifests itself in nature."

The Prologue to Bertrand Russell’s Autobiography

2010-11-22T21:15:00.000-08:00

What I Have Lived For

Three passions, simple but overwhelmingly strong, have governed my life: the longing for love, the search for knowledge, and unbearable pity for the suffering of mankind. These passions, like great winds, have blown me hither and thither, in a wayward course, over a great ocean of anguish, reaching to the very verge of despair.

I have sought love, first, because it brings ecstasy – ecstasy so great that I would often have sacrificed all the rest of life for a few hours of this joy. I have sought it, next, because it relieves loneliness–that terrible loneliness in which one shivering consciousness looks over the rim of the world into the cold unfathomable lifeless abyss. I have sought it finally, because in the union of love I have seen, in a mystic miniature, the prefiguring vision of the heaven that saints and poets have imagined. This is what I sought, and though it might seem too good for human life, this is what–at last–I have found.

With equal passion I have sought knowledge. I have wished to understand the hearts of men. I have wished to know why the stars shine. And I have tried to apprehend the Pythagorean power by which number holds sway above the flux. A little of this, but not much, I have achieved.

Love and knowledge, so far as they were possible, led upward toward the heavens. But always pity brought me back to earth. Echoes of cries of pain reverberate in my heart. Children in famine, victims tortured by oppressors, helpless old people a burden to their sons, and the whole world of loneliness, poverty, and pain make a mockery of what human life should be. I long to alleviate this evil, but I cannot, and I too suffer.

This has been my life. I have found it worth living, and would gladly live it again if the chance were offered me.

IF - by Rudyard Kipling

2010-03-12T23:53:00.000-08:00

Love all the lines of this poem by Rudyard Kipling

If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or, being lied about, don't deal in lies,
Or, being hated, don't give way to hating,
And yet don't look too good, nor talk too wise;

If you can dream—and not make dreams your master;
If you can think—and not make thoughts your aim;
If you can meet with triumph and disaster
And treat those two imposters just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to broken,
And stoop and build 'em up with wornout tools;

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breathe a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on";

If you can talk with crowds and keep your virtue,
Or walk with kings—nor lose the common touch;
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds' worth of distance run -
Yours is the Earth and everything that's in it,
And—which is more—you'll be a Man my son!

Random Quotes

2010-02-09T10:03:00.000-08:00

I love quotations because it is a joy to find thoughts one might have, beautifully expressed with much authority by someone recognized wiser than oneself - Marlene Dietrich

Here are some of the quotes that I like:

There is nothing in a caterpillar that tells you it's going to be a butterfly - Buckminster Fuller

You miss 100 per cent of the shots you never take

But so long as men are not trained to withhold judgment in the absence of evidence, they will be led astray ...
... To endure uncertainty is difficult, but so are most of
the other great virtues.
-Bertrand Russell

Rose is beautiful because it doesn't pretend to be a rose

Never do anything you wouldn't be proud to tell your mother about

Remember the Golden Rule. He who has the gold makes the rules

Dost thou love life? Then do not squander time, for that the stuff life is made of - Benjamin Franklin

Half of the harm that is done in this world is due to people who want to feel important - George Eliot

But the unfortunate, yet truly exciting thing about your life, is that there is no core curriculum. The entire place is an elective. The paths are infinite and the results uncertain College is something you complete. Life is something you experience So don’t worry about your grade, or the results or success. Success is defined in myriad ways, and you will find it, and people will no longer be grading you
- Jon Stewart addressing a B-school event

Never Explain- your friends do not need it and your enemies will not believe you anyway

Any man is EDUCATED who knows where to get knowledge when he needs it, and how to organize that knowledge into definite plan of action

They say pain is inevitable but suffering is optional

If you can't change your fate, change your attitude - Amy Tan

The love affair with knowledge will never end in heartbreak - Michael Garrett Marino

He who has a "WHY" to live, can bear with almost any "HOW" - Friedrich Nietzsche

In the end, it is important to remember that we cannot become what we need to be by remaining what we are - Max DePree

Things don't get better by worrying about them

Travel is fatal to prejudice, bigotry, and narrow-mindedness - Mark Twain

All generalizations are false, including this one - Mark Twain

We should also invest little in a book and not everything to cook

It takes less time to do things right than to explain why did u did it wrong

The total secret of success in life lies in 2 words, PERSISTENCE and RESISTANCE.
Persist in what must be done.
Resist in what ought not to be done.

What lies behind us and what lies before us are tiny matters compared to what lies within us - Ralph Waldo Emerson

When love and skill work together, expect a masterpiece - John Ruskin

If a man wants his dreams to come true, he must wake up!

You teach best what you most need to learn - Richard Bach

A picture has been said to be something between a thing and a thought - Samuel Palmer

Sure, real estate, stocks, bonds and commodities are investments, but so are education, art, spirituality, vacations, health and children

Appearance blinds, whereas words reveal - Oscar Wilde

I don't care what is written about me as long as it isn't true - Dorothy Parker

Those people who think they know everything are a great annoyance to those of us who do - Isaac Asimov

There is an inverse relationship between how good something is for you, and how much fun it is.

It's not denial I'm just very selective about what I accept as reality - Bill Watterson of the comic strip Calvin & Hobbes

That is the saving grace of humor, if you fail no one is laughing at you - Whitney Brown

Two thoughts that define our attitude What we think of ourself when we have nothing and … what we think of others when we have everything

When in doubt tell the truth - Mark Twain

The public is wonderfully tolerant It forgives everything except genius - Oscar Wilde

Conscience is the inner voice that warns us somebody may be looking - HL Mencken

People always make time to do the things they really want to do

He who asks is a fool for five minutes, but he who does not ask remains a fool forever - Chinese Proverb

How you spend your time is more important than how you spend your money. Money mistakes can be corrected, but time is gone forever - David Norris

Love vanquishes time To lovers, a moment can be eternity, eternity can be the tick of a clock - Mary Parrish

Time makes more converts - Thomas Paine

Anybody can become angry - that is easy; but to be angry with the right person, and to the right degree, and at the right time, and for the right purpose, and in the right way - that is not within everybody's power and is not easy - Aristotle

What would you do......

2009-12-20T05:59:00.000-08:00

I like this image a lot. Don't know why!!!

How I use my PC

2009-11-13T21:59:00.000-08:00

My friends say that I am very good with computers. I can find and do everything on net with minimal efforts.

The internet community is very dynamic and those people are ready or have already solved many problems to do almost anything on our PC.

The problem is that the internet world is so vast that many people cant find these solutions and hence don't know about these solutions.

Here are my two cents on HOW TO USE YOUR PC EFFECTIVELY

Learn how to use Google effectively. This is the most important skill that you can have. Google is not just search engine there are many new features on Google Labs that are very innovative. 99% of the life queries can be solved by searching effectively on Google (seriously, try out).

Use Google Desktop -
Search your desktop with ease. You will forget to use My Computer.

Use Gmail - Search function and other labs features are too good (esp. Offline Gmail)

Use Firefox. It's user-friendly and versatile. Can do lots of things and saves times

I use following add-ons on my firefox browser -

StumbleUpon - Gets to discover the BEST of the WEB
Adblock Plus - To block irritating ads
Answers - For quick info on terms
BugMeNot - Free Logins for popular sites
Download Helper - For downloading media directly from the webpage
Offline Gmail - Helps in accessing old mails without continuous internet connection

Use Google Reader - I have learned so many things in last year using Google reader than my entire college life.

Use Wordweb. It's a simple tool to find meaning of complex words when offline.

Stay secured. Use a good anti-virus and keep your PC updated. Use a Firewall and Spybot.

Always read manual of the software that you download. The tips and tricks part especially. Best thing to do is to read the reviews. They will give highlights if the main features and help us on how to use them more productively. Also search forums that will help troubleshoot your queries.

Always stay curious and you will find whatever you want.

As Atanu Dey says "The web is the most fascinating, entertaining, edifying and instructive tool available to us. It contains practically all that you need to educate yourself. But it also contains a lot of stuff that is mediocre, bad, incorrect, and plain old stupid nonsense. The challenge is to somehow filter out the crap and get to the good bits."

The Road Less Travelled

2009-10-21T18:51:00.000-07:00

Robert Frost (1874–1963)

TWO roads diverged in a yellow wood,
And sorry I could not travel both
And be one traveler, long I stood
And looked down one as far as I could
To where it bent in the undergrowth;

Then took the other, as just as fair,
And having perhaps the better claim,
Because it was grassy and wanted wear;
Though as for that the passing there
Had worn them really about the same,

And both that morning equally lay
In leaves no step had trodden black.
Oh, I kept the first for another day!
Yet knowing how way leads on to way,
I doubted if I should ever come back.

I shall be telling this with a sigh
Somewhere ages and ages hence:
Two roads diverged in a wood, and I—
I took the one less traveled by,
And that has made all the difference.

My first original post

2009-08-30T07:07:00.000-07:00

Here is my first original post.
I have already posted many posts from the net.
Now it’s time I pen down my own thoughts on this blog.
First things first
I am writing this blog to improve my writing skills.
To do that, I did what I always do when i need any gyaan
I simply googled the questions in my mind and kaboom thousands of webpages with great resources show up in milliseconds.
They all said one common thing
“TO BE A WRITER, FIRST YOU SHOULD WRITE”... Duh
That was so simple, wasn’t it!!
So now I have made a plan to write as much as I can in my free time and pen my thoughts.

This way you all will get insights in the workings of one of the great mind in the world. ;)

So with the promise to return I take your leave.

(P.S. Forgive my bad English coz to me its a foreign language)

Charlie Munger’s Address: Deserved Trust

2009-08-20T07:08:00.000-07:00

This is a great speech by Charlie Munger (Warren Buffett’s partner at Berkshire Hathaway)

Charlie Munger delivered the 2007 Law School Commencement address at the University of Southern California on May 13th. Munger is a guru in the original sense of the Sanskrit word, a person who conveys wisdom.

(source : http://www.deeshaa.org/2007/06/06/charlie-munger/)

Safest way to get what you want is to deserve what you want.

Deliver to the world what you would buy if you were on the other end.

There is huge pleasure in life to be obtained from getting deserved trust. And the way to get it is to deliver what you would want to buy if the circumstances were reversed.

There’s no love that’s so right as admiration based love and that love should include the instructive dead.

Wisdom acquisition is a moral duty. It’s not something you do just to advance in life. As a corollary to that proposition which is very important, it means that you are hooked for lifetime learning. And without lifetime learning, you people are not going to do very well. You are not going to get very far in life based on what you already know. You’re going to advance in life by what you learn after you leave here.

I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.

…so if civilization can progress only with an advanced method of invention, you can progress only when you learn the method of learning.

Nothing has served me better in my long life than continuous learning.

I went through life constantly practicing (because if you don’t practice it, you lose it) the multi-disciplinary approach and I can’t tell you what that’s done for me. It’s made life more fun, it’s made me more constructive, its made me more helpful to others, its made me enormously rich. You name it, that attitude really helps. Now, there are dangers in it because it works so well that if you do it, you will frequently find you’re sitting in the presence of some other expert, maybe even an expert superior to you (supervising you), and you’ll know more than he does about his own specialty, a lot more. You’ll see the correct answer and he’s missed it. That is a very dangerous position to be in. You can cause enormous offense by being right in a way that causes somebody else to lose face. And I never found a perfect way to solve that problem. My advice to you is to learn sometimes to keep your light under a bushel.

Marcus Cicero is famous for saying that the man who doesn’t know what happened before he was born goes through life like a child. That is a very correct idea. If you generalize Cicero , as I think one should, there are all these other things that you should know in addition to history. And those other things are the big ideas in all the other disciplines. It doesn’t help just to know them enough so you can [repeat] them back on an exam and get an A. You have to learn these things in such a way that they’re in a mental latticework in your head and you automatically use them for the rest of your life. If you do that I solemnly promise you that one day you’ll be walking down the street and you’ll look to your right and left and you’ll think “my heavenly days, I’m now one of the of the few most competent people in my whole age cohort.” If you don’t do it, many of the brightest of you will live in the middle ranks or in the shallows.

The way complex adaptive systems work and the way mental constructs work is that problems frequently get easier, I’d even say usually are easier to solve if you turn them around in reverse. In other words, if you want to help India , the question you should ask is not “how can I help India ”, it’s “what is doing the worst damage in India ? What will automatically do the worst damage and how do I avoid it?”

In life, unless you’re more gifted than Einstein, inversion will help you solve problems.

Let me use a little inversion now. What will really fail in life? What do you want to avoid? Such an easy answer: sloth and unreliability. If you’re unreliable it doesn’t matter what your virtues are. Doing what you have faithfully engaged to do should be an automatic part of your conduct. You want to avoid sloth and unreliability.

Another thing I think should be avoided is extremely intense ideology because it cabbages up one’s mind. You see it a lot with T.V. preachers (many have minds made of cabbage) but it can also happen with political ideology. When you’re young it’s easy to drift into loyalties and when you announce that you’re a loyal member and you start shouting the orthodox ideology out, what you’re doing is pounding it in, pounding it in, and you’re gradually ruining your mind. So you want to be very, very careful of this ideology. It’s a big danger. In my mind, I have a little example I use whenever I think about ideology. The example is these Scandinavia canoeists who succeeded in taming all the rapids of Scandinavia and they thought they would tackle the whirlpools of the Aron (sp) Rapids here in the United States . The death rate was 100%. A big whirlpool is not something you want to go into, and I think the same is true about a really deep ideology. I have what I call an iron prescription that helps me keep sane when I naturally drift toward preferring one ideology over another and that is: I say that I’m not entitled to have an opinion on this subject unless I can state the arguments against my position better than the people who support it. I think only when I’ve reached that state am I qualified to speak. This business of not drifting into extreme ideology is a very, very important thing in life.

Another thing that does one in, of course, is the self-serving bias to which we’re all subject. You think the true little me is entitled to do what it wants to do. And, for instance, why shouldn’t the true little me overspend my income. Mozart became the most famous composer in the world but was utterly miserable most of the time, and one of the reasons was because he always overspent his income. If Mozart can’t get by with this kind of asinine conduct, I don’t think you should try.

Generally speaking, envy, resentment, revenge and self-pity are disastrous modes of thoughts. Self-pity gets fairly close to paranoia, and paranoia is one of the very hardest things to reverse. You do not want to drift into self-pity. It’s a ridiculous way to behave and when you avoid it, you get a great advantage over everybody else or almost everybody else because self-pity is a standard condition, and yet you can train yourself out of it.

Of course the self-serving bias is something you want to get out of yourself. Thinking that what’s good for you is good for the wider civilization and rationalizing all these ridiculous conclusions based on this subconscious tendency to serve one’s self is a terribly inaccurate way to think. Of course you want to drive that out of yourself because you want to be wise, not foolish. You also have to allow for the self-serving bias of everybody else because most people are not going to remove it all that successfully, the human condition being what it is. If you don’t allow for self-serving bias in your conduct, again you’re a fool.

The correct answer to situations like [the Saloman case] was given by Ben Franklin, “If you would persuade, appeal to interest not to reason.”

Another thing, perverse incentives. You do not want to be in a perverse incentive system that’s causing you to behave more and more foolishly or worse and worse - incentives are too powerful a control over human cognition or human behavior. If you’re in one, I don’t have a solution for you. You’ll have to figure it out for yourself, but it’s a significant problem.

Perverse associations, also to be avoided. You particularly want to avoid working under somebody you really don’t admire and don’t want to be like. We’re all subject to control to some extent by authority figures, particularly authority figures that are rewarding us. Getting to work under people we admire requires some talent. The way I solved that is I figured out the people I did admire and I maneuvered cleverly without criticizing anybody so I was working entirely under people I admired. You’re outcome in life will be way more satisfactory and way better if you work under people you really admire. The alternative is not a good idea.

Objectivity maintenance. Darwin paid particular attention to disconfirming evidence. Objectivity maintenance routines are totally required in life if you’re going to be a great thinker. There, we’re talking about Darwin ’s special attention to disconfirming evidence and also about checklist routines. Checklist routines avoid a lot of errors. You should have all this elementary wisdom and then you should go through a mental checklist in order to use it. There is no other procedure in the world that will work as well.

The last idea that I found very important is that I realized very early that non-egality would work better in the parts of the world that I wanted to inhabit. What do I mean by non-egality? I mean John Wooden when he was the number one basketball coach in the world. He just said to the bottom five players that you don’t get to play. The top seven did all the playing. Well the top seven learned more, remember the learning machine, they learned more because they did all the playing. And when he got to that system he won more than he had ever won before. I think the game of life, in many respects, is about getting a lot of practice into the hands of the people that have the most aptitude to learn and the most tendency to be learning machines. And if you want the very highest reaches of human civilization, that’s where you have to go. You do not want to choose a brain surgeon for your child from 50 applicants where all of them just take turns doing the procedure. You don’t want your airplanes designed that way. You don’t want your Berkshire Hathaway’s run that way. You want to get the power into the right people.

[Told the story of Max Planck and his chauffeur. After winning the Nobel Prize, Planck toured around giving a speech. The chauffeur memorized the speech and asked if he could give it for him, pretending to be Planck, in Munich and Planck would pretend to be the chauffeur. Planck let him do it and after the speech someone asked a tough question. The real chauffeur said that he couldn’t believe someone in such an advanced city like Munich would ask such an elementary question and as such, he was going to ask his chauffeur (Planck) to reply].
In this world we have two kinds of knowledge. One is Planck knowledge, the people who really know. They’ve paid the dues, they have the aptitude. And then we’ve got chauffeur knowledge. They have learned the talk. They may have a big head of hair, they may have fine temper in the voice, they’ll make a hell of an impression. But in the end, all they have is chauffeur knowledge. I think I’ve just described practically every politician in the United States .

And you are going to have the problem in your life of getting the responsibility into the people with the Planck knowledge [and away from the people with the chauffeur knowledge]. And there are huge forces working against you. My generation has failed you a bit…..but you wouldn’t like it to be too easy now would you?

Another thing that I found is that an intense interest in the subject is indispensable if you’re really going to excel in it. I could force myself to be fairly good in a lot of things but I couldn’t be really good at anything where I didn’t have an intense interest. So to some extent, you’re going to have to follow me. If at all feasible, drift into something where you have an intense interest.

Another thing you have to do, of course, is to have a lot of assiduity. I like that word because it means: sit down on your ass until you do it. Two partners that I chose for one little phase in my life had the following rule when they created a design, build, construction team. They sat down and said, two-man partnership, divide everything equally, here’s the rule: if ever we’re behind in commitments to other people, we will both work 14 hours a day until we’re caught up. Needless to say, that firm didn’t fail. The people died very rich. It’s such a simple idea.

Another thing, of course, is that life will have terrible blows in it, horrible blows, unfair blows. And some people recover and others don’t. And there I think the attitude of Epectitus is the best. He said that every missed chance in life was an opportunity to behave well, every missed chance in life was an opportunity to learn something, and that your duty was not to be submerged in self-pity, but to utilize the terrible blow in constructive fashion. That is a very good idea. You may remember the epitaph which Epectitus left for himself: “Here lies Epectitus, a slave maimed in body, the ultimate in poverty, and the favored of the gods.”

I’ve got a final little idea because I’m all for prudence as well as opportunism. [He talked about his grandfather, Judge Munger, who under spent his income all his life and left his grandmother in comfortable circumstances, which he had to because there were no pensions for federal judges back then. Along the way, he bailed out Charlie’s uncle’s bank back in the ‘30s by taking over 1/3 of his good assets in exchange for bad assets of the bank. He remembered his grandfather’s example in college when he came across] Housman’s poem:

The thoughts of others
Were light and fleeting,
Of lovers’ meeting
Or luck or fame.
Mine were of trouble,
And mine were steady,
So I was ready
When trouble came.

You can say, who wants to go through life anticipating trouble? Well I did. All my life I’ve gone through life anticipating trouble. And here I am, going along in my 84th year and like Epectitus, I’ve had a favored life. It didn’t make me unhappy to anticipate trouble all the time and be ready to perform adequately if trouble came. It didn’t hurt me at all. In fact it helped me.

The last idea I want to give to you…..is that this is not the highest form that a civilization can reach. The highest form a civilization can reach is a seamless web of deserved trust. Not much procedure, just totally reliable people correctly trusting one another. That’s the way an operating room works at the Mayo Clinic. So never forget, when you’re a lawyer, that you may be rewarded for selling this stuff but you don’t have to buy. What you want in your own life is a seamless web of deserved trust. And so if your proposed marriage contract has 47 pages, my suggestion is you not enter.

Well that’s enough for one graduation. I hope these ruminations of an old man are useful to you. In the end I’m like an old valiant for truth and pilgrim’s progress. “My sword I leave to him who can wear it.”

A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business

2009-06-30T07:14:00.000-07:00

I found this speech from deesha.org. Its a great speech by Charlie Munger that he gave at the USC Business School way back in 1994. It’s long and will take about an hour to read, but the time invested is truly worth. His thoughts are so deep and so rich. But it is also very simple. It is about worldly wisdom.
Without giving away too much, just sit down, lock yourself and read this gem....

A Lesson on Elementary, Worldly Wisdom As It Relates To Investment Management & Business

Charles Munger, USC Business School, 1994

I’m going to play a minor trick on you today because the subject of my talk is the art of stock picking as a subdivision of the art of worldly wisdom. That enables me to start talking about worldly wisdom—a much broader topic that interests me because I think all too little of it is delivered by modern educational systems, at least in an effective way.

And therefore, the talk is sort of along the lines that some behaviorist psychologists call Grandma’s rule after the wisdom of Grandma when she said that you have to eat the carrots before you get the dessert.

The carrot part of this talk is about the general subject of worldly wisdom which is a pretty good way to start. After all, the theory of modern education is that you need a general education before you specialize. And I think to some extent, before you’re going to be a great stock picker, you need some general education.

So, emphasizing what I sometimes waggishly call remedial worldly wisdom, I’m going to start by waltzing you through a few basic notions.

What is elementary, worldly wisdom? Well, the first rule is that you can’t really know anything if you just remember isolated facts and try and bang ‘em back. If the facts don’t hang together on a latticework of theory, you don’t have them in a usable form.

You’ve got to have models in your head. And you’ve got to array your experience—both vicarious and direct—on this latticework of models. You may have noticed students who just try to remember and pound back what is remembered. Well, they fail in school and in life. You’ve got to hang experience on a latticework of models in your head.

What are the models? Well, the first rule is that you’ve got to have multiple models—because if you just have one or two that you’re using, the nature of human psychology is such that you’ll torture reality so that it fits your models, or at least you’ll think it does. You become the equivalent of a chiropractor who, of course, is the great boob in medicine.

It’s like the old saying, “To the man with only a hammer, every problem looks like a nail.” And of course, that’s the way the chiropractor goes about practicing medicine. But that’s a perfectly disastrous way to think and a perfectly disastrous way to operate in the world. So you’ve got to have multiple models.

And the models have to come from multiple disciplines—because all the wisdom of the world is not to be found in one little academic department. That’s why poetry professors, by and large, are so unwise in a worldly sense. They don’t have enough models in their heads. So you’ve got to have models across a fair array of disciplines.

You may say, “My God, this is already getting way too tough.” But, fortunately, it isn’t that tough—because 80 or 90 important models will carry about 90% of the freight in making you a worldly-wise person. And, of those, only a mere handful really carry very heavy freight.

So let’s briefly review what kind of models and techniques constitute this basic knowledge that everybody has to have before they proceed to being really good at a narrow art like stock picking.

First there’s mathematics. Obviously, you’ve got to be able to handle numbers and quantities—basic arithmetic. And the great useful model, after compound interest, is the elementary math of permutations and combinations. And that was taught in my day in the sophomore year in high school. I suppose by now in great private schools, it’s probably down to the eighth grade or so.

It’s very simple algebra. It was all worked out in the course of about one year between Pascal and Fermat. They worked it out casually in a series of letters.
It’s not that hard to learn. What is hard is to get so you use it routinely almost everyday of your life. The Fermat/Pascal system is dramatically consonant with the way that the world works. And it’s fundamental truth. So you simply have to have the technique.

Many educational institutions—although not nearly enough—have realized this. At Harvard Business School, the great quantitative thing that bonds the first-year class together is what they call decision tree theory. All they do is take high school algebra and apply it to real life problems. And the students love it. They’re amazed to find that high school algebra works in life….

By and large, as it works out, people can’t naturally and automatically do this. If you understand elementary psychology, the reason they can’t is really quite simple: The basic neural network of the brain is there through broad genetic and cultural evolution. And it’s not Fermat/Pascal. It uses a very crude, shortcut-type of approximation. It’s got elements of Fermat/Pascal in it. However, it’s not good.

So you have to learn in a very usable way this very elementary math and use it routinely in life—just the way if you want to become a golfer, you can’t use the natural swing that broad evolution gave you. You have to learn—to have a certain grip and swing in a different way to realize your full potential as a golfer.

If you don’t get this elementary, but mildly unnatural, mathematics of elementary probability into your repertoire, then you go through a long life like a onelegged man in an asskicking contest. You’re giving a huge advantage to everybody else.

One of the advantages of a fellow like Buffett, whom I’ve worked with all these years, is that he automatically thinks in terms of decision trees and the elementary math of permutations and combinations….

Obviously, you have to know accounting. It’s the language of practical business life. It was a very useful thing to deliver to civilization. I’ve heard it came to civilization through Venice which of course was once the great commercial power in the Mediterranean. However, double-entry bookkeeping was a hell of an invention.
And it’s not that hard to understand.

But you have to know enough about it to understand its limitations—because although accounting is the starting place, it’s only a crude approximation. And it’s not very hard to understand its limitations. For example, everyone can see that you have to more or less just guess at the useful life of a jet airplane or anything like that. Just because you express the depreciation rate in neat numbers doesn’t make it anything you really know.

In terms of the limitations of accounting, one of my favorite stories involves a very great businessman named Carl Braun who created the CF Braun Engineering Company. It designed and built oil refineries—which is very hard to do. And Braun would get them to come in on time and not blow up and have efficiencies and so forth.
This is a major art.

And Braun, being the thorough Teutonic type that he was, had a number of quirks. And one of them was that he took a look at standard accounting and the way it was applied to building oil refineries and he said, “This is asinine.”

So he threw all of his accountants out and he took his engineers and said, “Now, we’ll devise our own system of accounting to handle this process.” And in due time, accounting adopted a lot of Carl Braun’s notions. So he was a formidably willful and talented man who demonstrated both the importance of accounting and the importance of knowing its limitations.

He had another rule, from psychology, which, if you’re interested in wisdom, ought to be part of your repertoire—like the elementary mathematics of permutations and combinations.

His rule for all the Braun Company’s communications was called the five W’s—you had to tell who was going to do what, where, when and why. And if you wrote a letter or directive in the Braun Company telling somebody to do something, and you didn’t tell him why, you could get fired. In fact, you would get fired if you did it twice.

You might ask why that is so important? Well, again that’s a rule of psychology. Just as you think better if you array knowledge on a bunch of models that are basically answers to the question, why, why, why, if you always tell people why, they’ll understand it better, they’ll consider it more important, and they’ll be more likely to comply. Even if they don’t understand your reason, they’ll be more likely to comply.

So there’s an iron rule that just as you want to start getting worldly wisdom by asking why, why, why, in communicating with other people about everything, you want to include why, why, why. Even if it’s obvious, it’s wise to stick in the why.

Which models are the most reliable? Well, obviously, the models that come from hard science and engineering are the most reliable models on this Earth. And engineering quality control—at least the guts of it that matters to you and me and people who are not professional engineers—is very much based on the elementary mathematics of Fermat and Pascal:

It costs so much and you get so much less likelihood of it breaking if you spend this much. It’s all elementary high school mathematics. And an elaboration of that is what Deming brought to Japan for all of that quality control stuff.

I don’t think it’s necessary for most people to be terribly facile in statistics. For example, I’m not sure that I can even pronounce the Poisson distribution. But I know what a Gaussian or normal distribution looks like and I know that events and huge aspects of reality end up distributed that way. So I can do a rough calculation.

But if you ask me to work out something involving a Gaussian distribution to ten decimal points, I can’t sit down and do the math. I’m like a poker player who’s learned to play pretty well without mastering Pascal.

And by the way, that works well enough. But you have to understand that bellshaped curve at least roughly as well as I do.

And, of course, the engineering idea of a backup system is a very powerful idea. The engineering idea of breakpoints—that’s a very powerful model, too. The notion of a critical mass—that comes out of physics—is a very powerful model.

All of these things have great utility in looking at ordinary reality. And all of this cost-benefit analysis—hell, that’s all elementary high school algebra, too. It’s just been dolled up a little bit with fancy lingo.

I suppose the next most reliable models are from biology/ physiology because, after all, all of us are programmed by our genetic makeup to be much the same.

And then when you get into psychology, of course, it gets very much more complicated. But it’s an ungodly important subject if you’re going to have any worldly wisdom.

And you can demonstrate that point quite simply: There’s not a person in this room viewing the work of a very ordinary professional magician who doesn’t see a lot of things happening that aren’t happening and not see a lot of things happening that are happening.

And the reason why is that the perceptual apparatus of man has shortcuts in it. The brain cannot have unlimited circuitry. So someone who knows how to take advantage of those shortcuts and cause the brain to miscalculate in certain ways can cause you to see things that aren’t there.

Now you get into the cognitive function as distinguished from the perceptual function. And there, you are equally—more than equally in fact—likely to be misled. Again, your brain has a shortage of circuitry and so forth—and it’s taking all kinds of little automatic shortcuts.

So when circumstances combine in certain ways—or more commonly, your fellow man starts acting like the magician and manipulates you on purpose by causing your cognitive dysfunction—you’re a patsy.

And so just as a man working with a tool has to know its limitations, a man working with his cognitive apparatus has to know its limitations. And this knowledge, by the way, can be used to control and motivate other people….

So the most useful and practical part of psychology—which I personally think can be taught to any intelligent person in a week—is ungodly important. And nobody taught it to me by the way. I had to learn it later in life, one piece at a time. And it was fairly laborious. It’s so elementary though that, when it was all over, I felt like a fool.

And yeah, I’d been educated at Cal Tech and the Harvard Law School and so forth. So very eminent places miseducated people like you and me.

The elementary part of psychology—the psychology of misjudgment, as I call it—is a terribly important thing to learn. There are about 20 little principles. And they interact, so it gets slightly complicated. But the guts of it is unbelievably important.

Terribly smart people make totally bonkers mistakes by failing to pay heed to it. In fact, I’ve done it several times during the last two or three years in a very important way. You never get totally over making silly mistakes.

There’s another saying that comes from Pascal which I’ve always considered one of the really accurate observations in the history of thought. Pascal said in essence, “The mind of man at one and the same time is both the glory and the shame of the universe.”

And that’s exactly right. It has this enormous power. However, it also has these standard misfunctions that often cause it to reach wrong conclusions. It also makes man extraordinarily subject to manipulation by others. For example, roughly half of the army of Adolf Hitler was composed of believing Catholics. Given enough clever psychological manipulation, what human beings will do is quite interesting.

Personally, I’ve gotten so that I now use a kind of two-track analysis. First, what are the factors that really govern the interests involved, rationally considered? And second, what are the subconscious influences where the brain at a subconscious level is automatically doing these things—which by and large are useful, but which often misfunction.

One approach is rationality—the way you’d work out a bridge problem: by evaluating the real interests, the real probabilities and so forth. And the other is to evaluate the psychological factors that cause subconscious conclusions—many of which are wrong.

Now we come to another somewhat less reliable form of human wisdom—microeconomics. And here, I find it quite useful to think of a free market economy—or partly free market economy—as sort of the equivalent of an ecosystem….

This is a very unfashionable way of thinking because early in the days after Darwin came along, people like the robber barons assumed that the doctrine of the survival of the fittest authenticated them as deserving power—you know, “I’m the richest. Therefore, I’m the best. God’s in his heaven, etc.”

And that reaction of the robber barons was so irritating to people that it made it unfashionable to think of an economy as an ecosystem. But the truth is that it is a lot like an ecosystem. And you get many of the same results.

Just as in an ecosystem, people who narrowly specialize can get terribly good at occupying some little niche. Just as animals flourish in niches, similarly, people who specialize in the business world—and get very good because they specialize—frequently find good economics that they wouldn’t get any other way.

And once we get into microeconomics, we get into the concept of advantages of scale. Now we’re getting closer to investment analysis—because in terms of which businesses succeed and which businesses fail, advantages of scale are ungodly important.

For example, one great advantage of scale taught in all of the business schools of the world is cost reductions along the so-called experience curve. Just doing something complicated in more and more volume enables human beings, who are trying to improve and are motivated by the incentives of capitalism, to do it more and more efficiently.

The very nature of things is that if you get a whole lot of volume through your joint, you get better at processing that volume. That’s an enormous advantage. And it has a lot to do with which businesses succeed and fail….

Let’s go through a list—albeit an incomplete one—of possible advantages of scale. Some come from simple geometry. If you’re building a great spherical tank, obviously as you build it bigger, the amount of steel you use in the surface goes up with the square and the cubic volume goes up with the cube. So as you increase the dimensions, you can hold a lot more volume per unit area of steel.

And there are all kinds of things like that where the simple geometry—the simple reality—gives you an advantage of scale.

For example, you can get advantages of scale from TV advertising. When TV advertising first arrived—when talking color pictures first came into our living rooms—it was an unbelievably powerful thing. And in the early days, we had three networks that had whatever it was—say 90% of the audience.

Well, if you were Procter & Gamble, you could afford to use this new method of advertising. You could afford the very expensive cost of network television because you were selling so many cans and bottles. Some little guy couldn’t. And there was no way of buying it in part. Therefore, he couldn’t use it. In effect, if you didn’t have a big volume, you couldn’t use network TV advertising which was the most effective technique.

So when TV came in, the branded companies that were already big got a huge tail wind. Indeed, they prospered and prospered and prospered until some of them got fat and foolish, which happens with prosperity—at least to some people….

And your advantage of scale can be an informational advantage. If I go to some remote place, I may see Wrigley chewing gum alongside Glotz’s chewing gum. Well, I know that Wrigley is a satisfactory product, whereas I don’t know anything about Glotz’s. So if one is 40 cents and the other is 30 cents, am I going to take something
I don’t know and put it in my mouth—which is a pretty personal place, after all—for a lousy dime?

So, in effect, Wrigley , simply by being so well known, has advantages of scale—what you might call an informational advantage.

Another advantage of scale comes from psychology. The psychologists use the term social proof. We are all influenced—subconsciously and to some extent consciously—by what we see others do and approve. Therefore, if everybody’s buying something, we think it’s better. We don’t like to be the one guy who’s out of step.

Again, some of this is at a subconscious level and some of it isn’t. Sometimes, we consciously and rationally think, “Gee, I don’t know much about this. They know more than I do. Therefore, why shouldn’t I follow them?”

The social proof phenomenon which comes right out of psychology gives huge advantages to scale—for example, with very wide distribution, which of course is hard to get. One advantage of Coca-Cola is that it’s available almost everywhere in the world.

Well, suppose you have a little soft drink. Exactly how do you make it available all over the Earth? The worldwide distribution setup—which is slowly won by a big enterprise—gets to be a huge advantage…. And if you think about it, once you get enough advantages of that type, it can become very hard for anybody to dislodge you.

There’s another kind of advantage to scale. In some businesses, the very nature of things is to sort of cascade toward the overwhelming dominance of one firm.

The most obvious one is daily newspapers. There’s practically no city left in the U.S., aside from a few very big ones, where there’s more than one daily newspaper.
And again, that’s a scale thing. Once I get most of the circulation, I get most of the advertising. And once I get most of the advertising and circulation, why would anyone want the thinner paper with less information in it? So it tends to cascade to a winnertakeall situation. And that’s a separate form of the advantages of scale phenomenon.

Similarly, all these huge advantages of scale allow greater specialization within the firm. Therefore, each person can be better at what he does.

And these advantages of scale are so great, for example, that when Jack Welch came into General Electric, he just said, “To hell with it. We’re either going to be # 1 or #2 in every field we’re in or we’re going to be out. I don’t care how many people I have to fire and what I have to sell. We’re going to be #1 or #2 or out.”

That was a very toughminded thing to do, but I think it was a very correct decision if you’re thinking about maximizing shareholder wealth. And I don’t think it’s a bad thing to do for a civilization either, because I think that General Electric is stronger for having Jack Welch there.

And there are also disadvantages of scale. For example, we—by which I mean Berkshire Hathaway—are the largest shareholder in Capital Cities/ABC. And we had trade publications there that got murdered where our competitors beat us. And the way they beat us was by going to a narrower specialization.

We’d have a travel magazine for business travel. So somebody would create one which was addressed solely at corporate travel departments. Like an ecosystem, you’re getting a narrower and narrower specialization.

Well, they got much more efficient. They could tell more to the guys who ran corporate travel departments. Plus, they didn’t have to waste the ink and paper mailing out stuff that corporate travel departments weren’t interested in reading. It was a more efficient system. And they beat our brains out as we relied on our broader magazine.

That’s what happened to The Saturday Evening Post and all those things. They’re gone. What we have now isMotocross—which is read by a bunch of nuts who like to participate in tournaments where they turn somersaults on their motorcycles. But they care about it. For them, it’s the principal purpose of life. A magazine called Motocross is a total necessity to those people. And its profit margins would make you salivate.

Just think of how narrowcast that kind of publishing is. So occasionally, scaling down and intensifying gives you the big advantage. Bigger is not always better.

The great defect of scale, of course, which makes the game interesting—so that the big people don’t always win—is that as you get big, you get the bureaucracy. And with the bureaucracy comes the territoriality—which is again grounded in human nature.

And the incentives are perverse. For example, if you worked for AT&T in my day, it was a great bureaucracy. Who in the hell was really thinking about the shareholder or anything else? And in a bureaucracy, you think the work is done when it goes out of your in-basket into somebody else’s in-basket. But, of course, it isn’t. It’s not done until AT&T delivers what it’s supposed to deliver. So you get big, fat, dumb, unmotivated bureaucracies.

They also tend to become somewhat corrupt. In other words, if I’ve got a department and you’ve got a department and we kind of share power running this thing, there’s sort of an unwritten rule: “If you won’t bother me, I won’t bother you and we’re both happy.” So you get layers of management and associated costs that nobody needs. Then, while people are justifying all these layers, it takes forever to get anything done. They’re too slow to make decisions and nimbler people run circles around them.

The constant curse of scale is that it leads to big, dumb bureaucracy—which, of course, reaches its highest and worst form in government where the incentives are really awful. That doesn’t mean we don’t need governments—because we do. But it’s a terrible problem to get big bureaucracies to behave.

So people go to stratagems. They create little decentralized units and fancy motivation and training programs. For example, for a big company, General Electric has fought bureaucracy with amazing skill. But that’s because they have a combination of a genius and a fanatic running it. And they put him in young enough so he gets a long run. Of course, that’s Jack Welch.

But bureaucracy is terrible…. And as things get very powerful and very big, you can get some really dysfunctional behavior. Look at Westinghouse. They blew billions of dollars on a bunch of dumb loans to real estate developers. They put some guy who’d come up by some career path—I don’t know exactly what it was, but it could have been refrigerators or something—and all of a sudden, he’s loaning money to real estate developers building hotels. It’s a very unequal contest. And in due time, they lost all those billions of dollars.

CBS provides an interesting example of another rule of psychology—namely, Pavlovian association. If people tell you what you really don’t want to hear what’s unpleasant—there’s an almost automatic reaction of antipathy. You have to train yourself out of it. It isn’t foredestined that you have to be this way. But you will tend to be this way if you don’t think about it.

Television was dominated by one network—CBS in its early days. And Paley was a god. But he didn’t like to hear what he didn’t like to hear. And people soon learned that. So they told Paley only what he liked to hear. Therefore, he was soon living in a little cocoon of unreality and everything else was corrupt—although it was a great business.

So the idiocy that crept into the system was carried along by this huge tide. It was a Mad Hatter’s tea party the last ten years under Bill Paley.

And that is not the only example by any means. You can get severe misfunction in the high ranks of business. And of course, if you’re investing, it can make a lot of difference. If you take all the acquisitions that CBS made under Paley, after the acquisition of the network itself, with all his advisors—his investment bankers, management consultants and so forth who were getting paid very handsomely—it was absolutely terrible.

For example, he gave something like 20% of CBS to the Dumont Company for a television set manufacturer which was destined to go broke. I think it lasted all of two or three years or something like that. So very soon after he’d issued all of that stock, Dumont was history. You get a lot of dysfunction in a big fat, powerful place where no one will bring unwelcome reality to the boss.

So life is an everlasting battle between those two forces—to get these advantages of scale on one side and a tendency to get a lot like the U.S. Agriculture Department on the other side—where they just sit around and so forth. I don’t know exactly what they do. However, I do know that they do very little useful work.

On the subject of advantages of economies of scale, I find chain stores quite interesting. Just think about it. The concept of a chain store was a fascinating invention. You get this huge purchasing power—which means that you have lower merchandise costs. You get a whole bunch of little laboratories out there in which you can conduct experiments. And you get specialization.

If one little guy is trying to buy across 27 different merchandise categories influenced by traveling salesmen, he’s going to make a lot of poor decisions. But if your buying is done in headquarters for a huge bunch of stores, you can get very bright people that know a lot about refrigerators and so forth to do the buying.

The reverse is demonstrated by the little store where one guy is doing all the buying. It’s like the old story about the little store with salt all over its walls. And a stranger comes in and says to the storeowner, “You must sell a lot of salt.” And he replies, “No, I don’t. But you should see the guy who sells me salt.”

So there are huge purchasing advantages. And then there are the slick systems of forcing everyone to do what works. So a chain store can be a fantastic enterprise.
It’s quite interesting to think about Wal-Mart starting from a single store in Bentonville, Arkansas against Sears, Roebuck with its name, reputation and all of its billions.

How does a guy in Bentonville, Arkansas with no money blow right by Sears, Roebuck? And he does it in his own lifetime—in fact, during his own late lifetime because he was already pretty old by the time he started out with one little store….

He played the chain store game harder and better than anyone else. Walton invented practically nothing. But he copied everything anybody else ever did that was smart—and he did it with more fanaticism and better employee manipulation. So he just blew right by them all.

He also had a very interesting competitive strategy in the early days. He was like a prizefighter who wanted a great record so he could be in the finals and make a big TV hit. So what did he do? He went out and fought 42 palookas. Right? And the result was knockout, knockout, knockout—42 times.

Walton, being as shrewd as he was, basically broke other small town merchants in the early days. With his more efficient system, he might not have been able to tackle some titan head-on at the time. But with his better system, he could destroy those small town merchants. And he went around doing it time after time after time. Then, as he got bigger, he started destroying the big boys.

Well, that was a very, very shrewd strategy.

You can say, “Is this a nice way to behave?” Well, capitalism is a pretty brutal place. But I personally think that the world is better for having Wal-Mart. I mean you can idealize small town life. But I’ve spent a fair amount of time in small towns. And let me tell you you shouldn’t get too idealistic about all those businesses he destroyed.

Plus, a lot of people who work at Wal-Mart are very high grade, bouncy people who are raising nice children. I have no feeling that an inferior culture destroyed a superior culture. I think that is nothing more than nostalgia and delusion. But, at any rate, it’s an interesting model of how the scale of things and fanaticism combine to be very powerful.

And it’s also an interesting model on the other side—how with all its great advantages, the disadvantages of bureaucracy did such terrible damage to Sears, Roebuck. Sears had layers and layers of people it didn’t need. It was very bureaucratic. It was slow to think. And there was an established way of thinking. If you poked your head up with a new thought, the system kind of turned against you. It was everything in the way of a dysfunctional big bureaucracy that you would expect.

In all fairness, there was also much that was good about it. But it just wasn’t as lean and mean and shrewd and effective as Sam Walton. And, in due time, all its advantages of scale were not enough to prevent Sears from losing heavily to Wal-Mart and other similar retailers.

Here’s a model that we’ve had trouble with. Maybe you’ll be able to figure it out better. Many markets get down to two or three big competitors—or five or six. And in some of those markets, nobody makes any money to speak of. But in others, everybody does very well.

Over the years, we’ve tried to figure out why the competition in some markets gets sort of rational from the investor’s point of view so that the shareholders do well, and in other markets, there’s destructive competition that destroys shareholder wealth.

If it’s a pure commodity like airline seats, you can understand why no one makes any money. As we sit here, just think of what airlines have given to the world—safe travel, greater experience, time with your loved ones, you name it. Yet, the net amount of money that’s been made by the shareholders of airlines since Kitty Hawk, is now a negative figure—a substantial negative figure. Competition was so intense that, once it was unleashed by deregulation, it ravaged shareholder wealth in the airline business.

Yet, in other fields—like cereals, for example—almost all the big boys make out. If you’re some kind of a medium grade cereal maker, you might make 15% on your capital. And if you’re really good, you might make 40%. But why are cereals so profitable—despite the fact that it looks to me like they’re competing like crazy with promotions, coupons and everything else? I don’t fully understand it.

Obviously, there’s a brand identity factor in cereals that doesn’t exist in airlines. That must be the main factor that accounts for it.

And maybe the cereal makers by and large have learned to be less crazy about fighting for market share—because if you get even one person who’s hell-bent on gaining market share…. For example, if I were Kellogg and I decided that I had to have 60% of the market, I think I could take most of the profit out of cereals. I’d ruin Kellogg in the process. But I think I could do it.

In some businesses, the participants behave like a demented Kellogg. In other businesses, they don’t. Unfortunately, I do not have a perfect model for predicting how that’s going to happen.

For example, if you look around at bottler markets, you’ll find many markets where bottlers of Pepsi and Coke both make a lot of money and many others where they destroy most of the profitability of the two franchises. That must get down to the peculiarities of individual adjustment to market capitalism. I think you’d have to know the people involved to fully understand what was happening.

In microeconomics, of course, you’ve got the concept of patents, trademarks, exclusive franchises and so forth. Patents are quite interesting. When I was young, I think more money went into patents than came out. Judges tended to throw them out—based on arguments about what was really invented and what relied on prior art. That isn’t altogether clear.

But they changed that. They didn’t change the laws. They just changed the administration—so that it all goes to one patent court. And that court is now very much more pro-patent. So I think people are now starting to make a lot of money out of owning patents.

Trademarks, of course, have always made people a lot of money. A trademark system is a wonderful thing for a big operation if it’s well known.

The exclusive franchise can also be wonderful. If there were only three television channels awarded in a big city and you owned one of them, there were only so many hours a day that you could be on. So you had a natural position in an oligopoly in the pre-cable days.

And if you get the franchise for the only food stand in an airport, you have a captive clientele and you have a small monopoly of a sort.

The great lesson in microeconomics is to discriminate between when technology is going to help you and when it’s going to kill you. And most people do not get this straight in their heads. But a fellow like Buffett does.

For example, when we were in the textile business, which is a terrible commodity business, we were making low-end textiles—which are a real commodity product. And one day, the people came to Warren and said, “They’ve invented a new loom that we think will do twice as much work as our old ones.”

And Warren said, “Gee, I hope this doesn’t work because if it does, I’m going to close the mill.” And he meant it.

What was he thinking? He was thinking, “It’s a lousy business. We’re earning substandard returns and keeping it open just to be nice to the elderly workers. But we’re not going to put huge amounts of new capital into a lousy business.”

And he knew that the huge productivity increases that would come from a better machine introduced into the production of a commodity product would all go to the benefit of the buyers of the textiles. Nothing was going to stick to our ribs as owners.

That’s such an obvious concept—that there are all kinds of wonderful new inventions that give you nothing as owners except the opportunity to spend a lot more money in a business that’s still going to be lousy. The money still won’t come to you. All of the advantages from great improvements are going to flow through to the customers.

Conversely, if you own the only newspaper in Oshkosh and they were to invent more efficient ways of composing the whole newspaper, then when you got rid of the old technology and got new fancy computers and so forth, all of the savings would come right through to the bottom line.

In all cases, the people who sell the machinery—and, by and large, even the internal bureaucrats urging you to buy the equipment—show you projections with the amount you’ll save at current prices with the new technology. However, they don’t do the second step of the analysis which is to determine how much is going stay home and how much is just going to flow through to the customer. I’ve never seen a single projection incorporating that second step in my life. And I see them all the time. Rather, they always read: “This capital outlay will save you so much money that it will pay for itself in three years.”

So you keep buying things that will pay for themselves in three years. And after 20 years of doing it, somehow you’ve earned a return of only about 4% per annum.

That’s the textile business.

And it isn’t that the machines weren’t better. It’s just that the savings didn’t go to you. The cost reductions came through all right. But the benefit of the cost reductions didn’t go to the guy who bought the equipment. It’s such a simple idea. It’s so basic. And yet it’s so often forgotten.

Then there’s another model from microeconomics which I find very interesting. When technology moves as fast as it does in a civilization like ours, you get a phenomenon which I call competitive destruction. You know, you have the finest buggy whip factory and all of a sudden in comes this little horseless carriage. And before too many years go by, your buggy whip business is dead. You either get into a different business or you’re dead—you’re destroyed. It happens again and again and again.

And when these new businesses come in, there are huge advantages for the early birds. And when you’re an early bird, there’s a model that I call “surfing”—when a surfer gets up and catches the wave and just stays there, he can go a long, long time. But if he gets off the wave, he becomes mired in shallows….
But people get long runs when they’re right on the edge of the wave—whether it’s Microsoft or Intel or all kinds of people, including National Cash Register in the early days.

The cash register was one of the great contributions to civilization. It’s a wonderful story. Patterson was a small retail merchant who didn’t make any money. One day, somebody sold him a crude cash register which he put into his retail operation. And it instantly changed from losing money to earning a profit because it made it so much harder for the employees to steal….

But Patterson, having the kind of mind that he did, didn’t think, “Oh, good for my retail business.” He thought, “I’m going into the cash register business.” And, of course, he created National Cash Register.

And he “surfed”. He got the best distribution system, the biggest collection of patents and the best of everything. He was a fanatic about everything important as the technology developed. I have in my files an early National Cash Register Company report in which Patterson described his methods and objectives. And a well-educated orangutan could see that buying into partnership with Patterson in those early days, given his notions about the cash register business, was a total 100% cinch.

And, of course, that’s exactly what an investor should be looking for. In a long life, you can expect to profit heavily from at least a few of those opportunities if you develop the wisdom and will to seize them. At any rate, “surfing” is a very powerful model.

However, Berkshire Hathaway , by and large, does not invest in these people that are “surfing” on complicated technology. After all, we’re cranky and idiosyncratic—as you may have noticed.

And Warren and I don’t feel like we have any great advantage in the high-tech sector. In fact, we feel like we’re at a big disadvantage in trying to understand the nature of technical developments in software, computer chips or what have you. So we tend to avoid that stuff, based on our personal inadequacies.

Again, that is a very, very powerful idea. Every person is going to have a circle of competence. And it’s going to be very hard to advance that circle. If I had to make my living as a musician…. I can’t even think of a level low enough to describe where I would be sorted out to if music were the measuring standard of the civilization.

So you have to figure out what your own aptitudes are. If you play games where other people have the aptitudes and you don’t, you’re going to lose. And that’s as close to certain as any prediction that you can make. You have to figure out where you’ve got an edge. And you’ve got to play within your own circle of competence.

If you want to be the best tennis player in the world, you may start out trying and soon find out that it’s hopeless—that other people blow right by you. However, if you want to become the best plumbing contractor in Bemidji, that is probably doable by two-thirds of you. It takes a will. It takes the intelligence. But after a while, you’d gradually know all about the plumbing business in Bemidji and master the art. That is an attainable objective, given enough discipline.

And people who could never win a chess tournament or stand in center court in a respectable tennis tournament can rise quite high in life by slowly developing a circle of competence—which results partly from what they were born with and partly from what they slowly develop through work.

So some edges can be acquired. And the game of life to some extent for most of us is trying to be something like a good plumbing contractor in Bemidji. Very few of us are chosen to win the world’s chess tournaments.

Some of you may find opportunities “surfing” along in the new high-tech fields—the Intels, the Microsofts and so on. The fact that we don’t think we’re very good at it and have pretty well stayed out of it doesn’t mean that it’s irrational for you to do it.

Well, so much for the basic microeconomics models, a little bit of psychology, a little bit of mathematics, helping create what I call the general substructure of worldly wisdom. Now, if you want to go on from carrots to dessert, I’ll turn to stock picking—trying to draw on this general worldly wisdom as we go.

I don’t want to get into emerging markets, bond arbitrage and so forth. I’m talking about nothing but plain vanilla stock picking. That, believe me, is complicated enough. And I’m talking about common stock picking.

The first question is, “What is the nature of the stock market?” And that gets you directly to this efficient market theory that got to be the rage—a total rage—long after I graduated from law school.

And it’s rather interesting because one of the greatest economists of the world is a substantial shareholder in Berkshire Hathaway and has been for a long time. His textbook always taught that the stock market was perfectly efficient and that nobody could beat it. But his own money went into Berkshire and made him wealthy. So, like Pascal in his famous wager, he hedged his bet.

Is the stock market so efficient that people can’t beat it? Well, the efficient market theory is obviously roughly right—meaning that markets are quite efficient and it’s quite hard for anybody to beat the market by significant margins as a stock picker by just being intelligent and working in a disciplined way.

Indeed, the average result has to be the average result. By definition, everybody can’t beat the market. As I always say, the iron rule of life is that only 20% of the people can be in the top fifth. That’s just the way it is. So the answer is that it’s partly efficient and partly inefficient.

And, by the way, I have a name for people who went to the extreme efficient market theory—which is “bonkers”. It was an intellectually consistent theory that enabled them to do pretty mathematics. So I understand its seductiveness to people with large mathematical gifts. It just had a difficulty in that the fundamental assumption did not tie properly to reality.

Again, to the man with a hammer, every problem looks like a nail. If you’re good at manipulating higher mathematics in a consistent way, why not make an assumption which enables you to use your tool?

The model I like—to sort of simplify the notion of what goes on in a market for common stocks—is the pari-mutuel system at the racetrack. If you stop to think about it, a pari-mutuel system is a market. Everybody goes there and bets and the odds change based on what’s bet. That’s what happens in the stock market.

Any damn fool can see that a horse carrying a light weight with a wonderful win rate and a good post position etc., etc. is way more likely to win than a horse with a terrible record and extra weight and so on and so on. But if you look at the odds, the bad horse pays 100 to 1, whereas the good horse pays 3 to 2. Then it’s not clear which is statistically the best bet using the mathematics of Fermat and Pascal. The prices have changed in such a way that it’s very hard to beat the system.

And then the track is taking 17% off the top. So not only do you have to outwit all the other betters, but you’ve got to outwit them by such a big margin that on average, you can afford to take 17% of your gross bets off the top and give it to the house before the rest of your money can be put to work.

Given those mathematics, is it possible to beat the horses only using one’s intelligence? Intelligence should give some edge, because lots of people who don’t know anything go out and bet lucky numbers and so forth. Therefore, somebody who really thinks about nothing but horse performance and is shrewd and mathematical could have a very considerable edge, in the absence of the frictional cost caused by the house take.

Unfortunately, what a shrewd horseplayer’s edge does in most cases is to reduce his average loss over a season of betting from the 17% that he would lose if he got the average result to maybe 10%. However, there are actually a few people who can beat the game after paying the full 17%.

I used to play poker when I was young with a guy who made a substantial living doing nothing but bet harness races…. Now, harness racing is a relatively inefficient market. You don’t have the depth of intelligence betting on harness races that you do on regular races. What my poker pal would do was to think about harness races as his main profession. And he would bet only occasionally when he saw some mispriced bet available. And by doing that, after paying the full handle to the house—which I presume was around 17%—he made a substantial living.

You have to say that’s rare. However, the market was not perfectly efficient. And if it weren’t for that big 17% handle, lots of people would regularly be beating lots of other people at the horse races. It’s efficient, yes. But it’s not perfectly efficient. And with enough shrewdness and fanaticism, some people will get better results than others.

The stock market is the same way—except that the house handle is so much lower. If you take transaction costs—the spread between the bid and the ask plus the commissions—and if you don’t trade too actively, you’re talking about fairly low transaction costs. So that with enough fanaticism and enough discipline, some of the shrewd people are going to get way better results than average in the nature of things.

It is not a bit easy. And, of course, 50% will end up in the bottom half and 70% will end up in the bottom 70%. But some people will have an advantage. And in a fairly low transaction cost operation, they will get better than average results in stock picking.

How do you get to be one of those who is a winner—in a relative sense—instead of a loser?

Here again, look at the pari-mutuel system. I had dinner last night by absolute accident with the president of Santa Anita. He says that there are two or three betters who have a credit arrangement with them, now that they have off-track betting, who are actually beating the house. They’re sending money out net after the full handle—a lot of it to Las Vegas, by the way—to people who are actually winning slightly, net, after paying the full handle. They’re that shrewd about something with as much unpredictability as horse racing.

And the one thing that all those winning betters in the whole history of people who’ve beaten the pari-mutuel system have is quite simple. They bet very seldom.
It’s not given to human beings to have such talent that they can just know everything about everything all the time. But it is given to human beings who work hard at it—who look and sift the world for a mispriced be—that they can occasionally find one.

And the wise ones bet heavily when the world offers them that opportunity. They bet big when they have the odds. And the rest of the time, they don’t. It’s just that simple.

That is a very simple concept. And to me it’s obviously right—based on experience not only from the pari-mutuel system, but everywhere else.

And yet, in investment management, practically nobody operates that way. We operate that way—I’m talking about Buffett and Munger. And we’re not alone in the world. But a huge majority of people have some other crazy construct in their heads. And instead of waiting for a near cinch and loading up, they apparently ascribe to the theory that if they work a little harder or hire more business school students, they’ll come to know everything about everything all the time.

To me, that’s totally insane. The way to win is to work, work, work, work and hope to have a few insights.

How many insights do you need? Well, I’d argue: that you don’t need many in a lifetime. If you look at Berkshire Hathaway and all of its accumulated billions, the top ten insights account for most of it. And that’s with a very brilliant man—Warren’s a lot more able than I am and very disciplined—devoting his lifetime to it. I don’t mean to say that he’s only had ten insights. I’m just saying, that most of the money came from ten insights.

So you can get very remarkable investment results if you think more like a winning pari-mutuel player. Just think of it as a heavy odds against game full of craziness with an occasional mispriced something or other. And you’re probably not going to be smart enough to find thousands in a lifetime. And when you get a few, you really load up. It’s just that simple.

When Warren lectures at business schools, he says, “I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches—representing all the investments that you got to make in a lifetime. And once you’d punched through the card, you couldn’t make any more investments at all.”

He says, “Under those rules, you’d really think carefully about what you did and you’d be forced to load up on what you’d really thought about. So you’d do so much better.”

Again, this is a concept that seems perfectly obvious to me. And to Warren it seems perfectly obvious. But this is one of the very few business classes in the U.S. where anybody will be saying so. It just isn’t the conventional wisdom.

To me, it’s obvious that the winner has to bet very selectively. It’s been obvious to me since very early in life. I don’t know why it’s not obvious to very many other people.

I think the reason why we got into such idiocy in investment management is best illustrated by a story that I tell about the guy who sold fishing tackle. I asked him, “My God, they’re purple and green. Do fish really take these lures?” And he said, “Mister, I don’t sell to fish.”

Investment managers are in the position of that fishing tackle salesman. They’re like the guy who was selling salt to the guy who already had too much salt. And as long as the guy will buy salt, why they’ll sell salt. But that isn’t what ordinarily works for the buyer of investment advice.

If you invested Berkshire Hathaway-style, it would be hard to get paid as an investment manager as well as they’re currently paid—because you’d be holding a block of Wal-Mart and a block of Coca-Cola and a block of something else. You’d just sit there. And the client would be getting rich. And, after a while, the client would think, “Why am I paying this guy half a percent a year on my wonderful passive holdings?”

So what makes sense for the investor is different from what makes sense for the manager. And, as usual in human affairs, what determines the behavior are incentives for the decision maker.

From all business, my favorite case on incentives is Federal Express. The heart and soul of their system—which creates the integrity of the product—is having all their airplanes come to one place in the middle of the night and shift all the packages from plane to plane. If there are delays, the whole operation can’t deliver a product full of integrity to Federal Express customers.

And it was always screwed up. They could never get it done on time. They tried everything—moral suasion, threats, you name it. And nothing worked.
Finally, somebody got the idea to pay all these people not so much an hour, but so much a shift—and when it’s all done, they can all go home. Well, their problems cleared up overnight.

So getting the incentives right is a very, very important lesson. It was not obvious to Federal Express what the solution was. But maybe now, it will hereafter more often be obvious to you.

All right, we’ve now recognized that the market is efficient as a pari-mutuel system is efficient with the favorite more likely than the long shot to do well in racing, but not necessarily give any betting advantage to those that bet on the favorite.

In the stock market, some railroad that’s beset by better competitors and tough unions may be available at one-third of its book value. In contrast, IBM in its heyday might be selling at 6 times book value. So it’s just like the pari-mutuel system. Any damn fool could plainly see that IBM had better business prospects than the railroad. But once you put the price into the formula, it wasn’t so clear anymore what was going to work best for a buyer choosing between the stocks. So it’s a lot like a pari-mutuel system. And, therefore, it gets very hard to beat.

What style should the investor use as a picker of common stocks in order to try to beat the market—in other words, to get an above average long-term result? A standard technique that appeals to a lot of people is called “sector rotation”. You simply figure out when oils are going to outperform retailers, etc., etc., etc. You just kind of flit around being in the hot sector of the market making better choices than other people. And presumably, over a long period of time, you get ahead.
However, I know of no really rich sector rotator. Maybe some people can do it. I’m not saying they can’t. All I know is that all the people I know who got rich—and I know a lot of them—did not do it that way.

The second basic approach is the one that Ben Graham used—much admired by Warren and me. As one factor, Graham had this concept of value to a private owner—what the whole enterprise would sell for if it were available. And that was calculable in many cases.

Then, if you could take the stock price and multiply it by the number of shares and get something that was one third or less of sellout value, he would say that you’ve got a lot of edge going for you. Even with an elderly alcoholic running a stodgy business, this significant excess of real value per share working for you means that all kinds of good things can happen to you. You had a huge margin of safety—as he put it—by having this big excess value going for you.

But he was, by and large, operating when the world was in shell shock from the 1930s—which was the worst contraction in the English-speaking world in about 600 years. Wheat in Liverpool, I believe, got down to something like a 600-year low, adjusted for inflation. People were so shell-shocked for a long time thereafter that Ben Graham could run his Geiger counter over this detritus from the collapse of the 1930s and find things selling below their working capital per share and so on.

And in those days, working capital actually belonged to the shareholders. If the employees were no longer useful, you just sacked them all, took the working capital and stuck it in the owners’ pockets. That was the way capitalism then worked.

Nowadays, of course, the accounting is not realistic because the minute the business starts contracting, significant assets are not there. Under social norms and the new legal rules of the civilization, so much is owed to the employees that, the minute the enterprise goes into reverse, some of the assets on the balance sheet aren’t there anymore.

Now, that might not be true if you run a little auto dealership yourself. You may be able to run it in such a way that there’s no health plan and this and that so that if the business gets lousy, you can take your working capital and go home. But IBM can’t, or at least didn’t. Just look at what disappeared from its balance sheet when it decided that it had to change size both because the world had changed technologically and because its market position had deteriorated.

And in terms of blowing it, IBM is some example. Those were brilliant, disciplined people. But there was enough turmoil in technological change that IBM got bounced off the wave after “surfing” successfully for 60 years. And that was some collapse—an object lesson in the difficulties of technology and one of the reasons why Buffett and Munger don’t like technology very much. We don’t think we’re any good at it, and strange things can happen.

At any rate, the trouble with what I call the classic Ben Graham concept is that gradually the world wised up and those real obvious bargains disappeared. You could run your Geiger counter over the rubble and it wouldn’t click.

But such is the nature of people who have a hammer—to whom, as I mentioned, every problem looks like a nail that the Ben Graham followers responded by changing the calibration on their Geiger counters. In effect, they started defining a bargain in a different way. And they kept changing the definition so that they could keep doing what they’d always done. And it still worked pretty well. So the Ben Graham intellectual system was a very good one.

Of course, the best part of it all was his concept of “Mr. Market”. Instead of thinking the market was efficient, he treated it as a manic-depressive who comes by every day. And some days he says, “I’ll sell you some of my interest for way less than you think it’s worth.” And other days, “Mr. Market” comes by and says, “I’ll buy your interest at a price that’s way higher than you think it’s worth.” And you get the option of deciding whether you want to buy more, sell part of what you already have or do nothing at all.

To Graham, it was a blessing to be in business with a manic-depressive who gave you this series of options all the time. That was a very significant mental construct. And it’s been very useful to Buffett, for instance, over his whole adult lifetime.

However, if we’d stayed with classic Graham the way Ben Graham did it, we would never have had the record we have. And that’s because Graham wasn’t trying to do what we did.

For example, Graham didn’t want to ever talk to management. And his reason was that, like the best sort of professor aiming his teaching at a mass audience, he was trying to invent a system that anybody could use. And he didn’t feel that the man in the street could run around and talk to managements and learn things. He also had a concept that the management would often couch the information very shrewdly to mislead. Therefore, it was very difficult. And that is still true, of course—human nature being what it is.

And so having started out as Grahamites which, by the way, worked fine—we gradually got what I would call better insights. And we realized that some company that was selling at 2 or 3 times book value could still be a hell of a bargain because of momentums implicit in its position, sometimes combined with an unusual managerial skill plainly present in some individual or other, or some system or other.

And once we’d gotten over the hurdle of recognizing that a thing could be a bargain based on quantitative measures that would have horrified Graham, we started thinking about better businesses.

And, by the way, the bulk of the billions in Berkshire Hathaway have come from the better businesses. Much of the first $200 or $300 million came from scrambling around with our Geiger counter. But the great bulk of the money has come from the great businesses.

And even some of the early money was made by being temporarily present in great businesses. Buffett Partnership, for example, owned American Express and Disney when they got pounded down.

Most investment managers are in a game where the clients expect them to know a lot about a lot of things. We didn’t have any clients who could fire us at Berkshire Hathaway. So we didn’t have to be governed by any such construct. And we came to this notion of finding a mispriced bet and loading up when we were very confident that we were right. So we’re way less diversified. And I think our system is miles better.

However, in all fairness, I don’t think a lot of money managers could successfully sell their services if they used our system. But if you’re investing for 40 years in some pension fund, what difference does it make if the path from start to finish is a little more bumpy or a little different than everybody else’s so long as it’s all going to work out well in the end? So what if there’s a little extra volatility.

In investment management today, everybody wants not only to win, but to have a yearly outcome path that never diverges very much from a standard path except on the upside. Well, that is a very artificial, crazy construct. That’s the equivalent in investment management to the custom of binding the feet of Chinese women. It’s the equivalent of what Nietzsche meant when he criticized the man who had a lame leg and was proud of it.

That is really hobbling yourself. Now, investment managers would say, “We have to be that way. That’s how we’re measured.” And they may be right in terms of the way the business is now constructed. But from the viewpoint of a rational consumer, the whole system’s “bonkers” and draws a lot of talented people into socially useless activity.

And the Berkshire system is not “bonkers”. It’s so damned elementary that even bright people are going to have limited, really valuable insights in a very competitive world when they’re fighting against other very bright, hardworking people.

And it makes sense to load up on the very few good insights you have instead of pretending to know everything about everything at all times. You’re much more likely to do well if you start out to do something feasible instead of something that isn’t feasible. Isn’t that perfectly obvious?

How many of you have 56 brilliant ideas in which you have equal confidence? Raise your hands, please. How many of you have two or three insights that you have some confidence in? I rest my case.

I’d say that Berkshire Hathaway’s system is adapting to the nature of the investment problem as it really is.

We’ve really made the money out of high quality businesses. In some cases, we bought the whole business. And in some cases, we just bought a big block of stock. But when you analyze what happened, the big money’s been made in the high quality businesses. And most of the other people who’ve made a lot of money have done so in high quality businesses.

Over the long term, it’s hard for a stock to earn a much better return than the business which underlies it earns. If the business earns 6% on capital over 40 years and you hold it for that 40 years, you’re not going to make much different than a 6% return—even if you originally buy it at a huge discount. Conversely, if a business earns 18% on capital over 20 or 30 years, even if you pay an expensive looking price, you’ll end up with a fine result.

So the trick is getting into better businesses. And that involves all of these advantages of scale that you could consider momentum effects.

How do you get into these great companies? One method is what I’d call the method of finding them small get ‘em when they’re little. For example, buy Wal-Mart when Sam Walton first goes public and so forth. And a lot of people try to do just that. And it’s a very beguiling idea. If I were a young man, I might actually go into it.

But it doesn’t work for Berkshire Hathaway anymore because we’ve got too much money. We can’t find anything that fits our size parameter that way. Besides, we’re set in our ways. But I regard finding them small as a perfectly intelligent approach for somebody to try with discipline. It’s just not something that I’ve done.

Finding ‘em big obviously is very hard because of the competition. So far, Berkshire’s managed to do it. But can we continue to do it? What’s the next Coca-Cola investment for us? Well, the answer to that is I don’t know. I think it gets harder for us all the time….

And ideally and we’ve done a lot of this—you get into a great business which also has a great manager because management matters. For example, it’s made a great difference to General Electric that Jack Welch came in instead of the guy who took over Westinghouse—a very great difference. So management matters, too.

And some of it is predictable. I do not think it takes a genius to understand that Jack Welch was a more insightful person and a better manager than his peers in other companies. Nor do I think it took tremendous genius to understand that Disney had basic momentums in place which are very powerful and that Eisner and Wells were very unusual managers.

So you do get an occasional opportunity to get into a wonderful business that’s being run by a wonderful manager. And, of course, that’s hog heaven day. If you don’t load up when you get those opportunities, it’s a big mistake.

Occasionally, you’ll find a human being who’s so talented that he can do things that ordinary skilled mortals can’t. I would argue that Simon Marks—who was second generation in Marks & Spencer of England—was such a man. Patterson was such a man at National Cash Register. And Sam Walton was such a man.

These people do come along—and in many cases, they’re not all that hard to identify. If they’ve got a reasonable hand—with the fanaticism and intelligence and so on that these people generally bring to the party—then management can matter much.

However, averaged out, betting on the quality of a business is better than betting on the quality of management. In other words, if you have to choose one, bet on the business momentum, not the brilliance of the manager.

But, very rarely, you find a manager who’s so good that you’re wise to follow him into what looks like a mediocre business.

Another very simple effect I very seldom see discussed either by investment managers or anybody else is the effect of taxes. If you’re going to buy something which compounds for 30 years at 15% per annum and you pay one 35% tax at the very end, the way that works out is that after taxes, you keep 13.3% per annum.

In contrast, if you bought the same investment, but had to pay taxes every year of 35% out of the 15% that you earned, then your return would be 15% minus 35% of 15%—or only 9.75% per year compounded. So the difference there is over 3.5%. And what 3.5% does to the numbers over long holding periods like 30 years is truly eye-opening. If you sit back for long, long stretches in great companies, you can get a huge edge from nothing but the way that income taxes work.

Even with a 10% per annum investment, paying a 35% tax at the end gives you 8.3% after taxes as an annual compounded result after 30 years. In contrast, if you pay the 35% each year instead of at the end, your annual result goes down to 6.5%. So you add nearly 2% of after-tax return per annum if you only achieve an average return by historical standards from common stock investments in companies with tiny dividend payout ratios.

But in terms of business mistakes that I’ve seen over a long lifetime, I would say that trying to minimize taxes too much is one of the great standard causes of really dumb mistakes. I see terrible mistakes from people being overly motivated by tax considerations.

Warren and I personally don’t drill oil wells. We pay our taxes. And we’ve done pretty well, so far. Anytime somebody offers you a tax shelter from here on in life, my advice would be don’t buy it.

In fact, any time anybody offers you anything with a big commission and a 200-page prospectus, don’t buy it. Occasionally, you’ll be wrong if you adopt “Munger’s Rule”. However, over a lifetime, you’ll be a long way ahead—and you will miss a lot of unhappy experiences that might otherwise reduce your love for your fellow man.

There are huge advantages for an individual to get into a position where you make a few great investments and just sit back and wait: You’re paying less to brokers. You’re listening to less nonsense. And if it works, the governmental tax system gives you an extra 1, 2 or 3 percentage points per annum compounded.

And you think that most of you are going to get that much advantage by hiring investment counselors and paying them 1% to run around, incurring a lot of taxes on your behalf’? Lots of luck.

Are there any dangers in this philosophy? Yes. Everything in life has dangers. Since it’s so obvious that investing in great companies works, it gets horribly overdone from time to time. In the “Nifty-Fifty” days, everybody could tell which companies were the great ones. So they got up to 50, 60 and 70 times earnings. And just as IBM fell off the wave, other companies did, too. Thus, a large investment disaster resulted from too high prices. And you’ve got to be aware of that danger….

So there are risks. Nothing is automatic and easy. But if you can find some fairly-priced great company and buy it and sit, that tends to work out very, very well indeed—especially for an individual,

Within the growth stock model, there’s a sub-position: There are actually businesses, that you will find a few times in a lifetime, where any manager could raise the return enormously just by raising prices—and yet they haven’t done it. So they have huge untapped pricing power that they’re not using. That is the ultimate no-brainer.

That existed in Disney. It’s such a unique experience to take your grandchild to Disneyland. You’re not doing it that often. And there are lots of people in the country. And Disney found that it could raise those prices a lot and the attendance stayed right up.

So a lot of the great record of Eisner and Wells was utter brilliance but the rest came from just raising prices at Disneyland and Disneyworld and through video cassette sales of classic animated movies.

At Berkshire Hathaway, Warren and I raised the prices of See’s Candy a little faster than others might have. And, of course, we invested in Coca-Cola—which had some
untapped pricing power. And it also had brilliant management. So a Goizueta and Keough could do much more than raise prices. It was perfect.

You will get a few opportunities to profit from finding underpricing. There are actually people out there who don’t price everything as high as the market will easily stand. And once you figure that out, it’s like finding in the street—if you have the courage of your convictions.

If you look at Berkshire’s investments where a lot of the money’s been made and you look for the models, you can see that we twice bought into twonewspaper towns which have since become onenewspaper towns. So we made a bet to some extent….

In one of those—The Washington Post—we bought it at about 20% of the value to a private owner. So we bought it on a Ben Grahamstyle basis—at onefifth of obvious value—and, in addition, we faced a situation where you had both the top hand in a game that was clearly going to end up with one winner and a management with a lot of integrity and intelligence. That one was a real dream. They’re very high class people—the Katharine Graham family. That’s why it was a dream—an absolute, damn dream.

Of course, that came about back in ‘73-74. And that was almost like 1932. That was probably a once-in-40-yearstype denouement in the markets. That investment’s up about 50 times over our cost.

If I were you, I wouldn’t count on getting any investment in your lifetime quite as good as The Washington Post was in ‘73 and ‘74.

But it doesn’t have to be that good to take care of you.

Let me mention another model. Of course, Gillette and Coke make fairly lowpriced items and have a tremendous marketing advantage all over the world. And in Gillette’s case, they keep surfing along new technology which is fairly simple by the standards of microchips. But it’s hard for competitors to do.

So they’ve been able to stay constantly near the edge of improvements in shaving. There are whole countries where Gillette has more than 90% of the shaving market.
GEICO is a very interesting model. It’s another one of the 100 or so models you ought to have in your head. I’ve had many friends in the sick business fixup game over a long lifetime. And they practically all use the following formula—I call it the cancer surgery formula:

They look at this mess. And they figure out if there’s anything sound left that can live on its own if they cut away everything else. And if they find anything sound, they just cut away everything else. Of course, if that doesn’t work, they liquidate the business. But it frequently does work.

And GEICO had a perfectly magnificent business submerged in a mess, but still working. Misled by success, GEICO had done some foolish things. They got to thinking that, because they were making a lot of money, they knew everything. And they suffered huge losses.

All they had to do was to cut out all the folly and go back to the perfectly wonderful business that was lying there. And when you think about it, that’s a very simple model. And it’s repeated over and over again.

And, in GEICO’s case, think about all the money we passively made…. It was a wonderful business combined with a bunch of foolishness that could easily be cut out. And people were coming in who were temperamentally and intellectually designed so they were going to cut it out. That is a model you want to look for.

And you may find one or two or three in a long lifetime that are very good. And you may find 20 or 30 that are good enough to be quite useful.

Finally, I’d like to once again talk about investment management. That is a funny business because on a net basis, the whole investment management business together gives no value added to all buyers combined. That’s the way it has to work.

Of course, that isn’t true of plumbing and it isn’t true of medicine. If you’re going to make your careers in the investment management business, you face a very peculiar situation. And most investment managers handle it with psychological denial just like a chiropractor. That is the standard method of handling the limitations of the investment management process. But if you want to live the best sort of life, I would urge each of you not to use the psychological denial mode.

I think a select few—a small percentage of the investment managers—can deliver value added. But I don’t think brilliance alone is enough to do it. I think that you have to have a little of this discipline of calling your shots and loading up—you want to maximize your chances of becoming one who provides above average real returns for clients over the long pull.

But I’m just talking about investment managers engaged in common stock picking. I am agnostic elsewhere. I think there may well be people who are so shrewd about currencies and this, that and the other thing that they can achieve good longterm records operating on a pretty big scale in that way. But that doesn’t happen to be my milieu. I’m talking about stock picking in American stocks.
I think it’s hard to provide a lot of value added to the investment management client, but it’s not impossible.

As I Walk Through Life I've Learned

2009-02-18T22:35:00.000-08:00

Author: Unknown

As I Walk Through Life...

I've Learned-
that you cannot make someone love you. All you can do is be someone who can be loved. The rest is up to them.

I've learned-
that no matter how much I care, some people just don't care back.

I've learned-
that it takes years to build up trust, and only seconds to destroy it.

I've learned-
that no matter how good a friend is, they're going to hurt you every once in a while and you must forgive them for that.

I've learned-
that it's not what you have in your life but who you have in your life that counts.

I've learned-
that you should never ruin an apology with an excuse.

I've learned-
that you can get by on charm for about fifteen minutes. After that, you'd better know something.

I've learned-
that you shouldn't compare yourself to the best others can do.

I've learned-
that you can do something in an instant that will give you heartache for life.

I've learned-
that it's taking me a long time to become the person I want to be.

I've learned-
that you should always leave loved ones with loving words. It may be the last time you see them.

I've learned-
that you can keep going long after you can't.

I've learned-
that we are responsible for what we do, no matter how we feel.

I've learned-
that either you control your attitude or it controls you.

I've learned-
that regardless of how hot and steamy a relationship is at first, the passion fades and there had better be something else to take its place.

I've learned-
that heroes are the people who do what has to be done when it needs to be done, regardless of the consequences.

I've learned-
that money is a lousy way of keeping score.

I've learned-
that my best friend and I can do anything or nothing and have the best time.

I've learned-
that sometimes the people you expect to kick you when you're down will be the ones to help you get back up.

I've learned-
that sometimes when I'm angry I have the right to be angry, but that doesn't give me the right to be cruel.

I've learned-
that true friendship continues to grow, even over the longest distance. Same goes for true love.

I've learned-
that just because someone doesn't love you the way you want them to doesn't mean they don't love you with all they have.

I've learned-
that maturity has more to do with what types of experiences you've had and what you've learned from them and less to do with how many birthdays you've celebrated.

I've learned-
that you should never tell a child their dreams are unlikely or outlandish. Few things are more humiliating, and what a tragedy it would be if they believed it.

I've learned-
that your family won't always be there for you. It may seem funny, but people you aren't related to can take care of you and love you and teach you to trust people again. Families aren't biological.

I've learned-
that it isn't always enough to be forgiven by others. Sometimes you are to learn to forgive yourself.

I've learned-
that no matter how bad your heart is broken the world doesn't stop for your grief.

I've learned-
that our background and circumstances may have influenced who we are, but we are responsible for who we become.

I've learned-
that a rich person is not the one who has the most, but is one who needs the least.

I've learned-
that just because two people argue, it doesn't mean they don't love each other. And just because they don't argue, it doesn't mean they do.

I've learned-
that we don't have to change friends if we understand that friends change.

I've learned-
that you shouldn't be so eager to find out a secret. It could change your life forever.

I've learned-
that two people can look at the exact same thing and see something totally different.

I've learned-
that no matter how you try to protect your children, they will eventually get hurt and you will hurt in the process.

I've learned-
that even when you think you have no more to give, when a friend cries out to you, you will find the strength to help.

I've learned-
that credentials on the wall do not make you a decent human being.

I've learned-
that the people you care about most in life are taken from you too soon.

I've learned-
that it's hard to determine where to draw the line between being nice and not hurting people's feelings, and standing up for what you believe.

I've learned-
that people will forget what you said, and people will forget what you did, but people will never forget how you made them feel.

RULES OF LIVING

2009-02-07T03:49:00.000-08:00

-Thomas Jefferson

Never put off for tomorrow - What you can do today.

Never trouble another for - What you can do yourself.

Never spend your money - Before you have it.

Never buy what you do not want - Because it is cheap.

Pride costs us more than hunger,- Thirst and cold.

We seldom repent having - Eaten too little.

Nothing is troublesome - That we do willingly.

How much pain never occurred evils cost us.

Take things always by the - Smooth handle.

When angry, count ten before you speak; if very angry, an hundred.

Keep the Spark Alive - Inaugural Speech By Chetan Bhagat

2009-01-18T19:39:00.000-08:00

Keep the Spark Alive

Inaugural Speech for the new batch at the Symbiosis BBA program, Pune 23rd June, 2008

By Chetan Bhagat

Good Morning everyone and thank you for giving me this chance to speak to you. This day is about you. You, who have come to this college, leaving the comfort of your homes (or in some cases discomfort), to become something in your life. I am sure you are excited. There are few days in human life when one is truly elated. The first day in college is one of them. When you were getting ready today, you felt a tingling in your stomach. What would the auditorium be like, what would the teachers be like, who are my new classmates - there is so much to be curious about. I call this excitement, the spark within you that makes you feel truly alive today. Today I am going to talk about keeping the spark shining. Or to put it another way, how to be happy most, if not all the time.

Where do these sparks start? I think we are born with them. My 3-year old twin boys have a million sparks. A little Spiderman toy can make them jump on the bed. They get thrills from creaky swings in the park. A story from daddy gets them excited. They do a daily countdown for birthday party – several months in advance – just for the day they will cut their own birthday cake.

I see students like you, and I still see some sparks. But when I see older people, the spark is difficult to find. That means as we age, the spark fades. People whose spark has faded too much are dull, dejected, aimless and bitter. Remember Kareena in the first half of Jab We Met vs the second half? That is what happens when the spark is lost. So how to save the spark?

Imagine the spark to be a lamp's flame. The first aspect is nurturing - to give your spark the fuel, continuously. The second is to guard against storms.

To nurture, always have goals. It is human nature to strive, improve and achieve full potential. In fact, that is success. It is what is possible for you. It isn't any external measure - a certain cost to company pay package, a particular car or house.

Most of us are from middle class families. To us, having material landmarks is success and rightly so. When you have grown up where money constraints force everyday choices, financial freedom is a big achievement. But it isn't the purpose of life. If that was the case, Mr. Ambani would not show up for work. Shah Rukh Khan would stay at home and not dance anymore. Steve Jobs won't be working hard to make a better iPhone, as he sold Pixar for billions of dollars already. Why do they do it? What makes them come to work everyday? They do it because it makes them happy. They do it because it makes them feel alive. Just getting better from current levels feels good. If you study hard, you can improve your rank. If you make an effort to interact with people, you will do better in interviews. If you practice, your cricket will get better. You may also know that you cannot become Tendulkar, yet. But you can get to the next level. Striving for that next level is important.

Nature designed with a random set of genes and circumstances in which we were born. To be happy, we have to accept it and make the most of nature's design. Are you? Goals will help you do that.

I must add, don't just have career or academic goals. Set goals to give you a balanced, successful life. I use the word balanced before successful. Balanced means ensuring your health, relationships, mental peace are all in good order.

There is no point of getting a promotion on the day of your breakup. There is no fun in driving a car if your back hurts. Shopping is not enjoyable if your mind is full of tensions.

You must have read some quotes - Life is a tough race, it is a marathon or whatever. No, from what I have seen so far, life is one of those races in nursery school, where you have to run with a marble in a spoon kept in your mouth. If the marble falls, there is no point coming first. Same with life, where health and relationships are the marble. Your striving is only worth it if there is harmony in your life. Else, you may achieve the success, but this spark, this feeling of being excited and alive, will start to die.

One last thing about nurturing the spark - don't take life seriously. One of my yoga teachers used to make students laugh during classes. One student asked him if these jokes would take away something from the yoga practice. The teacher said - don't be serious, be sincere. This quote has defined my work ever since. Whether its my writing, my job, my relationships or any of my goals. I get thousands of opinions on my writing everyday. There is heaps of praise, there is intense criticism. If I take it all seriously, how will I write? Or rather, how will I live? Life is not to be taken seriously, as we are really temporary here. We are like a pre-paid card with limited validity. If we are lucky, we may last another 50 years. And 50 years is just 2,500 weekends. Do we really need to get so worked up? It's ok, bunk a few classes, goof up a few interviews, fall in love. We are people, not programmed devices.

I've told you three things - reasonable goals, balance and not taking it too seriously that will nurture the spark. However, there are four storms in life that will threaten to completely put out the flame. These must be guarded against. These are disappointment, frustration, unfairness and loneliness of purpose.

Disappointment will come when your effort does not give you the expected return. If things don't go as planned or if you face failure. Failure is extremely difficult to handle, but those that do come out stronger. What did this failure teach me? is the question you will need to ask. You will feel miserable. You will want to quit, like I wanted to when nine publishers rejected my first book. Some IITians kill themselves over low grades – how silly is that? But that is how much failure can hurt you. But it's life. If challenges could always be overcome, they would cease to be a challenge. And remember - if you are failing at something, that means you are at your limit or potential. And that's where you want to be.

Disappointment's cousin is frustration, the second storm. Have you ever been frustrated? It happens when things are stuck. This is especially relevant in India. From traffic jams to getting that job you deserve, sometimes things take so long that you don't know if you chose the right goal. After books, I set the goal of writing for Bollywood, as I thought they needed writers. I am called extremely lucky, but it took me five years to get close to a release. Frustration saps excitement, and turns your initial energy into something negative, making you a bitter person. How did I deal with it? A realistic assessment of the time involved – movies take a long time to make even though they are watched quickly, seeking a certain enjoyment in the process rather than the end result – at least I was learning how to write scripts, having a side plan – I had my third book to write and even something as simple as pleasurable distractions in your life - friends, food, travel can help you overcome it. Remember, nothing is to be taken seriously. Frustration is a sign somewhere, you took it too seriously.

Unfairness - this is hardest to deal with, but unfortunately that is how our country works. People with connections, rich dads, beautiful faces, pedigree find it easier to make it – not just in Bollywood, but everywhere. And sometimes it is just plain luck. There are so few opportunities in India, so many stars need to be aligned for you to make it happen. Merit and hard work is not always linked to achievement in the short term, but the long term correlation is high, and ultimately things do work out. But realize, there will be some people luckier than you. In fact, to have an opportunity to go to college and understand this speech in English means you are pretty damm lucky by Indian standards.. Let's be grateful for what we have and get the strength to accept what we don't. I have so much love from my readers that other writers cannot even imagine it. However, I don't get literary praise. It's ok. I don't look like Aishwarya Rai, but I have two boys who I think are more beautiful than her.. It's ok. Don't let unfairness kill your spark.

Finally, the last point that can kill your spark is isolation. As you grow older you will realize you are unique. When you are little, all kids want Ice cream and Spiderman. As you grow older to college, you still are a lot like your friends. But ten years later and you realize you are unique. What you want, what you believe in, what makes you feel, may be different from even the people closest to you. This can create conflict as your goals may not match with others. . And you may drop some of them. Basketball captains in college invariably stop playing basketball by the time they have their second child. They give up something that meant so much to them. They do it for their family. But in doing that, the spark dies. Never, ever make that compromise. Love yourself first, and then others.

There you go. I've told you the four thunderstorms - disappointment, frustration, unfairness and isolation. You cannot avoid them, as like the monsoon they will come into your life at regular intervals. You just need to keep the raincoat handy to not let the spark die.

I welcome you again to the most wonderful years of your life. If someone gave me the choice to go back in time, I will surely choose college. But I also hope that ten years later as well, your eyes will shine the same way as they do today. That you will Keep the Spark alive, not only through college, but through the next 2,500 weekends. And I hope not just you, but my whole country will keep that spark alive, as we really need it now more than any moment in history. And there is something cool about saying - I come from the land of a billion sparks.

Thank You

How Much Does Intelligence Matter

2009-01-12T19:15:00.000-08:00

Article from Study Hacks calnewport.com/blog/

(Source : http://calnewport.com/blog/2008/12/17/q-a-how-much-does-intelligence-matter-at-college/)

How Much Does Intelligence Matter?

A student recently sent me an interesting question. It’s a topic I’ve thought a lot about, so I thought I would share my answer with you.

Here’s the original question:

To what extent does intelligence matter in college success? I have a group of friends that try very hard at school, yet fail to score the grades a select group of people I know are able to do. This question captures my concern about grad school admissions: no matter how hard I try, there will always be hundreds of other “geniuses” out there.

I responded: I don’t believe that intrinsic intelligence plays any significant role at the college level.

Let me explain why…

Doogie Howser Nation

Americans are obsessed with genius. We love the idea of Doogie Howser. We think there are math people and arts people, naturally gifted writers and those who were born to play golf.

In the classroom, however, this causes problems. When we see a student breeze through a class while we struggle, we label him “naturally good” at the subject and then write it off as something that we’re not meant to master. This holds back a lot of students from reaching their potential. It also causes a lot of unnecessary anxiety.

Here’s the thing: I don’t buy it. And neither do scientists. No matter how hard researcher look, they can’t find any trace that significant natural abilities actually exist.

How Does a Piano Virtuoso Become Good?

In the early 1980s, Benjamin Bloom, an educational psychologist from the University of Chicago, launched a massive research effort to answer a simple question: how do extremely talented people become good?

His team identified 120 individuals who achieved international recognition. They were split evenly between the following fields: concert pianists, tennis players, swimmers, mathematicians, sculptors and research neurologists.

Over a period of five years, his team conducted extensive interviews with the individuals (and their families) to reconstruct their path to superstardom. The important result from this study was not what Bloom found, but what he failed to find: There was no trace of prodigies.

These stars got good only after many years of deliberate practice. Not only did it take a long time, but for many of these years there was no evidence that they would one day be great. After 6 years of serious training, the future concert pianists, for example, were still competing only at the local level. And they lost as much as they won The swimmers, on average, competed for 8 years at the national level before they started placing first, second, or third. Among the mathematicians and the neurologists, no one become renowned until their late 20s or early 30s.

This begs a natural follow-up question: if practice is key, why did these 120 individuals practice so hard while so many others give up? Fortunately, one of the researchers from Bloom’s team thought this question was worth exploring.

The Source of Persistence

In a 1997 study, Lauren Sosniak, ~~a current Berkeley professor~~ who was a member of Bloom’s original research team, dived back into the interview archives to figure out why the superstars persisted. She soon discovered that almost without exception they had all been exposed to their field, in a playful, unstructured, exploratory manner very early in life.

This random exposure built an interest which gave them just enough confidence to persist through the first stage of formal training. This extra persistence distinguished them enough to get re-discovered and advanced to more rigorous formal training. Their confidence grew. They were rediscovered and placed into ever more elite groups. Their confidence grew some more. And so on…

How a Math Person Becomes a Math Person

Sosniak gives the example of a future math star who recalled that when he was a kid, his dad would play a game where he would ask him what fraction of his omelet was left on the plate. He thought it was fun and soon learned his fractions.

Let’s imagine, for a moment, how this early exposure might have played out throughout the future mathematician’s education.

The omelet game might have generated slightly more confidence when the student was in his early elementary school math classes. His teachers, impressed that he seemed to know the fractions so well, probably would have then tracked him into the gifted and talented programs for math. At that young age, there isn’t much criteria to judge by, so seeming to be engaged in the math classroom is as good as any.

Once there, the student would get advanced training. More importantly, his confidence that he was good in math would increase. This would lead him to spend more time grappling with problems, which provides perfect deliberate practice (he’s stretching just beyond his ability) which in turn would make him even better. This gives him more confidence which leads to more deliberate practice and more ability, and the cycle continues.

By the time he arrives at college he’ll be considered a math whiz. By the time he’s 30, he’s a star in his field.

Why?

Because his dad liked to play with his food…

What You Can Do

You will encounter people at college who are much better than you at certain subjects. As we learned, this has nothing to do with a natural ability that you lack. They have simply done more deliberate practice of the relevant skills than you.

Here’s the good news: you can reduce this gap. Instead of despairing about your lack of ability to solve math problems or ace the LSAT, figure out your own plan of deliberate practice.

For example, you can experience huge jumps in math ability by tackling problem sets in a way that stretches your ability and adopting insight-driven review. Remember, this is how I went from a non-math person to a math whiz in one semester.

The same idea holds for other subjects. Early in my college career my papers were lacking. I came from a public high school. Many of my peers were from top private schools that had more demanding classes. These students simply wrote much better than me.

I didn’t, however, despair: “I just don’t have a gift for writing!” Instead, I practiced. I wrote for the newspaper. I wrote for magazines on campus. I obsessed over my papers, pushing myself to be better with each draft. By the time I reached my junior year I would regularly get notes that my papers were some of the best in the class.

I made myself into a “writing person.” Natural ability had nothing to do with it.

To answer the question that motivated this post: stop obsessing over intelligence. People are good at what they’ve practiced. Figure out what you want to be good at, then start making yourself better. You might not catch up to the rare student who has been building his ability over the past decade, but you can get good enough to score well.

Unless of course you’re Doogie. For him, everything just comes easy…

Don't Quit

2009-01-07T04:28:00.000-08:00

Author Unknown

When things go wrong, as they sometimes will,
When the road you're trudging seems all up hill,
When the funds are low and the debts are high,
And you want to smile, but you have to sigh,
When care is pressing you down a bit,
Rest if you must, but don't you quit.

Life is queer with its twists and turns,
As everyone of us sometimes learns,
And many a failure turns about
When he might have won had he stuck it out;
Don't give up, though the pace seems slow -
You might succeed with another blow.

Often the goal is nearer than
It seems to a faint and faltering man,
Often the struggler has given up
When he might have captured the victor's cup.
And he learned too late, when the night slipped down,
How close he was to the golden crown.

Success is failure turned inside out -
The silver tint of the clouds of doubt -
And you never can tell how close you are,
It may be near when it seems afar;
So stick to the fight when you're hardest hit -
It's when things seem worst that you mustn't quit.

Father Forgets

2008-12-12T02:53:00.000-08:00

Source Dale Carnegie

Any fool can criticize, condemn and complain - and
most fools do.
But it takes character and self-control to be under-standing
and forgiving.
“A great man shows his greatness,” said Carlyle, “by
the way he treats little men.”

Often parents are tempted to criticize their children. You would expect me to say “don’t.” But I will not, I am merely going to say, “Before you criticize them, read one of the classics of American journalism, ‘Father Forgets.’ ” It originally appeared as an editorial in the People's Home Journal.

“Father Forgets” is one of those little pieces which- dashed of in a moment of sincere feeling - strikes an echoing chord in so many readers as to become a perenial reprint favorite. Since its first appearance, “Father Forgets" has been reproduced, writes the author, W, Livingston Larned, “in hundreds of magazines and house organs, and in newspapers the country over. It has been reprinted almost as extensively in many foreign languages. I have given personal permission to thousands who wished to read it from school, church, and lecture platforms. It has been ‘on the air’ on countless occasions and programs. Oddly enough, college periodicals have used it, and high-school magazines. Sometimes a little piece seems mysteriously to ‘click.’ This one certainly did.”

FATHER FORGETS

W. Livingston Larned

Listen, son: I am saying this as you lie asleep, one little paw crumpled under your cheek and the blond curls stickily wet on your damp forehead. I have stolen into your room alone. Just a few minutes ago, as I sat reading my paper in the library, a stifling wave of remorse swept over me. Guiltily I came to your bedside.
There are the things I was thinking, son: I had been cross to you. I scolded you as you were dressing for school because you gave your face merely a dab with a towel. I took you to task for not cleaning your shoes. I called out angrily when you threw some of your things on the floor.

At breakfast I found fault, too. You spilled things. You gulped down your food. You put your elbows on the table. You spread butter too thick on your bread. And as you started off to play and I made for my train, you turned and waved a hand and called, “Goodbye, Daddy!” and I frowned, and said in reply, “Hold your shoulders back!”

Then it began all over again in the late afternoon. As I came up the road I spied you, down on your knees, playing marbles. There were holes in your stockings. I humiliated you before your boyfriends by marching you ahead of me to the house. Stockings were expensive - and if you had to buy them you would be more careful! Imagine that, son, from a father!

Do you remember, later, when I was reading in the library, how you came in timidly, with a sort of hurt look in your eyes? When I glanced up over my paper, impatient at the interruption, you hesitated at the door. “What is it you want?” I snapped.

You said nothing, but ran across in one tempestuous plunge, and threw your arms around my neck and kissed me, and your small arms tightened with an affection that God had set blooming in your heart and which even neglect could not wither. And then you were gone, pattering up the stairs.

Well, son, it was shortly afterwards that my paper slipped from my hands and a terrible sickening fear came over me. What has habit been doing to me? The habit of finding fault, of reprimanding - this was my reward to you for being a boy. It was not that I did not love you; it was that I expected too much of youth. I was measuring you by the yardstick of my own years.

And there was so much that was good and fine and true in your character. The little heart of you was as big as the dawn itself over the wide hills. This was shown by your spontaneous impulse to rush in and kiss me good night.Nothing else matters tonight, son. I have come to your bed-side in the darkness, and I have knelt there, ashamed!

It is a feeble atonement; I know you would not understand these things if I told them to you during your waking hours. But tomorrow I will be a real daddy! I will chum with you, and suffer when you suffer, and laugh when you laugh. I will bite my tongue when impatient words come. I will keep saying as if it were a ritual: “He is nothing but a boy - a little boy!”

I am afraid I have visualized you as a man. Yet as I see you now, son, crumpled and weary in your cot, I see that you are still a baby. Yesterday you were in your mother’s arms, your head on her shoulder. I have asked too much, too much.

Instead of condemning people, let’s try to understand them. Let’s try to figure out why they do what they do. That’s a lot more profitable and intriguing than criticism; and it breeds sympathy, tolerance and kindness. “To know all is to forgive all.”

As Dr. Johnson said: “God himself, sir, does not propose to judge man until the end of his days.” Why should you and I ?

ABRAHAM LINCOLN's LETTER TO SON's HEADMASTER

2008-11-25T02:36:00.000-08:00

A letter written by Abraham Lincoln to the Headmaster of a school in which his son was studying. It contains an advice, which is still relevant today for executives, workers, teachers, parents and students.

A WORD TO TEACHERS

"He will have to learn, I know, that all men are not just and are not true. But teach him if you can, the wonder of books.. but also give him quiet time to ponder the eternal mystery of birds in the sky, bees in the sun and flowers on a green hillside.

In school, teach him it is far more honorable to fall than to cheat.....

Teach to have faith in his own ideas, even if everyone tells him he is wrong.

Teach him to be gentle with gentlepeople and tough with the tough.

Try to give my son the strength not to follow the crowd when everyone getting on the bandwagon...

Teach him to listen to all men; but teach him also to filter all he hears on a screen of truth, and take only the good that comes through.

Teach him, if you can, how to laugh when he is sad... Teach him there is no shame in tears.

Teach him to scoff at cynics and to be beware of too much sweetness.. Teach him to sell his brawn and brain to highest bidders, but never to put a price on his heart and soul. Teach him to close his ears to a howling mob.. and stand and fight if thinks he is right.

Treat him gently, but do not cuddle him, because only the test of fire makes fine steel. Let him have the courage to be impatient.. Let him have the patience to be brave. Teach him always to have sublime faith in himself, because then he will have faith in humankind.

This is a big order, but see what you can do. . He is such a fine little fellow my son!

Panorama - Blue Moon, a restaurant in Lima - Peru

2008-11-04T05:40:00.000-08:00

Blue Moon, a restaurant in Lima - Peru

Claims to have the world's second biggest bottle collection (when it comes to limited editions of artistic bottles). 17.500 bottles in public view, and 5.000 bottles additionally stored away from public view.

And of course the buffet is superior.

Click on the link below and enjoy.

http://www.panoramas.dk/2008/flash/restaurant-peru.html

Good Sense of Humor

2008-11-01T02:28:00.000-07:00

“When someone blushes with embarrassment,
When someone carries away ache,
When something sacred is made to appear common,
When someone’s weakness provides the laughter,
When profanity is required to make it funny,
When a child is brought to tears or
When everyone can’t join the laughter,
It is a poor joke.”

Cliff Thomas

RISK

2008-10-28T04:25:00.001-07:00

By Arthur Ward

To laugh is to risk appearing the fool.
To weep is to risk appearing sentimental.
To reach out to others is to risk involvement.
To expose feelings is to risk exposing your true self.
To place your ideas, your dreams before a crowd is to risk their loss.
To love is to risk not being loved in return.
To live is to risk dying.
To hope is to risk despair.
To try is to risk failure.

But risks must be taken,
because the greatest hazard in life is to do nothing.

The person who risks nothing,
does nothing, has nothing, and is nothing.

They may avoid suffering and sorrow,
but they cannot learn, feel, change, grow, love, live.

Chained by their attitudes, they are a slave,
they forfeited their freedom.

Only the person who risks can be free

N R Narayan Murthy's lecture at New York University

2008-10-18T12:38:00.000-07:00

[N R Narayan Murthy, chief mentor and chairman of the board, Infosys Technologies, delivered a pre-commencement lecture at the New York University ( Stern School of Business) on May 9. It is a scintillating speech, Murthy speaks about the lessons he learnt from his life and career.]

Dean Cooley, faculty, staff, distinguished guests, and, most importantly, the graduating class of 2007, it is a great privilege to speak at your commencement ceremonies.
I thank Dean Cooley and Prof Marti Subrahmanyam for their kind invitation. I am exhilarated to be part of such a joyous occasion. Congratulations to you, the class of 2007, on completing an important milestone in your life journey.
After some thought, I have decided to share with you some of my life lessons. I learned these lessons in the context of my early career struggles, a life lived under the influence of sometimes unplanned events which were the crucibles that tempered my character and reshaped my future.
I would like first to share some of these key life events with you, in the hope that these may help you understand my struggles and how chance events and unplanned encounters with influential persons shaped my life and career.
Later, I will share the deeper life lessons that I have learned. My sincere hope is that this sharing will help you see your own trials and tribulations for the hidden blessings they can be .
The first event occurred when I was a graduate student in Control Theory at IIT, Kanpur , in India . At breakfast on a bright Sunday morning in 1968, I had a chance encounter with a famous computer scientist on sabbatical from a well-known US university.
He was discussing exciting new developments in the field of computer science with a large group of students and how such developments would alter our future. He was articulate, passionate and quite convincing. I was hooked. I went straight from breakfast to the library, read four or five papers he had suggested, and left the library determined to study computer
science.
Friends, when I look back today at that pivotal meeting, I marvel at how one role model can alter for the better the future of a young student. This experience taught me that valuable advice can sometimes come from an unexpected source, and chance events can sometimes open new doors.
The next event that left an indelible mark on me occurred in 1974. The location: Nis , a border town between former Yugoslavia, now Serbia, and Bulgaria. I was hitchhiking from Paris back to Mysore , India , my home town.
By the time a kind driver dropped me at Nis railway station at 9 p.m. on a Saturday night, the restaurant was closed. So was the bank the next morning, and I could not eat because I had no local money. I slept on the railway platform until 8.30 pm in the night when the Sofia Express pulled in.
The only passengers in my compartment were a girl and a boy. I struck a conversation in French with the young girl. She talked about the travails of living in an iron curtain country, until we were roughly interrupted by some policemen who, I later gathered, were summoned by the young man who thought we were criticizing the communist government of Bulgaria .
The girl was led away; my backpack and sleeping bag were confiscated. I was dragged along the platform into a small 8×8 foot room with a cold stone floor and a hole in one corner by way of toilet facilities. I was held in that bitterly cold room without food or water for over 72 hours.
I had lost all hope of ever seeing the outside world again, when the door opened. I was again dragged out unceremoniously, locked up in the guard’s compartment on a departing freight train and told that I would be released 20 hours later upon reaching Istanbul. The guard’s final words still ring in my ears — ” You are from a friendly country called India and that is why we are letting you go!”
The journey to Istanbul was lonely, and I was starving. This long, lonely, cold journey forced me to deeply rethink my convictions about Communism. Early on a dark Thursday morning, after being hungry for 108 hours, I was purged of any last vestiges of affinity for the Left.
I concluded that entrepreneurship, resulting in large-scale job creation, was the only viable mechanism for eradicating poverty in societies.
Deep in my heart, I always thank the Bulgarian guards for transforming me from a confused Leftist into a determined, compassionate capitalist!
Inevitably, this sequence of events led to the eventual founding of Infosys in 1981.
While these first two events were rather fortuitous, the next two, both concerning the Infosys journey, were more planned and profoundly influenced my career trajectory.
On a chilly Saturday morning in winter 1990, five of the seven founders of Infosys met in our small office in a leafy Bangalore suburb. The decision at hand was the possible sale of Infosys for the enticing sum of $1 million. After nine years of toil in the then business-unfriendly India , we were quite happy at the prospect of seeing at least some money.
I let my younger colleagues talk about their future plans. Discussions about the travails of our journey thus far and our future challenges went on for about four hours. I had not yet spoken a word.
Finally, it was my turn. I spoke about our journey from a small Mumbai apartment in 1981 that had been beset with many challenges, but also of how I believed we were at the darkest hour before the dawn. I then took an audacious step. If they were all bent upon selling the company, I said, I would buy out all my colleagues, though I did not have a cent in my pocket.
There was a stunned silence in the room. My colleagues wondered aloud about my foolhardiness. But I remained silent. However, after an hour of my arguments, my colleagues changed their minds to my way of thinking. I urged them that if we wanted to create a great company, we should be optimistic and confident. They have more than lived up to their promise of that day.
In the seventeen years since that day, Infosys has grown to revenues in excess of $3.0 billion, a net income of more than $800 million and a market capitalisation of more than $28 billion, 28,000 times richer than the offer of $1 million on that day.
In the process, Infosys has created more than 70,000 well-paying jobs, 2,000-plus dollar-millionaires and 20,000-plus rupee millionaires.
A final story: On a hot summer morning in 1995, a Fortune-10 corporation had sequestered all their Indian software vendors, including Infosys, in different rooms at the Taj Residency hotel in Bangalore so that the vendors could not communicate with one another. This customer’s propensity for tough negotiations was well-known. Our team was very nervous.
First of all, with revenues of only around $5 million, we were minnows compared to the customer.
Second, this customer contributed fully 25% of our revenues. The loss of this business would potentially devastate our recently-listed company.
Third, the customer’s negotiation style was very aggressive. The customer team would go from room to room, get the best terms out of each vendor and then pit one vendor against the other. This went on for several rounds. Our various arguments why a fair price — one that allowed us to invest in good people, R&D, infrastructure, technology and training — was actually in their interest failed to cut any ice with the customer.
By 5 p.m. on the last day, we had to make a decision right on the spot whether to accept the customer’s terms or to walk out.
All eyes were on me as I mulled over the decision. I closed my eyes, and reflected upon our journey until then. Through many a tough call, we had always thought about the long-term interests of Infosys. I communicated clearly to the customer team that we could not accept their terms, since it could well lead us to letting them down later. But I promised a smooth, professional transition to a vendor of customer’s choice.
This was a turning point for Infosys.
Subsequently, we created a Risk Mitigation Council which ensured that we would never again depend too much on any one client, technology, country, application area or key employee. The crisis was a blessing in disguise. Today, Infosys has a sound de-risking strategy that has stabilized its revenues and profits.
I want to share with you, next, the life lessons these events have taught me.
1. I will begin with the importance of learning from experience. It is less important, I believe, where you start. It is more important how and what you learn. If the quality of the learning is high, the development gradient is steep, and, given time, you can find yourself in a previously unattainable place. I believe the Infosys story is living proof of this.
Learning from experience, however, can be complicated. It can be much more difficult to learn from success than from failure. If we fail, we think carefully about the precise cause. Success can indiscriminately reinforce all our prior actions.
2. A second theme concerns the power of chance events. As I think across a wide variety of settings in my life, I am struck by the incredible role played by the interplay of chance events with intentional choices. While the turning points themselves are indeed often fortuitous, how we respond to them is anything but so. It is this very quality of how we respond systematically to chance events that is crucial.
3. Of course, the mindset one works with is also quite critical. As recent work by the psychologist, Carol Dweck, has shown, it matters greatly whether one believes in ability as inherent or that it can be developed. Put simply, the former view, a fixed mindset, creates a tendency to avoid challenges, to ignore useful negative feedback and leads such people to plateau early and not achieve their full potential.
The latter view, a growth mindset, leads to a tendency to embrace
challenges, to learn from criticism and such people reach ever higher levels of achievement (Krakovsky, 2007: page 48).
4. The fourth theme is a cornerstone of the Indian spiritual tradition: self-knowledge. Indeed, the highest form of knowledge, it is said, is self-knowledge. I believe this greater awareness and knowledge of oneself is what ultimately helps develop a more grounded belief in oneself, courage, determination, and, above all, humility, all qualities which enable one to wear one’s success with dignity and grace.
Based on my life experiences, I can assert that it is this belief in
learning from experience, a growth mindset, the power of chance events, and self-reflection that have helped me grow to the present.
Back in the 1960s, the odds of my being in front of you today would have been zero. Yet here I stand before you! With every successive step, the odds kept changing in my favor, and it is these life lessons that made all the difference.
My young friends, I would like to end with some words of advice. Do you believe that your future is pre-ordained, and is already set? Or, do you believe that your future is yet to be written and that it will depend upon the sometimes fortuitous events?

Do you believe that these events can provide turning points to which you will respond with your energy and enthusiasm? Do you believe that you will learn from these events and that you will reflect on your setbacks ? Do you believe that you will examine your successes with even greater care?
I hope you believe that the future will be shaped by several turning points with great learning opportunities. In fact, this is the path I have walked to much advantage.
A final word: When, one day, you have made your mark on the world, remember that, in the ultimate analysis, we are all mere temporary custodians of the wealth we generate, whether it be financial, intellectual, or emotional. The best use of all your wealth is to share it with those less fortunate.
I believe that we have all at some time eaten the fruit from trees that we did not plant. In the fullness of time, when it is our turn to give, it behooves us in turn to plant gardens that we may never eat the fruit of, which will largely benefit generations to come. I believe this is our sacred responsibility, one that I hope you will shoulder in time.
Thank you for your patience. Go forth and embrace your future with open arms, and pursue enthusiastically your own life journey of discovery!

Strange rubrics: No cat, no pray!

2008-10-17T10:36:00.000-07:00

Source : Economics Times

PARAMAHAMSA SRI NITHYANANDA

HAVE you ever wondered how normal events turn into superstitions or moral codes? A small story:
In an ashram in India, its master used to hold his puja worship every morning. Now, the master had a pet cat. The cat was very curious and used to jump and play around. It got in the way of the master and his disciples during the daily worship. It never allowed them to finish their worship peacefully.
Gradually the cat, in all its playfulness, became a big nuisance. The master had grown quite fond of the cat and did not want to get rid of it. Since he did not want his daily worship disturbed, he asked his disciples to cover the cat with a basket before he began the worship. That day, the worship was peaceful. The master asked his disciples to continue the same way next day. Covering the cat with a basket during their daily worship soon became a part of their routine.
Unexpectedly one day the master died. The disciples continued the tradition established by their master. They began their daily worship by covering the cat with a basket. Soon after, the cat too died. Now, the disciples faced a big dilemma. How could their worship be complete without covering the cat with a basket? They got another cat and subjected it to the same treatment. After a few days, the cat escaped. The disciples now had another job of catching cats for the ashram. Soon, all cats in neighbourhood moved away. The disciples found it harder and harder to get a cat to cover with a basket for their worship. How to worship without a cat? It was sacrilegious even to think of this! Gradually they stopped the worship because there was no cat!
This is how a practice becomes a superstition, and a superstition takes on its own life to become a binding rule.
Societal and religious commandments are similar rules. They are like superstitions that have taken lives of their own. When we have no understanding about the roots of the rules that have formed the moral commandments, we will also behave like the disciples in search of a cat.
Be clear. As long as morality is served as a rule, we rebel. When morality is enforced, we create two things in our mind. First, we try our best to escape from it. When we cannot, we give in reluctantly. We create a deep guilt in our system when we ignore the rules every time and regret when we comply. Guilt and regret are the worst sins we can commit. When we understand how rules we created, we create an awareness to either follow or break them, without guilt and fear.

Art Buchwald: The Last Laugh

2008-10-11T10:06:00.000-07:00

Read this witty article. You will enjoy it thoroughly.

Celebrated newspaper columnist Art Buchwald, who was known for his sly wit, died on January 17, 2007, at age 81 from kidney failure. Last year, after Buchwald refused dialysis treatment, doctors predicted he would die within weeks. Something unexpected happened, though, after the Pulitzer Prize winner checked into a hospice to face his final days: He lived to return home and write Too Soon to Say Goodbye, a funny, frank account of his near-death experience. Below is an excerpt from that book, published in November 2006 by Random House, which appears in the February 2007 issue of Reader's Digest

Here's the link The Last Laugh - Art Buchwald

Game Theory in The Dark Knight: A Critical Review of the Opening Scene (Spoilers)

2008-10-04T03:53:00.000-07:00

(Source :http://mindyourdecisions.com/blog/2008/08/19/game-theory-in-the-dark-knight-a-critical-review-of-the-opening-scene-spoilers/)

The newest Batman flick The Dark Knight absolutely stunned me. Not since Dr. Strangelove has a movie contained so much game theory. While many others have noticed the game theory connection, particularly about a scene near the end of the movie, such commentaries miss the big picture: the entire film is a sequence of games and an exploration of strategic thought.

Game theory comes up in many scenes even where it’s not clear what the “game” really is. Strategy is a theme introduced immediately in the opening bank robbery scene. This scene is one of the most powerful movie openings and it foreshadows the chaos and tempo in the story. Today, I’ll analyze the robbery scene using the lens of game theory.

(Warning: this article contains spoilers and covers roughly the first five minutes of the movie. The thoughtful comments contain major spoilers so only read them if you’ve seen the movie.)

How can we split up the stash?

The movie starts out with a bang. An aerial attack begins when a window shatters on a skyscraper, allowing two robbers to glide across a zip-line on to a bank’s roof. On the street-level, a car screeches to a stop to pick up the last member of the ground attack.

The first spoken words concern the topic of strategy. These lines introduce the Joker’s character and they foreshadow the punch and counterpunch of the entire movie. The robbers in the car explain the job and how the loot will be divided. It’s apparent they are not happy with the plan:

Driver: Three of a kind. Let’s do this.

Passenger side: That’s it—three guys?

Driver: Two guys on the roof. Every guy gets a share. Five shares is plenty.

Passenger side: Six shares. Don’t forget the guy who planned the job.

Driver: He thinks he can sit it out and still take a slice. I know why they call him the Joker.

The robbers don’t like that the Joker gets an equal share for doing unequal work. Their complaint raises the issue of fair division, which is central to game theory. In fact, fair division is the first problem that game theory addressed historically. The problem appears in the Babylonian Talmud about how creditors should divide an estate. The text offers a mysterious solution that had baffled scholars for over 2,000 years. It was only very recently that a Nobel Laureate economist deciphered the answer using the tools of coalitional game theory. Let me tell you, the answer is fascinating.

Fair division is about understanding incentives and strategic thought. How can you trust self-interested people? How can you achieve cooperative outcomes with diametrically opposed motives? Such ideas have been applied to important areas such as nuclear disarmament and labor negotiations. But they are even applicable to mundane situations, like dividing up restaurant bills fairly.

The robbers accept an equal division for unequal work, but should they believe things will go as planned? Perhaps they should not, if they really considered the incentives and the possible ways others could tamper with the plan. In game theory you do not trust someone because they are your friend. You trust them because it is in their self-interest to help you. We can learn from a natural example: children should trust their parents on safety rules because parents have a vested interest in seeing their children are safe. They should not, however, trust strangers.

Had the robbers considered these issues, perhaps their fate would have been different. A little bit of thinking ahead and reasoning backwards would have demonstrated flaws in the plan.

The scene is reminiscent of a popular game theory puzzle about pirates and splitting up treasure. Some of you may have even heard this as a technical interview question. The game offers insights to collective voting and the ability of a leader to buy off votes.

The Pirate puzzle

The game

Three pirates (A, B, and C) arrive from a lucrative voyage with 100 pieces of gold. They will split up the money according to an ancient code dependent on their leadership rules. The pirates are organized with a strict leadership structure—pirate A is stronger than pirate B who is stronger than pirate C.

The voting process is a series of proposals with a lethal twist. Here are the rules:

The strongest pirate offers a split of the gold. An example would be: “0 to me, 10 to B, and 90 to C.”
All of the pirates, including the proposer, vote on whether to accept the split. The proposer holds the casting vote in the case of a tie.
If the pirates agree to the split, it happens.
Otherwise, the pirate who proposed the plan gets thrown overboard from the ship and perishes.
The next strongest pirate takes over and then offers a split of the money. The process is repeated until a proposal is accepted.

Pirates care first and foremost about living, then about getting gold. How does the game play out?

The solution

At first glance it appears that the strongest pirate will have to give most of the loot. But a closer analysis demonstrates the opposite result—the leader holds quite a bit of power.

The game can be solved by thinking ahead and reasoning backwards. All pirates will do this because they are a very smart bunch, a trait necessary for surviving on the high seas.

Looking ahead, let’s consider what would happen if pirate A is thrown overboard. What will happen between pirates B and C? It turns out that pirate B turns into a dictator. Pirate B can vote “yes” to any offer that he proposes, and even if pirate C declines, the situation is a tie and pirate B holds the casting vote. In this situation, pirate C has no voting power at all. Pirate B will take full advantage of his power and give himself all 100 pieces in the split, leaving pirate C with nothing.

But will pirate A ever get thrown overboard? Pirate A will clearly vote on his own proposal, so his entire goal reduces to buying a single vote to gain the majority.

Which pirate is easiest to buy off? Pirate C is a likely candidate because he ends up with nothing if pirate A dies. This means pirate C has a vested interest in keeping pirate A alive. If pirate A gives him any reasonable offer—in theoretical sense, even a single gold coin—pirate C would accept the plan.

And that’s what will happen. Pirate A will offer 1 gold coin to pirate C, nothing to pirate B, and take 99 coins for himself. The plan will be accepted by pirates A and C, and it will pass. Amazingly, pirate A ends up with tremendous power despite having two opponents. Luckily, the opponents dislike each other and one can be bought off.

The game illustrates the spoils can go to the strongest pirate or the one that gets to act first, if the remaining members have conflicting interests. The leader has the means to buy off weak members.

Don’t get caught up in the exact assumptions or outcomes of the game—just remember the basic lesson. In the real world, it might be necessary to buy a vote with 20 gold coins. Nonetheless, the general logic is the same. Here are some of the main insights from the game:

Lessons:

Players should think ahead and reason backwards
A leader can win by exploiting conflict among weaker members
Players derive worth from voting power, and some players can be bought off

The robbery scene in The Dark Knight

The original plan of equal division is flawed. Each robber has incentive to increase his share by killing a fellow team member. Once a member performs his job, he loses his negotiating power and value to the team.

The Joker plays off this conflict by instructing the robbers to take out fellow teammates once their tasks are performed. The game would be different if the robbers were a group and they repeated crimes together—perhaps an even split could be sustainable. But as the movie hints right away with the first backstabbing scene, this robbery will be a one-shot game.

Many of the robbers fail to see they can be victim to the same deceit they pull on others. The second robber on the rooftop is a prime example. After his partner disarms the silent alarm, he quickly kills him and then proceeds to perform his own job. He doesn’t see the same thing could happen to him.

After he disarms the bank vault, he is greeted with a most unpleasant surprise:

Robber: Where’s the alarm guy?

Vault guy: Boss told when the guy was done, I should take him out. One less share, right? [opens the vault]

Robber: Funny. He told me something similar.

Vault guy: What? No! No! [gets shot in the back]

By now it’s clear the Joker wants everyone dead, and minutes later we learn the Joker has been present on the job all along. The plan finishes with two more deaths both involving the escape vehicle bus.

The Joker, being the “strongest pirate,” was able to sequentially bribe the weaker robbers one by one. In the end, he puts a twist on the game by taking the whole pie.

Other strategic elements

There are many other mini-strategy elements during the robbery scene. Here are three that came to my mind:

How can a handful of robbers overtake a bank?

In theory, a mob of unarmed citizens should be able to overwhelm a small group of armed robbers. The problem is there will be casualties, particularly for those that act first. Who is going to step out and be the hero? Robbers make sure that people don’t coordinate to force them to act sequentially. Any individual that attempts to be a hero will be killed as an example, like the angry bank employee. In the movie, the robbers demonstrate they are willing to use lethal violence by shooting up in the air and taking out the bank cop.

Do you trust your teammate?

This is a subtle point and I loved it. The robbers face a small obstacle when an angry bank employee starts firing his shotgun. The robbers duck for cover, and after a few shots, one robber asks the other if the bank employee is out of bullets.

If you watch closely, you’ll see the robber (really the Joker) ponders the question carefully and then nods his head “yes.” The other robber jumps out and is greeted with a bullet that narrowly misses him. Almost immediately the disguised Joker jumps out and disables the bank employee with a round of bullets. The disguised Joker acted so quickly and without fear, almost as if he was now sure the bank employee was out of bullets. Did the Joker lie on purpose earlier to put the other robber in danger? The other robber, not aware it’s the Joker, is furious that he was almost shot and yells back: “Where did you learn to count?” The disguised Joker looks back in scorn.

What kind of robber is the Joker?

The cops who arrive on the scene will be stunned. They will see a crime scene with five dead robbers and a bank vault that has been cleaned out. They will likely conclude the Joker is interested in selfish gains, a simple criminal, who wants all the money in Gotham.

As the cops, the mobsters, Batman, and we as the audience experience the complex themes that unfold later in the movie, many of us are left with one thought: if only the Joker were so simple.

The Joker demands money, yes, but is that what he really wants? That’s a question the Joker plays off later in the movie in an explosive fashion.

Steve Job’s Stanford Commencement Address

2008-09-20T07:27:00.000-07:00

(Source : http://news-service.stanford.edu/news/2005/june15/jobs-061505.html)

This is the text of the Commencement address by Steve Jobs, CEO of Apple Computer and of Pixar Animation Studios, delivered on June 12, 2005.

I am honored to be with you today at your commencement from one of the finest universities in the world. I never graduated from college. Truth be told, this is the closest I’ve ever gotten to a college graduation. Today I want to tell you three stories from my life. That’s it. No big deal. Just three stories.

The first story is about connecting the dots.

I dropped out of Reed College after the first 6 months, but then stayed around as a drop-in for another 18 months or so before I really quit. So why did I drop out?

It started before I was born. My biological mother was a young, unwed college graduate student, and she decided to put me up for adoption. She felt very strongly that I should be adopted by college graduates, so everything was all set for me to be adopted at birth by a lawyer and his wife. Except that when I popped out they decided at the last minute that they really wanted a girl. So my parents, who were on a waiting list, got a call in the middle of the night asking: “We have an unexpected baby boy; do you want him?” They said: “Of course.” My biological mother later found out that my mother had never graduated from college and that my father had never graduated from high school. She refused to sign the final adoption papers. She only relented a few months later when my parents promised that I would someday go to college.

And 17 years later I did go to college. But I naively chose a college that was almost as expensive as Stanford, and all of my working-class parents’ savings were being spent on my college tuition. After six months, I couldn’t see the value in it. I had no idea what I wanted to do with my life and no idea how college was going to help me figure it out. And here I was spending all of the money my parents had saved their entire life. So I decided to drop out and trust that it would all work out OK. It was pretty scary at the time, but looking back it was one of the best decisions I ever made. The minute I dropped out I could stop taking the required classes that didn’t interest me, and begin dropping in on the ones that looked interesting.

It wasn’t all romantic. I didn’t have a dorm room, so I slept on the floor in friends’ rooms, I returned coke bottles for the 5¢ deposits to buy food with, and I would walk the 7 miles across town every Sunday night to get one good meal a week at the Hare Krishna temple. I loved it. And much of what I stumbled into by following my curiosity and intuition turned out to be priceless later on. Let me give you one example:

Reed College at that time offered perhaps the best calligraphy instruction in the country. Throughout the campus every poster, every label on every drawer, was beautifully hand calligraphed. Because I had dropped out and didn’t have to take the normal classes, I decided to take a calligraphy class to learn how to do this. I learned about serif and san serif typefaces, about varying the amount of space between different letter combinations, about what makes great typography great. It was beautiful, historical, artistically subtle in a way that science can’t capture, and I found it fascinating.

None of this had even a hope of any practical application in my life. But ten years later, when we were designing the first Macintosh computer, it all came back to me. And we designed it all into the Mac. It was the first computer with beautiful typography. If I had never dropped in on that single course in college, the Mac would have never had multiple typefaces or proportionally spaced fonts. And since Windows just copied the Mac, its likely that no personal computer would have them. If I had never dropped out, I would have never dropped in on this calligraphy class, and personal computers might not have the wonderful typography that they do. Of course it was impossible to connect the dots looking forward when I was in college. But it was very, very clear looking backwards ten years later.

Again, you can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something - your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

My second story is about love and loss.

I was lucky – I found what I loved to do early in life. Woz and I started Apple in my parents garage when I was 20. We worked hard, and in 10 years Apple had grown from just the two of us in a garage into a $2 billion company with over 4000 employees. We had just released our finest creation - the Macintosh - a year earlier, and I had just turned 30. And then I got fired. How can you get fired from a company you started? Well, as Apple grew we hired someone who I thought was very talented to run the company with me, and for the first year or so things went well. But then our visions of the future began to diverge and eventually we had a falling out. When we did, our Board of Directors sided with him. So at 30 I was out. And very publicly out. What had been the focus of my entire adult life was gone, and it was devastating.

I really didn’t know what to do for a few months. I felt that I had let the previous generation of entrepreneurs down - that I had dropped the baton as it was being passed to me. I met with David Packard and Bob Noyce and tried to apologize for screwing up so badly. I was a very public failure, and I even thought about running away from the valley. But something slowly began to dawn on me – I still loved what I did. The turn of events at Apple had not changed that one bit. I had been rejected, but I was still in love. And so I decided to start over.

I didn’t see it then, but it turned out that getting fired from Apple was the best thing that could have ever happened to me. The heaviness of being successful was replaced by the lightness of being a beginner again, less sure about everything. It freed me to enter one of the most creative periods of my life.

During the next five years, I started a company named NeXT, another company named Pixar, and fell in love with an amazing woman who would become my wife. Pixar went on to create the worlds first computer animated feature film, Toy Story, and is now the most successful animation studio in the world. In a remarkable turn of events, Apple bought NeXT, I retuned to Apple, and the technology we developed at NeXT is at the heart of Apple’s current renaissance. And Laurene and I have a wonderful family together.

I’m pretty sure none of this would have happened if I hadn’t been fired from Apple. It was awful tasting medicine, but I guess the patient needed it. Sometimes life hits you in the head with a brick. Don’t lose faith. I’m convinced that the only thing that kept me going was that I loved what I did. You’ve got to find what you love. And that is as true for your work as it is for your lovers. Your work is going to fill a large part of your life, and the only way to be truly satisfied is to do what you believe is great work. And the only way to do great work is to love what you do. If you haven’t found it yet, keep looking. Don’t settle. As with all matters of the heart, you’ll know when you find it. And, like any great relationship, it just gets better and better as the years roll on. So keep looking until you find it. Don’t settle.

My third story is about death.

When I was 17, I read a quote that went something like: “If you live each day as if it was your last, someday you’ll most certainly be right.” It made an impression on me, and since then, for the past 33 years, I have looked in the mirror every morning and asked myself: “If today were the last day of my life, would I want to do what I am about to do today?” And whenever the answer has been “No” for too many days in a row, I know I need to change something.

Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything – all external expectations, all pride, all fear of embarrassment or failure - these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

About a year ago I was diagnosed with cancer. I had a scan at 7:30 in the morning, and it clearly showed a tumor on my pancreas. I didn’t even know what a pancreas was. The doctors told me this was almost certainly a type of cancer that is incurable, and that I should expect to live no longer than three to six months. My doctor advised me to go home and get my affairs in order, which is doctor’s code for prepare to die. It means to try to tell your kids everything you thought you’d have the next 10 years to tell them in just a few months. It means to make sure everything is buttoned up so that it will be as easy as possible for your family. It means to say your goodbyes.

I lived with that diagnosis all day. Later that evening I had a biopsy, where they stuck an endoscope down my throat, through my stomach and into my intestines, put a needle into my pancreas and got a few cells from the tumor. I was sedated, but my wife, who was there, told me that when they viewed the cells under a microscope the doctors started crying because it turned out to be a very rare form of pancreatic cancer that is curable with surgery. I had the surgery and I’m fine now.

This was the closest I’ve been to facing death, and I hope its the closest I get for a few more decades. Having lived through it, I can now say this to you with a bit more certainty than when death was a useful but purely intellectual concept:

No one wants to die. Even people who want to go to heaven don’t want to die to get there. And yet death is the destination we all share. No one has ever escaped it. And that is as it should be, because Death is very likely the single best invention of Life. It is Life’s change agent. It clears out the old to make way for the new. Right now the new is you, but someday not too long from now, you will gradually become the old and be cleared away. Sorry to be so dramatic, but it is quite true.

Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma - which is living with the results of other people’s thinking. Don’t let the noise of other’s opinions drown out your own inner voice. And most important, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

When I was young, there was an amazing publication called The Whole Earth Catalog, which was one of the bibles of my generation. It was created by a fellow named Stewart Brand not far from here in Menlo Park, and he brought it to life with his poetic touch. This was in the late 1960’s, before personal computers and desktop publishing, so it was all made with typewriters, scissors, and polaroid cameras. It was sort of like Google in paperback form, 35 years before Google came along: it was idealistic, and overflowing with neat tools and great notions.

Stewart and his team put out several issues of The Whole Earth Catalog, and then when it had run its course, they put out a final issue. It was the mid-1970s, and I was your age. On the back cover of their final issue was a photograph of an early morning country road, the kind you might find yourself hitchhiking on if you were so adventurous. Beneath it were the words: “Stay Hungry. Stay Foolish.” It was their farewell message as they signed off. Stay Hungry. Stay Foolish. And I have always wished that for myself. And now, as you graduate to begin anew, I wish that for you.

Stay Hungry. Stay Foolish.

Thank you all very much.