The Tim Ferriss Show - #466: Richard Koch on Mastering the 80/20 Principle, Achieving Unreasonable Success, and The Art of Gambling

Episode Date: September 22, 2020

Richard Koch (@RichardKoch8020) is an entrepreneur, investor, former strategy consultant, and author of several books on business and ideas, including four on how to apply the 80/20 principle in all walks of life.His investments have grown at 22 percent compounded annually over 37 years and have included Filofax, Plymouth Gin, Belgo, Betfair (the world’s largest betting exchange), FanDuel, and Auto1. He has worked for Boston Consulting Group and was a partner at Bain & Co. before joining Jim Lawrence and Iain Evans to start LEK, which expanded from three to 350 professionals during the six years Richard was there.In 1997, Richard’s book The 80/20 Principle reinterpreted the Pareto Rule, which states that most results come from a small minority of causes, and extended it beyond its well-known application in business into personal life, happiness, and success. The book, substantially updated in 2017, has sold more than a million copies, been translated into roughly 40 languages, and become a business classic. It was named by GQ magazine as one of the top 25 business books of all time.His new book, published on August 13, 2020, and available in the US in December, is Unreasonable Success and How to Achieve it. In it, Richard charts a new map of success, which he says can propel anyone to new heights of accomplishment. High success, he says, does not require genius, consistency, all-round ability, a safe pair of hands, or even basic competence — but it does require the nine key attitudes and strategies he has identified.Please enjoy! ***If you enjoy the podcast, would you please consider leaving a short review on Apple Podcasts/iTunes? It takes less than 60 seconds, and it really makes a difference in helping to convince hard-to-get guests. I also love reading the reviews!For show notes and past guests, please visit tim.blog/podcast.Sign up for Tim’s email newsletter (“5-Bullet Friday”) at tim.blog/friday.For transcripts of episodes, go to tim.blog/transcripts.Discover Tim’s books: tim.blog/books.Follow Tim:Twitter: twitter.com/tferriss Instagram: instagram.com/timferrissFacebook: facebook.com/timferriss YouTube: youtube.com/timferrissPast guests on The Tim Ferriss Show include Jerry Seinfeld, Hugh Jackman, Dr. Jane Goodall, LeBron James, Kevin Hart, Doris Kearns Goodwin, Jamie Foxx, Matthew McConaughey, Esther Perel, Elizabeth Gilbert, Terry Crews, Sia, Yuval Noah Harari, Malcolm Gladwell, Madeleine Albright, Cheryl Strayed, Jim Collins, Mary Karr, Maria Popova, Sam Harris, Michael Phelps, Bob Iger, Edward Norton, Arnold Schwarzenegger, Neil Strauss, Ken Burns, Maria Sharapova, Marc Andreessen, Neil Gaiman, Neil de Grasse Tyson, Jocko Willink, Daniel Ek, Kelly Slater, Dr. Peter Attia, Seth Godin, Howard Marks, Dr. Brené Brown, Eric Schmidt, Michael Lewis, Joe Gebbia, Michael Pollan, Dr. Jordan Peterson, Vince Vaughn, Brian Koppelman, Ramit Sethi, Dax Shepard, Tony Robbins, Jim Dethmer, Dan Harris, Ray Dalio, Naval Ravikant, Vitalik Buterin, Elizabeth Lesser, Amanda Palmer, Katie Haun, Sir Richard Branson, Chuck Palahniuk, Arianna Huffington, Reid Hoffman, Bill Burr, Whitney Cummings, Rick Rubin, Dr. Vivek Murthy, Darren Aronofsky, and many more.See Privacy Policy at https://art19.com/privacy and California Privacy Notice at https://art19.com/privacy#do-not-sell-my-info.

Well, hello, boys and girls, ladies and germs, whether you're here across the pond, in the pond, or otherwise, this is Tim Ferriss, and welcome to another episode of The Tim Ferriss Show. What I just said will make sense in a moment. It is my job on every episode to deconstruct world-class performers, to tease out the favorite books, the habits, routines, forms of journaling, whatever it might be, that you can test and apply in your own lives. My guest today, I've wanted to have on for a very long time. His name is Richard Koch, K-O-C-H. Richard is an entrepreneur, investor, former strategy consultant, and author of several books on business and ideas, including four books on how to apply the 80-20 principle in all walks of life. He also has a wonderful British accent, which is why I talked about Across the Pond.

His investments, because he's not just a theoretician, he's a practitioner, his investments have grown at 22% compounded annually over 37 years. That's a long time. Try that with a small number and see what happens. Richard's investments have included Filofax, Plymouth Gin, Belgo, Betfair, which is the world's largest betting exchange. We talk about this one quite a bit. FanDuel and AutoOne. He has worked for the Boston Consulting Group and was a partner at Bain & Co, that's Bain & Company, before leaving to start L.E.K. with Jim Lawrence and Ian Evans, which expanded from three to 350 professionals during the six years Richard was there. In 1997, the 80-20 principle, the book, reinterpreted the Pareto rule, extending the observation that most results come from a small

minority of causes, which was well-known in business, into personal life, happiness, success, and more. The book, substantially updated in 2017, has sold more than a million copies. I have bought many of those myself and given copies away. It's been translated into roughly 40 languages and become a business classic. It was named by GQ Magazine as one of the top 25 business books of all time. His new book, published on August 13th, 2020, is Unreasonable Success and How to Achieve It. In it, Richard charts a new map of success, which he says can propel anyone to new heights of accomplishment. High success, he says, does not require genius, consistency, all-around ability, a safe pair of

hands, or even basic competence, which is reassuring, but it does require the nine key attitudes and strategies he has identified. And we dig into all of this and more in this conversation. It's important to note, I had a great time doing this, that's not important, but the following is important, that we talk about a lot in the world of investing and consulting because I want to give you all a lens into his thinking. So rather than listening to someone say negotiating is important, I would prefer to dig into real world examples of what they have done. So you can learn how to fish, metaphorically speaking, as opposed to being given a fish in the form of

some type of fortune cookie parable or something like that. So we get into a lot of concrete details in investing and consulting, and those are lenses through which you can look at many, many areas in your own life, whether it's personal or business. So I just wanted to explain that. And I think that's enough preamble. We get into a lot. We get into the art of gambling, 80-20 principle, happiness islands, achieving unreasonable success, ball-aching insights, journaling, Walt Disney, and lots more. You can find him on Twitter at RichardKosch8020 and online at richardkosch.net. This episode is brought to you by Viore Clothing, spelled V-U-O-R-I, Viore. I've been wearing Viore at least one item per day for the last few months, and you can use it for everything. It's performance

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popular. Constantly sold out. In closing, and I'm abbreviating here, but in closing, with the exception of when I need technical outdoor gear, they're the only brand I've bought in the last year or so for yoga, running, loungewear that lasts and that I think look good also. I like the discreet logo. So that gives you some idea. That was not intended for the sponsor read. That was just her response via text. Viori, again spelled V-U-O-R-I, is designed for maximum comfort and versatility. You can wear it running. You can wear their stuff training, doing yoga, lounging, weekend errands, or in my case, again, going out to dinner. It really doesn't matter what you're doing. Their clothing is so comfortable and looks so good. And it's non-offensive. You don't have a

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out. Viori clothing.com slash Tim. That's V-U-O-R-I clothing.com slash Tim and discover the versatility of Viore clothing. This episode is brought to you by Athletic Greens. I get asked all the time what I would take if I could only take one supplement. The answer is inevitably Athletic Greens. I view it as my all-in-one nutritional insurance. I recommended it in 2010 in the 4-Hour Body, and I did not get paid to do so. I've used it ever since. Developed from a complex blend of 75 vitamins, minerals, and whole food sourced ingredients, Athletic Greens is a greens powder engineered to help fill the nutritional gaps in your diet. So I always try to do things through whole foods, but this covers my bases. Right now, Athletic Greens is offering

you their vitamin D3K2 liquid formula free with your first purchase. Two vital nutrients for a strong immune system and strong bones. So simply visit athleticgreens.com slash Tim to claim this special offer today and receive the free D3K2 bundle with your first purchase. That's up to a one-year supply of vitamin D as added value when you try their delicious and comprehensive all-in-one daily greens product. Again, that's athleticgreens.com slash Tim. What if I did the opposite? I'm a cybernetic organism, living tissue over metal endoskeleton. The Tim Ferriss Show. Richard, welcome to the show. I'm so thrilled to have you. It is, in some respects, decades overdue, and we were just chatting before clicking record. Could you please get us started with

wines and spirits? It's a great pleasure to be talking to you, Tim. Thank you very much for all your generosity in giving me quotes to put on books and things like that. That's very much appreciated. I'm not sure that this is a great place to start, but I was just thinking that you had reinvented the talk show. And when I was 17, and I had the first job in Windsor, England, as a van driver for a firm of wines and spirit merchants, they were called Lovey Bonds. And they were probably about the most old fashioned wine and spirit retailer you could possibly imagine. And one of the things which they did was deliver wine and spirits to quite a distinguished bunch of people. Actually, I used to drive into Windsor Castle and give the brigadier his gin and so on and so forth. But one of the other people that I used to visit was Michael Parkinson. And Michael Parkinson, as you know, was a very successful sports writer and broadcaster who then branched out into doing chat shows.

And some of the stuff which he did was marvelous. I saw a clip the other day of him talking to David Bowie, and it was fantastic. They were really enjoying themselves, and they were moving very smartly from point to point. And that made me think about you, because I think you reinvented the chat show on podcasts, and it's just amazing. So anyway, that was, that's my non-story to start with. Well, give me time to disappoint and I appreciate the kind words. And I should also say for people listening, those people who perhaps have, have read the various policies on my website will note or received one in my

autoresponse via email will know that I say I don't give quotes for books. I don't do forwards. I don't do, and I have a very long list of do not dos. The reason that I've made an exception is that, and if anyone else fits this bill, feel free to reach out because I know it's going to be approximately zero. If you've written a book like several of your books that have traveled with me for more than 10 years from place to place that sit on my shelves face out as a reminder, feel free to reach out. But that is going to be a very small number indeed. And perhaps we could start, this isn't exactly the beginning, so to speak, but with the Bodleian Library. And if you could explain what that is and take us into context from there, I think that would be helpful. The Bodleian Library is a fantastically beautiful building in Oxford, very close to the college that I was at.

And I used to sit in there in the stacks and look out of the window whenever I could. But the great thing about it was that it had almost any book that you could possibly imagine. And one day I decided that I wanted to read a book which I had read about called The Course of Economic Theory, but it was in French, written by our old friend Vilfredo Pareto. And it was published in Lausanne in, I think, 1896 and 97. And I have no idea at all, Tim, why I wanted to read this book, because it wasn't part of my coursework

or anything like that. But that was a book in which I discovered the 80-20 principle. And he didn't call it the 80-20 principle, as you know. But nevertheless, he had all these algebraic equations, which showed the wealth distribution in England in the 17th century, 18th century, 19th century, and also in Italy, France, Switzerland, other countries over those periods of time. And what he found was that there was the same pattern of distribution of wealth against the population. And a remarkably similar chart could be drawn from the algebra for any of those countries or any time in order to show what proportion of wealth was owned. And of course, it was a very small number of people or proportion of people who actually owned most of the wealth or

earned most of the money. So you might say, well, that's very arcane and it's not particularly interesting. But I instantly thought, I can use this. I can use this to cheat in my examinations without actually cheating. And so what I did was to say, well, I do know that I'm going to have to write 11 papers, three hours long each at the end of my time in Oxford. The Oxford degree is entirely determined by the final examinations. There's no assessment current or there are no previous examinations at all. So it's a very, very important thing. But I had noted that on sample papers, there were something like 50 questions or whatever. And it's impossible to imagine that I could actually research or do

work on 50 questions times 11. So I thought, well, maybe if this 80-20 principle applies, there will be some questions which are asked much more frequently. And lo and behold, I got the papers for the history exams for the last 20 years. And it was absolutely true. There was always a question about the French Revolution. There was usually a question about the Russian Revolution. There was always a question about the origins of the causes of the First World War and so on and so forth. So I said to myself, well, you know, I don't need to study very extensively. You could write the answers to three or four questions. It was your choice during three hours. So what I said was I will research six subjects, no more, for each paper.

And I will be word perfect. I will have very obscure quotes. I will use foreign languages that I don't actually understand. Absolutely word perfect. And if I do that, I don't have to do much work and I will get a top degree. And lo and behold, that is exactly what happened happened and then i thought to myself afterwards gosh this man peretto was quite onto something wasn't he so that was my introduction to the 80 20 principle and uh yeah perhaps i've never looked back in some senses you know what is well to me so funny about that in part is that i did something very similar. I just was not aware of Pareto at this point. But when I was doing my undergrad, I about halfway through began asking teachers

to give them some degree of plausible deniability because I was hesitant to ask outright what is going to be on the exam because they're not supposed to answer such a question. But I would ask teachers, or I would say rather, I know I need to study everything that we've covered for the exam, but if there are any particular areas you think I should focus on, would you mind telling me? And they were very forthcoming. So it ended up having a very similar effect, although I definitely was pleased that in most cases, not everything hinged on final exams. I think I probably would have been crushed under the sort of psychological intimidation of that type of sink or swim setup. Yeah, I was quite nervous in my exams, but I found a solution to that, at least in the afternoons, was after the morning paper, I would go down the pub and have

a couple of pints of beer. And I found that calmed my nose. And it was notable that I got better results in the afternoon than I did in the morning. Well, that could be in one of your next books if you haven't covered academic hygiene and preparation. Now, if we're looking at formative periods, let's just say high school, college, university, however you want to label it, I'm looking at notes as I do in these types of conversations from an interview you did with Boing Boing a long time ago, an outlet that I know very well. And one of the questions posed was, what advice would you give to a smart kid who's now in high school? And you can feel free

to fact check this and correct, but the answer I'm just going to read briefly and then I have a follow-up. Discover what you're best at doing and enjoy that is different from what all of your peers are doing and that requires relatively little effort from you. Then put huge effort into honing that skill so that it becomes monstrously greater than anyone else's. Keep demanding that each year you make your peculiar talent more peculiar and much more potent. Use the skill to make the world a more interesting place. Don't care about making money. If you have a fantastically different and useful skill, everything else you want will follow. So I have two questions. Accurate or not accurate? Secondly,

what is your peculiar talent and how did you discover it? Well, it's totally accurate and it's very easy to give advice and perhaps less easy to originate the advice or at least to exemplify the advice. I was always very, very interested in history because it enabled me to develop a certain skill in analysis with non-quantitative analysis. I'm absolutely hopeless at numbers. But in terms of understanding structures, in terms of understanding trends, in terms of really getting to grips with what might have happened that other people had not noticed, then that's what I did. And, you know, I came up with some pretty wacky ideas during my time studying history, but I thought that they were plausible and the examiners must have thought so too. I mean, for example, it seemed to me that Hitler

had been copied pretty much what Lenin and Stalin had done. So of course, Hitler was a great anti-communist and they were great anti-Nazis. But he actually had followed Lenin's policy, for example, of a one-party state, which no one before Lenin had really done, and of death camps for dissidents and enemies of the regime. Again, no one had really done that, certainly not on such a ruthless scale as Lenin and later Stalin did. So it was my theory that Hitler had based his policy on the Bolsheviks. And that's just a little example. I'm not absolutely sure that's true, but it's plausible. And it's sort of trying to winkle out things that might be true, which are interesting and important, but which no one else has spotted.

That's what I try and do. That's what I enjoy doing. So you mentioned hopeless with numbers now, or maybe I injected the hopeless, but you were very self-deprecating with respect to numbers and numeracy. And yet, people would look at your track record of investing as an example and ask, how can that possibly be the case? So again, in my notes, I have Betfair here, which I would love for you to explain. But it adds that you couldn't use their website. Now, please explain. Okay. Well, the way of reconciling those two apparently different things, I do have a very good track record, thank God. I've been very lucky or very fortunate,

at least in my investments, but it's not based on being an analyst in the conventional sense. I got fired from the Boston Consulting Group because I was no good at doing financial and market analysis, despite the fact that I was quite good at doing some other things, which they didn't value very much. It is true that I'm not particularly numerate. But I believe that's a skill which is readily available from other people. And as far as Betfair is concerned, I base my investment, as indeed all my investments are based, on the star principle, which was something that the Boston Consulting Group themselves had invented way back in the 1960s. And this is the old chart of the dogs, stars, question marks, and cash cows.

So I never make an investment unless the business is a star business or has the potential to be a star business. And BCG's definition, my definition of a star business, is the market leader in a niche, a defensible niche, where you can protect it against other people, other competitors, and a high market growth rate. BCG said more than 10%. I've really tried to aim at more than 30%. And the thing about Betfair was that a friend of mine in 2001 came along and said, we've started this betting company, and I'm a gambler, I like gambling. And we think it's completely different from anything else, because it's not a bookmaker. And I said, well, what do you mean? And he said, well, a bookmaker is someone who makes a book

and basically offers odds to punters, gamblers who might want to bet on it. But Betfair doesn't do that. What it does is it started an electronic market, which enables people to either act as a bookmaker or to act as a punter. So you can go onto the site and you can see posted up there the odds other people will give. And the odds for the punters are vastly better because there's no bookmaker's profit. Now, I said, well, it can't be true because Betfair has to make some money. How do they make money? What's their business model? He said, well, they have a very small commission, which they take, and they only take that on winning bets. And so I said, well, that sounds like a fantastic idea. So what's the problem? And he said,

well, do you want the real truth? And so I said, yeah, of course I want Anthony. Of course I want the real truth. What, what's the problem? He said, well, no venture capitalist, no professional financial firm would invest in this company. Uh, when they first had their round, they started about six months previous to this. And he said, then there was, you know, from their point of view, a very good reason for that, which was none of the managers in the business had any experience. I said, oh, you mean they didn't have experience in the industry? He said, no, no, they don't have experience in the industry. Well, one of them used to be a professional gambler, but that's not experience which venture capitalists would recognize as being applicable. He said, no, they never run anything. And I said to me,

so, Anson, you're telling me that I should put money into a business that has people running it, they've never run anything else. He said, well, one of them used to be a financial debt person at Morgan Stanley. And he was making, you know, he was trading loans and doing that sort of stuff. And he said, you know, trading loans is not a million miles away from running a betting exchange. But, you know, the truth was that they really were all sports enthusiasts, all gambling enthusiasts, and none of them had had any experience of management, which explained why it was only friends and family who'd been able to invest in, or been willing to invest in this particular company. So I said to Anthony, well, what's

the attraction? He said, it's a star business, Richard. I mean, Anthony had worked for me in L.E.K. and also in a company we set up after L.E.K. called Strategy Ventures. And so he knew that I knew that the way to make money in investing in small businesses was to actually invest in something which could be or was a star business. Well, you know, even though it was tiny and even though it was losing money, it was clear that Betfair was indeed a star business. And why was it clear? Because no one else was doing what they were doing. Their business model was completely different. Their cost structure was completely different. Their customers were completely different. All of their customers were sophisticated and quite large. Well, not all of them, but most of them were sophisticated and quite large gamblers. And so, you know, they didn't

compete with Ladbrokes or the other Corals, the Toads, the other British bookmakers. And in fact, they didn't compete with anybody because there was nobody. There was actually another firm set up originally in San Francisco called Flutter. It had a slightly different business model. So it had no competition. It had infinite relative market share. So I said, well, that's fantastic. So he said, well, let me give you the website and you can go on and see how it works. Well, unfortunately, I couldn't because I didn't know how to work the website. And I went along and talked to the people and just tried to make sure that it was indeed a star business.

And that I thought that, you know, it could actually get some professional management later on. And so after an hour, I decided to invest 1.5 million pounds in that business. And they were quite shocked by that. They said, well, are you sure? And I explained to them what a star business was and how it was wonderful and how they should be very pleased to be having a star business and all the rest of it. But they were quite taken aback at that. And they had been trying to raise money again from institutions that all said no. And the mates that they had to trying to raise money again from institutions. They'd all said no. And the mates that they had who put the money in originally, you know, didn't want to put more money in, particularly as they used that money much more quickly than expected. The reason they used the money much more quickly than expected was that the growth was fantastic. It was a tiny,

tiny, tiny business, but it was growing at 40%, 50%, even 60% a month. And, you know, I said, well, you know, the other thing which I believe in, apart from the star principle, is compound growth rate. And so I, you know, I looked at their financial projections, and I thought they're incredibly conservative, considering the market growth rate. And so I invested, I went onto the board and about four years later, the chaps had an away day at which I said how wonderful and star businesses were and so on and so forth. And then I said, and actually last week, I decided it was time that I actually learned how to use the website that you have. And they all fell about laughing. They thought I was joking. And I said, no, I did. I think it's great, great website.

And they said to me, well, how could you possibly have invested in the business without sort of going onto the website? And I said, well, it's a star business. And they said to me, I mean, I think I went down in their estimation quite considerably as a result of that. And of course, now I use the website most days. But and I think it's a wonderful website. I've sold my shares. I'm not advertising the company or anything like that. But I ended up making about 100 million pounds profit out of that investment.

So that's the power of the star principle. So how can someone who's not numerate make money out of what is generally a highly numerate industry? Well, the answer, Tim, is very simple. I believe in principles and I believe in the star principle. And it works. I'm the only investor in the world that does this. And I think I'm the only investor in the world of my scale that doesn't employ anyone and that does it on the basis of probably about a day a week of work. I do use my personal assistants to do some of the work. I do use contacts for special particular jobs. But, you know, your portfolio is X. That's absolutely unbelievable. I said, well, you know, I've only got one question when I invest in a business. Is it a star business or could it be a star business? And once I've invested, I want to retain it as a star business or make it more dominant. And the only question is, how do you do that?

And so life is very simple. I'm laughing because we could have five hours and I'm going to run out of time before I run out of questions. So let's bookmark a few things. We're going to come back to knowledge versus principles. Okay. So we'll bookmark that. I want to just make it clear, at least from Wikipedia and Wikipedia, of course, is subject to debate, but often inaccurate. And Betfair is described as the world's largest online betting exchange, just for those who are looking for some type of perspective and are not familiar with the company. And you had mentioned gambling and liking gambling. I want to dig into that because it strikes me that you may enjoy gambling,

but you're also very good at placing bets. And those are not necessarily the same thing if we think about the psychological dynamics, drivers, and criteria involved. And I want to explain also to people listening that investing is a wonderful metaphor and framework for exploring principles that apply elsewhere, thinking processes that apply elsewhere or perhaps even everywhere. So my question for you is very specific. 1.5 million. How did you decide on that bet sizing? That was all the money i had holy shit wow okay so you just pushed in all your chips yeah they're all my liquid assets you know and this is quite typical for me i mean i want to be full of you know something i'll talk about later which is that i one of the things which is quite

absurd about me is that i actually don't have very much money to spend. And I don't really mind that I tend to when I'm in London, for example, in normal circumstances, I would take public transport, I would go on a bus or the tube, I would cycle if I possibly could. But I wouldn't take a taxi or even an Uber, unless it was absolutely, you know, I was desperately short of time. And I don't believe in being desperately short of time, I always make sure I have plenty of time because I don't want to be rushed and because I can always use the time to think or whatever. So how do I decide on the bet size? You know, it's just a matter of what I have available if I think it's a good bet. I hasten to add I don't make money out of my horse racing gambling. That is purely an entertainment and I don't place particularly

large bets relative to my net worth either. And if I can go for 18 months without having to put any more money in my account, I'm very happy. It's a different kind of bet. I mean, gambling, I think is gambling, conventional gambling, whether it's poker or it's at the casino or it's horse racing or it's betting on tennis or baseball or football or anything like that. You know, I think there are people who make money at it, but they usually either have some inside information or they are incredibly skilled at judging probabilities. And they often have, know even research i know someone who had 50 employees tracking football in order to see whether the odds on particular football matches were right or not and he would take positions and he made a lot of money out of that consistently every year but you know someone like me who doesn't know a lot about football knows nothing about football not doesn't

know a great deal about horse racing, is at a certain disadvantage. I have a particular method which I use, which is based on looking not where the horse came in the race, but on the time relative to other times. And all that is calculated on the Racing Post website. It's called something called top speed. And whenever i make a lot of money in horse racing it's because top speed has shown me a horse which is not far away from the favorite but might be at odds of 30 to 1 or in one case it was even 330 to 1 that's unusual but betting on companies is fantastic because if you understand how important relative market share is, and if you understand whether or not a company is able to segment itself and therefore have a defensible position

in a particular segment like Betfair, then it's absolutely fantastic. Because you can, you know, you can basically invest and know that you might lose your money but overall you're going to do very well out of that and you know i have very rarely lost money on star businesses the cases where i've lost money is where i thought something might become a star business and it wasn't does that answer your question it does and i have a whole handful more to follow up so you wrote an entire book on this the star principle 2008. That was published in 2008, work and investing in star businesses. That was the focus. When you say segment itself, businesses that can segment itself, and you mentioned Betfair, what does segmenting itself

mean? It means that it defines the market in a way that nobody else has done or that very few people do and therefore that it's possible to become the market leader in it. So Betfair is a very good example of that. It's a betting exchange, which is an electronic market where people can post bets on either side, buy or sell. It doesn't take principal positions, as bookmakers do. So once its overheads are covered, it can't lose money. And it competes against other betting exchanges, not against the big bookmakers. Because anyone who's a big gambler isn't going to go to Ladbrokes or Corals or the Toads or Paddy Power or any of those conventional bookmakers because they know that the bookmaker typically takes out about 10% on each event.

And Betfair takes out maybe 2%, but that's only half the time if you win half the time and lose half the time. So it's 1% plays 10%. And therefore, it means that the customer profile is completely different. And the way that the cost structure operates is completely different. So it's a separate business segment, because it's not competing with conventional betting firms. So it means that a company has to do something differently. It either has to have a price advantage and therefore a cost advantage in the way that Betfair does, or it has to offer something which is so attractive that people will pay, even if it's the same price, they will actually go there. So, you know, the three things that you want to do if you want to, what I call proposition simplify,

are you have to have something which is very useful, you have to do if you want to, what I call proposition simplify, are you have to have something which is very useful, you have to have something which is easy to use, and preferably you want something which is aesthetically pleasing, which gratifies you as a joy to use. And if you think about any of the Apple devices, then they created their own segments with the iPod and the iPad and the iPhone and other devices because it was different from conventional competition. Even the Mac really didn't compete head-to-head with IBM. And anything where you can get a big price premium, for example, 30% plus, as Apple's been able to do on all of its devices, at least at the start, you have something which is a separate

segment because it's not competing against the low cost competitor. And if you are going to be the low cost competitor, you want to be low cost in a segment which is different from the other segments because otherwise the existing large companies will eat you for breakfast. You are unconventional in many different respects. And I'd like to ask you a personal question. You can feel free to decline to answer this question, but I'm very curious as to what your investment portfolio looks like, what principles govern its composition, because you had mentioned that you're quite happy to have small amounts of liquid assets, cash available. So what does your portfolio look like to the extent that you're comfortable discussing it? And what are the principles that govern its

composition? Well, it's pretty much an illustration of the 80-20 principle, but more so, I suppose my most valuable single, I've got about 40 assets, companies in which I've invested. And the most valuable company in the portfolio constitutes about the half the total value. And another one constitutes about a quarter of the total value. And so in a way that also simplifies my life, because if I take care of those two particular assets and know that they're going to do well or think that they're going to do well, then I can be relatively relaxed. I'm quite happy to increase my share in companies once I know or think I know, and I'm not infallible, that they are going to be successful. So for example, the company that is my largest single investment, I started off with a relatively modest investment that might have had about 2% of the company. I'm now up to 60% of the company. And basically, what I'm doing is buying my shares from the existing shareholders, whenever there is an

opportunity to make an offer for shares, which is, you know, when I've got some money. So that's the principle. I don't have any rules on industry. I don't care what industry it's in. I don't really care very much what the management is like, because if management doesn't perform, management will eventually get replaced. I don't really care where it is, as long as it's not, well, as long as it's in Europe, because I think I understand European markets. I won't invest in the US because competition is too great. And also because I don't like the IRS. And also, I don't know anything about American investment. So it's basically a European portfolio, industry irrelevant, and I don't care about concentration.

In fact, I rather like concentration. Just a quick thanks to one of our sponsors and we'll be right back to the show. This episode is brought to you by Boll & Branch. Long-time listeners will recognize the name Boll & Branch, B-O-L-L and Branch. I've been sleeping on them every night for the last six months, as one example. When I decided to overhaul my life for better sleep, to change all sorts of things, I landed on Boll & Branch for linens. They are incredible right out of the box, and you feel the difference immediately. They are the softest and most comfortable pure organic cotton sheets available. They are $1,000 quality for a fraction of the price, starting at just $160.

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sheet set at bowlinbranch.com with promo code TIMTIM. That's one word, TIMTIM. And the URL is spelled bowlandbranch, B-O-L-L-N-B-R-A-N-C-H.com, promo code TIMTIM for $50 off bowlandbranch.com, promo code TIMTIM. Restrictions may apply. See bowlandbranch.com for details. Remember, bowlandbranch.com, promo code TIMTIM. Let's go back to getting fired. Just to warm up the conversation. So what happened after you were fired? And could you actually tell us more about the day that you were fired? What was the conversation? What was that experience like? And then what happened after you

were fired? Well, it was a slow firing. And in fact, it was a very gentle firing. BCG, like McKinsey, McKinsey invented the phrase up or out. And at McKinsey, they would say that after three years, you would be assessed. And if you were really good at their business, you would get promoted. And if you weren't, you'd be asked to leave. But they would do it in a very, very nice way because they were sort of dividing the sheep and the goats. The sheep were the people who were good enough for McKinsey. And the goats were people who were good enough to be McKinsey clients so that was their philosophy and they were terribly nice to the people but in fact it was kind of like it was a form of I don't know it was a form of sort of psychological one-upmanship because the the people who left generally weren't as bright

as the other people it wasn't that they could do things that the McKinsey people couldn't do. It was that they weren't as bright in terms of the strategy of a business and analysis and so on and so forth. So that worked extremely well. Well, BCG did not have quite as rigid a formula as McKinsey, but they did have this policy that if after three or four years, you had not been made from a consultant into a manager, a consultant was a typical entry level for someone who'd been to business school, you would, you know, you'd be pretty much

an anomaly would be the way that they would probably put it. And therefore, you know, you might start thinking about what you wanted to do. And so I had a number of those conversations with people. But I said to him, look, you're dead wrong. This was me. This is me in my arrogant youth, and maybe I haven't got rid of the arrogance altogether. I said, look, I'm no good at analysis, but I can charm the clients. I can talk to the clients.

I'm quite articulate. And I can understand what the issues are, the strategic issues, and I can relate those to the client. So, you know, I might not be very good at being a consultant. I might not even be very good at being a manager. But why don't you make me a vice president? Because I could actually do rather well. And they would chortle, they would say, Richard, you know, we have to have a hierarchy. And I said, you know, X, Adrian, for example, Adrian's now a vice president. We all know that he was a pretty good consultant, but he wasn't a terribly good manager because he couldn't command the analysis. And that's the heart of, you know, what BCG does. And so he had to rely on other people to do it. But now he's a vice

president. He's selling a lot of business very successfully and helping clients. So, you know, I'm like Adrian, basically. And they would, again, chortle a bit. But eventually, a guy called, very nice guy called Phil Hume, who's later started Computer Center and made quite a lot of money out of Computer Center, sat me down and said, Richard, you know, you are running out of road a bit. And I said, well, look, I got a fantastic assessment from Roy Barbie the other day. You know, he said how much the clients love me. He said, yes, Richard, we know that. But basically but basically you can't do what, what is really our power alley. So, so, um, you maybe sort of think about looking around and I came out from that meeting thinking, is he right? Is he right

about this or am I right? And I thought to myself, well, maybe he's right so i actually then very quickly went to other consulting firms to mckinsey and to bain and company to see whether may i say something richard just for a second that is for people who don't have any context on management consulting when you say mckinsey when you talk about boston consulting group when you talk about bain and company just as a point of reference for folks who may not be familiar with this industry, when I was studying at Princeton, there were exactly two industries that recruited heavily. You had the investment banks, you had Goldman Sachs and a handful like that. And then you had what were considered the elite of the elite of management consulting. And that included

McKinsey, BCG, in other words, Boston Consulting Group, Bain & Company, and so on. So these are the most prestigious names in the world of management or strategy consulting. I just wanted to add that as a bit of background. Yeah, I'm sorry. I always assume that everyone knows and they don't. I mean, it's a very, when I was doing it, it was a very obscure industry. And now it's less obscure, but it's still pretty obscure. Anyway, I went to McKinsey, they said, no, you're a bright guy, but we don't think you should be doing this management consulting stuff because you want to make decisions rather than advise. And I said, yeah, that's probably true. Bain & Company, I'll come back to in a second.

I then said, well, maybe I should be a headhunter. And I was actually approached by firm headhunters, some of whom knew me personally. And so I went off to see Egon Zender in Zurich with a view to becoming, and Egon Zender was the leading at that time, probably still is the leading European headhunter. Just a footnote there for people, headhunting means recruiting, right? At a very high level and taking very large amounts of money from the client. So anyway, I talked to Egon Sender and he offered me a job on the spot and I very nearly accepted on the spot. But when I sort of examined my heart, I came back to the conclusion that I thought BCG was wrong. And, you know, I might not suit BCG, but I thought, you know,

maybe I can get a job in another consulting firm. There happened to be another individual who had left the Boston Consulting Group and joined Bain & Company, a guy who rejoiced in the name of Floyd Bradley III. And you might tell he was an American, very, very nice guy, quite a smart guy. Anyway, so I arranged to have a drink with him and said, you know, I'm not too happy with BCG. I don't think they're moving me on fast enough. How about Bain & Company? Do you think that they would be interested?

He said, yes, they're always looking for people. They find it quite difficult to recruit people at this stage. And so I said, fine, I'll go along and talk to them. So I went along and talked to the head of the London office, and he said, we'll send you off to Boston. Now, this was very interesting for me. It was my one chance, basically, to stay in the industry that I wanted to stay in. The only problem with Bain & Company was that it had a reputation for being an extremely hierarchical,

strict, controlled, almost mystical outfit where you had to do what you were told. Whereas BCG actually was a pretty freewheeling entrepreneurial sort of firm reflecting the difference in character between the guy who had started BCG Bruce Henderson and the guy who runs or ran rather uh Bain and Company I should say that he's dead now so I can't be sued for libel or slander or whatever it is and neither can you although I have the utmost respect for Bill Bain as I'll come on and say it in a second. So they sent me off to Boston. So there I was.

I had a 4 o'clock appointment to see Bill Bain in the afternoons. I got off the plane, got a cab to their Boston office, and turned up at the desk and said, I'm here to see Mr. Bain at four o'clock. And the woman sort of looked a bit confused. And basically, what had happened was that someone in the London office had not told the Boston people, although they'd given me a ticket to go and see him, given me an appointment time, apparently it had not somehow not got into the agenda of Mr. Bain. So they said, come back the following morning. So I went back the following morning.

And there I was, you know, I went through the offices, they were, the offices were quite remarkable, beautiful offices, but the associates, the consultants and the researchers were all hunched together. It was, you know, it was not quite a sweatshop. It was a very nice sweatshop, but you could see that they were either expanding very fast or very tight on the rental cost. And then I went into Bill Bain's office and it was palatial. You know, it was stuffed full of basketball and baseball trophies and insignia and paraphernalia of all sorts. And he was sitting behind this large desk and got up very graciously to meet me and said, do you want anything to drink? I said, no, I don't want anything. Thank you. And then he started talking to me. Well, it was very fortunate

for me because I didn't find out until afterwards. But it turned out that Bill Boehm was a historian. That was his undergraduate degree. And in fact, he had spent a year doing postgraduate research which he eventually gave up because he thought it was terribly boring and because he got offered a better job as the development director of Vanderbilt University but during the course of that interview Bill Bain said something and I thought well I want to ask him a question but he he was in full flood. So I let him carry on talking until probably about 20 minutes afterwards. And then I went back to him and said, you know, if I got it right, Mr. Baine, you said earlier, such and such and such and such. And I want to ask you a question about that, blah, blah, blah. And he said, you're incredibly unusual. And I said, what? And he said, well, you're a very good listener.

And not many people are good listeners. And I wasn't aware that I was a good listener. And maybe it was just I was so desperate to get a job that actually, I was actually listening. But I was also very curious about the business. Because right at the start, when I had joined BCG, I thought, what a wonderful industry this is. It requires no working capital. And basically, they charge huge fees. They don't pay people a hell of a lot of money. Eventually, they give them bonuses, which is where the working capital comes from the difference between the standard pay and the markup, which is some of which is eventually rebated to the professionals involved. And it's expanding very, very fast. And they've

got this great model called the growth share matrix, because it's got market growth on one axis, and it's got the relative market share on the other. So they call it the growth share matrix, but it's more popularly known as the Boston box. And it's this thing which has cash cows, dogs, question marks, and stars. The one thing I just wanted to say also as an observation of friends who have come out of McKinsey is that it seems that two by two matrices are very popular for organizing thought. Yes. And in fact, McKinsey went one better. They developed an imitation of the boston box which was a three by three matrix but as always economy is everything and it wasn't as good and it isn't as good in my humble opinion

anyway but the end of the story is that bill was quite taken with me and i quite it's quite surprised and he said i want you to come and talk to Ralph Willard one of the other founders of Bain and Company and Ralph was a very jolly chap and we got on very well and so on and so forth so they they actually offered me a job and then I said to them well Ralph said how much do you want to be paid and I said well I'm earning such and such a Boston Consulting Group but obviously if I'm going to take a step like this I want want a 50% increase. 50%? That's ridiculous. And I said, well, you know, maybe you can just make me an advance for joining and not consolidate it into the salary. But, you know, at that stage, I was feeling confident that they wanted me. So I sort of raised the stakes a little bit, despite the

fact that at the beginning of the day, I was totally desperate. And if they'd offered me a job after an hour, I wouldn't have cared what they were going to pay. But anyway, they did eventually pay me quite a large amount of money to join. And at the same time, I then went back to BCG and said, you know, I think you're making a mistake. But if you want me to leave, you know, I've got all this money, which I'm due in a few months time as a bonus and rest. And please, can I have that? And to my surprise, they said, Yes, okay. I mean, they were so desperate to get rid of me that they agreed. So I made quite a bit of money from BCG and from Bain & Company.

So it was quite apart from the fact that the previous two or three years have been very, very miserable. And I was, I redoubled my efforts to succeed at BCG. I worked 80 hours a week. I got fat in the face from eating fast food at night. You know, I basically neglected my personal relationship. I stopped exercising. It was a complete disaster. And, you know, if I was to give advice to anybody who's in a similar situation or even a less desperate situation, I would say, if you're not succeeding in a job, give up and go somewhere else where, you know, your talents can be better appreciated or your talents are more suited to what that firm does. So I just, Tim, I just could not admit failure.

This was the thing, you know. I just, to me, personal success was absolutely essential to my happiness. And it affected my self-image and all the rest of it. And I could not believe that these very intelligent people at BCG couldn't see the things that I could do. And, you know, it would have been far better for me to say, well, you know, they just have a different business model, you know, analysis, quantitative, heavy duty stuff is their bag. And, you know, it's not something I can do particularly well. And so please give up and stop and, you know, decide whether you want to be in the industry or

decide, you know, if you do want to be in the industry go to a competitor so the long and short of that story is that it worked out extremely well in the end but it was absolutely balls aching very unpleasant i wanted my pound of flesh at the end of it from all the suffering that we'd gone through. What did Bain & Company appreciate about you or utilize in you that was not utilized or appreciated at BCG? Oh, it's very simple to answer that because I've always been interested in what I call the theology of business. And by that, I mean the business model that a particular firm has. And BCG and Bain & Company were very, very interesting to me. And this goes back to your first question about what am I good at doing? I actually did analyze in my mind, not quantitatively, the business model that BCG had and the business model that Bain & Company had. And they used the same concepts.

They were all using, both using the gross share matrix of Boston Box, etc., which incidentally, Bill Bain had helped to originate. So it wasn't really plagiarism. And indeed, BCG had put the stuff out there in the public domain. So it wasn't, you know, they weren't doing anything underhand. But they were using all BCG's concepts. But the firms were completely different. And let me try and describe how they were very different. BCG, as I said before, was a very sort of decentralized company. And the vice presidents who were in charge of particular clients were sort of almost autonomous profit centers. Bruce absolutely believed in the market.

He was a red-toothed capitalist. He really read in tooth and claw. He really believed in competition and so on and so forth. So much so that he divided his firm at one stage, and this is quite interesting. This was before my time, but he divided the firm at one stage, and this is quite interesting, this was before my time, but he divided the firm into three different parts. And his view was that if one of those firms had developed a slightly different way of doing things, or if they were successful for any particular reason, then the other firms could learn from that. And the market would clear, as he was fond of saying. And what happened was that he put Bill Bain, whom he had hired from Vanderbilt University, where he was a development

director and met Bill Bain because he had the begging bowl out as an alumnus of Vanderbilt. Bruce is an alumnus. And he asked Bruce, will you give money to Vanderbilt University? And Bruce said, no, but come to Boston and we'll talk about giving you a job. So, you know, that was kind of like the backstory from that point of view. But BCG was very, very decentralized. And even each individual consultant was, or all the professionals were actually profit centers. They were rewarded at the end of the year, not on how well they'd done, not on their team performance, not on anything really, but their, what he called their billability, which is a number of hours that they had actually billed. And incidentally, I was probably one of the most billable people because I was willing to work very long hours. And because initially, at least anyway, people wanted me

on their teams. And if they didn't want me, I could even sell my own work. So I had to be included in the people who were on that. But it was very, very decentralized. B bain and company on the other hand was a very very controlled and i actually called it stalinist later on um organization where it radiated out from bill bill did all the thinking initially and then the trusted vice presidents who included mit romney who was a great guy guy i've got tremendous admiration for, and four or five other vice presidents. And the formula in Bone & Company was very, very tight and unforgiving, which was that they generated all of their business from a relationship with the chief executive or the head of the company, sometimes the president or the chairman of the company,

but usually the chief executive, or maybe they were president and chief executive. And they would not work for anybody who was not the top dog in the organization. So they wouldn't work for, you know, the head of Europe, or they wouldn't work for the head of manufacturing or marketing, or any other function. But they had a spiel, which they gave to the chief executive of the company, which was, Mr. Chief Executive, we want you to be very successful. Because if you're very successful, we will be very successful. We've got this funny little stuff called strategy, which really works and we can explain it to you.

But basically, you should think of it as a wonderful formula, kind of like a secret source for increasing the market value of your company, profits and the market value. And if we do the work with your company, your share price will double within the first year or so, or the first two years anyway. And it will continue doubling every few years because we have got a way of making a firm much more valuable. And we can describe that. But it relies upon you being willing to accept us as equal partners. And again, this was very, very different from the whole of the rest of the industry, which was in a way, salesmen for hire or cabs for hire, that consultants would do anything as long as they got their daily rate and so on and so forth. They didn't really care too much about which firm they were working for.

They would work for competitors and so forth. Boehner & Company said, we will only work for one company in an industry, or later they refined that to a competitive system, which was a slightly more sophisticated way of saying industry. And therefore, we won't work for your competitors. You won't hire our competitors. And so therefore, you know, we won't work for your competitors. You won't hire our competitors. And so, therefore, you'll be giving a monopoly of strategy consulting or any other form of consulting, really, to Bain & Company if you decided to hire them. It's incredibly smart.

Yeah. It's very smart. And the way in which they got clients, Tim, was that they had no website, but that wasn't unusual at the time. They had no business cards. They had no marketing literature. And the only way, and they were very secretive, the only way in which they got business was by personal recommendation

of one chief executive to another chief executive. And then within that firm, once the client had been signed on, you know, Guinness or Dun & Bradstreet or Baxter Trevon or whoever it was, they would then have almost a military operation where within each client organization, someone from Bain & Company would be assigned to work alongside or with, nominally for, you know, the head of manufacturing or the head of a particular product area or however the firm organized itself. And they would make sure that they understood what that person was thinking. They would help them by gathering this very valuable information, which Bain and Company did very, very well about competitors

and customers and costs of the competitors. And they would, you know, develop a relationship. I couldn't believe it when I was told by Bain and Company, when I joined, you know, take the head of manufacturing out to dinner and discuss things with. I thought, you know, the last thing I want to do is have dinner with the head of manufacturing who's a very boring man. And, you know, it was all part of the job. And it was incredibly effective because, you know, whereas at BCG, they would go away for six months, and they'd come

back and give a presentation, which was dazzling. But then people in the audience of the managers were free to disagree with what was recommended and often did cast doubt on the credibility of BCG as a result of that, rightly or wrongly, usually wrongly. In Bain & Company, everything had to be pre-wired. So all the work was specified from the top down, but it was validated from the bottom up. So that once you've done a piece of work, you then had to show it to the relatively low-level manager and make sure that they agreed with it. And if they disagreed, they could only disagree about data. They couldn't disagree about concepts because we were the kings of concepts. We knew relative market share was important and we could explain why.

We weren't unreasonable. But nevertheless, when it eventually got to the chief executive and then later to the board, it had all been pre-wired, which meant that everyone had agreed to everything. And therefore, there was no disagreement. And the only discussion which there'd be at the end of the presentation was about what Bain always used to call next steps. Well, let me tell you what next steps were. Next steps were, this is how we're going to make our next million dollars by consulting to you on this issue. But of course, it was justified because Bain & Company was a fantastic machine for getting consensus in organizations

and getting consensus about some very radical strategies, which might include getting out of half the businesses that they were in, selling them, or in some way, hiding them off, or closing them down if they were cash negative and no one would buy them. And then making acquisitions to strengthen existing businesses or even to go into new areas where Bain & Company would do all the investigation because particularly if it was outside the industry

that the company knew about, of course, they had no idea. So it was a wonderful machine for getting growth from existing clients. And this was what Bill Bain always used to say, I have no idea why everyone's interested in new clients. We don't need new clients. We should have built-in growth from existing clients if we're doing our job correctly, if their profits are going up and the market value is going up. And of course, they didn't say no to new clients. and they used the existing clients who were satisfied particularly those who sat as non-executive directors outside directors on the boards of other companies to say you know i'd like to show you some a sample of work which bone and company has done in our industry uh and i participated in one of those events in New York where I was sort of, you know, we were working for an information company and we went to present to a board of that information company. And subsequently, they hired Boehling Company largely because, I think,

of the recommendation of the chief executive and to a small degree, the quality of the dazzling quality of the presentation I made. Well, you know, as a result of that, Boehling Company made me a partner, nominally a partner, a vice president, whereas I went in as a consultant, and that would normally take several years. Well, that happened after 18 months. And it was a very interesting conversation with Bill Bain when he told me that I was going to be a partner of the firm. And what he said to me was, Richard, you know, I'm going to say something which might surprise you. You know, we've had our eye on you ever since you came and talked to me, blah, blah, blah. And I want you to be one of my partners. And I thought, you know, this is ridiculous. I, you know, I didn't expect this.

And he said, but there is something which we're going to do. And I don't think any other firm in the world has ever done this. Not to my knowledge, maybe you can correct me. But what they said was, we are going to promote you, but only in nine months time. And it's a done deal. You know, there's no question that you'll be one of my partners. And I can even give you something to sign and sign something myself. But, you know, if we made you a partner now, people might wonder what on earth we were doing. In that nine months, you've got to behave as though you're already a partner without the authority of being a partner. But just through force of personality and through knowing that you are reflecting the Bain way of doing things, you will, when we actually make the announcement that you are

going to be a partner of the firm, everyone will say, well, of course, of course, rather than say, how come that Kosher's got promoted? That's unbelievable. So Bill was such a clever man at controlling his organization. And he didn't work very hard, but he didn't work very long anyway, but he gave a great deal of thought to the procedures and to the management of his own company to make sure that everything that happened in Bain & Company had been initiated in one way or another by Bill Bain and make sure that that was the thing which was going to make the most money for Bill Bain, for Bain & Company, and also, I'm making it sound as though it's an incidental thing,

but it was very important. It's the whole foundation of it for the client organization. It was just a fantastically well-run organization and it grew at 40% a year for 20 or 30 years, whereas BCG had struggled to grow at 20%. Bain & Company fell on hard times, I think in the late 1980s because they did a leveraged buyout, but that's another story. I'm not going to say any more about Bain & Company. Well, I'm not going to let you off the hook that easily. You said, you explained rather, what Bill Bain asked of you, to behave like a partner, even though you won't have the official title and we can't make the announcement until nine months hence. In practice, what did that look like? What changed in your

behavior or in what you did? Oh, it totally changed me. It totally changed me. For one thing, it made me loyal. And I was always someone who was on the verge of committing self-destruction, self-destructing, because I'm a natural rebel. I'm a non-conformist. I'm very opinionated and almost unemployable. And that was the conclusion that everyone eventually came to. But, you know, in BCG, I was well known for going off script. And I remember one of my appraisals was, you know, in BCG, I was well known for going off script. And I remember one of my appraisals was, you know, most of the time, Richard, he's like

a volcano, this guy wrote in a formal written assessment. And I've still got the assessment. It's lovely. It said he's like a volcano. Most of the time, he's sort of, you know, working away and there are no rumblings and it's all very, very smooth. But occasionally he erupts like a volcano and he says something to the client, which is not what we want the client to hear. And he basically goes off at a tangent or he, you know, he has his own view about things so when i'm with richard and talking to

the chief executive of the nu you know big information company in holland or whatever i am very nervous i never know what richard's gonna say in bain and company that was you know i'd have been fired if i'd you know if i if I'd have said, you know, my vice president said, you know, something, and I said, I agree with 99.9% of that, but here's a slightly different view on 0.1%. I'd have been out the door straight away. So it was a complete contrast. So the first difference it made was I felt very loyal to Bill personally and to the organization, which I'd never really done before. I didn't do loyalty. I didn't really do teamwork very well. So that was the first difference it made. The second difference it made was that

I decided that I would become much more direct with the people who were working with me if they were at the same level, if they were below me in the organization, or even sometimes if they're slightly above me. But I did it very nicely. And so if I thought they were going in the wrong direction, I would say, well, you know, I've been thinking about this, Fred. And I think there's a better way of doing it than this. Instead of interviewing the customers in this segment, we should interview them in that segment. We should ask these questions rather than those questions, et cetera, et cetera. So it made me much more, paradoxically to me, it made me more diplomatic, but it also made me more assertive. And so, you know, that was, it was great. I mean, I actually thought, gosh, they're going to make me a partner

and I'm going to be a very successful partner and that's fantastic but it made me feel a little cautious because although Bill Boehner signed his bit of paper and all the rest of it I knew that that was meant nothing if he wanted to change his mind so I thought well the prize is well within grasp but I feel confident now that it gave me confidence. And so I was able to do, I was much more effective as a result of that. In fact, I was probably more effective when I wasn't a partner than when I was because I was, I wanted it so much. But at the same time, I felt in some ways, although nobody knew that I had authority, in reality, I did. And that was a tremendous thing. And I don't understand why firms don't do this more broadly. It's a fantastic way of encouraging personal development and also of keeping people who might otherwise decide to leave before they're given the nod that actually they are really appreciated and they are going to get promoted. I was going to ask you more about

L.E.K., which was the consultancy you started, which experienced incredible growth. And we may get to that, but I want to skip ahead a little bit. And I'm going to do that in a foreshadowing fashion by mentioning the 80-20 principle, which we'll come back to in an interview that I have in front of me, a separate interview. The question is, what book has had the single biggest impact on your career? And you answer, my own book, The 80-20 Principle, because it's sold more than a million copies and it's been translated into more than 35 languages. It goes on and on about that, are related to ideas on strategy consulting. And you learn those firsthand, not from books, but that you can recommend a book called Perspectives on Strategy, edited by Carl Stern and George Stock. Can you speak to what people might learn in that book and why you have recommended it? It's a collection of the early perspectives of the Boston Consulting

Group. And a perspective was what an evangelical group would call a tract, I suppose. It would be something like 500 words, maybe a thousand words, pretty short. It would be snazzily presented in the livery of BCG, which was a very, quite a nice dark green colour. And it would be mailed to the senior directors of companies in America and Britain and then wherever BCG had offices. And the very valuable thing about the book is a lot of the stuff is by Bruce Henderson himself, but there's also more modern stuff. And it outlines the theory that BCG had in the early days, which I think is still entirely valid, of competition, the experience curve, the Boston box, the growth share matrix, etc. And it's just a very, very good primer. And there are many, many books on business strategy,

including one which I've written. But I think this is a very, very good thing. And it's very easy to read because it was deliberately designed to do that. Bruce laid out the principles for the perspectives very clearly, which was anything that a chief executive would be likely to agree with was not argued. I mean, it was stated. And anything that the chief executive would be likely to disagree with, which was quite a lot, because BCG was on the mission of saying companies should reduce their costs and reduce their prices steadily. Whereas the conventional wisdom in business at that time was if you get a high price, know stick with it don't worry too much about the costs and bruce had a whole theology around that and it was it's great because it's a collection of those different perspectives

and it's over several years so you get the more modern stuff as well i think it was published in 2000 or something like that so it is difficult to get good books on strategy. There's a book by someone called Richard, oh God, I can't remember his name, called Good Strategy, Bad Strategy. He'll come back to me. But anyway, you can type it into Amazon if you want. Good Strategy, Bad Strategy.

That's actually a very good strategy book, very nice short strategy book. And there's my Financial Times Guide to Strategy. I'll give a small plug. Out of print at the moment, but I'm producing the fifth edition as we speak, but in the same period of time. Good Strategy, Bad Strategy by Richard Rumelt.

Does that sound correct? God, isn't the web amazing? Aren't you amazing? It'd be far more impressive if I was actually pressing the keys and came up with that myself, but I don't do that. Well, I'll give away one of my tricks, and that is if I'm recording an interview like this, I don't use my keyboard. I have my phone on silent so that I can tap the screen without making noise to find you're very clever well you do that you can have you can have a flunky who did that for you but

it's very impressive that you do it yourself that's true well it's just for on the spot tap dancing like that earlier in the conversation i i made a promise to the listeners and that was in the form of alluding to knowledge versus principles, which I think is perhaps a useful way to segue to the 80-20 principle. And from mergersandinquisitions.com, which is a great website, the distinction that I've read you drawing is the following. What I learned from consulting is exactly what I've been teaching. Knowledge is great, but principles are better. Principles are ideas that enable you to sort the knowledge, helps you to analyze it and get to the essence of the matter as simply and quickly as possible.

Would you like to add anything to why principles are important? And the second part of that is, how did the 80-20 principle come to be as a book? Because it was a very much an underground, became an underground bestseller so principles anything more that you would like to add and then where did this book come from no i think you put it very well i just think you know there are certain meta principles and i think there are probably only about half a dozen of them for the benefit of myself and the people that i work with and um invest with invest in rather it's basically the 80-20 principle and the star principle. So if you know what those are, then you can look at the business in a way that most people don't

look at the business very quickly and see whether there's potential for improvement. And we'll talk about that in regard to the 80-20 principle in a second, no doubt. But how did the book come about? Well, again, that's quite interesting, at least interesting to me, which is that I wrote something called the A to Z of management, because I had an editor who was currently working at Pearson and later left to start his own firm with another editor there. And the editor was called Mark Allen. The other editor was called Richard Burton. Very, very skilled guys, very nice guys. And they were looking to sort of, you know, try and get something by me published.

And Mark Allen said to me, you've written this thing called the A to Z of management, which is basically a paragraph about various different concepts. And it covered all the principles I could think of. It also covered important theorists in business. And it covered anything which was of interest in business. And it also covered jargon phrases like, you know, what did people mean by work in progress and stuff like that. Anyway, I'd written half a page on the 80-20 principle. And I went to see Mark Allen one day in his offices in Covent Garden. And he said to me, Richard, I've got a book for you to write. I said, yeah. And he said, what about writing a book about the 80-20 principle?

Because you've got this half page on it here, and it seems to be quite an important thing. You say it's very important, and I can understand it's very important. So why don't you write a book on that? I said, Mark, I couldn't possibly. I couldn't possibly write a book about the 80-20 principle. You know, I've said it all in that paragraph. And, you know, I could maybe pad it out to a page. You know, if you really put a gun to my head, I could write a chapter. But I'm not going to write

a whole bloody book about this, because there isn't anything more to say. And he said, well, I'm not so sure about that. Then he decided that he would go off and start this other publishing company. So he wasn't interested in me doing it for them and they had not got themselves organized. So I went to see a guy called Nicholas Brearley, who was the publisher of the eponymous firm, Nicholas Brearley, and very, very, very nice man, incredibly smart guy. And I'd written a book for him called Managing Without Management, which was a title, which he suggested was very clever, because it basically said, managing in particular middle managing was a complete waste of time. And so you could manage without it, managing without management. And the book wasn't a huge success, but it sold,

I don't know, 20,000 copies, which was good enough for Nicholas Brearley at that time. And I went to see him about another book shortly after I'd had the conversation with Mark Allen. And he said, do you have another book in mind? I said, conversation with Mark Allen. And he said, do you have another book in mind? I said, well, not really. But this sort of idea that someone's given me, and they've got first dibs on publishing it if I could ever write a book about it, but I don't think I could write a book about it. And then I described him what the 80-20 principle was. And honestly, I didn't take more than about about 60 seconds because there wasn't much to say as far as i was concerned and he said the hairs on the back of my head are rising and i said what do you mean i thought i thought he'd lost the plot or something

and he said that can be a big successful book and i said no i mean you know well maybe but but you know how do i pad it out to a book's length? He said, go and do some research. You know, you've mentioned Vilfredo Pareto, you know, read the book again, read all the other stuff, read all the stuff on the web, you know, and the truth was that there was a hell of a lot of stuff on the internet. And this was back in 1996, book was eventually published in 1997. You know, this was a golden, the beginning of the golden period of the internet. And, you know, and I hired a researcher and said,

find out everything that's going on on the internet, on the 80-20 principle. At that stage, I didn't know how to use the internet. And so she came back and gave me this whole wadge, this whole file. And I said, Diane, is that all about the 80-20 principle? And she said, yes. And I said, well, maybe I could write a book.

So anyway, I went through it all. And the more I went into it, the deeper it actually, and the more interesting it was. And so that's how I ended up writing the book. So I went back to my original guy Mark Allen said do you want to publish this book he said no we can't we we left Pearson at the time and um we haven't started our firm yet so I went back to Nicholas Brearley and he was very pleased and and uh and that you know the first draft I produced he said very very politely he said, very, very politely, he said, I think you need to go and do some more research.

And it was, it was pretty hopeless, actually. But the second draft, I took back and he more or less published it as it was, because by that stage, I've worked it through. And it was a, it was a great thinking exercise for me. And the whole point about making a book out of it was that I extended the reach of the principle. So the principle, the basic 80-200 principles, I'm sure nearly all your listeners know, is that if you look at any particular relationship between sales and another variable, or you look at time and another variable you might be interested in, it's usually true that there are very few events or data which account for a large majority of the total. And so if you look at the profits of any company by customer, usually there

are a very small number of customers, a very small proportion of the total who account for 80% of the sales and maybe more than 100% of the profits of a company. And likewise, if you do the same thing for products, you're likely to find the same thing. And this was a well-known economic concept. Anyone who'd been to business school and heard, it was generally called the Pareto rule at that time. But I wanted to call it the 80-20 principle because it was more descriptive. The rule, to me, sounded too deterministic. Principle sounded to me exactly right. And so I actually invented, I think, the 80-20 principle. I don't think anyone ever called it that beforehand. They would call it the 80-20 rule or the Pareto rule. And so it was,

the idea seemed to me to be applicable well beyond the sphere that had been used before, which was for really analyzinging sales and profits. And I said, well, why can't we use the 80-20 principle in other areas, in people's personal lives, for example? And so I became quite fascinated by the connection between time and results. And then it was a short hop from that to extend that. So basically I would say to people, well, the hypothesis and the whole thing about the 80-20 principle is not that it's a rule, but it's an observation.

So you come up with a hypothesis and then you test whether it's true with data if you possibly can, but with, you know, seeing if you think it really is true, if it's something much more subjective and squishy. So you actually could then say, well, it's probably true, it may be true, that 20% of your time generates 80% of your useful output. So tell me what the most valuable things are that you do. And I would say that to people at work, and they would have no difficulty at all in saying, well, it was inventing this new product, or it was selling a

large job to this particular customer. Or it was writing some copy, which is, you know, very, very effective, or it was making a website or whatever it was. And I would say to them, well, you know, you've got to do more of that and less of the other stuff. And I'd also say to people that if you manage to do something, which is, you know, hugely more valuable than the other stuff, and you do that in half a day, take the rest of the day off. And if you do that for two days, take the rest of the week off, if you want to, you know, if you want to carry on working and do even more, that's right. But, you know, as Parkinson's said, work expands to fill the time available. Spending expands to fill the budget, which you've got to spend it, whether it's inside a firm or it's your own money. I was quite interested, incidentally, in hearing an observation, which one of your other interviewees said about the Wall Street of the, well, I don't know,

was it 1980s or whatever? And that, you know, basically people got very, very used to the money which they'd earned. They were hugely overpaid, but nevertheless, they found ways to use that. And that was a big trap for them, not for him, but for the others. Because what they did was that they got locked into working for Salomon Brothers or Goldman Sachs or whatever. And after a time, they couldn't really leave because their wives or their own personal tastes had developed to such an extent, or their husbands, they needed the money. You know, they had to have half a million dollars a year. They couldn't live on less. So I was saying to people, well, let's extend this to your personal life as well. So if time is important at work, then maybe time is important elsewhere. And maybe you get most of

your happiness from a relatively small proportion of your time. What are the periods of time where you actually feel that you are being fulfilled, but you feel you don't notice time escaping, you know, when you feel that this is great, and you wake up and you find that, you know, the night's gone. It might be playing poker, you know, it might be talking to friends, it might be reading something that's very exciting, might be going to see a movie or whatever. But what are the times that you are happiest? And then just try and multiply those times. And then I said, well, you could apply that to friends. Let's take the 80-20

hypothesis that you get 80% of your relationship satisfaction from 20% of people. I mean, it's a bit gross in a way, but it's very true. I mean, I found when talking to people that very often they spent time with people that they didn't really like very much. I mean, obviously, sometimes it was their boss. So, you know, that was a disaster. And they bloody well better get a different boss or a different firm. But sometimes it was as simple as things like, well, your spouse actually liked these people, but you didn't. So you ended up spending a lot of time with neighbors or with other people or members of his or her family that you didn't really want to spend. And what you really wanted to spend your time on was something different.

And so I said to people, well, you know, you might want to be a bit more ruthless about that and so there's a chapter on happiness in the book which I was rereading recently and I think it's actually rather good I mean it's taking this sort of rather arcane dusty economic principle and then seeing whether it could apply to other areas of life. And I invented the concept of happiness islands. Well, a happiness island is part of your life, which is sort of not the main part of the life, but when you get a huge amount of satisfaction from that. And I said, well, live on those happiness islands and try, if possible, to make them happiness continents. So if there's a particular type of work which you like doing at work, then try and get yourself in a position

where you're spending all your time doing that sort of work, and so on and so forth. And I see it in many ways, as a kind of amateur version of the flow idea, which is, you know, that these times, according to the guy with the unpronounceable name, Mihaly Csikszentmihalyi, something like that. Yeah. And he's and he's written a couple of books about this. It all boils down, I mean, I think that, I say 80-20 principle could be written on one page, I think that could all be written on one page, but it's a fantastic idea. It's a slightly more sophisticated way of saying what I was trying to say. And there's stuff on there in money and all the rest of it. So it was a reinterpretation of the principle to apply it to not just to business, but to people's personal lives and to try and say a few things which were really useful

and which people could take away, which is what you do, isn't it? It's what I try to do. It's what I certainly try to do. That's what I certainly try to do. And for all the reasons you just mentioned and many more, this is why the 80-20 principle, your book, faces cover out on my bookshelf and has for a very, very long time as a constant reminder. Could you share just as examples, because it may help people listening, some examples of your own happiness islands or achievement islands. Yes, I can do that. The things that I really like doing are writing books

and making money and making money through investments, not through gambling or anything like that. And talking to people. I really used to like going to dinner parties in the days when we had dinner parties. I really like to go for long walks with people, not many people, but a few people that I know we will discover something that we didn't know we knew beforehand. Those are the things that really are interesting. Doing something like this podcast is a flow activity as far as I'm concerned, an 80-20 activity. So it's that sort of stuff. It's books,

it's writing books, it's also reading books, and it's talking to people, and it's also making money through investments. Do you have any regular or scheduled check-ins or calendared reviews where you assess your life to ensure that you're allocating your time and energy to match what you know to be happiness islands or achievement islands? In other words, how do you use, if you do in any systematic way, the 80-20 principle in your life? No, is the short answer, but let me qualify that a little bit. I do something which is very unsophisticated. Other people have therapists and other people have personal trainers and other people have quite elaborate systems for keeping track of their objectives or their concerns, their worries, and so on and so forth.

I have bike rides. Every day I go for a two-hour bike ride in the countryside. It is every day unless I'm away or unless I'm in Cape Town. I've got a home in Cape Town and it's too dangerous to ride a bicycle there. But everywhere else, I will ride a bicycle. And I take pretty much the same route every day, very unadventurous. I've got two alternative routes in Portugal, for example. And during those bike rides, something will come up sometimes. Not very often, but something will always come up. At the very least, I will work out what I'm going to do that day because that's one output from a bike ride,

and it just happens automatically. I don't even have to think about it. When do you do the bike rides? I presume in the morning. In the morning, yeah. I don't answer emails. I don't look at my phone. I do have a cup of tea, and sometimes I take the dog for a walk. But apart from that, it's the bike ride. And it's wonderful. I mean,

you know, I couldn't do without it. And in fact, when I'm away, and I can't ride a bicycle, I'm talking to you from Gibraltar, for example, and I do spend a fair bit of time in Gibraltar where I have an apartment. But here, it's also too dangerous to ride because the streets are too narrow. And there I have to substitute going for a walk or going to the gym. But basically a form of exercise, which is mindless, which is, you know, not too difficult, but enjoyable, where I can just relax and let my unconscious mind do whatever it does. That's how I do those sort of things. And occasionally, I go and sit on my fish pond with a notebook and say, it's time to think about some reflections. I make a point of only doing

that when I'm in a good mood. I never do it when I'm actually feeling slightly down. I'm usually in a good mood, but it's something to do when you're being expansive rather than you're doubting yourself. And, you know, I keep those notebooks and very occasionally also, I wake up in the middle of the night and I have thought of something that I had not thought of before. And then I have a notebook by the bed, or if it's not by the bed, it's in my office, which is very close to my bedroom. And so I will make a cup of tea, put the lights on, write my thoughts, put the book down, put the lights out, go to sleep. And those thoughts are usually quite seminal. I mean, they're very, very helpful. But it all happens sort of automatically.

I don't have any systems or anything like that. Do you? Well, I would say I have acute hypergraphia and take copious notes, most of which end up never being read and certainly most of which end up being completely unimportant. But amongst all the garbage, there are occasionally useful things. I find journaling very helpful for me, different forms.

It's the writing which is important, isn't it? It's the writing. The writing somehow ingrains it on your mind. Do you find that? I do find that. As you say, one may never review the notes. I do actually review my notebooks when I'm on a plane and got nothing better to do and no book to read. But it isn't that. It's actually the process of, I think the process of writing journaling is

very, very, very useful. But I don't do it every day and I don't do it systematically. I just do it when I feel the need to do it. I would say I have two different types of journaling. And then I'd like to ask you about your time at the pond in a moment and just what that actually looks like and maybe some examples from what you've written down. I would say I have two types of journaling. The first is almost entirely like emptying the garbage bin on a Mac to purge the system. It is simply to trap my monkey mind and all of the bullets ricocheting around inside my mind on paper so that I can get on with my day in a better fashion. The second type is more deliberate and objective driven where I might sit down and very explicitly do an 80-20 analysis of the types that you've been describing, looking at how my time is being used,

look at my calendar to see if it actually matches what I say is important to me, etc. So there are two main categories. Morning pages from Julia Cameron's template would be in the former as an example. But when you go to the pond and you sit down and you're in an expansive mood and you journal, what does that look like? Is it stream of consciousness? Are there certain prompts that you might use?

Could you give us any real world examples of what has come from those types of sessions? Yes. I mean, what I do is I write reflections and I put the date and then I put numbers and then I just start writing. And, you know, one of the things that comes out from that, which came out from that recently was thinking about my investments. And I was struck by the fact that I was average, to say I was average timing, each investment would not be fair. But I was spending a lot of time on stuff that actually wasn't at all important. And I was doing it partly through interest, partly because I perhaps felt some residual sense of obligation to the people who were managing the firm and other shareholders.

So, you know, one of the things which I decided was I was not going to worry about any companies which were outside the first, you know, half dozen in terms of the value of those companies, unless the value was increasing very fast or had the potential to increase very fast. And the other thing which I realized, because I'm always, you know, almost completely invested, was that that was not actually a terribly sensible thing to do. And the next time I have a major realization, I should be prepared. And I should have two or three companies, which are new companies, in other words, investments I have not yet made, where they do have the potential to be star businesses, or they already are star businesses, where I like the people involved. And that's a sine qua non for me that I don't invest in things unless I actually like the people. And where, you know, a relatively small amount of money might conceivably be another betfair or whatever.

So it's quite easy for me, because I've got a couple of companies that are increasing in value quite fast, and I'm reasonably confident that they will continue to do so the next few years, to be rather complacent about that. But in order to maintain the rate of return that I've had historically and that I want, I probably need to find a new, you know, a new betfair or two or three new betfairs over the next five years. And I should give a bit more attention to trawling for that and talking to my contacts that might conceivably know such companies. And actually, you know, I do get some leads and don't always follow them up very well. So, yes, so it can be useful from that point of view. And the other thing which I've realized as a result of journaling in the last few months is that I am too socially isolated. I mean, I've got some very good friends. I don't see them as often as I would like. And because I have such a really nice life, living in very

pretty places, and living in sunny places generally, which is very important for me to be outdoors, so that I can play tennis or ride the bicycle or sit on the fish pond or whatever. I ought to pay more attention to social interaction and to spending more time with the people that I enjoy spending time, but they're not close to where I am. So those are sort of conclusions which have come up in the last six months. And then there are the more philosophical conclusions which you sometimes come to and which sometimes you write down. For example, one of the things which I've learned in the last few years is I have been far too much of what I call a controller and far too little of what I call an adventurer. And, you know, my life has always run upon lines of saying, I must do

this, I must achieve this, I must make this sort of amount of money, I must have this type of job, I must do this kind of thing, I must start a company, and so on and so forth. But recently, I have realized that the people who have most fun in life are more the adventurer type than the controllers. In fact, to come back to something that I hope we're going to spend a little bit of time on later on, which is my new book, Unreasonable Success and How to Achieve It. There are 20 people who changed the world, in my opinion, in that book. And it's not in the book at all, but it's something which I did after the event, I divided those very successful people into controllers and adventurers. And I was quite surprised to find that 14 of them were actually adventurers

in one form or another. And only six of them were controllers. There were some who were both, but that was the count taking halves into account. And for example, one of the people who was a controller in the book was sort of my evil, evil successful person, which was Vladimir Lenin. And, you know, his life was pretty unpleasant, because he was always trying to control other people. And it was a very uphill struggle. And he achieved a great deal in his terms, I mean, not things that I would approve of. But he was the founder of practical communism. And he basically made communism a success in very large parts of the world, a success in the sense that they remained communist. And they did develop the countries were perhaps not as fast as they would

have developed under a free market system. But from that point of view, he was very, very successful, but he didn't have much of a great time. Whereas some of the people who were much more freewheeling, for example, the freewheeling Bob Dylan, or even Otto von Bismarck, they had much more fun because although they were determined to achieve things, they relied upon events flowing their way and they just bided their time until the

right moment came along. And then they worked. Then they basically made a huge effort to control, or not control events, but to actually steer them. One of the great quotes which I like is from Bismarck, who said, man cannot control the flow of events. All he can do is ride with them and steer. So, you know, sometimes you get those sort of kind of philosophical reflections coming up. More often, though, probably on a bike ride, and then I might write it down afterwards.

But I actually find it quite difficult to be as radical as that. often though probably on a bike ride and then i might write it down afterwards but i actually find it quite difficult to be as radical as that um just sitting down and writing i tend to write you know things which are they're much less important in a way they're less distant let's this was on my my my next note to segue into that is the the new books. Let's talk about the Genesis story. And this is always interesting to me as someone who occasionally tries to wordsmith things. And that is the sort of embarrassment of riches that you no doubt have in terms of possible subjects you could explore. So unreasonable successasonable Success and How to Achieve It, you've written many books. Why this book? I've always been fascinated by success,

and I've always been fascinated by the discrepancy, really, between, as I see it, the arbitrary nature of success in many ways, which is that the people who are successful are not necessarily the people who are most intelligent or most expected to succeed or who um deserve it you know and many of the people many of the 20 people that i highlight in the book weren't even competent and winston churchill was prime example of someone who was complete failure through most of his career got one thing right which was that hitler was a threat to the world and that he knew how to deal with Hitler.

But basically, the man was a disaster, and he thought that oratory would propel him to become prime minister. But, you know, as Herbert Asquith said, it does not matter if you speak with the tongues of men and angels if nobody trusts you. And it was directed exactly at Churchill. So I've always been fascinated by success, but the actual genesis of the book, as you said, came on a train journey. I was traveling from Paris with a friend of mine to Lyon, and I always take a book with me, And I didn't have a book, a new book that I wanted to

read. So I took an old book, which was Malcolm Gladwell's Outliers. And you probably remember that in Outliers, the whole thesis is that success derives from deep experience and long exposure to doing something in a very narrow field. And he came up with the idea of the 10,000 hours, which is now a trope, something which everyone talks about. And he gave a couple of examples very early on in the book, which resonate very nicely, which are the Beatles, for example. In 1960, they were just a rather poor high street band. And then something happened to them,

which was that they went off to the strip clubs of Hamburg and they had to play seven days a week eight hours a day and as John Lennon's quoted in the book as saying we couldn't help improve with all of that extra experience and then he quotes the example of Bill Gates, who, because he went to a private school, which, unlike the vast majority of schools at the time in America or anywhere else, had got computers, you know, he was able to acquire expertise in coding and how to use computers. And that was his sort of, you know, he got his 10,000 hours in very, very quickly. So the problem with that thesis is that it's not universally true. It certainly applies to Bill Gates, it certainly

applies to the Beatles, and it applies to some other people as well. But of the people that I looked at, that couldn't explain it. And what I did was I took 20 people whose life stories I knew well, in some cases, I knew them personally, such as Bruce Henderson, Bill Bain, whom I talked about before, who were very important to me and hugely underrated in terms of the impact which they've had set out to do and, in my opinion, did not succeed in doing? Would it be possible to look at the causes of success for those people and identify things which were common to all 20 people, which they all had or did? It might be an experience that they had, or it might be an attitude which they had, or it might be an attitude which they had, or it might be a way that they exploited particular opportunities. Would it be possible to look at that and say that there are things which are so universally

present that if you want to be what I call unreasonably successful, which is more than you deserve, if you like, terrifically successful in changing the world the way you want to work changing it, it might be a small corner of the world or it might beifically successful in changing the world the way you want to change it, it might be a small corner of the world, it might be a big corner of the world. Would it be possible to isolate the reasons for that? And I looked at 50 possible reasons. For example, I looked at, you know, would you need to be a high risk taker? And the answer was, of those 20 people, only nine of them actually took very high risk, of the 20 people in my book. Only nine of them actually took very high risk.

So that went away. And then I narrowed it down to nine reasons, which were universally present in all of the cases. And I did not throw people out if they didn't meet the nine requirements. I was quite rigorous with myself. I said no. And the players that I took were, bill burnham bruce henderson there was jeff bezos otto van bismarck winston churchill mary curie uh leonardo leonardo da vinci walt disney bob dylan albert einstein victor frankl the guy who was shoved into a concentration camp by hitler but came up with the third wave of psychology after Freud and Adler, and was probably the first

real existential philosopher. Bruce Henderson, I mentioned, Steve Jobs, John Maynard Keynes, who saved the world from fascism and communism, perhaps as a result of saying that you didn't have to have very high unemployment, and the state could step in, and that would be fine under a liberal capitalist regime. Lenin, I mentioned, Madonna, Nelson Mandela, totally obscure guy who was imprisoned on Robben Island 17 years, but somehow managed to negotiate a democracy in South Africa. J.K. Rowling, Helena Rubinstein formed the eponymous cosmetics company before anybody else had a cosmetics company. The person who I think was most successful of all of my 20 people, Paul of Tarsus. I don't like calling him Saint Paul

because it makes him sound, you know, an establishment figure. He was never an establishment figure. He had this vision of the living Christ, and he preached that throughout the Roman world. But he did something that none of the other followers of Jesus did, which, as you said, you know, following a Jewish customer base, if you like, is not the way to make a new religion take off. We don't want to be a very small sect within Judaism. I actually want to convert people in the whole world. And therefore, what we need to do is to turn, you know, that sort of Jewish religion that Jesus had been enveloped within and take away from that the things which actually were universally applicable. So, you know, without Paul, what eventually emerged as Christianity would never have either achieved liftoff,

nor transcended its Jewish roots. So fantastically successful, you know, I mean, who would have thought that Christianity could actually succeed? It was just a miracle. Margaret Thatcher was the other one of the 20 people. So I came up with these nine things which were common to all of them. And I'll rattle through those if you like. Definitely. Feel free to list the nine. But before we do that, if you could just take a moment to define success, since many people define success differently. Could you speak to what that means in the context of unreasonable success? Is it achieving what they set out to do, or is it something else? And then I would love to know what the nine characteristics are. Yes, it is. I think success is very subjective and can only be the person's objectives.

And, you know, I mean, people said to me, how on earth can you put Lenin in the book? And, in fact, at one stage I had Hitler in the book and the publishers insisted on it being thrown out because they said the booksellers would never sell it if it was in the book. I said, well, we don't like Hitler. We're in favour of Hitler. They said, no, Hitler's got to go. So it's value-free in the sense that it is what they achieved,

which changed the world the way they wanted to change it, whether that was a good thing or a bad thing or an indifferent thing. That's unreasonable success in one definition. Success is a whole continuum as far as I'm concerned. And, you know, I'm not against minor successes at all. They're absolutely great. But what I was really interested in, in order to establish the most important causes of major success,

is what I call unreasonable success, and I had four criteria for that. You could say that, in a word, it's undeserved success, but that's a little bit unfair. Firstly, it's such success in changing the world, it seems unreasonable for one individual to do that. I mean, we live in a world which is quite collective and which is governed by culture and constraints, which are quite immovable. We think the world's changing very fast, but in many ways, the world doesn't change very fast. And then suddenly it does. And what usually is behind that is not a huge number of people doing something, it's an individual deciding to do something and managing to persuade other people to do that.

So it's unreasonable in the sense that one person has all of that impact. Secondly, it's success that is unexpected and was not predicted when the individual was young or early in their career. So it's kind of, you know, it's success which comes from nowhere. Thirdly, it's success that goes well beyond what the individual's skills and performance seem to warrant. And Winston Churchill is a jolly good example of that. Some would say that the British Prime Minister Boris Johnson is an example of that.

Completely disastrous Foreign Secretary, probably completely incompetent when he's dealing with the coronavirus. But nevertheless, I think may well go down in history as a great Prime Minister, because he has certain objectives that he wants to achieve, like making sure Britain did leave the European Union, and maybe doing something about the excessive price of housing in Britain. The fact that it's almost impossible for young people to actually buy a house these days. And also, you know, Britain's a hugely over-centralised country, London-centric country, and there are left-behind areas of Britain,

which basically is most of the rest that's not in the south-east of Britain. And I think Boris Johnson wants to do something about that. And if he's able to do that, that would be a fantastic achievement. I know that you're interested in very practical things. So in the book, I discuss what do you do if you don't have self-belief? And for example, one of the things that you can do is to realize it has to be in a specific domain or context. And so you've got to identify that context where you could really change things. Secondly, find a fantasy mentor. Now, this is quite an interesting, perhaps original concept.

I was driven to it by studying Bob Dylan because here this guy arrived in New York, completely unknown, 19 years old, but with fantastically high ambition. And one of the things which he did was to seek out Woody Guthrie, who was probably the template that he wanted, which was Woody Guthrie had been not only a folk singer, but also a protester, really, and also someone who wrote his own songs. And in fact, that was very unusual at the time. And folk songs were meant to be sort of arose from the folk, not from individuals. And Guthrie actually changed that. He wrote a lot of original songs. And Dylan did too. He started writing his own songs, one of which was called The Ode to Woody.

And he went to the hospital in New Jersey where Woody Guthrie was suffering from a terrible, terrible disease called Huntington's syndrome. And whether or not Guthrie was really aware that Dylan was there, whether he actually thought Dylan was going to be the new Woody Guthrie

is really unclear. But it's curiously irrelevant as well, because Bob Dylan took from that template. That's what he had to do. He had to write his own original songs. He had to claim the heritage of Guthrie as something which would perhaps get him some publicity and attention. And somehow he managed to get a contract with the, all of the folk labels rejected him, but Columbia Records, which was a blue chip, you know, firm, obviously, signed him. And then, you know, that gave him confidence and it gave him contacts and it gave him gigs and goodness knows what else. And he was able to produce albums and, you know, then he was made. And also, of course, he hijacked, in a sense,

the protest movement with songs like, you know, Blowing in the Wind, etc., which made him, according to certain people, the voice of the generation. So it's another way to find a fantasy mentor. Thirdly, to search for transforming experiences. And I'll say something about that in a minute. And fourthly, to attract well-deserved praise. And I'll say something about one breakthrough achievement also in a moment. And then narrow your focus until your work is unique. Well, these are some of those are landmarks as well. So the first one being self-belief. The second one is Olympian expectations, that you expect a huge amount from

yourself and then from other people. And the high priest of high expectations is probably Jeff Bezos, who's always banging on about this. And, you know, really believes everyone in his senior management team has to be an absolute A player, class A player. And he says, you know, if you put someone who's not used to high expectations on a high expectations team, they will adapt. But the reverse is also true. If you have people who are not high expectation people, then people's standards will slip. And one thing that Bezos has been incredibly good at doing is having the highest possible standards. You know, his mantra is customer service and unbeatable prices, and he's totally inflexible on all that. So the second thing is Olympian expectations.

The third one, which is particularly interesting because it's really original, I think, and I was thrilled to discover this in my research, is transforming experiences. Every single one of these people had actually an experience which transformed them in the sense that they went into the experience as one sort of person and they came out as another sort of person or as someone who is 100 times more powerful or more effective. Every single one of them had that experience. And again, to take Bezos as an example of that, before he founded Amazon, he was a failed investment banker age 26, and a headhunter decided to send him as a last resort to see a guy called David Shaw, who had founded a countercultural quantitative investment hedge fund. And Shaw realized before anyone else did

by about 1992, that the internet was going to be huge, and it could be huge not just for information and all other things but for selling things for retailing and so his idea was that that his firm which was called desco d shore and company should develop a program for selling over the internet and that it should start a company to do that. And he put Bezos as the project leader on that. And he and Bezos got on very well, like a house on fire. They were the same extremely quantitative, extremely nerdy, extremely ambitious sort of people. And between the two of them, they developed the format for Amazon. And they decided that the first category that they would go into was books. And they decided that they would allow people to write

reviews on the sites, etc, etc, etc. It was Amazon Blueprint as it happened. And of course, David Shaw wanted that to happen within Desco. But one day Bezos went to David and said, I really want to do it myself. And David Shaw took him for a two-hour walk around Central Park in which he tried to dissuade him. But incredibly generously, David Shaw allowed Bezos to go off and found Amazon. He didn't even ask for a share in the company. But then that was David Shaw allowed Bezos to go off and found Amazon. He didn't even ask for a share in the company.

But then that was David Shaw. He was a very, very self-confident guy, and his firm has been amazingly successful anyway. So that was a transforming experience for Bezos. We talked earlier about Bill Bain. The transforming experience for him was getting hired by BCG, by Bruce Henderson, when he was the completely unqualified guy who'd never done any business, never done a business degree, didn't understand economics or whatever, managed a history researcher who managed to get a job as a development officer at Vanderbilt University, where he met Bruce Henderson. And Bruce Henderson, who had a tremendous nose for talent, then decided to hire Bill Bain. And Bill Bain took to Boston Consulting Group, BCG, like a duck to

water because he was a very, very smart guy. And because the power of the concepts, the concepts were so great. And Bill and Bruce developed them together together essentially. And then Bill decided to do the dirty on Bruce and leave and form his own firm. We would never have heard of Bill Bain if it had not been for Bruce Henderson meeting him and deciding to hire him and the formative experience of working within BCG. Let me ask you a question if I could, Richard, and I imagine you might get to this, and I'm sure you have an answer for it. But before we move ahead, if someone has not had a transforming experience, one might wonder if they're listening to this, is it possible to engineer a transforming experience? Or do I sit on my hands and wait for lady luck to smile upon me?

Absolutely, that's the whole point. One of the things I say in the book is that the whole point of trying to identify these nine landmarks is that the people who actually visited them didn't intend to. They didn't actually say, I need a transforming experience, let's have one. They happened to them. For example, the transforming experience, let's have one. They happened to them.

I mean, for example, the transforming experience of Margaret Thatcher was having the Falkland Islands invaded by General Galtieri of Argentina. And she said that was the worst moment of her life, but it was absolutely the making, as it happened, of her and the experience of living through that and commanding the armed forces and doing what everyone said was impossible, which was recovering the islands, made it possible for her then to do what she really wanted to do, which was, in her opinion, reverse national decline of Britain. So yes, the people who had these transforming experiences did not engineer them. But having seen how important it is, understanding that you cannot, in my opinion, admittedly from a relatively small sample, but it's amazing that every single one of these people had a transforming experience, which is

described in the book. And I did not fake it. I just, you know, I didn't throw anyone out because they hadn't had a transforming experience. I stuck to the rules. You can then say, well, I better have a transforming experience, haven't I? And then you come to the question, well, what is the most likely type of transforming experience which will put me in luck's path in order to then become much more powerful? So it could be going to a particular university and studying something which is very arcane and unusual. It could be finding a very high growth firm like BCG or Boston Consulting Group or DE Shore and Company, and then joining that firm when it's still very young, because you won't be on the forefront of developing. You see, the thing about companies

in their early days is that they don't know what they're doing. And so if you don't know what you're doing, you can be very creative about it. And if you're involved in that process, you discover things that you never knew that you had. And not only that, you become identified with them and you become powerful and you become perhaps a large shareholder in the company. And it's completely different from joining a company which is, you know, on tram lines, where basically it's not going to do anything radical and anything new. It's so exciting to actually be part of the company that's growing very fast, doesn't really know what it's doing, but has's got something, some rare knowledge, which actually means that it can be very, very successful. And it doesn't have to be a company,

it could be a social organization, it could be a way of thinking, it could be anything that's growing very fast, and where it's unformed, and where you think you've got some affinity with it, and the ability to contribute and be creative. It's not easy to specify what someone's transforming experience should be, but I've tried it on a few friends and good acquaintances. And it's amazing that actually we do in the end come up with something which might actually work in some cases has. Before we get to the fourth, I just want to say a few things. The first is that my experience maps very well to a few of the things that you just described in the sense that when I

was graduating from college and was suffering from all sorts of quarter life crisis, existential angst about what to do with my life. And I asked a mentor at the time what I should do, what type of sector I should go into. And his answer was, it doesn't matter as long as it's growing very quickly. You want to be in something that is growing quickly, not in a sector that is in decline or stagnant. And that ended up being exceptional advice. And I found that it also applies to where you place yourself. That is to say, one of the reasons, by example, that I left San Francisco after effectively a decade was that I felt like it was a place experiencing some degree of stagnation or even in decline. And I moved to Austin, Texas, which was very much a startup of a city. It was rapidly growing, expanding, where it was still taking shape

and still could be shaped. So I just wanted to reinforce what you said. And on that point, or I should say, moving on from that point, what is the fourth of the nine landmarks? Yes. I mean, growth is everything. I mean, it ties in with the start principle. Yes. The fourth one is one breakthrough achievement. Now this is different, Tim, from the other eight landmarks in that it is not a how to do it, it's a what to do. And in some ways, it's a bit odd of me to put it fourth, because it's the culmination of everything else. and all the others really lead to this. But I wanted to put it in the book fairly early because I wanted people to be thinking about this as they go through, which is, you know, what on earth are you going to do to change the world?

And you're not going to succeed unless it's something really dramatic, or he's not going to succeed at being unreasonably successful. So you need to start thinking about that. It might take you a decade, it might take you several decades to actually work out what it is. But it has to be something that you believe needs to be done. It's not a way of making you successful. It's a way of changing the world. And if you define it in those terms, again, it's surprising you can actually come to some kind of resolution, some kind of opinion. And for example, once Lenin had had his transforming experience, which was the hanging of his beloved elder brother that he idolized and adored because he was implicated in an assassination attempt at the Tsar. When he was 16 years old, Lenin heard that his brother had been hanged.

Instantly, he decided that his whole purpose in life was to smash the bourgeoisie and to cause revolution in Russia. And it was a ridiculous, you know, 16 year old school boy, ridiculous idea. And he wasn't political at all before. He wasn't, he was a very nice sort of, you know, everyone liked him, but he became very bitter and twisted, but also very effective. So it's, it's one breakthrough achievement, which, and it's not two, it's not three, and it's not one every five years. It's something that you do, which actually is going to in some way change the world. I mean, my breakthrough achievement was starting or co-starting L.E.K. It's not on the comparable

scale with the people in the book. But nevertheless, it was, you know, a very successful firm, which gave huge opportunity to hundreds or thousands of young people really, who were trained and developed in that way. And it also, you know, made an impact on the corporate world as well. We invented the idea of mergers and acquisitions strategy consulting, which is completely different from anything that anyone else had done. So one breakthrough achievement is the fourth one. The fifth one is make your own trial, which is basically become bloody minded and work out a way of doing something that goes off path from everyone else. And I describe how to do that. The sixth one is to find and drive your personal vehicle. Again, one of the discoveries in the book

is every one of these 20 people had some kind of vehicle which in some ways was sometimes it was a concept more often it was an organization of some sort of company if it's in the business sphere or an organization more broadly defined if it isn't the british state for example was a vehicle for margaret thatcher and for and for winston churchill together with a particularly eclectic sense of you know what they were trying to do the whole point about a personal vehicle is that the paradox of the individual who actually does manage to change the world is that they can't do it on their own but on the other hand it doesn't get averaged it's not sort of a committee deciding what to do so someone like Jeff Bezos decides to make internet retailing the thing which he does

and the thing that you know the everything Everything Store was the name that they gave it originally. And not just to be a successful internet retailer within books, but to be a successful retailer on the internet everywhere, and to be totally dominant in doing it, you know, an incredibly ambitious thing. But in order to do that, he needed to have an organization which was totally under his control, just the same way that Lenin needed to have the Bolsheviks, you know, a group of people who were totally dedicated to Lenin, not very many of them, but a couple of thousand. inertia that society and culture has so that an individual can change things by being very determined about it, but they don't have to do it all themselves. And the choice of the vehicle is terribly important. May I ask just before we move on, are there any particular unusual or unorthodox examples that come to mind for both make your own trail and find and drive your personal vehicle? If you could give perhaps one for each? Yes. I mean, your own trail is very much, I think, Walt Disneyland. I do actually mean Disneyland. The thing about Walt Disney is that he couldn't decide

what he wanted to do initially. He was a very good actor when he was in high school, and he used to do double acts with a friend of his, which garnered a huge amount of praise. And then he decided that he actually wanted to be an artist, but then he narrowed that down to being a cartoonist. But his firm, which he started, his studio, which he started in, I think, 1923 in Los Angeles, was not very successful for the

first few years. The big breakthrough that they came up with was Mickey Mouse. Mickey Mouse made all the difference because they gave a ridiculous story about a mouse who wanted to woo a lady mouse by flying a plane. It was a really silly story. But what Disney did was not only sort of this film called Plane Crazy, which he turned into a very expensive film, which almost bankrupted him and his brother and various other people. But he decided to give voices to the characters from the screen, which people had done before, but never with cartoons. So that was his personal trail. In the 1940s, he became disillusioned with Disney as a corporation.

It was a very successful corporation by that stage. But nevertheless, he was disillusioned with the fact that they were trying to take him away from the studio. He didn't have the sort of excitement of doing that. He didn't really feel that he was creating something new. And so he went into, you know, to find his own personal trail. He actually spent quite a bit of time with Salvador Dali, and they created a very surrealist movie, which then the board of Disney turned down, and Walt Disney was outraged by that. And he had to tell some of the, you know,

they did not think that having the board approve it was anything other than a formality, but the board said, no, you've lost your marbles, you know, as Peters and Waterman would say later, stick to the knitting, et cetera. They didn't use those words, but that was what they said. That's what they meant. And so Walt Disney decided to go off and do

something completely and utterly different which was invent Disneyland until then amusement parks had been the province as Disney called them of hard-faced men who basically were thugs but what he wanted to do was create something which would be a monument to the past, the present and the future of America, and all that was best in America. Now, you know, the first time I ever went to Disneyland, which was in 1969, I hated it. I thought it was too American, and too plastic and all the rest of it. But it was a fantastic achievement in the early 1950s and hugely successful commercially.

Again, he was making his own trail. The board again refused to invest in this. They refused to put up the capital for all the exploratory work, for all the imagination that had to go into it, for building Main Street and the fire station and Abraham Lincoln and all the rest of it. They said, no, we're not going to approve this, Walt. And Walt said, well, screw you, in effect, I will fund it myself. And so he sold his houses, he sort of, you know, took second

mortgages rather on his houses. He sold one of them and took a second mortgage on the first house. He found investors who would do this. And eventually at the last minute, the Disney Corporation decided that they would come on board as well when they saw it was inevitable and it was going to happen. They initially refused to let him use the characters, Snow White and Donald Duck and all the rest of it. They said, no, if you do that, we'll sue you.

So, you know, if Disneyland had failed, which was eminently possible, Disney would have been ruined and, indeed, the parent corporation might have been in some trouble one way or the other. But, you know, that was finding his own trail because he had this vision and he wanted to pursue it. And it was nuts, basically. So that's an example of making your own trail. Finding and driving your own personal vehicle. Well, I think actually Lenin is a jolly good example of that. It was the Bolsheviks. You know, initially, the dissident revolutionaries in exile around about 1900, etc., were dominated by people he later called the Mensheviks, by social revolutionists who were not as extreme and uncompromising as Lenin. And there was a conference, I think in 1903 or something like that, at which Lenin deliberately antagonized the other people and said, you know, I want to have my own party.

I'm going to split the revolutionaries. And they said, don't do that. We've got, you know, there aren't very many of us. Please don't do that. But he said, no, I can demonstrate that if I have, you know, a thousand people who are dedicated to me and to my way of doing things, we can have revolution in Russia. Now, absurd, because there are hundreds of millions of people in the Russian Empire. And how could it be that a thousand people could actually change that and make successful revolution?

But Lenin had an answer to that. And it was a very good answer, which was he said, look, Russia is a very backward country. It's an autocracy. It's not like Germany or France or Britain where, you know, there are lots and lots of different centers of power. All of the power is concentrated in the czarist army and the bureaucracy. And there are only about 2,000 people in Russia who actually control things. There are no independent centers of social pluralism. I'm sure he didn't use that word. But basically, it's a very top-down state. And if 2,000 people can rule Russia, why not us? And that was his theory, and it actually proved to be absolutely correct. So his vehicle was splitting the revolutionary movement, but having a group of people who were absolutely dedicated to him

and got shot if they didn't, if they weren't. So the vehicle is very, very important. The vehicle doesn't necessarily have to be very large, but it hugely augments the power of the individual. But it's not a compromise. You know, the vehicle must be totally the vehicle in the same way that Bain & Company was Bill Bain's vehicle. You know, you stepped out of line with Bill Bain, you didn't get shot, but you certainly got fired, and so on and so forth. Boston Consulting Group was Bruce Henderson's vehicle. You know, you stepped out of line with Bill Bain, you didn't get shot, but you certainly got fired. And so on and so forth. Boston Consulting Group was Bruce Henderson's vehicle. He did it a different way. It was more, let a thousand flowers bloom. But nevertheless, unless you were interested in developing the concepts, which was Bruce's thing, then you weren't going to succeed. And he got people who were very good at doing it.

Can I move on to the next three? I'm sorry, I'm probably taking too much time. Oh, no, that's totally fine. That's why this conversation is long form. So let's move on to the next one. Okay, the seventh one is thrive on setbacks. And this doesn't sound terribly original, but it is terribly important. You remember that Nicholas Nassim Taleb wrote a book called Anti-Fragile, which I think is probably his best book. And the thesis behind that, as you know, is that resilience is not the point. You actually have to like setbacks. And the reason that setbacks can be very helpful is two reasons. One is they give you feedback and might tell you that you're off, you know,

you're on the wrong path. And the other thing you know, you're on the wrong path. And the other thing is that either you're on the wrong path or you've got the wrong tactics. And it's quite important to distinguish between those two. Or that, in fact, the fact that you've been unsuccessful in a big way means that you're going to be very successful in a big way. It's quite difficult to describe. I also think about Winston Churchill and his wonderful failures. He went away from those failures, obviously a bit depressed at times. He went and did something completely different for a time, getting out of politics after he'd ruined the Gallipoli campaign,

the Dardanelles campaign in 1915, and sent several thousand people to their deaths from a harebrained scheme that he'd invented. And he got out of politics for a time. He joined the regular army and he went to the Western Front. In 1929, he was on the verge of bankruptcy as a result of having invested heavily in stocks in 1928. And when the crash came along, Wall Street crash, he was almost bankrupt. He decided to, and also he was very unpopular with his fellow conservative leaders at that time, because he'd made a number of mistakes in 1925 in going onto the gold standard for Britain and in antagonizing the miners leading to the general strike of 1926 and alienating the whole of the organized labor movement. So he was unpopular with his party. He was on the verge of bankruptcy. He went off and did a huge lecture tour of America,

which was very successful. And then he got run over on Fifth Avenue by a car and suffered some quite serious injuries, but battered and bruised, he'd gone up and did it again. And you can see from what he writes that he thinks what's happening to him is terribly important. And most people would say, no, this is a semi-comical drunk who's basically had a series of failures. But Winston Churchill didn't see it that way. It's very, very interesting, the psychology of not being resilient, but actually really liking failures because they make you seem important in some ways. And then the last two are acquiring unique intuition, which requires deep knowledge. And here I think that I overlap a little bit with Malcolm Gladwell. You know, you really do, the quality of intuition is a function of the degree of experience

that you've had in a very narrow field, but also your willingness to take notice of intuition, which some people do and some people don't. And the last of them is distort reality, which is Steve Jobs' phrase, of course, based on Star Trek. But what distort reality means is refusing to accept current reality and redefining a way of making that different and convincing your followers in particular that you know how to get around or distort reality, convincing them that you have a reality distortion field it works it's just amazing and and bruce henderson did that bill bain does all the other people in the book had got a way of of uh overcoming what was the incredulity of other people that they could actually really change the world in a major way

i would love to make a few observations based on a number of things you shared and also uh i'm going to follow that by asking you for an example of acquiring unique intuition, because this is of great interest to me. But I want to mention, one, a piece of trivia for people that ties into a name that came up several times, Jeff Bezos, thriving on setbacks, although he didn't come up in that particular landmark description. If you go to relentless.com, it will forward to where? To amazon.com. So relentless.com

is one of the first domain names pointed to that website. And what strikes me is that many of these landmarks are reinforcing for one another. So you have, let's just say, self-belief, Olympian expectations, and I'm going to group them in a very deliberate way. Self-belief, Olympian expectations, one breakthrough achievement, make your own trail, find and drive your personal vehicle, thrive on setbacks. And let's take distort reality because I'm not yet familiar enough with the acquire unique intuition, but all of those to some degree seem to be enormously enabled when you have a longer term vision and horizon in mind

than your possible competition. So if you look at Jeff Bezos, he is one of the few examples of chief executive officers who have been given a pass by Wall Street. I mean, he's convinced his investors, if you go back and read his annual letters, which I encourage everyone to do, you can find a PDF of all past Amazon annual letters. There was always an emphasis on a long term time horizon, longer term than a. Longer term than a quarter, longer term than a year, always longer term. Bob Iger at Disney is another great example of this. Toby Lutke of Shopify is another incredible example of this. And it just strikes me that this longer-term vision and time horizon enables a lot of these. And without that, if you are in any sense

feeling compelled to rush that you disable some of these landmarks. So that's just something that came to mind as you were describing these. I couldn't agree more. I mean, that's absolutely true. You need a long time horizon. You need to expect that you're going to have massive impact, but it might take a very long time. But you need to be sure about what you're trying to do, and you need to be sure that you'll get there. But, you know, time is kind of, you know, there's lots of time. Yeah. So acquiring unique intuition, could you perhaps give us an example of that that you like? And if there's one outside of Steve Jobs, that'd be great, but you could use Steve Jobs if you like.

I think Jobs is a great illustration of that, but I'll take Nelson Mandela as my example on this. Nelson Mandela was a leading member of the ANC who got caught and convicted and sent off to prison. Total of, I think, 19 years in prison life sentence actually uh he was quite lucky to escape the noose and we were very lucky that he did he was on uh this island called robin island which i visited off cape town it's you know it's a short boat ride away from cape town maybe half an hour at most but it's a world away. And it's a nasty, horrible, stark, it's basically, it's a scrapyard, essentially. I mean, it's got rocks, a lot of rocks, and that's it. I visited the cell in which he'd been incarcerated, and it's so small, you wonder how he could possibly have kept his self-respect. But during that period of time, something very interesting happened. The leaders of South Africa, including P.W. Botha, who was reckoned to be the great crocodile, sort of, you know, very, very hostile to change, actually realized that they'd painted themselves into a corner and that they didn't want to have

the possibility of bloody revolution and being driven into the sea as they saw it by the population of South Africa. And the whites were, you know, maybe 5 million people against 50 million plus who were blacks broadly defined and the anc were ratcheting up violence and the anc were controlled by all of the tambo in lusaka some distance away and here was this nelson mandela guy and he was when he was in prison on robin island some interesting things happened. One is that he acquired the charisma of the sort of, you know, prison hero, so that within the ANC he was viewed as the natural leader. Another interesting thing which has happened was that there were various outside forces,

including the British Commonwealth, that in the 1980s sent people to Robben Island to talk to Mandela and try and see whether there was any route forward there, because they couldn't speak to the guys in exile in Lusaka or wherever they were. And those guys were totally uncompromising and were trying to cause civil war, and they wouldn't have got anywhere. And so there were a group of people who went. There was a group from the Commonwealth called the Eminent Persons Group,

very self-deprecating. And these eminent people went, and of course they talked to Nelson Mandela because he was recognized to be almost the shop steward of the prisoners and he'd formed a sort of university there where they basically developed knowledge of this, that and the other. And somehow Nelson got the intuition that these people actually wanted a deal. They didn't want this to be continued forever,

and they were willing to compromise in some way. Hardline nationalists who were nasty, horrible racists would do apartheid, and they shot people, and they were extremely unpleasant. There's no doubt about it. These people actually wanted a solution, and he was the first person to realize that. The ANC had always said,

and Nelson Mandela had always said, we will not compromise. But when he met some of these people from the Commonwealth, and when he met later some of the senior ministers from the government of a nationalist party, the ruling party, he suddenly realized that a deal was possible. And he said to them, you know, if you really want a deal, you're going to have to have one person, one vote. And they said, we couldn't possibly have that democracy. No, we don't want democracy. There are more blacks than whites. We can't possibly do that. But, you know, Nelson stuck to that. And eventually, he formed personal relationships with the head of the Secret Service, the secret police, as it were, with the minister who was responsible for justice, with the minister who was responsible for state security, including the prisons, and eventually with P.W. Botha himself. And it was all based on this intuition that perhaps they could reach a deal. And nobody else had that intuition.

Nobody but Nelson Mandela actually thought it was worthwhile pursuing talks with those people. And it took five years. But in the end, his intuition won out. And the result was that instead of having a war, and, you know, bloody bloodshed going on, and possible revolution, and the only question for people, really, was whether that would be five years or 50 years before, you know, the whites would be thrown out and massacred. Instead of that, you might have a transition to black majority rule.

And that could be done in a controlled way where F.W. de Klerk, who succeeded Bota, would be the vice president and effectively the mentor of Nelson Mandela. I've talked personally to F.W. de Klerk about these days. For some reason, I had an opportunity to do that. And, you know, he was quite clear about it. If it had not have been for Mandela, and of course, he said himself, you know, the odds against this would be a thousand. It was just based on this intuition that there might be a solution where

everyone else thought there wouldn't be a solution and he would not have known that but for being in prison on robin island for 17 years and meeting all these people and gradually being able to size them up including the heads of the uh prison who were varied in quality from unpleasant to brutal but nevertheless you, he knew, he worked out the way the wind was going, and nobody else did. As I was working in South Africa at the time, and we never thought that there was a possibility of any solution, nobody that I talked to did. But Nelson Mandela had a different intuition. I describe that in the book, and it's very, very, it's very heartwarming. There's some horrible stories in the book, but it's very heartwarming. You know, intuition is hugely important.

Thank you for sharing that example. I think it's a wonderful place to start to wrap up this round one. We may have to do a round two on the podcast if you have the endurance sometime. I would love to. But Richard, I want to ensure that people know where they can find you. Of course, on Twitter, they can find you at richardkosch8020, 8020, richardkosch.net. You've written many books, including many books that have influenced me, like the 80-20 Principle.

You have the STAR Principle, which we've mentioned a number of times. And your newest book is unreasonable success and how to achieve it i have just one more question for you and then certainly i'm open to any closing comments or anything else that you would like to share if i've omitted anything certainly or if there's just anything in addition that you'd like to put forth and i'll start this question with a quote as prelude. And this is from an interview that I found with you. And it relates to New Year's resolutions.

This is a quote, which you can, of course, feel free to correct. But this is attributed to you. Once a year, rather than doing New Year's resolutions, I ask the same question. What did I do that meant the most to me and my family and friends, and sometimes strangers too? And what could I do in the next year? More of the same is not a bad answer, but something fresh too. So this really struck me as an impactful question. And good questions are impactful. And so, A, is this something that you do and might recommend? And number two, are there any other questions you might suggest listeners consider or ponder, let gestate on their minds. Yes, it is true. And I think it's right. The question I would ask is one again from the book, which is, in your whole life, what is your breakthrough achievement going to be? If you want to change the world, how do you want to change the world?

And ponder that maybe on New Year's Eve, maybe any other time. There's plenty of time to work it out. But do you really want to have a major impact on the world? If you do, what? That's really my question. It's a question I ask myself as well. I mean, my own ambition is to have many more creative, completely unreasonably successful people. And the thing I'm toying with,

which I don't know if you think is a good idea or not, but is offering to work with a number of people who have already been reasonably successful, but have not been unreasonably successful, and take them through the process and see whether we can generate some unreasonable success from a lot of people and to cascade that down and train other people to do that. Because I think this methodology is robust and I think it could make a huge difference to the world. And I'd like to see whether I can demonstrate that in practice through a few pilot studies. So that's my personal ambition. I love that. I think you should definitely test it and it could be a spectacular failure or spectacular success, but nothing ventured,

nothing gained, and you do like to bet. So I figure this is one good opportunity to do that. And having some experience with vetting, I'm not volunteering myself, but I would say run a competition or have applications that are vetted and can be vetted in some very simple ways that you're not overwhelmed and pick a handful of finalists to take through that process. And what I'll suggest just as a placeholder is that people follow you on Twitter, RichardKosch8020, 8020. And if you decide to do this, you can share that on Twitter. And that can be at least a possible starting point so that people are alert that this is a possibility. And what a pleasure it's been, Richard. I feel like I know you in the same way that perhaps

some people I meet who listen to the podcast feel like they know me, but it's been through your written words that I have come to admire and use, quite frankly, with great effect, much of your thinking. So I thank you very much for taking the time today. This has been an incredible, incredible pleasure. And I hope it's not the last. Indeed. Tim, thank you very much indeed. I reciprocate. Much more pleasure for me, I'm sure. It really is great. Anyway, thank you very much indeed. And I look forward to talking to you again at some stage, maybe a bit more frequently. That'd be wonderful. Well, the feeling is definitely mutual. And to those listening, I will have show notes for everything we've discussed, including

all of the books, all of the resources, including the most recent work from Richard, which is Unreasonable Success and How to Achieve It at tim.blog forward slash podcast. You'll have links to all the names, everything you can imagine. So please do check that out if you'd like to indulge in more exploration. And until next time, as always, thank you for tuning in. Hey guys, this is Tim again. Just a few more things before you take off. Number one, this is Five Bullet Friday. Do you want to get a short email from me would you enjoy getting a short email from me every friday that provides a little morsel of fun before the weekend

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