We Study Billionaires - The Investor’s Podcast Network - TIP 026 : Billionaire Mark Cuban's Book Recommendation - Rework (Investing Podcast)

Starting point is 00:00:00 This is episode 26 of The Investors Podcast. Broadcasting from Bel Air, Maryland. This is the Investors Podcast. They'll read the books and summarize the lessons. They'll test the waters and tell you when it's cold. They'll give you actionable investing strategies. Your host, Preston Pish and Sting Broderson. All right, how's everybody doing today?

Starting point is 00:00:29 This is Preston Pish, and I'm your host of the Inverston. investors podcast, and I'm accompanied by my co-host Stig Broderson out in Denmark. And we also have Hari Ramachandra back on the show, and he's out in the California area and the Bay Area. And so, uh, Hari's from Bits Business. And if you've listened to our show in the past, you've, uh, heard some episodes with Harry on. And the reason we brought Hari on to the show today is because Harry, myself, Stig, uh,

Starting point is 00:00:55 we're working on a project on the side, um, where we're trying to stand up a new website that, um, helps people, uh, learn. how to create online business assets. And just so everyone knows, don't get too excited because this isn't coming out like next week. We're probably about six months out. And it's March of 2015. So we've got about another six months, probably at the earliest that this thing was going to probably launch. But in an effort to prepare ourselves for working together as a team and standing up this new website, one of the things that we wanted to do is read a book together that we felt was going to be

Starting point is 00:01:30 very conducive for this new business that we were trying to start. And the name of that book is rework. We are also intrigued about reading this book because there's a very famous billionaire. His name is Mark Cuban. He's the owner of a basketball team down in Texas. And he's also on this TV show called Shark Tank. And Mark Cuban made this quote whenever he was writing a review for this book rework. He said, if given a choice between investing in somebody who has read rework,

Starting point is 00:02:00 or has an MBA, I'm investing in rework every time. This is a must read for every entrepreneur. So that kind of piqued our interest because Mark Cuban's a billionaire. And whenever billionaire say certain things, we try to listen up and try to take notes. And so that quote really caught our interest. And another thing that's nice about the book is it's not really all that long. It's kind of a short read. I think it's, is it 200 pages or what is it?

Starting point is 00:02:23 Something like that. Yeah, you guys are nod on your head. So it's somewhere around in that range. It's not very long at all. And after having read the book, I can completely understand why Mark Cuban has the quote that he has because this book was very, very useful. And it's so simple. And I think that's probably why it resonated with me most. And I think that Hari and Stig probably have the same opinion.

Starting point is 00:02:44 So what we're going to do is we're just going to highlight our top five points for the book. And for everybody that's out there on our email list, you know that we, every book that we read, we write an executive summary. and then we blast that out to everybody on our email list twice a month. And so if our discussion on here isn't long enough for you and you want to kind of capture more, definitely read our executive summary that we'll send out on the email. Also, this show is a little disjointed because we're talking about rework in the first half. And then in the second half, we're going to be talking about comments that were made at the World Economic Forum back in February, where people like Ray Dalio and the economist Larry Summers were there.

Starting point is 00:03:21 And they were making these fantastic remarks. We're going to play their remarks. and then we're going to talk about that. Because I know there's a lot of people out there that are interested on our thoughts and our opinions with this world de-leverging situation that we're talking about a lot lately. So that's going to be the second half of today's show. All right. So the first part here, we're going to be talking about rework. And I'm going to throw the first point over to Stig.

Starting point is 00:03:42 He's going to talk about his first point that he really liked in the book that he thought was useful for the audience. Yes. So what this book is, I think that the paradigm this book is really written in is Silicon Valley. So these guys who will be writing the book, they created Basecamp. So this is a piece of software where you manage your projects. Preston and I actually use this software myself. So I have the deepest respect for these guys. They really know what they're talking about.

Starting point is 00:04:10 But the thing that I really want to talk about was let customers outgrow you. This was a point that was highlighted a few times by the authors. And what he is saying is that he would very often get requests from people saying, you need to add this feature to your software very, very frequently because all individual companies have certain needs. But he was more looking in the other direction. He was saying, well, it might be that your business is growing and you have more complicated needs.

Starting point is 00:04:41 But if we're doing what you're saying, then we will lose focus on the overall project, which is making a simple piece of software that can be running your projects. So the more complicated you might be asking because it suits your needs, it's not good for the overall customer base. So just to sum it up, what he's really saying is that even though you might lose some customers, by keeping things simple, you will be gaining more customers because more customers will grow into your customer base than leaving.

Starting point is 00:05:11 So, Hari, I would actually like this to throw this out to you because you work in the valley. What do you think about his way of thinking simplicity into the product? I agree with him. many Silicon Valley entrepreneurs, including Peter Thiel, about whom we have talked about in the past, and Reid Hoffman, the founder of LinkedIn, they all talk about a minimum viable product to go with first. In fact, Reid Hoffman has once said in an interview that if you are not embarrassed when you release your first version, you're already too late to the market. Hey, so I like the example they used in the book with this one.

Starting point is 00:05:52 So he was talking about a hamburger stand. And he said, you know, at the end of the day, if you have a very focused product, your hamburger is going to be the best hamburger out there. So if you're in the United States, five guys kind of comes to mind for me. When you go in that restaurant, I mean, the things that they hang on the wall are like these cardboard like cutouts. It's almost embarrassing how minimal that restaurant is. But the one thing that they do get right is that the hamburger is very good. I mean, if compared to like McDonald's or something else like that, there's no comparison. And I think that that's really kind of at the heart of what these guys are getting at in the book is if you're starting a new business and your business is a hamburger stand, your total focus and all your effort needs to be on is the hamburger good.

Starting point is 00:06:40 And I think they use actually a hot dog stand in the book. It's been probably a month or two since I read this. So they talk about the hot dog has to be fantastic. The condiments, everything else that you put on it, whatever. Those are all secondary to the main product that you're trying to launch. And that laser focus on the product itself needs to be the essence of what it is that you're putting all your time and effort into because if you get that right, everything else is going to fall into place. Kristen, you kind of made a very good segue into what I was planning to highlight as one of the key takeaway for me from this book. And that is focus.

Starting point is 00:07:16 And you're absolutely right. In fact, many companies fail because they try to do too many things at the same time. Jeff Wiener, who is the CEO of LinkedIn, where I work, often tells the employees to focus and to do few things really well. And one of the points that the authors make in this book is that, you know, if you don't focus on the most important customer needs, and if you try to create a product that is trying to be good for everyone, you end up placing no one. Hey, so it's funny because there was a book, and I've read this book a long time ago.

Starting point is 00:07:55 In fact, I don't even know which one it is. I think it might have been the snowball that this conversation took place. And they talk about this discussion whenever Warren Buffett and Bill Gates first met each other. I guess Warren Buffett came out to Bill Gates's house, and Bill Gates had his parents there. And Bill Gates's father posed the question to Warren Buffett and Bill Gates, who had just for like the first time. And he said, what one thing, if you had to narrow it down, the one thing that has led to all of your success for both of you to, what would it be?

Starting point is 00:08:27 And I believe, and I'm, you know, I apologize if I'm messing this up, but I believe that Warren Buffett went first. And Warren Buffett said that his focus was the main reason for his success because he was able to continually focus on the same thing. And he became an expert in what that was. And so then Bill Gates, his father looked at Bill and he says, well, what do you think it is? And Bill Gates says, well, I think it's the same thing. I think it's focus. He says, I, you know, I focused on programming and all, you know, developing this software that was, you know, revolutionary. And because I focused on it so much, I was able to grow my business into what it is. So I find it very ironic. Two people, typically, I mean, the list kind of changes. But really, the two wealthiest people in the world saying that focus was the number one thing that led to their success. So I just wanted to piggyback off of that because that was a story I remember from a long time ago. One thing in the rework that's really related to this is when we're talking about working long hours.

Starting point is 00:09:23 Now, when you read rework, I would highly recommend that you do. You might also get the impression that the authors, they have this rant against corporate America. I don't know if that's why they created their own company. But I think that they have quite a few good points because they're saying that it's almost like an honorable title to be called a workaholic in corporate America. And what they're saying instead is that they would never hire people who cannot finish their jobs in like 40 hours a week. That just means they're very inefficient. I love that point. I'm serious.

Starting point is 00:09:56 I absolutely love that point. Go ahead, Hari. Yeah. I really like that point to stick. And thanks for bringing that up. In fact, one of the famous entrepreneurs in India, his name is Narain Murti. He started this company called Infussis, which is a famous outsourcing company. he once had sent an email to all his employees saying, if you're working after six in the evening,

Starting point is 00:10:19 you're a liability to the company. And his reasoning was that if you're working late, that means, one, you're not managing your time well. That means you're not a good employee. Number two, you might be stressed out and you're prone to making more mistakes, which might cost the company. You know, as a manager and as a leader, as soon as I would see somebody like that that's working way over the amount of hours that they should be working, you have a human capital allocation issue is what you've got. You have a guy who's taking on way too much responsibility and you probably have other people that are sitting on their hands for half their day and working four hours, even though they're sitting at the seat for eight. And so that is a major, I'd be going straight to the manager looking at him saying, why is this person here after hours and working so hard? Either you're not allocating the hours appropriately or this person is extremely inefficient.

Starting point is 00:11:16 So that's just a different way of looking at it. And I love how he debunks this in the book of, you know, in America, if you're staying after hours and you're working real hard like that, it's looked at as being a good thing. But it's really a display of inefficiency either on the manager's part or on the employee's part. So a fantastic point. Stick, go ahead. Do you have another one? I have a thing that I really disagree with, and that's always interesting. And it might be because it's taken out of context.

Starting point is 00:11:45 It might be because I have another approach to things than the authors, or it might just be that I'm not as original. But what he is saying, you cannot copy other people. You need to be very innovative. You need to be not necessarily the first mover, but you have to think out of the box. And this is an argument very often here. And it's not like I don't buy the argument. It's not like I don't understand the argument.

Starting point is 00:12:10 But I think another approach, and this is an approach that Moni's Pop Riot, which we have talked about a lot about, he's saying that you can just copy the best people. If you let the best people in the world, so in this situation, it would be Warren Buffett, for instance. If he copies what Warren Buffett is doing, well, basically, even though he might not be able to do it exactly as good as Warren Buffett, you know, getting close is actually really, really good. This really takes me to think of something that if you do the same thing as everybody else, you end up with the same thing as everyone else. But if you do the same thing as successful people, you end up with success. So, I mean, I know that this might seem like a very reactive way of looking at things, but I just think that this is a very philosophical point to bring up.

Starting point is 00:12:57 And Harry, I could see right away that you had something to say about that. Yes, I do. As always, I know that whenever you're disavis, disagree, there is some learning. And in fact, this was a point when I was reading this book, I still remember. I just paused for a while because the same thought came to my mind, that is Monish Pabri. And Pobrai calls it cloning, but he talks about the advantages of cloning. In fact, in a lunch with Charlie Munger, he asked him, what are good investments? And Munger, in a flash said, cloners, cannibals, and spin-offs. And Munger,

Starting point is 00:13:36 reasoning behind it was that the early movers usually don't end up winning or taking away the value out of a market segment they created. However, I was trying to put some context into this particular comment in the book. And my thought is that the authors are talking in the context of small niche entrepreneurs. The niche entrepreneurs are the small time entrepreneurs. They're also called as micro entrepreneurs. They don't usually have the resources or the scale to go after established markets. And they don't want to attract any big company or, to put it other way. They don't want to get into segments where big guys can put in a lot of money, clone them,

Starting point is 00:14:28 and then just drive them out of the market. In that context, I believe copying or cloning doesn't work for product. creation for small entrepreneurs. They need to figure out a niche that they can serve. And as Pat would put it, Pat Flynn, who we interviewed in one of the previous sessions, if you are working on a niche that cannot be served by a magazine where you can place an ad for, say, $200 to $300, then it's too big because you will be overshadowed by big guys. I think that's the context.

Starting point is 00:15:03 I can finally, and I'll conclude it. Yeah, and I agree with Hari as far as the context of their comments in the book. But, you know, Stig, I thought the same thing whenever I was reading it. I was like, well, I don't necessarily agree with that because there's a lot of things that I try to clone after people that are businesses or ideas that I've seen that are successful. And I think that it works out really well because you don't have to reinvent the wheel here. You're not trying to troubleshoot. You know it works. You can see what works.

Starting point is 00:15:31 And I really think at the end of the day, my personal opinion is that a balance between you've got to be creative and you've got to come up with new ideas or else you're going to be left in the dust and you have to be dynamic too. But at the same time, if there is a proven path that works, you need to start there as your as your starting point and kind of grow it, mold it, and develop it from there on. And I think that that's kind of how I took it. I thought it was a little bit, I had the same opinion as you whenever I read it. Stig. I thought it was a little extreme and maybe a little overdone. But the one point that I wanted to highlight in the book was this idea of having a master plan. And I really like this because I'm

Starting point is 00:16:11 a hardcore believer and you've got to have the roadmap and you've got to have the plan. And if you remember back when we talked about the Peter Thiel book, he was a huge proponent of having the roadmap of how you're going to get from where you're at right now to what it is that you're trying to accomplish later on. But I think the authors of this book, because they were not for having this master plan. They were more for like, hey, if you have an idea, go after it and be dynamic and where it takes you and run with it, really, was the kind of their plan. And again, I think that there's a balance between us. I think that you've got to have the mission statement of, hey, this is what I want to try to

Starting point is 00:16:49 accomplish. How I'm going to do that? I really don't know. But this is my end state of where I want to be. And I think that you just start off with a template of what you think is going to work. And I do agree with the authors that you don't want to get so detailed. I think a lot of people come up with their roadmap and their and their, and their plan and it's so detailed and they don't have any flexibility that they're so rigid that

Starting point is 00:17:10 they're just like a robot and they just kind of fall over in place because they're so drawn to the plan that they can't see how they can be dynamic and move with the current of opportunity and different things that present themselves. So again, I think it's a balancing act that you've got to have kind of both and you've got to know when is it, when is it time to deviate from the plan and when is it time to stick to the plan? But go ahead, Harri. Christian, that's a very good point. In fact, I feel Charlie Munger would agree with the authors. In an interview, he said at Berkshire, we never have master plans. And when asked why, he said, one of the psychological factors that play in when you have a master plan is consistency and commitment bias. Once you make a master plan, you're committed to it. You have shared that with your employees and your board of directors. And if you have to make changes to that, then you appear to be a loser or like, you know, somebody who didn't really plan out things well. So then you stick to it at the

Starting point is 00:18:16 detriment of your company's future prospects. Let's take a quick break and hear from today's sponsors. All right. I want you guys to imagine spending three days in Oslo at the height of the summer. You got long days of daylight, incredible food, floating saunas on the Oslo Fjord. In every conversation, conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is. From June 1st through the 3rd, 2026, the Oslo Freedom Forum is entering its 18th year bringing together activists, technologists, journalists, investors, and builders from all over the world, many of them operating on the front lines of history. This is where you hear firsthand stories from people using Bitcoin to survive currency collapse, using AI to expose human rights abuses,

Starting point is 00:19:03 and building technology under censorship and authoritarian pressures. These aren't abstract ideas. These are tools real people are using right now. You'll be in the room with about 2,000 extraordinary individuals, dissidents, founders, philanthropists, policymakers, the kind of people you don't just listen to but end up having dinner with. Over three days, you'll experience powerful mainstage talks, hands-on workshops on freedom tech, and financial sovereignty, immersive art installations, and conversations, and conversations. conversations that continue long after the sessions end. And it's all happening in Oslo in June.

Starting point is 00:19:38 If this sounds like your kind of room, well, you're in luck because you can attend in person. Standard and patron passes are available at Osloof Freedom Forum.com with patron passes offering deep access, private events, and small group time with the speakers. The Oslo Freedom Forum isn't just a conference. It's a place where ideas meet reality and where the future is being built by people living it. If you run a business, you've probably had the same thought lately. How do we make AI useful in the real world? Because the upside is huge, but guessing your way into it is a risky move.

Starting point is 00:20:13 With NetSuite by Oracle, you can put AI to work today. NetSuite is the number one AI cloud ERP, trusted by over 43,000 businesses. It pulls your financials, inventory, commerce, HR, and CRM into one unified system. And that connected data is what makes your AI. smarter. It can automate routine work, surface actionable insights, and help you cut costs while making fast AI-powered decisions with confidence. And now with the NetSuite AI connector, you can use the AI of your choice to connect directly to your real business data. This isn't some add-on, it's AI built into the system that runs your business. And whether your company does millions

Starting point is 00:20:53 or even hundreds of millions, NetSuite helps you stay ahead. If your revenues are at least in the seven figures, get their free business guide demystifying AI at netsuite.com slash study. The guide is free to you at net suite.com slash study. NetSuite.com slash study. When I started my own side business, it suddenly felt like I had to become 10 different people overnight wearing many different hats. Starting something from scratch can feel exciting, but also incredibly overwhelming and lonely.

Starting point is 00:21:26 That's why having the right tools matters. For millions of businesses, that tool is Shopify. Shopify is the commerce platform behind millions of businesses around the world and 10% of all e-commerce in the U.S. from brands just getting started to household names. It gives you everything you need in one place, from inventory to payments to analytics. So you're not juggling a bunch of different platforms. You can build a beautiful online store with hundreds of ready-to-use templates, and Shopify is packed with helpful AI tools that write product descriptions,

Starting point is 00:21:58 and even enhance your product photography. Plus, if you ever get stuck, they've got award-winning 24-7 customer support. Start your business today with the industry's best business partner, Shopify, and start hearing sign up for your $1 per month trial today at Shopify.com slash WSB. Go to Shopify.com slash WSB. That's Shopify.com slash WSB. All right. Back to the show.

Starting point is 00:22:31 All right, Stig, do you have any other points or Hari, do you have any other ones you want to throw out there? Let's do one more and then we'll move on to the second part of the episode. Sure. One last point that I wanted to highlight from this book is that we learn more from our success than failures. And this, to me, was a counterintuitive point because most books talk about failing fast. And I got that one down.

Starting point is 00:22:59 I was about to say that, you know, I got that one down. I'm a live example. I followed it for a couple of years. I just failed fast. Well, nothing happens if you keep doing the same thing. As I think Einstein might have said this, that trying to do the same thing over and over again is insanity. Yeah.

Starting point is 00:23:22 But the problem with learning from your failures is you will learn anti-patrons. That is, you learn what not to do, but that will not take you anywhere until you learn what to do. I think there's a great point, Harry. And I come to think about the book Outliers by Gladwell that we talked about last time, the last book we had. Because he was saying that he was using these like hockey players. And I don't want to go into to depth with the example. But he was saying that if you were a hugger player and you were born in the first three months of the year, you have more success. So you have more success because you would be bigger, stronger.

Starting point is 00:23:57 therefore gets selected for the best team, get a better coaching, get better teammates. I don't know if the way of thinking is the same. Like if you're successful in the business, it would very often find good people to work with. More qualified people will try to connect with you. And that will just give you even more success than that there's no one rolling. I've heard the same thing, read the same books about failures. And yes, I also cut that one down. But I just thought that this other approach was really interesting from, say, a very philosophical point of view, Preston.

Starting point is 00:24:27 Yeah, and I totally agree with the point that if you're going to be successful time and time again, you have to know what success looks like in order to implement it continually. And, you know, I'm of the opinion, and I know Stigs are the same opinion that the best way probably to do that is find out who's the best at whatever it is you're trying to understand how to do. Tony Robbins is huge on this. He goes out and he seeks the person who's the best at it. he studies their critical variables of what it is that has made them successful. And then it's just kind of copy and repeat. And so that's kind of taken this quote or this idea that Hari mentions that you can fail and you can keep on failing. But if you really never know what it is that you've got to do to be successful, you're going to continue to fail.

Starting point is 00:25:12 And there's so many people out there that have failed business after failed business after failed business. And I think that if they would take the approach of who is going to be the person that I try to model, or who's the best at this line of business. Let me study them, understand why they are, and let me go that route. And I think that's how you can maybe take that idea and kind of run with it. But Harri, you have to follow up. Go ahead. I have worked with serial entrepreneurs in my career in Silicon Valley.

Starting point is 00:25:41 And I could really see the positive feedback look that Stig was talking about in action. These guys have succeeded in one startup. they have the capital. And more importantly, they have the connections with the VCs. They have the trust of the VCs. And that really works for them when they start their second venture. I have rarely seen a serial entrepreneur fail in their second, third, or fourth venture because the snowball is just rolling for them.

Starting point is 00:26:12 Yeah. All right. Well, hey, let's go to the second segment here. And this is going to be a really fun discussion because if you've been on our form or you've seen some of the videos that we've been posting lately where there's a lot of talk that we've been throwing out there about this world the leveraging situation where interest rates have been at near zero for eight years. We're getting the jitters and we're just trying to talk about it and figure it out for ourselves, to be quite honest with you. And so Stig sent Hari, myself and a couple others this email a couple days ago of this discussion that they had at the World Economic Forum out in Davos, Switzerland. And so what we're going to do is we're going to play the comments.

Starting point is 00:26:51 And we were really excited because Ray Dalio, who we track very closely, his net worth is $16 billion. And he's the founder and manager at Bridgewater Associates, which is the largest hedge fund in the entire world. And in addition to Ray, there was another gentleman by the name of Larry Summers. And Larry is a professor and former president of Harvard University. He also served as the 71st Secretary of the Treasury for President Clinton, and he was also the director of the National Economic Council for President Obama. So this guy, whenever you hear him talk, you're going to see how bright he is. And I think he's somebody else that we're trying to get him to come on the show.

Starting point is 00:27:32 I know that that's probably a very lofty goal. But if you're listening to this and you want to send Larry Summers, who is at Harvard University a message and tell him that he needs to come on the Investors podcast, we will not tell you to hold that email back. So, Larry, if you're listening, I'm sure you aren't, we'd like to have you on the show. So let's go ahead and play these comments that we have from Davos. We're going to start off with the comment from Ray Dalio. And then we'll just have a general discussion afterwards.

Starting point is 00:28:03 And then we'll play Larry's comment and we'll have another discussion. So here's Ray Dalio's comments. Just to be clear, no, I think the U.S. is in good place. Okay, good. I didn't mean that. I think there's the U.S. and there's the world, and I think they're in different places, generally speaking. And it's just mechanistic.

Starting point is 00:28:24 When there's no ability to change interest rates, particularly when there's no ability to lower interest rates and have a transmission mechanism, monetary policy to ease is in a bad place. We don't have an ability to ease if we need it to ease. The two reasons the United States is in a good place, is partially because of the quantitative easing that it did. 25% of GDP was in quantitative easing, $3.8 billion.

Starting point is 00:28:51 $3.8 trillion. 26% was in the UK. In Japan, it's been 36% of GDP. In Europe, it's been 3% of GDP. When you're in a situation in which credit is not going to work the same way as it did before, We cannot have debt growth the way that we had before. We can't look at debt growth the way we looked at it before. The interest rates to bring it down, debt service payments can't decline.

Starting point is 00:29:20 So let's not look for debt growth as the solution. That means that you can spend with either debt or you can spend with money. That means money is more important. That's why when we see transactions, we see this ECB policy, it needs to have more money into the system. Money can produce more purchases. It also means that when the two levers are interest rates and currency. It means when interest rate lever doesn't work, currency lover becomes more effective. So we necessarily must see more volatility in currencies.

Starting point is 00:29:55 We must see a depreciation further in the euro. We must see a depreciation further in the yet. The average cost of MMSD structural reforms, structural reforms are important. the average cost of a southern European after adjusting a person worker, after adjusting for the amount of time that they work, the vacation time, the work week, the retirement age is about twice what it is in an American worker. So it's expensive. Either that is going to have to lead to structural reforms in the form of changing to make that

Starting point is 00:30:37 more efficient. There's a lot of potential in Europe to make things more efficient and more economic. But the currency depreciation is going to have to be a part of it. And it's the, it's the conversation that is not polite to have. In other words, we could talk about changing interest rates, but policymakers can talk about changing the exchange rate. And so the currency will be a bigger, will be a bigger influence in the years ahead. This will produce a dynamic because the world is a lot, there's a lot of dollar denominated debt. That means that because there's a lot of dollar denominated debt, there's a lot of promises to deliver dollars that are becoming more expensive for various entities. So there's a short squeeze emerging in the dollar, very similar to

Starting point is 00:31:22 1980 to 85. I would cause the period today, very similar to 80 to 85, in that there's falling commodity prices, there's falling oil prices. There's a relatively strong economy with falling inflation. Back then, we could lower interest rates. We cannot lower interest rates now. So it's a similar dynamic in terms of those deflationary pressures. I agree with Larry in that you have to wait to you see the whites of the eyes of inflation. In 1980, if we didn't lower interest rates, even though growth was strong, we would have had a disastrous situation. It's somewhat analogous to that now, I think. All right. So the first thing that I want to just talk about, which was highlighted at the very start of Ray's discussion was, we're in a different

Starting point is 00:32:09 situation now because we can't lower interest rates any lower. When you look back to the 2000 crash, you know, the yield curves back then, I want to say off the top of my head, they were around, they were flat at around 5 or 6%. Even in 2008, the yield curve was pretty flat at about 5%. where you're at right now, it's like it's starting to go flat, but it's like 2%. So that's a major issue. The other highlight that I wanted to just talk about that I found really interesting in his comments there. Actually, I have two points real fast, is the one that he says pretty much the only thing that we can do now, credit isn't going to work like it used to. So that means we have to do something with currency, which means we've got to add more dollars to the monetary baseline. That's what he's saying there.

Starting point is 00:32:58 And that's pretty much the way out of this for Europe. And I think he threw out the figure 3% was all the more to their GDP of how many dollars they added to their monetary baseline, whereas the U.S. was in excess of 25%. So that's a big difference. That's why I think you have seen such a change. And this is the other interesting point is that whenever the U.S. did that, when they added all these extra dollars to their monetary baseline, what they did is they weakened the dollar. I remember back in 2008, 2009. There was tons of people from Europe and all around the world coming to the U.S. because the dollar was so weak at that point.

Starting point is 00:33:34 And now what you're seeing is the exact opposite. And it's amazing how these things go in cycle. So you're seeing the exact opposite. The dollar is really strong right now. And what's happening is, that's bad for the U.S. Because you're not having these foreign investors and these foreign currencies coming into the country anymore because the dollar is strengthened. And you're seeing the exact opposite flow in the opposite direction. because now the euro is really weak,

Starting point is 00:33:57 so now you'll probably see a bunch of Americans start going on vacation over to Europe and things like that. And so that strengthening it in the short term. But overall, I think Europe's in a very tricky situation. But I want to throw it over to Stig and Hary and see if they have any comments on Ray's talk there. Yeah, so I have a few comments. But first, I'd like to piggyback of what you were saying before, President, about the currencies, because I think that what we're seeing right now is really interesting. Right now they are sending something like 60 billion euros a month out in the system.

Starting point is 00:34:32 So, I mean, things are really happening right now. And what is really interesting as Preston was also talking about is that it might sound counterintuitive. That is really good to have a weak currency. But very often countries would like to have a weak currency because that makes it better to export. And in crisis like we're seeing right now, we're really relying a lot on export. So we would have a very good incentive to have very cheap products because cheap products means that more people are buying them. And if we are looking at, and this is definitely not something I'm saying that we are, but if we are to be looking at a situation where you will see the EU or America or the yen in Japan

Starting point is 00:35:14 are competing to depreciate their own currency with money supply, then we're really heading for trouble. Mr. Stan and Stig, I really like the way you described the cycle starting 2008 when dollar was really weakening and how now the cycle has reversed and dollar is stronger. And one of the points that you made was also very interesting. Historically, whenever a currency is stronger, their labor costs are higher and hence their products are more expensive. Japan. Look at Japan. example. Exactly. And that kind of, you know, plays against them. And eventually, once they weaken

Starting point is 00:35:58 their currency, they become more kind of, you know, more in an advantage of situation to export their goods. India is a classic case. Whenever Indian currency weakens, the rest of the economy suffers, but the export industries, including the software outsourcing industry, does very well. Something that I want to say, because a lot of people are reading the gloom and doom and how we're talking about how we're so over leveraged and there's no room for interest rates to go, but down. And I just want to highlight, it's very important to understand that when you're talking about macroeconomics, it's very relative.

Starting point is 00:36:33 So when you look at the world economy and I'm just going to kind of talk about the 80% here, and that's really China, Japan, Europe, U.S., those are really the big heavy hitters that are involved in the world economy here. And what you find is in this current situation where we're at right now, the U.S. is actually sitting, believe it or not, in a better situation than China, Japan, and Europe. And so if that's the case, I think that there's a chance that during the next crash, whenever that would be, and for anybody who tells you that they know when it's going to happen, run the other way, we think that it could potentially happen in the next two years.

Starting point is 00:37:11 But at the end of the day, we really do not know for sure when it's going to happen. But I will say that I think that going into this next crash, I think that the U.S. is better prepared than the other major economic players. And that's a good thing because as the currency is traded amongst these countries, it's a very relative game, even though our debt to GDP is extremely high. I'm not saying that it's going to be a kickwalk as we go into this next crash. I'm not saying that of those countries, I think that the U.S. is probably best prepared. And I think that when you looked at the stress test that they just recently did on U.S. banks,

Starting point is 00:37:49 all of them did very well. They performed exceptionally well, and I think that the Fed has been monitoring that extremely close ever since 2008. And you know what? They don't have a lot of money that they're lending these days compared to 2008. I mean, it's like it is significantly less. So I think going into the next crash, the banks are going to be prepared. It's just a matter of how much the market psychology really weighs in on the real understanding of what's going on here. Stick ahead.

Starting point is 00:38:15 I see you have a point. Let's take a quick break and hear from today's sponsors. No, it's not your imagination. Risk and regulation are ramping up, and customers now expect proof of security just to do business. That's why VANTA is a game changer. VANTA automates your compliance process and brings compliance, risk, and customer trust together on one AI-powered platform. So whether you're prepping for a SOC 2 or running an enterprise GRC program, VANTA keeps you secure and keeps your deals moving. Instead of chasing spreadsheets and screenshots, Vanta gives you continuous automation

Starting point is 00:38:51 across more than 35 security and privacy frameworks. Companies like Ramp and Ryder spend 82% less time on audits with Vanty. That's not just faster compliance, it's more time for growth. If I were running a startup or scaling a team today, this is exactly the type of platform I'd want in place. Get started at Vanta.com slash billionaires. Vanta.com slash billionaires. Ever wanted to explore the world of online trading, but haven't dared try?

Starting point is 00:39:22 The futures market is more active now than ever before, and plus 500 futures is the perfect place to start. Plus 500 gives you access to a wide range of instruments, the S&P 500, NASDAQ, Bitcoin, gas, and much more. Explore equity indices, energy, metals, 4X, crypto, and beyond. With a simple and intuitive platform, you can trade from anywhere, right from your phone. Deposit with a minimum of $100 and experience the fast, accessible futures trading you've been waiting for. See a trading opportunity, you'll be able to trade it in just two clicks once your account is open.

Starting point is 00:40:00 Not sure if you're ready, not a problem. Plus 500 gives you an unlimited, risk-free demo account with charts and analytic tools for you to practice on. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit Plus500.com to learn more. Trading in futures involves risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus. Billion dollar investors don't typically park their cash in high-yield savings accounts.

Starting point is 00:40:34 Instead, they often use one of the premier passive income strategies for institutional investors. Private Credit. Now, the same passive income strategy is available to investors of all sizes thanks to the Fundrise income fund, which has more than $600 million invested in a 7.97% distribution rate. With traditional savings yields falling, it's no wonder private credit has grown to be a trillion dollar asset class in the last few years. Visit fundrise.com slash WSB to invest in the Fundrise income fund in just minutes. Fund's total return in 2025 was 8%, and the average annual total return since inception is 7.8%. Past performance does not guarantee future results, current distribution rate as of 1231, 2025.

Starting point is 00:41:23 Carefully consider the investment material before investing, including objectives, risks, charges, and expenses. This and other information can be found in the income fund's prospectus at fundrise.com slash income. This is a paid advertisement. All right. Back to the show. When Preston is talking about next crash and you might be thinking, is there some kind of news that didn't hear about? This is definitely not the situation. But when we're talking about the next crash,

Starting point is 00:41:50 that is because we are working in cycles. And you might be hearing this from Redalio, you might be hearing this from other people. But basically, even though you go back to the Bible, we're talking about cycles. The economy works in cycles. So when we're talking about the next crash, it's not really because we're trying to predict anything.

Starting point is 00:42:09 it's just because we know that we will, well, have a crisis some point of time, just as well as we will having a boom. I completely agree both with Radalio and Web of Preston. And that's, Preston, I must be really nice to hear someone saying, I agree both with Redalio and with Preston. Well, you know why they're saying that is because my thoughts are Ray Dalio's thoughts. They're not original thoughts by Preston. Okay, so that's why.

Starting point is 00:42:34 No, I definitely agree with you when you're saying that if you look in those four big economies at the EU, the US, Japan and China, then America is probably best prepared for the next crisis. But, and I mean, I might want to regret those words in years from now. I don't know. But when I look at those four big economies, I would say that America is like, say,

Starting point is 00:42:57 average prepared and then other three economies that are really poorly prepared. It's not like I'm saying, I'm looking at the US and thinking they're in ship shape at the moment. And what I think it's going to be interesting and what's getting more and increasingly interesting is that these four economies are really all interconnected. So, for instance, when you're hearing about China, they have just lowered their goals for their future growth.

Starting point is 00:43:21 Well, the reason for that is because China is such a large exporter. And when things goes wrong in the U.S. and the things go wrong in Europe, guess what? This hurts China. So, yes, if we do look at those four economies, I definitely think the U.S. in a better state, but it's really hard to just pick them apart because they're all so interconnected. All right. So what I'm going to do now is I'm going to go ahead and play the comment that Larry Summers had during the same exchange. And just so you guys know, there's a panel of five of the top level people, top economists, top economic thinkers in the world that we're playing these comments from. So this comment is from Larry and he was the gentleman who we were saying that is the professor at Harvard and who worked under the Clinton and Bond.

Starting point is 00:44:05 administration. I'm going to stay away from the Swiss and just beyond observing that it is a very useful reminder of how much deflationary risks are the main risks that we have to deal with. I think we need to emphasize what I think everyone in this panel is clear on, which is that a strategy of austerity and grudging acceptance of limited monetary accounting acceptance of limited monetary accommodation in the hope that that will be a driver of structural reform has proven itself to be substantially counterproductive and is instead bringing radicals to the fore in most of the places where it is being applied, that the situation in Europe is not yet in hand. I agree completely with you that the movements that have taken place in the euro have been desirable.

Starting point is 00:45:10 I don't think that any, and I agree with Christine, that QE has already had a significant impact, but that's why I'm worried. We've already had a set of positive developments, and the economic forecasts are pretty dismal from here. and the kinds of policies we're seeing are already built into those forecasts. So I don't think we should make the mistake of supposing that the situation in Europe is in hand. And I think we, I am for structural reform too, but I just want everybody to think about what I find to be one of the most surprising global economic facts. when I look at it because it's quite different from the conventional wisdom. Take men between the ages of 25 and 54.

Starting point is 00:46:05 And I choose that group because there's a pretty strong expectation in most societies that they'll all be working. And ask yourself about the non-employment rate of men 25 to 54. In the dynamic, flexible United States, it is several percentage points higher. than it is non-employment rate, than it is in France, with all of France's many, many rigidities. And that tells us something about the magnitude of the human capital issues that the United States faces. And it tells me that we can't, and it tells us something about the consequences because the coming of technology is probably more advanced. the United States. And it tells me that we can't be completely serene that if we just have

Starting point is 00:47:04 flexibleizing reform, all will be well, which is why I come back to the central importance of demand. And I would suggest that there's a very basic idea that Keynes had that has largely alluded Europe's largest economic power. And that is what Keynes

Starting point is 00:47:31 called the fallacy of composition, which I would explain this way. If anybody in this audience stands

Starting point is 00:47:38 up, they will see better. If everyone in this audience stands up, no one

Starting point is 00:47:45 will see better, and everyone will be less comfortable. If any one country saves more or any one bank hordes capital, it will strengthen its position. But if all countries

Starting point is 00:48:04 save more, there will be less spending, which will mean less income, which will mean less spending and the situation will not get better. If all banks simultaneously cut back on their lending, the result will be a across-the-board reduction in asset prices. And ironically, they will all end up with less capital, with more capital, once that works through. And it is the failure to recognize that a one-off model that worked to produce export-led growth for Germany in the early part of the decade, when applied collectively is like everybody stands up. That is the, and leads to an outcome that's worse for everyone. It is the failure of generalization and the failure of the error of assuming that a strategy

Starting point is 00:49:05 that worked for one once when applied universally will work. That is the central error that is driving much of European economic thought. And as long as it continues to drive European economic thought, the prospects for economic success in Europe are going to be very limited. So I love this comment. And I know it was a little long, but hopefully everyone was able to stay with us as we played all that. But the thing that I find just amazing is that last comment where he's talking about this overgeneralization of what worked in one country at one point in time is used. as the thought process that's just going to magically work as you apply that same model to a bigger problem that's universal across the entire euro. And I really liked his point before that, too, where he's talking about, we need a coordinated effort is really what he's saying.

Starting point is 00:50:04 He's saying these federal reserves across the world, this has to be a joint effort. If we're going, you know, one versus the other versus the other, it's just like this pushing of the water balloon from one. economy to the other economy to the next one, like our discussion, where the dollar was really weak because we had this massive influx to increase our monetary baseline, which made our dollar weak, which had an infusion of capital from foreign markets into the U.S. back in the 2009-010 timeframe. And now all of a sudden the dollar is really strong right now. All we're doing is just manipulating these cycles because we're not working together as a unified group of countries in order to try to solve this problem. And really, the,

Starting point is 00:50:46 The solution to the problem is we've got to print more money, and we've got to print more money in lockstep and in unison. And we have to do it at a controlled pace. Call it 10% every, you know, couple years. That way it's not so dramatic and you have this massive collapse of the system. That economic form, that's where those discussions need to take place and these key leaders need to be doing that. But I think that you have politicians that are trying to get their country ahead and all they're doing is they're in a sprint for the first 100 meters. and then they run out of breath as the next country comes up and gets in front of them. And then it's just this back and forth and back and forth.

Starting point is 00:51:23 And so amazing comments. It's really exciting to see somebody saying something like that in this type of form. And, you know, I just hope that other people are getting it. But go ahead, Stig. I see you have something. Yeah. And what the professor said about income and spending, I found that was really, really interesting. Because if we look at it, you know, really isolated, the best thing for the U.S.

Starting point is 00:51:43 would actually be if they saved. And the rest of the world, we just go on spending spree and buying American goods. But that's not what's going to happen. But ideally, that is what we want. But what he's saying is everybody needs to spend more. Because if we spend more, then we'll produce more and more people will be employed or pay more taxes and so on and so forth. And I completely agree with that. The interesting thing that we're seeing right now is that we have a widening gap between the rich and the poor.

Starting point is 00:52:12 And I really don't want to be political. I'm not saying that something is right or something is wrong. But what's really interesting is that the growth is not growing as high as it could be, simply because we see this widening of income. Simply because if you have a lot of poor people, they will not spend as much. They'll probably spend everything they have. And then you have the rich people. And what the rich people will do is they will buy financial assets.

Starting point is 00:52:39 They will not buy twice as much food if they have a lot of money, but they will buy financial assets. They'll increase their equity, exactly. They're just going to continue to grow their pool of money, or their money machine, if you will, that just keeps adding more and more dollars of their pocket, which then has the separation. Exactly.

Starting point is 00:52:56 Yeah. And two things will happen then. The first thing is that this will really not increase production, or at least it will not increase the same amount of production as if the wealth was spread. And the other thing is that it will create bubbles in the financial markets, simply because we have a lot of money flowing in.

Starting point is 00:53:14 And what is even happening more at the moment is that we see this quantitative easing. And these money can only be spent for financial assets. And that's why you see this crazy prices, especially in the bonds market, because that is where they can be applied. So again, it's not like I'm seeing a crisis right now, but I'm just seeing a lot of factors

Starting point is 00:53:34 where if something goes wrong, a lot of things can really go wrong. And it's really interesting times. And I think if you'd go back to 19, In 1981, at least in the U.S., is kind of that mark where everything started changing because that was the peak of your interest rates and they've gone down ever since 1981. And I think if you'd go back and you'd look at that gap, Stig, between the ultra wealthy and the lower income people in the United States, that's where you'd really start to see that gap starting to widen ever since that critical point in time back in 1981. Go ahead, Hari, you say your last comment, and then we're going to have to wrap things up. Sure, Stig, I really like your point about the widening gap between the rich and the poor. In fact, I remember this book, Stalks for the Long Run by Jeremy Siegel,

Starting point is 00:54:19 where he talks about the unsustainability of the gap between the capitalist and the labor income. And he compares the average labor income in United States to the overall market gap. and he questions the growth of market gap or earnings while the labor income is not growing at the same time. I guess Larry Summers also made the point when he talked about the non-employment rate in U.S. is much higher than France, even though as an economy we are doing much better. And all this kind of, you know, boils down to the same point that the gap is widening. So, folks, I just want to throw out there. Some of this stuff might sound like Greek. If you're hearing some of this for the first time,

Starting point is 00:55:11 if you haven't been on our forum and you haven't watched some of these videos that we've been putting out by Ray Dalio in different comments, what we're going to do in the show notes of this episode, we're going to have all that stuff laid out for you. We're going to have the video that this billionaire Ray Dalio has made that describes this de-leveraging process. He makes it crystal clear in this video. And it's 30 minutes long.

Starting point is 00:55:32 It's called How the Economic Metaliable, machine works. I'm really trying to have as many people as possible watch this video because it's really going to help you in the long run. It's well worth your time. I promise you that. There's also a white paper that Dahlio wrote. It's probably like 300 pages or something like that. We're going to have a link to that. Read that. That is going to increase your knowledge of macroeconomics and just kind of what's coming down the pipe a whole lot better. We're going to have that. There's also another white paper that Dallio wrote, that Ray Dahlio wrote, that is a this relative factor of currencies and how it relates to countries and their debt levels.

Starting point is 00:56:11 And we're also going to have that up in our show notes too. And I highly recommend that you read that. It is another powerful read. Anything Ray Dalio writes, and in my opinion, is worth reading because he's great at making things simple to understand. And I think that that's really hard when you get into this type of discussion of macroeconomics. Most people cannot make it simple. So we'll have all that out there so that you can kind of get caught up if you haven't been reading any of this stuff. Definitely start with the video because it's going to be,

Starting point is 00:56:37 it's going to lay a really good foundation for you as you read some of these other things. And we're going to continue this conversation. We have an ongoing discussion on our forum. That's the Warren Buffettforum.com. If you go there, you can see Stig and I are on that. Anytime somebody post something, we typically reply right away with our comments. And I think that that's a spot where we can kind of leverage our community as a whole to try to help everyone navigate this, this potential storm that's coming together. Because to say I have all the solutions, that's just a flat out lie. I do not have all the solutions.

Starting point is 00:57:13 And if you think that I fully understand everything, you're wrong. I'm trying to figure it out for myself. And so is Stig and everybody else. So this is, we are in uncharted territories. It is not normal to have interest rates at 0% for eight years. That is not normal. And we're just trying to make sure that we take the path to protect our principle as we go through. this. So help us out and we'll try to help you out as we continue this dialogue. And we'll

Starting point is 00:57:38 do this occasionally at the end of the podcast where we talk about different topics like this until we start to see things change and as we go through it. So really appreciate what everyone's doing for us on the forum. We are just having a blast interacting with different people that are sending us messages that are giving us recommendations for people to have on the show. Make sure you look up Larry Summers and send them a message and tell them we're trying to get them on the show. I think that'd be really cool. He's the second gentleman's comments there. And if there's anything that we can do, just make sure you shoot us a message on the form or by email and we'll try to get back to you and knock it out.

Starting point is 00:58:13 So I hope everyone enjoyed the show and we really enjoyed the book rework. We'll send out our executive summary of that for you. And we'll see you guys next week. Thanks for listening to The Investors Podcast. To listen to more shows or access to the tools discussed on the show, be sure to visit www. Submit your questions or request a guest appearance to the investors podcast by going to www. www. asktheinvestors.com. If your question is answered during the show, you will receive a free autographed copy of the Warren Buffett Accounting Book. This podcast is for entertainment purposes

Starting point is 00:58:48 only. This material is copyrighted by the TIP Network and must have written approval before a commercial application.

We Study Billionaires - The Investor’s Podcast Network - TIP 026 : Billionaire Mark Cuban's Book Recommendation - Rework (Investing Podcast)

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.