We Study Billionaires - The Investor’s Podcast Network - TIP 051 : Billionaire Mark Cuban's Book - How to Win at the Sport of Business (Investing Podcast)

Starting point is 00:00:00 We study billionaires, and this is episode 51 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. Hey, everybody.

Starting point is 00:00:29 How you doing? out there, this is Preston Pish, and I'm your host for The Investors Podcast, and as usual, I'm accompanied by my co-host, Stig Broderson, out in Denmark. So today, I think everyone's going to really enjoy this conversation because we're talking about a person that a lot of people know here in the United States, at least, and that is Mark Cuban. He's a billionaire that lives out of Dallas, Texas. He's the owner of the Dallas Mavericks, which is a basketball team. He's also the owner of Landmark Theater, Magnolia Pictures, and he's the chairman of the HDTV cable network AXS TV. And what people really know him for is that he's the shark on the TV show, the Shark Tank, which is this really popular TV show where a bunch of people come on and pitch their

Starting point is 00:01:12 ideas. And then there's some sharks that either take some equity in the business by investing in them or they pass on the deal. So we came in contact with Mark, really from the Shark Tank TV. That's how we came to know him and really had a lot of respect for him because you can hear how smart he is from a business sense. just by the way that he interacts with people on the show. But I want to give you a little bit of a history

Starting point is 00:01:34 because a lot of people don't realize how Mark Cuban made his money. And I was just going to give you a quick history on Mark Cuban. This was not in his book. And just so you know, what we're doing today is we're going to be reviewing Mark Cuban's book, How to Win at the Sport of Business. And it's not a long read. You can buy this on Amazon. It looks like it was self-published.

Starting point is 00:01:53 I think he circumnavigated the publishing industry, which I found really funny and quite awesome. but that's the book that we're going to be reviewing here after we just kind of give you a brief background on how Mark made his money. So early on, Mark always had this entrepreneurial spirit. Whenever he was in college, I think I remember him talking about this in the book where he started his own business when he was in college and it was a bar and he wasn't even of age to drink, but yet he owned a bar in college. And it seemed like the bar did pretty well. And yeah, so anyway, so he went to Indiana University, which is right there near Pittsburgh, Pennsylvania.

Starting point is 00:02:33 And that's where he grew up. He's from Pittsburgh. So I obviously have very strong ties to the Pittsburgh area. So I like that part of it for sure. He went to IUP. And then after he graduated, he went down to Texas with some buddies and they just started bartending. I think that's pretty much what he knew from college because he started the bartending business. But he goes down there. He's bartending. And then he starts working for this business. is called Your Business Software, which was like this one of the first PC software businesses down in Dallas, Texas. So he's working there, and he didn't even work there for a year before he got fired. And the reason that he got fired is because he decided to take it upon his own initiative

Starting point is 00:03:13 to go out on a sales call to meet with a customer instead of opening the store. So he gets back, the store owner, you know, he's looking at the store owner like, hey, I just sealed the deal over here with one of these customers and the manager of the shop looked at Cuban was like, yeah, you're fired. You didn't open the store. And Cuban just didn't understand. He was just like, well, what do you mean? I just got you a deal. Like, I just land you another client and the guy just fired him. So Mark was very frustrated. He decided to go out and start his own business because of that experience. So Mark started his own business and the name of the business that he started was called Micro Solutions, which was another software company.

Starting point is 00:03:55 and he goes and starts this up. The thing does really well. And then CompuServe, which was a subsidiary of H&R Block, buys out Cuban for $6 million. And so after taxes, it's reported that he made $2 million on the deal. So I want to say that he was in his 20s, late 20s at this point. And so he had $2 million in his pocket. I can't remember if it was in his book or his blog,

Starting point is 00:04:25 I read that he had all this money and he was, you know, obviously really pumped that he had made so much money at such a young age, really felt like he was on top of the world. And he wanted to just kind of take it easy and just take this nice conservative approach to just invest that small chunk of money. For him now, that's a small chunk of money. But he wanted to take that money and just kind of invest it, do something really safe and secure and just kind of, you know, coast through life. Well, it turns out by the mid-90s, I want to do something. I want to do something really safe and secure. I want to say it was around 1995. He links up with one of his buddies from Indiana University.

Starting point is 00:05:01 The guy's name is Todd Wagner, and they start this new business called AudioNet. And so what they were doing is they were combining Cuban had an intense interest in sports. So did Todd Wagner. So they start this thing called AudioNet. And what AudioNet was was it was broadcasting over the internet. So if you wanted to tune into like a sports game back in the early or the mid-1990, you had to turn on the radio or else you weren't listening to it. But with this, you could log on to the internet and you could go to their audio net website

Starting point is 00:05:34 and you could listen to a sports game from Indiana University or from Notre Dame or for whatever college you want to name. And they would have it being live streamed over the internet. That had never been done before. So that's what made him his money. Now, let's talk some of the numbers because I know everyone on this show loves the talk numbers like Stig and I. So everyone knows he became a billionaire off this deal.

Starting point is 00:05:59 And just so you know, AudioNet, they ended up buying the domain broadcast.com. So he basically pointed Broadcast.com to AudioNet. AudioNet becomes broadcast.com. And that was around the 1998 timeframe that the company became known as Broadcast.com. So now he's got this company. It's booming. Okay. And by booming, I mean the revenue.

Starting point is 00:06:23 So we're talking the top line, not the profit of the business, but the revenue for the second quarter was $13.5 million. And he had 330 employees working for him at the end, or I'm sorry, in 1999, he had 330 employees. And then one of his quarters, the revenue top line was $13.5 million. So let's just do some quick numbers here and talk about this deal because I'm going to tell you what Yahoo paid. for the company and bought him out, which was crazy. So if we look at the numbers, that's $26 million, I'm sorry, $27 million for half the year. And then if we double that, that'll give you the full year revenue. So let's just round it and say he was around $50 to $55 million, just to round some numbers.

Starting point is 00:07:17 That's his top line. So that's not the profit. So typically if a company's, you know, I'd say do it. well. There are about 10% of their revenue. Correct, Stig? Yeah. I'd say that's a fair estimate. Okay. So let's give him the benefit of the doubt and let's give him 20%. And let's just say he's kind of like a Google when he can do 20% or whatever, which I highly doubt. He might not even be profitable for all we know at the time. So let's just say that his bottom line was maybe $10 million a year. So how much are you willing to pay for a business this,

Starting point is 00:07:53 and $10 million here. Now, I will say there's huge upside with the potential for how this could grow and because it's something brand new, unknown potential here. I mean, there's lots of value there. I will definitely admit that there's lots of value there. But just to kind of show people the multiples that were paid back in the 1999 timeframe, this is at the peak of the internet bubble, and we're assuming that he has 20% margins on his revenues, he'd be making $10 million. for the entire year. And Yahoo purchased broadcast.com for $5.7 billion. So when we're talking multiples...

Starting point is 00:08:33 Wow, you're really making Facebook sound like a great deal. Yeah, it's a great deal. So, you know, if we were talking a 10% margin, $5.7 billion, you're probably at about a thousand multiple for Mark Cuban when he sold his company to Yahoo. So pretty cool. I think it shows you his negotiation skills, if anything. Yeah, it's called growth investing, Preston. It's because we're too much into value investing.

Starting point is 00:09:02 Yeah, I'd say. No, and Stig's exactly right. When you're growth investing, the multiples really don't make sense, and you're just looking at things more from a growth of the user base and things like that, you know, stuff I can't even begin to comprehend because there's so much risk associated with it. But, you know, there's people out there that love that. kind of stuff. They feel like they understand the space. And so they pay $5.7 billion for it.

Starting point is 00:09:29 And like Yahoo, they, if you type in Broadcast.com, you know where it takes you? It takes you straight to the Yahoo top level page. And all the things that Cuban had created with broadcast.com are pretty much a total wash for Yahoo. So they probably had to write down this whole $5.7 billion acquisition down to nothing onto their income statement because they never did anything with it. I think they fooled around with it for a few years and then they realized that they just really couldn't take it to anything that had any utility. So that's something else that's totally amazing when you look at this deal for them to pay a multiple of a thousand on something and then to never even use it in the long term was pretty amazing to me. Yeah. And so think

Starting point is 00:10:13 about that Yahoo, I think they bet something like a billion dollars on Google and they weren't too far away from each other actually to that point of time. But apparently the money went to my Cuban. So I think that that adds a lot of context when you're talking about Mark Cuban because everyone immediately is just like, oh, he's a billionaire. You know, he's the best there ever was and ever is. And I think that Mark Cuban has a ton to stand on. Don't get me wrong here. But I also like to add that context and for people to really understand the background of how he became a billionaire. It wasn't like he was like Warren Buffett here.

Starting point is 00:10:47 And he's investing in, you know, he's investing in a bunch of different companies and all these different backgrounds. and slowly growing his money into the billions. Like that's not how he did it. He really did it by having a great idea with broadcast.com and then selling it for a multiple of well over a thousand in order to, you know, check that block. But with all that said, I'm not trying to discount Mark Cuban because his book, I loved his book.

Starting point is 00:11:14 I thought his book was awesome. And it's a very short read. It's actually, what would you say, Stig, under 200 pages, I think. Yeah. And I think it's in compilation of all blog posts. So it's like the whole format actually makes it seems shorter than that. Yeah. Yeah, the format isn't really organized in like a logical layout.

Starting point is 00:11:37 And you can tell that he stole a lot of his blog posts. Because Cuban's a blogger. If you guys didn't know, Mark Cuban's a blogger. I think it's blog Maverick or something like that.com where you can go read his blog. and his blog is fantastic, so I highly recommend it. But they took a lot of his blog posts. He kind of formed it into a book.

Starting point is 00:11:58 And it's really good because it's all located in one area. And I think what he did is he took the posts that he liked the most that kind of represented his thought process. And he culminated into this book. So what Stig and I are going to do is we're going to hit the highlights of the book. We thoroughly enjoyed the book. And you can also get this on audibles. That's how I listened to it. But Stig, go ahead and take the first point that you really liked.

Starting point is 00:12:21 from the book. I think the one thing I really like, and there are a few pointers, but one of the things that really resonated with me was that he really encouraged that you start reading. That was one of the things he talked a lot about. And I think the best example of how important reading is, is that he started in the computer industry when he was like, I want to say 23, 24, something like that, which if you know the computer industry is not that young. I mean, he was not like Bill Gates, who started programs since he was like 10 years.

Starting point is 00:12:51 10 years old or something like that. He didn't know anything about computer in his early 20s. And he said the way that he caught up with his competitors in that industry was simply to read. And he was saying, it's not just like one hour a day. He was reading day and night. And even today, he's spending something like three hours a day. And he says that he's driving his family crazy because he wants to dedicate so much time reading. And one of the thing that he talked about, even though he was again back in the early 20, he was almost broke, was that back then he even thought that 20 bucks or something for a book that was extremely cheap. And today you can actually do it a lot cheaper than that.

Starting point is 00:13:33 And he's saying, why would you not start studying about something that's important to you if it's like 10 bucks and you can get a whole lifetime of experience just by sitting aside a weekend to go through that book? and he said that when he started, he was sure that all his competitors were doing the same thing. It would be really hard to catch on. But it is that no one does it. No one sits down and just study a book about how to succeed in the industry. And that was something that really led the foundation to his success.

Starting point is 00:14:06 I absolutely love this point. And I love the way that you framed this because in the book, Cuban talks about how he got ahead initially when he worked for this company, your business software. So he goes in and he has to sell the software. He knows absolutely nothing about software. And he says that in the book. And so what does he do? He goes and he gets these manuals from things like Lotus and carbon copy, like these obscure,

Starting point is 00:14:33 like old software programs. And he gets the manual and he just starts reading the manual inside out so that he understands the software better than the people that have been working in the software business for the last five years. He steps in and he just studies this and he reads these manuals like crazy. And so then when he goes out on sales calls, he knows the software better than anybody else out there. So he educated himself in this field that he had no experience in. And I think this is such a valuable lesson to everybody out there because if there's something that you don't understand or you don't know, it's so easy.

Starting point is 00:15:11 And you hear this so often where people will say, oh, yeah, I'd like to know something about. accounting or whatever it might be. And they say, but, you know, I haven't had any classes on it or I didn't go to college for that. And they just leave it at that. A guy like Mark Cuban's like, I don't know anything about the software business. It's really complex. It's brand new. But you know what? So what? And he says, I'm going to get a manual. I'm going to read it. I'm going to teach myself. And I think people that take that approach to life in general, if there's something you don't understand, go on YouTube, buy a book, do whatever it takes to learn it. And I'll tell you, It'll take you places.

Starting point is 00:15:47 I know from personal experience, I didn't know how to program. I had, you know, I'd taken some classes when I was in high school. I took one year of programming in high school and I took one year of programming in college. Neither in any language that would help me to build a website on the internet. You know what? I went after it. I went out and I'm not trying to, you know, toot my own horn here, but I guess I'm trying to tell you from my own personal experience how this worked for me. And so I went out on YouTube.

Starting point is 00:16:12 I found this guy who taught me how to program an HTML, C.S. JavaScript, all that kind of stuff. And I just sat down every single day and I watched those videos until I was blue in the face learning how to program a website. And then I was buying books and I'm reading these books and I'm trying to go through them and just trying to pick it apart so I could learn how to do it. That was a skill set. I was not taught at all. But you know what? I really took the initiative and I'm so glad that I did because I was able to stand up the Investors podcast and Buffett's books and things like that.

Starting point is 00:16:43 It's just been an awesome experience because I took this initiative that Cubans talking about in the book and just go out and do it, get after it. Yeah, so I definitely agree with you. And also just briefly to touch on the Investors podcast, it was not like Preston, we knew anything there was about investing. It's not like we do that today. But basically, we are reading with the audience. And I have learned so much from just reading like book after book about something that didn't know anything. about. Now, it might seem like we can come across as experts in inflation or an expert in an ETF. But guess what? You can just buy a book about inflation. So it really doesn't have anything

Starting point is 00:17:27 to do with your educational background. You can do that yourself. As president is saying, go on YouTube. That's free. If you think 10 bucks is too much for a book, you just go online and find articles on that. There's plenty of knowledgeable people who want to share their message to you. 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've got long days of daylight, incredible food, floating saunas on the Oslo Fjord, and every conversation you have is with people who are actually shaping the future. That's what the Oslo Freedom Forum is.

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Starting point is 00:21:40 WSB. Go to Shopify.com slash WSB. That's Shopify. dot com slash WSB. All right. Back to the show. And I will say this. I tell people this all the time. I said read books.

Starting point is 00:21:57 Read books. Don't go on the internet and just, you know, research things there. I'm very biased when it comes to reading books versus doing cursory research on the internet because I look at it this way. So like Mark Cuban. So we're studying Mark Cuban. We read his book. We didn't read his blog, a couple of his blog posts. And the reason we read his book is because I have the opinion that if a person writes a book, they're putting their most treasured secrets in that book on, you know, for Mark Cuban. It'd be why he became successful. I'd be of the opinion that the things that he guards most and that he, you know, feels are really the key recipes to his

Starting point is 00:22:36 success. Yeah, I'm sure it's on his blog, but it's spread about, you know, tons of articles that he's posted in the past and you're going to have to like search around for it. But for his book, he's going to put all of that right into the meat and potatoes of his book. And guess what? It's just not Cuban. It's any other person out there. If somebody's going to write a 300-page book, you better believe that they've done a lot of research and they're putting all the key important parts of whatever research that they've thought of because it's taken them probably two or three years to write it. So I have a lot of respect for reading a book opposed to an article on the internet. Plus, you don't understand the reliability of the source. So I think it's so

Starting point is 00:23:15 important that we talk about this point particularly. Yeah. So I definitely agree with you, Preston, because a book could definitely do something that online articles can't. It's, for one thing, it's more coherent. Ironically, that might not be the case for this book because this is basically a blog post that's been edited and compiled into a book. But basically, a book is much more coherent, which will give you a broader picture. Another thing is that you need to have time to reflect on what you're reading, and you need to have, I want to say, reach some kind of mental state to really digest what you have just read. And I don't know if it's just me that's old, but I think it's much harder to do that when you're reading a book or listening to a book,

Starting point is 00:23:57 if you're sitting in your sofa. Then if you're online and you can just check your email and on the right panel, it says that this is the top 10 Kate Perry, Taylor Swift, whatever. I mean, it's really going to confuse you a lot. Oh, Stig. It seems like you're not using the same web pages aside. Yeah, I'm not looking at those pages. And one other thing that I would to throw out there.

Starting point is 00:24:23 So a lot of people ask me, how do you read all these books so often? and I'll tell you, I do it through audibles. Audibles.com, you can get right on, I have my iPhone. It's just an app. I download onto my iPhone. It's through Amazon. And so I got and I find the book. I put it on my phone.

Starting point is 00:24:41 And then when I'm driving in my car or if I'm cutting grass or whatever it might be, I can listen to the book right there on my phone. So it's pretty awesome to be able to read books at such a fast pace because I'm listening to them. And any of this time that you really look as being just a total wasted downtime, like driving in your car, is now a time that you're like learning and you're, you know, turning that into like a learning laboratory as like when I like to refer to it as. But, okay, we're going to go to the next point. We cut a little bit off track there, but I really like that point that Stig captured. So we're going to go to the next point in the book that we really liked. One of the thing that I thought was really interesting was Cubans view on the success of future business model.

Starting point is 00:25:27 So he was talking about if you want to be successful in business and especially online business, you should be looking toward convenience. I mean, convenient was really the key word today. And he was saying something which is called least resistance. That was the term he used over and over again. And basically what he means by least resistance is think of Amazon or think of YouTube. Like it's really easy just to keep on consuming that product because everything is tailored to you. And you can just sit back and you can just click on it and it will take you right to what you want to see. So like real short, that was like his success of the future business model.

Starting point is 00:26:13 And if you were in business, you should always aim to. create the least resistant from a customer. So one of the things I want to talk about because Cuban is big on this. In fact, I think if you even watch the Shark Tank, this comes out from time to time, from time to time. And that's this idea of being a salesperson and how important sales are. So I think Cuban has such an enormous respect for this because whenever he moved down to Texas and he was working for this your business software, that was his forte. He had to go out there and he had to sell. He had to convince people, hey, you need this piece of software because if you don't have it,

Starting point is 00:26:51 you're going to be losing money because you're not saving time or whatever the case might be. And so he developed these hardcore sales skills early on. And to this day, I think if you're a person that can come in and sell and convince him to buy something, you immediately grab his respect. And he thinks very highly of you because I think at the end of the day, when you think about business, business in general. It's all about closing the deal and getting that sale. And so that's why he really has this strong reference. And he talks about that a lot in the book. He talks a lot about that on his blog of how important it is to be created sales, just straight up cold calls to having a long pitch

Starting point is 00:27:33 or whatever it might be. He just has a lot of emphasis on how important it is to be able to sell. And I think a lot of that comes down to your interpersonal skills and just being able to communicate effectively and having confidence in yourself when you're trying to sell something, being creative with the way that you maybe pitch something. So there's a lot that kind of comes together into that one piece of being a great salesman. And so it was just kind of a really interesting point of how much weight and interest he places on that skill set. Yeah, and you will never go out of fashion. It's not like if you're saying, I don't know, I specialized in this media. I mean, that might be old in two, three, five years. You know, the concept of selling, you know, it is about today as worth a thousand years ago.

Starting point is 00:28:19 And I can promise you guys in a thousand years from now, selling will be equal important as it is today. You know, all profit comes from the top line. So if you guys are looking to hone your salesmanship skills, I'll give you two book recommendations. One is by the Joe Gerard. What's the name of the Joe Gerard book, Stig? Something with cars, I want to say. Yeah. So I have not read this book, but Guy Spear told us about the book, and it's definitely

Starting point is 00:28:48 one that I would like to read. I'm pretty sure you're going to get a lot of good nuggets out of it. It might be a little extreme at times from what I've heard, but there's this book by Joe Gerard. He was the number one car salesman in the entire U.S. and he just talks about all these skills that he developed for selling cars and how he became, I don't know how many sold, but it's like an insane amount of cars. So there's one book. It's by Joe Gerard. And then the other one is Influence, which Stig and I already did an episode on. I can't remember which episode that was. But the name of the book is Influence by Robert Chaldeini. If you look in our episode list, you'll find that. And we also wrote a book summary for that if you want to download our book summary. But those two books will help you to become better at sales. I would argue at a much higher level than anything else you could read.

Starting point is 00:29:34 So there's two book recommendations if you're trying to hone those skills. Another thing I really found interesting about the book was that he said, Cuban said, don't listen to your customers. That was one of his main secrets. And to someone like me that has, you know, taking all these marketing classes and everything you hear is just like, you need to listen to the customer, you need to make market surveys, you need to make focus groups. I was really surprised by this, but I just heard so many billionaires saying you should never listen to your customers. Now, I think they were taking that to the extreme,

Starting point is 00:30:14 but I definitely think there is something to it. If you're very visionary and one, someone that comes to mind aside from Cuban is someone like Steve Jobs. He was also saying the same thing. You should not listen to customers. Because basically, how can your customers know that they need an iPhone or they need an iPad when it's a disruptive technology that they don't know the excess they don't know they have the need for it. I think of another quote from Henry Ford.

Starting point is 00:30:42 He said that if I ask people what they wanted, they would say they wanted faster horses. So you have these very visionary people that just think outside the box, someone like MacCuban, who has just been, for instance, we were broadcast.com, no one has ever seen this before. And it's really hard to make focus group and ask people about something that they can't visualize.

Starting point is 00:31:05 Yeah, I think that you'll find a lot of these people that have that same opinion like Steve Jobs. These guys were ultimate creators. So these guys are bringing new products to the world. And that's why I think they really have this opinion. Like, you can't ask the customer what it is that you'll want because here they are creating something that's new that's never been done before. And I think when you start asking people, hey, what do you think about this? well, they're going to shoot Holster. They're going to be like, oh, well, nobody's going to listen to the radio over the internet.

Starting point is 00:31:34 Why would they do that? They can just turn on their radio and they can hear it. So you're always going to have those naysayers. And I think it is important to ignore people. If you really think you've got something and you understand how it could, you know, shape the world in a different direction, go for it. Ignore them, you know, run after it. All right, Stig, you got the next point. Yeah, I think that there was a few, a few, a few,

Starting point is 00:31:59 good nuggets and one of them, um, which went up, I guess I disagree with the Cuban or at least I have another thing I wanted to, uh, to chip in with is that he's saying that business is the ultimate sport. Now it's not, let's still I disagree with that statement, but what he's saying is that in business, it's all about winning. It's all about if you can win someone else has to lose and you should always strive to be in the position where you would win that game. I mean, he's using all these sports metaphors, which is a lot of fun, and I can definitely see where it comes from. Now, I do agree that that is the life of business, but I think that for a lot of people, there might be better off going into, say, a mutual beneficial type of business.

Starting point is 00:32:45 I think that if you set yourself out for always competing with other people, and especially always thinking that for me to win, someone else has to lose, I think that you might not find the same satisfaction in life as you otherwise could, unless you're as good as my Cuban, of course. And this was really something I thought a lot about after reading Guy Spears' book, the occasion of a value investor, and something he also thought a lot about. And if you should just take one example from a personal life, for instance, if I am doing a podcast episode and I'm bringing on the guests, that guest, he will have the chance to tell his personal story, I will have a great show

Starting point is 00:33:26 and the audience will have a great experience learning from that person. I mean, we have three parties and everyone wins. Being in the middle of something like that I think gives you a lot of great things gives you a lot of great emotions but being in the opposite direction

Starting point is 00:33:43 like for instance I used to do as a commodities trader and a guy did something similar when he was in investment banker. Someone has to lose before you can win on that trade. I kind of see where my Cuban is coming from, but I think you should think about carefully if that's the path you want to take.

Starting point is 00:34:01 And something to highlight off of this point that you're making. So one of the key points that Cuban was making in the book, and I think he was trying to motivate people more than anything, is when you create your own business or you're working for a company, there is always somebody out there that's trying to kick your rear end. And they're trying to take you to the cleaning house. And so if you're not on your A game and you're not trying to you know, outsmart them or prepare yourself for something that's going to compete at a different level, you're going to get eaten alive. And I think that that's what he's really warning people with, with that metaphor where he's talking about business, where he's saying, you know, with my basketball team,

Starting point is 00:34:39 it's, you know, only a couple minutes in the day and then it's over. But with business, it's 24 hours a day where somebody's trying to kick your butt. And that's where he's really trying to make people aware, like, hey, you might create a product, but guess what? There's going to be somebody right down the road who's trying to create a better product and take it to the extreme and basically put you out of business. So if you're not, if you don't have that competitive spirit and you're always trying to bring your best, there's a chance that you might lose. And I think that that's one of the main points he's really trying to make is trying to motivate people and tell them, hey, this is not, this is not for the faint of heart. Like you can't just start a business and think that it's going

Starting point is 00:35:17 to continue to exist without somebody else trying to come along and kick your butt. So, and it's neat, Because when he talks about that, he says, you know, he has this saying, I always want to figure out how I could kick my own ass. That way I can make sure that somebody else doesn't come along and do it. And Steve Jobs also had a very similar thing out of his book where he says, I would much rather cannibalize myself than to let somebody else cannibalize my company. When he's getting that is, you know, people will say, we're asking them, why are you coming out with a new iPhone whenever you don't even have a competitor in the market

Starting point is 00:35:51 back when iPhones first came out, you don't even have a competitor on the market that's even close to competing with you. And Steve Jobs said, well, if I don't cannibalize myself, somebody else will. And so that was his way of always staying ahead of the technology and always staying ahead of the competitors was, hey, I'll just cannibalize myself and I'll make it even a better product. And I think that that's a good approach. I think that's a really good approach because you never know when the day is going to come

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Starting point is 00:39:41 Yeah, and just to follow up on that, Preston, I come to think about a marketing class or saw with Monish Paprai the other day. And this might sound weird because people usually know Monash from picking stocks. But what he's saying is, if you look at entering a new market and, again, think of someone like two jobs selling like my Cuban, you should not think about if only I can get like 1% of this market or if I can just get 1 tenth of percent, I would be rich because it's such a huge market. That's the wrong way of looking at business.

Starting point is 00:40:18 What Moni is Parvarez saying is that if you can't get at least 60% of the new market, then you're not specific enough of what you want to do. And I think that really pretty much captures some of the really big thinkers of how they think a business and disruptive technologies. So I'm going to talk about a point here that Cuban made in the book, which I thought was really good. And he says, you only have to be right once. And what he's really getting at is say you have a great idea and you try to create your own business or whatever the case might be. And it totally falls on its face.

Starting point is 00:40:54 You know, Cuban would tell you, get up off your feet and dust yourself off and get back into the game and come back with something new. and his saying you only have to be right once is you can fail five, six, seven, eight times, but then you get that one business that hits and it does it right. Well, guess what? Now you're a multimillionaire or whatever the case might be. And so he's saying stay in the game, stay after it. And it's really quite motivational. In fact, I think the whole book is quite motivational.

Starting point is 00:41:25 I think for somebody that might be just starting out, and maybe you're in college or whatever, I would highly recommend this read because he gives out great. great pieces of advice, great business sense, little tidbits here and there. He has a couple lists where he talks about, like, my list of the top 12 things I learned, you know, in business and all that kind of stuff is very useful, especially when you're starting out. And I think it's very motivational for people to, you know, understand that. Something else that I found to be highly interesting and very useful for a lot of people that might be working a job where you have a boss. He tells people that you need to think like an

Starting point is 00:42:01 entrepreneur. The best employees are the ones that think like an entrepreneur. And what he means by that is you need to be thinking from the lens in the context of the owner. When you're that employee and I get frustrated whenever I go into a business and I say this to my wife all the time, she just rolls her eyes at me. I say that person is thinking like an employee, not an owner. And what I mean by that is you go up to the counter. Let's say you're at a fast food restaurant or you're at, you know, wherever. And the person's just sitting. there and they could care less if you made a purchase, if you made an order or whatever the case might be. They could care less what choice you made. Like you're asking them some questions and they're just kind of like, yeah, so they'll give you the cookie cutter answer and then they're just looking like, I could care less if this person makes a purchase. In fact, I hope they leave so I don't have to do my job. And that is how an employee thinks. And what Cuban talks about is you need to think

Starting point is 00:42:57 like an entrepreneur, you need to think like an owner. Not only can I make the sale, but how can I make this sale and then convince this person to go tell their best friend to come down here and buy from me after that? That's how an entrepreneur thinks because they're the owner. They want as much business as possible. So if you're an employee working at a company, I would really challenge you to take on this mindset. How can I think like the owner of this business? How can I try to bring more business and follow on business and compounding business for this owner? When you think like that, I'll tell you, you'll get promoted faster than anybody else in the block. And on top of that, you'll probably have the sense to maybe start your own business someday and run with it.

Starting point is 00:43:34 But I thought that was a really good point. Yeah, and I definitely agree with your, Preston. This book is definitely well suited if you are a college student. And he addresses college students plenty of times. And I also want to say especially if you are a college student, don't educate yourself to be an employee for a company, educate yourself to be the owner of company, even though you probably, like everyone else has to start working for someone else. as Preston is saying, you'll get promoted faster, people will recognize you.

Starting point is 00:44:04 And by the end of the day, you might create the network that you have to, to create your own business if that's what you want to do. But no one wants to promote you and no one wants to network with you if you think like an employee. Yeah, I was lucky as a kid. I'm just going to shoot you straight. Like both of my parents were entrepreneurs. My mother owned her own business.

Starting point is 00:44:24 She had her own dance studio. I want to say she had like two to 300 students. It was a lot of students. And then my dad, he owned this apartment, you know, company. So I kind of grew up in this environment where entrepreneurship was pretty much the way things worked. It wasn't like you, you know, we're working for a boss. Like, you had this entrepreneurial spirit in our house. And so I was kind of brought up around that.

Starting point is 00:44:48 And it was, you know, I look back at how much of an advantage that was growing up as a kid. And I think a lot of people don't necessarily have that same experience. but I guess my point in telling you this is try to hone those skills of like what's it take to become an entrepreneur because when you do, I think that you're going to find that you have so much more potential to increase your net worth, your income stream when you own something and you create it yourself. And I think that this would be a great starter book for a person to get that entrepreneurial spirit because that's what Cuban talks a lot about in this book.

Starting point is 00:45:25 and that was probably one of the reasons I really liked it so much. All right. So there's more stuff that we could talk about with Mark Cuban and the different points that he makes in the book. And I'll tell you, there's a lot of different chapters and there's a lot of different points. So like we said, we can't highly recommend this book enough. But what we're going to do at this point is we're going to take a question from our audience. And this question comes from Satosh. My question for you guys is about inflation.

Starting point is 00:45:51 How likely is a scenario where an economy can experience a sense. severe inflation such that it can potentially invalidate the currency, something that many economists call as hyperinflation. In such a case, the currency would essentially lose its value and all our investments and liquid assets would essentially become useless. I read about such an event happening a few years back in Zimbabwe and in several other countries in the early 1900s. This is something that as an investor I should be worried about. If yes, what's the the best way to be prepared for the tenement is considering investing in fixed or tangible assets like real estate a good idea.

Starting point is 00:46:34 So, Sintosh, this is a really great question. And I think that it's a question that a lot of people have on their mind because of the current, you know, conditions around the world. So when you talk about inflation versus hyperinflation, I think the most prominent example in history is, you know, Germany back in the 1920 timeframe. The reason that Germany went through the hyperinflation back in the 1920s is because they had enormous war reparations that they had to pay from World War I finishing up. And those reparations were in such a large amount that Germany just couldn't possibly pay it

Starting point is 00:47:12 all back. So they print more money and devalue it. And it was just a total disaster when you go back into the 1920s. I think the picture of the guy with the willbarrel of money was from that time period. And I want to say that that picture was taken like around 1922 or somewhere around in there. So really when you're trying to understand what causes hyperinflation, it really comes down to the domestic obligations being in such exceedance of what that country's ability to pay and to collect tax revenues. It just gets completely out of whack. I would argue back in the 1920s for Germany, the payments that they needed to make to all the different foreign countries for all the war reparations were far in exceedance of what the company could bring in with their tax revenues.

Starting point is 00:47:59 And that's the reason that they went through that. Plus, you had some extreme leadership in place following World War I. And it was just, you know, a crazy time. And I think when you go around the world and you look at all these different hyperinflation scenarios, you're going to find that that country, was in enormous amounts of debt that far exceeded what they could bring in. So when we look at the United States during, you know, right now, I don't necessarily think that United States is anywhere near that scenario where the hyperinflation could, you know, occur. I could be completely wrong. They've done an enormous amount of quantitative easing.

Starting point is 00:48:35 We're going to be having a guest on our show here. And what is it, October that we're having Colin on the show, Stig. Yeah, middle of October or something. Yeah. We'll have a link to Colin's website in our show notes. And Colin wrote this white paper on how modern monetary policy works. And he talks a lot about what you're getting at here. And I want to say his white paper is like 50 or 60 pages long. It has been highly downloaded across the finance industry.

Starting point is 00:49:02 And I highly recommend people read this because it's quite fascinating how well he depicts the modern monetary system. And he gets into debunking a lot of things like money multipliers and how it's going to impact inflation. I know back during the 2008-2009 crash, he had a bunch of people out there saying that we were going to have hyperinflation with all this quantitative easing. Colin went out very early. I want to say like in the 2009-2010 time frame and said, that's not going to happen. And here's all the reasons why. So we give him a lot of kudos for calling something so obscure that I think, you know, you talk to any modern economists. They'd probably have told you that we would have had hyperinflation in the United States with all the QE.

Starting point is 00:49:46 And Colin was one of the few people that said that we wouldn't because I think he, you know, really had a fundamental understanding and knowledge of how things work. I want to also highlight that back in the, I want to say it was the late 70s or early into the 1980s in the United States, you had an enormous amount of devaluation that happened with the dollar. I think the dollar lost almost 50% of its value over like a five-year period during that time frame. that's what I think people are going to see this time around where you're going to see the dollar and every other world currency that's competing for market share right now, continue to lose its value. And that's how people are being taxed and that's how this de-leveraging is actually taking places through the devaluation of the currencies.

Starting point is 00:50:35 Oh, I'm so sad, Preston, and just talking about the vulnerability of the dollar. Because, you know, me living in Denmark and we're looking to watch the new. looking at the dollar and just thinking, this is a safe haven because I have no trust in ECB whatsoever. So I think this is a great discussion. And one book that really comes to mind here is the Black Swan, which we did not too long ago by Nassim Taleb. And the reason why I'm saying is it's really to continue what Preston said, because Preston said that he think this is really highly unlikely. And I completely agree.

Starting point is 00:51:13 I would say that for hyperinflation to happen in one of the major developing countries right now would be, I wouldn't put a percentage on, but it's highly, highly unlikely. But again, we've seen so many crazy things in the financial markets and there have been a black sworn. So could it happen? Yes, it could. And what you're also asking about Santos is, so what should you invest in to prevent that? I think one of the thing I probably should look into is to look into Talibs fund. I actually heard that he has like a Blaine Swan Fund. I actually don't know how he invests. That could be really interesting.

Starting point is 00:51:53 But if I just should think of some of the asset classes, type of assets that you can't buy, it would be something like tips, which is inflation-proved bonds. I mean, that might be a suggestion. Another thing which you, just yourself, is real estate. And the reason why you would do something like real estate is because you have a fixed rate mortgage

Starting point is 00:52:15 and it's in a given nominal number. So basically what you have borrowed to buy the building almost gets depleted. And also that you can raise your rent as there is more inflation. Other asset class would be something like commodities, oil and gold, something that people usually walk into when there's a high uncertainties which they are in type of inflation.

Starting point is 00:52:43 So at least that is like the traditional asset classes and you might even include something like stocks too which is not fully inflation proof but like partial inflation proof. So I think that would be my best advice to you if

Starting point is 00:52:58 that is in the direction you're going am I doing that myself? No. Not only because I trust the Fed, because I'm not really sure I do, just more than ECB. But I think the position I'm in and where I look at the, how I look at the world right now, I don't think I should be paying a premium to someone to protect myself against hyperinflation. So I'm going to talk about market conditions right now in August of 2015 real briefly. So one of the concerns that I've got right now

Starting point is 00:53:32 is the strength of the dollar. So the dollar is getting extremely strong. You're seeing all these different currencies pour into the dollar, you're seeing them pour into the 10-year treasury. And so for the United States domestically, that's not a good thing because what's happening is it's really hard for us. The import versus export piece of that, it's really cheap for us to buy things outside of the country, but very expensive for outside countries like China or people over in Europe to buy things in the U.S. Well, that's really bad because an enormous amount of the revenue being generated by

Starting point is 00:54:05 these U.S. companies are all from foreign currencies and from foreign countries. So as the dollar gets stronger, that's going to be an enormous amount of pressure on the U.S.'s ability to continue to grow their GDP. That's where I've got a concern moving forward. And I think that with these pressures mounting in the U.S., I think that the Fed is going to be in an extremely tricky situation because if they start tightening, meaning that they basically start to reverse all that quantitative easing that they've been doing. Instead of buying bonds, they're going to start selling these bonds, and then you're going to have a flood of bonds on the market, which is going to raise interest rates in the U.S.

Starting point is 00:54:44 If they start raising interest rates in the U.S., that's going to only make the dollar stronger yet, and that's going to put more pressures on the U.S. businesses. So I don't necessarily see how the Fed's going to be able to do that this year. Does that mean that they might still do it? Yeah, absolutely. They might still do it. In fact, if they do actually do this, I think they're going to do it at just a small piece just to be able to say that they did. I don't think that they're going to even remotely adjust interest rates that much that people might not even notice.

Starting point is 00:55:14 But I think it'll be maybe a psychological movement because they're going to say that they did it. You're really at this pivotal point in time where we don't necessarily know which decision they're going to make, but we know pretty much whatever decision they make it might not be a good one. So it's going to be interesting to see how it plays out. We're watching it very closely. We'll be sure to, and this is what I want to highlight to everybody, if you sign up on our list, either through Buffett's books or the Investors podcast, we type up an executive summary of every book that we read. So this book on Mark Cuban, we got an executive summary. We're going to send out to everybody for free.

Starting point is 00:55:48 So go and sign up on our list. Also, when we send out those executive summaries, we'll type up, you know, our current thoughts on the current market conditions and just kind of give you some thoughts like this in the email. We have no spam whatsoever, no advertising, no nothing like that. So if you're signing up on our list, you're just getting these executive summaries. And then in the body of the email, you're getting our notes on the current market condition. So thanks for joining us. And we'll see you guys next week. Thanks for listening to The Investors Podcast.

Starting point is 00:56:18 To listen to more shows or access to the tools discussed on the show, be sure to visit www. www.com. Submit your questions or request a guest appearance to the Investors podcast by going to www.w.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 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 051 : Billionaire Mark Cuban's Book - How to Win at the Sport of Business (Investing Podcast)

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