We Study Billionaires - The Investor’s Podcast Network - TIP250: Lessons from Billionaire Michael Bloomberg (Business Podcast)

Starting point is 00:00:00 You're listening to TIP. On today's show, we're talking about Mr. Michael Bloomberg, who's an American billionaire whose net worth is approximately $62 billion. He's the founder of Bloomberg Limited Partners, which is a global financial services, software, and mass media company. In addition to creating a large-cap business from the ground up, Mr. Bloomberg has given away $8.2 billion and has pledged to give away half of his net worth to charity upon his death. We cover topics like how Mr. Bloomberg created his company and what his childhood was

Starting point is 00:00:30 like and much, much more. So without further delay, here's our Q&A coverage of billionaire Michael Bloomberg. You are listening to The Investors Podcast, where we study the financial markets and read the books that influence self-made billionaires the most. We keep you informed and prepared for the unexpected. So for the very first audio clip that we're going to listen to, Michael Bloomberg talks about the vital lessons and principles from his life that he wanted to pass on to the next generation. and this is what he said. Don't spend a lot of time making long-term plans. Here's a photo of me, Johns Hopkins University, when I graduated.

Starting point is 00:01:19 I never dreamed of going to Hopkins, but I had a job in electronics company, and my boss suggested I apply. And my time at Hopkins didn't go exactly as I planned. I wanted to be a physics major. But there was a German requirement. This was right after all of the physics had been done in German and had not been translated into English after the war.

Starting point is 00:01:42 After three days in German class, I realized that I am not a linguist. I was not going to learn to speak German no matter what happened. So I switched the engineering school. So it didn't work out the way I'd thought. But then I went to business school, thinking I wind up managing a factory. But a friend recommended I try Wall Street,

Starting point is 00:02:01 even though I knew nothing about finance. And the lesson there is, focus mostly on now. You can't predict what's going to happen. Don't even think about tomorrow until it comes. Spend the time where you are right now learning as much as you can and making as many friends as you can. I taught myself to be the first in and the first out. At business school, I had to pay room board and tuition, and so I took a job renting apartments in a real estate office. None of the other salesmen understood why every client who came in had an appointment to see me. It was really really a job.

Starting point is 00:02:37 very simple. I got in first, about six in the morning, and I answered all the overnight inquiries. I always tried to be the first one there and the last one out at night. In the morning when the managing partner wanted to borrow a match to light his cigar or wanted to talk sports, I was the only one he could talk to, so we became friends. And at the end of the day, the number two guy was the last one to leave. What was he going to do? Refused to share an elevator in a sub-examined. subway car with me, so we became friends then. And to this day, I have always believed that a lot of people are smarter than me, and they can do things I can't do, but they cannot outwork me. I can work 24-7, and they can't work more than that. The longer you work, the lucky you get,

Starting point is 00:03:26 and the more successful you're going to be. And the more successful you are, the more you are going to want to work. Don't let failure get you down. Take risks. You're not going to get the top unless you do. How did I go to work at Solomon Brothers to start a company? Simple. I got fired. And when you get fired, this opportunity is open up. And people are afraid to say, oh, I got fired. I was proud to getting fired. I'd never been fired before. It was wonderful to learn what it felt like. Now, I don't want to do it a second time. And since my name is on the door of my company, I don't think that's going to happen. But nevertheless, I love my job. And the people that hired me and fired me were great people, and they all became Bloomberg customers.

Starting point is 00:04:14 But after leaving, I had a crazy idea, and I went for it. I started my own company. But if I hadn't gotten fired, I never would have started the company, run for mayor, or been invited to speak to you today. So always look at the bright side. Failure may be embarrassing at first, but it's how you grow. The lesson is you've got to believe. You've got to take risks. You cannot spend your life on the bunny slopes, and you can't read a book about skiing and go out and ski double black diamonds.

Starting point is 00:04:43 You have to learn by doing and falling down. Always hire people smarter than you, because you can only do as well as your team does. The press kept asking me, what did you do in the first hundred days? And I said, I built a team. And they said, yeah, yeah, but what did you do? I said, no, no, I built a team. and we went back and forth. They couldn't understand that the team was everything.

Starting point is 00:05:10 What I did is I picked them, I put them together, and if they had a problem, I could adjudicate between disagreements and find a ways to pay them. But they were the ones that were really doing it. So never be afraid to hire somebody smarter than you. They will make you look good. And give credit to them. When I say, no, I didn't do it, Sally did it.

Starting point is 00:05:33 Two things are true. Number one, everybody knows that I did it. And number two, they respect me more because of it. And Sally respects me. And now Sally's going to want to be part of the team for a longer time. So give credit to others. I don't know anything we do by ourselves. Everything requires other people.

Starting point is 00:05:51 And when I returned to Bloomberg after City Hall, I found much to my surprise that after all my instructions that I had left 12 years earlier, that there were not to be any private offices, people said we didn't have any private offices, but all the 12 senior people had conference rooms right next to their desk with the family pictures in them. Needless to say, the next Monday when they came in, the walls were gone.

Starting point is 00:06:17 Walls are one of the worst things you're going to have. They keep people from communicating. And if you want to set an example, people have to be able to see you. The more you break down the walls, the stronger your team's going to be. And if you put yourself right in the middle of all the people you work with,

Starting point is 00:06:32 you'll be shocked at just how much better informed you are, how much more they will love you and how much more you will all do together. If you don't back the people, they won't take risks. If you don't share credit, they won't be motivated. And the job of the leader is to take the heat and to stand by their people. Hold them accountable, but back them up when they take well-considered risks that don't work out. If somebody on your team has an idea that doesn't work, do what I do. I always make sure people understand that I am still supporting them.

Starting point is 00:07:06 So I'm always inspired by hearing how successful entrepreneurs rose to the top from the humble beginnings. But I also want to say that one thing that always frustrated me when I was younger was that it sounded too simple. And I sort of have the feeling that while what they say might be true, they were also just a little luckier than I was. I think that over the years I realized that it was more likely my jealousy talking than sensibility and I was the only one to blame for my own problems.

Starting point is 00:07:39 And really, one book that put stories like these into perspective, at least for me, were Radalia's book principles. Redalia defines principles as ways of successfully dealing with reality to get what you want out of life, which I think is very relevant when listening to stories like the one you just heard here from Michael Bloomberg. So one simple principle is just for the example is that if you want to grow your wealth, you need to spend less than you make. Now, we don't all want the same out of life, so we should all apply different principles.

Starting point is 00:08:13 But any correct principle is still universal. And that's exactly what Michael Bloomberg is doing here. He's outlying his principles for how to achieve what he defined as success in his life. So really the key here is if you're conscious about your goal, you can through principles achieve them. Personally, I have five business principles. I apply to my business goals and in my business, and I look at them every single day.

Starting point is 00:08:38 They do not include outworking everyone else, like Michael Bloomberg. I have other ambitions and goals at him, so I use other principles. And those principles would get me different rewards. So I guess my key takeaway when I listened to this clip was to emphasize not only for myself, but also for the listener, which principles you live by and why you chose those principles and which rewards you expect to get from them.

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Starting point is 00:13:18 So I'm going to go ahead and play a question that I had picked out here. And this question pertains to what Michael Bloomberg learned from his younger years. And this was his response. I think you look at your parents and most of us are lucky enough to have parents. Not everybody does. And one of our problems in New York City is we have a lot of kids we have to help who aren't so lucky. They are raised by grandparents or aunts or just friends. But I had two loving parents.

Starting point is 00:13:45 My mother's still alive, 98 years old, lives in the house that I grew up in, flew down this weekend to New York. went back. I hope that I've inherited her genes. But my father was a bookkeeper for a little dairy company, and he went to work seven days a week right up until he checked himself into the hospital to die. And I think you can't help but be formed by your parents, their work ethic. We talked about charity and social obligations. One of the things my parents did, which I had wanted to do with my daughters, but didn't quite get accomplished, but I would urge all of you if you have kids and do it. My mother made sure my sister and I waited at home for my father to come for dinner.

Starting point is 00:14:35 We always ate together as a family. We set the table together. It was never a pot in the history of our family that came to the table. We served everything much more formally, and we went around the table and talked about what we did that, that day. And so I remember discussing charity. We'd collect for some cause in the neighborhood. I was a Boy Scout and sold Christmas wreaths to raise money for a few things. And my sister did the same kinds of things. But if you look back and say, who was the most influential in setting your life on the right course, it was clearly, in my case, my parents. A lot of other people that had something to do with it.

Starting point is 00:15:25 But the great challenge we have in our society is we live in a world where parents aren't spending the time with their children. I went to visit a charter school two weeks ago where they have kindergarten and first grade. Next year they'll have K1 and 2 and then they'll build up to K through 5. But they insist that the parents read half a dozen books to the children every single week. They ask the children to write a sentence or two about each of the books. They call the parents every single week

Starting point is 00:15:59 and say, did you read? And if the parents didn't have time, they say, well, you're going to have to remove your kid from school unless you start doing it. But how we get in this society we live in where everybody's got so many things to do and families are

Starting point is 00:16:15 much more fluid than they've ever been before, how we get to have the parents really spend time. one-on-one with their children is one of our great challenges. And I think that's the challenge in our school system as well. We talk about numbers. We talk about methods of teaching. In the end, education, particularly at the lower level,

Starting point is 00:16:34 is a teacher looking a single student in the eye, dialoguing, understanding what that student needs, answering questions, and there's just too little of that in our competitive fund society. So I know our show is about investing, I just really like this comment about the influence of parents and the importance of parents, spending time with their kids, eating together. The reason I want to talk about this a little bit is because I read a book, oh, I don't know,

Starting point is 00:17:05 probably a year ago, maybe two years ago. And the book is called The Like Switch. It's a fairly popular book. The subtitle on the book is an ex-FBI agent's guide to influencing, attracting, and winning people. One of the things that I really found fascinating in this book is he talked about the authors, there's two authors, they talked about this idea of being close to another person and interacting with another person in order to kind of bring them into your sphere of influence. And when you look at a family that sits down and eats together like Michael Bloomberg was talking

Starting point is 00:17:41 about and the family dynamic that he grew up in, you can see that the relationship he had with his parents was close and that he was looking to them as role models. And I know the eating is just one aspect of that, maybe a very small aspect of that. But I think it's really important for people to understand that the people that they have day-to-day interactions with, the people that you're sitting down and having a meal with on an everyday kind of basis is going to drastically impact who they become, what they're going to become what they're learning. And I just think it's so important for parents out there to invest in their children and their time. And I just wanted to play that quick audio sound clip because I

Starting point is 00:18:29 just enjoyed it. So for the next question we're going to play here. Michael Bloomberg was asked, what is your advice to young entrepreneurs? And this is what Mike Bloomberg said. There's an awful lot of good ideas out there. And there aren't very many companies that succeed. and you've got to ask yourself, what's the disconnect between the two? And I think it's people don't understand when they start a business. You have to have a good idea. But the execution of building a business, of attracting the right people, of getting them to work together, of finding financing, if you needed, of going and selling the product, of maintaining

Starting point is 00:19:06 the product, and being able to recognize what the competitors are doing. Those are skill sets that most entrepreneurs don't. have. They tend to be young people straight out of school. That's amazing to me. The ideas that they come up with, but they have never had the experience of the real world. It's not easy to look somebody in the eye and say, I'm sorry, you're not going to work here tomorrow. It's not easy to get two people, both of whom you have to keep, both of whom you really need, who aren't getting along, to adjudicate between them and to get them to cooperate. You deal with social problems. You deal with social problems. You with government problems, you deal with tax problems, you deal with legal problems. And I think it's

Starting point is 00:19:50 the maturity of the management of these companies that is failing them because they just don't have it. They're starting young people. And that's something I suppose that a venture capitalist can bring to the party. They can give them the understanding of the real world and provide some stability. The bad news for venture capitalists is they have a short-term perspective, and they want to get their money out and they want to own a big chunk of the company and the entrepreneurs that give away the whole company because that's the only ways they can get going,

Starting point is 00:20:25 it sounds good, but why bother? You would be better off maybe starting slower, attracting a few older people to work with you who have some experience. And it's been, what I've noticed is older people don't have a problem at attracting and hiring and working with younger people. Why? Because that's the way the world is. As you get older, you have to bring in new employees. They're just out of school, so they're younger. But younger people are always afraid of bringing in older people. They just, for some reason or other, are scared of them and they don't recognize the talents that come with experience and with having been there before and done things. And so if I was going to start a new business, when I started my business, I was in my mid-30s and I'd had some experience.

Starting point is 00:21:14 But most of the entrepreneurs I meet here are straight out of school at 24, 25 years old. And they've never had to go through this. And they don't understand things they think are going to be easy that don't work out. They never quite understand why. But if somebody had been there before and done that, they could have explained to them. Not saying you can't do it, but here's the difficulties we're going to have to address. I don't think you hear a lot of these discussions. You know, you see these tech publications or whatnot and the rife with stories of crazy

Starting point is 00:21:46 successful 22-year-old, just out-of-school founders who become billionaires, which is kind of interesting than listening to Bloomberg's perspective. You know, I can say from personal experience, I've had two startups. The first I started whenever I was 26, and I hired multiple people, but I never ever hide anyone who was significantly older than me. And I'm sort of embarrassed to say that I've not been doing that for the exact same reasons. As you played here in the clip, Bloomberg is very likely right and I'm wrong. You know, those are the reasons why not. And I really like his response and the way he's thinking about this, because if you do say something like tech or if you're talking about

Starting point is 00:22:30 young entrepreneurs right of school, it might be a new technology. And why would you need more experienced people for doing something that's not even invented yet. But at the end of the day, a business is a business, meaning that the human aspect and experience in handling people is really the key to the success. And perhaps this is a bit anecdotal, but where would Max Zuckerberg and Facebook be today if Zuckerberg didn't persuade Sir Sandbock to leave Google in 2008? And this was a part in time where Sockberg was 23 and Sandbag was 38. And this was not a part in time where it would make a lot of sense to go from Google to a new startup called Facebook.

Starting point is 00:23:12 And I think my last comment is whenever I was looking through a magazine here the other day about success in the tech business, one thing really stood out to me. The average age of leaders of high growth startups, successful, that is, is actually 45 years old. I think it's really a testament to what Michael Blanche. Bloomberg is talking about here, a business is at the end of the day all about handling people more than the idea itself. 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

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Starting point is 00:27:03 All right, Stig, so the next question that I'm going to play here is a question that is really simple, but I just kind of find interesting. Bloomberg was asked, how did you start Bloomberg? And this is his response. Well, I got fired from my job. And I was too proud to go look for another one. So I said, well, I better work for myself. Seriously, part of that is true. I was fired for my job.

Starting point is 00:27:30 It's the best thing that ever happened to me. If you get fired that way, you should say, thank God. But I wanted to, I had an idea. And I was lucky enough to have the wherewithal to finance it myself. And so I was able to attract three people who had been working for me at the company I got fired from. And they joined me. The first day, it was me. Second day, we were four people.

Starting point is 00:27:55 And we just had an idea and we developed it. and it took us a couple of three years, I think, from the start of the business till we delivered our first product. It took us the first year, you know it's going to work. You just have all that enthusiasm. And the last year, you can see that it's going to work. So you don't have to worry about it. It's that middle year that's always the tricky one. But I went out and I spent three years to sell the product. And you just have to have the confidence that if you keep going and knocking on doors, you will eventually find a buyer. I've always thought, whether it's in government or in business, you have to lead.

Starting point is 00:28:33 So what I would argue in business is we all talk about listening to our customers. And I think that's okay, but I would say what you should do is hear your customers out. But if you build what your customer wants, by the time you get it there, they've moved on to something else. and so what you have to do is build what they're going to need down the road and then convince them when you have the product that it is in their interest to buy it and use it. And in government, that would be leading from the front. Nobody elects a government official to ask them in a poll what they want and then deliver it. They should be electing government officials to come up with ideas for the future and then convince them why it's okay and why they should fund it and live under that kind of an environment and go on.

Starting point is 00:29:26 So you have to have an idea, you have to figure out who to sell it to. You have to go out and sell. And selling is a very key part of every bit of innovation, whether you're selling yourself to somebody to fund it, or you're selling the product to somebody, or you're just selling your family to bear with you while you go through this adventure. successful entrepreneurs, my way of thinking, are always good salesmen.

Starting point is 00:29:56 Some may not be polished, but they're very effective in terms of convincing people that they've got an idea and it's worth listening to or investing in or buying. So I like this response. And I guess the reason I like this response is because it's not easy. It's extremely difficult to do what he did, especially when you look at the magnitude of what he did. but to get out there and to be a salesperson, to be the numbers person on the finance side, to be the person who's running the day-to-day operations, the person who's coming up with the market research to know what product or service you're going to build that the customer's going to need in the future.

Starting point is 00:30:39 Like all this stuff, it's not simple. I think it's so important for people that before they quit their job and say, hey, I'm going to do this, that they just understand the grind in the journey that's ahead. And they've got to be looking forward to that grind. They've got to be looking forward to that struggle and that challenge. Because if you're not looking forward to that challenge and you think you're just going to put your job and start whatever and it's just going to kind of happen and everything's going to fall into place, it's not so simple. And I think a lot of people don't necessarily have the personality or the skill set to be able to handle so many different facets and be good at so many different facets in order to run a business from the ground up. And so that was just a little taste of Michael Bloomberg's perspective on founding Bloomberg.

Starting point is 00:31:35 And I just, I think it's really valuable for people to hear. All right, guys. So in this part and time the show, we'll play a question from the audience. And this question comes from Tam. Hey, Preston and the steak. First of all I want to say, thank you so much for all that you guys do. The amount of information that you guys provide are super valuable. So I was listening to an old episode and the guest that was on said that he wants to take out on mortgage with the really high interest rate, something in the 10%.

Starting point is 00:32:03 And his mom was freaking out about it. But then he told her that because inflation was really high, say 8%. So the real industry that he paid turned out to be really low. So my question is that how is inflation factor into this? When he should have to pay the bank 10% in interest or would he have to pay the bank only 2% in interest? Thank you so much. Great question, Tam. So we have to define three different terms here.

Starting point is 00:32:31 The nominal interest rate, which in your example is 10%. inflation, which you mentioned to be 8%, and then the so-called real interest rate, which is the difference between the nominal interest rate and inflation. So when you ask, how much should you pay to the bank? Well, that is 10% in interest. So if your mortgage is $100,000, your interest payment is $10,000. Now, we also have inflation, which is vitally important

Starting point is 00:33:01 because inflation ensures that the nominal value of money, money goes down over time. So think about it like this, but you can buy for $100,000 today. You need $108,000 to buy a year from now. This is great if you borrow money. Imagine that you own a small store or perhaps just get your regular paycheck. Because goods or services are normally getting more expensive with inflation, typically what happens is that your annual nominal income will also go up and you will

Starting point is 00:33:35 Therefore, be able to pay back your mortgage with future dollars. While what you see on your bank statement is $10,000 in interest rate payment, it will, because of the effect of inflation, feel like you're only paying 2%, which is the so-called real interest rate. You pay back with future dollars that had lost 8% in value. So that's really why. We call this the real interest rate because that is the actual cost to us. we're sort of getting 8% for free, more or less, as a borrower due to inflation.

Starting point is 00:34:12 And then we just have to pay the actual real interest rate of 2% to the bank. I know there were quite a few numbers to keep track up there, but I really hope that this simplified explanation makes it clear what's the nominal interest rate, what's inflation, and what is the real interest rate. So, Tam, I don't think I can add any extra value beyond what Stigjjj. said. So I'm just going to leave it right there. We really appreciate your question. We have an online course called our intrinsic value course that we're going to give you completely for free. Additionally, we have a filtering and momentum tool, which we call TIP finance. We're going to give

Starting point is 00:34:51 you a year-long subscription to TIP finance completely for free. Leave us a question at asktheinvestors.com. That's ask theinvestors.com. If you're interested in these tools, simply go to our website, the investors podcast.com. And you can see right there in our top level navigation, there's links to TIP Finance and also the TIP Academy where you'd find the intrinsic value course. All right, guys. That was all that Preston and I had for this week's episode of the ambassadors podcast. We see each other again next week. Thanks for listening to TIP. To access the show notes, courses or forums, go to the investorspodcast.com. To get your questions played on the show, go to Ask theinvestors.com. And

Starting point is 00:35:33 win a free subscription to any of our courses on TIP Academy. This show is for entertainment purposes only. Before making investment decisions, consult a professional. This show is copyrighted by the TIP Network. Written permission must be granted before syndication or rebroadcasting.

We Study Billionaires - The Investor’s Podcast Network - TIP250: Lessons from Billionaire Michael Bloomberg (Business Podcast)

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