Miscellaneous Briefs

Discovering Warren Buffet’s Secret

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During my trip to South Africa and Australia last year, my business partner Bill Bonner and I had a conversation that should interest you. For those of you who don’t know, Bill and I worked together to found Agora publishing.

We were speaking about our company’s future. Right now, Agora is a $400-plus million publishing business with high profitability and good growth. By any conventional standards, it is a great business. But Bill is not satisfied. His goal is to make Agora a business that will last a hundred years. Very few businesses are able to do that.

To accomplish Bill’s goal, Agora will have to develop what Warren Buffet calls a “long-term, durable competitive advantage.”

Coca-Cola is a perfect example of what I’m talking about. Coca-Cola has been selling the same product since 1892. It spent money inventing its core product over one hundred years ago. Today, it spends very little money on research and development. It also has low manufacturing costs, since the machinery required to make Coke rarely needs updating.

These factors give Coca-Cola a big, long-term advantage. They can devote all the money they don’t spend on research, development, and manufacturing to marketing. That is how Coca-Cola stays way ahead of its competition.

This got me thinking about investing. Coca-Cola is one of the companies that Warren Buffet invested in many years ago. After losing money by investing in some speculative opportunities, Buffett realized he would be much better off investing in businesses that were more established and had distinct competitive advantages—businesses like Coca-Cola, Kraft Foods, and American Express. Berkshire Hathaway, his holding company, owns these kinds of companies. He buys them and holds them. If their share prices drop, he doesn’t sell them. He buys more shares. His goal is not year-by-year profits, but owning more and more shares of great companies.

This strategy is very different from what most professional investors use. Yet, it works. In fact, it works very well. Everyone acknowledges that Buffet is the most successful investor in history.

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Miscellaneous Briefs

Three Brains

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We have three brains: the neocortical, the limbic, and the reptilian. As a marketer, it is useful to understand the functions of each.

The reptilian brain is the oldest and simplest of the three. It is responsible for all of our survival instincts, including the “freeze, fight, or flight” response and the sexual impulse. (Any marketing approach that touches on the reptilian brain will evoke a strong reaction.)

The limbic brain is the center of our emotional intelligence. It guides us in a hundred decisions every day — from how far to stand when talking to someone to whether we should buy a new pair of shoes.

The neocortical — the newest part of the brain in terms of evolution — has nothing to do with instincts, emotions, or feelings. It is responsible for logical thinking. It is where we process abstract thoughts, words, and symbols.

Thus, if you appeal to the neocortical with your marketing, don’t expect much. But when selling products related to sex or survival, it stands to reason that you should excite the reptilian brain. And when selling other products, go for the limbic brain.

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Miscellaneous Essays

How a $10 Bill Made Me Richer Than All My Friends

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Of the hundreds of wealth-building strategies I have tried over the years, the very best one was also the simplest. It is this: make sure you get a little bit richer every day.This thought occurred to me almost thirty years ago. I had recently decided to become rich, and that decision had me reading and thinking about wealth building day and night.

I was bathing my brain in the elixir of clever ideas. It was very stimulating. I had daily fantasies of getting rich in all sorts of fancy ways. But deep down inside, I knew that these complicated strategies were not for me. When it came to making money, I was extremely risk averse. In the race to a multimillion-dollar retirement, I was a tortoise not a hare.

At the time, I had a net worth of zero and an annual salary of $35,000 a year. With three small children and my wife in college, our expenses were gobbling up every nickel of my after-tax income. And so my first wealth-building goal was small: I would get richer by just $10 a day.

I knew that I would eventually raise the ante, but I wondered, “How much money would I acquire in, say, forty years by just putting an extra $10 aside every day in a bank account earning 5% a year?”

I did the numbers and was happy with the answer: almost half-a-million dollars.

My total capital invested would be $149,650. The simple interest would total $156,950, and the compounded interest would amount to $182,061, for a total of $488,661.

Then I wondered, “What would happen if I put away $15 a day?” That came to $719,604.

And then I asked, “What would my retirement fund grow to at 8%?” That came to $1,620,592!

You can imagine my excitement. And so I made this wealth-building commandment number one: get a little bit richer every day.

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Miscellaneous Briefs

The Wealth Value of Entrepreneurs

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George Gilder says that the great entrepreneur, like the great artist or the great scientist, creates far more than he consumes.

This is one of those statements you believe or reject depending on whether you identify with the descriptor. As an entrepreneur, I want to believe that it is true. Certainly the man who starts a new business creates jobs and provides education for his employees. And in most cases, his business interacts with other businesses, propping up the economy. But I’m not sure that all entrepreneurs create more than they consume. Some, who develop shoddy businesses that are essentially thieving enterprises, can’t be contributing positively to the common good.

That said, there is a certain sense in it. Athletes and bankers do not contribute more than they consume. Neither do politicians. Teachers do. Who else?

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Miscellaneous Essays

Motivation

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I was once characterized by a book reviewer as a “motivational writer.” Apparently he felt that this moniker debased me. It didn’t.

I am very happy that my writing sometimes has the effect of motivating people. I find it hard to understand what is wrong with that. If he meant to imply that my work doesn’t have substance he should have said so. But I don’t think he dared say that because the book he was reviewing was about building businesses — and that is something I know a great deal more about than the average reader of that book, including him.

Still, a lot of folks have the idea that motivating people is somehow less legitimate than, say, just providing them with information. The thinking seems to go something like this: “Don’t try to excite me. Don’t try to get me moving. Just tell me the facts.”

But knowing the facts is only 20 percent of success. Testing the facts by putting them into action is 80 percent.

I can’t say for sure when motivation started creeping into my writing. But it was at least 20 years ago — well before I started writing books about marketing and business. I think it began when I became a consultant and realized that I couldn’t force my clients to execute my ideas. If I wanted them to follow my suggestions, I would have to take the extra step of motivating them to do it.

When I make presentations to a group, I try to motivate my audience to take the action I want them to take by using the persuasive techniques that I teach marketers to use in selling products. For one thing, I express the value of my ideas in terms of how the people I’m speaking to (not me or anyone else) will benefit from them.

I also sell one idea at a time. I have learned that if I try to do more, they (and I) will come away with nothing.

Whenever possible, I present my ideas through stories — because stories, more than any other information-sharing technique, have the power to inspire.

And I provide proof to support the claims I make. Tangible, relevant, and impressive proof.

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Miscellaneous Briefs

Big Ideas and Useful Emotions

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A “big idea” in marketing will drive the prospect toward a foregone conclusion by stimulating a useful emotion. By useful, I mean useful to the marketer.
A useful emotion is one that makes the prospect want the product.
Many copywriters miss this point.
They feel that evoking any strong emotion in the lead is their job. But if that emotion is not conducive to selling the product, they’ve made their job more difficult.

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