You have to be able to see around
the corners to see things coming.
I have been reasonably fortunate.
I have built 100 million and owned $100
million companies and five plus in five
different industries about 19,
10 million plus companies now.
And the way that I have done that is by
seeing what's coming and putting myself
ahead of the curve.
And I'd like to share with you some
of the ways that you can do that too.
[Inaudible]
I have a thousand X matrix.
I think that if you can
10 X through innovation,
10 X through optimization
and 10 X through leverage,
then you can thousand X.
I'm pretty sure if you multiply
those out it comes out to like 1,012.
So in each of the ways
that I like to do it,
the two I'm going to
talk with you about too,
cause I don't have enough time
to talk about them all today.
But one is first principles
reasoning, which comes from physics.
And the second is inversion
inversion thinking.
And if you use these tools,
you will never be blindsided
because you will always be ready.
You'll always be ahead and you'll always
be prepared for what's coming next.
But the two that I want to talk
about are first principles,
reasoning and inversion.
So these are some smart folks.
It's Richard Feldman and
Elon Musk and Aristotle,
Euclid Edison, and Nikolai Tesla.
And all of those people used first
principles reasoning to have the massive
innovations that they had. Ellen says,
you boil things down to their fundamental
truths and reason up from there.
Because most of our lives,
we reason by analogy copying what other
people do with only slight variations.
If you're just copying what other
people do, if you're me too,
if you're only making slight
improvements, incremental improvements,
it's pretty dead on hard to
a hundred X or thousand X.
But these guys don't do it. They use a
three step process. The very first one,
identify and define your
current assumptions.
You have assumptions that you don't
even know you have. I do all the time.
I am stunned at how stupid
I am constantly. It's
amazing, right? It's like,
Oh sh I was thinking that. So for Jerry,
Jerry says, I need a fund to acquire
luxury real estate properties.
Chris says,
I've got a $13 and 50 cent
cost to create a dugout mug.
These really cool mugs,
which I looked online and I think
they sell for about 50 bucks.
Then break down the problem
into its fundamental principles.
How do we do that?
Ilan says it's important to view
knowledge as a semantic tree.
Be sure you understand the
fundamental principles,
the trunk and the big branches before
you get to the leaves or the details or
there's nothing for those
things to hang onto.
So you have to go down to
the trunk of the thing first.
So for Jerry, back over to Jerry,
is ownership actually required to achieve
a core objective in your Lux homes
business? Yeah. No.
Then why are you raising a fund? Funds
have liability. Funds are expensive.
Funds take time, right? Something to think
about. Right. Okay. And I don't know,
I'm not presuming to know. Right.
I'm just suggesting and yeah,
or wear something different.
We'll talk about that in a second.
Is a fund required to own. And for Chris,
what are the material
components of a dugout mug?
What's the commoditized cost of the wood,
of the burn of the labor?
Does it have to be $13 and 50
cents maybe? No, maybe not.
And then think about
creating new solutions.
So for Ellen it was let's do cheaper,
higher capacity batteries, batteries.
At the time he was doing this,
we're selling at $600 per kilowatt hour.
He said that the commoditized
cost on the London,
London metals exchange for the components
to make a battery were about 80 bucks.
And his fortune is now heavily tied
up in being a battery innovator,
not a car out of it. Innovator space X.
What if we just reuse those
multimillion dollar rockets? Huh? Right.
Pretty basic assumption when
you think about it. But NASA,
literally rocket scientists, they
didn't think of that, but he did.
And then PayPal, Hey, what if
you can make payments by email?
Wouldn't that be cool? Right.
Big, big, big core assumptions.
So for Jerry, what about finding
an existing fund partner?
Somebody that's already got a fund to
save time costs and the liability of a
fund or a bank partner who already has
Oreos in the Lux market to partner with
them and turn dead inventory into
cashflow or go to a broker partner.
There's lots of things that you
can do without raising money.
Lots of things you can do
without raising money. Right?
And we did that. We wanted to do a fund,
we wanted to do a reggae fund for
a real estate company we have.
And so I went to Greg Harlene at horizon
trust who has thousands and thousands
of self directed IRA people. And I said,
Hey, how about if we do a fun together?
We put together a fund and then he put
$17 million of people's money into it in
about a week, in about a
week. I have no liability,
I have no lawyers to talk to, I
have no customers to deal with.
And it didn't take but a week
that's thinking outside the box.
Right. So you can do that too.
And for Chris [inaudible], Chris,
what about RA's not from bats? It's
really awesome. And I love the story,
but maybe, maybe there's a,
and it could be that this is the premium
model cause it's from an actual bat,
but maybe you go to the Philippines
or Vietnam or China and you say,
I just need to have wood that's shaped
like this and looks like this from the
start. I don't need it to be from a bat.
What if we just started with this
in mind? Could we get the cost down?
And if we had the labor there, could we
get the cost down maybe to a dollar 35?
Cause I bet you can. I bet you can
get it for sure. To two 50. Right?
Your margin instantly is up 80 90%. Okay.
The second thing is inversion
thinking. So think about the,
and plan for the exact opposite
of what you want to happen.
This was from a mathematician in
Germany. Carl Jacoby, who said,
Mon mus, emitter, OU McCarren. Don't
know if that's right or not. That's,
that's like when I speak Spanish,
you know, Hola, Como estas.
But think about the opposite.
So Charlie Munger says it's remarkable
how much longterm advantage people like
us have just by trying to
be consistently not stupid,
instead of trying to be very intelligent.
When you talk about people
who are truly wealthy,
their goal isn't typically to make money.
It's not to lose the money they have,
it's capital preservation.
He also said, invert,
turn a situation upside
down. Look at it backwards.
What happens if all our plans go wrong?
Tell me where I'm going to
die so I don't go there.
Pretty cool. So there's
three steps for it.
What do you want to happen for me in a
mail? Have a direct mail business. Yes,
you can still make
money doing direct mail.
We send about a million pieces of direct
mail a month. Got it for 26 years now.
So we want to get more customers
for the direct mail business.
What's the opposite of what I want? Well,
the opposite of what I want is
how can I prevent the business,
prevent the business from
getting new customers?
You will be surprised if you don't mail.
You can't get customers when
after about four months. I don't.
I'm off the org chart
and every single company,
that's how I managed to have a good life.
I don't want to work in any company.
I like to advise strategically and invest,
right? So about four or five months,
I'm watching the revenues decline on this
male business and I call up my CFO and
I say, Hey I, what's going on you know,
competition and, and all this
other stuff. And so I said, okay,
send me the mail records. I
want to see the actual receipts.
They didn't mail for
four months. You know,
why do you know what the biggest
expense of a male business is?
Printing and postage. If you don't
mail, you can save that money.
Pretty good, huh? So profits were
crazy high. I was like, gosh,
we're making a lot less.
I mean we're, we're,
we're generating a lot less than
revenue, but profits are amazing, right?
They didn't fricking mail.
So how can we prevent that?
Step three is,
how about if we just have a calendar
and we have somebody who's actually
accountable for that?
We have multiple people
who are responsible and we
have a calendar because we
didn't have one before, which
is kind of idiotic, right?
That's inversion thinking.
So 10 X and 10,000 and a thousand
X, if you like, through innovation,
through first principles,
reasoning, and inversion. Thinking.
