Category Archives: Business

Talking to fish

Talking to fish

Can you really explain to a fish what it’s like to walk on land? One day on land is worth a thousand years of talking about it, and one day running a business has exactly the same kind of value.

Warren Buffett, author of Berkshire Hathaway Letters to Shareholders

Talking about business is not the same thing as running a business.

Talking uses words which represent concepts of the real world. But it has limitations.

Try explaining to fish how walking on land feel like. The fish can’t understand how walking on land feel like no matter how hard we explain. The fish need to actually walk on land to understand it. Talking has its limitations. It does not change reality, it only changes our perception of reality.

We can fool the people. We can’t fool the nature.

In horse racing, gamblers bet on horses that they think will win the race. Each gambler has their own idea of which horse will likely to win and bet accordingly. No matter how confident the gambler is, he can still lose his life-saving if he bet on the wrong horse. His perception of reality does not change the reality. It is the actual outcome of the race that determines the winner.

In political debate, people bet on their favourite idea and try to convince others the merit of their idea. In a discussion, we are talking to other people. We are mutually changing each other perceptions of reality. The reality does not change. Just like in horse racing, the outcome in the reality could be a different story.

Debate is for addicted gamblers. Mostly, they are fooling other people and themselves. They bet without risking their own money.

As Warren Buffett observed, people are willing to spend thousands of dollars to go to Las Vegas to play games that are guaranteed to lose them money over long term. And they keep coming back. What we can learn from this observation is that this is a world of opportunities to make a lot money.

We are born gamblers.

On the other hands, doing experiment, testing, etc will tell us whether the solution work or does not work. The nature tells us the results. This requires real work.

We need actions to change the reality. That involves risk. Entrepreneurs test idea in the market, not in a meeting.

Wait, am I talking to fish?

Race between tortoise and hare

Value of work

The state of economy is in our mind. The way we think can change the world.

In physics, work is done when a force acts upon an object to cause a displacement.

In other words, work is moving an object over a distance. Everyone is capable of moving objects from one place to another. We can move and combines objects to produce new objects.

This “work” has value in economics.

Adam Smith, 18th-century economist and philosopher and author of The Wealth of Nations, had a radical insight that a nation’s wealth is really the stream of goods and services that it creates.

We can work to produce factory that in turn produces goods and services that lift the living standard of the people. Life becomes easier with the stuff that we produce to make our life easier.

When we work, we are productive. The more we produce, the wealthier we become (assuming we are producing stuff that people actually need and want, else they are waste). Productivity and wealth creation are twins.

People who own the means of production are the wealthiest persons in the world. For example, entrepreneurs like Jeff Bezos, Bill Gates, Steve Jobs created businesses that produce goods and services that people rely on daily to increase their productivity and quality of live.

Wealthy nations are highly productive. People get what they need and want almost all the times. For example, wealthy nations have abundance of food where people are more likely to die of over-eating than to die of starvation.

Zero-sum game

However, we are born with scarcity mindset. We learn since young as a kid that if someone takes away our toy, we no longer can play with the toy. Resources are scarce and limited. There is only so much land on earth.

Scarcity mindset leads us to play the zero-sum game where in order for one to gain, another has to lose. In order to grow our territory, we have to take it away from our neighbours.

In competitive environments, we can see zero-sum games being played everywhere. In a soccer game, no matter how hard each teams train themselves, there can only be one team as a winner in the end. In a status game, it is hierarchical and in order for number three to move to number two, number two has to move out of that slot. One person’s gain is another’s loss. It is not productive.

A compact organization lets all of us spend our time managing the business rather than managing each other.

Warren Buffett, extracted from Tap Dancing to Work: Warren Buffett on Practically Everything, 1966-2012: A Fortune Magazine Book

In economics, the gross domestic product (GDP) of a country can grow even if we are playing the zero-sum game. We can hire one team of people to dig a hole and pay them. And hire another team of people to fill in the hole and pay them. We can repeat these activities indefinitely. Two parties working in opposite direction where the interest are mis-aligned. Nothing is getting produced even though there is work being done by hard working people. We can get stuck in this loop forever due to our scarcity mindset. It produces a tons of waste.

Zero-sum game is counter-productive. You have to work harder every time to keep standing still. We are back to square one each time the game ended. Life does not get better overtime.

People keep playing zero-sum game because, apart from scarcity mindset, it is actually good to watch as a show like the football game. There is always a hero in a zero-sum game, e.g. Lionel Messi, Roger Federer.

Even though any competitive sports games are zero-sum games, they can generate billion dollars worth of economics activities. Zero-sum game is good for entertainment.


Value is subjective. As the saying goes: one man’s meat is another man’s poison. This is actually an opportunity for value creation. What I want to get rid of, might be what you are looking for. If I give the item to you, it is a win-win for both of us.

In economics, we have buyers and sellers. Buyers buy what the sellers sell. Buyers win as they buy the products and services that they want from sellers; sellers win as they also get the profit that they want by selling to buyers. These transactions create value for both parties. And there is no limit to the number of transactions allowed. This means that there is an infinite number of win-win waiting to be materialised.

International trades increase global wealth while at the same time reducing conflicts between trading partners which leads to more harmonious and prosperous environment.

The quality of our mind determine the outcome of our life. When somebody else’s win is also our win, we seek to maximise other people’s win.

When we listen and understand our customers’ need and want, we can satisfy them with the best we have to capture the most value out of it. This leads us to the positive-sum game where our work creates the most value.

Positive-sum game

Currently, there are around 8 billion people on earth and none of them know individually how to make a pencil. It actually takes millions of workers to produce a humble lead wooden pencil.

We need people to mine the mineral: a form of carbon called graphite, another group of people to chop down trees, and another to build factories to process the wood and and the graphite and assemble them, another group of people to ship the end product to shops for end users to buy. (And I miss out a lot of the detail.)

This whole process involves countless of strangers who work within their own specialty through division of labor guided by the market forces to produce goods that benefits the world. The output of one group is the input of another, each creates win-win throughout the chain.

The collaboration among these strangers is a million times more productive than individual workers who try to make the pencil all by themselves. This is the power of positive-sum game. We benefit from contributions of all participants in a positive-sum game. The whole is greater than the sum of its parts where the magic happens. Wealth is created out of thin air through human action: work that creates win-win.

None of the participants know how to make a pencil, but as a whole, they know. This is true for all other products like cell phone, computer, car, airplane and spaceship.

Example of positive-sum games in the real world:

  • China’s lifting of more than 800 million people out of extreme poverty since the late 1970s has been the largest global reduction in inequality in modern history.
  • Singapore went from Third World country to become First World country within one generation under the thoughtful policies from its disciplined leaders.
  • Stock markets is the breeding grounds for world changing companies that enrich the entrepreneurs, investors, customers and the society as a whole. It makes everyone richer.

Investors and entrepreneurs play the positive-sum game. Where people see problems, they see opportunities.

Everyone need to be an entrepreneur.

Positive-sum game grows the economic pie. The value is accumulated from all the work done. Life will get easier and easier the longer we play the positive-sum game.

Positive-sum game invents machine that extends muscle and computer that extends mind that lead to abundance.

Positive-sum game creates a perpetual bull market that leads to prosperity at grand scale.

Positive-sum game unleashes human full potential. Human best day lies ahead.

Final thought

Armed with better knowledge, we can judge how much value (or waste) we produce every day.

Zero-sum game has low horsepower with low output, positive-sum game gives maximum horsepower with maximum output.

Zero-sum game is hard and counter-productive. Positive-sum game is easier and productive.

Zero-sum game causes anxiety, positive-sum game is exciting.

Zero-sum game produces clear individual winner. Positive-sum game, however, does not have clear winner as everyone is a winner. Actually the whole group is a winner. Individual productivity measurement is misleading.

Individual is helpless, as a group we build spaceship.

Individual shows how smart he or she is. This is zero-sum. Supporting others is positive-sum and is the bigger game. Kindness has more value in a economics system that has billion of people.

It is harder to be kind than to be clever.

Jeff Bezos, as documented in The Everything Store: Jeff Bezos and the Age of Amazon

Make good deals for yourself and others. A group of givers make the world richer.

Positive-sum game is value creation game. Every effort counts. It is the infinite game and the ultimate win-win game.

Greater wealth is in the positive-sum game.

Do the right basic things can release a tons of value to the world.

Zero-sum game and positive-sum game are like the race between the hare and the tortoise. The hare is fast but loses to the tortoise that is slow and steady. It is pointless to go fast when the direction is wrong. We can get to our goal even if we are slow as long as we are making positive progress.

What we need is a switch. A switch to a better mindset. One mind switch for a better world.

It will take time to switch from zero-sum mindset to positive-sum mindset. Till then, there is a huge upside to the economy. Are you ready?

How to Make a Million Slowly

Most millionaires happen to be business owners.

John begins his career as an employee who also runs a small side business as a hobby. Over a period of less than two decades (16 years), his hobby side business is worth more than one million GBP.

It turns out that the business that John is running has higher success rate than any other businesses. In fact, people rarely lose money in it over the long term, typically 5 to 10 years and beyond.

It does not consume too much of John’s time and energy. It is almost a pleasure to run it. It does not even require large start-up capital: only GBP 7000 maximum per year. This means that the business that John runs is highly accessible and affordable to anyone of us.

That profitable business is called stock investment.

$600 per Month over 16 Years Can Turn into Miracle

What John had achieved is incredible. Investing $7000 per year is equivalent to around $600 per month.

Investing $600 per month consistently over 16 years to generate a net worth of more than one million. That is slightly more than 20 % return per annum. To keep thing in perspective, the total out-of-pocket capital amounts to a total of $115200.

If you start investing at 30 and achieve the same result as John investing $600 per month, you could be a millionaire by 46. If you repeat this process for another 16 years, you could be a multi-millionaire.

How to Make a Million Slowly

John follows certain criteria before making any investments.

  • Low PE, High Yield: He prefers single digit PE companies that pay generous dividends
  • Undiscovered, Unloved, Undervalued: These are the magical words that describe the type of companies that attract John’s attention
  • The Beauty of Small: John invests in small companies which have higher growth potential than larger more established companies
  • Reinvestment of dividends: He leverages on the compounding machine that does all the hard work for him
  • Friendly and frugal management: He likes to attend AGM to get the feel of CEOs whether they are honest and reliable with significant stakes in the companies

There is nothing extraordinary in the criteria list. That is exactly what make it so extraordinary. It means that you don’t need to be able to understand quantum physics in order to make a million.

John is a typical value investor who beliefs that value will prevail eventually.

You can read more about John’s investment principles from his book How to Make a Million – Slowly: My Guiding Principles from a Lifetime of Successful Investing (Financial Times) where he details all the investments he made including the many successes and especially the failures that he encountered during the process. He will show you how to make a million slowly.

Note: The book does not seem to be popular among the readers. This could mean good news and opportunities for those who actually read it.

Final Thought

If you dream of becoming a millionaire by starting a profitable business, stock investment is probably one of the safest and best options. You could run a one-man investment firm where you are the fund manager allocating your own money (no borrowing is necessary) to where it is the most productive to maximising its returns. $600 per month is a good starting point.

In a way, it is an advantage to not have a large capital to start because you could go places where most big investors can’t. That means more opportunities. The cost of failure is also lower.

However, it takes time to see results. But who will complain being a millionaire running a small part-time side business that cost so little?

Most millionaires are business owners. Do you want to own one too?