The Opposable Mind: How Successful Leaders Win Through Integrative Thinking; John Dewey on How to Find Your Calling, the Key to a Fulfilling Vocation, and Why Diverse Interests Are Essential for Excellence in Any Field – Bamboo Innovator Daily: 20 Oct (Tues)

Life

  • John Dewey on How to Find Your Calling, the Key to a Fulfilling Vocation, and Why Diverse Interests Are Essential for Excellence in Any Field: BP
  • Manny Stul takes out Australian EY Entrepreneur Of The Year; Stul says the secret to Moose Enterprise’s success is “innovation with integrity”. TheAge
  • Dilbert creator Scott Adams presents his 10 favorite comics of all time: BI
  • Watch A Clip From Pixar’s Super Team of Hindu Deities: WSJ
  • The histories of Judaism and Christianity suggest that words alone won’t pacify Islam. Its transformation will be long and bloody. WSJ
  • Richard Branson explains his 10 rules for being a great leader: BI

Books

  • The Opposable Mind: How Successful Leaders Win Through Integrative Thinking: Amazon

Read more of this post

What the Best Do Better Than Everyone Else – Asian Wide-Moat Innovators Surpassing Stall Points in Scaling New Heights

“Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”
BAMBOO LETTER UPDATE | October 19, 2015
Bamboo Innovator Insight (Issue 105)

  • The weekly insight is a teaser into the opportunities – and pitfalls! – in the Asian capital jungles.
  • Get The Moat Report Asia – a monthly in-depth presentation report of around 30-40 pages covering the business model of the company, why it has a wide moat and why the moat may continue to widen, a special section on “Inside the Leader’s Mind” to understand their thinking process in building up the business, the context – why now (certain corporate or industry events or groundbreaking news), valuations (why it can compound 2-3x in the next 5 years), potential risks and how it is part of the systematic process in the Bamboo Innovator Index of 200+ companies out of 15,000+ in the Asia ex-Japan universe.
  • Our paid Members from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.
Dear Friends,

What the Best Do Better Than Everyone Else – Asian Wide-Moat Innovators Surpassing Stall Points in Scaling New Heights

Training CampCan a small guy with a big heart succeed against all odds?

In the masterful book “Training Camp: What the Best Do Better Than Everyone Else” that was based on interviews with top professionals from a wide variety of fields, author Jon Gordon tells about the tale of Martin Jones, an undrafted rookie trying to make it in the NFL. After spraining his ankle in the preseason, Martin thinks his dream is lost, until he meets a very special coach who shares life-changing lessons that keep his dream alive as he strives for excellence and brings out the best in others every day.

The story of Martin bears some resemblance to the hidden fear and doubt that blighted many SME business owners whom we have interacted over the years. Despite attaining a certain level of success and personal wealth, their hearts are ever more unsettled as time passes, because they have hit a stall point in their core business model and they are unable to unlock the valuation potential of their business. In other words, they failed the acid test that value investors should employ to gain conviction in sizing up the investment bet to outperform in times of volatility and uncertainty, a seemingly simple but profound question: “Does the business get easier as it gets bigger?”

We like to share an article “Surpassing Stall Points in Scaling New Heights” below that we wrote in May 2011 in which we kicked ourselves and asked the tough question: “Is there a “natural limit” or “stall point” in the size of the business by industry and country as the entrepreneur attempts to scale up before he or she faces the challenge of their corporate lives to overcome the start of a secular reversal in fortune?” We had used the story of Ray Kroc to highlight how he and his team scaled McDonald’s with tenacity amidst the thicket of resource-rich incumbents, aggressive competitors under the wings of corporate giants, and copycats.

It has been four years since the article was written and we like to update the question for value investors to address the power of disruption lashing SME business owners and even giants who had hit the stall point in the growth of their core business model. Even seemingly stable wide-moat companies are not spared: McDonald’s is upended by fast casual disruptors such as Chipotle Mexican Grill; big beer firms are forced to merge with consumers switching to craft beer with innovative styles; Coca-Cola challenged by the secular decline of soda consumption as consumer taste change toward healthy and natural beverages. The decay in valuation once accorded to these incumbents and the narrowing of the economic moat had accelerated, posing an incredible dilemma for value investors:

“Should value investors hunt for what seemed to be “bargains” in disrupted business models hitting stall points? Or should they pivot and switch to buying the richly-valued disruptors instead?”

The icon of disruption is epitomized by Travis Kalanick, Uber’s co-founder, who entered and thrived in city after city, despite the opposition of giant taxi companies, lawsuits, strikes, consumer privacy woes, and other controversies from some of its drivers, who are private contractors rather than full-time employees. The question on the minds of value investors is undoubtedly: how do you value a company like Uber, as was asked and updated in Oct 2015 by NYU’s finance professor Aswath Damodaran. Uber was last valued at over $50bn from its last bond term sheet in Jun 2015 revealing $470m in operating losses on $415m in revenue. Even the disruptor Uber was not spared from being disrupted itself – by Google, who could end up undercutting Uber’s revenue by offering a service for free in a free app called “Free Ride” using its Google autonomous cars. Some venture capitalists have called the disruption risk of Google’s Free Ride to be overblown because Google was only trying a carpooling service internally for employees.

Asian Wide-Moat Innovator (Red) vs S&P 500 Index – Stock Price Performance, 1997-2015

WMI

The business of carpooling reminded us of an Asian wide-moat innovator in our Index who is the largest developer and operator of time-rental parking spaces. This innovator had updated the antiquated parking lot business and pioneered 24-hour automated time-rental parking services and became the most well-known brand of unmanned pay-by-the-hour parking lots, pulling itself ahead of its competitors who range from large real estate operators to sole proprietors. In terms of vehicle units managed, this innovator is over twice the size of rivals. The company disrupted itself by starting a car sharing business in June 2009, which was unprofitable for quite due to heavy up-front investment, but it turned profitable in FY14 and becomes an earnings driver to generate ROE of over 18% and this highly profitable world-class innovator is trading at EV/EBITDA 9x. Contrasting with Uber’s $470m in operating losses, this Asian innovator has created possibly the only profitable car-sharing business in the world, owning 60% of all vehicles used for car sharing services in its country.

The second generation leader of this family business has also introduced an innovative system that made it possible for the parking lot operator to…

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Read more at The Moat Report Asia

Importantly, as a result of striving for excellence every day, the low-profile family leaders are able to surpass its stall points in its business model to scale new heights. It is the task of value investors to dive through the rumpus and bustle of cabal in poignantly troubled times in a vigilant watch for Bamboo Innovators devoted in their intensive task of building a wide-moat business.

Surpassing Stall Points in Scaling New Heights

BY KEE Koon Boon, 9 May 2011

2011 marks the 50th “anniversary” since Ray Kroc, 59 years old then, bought out McDonald’s for US$2.7 million from the McDonald brothers who were the original pioneers of the fast food restaurant “system”– an expensive valuation then and with no secret recipe for hamburgers, no patents, and no technological breakthroughs. Since fully taking charge of McDonald’s destiny, Kroc, the visionary leader, enlisted the help of a team with Fred Turner as the execution extraordinaire, June Martino as the human resource specialist, and Harry Sonnenborne as the numbers guy who advised him that real estate was the key to a franchise’s financial success.

By 1965, the year when McDonald’s was listed – interestingly, at the same time as Singapore’s independence – the team had scaled the business nationwide with tenacity to more than 700 restaurants amidst the thicket of resource-rich incumbents, aggressive competitors under the wings of corporate giants, and copycats. McDonald’s now has more than 32,000 restaurants worldwide in 117 countries and two-thirds of its sales are now contributed from outside of America. More than 75 percent of McDonald’s restaurants worldwide are owned and operated by independent local men and women. McDonald’s is also one of the largest property companies with US$17.6 billion in self-owned “McProperty” real estate retail assets. The company’s market capitalization has since multiplied 140 times in 45 years to US$88 billion currently.

Why McDonald’s, easily one of the most recognizable brand name in the world, is not a core buy-and-hold stock in the portfolio of Warren Buffett, the world’s greatest value investor, is probably one of the greatest underexplored enigmas in value investing. The non-investment by Buffett’s Berkshire Hathaway is all the more ironic given that McDonald’s is the biggest buyer of Coke – and the Golden Arches was also listed in the same year as Berkshire. Having multiplied his returns by 10-folds after investing in Coca-Cola in a big way in 1988, the ubiquitous beverage brand is arguably the business model that most define Buffett’s philosophy in value investing.

When asked whether he would buy McDonald’s and go away for twenty years, Buffett gave an intriguing reply in a lecture at the Florida School of Business back in October 1998. “It is a tougher business over time“, Buffett said, “People don’t want to be eating – exception to the kids when they are giving away Beanie Babies or something – at McDonald’s every day. If people drink five Cokes a day, they probably will drink five of them tomorrow… I like the products that stand alone absent price promotions or appeals although you can build a very good business based on that.”

Buffett’s Berkshire Hathaway did purchase McDonald’s in 1995/6 when it was probably around US$17 to 20 billion, but he exited in 1997/8 at around US$26 to 30 billion. Although McDonald’s grew to US$50 billion around a year later, it started its precipitous trend to fall to US$13 billion by February 2002 as it posts its first ever quarterly loss. Singapore’s dynamic entrepreneur Robert Kwan, who had a small wholesale toy store, was earlier than Buffett, opening with sharp foresight the first McDonald’s in Singapore in 1979 at Liat Towers, although he sold off his share in the business in 2003. Mr. Kwan carried his experience and insights to rejuvenate the Singapore Zoo, Bird Park and Night Safari, bringing them back into the black in his role as the executive chairman of Wildlife Reserves Singapore in 2003, later stepping down in 2007.

“A tougher business over time”, an all-important axiom for entrepreneurs and value investors.

Coca-Cola itself hit its peak at around US$200 billion in market cap in Jul 1998 before dwindling to US$90 billion by 2005 and recovering to US$165 billion presently. Starbucks, in its 40th “anniversary” this year, poured its heart to scale one cup at a time after Howard Schultz bought over the six Starbucks shops for US$4 million in 1987 to reach US$28 billion in 2006 before hitting the roadblock to tumble to US$7 billion by end 2008 and is now back up again to US$38 billion.

Most businesses are not so fortunate to be able to recover. In 1962, the year IBM turned 50, Tom Watson Jr. – IBM’s chairman and the son of its founder – commented that of the top 25 industrial corporations in the United States in 1900, only two remained on that list by 1961. This year in 2011, as IBM celebrated its centennial, its current CEO Sam Palmisano carried on Watson’s insight and said that of the top 25 companies on the Fortune 500 at the time of Watson’s lecture, only four remained in 2010.

Is there a “natural limit” or “stall point” in the size of the business by industry and country as the entrepreneur attempts to scale up before he or she faces the challenge of their corporate lives to overcome the start of a secular reversal in fortune? After all, if an elephant were larger by a mere 15 percent, its body weight would require such bone and muscle strength in its legs that its weight would make it simply too heavy for the muscles to lift, and the beast, unable to move, would starve.

Yet, elephants can dance, as what Lou Gertsner said in describing how he led IBM to overcome a near-death experience in the early 1990s when he took over as CEO in April 1993. IBM then was at US$10 billion after falling from its 1987 peak at US$50 billion. By reducing the Big Blue’s dependency in mainframe manufacturing, which was supplanted by personal computers and servers, and building the global platform for services to provide higher value to customers, a core business which today accounts for over 40 percent of its overall profits, Lou had multiplied the market cap 10-folds to US$100 billion by the time he passed over the leadership baton in 2002 to Sam Palmisano. Palmisano quadrupled earnings and created another US$120 billion in shareholders’ value in 10 years as he positioned IBM in software and analytics, an area which now contribute more profits than services do.

Understanding the dynamics of this stall point can illuminate important lessons for both the Asian entrepreneur trying to scale his or her enterprise to a greater height and the diligent value investor wanting to generate sustainable compounding returns. In other words, value investing is about investing in the outstanding entrepreneur building the durable economic moat which means the business gets easier, not harder, as it gets bigger.

One key to McDonald’s success is what…

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Read more at The Moat Report Asia

Warm regards,

KB

The Moat Report Asia

www.moatreport.com

A new monthly issue of The Moat Report Asia is now available!

Access the in-depth idea presentation:

http://www.moatreport.com/members/

In the month of October, we investigate a listed Asian family business founded in 1975 that is now a leader in the foodservice industry with multiple brand format across several categories to capture a bigger chunk of the dining-out market where >12% of its local domestic population dine at one of their outlets every week, led by their flagship brand which dominates the market with a share of 57% which is 3x the value share of its next largest peer. The under-penetrated domestic market, where foodservice spending per capita is one of the lowest in Asia, paves the way for acceleration and long-term structural growth in outlet expansion, especially in the provincial areas where margins are potentially higher, as urbanization rise. Such market dominance and brand equity in generating consistent cashflow is underappreciated and deserves valuation premium.

We believe that the outstanding leadership provided by the inspiring visionary founder and his management esprit de corps team which has out-trumped the foreign and local rivals to dominate its domestic market, deserves a valuation premium. Most would have been contented to rest on their laurels but Mr. C has international ambitions, the “Maker’s” mentality to create value, by taking calculated risks to expand smartly with its own brands in selected countries and to acquire already-popular brands and work to improve their strength. The management has also fostered a powerful performance-based empowerment corporate culture and positive work environment where everyone has a sense of pride and emotional commitment in sustainably growing the company, which we believe is rare for an Asian company and is the underappreciated source of its wide-moat it enjoys in executing the scaling of the multi-brands, the product innovation, the support for franchise partners and identifying and integrating synergistic M&A targets. In essence, the company provides resilient growth with visible long run-way and upside surprise from outstanding execution track record in M&As.

What the most successful people understand about creative work; Best-selling author Elizabeth Gilbert shares her ideas about the importance of constantly moving between extremes for creative success – Bamboo Innovator Daily: 19 Oct (Mon)

Life

  • What the most successful people understand about creative work; Best-selling author Elizabeth Gilbert shares her ideas about the importance of constantly moving between extremes for creative success. FastCo
  • Physicist Lisa Randall on the Sublime, Our Human Quest for Meaning, and the Crucial Differences Between How Art, Science, and Religion Explain the Universe: BP
  • This Is The #1 Mistake Parents Make When Arguing With Kids: barker
  • How to train your brain by thinking like an expert: Wired
  • How to Work More Efficiently — The Eisenhower Matrix: Farnam
  • Marijn Dekkers, Bayer: From GE to Germany; Running a €90bn life sciences group without burning out: FT

Books

  • Avoiding Disaster: How to Keep Your Business Going When Catastrophe Strike: Amazon
  • 5 Gears: How to Be Present and Productive When There Is Never Enough Time: Amazon

Read more of this post

Why this VC who sold his last company for $3 billion asks this unusual interview question: “What did you learn from your mom?” “Basically I’m testing them to see, ‘How human are you ready to be with me?’ – Bamboo Innovator Daily: 18 Oct (Sun)

Life

  • Why this VC who sold his last company for $3 billion asks this unusual interview question: “What did you learn from your mom?” “Basically I’m testing them to see, ‘How human are you ready to be with me?’”: BI
  • Lars Dalgaard: Build Trust by Daring to Show That You’re Human: NYT
  • ‘What quality do you look for in a spouse? Do you look for beauty? Do you look for brains? Do you look for character? Do you look for honesty? Do you look for humor?’ No, no no,” added Buffett. “You want to marry the last-look for someone with low expectations”: Fortune
  • Why this CEO thinks a 6-figure salary isn’t always worth your time; If you only look at financial compensation, you might miss out on doing something you truly love: Fortune
  • Why What You Learned in Preschool Is Crucial at Work: NYT
  • Office Shows the Person: The assumption of authority brings out the leader’s inner world. It reveals whether the leader has undergone a process of honest self-discovery that allows for the productive application of power. Forbes
  • Girl, 3, takes care of bedridden mother in hospital: AsiaOne
  • Worry less, live more: Star
  • Why What You Learned in Preschool Is Crucial at Work: NYT

Books

  • Word Hero: A Fiendishly Clever Guide to Crafting the Lines that Get Laughs, Go Viral, and Live Forever : Amazon
  • Confessions of the Pricing Man: How Price Affects Everything : Amazon
  • Power Pricing: How Managing Price Transforms the Bottom Line : amazon
  • Manage for Profit, Not for Market Share: A Guide to Greater Profits in Highly Contested Markets: Amazon
  • Anxious: Using the Brain to Understand and Treat Fear and Anxiety: Amazon

Read more of this post

The Best Leaders Are Constant Learners; Hard Work Makes Children, and Families, Stronger; Think Like an Author, Not an Owner; Trailblazing Astronomer Vera Rubin on Obsessiveness, Minimizing Obstacles, and How the Thrill of Accidental Discovery Redeems the Terror of Uncertainty – Bamboo Innovator Daily: 15-17 Oct (Thurs-Sat)

Life

  • Hard Work Makes Children, and Families, Stronger: NYT
  • The Best Leaders Are Constant Learners: HBR
  • Think Like an Author, Not an Owner; Oswald’s story teaches us that what is most valuable in an economy is not what authors make, but their ability to make it. The executives at Universal tried to extort Disney and Iwerks by holding one of their creations hostage. But this was a naïve move. HBR
  • Trailblazing Astronomer Vera Rubin on Obsessiveness, Minimizing Obstacles, and How the Thrill of Accidental Discovery Redeems the Terror of Uncertainty; Why all creative endeavor is a matter of “getting hung up on little interesting things.” BP
  • Nietzsche on the Journey of Becoming and What It Means to Be a Free Spirit; “.become master over yourself, master of your own good qualities. acquire power over your aye and no and learn to hold and withhold them in accordance with your higher aims: BP
  • The Top Ten Resilient Animals on Earth: KM
  • What They Don’t Teach You in Business School: AWCS
  • Head to head: Michelangelo and Raphael; Leibniz and Newton; Constable and Turner. Does every creative genius need a bitter rival?: Aeon
  • The Innovative Mindset Your Company Can’t Afford to Lose: HBR
  • How to Turn a Bad Day Around: HBR
  • Be Your Own Best Advocate: HBR
  • The Best Data Scientists Know How to Tell Stories: HBR
  • A Simple Formula for Changing Our Behavior: HBR
  • The fascinating science behind your tastes and preferences: qz
  • Is necessity really the mother of invention? 14 speakers at TED@IBM challenge this adage: TED
  • You’re a Great Man, Charles Schulz: The soulful wit of Schulz’s writing is framed by his spare art—blanks left for the eye and brain to fill. WSJ
  • Success depends on succession: KH
  • The billionaire founder of Sam Adams shares his top 4 productivity tips: BI
  • A worthy journey to rethink how, what, where and when we learn: TODAY
  • Education ‘needs rethink to focus on individual’; “Kids want to grow into vocations, professions and careers that can allow them to protect the ones they love, to walk through fire to save others, to cure the sick, to build cars, to fly to the moon, to understand Mother Nature … the higher education system must help people uncover and pursue their passions, and chase their respective rainbows.”: TODAY
  • ‘This is what I was put on earth to do’: Elizabeth Holmes and the importance of passion: WaPo
  • How Injustice Affects Decision-making: K@W
  • The Social-Network Illusion That Tricks Your Mind; Network scientists have discovered how social networks can create the illusion that something is common when it is actually rare. TR
  • VW’s Problem Is Bad Management, Not Rogue Engineers: HBR
  • Professor Dr Robot QC: Once regarded as safe havens, the professions are now in the eye of the storm: Economist
  • Reality cheque: Angus Deaton wins the Nobel prize for bringing economics back to the real world: Economist
  • How The Apprentice Explains Donald Trump’s Campaign; His base is Apprentice viewers; and his Iowa coordinator is an Apprentice finalist who chooses delegates using Apprentice-style games.: Bloomberg
  • The Funny Thing About Adversity; It makes you more compassionate. Except when others are suffering just as you did. : NYT
  • Back to business: Michael Bloomberg; He ran New York for 12 years. Now the politician must fix the company he started 30 years ago: FT
  • A college entrance consultant with 19 years of experience describes the best essay she has ever read: BI
  • 9 tricks to motivate yourself to reach your goals: BI
  • Richard Branson, Tony Robbins, and 5 other successful people share their best productivity tricks: BI
  • Authors, Beware: Billionaire Subjects Don’t Make For Best-Selling Biographies: Forbes
  • The 10 funniest Dilbert comic strips about idiot bosses: BI
  • The riff: Mastered by ‘The Apprentice’; The TV show’s amorality has seeped into business culture: FT
  • How to unlock your secret productivity powers: FastCo
  • Help for Pantsers and Plotters: SP
  • Frontline Leadership: A New Source of Competitive Advantage: BCG
  • Demand-Centric Growth: How to Grow by Finding Out What Really Drives Consumer Choice: BCG
  • The Self-Tuning Enterprise: Wouldn’t it be nice if an algorithm could tell you when to develop a new business model or whether to enter a new market? BCG
  • Creating Exponential Growth at the Edge; An Interview with Entrepreneur and Author Salim Ismail: BCG
  • The Tim Ferriss Way: Life Is a Choose-Your-Own-Adventure Game: Success
  • You’re not as virtuous as you think: WaPo

Books

  • Rocket: Eight Lessons to Secure Infinite Growth: Amazon

Read more of this post

Reflections on Leadership from Gettysburg – Bamboo Innovator Daily: 13-14 Oct (Tues-Wed)

Life

  • Reflections on Leadership from Gettysburg: HBR
  • A Child Who Treats Their Parents With Respect Is An Employee Any Boss Would Be Thrilled To Hire: Forbes
  • Oprah Winfrey hates meetings so much she once persuaded Coretta Scott King not to visit her; “[I] really, really, really try to avoid meetings.” She prefers that her staff instead send her detailed emails. BI
  • Minimizing our problems can help us cope. Maximizing our strengths can help us flourish. Forbes
  • Louis I, King of the Sheep: An Illustrated Parable of How Power Changes Us; “Never be hard upon people who are in your power,”Charles Dickens counseled in a letter of advice to his young son: BP
  • The Gentle Giant: Oliver Sacks and the Art of Choosing Empathy Over Vengeance; An existential lesson gleaned from a brush with death and foolishness.: BP
  • The Four States of Mind: Farnam
  • Hunter S. Thompson on Living versus Existing: Farnam
  • The cofounder of Apple talks about how Steve Jobs viewed innovation and instilled it into the company’s products: BI
  • 13 tricks Steve Jobs, Jeff Bezos, and other famous execs have used to run effective meetings: BI
  • Why Angus Deaton Deserved the Economics Nobel Prize; Angus Deaton: A Skeptical Optimist Wins the Economics Nobel; Angus Deaton is a meticulous scholar who believes that reducing the world to simple theories is almost always dangerous; Nobel Economist Showed We’re Helping the Wrong People: NYT, NewYorker, Bloomberg
  • Former Indonesia investment banking head of UBS fined by Singapore regulator for insider trading; currently works for private equity firm Carlyle Group as the Indonesia head: Reuters
  • An email adding one letter to his domain name almost cost Centrify’s Tom Kemp $500,000. Here’s his 4 tips for avoiding ‘CEO fraud’. BRW
  • New Billionaire: Martin Selig Escaped Nazi Germany to Seattle, Where He Built Fortune In Real Estate: Forbes
  • Mental competency tests in the C-suite are more common than you think: Fortune
  • How Charles Koch made his billions; His new book Good Profit shows another side to the billionaire businessman: Fortune
  • The Innovative Mindset Your Company Can’t Afford to Lose: HBR
  • 4,000 Starbucks workers are going to college for free: CNN
  • Giant, ancient viruses are thawing out in Siberia – and they’re changing everything we thought we knew about them: BI
  • How Office ‘Bad Guys’ Handle the Role; Whether they are axing pet projects or firing underperformers, some managers learn how to be comfortable with being unpopular. WSJ
  • GE’s Jeff Immelt on evolving a corporate giantGE’s Jeff Immelt on evolving a corporate giant, what’s driving the company’s evolution, how he leads, and why he’s different from Jack Welch. McKinsey
  • What’s the Difference Between Data Science and Statistics?: PN
  • Chinese scientists are developing color-changing paint you can remotely control: BI
  • Famous last words of 18 famous people: BI
  • Woody Allen inspired billionaire Uber CEO Travis Kalanick to get back into startups: BI
  • Uber CEO Travis Kalanick knows a thing or two about when to call it quits if your company’s not finding success.: BI
  • Lunch with the FT: Jonathan Franzen; What is it about the great American novelist that provokes such strong reactions? FT
  • How Google’s head of marketing handles 20 meetings a day: FastCo
  • How Ads for Big Brands Could Benefit Rivals Instead: Strategy&
  • Freakonomics author Steven Levitt got a whole bunch of college kids to confess to cheating: BI

Books

  • 100 Baggers: Stocks That Return 100-to-1 and How To Find Them : Amazon

Read more of this post

Capital Allocation in Asian Wide-Moat Innovators: The Story of the Jin and Hui Merchants – Bamboo Innovator Weekly Insight

“Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”
BAMBOO LETTER UPDATE | October 12, 2015
Bamboo Innovator Insight (Issue 104)

  • The weekly insight is a teaser into the opportunities – and pitfalls! – in the Asian capital jungles.
  • Get The Moat Report Asia – a monthly in-depth presentation report of around 30-40 pages covering the business model of the company, why it has a wide moat and why the moat may continue to widen, a special section on “Inside the Leader’s Mind” to understand their thinking process in building up the business, the context – why now (certain corporate or industry events or groundbreaking news), valuations (why it can compound 2-3x in the next 5 years), potential risks and how it is part of the systematic process in the Bamboo Innovator Index of 200+ companies out of 15,000+ in the Asia ex-Japan universe.
  • Our paid Members from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.
Dear Friends,

Capital Allocation in Asian Wide-Moat Innovators: The Story of the Jin and Hui Merchants

“…the heads of many companies are not skilled in capital allocation. Their inadequacy is not surprising. Most bosses rise to the top because they have excelled in an area such as marketing, production, engineering, administration or, sometimes, institutional politics. Once they become CEOs, they face new responsibilities. They now must make capital allocation decisions, a critical job that they may have never tackled and that is not easily mastered. To stretch the point, it’s as if the final step for a highly-talented musician was not to perform at Carnegie Hall but, instead, to be named Chairman of the Federal Reserve. The lack of skill that many CEOs have at capital allocation is no small matter: After ten years on the job, a CEO whose company annually retains earnings equal to 10% of net worth will have been responsible for the deployment of more than 60% of all the capital at work in the business.”

– Warren Buffett

Intelligent capital allocation is possibly the most important skill that entrepreneurs need to master to cross the chasm to “Stage 2” to become a true wide-moat compounder. It requires understanding the long-term value of an array of opportunities to reinvest back into widening the economic moat of the business; sourcing and using money prudently and sagaciously in capital expenditures, R&D, M&As; having a sharp analytical framework and independence of mind to avoid “institutional imperative” and the illusory comfort of equating “busyness” in embarking different projects and multiple activities as “productive”.

Having recently visited the facilities and interacted with the top management team of one of Singapore’s most beloved consumer brands last week, we are confident that with the right capital allocation capabilities, selected Asian entrepreneurial companies can build upon their strong foundation, brand heritage and brand equity to scale to greater heights and create and compound value in a sustainable way.

Michael Mauboussin and his colleagues have written a great guide to capital allocation for investors: Capital Allocation: Evidence, Analytical Methods, and Assessment Guidance. The authors shared a Checklist for Assessing Capital Allocation Skills, reproduced below:

Past Spending Patterns

  • Have you analyzed how companies have spent money in the past, separating operating uses from return of capital to claimholders?
  • How has the company funded its investments?
  • Identify the prime use of capital. Do you know if management thinks about that use of capital properly?
  • Have there been shifts in the pattern of spending?
  • If there is new management, has spending changed?
  • Who makes which capital allocation decision?
  • How does the company conduct its budgeting process?

 Calculate ROIC and ROIIC

  • Have you calculated ROIC over time and observed a trend?
  • Examine composition of ROIC through a DuPont analysis—does this suggest a consumer or production advantage?
  • Have you compared the company’s results to those of its peers?
  • Have you calculated ROIIC for one year and rolling three- and five-year periods?

Incentives and Governance

  • How is the company’s incentive compensation structured?
  • How much stock does senior management own?
  • Is total shareholder return calculated on a relative basis?
  • Have you examined the company’s incentive score?
  • Are the measures in place to encourage management to think for the long term?

 Five Principles of Capital Allocation

  • Does the company use zero-based capital allocation or is it dominated by spending inertia?
  • Is the company focused on funding strategies or projects?
  • Does the company have a “scarce but free” attitude about capital, or “abundant but costly?”
  • Does the company prune businesses with poor prospects for creating value?
  • Does the company know how to calculate the value of its assets and does it act accordingly?

We like to share a story that we had written back in February 2011 about Hengan (1044 HK) to illustrate thoughtful capital allocation during 2004-2009; Hengan invested heavily to move up the value chain in higher-end products and to distinguish itself from the hundreds of low-end producers, becoming the largest producer of personal hygiene products such as tissue paper, sanitary napkins, pantiliners and baby diapers and compounding its market cap from a billion to $12 billion in the process.

Importantly, to complement the checklist approach, we explore why the once-powerful Jin and Hui merchant groups in China did not manage to cross the chasm to “Stage 2” to become true wide-moat compounders and blew up because they did not understand thoughtful capital allocation; while the Ningbo entrepreneurs “were more far-sighted, reinvesting their profits into building sustainable industrial businesses rather than making speculative asset transactions that yield transient profits, making the successful transition to Stage 2.”

We hope the story of the eclipse of the Jin and Hui merchants will provide positive and uplifting lessons for entrepreneurs and value investors: the compounding power of capital allocation when mastered properly.

Eclipse of the Jin and Hui Merchants: Lessons for Entrepreneurs and Value Investors

By KEE Koon Boon, 20 Feb 2011

Pinnacle to pits. Such is the tragic and thought-provoking path of the powerful Shanxi-based “Jin Merchants” (晋商) and Anhui-based “Hui Merchants” (徽商) during China’s Ming Dynasty till their demise in the late-Qing Dynasty as they could not cross the chasm to “Stage 2”.

They were richer than the emperor and their business empires stretched as far as to Asia, Russia and Europe. The powerful Shanxi “banks” (piaohao 票号) offered a full array of financial services, establishing the remote inland Shanxi province’s Pingyao and the nearby Qixian and Taigu counties as the premier financial centers or China’s Wall Street then; the first and largest of them, Sunrise Provident (Rishengchang 日升昌), was the modern equivalent of JPMorgan.

They were extremely hardworking; the Hui Merchants were also called “Hui Camels” as camels symbolize their propensity to tolerate hardwork and overcome adversity in harsh conditions. They were highly educated and cultured; the Hui Merchants were also called “Confucius merchants” and one in five imperial scholars came from the Anhui province then. They worked in “teams”; family groups and clan members collaborate to dominate geographies and industries ranging from tea, timber to textile.

So why and how did these two powerful business empires went into oblivion?

Both the Jin and Hui Merchants, for all their vast accumulated wealth, did not invest for growth in building an economic moat, a unique durable business model.

Take the case of Dashengkui (大盛魁), one of the largest business empires established by three “Jin Merchants” then. It had 20,000 camels, dominating the logistics business in China, particularly in the transport of tea to Mongolia, Xinjiang and Russia. Its assets were said to be so vast that they can be converted into enough 50-liang tael to lay a road that stretches from Ulan Bator (the capital and largest city of Mongolia) to Beijing.

Despite the advent of steamship as a low-cost and efficient transportation means, Dashengkui failed to invest any of its profits or reserves in upgrading its logistics assets. Also, the Jin Merchants who dominated the tea trade and became very rich, used the profits and cashflow from the businesses to fund their lavish lifestyles and indulge in asset speculation, purchase land and rebuilt their houses.

In 1866, without the burden of tariffs, the Russians started to transport tea from China via the sea route and subsequently exported the tea to Europe and Middle-East. They established modern processing and manufacturing facilities in places such as Hankou, Jiujiang, Fuzhou, making use of coal-based steam turbine technology and machines rather than the manually-driven turbines and labor-intensive manufacturing methods used by the Chinese Jin Merchants.

The Russians produced high quality and low-cost tea bricks in huge quantities and had the added advantage of transporting via the cheaper sea route instead of the conventional land-based path dominated by Dashengkui. The fortunes of the Jin Merchants started to take a sharp deterioration. They were contented to rely on their core business of piaohao and pawnshops for the cashflow to speculate in property and to fund their lavish lifestyles. As a result, they missed the opportunity to convert their piaohao into banks, including declining the invitation to invest in the current HSBC.

Hu Xueyan胡雪岩 (1823-1885), dubbed the richest-ever Chinese entrepreneur and known as the “Red-Topped Merchant” (hongding shangren 红顶商人) after the scarlet tasselled hat which reflected his position as a first-grade imperial official and awarded the “yellow mandarin jacket”, was probably the most celebrated Hui Merchant.

Despite the realities of the Industrial Revolution exposing the weaknesses of the labor-intensive manufacturing methods employed by most of the Chinese merchants as compared with the modern machines which western companies invested heavily in, Hu, a veteran in the silk business, insisted on using labor to process raw silk. At that time, the western companies had the upper hand and deliberately depressed the price of raw silk in China.

In May 1882, Hu purchased raw silk in bulk, hoping to monopolize the supply in order to force the cartel of western companies to buy at higher prices. Hu was an accomplished opportunistic trader all his life and he was highly confident that his Fukang “Bank” was “rock-solid” in providing the financing to fight the battle with the western companies.

Unfortunately, after two consecutive years of drought in Europe prior to Hu’s purchase, Italy had a good silk crop harvest. Raw silk prices plummet and Hu’s unsold inventory depressed the silk market further. A French navy fleet also arrived at Shanghai, threatening to attack China.

With the prospects of a Sino-French war breaking out, cash became king and banks withdrew their short-term loans. Trade halted and there were massive property and asset disposals in Shanghai. Bank runs erupted, impacting Hu’s “rock-solid” Fukang Bank. By December 1883, Hu was bankrupt. Hu died in 1885 in the same year as did General Zuo Zongtang 左宗棠, who provided Hu protection and patronage, enabling Hu to get and stay rich.

Their neighbors, the Ningbo Entrepreneurs, were more far-sighted, reinvesting their profits into building sustainable industrial businesses rather than making speculative asset transactions that yield transient profits, making the successful transition to Stage 2.

While investing for growth is critical, it is important for value investors to note that making capital investments without allocating them to build a team and an economic moat is likely to be an inefficient and value-destroying exercise. They will fall into the general category of firms described by finance researchers Sheridan Titman, John Wei and Xie Feixue in their 2004 JFQA paper. These firms that increase capital investments substantially destroy future firm value in the long-run because investors consistently fail to appreciate managerial motivations to put the best possible spin on their new “growth opportunities” when raising capital to fund their “expenditures”.

In addition, value investors need to be discerning in understanding that investing to build an economic moat to build up the intangibles and core competencies for sustainable and scalable growth could depress short-term cashflow. Thus, the financial numbers may not look appealing from a historical snapshot perspective.

Established by Mr. Sze Man Bok and Mr. Hui Chit Lin in 1985, Hengan grew over 20-fold from US$480 million to US$11 billion since its HK listing in 1998 to become the largest producer of personal hygiene products such as tissue paper, sanitary napkins, pantiliners and baby diapers.

Interestingly, Hengan was below a billion market cap post listing until 2004. From 1998 to 2003, Hengan invested a total of around S$140 million in capital expenditures and conserved cash. The capex figure scaled six-folds to a total of S$830 million from 2004 to 2009 as Hengan invested heavily to move up the value chain in higher-end products and to distinguish itself from the hundreds of low-end producers. Annual profits grew six-folds from a size of S$57 million in 2003 to S$400 million in 2009, creating S$12 billion in firm value in the process.

Long-term entrepreneurs need to appreciate that generating profits via collecting transactions will not lead to sustained compounding returns. Hu Xueyan, the consummate trader in accruing multiple profitable transactions all his life, witnessed the horror of not building a durable economic moat when he opened his warehouses that were stockpiled with unsold silkworm pupae. The silkworms had metamorphosed into moths and Hu literally watched his fortunes flutter away.

Profits need to emanate from, housed and reinvested in an economic moat to be rejuvenated, propelling the enterprise to scale new heights and generate sustained compounding returns. Without doing so, they risk blowing up in Stage 1 like the Jin and Hui Merchants.

It is the task of value investors to dive through the rumpus and bustle of cabal in poignantly troubled times in a vigilant watch for outstanding entrepreneurs devoted in their intensive task of building an economic moat.

PS: We also like to share with you an article “Scouring Accounting Footnotes to Prevent Tunneling” which we penned for our local newspaper Business Times Singapore that was published on 19 Aug 2015: PDF article link on SMU website. We are honoured to be able to have the opportunity to present to the top management of the regulatory authorities in Singapore about implementing the fact-based forward-looking fraud detection framework in a world’s first for Singapore.

Warm regards,

KB

The Moat Report Asia

www.moatreport.com

A new monthly issue of The Moat Report Asia is now available!

Access the in-depth idea presentation:

http://www.moatreport.com/members/

In the month of October, we investigate a listed Asian family business founded in 1975 that is now a leader in the foodservice industry with multiple brand format across several categories to capture a bigger chunk of the dining-out market where >12% of its local domestic population dine at one of their outlets every week, led by their flagship brand which dominates the market with a share of 57% which is 3x the value share of its next largest peer. The under-penetrated domestic market, where foodservice spending per capita is one of the lowest in Asia, paves the way for acceleration and long-term structural growth in outlet expansion, especially in the provincial areas where margins are potentially higher, as urbanization rise. Such market dominance and brand equity in generating consistent cashflow is underappreciated and deserves valuation premium.

We believe that the outstanding leadership provided by the inspiring visionary founder and his management esprit de corps team which has out-trumped the foreign and local rivals to dominate its domestic market, deserves a valuation premium. Most would have been contented to rest on their laurels but Mr. C has international ambitions, the “Maker’s” mentality to create value, by taking calculated risks to expand smartly with its own brands in selected countries and to acquire already-popular brands and work to improve their strength. The management has also fostered a powerful performance-based empowerment corporate culture and positive work environment where everyone has a sense of pride and emotional commitment in sustainably growing the company, which we believe is rare for an Asian company and is the underappreciated source of its wide-moat it enjoys in executing the scaling of the multi-brands, the product innovation, the support for franchise partners and identifying and integrating synergistic M&A targets. In essence, the company provides resilient growth with visible long run-way and upside surprise from outstanding execution track record in M&As.

Living the Life That Is Upright and Executing Day By Day to Scale Asia’s Wide-Moat Foodservice Company – Bamboo Innovator Monthly Riddle

“Bamboo Innovators bend, not break, even in the most terrifying storm that would snap the mighty resisting oak tree. It survives, therefore it conquers.”
BAMBOO LETTER UPDATE | October 7, 2015
Bamboo Innovator Insight (Issue 103)

  • The weekly insight is a teaser into the opportunities – and pitfalls! – in the Asian capital jungles.
  • Get The Moat Report Asia – a monthly in-depth presentation report of around 30-40 pages covering the business model of the company, why it has a wide moat and why the moat may continue to widen, a special section on “Inside the Leader’s Mind” to understand their thinking process in building up the business, the context – why now (certain corporate or industry events or groundbreaking news), valuations (why it can compound 2-3x in the next 5 years), potential risks and how it is part of the systematic process in the Bamboo Innovator Index of 200+ companies out of 15,000+ in the Asia ex-Japan universe.
  • Our paid Members from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, and savvy private individual investors who are lifelong learners in the art of value investing.
Dear Friends,

Living the Life That Is Upright and Executing Day By Day to Scale Asia’s Wide-Moat Foodservice Company 

Can You Guess This Asian Wide-Moat Company?

“Work hard. Deal with people honestly. Always look to improve yourself. Celebrate if we outdo ourselves, not when we outdo others. Enjoy what you are doing. This will help you to deliver the best products and services to your customers. It will also help you to strive to improve until you achieve excellence. Be ready to innovate. And never be afraid to dream big! The advice and motivation comes from one source – my mother. She is steadfast in counselling us, on how to live the life that is upright.”

This is the message that the inspiring Mr. C has for like-minded entrepreneurs and the next generation of leaders.

In the month of October, we investigate a listed Asian family business founded in 1975 by Mr. C and his wife that is now a leader in the foodservice industry with multiple brand format across several categories to capture a bigger chunk of the dining-out market where >12% of its local domestic population dine at one of their outlets every week, led by their flagship brand which dominates the market with a share of 57% which is 3x the value share of its next largest peer.

The under-penetrated domestic market, where foodservice spending per capita is one of the lowest in Asia, paves the way for acceleration and long-term structural growth in outlet expansion, especially in the provincial areas where margins are potentially higher, as urbanization rise. Such market dominance and brand equity in generating consistent cashflow is underappreciated and deserves valuation premium.

The company’s flagship brand, which contributed 52% of systemwide sales, has powerful store economics driven by high margin, low cash investment cost per outlet, resulting in cash-on-cash return of 43%, which is significantly higher than the 24% return for the average US peers. Its other domestic brands are leaders in their own categories with market share ranging from 35-91%.

Its international brands in China have broken even in 3Q14 after its initial entry more than 10 years ago; all along, the operations are profitable at the store level, but lack enough scale to cover the corporate and infrastructure overheads in which the management has committed to long-term investments in central kitchens to support the scaling up of the network expansion. In Jan 2015, management also inked a 60:40 JV and master franchise agreement with famous US snack chain in China and commented that they are exploring the opportunity to acquire a US brand with a $1bn market capitalization.

Being born into a poor family, Mr. C has demonstrated far-sightedness, discipline and values to build and scale the company into Asia’s leading foodservice company by “giving our fellow men more than they expect, whether they be customers, co-workers, suppliers, family and friends.” Below is an excerpt shedding more insights into the inspiring entrepreneurial story of Mr. C:

********

Q: “…Can you share with us the story of how the company started? What are the business and personal challenges that you face along the way? How did you overcome them and what are the lessons that you have learnt?”

Mr. C: “…That was the first lesson – and it is something that [Company’s name] espouses to this day. I believe that we should give our fellow men more than they expect, whether they be customers, co-workers, suppliers, family and friends. I think that comes from the view that we don’t have to be greedy in our daily lives or business. If we strike the right balance, we share the benefits with whomever we’re dealing…

Saving every dollar we could was our mindset during the early days of [Company’s name] when we had a lone store… We had to do everything by ourselves in the beginning.. My wife and I even cleaned the toilet. When there’s no cashier, you do the cashier.. if there’s no janitor, you clean the toilet. It’s like your neighborhood mom-and-pop store. We also served the customers as waiter and waitress, and then at night, we do the accounting by ourselves. As my wife said wisely, ‘There’s a Chinese saying that says it’s easier for you to save than to earn’. So if you have something and you can save it. Don’t waste it because to earn money, it takes a lot of hard work. We worked hands-on but as the business propels, we noticed they could not do it all so we started to set up an organization hired store managers, and trained people.

During those challenges I continued to have high hopes and optimism that anything is possible. I think I pick up this belief from my mom. Our role is to do what we can as best we can and don’t worry about the outcome. The outcome will take care of itself. This belief has allowed me to sleep well at night. It gives me new hope everyday.

The third lesson is that innovation starts in our minds. Our mindsets determine what we’re able to accomplish. The story of [Company’s name] is a story of finding opportunity amidst difficult times. The main thing is to dream, dream big and not be afraid of it. Dreams are free. Why limit what you are aspiring for? But dreaming is not enough. One must be willing to put in the needed action and hard work to make these dreams come true. If you dream big and put your dreams into action you will indefinitely make mistakes. But don’t be scared to make mistakes. Just be quick to recognize them and learn from them as fast as you can. Learn from each mistake and it will not be a waste of time. If we place no restrictions on ourselves, then we’re capable of doing anything. If we are not greedy, then more things will return to us. If we give more to our fellowmen and to our customers, more than what they expect, they’ll return over and over again…

…The food business is still very basic. It’s still about taste. It’s still about How did you serve me? Is your place nice? Am I treated well? Do I get value? If you think about it, if we’re going out to eat, these are the basic things we look out for, but the execution is the difficult part. It’s not like other businesses where it’s the concept or the knowledge that’s difficult. Here, there’s no secret; it’s very easy, but it’s the execution that’s hard. If you ask a lot of restaurant, they know all these things. Executing day by day is what’s hard.”

********

Historical precedents in Chipotle and Yum Brands show that EBITDA/store growth drives valuation multiple expansion; EBITDA/store and EV/store is not just a linear combination but an exponential one. Thus, companies that successfully increase store profitability in a sustainable manner will see valuation increase by an even greater degree. Market has rewarded the company in the past for productivity improvements but has punished the company lately for the weaker-than-expected FY2014 and 1H15 results. Enterprise Value/store for is now back to 2013 valuation multiple despite expanding store count by 8.6% and sales/store growth increasing 1.5% in the trailing 12 months. If EBITDA/store improves 5% back to 2013 level and the company is able to sustain the improvement as it expands the store count to the target level in the next 3 years, EV/store could rebound and EV could jump, indicating a 36-56% upside potential.

The company’s store economics and return metrics is more like “fast casual” that include Chipotle, Starbucks, Shake Shack, which have higher returns and tend to trade at higher valuation multiples. In terms of EV/EBITDA to the fast casual companies, the company trades at a 37% discount. The Price/Sales ratio of fast casual companies is >5x, as compared to the company’s 2.16x, indicating room for profitability improvement, especially with its China business breaking even in 3Q14, and therefore providing the foundation for further valuation gains. Thus, the company’s business model which is more fast-casual in its superior store economics, is underappreciated and undervalued by 37% to >100%.

We believe that the outstanding leadership provided by the inspiring visionary Mr. C, and his management esprit de corps team which has out-trumped the foreign and local rivals to dominate its domestic market, deserves a valuation premium. Most would have been contented to rest on their laurels but Mr. C has international ambitions, the “Maker’s” mentality to create value, by taking calculated risks to expand smartly with its own brands in selected countries and to acquire already-popular brands and work to improve their strength. The management has also fostered a powerful performance-based empowerment corporate culture and positive work environment where everyone has a sense of pride and emotional commitment in sustainably growing the company, which we believe is rare for an Asian company and is the underappreciated source of its wide-moat it enjoys in executing the scaling of the multi-brands, the product innovation, the support for franchise partners and identifying and integrating synergistic M&A targets. In essence, the company provides resilient growth with visible long run-way and upside surprise from outstanding execution track record in M&As.

Can you guess who is Mr. C and his wide-moat family business?

PS: We also like to share with you an article “Scouring Accounting Footnotes to Prevent Tunneling” which we penned for our local newspaper Business Times Singapore that was published on 19 Aug 2015: PDF article link on SMU website. We are honoured to be able to have the opportunity to present to the top management of the regulatory authorities in Singapore about implementing the fact-based forward-looking fraud detection framework in a world’s first for Singapore.

Warm regards,

KB

The Moat Report Asia

www.moatreport.com

A new monthly issue of The Moat Report Asia is now available!

Access the in-depth idea presentation:

http://www.moatreport.com/members/

In the month of September, we investigate a listed Asian family business that has persevered for over fifty years since 1962 in this high-electricity-rates emerging country to sell something that seems risky – air-conditioners and refrigerators to consumers and commercial clients. Led by the capable, down-to-earth third generation leader Mr. C who believe in making available to his countrymen products and services that used to be affordable by only the rich as his family and personal SWFF, [Company’s name] is now the #1 market leader in air-conditioner (36.7% market share) and refrigeration (25.6% market share) which are under-penetrated appliances in the country, with household penetration rates at 6% and 35% respectively, amongst the lowest in Asia where its neighbours have at least twice the penetration rate, representing significant untapped market potential.

Amongst the white good appliances that are disrupted by ecommerce, the sale of aircon and refrigerator remain resilient because they require installation and aftermarket service support. [Company’s name] provides unmatched end-to-end solutions from production to distribution to aftersales services network that spreads across the logistically-challenged country. [Company’s name] has over 90% appliance store coverage nationwide and its unrivalled aftersales service business is supported by over 170 accredited installer companies; over 130 accredited service centers; over 2,000 technicians; rapid sales facilitation and service turnaround from over 1,000 merchandisers deployed at the point of sale; and 8 dedicated parts stores; and a centralized in-house call center, distribution, parts availability/support as well as regional field personnel. Its robust logistics network ensure speedy delivery and fast service response.

In terms of business nature, margins and profitability, [Company’s name] is comparable to India’s Voltas (NSI: VOLTAS), India’s #1 aircon company who is an affiliate of the Tata Group with a 20% market share. [Company’s name] has a much higher and more stable market share than Voltas and generates higher ROE at 23.1% as compared to Voltas’ 18.1%. Yet, [Company’s name] trades at a 140% valuation discount in terms of EV/EBIT and EV/EBITDA at 9x as compared with 21x for Voltas. We think [Company’s name] deserves to command a higher valuation premium for its market leadership in an under-penetrated domestic market, its strong portfolio of synergistic businesses, and its visible long run way to reinvest its profits back into the core business to extend its market leadership and widen the moat. The company has a healthy balance sheet with net cash comprising 26% of book equity due to its integrated business model that has enabled the generation of steady, resilient and growing margins, profits and cashflow and the efficient employment of capital with a 23.1% ROE.

The key to Oprah Winfrey’s success: radical focus; After revamping her once-struggling TV channel, OWN, Oprah Winfrey has figured out how to make time for the projects she cares about most – Bamboo Innovator Daily: 12 Oct (Mon)

Life

  • The key to Oprah Winfrey’s success: radical focus; After revamping her once-struggling TV channel, OWN, Oprah Winfrey has figured out how to make time for the projects she cares about most. FastCo
  • Elise Andrew, the woman credited with making science sexy and interesting for millions around the world, says she was offered $40.1 million to sell her runaway success Facebook page and websites. TheAge
  • The Importance of Recreational Math: ‘Fun’ problems can lead to striking, unexpected discoveries.: NYT
  • Secrets from 11 of the most productive people from Oprah to Aziz Ansari: FastCo
  • Joining the family business: An emerging opportunity for investors: McKinsey
  • The Nobel prize in economics was awarded for showing the world as it is-not how it should be; Don’t let the Nobel prize fool you. Economics is not a science: qz
  • Making Caregiving Compatible with Work: HBR
  • The six lists you need to make every day productive: FastCo
  • Angus Deaton Awarded Nobel Prize in Economic Sciences; Professor of Economics and International Affairs at Princeton University wins for his analysis of consumption, poverty, and welfare: WSJ
  • They may be fighting like rats in a sack’ – how to survive a VW-style corporate crisis; From Enron to Kids Company, Northern Rock to the News of the World, former employees recall their feelings of excitement, isolation and despair  Guardian
  • Don’t let the Nobel : Guardian
  • Why It’s Important To Understand Cultural Difference In Business: Forbes
  • Ruby McGregor-Smith, Mitie CEO: Outsourcing’s prickly peer; Managing cleaners and carers has led her into the House of Lords – and a national debate over pay: FT
  • The problem with those who cheat; Insead professor of ethics analyses how the Volkswagen brand came to fail: FT
  • Maestro Guitarss found ways to improve its guitar quality expand the business: ST
  • Ageing: switching off genes could extend lifespan by 60 per cent, scientists say: TheAge
  • The Trouble With Economics: Bloomberg
  • Ageing: switching off genes could extend lifespan by 60 per cent, scientists say: TheAge
  •  The Trouble With Economics: Bloomberg
  • Ferrari Scion, Steered Away From Racing, Ends Up a Billionaire: Bloomberg

Books

  • Fortune’s Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street : Amazon

Read more of this post

Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe; You can learn to be creative, if you’re willing to embarrass yourself; Prepare yourself for the good, bad, and ugly moments of life; Steve Jobs used to ask Jony Ive the same question almost every day; Perfecting Pixar’s movies takes a crazy amount of research – Bamboo Innovator Daily: 7-11 Oct (Wed-Sun)

Life

  • You can learn to be creative, if you’re willing to embarrass yourself: qz
  • Prepare yourself for the good, bad, and ugly moments of life. TWS
  • Steve Jobs used to ask Jony Ive the same question almost every day: BI
  • Perfecting Pixar’s movies takes a crazy amount of research: Wired
  • Why an Open Mind Is Key to Making Better Predictions: K@W
  • The four critical traits of highly successful people; never give up on the dream, invest in experience – practice mastery, learn relentlessly…. persistent but also patient: LinkedIn
  • Read Tim Cook’s Note To Apple Employees On The Anniversary Of Jobs’ Death: Techcrunch
  • How To Never Get Angry: 3 New Secrets From Neuroscience: Barker
  • How Grok Learning uses fake Shakespeare sonnets and microwaved marshmallows to teach computers to kids: BRW
  • Mixed blessing for Tu’s Nobel honor; Nobel Winner’s Story Highlights Flaw in How China Picks Top Academicians: Standard, Caixin
  • Meet early Macintosh marketer Joanna Hoffman, who was not afraid to stand up to Steve Jobs: BI
  • For think tanks, it’s either innovate or die: WaPo
  • The science of organizational transformations; New survey results find that the most effective transformation initiatives draw upon four key actions to change mind-sets and behaviors. McKinsey
  • From rags to riches to jail: More details have emerged of the rags- to-riches Macau billionaire at the center of a bribery scandal that has rocked the United Nations. Standard
  • Why Businesses Back Innovation Centers: techcrunch
  • Why Free Markets Make Fools of Us: NYBooks
  • How Picasso the Sculptor Ruptured Art History: Vulture
  • “Just Googling it” is bad for your brain: qz
  • 9 Simple Statements That Will Make You Think Differently About the World: Fool
  • Why Are Black Action Stars So Old?: PE
  • Should You Ever Use a Pie Chart?: PE
  • Class 3 Notes From Reid Hoffman, John Lilly, Chris Yeh, and Allen Blue’s Technology-enabled Blitzscaling – CS183C Class At Stanford: LinkedIn
  • The Most Important Thing, and It’s Almost a Secret: NYT
  • The Big Decisions: NYT
  • The madness of Charlie Brown: Lancet
  • Poultry to property: how Australia’s richest families are making second fortunes: BRW
  • The Devil’s Dictionary: AB
  • Angela Merkel’s incredible rise from quantum chemist to the world’s most powerful woman: BI
  • The fascinating life of Nikola Tesla, the man who electrified our world and fell in love with a pigeon: BI
  • Here’s a young Steve Jobs giving the best advice on hiring, success and failure: BI
  • Treasures in our hearts: Star
  • Alice Walker on What Her Father Taught Her About Lying and the Love-Expanding Capacity of Telling the Truth: BP
  • Keeping it in the family: Asian tycoons lack confidence in their sons and heirs: SCMP
  • How to become CEO of a huge public company: Fortune
  • How the Star Wars producer went from secretary to studio boss: fortune
  • 6 fascinating ideas that are about to change our world: BI
  • Why elephants rarely get cancer – and what we can learn from them; CBS
  • There’s a fascinating reason why it feels like it keeps getting harder to sleep as you age: BI
  • These 3 simple words can help almost anyone earn their boss’s trust: BI
  • In Lotteries, Lucky Numbers Will Only Win You Less; Popular picks are no more likely to hit than others—and mean more potential winners when they do: WSJ
  • A Criminal Mind: For 40 years, Joel Dreyer was a respected psychiatrist who oversaw a clinic for troubled children, and doted on his four daughters and nine grandchildren. Then, suddenly, he became a major drug dealer. Why?: CS
  • The Importance of Empathy in Our Services-Centric, People-Oriented Economy: WSJ
  • Ken Jeong, From Medicine to Laughter; The doctor-turned-actor can’t quite leave his medical past behind: WSJ
  • Gil-li Vardi: Can Businesses Learn from Military Strategy?: Stanford
  • Dunkin’ and the Doughnut King: Ted Ngoy overcame poverty and escaped genocide, made a fortune off doughnuts and gambled it all away. Today, Ngoy is back on top — but America’s biggest doughnut chain could threaten the hundreds of California shops that are his legacy: CS
  • Rebirth of a Salesman: At 66, the founder of Men’s Wearhouse is starting over – with a startup.: CS
  • Why our demand for instant results hurts think tanks: WaPo
  • Successful and disastrous career of music legend: WaPo
  • Perfecting Pixar’s movies takes a crazy amount of research: Wired
  • The Meaning of History: Farnam
  • How to Disagree: Amin Maalouf on the Key to Intelligent Dissent and Effective Criticism: BP
  • Billionaire’s Dropout Grandson Wants to Kill Work E-mail: Bloomberg
  • Amazon Wants to Know How Its Employees Feel Every Day: Bloomberg
  •  How Two Guys Lost God and Found $40 Million: Bloomberg
  • How to Live and Invest Without Failure: SN
  • Driven to distraction by mounting multitasking; With evidence mounting against multitasking, bosses could do well to hit the pause button and spare staff from productivity-sapping overload: SCMP
  • From Langham To Xintiandi, Hong Kong’s Lo Clan Stays Together, Apart: Forbes
  • Near Misses: Clans Too ‘Poor’ For FORBES’ Inaugural List Of Asia’s Richest Families: Forbes
  • More Money, More Problems: Asia’s Richest Clans’ Most Notorious Feuds: Forbes
  • Galileo on Critical Thinking and the Folly of Believing Your Preconceptions: BP
  • Why We Choke: Farnam
  • Harvard, Goldman Sachs, Venture Capital.Fugitive; Iftikar Ahmed appeared to be an immigrant success story, but prosecutors and regulators allege he stole $65 million: WSJ
  • Pixar President Urges Companies to Tolerate Failure and ‘Mess’: WSJ
  • Pixar’s Ed Catmull: What Many Get Wrong About Steve Jobs: WSJ
  • Why We Fall for Bogus Research: Bloomberg
  • Take Giant Leaps (Because You’re Not Going to Win with Timid Steps): BCG
  • Excellence comes from saying no: Forbes
  • How Successful People Make Smart Decisions: Forbes
  • Stop teaching kids to add up — maths is more important; Business needs problem-solvers who use modern tools: FT

Books

  • Foolproof: Why Safety Can Be Dangerous and How Danger Makes Us Safe: Amazon, FT
  • Traction: How Any Startup Can Achieve Explosive Customer Growth : Amazon
  • Zen Pencils Volume Two: Dream the Impossible Dream : Amazon
  • Zen Pencils: Cartoon Quotes from Inspirational Folks : Amazon
  • The De-Textbook: The Stuff You Didn’t Know About the Stuff You Thought You Knew: Amazon
  • What If?: Serious Scientific Answers to Absurd Hypothetical Questions: Amazon
  • Everything Is Bullshit: The greatest scams on Earth revealed: Amazon
  • Hipster Business Models: How to make a living in the modern world: Amazon
  • Transformative Experience: Amazon
  • Startupland: How Three Guys Risked Everything to Turn an Idea into a Global Business : Amazon
  • Better Places, Better Lives: A Biography of James Rouse; A visionary developer and master planner, James Rouse was a key figure in the story of how and why the United States was built the way it was during the last half century.  Amazon
  • The Real Deal: The Autobiography of Britain’s Most Controversial Media Mogul: Amazon
  • The Liar’s Ball: The Extraordinary Saga of How One Building Broke the World’s Toughest Tycoons : Amazon
  • Zeckendorf: The autobiograpy of the man who played a real-life game of Monopoly and won the largest real estate empire in history.: Amazon
  • Black Box Thinking: Why Most People Never Learn from Their Mistakes–But Some Do: Amazon

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Not For Investors Only: Top 10 Nuggets Of Buffett Wisdom For Life Success; How Michelle Phan Built A $500 Million Company; The One Thing You Must Ignore To Boost Your Business and Elevate Your Craft – Bamboo Innovator Daily: 6 Oct (Tues)

Life

  • Not For Investors Only: Top 10 Nuggets Of Buffett Wisdom For Life Success: Forbes
  • How Michelle Phan Built A $500 Million Company: Forbes
  • The One Thing You Must Ignore To Boost Your Business and Elevate Your Craft: Forbes
  •  From Apple to Python: how everyone can tap teams’ creative juices; A leader’s talent lies in integrating other people’s work rather than trying to direct every aspect: FT
  • How the most successful people keep track of their best ideas; five leaders share how they record, organize, and manage their ideas.: FastCo
  • How Much Should Scientists Check Other Scientists’ Work? A debate is growing in the research world over the value of replicating older, peer-reviewed studies: WSJ
  • Is the Theory of Disruption Dead Wrong? The sexiest idea to come out of business schools in decades has major flaws, a new study says. Bloomberg
  • A Billionaire New York Landlord Who Doesn’t Trumpet His Wealth; New York real estate billionaire Larry Friedland got his start while he was studying to be a pharmacist in the late 1950s when he met a guy named Nathan Miller. Bloomberg
  • 15 inspirational quotes from Steve Jobs on the fourth anniversary of his death: BI
  • A former real estate agent reveals 7 broker tricks to look out for when searching for apartment rentals: BI
  • 20 things you should say at work if you want people to trust you: BI
  • The Network Man: LinkedIn’s Reid Hoffman’s big idea. NewYorker
  • Here’s how the cofounder of LinkedIn starts every dinner meeting: BI
  • Here’s the unglamorous job Hillary Clinton was fired from before she was famous: BI

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Listen Widely and Be Curious – Bamboo Innovator Daily: 5 Oct (Mon)

Life

  •  Weekend Listening: Listen Widely and Be Curious: CFA
  • Psychologist Barry Schwartz on What Motivates Us to Work, Why Incentives Fail, and How Our Ideas About Human Nature Shape Who We Become: BP
  • The 9 habits of insanely likable and charismatic people: GSK
  • How to Be a Speed Writer: HBR
  • Mystery of how fire ants survive floods solved: Insects hook their legs together to form LIFE RAFTS that help them float: Dailymail
  • How Uncertainty Teaches Us To Adapt For The Better: Forbes
  •  5 Easy Ways To Improve Difficult Relationships, Backed By Research: Barker
  • How Managers Can See the Future More Clearly: HBR
  • Inside The Epic Fantasy That’s Driven Donald Trump For 33 Years: Forbes
  • Michael O’Leary, Ryanair CEO: Growing up in public; A more adult approach has lifted the budget carrier’s profits: FT

Books

  • Why Greatness Cannot Be Planned: The Myth of the Objective: Amazon

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Life is like a jigsaw puzzle; We must learn to appreciate the different aspects that make our life complete, and not dwell on the imperfections – Bamboo Innovator Daily: 4 Oct (Sun)

Life

  • Life is like a jigsaw puzzle; We must learn to appreciate the different aspects that make our life complete, and not dwell on the imperfections. Star
  • The Mountain View of the Mind: Simone Weil on the Purest and Most Fertile Form of Thought; “Our thought should be empty, waiting, not seeking anything, but ready to receive in its naked truth the object that is to penetrate it.” BP
  • In 1975, this Kodak employee invented the digital camera. His bosses made him hide it.  BRW
  • Gary Smith of Ciena: Build a Culture on Trust and Respect: NYT

Books

  •  How to Build and Sustain a Championship Culture: Amazon
  • H3 Leadership: Be Humble. Stay Hungry. Always Hustle: Humble (Who am I?), Hungry (Where do I want to go?) and Hustle (How will I get there?).  Amazon

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Everybody Matters: The Extraordinary Power of Caring for Your People Like Family – Bamboo Innovator Daily: 3 Oct (Sat)

Life

  • To Get More Out of Workers, Invest More in Them: NYT
  • How Managers Can See the Future More Clearly: HBR
  • Warren Buffett urges young tech titans to give big and early:FT
  •  Three Reasons You Need To Say ‘No’ More Often: Forbes
  • Good design is good business: McKinsey
  • The truth about story-telling; It can be a powerful tool to ensure brand success: Star
  • ‘The Big Bang Theory’ Has Hidden Jokes Down to a Science; The CBS sitcom works to make sure its whiteboard equations and physics references are accurate: WSJ
  • One story that tells you everything you need to know about working for Elon Musk: BI
  • One CEO says résumés are a thing of the past — here’s what he looks at instead: BI
  • Holly Tucker, 38, founded the gift website Notonthehighstreet.com with Sophie Cornish from her kitchen table in April 2006: FT
  • Presidential interpreters: Insiders behind the curtain; Top interpreter reveals life in translation: KH1, KH2

Books

  • Everybody Matters: The Extraordinary Power of Caring for Your People Like Family: Amazon

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Nike’s founder reveals the best decision he ever made; What Generous People’s Brains Do Differently; “No artist is pleased… There is only a queer divine dissatisfaction, a blessed unrest that keeps us marching and makes us more alive than the others.” – Bamboo Innovator Daily: 2 Oct (Fri)

Life

  • Martha Graham on the Life-Force of Creativity and the Divine Dissatisfaction of Being an Artist; “No artist is pleased… There is only a queer divine dissatisfaction, a blessed unrest that keeps us marching and makes us more alive than the others.”: BP
  • Nike’s founder reveals the best decision he ever made: BI
  • What Generous People’s Brains Do Differently: HBR
  • How Gratitude Can Help Your Career: HBR
  • 4 Steps To Overcome Adversity And Amplify Your Success: Forbes
  • Old Money’s 7 Essential Ways to Stay Rich; Lessons from five centuries of safeguarding family money.: Bloomberg
  • How the Superwealthy Plan to Make Sure Their Kids Stay Superwealthy; Passing on a fortune isn’t as easy as it seems.: Bloomberg
  • Rewriting the Economic Rules; it’s insidious that farmers are buying genetically modified seeds. Attacking innovation is a strange way to save capitalism. WSJ
  • Nicolas Berggruen is on a crusade for ideas; wants to be “midwife” to new conceptual frameworks that can rank alongside the Reformation, the Enlightenment, Marxism or the Washington Consensus: FT
  • Psychiatrists use an old trick to get people to trust them with their secrets – and it works just as well in business: BI
  • Capitalism and its discontents: Anti-capitalism is being fuelled not just by capitalism’s vices but also by its virtues: Economist
  • 10 idioms from around the world that make absolutely no sense in English: BI
  • 8 bizarre German words with no English equivalent: BI
  • 3 brilliant ways to breeze through the mid-afternoon slump and have more energy all day: BI
  • Rewriting the Economic Rules; it’s insidious that farmers are buying genetically modified seeds. Attacking innovation is a strange way to save capitalism. WSJ

Books

  • First, Fast, Fearless: How to Lead Like a Navy SEAL : Amazon

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Happy 100th Birthday, Jerome Bruner: The Pioneering Psychologist on the Act of Discovery and the Key to True Learning; “Discovery, like surprise, favors the well-prepared mind.”; From humble patent clerk to the world’s most beloved genius: the fascinating life of Albert Einstein – Bamboo Innovator Daily: 1 Oct (Thurs)

Life

  • Happy 100th Birthday, Jerome Bruner: The Pioneering Psychologist on the Act of Discovery and the Key to True Learning; “Discovery, like surprise, favors the well-prepared mind.” BP
  • From humble patent clerk to the world’s most beloved genius: the fascinating life of Albert Einstein: BI
  • Henry David Thoreau on Success: Farnam
  • 4 Tips for Launching Minimum Viable Products Inside Big Companies: HBR
  • What does it take to go from challenger brand to market leader? These businesses start out as underdogs but can end up disrupting an entire industry: Guardian
  • The perils of true-crime writing; For even a scrupulous, serious-intentioned writer attempting to chronicle a contentious crime, there are all sorts of potholes along the way: Forbes
  • Claude Dauphin, Trafigura Trading House Founder, Dies at 64; Dauphin spent five months in an Ivory Coast jail in 2006 and 2007 over a dispute involving alleged dumping of toxic waste in Abidjan. The jail held some 4000 prisoners and did not have showers. Bloomberg, Reuters
  • Why More People Want an M.B.A.: Number of applicants seeking admission to business-school programs is on the rise: WSJ
  • A psychologist says there are 2 simple strategies for surviving anxiety in your 20s: BI
  • Meet the man behind the corporate world’s most incredible parties – and see his stunning work; When companies like J.P. Morgan need an event planner, they call Ron Wendt.: BI
  • The first results of a massive brain study reveal something fascinating about smart, successful people: BI
  • A hotel magnate warns CEOs about one major danger that comes with success: BI
  • 8 TED talks that can help you become insanely productive: BI
  • American Colleges Pay Agents to Woo Foreigners, Despite Fraud Risk; Campuses pay commissions to build foreign enrollment but sometimes get phony applications, ghostwritten essays: WSJ

Books

  • From the Other Side of the World: Extraordinary Entrepreneurs, Unlikely Places: Amazon

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Nietzsche on How to Find Yourself and the True Value of Education; “No one can build you the bridge on which you, and only you, must cross the river of life.” – Bamboo Innovator Daily: 29-30 Sep (Tues/Wed)

Life

  • Nietzsche on How to Find Yourself and the True Value of Education; “No one can build you the bridge on which you, and only you, must cross the river of life.”: BP
  • How Yogi Berra Turned His Love for a Kid’s Game Into a Lifetime of Service; Berra spent decades inspiring kids and creating educational opportunities for them, writes the founding director of the Yogi Berra Museum: WSJ
  • From dirt poor to billionaire – the incredible rags-to-riches story of fashion legend Ralph Lauren: BI
  • A mentor to some of Wall Street’s biggest names has died—here’s what he taught them: BI
  • The industrialist Andrew Carnegie used these 10 principles to become the richest man in the world: BI
  • All Storytelling is About Metaphor: SP
  • This Billionaire Knows The Secret To Saving A Family Business: Forbes
  • Vietnamese-American Pharma Billionaire Debuts On The Forbes 400: Forbes
  • James Dyson’s advice to Germany: scrap rules for real Vorsprung durch Technik; Regulations often offer little more than a smokescreen for manufacturers to hide behind. They are a form of control which stifles progress: Telegraph
  • How Meetings Differ, from Stockholm to New Delhi: HBR
  • Profit Is Less About Good Management than You Think: HBR
  •  “Companies Don’t Go Global, People Do”: An Interview with Andy Molinsky: HBR
  • Here’s a straightforward solution to the insanely complex ‘Einstein Riddle’: BI
  • 8 books Europe’s top business school recommends on entrepreneurship, finance and economics: BI
  • The Joy of Following: Many offices are finding they have plenty of leaders but not enough followers. And it isn’t easy to follow well: WSJ
  • Making design a business priority: Being “design driven” means operating in a fundamentally different way. In this video, McKinsey’s Mahin Samadani explains how companies can make the transition. McKinsey
  • Building a design-driven culture; It’s not enough to just sell a product or service—companies must truly engage with their customers. Here’s how to embed experience design in your organization. McKinsey
  • 9 hard-earned leadership lessons: FastCo
  • The Mindset of Internationally Successful Companies; Risk management for going global requires a delicate balance of detail-oriented preparation and openness to uncertainty. Insead

Books

  • The Art of Execution: How the world’s best investors get it wrong and still make millions: Amazon
  • A ZEBRA IN LION COUNTRY: The Dean Of Small Cap Stocks Explains How To Invest In Small Rapidly Growing Companies: Amazon

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