1. “Business isn’t that complicated” and “Take sales, take costs, and try to get this big positive number at the bottom.” Many people make a living trying to make “business” sufficiently complex that you feel the need to pay for their services. Their business is to make business complex, when it is actually simple.
2. “Of my mental cycles, I devote maybe ten percent to business thinking.” and [John Malone] and I are damn similar. He worked at Bell Labs and understands both business and technology.” It is not enough to understand just business or the just product or service. Successful entrepreneurs/CEOs understand both in a deep way. Great entrepreneurs/CEOs spend way more time on the product/service offering than business strategy, structure and operations. There are many ways to succeed but successful entrepreneurs/CEOs are seldom one dimensional. Having said that, entrepreneurs/CEOs which have success which persist over time do typically have a well-defined idea of the limits to their own competence.
3. “Being a visionary is trivial. Being a CEO is hard. All you have to do to be a visionary is to give the old ‘MIPS to the moon’ speech — everything will be everywhere, everything will be converged. Everybody knows that. Which is different from being the CEO of a company and seeing where the profits are.” Poseur CEOs are often eventually exposed but not always. Some CEOs look skillful and are surfing on the work done by people who were in that position before they arrived. CEOs who have created their company from scratch and it lasts over the years have proven their skill. Visionary CEO can often be attached to companies which generate revenue but never significant profits.
4. “Unless you’re running scared all the time, you’re gone.” Moats (sustainable competitive advantage) don’t last unless you are constantly working to reinforce them since they inevitably atrophy. If you don’t yet have a moat, you are even more exposed to competitors. The technology business is unique in that demand side economies of scale can result in nonlinear changes. In a technology business in particular, you can get run over by a mistake you made five years before.
5. “Intellectual property has the shelf life of a banana.” Intellectual property can be used to create a moat but it has a limited shelf life. If you are not investing constantly to renew your intellectual property, without a moat from some other source you are dead. Better yet, invest constantly in creating new intellectual property to replace what will inevitably expire.
6. “Supply is the killer of value. That’s why the computer industry is such a strange industry. We’re dealing with amazing increases in supply.” and “If you look at an industry where you have such a rapid increase in supply, usually that’s pretty bad, like when radial tires were invented, people didn’t start driving their cars a lot more, and so it means the need for production capacity went way down, and things got all messed up. The tire industry is still messed up.” Bill’s view on this is the inverse of the George Gilder thesis during the dot com years. Sometimes disruption caused by an increase in supply only benefits consumers and producers end up with nothing. Whether something is “disruptive” is orthogonal to whether it may be a direct source of profit for the producer. Disruption shifts value creation opportunities creating potential opportunities which may or may not benefit producers of a good or service.
7. “Word of mouth is the primary thing in our business. And advertising is there to spur word-of-mouth, to get people really talking about ‘the latest thing.’” Acquiring customers in a cost effective way is the essence of business. Customers you acquire “organically” are more valuable since they do not leave as often and usually generate more revenue.
8. “Your most unhappy customers are your greatest source of learning.” There is no end to how much products and services can improve. Dysfunction inside any company is best measured relative to its competitors. There is no perfect company without some dysfunction under the decks and that creates opportunities.
9. “It is fine to celebrate success, but it is more important to heed the lessons of failure.” and “There are many lessons about the dangers of success, and Henry [Ford] is one of them.” Failure is an opportunity to learn. The more you learn in life the more you learn that there is even more you don’t know and that some things are unknowable. What you may attribute to success may be luck and vice versa. Success in one domain does not equate to success in all domains. Success may cause you to succumb to “man with a hammer syndrome (everything looks like a nail).”
10. “Perseverance has been characteristic of our great success.” Going up against great competitors requires resilience and a thick skin. Steve Ballmer famously put it this way: “It doesn’t matter if we bang our head and fail. We keep right on banging and banging and banging and banging and banging.”
11. “If you look at us from a financial point of view we are wizards, but we have made many products that have faded.” It is magnitude of correctness not frequency of correctness that matters most. Babe Ruth struck out a lot, but that strike out record was vastly outstripped by his successes. Great entrepreneurs and CEOs think in terms of expected value.
12. “I spend a lot of time reading.” The best way to accelerate learning (which often comes from understanding the mistakes and successes of others) is to read widely and *a lot.* Learning from the mistakes of others scales far better than making those mistakes on your own.