entrepreneur | wealthymatters

Mohnish Pabrai

March 6, 2011 1 Comment

Mohnish Pabrai is an Indian-American businessman and deep value investor.He is the managing partner of the Pabrai Investment Funds, which he founded in 1999.He is also a member of the Young President’s Organization (YPO) and a charter member of The Indus Entrepreneurs (TIE).

Monhnish Pabrai first trained as a computer engineer. He then spent nearly two decades in the tech field.In 1990, he quit his job working as an engineer for Tellabs in Chicago and abandoned his master’s thesis at the Illinois Institute of Technology to launch TransTech, an IT consulting and systems integration company, which he funded with $30,000 from his retirement account and $70,000 from credit cards.His father encouraged him in the endeavour,saying that it was the right thing to do as staying at Tellabs and following the staid boring corporate path was high risk. Starting a business on the other hand was low risk, could give high returns and high adventure. As Monaish was single at the time there were few complications and in the worst case, he would lose everything ,which wasn’t much anyway,and could declare personal bankruptcy and start over. By 1999, Transtech, which had grown to 200 employees and $30 million in revenues, held no thrill. So he sold it. And during the tech boom,he started another company, internet incubator Digital Disrupters, which had a very painful and swift demise due the tightening of capital markets .In 2000, he sold TransTech to Kurt Salmon Associates.During late 1999, with nine other investors contributing $100,000 each,Mohnish started Pabrai Funds with $1,000,000 in assets. Pabrai Funds was modelled on the original “Buffett Partnership.” Read more of this post

Filed under Entrepreneurship, Paper Assets, Theory Tagged with Amar Bhide, Benjamin Graham, Blaise Pascal, bridge, Buffett Partnerships, businessman, capital, Charles Munger, Charlie Munger, Confusing Activity with Productivity, Digital Disrupters, double hulled oil tankers, entrepreneur, Greek Shippers, Gujarati, Guy Spier Aquamarine Capital Management, Harina Kapoor, Kurt Salmon Associates, Latticework Of Mental Models, leverage, Losing My Virginity, Lunch with Buffett, Michael Dell, Mohnish Pabrai, Mosaic: Perspectives on Investing, Motley Fool, Nike Just Do It, Norweigian oli tanker firm Frontline, Oracle of Omaha, Pabrai Investment Funds, Patels, postaday2011, RandomBlog2011, reading, real estate, Richard Branson, Sam Walton, scrap, Single Hulled Tankers, Smith & Wollensky, special situations, start up capital, Telllabs Chicago, The Dhandho Investor:The Low Risk Value Method to High Returns, The Indus Entrepreneurs TIE, The Origin and Evolution of New Businesses, Transtech IT consulting Systems Integration, value investor, Warren Buffett, Young President's Organization

The Perfect Business

March 1, 2011 3 Comments

The best and easiest way to make money either as a businessperson or an investor is to get hold of an as near to perfect business as possible.The best businesses have the following features:

High profitability. If the business provides customers a product or service they need or want very much, and only this business can provide it, and there are few substitutes available then this firm can charge a premium price far above the costs it incurs.
High returns on capital. A business with high margins ceases to be very attractive if it is very capital intensive and requires massive amounts of capital to launch and/or remain in business. The greatest businesses require little or no money to start, can grow without major additions of capital, and do not require much maintenance cap ex.
An enormous moat. To ensure high margins and return on capital in the future it’s critical for a business to have major competitive advantages that are unlikely to dissipate over time. The key here is lack of change .Rapid change as in the hi- tech sector,benefits consumers but is very bad for investors. To quote Warren Buffett, “We see change as the enemy of investments… so we look for absence of change. We don’t like to lose money. Capitalism is pretty brutal. We look for mundane products that everyone needs…. I guarantee that Coke, Wrigley’s , and Gillette will dominate. The Internet won’t change what brands people like.”
Profitable reinvestment opportunities. The greatest businesses can reinvest their robust free cash flows back into the business at equally high rates of return on capital. Consider this: Warren Buffett has often lamented the fact that See’s Candies has never been able to expand much beyond its historical West Coast markets. It’s a fabulous company and was one of his best acquisitions ever, but the inability to reinvest its free cash flows back into growing its operations makes it an inferior business to, say, Wrigley, which has been able to grow globally over the years. Read more of this post

Filed under Entrepreneurship, Paper Assets, Theory, Tool Kit Tagged with accounts payable, accounts receivable, businessperson, cap ex, capital intensive, Cash Conversion Cycle, cash flow, Coke, competitive advantage, entrepreneur, free cash flows, gillette, growth, inventory, Investor, Perfect Business, postaday2011, profitability, RandomBlog2011, Return on Capital, See's Candies, Warren Buffet Quotes, Warren Buffett, Wrigley's

Zhang Yin

February 25, 2011 8 Comments

Below is an inspiring story of a truly extraordinary woman.I found the original post here : http://invincibleprobity.wordpress.com/2011/02/24/the-american-spirit-now-comes-from-china/

The story is a must read for entrepreneurs and would be entrepreneurs, women and anyone interested in a human interest story.

When I have some down time I usually hang out at my home in the Rocky Mountains of northwest Montana, USA. This is a wonderful place of very few people and lots of big mountains and beautiful scenery. It’s a special region of rivers and streams and lakes … and billions of trees. As opposed to the eastern part of this huge state, where agriculture and cattle reign, northwest Montana has long depended on its biggest industry – timber and wood products. But this industry, faced with steadily increasing restrictions on logging in our national forests and steadily rising competition from cheaper products from overseas, has been in slow decline for the past forty years. It seems like another small lumber mill that had been around for a century is closed down every few months.

In 2009 even big corporate mills started closing. One of these was the Smerfit-Stone Container mill in Frenchtown near Missoula. A second Smerfit-Stone container mill also filed for bankruptcy in Canada at the same time, and Smerfit-Stone mills in Arizona and Quebec had closed earlier. The company naturally cited “the unprecedented global economic recession [which] has weakened demand for packaging”, but a major portion of the truth has been left out of the Smerfit-Stone rationalizing, including the fact that it had failed to upgrade its equipment to meet modern advanced capabilities and had retained its dependence on expensive freshly logged timber to manufacture its cardboard containers. This is another American industry that has long been locked in the past while taking profits for today and failing to improve its competitiveness in the arena for tomorrow.

Like so many American industries that were forged by great visionaries of the past, the American wood products industry is a microcosm of the nation as a whole over the past forty years. It all seems like an ingrained resistance by today’s Americans to learn the lessons of generations that went before. If perhaps not for Americans, however, the Greatest Generation definitely did set an indelible example for others. Read more of this post

Filed under Entrepreneurship Tagged with America Chung Nam inc, Arizona, billionaire, Brazil, Cheung Yan, Chinese, Chinese Billionaire, Cultural Revolution, Dongguan, entrepreneur, Frenchtown Missoula, Hong Kong, Los Angeles, Ming Chung Liu, Montana, Nine Dragons Paper Trading Company, paper, paper mills, paper products, Quebec, Shenzhen, Smerfit-Stone Container, Taiwan, US, wealthiest self made woman in the world, woman entrepreneur, Zhang Yin

Psychology of Wealth

February 24, 2011 1 Comment

The question why some people accumulate substantial wealth and others struggle so much in this field has attracted the attention of quite a few psychologists.There have been many studies to correlate various personality traits and behaviour patterns, cognitive patterns , self motivation habits, moods and emotional behaviours and social behaviours with the wealth a person accumulates.

The results of these studies have been used to construct the various quizzes here http://www.marketpsych.com/personality_test.php .They are free and a pretty good way to get to know both one’s strengths and weaknesses as an entrepreneur , investor and/or speculator.

Taking these tests is a great way to get to know the strengths we can play to and the weaknesses to guard against.The results sheets also have many good psychological tips to work around our individual weaknesses.