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Author: Alex Vostrykov

Bitcoin: No Future

Bitcoin: No Future

Everybody talks about Bitcoin nowadays. They use words like “miracle”, “tremendous”, “unbelievable” and so on to depict the prospects of cryptocurrencies. Some false prophets predict that its price will be chopped in half very soon and they use technical analysis to prove their point. Others naively predict that cryptocurrencies will substitute money and Blockchain will substitute core banking system. All it takes is to announce that your company is going to use Blockchain, and your stock prices could drastically surge overnight! The hype is that big, that even several of my clients in Black Belt Investments were almost “seduced to the Dark Side of Bitcoin”. In this article I’m going to tackle its technical and its financial nature. I decided to put this in writing in order not to repeat myself again and again when telling off somebody else who also wants to invest into Bitcoin. Also, since recently its price dropped quite significantly, so it’s high time to publish this article: maybe it can prevent some impulsive decisions.

Technical Details

If you are technically savvy, I apologize for a maybe too simplistic explanation. I added these technical details, because I saw that many people who praise Bitcoin and Blockchain simply don’t have a clue what all this about.


Say, we have some text:

line 1
line 2

line N.

And we decided to make sure that nobody can change any line. Each line is called a block. In cryptography there is class of functions named hash-functions. When you apply such a function to a block, you get some gibberish. This gibberish will change significantly if you change the block even a little bit. For example, MD5 hash of “line 1” is “22b597f64a2484189f4e3b9a3e0bc73a”, and for “mine 1” (just one letter was changed) is “5bd6c84598094b4b749832cc38969741”.

So, we calculate hash of “line 1” (hash1). Then we add hash1 to “line 2” and calculate hash of this combined line (hash 2). Then we use hash2 the same way when we calculate hash of “line 3” and so on.

What can we achieve by doing this? If some villain wants to change some line, he has to recalculate all the hashes of subsequent blocks. If the chain of blocks is long enough and the blocks are stored in distributed system, hacking it becomes a very tough nut to crack.

This was a very simplified explanation of Blockchain and it models only the main chain. In fact, this directional list allows also so-called orphan blocks aside (please refer to the picture).

Many people, including some of my friends and clients, repeat studied statement: “Blockchain is the technology of the future!” What they do not fully understand, is that yes, Blockchain is a great technology to secure data, but with quite limited area of use. It is effective to make sure that some data stays unchanged, but absolutely useless in majority of cases where we need to delete and update the data.

How Blockchain Used in Bitcoin

That is quite simple: Bitcoin uses Blockchain to store and secure its own transactions. So, the blocks of data in the system look like this: “John Doe bought 10 bitcoins”, “John Doe sold 5 bitcoins” and so on. Yes, yes, all what it does, Bitcoin just secures itself.

This tells me one distinct fact: Bitcoin is a thing in itself. It is not connected to some real world, it is not backed by anything; it is just a decentralized accounting system.

Financial Aspects

Is it a Currency?

No, it is not. Real currencies have legal status. Bitcoin was not legalized as a currency. Many people would retort that you can buy things for Bitcoins. True. But this itself doesn’t make Bitcoin a currency. Yes, some businesses accept bitcoins and sell you goods for them. But they do it only to increase their own private stashes of bitcoins. They cannot pay to any vendor with bitcoins, they cannot pay taxes with bitcoins. Bitcoin for them is a means of barter. It is not a currency.

Will it Ever Become Legal?

Printing money in every country is monopolized (Fed in U.S., Bank of Canada in Canada and so on). If somebodyillegal else wants to coin their own money, it is 100% illegal. Put yourself into the shoes of any center-bank: would you deliberately waive your power? I guess, the answer is no.

Moreover, such a precedent can become very detrimental: the next day after you legalize Bitcoin, everybody will be able to create their own currencies. The history already knows examples of such a chaos: for instance, U.S. was flooded with gazillion of different currencies in 19th century before U.S. dollar became the only currency.

So, my own conclusion is that Bitcoin will never become legal currency.

The Amount of Bitcoins is Constant

You probably know that once upon a time somebody decided to use video cards instead of CPU for mining. You have probably seen mining farms (like on a picture):


And now let’s look at this from the point of view of videocards manufacturers. Say, you can sell a video card at a price of $100. If somebody buys it and uses for Bitcoins mining, it will break even, say, in 2 months. You, as a manufacturer, give a warranty of 12 month. So, the buyer can use it for at least 10 more months and generate, say, $500 of net income. What is the minimum price you should sell this video card at? I would say, if you don’t sell the videocard and instead use for mining yourself, you will get at least $500. So, there is no point to sell it cheaper.

That’s exactly what has happened to video card prices. The demand increased, and manufacturers detected the reason and increased prices accordingly. Mining became unprofitable.

And since nobody mines Bitcoins anymore, the amount of bitcoins became constant. To be more precise, the amount of Bitcoin is almost constant: still some people mine it, and there are some huge mining farms in China (which, I guess, should belong to video card manufacturers, who can get video cards dirt cheap).

What Drives the Price of Bitcoin?

demand2That’s simple. Just imagine some thresholded resource (above we discussed why the amount of bitcoins is almost constant), which demonstrated growth from its inception. People look at it, see its constant historical growth, and decide to buy. The fact that the amount is thresholded coupled with their desire to buy makes its price higher. Indeed, you have to pay more than the previous owner did in order to convince him to part with this resource and sell it to you. Then next portion of speculators knows about such a precious resource: they also want to buy. And this in turn makes the price to surge again and again. And so on. The miracle is very simple: speculative demand on some limited amount of Bitcoins.

It is not bad, if you are not the last one to buy bitcoins at insane price (the historical maximum was about $20,000). In my opinion, what happens now is that people started to understand that there is no bright future for Bitcoin. I think, that in foreseeable future its price will stabilize at significantly lower mark. It will never get to initial next-to-nothing values, because there are always some believers (or I would call them “people with cognitive dissonance”), who will buy bitcoins and wait hoping that the miracle happens and it becomes a legit currency.


If we leave technical details aside, our summary is:

  1. Bitcoin is not profitable to mine, so the amount of bitcoins is capped-off;
  2. Speculative demand together with (1) drove it price insanely high;
  3. Very doubtful that Bitcoin will ever become a legitimate currency;
  4. Oh, Bitcoin is currently NOT a currency;
  5. If my assumption (3) is correct, then Bitcoin will drop further.

And the last, but not the least, if you share this opinion, stay away from Bitcoin.

P.S. I have been thinking what kind of caption image should this post use. Finally, I asked my wife and after one or two seconds of thinking she said: “Soap bubble”.

Perfect timing for an entrepreneur

Perfect timing for an entrepreneur

They tell us that we should strive to be always first. I believe that this misconception we absorb from the school (a school is supposed to be a competitive environment), from mass media (they generously regale us with business success stories “when somebody got ahead of time etc.”), from books (mythology is sold way better than bare true) and so on. But being first and getting ahead of time in many cases gives you nothing. Why?  I will try to answer this question in this article.palm-logo

Example 1. Palm PDAs rest in peace, whilst Android tablets and iPads flourish. You remember those devices from 1996. In fact they were “granddads” of modern tablets. What went wrong? Below we will discuss why it is a good example when the second mouse gets the cheese from a mouse trap…

Example 2. PayPal. Before PayPal there was no such internet payment processing systems. Inventors of PayPal demonstrated that even the first mouse can successfully get ALL THE CHEESE.

A parachute lesson

To answer what is the difference between Example 1 and Example 2, lets refer to a parachute. Leonardo da Vinci allegedly conceived the parachute idea in 1492 (a sketch along with the description was found in his records). S0, a parachute invention is a perfect example of getting ahead of time.

What is perfect for a scientists, can be very detrimental for entrepreneurs. Let’s imagine what would happen if he tried to invent the first practical parachute in 1492. He would face at least two problems.

Problem #1 (minor one): highly likely he would have a hard time finding appropriate materials to even create a proof of concept. I’m not even sure that the physics at that time was able to make appropriate calculations. This is a minor flip side of being too much ahead of time: the technologies of his time would not allow him to even build a decent proof o concept.

Problem #2 (major one): Сui prodest? Who needs a parachute in 1492, when people ride horses, inner combustion engines do not exist and you need to wait at least 4 centuries before Wright brothers’ invention of an airplane? It is major problem of being too much ahead of time: you either have to bury your invention or you have to speed-up the mankind in order to develop such behavioral patterns so that your invention becomes practically needed.

Both these problems combined compose what I would call “a dreadful curse of being too much ahead of time”.

Timing is the key

From the example above we can see that we get too much ahead of time, we will have to develop people’s habits. They must already have appropriate behavioral patterns, so our product or service can help them. Many entrepreneurs, venture capitalists and motivational speakers say that you should find the niche for your startup where nobody is presented, so you don’t have any competitors. Sounds promising. What they forget to mention is that you will have to create the market in that niche, not just promote your product.

And timing here is the key: being too much ahead of time means too much efforts and resources to develop the market. Ideally, you want to be that much ahead, so you can already create your product and the whole infrastructure, but then right away harness natural demand, rather than creating it at your own expenses.

Back to PayPal. Yes, they created something what never existed. But it wasn’t something like a parachute in 15th century: payments through email already existed and were pain in the ass. So, PayPal took an already existing situation and made it way better. That was their key difference from Palm PDAs.


You don’t want to be just first. You must be in time: you don’t want to outrun your time significantly. And wow is you if you get too much ahead!

Partnership In Business. Part 3 – Who can be a good match

Partnership In Business. Part 3 – Who can be a good match

This is an article #3 about partnership in business – a series of articles started in Part 1 – Your chances and Part 2 – Right questions. This time we are going to talk about who exactly can become a good business partner.

No friends, no relatives

Many people think that good personal relationships before establishing business is a perfect basis to start business partnership. Of course, if you are enemies, it is highly unlikely that you can be partners in business. But, nevertheless, some distance between partners is absolutely necessary. Partnership is a set of mutual obligations, and you will feel way more uncomfortable to disobey the obligations if there is some distance between you. To some extent, the more distance – the better.

Don’t get me wrong. Some of my relatives could be perfect business partners for me. But it is rather an exception. Such friend or relative must be very adequate and have enough sense of delicacy at work.

A great social technologist V. Tarassov says:

Friendship can be based on business, but business cannot be based on friendship (my 2 cents: otherwise you may lose either).

He or She must be a leader

Captain Obvious strikes back! But let’s first look what it actually means. In life we use the term leader intuitively, without actually thinking what it means. I guess, if I asked you to define what leader means, you would say that is someone who is number one in some contest or sort of that. But that’s not what I mean. There is another meaning. Please look at the picture below. We are going to define leadership in terms of “to-give and to-get” coordinates.

Social strategies in to-get and to-give axes


The terminology below is made up, to the best of my knowledge, by Radislav Gandapas.

How would we call someone who works rather to give then to get, or in other words, the one who struggles first for others, not for himself? It’s an altruist, or a Hero. Left top corner.

How would you call someone who never gives, only gets? The one who gets the resources for himself and never contributes to others? Dependent? It is a form of parasitism. A Parasite! Right bottom corner.

Many people make an agreement with themselves: I reduce my needs, I don’t dream about Ferrari and so on. But in return I don’t make efforts, and at half past five I go to pub. Deliberate asceticism? Radislav calls them Outsiders. As opposed to leaders. Left bottom corner, of course.

One last cell: the one who approximately equally motivated by giving to others and by getting for himself. That’s a Leader.

Hero, Leader, Parasite and Outsider

I think I don’t have to convince you that your partner must reside on upper cells, rather then bottom ones. Ability to give (or dedication in a way) is crucially important in business partnership.

Why leader, not hero? Well, first, heroes attract parasites, not leaders. And second, I think the leader (who also thinks of himself) has more balanced and strong motivation. Plus, in many cases heroes tend to have pure social entrepreneurial mindset, which stops them from building commercially successful ventures.

Same level of maturity

First lets explain maturity. With regards to many matters in life, maturity is a combination of your responsibility and initiative (of course, there are way more components out there, but these are two crucial ones). For a good and productive partnership partners should be in the same ballpark in terms of maturity. For example, for me a partner with high level of initiative but low level of responsibility (let’s call this classic high school attitude) is a misery. But for another “high-schooler” such partner can be a good match!

Skill Set

Business requires a lot of skills (practical things as opposed to theoretical knowledge): networking, managerial skills, people skills, entrepreneurial thinking etc. Nobody was born with such a skill set. So, both you and your partner should eager to get them equally. Your pace and motivation in learning must be comparable, otherwise one of you will turn into a dragging chute for your business.


Even if you don’t make drastic mistakes and your business is not in red, still the process of its growth is very-very SLO-O-OW. So, each partner must be in a good financial situation. Otherwise you can’t afford it! Plus, everyday financial pressure will add more stress into your already tough life.

Some of my colleagues tell that their best motivation to make business was debt they had. Maybe this kind of  negative motivation works perfectly for them, but I would refrain from being motivated by calls from collection agencies.


If I was asked to stress out just one trait a partner should have, I would say it is self-discipline. In startup partners do not have bosses (you may argue that a VC can be such a boss in some cases). Classical discipline based on self-preservation instinct (fear to be fired) does not work here. And you may be surprised to see how many very disciplined people (when they had a boss) turn into unruly lazybones in no-boss environment. Be ready to witness such Jekyll-and-Hyde examples!


You and your partner must resonate

Even though some distance is important, and every partner stays in his lane all the time, but all the partners should be on the same page in terms of philosophy, attitude, thinking, world-building (of course, all with regards to business) etc.

Two more aspects. One – partners’ dedication and motivation also should be on the similar levels. And two, which is often neglected by our rationalism, partners should have similar levels of energy. Your potential partner can be knowledgeable but energetically on his last legs, and this may significantly downplay his contribution and/or hinder any interaction with him/her.

So, where?

I think that the best way to assess someone in advance is either to work or to study together. So, the main sources of potential business partners:

  1. school, university;
  2. colleagues at work;
  3. pals (not close friends!);
  4. some experts in the realm (beware of too unequal partnership);
  5. somebody you may meet at conferences, forums etc.
  6. key employees of your business (unless they became key persons because of political games and unethical moves).

And beware of: close friends, relatives, bossy dictators, anybody lacking trust, someone who can pre-judge you (say, because of the difference in the age), somebody who got upper hand on you etc.

Check all this in practice

When you are at lunch with your colleagues and you are talking about geopolitics, business, investments etc. many people may seem to be a perfect business-match for you. But don’t rush to make conclusions. The devil is in the detail. Watch them. For example, minor signs of laziness at work can indicate that your potential partner works as Swiss watch only because he fears his boss. If so, it is very likely that he lacks of self-discipline, and this will become flagrant in your startup. Or your friend asks you to teach him about investments, but bails out after the first time: obvious lack of persisting. The same way you may notice some flavor of procrastination, irresponsibility etc.

Watch non-congruence in the behavior. This comes with experience.

Instead of conclusion

We see that finding a good partner is somewhat like finding a needle in a haystack. Moreover, not each needle will work for you. Nevertheless, don’t give up!  Best of luck and all the success in your partnerships!

My Two Cents On Three Steps Elon Musk Took To Become Successful

My Two Cents On Three Steps Elon Musk Took To Become Successful

I read some articles by Jason Fernando, and they are very interesting. But Three Steps Elon Musk Took To Become Successful attracted my attention because in my opinion it refers to the correct steps, but the interpretation misses key points. This article is my 2 cents on what made Elon Musk so successful.

1. A Clear Sense of Motivation

Jason writes:

Picture the scenario: you’re 28 years old and receive a cash payment of $22 million. This is the situation Elon Musk faced in 1999 after the sale of his first Internet company, Zip2. Under these circumstances, most of us would likely retire into a life of recreation and luxury.

Couple of years ago, before I started my first startup, I would also agree with this statement. But there is a bit of the elephant in the room: Elon got 22mln for creating the viable business. And on the way to complete this task he experienced the drug of pure leadership, it is like a tiger who first time felt the taste of flesh. After such an experience none of the people who I know, would agree to just veg out in the lap of luxury. Successful entrepreneurs actually can. But the feeling that you are capable of creating a viable business is HUGE REWARD in itself.

Puzzled? It's Dopamine molecula
Puzzled? It’s Dopamine

Yeah, it may sound idiotic. Especially if you are in the middle of your project, when you already exhausted and dazzled by the amount of unexpected troubles on your way. But trust me on that: after a relatively short vacation (in comparison to the time you spent building your startup), you will be bored and be happy as a clam to come back either to further develop your business or to found a new one.
I have pretty exciting avocations (sailing, motorcycle, snowboarding etc), but nothing really can compare to the fixes of adrenaline, dopamine and serotonin you get in your business. Especially at its early stages.

2. Confronting the Worst-Case Scenario

The author refers to Sun Tzu’s “win first, and then go to war”, saying that one of the interpretations is to accept the worst-case scenario first. Really? Accept the defeat, and then go to war?! Do you really believe that with a such attitude anybody can create a successful business? Yes, I know that you will definitely learn to be aware of the worst-case scenario down the road anyway, but it cannot become a cornerstone of your success. And also, how is it connected to “win first, and then go to war”? Can anybody explain this to me? To me it looks far-far-fetched.

My own interpretations of this counsel would be:

  • – win rather strategically than tactically;
  • – fight for the future rather for the past or present;
  • – ideally, do not compete, go for the niche which is not occupied;
  • – create demand first, then start selling

and so on.

And we can see that Elon Musk is a master of “win first, and then go to war”-approach. But I disbelieve that it’s because he has an experience of worst-case scenario and had been living for just $1 a day.

3. Self-Education

Jason states that one of the keys to Elon’s success is his life-long self-education. And even though the author refers to it as to a “hard-won knowledge” gained as a result of the access we all have to information nowadays, I think that the main point here is missing. Or at least it deserves to be stressed out more. Musk is successful not just because that he gobbled up gazillion of books and textbooks. The secret of his self-education is practice.

There is no correlation between how much you read and the level of your success. In fact, I know people who read a lot, but are not bold enough to go and apply the knowledge. For them it is an alibi – nobody can rebuke them, because they do so much: visit seminars, read books, take educational courses, mingle with like-minded people etc.

And also I know another sort of people – they are successful but they have not much time for reading. Their self-education is mostly limited to some training courses, when it is really needed for the business. But they prefer to imperfectly act rather than perfectly linger.

Musk knows this secret: his knowledge is very practical, so, it turns into practical skills quickly.


I think that we can conclude that we got the hang of some elements of Elon Musk’s success: self-education to gain appropriate skills, a good advice from Sun Tzu and a very natural entrepreneurial motivation.

They are all simple, but not so easy to practice. Anyway, I wish you good luck in practicing them! These lessons definitely won’t go amiss.

Lesson 008 – Inventorytelling

Lesson 008 – Inventorytelling

It’s been a while since I wrote the last investments lesson. In this lesson we are going to discuss such thing as  Inventory. I think there is no need to define it, because everybody either knows or at least intuitively understands that Inventory is finished goods or raw materials on a balance of the business.


According to Karl Marx’s General Formula for Capital, the business process is a transformation of Money into Products and then back into Money (of course, in the ideal world this pile of money is greater than the initial one). The same thing is reflected in Financial Statement of any business: Cash -> Inventory -> Cash. In a nutshell, this is how business functions. Further in our lessons we will talk about how to read the business story from Financial Statements.

Inventory is a pretty important value: as we can see from above, it’s like a blood of a business. And, as many other headings, this one tells not too much just by itself. But the dynamics of Inventory is very eloquent thing. In fact, what would you say when you see that Inventory grows significantly faster than the business itself? Obviously, something is wrong with this business: customers are not interested in buying their goods anymore. And the management doesn’t want to recognize this problem (typically because if they admit this, there will be no quarterly or annual bonuses). That is why this problem is not addressed and Inventory continues to grow. It is very dangerous: if today no one is interested in buying, what makes them to buy same stuff tomorrow? (We are not talking about some seasonal demand). Plus, even if they manage to sell out the Inventory later, it is not going to be very profitable: try to sell the clothes which is out of fashion already, try to sell cell phones or electronics which got outdated yesterday and so on. In other words, growing Inventory can be a HUGE risk.

High-Tech vs Brick-and-mortar businesses

One very important thing to remember is that the more high-tech the business is, the less Inventory it will have. Of course, a high-tech company can have, say, software on its Inventory account, if its business is reselling this software. But generally all what we discuss is more applicable to old school brick-and-mortar businesses rather than IT world.

Additional Metrics

There is one more metrics which goes hand in hand with Inventory. It is Days Inventory Outstanding, or a timespan needed to completely substitute (sell out) the Inventory. It is calculated by dividing Revenue by Inventory and works as a very good business performance gauge.
Example 1: Company X has $10,000 of Revenue per annum. Its Inventory at any time is approximately $1,000 (so called average inventory). It means that its being completely turned 10 times a year (aka Inventory Turnover): $10,000 / $1,000 = 10. I.e. the inventory stands out for 365 / 10 = 36.5 days approximately. So, Inventory Days Outstanding is 36.5 days for this business.

That said, we can formulate what we ideally want to see:

Days Inventory Outstanding must be consistent and should not grow.

Problem 13 What would you say about the company like this:

Couple More Caveats

First, when you use this criterion you actually compare Inventory dynamics with Revenue dynamics. Don’t forget to look at Net Profit Margin and make sure it is consistent! Otherwise, it possible that Revenue grows but Net Income doesn’t or even drops. You don’t need such a Revenue growth. And you definitely don’t need such a business!

Second, how to assess inventory. Sometimes your main motivation is to buy some company is that on its balance it ALLEGEDLY has more assets than its stock quoted. A dream of a value investor! The only niggle is that you must know the exact nature of those assets. And in case of inventory, the rule of thumb is:

The closer inventory to raw materials, the easier to assess how much it costs.


  1. Inadequate Inventory growth (faster than Revenue and Net Income) is a red flag;
  2. Ideally, Days Inventory Outstanding should not grow and be consistent;
  3. All this is not applicable to Hi-Tech companies (where all this is typically automatically satisfied);
  4. Inventory can be very tricky to assess;
  5. The closer the inventory to raw materials, the easier to estimate its cost.

P.S. I apologize if this lesson was rather boring, but my excuse is that even Elon Musk plans to start a boring company :)

Partnership in Business. Part 2 – Right questions

Partnership in Business. Part 2 – Right questions

This is the 2nd article in the series of articles about partnerships in business. In the first one we got rid of basic delusions and assessed our chances to find a good partner. The rest will be dedicated to:

  1. who you should consider as a partner (including where to find them);
  2. who to avoid;
  3. questions to ask before you decide.

And maybe I will put a carriage before a horse, but I will start with the questions you should ask your potential partner before shaking hands. I cannot state that it is a complete questionnaire, but all the questions here are based on my own experience.

Question I: % of ownership.

Well, this question is unavoidable. But never have 50/50 ownership. Even though, this may be absolutely legal in your jurisdiction, but such partnership is doomed to be unsuccessful or at least to face significant problems. Avoid having such a ticking time bomb under your business.

Question II: What you bring into and how to measure

Discuss, what each of you are going to bring into business. And, even more important, HOW to measure that? You don’t what to end up with a partner who is theoretically responsible for marketing, but all what he does is posting a single Facebook post once a month. And, of course, I’m not talking about an influencer with a gazillion of followers. I’m talking about an ordinary lazybones.

Also, you should be acutely conscious of the equality in your partnership. I mean you should have no delusions about whose position is stronger. For example, you plan to create a business in a realm, which is totally new for you. You find someone who is knowledgeable about the realm. His experience and your money should work together. Your position is stronger, right? Absolutely, till the moment you started a business, you have a freedom to pickup any specialist in the realm you like. But what happens when you already invested your money? Now you have no freedom plus now you have to blindly trust your partner. Still believe that your position is stronger?

Question III: Compare your goals in business

Compare your goals in business and seriousness of intentions. For example, your goal in business is to prove that you are a real businessman (by creating a viable business and helping out thousands of your clients) and you decided that you are going to achieve that at any cost. Would you like a partner whose only dream is BMW M6 and he strongly believes that business is quick and easy way to achieving this goal?


Question IV: How you formulate your dream

How you formulate your dream: to rather give something to others or rather to get something for yourself? We will discuss this later in more details in the following articles. But such a difference is a fundamental one: to give is more about hero or a leader, to get – more about parasitizing. Trust me, these two types cannot go together for a long time. And yes, I understand that nobody has just one pure form of motivation, we all typically combine to-get with to-give, but you always can identify the foremost one.

Question V: How long are you able to work?

How long are you able to work even if you see no result. How many iterations you are going to take? We all know that typically a real time to implement a brand new (when nobody had such an experience before) project is at least 3 times longer than your plan. But in our first startups we never really take this into a account. Discuss this with your partner, especially if the project is quite long. Do you really have resources, stamina and firm desire to complete the endevour even if it takes 3 times longer? What if you complete the project, but will not see any significant result? Say, you planned to work for 6 month to develop a revolutionary product. It took you a year (which is super fast in comparison to average). Finally you completed the development and your product is released. And voila! Nothing happens. In theory we all say that we will switch to plan B. In reality, the only plan you really had was: I release a product, it gives me tons of cash, I go to a dealership and buy a Bentley. Plan B? Sure, if I can’t afford a Bentley, I will buy a Maserati… And de-facto you are not ready for a plan B.

partnership2_avsbLet’s assume that you are down but not out. You take a pause and compose a plan B. Now you are smarter and your iterations are way shorter. And you completed an iteration B (according to your plan B). And then iteration C and D. But still no significant result. How long will you be able to continue? How many iterations would you promise to your partner to partake?

If you think that these questions are not applicable to you because you have got a brilliant business idea… Oh well! Please try to prove your point in practice. And I will keep my fingers crossed for you. Unfortunately, statistics is at my side: in 99% of cases you will have to come back and re-read this article…

Question VI: Money Expectations.

For a first attempt, what is your money expectations? It is not very important question, but knowing that will help you to understand your partner better and even to predict his or her future actions as soon as you get first results.

Question VII: How you are going to spend profits?

What are you going to do with profits: to blow the money or to reinvest into business? You and your partner should be on the same page. Otherwise, one of you reinvests money and develops future growth while another one just enjoys higher profits without equal participation. This may become a very valid background to part.

Question VIII: How to split?

What if you loose interest to work, say, 2 years from now? What we are going to do? How to decide how to split the business in such circumstances and so on. I faced such a situation and, fortunately, I didn’t have any problems in handling it, but potentially could: I missed to ask this right from the very beginning. It is a very uncomfortable topic (since it looks like you suspect that your partner is a potential schlepp), but you have to ask all this. Be gentle and very polite, say “one of us” rather than “you” when discussing. But woe is you if you feel too embarassed to ask…

Question IX: Other conditions for a partner to exit

The previous question tackles just one foremost case of a partner exiting a startup. There is a bunch of others: upon disability, upon death, upon sale etc. You don’t want to get a sudden message from your partner like “I decided to partnership2_exit-signquickly sell my share of our business. If you don’t buy within one week, I’m going to sell to other people…”

To mitigate such risks and to avoid such difficulties you should apply to an experienced lawyer. Expensive? Yes! But in many cases when you part with people (especially when you already have what to share), you will face conflicts about what was not discussed. Maybe today it is too expensive and does not make any sense, but as soon as the assets of your company reach a certain threshold, you should compose an appropriate buy-sell agreement.

Question X: How to measure the performance?

How to divide business if partnership is not fair enough. An example from real life: you ask your partner to complete a task which is crucially important and takes an hour. Your partner disregards your request for two weeks. This repeats over and over again till the last straw breaks the camel’s back. And in response to the rebuke he or she says: “Oh, I never thought that it is so important to you!” Here I will omit what you think and say in return, it is obvious that such partnership cannot last long.

In order to deal with the situation like this effectively, you should have discussed how to measure the performance of each partner. What is an acceptable response time. What to do next in such a situation – either shut down the company or buy-sell shares. All this must be discussed right at the very beginning.

Question XI: Ask about previous failures

If your potential partner has failed in the past, ask why. If his answers do not satisfy you, better avoid partnership. For example, if his answer is about bad market conditions or incorrect people, highly likely his infantilism will ruin your mutual business. But even if you are satisfied with the answers, this does not guarantee success.

Question XII: Compare notes about future.

Compare thoughts about growth of business, scaling, delegating, management etc. A consensus here is nice to have, and issues here should not stop you. You will have a lot of time to reconcile these thoughts down the road. But if you disregard all these items, they can potentially slow down your business and may beget lots of smaller problems.

Bad news, even though you and your partner are on the same page about everything, this does not guarantee any success. It is like two artists who belong to the same school and have similar technique and so on. This doesn’t mean that these two artists will be able to create a masterpiece together…

Question XIII: Big goals vs trifles.

Everybody dreams about big goals. But ask yourself and your partner if you are ready to make smaller, way less heroic deeds day in day out to reach those big goals. If the answer is no, your business is doomed to fail. A partner who doesn’t want to squander his gifts on trifles will become a huge dragging chute for your business. I’m not a great fan of bombastic quotes, but this one suits here:

Success is the sum of small efforts – repeated day in and day out. (Robert Collier)

So, if you believe that Robert Collier was right, steer clear of such “big dreamers” who don’t want to start with what they have. In my opinion, this is just a mask of procrastination.


Enough questions. Test!

There are mockingbirds who will be able to answer what you expect to hear. Moreover, there are some people who are able to deceive even themselves. And you will automatically be deceived by them. So, do not expect too much from such an interview. But there is an ultimate way of checking. Before starting any significant business, test your partner in a smaller and less significant affair. This will give way more information. This may unveil a lot of secrets. And keep your eyes open to see any discrepancies between the answers and  his (her) real actions.

Instead of a summary

It is hard to sum up the article which is already a summarization itself. But the key points are:

  • Don’t be delusional
  • Trust but check
  • Test your partner on a minor, but real affair

And the last but the least, if you can afford, better use the services of an experienced facilitator – such a help can be priceless.

This was the Part 2 of Partnership in business series of articles. The first one is Partnership In Business. Part 1 – Your Chances.

Partnership in business. Part 1 – Your chances.

Partnership in business. Part 1 – Your chances.

We all know that business is not a proper place for an one-aloner. But we automatically make conclusion that a partnership in business is a magic wand to solve all our problems. We tend to think that it is always rather positive thing, and then may feel very disappointed when this setting of our world-view collides with the reality!

This article is the first one in the series of articles regarding partnership in business: myths, legends, misconceptions and the cold truth… It is based on my own experience combined with the bitter pills taken by other people from who I learned a lot. This article will be about:

  • Good vs No-good partnerships
  • Your chances of getting a business partner

Good vs No-Good Partnerships

Having a partner in business potentially (you may even read: allegedly) has a lot of perks: it is way easier to stay focused and energetical when you are surrounded by like-minded people; we always feel safer in the group; you will definitely help each other to overcome the downturns in your mood; you will have more ideas and creativity (some say: 1 + 1 equals 11); the group of people secures higher level of adequateness. And so on. Not surprising that venture capitalists would prefer to invest into teams rather than individuals.

So why did I say “allegedly” then? Because it is truth, but with bunch of niggles and caveats. And the list of exceptions sometimes is that long that it completely downplays the rule! In order not to be proofless, I will bring couple of examples.

Example 1: Tandem bike. Please imagine a tandem bike which you share with a partner, who sits behind you. You are pedaling  as hard as you can, but after some time you start noticing that your partner tends to save strengths too much. In fact, you are pedaling singlehandedly, say, 70% of time. Carrying double weight, of course. Do you still think that such a partnership is beneficial for you?

I brought this analogy because I saw couple of startups like that. By the way, I’m not the author of this parallel. It was made up by my wife, Natalia, who also witnessed such distribution of the efforts in the aforementioned startups.

Example 2: Throwing fingers. Remember rock-paper-scissors? Please form a group of three. Your task is to throw fingers simultaneously, without any preparation and preliminary agreement. Goal: your group must get exactly 7 fingers in total. You may change this number if you want.

The purpose of this exercise is to demonstrate that even such a primitive interaction in group of three can be a problem. By the way, I tried this exercise couple of times with different groups of people. And it never worked from the first attempt.

Moral of these examples: not all partnerships will be beneficial for you, and in many cases an interaction between people leaves much to be desired. In further articles we are going to formulate the criteria of good partners/partnerships in business. Moreover, we will try to cover the measures how to fix, mitigate or eliminate the above mentioned and other potential problems .


Your chances

The idea of partnership is based on mutual benefits: you must amplify good qualities of each other and mutually compensate bad qualities of each other. It must be a win-win situation. Otherwise it turns into parasitizing. I will rephrase Lope de Vega: “Partnership prefers equality”. You don’t have to exactly same, but you must be comparable with your partner in business.

Now let’s talk about your chances of partnership.

When you just started your entrepreneurship and you don’t have any experience under your belt, you have very limited chances for partnership. You can pick up a partner only from the same kind of beginners. Anyone who is more experienced than you (and there is a lot of such people out there), wouldn’t benefit a lot from any partnership with a newbie. Unless, of course, you have $10 mln to invest into business, but we do not take such extremes into account.

Time and experience will make you more covetable business partner. And as you evolve, your chances to find more or less good potential partner will increase. But just to some extent.

Let’s assume that you continue to grow as an entrepreneur non-stop. After some moment you will find out that now you can find fewer and fewer potential partners. Yes, more and more people would find interaction with you beneficial for them. But not as much for you, right? There will be fewer and fewer people comparable to you.

The chart below illustrates the described trend:

Probability of partnership depending on the skills level
Probability of partnership depending on the skills level


This happens to everybody who surpasses a certain level of skills in business. I will try to use Steve Jobs as an example. I know it is a thankless job because here we refer to rather myths and legends, but nevertheless. Do you think Steve Jobs had really equal partners? I ask about the last couple of decades. Not about the very beginning, when Steve Wozniak was such a partner, but about the Pixar-and-later times. Can you name anybody? I disbelieve that, and the reason being: Steve Jobs became such an utmost entrepreneur, that it was almost impossible for him (and even not needed) to find anybody comparable to him. Moreover, other business gurus, comparable to him, they run their own very successful businesses. In truth, after you reached quite high level of entrepreneurship, it becomes like among the immortals: “There can be only one”.


Summary of Part 1

  • Contrary to common belief partnership may be not necessarily beneficial for you;
  • It can be mutually rewarding on certain conditions;
  • You may face significant difficulties in interaction;
  • Beware of parasites;
  • Your chances to find a good business partner change with your skills level: very low for a beginner, they grow with the skills level till a certain point, after which they start declining more and more.

To be continued in the article Partnership In Business. Part 2 – Right Questions.



Lesson 007 – Investment Risks: Montana!

Lesson 007 – Investment Risks: Montana!

A group of prisoners is bored to death already: they discussed all the topics possible, told all the jokes they knew and played all the card games they knew. They don’t know how to entertain themselves. So, when a newbie enters the cell, they ask: “What card games do you know?” The new guy says: “Well, I know poker, preferans, whist, ombre, montana…” Everybody is curious about this new game, montana, so they say: “Let’s play montana!” The newbie say: “Okay, the game is so simple that you will get the rules down the road. Let’s start!”
So, the deck is shuffled, and each player receives six cards. Our hero gets up, throws his cards on the table and says: “Montana! I won.” And takes all the money. Everybody looks adverse and puzzled, so he explains: “Whoever gets up first, says “Montana” and throws his card on a table, wins. Very simple.”
Everybody grins and offers to play again. The new guy is shuffling the deck again and is handing over 6 cards to each player. While he is doing this, everybody who just got cards, gets up, throws the cards on the table and says: “Montana!” Our hero is the last to take his cards. He waits till the last one throws the cards and says “Montana!” Then he slowly puts his cards on the table, and says: “Trump montana! I won again.” And takes all the money…

(An old-old joke)

In fact many people repeat the same mistake when it comes to investing: they don’t know about trump Montana! In this article we are going to discuss the most remarkable risks you definitely will face investing. First we will list the most important risks. Last and foremost – we will discuss how to mitigate them.

Market Risk

Pretty much everybody knows about this risk. It is the most obvious one: if you invest in stocks or mutual funds, be ready that if the whole market drops, your investment will highly likely drop too.

The most important question here is: how much will the drop of the market affect my investment? The answer for each particular publicly traded company is in its beta. For example, the Beta for MCD at the moment of writing is 0.64768:

It means that if the market drops today by 1%, McDonald’s will drop accordingly by 0.64768%.

Such a risk is called systemic: it affects the whole system, i.e. entire market or financial system. There are also non-systemic risks – they affect particular companies or industries.

Foreign Currency Risk

Let’s assume you bought OGZPY – shares of Gazprom, russian gas giant, back in 2013. All the profits Gazprom makes are in Russian rubles. Because of the sanctions against Russia and other factors, the value of Russian currency has chopped in half. So, even though they can report even some growth, the dividends you are going to receive today will be negatively affected by RUB-to-USD conversion rate.

NOTE: to be more precise, OGZPY are not technically shares of Gazprom itself, it is an ADR.

This risk is also known as Foreign Exchange Risk, or FX Risk, or Exchange Rate Risk, or just Currency Risk.

Interest rate risk

What happens if you buy stocks today, and tomorrow FED will increase interest rate?

To answer this question let’s look at what happens in the financial system. If interest rate grows, any financing becomes more expensive (both for people and organizations). So, everyone’s access to “cheap” money decreases. Many companies depend on these financing in their operations. So, less cheap money for them means shrinking of their business. Plus, of course, their clients are now short of money too. Thus, their earnings will go down. Obviously, less profitable business costs less. So, in general, stock market will go down. So do your shares.

At the same time, bank deposits become more attractive: they now will generate more interest.

Corporate bonds and government bonds will react to growing interest rate differently: corporate bonds will go down (the same reason as for stocks), but government-issued bonds will go up (in a way, they will behave same as bank deposits).

IMPORTANT! When you make any investment (stock or bonds purchase, bank deposit etc.) you must be aware of this risk: what happens if interest rate changes. This is another example of systemic risk.
Problem #12: What happens to all above mentioned investments if Fed decreases the interest rate?

And one more thing: bear in mind, that this risk can affect your investments directly (when it affects their market price, as we described above) and indirectly (when you already locked down your money and cannot switch to another, more profitable investment right now).

Industry Risk

The name of the risk speaks for itself: something affects the whole industry as opposed to single companies. Examples: price of gold affects the whole gold mining industry; recent turmoil with oil prices affected several industries related to oil; a disruptive innovation like Square-Up can theoretically affect not just Mastercard or Visa, but the whole credit card processing industry etc.

Business Risk

There is always a possibility that a company will have lower than anticipated profits or even experience an

All eggs in one basket

unexpected loss. This risk is driven by enormous amount of contributing factors like competition, change of input costs, lawsuits against the company, bad entrepreneurship, some unusual circumstances affecting sales (for example, an unusually cold summer affects the sales of soda pops and ice-cream, it also affects the consumption of electricity etc.) and so on.

How to mitigate this risk? Diversify! By the way, this is a non-systemic (or unsystematic, or “diversifiable”) risk.


MMI Risk

MMI stands for “Me, Myself and I”. In many realms your worst enemy is you. Investing is one of such realms. This refers to lack of knowledge, cognitive dissonance (when you continue doing something wrong, because you afraid to admit a mistake), over-excitement (when you buy something just following the hype and frenzy or when you make a stupid speculative decision), lack of patience and so on.

How to fix this? Just learn on your mistakes, be forgiving to yourself, every time explain to yourself what for you are going to do this or that, and refer to other people’s opinion (not necessarily experts or mentors, I ask my wife from time to time).

Call risk

This risk can affect “gentlemen who prefer bonds”. Callable bonds. Or debentures. Say, you bought a debenture which matures in 2049 and has a face value of $100. The price you paid was $115. And you forgot to look at its Call Date (which was, say, in 2014). Now there is a risk that the issuer will redeem them (call) before they mature – at any moment starting Call Date, i.e. even today. If it happens, you will get back just a face value, so, your loss will be $115 – $100 = $15.

And trust me, any issuer of callable bonds or debentures will do that as soon as maintaining them becomes too expensive!

How to avoid that? Look through the prospectus and find this information before making decision to buy.



Though this list of risks is not exhaustive, I tried to compose it from the most interesting and practical gotchas an individual investor can face. The risks here are systemic or related to the particular industry or company.

The most important thought about managing risks is this:

In theory you can protect your investments from any risk (in more details we are going to discuss hedging risks later, in other article). But, almost always, the cost of eliminating 100% of risk will be that high, that it will equally downplay your return. So, you have to accept a certain degree of risk.

And now let’s sum up some measures to minimize the aforementioned risks:

  • Form your portfolio according to your risk tolerance;
  • Don’t be too aggressive;
  • Read prospectus;
  • Know what you are buying and deal with only what you understand;
  • Make sure that the business behind equities is fundamentally strong;
  • Keep an eye on the state of things within industry, not just a company;
  • Diversify;
  • Learn on your mistakes.
Lesson 006 – Buybacks. The good, the bad and… your call

Lesson 006 – Buybacks. The good, the bad and… your call

Hello, my Dear Readers, this is the Lesson #6 about Investing. And, as I promised in one of the previous lessons, I’m going to talk about stock repurchase programs (buybacks) in this lesson. Many beginners either undervalue (like me 7 years ago) or overvalue buybacks. Both are typically incorrect, and both will have to take bitter pills. I hope this article will reduce the amount of bitter failures in your investment career. Let’ start.

What is buyback

Buybacks is a program by which a company buys back its own shares from the shareholders, reducing the number of shares outstanding. The following example will illustrate this concept better.

The Good

Example: company A cannot expand its business anymore – the business is okay, but already reached its physical limits. So, every year they report a growth on net income, but this is the growth mostly due to inflation and population increase. The management decides that every year they will buy back certain percentage of the shares outstanding.  For me as a shareholder it means that now I own bigger and bigger share of the business: I still own the same amount of shares, but there are less shares outstanding.

Problem 10: Last year EPS was $1. This year 10% of the shares were bought back. Assuming that net income for this year will remain the same, what EPS should we expect? Assuming that the average P/E ratio for the company is 10, what was the average share price last year, and what average share price should we expect this year?

Sounds great. But can be better?

A management of the company typically has the following ways of using the profits:

  1. pay dividends;
  2. re-invest into the core business;
  3. save money for a rainy day;
  4. stock repurchase.

And the answer to the question above depends on the type of investor and a situation with the company. If we talk about an income investor, cash dividends is the preferred way (sure! Dividends is the main incentive for such an investor to buy shares in the first place).  If a business is cyclical, the option #3 can make more sense if the management anticipates next downturn quite soon. If the company still has room for growth, and investing into its core business will be more beneficial for shareholders, the management should prefer option #2. And only if they ladled up all other possibilities, they should consider stock repurchase program.

What happens to the shares?

One of two: either they are physically destroyed (cancelled or retired) or they are stored at a company’s Treasury Stock account (we will talk about this account significantly later, when we will plunge into reading financial statements). In any case such shares cannot vote, there are no dividends on them and they do not count into the shares outstanding. It makes sense: a company cannot own itself!

Problem 11: Why would the management opt for keeping repurchased shares at Treasury Stock account rather than physically destroying them?

The Bad

Example: Company Z  has 1,000,000 shares outstanding. Its net income for previous year was $1 mln. This year the management expects an income of $950,000. The management decided to buy back 5% of shares outstanding to mask this fact. As a matter of fact, EPS will remain $1, same as was last year.

We can see that the management wants to get shareholders tricked by earnings per share statistics. This is so called detrimental buybacks.

If you see that Net Profits declines, but due to buybacks EPS looks okay, steer clear of such companies! (unless, of course, you have a short-term speculative interest).

Shares Issuance

As opposed to stock repurchase you may see that some companies issue more shares. Of course, for you it would be rather bad to see that your ownership diluted as a result. Many investors consider such state of things unacceptable, and I totally understand them. But they potentially can miss extremely good investments by refraining from some of such companies. Please look at the partial screenshot from a company report at below – it shows EPS and buyback stats:


As you can see, EPS grew 5 times and Shares Outstanding increased just 2 times during the same period. Provided that other company’s fundamentals are quite strong, I would put up with shares dilution. And yes, it is a real company… Under Armour Inc. Please, don’t get me wrong, I do not recommend this company in any wise. I’m just saying, that sometimes it makes sense to turn a blind eye on the fact that a company constantly issues more shares.

Thanks for reading and may the good buybacks be with you!

Lesson 005 – Golden Rules of Investor

Lesson 005 – Golden Rules of Investor

This is our next lesson regarding investments. It will be about the Golden Rules, or The Commandments Of Investor. Do not treat this list as just nice-to-know stuff: all these rules are written not in ink, but in sweat, blood and tears of many-many investors. Moreover, one of these rules is extremely important for us as for fundamental investors – I will stress it out later on in this lesson. Off we go!

We will start from briefly listing the Rules. Here they are:

Be ready for the losses.

Investing or business without losses is an oxymoron or Utopia. Nobody can always win in investments world. I can’t remember who said that, but the quote illustrates this fact:

Each entrepreneur at home has a sack, tied up with a red band. This sack contains the shares of companies he owned and which went to wall.

I have a collection of stocks like that too. Even though I don’t have them in flesh – they are all physically were at my brokerage accounts – but I have a list of my investments failures with important conclusions beside each one. I call it my Cemetery of Idiot’s Dreams. Second Cup, Real Goods Solar, GII.UN – to name a few. They either a result of over-excitement and reckless speculations or trace their roots into the times, when I knew too little about fundamental investing. Anyway, I will conclude this part with the words of an old and wise Jewish saying:

Thank you, Lord, that you took just the money!


Don’t be too aggressive

The rule “Don’t be too aggressive” also reads as “Avoid too risky companies”. How to measure the risk? In a way it is already statistically measured by such ratio as Beta. Beta measures volatility of the particular stock in comparison to the market. Beta = 1 means that it behaves exactly as the whole market; Beta = 10 means that this stock will react by 10% change in return to 1% of corresponding market change. So, another reading of the same rule: avoid companies with too high Beta. And, of course, if you speculate and you are aware of what you are doing, this rule is not applicable.

Once again,  most of the companies in your portfolio should give you stable not-risky income.

Problem #7: Take a couple of companies – first to pop into your mind. Please find out their Betas.

If you can’t afford to lose

Again, another very Captain-Obvious rule: if cannot afford to loose this money, do not even think of investing it! This an extreme edition of more general principle:

Your investment vehicle must correspond to your goals and time horizon.

An example: you need to buy a car in 2 years.  It would be a very risky move to invest the money into stocks or mutual funds in this case: if the market goes down, your investment will shrink accordingly, and, if it happens, because of short time span, the market will highly unlikely recuperate by the time you need the money. Some may say: “Yeah, but I will invest into blue chips only!” That’s good, but the market risk affects them as well. Of course, they will probably be less impacted by any crisis and will recover very soon, but all this requires time (and since you need a car in 2 years, you may not want to wait, say, 4 years).



We will talk about diversification in more details later. Just couple of recommendations here.

First – companies in your portfolio should belong to ideally absolutely different sectors and industries (the less interconnected they are – the better).

Second – statistics says that the portfolio of 20 companies is almost same good as the whole market index. Provided, of course, that they belong to not-very-interconnected sectors and industries.

Third – 20 companies in the portfolio is already too many for a newbie and non-professional. 10-12 is already enough for a quite good diversification, but much easier to maintain.

Nobody can predict financial future

Nobody in the financial world can predict the future, including interest rates, stock quotes, oil and commodities prices, market dynamics, frenzies and crises, future values of volatility index and so on. Nobody, including fund managers, journalists and financial experts etc. So, please adjust your expectations accordingly! Don’t get me wrong, you will be able to make educated decisions, relying onto fundamental analysis and common sense, and they will be accurate to certain extent. But nobody can guarantee you anything, so, don’t trust “gurus”.

Invest only in what you understand

This doesn’t mean that you need to be a doctor to invest into pharmaceuticals or a programmer to invest into IT etc. This rule should read: Know the nature of business! An extreme edition of this rule:

Never invest in any idea you can’t illustrate with a crayon. (Peter Lynch)

If someone offers you to buy a shop at the corner, you probably will ask a lot of questions (like what revenue it generates, how much is the rent etc), but the first question probably will be: “What does this shop sell?” But by some strange reason people forget to ask the same question about the companies when it comes to buying them at stock market. Never invest if you don’t understand the nature of business.

By the way, approximately 40-50% of my bad investments (see the Cemetery of Idiot’s Dreams above) in the past can be at least partially explained by not following this simple rule!

Do you remember that in the very beginning of this lesson I said that  one of these rules is extremely important for us as for fundamental investors? This is exactly this one!

And now a fly in the ointment: this rule is easier said than done. Sometimes we think that we know what the companies are doing, but in fact we don’t. For example…

Problem #8: What is the main business of McDonald’s?

Problem #9: What is the main business of payroll companies? Say, ADP?

Don’t have too many companies in your portfolio

Another principle is best explained by Peter Lynch:

Owning stocks is like having children – don’t get involved with more than you can handle.

In our case to handle means at least to read annual reports and follow the major news which can affect the business of them.

Moron-resistant companies

This is the only nice-to-follow rule here. But it is important though. When you assess any business, it is very important not only to make sure that it has a durable competitive advantage, but also that this advantage doesn’t require too much of:

  • research and development;
  • capital expenditures;
  • sophisticated management.

To illustrate this: X is a top-notch software company with durable competitive advantage and perfect management. Company Y is a tobacco company. Y also has a durable competitive advantage. All else being equal, which of them is more moron-resistant in terms of management? Look at X, with its short lifespan of the products, tons of research and development and a cut-throat competition from other rivals – it must be very management-sensitive as opposed to Y.

Ideally, you should invest in the companies which can be managed by a complete moron…

By the way, I like the continuation of this phrase: because sooner or later any of them can get a CEO who is not as bright as a bulb!

The last but not the least – Test yourself at Golden Rules of Investor Quiz if you have digested this article successfully.