Category: Wealth

The Cost per Use Principle

Do you want to spend less money than you earn, so you can save more, invest more, and ultimately achieve financial freedom?

Then I suggest you pay attention to the Cost per Use Principle:

For each material possession (especially the most expensive ones), calculate and minimize your cost per use.

Crave a swimming pool? Then interview someone who owns a pool and calculate his cost per use. It could be twenty dollars per swim.

Want to go on vacation with an RV? Then calculate the cost per night and compare it with a regular rental car in combination with hotels/motels/bungalows. The RV rental alone can easily be 100-150 EUR per day. Gas, campsite fees, parking, and additional public transportation not included. A regular rental car costs 20-25 EUR per day, with much less gas expenses. That leaves 75-130 EUR per night for the accommodation and parking. I love renting RVs myself, but you just have to be aware that more often than not, it’s the more expensive option.

Want to buy a Tesla with the largest battery pack and performance package? Compare the cost per kilometer with a smaller battery and regular performance. And then compare it with a pre-owned one. I talked to people who ended up paying more than $2 per kilometer ($3.22 per mile). So if I ever would buy a Tesla (I almost did), I’d do a careful calculation and try to bring my cost per kilometer down as much as possible.

Do your parents own a vacation home? You’d be surprised how much they pay per night if they don’t use it often. For the same money, they could often stay at 4 or 5 star hotels, and not always go to the same place.

I am aware that this is a purely financial perspective. You might want to consider convenience, quality of life, potential appreciation of assets, potential rental income, and other factors that are important to you.

Even more important than that is to make sure to consider the total and true cost of ownership of anything you own. Including maintenance, insurance, storage, opportunity cost of invested capital, your own time, people you need to hire, hassles/headaches, and all other directly and indirectly related expenses.

Of course, the most efficient cost per use is zero. This is achieved by either getting your things for free, or not buying them at all. Here are some hacks:

Hack #1: Instead of buying something, put it on your wishlist and wait for 48 hours. Often, your purchase impulse fades away. Example: Last year, I considered buying an electric moped. I ended up not buying it, and am using my bicycle (in combination with mobility-as-a-service options) ever since.

Hack #2: Force yourself to sell or give away one item before you are allowed to purchase another. Advanced: Give away two or more for each new one.

Hack #3: Make it a habit to buy things used. Example: I recently needed more teaspoons, so I went to a thrift store and bought some for a fraction of the price at IKEA.

Last year, I increased my iPhone cycle from 2 to 3 years, bringing my cost per day down by 33%. If I increase it to 3.5 years, 6 months after the introduction of a new model, I’d be able to buy it second-hand, decreasing my cost per use even further.

This is a powerful principle, and I hope that it will serve you as well as it did me.

[Hat tip to Mr. Money Mustache]


Posted on by Remo Uherek

31 Takeaways from START Summit 2019

My main motivation for going to START Summit 2019 was to meet old friends and acquaintances from the St. Gallen area, but also to learn from the talks. I was positively surprised. It ended up to be one of the best and most innovative tech/startup conferences I have ever attended. Check out the opening video as one of the details they nailed.

Here are my key takeaways:

#1: The University of St. Gallen (HSG) has a palpable entrepreneurship vibe. This event has been 100% student organized by 60 students. They had support of HSG’s Dean and the St. Gallen Mayor, both of whom came to the opening. I loved my time at the University of Basel, but looking back, I really missed the entrepreneurship vibe I felt in St. Gallen!

#2: St. Gallen wants to become the hub for eSports, similar to how Zug became the “Crypto Valley”. They started the initiative “Digital Sports Hub Switzerland” to push this forward. (Learned from the Mayor of St. Gallen.)

#3: There is no such thing as an “AI startup”. It always needs to be “AI plus x”, i.e. AI applied to a specific thing. AI itself is not a product, it’s a technology, similar to electricity. (Learned from Richard Socher, Chief Scientist at Salesforce.)

#4: How to build an AI startup: (1) Pick a very specific niche/problem. (2) Collect as much structured data as possible in this niche. (3) Create specialized algorithms that create value. (Learned from Richard Socher, Chief Scientist at Salesforce.)

#5: Ask yourself regularly: “Where can I have the biggest impact, given my personal skills and resources?”. I have added this question to my quarterly life review. (Learned from Richard Socher, Chief Scientist at Salesforce.)

#6: “Essentialism” is a better term than “Minimalism”. It’s not about the number of possessions, but how essential/important they are to you. (Learned from Cédric Waldburger, Entrepreneur and Essentialist.)

#7: Quick tips on how to start with essentialism: (1) For everything you add/buy, remove/give away one thing. (2) Put things you haven’t used in the past 90 days in a box. Then wait another 90 days to see whether you go back those things. If not, give away the box. This battles your loss aversion and the instinct of “I might need this one day”. (Learned from Cédric Waldburger, Entrepreneur and Essentialist.)

#8: “As an investor, it’s important to cut your losses. As an entrepreneur, it’s important to keep going. So there is a difference in mindset.” (Learned from Daniel Aegerter, Investor and Entrepreneur.)

#9: Dragon = a company that returns >1x the whole fund (compared to Unicorn = Startup valued at >$1 billion.) Recent European dragons were Spotify, Adyen, Supercell, Delivery Hero, Just Eat. (Learned from Nenad Marovac, Investor.)

#10: Logitech transformed itself from a PC peripherals company to a Cloud peripherals company. Now multi-brand, multi-category. Vision: Become a Nestlé or Unilever type company. (Learned from Bracken Darrell, CEO Logitech.)

#11: Best team size is a team of 2. Reason: You only have 1 relationship to manage. Team size of 3 = 3 relationships. Team size of 16 = 120 pairs of relationships. That’s why Jeff Bezos at Amazon focuses on very small teams (“two pizza teams”). (Learned from Bracken Darrell, CEO Logitech.)

#12: Large organizations have only one advantage: scale and resources. But one huge disadvantage: complexity and bureaucracy. Startups have the advantage of small teams and less pairs of relationships. That’s why startups can move much faster than the big guys. (Learned from Bracken Darrell, CEO Logitech.)

#13: Logitech CEO has 25 direct reports. This is a wonderful number. As he cannot micromanage them all (because they are too many), he needs to give them responsibility, so they can work autonomously. It’s not a 25 people team either (with 300 individual relationships). It’s 25 single pairs, i.e. 25 subsets of two people. This is manageable. (Learned from Bracken Darrell, CEO Logitech.) [Want to know how to calculate the number of relationships for a given number of people? I did. Here is formula with n representing the number of people: (n*(n-1))/2 e.g. for 25 people it’s (25*24)/2 = 300 pairs of relationships]

#14: Give each new employee this task: “after 30/60/90 days send me a note with things that are broken. What obviously broken/ineffective/inefficient things can we improve?” (Principle: Fish don’t notice water anymore). Logitech CEO meets with each new employee and gives her/him this task. They have implemented many suggestions already. (Learned from Bracken Darrell, CEO Logitech.)

#15: Logitech sees itself as a design company. Why did Bracken Darrell join Logitech as CEO? Because he wanted to be part of a design company.

#16: Pick a very specific niche. How did Scalable Capital (soon €2 billion assets under management) get started? They focused on a very particular target group. Super exclusive. Focused on people with a university degree in business or computer science (i.e. people with a high degree of numbers literacy.). (Learned from Erik Podzuweit, Founder of Scalable Capital.)

#17: California Privacy Act 2018 (CCPA) is coming. It’s similar to GDPR, i.e. everyone who has users in California needs to comply. (Learned from Lisa Gradow, Co-Founder of Usercentrics, a Consent Management Platform).

#18: Privacy = freedom from unauthorized intrusion. Cyber Security = measures taken to protect a computer against unauthorized access or attack. (Learned from Lisa Gradow, Co-Founder of Usercentrics).

#19: Archlet.io won the startup pitching competition. They use machine learning algorithms to make value chains more efficient. They implemented one project so far, and achieved cost savings of 3% for the client.

#20: A great business model for hackers is to become ethical hackers and sell their know-how to companies. Edwin van Andel (Hacker & CEO of Zerocopter) believes that 60% of all hackers could be converted to ethical hackers, applying responsible disclosure principles.

#21: How to fix your security issues? Apply the Security Knowledge Framework. (Learned from Edwin van Andel, Hacker & CEO of Zerocopter.)

#22: “There is no way to happiness. Happiness is the way.” — Buddha (Learned from Daniel Graf, Uber Advisor.)

#23: Kilian Wagner, Co-Founder of VIU Eyewear won the HSG Founder of the Year 2019 award. The other nominees were the founders of Avrios, FELFEL and Globegarden.

#24: N26’s first product was “pre-paid cards for teenagers”. They spent all money, it didn’t work, then pivoted to the current product. (Learned from Valentin Stalf, Co-Founder N26.)

#25: Most of N26 customer service is done via chat. Their new chatbot reduced 20% of customer service requests. (Learned from Valentin Stalf, Co-Founder N26.)

#26: In the real estate space, a lot of digital low handing fruits are still available, e.g. remote signing of contracts with DocuSign. Lot’s of other innovation/disruption potential in this industry! (Learned from Dustin Figge, Founder von Homelike.)

#27: Don’t underestimate the power of mentors. Look for somebody with the same values, who is 10-15 years ahead of you. Don’t do it half hearted. Create a project and systematically reach out to specific mentors! #mentors That’s what I will implement, to find 1-2 additional mentors.

#28: Sennheiser, a 3rd generation family business, was founded in 1945; born out of necessity (needed food for his family, founder was scientist before); started with voltmeters, microphones; today 3000 employees (50% in Germany, still near the farmhouse where the company started); invented the first headphones in 1968; built a new innovation campus; CEO is here in St. Gallen to see what is going on, to not become complacent; the big opportunity is to create audio solutions for iphone/ipad. Video of those devices is great, audio still shitty. (Learned from Daniel Sennheiser, CEO of Sennheiser.)

#29: Audio & video are the future (Podcasts, YouTube videos etc.). If you are not good at it, then hire freelancers to help you! Lack of action is not an option.

#30: “Only do what only you can do.” Always ask yourself: Where is my edge? Then 100% focus on this area. All other things: Outsource them, find partners, or don’t them at all. (Learned from Daniel Sennheiser, CEO of Sennheiser.)

#31: Freigeist Capital investment criteria: How big is the market? Is the team right? Can this have a huge impact? Traditional KPI’s are not important (cashflow etc.). (Learned from Frank Thelen, CEO at Freigeist Capital.)

Conclusion:
If you are interested in the Swiss and European innovation and entrepreneurship scene, you should definitely consider adding START Summit to your schedule in 2020! I will be back for sure. 

Related links:
– My Photos (many pics of slides!)
– My Tweet summary
– My LinkedIn summary


Posted on by Remo Uherek

Twitter is a public utility

I have been using Twitter for 12 years and I love it more than ever.

For me, Twitter is not a social network. It’s an interest community. An idea network. More like a protocol. A global conversation protocol.

Twitter the business

I have trouble viewing Twitter as a regular tech company. Of course, I want Twitter the company to be sustainable and profitable. But, Twitter has a history of not being very good at monetization. It looks like this has improved, as Twitter has been profitable for the past 5 quarters.

I might be mistaken (and I hope that I am), but I don’t believe Twitter will ever find a similarly strong business model as Google or Facebook. So while I couldn’t be more excited about Twitter the product, I am not similarly excited about Twitter the business.

The role of Twitter in society

I believe Twitter plays a different role. More one of a protocol and public utility. Twitter enables real-time global conversation, and it does it better than any other tool. Well, not fully global, as Twitter is currently blocked in China, which might never be resolved. But this is a different story.

A decentralized future?

Jack Dorsey, the CEO of Twitter, is also the CEO of Square, a mobile payments company. Both Jack and Square have been experimenting with and supporting Bitcoin for several years.

I have a strong conviction that the world is moving towards decentralization and privacy. Bitcoin and other cryptocurrencies are an important catalyst for that. So how could Twitter look like in a decentralized, censorship-resistant world?

It could be similar to Steemit. The central database would be decentralized on a distributed ledger. Created content could not be controlled or censored. It only could be moderated in a limited way on the client layer. There would be multiple clients and user-experiences.

Without a central database, the current business model would be heavily disrupted. There would be no data licensing. And advertising would be harder, as there would be multiple clients.

Conclusion

Is that the future of Twitter? I don’t know. What I do know is that I love Twitter and the work of Jack Dorsey, and I will be watching and continue to cheer from the sidelines.

—

This post has been inspired by the recent podcast episodes with Jack Dorsey, which allowed me to take a deep dive:

– Jack Dorsey on Roe Rogan Experience
– Jack Dorsey on Sam Harris
– Jack Dorsey on Tales from the Crypt
– Jack Dorsey on Stephan Livera


Posted on by Remo Uherek

Podcast Ads 101: How to Succeed with Podcast Sponsorship

My own experience shows that sponsoring podcasts can be very effective in driving awareness and sales. I have bought many things triggered by podcast ads, including supplements, clothing and even a new mattress.

Here are the success factors that made those sales happen:

A trusted host
Podcasts are very personal, and loyal listeners spend countless hours listening to their favorite hosts. I would only work with hosts that have earned a high level of personal connection and trust with its audience.

Let the host read the ads
When the host reads the ads, they feel much less intrusive and may even be perceived as useful information. Bonus points if the host ads his own twist to the ad text.

A product loved by the host
The absolute best conversion rate can be achieved when the host uses and loves your product, and includes his own experience/testimonial into the ad text. Most of my own purchases have been triggered by this factor.

A juicy coupon code
This serves two purposes. The consumer has a powerful call to action, and the advertiser can measure the effectiveness of the campaign.

A separate landing page
Sometimes, the company creates a unique landing page, e.g. yourproduct.com/john if the host goes by the name John. This can increase the conversion rate, because a testimonial or special promotion can be added.

Repeat the call to action
The call to action and URL should be repeated multiple times.

Frequency is key
It can take a long time for people to get the message. That is what frequency is for. Don’t book just one or two placements. Book 8, or 24 or 52 placements, spread out over a long period of time. Don’t stop when you or your employees are tired of hearing the ads. Consumers need regular reminders, even if they have purchased from you before. If you want repeat purchases, don’t stop the campaign.

Consider Media for Equity
Some entrepreneurs form a joint venture with podcast hosts. In such a deal, the podcast host gets a share of the business in return for its audience and influence. One such example is Onnit which has partnered with Joe Rogan.


Posted on by Remo Uherek

6 Key Takeaways from Charlie Munger’s 2019 Daily Journal Annual Meeting

Charlie Munger, business partner of Warren Buffett, recently spoke at the 2019 Daily Journal Annual Meeting. You can watch the full recording here.

Here are my key takeaways:

#1: Fish where the fish are
For Charlie, that means China. High-quality companies in China are currently available for cheaper prices than similar companies in the USA.

#2: China
Charlie has outsourced his China investments to Li Lu. This is the only time he has ever given money to an external manager.

#3: Don’t be too active
As a value investor, you need to be okay with inactivity. Be a good picker and then hold for a very long time. For example, Charlie has held Berkshire Hathaway and Costco for many decades.

#4: No exit strategy
Charlie does not have an exit strategy or price target for his investments. He rarely sells.

#5: Have a “Too hard” bucket
Charlie has three categories when evaluating investing opportunities: Yes / No / Too hard. Especially the last category solves many problems. Charlie looks for the easy and obvious opportunities, and discards the rest.

#6: Charlie on Stoicism
He admires stoicism and has learned a lot from stoic thinkers. I didn’t expect anything else. In fact, I view Charlie and Warren as modern stoics!


Posted on by Remo Uherek

What I learned from Sam Zemurray, America’s Banana King

My learnings from The Fish That Ate The Whale about Sam Zemurray:

  • Fire people who can’t get the job done, and replace them by people who can.
  • Fast decisions. Don’t nibble. Get things done.
  • Get your hands dirty. Work hard. Go out to the fields with the machete. “We are here, they are there.”
  • Make gold out of other peoples trash (Sam did this with ripe bananas)
  • Invent things. Be innovative. The company missed to invent the banana box, because Sam was not there anymore. When Sam was there, they were the innovation leader.
  • Founder led companies are stronger than companies where the founding generation has already passed away.
  • Get creative with your solutions! E.g. Sam double purchased land that was owned by two different parties. His opponents hired lawyers. Sam just purchased it twice and got it done. (Effective vs. efficient)
  • Never complain. Just play the hand you are dealt.
  • Want to replace current management? Get enough proxies and fire the board.
  • Listen to the people on the front lines. They have the best information. Go to the docks. Talk to people (scuttlebutt method).
  • Companies have a lifecycle. Even the most innovative, most profitable or most powerful companies fade away. What are the characteristics of companies that survive for hundreds of years? They need to keep reinventing themselves. A young generation needs to take over and rebuild the business.
  • Keep a low profile. Don’t attract too much attention. Be a doer, not an attention seeker.
  • Give anonymously. If you don’t, you are not giving, you are trading (e.g. for status or reputation).

What have you learned? Let me know on Twitter.

(Thank you for recommending the book, Brent Beshore.)


Posted on by Remo Uherek

The efficiency trap

Efficiency is often confused with effectiveness. It can be a trap.

“Efficiency is doing things right; effectiveness is doing the right things.”

Peter Drucker

You can be efficient in doing the wrong things. You can be efficient in doing things you shouldn’t even do. You can efficiently waste your time.

Too often, I make the same mistake. I’m optimizing prematurely. And not asking the important questions.

Efficiency asks us: How can we make this faster, cheaper, with less waste?

Effectiveness asks us: What is the job to be done? What is truly important? What can we eliminate, automate or delegate?

I re-learned this lesson in AI Superpowers by Kai-Fu Lee. China is often not very efficient, because they move super-fast and over-invest. Yet they are hugely effective, because they get the job done, and fast. Be it high-speed rail, mobile payments, or AI, China is brute-forcing its way to success.

You find the same in nature. A tree that produces thousands of seeds isn‘t very efficient. But it’s effective in growing its population.

Efficiency comes from scarcity. Effectiveness sees abundance. Better to waste some money or resources, than to waste time.

Now I understand why Stephen Covey named his bestseller 7 Habits of Highly Effective People and not 7 Habits of Highly Efficient People. (It’s a great book that I can highly recommend.)

To summarize:

Effectiveness first. Efficiency second.


Posted on by Remo Uherek

How to solve the email problem

Recently, a friend asked: “How do you deal with email? I get more than I can handle. Maybe I don’t invest enough time, focus or attention?”

First of all, I don’t have a final solution. It’s a work in progress, as for most of you.

Let’s use the principle of Inversion.

How can we make our email problem worse? We can subscribe to a ton of stuff. We can CC everybody by default. We can write a lot of emails. We can be unclear in our writing.

To improve our email problem, we can simply avoid these things.

How about applying The Regret Minimization Framework?

When you’re 80, will you wish that you’ve spend more time in your inbox? Will you regret responding a few days later? Will you regret having done creative work, instead of being on the email treadmill?

Probably not.

So is the email problem a real problem, or are we making it so? Remember, there are still plenty of people that don’t even use email. They live well. They are successful. They are happy.

Here is what I know: I prefer deep work. I prefer having control over my day. I prefer choosing where I spend my limited attention.

So, I’m learning to be ok with having a messy inbox. I currently have 81 pending emails. Sometimes I take a month to respond.

Here is what I do:

  • Every morning, I start with a blank piece of paper, and write down my most important tasks of the day.
  • Sometimes, one of these tasks is answering an email. Most days, it’s not.
  • I work on my tasks, starting with the most important or most tedious.
  • Once my high-quality attention/energy is depleted, I open my inbox and try to clear it as well as possible.
  • I’m a power-user of the unsubscribe and filter functions. Unwanted emails I can’t unsubscribe I create a filter for.
  • Some emails I simply ignore and archive. The more emails you write, the more you get back. Choose wisely.
  • I use “If… else” statements whenever possible to avoid back and forths: “If option A doesn’t work, try B or C.”
  • I buried the email app on my phone deep into a folder. Out of sight, out of mind. (In the last 7 days, I’ve spent 2h 25m in the email app. Still too much and I’m working to reduce it even further.)
  • When I’m drowning in email, I have to triage and cherry-pick the ones I need to do first. I don’t like the psychology of it. It feels messy.
  • I prefer the FIFO method: first in, first out. That means starting from the last one, and plowing through one by one. You start in the basement, and work yourself up. It’s satisfying and clean.
  • I use a “@WAITING-FOR” tag for emails where a follow-up might be needed or where I’m waiting for a shipment. This works beautifully and I rarely drop a ball. I review my Waiting-For’s every few days.

Another solution is to hire a (remote) assistant. Someone you trust. Someone who understands you. Once well trained, this could alleviate a lot of email pain. This assistant could also help you with purchases, travel planning and similar tasks. Hiring an assistant has been on my mind ever since reading the The 4-Hour Workweek. I’ve not done it yet, but I’m starting to think about it more seriously.

How to you solve the email problem? Let me know on Twitter.


Posted on by Remo Uherek

AI in China

Here are some examples of how Chinese companies are applying machine learning:

Chinese company Yongqianbao is using artificial intelligence to screen data to determine creditworthiness when issuing loans. No credit agents necessary! Watch this CNBC clip about them

ByteDance (a private company, last valued at $78B) uses machine learning to source and push content to users. Their main product is Toutiao. 90% of their users are under 30 years old and on average spend 76 minutes on the site every day, resulting in 1.3 billion articles read every day. Another of their products is TikTok. It gained popularity and became the most downloaded app in the U.S. in October 2018. TikTok employs artificial intelligence to analyze users interests and preferences through their interactions with the content, and display a personalized content feed to each user. I tried it and had to delete it, because it was too addictive.

iFlyTek is specialized on voice recognition and speech synthesis. Watch how they made Trump and Obama speak Mandarin, entirely generated by their algorithms.

(I learned this from AI Superpowers by Kai-Fu Lee.)


Posted on by Remo Uherek