Month: January 2024

An idea I think about from time to time is how our appreciation for any given skill or experience inevitably transcends to a spiritual experience.

Writing, for example, after all these years, is a spiritual experience. I can say the same for many things I’m passionate about.

A good friend framed it beautifully when he shared – as our passion, skill, and appreciation for a topic goes up, we inevitably move from understanding the science, appreciating the art, and then experiencing its spiritual nature.

It resonated.

One of the few guarantees in this life is that every up will be followed by a down. And vice versa.

We never know when we’ve hit the crest of the up-wave or the bottom of the down wave. But, as sure as we are that the sun will rise tomorrow, we know enough to know that the opposite will come.

It is an appropriately sobering thought on the up and an encouraging one on the down.

It is that understanding that helps us build equanimity and gives us the greatest gift of them all – perspective.

And where perspective resides, wisdom follows.

When I first added a quick run in the morning to my routine, I used to go out with 3 layers, a beanie, and a bandana. Mid-way through the run, I’d have to carry my jacket and the beanie as it’d get far too warm.

I’ve learnt from those experiences. I step out now and embrace the chill for a few minutes knowing that I’ll be feeling warm soon. And if I really wanted to feel warm sooner, I could.

Every morning, this experience reminds me of an idea I call “internal weather.” The external weather may be near freezing – but my internal weather feels different. By the time I run up that second hill, I’m sure I could even get down to my inner layer and be just fine.

An amazing contrast.

Of course, the external weather matters. But it is amazing how much I’m in control of my response to it.

It is a beautiful daily reminder of the insight around being proactive. It is easy to be overly focused on reacting to the external weather. There’s always a problem thrown at us – the economy, that skeptic, that person who doesn’t like us, that result that didn’t go our way, and so on.

But we always have the dials – typically turned with intentional effort – to change our internal weather.

A couple folks wrote in about day before yesterday’s note on appealing to logic. They acknowledged that the first step is to figure out if logic is even an option.

Marge, however, posed the next question – what happens when we realize we’re dealing with emotions? What levers was I referring to when I said “Use the right levers, we must”?

First up, I think the important step is differentiating a problem that can be solved with logic vs. emotions. Too often, we waste time trying to logic our way out of a decision that is emotional.

Next, once we realize it is all about the emotions, the next step is to understand the fear and incentives* involved.

Only then will we understand the way out.

*I think fear and incentives are the most powerful forces in the world.

“I only start counting sit ups once it begins to hurt.” | Muhammad Ali

I think of this every time I try to go easy on a workout.

The pain shows us the way – in our workouts and in our life.

A good first step to decoding how to move when we’re stuck on a problem that involves influencing others is to ask ourselves if the problem can ever be solved by appealing to logic.

Often, we find ourselves incredibly frustrated as we keep attempting to shine a light on the logic… only to realize that it wasn’t ever about the logic.

Use the right levers, we must.

I learnt about this exchange in the movie Lawrence of Arabia where Lawrence extinguished a match between his thumb and forefinger. William Potter, another character, surreptitiously attempts the same

William Potter: Ooh! It damn well ‘urts!

Lawrence: Certainly it hurts.

Officer : What’s the trick then?

Lawrence: The trick, William Potter, is not minding that it hurts.

The trick is not minding it hurts indeed.

PS: if you’re getting this via email, I’ve temporarily tried changing the “from” email so replies don’t get a failure message. Still trying to debug the issue. Hope this works in the meanwhile.

“To be rich, you don’t need to make more money; you chiefly need to better manage the money already flowing through your hands.” | Kevin Kelly

While it needs to be taken with a pinch of salt, the deeper point is that earning more alone isn’t and shouldn’t be the only tactic in our personal finance strategy.

In the long run, our ability to create wealth is more likely to be a function of our ability to harness the power of compounding.

There’s no point having a great offence if our defense leaks goals.

Stephen Covey was giving a seminar on the Oregon coast and a man came to him and said he really didn’t enjoy coming to the seminars. He lamented that while everyone enjoyed the coastline, he spent his day worrying about the grilling he’s going to get from his wife at night.

She grilled him every time she was away – What did he eat for breakfast? Who else was there? What happened at lunch? Who was with him? What did they talk about?

And he knew that what she really wanted to know was who she could call to verify everything he told her. Her nagging took the fun out of the whole experience.

They talked for a while and he then made an interesting comment. “I guess she knows all the questions to ask,” he said a little sheepishly. “It was at a seminar like this that I met her … when I was married to someone else!”

“You’re kind of into ‘quick fix’, aren’t you?”

“What do you mean?”

“Well, you’d like to take a screwdriver and just open up your wife’s head and rewire that attitude of hers really fast, wouldn’t you?”

“Sure, I’d like her to change,” he exclaimed. “I don’t think it’s right for her to constantly grill me like she does.”

“My friend,” Covey said, “you can’t talk your way out of problems you behave yourself into.”

This remains one of my all-time favorite 7 Habits stories. And “you can’t talk your way out of problems you behave yourself into” is one of the quotes that has stayed with me since the first time I read it.

PS: I’m aware that the “reply to” isn’t working. I’m working on fixing it – in the meantime, I’m on rohan at rohanrajiv dot com.

After rave reviews from good friends, I finally got to the Costco episode of the Acquired podcast. It justified the rave reviews – thank you Acquired team. Here were my reflections –

1. The first part of the Costco story is the story of Sol Price – probably one of retail’s most prolific inventors. He invented modern retail as we know it with the creation of Fedmart (that inspired “Walmart” and “K mart” ) and then Price club which led to Costco.
   
2. Sol Price was an inventor who was very aware of the fact that he wasn’t as good at running his inventions. However, I loved the anecdotes of just how principled he was. Sam Walton – the founder of Walmart – famously said he stole the most ideas from Sol Price. Sam Walton’s tape recorder was once confiscated at a Price Club. When Sol heard of this, he immediately mailed it back.
   
3. Jim Sinegal, Costco’s co-founder, famously corrected someone who said he learnt a lot from Sol to emphasize “I learnt everything from Sol.” Costco’s origin and biggest ideas – memberships, the warehouse concept, unique approach to inventory, etc., can be traced in a straight line to Sol Price’s innovations.
   
4. One of the magical parts of Costco’s strategy is the warehouse concept. As they’re a warehouse, suppliers deliver directly and items are immediately available to sell. They turn items over roughly 1 in 26 days – i.e., before supplier bills come due in 30 days. It is wild how beautifully their cash flow system works.
   
5. Costco has a mandate of a maximum of 14% margin with an average at 11%. So, for every dollar they save, 89 cents of value goes right back to the customer.
   
6. Costco doesn’t do loss leaders – goods sold at breakeven or at a negative profit – to bring customers into stores as it means fleecing the customer elsewhere. The only place where they barely break even is $1.50 hot dog – a tradition that has lasted four decades.
   
7. Costco have been reducing their SKUs over time – they’re currently in the range of 3000-4000 (other retailers store 50,000+). It is a mark of how much their customers trust them to pick the right thing. This also means each buyer REALLY understands the cost of every ingredient and monitors it carefully. And while they have tremendous power over suppliers given they go big on few SKUs, they are known to be tough but fair. Their objective is passing value to the customer.
   
8. Kirkland Signature is the largest consumer packaged goods brand in the US – $52B in sales out of ~$230B in 2023. Again, a symbol of how much customers trust Kirkland.
   
9. Costco rarely vertically integrates. One of the few exceptions is with chicken where they’d otherwise have to deal with a small group of firms (who then have pricing power). They produce 200 million chickens in-house a year.
   
10. They pride themselves to be learning machines. Stores in year 1 today are doing better than stores in year 5 from 2014. This shows up in their $ per squarefoot. They live in rarefied air – it is closer to Tiffany’s (who sell diamonds!) and are orders of magnitude above other retailers.
    
11. Their memberships are a profit center which contributes to 70% of their operating income. Their memberships also ensures record low shrinkage/stolen goods. Another reason for that record is staff who are paid $26/hour vs. $19/hour in other places with fantastic benefits. This means 4x lower turnover and high loyalty.
    
    Finally, Costco’s executive membership costs twice the normal membership. And if you don’t get enough value to make up for the extra cost, they give the money back to you. Only at Costco.
    
12. It is amazing how much Costco has inspired amazon. When Amazon was going through a difficult time after the dot com bust, Jim Sinegal and Jeff Bezos met for coffee and Sinegal explained to Bezos that there are two kinds of companies. The first focus on extracting value to customers and the second focuses on always giving customers value. Costco was firmly the second kind.
    
    That day, Bezos went back and sent an email to his team that Amazon would be the kind of company that was always focused on giving value back to customers. Prime memberships, of course, have strong parallels to Costco’s memberships.
    
13. Most of Costco’s senior executive team started 30-40 years prior. Their current CEO started as a forklift driver.
    
14. This, then, was the part I found most inspiring. The Costco exec team is such a phenomenal example of a quiet group that isn’t showy. Instead, they’re quietly focused on improving the retail experience for their customers. They’ve grown 10% every year, an incredible feat over a period of 30 years with no end in sight.
    
    I loved this because it is a beautiful counter example to job-hopping every 2 years. Complex fields take time to master. And I’m both inspired and grateful for the Costco executive team’s mastery over the business.