Author: alearningaday

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.

Failures are only stepping stones to eventual success when we reflect on them, understand what went wrong, accept our part in the process, and make the changes needed to avoid repeating them.

Absent the reflection, failures are just failures.

Tend to the small things. More people are defeated by blisters than mountains. | Kevin Kelly

It resonated.

Arnold Schwarzenegger shared a neat story about going to a famous ballet teacher when he was training as a bodybuilder. Bodybuilding competitions involve striking various poses. The goal is for each of these to be photo moments that impress the judges.

He expected this ballet teacher to help him strike graceful poses. Instead, she spent a disproportionate time giving him feedback on how he was getting to the pose. When he asked her why, she explained that while he was focused on getting to that photo moment, the judges were watching his form as he transitioned poses. He spent more time in transitions vs. striking poses during his routine and she wanted him to get that right.

The insight has wonderful parallels in our lives too. We often spend a disproportionate amount of our bandwidth thinking about big moments – big decisions, big meetings, and so on.

But most of what matters happen between those events.

A big milestone in our ability to understand ourselves is when we learn to differentiate…

…the unease that we need to overcome by simply pushing ourselves out of our current comfort zone from…

…the unease that is a sign that what we’re contemplating isn’t the right thing to do at this time.

Let’s start with this – I abhor the concept of selling bottled water. I understand the business rationale – as people understand the negative effects of sweetened sodas, beverage companies need revenue streams that help them recapture spend. Ergo bottled water.

The sad truth is that the countries that are the biggest buyers of bottled water are the countries that need them the least because of the quality of their tap water. Bottled water makes for a good story – but it is a head fake. If you really are worried about water quality, just buy a filter and you’re still likely going to get better quality water anyway.

All this said, this was an argument that a good story – and the picture of a nice sounding “spring” somewhere – was winning.

Until now.

A new study found that a one-liter bottle of water has over 240,000 fragments of plastic – 90% of which are previously undetected “nanoplastics.” This builds on previous studies that showed more microplastics existed in bottled water than otherwise. The scale of these nanoplastics, however, is an order of magnitude higher than we’d have thought.

I thought the response from the International Bottled Water Association was particularly good – “There is no scientific consensus on the potential health impacts of nano- and microplastic particles.”

Amazing.

I’m looking forward to more studies that build momentum around these findings and, of course, I’m eagerly looking forward to the IBWA’s responses to them.