Chapter 41 - Bloomberg by Bloomberg, Revised and Updated
Today’s Chapter is based on the book “Bloomberg by Bloomberg, Revised and Updated” by Michael Bloomberg, the founder of Bloomberg.
Buy it on Amazon here:
Here’s what I have learned from the book:
Small Earned Steps
“If you are diligent for a day, you will sleep comfortably for a night. If you are diligent for a month, the quality of your life will noticeably improve. If you are diligent for a year, two years, 10 years, your whole life... your accomplishments will be recognized by all.”
— Chung Ju-Yung
As we have learned previously from Kazuo Inamori, persistence pays off. The most important thing in life is the continuous devotion to a single activity. Success comes to individuals who are working hard untiringly and who are making steady progress by putting in more constant effort compared to others.
This concept of improvement day by day is a proof of the power of compounding. A one percent improvement every day can lead to 37x improvement in a year! As Edward Thorp once said, “Over a sufficiently long time, compound growth at a small rate will vastly exceed any rate of arithmetic growth, no matter how large!”
“But there's one thing I want them to understand: great achievements are born from steady effort on a road traveled one step at a time. Without that, big dreams, no matter how vividly imagined, remain nothing more than dreams.”
— Kazuo Inamori
Similarly, Michael Bloomberg, the founder of Bloomberg, believes in the saying that 80 percent of life is just showing up. As a matter of fact, while it is impossible to choose the circumstances you are born with, especially your genetic intelligence, the only thing you can control is how hard you work. Bloomberg mentions that “The more you work, the better you do. It’s that simple.” And that he always outworked the other person.
While predicting the future is impossible, Bloomberg explains that hard work increases your odds of success. While it is not guaranteed, he always believed that by working hard, you may place yourself in a better position to succeed. He also mentions the fact that his success comes from small earned steps rather than big lucky hits. He once said that “If you put in the time, you aren’t guaranteed success. But if you don’t, I’m reasonably sure of the results.”
“To succeed, you must string together many small incremental advances—rather than count on hitting the lottery jackpot once. Trusting to great luck is a strategy not likely to work for most people. As a practical matter, constantly enhance your skills, put in as many hours as possible, and make tactical plans for the next few steps. Then, based on what actually occurs, look one more move ahead and adjust the plan. Take lots of chances, and make lots of individual, spur-of-the-moment decisions.”
— Michael Bloomberg
Furthermore, Bloomberg insists on the importance of practice. As a matter of fact, he often says that “repetition builds instinct” and that the rewards almost always go to those who outwork the others. According to Bloomberg, time is the most important controllable factor that can determine one’s future and it should be used wisely to improve one-self.
This concept of “small earned steps” is also an important notion to succeed in business. As a matter of fact, constant innovation is a must when running a company, due to competition. Bloomberg mentions that “in business, growth is a necessity: you grow or you get out.” He explains that no company can afford to stay complacent, no matter how successful it is.
In Bloomberg’s case, the company grows by expanding on their basic product. This can be done by improving their product’s functionality. As customers’ needs are always in constant evolution, innovation is required. This is a never ending process.
In fact, Bloomberg says that “Keeping serviceable what you’ve built is a never-ending process. Every day, something you never thought could go wrong, does. So every day plus one, you fix a problem you previously didn’t know you had.” This is based on the fact that customers are always looking for “more capabilities, better efficiency, increased reliability, fewer controls.” If a company stops innovating, it will surely be surpassed by its competitors.
“Customers come and go; their needs change with time, and the services that help them do their jobs are always in flux. Woe to the supplier without the best offering. If you’re depending on longtime personal relationships, and not the quality of what you provide, start working on your golf game: You have a friendship with the buyer—your competitor already has one with his or her successor!”
— Michael Bloomberg
This reminds me of what we have learned from Chung Ju-Yung, the founder of Hyundai, who once said that “Every day needs to be a journey towards growth. If we pause today, it is a step backward. We must move forward even if it means only one or two steps at a time. If we don't, we will be overtaken and soon find ourselves falling behind.”
Chung also explained that people who work hard are better apt to take advantage of good timing in contrast to lazy people. As a matter of fact, diligent workers, even during bad times, understand that they still need to make continuous effort in order to minimize or avoid adverse consequences. Whereas, lazy individuals will miss the opportunities presented to them during good times and are oblivious to dangers during bad times. Thus, hard working people are deemed to be always lucky compared to others.
“And within our lifespans, I believe each person also undergoes roughly equal amounts of good times and bad times. Self-development is contingent on one's ability to make the most of the good times through hard work and diligence. When times are bad, all we can do is assess our situation and carry on. By doing so, we can overcome the bad times without needing to rely on luck. The course of one's life is not determined by the timing of one's birth, but by the choices he or she makes in both good times and bad.”
— Chung Ju-Yung
Finally, in the same line of thought, while Chung Ju-Yung believed that hard work lead to better luck, Michael Bloomberg believed that working harder and thinking smarter puts a company in a better position to win against its competitors.
As a matter of fact, he reiterates that “the chance of coming out ahead in a fair contest is one in two. In consecutive tests, that chance becomes one in four, one in eight, one in sixteen, and so on. In other words, the likelihood that we will prevail five times in a row in a fair fight is only about 3 percent. At Bloomberg, we don’t want fair fights. We want to go into contests with an advantage.”
This reminds me of this concept from Shane Parrish where he explains how everybody can look like an idiot if put in a bad situation and anyone can look like a genius if they are in a good position. Here’s how Parrish would describe the success of Warren Buffett due to his ability of being always in a great situation:
“And so what he’s always doing is everybody thinks he’s out of touch and he looks like an idiot. But he always wins because no matter what the outcome is, he wins. If the stock market goes up, he wins. If the stock market crashes, he wins because he’s put himself in a position where no matter what happens, he can take advantage of circumstances rather than having circumstances take advantage of him. And I think that that’s a key element we don’t realize. If you put Warren Buffett in a bad position where all of his options are bad, it doesn’t matter how smart he is, it doesn’t matter how Warren Buffett he is.”
— Shane Parrish
Be a Doer
“To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.”
— Steve Jobs
Michael Bloomberg noticed that in life, it is the “doers”, the lean and hungry ones that usually go the furthest and that achieve the most. As a matter of fact, Bloomberg mentions that while it is important to have a vision, it is dangerous to start second-guessing yourself by worrying too much about the details.
At Bloomberg, the strategy has always been to build the product first and the rest would take care of themselves. Of course, Bloomberg made mistakes along the way and the product would have to be improved on with the feedbacks received from their customers. However, while their competition were still planning on perfecting their product, they were already through rounds of testing and were about to release their tenth version.
“ It gets back to planning versus acting. We act from day one; others plan how to plan—for months.”
— Michael Bloomberg
This is exactly how Bloomberg obtained their first customer. While Merrill Lynch were in the planning to develop a similar product, Bloomberg was able to obtain the contract by guaranteeing that they would deliver a workable product before the estimated time of delivery provided by Merrill Lynch’s internal tech team. Furthermore, he promised that Bloomberg would only be paid until they were truly satisfied with their product.
While it does not seem like it on the surface, this agreement was extremely beneficial for Bloomberg as it would allow them to receive direct feedbacks from Merrill Lynch on how to improve their product. As Bloomberg would say, “At Bloomberg, a problem spurs a solution. That’s what makes us successful.”
“Every day, our system got better as we fixed each problem they pointed out. I’d always rather have a smart, fair, honest, demanding client than a nasty dummy or an “I don’t care” user.”
— Michael Bloomberg
This reminds me of Edisonian Approach we have learned from James Dyson which is based on Thomas Edison’s way of inventing through trial and error discovery rather than through a more systematic theoretical approach. As a follower of the Edisonian Approach, Dyson has encountered many failures through his experiments. He had created over 5000 hand-made prototypes over four years before finally achieving success with the cyclonic vacuum cleaner.
Rather than spending an excessive amount of time analyzing different options, the Edisonian approach encourages to build a product quickly and then to improve it based on the feedbacks we receive. This can be particularly useful in situations where there is uncertainty or where the consequences of making the wrong decision are not catastrophic or what Jeff Bezos would call Type 2 decisions.
“Some decisions are consequential and irreversible or nearly irreversible – one-way doors – and these decisions must be made methodically, carefully, slowly, with great deliberation and consultation. If you walk through and don’t like what you see on the other side, you can’t get back to where you were before. We can call these Type 1 decisions. But most decisions aren’t like that – they are changeable, reversible – they’re two-way doors. If you’ve made a suboptimal Type 2 decision, you don’t have to live with the consequences for that long. You can reopen the door and go back through. Type 2 decisions can and should be made quickly by high judgment individuals or small groups.”
— Jeff Bezos
If you ever had a business idea that you would like to execute, here’s Michael Bloomberg’s advice on how you should proceed:
Think and Write A Plan!
“Think logically and dispassionately about what you’d like to do. Work out all steps of the process—the entire what, when, where, why, and how. Then, sit down after you are absolutely positive you know it cold, and write it out. There’s an old saying, “If you can’t write it, you don’t know it.” Try it. The first paragraph invariably stops you short. “Now why did we want this particular thing?” you’ll find yourself asking. “Where did we think the resources would come from?” “And what makes us think others—the suppliers, the customers, the potential rivals—are going to cooperate?” On and on, you’ll find yourself asking the most basic questions you hadn’t focused on before taking pen to paper. As you discover you don’t know it all, force yourself to address the things you forgot, ignored, underestimated, or glossed over. Write them out for a doubting stranger who doesn’t come with unquestioned confidence in the project’s utility—and who, unlike your spouse, parent, sibling, or child, doesn’t have a vested interest in keeping you happy. Make sure your written description follows, from beginning to end, in a logical, complete, doable path.”
Tear It Down and Take Action!
“Then tear up the paper. That’s right, rip it up. You’ve done the analysis. You’ve found enough holes in the plan to drive your hoped-for Bentley automobile through repeatedly. You’ve planned for myriad what-if scenarios. You’ve presented your ideas to others. You’ve even mapped out the first few steps. But the real world throws curveballs and sliders every day, as well as the fastballs you practice against. You’ll inevitably face problems different from the ones you anticipated. Sometimes you’ll have to “zig” when the blueprint says “zag.” You don’t want a detailed, inflexible plan getting in the way when you have to respond instantly. By now, you either know what you can know—or you don’t and never will. As to the rest, take it as it comes.”
Story over Medium
“If you don’t know what your core business is, you’re probably not in business.”
— Jeff Bezos
In his autobiography, Michael Bloomberg explains the importance of understanding what’s the company’s core business. In fact, he mentions that in history, many companies have made the terrible error of mistaking their product for the device that delivers it. For example, the management team at Eastman Kodak believed they were in the camera and film business instead of the photography business. This led to the company’s demise with the revolution of digital photography.
Similarly, it was primordial for Bloomberg to not be confused about their core business and they quickly realized that they were in the data and analytics business and not the hardware business. In fact, while the company had to manufacture computers and keyboards at the beginning in order to deliver their product, they quickly realized that the core idea of their business was to produce and to distribute “the world’s most accurate, reliable, comprehensive up-to-the-second information and analysis.”
As such, they believed it was more beneficial for the company to stop building hardwares and to focus their effort in providing the best possible data, information, and insights to their customers. As Bloomberg once said that “the story and its message—not the medium that relays it—is what has always mattered to us.”
“But it all began with a simple premise: putting more information at people’s fingertips, more quickly and more accurately than they could otherwise get it. That’s still the heart of our business.”
— Michael Bloomberg
By consequence, Bloomberg understood that it was also important to become a multimedia company. This way, they would be able to deliver useful information to their customers through various medium, such as the Bloomberg terminal, television, print, radio, telephones, web and social medias. This allows the customers to receive the information they need via the medium that suits them the best.
In fact, Bloomberg mentions that “One can’t read print or watch television when taking a shower, jogging in the park, or driving to work. One can’t read a whole in-depth report when one has only two minutes to get caught up. If one’s traveling, one can’t receive local content easily. By having all forms of media, we can focus on utility, not just our own commercial interests.”
“Why use all media forms rather than focus on just one? What business are we in? Some companies declare themselves to be “in radio” or “in television” or “in newspapers,” and so on. We have a greater vision. Bloomberg is in the business of giving its customers the information they need, no matter what that information is, where and when they need it, in whatever form is most appropriate. We don’t shoehorn programs into less-than-optimal presentation formats, or deliver them at inappropriate times and places. With all methods at our disposal, we do better. We give our customers what they need, not just what we have. When there’s a difference between the two, we create or adopt a new medium—we don’t ask our customers to accept less.”
— Michael Bloomberg
Furthermore, I believe that Bloomberg is a perfect example of a company that used its distribution network as a competitive advantage to strengthen their moat. As a matter of fact, Bloomberg first got into radio and television as it could provide additional visibility to his company’s terminal and publication. Bloomberg explains that “To reach potential customers who don’t yet subscribe to our print products, radio and TV help us get our message through. The people who lease our Terminals are part of radio and television’s masses. They need news while jogging, showering, driving, or sitting at home, and we’ve got to give them what they need.”
“Radio and TV enhance the appeal of our Terminal and our publishing—and vice versa.”
— Michael Bloomberg
This reminds me of the power of distribution described by Peter Thiel in his book “Zero to One”. Thiel explains how a good distribution strategy is primordial for the success of a business. As a matter of fact, Thiel once said that, “Superior sales and distribution by itself can create a monopoly, even with no product differentiation. The converse is not true.”
Thiel mentions that poor sales rather than bad product is the most common cause of failure in startups. As such, no matter how good your product is, you won’t succeed in selling it if there isn’t a strong distribution plan in place.And in Bloomberg’s case, it is fair to say that by providing easy access to their data via various mediums, customers were more likely to use Bloomberg’s services over their larger competitors such as Dow Jones and Reuters.
“It’s better to think of distribution as something essential to the design of your product. If you’re invented something new but you haven’t invented an effective way to sell it, you have a bad business—no matter how good the product.”
— Peter Thiel
The People
“Four Seasons is the sum of its people—many, many good people.”
— Isadore Sharp
One of the main tenet of Bloomberg’s philosophy is that their main asset is not their technology or their databases but their employees. As a matter of fact, Michael Bloomberg once mentioned that at Bloomberg, “We have never stopped believing that our greatest asset is our own people, and we invest in them and reward them accordingly.”
As such, according to Bloomberg, one of the most important responsibility for a CEO is to take care of their employees. This can be done by implementing a system that encourages cooperation, rewards risk taking and gives incentives to work hard.
While CEOs are usually evaluated based on the company’s earnings growth or stock price, Bloomberg believes that the standard to evaluate success of a CEO should instead be based on building, leading and motivating staffs. In fact, he explains that to win big in business, it is essential to have the ability to leverage the work by hiring, training, delegating and motivating employees.
“If a company can’t survive a change at the top, the top person hasn’t done her or his job. Talent development is one of a CEO’s most important responsibilities.”
— Michael Bloomberg
One way Bloomberg did this was by encouraging employees to come up with innovative ideas. As a matter of fact, Bloomberg designed the company’s main headquarters as an open office design to encourage innovation and implemented a flat management structure to guarantee a meritocracy.
Furthermore, the company also had a common area where people could gather to chat and to have meetings. This was done to encourage everyone in the company, no matter what department they were in, to share information and ideas among them.
Also, Bloomberg thought none of their programmers should have distinct titles as they are disruptive at best. He says that titles “separate, create class distinctions, and inhibit communications. If you don’t get a title, you quit. If you do get one, you start thinking other firms may want to pay you more, now that you’re officially recognized as superior to what you were previously.”
“Openness also shows off our most important asset, our people. They are the company. You can replace our technology, data, reputation, and clients, but you cannot duplicate the group we’ve put together and the culture they’ve developed. We are a team.”
— Michael Bloomberg
In the same line of thought, it was important for Bloomberg to grow the company for internal reasons. As a matter of fact, it was primordial for the company to create new opportunities to keep employees within the company. He mentions that “we must grow to create new valuable positions, or watch our best and brightest quit for management jobs elsewhere and dissipate everything we’ve built over the years.”
This is also the reason why Bloomberg preferred to grow by building rather than acquiring other companies. This allows the chance to reward their best employees by inserting them into the newly created management jobs. More importantly, this was a good way to certify that the company culture remains intact.
“Whether by building or buying, there are dangers in growth you ignore at great peril. We insist on management depth at every position. Lack of it would leave us vulnerable when someone quits or gets hit by a truck.”
— Michael Bloomberg
This reminds me of the concept of “enlightened hospitality” that we have learned from Danny Meyer, the founder of Shake Shack. Meyer quickly understood that in the restaurant business, the people that would matter the most to his success weren’t his guests but his employees! That was the birth of his famous concept of “enlightened hospitality”, a business philosophy that would prioritizes employees over customers.
“At this moment, “enlightened hospitality” was born. In a meeting of the entire staff of Gramercy Tavern, and with full agreement and support from Tom, I began to outline what I considered nonnegotiable about how we did business. Nothing would ever matter more to me than how we expressed hospitality to one another. (Who ever wrote the rule that the customer is always first?) And then, in descending order, our next core values would be to extend gracious hospitality to our guests, our community, our suppliers, and finally our investors. I called that set of priorities enlightened hospitality. Every decision we made from that day forward would be evaluated according to enlightened hospitality. We would define our successes as well as our failures in terms of the degree to which we had championed, first, one another and then our guests, community, suppliers, and investors.”
— Danny Meyer
Beyond the Book
Read "Mental Model: Feedback Loops" by Farnam Street
Listen to "Mike Bloomberg" by Founders Podcast
Watch "Ideas Versus Execution | Mike Maples" by Farnam Street