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Note: The Bookrat email is a spin-off from Anthony Pompliano's Pomp Letter. You will receive all future book summaries here, while still receiving Pomp's finance, economics, and bitcoin commentary on The Pomp Letter. Our goal is to separate the two types of content to make it easier to consume.
I read one book per week. Last week’s book was The Dealmaker by Guy Hands. Highly recommend reading it. If you are interested in the individual highlights that I made in the physical book, you can read those here. Hope you enjoy these notes every Wednesday morning.
Guy Hands once made £40 million in a single year as a private equity investor. He ran the 9th largest private equity firm in the world at another point in his career. But the same guy also spent months eating three meals a day, seven days a week, in the office. This book is the tale of one of the great investors of the last 40 years, including his rise, fall, comeback, and eventual decision to prioritize family. You will learn about business, finance, entrepreneurship, geopolitics, and the struggles of fame and fortune. This book is just as educational as it is entertaining.
💡 Idea #1 — We are shaped by our childhood experiences. Guy Hands watched his parents immigrate from Africa to Europe, which contributed to the life he lived as a child — he was bullied, his parents went through financial troubles, and he was diagnosed with dyslexia. Hands writes:
"The fact is that the experience of even a few relatively tough years as a child creates a deep paranoia about it happening again and provides strong motivation to avoid it. I’ve had a deep fear of losing everything for as long as I can remember, which perhaps helps to explain why self-made millionaires like me so often tend to remain focused on creating wealth long after the average person feels rich beyond their wildest dreams."We often talk about the immigration experience as a fact of life, but it is a heroic journey that requires courage.
"I blamed my parents for my unhappiness. It wasn’t until I had children of my own that I appreciated how difficult it was for them to make such a momentous decision: to move from a country that they loved to one where they knew they would have to struggle."Eventually Guy learned how to escape the scars of his childhood and thrive as an adult. He claims his wife was a big part of that triumph.
"My success at business had shown me that I could express myself, be creative and use my emotional and negotiating skills. My relationship with Julia [his wife] gave me stability. I knew I was with someone I loved and respected and who shared my dreams. I could completely rely on her. She was not just the love of my life, not just the friend of my life, but she was the talisman of my life as well. She kept me grounded. Now, as I left my childhood behind, I had found a calling and a soulmate."💡 Idea #2 — Hard work never goes out of style. Guy Hands mentions the concept of hard work throughout the book, but not in the feel-good sense of the phrase. A level of dedication, commitment, and persistence that would make most people quit their job. He writes about the first time he discovered the value of hard work:
"I learnt some other key lessons, too. The first was that intellect has huge value, and huge limitations. Sometimes stamina and just being there is all it takes to get a trade done. I found the best traders would still be working in the late afternoon, preparing for the next day’s trades, long after most of their competitors had called it a day. Inspired by them, I would work into the early evening."As Hands' career matured, he continued to teach his teams that hard work would lead to more profits for them and their investors.
"We began buying businesses and transforming them—applying the simple strategy we had outlined to all those skeptical investors. It paid off. In those early years, there was a strong correlation between the improvements we made to a business and its ultimate valuation, and a similarly clear correlation between the amount of hard work we put in and the profits that we and our investors made."This obsession with working hard eventually reached an extreme. The level of dedication put forth by the team would be deemed insane by almost anyone else in the world.
"One of my senior team members, Julie Williamson, told me that her husband had informed her that she hadn’t eaten a single meal at home for 63 days straight, instead eating all three meals a day (including on Saturdays and Sundays) at the office. We took working long hours to a whole new level."💡 Idea #3 — Simplicity is essential when communicating ideas. Guy Hands learned this the hard way when he left Goldman Sachs for Nomura, which meant that he now had to learn a different culture — one that prioritized simplicity. Hands writes:
"The job of the written word in Japanese is to bring the listener on a journey, explaining everything as simply as possible." "At Nomura, I learnt—and still firmly believe—that it should be possible to write down good ideas so that a 14-year-old could understand them. If that’s not possible, then the ideas probably weren’t good ones in the first place."Striving for simplicity doesn't create an excuse for laziness though. The secret is to be simple, yet of the highest quality.
"When writing an essay I learnt the importance of spending half my time thinking and the other half writing. And I also learnt that one good paragraph is far better than any number of OK paragraphs, and that one good argument is far better than three totally correct pages of recycled facts."💡 Idea #4 — You have to be willing to think differently. You have to be willing to change your mind when the situation calls for it. Too many people are rigid in their beliefs and even more people are scared to break from the consensus. Don't make that mistake. Guy Hands writes:
"One attribute I have had all my life is the ability to change my mind if I receive new information, and withstand the criticism from others that invariably follows when I do so. The pain is almost always worth it and fades more quickly than people generally expect. Memories are very short. In my experience it’s far better not to do something, to walk away and risk people’s opprobrium than to do something that you will regret."The willingness to change your mind, and think from a contrarian perspective, can lead to the identification of trends before others. Guy Hands was early in private equity to looking for a diversity of thought and experience on his team. He writes:
"I had noted that those who had worked hardest for me at Goldman Sachs hadn’t been British or privately educated. I wanted true diversity among my colleagues to make sure that we had a true diversity of opinion. I didn’t want us to be yet another classic City of London institution." "Such a diverse pool of talent resulted in an extraordinarily creative and dynamic environment, and also a very competitive one."💡 Idea #5 — A great entrepreneur is rare. The combination of experience, skills, and talent is hard to put together for the full package. Guy Hands describes what he believes makes the best entrepreneurs:
"The fact is, though, it takes a lot to be an entrepreneur—ambition, the ability to take risks and superhuman drive are all key factors along with a willingness to work hard and make sacrifices. Hard work and drive aren’t the whole package though. Many people have the stamina to put in long days, weeks and months but are not successful. To get that crucial edge you need the qualities Chuck Davidson told me about back in 1982—greed and balls of brass. Then you need creative ideas, innovative strategies and achievable but tenacious goals. You also need to be good at execution, or, at least, make sure you have someone in your team who really understands it—something I learnt the hard way. Above all, to be a really great entrepreneur you need to follow the advice of Ray Dalio, the founder of Bridgewater, the world’s largest hedge fund, who says that the key to effective goal-setting is “pain plus reflection.” You need to adjust your business principles each time you fail, and after failure, you need to set yet more audacious goals."
This book reads like a fiction story, but it is an auto-biographical telling of Guy Hands life. It was entertaining, yet delivered some great life lessons along the way.
My first big takeaway was how Guy spent the first ~30 years of his career focused on working so hard that he basically ignored his family. At one point, he moves out of the UK to an island for tax purposes, but his family stays behind. The whole situation sounded horrible to me. The chasing of wealth is built into human nature — it doesn't mean anything though if you can't find the time to enjoy your freedom with family and friends. Just my humble perspective.
My second big takeaway was the importance of emotional distance between a decision and those who are working on the problem day-to-day. Guy Hands established a rule inside his private equity firm that he describes in the book:
"One of the earliest and most contrarian rules I established in private equity was my insistence that in determining the strategy for selling a business the CEO should not have a vote in the decision. Likewise, in determining the financing strategy for the business the CFO should not have a vote in the decision." "The information they (CEO/CFO) can provide to the shareholder is useful, but it’s the shareholders who need to make the final decision—and they need to make it calmly, coolly and in a considered fashion without concern for the day-to-day noise that exists in any business."This is obviously easier to do when you are a private equity firm that has a management team running the business day-to-day, but the overall lesson of emotional distance creates better decision-making is worth taking away.
My third big takeaway was how much an individual's life changes when the public learns about their financial success. This sounded like another horrific situation that the average person would want to avoid at all costs. Guy Hands explains what happened:
"If by now my successes had regularly become headline news in the financial press, it was my paycheck that brought me national media attention. In January 1998, the Guardian ran a front-page headline that screamed: “This man earned £40 million last year—things may even get better in 1998.”" "My wealth was a matter of public record and that seemed to change everything. The moment the Guardian article appeared, Julia and I started receiving begging letters and requests for investment ideas from people I had not heard from in years. At dinner parties, conversations no longer revolved around children or politics or food or television but financial schemes or friends of friends who wanted a job or a helping hand. Invitations flooded in from people we hardly knew. Julia and I had become a “must-invite” couple."I have long thought the attention that comes with being a mainstream celebrity, or in this case a celebrity within a very public occupation, would be hard to deal with. Many people would fear the constant attention on the street and/or when they are with their families, but the burden of having to constantly attend events you don't want to, or potentially turn down hundreds of invites to events a year sounds ridiculously painful too.
My fourth and final big takeaway was the classic lesson of betting on yourself. When Hands left Goldman, he bet on himself at Nomura. When Hands left Nomura, he bet on himself as the sole owner of Terra Firma. When Hands began to wind down Terra Firma, he bet on himself with his family office. There is a line in the book that I loved — "I either wanted to sell 100% or keep control of 100%." If things went well, Hands had himself to thank. If things didn't go well, he only had himself to blame. There are few people in today's society who are willing to take this type of risk. If you have the opportunity and the courage, it is probably worth trying. You'll never regret betting on you.
As I mentioned, last week’s book was The Dealmaker by Guy Hands. Highly recommend reading it. If you are interested in the individual highlights that I made in the physical book, you can read those here. Hope you enjoy these notes every Wednesday morning. Reply to this email with your thoughts, including what you agreed or disagreed with. I will respond to as many emails as I can.
-Pomp
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