Berkshire Hathaway Business Warren Buffett

Remembering Blue Chip Stamps

While I was going to college in the late 1960’s, Blue Chip Stamps became quite a presence in California. I was listening to a podcast with Jacob McDonough (TIP 573) on my morning walk this morning as he discussed the early years of Berkshire Hathaway – and that brought memories for me.

It was amazing to watch the arc of Blue Chip during the 60’s and 70’s. Our family moved to California from Ohio where S&H Green Stamps had a significant presence. But Blue Chip seemed much bigger in California.

Back in those days, gasoline service stations and supermarkets were the major distributors of these trading stamps – making a very nice business for Blue Chip and S&H. As gas stations competed for business, they started offering multiples – like 3X or 5X stamps on your purchases. Lots of stamps!

In 1970, Berkshire began investing in buy the stock of Blue Chip. One of the companies purchased by Berkshire back in those days was Blue Chip Stamps. Wikipedia quotes Warren Buffett in his 2006 letter to Berkshire shareholders, Blue Chip had 1970 sales of $126 million as about 60 billion “stamps were licked by savers, pasted into books, and taken to Blue Chip redemption stores. When I was told that even certain brothels and mortuaries gave stamps to their patrons, I felt I had finally found a sure thing.”

Similar to insurance companies, these trading stamp companies were getting cash in the door from selling stamps to retailers to pass along to their customers for their loyalty while not having any actual expenses to incur until those customers pasted the stamps in their little booklets and traded them in for actual merchandise. And, along the way, some of those stamps might just disappear – “breakage” helping enhance the financial returns.

Berkshire knew a lot about insurance businesses and clearly found the trading stamp business at Blue Chip had a lot of good similarities. As with many things, the trading stamp business was good while it lasted – but it didn’t last. No worries for Berkshire however as Buffett made a very nice return along the way on his investment in Blue Chip.

Memories of old times!

Books Business

Brad Stone’s The Everything Store: Jeff Bezos and the Age of Amazon

It’s been a while since I’ve made a book recommendation – but this is a good one. Over the weekend, I finished reading Brad Stone‘s remarkable story about Jeff Bezos and Amazon.

While some of the Amazon reviewers dispute Stone’s story telling, he does a masterful job of walking through the history of Amazon and educating us on the ins and outs of Jeff Bezos’ approach to building a business. And what an amazing business he’s built.

This is one of those business biographies worth the time – there are great stories of the competitive spirit, the absolute cheapness of the culture, and the power of plowing everything you make in the way of profits back into growing and extending the business. “Your margin is my opportunity” is a quote attributed to Bezos and Stone brings that attitude to life in this great story.

If you like this kind of business history, you’ll really enjoy Stone’s storytelling and come away educated and enlightened. Brad Stone was interviewed today on KQED’s Forum program with Michael Krasny – it’s worth a listen!

Here’s an Amazon Associates link to the book – The Everything Store: Jeff Bezos and the Age of Amazon – if you click on the link and end up buying the book, I’ll get a small referral commission at no additional cost to you. Just another of Bezos’ innovations.

Apple Business iPad Payments

Free Tablets!

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One of my favorite podcasts is Critical Path with Horace Dediu. Horace’s also the guy behind, a great blog about asymmetric competition, Apple, mobile in general, and more. He uses data to drive his analysis into otherwise lightly explored areas. Always a great read and an insightful podcast! He’s got an Asymconf conference coming up in late January at IBM’s Almaden Research Center – I’d be there if I could but I’ll be heading to Havana, Cuba for a photography workshop the week of his conference.

On a recent show, Horace talked about the evolution of tablets and how different companies were pursuing their objectives in the tablet market. At the high end, with classically high profit margins, is Apple with its iPad family. At the other end is and Google who both appear to be willing to settle for much lower margins on their base hardware products.

This discussion made me wonder what the endgame in tablets might be. We’ve got these two examples – Apple at the high end with a tablet (and associated ecosystem) generating lovely margins. At the other end, we’ve got others who are opting to price their tablets close to cost – viewing them as razors and expecting to make their real revenues from how those tablets are used to purchase content.

And then this article showed up a few days back – about how the Financial Times was crossing the threshold – giving away a free Nexus 7 tablet to new US digital or print subscribers. This feels like a slippery slope…

Pushing this discussion to an extreme, might we some day see free tablets from others – provided to us by those who would love to enable us for commerce within their particular ecosystem – and who might benefit from the additional signals such a tablet might provide from our browsing/searching/shopping history? Those signals – spanning across our interests as we read, search, shop, etc. – are valuable, aren’t they?

I’ve been thinking we’re moving into a post-card world with the capabilities our smartphones bring. Might a free tablet strategy fit in sometime soon? Where will mine come from? From Amazon? From Apple? From Google? A card issuer? A card network like Visa or MasterCard or American Express – or PayPal – or someone else? Maybe from my mobile carrier?

What do you think?

Business Living Work

Such an Elegant Custom – Writing a Thank You Letter!

While recently going through some old boxes of work-related materials in an early attempt at spring cleaning, I came across an old file of mine containing thank you letters from colleagues and clients of mine back in years at IBM. Finding these letters made me abandon the cleaning process for a while – while I reminisced about the memories the letters brought to mind!

Having started my working life at IBM, I was shaped by the strong culture that was such a core part of the company. The IBM Basic Beliefs (Respect for the Individual, Customer Service, and Excellence) became part of my life in those early years. Especially that first one: Respect for the Individual.

One of the customs inside IBM that was a delight was the practice of just saying thank you. When you became an IBM manager, one of the accoutrements was a set of personal stationery that you used to just say thanks. Sending those letters was an important part of gratitude for me – and receiving them was just a delight.

I had such fun going back through this folder of personal thank you letters that I had received over the years. A practice and a tradition that’s certainly faded a bit in today’s email-based world – but one certainly worth remembering! Gosh, how I also wish I had kept copies of the thank you letters I sent as well!

Blogs/Weblogs Business Living Payments

What a Week!

Two weeks ago I transitioned this personal blog of mine from TypePad to WordPress – and, in the process, began to get back into the swing of things in terms of regular posts. There’s something important about doing a daily post, IMHO – it’s the perfect cadence for a personal blog.

This week, naturally, I fell off that wagon. Completely fell off the wagon! No posts since last Saturday! WTF, as they say? I ask myself!

As it turned out, this week was one of those “perfect storms” of work – beginning with an all-hands partners meeting offsite on Monday, a private advanced-level Payments Boot Camp on Tuesday, a regular public Payments Boot Camp on Wednesday-Thursday, capped by an intensive client work day today. Exhausted… Heck, I’m writing this to just decompress – and yo look back at what an intense week it was!

While it was an intense week, it’s like an intense workout. You’re exhausted – but it’s that good tired feeling.

Frankly, for me, our Boot Camp sessions are just a delight. As instructors, we pour ourselves into them – and we get a huge amount back from everyone who attends. They’re pretty amazing experiences – as almost everyone who comes is an expert in some aspect of the payments systems we’re teaching – so it’s a joy to be able to draw on that expertise as the teacher.

We’ve recently begun including a case study exercise – dividing into small groups to better understand the perspectives of particular stakeholders in the payments system. These discussions get the juices flowing – as there are a lot of “zero sum” issues to consider in payments.

We also like to try to close the first day of our public boot camp sessions with an entrepreneur who’s actually innovating in and around the payments space. This week, Danny Shader, CEO of, spoke to our group – and shared some of his learnings building successful companies. Danny was great – and he got LOTS of questions!

So, I’m tired tonight – but it’s a really good tired. Lots of “good stuff” went on this week – and that’s what matters. The journey is indeed the reward!

Business Payments Stanford

Nathan Eagle’s Txteagle

Attended a great presentation this afternoon at Stanford with Nathan Eagle talking about Txteagle – putting 2.1 billion people in developing countries to work using their mobile phones.

Once qualified and working, they’re paid in mobile airtime – an effective virtual currency that avoids all of the regulatory issues with actually sending money instead.

What tasks do you have that a villager in Africa could help you with?

Business Stanford Venture Capital

Intensive vs. Extensive Growth – and more – Peter Thiel at Stanford

Last night, Peter Thiel spoke at Stanford – about a wide sweep of topics including entrepreneurship, innovation, macro economic trends and the role of technology in the world. It was a very stimulating discussion across this wide range of topics.

Peter Thiel at Stanford - November 30, 2010One of the more interesting notions that Peter shared was the difference between intensive growth and extensive growth. Intensive growth is hard work, that’s where the real innovations and breakthroughs occur. Extensive growth is much more about replication and scaling – ramping a business once the breakthroughs have been made. He described intensive growth as all about getting “from zero to one” and extensive growth being all about getting from “one to N”.

Peter noted that many venture investors focus on extensive growth. They want to invest once the breakthroughs have been demonstrated – and scaling is what’s ahead. As an investor, he’s more interested in the work being done in areas of intensive growth – a focus that’s different from many – but certainly not all – VCs.

Another recurring theme from Peter’s remarks was the whole issue of the “right people.” He repeatedly spoke about how his investment decisions revolve much less around the business plan and much more about whether the group of people he’s talking to can demonstrate passion, a desire to change the world, and, importantly, an ability to work together effectively – and with shared sacrifice. The ability of a team to effectively pivot as the business evolves and opportunities emerge is critical – and is basically what he’s trying to assess upfront.

A final point about startup success he discussed was his conclusion that you could tell a lot about whether a new venture might succeed or fail if you looked at just the CEO’s salary. In his experience, CEOs who were paid $120,000 or less much more frequently led their businesses to success – versus CEOs making $160,000 or more where success was less likely. He explained that while this might seem simplistic, the CEO salary level actually has many, many effects on the company and, importantly, on the people who join. If the cash comp is less up front, everyone – including management and investors – are much more aligned for equity returns. Similarly, the team will be made up of folks who are really committed to the dream – and not focused as much on current cash. A fascinating discussion with lots of insight!

[Update: a video of the event is here. More notes on his talk here.]


Disrupting the Credit Bureaus

Yesterday, literally while shaving, I was thinking about credit bureaus – how they gather all of this information about us from third party sources (with varying degrees of accuracy) and then sell it back to credit grantors seeking to find some assurance of our credit worthiness.

What if, I wondered, we had our own place to provide that information – our own “credit profile” as it were. For honest folks, it would be much more accurate than what the bureaus provide.

This morning, I came across this blog post by Jeremy Liew, a partner at Lightspeed Venture Partners. Turns out he’s been thinking along similar lines – “idea of using publicly available data to make better underwriting decisions”. His post is titled “Data exhaust moves beyond targeted marketing and into financial services decision making“. Love that term – data exhaust! Fascinating stuff – and worthy of more work.

Business Work

The End of Management

Alan Murray writing in the Wall St. Journal:

“The big companies Mr. Christensen studied failed, not necessarily because they didn’t see the coming innovations, but because they failed to adequately invest in those innovations. To avoid this problem, the people who control large pools of capital need to act more like venture capitalists, and less like corporate finance departments. They need to make lots of bets, not just a few big ones, and they need to be willing to cut their losses.”

Books Business

The Quants

I just finished Scott Peterson’s The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It, a great read!

Peterson chronicles the evolution of the quants – tracing the evolution from Ed Thorp and his Beat the Dealer book about blackjack. Like many other readers, Thorp’s book had a big impact on me when I first read it. It definitely improved my blackjack playing – even if I never was good enough to get kicked out of a casino!

The meltdown of the quant funds in August 2007 is the conclusion of Peterson’s book – an engrossing read!