martin zeman's blog

I went to another session of Eclub – entrepreneurial club which educates, inspires and empowers entrepreneurs. This time we talked about the importance of vision and people for the success of our ventures.

Guys from Eclub asked us what we think is the main reason behind the success of people like Richard Branson, Alan Sugar, Jamie Oliver, the entrepreneurs’ role models. They suggested it’s the visions they had which were so powerful or with which they were so obsessed that they dragged them towards success.

My answer to the question about the main reason of success was different. And after I have been thinking about it for a few days I still believe there is more important reason behind success of the successful. While I appreciate the importance of vision – I believe it’s not what determines your success – having a vision is easy, the difficult part is being able to realise that vision – ability to execute is what makes the difference – that’s the scarce skill. There is plenty of dreamers – well almost everyone is a dreamer – but only very few people can make their dreams make come true.

The second part of the session was about importance of people for the success of a company. We agreed that it is impossible to achieve a big success alone. Then we have discussed how many people we think we need to achieve success. My view was (and by looking at my first blogpost about Eclub it had been for a while) that having three really close people is the best.

Eclub guys suggested that a bigger group is better – they call it a Success Family – having circa 10 or so cooperators, supporters with whom you can discuss your progress and ideas, brainstorm your future steps, share experience, people from whom you can get open and honest feedback. Above all success family can help you sort your own thoughts.

These people don’t have to be working officially or directly on your project. In fact it might be better if they don’t, they might be more unbiased when they are a bit more distant from the project than you are.

I really bought into this idea. It makes a lot of sense – every person has different specialities, different skills and knowledge – so it seems better to utilise everyone’s strengths rather than hoping to find people who would be able to advise on everything.

I liked the idea so much that I have started to think immediately whom would like to be in my Success Family for Elexu. I need to think about this a bit more, give it a clearer shape but I will surely share my thoughts and experience in another blogpost.

I was going to hand in my notice last Friday, I had my plan nicely crafted (handing notice on Friday the 13th, starting my new life on 13th June – my wedding anniversary), all was nice and bright. On Thursday I came to work and saw an email from our HR which informed me that my replacement who was going to start in ten days had been given an offer from his current employer and decided to accept that. I was quite disappointed – mainly because it made my perfect plan no longer perfect…

…but after a few minutes I remembered this simple and powerful excercise from a great book Awaken the Giant Within by Anthony Robbins. The excercise is really simple – whenever you feel bad about something, when you wonder “Why me?” – ask yourself: What’s good about it? and write your answers down. It really helps. This is what I came up with in this case:

• I get more recruiting and interviewing experience.
• Several great lessons learned for the future:
  • always expect things to change – anything can happen – this is life.
  • it’s worth asking why a candidate wants to work at your company – it might help the candidate realise the benefits of your company/role.
• [we are in a process of building a new BI/reporting tool at work which will make analysis much easier and significantly reduce effort we put into building and running reports, so...] This is another reason to implement the BI solution as quickly as possible which is what I was recommending all along.
• Opportunity to make my boss and the company a favour by delaying a bit with handing in my notice.
• Something is happening => I feel more alive.
• Adam, my would-be-replacement, will get a better deal for himself.
• Someone else will get a job. And others will get a chance to get it.
• Then I thought about Elexu and tried to find something good about the fact that I will start dedicating most of my time to Elexu a week or two later. Surprisingly enough I did find a very good answer. I started wondering what would be the key Elexu tasks that would get delayed thinking that I could put more effort into them during evenings and weekends. And then it struck me that I have already been delaying some key tasks to the time after I would leave my full time position, giving myself an excuse that I will have more time to dedicate to them then, but then I realised that I have enought time to start with them right now and I should and I am going to do just that.

This little exercise completely changed the way I was feeling about the situation and pushed me from pity to action – amazing.

My friend Chris, has came up with an idea to set up an investment club. Basically it’s a group of people who invest into shares together. The main goal of our club is to learn how stock exchange work in a relatively inexpensive, time efficient and fun way.

There is something annoyingly unintuitive about share prices and I can’t really put a finger on it. So I thought it might be fun experiment to share my thinking process over here, sorting my thoughts and giving myself an opportunity to get corrected by more knowledgable people.

While I have no doubt internet is full of articles about this topic I haven’t read much about it on purpose. I think it’s firstly more fun to deduce something yourself and secondly you can understand it much better and understanding how stock market works seems fairly important when you plan to invest.

Warning: The information below is just an idea stream – it might not reflect reality and it surely does not give complete information – so don’t trust it blindly. If you see that I went wrong somewhere or you have some interesting insight of yours please don’t be shy and share it.

So let’s start:

Q: What is the goal of investing in shares?
A: To get a higher return on savings than with different saving/investing products. As investing in shares comes with a risk there might be a loss, the gain should be significantly higher than gain of the safe products (e.g. cash ISA) so circa 7%+ per year.

Q: How to make money on stock exchange?
A: Investing in shares and waiting for dividends, short term trading (exploiting temporary drops in share price, buying when low and selling when it’s back up), long term trading (investing in shares with the outlook they will grow significantly over time and then sell). Dividends are usually fairly low and unreliable, short term trading is risky with small gains and very time consuming, long term trading seems fine to me.

Q: What determines share price?
A: A friend of mine told me it’s just a matter of supply and the demand. Nothing else.

Q: What causes demand for share price to go up? Why people decide to buy shares? (and vice versa for going down and selling)
A: Expectations that share price will go up in the future. This is interesting people are buying shares because they believe there will be someone in the future who will believe there will be someone in the future ……. who will believe there will be someone in the future who will be willing to pay more for the shares (because they will believe there will be someone in the future)

There are two key players who might be able to influence a share price of a company.
1) Execs of the company.
2) Investors and analysts (the role and motivation of analysts might be different from investors – have to think about it).

Q: Why and when would execs want a high share price – or more accurately – high company valuation?
1) When a company needs cash for investments (growth, aquisitions, etc.) which it can’t fund from their operational cash flow and it’s not efficient or possible to borrow such amount from banks – the easiest way to get the money then is by issuing more shares. The higher the value of the company, the higher the share price and the more money raised with a given amount of new shares.
2) Execs want to cash out their shares. The higher the share price, the more money for the execs.

Here’s an interesting thought: if I am an exec and part of my salary is in shares then I benefit from a low share price. Let’s assume I get £1M worth of shares a year. If a share price is £1 I get 1M shares, if the share price is £2 I only get 500k shares. So during the time I earn the shares it’s better if the share price is lower compared to the time when I will want to sell the shares.

Q: What can execs do to increase the value of the company?
A: Increase profitability, reduce debt, etc. basically improve KPI’s investors use to decide whether to invest in the company or not. (I need to think about those KPI’s later)

Q: What can investors do to drive higher share price?
A: They can start buying more stock or persuade others to buy (increase demand) or if they are able to put power of more than 50% of the shares together they can replace executives with some other who will be more willing to increase a share price.

Q: So which companies might promise highest return on investment?
1) Companies with high expansion potential or aquisition appetite for which they will need a lot of money and which will be potentially issueing new shares.
2) Companies which are likely to be aquired in the future which would mean a high demand in the future.
3) Companies where the people in charge of the company will want to cash out in the future. People in charge could be founders of a company who still hold majority of the company, it could be VCs or public shareholders (although they have to be organised to have a proper power to action).

So how about this simple rule? Sell when people with power sell and buy when they buy or when they earn the shares. Companies’ insiders have to report when they sell/buy shares. This might be a good strategy when company is good and CEO is talented – worth following star CEO’s who were appointed by powerful people who want to sell.

Other questions (for some other time):
Q: Is there a relationship between company performance and company value and the share price?

Q: What is the role of supply? It’s not just about buying shares – someone has to be willing to sell them first. How stock exchange work? How people say they are selling/buying? How are they saying for how much they sell/buy? Do buyers always get the lowest price? Can selling price be below actual share price? What is the actual share price?

Q: If I know that a company will have stunning performance in the future – should I invest in it? Does performance matter at all?

It is not completely clear yet but it does makes more sense to me then it did before.

Any thoughts of yours?

Leaving a job is like a small death – one day you are there and the other one you are gone. Death is actually worse – it sometimes comes unexpected and unless your former colleagues can talk to ghosts they won’t be able to get any answers from you once you are dead. Nonetheless typically once you leave a company no one will contact you either.

Have you ever wondered how it would look like if you died tomorrow? How would it impact your family, your friends? Would people remember you often? For what? Have you created something worth remembering? Will it survive your death? If you haven’t left any legacy what was your life worth?

The way I see it it’s exactly the same with our jobs. When I was leaving my former jobs I have always tried to leave as big a legacy as I could, I put a lot of effort into writing ‘how-to’ guides, handing over my work as well as possible and even leaving my contact details in case something would have gone wrong. I have often met with surprised reactions from some of my colleagues. They were telling me – ‘Don’t bother, it’s the company’s problem to ensure they take the stuff over from you, don’t worry you have done everything you have been paid for.’ They get it wrong.

By doing as good handover as possible I am making lives of my former colleagues and my replacement easier. I am thanking the company, which I had been helping to succeed in the past, for giving me a job and an opporunity to make an impact. But first of all I am doing it for myself – to strengthen a belief that my work, my effort wasn’t pointless. That there I left a legacy.

Selfish? Sure, but using selfishness as an ally to do the right thing, to achieve a Win-Win solution is a great strategy, isn’t it?