How to be a Billionaire by Martin S. Fridson

• Key principles shared by the self-made billionaires are:
• Pursue the money in ideas
• Rules are breakable
• Copying pays better than innovating
• Keep on growing
• Hold on to your equity
• Hard work is essential
• Use financial leverage
• Keep the back door open
• Make mistakes, then learn from them
• Frugality pays
• Enjoy the pursuit
• Develop a thick skin
• Lawful sources of pricing power:
• Brand identity
• Patent protection
• Dominant market share
• Sustainable cost advantage
• A more dependable strategy is to learn how to make money from ideas, and then to be prepared to capitalize on an original notion dreamed up by someone who is more skilled at that sort of thing.
• The best odds of becoming a billionaire, in summary, exist in industries that ride the key trends of economic development. This suggests that in newly industrializing countries, great opportunities may remain in infrastructure and basic industries. In the world’s most developed economies, however, the cream of tomorrow’s billionaires probably will emerge from communications, services, and technology.
• Sooner or later, every rapid-growth industry slows down. If the industry’s sales did not accelerate, they would eventually exceed the economy’s total output, a logical impossibility. When the inevitable deceleration occurs, the baton passes to other businesses that begin growing at phenomenal rates and coining new billionaires.
• Opportunities are more abundant in a rapidly growing industry, which is inherently somewhat chaotic and therefore fraught with risk.
• Generally speaking, industries achieve their highest growth rates in their early stages.
• All things considered, mature industries do not represent the path of least resistance toward a billion-dollar fortune.
• Economies of scale and unit costs, it is true, ,have their greatest analytical value in traditional manufacturing businesses. In other industries, low unit costs are not necessarily the chief benefit of gaining market share during the rapid-growth phase. Instead, the objective may be to establish an industry standard.
• The difference between low growth and high growth really begins to affect net worth when a company goes public, that is, when it begins to raise money in the stock market.
• The benefits of succeeding increase sharply when the company trades at a high price-earnings multiple.
• Good old-fashioned hard work and risk taking pay much better in industries that carry high price-earning multiples.
• The more rapidly a company’s profits are expected to grow, the more valuable is a dollar of those earnings today.
• If history is any guide, the high-tech entrepreneur track will be only one of several that transport individuals to the upper echelons of the Forbes 400 in the future. A number of alternative strategies exist for aspiring billionaires who fear that they are not in the right place at the right time.
• Several fundamental business strategies emerge from studying the founders of great fortunes:
• Take extraordinary risks
• Do business in a new way
• Dominate your market
• Consolidate an industry
• Buy low
• Thrive on deals
• Outmanage the competition
• Invest in political influence
• Resist the unions
• Correlation of risk and reward is one of the most fundamental precepts of finance. The greater the danger of loss in an investment, the greater is the potential gain.
• Innovation in business has two highly appealing characteristics for aspiring millionaires. First, it offers a way to achieve the high growth rates that lead to high price-earning multiples. Second, it does not require an especially original mind.
• If innovation enables you to create immense equity value and requires no originality, what is the catch? The biggest drawback is the backlash inevitably triggered by change. Upsetting the status quo is a sure way to draw fire from the sort of people who invariably liked things better the way they used to be. They begin with the sound proposition that not every change represents progress, but carry the notion much too far.
• Take monumental risks.
• Thrive on deals.
• Keep on growing.
• Keep the back door open.
• Use financial leverage.
• Do business in a new way.
• Outmanage the competition.
• Frugality pays.
• Hold on to your equity.
• Make mistakes, then learn from them.
• Enjoy the pursuit.
• Copying pays better than innovating.
• Keep on growing.
• Use financial leverage.
• Hard work is essential.
• Develop a thick skin.
• The wisdom to admit a mistake is nearly as valuable as the wisdom to avoid mistakes in the first place.
• A mere desire to amass wealth is not a sufficiently strong enough motivation.
• Success is more likely to accrue to people who find intrinsic satisfaction in the accumulation of wealth, as opposed to the possession of wealth.
• Dominating a market is a highly effective strategy for accumulating wealth.
• Developing a thick skin is an especially important principle if you pursue this path to fortune.
• Market dominance is not synonymous with monopoly. Complete elimination of competition is the ultimate form of dominance, but it is not a realistic objective. Moreover, dominating a particular market does not confer unlimited economic power, given the interdependence of suppliers, producers, and customers.
• The toughest part of exploiting market dominance is achieving it in the first place.
• Dominate your market.
• Do business in a new way.
• Consolidate an industry.
• The keys to battling antitrust claims are ingenuity and tenacity.
• Another benefit of reading the Microsoft case study is the insight it provides on defending a dominant market position. If you achieve such  position, you can expect competitors to fight ferociously to take it away. While staying within the bounds of the law, you must be prepared to respond in a manner that can be summed up in three words: Play to win.
• Play to win.
• The high-growth industries that most often spawn vast personal fortunes tend to be characterized by fierce struggles for survival. No one is likely to emerge from such battles without a willingness to push the envelope.
• In high-stakes business such as computer software, making billions without making enemies is probably impossible.
• Don’t be too proud to take advantage of underserved good fortune.
• Consolidation consists of reducing the number of firms in an industry.
• To be sure, large organizations often become inefficient as a result of cumbersome controls, unduly long lines of communication, and redundant overhead. Smaller, more streamlined companies may then be able to enter the industry and compete successfully. In other instances, a new entrant may prosper by cream skimming, that is, concentrating solely on a highly profitable segment of the business. Long before any of these new entrants appear, however, young industries follow a predictable pattern of consolidation.
• Opportunities for amassing riches exist for those who recognize the potential for the process to repeat itself in yet another industry.
• Managing the managers is just one of several organizational problems of fashioning an effective organization out of desperate enterprises.
• An individual who excels at the deal making required to put the company together may lack any skill or interest in the administrative routine of preventing it from falling apart.
• In short, consolidation is a plausible path to colossal wealth, but one for which you must stretch your talents in several different directions.
• Outmanage the competition.
• Thrive on deals.
• An entrepreneur who has a significant stake in the acquiring company can create substantial paper wealth just be making acquisitions. As a rule, lasting wealth does not get created by randomly buying companies that fail to mesh as consolidated enterprises. By the same token, making acquisitions for stock can dramatically leverage the wealth-building efforts of a consolidators with a sizeable personal stake in the acquiring company.
• “Buy low, sell high” is the simplest formula imaginable for amassing wealth. What could be more complicated than purchasing an asset when nobody wants it, then selling it when no one can live without it?
• There are several different ways to realize value in buying and selling businesses. Negotiating favorable prices, both on the way in and on the way out, is only the most obvious. Another means of maximizing the gain on the round trip is to finance the purchase on advantageous terms. Further gains are achievable from increasing the asset’s value, following its purchase, through capable management. Not to be ignored, either, is the compensation that can be extracted during the ownership/management phase.
• By exploiting all these profit sources in every transaction, and by doing many transactions, it is possible to amuse a sizable fortune.
• A critical capability to develop is a manner that reassures all participants in the transaction.
• Wayne Huizenga’s Cardinal Rules for Closing Deals:
• Don’t lose a deal by failing to pay attention to it.
• Never talk about a deal until it is signed.
• Buy low.
• Superior management skills have [played a critical role in the foundation of may great fortunes.
• Doing the same thing in the same way as everyone else is decidedly not the way to overcome the leveling effects of competition.
• The leaders of organizations that run circles around procedure bound companies are not people who emphasize protocol over results. If a creative idea must undergo endless rounds of formal review, it will not be implemented soon enough to provide a competitive advantage. Innovations turn into actions much more swiftly in organizations run by individuals who feel as frustrated as Ross Perot did by the slow response to the events of General Motors.
• What makes the self-made billionaires knack for building effective companies distinctive has little to do with the formal elements, such as organization charts and performance measurement. It is more a matter of giving their organizations the stamp of their  invariable strong personalities.
• Most business enterprises that are vast enough to create billion-dollar fortunes are too complex to be run effectively by a single presiding genius. Therefore, recruitment of capable managers has been an essential ingredient to most of the great fortunes. Far from finding it difficult to delegate authority over day-to-day operations, most self-made billionaires have preferred to focus on more lucrative activities. By swinging more deals and overcoming the leveling effect of competition, they have become far wealthier than managers who were much more adept at handling the details.
• Looking beneath the differences in the self-made billionaires’ styles, several common factors emerge that represent the substance of effective management. To replicate their success, you must develop an approach that is compatible with your personality and achieves the following objectives:
• Attract managers with enough self-confidence to challenge your own judgement on matters.
• Delegate authority to detail-oriented executives who can free you to concentrate on billion-dollar ideas.
• Stay close enough to operations to be aware of problems and opportunities, making sure that your lieutenant's follow up on suggestions for improvement.
• Constantly reinforce a focus on controlling costs.
• Use equity incentives to provide your managers and other key employees a realistic chance to become millionaires.
• Show genuine, personal concern for people within your organization.
• Promote moral by maintaining a sense of fun along with seriousness of purpose.
• Do business in a new way.
• Branson rejects the notion of making his sprawling business empire more efficient by consolidating its operations. In service businesses, he argues, the key is to have happy and well-motivated employees. Accordingly, he percy is greater value in keeping his companies small scale, with no more than 50 or 60 people in one building, than in saving money by putting everybody under one roof. Once a company becomes so large that people no longer know one another, says Branson, it is time to break it up.
• Lobbying legislative and regulatory bodies is one lawful and effective way for a company to influence government’s impact on its profits. A more indirect approach is to contribute to the election campaigns of candidates for strategically important offices.
• Competing in certain businesses is impossible without becoming enmeshed in politics.
• For anyone who hopes to exploit the political process in the future, the key question is how to defend a private benefit in the guise of a boon to the public interest. This lesson can be summarized in a three-step program:
• Cultivate an underdog image.
• Find a friend in government.
• Devise a complex benefit.
• Gaining a sympathetic ear in the halls of power is paramount and not as difficult as it might seem. Making friends in politics is easy, just as it is in philanthropic circles.
• You can make it easy for seekers of campaign contributions to find you by throwing a few dollars into the coffers without waiting for them to prod you. It will surprise you how quickly the political operatives will learn to like you and how eager the officeholders will be to meet you.
• Best of all, politicians are surprisingly casual about ideological consistency.
• A benefit that is complex, with costs that are spread wide and thin throughout the population, tends to minimize the incentive for potential opponents to become well informed.
• An analysis of the great fortunes founded since the nineteenth century showed you that they greatly improved their chances by focusing their energies in high-growth industries.
• Social conventions that represent impediments to others we become stepping-stones to you. Chance to encroach on your rivals’ markets will appear as they adhere to unwritten pacts designed to preserve the competitive status quo.
• Business People more sensitive than you to public opinion will hand you opportunities by forgoing actions that would cause them to be reviled as despoilers of the traditional, small-town way of life. At the bargaining table, you will get the better of negotiators who lack your total commitment to winning. Unlike you, they will not have the brass to contest each tiny point and then, when the terms appear settled and the opposite party is emotionally commitment to the deal, raise a new objection that starts the process all over again.
• Wholehearted enthusiasm, in play as well as in work, is a trait you absolutely must develop if you hope to replicate the self-made billionaires’ success. Their experience indicates that you will not prosper by performing any activity in a perfunctory way, regardless of whether it has to do with making money.
• Far from distracting you from the goal of becoming super rich, intensely applying yourself to other aspects of your life will cultivate the habit of excelling.
• Self-made billionaires, in short, approach every activity with fervor.
• Tenacity is another trait invariably ascribed to the great fortune builders. The individuals profiled in this book have not grown immensely wealthy through luck alone. Instead, they have persevere until the breaks come. This, too, is a habit that you can and should form.
• More than loving money, the self-made billionaires loved the pursuit of money. To follow in their footsteps, you must adopt their mind-set, as well as their strategies, tactics, and principles.