The Rebel Allocator
The Rebel Allocator

The Rebel Allocator

for him: “The Rebel Allocator” or “The Wizard of Wichita.”  But his Christian name was Francis Xavier, and I had no idea at that time the role he’d play in my life. (Location 363)

“There are three qualities you want: integrity, intelligence, and energy.  If you don’t have the first, the other two can kill you. (Location 382)

“It is remarkable how much long-term advantage I’ve found by trying to be consistently not stupid.  You should try it sometime.  Instead of aiming to be very intelligent, just don’t be a dumbass.  If you avoid most of the big mistakes, you don’t have to be that smart to succeed.”  Good news for us dumbasses of the world. (Location 385)

Barring some miraculous advances in medicine, you’re only going to get one body for this lifetime.  Don’t crash it.  Take it in for regular maintenance. (Location 407)

‘What’s the one thing I could work on today that if I did a good job, it would make everything else easier, (Location 415)

That crucible made us fiercely loyal to each other and gave us the grit to become who we were.  You softies wouldn’t have survived. (Location 498)

“I like Warren Buffett’s thoughts on this: you should leave your children enough to where they can afford to do anything.  But not so much that they can afford to do nothing.” (Location 529)

The bird has to be slightly starved before it will hunt.  A fully-fed bird just sits there fat and happy.  But too hungry and the bird’s performance suffers from low energy. (Location 570)

I can promises you, if you do an automated savings plan correctly, you can’t help but end up being wealthy.  You don’t need any talent at earning a large income or being a professional investor.” (Location 586)

“We practice something called zero-based budgeting,” he said.  “Basically, every expense needs to be justified each year.  Nothing just rolls over mindlessly without passing inspection.  What do you think is the primary filter that we use to screen these expenses?” (Location 788)

“Here’s the filter we use: Will this expense go toward delighting our customer?  If the answer is no, then we’re ruthless about cutting it.  We call these non-strategic expenses because they don’t advance our strategy of making the customer happy.  We’ve found that these expenses are like fingernails; they always need trimming.” (Location 794)

The upper command would tell their soldiers what they wanted accomplished and why it was important.  It was then up to the lower ranks in the field to come up with how they got it done. (Location 921)

The Germans were often outnumbered, but they were one of the most effective armies ever assembled.  A lot of that was due to their thoughtful decision-making structure.  Just because their mission was so awful, doesn’t mean we can’t learn something useful from them.” (Location 926)

Mr. X just smiled knowingly.  “So now we’ve got value, price, and cost.  We have how they interact with profit and brand,” he said, pointing to each.  “We can describe an incredible variety of business situations by sliding these straws around. (Location 1017)

were connecting for me.  “I think I finally understand the Warren Buffett quote that you sent earlier this week.  You either have to be the lowest cost producer or build up a brand that lets you charge more if you want to earn higher returns.” (Location 1049)

Think of cash as the oxygen of a business.  During normal times when cash is plentiful, it’s easy to ignore and take for granted.  But when it’s suddenly missing, it’s hard to think about much else.” (Location 1140)

You just have to know what kind of business you’re in so you don’t get surprised and caught short.  It helps to be conservative.  When people forget they’re in a bad cash business, the universe has a way of painfully reminding them.” (Location 1158)

“Fair enough,” he said.  “‘On a scale of one to ten, how likely would you be to recommend us to a friend? (Location 1302)

The broader point here is that you need to be crystal clear with which human need you’re addressing.  Measure yourself against others addressing that specific need.” (Location 1335)

strategy?” “A strategy is a bigger goal we’re trying to accomplish as a team.  If you recall our previous conversations, a good strategy for us involves finding ways to better delight our customers or lower our costs.  There are usually several projects that make up a strategy.  Like a bundle,” he said. (Location 1441)

“We prefer to assess and fund strategies and not individual projects for several reasons.  First, we’re aiming to succeed in the long term.  A strategy is inherently more long term focused than a single project.”  “Alright, I’ll buy that,” (Location 1448)

“We pursue a strategy together as a team, not pet projects that make an individual champion look good.  Innovation is often best done in teams by combining ideas in novel ways.  How’s your burger?” he asked. (Location 1460)

“There is a strange fascination with growth,” he said.  “Maybe a better term for growth would simply be “more.”  If you’re doing something right, more is good.  But if you’re doing something wrong, more is definitely not what you want.  Return on invested capital can serve as the gauge that tells you if you’re doing something right or wrong.” (Location 1510)

“So you do smaller scale testing to make sure you have adequate returns on capital before you try to scale up and grow?” I said. (Location 1532)

We were better at logistics than real estate.  Remember, it’s a fool’s errand to believe (Location 1554)

“The franchisee, whom we carefully screen, has responsibility for the real estate side of the business.  They get help from us on the operations and get to use the Cootie name and systems. (Location 1561)

Our invested capital goes into designing better systems and building our brand--not buying more real estate.  That’s how our returns on invested capital are around (Location 1564)

“That’s right!” he said.  “That’s another important takeaway of this story.  There’s really no really such a thing as a bad asset.  Just the wrong price for that asset.” (Location 1845)

“Oh yeah, why is that?” Mr. X replied. “At every juncture, he’s looking at his various investment options and trying to pick the smartest one.  How can you make future plans if you don’t know what’s going to be on the menu later?  You’re limiting yourself by deciding (Location 1919)

Every business will be different.  It’s about cracking our minds open to find the obvious improvements that are hiding in plain sight.” (Location 2010)

man has an ailing horse,” Mr. X said.  “He takes it to the vet and asks: ‘Can you help me?  Sometimes my horse walks just fine and sometimes he limps.’  The vet replies: ‘No problem--when he's walking fine, sell him.’” (Location 2278)

He took a few deep breaths before replying.  “The average premium when you look at the historical numbers has been around fifty percent above market prices.  As a general rule of thumb, most deals benefit the target company’s shareholders at the expense of the acquiring company’s shareholders.” (Location 2284)

First, there’s a redundancy to carrying extra cash and very little debt.  Yes, it’s expensive to maintain and I bet your MBA professors would say it’s suboptimal. (Location 2316)

Business done well actually protects the little guys from natural fluctuations.”  Another pang of cognitive dissonance about my distrust of capitalism.  What are you doing to me, Mr. X? (Location 2320)

“Joking aside, I was a young single mother, no education, no credentials, no future, when Mr. X took me on as his assistant. (Location 2360)

Eventually a brave soul raised their hand and told a similar story of Mr. X believing in them when no one else did.  How he took a chance on them and it defined the trajectory of their career. (Location 2364)

It makes me nervous.  My mother would have beat me red with her purse if she found me showboating in front of a crowd.”  He laughed and coughed mightly.  I felt helpless. (Location 2393)

feeling of partnership between shareholders, the board of directors, and management.  If more CEOs viewed their shareholders as business partners, they’d do things a lot differently.”  He seemed to be channeling a new energy. (Location 2402)

“One of your responsibilities as the CEO of a publicly traded company is to make sure partners who need liquidity are able to get it. (Location 2412)

What if there’s a recession?  What if competition intensifies?  What if in the case of Cootie, people stop eating hamburgers?”  “That’s hard to imagine given what I ate earlier,” I said.  “I’ve yet to have a bad meal.” (Location 2451)

“The higher the interest rate, the less that dollar ten years from now is worth.  So even if we had a crystal ball and knew the exact quantity of cash that we’d get out of our business from here to eternity, different interest rate assumptions would make that pile of cash worth more or less today.  You can start to see why interest rates have a big effect on asset values.  They’re like the gravity of the financial world.  They’re everywhere and always tugging.” (Location 2467)

Did you know that the sun is 99.8% of the mass of our solar system? “I didn’t.  I guess it’s pretty big.” (Location 2476)

There’s nothing wrong with that-- diverse views make for healthy markets.  We simply provide all the facts as clearly as we (Location 2482)

“We learned about that in school,” I said.  “They called it the endowment effect.  It showed that we generally think the things we own are worth more, just because we own them.” “Good, and it’s very (Location 2502)