Steve Forbes and the Billionaire's Mind

0:00Look, as a manager of people, as an employer, as an entrepreneur, and as an investor in startups, I can tell you the most important thing for your business is the quality of the people you hire. The best part is that great candidates are already on LinkedIn. Employees hired through LinkedIn are 30 % more likely to stick around for at least a year compared to those hired through the leading competitor. And I will tell you that the great thing about LinkedIn is that you're not just looking at random people. you're able to see the people who your friends and trusted peers and colleagues who they trust and who they've hired in the past and who they recommend.

0:42And hiring doesn't have to be complicated. Realistically, when you have a business to run, you don't want to spend hours on hiring. You want to hire the right person as quickly as possible. That's why LinkedIn Jobs AI Assistant suggests immediately 25 great big candidates daily so you can invite them to apply and keep things moving. Hire right the first time. Post your job for free at linkedin.com slash Altature, then promote it to use LinkedIn Jobs' new AI assistant, making it easier and faster to find the top candidates. That's linkedin.com slash Altature. Post your job for free. Terms and conditions apply.

1:25Steve Forbes is probably the world's expert on billionaires. Every year for the past 6 ,000 years or so, Forbes magazine publishes their Forbes 400, which is the 400 richest people on the planet. I don't actually always agree with the list, which I tell Steve. Like I think sometimes they're missing information. He disagrees with me, but he always has very interesting insights into what makes up a billionaire. This is obviously something I'm fascinated with because I wrote the book, Think Like a Billionaire. We have a great conversation. Here it is.

2:01This isn't your average business podcast and he's not your average host. This is the James Altucher Show.

2:18must have made for interesting copy well oh yeah that was a great a great podcast with ken langone um and now i have steve forbes editor-in-chief of forbes magazine and of course your family started forbes magazine which is my favorite magazine in the in the finance business but like everybody else i'm so excited every year when the billionaires list comes out well why do you think everybody's so fascinated to see oh who came in first this year Who are the new billionaires? Like there's this fascination with who's a billionaire. Well, people are always interested in people and interested in people who do things, people they may not know about or people they have heard of.

3:01And it's also interesting to see who is rising up, who is creating things, how this wealth is created on our global billionaires list, as well as the Forbes 400 richest list, which comes out in the fall. Most of those people are entrepreneurs. They are self-made. And most of the others are those who may have inherited but built on that inheritance. So these are almost all achievers. Not what in the old days they used to call coupon clippers, passive individuals. These are activists. They are trying to achieve great things. And what is also remarkable is the turnover on the list. Each year, people drop off not just because of the Grim Reaper but because they may have had setbacks or others are just doing better and we get people who come on again we like to call them retreads it's nice to be a retread billionaire but uh uh so it's it's a really a good portrait of how the world is doing and what is another thing that's remarkable about the global side is how many people from around the world are doing big things it's not just the west it's it's everywhere right You could almost track the economic development of continents by how many of their citizens get on the Forbes billionaire list.

4:17Like this year is a lot more from Africa, for instance. You know, so you could see. And then you look at other things like you go to the World Bank website. You could see, oh, suddenly Africa has much more access to clean water than they've ever had before. Of course, it makes sense then that economic development spreads into other areas of development. whether it's billionaires or access to clean water or whatever. So I have a couple of questions, though. One's a spurious gossipy question about the billionaires list. Did it surprise you that Jeff Bezos was the first to hit over 100? Not really.

4:51I mean, Warren Buffett could have if he hadn't given the money away. Bill Gates could have if he had stayed with Microsoft instead of doing his efforts in numerous areas in philanthropy. be. But Bezos is an example of an individual who took a fairly simple concept and has expanded it relentlessly. And one of the things that's interesting about these people as they achieve size is how do you stay nimble as you get bigger? Not so easy to do. Warren Buffett, for example, has done it in a way in which he allows people to run these numerous large companies that he takes huge stakes in or buys them out outright and has not fallen by the wayside the way General General Electric has done in recent times where it had a portfolio of businesses and it's faltered badly.

5:38Buffett's made it work. How did he do it? Bezos is a big, among other things, a big believer in teams, eight to ten people working on projects, coming up with ideas or executing ideas. And he has a two-pizza rule. His two-pizza rule is if it takes more than two pizzas to feed a team when they're working at night, the team is too big. When a team gets bigger than 10 or 12 people, it loses that spark of creativity that makes a team work. So Amazon, huge. Bezos' wealth, huge. But he's tried to make sure he doesn't lose the ingredients, so to speak. And you see it in the cloud. No one ever thought that Amazon would be the biggest player in the cloud.

6:21And he is. Well, one time I visited Amazon and they told me another rule he has is, if you have an idea, write the press release first. as if the idea was already completed. And then you could start to feel, is this press release impressive? It's kind of an interesting way to, let's determine what the success of this idea is before we start working on it. How do you define success for this idea? Because that'll show up in the pre-press release that you write. It's an interesting strategy. It is an interesting strategy. And again, it's enabling people to focus on what is it you're trying to do.

6:57Peter Drucker, the late great management guru who wrote books about managing entities organizations businesses still read in many business schools today said every organization including businesses should always ask themselves what is your purpose what is it you were trying to do if you focus on your purpose you get less hung up if the means to achieve that purpose change and the era we're living in now with the web and all the mammoth changes coming from a blockchain and 5G. Every CEO now knows that disruption is coming his or her way. So how do you cope with it? So what Bezos and others do, highly relevant.

7:36Well, I'm going to ask you about that in a second in the context of Forbes. On the billionaires list, though, right now I think you list there's about 2 ,200 billionaires in the world. Right. And you're able to list that because there's a lot of public records. It's like Bezos or Gates, a great example. We could see exactly what their shares in Amazon and Microsoft are worth. They might have billions from other sources, but we might not know what those billions are. We can guess, but we don't know. How many actual, I know many billionaires, for instance, who are not on your list. And that's just me randomly knowing people who are not on your list, who happen to have maybe many, many billions.

8:15How many actual billionaires do you think there are in the world? Well, the number changes because asset values change. And we're always coming up with new names. They're not publicly listed. And most of the information is from other sources because it's not always in the public record. Most people are cooperative. Others are not. Some always try to inflate their wealth. Why would they try to do that? Because they feel it's a source of power. wilbur ross we have a story now how he exaggerated his wealth substantially and you get in fights with some people donald trump always feels we underestimate his wealth by about 60 each year what do you think donald's one's actually worth well you have him it's nine billion right now right or i i don't know we we have him a little over three we have between three to four billion uh sizable by anybody's standards nine he he says oh no my brand is worth nine or ten billion We always take the position that a brand, we don't monetize or give value to a brand unless you've monetized it.

9:21So Oprah, yes, their name is extremely valuable. But unless she's monetized it, which she has in a number of areas. And she has shares of CBS worth X. We want to see, okay, how you've turned that into a money. It's like having a chicken and saying, well, that's a dozen eggs. No, the chicken's got to lay the eggs before we count the eggs. Right. So, yeah, but like I'm not – I didn't mean to say your list is not accurate. I just think there's probably many people. Yes. Well, it's a big world out there, and so we're always constantly trying to dig and find. Most people don't volunteer because they don't want to have more light shown on them than already is.

10:01You don't want to be a target. Not a target of bad people, but a target of tax collectors and fundraisers. Every development office in the world gets our billionaires issue and the Forbes 400 issue. It's the first thing they look to. What prospects can we find now? And in China, years ago, the Chinese government, when we came out with our list of the richest hundred Chinese, said everyone will be subject to a tax examination. So sometimes the attention is not wanted. But if you have names, we'll be glad to take them and check them out to see if we can find the sources that they're billionaires.

10:42We'd love to have them. Well, let's just guess. Let's say instead of 2 ,000 billionaires, I would say there's probably more like 10 ,000 billionaires in the world. Does that seem wildly off or reasonable? I think we have people, sources in most countries around the world. So I think if there was somebody very, very wealthy that we haven't heard of, I don't think it would number 8 ,000. And a lot of people, some people may think they're worth more than they actually are. In their own minds, this is a priceless thing. But in the marketplace, it may not. And the market is always changing. Market is consumer preferences, what works or what doesn't work.

11:26So you see it, especially startups and new drugs, going through the various trials at the FDA. They can be worth billions one day and nothing the next day. You come up with a new way of making a product. The old machinery may still work, but it doesn't have the value that it did before the better new ways came along. You saw it most dramatically in my business, in the print business, where the web threw out just about everything we thought we had learned in the past 150 years. And so what Joseph Schumpeter called creative destruction, everyone loves the creative part, but the destruction is there destroying old capital, destroying capital.

12:07You take the New York Times. They bought the Boston Globe decades ago for over a billion dollars, sold that in a handful of other Massachusetts papers a few years ago for, what, 50 million, depending on whose numbers you look at? Number six on your list, Carlos Slim. And so it was a billion dollars of capital destroyed by the advent of new technology. So you always have this changing. It's not a stable environment. So let's say there's 2 ,000 billionaires, the guys on your list, the men and women on your list, and there's 38 million millionaires in the world, which is, of course, a great achievement.

12:44This is not detracting from them. In your mind, what's the difference? What are the habits that are specifically different between a self-made billionaire and a very successful millionaire? Only zeros. You think that's it? You think there's not an extra habit? Like when I interview a guy like Ken Langone. It depends. Some people are not good executives, but they know how to get people around who can make things happen. Warren Buffett is not a micromanager, but he makes sure he has metrics to keep track of how how these individuals are doing and running these various companies so uh what it takes you to get to a million uh doesn't stand in the way of going to the next step a lot of it is just the kind of business you're in doesn't have the scale to uh to to reach up some people are great deal makers others like to focus in their own what we call the wheel your own wheelhouse your own sandbox and so I don't think you're going to find huge differences.

13:53There's an innate ability in there, but I don't think it's something you can quantify. I don't think you're going to be able to come up with the metrics in the business school to say, aha, millionaire, billionaire, zillionaire. You don't think there's an extra like, and I don't know the answer, you don't think there's an extra amount of persistence? Like, I just want to... I think probably the hardest workers in the world are people scratching out a living in parts of Africa with obsolete tools. Right. In terms of the sweat they put in and because they don't have the right tools, they're still always struggling.

14:31So it's not the amount of work per se, not the amount of hours per se, not the amount of drive per se. i could spend 10 000 hours trying to play golf i wouldn't get to break a hundred uh no matter what me me neither by the way so uh some some may have a real knack for something that also meets the needs and wants of hundreds of millions or billions of people so i don't think it's a sweat equity or drive or ambition. It's a combination of that intangible thing of seeing something that somebody doesn't. And then if it succeeds, everyone says, well, that was obvious. And if it doesn't, boy, that was a stupid idea.

15:16As a matter of fact, most new ideas, somebody once said, if you have a great new idea, you don't have to patent it because most people think it's stupid until it works. It's interesting. A lot of entrepreneurs make the mistake of say, of not wanting to share their idea because they think people will steal it. And I always say, don't worry, no one is stealing your idea. A, if you're passionate about it, you're going to beat everyone else anyway. B, it's like what you just said. If your idea is unique and the first in its space or whatever, no one cares about your idea until you've already succeeded with it.

15:50it it that that that is true and uh so uh you can uh steal a lot of ideas but it doesn't mean you're going to make them work the classic case is seeing what others don't uh steve jobs goes to menlo park xerox's great research laboratory in the late 70s sees what we later call the mouse saw possibilities that xerox did not ran with it he didn't invent the mouse so to speak but he saw the possibilities of what was there and developed it. Take a nutritionist gag at this, but take Ray Kroc. He saw what the McDonald brothers had done in a business that everyone knows and still is today, has the highest casualty rate, the restaurant business.

16:33They come and they go, like you change your shirt and or underwear and tough, tough business. But the McDonald brothers had stumbled on a way through simplicity, especially at that time back in the 1950s when diners were prevalent. The nice thing about diners is the wonderful menus. They're about 800 pages, every conceivable thing. You can spend your whole day reading the menu. But the McDonald brothers had focused on a few key things, and Kroc saw the possibilities of actually doing a real national chain, which really hadn't been done before on the scale he envisioned. So the McDonald brothers invented it, but Kroc saw the possibilities of it and made it happen.

17:17Take a quick break. If you like this episode, I'd really, really appreciate it. It means so much to me. Please share it with your friends and subscribe to the podcast. Email me at Alcatra at gmail.com and tell me why you subscribed. Thanks.

17:38Look, as a manager of people, as an employer, as an entrepreneur, and as even an investor in startups, I can tell you the most important thing for your business is the quality of the people you hire. The best part is that great candidates are already on LinkedIn. Employees hired through LinkedIn are 30 % more likely to stick around for at least a year compared to those hired through the leading competitor. And I will tell you that the great thing about LinkedIn is that you're not just looking at random people. You're able to see the people who your friends and trusted peers and colleagues, who they trust and who they've hired in the past and who they recommend.

18:21And hiring doesn't have to be complicated. Realistically, when you have a business to run, you don't want to spend hours on hiring. You want to hire the right person as quickly as possible. That's why LinkedIn Jobs AI Assistant suggests immediately 25 great fit candidates daily so you can invite them to apply and keep things moving. Hire right the first time. Post your job for free at linkedin.com slash Altature, then promote it to use LinkedIn Jobs' new AI assistant, making it easier and faster to find the top candidates. That's linkedin.com slash Altature. Post your job for free. Terms and conditions apply.

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19:36Plus, the card earns unlimited double miles on every purchase, so the more a business spends, the more miles earned. And when traveling, the VentureX Business Card grants access to over a thousand airport lounges. The VentureX Business Card, what's in your wallet? Terms and conditions apply. Find out more at CapitalOne.com slash VentureXBusiness. If you look at the top 10, 20, 30 on your list, A lot of them take older concepts and then kind of maybe combine it with other concepts. Like Ray Kroc takes the idea of the diner but then thinks to himself, okay, we could almost make this like the assembly line of diners.

20:19Like we could take this exact concept and just plant it down everywhere and think huge. And he focused on a couple of popular things, cheeseburgers, hamburgers. I don't know whether they ever served hot dogs at McDonald's. I don't think so. Burger King once did, and soda pop and milkshakes, and focused on that. And people loved the simplicity. You didn't have to have 800 items on the menu. And so this ability to see what others don't, you ask yourself, who made the most money from mainframe computers? It wasn't the company that invented the computer during World War II in the 1940s or IBM, which dominated the field.

20:54IBM nearly went bust in the early 90s. The one who made the most money on it was Sam Walton, who recognized in the early 60s, one of the time when Kmart and others were 50, 100, 500 times the size of Walmart, that if he managed inventories using specialized software in a way that the other big boys didn't, he'd beat them at their own game, and he did. He managed inventories and then chains, supply chains in a way that hadn't been done before, and he became the biggest. He didn't invent the PC, but he used it in the software that could be developed in a way that no one else did. So again, he didn't invent it, but he used the tools in a way no one else did.

21:31But there was a passion there too in that he would go to other big box stores that didn't have necessarily the ideas of distribution that he was thinking. He'd go to like, I don't know, the woman's lingerie rack and say, oh, no, it's a little messy here or here's what they're doing right. Like he was – he had an extra passion. He didn't just want to make money. He had an extra passion about big box retail. Most entrepreneurs, most are not out to make money. They like it. And they succeed in part because we have financial markets that can supply the capital to grow. It's nice to have an idea. But if you don't have the means to develop it and continue to improve it and distribute it, you're not going to get very far.

22:16So, yes, he had that passion and he was obsessed with it, which is why oftentimes entrepreneurs may not make the best dinner partners for a conversation or perhaps a spouse or something. They are devoted to something. They're obsessed by it. Ray Kroc, when he was asked, why don't you expand into other kinds of foods or diversify, he would say, can you guarantee that every restroom in our 1 ,000-plus stores, this was back in the 60s, is absolutely spotless clean? Can you guarantee me that right now? No. Then we're not going to leave what we're doing. That's interesting. So Forbes and Forbes.com, I'm going to just pitch you a quick idea.

23:04Think about CNBC. Why was CNBC so successful? They early on got in with all the cable companies and got a low channel. So it was easy to find and they got some good programming and so on. I sort of, and tell me if you disagree. I feel like now anybody that has traffic to their website can become a Netflix. Anybody can create original visual programming and the world is moving towards visual programming instead of written, you know, which is how storytelling happened 10 ,000 years ago with photos or not with photos with with with hieroglyphics on a cave wall now instagram is the most popular social media website forbes.com has an enormous amount of traffic would you put what you should you should produce tv shows get on a set top box doesn't matter what your channel is where where we're producing a video now and uh everyone is doing it and everyone says well well, if Netflix can do it, why can't anyone else?

24:04Well, people are finding out. Yes, anyone can write anything online. Anyone can take pictures online. But finding the right content, right audience, easier said than done. So our traffic is going up. We're now averaging according to Comscore, which is much more conservative than some of these other measuring firms. We're over 70 million unique visitors a month. So, yeah, we're doing video. We're not going to do Game of Thrones, I don't think, or some of the other series. It's really a golden age for cable in terms of the content, much more than traditional television or even movies. Now it's what you can do with streaming, what you can do on cable, less and less cable in the future.

24:50So the means of entertainment is drastically changing. But everyone now is a publisher. Everyone now is a content producer. In more than one medium. It's not just written. You have to do everything. Because people take information in in various ways. And more and more it will be video. And one of the things that has been phenomenally growing, as you know, is handhelds, smartphones, whatever you want to call them. If you said 25 years ago your grandmother could learn to operate a supercomputer, you'd have said you're out of your mind. while granny today with a handheld is operating a supercomputer.

25:32And the nice thing about those handhelds, you hit it and things happen. You know, it's funny because the phone now is just an app on your phone. That's basically what the traditional phone is. It's just an app on the phone in your pocket. Another thing about these entrepreneurs is if you don't get in the way of free markets, which is another word for free people, markets will always, people always turn scarcity into abundance. somebody once said if you want to see how poor people will live tomorrow see how rich people live today because today's luxuries will become tomorrow's commodities and we see the process time and again we think we don't think anything of it handheld first one you mentioned voice telephony came out of motorola 35 36 years ago all it did was voice big as a shoebox weighed like a brick first one for motorola cost 3995 dollars even with apple's increases on the apple I don't know, Apple 11, maybe it's Apple 21 coming up.

26:31They try to jack up the price, and so they have these deals where you lease it for a certain amount and get a certain credit if you turn it in for the next new operation, model of it. But anyway, it's nowhere near$3 ,995. As you pointed out, voice is almost a sideshow compared to all the other things it does. The only thing that's missing now is hair-growing capabilities, wrote put an app to grow your hair but maybe they'll come up with that in the next model you make a good point though because everybody views inflation just in terms of how much does it does it cost but you basically said uh okay instead of having something with just voiced capabilities that's four thousand dollars you now have a supercomputer that's a thousand dollars so there's almost no way to really qualify that kind of deflation and i sort of feel like this this this gets to a fundamental point and that is too many economists confuse price changes because of supply demand changes in improvement productivity with the trashing your money making it either too abundant or too scarce and if you have a normal uh free market and the authorities stay out of the way prices will go down unless you add improvements to them you see it in moore's law you see it in And if you take a handheld today, it would have cost millions of dollars a few years ago, even if you're assuming you had the technology to make it.

27:57So these price indices like the consumer price index, they seem so precise, 2.25 % and blah, blah, blah. They aren't. They are all estimations of changes because people's buying habits change, people's preferences change. What is a luxury today is a must-have tomorrow. Everyone must have. Must have. Measuring productivity turns not so easy to do. So, yeah. Would you say we're experiencing deflation now? No. I think right now you're not experiencing anything. The Fed is somewhat behaving itself, not because it wants to, but because sometimes it stumbles on not doing too much harm. But the fact that something becomes cheaper is not deflation, which economists say, oh, that's bad if you have deflation.

28:53No, it's called productivity. So when you see big changes in commodity prices, it's usually because the Fed and the government is messing up. There was no supply and demand reason why in the early 2000s oil went from$20 a barrel to over$100 a barrel. that was simply weakening the dollar. So let me ask you this. Now that Donald Trump, for better or for worse, has sort of opened the door to billionaires applying, you know, running for office, I feel like actually he didn't open the door, you opened the door in 1996 when you ran for president that you could say, look, I have experience being an executive.