Growth Investment Policy

GROWTH strategy to go beyond Apple,Google,Microsoft,Amazon,Facebook,BerkshireHathaway

1. Nature

Nature is the ultimate standard for all life. We run business to learn nature; life, human, earth, universe. We can’t live in fiction. We should recognize the realty as if Leonardo Da Vinci did so. We can’t avoid reality and should compete with nature. Business is the metaphors of nature.

2.Golden rule

Rule No.1: never lose value
Rule No.2: do not forget Rule No.1

Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily-understandable business whose earnings are virtually certain to be materially higher five, ten, twenty years from now. -Warren Buffett
Time, Talent, Energy, Money, Raw Materials…every resource is limited. The long term increasing value is agreeable standard and guideline for every stakeholder. The value is gravity in economic field.

3.Redefining relationship

Business is about redefining relationship. Redefine the relationship between me and my father, mother, grandfather, grandmother, husband, wife, son, daughter, other families, friends, colleagues, other people, race, tribes, and other animals, plants, minerals, lands, seas, sky, planet, universe. Maintenance every relationship into healthy and sustainable and social state.It will solve the loneliness history of mankind locally and globally.
Do not control others,  but just move yourself into right timing, coordinate, orbit, environment. Everything has the timing. Feel, smell, taste the nuance of the sound of multiple languages, get the implicit message through financial statements. Feel the sense of distance between others and adjust that appropriately through firms, contracts, and financial struture. 

4.Health

Health is a dynamic state of complete physical, mental, spiritual and social well-being and not merely the absence of disease or infirmity.

Constitution of the World Health Organization: Principles

  • Health is a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.
  • The enjoyment of the highest attainable standard of health is one of the fundamental rights of every human being without distinction of race, religion, political belief, economic or social condition.
  • The health of all peoples is fundamental to the attainment of peace and security and is dependent on the fullest co-operation of individuals and States.
  • The achievement of any State in the promotion and protection of health is of value to all.
  • Unequal development in different countries in the promotion of health and control of diseases, especially communicable disease, is a common danger.
  • Healthy development of the child is of basic importance; the ability to live harmoniously in a changing total environment is essential to such development.
  • The extension to all peoples of the benefits of medical, psychological and related knowledge is essential to the fullest attainment of health.
  • Informed opinion and active co-operation on the part of the public are of the utmost importance in the improvement of the health of the people.
  • Governments have a responsibility for the health of their peoples which can be fulfilled only by the provision of adequate health and social measures.

Big purpose,Social connection,inner growth will do good for CTRA: our DNA system.

Article 25. All people shall have the right to maintain the minimum standards of wholesome and cultured living.-The Constitution of Japan November 3, 1946

We pursue maximum standards of wholesome and cultured living.

5.Intrinsic value > Price

“intrinsic value” is actual value of the business ecosystem.
It is not equals to market value or stock price. Detect intrinsic value by research and analysis into intangible asset : human capital, intellectual capital, network capital, business ecosystem, market brand recognition, leadership team, value-added reseller,distribution chain, look-through earnings and so on. There is four value business models; Network orchestrators have more market value than asset builders, service providers and technology creators.Calculate enterprise value by following methods:  P/E, P/B, EV/EBITDA, DCF, FCF
Look into net income, net assets in consecutive years.

6.EVA (EconomicValue Added)

If there is good business, it means there is constant Economic Value Added in their business process. The time with no value added means it’s waste of the time.

7.Leadership team

Purpose-inspired leadership, marketing, innovation.
Open, positive and creative atmosphere.

Warren Buffet look for three things; intelligence, energy, integrity
“We look for three things when we hire people. We look for intelligence, we look for initiative or energy, and we look for integrity. And if they don’t have the latter, the first two will kill you, because if you’re going to get someone without integrity, you want them lazy and dumb. I mean, you don’t want a spark of energy out of them. So it’s that third quality. But everything about that quality is your choice.”

Is there leadership team with appropriate skillset?
Investing in a company simply based on its leadership sometimes might not be the best strategy.
“the business model is good enough even with poor talent”, one should instead invest in a business that any fool can run.

8.CEO’s job

First ‘product'(or service), Second ‘team’
A CEO’s first job is to build a great product and find a small group of people who love it and use it enthusiastically, which inspire people and in future accumulate big crowd.
Three critical skills : product inovater,entrepreneur,have generosity and self decipline -Andressen Horowitz

9.Ownership

Financial incentive structure is the magic that control motivation of stakeholders.If CEO has no ownership, then the project go wrong way.

10.Understandable

If there is well aligned founders purpose, the business strategy, product ,service, process, platform, ecosystem, then it looks simple and well designed. Consistency and integrity means it is easy to understand.

11.Have Finland plan

How to beat Apple,Google,Microsoft,Amazon,Facebook,BerkshireHathaway or other big companies. Find appropriate benchmark. Find global No.1 talent or institution around any professions.

12.Risk vs Return

If there is risk, understand risk, hedge risk, manage risk. Take the risk only if we can understand,hedge,manage and control that.
use THE OUTSIDER TEST and THE BUFFETT TEST

13.Deligation

Three Tasks That CEOs Can’t Delegate
1.Hiring a Leadership Team and Making Sure They Work Well Together
2.Creating Purpose and Alignment
3.Nurturing Company Culture

14.Free time 

Steve Jobs say, “When I’m at my best, 50% of my time is unscheduled. That’s the time I use to think, drop in on the people I want to speak with, and let my curiosity roam. It’s my time to be creative. Without this free time, I would never be able to stay ahead of the company. To lead a company, you’ve always got to be two steps ahead. There’s no way to lead a company from behind.”-Ali Rowghani CEO of Ycombinater

Warren said ” Yeah, you have to be good at saying no. And picking the things that really makes a difference.” That’s one of many things I’ve learned from Warren. That’s my favorite. So I can blame it on him when I’m turning things down-Bill Gates

15.research,research,research

We move by inspiration and instinct but it always go wrong. We are totally fool. Therefore, research, research,research anything and adjust everything we can.

16.listen, Iisten, listen

listen to the users, listen to the customers, listen to the business partners, listen to your collegue  listen to other professionals. listen to the fabrics, materials, animals, air, sea, and most important, listen to yourself. There will be implicit message. EXPLORE our PURPOSE. test test test and modify modify modify your product and service. Inspiration and sense of purpose is the key.

17.test, test, test, seek best customer

We all have decision making bias. Nothing goes well for the first time. The only solution is do research and go to customer, try and error rapidly and endlessly like the movement of the sun and the moon.

18.Design, Redesign

Design is not about its looks but how it works. Design products, service and business to build the brand value. Redesign brands by educating their respective identities.
Design imply its nature, life.

Design is a specification of an object, manifested by  an agent, intended to accomplish goals, in a particular enviroment, using a set of premitive components, satisfying a set of requrements, subject to constraints.-A proposal for a formal definition of the design concept, Paul Ralph and Yair Wand
Design has magical power that moves people.
Forcused and sophisticated design might look as if it has life and spirit. That kind of design which is similar to human, animal, mineral, insect, plant, planet will move one’s heart. Redesign old into new classics.

Simplicity is the ultimate sophistication. -Leonardo da Vinci

19. Guideline, standards

Guideline, standards like mesurement, temperature, distance is essential for rapid and smooth  communication. “Public” means it is well  communicated.

20.Startup

Startup is similar to R&D.  It is like fundamental research or thesis writing. Hypothesis testing, technology research, user test marketing are essential. No ads, PR is needed for startup companies. The simple rule of recruit in startup is “Are you eager to work with him or her as  their subordinates.” “Is he or her really potential A class person?”

21.GROWTH TEST

The following tests are about high growth companies.

THE OUTSIDER TEST

1.The allocation process should be CEO led, not deligated to finance or business development personnel.

2.Start by determining the hurdle rate – the minimum acceptable return for investment projects(one of the most important decisions any CEO makes). Hurdle rates should be determined in reference to the set of opportunities available to the company, and should generally exceed the blended cost of equity and debt capital(usually in the mid teens or higher)

3.Calculate returns for all internal and external investment alternatives, and rank them by return and risk(calculations do not need to be perfectly precise). Use conservative assumptions. Projects with higher risk(such as acquisitions) should require higher returns. Be very wary of the adjective strategic- it is often corporate code for low returns.

4.Calculate the return for stock repurchases. Require that acquisition returns meaningfully exceed this benchmark. while stock buybacks were a significant source of value creation for these outsider CEOs, they are not a panacea. Repurchases can also destroy value if they are made at exorbitant prices.

5.Focus on after-tax returns, and run all transactions by tax counsel.

6.Determine acceptable, conservative cash and debt levels, and run the company to stay within them.

7.Consider a decentralized organizational model.(What is the ratio of people at corporate headquarters to total employees- how does this compare to your peer group?)

8.Retain capital in the business only if you have confidence you can generate returns over time that are above your hurdle rate

9.If you do not have potential high-return investment projects, consider paying a dividend. Be aware, however, that dividend decisions can be hard to reverse and that dividends can be tax inefficient.

10.When prices are extremely high, it’s OK to consider selling businesses or stock. It’s also OK to close under-performing business units if they are no longer capable of generating acceptable returns.

 

THE BUFFETT TEST

Warren Buffett has proposed a simple test of capital allocation ability: has a CEO created at least a dollar of value for every dollar of retained earnings over the course of his tenure?

 

Warren Buffet words of wisdom

durable competitive advantage
one dollar test
circle of competence
mirgin of safety
compounding
Habit is a second nature.
the do-nothing rationale
e.g. 1 hour in a week or in a month is the best timing for even startup mentoring in Y combinator, or sales mentoring in Prudential life insurance.

Reference materials

Tanaakk Corporate Profile

Tanaakk Reading List & Reference Materials

 

 

 

“Η ΑΛΗΘΕΙΑ ΕΛΕΥΘΕΡΩΣΕΙ ΥΜΑΣ”

(The truth shall make you free.)

The only truth is that we should continue to learn and change ourselves forever with passion and fighting spirit among limited life.

※We should revise this policy every year if needed.