“Failure is rarely fatal. But success is never final.”
Worst investment ever
Bracken once went to lunch with one of his board members at Logitech. His name is Neil Hunt. As they were chatting, Bracken asked Neil what he had worked on. At the time, Bracken did not know anything about the company Neil worked for.
Neil told him that he had worked on an algorithm all day. It was an algorithm that was trying to help recommend something to users. He explained to Bracken that they already had a recommendation algorithm, but he was trying to understand why the two algorithms were bringing different results.
Impressed by Neil’s curiosity
Neil was the head of product at his company. Bracken was so impressed by the level at which Neil and his company were trying to understand their product and user behaviors to give their customers a good experience.
Bracken invested in the company as soon as he got back to his office. He put in a lot of money into the company. The stock doubled in two months. In six months it had gone up by 250%.
Something just did not sit right with his investment decision
Though Bracken was super impressed by Neil’s company, he had this little voice in his head that made him uncomfortable about the investment he made. Bracken felt uncomfortable because Neil was a member of his board, and he thought that this would be seen as a conflict of interest.
Bracken thought that the smart move would be to sell his stock, so he sold half of it.
The stock continued to double, and the more the stock went up, the more Bracken felt uncomfortable.
He kept thinking that if people knew that Neil was a board member, they would think he had gotten insider information. Eventually, he sold his entire stock. The stock ended up going up 30-fold. The company is Netflix.
Bracken should have known better
Instead of selling his stock, Bracken should have gone to his general counsel and inquired if he had done anything wrong. He would have been told that there is nothing wrong with investing in your board member’s companies.
But Bracken never asked, so he lost so much money by selling a stock that has continued to grow tremendously over the years.
Trust your instincts
Trust your intuition on things that you feel are good for you. Chances are, they are good.
Hold onto your investment for as long as possible
Most people get out of investments too early. When you invest, do not be afraid to hold on to it for as long as you can.
Communicate and ask for advice
Before you sell your investment, seek advice. If you are having doubts about your investment, communicate with the people involved. There might just be a better solution than selling your investment.
Think long term
You should look at your investing period over decades. So if you are 30 years old, you want to retire when you are 60. That is 30 years, but do not forget, you are probably going to live to be 90, that is another 30 years, so we are talking about 60 years. When you put 60 years into your head, it helps you think long term and not short term.
Sometimes all you have to do is ask
If there is anything that you do not understand regarding your investment, ask and get the help or advice you need. But do not keep it inside. Ask.
Take a long-term view of everything in your life because you will rarely go wrong if you bet on long-term trends.
No. 1 goal for the next 12 months
Bracken’s number one goal for the next 12 months is to make tremendous progress on diversity and inclusion at Logitech.
“Stay focused on the long term, and you will have a long successful life.”
Andrew Stotz 00:01
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning in our community we know that winning investing you must take risks but to win big, you've got to reduce it. This episode is sponsored by a stocks Academy's valuation masterclass. They call it the boot camp for valuation because it takes almost 200 hours and students must value about 20 companies to graduate maybe we need to add in Logitech as one of the companies that our students will value. It really is the complete proven step by step course to guide you from novice to valuation expert go to my worst investment ever.com slash deals before March 20 31st 2020. Want to claim your 30% discount for podcast listeners? fellow risk takers This is your worst podcast host Andrew Stotz and I'm here with featured guests brackin Daryl Bracken, are you ready to rock? I am. Now I'm going to introduce you to the audience. It's short and sweet. Brandon P. Darrell, is the President and CEO of Logitech. And the company is worth now 12 times more than when he started back in 2012. Got it. So take a minute and filling further tidbits about your life.
Bracken P Darrell 01:18
Yeah, I grew up in Kentucky. So in the middle of the middle of the country, for those of you who are not Americans, and are familiar with us, I went to college in Arkansas. So I went to another place in the middle of the country. And then from there, I went back to I worked in accounting and then I moved into marketing and product management, worked at a big company at a big company and I arrived it at a Logitech eight year. It'll be nine years in April, actually.
Andrew Stotz 01:48
And how did you arrive there? What was it? Was it a? What was that process?
Bracken P Darrell 01:52
Well, I really would, I had gotten very excited about the concept of design. And I was running the Braun business out of Germany for six or six years total. And in between I went to Whirlpool and I love the idea of trying to create a design company, or take an existing company and try to turn it into a design company. And design company to me bring design and design thinking into everything, and also using it to enter new businesses, new categories. And so when I got the call from a recruiter about coming to Logitech, I thought that looks like a good place to do that.
Andrew Stotz 02:27
Um, and I'm curious, when you first came in the idea of design, did everybody on board with that? Or was there like some like, well, we're not really a design company, we're more of a manufacturing company or whatever.
Bracken P Darrell 02:39
Yeah, I mean, we're an engineering company. And I think I didn't talk about it very much. In the beginning, I knew what I wanted to do. But I talked about with the board, before I came to the inside the company, I didn't make a big deal out of that at all, when I did finally start saying we're going to become a design company, I immediately got a backlash from our strong engineering culture. And the engineers said, this guy's gonna screw up the company, you're going to turn us into a decoration company, and, you know, we're gonna, we're gonna lose, and in our businesses, which are so heavily into engineering, they didn't understand that what and I didn't do a good job of explaining that design, in my sense, is building a product experience around the user, and that unlocks the power of your engineering, it makes it relevant. So later, they understood that everybody's totally supported now.
Andrew Stotz 03:24
And just out of curiosity, during that time, you know, before you arrived, or when you first arrived, you know, how did engineers or people within the company, design their products? You know, were they less connected with the customer does design when you talk about design, and I'm thinking about, you know, myself and all of the other business owners and people that are working for businesses? You know, I'm trying to think about that engagement and feedback loop with the customer. How do we make that better? And, you know, what was your experience with that?
Bracken P Darrell 03:53
Well, I think the company had always done a good job with products and was very innovative. And we use design firms on the outside. But I think by the time I'd gotten there, we've gone through three or four years of where I would say we became too focused on features and in technology, and not enough on users. And as a result, our products were a sea of black plastic. And, you know, they all look like they came out of the same room and the same materials and the same. And I'm generalizing, but it's not far from the truth. And I think that that's because the design process wasn't, wasn't fixated on really, our creation process wasn't fixated on building something around the user. It was fixated on improving what we made. And so what we changed as we started to build designing the company, we brought literally brought in designers, but we also that bled into everyone's view of what an innovative product could be. It needed to be something that delight the user that helped users in ways they didn't even know they had problems. And that has really spread throughout the company. Now even more Design Awards per revenue dollar than any think about any other company and, and were named as one of the top nine design companies in your most innovative design companies in Fast Company last year. So we're and we still have a long way to go to be great in mind.
Andrew Stotz 05:13
It's interesting because, you know, for the listeners out there Look, look at your desk Look around you and look for a Logitech project product. I have my briault camera that I'm using right now I have my MX anywhere to potty mouth. And I also always have my I don't know, I call it a clicker. What is this called actually
zinter. That's a presenter, presenter,
Andrew Stotz 05:37
I always have this as a speaker. And that's three products of yours on my desk. But I think one of the things is kind of fascinating about it is that if we go back in time to 2012. And I would say that most, most companies, were almost giving up on the hardware aspect of computers. I know Intel, as an example, we're looking at, you know, many of these companies were just abandoning it and saying, it's just, it's all going to be outsourced low labor costs to build it. And there's no point in competing. So I just, I'm curious about the story. And we're gonna get into the stories of last but I just curious, like, How hard is it to compete in this space, when you want to bring design, you want to bring customer into it. But yet, you're also in kind of a hardware space where there is a very competitive element.
Bracken P Darrell 06:29
You know, it's any business worth being is competitive, you know, because if it weren't, if it were, if it's attractive, it's going to attract competitors. And so, you know, it is a very competitive space, but there's a place to win in better experience in every business. And so we we, we've grown market share in every single category, we're now over 50 share, and many of our categories were we started much lower and most of them. So it's a, I think there's no substitute for really understanding users and trying to constantly iterate to get the value equation right for them. And we usually do and so we're, we're, we're very much fixated on users, not on competitors. And that, so far, it's been good for us.
Andrew Stotz 07:16
There's so much out of that, but I just want to, you know, highlight to the listeners, what you said, you know, any, I've had to write down so fast, but any business worth being in, has, you know, competitors. Otherwise, why be there unless you're just an absolute innovator with something brand new. The second thing that reminds me of as I was, when I was young at Pepsi, when I first started my career, they sent me to learn with a guy named Dr. Deming in I took different seminars with him. And, you know, personally, the guide shaped my life. And I still to this day, think about the things that he's taught. And I've written a book about what I call transform your business with Dr. demings, 14 points. But a huge part of what he talked about was that idea of, you know, qualities in the eyes of the customer, that that is the ultimate measure of quality, not he was not a guy advocating, or let's get more efficient in the way that we do this, that those are tools. But if you miss the customer, he said, as he said, I remember him saying it and one of the seminars, he said, you can take a company with the best quality management in the world, and it can go out of business, because it's not in touch with the customer.
Bracken P Darrell 08:28
Absolutely. Couldn't agree with that more. Yeah, it's pretty, it's pretty easy to do. And it's been proven many, many times, maybe not going out of business, but losing their stature, you know, and I think you could point to almost any company, including the ones that good, great, that are no longer great, you know, might not even be good. And it's usually because what got them there, what they lost, because they started trying to protect themselves from losing, and or protect their stature or get to the 27th quarter in a row of growth or whatever it was. And they stopped focusing on the customer the experience.
Andrew Stotz 09:01
Well, a lot of great lessons there. So now it's time to share your worst investment ever. And since no one ever goes into their worst investment thinking it will be. Tell us a bit about the circumstances leading up to it and tell us your story.
Bracken P Darrell 09:13
Yeah, you know, you know, I have a lot of, I could go through a litany of mistakes I've made in my career things that didn't work. And I'll start by saying, I don't really regret almost any of them. I mean, I i've you you're kind of what most people call failure is, I just don't use the word. You know, to me. Mistakes are come with the territory, and it's all about learning. I feel the same way about success. I just don't think it's worth thinking about very much. It's all about learning and going forward. And so, so I'm not, you know, I'm not emotional about my mistakes in this case, and, but they're interesting, you know, and it's and you have to figure out how to learn from inside our company. We make more mistakes per per day than I bet most companies are per person, you know But we also try more things, you know, and I think, you know, the I love the the analogy that one time when I was long ago was at a company and and the CEO asked the guy who's a friend of mine, CEO, Avi jack welch. And he said, What's the difference between company x and us? And he said, Well, company x takes 100 swings a year and gets 90 hits. And company, and our company g at the time, takes 1000 swings a year and gets 300 hits. And he was much, much more successful in that other company. And I think so it captures kind of how I feel about now when it comes to personal investing, you know, and I'll talk about a personal investment. I've invested in many things that lost money or went bust. And I've done angel investing, I've done everything. My biggest mistake is actually one where I made money. So you've probably had this kind of scenario before I went to lunch with one of my board members the first month when I was at Logitech. His name's Neil hunt. I don't think he even knows the story. And Neil and I had a talk and I said, so Neil, you know, I didn't know anything about the company worked for I said, What did you do today? He said, Well, I, I worked on an algorithm. And he was the head of product. He said, I worked on algorithm all day. So an algorithm Hmm, what was it? He said? Well, it was an algorithm that was trying to help recommend users recommend something for users. And, and, and so we have a recommendation already. And their recommendation is gives a rank of things that they might be interested in from one to 10. And it's based it's completely database, he said, and the problem is, because people experience you use this, this, our service a lot. It actually doesn't change much for most people from time to time. So you get the same 10 recommendations every time. And if you use one of them, it comes off, but the order stays exactly the same. He said So our question was, could we get people to engage more in our service if that was different. If I came in, instead of getting, you know, same 10 things in a row every time I got a different SAP, he said, so we tried putting we tried just taking one of the order and moving it up. One of the 10 move from number nine to number one. Another one we try, we put a random number generator in there instead of it. And that had a big impact instead of ranking one to 10. Like that would rejigger the order completely. And I said and he said, and then we tested those A, B and C against each other. And they said, I said What happened? He said, Well, what do you think happened? I thought about I thought maybe the maybe the original way was better. He said the original way was better, because he said I don't know why. And then we don't really care why we just wouldn't know what the reason was better. And I always thought, I like this story. Because I thought the original it's better because people intuitively understand honesty. And if you try to be dishonest with an algorithm, you spot it. Okay. So I love that story so much. And I love the fact that they were doing that level of understanding that I immediately got back to my office, I invested in the company. And I'm not a huge investor, but I put me in for me a lot of money into the company. You know, I thought that's really fascinating. But I had this little voice in my head that I thought there's something uncomfortable about this, because I just, I knew I didn't have any insider information. But I was uncomfortable with it, for whatever reasons, a board member, but I invested you know, because I invest once in a while. And immediately the stock went out. So if I invested 100. It, it doubled within two months. In fact, it went up 250% within six months. And at that point I did want any smart investor to do I sold half but I let I let the restaurant that doubled again. And at that point, I got uncomfortable. I thought this is a board member, what if what do people think maybe they'll think I've gotten insider information from my board member. He's high enough up I could have. And I don't want that perception. And once this thing goes up even more and then, so I sold it off. The stock ended up going from making this up from 100. It went up 30 fold. three, zero, the company is Netflix. And so that was the worst investment choice now what did I learn from it? I should have gone to my general counsel and said, Did I do anything wrong here? And you and my general counsel, she would have said, Of course not. There's nothing wrong with that you didn't have any information. There's nothing wrong with investing in companies that your your or on your board. And then if I was still uncomfortable, I could have gone to the entire word and said I've invested in Neil's company. Do you think I did anything wrong here? And the answer would have been no, of course you didn't do anything wrong. There's nothing wrong with investing in Neil's company, but I didn't so I lost that upset. But I don't really mind because I'm not so financially I'm not so money focused. And I thought it's a good learning about communication. You know, just making sure that you're always communicating things that are and getting to the bottom of what you're uncomfortable.
Andrew Stotz 15:00
So tell me what let's review the lessons that you learned from this?
Bracken P Darrell 15:05
Well, like I said, I think I think number one is, trust your instincts. My instinct was I like the honesty of an algorithm. But I even liked more of the fact that they were using algorithms for something that seems so judgmental. Normally, you get a recommendation from somebody, and it's based on, you know, some, you know, Star tomatoes, you know, in this case, it was really based on what people liked, what people watched. So I love that. So I think trusting your intuition on things, when you hear is really good. The second, the second thing I learned from it is, you know, make sure you when you do make an investment, don't be afraid to hold on, you know, it's, I think, I think you talked a lot about, about controlling your losses, but there's also there's a time you know, if you can afford it, just stay in, I think most people probably get, I think most people get out of investments too early Normally, if they're on their way up. And the third one is, you know, communicate. And if you got something you're in touch with communicate, you know, it's a, it's a world, I don't regret doing it, because I, you know, my integrity is everything. But you know, had I communicated better than I would be more money in my pocket.
Andrew Stotz 16:17
Maybe I can share a few things that I take away, there's three things that come up in my mind, and then maybe a little bit coming from different angles. But in the world of finance, there's something called the altman Z score. And the altman Z score was Professor altman came up with this idea. If we combine these different measures, we'll be able to identify the probability that a company is going to go bust. It's very simple measure. And it's stood the test of time. I was in Hong Kong recently, or not not too long ago for an event. And a guy from Reuters, Thomson Reuters got up and said, we've been developing an algorithm to try to predict bankruptcy. And he went through this whole long speech about what they've been doing. It was fascinating. I mean, really, really interesting. And, and then people had a lot of questions about what they were doing. And I just raised my hand, I said, you know, we already have this model, the original model is the altman Z score. So my question to you is, you know, to what extent does the 100 million dollars that you spent developing this algorithm outperformed the altman Z score, he said, by a tiny amount. And it made me think what you said is, you know, sometimes the original is better, or maybe from a cost perspective. So the idea is, you know, there's a lot of knowledge that we have in this world that, you know, should not just be thrown away.
Bracken P Darrell 17:37
can I contribute to that? Yeah, I think there's another way to look at, which is, there's kind of a, you could use the altman Z score another way in this case, you could say, you could literally say, what's the probability this company is going to, maybe I'll lose everything? Again? What's the probability that I've lost everything I invest? Very low, very low. I think too often we look at it and say, you know, Oh, my gosh, that's so high. What if I lose it all, you're not gonna lose it all. Here's your interest in getting out of things you should?
Andrew Stotz 18:11
Well, and that goes to my second point, which in the world of finance, we always say, let your winners run. And I think one of the biggest mistakes and I try to teach in the courses and stuff that I've always been advocating is the idea that you should look at your investing period over decades. So if you're 30 years old, you want to retire when you're 60. That's 30 years, but don't forget, you're probably going to live to be 90, that's another 30 years, we're talking about 60 years, when you put 60 years into your head, it helps you think, yeah, that just let that just let it run. And, you know, that's another second learning. And that's one. That's my favorite one. Because
Bracken P Darrell 18:47
I think everybody thinks too short term. Yeah. And I don't in my business, and I and I don't anymore, my best thing, but in probably in those early days.
Andrew Stotz 18:57
The last one is something related since I, you know, I'm a CFA charterholders. And also was the president of CFA society here in Thailand. We focus a lot on ethics. And I think that's a differentiating point for Chartered Financial Analysts designation. And I teach ethics. And I have a story that I tell about, I was working for a particular company. And then I left that company went across the street, and I implemented the exact same method that I had developed at that company. And I had a all the contract everything in my contract said I could not do that. So technically, I was against the contract. But of course, I'm an ethical guy. And I tell my students, you know, Did I break code of ethics? Did I break the contract? And they say, of course you did. You know, you can't take work that you've done in a company and set up a new company using that word. And I told him, I didn't Brake, that. And they say, What do you mean? And I said, I went and talked to the CEO of the company. I said, the reason why you asked me basically, they said, We don't want to do this type of research anymore. It's not really what we're about. So therefore, there's not really a position for you. So I went back and I said, Look, I want to go across the street and set up my own firm using this stuff. You said that you're not going to use it? Would you mind? If I used it? Would you exempt me from the clauses in the contract? And they said, no problem. And so I was exempted from that and allowed to go across the street. And the company is made bank, which is a Malaysian bank, and my boss was mantri, the guy who did it. And you know, it was a friendly agreement. And I've always had a friendly relationship there. But it's the point, the point I want to get across is ask. And that's what you just said, You know, I just could have asked, you know, nothing wrong. And if someone says, No, no, no, that's, that's not okay. Fine. But don't keep it inside. Ask.
Bracken P Darrell 21:02
Totally agree. That's a very, very good point.
Andrew Stotz 21:04
Yeah. Just ask. All right. So based upon what you learn from this story, and what you continue to learn, think about that young person out there that is getting some really interesting something to hearing about something that they liked, they liked this company or whatever. What one action would you recommend our listeners take to avoid suffering the same fate?
Bracken P Darrell 21:25
Well, I think the most important thing, and for the most investors, you're usually not gonna have a board member that you suddenly, I hope, things I knew something I didn't. I think the most important thing is to take a long term view on everything in your life. You know, because if you live, if you take a long term view on things, you don't get caught up in the news cycles, you get caught up in the secular trends inside of Logitech. The best things that I've been involved with have been to put us in a position in the fall long term secular trends. And as you said, you know, you'll you'll have ups and downs and everything else. But if you really believe if you bet on long term trends, you rarely go wrong.
Andrew Stotz 22:10
Great advice. So last question, what's your number one goal for the next 12 months?
Bracken P Darrell 22:17
I have a whole lot of goals, you know, I do around a goal setting every year I go through every area of my life. You know, I don't I wouldn't say any of them is number one. In this case, I have goals across, you know, work, health, family, everything. What do I hope happens in over the next 12 months, I really hope that we'll make Logitech tremendous progress on diversity and inclusion. And, and or tremendous progress on the environment.
Andrew Stotz 22:47
Great. Well, we'll look for that. You know, I have to add in one other thing that you I didn't say that I took away. And, you know, when I think about the stock market in particular, but when I think about life, it's kind of like a sine wave peaks and troughs. And what you described was trying to kind of cut the, the peaks and the troughs off to try not to bring the emotion into those two areas. And I think that that's a really important point that I wanted to highlight. And I remember someone used to say to me, you know, success isn't. A failure isn't fatal. Success isn't final. And so
Bracken P Darrell 23:29
that's a quote we use in our company. Yeah, failure is never fail. Failure is rarely fatal. But success is never final. Exactly.
Andrew Stotz 23:37
So that I think that's a great, great advice and for people listening. When you're managing teams, I think it's also important that you don't bring too much over enthusiasm to success and too much negative enthusiasm to failure. Keep a steady keel. Alright, listeners, so there you have it another story of loss to keep you winning. Remember to go to my worst investment ever.com slash deals to claim your 30% discount on the valuation masterclass. As we conclude back in, I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?
Bracken P Darrell 24:20
I think just just stay focused on the long term and you'll have a long successful life. Amen.
Andrew Stotz 24:27
And that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. This is your worst podcast host Andrew Stotz saying. I'll see you on the upside.
Connect with Bracken Darrell
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points