Video Link: https://youtu.be/XYB7JKRNkFA
In this episode, Mohnish Pabrai explain why most people doesn't do cloning and how well-known companies today use cloning.
In this episode, you’ll learn:
Why should you do cloning?
How Mohnish Pabrai use cloning in his investment career?
How Microsoft cloned from other companies?
How Walmart cloned from KMart and Sears?
How Burger King cloned from McDonald's?
To check out all Collection: Mohnish Pabrai <click here>
MOHNISH PABRAI 00:15
So you said "I says that's replicable but no one is replicating."
So it took me a long time to figure this out and I'm just about getting close to figuring it out. So that is something strange in the human genome. And that's something strange makes people – and the good news is we have some time to expand that – that means people very much opposed to being intense copycats.
So humans – most humans do not want to do cloning. And they do not want do cloning because it's considered beneath themselves. And of course, no life people like me do not considered cloning beneath myself so I'm willing to do it. So to give you an example, if you look at the company like Microsoft.
Microsoft isn't even that great a cloner because anything they work out takes 3 or 5 or 7 versions to get it right. Sorry [Inaudible] maybe you can make it better for that. But it takes them a long time but bottom line is that most of Microsoft revenue comes from Windows which was cloned, comes from Office which was cloned.
You know, Powerpoint was actually bought from another company. Word was with WordPerfect and Excel was from Lotus. And so on and so forth, and you know even sequel server was [Inaudible] it just goes on and on you can look at Microsoft Money you can look at [Inaudible] coming from Google and so on.
So bottom line is that Microsoft isn't even that great a cloner. What is one of the – you know, largest and most successful company out there. You look at another company and this is something that really perplexes me.
It is a company called Walmart. And so Sam Walton, people who knew him well, Founder of Walmart. They would not call him a brilliant man, he was not someone who would have been growing off IQ tests and I think most people in this room would have a higher IQ than Sam Walton.
But Sam Walton if you are like today, you would have a net worth of $140 billion to be the richest person on the planet. And Walmart for the first 20 years of its existence did not come up with any innovation. All Walmart did was they looked at KMart's model and they looked at Sears' model. And they replicated that one, that's it.
And in fact, you know what I found really funny in the India we have this big debate going on about letting this [Inaudible] foreign retailer in so that they can make things more efficient. And then they talk about Walmart coming in. There is nothing in Walmart's business model that anyone cannot look at by walking into Walmart and replicate it.
India does not need Walmart to come in, in order for retail become efficient. India does need an entrepreneur to look at that model and replicate, that's it. There is nothing else you needed. There's nothing special about Walmart's model. There's nothing special about Microsoft's model and it goes on and on.
You know McDonald's for example, they have a whole army of people the whole departments which spend all their time trying to figure out which is the next location they should put the next McDonald's in. They do lots of study and analysis to figure out demographics and all that.
In the United States, Burger King which compete the McDonald's has two people figuring out locations. And all they do is look at where McDonald's is putting their locations. (Laughters) And it's very powerful strategy so they looked at all McDonald's opening up in Peoria Illinois in this corner, okay we will take rest in that corner we open up over there too.
They have done all the work so it must be working. And it worked really well for them. So the thing is the Walmart of the world, the Burger King of the world, Microsoft of the world are a rarity. Most people do not want to do cloning because they think is low.
So in fact, even when I looked at Buffett's model. I set up my own investment partnership the Pabrai Fund. I replicated the Buffett partnership and he closed his partnership in 1969. I opened my partnership in 1999, 30 years later. In 30 years, I cannot find one example of a single fund anywhere in the world that have replicated the Buffett's model.
Which was the most successful hedge fund ever created. Nobody replicate that model that ran for from 1956 to 1969. And there were books published, the books I read and the books had sold millions of copies.
And there were printed many languages and all of that. So even and the model is very simple, there's nothing special about the model. And even today forget 1999, today it's 2013.
I've been running Pabrai Fund for almost 14 years [inaudible]. And I've spoken at so many business schools and so many different places and I answered questions that you asked. And I've asked the business school students that listen there's no point paying fees to ISB.
I'm sorry have you all already collected fully in advance? (Laughters) Pardon?
AUDIENCE MEMBER 06:08
MOHNISH PABRAI 06:09
Half, you can still save half.
Sorry [Inaudible], I'm sorry it's not an ad but you can still save half. What you can do is you don't need to listen to the rest of the boring Q&A. You can walk out right now and start replicating.
And every time I said nobody walks out. They already pay tuition. So anyway – so first of all the only thing I can figure out is there's something in the human genome that makes cloning very attractive maybe 1-2% of the population at least that or probably less than that.
And for some reason makes it very attractive so I have found. Because I understood this, I have adopted cloning in a very serious manner. In fact, on my grave stone they will write and I hope they write "he was a cloner," that's it.