• 003 05/09/2014

    I had an opportunity to meet with J. Hilburn co-founder Hil Davis in December of 2013. In my efforts to do a little research prior to the meeting I stumbled across an article in Inc. Magazine. I like stories that expose the catalyst for a new venture:

    In a story that's now enshrined in the company mythology, Hil Davis was reading The Warren Buffett Way on a plane about six years ago when he came upon a passage in which the legendary investor said that his best investment ever, dollar for dollar, was not Coca-Cola or American Express or Geico but the direct-sales kitchen-equipment company The Pampered Chef. In fact, Davis learned, Buffett owns several other direct-sales companies, under the umbrella group Scott Fetzer Companies.

    "My first thought was, That makes no sense. Direct sales? That's a dirty word," Davis remembers. But Buffett was his hero, and Davis found himself preoccupied with figuring out what he had missed about the model. Davis, who talks in a high-speed mashup of business jargon and good-ol'-boy charm, was 33 at the time and working in investment banking as an equity researcher, a job that paid him the very handsome salary of $1.4 million. "I loved equity research," he says. "I loved the chess game, the math behind it." Partly, his deciding to examine direct sales in depth was just a way to channel his excess business geekery. It was a puzzle that demanded solving. But he was also restless.

    Five years later, J.Hilburn is the single largest seller of men's custom dress shirts in the world. Shirts start at $89, and they're made from the same fabric as shirts from the Zegnas and Armanis of the world. Last year, Esquire named J.Hilburn the best custom shirtmaker. Since the company officially launched in 2007, it has expanded from dress shirts to custom men's suiting; ready-to-wear casual clothes; belts, ties, cufflinks, and other accessories; outerwear; and now formalwear.

    For the full article (and description of how he solved the “puzzle”) please visit the LINK.


  • 002 05/09/2014

    The Financial Page of the New Yorker recently featured a new hepititis-C drug developed by Gilead. The new drug can cure 90% of patients in three to six months. 

    “There’s just one catch: a single dose of the drug costs a thousand dollars, which means that a full, twelve-week course of treatment comes to more than eighty grand.”

    The article also states that that hep-C patients have an average annual income of just twenty-three thousand dollars - a disturbing discrepancy. What I like most about the article is how it concisely explains the economics that bridge this gap, and the pricing power pharmaceutical manufacturers have:  

    Investors love drug companies in part because they often have tremendous pricing power. Drugs designed to fight rare diseases routinely cost two or three hundred thousand dollars; cancer drugs often cost a hundred grand. And, whereas product prices in most industries drop over time, pharmaceuticals actually get more expensive. The price of the anti-leukemia drug Gleevec, for instance, has tripled since 2001. And, across the board, drug prices rise much faster than inflation. The reason for this is that prices for brand-name, patented drugs aren’t really set in a free market. The people taking the drugs aren’t paying most of the cost, which makes them less price-sensitive, and the bargaining power of those who do foot the bill is limited. Insurers have to cover drugs that work well; the economists Darius Lakdawalla and Wesley Yin recently found that even big insurers had “virtually zero” ability to drive a hard bargain when it comes to drugs with no real equivalents. And the biggest buyer in the drug market—the federal government—is prohibited from bargaining for lower prices for Medicare, and from refusing to pay for drugs on the basis of cost. In short, if you invent a drug that doctors think is necessary, you have enormous leeway to charge what you will.

    For the full article follow the LINK or click on the image of the magazine to the right. 


Debit and Credit Review 001 07/31/2013 Debit and Credit Review

Initially debits and credits are a difficult concept to grasp. If you look at the expanded accounting equation in reference note 001 you should quickly draw the conclusion that debit = left and credit = right.

This quote (from a book: see figure 1) is helpful because it quickly applies the concept to cash. And cash is king.

If the concept feels abstract at first that's because it is. This concept simply takes time to digest (mentally, don't eat it).



Models are:
A) really boring
B) pretty sweet
C) super important
D) somewhat easy
E) kind of hard
F) fun
G) all of the above



*Answers a, b, c, d, e, f and g are all correct.