I was watching a PBS special of Warren Buffet and Bill Gates sharing the stage while speaking to a group of college students – possibly the only time the two richest people in the world shared the advice giving stage at the same time.

There were two stories that I’d like to share with you today.

One of the students asked Bill Gates to recall the biggest mistakes of his career-which I thought was a great question.

Gates said one of the big mistakes was realizing the importance of the Internet very late in the game.

As you may recall, the growth of the Internet in the mid 1990′s was NOT powered by Microsoft. It was being driven by Marc Andreesen, the inventor of the first web browser, and his company Netscape.

I remember the time very well.

Gates had one of his infamous “Think Weeks” where we locked himself in a retreat for 1 – 2 weeks — no telephone calls, no email – with nothing but time to think.

He realized he totally missed the Internet opportunity.

The next day, he issued a company wide memo that pretty much said EVERY project and product in Microsoft had to incorporate the Internet.

Overnight, tends of thousands of Microsoft employees and tens of billions of dollars in R&D (the corporate equivalent of acquiring new skills) was now ear marked towards the Internet.

He spent billions acquiring third party companies with skills and assets Microsoft did not have. Early on this included paying $400 million for Hotmail which formed the basis for MSN Hotmail.

Within 24 months, Microsoft pretty much terminated Netscape (not to mention got a whole bunch of anti-trust lawsuits in the process).

The lesson is this.

When you’re chasing a new opportunity, especially one that you were ignoring previously, it’s impossible to succeed without acquiring the new skills needed to succeed with that opportunity.

This is exactly what’s going on with many entrepreneurs today. The recession has taken away opportunities that many business owners have grown accustomed to.

It is also creating NEW opportunities that many entrepreneurs are flat out overlooking and stubbornly insist on ignoring.

The problem is many entrepreneurs simply lack the skills to notice and take advantage of these opportunities.

This leads me to my second story.

On the same PBS special, Warren Buffet was asked what advice he would give to a new college graduate in terms of building a business or career.

His answer was very revealing:

INVEST IN YOURSELF

In his words, investing in yourself has an incredibly high return on investment.

Do you know where Warren Buffet learned to invest?

He learned from his college professor and mentor Benjamin Graham. After graduating from college, he begged and pleaded to work with Graham.

He interview for the job, got the job, accepted the job and never once asked for what the job paid. It wasn’t until he got his first paycheck that he saw the amount.

But Buffet KNEW that this guy Graham could teach him how to be a better investor.

Truth be told, he would have paid Graham to allow him to work under him just to have the opportunity to acquiring better investing skills.

Considering Warren Buffet today has a net worth of $40 billion or so, I’d say that Buffet got a pretty good deal.

Invest in yourself – advice from the 2nd richest man in the world… advice worth listening to.

If you have been reading between the lines of what Bill Gates and Warren Buffet do and advise, you see the vital role that acquiring new skills plays in being successful at the highest levels.

This is frankly an approach I firmly believe in and practice myself.

Over the past 5 years, I’ve invested over $200,000 in building my own skills. I go to seminars, conferences, speeches, and workshops. I invest in mentors and coaches. I invest in tons of books, home study programs, audio/video programs and more.

I have tons of bookshelves to house all this information. I rent storage facilities to store these skill building materials that don’t fit on the shelf.

Keep in mind this does NOT include the investment I made in my wife’s Harvard MBA. It also does not include any of the education costs incurred when I attended Stanford.

It is my investment in myself in continuing education — not because I’m required to – but because I personally find it easy to win in a competitive marketplace.

Early on in my career, this investment was not easy to pull off financially. I made a number of tradeoffs.

I only buy and drive used cars (can’t stand a 10% depreciation loss on day #1 of owning a new car).

I wear a $19 watch with a plastic wrist band (it keeps better time than a $10k Rolex… and has a nightlight which is handy for checking in on the little ones when they’re sleeping.. and I can hold my 2 year old with the wrist band scratching her).

I buy a lot of my personal clothing at Costco (though I do buy most my work related clothing from Nordstroms)

I own a 10 year old Sony television (NOT a flat screen) – (If I had a flat screen, I’d be tempted to watch tv more.)

I am told that I’m very extreme in my habits. I suppose I am. But it is all driven by a very simple philosophy.

I will invest incredibly aggressively in anything that helps me win… which is very different than spending money on things that give me the appearance of winning without actually making a difference.

Everything else doesn’t matter to me.

I figure if it works for Warren Buffet and worked for the late Sam Walton (founder of Wal-Mart), it works for me.

This type of philosophy seems to be coming back in vogue these days… and I predict will continue for some time.

But it has not always been easy to practice day to day. When I go workout at the gym, I always end up parking next to the guy with the Ferrari (I must admit it’s a pretty sweet ride). I pull up in my 13 year old Toyota.

If someone ever broke into my home, they would be seriously disappointed. There isn’t anything to steal – other than books that line 125 linear feet of book shelves.

My most valuable financial asset has always been my brain… in other words my skills.

It is those skills that pay the bills. It is those skills that provide the financial future for my family. Everything in my life as an entrepreneur revolves around and is built on the foundation of those skills.

It is the same skills that has given me (and by proxy my clients and even readers of this newsletter) perspective over the recession.

When others are in a state of massive panic, the people who work with me or follow my work benefit from a sense of calm based on a factual understanding of economic reality…. and yes, all of this at the end of the day comes from skills.

Based on these skills, I’ve found that the path to a better business for most entrepreneurs is fairly simple. The mistakes entrepreneurs are making in this recession are very common and unfortunately for many will be fatal.

It doesn’t have to be this way, but most stubbornly insist on continuing to do what is NOT working.

Look the environment has changed.

The rules of the game have changed.

If you are not winning in this environment, then you are losing. There is very little middle ground.

If you don’t have the skills needed to win, then go get them or quit. But whatever you do, don’t just sit there doing nothing. That’s the worst thing to do.

In a few weeks, I’ll be introducing a new program to help entrepreneurs like you acquire the skills, confidence, and direction needed to build a growing and profitable business in a tough economic environment.

(Incidentally if you think the recession has been rough, wait till you see the “flat” recovery or the “double-dip” back-to-back recession.)

Certain business practices don’t work in this kind of environment. Sloppily run business get killed in this environment. Don’t be one of them.

In my last post, I mentioned that if Bill Gates were running your business, it would be doing a lot better than it is now for three reasons: 1) Desire to Win, 2) Bigger Thinking, 3) Better Business Skills

Of these, the most important are actually the first two. If you have a massive desire to win and are actively looking for how to make your business grow more (rather than thinking about how to make it shrink less), you can find ways to acquire the business skills you’re missing.

For example, when I work with new clients, I have one major rule. The new client must be highly MOTIVATED.

Here’s why.

If you lay out a perfect game plan to take a business from where it is today to where you want to go tomorrow, if the owner isn’t motivated nothing will happen.

I never take on clients who aren’t super motivated to take their business to the next level. It doesn’t work out well for them and selfishly it screws up my track record.

ALL of my 1:1 coaching clients have TRIPLED their revenues and profits since the beginning of this recession (Jan 2008).

There are three reasons for this track record.

(Note you can see video case studies of a few of my clients on my website at http://www.victorcheng.com/coaching )

• Reason 1: Incredible desire and motivation on their part
• Reason 2: Major investments in improving their business skills
• Reason 3: Disciplined execution of the game plan I developed for them

To their credit, all of them realized they had a very exciting marketplace opportunity they could profit from.

And like Bill Gates, they all realized they were missing some of the skills needed to be successful.

Like Gates, the made acquiring the right skills a super high priority… and it paid off.

In a recession, most business owners cut back on investing in themselves and their business skills.

I think the thinking is that money’s tight and you need to cut expenses wherever possible.

But there’s a huge flaw in that logic.

If your business is growing like crazy, I can see the case for cutting back on acquiring new skills. You could argue that in the short run, they may not be needed (though to keep up a huge growth rate, they are very much needed in the medium run).

If your business is not doing well or not doing as well as you like, this is market feedback that’s telling you your skills are not good enough to win in this environment.

There is no clearer message in business than declining or stagnating revenues. PAY ATTENTION to it.

If this happens to describe your situation, you have two options.

Option 1:

Give up, quit, and shut down your business fast (as opposed to a long drawn out failure that consumes enormous resources, mental energy, and cash) and find something else to do for a living.

This is a legitimate course of action and I have given this advice to people who had businesses that weren’t worth trying to save. Option 2:

Play to win. Invest in yourself and in finding a better way to run your business.

If your business solves a real problem for customers and has something unique/different to offer, you got a real shot at building a great and growing business – regardless of economy.

GROW OR DIE

In this economy, it’s GROW OR DIE.

It’s very hard to just stand still.

And in general, it’s best to be fast.

If your business is dying and you’re not doing anything actively or effectively in turning it around, best to just accelerate the business failure and do damage control on your losses.

If your intent is to grow, find a way to accelerate the process and be aggressive as possible to make that happen.

Time is incredibly expensive right now. Use it wisely.

From time to time, I play an interesting exercise with my business and my clients’ businesses.

I ask myself, if Bill Gates were running this business, what we he do differently?

I always assume that he runs the business anonymously, isn’t able to take advantage of his fame as the richest and most successful entrepreneur in the world, and isn’t allowed to use his personal Rolodex.

Given all that, could the business in question perform any better than it is right now?

Invariable the answer I always come up with is an absolute YES.

I once watched an interview with Bill Gate’s good friend Warren Buffet. He said, “Bill is a phenomenal business person. If he had to run a hot dog stand instead of Microsoft, you can be darn sure that it would the world’s largest and most successful hot dog stand business within a few years.”

The second thing I always can’t help but notice is WHY I think Gates could any business to an entirely new level.

It always comes down to 3 things.

1) DESIRE TO WIN

2) THINKING BIGGER

3) SKILLS

1) DESIRE TO WIN

First, Gates is an incredibly motivated guy. You don’t become the richest person in the world on pure luck or even on pure talent. It does take an incredible desire to win (and the action behind that desire) to pull it off..

And one thing is for certain, Bill Gates simply can not stand to lose. It’s just not in his DNA.

In fact, if you look carefully at the Billionaire Boys Club here in Silicon Valley, you’ll see that all those guys Steve Jobs (Founder of Apple), Larry Ellison (Founder of Oracle Software), and dozens of less notable super achievers hate to lose at anything.

Where the field of competition is business, sports, or checkers, the billionaires MUST WIN NO MATTER WHAT.

Their need to win is almost a psychological obsession – and many would argue it IS an obsession.

As a small business owner, you don’t need to have a pathological desire (and willingness to action) to win, but you do need to be incredibly determined.

2) THINKING BIGGER

Very closely related to motivation is what someone like Bill Gates expects to get out of any business he runs. All of them are determined to win in any economic environment and they EXPECT to grow.

It doesn’t even occur to someone like Gates that his business is going to shrink. He doesn’t expect it and certainly doesn’t tolerate it in the slightest.

Now thinking bigger and expecting revenue growth alone doesn’t grow a business. But what it DOES do that is vital is this. When you expect a business to grow, but aren’t sure how to make it happen… it forces you to LOOK for ways to make it grow.

See right now in this economy most business are expecting to SHRINK. And guess what this “think small/smaller” perspective is causing most business (i.e., all of your competitors) to overlook opportunities left and right.

Not surprisingly many business are shrinking – not just because of the shrinkage of the economy but also because of their insistence on ignoring the opportunities that recessions create.

The simply mathematical reality is the ONLY possible way to grow your business in shrinking economy/market is to take business away from a competitor.

When the size of the pie shrinks and you’re hungry, you must fight to get a bigger slice of the pie. Period.

There is NO OTHER WAY.

This is WHY you have to thing bigger and think outside of the “box” (or at least think beyond what normally comprises your slice of the economic pie)

3) SKILLS

The final area is comes to business skills. If you want your business to double in sales and profits each year, it’s pretty much impossible unless your own business skills are doubling each year too.

This is what I admire most about Bill Gates.

Not his wealth, but the face that he grew his business skills from solo entrepreneur to empire builder.

Every time you “add a zero” to your sales, say from $100,000 to $ 1 million or $1 million to $10 million, it requires the CEO/owner to have developed a whole need level of business skill to pull it off.

Considering Microsoft went from a $100,000 a year business to a $60,000,000,000 a year business, the level of improvement in Gates’ skills to pull that off is astounding.

The tricky part is the skills that got you “here” are exactly the wrong skills to get you “there”. You have to stop doing what made you successful so far to get you to the next level of success.

In my next email, I’ll share two stories with you that I heard Bill Gates share in a PBS special last night.

Bill Gates and his buddy Warren Buffet were filmed while giving an advice giving Q&A session to a few thousand college students – possibly the only time the richest and second richest people in the world were in the same room freely giving business and career advice to others.