What Makes Companies Great?

Good evening and welcome to today's meeting of the Commonwealth Club of California. My name is Tom Waller; I am Chair of the Club's Business and Leadership Forum and your host for today. This evenings program is entitled "Insight into what makes companies great." We want to welcome our audience here tonight. We hope you'll visit the club on the website at www.commonwealthclub org, to learn about the many fine programs held here at the club. Now it's my pleasure to introduce our distinguished speaker. Michael Moe is a founding partner of Think Equity Partners LLC and was formerly Director of Global Growth Stock Research and a Managing Director at Merrill Lynch. Prior to joining Merrill Lynch in 1998, Michael was a Senior Managing Director and Director of Growth Stock Strategy at Montgomery Securities. He has been named to Institutional Investor's "All American" research team and has been awarded "Best on the Street" by The Wall Street Journal. He also has testified in front of the Congress on the subjects of education technology, the new economy and initial public offerings, and he has also appeared before the President's Information Technology Advisory Committee. He is frequently cited in publications such as The Wall Street Journal and The New York Times for his opinions on growth of companies. He also appears regularly on financial programs on CNBC and CNN and is a contributor to the Always On Network - a blog site about new media technology and venture capital news. He earned his BA in Political Science and Economics at the University of Minnesota. He is a member of the New York Society of Security Analysts, a member of the San Francisco Analyst Society and is a past advisor for the Center for Innovation. In 2007 he published his first book, "Finding The Next Starbucks: How to Identify and Invest in the Hot Stocks of Tomorrow." So, please join me in welcoming Michael Moe. Now, it's a my absolute pleasure to be here this evening and just by way of background though the book that by I would try to give the the name, you know the invest in the hot stocks tomorrow makes me crazy a little bit. But why in fact, the the publisher suggested that name was back in 1992, I happened to be fortunate of to be the first person to identify and recommend invest in the Starbucks coffee and that turned out to be a pretty fortuitous investment idea. Well with that, they and I think, over last really 20 years, I've been fortunate to be involved with small companies that became big companies, the power group what actually was the number one performance stock for 1994, 2004's largest private university in the country. Our firm was the first recommend research on Google. And I am saying all these not to toot my horn, but just the the background that has lead to what I am going to talk about tonight really is you know and it's very foundation is the best investments you know, are really the best businesses. And so, talk about "Invest in the Hot Stocks of Tomorrow", what it really boils down to how do you identify what I call the stars of tomorrow, the most important you know most innovative companies in the market place. And so, just for that back drop let me hit hit you with a few facts. Because the bull you know, it boils down to often an entrepreneur with an idea, a dream and how they execute against that dream. You know, everyday in America, 2700 companies are formed. Every day in America, 2200 companies fail. The probability of a new business surviving this first three years is then percent. In 2006, Venture Capitalists invested in 3522 companies. IN 2006, just 61 venture back companies were able to go public. What kind of now we start a business? And what I found in 20 years of trying to find the next Starbucks trying to find these stars of tomorrow, the first and most common the most important ingredient were finding entrepreneurs that just wouldn't quit. They had the persistence and the guts to keep on getting up in even even against the odds when people told him to stay down, now the people that were told they were crazy but they are the ones that also going to make it happens. So I guess one lesson is he going to kind of throw the conventional wisdom out the door and really truly find people that you know, that that are exceptional and unusual. See if you can name this nut. He failed in business in '32.He ran as a state legislator and lost in '32. He tried business again in '33 and failed again. His sweetheart died in '35. He had a nervous breakdown in '41. He was defeated for the nomination of Congress in '43, defeated again for Congress in '48, defeated when he ran for the Senate in '55, and defeated for the vice presidency of the United States in '56. He ran for the Senate again in '58 and lost. And the answer is, Abraham Lincoln. See the factor the matter is when you look at the success stories, whether you talk about politics, whether you talk about businesses. But it's made up you know, history is made up by these people that you know just kept on pushing. Thomas Edison, the kind the person who came up with the phrase that "Success was one percent inspiration and 99 percent perspiration." You know he was the one that invented the photograph, the the electric light bulbs, the film. You know today, General Electric is a $400 billion Market Cap Company. Walt Disney, in 1923 we started Walt Disney Company in the back of a realtors office in Los Angeles after he was fired for his first job because he wasn't innovative enough. You know, went on to create the business today worth a $60 billion Market Value. Sam Walton started his first two businesses in Missouri called Wal-Mart Five and Dime. You know this is one of the first Wal-Mart see to business. So this is the two so they openly open up the first to close down and they open second. That closed down. Today, Wal-Mart, is largest retail the world the $190billion Market Value. Howard Schultz, the the CEO Chairman of Starbucks Coffee actually came to Starbucks which was in Pike Place, Seattle; in 1982 as a sales person. He had this dream of putting a Coffee Bar in every corner. People thought he was crazy, he left the company and actually start his own coffee company, came back was founded to start Starbuck today $20billion Market Cap 11000 stores, 35 countries. Mike Bloomberg, you know who is now has been toted as a as a Presidential candidate was fired from Salomon Brothers which was a huge disappoint; started a company Bloomberg. Terminals which is the first one you know Bloomberg has become a ubiquitous media empire what are them most important media business in the world. And obviously Mike may Mike Bloomberg has become a very successful politician running New York City. Steve Jobs, you know again started the Apple Computer with Steve Wozniak in 1976 in the literally in his parents garage. This is what was called an insanely great computer which was the vision in 1976, came afar, stretch from that was fired from from the company that he started was brought back. Today, you know, Apple Computer not only $120 billion Market Value but also creating one of the most important brands in media and retail businesses in the world. The point with all this is it starts with people and so what we are trying to find the stars of tomorrow as I said. You know, we have a formula that we call the four P's which really is the essence of every great business and every great company and it starts with people. As I said, whether it's a business, whether it's a Government, whether it's a sports team; people make the difference particularly with the merging companies. People that have the passion to to go against all odds. People have the opportunity to execute against were able to execute against an opportunity. A lot of these companies don't have long histories but the people do. And so we are looking the better on people. Here I just gave a fine example of of a different situation that businesses is is the story of Michael Jordan of the Chicago Bulls. When he joined Chicago Bulls after 1984 season, that year before they did, they had 261,000 fans came to Bulls, games paid $15 a ticket. In the four years after he joined the team, the Jordan Era; ticket ticket prices went to $30, fans were 737,000. And they won three National three World Championships and the economic difference is $18million. So, you know one person does make a difference. When you look at the people aspect of the great businesses of today and tomorrow, it's really is critical. In the old economy in the old businesses it was it was, book value was manufacturing businesses that you know, that weren't as dependent on people as businesses today and tomorrow will be. But when you look at some of the most important attributes of the businesses that we think are critical you know since this people on the culture, Fortune Magazine comes out w an annual survey of the hundred best companies to work for. It's interesting when you look at the criteria of companies that make that that list it's things such as how much training and education do they provide, how much you know what is the what is the turn over, you know what kind of benefits are being provided in terms of child support and other health care benefits. And when you look at that list its companies that everybody recognizes, this is the Googles and Whole Foods and Star bucks and Cisco systems and Qualcomm, quite interesting from an investment stand point that these companies weren't listed because they were successful stocks when you look at it from a stock perspective for the last three years the dollar invested in this ten best companies to work for, actually is worth $2 and 47 cents. So when people makes the difference in your business having invested in the attributes that make a great place to work ultimately turn into a great investments as well. In the product piece back to this you know we are looking for you know what makes it great companies like all four Ps and started with the first P, people. Second P is product and here what you are looking for is a company that is really is a leader in what they do has acclaimed the fame, one of a kind of kind company something that makes it special different or great, because lot of me too companies particularly in hot industries that ultimately you know don't have the same type of success as the leaders. So we want to have the companies that are not only survive but thrive during the corporate evolution and the difference between the leader and the second best you know can be you know not that big in the terms of numbers but could be awfully big in terms of value. You know in horse racing just in the Preakness you see streets stand one by just a nose but the economic value for that leading horse was tens of millions of dollars in terms of siring again the same example we can look at Google and Yahoo you know Google and Yahoo are comparable businesses in many respects but the fact is the Google's market value is about 4X than Yahoo's and again its the little things that make the big difference. Potential, you know finding the companies that have open ended growth potential small companies that can be big companies and here we are really looking at mega trends and impact that the sectors that we follow. We are looking for areas where there is benefits such as globalization, the internet outsourcing, demographics and also companies that address problems the bigger the problem the bigger the opportunity. So the mega trends that we look at in terms of spotting industries and companies within those industries that have huge potential, we first look at what are the growth sectors of the economy, so health care, green technology which we think is an enormous area of opportunities so alternative of the energy, software semiconductors media communications and business consumer services and I am thinking about these mega trends, the knowledge economy where education and knowledge makes the difference now where the company does but how the person does and how that fragment of our country does globalization, internet, consolidation, branding, demographics, outsourcing, convergence are mega trend that we added is green you know we think green is important mega trends that kind of cross all growth sectors that will create the biggest opportunities as we look ahead. And our fourth P is predictability how visible is that growth what type of reoccurring revenue does a company have, the more reoccurring revenue, the more visibility - the greater the value ultimately should be described just because it's that much more predicable. Here is the one that I like in terms of predictability forecast for tonight...dark. George Carlin. But you know just like the birds migrating to the south in the winter, finding predictable business patterns you know ultimately creates a better business and ultimately creates a more valuable business and so just give me an example on everybody thinks of business and where you create a contract and so you get a five or ten year contract with the government or something, and that's how we heard outsourcing contract you know we could have five or ten years, that creates great visibility but even business that don't that necessarily you think about as being inherently predictable it can be very predictable so for example Star bucks you say well how predictable could be a restaurant or retailer be well the typical Star bucks customer went there 16 to 20 times a month, create a real association with the business and the brand and Star bucks is able to create other other products so they will be able solve their consumers who is coming there 16 to 20 times a month creating real visibility if you look the same story, sales or Star bucks over the last 10 years has been not short remarkable. And so I think we look at any business creating - figuring out how you make it more predictable its very very crucial great businesses are systematic and strategic in the terms of the way they operate and so as we tried to think about what are the attributes of great business and how do we identify investing in those business and what are the characteristics we have created a frame work. We have talked about the 4 Ps here the 10 commandments that we use to define the first commitment "earnings growth drive stock price". Over time this is essentially a 100 percent correlation with how a business does and how their stock does or how their earning how their earnings do and how the stock does, secondly being proactive not reactive. I think importantly being able to look what tomorrow looks like I suppose to what yesterday is as critical to really be positioned where the puck's going be rigorous but don't have rigor mortis by this I mean being very disciplined about a frame work how you look at a business, how businesses are being built but you have to flexible because things change, times change. When wrong admitt it. You know one of the biggest mistakes I think we see people make is they get kind of locked into a decision and no matter what the new facts might be they continue trying to rationalize a decision based on by that old thesis. One of the great lessons that I learnt very early in my in the business career was I happened to be following two companies writing research on two companies at Pearland who was arguably one of the most important mutual fund managers of the last 30 - 40 years whom own both of these companies not because of me by the way but because he just followed me talked to me because I covered them. And both companies he couldn't have been more wrong about those companies than he turned out to be about what he did as when he when he realized that he was wrong he didn't even think twice about it he just made a decision and moved ahead. That I was stuck with me because you know how could be a person be so wrong but have such a wonderful track record well one of the reasons is because when he was wrong he admitted it. The Cockroach Theory is I think a great rule to have for emerging companies because what the cockroach theory says once you find one cockroach in the kitchen, there is always more. And so with an emerging company we truly find a problem and that problem is not a real bump in the road problem is a cockroach. You know its best to admit that you got a cockroach you got to home real problem that ultimately might do in. Investment ideas are about information and insight. The 4 Ps which I talked about before really are the essence of the every great company that we have ever seen or been involved with of five independent sources to sort of check your thesis of be able to you know create information and insight intellectual capital, we create three main reasons for stock. Move up or down just to have a thesis, and tenth is be passion about investing but dispassion about investment I mean the stock doesn't know the owner it doesn't have any feelings. Once you make a decision that you ultimately want to do something different, you just kind of make it based on sort of intellectual anxiety and move on. So here is sort of a conceptual framework we utilize to identify and invest in this stars of tomorrow, what their real characteristics are so the very top over arching all this, this is ten commandments I just discuss mega trends, the impact of the growth sector that's creates investment themes that's how we allocate our research and resources the four Ps you know we have a evolution approach looking at repeated growth and this kind of cash flow and price to sales. Now when we look at short term issues you know and then we look at long term issues realities with the idea that earnings growth again is what drives stock prices over time and so the simple formula that we are trying to find this companies that we think has the earnings of the highest rate for the longest time and that's how we find the Star bucks and next Apollo the next Google and next My space. So who is next? Well to try to identify what's next is I think is, you know important to look at the past and in terms of what we can learn from it. So this just shows a list of the top 25 companies in the terms of overall return in stock market from 1995 to 2005 and this is out of over 10,000 companies see you can see at the very top of list is a company that may be somebody wouldn't even know that's American Yield Officers which is the number one performing stock during this 10 year period of time but the companies like Dell, Whole Foods, Best buy, Urban Outfitters Sandisk, Qualcomm and these are all amongst the top performing stocks. What's interesting is not so much who made this list, because I think probably many of you could have picked several of not many of these names in hindsight, what's interesting is the characteristics of how you made this list. The first characteristic is the average stock appreciate at 36 percent per year, may be that's not so surprising just because after all to make a top 25 list out of 10,000, you know you have to have pretty strong returns with 36 percent pre year as the stock double in every two years. Interestingly the average PE in 1995 in other words the year that this that our performance began was 31.8 times PE on a 31.8 times PE, so in other words these weren't exactly in general spirit terms undiscovered in expensive stocks, 31 terms earnings are very expensive PE but double a current market multiple, yet none or less these stocks have the top performance how that happen? Well the average earnings growth for these companies was 42 percent per year, and that was what offset said that relatively high PE and the medium market capital beginning that period of our performance was a 199 million market cap, which in today's world would actually not only we called a small cap company, we argue that we called a micro cap company. And so our conclusion from this is that if we are trying to pick companies that could be on this list ten years from now, you know one, you know we need to focus on you know earnings growth not the market basement, because over time this earnings growth better stock prices secondly focus on small companies they potentially be big companies, because as a company becomes larger size force is in anchor so in other words you know for example, Google is one of my favorite companies in the world, really is and it gets probably the premier growth company on the planet right now. Its market cap is about a $150 billion. So for Google, unfortunately you know if it grows at you know 40 percent rate for the next ten years what that basically says is that its market cap would be over $2 trillion, and in other words you know larger than the size of the Chinese economy. Now can that happen? Sure is it likely to happen? Probably no. So its likely the Google won't have this higher future arranged growth as well as it had in the past but nevertheless it is a great company. Here is an interesting statistics just as the relates opportunity here by says well how do you you know beat the pros of spending - have all this information and spent all the day looking at machines and so forth, so here is an interesting fact. First of all you have got 73 percent of all NASDAQ companies have below billing to our market cap and back you know but if 85 percent of Wall Street's research coverage is above a billion market cap. So in other words you know most of the researches on these companies there are larger impact of the study I just talked about before and they are not focused on where they are most likely going to find these stars tomorrow, you know in the small market cap normal cap area. So I think that really is a message of hope, as it relates to finding companies that not every body in the world is focused on. The world is flat, it's just a theme that you know, I think its pretty critical its different. You know in terms of this time around in the good old days you could find a lot of these companies just if you spent all your time between San Francesco and San Jose but investors today opportunities have been created around the globe. Tom Friedman is right, the worlds flat, and the fact is that other sectors are global. Where to hunt - its probably, you know again back to just some historical perspective to look ahead this just shows the top performing I have done this a little different but, the top performing, the top market cap companies in the US capital markets in 1925, what this shows that the rail roads, metals and auto parts actually have the top 100 had 37 of that hundred largest companies in America in 1925, you fast forward to 2005 and only one of the largest hundred companies in the US capital markets only one of those three industries. If you look at information technology, financial service, and health care and pharmaceuticals Zero companies were amongst the top hundred in 1925 today 60 of the top hundred in those three sectors, the point as things change, times change, things change. You know in terms of the market you know there is a little exception of two days last week you know you know Dow is hitting new highs very day Russell 2000 which is small cap index up a 141 percent since this October 2002 bottom. But really you know as much as everybody talks about you know the market doing so well, grow stocks you know really not participated in other success in fact NASDAQ is 50 percent below, its March 2000 high but finally we were in a bull market to grow stocks which I think is you know we are encouraging to the people that are looking for that next Google or next Star bucks and also 26 percent since this bottom of July 2006, but I think that one of the things that is natural, but wrong is where people are looking and say oh finally the growth market will you know we are going back to sort of the companies that we are with the stars of the last bull market for growth companies so Yahoo, its down 70 percent from its all time high, Intel is down nearly 70 percent, CISCO down 65 percent from its all time high. You know Oracle 56 percent, DELL 55 percent, Microsoft 44 percent, but I would argue that if you look ahead in this new year that we are entering this it is not going to be the whole framers in the past and say just like you know Barry Bonds and you might have few good home runs left and then Roger Clements might have a few good innings you are not going to predict that they are going to be in that many all star games over the next ten years because this age is to an athlete size is to a growth company. So you got a really say, who is next. So new era is required new leaders, I think and I am going to go through this real quickly I think some of the greatest places to find who these new leaders are going to be is in the IPO market, this just shows 1990s, you had a average of 533 IPOs per year, you know 51 percent of them were venture back, here is the nuclear winter that happened on Wall Street from 2000 to 2003 and during that period of time you went from 533 IPOs per year to 87 per year and the characteristics of these company is much larger much slower growth when Sun came up on the east again sort of in 2004, you had to pick up to now about 240 IPOs per year but still dramatically below what we experience during the 1990's but you are starting to see kind of this ray of hope and you are starting to see the real innovation hits the market place and back to my point with that is often that's where you are going to find these new leaders and new companies new IPOs. So just looking at some eras and then going to kind of future so we know we have gone from the Agrarian economy when the beginning of our country, the evidence by the steam engine James Watt and for the Industrial economy we talked about Thomas Edison so on General electric, manufacturing economy you know the best poster child for that ford motor which one is public in the 1939 then we have the service economy and IBM is a great example of that and the Information economy the INTEL, with Microsoft and INTEL and Netscape sort of the shot gun going off on the Internet area, the knowledge economy where again education and knowledge is making the difference, for how well a company did, companies like Google and salesforce.com and you know Apollo power group, Whole Foods are all part of that knowledge economy. I think the area that, we are entering as well, I call the innovation economy. The innovation economy is focused on creating solutions to worlds biggest problems so look at a few of those problems every day in America burns over 21 million barrels of oil. Everyday in America imports 12 million barrels of oil, 785 million people in the world cant read or write nearly two million children die each year due to unsafe water and inadequate sanitation, the average college graduate who changes job 11 times in his or her career. Ocean levels are expected to rise six feet with in the next hundred years leading to mass devastation of population centers world wide. 10,000 universities, is the size of the university Indiana 10,000 universities of size the university of Indiana would be required to fill China's post sector education needs it's a big problem. By 2030, nearly 25 percent of the US population be 65 years or older the median earnings or somewhat the bachelors degree is 70 percent higher than person going to a high school degree, 23 to 25 large global IPOs in 2006 were not listed in US exchange. Here is just an example of bunch of problems again problems create opportunities, who is creating the better solutions to those problems? So I sort of semi seriously, I pull out a weekly piece called think thoughts you can also subscribe to it for free just by going to going to the website but we came up with a new party just because we said the democrats and republicans nobody was addressing this big issues so what are the 6 EEs for this earth party one is the environment you know it's not a question of growth of the environment you got to have both and clearly of the businesses of tomorrow need to have the balance between the two, the education is critical. You know it is what we look about around the planet in terms of what is required for businesses to succeed, it is a knowledge economy, energy independence and alternatives you know again the depends on foreign oil you know whatever your political stands is irrelevant. It's fundamentally unacceptable to have that being part of the future equation. Elderly support and talk about 25 percent US population being 65 years or older and fundamentally how society treats its elder people is a real issue and real important. Entrepreneurism, one of the interesting facts when you look at the success of the 1990s and people kind of say well you know everybody in the world interestingly unfortunately 500 or less lost three million jobs during the 1990s. But that was replaced by the 25 million jobs that was created by Entrepreneurism and small mid size business and having you know again addressing that reality in terms of true economic growth is extremely important. Its economic can set us people behave or compensate. Investment themes and this is where I may wrap up. So you know the earth part is a kind of fine we looked at some problems, looked up at some opportunities. Here is some investment theme where I think some of the greatest opportunities will be created you know one the the mega theme amongst all these themes as web 2.O and we already talking about web 3.O. But web 2.O was really that the internet is the platform for everything from information to commerce, to education to services, you know Google is clearly at first in name of this web tool theme. But there is a number of themes and many themes that is gone off from this and internet is really only probably in the second ending of the ultimate reality of what that is going to mean. You know online advertising, which is the sub theme from web 2.O and that is the shift from traditional media and advertising online. As much as you seen tremendous growth and success with companies like Conex that was bought by Microsoft for I think of seven billion dollars and 24/7 and the wave of success you have seen from this online advertising companies, you still have only referred eight percent of all advertising dollars spent online yet the fact to the matter is people are spending now about 20 percent of their media time online. Younger generation are spending significantly more and all by the way you are looking at the growth or negative growth you have seen every traditional form media when we talk about network TV, magazines, newspapers, radio, they all are going down. So advertisers are going to continue to put more and more dollars online. That is going to be a great theme from long time to come. Open source you know Linux was the beginning of this movement but have user generated content, blogs, software development, open sources, is extremely exciting theme, companies like Sugar CRM and so forth. Think you talk about this for ever and ever because I'm such a believer in the power of this concept but there is going to be a lot of opportunities created within that. Our demand again on web tool of many theme, this is software, it's a service. Salesforce,com is the poster child at this moment but there is a number of models that that are being created, that are doing quite well. The phone is my life and this is you know when you look at my parents, the automobile was really kind of how they identify themselves, when you look at my kids, it's their phone and now you saw the iPhone which I kind of kiddingly said you know we had eight, we had PC, we had AD and now we have IP which is this after the eye iphone. But the factor in matter is what apple's clearly done is created you know the first true computer as your phone and that's going with everywhere and just the complications of that the business are created for that and around that you know I think is extremely open ended. ABC is a biotech in the three Gs. This is just talks about Amgen and Biogen and Cellgen and Gillia genentech and Genzone being sort of the new blue chip farmers in fact if you believe I mean that's and what they are going to do is basically will be buying the innovative product companies, there are going to be in our children's medicine cabinets. The digital doctor even with the growth of technology in hospitals and health care, you are still seem just the very early innings of this digitization and the way to creative more effective, more efficient health care. Healthy and wealthy wise aging baby boomers looking for a life styles that are both healthier and what they do with the fluency that is being created with this generation which is the most innovative you know in the history of the world and wise life long learning, you don't still and fill up your knowledge taking aged 25 and drive off but it is going to be ongoing and so again businesses is located in towards this and the reality is people live in more bios and where there is just a number of business will be created for them. Knowledge economy I talked about before pay gap between somebody as a high school education and college education. High school education and colleges education is big and growing and so that can become greater minorities to majority. Demographics if I would tell you one thing I have learned from some of the most successful investors is that they really understand demographics because demographics are like a slow curve ball, you can see it coming from a mile away, and it allows you to position yourself to where that ball is heading. So whether you are talking about you know for example, we have a media a theme called women probably you look at you know college educated women have gone from 20 years ago. 42 percent of college students were women today its 58 percent. You are looking at the same reality in terms of graduate programs whether you are talking medicine whether you are talking business, you looking in politics, you looking at business history by women are two to one over man. I mean this is just a big wave of demographics in the implications of Brian that are going to be for years and years -years to come. The fact in places like California and Hawaii, and makes five to six states, that the you know white population will be less than the minority and again you know I was the fast is growing, category is expanding and again for this type of marketing or restaurants and so forth is all very very significant, safe and secure you know in the old world, when you looked at you know white, you are really certain that whiter people have banks because that's where the the money is. On the new world, the money is on the internet, so how you create a safe and secure environment is critical. Greentech is huge and again problem opportunity whether you are talking about from environment state point or dependences on foreign oil or look at the economics of the 77 dollar barrel oil price, whether we are talking bio fuels, solar, wind, all are very very important and big in terms of what I think is on the greatest opportunities that may create in the future. Just two more - nanotechnology you know scientists and features for 20 years, have been talking about nanotechnology at being you know being the next big thing. The key thing about nanotechnology is that it is actually becoming commercial. You know whether you are going to be looking at the decade of the many me and it is going to affect all industries and so it affect Greentech, it affects automobiles, it affects apparel it affect technology, it affects biotech and that is going to be very exciting and lastly I hate to be on the side of conventional wisdom with China and India are going to be were lot of these opportunities are created. When we look at china for example there is going to be over 10000 IPOs project in china in the next 20 years and you just can't get around the fact that you get 1.3 billion people with the GDP per capita, that's growing very very significant you know five or seven years ago, we were looking a GDP per capita in china it was about 2000, today it is 7000 yet the United States is 42000, long way to go, huge leverage to their model. And last thing I am just going to tell about is what I call the four sectors and this is sort of a side trend it's really not - I think it factors in their commercial businesses but also can be independent by itself and this is just the trend you are seeing of people that want to do well but by doing good Ethos waters and example Star buck's bought this company whether they are given a neck of every barrel that they sell to help portable water you know across in Africa. America idol had one night that was dedicated to providing the money that they made, they give off to charity you know the red program that Bono started and again we were looking across the spectrum of opportunities, how they factor this four sector into their plan I think is a pretty notable trend. It is just a kind of you know something is not, this is in the advertisement but just in case you are have an interest in some of the things I have talked about that I mention think thoughts is something I published for like in 17 or 18 years, it is a weekly commentary on the growth economy, we have 21 thousand people that get this today. The only thing we ask for this if you like it you make it we give the money to charities. Find next the book outside, we are fortunate to do 31 interviews for some of the most important investors and business people had some people say some nice things about the book including Pier Lynch and Mike Nuke and then Dill Chamblee and Cindy Ripen so forth and lastly to just to make you work if you have an interest we know, where our own focus is on innovation. We have a number of advancing conferences including we have our fifth growth conference in San Francisco in September we have 200 CEOs in the fastest growing companies in the world at this conference so you can find all that stuff there in the website. So before you open up to questions, I want to see all good job I did and so if I do a reasonable job what I find is that people start to kind of think along the frame work, the systemic and the strategic and the kind of you know we start to kind have a mind of - a kind of welcome mind also. Let me do this quick exercise with you. First of all think about the fourth letter in the alphabet. Got it? Ok. Think about a country that starts with that letter ok. Take the last letter of that country and think of an animal. Ok. Now with that animal think of - take the last letter of the animal and think of a color. Ok. Raise your hand if you thought about orange kangaroo and Denmark. Ok it works pretty well. Thank you.