Mark Cuban’s six rules of money (Shark Tank)

Money feels a little different to billionaires. Imagine spending 40 million dollars online for a private jet or buying a 13 million dollar mansion without even looking at it. Well this is a reality for Mark Cuban who became a billionaire after he sold his company broadcast.com to Yahoo in 1999.

After the sell he bought his favorite basketball team the Dallas mavericks for $285 million and bought the players their own private jet for 36 million. He later became an investor in the television show Shark Tank and has invested in over 80 companies since the beginning of the show. So let’s take a look at Mark Cuban’s six rules of money.

1. Work on your mission even if no one believes in it

Cuban says that if you’re innovating and bringing new ideas to the market you will always find those who don’t believe in what you’re doing. He says to stay on the course and work on your mission even if others don’t believe in it.

Okay I’m investing a lot of my saved money into this whole idea of net casting or internet broadcasting in early 1995 when people didn’t even know what the internet was. That was all risk because I literally was putting everything that I had on the line for something people just laughed at me and said:

– “Wait, audio over the internet? You know you can turn on the radio? You know you can turn on the tv?”.

– Yeah but you don’t get it!

– No that’s just dumb. All right you know and…

And so being able to overcome all that resistance, because remember back then you had to have a PC, you had to know what a modem was and install it, you had to know what the internet was and then you had to download a TCPIP client that worked over a modem and then connected to a browser that you probably didn’t even know what it was or how to download it… And we had to take it on faith that all this was going to grow.

A few months after the IPO Yahoo bought out broadcast.com for six billion dollars. I remember the date April first. It was April fool’s day April fool’s day yeah 1999. Closing in July yeah it’s been said that that was one of the worst acquisitions.

But, they didn’t execute the plan first of all. They paid in stock it wasn’t cash so their stock was as inflated if not more and so they paid in stock and think about it… if you could go back to 1999 and have the company that dominated streaming, so we had hundreds of internet radio stations so we were Pandora and Spotify, we had really started video we dominated all video streaming on the internet it wasn’t even close, there was no YouTube, there was no anything else six seven years before YouTube so you know radio stations, online music customized radio stations customized video… we were integrating advertising, doing indexing of the spoken word and all this kind of stuff.

ALSO READ: Kevin Oleary’s six rulef of getting rich

2. Work as if someone is trying to take everything from you because they are

We live in a hyper competitive world. In the midst of the internet age this means that at all times there is always someone trying to get better as Cuban says you got to know your business better than anyone in the world and act as if someone is trying to take it all away from you because they are.

When you walk in the room when you start a business and you start to talk about somebody you’re never in a vacuum with no competition unless you’re just extremely lucky.

And if there’s going to be competition that means somebody else knows your business as well as you do when you get started. And if you walk into a competitive environment and they still know more about the business than you do and more about your customers you’re going to lose.

But most people don’t consider that they don’t do the work they don’t learn more about their industry they don’t know even about their business. And so you’ve got to put in the effort to know more about your industry than anybody else. And that’s the brains part and that’s the effort part as well because look if you’re competing with me you better know what you’re doing otherwise I’m gonna kick your ass.

But whatever industry you pick if you outwork everybody, if you try to be a little smarter than everybody, if you try to be a better sales person than everybody, if you try to be better prepared than everybody you’ve got your best chance. Because if you don’t do it and somebody else does you know… Work like someone’s trying to take it all away from you, actually work like someone’s spending 24 hours working 24 hours to take it all away from you and that’s kind of the way I look at it.

3. Learn the skills of the future

The world is changing and is changing fast. If we don’t adapt we will be left behind. But you’ve got to take that step, this is the price of poker. There’s no future that doesn’t have ambient computing or voice activation. That’s super cool, I just can’t imagine what the future is going to be like. It’s great five years from now, it’s crazy.

But you know what? Like my dad used to say – we don’t live in the world we were born into. If you just think about the year you were born and the stuff that was around yeah you know it’s crazy. A 90 year old that was born in 1928… I mean it’s just unbelievable. People weren’t flying commercially then you know? There was no radio, no TV just things that are archaic already. And it’s not going to change, it’s not going to slow down I think if anything it’ll accelerate and you could hypothesize about our future and there’s a lot of different directions it can go.

4. Try different things

Most of us have little to no idea exactly what it is that we want to do or what will be the winning idea that will make us successful. And the truth is that we won’t know unless we try different things. As Cuban says we only have to be right once particularly if you’re young today curiosity is great. Always learning and trying to find new things and being curious about new things because that’s what leads you to that path trying to figure out in advance that’s hard because you don’t know what you don’t know.

I always say he or she who experiment experiments the most – wins. Yeah I agree with Thomas Edison had almost 950 experiments before he came up with the … yeah you know it’s okay to get it wrong, yeah it’s okay to fail, particularly when you’re young. Yeah what the hell… go back to your room and make your bed because you didn’t get that business right –  why not?

5. It pays to be nice

There’s a common saying that says people don’t quit jobs they quit bosses. Cuban says that something that he learned as he built and invested in companies is that being nice is actually very beneficial. Not just to be a better person but also when building great companies.

It became apparent to me that the nicer I got the more effective people around me got the more productive they got the more sales we had. I was undervaluing nice. I started my first company after I got fired from a job and I was 24 just turned 24. There I was always go go go go all consumed right live it eat it sleep it breathe it and I knew people couldn’t keep up or work as hard as many hours as me but I wanted them to.

And we were successful and we didn’t have much turnover but I could have done a better job if I were nicer. At broadcast.com I got a little bit nicer. But then once I got to the Mavs and some of these other companies and Todd reminded me and really told me you know just “nice works”.

And so when you find yourself going to work when you’re finding yourself dealing with customers when you’re finding yourself making decisions we all get that object right that feeling in our stomach that tenseness that stress at various points and times that we all have to go through. But sometimes you just need to calm down, take a deep breath and be nice. Because if you reduce the stress of people and you’re nice you’re gonna have such a huge advantage no matter what your technology is no matter how it compares even if it’s a download for an app.

People will still have to deal with you your culture will come through being nice, being supportive, reducing stress that all comes through even in an app.

6. Know the rules of the game and use them to your advantage

Something that most people don’t know is that Mark Cuban almost lost over 95 percent of his money after he sold his company to yahoo he would have lost over a billion dollars if he didn’t know the rules of the game

See Mark and his partners sold broadcast.com to Yahoo for 5.7 billion dollars but they did not receive cash yahoo bought the company with their shares so Mark Cuban received 14.6 million shares of Yahoo for his share of the company at $95 per share. This means that the sell of his company gave him around $1.4 billion worth of Yahoo shares. This was in 1999. But he began noticing that many internet companies were crashing in value. He thought that it was only a matter of time before Yahoo where he had over a billion dollars worth of shares crashed.

But there was a problem he could not sell his shares right away after the sale as part of his agreement. So Cuban created what is known as one of the best trades in history when he used what is called options to protect his wealth.

Okay now that we understand options here’s what Cuban did to protect his money. Since Mark Cuban had 14.6 million shares of Yahoo he bought 146 000 put contracts to protect all of his shares in case the Yahoo shares crashed this meant that he would have to pay millions of dollars in contracts to ensure his money to avoid paying this he sold another 146 000 call contracts to cover the cost of the put contracts making his trade virtually free.

He bought his put options at a strike price of eighty dollars per share. Remember his stock was worth ninety five dollars per share so he had a small loss margin. He was protected if the stock dropped below eighty dollars per share but he also sold call options with a 205 dollar strike price. So if the price of the stock dropped below eighty dollars per share he was insured with his put option but if the price went over 205 dollars he would not be able to profit from anything over that price.

Yet if he was wrong and the stock didn’t crash and instead grew in value he would still have a margin of profit up to $205 per share. Interestingly by January of 2000 the price of Yahoo stocks skyrocketed to $237 per share making his trade looked like a very expensive mistake.

But in late 2002 when the dot-com bubble burst Yahoo stock was trading at an all-time low of $13 per share making this trade a stroke of genius that allowed him to protect around $1 billion so educating ourselves to know the rules of the game can be really profitable. – Mark Cuban’s six rules of money

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