I had a debate with someone about speed of execution and its impact on entrepreneurial success. Oversimplifying, he believes that speed of execution increases founders’ chances of success. People who move fast and get a ton of stuff done will be more successful—or so he believes.

Getting stuff done matters a lot in companies of all stages. If you can’t execute, you’re dead in the water. But what you get done matters more than how fast you move. I like this analogy: Two people are rowing a boat. Imagine that Person A is rowing south toward their destination, but Person B is rowing north as fast and hard as possible. Not only does B negate A’s effort (they’re at a standstill), but B could take them in the opposite direction of where they intended to be. Ideally, partners will agree on a destination and row, in sync, in that direction. Rowing in the right direction is more important than how fast you row. You should row (a) as fast as you can (b) in the right direction.

Speed of execution matters, but directional accuracy matters more. The CEO of Flexport, Ryan Petersen, put it well:

"Velocity is different from speed. Velocity has a direction. You have to know where you’re going. Sometimes going really really fast is negative velocity, because you’re going the wrong way."

The people who have outsize success focus on velocity, not speed.

Today I was looking at a few tech companies in the public stock market. The market capitalizations (i.e., valuation) on some have been drastically reduced. I’d imagine it’s a big distraction to the leadership and employees. I was thinking that some of these companies could benefit from being part of a larger organization where they could execute on their strategy without worrying about market gyrations or scrutiny.

Nonfinancial companies issued $1.7 trillion in bonds in 2020. That was a record. Partly it was due to the uncertainty at the time, but it was also driven by interest rates reaching record lows. It was cheap to borrow, so companies borrowed.

Many great companies are valued at a fraction of what they were, yet the fundamentals of the underlying business remain solid. I’m sure this fact hasn’t gone unnoticed by the leaders and M&A teams at companies flush with cash. If valuations keep going down, I suspect we’ll see some of these companies putting that cash to work in acquisitions.

A few years back I chatted with someone at a corporation about a company it had acquired but later divested (i.e., sold) for a loss. I asked why they sold it and was told that “the business looked great on the surface, but we later realized there wasn’t a path to profitability.” I recently read something about the company they divested. It never reached profitability and has since been sold again. A few years into ownership, the most recent owners couldn’t get it to profitability either and opted to sell it for a loss.

I’m not sure what’s in store for this company, but I imagine the day of reckoning is coming. A company exists to solve a problem in a way that’s profitable and creates value for shareholders (as well as for customers). Sure, for a while, you may be investing ahead of growth, which will make the company unprofitable, but the goal should always be profitability. If a company can’t provide its product or service in a profitable manner, it’s essentially subsidizing the cost of the solution to customers, which isn’t a sustainable long-term business model.

I talked to a friend today who joked about how much her stock portfolio is down and how she’s adjusting accordingly. Another friend said something similar yesterday. Both are invested for the long term, but recent market activity has had an impact on their psychology. They’re thinking about things differently and changing their behavior.

These conversations were a reminder to me of how short-term movements in valuations can impact psychology and motivation. I can’t imagine what public companies that have seen their valuations slashed are dealing with. Morale must be—or at least it will become—a concern for these companies if pay packages have heavy stock components.

I’m curious to watch how public and private company CEOs navigate in this environment. Will we see material changes in things like compensation and publicity around new fundraising rounds?

With all the talk about an economic slowdown, I spent a bit of time thinking about the great financial crisis. Lots of challenges around real estate that led to many people losing their jobs. Unemployment peaked at ten percent in October 2009. If we have another slowdown (hopefully we won’t), there’s a chance we’ll see layoffs again. In the tech industry, we already are (see here and here).

If we see more layoffs in the coming months, I think they could be the catalyst for something unexpected: the rise of solopreneurs. More people will opt to work for themselves, but instead of aiming to build a large company, they’ll choose to be a team of one.

Why? People value flexibility and control over their own destiny more than ever. They want work to fit into their life, not vice versa. Solopreneurship is a path that accomplishes this. People are starting to be more comfortable putting their own interests ahead of their employers’ (if they’re laid off, can you blame them?). They want a situation that aligns with their personal priorities.

Why would this accelerate now? COVID-19 has made working remotely commonplace. You can work from wherever you want, and most companies are comfortable with this. If there are layoffs, companies still want to get the work done, but without the overhead of full-time employees. High-quality contracts that can be dialed up and down as needed can be an attractive alternative.

I hope we don’t have an economic slowdown, but if we do, I think we’ll see Solopreneurship become a career path that many people embrace.

Today marks the end of my one-hundred-twelfth week of working from home (mostly). Here are my takeaways from week one hundred twelve:

• Retreat – I attended retreats with other founders for years. I haven’t been able to do that regularly since 2019, and I’ve missed those trips. This week, I attended one and really enjoyed it. The opportunity to have a change of scenery, do activities I otherwise wouldn’t, and think deeply with smart people was amazing.  
• Learning – Spent a good bit of time thinking about the impact of accelerated learning. I devote time to learning now, but I want to supercharge that over the next decade. I’m thinking about ways to execute on that goal.    

Week one hundred twelve was a good week. Good times with great people. I’m ready to get back to it next week.

I had a great conversation with an entrepreneurial buddy yesterday. He built and sold his company and has opinions on business. We discussed knowledge gaps and how they affect people’s trajectories. If you don’t know how a space works, it’s hard to excel in it compared to others who do have that knowledge. For example, it’d be hard for me to be a great restaurateur because I know nothing about restaurants. I might have the necessary abilities, but that knowledge gap hinders me until it’s filled.

As we chatted about our journeys, we zeroed in on a trait we share. Throughout our journeys, we both prioritized learning. We realized we were behind (something I was embarrassed about), so we supercharged acquiring knowledge to fill the gaps. We read tons of books, went to seminars, sought out more experienced founders we could learn from, and did a host of other things.

As we expounded on this, we noted that our other successful founder friends had filled their gaps and ultimately accelerated their success by increasing the rate at which they learned. My buddy framed it well: the biggest throttle on your success is how fast you can improve yourself. Said differently, the faster you improve (and learn), the more successful you can become.

Warren Buffet reads 500 pages every day and is one of the most successful investors of all time. Not only did he fill any gaps he had by turbocharging his learning, that knowledge compounded over time and led him to outsize success. He left his peers in the dust.  

Having knowledge gaps isn’t a great starting position, but they don’t mean you can’t be successful. If you want to make up for that disadvantage, improve the rate at which you acquire knowledge and how consistently you do so. It’s something you have complete control over, and anyone can do it. Stick with it long enough and you’ll not only make up ground on your peers, you’ll leave them in the dust.

I met with an impressive founder who turned his love for music into a thriving business. He noticed that the genre he’s passionate about wasn’t being given proper credit from a business perspective. The innovation and strategies that helped catapult the genre into greater public awareness and change the landscape of music weren’t being reported on. So, he created a media company that does just that. He’s been able to attract the top names in the genre—artists, music executives, founders, and others. They talk about their journeys and the strategies they’ve used to achieve outsize success in the genre.

I really like this founder’s approach to entrepreneurship. He saw an overlooked niche that aligned with his passion. He figured out a business model and was able to go full-time on the business a year after founding it. I’m excited to follow his journey and have no doubt he’s well on his way to building something massive.

Elon Musk gave an interview at a conference yesterday. A few friends who attended the conference texted me to suggest that I check out the interview replay. The interview touched on many topics, but the part about the macro environment for founders was most interesting to me. Here are a few takeaways:

• Fundraising environment – Elon pointed out that things can change quickly. He shared his experience raising for PayPal. They raised $100 million in March 2000 when fundraising was easy—so much so that people wired them money without PayPal agreeing to take the investment or even seeing a term sheet. A month later, good companies couldn’t raise money.
• Have capital – Have money in the bank so you have the runway you need to execute against your strategy.
• Recessions aren’t all bad – If times are too good for too long, the result is misallocation of capital. Ideas that aren’t that great get funded. Because subpar ideas get funded, human capital is misallocated: people are working on things that aren’t useful to society.  
• Watch your cash flow – Be aware of your cash position and how much is coming in and going out. Get to positive cash flow as soon as you can.
• Tough times pass – Hard times don’t last. They will pass, and boom times will return.

Regardless of your opinion of Elon as a person, he’s a credible founder who’s built great companies many times. His views on navigating challenging times are worth considering.

Today I had a chat with an emerging venture capital investor who’s raising his first fund. He shared the journey with me, and it didn’t sound that different from a start-up founder’s fundraising journey. He worked to refine his story and pitch potential limited partners (LPs) to invest in his fund. He’s heard more noes than he can count but pushed through until he heard yes.

The fundraise has been a grueling multiyear journey for him and his partner. It’s finally coming to an end (for fund one at least). I asked him what his big takeaways are. He has quite a few, but two stood out to me:

• Knowledge gap – Just as founders don’t understand the VC landscape when raising for the first time, neither did he. It took him months to learn that each LP is different and looking for something different in the fund investments they make. After he filled his gap, he adjusted his outreach strategy.
• Timeline – Their raise process initially was open-ended, with no timelines. Potential LPs were slow to commit or decline. He and his partner were in limbo, and so was the overall fundraise process. Once they established a timeline and asked people if they could respect it, they got clarity on who was serious.

This emerging manager and his partner hustled their way to raising a $50+ million first fund. He’s now focused on building out the team and infrastructure to support the operation of his fund. I walked away from today’s call thinking of him as more founder than investor.