This week, I had a conversation with an early-stage founder building an AI company to help large companies manage software development. He recently completed a substantial fundraising round. He’s from Atlanta, founded his company here, and was splitting his time between San Francisco (SF) and Atlanta, but he recently moved full-time to San Francisco.

I was curious about why he moved, and he told me he had two main reasons:

• Talent – Only a few hundred people in the world know how to train large language models the way his company needs them trained, and those people are all in SF. He needs to be there to recruit talent.
• Ground zero – The biggest breakthroughs are happening daily in SF. When you’re there, you’re working alongside the people making them. Because you know what they’re working on, you can build complementary products six or eight months before other people—who aren’t even aware the breakthrough is coming. Additionally, being physically closer to large-model companies like OpenAI enables you to gain access to useful information such as product roadmaps, which allows you to stay ahead of the curve in your building and decision-making.

This founder’s perspective is unique, given his knowledge of and deep entrenchment in both cities. I found it helpful. I understand why he moved to SF, but I’m hopeful that Atlanta will attract and produce more AI talent over the next few years, making it feel like ground zero. If so, hopefully, talented AI founders won’t need to move to achieve outsize success.

Ever since I read James Webb Young’s  A Technique for Producing Ideas a few weeks ago, one of its ideas has been in the back of my mind: the importance of learning a principle before a tactic when trying to master something.

Here are a few passages from the book about this:

“In learning any art, the important things to learn are, first Principles; and second, Method.”

“Particular bits of knowledge are nothing, because they are made up, of what Dr. Robert Hutchins has called rapidly aging facts. Principle and method are everything.”

“We may know all these [advertising tactics] and still not be an advertising man, because we have no understanding of the principles and fundamental methods by which advertising works.”

“On the other hand, we may know none of these [advertising tactics] but have insight into advertising principles and method, so that employing technicians to help us we may produce advertising results.”

“Thus we sometimes see a manufacturer or merchant who is a better advertising man than his advertising agent or manager.”

I’m not sure how other people approach this, but I haven’t been intentional about learning principles first when I’m trying to master something. I’m intentional about focusing my reading and knowledge consumption on information specifically related to the topic. But I haven’t thought to prioritize starting with a book or podcast that explains principles. It happens sometimes, but it’s random.

The more I’ve thought about Young’s approach, the more sense it’s made. Principles are the foundation that isn’t likely to change, while tactics and methods evolve with the times. Understanding the principle is key to understanding why a current tactic is valid and to being able to experiment to find its replacement if it becomes ineffective.

I suspect that Young’s approach applies to learning in general, too. To understand concepts (even if you don’t plan on mastering something), it’s best to seek out and understand the principles and then seek out tactics that others have used. Doing so will result in better comprehension and retention, or so I think. I’m going to test this theory as I learn about copywriting this summer (see here).

I’ve been chatting with an early-stage founder and providing feedback about his pitch deck. He’s sharp and a go-getter, and I enjoy working with him. He’s looking to raise a seed round from a venture capital firm and wanted my thoughts, since I’ve been inside an early-stage venture capital firm.

One of the things I’ve been questioning is the problem he’s trying to solve. He wasn’t stating it succinctly—he alluded to it, mentioning other problems as well. It was up to me, the reader, to reach the correct conclusion about the main problem he’s solving. I’d talked to him, so I could do that, but what about the investors who see a few pitch decks a day and would see his pitch cold? They won’t take the time to try to figure out the problem; they’ll just say no and move on to the next pitch deck.

Businesses exist to solve a problem for their customers. Customers pay for that solution if it provides value to them. It’s that simple. The customer’s problem is the foundation of the business. Solve their problem in a way that customers value, and they’ll pay you for that value. If you can’t articulate the problem clearly, that failure cascades through all aspects of the business and makes everything harder. Raising money and closing customers is harder, and even recruiting may be more challenging.

Understanding the one main problem you’re solving and communicating it clearly is harder than it sounds. If you can’t articulate your problem in a way that people instantly understand (even if they disagree with it), consider spending some time refining it and getting feedback until you nail it. Getting this right as early as possible will give you a north star that will make decision-making, fundraising, and a host of other things easier (not easy!) down the road.

I love studying entrepreneurs. Reading about their journeys is the best way for me to do it. I’m reading a book every week, usually a biography, and then sharing it in my Library on this site. Every Sunday, I’m posting the latest book I read.

Last month I read Netflixed, a biography about—you guessed it—Netflix. The book mentioned Andre Blay and how he pioneered the VHS industry, which helped birth the home video rental industry. According to that book, Blay laid the foundation for Blockbuster and then Netflix.

This week, I read Blay’s memoir about his journey as an “entertainment entrepreneur.” Pre-Recorded History, published in 2010, describes how he became the “founder of the home video industry.”

Blay’s memoir was about more than his own journey; he delineated the backstory of the movie industry and provided a detailed timeline of each movie studio’s chain of ownership and significant events. He then described how working with Learjet founder Bill Lear (who also created the 8-track stereo system) and then at a tape-duplication company that acquired music rights from Motown Records gave him the idea for recorded movies on VHS.

Blay’s idea, combined with new VCR technology in the late 1970s, led to explosions of consumers watching movies at home and video rental stores to satisfy the demand. Between 1978 and 1985, around 20,000 video rental stores, mostly mom-and-pop outfits, sprang up across the country. In 1981, the first year data was recorded, pre-recorded home entertainment retail sales reached $500 million. By 1999, they were $16 billion, according to Blay.

If you’re interested in learning about how technology disrupted the way Hollywood distributed movies, leading to the rise of Netflix, or about how movie distribution deals are structured, consider giving this book a read.

Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

Cumulative metrics (since 4/1/24):

• Total books read: 62
• Total blog posts published: 399

This week’s metrics:

• Books read: 1
• Blog posts published: 7

What I completed this week (link to last week’s commitments):

• Read Pre-Recorded History, a biography about Andre Blay, the entrepreneur who created the home movie industry and paved the way for Netflix, Blockbuster, and others
• Created an opportunity solution tree for this project using the framework I read about in Continuous Discovery Habits
• Ordered the books I need for my 2025 Summer Uncomfortable Challenge (see here)

What I’ll do next week:

• Read a biography, autobiography, or framework book
• Tag specific actions on each page of this site to start collecting data in Google Tag Manager
• Complete a brand journey framework for this project (learn more here)

Asks:

• If you know any senior full-stack developers interested in working on the software for my current project, please introduce us!

Week two hundred sixty-seven was another week of learning. Looking forward to next week!

Current Project: Reading books about entrepreneurs and sharing what I learned from them

Mission: Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

What I struggled with:

• No struggles this week.

What I learned:

• The International Institute of Information Technology Hyderabad is a university in India that’s well known for its curriculum around natural-language processing. Alumni and students from this school could be a good fit for my project.
• The opportunity solution tree framework in Continuous Discovery Habits is helpful. It’s a great way to lay out customers’ mini pain points and brainstorm solutions that can help resolve them. It helps you determine which pain points are the highest priority and can be solved in a way that aligns with your business objectives. The book doesn't say this, but the most important and highest level is a major customer problem or need. Adding this to the framework helped me tremendously and focused everything on the customer’s pain.
• Capturing, recalling, and using what I learn from mediums like YouTube to solve problems is just as challenging as it is with books. See more here.
• The brand journey framework is a good way to think about how to create a brand intentionally. You start with your goal and work backward to today by answering four questions:
  
  • 1. What outcome do you want, or what’s your motivation for doing something?
  • 2. What do you have to be known for to get #1 to happen?
  • 3. What would you have to do to be known for the thing in #2?
  • 4. What do I have to learn right now to do the thing in #3?
  • For a more detailed explanation, see here.

That’s what I learned and struggled with last week.

I’ve been learning more about copywriting, which most people think of as writing that makes people buy something. That’s true, but it’s more than that. It’s about persuading or influencing someone, but with the written word instead of oral communication.

I’m not great at persuasion, but I’ve always wanted to get better, which is why I’m curious about copywriting. When I read the biographies of advertising and public relations entrepreneurs Albert Lasker (see here and here) and Edward Bernays (see here), I realized that I don’t understand the fundamentals of persuasion. Before I dive into the tactics of writing persuasively, I want to learn the principles underlying them.

Influence is a famous book by Robert Cialdini. I’ve heard nothing but good things about it, and it’s been mentioned in several biographies as having an outsize impact on entrepreneurs. I’ve owned this book for several years but never read it. But that’s about to change—I’m going to read it soon. I hope it helps me understand the principles of persuasion so the tactics I learn regarding persuasive written and oral communication will be more effective.

I listen to YouTube every day. It’s one of my preferred daily learning methods (see here). I even pay for the premium version, and it’s money well spent. As I’ve ramped up my use of YouTube, I keep running into the same pain point. Today I hit it again.

A few weeks ago, I listened to an interview on YouTube in which an entrepreneur shared one of his tricks for improving his decision-making when something isn't working. It was a good trick that stuck with me (high level, at least). Today, I wanted to use it but couldn’t remember the specifics. I tried to find the interview without success. I know who said it, but I don’t know which YouTube video he said it in.

It’s a pain not being able to quickly find a specific segment of a YouTube video I’ve watched. My current workaround is to search through my viewing history and try to figure out which video is the right one. Then, I search through the transcript to find the segment I’m looking for. Sometimes I find it, and sometimes I don’t. But in all instances, it’s a painful experience.

I’d love to use a tool that looks at my YouTube history, indexes the transcripts of the videos I’ve watched, and helps me identify the segment I need via a simple chat interface. I’d happily pay for this because it would enhance my learning and give me a repository of all the information I’ve consumed on YouTube.

If you know of a tool that can solve this problem, please let me know.

A few days ago, a friend told me about Reducto. The company just raised over $24 million from venture capital firms to solve the problem of unstructured data in PDFs by making it usable. It structures the text in PDF documents so you can feed it into other systems, such as LLMs or your own applications.

Some companies are building solutions that require information from PDFs to be fed into their software to achieve a desired output. They spend a significant amount of time figuring out how to extract unstructured information from PDFs, which isn’t as easy as it sounds. The issue is that this isn’t what these companies specialize in, so it takes them a long time to figure out. In many cases, they build something that’s decent but not great. Reducto’s PDF-processing service lets them skip mastering PDF extraction. They use the output from Reducto and focus on the more important aspects of the solution they’re building.

I spent some time playing with the tool’s free version. A few notes:

• Reducto can scan any document and turn the entire document into structured JSON. The free version has a 30-page document limit.
• The tool is incredibly good at extracting information from charts, which isn’t easy.
• There are many useful settings, including extraction method, chunking method, and more.
• The tool has an API, which is great for automation.
• If you need the extracted data formatted in a particular way, you can create a schema in Reducto, and the output will be formatted using your schema. I love this feature.

This is an impressive tool that solves a boring but big problem for companies. I can see companies quickly agreeing to pay for this service, which likely led to rapid growth in revenue and caught the attention of venture capital investors.

I get the impression this service is built for enterprise clients. I wonder if Reducto plans to offer something that’s more suited to small or midsize companies.

I recently chatted with an early-stage entrepreneur who built an app that enables businesses to accept almost any payment method. As I learned about the problem he’s solving, he mentioned that his target customers are “micro SMBs.” That caught my attention—I liked that framing.

“SMB” stands for small and midsize business. It’s normally applied to any company that’s not a huge enterprise. This bucket is pretty wide. For example, a midsize company might be a retailer with $75 million in annual revenue and 150 employees. A small company might be a graphic design shop with 10 employees doing $1 million in revenue. Though they’re both SMBs, their complexity and problems differ wildly.

The micro SMB is the smallest business in this group. I think of it as solopreneurs (i.e., the founder is the only employee) and teams of up to five people doing $500,000 or less in annual revenue.

For many years, I’ve been bullish on building a business that solves problems for SMBs as a way to build a large business. According to an older book by Verne Harnish, only 4 percent of businesses in the U.S. have revenue of more than $1 million a year. Translation: the market to serve small businesses is huge. If you can solve a problem they have, you can get a lot of customers.

I love going after micro SMBs because they don’t expect perfection, there are tons of them, you’re usually selling to the owner, and they make purchase decisions quickly. Solutions to problems they couldn’t solve themselves and solutions that significantly free up their time so they can work on other parts of their business do great in this market. They’ll often buy on the spot if you check either of those boxes.

One knock against micro SMBs by investors and founders has to do with the process of selling to them. Price points for solutions in this market are often lower, which means you can’t afford outbound sales teams in many cases. That’s true, but I don’t think it’s a negative. I think of this market as more of a prosumer market. You’re marketing to a sophisticated consumer who is more willing to spend than the average consumer. Instead of outbound sales, strategies that gain this customer’s attention or educate them can attract them. Easier said than done, but highly effective when done strategically.

My conversation with this founder crystallized something for me. I like serving the SMB market, but I love serving the micro SMB market. It’s a tough-looking market, but once you nail it you can build a massive business with customers who often won’t consider switching solutions because they’re too busy running their small business.