This is my two-hundred-seventh weekly reflection. Here are my takeaways from this week:

• Sharing ideas – I shared an idea with a few people over the last few weeks. The idea is unconventional. I figured it would be received with skepticism. The exact opposite happened. Several people have been thinking about the topic that my idea’s about for years; they just haven’t talked about it publicly. One person considered starting a company. Another did start a company, but it didn’t last. Instead of having to defend my idea, l heard about lessons learned and was pointed to helpful resources that I wasn’t aware of. Just a reminder that there’s more upside than downside in sharing ideas.
• Commerce gateway– I thought more about this. Commerce (i.e., retail) has been the historical gateway to entrepreneurship for many. This will likely continue. I’m noticing another trend with aspiring entrepreneurs, which could be an indication of another gateway starting to emerge. I'm seeing more people try entrepreneurship by renting things to others.  Could rentals be the new gateway?
• Four years of posts – This week marked my fourth year of doing daily posts. I’m proud of sticking with this for so long. I want to reflect a bit on the last year of posting and think about what the next year of posts will look like.

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

Today I finished reading Kick Up Some Dust: Lessons on Thinking Big, Giving Back, and Doing It Yourself by Bernie Marcus, cofounder and longtime CEO of Home Depot. The book is about Marcus’s life. It describes his upbringing, career in corporate America, transition to entrepreneur, and transition to philanthropist. Marcus is almost 95 and has accomplished (and failed at) many things over the years. I was eager to hear about his experiences and the lessons he learned from them.

Marcus shares what he calls “core lessons in business and life.” He makes it clear that lessons are easy to grasp but hard to put into action. Here are the lessons:

• Confidence – You won’t get anywhere if you don’t believe that you can “do it yourself.” You must be confident that you have the skills and abilities to accomplish any task or solve any problem. If you don’t have the skills, you can learn most of them without going to school.
• Teamwork – On the other hand, you don’t have to do hard things by yourself. Some people will help if you give them the opportunity.
• Full-time – You must be committed and determined to make whatever you’re pursuing work. Marcus says “[t]here is no such thing as part-time passion.”
• Risk taking – If you find a problem or need that isn’t being met, you must take big risks to meet the need or solve the problem. Consider taking the biggest risks when you’re young; there’s less downside.
• Failure – “Failure is the price you pay on your way to success.” Marcus describes his ninety-plus-year journey through life as "stumbling" fueled by optimism.
• Storytelling – Marcus considers this the most important lesson. You must be able to articulate what you’re doing and why it adds value in a compelling story that’s easy to understand.

I’m glad I found this book. I learned a lot about Marcus that I wasn’t aware of. He’s a driven person who’s had a significant impact as both an entrepreneur and a philanthropist.

After reading the book by Home Depot cofounder Ken Langone, I decided to go deeper on the other cofounders. Bernie Marcus was the CEO for many years, and I discovered that within the last few years, he wrote Kick Up Some Dust: Lessons on Thinking Big, Giving Back, and Doing It Yourself. Bernie is almost 95 years old, so I was curious about the wisdom he’d accumulated after almost a century. I ordered his book.

I’m not finished with the book yet, but so far as I can tell, Bernie has a strong personality and entrepreneurial fire inside him.

Bernie shared his thoughts on failure, and they got me thinking:

"I think how you respond to failure comes down to whether your fear is stronger than your passion. People driven by passion see setbacks as unpleasant, but inevitable challenges. What they know that quitters do not is that failure can be eaten in small pieces."

I never enjoyed failing when I was younger, but my mindset shifted when I started being entrepreneurial. I was passionate about what I was doing and driven to see it succeed. This meant I was trying a bunch of things and a lot of it didn’t work. But I noticed a pattern. Going through the things that didn’t work led me to the things that did work. Instead of looking at things via a success-or-failure construct, I began looking at them as either a success or a lesson that got me closer to success. Failures became expected. Many were still painful, but I focused on what I could learn from each failure instead of the pain.

Failure is part of life. As they say in baseball, nobody bats a thousand. Even the best players strike out at the plate. But a single strikeout doesn’t stop them from winning the World Series as long as they don’t give up and keep playing the game to the best of their ability.

One thing I hear founders discussing is raising the next round of growth capital from venture capital investors. That’s their goal. They orient everything the team does around it. They spend time figuring out what metrics investors need to see to be comfortable investing. Then they work backward to hit those metrics.

I know a founder who set a goal of raising a few million for his seed round, even though he had sufficient capital in the bank. He heard that seed-stage investors want to see a few hundred thousand dollars in revenue before considering writing a check. He wasn’t close to that, so he found a way to get there fast. His software product was sold on a subscription basis (monthly or yearly), meaning the revenue was recurring every month or year. He decided to run a promotion to give new customers lifetime access to the product in exchange for a one-time payment at a heavily discounted price. The result was a surge in new customers and one-time revenue.

The founder hit the metric that seed investors wanted and got meetings with dozens of firms. The problem was that the quality of the revenue was low. First, the revenue wasn’t recurring, but the costs of running the platform were. Next, the customers weren’t people who were enthusiastic about the product because it solved a problem for them. Rather, they were bargain hunters who were loyal to getting something for a steal. They were never satisfied, and they needed a lot of handholding from the service team to onboard and use the product. They just weren’t an ideal customer profile for his product. After many conversations, the VC firms decided against investing in this company—I assume for these reasons.

The lesson from this is to start with the right goal. The goal of any company should be to satisfy and bring value to customers by solving a problem that’s sufficiently painful for them. A company that succeeds in doing this produces positive metrics (revenue, retention, engagement, etc.) that investors like to see.

All companies need capital to stay alive, but continuously raising capital from investors shouldn’t be the end goal. Instead, it should be the byproduct of having created something that satisfies customer demand for a solution to a painful problem and that has the potential to scale tremendously. By focusing on the customer and creating something they want, you up your chances of getting capital from investors (if you even need it).

I recently finished reading Bull! A History of the Boom and Bust, 1982–2004 by Maggie Mahar. The book was published in 2004, not too long after the dot-com bubble burst. I’ve seen the book recommended a few times and noticed that the cover includes an endorsement by Warren Buffett, so I ordered it. Also, the book’s narrow focus on the period when interest rates started what ended up being a forty-year decline through 2004 was intriguing to me.

I enjoyed reading the book. Given the focus on a very specific period, it provides lots of details about the economic environment, who the main figures were who had an impact on the stock market, and the key decisions they made. Mahar does a good job of describing her perspective on the impact those decisions had on inflating and bursting the internet bubble.

One thing that caught my attention was her explanation of the role the inclusion of high-flying technology companies in stock market indexes (e.g., the S&P 500 and NASDAQ Composite) played in valuations reaching levels that were hard to justify. She believes that this, combined with the rise of the 401k and index funds, contributed to a significant amount of capital being allocated to these highfliers even though valuations were hard to justify. The valuations of companies kept rising because capital kept flowing into the index funds until the stock market bubble burst around 2000.

This caught my attention because last month, I listened to an interview of David Einhorn, founder of Greenlight Capital. Einhorn shared his opinion of the impact that passive investing is having on the valuations of certain companies in today’s stock market. Essentially, he believes that valuations of companies continue to rise because they’re part of one or more stock market indexes (e.g., the S&P 500 and NASDAQ Composite). Passive index funds track indexes, which leads to the funds buying more shares in these companies, regardless of the valuation, as more investors allocate capital to the passive index funds. For this section of Einhorn’s interview, listen here.

I found this interesting because there’s a twenty-year gap between this book’s publication date and Einhorn’s interview.

A friend shared a quote today that caught my eye:

“People do not decide their futures, they decide their habits and their habits decide their futures.”

~ F. M. Alexander

This statement is simple, clear, and true. We have the power to increase the probability that the future we desire will become reality. If you want a particular outcome, consistently act in a way that aligns with that outcome. It will be more likely to happen.  

This weekend, I was chatting with a friend about public markets and IPOs. Neither of us knew how IPOs are trending this year, so I decided to check the stats. Here’s what I found:

2024 IPOs

• January: 15
• February: 16
• First two months total: 31

For comparison, here are the stats for the same months for the last five years:

2023 IPOs

• January: 8
• February: 17
• First two months total: 25
• Full-year total: 154

2022 IPOs

• January: 34
• February: 32
• First two months total: 66
• Full-year total: 181

2021 IPOs

• January: 118
• February: 132
• First two months total: 250
• Full-year total: 1,035

2020 IPOs

• January: 12
• February: 20
• First two months total: 32
• Full-year total: 480

2019 IPOs

• January: 6
• February: 21
• First two months total: 27
• Full-year total: 232

The number of IPOs completed in the first two months of this year has increased compared to the same months in 2023 (which was an anemic year). But we’re well below the number of IPOs we saw in 2021 (which was a record year).

Interestingly, the stock market reached an all-time high this past week. The NASDAQ Composite Index reached a record high close of 16,274 this past week. Its previous high was 16,057 over two years ago in November 2021.

I’m curious to see how IPO activity plays out for the rest of this year, especially if the NASDAQ Composite Index stays above the records set in 2021.

This is my two-hundred-sixth weekly reflection. Here are my takeaways from this week:

• Commerce gateway – I’m starting to see a pattern in the origin stories of wildly successful entrepreneurs of the last few centuries. Many of them got their start by selling products. They were essentially retailers. After they learned basic entrepreneurial lessons, they found painful problems and created solutions to them. Commerce is a gateway to entrepreneurship for many.
• Storytelling – I’ve kickstarted my progress on my goal of publicly practicing my storytelling in 2024. I still have a few more things I need to do, but I’m hoping to begin telling stories soon.  
• Reading insights – I tested sharing, in my posts, insights from a book I read. This was helpful. While I was reading, I took better notes on potentially insightful passages because I knew I’d be sharing those insights. The process of writing helped clarify my thinking. Overall, this enhanced my reading process.‍
• Reviewing highlights – Digitizing highlights from physical books has been a pain. The best software I’ve found so far isn’t great. I plan to test a few others, but the chances of finding a satisfactory solution to this problem aren’t looking good.

Week two hundred six was another week of learning. Looking forward to next week!

This week, an entrepreneur told me about a real estate project he’s finishing. He shared that he ran into several delays and other hurdles that he didn’t anticipate. Because of them, he had to adjust how he funded the project to give himself enough runway to complete it. The project looks great and is projected to do well financially.

During our chat, I asked him about the projected completion timeline versus what played out. He planned for the project to take a little over a year, and it ended up taking twice as long. The only reason he was able to complete the project instead of being forced to abandon it was that he personally had the cash to see it to completion.

In the end, it should all work out for this entrepreneur. His situation reminded me of a lesson I learned the hard way as an early-stage founder. When I’m doing something difficult, unforeseen events will cause things to take twice as long as I thought they would. Building in enough runway to support things taking twice as long should be part of my plan.

Yesterday I shared a key concept I took away from reading Home Depot cofounder Ken Langone’s book I Love Capitalism!: An American Story. Today I read a section where Langone shared the details of how he orchestrated Home Depot’s successful IPO in 1981. It was a tough environment in which to raise money from public-market investors. The economy was in a recession, inflation was through the roof, and interest rates were surging. But Home Depot was just a start-up and needed cash.

One week before the IPO date, bankers said they could fill only $3 million of the target $6 million the company needed to raise. Langone got to work and figured out a way to craft a creative deal and sell it to the existing investors (who ended up not being able to sell shares in the IPO). Everyone agreed to the new terms, and the company raised the $6 million it badly needed.

Langone’s reflection on this difficult situation stuck with me:

If there’s anything I would take a bow for throughout this whole process, it would be this: never giving up, and thinking creatively, instead of reactively, when the chips are down . . . . You get to enjoy lemonade instead of the lemons God gives you . . . .

Langone was in a tough spot. Home Depot cofounders, employees, and existing investors were all counting on him to remove the IPO roadblocks before the deadline. He was in a high-pressure situation, and he kept pushing. He focused on figuring out how to accomplish the goal given the hand they’d been dealt. His solution was unorthodox but ended up working. Absent Langone’s persistence and resourcefulness, Home Depot might not have gone public in 1981 or, worse, survived.