This week’s Silicon Valley Bank (SVB) failure was unexpected and happened in less than 48 hours. I’ve chatted with a few founders and venture capitalists whose companies have assets with SVB. As of Friday afternoon, SVB accounts were frozen, meaning customers couldn’t add or withdraw any funds. Most of the people I talked with were busy establishing relationships with other banks in anticipation of being able to move their funds. The venture capital firms were assessing their own exposure and the exposure of their portfolio companies and updating limited partners on the situation.

The FDIC insures deposits up to $250 thousand. Insured deposits will be available Monday morning. Anything above $250 thousand likely won’t be available until the FDIC sorts through everything, which could take time. My gut tells me that SVB customers will likely get most of their money back, but when that will happen isn’t clear. The longer it takes, the more difficult decisions there will be for SVB customers to make.

I’ll be watching this closely as it unfolds.

This is my one-hundred-fifty-fourth weekly reflection. Here are my takeaways from this week:

• SVB – Silicon Valley Bank’s failure this week was a surprise. I’m curious to see how this failure will impact venture capital and banking more broadly. As of today, I know a few VC funds and start-ups with frozen accounts at the bank.
• New community – I joined a new community full of accomplished people this week. I’m excited to get to know them.  
• Young companies – Some of the largest companies in the US haven’t been around that long relative to their market cap (i.e., valuation). For example, Alphabet Inc. (Google) was started in 1998. Twenty-five years ago. It has a market cap of over $1 trillion. That’s a staggering rate of compounding and wealth creation.

Week one hundred fifty-four was a crazy week. Looking forward to next week!

I met with a “spotter” entrepreneur this week. I was curious to hear about the next opportunity he’s identified. As we chatted, I realized a few things about him:

• Discovery – He’s gifted at finding opportunities others haven’t found. He looks where others don’t look. He sees value in things others have written off by thinking about them differently. He’s good at keeping his finger on the pulse of what’s going on, broadly, to spot trends early.
• Odds – He understands that what he’s trying to do is very difficult and it’s not a sure thing. At the same time, he’s aware that the odds of success are in his favor because the dynamics of the market he’s entering favor him. He doesn’t realize it, but he’s thinking in probabilities.
• Risk and return – He’s done simple math sufficient to understand that the return could be material if he’s successful. He’s considered the return relative to the risk he’s taking on. And he’s thought about how to lower the risk but still realize a material return if all goes well.

This entrepreneur isn’t from a fancy school or anything like that. He’s just a hustler gifted with the above-listed abilities and a great work ethic. I think a lot of this type of entrepreneurs are out there. The top 1% of these spotter entrepreneurs have the potential to build large non-consensus businesses.

I want to continue talking to spotters to understand what traits the 1% have.

When someone says a company is a Fortune 500 company, people know it’s a large company. But what does that mean exactly? I decided to find out. Apple is the most valuable public US company and has a market cap (i.e., valuation) of $2.42 trillion as of today, so I assumed it would be ranked first on the Fortune 500 list. To my surprise, it was third. Walmart was ranked first and Amazon second. See the complete Fortune 500 list for 2022 list here.

I looked up Fortune’s methodology and learned that it uses total revenue to determine the rankings. Not market cap (i.e., valuation) or profitability. Just top-line revenue. It ranks on how many dollars customers gave a company (revenue) in a year, not how many of those dollars the company kept (profit) or what the market says the company is worth (market cap). Here’s the top three Fortune 500 companies (with 2022 revenue for context):

• Walmart – $573 billion
• Amazon – $514 billion
• Apple – $394 billion

Conversely, the S&P 500 is an index of the largest publicly traded companies listed in the United States. The S&P 500 doesn’t rank companies directly. Instead, each company makes up a certain percentage of the overall index, which is called its index weight. The weight calculation isn’t as simple as Fortune’s revenue methodology, but it is mostly based on market cap. The larger a company’s market cap, the more weight that company carries in the index. Full weighting methodology here.

Here are the companies with the biggest index weights (with market cap as of today for context):

• Apple Inc. – $2.42 trillion
• Microsoft Corp. – $1.89 trillion
• Alphabet Inc. – $1.21 trillion
• Amazon.com Inc. – $962 billion
• Berkshire Hathaway – $684 billion
• Nvidia Corp. – $597 billion
• Tesla, Inc. – $570 billion
• Exxon Mobil Corp. – $447 billion
• UnitedHealth Group Inc. – $439 billion

Interestingly, Walmart is an S&P 500 company, but it has a lower weight in the index than the above-listed companies. It has a market cap of $372 billion as of today.

Interesting to see how Fortune and S&P 500 both seek to identify the largest companies, but their rankings differ because they’re measuring different things.

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I recently caught up with an early-stage founder who’s building an interesting business. He had a setback recently and, understandably, is frustrated. Unfortunately, he publicly communicated his frustration with his business partner on social media. The partner was not pleased. The business is at a standstill.

Building a company is harder than most people realize. Setbacks are inevitable. Founders, like everybody else, react to setbacks emotionally—with anger, frustration, fear, etc. But those emotions can’t get in the way of the founder accomplishing their mission. Founders must figure out how to work around or through setbacks.

Over the years, I learned to acknowledge how I was feeling when I experienced setbacks. If I was especially worked up, I made a point of doing my best to avoid taking action until I’d calmed down. I found that talking the situation over with another entrepreneur—someone credible and level-headed—often helped, especially if they’d been in a similar situation.

This founder has put himself in a position where his mission could be jeopardized. His uncontrolled emotional reaction fractured a critical relationship. The emotion has dissipated and he regrets what he did, but he can’t take it back. He’s aware of that, and he’s trying to repair the relationship and overcome the setback. I’m sure he’ll figure things out, but this incident might materially slow down his execution and may have permanently weakened an important relationship.

Last week I wrote about two of my takeaways (see here and here) from an interview with the founder of Carlyle Group, David Rubenstein. David shared a lot of great nuggets, including some that would otherwise take people a lifetime to figure out. In addition to being a founder, David also hosts The David Rubenstein Show: Peer to Peer Conversations. He’s had the opportunity to interview over two hundred people, some of whom are investors, on his show and work with numerous investors over his many-decades-long career.

Over the years, David has noticed a few traits that great investors have in common:

• Well educated – They aren’t high school dropouts.  
• Good at math – Their math skills are above average.
• From an average family – They were raised in a blue-collar or middle-class family.
• Willing to own mistakes – They’re willing to recognize a mistake, admit it, and get out quickly.
• Generous – They’re willing to share credit for good things.
• Accepting of accountability – They’re willing to take the blame when things don’t go as planned.
• Avid readers – They have a strong appetite for learning and knowledge. They’re constantly reading. I noticed something similar.
• Gratified by the act of investing – The challenge of investing—not just the money—is interesting to them. It’s a matter of mental sharpness and challenge.
• Contrarian – They’re comfortable going against the grain instead of following the path of least resistance.
• Philanthropic – They enjoy promoting the welfare of others.

This is an interesting list. Some of the items I wouldn’t expect. I’m going to think about this list and see if it holds true for the investors I know.

Take a listen to David’s comments on great investors here.

I met with someone recently who’s a self-described contrarian. Contrarians go against popular beliefs, so I was curious to hear his views. As we chatted, I realized he takes the opposite side on most topics. He doesn’t have a strong belief in his positions; rather, he strongly values doing the opposite of what everyone else is doing.

Being contrarian—in a positive way—isn’t about doing the opposite of what everyone else is doing for the sake of being different. Just because everyone isn’t jumping off a bridge, that doesn’t mean you should.

The contrarians I admire go deeper. They understand what others are doing, but they don’t stop there. They try to understand why others are doing what they’re doing. Then they develop an informed position on what’s wrong with the action others are taking (i.e., why it’s incorrect). Then they figure out if there’s a better way. If they find a better way, they take that path, and they have conviction about their position because of the process they’ve followed, as just described.

Earlier this week, I shared a takeaway from an interview with the founder of Carlyle Group, David Rubenstein. I enjoyed that interview and had many more takeaways. Some of them were presented casually as simple, common-knowledge concepts that nevertheless take some people a lifetime to figure out. Understanding the power of some of the concepts David shared, and implementing them, can change your trajectory. Here’s another trajectory-changing takeaway: you can create your own luck.

When David was starting Carlyle, he didn’t want to build a firm that was all white males. He approached Gracia Martore, a female executive of Latino descent. She declined to join the firm but suggested he talk to Bill Conway Jr., who was transitioning out of a telecommunications CFO role. David had never heard of Bill, but he called him. They connected, and Bill became a cofounder of Carlyle.

The big takeaway from this story is that you can create your own luck. Luck is about the probability of a favorable outcome. You can increase the probability of good things happening, and create your own luck, by taking certain actions. In David’s example, he networked and chatted with people, which led to opportunities. Not the opportunity he was aiming for (Gracia), but a great one nonetheless (Bill).

If you want to achieve outsize success, you can increase the chances of it happening by creating your own luck.

Take a listen to David’s comments on creating your own luck here.

This is my one-hundred-fifty-third weekly reflection. Here are my takeaways from this week:

• Biographies – There’s a lot to be learned from entrepreneurs who are no longer with us or at the tail end of their career. Wisdom learned over a lifetime is invaluable.
• Decision-making – I want to start developing and using more mental models to help make decision-making in complex situations easier.
• Rational thinking – Rational thinking is something I view as an advantage. I’ve observed that some people are rational thinkers in some areas of life but irrational in others. Thinking rationally in all areas of life is the key. It’s easier said than done.

Week one hundred fifty-three was a mediocre week. Looking forward to next week!

David Rubenstein is the founder of Carlyle Group, a publicly traded private equity firm in DC. The firm has about $373 billion in assets under management as of this writing. David is a good example of what I call investor entrepreneurs—investors who have an entrepreneurial spirit and found their own investment firms rather than work for someone else. I’ve been learning more about David’s outsize success and the founding of Carlyle. I listened to an interview he gave recently at Wharton’s Private Equity & Venture Capital (PE/VC) Club.

David believes that culture is one of the most important things in an organization. He was purposeful in crafting the culture of his firm, and it’s been a competitive advantage and part of Carlyle’s brand. David was asked what’s needed to build a great culture. He shared something I didn't anticipate: persuasion skills. He went on to say that life is about persuading others to do what you want. Family, coworkers, friends, spouses, everyone—if you can persuade people you’re right and get them to do what you want, it’s an advantage in life and helps build a great culture.

He explained how to persuade people:

• Writing – Effective writing is important because it helps you communicate your point succinctly, which can persuade others.
• Talking – Oral persuasion is about making your case by speaking. If you can speak clearly and succinctly, that will help you be persuasive. Practicing helps.
• Actions – Leading by example is an effective way to persuade. Do what you want others to do to set an example that they’ll follow.

David is right. Persuasion is an important life skill that can be a superpower for entrepreneurs who lead other people. Culture is about how people act while they execute the company’s mission. Effective leaders are good at persuading their teams to act in a manner that aligns with the company’s core values.