I recently met an entrepreneur who started his business earlier this year. It’s gone from zero to over $5 million in monthly revenue in just nine months. By the end of 2024, he’ll likely be doing $9 to $10 million in monthly revenue, well over a $100-million-annual-revenue run rate. That’s insane growth in one year.

I was super curious about his journey. During our chat, I learned he has no background in the industry and didn’t know it existed 18 months ago. I was curious how he learned about the problem. It turned out he’d encountered it personally and searched for a solution. He hit a brick wall. Every local company he called couldn’t solve the problem for six months or more. After his searches, he was bombarded with online ads. It was an abnormally high number of online retargeting ads, which caught his attention. Still needing a solution, he tried one of the online companies. It delivered and solved his problem, but the experience was awful.

As a customer, he zeroed in on two things. First, given the number of retargeting ads he was seeing from various companies, there must be an enormous business opportunity. Second, customer demand was so high that people happily put up with terrible customer experiences offered by low-quality companies. He concluded that massive demand and low customer expectations likely meant this market was exploding—ideal for a start-up. Clearly, he was right.

I had lunch with an entrepreneur friend. We talked about what his next company will look like. He isn’t sure what the company will do or the space it will be in, but he’s crystal clear on the kind of people he wants to work with: people he calls “grinders.” They work hard, create no drama, and win. Their goal isn’t to be praised regardless of the quality of their work; it’s to do great work and win by making customers happy.

I thought about this more later in the day and texted him some thoughts about also wanting people who are learners. His replies went deeper than I was thinking. He wants people who have a “diverse track record of success” that “shows they can figure things out.” And then he made a sports analogy that I love. Alluding to a successful recruiting strategy that college football coach Urban Meyer used to win three national championships at two schools, he said he wants to work with multisport athletes.

“Diverse track record of success” stuck with me. To have one, a person has to do several things. First, put in the work to learn new things: learn the rules of a new game, learn new skills required to compete, etc. Second, figure out how to apply what they’ve learned. Learning is nice but not valuable if you can’t apply it. Last, compete at a high level. To my friend’s point, anyone who demonstrates this is someone I want to work with.

I was thinking about yesterday’s post and the Newhouse family’s strategy for reducing their estate tax liability. The fact that they had a tax strategy, and the results, stuck with me and reminded me of a tax conversation I had.

A successful entrepreneur once pointed out that taxes are a successful entrepreneur’s biggest expense, yet most spend less than 1% of their time thinking about them. They don’t have a strategy or defined actions around taxes. Most entrepreneurs spend time scrutinizing and optimizing their biggest business expenses on their profit-and-loss statement but don’t do the same with taxes. He believes this is a big mistake and that founders should spend some percentage of their time, say 5%, on their tax strategy every year. Doing so can have a material impact on business finances and the ability to reinvest in growth opportunities.

Regardless of how you feel about Newhouse's estate tax strategy, the result highlights that an effective tax strategy can indeed have a material impact on a business. To be clear, I don’t believe in tax dodging or doing shady things to avoid paying taxes. That’s just silly and can land you in jail. But I think there’s something to be said about having more of the capital your company generated available to reinvest in growth.

I finished reading Newspaperman: S.I. Newhouse and the Business of News by Richard H. Meeker. The biography is about Samuel Irving Newhouse Sr., who founded Advance Publications. At Sr.’s death, Advance Publications owned multiple newspapers and Condé Nast, which publishes famous magazines such as Vogue, Vanity Fair, GQ, and The New Yorker. Since then the company has grown rapidly, and it owned 26.5% of Reddit when Reddit began trading on the public stock market this year (see here, page 194). Reddit’s market capitalization (i.e., valuation) is just under $12 billion as of this writing.

This book and Newhouse: All the Glitter, Power, & Glory of America's Richest Media Empire & the Secretive Man Behind It by Thomas Maier detail one key strategy the Newhouse family used to grow their wealth: they optimized their tax liability and maximized the compounding of their wealth. The family studied the tax laws and implemented strategies that reduced their tax liability. This gave them more capital to reinvest in growing their companies or acquiring new companies.

Both books contain numerous examples. Their estate tax strategy especially caught my attention. When someone dies, their estate is transferred to heirs and a tax is due on the value of the estate being transferred if it exceeds that year’s federal threshold. When Sr. died in 1979, his sons filed a return valuing his ownership in Advance Publications at roughly $182 million and showing an estate tax due of roughly $49 million. The IRS said his estate was worth somewhere between $1 billion and $2 billion and that the estate tax due was, at a minimum, $600 million, and as high as $1.2 billion. At the time, Advance Publication owned thirty newspapers and various magazines. Its two most prosperous newspaper properties alone were worth more than $182 million.

Sr. had studied other publishing families to understand how death and estate taxes negatively impacted their family empires. Families often had to sell all or some of the company’s assets to pay the estate tax upon the founder’s death. Sr. developed a dual-share-class strategy to avoid that outcome. Sr. owned common shares in Advance Publications but issued preferred shares to his siblings, wife, and sons. His common shares carried voting rights and, essentially, control of company decision-making, but the preferred shares gave holders the right to vote on a company liquidation or sale. Said differently, if a buyer wanted control of the company, the buyer had to get the approval of the preferred shareholders first. The result was a gray area in the tax law. It could be argued that the fair market value of the company—the price a willing buyer and seller would transact at—was significantly lower than the IRS’s figure because there would be fewer buyers willing to buy a minority stake in a family-owned company that had such a bizarre ownership structure. Most buyers spending that kind of money would want majority ownership so they could have control. To gain control, they’d have to convince multiple family members to sell, a prospect many buyers would rather avoid. There’s more to this, but that’s the gist of it.

The IRS took the family to court, and the family prevailed. The result was that the family paid an estate tax bill that was a fraction of what it would have been if Sr. hadn’t planned so carefully. It wasn’t a material amount for the company, so it didn’t have to sell any assets to pay the tax. The Newhouse family’s empire could continue compounding for another generation and grow exponentially under Samuel “Si” Newhouse Jr.’s leadership for the next forty years.

I’m continuing to read a biography of Samuel Irving Newhouse Sr. that describes the empire he founded with Advance Publications. Newhouse was in the media business. He started with newspapers but expanded into magazines, broadcast television, and cable systems before he died in 1979.

Newhouse was in the business of providing information to people, but he was adamant that the information must be unrelated to him. He went to great lengths to make sure there was no reporting on him. Sr. had a “genuine, abiding mistrust of the press,” according to the book.  

I’m sure he had his reasons. I’d imagine a big one was that he didn’t want to be perceived negatively, as most people don’t. Negative publicity could have made his empire-building difficult and his family uncomfortable. Maybe Sr. realized it’s easier to manage public perception if it doesn’t exist. If people don’t know who you are, there’s nothing to manage.

We’ll never know why Sr. was adamant about avoiding publicity, but given his business, I found his disdain for the press noteworthy. And it may have been influential, since his son Samuel “Si” Newhouse Jr. and other descendants felt the same way.

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: 32
• Total book digests created: 12
• Total blog posts published: 182
• Total audio recordings published: 103

This week’s metrics:

• Books read: 1
• Book digests created: 0
• Blog posts published: 7
• Audio recordings published: 0

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

• Read a biography about Samuel Irving Newhouse Sr.
• Created a notebook in NotebookLM using a book digest and got feedback from two people on using it

What I’ll do next week:

• Read a biography or autobiography
• Digitize one biography or autobiography
• Finalize talking points for the next podcast series

Asks:

• None

Week two hundred thirty-six 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 material struggles this week

What I learned:

• Classifying and categorizing people’s journeys is much more complicated than I realized, which is likely why it hasn’t been done for entrepreneurs. I learned about the Library of Congress Classification system this week and realized I have a lot to learn about taxonomy.
• Feedback this week highlighted that to be valuable to current entrepreneurs, my library of entrepreneurs’ journeys needs to be significantly more useful than existing alternatives. Marginally better isn’t enough. It needs to be 10x or even 100x more useful.
• Building an audience, then a community from that audience, and then a product based on community feedback is a company-building approach that I thought about and discussed with others this week.

Those are my struggles and learnings from the week!

I’m learning a lot from Newspaperman: S.I. Newhouse and the Business of News by Richard H. Meeker. This biography is about Samuel Irving Newhouse Sr., who founded Advance Publications. His son Samuel “Si” Newhouse Jr. led the company after his father’s death. It’s interesting to compare father and son. They led their family business using very different styles, but both were successful.

One difference that stood out to me was how detail-oriented Sr. was. He was happy to get into the weeds on the business side of his newspaper operation (mostly leaving the editorial side alone). He wanted a weekly report for each newspaper detailing metrics, department by department. He walked through each department weekly checking the operations. He even monitored the cost per page to produce each paper every week. He’d notice if the cost went up a thousandth of a cent and ask why.

I wondered why he was such an operationally focused leader and landed on several possible reasons. When Sr. started in the newspaper business, he had to do everything himself. He learned from the ground up and knew every part of the business inside out. He knew what a smooth-running operation looked like and ensured that all his papers ran smoothly. Sr. also understood that local newspapers weren’t a high-growth business. There were only so many people his local papers could reach. Each daily edition had to turn a profit. Knowing this, he focused on maximizing profitability by watching his costs closely and maximizing advertisements in each newspaper. These factors, combined with growing up in a poor household, likely led to his operationally focused management style.

Jr.’s management style was different. When he ran the family empire, he focused on growing the circulation of magazines, which were distributed more broadly than local newspapers. He was aware of costs, but not to the extent his father had been, and some of his magazines ran unprofitably for years if Jr. saw potential. He didn’t get into the specifics of printing operations; he left that to others. Jr.’s upbringing was also different than his father’s. Because of their dad’s success, Jr. and his brother Donald were raised in luxury and encountered minimal challenges early in life.

Both men led Advance Publications, albeit at different times, and both successfully grew the company—but they went about it in very different ways. I’m curious to learn more about Sr. as I continue reading the biography about him.

For the last few podcast series I’ve published, I created digests of the books beforehand—a time-consuming process. Combined with recording and editing the podcasts, a significant time commitment was required.

This process left me with an uncomfortable feeling. I was spending a considerable amount of time executing—sharing what I’d learned—and not enough time strategizing the best way to share what I’d learned and how to scale my idea. I felt like I was falling into the founder trap of working in the business and not working on it (even though I technically don’t have a business yet; it’s just a project). This is dangerous because you can end up on a hamster wheel going nowhere fast.

It was unsustainable, so I slowed down and eventually paused publishing more podcasts until I found a way to create the digests more efficiently using technology. I’ve tested some technologies but haven’t found anything that has materially helped with digest creation. Since I haven’t found the solution, I haven’t published new podcasts. In retrospect, that was a mistake.

My goal is to share what I learn with others, and I haven’t been doing that at the level I know I’m capable of. That bothers me. Also, the podcast was an external and internal feedback loop that improved my communication skills.

I’ve decided to restart sharing what I’ve learned via podcast series. Because creating them takes a long time, I can’t get them out as fast as I’d like (weekly), but I shouldn’t let that stop me from doing it at all. I just have to do it at a slower pace for now. As I find new technologies that make the process more efficient, I can increase my publishing frequency.

Last week, I read Newhouse: All the Glitter, Power, & Glory of America’s Richest Media Empire & the Secretive Man Behind It by Thomas Maier. It was about the Newhouse family’s media empire but mainly focused on Samuel “Si” Newhouse Jr. I enjoyed the book, but I didn’t get a good grasp of the empire’s origin story. I’m also curious about the man who founded the empire, Si’s father Samuel Irving Newhouse Sr.

I decided to learn more about Sr., so I started reading Newspaperman: S.I. Newhouse and the Business of News by Richard H. Meeker. I’m still early in the book, but I already see clear differences between how Jr. and Sr. thought and acted as teenagers and young men. Both were great entrepreneurs, but Sr. had a founder’s and hustler’s mentality as a teen, which led him to found Advance Publications. Jr. didn’t really start to excel in the family business until he was in his 40s.

I’m sure there are way more differences between the two. I’m looking forward to finishing this book to compare the two further and understand how each achieved outsize success leading the same company.