Today I heard about an interesting technique. The objective is to improve your decision-making by getting feedback on the thought process you used to make a decision, not the outcome. The outcome of a decision isn’t a reflection of decision quality. Bad decisions end up turning out well, and vice versa, because of chance and randomness.

The technique involves sharing your thought process, including the variables you considered, with credible people who make good decisions. How did you think about the decision? What information did you factor in? The twist is that you don’t share outcomes with them (ask for feedback on decisions that have had good and bad outcomes). These people then explain the shortcomings and strengths they see in your thought process. They might even tell you how they would approach the decision if they were in your shoes. From all this feedback, you’ll learn how other people approach making decisions and improve your own decision-making.

This technique caught my attention because most people ask for feedback on decisions by leading with the outcome. This is completely different but makes a lot of sense to me (in theory). I’m curious to try it out and see how it works in practice.

I chatted with a founder about a seed fundraise he’s considering. He wants to raise $2 million. We talked through his thinking, and I realized two things: he didn’t have a great grasp on current market valuations, and he didn’t realize how raising that much capital at today’s lower valuations would dilute his ownership, especially if he continued to raise capital.

I did some back-of-the-envelope math regarding his future round and a few hypothetical rounds after that. It was eye opening to him. He realized that dilution by early and subsequent rounds would have a material impact on his ownership as founder and materially reduce his proceeds if his company were to be sold.

Raising capital is hard right now for early founders. Even if you can raise the amount you desire, it’s worth thinking through how much you need, the current market valuation of your company, and how dilution will affect you. Tools that can help founders understand the dilution impact of fundraising rounds are out there (645 ventures built one). Spending time with one of these tools can help founders quantify the impact of dilution.

Every month I get email updates from several early-stage founders. They usually include what’s going well and not so well with the business, along with the latest company metrics. In 2022 and the first half of 2023, the tone of these updates wasn’t optimistic. The fundraising environment wasn’t great, and founders were reducing expenses to extend their runway.

Over the last two or so months, I’ve been seeing more optimism in these emails. The fundraising environment is still tough. But founders are sharing more signs of being closer to product–market fit. Metrics are improving, and for some of them, revenue and customer growth are beginning to accelerate materially.

This is anecdotal, of course, and not representative of all early-stage founders, but it feels like founders got the message and may have been able to right the ship. I hope so. I look forward to seeing if this is confirmed in the remaining 2023 updates.

A family member recently sent out a group text about suddenly not being able to access their Netflix account. After a bit of back and forth, we realized they’d been “borrowing” the account of another family member . . . for years. Netflix has been cracking down on account sharing by people in different households, which resulted in this family member’s access being revoked. I don’t watch much TV and hadn’t been following this, but this time I got a front-row view.

The whole situation was funny to me given how many years this had been going on, but then I realized something. Netflix had been providing immense value to two households in my family. They were receiving only 50% of the revenue they should have been receiving. Said differently, they were capturing a fraction of the value they were providing.

Netflix is a huge technology company. I assume they’ve known about this sharing issue for many years and have had a fix in mind. I wonder if they waited to deploy it until their growth began to slow, or if another catalyst is driving this crackdown. In the case of my family member, they got them hooked on the value of the service and original content. Now they’re forcing them to pay for that value. Essentially, they’re forcing my family member and everyone else who’s been on a multiyear free trial to put up or shut up. Become a paying customer or stop using the service.

As of the last group chat messages, my family member was in get-my-Netflix-working-again-ASAP mode. Translation: they’ll end up creating their own account and happily begin paying for the service.

I don’t follow Netflix, but I imagine this will have a material impact on their top-line revenue at some point (assuming it doesn’t drastically increase churn). It’ll likely ruffle some feathers in the short term, but I like this move. They’re making sure they’re being compensated for the value they provide.

I recently attended a social gathering where I met someone working in tech who moved to Atlanta within the last eighteen months. He’s a native of New York City but most recently lived in Los Angeles. Before that he lived in Austin. He has an interesting baseline, so I was curious to get his candid thoughts on Atlanta so far.

Overall, he likes Atlanta. The climate is nice. The cost of living isn’t a steal (anymore), but it’s reasonable. The people are nice. The biggest downside, in comparison to Los Angeles and New York, has to do with the variety of social activities. I wasn’t expecting this, so I was interested to hear more.

In Los Angeles and New York there are several parts of town to explore, each with its own set of social activities. The options are well known, regularly explored, and openly discussed. Having a social life with tons of variety is easy. If you make the effort to leave the house, you know of many interesting things you can do.

He doesn’t feel the same way about Atlanta. A few parts of town are known for being entertainment venues, such as Buckhead, West Midtown, and O4W, and he’s aware of them, but he doesn’t feel the city offers as much social variety.

As we chatted, I shared with him some other parts of town and things to do. He had no idea some of them existed. I said that Atlanta may not have as much to do as New York or Los Angeles, but Atlanta does offer a healthy variety of desirable social activities in various parts of town. However, the awareness that people have of them, and their discoverability, are highly variable.

Atlanta is influenced heavily by homophily (the tendency for contact between similar people to occur at a higher rate than among dissimilar people). People who have a lot in common interact with each other frequently. People who don’t have anything in common interact infrequently or not at all. Of course, frequency of interaction is what defines a person’s social circle.

One of many ramifications of this is that information becomes localized in a social circle. The infrequent or nonexistent interaction among people who lack commonalities means that information doesn’t leave certain circles. In the case of social activities, people outside a social circle don’t know certain activities (or even parts of town) exist and therefore don’t participate. Said differently, people’s awareness of desirable social options varies drastically depending on whom they interact with frequently. People living in the same city end up having vastly different awareness of the social experiences available to them.

Homophily is a basic human principle. It isn’t going anywhere anytime soon. The key to maximizing social variety in Atlanta is acknowledging homophily’s heavy influence and trying to interact more often with people you have less in common with. This will help you get access to information that’s localized in circles you’re not part of about fun things to do in different parts of town. Obviously, this is easier said than done, but I believe it’s worth the effort because it helps you experience all Atlanta has to offer socially.

I had several side hustles as a kid. Mowing lawns, selling CDs, selling automotive parts, washing cars, selling bailed hay . . . I was always down for a side hustle. I even worked 12-hour days building houses one summer and earned a cool $125 a week (yes . . . per week). A friend recently asked me what motivated me at such a young age.

The driver was wanting independence. I vividly remember my parents telling me they wouldn’t buy certain things for me. Their reasoning was solid. We weren’t rich. Money didn’t grow on trees. I needed to earn the expensive things I wanted. My parents controlled how money was spent (and rightly so because they worked hard to earn it), which meant my buying decisions depended on what they’d allow.

I hated this dependence. It felt suffocating. I was limited because my funds were limited. I decided to start doing things to earn money and reduce my dependence on my folks. To their credit, when they saw what I was doing and why I was doing it, they encouraged me. They didn’t try to reassert control (even though I was still living under their roof). They told me I could do whatever I wanted with the money I earned, with a few exceptions.

Disliking feeling dependent and doing what I could to break away from it led me to entrepreneurship. The more I learned about entrepreneurship, the more I saw it as the path to a life of independence (and not just financial independence).

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

• Adjust solutions, not people – Trying to bend customers so they can use what you’ve built doesn’t end well. The best solutions are built and scaled when you’ve listened to what customers want and adjusted the solution to meet their needs and solve their pain point. Adjust the solution to people, not people to the solution.
• Holiday – It was great to spend time with family and friends. I was able to get some good reading in, too.  

Week one hundred seventy-one was a short week. Looking forward to next week!

Today I read a WSJ article about deposits at Main Street banks and interest rates. It’s an interesting read that explains how the rapid increase in interest rates is affecting community banks’ ability to attract and retain deposits.

In a post a few months ago, I said that banks will start having to compete for deposits, which we haven’t seen in almost twenty years. The willingness of consumers to move funds in search of higher yields will be the forcing function in this competition.

According to today’s article, Randy Chesler, CEO of Glacier Bancorp, explained, “We went through a decade of zero to low rates, and so there was a little muscle memory that had to be developed in terms of competing for deposits.”

Chip Reeves, CEO of MidWestOne Financial Group, has been in banking for thirty years. He was quoted as saying that “[i]t’s probably the greatest deposit competition that I’ve seen in my banking career.”

The competition for deposits is on. Non-mega banks (sub $250B in assets) will be fighting each other to attract and retain deposits. The first-order effect is that depositors will be paid more than in any other period in the last twenty or so years. I suspect the impact from this competition won’t stop there; we’re likely to see material second-order effects as well.

I caught up with a founder recently. He’s started several companies. He’s got one running smoothly, with a management team installed. He’s got another off the ground and is currently installing the management team. Even with all this, we talked about new ideas he wants to pursue.

This founder is a zero-to-one person. He gets energy from taking something from the starting line to the end of the first leg of the race. He isn’t the person who’ll finish the rest of the race. He wants to get things going and put the right people in place to win the race. The idea of taking an idea and turning it into something—not living the entire journey—excites him.

When he’s asked why he doesn’t keep running his companies himself, his explanation is simple: He gets bored working on the same thing too long.

Entrepreneurship is a choose-your-adventure journey with lots of ways to achieve success. This founder is a good example. He’s founded several successful companies, taking them only from zero to one. After that he’s let other people capable of growing beyond one take over. He’s happy watching the companies he founded from the sideline while he incubates his next big idea.

Happy July 4th!

I hope everyone had a safe and happy holiday!