More Demand for Disciplined Founders?
I founder friend I’ve known for years reminded me that bootstrapping my company forced me to apply discipline in building my company differently than other founders who were focused on growth (and raising capital from investors). I’ve thought about this a bit, and he’s right.
The margin of error was much smaller for my company. If we ran out of cash, that was it. Game over. Paranoia forced me to dive into learning the numbers early in the company’s life cycle and focus on adding to our cash (i.e., turning a profit).
This type of management style wasn’t always in favor when profitability was less of a priority than growth. After my conversation with my buddy, I’m wondering if that will change. Will founders with a more disciplined approach to running and growing companies be more in demand?
Biggest Takeaway from My Parents
Our parents have an outsize influence on us, whether we realize it or not. It can be positive or negative. The environment they create and the actions they take shape us. We’re usually in the environment they create and under their care for approximately eighteen years. That’s a long time. And that period is when the brain is still developing.
Today I thought about what I learned from my parents. I came up with a long list of things, but one trait especially stood out because both my parents displayed it. They consistently pursued the professions they’d chosen. Said differently:
They got up in the morning and went to work every day, whether they wanted to or not.
I remember having conversations with my dad about this. He worked for the same company for over thirty years. He openly shared that he often didn’t want to go to work. He didn’t enjoy the work or the culture (racism, etc.), but he was great at what he did, and it provided for the lifestyle he wanted his family to have. So he consistently went to work for over thirty years.
My mom was the same. She worked for the same organization for over forty years. She enjoyed her work and being able to have an impact, which helped, but it was still demanding. There were days she didn’t want to go, but she always did . . . for over forty years.
I think . . . I hope . . . I learned from them to persevere and be consistent, no matter what.
Weekly Reflection: Week One Hundred Sixty-One
This is my one-hundred-sixty-first weekly reflection. Here are my takeaways from this week:
- Schedule – I’m excited about my new schedule. Can’t wait for next week—the first full week. I’m curious to see what impact this change will have.
- Consensus – I had a few conversations with entrepreneur friends who have a passion for investing (public and private). I noticed they’re adopting the same viewpoint and risk tolerances at the same time. They all have the same reasoning (which I must admit is grounded in logic). I didn’t hear any contrarian views, which was surprising for this group. No one is considering a new or better approach.
- Patience – Sometimes people take a different path to get to the same conclusion or insight as you. You might not agree with their path or like their pace. This week reminded me to be patient and to remember that what’s important is that you both ended up at the same place.
Week one-hundred sixty-one was a calm week. Looking forward to next week!
Experimenting with a New Schedule
I’ve developed a habit of starting my day with physical activity. Walking, weights, etc. Getting my blood flowing and working up a nice sweat. It’s been a great way to get the day going, and it gives me energy throughout the day.
I’m a morning person. My brain is firing on all cylinders when I first wake up. I have my best ideas and clearest thoughts early in the morning when it’s quiet. Knowing this, I didn’t always feel like I was getting the most out of my most productive time, since I was exercising instead of thinking.
I want to be intentional about reading more long-form pieces as part of my daily learning habit. I usually do this in the evening. Sometimes I’m tired, which affects how much I absorb. And I tend to put off reading anything that requires deep thinking.
This week I decided to tinker with my schedule a bit. My goal is to figure out what the right activity is for my most productive early-morning hours.
I’m going to experiment with starting my day reading long-form writings. I plan to focus on things experts have written about topics I want to learn more about and on dense business materials (e.g., white papers and reports). The idea is to be able to think more and absorb more of what I’m reading because my brain will be fresh. I’ll keep reading in the evening too, but I’ll focus then on stories and autobiographies where I just need to follow along. As for my workouts, I’m aiming to do those at lunchtime.
I’m curious to see how this experiment works and what I learn from it.
My “Retirement Plan”
I was asked about my plans for retirement recently. Here’s how Merriam-Webster defines “retired”:
Withdrawn from one’s position or occupation : having concluded one’s working or professional career.
A few years ago, I had the opportunity to take a few months off after rarely taking time off for the last decade. I gave myself permission to disconnect. I wasn’t thinking about anything that resembled work. I wasn’t thinking about how to solve problems; I wasn’t tinkering with new ideas. I wasn’t checking email (regularly). I wasn’t talking business with anyone. I focused on doing things I couldn’t do while I was leading a company, like spending a few weeks with a family member who was recovering from a life-threatening medical condition. I completely withdrew from work.
I enjoyed the time off and being able to reconnect with people. It was a much-needed respite after years of grinding. But I also felt like I was at a standstill. As a founder, I was constantly having to rise to the occasion to overcome the latest hurdle. That kept me in perpetual learning and growth mode. I didn’t always enjoy the things I had to work on or learn as a founder, but I enjoyed the personal growth. My time off felt odd because I wasn’t being challenged or growing—not quickly at least. Mental stimulation was missing.
I did learn from the experience how powerful controlling your own time can be. Other people have affected my calendar since I was a child. If it wasn’t a school schedule, it was a work schedule or a business issue or something or someone else materially impacting how I spent my time. But during my time off, my calendar was under my sole control. I wasn’t working on stuff I didn’t want to work on. I wasn’t spending time with people I didn’t want to spend time with. I was in complete control of my time. It was quite liberating.
At the end of my down period, I concluded that my goal isn’t to retire. I’ll never want to retire (in the traditional sense). I’ll never want to walk away from the professional things I enjoy and the mental stimulation they bring. Instead, I want the freedom to work on the things I enjoy and that are mentally stimulating.
My goal isn’t to retire—it’s to control my time in perpetuity. I want the freedom to work on things and with people that bring me joy (so it doesn’t feel like work). If it doesn’t feel like work, I’ll end up doing more of it. I’ll be as engaged and busy as ever!
My retirement plan is to never retire.
Warren Buffett’s Uncharacteristic Early-Stage Investment
I shared a few days ago that I’m reading the letters Warren Buffet wrote to the limited partners in his Buffett Partnership, Ltd. This partnership, basically a start-up focused on investing, was the precursor to Berkshire Hathaway. I wanted to learn more about those early days and Buffet’s mindset as a founder.
I found an interesting fact that most people don’t know. Buffet is known for investing in public companies and large, established private companies. What people don’t know is that Buffett has done early-stage investing too.
Buffet had most of his wealth tied up in the partnership to make sure his interests were aligned with those of his limited partners. But in 1960, he made an investment, using his personal capital, in Mid-Continent Tab Card Co. He invested $60,000 initially.
The partnership annual letters don’t discuss this investment, so I did some digging. Alice Schroder, who wrote The Snowball: Warren Buffett and the Business of Life, learned more about this obscure investment by reviewing Buffett’s private files. She shared what she learned about his thought process regarding this investment and the outcome in this video.
At first, because of concern that IBM would be a too-formidable competitor, Buffett didn’t invest. But the founders persevered, and the company was able to compete against IBM. The founders approached Buffett again and shared their traction and metrics (40% net margins, turning capital 7x yearly, etc.).
Alice did a great job in the video of detailing Buffett’s analytical process and how he came up with his target return. Interestingly, he relied on historical data and made no projections. He ended up making the investment, invested an additional $1 million over time, and owned his position for 18 years until the company was sold. Buffett’s early-stage investment earned him a 33% annual compounded return, which is amazing.
One Founder’s Taking Care of His Family and Swinging for the Fences
I caught up with an entrepreneur friend who’s building a new company—his third start-up. His second start-up has been a massive success. One of the keys to that home run was his first company, which many people don’t know about. He doesn’t run it anymore, but he still owns it.
Company number one is of modest size, has a small team, and doesn’t grow much. But it’s highly profitable. Over more than a decade, he’s been able to use the cash from this predictably profitable company to fund his personal income needs. This took the financial pressure off, giving him the freedom to work on his second start-up without needing to take a salary in the early days. And he could delay raising venture capital until after the product was built and had material customer revenue.
He essentially built a company to generate cash flow to support his family and then built a high-growth company that compounded his family’s wealth. Now, he spends his time doing things he enjoys, like solving the problem his third company is addressing.
More Long-Form Pieces for Learning
I try to acquire knowledge daily using a variety of methods and sources. The most effective way for me (not everyone) to get the most from this effort is to read long-form material—books, papers, articles, etc.
Don’t get me wrong, I enjoy audiobooks, podcasts, YouTube, and other approaches, but they aren’t as effective for me. I’m usually multitasking while consuming these mediums. They’re great in the sense that they help me maximize my productivity on the treadmill, walks, driving, etc., but I don’t gain as much as I do when I’m focused on reading long-form pieces.
I share my thoughts publicly every day and enjoy reading stream-of-consciousness pieces. I browse Twitter, blogs, and other places where people share their thoughts, but these mediums are most helpful for discovery. I tend to find golden nuggets there that steer me to long-form written content about a topic.
I’m still committed to acquiring knowledge daily and will keep using many methods, but I plan to be more intentional about making consuming long-form pieces every day a priority.
Investor Entrepreneur: Warren Buffet and Buffett Partnership, Ltd.
I was talking to a friend who’s a big Warren Buffett and Charlie Munger fan. He shared his views on their long-standing habit of buying cash-flow-generating companies and holding them forever via Berkshire Hathaway and the Daily Journal. I’m familiar with both and with their styles of investing, but my conversation with my friend made me want to dig a little deeper.
Before Berkshire Hathaway, Buffett was investing in publicly traded companies with money from limited partners. It was 1956. He was twenty-five years old when he became an investor entrepreneur by starting Buffett Partnership, Ltd. with seven limited partners (almost all of whom were family) and raising $105,000.
Buffett is well known. He went on to have a wonderful track record as an investor. But what really intrigues me is the fact that he didn’t want to work for anyone else. Deciding to bet on himself, he started his investing partnerships. That’s strong entrepreneurial spirit combined with an investor’s mindset.
I want to learn more about his mindset in those early days and how he went about building his partnerships and investing in other companies. Buffett regularly wrote letters to his limited partners. I’ve decided to read all those letters to learn more about his early days, his entrepreneurial spirit, and, hopefully, what led to his outsize success.
Weekly Reflection: Week One Hundred Sixty
This is my one-hundred-sixtieth weekly reflection. Here are my takeaways from this week:
- Runway – A few early-stage founders I know are running out of runway. Founders who can’t raise more capital will have to start making tough decisions. You can’t kick the can down the road when you’re out of cash.
- Venture – I chatted this week with a few high-net-worth people who made their wealth building tech companies and invested in venture capital funds. They’re more interested now in investing in traditional companies that generate cash, not venture-backed companies or venture funds.
- Founder hunger – A founder friend told me about what he’s doing now. Even though he doesn’t have to do anything (he’s financially set), he’s a founder at heart and still has a hunger and drive to try and build new things.
Week one-hundred sixty was a good week. Looking forward to next week!