Today is the last day of 2022. This year felt more evenly paced than 2021, which went by in the blink of an eye. Although 2022 was another year of macro uncertainty and pain for many, for me personally, it was a good year. It was a year of learning, refinement, and growth. I appreciate having experienced another year, and I’m looking forward to 2023.
Weekly Reflection: Week One Hundred Forty-Four
Today marks the end of my one-hundred-forty-fourth week of working from home (mostly). Here are my takeaways from week one hundred forty-four:
- Christmas – It’s always great to spend holidays with family and friends. This year’s Christmas was cold but a good time. We didn’t do Christmas in 2021, and that’s something I hope to never have to repeat.
- Year end – Tomorrow is the last day of 2022. What a year it was. Lots of highs and lows, but more importantly lots of growth. Looking forward to 2023.
- Public markets – The last two weeks, I’ve had more friends share contrarian views on public market valuations. They’re expressing optimism even though headlines are gloom and doom. Not sure if holiday downtime prompted people to pay closer attention to the latest market movements and share their views. Or something else. I noticed a pattern, though.
- Rest-of-year plans – I shared my holiday plans last week, which helped me be intentional and stick to the plan.
Week one hundred forty-four was a quiet week. Looking forward to next week!
Do You Know How Your Business Is Performing?
One thing that’s more common than most people realize is early-stage founders not having the data they need to understand how their business is performing. For example, I talked with a real estate founder with multiple properties. I asked how he knows how each property is performing. He doesn’t, he said. He does back-of-the-napkin math on rent and expenses. I’ve talked with other early-stage software founders who don’t have a great handle on their customer conversion rate, customer acquisition cost, or, sometimes, how much runway they have left.
Early-stage founders have limited resources, so it’s not realistic to expect them to precisely measure and understand every data point in the business. But it does make sense to pick two or three that really matter. The highest-priority one should be financial. Businesses fail because they run out of cash. You always want to understand your cash position and its trajectory. For nonprofitable or pre-revenue businesses, understanding your revenue is critical. Knowing how many months you can plan before the bank balance hits zero is key. For profitable businesses, review your profit and loss statement and balance sheet monthly to understand what’s contributing to (or detracting from) your profitability and how much net cash you have on hand. If you’re not a numbers person, there are plenty of firms who can help pull these numbers together and explain them to you.
As we head into 2023, early-stage founders should be mindful of what numbers tell them about how their business is performing. Hint, hint . . . every founder should keep their finger on the pulse of their cash.
Feedback Loops and Habits
With the new year approaching, many people are thinking about what they want to accomplish. A friend told me his weight loss goal for 2023 and asked for feedback. I think he was hoping I’d share my experiences with food or exercises. Instead, I had one piece of advice: start simple by weighing yourself daily. It takes five seconds and doesn’t require changing your life as you’ve known it.
Losing weight is hard for many people—especially when they make abrupt changes. Starting with a feedback loop, instead of big changes, can be a great first step. By measuring something every day that you want to improve, you’re more likely to change your behavior. And if you change your daily behavior, you’re more likely to form habits that contribute to achieving a goal. For example, if you weigh yourself every day, you’re more likely to rethink eating a piece of cake after dinner if you don’t like what you saw on the scale that morning. If you establish a habit of not eating desserts, that reduces your calorie count, which can get you closer to your weight loss goal. Of course, you need to do other things, including upping your physical activity—but you get the idea.
Feedback loops can be a simple but powerful way of taking the first step toward forming powerful habits that align with a goal. Next time you think about something you want to accomplish, ask yourself what feedback loop will send you down the right path.
Decisions by Poll
I listened to someone explain poll-based decision-making. When faced with a difficult decision, you reach out to people in your network and ask which choice they think is correct. Then you do whatever the majority “vote” for. For example, you ask one hundred people if it’s a good idea to put all your money into a single stock someone told you about. If ninety-nine people say yes and one person named Warren Buffett says no, this person would make the investment.
This thought process has several flaws. I’ll discuss two:
- Credibility – It’s good to ask for others’ perspectives. But it’s important to ask credible people, meaning people who have experience or a track record of success in the area. People who have no experience or success in the area aren’t credible, and their perspectives should be discounted or, in extreme cases, ignored.
- Independent thinking – It’s important to take the time to figure things out yourself and reach your own decisions. Letting other people do the thinking for you—following the crowd—can be dangerous. You can factor in the perspectives of others to make sure you’re not missing something, but you don’t know how they made their decisions. If you rely on them, you could be exposed to serious errors. Frauds like Ponzi schemes grow because new investors take comfort from and rely on the fact that other people decided to invest. People who evaluate opportunities independently are more likely to see things that are too good to be true for what they are.
I’m all for getting perspectives from others before making decisions, but I’m not a fan of poll decision-making.
Seeking Truthful Feedback
I had a chat with my family over the holiday about truthful feedback. I asked them to share with me any observations they have about me (positive, negative, or neutral). I let them know I wanted the truth and wanted to understand different perspectives to improve my decision-making. I value the feedback of those who’ve known me longest. I may not agree with it, but I still want to hear it. Ideally, I want to hear their raw thoughts, not a watered-down version that I have to interpret later.
The request was embraced, and I got some valuable info. One family member thanked me for giving them permission to provide feedback. They said they’ve had feedback for me in the past but didn’t feel it was their place to share without my asking for it. I always assumed those close to me know how I value candid feedback. I also assumed that knowing this meant they would readily share any feedback. Today that assumption was proven wrong.
As I’ve matured, I’ve become more intentional about seeking out people who will readily share candid feedback. What I missed is that people in my circle might have something to tell me but not be comfortable doing so absent an explicit request.
In 2023, I want to have the truthful-feedback conversation with more credible people in my circle. I suspect this will be a positive exercise that takes some relationships to the next level in the long term and unlocks some valuable observations in the short term and long term.
Running Down a Dream
I recently listened to a presentation Bill Gurley gave at his alma mater a few years ago. It was a great presentation from a highly successful investor. He shared his ideas about how some of the most successful people have thought about and executed their journeys. Here are a few takeaways:
- Passion – Pick something you’re passionate about. Your passion will push you further than others. That extra effort can be the difference.
- Preparation – There’s no shortcut to outsize success. It takes hard work and preparation. Those who achieve it prepare in a way that others may not understand and can view as borderline obsessive. Bill named a few wildly successful people we all know (Bob Dylan, Bob Knight) and gave examples of the intense preparation they all put in.
- Mentors – Find people who’ve had success in your field and ask them as many questions as possible. Take notes on what you hear; they’ll be invaluable later. Have mentors throughout your journey, and be sure to update them as you go along (good or bad).
- Peers – Find people doing something similar, not necessarily in the same field. Try to learn from them and help them learn from you. Cheer them on by celebrating their accomplishments.
- Humility – Give most of the credit for your success to everyone who helped you along the way. Pay it forward by helping others who come along behind you.
Bill shared a lot of other insights that I haven’t mentioned, too. Overall, this was a great presentation for anyone trying to understand what it takes to accomplish something great or trying to think about their career. If you’re interested, you can watch the presentation here and see the presentation slides here.
Gauging How Painful a Problem Is
An aspiring founder has been looking for the right problem to solve. He heard about a problem and found a company experiencing it. He talked to the company leaders to understand the problem from their perspective. They validated the problem, but the aspiring founder wasn’t sure how painful it was. He decided to send them a proposal before he started building the solution. It recapped his takeaways from their discovery conversation and outlined key functionality that needed to be built. More importantly, it also included potential pricing options for the solution.
The company leaders’ response was telling. They didn’t want to pay anything close to the pricing the aspiring founder had proposed. Hearing this, the founder paused building this solution.
This founder quickly learned valuable information: this problem isn’t painful enough for this company to pay for a solution. This founder likely saved weeks or months of time. Now he can focus on finding a problem that needs a painkiller instead of one that’s merely inconvenient.
Great companies are built around solutions that create value by solving painful problems. If the value created is sufficient, customers readily pay for the solution. Finding a burning problem that is or will be painful to a large group of people is the key. If you build a business around an inconvenience, the chances of your solution turning into a large company are significantly reduced.
I was chatting with a friend today about the rest of the year. He told me everything he plans to do and asked about my plans through the new year. I shared this ordered list with him:
- Spend quality time with family and friends for Christmas
- Read an interesting book
- Make progress on a work project
My list is noticeably shorter and simpler than his. Spending time with family and friends is my highest priority. I don’t want to commit to too many things or attempt to do much during this holiday season because I want to be present with them.