I listened to an interview this week in which an entrepreneur who recently sold his advertising agency shared an interesting insight. He thinks that a new wave is being ushered in for software companies and agencies. His premise is that B2B software is a tool that a customer buys in hopes of achieving an outcome. True value is created by the company that’s willing to be accountable for an outcome. Software doesn’t make that happen; it’s up to the customer to figure out how to use the software tool to get the outcome.

This entrepreneur believes that companies don’t want to pay for tools. They want to pay for results. Right now, the result is detached from their spending. More companies are wising up and saying they want to pay for the result, not the tool. They don’t care how it’s done; they just want the result.

He goes on to explain that when you buy software, you often must hire an employee to use the software to create the result you want. And the other way around: If you hire an employee, you must buy the software that empowers them to get the result you want. He believes that the future is software-enabled agencies. The agency hires the person and buys the software, which work together to get companies the result they want at a lower price than they could achieve on their own and with a higher level of execution because they do this all day across a broader base of companies. The software-enabled agency allows the company to pay for results at a lower cost than if they did it internally.

Now this is where it gets interesting. He goes on to make the case that some software companies will become agencies. These companies will do the work for their clients and focus on delivering results. They’ll use the software they’ve built (and that they’re super users of) to achieve results for their clients in a scalable and efficient manner. The rationale is that some companies don’t know how to use the software tool, so they’re not getting the desired result, which leads them to cancel the software subscription. If these software companies start selling services focused on outcomes, they can retain and attract more customers because their customers are paying for results, not tools.

This is a fascinating take on things that I’m thinking about more. I’m going to chat about this with my friends who are software entrepreneurs.

The interview discusses this concept in much more detail and touches on lots of other great stuff. Anyone interested in this section of the interview can listen or watch here.

Earlier this week, the CEO of Amazon announced (see here) that any business can now use Amazon Supply Chain Services, a freight, distribution, fulfillment, and parcel shipping network, without needing to sell on Amazon. Translation: Amazon is selling the logistics infrastructure it built up to support its massive retail operation to other businesses. This wasn’t news to me. Honestly, it was really more branding. I think these services existed already, but they were offered separately. They’re now all housed under a single roof, Amazon Supply Chain Services.

After reading the announcement, I dug into their parcel shipping service, Amazon Shipping. This is their version of last-mile delivery, and it’s competing with UPS Ground and FedEx Ground. An Amazon driver will pick up packages from a business and deliver them to the designated recipient, who didn’t necessarily purchase anything on Amazon’s website. It’s truly a stand-alone small-parcel delivery service. I found two tables: base rates (see here) and discounted rates if you ship 150 packages a day (see here).

Having spent millions shipping with UPS and FedEx Ground in my company, I’m familiar with ground rates and how they impact the available strategies a brand can leverage to distribute products to customers. For example, for many brands, the cost to ship a low-priced item to a customer’s doorstep (say, $15 for a $20 item) makes a direct-to-consumer distribution strategy impossible. Instead, they rely on big retailers like Walmart and Target who have tons of stores and steady customer traffic. A brand can ship hundreds of units to each big box retail store, reducing its per-unit shipping cost to something like a few cents instead of $15. The caveat is that they have to sell the items to Walmart and Target at significantly lower than MSRP (usually 50%) so the big stores can make a profit. Brands give up margin and owning the relationship with the customer (among other things) in exchange for larger orders from a handful of huge retailers. I’m oversimplifying, but you get the gist.

When I looked at the rate table for Amazon Shipping, I saw something new. A brand has to ship only 150 packages a day (a modest number) to earn a substantial discount. Shipping a one-pound package within 150 miles goes from costing $12 to costing $6.50. That’s a massive discount. And if a brand is shipping more than 300 packages a day, Amazon will negotiate a custom lower rate.

This is a big deal because it changes how some (not all) brands can think about their distribution strategy: they can now consider direct-to-consumer. Especially brands that sell small, light items that have lower retail price points. Amazon Shipping makes it possible for those brands to profitably ship directly to consumers. More operational complexity comes with this, for sure. But for some brands, it might be worth it, especially if they want to own the relationship with the end buyers of their products.

Amazon Services isn’t new; it’s been around for about two years. But its latest pricing structure and discounted rate transparency are game-changers, and I think it could impact how brands develop their strategy for selling and getting their products in the hands of customers.

I learned the growth hack The New York Times used to explode readership.

Last week I read An Honorable Titan, a biography about Adolph Ochs, who acquired The New York Times and turned the paper into an institution. Adolph executed this strategy in around 1900, but I think it’s ingenious and something others could find helpful. So, what’d he do exactly?

The Times’s daily circulation was stuck at 26,000, and it was losing money. The Times made money from sales at newsstands and advertising revenue. Adolph determined that he needed to double his circulation to 50,000 to break even.

His paper was respected and sold for the going rate of $0.03. Papers that sold for less than that were deemed sensationalized and from the yellow press. These lower-quality papers sold for $0.01. At the time, the thinking was that anyone who wanted to read a respectable paper would have $0.03. The $0.01 and $0.03 tiers were accepted pricing norms.

This pricing logic didn’t make sense to Adolph, and he decided to blow it up. He hypothesized that “the requisite number of readers could be found among those to whom the difference between three dollars a year and ten dollars a year for a newspaper was a material difference.” Using this logic, he priced the Times at $0.01. The move shocked everyone. His advisers and other publishers thought he was crazy because he essentially reduced his revenue from newsstand sales by 66%. Said differently, he had been losing money before, and he would lose money faster—and be wiped out—if he were wrong.

A funny thing happened. Circulation skyrocketed from 26,000 to 75,000. This jump allowed him to increase advertising rates because more people saw the ads. The Times went from losing money to being solidly profitable. The newspaper world called Adolph’s move a stroke of genius.

What did Adolph see that others had missed?

The unsaid and accepted logic behind pricing at that time was that the poor were unintelligent and, therefore, had no desire to read a respectable paper. Adolph recognized that intelligence is evenly distributed through the population at all economic levels. Doing the math, he realized that the rich are a small percentage of the population and if intelligence is evenly distributed, there was huge unmet demand among the largest segment of the population, the poor.

If, say, 10% of people are intelligent and 100 people are rich, 10 would desire a respectable paper like the Times. If 1,000 people are poor, 100 would want the paper if it was affordable.

Adolph didn’t just accept the status quo. He did his own thinking to reach his own conclusions instead of accepting the thinking of others. This approach allowed him to see an opportunity everyone stared at but couldn’t see.

I finished reading That Will Never Work, the biography about Netflix’s early years. Cofounder and first CEO Marc Randolph’s perspective on taking the company from idea to IPO in seven years is full of wisdom that entrepreneurs will find helpful.

One of his principles I enjoyed was what Marc and Reed Hastings call the “Canada Principle.” For the first twelve years, Netflix served only the United States. But several times during that period, they thought about expanding into Canada. It was close, so shipping costs would be low (it was shipping DVDs then), and the regulatory environment was friendly. Canada looked like low-hanging fruit.

But first appearances were deceiving.

When they dug into it, they learned it would be complicated:

• French is the main language spoken in some parts of Canada, so they’d have translation issues.
• Canadian dollars differ from U.S. dollars, so they’d have to deal with currency issues.
• The postal system in Canada was different, so special envelopes would be necessary.

When they ran the numbers, they learned they’d get a roughly 10% revenue boost by expanding into Canada.

They then considered the “effort, manpower, and mind-power” required to expand into Canada. It would be a big lift for their team. Then they analyzed how much they could increase revenue if they applied the same amount of effort to other aspects of the business.

Using that framework to evaluate the decision made things crystal clear. If they applied that effort in other areas, they could get a far greater return by increasing revenue considerably more than 10%. Expanding into Canada wasn’t the best way to allocate their resources. The return was too low relative to other options requiring similar effort.

They realized that Canada was a short-term, obvious move that would provide short-term benefits. “It would have diluted our focus,” wrote Marc.

After this experience, Netflix adopted what Marc calls the “Canada Principle.” When faced with options, evaluate the potential return of each of them and the effort and resources required to generate it. Pick the highest-return activity and focus on it. Don’t spread yourself thin and lose focus by doing low-return activities.

Marc and Reed realized, through trial and error, that focus is a superpower and that if they could focus on the right high-return activities, they’d have a competitive advantage. The Canada Principle became key to deciding what initiatives to pursue or kill.

The Canada Principle led the company to stop selling physical DVDs and focus entirely on subscription rentals, even though DVD sales were 90% of their revenue. It also helped them decide against pursuing automated DVD rental kiosks, despite promising results from months of testing. (Side note: a team member on the kiosk project helped found Redbox.) All of these were the right decisions. They kept the company focused. They leapfrogged competitors and built a behemoth that’s now publicly traded and has a market capitalization (valuation) of over $410 billion as of this writing.

I didn’t have a name for it when I was building my company, but I applied the Canada Principle several times when making strategic decisions. It was sometimes painful in the short run, but it usually led to the best long-term decision.

This weekend, I finished reading Direct from Dell: Strategies That Revolutionized an Industry, which is the autobiography of Michael Dell. The book was first published in 1998, so it covers only Michael’s (remarkable!) early journey. Michael turned $1,000 in 1984 into a company doing over $12 billion in revenue during the fiscal year ending February 1, 1998. That’s an astonishing level of growth in 14 years.

Michael is an incredible entrepreneur. He was in his early thirties when this book was published. A lot of Dell’s success can be attributed to him as its leader. (Side note: He’s still CEO over 25 years later.) But in the book, Michael highlighted another factor that led to Dell’s success: the PC market. In 1984, Michael unknowingly stumbled into a market in its infancy that exploded in growth for various reasons (including the internet) over the next 14 years. Dell rode the wave of the personal computer market (later, servers too). Michael’s genius was in combining explosive growth in a new market with an innovative business model (selling direct). He realized what Charlie Munger calls a Lollapalooza effect. The result? Dell became a massive company that grew at a torrid pace for 14 straight years. And Michael amassed a sizeable fortune, $125 billion per Bloomberg as of this writing.

The lesson learned is that markets matter a lot. A rapidly growing market is an ideal place to build a business because it usually means the number of people experiencing the problem is growing rapidly too. In that type of market, a company’s solutions don’t have to be stellar. They need to not suck. If companies can check that box, the demand from the market will yank them along. In this type of market, there’s enough business to go around, so there likely isn’t much price competition and margins and profits are healthy.

Michael Dell built, and still runs, a juggernaut of a company. Dell is a textbook example of why entrepreneurs want to start businesses in markets that are—or will be—growing rapidly.

This week, I started reading Direct from Dell: Strategies That Revolutionized an Industry. It’s the autobiography of Michael Dell, founder of Dell. The company is famous for being the first to allow customers to order custom-made computers directly from a manufacturer.

I’m early in the book, but already one line has caught my attention: “The $1,000 required to capitalize a company in Texas was the extent of my initial start-up capital.” Michael incorporated the company in January 1984 while he was in college. He dropped out after he finished his freshman year, to his parents' chagrin.

So, Michael is super young and starts this company with $1,000. By the end of 1986, three years later, the company was doing $60 million in annual revenue. And Michael set a goal to do $1 billion in annual revenue by 1992 (which he exceeded).

In the first three years of Dell’s existence, it did $160 million in total revenue and raised zero outside capital. This is probably one of the craziest growth stories for a bootstrapped company I’ve ever read. Growing fast is expensive. You have to put people, systems, and processes in place ahead of that kind of growth. It’s very rare to grow that fast and not raise outside capital.

This is where the genius of Michael’s model shines. A lot of this can be attributed to how Dell sold computers then. It didn’t make computers ahead of time and ship from inventory. Customers paid up front, and then Dell built and shipped the computers. Getting paid up front was a stroke of genius. It allowed Dell to obtain growth capital from customer revenue instead of having to raise money from outside investors. Now, Dell did have to buy parts and other stuff to assemble the computers, but it did so as close to just in time as possible, minimizing the amount of money tied up in raw materials inventory.

In October 1987, Dell completed a private placement on Black Monday and raised $20 million, even though the stock market was crashing. The following summer, Dell went public. The company merged with EMC Corporation in 2016, so it has changed a bit. But that combined company has a market capitalization (valuation) of over $78 billion as of this writing and over 120,000 employees. And Michael Dell is still CEO, more than 40 years later.

I was impressed when I read the details of Dell’s early growth and how Michael did it. His story is a reminder that customer revenue is always the best source of growth capital, especially if you can get customers to pay up front.

I’m rereading Junk to Gold: From Salvage to the World’s Largest Online Auto Auction. It’s the autobiography of Copart founder Willis Johnson. Johnson is worth roughly $3 billion today, most of which is his stake in Copart. I listened to an interview he gave recently, and it made me want to read his book again. He founded Copart in 1982 as a salvage yard. He purchased wrecked cars and sold the parts and scrap metal for a profit. The company has expanded. It’s now a global online auction market for used and repairable vehicles. As of this writing, it has a market capitalization (i.e., valuation) of over $56 billion.

In his book, Johnson describes himself as rough around the edges. He isn’t polished and doesn’t always use the “right” words. He attended community college for one semester on the GI Bill and then dropped out. So, how did Copart become a massive company?

As I shared last year when I read the book (see here), Johnson didn’t have a big vision for the company. He didn’t even have a plan. But he knew he wanted to grow. The key to Johnson’s success was his ability to master two things.

He was a cloner. He paid close attention to what was happening around him and what others had done. If he liked an idea and thought he could make money with it, he tried it out. He learned about a new model involving people pulling parts off cars themselves called “Pick-A-Part.” He studied it closely and copied it by creating “U-Pull-It.” The idea was a massive success. When he heard a competitor was raising capital to expand rapidly by doing an IPO, he paid attention. Two years later, Johnson’s company was trading on the stock market too.

Johnson also was an astute student and avid reader. He believed he could teach himself anything. For example, to figure out how to do an IPO, he started by trying to get a basic understanding of IPOs. He read the IPO prospectus of his competitor many times to understand what the IPO involved and to understand the Wall Street terminology. He then went to his local library to find books that explained the IPO process and all the terminology in more detail. He had trouble finding a book because nothing came up when he searched for “IPO.” He went to three different library branches. It wasn’t until someone at the third library branch told him that “IPO” stands for “initial public offering” that he found a helpful book from Ernst & Young, which he studied extensively.

Being an avid learner and reader is a great way for entrepreneurs to get ideas and strategies to grow their businesses. Some of the most successful entrepreneurs and investors didn’t invent new ideas or strategies; they copied other people’s great ideas. For example, Warren Buffett got the idea to have an insurance company (and maybe decentralization too) as part of Berkshire Hathaway from Henry Singleton and Teledyne. Henry Singleton got the idea by reading the book My Years at General Motors by former General Motors chairman Alfred Sloan.

The beauty of both of these—copying others’ good ideas and self-learning—is that anyone can do them. They don’t require permission or consent from anyone else. Not sure what to do to solve a problem? Not sure how to grow your business? No problem; start reading biographies of credible entrepreneurs. Learning about their journeys to build their companies is bound to give you some ideas about how to grow yours.

Today, I listened to an interview of Matt Mullenweg, founder of WordPress and Automattic. WordPress is an open-source content management system for websites. The platform helps you manage what your website shows. WordPress is extremely popular, powering roughly 43% of all websites (hundreds of millions of them) on the internet. Automattic is a holding company that owns several internet businesses, including WordPress. It did over $500 million in revenue in 2024.

Matt started WordPress when he was 19. One thing in the interview got my attention. WordPress is a platform that people can build businesses on. To develop his platform strategy, Matt didn’t try to reinvent the wheel. Instead, he studied another platform company—and not just any platform company, but the most successful one: Microsoft. He read about Microsoft and realized that the Windows operating system had Microsoft Office (Word, Excel, PowerPoint, etc.). For Microsoft, building its own application on top of its platform was a key strategy that turbocharged its financial performance.

Learning about Microsoft’s strategy led Matt to ponder what the WordPress equivalent of Microsoft Office would be. What application could he own that sat on top of the WordPress platform? Matt leaned into the strategy but didn’t build an application. He bought one. He ended up purchasing WooCommerce, an e-commerce plugin for WordPress. It allows people to turn a WordPress website into an e-commerce site where people can complete purchase transactions.

WooCommerce, according to Matt, has been one of his best acquisitions. Last year, $30 billion worth of transactions occurred on WooCommerce.

Matt’s a pretty sharp dude. Even so, he got his inspiration from reading about the history of another successful company. He copied its strategy (clearly, it worked, since his product is running a little less than half the internet) and modified it for his situation. He didn’t waste time trying to figure out what would work; he focused on modifying and executing a wildly successful strategy.

This resonated with me because I’ve had a comparable experience. This past summer I read about Michael Bloomberg’s strategy in a biography. After that, everything clicked, and I knew what my strategy was for my book project. I’ve been executing on it  since.

My takeaway from Matt’s interview and my experience is that there’s immense value in the biographies of founders and histories of companies. If you’re unsure about what strategy to take to grow your company, reading biographies and learning about other entrepreneurs’ strategies and why they worked is a good use of time. You might just read one that clicks and changes your business or idea, too.

If you want to see this strategy section of Matt’s interview, it’s here. If you want to watch the entire interview, which is good, see here.

I finished reading Poor Charlie’s Almanack: The Essential Wit and Wisdom of Charles T. Munger last week. It’s a memoir and collection of famous speeches by Charlie Munger. I’d put off reading it for a while. Looking back, I regret that decision. The book unlocked a different way of evaluating decisions and exposed me to new psychological concepts—some that aren’t even taught in schools. It felt like an introduction to practical psychology for entrepreneurs and investors. I made tons of highlights and notes while reading this book.

I’ll eventually create a blog series on this book, so I won’t go into everything here. But here are a few more takeaways:

• Checklists – Countless times throughout the book, Charlie mentioned using mental checklists as a way to avoid mistakes in your decision process. Checklists are also a central part of David Allen’s Getting Things Done (unrelated) framework. My takeaway is that checklists are simple tools that are available to everyone, but they’re more powerful than people realize when used consistently.
• Multidisciplinary learning – I mentioned this in my post last week (here). If you have a narrow understanding of topics or a small tool set, you increase your risk of the cognitive bias of relying too much on one tool or a limited number of tools. Mark Twain described it well: “To a man with a hammer, everything looks like a nail.” You apply tools to situations for which they’re not appropriate and increase the chances of making subpar decisions. Broad learning about topics that interest you helps prevent this. Often, you discover nonobvious relationships between topics that others have missed, which improves your decision-making and gives you an edge. Charlie mastered this, and it led to a life of curiosity-driven learning and a billion-dollar fortune from shrewd decisions.
• Hard work – Acting and getting things done is one form of hard work. But learning and thinking is another form, one that many people underestimate. Learning and thinking are preparation. Good preparation leads to better decisions and allows you to practice “extreme decisiveness,” which is valuable during extreme uncertainty. From an investing perspective, preparation allows you to identify when something is mispriced and gives you the confidence to bet heavily based on your work, even if everyone else is selling for dear life.
• Incentives – Incentives heavily influence individual decision-making. Getting them right is critical for entrepreneurs and managers. If you want to understand someone’s actions or thought process, think about how they’re being incentivized.
• Lollapalooza effect – When two or more factors work at the same time, they magnify outcomes. This works positively and negatively. This reminded me of twin tailwinds, which I’ve noticed when reading about Henry Singleton (see here), Warren Buffett (see here), and 2021’s IPO explosion (here). These are lollapalooza-effect examples that led to massive wealth creation.
• Mastering wisdom – Mastering the best things others have figured out is a discipline. It’s also a hack. Trying to figure out everything from scratch on your own is hard to do, and most people aren’t smart enough to do it (Charlie’s words, not mine). It’s better to take what others have figured out and build upon their wisdom. Everyone can do it, but many people won’t because it requires a passion for learning and curiosity and is hard work.
• Inversion – If you’re not sure what to do about a problem, think it through backward to figure out what not to do. By knowing what not to do, you’re one step closer to understanding what to do.
• Outsourcing thinking – You can’t outsource your thinking. You must think for yourself and, ideally, in a multidisciplinary manner.

Those are just some of my takeaways from this book. I’m glad I read it and will likely reread it someday.

The last book I read in 2024 was The Money Masters: Nine Great Investors: Their Winning Strategies and How You Can Apply Them by John Train. It’s an older book, first published in 1980, but I read it because the author was referenced in a book about Warren Buffett. The book is a biography but not about one person. Each chapter is a profile of an investor who achieved outsize returns. The book introduced nine investors, most of whom I’d never heard of.

I went into this book with no expectations. It didn’t have a lot of reviews, and I’ve never heard anyone talk about it or seen anything written about it. But when I read it, it reminded of The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success, which I read in April. Outsiders was slightly different because it was highly rated, and many people suggested it. But it, too, was a series of mini-biographies with a slightly different focus—CEOs, not investors.

When I read Outsiders, I discovered people I didn’t know about and read another roughly twenty books. Each book mentioned another person or book, and I read it. This went on for a few months. And I still have a few more books I discovered because of Outsiders that I haven’t read yet. Something similar began playing out when I read Money Masters. I learned about investors who built their own investment firms and got really interested in them. I ended up buying a few books, and I’m starting one of them now.

I didn’t know what to call books in this category, but someone pointed out to me that they're biographical anthologies. These books are great discovery mechanisms. They don’t go as deep as a biography about one person would, but they go deep enough on each person for me to understand if I want to learn more about them. If I do, these books usually have a list of sources that I can read.

This type of book is helpful to me because it provides more connections to more people and companies than a normal biography. The exposure to many people and ideas in a single book is helpful. I’m excited and curious to learn more about those people, and I know exactly what books to read.

My big takeaway is that when I’m starting to learn about something new (industry, time period, etc.), I’ll likely start with a biographical anthology. It’s a great way to learn about multiple players in a space at once and find good books about them.