🔑 Key Takeaways
- Don't panic during market volatility, invest in a diverse range of businesses with competitive advantages and focus on the micro. A patient and thoughtful approach can avoid panic selling and lead to long-term success.
- Bootstrapping can teach important skills, but it's important not to get stuck in a scarcity mindset and take on low leverage tasks. Implementing best practices and acquiring other businesses can lead to growth and success, but beware of the challenges and sacrifices that come with it.
- To grow and succeed in business, it is crucial to invest in R&D and capital assets, take risks, and learn from past mistakes. Networking with industry titans and buying back previously sold businesses can also lead to valuable investment opportunities.
- When acquiring a company, it's critical to evaluate the leadership team's ability to drive growth. Founders who excel in starting businesses may not always be effective at managing growth or scaling, so identifying and leveraging experienced leaders is crucial.
- Find an experienced partner for business expansion and focus on the quality of the person rather than just the contract. Incentivize employees with equitable remuneration to increase delegation and achieve goals.
- Simplify your life and delegate responsibilities to competent individuals for better time management and work-life balance. Avoid lottery ticket incentives and focus on high-level matters while relying on CEOs to handle day-to-day fires.
- Observing Warren Buffet's high emotional intelligence, active listening, and great questioning skills can inspire effective communication. Educating children about wealth, investing, and entrepreneurship can be challenging, but it's essential.
- Don’t force interests, use incentives sparingly, identify what you don’t want, and educate yourself on the structure of a deal before jumping in.
- Pay attention to earnings and potential growth, identify low-hanging fruit opportunities for quick earnings, be patient like successful investors, focus on majority stakes in cash-flowing businesses, and view minorities as insights rather than primary focus.
- Attend conferences, study people from a distance, and find creative ways to meet important people. Building meaningful relationships takes time but yields rich rewards.
- Andrew Wilkinson emphasizes the importance of seeking out successful investors and learning from their approach. Ackman's entrepreneurial spirit and willingness to take risks sets him apart from other value investors.
- Managing stress through delegation, taking time off, and finding fulfilling activities is important for mental health and productivity. Learning from experienced investors and recognizing the limits of dopamine supply can lead to personal growth and success.
- Giving back and seeking purpose can bring more fulfillment than just accumulating wealth. It's important to stay connected to your roots and value relationships that keep you grounded.
- Starting a business should never be a forced decision. Learn from experts like Felix Dennis and Michael Gerber to avoid making your business all about yourself. Take advantage of online resources to brush up on accounting and finance.
- Building a successful business requires the right processes and people, but also understanding business quality, psychology, and incentives. Reading books like 'The Dondo Investor', 'The Tau of Charlie Munger', and 'Influence' by Robert Cialdini can provide valuable insights. Listening to interviews with entrepreneurs like Andrew on podcasts like 'My First Million', 'Knowledge Project', and '20 Minute VC' can also be helpful.
📝 Podcast Summary
The Benefits of Micro-Focused Investing
Investing in a diverse range of businesses, rather than focusing on the macro environment, can provide a more stable investment strategy. By focusing on the micro and examining each individual business for its competitive advantage, panic selling can be avoided, even during times of market volatility. Owning a variety of businesses can also help avoid the temptation to constantly track and check individual stock tickers. The ability to hold businesses for the long-term and wait for opportunities to arise can provide a more patient and thoughtful approach to investing that can ultimately lead to success.
The Pros and Cons of Bootstrapping: Lessons Learned from Andrew Wilkinson's Journey to Business Growth
Bootstrapping can be both a gift and a curse: it teaches important skills, but can create a scarcity mindset and lead to taking on low leverage tasks. However, owning a smaller slice of a larger pie can be worth giving up some control. Andrew Wilkinson's companies have been profitable because they followed best practices out of necessity, and he later realized that many other business owners were not operating with the same discipline. By acquiring these businesses and implementing best practices, his company grew into a Berkshire Hathaway for tech. Growing out of bootstrapping required disastrous hiring and a lot of misery, but it was necessary to deploy capital and maximize the business's potential.
Importance of Investing in R&D, Capital Assets, and Taking Risks for Business Growth
Investing in R&D and capital assets is crucial for business growth and expanding opportunities. Bootstrapping mentality can sometimes hold businesses back from taking advantage of potential growth opportunities. Being open to taking risks and investing in opportunities, such as increasing ad spend, can lead to significant payoffs. Learning from past mistakes and utilizing investment knowledge can help in starting and growing successful businesses. Buying back a previously sold business can prove to be a valuable investment opportunity. Forming connections and networking with industry titans can aid in business success and growth.
Assessing Management Capabilities during Company Acquisition
When acquiring a company, it is important to assess if the existing management is capable of leading the company through various phases of growth. Founders who are great at starting things may not necessarily be great at managing large groups of people or scaling a business to a thousand locations. Therefore, it is necessary to identify CEOs or leaders with the required skill set and experience to effectively run the business. While some founders prefer to stay on and run their business with minimal interference, others prefer to leave after a quick and easy deal. Tiny Capital has experience working with both types of founders and provides help and support wherever necessary.
Finding the Right Partner and Incentives for Business Expansion
When looking to expand a business, look for someone who has done a similar expansion before and plug them in. A deal can be done quickly if the founder has everything in order and the buyer loves the business and person. Contracts are important, but the quality of the person is more important for a good deal. A lot of qualitative analysis is necessary to assess the person's authenticity and trustworthiness. Incentivizing employees with equitable remuneration, based on the numbers the company cares about, is crucial for increasing delegation and achieving goals.
Delegating responsibilities for improved work-life balance
Avoid creating lottery ticket incentives for employees, as it can lead to dejection and a binary outcome where options become worthless. Instead, focus on delegating responsibilities to CEOs and rely on them to handle day-to-day fires. This gives more time for analysis and decision-making on high-level matters. Simplifying life can be achieved by reducing responsibilities and delegating to competent individuals. While it may not be possible to completely eliminate tasks, having an assistant to sift through emails and flagging critical messages can save time. Lastly, meeting heroes can be disappointing, but some successful people like Warren Buffet still make time for others and are able to balance a stress-free life with work.
Andrew Wilkinson on Meeting Warren Buffet and Raising Children to Understand Wealth
Andrew Wilkinson met Warren Buffet and observed how high his EQ was, how he really listened, mirrored back, and asked great questions. Buffet is very public with his opinions, and if you’ve listened to all of his public interviews and read all of his letters, you pretty much know what he’s going to say on any topic. Munger, on the other hand, spouts off about any topic like jazz, and you never know what he is going to say. Raising children and teaching them about wealth, investing, and starting businesses is a challenging decision. Andrew is trying to explain to his kids all the different businesses he owns and how he makes money, but he is yet to come to a conclusion.
Encouraging natural passions, identifying anti-goals, and educating oneself on deal-making can lead to lasting growth.
It is important not to pressure children into pursuing certain interests. Instead, let them develop their own passions and get obsessed with something naturally. The use of incentives can motivate someone to learn a new skill quickly, but it must come from within to be lasting. Anti-goals can be helpful in guiding personal and professional decisions by identifying things that one does not want to do. This allows for a clearer focus on what makes someone happy. When it comes to deal-making, the structure of a deal is almost as important as the price. It is important to educate oneself on deal terms, structures, and cap tables before diving in.
Tips for Successful Business Investment
When investing in a business, it's important to pay attention to the earnings and think about the potential for growth in order to pay oneself back within a reasonable time frame. Low hanging fruit opportunities should be identified to double the earnings in the first few years. It's also important to have patience - successful investors like Munger sit on their hands for years before making a move. While it can be tempting to invest in many startups, focus should be on buying majority stakes in cash flowing businesses, like playing poker where skill matters. Minorities are like roulette chips - it's not the primary focus but can give insight on the startup world.
Luck is not tied to location. Targeted reach-out and smart networking can open doors in any city.
Creating your own luck doesn't always mean moving to a major metropolitan area to network and build relationships. Being based in a smaller city or town can offer more independence and a lower level of competition, which can reduce anxiety and provide a quiet pace of life. To create your own luck, targeted reach out and getting into the right room are crucial strategies. Attend conferences like Ted or study people from a distance to learn from them. When you really want to meet someone, find a clever way to do so, like bidding for a charity lunch with Bill Ackman. Building meaningful relationships takes time and effort, but it is worth it.
Learning from Successful Investors: Wilkinson's Experience with Ackman
When meeting with successful investors, Andrew Wilkinson focuses on learning from them and getting as much out of their brains as possible. He invested in Bill Ackman's publicly traded company and had a positive experience meeting with him and his team, ultimately leading to the opportunity to work together. Though Ackman has had some notable losses, Wilkinson recognizes his exceptional track record and entrepreneurial approach to investing, which sets him apart from other value investors who primarily buy businesses passively. Wilkinson admires Ackman's willingness to wrestle with the universe to see his investments succeed and manifest the outcomes he envisions.
Importance of Self-Care and Delegation for Entrepreneurs
Self-care and managing stress are important for operators and entrepreneurs to maintain mental health and productivity. Taking time off and reducing the number of decisions made can help prevent burnout and fatigue. Delegation is a key strategy, but it can be difficult to adjust to a new routine and find fulfilling activities when not working constantly. Overwhelm can still occur, especially with a multitude of interesting opportunities to pursue. Getting back up after failure is important for personal growth and success, and learning from experienced investors like Bill and Munger can provide valuable insights. It's important to find a balance between ambition and self-care, and to recognize the limits of the brain's dopamine supply.
Finding fulfillment through philanthropy and staying grounded in wealth
Andrew Wilkinson emphasizes the importance of philanthropy and giving back to society. Thus, he decided to give away most of his wealth and reframed his mindset towards maximizing his impact on philanthropy. After having enough money to retire and feeling empty, he found excitement again by working and giving. Despite talking to many wealthy people and receiving different advice, he had to figure out what to do with his e-commerce business and net worth, which was slapping him in the face. In addition, Andrew values his old friends who roast him and bring him back down to size, which helps him stay grounded and connected to his roots.
Insights for Aspiring Entrepreneurs.
Starting a business is not for everyone, and it can be a stressful and difficult life. One should not start a business just because it sounds good or someone else wants them to do it. The feeling of compulsion is essential. Favorite business books recommended by Andrew Wilkinson include How to Get Rich by Felix Dennis, which is about Felix's secrets of building wealth and his advice on why one does not want to get rich. Michael Gerber's book E-Myth is an incredible guide to delegation that will help one realize their business is not them. Aspiring entrepreneurs could learn accounting and finance from Khan Academy in two hours or less.
Books and resources for scaling a business and improving decision making.
To scale a business, one needs to build a machine of processes and people. 'The Dondo Investor' by Monish Bry is a good manual on basic value investing. 'The Tau of Charlie Munger' is more about examining business quality, psychology, and incentives, which is more important than numbers. 'Influence' by Robert Cialdini is an important book and an encyclopedia of every psychological misjudgment that one can refer to every day. To learn more about Tiny, one can visit their website and listen to Andrew's interviews on 'My First Million', 'Knowledge Project', and '20 Minute VC'.