🔑 Key Takeaways
- Bear markets can be beneficial for seed-level companies as larger competitors are forced to prioritize and take less risk. Solana's rapid growth in the industry highlights the importance of energy efficiency in blockchain technology.
- Optimism is rational and drives progress, while investing in compounding can lead to outsized returns. Understanding and harnessing these forces can help entrepreneurs achieve great success.
- Despite moments of seeming stagnation, advancements in technology continually lead to exponential growth, making it important to stay optimistic about tech's future and hold onto successful ventures.
- Holding onto winners for the long-term is crucial in building successful companies. Founders must have an unyielding will to survive and the ability to pivot and persevere in the face of adversity to achieve greatness.
- To become more valuable and successful in business, use acquired resources to acquire new ones and uniquely marshal them. Prioritize survival, the ability to ship great products, and think differently to become stronger.
- Always stay up-to-date with the ever-changing technology market and be open to new opportunities. Companies should invest in smart employee engagement to boost productivity and Mystery is a leading platform for achieving this. Age is just a number, and it's never too late to start something new with the power of compounding.
- Evaluating potential outcomes and their likelihood using TAM and diverse portfolios are crucial in early-stage startups investing. Age doesn't matter; anyone can start a world-changing company. Venture capital investing requires estimating and making assumptions based on limited information, not cash flow-based classic investing.
- Invest in startups with a long-term perspective and show respect towards founders, while focusing solely on customer needs. A utility business model can be strong but being an unregulated provider of mission-critical infrastructure doesn't necessarily improve the product. Specialization is key.
- Don't try to do everything for everyone. Niching down requires focus and letting go of unprofitable areas, while scaling up demands investment and global ambition. Loudly and specifically advertise your value proposition to avoid being undifferentiated in the middle.
- Owning your craft and content is key to becoming a millionaire in the media industry, while retaining rights to your content is crucial for reaching billionaire status. The fintech app, Modern Treasury, simplifies financial operations with code-based money transfers.
- The internet has democratized content creation, allowing individuals to build their own audience and prioritize long-term growth. Authenticity and enjoyment are key to building a loyal community and achieving success.
📝 Podcast Summary
Insights on Startup Success and Innovation in the Tech Industry.
The Acquired Playbook, a collection of lessons learned from analyzing 200 companies, is the focus of this special episode of the Acquired podcast. Hosts Ben Gilbert and David Rosenthal discuss the evolution of their podcast and their decision not to publish a book on their findings. They also interview the co-founders of Solana, a public blockchain system, and discuss its architecture, energy efficiency, and rapid growth within the industry. The co-founders advise that bear markets are actually good for seed-level companies with bright ideas and energy, as larger competitors are forced to prioritize and take less risk. Overall, the episode offers insights on startup success and innovation in the tech industry.
The power of optimism and compounding in building successful companies.
The key lesson from the stories of successful companies like Sony is that optimism always wins. Even in the face of unlikely circumstances, being optimistic is rational and the driving force behind progress. Additionally, investing in optimism is the only way to make outsized returns and build great companies. Another lesson is the power of compounding, specifically in terms of the number of transistors on a chip doubling every 18-24 months. This compounding leads to a 10X improvement in processing power every seven years, and companies like Intel and Apple have exemplified this trend. By being optimistic and understanding the power of compounding, entrepreneurs can achieve great success.
Why Tech Markets Seem to Suddenly Explode with Innovation and Success
Moore's Law and exponential growth explain why it seems like there is no progress and then suddenly everything happens at once in tech markets. Computing power getting cheaper means technology can access bigger markets leading to bigger returns, as seen in Sequoia's investments in Google, WhatsApp, Airbnb, and more. Lesson learned: stay optimistic about the future of tech. Additionally, it's important to let your winners ride, as Sequoia's biggest mistake was selling Apple shares before their IPO, missing out on one of the greatest venture returns of all time.
The Importance of Long-Term Growth and Perseverance in Company-Building.
When it comes to investing in long-term growth, what matters is not the growth rate in any given year but how many years of growth the company has left. Holding onto winners is crucial, as there is often much more value in the out years. Founders must have an unyielding will to survive in order to overcome the many challenges of company-building. Success is not always about taking the obvious route, and the key to success lies in the ability to pivot and persevere even in the face of adversity. The market can be fickle and the competition fierce, but companies like Amazon, Apple, NVIDIA, and TSMC have shown that the hero's journey, complete with its trials and tribulations, is the path to greatness.
The Power of Leveraging Resources for Growth and Success in Business.
In order to become more valuable, leverage acquired resources to get the next resource and become more powerful. Acquiring new resources makes a company more valuable, giving it the ability to uniquely marshal resources. This is demonstrated by Tesla's market cap and raising over $10 billion of cash to the balance sheet. Surviving in a brutal commodity industry requires different thinking, as demonstrated by NVIDIA shipping six months ahead of their competitors. They accomplished this by designing all of their chips in software emulation. Founders who prioritize survival and the ability to ship great products are the ones who succeed. Strength leads to strength, meaning that acquiring new resources makes a company more valuable, giving it the ability to acquire even more resources and become more successful.
Seizing Opportunities and Smart Employee Engagement in the Technology Market
Always be thoughtful and super aggressive about seizing the next opportunity. It's never too late to get into the technology market, as long as you keep up with Moore's Law, there will always be new markets and paradigms. Companies spending smartly on employee engagement has become even more important, and Mystery is the leading online platform for team events and employee engagement that delivers results. Morris Chang founded TSMC at 56, proving it's never too late to start something new. It's all about having the mindset of compounding what you have and using what you have to become even stronger.
Venture Capital Investing as Options Investing
Venture capital investing in early stage startups is actually options investing, where the range of potential outcomes and their probabilistic likelihood are evaluated to determine the chance of the company becoming successful. This explains why venture capitalists are obsessed with the total addressable market (TAM) and why diverse portfolios are needed in the early stages. Investing in startups is not cash flow based like classic investing. Anyone can start an important world-changing company regardless of their age, which is a mindset that older entrepreneurs should embrace. Don't mistake buying options for investing in cash flow, as venture capital investing involves a lot of estimating and making assumptions based on limited information.
The Importance of Respect and Specialization in Startup Investing and Business Models
Investing in startups is a multi-turn game and it's important to treat founders with respect, even if your investment doesn't work out. Being a utility company can be a powerful and defensible business model, as seen with AWS and other technology companies. Startups should focus solely on the attributes of their product that customers care about. Unregulated utility companies can provide mission-critical infrastructure that other companies need, but doesn't necessarily make their product better. This is similar to the economic theory of specialization of labor, where individuals focus on what they're good at and rely on others who are good at different things.
Niching Down vs. Scaling Up: Finding the Right Strategy to Grow Your Business
The strategy of either niching down or scaling up can be effective in growing a business, but it's important not to get caught in the middle. Companies that try to do everything for everyone risk losing focus and not being profitable. Niching down requires focus and a willingness to let go of unprofitable product lines and distribution channels, as demonstrated by Brooks Running. On the other hand, scaling up requires significant investment in fixed costs and a belief in the ability to operate at a global scale, as seen with The New York Times. It's also possible to succeed by focusing on deep niches, as demonstrated by some media companies and venture capital funds. The key is to be loud and specific about the value proposition and to avoid being undifferentiated in the crowded middle.
The Internet's impact on the media business and the rise of platformification and technology companies.
The Internet has massively concentrated the returns to scale for technology internet companies, making them much more valuable than before. However, the platformification that the Internet brought enabled the viability of the long tail as well. If you want to be a millionaire in the media business, you should own your craft and become must-see content. If you want to be a billionaire, you should never give away the rights to your content. This is easier to do in media than in sports, where players are playing within someone else's game. Modern Treasury is a fintech app that enables you to move money within your product using code and not manual finance operations, abstraction away all the complexity of banking rails.
The Power of Creating Your Own Content Online
The internet enables individuals to create their own game. Thanks to platforms like Substack, podcasting, YouTube, TikTok, Instagram, anyone can publish anything. It's no longer necessary to rely on traditional media giants like NBC or Universal Music Group. Businesses that prioritize growth with a long-term view, even if they don't turn a profit immediately like Amazon did for 20 years, can succeed if they remain committed to their strategy. It's important to treat your audience like they're smart and do something you genuinely enjoy to build a loyal community. Joy can't be faked and it's easier to market and evangelize if you have fun doing what you do. Lastly, if you want to run farther, longer, faster, and better than everyone else, find something you have fun doing.