Seven Observations

2020 marks twenty years that I’ve been an entrepreneur. I’m often asked what launched my career and my response is, “I wanted to make a difference.” My first job was working for a financial services corporation, and in 2000 a company email announced we had “one trillion dollars” under management. I suddenly realized the company didn’t need my help, and my contribution was nothing more than a rounding error for my division. I gave notice, started my first company, and never had a moment of regret. Over the past two decades I have met incredible people and learned numerous lessons to aid me throughout my career. I thought I’d share some interesting observations I’ve made during my journey as an entrepreneur.

I. The Opportunity

“I grew up where, when a door closed, a window didn’t open. The only thing I had was cracks. I’d do everything to get through those cracks – scratch, claw, bite, push, bleed.” -Dwayne Johnson

Most of us enter the workforce with a humble beginning and hopefully, find our path towards personal fulfillment. One of my friends started his career as an unassuming assistant to a famous photographer. He carried equipment bags, coordinated schedules, and other basic tasks. One day they were shooting an ad which was supposed to feature a woman skiing down a mountain, but the problem was they weren’t on a ski slope, they were stuck in a Manhattan studio.  

Assistants were stacking books under the skis of the model, trying to make the skier to appear to be soaring in the air, but she kept falling over. My friend observed the dilemma and suggested they should just build a ski jump. The photographer laughed and said if my friend could build a ski jump before they returned from lunch, he would pay him $1000. An hour later, the photographer returned to find a finished ski jump. The photographer smiled and said, “You shouldn’t be my assistant, you should be in set design.” My friend asked what that entailed and the photographer responded, “It begins with no longer carrying my bag, the rest is up to you.” 

Over the next decade my friend would build one of the largest production houses in the country. Entrepreneurs know the average person wouldn’t have conceived of the ski jump nor had the courage to try something new. I’ve seen very few success stories built upon pure luck or an unknown benefactor giving someone a “big break.” It’s more about recognizing an opportunity and being prepared to take a chance. Often, we end company meetings by saying, “Fortune favors the bold.” We might be taking an uncertain step forward, but we’ve taken the necessary preparations to improve our chances for success. Few aspects of business are a certainty, but success often begins by seeing an advantage to seize. 

II. The Game

 “The human brain is an incredible pattern matching machine.” -Jeff Bezos

I’m a geek at heart and I grew up playing video games (MMOs/RTS), tabletop (D&D), and card games (Magic the Gathering). One of my friends was the best “minmaxer” I have ever met. What's a minmaxer? They are like codebreakers, because minmaxers possess an innate ability for pattern recognition and understand the precise combination of inputs to achieve the greatest output. This often involves overloading a certain variable (the exploit), at the expense of all other functions to achieve an unforeseeable advantage. It didn't matter which game we played, my friend would always have the most potent solution to ensure his victory. 

This skillset carried with him into his business career and he thrived in competitive situations, especially sales. He was always the top salesperson in his company, not because he was incredibly charming or good looking (remember, we were geeks playing D&D), but because of his strategy. More importantly, when he advanced into management roles, his skillsets became a force multiplier for his organization. For example, in one of his earliest management roles, he was put in charge of a regional territory with ten salespeople reporting into him to sell cloud services. It was a great opportunity, but there was a catch. He inherited the worst performing sales group in the country. 

In his first team meeting he outlined a lofty goal: In nine months they’d become the top producing team in the country. My friend explained they weren’t bad salespeople, they just had an inferior sales plan. More importantly, all growth strategies are a game, and every game has an exploit. He ordered everyone to stop selling for one week, because it was clear they lacked an effective strategy. To formulate his strategy (find the exploit), he studied the competitive landscape, assessed price points, reviewed quality scores, and examined performance reports.

He quickly discovered his company was uncompetitive on price for their primary product, while features and satisfaction were equally unremarkable. However, when they combined specific packages, their price point started to shine (the exploit). With his sales plan complete, he instructed his team to ignore single-product sales and focus their efforts on packages. Within six months his team was number one in the nation. Today, he is an EVP with a Fortune 50 company, but this isn’t a surprise to any of his friends. You just had to play one round of Magic the Gathering to recognize he was a force of nature.

For most people, this type of minmaxing behavior isn’t the reason we play a game (or work), but for some, it is the only reason why they play. From software engineering to deploying successful advertising campaigns, minmaxing is everywhere. This skillset might be described as tenacity or genius, but to a “gamer” it’s minmaxing. The key to every successful business is to identify and embrace your minmaxers, because very few people will impact your organization to such an extent. I genuinely believe the minmaxer’s philosophy is critical to accelerate a company’s growth.

 III. The Cause

 “Happiness is not in doing nothing. Happiness is to be overloaded the whole day, become exhausted by the evening and realize you did something worthy.”  -Margaret Thatcher

Business is more than “minmaxing” growth. Ideally, we’re solving critical issues or improving society in some measurable way. Most of our waking hours are at work, so we should be inspired by our company’s mission. Granted, I wasn’t inspired by pharmaceutical supply chain software installations (my first small business), but I was excited to learn new disciplines and work with global corporations. Seventeen years later, I discovered that spark of passion when we founded Capital Rx. 

I’ve spent the majority of my adult life studying the pharmaceutical supply chain. When we started Capital Rx, I recognized we had an opportunity to change the way drugs are priced and serviced in the US. More importantly, I felt it was our obligation to champion this cause, and everyone at our company should embrace this mission. 

During our interview process our founders all ask the same question, “Do you believe in our mission?” If the answer doesn’t reflect genuine affirmation, we keep looking for the right candidate. We can hire the most brilliant people, but if they don’t embrace our cause, the result will always be failure. This doesn’t mean we can’t propose different paths to reach our objective, but we must be navigating to the same destination. 

IV. The Challenge

 “Run towards the hardest problems.” -Lisa Su

I can’t verify if Lisa Su (CEO of AMD) actually made this statement, but if you follow her incredible career, you know she lives by this principle. As a self-professed geek (see section #2), I visit cpubenchmark.org regularly to see which CPU owns the current performance title. Over the last decade, the chart has been boring, with Intel CPUs owning the top ten rankings… until Lisa Su came along. Late last year, I literally spit out my coffee when I saw that AMD made an appearance on the Top 10 list. I did more research on AMD’s release schedule, and recognized this entrant wasn’t a fluke, but the beginning of a market shift. This isn’t any normal market, this is achieving market dominance in one of the most technologically advanced industries in the world. 

Today, AMD chips control 8 out of the Top 10 CPU spots. If you look at AMD’s stock performance (1200%+ return), it reflects the newfound success with Lisa Su at the helm. How did AMD go from not appearing in over a decade to controlling the benchmark charts?  Clearly AMD’s leadership wasn’t afraid to tackle the most challenging problems (e.g. sTRX4 7nm Zen 2 architecture) and overtake the market leader, Intel, with a fractional R&D budget. 

Courage and agility can make a smaller company a dangerous adversary to industry leaders. Throughout my career I have been told it is impossible to challenge larger entities, but I view this as a convenient excuse to maintain the status quo. If you’re trying to compete within or disrupt an industry, you can’t be afraid of confronting the hardest problems. Once you are committed to a cause, the next critical factor is nimbleness. The skill reflects an organization’s ability to both make rapid decisions and execute the agreed upon plan of action.

I remind our colleagues that there are no bad decisions and the average decision can’t break a company. As long as you honestly put thought into your conclusion, your decision is sound. Really, second guessing is imperfect as we’ll never know what outcomes could have been achieved through a single event. I try and reinforce that making no decision is the worst result, unless the actual resolution was to do nothing. 

V. The Doubt

 “Only the spoon knows what is stirring in the pot.” -Sicilian proverb

This quote I owe to my grandmother. Anyone who has worked with me in the last decade has heard this saying come out of my mouth. It sounds simple, downright trite, but I can’t tell you how many times I see professionals ignore the wisdom of these words. 

When I first started to review prescription benefit plans for cost accuracy (my last company), my more experienced colleagues would patiently explain to me the fundamentals of contract auditing. I would listen to seasoned professionals explain odd procedures, like we weren’t allowed to take any electronic devices into a room during a rebate audit, or drug prices could vary +/- 40% by client. I asked why these processes were allowed and the response was the same every time, “That’s how things work.” At some point you must question procedures that are illogical. Once revealed, the truth is easy to see, but it needs to be discovered. 

JFK stated, “The great enemy of truth is very often not the lie, deliberate, contrived and dishonest, but the myth, persistent, persuasive and unrealistic.” After spending years reviewing pharmacy benefit contracts, I finally understood what President Kennedy meant when he spoke these words. I’ve been in countless meetings with industry leaders and they unsurprisingly perpetuate the myths of their mentors (generational unawareness). More importantly, they are highly resistant to change, since it would suggest their prior thesis was flawed. In our company we call these people, “the enablers of bad behavior,” because they’d prefer to maintain the status quo, rather than entertain the heresy of new ideas. Furthermore, their bond to preserving antiquated practices is often secured by a leash of gold. 

Most people believe there is no reward for embracing change, simply risk. To understand what needs to be fixed, an executive must occasionally become the spoon and actually touch the work that is often delegated a level or two beneath them. The problem is, most executives have their lunch brought to them and it’s been years since they saw a pot. They have no idea where the kitchen is even located. The myth, persistent and persuasive, is the food is fine and there is no reason to question what’s in the pot. Do yourself a favor and stir a pot. More importantly, be willing to change a recipe -- or there’s no reason to visit the kitchen.

VI. The Time

 “Tomorrow is nothing, today is too late; the good lived yesterday.” -Marcus Aurelius

 This section might read like a journey into Hellenistic Philosophy, but anyone who as ever worked with me, has heard me reference Meditations by Marcus Aurelius. As a student of Stoicism, Marcus Aurelius valued discipline and compassion, but also developed a keen appreciation of time. He has dozens of famous quotes that both inspire or teach a reader to recognize our journey is linear, one that will not be repeated (a river we cross but once…). If I had to condense his teachings regarding time, I believe the two most important lessons are “acceptance” and “efficiency.” 

Our head of people operations asked me during our holiday party if I ever take a moment to appreciate our progress. Sadly, the answer is no. The reason is, for most obsessed entrepreneurs, you constantly believe you are one act away from becoming a tragic hero. I often describe my acute fear of failure as my shadow, ever present and clearest upon the brightest of days. Quite simply, the higher a company ascends, the more spectacular the potential fall. 

Fear of catastrophe can keep an executive humble and focused on important goals. However, fixation requires balance and you remember it’s reasonable to pause and “accept” the moment. Marcus Aurelius writes, “Accept the things to which fate binds you, and love the people with whom fate brings you together, but do so with all your heart.”

To understand the importance of “efficiency,” every day should be the training sequence from Rocky III, with Carl Weathers screaming at you, “There is no tomorrow!” Entrepreneurs have finite resources, with time being the most precious asset. I can spot when an organization is making rapid progress and when it is starting to flounder. Telltale signs are “scheduling a meeting to discuss the current meeting,” or “forming a committee to approve a nonessential decision.” 

How do you make the best use of time? 1) Empower your colleagues, down to the associate level, 2) trust your colleagues, because you can’t empower anyone you second-guess, and 3) understand perfection will never occur, regardless of the number of meetings or committees.  This doesn’t mean a company should accept a substandard deliverable or outcome. If you hired, trained, and inspired correctly, your colleagues should recognize what “good” looks like; not to be confused with “good enough.” Everyone in the organization should know that “good” is the baseline and there will always be room for improvement, but only if time allows. 

VII. The Evolution

“The best way to predict the future is to create it.” -Peter Drucker

Peter Drucker, “The father of modern management,” has countless lessons, but his approach to a company staying relevant truly influenced me. One of my professors, who met Drucker, explained his genius in a story about a telecommunication company that sought his consultancy. When Drucker spoke with the senior management team at the telco company he asked them a simple question, “What does your company do?” They responded, “we’re in the communication business.” Drucker explained they were actually in the entertainment business. The point the executives had missed was that when a mother is on the phone with her sister or a teenager is chatting with a friend, they’re being entertained. Time on the phone was competing with listening to music or watching tv. To stay relevant, the executives needed to embrace this thinking.

I am not sure if this story is a myth, but the elegance of his question stuck with me all these years. When I look at the transition of “copper-line” telco companies into internet providers (DSL, cable, satellite, fiber-optic, etc.) and the expansion into global production companies (NBC, HBO, Syfy, Turner, Universal Pictures, etc.), there’s validity to his observations. More importantly, if a company stuck with simply selling phone services, they probably didn’t last very long in the 21st century. 

Not all entrepreneurs attempt to disrupt an industry or create a fundamental shift to an entire sector. However, a small business must face the specter of being put out of business through technology, legislation, or other factors. For example, I think about all of the advances made in tax software over the last twenty years and the role of the personal accountant being minimized. In fact, if you search online for “personal accountant,” an ad for Quicken appears first. Then I think about the possibility of the tax code being simplified through legislation and wonder if accountants would even be needed for the average American. 

Still, an accountant who started a business to complete personal tax returns in 2000 probably needed to find a niche (small businesses) or develop a specialty (hedge fund audits) to survive. If you follow the logic of Peter Drucker, the accountant probably isn’t in the tax filing business, they are more likely in the advice business. If that’s true, the accountant should be planning a future where they remain a valuable advisor, not how to file more returns (that plan probably doesn’t scale, unless your name is Michael Chipman). In a world where AI, block chain, and extended reality redefine every portion of our lives going forward, even the most mundane businesses should be asking how they invent or reinvent their future.

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This is hardly a comprehensive list, but this is what time afforded me (remember, good, not perfect). Perhaps, with some positive reviews I might have a follow-up article, but I promise a cadence faster than my next vicennial anniversary.