I’ve been hearing rumblings about commercial office vacancy rates increasing in Atlanta and a few other metropolitan cities, and I’ve been curious about the impact of the vacancies. This morning the title of a Bloomberg article—“Starwood Defaults on $212.5 Million Atlanta Office Mortgage”—caught my attention, and I read it.

Starwood Capital Group is in default of its $212.5 million mortgage backed by a 29-story office building in the Buckhead neighborhood. I’m very familiar with the property: I have friends who work in this building, and I’ve been to the WeWork offices there.

Here are more details from the article:

• The mortgage originated in 2018 and matured earlier this month.
• Starwood didn’t refinance or pay off the debt.
• The property was 87% occupied in 2018. Occupancy was 62% at the end of 2022.
• Starwood and its lenders are negotiating an agreement.

Sounds like this situation is far from over. I’m curious to see how it’s resolved and if any other office buildings in Atlanta will be involved in a default.

Given the current interest rate environment, there’s been a lot of focus on fast-growing companies trying to reach breakeven or profitability. Many fueled their growth with losses when capital was cheap. Those days are likely over, and these companies are now concentrating on generating cash instead of consuming it. All of them won’t survive, but the ones that are solving painful problems and that have strong leadership teams have a higher probability of becoming profitable.

There’s another segment of companies that I haven’t heard discussed as much that I’m curious about: companies with recurring-revenue business models that grew rapidly because of COVID tailwinds and that generate material free cash flow, but that saw their growth rates slow or flatline. These companies can be cash registers. If they retain their current customers, they will generate cash on a recurring basis.

The recurring cash generation of these companies is key. They have cash from customers they can use to experiment with growth activities and ideas. The recurring-revenue nature of their business model means that cash will be replenished. They can keep experimenting. Learnings from failed experiments can be applied to new experiments. Hopefully, compounding learnings from experimentation will lead to the growth engine being restarted.

To be fair, restarting growth is hard—especially for a large company. It often involves retooling entire functions, such as sales and marketing. These efforts can be painful and take time to bear fruit. This isn’t something all management teams are able to achieve. But if they are successful, the rewards could be enormous when these companies are revalued.

I’m curious to see which cash-flow-positive, recurring-revenue companies can restart their growth and what impact it will have on their valuation multiples.

One of my personal characteristics that I’m mindful of is my capacity for empathy. Seeing something from the perspective of someone else or understanding how a situation makes them feel doesn’t come naturally to me. Over time, I learned that understanding the perspectives and feelings of others is a superpower. It makes navigating the world much easier, especially for founders (it’s hard to solve a problem unless you understand the feelings and perspectives of those living the problem).

Over the years, I’ve improved significantly in this area. I’ve tried various things, but what’s had the most impact is simple: spending time with people different from me and trying to understand their perspectives and how they developed them. Doing this (in a genuine and authentic way) has enlarged the lens that I view the world through. That’s made it easier to see things from multiple vantage points. I still may not agree with their perspective, but I can see things through their lens and understand how they feel.

I’m still not an overly empathetic person. But intentionally spending time with others with different perspectives has enhanced my capacity for empathy. It’s something I want to continue doing as long as I can.

I’ve been posting daily since 2020. After three years, it’s still something I enjoy and get a lot out of. When I first started, lots of low-hanging fruit was available—I had many experiences as a founder that I could reflect on and identify insights from. I wasn’t used to sharing my thoughts publicly, though, so it took energy to crystallize my thoughts and craft a post that people could understand.

Now that I’ve been doing this for a few years, I can write a post with minimal effort. I’ve built muscle memory around writing and gaining clarity of thought.

I focus my effort now on identifying interesting things and insights to share. I’ve become more intentional about acquiring knowledge related to concepts I want to understand and attempting to develop unique insights about them.

The result of all this is that writing daily posts is still challenging, but in a different way. I began by being more intentional about developing the habit of sharing my crystallized thoughts. I’m now more intentional about understanding a concept and identifying insights related to it. Focusing on concepts is more difficult. I’ve had to adjust my habits to support the change, but I’m happy with the adjustments. I’m excited to be learning about interesting and difficult concepts. I’m even more excited by the challenge of coming up with unique insights.

This is my one-hundred-seventy-second weekly reflection. Here are my takeaways from this week:

• Decision feedback – I’m curious to try out the new technique for improving decision-making that I wrote about recently. I’m going to start asking a few people I think highly of if they’ll provide feedback.
• Jump start – Sometimes it’s good to have a change of scenery for thinking. For some reason it jump-starts my creativity and my ability to recognize insights.
• Frustration – Earlier this week, I was frustrated about a few things that were out of my control. Exercising and talking through my frustrations with others was helpful.

Week one hundred seventy-two was a frustrating week. Looking forward to next week!

Today I heard about an interesting technique. The objective is to improve your decision-making by getting feedback on the thought process you used to make a decision, not the outcome. The outcome of a decision isn’t a reflection of decision quality. Bad decisions end up turning out well, and vice versa, because of chance and randomness.

The technique involves sharing your thought process, including the variables you considered, with credible people who make good decisions. How did you think about the decision? What information did you factor in? The twist is that you don’t share outcomes with them (ask for feedback on decisions that have had good and bad outcomes). These people then explain the shortcomings and strengths they see in your thought process. They might even tell you how they would approach the decision if they were in your shoes. From all this feedback, you’ll learn how other people approach making decisions and improve your own decision-making.

This technique caught my attention because most people ask for feedback on decisions by leading with the outcome. This is completely different but makes a lot of sense to me (in theory). I’m curious to try it out and see how it works in practice.

I chatted with a founder about a seed fundraise he’s considering. He wants to raise $2 million. We talked through his thinking, and I realized two things: he didn’t have a great grasp on current market valuations, and he didn’t realize how raising that much capital at today’s lower valuations would dilute his ownership, especially if he continued to raise capital.

I did some back-of-the-envelope math regarding his future round and a few hypothetical rounds after that. It was eye opening to him. He realized that dilution by early and subsequent rounds would have a material impact on his ownership as founder and materially reduce his proceeds if his company were to be sold.

Raising capital is hard right now for early founders. Even if you can raise the amount you desire, it’s worth thinking through how much you need, the current market valuation of your company, and how dilution will affect you. Tools that can help founders understand the dilution impact of fundraising rounds are out there (645 ventures built one). Spending time with one of these tools can help founders quantify the impact of dilution.

Every month I get email updates from several early-stage founders. They usually include what’s going well and not so well with the business, along with the latest company metrics. In 2022 and the first half of 2023, the tone of these updates wasn’t optimistic. The fundraising environment wasn’t great, and founders were reducing expenses to extend their runway.

Over the last two or so months, I’ve been seeing more optimism in these emails. The fundraising environment is still tough. But founders are sharing more signs of being closer to product–market fit. Metrics are improving, and for some of them, revenue and customer growth are beginning to accelerate materially.

This is anecdotal, of course, and not representative of all early-stage founders, but it feels like founders got the message and may have been able to right the ship. I hope so. I look forward to seeing if this is confirmed in the remaining 2023 updates.

A family member recently sent out a group text about suddenly not being able to access their Netflix account. After a bit of back and forth, we realized they’d been “borrowing” the account of another family member . . . for years. Netflix has been cracking down on account sharing by people in different households, which resulted in this family member’s access being revoked. I don’t watch much TV and hadn’t been following this, but this time I got a front-row view.

The whole situation was funny to me given how many years this had been going on, but then I realized something. Netflix had been providing immense value to two households in my family. They were receiving only 50% of the revenue they should have been receiving. Said differently, they were capturing a fraction of the value they were providing.

Netflix is a huge technology company. I assume they’ve known about this sharing issue for many years and have had a fix in mind. I wonder if they waited to deploy it until their growth began to slow, or if another catalyst is driving this crackdown. In the case of my family member, they got them hooked on the value of the service and original content. Now they’re forcing them to pay for that value. Essentially, they’re forcing my family member and everyone else who’s been on a multiyear free trial to put up or shut up. Become a paying customer or stop using the service.

As of the last group chat messages, my family member was in get-my-Netflix-working-again-ASAP mode. Translation: they’ll end up creating their own account and happily begin paying for the service.

I don’t follow Netflix, but I imagine this will have a material impact on their top-line revenue at some point (assuming it doesn’t drastically increase churn). It’ll likely ruffle some feathers in the short term, but I like this move. They’re making sure they’re being compensated for the value they provide.

I recently attended a social gathering where I met someone working in tech who moved to Atlanta within the last eighteen months. He’s a native of New York City but most recently lived in Los Angeles. Before that he lived in Austin. He has an interesting baseline, so I was curious to get his candid thoughts on Atlanta so far.

Overall, he likes Atlanta. The climate is nice. The cost of living isn’t a steal (anymore), but it’s reasonable. The people are nice. The biggest downside, in comparison to Los Angeles and New York, has to do with the variety of social activities. I wasn’t expecting this, so I was interested to hear more.

In Los Angeles and New York there are several parts of town to explore, each with its own set of social activities. The options are well known, regularly explored, and openly discussed. Having a social life with tons of variety is easy. If you make the effort to leave the house, you know of many interesting things you can do.

He doesn’t feel the same way about Atlanta. A few parts of town are known for being entertainment venues, such as Buckhead, West Midtown, and O4W, and he’s aware of them, but he doesn’t feel the city offers as much social variety.

As we chatted, I shared with him some other parts of town and things to do. He had no idea some of them existed. I said that Atlanta may not have as much to do as New York or Los Angeles, but Atlanta does offer a healthy variety of desirable social activities in various parts of town. However, the awareness that people have of them, and their discoverability, are highly variable.

Atlanta is influenced heavily by homophily (the tendency for contact between similar people to occur at a higher rate than among dissimilar people). People who have a lot in common interact with each other frequently. People who don’t have anything in common interact infrequently or not at all. Of course, frequency of interaction is what defines a person’s social circle.

One of many ramifications of this is that information becomes localized in a social circle. The infrequent or nonexistent interaction among people who lack commonalities means that information doesn’t leave certain circles. In the case of social activities, people outside a social circle don’t know certain activities (or even parts of town) exist and therefore don’t participate. Said differently, people’s awareness of desirable social options varies drastically depending on whom they interact with frequently. People living in the same city end up having vastly different awareness of the social experiences available to them.

Homophily is a basic human principle. It isn’t going anywhere anytime soon. The key to maximizing social variety in Atlanta is acknowledging homophily’s heavy influence and trying to interact more often with people you have less in common with. This will help you get access to information that’s localized in circles you’re not part of about fun things to do in different parts of town. Obviously, this is easier said than done, but I believe it’s worth the effort because it helps you experience all Atlanta has to offer socially.