I enjoy reading nonfiction books. Books that recount historical events or people’s lives and books that enhance my understanding of complex subjects are my favorites. I’ve come to appreciate these books for more than just their content. Well-written nonfiction books can be great jumping-off points.

Most well-written nonfiction books take a long time to create. The authors spend lots of time researching their topic. They read and talk to people to make sure their facts and understanding are sound. The amount of information found and consumed during their research can be staggering. Identifying and accessing this information by applying their investigative skills can consume a material amount of time and energy.

What most people don’t realize is that authors often share their research process in their books. They cite the sources of facts and important concepts throughout the text. But more importantly, they often have a notes section at the end of the book that lists all the articles, books, interviews, etc. they researched and used in the writing of the book.

The notes section of a great book can be an overlooked gold mine. It gives me a list of additional vetted sources of knowledge about a topic I’m interested in. The author’s countless hours of research are summed up in one easy-to-read list. I’ve used the notes sections of books many times to find other wonderful writings and people I otherwise would have never known about.

When I finish reading a good book, I make a point of reviewing the notes section for golden nuggets and bread crumbs.

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

• Schedule – This was the third full week of my schedule experiment. My purpose for reading something and the type of material affects how fast I read. For example, if I’m trying to understand a new, complex subject, I read more slowly (which I think is a good thing). Mornings are best for me for this kind of reading.
• Supply and demand – When supply far outpaces demand, people on the supply side will experience unwanted outcomes. In investing, this can occur when capital far exceeds quality destinations for capital. It’s better to be investing when the opposite is true.

Week one hundred sixty-four was a productive week. Looking forward to next week!

An initial public offering (IPO) occurs when a private company is publicly listed on the stock exchange. It means the public can buy or sell shares (ownership) in a company. An IPO is a liquidity event favored by founders and venture capital firms because it gives them the liquidity of an auction-driven market that they don’t have when a company is private. Their ownership in a company can be easily sold or added to with a few clicks. And the funds from a sale are usually available instantly. That’s much more efficient than a private transaction.  

I was curious about IPO historical activity. Here’s what I found for the number of IPOs annually:

• 2018: 255
• 2019: 232
• 2020: 480
• 2021: 1,035
• 2022: 181

The number of IPOs in 2021, in comparison with other years, was huge. That year didn’t just have the highest number of IPOs in the last five years (by a large margin), it saw the highest number of IPOs in in more than twenty-five years (I didn't find reliable data before this). And that includes the internet bubble of the late nineties.

This data was eye-opening—2021 was gargantuan. It was the best year in the last quarter century in terms of companies accessing liquidity via public markets.

Number of annual IPOs is a stat I’ll begin watching more closely.

I caught up with a founder who updated me on his progress. His company recently launched its product and is now looking for customers. He has less than a year of runway left and understands that raising additional venture capital funds isn’t a sure bet.

During our conversation, he shared that he’s hyper-focused on getting to breakeven. He’s trying to convince customers to pay for the solution, which has him hyper-focused on creating real value for them that he can be paid for. He isn’t spending time with customers who can’t or won’t pay. He isn’t building nice-to-have features, only must-haves. He’s now open to introductions to different industries and customers that have the problem he’s solving (he used to be open only to a narrow industry and customer profile).

This founder has always been good about listening to customers and running a good customer discovery process, but it’s on steroids now. His focus on creating value, being paid for that value, and reaching breakeven has elevated his company’s customer discovery process to another level. The entire team is laser focused on iterating the solution quickly to turn it into something customers will happily pay for.

When capital was abundant, founders could always punt. They could raise another round to extend their runway if they didn’t find product–market fit. Now, with that option no longer readily available, the possibility of running out of runway and shutting down is very real. It has more founders focused on getting paying customers to extend their runway.

The current fundraising environment is tough for many founders, but an unexpected benefit of it could be a heightened focus on customer discovery. That would be a good thing because it would lead to more founders solving problems that people care about and are willing to pay for.

A Bloomberg article today reported that 1.6% of job seekers relocated to take a new job in the first quarter of 2023. According to the article, that’s “the lowest level on record.”

That statistic really jumped out at me. That means people are now choosing where they live based on factors other than their work. I’m sure other things, such as low unemployment making competition for talent fierce and high interest rates making buying a new home more expensive and less appealing, are playing into this. But it still says a lot about the shift in employee psychology.

I don’t think this change is limited to employees. I suspect founder psychology has also changed. Founders are choosing where to build companies based on personal factors like quality of life—not proximity to investors or traditional tech talent pools.

If this dispersion of founders continues, I’m curious to see how seed-stage venture capital funds adjust their sourcing strategies.

I recently caught up with someone who works for a publicly traded tech company. I asked him what the most material change he’s observed coming from leadership is. I expected something like closer scrutiny of expenses, but he said something else. He said there is the highest level of accountability across the board.

Leadership is communicating that goals must be achieved every quarter. There’s no more “We got close, but we’ll hit it next quarter,” because the reaction to missed goals by public market investors could be dire. He shared that when the numbers aren’t on track to achieve goals, leaders are double-clicking into the details looking for answers and holding everyone accountable. He said the result of this heightened accountability is an organization extremely focused on what matters most.

When companies focus, they can accomplish the impossible. I’m curious to see public tech companies’ results over the next quarter or two. I suspect the increased accountability will lead to some unexpected positive outcomes for some public companies. If that happens (and that’s a big if), those positive outcomes could change sentiment toward those companies and increase investor demand for ownership in them.

My early years were foundational for me. I had lots of energy and crazy ideas as a kid. My mom always listened to those crazy ideas and gave me the leeway to make mistakes. She encouraged me to work hard and, when things didn’t go well, reflect on it, dust myself off, and try again. Over the years I learned, became confident, and realized I love business and entrepreneurship. I’m super appreciative of her approach, her love, and most all, her patience with me!

Happy Mother’s Day, Mom! Thanks for being a great mom!

Negative sentiment about certain types of companies has caught my attention. Some of it feels extreme. When people say things like all companies in a particular sector should be avoided, that doesn’t make sense to me. With interest rates rising and funding for companies harder to come by, it’s reasonable to assume that companies will struggle and may even fail. But expecting all companies (in a sector or segment) to fail or not grow isn’t reasonable.

When sentiment is negative, that’s a sign that the market has negative expectations of a company’s future results. Said differently, negative sentiment is a prediction that the probability of a negative outcome is high.

Sometimes negative expectations don’t align with what’s happening within a company. It may have hit a rough patch, but its leaders have done things to get back on the right path. For example, they were focused exclusively on growth, which resulted in extreme negative profitability and a high burn rate. But now they’ve taken correction actions, examples of which could be focusing on more profitable customer segments or reducing headcount.

If the company continues to focus and take the right actions, eventually this will be reflected in their results. Then, market sentiment and expectations will become less negative (or even positive).

I’m curious to see how many companies will make this transition and prove the current market sentiment wrong.

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

• Schedule – This was the second full week of my schedule experiment. This habit is having a positive impact on my knowledge acquisition. I’m starting to think about a daily goal for number of pages read.
• Insights – Developing insights from data that’s readily available won’t generate outsize outcomes. Many people can do that. Cultivating qualitative insights and making decisions based on them isn’t something everyone can do. Therefore, those insights generate outsize outcomes when they prove to be correct.
• Consistency – Someone pointed out that one of my superpowers is consistency. I am consistent, but I hadn’t considered it a superpower. I’ve been thinking more about this.

Week one-hundred sixty-third was a great week. Looking forward to next week!

I was exchanging thoughts with an investor friend about other seasoned investors. These are investors with many decades of experience. They’ve typically been through multiple cycles and navigated them successfully.

My friend said he doesn’t believe in reading about the thoughts of seasoned investors. He wants to know what action they’re taking and what their strategies are—not principles or concepts. Because they don’t share their current actions or strategies, he doesn’t read any of their writings; to him, they’re not interesting or insightful.

I disagree with my friend. I don’t think it’s realistic to expect an investor to share his strategies or real-time investments. Doing so would likely mean more capital being deployed into those investments, which would raise prices and reduce returns. Why would anyone want that?

I also think there’s value in understanding the frameworks other people use to inform their actions. How they view and think about the world may be different and worth considering, even if you disagree with it. Lastly, there’s something to be said for the wisdom accumulated during decades of success. It’s taken these people a long time to figure out some of their insights. Even if you don’t agree, it’s worth listening them—it might take you decades to reach the same conclusion on your own.

I may disagree with elder investors’ views, but I actively seek out material in which they share their insights because I have respect for the wisdom they’ve accumulated over their successful careers. The wisdom might not be valuable at the moment, but it could be priceless at some point.