At a recent event, I met an entrepreneur in the real estate space. I love learning about company origin stories, so I asked for his. He said that after the Global Financial Crisis, his financial services career was uncertain because no Wall Street banks were hiring. In fact, many were firing employees and trying to stay afloat. He used his relationships with his previous banking customers and his curiosity to learn about a real estate problem that others were unaware of. He researched the space for over two years and then launched his company.

I love his story because it demonstrates how focus, creativity, and drive can help entrepreneurs do their best work, even in the worst of circumstances.

You may have heard this proverb:

If you give a man a fish, you feed him for a day. If you teach a man to fish, you feed him for a lifetime.

This makes sense to me. Sometimes people ask for your help with a problem, but they really want you to solve it for them. If you do, you’ve satisfied their immediate need but not set them up for future success. You’ve just taught them to call you whenever they encounter that problem.

I don’t believe in leaving people hanging when they ask for your help. Instead, I believe in supporting them. I won’t solve the problem for them, but I’ll be there to help them think and navigate through the problem. I make it a point to not lead; instead, to follow their direction. I try to support, nudge, and encourage along the way. When the problem is solved, they’ve solved it—I haven’t. The process of figuring out the solution sticks with them, and they can comfortably solve problems like it in the future on their own. And you’ve helped them become more confident. When someone succeeds in doing something they thought was impossible, they become surer of themselves and their abilities. They start to look at other problems not as insurmountable but as puzzles they can solve if they focus and put forth the effort.

I’m not sure who wrote this proverb, but it’s spot on. I prefer to teach someone how to fish.

Today I read an article about the dispute between Warren Buffett and the Haslam family over Berkshire Hathaway’s purchase of the Haslam family’s prize asset, Pilot Travel Centers. The dispute has led to a lawsuit. Pilot is a truck stop operator with over 860 locations operating under the Pilot Flying J and One9 Dealer brands.

Since 2017, Berkshire has gradually purchased 80% of Pilot for $11 billion. During an annual 60-day window, the Haslam family can opt to sell their 20% remaining stake to Berkshire. The contractually agreed-upon price would be 10 times the prior year’s earnings before interest and taxes (EBIT). Note that EBIT differs from EBITDA. EBITDA is earnings before interest, taxes, depreciation, and amortization.

The lawsuit centers on what financial reporting method should be used to calculate EBIT and thus determine the purchase price should the Haslams elect to sell the remaining 20%. The issue is pushdown accounting, a method that has an impact on the value of assets a company owns, which impacts the depreciation and amortization expenses, which impacts reported profitability (in this case, EBIT). The Wall Street Journal reported that the decision to use pushdown accounting can have as much as a $1.2 billion impact on the price Berkshire would pay for the remaining 20% of Pilot. I assume the Haslams want to use the method that determines a higher EBIT and Berkshire and Buffett want to use the method that determines a lower EBIT.

There’s more to this case that I won’t get into, but I find it interesting that this dispute isn’t about the company's operations. It’s about how the results of its operations are recorded in financial statements and how the method used could have a $1 billion-plus impact.

Accounting isn’t fun, but it’s the language of business. This case reinforces my thoughts about it being important for entrepreneurs to learn basic accounting concepts.

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

• Fundraising – I chatted this week with two founders who are finalizing fundraising rounds. They’re wrapping up diligence and have target close dates in the next week or so. I suspect most investors and lawyers are aiming to get most deals done by December 15.
• Serendipity – I ran into someone I haven’t talked to in years. We caught up, and I learned that he has expertise that will be helpful with something I’m actively working on. He even offered to help. I’ve benefited from serendipity many times, but I’m still surprised by its power.

Week one hundred ninety-three was another week of learning. Looking forward to next week!

I want to improve how efficiently I learn—specifically, how efficiently I read. To answer the question of how I can improve my ability to learn through reading, I sought out a few books and experts on the topic. From these sources, I’ve learned a few ways to read faster with better comprehension. One suggestion that I heard consistently was simple but effective: underline the words you’re reading with something (e.g., your finger or a pen).

A few observations on why this technique works:

• Speed – The pointer acts as a visual pacer: your eyes will move as fast as it does. If you want to increase your reading speed, you can move the pointer faster. This is a good way to practice improving your reading speed.  
• Comprehension – Your eyes focus on what you’re pointing to. You’re less likely to daydream or be distracted by things happening around you. With the power of focus, your understanding of what you’re reading improves.

I’ve tried this hack, and I must admit, it works when it’s applied consistently. If you want to improve your reading speed and comprehension, consider following your finger.

I caught up with an entrepreneur friend considering his next thing. He sold his first company and wants to buy a company he can optimize for cash flow. The dilemma he’s working through now is what size company to buy.

If he buys a company that’s over $1 million in annual EBITDA, the multiple paid on EBITDA will be higher. Translation: it will be a much more expensive purchase price, and the yield on the investment likely will be lower than he would like. On the other hand, the company will likely have more people with institutional knowledge of how the business operates. That will minimize the chances of the business rapidly declining if the CEO transitions out. The purchase price will be higher and the yield could be lower, but the business is more likely to run on its own without much intervention from my friend. He could be a passive owner.

If he buys a company with less than $1 million in annual EBITDA, it’s the opposite. The multiple will be lower and the potential yield higher. But there’s key-man risk. The CEO is likely the glue holding it all together. My friend will likely have to become CEO or work closely with the CEO so he can learn the business and minimize the chances of a rapid decline if a CEO transition happens. The purchase price is lower and the yield may be higher, but my friend will likely need to be a very active owner.

Both approaches have pros and cons. I’m curious to see which path my friend chooses.

I’ve been watching Apple’s push into financial services over the last few years. Financial services for consumers and small businesses is a large enough market to move the needle for a company of Apple’s size. Consumers shifting from in-person to digital banking and the slow pace of innovation by banks make it ripe for disruption. 

Apple partnered with Goldman Sachs to offer credit card and high-yield savings account products. But it’s been reported that Goldman Sachs has been trying to get out of the credit card business, and Apple offered the bank a way out of their credit card arrangement. The article doesn’t include specific details about why the bank wants out.

I’m a fan of Apple’s push into financial services. I’m curious about why this partnership isn’t working, how this change will affect Apple Card customers, and what impact it will have on other financial products Apple offers. I hope we’re looking at a bump in the road and not a major setback for the tech giant.

I recently had a conversation with an entrepreneur who’s started several successful businesses in various industries. He was telling me about the latest company he’s working on. It’s a waste management space, and the company will remove trash from residential homes. He doesn’t have experience in this industry, so how did he decide to start this, I wondered. The story was that he heard from a friend about the opportunity to obtain a contract (i.e., recurring revenue), investigated it, and decided it could be profitable. He went to work finding a cofounder and developing a strategy to execute the work.

During our chat, I realized a few things:

• This isn’t a space this founder is passionate about; he just saw an opportunity he couldn’t pass up. 
• He isn’t planning to scale this company. He just wants to have a few reliable customers and build a small, reliable team to execute the work.
• This is a small (and tough) market, so there isn’t an opportunity to create large amounts of value for others and recognize that value through appreciation of the company's value. Rather, it’s an opportunity to create a steady stream of cash flow by providing a service that people don’t want to do, but also don’t highly value.

During my conversation with this entrepreneur, I realized something. Some entrepreneurs are gifted at creating small companies that essentially exist to generate cash flow for the owner. And they do this repeatedly. They’re great at taking a company from zero to one—to getting the machine started—but rarely think about the problem’s market size or how big the company could be. They focus on getting the company to the point where it can distribute a certain amount of cash to them, and when it does, they’re happy. The idea of reinvesting cash into growth opportunities to scale the company doesn’t cross their mind and doesn’t interest them when it’s brought to their attention. 

I think of these gifted people as serial cash-flow entrepreneurs.

This week I had the opportunity to attend a holiday party. As I mingled and chatted, I noticed that no one was talking about work. I heard conversations about life, family, fun experiences, and funny stories. After the party, a group of us went to dinner, where we learned more about each other and our significant others.

The party was wildly successful. I watched people enhance existing work relationships, making them deeper and more personal. And I watched people establish new relationships with others they didn’t know they had things in common with. 

My takeaway is that I’m a fan of holiday parties. It’s a great time for people to connect outside work and build deeper relationships based on who they are, not the work they do.

I chatted with an aspiring founder recently. He’s a senior software engineer at a start-up valued at a few billion dollars. He’s been there for several years. He joined when they were a team of one hundred—it’s now one thousand. His equity is fully vested, and he’s excited about leaving to start his own company.

He’s currently in search of the problem he wants to solve. He’s investigated a few problems and done discovery, but none panned out. He’s also looking for someone to join him. Specifically, he’s been looking for someone technical. This stuck out to me, and I asked why. His response was simple: I want to be CEO and need someone to build the product.

As we chatted, I shared my learnings as (1) a nontechnical founder who regretted not having a technical cofounder and (2) an investor who’s talked with countless aspiring nontechnical founders who deeply understand a problem and have an idea of how to solve it but lack the technical skills necessary to build a solution:

• The problem is where it all starts. The more painful it is and the more people who experience the pain, the better. If you haven’t found the problem you want to solve, there’s nothing wrong with listening to the problems other aspiring founders want to solve. Nontechnical aspiring founders with deep understanding of a problem (i.e., founder–market fit) are always looking to connect with aspiring technical founders.
• Building a team best suited to solve a particular problem is the goal. Great team members have complementary, not overlapping, skills. Hiring people to do what you don’t want to do will likely lead to overlapping skills and team gaps (in his situation, great technical abilities but no deep understanding of a problem—or no problem at all).
• Titles don’t mean much in early-stage companies and often change. Having the CEO title is great for the ego, but it isn’t worth missing out on solving a great problem or working with a strong team.

These points resonated with this aspiring founder. He’d recently realized he was limiting his cofounder prospects by focusing only on people with technical skills and had been thinking about changing his approach. What I said about my experience confirmed some of what he was already thinking. 

This founder is super smart and has the drive to build an amazing business. I can’t wait to see where his entrepreneurial journey takes him!