This week, I had a long conversation with an entrepreneur who owns retail stores. The conversation centered on how tariffs are impacting her business. Most of the items she sells are imported from China. The only other countries with manufacturing capabilities are also subject to high tariffs, albeit lower ones than China. So, shifting to other countries wouldn’t solve her problem.

This entrepreneur traveled to the West Coast to understand how her wholesalers are planning to react. It wasn’t good. Some are raising prices to reflect the full tariff amount. Others plan to close up shop and walk away (after decades in business).

This entrepreneur’s wholesale costs will more than double, and she will likely have to double her prices. The challenge is that she doesn’t think her customers will be willing to pay double. She figures that revenue will decline regardless of what she does; the question is how much.

She also shared that she’s now considering starting other businesses. The possibility of her retail store failing for reasons beyond her control is real. It’s forcing her to be open to new opportunities in other industries to pay the bills.

I don’t know what will happen with tariffs. I suspect lots of entrepreneurs are rattled and thinking about plan B. I’m curious about what this will lead to. We could see a burst of entrepreneurial activity. When entrepreneurs’ backs are against the wall, they’re forced to do their best work. With tons of them facing this situation at the same time, some good is bound to come out of it.

AI is a hot topic among entrepreneurs right now. It’s a fantastic technology that makes the previously impossible possible. In the last few weeks, I’ve talked to several founders who want to use AI in their companies. They’re thinking along the lines of chatbots and other features. This struck me as odd because it’s not clear if these things would add value to their customers.

After I left one of these conversations, I realized that the founder is building technology in search of a problem. To his credit, he knows that AI is powerful and can change his company and benefit its customers. But he just doesn’t know enough about the technology to determine how to apply it in his business. So, he defaulted to building what he’s seen be successful at other companies: chatbots and the like.  

Companies exist to solve problems. By solving problems, they add value to customers, and customers pay them for that value. If a technology doesn’t help a customer materially or help you help the customer, what’s the point of using the technology in your business?

AI is powerful, and all entrepreneurs should explore and use it in their businesses. I think the best approach to adopting it, if you’re unfamiliar with it, is to pinpoint a problem that’s painful for you or your customers—one that you can’t solve or that’s painfully expensive to solve. Then, search the numerous AI tools for one that can help you solve that problem. Evaluating each AI tool to understand whether it can do that will expose the limitations of each tool and the technology as a whole. This process will accelerate your AI learning and help you get comfortable with the technology.

This approach will help you create a better solution for yourself or your customers and give you a deeper understanding of AI capabilities that you can use to solve future problems.

Tariffs and the stock market decline after they were announced were all over the media late last week. I lived through tariffs with my e-commerce company, and it wasn’t fun. I learned valuable lessons about how tariffs impact wholesale and retail markets for physical goods, especially for the automotive parts we sold online.

I was curious about how entrepreneurs think about tariffs, so I talked to a few e-commerce entrepreneurs, who are also friends, this weekend.

A few things I learned:

• Entrepreneurs in retail (online and physical) are worried about tariffs because they can’t absorb the cost of tariffs—they have to pass the cost on to customers.
• All the entrepreneurs saw sales soften in the last quarter or two before the tariff announcements. The tariffs feel like a double whammy.
• Customers are asking when or if prices will increase because of tariffs.
• All the entrepreneurs are looking at ways to do more with less and exploring whether AI can help.
• They’re all pausing any spending on new growth initiatives.
• They all recognize that they can’t do anything about the tariffs and aren’t dwelling on them—but they’re monitoring developments like hawks and navigating them as best they can.

Tariffs are a big deal for e-commerce companies whose products aren’t manufactured in the US. I’m curious to see how this all plays out, and I’m mentally preparing myself to pay more for physical goods.

Today, I talked to an entrepreneur who’s a dentist. Over the last decade, he’s steadily grown the business to about 20 dental offices (each office does ~$1 million in annual revenue). To date, he’s used bank loans and hasn’t raised from investors, but he’s considering raising growth capital to accelerate growth and build his company to more than 100 locations.

During our chat, he shared that he recently stopped seeing patients. That decision completely changed his business. He realized that for many years he’d been a full-time dentist and a part-time CEO. He wasn’t giving the business the attention it needed. He didn’t have the bandwidth to work on long-term or strategic planning. He was too busy working in the business, seeing patients.

Now that he’s a full-time CEO, he sees the opportunity ahead of him more clearly, and he realizes he needs to raise eight figures of growth capital to turn his vision into reality.

His insight reminded me of the difference between working in the business and working on the business. For years after I started my company, I was deep in operations to keep the company going. Once I hired more people and removed myself from operations, we grew rapidly. I was finally able to think higher level and longer-term. I identified growth initiatives and focused on making those projects successful so the business could grow.

Like this dental entrepreneur, I didn’t realize for years that to grow my business, I needed to be working on it, not in it.

Two weeks ago, I read a second biography about Albert Lasker, The Man Who Sold America. It mentioned how Lasker worked with Adolph Ochs, who owned The New York Times, to free Leo Frank, who had been charged with the murder of Mary Phagan in Atlanta in 1913. Lasker and Ochs, both Jewish, felt Frank was being wrongly accused because he was Jewish. Learning how Lasker and Ochs created a sophisticated media campaign to draw attention to this case nationally was fascinating.

I’d never heard of Ochs, but I was curious about his journey and how he became the owner of The New York Times. This week, I began reading a biography about him, An Honorable Titan, by Gerald Johnson.

I’m early in the book, but I’ve already been surprised by Ochs’s history: The publisher of a nationally recognized and New York–based newspaper dropped out of school at 14. He wasn’t from an elite family or background. He had to start working full-time at 14.

Adolph began his career as an information entrepreneur in Chattanooga, Tennessee, where he sold a directory at age 19. In 1878, he and a partner created a directory of all the businesses in Chattanooga. This was a manual effort requiring them to canvass the entire city house-by-house to collect the information before they compiled it in a book.

The benefit of this grunt work was that Adolph developed a detailed understanding of the town, its businesses, and the entrepreneurs who owned them. His directory became a valuable resource that allowed him to establish relationships with all the entrepreneurs in town and add value to them by providing aggregated information about where to buy goods and services.

Adolph was selling information that, for the most part, was readily available to everyone in Chattanooga. But by compiling it and making it easy to use, he created something of value that others were happy to pay for. It’s not exactly the same, but it reminds me of how Michael Bloomberg took publicly available bond market data, centralized it, and made it easy for people to make buy-and-sell decisions around bonds (more here). The information product is still, as of this writing, the anchor of his empire and over $100 billion fortune.

It’s interesting how these two information entrepreneurs took a similar approach when they started out though there’s a 100-year gap between them.

I’m curious to learn more about Ochs and how all this led him to The New York Times.

Yesterday, I shared what I read in the Netflix biography That Will Never Work about how cofounders Marc Randolph and Reed Hastings divided equity and how the first financing round led to Reed owning 68% of the company to Marc’s 30%. I shared all the math in this post.

The interesting outcome of that scenario was the ownership, voting control, and control of the board. Marc was CEO, but he owned a minority 30% stake in the company and didn’t have voting control. He also didn’t control the board because he wasn’t the board's chairman. Reed wasn’t an employee of the company but owned a majority 68% stake in it, which meant he had voting control. He was also chairman of the board, so he effectively controlled the board, too.

Marc and Reed were friends and had worked together at another company. They spitballed ideas until they landed on the idea that became Netflix. So they were used to working together and being brutally honest with each other.

In the fall of 1998, about a year into the company’s life, Reed sat Marc down and told him that he’d done some good things. Then he added, “I don’t think you’re a complete CEO” and “A complete CEO wouldn’t have to rely on the guidance of the board as much as you do.” Reed proposed that he join the company full-time and become the CEO. He suggested Marc become the president and that they run the company together as a team.

Reed had voting and board control, so technically he could have forced this decision on Marc. Instead, he left it up to Marc. Marc thought about it and in the end decided that Reed was better suited to be CEO and that he himself was better suited to work alongside someone disciplined like Reed. They divvied up duties. Reed focused on what they called “back-end” functions such as finances, operations, and engineering. Marc handled customer-facing things like PR, web design, movie content, partnership relations, and customer service.

With the changes agreed to, there was one last issue: compensation. Reed surprised Marc by requesting that the two cofounders redivide their ownership. Reed wanted 2 million more shares—and he thought they should come from Marc.

Marc doesn’t share exact numbers in the book, but he does say, “In the end, I’d agreed that a third of the shares Reed wanted, if he was to come on as CEO, would come from me. The other two-thirds he was going to have to ask the board for. Which he did – and which he got.”

In the end, roughly one year after the birth of the company, Marc relinquished the CEO title to Reed and Reed received additional shares. By this point, they’d raised an additional $6 million from Institutional Venture Partners, a prominent VC firm in Silicon Valley at the time. I’m not sure what the exact ownership split between the cofounders was, but I’d assume Reed had a significant, majority ownership stake in the company.

That’s the story of how Reed Hastings became the CEO of Netflix, as told from Marc Randolph’s perspective.

I’m making my way through That Will Never Work, a biography about Netflix’s origin. I finally got to the part I’ve been curious about. Marc Randolph is the author and was the first CEO and cofounder of Netflix, along with Reed Hastings. I’ve always considered Reed the founding CEO, and this book is helping me understand why.

A little bit of background first. When they started the company in 1997, Marc and Reed each received 50% ownership. They valued the company—an idea and two guys—at $3 million (pre-money). They issued 6 million shares, with each share valued at $0.50. Here’s how the ownership looked at this point:

• Reed: 3m founder shares *$0.50 per share = $1.5m (50%) ownership stake
• Marc: 3m founder shares *$0.50 per share = $1.5m (50%) ownership stake

To capitalize the company, they raised $2 million from investors. The company was worth $3 million (pre-money) and raised $2 million from investors, so its post-money valuation was $5 million (pre-money plus cash raised). For their $2 million, investors were buying 40% of the company. Here’s the math:

• $3 million pre-money valuation + $2 million raised from investors = $5 million post-money valuation
• $2 million raised from investors / $5 million post-money valuation = 40% ownership

Six million founder shares already existed. To give investors 40% ownership, the company issued 4 million investor shares, increasing the total to 10 million: 6 million founder shares split between Reed and Marc and 4 million investor shares.

Marc had a young family and was working full-time in the business, while Reed was part-time and had ample liquidity from selling another company. Reed believed in the idea and invested $1.9 million of the money they needed, and angel investors contributed the other $100k. Marc didn’t invest any capital. Here’s how the 4 million shares issued to investors were split between Reed and the angel investors:

• Reed: 3.8m shares ($1.9m / $2m = 95%) * 4m investor shares
• Angels: 0.2m shares ($0.1m / $2m = 5%) * 4m investor shares

This is where the ownership between the two founders changed drastically. Reed was a cofounder and investor, while Marc was just a cofounder. Here’s how their ownership changed after this fundraise was completed:

• Reed: 68% = 6.8m total shares (3.8m investor shares + 3m founder shares) / 10m total shares
• Marc: 30% = 3m founder shares / 10m total shares
• Angels: 2% = 0.2m investors shares / 10m total shares

Even though they were cofounders and Marc was CEO, Reed had a majority 68% ownership position in the company and was also the Chairman of the Board. Marc was CEO but had only a 30% ownership.

In the next post, I’ll detail how the ownership and other dynamics led to changes in leadership titles.

I’m still reading That Will Never Work, a biography about Netflix’s origin. The author, Marc Randolph, shares his perspective on the early days as cofounder and the first CEO of Netflix.

Netflix is a household name worldwide. It’s the go-to streaming service for people to watch movies, shows, and other television content. The company is publicly traded and has a market capitalization (valuation) of over $410 billion.

But things didn’t start that way. The company was born in 1997. Users could buy or rent DVDs by placing an order on its website. The orders were all fulfilled via snail mail from its small office in Scotts Valley, California. The launch of Netflix was a big deal that included tons of press. It was so successful that on the first day, the company servers crashed multiple times and the team had difficulty keeping up with and fulfilling all the orders.

What surprised me was how many orders the company processed that day: 137, which seemed low to me. Given the amount of publicity they'd generated before launching, I expected them to have done hundreds or even thousands of orders. But it was only 137, and that exceeded their initial expectations. They thought 15 to 20 people would order DVDs that day.

When I read this section, I thought about where the company is today and that first launch day. My takeaway is that everything starts not just small but really small. It takes time to make people aware you exist, even if you have a great solution. It’s the discipline to get a little better and compound your learning and growth consistently every single day that leads to massive outcomes over a long period. Being a breakout success on day one is the exception, not the norm. Most companies we consider wildly successful started small and got better every single day, year after year.

For the last year, I’ve been enamored with media entrepreneurs and biographies about them. This week, I started reading That Will Never Work, a biography about Netflix’s origin story. It’s written by Marc Randolph, the cofounder and first CEO of Netflix. I always think of Reed Hastings as the first and only CEO—I had no clue Marc was the founding CEO.

I’m early in the book, but I’m enjoying Marc’s recounting of the early days and how he overcame early obstacles.

One thing that resonated with me was his approach to naming the company and the concept of a beta name. Fun fact: the company was originally named Kibble. The logic behind the name was based on an old advertising and marketing saying: “It doesn’t make a difference how good the ads are if the dogs don’t eat the food.”

Marc chose this name because he wanted to remind the team that if the product was lackluster, it wouldn’t matter how well they sold it. He picked “Kibble” as a placeholder to remind his team to focus on building an amazing product that people would love.

Marc realized that picking the right name can take months and that you must give yourself time for serendipity to kick in. Instead of forcing a name at founding, he chose a beta name—a working name you use to get the company up and running (email, bank accounts, website, etc.). The key to a beta name is that it must be something so bad that there’s zero chance you’ll keep it. If you pick something tolerable, he said, your exhaustion and familiarity six months down the road may lead to your just keeping it. But, if you pick something awful, you’ll be forced to rename the company.

Ultimately, his team wanted one word that combined movies and the internet: Net . . . flix.

Marc detailed how hard it is to pick a good name. Here’s what to think about:

• A good name rolls off the tongue. One- or two-syllable words are best; ideally, the emphasis is on the first syllable. His examples: Google and Facebook.
• Too many syllables, too many letters, and people might misspell your website. Too few and they might forget the name.
• A name isn’t great if someone else already owns the domain or the trademark. Double-check before settling on a name.

Even a good name might not be an immediate slam dunk. Marc’s team didn’t initially like “Netflix” because “flix” made some team members think of “porno” or “skin flicks.” When the team was down to the wire and had to decide, they slept on it for a night and agreed it was their best option.

Naming is hard, but it shouldn’t stop you from moving the company forward or building your product or solution. Beta names give you a placeholder and time to find the right name. Marc’s beta name approach is great, and I plan to use it.

One of my favorite entrepreneurs is John H. Johnson. He was a publishing entrepreneur who created Ebony and Jet magazines. Both were iconic magazines in the Black community for several decades. Johnson bootstrapped his company, and by 1987 it was doing over $174 million in annual revenue—almost $481 million in 2024 dollars. Johnson’s autobiography was one of my favorite reads last year. I bought several copies and wrote a five-part deep dive on it (see here).

I wanted to learn more about Johnson and found Empire: The House That John H. Johnson Built, a biography of him. It was written by Margena A. Christian, who used to work at Johnson’s Johnson Publishing Company.

I’m still reading the book, but a few things have caught my attention:

• Start-up capital – Johnson “borrowed” the customer list (20,000 names) of the insurance company that employed him. He then wrote a letter to every customer asking them to prepay for a subscription to a magazine he hadn’t created yet. Three thousand people agreed to pay $2, giving him $2,000 in start-up capital—more than $100,000 in 2024 dollars. This biography highlighted Johnson’s copywriting in that letter. He worded the sales letter in a highly effective way and made people want to buy, sight unseen. Johnson noted that this letter was so unique that he could never replicate those results.
• Curation – Johnson’s first magazine, Negro Digest, didn’t include any original articles. He aggregated all its articles from various publications about Blacks. Making information readily available in a single place made his first magazine successful.
• Cloning – Johnson didn’t try to reinvent the wheel or create something new. He “borrowed” from successful magazine formats and used them to communicate to the Black community. Life magazine was a picture-based magazine that was wildly successful. Johnson used that format when he launched Ebony magazine.

Those are some of my early takeaways from the book. I’m looking forward to reading the rest of it.