Leverage is the ability to multiply the output of your efforts. You achieve more with the same level of effort. Leverage allows you to 10x or more your outcome.

Today I started reading The Almanack of Naval Ravikant by Eric Jorgenson. You can download the e-book file or PDF for free here. Naval thinks about leverage in three classes:

• Labor – Having other humans work for you. You can get more accomplished if others are working on something than you could by yourself. This is the oldest form of leverage and likely the hardest to use. Managing people isn’t easy.
• Capital – Having money work for you. You can magnify your decisions with money. Entrepreneurs use capital leverage by borrowing money to help their company grow, while investors borrow money to purchase investments. More on this type of leverage here. This is likely the most dominant form of leverage used to accumulate wealth over the last century.
• Products with zero cost of marginal replication – Having your product work for you. Duplication of these products costs little or nothing. Think software or media. You write the code once (assuming you don’t update it) or record the video once. Your cost is the same whether one person or one million people buy the software or watch the video. This is the newest form of leverage and has been used by the new billionaires.

Naval also shares why the last of these forms of leverage is so powerful and the most democratic, accessible by all.

Labor and capital leverage require someone else’s permission before you can use them. People must agree to work for you or agree to give you capital. This limits who can take advantage of these forms of leverage. You can have the best business idea, but if people won’t work for you or give you money, the size of the business is capped.

Products with zero cost of marginal replication are permissionless. You can write software, create a video game, write a book, or record a YouTube video and share it anytime. If your product resonates with others, they can buy or consume it without your incurring additional costs. The upside potential of these types of products is hypothetically unlimited.

The book says we now live in an age of limitless leverage where the economic rewards have never been higher.

Naval’s thinking about leverage is simple and thought-provoking, especially for entrepreneurs.

If you're interested in hearing Naval discuss leverage in more detail, you can listen here.

I’m looking forward to finishing this book and sharing my takeaways.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

Over the last two or three weeks, I’ve learned about mercenary builders like John Malone, Robert “Bob” Johnson, and Willis Johnson by reading books about their journeys. I’ve also spent time thinking about my own journey and the journeys of friends who are entrepreneurs. I’m starting to adjust my thinking on mercenary builders.

I used to give more weight to missionary founders, likely because they have a clear idea about what problem they’re solving and what the end game looks like (they have a vision). How they’ll get there isn’t known, but where they want to go is.

My criteria for evaluating mercenary and missionary founders were the same. I was dinging mercenary founders because they hadn’t figured “it” out. I was subconsciously saying, I want to know where the ride’s going before I agree to get on. That was a mistake and ignored my own experience and that of others around me who were wildly successful mercenaries.

Going forward, my criteria will be different. I’ll spend time developing a framework to evaluate mercenaries, but one thing is crystal clear: working with mercenaries with questionable values or ethics isn’t something I want to do.

Where mercenaries end up can be unpredictable, and that’s okay. They’re shaking trees, seeing what falls, and picking up and running with the best opportunity until they find “the one.” How mercenaries go about this journey matters—they’ll often be presented with questionable paths or choices that could be lucrative. Strong values and ethics will guide mercenaries and stop them from engaging in questionable behavior that could be financially rewarding. I’m happy to be part of the ride, but not if by-any-means-necessary methods power it. I want to win the right way, not any way, and I want to work with people who think that way. The end never justifies questionable means.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

According to Verne Harnish, only four percent of businesses in the United States have annual revenue of more than $1 million. If true, that means that most businesses are truly small businesses. I remember when my company had less than $1 million in revenue (it was painful) and when we were larger, with $10 million in revenue. From a resource perspective, $10 million was better, but still inadequate. I was always looking for ways to do more with less.

I regularly think about how many entrepreneurs run small businesses in the U.S. and the tough position they’re in. With their limited resources, they need all the help they can get. Anything that helps them do something they couldn’t do before or more of what they were already doing with the same resources is valuable.

My experience as one of these entrepreneurs informs my investment thesis about enabling small and midsize businesses (SMBs). The thesis is broad, but so are the types of business SMB entrepreneurs run.

Lately, I’ve gotten more excited about this thesis. I think some people overlook something when they’re evaluating the market of SMB entrepreneurs: A rapidly growing number of people want more control over their lives. They view owning a business as the path to getting it and the path to economic freedom. They don’t have a specific problem in mind; rather, they’re open to entrepreneurial opportunities that check this box. I think that in turn, this group of entrepreneurs present an opportunity for others. Entrepreneurs who remove friction and make it easier for these aspiring founders to start and run businesses will create massive value for this group—and in the process, build large businesses with big, loyal customer bases.

I think the SMB market is bigger than some realize and likely poised for growth. From my reading of history, helping other people build businesses and achieve economic freedom has been a great playbook for building one’s own rapidly growing and massive business with passionate, loyal customers.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

My first two posts about Sheila Johnson’s autobiography (here and here) didn’t do her journey justice. After entrepreneurs achieve success or wealth, they often struggle less. Not Sheila Johnson, to my surprise:

Age 0 to 21

• Moved thirteen times as a child.
• Her mother had a nervous breakdown and struggled financially when her father left.
• Kicked out of the University of Illinois orchestra and lost her scholarship because she pursued cheerleading.

Age 22 to 50

• Struggled with infertility for years.
• Newborn son died one hour after birth.
• Sister-in-law embezzled from BET.
• Learned of husband’s affair with an early BET employee when served with a lawsuit.
• BET’s CFO embezzled $2 million.
• Husband had an affair with a BET executive.
• Fired from BET after questioning husband’s affair.
• Relocated from DC to Middleburg, Virginia, to escape public humiliation.
• Divorced.

Age 51 to 75 (today)

• Two years of depression after selling BET.
• Thrown from a horse and nearly killed when the horse stomped on her chest, narrowly missing her heart.
• Received death threats and verbal attacks for years from Middleburg residents opposed to her planned resort.
• Denied bank funding for resort projects; forced to personally fund them.
• Global financial crisis forced a two-year construction pause on resorts.
• Endured nightmares and panic attacks for years.

The above list isn’t comprehensive, but you get the idea. What stood out to me was what she still managed to accomplish:

Age 0 to 21

• First-chair violinist for Illinois All-State Orchestra.
• University of Illinois’s first Black cheerleader.
• Graduated from the University of Illinois.

Age 22 to 50

• Started a youth orchestra, which performed internationally.  
• Started a full-time private music instruction business, which operated for seventeen years.
• Landed acting roles for extra income.
• Flipped a home with money made from acting.
• Wrote music textbooks for income.
• Traveled internationally with the University of Illinois String Research Project.
• Adopted two children.
• Cofounded BET.
• Helped launch and raise funding for the National Music Conservatory in Jordan.
• Became full-time executive vice president of corporate affairs to help prepare BET for an IPO.
• Launched and raised funding for BET’s Teen Summit, an Emmy-nominated show.
• Completed successful BET IPO in 1991 at roughly $500 million valuation.
• Sold BET to Viacom in 2000 for $2.3 billion in stock.

Age 51 to 75 (today)

• Founded Salamander Hospitality.
• Opened a French-style café in Middleburg in 2004.
• Won a multiyear battle with Middleburg city council in 2005 to build resort on 340 acres purchased years earlier.
• Remarried in 2005.
• Purchased ownership in an NBA team, NHL team, and WNBA team in 2005.
• Acquired resort in Summerville, South Carolina, in 2006, renovated the property, and sold it in 2010.
• Acquired resort and golf club in Palm Harbor, Florida, in 2007 and renovated the property.
• Opened Salamander Resort & Spa in Middleburg in 2013.
• Launched Middleburg Film Festival in 2013.
• Built or renovated properties in Jamaica, Colorado, and DC.

Sheila’s life has been full of personal and professional struggles. Her ability to march forward is amazing. No matter what happened in her life, she gained wisdom and kept moving forward.

Struggle is inevitable for entrepreneurs. Johnson’s story demonstrates the importance of not being paralyzed by circumstances and what’s possible when you focus on moving forward.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

Reading about John Malone’s and Shelia Johnson’s journeys gave me perspective on two great company builders and the rise of Black Entertainment Television (BET). Two things stood out about the company’s early days.

BET was founded in 1979, when the cable programming market was young. New satellite technology and outlawing pirated broadcast signals caused demand for programming to explode.

Per Johnson’s autobiography, Malone acquired a cable system in Memphis, Tennessee, which had a roughly 40% Black population at the time. He needed cheap programming that resonated with the city’s Black audience. Bob Johnson, BET’s cofounder, knew Malone. Bob got permission to repurpose a proposal for a cable channel targeting elderly people. He then changed “elderly” to “Black” and pitched Malone. Malone loved the idea. He invested $180,000 for 20% ownership and loaned an additional $320,000.

At launch in January 1980, BET broadcast movie reruns during a two-hour time slot every Friday. It was a start, but not enough. Programming hours had to expand for the company to survive, and reruns couldn’t be the only programming.  

Entertainment and Sports Programming Network (ESPN) launched in 1979 and had early success broadcasting college basketball games. BET noticed that ESPN didn’t broadcast the games of Black colleges. BET decided to fill this gap and began broadcasting Black colleges’ basketball and football games. Programming expanded to six hours per week, but that still wasn’t enough.

In 1981, MTV launched. Consumer demand for music videos skyrocketed. Every artist wanted their video on cable TV. But MTV executives wouldn’t play videos from most Black artists. BET saw this “big cultural gap” in music videos as an opportunity. Artists’ desire for exposure on cable TV made creating music video programming cheap. And strong consumer demand for videos translated into strong viewership. BET saw filling the music video gap as a win for BET, artists, and consumers. In 1981, BET launched Video Soul, which aired for fifteen years.

Music videos and college sports helped BET find product–market fit. Things were going so well that in 1982, BET sold 20% of the company to Taft Broadcasting Company for $1 million. By the fall of 1984, less than four years after launching, BET had 24-hour-a-day programming, 18 million subscribers, and more than 36 employees.

BET’s early success boiled down to two strategic things:

• Cloning – BET didn’t try to reinvent the wheel. Instead, it took ideas that others had proven were viable, cloned them, and applied them to market gaps.
• Market – BET was early in the cable programming market, which grew rapidly. A rising tide lifts all boats. In BET’s case, the market was moving so fast that it yanked BET along. BET made a lot of mistakes early on, but being early in a growing market meant those mistakes weren’t deadly.

BET was a massive financial success for John Malone and Sheila Johnson. It’s interesting to see how two simple strategies, taken seriously, were central to their early success.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

Today I finished reading Sheila Johnson’s autobiography, Walk Through Fire: A Memoir of Love, Loss, and Triumph. Johnson is the cofounder of Black Entertainment Television (BET).  She became the first Black, female billionaire in 2000 when the company was sold for $3.2 billion to Viacom.

Johnson was the lesser-known BET cofounder, but she’s a serial entrepreneur. She was an accomplished violinist, and before going full-time at BET, she built a music business. She taught music and founded a youth orchestra that performed globally, including for royalty. After BET, Johnson founded Salamander Hospitality, a five-star hospitality company with properties in Jamaica, Virginia, DC, South Carolina, Florida, and Colorado.

Johnson has had outsize success, but her book doesn’t focus on that. Johnson is candid about dealing with insecurities, feeling like an outsider, and experiencing infertility, betrayal, public humiliation, and self-doubt. She’s open about her internal and external struggles, their impact on her, and how she overcame them. Johnson is 75 and has struggled at every life stage since adolescence. She still struggles today, despite being successful beyond her wildest dreams.

Her openness about her struggles and her wisdom are valuable, especially to entrepreneurs. Here are my takeaways:

• Partner alignment – Johnson is guided by her values. Her BET cofounder, who was her husband, didn’t operate with ethics or values. His words, acts, and decisions created a difficult culture at BET and problems in their relationship. Alignment of values is critical. If you’re setting out to do the impossible with others and aren’t aligned on values, your journey will become orders of magnitude more challenging.
• Everything starts small – Each of Johnson’s businesses started off tiny. For example, only ten people attended BET’s launch party, and they ate potato chips because they were “pretty broke.” Starting small is part of the journey.
• Don’t give up – In each business, Johnson encountered massive setbacks. Some of them sent her into deep depression. When things looked bleak and there was no clear path to success, she didn’t give up. She kept moving forward, and continual progress prevented her from getting stuck in her troughs and ultimately led to outsize successes. Survival is often a big factor separating winners from losers—figure out how to keep moving forward so you can stay in the game long enough to win.
• Experience – Johnson had no media or hospitality experience, but she didn’t let that stop her. She created large companies in both industries by learning as she went along and finding people she could work with who filled her industry knowledge gaps. You don’t always need personal experience to win in a space.

Greatness doesn’t come easy.  Struggle is an inevitable part of the journey. In Johnson’s case, the struggles were sometimes deep and dark. But surviving struggle often leads to outsize success. You learn resiliency and that you’re capable of more than you thought.

I’m glad I found this book. Johnson is a great entrepreneur, and I’m glad she shared her struggles publicly.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

One of John Malone’s lucrative investments was a seed investment in Black Entertainment Television (BET). In 1979, he invested $180,000 for a 20% equity stake in BET. He loaned another $320,000, which could be drawn down over time. In 2000, Viacom purchased BET for $3.2 billion in stock. Malone received $850 million, an amazing return.

The founders of BET, Robert “Bob” Johnson and Sheila Johnson, received stock worth $1.4 billion. I was intrigued to learn more about their journeys as founders, especially since they were a husband–wife team with no prior media experience.

Sheila’s autobiography, Walk Through Fire: A Memoir of Love, Loss, and Triumph, came out last year, and I started reading it yesterday. She was an entrepreneur before starting BET with Bob, and she went on to start and buy into several businesses after BET. I’m not finished with the book yet, but I can already see that Shelia provides her unique perspective on what happened behind the scenes as she built a billion-dollar company with her husband.

Sheila talks extensively about how Bob, as CEO, didn’t have a vision for BET and lacked values. He focused on generating profits and revenue by any means necessary. While the company was successful financially, BET’s programming wasn’t something she was proud of. The company’s culture was also less than stellar. The misalignment between Sheila and Bob around culture and values is what led to the company being sold. In the end, the outcome was financially rewarding, but the journey to get there was rough on Shelia and her family and left lasting scars on them.

This autobiography is different from others I’ve read. Sheila is candid and raw about the extreme highs and lows she encountered before and after BET. I’m looking forward to finishing it this weekend.

You can listen to audio versions of my blog posts on Apple here and Spotify here.

I caught up with a friend who’s seasoned in the restaurant industry. He’s helped build some of the most successful restaurants in Atlanta. He’s now taking his experience and opening a consultancy focused on helping restaurateurs run their restaurants efficiently and profitably.

During our chat, he told me he encounters a problem with some clients: they won’t share their costs with him. Their explanations vary, but the result is the same. Without seeing all the costs, he can’t tell whether the restaurant is profitable or how efficient it is. His ability to add value is severely hampered.

Many years ago, when I was an early-stage founder, I was lucky enough to land a meeting with someone who had a $300+ million-annual-revenue business. He was busy, and I wanted to make the most of the meeting. I prepared my financials and presented them to him as soon as we sat down. He looked at the numbers, peppered me with questions, and started sharing relevant experiences and making suggestions. Seeing the numbers helped him quickly understand the current state of my business and identify where he could add value. The meeting was transformative for my business. The seasoned entrepreneur thanked me for being transparent, trusting him, and coming prepared. We remained friends for years after that.

Entrepreneurs are sometimes reluctant to share their financial data. Often, that’s the right decision. You don’t want your numbers floating around. You also don’t want to take advice from people without relevant experience. But when you’re seeking input from credible people who want to help your business succeed, the risk/reward ratio changes. The upside to sharing your data dwarfs the downside. In those cases, it’s often worth being an open book (after your adviser has assured you that they won’t share your data). One idea or comment from a credible person can propel your business forward or help it avoid trouble you didn’t see coming.

Listen to the audio versions of my blog on Apple Podcasts and Spotify. Tune in here and here!

I’ve recently read books about two founders who founded massive publicly traded companies, but in different ways: Pierre Omidyar, founder of eBay, and Willis Johnson, founder of Copart. Both companies offer online auctions. As of this writing, eBay has a market capitalization of roughly $27 billion, while the Copart valuation is roughly $53 billion.

Omidyar worked in Silicon Valley and was financially comfortable after a previous employer was acquired. He thought the world was unnecessarily unfair economically. He envisioned an efficient market that empowered people financially so they could control their own lives. His mission was to create an online auction with a strong community. His vision- and mission-first approach led to his nailing product–market fit straight out of the gate. The company went from zero to $41.7 million in revenue and was publicly traded on the stock market in three short years.

Johnson didn’t want to work for anyone but needed to support his family. He knew the salvage industry and started a salvage yard because he knew he could make money. As more problems presented themselves and money-making opportunities arose, he took them on too. After twenty years of opportunistically solving various problems, the rapid success of his online auction market in 2003 caused him to question his “job.” He shifted his mission from solving various salvage problems for profit to “streamline and simplify the auction process.” Johnson’s twenty-year transition from mercenary to missionary led to unprecedented growth at Copart. It’s now a global online auction market.

I, too, began as a mercenary when I started my company. I wanted more control over my life and needed to replace the salary from the job I’d had. I went from problem to problem with a focus on profitability. Years later, after I had financial breathing room, I started to focus on the painful problems. I became something of a missionary. This led to $10 million in annual revenue, but that could have been $300 million if I’d gone full missionary. I should have been laser-focused on our customers’ most painful problem.  

As I thought about my founder friends and myself, I realized that Johnson’s journey is most common among my peers. Most of them picked a market and focused on making money to support themselves. They often attempted to solve various problems. But my friends who had outsize success didn’t stick with that approach. When their companies began to grow rapidly, it was because they were laser-focused on a single problem and mission. Their outsize success was the result of converting to being missionary founders, often after they had financial breathing room.

Entrepreneurs wanting financial independence and control of their lives can accomplish these goals as mercenaries, but if they aspire to have a bigger impact or build something significant, crystallizing a vision and mission is likely the key.

Listen to the audio versions of my blog on Apple Podcasts and Spotify. Tune in here and here!

Today, I finished reading Junk to Gold: From Salvage to the World’s Largest Online Auto Auction, an autobiography of Copart founder Willis Johnson. Johnson founded Copart in 1982. It started as a salvage yard. He purchased wrecked cars and sold the parts and scrap metal for a profit.

Johnson picked the salvage market because it was supported by two larger industries. Car manufacturers had to produce cars or they’d go out of business. Insurance companies had to write car insurance policies or they’d go out of business. “They’re always gonna make cars, and they’re always gonna insure them. We’re the guy in between.” The salvage business was important because it sat between the two and helped dispose of wrecked or inoperable cars, which are inevitable.

Johnson started with a salvage yard but was always scanning the landscape, paying attention to what was happening around him and searching for the next thing. He started a pick-your-own-parts yard and other businesses as opportunities cropped up. Over the years, he realized that providing a place to auction salvaged cars helped insurance companies recoup more money—and insurance companies were great repeat customers.

He continued to iterate on the auction model. In 2003, Copart rolled out an online auction platform. The platform was a tremendous success. Johnson realized he was on to something big and began to ask himself, What is our job? which I translate to What’s our mission? Up to this point, he’d been chasing anything that could make money. But now, the online platform’s success changed his thinking. He’d found product–market fit but wasn’t sure what to do with the in-person auctions and other businesses. Where should he spend his time? What was the biggest opportunity? He realized that his mission was to “streamline and simplify the auction process.” With a clear mission, his decisions were easy. He ended in-person auctions. All auctions would be online going forward.

Having a clear mission and product–market fit took Copart on an unprecedented run. The company is now a global online auction market and has a market capitalization (i.e., valuation) of over $52 billion as of this writing.

I enjoyed learning about Johnson’s journey. The distance he traveled was impressive. He doesn’t have a college degree and isn’t technical, but he nevertheless built a massive company centered on technology. Johnson’s business was founded in 1982 and started trading on the NASDAQ stock exchange in 1994. It took nine more years for him to crystallize his mission and focus on a single solution with massive potential in 2003.

Johnson hustled in the salvage industry for twenty years before he found product–market fit. When that happened, he switched from hustling to being laser focused.

Johnson’s journey is unconventional, even by entrepreneurial standards, but his success is outsize and undeniable. His story reminds us that there are many paths to success as an entrepreneur, including unsexy paths like the salvage industry. In the end, it boils down to finding a painful problem, solving that problem well, and providing the solution to a large pool of people or businesses.