As an early-stage founder, I was part of an entrepreneurial group that taught new founders about key business functions. Each quarter we went deep into a specific business function: marketing, finances, HR, marketing, etc. At the end of each of those sessions, I better understood functions that didn’t come naturally to me (e.g., marketing). I felt educated. But I still had a problem: What do I do with this new knowledge? How do I use it in my business? I’d learned what I needed to do, but I still had no idea how to do it.

This experience highlighted the difference between knowledge and wisdom.

Knowledge is acquired by learning new information or being made aware of something. Learning about marketing is an example of acquiring knowledge. Knowledge acquisition doesn’t always equate to adding value. There’s another step.

Wisdom is the ability to apply knowledge in a manner that aligns with the outcome you desire. Wisdom means changed behavior and improved decision-making—knowing what to do and when to do it. Wisdom is acquired from experience (yours or someone else’s). Growing your company through marketing execution is the result of wisdom.

Through trial and error and talking with other successful entrepreneurs (who shared their experiences), I learned how to apply the concepts I learned in those sessions to grow my business. My problem was solved.

This experience showed me that knowledge is important. You can’t apply something if you aren’t aware of it, which is why continuous learning is so important. But wisdom is what I value most because applying knowledge well is how I achieve the outcomes I desire.

This week I chatted with a founder who wants to hire for a key role but feels he can’t afford to do so. The business is bootstrapped and hasn’t received any external growth capital. I faced the same situation when I bootstrapped my company. I was drowning and needed someone who could think strategically and execute. I wanted to hire someone in a leadership role, but the business wasn’t generating enough cash to support an additional leadership-level salary.

I ultimately realized that I would be adding this person to help grow the business, not stagnate it. If the business grew, then the incremental cash generated by the business could cover the additional salary expense.

I couldn’t afford to pay someone for a year if they didn’t help move the business forward. I also couldn’t expect them to move mountains on their first day. There would be an evaluation and ramp-up period, and at the end of it, I should know if their contributions could help grow the business and if they were a good culture fit. Because I was hiring a leader, I estimated that within three months I should know. After reframing it like this, I realized that I didn’t need to think in terms of the business’s current state absorbing this leader’s entire annual salary. It just needed to be able to absorb three months’ worth or so. Said differently, I needed to be able to invest just one-fourth of their annual salary. Since this amount was much lower, thinking of it this way made the decision seem less risky.

I ended up hiring someone, and it worked out perfectly. Within a few months, he had learned the specifics of the business and our industry and was contributing in a meaningful way. The business began generating more cash around the third month, and within twelve months the growth more than covered his salary.

My big takeaway is to not think in terms of annual salary when resources are limited at an early-stage company. Instead, think of hiring as making a three-month (or so) investment in someone to accelerate business growth (and cash generation). By the end of three months, you can usually tell if you’ve made the right decision. This isn’t a hard-and-fast rule and doesn’t work for all roles or at all companies, but it’s an alternative way to think about hiring when things are tight.

A few months ago, I started thinking about what traits founders/CEOs who take a company from idea to public-market company worth billions possess. It’s a small group of people, as the number of companies that reach hundreds of millions or billions in annual revenue is small relative to the total number of companies founded.

After spending time learning about people who’ve accomplished this, I see one clear trait. These people were obsessive about a single problem. They weren’t entrepreneurs who wanted to build a company but weren’t sure what problem they wanted to solve. Rather, they’d been thinking about a problem intensely and decided they wanted to solve it.

It's hard to scale a company to billions and take it public. Along the way, founders will usually get an offer to sell if the company is doing well. To reject the offer and the financial windfall associated with it and take a company public is a hard decision. To continue as a public-company CEO and endure all the scrutiny from public-market investors isn’t for the faint of heart, either. This requires a vision and level of commitment that founders aren’t likely to have if they weren’t obsessive about the problem they’re solving.

I’ll keep looking as I study more founders/CEOs of public companies, but I’ve yet to find a founder of a public company who was a founder in search of problem before starting their company.

During a meeting with an entrepreneur, the topic of unique work styles came up. He has a long track record of success, so I was interested in hearing about his approach. He almost burned out early in his entrepreneurial journey and realized that he’s a sprinter, not an endurance entrepreneur.

He learned that he isn’t wired to run hard 24/7/365. Instead, he’s more effective when he goes all out for a while and then recovers before repeating the cycle. He’ll work intensely for a few months and then take two or three weeks off to rest and recover. Recharging and recovering are key to how he operates best. He comes back refreshed, energized, and full of new ideas.

He went on to share that the key to this working style is his productivity when he’s in work mode. He works intensely—so much so that he’s able to get more work done during his sprint than most people would accomplish during his sprint and recovery period. He essentially gets the same or slightly more work done in a year, even with his breaks, than people who don’t take these kinds of breaks do.

He isn’t the first person to share this type of work style with me. I know a successful angel investor who focused intensely on investing for three or four months and then took a month or two off to recover and travel. He could do this because he was investing his own capital, so he could deploy it at a pace that suited him. He too works intensely when he’s in work mode but needs time off to recover.

Sprinting as a way of working isn’t available to everyone, but for those who are intense but not wired for endurance, it’s a work style to consider.

Recently I listened to an interview in which the guest shared his favorite class in high school. It wasn’t a regular class; it was a work–study arrangement his senior year. He got to leave campus every day to work at a local business. He was paid for his time and received course credit. This work–study class was his favorite because he made money, which allowed him to buy and do things he enjoyed.

My favorite class in high school was woodshop. I loved it. I’d spent a summer working for a homebuilder and discovered I enjoyed woodworking. The teacher realized I knew what I was doing, so he gave me free rein. I could build whatever I wanted as long as I didn’t cause trouble or disrupt class (which the rest of the class did daily). It was the last class of the day, so he’d let me leave early when I was finished.

As part of my first “official” business, I sold speakers to friends and usually gave them a design for speaker boxes, too. They’d have to find someone to build the box for them, which wasn’t always easy. One day I realized I could use my time in woodshop class to build those boxes for my customers. I asked the teacher, and he thought it was a great idea. From then on, I was building and selling speaker boxes in woodshop class. It was a great hustle because I didn’t have to pay for materials, and I ended up showing a few classmates how to build their own speaker boxes.

Woodshop was my favorite class because it ended up being an entrepreneurial class. It allowed me to work on my business and make money, which made me feel financially independent from my parents. It also allowed me to share my knowledge about building speaker boxes with my classmates and do woodworking, which I find fun.

One of the things I like to think about when evaluating a business model is the cost of scaling it. For example, if a company is in the business of manufacturing and selling widgets, to grow sales it would need to produce more widgets and then sell them. A cost is associated with each additional widget sold. To produce and store more widgets, it would need to incur costs to increase production and warehousing capacity. These investments likely must occur before the number of widgets sold can increase. The widget company has high replication costs, which impacts the scalability of its business model (unless it has unlimited cash).

Conversely, if a company is a software-as-a-service (SaaS) business, it’s selling a software product that’s delivered digitally over the internet. Incremental sales don’t require producing more software. People can just buy the existing software at will. The software company can increase sales without incurring replication costs (for simplicity, I’m ignoring costs for R&D, sales, marketing, etc.). In an ideal world (which business isn’t), the software company has low, very low, or nonexistent replication costs, which means the business model is highly scalable.

Businesses with low replication costs and the potential for infinite scalability are intriguing. As I evaluate business models through this lens, businesses that don’t appear attractive on the surface become interesting opportunities, especially if their product or solution could be distributed digitally.

I’ve been chatting with a friend for months about something we’ve both noticed: there are people who excel at their highly technical profession because of years of training and experience and who would like to be entrepreneurs. We call them practitioners. They often continue to work for others because they don’t understand business. They’re aspiring entrepreneurs, but they don’t have the skillsets necessary to be successful entrepreneurs. They understand a problem and how to provide a solution to it, but they don’t understand how to build a business around that understanding because they haven’t been exposed to business concepts.

The more I’ve thought about this, the more I think these practitioners could be great cofounders. They have deep expertise in their craft and the problem it solves but large gaps around monetizing it. They’re very aware of their gaps and want help filling them, but they don’t usually have entrepreneurs in their network—just other practitioners. An ambitious practitioner paired with a hungry hustler who gets things done and understands business could be a combination with a high probability of succeeding.

I’m going to think more about this and discuss it in more detail with practitioners who have entrepreneurial aspirations.

Yesterday’s chat with fellow entrepreneurs was great for all the reasons I gave yesterday. I learned about the amount of financial leverage new entrepreneurs are using to start their companies. Using financial leverage is normal, but I was surprised by the amount. These founders are receiving 100% financing from banks for all their start-up costs. No business plan and no entrepreneurial experience required, either.

This blew my mind. It reminded me of the years leading up to the global financial crisis (GFC), when homeowners were able to take out 100% of a home’s price as a loan from the bank. They didn’t have to put anything down, so they didn’t have any skin in the game. Some homeowners were given stated-income loans, meaning their incomes were verified. What my friend described yesterday isn’t exactly the same as the GFC, but made me think of that period and the ensuing carnage.

One of the entrepreneurs yesterday shared that he’s starting to see these new entrepreneurs struggle. Inflation has materially increased start-up and construction costs, so new entrepreneurs must take out larger loans to get the company going. These larger loans have higher interest rates, compared to the previous fifteen years, so the amount of cash required to service the debt payment is materially higher. Prices these entrepreneurs can charge customers haven’t risen materially, so they can’t offset the higher debt costs unless they build a business that can service materially more customers (which requires higher start-up costs and more debt). Some of these entrepreneurs are having second thoughts and considering selling their businesses at a discount to wash their hands of the problem.

It was super interesting to hear about this from operators at the ground level of this industry. It makes we wonder if there’s too much leverage in the system that many people aren’t aware of.

Today I had the chance to catch up with a friend who was in town. I brought another friend with me and he brought a few friends who were in town with him. As we all chatted, the conversation turned to people’s interests, and it became apparent that everyone was an entrepreneur. From that point on, the conversation went into overdrive and everyone’s energy level went through the roof.

Over a few hours, we educated each other on the details of various business models and industries. We shared book recommendations, insights learned from building businesses, and long-term strategies, and we made introductions to others who could help.

Today reinforced what I already knew: that entrepreneurs love talking about business. Many don’t get the opportunity to talk about their business outside work. They long to talk about what they’re passionate about but can’t because most people can’t relate. When they come across someone else who loves to talk about business, a magnetic pull draws them together. The resulting conversations are the equivalent of pent-up energy being released. They’re intense, educational, and fun.

I’m glad I had the chance to catch up with my friend and the other entrepreneurs today. I enjoyed the high-octane conversation!

A friend told me about a book he just read and shared a quote from it that stuck with me. It’s from Stanley Marcus, former CEO and chairman of Neiman Marcus:

The road to success is paved with mistakes well handled.

Spot on! It’s impossible to be successful and get everything right on the first try. Mistakes (and the learnings from them) are inevitable and part of the process. What’s important is how mistakes are handled. Handle them well and the probability of success increases. Handle them poorly and it decreases.