I’m reading Warren Buffett: Inside the Ultimate Money Mind, which is a book about the mindset of Warren Buffett and other investors. One of the things it discusses is how Buffett and other investors make decisions. Robert Hagstrom points out that to understand psychology is to understand human decision-making. That’s why successful investors like Charlie Munger studied psychology to improve their own decision-making.

I’ve never thought much about psychology,  but this book got me thinking about it in relation to entrepreneurship—specifically, entrepreneurial wisdom. In this post, I shared that 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.

I’m always looking for ways to improve my decision-making (and share what I learn). But I’ve never really thought about trying to understand psychology to accomplish this until now. Hagstrom has me interested in learning more about psychology.

I’m going to try to find one of two books about psychology and add them to my reading list.

My book project started with me reading biographies about entrepreneurs and sharing what I learned. During that process, I realized there’s no central repository of all the wisdom of entrepreneurs who came before us. I decided to create one and came up with this mission:

Create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success

This project is super early, but I’ve been thinking about the impact it could have. The thing I keep coming back to is economic mobility. Starting a business that becomes successful is the fastest way to climb the economic ladder, which is why I think entrepreneurship is such a powerful force. Families who struggled financially for generations have seen their circumstances change in a few years because they started a successful business. There are numerous examples of family patriarchs and matriarchs starting businesses and their families still benefiting economically many generations later. Their descendants have continued to climb the economic ladder because of their business (or the resources it created).

Entrepreneurs still must do the work. There’s no substitute for execution and no shortcut to it. But if this project is successful, I can see it boosting many entrepreneurs. Making learnings of notable entrepreneurs easily accessible and helping other entrepreneurs figure out how to apply them could accelerate their velocity and increase their chances of success. If more entrepreneurs are successful, more people, and their families, will experience economic mobility and, hopefully, economic independence.

I’ve been working on the next version of the “book library” MVP with a developer friend. Living the problem this past summer by reading, taking notes, blogging, podcasting, etc. is coming in handy. The insights are helping with feature prioritization and nuances around how it’s built.

One thing I didn’t expect that we’re encountering this week has to do with data. We’re finding errors and weird record relationships in book databases that we’d planned on using. My gut instinct is to create our own pristine database by aggregating and cleansing the data from various sources. But that’s a decent amount of work, and I’m not sure we need to do it for what I want to accomplish with the MVP. I’ll think about it some more over the next few days.

This weekend, I was working on the “book library” MVP. I checked X, formerly Twitter, to see if others were experiencing the same pains around reading that I’ve experienced. I came across a thread from a notable CEO complaining about the same pain I’m trying to solve.

Because he’s well known, the thread got tons of exposure, which resulted in lots of replies. The replies were a gold mine. I learned about other founders who’ve built solutions to solve this problem. I started a list of competitors and added each of them to it. I also read every reply because people articulated their perspective on the problem and suggested solutions. I noted the suggestions and added some to a list of potential features.

My takeaway was that X is a pretty good tool for researching a problem, given the crowdsourced nature of the platform. Despite lots of noise and downsides, it quickly helped me find competitors I might not have known about otherwise and get candid thoughts on the problem from users I wouldn’t have had access to.

This week, I received a call from a founder. He’s in a disagreement with the other cofounder of his company. Disagreements between people who spend significant time together regularly are inevitable (e.g., family, romantic partners). So, they’re bound to happen between entrepreneurs, who often have stronger opinions than the average person.

Disagreements between founders can fracture the relationship beyond repair and seriously impact the company if they’re not resolved. Cofounder disagreements are one of the top reasons early-stage companies fail.

These two founders decided to get help from a neutral third party. They hired a counselor who specializes in helping founding teams work through disagreements. Through this process, they got to the root cause of the issues and are now trying to work through them.

I’m hopeful that they’ll be able to resolve their disagreement and the company can get back to focusing on customers.

This week, I chatted with the founder of a growing company. The business is doing well, but he’s uncertain about the future because the business is in a heavily regulated industry. This makes planning more challenging, especially since a new presidential administration will take over here in the U.S. in January.

The regulations he’s concerned about will determine what customers he can sell to. If the regulations are loose, the number of customers he can serve will be large. If they’re strict, the market of potential customers will shrink materially. There are lots of competitors in the market, so loose regulations mean plenty of business to go around for everyone. Strict regulations will lead to steep competition and, probably, price wars, which will reduce profit margins.

So, while he’s watching the regulatory environment, what he’s primarily worried about is the future size of his market. Markets can make or break a company. This founder hopes that regulation doesn’t shrink his market and put his company in a challenging situation.

Today, I chatted with an entrepreneur who owns a retail company about what can be done to grow sales. One of the projects mentioned was improving the functionality of its website. The entrepreneur views money spent that way as a cost and wants to spend as little as possible. This perspective got me thinking.

Entrepreneurs should keep a close eye on costs. The old saying, “If you watch the pennies, the dollars will take care of themselves,” is true. The best entrepreneurs keep costs under control.

However, expenses and investments are different. An expense is a cost to operate a business that generally covers only a year. Think insurance, taxes, rent, salary, etc. An investment creates an asset that produces revenue (and hopefully profits) for years. An investment should generate a return.

The entrepreneur I was talking with today was thinking of money spent on an ecommerce website as an expense, but I think it’s an investment. A website is an asset that, if properly built, can drive revenue and create a return on the money invested for years.

Entrepreneurs have a dual role. They should manage the costs of the company to ensure short-term profitability. But they’re also capital allocators who must invest profits in ways that will help the company grow long term. Treating investments as expenses will improve short-term profitability at the expense of long-term viability.

A friend of mine, Markell, is an engineer and investor who’s been following my book project journey. Today, he shared an example of a different way to communicate a book’s concepts: a mind map. I like mind maps. They effectively communicate concepts quickly. And creating one is a great exercise in thinking through an idea and all the supporting parts.

My mission with my book project is to create a library of wisdom from notable entrepreneurs that current entrepreneurs can leverage to increase their chances of success.

I’d never considered using a visual like a mind map to communicate entrepreneurial wisdom or an entrepreneur’s journey. But when I looked at what Markell sent me, it clicked. A mind map is a great way to quickly give someone a 50,000-foot view of something. They can then zoom into whatever areas they want to know more about. It’s also a great way to show how actions and ideas build upon each other, how multiple people leverage the ideas, etc. Said differently, it’s an effective communication tool that shows how things are connected.

I’m not sure how to create a mind map of an entrepreneur’s journey or wisdom (or multiple entrepreneurs’ journeys or wisdom), but I’m excited to try to figure it out. It could add a lot of value to my book project.

I’ve been learning more about retrieval augmented generation (RAG) and how it can enhance AI responses and help AI-oriented businesses. Here are a few thoughts based on my understanding today:

• The better the data, the better the responses from AI. Data can be a moat that will keep competitors away. Data aggregated in a single source will be valuable because it will enhance the output from AI. Assuming that AI will aggregate disparate data, organize it, and provide a quality response isn’t a winning strategy as of today.
• Data structure matters for large data sets. AI struggles to make sense of large data sets. The data needs to be structured so AI can easily understand connections within it. And when I say data, I’m including text.
• AI will make it easy to build solutions. I see new niche AI apps launching daily. Competition is ramping up. To succeed long-term, entrepreneurs building AI solutions will need a proprietary data set or a unique way to distribute their solution to customers (e.g., brand credibility or a creative way to acquire customers)—ideally both. Absent these two things, having a sustainable edge over competitors will be difficult.

I’m still learning, but those are my thoughts right now.

Last week I talked to an entrepreneur who’s shuttering his start-up after several years. The company is at breakeven, but it’s not growing. He shared with me what he’d learned from his journey.

The market is the main thing he wishes he’d paid attention to in the beginning. The market he entered looked good at first glance because it’s large. However, it’s slowly shrinking, and shrinking market forces have made it difficult for him to acquire customers because he has to steal market share from other companies. He now recognizes the huge role the market played in his company’s trajectory, but he didn’t understand it until he was in deep. If he knew then what he knows now, he wouldn’t have started a company in that market.

Markets matter a lot for entrepreneurs, especially if they aim for outsize success. Growing markets are good, and new, rapidly growing markets are the best. This founder is talented, but that wasn’t enough to overcome a shrinking market. He recognizes this now and says his next company must be in a growing market.

Shuttering a company isn’t ideal, but it happens often in entrepreneurship. This founder gained valuable wisdom from his first company. I’m excited to see what the next leg of his journey looks like.