3 Paths of an Entrepreneur Ep 517

In this episode, the host discusses the three entrepreneurial paths: the artist, who focuses on perfecting their craft; the entrepreneur, for whom business itself is the art; and the hybrid, which combines elements of both. Using Tobias Lutke of Shopify as an example, the host illustrates how entrepreneurs can evolve from one path to another, highlighting the importance of product quality, marketing, and sales, in that order. He emphasizes that exceptional products drive word-of-mouth promotion and sustainable scaling, contrasting with businesses that rely heavily on advertising and sales teams. The host's personal journey from fitness enthusiast to diverse business founder illustrates the fluidity of these paths and the potential for change as one's entrepreneurial art evolves.

• The most valuable skill set for an entrepreneur prioritizes product development, followed by marketing, and then sales.
• A strong ability to sell is often indicative of a lack of marketing skills.
• Product creation is the foundational skill in this hierarchy.

"The most valuable skill that you can have in order is product first, then marketing, then sales. And so right now, if you know how to sell, it's because you don't know how to market. You know how to build product."

This quote emphasizes the importance of product development as the most crucial skill for entrepreneurs, suggesting that sales skills are a fallback when marketing is not fully mastered.

• Speaker A aspires to build a billion-dollar business with acquisition.com.
• They express a wish that renowned entrepreneurs like Bezos, Musk, and Buffett had documented their journeys, and Speaker A aims to do that for others.
• Speaker A is sharing their experiences and insights for others to learn from and enjoy.

"I'm trying to build a billion dollar thing with acquisition.com. I always wish Bezos, Musk and Buffett had documented their journey. So I'm doing it for the rest of us."

The quote reveals Speaker A's ambition and their intent to provide a documented account of their entrepreneurial journey, filling a gap they believe exists in the records of other famous entrepreneurs' paths.

• The path of the pure artist involves a deep passion for a particular craft or activity.
• The pure entrepreneur path focuses on the love of business and the process of monetization.
• The hybrid path combines a passion for a specific craft with the business acumen to grow it.
• Tobias Lutke, founder of Shopify, exemplifies the hybrid path, focusing on product while partnering with someone passionate about the business side.
• There is no single correct path; the best path depends on the individual's current season and can change over time.

"There are three paths that every entrepreneur eventually has to take. You have the path of the pure artist, the path of the pure entrepreneur, and then a hybrid path."

This quote introduces the concept of three distinct paths an entrepreneur can take, each with its own focus and potential for success.

• Speaker A began with a passion for fitness and a desire to focus solely on that interest.
• After starting a gym, Speaker A discovered a greater passion for business itself.
• This personal evolution from artist to entrepreneur is an example of how paths can change over time.

"When I started, I really loved fitness. I was obsessed with fitness... And so you may be surprised as what you start, because when I started, I thought, I'm just going to do the thing I love for the rest of my life. I started as an artist of fitness and I became an entrepreneur."

This quote illustrates Speaker A's initial passion for fitness and their unexpected transition to becoming more interested in the business aspect, highlighting the fluid nature of entrepreneurial paths.

• The artist path at its extreme leads to high-level craftsmanship without scaling an enterprise.
• This path can progress from a commoditized price point to a premium and eventually a luxury price point.
• Speaker A suggests that each path has a natural extreme endpoint.

"But let me play out all three paths to their natural extremes. [...] So the artist at its extreme is somebody who continues to not scale an enterprise around them and continues to do the thing at extraordinarily high levels."

This quote discusses the extreme end of the artist path, where an individual may achieve high levels of craftsmanship and command premium pricing, yet does not focus on scaling the business.

• Commoditization refers to offering a service or product similar to what others provide, like standard plumbing work.
• Premium providers emerge from commoditization by performing better and faster work, gaining trust, and raising prices.
• At the luxury level, the service or product becomes highly specialized, such as plumbing for massive buildings or luxury homes with ornate designs.
• In luxury, rather than increasing sales volume, providers increase prices while maintaining high demand, leading to more profit while still engaging in their core passion.
• This model allows for significant income without the need for a large organization, as seen in artists who sell high-value paintings while focusing on their art.

And so in that instance, what happens is demand continues to increase for your services or your product. And so rather than increase the number of units you sell, you just increase the price.

This quote explains the transition from a standard service provider to a luxury brand, where the focus shifts from quantity to quality, resulting in higher prices due to increased demand and reputation.

• Artists can be considered entrepreneurs since they make money and transact, but their primary identity and focus remain on their art.
• The transition from artist to entrepreneur can be exemplified by Tobias Luka, who began as a developer creating a product for his own need and then expanded due to demand.
• Entrepreneurs like Tobias Luka may choose to focus on product development and hire others to manage the business, allowing them to continue their passion while the company grows.
• This hybrid model requires the ability to judge who can effectively lead the company, often necessitating outside advisors.

The hybrid version is Tobias Luka is somebody who started as a know, a developer who built the little website because he wanted to make something for, I think it was a surfing company or something like that.

This quote illustrates the hybrid model where an individual starts with a passion (e.g., development) and transitions into an entrepreneurial role without losing the core of their craft.

• The value of advice is based on the advisor's experience and success in guiding others in similar situations.
• The highest level of advice comes from those who have succeeded in the same field and have helped others do the same multiple times.
• Lesser levels of advice come from those with varying degrees of indirect experience or from personal acquaintances with no business experience.
• Entrepreneurs should seek advice from those with proven track records and relevant experience.

And the way that I layer that advice, at least weigh it so that you can think about this for yourself, is that the highest level of advice is someone who has been there, done that themselves and taken other people just like me to where I'm trying to go multiple times.

This quote provides a framework for evaluating the credibility of business advice, emphasizing the importance of the advisor's direct experience and success in guiding others to similar goals.

• Importance of choosing top sources of information for business insights.
• Sources must align with personal interests or have no incentive to mislead.
• Leveraging experience of trusted sources to find suitable team members for business growth.

"Really only look at the top one or two for my sources of information. And the big caveat here, they either have to have a lined interest with me or no incentive at all."

The quote emphasizes the speaker's strategy for selecting information sources, prioritizing those that are either aligned with their interests or completely unbiased.

• Three distinct paths for business owners: the artist, the hybrid, and the entrepreneur.
• Each path reflects a different approach and relationship with the business.

• Focus on the love for the craft or service provided.
• Success comes from passion and excelling over competitors.
• Growth may lead to a transition to hybrid or entrepreneur paths.

• Starts as an artist but evolves to build a larger enterprise without sacrificing passion.
• Involves owning a specific component of the business while expanding.

• Views business as an art form, with each venture being a different "painting."
• Entrepreneurs create multiple, varied businesses over time.
• The focus is on the business itself rather than a specific product or service.

"The third path is that of the entrepreneur. That's the person whose art form is the businesses."

The quote defines the entrepreneur path as one where the creation and management of businesses are seen as an art form, with each venture representing a different expression of the entrepreneur's development.

• The speaker shares their own entrepreneurial journey, highlighting the variety and evolution of their business ventures.
• The journey reflects the entrepreneur path, with businesses ranging from non-profit online training to private equity.

"I started a nonprofit online training business. I switched to a for profit training business, and then I switched to a brick and mortar gym. Then I had a chain of gyms. Then I had a gym turnaround business. I had a chiropractor agency. I had a dental agency. I had a corporate wellness contract thing that I did. I've had an ecommerce business that sold physical products. I've had a software business, software as a service b to b, and now I have a private equity firm."

This quote provides a detailed account of the speaker's varied entrepreneurial experiences, showcasing the dynamic nature of the entrepreneur path and the evolution of their business interests over time.

• The speaker encourages self-reflection to determine which path aligns with one's passion and goals.
• Understanding personal inclination towards the craft, the process, or the entrepreneurial aspect is crucial.
• The path chosen should resonate with one's natural strengths and interests.

"So the biggest question is, which of the three are you?"

The quote prompts listeners to introspect and identify with one of the three paths of business ownership based on their passion and approach to business, emphasizing the importance of self-awareness in entrepreneurship.

• Entrepreneurs need to identify whether they love the product they are creating or the business aspect of creating a product.
• The distinction guides how they involve themselves in their company.
• Being product-focused or business-focused influences the roles and departments the entrepreneur will be more heavily involved in.
• It's possible to pivot between these focuses over time.

"And so identifying which one you are is, do I love the thing, or do I love the business of doing the thing and then walking that path down?"

This quote emphasizes the importance of self-awareness in entrepreneurship, identifying personal passion whether it's for the product itself or the business operations surrounding it.

• The speaker outlines a hierarchy of skills for entrepreneurs: product development, marketing, and sales.
• Effective marketing can only take a product so far without quality.
• Exceptional products can generate word-of-mouth referrals, which are crucial for sustainable growth.
• The marginal cost of acquiring new customers can become unsustainable without organic promotion.
• The speaker suggests that learning to sell is easier than learning to market or develop a product.

"The most valuable skill that you can have in order is product first, then marketing, then sales."

This quote presents the idea that the ability to create an outstanding product is the most valuable skill an entrepreneur can possess, as it underpins the effectiveness of marketing and sales efforts.

• A high-quality product can incentivize customers to promote it, which is more effective than the entrepreneur promoting it themselves.
• The speaker emphasizes that a great product has the highest leverage for business growth.
• The example of the book "100 million dollar offers" illustrates the power of product-driven word-of-mouth promotion.
• A product that people eagerly promote can eliminate the need for additional marketing spend.
• Product-driven growth can compound over time, leading to a sustainable and scalable business.

"And so the highest leverage thing you can do is make an exceptional product that other people want to promote for you."

This quote highlights the strategic advantage of developing a product so compelling that customers become advocates, driving organic growth.

• Exceptional products lead to organic growth and increased profit margins.
• Relying solely on paid advertising, outbound sales, or affiliates is less desirable than organic promotion through product quality.
• A product-centric approach leads to a self-sustaining cycle of referral-based business growth.
• All methods can generate income, but focusing on product quality yields the greatest financial returns.

"And that ultimately drives the most margin and allows you to scale the enterprise in a compounding fashion."

This quote explains that a focus on product quality not only increases profit margins but also enables a business to scale more effectively through compounding organic growth.