Don't keep starting from scratch Ep 329

Summary Notes


In this insightful discussion, the host explores the common entrepreneurial trap of seeking novelty and challenges at the expense of established success. He shares stories, including one about a neighbor who sold his trash business for a hefty sum and planned to replicate his success in the same industry, to illustrate the wisdom of leveraging existing expertise rather than starting anew. He emphasizes the importance of redefining growth as improving one's ability to persevere rather than constantly seeking change. The host also discusses the dangers of allowing personal insecurities to dictate business decisions, proposing instead the creation of new challenges within the current business framework and setting multiple metrics for success. By introducing constraints and focusing on providing value to the customer, entrepreneurs can continue to innovate without undermining their business's foundation.

Summary Notes

Desire for Novelty and Challenges in Entrepreneurship

  • Entrepreneurs often seek new challenges and growth, associating growth with novelty.
  • There is a misconception that growth must involve new ventures or industries.
  • The story of the neighbor with a trash collection business illustrates the value of sticking with what you know.
  • The neighbor's decision to restart a similar business after a non-compete clause exemplifies a different approach to growth.

"We desire novelty. We desire challenges. We want growth, right? But the thing is, is that we think growth means new."

This quote highlights the common entrepreneurial mindset that equates growth with pursuing new and different ventures, rather than deepening expertise in a current field.

"I plan on starting another trash business and selling it right back to the guys who bought my last one."

The neighbor's plan to re-enter the same business he knows well suggests an alternative view of growth that focuses on leveraging existing knowledge and skills.

Redefining Growth

  • Growth can be redefined as developing the character traits to persist and repeat successful actions.
  • Real estate moguls serve as an example of individuals who focus on their area of expertise instead of seeking unrelated challenges.
  • The need for constant change can be more pronounced in certain communities, like marketing.

"I think that a lot of times we could redefine growth as meaning we develop the character traits to be able to persist and continue to do the same things over and over again, right?"

This quote proposes a redefinition of growth that emphasizes perseverance and mastery over the pursuit of new endeavors.

The Role of Business and Internal Deficiencies

  • Businesses are often created to address the entrepreneur's personal needs, such as insecurity, connection, or status.
  • The primary purpose of a business should be to provide value to the customer, not to satisfy the entrepreneur's deficiencies.
  • Projecting personal needs onto a business can lead to poor decisions and potentially harm the business.

"The business doesn't exist to satisfy our internal deficiencies, right? And that's usually what most of us build it. We're insecure, we need connection, we want status, right?"

This quote discusses the problem of entrepreneurs building businesses to fulfill their personal voids rather than focusing on the value provided to customers.

The Allure of Starting Over in a New Industry

  • Entrepreneurs at the top of their game in one industry may feel bored and consider entering a completely new industry for a challenge.
  • Starting a software company is given as an example of entrepreneurs seeking a new challenge in a field where they have no experience.
  • The risks of entering a new industry include starting from scratch and competing against established players.

"I'm going to stop doing this and then I'm going to enter a new arena where everyone else has been doing that for ten years, and there are other kingpins in that arena, and I'm going to try and relearn everything from ground zero and then try and beat them."

This quote captures the daunting task entrepreneurs face when they abandon their area of expertise to start anew in a different industry, highlighting the steep learning curve and competition they will encounter.

Entrepreneurial Persistence and Growth

  • Entrepreneurs should aim for consistency and persistence over a long period, like 40 years.
  • Matching market growth, typically around 10% per year, can lead to significant wealth over time.
  • The desire to outpace the market can stem from personal insecurities rather than business needs.
  • Entrepreneurs often mistakenly try to use their businesses to solve personal problems.
  • It's important to focus on solving client problems and addressing personal issues separately.

"If you were to gain at the same pace as the marketplace, which, by the way, when you're smaller, is really easy, right? It's 10% a year."

This quote emphasizes the ease of growing at market pace for smaller businesses and the substantial wealth that can be achieved by maintaining this growth over a long period.

"We end up breaking the thing that is actually working just fine because we have these interpersonal needs that we're trying to satisfy."

This quote highlights the common mistake of entrepreneurs disrupting their functional businesses due to their personal issues, rather than focusing on their clients' needs.

Innovation within Business Constraints

  • Entrepreneurs should channel their desire for innovation into the existing business, rather than starting new ones.
  • Innovating within the business can involve changing marketing strategies and attracting different customer avatars.
  • Creating new businesses to satisfy entrepreneurial desires can lead to financial instability.

"Where to channel that is to create new front ends or new back ends."

This quote suggests focusing on modifying the existing business model, such as marketing and product delivery, to innovate without jeopardizing the business.

"Whereas if you start creating more businesses to satisfy your add, then what ends up happening is, well, you have lots of businesses and you don't have any money."

This quote warns of the financial risks associated with starting multiple businesses to fulfill entrepreneurial cravings rather than concentrating on the success of a single enterprise.

Multiple Metrics for Success

  • Entrepreneurs should develop multiple metrics for success beyond just profit and net worth.
  • As wealth increases, the marginal utility of money diminishes, necessitating new success measures.
  • Success can be redefined to include personal achievements like a healthy marriage or physical fitness.
  • Time can be used as a constraint to provide challenges without getting bored in business.

"The only metric for success that I had was how much profit and how much increase in net worth I had at the end of the year."

This quote reflects a common but limited view of success focused solely on financial gain.

"Can I increase my net worth and have a good marriage? Can I increase my net worth and be in shape?"

This quote suggests incorporating personal life goals into the definition of success, balancing financial achievements with personal well-being.

"And so that was one of the things that I did over the last twelve months was like, ok."

This quote indicates the speaker's recent implementation of time constraints as a new metric for success to maintain interest and challenge in their business endeavors.

Revenue Goals and Current Status

  • The speaker's portfolio aims to achieve $1 billion in annual revenue.
  • Currently, the portfolio generates approximately $85 million a year.
  • There is an acknowledgment of the gap between the current revenue and the goal.

"Ay, I want to build something that does a billion dollars a year in revenue, which is the goal for the portfolio. And transparently we're not there. We're at about $85 million a year across our portfolio."

This quote outlines the speaker's ambitious revenue goal for their portfolio and transparently recognizes the current status, which is well below the target.

Growth and Compounding

  • The speaker emphasizes the importance of making good decisions and allowing compounding to work.
  • A 10% annual growth rate is considered, with a projection of reaching the goal in 20 years.
  • The speaker calculates that with consistent doubling, the goal could be achievable in approximately 28 years.
  • Beating the market rate is seen as an encouraging possibility for achieving the goal faster.

"You have to make good decisions and you have to let compounding work in your favor."

This quote highlights the speaker's strategy of relying on wise decision-making and the power of compounding interest to grow their portfolio.

"Because if we have the 85 million and we grow by 10% a year, in 20 years, we'll probably be there."

The speaker provides a rough estimate of the time frame required to reach the billion-dollar revenue goal with a steady growth rate.

Sacrifice for Success

  • The speaker believes that the first level of achieving any goal requires sacrificing everything for success.
  • The speaker notes that many successful people have made significant sacrifices.
  • The speaker shares their own approach of choosing to outsacrifice competitors to get ahead.
  • The speaker acknowledges that this approach worked but now seeks to set new goals with constraints.

"The first level of achieving any goal is learning how to sacrifice everything to achieve the goal, which I think candidly, I don't know many people who are super successful who haven't done that."

This quote underscores the speaker's belief that sacrifice is a common denominator among highly successful individuals.

"I will outsacrifice everyone. So when my competitors are going out to dinner, when my competitors are hanging out with their kids, when my competitors are hanging out with their wives or being good husbands, I was like, I will get ahead."

The speaker describes their personal mindset of prioritizing work and success over other aspects of life, which they believe has contributed to their success.

Setting New Goals with Constraints

  • The speaker expresses a desire to achieve their revenue goal while working limited hours per week.
  • The goal includes maintaining competitive physical shape and enjoying daily workouts.
  • These new challenges are about adding constraints to make the game more fun without breaking the existing successful system.
  • The speaker emphasizes that the business should serve the customer, not just the owner.

"But the question is, can I build a billion dollar a year revenue portfolio working two or three days a week, right. And can I do that also while being in competitive shape physically, right. And working out one to 2 hours a day because I like it, can I do all of those things?"

This quote reflects the speaker's current challenge of balancing a significant revenue goal with personal well-being and time management constraints.

Learning to Sacrifice

  • The speaker learned the importance of sacrifice during college while pledging a fraternity.
  • The pledging process was time-consuming and taught the speaker about sacrificing time.

"So when I was in college, I ended up pledging a fraternity, and it was a very hard pledging process hard being like time consuming."

The speaker shares a personal anecdote that illustrates an early experience with sacrifice, which has informed their approach to achieving success.

Importance of Structured Study Time

  • Regular, structured study time can significantly improve academic performance.
  • Committing to a fixed amount of daily study time leads to getting ahead on future work.
  • The discipline of structured study time can be beneficial beyond academics, such as in business.

And it was because they forced me to do 3 hours a day, every single day of homework.

The quote highlights the impact of enforced structured study time on the speaker's academic performance, leading to good grades.

And if you do 3 hours a day of work every day, and this is what I realized in college, the days that you don't have work to do, if you still work 3 hours, you get ahead on a future work.

This quote emphasizes the realization that consistent daily work, even without immediate assignments, prepares one for future tasks.

Sacrifice and Time Management

  • Sacrificing leisure and non-essential activities can lead to high achievement.
  • Effective time management involves prioritizing essential tasks like work, exercise, and study.
  • Limiting work hours and maintaining a social life can be compatible with success.

I just didn't do anything besides work, work out and go to class.

The quote underscores the speaker's commitment to prioritizing essential activities to achieve academic success.

I never worked past 09:00 p.m. And I went out most of the nights of the week.

This quote reveals a balance between disciplined work and maintaining an active social life, suggesting it is possible to succeed without overworking.

Application of Discipline to Business

  • The discipline learned from academics can be transferred to business.
  • Sacrifice is a necessary step in learning how not to sacrifice later in life.
  • Achieving mastery over something allows one to eventually master and relinquish the desire for it.

Throw my day. And so when I started applying that same kind of concept to business, it was actually fairly easy for me because I was so used to sacrificing everything, I just switched over what I was sacrificing for.

This quote explains how the discipline of sacrifice in academics was easily applied to the speaker's business endeavors.

I think that you have to learn how to sacrifice first in order to learn how not to sacrifice later, right?

The speaker suggests that initial sacrifice is essential to understand the value of balance and moderation later on.

Philosophical Perspective on Success and Sacrifice

  • Success often requires initial sacrifices.
  • Understanding the hold of desires, such as money, may require first achieving and then relinquishing them.
  • The 'middle path' involves experiencing extremes to find balance.

I think you have to achieve something before you can give it up, right?

The speaker believes that understanding the value of something often requires first possessing it before choosing to live without it.

And that's how we can eliminate the desire for the thing, because we truly know what it's like to have it, right.

This quote explains that desires can be overcome by experiencing and understanding the true nature of what is desired.

Business Strategy and Personal Satisfaction

  • Success metrics in business should not solely be about challenging oneself.
  • Innovating within one's business can satisfy the need for challenge without changing the business model.
  • Using constraints creatively can improve business and personal life.

So big picture here, multiple metrics of success don't change your business just to challenge yourself.

The quote advises against altering a successful business model solely for the sake of self-challenge, advocating for alternative ways to find satisfaction.

And if neither of those things are what you want to do, then just use constraints to create challenges in your own business that improve your life in other ways.

This suggests using self-imposed constraints as a means to create challenges that can lead to personal and business growth.

Valuing Expertise and Simplicity in Business

  • Mastery of a business should be valued over the pursuit of new, unfamiliar ventures.
  • Businesses can be a means to create wealth rather than fulfill personal desires.
  • Simplicity and expertise in one's field can be wiser than seeking new challenges for the sake of it.

He's like, why would I learn another business when I'm already really good at this one?

The speaker shares wisdom from a neighbor who questions the logic of starting over in a new business when one has already achieved mastery in their current field.

He doesn't use his business to satisfy his interpersonal desires. He used his business to create wealth, which was the whole point.

This quote distinguishes between using a business for personal fulfillment versus using it as a means to create wealth, highlighting the neighbor's practical approach to business.

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