Moats and Allocators

Supported by Greenhaven Road Capital, finding value off the beaten path.

After writing the post about Pat Dorsey I started to read, listen, and watch more of Dorey’s talks, presentations, and interviews. It led me to a more complete picture of Moats and Allocators. This audio post will cover:

Why alpha erosion occurs and the hard work to prevent it. In Dorsey’s words, capitalism works.

Building moats. Why can Tiffany & Co, Tide, and Whitman’s chocolate all charge more? We’ll also look at New Coke, Apple in middle age, and a Twitter poll.

Allocating capital. The best capital allocators are – probably – Intelligent Fanatics  and Outsiders. Oh, and these two; Charlie Munger, early Warren Buffett, 2012 Warren Buffett, Bill Gates and Warren Buffett.

We’ll end the episode with the same question Patrick O’Shaughnessy asked Dorsey, what would you do with HQ Trivia? My guesses; become a social consensus brand (best chance), raise switching costs (infinitesimal chance), establish network effects (meh, maybe), or become a shared experience (wildcard).

Warning: This podcast includes a musical number that may be stuck in your head for the rest of the day.


Ted Sarandos

Supported by Greenhaven Road Capital, finding value off the beaten path.

Ted Sarandos is the Chief Content Officer at Netflix, who started his journey in a Phoenix video store and went on to greenlight six billion dollars worth of content. Most of this post will draw from Sarandos’s November 2017 conversation with Marc Andreessen, who said;

“What Netflix has done, and at this scale, is an extraordinary accomplishment. I also think that Netflix beyond that has catalyzed the most dramatic period of revolution and change in the television and video industry since the arrival of color TV and maybe before that.”

Sarandos explained that he had a non-traditional start and his trajectory is thanks to serendipity. He planned to become a journalist, but “I was a really lousy writer.” Instead, he worked part-time at a video rental place. The owner read in a magazine that video rental and yogurt shops were the future, and he hated yogurt.

Whatever we call it; serendipity, luck, fortune – conditions matter. I’d wager that Sarandos would have had career success no matter what. But to become the Netflix CCO, he needed a writer to compose an article, a guy who hated yogurt to read it, and for that guy to land in Sarandos’s part of Phoneix.

That guy would eventually ask Sarandos to “take things over for a little while.”

“I took him up on it. I didn’t finish school and for me, it was this crazy MBA and film school mashup that I got paid for, and that kind of got me to where I am today. That was my entrance to the edges of the entertainment business.”

We call this education-via-action the XMBA and it turns up often. Just in the food world, we have stories of David Chang, Alice Waters, Ken Grossman, and Rich Snyder all learning by doing.

That’s what Sarandos did too. The early days of Netflix were Costco trips to buy movies. At the time, Sarandos said, everyone had a scale on their desk to determine postage.

“Netflix was hardly like being in the entertainment business. I worked out of my house. We bought movies at Costco.”

Soon Netflix moved from DVD to streaming. It was once Sarandos and Reed Hastings saw YouTube, “that’s when we knew Netflix was going to work.” These see-it-to-believe-it moments are powerful. Tony Hsieh said that he was dubious about ordering shoes without trying them on until someone showed him that people were already doing it, via magazines.

Netflix used this same sort of reasoning – it worked there why not here – for Marvel content. Those characters have succeeded in comic books and in movies, why not in a television show?

And the same reasoning for binge watching. Sarandos told The Guardian: “We saw that people would return those discs for TV series very quickly, given they had three hours of programming on them – more quickly than they would a movie. They wanted the next hit.”

Netflix’s streaming success comes – in part – from understanding early on about Wholesale Transfer Pricing. Tren Griffin has wonderful posts (one, two) on Netflix CEO Reed Hastings.

It’s why you shouldn’t expect sports on Netflix anytime soon. “The reason I don’t get tempted by major league sports,” Sarandos explained, “is that the pricing power all belongs to the leagues.”

Sarandos said that Netflix succeeds making original content because they understand the quantitative and qualitative aspects.

“The fundamental difference between Silicon Valley and Hollywood is quant and qual. The whole efficiency driven thing is very Silicon Valley and the whole quality thing is Hollywood. Rarely do those things meet. I think part of the reason Netflix has been successful is that we’ve always kept a presence in Hollywood and we’ve always kept a presence in Silicon Valley.”

Another thing that helps is the ability to argue well.

“It’s all credit to Reed. Reed created a culture where you’re free to ask questions, you’re free to push back – but support the outcome. Everyone has a strong voice at the table but once the decision is made everyone supports the outcome. “

Good arguments are hard but worthwhile. Marc Andreessen has said:

“It’s the responsibility of everybody else in the room to stress test the thinking. If necessary we’ll create a red team. We’ll formally create the countervailing force and designated some set of people to counter argue the other side…Whenever he (Ben Horowitz) brings in a deal, I’ll trash the shit out of it.”

These red teams work, but try to finding someone with a real belief is better said Josh Wolfe. “Some firms implement a devil’s advocate or red corner person to actively do that, it’s much better when it comes naturally.”

Sarandos sees about eight pitches a day, but sometimes it can be up to twenty. “There’s no shortage of ideas but there is a shortage of people who can execute on a big vision…You have to buy into the creator’s ability to bring a vision to the screen.”

That’s about the same investment rate for Andreessen’s firm, a16z, but how do you know which ones to pick? Andreessen said it’s the errors of omission that hurt the worst:

“We always worry about two kinds of mistakes, false negatives and false positives. False positive is, we say yes to something and it fails. False negative is we say no to something and it succeeds. In our business, those are the ones that torture the shit out of you.”

Well, explained, Sarandos, “Almost all the ones we pick and succeed change a lot and almost all the ones we don’t pick and succeed also tend to change a lot.” This is why picking the person is so important. Sarandos and his team saw a small movie the Duffer brothers had made. “Mostly what it said was that on almost no resources they pulled together this really rich, satisfying movie experience, which gave us confidence that they could do it on the small screen too.”

In the year before, Hastings explained it the Stranger Things choice to Andreessen (~37:00).


Once Netflix finds a person they mostly let them be.  “We’re way better off, taking someone’s creative vision and putting it through the service than us trying to go in and retool it….At the end of the day if the creator says, ‘That’s my show.’ we put it up.”

At Netflix, they have hunches about what works but don’t know for sure. Sarandos told The Guardian about House of Cards:

“It was generated by algorithm. I didn’t use data to make the show, but I used data to determine the potential audience to a level of accuracy very few people can do…We’ve been collecting data for a long time. It showed how many Netflix members love The West Wing and the original House of Cards. It also showed who loved David Fincher’s films and Kevin Spacey’s.”

Yeah But! – Andreesseen notes – it’s one thing to let one of the best directors in the world – David Fincher – do whatever he wants, what about television shows number two and beyond? Sarandos instills ownership. He explained the Fincher arrangement like this:

“You can give me twenty-six hours of home movies but you have to put your name on it.”

This same sense of ownership, wrote Ashley Vance, is how Elon Musk motivates his engineers. Ownership is how Intelligent Fanatics run their businesses too.


Thanks for reading, Mike.


Pat Dorsey

Supported by Greenhaven Road Capital, finding value off the beaten path.

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From a 2017 presentation at the 14th Annual Value Investor Conference in Omaha, Nebraska

Pat Dorsey joined Patrick O’Shaughnessy to talk (part1, part 2] about good business. There were two themes. First about operations; what operators should know about running a business. Then about observations; what investors should look for in a business. Ready?

Operations. “The most finite asset is not capital,” explained Dorsey, “it’s time.” How can you suppress FOMO? “(Something) could be an interesting idea but maybe it’s an interesting idea but it’s not one you have any competence at looking at.”

Don’t try to be a round peg squirming into a square hole. Dorsey said, “The first thing is; know who you want to be when you grow up.” It helps to know thyself.

Dorsey’s strategy is to focus on the areas with the most reward. “On the sell side you’re paid to say ‘Yes’, on the buy side you’re paid to say ‘No’.” Derek Sivers puts it another way, wait for the ‘Hell Yes!’

“We have three baskets; in, out, and too tough… we have to have a special insight, or we’ll put it in the ‘too tough’ basket,” explained Charlie Munger. Dorsey added that your ‘IN’ basket should be things that fit you. Like the right cut of bathing suit, adopt things that work for you.

“The path to superior results is to accept only the best ideas,” wrote Seymour Schulich.

Suppressing FOMO and staying focused help Dorsey avoid situations “when people create a product to meet demand.”

Yet, investors have to Be Different. “Don’t just do things other people do.” Instead,  have a “willingness to do stuff that looks optically stupid.” If someone says that’s the dumbest thing ever take it as a sign you’re headed in the right direction.

“Firms that are willing to change things that don’t work and that never say ‘because we’ve always done it this way’ is a hallmark of good firms.”

Good processes are run by good people. That means people with open minds and who don’t weaponize information. It’s people with intellectual integrity and humility. It’s people who Argue Well. When asked how to prepare for a stock picking competition, Dorsey said, “Get one member of your pair to take the other side.”

Dorsey succeeds because he has good processes and good people that operate within a circle of competence. He told Patrick, “take care of your customer and ignore Wall Street…at the end of the day, the guy who pays your bills is the guy who matters, and that’s the customers.”

Observations. Dorsey relies on three forms of analysis; financial calculations, destination visitations, and moat inspections.

Financial calculations won’t give the full picture but they can give a peek into a business. Calculations like CAC and customer LTV tell you something, but like any number, require interpretation. They are “very blunt tools.”

Dorsey explained that an LTV:CAC ratio of 1 means something and 5 means something else – but more isn’t always better. Changes in strategy, like when Adobe switched to subscriptions, can change the ratio and changing ratios should change strategy.

Destination visitation is another observation technique Dorsey uses.

“You can’t understand a business unless you sit in the customer’s shoes and the best way to sit in their shoes is to go talk to them.”

“In the case of Chegg, we did an online survey of eight-hundred students across the country.”

“You gotta get off your rear end and work the phone. The insights we get from talking to people deep in the industry are phenomenal.”

Visits are helpful because visits are valuable. In his 2017 presentation at the Value Investor’s Conference, Dorsey said: “quantitative data is often priced efficiently.” While:

“Qualitative insights come from sending out thirty emails and getting one back. It comes from getting out to trade shows and talking to people. That’s how you add value.”

Being there is a powerful information gathering tool. But it’s also a harder one than a database formula. Milton Hershey apprenticed as a caramel maker. Yvon Chouinard was a climbing-gear-user before a climbing-gear-manufacturer. John Elkann worked in half a dozen departments at Fiat before becoming the head of all of them.

When Warren Buffett says that he’s a better investor because he’s a businessman and vice versa this is what he means. There’s a depth in understanding the numbers behind a balance statement line item. Dorsey calls it a “granular understanding.” Visits are not a magic bullet but nothing is.

Dorsey said that he went to India to see if it was “diligence-able.” The verdict, kind of. After a week he learned that consumer taste was not something they would understand, “that’s out of our wheelhouse, but there are plenty of good Indian export businesses that compete on a global scale.”  But there’s no rush, “It could be five years or never when we buy something in India.”

Mohnish Pabrai gave advice on how to study and avoid sunk cost tendencies. Like say, flying halfway around the world to find investments.

Moat inspections are the final technique. Remember, not everything is a network effect and not every brand is a moat. “Economic moats are not evenly distributed across the market.” Brands can be a moat but “If a brand doesn’t translate into pricing power it’s not worth what the company spends to maintain it.” Rory Sutherland guessed that people buy brands as a kind of insurance.

At the Value Investor’s Conference, Dorsey noted the question to ask about (signaling) brands.

“Positional and legitimacy brands have a big big difference from low-search-cost brands. If I decide I can get a razor from Dollar Shave Club a lot cheaper than Gillette and it does the same job I get full value from that product without anyone of you having to change your mind.”

Meanwhile, a Rolex and Mickey Mouse watch both tell the same time but it would require social consensus to affect those brand values.

Businesses with high switching costs can have pricing power (read:moats) too but some businesses ahem Bloomberg ahem are more like rent collectors. The better moats, Dorsey explained, are like plumbing. They’re essential services but not primary costs.

However, companies like Boeing and Airbus are fungible. On the consumer side, it’s easier for established brands to get upset. “This was not possible fifteen years ago….moreover, I can use Facebook and Google to target very effectively.”

Dorsey also falls in the less-pain-in-the-ass camp. About Amazon, he said, “Everything comes back to making the customer’s life easier because if the customer’s life is easier they’ll use it more.”

Josh Wolfe told Patrick, “We always point our turret and say a very sophisticated two-word question to figure out where the next thing is; what sucks?”
In his book, Alex Moazed wrote “You can think of transaction costs broadly as pain-in-the-ass costs. All platforms reduce these costs in some way.”

If you can find what Moazed calls a platform company you want something that “will grow itself” says Dorsey. How do you find them? Dorsey said, start with a universe of 5,000 then throw out whatever you aren’t interested in, like commodities, chemicals or life insurance. From there think about who has tailwinds and write up a first pass memo. These, Dorsey explained, are not should we invest but could we invest.

If you want more of Pat Dorsey, his site collects interviews and presentaitons.


Thanks for reading.


John Elkann

Supported by Greenhaven Road Capital, finding value off the beaten path.

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On Masters of Scale Reid Hoffman spoke with John Elkann of Fiat. It wasn’t until finishing this post that I realized the similarities between Elkann at Fiat and Andy Grove at Intel.

Curiosity + Humility .

“I always enjoyed solving problems, I still do enjoy that.”

Like Tariq Farid of Edible Arrangments, Elkann had an optimistic curiosity and humility. When he was invited to sit on the Fiat board of directors as a twenty-one-year-old “that came with a shock.” But he had good advice from his grandfather:

“The advice from my grandfather was very clear, ‘no one is expecting you to know or understand or contribute. The most important thing is for you to listen, but really to ask questions. If you don’t understand that is absolutely normal.'”

Hoffman added, “John was welcomed onto the board on one condition, he couldn’t conceal his ignorance. His grandfather was insistent that it all hang out.”

David Ogilvy advised young people to learn before they earn. That requires curiosity and humility. Charlie Munger saw this in his grandfather too:  “he had an attitude that was pretty damned extreme. And I would say his attitude was, you had a moral duty to make yourself as un-ignorant and as un-stupid as you possibly can.”

Be there for a deep understanding.

Beyond being on the board, Elkann had direct experiences.

“In parallel to that, he organized for me to start working, spending time in the accounting department, in the finance department, in the legal department just to learn the basic duties of the director and I got incredible teachers and was very fortunate to go through that apprenticeship.”

“I’ve always enjoyed being able to be close to where things happen. The experience I had as an intern in a headlamp factory in the suburbs of Birmingham was really about understanding how a manufacturing process worked.”

Why was it so important for the grandson of the CEO to work the factory lines?

“You are quite far away in a board setting from where the actual life of the business is happening and how that information gets distilled and filtered through the organization.”

Andy Grove gave the same advice:

“Our IT manager said, ‘Well, that guy is always the last to know.’ He, like most CEOs, is in the center of a fortified palace, and news from the outside has to percolate through layers of people from the periphery where the action is.”

Grove also described what kind of deep understanding you’re looking to congeal from these experiences:

“You have to understand what it is that you are better at than anybody else and mercilessly focus your efforts on it.”

Resilience. The theme of the episode is being like a phoenix and rising from the ashes.

“I often compare starting a company to jumping off a cliff and assembling a plane on the way down.” Reid Hoffman

“It’s as if we jumped out that window with the parts we need to sew a parachute.” Jerry Kaplan, The Startup

Barbara Corcoran wants to see jack-in-the-box founders on Shark Tank. “They keep popping up. It doesn’t mean they don’t take the injury, but it’s a quicker turn around time.”

Truths; uncomfortable, inconvenient, or otherwise. Elkann was fortunate to have Sergio Marchionne running one of the businesses and join as the CEO. There were two reasons he was an excellent choice. First, Sergio had direct experience, “Sergio had run and turned around SGS.”

“Secondly Sergio was a truth teller. For the amount of problems, we had, having someone who was a truth teller was a breath of fresh air. His attitude and honesty really led to the extraordinary turnaround from 2004 to 2008.”

Andy Grove wrote:

“People who have no emotional stake in a decision can see what needs to be done sooner.”

Hoffman added, “any key executive must be by nature a truth teller.” We’ll add, you can get to the truth by arguing well.

Good arguments are competitive disagreements. Grove wrote, “we developed a style of ferociously arguing with one another while remaining friends (we call this ‘constructive confrontation’).”

Businesses need to answer; What job is the customer hiring me for? That’s a question truth-tellers can answer.

Career capital. Though not a startup, Hoffman connected with Fiat because of the founder-like connection. He explained:

“The real benefit of having the founder stick around is their ability to take a big risk, to say, ‘We must take this risk. We must take this stab at the future. We can’t just preserve what we built. And not just say it but have the whole company believe in it.”

“The willingness to take that risk and the moral authority to drive it is actually quite hard to replace once the founder steps down.”

For Grove, “It required swallowing my pride.” Why? Grove explained: “Businesspeople have emotions, and a lot of their emotions are tied up in the identity and well-being of their business…In many instances, your personal identity is inseparable from your lifework.”

To make a change like Elkann and Grove pulled off requires no ego, which is hard as sometimes it’s literally the name on the building.


Thanks for reading.

Charlie Munger

Supported by Greenhaven Road Capital, finding value off the beaten path.

Unsurprisingly we’ve covered Munger before; using Damn Right (post), the 2017 Daily Journal Meeting, and using Tren Griffin’s Book (twice!). Today’s source is a 2017 conversation at the University of Michigan.

My favorite quote was this: “I was not a courageous, adventuresome, admirable man. I was a cautious little squirrel.”

Charlie Munger is like a time traveling man; he’s seen the future but explains it in the language of the past.

Onto the notes.

Learn the right things.

“And he (Charlie’s paternal grandfather) had an attitude that was pretty damned extreme. And I would say his attitude was, you had a moral duty to make yourself as un-ignorant and as un-stupid as you possibly can.”

“When I was young, I could get an A in any mathematics course without doing any work at all.”


“I never touched calculus, not once, after I was 19 years-old, I’ve lost it. The symbols would mystify me. But I think you’ll find, if you really know the basic stuff, it’s enormously useful, and only a very few people are ever going to need any calculus.”

Munger’s success equation is this; natural gifts plus hard work times a luck coefficient. Within the ‘hard word’ variable is ‘working on the right things.’ Toward the end of the interview he talks about Bitcoin then makes a larger point.

“And by the way, I just laid out a wonderful life lesson for you. Give a whole lot of things a wide berth; they don’t exist. Crooks, crazies, egomaniacs, people full of resentment, people full of self-pity, people who feel like victims—there’s a whole lot of things that aren’t going to work for you; figure out what they are and avoid them like the plague. And one of them is Bitcoin.”

Munger’s best compounding investment hasn’t been financial, but intellectual. Learning new things each day has made him a better decision maker and that’s his real success.

Another thing to learn is about yourself.

Know thyself. Why did Charlie Munger go to law school?

“I knew I didn’t want to go into the bottom of a big organization and crawl my way up. I’m a natural contrarian; that was not going to work for me. And I found that people could tell … when I thought they were idiots, and that is not a way to rise in a big organization. And so I couldn’t do that.”

Self-knowledge was one of the big ideas from 2017 and it’s still underappreciated. To enter your thoughts like a third person and make sound decisions is a wonderful skill.

Stakeholders. Host Scott DeRue had this exchange with Munger.

So, that’s actually what I wanted to ask. So you moved to California and you actually start a law firm and then practice law for some period of time…
“I had no alternative…I had an army of children almost immediately. I painted myself into quite a corner.”

Yeah. So zero choice is pretty powerful, for sure.
“Yes. Of course.”

Part-of-the-reason Munger and Buffett have been successful investors is their advantage of personal/permanent capital. They don’t have to answer to investors in the same way that Munger had to answer to his children earlier in his career.

Some stakeholders are like small yippy dogs. Good for appearances but expensive in time and money. “We don’t have an isolated group [managers] surrounded by servants,” Munger said in another interview, “Berkshire’s headquarters is a tiny little suite.”

Some stakeholders can be external, created by peer pressure with the Joneses. Burton Malkiel told this story:

“When Jack Bogle first met Warren Buffett they were at a hotel together and Jack recognized Warren, went up and introduced himself, and he said to Warren, ‘you know the thing I really like about you is you have rumpled suits just the same as I do’ and Jack and Warren have become very good friends.”

Some stakeholders can be fans, peers, or owners as in the case with The GMs like Daryl Morey or Sam Hinkie.

Whether mouths to feed or mouths with feedback, the more people involved the more you’ll be involved with people.

Career capital.

“Coming to business, not as business school graduates, but as people who would own portfolios or securities, we fought like capitalists, because we were always in a shareholder mindset. A lot of people running the business think like careerists. And believe me, you gotta think like a careerist to a certain extent if you’re in a career. But it also helps to look at the business strategy problems as though you are an owner. And so my advice to you is, you don’t wanna be…never get to be a careerist so much that you don’t see it from the owner’s point of view.”

Reid Hoffman said that what makes company founders so powerful is their ability to think like owners rather than careerists AND to get people to believe in those ideas too.

Rory Sutherland is on the same page:

“There are lots of cases where your need to signal something, by making a decisions – and it may be the rationality of the decision – actually prevents you from making a better decision.”

Michael Mauboussin is too:

“I do think there’s an element of career risk, and this spans not just sports but also investment management. Bill Belicheck goes for it in fourth down and it doesn’t work out and people give him the benefit of the doubt. But if you’re a coach who has a .500 team, it may be th correct decision but if you lose that game people don’t think about the quality of your section making process, they do think about the outcome, that’s a real big problem.”


Thanks for reading.


Supported by Greenhaven Road Capital, finding value off the beaten path.

Periodically the big ideas from this blog need to be updated. This post is about a DIY Education or a Do-It-Yourself MBA. This post could be 100% wrong.

The signaling effect of an MBA is so strong that a friend told me that the correct lingo isn’t The University of Chicago MBA but rather Booth MBA.

Yet, the first principle of attending Wharton, Booth, Haas, or HBS is to learn something – and then keep learning somethings. The DIY or eXperimental approach shows up enough in interviews that it’s worth pointing out that the University of Hard Knocks offers different classes and different fees.

Fariq Tarid wrote “In 1989, I enrolled in college part-time. As I weighed the benefits of the classes against what I was learning and earning with my businesses, I decided to put off college and never finished.” His career before and during the Edible Arrangments success was all about figuring things out.

Eddy Elfenbein started a newsletter on microcaps that “was fun doing, very informative, a learning experience.”

Charles Lindberg wanted to be a pilot but the best education was in the skies, not the classroom. Bill Bryson wrote that when Lindbergh delivered airmail, “he acquired the sort of resourcefulness that comes with flying cheap and temperamental planes through every possible type of adversity.”

Meb Faber noted that Angel Investing is a DIY education. “I think the only way to learn this world (angel investing) is to do it and get some skin in the game, maybe even viewing it as an education expense given the high likelihood that these things won’t pan out.”

Elizabeth Gilbert‘s comments might be my favorite. “My parents would have seen (getting a degree or credentials) as a waste of money and time when you could just be out there doing the thing, and learning how to do the thing by doing the thing.”

Ben Carlson said: “For people trying to understand how the market works, for how business works, you can do a lot worse than dabbling in stock picking when you’re first starting out.”

Seth Klarman said, “I learned an enormous amount there (at Mutual Shares), probably more than in my subsequent two years of business school.”

Rich Snyder took over In-N-Out Burger when founder, and father, Harry passed away in 1976. At first, Rich was unsure of himself, having never attended college. But,  “He cobbled together his own kind of degree, attending leadership seminars and classes and seeking out mentors.”

Ken Grossman got most of his business education for the Sierra Nevada Beer Company when he ran a bike shop.

Alice Waters did a semester abroad in France, “but I never went to class.” Instead, she traveled, hitchhiked, attended art shows, consumed concerts, and ate at little restaurants where the fish were pulled from a stream and prepared fresh.

Ty Warner “seemed to have a genuine passion for the product. He was making a lot of money, but he was also using it as an extremely well-paid internship in the business of plush. Retailers Warner once sold to recall him quizzing them on which products were selling and which ones weren’t; Warner sought feedback on competitors’ products, too. What did they think of this idea? What about that? What if you combined this with that?”

In Damn Right Janet Lowe wrote that Charlie Munger, “began investing in securities and joining friends and clients in business endeavors, some of which proved to be graduate-level courses in the school of hard knocks.” Munger said that he learned the value of learning from his paternal grandfather who “had an attitude that was pretty damned extreme. And I would say his attitude was, you had a moral duty to make yourself as un-ignorant and as un-stupid as you possibly can.”

All that said, Morgan Housel made this point. “As a twenty-two-year-old, you’re showing your employer, ‘I did this for four years. I followed the rules. I checked the boxes.’ That’s the only thing you have on your resume, so people say ‘it’s just the signaling,’ but that’s extremely important for both the employers and for you as a student.”

Mark Suster has this advice:

My advice is often, “make sure that what you get out of working at this company is one or several of the following: a great network of talented excutives (sic) and VCs, more responsibility than your last job, specific industry or technical skills that will help you in what you do next, a chance to partner with companies that will increase your industry relationships, etc.” Learn now to earn later.

David Ogilvy also said to learn before you earn.

What would be the curriculum? Whatever you want. All of the examples listed learned something they were interested in. That’s the most important thing.

Tariq Farid

Supported by Greenhaven Road Capital, finding value off the beaten path.

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On How I Built This Tariq Farid tells Guy Raz about his careers mowing lawns, cleaning McDonald’s bathrooms, and opening flower shops before starting and growing Edible Arrangments to six-hundred million dollars in revenue.

The tl;dr version is like the Susan Tynan of Framebridge (and fellow HIBT interviewee) post — understand your customer.

Farid’s youth was filled with benevolent adults. His mother and father played large influences but so too did early employers. One man, Charlie, who ran a flower shop said he could “come down a few days a week to keep yourself busy.” Another, a neighbor, paid Farid to shovel snow and mow grass. Sometimes Farid would even show up before it stopped snowing. That neighbor told him, “If you keep working this hard, by the time you’re 35, you’re going to be a millionaire.”

Entrepreneurial children need adults who believe in them. Jim Clark, Yvon Chouinard, and Ken Grossman were all fortunate to have mentors.

For Farid, shadowing Charlie in the flower shop was formative.

“The genius of this man was that he would have you follow him. When he would go and help a customer you would follow and he was just amazing at customer service.”

Farid did all the jobs in the shop, learning by doing. The HIBT interview ends with Charlie, the original mentor talking to Raz.

“I turned to my brother and said ‘How do you like these kids? They picked my brain and opened up a flower shop and now I’m in competition with them! But you know, it’s a beautiful competition. I’m happy with that kind of competition.”

After a six-thousand dollar loan from his father’s boss, Farid had his own flower shop. Even though the shop was small and out of the way it worked because Farid understood what customers needed.

“I looked around and everyone closed at five-o’clock and I stayed open until seven-o’clock and we started to get a lot of customers coming home after work.”

Farid wrote for Entrepreneur magazine:

“Live in your customers’ shoes…I like to be a one-man market research department conducting my own surveys. I often engage strangers in conversation at an airport or a hotel to get a feel for others’ opinions. I sometimes become an informal mystery shopper inside my own stores as well as those of the competition to see what works and what needs improvement.”

This is something Indra Nooyi, CEO of PepsiCo does too:

Designers like Steve Vassallo or the IDEO team rely on research. Jan Chipchase conducts his research in pop-up studios. Other times, people Farid or Steve Jobs know (or guess).

Farid’s first locations succeeded, and he opened a second. To make the businesses more efficient, Farid wanted to computerize the shops. It cost twelve-thousand dollars. That was too much to pay so Farid, as he’d done before, figured things out himself.

If wowing customers was the backbone of Farid’s businesses, the can do attitude was the brains. He liked figuring things out. He said in another intervew:

“The world is at the fingertip of anyone who wants to do the research. So if you want to find out how a brand got built, what it took, and what the risks were. People write stories about what they went through…”

Farid’s curiosity led to a fruitful idea. He saw fruit arrangments in stores and on a cruise ship. “I saw that and with that, I started to dabble…I got a knife and started doing it. The same way we did the flower shops, you just experiment until you get it right.”

The Steve Jobs bio is Farid’s favorite book and he explained:

“To this day for inspiration I often refer back to his famous quote that everything around us that we call life was made up by people that were no smarter than any of us and we all have the ability to change things, to influence things and to create things that make the world a better place for us all.”

Gumption pays. Jenn Hyman (another HIBT alum) saw her email list included someone with an @NYT address. She reached out and landed a profile.

Toward the end of 1997, Farid sent a few fruit arrangments to friends. “Some thought it would be great but the majority thought it wouldn’t work. ‘Who’s going to buy fruit on sticks in a basket? Come on.'” Even Guy Raz expressed doubt, “If I was your friend at the time I would have said the same thing. Who is going to buy fruit arranged as flowers? What a weird idea.”

Farid’s father was doubtful too:

“My father was always a person who needed it validated, so what he did was, he asked a “doctor sahib” friend to visit my first shop. His (doctor sahib’s) first question to me was: “Is anyone else doing this?” I excitedly replied, “No, no one else is doing it. I’ll be the first one.” “What makes you think you’ll become successful if no one else is doing it, and it’s such a good idea so all these big companies, the ones with millions of dollars, why aren’t they doing it?” Tariq recalls he was told to calm down, and to concentrate on his flower shop. He was also asked if he had done a focus group, the term he had never heard of. “Yes, yes, I did one. I made one. I put it on the table, and my mother saw it, and she said it would be a complete success.”

Typically, maternal validation is a poor choice. It was one of the themes for start-ups who failed. Instead, be like Scott Norton and his ketchup tasting party. Norton invited friends and neighbors, looking for constructive feedback not adoring praise.

Yet, Farid had something. He had a ‘Zero to One‘ idea. He sold the fruit arrangments alongside his flowers. Then the fruit arrangements passed the flowers. One day a man came in wanting to franchise it. ‘Sure we can do that,’ Farid said, even though he had no idea how. Farid’s career is a bit like the improv bit “Yes and…”.

Yes, and…” thinking is a rule-of-thumb in improvisational comedy that suggests that a participant should accept what another participant has stated (“yes”) and then expand on that line of thinking.

For Farid, this mindset wasn’t to make laughs, but bring delight.

Time is a zero-sum game and while he built a company Farid did not coach youth soccer. His first marriage ended in divorce and he said that an outsized commitment to a business “is something that you have to be ready for. Our business is unique because when people are taking time off we’re working hard. The holidays are when we’re busy.”

Marcus Lemonis said that part of his advantage is a lack of kids. Morgan Housel commented, “If you want to be an Elon Musk type character you need to work one hundred hour weeks for years, maybe decades, on end. There’s no way around it. There are no part-time founder jobs.” Stephanie Linnartz, Chief Communication Officer at Marriott said, “My family first, my job second and that doesn’t leave a lot of roomful hobbies and book clubs.”

During the long hours and bits of success Farid was humble and always learning:

“I’m very prepared to be wrong. One thing I learned a long time ago was that, when you’re wrong and you admit that you’re wrong, everybody around you will help to dig out of it and help you learn a lesson. But if you have an ego or think you are right people will stomp on you.”

Mistake custody is powerful. Elon Musk does it. Scott Norton built it into his company. David Ogilvy wrote, “Great leaders almost always exude self-confidence. They are never petty. They are never buck-passers.”

Humility and curiosity combine to form life-long learning. But this doesn’t necessarily mean school.

“In 1989, I enrolled in college part-time. As I weighed the benefits of the classes against what I was learning and earning with my businesses, I decided to put off college and never finished.”

Instead, be curious.

“Ask questions and listen to the answers. When I started out, I sought the advice of people in similar businesses. Not everyone would take the time to help, but I didn’t give up. Those who did find time for me provided a wealth of useful business information. When I found someone willing to offer advice, I only asked one or two questions and then soaked up all the wisdom they had to offer.”


Thanks for reading, Mike.