Yesterday I read a Wall Street Journal article that said the Washington Post is losing -$100 million per year.
Jeff Bezos bought the Washington Post for $250 million in 2013.
That same Jeff Bezos built Amazon from nothing to over $2 trillion in market value, making him over $200 billion in personal net worth.
In one business, Bezos turned $0 into $2 trillion. In another business, after decades of accumulated experience, he turned $250 million into negative -$100 million per year.
The most underrated business success factor
I have great admiration for Jeff Bezos. He’s smart, relentless, driven, visionary…and he had the guts to quit while he was way ahead, firing himself as CEO a few years ago.
But, he’s not a magician.
He can’t make any business successful.
The most underrated business success factor is being in the right business in the first place.
He did a lot right at Amazon. He had innate intelligence, a maniacial drive to succeed, long-term thinking, insatiable learning from those before him like brick-and-mortar discount store legends.
On top of all that, Bezos also launched an online retail store right at the beginning of the multi-decade tailwind of the internet consuming the world.
Had Bezos instead tried to launch a business selling landline phone service, none of us would have heard of him.
Should you jump ship?
Sometimes when you’re in a sinking boat, it’s smart to keep patching holes so the boat stays afloat. Other times, it’s better to jump out and find a better ship.
Unfortunately, the decision is more often than not perfectly clear.
One mental trick to separate yourself from your situation is to ask, “What would I advise a friend to do in the same situation?”
If you were advising a friend, would you tell her to keep working at the business (or job), try to pivot by selling a new product or trying a new marketing channel, sell the business, hire a CEO/manager, or just throw the business away and start something new?
You only have so much time, energy, and money. There’s a high opportunity cost to everything you decide to do, especially which business opportunities to pursue.
If your business has a lot of traction or high potential for growth, then you’re likely better off fixing what’s broken and/or devoting more time to it.
If the same time you’d spend fixing a broken business would reap 10X the rewards of starting something new and more promising, then maybe it’s time to make an exit plan.
Try a lot, go deep with a few
I talked with a successful entrepreneur two days ago who said he struggles to read some books because he feels like he needs to slog through them to the end.
I told him that I prefer to skim many books and only devote significant time to a few that really catch my attention. (This was also the preferred reading method of the late billionaire Charlie Munger.)
A similar principle applies to starting and growing a business.
In starting a business, try a lot of ideas. Keep your risk, especially upfront financial investment, as low as possible. Not every business will work out. That’s OK. You want enough time, energy, and money to keep trying until you find a big winner.
In growing a business, also try a lot of ideas. Experiment with many ads, even many types of traffic, even multiple sales channels (eventually). Don’t risk your whole business on any one effort. Many tests won’t work out. That’s OK. Keep trying.
What most people do, however, is risk everything they have on one new idea. They pour their entire savings, all their time, and all their energy into one shot.
Sometimes it works. Often it doesn’t.
With many experiments you gain experience. With experience you get smarter about which opportunities are worth pursuing and which aren’t.
You can fail 99 times, but if that 100th turns into a $10M, $100M, or $1B+, life isn’t too bad.
Look for tailwinds
Warren Buffett has spoken much about being in businesses with tailwinds as opposed to headwinds.
Find businesses with great tailwinds due to changes in technology and consumer preferences.
Specifically, look for tailwinds likely to last for many years.
When you’re going to put in all the same time, effort, and money into one opportunity versus another, choose the one with an invisible force pushing you along the way.
As mentioned in Poor Charlie’s Almanack, Charlie Munger asked his friend how a mutual acquaintance made a bunch of money. His friend said, “He was a duck sitting in a pond, and they raised the pond.”
Every once in a while, raise your head up and make sure you’re in the right pond.
—Matt