To Increase Your Personal and Business Prosperity: Exchange More

A Business and Personal Prosperity Secret?

Business and Personal Prosperity through ExchangeWhat is the secret to creating value in the world for yourself and others?  Exchange is the best and shortest answer I would give today.  Exchange, or the act of giving one thing and receiving another in return, creates prosperity.  Exchanges: idea exchanges, commercial exchanges, and social exchanges will create value for you and for the world.  Matt Ridley got me thinking about this as he makes the case in his book The Rational Optimist that human prosperity “was not something that happened within a brain.  It was something that happened between brains.  It was a collective phenomenon,” writes Ridley.  “At some point, human intelligence became collective and cumulative in a way that happened to no other animal.”

Exchange at the Macro and Micro Levels

I found the idea of prosperity through exchange to be most interesting as it could be applied on a micro level — to my life today.  It wasn’t necessarily intelligence, or strength, or outstanding governments, or capital, or property rights, or science that made humans so successful, writes Ridley, It was the “ever-increasing exchange of ideas that causes the ever-increasing rate of innovation in the modern world.”  If that is the case on a macro level, it should very well apply on a micro level to a single person’s life.

The Law of Comparative Advantage Applied to You and Me

We know from the law of comparative advantage by David Ricardo that even if you are the best person in the world at everything, you will be better off focusing on what you do best and trading for other goods and services.  Here are some ideas to apply the concept of exchange to a personal level of creating prosperity for you and me:

  1. Improve your skill in the art of delegating or outsourcing.  Delegating is not easy.  It takes great care to identify things that can be delegated (force yourself to think more broadly), to carve out the tasks or responsibilities in understandable groups, to communicate the requirements of the tasks well, and to set-up a system of monitoring that is efficient.  We can all work on each step of this.  We can all practice by constantly taking small tasks and looking to exchange them.
  2. Become proficient with modern tools to assist you with anything and everything — don’t do everything yourself.  In today’s world, there are many more opportunities to exchange for personal goods and services, particularly tools that are creating value by tapping into unused capacity.  Zipcar to replace your car, Relay Rides to rent out your car, AirBnB to rent your spare bedroom, TaskRabbit to earn some extra cash while running errands, Mechanical Turk to find workers around the globe — the examples are becoming endless as the methods of exchanging with others increases dramatically.  With so many tools of financial and idea exchange, the advantage goes to those who know how to use the modern tools of exchange for mutual prosperity.
  3. Connections with others (inter-dependencies) create community and prosperity.  While counter-intuitive for me because I could sometimes fantasize about perfect self-sufficiency, creating exchanges and connections with others creates time-saving, prosperity, and richer lives.  Getting to know your local restaurateur, contracting for help with a garden project, using a start-up web design firm, volunteering for a neighborhood project, taking on a business partner, or whatever other ideas are ways to increase your prosperity and deepen your connections at the same time.  This reminds me of one of the core recommendations from the US Competitiveness Project by the Harvard Business School, which is for US companies to deepen their ties to their local communities.
  4. Expose yourself to new ideas.  Innovation comes from mixing ideas.  Personally, I can never get enough exposure to good ideas — however they may come.  Ridley writes, “The history of the modern world is a history if ideas meeting, mixing, mating, and mutating.”
  5. Expose your ideas to new people.  Share your ideas and see what happens.  Put yourself out there, and see what ideas and people flow back to you.  Our collective brain creates value and prosperity.
  6. Meet new people.  New people bring inspiration, new ways of looking at things, and new ideas.
  7. Travel.  Enough said.

Exchange should work on a personal level if you believe Ridley’s thesis that “The more human beings diversified as consumers and specialized as producers, and the more they then exchanged, the better off they have been, are and will be.”

[Note: Ridley’s book was acclaimed for his work on exchange, but criticized by some for his comments on Africa (see Bill Gates’ review of the book).  I am focused on the concept of exchange, but not on the political debate.]

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Is It Better to Make Employees Fit Roles or Roles Fit Employees?

Should an employee fit a role or should pre-defined role fit an employee?

Should employees be made to fit into a role or should roles be made to fit an employee?

Employee Role Playing

Over a grill this past weekend, a debate arose among friends about whether it is better to help employees change to fit the role you envision for them, or change their role to fit their strengths.  The VP of Sales in a friend’s company was more oriented to implementing a sales strategy designed by someone else than oriented to creating the sales strategy himself.  This was frustrating my friend, the owner of the business,  because the VP of Sales was not strong at the same things as my friend.  He envisioned someone in his own mold who could create diverse sales strategies and was comfortable modifying them on the fly.  On the other hand, my friend is not that good at consistent execution once that is what is needed.

The debate has strong arguments on either side.  Some people argue that an organization should develop an optimal structure and then find/modify the people to fit the structure.  The argument is that you cannot change your company structure around every time the employee mix changes.  And certainly, you should not disrupt the organization to fit someone’s particular strengths and weaknesses.

On the other side, it may be difficult to find people to slot perfectly into pre-defined roles.

In my experience with smaller companies or teams within larger companies, I lean toward trying to put people in jobs that match to their strengths.  First of all, the people are happier because they are more successful.  This creates an overall better vibe to the organization.  Second, I once received the advice that it was more effective to build on someone’s strengths than attempt to mitigate their weaknesses.  It is much less work and easier to build on someone’s strengths than the energy it takes to improve something that is a weakness (particularly if they are not inspired to improve).  Third, the more creative or ‘knowledge worker’ the work, the more that matching people to roles consistent with their strengths is important, in my opinion.

The debate reminded me of an employee at the National Holistic Institute, the massage school where I am part owner.  This person had a role where she did not interact with students face-to-face that much, but she always encouraged students to come talk with her in her office, or she found herself in the hallways interacting with students and doing her best to support them.  This created tension as she was not doing her assigned role, but was interacting with students.  This disconnect got worse and worse until one day when we asked her what she felt were her strengths and she said, “Helping students and being present to support them.”  With that statement fresh in our minds, we set about thinking about where we needed someone with that skill.  In short order, we realized we had a role that was a perfect fit for her strengths and she has gone on to thrive in that role and have a major positive impact on the school.

What it took was focusing attention on finding the right role for her strengths.

Nature and the Great Outdoors: Important Aid to Business Owners

A walk in nature is an exercise in business productivity.

The East Summit of Mt Tamalpais, California Offers an Awesome View of San Francisco Bay

A Productivity “Exercise” for Business Owners

A walk in nature is the most productive activity I do.  It is so easy to forget this and forge ahead with work indoors, but each time I hike or walk (most often through the Marin Headlands or Mt Tamalpais) I feel completely refreshed, inspired by the ideas and conversation, and better prepared to tackle whatever work challenges I have. In other words, I experience an increase in productivity.

Jonah Lehrer wrote about this topic in a recent column in the Wall Street Journal titled “Mom Was Right: Go Outside” where he cites several studies that tested the impact of time in natural settings.  Lehrer wrote, “After a brief exposure to the outdoors, people are more creative, happier and better able to focus.”  A study by the University of Kansas in conjunction with Outward Bound found that “hikers in the midst of nature showed a nearly 50% increase in performance on the test of creativity, and the effect held across all age groups.”

For business owners, I feel that this is especially important – a boost to your creative side means enhanced productivity and problem solving skills.  For me, I find that being an owner means that your mind is constantly thinking about your business.  There is not a time where you can turn-off work, other than trying to distract yourself with a book, tv, movie, game or whatever.  But simply being outdoors in a natural setting seems to shift my mind into a more relaxed (and less anxious) space of thinking about the business and life.

How are you planning to get outdoors this July 4th week?

Have Your CEO (and Management Team) In Place (To Sell or Not to Sell Your Business — a series)

Selling Your Business:

To sell your business, I recommend that you present the deal with a CEO and management team in place through the first few years post-transaction.

Simply put, this can be done in two ways: you are the CEO and you agree to continue running the business for a year or two, or you have a CEO and management team in place.  Either way, you will dramatically increase the universe of potential buyers if you have a CEO and management team in place (vice versa if you expect the buyer to bring a CEO).  If you agree to remain as CEO post-transaction, I actually think most seller CEO’s might overestimate the downside of this scenario.  I think it usually isn’t that bad because: a) time flies and a year will go by very quickly, b) some of the stress goes away because your income is no longer affected so dramatically, c) frankly, it can help you get the sale done and if you have to leave earlier (or if the seller wants you to leave earlier), you can manage through that, and d) you might like continuing to manage the business (depends upon your new owners) more than you thought because it keeps you engaged in a familiar endeavor.

Sometimes it can work out without a CEO.   But, there is no scenario that it hurts you if you have a CEO in place.  Even if the acquiring company has a CEO and management team that they would prefer, you can graciously offer to step away at the transaction or phase out the hired CEO.  In large company transactions, I have seen private equity firms bring in a new CEO about 18 months before an anticipated sale with the explicit mission to manage the company through the sale and then for a few years afterward to give the acquirer time to find someone new.  Please let go of your dream to sell your business and ride off into the sunset.

Benefits of Having a CEO and Management Team in Place:

  • More bandwidth to manage the sale.  If you have a CEO, you can work on the transaction while the CEO keeps the business on track.  The sale process is much more difficult and time-consuming than most first-time sellers realize and you cannot have enough extra help during the process.
  • Minimize disruption.  A sale is risky for the buyer because there are many potential disruptions for customers, employees, and others.  If the management has to change, that adds a huge level of risk to the transition.
  • Most buyers are not CEO’s.  For businesses above $1m in EBITDA, most of the potential buyers are not people who will want to run the business themselves (search fund buyers are one exception).  You limit your universe of buyers
  • Finding a good CEO is hard work.  If you have done the work, that adds value to your business.  If a buyer has to find a CEO, it’s another cost of the transaction to him.  It may be the cost that drives him to prefer spending his time on another purchase rather than yours.

I have bought businesses both with and without management teams, but it required a degree of luck to have a management team ready.  I have also had to pass on many good opportunities because I did not have anyone to manage the business.  On the other hand, I know of business owners where it took hiring 2 or 3 different CEO’s before they found the CEO they trusted to manage the business through a transaction.

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Company Culture a Superman-Strong Competitive Advantage

Company Culture Demonstrated at NHIIn a very difficult environment for small vocational schools recently, the National Holistic Institute, one of the best massage schools in the country where I am a co-owner, is surviving and thriving.  A key reason behind the organization’s success is its unique, palpable company culture and mission.  This was apparent at the grand opening ceremony last week at NHI’s new campus in Santa Ana, California — the photo nearby is of some NHI staff members doing the “whoosh” after the ribbon-cutting in Santa Ana.  The whoosh is a unique cultural element mentioned below.  The National Holistic Institute has been able to add campuses during the last few years even though I have received 6 phone calls in the last two months from massage schools in various parts of the country that are in distress.  This is due to new regulatory requirements from state and federal agencies aimed primarily at the large, publicly-traded companies that is having a very negative impact on small schools without the resources to handle the increased requirements.

Why is NHI so strong?  To me, the primary reason is the strong company culture of the organization.  As James Haskett of the Harvard Business School writes, “Culture can account for up to half of the difference in operating income between two organizations in the same business”.  The National Holistic Institute had a very strong company culture when my business partner and I purchased the business in 2003.  It was one of the top three reasons we loved the organization:  the other two were the people (attracted to the organization because of the company culture) and the systems in place that created a high-quality experience for students and made the organization more scalable.  Fortunately, we have been able to avoid messing up the company culture and have even strengthened it a bit.  At the companies that I invest in through Greybull Stewardship, a key objective of mine is to help them maintain the unique elements of their company culture and strengthen them over time.  This is because a long-term, sustainable competitive advantage is usually through activities that a company does differently than its competition and company culture is a vital element to the differences that create competitive advantages.

Haskett mentions several other things in his book The Culture Cycle to think about with your company:

  • Cultures form by themselves with or without leadership.
  • A strong culture can help or hurt performance.
  • Shaping a culture is one of a leader’s most important jobs; it can be ignored, but only for so long and at one’s peril.

For NHI, there are cultural elements that developed out of creating the best learning environment that we can for our students. These are things such as a very conscious establishment of a “safe space” in every class, the philosophy that every class (and as many other communications as we can) should include audio, visual, and kinesthetic methods to help every student learn, reasonable breaks (as a wise man once said, “the brain can only absorb as long as the butt can endure”), opening exercises to classes and company meetings to set the tone, and one of the most fun elements for me, the “whoosh”.  The whoosh was developed by a Thai Chi master to help students bring closure to the information they just absorbed and open the mind for the next activity.  It is done before breaks and at the end of a class or meeting.  It combines movement (a swing of the leg and simultaneous clap) and sound (everyone saying together “whoosh”) to bring closure to a segment or activity.  It is a fun thing that serves as a constant reminder to all staff and students that our company culture is a strength and we like how the “whoosh” represents our differences.

Company Culture Related Posts:

Here are some quotes from some luminaries about the importance of a company’s culture:

“I came to see, in my time at IBM, that culture isn’t just one aspect of the game — it is the game . . . If the CEO isn’t living and preaching the culture and isn’t doing it consistently, then it just doesn’thappen.”  Louis Gerstner, as Chairman and CEO of IBM

“Our belief is that if you get the culture right, most of the other stuff — like great customer service, or building a great long-term brand, or passionate employees and customers — wil happen naturally on its own.”  Tony Hsieh, CEO of

Mezzanine Financing – A Guide for Business Owners

Mezzanine financing is a type of debt financing that sits between bank loan financing and equity financing in a company’s capital structure.  This post is meant to be a general overview of mezzanine.   I recommend that all business owners should know about this financing option because it may be useful at some point.  There are pros and cons to every financing option available, and mezzanine debt financing is no exception.  You may want to utilize mezzanine financing to make an acquisition, to buy-out another owner, or for growth capital.

As with most financial terms, the term “mezzanine” can mean different things to different people — to me it means debt financing that is subordinated to bank loans.  The observations below are generally for companies with between $1 million and $3 million in EBITDA — larger companies will receive different (usually better) terms.

Mezzanine Financing:


  • A financing option to bridge the gap between equity and senior debt (bank) financing.  Banks typically want strong tangible assets and receivables and often personal guarantees.  Equity is expensive to give up.  Mezzanine fits in between these two options.
  • Less pressure on cash flows because the mezzanine debt typically is non-amortizing (interest only payments, no principal payments) until the 5-year mark when the entire principal is due.
  • Mezzanine lenders typically have more of a partnership mentality than bank lenders (your results may vary!) because they recognize the ebbs and flows of business results and panic less than bank lenders.
  • Mezzanine loans are subordinate to senior bank loans.
  • You can receive between 1 and 3 times your company’s EBITDA in mezzanine financing (for low EBITDA companies), but this depends upon the amount of senior debt ahead of the mezzanine and other factors.
  • Less expensive than equity.  The cost of equity for smaller, private companies will usually be quite high (> 20%+ returns) which suggests that mezzanine financing is less expensive than giving up equity.


  • Expensive interest.  Mezzanine lenders can charge between 10 and 14 percent cash interest with maybe some additional non-cash interest (payment-in-kind or PIK that adds to principal) or equity warrants on top of the cash interest.
  • Big payment in year 5.  Because the company is not required to make principal payments along the way, the company needs to be prepared to pay off the principal in year 5 or refinance the debt.
  • Restrictions and covenants.  You have another voice at the table when making decisions about your company.  And, the mezzanine lender will institute covenants regarding your total debt amounts, cash flows, and more than you need to comply with during the term of the loan.

Common Terms:

  • Cash Interest of between 12 and 14 percent annually.
  • Non-cash interest (additional to principal, or PIK — payment-in-kind) or warrants or a combination.  This can be another 4-5% PIK, so the all-in interest can be as high as 17% or more.
  • Warrants or some equity participation.  The mezzanine lenders are usually looking for some more participation in the upside of the company if it does well, so they are often asking to purchase some equity or to receive warrants to give them more upside potential.  Warrants are an option to purchase equity at a specified price, so the mezzanine lender will exercise if the company increases in value and their warrant is in the money.
  • Prepayment Fees.  There will usually be prepayment fees as the lender does not want you to pay off the loan quickly — they want the chance to earn the interest that they expect.  The prepayment fee will usually decline over time.
  • Subordination.  Mezzanine will be subordinated to senior loans, usually from a bank, but will obviously be senior to equity.
  • Closing fee.  Closing fees can be high, such as 2%, because mezzanine lenders are usually SBIC lenders (small business investment company) and they need to pay a closing fee back to the US government and they want to cover that fee (at least, that’s the story they tell me!).

A high percentage of mezzanine lenders participate in the US government’s Small Business Investment Company program which is different than the SBA loans that you may be familiar with.  In this program, the mezzanine funds raise $1 of private capital and can usually get another $2 of capital from the SBIC program.  And, the capital from the SBIC program usually only costs a little more than the 10-year US Treasury Rate.  So, if their capital costs 3% and they are lending at 14%, they can usually make a good return for their partners.

Business Owners Benefit from Good Ideas from the Edge

Business owners can benefit from ideas found in niche publications

Good ideas often come from niche publications such as the Stockman Grass Farmer – practical advice and wisdom for the issues you may face in your own business. 

Happy Anniversary to the Stockman Grass Farmer newspaper and Wired magazine — 65 years for the Stockman Grass Farmer this month and 20 years for Wired magazine in January (but issue 1.1.1 released this month for the iPad).  At certain points in time for me, both of these publications provided me a fresh flow of new ideas, business and otherwise.  I find this to be very helpful for business owners and in life — a constant flow of ideas helps me make sense of what’s happening in business and in the world around me.  And often, it is the smaller, niche publications and blogs that provide the most thought-provoking and helpful source of ideas, thoughts, and inspiration.

In the early 1990’s as I was graduating from college with a plan to be a newspaper journalist, Wired magazine helped me make sense of the changes of the digital revolution and eventually choose to start an Internet company in 1995.  For years, I saved each issue and referred back to them as everything at that time was so new, interesting, and full of possibility.  Recently, I learned about the Stockman Grass Farmer newspaper reading Michael Pollan’s Omnivore’s Dilemma and then attended two conferences hosted by the Editor, Allan Nation, in 2008 and 2009.  What I found in Allan Nation is not only an expert in back-to-the-future grass farming style of cattle ranching, but a wise professor of common-sense business advice as he instructs farmers and ranchers in the art of business.  I found myself taking notes and being inspired at his conferences and excited to read Allan’s column each month when his newspaper arrives in the mail.

Some tidbits from Allan:

“If you cannot change something, then feature it.”

“In highly profitable businesses, the product IS the marketing.”  Basically, this is the same idea behind the power of viral Internet businesses.  And importantly, people will NOT spread the idea of your product, even if they love it, if they are worried about the increased demand diminishing the product or hurting their ability to get it.

“Characteristics of High Profit Businesses:  1)  Repeat customers, 2) Customers pay up-front (no receivables), 3) Customers come to you (no transportation costs), and 4) Word of mouth marketing.”  Also sounds a lot like many of the excellent business models today in such things as software-as-a-service, but Allan delivered this message in trying to help ranchers figure out how to make a cattle ranch work better than just selling cattle to feedlots.

“There are only two proven successful business strategies: least-cost production and differentiation.”  This is Allan bringing Harvard Business School professor Michael Porter’s strategy ideas to ranchers as he encourages them to build differentiation and higher willingness to pay into their products.

Allan’s story of his editorship of the Stockman Grass Farmer and its development is a business lesson itself as he tells his story of buying the newspaper as a 30-year-old without much due diligence, borrowing when he was “totally fearless about going in debt”, paying 22 percent interest to the bank on the money he borrowed, and learning hard lessons about how to make a business work.  It is an American story at its core and Allan tells it at his business school for ranchers.

Today’s world is (and should be) a boon for small, niche publications and blogs that can provide value.  If you have any blogs or publications or whatever that you think provides good information, please send them my way.

Business Growth Rate and Selling Your Business (To Sell or Not to Sell – a series)

The business growth rate is obviously a huge factor in a decision to sell or not to sell your business.  This post is next in my series “To Sell or Not to Sell Your Business”. Obviously, the higher the sustainable growth rate that has been demonstrated by the business, the more value will be created by your business for yourself or for a future owner.  As I have mentioned, my natural bias is to not sell a good business because they can be difficult to find.  This is even more so when a strong business is growing. This is pretty apparent and logical.

In addition, here are some other things to think about:

  • Growth is critical to selling your business.  It is much easier to sell a growing business.  If you are planning to sell, it is highly preferred to sell when you have a several year track record of sustainable growth.  On the other hand, if your business is declining, it is going to be very difficult to find a buyer that is comfortable with the decline and be able to possibly improve the situation.  Buyers need growth to take the risk in buying a company.
  • Pay attention to the trends in your annual growth rate.  Is your year-over-year growth rate increasing or declining?  Try to understand deeply why the trend is accelerating or why it may be declining or why it has been steady?  You will want to be prepared to get the buyers excited about the accelerating growth rate or comfortable with a declining growth rate.
  • Does future growth require the same things (resources, strategy, skill set, etc.) as historical growth?  Sometimes, you will be able to execute the same growth strategy well into the future.  Other times, future growth will require an investment that will diminish financial results for a time or require a different strategy or skill set to implement.
  • Review the data around growth rates.  In the process of owning your business, you probably know the key internal metrics that have driven the growth and success of your business.  And, you probably have kept your eye on some external data that impacts your industry or your business.  What is the data telling you about the future?  Will the trends that are supporting your growth maintain themselves or not?
  • Listen to your intuition.  To me, one’s intuition is your mind applying your business and life experience onto the present situation.  It should be listened to.  If all the data is telling you one thing and your intuition is telling you another, it is worth pondering the disconnect to try and determine why your intuition is different.
  • If selling, have an attractive, untapped growth initiative “shovel ready”.  If you want to sell, I think it is helpful to have an underlying, sustainable growth rate but also have a new attractive growth initiative that has evidence of success but has not been fully realized.  This allows a buyer to envision an upside scenario that every buyer yearns to find.
  • Larger businesses receive higher multiples.  Another positive to retaining ownership of a growing business is that larger businesses get a bonus of receiving higher multiples from a buyer.  This is for many reasons, and if things are equal, may be a reason to hold your business for a few years more.

Since I am (sort of) younger and in the mindset of investing in strong businesses, I have a natural bias to retain ownership in great businesses.  Please recognize that I have that bias.  On the other hand, balancing things out is that we never know what is around the corner in life or in business.  Here are some other posts related to selling your business.



Three Cheers to the Lazerows and Buddy Media to purchase Buddy MediaI love my job (if you can call it that) because I get to work with excellent entrepreneurs and business owners.  They are inspiring people with the optimism to improve the world, the bravery to double down on the roller coaster of the inevitable ups and downs of life (and business), and the intelligence to see things others do not and adapt over time.  I love it.  I particularly love supporting them, providing them input when requested, asking questions that may lead to some insight, and seeing them succeed.

My realization that I loved supporting entrepreneurs and business owners began in the mid-1990’s.  And, I can point to a particular moment in 1996 (I think) where I bought a tiny business from a college senior at Northwestern University and hired him to run it post acquisition.  His name was Mike Lazerow and the business was University Wire or U-Wire.  Earlier this week, Mike and his wife Kass announced they had an agreement to sell their business, Buddy Media, to for $689 million.

My deal with Mike was almost as big of a deal to both of us at the time.  My start-up company, The Main Quad (a website for college students with the mission statement to “connect college students to each other, themselves, and the world” — sound familiar?), paid a grand total of $10,000 for U-Wire.  It was all the money we had in the bank at the time.  I signed the deal with Mike and slept on his couch that night because I had no money for a hotel room.  For the next few years, Mike grew U-Wire steadily and stuck with us at the Main Quad as we merged with Student Advantage.  I then invested in Mike’s next start-up (Golfserv that he did with his wife Kass and Mike Caspar) and sat on his board.  Through U-Wire and Golfserv, I tried to add value to Mike’s endeavors and I think began learning how to provide support and not get in his way.

In watching Mike over those experiences and now from a distance while he did Buddy Media, there are a few things that I particularly admire about Mike and Kass and would encourage all entrepreneurs and business owners to endeavor to do well.

  • Be an excellent communicator.  No one can write a compelling email like Mike.  I was amazed at how Mike, even as a college senior, could write an email that could get the attention of anyone.  He consistently got the attention and therefore struck partnerships and deals with big time publications, revenue partnerships, etc. because he could communicate with the best of them.  Everyone can improve their communication skills and it pays big dividends.
  • Establish/develop the emotional intelligence to navigate personal relationships with multiple elements.  In the case of Mike and Kass, this became particularly apparent in their skill in making a business partnership work while being married.  The data shows (see Noam Wasserman’s book, The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup) that start-ups with partnerships with family or friends fail more often than partnerships among other types of co-founders.  Mike and Kass worked together as partners at both Golfserv and Buddy Media and therefore navigated together two successful start-ups on a world class level.  That isn’t easy and they should be commended for that.  They also have been able to manage their partnership in combination with other co-founders — an even more difficult task.  This demonstrates an awesome emotional intelligence on the part of Mike, Kass, and their co-founders.  We all can constantly improve our emotional intelligence and our ability to manage interpersonal relationships.
  • Wise persistence pays for entrepreneurs (not suggesting blind faith).  Persistence and determination are often cited as key characteristics of successful entrepreneurs.  That is true, but equally as true is the wisdom to know when to hold ’em and when to fold ’em.  Mike and Kass showed very wise persistence in their experience at Golfserv.  The time in the early 2000’s after the dot-com bust was not easy for Internet entrepreneurs.  Mike, Kass, and Mike Caspar managed through that time wisely and demonstrated a wise persistence in their efforts.  Wise persistence pays off and we all should look to be learning and improving our wisdom for these moments and the skills necessary to persist when it makes sense.
  • Pick a playground with a lot of potential.  As Mike was considering his start at Buddy Media, I remember talking with him as he was trying to decide between another Internet endeavor (Buddy Media) or something in the skin care arena.  Both are very high potential areas.  I think Mike chose wisely (obvious given the outcome) because it built upon his earlier experiences, personal network, and skill set.  Skin care is also a good area as I have friends with great success in that area.  It takes as much effort to start a tiny business in a small town somewhere as to launch a global level business — you might as well play in a large playground if that is what you are interested in.

I could go on, but I will save it for another day.  Congratulations to Mike, Kass, and the entire Buddy Media team!


Trend-spotting at Harvard Business School

Trend Spotting at HarvardOne magnificent place to spot trends (and things that are too trendy) is the Harvard Business School.  There is a famous saying that someone should watch what newly minted Harvard MBA’s are doing and do the opposite — such as when all the MBA’s joined Internet start-ups in 1999.  Sometimes that’s true and sometime one should really pay attention!  This past weekend, I was back on campus at Harvard for my 10th year MBA reunion.  The last time I was on campus for a reunion was 2007 when I remember John Whitehead (former all-everything in finance and Goldman Sachs) warning everyone of the credit problems in the economy and that we were due for a large correction in financial services.  People also kept mentioning in amazement how much capital was flowing around the world.  Those were trends I should have listened to more closely in 2007.

This year, there were a few thing that caught my attention:

  • Interest in tangible assets.  For me, it began with a presentation from the CEO of the Harvard Management Company that manages the $30 billion Harvard endowment, Jane Mendillo.  She explained how the strategies of the endowment have changed over time and how they are allocating more capital to tangible assets such as assets involved in food production, energy, and water.  It won’t be a huge percentage of the Harvard endowment, but it is a growing percentage (I forget exactly what she said, but I think she expects it to be 10-15% of their assets up from a negligible amount previously).  The strategy began with timber investments some years back that have now been sold.  And, it clearly seemed to be the place where Harvard felt they had an advantage over other investors because of their long-term time horizon and insight from the Harvard community.  It also seemed they expected to get strong financial returns to allow them to outpace the market, sort of how their early and large capital allocations to private equity and hedge fund investments allowed them to beat the market for the last 20 years.  It was obvious that she also felt that tangible assets would be a good hedge against inflation if inflation ever came to pass.  It was also apparent in the schedule of sessions during the reunion that “real assets”, “energy”, and “tangible assets” tied for the largest number of sessions with technology and digital topics.
  • Interest in Africa.  Particularly from the private equity community, it was clear that there is a trendy interest in private equity investments and real asset investments in Africa.  Even the Harvard endowment mentioned they have some assets in Africa.
  • Direct business ownership through a purchase of a business (not including start-ups or purchases through investment funds) is still a small percentage of career choices.  I know of 4 of us from our class (maybe that means there are 9-10 out of a class of 900) that have purchased direct ownership in small or medium size businesses.  So, only 1% of our class purchased businesses.  As I talked with people about how things are going, nearly everyone made some comment about how small businesses are the key to improving US employment rates.  And I suppose it may be true — all of the investments of Greybull Stewardship are adding employees as is the National Holistic Institute.  I also expect that more and more of our class will look to buy businesses over the coming years as that is what has happened to other MBA classes as they get older.

I must also just give kudos to Harvard Business School for organizing a great reunion.  As an organization, they know how to do things well that helps all of us have a warm feeling about HBS, our experience there, and especially our classmates.