A Formula for Successful Entrepreneurship in the Modern World
Build Judgement + Acquire Leverage.
Definition
I once thought successful entrepreneurship boiled down to two things: what you know and who you know. But through my experience, I am led to believe this isn’t true. It's really about:
Judgment: It's all about making savvy choices.
Leverage: And then amplifying the impact of those choices.
Great judgement requires expertise and an understanding of the impact of your choices.
Leverage can be increased through various avenues: Money, Labor, Media, and Software. You may be asking, how? To make this more concrete, here are some examples.
Real Examples of Leverage
Money: Put $10,000 in a solid stock, and you make thousands. Warren Buffet, a rich man, does the same, and boom, he's raking in millions.
Labor: Say, I mow a lawn for a $30/hour. Or, I could get smarter and hire ten people to mow ten lawns to make $300/hour.
Media: Having a killer conversation can make you smarter, maybe even happier. Now, imagine a book, podcast, film, or YouTube video doing that but for millions, and for years to come.
Software: Salesmen used to sell items door to door. Now people spin up websites for online e-commerce stores and automate operations through lines of code.
On what I classify as successful entrepreneurship. Your work effort leads to an outsized, non-linear outcomes. A linear relationship makes this career path no better than a job, and you’ll likely lose to competitors who’ve figured out this formula as seen in the examples…
Application
Forgive the extended definitions, but they're foundational to succeeding in entrepreneurship in today’s landscape.
Main Idea: Opportunities to hone judgment and accrue leverage exist in everyday life through many facets of your jobs and hobbies.
Shall we dive deeper?
How can I optimize my job?
Boost Your Leverage via Network
Elad Gil makes a compelling case: Networking could be the cornerstone of your early career. Think PayPal Mafia or early teams at Google and Facebook. Those who started their career at these firms through intentional networking and serendipity have been able to partner with their previous colleagues for later business ventures. Take Peter Thiel and Elon Musk. Both were big shots at PayPal and, despite a rocky relationship, their early trust set the stage for Thiel’s VC fund to rescue SpaceX later on. They, and others like them, didn't just clock in and clock out; they built trust-based alliances that turned into springboards for future opportunities. So, is choosing the right environment and exceeding expectations merely about the job, or is it more about building strong relationships that’ll set up your future chess moves? Cultivating these relationships can serve as leverage.
Hone Judgement via Specific Knowledge on "How to X"
Aforementioned, building great judgment requires expertise and an understanding of the impact of your choices. When you are working in a specific role, over time, you are able to get direct exposure to your domain and have made enough decisions to understand their impact. Picture a product manager at Google. They've figured out how to successfully ship features (expertise in product development) and know what happens when they choose to not fully test their product before (impact of their choice). They gain great judgement within the context of product management. The skills and judgment you're honing are deeply connected to your work context. Your 9-to-5 isn't just a paycheck—it's a dojo where you're sharpening your judgment in a specific arena.
If you're chasing an opportunity to gain a broader range of judgment skills, look for workplaces that provide you exposure to a wide array of contexts (to gain more expertise and learn the impact of these decisions made in those contexts) —startups are a prime example. As an entrepreneur, you have little guidance on hand; nailing judgment across the board is your cheat code for success.
Hone Judgement via Specific Knowledge in X Industry
The second layer, often overlooked, is industry know-how. Take the PayPal Mafia, again: their deep dive into payments wasn't just a job—it was a masterclass in industry-specific judgment. As you dive into your chosen field, you're likely to spot gaps or potential business opportunities. If you're intentional, you could even start crafting strategies to fill those gaps. The PayPal crew leveraged this understanding in their subsequent ventures, often mirroring the platform-centric models they knew so well. It's not luck; it's well-calculated strategy. And if you're not jazzed about your industry, you'll probably resist this kind of organic learning. Leaning into this will allow you to gain expertise that eventually fuels good decision making in this industry.
The Bridge Between Jobs and Side Hustles
While traditional employment lays a solid foundation, it's often your pursuits outside the job that supercharge your judgement and leverage. That brings us to the question:
What can I learn from my side hustles?
Acquire Leverage through Technical Skills
I've already touched on this in my last post below, so I won't belabor the point: Your free hours outside of work are golden opportunities to learn skills that can seriously amplify your impact.
Acquire Leverage through a Public Reputation
Building and sharing online content, be it media or software, will bolster your reputation. People respect those who put skin in the game and embrace public accountability, even when they stumble. Struggling to find backers? A rock-solid public persona can flip that script and open doors you didn't even know existed. Just look at Mr. Beast—he's in a league where he can partner with pretty much anyone, talk about leverage.
Accelerate Building Judgment by Learning How to Learn
Boosting your ability to learn and think clearly are the ultimate meta-skills. Consider your brain a muscle; work it out well, and it won't fail you when it's crunch time. Charlie Munger, a man in his 90s still regarded to be sharp as a tact, is one of the biggest proponents of mental models, and having a multidisciplinary approach to thinking. Cultivating a habit of reading is a foolproof start to this journey. Chess is another avenue that I truly enjoy.
Putting it all together: Entrepreneurship
Here's where all the components click. You get to test-drive your judgment and leverage in the real-world arena. With razor-sharp insights in your areas of experiential advantage and the right leverage, entrepreneurial success becomes more of a plan than a stroke of luck. Piecing it all together is an art form, so keep fine-tuning your judgement and increasing your leverage until the world resonates with what you're offering.
Conclusion
Great Judgment + Applied Leverage = Successful Entrepreneurship. Luckily we can build these components and aspire to be great entrepreneurs without disrupting our current life practices. Just need to be intentional with our approach to work and strategic with our hobbies. I’ll wrap with a mathematician's thoughts on leverage:
“Give me a place to stand, and a lever long enough, and I will move the world.”
Archimedes
Disclaimer: This post is designed to be a think-piece on how we could optimize for building judgment and acquiring leverage in the flow of our daily lives if we are intentional. However, advice on this topic can be found in the greatest tweet thread I’ve ever read, pinned on Naval’s Twitter account. His thinking has influenced me greatly. I’d gently recommend sampling his content if you’re interested in the rare, double whammy of Happiness+Wealth that he’s achieved. Ideas from the thread explained by the man himself on a podcast below:
Judgement in and of itself is a skill. There are people who consistently make swift correct decisions 99% of the time, and those that take ages to simply blunder. Interested to hear your thoughts on how to build the former.
Insightful and well written. Definitely a new perspective for me.