The Ten Roads to Riches

by Ken Fisher

  But, naturally, with success, Knight was attacked. To keep Nike’s designs inexpensive, Knight used factories in emerging markets. Classic Adam Smith! Classic target of anti-capitalist Michael Moore. In his crockumentary Downsize This!, Moore complained that conditions were harsh in Nike’s overseas factories. Journalists piled on, calling for a Nike boycott for “outsourcing” and its alleged factory worker abuse. Knight’s attackers wanted a sensational story—plus, they had a social agenda to advance.

  They had their viewpoint. Knight had his. His was: Though working conditions in his overseas plants might not be up to middle-class American standards, those workers didn’t have to take those jobs. They did so out of free will. And, in general, Nike’s factory workers earned far more than their compatriots28 and had better benefits—on-site clinics, schooling for employees’ children, and more. They took those jobs because they were better than alternatives. None of that, of course, slowed the attackers. He got attacked from myriad sources, including his alma mater. Knight remained resolute that he was right—that the overseas plants were necessary to deliver good-quality, inexpensive shoes.

  Here’s my point: Knight could have fatigued and sold out—tiring from getting attacked. After signing Jordan, he could have stayed solely in sneakers and been an attractive takeover target. Selling out then, he wouldn’t have hit the Forbes 400, but he’d be plenty wealthy and wouldn’t get annoyingly attacked anymore. He wouldn’t have shareholders to answer to. He could shop in peace. But he didn’t cave—luckily for Nike’s employees, shareholders, and anyone who likes buying competitively priced sneakers. He toughed it out and kept building, adding products beyond sneakers, overcoming his attackers eventually. Knight built Nike to last. Few have his grit and enduring quality. Do you?

  FOUNDERS ARE QUITTERS—JUST DO IT

  So you want to be a founder. Then don’t be stopped. Quit everything else. Founders are quitters first. If you’ve got a job, quit. Find a way to sustain yourself and just do it. If you’re in college, drop out. If you’re president of the United States, resign to make something useful of yourself and hand the front-door key to that little VP twit you picked because you had to pick someone. Just do it. Quit. Founders quit before they found.

  Once you quit, it’s quiet. No one to bug you but your spouse and kids. Find a quiet place to work. If you live in a studio apartment, wall off a corner with blankets to keep your spouse at bay. Find space—doesn’t matter where. You’ll work more out of your briefcase and laptop than anywhere else at first.

  I only offer certain suggestions about how to be a founder because lots have been written on entrepreneurialism. My first suggestion, if you haven’t done so, is read a few books. Good ones to start with are:

  Innovation and Entrepreneurship by Peter Drucker. A great overview of what every entrepreneur needs to know to succeed.

  Entrepreneurship for Dummies by Kathleen Allen. A good introductory how-to on everything tactical you must know to start a business, particularly when and where you need a lawyer.

  Beyond Entrepreneurship by James C. Collins and William C. Lazier. This covers how to take your relatively new business to the next level and move toward building a great firm.

  Take your books and go to your blanketed-off quiet space. I assume—if you haven’t been stagnating in the upper Amazon basin, rapidly fleeing humanity—you’ve got, and are comfortable with, a laptop. Get a boxy, functional, nonfancy briefcase. Now sit in your quiet space a while. Notice how quiet it is? That’s because there’s nothing going on there. So put the laptop in the briefcase with one of those books. Now get out of your quiet space. Go.

  Gene Watson founded myriad laser companies, including, in the 1960s, industry pioneers Coherent Radiation and Spectra-Physics. During a laser deal we did together in the 1970s, he drummed into my head: “The problems are in here; the opportunities are out there.” Get out of your quiet space and go where you think the opportunities are. If you don’t know where to go, stop at a park somewhere. Get out your laptop and figure out 20 likely customers. Rank them in order of importance. If you can’t fathom 20 likely customers, something is off and you need to go back and start this chapter over again—or take another road.

  Now take the three lowest-ranked of your 20—not the highest—and go talk to them about your idea. While you’re there, ask them for money in exchange for some future interest in using the results of your idea. Why will they see you? Because you’re Just You, founder and CEO of Whatever-You-Call-It, which has novel ideas that could help Whoever-They-Are—because those ideas will change their world.

  Don’t see your most important prospects first. You’re not ready—you don’t have your strategy down enough yet. Better still to think up prospects number 21 through 40 and see them first, rather than blow up with your most important prospects. But go. Talk. Ask. Listen. Do it. The next steps of your initial business plan will come to you as you keep making such calls. Don’t register with your state business licensing officer yet. Don’t hire a lawyer or incorporate Whatever-You-Call-It yet. Don’t rent office space. Or raise money—yet. Get customer interest first.

  Why did I tell you to put one of the books in the briefcase? Because you can’t fill all your time with customer appointments, so spend the time in between booking more appointments and reading the book. Reading the book will make you think more and more about what you’re doing—founding a company. The appointments will tell you what to do next. If you can get a customer to commit money in exchange for a future interest in the results of your idea, you can fathom what’s next.

  Once a Quitter, Always a Quitter

  Now is the time to remember, once again, you’re a founder and hence a quitter. So quit again. Since your basic idea is novel and useful, the customer interest you discovered is just an indication of greater interest for your novel approach to solving their problem. So quit calling prospects and delegate. Hire a salesperson to approach your prospects. Doing so makes huge sense. First, you need someone to generate sales. Second, you pay your sales rep a commission, which means no up-front cash (which you don’t have). Third, if he or she sells, you can focus on other things (all of which you want to quit, except being CEO—until you’re ready to quit that, too, and become CEO emeritus).

  Many salespeople want base pay. Forget it—and them. You want someone who gets your enthusiasm, vision, and hopes to be ground-flooring onto something big, so someday, he or she is national sales manager of a vast enterprise. The right salesperson is only a little less entrepreneurial than you are and is otherwise a ride-along (see Chapter 3), hoping to get wealthy on your coattails.

  Remember, “The problems are in here; the opportunities are out there.” Now that you have a sales rep, go back to your quiet space and notice . . . still not much is happening there. So quit that and hire someone to sit in your quiet space in case anything does happen there. Someday you hope lots will, and you’ll call your quiet space “headquarters” and it won’t be quiet anymore. Hire someone to be there. It shouldn’t be you. Stay out where the opportunities are. Keep seeing prospects and customers. That keeps you close to your market.

  The trials and triumphs of quitting.

  Quitting won’t be easy. Your company is your baby, your passion, your net worth, your life’s work. You’ll want control, especially as you grow and hire more people who think working for you is “just a job” and can’t fathom why you live and breathe your business.

  Not all your employees will be as into your firm as you are. That’s OK! Accept it. But a few will feel just as invested as you do. You want to find them, nurture them, keep them—they’re the ones you will hire to backfill you whenever you quit Role X.

  I’ve been blessed with several such folks at my firm, and they’ve let me quit many roles since I started out. Hardworking, loyal, trustworthy ladies and gents who just “get it.” My three-star generals. The more loyal generals you can cultivate, the more you can quit—and you’ll be more successful and happier for it. I just
quit being CEO and couldn’t be more thrilled. Someone else gets the hassle of running the business, and I get to do what I always loved most—overseeing portfolios and blue-sky strategy, interacting with clients, and writing. I’ll never quit that.

  To fully enjoy being a founder, quit whatever you find humdrum. Quit whatever someone else could do better. Focus on the parts you love. You’ll be happier. Your employees will be happier. Your happier employees will serve your clients better. Everyone wins.

  Just a Walk in the Park

  There’s lots to do out there. Go back to that park bench and pull out your laptop. Make a list of all the functions you think you’ll need to have back at headquarters once it isn’t quiet anymore. The Entrepreneurship for Dummies book helps you with this list if it’s in your briefcase. Think of one person who can handle maybe half those functions, even if imperfectly—hire that person with a title like operations VP. It’s ideal if this person has skills that might regularly crank out your novelty (whatever it is). This person’s job is to take orders your sales rep gets and turn them into noise so your quiet space isn’t quiet.

  When you wake up in the morning, ask, “How do I get out of my not-so-quiet space?” Then turn to your sales rep and operations VP and say, “What can I do to help you today?” Then call 15 prospects and say, “What can I do to help you today?” This is all so simple, it’s hardly justifiable to put in a book.

  One day you wake up and do everything from the previous paragraph. Then you turn to your sales rep and say, “It’s time we hire another sales rep—one you could train and manage so we could have more noise for our operations VP.” So do it. Of course, that day you also call 15 prospects, as always, just to do it.

  Maybe you’re a faster quitter. If so, hire folks to do all the other functions on the list you made that second day on the park bench. Marketing, post-sales service, product development, recruiting—whatever—every function on your list. And each time you hire someone, you quit that function. Then ask those people every morning, “What can I do to help you today?” If they actually want you to do something, fine, do it. But the next day, quit and hire someone to do that thing.

  This is what an entrepreneur does. It isn’t rocket science. If you do what I’ve described, you’re a founder-CEO—just one of a small firm. If you want to become a bigger-company CEO, read Chapter 2—about the road to riches as a CEO—which is about building a company into more than what it was—because as founder, that’s where this road ends. So quit this chapter and on to the next.

  The Guide to Being a Founder

  Starting a business is the American dream. But most new firms fail within four years. How do you succeed instead? Follow this guide.

  Pick the right road. Which part of the world can you change? Select an area that will remain relevant or one you can fathom steering out of irrelevancy.

  Start small, dream big. Don’t dream of being like Nike. Find an area that needs changing or improving, no matter how small. But think in terms of scalability.

  Innovate or improve. Create something novel or improve something, or do both. Novel is a marvel, but it’s OK just to be a better, faster, cheaper, more profitable version of an old version.

  Build to sell or build to last. These are two different mindsets and are done differently, so decide early if you can. Each option has separate considerations. And you can build an empire and later decide to sell. But building to last means thinking like an owner. To sell, think like a buyer.

  Bootstrap or find financing. If your business is capital-intensive, you need outside funding, but if not, you have a choice. Venture capital is for “building to sell,” because your investors like liquidity. Bootstrapping is better if you want to build to last and allows more freedom. But you can go either way.

  Go public or stay private. Going public has prestige but is a pain. Try to stay private. Again, staying private offers more freedom, control, and free time at the deli counter.

  Ignore naysayers. The bigger you are, the more you’ll be attacked. So build up your toughness.

  Be a quitter. Founders are quitters, so just quit. Find a quiet space and notice there’s nothing going on there and quit it. Keep quitting until it isn’t quiet in your quiet space. Find a vital function and quit it.

  But never quit your clients. Stay with your prospects and customers even when you have great sales representatives. You never, ever get to quit clients or potential clients, or your business goes poof.

  NOTES

  1. “The Forbes 400 2016,” Forbes, http://www.forbes.com/forbes-400/list/# version:static (accessed October 6, 2016).

  2. Ibid.

  3. Ibid.

  4. Small Business Association, “Frequently Asked Questions” (August 2007), http://www.sba.gov/advo/stats/sbfaq.pdf (accessed April 21, 2008).

  5. Bureau of Economic Analysis.

  6. “The Forbes 400 2016.”

  7. George Raine, “LeapFrog Founder Steps Down,” San Francisco Chronicle (September 2, 2004), http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2004/09/02/BUG8M8I4K41.DTL&type=business (accessed April 21, 2008).

  8. “The Forbes 400 2016.”

  9. Ibid.

  10. FactSet, as of August 3, 2016.

  11. “The Forbes 400 2016.”

  12. Ibid.

  13. Samantha Critchell, “Resorts Recruit Top Designers to Outfit Ski Patrol,” USA Today (December 20, 2006), http://www.usatoday.com/travel/destinations/ski/2006-11-28-ski-fashion_x.htm (accessed April 20, 2008).

  14. Gwendolyn Bounds, Kelly K. Spors, and Raymund Flandez, “Psst! The Secrets of Serial Success,” Yahoo! Finance (August 28, 2007), http://finance.yahoo.com/career-work/article/103425/Psst!-The-Secrets-Of-Serial-Success (accessed April 30, 2008).

  15. “Franchising: New Power for 500,000 Small Businessmen,” Time (April 18, 1969), http://www.time.com/time/magazine/article/0,9171,844780-1,00.html (accessed April 30, 2008).

  16. H. Salt Fish & Chips locations found at http://www.hsalt.com/locations_ 01.htm.

  17. Robert Klara, “Did Starbucks Buy (and Close) La Boulange Just to Get Its Recipes?,” Adweek (June 22, 2015), http://www.adweek.com/news/advertising- branding/did-starbucks-buy-and-close-la-boulange-just-get-its-recipes- 165468 (accessed August 3, 2016).

  18. Chris Isidore, “The Melancholy Billionaire: Minecraft Creator Unhappy with His Sudden Wealth,” CNNMoney (August 31, 2015), http://money.cnn.com/2015/08/31/technology/minecraft-creator-tweets/ (accessed August 3, 2016).

  19. Phil Haslett, “Travis Owns ~10% of Uber’s Stock, Worth $7.1 Billion,” Quora (July 20, 2016), https://www.quora.com/Uber-company-How-much-equity-of-Uber-does-Travis-Kalanick-still-own (accessed August 3, 2016).

  20. “The Forbes 400 2016.”

  21. “America’s Largest Private Companies, 2016 Ranking—#2 Koch Industries,” Forbes (July 20, 2016), http://www.forbes.com/companies/koch-industries/ (accessed August 3, 2016).

  22. Daniel Fisher, “Mr. Big,” Forbes (March 13, 2006), http://www.forbes.com/global/2006/0313/024.html (accessed April 30, 2008).

  23. “The Forbes 400 2016.”

  24. Fisher, “Mr. Big.”

  25. Inflation calculator found at http://data.bls.gov/cgi-bin/cpicalc.pl.

  26. Jackie Krentzman, “The Force Behind the Nike Empire,” Stanford Magazine (January 1997), http://www.stanfordalumni.org/news/magazine/ 1997/janfeb/articles/knight.html (accessed April 30, 2008).

  27. Ibid.

  28. Benjamin Powell, “In Defense of ‘Sweatshops,’” Library of Economics and Liberty (June 2, 2008), http://www.econlib.org/library/Columns/y2008/ Powellsweatshops.html (accessed June 3, 2008).

  2

  PARDON ME, THAT’S MY THRONE

  Responsibility and running things come easy? But you’re no visionary founder? Maybe the corner office is in your future.

  Some of our finest CEOs didn’t found the firms they lead—like GE’s Jack Welch. Nonfounder CEOs can take firms to unthought-of heights. Sometimes reinvent
ing is easier than creating from whole cloth, so while founder-CEOs usually rank higher in mega-wealth, just becoming CEO pays big. And it is a rich road indeed—even if you don’t aspire to billionaire status. Fully half of America’s largest-firm CEOs make in excess of $10.8 million.1

  Warning: Heavy is the head wearing the CEO crown. Firm successes are rarely wholly, directly attributed to CEOs—as in, “Success has a thousand fathers but failure is a bastard.” The bastard is the CEO, always. So a big failure can kill your future. CEOs must be tough—more now than ever. Failed CEOs don’t just lose their jobs—they frequently end up vilified by the media, even indicted! And CEOs are often demonized just for their big pay—which they get precisely because of the career risk they face.

  On this road, you need leadership and executive qualities to rise, be anointed, and keep the throne. The world loves successful CEOs—heroes! But the difference between a hero, a zero, and a weirdo often isn’t much, as we’ll see.

  GRAY HAIR AND DUES-PAYING

  Where to start? Like in Chapter 1, start where you’re passionate. Most CEOs, except for some very few founders, aren’t young. It takes time, so you better enjoy the ride. Working for a firm you love, in a field you have passion for, is critical—and the more profitable the better (see our exercises in Chapter 7), but to endure long enough to become CEO, passion trumps profitability. Enjoy it.

  Though there are shortcuts to being CEO (covered later), you toil long and pay your dues. But there’s good news: If successful, you can keep your seat a long time—like Hank Greenberg.2 Former AIG CEO founder Cornelius Vander Starr tapped him as CEO in 1968—a post he held until 2005. Greenberg was worth $2.8 billion when this book first came out, but he lost about 90 percent of it when AIG imploded in the financial crisis because he never diversified.3 (In all fairness, a good chunk of his stock was probably restricted.) Former Google CEO Eric Schmidt ($11.3 billion) held the post for a decade before graduating to Executive Chairman, where he remains today.4 Former Microsoft CEO Steve Ballmer (worth $27.5 billion)5 was a longtime ride-along (Chapter 3) to Bill Gates and got the throne in 2000. As a ride-along-turned-CEO he rode two roads well. Nonfounder CEOs are often a ride-along variation who switched to the hot seat. To do this, study Chapter 3 on how to be a ride-along.