The headlines will tell you that Ron built Panera into a $7.8 billion company, but the real story is far more interesting. 

He went all in on Panera. He sold off every other concept they owned, like Au Bon Pain, to focus on Panera. 

Public Release: November 11.
Members have access now.
Join us.

Coming Soon: Apple Podcasts | Spotify | Transcript

His philosophy is simple: Be long-term greedy, not short-term stupid.

We discuss why profit is always a byproduct (focus on it and you’ll lose everything), how to understand the customer, and the real costs of building something great.  Today he’s repeating the same playbook he used at Panera with CAVA. 

This isn’t about restaurants. It’s about making painful bets when everyone else is optimizing for next quarter, and understanding that real commitment owns you—you never own it.

The post Ron Shaich: Lessons from Building Panera appeared first on Farnam Street.

Then he did something Silicon Valley still doesn’t understand: he gave millions of his own money away to early employees, walked away from power, and refused to play the game everyone else was playing.

While HP rejected his design and competitors built walled gardens, Wozniak’s philosophy of open architecture, the very one a young Steve Jobs fought against, is what saved Apple long enough for it to become Apple.

This is the story of the reluctant founder who won by refusing to compromise, and a blueprint for success without selling your soul.

Listen Now: Apple Podcasts | Spotify | Transcript | X

+ Members have access to all 87 of my highlights and notes from Steve’s biography, iWoz.

Wozniak’s Rules to Live By

1. Believe in yourself.

“First, you need to believe in yourself. Don’t waver. There will be people—and I’m talking about the vast majority of people, practically everybody you’ll ever meet—who just think in black-and-white terms. 

Most people see things the way the media sees them or the way their friends see them, and they think if they’re right, everyone else is wrong. 

So a new idea—a revolutionary new product or product feature—won’t be understandable to most people because they see things so black and white. 

Maybe they don’t get it because they can’t imagine it, or maybe they don’t get it because someone else has already told them what’s useful or good, and what they heard doesn’t include your idea. 

Don’t let these people bring you down. Remember that they’re just taking the point of view that matches whatever the popular cultural view of the moment is. They only know what they’re exposed to. It’s a type of prejudice, actually, a type of prejudice that is absolutely against the spirit of invention. 

But the world isn’t black and white. It’s gray scale. As an inventor, you have to see things in gray scale. You need to be open. You can’t follow the crowd. Forget the crowd. And you need the kind of objectivity that makes you forget everything you’ve heard, clear the table, and do a factual study like a scientist would.”

2. Be slow to form an opinion and hold it with the right grip.

“You don’t want to jump to conclusions, take a position too quickly, and then search for as much material as you can to support your side. 

Who wants to waste time supporting a bad idea? It’s not worth it, that way of being stuck in your ego. 

You don’t want to just come up with any excuse to support your way. 

Engineers have an easier time than most people seeing and accepting the gray-scale nature of the world. That’s because they already live in a gray-scale world, knowing what it is to have a hunch or a vision about what can be, even though it doesn’t exist yet. Plus, they’re able to calculate solutions that have partial values—in between all and none.”

3. Think for yourself.

“The only way to come up with something new—something world-changing—is to think outside of the constraints everyone else has. You have to think outside of the artificial limits everyone else has already set. You have to live in the gray-scale world, not the black-and-white one, if you’re going to come up with something no one has thought of before.”

4. Nothing good has ever been invented by committee.

“Most inventors and engineers I’ve met are like me—they’re shy and they live in their heads. They’re almost like artists. In fact, the very best of them are artists. And artists work best alone—best outside of corporate environments, best where they can control an invention’s design without a lot of other people designing it for marketing or some other committee. I don’t believe anything really revolutionary has ever been invented by committee. Because the committee would never agree on it!”

“Why do I say engineers are like artists? Engineers often strive to do things more perfectly than even they think is possible.”

5. Work alone in the dark.

“If you’re that rare engineer who’s an inventor and also an artist, I’m going to give you some advice that might be hard to take. That advice is: Work alone.

When you’re working for a large, structured company, there’s much less leeway to turn clever ideas into revolutionary new products or product features by yourself. Money is, unfortunately, a god in our society, and those who finance your efforts are businesspeople with lots of experience at organizing contracts that define who owns what and what you can do on your own. 

But you probably have little business experience, know-how, or acumen, and it’ll be hard to protect your work or deal with all that corporate nonsense. I mean, those who provide the funding and tools and environment are often perceived as taking the credit for inventions. If you’re a young inventor who wants to change the world, a corporate environment is the wrong place for you. 

You’re going to be best able to design revolutionary products and features if you’re working on your own. Not on a committee. Not on a team. That means you’re probably going to have to do what I did. Do your projects as moonlighting, with limited money and limited resources. But man, it’ll be worth it in the end. It’ll be worth it if this is really, truly what you want to do—invent things. If you want to invent things that can change the world, and not just work at a corporation working on other people’s inventions, you’re going to have to work on your own projects. When you’re working as your own boss, making decisions about what you’re going to build and how you’re going to go about it, making trade-offs as to features and qualities, it becomes a part of you. 

Like a child you love and want to support. You have huge motivation to create the best possible inventions—and you care about them with a passion you could never feel about an invention someone else ordered you to come up with. And if you don’t enjoy working on stuff for yourself—with your own money and your own resources, after work if you have to—then you definitely shouldn’t be doing it!”

6. If you believe in your power to reason, you can just relax.

“It’s so easy to doubt yourself, and it’s especially easy to doubt yourself when what you’re working on is at odds with everyone else in the world who thinks they know the right way to do things.

 Sometimes you can’t prove whether you’re right or wrong. Only time can tell that. But if you believe in your own power to objectively reason, that’s a key to happiness. And a key to confidence. Another key I found to happiness was to realize that I didn’t have to disagree with someone and let it get all intense. If you believe in your own power to reason, you can just relax. You don’t have to feel the pressure to set out and convince anyone. So don’t sweat it! You have to trust your own designs, your own intuition, and your own understanding of what your invention needs to be.”

Lessons from Steve Wozniak

Master the step you are on. Wozniak spent years designing computers on paper because he couldn’t afford the parts. “I learned to not worry so much about the outcome,” he wrote, “but to concentrate on the step I was on and to try to do it as perfectly as I could when I was doing it.” He’d design a computer, then redesign it over and over again. By the time he got real components, he’d already done the hardest work: the thinking. Most people rush through fundamentals chasing the outcome. Woz had the patience to master each step completely before moving to the next.

Nothing good has ever been invented by committee. “Nothing really revolutionary has ever been invented by committee,” Wozniak wrote. “Because the committee would never agree on it!” He designed the Apple I and Apple II alone, in his apartment, after hours at HP, because it was fun. Committees lean toward consensus. Artists optimize for simplicity and truth. Innovation requires the freedom to explore and play.

Be slow to form an opinion, and when you do, hold it with the right grip. “You don’t want to jump to conclusions, take a position too quickly, and then search for as much material as you can to support your side.” It’s a waste of time to support a bad idea. It’s ego over outcome.

Constraints are secret advantages. Wozniak couldn’t afford chips, so he designed computers on paper, competing with himself to use fewer parts. He’d redesign the same computer repeatedly, each time with one less chip. The constraint forced him to develop design tricks “that certainly would never be describable or put in books.” By the time he accessed real components, he’d built deep expertise born from limitation.

The best understand more. When Wozniak’s tic-tac-toe machine blew up the night before the science fair, he was disappointed but still took pride in it. “The most important thing is that you’ve done the learning on your own to figure out how to do it. It’s the engineering, not the glory, that’s really important.” Richard Feynman said it too: “The prize is the pleasure of finding the thing out.”

Optimize for the customer. Steve Jobs wanted two expansion slots to keep the Apple II elegant. Wozniak fought for eight slots because he’d been going to Homebrew meetings and watching actual users share ideas and push boundaries. Jobs was optimizing for beauty. Wozniak was optimizing for the people who want to play. Woz won that argument, and it saved the company. Those eight slots created an ecosystem of companies building products and marketing for Apple. Your first customers aren’t average users. They’re evangelists. Design for them.

Question everything. Every computer before the Apple I had switches and blinking lights. Industry experts accepted that’s just how computers worked. Wozniak asked: “Why not put a keyboard and screen on it?” When he built the Disk II controller, competitors used twenty-two chips. Wozniak used two. He realized the idle CPU could do the controller’s work in software. Sometimes the most important question isn’t “How do I do this better?” It’s “Why am I doing it this way at all?”

Loyalty has limits. Working at HP was Wozniak’s dream job. When he invented the Apple I, he offered it to them. Five times. They said no every time. Woz kept showing up despite building Apple on nights and on weekends. When Jobs asked him to leave HP, Woz said no. Finally, Steve Jobs had had enough and did what Steve Jobs did, and used an overwhelming amount of force to convince him to leave HP. Jobs called every single friend and family member of Woz, convinced them it was in Woz’s best interest to leave HP, and had them call Woz to convince him to leave. HP’s blindness cost them billions.

Give away control. Wozniak xeroxed his Apple I schematics and handed them to anyone who asked. Hundreds of copies. Every person who tried to build one appreciated the elegance of his solutions. By the time the Apple II was launched, a community of enthusiasts had already formed. Giving away control created something you can’t buy: genuine advocacy. Most people hoard their ideas. The best make them spread.

Success is living life on your terms. The day Apple went public, Wozniak became worth $88 million. He looked around at colleagues who’d been left out and sold them his shares at a discount. When Apple became obsessed with quarterly earnings, he left. Not in anger. Quietly. He went back to Berkeley under a pseudonym to complete his degree and taught fifth graders how to build computers. He’d figured out as a kid: “Happiness equals smiles minus frowns.” The hardest thing you’ll ever do is turn down what everyone else wants so you can have what you actually need.

Simplicity is beautiful. Most disk controllers used twenty-two chips. Wozniak examined the standard design and realized only two were needed. He offloaded the controller’s functions to the idle CPU. Why pay for expensive hardware when you have a processor sitting there doing nothing? Bill Gates would later call it “the most clever program ever written for a small computer.”

Maxims

1. Constraints force deep understanding.
2. Focus on the step, not the outcome.
3. Nothing good has ever been invented by committee.
4. Learning is the prize.
5. Institutions, by default, reject anything that means existing beliefs are wrong.
6. Happiness equals smiles minus frowns.
7. Misplaced loyalty is a waste.
8. Work alone on what matters if you must.
9. Patience is underrated.
10. Hold your ideas with the right grip. Let go of incorrect ideas.
11. If it’s worth doing, it’s worth giving it 100%.
12. Obsession isn’t a problem. It’s an advantage.
13. Simplicity has the fewest moving parts.
14. Time will do the work for you if you align with how the world works.
15. Move with urgency. You can do it much faster than you think.
16. Design around engineering, not marketing.
17. Optimize for happiness, not fairness.
18. You don’t have to run the company to be a co-founder.
19. “It takes a lot of work to make something simple.”
20. Obsess over customers.
21. Don’t accept something because it’s the way it is.
22. You win in the dark, when everyone else is partying or sleeping.
23. The only way to understand is to get your hands dirty in the work.
24. “Simplicity is the ultimate sophistication.”
25. The best are always learning more.

The post [Outliers] Steve Wozniak: The Engineer Who Built Apple appeared first on Farnam Street.

He called the collapses of both Valeant Pharmaceuticals and Nortel before they happened, and now he has some thoughts on AI.

Play

Featured clips

02:53

The Enron Scandal

16:12

The AI 'Bubble' and the State of the Market

28:12

Parallels Between the Internet Bubble and Today

39:14

Investing Rules

45:56

The Rise and Fall of Valeant Pharmaceuticals

1:26:58

The Power of the Retail Investor

We talk about asking better questions, reading the fine print, the role of short selling, and what it means to be wrong. We explore why AI gives you information but not insight, why cheap risk is often the most expensive, and why nothing matters until it does.

Available Now: Apple Podcasts | Spotify | YouTube | Transcript | X

It’s a conversation about the difference between seeing and understanding and the discipline to notice what everyone else ignores.

This episode is not investment advice.

It’s time to listen and learn.

Summary

• Experience teaches pattern recognition and judgment that AI cannot replicate because you must already know where you want to go before AI can help you get there faster.
• Junior analysts learning with AI as a crutch will never develop the ability to connect second- and third-order consequences across financial statements.
• Current markets show euphoria where “fundamentals” have lost meaning.
• Circular investment patterns in today’s AI ecosystem mirror the dot-com era: Nvidia invests in OpenAI while supplying chips; Microsoft funds OpenAI while being its customer; CoreWeave went public with Nvidia as investor and chip supplier.
• The accounting doesn’t capture these interconnected relationships because individual transactions are immaterial to giants like Nvidia, yet hundreds of such deals create systemic vulnerability.
• Read financial statement notes BEFORE reading the statements themselves because notes reveal how management chose to account for transactions and what they modified.
• “Avoid embarrassing loss” is a better rule than “don’t lose money” because any investment involves risk, and investing out of fear prevents returns.
• The three-stage forensic framework: understand the business and control environment, identify flammable items (not red flags), then watch for the spark that ignites them.
• Negative cash flow isn’t inherently bad: it depends on lifecycle stage, return on invested capital, and business model—which is why context-blind red flags fail.
• EBITDA is “the mother of all disastrous measures” because investors treat it as cash flow, even though it’s merely an operating performance metric with no standardized adjustments.
• Stock options are an expense that should be treated as such; companies paying in options versus cash have identical economic impact but different reported earnings.
• Most buybacks simply offset stock option dilution, making them an expense disguised as capital allocation—especially dangerous when funded with debt.
• Passive index investing is momentum investing in disguise: money flows to largest market caps, which drags the index higher until those same companies drag it lower.
• The retail investor now has more power and access to information than ever, yet 40% single-day price moves on earnings news prove information hasn’t improved price discovery.
• Structure enables strategy: Berkshire works because Buffett controls shares and operates cash-generating businesses, avoiding the agency problems that paralyze traditional fund managers during crises.
• Price creates narrative—after repeated success, investors accept increasingly suspicious accounting because the stock keeps rising, making it psychologically difficult to maintain skepticism.

Lessons

Learn the hard way. Anthony’s children wanted to use calculators in elementary school. “You need to learn it without the calculator, and then you can use the calculator.” Same with AI. If you never learn to read financial statements the hard way, you’ll never know when AI results matter and when they don’t. The calculator gives you the answer, it doesn’t teach you math. Master the fundamentals before using tools to go faster.

Information without understanding is noise. Steve Schwarzman told me that analysts today know the numbers but don’t know what the numbers mean. Anthony sees it constantly. Someone pulls up a company’s capitalized costs. They know the number, but they don’t know what it means for operating earnings, the balance sheet, or cash flow. “You need someone with experience to know which of those references matter and what that means to the business,” Anthony says.

Nothing matters until it does. You don’t think about oxygen until you need it; the same goes for cash. When you need it, you need it a lot. Most people ignore the symptoms because nothing’s broken yet. The careful watch for familiar patterns. When the music stops, those who weren’t paying attention get crushed.

People buy narrative and resist facts. If you want to sell the positive side, you have to sell the dream. AI will change the world. Margins will expand. Healthcare will improve. People buy dreams. They resist facts. (LuLu mentioned this too: you can’t fight a story with a fact). When Anthony points to intricate transactions with no disclosure, people wave it off. “We’re changing the world, buddy.” People who point out facts are the person in the basement looking at the cracks in the foundation, while everyone else is in the penthouse admiring the view.

Don’t trust, verify. One of Anthony’s investing rules. “I’m sure there are many good management teams,” he says. “It’s not that you shouldn’t trust anything they say, but again, it’s a mindset.” If you go in with the mindset of “don’t trust,” you’ll be curious. You’ll ask questions. It doesn’t mean they’re bad people. It means you verify first. Then you trust.

Always read the fine print. Before looking at the financial statements, read the footnotes. “The notes tell you how the company modified the accounting. It made accounting choices: We decided to account for these types of transactions in this way.” Once you know how they’re prepared, you can interpret them properly.

Complicated is a choice. Complexity is often the camouflage for problems management doesn’t want you to see.

Price creates narrative: When prices keep going up, the narrative becomes “it works.” The company makes an acquisition. It seems questionable, but the stock goes higher. They do something strange, and the stock goes higher again. They change their accounting, and the stock goes up. As the price rises, belief follows. The independent thinkers trust their analysis even when prices disagree.

Experience is a handicap in a bull market. “During raging bull markets, knowledge is superfluous and experience is a handicap.” If you’ve seen the blowups, you know how painful it gets. That makes you cautious. But if you’ve never experienced a crash, and every dip just rallied back, you think it will continue forever. Bull markets reward the reckless until they don’t.

Success is something you share. “Success is achieving something that I can share with those that I love and care about—my family and my friends, my employees, and my customers.” Winning alone means nothing.

Short Lessons

1. Nothing matters until it does.
2. A calculator can give you the answer, but it can’t teach you math.
3. Risk is highest when you think it’s priced the lowest.
4. Price creates narrative.
5. You can’t fight a story with a fact.
6. Structure enables strategy. Anyone looks like a genius in a good position, and an idiot in a bad one.
7. “Don’t trust management.” Verify.
8. Read the footnotes first.
9. Experience teaches judgment.
10. Positioning beats predicting.
11. “The four most dangerous words in investing are: ‘This Time It’s Different.’” – John Templeton
12. Focus on what’s the same, not what’s different.
13. Cash is optionality.
14. Experience is a handicap in a bull market.
15. If stock options aren’t an expense, what are they?
16. EBITDA is the mother of all disastrous measures.
17. The answer is always “it depends.”
18. The road to implosion starts with us needing a few cents this quarter to hit a number.
19. You learn by being immersed in the details.
20. Culture and values aren’t what you read in press releases. Watch what they actually do.
21. Stock buybacks mean you’re admitting you have no better investment opportunities in your business.
22. AI makes you get to the answer faster, but only if you already know where you want to go.
23. Passive investing is momentum investing—you’re buying what’s already biggest.
24. You can’t buy good company, you have to earn it.
25. Success is achieving something you can share with those you love.

The post Anthony Scilipoti: Reading the Footnotes appeared first on Farnam Street.

When the bank forced him into bankruptcy at 27, he started rebuilding the very next day, following an unconventional playbook: refusing to lower standards, vertically integrating everything, and playing relentless offense during downturns.​​

While the home industry collapsed in the 1970s, 1990s, and 2000s, Clayton stayed disciplined. While competitors chased growth with loose credit, he stayed disciplined and bought their pieces for pennies on the dollar.

Then Warren Buffett read his autobiography. Days later, Berkshire Hathaway bought Clayton Homes for $1.7 billion in cash.

It’s time to listen and learn. 

Available Now: Apple Podcasts | Spotify | X | Transcript

+ Members have access to all 92 of my highlights and notes from Jim’s biography, Build A Dream.

Key Lessons

1. If you have to swallow a frog, don’t look at it too long. When the bank forced Jim Clayton into bankruptcy and seized everything, his name was splashed across the front page. He could have wallowed. Instead, he was at the local restaurant the very next morning with his team, planning the comeback. Grandpa Clayton used to say, “If you have to swallow a frog, don’t look at him too long. If you have to swallow two frogs, swallow the big scudder first.” All the time you spend complaining about what happened comes at the expense of improving where you are.
2. The strong feed during depressions. During the 1970s crash, Clayton Homes watched competitors fire everyone and close locations. Not only did Clayton keep everyone employed, but he went on offense. His motto: “The country is in a recession, and we have elected not to participate.” They grew 25% annually through the disaster. As John D. Rockefeller observed: “The strong feed during depressions.”
3. Don’t fight the flow. Jim Clayton bought a mobile home park with a creek running through it. At great expense, he tried to divert the water twice. Both times, the pavement collapsed exactly where the creek used to flow. The lesson: “Make your plan conform to the land, not the other way around.”
4. The best legal department is happy customers. Jim Clayton learned that “Over 80% of legal claims originate from failure to deliver customer satisfaction.” Happy customers don’t sue. Most companies hire lawyers to fight. Clayton eliminated the fights.
5. Turn your adversary into an advisor. State regulators caught Jim Clayton running an illegal car dealership. The fines would have been massive. Instead, Clayton admitted his ignorance in a way that made the regulator want to root for him. “Within moments,” Clayton writes, “my adversary became my mentor.” The fines were waived. Most people fight regulators. The wise make them allies.
6. Bad loans are a virus. In the late 1990s, Clayton Homes watched every competitor chase growth by loosening credit standards. Clayton held firm. As competitors inevitably imploded, Clayton was perfectly positioned to buy their assets for pennies on the dollar. By 2002, they were the last company standing. Then Warren Buffett called. Discipline in the boom leads to dominance in the bust.
7. There is profit in precision. Before Clayton, the mobile home industry built homes “about” 12 feet wide that “pretty much” fit together. The result was poor quality, labour-intensive installations, and unhappy customers. Clayton did the obvious thing and measured. While competitors built double-wide halves separately and prayed they’d fit, Clayton built them as one, sawed them apart, then rejoined them perfectly.
8. Own the ecosystem. The mobile home industry worked like this: manufacturers built, dealers sold, banks financed, everyone took their cut. Jim Clayton broke the rules—he became all of them. Factory, dealership, bank, insurance company. When 1974’s crash destroyed 60% of the industry, Clayton didn’t need anyone’s permission to survive. They made their own homes, financed their own sales, and insured their own buyers. If you don’t control the entire ecosystem, you are at its mercy.
9. When you’re lost, trust your instruments. Flying his Cessna, Jim Clayton got lost when a landmark wasn’t where it should be. He abandoned his flight plan and started chasing highways, nearly running out of fuel. The lesson: “In business as in flying, your instruments beat your instincts.” The last thing you should do is the first thing you feel you should do.
10. Plant seeds, don’t chase the toy. As a kid, Jim Clayton sold seeds door-to-door. When they hit their sales quota, the company offered prizes to the kids. Nearly everyone took the toy. Clayton opted for free seeds—when he sold them, he could keep all the profit. That choice became his philosophy: “Forgo momentary satisfaction. Plant the right seeds.” The best compound their advantages while others consume theirs.
11. The 3A Flywheel: Clayton believed success runs on three interconnected forces: Action, Attitude, and Atmosphere. Each one feeds the next. Most people wait for the right atmosphere to start, not realizing that action creates the conditions.
12. Certain concepts are ageless. “Self-discipline. Willpower. Perseverance. Realizing that disappointment is not defeat. Knowing that problems often present opportunities. Obstacles may get in the way—for us … But the human spirit can triumph over these things. Adversity breeds resilience and can build character. It is possible to survive, even prevail.”

Takeaways

From the episode and my research

1. If you have to swallow a frog, don’t look at it too long.
2. The strong feed during depressions.
3. “Money can’t buy happiness. … but it sure can help you look in a lot more places.”
4. All complaining comes at the expense of improving.
5. Don’t fight the flow.
6. “Positive action produces positive attitudes, which produce a positive atmosphere.”
7. Disappointment is not defeat.
8. Problems are opportunities. Run toward them.
9. “Our lives work only to the extent that we are willing to keep our agreements.”
10. When you lose your sense of direction, don’t act on impulse.
11. Talk less and listen more.
12. “He who has the last laugh has the best laugh.”
13. Bad loans spread like a virus.
14. When people tell you what you want to hear, your judgment takes a sabbatical.
15. People are expected to make 90% of decisions. If they don’t know which ones are in the 10%, they likely lack good judgment in other areas.
16. If you do what everyone else does, you’ll get results like everyone else.
17. “Never shine a light on your competitor. Not even a candlelight.”
18. Hard times reveal friends.
19. The best legal department is happy customers.
20. The spouses of the people you are considering hiring will tell you more about who they are than an interview.
21. Always be the fastest paying customer to your suppliers.
22. Make your plan conform to reality, not the other way around. Either work with the world the way you find it, or it will teach you a lesson.
23. “There are 3 kinds of people: those who make it happen, those who watch it happen, and occasionally, someone who doesn’t know what happened.”
24. “I have never worshipped money and I never worked for money. I worked for pride and accomplishment. Money can become a nuisance. It’s a hell of a lot more fund chasing it than getting it. The fun is in the race.” — Ray Kroc
25. The time to pull the trigger on an employee is the first time you think of it.
26. When hiring, look for people who already have jobs.
27. Sometimes you don’t need to be great; you just need to be better than the competition.
28. Always act like the underdog, even when you’re the favorite.
29. Skin in the game prevents a lot of poor behavior. If you want upside, you need downside.

Sources:

1. Clayton, Jim, and Bill Retherford. First a Dream. Maryville, TN: FSB Press, 2002
2. Warren Buffett on Berkshire’s Acquisition of Clayton Homes | https://www.youtube.com/watch?v=0OvvSXQZ7Ys 
3. Clayton Homes: First Quarter 2024 – Building a Bright Future Together | https://brk-b.com/clayton-homes-first-quarter-2024-building-a-bright-future-together_240517.html

The post [Outliers] Jim Clayton: Turning Competitors’ Mistakes Into $1.7B appeared first on Farnam Street.

In this episode, you’ll learn how she went from writing a cold letter to Buffett to being sent in to fix struggling Berkshire subsidiaries, how to evaluate a business, the types of people to avoid at all costs, the mistake almost every makes when hiring, the three elements of long term thinking, and so much more.

Play

Featured clips

13:46

Lessons from Berkshire

22:38

The Three Elements of Long Term Thinking

26:23

Turing Around a Declining Business

43:56

Evaluate a Business like Buffett

1:15:13

What Most People Get Wrong When Hiring

(This is a rare case where the public and private feeds vary. The private feed is about 15 minutes longer and contains details that 99 percent of people won’t care about. If you’re one of the 1%, you can sign up here.)

Available Now: Apple Podcasts | Spotify | Youtube | X | Transcript

Lessons

1. Everything is capital allocation. Your primary job is time allocation. Every decision is a resource allocation. You can ruin a good business with poor allocation. All decisions are investment decisions.
2. Structure creates outcomes. Everyone says they think long-term. Few have the structure to support it. Intentions mean nothing without infrastructure.
3. Do the work upfront. Create deep scorecards before posting roles. Define the mission, outcomes, and competencies before you start with the job description. Then proactively find the best person for the job instead of waiting for applications. Discipline up front saves years on the back end.
4. Relentlessly focus on the basics. After two years of growth at Pampered Chef, Tracy hit a wall. She lost sight of the fundamentals.
5. Avoid politicians. The biggest tell of incompetence is evasion. Ask a direct question, and they won’t give you a direct answer. They’ll dance around it. Push harder, and they’ll dance some more. People who really know their craft know why something works and why it doesn’t. They understand the issues even if they can’t fix everything yet. Clarity reveals competence.
6. Everyone needs to understand the business drivers. Tracy took her entire leadership team through business drivers training every year. She walked them through an income statement. Explained what everything means and how things flow through the business. Too many people assume everyone knows, and if they don’t, they feel too embarrassed to ask.
7. If you’re on slide 112, something is wrong. Figure out what actually creates the most value in this business and spend your time there. Tracy remembers one board meeting debating product packaging in detail. Another where she sat through slide 112. Focus on what moves the needle and ignore the theater.
8. Asking WHEN changes everything. When Tracy goes through someone’s work history, she asks who their manager was. She writes it down. Sally Smith. What years? Then: “When I call Sally, what will she say about your strengths and development areas?” Notice the language. Not if, when. That one word changes everything. People become more honest because they know you’ll actually check.
9. The best are always learning. Warren reads every day and gets smarter. Continuous improvement compounds over decades. The best people have a natural curiosity about solving issues, even outside their area of expertise. They ask about things they don’t own. They want to understand how the whole business works. Curiosity compounds.
10. The newspaper test. “If this decision were on the front page, written by a fair, critical reporter your family would read, how would you feel?” Not what’s legal. Not what you can get away with. Reputation the hardest asset to rebuild.
11. Find joy in your work. Tracy’s dad loved farming. He worked harder than anyone she’d ever seen. Late nights, early mornings, all summer long. Throughout winter, he took a small break. But it wasn’t work to him, it was what he loved. You can’t compete with someone having fun.
12. Independence builds problem solvers. Tracy learned independence early. She was driving at 11. At eight, she ran a farmer’s market stand alone. Her dad dropped her off in the morning and picked her up at night. She hired friends and grew sales from $500 a week to $1,500. The best way to learn is by doing when nobody’s watching.
13. People want to help. Tracy wrote letters to CEOs asking to pick their brain. Most said yes. That’s how she landed her job at Berkshire Hathaway. People want to help other people, especially young people who ask good questions. The only barrier is not asking. She wasn’t looking for a job. She wanted to learn. That sincerity opened doors that would’ve stayed closed. Access follows curiosity.
14. Skate where the puck is going. Value creation is moving from buying to operating a business.
15. Get the system working. The best companies have repeatable business systems (ex., Danaher, Toyota, Constellation). They manage businesses in integrated ways where components reinforce each other.

Highlights and Takeaways

A compression of things that stood out to me from my research and this conversation.

1. Everything takes longer and is harder than you think.
2. Problems need to be solved at the right level.
3. The source of all bad decisions is blind spots.
4. It’s not work if you love it.
5. Find people with energy, intelligence, and integrity.
6. The best are always learning.
7. The CEO job is very lonely.
8. “If you only think about the long term, you probably won’t get out of the short term because you’re going to miss the situations of today.”
9. Structure creates outcomes.
10. If you’re trying to attract talent to a losing team, focus on the value proposition to the employee.
11. “You don’t usually get payback on things as quickly as you think.”
12. Culture is the foundational aspect of every business.
13. Hiring someone for $100K is a million-dollar capital allocation decision.
14. Avoid the people who hand-wave and go all over when you ask a simple question.
15. Everyone needs to know the key drivers of the business.
16. The best people are curious.
17. People can’t copy discipline.
18. “The more leverage you put on the business, the more everything has to go well for the business to be able to service that.”
19. Long-term thinking requires structure, not just intent.
20. If you’re on slide 112, something is wrong.
21. The best candidates don’t apply; you have to find them.
22. Think about your business as if it’s your family’s only asset and you can’t sell it for 50 years.
23. You can’t buy good people wanting to work with you; you have to earn it.
24. If you’re not having fun four days out of five, it’s not the right fit.
25. When leaders grow up in businesses, they gain depth but lose outside perspective.
26. “I am a better investor because I am a businessman, and a better businessman because I am an investor.” — Warren Buffett
27. You save time today, but lose time later when you hire the wrong person.
28. Capital is commoditized now. You create value through operating, not financial engineering.
29. Where’s your people calendar? You need the same discipline for talent as for budgets.
30. Don’t fight the trend. Skate where the puck is going.
31. Make sure you pass the newspaper test: “If this decision were on the front page, written by a fair, critical reporter your family would read, how would you feel?”
32. Asking WHEN changes everything.

The 5 M Framework to Evaluate Investments

1. Moat. What is the moat? What’s the competitive advantage?
2. Market. “You may have a moat, but is the market growing and do we think it’s an attractive market? What is the growth rate? What are the likely dynamics of that?”
3. Management. “Does it have a strong management team today, or is it something where we think we can help build the management team if there are opportunities? Sometimes there’ll be a great business, it’s got three strong leaders, but they need to build out a sales leader or a talent leader or a finance leader, and can we help them do that?”
4. More potential. “There’s some opportunity that’s not being fully leveraged today that we think we can help them with. It might be expanding into new markets. It might be a more structured approach to how they manage the business today. There’s a variety of different avenues in terms of more potential, but absolutely a focus.”
5. Margin of safety. “And what we mean by margin of safety is that we don’t want to have to have everything go perfectly right in order for us to be successful. We want to have a little bit of flex so that if there is something like COVID or a downturn or tariffs, we can navigate that well with the management team and we don’t put undue pressure on the business to make shorter-term decisions because of something that’s happening that may be outside of our control.”

Still Curious?

These were mentioned in the episode.

• Alan Mulally‘s Ford Turnaround
• Katharine Graham
• Melinda Gates: The Next Day: Transitions, Change, and Moving Forward
• Bryce Hoffman: American Icon
• Who: The A Method for Hiring
• Kanbrick’s Hiring Playbook

The post Tracy Britt Cool: Building Great Businesses appeared first on Farnam Street.

In the late 1800s, she built a fortune worth billions today in a world designed to stop her. Women couldn’t vote, couldn’t own property, and weren’t even allowed on the stock exchange floor.

She was a force that couldn’t be stopped. She bought entire towns, crushed railroad barons, and became the lender of last resort during financial panics. Her strategies still work today.

This is the story of how an unwanted daughter became “The Witch of Wall Street,” and a playbook for building lasting wealth and independence.

+ Members can read all 123 of my highlights here.

Listen Now: Apple Podcasts | Spotify | Transcript

Key Lessons:

1. Have a Detective’s Eye. Before buying anything, Hetty researched obsessively to uncover what others missed or ignored. When purchasing a horse and buggy, she found someone with a grudge against the seller to reveal every hidden flaw, getting it for half the asking price. This obsessive research gave her an information edge and set her apart from her contemporaries.
2. Positioning over Prediction. While others chased hot investments and bought on margin, Hetty always kept massive cash reserves and never went into debt. During the 1907 Panic, she had “a million dollars in cash on my desk every day” when banks were failing and credit was impossible to find. This liquidity allowed her to buy entire towns when others were forced to sell, and lend millions at reasonable rates when desperate borrowers would have paid anything. Everyone looks like a genius when they’re in a good position and even the smartest person looks like an idiot when they are in a bad position. 
3. Buy when others are fearful and sell when they are greedy. Hetty’s core investment philosophy was beautifully simple: “I buy when things are low and nobody wants them. I keep them until they go up and people are crazy to get them.” This wasn’t just a clever saying – she executed this strategy through every financial panic from 1857 to 1907.
4. Pay attention to the right side of the decimal. She often said, “Watch your pennies and the dollars will take care of themselves.”
5. Be fiercely independent. Hetty was completely comfortable trusting the results of her own thinking and judgment. She lived convinced that as a businesswoman, she was fundamentally alone and nobody else would watch out for her interests, so she had to. While others sought the safety of consensus, Hetty felt most comfortable making decisions on her own. This independence extended to how she lived – the rules she chose to live by were her own rather than society’s.
6. Structure matters. “I go my own way, take no partners, risk nobody else’s fortune.”
7. Mix patience with decisiveness. She would buy assets and “tuck them away” for years, sometimes waiting a decade for investments like greenbacks to pay off. Her extreme frugality – refusing to take carriages despite being worth millions – wasn’t miserliness but rather an understanding that every dollar spent was a dollar that couldn’t compound.
8. Stick to your circle of competence. Hetty concentrated on what she knew best: railroads, real estate, and government bonds. She avoided complexity and speculation, never borrowed money (following her father’s advice to “never owe anyone anything”), and kept her operations simple enough that she could manage everything herself from a desk at her bank.
9. Make work your passion. She said, “my work is my amusement,” and when asked why she didn’t retire, responded, “Why should I give up work?” Work wasn’t a burden; she was completely in love with the intellectual puzzle of investing and business.
10. Manage risk. Hetty’s approach to risk was sophisticated yet simple. She would only invest when she was satisfied that “the downside risk was low and the upside high”.
11. The storm doesn’t warn you. Don’t draw attention to yourself: “Hetty’s investments were not always known: she purchased property under fictitious names, bought stocks under other identities, and was praised by shrewd observers for how closely she held her positions.” She moved in silence.
12. Stay grounded. Her frugality served another purpose; she kept in touch with the real world.

Maxims for Life and Investing

Here is a list of ideas I took away from this episode and my research.

1. “I buy when things are low and nobody wants them. I keep them until they go up and people are crazy to get them.”
2. Position beats prediction. Always keep cash reserves.
3. “If you can manage your brain, you can manage your fortune.”
4. “Before deciding on an investment, seek out every kind of information about it.”
5. The skills to get rich and the skills to stay rich are not the same.
6. “In business generally, don’t close a bargain until you have reflected on it overnight.”
7. Only invest when downside risk is low and upside is high.
8. Self-reliance is the ultimate competitive advantage.
9. Everyone looks smart when they’re in a good position, and even the smartest person looks like a fool in a bad one.
10. Panics are temporary. Value is permanent.
11. Have a detective’s eye. Uncover what others miss or ignore.
12. “I go my own way, take no partners, risk nobody else’s fortune.”
13. “Never owe anyone anything. Not even a kindness.”
14. Mix extreme patience with extreme decisiveness.
15. Never bet against America.
16. “Watch your pennies and the dollars will take care of themselves.”
17. Move in silence. Keep your positions private.
18. Never take advantage of people, even when you could.
19. “When you try to do too much, you never get anywhere. Focus.”
20. Stay connected to reality. Frugality keeps you grounded.
21. “When it comes to spending your life, there have to be some things neglected. If you try to do too much, you can never get anywhere.”
22. “My work is my amusement.”
23. “Property is a trust to be enlarged for future generations.”
24. Live by your own rules, not society’s expectations.
25. Be fair in all things. Your conscience will haunt you otherwise.
26. “Don’t kick a man when he’s down.”
27. “Seek elegance rather than luxury, refinement rather than fashion.”
28. “When I see a good thing going cheap because nobody wants it, I buy a lot of it and tuck it away.”
29. From her favorite poem: “To live content with small means; To seek elegance rather than luxury, And refinement rather than fashion; To be worthy, not respectable, and wealthy, not rich.”

Things Not to Do

Hetty gave her children a list of things not to do.

• Don’t cheat in any of your business dealings, for sooner or later, your conscience will trouble you and you’ll worry yourself into an early grave.
• Don’t fail to be fair in all things business and otherwise.
• Don’t kick a man when he’s down.
• Don’t envy your neighbors.
• Don’t overdress, whether you have the means or not; this causes envy.
• Don’t fail to go to church, for the church needs you and you need the church.
• Don’t forget that riches dishonorably gained must be left behind someday, and when you depart, you will find the gates of heaven bolted against you.
• Don’t forget to be charitable.

Sources

• Wallach, Janet. The Richest Woman in America: Hetty Green in the Gilded Age. New York: Nan A. Talese/Doubleday, 2012.
• Slack, Charles. Hetty: The Genius and Madness of America’s First Female Tycoon.

The post [Outliers] Hetty Green: The Witch of Wall Street appeared first on Farnam Street.

With surprising candor he details the rules he’s lived by: trust first, confront directly, and make the call when the clock starts. In our conversation, he shares why success teaches you nothing, why failure is essential, and why instinct still beats algorithms in a data-obsessed world.

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17:58

Changes In The Entertainment Industry

22:35

Instinct Vs Data

52:39

Accountability During Conflict

Available Now: Apple Podcasts | Spotify |YouTube | Transcript

This episode is filled with Hollywood lore and business acumen. 

Takeaways:

1. The clock starts the moment you know.
2. Money is a byproduct, not a motivation.
3. No job is below you.
4. If you want responsibility, take it.
5. Don’t run from confrontation.
6. If you don’t get what you want, be prepared to walk away.
7. The best way to learn is to start something, where each step teaches you every task.
8. Instinct beats algorithms.
9. “Data can tell you what has happened, not what can or will happen.”
10. Don’t treat your job as a stepping stone.
11. It’s far better to be underestimated than overestimated.
12. Make decisions as an optimist, not a pessimist.
13. “The daily drip of cynicism that this business generates in carloads has to be constantly exorcised.”
14. Decision-making shouldn’t be peaceful.
15. The outside of picture-perfect mansions and the inside rarely resemble each other.
16. Curiosity is the only success metric that matters.
17. Hire for hunger.
18. Don’t get into contests.
19. Don’t look back at what might have been. Keep your eyes on the horizon.
20. If you like the idea, start. Don’t over-analyze.
21. Act like a principal, even if you’re not one.
22. “You either are or you are not capable of being on your own.”
23. “The world belongs to the discontented.” – Robert Woodruff
24. Start with trust.
25. Conventional wisdom is uninteresting.
26. “Either you are or you’re not.” Independence is binary.
27. Read everything with a detective’s eye.
28. To get the job you want, master the one you have.
29. Risk without reward is charity.
30. Conflict is better than consensus.

Lessons

1. The process: “One dumb step in front of the other, course-correcting as you go, is the only process I’m any good at.” Diller bounces off walls to find doors. Makes mistakes. Find what works. Repeat. This is the process.
2. The dark hours matter. Nobody wanted the William Morris file room job. Diller took it. He read every contract from Hollywood’s 70-year history. “I’m no good unless I understand everything down to the smallest molecule.” His peers networked upstairs while he studied in the basement. They became agents. He became a mogul.
3. The clock starts the minute you know. Two executives were stealing from Diller’s company. Someone suggested burying it. The thief even tried blackmail. Barry discovered his most important principle: the second you know about a problem, you own it. Before that moment, nothing is your fault. After that moment, every second is yours.
4. Start with trust. Diller starts with trust. “I’ve been in situations where it’s been misplaced, to say the least.” He forgets the betrayals. No vengeance. Just forward motion. Others waste fortunes on safeguards and lawyers. He moves at the speed of trust. Paranoia is expensive. Trust is profitable.
5. Instinct over Algorithms. Netflix knows the exact second you stop watching. None of it matters. “Predictive research is worthless for making forward decisions,” Diller says. Data tells you what happened, not what will happen.
6. Make decisions as an optimist, not a pessimist. “Every time I’ve made a decision out of cynicism, it’s been poor.” Experience breeds sophistication. Sophistication breeds cynicism. Cynicism kills instinct. After decades in Hollywood, Barry still fights to stay naive.
7. No job is too small or below you. “There was no task I wouldn’t do, tiny or large, no length to which I wouldn’t go.” While peers positioned for promotions, Diller did everything. He worked the hours nobody worked, doing the things nobody wanted to do. His job wasn’t a stepping stone to something else; he was all in. Excellence where you are creates opportunity where you’re going.
8. If you don’t get what you want, be prepared to walk away. Les Wasserman taught Diller negotiation in one sentence: “Be fully prepared to call the whole deal off if you don’t get what you asked for. Otherwise, you never will.” Power comes from needing nothing. Leverage comes from walking away.
9. Conflict is better than consensus. “I love confrontation,” Diller admits. Not to be difficult. To find truth. Calm meetings produce consensus ideas. Explosive meetings produce advantageous divergences. If you listen through the noise, you’ll hear what matters. Friction creates fire.
10. Become a life-long learner. At 83, after running studios and building empires, what’s success? “Remaining curious. If I’m curious, then that is success.” Curiosity compounds forever.

The post Barry Diller: Building IAC appeared first on Farnam Street.

This episode is the story of what he did, how he did it, and the lessons you can learn.

Available Now: Apple Podcasts | Spotify | Transcript

Lessons From Ed Stack:

1. Believing in someone before they believe in themselves changes everything. Dick Stack’s grandmother pulled $300 from her cookie jar after his boss crossed out his carefully crafted list. She didn’t give him business advice or connections. She gave him belief. Dick’s Sporting Goods exists because a grandmother believed in an eighteen-year-old kid who barely graduated high school.

2. Your name is your biggest asset. When Dick’s second store failed in 1956, he could have declared bankruptcy like everyone expected. Instead, he sold his house, his car, everything he owned to pay back creditors in full. Six weeks later, when he asked those same suppliers for another chance, they remembered. Trust isn’t earned in the easy times; it’s earned in the fire. 

3. Develop a taste for saltwater. Ed despised working at his father’s store every summer and on weekends from age thirteen. While friends played baseball, he unloaded trucks in suffocating heat. However miserable those years were, he learned. Sometimes your worst experiences are the best education. 

4. Ignorance can be a superpower. Ed and Tim signed papers to buy land in Syracuse with no plan, no budget, and no idea they were getting a “vanilla box”. They nearly opened a store with empty walls. They made every possible mistake. But here’s the thing: if they’d known everything that could go wrong, they might never have even tried to expand. Sometimes knowing too much kills action. 

5. The quiet one is the decision maker. At the make-or-break GE Capital meeting, suits grilled Ed for ninety minutes. But in the back corner sat a man who never spoke, just watched. Ed reflected later, “If you’re in a meeting and there’s a guy sitting off in a corner, not saying anything, that’s the guy you probably have to convince. He’s the decision-maker.” Every important meeting works this way: The loud ones interrogate. The quiet one decides.

6. Own your mistakes. When GE Capital asked about Dick’s near-bankruptcy, Ed didn’t deflect or minimize. In fact, he was brutally honest: “We made a series of mistakes. Here’s what they were. Here’s why we made them. Here’s exactly how we’ll ensure they never happen again.” Most people explain away failure. The best own it. The precision of your diagnosis proves the depth of your learning.

7. Never rely on the kindness of strangers. After nearly losing everything in 1996, Ed learned what Buffett knew: “Never count on the kindness of strangers to meet tomorrow’s obligations.” The banks can’t take your business if you don’t owe them money. Never put yourself in a position to need the kindness of strangers. 

8. Pick the company that wants it more. When Puma and Adidas wouldn’t return Ed’s calls, he gave shelf space to an upstart company that really wanted it. That company was Nike. When established brands ignored them, he backed a hungry football player making shirts in his grandmother’s basement. That company was Under Armour. Sometimes the best deals come from those desperate to prove themselves, not those who’ve already made it.

9. When the map and territory differ, believe the territory. The VCs pulled out spreadsheets showing Ed what looked good on the screen. But Ed remembered that kid in Buffalo who gasped at thirty feet of baseball gloves. Sure, that wall of gloves didn’t turn inventory fast, but it got people in the store. When spreadsheets and customers disagree, the customers are almost always right. The data isn’t wrong. You’re measuring the wrong thing. The map is not the territory. The spreadsheet is not the store.

10. Remember what you’re really selling. Dick’s Sporting Goods became an empire because Dick and Ed Stack knew they weren’t just selling equipment. They were selling dreams. When you understand what people really buy, you understand everything.

11. Become someone people want to root for. If people think you’re overrated, they’ll root against you. However, if people see you as underrated, they’ll go out of their way to help you. There is no status quo.

Some short maxims from my research

1. Never rely on the kindness of strangers.
2. Your name is your biggest asset.
3. The person who talks the least is usually the decision maker.
4. Sometimes the most profitable decision on a spreadsheet is the worst decision for a business.
5. Good businesses don’t need debt and bad ones can’t handle it.
6. When the data and the anecdotes differ, you’re measuring the wrong thing.
7. Trust isn’t earned in the easy times; it’s earned in the fire.
8. People are rarely buying just your product.
9. Give the underdog a chance. They want it more.
10. Not knowing what you’re doing can be an asset.
11. All money comes with strings.
12. Your competition always has something to teach you.
13. Always bet on yourself.
14. Learn from mistakes, but don’t over-learn them.
15. “The moment a business stops evolving, the moment its leaders sit back and think, ‘Everything’s good,’ that’s when it starts to fail.”
16. Problems are opportunities to add value.
17. Play the game to win.
18. Become someone people want to help.
19. Investment bankers are not your friends.
20. Manically focus on the numbers.
21. The recipe is boldness mixed with caution.
22. What you get out of anything is directly proportional to what you put in.
23. The spreadsheet is not the customer.
24. Arguing teaches you how to think.
25. If you go into a deal with a win-win mindset, it almost always works out.
26. Clever excuses don’t make anything better.
27. Every business is someone’s irrational dedication.
28. The most important element of success is perseverance.
29. Always let people keep their dignity.
30. The cost of making others happy is losing yourself.
31. Do right for the company. Do right for society. You can’t prosper unless the community around you prospers.
32. Believing in someone before they believe in themselves changes everything.

Source:

Stack, E., & Deitsch, R. (2019). It’s how we play the game: Build a business. Take a stand. Make a difference. Scribner.

The post [Outliers] Ed Stack: Lessons from Dick’s Sporting Goods appeared first on Farnam Street.

Lulu is known as the go-to strategist for CEOs, founders, and policymakers navigating high-stakes moments.

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08:34

The Importance Of The Hook

39:19

How To Respond To A Public Relations Attack

01:00:03

How To Play Offence In PR

01:46:17

What Is Success For You?

In this episode, she explains how to grab attention in a noisy world filled with AI-slop, appeal to human psychology, and build trust instead of farming engagement.

Available Now: Apple Podcasts | Spotify | YouTube | Transcript

About Lulu:

Former CCO and EVP of Corporate Affairs at Activision Blizzard and former VP of Comms at Substack, she is now the creator of Rostra, the only advisory firm focused on founder-led comms.

21 Takeaways

1. Conviction beats logic.

2. Under attack? Spread the force (pressure equals the force divided by the surface area). Attacking? Focus on a specific point.

3. In order of how much it matters: the hook is first (to get attention), then how you tell your story, and finally where you tell it. Most people get this wrong.

4. You have to fight story with story.

5. Facts don’t win hearts and minds.

6. Stories trump statistics. One death is a tragedy. A thousand is a statistic. Stories always win.

7. People remember 2-3 things about you. Don’t let them be random.

8. If you have a repeated game of long-term relationships and repeated interactions, the optimal strategy is actually tit for two tats. You can cross me once, and maybe I’ll let that go, but if you cross me the second time, I never will.

9. No spokesperson can tell your story better than you.

10. Deterrence matters: Establish that you’re not a soft target. If you can establish that you’ll fight back, you’ll make the rest of your life so much easier.

11. Reality bends to whoever tells the better story.

12. Let your inner circle tell you you’re wrong, or strangers will embarrass you.

12. Use common words. Everyone gets it. No one feels stupid.

13. Trust = Not a stranger + shared values + common ground first.

14. We’re more convinced by people we like, and we like people that we trust.

15. Humor creates involuntary likability.

16. Apologize when wrong. Never when right. Most do the opposite.

17. Cult leaders speak directly. So should you.

18. Corporate speak is everyone copying everyone, saying nothing.

19. The wizard behind the curtain gets no trust. Show your face.

20. Every unicorn pitched the impossible with impossible conviction.

21. Reality is subjective. You can bend it to your will if you’re able to communicate to people who matter in the ways that strike them in the heart and in the mind to get them to see the world the way that you do.

22. You don’t build believers with press releases.

The post Lulu Cheng Meservey: How To Build A Cult appeared first on Farnam Street.

In this episode, we dive into how he built FedEx and the lessons he learned along the way. 

Available Now: Apple Podcasts | Spotify | X | Transcript

This story proves that impossible is just another word for opportunity.

Lessons From Fred Smith

1. Not trying guarantees failure. Fred Smith spent his childhood in leg braces. Doctors said he’d never walk normally. Through thousands of hours of excruciating therapy, he didn’t just walk; he became a varsity athlete. “Fear of failure must never be a reason not to try something,” he’d later say. When everyone said overnight delivery was impossible, he remembered the doctors who said he’d never play sports.
2. Incentives matter. The Memphis hub was a nightly disaster. Planes had to land, unload, sort, and reload in hours. Nothing worked until someone noticed the obvious: they paid workers by the hour. The longer it took, the more they earned. FedEx switched to paying by the shift. Same pay, go home when you’re done. The sort suddenly ran like clockwork. Charlie Munger loved this story: “Never, ever, think about something else when you should be thinking about the power of incentives.”
3. Loyalty is earned in the trenches. In Vietnam, Fred learned soldiers don’t fight for politicians; they fight for the person next to them. Years later, when FedEx ran out of money, employees worked without pay. Pilots used personal credit cards for fuel. Not because they had to. Because of the loyalty that was earned in the trenches.
4. Become a learning machine. Fred Smith read four hours a day. Every day. “People who supposedly have vision spend a lot of time reading and gathering information, then synthesize it until they come up with an idea,” he explained. All that reading showed him something nobody else saw: people would soon care more about tracking their package than getting it fast.
5. Take care of your people and they will take care of you. In 1974, investors moved to fire Fred Smith. Every senior officer signed the same letter: fire him, and we all walk. One was even offered the presidency as a bribe. (He refused.) This was People-Service-Profit in action. The order of those words is important. People first, then service, then profit. Not the other way around. Most companies put this stuff on motivational posters. At FedEx, people bet their careers on it.
6. Reliability is rare. Speed without predictability is useless. FedEx guaranteed overnight delivery or your money back, a feat that seemed impossible at the time. The guarantee created trust with customers and accountability internally. There were no excuses.
7. All in or all out. FedEx had $5,000 left. The planes needed $24,000 to fly on Monday. So Fred Smith took the five grand to Vegas and turned it into $27,000 at blackjack. When investors heard this story, they didn’t see a gambling problem. They saw a founder who’d already bet his inheritance, his house, everything, and was still fighting. Two weeks later, they gave him $11 million.
8. Trust is built in drips and emptied in buckets. When Fred Smith bought Flying Tigers, he faced a choice: protect the seniority of Tigers pilots or his own FedEx pilots. He chose Tigers. The FedEx pilots—the ones who’d saved his company with their credit cards—called it “treachery.” FedEx recovered financially, but the family was dead.
9. Outcome over Ego: FedEx lost $629 million in Europe because Smith assumed Europeans wanted overnight delivery. They didn’t. Their countries were small enough that regular trucks worked fine. Rather than double down to save face, Smith killed the entire operation. Most CEOs would have thrown another billion at the problem rather than admit they were wrong. They confuse stubbornness with strength. But Smith had learned from military history: sometimes the smartest generals are the ones who know when to retreat.

10. Bounce, Don’t Break: Fred Smith survived childhood disease, his friend’s death, Vietnam combat, near bankruptcy, a coup attempt, and a $629 million failure in Europe. Despite disasters that would have broken most people, he kept going and built an $88 billion empire.

References:

Trimble, Vance H. 1993. Overnight Success: Federal Express and Frederick Smith, Its Renegade Creator. New York: Crown Publishers.

The post [Outliers] Fred Smith: The Story of FedEx  appeared first on Farnam Street.

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01:13

Your Most Controversial Take On AI?

23:48

How To Learn Pattern Matching And Spot Trends

44:06

Thinking By Writing

59:17

Who Will Win The AI Race?

We talk about why everyone gets platform shifts wrong, where Google’s actually vulnerable, and what real people do with AI when nobody’s watching.

Available Now: Apple Podcasts | Spotify | YouTube | Transcript

Evans sees patterns others don’t. This conversation will change how you think about what’s actually happening versus what everyone says is happening.

Key Ideas

• AI is the biggest platform shift since the iPhone, but it’s only that. It’s not a civilization-altering technology like electricity, because platform shifts happen every 10-15 years and then become just software.
• The data advantage incumbents supposedly have is illusory, mainly because LLMs require vast amounts of generalized text, which is readily available, making data effectively a commodity.
• ChatGPT has captured the brand position like Google did for search, but the underlying models are becoming commodities with no clear product differentiation.
• Only 10% of people use AI daily, with another 15-20% weekly, while 20-30% tried it and didn’t get it, suggesting a major adoption gap despite free access, because people struggle to map AI capabilities to their actual tasks.
• Historical platform shifts demonstrate that incumbents often attempt to integrate new technology as a feature, rather than acknowledging fundamental changes, as evidenced by Kodak’s all-in approach to digital cameras, which ultimately failed due to a shifting business model.
• Regulation that treats AI like weapons creates explicit trade-offs: if you make it hard to build models and start companies, you can’t complain when innovation happens elsewhere.
• Current AI systems have “zero value for quantitative analysis” because error rates remain at dozens per page rather than approaching the near-zero threshold needed for reliable use.
• The feedback loop problem means AI can generate variations but struggles with true originality because variance is penalized in training, unlike AlphaGo, which had an external scoring system.
• Meta and Amazon aim to make LLMs a commodity infrastructure sold at cost, allowing them to differentiate their platforms, whereas OpenAI requires models to retain their value.
• Writing is thinking, and delegating writing to AI means missing the chance to think clearly. Students using AI for homework avoid the mental work that builds reasoning skills.

Reminder: all opinions are the opinion of the guest!

The post Benedict Evans: Why AI Isn’t What You Think appeared first on Farnam Street.

In this episode, we decode the counterintuitive playbook of patient capital, rural advantage, and why Bragg’s refusal to sell a single share made him unstoppable.

Now Available: Apple Podcasts | Spotify | Transcript 

My interview with John (#204) was the class. This is the homework. 

Lessons from John Bragg:

1. Bounce, Don’t Break: In 1968, John Bragg borrowed everything to build his first processing plant. To say he was all in was an understatement. Then frost killed his entire crop. It was a disaster. He had a nearly empty factory, barely any revenue, and a lot of bills to pay. Most people would have declared bankruptcy. Instead, Bragg called Wallace McCain at midnight: “What do you need that you don’t want to make yourself?” McCain threw him a file on onion rings. Bragg had never made an onion ring, but he had an empty factory and no choice. When you’re staring at complete ruin, the question isn’t “Why me?” It’s “What now?”
2. Reputation is Currency: The bank manager laughed Bragg out of the office when he needed his first loan. But a Conservative politician stood up for the Liberal Bragg family: “If we can’t lend money to the Bragg family, we can’t lend money to anybody.” Later, Bragg intentionally overpaid for acquisitions. Word spread fast: if you want to sell, call John Bragg. Fair price, quick close, no games. While competitors fought over pennies on one deal, Bragg was already closing three more. You can’t buy reputation. You can only earn it, one interaction at a time.
3. Look to the Horizon: In 1969, nobody wanted a cable TV license for Amherst, Nova Scotia. Population: 9,000. Bragg was the only applicant. Early cable meant recording shows on tapes, putting them on buses, and playing two-week-old programming. While others saw losses, Bragg saw rural communities desperate for connection, recurring revenue, and a shrinking world. “We’re big, big believers in looking at the horizon,” he says, quoting Dag Hammarskjöld: “Only those who look at the horizon find the right road. If you look at your feet, you’ll stumble.” That license, which nobody wanted, was the first brick in what would become North America’s largest private telecom empire. 
4. Grow the Pie: Bragg’s brother invented a blueberry harvester that did the work of thirty hand pickers. Instead of keeping it secret, they sold harvesters to competitors. “What’s good for the industry is good for everyone,” Bragg said. He wasn’t competing against other blueberry growers; he was competing against every other fruit. This drives people crazy. Even today, Oxford funds research on growing and cultivating and shares everything freely. While other people want to divide the pie, John Bragg wants to grow it for everyone. 
5. Overpay for What’s Only Available Once: Bragg routinely paid more than competitors for acquisitions. Sometimes double. His reasoning is simple: “It’s only available once.” When opportunities are scarce, pay what it takes. The people who nickel and dime their way out of great deals spend years regretting it.
6. No Reverse Gear: At 22, Bragg turned down a secure teaching job to pick wild blueberries. Everyone thought he’d lost his mind. When his business was on the verge of failure, he persevered. When banks rejected him, he found another way. When Bell killed his partnership, he borrowed $265 million and built a competitor instead. “I have no reverse gear,” Bragg says. The world is full of people who almost started something, almost took the risk, almost bet on themselves. Don’t be one of them.
7. Outcome Over Ego: Bragg could have named his companies after himself. Instead, Oxford and Eastlink. “Never let your ego run your business,” he says. At 85, worth billions, he still uses scuffed golf balls. “They go as far as new ones.” His headquarters look like a community college. Every dollar that doesn’t feed your ego feeds your growth. Most people would rather look successful than be successful. That’s why most people aren’t as successful as they could be. 
8. Lead by Suggestion: Every month, Bragg drives to his executives instead of summoning them. He rarely gives orders. When a beekeeper said 2,500 hives were his limit, Bragg didn’t bark commands. He said, “I have confidence you can handle more. Think about how.” The beekeeper redesigned everything and now manages 12,000 hives. Strong leaders help people discover their full potential.
9. Never Stop Learning: At 70, worth hundreds of millions, Bragg gave six teams of executives $10 million each, not for bonuses, but for investment portfolios. Real money, real stakes. “I wanted them to see how strong companies operate and how weak ones fail,” he said. No penalties for losses, no bonuses for gains. Pure education. Bragg himself became a student, attending Berkshire Hathaway meetings, studying other businesses. His favorite Buffett quote: “I am a better investor because I am a businessman and a better businessman because I am an investor.” Most people stop learning once they become successful. Outliers never stop being students.
10. Stay Private, Stay Nimble: For fifty years, banks begged Bragg to go public. He refused. When he acquired AM Telecom, a publicly traded company, he immediately eliminated $4 million in overhead. “It’s costly to be public, and it slows you down,” Bragg says. Public companies need board approvals, regulatory filings, and quarterly guidance. When Bragg’s engineers recommended new technology, he gave them $10 million the same day.
11. Patient Capital Wins: For fifty years, Bragg reinvested every dollar back into growth. While competitors paid shareholders, Bragg continued to compound. Bragg thought in generations. In a world of quick flips and fast exits, the person willing to wait twenty years has no competition.

More Resources/Sources 

1. Savoie, Donald J. The Rural Entrepreneur: John Bragg: The Force Behind Oxford Frozen Foods and Eastlink. Halifax, NS: Nimbus Publishing Limited, 2021. (Members have access to all 97 of my highlights here)
2. Parrish, Shane. “John Bragg: The Blueberry Billionaire (#204).” Interview with John Bragg. The Knowledge Project Podcast, 2024. https://myvibez.link/knowledge-project-podcast-transcripts/john-bragg-204/.

The post [Outliers] John Bragg: The Unknown Billionaire Who Controls Half the World’s Blueberries  appeared first on Farnam Street.

She breaks down the real signals to look for in a partner.  Why people actually cheat (not what you think) and how to spot it coming a mile away. Plus she offers a simple framework that can turn fights from something that pushes you away to something that brings you closer than ever. 

Available Now Soon: Apple Podcasts | Spotify | Transcript

We dig into how to keep the spark alive (even after kids), how to survive the empty-nest phase, and three simple things you can do to strengthen your relationship. 

Doesn’t matter if you’re single, dating, married, or divorced. You need to hear this.

Key Lessons from Dr. Sue Johnson

Criticism Is a Bid for Connection: When your partner criticizes or becomes passive-aggressive, they’re not trying to hurt you. They’re asking “Where are you?” Sue explains that demanding partners are desperately seeking connection: “If the other person doesn’t respond, they say it louder. ‘I’ll get you to respond to me. Where are you? You’re a bad partner.’ Oh, that’ll get your attention.” Behind every criticism is a wish. Most people respond by shutting down to protect themselves. But shutting down sends danger cues to your partner’s nervous system. The person who seems angry is actually terrified of being alone.

Shutdown Is Not Protection: “I stopped talking because everything I say is wrong,” Sue hears this from countless couples. It makes sense. Except when you cut off emotionally in intimate relationships, you shut your partner out. You can’t protect yourself and connect at the same time. Protection kills connection.

Affairs Aren’t About Sex: “People do not have affairs because of sexuality or sexual frustration,” Sue says after 35 years of practice. “They have affairs because they’re emotionally disconnected and alone.” The secretary brings coffee and smiles. Suddenly she’s attractive after three years of working together. Most affairs are about deprivation, not lust. Fix the emotional connection and the sexual temptation disappears.

The Best Sex Requires Safety, Not Novelty: “The best recipe for a great sex life throughout your life is safe emotional connection.” When you feel safe, you can play, explore, be unpredictable. When you don’t feel safe, you need more and more novelty just to feel something. “You need novelty when you’re numbed out and shut down.” The people having the best sex? Long-term couples who trust each other completely.

Secrets Are Bombs in the Basement: Be open and honest.”You want me to help you rebuild your relationship house, but you have a ticking bomb in the basement.” You’re holding the secret to your chest. That takes energy. Meanwhile, your partner knows something’s wrong. They feel you pulling away. They just don’t know why. Secrets don’t protect. They corrode.

Men Want to Be Desired: Sue has listened to thousands of men. What she hears surprises most people. Men don’t just want sex. They want to be wanted. “The most concrete way of feeling desired is for you to desire me to come close.” Our culture tells men they’re supposed to be sexual machines. The truth is simpler. Like everyone else, they want to matter to someone.

The Warning Sign Isn’t Fighting: People say “We don’t fight” like it means they’re happy. Sue’s response: “Yeah, I know, but do you have a happy relationship?” The real warning sign is when you stop getting upset about disconnection. Fighting means you still care. Indifference means you’ve already left.

Model What Matters: “The very best thing you can do for your kids is create a safe parental alliance,” Sue insists. Parents focus everything on their children, avoiding their own relationship. But kids are going to leave. “What you give your children is a vision of what a good relationship looks like.” That template guides them for life. Children don’t need perfect parents. They need parents who can repair conflicts and come back together.

Transitions Reveal Cracks: Having kids. Empty nest. Retirement. “The stress reveals the cracks in the relationship,” Sue explains. These transitions don’t create problems. They expose what was already broken. Couples who’ve avoided each other for years suddenly can’t when the kids leave. “If you starve a relationship of attention, ignore it, and leave it on a shelf for years, then try to pick it off the shelf – I’m sorry, but it’s shriveled and died.”

Silence Is the Real Virus: “People get fixated on conflict,” Sue observes. “Distance slips by them.” Therapists teach you to fight fair but the real problem isn’t how you fight. It’s that you’ve become strangers living in the same house. One couple called their pattern “the nothing” – no fighting, no connection, just nothing. That’s when relationships die. Not in battle, but in silence.

There’s a Point of No Return: Therapists hate hearing this, but Sue is clear: “There’s a certain point where no, you can’t breathe life back into it.” When someone has emotionally detached and given up, reattachment becomes nearly impossible. You can still care about the person. You can be friends. But you won’t risk and invest the way love requires. Once you’ve walked into detachment, you can’t walk back.

Love Has a Science: “If we can go to the moon, we have the key to love relationships,” Sue argues. We’re not victims of random emotions. There’s a deep logic to how attachment works. “What you understand, you can shape.” Most people think love is something that happens to you. They “fall” in love, then “fall” out. But secure attachment can be learned, shaped, repaired.

High Agency in Love: You’re not a passenger in your relationship. You can understand the patterns, recognize the dance, and change the steps. Most relationship distress happens because people don’t understand the attachment drama they’re caught in. Not because anyone is fundamentally bad. When you understand love’s mechanics, you can shape it. Just like high-agency people don’t wait for life to happen to them, secure partners don’t wait for the relationship to magically get better. They build it one day at a time.

The post Dr. Sue Johnson: The Science of Lasting Love  appeared first on Farnam Street.

Have you ever wondered why you can still buy a hot dog and soda for $1.50 today at Costco? We can thank Sol Price for that. To him, keeping promises to customers mattered more than profit margins.

Available Now: Apple Podcasts | Spotify | Transcript | YouTube

Sam Walton said he borrowed more ideas from Sol Price than anyone else. Jim Sinegal of Costco said, “I didn’t learn a lot from Sol. I learned everything.” Jeff Bezos studied him. Home Depot echoed him. 

He invented the warehouse club, pioneered membership retail and built two multi-billion-dollar companies. The real lessons aren’t about what he built, but how he did it. 

This episode is based on the book Sol Price: Retail Revolutionary by his son Robert Price.

Lessons from Sol Price:

1. Ignorance is a Superpower: Sol had never worked retail when he started FedMart. “Fortunately, we didn’t know what wouldn’t work or what we couldn’t do.” Retail experts knew you couldn’t sell tires next to toothpaste. Sol did it anyway. Experts knew stores needed elaborate displays. Sol used sawhorses and plywood. Experts knew warehouse locations were death. Sol thrived there. Revenue went from zero to $300 million. Sometimes the most dangerous thing you can know is why something won’t work.
2. The Intelligent Loss of Sales: Sol Price deliberately chose not to sell small bottles of 3-in-1 Oil. Every hardware store carried three sizes. Sol only stocked the eight-ounce bottle – the best value per ounce. “That’s the intelligent loss of sales,” he explained. He’d rather lose customers who wanted smaller sizes than manage three SKUs. The efficiency gained from handling one product instead of three meant lower prices for everyone. Most businesses fear any lost sale. The best businesses choose which sales to lose.
3. Think Like a Fiduciary, Not a Merchant: When Safeway sold sugar below cost, Sol did something insane. He put up signs in FedMart: “Sugar is cheaper at Safeway this week. Go buy it there.” His managers thought he’d lost it. Sol’s view? “I have a fiduciary duty to my members, like a lawyer to clients.” That radical honesty created something powerful. People drove 200 miles round-trip from San Diego to shop at his LA store. When you treat customers like clients, not targets, trust becomes your greatest asset.
4. Win-Win: The Math of Success: Most businesses think someone has to lose for them to win. Sol flipped the equation. San Antonio retailers paid 50 cents an hour in 1957. Sol paid a dollar. His advisors thought he’d lost his mind. But turnover disappeared. Theft became almost nonexistent. The best workers lined up to join. Employees treated the business like their own. Paying the minimum gets you minimum effort. Paying double gets you ten times the value.
5.  Serve One, Completely: Eddie K’s Seven Seas Locker Club only served sailors. Period. Lockers for uniforms. Civilian clothes. Barber shop. Everything a sailor needed on shore leave. While Sol’s small business clients tried competing with everyone, Seven Seas competed with no one. They owned their niche completely. Success doesn’t come from serving everyone a little. It comes from serving someone completely.
6. The $1.50 Promise: Hot dog vendors wanted to set up outside Price Club. Sol thought: Why let them profit off our traffic? He sold Hebrew National hot dogs with a soda for $1.50 – at cost, maybe a loss. His son thought he’d lost it. Nearly fifty years later, Costco still sells that combo for $1.50. The CEO said he’d kill anyone who raises it. Some losses aren’t losses. They’re promises that build empires.
7. Be a Teacher: Bernie Marcus visited Sol after getting fired, planning revenge lawsuits. Sol’s advice: “Don’t waste time suing. Build something better.” Then Sol walked him through Price Club’s entire operation. Bernie built Home Depot. Sam Walton came with a tape recorder. Sol mailed it back intact after store security confiscated it. Sam built Sam’s Club. Sol joked he “should have worn a condom.” When your principles are sound enough, teaching competitors validates your model. They expand your market. They make your innovation normal. 
8. Bet on Yourself: At 38, Sol put $5,000 into FedMart. For a small-town lawyer in 1954, that was serious money. When he got fired at 60, most people would retire to a golf course. Sol? He dumped $800,000 of his own cash into Price Club. No backup plan. No safety net. Just conviction that he could figure it out. The first company became a $300 million giant. The second one spawned a trillion-dollar industry. When you believe in what you’re building, go all in. Half-measures guarantee half-results.
9. Turn Problems into Principles: There is almost always another way. Texas law in 1957 required separate facilities by race. Sol’s San Antonio solution? Remove every table and chair from the lunch counter. If everyone had to stand, everyone could eat together. When a Dallas bank demanded segregation clauses for his loan, Sol said remove it or no deal. The bank blinked first. He didn’t fight the system. He redesigned around it. 
10. Convert Charity to Capital: Fresh out of law school, Sol took every charity case free. Hebrew Home for the Aged. Jewish Welfare Society. Other lawyers said he was leaving money on the table. But those charity boards were full of San Diego business owners. When they needed paying legal work, they called Sol. When he needed investors for FedMart, they wrote checks. Give away what others sell. It comes back multiplied.
11. The Anti-Manual: Sol refused to create training manuals. Other retailers had thick binders of procedures. Sol had a saying: “You train an animal, you teach a person.” He wanted people who could assess situations and make the right call, not robots following scripts. Jim Sinegal took this to heart – he spent 90% of his time teaching, not managing. Manuals create followers. Teaching creates thinkers.
12. The Right Time is Now: December 1975. Sol gets fired from FedMart at sixty – literally locked out. Within one week, he’s signing a lease one floor up in the same building. Every morning, he rides the elevator past the company that fired him. Above his desk, three words: “Do it now.” Seven months later, Price Club opens. Most people need months to process failure. Winners need a week.
13. Bounce, Don’t Break: Helen’s parents said Sol wasn’t good enough. Socialist parents, lazy father, drooping eye. He married her anyway with a dollar ring from Woolworth’s. FEDCO rejected his partnership. He built FedMart and crushed them. Hugo Mann locked him out of FedMart at 60. Within a week, Sol signed a lease one floor up. Every morning, he rode the elevator past the company that fired him. Seven months later, Price Club opened. At 87, when PriceSmart tanked, he rescued it with his own money. Three knockdowns. Three comebacks. Each one bigger. Success isn’t avoiding failure. It’s what you do after.

Source:

1. Price, Robert E. 2012. Sol Price: Retail Revolutionary & Social Innovator. San Diego: San Diego Sol Price.

The post [Outliers] Sol Price: The Godfather of Costco, Walmart, and Modern Retail appeared first on Farnam Street.

Featured clips

11:13

Steve Jobs & iPhone 3G data leak

22:33

Lessons from Paul Graham

01:06:57

Why tariffs matter

Ryan Petersen (@typesfast) is the founder and CEO of Flexport, the platform that coordinates global logistics from factory floor to customer door.

In this conversation, he’s refreshingly transparent about the mistakes and painful lessons he’s learned building several companies.  He opens up about stepping down as CEO, his struggles with self-confidence, and what happened when he was forced to step in and save his own company.

Available Now: Apple Podcasts | Spotify | YouTube | Transcript

Along the way, we explore why micromanagement might be the secret to better leadership, how Trump-era tariffs reveal the hidden complexity of global trade, and what it takes to scale a company without losing control.

There are stories and lessons here you won’t find anywhere else, from a data leak that triggered a call from Steve Jobs to flying 500 million masks into the U.S. during a global shutdown. 

Key takeaways from this conversation:

1. Play Against Weak Competition: Charlie Munger told Ryan his freight business was brilliant because of “dumb competition.” Competing in AI means battling Stanford PhDs. In logistics, coding makes you revolutionary. Find markets where your natural strengths face others’ blind spots.

2. Founder Mode: Ryan returned from chairman to CEO after the company burned through cash. He had a newfound confidence and some new rules: promote internally, read all reports, get in the weeds. When survival’s at stake, depth beats delegation.

3. Obsession Is the Advantage: “I can’t stop thinking about Flexport,” Ryan admits. It consumes him—infinite problems, daily variety, global complexity. While others burn out, his obsession sustains decades of grinding. Work that captures your mind beats work that pays your bills.

4. Quality Costs Less: In logistics, a single mistake erases months of efficiency gains. One wrong customs code triggers weeks of fixes. Ryan’s teams now prioritize accuracy over speed. In complex systems, doing it right once beats doing it fast twice.

5. Velocity Beats Mass: Peter Kaufman taught Ryan physics: kinetic energy = ½ mass × velocity². Velocity gets squared; mass doesn’t. Three fast engineers beat 300 slow ones. Small teams moving fast beat large teams moving slow.

6. The 90-Day Rule: After failed hires, Ryan adopted a rule: external hires can’t make decisions for 90 days. Even brilliant outsiders need months to understand years of context. Context beats credentials every time.

7. Micromanagement Works: Tobi Lütke reframed micromanagement for Ryan: “It’s just attention to detail.” Ryan now talks to 40-50 employees daily, skips levels to see reality unfiltered. Deep involvement isn’t meddling, it’s care.

8. Own the Niche: There are riches in niches. Peter Kaufman’s competitive exclusion principle: two species can’t occupy the same niche. Flexport expanded from customs to freight to warehouses. Leave no gaps for competitors. Do everything your customers need or someone else will.

9. Attention is the Currency: When he started import genius, Ryan found Apple importing “electric computers” in public shipping records and posted it online. Steve Jobs called customs, furious. The data was always public. Revenue jumped from $0 to $50K monthly in two weeks. Obvious opportunities hide in plain sight.

10. Choose Your Constraint: “If a bottleneck appears where you didn’t choose it, you’re not running the operation, it’s running you.” During COVID, surprise bottlenecks erupted everywhere. Ryan lost control. Now he designs constraints intentionally, ideally at customer demand. Control where work slows down or it controls you.

Charlie Munger Talks:

A Lesson on Elementary Worldly Wisdom: https://fs.blog/great-talks/a-lesson-on-worldly-wisdom/

The Psychology of Human Midjudgment: https://fs.blog/great-talks/psychology-human-misjudgment/

The post Ryan Petersen: Building Flexport appeared first on Farnam Street.

Graham had no training, no experience, not even confidence. Just a newspaper bleeding money and a government that expected her to fall in line.

Available Now: Apple Podcasts | Spotify | Transcript

When her editors brought her stolen classified documents, her lawyers begged her not to publish. They said it would destroy the company. She published them anyway. Nixon came after her, attacking her with the full force of the executive. Then Watergate. For nearly a year she was ridiculed and isolated while pursuing the story that would eventually bring down the president. 

Graham proved that you can grow into a job that initially seems impossible and no amount of training can substitute for having the right values and the courage to act on them.

This episode is full of practical lessons I learned reading her memoir, Personal History and watching Becoming Katharine Graham.

10 Lessons from Katharine Graham

1. The Velvet Hammer: Katharine never raised her voice. She never pounded tables. Never tried to out-masculine the men. She stayed soft-spoken while becoming as hard as steel. Nixon’s administration learned too late: the quiet ones hit hardest. Competence whispers, it doesn’t shout. 

2. Values Beat Analysis: The Pentagon Papers decision arrived during Katharine’s Georgetown dinner party. The Washington Post had just gone public two days earlier. Everything was at stake. Publishing classified documents meant likely criminal charges, losing television licenses, and destroying the IPO. Her lawyers said it was financial suicide. Her editors said not publishing was journalistic suicide. She remembered her father’s principle: newspapers exist to tell the truth. “Let’s publish,” she said, then hung up. 

3. Don’t Care What They Think: Nine months into Watergate, the Post was still the only major paper digging. Everyone thought they were wrong. The Chicago Tribune and other major media outlets openly mocked them. The administration went after the Post, causing the stock to crash 45%. The President of the United States targeted their TV licenses. The Post’s lawyers begged them to stop. Katharine kept going. The rest is history. 

4. Bounce, Don’t Break: The pressmen destroyed equipment, beat a foreman unconscious, and walked out. They expected Katharine to fold. After all, what choice did she have if she wanted to print papers? But Katharine had been preparing for months, training replacements and arranging backup presses. When picketers blocked trucks, she hired helicopters. While they marched outside, she worked the mailroom floor. It lasted 139 days before she won. 

5. Find a Teacher: Warren Buffett bought 5% of her company without asking. The board panicked. Katharine ignored them. She met Buffett herself, saw his genius, and made him her professor. He’d bring 20 annual reports to board meetings, teaching her line by line. She was humble enough to know she didn’t have all the answers and smart enough to know who to listen to. 

6. Freedom With Transparency: Ben Bradlee got total editorial freedom. The only rule? No surprises. He could fight presidents, spend millions, and pursue any story in the public interest. She never questioned his judgment. He never blindsided her. Result: Pentagon Papers, Watergate, 18 Pulitzers. Maximum freedom requires maximum transparency.

7. Step Off the Edge: “What I essentially did was to put one foot in front of the other, shut my eyes and step off the edge.” That’s how Katharine described taking over the Post. There was no grand strategy, no master plan. Just the next step. Eight years later, she was staring down presidents. You’ll never feel qualified for what matters. Step anyway.

8. Decades Over Quarters: Wall Street wanted quarterly earnings and exciting acquisitions. Katharine wanted to create a company that would last. She went against their wishes, buying back stock when it was cheap (and it was very uncommon to do so), and acquiring a “boring” education company, Kaplan, which would eventually generate more revenue than the newspaper. She was a public company but operated it like a private one. 

9. Keep the Main Thing the Main Thing: Katharine faced constant pressure to choose: profits or principles, safety or stories, shareholders or journalism. The Pentagon Papers could have killed the IPO. Watergate bled millions in legal fees and threatened their television licenses. The pressmen’s strike threatened operations. Every crisis offered an excuse to compromise but she never took it. The Post’s mission to hold power to account stayed the main thing. She proved what others deny: when you keep the main thing the main thing, everything else follows. Principles aren’t an expense. They’re your compass.

10. Keep Your Word: When Nixon came after the Post with the full force of the executive branch (challenging TV licenses, crashing their stock, and threatening prison), Katharine never wavered. She’d told her reporters to keep digging, and she meant it. When prosecutors demanded their notes, she took them home herself. If anyone went to jail, it would be her. Not them. For nine months, while other papers stayed silent and friends begged her to stop, she kept her word. The President of the United States couldn’t make her break it. Most leaders fold under pressure. She knew something they didn’t: your word is all you have. Once broken, it’s worthless forever.

References

Image source: https://www.iwmf.org/community/katharine-graham/

Wikipedia and Wikimedia Commons

• Agnes E. Meyer. Wikipedia. https://en.wikipedia.org/wiki/Agnes_E._Meyer
• Eugene Meyer (financier). Wikipedia. https://en.wikipedia.org/wiki/Eugene_Meyer_(financier)
• Katharine Graham (image). Wikimedia Commons. https://commons.wikimedia.org/wiki/File:Katharine_Graham_927-9432_(cropped).jpg
• Artists at Mount Kisco, 1912. Wikimedia Commons. https://commons.wikimedia.org/wiki/File:Artists_at_Mount_Kisco_1912-restored.jpg
• Phil Graham, 1961. Wikimedia Commons. https://commons.wikimedia.org/wiki/File:Phil_Graham,_1961.jpg
• Portrait of Eugene Meyer. Wikimedia Commons (Esperanto). https://eo.m.wikipedia.org/wiki/Dosiero:Portrait_of_Eugene_Meyer.jpg

YouTube Videos

• https://www.youtube.com/watch?v=m0Pb5tqX7e4
• https://www.youtube.com/watch?v=5RPYu9Y8KLE
• https://www.youtube.com/watch?v=NAlvkQCDS9g
• https://www.youtube.com/watch?v=nrXlY6gzTTM
• https://www.youtube.com/watch?v=x4F5gIWS_Is
• https://www.youtube.com/watch?v=IHnmriyXYeg&t=16s

News & Media Articles

• Axios. “Watergate Latino Break-In Anniversary.” https://www.axios.com/2022/06/16/watergate-latino-break-in-anniversary
• Baltimore Sun. “How Katharine Graham Stood Tall for Journalism.” https://www.baltimoresun.com/2017/12/25/witcover-the-post-reveals-how-katharine-graham-stood-tall-for-journalism/
• CBS News. “Watergate at 50.” https://www.cbsnews.com/news/watergate-at-50-the-political-scandal-that-changed-washington/
• CBS News. “Warren Buffett on Katharine Graham.” https://www.cbsnews.com/news/warren-buffett-on-legendary-washington-post-publisher-katharine-graham/
• Chicago Tribune. “Diet Advice from Warren Buffett.” https://www.chicagotribune.com/2015/02/26/diet-advice-from-warren-buffett-maybe-not/
• CNN. “Warren Buffett is Bullish on Women.” https://www.cnn.com/2013/05/02/us/warren-buffett-is-bullish-on-women
• Forbes. “Warren Buffett Profile.” https://www.forbes.com/profile/warren-buffett/
• The Guardian. “Ben Bradlee: The Newspaperman.” https://www.theguardian.com/tv-and-radio/2017/dec/04/ben-bradlee-the-newspaperman-hbo-documentary-nixon-washington-post
• The Guardian. “The Magician by Colm Tóibín – Review.” https://www.theguardian.com/books/2021/sep/17/the-magician-by-colm-toibin-review-inside-the-mind-of-thomas-mann

Other Online Articles

• Clifford Ribner. “Who Killed JFK?” https://cliffordribner.com/who-killed-jfk/
• CJR. “The Fabulist Who Changed Journalism.” https://www.cjr.org/the_feature/the_fabulist_who_changed_journalism.php
• Deano Beidallah. “Far Bigger and Worse.” https://deanobeidallah.substack.com/p/this-actually-is-far-bigger-and-worse
• Genetic Literacy Project. “Einstein’s Stolen Brain.” https://geneticliteracyproject.org/2022/08/11/exploring-the-history-and-mystery-of-einsteins-stolen-brain/
• IWMF. “Katharine Graham.” https://www.iwmf.org/community/katharine-graham/
• Pophistorydig. “Pentagon Papers.” https://pophistorydig.com/topics/pentagon-papers-1967-2018/
• Spiegel.de. “Historische Fake News.” https://www.spiegel.de/geschichte/historische-fake-news-die-groessten-zeitungsenten-a-1166379.html
• The Weekend Investor. “Becoming Berkshire: 1973, Part 3.” https://theweekendinvestor.substack.com/p/becoming-berkshire-1973-part-3-the
• UT Austin Ransom Center. “Ben Bradlee Archive.” https://sites.utexas.edu/ransomcentermagazine/2015/06/03/ben-bradlee/

Books

• Personal History by Katharine Graham. 

Archives & History

• Archive.org. https://archive.org/details/mdplflaro201710240012
• Archive.org. https://archive.org/details/NewspaperSto
• Archive.org. https://archive.org/details/l9jYAgxntdeCMRSOuz2d8xCq6Uzg5T
• MtWelby.com. “History of Mount Welby.” http://mtwelby.com/history_of_mount_welby

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We discuss how to think clearly in a world full of noise, the invisible forces that cloud our judgement, and why more information doesn’t equal better thinking. Kahneman also reveals the mental model he discovered at 22 that still guides elite teams today. 

As we revisit this conversation this summer, I also share a previously untold story in the introduction about how a small, seemingly insignificant moment in his NYC penthouse changed my life. 

11 Key Takeaways from my conversation with Daniel Kahneman

1. Delay Your Intuition: At 22, Kahneman redesigned the Israeli army’s interview system. The old way relied on gut feelings about recruits, and it failed badly. His fix: make interviewers score six specific traits separately, write each score down, then after completing all six scores, close their eyes and give an overall intuition. The interviewers revolted. “You’re turning us into robots,” one complained. But when they tested the new system, it worked dramatically better. That “close your eyes” instruction survived in the Israeli military for 50 years. Most people form an impression in seconds and spend the rest of their time confirming it. The best wait for all the information before letting their intuition speak.
2. Loss Aversion Creates Permanent Programs: When you own something, losing it hurts twice as much as getting it felt good. Once people have a benefit, you can’t easily remove it. When you try, they fight like crazy. The 100 people losing a government subsidy scream louder (and organize better) than the million paying for it. That’s why the government only grows. Every program creates fierce defenders. Nobody fights as hard for lower taxes. Once you give people something (a perk, a feature, a benefit), it’s nearly impossible to take back. The founder who would offer free lunch on day one can’t cancel it on day 1000. Small groups lose something specific, while large groups gain something abstract. Every time.
3. Your Rules Become Your Default: Kahneman’s phone rang during the interview. Someone wanted a book review. “My rule is I never say yes on the phone,” he said. This wasn’t about being difficult. Danny was human just like us, he often said yes to things he didn’t want to do. So he created a rule. Not a goal, not an intention, a rule. It reprogrammed his unconscious mind and turned his desired behavior into his default behavior.
4. Facts Don’t Form Beliefs: “I believe in climate change,” Kahneman said. “I believe in the people who tell me there is climate change. The people who don’t believe in climate change, they believe in other people.” This is how we form all beliefs. We don’t examine evidence and reach conclusions. We trust people we like, then adopt their views. “The reasons are not the causes of our beliefs,” he explained. They’re stories we tell ourselves afterward. Want to change someone’s mind? Facts won’t do it. They need to trust you first. If they admire you, they’ll find reasons to agree. If they dislike you, the best evidence won’t matter. Smart people believe opposite things because they trust different people.
5. The Julia Fallacy: You have the following information. Julia is graduating college. She read fluently at age four. What’s her GPA? You just thought of something around 3.8, and Kahneman knew you would. Here’s why: a four-year-old who reads fluently seems exceptional, maybe 90th percentile. So your brain assumes 90th percentile everything. “It’s idiotic statistically,” he said. Early reading barely predicts college performance. Doesn’t matter. We can’t help ourselves. Stellar interview means stellar employee. One bad presentation means the person can’t teach. Our predictions match our impressions, even when they shouldn’t.
6. Winners Want the Score, Not the Prize: Why do billionaires work 80-hour weeks? “They’re clearly not doing this because they need more money,” Kahneman observed. At that level, money becomes proof that you’re good at what you do. His research found that past $70,000, extra money doesn’t make you emotionally happier, it just makes you more satisfied with your life. And these are completely different things. Happiness is social, it’s being with people who love you. Satisfaction is conventional success: money, prestige, achievements. The tragedy? “People don’t seem to care about how happy they’ll be. They want to be satisfied with their life.” We optimize for the story we’ll tell, not the life we’ll actually live.
7. Behavior Is Situation, Not Personality: When someone acts like a jerk, “look at the situation they’re in,” Kahneman advised. We instinctively blame personality. Psychologists call this the fundamental attribution error. When others speed, we think they’re reckless. When we speed, we know we’re late for something important. “People do good things for a mixture of good and bad reasons, and they do bad things for a mixture of good and bad reasons.” The kindest person will snap under enough pressure, and the worst person will help when the conditions are right. Change the environment, change the behavior.
8. Algorithms Beat You Every Time: “If you can replace judgements by rules and algorithms, they’ll do better,” Kahneman said. Not sometimes, always. We trust our judgment and value human insight, but we’re consistently wrong about this. The real problem is that we prefer confident, intuitive leaders to analytical ones. “People want leaders who are intuitive,” Kahneman observed. We choose the leaders who make us feel good about ourselves, not the ones who make good decisions.
9. Wherever There’s Judgment, There’s Noise: An insurance company asked Kahneman to test their underwriters. Same exact cases, same information, 50 different people. The executives expected maybe 10% variation in quotes. The reality shocked them: 50% variation. One customer gets quoted $10,000, another gets $15,000 for the exact same coverage. “Wherever there is judgment, there is noise, and more of it than you think,” he said. The solution is simple: use algorithms or structured procedures. But companies would rather live with expensive chaos than admit their experts disagree with each other.
10. Legitimize Doubt: Before making a big decision, Kahneman recommended this technique: gather your team and say, “It’s two years from now. We made this decision and it was a disaster. Write down what went wrong.” He loved this because timing is everything. “When people are coming close to a decision, it becomes difficult to raise doubts,” he explained. Anyone slowing things down becomes the enemy. The premortem flips this dynamic, it doesn’t just allow dissent, it requires it. It won’t prevent every mistake, but it forces you to face the problems everyone’s trying to ignore.
11. Clear Intuitions Fool Experts: Experts see all the options. You don’t. When economists design policies or product managers add features, they imagine users comparing every possibility. But you take a job and forget the others existed. You buy a house and stop thinking about the ones you passed on. Life isn’t a menu where you see all choices side by side, it’s one door closing as another opens. “They are completely lost between clear intuitions and strong intuitions,” Kahneman said. The expert thinks small differences matter because they can see them all. You can’t see them, so they don’t. That’s why economists botch predictions and why your phone has 50 features you’ve never touched.

Episode Art photo credit: Richard Saker/The Guardian

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What Schwab discovered will change how you think about business.

Available Now: Apple Podcasts | Spotify | Transcript

13 Lessons from Les Schwab:

1. Get the Incentives Right: Les gave store managers 50% of profits but made them keep every penny invested until their stake equaled his. “If I share half but the store is more successful, my half is worth more than my whole used to be.” By locking in their wealth, he ensured they’d think long-term. They couldn’t cash out until they’d created real value. No manager ever quit. Every store exploded. The magic wasn’t just win-win profit sharing, it was ownership. When people can only get rich slowly, they tend to build things that last.

2. Bet on Yourself: At 34, Les sold his house, borrowed against his life insurance, and scraped together $11,000 to buy a failing tire shop with no running water. He’d never changed a tire. His competitors had decades of experience. But Les had something they didn’t: no backup plan. When failure means ruin, you find ways to win that comfortable people never discover. One year later, he’d quintupled revenue. Half-measures guarantee half-results.

3. High Agency: Everything is your job. Les bought his first tire shop, having never fixed a flat. Day one: A customer needs tires mounted. Les fumbles with hand tools on cold concrete, making a complete mess until his employee arrives and saves him. Instead of hiding behind “that’s not my job,” Les insisted on being taught immediately. You don’t need permission. Just start and improve quickly.

4. Go Positive, Go First: Les gave free flat repairs to anyone, customer or not. Competitors called him crazy. Why fix flats for people who bought tires elsewhere? But Les understood reciprocity: humans are biologically wired to return favors. Those free repairs converted more customers than any ad campaign ever could. Most businesses demand payment before delivering a service. Les reversed it. Give first, without keeping score, and the universe will do most of the work for you.

5. Dark Hours: Every morning before dawn, teenage Les ran his paper route. Not biked. Ran. For two months, he sprinted through dark streets on foot, saving for a bicycle. While classmates slept, he delivered. By senior year, he owned all nine routes in town and out-earned his high school principal. The hours nobody wants compound into the life everybody wants.

6. The Work Is the Way: Les wrote: “Life is hard… for the man who thinks he can take a shortcut.” He ran paper routes on foot before he could afford a bike. He learned every job in his stores from the ground up. He paid cash for every expansion rather than borrowing for speed. The work is the shortcut.

7. Invert the Hierarchy : Les paid store managers more than executives, including himself. “Too many corporations think all the brains are in the main office. The truth is that success is at the other end.” He told people: if headquarters executives ever out-earned the best store managers, the company would die. Most businesses worship the office and exploit the front line. Les worshipped the front line and made the office serve them.

8. Stay Paranoid: Les warned his managers: “If we become complacent, brother it’s all over with.” He saw it starting to creep in. Success sows the seeds of its own destruction. It takes a lot of vigilance and effort to stamp out complacency.

9. You Can’t Make a Good Deal with a Bad Person: Les learned this early: “A handshake deal with Pleas Brown is better than a long contract with most any man.” No contract can create trust. The wrong person will find loopholes in any agreement. The right person doesn’t need one.

10. Ride the Wave: Charlie Munger spotted Les’s secret: “The Japanese had a zero position in tires, and they got big. So this guy must have ridden that wave.” While competitors stayed loyal to American suppliers who screwed them on price, Les partnered with hungry Japanese manufacturers who needed distribution. When you get the trend right, you can make a lot of mistakes.

11. Lead, Don’t Follow: Les told his wife, “There was a better way to do business, and I had to explore my own ideas, even though it was going to make my life more complicated.” He could have stayed a franchise owner, followed their rules, and collected safe profits. But something in him wanted to lead, not follow, to play by his rules, not theirs.

12. Your Name Is Your Business: In the 1960s, Les ripped down every Goodyear and Firestone sign from his stores. Insane move. Those signs meant manufacturer support and co-op advertising dollars. But Les bet customers bought from people, not brands. Within a decade, “Les Schwab” meant more than any tire brand in the Northwest. He turned his name into a promise.

13. Think in Decades: Investment bankers waved billion-dollar offers at Les. He refused them all. “What would I do with the money?” The real reason: buyers would “fix” his upside-down pay structure where store managers out-earned executives because they didn’t understand why it worked. Some things are worth more than money.

The post [Outliers] Les Schwab: Why Real Ownership Outperforms Experience, Capital, and Credentials [The Knowledge Project Ep. #237] appeared first on Farnam Street.

Featured clips

00:48

Living With Unreasonably High Standards

02:18

Generational Trauma and Family Relationships

15:50

Prioritizing In Life And Becoming World-Class

25:48

Requalifying For Your Job

31:09

Mindset for Professional Growth and Success

What does it mean to live – and lead – with intention? 

Shopify President Harley Finkelstein explores what happens when you treat every role in your life—father, husband, leader—as something you have to requalify for, every single year. 

It’s a candid look at ambition, identity, and the challenge of holding yourself to a higher standard—everywhere it counts.

Available Now: YouTube | Apple Podcasts | Spotify | Transcript

Key Takeaways

1. Outcome Over Ego: Harley managed thousands of people as COO at Shopify. “There was a little bit of ego in there,” he admits. “I felt very important.” But it wasn’t natural. In 2021, he stepped down to become president with a significantly smaller team. To outsiders, it seemed like a demotion. Within weeks, his energy exploded. The company started growing even faster. He went from managing many things adequately to doing one thing exceptionally. The best never choose titles over impact.

2. Don’t Care What They Think: “I can’t be everything to everyone,” Harley says. “I kind of made peace with it years ago.” He’s particular about who he spends time with. Some people are energy vampires. Others are energy catalysts. He only makes time for catalysts. While others bend over backwards to organize their lives around pleasing everyone, he organizes his life around his priorities. The cost of trying to please everyone is disappointing yourself.

3. Find a Good Co-Pilot: “Most people need someone else to help them pull up to the next level,” Harley says about his partnership with Tobi Lütke. For 16 years, Tobi has seen a better version of Harley than he saw in himself. When Harley thinks he’s peaked, Tobi shows him another gear. No coasting. They’re opposites. Tobi builds products. Harley tells stories. Together, they built a company worth over $100 billion. While some people can push themselves to greatness alone, most need a partner who won’t let them settle. The right partner unlocks everything. The wrong one kills everything.

4. Find a Model to Emulate: Before getting married, Harley and Lindsay identified couples with great marriages. Then they scheduled double dates. They observed. How did these couples argue? How did they repair? “We ended up developing these relationship mentors,” he says. They never told them. They just watched and learned. Most people learn by failing. Smart people learn by watching.

5. Embarrassment is the Entry Fee: Harley’s first interview was painful. His eight-year-old daughter has it memorized. She’s also seen his recent ones where he commands the conversation. “Getting really, really comfortable with being uncomfortable is magic,” he says. He watches every single one back, obsessing over improvements. As Charlie Munger said, “You have to rub your nose in your mistakes.” Most people hide their mistakes. Harley analyzes his. Guess who improves faster.

6. Obsession Beats Talent: “(the best) entrepreneurs just simply out-care other people,” Harley says. You can’t beat someone who cares more than you. They work harder. They work longer. They work smarter. Most people reach “good enough” and stop. The obsessed never stop. That’s why they win.

7. High Agency: “High agency is someone who sees a problem and says, ‘I’m going to fix it’ and then fixes it themselves,” he says. No committees. No permission. Just solutions. Life happens to most people. High-agency people happen to life.

8. Calendar Your Priorities: Harley meditates eight minutes daily. It’s calendared. So are walks with his wife Lindsay, family time, and thinking blocks. Everything is color-coded. Purple means social dinners. One per week maximum. As I like to say, show me your calendar and I’ll show you your priorities. Most people say one thing and do another. The system or record is how you spend your time, not what you say.

9. Adapt or Die: “If you’re not using AI reflexively, you’re in trouble,” Tobi wrote to all of Shopify. Every year, the bar rises. What qualified you last year won’t qualify you this year. A lot of people dabble in AI. Harley jumps in. He uses it for health tracking, speech analysis, and detailed research. Environments change. You either change faster or get replaced by someone who does. At Shopify, everyone must requalify for their job annually. The standard keeps rising. Keep up or get out.

The post Harley Finkelstein: You Must Requalify for Your Role—Every Year [The Knowledge Project Ep. #236] appeared first on Farnam Street.

He’s built it over 63 years without outside capital or a college degree. He owns 100% of car dealerships, billboards, radio stations—even Ripley’s Believe It or Not—with a philosophy of: “No partners, no shareholders, no relatives.”

This episode is based on Jimmy: An Autobiography by Jim Pattison and Paul Grescoe.

Available Now: Apple Podcasts | Spotify | Transcript

11 Lessons from Jimmy Pattison

1. Reputation is Trust: When Jimmy’s father’s car dealership failed in 1929, bankruptcy was the obvious choice. Instead, he spent twenty-five years paying back every penny while working as a mechanic and laborer. Jimmy watched his father make those payments decade after decade. The payoff? When Jimmy needed a $40,000 loan to start his own dealership, banker Harold Nelson looked past his thin balance sheet to his reputation. Most people think reputation is about being liked. Pattison learned that it’s about being trusted, and trust takes decades to build, seconds to destroy.
2. Bounce, Don’t Break: Most people see the first obstacle as the final no; Jimmy saw it as a wall to bounce off. When his newspapers became worthless at 7 AM because of the radio, he didn’t dump them; he rebranded them. When CIBC called his loans with 60 days’ notice, he didn’t panic; he bluffed. The lesson isn’t avoiding failure. It’s refusing to let failure define the outcome.
3. Be a Learning Machine: At an age when most start to wind down, Jimmy flew to Japan and discovered his entire business philosophy was wrong. Toyota spent $31 on warranty repairs per car; GM spent $331. One boy’s comment about his Japanese bicycle triggered a complete overhaul of the operation. Don’t defend outdated methods; abandon them immediately when something better comes along.
4. Cash Flow is Religion: While others chased growth, Jimmy worshipped cash flow. He pioneered car leasing not for the margins but for the guaranteed return business. When evaluating Neon Products, he valued the forward contracts more than others. Every empire needs a foundation. Cash is king.
5. The Prison of Public Markets: After building Neonex into a high-flying public company that reached $45 a share, Jimmy bought it all back at $3 per share. His new philosophy: “No partners, no shareholders, no relatives.” Public companies optimize for quarters; private companies optimize for decades. 
6. Bet On Yourself: Pattison continuously took daring risks and bet on himself. He leapt to buy his own dealership, leveraging up and going all in on himself. He cold-called a big-time Wall Street banker and said, with nothing but chutzpah, “My name is Jimmy Pattison. You don’t know me… I want to build a Canadian conglomerate.” Pattison didn’t have all the answers, but he did have a belief he’d figure it out one step at a time. The gap between where you are and where you want to be is bridged by action.
7. Move in Silence: Jimmy executed Western Canada’s first hostile takeover because Arthur Christopher didn’t know who was buying his shares. When he found out, he simply said, “Jesus Christ! The guy only lives two miles from me”. In negotiations, what matters isn’t what you know. It’s what the other side doesn’t know you know. 
8. Brutal Clarity Beats False Kindness: Every month at Jimmy’s dealerships, whoever sold the fewest cars got fired. No exceptions, no negotiations. Sounds cruel? Jimmy saw it differently: “They were never going to be successful at selling cars, so why shouldn’t they cut their losses and become mechanics or teachers?” Everyone knew the rules when they signed on. Like Reed Hastings at Netflix, Jimmy treated business like a professional sports team where only the best players stay on the field. The paradox: His “ruthless” clarity created more loyalty than managers who strung people along with false hope.
9. Pick the right Co-Pilot: Picking the right partner means avoiding the wrong ones. Dan McLean offered Jimmy 25% ownership with one catch: partnering with McLean’s son-in-law. Jimmy’s response was instant: “I wouldn’t be interested.” A month later, he was fired. The lesson? Bad partnerships don’t just slow you down, they kill your future.
10. Autonomy is the Best Teacher: Jimmy’s education came from being left alone to figure it out. Dan McLean gave him complete freedom to run a dealership: “You’re my servant, I’m your boss,” but never interfered. Like Anna Wintour at Viva, Pattison took a lesser position for greater control. The best mentors often teach by letting you learn.
11. Unreasonable Standards: Pattison is known for expecting a lot from his people. He fired underperformers, ruthlessly cut costs, and insisted on his vision. Yet he also inspired loyalty by working as hard as anyone, rewarding those who succeeded, and being clear and direct in his communications.

The post [Outliers] Jimmy Pattison: Building a $16B Empire Without Connections, Capital, or Credentials [The Knowledge Project Ep. #235] appeared first on Farnam Street.