Chapter 88 - Never Enough: From Barista to Billionaire
Today’s Chapter is based on the book “Never Enough: From Barista to Billionaire” by Andrew Wilkinson.
Andrew Wilkinson is the co-founder of Tiny, a publicly traded company that has been called a “Berkshire Hathaway, but for internet companies”.
Here’s what I have learned:
Entrepreneur Mindset
"A wise man will make more opportunities than he finds.”
— Francis Bacon
In a recent podcast, Mohnish Pabrai mentioned that when he looks at a CEO, he tries to find out if they ran a lemonade stand when they were 12. He explains, “Because if they didn’t run the lemonade stand when they were 12, they’re not going to be that great a business at 30.” As we have studied a lot of successful entrepreneurs in the past on Biography Nuts, you will also notice that it is a common trend to have an entrepreneur mindset at a young age.
Andrew Wilkinson, the co-founder of Tiny, is another one who exhibited an intense drive and entrepreneurial spirit from a very young age. When Wilkinson was only eleven years old, he started going to Simply Computing, a rundown Mac store where he started acting as a salesman at the store. His sole goal was to convert customers to buy a Mac instead of a PC. Since he was so knowledgeable about Macs, he was able to get his first real job at the age of twelve to teach a customer how to use a Mac.
By the time Wilkinson was in middle school, he was running the website MacTeens along with other Apple teenagers enthusiasts, where they shared daily reviews and news about technology products. Reviews were actually an ingenious way for Wilkinson to obtain free tech products that he would of never been able to afford. Wilkinson was notoriously a Steve Jobs fanatic. He explained that he slept next to a dog-eared copy of “The Journey is the Reward”, a biography of Jobs and that when asked to write a letter to his future self, he confidently predicted that, by 2035, he would be running Apple Computer.
Even though Wilkinson’s prediction didn’t end up happening, this early entrepreneurial experience helped Wilkinson build an innate ability to identify opportunities gap which would become a valuable asset to him. As a matter of fact, Wilkinson started his first truly successful business Metalab after seeing two individuals making websites at the coffee shop he was working at. He then leveraged the cash flow earned from Metalab into building other businesses as he had developed a mindset to be always on the lookout for the next opportunity from an early age.
“By the time I was in my early twenties and running my own company, I scratched business ideas on scraps of paper sprinkled around my office and in the margins of books.”
— Andrew Wilkinson
Not before long, Wilkinson and his partner Chris Sparling created Tiny, their own investment vehicle where they strategically acquire technology businesses that are often overlooked due to their boringness. Here’s how Sparling explains Tiny’s business strategy, “Before long, we were buying up technology businesses. Not the kind favored by venture capitalists, the kind of companies some people would perceive as boring. We like to joke that we own the dry cleaners and auto dealerships of the internet. Simple, profitable businesses that do something the world needs, purchased at a fair price.”
This concept of having to develop this innate ability to find opportunity gaps in business from a young age reminds me of the story of Lui Che-woo. As we have learned, Lui first started his business career at the early age of 13. He quickly understood a basic principle of running businesses: “focus on observation and seek opportunities from the real environment.”
As a matter of fact, he started selling snacks due to a simple rationale after a long period of observation and deep thought: “the food business is a lifelong endeavour. No matter how difficult life gets, people still need to feed themselves.”
Despite his young age, he had a competitive advantage compared to his competitors: he had a keen observation of society and life. This allowed the young Lui to find the perfect location to reach his customers and to resell peanuts; “The fact that he decided to peddle peanuts was based on what he had observed. There were many people trying to return to their homes in Mainland China now that the war had come to Hong Kong. The queue to apply for travel documents would invariably be long. Lui knew that the people waiting in line would want to snack on something, such as peanuts. So demand gave birth to his business.”
“We need to understand what people and the society need, and then we find ways to meet their needs,”
— Lui Che-woo
Furthermore, when he was running his snack business, Lui enjoyed walking back and forth through Shanghai Street where shop owners sold grains and groceries on the street. Lui’s purpose was to study how shop and stall owners ran their businesses and to learn about their success formula through deep observation.
Learning From Mentors
“If I have seen further than others, it is by standing upon the shoulders of giants.”
— Isaac Newton
The influence of mentors played a crucial role in Andrew Wilkinson’s development as an entrepreneur. Based on the book, Wilkinson’s biggest mentors are his father, Steve Jobs, Warren Buffett and Charlie Munger.
As a matter of fact, from a young age, his father’s teachings resonated deeply with him, particularly the concept of intellectual curiosity and the importance of money. As a child, Wilkinson’s father used family dinners to teach his children about the world. He would often make a statement and ask his children to take the other side and to debate him or vice versa. This certainly helped Wilkinson to see the world in different perspectives which is crucial in entrepreneurship.
His father also taught him various finance concepts such as compound interest. His father once told him, “if you saved and invested just $5 a day…you’d be a millionaire by the time you’re fifty.”
Furthermore, I believe that Andrew Wilkinson’s biggest role model and mentor is Charlie Munger. In fact, Wilkinson once said, “When Chris and I started our company, Tiny, we had said that if we could pick just one person that we’d want to meet it would be Charlie Munger.” As such, when Munger asked Andrew and his partner Chris to merge Tiny with the Daily Journal Corporation and to run the combined companies as the CEO, it was surely an unreal feeling for him.
Wilkinson’s admiration to Buffett and Munger is evident. He knew everything about them from how they first met at a dinner party to how they became fast friends and eventually business partners at Berkshire Hathaway. He has ready every book about them and could recite all of their quotes. He explains that, “These weren’t just one-liners that meant nothing to him; they meant everything. They were formulas and strings and values to live by that could reap an ever-compounding 1,800,000 percent return on your investment.”
"I could tell you the companies Munger and Buffett had acquired in any order: by revenue, industry, or alphabetically: Acme Brick Company, Benjamin Moore, BNSF Railway, Dairy Queen, Duracell, Fruit of the Loom, GEICO... I could keep going, but you get the point. If there was a version of Jeopardy! just about Munger and Buffett’s holdings, I’d be the contest’s Ken Jennings."
— Andrew Wilkinson
As such, it wouldn’t be surprising to know that Wilkinson and his partner Chris Sparling has built Tiny with a business model and investment approach eerily similar to their role models Charlie Munger and Warren Buffett. Funnily enough, we have learned previously how both Munger and Buffett are known to learn from others. As a matter of fact, life is way too short to learn everything on your own, and that’s without saying how much pain we can avoid by learning from mistakes of others instead of committing them ourselves.
As Charlie Munger once said, “I believe in the discipline of mastering the best that other people have ever figured out. I don’t believe in just sitting down and trying to dream it all up yourself. Nobody’s that smart.”
In the case of Charlie Munger, he loved to read biographies as it is a great way to learn from the masters of each disciplines. Here’s how he explains it:
“I am a biography nut myself. And I think when you’re trying to teach the great concepts that work, it helps to tie them into the lives and personalities of the people who developed them. I think you learn economics better if you make Adam Smith your friend. That sounds funny, making friends among the “eminent dead,” but if you go through life making friends with the eminent dead who had the right ideas, I think it will work better for you in life and work better in education. It’s way better than just giving the basic concepts.”
— Charlie Munger
Similarly, Buffett’s investing strategy was inspired by Benjamin Graham’s value investing. According to Buffett, he took three main principles from Benjamin Graham’s investment philosophy:
A stock is the right to own a little piece of a business. A stock is worth a certain fraction of what you would be willing to pay for the whole business.
Use a margin of safety . Investing is built on estimates and uncertainty. A wide margin of safety ensures that the effects of good decisions are not wiped out by errors. The way to advance, above all, is by not retreating.
Mr. Market is your servant, not your master . Graham postulated a moody character called Mr. Market, who offers to buy and sell stocks every day, often at prices that don’t make sense. Mr. Market’s moods should not influence your view of price. However, from time to time he does offer the chance to buy low and sell high.
What’s Your Number?
“Money is a terrible master but an excellent servant.”
— P.T. Barnum
As one of the core theme of the book, Wilkinson reflects on how important it is to question oneself on how much money is enough. In fact, he explains that when he encountered wealthy individuals, he often asked how much wealth would be enough (or what he called “What your number?”), and everyone, “irrespective of where they sat on the pecking order of success, answered the question in almost the exact same way: they would be happy if only they were able to ‘double’ what they already had.”
Unfortunately for Wilkinson, he was also under the illusion that money would bring him happiness. As a matter of fact, due to his parents’ financial situation, Wilkinson was driven by this relentless pursuit of wealth and desire for financial independence. He explained that one time after he heard his parents’ fighting due to money, "I walked out of my room and just sat on the stairs. I looked at the family photos that lined the stairwell, and as I felt the mood in our home turn sour, I decided then and there that I would make enough money that finances would never be a problem for me or my brothers or my mother and father—and especially for my future family.”
This was further highlighted by the fact that his father was always challenging him to pursue higher goals by asking him “What’s next?”:
"Dad was constantly encouraging me to start little businesses. When I started a lemonade stand and told him, proudly, about how I’d raked in $ 40, he asked me, “What’s next?” I’d looked at him, perplexed. “Okay, think about it, let’s say you make $ 10 an hour selling lemonade. That means you could pay another kid $ 5 an hour, have them run the stand, and then use your profits to go start another one. And another. And another.”
— Andrew Wilkinson
However, Wilkinson realized how this relentless pursuit of financial success often lead to, ironically, unhappiness. In fact, he found out that most wealthy people who are happy are those that live in simplicity and humility. Charlie Munger, according to Wilkinson, is a perfect example of how the pursuit of knowledge and the joy of learning can far outweigh the pleasures of material possessions. Wilkinson on Charlie Munger once said, “Over the years, I’ve met people who pretended not to care about their wealth... but it seemed that he truly didn’t care about any of the luxuries.”
“Though the homes on this street were worth millions, you wouldn't think this of his particular home, a modest single-story bungalow, barely taking up three thousand square feet within its exterior walls. It was whitewashed stucco with a terra-cotta tile roof typical of the neighborhood. A simple path of stepping stones led from the sidewalk to the double front door, which was painted a cheerful yellow and featured an old-fashioned brass door knocker. The front yard was small, with just enough room for a few rosebushes and a single palm tree swaying gently in the breeze. An old-fashioned white picket fence surrounded the perimeter. Clearly, Munger had opted to keep things simple.”
— Andrew Wilkinson
This reminds me of how we have previously learned from Henry Ford that a business, similar to a person, should have a larger purpose than just making money. As he once said, “A business absolutely devoted to service will have only one worry about profits. they will be embarrassingly large.” According to Henry Ford, businesses exist to provide services. In fact, after working in business for so many years, he came to these three conclusions:
(1) That finance is given a place ahead of work and therefore tends to kill the work and destroy the fundamental of service.
(2) That thinking first of money instead of work brings on fear of failure and this fear blocks every avenue of business—it makes a man afraid of competition, of changing his methods, or of doing anything which might change his condition.
(3) That the way is clear for any one who thinks first of service—of doing the work in the best possible way.
As such, Ford reminds us to not be too greedy for money when running a business, as that is the surest way to not get any. He believes that when one focuses on providing great services, then money will abundantly takes care of itself. As he once said, “For the only foundation of real business is service.”
He explains that “The most surprising feature of business as it was conducted was the large attention given to finance and the small attention to service. That seemed to me to be reversing the natural process which is that the money should come as the result of work and not before the work. The second feature was the general indifference to better methods of manufacture as long as whatever was done got by and took the money.”
“ It is the function of business to produce for consumption and not for money or speculation.”
— Henry Ford
Beyond the Book
Read "Standing on the Shoulders of Giants" by Farnam Street