What does it take to strike it rich in Silicon Valley? I’ve had the opportunity to work closely with dozens of self-made millionaires and interview a few folks who have amassed wealth that might have been counted in the hundreds of millions of dollars — and one or two who had catapulted into the billionaire range.
How did they get there? They each had their own paths. For some, amassing wealth was an explicit aim. For others it was just an external validation of the value they’d created. Some hardly noticed; they were doing what they were doing and kept doing it, and then one day they woke up rich and realized they’d done what they set out to do and didn’t know what to do next.
Each successful person I ever spoke with had some set of principles, theories or a “mentality” to which they attributed their success. Whether it actually guided them as they made their money or whether it was a view they adopted to explain their wealth afterward is difficult to know. But when the rich speak on how to make money, one is apt to listen.
Here’s what I’ve learned about the super successful here in Silicon Valley:
Michael Moritz is one of the most successful venture capitalists of the past two decades. He backed PayPal, Yahoo, Zappos and Google while working for Sequoia Capital. I wrote extensively about his firm while a journalist for Reuters and frequently reported on subjects his firm might have preferred to keep private.
Whenever I wrote an email to Moritz I got a response, usually within a couple of hours. He didn’t have to respond to me at all, let alone respond with alacrity. Indeed, he was alone among his peers in the speed of his email responses.
Speed was a discipline that he pushed within Sequoia Capital, and it helped keep the firm on the cutting edge of early stage investing. It worked particularly well when two burgeoning entrepreneurs walked into the firm’s offices on a Thursday afternoon pitching a product that sounded promising: a platform for sharing videos online.
The Sequoia partners, including Michael Moritz, liked what they heard. Instead of dithering on a decision, the Sequoia team moved quickly and worked over the weekend with lawyers and the startup founders to get a deal done. On Sunday the ink was dry, and Chad Hurley and Steve Chen walked out of Sequoia’s offices with $3.5 million to put toward the development of YouTube.
Silicon Valley is a place that prides itself on moving quickly, but Sequoia’s speed was lightning fast. Most deals take weeks to get done. The team at Sequoia moved in days and worked over the weekend to get it done. They profited handsomely when YouTube sold to Google for $1.65 billion.
The rich move fast, and it helps them make even more money.
The rich move fast because they’re able to ignore the non-essentials and focus on what they do best. They recognize that time is the only commodity they can’t acquire more of. If they want to become more successful, they have to constantly search for ways to maximize the time they invest in their most profitable pursuits.
The most successful people in Silicon Valley actually employ a coterie of service providers. That can be a gardener to cut their grass, a Starbucks’ barista to make their coffee, or a corporate lawyer to draw up their legal agreements. Successful people outsource anything that they don’t have a competitive advantage in. Do you really think that Marissa Mayer is running Yahoo AND taking care of her new baby all by herself?
It’s a simple lesson from introductory economics, but the most successful people find ways to invest in their own focus to maximize the time they spend doing what they do best. That’s why they’re always looking for people with skills that complement their own. It’s how they build teams.
Just look at some of the successful entrepreneurial duos in history, and you’ll see how the most successful people objectively evaluate their own skills before taking on a cofounder. Steve Jobs, the consummate salesman, worked with Steve Wozniak, the epitome of geekdom. Marc Andreessen, a boy-wonder coder when he began Netscape, worked with Jim Clark, a seasoned executive. Larry Page and Sergey Brin realized that they were too similar to each other and famously brought in the “adult supervision” of Eric Schmidt during the early days of Google.
These partnerships allowed each person to focus on what he did best: the thing that created the most value and pushed their endeavor forward.
They Make Tough Choices
Speed and focus come at a price. Getting an investment in YouTube done by Sunday meant somebody had to work on the weekend. Marissa Mayer doesn’t get to enjoy much time with her baby. Larry and Sergei gave up control (along with hundreds of millions of dollars of equity) when they brought on an experienced CEO. The rich, the successful — they make tradeoffs to get what they’ve got.
Everybody sacrifices something at some point. Sometimes we’re aware of it, sometimes not. Going on vacation to Hawaii probably means not going to Tahiti, and going to the gym in the morning before work probably means not sleeping an extra half-hour.
We make tradeoffs all day long, but the most successful people make purposeful tradeoffs. They give up one thing because it makes it possible to have much, much more of something else. They’re hyper aware of the costs that they incur and the benefits they expect to receive.
Again, this is a basic economic principle, taught in every Econ 101 course in America: opportunity cost. The opportunity cost of a thing represents what else you could have done with the resources you expend. The opportunity cost of a new BMW may be an Audi, or it may be a higher down payment on a mortgage or 10,000 shares of a promising small technology company.
Silicon Valley’s most successful people live their lives with a heightened awareness of what else they could be doing with their resources, and they commit to living in a way that maximizes their ability to accumulate more wealth.
We think of the rich as having great freedom and the ability to enjoy all of what their money buys. But this perception couldn’t be further from the truth, at least for the most successful in Silicon Valley. They’re hyper-disciplined. They know just how powerful money can be as a catalyst for change or as a way of creating more wealth.
I learned this firsthand when I was starting out as a reporter. I had the opportunity to interview Dan Avida, an entrepreneur who had been successful before beginning a digital security startup called Decru. When he sold his company for $280 million, I naturally assumed he would be excited for the opportunity to enjoy his newfound wealth. But no, he said he would continue to drive his Honda Accord (instead of upgrading to a flashy Ferrari). Instead, he funneled his money into other Silicon Valley startups that he hoped would grow and multiply his investment.
Dan’s discipline impressed me and taught me a valuable lesson in how the most successful people in Silicon Valley think differently. They intuitively understand the sacrifices they face and make choices again and again and again that support the creation of more wealth.
I work next to a bank and walk past a beautiful mosaic mural spread across the front of its building each day. The mural shows many Bay Area scenes in vivid color and stands in honor of Amadeo Giannini, the founder of Bank of America. Above the bank doors is an inscription dedicated to the bank’s founder that reads: “His achievements were the result of his understanding of the needs of his fellow man.”
I’ve always liked that inscription. To me, it encapsulates the basic premise of all entrepreneurship: create something that will serve the needs of others. That’s a remarkably egalitarian and enabling business principle.
For Giannini, it meant starting a bank that catered to small customers, especially immigrants. For today’s Silicon Valley entrepreneurs, it means striving to serve a global customer base through the Internet. And those few who can understand, anticipate and serve the needs of the many find themselves richly rewarded.
It’s been my experience that the best entrepreneurs are uniquely attuned to their customers and take real pleasure in giving them something of real value that they can’t get anywhere else. They genuinely care for their customers and enjoy helping them.
Ignore at Your Own Peril
Businesses and entrepreneurs that lose sight of the basic concepts of speed, focus, disciplined decision making and empathy do not long prosper. Recent history provides plenty of examples:
- Research in Motion was fast to market with a mobile email device a decade ago, but was unable to rapidly respond to the rise of the iPhone.
- Microsoft has soldiered along based on the strength of its operating system and Office suite, despite its efforts to dilute that advantage with the Microsoft Zune media player and the Microsoft Kin mobile phone, products well outside its area of competitive advantage.
- AOL had the hottest property online during a boom time for tech, and its decision to invest in a slow-growing traditional media company — buying Time Warner — proved to be disastrous. If it hadn’t spend the time and energy working through the acquisition, it might have been better positioned to take advantage of other opportunities, such as the rise of broadband and the emergence of the search engine.
- When it comes to caring about customers, it’s clear that the bankers at Bear Stearns and Lehman Brothers who faced ruin during the crisis of 2008 lost sight of the needs of their fellow men.
The Modern Millionaire Mentality
John Paul Getty was rich in a big way, topping the charts of the Forbes list of richest Americans in the 1950’s and growing his wealth through the 1960’s after buying the first Saudi Arabian oil extraction rights. He was willing to take big swings of the bat, often going against the grain, bucking the market and fighting even bigger companies as a wildcatter, real estate investor and corporate raider.
Writing for Playboy, Getty defined the “Millionaire Mentality” as a concept that encapsulated a willingness to work hard and search for opportunities to save money. He wrote: “There is a frame of mind which puts an individual a long way ahead on the road to success in business, whether it be on his own or as an executive. In short, The Millionaire Mentality is one which is always and above all cost-conscious and profit-minded.”
His essay, taken by itself, seems to miss much of the essence of what defines success in today’s Silicon Valley. We seldom discuss profits in a culture obsessed with getting users instead of customers and defining a novel monetization method somewhere down the road. And costs? Well, entrepreneurs are obviously aware of what it costs to do business, but few would be willing to part with their Aeron chairs or MacBook Airs.
These facts show how differently we conceptualize Getty’s Millionaire Mentality today. Less literally, perhaps. The most expensive thing in Silicon Valley is time, so speed is important, and focusing on the highest-value uses of time is critical. Profit comes from a full understanding of the opportunities available and a disciplined approach to selecting the best. This is a real skill in a world defined by near infinite choice. Profit also comes from defining an offering that connects with customer needs, something that rises above all the other choices consumers face.
Of course the Millionaire Mentality isn’t just for millionaires. I’ve certainly seen the same characteristics in successful students, writers, artists, teachers and others. Speed, focus, disciplined decision making and empathy are hallmarks of successful people in any field. Best of all, you can work to improve yourself in each area and perfect the skills of Silicon Valley’s most successful over time, and who knows — you too may find yourself sliding into a seven-digit bank account.