This System Built A $100M Holding Company
The low-risk, high-impact system to build innovative businesses.
Morning! It's Thursday, January 5th - Today, we're covering why workers are still quitting at record rates, Dana Whites stock plunges, stable interest rates, the 10% cut at Salesforce, Meta's $414m fine, Cathy Woods's $19m Tesla investment, Paramount's $500m lawsuit, Microsoft's use of ChatGPT, and a system that built a $100m holding company.
Workers Are Still Quitting At Historically High Levels
> Workers are still quitting at historically high levels as some employers offer largest raises in years
> Endeavour stock plunges as video of owner Dana White slapping his wife goes viral.
> The Fed expects no interest rate cuts in 2023
> Salesforce to cut up to 10% of its staff, ~8,000 employees, in a decision to correct for its pandemic hiring spree
> Meta to pay $414m as its ad policies were deemed illegal in the EU.
> Cathy Wood invests $19m into Tesla as her fund's Ark Innovation ETF is down 80% from its 2021 peak.
> Roku stock jumps as the company announces plans to release its own line of connected TVs
> Apple lost $1 trillion of value in 2022, becoming the second company to join this club (Amazon was #1)
> Paramount sued for $500m over a nude scene from its 1968 'Romeo & Juliet' movie
> Bad Business 🚓: Megan Hess, a former funeral home director in Colorado, is sentenced to 20 years in prison after selling the body parts of 560 people without permission (WTF!)
This System Built A $100M Holding Company
Micheal Girldley owns 11 businesses, employs 1,000+ people, and makes $100m+ per year.
His businesses are random - Like a chain of 200+ fireworks stores that generate $30m+ per year, a code academy that makes $10m+, or Geekdom Fund, a $46m VC firm.
He doesn't build businesses like everyone else. Instead, he uses a system called "Effectuation."
Most people don't know this system exists - now you do!
What Is 'Effectuation'
This model isn't like the "lean startup" method, in which you ask customers their problems, which can produce small ideas.
Nor is it like the "waterfall" method, where you raise tons of VC money to tackle a big vision, which can be super risky.
Effectuation is improvisation - you use available resources to take immediate action and let the big vision emerge over time.
The 6 Principles of Effectuation
1) Bird In The Hand: You start by listing your resources. Try these buckets:
- Who you are - Your personality & abilities
- What you know - education & skills
- Who you know - your network
Explore ideas using these strengths and have a bias toward action.
2) Lemonade Principle: The idea is that "when life gives you a lemon. Make lemonade."
Your goal is to move fast and make mistakes. Why? Because you need to iterate and learn. Mistakes allow you to do that.
Imagine yourself blindfolded in a maze - bumping into a wall (aka the "mistake") gives you a clue as to the direction you should be going.
Make them early and make them often.
3) Affordable Loss: Unlike the "all-or-nothing" bets VCs take, this is engineered testing.
Make a series of small experiments - if they work, then you're onto something exciting. If they don't, you didn't lose much in the process.
4) Crazy Quilt Principle: Only work with partners willing to put skin in the game.
These people become part of your "crazy quilt" of resources to help you win.
If they don't put skin in the game (meaningful time or capital), then you don't need them!
5) Pilot In The Plane: Focus only on activities you can control. Nobody knows the future, so
The big idea here is that you believe the future is unknowable, so you create tomorrow solely through your entrepreneurial experimentation!
6) Effectual Cycle: These principles tie together in a cycle that is BACKWARDS from what others do.
Capabilities >> initial actions & experiments
Your experiments maximize learning >> Conviction.
And goals emerge!
All done in a low-risk way.
Effectuation is a lower-risk but high-upside way to build startups.
Microsoft To Power Bing With ChatGPT
Microsoft CEO Satya Nadella announces a plan to power Bing, its search engine, with ChatGPT, a chatbot powered by OpenAI, which launched in November 2022.
- Bing has ~3% of the total search engine market share making it the 2nd largest search engine with ~1 billion visitors per month.
- Microsoft could launch the new feature before the end of March.
- In 2019, Microsoft offered OpenAi $1 billion+ in funding in a multi-year partnership.
For more, join the conversation below.
Microsoft is planning to use ChatGPT to power Bing, and plans to launch it in a couple of months.
The turnaround under Satya Nadella is incredible.
— Sheel Mohnot (@pitdesi)
Jan 4, 2023
This Is Effectuation In Action!
Effectuation is the system of entrepreneurship used by Micheal Girdley (featured above).
This system creates a low-risk, high-impact model for building businesses. It introduces a flywheel in which a series of small experiments drive business innovation.
Michael has used this model to build 11 businesses and a holding company that generates $100m+ in revenue.