But most people, and most companies, aren’t Apple. Most people and companies, however, are definitely blinded by others’ success.

Let’s take investing as an obvious example. Everyone wants to beat the market. And the best traders claim they do beat the market. So let’s look at the data.

There are over 16,000 investment conglomerates in the U.S., including mutual funds and exchange-traded funds. From 2014 to 2024, there were just 20 total funds that beat the S&P 500’s 327.8% return. Each of those 20 likely markets that fact, and thousands of others likely try to copy the investment strategies of those 20.

But if there’s anything we know, it’s that humans behave irrationally, and humans certainly ignore statistical probabilities. If you start in Year 1 with 10,000 investors, and every year 50% of them beat the market, then 13 years later there will be one person that beat the market every year. That person will say “I’m smarter than everyone else,” but in reality it’s just math.

So let’s take the real-world example. The 16,000 conglomerates that exist in this country? If half of them beat the market in any given year, then after 10 years, we would expect 15-16 firms to have beaten the market in total. That’s pretty darn close to the 20 that have actually beaten the market during that time span.

So if “winners” in the market are just a statistical normality, why are they considered “special” or “brilliant”? It’s because we like good stories. Everyone does. No one wants to admit that it’s just dumb luck. It’s more fun to laud brilliance and build people up. In reality, they are just the statistically lucky ones that have flipped a coin and landed on heads ten times in a row.

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There are a myriad of psychological terms that encompass this: selection bias, survivorship bias, outcome bias. The bottom line is that humans love starting at the end of the story and working backwards. No one starts their research or story with the 16,000 investors at the beginning. You start at the end, with the ones that won, and then back fill the decisions that you believe led to their success – even though 15,000 others may have employed the exact same strategy. We love studying survivors. It’s not a moral failing, but a data error. If 1,000 people each invest in different risky startups, and one of them becomes the next Facebook, the single person who invested in it is called a genius. They might very well be, but statistically, that makes no sense, especially since all 1,000 people thought they were backing the correct company.

In any sample of people, if you have a large enough number, someone will outperform. Over a long enough time horizon, someone will always look brilliant. That doesn’t necessarily mean they are. Long-term success doesn’t always require genius. Sometimes, it’s just probability. In large samples, extreme success is inevitable. But inevitability is not the same thing as insight.

In investing, it is widely known that the smartest investment strategy for an average investor (and even some Wall Street investors) is to put your money in low-cost indices that simply track the stock market. By nature, the “market” is almost impossible to consistently beat, because the whole point of the “market” is that it’s the most efficient collection of companies. So by tracking the market, you increase your chance of maximizing your return.

Even famed investor and longtime Berkshire Hathaway CEO Warren Buffett agrees with that sentiment. As someone who picked stocks for a living (and was incredibly successful at it), he regularly admitted that Berkshire failed way more often than they succeeded. But the ones you hit big on can grow indefinitely, whereas a mistake can only go to zero. It only takes a few home runs to erase hundreds of strikeouts. Even amidst his success picking companies, he still recommended that everyone simply invest in a market fund.

This happens all the time in business as well. We all compete against something or someone. Sometimes, your competitor is selling the exact same item as you. Sometimes they’re selling a competing item. Sometimes, you’re competing for people’s attention. And while it’s important to keep an eye on your competition, the most dangerous thing you can do is try to mimic your competition.

My family’s businesses were extremely successful. Not every single year, but we had many more good years than bad. And over the long term, that compounded into immense success for us and our staff. We did that by always keeping both eyes on our own companies. Yes, there was definitely a pile of luck throughout the years. But we never tried to copy anyone else. We always paid attention to what competitors were doing, but we didn’t make decisions based on that knowledge.

On the contrary, there were many companies in our industry that attempted to copy our business model. In fact, there was even a competitor who called me to tell me exactly that.1 That competitor didn’t last very long. Our business model worked great for us, but it’s possible that it only worked great for us. It’s also possible that it was all luck and we actually had no brilliance at all.2 The environment often matters more than the strategy. Timing, the economy, customer behavior, regulation – it all plays a role and none of us can influence those factors. A business that succeeded in a low interest rate environment might fail when rates increase. A strategy that worked in a fast-growth market may not be able to handle stagnation. And a model that worked when labor was abundant could collapse when the labor market tightens.

We should always learn from others’ successes and failures. Even those that fail potentially had great strategies. Sometimes, they did everything right but just hit a speed bump from which they couldn’t recover. Don’t get blinded by others’ success. Focus instead on process. You always see the one business that made it, but you don’t usually see the ten that tried the same strategy and disappeared.

Don’t mistake survivability for repeatability. Some strategies only work if nothing goes wrong. And there is often a tenuous fragility hiding just behind that success. What looks brilliant at scale may actually be lethal without a safety net.

Instead, you should study broadly, borrow selectively, and question relentlessly. The goal isn’t to find someone who beats the market. It’s to understand what would have happened if they didn’t.

Your attention is drawn to the old lady on the aisle, as you hope for her sake that she’s about to win big: seven…seven…cherry! Ah, so close! You stop for a moment and watch her mash that button again. Seven…seven…lemon! Must be rigged. But you still keep your eye on the machine. She was so close to hitting the jackpot! Maybe this spin is the one.

Forgetting the fact that casinos tend to program aisle-facing machines to win slightly more often than normal, what you’ve fallen for (and what nearly every human falls for) is what’s called the “close-call effect.” It hits us in all walks of life. Your favorite sports team loses the championship on the last play of the game and you feel absolutely crushed. If that same sports team loses in a blowout, you don’t feel quite as bad, even though the final score doesn’t change the fact that they still lost.

Near misses trigger the same reward center as wins in our evolved brains. Dopamine levels spike when you nearly win, which is dangerous. It reinforces behavior without delivering the actual reward of winning. Near misses increase engagement. That’s how casinos are so successful. They don’t want you to win. They just want you to continue engaging, and they do it by tricking you into thinking you’re about to win.

The brain interprets “close” as progress, even when it isn’t. This was one of the key findings of two famous scientists, Amos Tversky and Danny Kahneman. I’ve written about them before, but in short they performed tons of research on behavioral irrationality. They are perhaps the two people that most contributed to our library of knowledge about human behavior. The close-call effect came up many times in their research findings. For example, a traveler feels worse when they miss their flight by five minutes than if they missed it by 30 minutes, even though the result itself hasn’t changed. And if three people all have losing lottery tickets, the one who was only one number off feels worse than the ones who didn’t match a single digit, even though none of them won the jackpot.

While this is classic human behavior, and we all do this regularly, it can be fatal in business. Being oh-so-close to success can have disastrous consequences if you don’t properly analyze your failure. Near-success is more addictive than failure, because it preserves hope while preventing change. If you miss a sales goal by miles, you tend to break down the entire process and build it back up. But if you miss a sales goal by an inch, you are liable to think “Ah, we’ll get it next time.” And it’s possible that your process really is correct. But being close doesn’t make it correct. Being correct makes it correct.

Clear failure forces reassessment. Near-success invites endurance and grit in trying the same thing again. Endurance without reevaluation becomes inertia. And inertia is a death knell to most small businesses.

There are a large number of ways this can sneak up on you in business. You could have an incredibly busy week, and fall just short of meeting your productivity goal. A typical response can be, “We’re just one more hire away.” But in reality, it’s possible that your process is inefficient. Maybe you’re not one hire away, but rather could improve the process to the point where you’re actually over-employed by a few people.

What about a busy season in which you miss a sales goal by a small amount? It shouldn’t matter how close you were, you should always break down the entire process as if you missed it by a mile. Perhaps your process was right, but perhaps it wasn’t. It has no bearing on whether or not you’re on the right track. Leaders often confuse motion with progress. The two are correlated, but correlation does not equal causation.

Think of it like an accounting issue. If you’re adding up the debits and credits (in a pre-software world), and you’re off by three cents, it’s easy to assume that you’re just off by three cents. But in reality, you could be off by 3,564.05 in one column and 3,564.08 in the other column. That’s a much different picture than three cents.

What kind of phrases can you catch yourself saying, either out loud or silently, that mirror the close-call effect? If you’re behind on your bills, have you ever thought, “Oh, we just need one good month of business to get out of this.” Or, if you’ve been trying to solve a major operational problem, have you said “We’re really close, so we must be on the right track”? Sometimes your beliefs are indeed true, but it’s easy to be fooled by the close-call effect.

It’s just like the mantra, “Busy is not the same as better.” You can work your butt off, but if you’re not doing the right work, you’re not actually getting anywhere. We often confuse exhaustion with momentum. In fact, hardworking leaders are most at risk here. Persistence is often rewarded in our society. Grit is a strong, respected leadership trait. But those two alone don’t make someone successful. On the pyramid of business success, grit and hard work would be close to the top, not the bottom. You build a foundation with the proper strategy, team, and processes, and only then does hard work actually make a difference. If you’re asking “Why isn’t this working” instead of “Is this going to work at all”, you’re putting yourself and your business at risk.

Now, this doesn’t mean you should give up anytime you fall short. Far from it. Instead, any level of failure, whether you were an inch away or a mile away, should result in a reassessment. Failure is an excellent learning opportunity, even if you believe you were that close.

Near-success deserves scrutiny. Hell, even success still deserves scrutiny, because we can always improve. But what’s crucial, when you fall short, is to remember that hope is not a plan. Optimism doesn’t replace proper planning. Almost winning feels like validation. But sometimes it’s the last signal you’ll get before a decline.

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So down he went to Florida, turning his business over to the son, but he got weekly financial reports. And he hadn’t been in Florida very long before they turned sharply negative. In fact, they were terrible. So he got on an airplane, and he went back to New Jersey where the factory was. As he left the airport on the way to the factory, he saw one of his company’s billboards lit up. There was Jesus, spread out on the cross. And under it was a big caption: “They Used Liebowitz’s Nails.”

So he stormed into the factory and said, “You dumb son! What do you think you’re doing? It took me 50 years to create this business!”

“Papa,” the son said, “Trust me. I will fix it.”

So back he went to Florida, and while he was in Florida, he got more reports, and the results kept getting worse. So he got on the airplane again. Left the airport, looked up at the billboard, and now there’s a vacant cross. And lo and behold, Jesus is crumpled on the ground under the cross. And underneath, the caption said, “They Didn’t Use Liebowitz’s Nails.”

This is one of my favorite parables, once told by the late, great Charlie Munger. It illustrates how ridiculous it can look to the outside when someone clings to a failed idea.1 But despite this parable, it’s amazing how quickly you can find examples of this, especially in the small, family business world.

We had a joke when I entered the family business after college. As I was getting up to speed, I would ask a ton of questions. None more so than, “Why do we do X this way?” And almost universally, the answer was, “Because we’ve always done it this way.” As a young’un2, I found that reply incredibly frustrating. But over time it actually became funny. Because my dad (who also went through the same conversations with his dad years earlier) and the other managers in the business realized immediately how ridiculous the answer was.

Now, there are often reasons why you should stick to certain processes and ideas. Usually, you can articulate what those reasons are. And in a small business, it’s even harder to walk away from old ideas because those ideas did, at one time, work. Small business leaders are often emotionally invested in the way we do things right now. We remember effort, not outcomes. And we mistake familiarity for validity. Quite often, we over-appraise effort and under-appraise evidence. We see that something no longer works, but we just can’t get the nerve up to change what we believe is a core part of our business.

This can take many forms: it can be a product line that no longer sells well but you just won’t let it go because it helped you grow to the place you are now. It can be customers you insist on continuing to serve, despite the poor or even negative margins you get with those customers.3 It can be suppliers you defend out of long-term loyalty, even though their business policies may be nowhere near what they were five or ten years ago.

We all do it. I’ve done it. My dad did it. His dad did it. And I’m sure you’ve done it as well. Sometimes this stubbornness can be laudable. Other times, it’s damaging. What’s important to remember, though, is that it’s not a failure of character. It’s simply a part of the process of trying to sustain growth over the years.

Going back to the Liebowitz parable, the father is not stupid, and the son isn’t malicious. The son firmly believes he is correct in his marketing plan. And the father is obviously correct in his analysis of the situation.4 The mistake isn’t incompetence. It’s misplaced confidence.

We all make mistakes, and we all fail at various levels as business leaders. If the premise or the direction is correct, then failures are not only acceptable, but helpful to learn from. Where this becomes problematic is when you’re misunderstanding the situation in the first place. Brand inertia, legacy thinking, and confusing past success with present relevance are all ways to turn a company’s growth upside down. The issue with Hyman’s son wasn’t that he framed the billboard incorrectly. It’s that he shouldn’t have been utilizing the crucifixion in his advertising in the first place.

What fascinates me about this legacy inertia, for lack of a better term, is that the more intelligent you are, the more vulnerable you tend to be to this issue. Intelligence increases your ability to rationalize your own mistakes. I’ve seen brilliant businesspeople make horrendous mistakes because they completely misunderstood the situation. Oftentimes, it’s because they had seen such great past success that they naturally assumed what they were doing was right. Again, it wasn’t about smarts. It was about being stuck in a past mindset. What helped you grow from 0 to 100 doesn’t necessarily help you grow from 100 to 1,000. Different stages of growth require different strategies. Past wins create blind spots.

Small businesses often treat startup tactics as a permanent strategy. What worked when you were a nascent company trying to get off the ground does not always continue to work once you’re established and growing. Leaders also tend to confuse scrappiness and grit with scalability. You can work as hard as you want, but if you’re focusing on the wrong strategy, it’s just a waste of air. Think about the founder who insists on approving every order because that’s what he did when he was first getting started. The owner who refuses to delegate pricing because that’s the task he’s done for the past 30 years. Or the company that still interacts with customers like it’s desperate for business, long after it isn’t.

As a leader, confidence can often reduce your willingness to revisit your assumptions. If it’s worked in the past, it’s easy to assume it will work in the present or the future. But what’s important is to frame each issue as questions with consequences. What does this product/idea/strategy cost every year that it stays alive? What else could you do with the attention it consumes? What else could you do with the capital it consumes? What revenue/profit are you missing out on by not trying something new?

The goal in business isn’t to honor what worked. It’s to stay honest about what works now. Letting go of an old idea is not admitting failure. You can update your beliefs while still respecting and honoring the past and the decisions that got you to where you are. Past success deserves respect, but it does not deserve control.

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When people talk about the labor market, they generally refer to the national unemployment rate or the national labor force. But these numbers aren’t helpful for a small business. My business is in New Jersey, which means California’s labor data has no bearing on how easy or difficult it is for me to hire someone. Unless you’re hiring for remote work, you care only about your own region.

The problem is, the data most covered by the media is the national data. And those data tell us that the national unemployment rate is good: between 4.3 and 4.4 percent. In fact, since the job market recovered from the pandemic closures, the unemployment rate has never been above five percent. That’s the threshold under which the Fed considers the country at “full employment.” Usually that means it’s harder for businesses to hire.

But that data only tells a small piece of the story. Hiring problems aren’t just about wages, culture, or any other national theme. In fact, if you break down the unemployment rate by state, it can range anywhere from 2.2 to 6.7, which is an enormous gap. More often than not, hiring problems are literally about how many people there are available to hire in your area.

You may be beating yourself up because you can’t seem to find new staff. I’ve got good news, though.1 Your hiring problem may not be cultural or operational at all, but rather demographic. That’s what jumped out to me when I saw some census data buried deep in a recent Wall Street Journal article:

Allow me to mansplain for a moment: this chart shows net migration for each region of the country since 2021. As you can see, up until 2025, the entire country saw positive international migration, no one more than the South. But during the same time period, every area of the country saw negative domestic migration except the South. Residents that are moving are generally choosing to move to the South.

What this means is that as international migration has grinded to almost a halt in the last year, the West, Midwest, and Northeast have all seen their labor forces dwindle. The South, meanwhile, has seen a boom in their populations. This became apparent during the last two rounds of congressional reapportionment: in 2010, eight states gained seats in Congress, with only one of them (Washington) in either the Northwest or Northeast. In 2020, six states gained seats in Congress, none of them from the Northwest or Northeast. States that lost seats in 2020 include California, New York, Pennsylvania, and Ohio. Sense a pattern?

Furthermore, this second chart shows that population growth has dropped precipitously. There are a myriad of reasons behind this: a drop in legal immigration, an increase in deportations, a drop in the birth rate, and more. Now, far be it from me to discuss a political topic as toxic as immigration at this moment.2 But this data shows a problem that’s getting worse in certain regions, specifically the Northeast.

If you dig deeper into recent Census data3, you can see how the above charts contribute to a larger labor problem. Since December 2024, the labor force (the number of people available to work) has increased by just under 3 million people, but the labor participation rate (the percentage of that force actually choosing to work) has dropped by 0.1 percent. So the number of people available to work nationally has increased by less than 1 percent in the last year, which is incredibly small by historic standards. And data from Cal Matters shows that in August 2025, there were 1.4 million fewer legal immigrants living in the United States than in January 2025. That was months ago, and we can safely assume that number has only grown since then. That shrinks the labor pool even further.

If you look at the data by state, and how it’s changed between December 2024 and November 2025, 16 states had a drop in total labor force. Of those 16, 14 were located in regions outside the South. And there was only a single Northeast state that saw its labor force increase by more than one percent during this timeframe: Delaware, a state known nationally for its pro-business and pro-resident policies.

In layman terms, all of this data means a few things: first, the U.S. is not organically producing many new workers. Second, the labor supply growth is coming from people moving around the country, not births or immigration. Third, and most importantly, the people that are moving around the country are generally moving to one region – the South. Unless your business is located in Florida, Texas, or any of those other states, you’re likely having more trouble hiring than you did a few years ago.

This doesn’t create a national labor story. Rather, it creates a regional hiring asymmetry that can make it feel like you’re doing something wrong as a small business leader. But that’s not necessarily true. Here’s the landscape in 2026: a Fortune 500 company can relocate employees, sponsor visas, hire remotely, open satellite offices, and rely less on regional labor rates. Small businesses are tied to physical geography in a way that large businesses are often not. When population flows shift, small businesses get hit the hardest. And as more workers have gone remote in recent years, they’ve likely moved to lower-cost states knowing that they can continue to keep the job they have.

This is one of the reasons why, despite the strong economic data that comes out of the government, it can often feel like your region or town is struggling. The data supports that. Economic data is often national, but the small business reality is usually local. So the next time you feel like you’re doing something wrong when it comes to hiring, sure, take a look at your policies, your starting salary, your employee benefits, and any other hiring strategy you utilize.

But if all of that is in order, remember that hiring difficulty is not always a signal of competence. Sometimes, it’s simply a strategic constraint, especially when the demographics are against you.

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The administration’s tariffs were based on a law called the International Emergency Economic Powers Act, or IEEPA, as it’s now known. The law states that the president, after identifying an “unusual and extraordinary threat,” may, among other acts, “regulate, direct and compel, nullify, void, prevent or prohibit, any acquisition, holding, withholding, use, transfer, withdrawal, transportation, importation or exportation of, or dealing in, or exercising any right, power, or privilege with respect to, or transactions involving, any property in which any foreign country or a national thereof has any interest.”

Perfectly clear, right?

The government’s argument to the court was that because of the words “regulate” and “importation,” the Executive Branch can issue tariffs under this law, because tariffs are a type of regulation.

Chief Justice Roberts and five of his colleagues read that argument and essentially said: no. Roberts’ opinion boiled down to four points:

1. The administration’s argument is based on the words “regulate” and “importation,” which are separated by 16 other words in IEEPA. “Those words,” Roberts wrote, “Cannot bear such weight.”

2. Article I, Section 8 of the Constitution specifies that “The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises.” The founders assigned the taxing power to Congress – not the executive branch.

3. At no point in our nation’s history has Congress ever subtly intonated that an executive power included unilaterally imposing a tax. Any time the Congress has ever wanted to give a taxing power to the president, they have done so explicitly within a law.

4. The government’s argument was based on the word “regulate,” but when pressed by the Court, they could not identify a single case in United States history where the word “regulate” allowed taxes to be put into place, without the express written consent of the Congress.

During oral arguments, the government admitted that “the president does not have any inherent authority to impose tariffs during peacetime.” And since we’re not at war with every nation around the world, that pretty much sealed the deal.

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Now that this issue is settled, what next? Well, the biggest unanswered question is what happens to all of the tariffs already paid under IEEPA by millions of companies and citizens across the country? According to Customs and Border Patrol, the current estimate is that $179 billion in total receipts have been collected for IEEPA tariffs. And naturally, everyone that contributed to that now wants their money back2. The Court’s opinion conspicuously did not touch this issue, and in fairness, that question was not put in front of the Court. The only issue they were asked about was whether the tariffs themselves were legal.

More than likely, what will happen now (if it hasn’t already) is that hordes of companies will file suit against the government to get their money back. If money was collected under a statute later deemed illegal, restitution would logically follow. We can expect that these cases will eventually be joined together, and also end up in the Supreme Court one day, likely a few years from now. That’s right, we’re all likely going to be waiting quite a while to see if any of us get our money back.

But let’s assume, just for argument’s sake, that the government will eventually be required to refund all of the IEEPA tariffs. There are many questions that arise.

First, how will the money be returned? Is each company going to be required to petition CBP for a refund? Or will it be required to be done by the Customs broker who filed the entry summary in the first place? Is it going to be on a per-entry basis or in aggregate?

Another question that arises in my mind is what happens to all of that money, once it’s returned? Most tariffs are paid by corporations. Whether that money ever flows back to consumers is a different question entirely. A company like Walmart? There is almost no way that they return the money back to their consumers. More than likely, companies will simply pocket this refund.

Now, that raises its own questions in kind. First, what happens to the U.S. economy when $179 billion of cash is suddenly added into companies’ coffers? That number sounds enormous, but in macroeconomic terms, it’s not. The stock market (meaning the value of all public companies) is about $70 trillion. The United States’ annual GDP is about $31.5 trillion. The amount of IEEPA tariffs that have been paid amounts to 0.2% of the total stock market value and 0.5% of annual GDP. Not trivial, but way less than you might expect. And the stock market number doesn’t even count every small business that has paid tariffs over the last year.

Estimates have put the cost of tariffs for each family at between $400 and $1700. If families get refunds, will they spend it or pay down record household debt?

And what about prices that have been hiked because of the increase in costs? Some companies may certainly choose to lower their pricing, but you and I both know that most companies will just pocket the money, knowing that consumers have generally accepted (albeit unhappily) new pricing. But does this mean that, when supplier or raw material prices increase in 2026, they will then absorb that pricing, since they’re looking at an increased margin from the tariff refunds? The range of outcomes runs from short-term deflation to lower inflation over the next few years. Consumers would want the former, but economists would want the latter.3

Basically, this decision does not really answer the “what now” question. In fact, shortly after the announcement, we also saw President Trump announce a new round of 10% global tariffs based on a different law, which the administration claims allows the president to do so temporarily for 150 days. That’s five more months of essentially the same tariffs, which likely will also be challenged in court. In other words, as one legal theory collapses, another takes its place.

So what do you do now, if you’re a small business owner? Especially if you’re one who has been directly or indirectly affected by tariffs? Well, my (non-legal and non-binding) suggestion would be: nothing. There is too much unresolved to justify major strategic shifts. Rather, keep paying attention to any court cases that arise from this ruling, but don’t make big changes to your business until there is more certainty moving forward. Don’t overreact to incomplete information.

Lastly, and most importantly, a quick reminder to anyone viewing this decision through a partisan lens. After the opinion was released, some political leaders quickly framed the decision as good or bad for the country. The Supreme Court’s job is not to weigh economic consequences. That’s the job of the Congress and the President4. The Supreme Court’s job is to interpret statutory and constitutional authority.

The law has been clarified, but the money has not. Whether $179 billion returns to companies, stays in government coffers, or gets tied up in litigation for years will shape the real economic impact of this decision. For now, the only certainty is uncertainty. And for small businesses, that means discipline matters more than reaction.

The Court answered the constitutional question. The economic one is just getting started.

I’ve admired the Disney business for as long as I can remember.1 If you invested in Disney stock back in 1962, when it traded for about six cents per share, you would have multiplied your money by nearly 1900 times by the end of 2025. The company today is worth about $200 billion and is a conglomerate larger than Walt Disney would ever have imagined back when he was drawing an odd-looking rabbit and mouse.2

What’s most impressive about Disney to me, though, is how relatable its design is for a small business, despite its size. Disney’s biggest strength lies in its resilience and its operating system. The company’s segments operate like spokes on a wheel, with the center being its intellectual property – its studios, movies, and content. In short, its characters. Think about any part of Disney: the parks, the cruises, the merchandise, the licensing. All of it is based off of the creative side of the company. Disney’s core business is creating stories and characters. Without that, the rest of the company falls apart.

That’s why, over the last few decades, Disney has aggressively pursued acquisitions that give it access to popular IP. Here is a small selection of the companies Disney owns: Pixar, Lucasfilm, 20th Century Fox, Marvel, Searchlight Pictures, ESPN/ABC, Hulu, FuboTV, FX/National Geographic, and half of A&E (which also owns History Channel and Lifetime). That means Disney owns, in addition to all of the characters it’s created in the last 100 years, every Marvel character, every Star Wars character, every Simpsons character, a huge chunk of the global sports content, and more. These acquisitions, while pricey, expanded its core offering and allowed it to further expand the rest of its business segments using this new IP. Disney found a recipe for success and they use it over and over again.

Most importantly, this focus gives it the type of resilience that Coca-Cola and Pepsi have. Disney has survived many bumpy parts of its history, including leadership changes, strategic reversals, capex mistakes, and more. But it’s built to survive these things. It can absorb mistakes and errors, so long as they continue to focus on their core business.

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This has become an issue multiple times throughout the company’s long history. After Walt Disney’s death, the company’s creativity struggled mightily. In fact, if you scroll through a list of the Disney movies from 1971 to 1988, you’d be hard-pressed to find any that you really remember. Similarly, in the early 2000s, after the musical animation boom of the 90s, Disney Animation couldn’t keep pace. Almost all of the successful Disney movies of this era were made by Pixar, which hadn’t yet been acquired by the entertainment giant.

And when Bob Iger relinquished the CEO role in 2020, his successor, Bob Chapek, made plenty of mistakes, but none worse than trying to restructure the management tree of the core business – media and entertainment. The uproar among the careerists at Disney was deafening, and within two years he had been fired by the board. When Iger replaced Chapek for his second stint as CEO, he handed creative control back to Disney’s creators.

As an investor, you could be excused for getting impatient with Disney’s stock market performance. It has lagged that of the greater market every year since 2021. But that’s exactly why I think it’s a great company to follow as a small business owner. Wall Street likes clean stories, margin expansions, and short-term clarity. But Disney lives in the long cycle. They live in the world of capital expenditures that take years to pan out. They live in the world of delayed gratification. As long as they continue to create great IP and great stories, I trust that the financial success of their company will follow along shortly thereafter.

As small business leaders, we can’t match Disney’s scale. But we can learn from their priorities.

Disney works because no single failure can take the whole system down. That’s not about scale, it’s about design. The best companies’ successes don’t hinge on one small area. It should be diverse enough that a small failure, a poor decision, or a single setback doesn’t bring the entire thing down.

Disney consistently chooses decisions that keep the institution intact, even when they don’t look optimal in the short-term. The strongest businesses make decisions based on what’s best for the long-term health of the company. Weaker companies chase sales and profit in a way that is unsustainable.

Disney found a formula that works, and keeps using it repeatedly. That’s the sign of a smart business model. That doesn’t mean they can’t make adjustments. But you should never veer away from a successful formula just because you think you’re supposed to.

Most importantly, Disney rarely loses its focus on the core business. Disney knows it struggles when its creative minds can’t keep pace. In any business, no matter how much you expand and no matter how much you diversify, you should ask yourself every day if the core business is healthy. Without it, everything downstream suffers.

One other lesson that you can take directly from Disney parks: experiences matter. I don’t mean from a grand perspective – none of us are going to be setting off nightly fireworks shows for our customers. But the next time you happen to be in a Disney park, take some time and focus on the design and operational efficiency. Look at the sightlines – you only ever see exactly what Disney wants you to see from that spot. Look at the ground – you rarely ever see a piece of trash, yet you also rarely notice a janitor walking around. Look at the lines – you spend half of your time in them, but you’re also rarely bored. Look at the way the design influences traffic flow – Disney wants people to move in a certain way, and builds accordingly.

None of us are building theme parks or cruise ships. But we all, as small business leaders, create an experience for our customers, especially if you are in a retail setting. For example, is your physical setup one that flows traffic in an ideal way? Do you present items in a way that shows your customers exactly what they should see at that moment? Does your checkout line have impulse buys or distractions in case someone is waiting a while?

The key lesson from Disney is to focus on the little things. They often matter more. Their strengths are copyable even at the smallest levels. To follow them is to follow a posture and resilience model that has endured for over 100 years.

First and foremost, I don’t like clickbait, and just about everyone writing about AI is only interested in jumping on a bandwagon. There are way too many articles that are either “AI is destroying our country” or “AI is the greatest thing ever invented,” neither of which is helpful. And I don’t like just doing the popular thing. I tend to be pretty disagreeable in the face of a popular consensus.1

Second, and more importantly, I didn’t feel like I actually had anything useful to contribute to the larger AI conversation. And I tend to abide by the mantra of “‘Tis better to remain silent and be thought a fool than to open your mouth and remove all doubt.” I have no plans to pretend the complexities of AI are my strong suit.

It’s been written ad nauseum that the economic data doesn’t match the popular consensus. The charts and graphs seem to show the economy is strong, but the average household is still struggling. Both things can technically be true.

The most-cited strength of the economy the last few years is the stock market. Since 2023, the annual returns for the S&P 500 have been 24.2%, 23.3%, and 16.4%. Those are astronomical numbers, way above the historical average. And since 2020, there has only been one year in which the market was down. If you invested on January 1, 2020, you would have more than doubled your money by the end of 2025. That’s quite a profit for a five-year period.

But when you dig deeper into the market gains of the last few years, it’s generally been concentrated in just seven companies: Nvidia, Alphabet (Google), Apple, Meta (Facebook), Microsoft, Amazon, and Tesla. These stocks, referred to as the Magnificent Seven, or Mag7, accounted for nearly 37% of the entire S&P 500’s market capitalization, and about 31% of the entire U.S. stock market at the end of 2025. The Mag7 also accounted for 42.5% of the S&P 500’s total 2025 return. Meanwhile, the market’s equal weight index (which treats each stock the same, regardless of its size), returned just 9.34% in 2025, underperforming the broader market by six points, and the Mag7 by an enormous amount. In layman’s terms, this means these seven stocks propped up the rest of the stock market with them. In fact, Nvidia alone made up nearly 8% of the entire stock market at the end of 2025.

Technology isn’t my expertise – business is. So the more I started seeing trends in the economy over the last few months, and in particular the disparity between the Mag7 and the rest of the market, the deeper the AI earworm kept digging into my brain. As anyone who has been a consistent reader would expect, my next step was to do some research. According to AI Invest, in the three-year period from June 30, 2022 to 2025, the weighted S&P 500 (which weighs each company based on market capitalization) returned approximately 70.9%, while the equal-weight S&P 500 (which assigns each company an equal weight of .2% of the index) returned 49.4%, highlighting the disparity in returns. “As a result,” they write, “Investors have been heavily concentrated in a subset of…technology firms, all of which are now competing in the AI space, increasing the overall risk of the market.”

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Now, this is where you would expect me to go into a soliloquy about a market bubble, how it’s all about to collapse, and compare it to the dot-com bubble of the early 2000s. But to be honest, I don’t see the same risk. Yes, the dot-com bubble saw companies skyrocket in value because they said the word “Internet,” and we’re starting to see companies use the term “AI” in their quarterly earnings calls way more than ever before, even when it doesn’t apply. And there are certainly companies that are massively overvalued at the moment because of this – that much is inarguable.

But the companies at the top of this list are all profitable, and six of the seven are massively profitable. Over the trailing 12 months, here are the profits each of those six companies reported on their public financials:

Nvidia: $99 billion

Apple: $112 billion

Alphabet: $124 billion

Microsoft: $105 billion

Amazon: $76.5 billion

Meta: $58.5 billion

And here are their free cash flow (a more accurate depiction of their financial strength):

Nvidia: $77 billion

Apple: $123 billion

Alphabet: $73.5 billion

Microsoft: $77 billion

Amazon: $10.5 billion

Meta: $46 billion

These companies’ stock prices may be riding a high, but they’re not at risk of going anywhere or falling at the pop of the proverbial bubble. If Apple wants to spend over $100 billion per year on capital expenditures related to AI, I can disagree with the decision without thinking it’s going to turn the company from a success to a failure. Put it in numbers closer to our comprehension as mere mortals: if you sold your business for $10 million, and told me you wanted to buy a $250,000 Ferrari, I would tell you it’s irresponsible, but I wouldn’t worry about an impending bankruptcy.2 That’s not to say the market can’t crash from being overvalued, but these companies themselves are highly unlikely to go anywhere even if the bubble bursts. Their core, profitable businesses will generally be unaffected.

The Wall Street Journal reports that Meta, Alphabet, Amazon, and Microsoft are actively spending nearly $120 billion per quarter on capital expenditures, most of it building AI data centers.

And while we can all discuss and disagree about the worthiness of these expenditures, this is real money actually being spent. These are construction jobs, maintenance jobs, and ongoing investments in the country’s technological infrastructure. Five, ten years down the line, we will see if it was the correct investment, but for the time being, I don’t necessarily see how this is any different than other industrial revolutions that we’ve gone through as a society. If this is the direction we’re heading, then I would rather have companies invest in it early on so that we do it properly. We’ve still got areas of the country that don’t have reliable Internet, 25 years after the dot-com boom. I think it’s reasonable to suggest that we didn’t properly invest in the technology back then – perhaps we can make up for it this time around.

But here’s where the risk lies for those of us that don’t live in the world of big business and technology: most businesses, and especially small businesses, do not participate in the mechanisms creating these numbers. Whether or not over-investing in AI is the correct move, those companies not involved in AI are living in a different economic reality.

Harvard Economist Jason Furman reported that investment in information processing equipment and software was responsible for 92% of H1 GDP in 2025. Without these technology-related categories, GDP growth for that six-month period would have been just 0.1%. And according to CNBC, “A September 2025 analysis from Deutsche Bank argued that without AI-related investment, the US economy might already be in a recession.”

I recently wrote about how small businesses are getting left behind in the current economy. I can put an addendum onto that piece by saying, small businesses and those businesses not involved in AI feel like they’re getting left behind in the current economy. There are now two economies: the asset/capex economy, and the cash-flow economy. Small businesses live in the cash flow economy, but that’s not where the growth is.

The companies driving AI-related growth benefit from everything currently driving economic growth. And their multi-billion-dollar investments show up immediately in GDP, employment numbers, and market indices. Small businesses, on the other hand, don’t issue stock. They don’t borrow against soaring equity values. They don’t spend half of their company’s worth on infrastructure and patiently wait for annual returns. They live on cash flow, margin, and whether this month’s sales cover payroll.

The risk isn’t that AI-driven growth is fake – it’s real. The risk is that this growth convinces people the economy is healthier than it is, which delays the reckoning for those living outside the AI economy. For those of us that live in the cash-flow economy, it’s crucial to not use asset-economy signals to judge yourself and your business. By severing the ties between these two realities, you’re less likely to feel like you’re falling behind, and more likely to understand that you exist in a different economy than the one most news outlets write about.

We all have to make business decisions based on our places in our own economy. Everyone should learn about, utilize, and leverage whatever part of AI can help within their own business, while continuing to reap any benefits that advancing technology provides. But always keep in mind the economic realities of your own space, rather than just reading the big-picture numbers without the proper context. Because a chart without context is just decoration.

Real leadership happens in stages. It happens over a long period of time. It’s something that shows in action, rather than a few inspirational words. It takes years to fully develop a leadership style and have people recognize and respond to it. Sometimes it happens intentionally, sometimes it happens accidentally.

When I want to learn more about leadership, I tend to go to look toward some of the best leaders in corporate history. The obvious example is Warren Buffett, the long-time (and now former) CEO of Berkshire Hathaway. Buffett’s annual shareholder letters were legendary. He always had a tidbit or two about management, leadership, and decision-making that stuck with me. I read his letters religiously each year when the company released it. One of his best lines is, “You only find out who is swimming naked when the tide goes out.” Meaning, when times are good, everyone seems brilliant. It’s only when times are bad that you truly know who has it under control.

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One of Buffett’s most brilliant leadership moves was in how he structured the Berkshire corporate office. Their website lists 68 subsidiaries it fully owns, but it is believed that over 80 companies are currently owned by Berkshire, including GEICO, Benjamin Moore, Sees Candies, Duracell, and more. That doesn’t even count the enormous percentage of some public companies Berkshire owns as well, including 27% of Kraft-Heinz, 21% of American Express, 9% of Coca-Cola, and more.

It’s believed that Berkshire employs nearly 400,000 people across its entire web of operations. Yet, only a couple dozen employees staff their corporate headquarters in Nebraska. This is a company that oversees over $400 billion of annual revenue. It’s the 13th-most valuable company in the world at the moment. And they have just over 20 staff members overseeing it.

Why do they do this? According to Buffett, because it makes micromanaging nearly impossible. It’s difficult enough to micromanage one company – trust me, I’ve watched it happen many times throughout my career. But to micromanage scores of companies, some of whom are doing over a billion dollars of annual revenue? That’s just nuts. Buffett’s mantra is to hire good people and trust them. And he ensures the alternative is impossible by keeping the headcount to a bare minimum. At first glance, one would think that takes some hefty cojones. But after thinking it through, it makes perfect sense. Why would you hire someone if you are just going to second-guess their decisions?

Another executive that I’m fond of is JPMorgan Chase CEO Jamie Dimon. He’s led the world’s largest bank since 2005, an enormous reign in an industry where leadership turns over much more often than 20-plus years. Forgetting how successful his own company is, world leaders and economists look to him for guidance. He was even rumored to be in the running for U.S. Treasury Secretary or the chairman of the Federal Reserve, before he made it clear he wasn’t interested. In an era where high-powered financial world leaders are usually lambasted, Dimon has the respect of nearly everyone.

And it’s not an accident. I’m convinced the reason is because of his patience and his humility. He understands that he doesn’t know everything. He doesn’t try to convince anyone he does. And he shows legitimate interest in learning not just from those around him, but from people many rungs beneath him.

In a recent interview with Fortune, he said, “There’s a humility about learning. Every day, if I need to know something, I have to call you up to find out. I’m not an expert in everything that takes place in the company. If you get arrogant, complacent, a lack of curiosity, you’ll kill the company.”

But more importantly, his actions speak louder than his words. One of the tidbits I learned over the last few years is that Dimon and his executive team go on an annual bus tour to visit a bunch of Chase branches in a region of the country. And it’s not just for show. Sure, it starts as a giant pep rally to get everyone excited. But afterward, he sits down with everyday employees to find out what the company can do better. He wants to see them in action, how they work, to get ideas for improvement.

In a Wall Street Journal feature covering the 2025 tour, he explained that the first time they did this, they returned to headquarters with “over 1,000 things to fix. I’m not kidding.” Leadership may happen from the top, but it has to start from the bottom. You can’t lead without knowing what needs to be done. And you know what needs to be done by learning from people at every rung of the ladder, especially those on the front lines.

Now, in the same Fortune interview, Dimon also joked, “Management is a lot of fun, except for two things…customers and employees.” And while I certainly identify with that mantra1, the reason he can joke about that is because his customers and employees know that he truly cares about them. They know he takes the time to learn from them. They know he relies on them to make the company better, that he can’t do it himself. And they know that he will do everything in his power to make improvements to the company they devote their time to.

Dimon and Buffett didn’t create their aura in a day, a month, or even a year. They did it over the course of many years of putting in the work, often quietly, in order to achieve their company goals. And people see that work. You don’t need to tell them you’re doing it or advertise the fact. Actions speak louder than words, but those actions need to occur consistently and over a long period of time.

Most of us will never write an annual shareholder’s letter or go on an annual bus tour throughout America. So how does this scale down for those of us in small businesses? First, by recognizing the obvious: leadership often feels unsatisfying because it often looks like you’re doing nothing special. Leadership isn’t developed with big displays of bravado. It’s done with baby steps that are sometimes imperceptible to anyone else – even yourself. But if you’re doing it properly, one day someone around you will think, “Huh, how did we get here?” and realize the effect you had on the direction of the company. That’s how loyalty is built: you show people the way, and give them the space to follow.

And Buffett is right: great leadership is recognized only after the tide goes out. Dimon was a lifeline for the entire economy, let alone his own company, during the 2008 financial crisis. He held everything steady and continued to grow in the face of massive roadblocks. I recall a few times during my career when things were rough, and everyone in our building knew it. It was those times where I often gathered segments of my staff, or even the entire company, to make sure everyone’s concerns were heard. Were we on the right track? Was the rough patch something we just had to wait out, or did it require significant decision-making or evolution? Just asking these questions and listening to what people have to say helps make them know you’re working on their behalf.

Because of pop culture, we often cling to illusions of leadership that resemble dramatic episodes. Whether it’s a single decision that comes to mind with a shout of “eureka!” or a verbal brow-beating to get someone to do what’s necessary, many people believe in these fictitious ways of getting to the top. But that’s simply untrue. My most important moments of leadership generally occurred within the quiet of my own office, or even amidst something I chose not to do. That’s why leadership often feels unsatisfying in the moment. You rarely feel it working until months or years later.

So why does it feel like something’s still off? Talk to anyone on Main Street, be it consumer or small business, and people aren’t feeling too hot. The economy of the last few years has had a plethora of headwinds – inflation and tariffs among the biggest. Larger businesses have hung on just fine. Smaller businesses, on the other hand, are another story.

My grand theory recently has been this: small businesses are falling so far behind the rest of the economy that they are no longer the natural engine of growth in the United States. But since small businesses don’t publicly report their financials, it was nearly impossible to support that hypothesis. That is, until recently.

ADP, one of the largest payroll firms in the country, released their monthly employment report and there was a chart that stopped me in my tracks:

These three lines are the change in jobs in the last 12 months. And they show that mid-size and large companies are growing their employment, but among small businesses, defined as those under 50 employees, employment is plummeting.

I delved deeper into their report and it’s as bad as the chart suggests: in November, small businesses cut 120,000 jobs. And private employers (regardless of size) cut 32,000 jobs. Mid-size and larger companies had cumulative job growth of 90,000. That means that almost the entirety of recent job growth has been in large, public companies.

I’m always skeptical of an outlier. So I went directly into the government’s data to see if I could find anything different. And I couldn’t.

The BLS Quarterly Census of Employment and Wages shows that just over 40 percent of jobs are in companies with under 50 employees, a multi-point drop from the historical average. That means over the past few years, the share of jobs that are held by small businesses has decreased significantly relative to its larger peers.

For the life of me, I can’t figure out why this report didn’t get more attention. In my mind, the report should have come with giant red flags and a blaring siren. This is not some niche, marginal group struggling: it’s a core pillar of the U.S. economy, of the labor market.

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It’s one thing if the entire economy is weak. If the jobs report is bad all around, or inflation is high, or GDP has stalled. That’s actually easier to explain: economic weakness affects everyone. But this data suggests something far more dangerous: the smallest businesses are losing, while the larger businesses are winning. The economy isn’t generally zero-sum – there’s enough money in the U.S. economy for everyone to succeed. This isn’t a case of all businesses slowing down or being more cautious: this is active divergence based on the size of a company.

Let’s lay out some of the economic indicators that the government and media use to explain the strength of the economy:

GDP has risen each year. Nominal and real wage growth is up each year. But look at the stock market: in a three-year span, it’s returned a total of nearly 85%.1 That’s only happened one other time since the 1990s.

But here’s the thing: small businesses live in the GDP and wage growth reality. The return of the stock market has little to no effect on those companies, even if they’re invested. Larger companies can leverage that stock market growth in the form of higher pay packages and more valuable stock options/bonuses. They can borrow against their rising equity to help finance their growing costs. Small companies have to rely solely on cash flow. We can’t ask our shareholders or our bank for more money because the value of our company is up. In the small business world, you’re either making money or you’re not.

What has been acknowledged publicly are the skyrocketing fixed costs of running a business. Since 2023, commercial liability insurance is up about 15% on average. Utilities are up more. Payroll costs are up the same amount. Software costs are up around 20%. Employer-sponsored healthcare plans have increased about 25% on average.2

Amidst these rising costs, as well as general inflation that has peskily stuck around since 2021, small businesses can’t keep up. Larger companies can squeeze suppliers or even absorb margin hits. Small businesses generally have to say “yes sir, may I have another.” Larger companies can hire into uncertainty. They can hire and fire at will. If they get into a bind, they can cut some jobs or issue another corporate bond. Small companies can’t miss payroll even once. Small companies can’t pump revenue up in the same way larger companies can. Fixed costs go up regardless of your revenue – that’s the nature of the cost being fixed in the first place. And when fixed costs rise this much, this fast, it’s nearly impossible for revenue growth to match it.

Now, there’s no data that suggests small businesses are closing at any greater rate than businesses of any other size. But it means that the game is changing. It means the definition of success is changing. Growth at all costs is rarely a strategy that works for small businesses in the best of times. It certainly won’t work when the deck is stacked against you.

So, if small businesses are cutting jobs, but still remaining in business, it suggests one of two things: first, that business is down everywhere. I don’t buy that, because again, the data doesn’t support it. The second option is that small business leaders are opting out of scale. They’re choosing not to hire people when they might have otherwise. They’re choosing not to replace an employee that leaves or retires. They’re choosing not to take on more risk. If your fixed costs are up that much more than your revenue, you have no choice but to skimp on your variable costs. That means decreasing payroll, lower-margin products and services, building upgrades, software upgrades, and anything else that can be pushed off another year. Small businesses are opting out of growth because growth has become too expensive.

If you’re in the small business world, you’ve probably heard people complain that it takes way more work to do the same amount of business. There are a variety of reasons behind that: business ownership has gotten way more complex in the last decades; increased regulations have made compliance much harder and more costly; and some owners are simply taking on more tasks themselves to avoid having to expend cash hiring an extra person or two.

I’m not looking to be a Debbie-Downer. In fact, I don’t think this is even an existential risk to small businesses: most family-run companies can adjust to a changing landscape accordingly and survive just fine. This data isn’t suggesting that small businesses are collapsing. Rather, it shows that they are showing quiet restraint and simply acknowledging that the rules have changed. There is a widening gap between Main Street and corporate America, and small business owners know there’s pretty much nothing they can do to change that.

Perhaps we just need to reanalyze what we consider success for a small business. There are pundits every day who declare the American Dream dead, but that’s clickbait. The American Dream is alive and well, though the route to get there certainly has some detours. Just because small businesses don’t seem as successful when we use the same metrics we’ve always used, doesn’t mean we suddenly won’t have small businesses. But we do need to begin adjusting how we view their role in the modern economy, especially if we want to ensure that they’re indeed here in the future.

Unfortunately, I don’t have a solution. I don’t have some inspirational words or a magical fix. There isn’t a policy tweak or a productivity hack that closes this gap. The forces that drive this change are structural to our economy. I would argue that being a small business owner has never been harder than it is now. And business is supposed to be hard. No reasonable person ever asked for it to be easy.

But we’re entering new territory now. We’re in a society where the public as a whole seems to be okay with small businesses being left behind. Everyone says they want to support small businesses, but when they have to tighten their purse strings, they understandably migrate to Walmarts, Amazons, and Costcos. I don’t blame them – I would do the exact same thing. No one looks out for you better than yourself.

The danger isn’t that Main Street disappears. Rather, it’s that we keep pretending we can continue to succeed using the old playbook. The danger is in doing the same thing we’ve always done, and expecting the same result. Times have changed, and sometimes you can do everything correctly, and still fall behind.

Whether this shift is a long-term problem or simply a rational evolution of a global economic superpower is yet to be seen. We’ve lived through major economic transformations before – the industrial revolution, the dot-com era, and now the rise of artificial intelligence. And we’ve always come out the other side. But each of those major shifts in society still produced long, uncomfortable periods where entire groups got left behind.

Small business owners aren’t suddenly less capable or less driven. Rather, they’re responding rationally to an environment that now rewards scale, capital access, and risk absorption in ways they simply can’t match. The real risk isn’t that small businesses disappear; it’s that we continue to judge them by outdated measures, expect them to control the things they can’t control, and fail to recognize that sometimes the smartest move in a changed system is not to grow at all.

Just about everyone starts off working for what we can call “survival income” – making enough money to put food on your table, support your family, maybe buy a house, or any other typical financial goal. That can quickly morph into “status income,” when suddenly you want a larger house, or you want fancier decor, or luxury vacations. At the far end of the spectrum, it can even become “identity income,” where your earnings become indistinguishable from your sense of self-worth.

Don’t get me wrong, there is nothing wrong with wanting to achieve immense financial success and reward yourself accordingly. But some people continue chasing success long after the chase stops making sense. It starts with “I just need enough to pay off my credit card debt,” but can end with “If I don’t have that yacht, will anyone truly love me?”

Okay, I went a bit off the deep end. But you get my point.

We aren’t built to recognize the exact moment when “more” stops being useful. In his best-selling book The Psychology of Money, Morgan Housel discusses what he describes as “the relentless pursuit of more.” The research shows that it often results in “irrational behavior, causing us to…make choices that conflict with our values.”

You see this occur regularly in business, especially in small business leadership. Leaders and owners burn out not because a business fails – it happens when you discover success hasn’t fixed all of the problems you thought it would. I’ve written endlessly about the fallacy of money equalling happiness (https://www.mainstreetmind.com/p/employees-say-theyre-motivated-by). Things can be going great, but you’re still dragging yourself out of bed each day, mustering up the energy to go through the motions yet again. You say to yourself, “I just need to do this one more year,” but then five years later, nothing has changed. As leaders, we tell ourselves it’s responsible – noble, even – to keep pushing. In reality, we may be hanging onto something long gone – a past version of ourselves, a passion that used to exist but has long disappeared, or anything of the ilk.

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The Catch-22 is that a business, by its nature, always wants more. Everyone around you expects you to grow each year – your employees, your customers, and your vendors. If you’re not growing, you’re contracting. If you’re not evolving, you’re falling behind. How would you appear to those who look to you for leadership if you said, “Eh, this year we’re just going to ride it out and see what happens,” and put your feet up? No ethical leader could do that in good conscience.

Housel also delves into how the fear of the unknown affects people’s financial behavior. “An uncertain future drives many to seek more money than they might ever need,” he says. “This relentless accumulation often comes at the cost of time, relationships, and peace of mind.” And those items are priceless – you literally cannot put a monetary value on them. Time, freedom, reputation, happiness, social and familial relationships: all of these are some of the key factors in one’s life satisfaction, and no amount of money can buy them. Yet, all of them suffer when you pursue additional financial success above all else.

You could argue that freedom is something you can indeed “buy” with money – generally freedom only comes once you have enough in life to not worry about where your next paycheck is coming from. But how many people out there have plenty, yet cannot seem to make the decision to take that freedom? We all know people like that – financially secure on paper, terrified in practice. They’re terrified of not working, terrified of losing the identity that is linked with their career, terrified of the unknown. So I would argue that freedom isn’t something money can buy; it’s something you need to be willing and ready to claim once you’re able.

There’s an old story, likely apocryphal, but eye-opening nonetheless. The late Kurt Vonnegut goes to a billionaire’s party on Shelter Island with author Joseph Heller. Vonnegut tells Heller that their host, a hedge fund manager, makes more money in a single day than Heller did from the sales of Catch-22.

“Yes,” Heller replies, “And I’ve got something he can never have.”

“What on earth could that be, Joe?”

“The knowledge that I’ve got enough.”

A quick caveat: the definition of “enough” is very personal. It is different for everyone, depending on their income level, financial situation, or stage of life. But when I talk about “enough,” I’m not talking about a mega-mansion with a luxury car in the driveway. I’m talking about the moment in which your life stops being dictated by fear. That fear could be the fear of failure, the fear of the future, or the fear of ending one chapter and beginning the next one. Whether we’re willing to admit it or not, most of us know that feeling well in advance.

If you do have enough, then what are you still working for? Is it because you’re still passionate about your work? Or is it because you don’t know what else to do? Is it because you wake up each day energized about the day to come? Or is it because you’re scared of the alternative?

I’m not one for New Year’s resolutions, but I do like using the turning of the calendar as an opportunity to reflect. As we head into the new year, ask yourself these questions. Be sure that the reasons behind your continued hard work still make sense.

Enough is something that we often don’t think about amidst the day-to-day stressors of life and work. But it’s something we should all spend a bit more time focusing on.

Enough isn’t a number. Enough is a decision.

Hockey is a game played with five skaters on the ice for each team, plus a goalie. That’s 12 total players at any given time. However, a team has the option to “pull the goalie,” meaning the goalie skates to the bench, and a sixth skater jumps on the ice. While that leaves the net empty and open for the opposing team to score, it also gives the team with six skaters a man-advantage, and a higher chance to score. It’s a high risk, high reward strategy, usually utilized at the end of a game when a team is desperate to score.

The idea of this is that, if you’re losing by one goal, you need to make a really hard push and do anything possible to tie the game. Whether you lose by one goal, two goals, or ten goals, it’s still a loss. You don’t get additional points in the standings depending on your winning margin. So, as backwards as it might seem, late in a one- or two- goal game, teams would historically heighten the chance of conceding a goal in order to raise the odds of scoring a goal themselves. It’s why the last minute or two of a one-goal hockey game is often incredibly exciting. Everyone is pulling out all the stops, on both teams.

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The problem with this is that, for decades, hockey coaches would only pull their goalies in the last minute of a game, and no earlier. There are a variety of reasons for this: perhaps a coach trusts their team may be able to tie the game without the extra skater. Maybe the coach doesn’t think the extra skater gives their team that much of a better chance to tie the game. More likely, however, is that subconsciously coaches are terrified of the perception of what could happen if they pull their goalie too soon. While it’s technically true that losing 3-2 or 10-2 is the same thing, no one wants to be on the losing end of a blowout. Especially in a career where job security is minimal, coaches don’t want to stand out for poor decision-making. Instead, it’s better to take the safer route, perhaps give up one empty net goal, and move on to fight another day.

But over the last 15 years, there has been a push in hockey (as in all sports) to utilize data and analytics for better decision making. One of the strategies that kept being pushed by analytic nerds was that coaches should be pulling the goalie much earlier than they had historically. Unsurprisingly, most coaches (hockey being an old-school sport amidst an old boys club) rejected this data.

Then, in 2018, an unpublished paper by Clifford Asness and Aaron Brown made the rounds in the hockey world. They dove deep into the data and found that, on average, coaches pulled their goalie about three minutes too late when down a goal. They found that if a team was down one goal, the ideal time to pull their goalie is with just over four minutes left in the game. If they were down two goals, they should pull the goalie with 13 minutes left in the game. Down four goals, the data shows the goalie should be pulled the entire game.

Their data showed that, on average, a team is more likely to score a goal than concede a goal with the goalie pulled. So, while you may lose a bunch of games with this strategy, you’re more likely to win in the long-term. In fact, the researchers found that utilizing this strategy would earn an average team four more points per season. That may not seem like a lot over an 82-game season, but this past season four points would have been enough for two teams to make the playoffs that ultimately didn’t. In the 2023-24 season, it would have been enough for three teams. That is the difference of millions of dollars of revenue, perhaps another year or two of job security for a coach or player, and increased happiness of the fan base.

Even so, it took teams many years after this research to actually change the way they did things. Now, teams certainly are willing to pull their goalie much earlier – not quite with four minutes left, but definitely earlier than they used to. Hockey is a conservative, slow moving business – it takes a long time for people to change their habits. But in the meantime, dozens of players, coaches, and general managers likely lost their jobs because of their inability to change their habits. “This is the way we’ve always done it.”

This trap is something that has not only bothered me for my entire career, but is also one I’ve found myself falling into as I get older. It’s incredibly easy to just stick to the status quo, since change is often so complex, especially in business. When I was younger, I would push back against these “ways”, because I wasn’t a part of the decisions in how we did those processes. Nearly 15 years later, there are processes that I put in place that may need changing. And I certainly find that it’s much harder to change something that I’ve implemented than it is to change something that someone else implemented.

Yet, this is how a business stagnates. As business leaders, our job is to always keep growing, to always keep improving. Just because we made a process more efficient last year, doesn’t mean we can’t continue improving it this year. Just because we spent money on a solution a few years back doesn’t mean there isn’t a better option (which also costs money) right now.

There are endless examples of this in the sporting world, including how baseball uses their pitchers; how football coaches choose whether or not to “go for it” on fourth down; how soccer players take or defend against penalties. There are also a plethora of examples that you can find just by diving into your business’s operations. Most of us aren’t in denial about what processes or strategies we use that are outdated. It’s simply that we often don’t want to make an adjustment, because something new and unknown is terrifying. It’s the principle of “the devil you know.”

This is the part where I usually try to give advice or suggestions on how to avoid falling into some trap. But to be honest, this is one that is incredibly difficult to do. There’s no secret recipe for getting past “the way we’ve always done it.” More often than not, you simply need to step to the edge of the cliff and just jump. There’s no way around it. Especially for larger changes, it can be terrifying and anxiety-inducing. But if you want to progress, improve, and continue growing — not just in business, but also personally — you often have no other option.

Pull the goalie.

A trolley is going down a set of tracks. It’s heading in a direction that will run over five people currently on the tracks. However, you can pull the lever and force the trolley to the other track, where just one person is standing. Do you pull the lever?

This is one of the oldest philosophical thought-pieces. Essentially, it’s asking if you’re willing to let five people die by doing nothing, or cause one person to die by pulling the lever. Most people say they have no problem pulling the lever, because they see it as saving four lives.

But if you make the example more realistic, you can throw a wrench into the thought process. Say you’re a doctor, facing five patients who will die if they don’t get transplants by the end of the day. And you have a single patient with all of the needed organs. Are you willing to kill the one patient in order to harvest the organs and save the other five? Or are you comfortable doing nothing and letting the five patients perish?

There are all varieties of the trolley problem, some more ridiculous than others. But the bottom line is that it forces us to come face-to-face with the issue of omission vs. commission.

Omission means you fail to do something right by not doing anything. Commission is when you make a decision, but you do it incorrectly. Omission is passive; commission is active. Here are a few examples:

Commission: a doctor prescribes medication that the patient turns out to be allergic to – the patient dies.

Omission: a doctor takes no action when faced with a patient’s symptoms - the patient dies.

Commission: a witness lies under oath in order to put someone behind bars. The defendant is found guilty.

Omission: a potential witness fails to offer exonerating evidence. The defendant is found guilty.

Commission: telling a lie.

Omission: withholding the truth.

Commission: bullying someone.

Omission: watching someone else get bullied.

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There are countless examples of this through all walks of life. And some of the fun in these mental exercises is seeing what variables you can add to the equation. You can try a wacky version of the trolley problem here.

In general, the human brain is wired to commit sins of omission, rather than sins of commission. We do not want to actively harm anyone else. Oftentimes, that becomes irrational. Other times, it’s right.

Look at the entire medical profession. The Hippocratic Oath says, “First do no harm.” It doesn’t say “Do good.” It doesn’t say “Heal sick patients.” First and foremost, we’ve been taught, do not harm another person. And that’s fantastic advice, when your career involves life or death decisions, or when the fate of another human is potentially in your hands.

But in business, most decisions we make are not life or death. In fact, I can’t remember any time I’ve made a decision that had those types of consequences. Almost every decision we make is ultimately financial, even the difficult decision to lay someone off.1 Yet, in business, missing out on a great opportunity is viewed as less problematic than taking a risk and failing. I’d like to say this is perplexing, but it’s not. This is how our brains are wired. Be risk-averse, be safe, “first do no harm.”

When we engage in “omission” as business leaders, we’re essentially saying that we’re afraid of failure or error. That’s perfectly rational – no one wants to fail. No one wants to make a mistake or make the wrong decision. But as a business leader, those around you are relying on your decision-making abilities. You end up in your role because you have to be able to make those difficult decisions. Frankly, if you couldn’t, you likely wouldn’t be in your position anymore.2

I’m certainly a victim to the omission vs. commission bias on a regular basis. No one likes change, no one likes risk, and no one likes the chance of failure. But I often think back to the riskiest business decision we’ve ever made as a family, one that I was at the forefront of. Years ago, we had the opportunity to acquire a company that would help us vertically integrate within our industry. It was a larger financial risk than we had ever committed to, and we were terrified. Our company has always been conservative and fairly risk-averse. This was not one of those moments.

The safe thing to do would be to carry on with the status-quo. But we had done an incredible amount of analysis, as did the professionals we hired, and we saw exactly what the financial benefit was going to be over the course of the next ten years. Even with those numbers slapping us in the face, we still were afraid to pull the trigger. I honestly can’t remember, this many years later, what finally convinced us to okay the deal. But I’m assuming it was our family collectively saying something to the effect of, “F**k it”.

As it turns out, it was perhaps the smartest business decision we’ve ever made. Our analysis was spot on, and 13 years later we’re still reaping the benefits. That doesn’t mean that any risky decision is worth making. But it means that, if you’ve done all of your homework, all of your research, and have triple-checked yourself, it’s irrational not to do something that will benefit your business.

We have certainly failed at many things. And though it doesn’t feel like it at the time, years later no one remembers those failures, including yourself. Many leaders are more comfortable doing nothing than something, because if you do nothing and fail, you are less likely to be criticized. If you do something and fail at it, you are more likely to be criticized for making a bad choice. But that thought process will inhibit growth in your business. Do your homework, look at the pros and cons, and make a decision based on what will be best for you and your business. Pull the lever. Even if it’s a little terrifying.

There is a tendency among people who aren’t used to having power (or people that are incredibly insecure) to try and show off their power in the most obscene ways possible. Telling people how powerful you are, and even utilizing that power, is not effective, especially if you want to craft the perception of a strong leader. If you run a company, everyone in the company inherently knows that you can fire people. So what good does it do to remind those around you regularly that you have this ability? It might work once, but after you utilize that strategy a few more times, you’re just a vindictive jerk.

Instead, the best show of power is not to use it – especially when people know that you could.

Let’s dive into the sports world for a great example. With the new hockey season among us, this situation came up a few times as some very large contracts were signed between teams and their superstars. It made me double down on this opinion that power is best utilized when it is not utilized at all.

In the last few weeks, two NHL superstars signed enormous contracts to stay with their existing teams. A brief background for those who don’t follow hockey: the league has a salary cap, and the most a player can make is 20 percent of the cap, which for this coming season is just over $19 million. No player has ever signed for 20 percent of the cap ever since it was implemented in 2005. The highest-paid player for the 2024-25 season made just $14 million.1

So, it was pretty shocking when Kirill Kaprizov, the Minnesota Wild’s top player and one of the best players in the world, reportedly rejected a contract extension that would pay him $16 million per season. Fans and media debated whether that meant Kaprizov wanted to leave Minnesota, or if he just wanted to be paid more. That argument was settled days later, when he signed an eight-year extension worth $17 million per season, the largest salary in NHL history (and by far the largest salary in the post-2005 cap era). Kaprizov had the power to name his price – and he did, bending Minnesota’s management over a barrel, since their option was essentially: pay up or lose the type of player that you may not come across for another generation.

That contract then jump-started another discussion, this one about Edmonton Oilers superstar Connor McDavid, generally agreed to be the best player in the world and perhaps one of the best to ever play the game. Entering the last year of his current contract, he has been eligible to sign an extension since July 1, yet had not done so. People were clamoring over how much money he would ask for. The discussion was pretty much identical across the hockey world: McDavid could ask for 20 percent of the cap – the maximum salary – and Edmonton would have no choice but to pay it. No one wants to risk losing a player of his caliber. The only question was, what salary would he demand?

Everyone knew that McDavid, at that moment, was the most powerful person in the hockey world. He could literally name his price. So what did he do?

He asked the Oilers for no raise at all. Just a few days ago, he signed a two-year contract extension that pays him $12.5 million per season, the same salary he has made since 2018. McDavid will be the fifth-highest paid player in the NHL next year – and the second-highest paid player on his own team.

And what was the general reaction from the hockey world? Pretty much wonder and amazement. It was no secret that he could have demanded $19 million and received it with no argument. Yet, he chose to keep his salary the same. Now, we mortals can argue about whether or not there is a legitimate difference between making $12.5 million and making $19 million – rich is rich. But in a cutthroat world – the sports business world – most people don’t look to be “nice.” They want to win, they want to max out their earnings, and they want to be the best.

Take a similar example from a year ago. Sidney Crosby, the 38-year-old captain of the Pittsburgh Penguins, was in negotiations for a small contract extension to get him to the end of his illustrious career. That career includes: three Stanley Cups, Olympic Gold Medals, perhaps the best player of his generation, and arguably one of the top five players of all-time. So what did he demand in this new contract?

$8.7 million per year over two years.

That’s it. He also could have asked for the moon and received it. Instead, he kept his pay at the same rate it’s been since 2008, when he was 21 years old. This season, Crosby will be the 46th-highest paid player in the league. It’s wild to think there are even five players who would be more desired this season, let alone 45. Yet, Crosby didn’t feel the need to demand the max.

Just like McDavid, Crosby had the power to name his price. And he essentially chose not to. McDavid didn’t need to take the max. Everyone already knew he could. Players may choose to take a lower salary for a multitude of reasons, but chief among them is to give their team the ability to use that excess money to sign other good players. A sport with a hard salary cap is a zero-sum game – every dollar given to one person is a dollar less you have to give to someone else. McDavid and Crosby are telling their bosses, their teammates, and their fans that they want to use their power for the benefit of their team, rather than for their own personal gain.

The supply of superstar hockey players is light, which generally makes the demand high, which makes the pay rate high. But Kaprizov chose to follow that economic curve, while McDavid and Crosby chose to parlay their power in a different way. Don’t get me wrong – any player has the right to demand a market rate for their services. I harbor no feelings of ill-will toward Kaprizov. He wanted to max out his pay, and he has earned the right to do that.

But after the dust has settled on these deals, the ones that hockey fans and media continue to be in awe of are those that Crosby and McDavid signed. Everyone agrees: they had the power, and chose not to utilize it. In a way, that makes them even more powerful – the fact that the entire world, including their employers, understands this.

This same dynamic plays out in the business world each day. Leaders who constantly remind everyone they’re in charge may command obedience, but they don’t command loyalty or respect. Those who hold power, but choose not to yield it, command both.

There’s a quote from House of Cards that I always remembered in business. I’m paraphrasing here, but it’s when the main character is talking about courage. He says that anyone can run their mouth and yell and scream. But what takes real courage is keeping your mouth shut, holding it together when the stakes are high. I often think about that. Sometimes, even when you want to tell someone off or get in someone’s face, the more powerful thing to do is say nothing.

I find the same with power, especially when you’re in a position of business leadership. Everyone knows you have power, just by the nature of your position. What makes the power even more awe-inspiring, is when you choose not to use it. In business, as in sports, the most powerful people are the ones who never have to remind you that they are.

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Our brains are wired to believe that our beliefs are correct, and also to be socially accepted by those around us. Being told no, or being told our idea is incorrect, threatens both of those. All of us, at some time, have witnessed a colleague react horrifically when they were told no, or when they were told they had to do something that they didn’t agree with. It’s not fun – but as a leader, we often have to make these hard decisions.

A way around this is to make people believe that your idea was actually theirs. This isn’t a matter of forcing your idea onto others. Rather, it’s a matter of getting someone to think the way you are, and seeing if they get to that same conclusion. If they don’t, then perhaps your idea wasn’t correct in the first place. But oftentimes, someone fails to agree with an idea because they’re only looking at it from their own perspective.

You know how the book is always better than the movie? There’s a psychological reason for that. When we read, our brains create. Our minds build the world that the book itself has presented, and we forever believe that our mental image is correct. When the movie comes out, we’re seeing a director’s mental image of that same book, and it rarely matches ours. It’s the ultimate form of confirmation bias – we have a belief that the book looks this way, and the movie is that way. When two ideas collide, the one in our own head wins.

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Which is why it’s so difficult when you want to suggest an idea, or try something new, and the person who has to actually implement it is putting up a roadblock. Their mental image of the situation is different from yours, so the pushback is not just natural – it’s what has helped us survive as a species over millennia.

Ultimately, you need to get someone thinking about a problem in the same way as you, so that they can get to the same place you did on their own. Here are a few tips of how to get there:

Use the Socratic method of questioning

Asking someone questions is a much better method than trying to convince them of something. If you tell someone “this is how it should be,” their first response will likely be defensiveness. If you ask open-ended questions, however, they are much more likely to ponder the situation and consider different options. It’s a typical tactic lawyers use every day. You also may want to start with the end goal and work backwards. Why aren’t we at that place right now? What are some options to try to fix that issue? Is there something we need to purchase to make it better? Do we have the solution here already? You know where you’re trying to get to at the end of the day – but you need your colleague to get there as well.

“Yes and”

While this is actually a technique used for improv comedy, there is plenty of research showing that the use of the word “and” instead of “but” makes life much easier. If your colleague expresses an opinion that you disagree with, don’t say “Yeah, but…”, as that will cause defensiveness from the other side. Tell them, “Yeah, and…” Your idea will still come across, but in a way that will lessen the chances of the other person closing off their mind to an alternative opinion. It shows you’ve heard them and are taking their opinion into account when presenting your own.

Know Your Audience

More than likely, you know your colleagues quite well, especially if you’ve worked with them for a long time. You know their strengths, weaknesses, personality flaws, and how they best operate. Utilize this knowledge to frame your argument in a way that will give you the best chance of success. If you know one of their biggest concerns is their workload, try to ask questions that help them see how the change will ultimately make their life easier in the long-term. If their concerns tend to be about making a wrong decision, ease their mind by reminding them that mistakes are how we learn and improve. Use your knowledge of them to your benefit, by framing issues in a way that they will care the most about.

Don’t take credit. Ever.

Being a business leader is not an ego-boosting activity. I’ve written about this ad nauseum, but it can never be said enough. As a business leader, you should care about only one thing: is it good for the company? If the answer is yes, then nothing else should matter. If your colleague’s “idea” is actually yours, you shouldn’t care about claiming credit for it. You should only care that it gets implemented. That internal satisfaction should be plenty. If you’re looking for external praise or external motivation, you should get out of business right away. As Winston Churchill once said, “Neither look for nor expect gratitude but rather get whatever comfort you can out of the belief that your effort is constructive in purpose.”

Perhaps the biggest key to this entire strategy is to make sure you’re not over-using it, or that you’re using it for miniscule issues. Utilizing this strategy to convince someone that they should take out the trash is a recipe for disaster. But if you’re looking to improve a larger part of the business with bigger ideas, especially if you want to try some different things to see how they work, I highly recommend making others think that they’re the ones who came up with the idea in the first place. Not only does it get them on board with what you are ultimately trying to achieve, but they end up much more enthusiastic and energetic upon implementation.

By that, of course, I mean your staff – everyone from management down to entry-level employees. Respect is like trust: it can take a lifetime to earn it, and just seconds to demolish it. And by the time you’ve been a business leader for some years, you learn quite quickly how long it can take to garner that respect.

In my experience, it was a very bumpy road in the years preceding when I took over. As the third generation in our family business, I was put in an awkward position, just as my father once was: I was suddenly put in charge of people that I had grown up with, many of them twice my age. They were working at their desks while I was a toddler running around the place.1 Now, I’m suddenly dictating what people are supposed to be doing in the jobs they have done forever.

I already had some experience with this from years earlier, when I first entered the business full-time, a point in which the only experience I had was listening to dinnertime conversations at home, as well as a few summers working in the building – hardly management material. Yet, at that time, I just assumed there would be a level of respect for a “member of the family.”

Turns out, I was quite wrong. I made the mistake of expecting respect, rather than figuring out how to earn that respect. The good news is, the building was already populated with people who truly cared about my family and the business, and over time we all found an excellent balance. Part of that meant I had to bide my time before suggesting or implementing major changes to the company. No one likes a young, rash kid who walks into a successful business and says, “we’re gonna do things differently!”

Now, nearly 15 years later, I’ve learned quite a lot about the best ways to garner respect. And the answer is quite simple:

You need to show your staff that you care – that it’s about more than just money.

It doesn’t take a genius to make numbers add up, put in some crazy sales policies, cut costs, and rake in the profit in the short-term. However, it is extremely difficult to run a successful, profitable business, while also showing how much you care about the company and the people that run it on your behalf. As NFL coach Marvin Lewis once said, “They don’t care what you know until they know that you care.”

How do you show them that you care? Here are a few ways that I find are extremely beneficial, and something that should come easy to any good business leader:

Know and share your motive

Make sure your staff knows why you do what you do. If you don’t have motivation, they certainly won’t. This also comes into play with basic business decisions. It’s common knowledge that the phrase “because I said so” can destroy years of great parenting. It’s the same thing in management. If you firmly believe in a decision you’ve made, explain it to your staff, especially if they’re skeptical. If you show your motivation, they will respect it, even if they disagree. As famed financial consultant Peter Drucker once said, “[Effective leaders] have authority only because they have the trust of the organization.”

Be honest

Honesty is by far the easiest item on this list. I remember one of my middle school teachers saying that if you’re going to lie, you better have a good memory.2 To me, there is no reason not to be honest, so long as the topic isn’t proprietary. That means, if someone wants to know specific financial figures from the business, I’ll politely decline. But I will certainly open up about why we do things a certain way, the risks we do or don’t take, and what we hope to achieve with certain decisions. Again, even if people disagree with an action you’ve taken, they will respect you if they believe they can trust you.

Put the company ahead of yourself

A mantra that I preach (and practice) regularly is, “It’s all about the company.” Meaning, everything we do is for the betterment of the company. Sometimes, that means saving money. Sometimes, that means spending money. Sometimes, that means making a decision that may not be good for you personally. Sometimes, that means changing an internal policy that irks people. A business is not a personal piggy bank – you need to show with your actions that the decisions you make are to help make the company, and therefore all of your employees, more successful. If it’s good for the company, then it’s good for you – even if it isn’t.

Lead by example

Especially when business is rough, you need to set the tone. A phrase I learned from writing about Ed Snider is “a fish stinks from the head.” You need to be the optimist so that the trait trickles down through the organization. And it’s not just about saying positive things. It’s about doing things that people view as a positive attempt to better the company. “Hope is more than the sunny view that everything will turn out all right,” said psychologist and author Daniel Goleman. “It is believing you have the will and the way to accomplish your goals.”

Give respect to get respect

If someone chooses to work for your company, that’s a big deal. They are telling you that they’re willing to put their livelihood in your hands. That’s a huge responsibility, and one that I never forget each day when I walk into our building. Furthermore, if someone chooses to continue working for your company year after year, it’s an immense sign of respect. Contrary to old-timey thinking, “a paycheck” is not a thank you for working. It’s the reason they work. I’ve written before about money not being the main motivator behind people’s day-to-day work. You need to give people additional, non-monetary respect to show that you care about them, especially if you want them to reciprocate.

Always be open to learning

I’ve written before about the best trait a leader can have. Part of having curiosity is showing a willingness to learn – or more importantly, admitting that you don’t always know the answer. Many people in your business will be smarter than you, both at specific tasks and in general. By putting your faith in them, asking questions, and bettering yourself, you show an immense amount of respect for them and their work. Contrary to popular belief, admitting you don’t know something isn’t a detriment to your persona. Rather, it’s both normal and humanizing.

Well, the simple answer is that it works. Despite our better judgment, our subconscious, irrational brains still want to see the smaller number. Our brain loves impulsive behavior and snap judgments, and it certainly loves seeing a small number on the left side of a price. This has been referred to as “left-digit bias.” It is the tendency of people to prefer the lowest possible number in the left-digit when looking at the cost of an item or service.

The “round number bias,” on the other hand, is the opposite: the preference, in certain scenarios, of people to prefer the round number to something just below. In their fascinating book, Scorecasting, Tobias Moskowitz and Jon Wertheim write about the round-number bias with regards to sports. When their book was published in 2012, they discussed some data that is almost unbelievable. A magic number for a baseball hitter is .300 – meaning they get a hit (or a double, triple, or home run) 30 percent of the time. That’s a historically large number: only the best of the best can hit the ball that efficiently over the course of a 162-game season. The authors realized, though, that while .300 hitters are rare, what’s even rarer are .299 hitters.

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If a player was hitting .299 going into the last game of the season, they always attempted to get a hit – many struck out and had their average drop a point, while others got that hit, raised their average to .300, and were promptly removed from the game to secure their final stat line. What was mind-blowing is that, in pursuing this line of questioning, the authors found that in the over 100 years that baseball has existed, there has never been a batter who, when sitting at a .299 average on the last day of the season, walked in their last at bat of the season. Why? Because if you walk, your average is not affected at all. It’s as if the at-bat never occurred. And no one wants to be the person who nearly hit .300. The value of being a .300 hitter, both financially and historically, is immense.

But again, just like with pricing in a supermarket, is there really a difference between a .299 hitter and a .300 hitter? Of course not. They are nearly identical, statistically. Yet, the idea of being just below the round number makes athletes behave more irrationally in order to attain that pointless goal.

There are tons of examples of these statistical mountaintops in sports: 50 goals in hockey, 1,000 rushing yards in football, the 40-40 club in baseball, triple-doubles in basketball – the list goes on and on. But again, is someone who scored 49 goals in the NHL less valuable than someone who scored 50? Is an NFL running back not worth it if they only got 999 rushing yards one season? The value is the same. The only difference is your perception of the value.

This happens all the time outside of sports as well. Studies show that a high school senior is more likely to retake the SATs if their score ends in “-90”. Meaning someone who got 1200 is likely going to be happier with their score than someone who got 1490. The 1490 student is “oh so close” to 1500. The 1200 student is filled with relief that their score was above that nice, round, threshold.

The value of a car drops significantly at 100,000 miles. But is it any older than a car with 99,000 miles on it? The 99,000-mile car is being overvalued, and the 100,000-mile car is being undervalued. The same thing happens in the stock market: many traders place limit orders at round numbers (e.g. $10.00 per share), which creates a liquidity pocket that smarter, algorithmic traders can use to exploit, knowing that there will be a batch of purchases or sales at certain thresholds. It happens in medicine, as well: patients who just turned 80 were 25 percent less likely to get a coronary bypass than those who were just a few weeks shy of 80. A few weeks difference in age is irrelevant, yet even doctors acted irrationally when it comes to a round number.

I distinctly remember, years ago, when shopping for my wife’s engagement ring, learning that a 1.00-carat diamond cost significantly more than a 0.99-carat diamond. I don’t remember the actual numbers, but let’s say the difference between 0.98 and 0.99 was tens of dollars – the difference between 0.99 and 1.00 was closer to a thousand. And as an analytical, math-loving adult, I did what any rational man would do – I bought the 1.00-carat ring because I was not going to live with that risk for the rest of my married life.1

You see what I mean, though? Even when we know the facts, and know that we are acting irrationally, we still can’t help ourselves. If you look deep enough, all of you will likely find examples of this in your own lives each week.

The question, as it always is, is how can we use this natural human bias to our benefit as business leaders? For one, you certainly are stuck pricing things at “-.99” for the rest of your days. Even once the penny is eliminated from circulation, the left-digit bias will still exist, thanks to electronic payments (and stores inevitably rounding up during cash payments).

But on the other side, if you know what types of assets are overvalued, that means you also know what is undervalued. For example, if you’re hiring someone for your business, and the market maintains that this position should require ten years of experience, don’t stick to your guns too hard. The person with nine years of experience is likely just as capable, but probably will not be heavily recruited by others in your industry. Not only are you likely getting someone that costs less, but you will also get someone who is more devoted to your willingness to give them a chance. If you’re hiring at a place that requires a certain GPA, know that 3.0 students are overvalued and 2.9 students are undervalued. Go for the person who gives you the same performance but costs you less.

The same thing with asset purchases. If you’re looking to buy something for your business – let’s say a new printer – don’t be fooled by the round number. If Printer A advertises itself as being able to print 50 pages per minute, and Printer B advertises as 48 pages per minute, Printer B is likely significantly cheaper, but will achieve almost identical performance.

Lastly, if you set goals for yourself as a company, don’t be so blinded by the round number that you act irrationally in order to attain it. If you set a sales goal of $10,000 per month, and you’re on pace to finish at $9,500, it’s more damaging to do something stupid to get that last $500 than it is to simply say, “Ah, we were close. Let’s see what we can improve next month to finally cross that threshold.”

Our brains are wired to see patterns and desire round numbers. Put more simply, our brains are wired to act irrationally. Unlike most biases, simply being aware of the round number bias’s existence doesn’t help you overcome it. More likely, you’ll need to actually talk yourself off a ledge – do I really need the truck that has 49,900 miles? Or can I save a few thousand dollars and get the one with 51,000 miles on it?

By focusing on the implicit value of a product, service, or a person, instead of looking at a number and jumping to judgment, we can avoid making costly mistakes and overpaying for things that, at the end of the day, would not give us any additional benefit.

Most of us in small businesses know a good chunk (if not all) of our customers by face and by name. You don’t hear the CEO of Walmart say, “Hey, Jim!” as a consumer walks into one of their stores. But you likely can do that – more than likely, you don’t just know Jim, but you know his family, what’s going on in his life, and the struggles he’s currently facing.

As a small business leader, you have the unique ability to hear your customers’ comments and concerns, listen to their feedback, and utilize it to help your business evolve and grow. And that’s crucial, because as much as we often know where we need to head, customers are the ones that ultimately help us point the bus in the right direction in the first place.

But there’s one big problem that I’ve learned over the years: customers may tell you what they want you to do, but very often they’re unhappy when you do exactly that. I’m not trying to be snarky or sarcastic.1 And this isn’t a shot at customers. It’s simply a reality of human nature. Even outside of business, we may think we know exactly what we want, but oftentimes when we get it, something still isn’t right. Maybe we thought it was the solution, but turned out not to be. Maybe there is an unintended consequence we didn’t previously consider. Or maybe it just isn’t what we had hoped.

Take the U.S. budget, for example. The country’s budget for 2025 is projected to be just under $7 trillion. Our deficit for the year is projected to be just under $2 trillion. If you ask every American their feelings about this (and countless surveys have been done to find this data), the vast majority will agree on a few points: (1) the deficit is much too large, and we need to get it under control; (2) there is an incredible amount of waste in government spending; and (3) we definitely need to cut from the budget in order to reach our country’s financial goals.

For the record, it’s nearly impossible to get a vast majority of Americans to agree on anything. But there is bipartisan support for fixing the budget and cleaning up government waste. Yet, when it comes time to take action, most people become irate at what cuts might mean for them. “Don’t touch my Social Security,” “You can’t take money away from our military,” “Our children need more funding, not less.” Do these sound familiar? When you talk about the macro – we need to cut 10% from the budget – people almost universally agree. But when you talk about the micro – e.g. funding for education will go down 10% – there is an uproar.

This type of issue occurs every day in big business, but nowhere more so at the moment than in the food industry. The topic of artificial coloring in foods has gotten more and more attention recently, especially after Secretary of Health and Human Services Robert Kennedy Jr. announced that HHS and the FDA are looking to remove most synthetic dyes from the U.S. supply chain before 2028.

Not only is this something that’s received bipartisan support, but it’s something a majority of U.S. consumers have requested in recent years, as more research uncovers the risks of using these dyes in our food. Most other first-world countries are well ahead of us in terms of their use of natural coloring, and just about everyone agrees that it’s about time we catch up as a country.

Here’s the problem, though: in many real-life case studies over the last decade, companies that have attempted to do this on their own ended up receiving huge backlash from their customers. Why? Because people like what they know. Consumers may state that they want an overarching change, but when you get to the specifics, people may not actually want it.

There are numerous stories of companies receiving backlash just for changing the packaging of their food, let alone the actual formula. At one time, Sprite redesigned their cans to make the lemon appear slightly larger. After they did so, they received countless calls complaining that the soda was now too lemony. But they didn’t actually change the formula. It was the same drink, but people’s perception had changed.

Similarly, there is research showing that the same ice cream tastes better in a cylindrical container vs. a rectangular container. Again, same exact product inside. But the perception changes the reality.

So, let’s say Kellogg wants to take all of the artificial dyes out of their U.S. food tomorrow. It wouldn’t be too hard, as they already have done so in most other countries. Now let’s see what your kid’s Froot Loops will look like tomorrow morning:

You can’t tell me with a straight face that the Froot Loops on the left will “taste” the same as the Froot Loops on the right, even though it’s the same product. Historically, when companies remove artificial dyes from their food, the food becomes less appetizing because the color palette becomes muted. Colors appear paler, and the brightness disappears. It might be healthier, but if Kellogg’s Froot Loops sales are going to plummet in the U.S. because of this change, they can’t take that risk.

This has already been the case, like when General Mills removed artificial dyes from Trix in 2016 and created a big fanfare when they announced it. However, consumers immediately stopped buying the cereal, since the bright, fun colors were no longer there. The company had to reverse course a year later and revert the cereal back to its prior look. There are plenty of examples of this happening. Consumers say, “I want artificial colors removed from my food,” a company says, “Okay,” and then consumers say, “What did you do to my food?” It’s a lose-lose for a company trying to do right by its customers.

To me, the lesson of this endless struggle is to ensure you always walk customers to where they say they want to be. Don’t blindly trust them just because they tell you what they want. It’s easy for people to want X, Y, or Z. But they often don’t know what comes with X, Y, and Z. Instead, ensure you slowly move your customers toward that goal, rather than jumping right to the end. It allows the transition to be smoother, while allowing both you and your customer to go through the process together, step by step.

In fact, one food company achieved this with almost no issue. Back in 2016, Kraft Heinz removed artificial dyes from its famous mac and cheese, and didn’t broadcast it. They simply made the change, and the only thing that changed on the box was within the ingredient list.2 When people finally realized what had happened, it didn’t bother them, because they learned that they’d been eating this “new” product for years and it didn’t look or taste any different. “Let’s make sure that we are not ahead of the consumer, that we’re walking with the consumer,” said Kraft Heinz CEO Carlos Abrams-Rivera in a March 2025 Bloomberg article.

Perhaps a solution for a company like General Mills (or anyone) is to offer consumers choices in the short-term, to ease the transition. Let them see a “naturally-colored” version next to the original version, highlighting the health benefits. It’s inevitable that we will be moving to an artificial-dye-less world in the near future – but help a consumer get there with you, rather than insist they do it right now.

Similarly, for your business, if you’re considering a major change in a policy, a business model, or a product offering, be sure you’re doing it in a way that eases the transition for your customers. Walk them to the end goal. Because even if they asked for exactly what you’re giving them, they still may not be ready for it just yet.

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There are days, weeks, even months where business does seem easy. Everything is running smoothly, business is strong, cash flow is good, and everyone, from employees to customers to vendors, seem to be happy.

Then there are times that you feel ready to throw in the towel. We all have those. What leads someone to keep pushing on, while someone else in the same position might decide it’s time to go?

Thinking about this topic recently led me back to an old love in my psychology life: Angela Duckworth.

Duckworth is one of my favorite people in the psychology world. Not only is she a brilliant researcher and an incredible thinker, but there’s a personal connection as well: Duckworth was born in the same city as me, grew up in the same town as me, went to our local high school, and still resides in Philadelphia to this day. She’s a local girl!

Duckworth’s personal story is also extremely respectable. A daughter of Chinese immigrants, she joined famed consulting firm McKinsey after graduating from Harvard and receiving her master’s from Oxford. Shortly thereafter, she decided the consulting world wasn’t for her, and quit to become a high school math teacher. A few years later, she received her doctorate from UPenn, and is now a professor there. She became world-renown after a TED Talk of hers went viral, and she went on to publish a New York Times #1 Bestselling book, Grit: The Power of Passion and Perseverance. Her psychological research has been near and dear to my heart since I was first introduced to it as a teenager.

Initially, her research on grit started with a contract from the U.S. Army to determine what caused some cadets to attrit, while others stayed through the end of their training. She ultimately created what is now called the “Grit Scale”, a self-report survey that has up to twelve questions and helps determine someone’s level of passion and perseverance.

The idea of “grit” has taken on a life of its own in the years since Duckworth published her book. And it’s clear why. I highly recommend reading her book if you haven’t yet, but there are a couple quotes that really stick out to me all these years later. The first one is when she distinguishes between two people, one who says “I have a feeling tomorrow will be better” and the other who says “I resolve to make tomorrow better.” Two very similar, yet incredibly different ways of thinking. The second is when she writes, “Enthusiasm is common. Endurance is rare” This quote perfectly illustrates something I was trying to uncover many years ago.

Duckworth’s research played an enormous role during my senior year of college, when I spent two semesters on a senior thesis that explored talent development in sports and factors that lead to success. For months, I tested college hockey players at our school, minor league professional hockey players, and major league (NHL) hockey players,1 to see differences between each of their mental states. This year-long thesis ended with an hour-long oral defense and a 60-page paper, including eight pages of bibliography and multiple charts that boggle the mind, including this one:

Don’t worry. I still know what about 30 percent of that table means.

To be clear: my study had incredible limitations, including a small sample size and flaws in the design. So scientifically, you certainly cannot take my results and extrapolate them into a steadfast rule. But the results were indeed consistent with a lot of the existing research on expertise, including the traits that were most associated with reaching higher levels of success in a field.

In short, the research I did found that grit was one of the factors that best predicted talent development in sports. But perhaps more importantly, there were factors that specifically predicted grit, such as enjoyment and intrinsic motivation.2 In layman’s terms, you can’t just wake up and say, “I’m going to work my butt off to become an expert at [insert random activity].” That alone doesn’t create the grit necessary to become an expert. You need sincere enjoyment of an activity, as well as the proper motivation for wanting to better yourself at a specific task.

My ultimate goal, if I were to have continued this research past college, was to create a theory of talent development, using a hierarchy similar to Maslow’s. Unfortunately, I never did get the chance to move forward with the project, but I have always kept the lessons from that year in the back of my mind as I’ve worked to improve upon myself as a leader. The main takeaways were these:

1. If you want to become an expert at something, you absolutely have to have a level of enjoyment. That doesn’t mean every moment is enjoyable, but the activity as a whole needs to fill you with passion.

2. Once you have the requisite enjoyment, you need to be intrinsically motivated. Meaning you can’t be drawn to an activity because of the monetary reward, or renown, or social approval. You have to want to do it because you want to do it.

3. Once you have both of the aforementioned traits, you need to have a high enough level of grit so that you can push through any adversity, no matter how much of a roadblock it is. People with high levels of grit are willing to persevere when times get tough, but only when they truly love and enjoy it.

Think of it like a pyramid, with enjoyment at the bottom, then intrinsic motivation above it, then grit above that. You can’t have grit without the traits that come before it. At the end of the day, as a leader, you need to have the grit to get by tough times and difficult decisions. But that grit can only be present if you ensure the enjoyment and the intrinsic motivation remain as well. If the bottom of the pyramid disintegrates, the rest of it will crumble soon thereafter.

Which leads me back to my original question: what causes one leader to keep pushing on, while another leader might decide it’s time to go? To me, it all comes down to enjoyment, or to be more specific, passion. While the passion may not be apparent every day, a leader has to have the passion to push through those tough times. People around you can sense your passion, or lack thereof. If you have it, even if it’s not outwardly on display at a given moment, those around you will feel it. If it’s missing, they will also notice, and their own passion and dedication will suffer accordingly.

One of the hardest things to do, especially amidst a long career, is to keep that passion alive for your business. We all get stuck in the day-to-day grind, that oftentimes it’s hard to remember why we’re doing it. I have a few strategies of my own to try and rekindle that passion when I feel the light is dimming. Find your own strategies that help you get out of a rut.

Business isn’t always fun. Again, if it were easy, everyone would do it. But business also isn’t only enjoyable when it’s easy. It’s enjoyable when you have a purpose, you firmly believe in that purpose, and you commit yourself to chasing that purpose with a vengeance, each and every day, even if those days are filled with impossible challenges.

If your passion is consistently lacking, it’s a big red flag to take a step back and figure out if it’s only temporary, or something more permanent. You can’t lead without passion – and people won’t follow you without it.

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My basic hiring philosophy came from my years of studying psychology in school and the post-years, where I’ve tried to keep up on the biggest theories and researchers in the field (as well as some familial history, which we’ll get to). One of these researchers is Carol Dweck, a Stanford professor and winner of multiple science awards over the years. Her fantastic book, Mindset: The New Psychology of Success, came out in 2006, but I had been familiarizing myself with her research before she published it.

Dweck’s research found that there are two kinds of mindsets among people: fixed and growth. To boil it down quite simply, people with a fixed mindset believe someone’s intelligence is fixed – you’re born with it and you cannot improve it, no matter how hard you try. A growth mindset means you believe that your intelligence is malleable, and you can improve it with deliberate effort.

Now, it doesn’t take a genius to guess that it’s better to have a growth mindset, but the research goes much deeper than that. Fixed mindset people tend to learn with the goal of looking smart (because remember, they don’t believe they can actually improve upon themselves. They are what they are). These people are often afraid to challenge themselves or take risks, because failure suggests a lack of intelligence. They don’t want to look “stupid” in front of others, or even to themselves. Growth mindset people, on the other hand, tend to continuously seek out challenges, because even if they fail, they understand that the experience can help them improve upon themselves for the next time.

Dweck’s research career started with a basic question: “What makes a really capable child give up in the face of failure, where other children may be motivated by the failure”? That question can be asked about adults in the working world as well. The difference between the two mindsets can be seen in two people working on the same, difficult task. One person says, “I’ll never figure this out.” The other one says, “Okay, let’s try this again.” Most importantly, if you don’t have a growth mindset, you can develop one. You can have a growth mindset about growth mindset!1 All it takes is the understanding that you can always improve upon yourself, and you’re on the right track.

But as obvious as this is, our society as a whole seems to refuse to act accordingly, even if we think we are. How often do we see a child struggling with a subject – let’s say a young girl in math class – and say things like, “Oh, she just doesn’t have the brain for math,” or “Well, I know girls aren’t as good at math as boys.” The math children are doing at that age? There’s no innate talent for it. Perhaps I’ll buy the theory if you tell me your kid doesn’t have a brain for AP Calculus when they’re 18 years old. But basic addition? Subtraction? Multiplication tables? Everyone has the capability to learn those skills. By making excuses for them, we are essentially telling them they have no chance to improve their intelligence. What kind of a lesson is that?

So, when we’re hiring for basic or entry-level jobs, why are we so focused on traits that are irrelevant? If I’m hiring someone to work in our office, why would I care if they have previous office experience? Why do I care if they’ve used our specific software before? The only thing I truly care about is if they have the ability and the mindset to learn and grow. No employee, no matter how experienced, comes into your organization ready to hit the ground running, with no training necessary. It’s impossible – every company has their own structure, their own process, their own operational strategy. Even the smartest, most brilliant person needs time to learn that.

The U.S. Army is one of the greatest examples of this. Think about what a private will have to achieve one day: they will have to get in incredible shape. They will have to learn to shoot a weapon accurately. They will have to learn how to read a situation on a battlefield and make life-or-death decisions. It is perhaps one of the most consequential jobs one could have in their life. And yet, does the Army say, “Sorry, we don’t want you, we’re really looking for someone with more experience at wartime strategy”? Of course not, that’s ridiculous. Instead, the Army firmly believes that they can take anyone physically and mentally willing and turn them into an excellent soldier. In fact, they’ve taken Dweck’s research and turned it into a chart for recruits so they know what is expected of them:

The Army talks about the “power of yet.” A recruit never says “I can’t do X.” They say, “I can’t do X yet.” The organizational structure imbues their recruits with the knowledge that it’s only a matter of time before they learn it, because anyone can learn anything.

In fact, our basic hiring practice stems not only from this idea of growth mindset, but from a strategy that came from my grandfather (who was hiring people well before Dweck did her research). He would write a string of random letters and numbers, and ask people to put it in alphabetical and numerical order. If they could do it, he figured they were “smart enough.” Everything else past that could be learned. Our HR manager does something similar today – are you smart enough to work here?2 And do we believe you have the capability and mindset to learn anything past that? Great, you’re hired. It doesn’t always work out, don’t get me wrong. We have our hiring snafus, just like everyone. But as a whole, it makes the process much easier. We don’t care much about experience, how long they held their last job, or any other pointless trait. We just want to know if they are willing and able to learn.

Employing a growth mindset has shown to be incredibly valuable to an organization. “When entire companies embrace a growth mindset, their employees report feeling far more empowered and committed,” writes Harvard Business Review.

“They also receive greater organizational support for collaboration and innovation. In contrast, people at primarily fixed-mindset companies report more cheating and deception among employees.”

Enron is an extreme example of how a fixed mindset can doom a company. Mistakes were seen as failures at Enron, and were not acceptable. At one point, the company was a legitimate, profitable firm. But as their debt skyrocketed and financial errors were made, people covered them up instead of telling their superiors. That culture eventually permeated the entire company, snowballing into what was eventually a complete fraud.

Enron also had an infamous “rank and yank” policy, where every employee in the company was ranked each year, and the bottom 15% were automatically fired. This certainly doesn’t encourage people to learn and improve; it creates fear, anxiety, and paralysis.

The popular idea is that greatness is born, not made. This is especially apparent in sports, where people talk about natural, God-given talent. There are certainly genes and traits that make someone predisposed to be successful athletically, but there are almost no examples of someone succeeding without going through years of hard work. If the best athlete at age 11 believes they’re born with all the talent they’re going to have, that child is going to be passed quickly by those that believe they can improve.

Growth mindset is not limited to just hiring. It can be extrapolated to an organization’s hierarchy, structure, and operation – as well as your own mindset as a leader. When someone makes a mistake, do you automatically criticize them? If so, what is the rationale behind the critique? Mistakes are bound to happen, and criticism is needed in many scenarios. But you don’t want to criticize the mistake itself. You want to find the reason for the mistake, and see if that warrants a proper chiding. Was it that the person didn’t give the proper effort? Did they not understand the training properly and fail to ask for clarification? Were they afraid to ask for help, so instead they guessed?

I don’t have data on this, but I believe the critique I level most often at my staff is, “Why didn’t you ask for help?” I certainly encourage them to have autonomy over their job. But I also tell them to ask questions. If someone fails to do that, that’s a valid critique. You’re not mad at the fact that they made a mistake; you’re mad at them not taking the proper effort to ensure it was being done correctly when they were unsure. Similarly, if you praise someone, don’t tell them how smart they are or how talented they are. Praise something specific: “I really loved how you looked at that problem from a few different angles before making your ultimate decision,” or “You worked really efficiently to ensure that it got done on time.” Most importantly, you don’t ever want to just praise effort, especially if the effort was misguided. Outcomes still matter in business. You want to praise concerted effort that resulted in learning and understanding. Someone may have tried incredibly hard, yet still made a mistake; but if they haven’t learned how to improve for next time, the effort was for naught.

Does your company encourage people to have a growth mindset? Or do you expect people to walk in on day one and be proficient? Do you give them the space and the tools to improve? Or do you expect it to happen by osmosis? The answer to these questions will tell you whether you have a company culture that sets its people up for success and longevity.

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However, if you have higher ambitions, perhaps to find ways to take over a specific market, or multiply your growth rate and profitability, you often have no choice but to consider expansions into other parts of your market stream, or even an acquisition to get you there quicker. The most common method of this is through what’s called horizontal integration. That is when you acquire someone at the same level of your industry in order to expand your own company.

Think of Coca-Cola and Pepsi. Those companies consistently stay in their lane – none of them are looking to open their own retail store, and none of them are collecting their own raw materials. Instead, they stick with manufacturing products and allowing their distributors to get those items in front of consumers. When they acquire other companies, it is almost always a competitor or a potential competitor whom they want to fold into their own operations and revenue streams. In recent years, Coca-Cola has bought Fairlife (a dairy company), Billson’s (an alcohol company), Costa Coffee, and others. Pepsi has acquired Poppi (a prebiotic soda brand), Rockstar (an energy drink company), Sabra (the hummus company), and others. While some of these companies may not be direct competitors with the parent company, they are all at the same level of the market: food/drink manufacturer. These two beverage behemoths continue to expand horizontally, while staying in their lane vertically.

Vertical integration, on the other hand, is when you expand upstream or downstream within the supply chain to have more control over it. One example is Live Nation merging with Ticketmaster. Both are in the same industry (live events), but Live Nation handles production of the events, while Ticketmaster handles the ticketing to the end users. They are in completely different parts of the entertainment industry, but their partnership gives the larger company much more control over the final product.

Apple is another great example of vertical integration. They control their own manufacturing, they control the software, they control the sales of its products through its distribution, and they sell an estimated 50 percent of their products to end users through its own retail stores and website (the remainder goes through other retail channels like Amazon, Best Buy, Target, etc).

Going back over a century, Carnegie Steel perfected the art of vertical integration: they controlled the raw materials, the supply, the logistics, the shipping, etc. This was one of the many reasons Andrew Carnegie became one of the richest people in human history.

Starbucks attempts to do the same thing: they own their coffee farms (the raw material), plus its own manufacturing and distribution to its own coffee shops, and then they sell the product directly to the end consumer (while also selling packaged versions in other companies’ retail stores).

However, vertical integration is certainly not as easy as finding a company you want to buy and writing a big check. Vertical integration is actually one of the riskiest moves you can make in business, and more options are bound to be terrible for your company. Let’s say you’re a manufacturer and you’re unhappy with the fact that you have to sell a product at a large discount to a wholesaler in order to get access to a large network of retailers or consumers. Sure, by looking at the numbers, anyone capable of basic math can say, “Huh, if I can just skip that level of the supply chain and do it myself, I can make more money.” And if my grandmother had wheels, she’d be a bike.

If you’ve read anything on Main Street Mindset, or more accurately, if you’ve ever run a business of your own, you know that nothing comes easily in business. My actual grandmother used to say, “If business were easy, everyone would do it.” I think about that every time I run into a roadblock at work.1

If the aforementioned manufacturer thinks they can manage more parts of the supply chain, that’s great. But thinking you might be good at something, and more specifically, being blinded by potential riches, is not a substitute for doing your actual research. Let’s say you are the manufacturer and have a global network of customers. Do you actually understand the various markets your customers are selling in? Do you understand the differences between each continent, each country, each county? Do you know the laws and regulations of each of these places? Sure, you can learn, just like anyone can, but there’s a reason these companies exist and are successful in the first place. Don’t let yourself be blinded by ego or visions of grandeur. One of the best lessons I received in college was from my “Investments and Portfolios” professor, who answered another student’s question about trying to trade stocks based on something you think you know about the company’s future: “Why do you think you’re so much smarter than the entirety of the stock market?” or “What do you think you know that no one else in the world does?”

I often ask myself this question to humble myself when I think I’ve come up with a brilliant idea. If it’s so brilliant, why has no one else done it? Sometimes, there is a legitimate answer. Other times, it helps me ground myself into reality and really critique my own ideas.

In our current example, the question would be, “What do you know about wholesaling or retailing that you believe none of your customers already know?” Remember, we’re not talking about multi-billion acquisitions anymore, we’re talking about small businesses. To insert yourself into a different part of the supply chain without actually understanding what is involved reeks of hubris, and companies that think too highly of themselves usually find themselves in bankruptcy a short time thereafter.

I recently read a quote from Justin Simon, a portfolio manager at Jasper Capital Management, in discussing CVS’s recent (failed) acquisition of Aetna that beautifully illustrated the dangers of vertical integration. He said, “If you put a V-8 engine in your car, it doesn’t automatically make it a Ferrari.” That’s similar to a quote that used to hang over one of my employees’ desks that said, “Going to church doesn’t make you a Christian any more than standing in a garage makes you a car.” Simply inserting yourself into another part of the supply chain does not suddenly make it work. You need to do some serious soul-searching in order to determine if your brilliant idea actually has merit to it.

If you’re thinking of vertically integrating your business, I would ask yourself these questions, and really ponder on them over the course of some weeks (using “supplier” and “customer” as subs for the levels above and below you on the supply chain, wherever that may be):

• Are my suppliers/customers really not doing a good job at handling their part of the supply chain?

• If so, why are they having trouble doing so? Is it the economy? Is it the market? Is it the way we’re approaching the market? Is it the product? Is it their operations?

• Is there something I can do differently at my level of the supply chain that would solve these problems for my supplier/customer?

• What would I do differently than my supplier/customer that would improve that part of the supply chain? Is the idea realistic, achievable, and profitable?

Here’s a crucial piece of advice, which can be generalized to any business question, but specifically vertical integration: there is a huge difference between someone not doing the job properly, and someone simply doing the job differently than you would. Different is not necessarily wrong. It can be, certainly. But just because you don’t like the way someone is running their business doesn’t mean you can necessarily do it better.

And if, after really grilling yourself on these issues, you legitimately believe you can? Then go for it. Just remember that vertical integration carries a greater risk than perhaps any other strategic decision you will make in your company’s lifetime.

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