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It was late at night during my first year after business school and I was on the phone with my friend and classmate, Mariam Naficy. I had helped Mariam and her co-founder with their financial model and business plan during school, and recently I had introduced her to the VC fund where I was working. My bosses were eager to invest.

It was 1999 and Mariam was launching Eve.com — the first ever DTC beauty ecommerce business. She intended to focus on prestige brands like Estée Lauder, and she was on the verge of closing her first round. She had three VC offers on the table and needed to decide.

My fund was part of the DLJ Merchant Banking group, the LA office of which was famous for big, bold investments in consumer and retail. We often co-invested with Jerry Gallagher’s fund and a successful Bay Area firm called Trinity Ventures. All three had invested together in iMotors — my company — and all three were also investors in a small, struggling beauty retail concept called Ulta. The connection to Ulta made Trinity and my fund particularly interested in Eve.com. Jerry had decided to pass.

The third suitor was an LA-based vehicle called Idealab, run by an entrepreneur-investor named Bill Gross. Idealab was an incubator and probably the largest ecommerce investor in the country, maybe the world. eToys.com was already massive, as were CitySearch.com and GoTo.com, which invented the pay-per-click model. Bill had made Mariam an offer for a few hundred thousand dollars in funding and some “in kind services” like accounting and marketing in exchange for equity — and this offer would expire the next morning if she did not accept it. She was calling me that night to say she had decided to turn it down and go with Trinity instead, which was several million dollars (along with an office that Mariam could work out of on Sand Hill Road).

“Don’t do it,” I told her. “If you turn down Idealab, you’ll regret it forever.”

What I knew, and could not easily explain without betraying my employer, was this: one of the managing partners at my fund had discovered that Mariam preferred Trinity and had devised a plan to block her. As part of their joint investment in Ulta, my fund, Trinity and Jerry’s fund had agreed that if any of the three wanted to invest in anything beauty-related, the other two had an effective right of veto. Mariam was about to turn down Idealab and find herself with nothing.

I couldn’t let that happen, so I told her the truth.

Mariam says, “I still remember the call from you and my blood running cold as you told me. We had actually already accepted the Trinity offer and received the keys to the office suite. We were about to make a courtesy call to Bill the next day to turn him down. If you hadn’t called us, I don’t think Eve would have been born. Business is a remarkably relational profession — the friendships you have, and whether you have ethical people in your corner, really matter.”

Mariam changed course and accepted the Idealab offer. Eve.com went on to generate $10 million in sales, and the company sold for over $110 million in cash two weeks before the dot-com bubble burst. She went on to build The Body Shop’s first ecommerce site and then founded Minted, the online stationery and design marketplace. Today she is one of the most celebrated female entrepreneurs in Silicon Valley.

Ulta did pretty well too — making up manifold for the losses those three VCs had incurred with iMotors.

Stanford Business School later wrote a case study about my moral conundrum, and I got to sit in the back of the room as students debated whether my possession of inside information and loyalty to my employer should have trumped my allegiance to a friend and my own conscience. It remains one of the more interesting two hours of my life.

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I am telling this story because it was the moment my worldview of investors shifted — and because everything that followed only confirmed what I learned that night.

At Stanford, we were taught that investors’ incentives are aligned with those of entrepreneurs. The VCs who cycled through campus were the geniuses who had believed in Steve Jobs and Jeff Bezos and earned their fortunes by nurturing fragile ideas into world-changing companies. The message was clear: find the right investors and they will make you.

My friend Tevya — one of the most successful haircare entrepreneurs I know — used to open every session at Bumble and bumble University with the parable of the scorpion and the frog. Look it up if you don’t know it, but the core idea is simple: a scorpion is a scorpion, even when it promises to behave otherwise. That is how I have come to think about professional investors. Not because they are bad people — most are not — but because their incentives make certain behaviors inevitable, regardless of their intentions.

The biggest misalignment is time. Investors are judged on compounded annual returns. An investment that doubles in two years produces a 41% CAGR — heroic. The same investment taking ten years to double produces 7% — a failure. The clock is always running, and it is always running faster for your investor than it is for you.

The second misalignment is diversification. A venture capitalist knows that most of their bets will fail. Their strategy depends on it — they spread risk broadly, accepting many losses in the hope that one or two investments will generate returns large enough to cover everything else. The entrepreneur, by definition, has only one bet. There is no diversification for you.

Put those two forces together and you get a perverse incentive that is quietly ruinous for founders: investors want their failures to fail fast. They need to cut losses and concentrate attention on their winners. And so they push — go big or go home, grow fast or get out. The entrepreneur, meanwhile, needs time. Time to test assumptions, to find the right customer, to pivot when the first plan turns out to be wrong. Anything that artificially shortens that runway lowers your probability of success.

iMotors had a real business. We had inventory, customers, a working model. But our investors had run out of patience and appetite, and a company that might have found its footing was pushed to go big or die — and died. I have watched versions of that story play out many times since.

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So what should you do instead?

Bootstrap for as long as you possibly can.

If your idea is worth pursuing, it is worth carving out time to pursue it before you need anyone else’s money. Work on it nights and weekends if you have to. Your own behavior during that period will tell you more about your conviction than any amount of deliberation. If you find yourself making excuses not to work on it, that is information. If you cannot stop working on it, that is information too.

When you are ready to commit fully, raise from friends and family first. Make every penny last as long as possible. The goal is to get as far down the proof-of-concept curve as you can before you ever sit across a table from a professional investor. Every milestone you reach on your own increases your leverage and decreases your dependency.

When we launched Hairstory, we raised from a group of friends. There was already a product — New Wash — and already a base of sales, but also a team to pay and a business losing money. We acquired the assets, rebuilt the brand, relaunched the website and rewrote the business model. Eighteen months later we hit cash flow breakeven. At that point we controlled our own destiny. No one could force our hand.

That moment — breakeven — is the most important milestone an entrepreneur can achieve. Not a Series A. Not a valuation. Breakeven. It is the point at which you stop needing anyone’s permission to keep going.

The venture capital culture has quietly convinced an entire generation of founders that the goal is to raise money, then raise more money — Series A, B, C, onward through the alphabet — with growth measured in funding rounds rather than in the fundamental truth of any business: does it generate cash? That model works for a small number of companies. It quietly destroys many more.

Businesses exist to generate cash. Everything else is a means to that end. Keep that truth in front of you, especially when someone with a large checkbook is telling you otherwise.

The scorpion cannot help what it is. But you can choose not to get in the boat.

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Mariam Naficy
Founder, Minted & Arcade

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For my first major research assignment at Sanford Bernstein, my boss asked me to determine the household penetration of personal computers in the United States. All of the stocks we covered — Best Buy, Circuit City, CompUSA — were flying high on PC sales. The big question: how long could it last?

Our firm had relationships with the two top technology consulting firms of the era, and I called them each up. One thought PC penetration was 10-15%. The other thought it was over 50%. Neither had any real data to support their position — they were just guessing. So I did what any young nerdy kid would do: I conducted my own research. I hired a professional survey company to call thousands of households across the country, properly stratified for demographic diversity and statistical significance, and in the end I had my number. If memory serves it was 27%. We called the resulting report A PC in Every Pot. A few weeks later, I was quoted in The Economist.

This is how I fell in love with data.

From that point on, data became my competitive edge — and my obsession. When I ran Bumble and bumble, I invented a new KPI to measure salon sales performance and convinced the owner of the most popular salon management software to build it into his platform. When I got to DE Shaw, I watched first-party data explode with the rise of ecommerce, and saw that almost no consumer companies knew what to do with any of it. When I left to start Hairstory, I decided data would be our competitive advantage from day one. Ten years later, I’m confident we know more about our business than any other beauty brand I’ve encountered.

There is only one problem with being a data obsessive who wants to start a new business: there is no data yet to analyze.

So what do you do?

You make it up. We nerds call it modeling.

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My grandmother once tasted an angel food cake I’d made her from a box mix and said, deadpan in her heavy German accent: “I can understand why someone would buy this once. But who would ever buy it again?”

She didn’t know she was describing the central question of every business model ever built. But she was.

When I first started building the Hairstory model, I was sitting on the rubberized floor of my local community center gym, my back against the wooden bleachers, laptop open, watching my son attempt one-armed free throws for the rec department basketball program. Not easy for a kid who had a stroke in utero — but he figured it out, which probably should have told me something about how the business would go.

Building a model forces you to think through every element of a business. If you do it right, it pressure-tests your key assumptions and tells you what you need to believe for the business to succeed. Most importantly, it tells you how much money you will need to invest before you reach cash flow breakeven — the point at which the business can sustain itself — and how long that will take.

The output is financial, but this is fundamentally an operating model: a granular, working representation of how the business will function before it exists. The trick is to build it with as few assumptions as possible. Every assumption is a place where you can be wrong and the more assumptions you have the greater the permutations you need to test. Fewer assumptions, better insights.

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Let me start where my grandmother did: with the question of who comes back.

In the world of ecommerce, new customer acquisition has become relatively measurable. You spend money on marketing, you get customers. The two metrics that define that exchange are CAC (customer acquisition cost — how much you spent to earn each new customer) and AOV (average order value — how much they spent when they arrived). The relationship between them is called ROAS — return on ad spend — and it tells you the efficiency of your marketing. And these metrics apply to pretty much all businesses, not just ecommerce.

But ROAS only tells half the story. The more important question is what happens next.

At Hairstory, our core product works so well that once people try it, they come back. Not quite forever, but almost. Of first-time buyers, 40-50% return for a second purchase. Of those, ~75% come back a third time. And once someone has bought three times, they stay with only minor attrition. Every new customer we acquire will generate, on average, hundreds of dollars into the future. That changes everything about how you think about the economics.

The metric that captures this is LTR — lifetime revenue. It measures the total revenue generated by a cohort of new customers over time, divided by the number of customers in that cohort. It lets you compare sales productivity across time periods and tells you whether your retention is getting better or worse. Not whether you’re growing — whether the customers you worked so hard to acquire are actually coming back.

You can also track what I call iLTR — incremental lifetime revenue — the revenue added in each subsequent month after the first. This tells you how long it takes to recoup the money you spent acquiring each customer. That window is called your payback period, and it matters enormously for cash flow. If your CAC rises, your payback period lengthens, which means you need more cash just to sustain the same rate of growth. If your iLTR declines, same problem from the other direction.

My first Hairstory model assumed the hairdresser side of the business would be the primary revenue driver. I thought DTC would be small — icing on the cake. I was completely wrong. Hairdressers were cautious about something so new and different; it took years for that channel to develop. Meanwhile, the DTC business took off. Fueled by exactly the retention dynamics above, we reached cash flow breakeven within 18 months of launch.

Predicting new customer acquisition is hard. Retention is where the truth lives.

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Now for the other side of the equation — the one my grandmother would have understood intuitively, because she grew up in Weimar Germany and never wasted anything.

When I was selling used cars at iMotors, we weren’t thinking about LTR or retention. We were thinking about whether we made money on each car we sold. This is what’s called unit economics — the math behind each individual transaction that answers the most basic question in business: after I earn this revenue, how much is left?

Start with revenue per transaction — your AOV. To earn that, you had to spend something: ingredients, manufacturing, raw materials, the cost of buying and reconditioning a used car. These are your COGS — cost of goods sold. What remains after COGS is your gross profit.

Then there are direct expenses you only incur when you actually have a transaction: shipping, payment processing fees, commissions. Subtract those and you arrive at your contribution profit — the amount left to cover everything else required to run the business. As a percentage of revenue, this is your contribution margin, and it is one of the most telling metrics in any business.

Here is one of my golden rules: every expense above your contribution margin should be variable — directly tied to generating revenue. Every expense below it should be fixed, or at a minimum independent of incremental revenue. This discipline is what lets you compare businesses across completely different industries in a common framework.

Software businesses are attractive to investors because their marginal cost of serving one more customer is nearly zero — each new customer is almost pure contribution. Heavy manufacturing is the opposite: enormous fixed overhead requires very high volume to reach profitability and contribution margins are thin. Hotels and airlines are capacity businesses — they lose money below a certain occupancy rate and hit a ceiling at full utilization. Understanding where your business sits on this spectrum is essential to knowing what scale you actually need.

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With those two lenses in place — the revenue model and the unit economics — you can build a model worth trusting.

I start with the revenue drivers: new customer acquisition and repeat purchases, structured as a cohort waterfall so each month’s new customers are tracked individually as they generate revenue over time. Then I pressure-test the unit economics and layer in fixed expenses. I work hard to minimize assumptions and build a sensitivity dashboard so I can see exactly how much each variable moves the output.

Which output matters most? Not sales. Not profit. Cash required to reach breakeven.

Every model I build produces a simple P&L and a bare-bones balance sheet. I set opening cash to zero and look for two numbers: how long until the business stops losing money, and how much cash does it burn before that happens? Then I stress-test the inputs. What if CAC rises 30%? If retention drops? If your margin assumptions turn out to be optimistic? If you need twice as much capital to launch as you planned?

Getting to cash flow breakeven is the most important milestone any entrepreneur can achieve. It is the inflection point where the power shifts — from investors back to the founder, from the market back to you. It is the moment you stop surviving and start deciding: how big, how fast, which direction?

That is what the model is really asking. Not whether the idea is good. Whether it can become self-sustaining — and what it will cost, in time and money and nerve, to find out.

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I built my first Hairstory model on a gym floor, half-watching my son shoot free throws. I built the Sans Savon model in a spreadsheet while Erica and I debated whether to bet our savings on ourselves rather than the stock market. In both cases the model didn’t tell me the idea was good. It told me what I had to believe for it to be good — and gave me the chance to decide whether I believed it.

That is what good models do. They don’t predict the future. They show you the shape of the bet you’re making.

The rest is up to you.

Grandma Hella at our wedding in my parents’ house.

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I was somewhere in the Rocky Mountains when it occurred to me that I had no idea where I was going next.

Not just geographically. I had quit my Wall Street job right before the July 4th weekend, loaded my dog into the car, and pointed west with a loose plan: climb some mountains, finish the business plan I owed Bumble and bumble, end up at Stanford before the summer was over. The plan was almost done — I’d promised it in exchange for a new laptop — and I’d already survived multiple adventures above twelve thousand feet. I was twenty-six years old, unscheduled for the first time in my adult life, and the feeling was somewhere between exhilarating and terrifying.

That’s when Jerry Gallagher tracked me down.

I was at a ranch in Colorado when his message came through, and I called him back from the kitchen. My dog, Moses, had jumped through my friend’s window while we were out and I was trying hard not to get distracted by the blood he was still dripping while Jerry spoke. He had read my CarMax report — the first Wall Street analysis anyone had written on the company — and he’d spent the past few years watching CarMax expand. He wanted to fund a copycat. He’d found his operator: a young guy named Adam Simms who could run the business, but needed someone to write the plan and build the model. Jerry’s pitch was simple. Adam was Batman. I would be Robin.

I re-bandaged the dog. I packed the car and I hit the road the next morning.

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Copycats require operational excellence

Writing that business plan was straightforward — CarMax had been the innovator, we were just copying it. The first question I always ask when evaluating a new business idea is a simple one: how different is this from businesses that already exist? Despite the mythology surrounding our current tech titans, the most successful entrepreneurs are often not innovators at all. They are operators.

CarMax had started as a skunkworks project inside Circuit City, the largest consumer electronics big-box retailer in the country before ecommerce killed it. The Circuit City model was to sell large-ticket goods — TVs, stereos, appliances — at thin margins and make all the real money on extended warranties. They looked at the used car market and saw the same opportunity: sell the cars cheap, make your profit on the warranty. My analysis had shown it was working, and by the time we wrote the business plan for our copycat — Adam called it AutoChoice — Circuit City was rolling out new CarMax stores as fast as they could build them.

Adam is a world-class operator and he did an incredible job executing a genuinely complex model. We built a used car factory just outside of Fresno where cars entered at one end and exited the other in like-new condition — so well reconditioned that consumers were excited to buy them and we were confident enough to warranty them. Two years in, our first store was performing well and we were preparing to expand.

But by then it was 1999.

Every consumer venture capitalist had pivoted to ecommerce, and over the course of a month — I honestly can’t remember whose idea it was — we started to noodle on a pivot. What if we could turn AutoChoice into an online business? We’d no longer need to invest millions in real estate. A website, small points of sale, a handful of cars on hand. Everyone loved it. We raised $15 million, renamed the company iMotors, and I went in full time to drive the new strategy.

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My sweet spot — innovation with a twist

As I’ve come to understand, innovating on existing businesses is my sweet spot. You can sell the same products through a new business model or keep the old model and sell a new product innovation. Sometimes you can do both.

When I first decided to start Hairstory, I was excited to build a new business model. I’d been seven years out of operating companies, investing in consumer businesses for the hedge fund DE Shaw & Co., and I’d been watching the model we had used at Bumble and bumble — selling professional haircare through salons — disintegrate in slow motion. The Great Recession had devastated salons financially. Social media had enabled staff to steal clients and go independent. Ecommerce had killed channel exclusivity. I thought: what if technology could let hairdressers participate in ecommerce instead of getting run over by it?

That was before I was introduced to New Wash.

Once I tried New Wash, I decided to add a second bet: let’s change both the way people clean their hair AND the way hairdressers sell products. It turns out, sometimes two bets are better than one.

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Pure innovation is hard

Innovation is often conflated with entrepreneurship, but it doesn’t need to be. Many of the most successful entrepreneurs I know have never innovated. Tevya Finger has built multiple incredibly successful haircare brands by executing a proven model better than anyone else. Friends of mine have built investment firms indistinguishable from their competitors and made fortunes. And Adam Simms, after iMotors failed, went on to build the largest automotive group in Northern California. He sprinkled in some internet marketing, but his dealerships succeed because they’re well run — not because they changed the business model. You don’t have to be an innovator to be an entrepreneur.

But pure innovation — creating something genuinely new — is hard to resist. Particularly in a world where technological breakthroughs seem to generate billionaires overnight. What we don’t see are all the failed innovators, the businesses that died trying. As I’ll explore in the next installment, there’s a structural reason why most innovative technology companies must fail.

I had to learn that one myself.

Within a year of discovering that my son Levi had suffered a stroke in utero, I took a sabbatical from work. It was a time of serious soul-searching — I’ll share more of that story another time — and I’d decided that my job, for now, was to focus on caring for my family. One afternoon, letting my mind wander during yoga, I had a flash: what if there were a website through which the will of ordinary people could be used to influence those in positions of power? Democratized lobbying — no political parties, no corporate funding. I’d collect opinions alongside demographics, anonymously, analyze them and present them to decision-makers. Crowdsourced policymaking. How would I make money? Sell access to the anonymized data.

I called each person’s data their “Values Graph” — a riff on Facebook’s “Social Graph” — and I became convinced that if enough people participated, I could improve the world and pay for my life. My favorite part was a data visualization I designed that mapped each person’s values against everyone else’s, creating clusters of like-mindedness and revealing how much more we have in common than we like to believe. I called the visualization The Orb and named the business VotaVox.

It was sheer hubris and a bad business idea. And I fell in love with it.

Two years later, with both VotaVox and The Orb built and our savings largely gone, I needed a job. That’s how I ended up at DE Shaw. The problem with big ideas — with pure innovation — is that most of the time they require massive scale before they’re worth anything at all. I didn’t have the time, the money, or the knowledge to build VotaVox to that scale. So I quit.

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A simple construct

I’ve now built or co-built six businesses. Three of them — iMotors, Hairstory, Sans Savon — sit in what I think of as my sweet spot: a proven concept with a genuine twist. Not pure imitation, which demands operational excellence I’m not sure I have in sufficient quantity. Not pure innovation, which demands scale and a tolerance for uncertainty that has broken better people than me. The middle path suits my temperament and my skills.

But I want to be honest about something. I didn’t arrive here by reasoning my way to it. I arrived because the other options taught me their lessons the hard way.

VotaVox was pure innovation — a big idea with no existing market, no proven model, no operational playbook. I fell in love with it the way you fall in love with ideas that are mostly beautiful in your own head. Two years later, having drained our savings building something that required a scale I couldn’t get near, I had to walk away. The idea wasn’t wrong exactly. The bet was just too large for me.

And iMotors — which started as a disciplined copycat — failed not because the model was wrong, but because we decided to layer innovation on top of operations at exactly the wrong moment. We turned a working business into an ecommerce pivot, watched the bubble burst, and folded. Carvana would prove the original iMotors thesis right fifteen years later and get valued at $100 billion. Timing is everything. So is knowing when to leave a working thing alone.

What I’ve landed on, after enough failures to take the lesson seriously, is this: the level of innovation you choose determines the nature of the challenge ahead. More innovation means you need more scale, more capital, more time, and more luck. Less innovation means the competition is right there with you and execution is everything. Neither path is easier. They’re just different kinds of hard.

The question worth asking before you start isn’t is this a good idea? It’s what kind of bet is this — and am I the right person to make it?

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The Orb lives

While writing this post I had an itch to scratch, so I took a break and pulled up Claude. I uploaded an old description of VotaVox and The Orb — the data visualization I’d spent months and roughly $50,000 building in 2009 — and asked what Claude thought of the idea and how hard it would be to recreate. Then I hit return and went to make coffee.

Thirty minutes later I was staring at a fully functional Orb, populated with actual data, doing exactly what I’d spent a year trying to build. What took me months and a small fortune in 2009 took Claude a few minutes and cost a few cents.

There has never been a faster or cheaper time to test whether your big idea is actually worth chasing.

It hasn’t become a better business idea. But I can’t tell you how happy it makes me to see The Orb again. Click here and play with it — answer the questions yourself to see where you land compared to me, then share it with a friend to compare with them. If that’s not fun, I don’t know what is.

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My first job after college was selling fish tanks. My friend had created a new invention called ‘The Rivertank Ecosystem,’ and I had joined up with him to turn it into a business. My first business trip was to Minneapolis to train our first distributor how to introduce our product to customers, and I asked my college roommate if I could crash at his parents’ house while I was there. It turns out that his father, Jerry Gallagher, had invented the concept of “comp store sales” and then become the most successful retail venture capitalist in the country, having made early-stage investments in Whole Foods, Ulta Beauty, Office Depot, PetSmart and countless other big box retailers and restaurants that took over American strip malls. He would ultimately fund my used car retailing business too, but on that first night over dinner, he told me a story that paved the path to becoming a serial entrepreneur.

We were sitting in a stately dining room in a beautiful, early 1900s mansion. At some point, Jerry asked me if I planned to sell fish tanks as my main vocation (I’m sure in a very polite, yet funny way), and I shared that I didn’t know what I wanted to do, but that my father seemed to like the idea of me getting a law degree. Here’s how he responded:

“Eli, let me tell you a little story that you may find interesting. I was on a plane flying home to Minneapolis from Detroit and I’d just settled into my seat when a young woman sat down next to me. Now, I’m on a plane many times a week, and as a rule, I avoid making any conversation with anyone sitting next to me, and that evening was no exception to the rule. But the young woman was very energized and excited, and she eventually couldn’t contain herself any longer and introduced herself. I acknowledged her and turned back to my reading when she said, “I’m so excited because I just found out I got into law school!” I turned to her and said, “Congratulations, that’s wonderful,” and then turned back to my reading again. She was quiet for a bit, and then said, “You don’t seem to actually think it is that wonderful. Why is that?” And so I decided to break my own rule. I put down my reading and asked her, “How many lawyers will the U.S. graduate this year? 20,000? 30,000? You seem like an intelligent, engaged young person. Does the world need another lawyer? I’m not so sure. So the truth of the matter is, I’m not actually that excited for you.” Well, she was taken aback, but she was now curious and maybe a touch combative, and so she asked me what I thought she should do instead of becoming a lawyer. “Well, if I were you,” I told her, “I’d go to beauty school.”” He paused for emphasis to let that sink in — with all its implied chauvinism. “And when I graduated from beauty school, I’d get a job as a hairdresser in a high end salon and then I’d get a job in a low price salon chain.” Another pregnant pause for effect. “And then, I’d go to business school and get my MBA, because I’m just coming back from a meeting where I’m on the board of directors for the largest salon chain in the entire Midwest, and I’ve been interviewing dozens and dozens of people and I have not been able to find a single person who both understands the salon industry and knows how to run a business.” Pause. So Eli, I guess I’m inclined to give you the same advice I gave to that young woman on the plane. When everyone is running in one direction, the best opportunities often come from heading the other way. That’s what makes the difference.”

Fast forward less than 10 years later, and I had earned my MBA and was running a hair business (Bumble and bumble)! Was I following Jerry’s plan? I don’t think so, but there were several key components to Jerry’s advice that are incredibly important when considering becoming an entrepreneur.

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Become an expert by learning from others.

My fishtank experience only lasted one year because I quickly realized that trial and error is a very inefficient way to learn. I had cold called hundreds of pet stores and figured out how to generate sales. I had taught myself excel and taken accounting classes at night so I could track and forecast our finances. But my friend and I knew nothing about building a business and I knew I needed to learn from experts. With Jerry as my mentor and guide, I spent the next decade getting as much exposure as I could. I learned how to analyze and value consumer businesses from the best analysts on Wall Street, I studied with top business school professors at Stanford and, most importantly, I spent years working directly with experienced, best-in-class operators in the industries that interested me — most of whom didn’t have a fancy education and had risen to the top of their trade through a combination of grit, street smarts, raw intellect and decades of experience. Along this journey I gained the confidence to believe in my ideas and convictions paired with the deep humility to know that experience is essential to success (if you don’t want to count on being lucky).

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Find the open space.

Two years after that dinner with Jerry and just one into my Wall Street education I found myself mulling over Jerry’s words as I walked out of an after-hours meeting at a super hip salon in New York City called Bumble and bumble. The owner of the salon, Michael Gordon, lived in a mini commune of sorts in my small suburban town with his best friend, the pioneering yogi, Alan Finger. Alan’s son, Tevya, had become a friend and, after graduating from high school, had decided to work for Michael at Bumble. Tevya would go on to become one of the most successful entrepreneurs in the hair business, founding Oribe, R&Co and a handful of other hair brands through his investment vehicle Luxury Brand Partners, but at that point he was a lowly photo assistant to Michael and was just starting his journey. Tevya and Michael had reached out to me because they wanted help thinking through how to start a line of hair care products with the Bumble brand name. I had spent the evening helping Tevya with a basic business plan — products, pricing, margins, and distribution. They already had the brand nailed. It felt great to be able to leverage what I’d already learned to help them chart a path forward. Wandering up 56th street I mused to myself: How many ivy league grads are there in the hair industry? According to Jerry, not many. Maybe this could be a good place to make my mark one day. Seven years later, after selling a controlling stake, Michael and Tevya asked me to help them run Bumble and I became the youngest General Manager in Estee Lauder Companies’ history. I have loved the hair business for many reasons, but #1 is that it has been forgiving enough competitively to allow for the many mistakes I’ve made as a leader and entrepreneur along the way. It has been a perfect proving ground for the unconventional, non-conformist business ideas that have been my muses.

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You can’t force inspiration, but learn to seize the moment.

Fast forward almost a decade. I was sitting in a fabulous hedge fund conference room with Michael Gordon after years of zero contact. Michael and I had a falling out after I left Bumble to run Jurlique, and only recently had we cautiously reconnected. Since I’d seen him last, he’d made a series of decisions that hadn’t gone his way, and the fortune he’d earned selling Bumble to Estee Lauder was largely gone. He needed my help and I was reluctant to get involved for many reasons. As the meeting came to a close and I’d shared my feedback, Michael handed me a bottle and asked me to please try it.

Standing in the shower the next morning, as I massaged into my hair a ludicrously luxurious cream with a consistency something like custard, I marveled at how differentiated the experience felt. No foaming bubbles, just silkiness with a subtle beautiful scent. Rinsing, my hair felt soft with a slight slip. It wasn’t squeaky clean but somehow I could tell it was indeed clean — just a different kind of clean. And I understood why: without any detergent, the oil-based cleansers in this crazy product had removed everything that needed to go and left behind a deeply conditioning yet light coating. I smiled and thought to myself, “This is probably the single best, most innovative beauty product I’ve ever encountered.” Within six months Michael and I were partners in a new venture called Hairstory, and I attribute 90% of our tremendous success since to New Wash — that amazing, innovative, incredibly effective cleansing cream that still to this day has no competition in the marketplace.

I credit all of the best things that have happened in my life to an innate, subconscious willingness to act swiftly with conviction when confronted with a compelling opportunity. I married my wife within a year of meeting her on a blind yoga date. We conceived our first kid before there was even a room for her to sleep in our loft. Our second, while we were commuting between Australia and New York. I don’t consider myself impulsive, but I’m definitely a risk-taker. The caveat: only in the context where I have conviction in my own ability to control the outcome to a reasonable degree and protect against the downside. I’m a rock climber, not a skydiver.

Opportunity often presents itself out of nowhere and when you least expect it. If you’ve done the pre-work, you’ll recognize the moment when it arrives. The contrapositive to this is equally important and true — you can’t force inspiration. A close friend and serial entrepreneur proved this point for me. After founding, building, scaling and selling a business to a top strategic buyer, he and his co-founders decided to “do it again” and locked themselves in a co-working space for a few months with a goal and a deadline. They ideated and researched and analyzed dozens of potential next businesses, debating and deliberating, even force-ranking. Ultimately, they landed on an idea they thought had the highest potential for leveraging their experiences and meeting an unmet market need. It wasn’t any of their favorite idea — no inspiration — but they hoped it would be the highest common denominator. They raised millions from top VCs and spent a full decade building a business that was indeed successful enough to generate sales but never broke through with true momentum. Ultimately, they wound it down and one of the founders stayed to pivot to a new idea. It still languishes to this day.

Building a business is incredibly challenging and being an entrepreneur requires deep resilience and perseverance. You simply can’t invest the proper creativity, endurance and positive energy into an idea that is anything short of inspiration. You need to believe in your bones that this new business deserves and needs to exist in the world. This is not something you can manufacture — it hits you in the face. And when it does, you need to recognize it and respond.

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So back to my earlier question: Was I following Jerry’s plan for me? No. But that fateful night, he gave me something incredibly valuable and profoundly important: he gave me permission to take the path less traveled. Not only did he give me permission, he presented it as a noble undertaking. Taking a step back, I’m guessing Jerry had already figured me out. He saw that I was entrepreneurial, independent and I wasn’t likely to follow a traditional path anyway, and so he helped me realize it myself and made me feel good about being who I am. It was an incredibly gracious, generous gift — one of the best anyone has ever given me — and I will be forever grateful.

Jerry Gallagher, 1941-2014

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In 1975, at 39 years old, Amancio Ortega and his wife opened a clothing store in a remote region of Spain. He had been working in the textile industry since dropping out of school at fourteen and had taken his first stab at entrepreneurship twelve years earlier. Recognizing that the biggest expense in fashion is end-of-season markdowns, Amancio focused on making limited runs of each design, seeing which his customers liked most and iterating on those designs to capture emerging trends and limit his markdowns. Even in the backwater of A Coruña, Spain, this innovative approach to fashion proved successful, enabling Amancio to expand and scale his business profitably. 50 years later as I write, the Inditex Fashion Group has grown from that first Zara to 7,200 stores in 93 countries, and Amancio is the second wealthiest man in Europe.

When I visited the Inditex headquarters in A Coruña, I was taken to a gargantuan building the size of an airplane hangar. A long row of tables and desks ran down the center of the space offering easy access to the reams of fabric, boxes of buttons and racks upon racks of finished products hanging in the periphery. The energy was equal to the Goldman Sachs trading floor where I’d interned in business school: there were hundreds of employees talking on phones, walking back and forth, yelling urgent commands to be heard above the din. And yet through the cacophony emerged patterns of logic, like a hive.

At the far right of the table everyone was on the phone. They were talking with store managers from around the world — both inbound and outbound — to understand how customers were engaging with the current line that was in store. The store managers had been trained to track which clothes were catching people’s attention on the racks. Were they just looking at them or did they bring them to the dressing room? Of those brought to the dressing room, which were left and which were brought to checkout? Every step of the customers’ journey from consideration to purchase was captured by the store staff and relayed back to the people on phones in this massive room. It was analog, but it was data.

As soon as they hung up, the phone data collectors would turn to the merchants grouped around the table in the next section to their left. They shared which colors were working, which design patterns, which buttons, zippers, fringe elements, lengths. And equally importantly, they shared what was left in the dressing room or not even taken off the racks to begin with. This information was collated and passed to the designers in the next section, who would promptly start pulling fabric and materials to develop iterations on successful designs. These drawings and materials were passed along to a group of seamstresses waiting for direction, and at the end of the long line of tables stood models waiting to demonstrate how the newer versions compared to those selling out in the stores.

This human algorithm changed the world of fashion.

I haven’t been back to visit Inditex in over 10 years and the humanist romantic luddite in me hopes that room remains basically unchanged. Most likely, however, the human algorithm was replaced by a digital algorithm, which, if it hasn’t happened already, will imminently be replaced by AI and a handful of robots. Human ingenuity synthesized to its essence, digitized and automated. No need for a big room, let alone the hive of people.

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This is the first in a how-to series (warning: I will bounce around a bit). It doesn’t attempt to analyze history or forecast the future. It simply looks at the world we live in today — a world in the throes of tectonic shifts that create seismic instability — and maps out a path forward for us, the normal people. While our genius trillionaires are trying to save humanity by AI’ing everything and figuring out how to colonize Mars, we still need to pursue Maslow’s hierarchy and maybe raise a family. In many ways this has become more challenging but, for those willing to change the way they think about what it means to have a career, there is tremendous opportunity to live a meaningful life in this post-corporate world: become an entrepreneur.

Post-corporate world?

Yes — traditional corporations are decreasing in relevance as the convergence of globalization, automation and remote working have changed the definition of work. The traditional bonds between employee and employer have been severed as workflows are streamlined and most stages of the value creation chain are commoditized. Work is now (almost) entirely transactional as companies change people and people change jobs with fluidity. The quaint idea that someone would join a company out of school and stay there for life is gone, even in Japan. In the modern corporation, people are only as valuable as their next contribution and employers are equally fungible.

This is particularly true for larger corporations. Employee turnover rates at Fortune 500 companies have roughly doubled in the past ten years, while data for the broader US private sector shows average tenure has declined by only 14% in the same period. Smaller, more nimble, more entrepreneurial businesses are taking share from big corporations as capitalism’s creative destruction cycle accelerates, and talent is migrating to these smaller businesses that are also better at creating and sustaining culture.

So the same trends that generate instability also create opportunity. That’s the exciting twist. The innovations that enable corporations to slash their workforce make it easier for smaller businesses to compete, leveling the playing field and accelerating the cycle of entrepreneurial value creation through a powerful feedback loop. Here’s a simple illustration from my own experience:

When I ran Bumble and bumble in the early 2000s, we employed about 100 people in the corporate offices, excluding our salons. In 2015 my partners and I launched and built Hairstory to profitability with just 15 employees — and ten years in, the business is on the same trajectory as Bumble with one third as many people. Recently in 2024 my wife and I launched and now run Sans Savon alone, relying on a small handful of contractors for the functions we can’t manage well ourselves.

There has never been an easier or better time to be an entrepreneur and as the AI revolution accelerates — enabling larger corporate layoffs and giving entrepreneurs even better tools to create value — more and more jobs will shift from corporations to small entrepreneurial ventures.

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Ultimately, the rise of entrepreneurialism is good for the world. While many businesses make money by extracting value (mining, oil & gas) or by arbitraging value (finance, trade and distribution), entrepreneurial businesses actually create value out of thin air. Creating value is fundamental to the human experience — generating ideas and bringing them to life — and it fulfills our most basic desire for meaning. The fact that entrepreneurial ventures are so tenuous, that they require constant attention, innovation and ongoing investment to survive and thrive — these are the elements of creating value for an entrepreneur that are comparable to building deep relationships, establishing a family or making works of art. Creating value feels good.

We don’t have to be Amancio Ortega to have a fulfilling career as an entrepreneur, but there is much to learn from his example. Everything about the Zara product development process is analogous to building a business. You need to start with a good idea, measure your progress by religiously mining and evaluating data, and set up processes whereby you are constantly learning and iterating and evolving based on feedback from the marketplace. As the Zara example demonstrates, this is both radically simplistic and incredibly challenging to execute — if it were easy then every apparel brand in the world would have copied Zara by now and whittled away their competitive edge. But building a meaningful life as an entrepreneur is possible, and while entrepreneurship has a host of challenges — it’s a lot of work, it’s lonely, it’s stressful — it feels like the best way to navigate an unstable world where the fabric of society is fraying from so much change. Even for people who wouldn’t normally think of themselves as entrepreneurial.

Take control of your work life.

Create value for your customers, your team, your family, yourself.

Become an entrepreneur.

Next up: the specific do’s and don’ts — starting with a story from a dinner table in Minneapolis that changed everything about how I thought a career could go.