November was Entrepreneurship Month on the Rule Breaker Investing podcast, and in this segment, Motley Fool co-founders David and Tom Gardner discuss some of their best advice for anyone else who wants to start a business, be their own boss, and create a lasting enterprise.
Their first tip: Only go into a business if you enjoy having to solve ever-more difficult problems, because this path starts out tough and only gets tougher, even if things go well.
A transcript follows the video.
This podcast was recorded on Nov. 9, 2016.
David Gardner: What is your No. 1 tip for entrepreneurs?
Tom Gardner: It's hard. It's hard. It's not going to be easy. I remember talking to Howard Schultz, who was an early investor in The Motley Fool and saying, "Gosh, Howard, it must be amazing to wake up in the morning and know that people in countries around the world are waking up with one of the early thoughts in their mind, 'I want a Starbucks."' I'm like, "That's just incredible. Your business is just set up every morning to make you feel good."
And he looked at me like I was insane, and he said, "No. It's harder. It gets more challenging. We're in more countries. Different cultures. Food quality is so important, and to scale that. I mean, it's all more difficult. We have more employees. We have more challenges." And he looked at me and he said, "The No. 1 thing you need to realize is that you should only go into business, or really into any field professionally, if you want to solve harder problems as you go."
David: Mm. That's such a great point.
Tom: If you're hoping they're going to get easier, and you're going to finally get that downhill run with wind behind your back as you leap into the river smiling. That's retirement. The real joy of doing something important as an entrepreneur is to solve more complicated problems.
And that's why I know it is true for you, too, David, but certainly somebody that I admire tremendously is Elon Musk, who after the sale of his early first business (I think it was Zip2) and then after the sale of PayPal, he had $180 million, and he could have put it into bonds and stocks and real estate, and diversified it all. Bought a plane. Bought a yacht.
David: He at least could have subscribed to Motley Fool Stock Advisor.
Tom: You know what? Darn it, Elon. I had a lot more love for you before David just observed that.
David: The truth is maybe he has. I will say this.
Tom: That's also true.
David: As you know, we got to know him ...
Tom: Let's just assume that he has.
David: ... because he came to speak at our offices in 2011 ...
Tom: That was great.
David: ... which is actually what triggered me ...
Tom: You know what's terrible about that? I was out of the office that day. And you walked right out of that interview and you recommended Tesla.
David: Well, I made it my next pick for Rule Breakers. But you know what was amazing to me about that?
Tom: At like $19 a share, right? $14 or $19?
David: I can't remember. I think it was in the $20s, actually.
Tom: You know, it's great when you're doing so well as an investor, and my cost basis ...
David: By no means ...
Tom: ... was it one or three. I just can't remember.
David: Any investor knows that over the course of time if you hold long enough, you'll forget your cost basis, but ...
Tom: You've got to find the right companies.
David: But what was awesome about that visit, and then back to your important point, is that Musk was saying, at Fool HQ that day ... he kind of laid out his vision for Tesla and what it's all about -- the Model S wasn't out yet -- and it was the third most shorted stock on the Nasdaq, and that's really what I keyed into. I was like, "This guy has such a great pedigree behind him. He's so bright. He's ambitious. And he's so shorted." And those of us who know how shorting works -- I know you do, Tom. But for anybody's who's not that familiar with shorting, when a lot of people are betting against you, that means they've already sold your stock, and to close out of that transaction, they're going to end up needing to buy back the shares.
Tom: A lot of pain.
David: That's how shorting works. And so ...
Tom: The 10-bagger.
David: So, anyway. But Tom, back to your point, it's hard. So if I'm an entrepreneur, I hear you say that. Are you simply expressing as your No. 1 emotional impact point empathy with me? Or are you trying to nudge me in some direction with that? Is there a tip there, or is it just like, "Hey, man. Dude."
Tom: It's an empathetic push. It's an empathetic push. It's hard. I feel for what you're going to go through. There has been a lot of hard, challenging problems that we had to solve, and puzzles that we needed to put together, David and me, over 23 years, and we still have fun, big, hard challenges, and it can be painful.
I mean, Elon Musk, since we're talking about him, his great quote: "Starting and running a business is like eating glass while staring into the abyss of death."
David: He said that?
Tom: That is a beautiful quote by him. And again, a final point on Musk, and then Tip No. 1 is done. He had made $180 million when he went home, reflected, and returned, I believe, to a high school essay or notes that he had taken in a journal and reflected on the three ways that he wanted to change the world: Namely, he wanted to get to Mars to help humanity expand and perhaps survive, he wanted electric cars, and he wanted solar energy. Those were three passions that he had ...
Tom: ... as a high-schooler, and so what did he do? He didn't put his $180 million in bond stocks, and diversify, and make sure to protect it. He calculated how much he could afford to lose and bet it on those three changes.
David: And began eating glass.
Tom: Again, even though he didn't have to, and now, beautifully, he's created SolarCity, Tesla, SpaceX, and his net worth is around $10 billion or $11 billion from where he was at $180 million. So, isn't it beautiful that sometimes, when you make that right, bold decision, you are also handsomely rewarded for it.
David: That is awesome.
Tom: It's hard, but it's going to be worth it. It's going to be the greatest learning experience of your life, even if the business you start goes under. Which none of us want to see happen, but it happens out there, and in the best of professional cultures and environments in the world, there's no great shame in that as long as you went down honorably.