What makes a business great?
If there is a central, unifying question at the heart of The Generalist’s pieces, this is it. Where is the magic in this machine? What makes it special?
Since I went full-time as a writer, we’ve published deep dives on 50 businesses, touching on hundreds of others in the process. That has spanned mainstays like Red Bull, Starbucks, and LVMH to radical insurgents like OpenSea, Decentraland, FTX, and Terra. In total, we’ve published more than 585,000 words, the equivalent of half the Harry Potter series.
Output is only useful if it produces commensurate insight. What have we learned from writing a budding fantasy franchise’s worth of business analysis? What higher-order observations can we begin to make?
This piece is designed to answer these questions, pulling together the ten most impactful lessons I’ve learned from studying leading companies and crypto projects. They are more than theoretical – I have used many to improve my running of The Generalist. I expect to return to each of them many times in the years to come; I hope that they will be useful objects of reflection for you, too.
Be a painfully persistent recruiter (Stripe)
The Collisons’ business shines by converting complexity to simplicity. Stripe absorbs the scuff and tangle of payment infrastructure so that it can radiate clean technical primitives. It is fitting that the company’s founders also apply this talent in other domains. Perhaps most usefully, it plays a vital role in Stripe’s culture.
The best example of this is the firm’s approach to recruiting. Attracting exceptional people is a startup’s most important task outside of finding product-market fit. Much has been written on the tricks and tactics to secure top talent. What interview process produces optimal results? What perks are most persuasive?
All of these things matter. But, we can simplify. More than any particular stratagem or scheme, the most effective way to hire extraordinary people is to be so persistent it hurts. From The Generalist’s piece on Stripe:
Patrick notes that “the biggest thing we did differently...is just being ok to take a really long time to hire people.” It took the company six months to hire its first two employees. Describing their “painfully persistent” process of recruiting in his conversation with Lilly, Patrick noted that he could think of five employees that Stripe had taken three or more years to recruit.
Like Stripe itself, this maneuver is the sort of thing that sounds simple – like accepting payments online – but is deceptively tricky. Persistence and pestering are twins with scarcely a mark to distinguish them. The difference is articulation, tone. If you can find the right words, the right message, you can persist – if you fail, you pester. Attempting to thread this needle involves some jeopardy of one’s emotions (it does not feel nice to badger) and reputation. But how often do we stop right before we succeed? How often do we stop one ask too soon?
Though The Generalist does not have the prolific hiring requirements of a high-growth startup, I have found the Collisons’ framing broadly applicable. When you see an exceptional opportunity or happen upon an extraordinary potential partner, find the words. Find a way to be absurdly, painfully persistent.
Maximize deep work time (Levels)
High impact work requires concentration, often for hours at a time. Of all the companies I’ve studied, no business recognizes this like Levels Health. The blood glucose monitoring startup has the most distinctive culture I’ve seen, but with an entirely logical end: giving its team the maximum possible deep work time.
To do this, Levels makes several atypical decisions, including actively discouraging tools like Slack and meetings. These restrictions aim to create a business that runs asynchronously, reducing interruptions and protecting unbroken deep work. Levels employees effectively operate on a “maker’s schedule,” as Paul Graham termed it.
While not every business may want to take this approach, I expect we’ll see many follow Levels’ lead in the coming years, especially those operating remote-first. It gives a company’s greatest assets – its people – the chance to do their most impactful work.
Obsess over your customer (Coupang)
The word “obsession” and its associated derivatives are victims of its popularity. As part of the everyday lexicon, it can be employed as a somewhat whimsical alternative to something as mild as the word “interest.” We are obsessed with a new pizza, a new podcast, a new pair of shoes.
This is altogether too benign. It is too normal. In reality, “obsession” connotes abnormality; it is not just “interest” but the experience of being haunted or unhinged by interest.
Every successful company cares about serving its customers to some extent, but very few are genuinely obsessed with pleasing them in that word’s truest meaning. Those who embrace such devotion are rewarded with stronger customer affinity and better retention.
The best exponent of true customer obsession is the South Korean business, Coupang. The e-commerce company takes extraordinary measures to improve its service. For example, every delivery person is given a manual outlining the most esoteric of details. This includes the proper way to knock on a door and how to recognize a family might have a baby to avoid making too much noise. Such dedication colors Coupang’s decisions and has been pivotal in securing domestic ubiquity. Part of the reason it has vertically integrated so aggressively is to control the end customer experience better.
It is no accident that many of the younger businesses I’ve profiled seem to exhibit some of this obsession. Both Clair and Elenas are constantly communicating with stakeholders and are continually looking to go above and beyond in serving them.
At The Generalist, I’ve sought to emulate Coupang’s level of obsession. One example is the onboarding to the Generalist’s private community. I write a personal note to every person that signs up and make a tailored introduction to someone else in the community. (If you’d like to test the veracity of this claim, I’d love to have you join us 😉.) I hadn’t seen this approach in other paid communities I’d joined but considered what I would have ideally wanted as a member and worked backward. It was only by obsessively thinking through how I could overdeliver on welcoming new members that I came up with this process.
While there is much to improve about every aspect of The Generalist, Coupang’s example has already been extremely useful. To please your customers, you must obsess over them.
Align the incentives (AngelList)
Charlie Munger once said, “Never, ever, think about something else when you should be thinking about the power of incentives.” When it comes to organizing your company, optimizing performance, and capturing the upside, there’s no better place to begin than with the underlying incentives.
AngelList’s understanding of this concept is particularly sophisticated. The business constantly tinkers to align incentives for its many experiments. Often, that involves spinning out part of its team to capitalize on an idea directly, a structure that founder Naval Ravikant believes creates better focus:
In Ravikant’s view, it is preferable to have a team focused on a narrower problem for which their efforts are directly rewarded. Instead of having a staff jointly running a job board and venture platform, why not bifurcate them? Rather than ask your engineers to support a crowdfunding business, why not start from scratch?
This isn’t the only approach AngelList takes. Other times, Ravikant’s company uses something closer to a franchise model, as it has with AngelList India. Whatever the precise design, the goal is the same: maximum incentive alignment.
Think like a nation-state (Terra)
Do Kwon often talks about Singapore. The founder of crypto project Terra takes inspiration from the creation of the Asian republic and how prime minister Lee Kuan Yew fostered prosperity. Kwon’s interest in Singapore’s success is no accident, but rather a reflection of how he views the scale of his work. Our piece on project alludes to this framing:
The way Terra speaks of its currency mechanics, market modules, and treasury is often in the language of nations. In many cases, Terra seems to serve a similar purpose to a central bank, stimulating progress in the manner it considers most advantageous.
The tendency to view one’s work at a state or civilizational level may sound grandiose, but in many instances, it offers the aptest comparison and clearest lessons. As tech insinuates itself into every aspect of our lives, companies and protocols act as pseudo-nation states with enormous impact and broad scope.
The crypto sector particularly lends itself to this framing. Not only does it involve fundamental economic design (unlike web2 businesses), many include a true constituency, whether that be of NFT or token holders. In Terra’s case, this perspective has created an ambitious scope that remains conscious of its many stakeholders.
Invest in soft-power (FTX)
There is a difference between having a well-known brand and an influential one. FTX has made one of the most ambitious attempts to secure the latter in recent memory. Entering the American market late, the cryptocurrency exchange has sought to capture attention and influence by partnering with beloved sporting institutions, buying the naming rights to the Miami Heat’s arena, and sponsoring MLB uniforms. From Part 2 of our FTX Trilogy:
FTX is making soft power moves. What better way to appeal to US regulators than becoming supporters of its most beloved pastimes? In a way that Binance could never hope to do given its origins, FTX is bringing Americana into its narrative. That may make the firm appear like a less foreign proposition.
The audacity of FTX’s maneuver has attracted earned media; it has also built affinity, familiarity, and influence with the American public. In “Whose Story Wins?,” we identified a few other companies that can be considered modern masters of soft power, including Robinhood, a16z, and Stripe.
While not every business needs soft power, it remains under-appreciated by most tech startups and venture capitalists. With online marketing saturated, finding innovative ways to advance a story of one’s making is likely to become increasingly valuable and a critical source of differentiation.
Understand the world's most consequential tech companies before they IPO. Join 55,000 others by signing up today.
Preserve optionality (OpenSea)
Devin Finzer and Alex Atallah founded OpenSea when NFTs were scarcely a blip on the world’s radar. CryptoKitties might have taken off, but there was little to suggest that an obscure on-chain data structure and the imagery it could contain represented big business.
Given those conditions, OpenSea’s leadership followed an astute strategy: they preserved optionality on multiple levels. Firstly, the team kept burn low, bringing in money through fees. Doing so freed Finzer and Atallah from continuously fundraising and gave them the time for the market to mature.
More importantly, OpenSea built optionality into its product. Rather than concentrating on owning a particular use-case, the team designed the platform to host the long-tail of assets. Again, this was a sharp move. When “PFP” collectibles like Bored Ape Yacht Club and CryptoPunks took off in 2021, OpenSea was well-positioned to capitalize, thanks to its flexibility.
Not every company benefits from the approach OpenSea took. But in immature markets where funding may be hard to come by, and the first great use-case is harder to parse, preserving optionality can be the difference between outrageous success and quiet death.
Intensify your advantages (Tiger)
Great businesses often don’t try to do everything. Rather than splitting their energies, they focus on how they can intensify their most pronounced advantage.
Mega-fund Tiger Global is an example. Traditionally, venture funds conduct research and due diligence in-house by relying on a team of analysts and associates. This process often makes it difficult to make quick decisions or gain familiarity with a new market or geography. Recognizing the flaws of this approach and the trickiness of building a competitive advantage in this area, Tiger follows an axially different method. The firm outsources its diligence to consulting firm Bain. Tiger can focus on its greatest strengths by taking this tact: moving quickly and relying on an encyclopedic knowledge of successful business models to pick winners.
Red Bull does something similar. The company outsources the production of its beverages to focus entirely on marketing. The implicit message here is that the Austrian business does not believe it can differentiate on the formulation but understands it is genuinely brilliant at telling a story and advancing a lifestyle linked to its drinks. To win, find ways to deepen your advantages, even at the cost of outsourcing commoditized operations.
Find your counter-positioning (Telegram)
Sometimes, the best marketing strategy is to define yourself by what you’re not. No business thrives in this state of negation quite like Telegram.
When the Durov brothers first began working on the app in 2012, they entered an already competitive social media and messaging space. Jan Koum and Brian Acton had founded WhatsApp three years earlier and amassed a user base in the millions. Facebook had been running a version of its chat functionality since 2008.
While many other businesses might have been intimidated by this competitive set, Pavel Durov treated it as an invitation to punch upward and expose his rivals’ weaknesses. Throughout Telegram’s journey, the company has defined itself as a kind of Not-Facebook: a user-friendly private alternative to Big Blue’s surveillance state. Such counter-positioning was made more effective once WhatsApp was brought into Zuckerberg’s fold, allowing Durov to extend the same argument to his most direct competitor. As Facebook has fumbled through data breaches and congressional hearings, Telegram’s allure has only grown more pronounced. Today, Telegram has more than 600 million users and a rich feature set.
Rather than accepting the positioning of the market leader and proposing improvements, the shrewdest move may be to renounce, invert, and counter-punch.
Proactively reinvent yourself (Many)
Great businesses never sit still. They are constantly in a state of reinvention and internal bottoms-up disruption. Doing so not only opens new opportunities but protects against competitive displacement.
Mercado Libre is an example of an endlessly inventive business. What began as a straightforward e-commerce company has forked into Latin America’s leading online retailer with a vertically integrated logistics network and rich set of fintech features. Kaspi shares this trait, having transformed from a middling bank into Kazakhstan’s super-app. This metamorphosis required Kaspi to evolve continually, adding online bill payment, mobile commerce, messaging, point of sale services, maps, and travel booking. Though earlier in its life, Nubank appears to be following in a similar trajectory, starting with credit cards and layering on insurance and stock trading.
On the investment side, perhaps the best example is Coatue Management. Though the firm has flaws, it is exceptional in how it perennially reinvents itself. Since launching in 1999, the fund has added an impressive private market practice, developed robust in-house data infrastructure, and created a suite of different thematic investment vehicles. To stave off staleness and disruption, businesses must innovate from within.
Next up: the inside story on one of the highest performing funds of all time. Sign up to make sure you don't miss it.