Transcription
Steve would say, "By the way, not a nice guy. Not a nice guy." He would say to a room full of people, "Kevin, I don't give a [ __ ] what the students want or the parents think or anybody thinks. It's what I want. They don't know what they want till I tell them what they want." And I said, "Steve, you sound like such an [ __ ]. You have no idea what that sounds like." He says, "No, no, that's how it is, Kevin. Now, are you making money with me? Are we, are you, am I your fastest growing OEM? Have we not been wildly successful and continue to be?" I said, "Yes, Steve, that's true." He said, "Then [ __ ] shut up and do what I say."
"That's how he would talk to you." "100%." And here's what I learned. Look how wildly successful he was. But here's why. There's a concept that he understood that very few people focused on back then in the early 90s: signal-to-noise ratio. What was so brilliant about Jobs? I tell every CEO now, and I don't care if you're an S&P 500 CEO or you're just starting a business. His vision of signal was the top three to five things you have to get done in the next 18 hours. Not your vision for the business next week or next month or next year. Just the next 18 hours you're awake. You're going to get those three things or those five things done that you have deemed critical for your mission. They must get done today. Anything that stops you from doing that is the noise. So, this signal-to-noise ratio to be successful for Steve Jobs was 80/20. 80% signal, 20% noise. And I knew that to be true with him because he would email me at 2:30 in the morning, expect me to get back to him because back then we didn't have texts. It was all email. He was right. He was right.
And the only other person that I've seen that has a higher ratio than that is Elon Musk. He has no noise. He does not deal with noise. He is 100% signal, 24 seconds, you know, every cycle. I mean, the guy is just 60 seconds of every minute, 60 minutes of every hour, the 18 hours he's awake, it's all signal. And look what he's achieved now. That's very awkward for him socially because noise is dealing with your family sometimes, or noise is saying hi to a friend, or noise is is is listening to some doom-scrolling on, you know, some social media app that just takes your mind, or maybe playing your guitar. But very few people on Earth, and if you could go back in history, you're going to find out that the geniuses of their time were close to 100% signal.
"And so I can really sort of summarize this for my audience. Signal is the most urgent thing you should be focused on right now. And noise is basically everything."
"No. The goals you set for that, the the weight, the that you are awake. If you're going to be awake 18 hours..."
"Yeah." "...and you've determined that there's three things you have to get done, you're going to get those done, no matter what it takes, you're going to get those done. And you're not going to let anything distract you from the three to five things. If you're a CEO and you achieve that and you can get those done with 80% of your time based on that, you're extraordinarily successful. You are absolut- and you're Steve Jobs, or you're an Elon Musk, or you're somebody. If you, if you even talk to Bezos, I don't know him personally, but I've heard in many interviews like I knew, you know, I've I've met Elon just a few times. I spent a lot of time with Jobs, but they say the same thing. Bezos will not make a decision after 1:00 in the afternoon because he felt that the noise was too high. The signal for him was in the morning hours."
"It. This is a crucial aspect of success that that I now understand to be the ability of of of it defines an entrepreneur. A man or woman that understands a signal-to-noise ratio, that focuses on that, they'll be successful. The ones that can't, that get down to a 50/50 signal-to-noise, they'll fail. It's that simple. And it's a very simple concept. You know, you made one of your things today this interview. You're going to get it done. You're going to all these people around and everything else. This is one of the three to five things you're going to get done. I have five things today. I'm going to get them done. I'll do the same thing tomorrow and the day after that. And you have to decide how much signal you need to get those three to five things done. And for Jobs, it was 80%."
"What's the opposite of that? Sometimes looking at the opposite helps us to understand something. So the opposite of having, you know..."
"Well, I hire managers and CEOs that have a balance in life between the discipline, the binary aspect of business, which is I make money, I lose money, and the chaos of the arts or some other pursuit. Dance, painting, photography, collecting crystals, whatever it is. That that they have that balance. You, you need, you need the yin and yang in your mind to make correct decisions. It doesn't mean it takes you off the signal. The signal is, you got to get stuff done. But how do you live your life? And so I spend a fair amount of my time practicing my guitar, or working with my photography, or my my watch. You know, tonight, very late tonight, I will meet a master watchmaker, and we will deal with the design of a new piece unique that he's going to make for me, and I'm going to love that moment. That's going to be something completely different to what I did all day long. And we'll start our journey together over the next two years to make this piece unique. And that's something that just takes me away from all the [ __ ] I'm going to be dealing with today. And I also tell successful entrepreneurs, in the same day, you will get a, and this happened to me today, it happens every day. You're going to get a call from some aspect of of your, what you, you call it your empire, whatever you want, where you're this company's going bankrupt. It's just going to go bankrupt, and you're going to lose, I don't know, 10 million bucks on that deal. And that's a piece of information you're dealing with. Half an hour later, this actually happened to me today. One of my companies going public. It's a 450X for me. The stock will get unlocked sometime in the fall. But how can, how do you fit that together? Utter catastrophe, destruction, woe, loss, utter euphoria. Half an hour later. That's that's what my life is like."
"That's entrepreneurship, obviously, on a different scale for most founders."
"Well, the founders deal with the same thing. They get disastrous news. They lose an account like a Costco or something if it's consumer goods or service, and they get something else. The, the ebb and flow is is the management of expectations, and your ability emotionally to navigate those ups and downs is part of what entrepreneurship is. But it goes back to the signal. It can't take you off the signal. This is what Steve taught me. Yes, it's great news. Yes, it's bad news. But focus on the signal, O'Leary. Focus on the signal. That's it."
"Where does this analogy come from, of signal and noise?"
"It was his genius of of of making it so simple. What are the three things you got to get done today? What are they? What are they?"
"How do you know what they are?"
"They will make themselves apparent. They will definitely make themselves apparent. They will make themselves apparent, and you will realize, I have to deal with that. You may have them set up from the day before. I actually still use sticky notes on my mirror. Got to get these three things done. And or five things, whatever it is. But then something else will hit. That's the skill of understanding. Is that noise hitting me? Or is that signal? There is the essence of the great entrepreneur, the great manager, the great leader. Is that signal or is that noise? What is it? That's what you're looking for. You're hiring somebody that can actually distinguish signal and noise, because it could be noise. It could be irrelevant. You have to determine. Only you makes that decision. That's the key right there. This is what I teach entrepreneurs and engineers. And this is the most important thing. It's that judgment of prioritization, but then the sort of force of execution to get it done."
"Can you interpret signal and noise, and can you keep the noise away from from the things you got to get done? That's one. The other, which is something that I've learned over the last 5 years, and this, uh, you might find this interesting, but most of my, particularly the nascent startups, and you're you're involved in the same format I am. You're Dragon's Den in England, I'm a Shark Tank in the US. I, you know, you put up 500,000 or a million bucks into somebody's business. Eight out of 10 is going to fail, maybe six out of 10, depend, you just don't know. And I love it when people tell me, oh, I, I know when I make an investment, it's going to work. [Laughter] They are so full of [ __ ]. They have, I'm talking about startups, they have no idea what's going to work. And you won't know for 5 to 7 years, which is why you need diversification in the portfolio. But I would go as far to say now, you know, when I meet, um, venture capital firms and young analysts that work there, and they think they're so damn smart. They've never operated a business, they know nothing. They have no idea what they're doing. They're going to hope that one or two of their portfolio, uh, is going to work out in seven years and pay for all the other mistakes. But the serendipitous nature of success in entrepreneurship is brutal. It is."
"So, does that mean though that it's, I guess I was going to say, does that not mean that it's highly luck? Investing is highly luck. Entrepreneurship must be."
"Well, I said karma. You know, I call it karma. But you need executional skills. But here's another skill that I think we should talk about, um, when you look at, at least my experience over decades of making these, uh, nascent, these early-stage investments, these around investments, remarkably, and I've done them in all 11 sectors of the of the economy, the majority of the successes, five to seven years later, companies run by women. Why is that? Why is that? And so they don't know each other. They're in different sectors. They never meet each other. Why is that? And I have come to the conclusion, um, two things. They set goals that they can achieve. So that in the early stage of their businesses, they put growth rate targets like 15, 16% versus men at 30%. Very often, men hit their target 65% of the time, at least in my portfolio, and women 90 [ __ ] plus percent of the time. And that keeps the, the team very sticky. They want to be part of a, so they don't have a lot of attrition when they're small. They don't lose the head of finance, the marketing that that works. But they have another attribute, and this was pointed out to me by one of my female CEOs a few years ago to me. She said, 'You know, Kevin, you talk too much. You talk too much. Um, you talk two-thirds, you listen one-third. Why don't you try reversing the ratio?'"
"She said that to you?"
"Yeah. Yeah. [Laughter] I'm very thankful, actually, because I tried it, and, um, she's right. If you don't talk and you listen, you become far more effective as a manager or an investor in my case by getting information that you weren't going to get by talking. And so if you go into a room, I just did this a few minutes ago before I came here. I'm involved in a litigation, and we decided to attempt settlement talks, which is why I was a few minutes late. And, um, you know, we knew we were going in there to settle, and it, it's long-protruded, you know, long, it's a long, long, long, uh, litigation. And I remembered her as we sat at the table like this. There were other people in the room, but the two, uh, you know, were across from each other. I just looked at him. I understand for a long time, a long time. And it gets uncomfortable, and no one else is talking, you know, just looking. And, um, maybe after 90 seconds, he blurted out something he shouldn't have said. And I knew exactly what the price was. [Snorts] Right there. That was the end of it."
"You learned that as a podcaster. You learn that there's actually something going on in the silence."
"There is something going on in silence. And it's, it's, it's the number that he was going to settle at."
"He showed his hand."
"So we saved ourselves two hours. You know."
"It's an attribute that many people can't do because they can't stand the social uncomfort of it. I have no problem with it. I could sit here and look at you for 10 minutes. It wouldn't matter to me. And I've actually found it to be a very useful piece of information. It's not just in negotiating, but to listen to employees, listen to investors, listen to financiers, listen to alternative ideas to yours and become more powerful from it."
"You're in the very business of people selling to you and pitching to you. We both sit on a similar show, and where people come in and pitch to us. You're seeing at times 10 to 12 pitches a day. So you've developed this muscle over the last couple of decades now, almost this instinctive spidey sense of when an entrepreneur will be successful, at least in the context of securing investment. What have you come to learn about the the attributes of the ones that are successful? Is there is there anything one can take from that?"
"In the moment when that entrepreneur comes out onto the carpet in the context of Shark Tank or Dragon's Den, even they need the setup shot of the product with the entrepreneur, and they have a, in our case, a steady cam or a jib that comes down and shoots it. So, the, the stage director, Eric, uh, is his name. I worked with him for years, says to the entrepreneurs I've never met, usually it's a team or it's a family or it's whatever, three or four, two people, whatever. 'Hold, hold, hold. Don't speak. Hold. Hold. Don't mind the camera coming into your face. Hold. Hold.' Maybe for two minutes. And I'm right there in front of them. I'm 12 feet from them. And I just look at them. Not smiling, not blinking, not frowning, just looking at them. And before they say a single word, I know if they're winners or losers. Just like that. And why is that? Why is that? When? And I'm right, probably 99% of the time. Maybe I get it wrong one out of a hundred. I doubt it though. You walk in a room, even though you've practiced, you, you know, you, in the context of of Shark Tank, 20 plus cameras, a billion plus dollars in the five chairs there. You've been practicing for months your pitch, but it wasn't the real deal. Here you are, cameras are rolling, tape is running, you know, you've only got so many minutes. This is your moment. And you're on national television, 100 plus million people will see you in syndication. It's all in your mind. It's all in your mind. It's going through your head. Can you project who you are with your eyes and the way you're standing? Can you project your confidence? Are you looking at the ground? Are you looking away from me? Because you can't stand me looking at you directly without saying anything to you. Or do you push back? Or did you say, 'I'm gonna, I'm gonna stake my aura. I'm going to stake my ground here. I'm going to show you I'm ready.' You see what I'm getting at?"
"Yeah."
"And I can feel it. I can see that they're ready to do battle. They're ready to answer. They're ready to present. They're ready, ready, ready. Or they're not. And I've taken that out of the Shark Tank. I see that every day in life. I see it. So you have to learn how to project yourself in front of your peers or who's who you want [clears throat] to you want to lead or teach, or if you're a general or a preacher. That is maybe an innate something you're born with, or maybe you can learn that. I don't know. I don't care. But if you don't have it, you're going to fail. And you're just, that's before a word is spoken, before the first word is spoken. And so then what has to happen? Then Eric says, 'Go. You're on.' And everybody's just sitting there looking at you. Can you articulate your idea in 90 seconds or less? Can you, whatever props you have or whatever you're going to say, can I get the big idea right away? The ones that had that aura generally get there. 30 seconds later, I get it. I get what they're here for. I understand their product. Okay, that's good. Unfortunately, great ideas are a dime a dozen. I mean, there's millions of them. The next phase begins. This is after 90 seconds. Can you explain why you're the right person to execute on this idea and create a business from it? Because you know something about this space? You worked for a competitor. You've tried three times before and failed. You've figured out what you did wrong. What is it about you or your team that can take this idea and make it happen? Now, when you get those two things together, you can feel the aura of the room. The isotope is sizzling because you've devised a great idea. You got an operator in. And they. But then the third thing, this is the killer. This is the killer. I've seen it so many times in real life and Shark Tank's real life, it is. But you got to know your numbers. How big is the market? How fast is it growing? What's the gross margin? I mean, I've said this a million times to people. I teach this every day. How many competitors are there? When are you going to break even? What month? If you get the first two right and you don't know your numbers, you deserve to burn in hell. And I'll put you there myself. I mean, you wasted an opportunity for an entrepreneur that did know their numbers that could have been in that spot that I could have invested in. You don't know your numbers. I take you up behind the barn and shoot you. You should have brought somebody that understands the language of business, because those three together are the definition of leadership right there. If you love the Diver CEO brand and you watch this channel, please do me a huge favor. Become part of the 15% of the viewers on this channel that have hit the subscribe button. It helps us tremendously, and the bigger the channel gets, the bigger the guests."