Warren Buffett shares advice to investors every year. One big theme: Stop thinking that there’s a magical secret formula for making tons of money overnight. Or in short. get rich slowly.
This is true not only for investors, but also for entrepreneurs. The world celebrates the overnight successes. Groupon. Facebook. Uber. AirBnB. Enron. The world keeps doing that, no matter how many times these “successes” turn out to be not so successful.
The world doesn’t make movies about the companies that grow 50% year after year after year. There are millions of profitable companies employing hundreds of millions of people, creating nice amount of wealth for their founders and any Angels who helped get them going.
But those companies don’t raise massive amounts of venture capital. Few of those companies ever go public. Thus they tend to live in obscurity, even when we use their products every day. MailChimp was one of those companies, but then had their 15 minutes of fame when they were acquired by Intuit a year ago.
I see a mix of these paths in my work. Two examples from my Africa Eats portfolio are below. Which would you rather own? Which type of growth would you prefer as an entrepreneur?
Agro Supply had a 5x jump in revenues in 2021 (the values shown are “top-line revenues”). Swahili Honey has instead been doubling year after year after year.
Warren Buffett would probably like neither, as Berkshire Hathaway has never invested in Africa, but it hadn’t invested in technology prior to Apple a few years ago. In any case, my money is literally on both, but as an investor the doubling every year makes me a lot more confident in the future results than seeing a company “pop” up in any one year.
And as a 30+ year entrepreneurs, I know how stressful doubling can be, and thus I warn the entrepreneurs I mentor about trying to do more than triple in any given year. If it happens opportunistically, as it did at Agro Supply, great, but don’t try and replicate that year after year after year.
Warren Buffett is correct (as he usually is. Far better to grow steadily year after year. Do that for ten years and no matter where you start, you’ll have a much much larger company a decade later.