Tag: opszero

As I am reading The Outsiders a book about unconventional CEOs. The book has some great arguments of what the best CEOs did.

• Focus on free cash flow as their primary metric.
• Focused on allocating capital, not necessarily on being a manager. They would redeploy free cash flow and have others execute day-to-day operations with a focus on cutting expenses.
• Focus on returns per share which they would rebuy when the PE of their company was low. When it was high, they would borrow against their stock to acquire and grow.
• They would also downsize the company to achieve the above instead of focusing solely on growth. If you are making more money per unit of work, why do you need to grow at all costs?

So what does this book have to do with me? I’ve been haphazard to say the least. I was the guy who had like 6 majors in college. However, as you grow older, the things you learn deepen if you are in constant practice. You understand your strengths and weaknesses. You have the battle scars of experience to know when things won’t work. You develop a sense of taste of how things should be.

As opsZero has developed over the years, I have evolved with it. A company doesn’t exist in a vacuum. It exists within the folds of individuals and society. I’ve had this idea of different brands doing different things, etc. How awesome to build a conglomerate. However, this is a lack of focus. It just means you do 10 things terribly instead of one thing well.

So I am going through an exercise of downsizing. The only two things I am working on are abhiyerra&co and opsZero. The abhiyerra&co will focus on pure capital allocation and nothing but that. Since a lot of what I am doing there is long-term bets the more I do the worst I will likely do.

opsZero will focus on nothing but DevOps and expanding our capabilities. I am divesting everything else, including domains, other apps, etc. that don’t pertain to opsZero. The Cloud has a lot of potential and once a majority of the startups funded on cheap capital crash, people will use open source.

This does not mean stopping experimentation. Small bets to learn are important even if the outcome is not what you expect. However, big bets should be where large amounts of value can be generated through realized cash flow. This while ensuring that every dollar provides a return on invested capital.

This also means a personal transformation from an operator to mostly an allocator. This may be the biggest change I will need to undergo which means transitioning from doing the work to finding the people who can accomplish the work.

Capital is going to get expensive if it already hasn’t which means the era of crazy valuations and everyone getting a puppy when they join a tech company are over. This will result in a sizable adjustment as many venture backed companies will just perish as they run out of funding the next few years.

However, this is not going to be peaches and roses for Google, Meta, or Microsoft either. The first two are reliant on the cheap Capital to help startups pay for advertising. Microsoft on the other hand has half its revenue coming from international. As the dollar strengthens relative to the other currencies Microsoft will also face the same headwinds.

In this market Amazon seems to be in the strongest position as they seem to be the most diversified. They will have headwinds on their AWS business but a lot of the startups are playing with credits anyways and haven’t started to pay Amazon. With a focus on healthcare that they seem to be doing with their recent purchases they seem to have the most strength of the big tech companies.

The lack of capital will kill many companies because there is just no way many of them have a way to get to profitability. This will be likely the big focus of the next decade, back to the power of cash flows and balance sheets. This may have unintended consequences on the broader tech ecosystem as the goodwill of these companies has been the primary driver of many of the innovations in tech the last decade.