203 - The Four Entrepreneurship Types: Which Game Are You Playing? with Trenton Hughes

0:00It's big for people to realize that now, like, hey, I am chasing freedom. So let me optimize for freedom along the way. These are still people working probably five to eight hours a day, but they're fulfilled doing it. And then the rest of their lifestyle is really optimized, too. They're not just coming home and like sitting on the couch. I totally agree. I think I'm an Austin type. You can still reach me at most hours of the day, but I have optimized for my life. I know what it would take to go and build a hundred million dollar company, and I don't want to do that.

0:27All right, Trenton, I always love talking to you because you're one of the most thoughtful people that I know, successful, multiple exits, started a company called Tribe, which is a peer group that has many entrepreneurs from many walks of life joining it. And we were just talking about before this call that not only are more and more people getting into entrepreneurship, but they sometimes don't even know what game they're playing. And that can sort of be to their detriment. And you had this post interesting post a little while ago about sort of the four types of entrepreneurship that you're seeing.

0:58And why you think it might be important for people to understand what type of entrepreneur they are. Do you want to frame it up? Yeah, appreciate you having me. Yeah, it is interesting. So you know, been entrepreneur for a while. And now that we have tried, we have this ability to see all these different entrepreneurs and what they're doing. And I'm really starting to see that. I think there's a lot of different reasons people in entrepreneurship, but there really seems to be this breakdown of four different types of entrepreneurs that I'm personally seeing today. And so the four different types, I've kind of phrased them by geos.

1:27And so we've got sort of Main Street, we've got the Silicon Valley type, we've got the Austin type, and we've got the Tomorrowland type. And go ahead, sorry. I want to pretend like I'm smart. What do you mean by geos, though? I don't know what that means. Geography. So they kind of fit into almost different geographies as well, or at least their their mindset sort of does and how they think about things like Austin type literally Austin Texas Silicon Valley Silicon Valley Tomorrowland I don't know where that is maybe someone's basement some festival and then it's somewhere tomorrow it's somewhere tomorrow exactly they're they're in the future they're trying to be at least and then you got the Main Street folks who are just sort of in like small town USA we'll get into like what each one of these means why do you think it's important for people to understand what game they're playing?

2:16Yeah, I think people get entrepreneurship. And like, truthfully, everyone's reason is different. Maybe they assume that they're all kind of the same. And they kind of have these North stars that they needed, need to go up these ladders and figure out how to get to those ladders in order to win the game of entrepreneurship. But everyone's goals are kind of different. And the way that they're thinking about building businesses is are different as well. And that's what I'm seeing is like, there's, there's really like four main types, maybe a fifth one would be like a entrepreneur. And we can kind of throw that one out for this conversation, but four main types.

2:45And each of those types kind of have different ways that they're thinking about building and they have different ways that success means different things to them. And so like, if you're truthfully probably fit into one of these types, but you're chasing a different lane, you're going to feel maybe like you're not making the progress you want to make. But some of the people that kind of understand the type of entrepreneur they are and play in their lane and do it the way that they want to understand their end goals, they're going to obviously have more success. I kind of think of it in terms of, you know, it's the early or mid 1800s and the West is just totally unexplored.

3:16And so people don't really know how to get out West. The other day we were driving through Eastern Idaho on our way to this place called Lava Hot Springs, freaking middle of nowhere, but it was amazing. It was literally hot springs that are hot by lava. That's geothermal heat, right? Like heating these hot springs. And as we were driving, we passed this road that was the old Lewis and Clark trail, I think was the name of it. It's crazy. And I was like, what the freak? So I go and Google it and sure enough, that was part of the Lewis and Clark trail. So Lewis and Clark, two famous explorers that explored the West.

3:47But if you were starting, let's say in Chicago or somewhere that was the quote unquote frontier land in the mid 1800s, going to Seattle and going to San Diego were two very different trips. Yeah. And if you were setting out and you were just like, I'm going to go West, you don't necessarily know which one of those is best. Are you supposed to go, you know, into the Rockies, North of the Rockies? Do you go under through New Mexico in the middle of the desert and try to, you know, figure your way out through the Rio Grande? But starting with the end in mind, understanding, okay, what's my goal? Okay, I want to get to San Francisco or I want to get to Idaho or I want to get to San Diego or whatever the place is, is really important because it sort of dictates the path that you're going to take.

4:27And you may be somebody who's not well suited for one of those paths or the other. So that's why I like these sort of types is it's like, okay, which one of these am I, where am I going? And it sort of allows you then to plan out your path as an entrepreneur. Yeah. And if you start just heading West, you very likely will get lost. If you kind of don't understand where you're going, you might turn back. You maybe will get lucky and figure out that way, but why not use a map and actually like get there and follow it the way that you want to follow it. Well, and luckily, there's been enough entrepreneurs ahead of us now where we have highways.

5:03It's pretty clear. It's pretty easy for us to understand, okay, which lane am I in? All right, that's the path I can follow. You don't have to reinvent the wheel every time. There is something fun about reinventing the wheel, but let's go through the four types. Which one do you want to start with? Yeah, I mean, and it's interesting because all four do have kind of different reasons that they're playing in different goals. But we can talk about the one that I'm seeing a lot lately. So we're getting four types. We got Main Street, we've got Tomorrowland, we've got Austin, and then we got Silicon Valley.

5:30And I'm seeing a lot of people in what I'm calling Austin. So let me define each of these four first, then we can kind of talk about them individually. But the Austin type, to me, this is a person that's definitely wanting to build a business, have fun doing it and chase freedom. And so they're trying to chase this, like, let's make money and have some freedom and fun along the way. And like, let's live the lifestyle we want to live. So a very freeing and freedom chasing type of person. Let's talk about each one as we define them. Okay, sure. So we could just like deep dive. So like Austin, in my opinion, is what we used to call the lifestyle entrepreneur.

6:05You remember when people would, it was almost a pejorative. It was like, oh, well, you're just a lifestyle entrepreneur. And they would sort of knock it, which essentially meant, well, you don't, you don't have any larger ambitions. You just want to have a nice lifestyle. I'm excited to see now people are sort of recapturing that and like, yeah, yeah, I don't need a hundred million dollar exit. I just want to have a nice life. I think it's big for people to realize that now, like, hey, I am chasing freedom. So let me optimize for freedom along the way. I do think that it's not necessarily like lifestyle kind of got a bad rap where it was like, I'm hoping to work one hour a day and the rest of my day is going to be on my life.

6:37I do think a lot of these Austin types enjoy their business now. and it's because they probably optimized their lifestyle to attach to that business. I'm not seeing them be like lazy types of people that are chasing like this. I only want to work one or two or three hours a day. Like these are still people working probably five to eight hours a day, but they're fulfilled doing it. And then the rest of their lifestyle is really optimized too. They're not just coming home and like sitting on the couch. They're really like doing the stuff they want to do. I totally agree. I think I'm an Austin type.

7:05Like I have kids that are really young. I don't want to travel. I'm not going to a bunch of different conferences. I'm not going to a bunch of different places. like, I kind of know where my boundaries are. And it's not even that I work four or five hours a day. Like, I still work hard, you can still reach me at most hours of the day. But I have optimized for my life. Yeah, I know what it would take to go and build 100 million dollar company. And I don't want to do that. Like that this is not something for me. And so I've kind of optimized it. Where are you? Do you think you're an Austin type?

7:33I am, but I wasn't always that way. And I've really like switched over the years. And I do think people can evolve. Like, I actually think that they probably maybe not maybe they do but most time i don't think they start off there as an austin type i feel like they learn the hard way that maybe the silicon valley or the tomorrowland isn't the path and then they move over to this austin type could be wrong on that and i do think like a lot of the people that i'm seeing within tribe are attracted to it because they're kind of in a similar boat not everyone there's there's different types in there but there's a lot of the folks are in there i'd say like that's probably the majority of the folks in tribe as well and a lot of them aren't necessarily first time founders.

8:09Some of them are, but a lot of them aren't. For a quick flavor, full disclosure, I'm an investor in Tribe. Trenton, how many members do we have? A little over 150 at this point. And they're all over the country, right? And we're talking East Coast, West Coast, North, South, everywhere. It's pretty cool. I get to facilitate two of these groups. And so you just get to see what different people and different industries and different geographies work like. And we both had prior experience outside of this as well. But But I agree with you. I do think that from my experience now seeing many of these individuals, the Austin type are prioritizing cash flow.

8:46Ownership and autonomy are incredibly important to them. They want to control their schedule, do what they want to do, when they want to do, with who they want to do it with. They're still ambitious. They're a bootstrapper. They're not raising money. That brand of entrepreneurship, in my opinion, is becoming more and more and more prevalent. And we're even seeing kind of a shift, in my opinion, outside of that from SMB to this Austin type. I love this. I love that you've named this the Austin type of entrepreneur. It's awesome. Hey, I don't know if you remember this, but when we started this podcast, we entered into a social contract.

9:17I would spend time, energy, and money producing this podcast, interviewing these individuals and giving you insights into how to build, buy, start, grow your business. And you would like, subscribe, and leave me five-star review. Now, out of that, we both get to talk to really cool people and hear really cool insights. We both get a ton of value. But I just want to help you keep your word. So would you do me a favor? Will you go leave a five-star review for me on Apple or Spotify? It would really help. And if you want, even share this with a friend. And if you've never been to Austin, you can kind of feel it.

9:50The vibes out there are a lot of the people that live there and just the way of life out there. I created a little self-quiz. I'm going to pose these questions. If you're listening and you're like, hmm, I wonder which type of entrepreneur I am. At the end of each one of these, I'm going to ask questions. All right. So ask this to yourself. Would you rather own 100 % of a$5 million business than 5 % of a$100 million business? Okay. So that's one question. Do you want to build something that supports your life and not take it over? Do you love experimenting, shipping, and learning in public? Maybe are you not anti-VC?

10:24You're just not sure you need it? those are some questions you can kind of ask yourself. I think that any, any question you would add? No, those are pretty good. I do think like income level and just like, are you willing to go all in to get your end goal of like a certain company? Cause that would be an indicator of, of you're not an Austin type. I think there's, there's indicators that you are. And then there's indicators that you're not, but like even income level too, like with the Austin type, these, these people aren't chasing, like you said, the a hundred million dollar thing, like to them, wealth and riches a little bit of a different number, probably like a$5 million business would be amazing.

10:58And I think a lot of them are looking to chase that type of business. But on average, what I'm seeing most of these people make like take home to, I don't know,$200 ,000 to$500 ,000 a year, maybe a little bit more, maybe a little less if they're on the earlier side, but somewhere in that range, probably. And then their businesses are probably worth on the low end, a million to on the higher end 10, 15 million. Like these aren't, and they're not trying to go too much beyond that. Like they're, they're just not at this stage of their life. And to your point, I think there's two types of Austin entrepreneurs.

11:28I think there's the mature entrepreneurs like you and I who like chase something and then realize like, I don't need that actually. I want to do this. And then there's the type who just always since day one, we're like, I don't need something big. This is, I want to exactly have my lifestyle and I'm going to shoot for that. So they exist. They definitely exist. they're more grounded than than I was. So all right, let's, let's go to the opposite end of that spectrum. The Silicon Valley type, tell me about them. Yeah, Silicon Valley type. And I come from California, you do too, actually, this is where I started, I definitely thought like the end goal was to get VC money.

12:06And like, that would be like, wow, if we could get VC funded, and then create this$100 million business, or maybe eventually a unicorn, like that would be the coolest thing ever. But yeah, basically the Silicon Valley type, you know, tech, SaaS, I guess AI at this point too. And they're focused on like big, big companies and exits, apps, SaaS companies. Most of them do have that like North Star goal of VC backed, going through series A, series B, series C, you know, maybe eventually exiting or IPOing. Like that's kind of where they're trying to go. And it's, there's obviously like a clear path there for them to follow.

12:44It's changed a bit over the last few years. But this one is to me where most of the young kids, I feel like fall, like, I don't know too many like people in our 30s, 40s, 50s, 60s trying to chase this path. Like it's these are like fresh out of college or dropped out of college. That's even cooler if you drop out of college to do this. And they're chasing this. But what's funny is like, they're going to have two opposite ends. They're either going to be super successful or super poor. There's no in-between with this group, it feels like. They're home run hitters. They're going to strike out a number of times.

13:20But to your point, they're either going to be super successful or they're going to be super poor. I had to laugh because that was freaking funny when you said, these are the young whippersnappers. All these young kids chasing after their dreams. That's totally me. It's just shaking my head and I'm like, you guys go do that. yeah i'm no longer in that game i was i definitely was and uh and it was super appealing but but yeah like you have to ask yourself why why are you doing that but i mean there are some people that obviously end up like these are probably the richest people we know end up are from this this world like they they hit it but oh for sure i guess that's only a couple percent of founders actually make it that far and do well most fail somewhere along that that path it seems which is, you know, VCs in general are known for taking, you know, 10 bets on different, different companies and seven of those failing within the first couple of years.

14:16So definitely odds are stacked against you. I agree with you. These are more of the high risk, high reward individuals where they're dreamers. They have a really big idea. They think they can bring it to fruition, but in order to do that, they've got to go raise money. they've got to go play in a much bigger space and a much bigger game than most of us have experience with. So it's, it is a very different game. It's interesting because it's, you feel like you are a part of the future. And I know we have the techno optimist, which is one of your archetypes, but you feel like you are, you're changing humanity, right?

14:55Like every single one of these people that I speak with always quote Steve Jobs when Steve Jobs was like, I just want make a dent in the universe yeah and that's where i think they are and i think it's very cool and you can be very ambitious but in order to play this game typically you've got to raise at least a couple million dollars you've got to live in probably specific geographies like we're talking about large urban centers in the past it was the bay area but now it's probably like miami new york austin san francisco maybe la as well yeah and these are in many cases 10-year bets they're not optimizing cash flows this is either going to be a hundred million dollar plus exit or it's going to be nothing and they're going to move on to the next venture yep yeah i'd agree with that and i think that back to like it's important for you to know what game you're playing like to your point 10 years is probably a good like or more right like the people that are obviously the most successful.

15:51Zuckerberg's still in his company. A lot of them just continue to be in those companies and they have to evolve throughout that. But this is a longer term play. And it's funny because I think a lot of these people are taking big risk and they're hoping that it pays off in the short term, but it definitely is a longer term play. And frankly, the ones that win are obviously going to be a lot richer than even you or I, who we know we've done well. To them, it's worth it. They want to change the world. Some of them are really motivated. And I think that the ones that really are that have this fine balance of like, I want to change the world and I want to be rich.

16:23Those ones probably are going to really succeed. If you have just one or the other, you probably fail in this one where you just want to change the world. Those people often don't know how to price right, don't know how to go out and sell and market as much. And then the ones that just want to be rich don't have as much of a meaningful company that people can actually grasp onto. And so I think you need both of those for you to succeed in this world. That mission that really drives you and this like wanting to dominate and make a ton of money. I also will see a lot of entrepreneurs. I mean, you were like this who go from this to the Austin entrepreneur, right?

16:54You're like, okay, I tried my hand at this. I played that game for a little while and they may even get a small or meaningful exit of like a couple hundred thousand dollars or maybe even in the low millions. And they're like, all right, I'm going to go like buy a business now, or I'm going to go create my ideal business setup. It's not abnormal to kind of graduate from one to the other. All right, here's my self-test. Are you ready? If you say any of these things, you might be a Silicon Valley type. I'd rather raise 10 million than make$1 million in profit. I dream of building something the world's never seen.

17:30I'm okay giving up equity if it means I get there faster. Failure does not scare me. Irrelevance does. I'd rather have 5 % of a$20 billion pie than 100 % of a$10 million pie. Anyway, those are some things to think about. I'm not going to lie. Some of those still speak to me. It's in there still. There's still some of me that... And we built an eight-figure company in this space. We did all right, but we still didn't go to where a lot of these people have gone. And so it's a very alluring type. And especially if you come from that world. I went to school in the Silicon Valley university there. It's just when you're surrounded by it, it's very infectious.

18:09But it definitely is a lot different than an Austin type because Austin type is like, let me just focus on me and my family. This other one is sort of there is some ego driven part to it, I think, for better or worse. Oh, yeah. Oh, yeah, I totally agree. So video is cool. But I have what scientists call a face for radio. And so it's even cooler is long form audio via my podcast and my newsletter nickonomicspod.com go there for free subscribe to my newsletter it's one email per week super tactical and then go to my audio podcast i do three to five episodes a week depending on how curious i am and it's stuff like this it's all free no sleazy sales pitches nickonomicspod.com all right tomorrowland or sm or main street which one do you want tomorrowland's a little bit similar to silicon valley type but in like a much different way in the same way it's that they're either going to be rich or poor like they're either going to like do very well or they're going to not make any money at all.

19:00But I think that instead of trying to go this conventional path of VC and needing to give up a bunch of their company in equity, these people are really like the pioneers, to your point. They want to do it their own way and they don't want to play by conventional rules. So anytime any sort of trend comes up, they're on it. Like crypto, they were probably on it early. But I know a lot of people that started crypto early and sold early or lost a lot of money, even though they were early on it. And so it doesn't mean that they're going to be successful for sure. But even with AI, like I think a lot of them are using it a ton, but don't know how to like capitalize or monetize or build an actual business with it.

19:37And so the ones that have business savvy attached to this and the right like smarts, and they're not just because this is a super high risk group. Like they're, they're really high risk. And honestly, I know a lot of them that are massive credit card debt, where they're just like, they do not know how to spend or control their spending because they're so risky. And they just take too many risks. And they just don't have enough structure to actually like go through with this and make it work. However, there's some that are really good at networking and some that really good at like building people around them and like learning from people and going in on bets together and trying things together.

20:12And those are the ones that have done well. Whether or not we want to call that legitimate, I don't know. Like some of these, you know, maybe helped pump together some meme coins. What do you think of this group is, do you think they are more scared than the Silicon Valley group? I mean, they're doing the same things that the Silicon Valley group is, but they're just optimizing, staying in the game long enough cash flow, making money. They don't raise. And I've seen people like this. My question has always been like, why don't they raise money? And to me, that's the differentiator between these people and the Silicon Valley people is these people don't raise money.

20:47And I don't know if it's because they're scared. Oh, if I go raise money and I let people down or if they don't believe in their idea enough, or if they're just too. nervous to make those investments. Like, I feel like I kind of fall into the Tomorrowland camp sometimes because I'm like, I have the idea. I like the future. But I'm just nervous about getting the money to then make the investment necessary to really turn these ideas into viable long term businesses. To me, it's funny. I see this, like we talked about Silicon Valley being people that are trying to hit home runs. To me, this group is actually like Tomorrowland are the people that are going to the casino.

21:24And some of these people know how to count cards. and some of them like are very good at gambling and they can win but most are just going to keep pushing those those buttons and just losing money and they're like they're at the right place where they could potentially make a lot of money they might even know how to do it but you know very few of them are structured enough and have the know-how to actually like win at gambling you know we'll call it but it's definitely appealing because you're like oh my gosh the money's so fat to me like these are the people that are chasing quick money and and being a part of something big early.

21:56And so some of them do succeed, but I would guess it's gonna be even fewer than the Silicon Valley. Okay. Yeah. Hard to know. Okay, that's fair. All right. Here's some self tests. Are you ready? Yeah, I prefer building for, for three years from now, not today. I believe decentralization and automation will reshape businesses. I'm fine with massive uncertainty if the upside is there. I often quote people like Balaji, naval or vitalik perfect he said it checks out checks out oh it's pretty good and i think that there's still people that can make money in this area it's an interesting one honestly for tribe and what we see this is probably where we have the least amount of people like there's probably not maybe no one or very few of these these types in there yeah we have people who have tech businesses i wouldn't say they're tech optimists they're not this category these people also i will say one last thing.

22:51These guys are on social media a lot. This Tomorrowland type, they're definitely on X. They're on these social medias. They're connecting with people. Sometimes they have decent followings. They live on their computer. That's how I see them. They're hustlers. They're on it. They're live streamers. They're hustlers. Yeah, they're interesting. All right, here we go. The Main Street type. Tell us about the fourth category. I don't know if this one is one that people burn out on another one and then go to this one. I I feel like this one, they're almost like they get raised up and they're like, this is where the path they want to go.

23:22A lot of them truthfully are in middle America or like main street type of America. But basically they're doing small to medium sized businesses, typically local. And they just want to have a good life and be involved in their community. Like they want to give back to their community. They care about their family. They want to help people. You know, they're not they don't care about being millionaires. Most of them, some of them will become that. but a lot of them just want to make a decent living and not have to work for someone. And so, you know, this is HVAC, this is lawn care, this is laundromats, this is, you know, even local marketing businesses potentially, but they're really involved in their local community.