When the Bank Says No: How San Francisco Mortgaged Itself to Build the Golden Gate Bridge

In 1930, San Francisco wanted a bridge across the Golden Gate Strait. It would be the longest suspension span in the world, linking the city to Marin County. It would be the longest suspension span in the world, linking San Francisco to Marin County and transforming the region’s economy forever.

But there was one problem: the money.

The cost was pegged at $35 million (about $750M today). The economy was in freefall. Unemployment sat near 25%. Banks were collapsing. And to financiers on Wall Street, the idea of lending millions for an unbuilt bridge with untested toll revenues sounded insane.

The project was stamped with the word every founder, operator, and business owner dreads: unbankable.

Step One: Build a Vehicle

Supporters didn’t give up. They pushed through legislation creating the Golden Gate Bridge and Highway District, a special-purpose entity empowered to raise capital.

This is a timeless move: if your operating business or city balance sheet can’t carry the project, carve out a vehicle that can.

The District’s plan was simple. Issue $35M in bonds, pay them back with tolls.

But the market still wouldn’t bite. By 1932, muni bond buyers were hiding under their desks. No one wanted the risk.

Step Two: Collateralize Belief

The newly created Golden Gate Bridge and Highway District had legal authority to issue $35 million in bonds. But in the depths of the Depression, no one wanted them. Investors saw risk, not promise.

The only way forward was to put real collateral behind the bonds. The District structured it so that property taxes across six counties — San Francisco, Marin, Sonoma, Napa, Mendocino, and Del Norte — would secure repayment. If toll revenues ever came up short, property owners’ taxes would rise to make bondholders whole.

This wasn’t symbolic. It meant thousands of families were putting their property on the line to make the bridge bankable.

And yet they agreed. Because the bridge wasn’t just steel and cables — it was jobs in the middle of the Depression. It was farmland that would finally be connected to city markets. It was a region betting on its own future.

That’s when Bank of America, led by Amadeo Giannini, stepped in as underwriter. While Wall Street banks refused, Giannini believed the project (and the people) would succeed. With his backing, the bonds were sold, and the project was greenlit.

Step Three: Deliver

Construction began in 1933. Crews battled fog, wind, and dangerous tides. By 1937, the Golden Gate Bridge opened: on time, under budget, and fully financed.

Toll revenues serviced the debt. No defaults. No foreclosures. Not a single home was seized.

And the Bay Area was transformed forever.

Who Got Paid?

• Bondholders clipped their coupons, earning steady interest.

• Property owners earned no direct yield. But they got something better:

  • Paychecks during the construction years.

  • Land and property values that surged once the bridge opened new markets.

  • A generational public asset that created prosperity for decades.

The “return” wasn’t a dividend check. It was mutual value creation, the kind of payoff you only get when people are willing to collateralize belief.

That’s the essence of creative finance: returns that flow through the system, not just the balance sheet. And if you’re running a business today, the parallels should feel uncomfortably familiar.

The Lesson for SMBs

If you’re a founder or operator today, the story should sound familiar.

You’ve got a growth project — a factory expansion, a new product line, a strategic acquisition. You know the upside is obvious. But when you walk into the bank, they say: too risky, doesn’t fit the box, come back later.

What the Golden Gate Bridge financing teaches us is this:

1. Unbankable often just means unstructured. If the default path doesn’t work, carve out a vehicle. SPVs, project companies, joint ventures, the structure may make the deal fundable.

2. Collateral can be creative. In the 1930s, it was property taxes. Today, it could be supplier guarantees, customer contracts, cross-collateral from peers, or investor pools. Don’t default to “cash or real estate” — think about who else has skin in your game.

3. Align risk with upside. The best guarantors are the ones who benefit if the project succeeds. For the bridge, it was property owners. For your business, it might be your landlord, your distributor, or a key supplier.

4. Remember the true return. The people of San Francisco didn’t get cash yield. They got a bridge that multiplied their long-term prosperity. Sometimes the payoff from creative financing is a stronger operating environment, not a quarterly check.

A Modern Echo: Customers as Co-Investors

Take a mid-sized packaging manufacturer. Their biggest customer, a fast-growing food brand, relies on them for critical inputs. To keep up with demand, the manufacturer needs a new $5M production line, a project the bank has already stamped too risky.

Here’s how they structure it:

• Joint Venture Vehicle: An SPV is set up to own and operate the new line. The manufacturer contributes expertise; the customer commits to a long-term offtake agreement with better pricing if the line succeeds.

• Mutual Collateralization: The customer takes a small equity stake ($500k) and provides a limited guarantee, backstopping the bank financing.

• Aligned Incentives: If the line succeeds, the customer wins with lower prices and secured capacity. If it fails, their unit costs rise anyway. Sharing risk is cheaper than watching the supplier collapse.

The payoff: The bank now sees a credible, bankable deal. The manufacturer expands. The customer locks in supply and savings. Both parties are “on the hook,” but both stand to gain far more from success than they lose from failure.

That’s the bridge lesson in modern dress: when you structure belief into capital, you can turn an impossible project into a Golden Gate: opening up opportunities no single balance sheet could carry alone.

Why It Matters

The Golden Gate Bridge was more than an engineering marvel. It was a masterclass in creative finance.

When the banks said no, the community structured their way to yes. They pooled credibility, pledged collateral, aligned incentives, and created an asset that changed everything.

The lesson is timeless: your balance sheet may not be enough, but your ecosystem probably is.

When you structure belief into capital, impossible projects become inevitable outcomes.

That’s what we do at Saorsa Growth Partners: help founders and operators take projects the banks won’t touch and make them fundable. Not by chasing yield, but by aligning incentives and turning trust into strength.

If San Francisco could mortgage itself into prosperity during the Depression, what might you build if you structured your credit the same way? That’s the kind of work we live for at Saorsa.

No More Cushion: The New Reality for Borrowing Costs

Executive Summary

• The Fed’s $2T “liquidity sponge” is gone, leaving no buffer between market stress and your bank’s cost of funds.

• When liquidity is tight, Fed rate cuts may take months (not days) to lower SMB loan rates.

• Market rates like SOFR can stay above target even after cuts, keeping borrowing costs elevated.

• Expect credit pricing to be driven more by policy moves than by lender competition.

• Plan financing with buffers: lock favorable terms when you can, and stress-test for slower-than-expected relief.

The Fed Metric That Signals Tighter Credit Ahead

Federal Reserve - Reverse Repo Operations [Source]

Most small business owners do not realize the Federal Reserve runs what is basically the safest overnight bank account in the world for big financial institutions. This program, called the overnight reverse repo facility, has been absorbing trillions of dollars of extra cash in the financial system since the pandemic.

Think of it like a giant sponge. When there was too much money sloshing around, the Fed soaked some of it up to keep short-term interest rates from falling too low. That “excess cash” acted as a buffer. If money was needed somewhere else, it could flow out of the facility back into the market without disrupting borrowing costs.

Today, that sponge is almost bone dry. The amount parked at the Fed has fallen from more than $2 trillion to nearly zero. That means there is no longer a reserve of extra cash to absorb shocks. From here, any strain in the financial system affects bank reserves directly. That matters to you because reserves are the foundation of how your bank decides how much to lend, and at what rate. If your bank’s reserves get squeezed, the rate they charge you to borrow can jump even if the Fed hasn’t changed its official rate.

If reserves get tight, short-term interest rates can move up quickly, which can affect the pricing of your credit line, equipment loan, or refinancing—sometimes in a matter of days.

How the “money plumbing” works for your business

Banks, money market funds, and large institutions lend each other money overnight to keep the financial system running smoothly. The Federal Reserve sets the floor for those overnight rates, which becomes the foundation for nearly all other short-term borrowing costs in the economy.

When there is extra cash in the system, these rates stay pinned near that floor. This means your bank can borrow cheaply, which helps keep the rates on your working capital lines, term loans, and equipment financing lower.

Secure Overnight Financing Rate - 2021 to 2025.

When cash is tight, it is a different story. Banks and other borrowers compete harder for available funds, driving rates higher above that Fed-set floor. Even if the Fed’s policy rate has not changed, your cost of borrowing can still rise because the “wholesale” price of money has gone up in the background.

Understanding this connection is important. If you notice short-term rates climbing while the Fed’s official rate is steady, it can be a sign that liquidity is tightening. That often shows up in business lending costs before it makes headlines. By the time you read about “tight liquidity” in the news, it may already be reflected in your loan quote or your next credit line renewal.

Why lower Fed rates do not always mean cheaper business loans

It is easy to assume that when the Federal Reserve cuts interest rates, borrowing costs will drop across the board. In reality, that is only true if there is enough cash in the financial system to keep market rates close to the Fed’s new lower floor.

When liquidity is plentiful, the cut flows through quickly. Your bank’s cost of funds drops, and that saving can be passed along to you in the form of lower rates on new loans or lower interest on variable-rate credit lines.

When liquidity is tight, lenders can keep charging more even after a Fed rate cut. That is because they are competing for a small pool of available cash, and those willing to pay more will get it first. In this environment, the Fed’s policy change is more of a signal than a guarantee. For the rate cut to truly reach your business, the Fed may need to step in and add cash to the system through what are called “repo operations,” which directly supply short-term funding to banks and dealers.

The takeaway for business owners is that Fed rate cuts are not an automatic trigger for lower borrowing costs. It is worth keeping an eye on short-term market rates like SOFR alongside the headlines, because they are the true day-to-day price of money. If you are counting on a Fed cut to reduce your financing costs, track these market rates so you can see whether the cut is actually flowing through — or if you need to wait before locking terms.

The 2019 wake-up call

In September 2019, the financial system hit a wall. Extra cash in the Fed’s reverse repo facility had already run down to zero, and reserves in the banking system were near the minimum needed to keep everything functioning smoothly. Then two things happened at the same time: large corporate tax payments pulled tens of billions out of bank accounts, and a big batch of newly issued Treasury bonds had to be paid for.

Those cash drains left banks and dealers scrambling for overnight funding. The cost of borrowing in the repo market, which is the backbone of short-term lending, jumped from about 2 percent to over 10 percent in a single day. SOFR, the main benchmark for short-term loans, spiked well above the Fed’s target range.

SOFR - September 2019, Liquidity dried up.

The Fed stepped in the next morning with emergency repo operations, lending cash directly into the market in exchange for Treasuries. Rates came back down quickly, but the episode forced the Fed to halt its balance sheet reduction earlier than planned.

For business owners, this is a reminder that funding stress can appear suddenly and feed into higher borrowing costs almost immediately. Even if you are not borrowing in overnight markets, your lender’s cost of funds can shift in a matter of hours when the cushion is gone.

The 2025 setup

With the Fed’s reverse repo facility nearly empty, there is no longer a pool of excess cash that can buffer the system from short-term funding pressures. This means we are entering a stage where the effects of Fed policy changes, like interest rate cuts, may play out differently than many expect.

Overnight Reverse Repo Operations from the Federal Reserve - August 2025

In a well-cushioned system, a Fed rate cut usually pulls market rates down quickly, which in turn helps lower borrowing costs for businesses and consumers. Without that cushion, a rate cut may not bring market rates down as far or as fast, because competition for limited cash can keep short-term lending rates elevated.

For inflation, this dynamic cuts both ways. If market rates stay higher than the Fed intends, credit conditions can remain tighter, which slows economic activity. But if the Fed responds by adding liquidity to push rates down, it can also ease financial conditions faster, which may help growth but risks fueling inflation if done too aggressively.

For borrowers, the main takeaway is that future Fed rate cuts may not translate to immediate relief on borrowing costs, especially in the early stages of an easing cycle. Understanding this lag can help with planning around refinancing or taking on new debt.

Why the Fed’s balance sheet still matters for your next loan

The Federal Reserve’s balance sheet has been shrinking for the past two years, but the “excess cash” portion is now gone. Any further reduction would come straight out of the reserves that banks rely on to settle payments and meet regulatory requirements. If those reserves drop too far, short-term funding markets can get unstable, which forces the Fed to step in and add liquidity back.

Federal Reserve Assets since 2015 (in Millions [ i.e. 7M = 7 Trillion] )

For you, the important part is this: because the Fed is near that lower limit, it is unlikely to tighten much further through balance sheet reductions. That means the main lever left to control inflation is interest rate policy. If inflation runs hotter than expected, the Fed will lean on keeping rates higher for longer, which directly affects your borrowing costs.

Even when rates do come down, banks will still be earning a safe, policy-set return on the reserves they hold at the Fed. That means they will not chase every lending opportunity just to put cash to work. They will remain selective, and spreads may not narrow quickly after the first rate cuts.

What this means for your business:

• Do not expect big drops in loan rates purely because the Fed’s balance sheet is shrinking — that phase of tightening is nearly done.

• Rate cuts, when they happen, may take time to filter into better loan terms.

• If you are planning to refinance or borrow, keep an eye on Fed policy announcements, not just market chatter.

The new dependency

Over the past decade, the financial system has grown used to the Federal Reserve acting as a standing backstop for liquidity. Banks, money market funds, and large borrowers know that if short-term funding markets become stressed, the Fed can quickly add cash through its lending facilities.

For businesses, this setup is mostly invisible — until it is not. In normal times, it helps keep credit markets stable and prevents sudden spikes in borrowing costs. But it also means that when the Fed misjudges how much cash is in the system or keeps rates too high or too low for too long, the effects ripple quickly through to loan pricing, credit availability, and investor confidence.

This dependency has a trade-off. Stability is higher most of the time, but market discipline is weaker. Instead of rates and credit terms moving primarily based on supply and demand between lenders and borrowers, they are anchored to the Fed’s policy decisions. When policy is well-calibrated, this is good for predictability. When it is not, the whole system moves in the wrong direction together.

For your business, the takeaway is that the Fed is now one of the largest forces shaping credit costs, alongside lender competition, risk appetite, and your own financial profile. Market conditions still matter, but policy shifts can move borrowing costs faster than you might expect, so it pays to track both.

The philosophical shift

The U.S. credit system has changed. A generation ago, the base cost of money was shaped mostly by market forces. Today, it is anchored by policy. The Federal Reserve’s balance sheet, interest rate decisions, and the Treasury’s issuance plans now set the starting point for nearly every loan and credit line in the economy. Markets still decide the spread you pay on top of that base rate, but the floor is determined elsewhere.

For a disciplined business owner, this matters less as a debate and more as a planning reality. Rate shifts are now more likely to come from a policy announcement than from a sudden surge or drop in market competition. Sometimes those moves will pass through to your borrowing costs quickly, other times they will take months. Neither outcome is fully in your control.

What you can control is your positioning. Keep financing flexible enough to benefit from favorable moves, but resilient enough to handle delays or reversals. Watch the policy calendar and the broader economy together, and make funding decisions on your own schedule — not in reaction to the noise around every rate headline.

Running your business in a policy-shaped credit world

The Fed’s liquidity cushion is gone, reserves are closer to their floor, and short-term rates are now more sensitive to policy decisions than they have been in years. That is the backdrop you are operating in. You cannot change it, but you can factor it into how you approach financing.

For most small and medium businesses, this means two things. First, watch policy as closely as you watch market conditions. If the Fed signals a shift, know how it might filter into your borrowing costs and have a plan to act when the change reaches your lender. Second, build your capital structure so you are not dependent on perfect timing. That might mean locking in terms when conditions are favorable, or keeping flexibility to adjust if rates move against you.

Here are a few practical examples to make this real:

• If you are due to refinance an equipment loan in six months and the Fed has just signaled a possible cut, weigh whether to bridge with short-term financing so you can capture a lower rate later — but model the risk if the cut is delayed.

• If you are sitting on a large variable-rate credit line that has become expensive, compare the cost of paying it down now versus restructuring part of it into a fixed-rate term loan while policy rates are stable.

• If you have a major capital project planned, stress-test it at both current rates and at rates 100 basis points higher, so you are not forced into a bad financing deal if liquidity tightens unexpectedly.

The credit environment will keep evolving, and policy will continue to play a larger role in shaping it. The businesses that thrive are the ones that treat these shifts as inputs to their own decisions — not as reasons to delay them.

If you want to make sure your financing plans work in this new, policy-shaped credit environment, it helps to have a partner tracking both the market and the Fed. At Saorsa Growth Partners, we work with business owners to translate these shifts into clear, actionable funding strategies, so you can move when the timing is right and stay resilient when it’s not.

When the Throttle Sticks: A Case Study

What KTM’s near-collapse reveals about belief, leverage, and who really holds the keys.

The factory lights in Mattighofen had gone dark again. Not for maintenance. Not for holidays. This time, the bikes weren’t moving because there was too many of them. Inside KTM’s Austrian headquarters, suppliers were calling, creditors were waiting, and inventory was gathering dust.

After a decade of high-performance growth, the engine had seized.

Setting the Pace

In 2022, KTM looked unstoppable. Record sales. A new North American HQ. More brands under its belt — from GasGas to MV Agusta — and more product lines in every category. The company was no longer just building motorcycles; it was building an empire.

At the center of it all was Stefan Pierer. Founder, majority owner, CEO. The man who had saved KTM from bankruptcy in the 1990s was now turning it into a global mobility conglomerate. Or so it seemed.

The company was “ready to race,” as the tagline went. But when the race changed, it couldn’t adjust.

Built for the Straightaway

When COVID hit in early 2020, KTM did what smart operators do in a crisis. It paused production, leaned on government support, and focused on survival. But to everyone’s surprise, demand bounced back fast. People wanted to be outside. Off-road bikes, e-bikes, anything with wheels — it all sold.

KTM caught that wave. It didn’t just ride it — it built a whole new vehicle on top of it.

More models. More tooling. More suppliers. More debt. The factory lines kept running, and the company assumed this new demand was structural. By 2021 and into 2022, they were producing motorcycles as if the boom would last forever.

But by late 2022, cracks were forming. Interest rates climbed. Consumer financing tightened. Inflation ate into wallets. KTM's core markets — the U.S. and Europe — softened fast.

Internally, the warnings were there. Free cash flow flipped negative. Dealers began pushing back on inventory. But production continued. Units piled up. Marketing spend kept flowing.

And quality began to slip.

Momentum looks like control — until the turn comes.|

Thrown Over the Handlebar

As a KTM dealer you’d remember it clearly. A shipment of 2023 models arrived, but no one was asking for them. Your floor was still full of 2022s. KTM told you not to worry — demand would return. In the meantime, they offered extended payment terms. More bikes, more debt, same bet.

And you weren’t alone. By early 2024, KTM had racked up more than 265,000 unsold motorcycles — nearly a full year’s worth of global sales — sitting in lots and warehouses. Discounts got steeper. Terms got longer. But the bikes just kept coming.

By mid-2023, even KTM’s executives couldn’t deny what was happening.

One board member said the quiet part out loud:

“We damaged the KTM brand with overproduction and quality problems”

The share price tanked.

And he wasn’t wrong. There were growing complaints about build issues. Warranty claims stacked up. Forums that used to gush over KTM’s racing DNA were now filled with frustration.

It wasn’t just the money. It was the erosion of trust — the intangible thing a brand lives or dies by.

Behind the scenes, cash was running out. In late 2024, production stopped. Not as a cost measure — as a last resort. The company couldn’t afford to keep building bikes no one was buying.

Restructuring followed. Creditors were asked to accept 30 cents on the euro. Hundreds of jobs were lost. KTM’s Austrian facilities fell quiet again, this time with no clear path back.

The Capital Was Ready. Non-Negotiable.

Pierer tried to find external investors. The usual suspects passed. Too much debt. Too much risk. The story was spinning in mud.

Only one player was willing to step in: Bajaj Auto.

The Indian manufacturer had been a long-time KTM partner, producing smaller bikes in Pune and holding a quiet economic interest through a joint holding company. But they weren’t in it for quick returns. Bajaj had scale, liquidity, and operational alignment — and they saw a strategic opportunity others didn’t.

This wasn’t distressed investing. It was a long-term bet on a brand they knew intimately, backed by years of operational data and firsthand exposure to the business.

By early 2025, Bajaj arranged a rescue package worth €800 million, enough to meet the creditor payment deadline and restart production.

In return, Bajaj secured the right to take full control of the company.

Pierer stepped down. The factory he’d once saved would now run under someone else’s playbook. The vision that built the brand — fast bikes, big bets, belief in the product above all — had been replaced by something more measured. Leaner. Safer. Globalized.

After three decades at full throttle, Pierer’s race ended in a crash.

The Cost of Conviction

KTM didn’t collapse because it lost its market. It collapsed because it took a levered bet on momentum, ignored the data, and scaled belief into something the balance sheet couldn’t support.

It’s easy to admire what Pierer built. He created a brand that mattered. But he also created a company that couldn’t slow down — that was structurally unable to throttle back when demand softened. The capital structure was tight. The governance was centralized. The risk controls weren’t there.

When the wheels came off, it was capital, not belief, that kept the company upright.

Bajaj stepped in because they could. As an unlevered industrial with billions in cash and years of operational intimacy with KTM, they didn’t need to call a bank or hedge their bet. They had the balance sheet — and the conviction — to act when no one else would. They wrote the check, and with it, took the keys.

This is the lesson for operators and allocators alike: control follows capital. Always has, always will.

But there’s something deeper here too.

Belief is a kind of leverage. It propels you forward. It raises money, hires staff, wins customers. But belief without constraint, without brakes, is dangerous. When it outpaces data, it becomes a liability. And in a high-fixed-cost, inventory-heavy business, that liability becomes existential.

In the end, that’s what made the difference.

Not just belief, but a robust balance sheet.

Building something ambitious? Don’t wait for the brakes to fail. Book a strategy call to stress test your capital plan and make sure your balance sheet is built to last.

This piece was originally posted on my Substack newsletter on capital, strategy, and founder-aligned finance: Conduit of Value

The Mirage of the $1B Solo Founder

When Capital Outpaces People, Growth Begins to Fracture.

• AI doesn’t just make firms leaner. It rewires the relationship between capital and people.

• This essay explores what happens when participation breaks down, and why scale without labor may be a mirage.

• For allocators and builders alike, the next edge isn’t speed. It’s structural resilience.

When the Firm No Longer Needs You

Imagine a startup that goes public with a five-person team. No sales org. No customer service. No HR. Just one brilliant engineer, one finely tuned model, and a firm that runs almost entirely on code. Profit margins spike. VCs applaud. Media writes the headline: “The Future of Work Is No Work at All.”

But something doesn’t add up. Revenue grows, yet demand plateaus. The product is efficient—but the customers aren’t spending. The firm scales—but the economy stalls. What looked like the future turns out to be a warning.

We’re told to brace for an era of solo founders and infinite leverage. But that story skips the more uncomfortable, systemic question:

What happens when capital no longer needs people to generate growth?

That question is more than rhetorical. We are entering an era where the traditional handshake between labor and capital is being renegotiated, and AI is the catalyst. In the industrial model, people were the engine of production. In the digital model, they became the interface. With AI, they risk becoming a latency.

The narrative that "AI will replace jobs" flattens a complex transition. Some jobs will vanish. Others will become unrecognizable. But more importantly, the function of a job is changing. No longer just a means of earning income, a job is increasingly the mechanism by which individuals access systems of health, housing, and identity.

If those systems remain tied to employment, but employment becomes scarce or fragmented, the social contract will become brittle.

The reality is more structural than existential. AI doesn't end work. It rewires the economy beneath our feet, and it may do so faster than our institutions can adapt.

Conduit of Value explores capital, structure, and the systems that shape economic resilience. One essay each week → Subscribe to get clear, durable insight in your inbox.

What Is Money Without People?

Money is often treated as an independent force, a natural law. But money is only meaningful in the context of people. It is a conduit of trust, value, and potential energy. It flows between participants, not abstract entities. This isn't a philosophical point, but rather a structural constraint. When money no longer touches people, the engine of reinvestment breaks down.

If people are excluded from the productive process, money loses its connective tissue. It may still exist on balance sheets, but it no longer circulates through lives. Economies don’t collapse from lack of capital. They fracture when capital stops touching people.

The most powerful currencies in the world—the dollar, the euro, the yen—are backed not by gold or code but by mass belief and participation. Strip away participation, and even the strongest fiat becomes an artifact rather than a force. Markets depend on velocity, not just stockpiles. The system needs circulation: labor into income, income into demand, demand into reinvestment.

This is the hidden fragility of AI-led disintermediation. It may increase output but undermine throughput. An economy where people are no longer paid is an economy where people can no longer pay. The result is an abundance of capital and a scarcity of buyers: a system flush with supply but starving for demand.

So the question isn’t whether AI can make firms more efficient. It already has. The question is whether efficiency alone can sustain an economy rooted in mutual exchange. Money doesn't disappear when people are removed. But meaning of money does.

Capital Without Labor Is Not a Virtue

The fantasy of laborless growth is seductive but unstable. If AI enables a firm to do more with fewer people, that increases margins, until it doesn’t. As wage income declines across broad swaths of the population, the purchasing power that underpins consumption-based economies erodes. Real wages may rise in narrow pockets, but wage compression is broad. And when people can’t spend, growth stalls.

This erosion plays out most sharply in developed economies. These are nations where population growth has slowed, entitlement costs are rising, and consumer demand is heavily sustained by credit. Remove or weaken the labor income that fuels those debt repayments and discretionary spending, and the scaffolding of growth begins to wobble.

Even as AI helps businesses become more efficient and profitable, those gains aren’t spreading evenly. We’re seeing companies post record earnings, but fewer people are starting families, buying homes, or spending confidently. That’s not just a social trend, it directly limits market growth.

Capital is piling up, but it has fewer productive places to go. When people can’t participate in the economy as earners and consumers, even the best-run businesses will start to feel demand soften. The money is there, but the motion is missing.

If we don’t find new ways to connect investment with everyday participation, growth will become harder to sustain and easier to break. This isn’t about fairness, it’s about function. A business, like an engine, needs fuel to run. And in our economy, that fuel comes from people earning, spending, and building. If fewer people have meaningful ways to contribute and earn, demand thins out, and even the most well-capitalized strategies will stall. These aren’t just macro effects. They are reshaping firm structure, and with it, the logic of size.

AI as Anti-Scale

One of AI’s most important shifts is also one of the least appreciated: it breaks the traditional logic of scale.

For a century, large firms thrived on structural advantages: whole departments for finance, compliance, HR, and legal. Size wasn’t just about market share; it was about absorbing complexity. The bigger you were, the more efficiently you could manage overhead.

AI flattens that. Tasks once handled by teams can now be automated, orchestrated, or delegated to models. A five-person firm can match the operational capability of a fifty-person team. Payroll, taxes, procurement, support; nearly every administrative function is becoming programmable.

This changes the shape of competition. Smaller, sharper firms can now credibly operate in spaces once reserved for incumbents. AI doesn't just make small firms competitive, it turns them into agile disruptors, capable of challenging all but the most entrenched incumbents. They're not just lean; they're strategically dangerous to anyone without a structural moat.

But this isn’t a solo founder revolution. The $1B one-person company may be real, but it’s also a momentary edge, an arbitrage on early tooling. Once that tooling is widespread, the edge shifts to judgment, speed, and alignment. A small, aligned team will outperform a lone operator with the same tools.

The deeper shift is this: firms no longer need to scale headcount to scale impact. And that means the next generation of business builders won’t just be chasing size. They’ll be chasing economic sovereignty.

Knowledge Is Still a Trade Good

For much of the last several decades, global growth was driven by labor arbitrage, moving production to wherever people were cheapest. AI upends that equation. It doesn't just move work around. It automates it. But even in a world where tasks are handled by models, knowledge and data remain scarce inputs.

Nations and firms that develop, refine, and deploy high-quality models, backed by proprietary data, local context, and structured feedback loops, will hold the advantage. That advantage won’t come from the number of people working, but from the quality of intelligence embedded in the systems they run. Nations with surplus capital and underdeveloped technical stacks will increasingly import intelligence, not labor. That shift redefines what it means to be an industrial power.

This makes intellectual leverage the new manufacturing edge. While domestic employment may decline in traditional roles, the opportunity to export tools, models, and decision infrastructure will grow. The global economy will depend not just on what you can make, but on what others use that you built.

The winners won’t be those who scale fastest. They’ll be those who become foundational, whose tools others rely on to operate, produce, and compete.

The Economic Horizon: New Engines, Same Passengers

People will continue to have problems. And where there are problems, there will be work. It just won’t look like the jobs we know.

Humans aren’t wired for contentment. We adapt, evolve, and invent new challenges the moment old ones are resolved. That restlessness, sometimes called ambition (other times, anxiety), isn’t a flaw: It’s the fuel. It guarantees that demand never disappears. It simply shifts.

Jobs are not static roles. They're dynamic agreements, between needs, capabilities, and systems. As the substrate of the economy evolves, so too will the work that matters. Participation will shift. But the need for participation endures.

The core risk isn’t that AI takes all the jobs. It’s that we fail to rebuild the systems that make participation viable, that we mistake efficiency for progress; confuse financial returns with real outcomes; and overlook the foundational role of inclusion in a functioning economy.

Participation and inclusion aren’t moral luxuries: they’re a hedge against entropy. Systems with too few nodes become brittle. When growth is concentrated in tools, not users, capital becomes “valuable”, but unproductive.

Where This Leaves Us

The most durable firms in the next cycle won’t just be the biggest or fastest. They’ll be the ones built with intention: high-trust systems, high-leverage tools, and a clear understanding of the shifting terrain. Scale still matters. But sovereignty will matter more.

For builders, this means designing for control, adaptability, and margin, not just scale. For allocators, it means backing teams who understand systems, not just spreadsheets. Those who can turn alignment into advantage.

If you're thinking about how technology and capital intersect in your business—and how to structure for resilience, not just returns—book a call with me. I help founders design capital strategies that support growth without losing control.

This piece was originally posted on my Substack newsletter on capital, strategy, and founder-aligned finance: Conduit of Value

The Return of Founder-Aligned Finance

Why Founders Need Capital Partners, Not Just Capital Providers

Fifteen months ago, I had dinner with a friend I’d known since childhood.

He and his cofounder had built a real business, one that had outgrown its side-project roots, but now found themselves at a fork in the road. His partner wanted out. My friend wanted to go all-in. The business was stable and growing, but emotionally and structurally, they were stuck.

We sketched options on napkins, pulled up the financials later that week, and eventually landed on a seller’s note. It let one partner convert equity risk into fixed income over a three-year structure, while the other assumed the upside and took control of the company outright. It wasn’t flashy, but it worked. Over the following year, monthly revenue grew 400%. The business began operating with intention. Budgeting, investing, forecasting, not just reacting. A few key moves are now putting it on a path toward meaningful profitability.

That experience changed how I think about my own work.

I wasn’t inside the company, but I was close to the decisions. I wasn’t the founder, but I was a trusted partner, someone who could bring clarity without taking control, aligned with equity, and understood both the numbers and the context they lived in.

And I saw clearly: most entrepreneurs don’t need a banker or a spreadsheet. They need someone who shows up when the stakes are real. Someone who can help them think through tradeoffs, structure risk, and stay aligned with their own goals; not someone else’s playbook.

That’s the role I’ve decided to build into a practice.

The Only Scarcity That Matters

That partnership made something obvious I’d been circling for years: the real constraint isn’t capital. It’s time.

Money is abundant if you know where to look. Advice is everywhere. But aligned, timely decision-making? Strategy rooted in real understanding of a partner’s goals, risk tolerance, and tradeoffs? That’s rare.

Most businesses don’t fail for lack of capital. They stall because the capital isn’t shaped to match the pace of the business; or the intent of the founder. They raise the wrong money, at the wrong moment, under someone else’s assumptions. And suddenly the clock starts working against them.

I spent the last year trying to de-risk my own path. Consulting. Testing models. Working inside a fractional CFO firm. All useful in isolation, but I was keeping distance. Protecting downside and avoiding the risk that comes with full commitment.

But as the days tick away, I’m reminded that the upside lives in context. In trust. In being close enough to know what the founder actually wants long-term, and helping them shape decisions that serve that, not just the next board meeting.

That’s why I’ve launched a capital strategy practice for founder-led businesses.

To help them structure growth intentionally.

Preserve control.

And backing up vision with financial architecture that holds up under pressure.

Because when capital fits the business, and the founder, time compounds. When it doesn’t, it erodes everything, from the inside out.

From Exposure to Intention

Over the past few years, I’ve had the privilege of working closely with founders, CEOs, and capital allocators, on the buy-side, in advisory roles, and often simply as friends. I’ve met with over 300 companies, reviewed financials on dozens, and gone deep on a select few. Each one sharpened my understanding of how capital shapes decisions; not just on the balance sheet, but in the business itself.

That exposure revealed two consistent patterns:

• Most capital structures are built to close a round, not to serve the business.

• Even the smartest operators often don’t have a strategic partner who understands both the financial architecture and the founder’s actual intent.

Too often, capital gets raised but the structure constrains growth. Or the plan looks good on paper, but it ignores how the business actually runs. Or worse: founders get pushed into decisions they don’t fully own, because no one around them is close enough to their world and fluent enough in capital to offer better options.

That’s the gap I’m building this practice to fill.

A Capital Practice Built on Context

I’m not building a firm that drops in, builds a model, and moves on. I’m building a practice designed to stay close to the work: close enough to understand the founder’s goals, and sharp enough to translate those goals into capital structure, investor alignment, and financial clarity.

This isn’t about one-off deliverables or transactional raises. It’s about designing financial architecture that supports how the business runs and the founder thinks.

I’ve never called myself a founder. But I’ve worked closely with enough of them to understand what’s at stake. I’ve spent nights and weekends inside their financial engine rooms, helping pressure-test strategy and restructure capital at inflection points. The deeper I’ve gone, the more I’ve realized: I don’t need to be inside the company to make a meaningful difference. I need to be near the decisions with the right toolkit, and the right level of trust.

Over the past year, I’ve tested models: independent consulting, advisory roles, even time inside a fractional CFO firm. All of it helped clarify the problem. Most services for small businesses fall into one of two camps.

The first: accounting-heavy firms that close the books but miss the strategy.
The second: transaction-focused advisors who help raise capital, then disappear.

What’s missing is the strategic middle. A partner who works with the founder, not around them, to translate business momentum into capital strategy, and capital strategy into durable leverage.

That’s the space I’ve chosen to build into. Serving bootstrapped and lightly funded founders under $10MM of revenue, with a model simple by design:

1. Capital Readiness
   Short-term engagements focused on modeling, investor materials, capital stack analysis, and pressure-testing the plan. This is about getting the story and structure right before stepping into the market.

2. Fractional Capital Strategy
   Ongoing partnership. Scenario planning, investor communication, board prep, and internal allocation decisions, all with the founder’s real ambitions in mind, not a VC’s pitch cadence.

3. Capital Execution
   Support for fundraising, structured finance, or community capital. I work behind the scenes to make sure the capital raised actually fits the company.

Each tier is built to match the complexity of the business and the level of trust in the relationship. Some clients just need clarity. Others need a strategic partner across quarters or years. I’m open to both, as long as the alignment is real.

The Return of Embedded Finance

At the start of the industrial era, capital was scarce and context was everything. The best bankers weren’t intermediaries. They were embedded. They structured deals to fit the operators, not the other way around. They made bets based on proximity, trust, and a working knowledge of how businesses actually ran.

Over time, that model was abstracted. Relationship became product. Context was replaced by coverage. Modern banking evolved into a system optimized for scale rather than alignment.

That worked, until the cost of information went to zero.

Today, analysis is cheap. AI and financial tooling have collapsed the time it takes to build models, structure decks, and summarize financials. What once took weeks now takes hours. The marginal cost of output has collapsed.

But the real work was never just output.

What’s scarce now is context: the ability to understand how capital decisions interact with operating reality.

It’s alignment: shaping capital to match the business, not contorting the business to fit the capital.

And it’s relationships: being close enough to know what the founder actually wants, and trusted enough to help shape the path to get there.

The edge is no longer access or financial engineering. It is the context, alignment, and real partnership.
It’s knowing how to translate ambition into financial structure, without forcing the business to bend (and often break) around the capital.

That is where I am focused.

I am building a modern capital strategy practice: part operator counsel, part investment prep, part embedded allocator. It is not a fund, not yet.

This is a return to first principles, where capital is close to the work, aligned with the builder, and shaped for the long term.

And if history is any guide, this is where the next generation of capital firms will be born.

A Note for Founders

I’m not trying to scale fast. I’m trying to build right: one relationship at a time, close to the work, trusted by the operators, and disciplined enough to earn my way into the capital stack.

I’m not here to run your business. I’m here to strengthen your ability to control it.

To help you think like a capital allocator.
To support high-leverage financial decisions with clarity and context.
To be a strategic partner who moves at founder speed, with investor fluency.

This isn’t about raising more money. It’s about making capital a competitive advantage, and building something you won’t need to escape from later.

This is a capital strategy practice today. But it’s also a foundation. The reps are compounding. The model is evolving. And the opportunities are already starting to find their way upstream.

If you're building something real, or looking for aligned, embedded capital thinking, I'd love to connect. Shoot me a DM on here and we can schedule a call.

The return of embedded finance isn’t a trend. It's a cycle turning.

And this is just the beginning.

If you're a founder navigating a capital decision or want a partner who speaks both spreadsheet and strategy, book a call with me. Let’s align your capital stack with the business (and life) you’re actually trying to build.

This piece was originally posted on my Substack newsletter on capital, strategy, and founder-aligned finance: Conduit of Value

Reclaiming Savings: From Wall Street to Main Street

At its core, saving money is about shifting work from today to the future. When we save, our goal is to consume that value later—whether on groceries, healthcare, or travel—so that we don’t have to keep working indefinitely. Put simply, assuming no inflation, investments, or other financial factors, we spend 30–50 years of our working lives stockpiling cash so that one day, we can spend it when we aren’t earning it. Let me be very clear: you save money to convert extra work today into less work tomorrow.

From an economic perspective, saving is the process of moving our excess production—the value we create but do not immediately consume—from the moment of its creation to a point in the future. Historically, this could have meant farming extra land to feed an additional child, ensuring that when you grew old and weary, there would be extra hands to work on the land. From this self-interested perspective, raising an extra child was effectively an early form of a "retirement plan."

It Takes a Village

Now, let’s scale this idea up while staying in a small agricultural economy. For simplicity, assume each villager produces enough food to feed 1.2 people annually, meaning a 10-person village produces 12 units of food. With this surplus, the village develops two key economic functions:

Insurance

Each villager agrees to contribute 0.1 food units to a community pool at the start of the growing season. If someone's crops fail due to fire, pests, or illness, they can draw from this reserve to avoid starvation. Collectively, the village saves 1 unit of food each season for this safety net.

Investment

After eating and setting aside the insurance pool, the village still has 1 unit of surplus food. Instead of letting it spoil, they send a representative to a nearby trading city to find something of value in exchange.

In the market, the representative sees various goods but eventually meets a blacksmith offering a plow and scythe. The blacksmith explains that these tools will allow a single person to farm twice as much land. Excited, the villager trades the food for the equipment and returns home.

The next season, the tools prove their worth, doubling the villager’s productivity. The village now produces 13.2 food units. After eating and contributing to insurance, the village now has 2.2 food units to reinvest in more tools. Heck, might as well throw a party and buy a barrel of wine as well!

This cycle of investment and growth has driven human progress for millennia. With the rise of financial systems, we shifted from investing in extra farmhands and new tools to investing in pensions and retirement accounts. But along the way, we broke this cycle of investment.

The Shift from Real Investment to Financialization

For centuries, savings fueled tangible improvements— funding schools, building homes, or financing local businesses. But today, instead of using excess production to strengthen communities, we funnel our savings into massive financial institutions. Rather than lowering costs and improving daily life, we passively invest—increasingly through conglomerate-centric index funds— investing with the hope of innovation, better economies of scale, and most importantly seeing the stock chart to go up.

We shifted from an economic system of savings based on tangible savings and productive local investment to one that centralizes resources and decision-making in massive institutions. Instead of using our excess production to lower costs, strengthen local economies, and improve our daily lives, we have funneled our savings into passive investments— bid-up by global investors to the point of speculation—that pass allocation decisions to professional investors and CEOs leading to a concentration of economic growth in major urban centers. Furthermore, with a focus on percentage gains rather than real productivity, these professional investors have tended to seek rents and create short-sighted gains, at the expense of long-term economic growth.

The Problem with Outsourcing Our Investments

At a fundamental level, savings should enable future productivity and prosperity. But today, thanks to tax-advantaged investing in 401(k)s, IRAs, 529s, and HSAs (well over $27 Trillion by some estimates) , much of what we consider "investment" is only a bet on the growth of a few massive companies in the United States, making these investment speculative at best and financial engineering at worst.

Here’s how we got it wrong:

1. The Power of Passive Investment: Millions of people now invest their savings into index funds, which buy shares of the largest publicly traded companies. While this provides diversification, it also means that our collective wealth is being used to strengthen corporations that have little or no connection to our local communities. The result? Capital flows into companies that prioritize global supply chains, rent-seeking, financial engineering, and automation rather than local business development and job creation.

2. Rural Communities Are Funding Urban Growth: Many US towns are ‘dying out’ as the younger generations leave home in hopes of high-paying jobs, leaving their parents to age in place and fragmenting multi-generational family structures. For those who live in a small town or rural area and invest in the S&P 500, the money is effectively being used to create jobs and infrastructure in major financial hubs—New York, Florida, California, Texas, and other economic centers. Meanwhile, your own community struggles with job losses, population decline, and rising costs of living. By directing savings into these massive corporations, rural America is, in effect, making a bet on innovation and urbanization rather than their own community’s future prosperity.

3. Capital Consolidation and Institutional Control: The biggest players in the market—BlackRock, Vanguard, and State Street—now control trillions of dollars in assets and wield enormous influence over corporate governance. These institutions, which oversee most index fund investments, prioritize shareholder returns over community well-being. Their strategies often favor stock buybacks, executive compensation, and short-term gains rather than productive investments that could directly benefit individuals and local economies.

4. The Lost Art of Local Investment: In previous generations, wealth accumulation was directly tied to community development. People built housing, started businesses, and invested in local industries that created lasting prosperity. Today, those with extra savings are encouraged to passively park their money in financial markets rather than reinvesting in their own communities. This leads to a paradox: while national stock markets reach all-time highs, many local economies are stagnating or declining.

The Consequences of Outsourcing Investment

By funneling nearly all personal savings into massive institutions, we have created an economic system that prioritizes financialization over real tangible wealth creation which has lead to:

• Local Economic Decay: Rural and small-town economies shrink as capital and talent are continuously siphoned away to major cities.

• Housing Affordability Crisis: Instead of using savings to build more housing (not just have our own home increase in value…) and lower living costs in our own communities, we rely on centralized financial markets that contribute to asset inflation and housing shortages. Local labor (bars, restaurants, haircuts, shops, and local industry) is a direct function of housing costs - higher housing costs means industry is less cost-competitive and services become more expensive. For example, it is more expensive to hire a framer to build a house, if the framer is paying high rent due to high house prices…

• Loss of Economic Self-Determination: Individuals have far less control over how their savings are used, as investment decisions are increasingly made by large institutions that prioritize corporate profits over community needs.

Rebuilding a Local Savings & Investment System

If we want to fix the broken savings model, we need to return to a system where savings directly improve our daily lives. This means focusing on investments that lower costs, create local jobs, and increase economic resilience. Here’s how:

1. Invest in Local Housing & Infrastructure: Instead of buying index funds, consider using savings to build rental properties, renovate homes, or improve local infrastructure. This not only increases housing availability but also generates stable, tangible returns.

2. Support Local Businesses & Cooperatives: Rather than passively investing in distant corporations, channel capital into small businesses, worker cooperatives, and regional enterprises that contribute to long-term community wealth.

3. Decentralize Investment Power: We need to move away from a system where a handful of global institutions control a vast majority of investment decisions. This could mean exploring alternative finance models like community investment funds, direct lending to local entrepreneurs, or regional banking cooperatives that prioritize local economic growth.

4. Shift Savings Toward Productivity, Not Speculation: The goal of investment should be to make life better—lower costs, improve efficiency, and create prosperity. Instead of chasing financial returns in abstract markets, we should focus on investments that have direct, visible benefits in our daily lives.

Conclusion: Choosing the Future We Want

In conclusion, while there is undeniable value of large corporations in driving economic progress, the financialization of our savings has distorted the fundamental purpose of investment. The concentration of capital in financial institutions and the passive flow of capital into global corporations has not only undermined local economies but has also diverted the true purpose of savings—enhancing future productivity and community prosperity.

Our ancestors saved and invested to secure their own futures and the prosperity of their communities; they built homes, developed their community, and passed down real, tangible wealth. Today, we have replaced that system with passive financialization, ceding control of our economic future to distant institutions that care little for our well-being.

As investors, we can support the critical role that large firms play in generating returns and fostering innovation, while simultaneously focusing on the need for a return to more locally-focused investment strategies. By shifting our focus back to investments that build tangible, sustainable value in our own communities, we can create a more balanced economic system—one that supports both the growth of globally competitive enterprises and the resilience of local economies, ultimately ensuring long-term prosperity for all.

If we continue down the current path of financialization, we risk finding ourselves in a world where our savings do not serve us—where the returns on our labor are siphoned into a financial system that benefits the few at the expense of the many; where real resources become scarce as financial returns are plentiful and inflationary.

But we have a choice. We can reclaim our economic power by reinvesting in what truly matters: our homes, our communities, and our futures. This approach not only redefines what it means to save, but also champions a future where investment serves the needs of the many, not just the few. The question is, will we make the choice to reclaim our economic future and reinvest in what matters most?

Want to Turn Your Capital into Real, Local Growth?

If you're rethinking how you save, invest, or build wealth, and want to align your business strategy with tangible returns, book a free strategy session. We’ll explore how to deploy capital in ways that strengthen your business, your margins, and your community.

This piece was also posted on my Substack newsletter on capital, strategy, and founder-aligned finance: Conduit of Value

To Salary or not to Salary?

For most entrepreneurs, myself included, the aspiration behind starting a business is the freedom to live your life on your terms, rather than clocking-in and clocking-out everyday for 30-50 years. It’s an admirable goal - the American Dream by many standards - but at the end of the day everybody needs a paycheck to put food on the table.

In this article I analyze how much should you pay yourself, what makes projects worth your time, and how to consistently grow your business through a thoughtful investing template.

To Salary or not to Salary?

Everybody has a choice when they receive a paycheck: how much do I spend and how much do I put aside in savings? This first part is different for everyone but I like to think about it as a “Consumption level” - or “how much cash do I need each year to maintain the lifestyle that I am comfortable with?” Keep that consumption level concept in mind but let’s briefly hit on my favorite part Savings!

Saving IS Investing

For the savings people put aside, there’s always a good reason like saving for:

• An emergency like losing your income, a health issue, or a leaky pipe

• Large life events like a buying a house, having a kid, or retirement

• A special occasion like a vacation

There’s a few choices with what to do with these savings:

Hold it in Cash - A little flavorless compared to the other options but often ideal for needs within the next 1-3 years given the stable value.

Side note: Even though inflation has been relatively high the past couple of years, cash is still the most liquid form of savings since it’s the only one you can spend!

Make Investments - Investments are a form of turning your extra savings (plus some patience!) into income down the road. This comes in a lot of forms: it could be buying a property, investing in a small business, or buying stocks and bonds. Depending on the investment, this is best for spending needs in more than 3 years. Bonds and lending money are also investments, which means buying your own debt is also an investment!

Pay down Debt - I like to say “buying your own debt” as a bit of a joke, but it’s true: when you pay down debt you are choosing, adjusted for the risk, that you're getting a guaranteed return equal to the interest rate on the debt. For example, if you have debt at a 7% interest rate, paying it off is like making an investment that gives you a guaranteed 7% return. Not too bad!

Small Business Owners as Investors

For Owner-Operators, like the clients I work with, there’s a unique investment opportunity that most normal people don’t have access to - Private Equity.

I know, I know, your thinking: Duncan isn’t Private Equity, just a bunch of Ivy League dudes in vests moving around money for rich people?

And my response is… Well, you’re not totally wrong… BUT the way you invest as a business owner that is in the same way they do it - YOU put your savings into the equity of a private company! That’s right you’ve been doing PE all along (sleepless nights of a Wall Street analyst included…) Private Equity investors look at a company as an asset, similar to a stock or a bond, but with a much more complex system behind it.

When I’m working with my clients, we first think about how they want to live their life. Once we establish the type of work they want to be doing, we can take a step back from the business and also think about the company as a complex system. This allows us to diagram out their current role in the business and start to think about:

• What are the Core Competencies of the operator and also the business?

• Which non-core areas can be hired internally or outsourced all together?

• What investments can we make to expand the Core Competencies?
  

Back-of-the-napkin Business System Diagram created with a client

How much to pay yourself?

Spoiler Alert! The amount you should pay yourself is your Consumption Level (CL). However, this needs to be separated out into Minimum CL and Desired CL:

Minimum CL: You have money to feel comfortable while being frugal to creating savings for investment.

Desired CL: You have money to be at the ideal level of comfort for you and your family.

Once you have these figures, we can use some trusty math:

Desired CL / Desired hours of work = Golden Rate

Minimum CL / Acceptable hours of work = Minimum Rate

These equations, while simple, gives us a framework for how much we are targeting to pay you, the Golden Rate, as an input to judge potential investments in the business. The minimum rate allows us to analyze investments that are worth your time and being thoughtful about the sweat equity that goes into the returns on investment.

Making Investments to Increase Income

Going back to our discussion about business as a complex system, we can now start thinking about the projects that we can invest into to increase your hourly pay to the Golden rate. When working with clients, this is where we begin diving into the operations and data to build a deep understanding of the business to build a shopping list of opportunities.

Shopping list in hand, we can model each project opportunity as its own investment; looking at the additional revenue/reduced expenses, CapEx, operating expenses, and labor costs (using the minimum rate for your hours). After thinking through the capital outlay and risks, we come up with a compound rate of return on each of the projects, aka an “Internal Rate of Return", or IRR. We now execute each project in order of highest risk-adjusted IRR first.

A great example of a the #1 project with one of my clients was a tooling investment to launch a new product. After questioning our assumptions and judging the risks, we estimated the IRR to be above 25% over the next three years . This meant that for every $1,000 invested into the project, we were expecting a $1,953 in return over the next 3 years, or a 95% cash-on-cash return. 

From here, we repeat the cycle using savings to make good investments and increase the company’s income. Each time increasing the income savings of the business until the company’s income plus your salary exceeds the Desired CL at your desired level of hours in the business. 

Side Note: As the desired hours of work approaches zero, then the golden rate would exponentially approach to infinity. At this point, we steadily replace your least enjoyable roles in each project with the cost of an employee. The logical conclusion is eventually hiring a CEO to manage everything on your behalf!

Cash is KEY

A key input into this compounding investment engine is having the cash to execute on these opportunities. That could mean saving the cash in the business by paying yourself the minimum rate for longer and/or, particularly if it would take to long to save for, taking outside investment!

When to take Outside Investment

My rule of thumb on outside investment is to look at the duration and risk of the opportunity and then find matching investors while thinking about the cashflow dynamics and “cost of capital”, or interest rate, in the context of the larger business.

Always raise debt before equity if possible. The cost of capital for debt is anywhere from 7-12%+ so it shouldn’t be a consideration unless the return on the project is modest (10-15%+) and the timeline to self-finance is too long.

Personally I don’t think outside equity makes much sense until we start looking at projects well above a 20% return, and even then its important to put that in the context of the larger business and structure the equity in a way that shares the reward without giving up the kingdom.

I’ll plan to write a more in depth article on Debt, Equity, and the Capital Stack in the coming months.

To Salary or Not to Salary?

After reading this article, I hope you agree that there isn’t a simple answer to this question. It’s nuanced based on your lifestyle, risk tolerance, and business opportunities. Savings are an important consideration when thinking about salary particularly if you are looking to continue to grow the business and your earning potential. In summary, if you are looking at the profits each quarter, make sure you cover your minimum lifestyle first and make an active decision with the remainder to determine if you prefer to live a nicer lifestyle in the short-term or continue to push towards your long-term goals!

Want to apply this framework to your business?

If you're a founder thinking about salary, savings, or how to reinvest in your business like a real investor—book a 30-minute strategy call. We’ll walk through your goals, your capital stack, and identify opportunities to grow income and reduce founder friction.