When we’re new at something, we pay extra. We’re novices, so we ask more questions, consume more resources and are less efficient. We make mistakes and sometimes don’t fully understand how things really work.
Beginners get in the back of the line and are given the least favorable terms. Outsiders doubt the beginner. They’ve seen this before…others have come before, yet packed their bags and went home when things got tough. So they scrutinize the newbie and charge application fees.
All of this can be summed up and labeled as the Beginner Tax.
The opposite of this is when we’re an established expert. When we’ve done it a thousand times and know all the tricks. Experts have scale – they employ teams, have documented processes, and have systems to manage and measure.
As a result – veterans get better terms and treatment. Vendors and institutions line up to work with proven players because they are efficient. They get stuff done, usually a lot of it and they don’t need much support to do it.
This dynamic is the result of the Speed of Trust. Steven Covey wrote a book about it and explains in depth how trust reduces friction and increases speed in all situations. The pain and drudgery in life often stems from a lack of trust (looking at you, TSA and long airport security lines). Meanwhile, situations of ease and efficiency are always accompanied by a high degree of trust (I see you, Amazon Prime and same day delivery).
Two take-aways on this:
Although frustrating in the moment, paying the Beginner Tax is worthwhile for both the journey and the result. The experience of overcoming the necessary obstacles improves your skills and mindset while “proven expert with an abundance of options” is a worthy destination.
Understand that we can influence the taxes we pay. Much like we discussed in Choosing Uncomfortable – paying the fee of being a beginner is not an option, but how you pay it is. Recognize the time, resources, and effort a given pursuit will cost, and embrace those strategically to match up with your strengths and interests. Get very clear and aligned with why you’re dong this in the first place.
So get to work on becoming a trusted expert and stop complaining about the obstacles of getting started. It’s supposed to be that way and it will always be. Turn it to your advantage by influencing how and when you pay your dues, ensuring that Beginner Taxes are always a good investment for you long-term.
Ventured Highlight
You know who paid some serious Beginner Tax? Jeff Bezos, Warren Buffett, Taylor Swift, Oprah Winfrey, Michael Jordan & Tom Brady, to name a few. Each of these G.O.A.T.s carry with them humbling stories from their early careers. But the common theme of this group is that each of them also made sure the taxes they were paying inched them closer to their ultimate goal.
Jeff Bezos gave up 25% of Amazon equity for $1 million in cash in 1995. That seems insane, given that slice is now worth upwards of $400 billion. But at that time, Bezos was a beginner and he was trying to sell books on the internet before anyone shopped for anything on the internet. He even predicted a 70% chance he’d lose it all. But his hunch on the internet was spot on and the company’s early investments meant Amazon was first to many milestones in the development of e-commerce.
Tom Brady was sixth on Michigan’s QB depth chart at one point. Sixth! And he was selected 199th in the NFL Draft, meaning professional coaching staffs didn’t expect much from him either. But he believed if he could just get a spot on a roster, he could become the starter and thrive. He rode the bench for years, until that fateful day when an injury put him in the game. Tom went on to win seven Super Bowls and his years as a humble back-up are forgotten by most.
I recently paid some Beginner Taxes of my own. My partner and I went went through the process of securing a commercial mortgage through one of the country’s two agency lenders. What’s a quick process for the seasoned borrower turned into months of grueling underwriting and delayed approvals – a result of the tight credit markets and this property being located in a new market for us. We took a grin-and-bear-it approach, knowing that getting through their process secures our eligibility for agency financing on all future deals.
With the closing of this loan, I’m happy to report that our business has expanded into Jacksonville FL, where I went to school and continue to have family. In other words, securing this asset was very strategic in taking me where I want to go long term. Now, having crossed to the other side of this transaction, we already glad we paid the tax.
Worth The Click
1. What Startups Are Really Like: "As you go into a startup, you'll be thinking "everyone says it's really extreme." Your next thought will probably be "but I can't believe it will be that bad." If you want to avoid being surprised, the next thought after that should be: "and the reason I can't believe it will be that bad is that my model of work is a job."
2. Warren Buffett’s 2023 Letter to Shareholders: "Three years later he told me – correctly! – that I had made a dumb decision in buying control of Berkshire Hathaway. But, he assured me, since I had already made the move, he would tell me how to correct my mistake."
3. The Speed of Trust: "There is one thing that is common to every individual, relationship, team, family, organization, nation, economy and civilization throughout the world — one thing that has potential to create or destroy the most powerful government, the most successful business, the most thriving economy, the most influential leadership, the greatest friendship, the strongest character, the deepest love."
I hope you found this note useful or at least allowed you to pause and be intentional for a moment. And remember – we always get more of whatever we focus on!
Best,
Dan Reilly