I recently went one-on-one with Jim McDermott, founder and managing partner of Rusheen Capital Management. Jim has founded five different businesses that have been acquired, including Stamps.com, which was acquired for $6.6 billion.
Adam: You grew up all over. Your dad was in the Navy, and that brought you to places far and wide. You ultimately went to college in Colorado, studying philosophy at Colorado College, before getting your MBA at my alma mater, UCLA Anderson, where you founded Stamps.com. What early experiences and lessons shaped your worldview and shaped the trajectory of your success?
Jim: Funny that you mentioned Stamps.com. Before attending graduate school at UCLA, I was actually an energy investment banker in New York. The joke I always make is that if you have an undergraduate degree in philosophy, you can end up almost anywhere, because you have no specific skills. So I got a job at an investment bank, where I worked for a few years. I moved to California in 1995, partly because my college roommate was from Pacific Palisades and partly because of an entrepreneurial program that caught my eye. I really wanted to be an entrepreneur, and at the time, I thought I was going into the energy business. I had been financing coal plants, and then we shifted to natural gas plants, and I could already see wind and solar on the horizon.
So I came to California intending to become a renewable energy developer. That turned out to be too early. The genesis of Stamps.com came during a summer I spent working at Allen & Company, a New York-based investment bank. I worked alongside another associate named Dara Khosrowshahi, who now runs Uber. At the end of the summer, they politely told me, “Jim, we like you, but we like Dara more,” and sent me back to LA with no job.
There’s a saying: necessity is the mother of invention. That was absolutely true in my case. I didn’t have a job, I had graduate school debt, and the energy business didn’t seem promising. I printed out my resumes and cover letters, and the next morning, I was going to the post office to mail them. That struck me as incredibly inefficient. Why couldn’t I just print postage at home?
That moment sparked the idea. It was the final piece of a very real process in my life: I needed a job. So I decided to build a company that made it possible to buy and print postage. The next major milestone was meeting my co-founders, Ari Engelberg and Jeff Green, who had skills that complemented mine. Together, we launched what became a 25-year journey, one that ended with Elmo Bravo acquiring the company for a sizable sum.
Adam: I love that. There are so many amazing lessons in that story. So much of life revolves around timing, and when things don’t work out, that’s not necessarily a bad thing. You thought that the energy business was the right business for you right then and there, and it turned out to be the wrong business for you at that moment in time, but the right business for you many years later. And the job that you wanted didn’t work out for you, but something much bigger wound up working out for you.
Jim: Yes, that’s right, and it’s actually a really good insight. One of the things that shaped me as a kid was that my dad was a doctor, but he really wanted to be involved in politics. He ran for governor three times while I was growing up, and he lost every time. Eventually, while I was in college, he got elected to Congress.
One of the most formative experiences of my life came in 1980 when I was 14. My dad was well ahead going into the final stretch of the race, but lost in the Reagan landslide. I’ll never forget being in the car on the way to his concession speech. He was the center of my world, and I was crying. He said, “I need you to stop crying for the next 10 minutes while we do the concession speech. Nobody likes to see people crying at those.”
I pulled myself together. The next morning, he woke me up and said, “Do you know where I’m going?” I said no. He replied, “I’m going to the office to see patients.” I didn’t really understand. He explained, “Sometimes when you go big, you lose. But I lost, and I’m not a loser. I took a risk, and it didn’t work out. That doesn’t define and it shouldn’t define you.”
That perspective stayed with me. I’ve carried that lesson my whole life. Failure is common, especially when you’re starting something new. Like you said, I thought I was going to be an energy developer, but I was a decade too early. I pivoted, stayed aware of my surroundings, and turned Stamps.com into a real success. That gave me the capital I needed after the company went public to start US Renewables Group, which was arguably one of the first private equity firms in the country focused on clean tech and sustainability. I ran it for 16 years.
The success of Stamps.com helped a lot of people believe in my transition into the energy business, which wasn’t very common at the time. One of the biggest lessons my dad taught me was that no matter what you’re doing, be great at it. I was a caddy, I delivered papers. Whatever I did, I tried to do it really well. When you’re really good at what you do, people notice. It gives them the confidence to trust you with something new. Even if you don’t seem fully qualified, they remember the quality of your previous work and are more willing to give you a chance. That’s a critical lesson when you’re just starting out: don’t stress too much about where you are. Focus on making your work excellent.
Adam: How do you know if you’re on the right track?
Jim: I have two thoughts on that. One is something I got from my dad. He used to say that success is the intersection of three things: what you are good at, what people will pay you to do, and what you enjoy. I was a very good investment banker. People were willing to pay me a lot to do it. But I did not enjoy it, which meant success was not available to me in that role.
So I define success as aligning those three elements. You decide what you want to do and start down that path. If at some point you realize you are not going to get all three, you may want to reconsider. But here is the important part: it takes time to achieve all three. That is where many people get tripped up.
My advice, especially for younger people, is that once you choose a direction and think you might be good at it and that people might pay you to do it, give yourself one to two years. Put your head down and focus. What I often see is that someone sets a goal and then a week later looks up and says, I am not there yet. Of course not. These things do not align instantly.
Personally, I set daily goals. But I also set yearly goals. At the end of each year, I look back and ask myself, did I achieve the things I set out to do?
For example, if you love something but nobody will pay you for it, then it is not a viable career. On the other hand, if people are paying you a lot of money to do something, but you are miserable and want to numb yourself at the end of each day, that is not success either.
Success is the intersection of those three areas over time. That is why I tell people in their twenties to give themselves permission to screw up. It is a fantasy to think you will be immediately successful. That is just not how it works. If you talk to anyone who has figured out where they belong and what they love doing, it usually took them five to ten years to get there.
There are a lot of seven-year overnight success stories. Be patient. Focus on aligning those three elements.
Adam: What steps can you take to improve the probability of reaching your goals?
Jim: I will give you a very concrete example. I really wanted to be in the energy business, but I took a detour into the internet world. That path ended up making me a lot of money, which was great. Then I decided I wanted to start a private equity firm focused on renewable energy, stationary power generation, clean fuels, and energy infrastructure. That is what I wanted to do.
The first thing I believe you need in that kind of situation is a no-nonsense skills assessment. What am I actually good at? What do I like doing? Those are two different things.
For example, I am dyslexic. I am a terrible writer. The gap between how I speak and how I write is massive. So one of the first things I always look for is someone who is a strong writer. I need that skill around me. It is important to be honest about your abilities.
So ask yourself, what are the core requirements to get where I want to go? How many of those do I personally have? The answer is never one hundred percent. Anyone who thinks they have all the required skills is either lying or delusional.
Once you know what skills are required and which ones you lack, the next step is to find the best people to fill in those gaps. That involves clearly communicating your vision. You have to explain why you want to do something, why it matters, and how someone else fits into that vision. That helps them feel ownership in the mission.
So step one is figuring out what you want to do. Step two is identifying the skills required to achieve it. Step three is doing an honest self-assessment. Step four is finding great people who can cover your weaknesses.
If you repeat that process, you will build great teams. And when you build great teams, things happen. One of my favorite sayings is, if you want to go fast, go by yourself. If you want to go far, go with others. Trying to do everything on your own is a losing strategy.
Adam: How can you find the right people to partner with and work with?
Jim: Start with a very clear understanding of what you are actually good at. Be honest about what you can contribute to a team. Then go out and find others who bring the skills you do not have.
When we started Stamps.com, Ari Engelberg was an amazing writer. Jeff Green had a great eye for marketing. Those were both areas where I was not strong. I knew that, so I looked for partners who could fill those needs.
Another important factor is diversity of opinion. If you are in finance, do not just socialize with other finance people. That is a terrible idea because you will all be talking about the same things. When you are looking for collaborators or people who can add value to what you are doing, find people who are not in your field.
Have lunch with someone in the music department. Talk to a civil engineer or a theater major. See how they think. Some of the most innovative ideas I have encountered came from people in completely unrelated fields. When someone applies their skills to their own work and you find a way to transfer that thinking into your industry, that is where real creativity happens.
It may sound crazy, but someone with a music background might understand how sound influences behavior. Maybe playing a specific type of music at the checkout page on your website increases conversions. You would not know that unless you talked to someone outside your world.
That is why I encourage people to seek out diverse perspectives. You will only get those unexpected insights by engaging with people you do not usually cross paths with.
Now, a quick word of caution. Diversity of opinion does not automatically mean value. Just because an idea is different does not mean it is a good one. I have family members who work in completely unrelated fields, and some of the things they say make no sense at all. So while it is important to get a range of opinions, you still have to evaluate the quality of those ideas.
What you really want is thoughtful, intelligent perspectives from a wide variety of people. That kind of diversity can push your thinking forward and help you build something better.
Adam: How can you assess if your idea is a great idea or not?
Jim: One thing we were taught in the business plan competition was to go out and ask one hundred people. So I literally stood on the corner of Westwood Boulevard and Wilshire, handing out flyers and stopping strangers to ask them about postage. Picture me saying, “Hey, can I talk to you about your postage habits?” Most people thought I was a complete weirdo. But I did it anyway.
The point is, put your idea directly in front of people and ask them what they think. Do not just ask one person. Do not ask your mom. Your mom will always think your ideas are great. Go ask one hundred real people. When you do that, you will quickly find out if you are onto something.
I have seen entrepreneurs fall into the trap of getting emotionally attached to an idea and trying to force it to work. They think, “This is great, and the world just has to see it.” No. The world does not have to see it. Just go talk to fifty people. If they say it is great, you are probably on to something. And they will usually give you small tips to make it even better. If they do not like it, they will tell you. That feedback is invaluable.
This applies to big problems, too. I am in the climate business now, and there is a widely accepted belief that climate change cannot be fixed. I can tell you, because I am in this world every day and talking to engineers at places like UCLA, Caltech, Berkeley, Stanford, and MIT, that this belief is wrong. Climate solutions are being developed right now, and the progress is more significant than most people realize.
But you would not know that if you only followed the popular press. You have to go out and talk to people who are actually working on the problem. That is how you get a real sense of what is possible.
Being inquisitive is one of the most important qualities an entrepreneur can have. Test your ideas against reality. If they fail, throw them out. That is not a failure of you. It is just part of the process.
My wife jokes that I have never met an idea I did not love. That is probably true. But I am also completely willing to throw an idea away the minute I see that it will not work. There is nothing wrong with being excited about an idea at first. Just make sure you are willing to let it go when the evidence tells you it is not going to fly.
Adam: What questions should you ask when seeking feedback on whether your idea is a good idea?
Jim: The first question I always ask is, “Is this a problem for you?” Whatever it is I am trying to solve, I need to know if it is actually solving a problem that the other person has.
If they say yes, then the immediate follow-up question is, “How bad is that problem?” That is the difference between a nice-to-have and a must-have. For example, someone might say, “Yeah, my paper clips fall on the floor all the time.” But if you ask whether they would pay to solve that problem, they say no. That tells you it is not worth building a business around.
You need to make sure you are truly solving someone’s problem and then understand how much value they place on the solution. The level of utility they get from the fix is critical.
In energy, for instance, there can be a massive difference between a small improvement and a huge one. If you are solving a major problem, the money associated with it will usually be much larger.
So if you can establish that yes, it is a real problem, yes, people want it solved, and yes, there is significant money involved, then you are likely onto something big.
At the same time, not every good business has to be massive. There are many businesses that are very profitable but operate in relatively small markets. A company might never exceed ten million dollars in revenue, but still make five million in profit annually. That is a great business.
It will never be Google, and that is fine. Not every company has to scale endlessly. You just need to be clear about what you are building and whether it fits your goals.
Adam: You have an incredible track record: five businesses started and sold. What are the common variables that have led to success for you? And what are the common variables that you believe are universal for success?
Jim: First of all, I do not think there is a universal recipe for success because people are wired differently and have different interests. But I can tell you what has worked for me.
If you look at the businesses I have been involved in, they are all utility-based. Postage, water, energy. These are basic needs, sitting at the bottom of Maslow’s hierarchy. I am a volume guy. I operate with small margins, but large scale.
Part of the reason I gravitate toward that is because I have no sense of what is popular. If I like a movie, it is probably going to bomb. I am the opposite of a trendspotter. But if you tell me you need a gallon of water and you are willing to pay eight-tenths of a cent for it, I will figure out how to deliver it for seven-tenths. That gets my mind going.
For me, success has always been about identifying a fundamental commodity and finding a way to deliver it more efficiently. If you can do that, you do not have to worry about demand. People will always need water. People will always need electricity. People will always need postage. If you can deliver it at a lower cost, you can build a business around that.
The second thing I would say is that saving money never goes out of style. There are many ways to make money, but I have always leaned toward the save-money approach.
That said, there are other types of businesses that thrive in entirely different ways. The internet economy, for example, is about scale, attention, and content. Marginal distribution cost is almost zero, and growth depends on how many people you can reach. That is not my strength. I have never been great at attention-based businesses. I do not do well in that world, and I know it.
So it is important to understand what you are good at and where you fit. All of my businesses have operated in spaces where demand is not the issue. Timing has always been the key variable. You can have the right idea at the wrong time, and it will not work.
Finally, I believe in what Peter Thiel talks about in his book, Zero to One. The goal is to find or create a monopoly. That is not a popular thing to say, but it is true. There are two kinds of monopolies. One is given to you by the government, like we had with Stamps.com, where not just anyone can print postage. The other is an innovation monopoly, where you move so fast and create so much value that competitors cannot keep up. You end up dominating the market simply by outperforming everyone else.
So I ask myself, can I move faster, deliver better, and create more value than the next guy? If the answer is yes, I know I can win.
Adam: What is your approach to investing, and what advice do you have for anyone listening on the topic of investing?
Jim: The first thing I would say is that I only invest in climate. There are a lot of other exciting areas like cloud and AI, but I do not participate in those directly. I give my money to other people who are subject matter experts in those fields and let them manage it. I stay in my lane.
In climate, I am always looking for areas where there is a fundamental need, whether that is water, energy, or reducing carbon. I ask myself, how can we provide the same utility with lower carbon output per unit of energy delivered?
That is one part of it. The other part is a personal filter I apply that makes my investment process a little slower. I not only want to find a business that is highly profitable and generally unsubsidized, but I also want to make sure that if I told my kids about it, they would approve.
For example, I built a company with one of my Stamps.com co-founders called NanoH2O. It became one of the largest desalination membrane companies in the world. It made money, it delivered water, and if you tell your kids that you are involved in a company that helps provide clean water around the globe, they say, that is great. Keep doing that.
The same goes for solar, wind, or direct air capture technology that removes CO2 from the atmosphere. These are profitable, scalable businesses. They have a big total addressable market. And when you tell your kids you are removing the carbon that has built up over the last 150 years, they say, okay, keep going.
So that is my framework. I look for investments that are profitable, that often have a regulatory angle, and that are morally unassailable. If my kids are proud of it, and the economics work, I am in.
Adam: What can anyone do to become more successful, personally and professionally?
Jim: I would say three things.
First, spend time figuring out what makes you happy. Think about what puts you in a state of flow. What are the moments when you forget everything else because you are so engaged? Solve for those. Do not let other people tell you what should make you happy. That is a huge mistake, and people do it all the time. Parents are especially guilty of this.
For example, I was a good investment banker. I made money and had all the external validation. Everyone loves saying, “My kid works at an investment bank.” But I did not love it. You cannot sustain yourself through tough times if you do not actually enjoy what you are doing.
Second, once you know what you love, be deliberate about understanding what parts of the job are required for success and which of those you are good at. And then, forgive yourself for the parts you are bad at. That is key.
Third, align yourself with the absolute best people you can find. When you work with people who are amazing at the things you are not good at, they lift that burden off your plate. That lets you focus on what you do best. When you combine all those strengths into one team, everything runs better.
And here is one final thing. If you want to be successful, figure out how to be useful to other people. Do not focus on extracting money. That mindset is backward. Ask yourself, how do I create something so valuable and so helpful that people cannot live without it? The money will follow.
That principle holds true whether you are a professor or running a lawn care business. If people walk away from their experience with you feeling like they got something amazing, they will come back. They will tell their friends. That is how you grow. That is how you win.
