The Advantage #11: Basis Points Beat Breakthroughs, Pixar's 21-Year Bet, and the Optimist's Edge

Thanks for tuning into the eleventh episode of The Advantage. A short, weekly note where I share what I am working on, something worth watching, a lesson from history, and one practical edge you can try right away.

This week is about the power of small, consistent moves. Whether it is compounding basis-point improvements in a business, compounding 21 years of work into the first computer-animated film, or compounding tiny shifts in how you think into a fundamentally better life, the pattern is the same. The biggest results rarely come from one big swing. They come from thousands of small ones, made every day, over a long period of time.

Let's get into it.

I published about Petfolk on my blog on Monday. While I am a huge fan of first-time founders aiming for what I call stand-up doubles, exits in the $50M to $200M range, this piece is about what you get to do after that first win.

Freshly was my first at-bat. From idea to exit was less than eight years. We built that business like a rocket ship, and sadly, after I left in 2021, it did not survive without me at the helm. For the next one, I wanted to build something different. I wanted it to last the test of time. I wanted to stay at the helm for 20-plus years. And I wanted to aim at least 10x bigger. Something that would be part of my legacy.

This piece, which is about an 8-minute read, gives a little background on why I am so excited to be building Petfolk. And it connects directly to this week's theme. Whether it is Jim Simons compounding basis-point improvements or Pixar compounding 21 years of short films into Toy Story, the pattern is the same. The biggest outcomes come from small, consistent moves made over a long period of time. Petfolk is my long game.

Quick intro:

This week’s watch is a 23 minute video on Jim Simons and the power of compounding. Jim Simons: You Can Easily Compound Tiny Amounts Of Money the surface, which is about investing. But the reason it stayed with me is that I think the exact same principle applies to building a business. Most people hear compounding and think about money. I hear compounding and think about process, data, feedback loops, and the thousands of tiny decisions that shape a company over time.

We tend to think linearly. A small improvement in a process does not feel like it should matter that much. A slightly better handoff. A slightly faster feedback loop. A slightly clearer way of looking at data. On their own, each one looks too minor to move the business. But that is precisely the mistake. These things do not stack linearly. In a well-run company, they compound.

What I loved about it:

The best line of thinking in the video is that people consistently underestimate small gains because they are too focused on the big breakthrough. I think founders do this all the time. They look for the one strategic decision that changes everything. And while big strategic decisions absolutely matter, that is usually not where the real moat gets built.

The real moat is usually built in the small things. It is built in the basis-point improvements that get made over and over and over again. The tiny process improvements. The better operating cadence. The better feedback loops. The better data. The better decisions that come from that data. Then the discipline to take what works and do it again tomorrow.

What Happened:

Pixar started as a small group of computer graphics believers in 1974 at the New York Institute of Technology, led early by Ed Catmull and soon joined by Alvy Ray Smith. They wanted to make the first computer-animated film, and they learned fast that the idea was bigger than a lab. In 1979, Lucasfilm recruited the core group and built the Graphics Group around them. In 1986, Steve Jobs bought that division from George Lucas and formed Pixar as an independent company. For years, the business stayed alive on hardware and paid work while the real ambition stayed fixed. They built credibility one short at a time, with Oscar recognition for Luxo Jr. and an Academy Award win for Tin Toy. Finally, Toy Story was released in November 1995, almost a decade after Jobs bought the company and about 21 years after the original team started in that NYIT lab.

Insight Behind It:

If you are trying to do something that has never been done, the timeline is the price. The pitch will sound clean. The middle will not. The winners are the ones who keep showing up when the market is bored, the model is wrong, and the payoff feels hypothetical.

Modern Application:

If you are building something that can reshape a category, plan for a long walk. Not the optimistic version. The real version. Years longer than your first plan and more nonlinear than your board deck. Do not treat time as evidence you are failing. Treat it as the entry fee for doing something that matters. If you are going big, you do not get to think in years. You think in decades.

Why it works:

Most people think optimism is a personality trait. You either have it or you do not. That is wrong. Optimism is a skill. Like any skill, it can be learned, practiced, and improved over time.

The shift is simpler than people think. It is not about ignoring reality. It is about controlling how you frame what happens to you. Perception is reality. Two people can look at the same situation and see completely different things. One sees a disaster. The other sees a lesson. Same facts. Different frame. Wildly different outcomes.

One small change that has made a huge difference for me: I almost never say "the problem." I say "the opportunity." When you say problem, you are a victim. Something happened to you. When you say opportunity, you are an operator. Something happened, and now you get to decide what to do about it. That one word moves you from reactive to proactive. From stuck to in motion.

The data supports it:

Martin Seligman, the father of positive psychology, proved this decades ago. His research on "learned optimism" showed that optimism is a cognitive pattern that can be trained through deliberate practice. He tested it at MetLife. Agents who scored in the top half for optimism outsold their pessimistic peers by 37 percent. The top 10 percent outsold the bottom 10 percent by 88 percent. Optimism outperformed raw ability.

How I use it:

I use it with everything. Business, golf, relationships. I am not perfect at it, but I put a ton of effort into reframing how I look at things.

In 2017, Hurricane Harvey hit and we lost over a million dollars of food in transit at Freshly. The easy response would have been to treat it as a catastrophe. Instead, we immediately reframed it as an opportunity to build something we did not have: a real weather and emergency strategy. We went deep, studied the failure points, and built new systems from scratch. Three years later, we had tripled our footprint and 10x'd our revenue, and we never had a single weather-related loss that hit even a tenth of what Harvey cost us.

These are micro changes. Replace "problem" with "opportunity." Replace "I have to" with "I get to." They sound small. They are not.

And if you need one final reason, think about it like Pascal's Wager. The seventeenth-century philosopher argued that believing in God is the only rational bet. If you believe and you are right, you gain everything. If you are wrong, you lose nothing. But if you do not believe and you are wrong, you lose everything.

Optimism works the same way. If you choose optimism and you are right, your life is better in every measurable way. If you are wrong, you lived a happier life anyway. But if you choose pessimism and you are wrong, you wasted the one life you had being miserable about things that were never as bad as you thought.

There is only one rational bet. Make it.

Thanks for reading,

Mike Wystrach

Founder  ·  Operator  ·  Investor

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