What the gas station test reveals

At 12, I was walking around a very affluent neighborhood with my father and he said, “Mikey, all these people in these nice houses, not one of them could run a gas station.” That stuck with me. The gas station test isn’t about intelligence or ambition, it’s about aptitude for running a successful business.

As a strong student, then an investment banking analyst, then a private equity associate, I was in this jetstream towards a career in investing. But can investors run gas stations? Does it matter?

This concept was always in the back of my mind. I dove so deep into business details as an investor that my interest actually inhibited my performance. I was propelled into the operating world. As someone who made the transition from the investing world, albeit relatively quickly after four years, I get asked a lot about what attributes make someone successful in an operating role versus in an investing one.

OPERATORS GO DEEP

What stands out to me as the most basic difference between operating and investing comes back to the gas station. Most people in those nice houses I walked by at 12 years old probably weren’t interested in details like convenience store inventory. When you work in the operating world, you are in the weeds of your business. For example, at SoFi I knew all the nuances of different types of student loan forbearance programs and at Brex I knew the minutiae of the Mastercard transaction chargeback rules—though not an expectation of my role at either company.

This contrasts with my experience as a private equity investor where I look at purchasing a business ranging from a chain of laundromats to Ancestry.com within the same month. In private equity, success often came down to three things: underwriting growth, paying the right multiple, and adding leverage. There is no way to distill what it is like to run a business, especially one as complex as Figure, into such a simple framework. The most successful operators enjoy going deep.

PROACTIVITY VERSUS PROCEDURE

In terms of behaviors that make someone successful in the operating world, proactivity stands out. My experience in fintech has been that everything is breaking all the time. I wake up each day to problems new and old. While high-growth industries like fintech exacerbate this, all operating roles have all kinds of changing dynamics and customer issues that create challenges. The way to combat this chaos and thrive is to proactively anticipate issues. The moment that most exemplified my proactivity was at Brex when I managed the Silicon Valley Bank fallout. I had been tracking the issues at the bank early, and I was able to swiftly reduce almost all of Brex’s exposure, enabling the company to be offensive in the wake of the crisis, and add over $1 billion of deposits in a weekend.

On the investor side, work life is a lot more procedural. There is an investment process—and that itself differs across private and public investing. But regardless, there is a relatively defined set of steps investors take. Evaluating an investment in a gas station or chain of them is very different than actually operating one. The former allows you to calmly consider the supply and demand dynamics, commodity price forecasts, etc., but there is almost no chance you will be screamed at by an unhappy customer or feel the visceral worry about the liquidity to fund your business. The process is much calmer and more controlled. That doesn’t make investing easier, but the challenge is more intellectual rather than operational.

PEOPLE MANAGEMENT IS THE JOB

The operating world is all about people. The people who get to the top are most often the best managers of people. They know how to set goals and mobilize large teams towards those goals, because, at scale, leadership is less about individual contribution and more about creating the conditions for an organization to succeed. This seems very basic but it’s at the core of what differentiates operating roles from investing ones. My time as an operator meant managing a range of teams from accountants to mortgage loan officers to executives. The common approach I have taken is to understand people’s motivations and how I can help the company and role best fulfill them.

Contrast this to my investor experience, where people management was a very small part of the picture. Most of the people were highly motivated and compensated in a competitive environment. Feedback was rarely given and what determined promotions was opaque.

THE POINT IS HOW YOU’RE WIRED

If the idea of going deep on messy details, waking up to problems, and spending most of your time thinking about how to get the best out of other people excites you, you are probably wired to be an operator. You don’t need a perfectly defined process to be comfortable; you need ownership.

If, on the other hand, you enjoy pattern recognition across new areas of learning, structured decision-making, and optimizing within a defined framework, investing may be a better fit. It’s a very real craft, and often very lucrative.

Early in my career, I assumed that operating was simply a more “hands-on” version of investing. It’s not. It’s a different job entirely. Running a business, whether it’s a fintech company or a gas station, requires a willingness to live inside complexity rather than analyze it from a distance.

Not everyone wants to run a gas station, and that’s fine. But if you find yourself drawn to depth over breadth, proactivity over procedure, and people over process, you might want to step out of the jetstream, and into the operator’s seat.

Michael Tannenbaum is CEO of Figure.

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