Tag: tim ferriss show

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Interviewers I Really Respect and Why

podcast

I’ve always been fascinated by how to get to the bottom of things. Yes, you can do your homework into the data, but at the end of the day, you have to go back to people and their experience.

Jeff Bezos has this line: “The thing I have noticed is that when the anecdotes and the data disagree, the anecdotes are usually right. There is something wrong with the way that you are measuring it.”

So, when it comes down to finding the right anecdotes, I’m a big believer that asking the right questions gets you most of the way there. It’s why I started the DGQ series on this blog. Naturally, I spend a lot of time studying others who are better at the craft than I am. After all, I have a long road ahead of me. While this is obviously useful in the context of my podcast, studying the best interviewers has also helped me when:

  • Listening to founder and GP pitches
  • Doing diligence
  • Interviewing potential candidates for a role
  • Making friends
  • Small talk
  • Coffee chats / when asking for advice
  • And of course, when doing research.

So while you may not have a podcast — or maybe you do — I hope you find the below useful in regards to other aspects of your life.

The callback

What is the callback? A callback — a term quite often used in the comedy circuit — is an allusion to something previously brought up in conversation. It’s not only a sign that you’re actively listening, but that you’re actively engaging in the flow of the conversation. For instance, say you hear someone bring up a quote they liked recently. For the purpose of this example, it’s Amos Tversky‘s line. “You waste years by not being able to waste hours.” Then later in the conversation, they say the last hour flew by so quickly. Then a callback could come in the form of, “Better than wasting a year with me.”

Conan O’Brien is world-class at this, if not best-in-class. If you watch his show or his podcast, you’ll see multiple examples. But probably best illustrated in just the number of times he did it in one episode, I’d recommend his episode with Larry David.

Surprise and delight

The first question in a conversation is often the hardest, but also has the greatest impact towards the rest of the conversation. Getting someone to put down their guardrails without pre-established rapport is really, really hard. It’s why podcasters and TV show hosts alike have pre-chats, where they spend time with each guest to warm them up.

It’s for that reason I have a lot of respect for Sean Evans who hosts Hot Ones. The number of times his guests have responded to his questions with “How did you know that?” and “You really did your research” or “I’ve never been asked that before” is a refreshing take in a world where talk show interviews are just a formality for a celebrity’s road show. And not only does the style and how Sean ask questions set the show apart from literally every other interview that celebrities go on, you can see how his first few questions help him build instant rapport with a guest whether or not they knew each other well before.

That said, I’d be hard-pressed to find just one as he’s able to execute well for most episodes of Hot Ones already. If you’re short on time, the only ones I find to be little less helpful, at least to see the mutual banter, are probably the ones where he’s interviewing himself, or a fictional character (i.e. Donald Duck or himself), or the guest and him go through less than 10 chicken wings (aka the full gauntlet).

Underneath the surface

Despite having hosted a number of fireside chats, when I first started Superclusters, I was obsessed with hitting every question I had prepared. An internal expectation that because the podcast is a public asset and is likely to be online till the end of time made me feel I had to cram as much information into each interview as possible. The funny thing is I still didn’t end up covering the lion share of questions.

For each episode, I end up preparing anywhere between 10 and 30 questions. Yes, you read that latter number right. And yes, for a roughly hour-long podcast. Naturally, there’s no way in hell I’d get to the vast majority of questions, but in mind, I had an internal drumbeat that I felt compelled to keep on pace with.

The more I talked with other seasoned podcasters, the more I realize that while others may not prepare as much research as I do before each interview, the best ones let the conversation flow. They ask great follow-up questions. They spend time on the nuance of words, phrases, even micro-reactions and flinches when guests speak or hear something. One of the most useful pieces of advice I got from a friend, Erica Wenger, was to do all the research you humanly can before each recording. Then, ask the first question, and throw the rest out the door. Which I’ve since internalized.

Tim Ferriss is my favorite on this front. And he does this for almost every single one of his episodes. That said, if you’re looking for a starting point, his episode with Eric Ripert was the first one I actually sat down with pen and paper purely to take notes on how Tim follows up with each of Eric’s comments.

By a friend’s recent recommendation, I also stumbled across The Diary of a CEO podcast. I will admit that the first few episodes I came across I found less interesting from a content perspective. But when three episodes later, I tuned into his episode with Marc Randolph, and holy cow, the depth of questions was clearly a cut above the rest, specifically around when Marc had to step down as CEO of Netflix. And you can just see Steven Bartlett asking one great question after the next.

Avoiding the yes

The fallacy with many rookie podcasters, admittedly my own rookie mistake as well, is that the host doesn’t push back on the guest’s answers enough. When an answer just isn’t good enough. Either the one answering dodges the question or kept their answer too broad.

Hasan Minhaj is my go-to person on this front as he’s incredible at pushing back thoughtfully, which is a really hard thing to do. One of my favorite interviews he did by far was the one he did with Kevin O’Leary on FTX, which Kevin personally invested in.

Drills, drills, drills

I can’t say I got this from any one podcaster, but actually something I learned from my time as a competitive swimmer. For every race we competed, we had to practice sets of twice the distance regularly. Even more so, we had to practice with a handicap, focusing on refining the technique for only part of our body. Be it legs only, or arms only, hell we even swam with our goggles black-sharpied out before. To us, these were drills that would help prepare us for the real thing.

As a podcaster, in case you couldn’t tell, I’m still a work-in-progress. Likely will always be. That said, one of the most helpful ways I’ve found to practice the art of asking questions (since I’m not in race mode every day) is I often listen to the above shows, hear the host ask the question. Then wait for the guest to respond. Then right before the host asks another question, I practice what I would say and where I’d interrupt. And only after I’ve said my response aloud, do I press play again and see what the host would say.

To me, those are the drills I run through when I can to prepare myself when I am eventually on camera. Other times, it’s just fun to see how my response or line of questions would differ from some of these other hosts.

In closing

I’ve often given the excuse that I’m a better writer than I’m a speaker. Which may be true. I often sit with myself during the editing process and wince at words I’ve used or using some complex language to explain what could have been a 140-character question. And the truth is, I’ve held myself back. By giving that very excuse. So now I am earnestly trying to improve. To close that gap, that delta between the way I write and the way I talk. At least from a proficiency standpoint. It may take me a while. But I appreciate every one of you being on this journey with me. And if there’s any advice you can share along this path, as some of you are further along, I’m all ears.

I hope the next time I write something like this, I’ll be further along. And maybe… just maybe, find myself circa today to be embarrassing to watch and listen to.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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#unfiltered #86 Learning from Personal Mistakes, Excellence, and from Others

sand, filter

A few years ago, in one of my favorite coffee shops on 7th Street in San Francisco, over a vanilla cold brew, a then 25-year old founder told me that he had recently taken his then-first vacation in five years. Took a full week off. Didn’t touch work at all. And just enjoyed it with his fiancée. But contrary to what one would expect, his body language that seemed to indicate the exact opposite of having a good time. Two hands cupped over his face, as he slowly dragged them both downwards in exasperation. Followed by many sighs.

He shared that in the time he was gone, the website crashed and the team had trouble bringing it back online. And when they finally did bring it back online, they were waiting for his approval to move forward. As such, didn’t bring it back online until he came back. With another large sigh, he went on to say that he’d never take another vacation ever again.

Running your own business is tough. Really tough. I get it. If you’re the founder, it’s your baby. And sometimes, it’s really hard letting go on what may seem like key decisions. Eventually, that becomes a slippery slope where I see too many founders needing to control every decision that goes on in the company. And even if you hired extremely well, you’ve capped your team’s potential by not letting them execute to their fullest capacity.

In the above dilemma, as you might know, it’s not a to-vacation-or-not-to-vacation problem. It’s a you-need-to-give-your-teammates agency problem. And it might seem obvious to you and me, to any third party observer. But it wasn’t to him. He was so frustrated that he was focused on the one new thing he did and believed that one new thing had a causal effect to a problem that was looming over his team’s head for a long time.

It is true that we are products of our scar tissue, but quite often, in an attempt to not be in the same situation again, people overcorrect. They take then run with the seemingly most extreme “solution.”

And in the times scar tissue start to form, start from first principles. Is taking a vacation really the biggest offender? Do great CEOs just not take time off? Is there something else that I’m not willing to admit about how the results played out?

What am I assuming to be true that may not have to be true? What are the raw facts, stripped of opinions and speculation?

Why was my team incapable of making that decision? Was it something that I told them before or did before that has since prevented them from making calls? What do I spend most of my day doing? Can I outsource some of my tasks? Some of my decisions? How would I do that? And only then, can I ask myself and others: what can I do from now on so that history doesn’t repeat?

Seeking and redefining excellence

And once you’re at the root of the problem, find others you admire who run organizations you admire.

Excellence is an interesting concept. One of the few words out there where its definition changes over the course of your life.

It’s one of the few words where it is not only different for every person, but that even within each person, every time you see something excellent, it sets a new bar and stretches that definition. Defined by only the most excellent thing you’ve seen.

The truth is that most great lessons happen to err on the side of examples. So to have people who define that word for you again and again are the “Sensei-s” you want in your life.

So spend time with others. Notice how they approach problems. And stretch your definition of excellence.

For the 25-year old founder who hadn’t worked any other job in his life, and only his own, there’s immense value in learning from others and building expertise at high-growth institutions. Or with people who you deeply respect.

Asking for the lesson

Tim Ferriss, on a recent episode with Noah Kagan, said, “Life punishes the vague wish and rewards the specific ask.” And I frickin’ love that line.

Be specific. No picking brains. You’re not a zombie or a vulture or a crow.

Not 30-minute coffee chats. Those quickly become recipes of asking for too much time with an amorphous ask. To a busy person, that 30-minute ask sounds like a recipe for losing 50 minutes to an hour of your life you can never get back. Including travel to and from. Time, as the only unreplenishable commodity, is precious. As Howard Lindzon said on the Superclusters podcast, when we’re young, we’re time-millionaires, but over time, we get poorer and poorer. We then become time-thousand-aires as we age. And eventually, we run out of temporal capital.

It is in times of need and struggle, that we often have the most prescient and specific ask to make of potential mentors.

“When in X situation, and after having Y results, my gut seems to tell me to do Z, but given that you’ve experienced these situations before or have likely seen these situations unfold, am I directionally accurate?”

In closing

There’s a lot of this hustle porn in the Bay Area. Loud claims of not taking any vacations or sleeping only three hours per night. Moreover media perpetuates and lionizes this way of living.

It’s not true. Science shows we do much better with eight hours of sleep. It shows that every so often, we need to take time to unwind, so that we can come back to be more efficient and inspired than before. You can clock in the hours, but that doesn’t mean you are producing quality in a one-to-one capacity.

And I worry that like the founder that took his vacation for the first time, then overcorrected, we live in a society where we’ve forgotten that we’re human. That we need breaks. That we need sleep. And that we can’t do most things alone, including building ambitious ideas and maturing as professionals.

Photo by NEOM on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Paying Attention Vs Paying Proper Attention

magnifying glass, pay attention

Earlier this week, I was listening to a fascinatingly thoughtful conversation between Tim Ferriss and Kindred’s Steve Jang, where Tim said one line that stood out in particular: “I’ve been paying a lot of attention, but I’ll be honest, I don’t know how to pay proper attention.”

And well, it got me thinking. About the difference between knowing what to look at and knowing how to look at it.

One of my favorite TED talks is by Will Guidara (quite honestly I think it deserves more views on YouTube than it has). Will is probably best known for co-founding one of New York’s hottest fine dining restaurants, Eleven Madison Park, and for writing the book, Unreasonable Hospitality. And in it, he talks about how just listening to the conversations that are happening at the tables and delivering these small, unexpected pockets of joy can create experiences that transcend money and time.

In the afore-mentioned talk, he talks about how there are four diners at Eleven Madison Park. That they went to all the top restaurants in NYC. Le Bernardin. Per se. And so on. And Eleven Madison Park was the last on their to-do list. But the only regret they had was that they never got to try a New York hot dog. Of course, upon hearing that, Will storms out the door to buy a $2 dog, brings it back to the kitchen and convinces the chef to serve it over the aged duck that took years to perfect. And when he finally delivered the next course on the menu as the hot dog he just bought, the four guests went bonkers. That despite on the multiple courses and the brilliant food, that their favorite dish was the NYC hot dog.

That it was because Will paid proper attention to his guests that he was able to deliver a truly unforgettable experience.

The truth is how to pay proper attention to anything that deserves our attention is the million-dollar question.

Paying proper attention

There’s the famous selective attention test, where viewers are asked to count the number of times the ball is being passed between the players, only to fail to realize that there is gorilla that walks across the screen. We’re told to pay attention to the ball passes, but only by paying proper attention to the purpose of why the test is being administered, do we catch what is hiding in plain sight.

Similarly, Raymond Joseph Teller (or better known for being half of the dynamic magic duo Penn & Teller) did a fascinating talk a decade and a half ago about the illusion of expectation. That magic in all of its novel facets feeds off of the expectations of its onlookers. When one tries to pay attention to the coins that are “magically” jumping from one hand to the next, you might fail to catch the sleight of hand in between. But only after he reveals his secrets is the simple magic act all the more impressive. In other words, in the second half, he teaches you how to pay proper attention.

If you have eight minutes in your day, would highly recommend watching the below video.

I can’t speak for every topic, industry, relationship, and so on out there, but at least for the cottage industry of venture capital, why I choose to write an angel or an LP check is similar. I don’t really look for what will change. ‘Cause damn, it’s so hard to predict what will change and how things will change. If I knew, and if one day, I know, please invest in my public markets fund, which will be the best performing fund of all time. But I don’t. We, as pundits sitting around the table, might draw predictions. But even the smartest of us (not sure why I say us, ’cause not sure if I can put myself in that category yet) would be lying if we knew what would happen in foresight.

Instead, I look at what doesn’t change.

What doesn’t change?

The great Charlie Munger passed away last week at the age of 99. And without question, a great loss to the world we live in today. Just half a year prior, he and Warren Buffett were hosting their 2023 annual meeting. And just two weeks prior, he was still doing CNBC interviews. And one of my favorite lines from that May annual meeting was:

“Well, it’s so simple to spend less than you earn, and invest shrewdly, and avoid toxic people and toxic activities, and try and keep learning all your life, et cetera, et cetera, and do a lot of deferred gratification because you prefer life that way. And if you do all those things, you are almost certain to succeed. If you don’t, you’re going to need a lot of luck. And you don’t want to need a lot of luck. You want to go into a game where you’re very likely to win without having any unusual luck.”

In reducing the requirement to need luck, one of the most effective ways to find what is constant in life. That despite changing times and technologies, these stay true. Or as Morgan Housel and Naval Ravikant put it, If you lived your life 1000 times, what would be true in 999 of them? In investing jargon, pattern recognition. Across my investments and more, where have I seen outperformance? What characteristics do they all share? What about human nature won’t change?

In fairness, pattern recognition gets a bad rap. And for a lot of investors, that’s because they choose to only invest in their comfort zone, and what they know best. Their former colleagues. Their Stanford GSB classmates. People who look like them, think like them, act like them. But recognizing thematic threads stretch across all facets of our life. We learn that not brushing our teeth well can lead to cavities. We learn that after stubbing our toe on the kitchen counter numerous times, we take a wider turn before turning into the kitchen. And we learn that eating piping hot foods kills your tastebuds for the next few days.

The venture corollary

In venture, we’re always taught to look at the team, product, and market. And that all are important. But if you tell a new grad or an ex-founder or an emerging angel to do just that. To them, that means nothing. They wouldn’t know how to judge. They have no benchmarks, nor do they know what’s right versus wrong. Now I don’t want to sound like a broken record, but I do believe previous blogposts like this and this are quite comprehensive for how I pay proper attention as an investor.

Emerging LPs are not immune to the lack of perspective as well. My hope and my goal is for how to be just as important if not more than the what. And for the why to be just as or more important than the how. It’s because of that, I write essays like this and this. And of course, it’s why I started Superclusters because I, too, am looking for how to pay proper attention to the next generation of venture investors. (Stay tuned for the coming Monday for episode four where we unpack the bull and bear case of early distributions in a fund!)

Photo by Shane Aldendorff on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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To Define or To Be Defined By

dictionary, definition, defined

One of my recent favorite soundbites is Rich Paul‘s. For the uninitiated, he’s the agent behind LeBron James and Draymond Green. And in his recent Tim Ferriss episode, he said: “Some people define the business card and some people are defined by their business card, and so I don’t carry a business card.”

Some of the most exciting conversations I’ve been having as of late have been in the world of family offices. There’s this shift in generational wealth transfer, but often times without sufficient knowledge transfer. At the same time, there are many next gens leaning more into risk and philanthropy. Many want to increase their exposure to venture and private equity as an asset class, but are still learning how to underwrite such risk.

My conversations echo a lot of what Citi’s been seeing as well. Two in five family offices wanted to increase their exposure to illiquid asset classes, namely the PE and VC asset classes. And while many bucket VC and PE in the same asset class, the truth is the assets operate very differently. Even within venture, underwriting the risk and performance of a sub-$40M fund versus a $40-100M fund versus a $100-500M fund versus a $500M+ VC fund are completely different. Some LPs may disagree on the exact benchmarks (for instance, sub-$100M funds and everything else), but the reality of assessing an emerging manager and an established manager are different. But I digress.

The rest are either rebalancing or figuring out their re-up strategy. Yet, as I’m sure GPs are seeing today, that shift in strategy, requires time, research, and confidence before family offices can pull the trigger. Many are waiting to Q1 next year, but engaging in conversation today.

I’ve also written before about one of my favorite lines from Engineering Capital’s Ashmeet Sidana, “A company’s success makes a VC’s reputation; a VC’s success does not make a company’s reputation. In other words to take a concrete example, Google is a great company. Google is not a great company because Sequoia invested in them. Sequoia is a great venture firm because they invested in Google.”

And I’m seeing a similar vein with family offices. The next gen don’t want to be defined by their predecessor’s goals and records. They want to define their own legacy.

There’s also the saying: If you know one family office, you only know one family office. So any broad-stroke generalizations are loosely correlated at best. That said, anecdotally, having talked with about a hundred or so family offices, here’s what I’ve come to notice.

My crudely drawn 1D scale of whether venture capital is an asset class or an access class

Smaller and/or emerging LPs see VC as an access class. Larger and more sophisticated and established LPs see VC as an asset class.

The Mendoza line — the line that separates the emerging LPs from the established ones —seems to be around 20-30 managers or over 6-7 years of venture data. For the latter, that means, you’ve seen Fund I’s and II’s graduate to Fund III’s and IV’s.

So the question for many of the next generation leading family offices has flipped from: Are you defined by your surname? To: Do you define your surname?

For those that pursue the latter, they’re a lot more proactive than previous generations. They participate in communities. Go to events. Seek education on the matter. Network with their existing managers to discover new ones. Some have also built covenants to co-invest in their manager’s breakout winners. Quite a few are building emerging manager programs or would like to. They’re hungry. Hungry to learn.

The problem I’m seeing with many managers is that they’re seeking transactional relationships. The urgency to get to their first or final close leads them to optimize for LPs who can close fast. And I get it, that’s been the game historically. But it’s leaving a massive opportunity in the market for those who have the time and are willing to educate their and prospective LPs. Who are willing to spend time building a relationship through giving first.

Photo by Edurne Tx on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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#unfiltered #83 There Doesn’t Have to be a First Place

medal, winner, gold, first place

I recently learned that in FISM competitions — competitions hosted by the International Federation of Magic Societies (if the letters aren’t in order, it’s because FISM is in French not in English), that the judges don’t have to award any prizes. Meaning if they don’t think any of the magicians and their acts are up to par, they don’t have to dole out a first, second or third place. And according to Simon Coronel, it happens quite often. The goal is simple. That winning first place should mean something. Not just because you’re better than the rest that day or that year, but that you really deserve to stand among the greats.

And it got me thinking. Are there other fields that should strive for the same level of rigor?

For instance, does an Oscar need to be awarded every year for each category?

Or an Olympic gold medal for each event every four? (Although a caveat to my own, if the rules change, like when in 2010, they banned male full-body suits when swimming at the international stage, then there should be a reevaluation of excellence.)

And there might be some years that the best prize awarded should just be a second place one.

Then there are other contests, where the number of prizes only seem to increase. In other areas, namely to join certain rankings organized by members of the press, you have to pay for your spot. The latter of which I have no experience in. But had heard of accounts from friends who have.

The truth is it’s not my place to rate the world’s greatest artists or athletes. But it does make you wonder that if the magic society can hold themselves to that high of a regard, why can’t the rest of us do so?

Once upon a note

As all good Asian children did, once upon a time, I learned to play the piano since I was five. One of many teachers and admittedly the one I was with for the longest happened to this sweet lady who taught her students out of her home. And every year, usually around the beginning of summer, she would rent out a hall and host a recital between all her students. Every student (and she had 30-40 students) — from beginning to master — would play one song.

The whole recital would last about 2-3 hours. And at the close, there would be an award ceremony. For each skill category, there would be a Best of Show trophy. And for everyone else, a participation trophy. When I was first started off and was quite bad, that participation trophy felt great, even if I was only playing Twinkle Twinkle Little Stars. I put it at the top of my shelf next to my bed, so I would see it every morning when I woke up.

Then 1-2 participation awards later, they had lost their luster. The Best of Show is now what I was aiming for.

For a brief period of time, that was my goal. And eventually I got it. But I remember when I finally got it, I wasn’t nearly as elated as I thought I’d be. ‘Cause that year my teacher decided that one Best of Show wasn’t enough. Three felt right to her. To be fair, I don’t know if she had over-ordered or just felt the need to give more out due to some parental complaints. But I remember receiving mine alongside someone who I knew made a few hiccups on stage. And even though I did the best I could have, I didn’t feel like I deserved it.

So that night, I didn’t even put the Best of Show trophy on my shelf.

A side corollary to angel investing

The greatest feature of being an angel investor (as opposed to being a VC) is that you can be opportunistic. Your fund size is your own liquidity. You’re not tied down to a mandate. Or a deployment schedule. And if so, self-induced. What it means is that you invest only when you see a great company and team. Anything south of that means you don’t have to. You don’t have to award a check to a founder if you don’t feel they’re deserving of a first place. And because of that, “first place” actually means something. Not only to the founders you invest in, but to you.

That said, playing my own devil’s advocate, much of early-stage investing is luck-based game. And it is foolhardy to attribute to skill when a large amount of variables is unbeknownst at the time of investing — be it asymmetric information, or market conditions, incumbent moves, or purely black swan events in the future. The latter few, you need to count on luck more than once. And luck purely defined as “uncertainty in outcome,” in the words of the great Richard Garfield.

Photo by Brands&People on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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What It Means to be Antifragile

boxing, antifragile, resilient

The thing is this is the first real recession I’m working in. I entered the workforce something in the midst of one of the longest bull markets in modern history. So, naturally, I had a lot of questions. One of which I asked one of my mentors in VC who’s been through a few cycles late last year. “Are there any leading indicators that foretell when we’re going to get out of a recession? Or when we truly hit rock bottom in a recession?”

And he said something that made complete sense. “When the frequency of mass layoffs, especially from some of America’s largest employers, slows to a halt.”

Since then, every month or so, I check in the number of WARN notices that come in which require companies doing a mass layoff to publicly report a layoff 60 days in advance. For instance, you can find California’s here.

As Chamath Palihapitiya puts it in his 2022 annual letter, “while we believe that most of the multiple contractions in these markets have largely worked their way through the system, we suspect there is still some more room to fall — particularly if the U.S. enters a recession in the coming year.” Since it seems layoff season is yet to pass, it seems wise to buckle in for the longer run.

While friends have asked me when the recession will end, I responded with a simple “I don’t know.” No one does. And while many may make conjectures on the timing, the one thing we can use this free fall for is to build a heat shield.

I really like this one line in Chris Neumann‘s recent blogpost on antifragility. “As great as it sounds for a startup to get stronger when unexpected events occur, I don’t actually think that’s a realistic goal for most companies (it certainly isn’t the case for VC firms). Rather, I think the goal in making antifragile startups should be to minimize the risk and distraction when unexpected events occur, such that the company can continue to make progress while its competitors are panicking and reacting.” One thing’s for sure. The world is host to a plethora of distractions. Something we won’t be in shortage of. With each black swan event, we will only be left with a surplus of attention stealers.

And I’d be presumptuous to say that the best do not get distracted. Rather the best realize when they are and have ways to get back to a focused flow state. Simply put, it’s helpful to play a game of What if? What if this unexpected shock happens? How will I react when my servers get hacked? How do I react when my cash flow is constrained due to an unpredictable event? And in each broad category of What if’s, do you have a way to hedge the risk?

Sometimes, it’s preparing for the unexpected black swan event.

That’s why code is redundant to prevent the fragility of storing it only on one server.

It’s why companies like HackerOne exists.

It’s why you should have your cash in multiple bank accounts, with at least one of them being a big 4. A few top firms, including General Catalyst, Greylock, and Redpoint, have also said, “Keep two core operating accounts, each with 3-6 months of cash. Maintain a third account for ‘excess cash’ to be invested in safe, liquid options to generate slightly more income.” All to protect against the downside risk of losing all your money when you put your eggs in one basket.

But when the black swan does hit, prioritization matters even more. When the pandemic hit and Airbnb was between a rock and a hard place, Brian Chesky described it, “We realized not everything mattered. And it was like if you have to go into a house — your house is burning — and if you could only take half the things in your house, what would you take?”

Chamath went on to write in the same letter. “The most alarming consequence in startup-land has been the divide it has created between the management teams who have ‘found religion’ (i.e. made the tough decisions and managed their businesses smartly) and the rest who are trying their best to avoid reality.” And those tough decisions include, “cutting non-core projects, lowering costs, and vastly reducing G&A while getting to profitability [which] is now mandatory — otherwise you will have to face the consequences.” Those same tough decisions set teams up for success in bad times and bear markets.

In closing

Recently on the Tim Ferriss Show, David Deutsch said, “wealth is not a number. […] It is the set of all transformations that you are capable of bringing about.” Similarly, a company’s revenue is not just another number. It is a product of all the miracles that the company willed into existence. Crossing the chasm. Leaping over hurdles.

To take a line out of Nassim Taleb‘s book, “Crucially, if antifragility is the property of all those natural (and complex) systems that have survived, depriving these systems of volatility, randomness, and stressors will harm them. They will weaken, die, or blow up.” We need black swan events to create miracles. And we need miracles to create stronger, more resilient companies.

Trauma strengthens us. You need to bleed to grow scars. You need to feel pain before you grow calluses. The product of each makes one more resilient to pain and injury in the future.

One might call it antifragility.

Photo by Johann Walter Bantz on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Chasing Revenue Multiples and Revenue

unicorn, sunset

On Wednesday this week, I hosted an intimate dinner with founders in the windy backdrop of San Francisco. And I’m writing this piece, I can’t help but recall one founder from that evening asking us all to play a little game she built. A mini mobile test to see if we could tell the difference between real headshot portraits and AI-generated ones based on the former. There were 15 picture. Each where we had to pick one of two choices: real or AI.

10/15. 6/15. 9/15. 11/15. 8/15… By the time it was my turn, having seen the looks of confusion of my predecessors, I wasn’t confident in my own ability to spot the difference. Then again, I was neither the best nor the worst when it came to games of Where’s Waldo? 90 quick seconds later, a score popped up. 10/15. Something slightly better than chance.

Naturally, we asked the person who got 11/15 if he knew something we didn’t. To which, he shared his hypothesis. A seemingly sound and quite intellectual conjecture. So, we asked him to try again to see if his odds would improve. 90 seconds later, 6/15.

Despite the variance in scores, none were the wiser.

Michael Mauboussin shared a great line recently. “Intuition is a situation where you’ve trained your system one in a particular domain to be very effective. For that to work, I would argue that you need to have a system, so this is the system level, that it’s fairly linear and stable. So linear in that sense, I mean really the cause and effect are pretty clear. And stable means the basic rules of the game don’t change all that much.”

For our real-or-AI game, we lacked that clear cause and effect. If we received individual question scores of right or wrong, we’d probably have ended up building intuition more quickly.

Venture is unfortunately an industry that is stable, but not very linear. In many ways, you can do everything right and still not have things work out. That same premise led to another interesting thread I saw on Twitter this week by Harry Stebbings.

In a bull market, and I was guilty of this myself, the most predictable trait came in two parts: (a) mark-ups (and graduation rates to the next round), and (b) unicorn status. In 2020 and 2021, growth equity moved upstream to win allocation when they needed it with their core check and stage. But that also meant they were less price-sensitive and disciplined in the stages preceding their core check.

The velocity of rounds coming together due to a combination of FOMO and cheap cash empowered founders to raise quickly and often. Sometimes, in half the funding window during a disciplined market. In other words, from 18 months to 9 months. Subsequently, investors found themselves with 70+% IRR and deploying capital twice or thrice as fast as they had promised their LPs. In attempts to keep up and not get priced out of deals. Many of whom believed that to be the new norm.

While the true determinant of success as an investor is how much money you actually return to your investors, or as Chris Douvos calls it moolah in da coolah, the truth is all startup investors play the long game. Games that last at least a decade. Games that are stable, but not linear. The nonlinearity, in large part, due to the sheer number of confounding variables and the weight distribution changing in different economic environments. A single fund often goes through at least one bull run and one bear run. So, because of the insanely long feedback loops and venture’s J-curve, it’s often hard to tell.

Source: Crunchbase

In fact, in recent news, Business Insider reported half of Sequoia’s funds since 2018 posted “losses” for the University of California endowment. We’re in the beginning of 2023. In other words, we’re at most five years out. While I don’t have any insider information, time will tell how much capital Sequoia will return. For now, it’s too early to pass any judgment.

The truth is most venture funds have yet to return one times their capital to their investors within five years. Funds with early exits and have a need to prove themselves to LPs to raise a subsequent fund are likely to see early DPI, but many established funds hold and/or recycle carry. Sequoia being one of the latter. After all, typical recycling periods are 3-4 years. In other words, a fund can reinvest their early moolah in da coolah in the first 3-4 years back into the fund to make new investments. There is a dark side to recycling, but a story for another time. Or a read of Chris Neumann’s piece will satiate any current surplus of curiosity.

But I digress.

In the insane bull run of 2020 and 2021, the startup world became a competition of who could best sell their company’s future as a function of their — the founders’ — past. It became a world where people chased signal and logos. A charismatic way to weave a strong narrative behind logos on a resume seemed to be the primary predictors of founder “success.” And in a market with a surplus of deployable capital and heightened expectations (i.e. 50x or higher valuation multiples on revenue), unicorn status had never been easier to reach.

As of January of this year — 2023, if you’re a time traveler from the future, there are over 1,200 unicorns in the world. 200 more than the beginning of 2022. Many who have yet to go back to market for cash, and will likely need a haircut. Yet for so many funds, the unicorn rate is one of the risks they underwrite.

I was talking with an LP recently where he pointed out the potential fallacy of a fund strategy predicated on unicorn exits. There have only been 118 companies that have historically acquired unicorns. And only four of the 118 have acquired more than four venture-backed unicorns. Microsoft sitting at 12. Google at 8. And Meta and Amazon at 5 each. Given that a meaningful percentage of the 1200 unicorns will need a haircut in their next fundraise, like Stripe and Instacart, we’re likely going to see a slowdown of unicorns in the foreseeable future. And for those on the cusp to slip below the unicorn threshold. Some investors have preemptively marked down their assets by 25-30%. Others waiting to see the ball drop.

The impending future is one not on multiples but one of business quality, namely revenue and revenue growth. All that to say, unless you’re growing the business, exit opportunities are slim if you’re just betting on having unicorn acquisitions in your portfolio.

So while many investors will claim unicorn rate as their metric for success, it’s two degrees of freedom off of the true North.

In the bear market we are in today, the world is now a competition of the quality of business, rather than the quality of words. At the pre-seed stage, companies who are generating revenue have no trouble raising, but companies who don’t are struggling more.

As Andy Rachleff recently pointed out, “Valuations are not the way you judge a venture capitalist, or multiples of their fund. […] The way that I judge a venture capitalist is by how many companies did they back that grew into $100M revenue businesses.” If you bring in good money, whether an exit to the public market or to a partner, you’re a business worth acquiring. A brand and hardly any revenue, if acquired, is hardly going to fetch a good price. And I’ve heard from many LPs and longtime GPs that we’re in for a mass extinction if businesses don’t pivot back to fundamentals quickly. What are fundamentals? Non-dilutive cash in the bank. In other words, paying customers.

Bull markets welcome an age of chasing revenue multiples (expectation and sentiment). Bear markets welcome an age of chasing revenue.

The latter are a lot more linear and predictable than the former.

Photo by Paul Bill on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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#unfiltered #75 Why I Write Long Form Blogposts

typewriter, blog, write

This past Wednesday, I was having lunch with an artist-turned-VC. And as you might imagine, we had to cover every topic at the intersection of art and startup investing. But of all the ground we covered, one stood out — content creation.

She’s on the Gram, LinkedIn, and everything in between. (Although surprisingly not on Twitter.) But to help her focus, she uninstalls those apps on her phone. Otherwise, she says she’ll end up “doomscrolling.” I get it. In fact, many of my friends and colleagues have shared similar things as well. But…

I’m weird. At least among my friend group, I’m really weird. I’m terrible at social media. I’m an 80-year old stuck in a 27-year old body. At least on the social media front. I find it so hard to keep my attention on social. In fact, I schedule ten minutes three times a week to hold myself accountable to be on LinkedIn and Twitter.

So, when it came to sharing my thoughts and learnings publicly, it was a pretty easy decision. Of course, I eventually came to self-rationalize it as the ability to own my own piece of virtual real estate, but there are three more reasons I chose blogging rather than tweeting or social posting.

1. I write to think

I’ve written about this before so I won’t elaborate in length on my own rationale here, but share a few examples of others also holding it in high regard.

There’s only so much you can flush out in just 280 characters, or over any short post. And while some of my thoughts fully flushed out may only be that long or less, not having that restriction gives me peace of mind to not hold back.

One of my favorite George Orwell lines happens to be: “If people cannot write well, they cannot think well. And if they cannot think well, others will do their thinking for them.”

On that same wavelength on writing, Jeff Bezos makes Amazon execs write six-page memos. In most companies, team members often resort to PowerPoint presentations. Take anywhere between five and ten slides. Maybe less, maybe more. It’s much less thought out than a six-page dissertation. As Bezos says, “The reason writing a ‘good’ four page memo is harder than ‘writing’ a 20-page PowerPoint is because the narrative structure of a good memo forces better thought and better understanding of what’s more important than what.”

Equally so, it’s the same reason the best investors write memos for their investment decisions. My favorite public ones are Bessemer’s, which encapsulates much of their thinking at the time in amber. Turner Novak also turned his ability to write great memos to eventually raising his fund, Banana Capital. And the great Brian Rumao writes memos not just pre-investment, but also in his post-mortems where he gathers his learnings.

While I won’t go as far as to comparing myself to the afore-mentioned, I do find great pleasure and great learning from putting words on paper.

2. Longer feedback loop

My writing is more often a form of self-expression, self-curiosity, and self-discovery. So, unlike a product manager or founder who’s relentlessly testing and iterating on feedback, I enjoy longer feedback loops. I may start another content engine at some point that is for a particular audience, focused on feedback and iteration. But this humble piece of virtual estate will stay me. With no algorithm conditioning my attention span and yearn for external validation. That’s not to say I won’t ever (or have not ever) written things that you my awesome readers want, but it is only at the intersection of what you want and the what I enjoy writing about and asking others about that mint content here.

I also spend a lot of time thinking about audience capture, a term Gurwinder brought to my attention in an essay he wrote about Nikocado Avocado, which I also touched on in an essay I wrote near the end of last year.

I’m reminded by something Gurwinder wrote a few months ago about the perils of audience capture. In it, he shares the story of Nikocado Avocado, who lost himself to his audience, in a section of that essay he calls: The Man Who Ate Himself. He also shares one line that I find quite profound:

“We often talk of ‘captive audiences,’ regarding the performer as hypnotizing their viewers. But just as often, it’s the viewers hypnotizing the performer. This disease, of which Perry is but one victim of many, is known as audience capture, and it’s essential to understanding influencers in particular and the online ecosystem in general.”

3. The impermanence of social media

Most things on social media are ephemeral in nature. It’s designed to capture the moment, but not chronicle the moments. On Twitter, you can only pin one tweet. On Instagram, you can pin three. And on LinkedIn, only three are visible on the featured carousel, and include, five max before it takes you down another layer of friction to discover more.

There’s a level of impermanence which makes thoughts feel whimsical rather than evergreen. To use a phrase I recently heard Tim Ferriss use, the “durability of the signal seems to wane so quickly.” And that made my thoughts feel cheap.

That’s not to say every post I write has their weight in gold, but the searchability and the evergreen nature of my favorite blogposts (saved in my “About” tab) are the reasons I keep most of my thoughts here.

Photo by Fiona Murray on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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DGQ 12: What is play to you but work to everyone else?

children playing, not work

What is play to you but work to everyone else? Or said differently, what do you love doing that many others would hate or get bored of quickly?

This isn’t an original self-query. I want to say I heard it years ago on one of Tim Ferriss’ episodes, but the exact one escapes me. Yet, recently, my friends and colleagues remind me of this more and more. In the ultimate shortage of labor, more than ever before, people are rethinking what career means to them and what a meaningful career means. I’ve had friends become full-time live streamers, NFT creators, inventors, fiction novelists, artisans… you name it, and I bet you someone that I know – hell someone you know – has dabbled or jumped head-first into it. It truly is the era of the Great Resignation.

Now this question isn’t a call to arms to leave whatever you’re doing. Rather a direction of clarity that may help you live a more enriching life. Something to pursue in your down time. Until you can find a way to get paid to do so – unless you happen to have 20-30 years of runway from previous riches. The same is true if you’re an aspiring founder. Work on your project part-time, until you are ready to take it full-time either with investment capital or revenue.

For me, the answer to the above question is:

  • Writing (to think)
  • Meeting, and more specifically, learning from passionately curious and curiously passionate people (what can I say, I’m a glutton for inspiration)
  • Becoming a world-class questioner (you’ve probably guessed this one from the DGQ series)
  • Collecting quotes and phrasings that resonate (a few of which are repeat offenders on my blog)
  • Helping people realize their dreams (something that was much easier when I only had 20 friends, but much harder when I’m adding zeros to the right)

Many of the above have become synonymous with my job description over the years. Did I predict I would fall into venture capital? No. Frankly, it was a result of serendipity and staying open-minded to suggestions from people I really respect.

While this may come off as virtue signaling, to me, I’m willing to, did lose, and continue to lose sleep over each and every one of the above activities. And if I know anything about myself, my goalposts are likely to change over time. Not drastically, but fine-tuned over time.

Photo by Robert Collins on Unsplash

The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.

Subscribe to more of my shenaniganery. Warning: Not all of it will be worth the subscription. But hey, it’s free. But even if you don’t, you can always come back at your own pace.

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#unfiltered #59 I Am The Worst Marketer Out There

billboard, marketing

Last week, after a lovely conversation with a startup operator, he asked if there was anything he could help me with. I defaulted to my usual. As I’m working on being a better writer, I asked him if time permitted, could he give me some feedback on my writing. For the sake of this blogpost, let’s call him “Alex.”

While I expected just general feedback on my style of content delivery, Alex gave me a full audit of this blog. He told me I should focus, until I’ve built up an audience. He also said that I should find my top 20 blogposts, figure which category they fall under and narrow down by writing more of those. On the same token, he recommended I reference Hubspot’s “topic clusters.” Which is an amazing piece about how to nail SEO in 2021, if I say so myself. Incredibly prescient. And incredibly true.

He also recommended I use Medium or Substack over my antiquated design of a website. And forgo the header image. Which you might have noticed I haven’t (yet).

The thing is… he’s 100% right. I’ve done little right, in the sense of marketing and branding. In fact, in the Google search engines, I probably am a mess to categorize, which means I exist in no category. Even in my own words, focusing on everything means focusing on nothing. While at the time of writing this post, a good majority of my content is based in startups and venture capital. If I focused on better branding, I would have doubled down on fundraising, or marketing. Or social experiments. But I haven’t.

Truth be told, I’ve stunted my growth, or my brand’s growth, by intentionally choosing otherwise. In turn, there are only two questions I optimize for in this blog.

  1. Will this make David from yesterday smarter?
  2. Is this still fun?

I started this blog writing for an audience of one. For the person I was yesterday. And if I know the me from yesterday would love it, then I have at least one happy customer.

I don’t write this blog for profit. This blog is my de-stressor. It is my entertainer, yet also my coach. It is my confidant. And it is just fun. The process of learning and thinking through writing – refining my thoughts – gets me really excited. I don’t want to end up dragging my feet through mud. Funnily enough, despite being an extremely, and I stress the former word, small blogger, I’ve had the occasional brand reach out to sponsor content. As you might have guessed, I said “no” to everyone so far. Either I didn’t believe that the product would make the world a better place or that I just didn’t get their product. This is not to say I won’t ever take on sponsors, but I just want to be really excited about it.

I’ve also had a number of folks reach out wanting to guest post on this blog, to which I’ve also said “no” to everyone so far. Because (a) it makes me lazy and defeats the purpose of me writing to think, and (b) I haven’t learned anything from them yet.

And because I write from a motivation of “psychic gratification,” borrowing the phrasing Tim Ferriss used in his recent episode, my writing is “very me,” to borrow the phrasing of readers and friends who’ve talked to me face-to-face before. I feel I can be genuine. And I can be unapologetically curious. I can learn what I want when I want how I want. I love each topic I write about, at least in the moment my pen touches paper. It excites me. It inspires me. And it pulls me with a force I want more of.

As a product of me being me, every so often, a random essay sees a momentary breath of fame. On average, it happens every 7th or 8th blogpost. I have these random spikes of several hundred views within 24 hours every so often. And don’t get me wrong. I would be lying if I said that wasn’t gratifying as well. Other times, some essays are far more perennial and see anywhere between two and ten views a day – almost every day. There are the ones that never make it onto the stage. And live somewhere in a virtual public graveyard.

I’m publicly logging my thought process here as a bookmark for future reference. And so that my future self can’t go back in time and write off my thought processes now in a grand motion of revisionist’s history.

I also know that this won’t be the last time I revisit this topic. My future mental model might differ greatly from what it is now. As John Maynard Keynes, father of Keynesian economics, once said, “When the facts change, I change my mind.” But it might stay the same. Who knows?

I’ll keep you updated.

Photo by Bram Naus on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

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