Having a Conversation With Yourself: 2023

Revisiting Your Own Ideas

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A few weeks ago I had coffee with a friend who happens to read my writing. He asked me what the most surprising result was after having written consistently every week for almost two years. This week (the last week of 2023) marks two straight years of not missing a single week. In terms of some surprises along the way, a few things came to mind, but one really stood out.

Through writing on Twitter and Substack, I've met awesome people like Sam Hinkie, Alex Pall, Kyla Scanlon, Dan Shipper, Visa Veerasamy, Hunter Walk, Anna Gát, and on and on.

The conversations I've had with the dozens of people through my writing is a powerful side benefit of writing consistently. Every time I talk about why people should write online, I always use the same phrase: "sending your vibes out into the world and seeing who responds." That's one of the most powerful side effects of the internet. You never who you'll vibe with.

But as powerful as the conversations with other people are, the conversation with yourself will always be the most powerful result of writing. Last year, around this same time, I published a piece called "Having a Conversation With Yourself." In full transparency, I just thought it would be an easy way to not have to write anything new at the end of the year.

But it turned out to be one of the most valuable exercises for me. Writing once a week is... a LOT. You end up writing things you don't even remember writing, like a secret public journal that is secret even from yourself. For example, one theme I didn't even realize I had revisited over and over again was how storytelling can rewrite reality; for better or worse. But turned out I found at least ~10 instances where I had unpacked that idea over the past year.

I was literally having a conversation with myself because I hadn't even remembered unpacking those ideas. It was a honest-to-goodness real-life example of the quote that I return to so often:

"I write because I don't know what I think until I read what I say." (Flannery O'Connor)

So after having already taken some time to reflect on what I wrote this year, and what I read this year, I decided to once again spend some time reflecting on what I thought this year.

Talking To Myself

After looking back on all my writing, these were the conversations topics that came up most often:

1. The venture capital industrial complex

2. The sins of my people: from funders to founders

3. What is the virtue of progress? Or optimism?

4. "Show me the incentives, and I'll tell you the outcome."

5. The beginner's mind is built on the foundation of first principles thinking.

6. Refuse to live a binary life. Be brave enough to acknowledge nuance in everything.

7. I used to believe reality would triumph over narrative; now I'm not so sure.

8. Psychology IS the ball game

9. The meritocracy of ideas, and how actions demonstrate our values

10. The serendipity of writing online is putting your vibes out into the universe and seeing what happens

11. Distribution is increasingly the most difficult (and important) thing in the world.

12. Risk management is an under practiced dark art

Below I included some excerpts from my writing that best represent these ideas I kept revolving around. Then, for an interesting bonus at the end are the quotes I returned to again and again, from Bill Gurley to F. Scott Fitzgerald to Morgan Housel, and more.

(1) The venture capital industrial complex

"'Wherever there's turmoil, there's indecision. And wherever there's indecision, there's opportunity.' (Don Valentine). I believe that there is similar turmoil in the world of venture capital. In 2021, that turmoil came from things moving too fast. In 2022, that turmoil came from an existential question: 'why do we do what we do?'" (The Art and Science of Investing)

"Venture capitalists love to sing the song of long journeys. "We're in it for the long road, right alongside the founders." That belief can often lead to unchecked optimism, and a limited point of view on the details. But death is typically in the details." (Risk Management In The Age of YOLO)

"As much as VCs want to be partners in helping you build a business, at the end of the day their business only works if they're realistic about what your company can eventually be worth. That equation dictates the entirety of their returns. No matter how helpful you find them, or how impactful they are on your business, if your company doesn't go on to be worth more than they paid, then they don't make money." (Thinning The Herd)

"Peter Pezaris, SVP of strategy and experience at New Relic, described venture this way: “Venture capital simply cannot stay frozen for long, and we’ll see renewed investments by the end of 2023. The record amount of dry powder at VC funds must be deployed according to schedules and in search of returns for investors. The VC community is driven by rumors and groupthink. All it will take to unlock a furious wave of pent-up demand is one person investing and sparking everyone else’s fear of missing out.”" (Dreaming Of Dry Powder)

"To some extent, avoiding the term "investor" is, in part, a marketing tactic. Founders don't want to hear about their VC's "allocation strategy," they want someone who will get into the weeds with them and help them push this monster undertaking up a hill. But the business model of venture capital is important not to ignore. Should VCs have the mindset of builders rather than portfolio managers? Yes. But would they have a business model if they weren't portfolio managers? No." (What Is An Investor?)

"That's one reason why most VCs can afford to not particularly care about the long-term economic engine of a company (or at least, they could for the last decade). It doesn't matter if you're pouring billions into a money inferno that is selling $2 for $1 because the company doesn't have to make money, you just have to find someone willing to believe the company will eventually make money (i.e. someone willing to hold the bag.)" (Building An Actual Unicorn)

"The key implication I come away from this thought process with is that VCs are too often focused on funding companies that represent "passable bags" rather than long-term exceptional companies. Being able to say, "this is a company whose stock I never want to sell," is a more likely way to see exceptional companies, as opposed to piggybacking on passable bags." (Building An Actual Unicorn)

"Venture investing is a sort of insane asset class when you think about it. The participants differ wildly, from suit-and-tie asset managers to shorts-wearing hacker nerds, and the approaches are exceptionally different, from cottage-esque micro funds to multi-billion dollar empires. But the majority of venture investing can feel like little more than guesswork, while the outcomes can generate literally billions of dollars in returns." (Let Me Know How I Can Be Helpful)

"I've written before about how much venture firms want to try and be everything to everyone. But one of the dangers of such a broad set of use cases a firm can offer is that it opens you up to the Dunning-Kruger effect. The main idea is the disconnect that exists between someone who is bad at something vs. how good they think they are at it. The more things you’re doing, the more likely you are to be bad at them but think you’re good at them." (Let Me Know How I Can Be Helpful)

"Venture capital firms are complex webs of cultural politics, power struggles, and short-term measurements of long-term activities. In some ways, VCs can be the dumbest people you'll talk to. Not because they're normal dumb, but because they move so fast, and do so much while operating on so little information that their decision making paradigms can defy most forms of logic." (Eat What You Kill)

"Now, take that strange fast-moving poorly-informed decision making paradigm, and then stick a dozen or so of them in a room. That's a venture capital firm. For people coming up in a venture firm proving themselves, one of their primary responsibilities is to understand all those fixed-reality frameworks floating around in their partner’s heads (e.g. playing politics with who will like what deals)." (Eat What You Kill)

"Finally, most VCs don't really trust each other. There is a constant organizational politicking that exists where people try and understand what other people say yes to, what concerns they'll have, and how best to frame the story of an investment in the best possible light." (Eat What You Kill)

"Unfortunately, for a lot of VCs, you have fast-moving diversified reactionaries that are operating with limited information, a fine-tuned sense of internal organizational politics, and very little trust in the people around them. Now, in a bull market a lot of that can swept under the rug. But what happens when the rug gets swept out from under you?" (Eat What You Kill)

"Instead, I find myself reflecting on the dynamics that exist in modern venture capital that are driving hype so fervently. 2021 isn't dead. It lives on in each of us. But it's also living on in some of the rounds we're seeing get done. In the last few months, we've certainly seen mega-rounds from established companies like Stripe (albeit a rocky process), as well as massive rounds from AI startups (more on that hype later). But today, in the year of our Lord 2023, we're still seeing rounds for fairly traditional SaaS companies get done at 100x ARR." (Blaspheming Against The Hype)

"My fear is that we've learned almost nothing from 2021. Venture funds have become massive and, as a result, they'll put massive amounts of capital into businesses with slim chances of becoming massive outcomes in hopes of backing the one multi-bagger, even that means backing founders who literally lit billions of dollars on fire, now in pursuit of luxury real estate with saltwater pools and dog valets." (Blaspheming Against The Hype)

"I don't think we talk enough about the concept of "parking capital," but its basically how capitalism works. When I talk about the business model of venture capital, I'm attempting to explain how most large venture firms are thinking. If you're managing tens, if not hundreds of billions of dollars, you're not looking for the same kinds of returns on that capital as a typical venture fund. You can afford lower returns because you're putting more capital to work (aka parking)." (Blaspheming Against The Hype)

"When I thought about a16z's $350M investment (their single largest individual check) into Adam Neumann's Flow, and both a16z's and Adam Neumann's very public courtship of Saudi money, capital agglomeration was the reason that made the most sense to me. Here's a firm whose main focus is on aggregating as big a pool of assets as possible. Here's a guy whose proven he can take on massive amounts of capital in pursuit of a big vision. Here's a source of capital that has proven it is borderline infinite. If the startup goes to zero? That's 1% of a16z's AUM. But if it hits it big? They have a residential real estate play that can scale, eat tons of capital, and maybe drive massive returns. We used to talk about Tiger playing a different game, but I'll tell you what. Capital agglomeration is the real new game in town. (Blaspheming Against The Hype)

"Beyond normal hunger (or homicidal foliage hunger) you also have institutional hunger. Humans are great at making hungry, hungry machines—from hippos to industrial complexes that span prisons, gas, and militaries. Venture capital is no exception. Every engine needs fuel. Every process has inputs and outputs. But eventually, when incentives align, you start to see a hunger that is dangerously self-reinforcing." (VC Contagion)

"Venture capital enables the perpetuation of unsustainable models in favor of eventual scale. This isn’t necessarily a bad thing. The runway to experiment has been critical for any number of businesses. Apple, Google, Facebook, Amazon, Salesforce, and so many others are companies that operated unsustainably for a while with the help of funding, in order to reach scale and become cash generating machines, with billions in annual cash flows today. But any good thing taken to excess can become problematic. The same is true with capital. There are a number of businesses that have yet to demonstrate their ability to consistently turn a profit. That doesn’t mean they are bad businesses, but they’ve certainly been beneficiaries of exorbitant amounts of capital that may hide the less-than-economical aspects of their businesses." (VC Contagion)

"It is a reality that the vast majority of funded companies start their lives as unsustainable engines. They burn cash in pursuit of a future economic engine that will spit off cash. But as capital became more, and more plentiful it has enabled unsustainability to persist for much longer. When the inevitable weight of business gravity smashes into the face of an unsuspecting subsidy darling, it can get ugly. That is happening more and more as the subsidy subsides, the cash funnel shuts off, and companies have their lack of sustainability exposed. In the words of Warren Buffett, “only when the tide goes out do you learn who has been swimming naked.” (VC Contagion)

"As the amount of venture capital exploded from $23B in 2012 to $345B in 2021, the appetite for funding unsustainable growth only increased. The business model of venture is increasingly about aggregating as much AUM as possible. As a result, that sends VCs out looking for cash-hungry startups that want to consume ever more capital. In the pursuit of unsustainable growth, there are two common strategies (among many others) that venture-backed startups have discovered as excellent cash infernos: (1) acquisition at all costs, and (2) selling to startups (aka turtles all the way down)." (VC Contagion)

"Venture capital firms are becoming insatiable capital agglomerators. “You don’t want to be a hungry unicorn? You don’t need any help growing? Too bad. Take the cash. We’ve got billions to deploy.” But like an unreliable drug dealer, as soon as VCs got a generation of founders hooked on massive amounts of capital, ever larger valuations, and increasingly grand ambitions, they suddenly froze up and disappeared. That left in its wake a number of companies trapped in unsustainable territory with no extraction plan. No more funding is coming, and it’s sink or swim." (VC Contagion)

"As it relates to my feelings about venture capital, it comes down to what we're incentivized to build. I often find myself articulating this by using Hollywood as an analogy. The "business of blockbusters" has pushed movie studios to focus on spin-offs, sequels, and reboots. While this can lead to exciting movies, it rarely leads to unique stories. I'm reminded of a story where Steven Spielberg complained that he had almost been forced to release his film, Lincoln, as a mini-series instead of a full feature film because he couldn't get anyone to fund it! A movie made by Steven Spielberg, starring Daniel Day-Lewis! But the studio model had pushed those unique stories into the periphery in favor of massive blockbuster potential. Venture capital is facing a similar problem. The economic model pushes for bigger and bigger outcomes, that require more and more capital. This leads to larger funds, larger rounds, more cash burn, and more exorbitant ambitions. And don’t get me wrong, I don’t have any problems with ambition! I want to see the full unlock of human potential. Automation, robotics, diseases cured, and space traversed. But the ambitions are, so often, luxury dog houses dressed up as solutions to the housing crisis." (The Existential Dread of Cognitive Dissonance)

"That is, I think, an important reality about most of our institutions and systems. We are governed the way we're governed because we agree to it. People have power over us only inasmuch as we allow them to. But that doesn't stop a generation of would-be kings from asserting their influence. The same is true in venture. VCs often consider themselves "king makers," able to tip the scales in one direction or another. The breadth of their royalty doesn't come from any God, or divine right, but simply the size of their coffers." (King Making vs Taste Making)

"Over the course of the bull market from 2009 to 2021, venture capital has grown quite far from the "cottage industry" of old. More capital meant more spend, more spend meant bigger operations, and bigger ambitions. The bigger the outcome, the more justification there was for more capital. How do you fight capital? With more capital. (Right? Cause fight fire with fire has been a staple of the firefighting industry for decades.)" (King Making vs Taste Making)

"Venture capital has been busy focused on the king making capabilities of capital, but they've lost sight of something important—there aren't enough startups to justify all that capital. But why is that? Because (1) there aren't enough people building things that people truly want, and (2) there is only so much attention (time, energy, disposable income, corporate spend) that people have to give. There is a finite amount of "taste" in the world. A lot of brands have thrived because there are surprisingly big niche markets, like mushroom foraging, that can sustain a certain amount of value creation and capture. But the biggest misallocation of capital is the limited understanding of taste—what do people actually want?" (King Making vs Taste Making)

"How can investors believe a company that went from $20M to $100M ARR in 8 months could eventually get to $2.3B in revenue? They probably didn't! They just had to believe that someone ELSE could believe that something like that was possible. This is literally an academic representation of "passing the bag." One of the most un-dealt with ramifications of a 13-year bull market is the institutionalized belief in "the greater fool." People can make money, not because a business is sound, but because there is always someone else down the line who will buy you out. And that was true for 10+ years!" (Institutionalized Belief In The Greater Fool)

"In terms of rules, I actually agree there are very few "rules" in real life, but there are powerful forces. Forces that can be difficult to escape from or avoid. As powerful as gravity, but as made up as capitalism. And some of these forces shape the way that companies are made, and capital is deployed." (Playing Different (Stupider) Games)

"Granted, it isn't just founders that are shaping these expected (and often dramatically inflated) outcomes. The business model of venture capital has done a lot to force founders to focus on very different games because investors need very different outcomes to make their own math work." (Playing Different (Stupider) Games)

"Even outside of AI, there have been a few rounds done this year during an otherwise bone dry funding environment that have been reminiscent of 2021. [Some] of these non-AI zirpy investments have come from specific firms. Firms that I call "capital agglomerators." These are firms that are truly playing out the vision of becoming the Blackstone of Innovation. The goal is just to raise as much capital as humanly possible. It is unlikely that any of these kinds of firms would do what Founders Fund did a few months ago in cutting its latest venture fund in half." (Playing Different (Stupider) Games)

"I'm not criticizing Sequoia's investment in Instacart. A 5x return on $300M of capital is what dreams are made of. But Sequoia illustrates two things about the value chain of capital that I'll explore more below: (1) Capital Dependency: A company's "terminal value" can look great for early investors, while being dependent on later investors. (2) What's It Worth: The success of an early investor's return is determined based on what a later stage investor decides the company is worth." (The Value Chain of Capital)

"Even when you step back from the individual investor lens, and look at the incentives of the overall fund. Funds have lifecycles in which they're trying to deploy and reclaim capital. Selling is as an unavoidable part of the equation. Compounding in venture is much more limited than, say, a Berkshire Hathaway approach." (The Value Chain of Capital)

"In that video by Aswath Damodaran where he unpacks the returns of each round for Instacart, he makes this point about VCs: "I know over the last few decades, especially the last decade, when VCs were viewed as superstar investors; why? Because we saw stories of incredible success. This is selection bias in what we read. And also, some VCs are relentless self-promoters. They try to promote themselves as people who can judge businesses as amazing guagers of whether a business will pay off. I've never believed this about VCs. I think most successful VCs share more with successful traders than they do successful investors. They play the pricing game. What does that mean? They get judged on timing. When they enter and when they exit." (The Value Chain of Capital)

"I've written before about the dangers of excess capital. I've also written frequently about how raising venture capital is picking up one end of a stick, but it forces you to pick up the other end of the stick (outcome expectations). Business models are the same (which I wrote about here). The model you pick dictates the amount of capital you need. And that dependence on capital determines how much control you have over your own destiny." (The Value Chain of Capital)

"The business model of venture capital has invited a plethora of capital agglomerators whose primary business is asset aggregation, rather than generating outsized returns. Firms with $10B+ of active AUM typically have LPs that are fine with 2-2.5x returns, which can justify more capital, and worse outcomes. Smaller funds may think they’re immune, but they have to compete with the prices those capital agglomerators are willing to pay." (The Value Chain of Capital)

"Venture capital is an existentially flawed, yet powerful, economic system that could kill the thing most VCs purport to love: startups. Just like the person who doesn't want to take a life on the boat — you're staring at a deadly thing. The deadly outcome isn't something you want. But the failure of that outcome threatens your own life. The dissolution or rapid revolution of the venture capital industry threatens to kill a generation of tried-and-true VCs. So what's to be done?" (Surviving The Death of Venture Capital)

"The increasing vitriol thrown at venture capitalists is as broad as it is creative: parasites, con artists, Venture Catastrophists, and (the most creative), ill-dressed rent-seeking oligarchic vampires." (Surviving The Death of Venture Capital)

"The reality is, you can segment most of people's frustrations or (as homicide detectives call it) "motive," into three buckets: (1) personality, (2) process, and (3) outcomes. Number 1 is accurate; a lot of VCs are lame. Number 2 is the majority of what I write about; there is plenty of room for improvement. But saying someone's process could be better isn't a great reason to kill them. Finally, we're left with number 3: outcomes. One of the strongest defenses for venture investing is the size of the outcomes. As much as VCs are annoying, and have a myriad of broken business behaviors, they have continued to put up numbers." (Surviving The Death of Venture Capital)

"Just because venture capital deserves to live doesn't mean it doesn't deserve to change. For an industry built around disruption and innovation, the venture industry sure is allergic to its own medicine." (Surviving The Death of Venture Capital)

"So much has been said about the weaknesses of the venture model. Venture firms have done dramatic damage to their brand value as a result of intense hype chasing and FOMO baiting. Even Sequoia, who is definitively one of the best multi-stage venture firms to ever exist, has gotten their fair share of black eyes, most recently (and notably) with FTX." (Surviving The Death of Venture Capital)

"Things are changing. Venture is increasingly following a similar bifurcation to income inequality. On the one hand, you'll continue to have capital agglomerators. Their business model? Aggregate assets, deploy assets, collect fees, profit. On the other hand, you'll have the rise of product-led firms. They won't be defined by their AUM, but by the specificity of their product offering. This is a topic I haven't unpacked as much as I would like, but I will do it justice someday." (Surviving The Death of Venture Capital)

"That's the key to survival. Adapt. Venture capital is dying because it has adapted to focus on returns. The model has crafted an engine that generates returns, not necessarily enduring, generational companies. The same is true of things like the oil industry. Eventually, companies will be forced to bear the brunt of their own externalities. Venture capital is no different. Inhumanely subsidized labor, monopoly price gouging, over-paid lobbyists, the selling of digital opioids, and radicalization of the misinformation campaign. The pump-and-dump of radically blitzscaling an inefficient model to convince public markets that the upside is just getting started... it's not going to work anymore." (Surviving The Death of Venture Capital)

"The second piece of Charlie Munger advice? The quote that came to mind for me was, "don't sell anything you wouldn't buy." But in this instance, that idea is actually best illustrated by another quote from Meb Faber that I read in this piece by David Perell: “In the history of Wall Street I think there are two types of firms — I think there are firms…where you’re putting out products that you believe in, you work your ass off to make them the best possible products, you put your own money in them, and you build a culture that these are things you believe in. Then you have a lot of firms…that will put out whatever they can to capitalize and make as much money as they can on the themes of the day.” And that reality is true on and off of Wall Street. This is, in my opinion, the critical point in the case against the bubble brains of Silicon Valley. Some of you are in the business of having bubble brains! If you've setup your firm with the strategy of becoming a capital agglomerator? Then you need to have your head filled with bubbles, because that's how you're going to attract the most capital to ratchet up your fees. If you're looking for a quick buck, build a company, sell $120M in secondary, and get out? You need to be dripping with bubbles that will bolster up your quick flip. (The Bubble Brains of Silicon Valley)

"Increased pressure on venture capital as an asset class will continue to further exacerbate concentration. LPs will look for exposure to what they see as the dominant fund managers and likely see a similar form of consolidation to what you've seen in fields like consulting (Big 3), accounting (Big 4), and bulge-bracket banking." (Revisiting The Death of a Venture Fund)

(2) The sins of my people: from funders to founders

"The 10+ year bull market hid a multitude of sins, especially in the last few years leading up to 2021. But potentially one of the most significant negative impacts of an insane bull run is the havoc that's been wrought on people's psychology. FOMO and YOLO reached peak, near religious fervor. Being able to sit, quietly, while everyone around you makes money isn’t easy. And very few people managed to avoid the siren call of 2021 speculation." (Risk Management In The Age of YOLO)

"Even if it costs us some easy money in good times..." If speculation is your game, then by all means ride the waves and run the risk of getting wiped out. But for investors, and founders, who are building things that last—survival is, ultimately, the only game that matters. (Risk Management In The Age of YOLO)

"For many of these companies, the biggest reality that they will have to face is that for most of these companies, any valuation mark from 2020 - 2021 aren't just one of many data points. They're irrelevant data points." (Thinning The Herd)

"A lot of companies will find that they have less of a war chest, and more of a leaky cash bucket. If you're a founder, and don't have a handle on exactly where cash is going? That's a problem. If you're on an executive team and you're not having discussions about burn? That's a problem. If you're at a company continuing to hire and spend without any discussion of runway? That's a problem." (Thinning The Herd)

"It is also important to note that VCs are largely to blame for the period of excess. The "fear of missing out" on a massive outcome drove capital providers to throw money at companies that not weren’t ready for it, but also used tactics to convince founders that they were ready." (Thinning The Herd)

"But one of the things that investors use to trick themselves into ascribing value to a company comes from imagined value. Investors are pretty affective storytellers, but like Medusa turning herself to stone looking in the mirror, those stories can sometimes turn on their tellers." (Updating The Hype Cycle)

"The unfortunate reality is, I think there are a lot of investors that didn't learn anything from the hype of 2021. And at the end of the day, this comes back to the structure of incentives and business models that many investors are employing. For many of these firms, your job isn't actually to make the most pragmatic decisions about what can drive long-term business value. Your business model is to expose capital to assets with the most dramatic potential increases in value. That's what 2021 was all about; being exposed to the assets that have the makings of something that will continue to appreciate in value. Does that appreciation always come with revenue growth, cash flow, or market share? Maybe, but not necessarily. This is another reason why I so often return to this idea of nonsensical valuations in private markets. The narrative. The imagined value can play just as big a role, if not bigger, in determining the valuation of a particular company. The most valuable companies will be those with the best stories to tell, and investors will continue to trip over themselves in pursuit of those stories." (Updating The Hype Cycle)

"The easier it is for VCs to defer to "rumors and groupthink," the less likely they are to be innovative. And if there is one thing we need more of in venture, it’s thinking that is less like more of the same." (Dreaming Of Dry Powder)

"The last decade or so of company building has largely revolved around cash burn. Companies have spent exorbitant amounts of money, and in almost (not every) case it has been after one pursuit: customer acquisition. Market share. There is a graveyard of companies who probably spent a lot of time reading about competitive moats, but never lived long enough for them to matter practically. If you don't have the money or time to build a castle, then your moat doesn't matter. And now, a lot of the things that investors could use to artificially inflate their belief in defensibility are much cheaper. Whether you're writing, coding, designing, or emailing, a lot of that stuff is pretty cheap now." (Competitive Moats)

"The biggest recipe for building a competitive moat in the long-term are the business capabilities that you build early on. And here's an idea that may feel blasphemous in the current VC religion of "profit, profit, profit," but burning cash can actually be an effective capability. The last few years where dozens of companies have lit atrocious amounts of money on fire, their cardinal sin wasn't burning money. It was burning money ineffectually." (Competitive Moats)

"Markets have been rewarding growth over profit for over a decade, so just because the narrative has shifted in the last 5 quarters doesn't mean every business can turn on a dime." (Building An Actual Unicorn)

"The idea of "playing the game on the field" is the reason I'm not that surprised there aren't more profitable companies around today. Even examples like Amazon, who took longer to generate profit, still did it in less than 15 years. And individual business lines, like AWS, were profitable within ~11 years, generating $4.3B in net income after 15 years. The game for the last 15 years (e.g. the environment the majority of these companies have grown up in) has not prioritized profit in any meaningful way." (Building An Actual Unicorn)

"So you have an unstoppable force of reality-altering AI, and an immovable object of capital agglomeration screaming towards each other. Candidly, I think they're a match made in heaven and they're going to shape the world. There are oceans of consideration across AI safety, universal basic income, misinformation, AGI, and on and on. Who knows how all of that will play out? But what does seem to be the case is that a huge majority of startups, and even venture capitalists, are caught in the middle of these behemoth forces. And my fear is that the hype from a very different game will poison the dynamics of company building and funding." (Blaspheming Against The Hype)

"As a VC, your job is to associate yourself with as much success as possible (even if you had nothing to do with it) and to avoid failure like the plague (even if it was 100% your fault). Venture funds, contrary to the marketing framework they like to reinforce, are not long-term thinkers. They’re a collection of short-term careerists focused on maximizing the amount of success they’re associated with. As an individual investor, your economic interests are not as easily connected to long-term success, but instead short-term performance." (On Hype And Hot Air)

"So how is it that Warren Buffett can acknowledge he's made a mistake 100+ times in 46 years? Mistakes like selling McDonald's in the late 90's, getting into textiles or the shoe business (especially when he bought the failing shoe business with Berkshire stock), or turning down a $35M NBC station that ended up being worth $800M. Meanwhile, every VC can say 2021 got crazy but can rarely say "we made a mistake investing in that company at a $2B valuation for $3M of revenue, or even other world-class capital allocators, like Jeff Bezos, who only ever really acknowledged he made a mistake 3 times in 24 years." (On Hype And Hot Air)

"You might think about venture capital as long-term capital. But again, just because venture funds have 10-year lifecycles, most investors are battling the trust of their colleagues more than the longer-term view of their funds or LPs. If your partners don't trust you, then you won't stick around to take advantage of long-term compounding. And most VC partners are making decisions, not based on long-term performance, but on short-term activity. As a result, that makes it very difficult to acknowledge mistakes without damaging one individual career." (On Hype And Hot Air)

"Venture capital, as an institution, has developed a number of “move fast and break things,” “grow at all costs,” and “blitzscaling” playbooks. There are very few playbooks for how to make progress from unsustainable to sustainable territory. Instead, you have a bit of a mentality of “passing the bag.” Who cares if Uber is at $30B of revenue, still trying to figure out “if our unit economics work”? The early investors made lots of money. The next phase is someone else’s problem." (VC Contagion)

"There may be no "I" in team, but everyone is desperate to avoid the "me" in blame." (The Coward's Conviction)

"As an investor, I've had plenty of experiences where I'll do dozens of customer interviews, evaluate product benchmarks, crunch the numbers on a company's traction, and spend hours with the founder, only to have the investment shot down because someone looked at the end market two years ago and it was "too tough." Deciding to just think what you already think isn't necessarily as lazy as wanting to simply stay negative and avoid thinking. Instead, there is often a significant amount of effort that often goes into people who are convinced that they're right. Their hard work, however, is less an exploration of truth, and more like reinforcing their own beliefs with additional confirmation bias." (The Coward's Conviction)

"Companies that have been built on a glut of capital have similar habits of the US government. Incentives around spending, shallow north star metrics, and complete lack of efficiency measurements. There is a host of lessons for startups to learn form these exceptional projects that have been built quickly, and often shockingly cheap." (The Axis of Building)

"The music stopped when the market corrected. Whether it’s smaller, commoditized companies that can’t persist and need to get acquired, or it’s fake hyped-up consumer companies. Some of those outcomes hurt way more than my temporary face slam in the suped-up game of musical chairs." (The Scramble Landscape)

"My friend perfectly captured the things I'd been feeling (edited for clarity and anonymity): "It just sucks. Our industry should be more responsible. Obviously it’s first on the founders themselves, but let me hold a tiny bit of cynicism for the VCs. So many examples in our industry these last few years (SPACs, crypto) where you ‘did your job’ by making money but shit the bed ethically.It helps to thrive on the good stuff and good people, living your values, being a truth teller (including punching up), and making sure you're using your own scorecard, not someone else's. Yes, there are performance benchmarks that wrap us (as VCs) into competitive brackets, but it's not a winner-take-all world, and you can make it a single-player game and still win.Getting bigger forces you to say yes to things you might not otherwise say yes to. I'm more interested, instead, in punching our industry in the face by helping as many VCs as possible succeed, building competitors to the most mediocre of VCs so that they can get eaten faster." (The Existential Dread of Cognitive Dissonance)

"The world of change-making would be much better off if venture capitalists would leave the financial engineering to the "growth investors" and focus, instead, on being the idealistic enablers that they were meant to be. Nerdy fans of science fiction, human progress, and Utopian idealism. The world, instead, moves further and further from manifesting the imaginable, descending deeper into a culture war of frustration and fear." (The Existential Dread of Cognitive Dissonance)

"When a founder sets out to build a business they have a critical decision to make. The size of the outcome you want to pursue will dictate the methods you use to get there. When you raise venture capital at higher and higher valuations you're picking up one end of the stick. The other end of the stick is a host of expectations around how big your outcome needs to be. There are a lot of founders who want to pick up the stick with the 100x higher valuation without having to pick up the requirement for a 100x larger outcome." (Revisiting A Tale of Two Markets)

"I'll say it one more time. I do not think Stripe is a bad business. But I think businesses whose operating model and valuation mechanisms were crafted between 2009 and 2021 all have a fundamental flaw of believing that the institutionalized belief in the greater fool will allow the next investor (the bag holder) to hide a multitude of sins. Though, there are some notable exceptions, like Datadog and Airbnb, that I think have healthier P&Ls." (Institutionalized Belief In The Greater Fool)

"I'm a fervent believer in the need for technological progress and rapid change. And I believe that venture capital is an overwhelmingly net positive force in the innovation necessary to drive that progress and change. But venture capital, as a discipline, runs an existential risk of invalidating itself by becoming institutionally what crypto is colloquially. If venture capital is just about "[creating] the impression that recoupment", then its no better than the pump and dumps of the crypto bros." (Institutionalized Belief In The Greater Fool)

"People want to idolize Warren Buffett's success, but never his practices. And what are his two most poignant practices? (1) Get rich slowly, and (2) never sell a share of Berkshire Hathaway. I recognize the need for liquidity, both for founders trying to live their lives, and VCs trying to generate returns for LPs. So none of this is a blanket statement of good or bad. But it is a statement against excess. Too many people want to get rich quickly, and to do it by selling to the greater fool. And that is a problem." (Institutionalized Belief In The Greater Fool)

"Here's where the danger of stupider games comes into play. So many companies are looking at OpenAI and saying "yup, that's the game I'm playing." Your golf app that "leverages AI" to suggest personalized swing recommendations is definitively NOT playing the same game as OpenAI." (Playing Different (Stupider) Games)

"Is this the stupider game? Not necessarily! It's just a different game. So what's the stupider game? For other VCs, its not realizing that you're competing with someone who is playing a very different game. For founders, its realizing that to these firms you are a rounding error. Going from a $1B to a $3B valuation isn't always a herculean effort. But when you're at $8M of ARR? Getting to be a $3B business is such a statistical anomaly." (Playing Different (Stupider) Games)

"Stupider games are not realizing that other people are playing different games. OpenAI is playing a different game. Capital agglomerators are playing different games. Chamath is playing a different game. One of the biggest obstacles to most of the systems in the world, whether its healthcare, criminal justice, mental health, housing, or capitalism itself—all of them are filled with people playing different games." (Playing Different (Stupider) Games)

"The same skepticism of the healthcare complex, the military complex, the prison industrial complex, all of these things are based on the skepticisms derived from other people's profit motives. In other words? People feel like they've been playing stupider games. And they're trying to wake up to understand what different games other people are playing. And how those games impact their own games; their own lives." (Playing Different (Stupider) Games)

"Some people refer to this as the VC ponzi scheme, or the financial circle-jerk (again, my Mom reads this blog, so I'm not going into that one.) You want to know the deepest irony of both of those examples, though? The first one is Chamath, and the second one is SBF. Some of the greatest examples of financial "he who smelt it, dealt it." The point that these goobers, and a lot of other less criminal people, have made is that the pursuit of growth has been the thing that expanded company's appetites for more and more capital. Never mind whether the LTVs justified the CACs, it was about growing. Unsustainable business models have created a generation of businesses addicted to more and more capital. That is where capital dependency comes from." (The Value Chain of Capital)

"That’s one of the obstacles of the value chain of capital. I’ve written before about this isolated scorecard for investors. Investors are not measured by ultimate outcomes (e.g. the company from beginning to end), but rather are measured by intermittent outcomes (e.g. hold periods.) And in many instances, that intermittent outcome is completely divorced from that ultimate outcome." (The Value Chain of Capital)

"VCs can do more to thoughtfully calculate the true value of their offering. But founders could also do more to transparently communicate the things that are top of mind for them. When VCs demonstrate a thoughtfulness about their business, founders could do more to point them in the right direction as they try to be helpful." (You Don't Want My Value Add)

"Stepping away from the global conflict back to the bubble brain phenomenon. I think this lack of original thinking comes from how intricately interwoven everything is. Investors, founders, operators, they're all dependent on each other. The same VC contagion that I've written before is really a startup contagion." (The Bubble Brains of Silicon Valley)

(3) What is the virtue of progress? Or optimism?

"Progress is most often proactive, not inevitable. We can say, "obviously, in 50 years things will be better than they are now. But will they? It took mankind 4x longer to switch from copper swords to steel swords than it did to switch from steel swords to nuclear bombs. So it got faster, but is that progress? Are we moving faster towards progress? Or apocalyptic doom? The dark ages happened, in spite of previous progress. Declines can happen. Things could get worse before they get better." (The Art and Science of Investing)

"Why do I love studying businesses so much? Because they are fundamentally economic engines for taking in inputs, and attempting to maximize outputs. Are they always effective at taking inputs? No. Are the outputs always desirable? Definitely not. But they are the best mechanism we have come up with thus far for producing innovation, progress, and problem-solving. No government, no think tank, no agency, no co-op, no secret underground illuminati has ever been more effective than the collective effort of the businesses of the world." (Where Have All The Good Ones Gone?)

"The reality? Technological progress has been a net positive for the entire world. People often point to the idea that most businesses revolve around one of the 7 deadly sins. But social media didn't create pride, or envy, or even loneliness or wrath. The worst things about the internet, social media, and technology, are largely things based, not in technology itself, but in human nature." (Where Have All The Good Ones Gone?)

"It's not enough to say "progress = happiness." There are a lot of components missing that should make you capable of stepping back and being critically pessimistic about your potential optimism. The two opposing ideas that every person working in technology needs to maintain are (1) technological progress is good, (2) technological progress brings with it a lot of social and moral dilemmas that shouldn't just be swept under the rug." (Where Have All The Good Ones Gone?)

"Genuinely, many people consider technology as an industry to be the Caeser of progress. In a time of rapid acceleration, technology pushed itself to the center of human progress, and enticed the entire world to revolve around that vector. The rapid progress of technology, mapped to the cold, calculated reality of capitalism, and a declining justice system created a perfect world for people like Elon Musk to gain dramatic amounts of power, with significantly limited controls." (The Renaissance of Rise and Grind)

"But we should also work to build for the sake of building. We should invent the future we want to see. We should seek to be intensely curious, and obsessively creative. We should dream more fervently than we currently do. I think we should choose to pursue difficult things, "not because they are easy, but because they are hard." (The Renaissance of Rise and Grind)

"I started out thinking about this piece as an exploration of optimism vs. pessimism. But the more I read, the more I kept coming back to the intellectual effort that optimism requires. People don't want to take the time to think about what could happen (optimism), so they default to not thinking at all, or at least not beyond the thinking they've already done (pessimism). And that's not only lazy, but it's dangerous." (The Coward's Conviction)

"The very best investors are those who think deeply about what the future holds. I've always loved Accel's concept of a "prepared mind." The willingness of people willing to think deeply, and to dream the dream will ultimately allow those same people to see the stars that can be produced by simplicity. Pessimism will always sound smarter. And it will always play into the hand of someone desperately trying to avoid failure. The constant pressure of conformity makes contrarian optimism nearly impossible. But in the end, the ultimate successes will come from optimism. And optimism is hard work." (The Coward's Conviction)

"In a world increasingly controlled by cowards, it starts to feel heretical to require analytical rigor and question asking, or to display intense optimism in the face of programmatic skepticism. One of the best talks I've heard on this came from Visakan Veerasamy. At the Thesis Festival, he gave a talk called "The Clustering of Citizens Who Can Change The World." Sadly, I don't think the conference captured the whole talk on video. But these citizens who can change the world, he called deviants. "Most human creativity is spent suppressing human creativity. Deviance is punished by social regulation. That's why we don't have 1000x the greatness that we could have every year." (The Coward's Conviction)

"But instead, I agree with Arthur Koestler. I'm so eagerly tied to the potential for the future and the optimistic picture of what the world can be, that I'm willing to accept the short-term problems. I’m willing to swallow the bitter pill. I'm not trying to dull my senses to the intellectual negativity or complacency around us. I'm more interested in understanding the problems that plague us, and then helping to paint the picture of what the future could look like." (The Coward's Conviction)

"When it comes to the capabilities of our civilization, people seem unable to appreciate how young the US really is. The US has been around for 246 years. The Roman Empire lasted ~1,000 years. We might think that our inability to build anything without exorbitant costs is just a frustrating administrative headache. But the reality is our inability to build things efficiently is a sign of civilizational decline. The Romans forgot how to build aqueducts. The Egyptians forgot how to build pyramids. We might not make it 1,000 years if we can't continue to progress in the way we build things." (The Coward's Conviction)

"As we inspire more dreamers, we want to build the feedback loop. Optimistic science fiction inspires builders. The builders build. They imagine a future. Then, the artists come full circle and they take those dreams, and communicate them to everybody else. Few images have inspired me more than drawings of the original EPCOT design. That was a dreamer (Walt Disney) inspired by technology (World's Fair) who set out to build, and an artist (Walt Peregoy) captured that dream in a way that would go on to inspire a generation of young people just at the possibility of such a place." (Historical Futurism)

"Is Technological Progress Inevitable? If we didn't pour billions into AI... would we still get the same progress? If we hadn't had the dotcom bubble, would we still have Amazon? Or Google? I'm inclined to believe that progress is not inevitable, and needs to be coaxed with the right environment. But I'm also inclined to believe that it isn't just a function of capital." (The Value Chain of Capital)

"First, the inevitability of technological progress. I'm reminded of a video of Neil deGrasse Tyson where he talks about the Islamic Golden Age. He talks about how 2/3 of the stars with names have Arabic names. How algebra is an Arabic invention. From AD 800 to AD 1100, Baghdad was the center of the Islamic Golden Age, that led to a lot of these types of discoveries. Tyson argues that a particular character, al-Ghazali, led to the decline of science in the Islamic nation. His codified principles of "what it means to be a good Muslim," included assertions like "the manipulation of numbers is the work of the devil," or that "actions that you see in nature are the will of Allah." He makes the point that the removal of science and math from the center of Islamic culture unwound the whole enterprise of that golden age. He also makes the argument that, while Islam has risen to become the second largest religion in the world, with 1.9B adherents, it contributes a small portion of technological advancements in the world. One anecdote is the fact that while Muslims made up "23 percent of the world’s population, as of 2015, only 12 Nobel laureates have been Muslims, whereas 193 (22 percent) of the total 855 laureates have been Jewish, although Jews comprise less than 0.2 percent of the world’s population." (The Value Chain of Capital)

"In a great piece by L.M. Sacasas entitled "Resistance Is Futile: The Myth of Tech Inevitability", there is a quote from historian Thomas Misa that really stuck out to me: “We lack a full picture of the technological alternatives that once existed as well as knowledge and understanding of the decision-making processes that winnowed them down. We see only the results and assume, understandably but in error, that there was no other path to the present. Yet it is a truism that the victors write the history, in technology as in war, and the technological ‘paths not taken’ are often suppressed or ignored.” Looking at the curve of history, I think it is fair to say that technological progress is not inevitable. The pursuit of progress is critical to manifesting it. But that doesn't mean that capital destruction is a necessary ingredient." (The Value Chain of Capital)

"We should, instead, be focused on all the drivers of innovation and progress that make the world a better place. People have skewered the ESG-flavor of corporate social responsibility, and rightfully so in many cases. There are plenty of examples of corporate green-washing that have nothing to do with "innovation" in the broadest sense (other than innovative marketing and financial massaging). I think purely focusing on things through a capital lens and what the next person will be willing to pay leads to a lot of conformist views. This deprioritizes things that take a very long time but have outsized impact, in favor of things that can have short-term pay off, regardless of the actual impact. "What you measure is what you get." So we could start quantifying better the elements of creation beyond just the capital inputs and outputs." (The Value Chain of Capital)

"I've written before about a common idea I return to: Compare the thinking of John Adams vs. Thomas Jefferson. There's a lot of meat on the idea so I'll just summarize it. On the one hand, people will act in their own self-interest and should be left free to do what they want, giving unfettered power to the people (Jefferson). On the other hand, people are riddled with inadequacies and easily swayed by misaligned incentives. They need guard rails, guidance, and systems to ensure people are protected from each other and themselves (Adams)." In some ways, I see those two views as a default optimism vs. default pessimism about people in general. Are people generally good, who often make bad decisions? Or are people generally bad, who often make good decisions? As both a religious person and a venture capitalist, it's hard not to be optimistic. You want to "dream the dream." (The Inescapable Debate of Human Nature)

"What's more, reflecting on these ideologies has left me attempting to unpack them to first principles. I believe in progress, and accelerationism in its rawest form. But my bigger question becomes, "...build what?" Because all building is not created equal. All progress is not in our best interest. Accelerating at all costs can be just as easily directed at a brick wall as it is at a utopian future." (It's Time To Build... But Build What?)

"I keep feeling the obligation to reinforce this. I believe in progress. I'm a fan of the focus on accelerationism. I don't want to see progress locked away behind corporate monopolies or government negative Nancy's (nancies? Nancy-ites?). But in some respects, the global economy may need a down round. For years, companies were rewarded for "growth at all costs." That's how you got markups. That's how you won customers. That's how you made great hires. Capitalism is very similar; it existentially drives towards growth above anything else. When people talk about the social injustices of capitalism, they often focus on the idea of externalities. Economic growth isn't forced to bear the brunt of unjust labor or environmental impacts or health issues. The same way companies aren't forced to bear the burden of unsound unit economics, unsustainable growth, or burnout cultures. Or at least, they weren't until recently." (It's Time To Build... But Build What?)

"My idea of purposeful growth is one that attempts to account for an "all hands on deck" approach to solving problems, rather than a "get out of my way" mentality. As much as I philosophically agree with the ideas that Marc and e/acc proponents articulate, there is a nagging in the back of my mind. Marc's essay espouses this idea of "intellectual natural selection": "The techno-capital machine makes natural selection work for us in the realm of ideas. The best and most productive ideas win, and are combined and generate even better ideas. Those ideas materialize in the real world as technologically enabled goods and services that never would have emerged de novo." (It's Time To Build... But Build What?)

"The fear with e/acc as a movement is not in the fundamental ideas of progress and optimism and effort. Its the unabashed cultural absolutism that, once again, is choking out nuance. You may be getting on the bus, shaking your fist in air, crying out the ra-ra cry of progress! And then progress directly into a brick wall of negative externalities and disappointments. Along the way, anyone attempting to point out the "brickyness" of the oncoming wall was tossed out the back of bus through a door marked "decels beware." (It's Time To Build... But Build What?)

"I'm not crying for deceleration. I'm not crying for an aversion to growth or progress. But I'm hoping for a healthy dose of self-reflection in being willing to identify where there are issues with your own ideology. And where there are issues, lets attempt to find better alternatives together. Lets avoid the tribalistic blame-game, and instead identify synergistic paths for mutual benefit. Don't take e/acc out of your Twitter bio. But don't define yourself by your ability to out a decel before anyone else, either. Define yourself by what you contribute, not what you contest. And have the willingness to be your own judge, jury, and executioner on whether your contributions are adequate or not." (It's Time To Build... But Build What?)

(4) "Show me the incentives, and I'll tell you the outcome."

"Berkshire Hathaway is one of the ultimate case studies in perfectly aligned incentives. Warren Buffett doesn't have a fund lifecycle, he doesn't make money on carry or fees. He just owns Berkshire Hathaway. His salary has been $100K for 40+ years. The only way he makes money is if Berkshire Hathaway stock goes up. So what are his dependencies? Effectively just the performance of his underlying businesses. If the businesses do well, he has more cash to deploy." (Controlling Your Own Destiny)

"What's most important to understand about this is the incentives that exist in that fund. To keep raising funds, VCs need to demonstrate to LPs that they've generated returns, whether on paper, or cash returned. A lot of investors talk about the focus being on distributed to paid-in capital (DPI), which is actual cash returned to LPs." (Dreaming Of Dry Powder)

"And it's fair to say, there is a lot of capital raised. But comparing dry powder to the force of gravity is a misrepresentation of the forces that drive capital allocation; it isn't nature, it's nurture. People and incentives are the most important force to understand when it comes to capital." (Dreaming Of Dry Powder)

"LPs care about not losing money. VCs care about raising their next fund. The best thing for both parties in the capital allocation value chain is NOT speed. If VCs start aggressively calling capital, LPs may find themselves unable to come up with the cash to satisfy those capital calls. If VCs invest, and then the market takes longer to correct than expected, their returns could be lower." (Dreaming Of Dry Powder)

"In life generally, I would rather do something I felt proud of, even if I knew it wouldn't maximize my financial outcome. That would be more attractive than doing something I didn't feel proud of, but that could potentially make a lot of money." (The Renaissance of Rise and Grind)

"If you've been reading my writing for a long time you might have seen this consistent thread in the background. The idea that ultimate outcomes SHOULD matter, but most investors only need to focus on ISOLATED outcomes." (Building An Actual Unicorn)

"Before I get into a bit of a spicy take, I want to start with a caveat. There is the ideal world that many of us aspire to (only the hucksters prefer the case for every company and investor being a sucker). Most people want to invest in exceptional companies that are responsibly built, that provide meaningful value, do little harm, and generate extraordinary returns. I want to invest in companies that drive the most value in every sense of the word. But that aspirational case is not always reality. There are a lot of not-great dynamics at play in the world of company building and funding. By design, venture capital has a structured timeline. Funds have specific time frames, typically 10 years. The longer those funds take to return capital, the more their IRR is punished, and the more difficult it is to raise their next fund. And that isn't just venture funds. Most investors have some kind of time-constrained liquidity requirements that define their hold periods." (Building An Actual Unicorn)

"Investors are allocators of capital, but capital has always been a function of attention. "What gets measured gets managed." Where you look is where you'll throw. In a zero interest rate world, there's always more cash to burn. But are you burning it in favor of the biggest number?" (Building An Actual Unicorn)

"I swear I heard this story somewhere, or something like it, but I've never been able to find it again to see if I'm telling it right. There is this idea about incentives. Somewhere, a country was trying to incentivize oil extractors to drill more oil wells. So the government said they would pay $1,000 for every foot these companies drill into the ground. But the cost of digging a well is meaningful, and turns out the first 100 feet are much easier to drill than the next 100 feet. So, because the government simply incentivized drilling, you had drilling companies going around drilling 100 foot holes everywhere to collect the easy money." (Building An Actual Unicorn)

"The problem with that is that most of the realized value in a company's life doesn't happen in the first few years after investing (e.g. during the deployment period). Instead, it happens in the latter years of being invested (e.g. the harvest period). But if you're measuring the success of the harvest by the metrics associated with deployment, you're bound to make a pretty weak judgement." (Eat What You Kill)

"I wrote last week, too, about Warren Buffett describing a world where "activity has become the order of the day." The "eat what you kill" mentality is the epitome of measuring what should be long-term activities (investing) using short-term measurements (getting deals done)." (Eat What You Kill)

"So what, instead, are the best investors measuring? Long-term success. When you look at someone like Warren Buffett's career, there's no question that it's phenomenal. But one of the most impactful things he did was enabled himself to keep playing the game without ever getting wiped out. And then he did that for 70+ years." (Eat What You Kill)

"On the macro, though, its a much more complex question. Venture capital, as currently constituted, is a very difficult organism to establish with legitimate long-term focus. Berkshire Hathaway is a perfect alignment of incentives. Warren Buffett's salary has been $100K for 40 years—no bonus, and no stock awards. Buffett's $100B+ net worth is almost entirely made up of the appreciation of his Berkshire Hathaway stock that he has purchased. Models that rely heavily on the interplay between a limited number of trusted partners, like Benchmark, is maybe one way to come close to avoiding the perverse incentives of hyperactivity. But it's quite difficult in venture capital to be open and honest about the mistakes you make. Part of that is a function of private companies being (obviously) private about their trajectory and traction. VCs can't talk as openly about buys and sales the same way public investors can." (On Hype and Hot Air)

"A typical hedge fund (similar to other managed funds) makes money by charging a 2% management fee, and a 20% performance fee (aka 2 and 20) Most hedge funds have a return threshold before their performance fee kicks in, like 8%. If a hedge fund returns 15% then they get to keep 20% of the upside on the 7% after the 8% threshold. ARK doesn't have a performance fee. They charge 0.75% of AUM as a fee to their investors (compared to other ETFs, like QQQ which charges 0.2%). Recently, ARK announced their introduction of a venture fund ETF to let investors get exposure to private companies. But even on that fund, they're not charging carried interest (like a normal fund would). Instead, they're charging a 4.22% management fee. So what does all that mean? Across the $13.3B in ARK's ETFs, each year ARK generates ~$100M of "revenue" in fees. Regardless of performance. That's where ARK Invest really starts to cause problems for me." (The Gospel of ARK Invest)

"I've written a fair bit about the business model of venture capital. Any industry that offers fees for just having capital will eventually encourage everyone to just amass as much capital as possible. And in some ways, that creates some perverse incentives. But at the end of the day, institutional investors are professionals. If LPs want to pour money into funds that are managed not for long-term performance, but for short-term capital agglomeration, then that's their prerogative. They're professionals. And their careers and net worths will be rewarded or punished as a result." (The Gospel of ARK Invest)

"Sometimes, professional investors lose sight of what an "average investor" looks like. One of the biggest dangers in modern marketing, generative AI, deep fakes, and algorithmic content engines is the impact that it has on the "average person" who believes the things they're served up by a system dripping with incentives. The same is true for the impact this information engine can have on investors, but they're pouring fuel on the fire by not just believing the things they see, but then pouring their money behind it. And the counter-argument to ARK being incentivized by just being buzzy and driving net inflows is that in the long-run, if performance isn't good then inflows will eventually shut off. But theres no shortage of examples of what people will do for a $100M now, despite what could lead to $500M later. Short-term incentives are clear and shiny, long-term incentives are fuzzy and boring." (The Gospel of ARK Invest)

"My biggest concern is with investors who have built their incentive engines around stories, regardless of fact vs. fiction. Chamath rode that same power of story to the moon on the back of a number of terrible SPACs in 2020. Everyone has to do marketing. Everyone has to express their vibes to the universe. In an increasingly noisy world, its an expected form of engagement. But let your goal in your storytelling to build trust, not hype." (The Gospel of ARK Invest)

"As a result of the incentives of venture funds, I'm reminded of the idea that success has many parents, but failure is an orphan. Given the incentive to associate yourself with as much success as possible, while distancing yourself from as much failure as possible, you end up with more of a decision-making committee, each trying to maximize and minimize the good and the bad respectively." (The Coward's Conviction)

"Take, for example, the ride share wars. I've written before about the Uber vs. Lyft cash inferno. Some would argue that the billions of dollars that went into that space may not have generated positive investment outcomes for everyone, but it created a good product for people, so there was still that net positive. My own recent experience would indicate the breaking points behind what has been an actually fairly unsustainable business model. As the massive VC-enabled incentives for drivers go away the quality of the service goes down significantly. In some instances, that leaves a hollowed out industry (like taxi cabs) that may end up worse than it was before. Time will tell." (The Value Chain of Capital)

"Every time I talk about psychology when it comes to investing, it comes back to incentives. That's not a coincidence. The same is true of most psychology. We often believe what we want to believe because of what we want to come to pass. I've written before about people's aversion to other people's incentives: "The same skepticism of the healthcare complex, the military complex, the prison industrial complex, all of these things are based on the skepticisms derived from other people's profit motives. In other words? People feel like they've been playing stupider games. And they're trying to wake up to understand what different games other people are playing. And how those games impact their own games; their own lives." (The Inescapable Debate of Human Nature)

"Captain Euthanasia argues that one study pointed to limitations in VCs ability to actually fund things that provide utility: (1) VC and founder networks are very small and exclusive, (2) VCs exhibit herd mentality, and (3) the VC business model favors investments that "promise large returns in a medium time frame with minimal risk." I've written about most of these. "The Institutionalized Belief In The Greater Fool," and "The Blackstone of Innovation." The incentives of the venture business model do, in fact, reward structurally unsound thinking." (Surviving The Death of Venture Capital)

(5) The beginner's mind is built on the foundation of first principles thinking.

"'Reinventing the practice in the process of learning it.' There is something powerful about a beginners mind where you can revolutionize something most effectively as you learn the trade (and don't kid yourself; we're all learning--especially in a transition like we've had in the last year)." (The Art and Science of Investing)

"I've quoted a great line from Walter Isaacson's biography of Leonardo da Vinci before when it comes to a beginner's mind disrupting a craft: "The Last Supper is a mix of scientific perspective and theatrical license, of intellect and fantasy, worthy of Leonardo. His study of perspective science had not made him rigid or academic as a painter. Instead, it was complemented by the cleverness and ingenuity he had picked up as a stage impresario. Once he knew the rules, he became a master at fudging and distorting them." (The Art and Science of Investing)

"Life is filled with these types of dependencies. Some bad, some good, some just "necessary burdens." My family is a good dependency, they help me prioritize things. TikTok is a bad dependency, it makes my brain think it needs way more dopamine than it does. Venture funding can be a necessary burden. It's not bad, or good, just a tool that isn't necessarily easy to get or use." (Controlling Your Own Destiny)

"I should caveat this idea with the acknowledgement that every idea requires nuance. Venture capital isn't evil. Bootstrapping isn't the ONLY way to build a business. Everything is a tool. You can accept dependencies, but you should accept them thoughtfully." (Controlling Your Own Destiny)

"The concept of being willing to change your mind goes hand-in-hand with the willingness to learn lessons. To evolve, and change behavior. Unfortunately, that is something most of us struggle to do." (Updating The Hype Cycle)

"So much of success in life, business, and investing, is mastering yourself. Your bias', your habits, your fears, and your aspirations. I continue to return to this idea: I'm shocked by how little thought investors put into their own intellectual exercise and processes." (Touch Some Grass)

"When I think about core pillars of the software world, like Salesforce, ServiceNow, or Adobe, they've all extended their product capabilities pretty dramatically. One company that hasn't as successfully extended itself is Workday. That doesn't mean that Workday doesn't have any competitive moats, but it doesn't seem to have a rapid pace of innovation. As a result, you have to start to really evaluate the longevity of any existing advantage they have." (Competitive Moats)

"I've written before about how Elon Musk often talks all the time about first principles. Here's how he describes it: "It is important to view knowledge as sort of a semantic tree — make sure you understand the fundamental principles, like the trunk and big branches, before you get into the leaves/details or there is nothing for them to hang on to." This is how I commented on it: "Before you can get into the problems that need to be solved you have to be confident that everyone is meeting your initial expectation. Once you're confident everyone is focused on finding the best ideas regardless of hierarchy (first principles) then you don't have to stop and evaluate every single decision that gets made. But unfortunately, we can’t usually make that assumption. I don't think anyone approaches anything from first principles nearly as often as they should. Nuance is lost because people find themselves arguing on a branch of a branch of a branch on Elon’s tree of fundamentals. But the problem with waging war on the tiniest branch is you inevitably fall out of the tree." (The Meme Economy)

"But as powerful as the pain or pride that reflection can cause you, it is almost never coupled with instruction. Investing is meant to be one of the most learning-heavy disciplines precisely because we don't have a time machine. We can't live the same markets or opportunities over again, so all we can do is learn from it. But investing is so often mired in rewritten history and unlearned lessons." (On Hype And Hot Air)

One of the most powerful benefits of building retrospection into your process is the ability to develop a more "prepared mind." This concept is common, but one venture firm really focused on building it into their process: Accel. In the book "The Power Law," there is a great explanation of Accel's approach to developing a prepared mind: "Accel embraced an approach that it came to call 'the prepared mind.' Rather than looking anywhere and everywhere for the next big thing, the partnership carried out management-consultant-style studies on the technologies and business models that seemed to hold promise.[Arthur Patterson] read widely, theorized fluently, and wrote a series of internal papers codifying the Accel approach. It was he who had come up with the Accel watchword, 'prepared mind,' having borrowed it from the nineteenth-century father of microbiology, Louis Pasteur. 'Chance favors only the prepared mind,' Pasteur had observed sagely." (On Hype And Hot Air)

"Paul Graham published a great essay today to go along with it called "How To Do Great Work." In it, he set out to articulate a recipe for answering this question: "If you collected lists of techniques for doing great work in a lot of different fields, what would the intersection look like?" Here was a snapshot of it: “Four steps: choose a field, learn enough to get to the frontier, notice gaps, explore promising ones. This is how practically everyone who's done great work has done it, from painters to physicists." (The Existential Dread of Cognitive Dissonance)

"In order for Buffett to be successful in networking, and traveling, and building relationships, he had to have “preconditions.” Reading gave him a prepared mind that he could take into those interactions. Reading is the process by which we build a prepared mind. If you haven't done the work to understand the concepts, you're much less prepared in every conversation you go into." (The Wrath of Reading and Writing)

"In terms of rules, I actually agree there are very few "rules" in real life, but there are powerful forces. Forces that can be difficult to escape from or avoid. As powerful as gravity, but as made up as capitalism. And some of these forces shape the way that companies are made, and capital is deployed." (Playing Different (Stupider) Games)

"It can sometimes be easy to think of "Silicon Valley" as established, tried and true. We forget how young all of this still is. Gordon Moore, one of the traitorous eight, and the source of Moore's Law only died in March of this year! Fairchild was founded ~60 years ago, personal computing is maybe 50 years old, the internet is only ~30, mobile is like 16 years old. All of this is so new, so to think that its not going to change dramatically is naive." (The Rising Generation)

"Identifying the first principles of who you are is becoming dangerously well-packaged from all sorts of identity groups, and its dangerous. The same is true personally, professionally, religiously, and on and on. The more you cede personal responsibility for deciding who you are, the more you empower the people who ultimately are deciding the value system of your in-group." (The Inescapable Debate of Human Nature)

"Joseph Smith, the first modern prophet in the Church of Jesus Christ of Latter-Day Saints, has a quote about how he led a church that had 26K members. It's a quote that I think very highly of, and have tried to live by: “I teach them correct principles, and they govern themselves.” I try not to do things because I'm Mormon, or because I'm white, or because I'm heterosexual, or because I'm American. I try and do things because they adhere to my first principles. What do I believe? And what does that say about who I am?" (The Inescapable Debate of Human Nature)

"We should want to eliminate suffering, from the slightest tweak in someone's expense management software interface to the alleviation of poverty, starvation, and violence. When I think about every institution or reality of life, I try not to say "is this what a democrat wants?" Or "is this what a Christian wants?" Instead, I apply that first principle of "does this alleviate or cause suffering?" Impact investing is bad if it doesn't alleviate suffering. ESG is bad if it doesn't alleviate suffering. Billionaires are good if they alleviate suffering. Burning fossil fuels is good if it alleviates suffering." (The Inescapable Debate of Human Nature)

(6) Refuse to live a binary life. Be brave enough to acknowledge nuance in everything.

"But if I had to put it into one idea it's this: storytelling is more important than reality, because every aspect of reality is a story. The world is filled with nuance. And I'm trying to balance these two, seemingly, opposed ideas. (1) Factual reality is important, and (2) most of reality is dictated by what people decide to believe. On the one hand, I agree with the idea that many people have drifted away from having an inherent respect for demonstrable facts." (The Meme Economy)

"But I don't think it's as simple as "people just need to believe science." Because "facts" are as nuanced as "beliefs." They all depend on the time and amount of information." (The Meme Economy)

"I realize a lot of these examples are political, and I'm not trying to articulate any position I have in either direction. Instead, what I'm trying to articulate is the immense nuance that exists between "facts" and "reality." What's more, the claim that we, as human beings, have fallen away from a society that respects science, and devolved into a society that only focuses on opinion, I think its unhistorical (is that a word?)" (The Meme Economy)

"This is one reason, I think, that high volume sales roles or sourcing-heavy investing roles can be a double-edged sword. You get very good at being very curious about a very specific type of person. But the institutions that value the ability to "build a funnel" won't typically reward you for being generally curious. They only reward you for being specifically curious. And that can work for a while, but will ultimately be limiting for your network." (Relationship Liquidity)

"Our tribal brains have a really hard time breaking with the group. As a result, it becomes more and more difficult to be skeptical, hesitant, or doubtful. The same thing happens in religions when they shun the non-believers. In the investing world, you look at the number of times in hype-cycles that Warren Buffett has been called "out of touch." It's like clockwork. 1999, 2009, 2020. Or Bill Gurley having to endure criticism for being skeptical of the seemingly infinite supply of bull market as far back as 2016. There is an correlated relationship between the volume of hype and the courage it takes to be skeptical." (Blaspheming Against The Hype)

"Cathie Wood is no different. As an investor, she's an incredibly polarizing figure. People are convinced she's either a misunderstood genius or the dumbest person to ever be allocating billions of dollars. One of the things most people struggle to do with polarizing characters is to separate some valuable takeaways or lessons from what they do, while still being able to acknowledge other aspects of what they do are ridiculous." (The Gospel of ARK Invest)

"Bit of a tangent. I'm a very religious person. The idea of "not being willing to change your mind" can often feel uncomfortable for religious people. For whatever reason, I haven't had a problem with that. I think the ultimate question of "is there a God?" seems to me to be as unprovable as the statement, "there is no God." Instead, I focus my powers of discernment around the details, not the dogma. I seek to apply critical thinking into every individual decision about how to live my life, what to believe, what I think is critical for my family, and what is the biased opinions of human beings creating rules for no reason but status quo. In every religion, including my own, there are aspects of the orthodoxy that I'm sure their/my God doesn't care about, even if he/she/it is actually real. The philosophies of men, mingled with scripture. When it comes to religion, I'm more interested in getting to heaven and having God say "you got all the details wrong, but you were the best person you could be. Let me teach you the right details," rather than showing up and having him say, "well, you got all the details right. But you were a terrible person." (The Coward's Conviction)

"The pursuit of complex ideas, nuance, complicated problems, and earth-shattering progress and ideas are the most important aspects of what it means to be human. There is a great tweet from Scott Belsky where he quotes Karen Baker, someone who researches imperceptible wavelengths of sound: "Humans tend to believe that what we don't perceive does not exist. So, we miss a lot." (The Coward's Conviction)

"The path to progress more often is built on the value of the ideas themselves, and the execution of those ideas. I think that's why I experience so much cognitive dissonance when it comes to characters like Elon Musk. I can simultaneously think a lot of what he does is gross, while having immense respect for his ideas and execution. But a lot of people can't seem to divorce his character from his contributions." (The Coward's Conviction)

Trevor Noah gave an interview where he was asked whether Dave Chapelle crossed the line with his comedy special:

Trevor Noah: "[That question] puts me in a position where I have to choose 'a side' when I think the matter is a lot more complex than that. I think everyone is defining the line for themselves."

Lesley Stahl: "No, society defines the line."

Trevor Noah: "You see what you're saying, 'society has decided.' But America is clearly divided in that half of society has said 'No, Dave Chapelle, we love what you said.' So if half of society is saying that he's right, and half of society is saying that he's wrong, then that means that there is no line. Society is seeing the line from two different sides." (King Making vs Taste Making)

"In a world where capitalists are primarily concerned with building kingdoms, they're missing the point of what their capital is meant to create. People are so dramatically uninterested in monolithic decision makers dictating their tastes. Recently, I learned that the most watched TV episode of all-time is the final episode of M*A*S*H in 1983. And most of the highly watched TV shows are all from the 70s and 80s. Why? Because people still had a dramatically limited selection of shows to choose from, so most people were watching the same thing. But that’s not the case anymore. People contain multitudes, maybe more today than ever before." (King Making vs Taste Making)

"So despite my in-group default to assume other VCs are doing what's best for technological progress, I instead choose to acknowledge nuance. I can simultaneously believe that Marc Andreessen is an exceptional investor and company builder, while also being inconsistent in (1) believing we need to build more housing, (2) deploying a NIMBY strategy in his hometown, and (3) funding a company that is likely going to do more for rich people than it will in solving the housing crisis." (It's Time To Build... But Build What?)

"All of this context informs how I'm reflecting on this most recent culture clash between accelerationism and “decelerationism”. On the one hand it is build or die; on the other, it is slow and steady. But I refuse to live in black or white. I strive for the acknowledgement of nuance in everything I do. So lets apply the lens of nuance to the question of growth." (It's Time To Build... But Build What?)

"Herein lies the nuance. Growth is not always a good thing. Every tech company is learning that in real-time. Am I decrying every form of economic growth? No. Am I calling for a Marxist revolution to level out any growth? No. The nuance is in saying that growth, when it comes from buying $1 in exchange for $2, is bad growth." (It's Time To Build... But Build What?)

"But, above all, my hope is that everything I do can have a sense of genuineness. I look at the hucksters that plague the company building world, and I can see their profit motives dripping through their teeth. I can hear the calls for altruistic acceptance disguising accusations of 1984 "thought crimes." Everything is so riddled with two-facedness." (It's Time To Build... But Build What?)

(7) I used to believe reality would triumph over narrative; now I'm not so sure.

"Belief is what drives you forward. Narrative can move mountains. But a line from the movie, A Few Good Men, comes to mind: "It doesn't matter what I believe. It only matters what I can prove." In other words? Everyone has a story, until they get punched in the face by reality." (Risk Management In The Age of YOLO)

"But the more dependencies you introduce into building anything, the more you become subject to narrative. The more people who have to believe in something to make it work, the more you're dependent on their belief system." (Controlling Your Own Destiny)

"We had a few years there that represented a collective fever dream of storytelling. Everyone bought into almost every story. The infallibility of crypto, stonks only go up, the metaverse is now. The forcefulness of the story felt like we couldn't believe our own judgement. "These valuations don't make sense, but I must be wrong." I can't tell you the number of people I've talked to who say some version of that. "I was convinced that we had somehow unlocked a new paradigm, and this was the 'new normal.'" But it wasn't. It was a combination of free money, and exuberant hype folks pumping up these stories." (Controlling Your Own Destiny)

"But if I had to put it into one idea it's this: storytelling is more important than reality, because every aspect of reality is a story. The world is filled with nuance. And I'm trying to balance these two, seemingly, opposed ideas. (1) Factual reality is important, and (2) most of reality is dictated by what people decide to believe. On the one hand, I agree with the idea that many people have drifted away from having an inherent respect for demonstrable facts." (The Meme Economy)

"The world of company building, and all the participants involved, need to wake up and acknowledge that their inclusion in the broader human narrative is much more apparent. The memes are not just coming from internally, they're coming externally. And that narrative can shape the reality of how the future of technology comes together, for better or for worse." (The Meme Economy)

"Optimism is such a drug. People want so bad for the best case scenario to be true. We, too, are so trickable. For a species that had the majority of our "coming of age" years in a time when the life expectancy was 20-25 years and we were hunted more often than the hunter, it's surprising how optimistic we've been able to remain. This is the other side of the storytelling coin that I find myself talking about so often. If you end up believing enough stories that aren't true, or getting overwhelmed with how often stories turn out to be a huge bummer, optimism becomes increasingly more difficult to muster." (Where Have All The Good Ones Gone?)

"If you've read my writing long enough, you know that I love storytelling. It's probably the topic I've written about the most. Stories can be fact, or fiction. But sometimes, great stories can start as fiction and build into fact. Imagine if, instead of a 24 hour news cycle, you had a 50 year news cycle (a publication that only came out every 50 years). You wouldn't take up the pages catching up on 50 years of gossip or tragedy. As you laid out the most important details, you would see that the curve of history bends towards progress." (Historical Futurism)

"There were certainly pessimistic takes before the 80s (Nineteen Eighty-Four was written in 1949!) There have also been some optimistic science fiction portrayals of the future like Her, or Arrival... but the list is actually quite thin. I think we've developed a shortage of dreams in the wake of our collective fictional nightmares." (Historical Futurism)

"There really is this very limited amount of storytelling that portrays an optimistic view of the future. And while that is likely downstream of a lot of the things going on in the world that leave limited room for optimism, it also has a downstream impact. Fewer optimistic stories about the future lead to fewer people wanting to invent the future. The negative view of the future also leads to poor perception of technology in the media, and an overt pessimism in people's lives." (Historical Futurism)

"We've got an educational system trapped in the past most well-suited to produce factory workers, a political system that is more intent on ripping people apart than building anything, and a sliver of excitement in AI that has shadows of doomerism on either side. We need a new paradigm of inspiration: open source imagination." (Historical Futurism)

"Memes are such a fascinating cultural currency because their impact has become tangible. Whether its sending GameStop to the moon, or smashing the stock of companies like Eli Lily and Bud Light. Whether you agree with the underlying sentiment, or not. There is legitimate power in those memes. Memes have enabled more decentralized influence than any cryptocurrency." (King Making vs Taste Making)

"The abstract concept of "Silicon Valley" has become so professionalized, so memeified, that it has begun to feel impossible to untangle anything from this corrosive cesspool of incentives and deceptive strategies. For a long time, I believed that reality was ultimately more important than the narrative. But the reason I've written over, and over, and over, and over, and over, and over, and over, and over, and over, and over again about the role of storytelling, is because I've become increasingly convinced that narrative controls reality." (The Bubble Brains of Silicon Valley)

(8) Psychology IS the ball game

"When it comes to why we do things, it's always worth looking back at the precedent. Why do we do the things we do the way we do them?" (The Art and Science of Investing)

"For thus such reverence is lent To well-established precedent. For men are prone to go it blind Along the calf-paths of the mind, And work away from sun to sun, To do what other men have done." (The Art and Science of Investing)

"The art of investing often comes down to psychology. Being a master of your own mental inadequacies is the only way to avoid the endless pitfalls of foolish decisions. Forcing yourself to be a student of the world around you is the only way to constantly remind yourself of your own inadequacies. When you start to ask the question "what don't I know?," the world will willingly respond with quite a long list." (The Art and Science of Investing)

"People accept jobs, take meetings, do favors, ask questions, and offer help almost always because of who they know. "Knowing someone," can mean a lot of different things. People do respond to people they've never met before, but there is still an aspect of "knowing" that usually explains why that person responded." (Relationship Liquidity)

"I often see investors, especially public markets, and value investors, spend a LOT of time thinking about psychology. But the primary focus of that psychological exploration is focused inward; "how do I avoid making bad emotional decisions?" Venture capitalists are supposed to "see the present clearly." Part of that is understanding group psychology. Why do people feel the way that they feel?" (King Making vs Taste Making)

"Venture capitalists would do well to spend less time counting their capital, and more time seeking to understand the human experience, and all the preferences that come from that." (King Making vs Taste Making)

"Investors are very much in the business of "dreaming the dream," but too often we have investors that assume the dream is supposed to be a fever dream. Instead, the reality is that human behavior changes very little, and when it does it happens very slowly. More often than not, you can see these changes coming in the future. You may not appreciate the gravity of the future, but you can see trends like cellular bandwidth speeds acting as a clear catalyst." (Institutionalized Belief In The Greater Fool)

"In venture, the same dynamic exists. But its much less constrained than the entire public market. In private markets, you're primarily focused on understanding what a VC would be willing to pay. And VCs are sort of lemmings; all using the same decision-making heuristics to determine what something is worth. The resulting constraint in capital during this market correction has meant that VCs are becoming more and more “bubble-minded,” focusing on what the next stage of capital will want, not necessarily what the best business might be in the long-run." (The Value Chain of Capital)

Investing Is 95% Human Psychology. I've written again and again and again and  again and again and again and again about this core truth of the central role that psychology plays in investing, no matter the asset class: "As I've read about many of the best investors in history, I've noticed two important takeaways: (1) they seem to be thinking about investing all the time, and (2) they're NOT talking about investing all the time. What do they talk about a LOT? Psychology. So much of success in life, business, and investing, is mastering yourself. Your bias', your habits, your fears, and your aspirations." (The Inescapable Debate of Human Nature)

"We spend so much time talking about bubbles. Internet bubbles. Real estate bubbles. Asset bubbles. AI bubbles. We often are so focused on the macro that we completely miss the bubble that is forming in our own brain. People have become so dramatically programmable. The bubble forming in their own thinking is there without anyone even realizing the mechanisms that put it there. There's no better argument against free will than a mindful observation of the decision making among most people in Silicon Valley, but especially among VCs." (The Bubble Brains of Silicon Valley)

"Thinking is an output. So measuring someones thinking, and where they're spending time and effort, those are all lagging indicators. The kind of thinking you're doing is reflective of the information you're consuming. Your outputs are a function of your inputs. Inputs can be anything from the media you read, watch, or listen to, to the conversations you have, the people you surround yourself with, what you think about when you don't have to think, the gossip you share, the judgement you pass, the prayers you pray, the swears you swear. All of it. It all shapes who you are." (The Bubble Brains of Silicon Valley)

"I don't have a solution. I don't have a battle plan. I have only a call to arms. I can't tell you the path to take, but I can tell you the direction to point your face. Control your own algorithm. For too long, we've outsourced our perceptions of reality, and what is right or wrong, and what can or can't work. We've put parameters into production that we played no role in defining. If each of us represents an operating system, we're riddled for dependencies on third party software." (The Bubble Brains of Silicon Valley)

"The loading of inputs into your mental operating system has very few things that become part of your core read-only memory (e.g. who you are). The vast majority of information we consume comes and goes through random access memory. But increasingly, the algorithms are getting better at using what should be simple observational RAM information, and instead shoving it through to re-write your entire system. If you've ever read something and you feel like you can't NOT have a visceral reaction, then you've been the victim of algorithmic information inception." (The Bubble Brains of Silicon Valley)

(9) The meritocracy of ideas, and how actions demonstrate our values

"The debate of ideas has been largely displaced by the debate of identities. Whether you're conservative or liberal, religious or atheist, capitalist or socialist. We are, in most instances, arguing more about the identity of the person leading the argument, rather than the merits of the idea." (The Coward's Conviction)

"Every person is capable of so much more than they typically accomplish. And I'm not talking about unreasonable expectations, grind culture, or unhealthy comparisons. I'm saying that within every person there is more capacity than they typically take advantage of. Enabling kids to do hard things, and learn along the way, is the way to unlock that capability." (The Rising Generation)

"So often, people trust nuanced tribal group identity and political association without any basis of first principles. I'm not Mormon, or Christian, or Republican, or a Costco member. I am a system of values and beliefs that determine how I act. Group membership should be a lagging indicator of your beliefs, not a leading indicator. When people substitute their own value system with a cookie-cutter platform from their in-group the first thing to die is nuance." (The Inescapable Debate of Human Nature)

"I think all the time about this video of Jordan Klepper describing his experience talking to a woman who was completely bought into the Donald Trump in-group of MAGA. She was reaffirming her belief in Trump's innocence. Klepper said, "like if he was blocking witnesses from testifying, that would actually be bad?" And the woman said, "right, it's not like he's doing that." Then Klepper said, "... but he is doing that." And her response after a long beat? "...I don't care." "So much of this is 'maybe I could convince that person.' We can have debates about what you want. You want this, I want that. Let’s compromise in the middle. That's politics. When your politics becomes who you are, we can't debate that." (The Inescapable Debate of Human Nature)

"What are the incentives we each have for speaking up in defense of other people? Other groups? Other identities? The reality is empathy can never be a macro activity. Empathy is a 1:1 human experience. You can't feel empathy for a group because that group doesn't actually exist. Only people exist. Macro empathy is hollow and based in identity politics. Micro empathy is based on shared human experiences. So you can't answer the question "why should people care?" You have to answer the question, "why should I care?" And that brings us back to first principles. What is your value system? Why should you care? (The Inescapable Debate of Human Nature)

"The in-group “Morality-in-a-Box” that people seem content to let dictate who they are and how they live is a lazy approach to life. People have ceded their morality to their in-groups. It's a short hand. Cancel culture simply ensures that those values become only more entrenched, but cancel culture wouldn’t work if we hadn’t decided to renew our in-group membership cards. As simple as that shorthand seems, it is anything but. Inaction is, as always, a form of action. The debate of human nature is really meant to do one thing: make you question your own judgement, your own actions." (The Inescapable Debate of Human Nature)

"So much of the world has become short-sighted, focused on profit margins and earnings in the next quarter, maybe two (what are you, Warren Buffett?) Personally, we're centered around immediate satisfaction, status, and dopamine. We've built our stories, our values, our heroes, and our ambitions to be centered around things that, very often, will not last. Original thinking comes from casting off the myopic mythologies that are institutions have increasingly become built on and, instead, ideating new institutions that should get built up. What are the organizations that you want organizing the people, places, and things around us? And then do what you can with what time, talents, and energy you have, to bring those institutions to bear." (The Bubble Brains of Silicon Valley)

"There is a clear relationship between having a dream. A successful imagination. And then leveraging will-power in pursuit of that dream. But here's the rub. We start to get into nuanced territory where beliefs and actions don't always easily align." (It's Time To Build... But Build What?)

"I've written before about this relationship between beliefs and actions. Changing it slightly, but your actions ought to be lagging indicators of your beliefs. In religion, you often have what people refer to as "Sunday school answers." How do you be a good Christian? "Read your scriptures. Say your prayers. Go to church." But often, these Sunday school answers are true. And they strike of first principles. Here's another Sunday school answer / first principles truthism: "Actions speak louder than words." And here's the other thing. I don't mean to crap on Marc Andreessen. I have intense respect for him and what he's built with a16z. My whole vibe is attempting to live within the grey areas of nuance. Going back to what I've written before about beliefs, and actions. I think its important to attempt to define your own beliefs, not just use your in-group as a proxy." (It's Time To Build... But Build What?)

"I also want an infinite upward spiral of intelligence and energy. I want every person on earth to feel like every physical good is as accessible as a pencil. I want people to be able to have (and support) more children than ever. Being a parent is everything to me, and I want everyone to have the ability to feel secure in growing the human population without fear of distress or resource fatigue. But the reality is things are breaking. We're not just raging on in an ideal growth euphoria. The best ideas are demonstrably NOT winning. Look no further than government for the failings of ideological meritocracy. Whether a policy has 0% public support, or 100% public support, there is still a 30% chance that Congress will pass a law that supports it. The quality of an idea has a statistically insignificant influence on whether its enforced by law. (It's Time To Build... But Build What?)

(10) The serendipity of writing online is putting your vibes out into the universe and seeing what happens

"Even just "communicating your vibe online" is a form of allowing someone to "know" you. It's similar to the identity-based short-hands people use to recognize their "compatriots." Whether someone has seen me on Twitter, or has read my writing, or even just knows about Contrary, all of those can be effective ways for someone to know me, and therefore be more likely to engage." (Relationship Liquidity)

"For me personally, I prefer to help convert people just by doing my thing and living my life. Like I said last week: "I try and use my writing as a way to unpack my own thinking. Decisions are made not in what I write, but in what I do as a result of that thinking." I don't want to argue to convince people, I want to live my life, exude my vibes, and engage with the people who want to engage." (Relationship Liquidity)

"And for most people, thats perfectly acceptable. "Next time," they'd say. But lately, it has awoken in me a sense of existential dread. I see these concepts connecting in front of my eyes, but like an ethereal dream they exist just outside my reach. And that sent me down a rabbit hole of the meta elements of what I was trying to do. Why do I write? Why do I read? Why don't I read and write as much as I wish I did?" (The Wrath of Reading and Writing)

"General social networks will give way to micro social networks. Interests and skill sets will become the most important identities. That feeling of many of the people talking about AI talking as "spectators rather than players," that is a reflection of the forming of a new out-group. AI, nuclear fusion, high speed air and rail transportation, robotics, genetic food alternatives, direct carbon capture, and several others—those are the new frontiers. And they have a lot more barriers to entry than my dial-up internet." (The Rising Generation)

"My friend Frederik Gieschen delivered some exceptional thoughts this week on the topic of writing. One section encapsulated the "why" behind writing that comes before the "how." So how does Frederik answer the question of "why do you write?" "You do it because you don’t know where it will lead and because you can’t know unless you keep doing it.You do it because you feel you have to, because you can’t help yourself. Because you need to keep going to, hopefully, one day arrive at great work.In the words of Bukowski, don’t write professionally unless it comes “bursting out of you in spite of everything.” I, like Frederik, don't consider my writing today to be "great work." But I appreciate the driver of aspiration. Aspiring to write something exceptional. Frederik shares another quote on this idea that struck me: “We underestimate the cumulative effect of work,” Paul Graham wrote in his essay on doing great work. “Writing a page a day doesn't sound like much, but if you do it every day you'll write a book a year. That's the key: consistency. People who do great things don't get a lot done every day. They get something done, rather than nothing.” (On Writing)

"Writing is a lagging indicator of observation. Those who do not observe have very little to say. Writing is the act of interpreting what you've observed. Trying to make sense of it. The reason I call them "atomic units of thought" are because observations are, in and of themselves, not a thought. Instead, thoughts have to be molded together from those observations." (On Writing)

"My writing each week isn't really meant for anyone but me, at least not in how its designed. I write to unpack how I'm thinking and the implications of the work that I'm doing. My "secret public journal." But this week, a lot of my thinking is drawn more towards human nature, psychology, and things like empathy. I kept finding myself thinking, "I'm not sure that stuff matters in an investing blog." But first? I write for me and you decide to come along for the journey, so what really matters is whats in my head. And second? In investing, as in so much of life, often psychology is the only thing that matters." (The Inescapable Debate of Human Nature)

(11) Distribution is increasingly the most difficult (and important) thing in the world.

"I had a conversation recently with a founder who is in the earliest days of his journey building a company. He's faced with a pivot. On the one hand, he has a great idea, but no good method of distribution. On the other hand, he has a good (maybe not great) idea, but a really obvious path to distribution. He asked me the question, "which of those is more compelling to you?" (Risk Management In The Age of YOLO)

"The most significant implication of the current wave of innovation in AI feels somewhat unique to this moment. If I were to broaden a lesson from 2021, it's that real long-term business value takes a long time and is difficult to create. AI is just illustrating that example by proving how much more valuable it can be for incumbents. Several people have written about this idea that existing incumbents with established distribution will fair much better than newer startups." (Updating The Hype Cycle)

"In a great post recently, Evan Armstrong explains the core components of a business: (1) Create stuff, (2) Acquire customer to buy stuff, and (3) Distribute that stuff. He describes the impact that AI will have this way: "The internet broke the third category of distribution, and AI is going to break the first one. Innovations like GPT-3, DALL-E, and other AI tools will dramatically decrease the cost of producing goods with a digital component." So what does that leave? Customer acquisition." (Competitive Moats)

"The world has become incredibly noisy. While 40% of all VC dollars going to Facebook or Google ads is nuts, the reality is that startups are being forced to borrow distribution from whatever platforms or resources they can get access to. That “borrowed distribution” creates a lot of dependencies that make it more difficult to control your own destiny." (VC Contagion)

"AWS might have made it easier than ever to start a technology company, but a flood of S&M-bound venture dollars have made it harder than ever to build a technology brand. Customer acquisition costs are rising across the board. So first, venture dollars flooded in and made the landscape noisier for startups. More companies in more categories doing more marketing. Then, startups turned around and realized “we all have venture funding!” and instead, started selling to each other." (VC Contagion)

"While Netscape had, at one point, controlled 90% of the browser market in the mid-90s, within a few years after the AOL acquisition Netscape had dropped to less than 1% in 2003 when AOL disbanded the company. The culprit? Microsoft's Internet Explorer. In classic Microsoft fashion, they were able to use their existing distribution to put the IE browser on every computer, regardless of the fact that it wasn't necessarily a better product." (The Value Chain of Capital)

(12) Risk management is an under practiced dark art

"In the world of investing, there is a lot of talk about risk. In the last few years, when it comes to company building, there hasn't been nearly enough talk about risk. Though, there's always a lot of talk about rewards. Not often enough are the two discussed together. Not just high risk = high reward, but risk as a necessary measurement to understand your rewards." (Risk Management In The Age of YOLO)

"Risk management can only be learned by taking risks. The other side of the coin is religiously conducting post-mortems every time you take a risk, so you can learn from the outcome and recalibrate whether or not you should have taken that risk." (Risk Management In The Age of YOLO)

"Risk is neither short-term, nor long-term. It is simply measured. You can’t eliminate it, or control it. You can only manage it." (Risk Management In The Age of YOLO)

"I think often of a quote from Mike Tyson, when asked if he was worried about his opponent's "fight plan." Tyson's response was “Everyone has a plan until they get punched in the mouth.” Whenever I think about the face punch that is reality, I think about this quote. So much of life is formulated in some shape or form as a "plan." But reality is, for everyone, a punch in the face. You're always surprised because life is unpredictable." (Thinning The Herd)

"Capital owners will rationally seek to multiply their wealth. But too often they hunger for risk. Capital allocators should pursue great investments. But too often they hunger for a way to deploy capital quickly. Startups want fuel to grow their businesses. But too often they hunger for cash as a status symbol or for their own quick enrichment." (VC Contagion)

"Too much capital can cause a myriad of problems. For one, too much capital is typically driven by too many investors. And in the case of Hopin, that meant nobody was doing their homework. What you get is far from an ecosystem of thoughtful investors attempting to make wise capital allocation decisions, and instead get the closest humanity may have come to "a thousand monkeys in a room with a typewriter," except instead of typewriters they have checkbooks." (Institutionalized Belief In The Greater Fool)

"Whether you're the CEO of Hopin selling $200M in secondary, or a founder pitching a $47B valuation for WeWork, or investors giving Quibi $1B+, you're probably not buying into pragmatic decision making and capital allocation. You're buying into the institutionalized belief in a greater fool. But no one will say that out loud. They'll reenact a scene right out of Margin Call." (Institutionalized Belief In The Greater Fool)

And Now Some Quotes

That's a lot. Finally, I thought it was interesting that I kept returning to several of the same quotes or references. So I thought I'd summarize a few of them here as well because (1) why not? And (2) most people won't make it this far in this behemoth post, so this is a special reward just for you most tenacious of folks.

In Blaspheming Against The Hype, The Axis of Building, and The Value Chain of Capital, I quoted Bill Gurley from 2016 in a pretty poignant explanation of how the cash appetite of startups has changed:

"Never in the history of venture capital have early stage startups had access to so much capital. Back in 1999, if a company raised $30mm before an IPO, that was considered a large historic raise. Today, private companies have raised 10x that amount and more. And consequently, the burn rates are 10x larger than they were back then. All of which creates a voraciously hungry Unicorn. One that needs lots and lots of capital (if it is to stay on the current trajectory)."

After first using this awesome quote last year, in On Hype and Hot Air and The Gospel of ARK Invest I continued to refer to a comment made by Morgan Housel in a conversation with David Perell:

"I think Warren Buffett and Howard Marks were really the forerunners for all of this. They were not just giving their investors more information, but they were using their ability to communicate as a bridge towards trust. And that’s really what it was.

So many investors will say 'Oh I went back and read Warren Buffet’s letters to shareholders and they’re so enlightening.' I think, for the most part, there’s actually not that much technical information in there that most people didn’t already know.  If you have a finance background, you understand a free cash flow and value and margin of safety. You get all of that. But Buffett’s letters instilled the sense of like subconscious trust. The way Buffett describes things gives you this view of: 'Hey, you’re not trying to screw me.' Buffett and Marks more or less had permanent capital because their investors trusted them. And because of that trust, all these other hedge fund managers and private equity managers that during a bear market, their investors would have said, “I don’t trust you anymore. I’m out of here. Give me my money back.”

But investors didn’t do that for Buffett or Marks, and that’s a massive competitive advantage right there. So put all that together. Buffett and Marks used content to instill trust, trust gave them permanent capital, and permanent capital gave them a massive financial advantage over other investors."

From my very first piece on venture, I've been quoting Don Valentine. I did so again in The Art and Science of Investing and The Existential Dread of Cognitive Dissonance:

"One of our theories is to seek out opportunities where there's a major change. Major dislocation in the way things are. Wherever there's turmoil, there's indecision. And wherever there's indecision, there's opportunity. So we look for the confusion when the big companies are confused. When the other venture groups are confused. That's the time to start companies."

In On Hype And Hot Air, Risk Management in The Age of YOLO, The Coward's Conviction, The Renaissance of Rise and Grind, and The Wrath of Reading and Writing, I referenced this quote from The Power Law about Accel's approach to developing a "prepared mind":

"Accel embraced an approach that it came to call 'the prepared mind.' Rather than looking anywhere and everywhere for the next big thing, the partnership carried out management-consultant-style studies on the technologies and business models that seemed to hold promise.

[Arthur Patterson] read widely, theorized fluently, and wrote a series of internal papers codifying the Accel approach. It was he who had come up with the Accel watchword, 'prepared mind,' having borrowed it from the nineteenth-century father of microbiology, Louis Pasteur. 'Chance favors only the prepared mind,' Pasteur had observed sagely."

Another quote I've been referencing frequently for a long time comes from Sapiens. I quoted it in King-Making vs. Taste-Making, Controlling Your Own Destiny, and The Meme Economy:

”There are no gods in the universe, no nations, no money, no human rights, no laws, and no justice outside the common imagination of human beings. Whether or not something is true doesn’t impact whether you believe it.”

In Institutionalized Belief in The Greater Fool and Surviving The Death of Venture Capital I quoted the same paper on Venture Predation:

"Critically, for VCs and founders, a predator does not need to recoup its losses for the strategy to succeed. The VCs and founders just need to create the impression that recoupment is possible, so they can sell their shares at an attractive price to later investors who anticipate years of monopoly pricing."

I love this quote from Abraham Lincoln, and kept coming back to it in pieces like The Rising Generation, and Back To The Grass:

"Whatever you are, be a good one."

Another quote about how to become what you want to become comes from Alan Rickman that I referenced in The Rising Generation, and Back To The Grass:

“Forget about acting. Whatever you do as an actor is cumulative. Go to art galleries, listen to music, know what's happening on the news, in the world, and form your opinions, develop your taste and judgement. So that when a quality piece of writing is put in front of you your imagination, which you've nurtured, has something to bounce off of."

Not a quote per se, but I've taken to referring to my writing process as "panic writing", in pieces like On Writing, Becoming An Allocator, Oops I Did It Again, and Blaspheming Against The Hype. A concept that I've been informed comes from Matt Levine:

"But mostly I have no repeatable process, I just wake up and panic until there’s a newsletter. I have been doing it long enough that the panic feels less overwhelming; I figure I have a good track record of producing a newsletter every day, so the odds that today’s the day it stops working are low. But I do text my friends most days saying “help I have nothing to write about” or “help I have forgotten how to write” or “help—today’s the day it stops working.”

Finally, another classic favorite of mine from F. Scott Fitzgerald that I referenced in pieces like The Renaissance of Rise and Grind, The Meme Economy, and It's Time To Build... But Build What?:

“The test of a first-rate intelligence is the ability to hold two opposed ideas in mind at the same time and still retain the ability to function."

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