Car access network fleets or aggregators?

In an earlier post, I wrote about how the future of transportation is one where we access autonomous electric vehicles. However, I didn’t address the question of whether these car access networks will own their fleet of cars or aggregate the cars of individual owners when those cars are not being used. Here’s how I think about this problem.

A car access network that owns its fleet of cars will be able to achieve a lower unit cost per car due to its bulk manufacturing (if it’s an OEM) or bulk purchasing (if it’s not an OEM) volume. In contrast, a car access network which aggregates the unused cars of individual owners will be paying these owners a fee which takes into account the higher per unit costs at which these individual owners purchased their cars. It will also incur the additional cost of transporting the car to the owner’s location when the owner wants to use it.

As a result, the car access network with its own fleet will be able to serve passengers at a lower price point than the network which aggregates the cars of individual owners. And since passengers will flock to the network offering lower prices, as long as the network has the financial capital to fund the up-front cost of its own fleet and enough political capital to receive fair treatment when competing for the right to serve a specific region, it will win over the network aggregator.

Something legendary

I recently came across the following quote: “People are too eager to say “This legendary person had flaws!” instead of, “Wow, this flawed human being managed to do something legendary.””

At its surface, the quote points out that people are quicker to criticize than to praise. Rather than compliment someone for their accomplishments, most people prefer to highlight the person’s flaws.

However, I believe that we need to go one level deeper. It isn’t enough to simply claim that people are more willing to criticize than to praise. We need to understand why this is the case.

The answer also lies in the quote. As the second part of the quote shows, if we accept that human beings have flaws, then we’re able to focus on our achievements despite these flaws. However, if we believe that human beings are perfect, all we can see is those character traits and actions that show deviations from this perfection.

I believe that most people would agree that we aren’t perfect. We have shortcomings because of our humanity as well as shortcomings unique to our individual character. Although we each know this to be true at an individual level, when individuals come together as a group it becomes much more difficult to point out personal as well as group level flaws. This is because the social pressure within groups penalizes deviations from and rewards the appearance of the group’s view of perfection. And this incorrectly influences our view of what it means to be human.

Once we let go of our need to be perfect, an artificial construct imposed by group think that we personally know to not be true, we benefit in two ways.

First, we become much more tolerant of others’ shortcomings. We look to appreciate their strengths rather than condemn their weaknesses. In the context of startups, this can be very valuable for hiring decisions. I’m a strong believer that you should hire for strength, not lack of weakness.

Second, we come to terms with our own flaws. We accept what we’re not good at and find people to complement these weaknesses. We also recognize what we’re good at and where, if we work hard, we can be the best at. Only then can we do something legendary.

Entrepreneur blogs

Many entrepreneurs have started writing blogs to highlight the progress that their company is making in areas like product, hiring, management, and fundraising.

Investor blogs like this one make sense because they serve two main outward purposes. The first is to share the investor’s thinking with potential entrepreneurs in order for these entrepreneurs to reach out to the investor, and hopefully accept his money at the time of their fundraise. The second is to promote the investor’s companies to other investors and potential users. There are also inward purposes like helping an investor structure their thoughts, but the outward purposes are why an investor writes a public blog rather than keeping private notes.

The value of entrepreneur blogs, on the other hand, depends on the stage of the company that the entrepreneur is running. If the company has achieved product-market fit, blogging makes sense to promote the company to new users and potential employees. The founder of a company that has achieved product-market fit is relatively less pressed for time than the founder of a company that has yet to achieve product-market fit, so spending some time on blogging can make sense.

Blogging also makes sense if the entrepreneur is a repeat entrepreneur who has built a successful company in the past. This positions the entrepreneur as a thought leader who can use the combination of his reputation and a written online presence to showcase his company and attract talent.

But if a company has yet to achieve product-market fit or the entrepreneur isn’t a repeat founder with a successful previous company under his belt, the founder’s only goal should be to get to product-market fit. And blogging doesn’t help you reach this goal.

Casting a wide net when fundraising

We currently have 33 companies in our Turkish portfolio. Of these 33 companies, 24 have received follow-on funding from at least one other investor.

When our companies start to look for follow-on funding, we help them think through investors who are likely to be interested in the company. Most investors have specific geographies, sectors, business models, and/or company stages that they focus on. So, in the past, for each of our companies I would go through my list of investors and advise them on which specific investors to target so as to not waste their time on those that are unlikely to invest in the company.

Over time, I’ve come to realize that this approach isn’t always the right one. It tends to work for those companies for which there’s very strong investor interest. By prioritizing their investor outreach according to who they want to work with and putting an end to fundraising once they’ve reached an agreement, such companies save a lot of time.

However, for companies whose fundraising success isn’t all but guaranteed, which is most companies, it’s better to cast a wide net. You just don’t know who’s going to be interested. There have been multiple instances where an investor who I thought would be very interested in a company didn’t end up showing any interest. There have also been multiple instances where I didn’t include an investor in my outreach recommendation list because I didn’t think that a company fit their investment profile, the company spoke with that investor through another channel, and the investor ended up funding the company.

There could be two explanations for this. The first is that I don’t know the investment profiles of our co-investors. I don’t think that this is the case because that’s one of the first questions we address when we first meet. And I have a spreadsheet where I record what each investor I meet is looking for immediately after I meet them.

The second explanation is that, although investors have investment profiles, these reflect general preferences rather than strict guidelines. If the circumstances are right, exceptions can be and often are made. Given our own investment profile and the deviations which we sometimes make from it, this is the explanation that makes sense to me.

As a result of this insight, I now recommend that our entrepreneurs who don’t have their next round all but guaranteed knock on the doors of as many investors as possible. You should still keep this within reason. For example, reaching out to an angel investor who is known to invest between $100K and $250K to lead your $5M round probably isn’t the right approach. But, as long as you act within reason, the wider a net you cast the higher your chances of landing an investor. You just don’t know who might be interested.

Reducing uncertainty or seeking perfection?

Our educational system grades students on a scale of 0 to 100. If you know everything and do everything well, you can get a score of 100. And that’s a perfect score.

Operating in this paradigm, intelligent and motivated students seek perfection. Perfection is attainable and the path to reaching it is clear. There is a certain right answer to each problem, and you just have to provide it for each problem on the test. You train your mind to pursue certainty because you know that if you discover certainty repeatedly, you’ll reach perfection. And since perfection is attainable, if you don’t reach it, you’ll be left behind someone else who does.

This paradigm doesn’t extend to life or business. In life and business, there is no certainty. There are only probabilities of particular outcomes which you can influence by taking particular actions. Taking actions to change these probabilities leads to the reduction of uncertainty, not its removal. Uncertainty is always there, and perfection is therefore not attainable.

The move from education to life and business represents a big paradigm shift. It requires changing your mindset from one that accepts certainty as default and therefore seeks perfection to one that accepts uncertainty as default and attempts to gradually reduce this uncertainty.

Because of the different paradigms which govern the education world and the life and business worlds, success in one doesn’t necessarily translate into success in the other. Knowing which paradigm you’re operating under and whether it’s the right one for what you’re doing is the first step to achieving success, and the resulting happiness, in what you’re doing.

Volkan Ozkan from Webnak

Webnak‘s GM Volkan Ozkan recently gave a talk about the company at Kolektif House.

In the talk, Volkan shares some metrics about the size and structure of the trucking market, how companies and truckers have traditionally found each other, and how Webnak’s managed marketplace offers both sides a strictly better experience than this status quo.

You can watch the full talk below.

Skill and luck

Michael Mauboussin is the head of global financial strategies at Credit Suisse. He also teaches at Columbia Business School.

He’s a student of uncertainty with a deep interest in the respective roles of skill and luck in determining outcomes in different areas of life including business, investing, and sports.

In this 75 minute interview, Michael shares his thoughts on a wide range of topics including the relative roles of skill and luck in different fields, the difference between fund management as a profession and fund management as a business, and some of our most common human biases.

Although the interview is 75 minutes long, when I reached the end I wished it had been longer.

Tapu’s first year

Tapu, an online real estate auction marketplace where we’re investors, recently completed its first year of operations.

The company shared some data about its performance over its first year, which you can read in Turkish here.

Here are some highlights of what the company achieved during its first year:

  1. The number of properties sold on Tapu grew an average of 87% per quarter.
  2. Over 1,200 buyer candidates participated in auctions on in the 2nd quarter of 2016.
  3. had 250,000 visitors in July 2016.
  4. Of the properties that were first listed for sale in May 2016, 30% were sold within 3 months (by the of July 2016).
  5. Of the properties sold on Tapu, 26% were sold within the first 15 days of listing.

Disconnecting before sleep

Since I wake up at 6 AM and I need a good 7-8 hours of sleep to function well, I’m usually in bed by 10 or 11 PM. And I can’t get to sleep without disconnecting from electronic devices like my smartphone and laptop at least an hour before sleeping. Some people claim that 30 minutes is enough but I’ve found that I need an hour to unwind my mind.

Disconnecting for me isn’t simply about not using the device while it’s on. It’s about effectively turning the device off so that I can’t be interrupted by an incoming call, message, or email. This means placing my smartphone in airplane mode by around 9 or 10 PM depending on when I plan to go to sleep.

It can be tempting to work a bit longer especially when I’m in the zone. However the result is always that I have a hard time going to sleep, sometimes tossing and turning in bed until past midnight. And since my biological clock is programmed to wake up around 6 AM, this means that I get less than 6 hours of sleep which makes me grumpy the next day.

Having the discipline to disconnect at least an hour before sleeping is well worth it.