The turtle and the rabbit

You’ve likely heard the story of the turtle and the rabbit racing each other. Although the rabbit is faster, he stops to look around in the middle of the race, and this lets the slower turtle win the race.

The moral of the story is that, in many settings, a steady and persistent approach outperforms a series of bursts and declines in effort.

Although I believe in the moral of the story, I didn’t believe that a turtle could actually win a race against a rabbit. It turns out that it can happen.

System dynamics

When a cause is introduced into a system, there’s an immediate and often obvious effect.

However, if we’re dealing with a complex system, the cause often has multiple less obvious effects, and many of these effects have follow-on effects which are challenging to predict. As a result, the final outcome, if there is such a thing, can be very different than what the immediate and obvious effect would suggest.

System dynamics is the study of such complex systems where causes produce multiple effects with follow-on effects.

As a complex system, nature produces many great examples of observations which can be analyzed from the lens of system dynamics.¬†Here’s an example of what happened after wolves were introduced to Yellowstone National Park.

The flavor of the day

I was recently speaking with another investor about a potential e-commerce investment they’re looking into. While the investor really liked the startup, they were concerned by the threat that Amazon presents for the company. While Amazon has yet to focus on the company’s geography and vertical, the former is likely to happen within the next year and, given Amazon’s somewhat unexpected aggressive moves in the grocery space, it may also unexpectedly decide to focus on the company’s vertical.

While the threat presented by a large and well-funded competitor with a track record of strong execution is important to recognize, this threat alone isn’t sufficient to justify not investing in a team with a similar track record of strong execution with a singular focus on a large market.

The reason is that there is always a big and well-funded company with strong execution capabilities operating in or adjacent to a startup’s target market. Today, the flavor of the day is Amazon. Everyone is fascinated by the company. The respect is certainly deserved, but the fascination is excessive.

2 years ago, this company was Uber. A few years before that, it was Facebook. Before that, it was Google. And before that, it was Microsoft.

Despite Uber’s presence, competitors like Didi in China and Bitaksi in Turkey are clear market leaders. Despite Facebook’s presence, Snapchat emerged and is now a public company. Despite Google, DropBox is a leading player in the cloud storage space. And despite Microsoft, Google developed into the leading search engine.

While the presence or potential interest of a large company in a startup’s target market is a threat to the startup, it also validates the market.

And what the right startup has is talent and focus that’s very often not available to a large company. The right startup founder is at least as capable and more motivated than the division head leading a large company’s efforts in the startup’s market. And the startup’s singular focus on the market is different than the non-pole position which the market occupies on the large company’s priority list.

Sometimes the large company also has users or customers in its core market who it doesn’t want to risk alienating by aggressively entering a new market.

For all these reasons, know the flavor of the day. But also know that it’s just that.

Comfort with conversational silence

It’s tempting to fill in the natural silences that emerge in a conversation. The reason is that you don’t know the reason for the silence. Specifically, you don’t know whether it’s because the other person isn’t interested in the conversation, or is simply reflecting on what has been said to guide the rest of the conversation in a more informed way.

Since you don’t know which is the case, it’s tempting to play it safe and fill in the silence with the hope of reigniting interest in the conversation.

However, more often than not, it isn’t that your partner isn’t interested in the conversation, but that they were simply reflecting in order to provide a more informed reply. Since we can speak faster than we can think, we often need to allow time for our thoughts to catch up on and internalize what was said before responding.

So, most of the time, the right response to a natural silence is no response. The right response is to simply be comfortable with the silence by acknowleding that it’s a necessary part of enhancing the future quality of the conversation.

Prioritizing startups to evaluate

There are many more small companies trying to grow big than large and relatively established companies. As a result, venture capital (VC) investors who invest in small companies with the potential to grow big are seeing many more companies at any given time than private equity or public equity investors who invest primarily in large and relatively established companies.

However, there is a natural limit to how many companies you can evaluate in sufficient depth to develop an informed view on these companies at any one time. For me this is no more than 3 companies at any given time. For others it may be slightly less or slightly more. However, there is a limit.

In order to manage the large number of companies that you can potentially evaluate as a VC, you need to do two things.

First, you need to get comfortable with saying no very often. If there are clear red flags regarding an opportunity, dismissing it at the outset is necessary to save your time to evaluate those opportunities that you find more promising.

While you might be mistaken and miss out on a big future success, not doing so is more costly as it leaves you with less time to evaluate those companies that you believe are much more likely to become big successes. The more startups you’ve seen, the better your intuition about what is likely to develop into a big success becomes, so the higher the cost of not trusting that intuition.

Second, among the companies that you decide to evaluate in further depth, you need to keep a running list (I keep an actual written list but this can also be a mental list) where you change the prioritization of, add, or drop startups as you do more research into each company and as new opportunities arise. Although there may be 5 to 10 interesting companies on your list, you can only properly research and deeply think about a few (in my case 2 to 3) of these at any given time.

The rest just have to wait, even if this means that you miss out an a big future success. With experience and the pattern recognition that comes with it, the likelihood of this happening will fall over time.

Delegate what you can, not what you want to

In order to achieve something at large scale, you need to work with other people and delegate parts of your work to them. You can’t do it all on your own.

However, how do you decide what to delegate?

A common approach is to delegate what you don’t like to do, while doing what you do like to do yourself. Since the things you like to do are often the things that you’re also good at doing, this is a generally useful approach during the initial stages of scaling.

However, just because you like to do something doesn’t mean that it’s a high value activity. As you scale further, the demands on your time increase to the point where you need to allocate your scarce time to those activities that yield the highest return on your time.

These activities may or may not be those that you enjoy doing. But they are those activities which will have the greatest impact in moving the organization forward. They are those activities which you are uniquely positioned to do, and which cannot be done as well by others.

In other words, you need to delegate what you can, not what you want to.

The implication of a single buyer or seller purchasing an online marketplace

The value proposition of an online marketplace is that it aggregates demand on one side, supply on the other, and makes it easy for both sides to find and transact with each other.

In other words, the value of an online marketplace comes from the fact that it serves more than a single buyer or a single seller.

As a result, when a single buyer or a single seller purchases an online marketplace company, even if this buyer or seller is big, it’s likely that the marketplace did not live up to its potential. If it had, its value would have been much greater than that which a single buyer or a single seller would have been willing to pay.

Ikea’s recent purchase of Taskrabbit seems to be an example of this.

Taskrabbit freelancers offer services in areas like furniture delivery and assembly to Ikea customers. However, they also offer these services to customers of furniture retailers other than Ikea. In addition, they offer services in many other areas, like home repair, yard work, and house cleaning.

In other words, Ikea’s customers, taken together, effectively represent a single buyer on Taskrabbit. As a result, the price that Ikea would be willing to pay for Taskrabbit would be limited to the value that this single buyer gets from the marketplace. And this value is a fraction of the total value of the marketplace.

The fact that Ikea purchased Taskrabbit despite the former’s status as a single buyer suggests that the latter achieved a fraction of its potential.

Flying through a hurricane

This was a fascinating article on what it’s like to fly an airplane through a hurricane with the goal of collecting sensor data to inform public evacuation decisions. It also includes a video of an airplane doing just that, which I unfortunately couldn’t embed into this post.

Based on the airplane’s mission and the data that it collects, drones will likely be able to perform the same tasks in the near future. As a result, we will no longer need to risk the lives of human pilots and data collection personnel in the middle of a hurricane.

However, until then, we need to risk a few lives in order to potentially save thousands.

Power and responsibility

Here’s LeBron James’ take on US President Donald Trump’s reaction to the Golden State Warriors’ Steph Curry stating earlier this week that he wasn’t going to visit the White House.

Unlike LeBron, I don’t think that he should have called Trump a bum.

Like LeBron, I believe that the US President has the power to guide not only his country, but also the world. And with power comes responsibility.

Group vs self motivation

Even if you’re passionate about something, it’s challenging to sustain your individual motivation level across time. There are times when you feel very motivated, as well as troughs in motivation.

The benefit of being part of a group is that your group members can pick you up when you hit a trough in individual motivation. The combination of support and, depending on the environment, healthy competition that they provide are antidotes to a motivational trough.

The less you like doing something, the greater the positive motivational impact of doing that thing as part of a group.

Exercising is a clear example of this. You exercise harder when there are people around you than when there are not. This effect is particularly pronounced when you’re part of the same training class.

The effect also extends to your personal and professional life.