A lot is written about cognitive biases you want to avoid – e.g. the tendency to seek out information that confirms our hypotheses, but there are four other cognitive biases that are commonly displayed by successful people. These are biases that you want to have, but they come with risks as well. So the mind-trick required from those that would be really successful is to maintain the bias whilst being sufficiently self aware to avoid the risk.
Personal exceptionalism – a macro-sense that you are at the top of your cohort and that your work is snowflake-special
- Benefit: resiliance, stamina, charisma
- Risk: assuming that being top of your cohort means you need to be great at everything, brittleness
Dichotomous thinking – being highly judgemental of people and situations, viewing the world as black and white with little grey in the middle – everything is great or sh*t
- Benefit: achieves excellence quickly
- Risk: perfectionism
Correct over generalisation – makes judgements from limited data and is right most of the time
- Benefit: speed
- Risk: addiction to instinct and indifference to data
Sees creative destruction as natural
- Benefit: fearlessness, tolerance for destruction and pain
- Risk: heartlessness, alienation
I think this is a great list for anybody who aspires to success to look at, both to assess whether they share characteristics with other successful people and to see if they are falling on the wrong side of any of the risks. I know that I have.
Our portfolio company Makers Academy is one year old today. They have had a remarkable first year teaching people to code in twelve weeks (see this video I posted before for more details). As investors we are always asking people what they think about our companies and everyone loves Makers. The best feedback is from students, many of whom gush about their amazing experiences on the course.
Teaching people to code is a noble cause and these guys are nailing it. We’re proud to be involved.
Here are some of the highlights of the year (courtesy of an interview founder Rob Johnson did with trendsonline):
Placed students at salaries up to £35K. See a blog post here. (students go from beginners to professional developer in 12 weeks)
Changed the way top software agencies perceive junior developers and Makers. See blog post here.
For the last four months I have been using an HTC One and for about two months before that I was using a Samsung S3. On Monday my new Nexus 5 arrived, and man is good to be back with stock android. As you probably know handset OEMs like HTC and Samsung are trying to differentiate their phones by putting proprietary software on top of Android, but that stuff is a pain! Aside from having to learn a different UI I found them buggy and to get slow quicker than my previous Nexus devices. At the end my HTC would autonomously start playing music during phone calls and regularly hang for a couple of seconds when it should be launching the keyboard. That was too much for me.
I understand that HTC and Samsung want to differentiate their phones so they can charge higher prices and maintain good margins. I just don’t think they’re going about it in the right way. When I ask people they rarely value the software features that they add – HTC Blinkfeed is kind of confusing and Samsung’s gesture controls don’t work that well and are arguably unnecessary. In my opinion both these companies and other Android OEMs would be better off completely focusing on the hardware – how it looks, how fast it runs, how long the battery lasts, how good the camera is, and last but not least, price.
That’s the world that I would like to live in. It worked well on PCs until Windows lost pace with Apple’s OS’s and I don’t see why it shouldn’t work with phones and Android.
Everpix, a photo startup in San Francisco shut down recently and published a post mortem on The Verge. Andrew Chen responded to that with a thoughtful post about how the ‘funding goalposts continue to move’. Here’s the money quote:
It’s been widely noted that investing milestones have evolved quickly over time:
In 1998, you’d raise $5M Series A with an idea and not much else. The capital would be spent to build the product, and hopefully you’d have some customers at the end of it, but it wasn’t required. You had to do crazy stuff like put machines into a datacenter, at this point. Then you’d raise a Series B to scale the marketing. The qualitative bar for the team, idea, and market was high.
In 2004, you’d raise $500k with just an idea. Then you’d build the product and spend $5M to market it. At this point, you could use a free Open Source stack which would accelerate development. You didn’t need to build a datacenter either.
In 2013, these days, you are expected to have a product coded up and ready before you raise your first substantial angel round. Maybe the product won’t be launched, but people will want to play with a demo at least. Then you raise $1-2M to get traction on your product. Then if you have millions of signups, then you get to raise your Series A of $5-10M.
The primary driver of this evolution in investment milestones is that startups have become much more capital efficient. Investors have always looked for the trifecta of great team, great product, great market, but now that startups do more with less investors of waiting to see whether the team can execute and the product works before they make a meaningful investment.
The challenge has now become judging whether the product works. The first level of assessment is how it looks and feels, but the second is how much people are buying it or using it – i.e. growth. One read on where the Everpix guys went wrong is that they paid too much attention to look and feel but not enough to growth (the other is that the photo market has too many free competitors). Similarly, when Chris Dixon says that 10m users is the new 1m users it’s partly a comment about growth – i.e. growth is now so much more important that getting to 10m is now the bar (the other part is that with increased internet penetration and increasingly efficient distribution channels getting to 1m is much easier than it used to be).
To my mind growth, sometimes called momentum, is now right up there with team, product, and market as a filter for judging investments.
I’m a big believer in continuous self-improvement and hence I read a lot of articles like You can increase your intelligence: 5 ways to maximise your cognitive potential which appeared in Scientific American yesterday. This is a great one. It’s reasonably accessible whilst also containing enough science to be convincing, and I love that scientists are now concluding that intelligence is teachable. Moreover the way to improvement isn’t playing brain training games, but doing many of the things that make life interesting:
1. Seek Novelty
2. Challenge Yourself
3. Think Creatively
4. Do Things The Hard Way
If this topic is of interest you should really go read the whole article (warning: it’s quite long), but for those wanting a brief summary, the key to maximising your cognitive potential is to seek out new and challenging situations. To deal with these situations the brain forms new synaptic connections which build on each other leading to an increase in cognitive activity. Moreover, as I keep telling my kids, the brain is like a muscle, the more you use it the stronger it gets. Regularly dealing with new situations keeps the brain in a prime state for learning, or more scientifically keeps it in a prime state for forming those new synaptic connections.
If you’re an entrepreneur or an investor these activities are what you should be doing anyway (with the possible exception of doing things the hard way). I know I do. That makes extra intelligence a side effect of the day job! Perfect.
Aileen Lee of early stage fund Cowboy ventures wrote a post for Techcrunch yesterday looking at the characteristics of 39 startups founded since 2003 that are worth over $1bn. She calls them ‘Unicorns’. There has been a lot of discussion since. Most notably Dave McLure who Tweeted that “The future of venture capital is not about picking unicorns more accurately — it’s about educating and empowering 2-5% of talented humanity w/ $50k/$5m capital” (which I largely agree with) and Fred Wilson who created a Hackpad to crowdsource a fuller list of $1bn companies.
Fred’s Hackpad lists $1bn+ value companies founded after 2003 and founded before 2003. In the pre-2003 cohort there is just one European company (Vente-Privee) whilst in the post 2003 cohort there are eleven (Klarna, Spotify, Skype, Zalando, Supercell, Rovio, King.com, Criteo, Wonga, Zoopla, Soundcloud). Now the list is not complete (e.g. it excludes ARM and Autonomy) and elements are debateable (I’m not sure Soundcloud has achieved a $1bn valuation yet) but even with those caveats its clear that Europe has made a big step forward in creating ‘Unicorns’.
Finally, if you’ve ever wondered why VCs care so much about $1bn exits, Aileen explains why:
Why do investors seem to care about “billion dollar exits”? Historically, top venture funds have driven returns from their ownership in just a few companies in a given fund of many companies. Plus, traditional venture funds have grown in size, requiring larger “exits” to deliver acceptable returns. For example – to return just the initial capital of a $400 million venture fund, that might mean needing to own 20 percent of two different $1 billion companies, or 20 percent of a $2 billion company when the company is acquired or goes public.
We have a small fund here at Forward which means we aren’t subject to this logic. We’d love our companies to be worth $1bn of course, and hope and expect that some of them will be, but we can make great returns for our investors even if that doesn’t happen and we support our companies in finding the right level of exit for them.
Automation is continuing apace. Before too long we will have self-driving cars, robots running factories, and computers taking over white collar jobs like marking exam papers and legal work. Oxford researchers estimate that 45% of todays jobs will disappear in the next twenty years. Also in this fast changing world hard-earned professional skills can quickly become redundant – driving and legal work follow from the examples I gave above, but there are many, many others. The folks at Singularity University are fond of saying that half life for a skill has dropped from 30 years in the mid-late twentieth century to five years today.
All this means that training for a specific job is highly dangerous. No longer will doing a law or medical degree be safe options. Nor will be people be able to work hard to build a trade and then rest on their laurels.
In the future success is going to go more to people who have a good ability to learn, and who are happy to keep evolving their skill set to stay relevant. So we should be teaching our kids how to learn and instilling a thirst for knowledge. It’s not just our kids either. If 45% of jobs are going to disappear in the next twenty years then there will be a lot of people who need help learning something new to get back into the workforce. Teaching them how to learn and how to stay relevant is a much smarter idea than teaching them a new skill which may well itself become redundant.
We should also try to ensure our kids have social skills, self-awareness and a conscience. In a world of fast change and automation those who get on with others, are prepared to look at themselves critically, and genuinely want to do good work will prosper whilst those who try to duck and dive or game the system will increasingly find that their tricks don’t work.
I felt a real surge of pride when I was presented with a signed copy of Letters of Note at the Unbound board meeting this week. First off, the book is beautifully constructed. A real joy to hold in the hand. Then the contents are amazing too, an incredible set of letters curated by Shaun Usher. Some are funny, many are moving, and all are very interesting. My favourite is a letter from John F Kennedy carved into a coconut husk which secured his rescue from the Solomon Islands during WW2 whilst my kids liked the letter Roald Dahl sent to thank one of his fans for capturing her dream and sending it to him in a bottle. He promised to “blow it through the bedroom window of a sleeping child”.
Unbound, one of our portfolio companies, is a crowdfunding platform for authors. The traditional publishing industry is failing all but the most popular authors and it’s great that Unbound is helping books like this to see the light of day and hugely gratifying that they do so in such style.
Here at Forward Investment Partners we believe that being a good VC is all about adding tangible value to our portfolio companies, and a lot of that value will be operational. Google Ventures are thinking the same thing and I love this video which describes their ‘Design Sprint’, a process/tool which they make available to their portfolio. The Design Sprint is cool because it helps companies connect deeply with customers to create things that people love, because it delivers quick solutions to design problems, and because it embeds a design capability in the team. We have similar processes here, but our videos aren’t as good Enjoy.
I’ve been reading a few articles recently about the power of platforms as business models and how they’ve replaced vertically integrated models in a number of industries. Three numbers from the Apple Event in San Francisco ram home this message:
1 million apps
60 billion downloads
$13bn paid out to app developers
The Apple App Store is of course one of the biggest platforms in the world but this story is playing out everywhere. AirBnB, Etsy and Hailo and Unbound could all make huge cheques like the one in the picture above, albeit with smaller numbers next to the $ sign in the box on the right…