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Looking for Gym Rats

People ask investors all the time: “What do you look for in a founder?”

The obvious stuff is easier to spot: intelligence, domain expertise, likeability. The harder part is a “gym rat” like mentality. Gym rats would rather play their chosen sport rather than anything else in the world. Some gym rats: Tom Brady, Michael Jordan, Tiger Woods, Bill Belichick. Other gym rats in other professions: Warren Buffett, Mark Zuckerberg.

This dedication, love and focus for any profession is very, very rare. And often more difficult to spot. Many people love what they do but not many are gym rats. I’d rather have this quality and a “B+/A-” ranking in all other areas than the other way around. The legendary football coach BIll Belichick takes this approach: “loves football” is the #1 criteria he looks for in new players. Also here’s a quote from Malcolm Gladwell and Bill Simmons circa 2006 that speaks to this idea:

I'm happy writing anywhere and under any circumstances and in fact I'm now to the point where I'm suspicious of people who don't love what they do in the same way. I was watching golf, before Christmas, and the announcer said of Phil Mickelson that the tournament was the first time he'd picked up a golf club in five weeks. Assuming that's true, isn't that profoundly weird? How can you be one of the top two or three golfers of your generation and go five weeks without doing the thing you love? Did Mickelson also not have sex with his wife for five weeks? Did he give up chocolate for five weeks? Is this some weird golfer's version of Lent that I'm unaware of? They say that Wayne Gretzky, as a 2-year-old, would cry when the Saturday night hockey game on TV was over, because it seemed to him at that age unbearably sad that something he loved so much had to come to end, and I've always thought that was the simplest explanation for why Gretzky was Gretzky. And surely it's the explanation as well for why Mickelson will never be Tiger Woods. Link

The Risk of Working Hard

Always loved this. Circa 2006 from Malcolm Gladwell and Bill Simmons:

Why don't people work hard when it's in their best interest to do so? Why does Eddy Curry come to camp every year overweight?

The (short) answer is that it's really risky to work hard, because then if you fail you can no longer say that you failed because you didn't work hard. It's a form of self-protection. I swear that's why Mickelson has that almost absurdly calm demeanor. If he loses, he can always say: Well, I could have practiced more, and maybe next year I will and I'll win then. When Tiger loses, what does he tell himself? He worked as hard as he possibly could. He prepared like no one else in the game and he still lost. That has to be devastating, and dealing with that kind of conclusion takes a very special and rare kind of resilience. Most of the psychological research on this is focused on why some kids don't study for tests -- which is a much more serious version of the same problem. If you get drunk the night before an exam instead of studying and you fail, then the problem is that you got drunk. If you do study and you fail, the problem is that you're stupid -- and stupid, for a student, is a death sentence. The point is that it is far more psychologically dangerous and difficult to prepare for a task than not to prepare. People think that Tiger is tougher than Mickelson because he works harder. Wrong: Tiger is tougher than Mickelson and because of that he works harder. Link

One Possession Players

-Michael Jordan: The Life

21 years ago, I became cancer-free. My journey was very similar to Homer's when he ate the toxic fugu fish and only had 22 hours to live. In my darkest hours, I resorted to any source of comfort - like Homer listening to The Bible on tape read by Larry King. When I was cleared, I said I would love every day like my last. In the end, I spend more days in front of the television and forget it ever happened. Life goes on. Health is wealth.

Investor Makes Yet Another Insufferable Analogy Between Football and Business

Reid Hoffman says he looks for “learning machines” when it comes to ideal founders. Someone who worked for Hall of Fame Patriots coach Bill Belichick:

“Bill’s always moving forward,” said Al Groh, an assistant alongside Belichick with the New York Giants. “He’s not just thinking about this season. What is distinguishingly unique for somebody who is very bright and on top is he’s a terrific listener. He’s interested in anybody and everybody’s opinion because out of that might come a good idea. That was the case even when he knew he wanted to do.”

Washington Post article on Belichick here.

Checklists for Startups

If you want to use the Checklist Manifesto approach, here are 3 checklists I recommend to any entrepreneur. I could take time to come up with my own checklist(s) but there’s really no use re-inventing the wheel. I still use these often even after evaluating and working with many startups. And like all checklists and Simple Rules, writing them down is easy but executing on them is hard.

How to Start by Peter Thiel:

See his 7 questions you should ask here:

The Engineering Question: Can you create breakthrough technology instead of incremental improvements?

The Timing Question: Is now the right time to start your business?

The Monopoly Question : Are you starting with a big share of a small market?

The People Question: Do you have the right team?

The Distribution Question: Do you have a way to not just create but deliver your product?

The Durability Question: Will your market position be defensible 10 and 20 years into the future?

The Secret Question: Have you identified a unique opportunity that others don’t see?

How to Get Money by Sequoia Capital:

Writing a Business Plan and creating the pitch deck: See the 10 item checklist here.

How to Make Money by Andreessen Horowitz:

See the 16 item list here.

Any others?

Time for Football - Don’t Fuck It Up

In an email interview, Taylor explained how he earned the trust of his coaches: “Both Bills [Parcells and Belichick] came to me and made it clear: We’ll let you roam, but if you f--- it up, we go back to doing it our way. I never f---ed it up … And I’ll tell you this. Parcells and Belichick weren’t exactly the types of guys to have a player tell them how s--- should be run.” Link

hypebeast

Nike Chronicles the Genius and Innovation of Co-Founder Bill Bowerman “A shoe must be three things…”

Fundraising Advice - A Fortune Cookie Message

First published in March 2015:

YCombinator had its Demo Day this week. There were 100+ startups with an unprecedented breadth. I particularly liked the health informatics/tech-in-bio startups, an area I’ve talked about before.

And with every Demo Day, we at SV Angel and many other investors try to meet and evaluate many of the startups. We try to give advice and help, and one topic we discuss is fundraising.

Advice on fundraising is hard to generalize. For some startups and founders, raising more money is the right thing to do; for others, raising less can be the right thing. It’s all fact-specific and situational. So when you try to give advice that applies to all startups, it starts to sound like a fortune cookie message.

Startup Jackson has the crispest recent advice I’ve seen recently on this topic. Here’s an email I wrote to a startup we funded in 2013 when it was raising its seed round. The founder wanted high-level thoughts on how to think about his financing. It had a Heroku, Parse-like business but you could maybe apply this framework to your business with similar comps. There’s not much new that Startup Jackson doesn’t cover but hopefully it gives an insider view of how we think about fundraising for startups (some items redacted). I didn’t add substantive edits so some of the email is cringeworthy but hopefully it gives the reader a gist of our thinking:

----

8/21/2013

Hey ____,

Here are some early thoughts:

You will be able to raise a seed 1-1.5 pretty easily in September. I say this given the strength of the team/background and the space. Other startups have raised this on much less customer feedback and with no product launch.

Very hard to generalize on funding advice since every case is fact-specific. But you should raise as little as possible but as much as you need. It sounds like a punchline but you’d be surprised how many founders don’t think through this!

You want funding that will last 18 months comfortably. I’d estimate how many people you want to hire. Take that yearly salary and multiply by 1.4 (figure taxes, health, etc.). Then add rent and other incidentals. Then add 20% buffer. That’s the amount you want to raise.

How many people? So that begs the question of how many people you need. That’s a function of either (a) number of things you need to do to get to cash-fow positive where you don’t need to raise, or (b) number of things you need to do to get a top tier VC to want to invest $5-10MM. This $5-10MM will presumably last you another 2 years where you do this exercise all over again for the Series B.

On point (a) above, you are in best position to calculate. Will people pay? How much? How many customers? And so on.

On point (b), I’d look at companies like Heroku, Parse, Github and others to see where they were when they hit their Series A. For example, Parse had 3,500 developers and growing 40% week/week when they raised their Series A. Heroku had 10,000 developers when they raised their Series A. So clearly developer growth was a key metric. You should also discount this because when these companies raised, they were in hot sectors at the time. Your space is heating up but there aren’t enough investors to make this heated as Rails development platforms or “AWS for mobile.” (Again, raising money is a function of investor interest and demand too)

Given your space, you will attract certain investors like XXXXXXX. They will all be interested and give you good feedback and I’m happy to intro!

Then there’s the Github model. They didn’t raise a dime until this happened. That’s the path where you’re able to get to profitability within 18 months. The nice thing is that you could be a good candidate to do this. That’s just

So lmk if you want to work though this live. I’m more than happy to!!

-------

Beginner’s Mind

When I was really sick with cancer in 1994, I was freaking out emotionally. My emotions were super volatile - some days I was upbeat and in a fighting spirit and some days I was scared shitless and paralyzed with fear. My doctors eventually told me that I needed to get on a more emotional keel. It was a long journey and I would burn out with these ups and downs, and this “burn out” could make my condition even worse.

I tried everything to “calm myself down.” My initial tactic was to watch as much television and movies as possible - I watched every episode of The Simpsons, Wings, and Seinfeld - all on VHS. I watched the OJ trial, the NBA finals, the car chase. I hoped that by tuning in, I could tune out.

None of that worked. So one day a nurse practitioner suggested that I meditate and do yoga. She talked about the “mind-body connection” and how your mind and emotional self can affect your physical self. Again, this was 1994. Yoga (and now meditation) weren’t as mainstream as they arenow. For me, this stuff was for the hippies, freaks and geeks. Not for me.

But I got so desperate that I finally succumbed. I went to some Meditation sessions, did some Yoga and read “Full Catastrophe Living: Using the Wisdom of Your Body and Mind to Face Stress, Pain and Illness” by Jon Kabat-Zinn. I also read his book, “Whereever You Go, There You are.”

I basically became a believer when I read that professional athletes used mindfulness and meditation as a tool to develop and harness focus and composure in times of stress. In his first book, “Sacred Hoops”, Hall of Fame basketball coach Phil Jackson talks about how he incorporated mindfulness into the dominant 1990s Chicago Bulls. Even Michael Jordan - the archetype alpha male - bought into this hocus pocus. I learned that mindfulness wasn’t about tuning out and some pollyannish belieft that “everything is ok.” It’s actually the contrary - it’s about tuning in, staying in and accepting the moment. And developing this focus is like developing any muscle in your body - it needs to be strengthened through deliberate practice.

I eventually read a book called Zen Mind, Beginner’s Mind by Shunryu Suzuki, a renowned Buddhist monk. I’m not a Buddhist (more like, a non-practicing Christian) but the secular lessons really resonated with me. In short, Suzuki said that “[i]n the beginner’s mind, there are many possibilities, in the experts mind, there are few.” This is a corollary to the concept of mindfulness and the power of staying in the moment.**

When I first started investing in 2007, I didn’t know anything about it. And it was daunting as hell. Some of my peers had way more experience operationally and as an investor. So I tried to keep a “beginner’s mind.” This was at times really hard because it meant asking really dumb questions and looking pretty clueless in the process. But it also helped because I wasn’t burdened with unhelpful biases. And those dumb questions actually questioned some “best practices” that were hardwired only because of legacy and not because of common sense.

A lot of these “best practices” are being challenged today with developments like crowdfunding, JOBS Act and the like. Things are changing quickly. These developments won’t displace the current systems but they will be a powerful force much like e-commerce was a powerful force in overall commerce. Having a Beginner’s Mind mindset is helpful for me and the most useful way to develop that is through meditation.

**As a disclaimer, I meditate about as often as I exercise - which is sporadically and erratically.

*** First published on daslee.me/beginners-mind

Things I’m Excited to Watch

@gracelee and I have some watching to do…

Narcos —Netflix Series about Pablo Escobar. Top of the queue.

Mr. Robot — Not usually my thing but rave reviews.

Suits — This is my thing so starting from Season 1.

Black Mass — Johnny Depp as Whitey Bulger. Done.

Top of the Lake — Crime show from Sundance. Artsy Law & Order.

Hard Knocks — Over and over again. If you like sports, watch this.

Do Your Job — My regard for you will go up or down a notch depending on how you feel about this trailer.

Sherlock — Will start from Season 1. Benedict Cumberlich broke out from this show so it can’t be awful.

Sex & Drugs & Rock & Roll — Denis Leary rarely disappoints.

The Man from U.N.C.L.E. — Some say it’s better than Daniel Craig Bond movies.

Any suggestions I’m missing?

continuations

Values for a World of Knowledge

I have been thinking about the value implications of embracing knowledge. Maybe I am being overly reductionist here but there are three values that seem to me to be intimately connected with the knowledge loop of learning, creating and sharing. Put differently I don’t see how a society based on knowledge would work well or be sustained if any one of these is removed. Now other than the first one you may not recognize these as values and it is not even that easy to define what “values” are in the first place. Think of them as principles that should guide one’s behavior.

Respect

The foundational value for the knowledge system is respect for other people as fellow humans. The system is based on recognizing that while we are individually different and ephemeral (at least for now), we are all members of a species that has developed knowledge as our collective inheritance for generations to come. Each and everyone of us can be part of the knowledge loop but only if we respect each other as humans (the knowledge loop consists of learning, creating and sharing).

Many implications for behavior flow from respect. Obviously it means we should seek to avoid physical or mental harm to others. It also means we should give everyone the opportunity to express themselves and have their concerns be taken seriously. We should not force our opinions on others and tolerate a great many beliefs (as long as those in turn allow for respect). There are also many smaller behavioral implications that flow from respect, such as asking people their name and being polite.

Collectively respect should lead us to assure that everyone’s basic needs are taken care of so that no human has to worry about food, clothing, shelter or healthcare. In other words, respect is more than just the application of the golden rule which is highly self referential. Instead it is a baseline for the treatment of any person as a human being and a participant in the knowledge loop.

Mindfulness

This may at first seem like an odd value and maybe that’s just a question of finding a better word. Historically a lot of people might have said “rationality” but that’s not quite the same.

By mindfulness I mean the ability to experience one’s emotions without letting them hijack our behavior. It is OK to be sad or angry or frightened or jealous. Part of what makes us human is our evolutionary heritage that has given us brain circuits for experiencing those feelings. But as humans we have a kind of super power. We can learn to recognize emotions, acknowledge them and then still return to a state in which we can use what Daniel Kahneman calls “system two” — our ability to reason.

Put differently, mindfulness is a pre-condition for rationality. We should value mindfulness in ourselves and in others. We should act to grow our ability to be mindful whether that is through meditation or simply by trying to get enough sleep. Without mindfulness maintaining respect for others becomes at times difficult if not downright impossible. Much of what we seen in people yelling at each other online (or IRL) is the result of a breakdown of mindfulness.

Precaution

All of our choices should be informed by a precautionary principle (hat tip to Nassim Taleb): we should avoid irreversibility. That’s true at small scales, such as dealing with individuals, but most importantly it is true when dealing with choices that impact planet Earth as a whole. Precaution for instance immediately suggests that it is a bad idea to add a lot of carbon dioxide to the atmosphere. We have only one atmosphere, it is relatively small and massively impacts the climate we experience here on earth.

So when we evaluate what to work on or what to do, we should choose projects that have limited downside but the potential for great upside. For instance, working on a system for diagnosing disease is a great example. If you fail there is limited harm but if you succeed humanity will benefit greatly. Building lots of nuclear bombs is an example on the opposite end of the scale as is the Large Hadron Collider.

Precaution is a critical value because it puts a boundary on what the knowledge system should produce. It does so not by telling people what to work on but rather by suggesting important limits. Precaution is what lets the knowledge loop continue (hopefully forever).

There are many other traditional philosophical, religious or humanist values that are notably absent from this short list of three. I would love to hear from readers as to what they think absolutely needs to be added to the list. Of course any other feedback you have is also much appreciated.

Ambiguity

For most people, you go to school, they tell you what class to go to, what classes to take. This goes on all the way through university. "Do this, do this, do this..." and then you go into the class and they say, "Learn this," and, "This is the information," and it's a largely memory-based and instructional-based process. This is not what these people do. Right? This is not. So the path, what they have is a strong, strong desire to understand and make sense of reality. How does reality work? So they're all very independent-thinking and, and rebellious. They don't mind saying, "Screw you. This is what makes sense and I've got to go down that path." They're comfortable with ambiguity. They love ambiguity. Some people don't like ambiguity. Most people, they say, "I'm nervous about ambiguity." They love to go in the space of what's ambiguous, because that's where the discovery is. They love making mistakes, the process, they understand that making mistakes -- you know, loosen up! It's like you're going to ski or something. You can't learn how to ski unless you're falling. So they don't mind the falling. They're not embarrassed about making mistakes. They're not worried also about the approval of others. So many people are constantly saying, "Oh well, risk!" The whole different definition of risk -- what's risky? They're not worried about what people think of them, right? Is that risk or failure? The term of failure is a totally different thing. Failure is part of a learning process. Right? What's the risk of failure? What, you'll be embarrassed? Risk of failure? How do you distinguish failure from learning? In your whole life, "failure" implies that it stopped, that the game stops. If it's part of a "You're failing and then you learn," then that learning is part of the moving forward. So that is what the process is like. Fail, learn, move forward. And constantly do that, because you're cutting-edge. You're going where people haven't been before, in inventiveness. That's exciting to those people. So that's a different kind of approach to life. It's a different way of being. -Ray Dalio

Juicy.

Code Red.

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