5 Things I Learned From Chris Dixon

Chris Dixon (@CDixon) joined Shane Parrish (@farnamstreet) on The Knowledge Project podcast to talk about venture capital, private companies, and how Silicon valley works. I found Dixon well spoken, warm, and a really smart guy. These notes will be in two parts. Part one – this part – is 5 things I learned from Dixon. Part two will be all about the weeds of venture capital.

Our table of contents looks like this; modes of workmental models meets physical psychesmaybe a16z should be z16aautomation (explained by dinosaurs)the 3rd good use of Twittera reading list.

Ready?

Modes of work.

Dixon, like others, defines his work in terms of modes. One mode is meeting with entrepreneurs that a16z might invest with, another is to work with entrepreneurs they’ve already invested in. “It’s a lot of meetings,” Dixon says.

He mentions the Paul Graham post, Maker’s Schedule, Manager’s Schedule as an example of how his career has changed. Dixon began as a coder and followed a maker schedule. Now he’s a manager. Graham writes that the manager schedule is what we tend to think of, one with hour sized blocks to be filled. Makers on the other hand, think in terms of half a day or full days for their work. This creates a problem Graham writes:

“I find one meeting can sometimes affect a whole day. A meeting commonly blows at least half a day, by breaking up a morning or afternoon. But in addition there’s sometimes a cascading effect. If I know the afternoon is going to be broken up, I’m slightly less likely to start something ambitious in the morning. I know this may sound oversensitive, but if you’re a maker, think of your own case. Don’t your spirits rise at the thought of having an entire day free to work, with no appointments at all?”

Creatives work around this using modes of work (h/t to @MikeVardy for sharing this term).

Adam McKay talked about this when he spoke on the Slate’s Working podcast. John August said the same thing about writing. Neil Gaiman trots off to the woods to write. Stephen King also outlines his modes of work. The book Daily Rituals has many examples of makers who carve out time for modes.

Each makers has found that their best work happens in large chunks, and they structure time for those as best they can. Graham notes – and Dixon lives – the challenges of a manager.

Mental models meets physical psyches.

Silicon Valley is great, says Dixon, but it’s not the only place you can make stuff. 

“What’s great about places like New York and Los Angeles is you’re surrounded with people in the arts and media and all kinds of different industries, and that creates a different creative dynamic,” says Dixon.

The value of mental models has been trumpeted by many. Tren Griffin and Michael Mauboussin speak about mental models quite a bit. So does Sanjay Bakshi and  Phil Rosenthal suggests there is value in different creative outlets. 

We can also hack our way to better models. Your models plus my models equal something great than the sum of its parts. Each set is a filter that further refines ideas. 

Dixon suggests another hack, a new place. A geographic change can help you think in new ways. Physically moving could be helpful as a change of addition or subtraction. Dixon speaks to the advantages of other points of view, Michael Mauboussin says that it might help to “quiet the cacophony of Wall Street.” Either way can work for a way to think different. About being different, how is a16z different?

Why a16z might be called z16a.

When asked why a16z has succeed Dixon says, “we flip the model and think of ourselves like a service firm.” They’re different.

Being different is paramount to success. Brett Steenbarger said, “you don’t find generic super-successful traders.” Naveen Jain advised people to ask themselves, “when everyone is thinking one way, how can you go about thinking in a slightly different way?” Casey Neistat said, “the biggest waste of energy and resources on YouTube is creators trying to copy and be exactly like someone else.” Gary Vaynerchuk says he likes to zig when everybody else will zag. 

Dixon says that a16z is different. Rather than simply invest money, they help companies along the way (hence so many meetings). They help hire people, recruit, and figure out market fits. All this has given them a competitive advantage.

When Parrish asks if they’ve seen other companies copy them, Dixon says older firms haven’t, but newer ones might. It wasn’t a significant part of the interview, but it caught my attention. Why newer but not older? 

(Begin speculation).

Dixon doesn’t get into the compensation structure (and I couldn’t find it online), but it sounds like the a16z team earns their money differently. I’m guessing they get more upside in the long run and fewer guarantees in the short. Here’s why that matters.

Existing firms that don’t have this model won’t copy it because it’ll mean a short-term dip in earnings. And people hate to lose things they already have. The psychological term for this is loss aversion and here’s how it works.

When people have something – or even imagine having it – they feel more strongly toward it. Richard Thaler did wonderful research on this. Thaler walked into his classroom and handed out coffee mugs to half the students. Then he asked the mug owners to write down what they would sell the mug for, and the non-owners to write down what they would buy the mug for. 

He collected the slips of paper and noted something interesting. They sellers wanted 2X what the buyers offered AND not a single buyer was more than a single seller. That is, no deals could have been made.

We don’t like to lose what we consider ours. Firms other than a16z face this challenge. Those employees don’t want to lose money they already have or expect to have. 

The second way that a16z successfully differentiated is that they are committed to the entrepreneurs. “Our interests are in line with entrepreneurs,” Dixon says.

It seems like a16z has “skin in the game,” which is a powerful force. Casey Neistat says that the best part of working for himself is to have ownership of the outcomes. Seth Godin commented on this as well saying, “change happens when people take the blame but giveaway the credit.” My guess is that a16z has applied this to advising entrepreneurs where others have not. It’s their competitive advantage.

(End speculation).

Automation as explained by dinosaurs.

Toward the middle of the interview Parrish asks Dixon what he thinks are some new ideas that will gain traction. (Steven Kotler and others have given their own predictions for the future.) Dixon says; virtual reality*, digital currencies, and automation are areas he thinks will be more popular.

“A lot of automation doesn’t look like automation,” Dixon says,  “it just looks like software.” Let’s pause that thought and watch this awesome video.

That video points out that we only notice bad computer graphics. Things that are awesome, that blend in naturally, we miss. It’s like when Judd Apatow and James Corden spoke about good and bad movies. If someone tries to do something unnatural it shows. That video demonstrates that the best CG, is CG we don’t even notice. It supplements the movie.

Self driving cars is a big automation goal, and we see its limits because it’s still unnatural. It’s like CG that’s trying to do too much. What we don’t remark on is checking accounts can make automatic payments. That’s good automation.

 

The 3rd way to use Twitter well.

Twitter can be a great tool if you use it well. Here’s what others have said:

The first way to use Twitter well is to be inspired and collaborate. Austin Kleon, John August, and Nicholas Megalis talked about the value of connnecting with other people.

The second way to use Twitter well is to check your conclusions. Jason Zweig, Tadas Viskanta, and Tren Griffin all suggested we generate conclusions from multiple perspectives, of which Twitter can be one.

The third way to use Twitter – courtesy of Dixon – is to have it work for you. “Essentially I have two thousand of the smartest people in the world finding information for me and telling me what to read,” Dixon says.

Dixon’s reading list.

Parrish ends the interview with common questions and Dixon gives a nice smattering of books to read. Dixon, like Michael Mauboussin and Malcolm Gladwell prefers physical books to digital ones. Some of his suggestions:

Godel, Escher, Bach is the one book Dixon has read that had the greatest influence in his life. “I was interested in computers since I was a kid,” Dixon says, “and this book tied together computers and philosophy and music and it really broadened my horizons.”

Anything by Daniel Dennett, Oliver Sacks, and Stephen Jay Gould is good too. “I used to read all of those popular science books,” Dixon says.

He also picked up The Martian by Andy Weir and recommends The Three-Body Problem, Elon Musk (“I thought was good,”), and Sapiens (“a really good book,”).

Thanks for reading, I’m @mikedariano on Twitter. Part 2 of the interview will be online Friday.

*One additional point that didn’t fit. When Dixon was talking about VR, he mentioned virtual tourism. My personal experiences differ from Dixon’s conclusion. Each trip leads me to a new thought, moment, or experience in a way that being online does not. The best example of this is boat captains.

I’ve been deep sea fishing (years ago) and snorkeling (2013), and both experiences included boat captains that made the trip so much more. The fisherman was gruff and funny and to my teenage self he seemed like he knew things about life I would never understand. The snorkeling crew had great British accents and told stories of the Cayman Islands we couldn’t get anywhere else. Neither of these was central to the experience, but each was a strand in the web of the experience. It seems like VR misses that. 

Traveling, as Tyler Cowen noted, is more than what you see. It’s how you feel, what you smell, and how you think. I don’t know how close VR will ever get to that.

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