Derek Thompson

Supported by Greenhaven Road Capital, finding value off the beaten path.

Derek Thompson spoke (March 2017) with Barry Ritholtz about a stew of ideas from his book Hit Makers. I enjoyed the book and it will make further appearances here, but we’ll just focus on Thompson’s talk with Ritholtz.

Prefer to listen? iTunes, Overcast, or Soundcloud.

Ready?

Barry quotes the book, “Content may be king but distribution is the kingdom,” and asks Thompson to explain.

Content is king is, “so obviously not true. Some of the biggest hits in music and movie history depended overwhelmingly on distribution mechanisms to get out to the public.”

In the book, he cites the greatest show of all-time and brings up their run-up bump up.

We get dated graphics and a timeless lesson. It is both the sizzle and the steak that matter. For better and worse.

Jonah Goldberg lamented to Russ Roberts, “Part of the problem is the corruption of mass media where these politicians know they can keep their jobs with a good media campaign rather than writing legislation.”

Legislators do a better job selling us about their job than legislating for new jobs. This is part of all jobs, only the degree changes. Lee Child said that after a new Jack Reacher book comes out he’ll have dozens of fans come up to him and say I’m your biggest fan, when is the next book out? To which Child responds, Last week. “Eighty percent of marketing,” he told Andy Martin, “is just reminding people that the book is out.”

Josh Wolfe emphasized that selling and building are crucial elements for entrepreneurs. Bethany McLean noted, “This idea of storytelling in business is amazing because of the power that you can create something from nothing with a great story.”

In 2018 it’s the story of Elon Musk. How much of Tesla is sizzle? How much is steak? Jim Chanos isn’t biting:

“I think the Tesla stock might not be worth anything. To us, it is one of the bellwethers of this market. It is a hopes and dreams stock. Investors have pinned their hopes and dreams on this stock and on this CEO, who has done a very good job promoting that vision. The problem is that it is an automobile company.”

In his book, Thompson used novel stories and new studies. There were few socio-anthro-psycho-logical retreads on the tires that move his book.

In one study, Stanford professors looked at Reddit successes. They found images which were shared about seven times each, but who only ‘took off’ once or twice. What happened if you kept the pictures the same but changed the title?

Their finding is one of Thompson’s key points. Things need to be different but not too different. Or, things need to be the same, but not too similar. There is a goldilocks zone for what people want. For example:

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Bad titles for this Civil War caricature were, “I’m not sure I quite understand this picture,” and “So I was looking for a picture of a bear…” Those titles are cold. They are bad fits for the community. The hit? Naturally, “‘Murica.”

Though that’s not the end of the story for laser-eyed-Abe. This picture’s score rocketed a second time with the title, “God bless whoever makes these..,”  Good titles are like good jokes; not too short and not too long and landing with the audience.

How does something land? Ritholtz asked, “What do you do to make things people want to talk about?”

“When I write an article, for that article to go big, it can’t just be appealing to my first audience, my first level of readers. They can’t simply say, ‘Ok. Cool.’ Click out, and never talk about it again.’ I need a handful of them to want to pass it along because they think that passing along that article will make them – my readers – look smart, morally in touch, surprisingly counter-intuitive about what is true about economics.”

“To create something that your consumers feel will make them look good if they pass it along.”

Thompson wants his readers to signal something. Whether it’s explanations from Geoffrey Miller, Rory Sutherland or Robin Hanson, we all signal. Kayak founder Paul English wanted to create a purple Swatch that cost ten thousand dollars. The money would go to charity, but people could still signal.

Maybe hits are more important than ever. Thompson’s examples mostly come from what Brian Arthur called the two economies.

  • The innovation economy which is defined by increasing returns, positive feedback, heavy on know-how and light on resources.
  • The optimization economy which is defined by bulk processing, genteelism, and heavy on resources and light on know-how.

Arthur wants managers to be aware of their economy. Innovative economies require commando units who can move fast and break things. Optimization economies require hierarchy and baby steps. Thompson points out that Reed Hastings of Netflix is really a venture capitalist.

Maybe that’s why Marc Andreessen enjoyed their conversation so much. Can you tell who said what?

  1. “There’s this counterfactual universe where Netflix got disrupted by some other company that created streaming and made DVD rentals irrelevant.”
  2. “We don’t need to be associated with just one type of content/investment.”
  3. “As we grew we tried to have less rules, not more rules.”

What Marc and Reed are trying to do is be different. Everybody is a contrarian is one of Ritholtz’s favorite quotes. Life of Brian, one of his favorite moments.

Tweet and repeat, we are all individuals. Life of Brian uses comedy to define the absurdity. Being funny shows a deep understanding.  Jason Zweig said about writing The Devil’s Financial Dictionary, “The ability to define a term in such a way to be cynical or funny is a measure of your own skepticism.” That is, you understand both sides. B.J. Novak said, “You really learn something when you parody it.”

Rory Sutherland takes it from entertainment to sales.

“Behavioral economics is to some extent, the study of differences between, how we think we choose and how we really choose. Comedy seems a close relative. Not all, but some is partly about context, it’s about the extraordinary effect of context on how we behave. In one context twenty dollars can feel like fun and in another a monstrous extravagance.”

“The comedian is a bit like the anthropologist, they have to be this kind of alien outsider who’s capable of observing things at a distance, with a degree of detachment.”

A final quote that struck Ritholtz from the book. “A reader both performs the book and attends the performance. She is conductor, orchestra, and audience.” Thompson replied that “…books are ours. They belong to us in a way that movies don’t.”

Blog posts are like that too. Thanks for reading. The three quotes went; Andreessen, Hastings, Hastings.

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Mike Reiss

Supported by Greenhaven Road Capital, finding value off the beaten path.

We’ve focused on the Simpsons and used them to show the endowment effect:

Today we’ll highlight Mike Reiss; writer, showrunner, and jack-of-all-trades for The Simpsons. In Springfield Confidential Reiss admits that he wasn’t the funniest staffer (but definitely in the top ten) and tells many great stories.

The Simpsons were expected to fail. In a writer’s room survey every writer said they thought the show would last six weeks, except for one. He guessed thirteen. “I took the job but didn’t tell anyone what I was doing,” Reiss wrote.

With this attitude, they made something new. “Maybe that’s the secret of the show’s success: since we thought no one would be watching we didn’t make the kind of show we saw on TV; we made the kind of show we wanted to see on TV.”

Much like Alice Waters, this was something that no American enterprise had ever done.  Investor’s know Mark’s maxim to be different and be right, but how does someone go about this? Reiss’s career is a clue.

“Although we bounced from job to job (Airplane 2, Alf, Johnny Carson, Sledge Hammer, It’s Garry Shandling’s Show) and took whatever came our way, all these sitcoms taught us valuable lessons that we were about to use on The Simpsons.” Reiss and writing partner Al Jean also wrote for the Harvard Lampoon.

Actors like Arnold Schwartzenegger and Jenna Fischer advocate for reps, reps reps.  Brian Koppelman’s does too. Jim O’Shaughnessy said that to understand art, “you want to look at tons of art.”

One kind of art is graffiti and former NYPC officer Steve Osborne wrote, “To normal people, graffiti looks like some nonsense written by a two-year-old child with a crayon, but to the trained eye it contains a wealth of knowledge.”

An investor or writer can figure out if something is good if they develop “a cold eye to the work.” Koppelman said of this objectivity, “If you want to be a screenwriter read a thousand screenplays and watch a thousand movies and then you will have a frame of reference for the work if you’re honest enough with yourself.”

Reiss built a reservoir of experience. At The Tonight Show, he wrote sixty jokes a day. He learned, “night after night, one out of every three jokes would bomb.” Reiss also learned to find secrets.

Both Peter Thiel and Ben Horowitz have addressed the value of secrets. On the a16z podcast, Horowitz told this story about Brian Chesky:

“He wondered why there were even hotels. He researched hotels and finds out that hotels have only been around a hundred years. Before hotels, there were inns and beds and breakfasts. You’d roll into town and there was some old lady who would rent you out a room.”

“The reason why that starts to lose out to Hyatt, Hilton and those guys was that you didn’t know what you were going to get at the inn.”

“So Brian said, with the internet, I could rate every room, every air mattress, and every house to a finer degree than the Hilton can. I can get the best of beds and breakfasts and hotels in one product.”

“That was the secret he learned along the way.”

Reiss’s learned secret was the punchline.

“I’m not a spiritual man. I don’t believe in ghosts or astrology or reincarnation. And if the Dalai Lama is so godlike, why does he need glasses?… I have only one supernatural belief: No matter what the setup, there’s always a perfect joke for it. It may not be a great joke, but it’s always the right joke for the moment: it’s there in the universe waiting to be discovered.”

With Reiss’s attitude and experience, The Simpsons succeed. They also had a good culture. Reiss reprimands the reader, “if you want dirt, dig a hole.” Except for a hire or two, the show had very few assholes. Even better, they had fewer executives.

The problem with television executives is that they step outside their circle of competency and violate a decentralized command structure. Reiss wrote:

“When Homeboys in Outer Space premiered, the Los Angeles Times called it ‘the best new comedy of the season.’ And then the executives got involved: they shot down every story pitched to them and assigned us a supervisor who told us, ‘I come from soap operas. I don’t get comedy.'”

“The true secret to The Simpsons’ success is the valuable input of network executives. We don’t have any.”

Beyond the stories in the book, Reiss repeatedly address the question Why/How did The Simpsons work? Reiss repeatedly gives the same answer; a variety of reasons. Their great writers. There were no actors (“Actors in live-action shows get bored doing the same role week after week.”). There was a meritocracy, (“The writers’ room is a democracy where you vote with laughter – like a kibbutz, only more Jewish.”)

 

Thanks for reading.

 

Stakeholders

Supported by Greenhaven Road Capital, finding value off the beaten path.

This pdf, or podcast; iTunes, Overcast, or Soundcloud, offers examples and stories about thinking about stakeholders.  If you like the blog, you’ll like this. It’ll take about 20 minutes to read.

From the introduction:

A stakeholder is anyone or anything you commit to. Stakeholders take many forms but are denominated in one currency; time.

Financial costs are stakeholders. Each month of Netflix requires some amount of work, which you get paid for because of the time you’ve spent training.

Relational costs are stakeholders. Each mother or brother or spouse or neighbor is a relationship and relationships grow or whither when watered with time.

Experiential costs are stakeholders. Each job or hobby has travel time, participation time, preparation time, recovery time, and so on.

Hopefully we – mostly – choose our stakeholders. We pay for Netflix. We select a partner. We pick our jobs. What this ebook will attempt to do is enhance our point-of-view regarding stakeholders.

One weekend morning my ten-year-old daughter wanted cereal. I told her ‘sniff the milk’ before she poured it. What?
‘Sniff the milk!’ What’s that?

She didn’t have a frame of reference for spoiled milk. With a swift sniff, I showed her.

That’s what we’re going to do here. Instead of milk, we’ll think about stakeholders. Subscription magazines that pile up, unread. Weeks go by between watching Netflix (or HBO). Timeshares expire. Some stakeholders are treacherous. Some stakeholders are happy tradeoffs.

 

Thanks for reading.

Jenna Fischer

Supported by Greenhaven Road Capital, finding value off the beaten path.

Jenna Fischer, Pam from The Office, has written a book, The Actor’s Life: A Survival Guide. Fischer is another overnight success that only took eight years. Sam Walton deflated the overnight success cock-and-bull story like this, “It’s true that I was forty-four when we opened our first Walk-Mart in 1962, but the store was totally an outgrowth of everything we’d been doing since Newport.”

Walton started his career as a franchisee, and only after a leasing miscue started Wal-Mart. This journey is more work for more reward with more uncertainty. It was the same for Fischer, who advised the reader:

“I had an acting teacher who used to say, ‘If you can think of anything you’re passionate about besides acting, do that. Your life will be better for it.’ And while it may sound harsh, I actually think that’s very good advice.”

On one level, Fischer’s book is a how-to, hands-on, up-close manual for someone who wants to be an actor. On another it’s about a formula for success; skill + perseverance + luck. Fischer wrote:

“The journey to become a working actor is a long and difficult one that requires a lot of hard work and perseverance. But it also requires something more obscure and out of your control: luck. Without a little luck on your side, you can be the most talented actor in the world and not achieve success. That’s the hard truth about this profession.”

That’s why Fischer, like Sam Hinkie, the Houston Astros, and Amelia Boone focus on the process, not the outcome. Fischer wrote that this may be the most important bit of advice:

“Your job as an actor is to create a consistent body of work. It’s not to book jobs. It is not to worry and beat yourself up over every job you didn’t book. Those decisions are out of your control. What is in your control is your approach to auditioning.”

While hard work on valuable skills + perseverance + luck may not be the right variables for all jobs, it was right for Fischer. Let’s see how.

Hard work.

“If you just want to be famous, become a reality star. If you want to be an actor, study acting.”

Fischer’s first job was in a commercial for the UCLA Medical Center. Her first line was, “Protection? Protection from what?” But everyone has to start somewhere. “I needed credits and this was a credit. Even better, it was real on-camera experience with a lot of dialogue.”

Fischer’s a fan of Steve Martin’s advice to be so good they can’t ignore you and (probably) also likes Cal Newport’s academic follow-up.

Newport’s advice is to pursue excellence, not passion. “Put your head down and plug away at getting really damn good,” Newport wrote. Once you’re good you have career capital, in Michael Caine’s words, these are the great roles.

Fischer needed ones that paid the rent.

But she kept improving. She graduated with a degree in theater. She moved to Los Angeles, and then after a year of waiting for her break, (it never came), she acted in anything that came along. She also took more classes.

“Training is not just something you do when you are first starting out, either. It should be an ongoing commitment. Professional athletes train in the off-season. So should you.”

Perseverance.

“The trick to surviving the big move and your first year as an actor is finding the secret value of shitty situations.”

Though Fischer is funny in The Office, the book is not. But it’s not supposed to be. If an aspiring actor read this, compiled a checklist, and followed it — it just might work.

Fischer does tell some stories, some of them are funny, and with hindsight, each had a silver lining. Crappy catering jobs fed her. Temp work was flexible. Secretarial work, well, that was perfect.

“I spent that year (after college, before Los Angeles) working as a secretary/receptionist in a small business that specialized in selling marine audio equipment. I made coffee, answered the phones, helped the salesmen with their PowerPoint presentations, did the filing, processed invoices, and handled customers returns. Essentially, I was Pam.”

Elizabeth Gilbert had this realization in advance. “I need to write what I know, but I don’t know anything…I created – really intentionally – my own postgraduate MFA program.” Gilbert worked in a diner, collecting more character quirks than generous tips. Then she would hit the road and travel. One trip led to her Wyoming working as a trail cook. That turned into her first published story.

But it won’t be easy. Fischer wrote:

“In addition to talent, training, and hard work, living the life of a working actor requires a very special emotional constitution. You must have a strong will, you must be determined, and you must be able to withstand countless rejections without becoming depressed, cynical, or self-destructive.”

Perseverance is what Ken Burns attributes his success to, “I’m sure there are a lot of more talented filmmakers than me, with really great ideas, who just haven’t followed through.”

Luck and serendipity.

Luck, wrote Michael Mauboussin, cannot be changed yet luck changes our lives. Reed Hastings said that his lucky break was serving coffee, where he saw a new style of computer architecture. “That changed my life,” Hastings said.

So if luck is some uncontrollable variable what do we do? Fischer’s advice is to increase your serendipity.

“…you’re much more likely to be in the right place at the right time if you’re busy doing showcases, plays, and taking classes. Chances are you won’t be in the right place at the right time if you’re spending your days eating Lucky Charms your couch. Trust me, I tried.”

She had to get out there. At first, this was hard. She came to Los Angeles to be an actor, not to sell tickets for other actors or build sets for other actors or support other actors. But it was the other things, getting drawn into new groups and growing in new ways that were the real start of her journey.

Scott Adams writes that life is like a slot machine. Eventually, there’s a payout but you gotta be in it to win it. Only, Adams notes, life is even better, all it takes is time and effort to play the game. It takes hard work and perseverance then a little bit of luck. That’s Fischer’s story.

 

Thanks for reading.

Opportunity Costs

Supported by Greenhaven Road Capital, finding value off the beaten path.

“The cost of one modern heavy bomber is a modern brick school in more than thirty cities.” When Dwight Eisenhower gave his farewell address in 1961 he warned against the military industrial complex and vividly laid out what else we might spend the money on.

In the paper, Opportunity Cost Neglect a trio of Yale professors and two others commend Eisenhower for his language. Most people are vaguely aware of opportunity cost, and its calculations aren’t difficult, yet unless the costs are vivid and explicit we won’t weigh the decision.

One of the paper’s authors wrote:

“This customer was frozen in indecision between a $1,000 Pioneer and a $700 Sony, and the salesman intervened, framing the choice as follows: ‘Well, think of it this way—would you rather have the Pioneer or the Sony and $300 worth of CDs?’ Remarkably, the decision that seemed so difficult just moments before was no longer even close—the Sony was at the cash register moments after the word CDs escaped the salesman’s mouth. A big pile of new CDs seemed far too steep a price to pay for the Pioneer’s slightly more attractive speakers.”

In a recent podcast, Rory Sutherland put it this way:

“I made the decision to underspend on property on the grounds that nearly everybody else was effectively maxing themselves out. The default behavior of housing was to buy as much as you can borrow. That assumes the greatest return on happiness comes from property expenditure. No one really looks at the opportunity cost. If you’ve got a massive mortgage there’s a holiday you can’t take there are children you can’t educate.”

When considering a purchase try to be creative when what else you could buy.

  • It’s not just Apple or Samsung.
  • It’s Apple or Samsung or ‘dumb’ phone and two-months of groceries.

Actually, the authors note, if the alternative isn’t exciting or enticing people tend not to choose it. A better comparison might be a ‘dumb’ phone and a new television.

 

Thanks for reading and watching.

Stewart Butterfield

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Supported by Greenhaven Road Capital, finding value off the beaten path.

Stewart Butterfield spoke with Guy Raz on the How I Built This podcast about Flickr and Slack.

We’ve highlighted other HIBT episodes; Systrom & Krieger, Jenn Hyman, Ron Shaich, Tony Hsieh, Katrina Lake, Troy Carter, and Yvon Chouinard. Roz has quite a roster.

Butterfield succeeded because he found customers where they were, not where he wanted them to be. In the words of Lady Gaga, “I will continue to become whatever it is [the fans] would like for me to be.” Butterfield’s online game turned into Flickr. Another online game turned into Slack. The first pivot came because the game was too hard.

“We had been working (on this game) for over a year and it was clear how complex this was going to be and we realized we were never going to be able to finish it. We were desperate for something else that we could complete in a shorter amount of time – and that thing ended up being Flickr.”

It was a smart choice with a helping of Google good fortune.

“Around that time Google had bought blogger and they didn’t have a way to host photos online. When someone asked how, they said to use Flickr.”

Tom Brokaw had similar luck, showing up in California for the genesis of a gubernatorial candidate named Ronald Reagan.

Flickr also had a great product. They asked people to become customers and they did. This is something many failed startups failed to do.

After a Newsweek cover (more on this in a bit) and a buyout, then earn-out, from Yahoo (thirty-five million) Butterfield left. He says of Yahoo. “It was horrible at the time but I did develop character.”

Butterfield did hear some helpful stuff. “I learned a lot more than any MBA program…I was involved in things I never would have been involved with otherwise.”

People marvel when Alice Waters explains she never went to culinary school. Instead she traveled, hitchhiked, visited galleries and concerts, and ate at any little restaurant that looked right. As we’re often reminded; school is not our only education.

Butterfield vested, left Yahoo, and noticed something was different.

“Now there was an order of magnitude more people online. In 2002, the majority of people didn’t have internet access or computers at home.”

Let’s try the game again!

It was called Glitch and Butterfield described the bizarre fantastical world as “Dr. Seuss meets Monty Python.” They fundraised. They got customers to say shut up and take my money. But they didn’t get enough. Glitch had “a leaky bucket.”

“We never found the magic formula that would make it work economically. It would have been a fine lifestyle-business, but it was never going to become the type of business that would justify seventeen and a half million dollars of venture capital.”

Andy Weissman reminds founders that when a business pockets venture capital money, they shoulder the venture capital business model. Weissman said, “an investor like me needs to make 10 or 100x on our money, which means we need these companies to be really large businesses for us to return money to our investors…You have to believe it’s a big business. You are comfortable taking big risks, including existential risks around managing that business.”

Butterfield called an all-hands meeting. “It was humiliating. There was a real sense I had failed all these people.” They shut down the game. They coached, counseled, and connected their employees to new jobs.

Then the aha moment arrived. Butterfield doesn’t say if was a mental anvil or inspirational breeze, but the forces behind it were built from years of experience and a deep understanding of working on teams that built software.

“While Glitch wasn’t successful as a business, we were extraordinarily productive. There was this system of communication we developed, we didn’t think of it as a thing, it didn’t have a name, we didn’t talk about it, it was just how we happened to communicate. It was built around the concept of a channel.”

And Slack took off like a rocket ship!

Well, no. Kind of.

“What we imagined was an easy sell was met with cold stares.”

What gives?

“We had been working like this for years and the advantages were obvious, they were so obvious they were hard to articulate. When we tried to convince our friends and other companies they said, ‘Why would we do it that way?’ And, unlike most software you can’t unilaterally decide to use Slack – everyone has to buy in.”

Butterfield and his team needed to find the IDEO style of empathy. Ali Hamed said, “that empathy translates to features and functions that understand the seemly non-pragmatic nuances of a given industry.”

They retooled the product. They got feedback. They empathized with customers. They got out of beta. “Within three weeks of our official launch we sold a million bucks worth of Slack.”

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Butterfield posed for another magazine (Fortune this time) and it was a huge help. The cover and the word-of-mouth spawned a virtuous loop.

“We were growing really quickly, and because of that the press would write about us. Because the press wrote about us, investors were interested. Because investors were interested, we were able to raise all this money. That got us more headlines. It got us more interest from great applicants.”

It’s the Increasing Returns Economy.

 

Thanks for reading.

 

 

Randy Komisar

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Supported by Greenhaven Road Capital, finding value off the beaten path.

Randy Komisar, entrepreneur & Kleiner Perkins VC, spoke with Jason Calacanis on the TWIST podcast about the “importance of cultivating luck as a skill & accountability over apology, how VC has changed, the future of the market & the enduring wisdom of investing in talent.” We’ll highlight a few parts of the interview. Ready?

Komisar is another advocate for the talent stack and suggests entrepreneurs be able to build, brag, and bounce back. In an August Marginal Revolution post, Why Does Tech have so Many Political Problems, Tyler Cowen wonders if part of Silicon Valley’s problem is, “1. Most tech leaders aren’t especially personable. Instead, they’re quirky introverts. Or worse.”. Komisar said that a key skill is communicating your idea in a compelling way.

This is one of Elon Musk’s skills. “The marketplace was not going to capitalize two (electric car companies) and Elon is a master at conveying optimism and potential to investors. He was able to bridge the gap on the financing side that others couldn’t get to.”

Josh Wolfe said – ideally – “You need a storyteller and you need an operator.” If they aren’t the same person, they need to be two people who think alike.

Sometimes the storyteller is too good. Some people think Musk is selling more sizzle than steak. Jim Chanos says Tesla doesn’t sell cars so much as hopes and dreams and visions.  But maybe that’s what you have to do. Patrick O’Shaughnessy said to Bethany McLean, “This idea of storytelling in business is amazing because of the power that you can create something from nothing with a great story.”

It’s okay to drink the label? Yes.

In 2009, Komisar wrote Getting to Plan B, “That book often gets interpreted as, if you don’t believe there’s a correlation (between business plans and business success) why do them?”

This is the wrong conclusion, and misses the point. “I need to see a business plan because I need to see how you think. That’s the linga franca of the business.”

Randy Komisar wants to read your writing to follow your thinking.

Stephen King wrote, “Writing is refined thinking.”

Maria Popova said, “Writing is thinking in public.”

Guy Spier said, “The more conscious we are of what we’re doing the better it is, and writing is a great way to be more conscious of yourself.”

David Salem added, “I think that clear writing and clear thinking are synonymous.”

That’s why Komisar wants to read business plans.

Venture capital has changed. It’s gotten more competitive. “What’s going on (in 2018) from an economic perspectives doesn’t seem rational,” Komisar says. Twenty years ago the base level of a fund could return 1-2X and “have some huge hits on top.” Now, “You’re going to make your money only on your black swans.”

Venture capitalists now confront Michael Mauboussin‘s Paradox of Skill. Michael Batnick simplified it as this, “Imagine a team of Lebron James’s playing a team of Lebron James’s.”

Twenty years ago a venture capitalist “didn’t have to be brilliant to make a lot of money.” You just had to be a little better than average because you had great deal flow.

Now the venture capital advantage – if multiple is your metric –  is size. And bigger ain’t better. “I think what you will see is syndicates of angels and smaller venture capitalists start to produce great multiples with smaller numbers.” Calacanis agrees, “That’s definitely where we live, higher multiples, smaller dollar amounts.”

Warren Buffett does too, noting that his early partnership deals (and returns) were some of the best.

The fail fast maxim is a contextual point often taken out of context. Komisar summarized it well, explaining that entrepreneurs need to, “Quickly discover your business.” Most businesses die from indigestion not from malnourishment. “When you’ve got too much capital you’re insulated from market information.”

The business owner needs to find the business’s customers.

Ron Shaich of Panera did just that. Before selling bread bowls, Shaich sold cookies. “We took the Tollhouse recipe right off the bag and I would stand out front and hand out samples. Then we would adjust the recipe based on what I would learn talking to customers.”

Then the ah-ha moment for Panera came, again, when he talked to his customer. He’d be working the counter and a customer would ask to have their baguette sliced.

“You didn’t have to be a Harvard MBA to say, the real thing here is that the baguette is not the end, it’s the platform to sell sandwiches. My whole view of business is that if you really focus on listening and seeing you’ll learn amazing things.”

A few more quotes from Komisar.

“I look for entrepreneurs who are super-optimistic but not delusional.”  Brian Koppelman said there’s a thin line between art and delusion. How do you tell the difference? Koppelman says if you’re smart, rational, and hardworking – “If you want to be a screenwriter read a thousand screenplays and watch a thousand movies and then you will have a frame of reference for the work if you’re honest enough with yourself.” – you’ll end up on the right side.

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Entrepreneurs, like labradors, are over-enthusiastic.  “They know where they have exaggerated their numbers or opportunity. I’m not talking about lying. Lying crosses a different line. But they know where they’ve pushed these things.”

But they need that excitement. Bad businesses, said Bethany McLean, “are always a mixture of self-delusion, rationalization, greed in the service of ego – not money, maybe some finality, maybe some outright corruption, maybe even some idealism.”

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When Calacanis asks if Komisar prefers resiliency or domain expertise, he says, “Resiliency hands down…It seems like the people who win aren’t always the ones with the best domain expertise or who make the best product but the ones who don’t give up or figure out a way to not fail.”

That’s a good one to end on. thanks for reading.