What I Believe Most

Ten things that guide almost everything I think about in business and investing:

Investing is a game of probabilities, and almost all probabilities are less than 100%. So you’re going to be wrong and lose sometimes, even when the odds were in your favor. The late investor Peter Bernstein: “You just have to be prepared to be wrong and understand that your ego had better not depend on being proven right. Being wrong is part of the process. Survival is the only road to riches.”

History is mostly the study of unprecedented events, ironically used as a map of the future. Stuff evolves, tastes change, paradigms shift. So what worked in the past may not work today or tomorrow. The most valuable part of history is studying how people behaved when something unprecedented happened. It’s the most consistent thing over time.

The coziest spot is under the warm blanket of ideology. It offers easy answers to difficult problems. But, man, is it dangerous, especially in an adapting world. Great stuff happens at the intersection of “Confident enough to take a stand” and “Humble enough to admit when something I don’t want to be true is true.”

The best results happen when your interests align with others’. This sounds obvious but few business models truly scratch every stakeholder’s itch. Once you view businesses as a collection of people trying to solve each other’s problems, with some groups that can be taken advantage of for a period of time but never all of the time, you see investments mostly through the lens of aligning interests of everyone involved.

Many failures can be traced to the pointless pursuit of arbitrary benchmarks. Most notable is the calendar, which pushes companies and investors to cut corners before the earth completes its rotation around the sun. Swap out the sun for another celestial body and you’ve described a mental illness. Another is index benchmarks, which use something short-term and broad (industry performance) to guide something long-term and specific (a strategy to meet your goals).

The worst business and investing traits are ego, single-outcome modeling, and pessimism. The first two are based on the idea that 7 billion people trying to improve their lives will adapt their activities to the way you want the world to work. The third is the idea that there aren’t 7 billion people trying to improve their lives.

Incentives are the strongest force in the world. They cause otherwise good people to do awful things, and vice versa. They’re also the most misunderstood and counterintuitive force in business. Brent Beshore: “I want to know what motivates people. The problem is not that they won’t tell me, because they will. The problem is that none of us know the truth, even about ourselves. The only thing to do is watch someone over a very long period of time and try to piece it together.”

Investors are always looking for factors that select for above-average investments. To me, the best one is “Things that feel uncomfortable to the point of crazy.” It doesn’t work every time, of course. But in hindsight the root of most successful investments is the guts to back something that made little sense to others. Lack of enthusiasm or understanding among competitors is what seeds the potential for something big.

Amazing things rarely happen outside of teams. And teams only work when everyone is confident enough to push back when they see problems, yet understands that diverse thinking often means moving ahead with things you disagree with. It is a hard balance to strike.

There are five sources of edge: 1) Learn faster than your competition, 2) empathize with stakeholders more than your competition, 3) communicate more effectively than your competition, 4) be willing to fail more than your competition, and 5) wait longer than your competition.


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