“We can never see past the choices we don’t understand.” — The Oracle
Ricardo Anguiano, my friend and former colleague, recently expressed frustration over the fact that life wasn’t long enough to be good at everything. What sort of cruel universe would deny him the ability to play scratch golf, perform as a concert violinist, and serve on the City Council, all while excelling at his job? Why should he have to choose?
I recently met an obviously talented entrepreneur (lets call him Albert) and asked him about his goals for his nascent business. Was he looking to make an adequate living with more control of his day-to-day existence than he’d have if he took a job for a big company? Would he prefer to have a business that steadily provided him a $1M/yr. annuity for life, or would he rather forgo the income stream for a chance to be a multibillionaire icon like Bill Gates, Jeff Bezos, or Mark Zuckerberg? His answer was that he’d like the chance to go big, but he wouldn’t want to endanger the business to do it. When I asked whether he had plans to raise a larger VC round after the initial angel round, he said he wasn’t sure; he thought an angel round would allow the company to reach break-even, at which point he could re-evaluate his options. In other words, he didn’t want to make a choice.
In mathematics, the Axiom of Choice is a mildly controversial principle of modern set theory that says that you can simultaneously choose elements out of any collection (even an infinite collection) of non-empty sets. But, my version of the Axiom of Choice is simpler: you always have to choose.
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The Wall Street Journal recently published an article entitled “Is Silicon Valley Funding the Wrong Stuff?” The piece suggests that VCs may be encouraging entrepreneurs to work only on silly ideas that seem appealing to young, techie denizens of the Bay Area rather than “the kind of basic research and development that transforms lives, in fields such as energy, medicine or food safety.”
Of course, when you use a word like “wrong,” you need to have a clear idea as to the basis for making that judgment. A temperance advocate might think that investing in Brown-Forman, maker of Jack Daniels and other spirits, is “wrong” — but an investor who thinks that the stock is undervalued might think such an investment is “right”. (Full disclosure: I’ve owned a few shares of Brown-Forman for over a decade. That’s a story for another post.) In this case, the article questions whether investors are making investments that are likely to offer strong financial returns. If investors are attracted to gimmicky, faddish products, they may incentivize entrepreneurs to create start-ups that are likely to fail — which will result in poor returns for those same investors.
As an investor, I certainly don’t want to invest in flash-in-the-pan junk. But, how much basic R&D do I want to fund? And, as an entrepreneur, just how “innovative do” I want to be? Am I the sort of person who wants to make a fundamental break-through, or the kind of person who wants to make an incremental improvement?
If building a business were a video game, would I want to beat the game in the easiest mode — or, would I play in the mode where you have only one life, the bad guys have weapons that kill you with a single shot, and there are no power-ups? Especially if I knew that winning the game in the hardest mode unlocks special bonus levels?
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