To be Great, you have to Risk Looking Stupid: Big Swings Lead to Big Wins and Losses

Listening to the excellent “All in Podcast”, Chamath makes a great comment about Masayoshi Son over at Softbank. 

“People don’t seem to understand that if you are going to attempt to be great there are going to be moments when you look the exact opposite of great. You know The guy who takes the final shot is the guy who can miss the final shot. And here is the guy over his 50 year career has had some huge ups and downs. This is also the same guy who found a way to rip in 25-30 Million dollars and turn it into 125 Billion off of Alibaba. 

It takes enormous amounts of courage. It’s hard to put lots of money to work. The same person who can make 125 billion, is the same guy who can lose 30 billion.” 

And I think this reflects the greats in every single field of life. You have to take big risks and  take big swings. This is the case in Hollywood, this is the case as an investor in almost any field and is the whole game of Startups & entrepreneurship: the ultimate big swing and bet on yourself. 

I learned this in Venture Capital. If your portfolio looks safe, you are probably not taking big enough risks. You are not betting on the right industries, companies and founders. It’s pretty safe and easy to just invest on traction or the 2nd or 3rd time successful founder. This is unsurprisingly the strategy for many established VC funds and angel investors. And this is also why many of them don’t drive good returns on their investments. As investor extraordinaire Naval Ravikant states “The larger the herd, the lower the returns.”

Safety is risky. All my returns have come from betting on founders, geographies and sectors that were at that time seen as unusual, too risky and controversial. Looking back they were just misunderstood. This is what makes being great in VC so hard. Outlier startups drive all the returns. And you need a massive level of conviction. Plus have the courage and willingness to put money and action behind your conviction. Learn not to care too much what other people think. In fact, consensus can be very dangerous.

We should follow and do what the best capital allocators do here. As the founder of Amazon, Jeff Bezos wisely said: “We are willing to think long-term. We start with the customer and work backwards. And, very importantly, we are willing to be misunderstood for long periods of time.”