31st January 2021
Week 05/52
I've spent this weekend in Blenheim attending a Mounted Games Regional Teams competition. Add this to the list of fun sports you've probably never heard of - it's a branch of equestrian sport involving teams of five riders and a series of fast relay races on ponies requiring different skills, accuracy, teamwork and - most spectacularly - vaulting.
This has required two trips over the Whangamoas, and lots of time to think about what to write about this week. So I trust you are sitting comfortably...
🔄 (A)Synchronise
To repeat my warning from June last year:
I want to write much more about what we're working on at All Hands soon, but in the meantime here is a simple suggestion you can use right away…
The year has started for me with a bunch of meeting requests in my inbox. I must not complain - it's a first-world problem. However, to avoid repeating past mistakes I'm trying to be much more protective of my time. This is my new rule:
No external meetings without a specific agenda
That maybe sounds harsh, but I'm delighted with the results so far.
I've simply asked anybody who would like some of my time to explain in words specifically what they would like to talk about: what questions they have, what problem they are looking for advice on, what they have tried so far, what has and hasn't worked, what they've learned, what are their constraints, etc, etc.
The responses I've gotten so far have all been excellent, and have allowed me to do much more work asynchronously.
Often I can answer the questions with a link to something I've written previously. Or even better point them at somebody else who actually knows what they are talking about. And, if I can't, I at least have an opportunity to think in advance about the topic and come prepared - with the advantage that my responses will be much better than if I'm just put on the spot on a Zoom call.
Maybe some people won't bother to reply at all. It hasn't happened yet, but if/when it does I'm going to be generous and assume that is because they decided they didn't need to meet with me after all, having thought about their situation in more detail.
I recommend this approach to you. I hope you find it useful.
🤨 Under-Estimate
One of the things I like to think about are repeated lazy patterns in news reporting.
My favourite example are the stories that get rolled out whenever there is a Lotto jackpot.
As I wrote in Most People (with bonus links to old blog posts from 2008 and 2011):
It’s the same stories repeated every single time: the buzz of anticipation as the prize pool grows; the excitement of the “lucky” outlet that has beaten the odds and sold the winning ticket; and finally the winner, once identified, will inevitably tell journalists about all of the things they are going to spend their windfall on, while at the same time wanting to remain anonymous and/or continue with their existing life.
Interestingly, we never hear from the unlucky losers.
Sadly, there's no Lotto jackpot to entertain me this week, however my second favourite example is the way the news media report on the stock market.
Take this headline as an example, from November last year:
Meridian, Contact shares gain on optimism of Tiwai Point revival
That day there were likely many thousands of transactions that were completed on the market. Some people who owned shares decided to sell them and others who didn't decided to buy them. Every trade involved both a buyer and a seller, and the price agreed was by definition one that both sides were happy with. It's a more complicated story, but more accurate - there is no such thing as a share price, only a price at which shares most recently traded. If the price attached to the final trade of the day was higher than the price of the final trade of the previous day then we say the price has gone up.
Perhaps some of those buyers or sellers that day were speculating on future announcements about Tiwai Point, but I'd suggest it probably wasn't that many. Either way, in the article that all gets boiled down to investors who are "expecting a positive announcement about the smelter now that Prime Minister Jacinda Ardern has formed a Government".
Which brings us indirectly to GameStop.
There have been no shortage of hot takes on this story in the last few days. I'm very reluctant to add to them.
But there is one aspect of the reporting of this story which I think is worth noting, because I think it's a good example of a mistake that we make over and over again...
The simple version of the story involves two distinct sides. Consider the descriptors given to each of these in this New York Times piece by Kevin Roose.
See if you can tell which is which:
Crusading internet mob; hyper-online mischief-makers; self-described degenerates; reckless nerds; insurgents; amateurs; disillusioned day traders; hordes.
vs
Suits; elites; establishment; professionals.
So, yeah...
On Radio New Zealand, Jessie Mulligan had an explainer segment on his show, with guest Shaan Puri, which included this exchange:
Shaan: Retail traders, on this website, Reddit, who you know you just see a bunch of usernames, you don't know if these are 21 year olds in their mothers basement or they are sophisticated stock traders, but what we do know is they basically bankrupted a multi-million dollar hedge fund, and I can explain how that happened. But that's what caught my eye, I'd never seen a hedge fund over night taken out by a group of individual traders from a website.
Jessi: Who are most likely, let's be honest, most likely 21 year olds in their mothers basement.
Shaan: You know... probably, but not to be underestimated. That's the fun part of this story.
Ha ha, 21 year olds. Can't possibly be something we should take seriously. Except, oops, possibly a few hedge fund managers with some regrets about that at this point!
I'd wager that most people hanging out on r/WallStreetBets are more likely to be somewhat experienced stock traders (albeit it unprofessional ... for now) and older than they present, rather than 21 year olds living at home. However even if we overlook that point, how does forcefully trying to sort these people into "21 year olds" or "sophisticated stock traders" help explain what happened?
Niki Scevak at Blackbird VC talks about searching for people and ideas that are "temporarily unpopular". In other words, he's looking for the underestimated founders working on ideas that most people don't believe can be successful. Those are the potentially great investments.
Once upon a time I was one of those underestimated 20-somethings. This is how I wrote about this same observation back then:
We want an enjoyable and relaxed place to work.
We want to come to work.
We don’t wear expensive suits, or flashy ties.
We don’t sit in offices with walls or doors, although we’re cool with people wearing headphones when they need to concentrate on what they are doing or using a meeting room to make a private phone call.
We have some unusual things in the office – a pool table, scooters, graffiti on the walls, etc.
When people who aren’t used to this kind of work environment visit they sometimes confuse informal for slack.
But, make no mistake about how serious we are about what we do.
We want to have fun while committing 100% to our work and completing whatever we need to do to be successful.
— Trade Me Manifesto: #8 Be Informal But Serious
The lesson: people can be both informal and serious. In fact, that's the most promising place to look for the next disruption.
In the time since I worked at Trade Me I've been able to invest in a bunch of other companies started by people that were underestimated at the time, but which have gone on to more obvious success, mostly by following this pattern.
To quote myself again:
When you look at those start-ups that went on to become successful companies they nearly always did their hard yards in a skanky flat or dingy office, rather than emerging from the safety and comfort of a business park.
I think it's a safe bet that most people will continue to make this mistake and underestimate anybody who doesn't appear on the surface to fit the pattern of success. If you are able to look through that simple reporting it can be very profitable.
Bonus: This whole GameStop situation is actually a much more interesting story than abbreviated headlines would suggest. If you'd like to learn more about the detail then I recommend starting with Matt Levine, who writes an excellent and accessible newsletter. This was his week:
26th: GameStop is just a game
And, the slightly drier and academic but always educational Aswath Damodoran:
🏅 Win
We should briefly recognise two remarkable sporting performances from the last week or so that haven’t made headlines but are great achievements...
Yesterday Nico Porteous won the X Games gold medal in the Men's Ski SuperPipe. His third run is spectacular to watch and amazingly brave:
http://xgames.espn.com/xgames/video/30803194?'t='01m52s
I’ve been lucky to spend some time with Nico on a few occasions since his breakthrough bronze medal at the Winter Olympics in 2018 and always come away so impressed by his character and the way he thinks about what he does. He’s unlucky that he’s world class in something that most people in NZ don’t really care about or pay attention to. He deserves more recognition.
Perhaps even more impressive and maybe even more under the radar these days, Nick Willis recently ran under 4 minutes for the mile for the 48th time. And in the process extended his streak to 19 years - i.e. he's run a sub-4 minute mile at least once every year since 2003. That breaks the previous record of 18 years set by ... John Walker.
He’s been performing at this elite level over middle distances for so long I think many in NZ have normalised it, and forget how competitive these events are internationally, especially when compared to the Track and Field era that older folks remember fondly.
Here's to the 20 year streak in 2022?
Top Three is a weekly collection of things I notice in 2021. I’m writing it for myself, and will include a lot of half-formed work-in-progress, but please feel free to follow along and share it if it’s interesting to you. If there is something above that especially interests you please let me know - that’s a useful feedback loop.
Previously:
3rd January 2021:
🎵 Listen, 📖 Read, 💡 Think10th January 2021:
⛰ Climb, 📖 Read, 👴🏻 Age17th January 2021:
👍 Improve, 📸 Share, ⚡️Recharge24th January 2021:
😝 Enjoy, 🏷 Define, 🎧 Listen