This is a blogpost where I’ll risk sounding like an asshole. Probably am already one to some, although I try not to be.
My job—as well as all other investors, hiring managers, talent agents, sports scouts, just to name a few—is to make decisions relatively quickly when faced with the pure volume of inflows. Not necessarily investment decisions, but in a brief interaction, it’s my job to figure out if I want to continue spending time with someone. And if I do know, I need to set expectations clearly as soon as I can. Usually within the first interaction. Because of that, I find it useful to develop heuristics.
(max age at which the knowledge one has today would still be impressive) – (age today) = (# of F’s given)
Where… negative F’s is a lost cause. You’re too late to the game. Zero F’s means it’s to be expected. Expectation meets reality. And the larger the number of positive F’s given, the more impressive you are.
Let me contextualize this.
Today, I know that 7 x 8 = 56. Not impressive at all. I’m 29, at the time of writing this post. The max age knowing what 7 x 8 is, and still be impressive, is probably 5 years old.
The Pythagorean Theorem probably caps out on the “impressive scale” at 8 or 9-years old before it’s to be expected. Maybe 10. There are some pieces of knowledge that have an expiration date on impressiveness. If you know E=mc2 at 6-years old, you might be a genius. If you brag about it at 30-years old, people will wonder what you’ve done with your life. That’s not to discount the folks who spend their life on the actual intricacies of the equation. There is also an age where it starts being worrisome if you still don’t know how to do something. At 10, if you know how to file taxes, people will shower praises at you. At 40, if you don’t know how to file your taxes, people will scoff.
The interesting thing is it extends beyond simple math. In venture, there is a certain point in your career that you need to know what pre- and post-money SAFEs are. You need to know the responsibilities of a board member, if you want to be a lead investor. You need to know how to file your K-1’s. You need to know what qualifies for QSBS. If you’re three months into your job as a VC, I don’t expect you to know how to negotiate pro-rata rights when a downstream investor wants you to sell a piece of your equity so they can keep their ownership targets. If you’re a VC, and not a GP, I don’t expect you to know the difference between a 3(c)(1) and a 3(c)(7) entity and that if you have a 3(c)(1) structure, then any LP owning more than 10% will be subject to the look-through rule and every single underlying LP in theirs counts as a beneficial owner and counts towards your 100 investor cap.
There is also so much free content online at this point that the max age where someone will still be impressed by a certain skillset or knowledge will continue to decrease as media democratizes knowledge. Made even easier with AI. Although do take niche knowledge generated by AI with a grain of salt.
The second part, which is equally as important, is: How did you acquire that piece of knowledge? For instance, one of the common “Would you rather?” assessments when I first jumped into venture was: Would you rather invest in someone who graduated from MIT with a 4.0 GPA or someone who took every free computer science course online to learn to built a software product? The common consensus on our team was the latter. The latter shows drive and intrinsic motivation. Critical for someone who’s a founder. Aram Verdiyan and Pejman Nozad call it “distance travelled”, a terminology I’ve since borrowed.
As such, both the insight and the insight development matters. It’s what I look for when I have an intro conversation with a GP and/or founder. It’s what I seek when I go to an investor’s annual summit. So much so, that in my notes, I keep track of who has the highest “insight per half hour.” And I have an extreme bias towards those who have something insightful to share almost every time I have a conversation with them, as well as those who accumulate insights faster than others.
Of course, this isn’t the end all, be all heuristic, but I find it helpful as a rough rule of thumb when a GP claims to have insight in a given area.
Photo by Ethan Hoover on Unsplash
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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.