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Seems like people are sharing their investment theories, so I'll add mine. Invest in 100x-ers, like Zuck or Musk. To be clear, a 10x-er is not good enough for
by aerosmile 5y ago
Seems like people are sharing their investment theories, so I'll add mine. Invest in 100x-ers, like Zuck or Musk.
To be clear, a 10x-er is not good enough for this strategy to work. Those are the people who lead at SpaceX and make the impossible possible. What I am talking about is the person who is the 10x-er to the 10x-ers. The person who comes up with the idea and gets those 10x-ers into the same room and organizes them.
Obviously, the scale of that talent is hard to estimate, and "100x-er" is just a figurative term. Think of it this way - there should be only 10-20 such people among the CEOs of public companies (the other 100x-ers are musicians, politicians, authors, athletes, etc). They are easy to spot - definitionally, they do extremely well and will be in the fortune 500, shooting rapidly towards the fortune 50.
The cornerstone of this theory is that given enough talent, an individual can outperform the efforts of thousands or tens of thousands of regular people (hence think of the 100x-er as a figurative term). Just look at Musk going up against the entire automobile industry (while also building SpaceX on the side). Such people tend to find the right problems to work on, get the needed funding, hire the right people, and avoid all the possible calamities. Occasionally they also crack under pressure and smoke a joint on Joe Rogan's podcast, but they always prevail in the end.
Another way of looking at this is to look back in history. Rockefeller, Carnegie, Edison, Ford, Merrill, Walton, Schwab, etc. Would you want to bet against any one of them? So the key is to find that same group of people in today's society. I already mentioned the two obvious ones, but there should be another 10-20, at various stages of their careers. One that recently retired would be Bezos, some of the younger ones could be Max Levchin, Jack Dorsey, etc.
The important point here is to be extremely picky. Max and Jack are probably still too young and need a few more cycles before you can expect them to move mountains. Don't get me wrong, they are exceptionally amazing today. But if you're going to put a considerable amount of money on them (which you would have to if you buy into the idea that there are only 20 investable people of this caliber), you want them to be Steve Jobs-level at his prime in the 2000s, not Steve Jobs-level in the 1980s.
This is super contrarian and the difference between wins and losses will hinge on picking the top 20 versus the top 100 people. YMMV!
- m101 5y agoGood post. Not a fan of Jack though. Maybe I have him all wrong though.
- aerosmile 5y agoYeah, I've been going back and forth. Kind of leaning in at the moment.
- dash2 5y agoThe end result of this strategy seems like “invest in Steve Jobs, Elon Musk, Mark Z and Bill Gates”. Doesn’t sound very contrarian.
- shapefrog 5y agoAnd do so with the clarity of hindisght.
- cinntaile 5y agoIf you had invested in Facebook or Tesla around their IPO you would be a contrarian though. Facebook less so than Tesla maybe, but not a lot of people seemed to believe that they would stick around.
- shapefrog 5y agoBy the very nature of an IPO there is basically 1 seller the company (and in many cases the insiders) who are selling to 10's or 100's of thousands of buyers, private and institutional. Hint: The contrarian here is not the thousands of people/institutions/funds buying on the float.
- cinntaile 5y agoIt depends on how many would want to invest in those companies and how many wouldn't. If you have 10000 buyers but 100000 that wouldn't touch it with a ten foot pole then those 10000 buyers are still contrarians. (Partly) cashing out isn't by definition contrarian.
- shapefrog 5y agoHaving 0 position is not the opposite of having 100 shares; -100 shares is the opposite. By your definition owning an iPhone is contrarian, because there are only 1billion people with iPhones.
- didibus 5y agoThere's an alternative correlation I think to your same strategy: "invest in tech".
- aerosmile 5y agoIt does seem that most of the prominent entrepreneurs of our age are focused on tech. Before that it was finance, and going back further, steel, oil and railroad. In the future, I expect to see more bioengineering.
- didibus 5y agoRight, so the trend is always to invest in the emerging market category. Steel, oil and railroads were new when they boomed. Financial services was a new new thing when it boomed. Tech is currently booming. Renewables is another one coming in big, so is space, and yeah biotech, Moderna and co, I wouldn't be surprised to see a boom there as well now that people saw the potential. Those things will corelate, because the 100xers aren't 100x because they can make anything happen, they are 100x because they choose the right battles and have the energy, know how, motivation and connections to deliver on it. So I think the booming markets and the 100x entrepreneurs will almost always align.
- aerosmile 5y ago100% agreed!
- samhw 5y agoThis seems to amount to "pick fantastically successful businesspeople to invest in, before the market has priced in their fantasticness". Obviously that would be successful if you can do it, but it's predicated on your being smarter than anyone else in the market, which is ... unlikely.
- aerosmile 5y agoYou're not wrong with the description, although I would counter that you don't have to be smarter than anyone else - even if just a fraction of people is undervaluing an asset, you can still make a profit. I think Elon is a good example of that - a lot of coverage in the past years focused on missed production numbers and that sent his reputation into a tailspin. But anyone who actually bought and drove a Tesla knew that the cars were ahead of their time and that the rest of the country would eventually catch on.
- samhw 5y agoI guess it depends on the average relative valuation (i.e. are more people undervaluing that person to a greater degree than those overvaluing them?). But this also seems to depend on some kind of great man theory of business history. Plenty of people smarter than Jobs or Gates have failed, just due to the vicissitudes of life, if nothing else.
- aerosmile 5y agoThat average relative valuation is a good way to think about it. I would propose that most people don't believe in the exponential potential of individuals, so you'll find that people undervaluing the top CEOs outweigh those overvaluing them.
- samhw 5y agoYeah, I definitely agree to some extent. I've worked with enough people like this to know that there are 100x engineers, and 100x CEOs, and so forth. But I wouldn't assume that every 100x CEO succeeds. It's a contributing factor, but luck still plays an outsize part.