Investing

Riskiness

The biggest gains come from investing in a company that isn’t necessarily expected to win, as evidenced by its low stock price. Your losses are limited to 1x, and your gains are uncapped.

Angel bets and venture bets are great because they have nonlinear outcomes in the positive, but on the downside you can only lose 1x (where x is your investment). On the upside, you can make 10,000x.

See many companies

as an investor, my system is: I want to see 10,000 companies and I want to pick 500 that have a shot of being huge. Then I want the option to double down on the five winners. I don’t want to just look at 100 companies and pick 10 that I think are winners and go all in on those. I don’t think I have that capability.

Start a business

Highly recommend that every would-be investor start a company first. It's hard to understand pain in the abstract.

What to look for in founders

Number one, intelligence; you’ve got to be smart, which means you have to know what you’re doing, to some level.

Energy, because being a founder is brutally difficult. It takes a long time and in the long run, the people who succeed are just the ones who persevere. So if someone runs out of energy or if they’re doing this in some hesitating, preliminary way where they’re looking for constant positive feedback, or if they’re easily thrown off course, then they’re not going to make it to the end, especially in the highly competitive startup context.

And finally is integrity. Because if you have someone who is high intelligence and high energy but they’re low integrity, what you’ve got is a hard working, smart crook.

Failures

I don't actually dwell on the bad investments much. In the startup world, you're betting that 90% of these companies will go to zero, or just return your money and the remaining 10% are going to post huge multiples. The Twitter investment is probably up 400x, Uber is probably up around 4,000x. So the returns of the winners can be staggering and can overwhelm the losses in the portfolio.