The unbearable conviction of thesis-based investing
The last few weeks I have been heads down in a category of an industry, I have been researching, learning, meeting, and asking as many questions as I can to both experts, and myself. Being in the thick of an industry analysis is an interesting place, an undefined place, you can’t totally see the path through it, but you start with an idea and a hypothesis and walk through the forest to see what you find. You may result in validating your hypotheses and finding a specific opportunity, you may also result in realizing that your assumptions were incorrect and move on. Both are equally valid, both equally important, in fact.
On the palette of investing in startups there are an incredible number of shades you can use. Through my relatively short time in venture, and especially through Kauffman Fellows, I have learned of so many ways that venture can be practiced: early-stage, late-stage, growth-stage, SPV, primary, secondary, spray and pray, focused, generalist, opportunistic, thematic, geographic, impact, capitalistic and so many more. Over time I realize that I naturally gravitate towards thesis-based investing, which often frustrates me actually, but I realize that it’s my entrepreneurial creativity, the way of seeing the world in a certain way that drives me into a market and down the rabbit hole.
I recently heard someone describe their investment strategy as having “deep convictions, loosely held.” And I loved it, it really resonated, I think I’ve adopted it. To me this means, I have a very specific view of the world, but that with the right data, by asking the right questions, I may realize I’m wrong. And that’s OK, that’s welcome. I will learn and adjust my perspective.
There is a macro way I see the world progressing. And my investment theses are the micro ways that this world can come about. For me, these theses have taken two vectors, one technology-first, the second human-first. I’ll share a bit more.
Technology-first: Convergence of the Physical & the Digital
We are at an incredibly unique point in time where machines can now intake real-world data in real-time and process it fast enough to render a real-time result in our physical world. Applications like autonomous driving are the most pointed example of this, but in fact it’s happening all around us. Alexa, Maps, Face ID, we are just at the tip of the iceberg of a major shift from “explicit” computing to “implicit” computing where the machines around us know what is going on as presently as we do.
The flip side of this coin is that people who exist in the physical world (us) are spending more time in the digital world, and ascribing incredible amounts of value (time and money) to it. Esports, Marshmallow concerts in Fortnite
, TikTok, Pokemon Go, Digital Assets, Blockchain, the list will go on.
These are shifts in how products are created enabled by advances in technology and I’ve got a field of rabbit holes behind me, and a big broad field ahead of me yet to dig into.
Human-first: Focus on “first principles:” Prosperity, Health & Happiness
This is a broader thesis but comes with a specific point of view. As a Political Science major from Yale, I spent a lot of time reading political theory (Bentham, Hobbes, Locke, Rawls, Nozick) and thinking about why groups of people organize in different ways. At the end of the day, it comes down to personal incentive. Beyond safety and shelter, humans want the opportunity to thrive, to have the opportunity to be prosperous, healthy and happy. In today’s world of growing inequality, chronic disagreement, lack of public healthcare and weak public education people are looking for solutions elsewhere from the status quo.
Today, we are seeing ambitious entrepreneurs creating incredibly innovative solutions to serve the unmet needs of these first principles. Entrepreneurs are re-inventing education systems, healthcare systems, ways of saving for the future. Others are helping us understand the complexity of our own bodies and inventing new ways to measure and engage it to be stronger and healthier. And there is a rapidly growing market coming up around happiness and mindfulness. We are only as good as we let ourselves be, and too often we are our own worst enemy. So how can we leverage all the resources we have to be happier, isn’t that the least we can do?
It’s a thrilling time to be alive. With strong convictions comes lots of people saying you’re wrong, and maybe I am. But then again, that’s OK.