This first appeared in the Wall Street Journal’s Accelerator series last week under the title Don’t Believe the Hype.
Every year, at this time, I get a flurry of requests for my “predictions for 2013” or “exciting, hot, new trends for 2013 that I’m looking at.”
I respond with “I don’t care about trends and my only prediction is that one day I will die.”
This is usually not a particularly satisfying response to whomever sent me the request. One of two things happen: They either ignore my response and drop me from their prediction request list for whatever article they are writing. Alternatively, they press a little further, usually with something like “c’mon, you’re a venture capitalist — you must have an opinion about what is going to be hot next year.”
Actually, I don’t. I have never been a short term investor, and I don’t think entrepreneurs should be short term thinkers. Creating a company is really hard and it almost always takes a long time. Sure, there are occasional short term success stories — companies founded two years ago that get bought for $1 billion, but these are rarities. Black swans. Things you don’t see in nature and can’t count on.
So don’t. If you are an entrepreneur and following a trend, you are too late. You want to be creating the trend that other people are following. And then you need to work your butt off to stay ahead of them. Every single day. For a very long time. Through many product cycles and multiple trends.
As a VC, I feel exactly the same way. At Foundry Group, we have a set of well-defined themes. We believe there will be investment opportunities in these themes for the next ten to 20 years. We are constantly tuning the themes, learning from our investments, and exploring new themes. But these themes aren’t trends and we don’t predict anything around them, other than they are constructs in which we think great companies can be created and built.
So I don’t really care about the predictions for 2013. I don’t care about hot new trends. I don’t care that some people think the world is going to end on 12/21/12. I take a much longer view. And I encourage you to as well.
Over the past two weeks I’ve heard the word “contrarian” more times than I can count. Suddenly, to become a successful investor in any segment (angel, venture capital, public markets, debt markets) you have to be contrarian. The assertion that a “contrarian strategy” always wins seems to be in the air.
When I ask people what they mean by “contrarian”, I’m amazed at how often they define it as either as “actively investing” or “sitting on the sidelines.” Specifically, “there are too many people investing at this point – I’m going to take a contrarian approach and sit on the sidelines for a while.”
To me, contrarian means doing the opposite of everyone else. If everyone is buying, you are selling. If everyone is selling, you are buying. Our friends at Webster even give us an example:
“As an investor, he’s a contrarian, preferring to buy stocks when most people are selling.”
Now, to be fair, you can make the case that “not buying” when everyone else is buying is contrarian. But I have never thought about it that way. And, as the word contrarian enters the mainstream vernacular around entrepreneur / angel / VC land, I think it’s important to ponder what it really means, especially if the majority suddenly adopt a “contrarian strategy” which, by definition, ceases to be contrarian.
Do you remember the amazingly hilarious “We’re All Individuals” segment from Monty Python’s Life of Brian?