30-11-2022, 10:40 AM
I am sure many VBs have read too much on FTX in the last few weeks but I will risk another one as below.
I would like to espouse more on the "halo effect" (this person can do no wrong) and the "anti-halo effect" (this person can do no right). And really, what is the "secret sauce" to possibly allow my average capability to produce "above average" outcomes?
How VCs can avoid being tricked by obvious frauds
“human ability is normally distributed but the outcomes are power law distributed”. What this means is that just because someone builds a company that produces extraordinary outcomes, 10000x the average, doesn’t mean that they were 10000x as capable. Achievements are created from multiplicative outcomes of many different variables. So if you’re investing in a “10x founder” it doesn’t mean that they themselves are 10x the capability of everyone else, but what it means is that their advantage, combined with everyone else’s advantage, can get you to a 10000x outcome.
https://noahpinion.substack.com/p/how-vc...tricked-by
I would like to espouse more on the "halo effect" (this person can do no wrong) and the "anti-halo effect" (this person can do no right). And really, what is the "secret sauce" to possibly allow my average capability to produce "above average" outcomes?
How VCs can avoid being tricked by obvious frauds
“human ability is normally distributed but the outcomes are power law distributed”. What this means is that just because someone builds a company that produces extraordinary outcomes, 10000x the average, doesn’t mean that they were 10000x as capable. Achievements are created from multiplicative outcomes of many different variables. So if you’re investing in a “10x founder” it doesn’t mean that they themselves are 10x the capability of everyone else, but what it means is that their advantage, combined with everyone else’s advantage, can get you to a 10000x outcome.
https://noahpinion.substack.com/p/how-vc...tricked-by
