Cynic or Optimist?

There will be a downturn. It might be in a day. It might be in a year. It might be in a decade. We have no idea when it will come, but it will come.

I was talking to a VC yesterday who was an entrepreneur in the late 1990s, which we now commonly referred to as the Internet bubble. He was very successful as an entrepreneur and has continued to be very successful as a VC. A VC who has been around for a long time recently told him that you aren’t a real VC until you’ve been through at least one downturn. He commented that while knowing this, it’s hard not to be a cynic when things are going well and he wondered out loud if there was a way to balance optimism and cynicism as a VC. I had a quick reaction about continually being deeply rational about what one encounters, but it didn’t feel very satisfying to me as an answer.

We are in a very positive part of the startup / entrepreneurship cycle. Given that, there is a regularly occurring discussion about whether or not we are in a bubble, or this is a bubble, or is a bubble forming, or some other bubble thing. The conversations devolve quickly into “yes we are” and “no we aren’t.” This is often followed by justifications of positions with a bunch of random data to support the position, where most of the data is either inaccurate, narrowly chosen with huge selection bias, or a function of what the public market guys like to call “talking your own book.”

I have no idea if we are in a bubble or not. And I don’t care since, as an early stage investor, I play a long term investing game, because I have to. I can’t control liquidity or timing, especially when I initially make an investment. The market is going to move wherever it is going to move and is completely exogenous to me so timing it is irrelevant.

I’ve lived through several severe cycles – both positive and negative – as an investor. I’ve had successful companies created and built at all stages of the cycle. I’ve had failure at all stages of the cycle. There are great strategies for success in both the positive part of the cycle and the negative part of the cycle. And you can do completely stupid things that blow up your company in both the positive and negative part of the cycle. While the stage of a cycle has impact on a company, it’s only one factor.

As I pondered the cynic vs. optimist question this morning, I landed on a synthetic view that feels right to me. I was walking around my office looking at my physical book shelves, mostly for words to try to characterize what I was thinking about, and I landed on Andy Grove’s amazing book Only The Paranoid Survive. I bought the physical copy after reading The Intel Trinity (one of the business / history books I’ve read recently) which inspired me to go back and read – slowly and on paper – each of Andy Grove’s books.

Boom – that was it – I’m a paranoid optimist in a business context. As a human, I’m optimistic. I believe in good. I like good. I hope for good. I prefer good. I am hopeful about the future. I love the work I do. I love helping create companies. I love playing with technology. I love seeing amazing new ideas come to life. I love being alive. I hope to live a long time.

But I know that there is plenty of bad out there. I’ve experienced a lot directly in business, whether it’s bad actors, stupid decisions, unintended negative consequences, self-inflicted trauma, passive aggressive behavior, or outright deceit. I’ve made assumptions about what I think will happen only to have my assumptions be completely incorrect, or correct in my parallel universe to the reality that actually ensues. Some of this has been under my control or impacted by my viewpoint while some of it has nothing to do with me in any way, but is like the proverbial elephant that accidentally steps on and crushes the ant.

When I link this to the cynic vs. optimist dichotomy, I’m definitely not a cynic. But I’m not an unbridled optimist that can only expect more positive. And I don’t vacillate between cynic and optimist based on individual situations, companies, or the macro.

Instead, I ignore the macro. I recognize that I have no control over it. I try to use the experience and lessons from the last 30 years of being in business to guide me steadily through whatever part of the cycle we are in. I know the cycle will change and the companies I’m part of will have the opportunity to be successful regardless of the situation. But I also know they have the opportunity to fail. And that’s where the paranoia comes in. It’s a powerful calibrator.

When I reflect on Andy Grove’s leadership of Intel, it was through a series of intense up and down cycles – both within the semiconductor industry as well as the global macro environment. While he leads with the idea of being intensely paranoid, there’s a thread of clear optimism through his big decisions. When faced with brutal challenges, he dealt with them. When there was daylight in front of him, he ran incredibly hard in a positive way to cover as much ground as possible. But he always knew he’d face more challenges.

The next time I get asked the question, “How can you avoid turning into a cynic when things are going well and you know it won’t last forever” I now have an answer. Be a paranoid optimist.

  • I love these sort of posts, Brad. I wrote more about non attachment after your post the other day -

    A note on not controlling the macro. I love the Stephen Covey frame of “circle of influence” vs. circle of control in thinking about this. And, it is so true that the more you focus on your circle of influence, the more it expands.

    Thanks for sharing as always!

    • Ooh – I love Seth Godin’s post The Paradox of Expectations – good link!

      • Glad! Seth is great.

        • Yeah – I love him. We get together for a meal every couple of years when I’m in NY. Such a deep and wonderful soul.

          • I can’t wait to meet him in person. He’s been such an incredible cheerleader for my little blog, Brad. It is amazing. He writes every time there’s a significant event (e.g. had my 7 year blogversary a few days ago and he wrote a lovely note). And, he’d written a line about my blog and linked to it last year – 10x’d my readership!

            I am very grateful for all he does.

          • Hi @rrohan189:disqus – Long time no talk

            The thing I like about your comment is that I did not know there was a connection between Seth and Brad and yourself, but now that I do it is no surprise. Some people try to make things better – I like that !

          • Brad and Seth are awesome. I just try staying connected with them.. haha

      • ZekeV

        aha — stoicism!

    • Steven Covey’s “7 Habits” is a masterpiece!

      • Completely agree.

  • Natty Zola

    Great post. Jim Collins writes similarly about this as Productive Paranoia in Great By Choice. Andy is commonly a protagonist in his books too. Couldn’t find a copy of the chapter with a quick online search but here is a short summary:

  • Rosey

    Brad, is it perhaps that you’ve learned to ignore the macro that you’re able to focus on what you can control and live in the joy of what you enjoy and do well, like starting companies and playing with technologies?

    ‘Ignoring the macro’, to me, does not mean taking ones eyes off of it. It’s more like deep sea currents vs. surface waves to me. As we try to sail our little boats — keep them seaworthy and help others launch and pilot their boats, it’s the waves — the near-term events that challenge our navigation skills, but we really have no control of the currents beneath us, other than slowly enter or exit them, if we’re even aware of them.

    I just finished ‘The Intel Trinity.’ It reaffirmed my admiration of the WWII generation, the last generation that learned to think without television’s influence. And I too have reached for ‘Only the Paranoid Survive’, now on my bedside table to read next.

  • mark gelband

    what exactly is a “downturn” – life or business, the business of life and the life of a business(person) as they’re so often merged here? something opposite – it’s none of your business?

    I enjoy the subtext of brad’s introspective graffiti. One f, two ts or as I wrote it?

    does downturn = access to capital, perceived emotional well being, proclaimed emotional well being? Is it a line on a graph? Nasdaq NYSE? the dull routine of familiarity?

    Or is it a divorce, illness, loss, bad eating habits, poor sleep, no exercise, napping on an off-the-grid week of a vacation to Paris that might be some other poor schmuck’s once-in-a-lifetime dream.

    I like what Rosey says below, and I continue to value Brad’s introspective grafitti – auto correct says it’s one f two ts.

  • Dave

    I am struggling with the “paranoid” aspect. The optimism is easier…letting optimism and positivity guide my actions and my reactions to situations and believing I’m doing them for the right and good reasons. But to me, the paranoid aspect seems like an active mindset that could easily cloud the optimist and lead to inaction. I feel like I’m more of a realistic optimist…I try to approach life and my decisions with a positive attitude but I know that it’s not always going to be positive…but I don’t feel like i need to actively expect or wait for it.

  • Matt Kruza

    Somewhat sounds like you are talking about a “serenity prayer” mindset. I think we can create a modified entrepenerus’ serenity prayer. I am not a religious person (not exactly sure of the “prayer’s origin”) but the serenity prayer is so powerful if you embrace it because you little only focus on what you can focus on. Seems so tautological and “new agey” but if done sincerely it is liberating

    • ZekeV

      I think the serenity prayer comes from the AA program… make of that what you will.

      • Matt Kruza

        Interesting. I had to look up after you said that. Looks like it was ADOPTED, not made by them. But nonetheless, it literally is probably the best simple expression to describe how to live that I know. I mean the real answer is obviously no one statement can describe the complexity and richness of life, but the serenity prayer combined with Socrates “the unexamined life is not worth living” are two credos for mine. From the comment on AA I take you don’t approve of AA or the serenity prayer?

        • ZekeV

          I did not mean to imply any lack of approval for either AA or the s.p., both of which seem to be helpful to a lot of people. For the record, I have nothing against either of those things!

          I was just inviting you, tongue-in-cheek, to extend the analogy between a 12-step program and pop-business advice.

          • Matt Kruza

            are you implying I must be drunk with my comments? 🙂 haha.. I am intentionally overreacting and being sarcastic, but at times I do go on rants with the best (aka worst) of them! Yeah, and 12 step programs are interesting, never done them myself, and they certainly aren’t a panacea, but I have seen people do them well and the key is really the sponsor/mentor and the sanctity and bond that a group can form. The unfortunate side is that the religious connotations take over. This makes both supporters and detractors reach such a level of fury / emotion that the good elements of the program aren’t extracted out. In all honesty, I think 12 step paired with traditional therapy would be a very compelling offering, but I don’t think that is too common now adays.

          • ZekeV

            Well, perhaps the common element between Brad’s neologism and your outlook is a basis in stoicism. I could get on board with a stoic approach to life and business.

          • Matt Kruza

            See this is why I love commenting. Smart people like yourself. I had heard of stoicism, but never really gave much thought or really knew what it was. Doing some research I think I actually am pretty in sync with it without even knowing it 🙂 Thanks again for the share

  • I am an optimist, and a realist. In VC, things happen slowly, then all at once. When I was actively trading, I felt the sharp edge of the knife every day. Sometimes it cut you, sometimes you were slashing away with it.

    Bubble or not? Who cares. But, do stock markets go up forever? (1970-72, 87, 89, 01, 08) Does the market ignore data forever like it has the past few years? Are interest rates and easy money policy going to go on ad infinitum? (I remember when 3 month bills yielded 21%)

    Never ever get careless with risk/reward. That’s the true lesson and always remember when you want to go through the out door, most likely it will be closed. Liquidity always dries up when markets turn lower. In every market….. If you think you will be the first rat off the sinking ship, you are wrong.

  • Ali Hamed

    Funny, was thinking today that unpragmatic optimism is the only thing that could convince someone starting a company is a good idea. And unpragmatic optimism is the easiest way to kill a startup (running out of cash, late pushes to production, etc.).

  • DaveJ

    I think I know when you started to learn this. In 1983 you had said “oil prices will keep going up forever.” Then you saw how some folks back home in Dallas struggled when they didn’t. People’s views sometimes get stuck in their experience when they are young; instead they need to observe the cycles that they live through.

    • That is a great example to reply. I think you may have inspired a post…

  • Glenn Whitney

    Good stuff. I know I’m just playing with words here a bit, yet I think there’s probably a subtle but important difference between between a “cynic” and a “pessimist.” The classic definition of a “cynic” – he knows the price of everything and the value of nothing. A pessimist expects things to get worse and perhaps brings that about through self fulfilling prophesies.
    “Paranoia” is a somewhat problematic notion looked at from a psychiatric perspective. On balance, I think I prefer a “vigilant optimist” or maybe a “prudent optimist.” And a variation on Ronald Reagan’s adaptation of the Russian proverb: “Trust but verify.. but first clarify!”

    • David Fox

      +1 for vigilant optimist

  • love this way of framing it Brad. I can relate.

  • Being an entrepreneur, from what I can tell, is like sailing off into the open sea. You can’t control the weather, but you sure can hope you’ve built your ship to be strong enough.

    • Good metaphor. Nice synergy with @Jrosen07:disqus comments.

  • Count me in as a member of that group too Brad

    • I’d like to appoint you co-chairman if you are up for it …

  • Ian Scott

    How to maintain equilibrium when the worlds stochastic? – how about living life in the OODA loop?