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I’ve got a little end of day advice for everyone out there that is getting whipsawed around by all the craziness in the financial markets. While this is aimed at entrepreneurs, it applies to everyone.
Focus on things under your control.
When I was a teenager, my dad said something to me that has stuck with me and informs many of the decisions I make and things I decide to spend my time on. He said something like "Brad – if you want to change the world, start with the 2% you know best."
Now, this doesn’t mean "don’t be curious." It doesn’t mean "don’t learn new things." And it doesn’t mean "don’t try new things." However, it does mean "don’t get distracted by all the things you don’t know, or can’t influence."
This is especially important when confusing and chaotic things are happening all around us. Since I’ve returned from vacation in England, I’ve been asked numerous times what I think of the current financial crisis, how it impacts entrepreneurship and venture capital, and what the government should do about it. In general, my answer has been "I have no clue." Now – I have some very specific ideas about how it might impact some of the companies we are investors in – especially if the macroeconomy continues to deteriorate. But I know enough to know that I can’t actually predict what’s going to happen nor can I influence the macro stuff at all.
As a result, rather than get all spun up about what’s happening minute by minute in Washington or in the financial markets, I concentrate on making sure that the companies I’m an investor in are thinking through the issues that will directly impact them – either because of exposure to certain customers (e.g. the financial services market) or a broad macroeconomic downtown. These are things I understand (in my 2%) and can influence.
Fear and anxiety comes from lots of places, including fatigue, misinformation, and the endless blathering on of talking heads on the television. If you start feeling your anxiety level increase because of things you have no ability to influence, step back and reconsider how you are spending your time. Go for walk around the block and enjoy a nice October afternoon. Take your best friend out to lunch at a restaurant you’ve never been too. Get a good night’s sleep. Take a deep breath and – as my dad once told me, focus on things under your control.
Amy and I were talking about the election process during our vacation. Both of us dislike the electoral college process and have concluded that the cycle is way too long, the primaries are stupid, and the amount of money being spent is totally obscene. We are also deeply tired of all of the endless partisan crap.
So I came up with a new process. How’s this?
- There is one election. No primaries. No parties. As many people can enter as they’d like.
- The winner is whomever gets over 50% of the votes.
- The election is a multi-day process. On day one, all voters vote from the entire pool of candidates. If someone gets more than 50% of the votes they win. If no one gets > 50%, then anyone with > 10% of the votes gets to be on the ballot for day two. Repeat – this time only people that get > 20% of the votes get to be on the ballot on day 3. If day 3 doesn’t have a winner, the ballot is now between anyone with > 30% of the votes. Yes – there’s a slight risk that no one will get over the minimum threshold on day 1, but assuming someone does, it should work.
- The winner of the most popular votes is president. #2 is vice president.
It needs more work, but you get the idea.
I’m sitting in my hotel room in Palo Alto after 20 hours of travel from Hampshire, England. Amy and I took our Q3 vacation in the English countryside at the Hampshire Four Seasons where we had a glorious week off of the grid. I find myself really wanting to be tired, but I am so far beyond tired that I’m wide awake well past midnight California time.
Our Q3 vacation was dynamite. I would have never thought to choose the English countryside, but Amy loves horses and our Q3 vacation is near her birthday, so we go wherever she wants to go. The weather cooperated in some sort of pleasant karmic-recovery from our abysmal Alaska weather (yes, I know they are uncorrelated events, but one can fantasize), my runs along with Basingstoke Canal were awesome, and the food surpassed expectations.
We were off the grid – mostly. I had a few work related things that reared their head during the week – none required a lot of time but each harshed my mellow a little bit. I was typically agitated for the first few days, which is a sign that I really needed a total disconnect to recharge my batteries. After four days of sleeping more than 12 hours a night, I started to calm down. The daily runs, swims, tennis, massages, books, and adult activities helped.
During our Q-vacations, I turn off my computer and cell phone. My assistant Kelly reads my email and calls me if there is something I have to pay attention to. However, we do watch TV – mostly movies – as we lay in bed before we fall asleep.
This week, the best movie on TV was CNBC Europe as our bed time correlated to the last hour of the market in the US. I never watch CNN / CNBC / MSNBC / Bloomberg / local news so it’s a rare treat to watch a chunk of it. Last week was a doozy. If we hadn’t turned the TV on at all and just checked the Dow Jones index on Friday when we left for Europe and Sunday a week later when we reconnected, we would have noticed a measly 30 point drop in the Dow. Instead, we got to watch talking head after talking head analyze, speculate, prognosticate, fluctuate, pontificate – basically everything except masturbate – while chart after chart appeared with radically spikey looking graphs that changed every few seconds.
In the midst of this noise, we watched a few movies (I finally saw Ironman – yes – the first half was much better than the second half) and I reread Nassim Nicholas Taleb’ brilliant book The Black Swan: The Impact of the Highly Improbable. I reached a very simple conclusion – everything that I was watching being discussed on CNBC was probably incorrect and, more importantly, likely irrelevant. The actual events that occurred would take me less than five minutes to read the following week when I skim BusinessWeek in the bathroom. The commentary was just noise.
But I knew this already so this wasn’t my key insight. Over the weekend, we ended up watching Davis Cup Tennis (Andy Murray is going to give Nadal and Federer some trouble) while avoiding the endless Ryder Cup coverage. I tried to understand cricket (still no luck), watched some rugby (or is that Australian football?), and watched the soccer highlights (why suffer through a game when you can watch the highlights.)
And now for the insight. During the week, we have CNBC. Over the weekend, we have ESPN. They are exactly the same – just with different uniforms and commentators. As Taleb would suggest, the only way to keep your eyes wide open about what is going on is to turn off the TV and stop reading the newspapers.
I just yawned, so it must be time to end this "welcome back" post, close my eyes, and dream of fields of golden retriever puppies. I wonder if that’s what Hank Paulson is doing.
Having just finished reading George Soros’s latest book The New Paradigm for Financial Markets: The Credit Crash of 2008 and What It Means my brain is now full of his theories around reflexivity. I have always instinctively agreed with Soros’s philosophy even though I find it incredibly difficult and chewy to work my way through (but that’s true of all philosophy for me.)
I’m a great fan of the Heisenberg Uncertainty Principle which, according to my friend Wikipedia, "is the statement that locating a particle in a small region of space makes the velocity of the particle uncertain; and conversely, that measuring the velocity of a particle precisely makes the position uncertain." Wikipedia suggests that this is often conflated with the Observer Effect (when you observe a phenomenon, you change it), but I think the intersection of the Heisenberg Uncertainty Principle and Soros’s Theory of Reflexivity reduce nicely in my brain to the Observer Effect.
That leads me to the real point of this post, which is the great short article in the New Yorker by James Surowiecki titled Oily Speculations (thanks Amy.) In the last month a new class of villain has emerged in the rapidly escalating price of oil – the "speculator." Surowiecki calls bullshit on this (not on the involvement of the speculator, but why this is both irrelevant and why the speculator is not the villain.)
The key sentence in the article is "Speculation has been a favorite target of politicians looking to mollify anxious voters since the time of ancient Greece, when the orator Lysias protested that wheat traders had reduced Athens to a state of siege.”
The conclusion, which Surowiecki bashes us (appropriately) over the head with is "The difficulty for Congress, of course, is that none of the problems that have driven up the price of oil lend themselves to a quick fix, and most, like the boom in global demand and the inaccessibility of certain oil fields, aren’t under our control at all. That’s what makes speculators a perfect target: by going after them, Congress can demonstrate to voters that it understands their pain, and at the same time avoid doing anything that might require real sacrifice from Americans. Our dependence on foreign oil, together with the fiscal fecklessness that has helped reduce the value of the dollar, means that there is no easy way out of where we are. But in an election year that’s hardly a message that anyone in Washington is going to deliver."
If you net it all out, it’s the Observer Effect writ large.
I heard a "superb" cynical statement today. I have no idea if it is factually correct, have no data (empirical or anecdotal) to support it, but it is such a great potential example of unintended consequences that I thought it was worth putting out there.
The statement was "While hybrid vehicles make us feel better, they actually do more harm than good because they result in more driving."
The follow up thought is that for hybrid cars to really work (at today’s efficiency levels), people still need to modify their behavior and drive less (e.g. relying on public transportation or carpooling.) However, once you’ve bought a hybrid, you suddenly feel like you are doing your part and subsequently drive more! This additional driving adds up across the system and increases total system fuel (and other resource) consumption.
Ponder that the next time you get in your hybrid.