If you will it, it is no dream.Theodor Herzl
I went hunting this past weekend. There were plenty signs of deer and many locations that might prove profitable, but the wind was not favorable. I chose an unusual plan to hunt from the ground (as opposed to my usual platform about 12 feet up in a tree). From my ground-based vantage point in the brush, I had about 90 degrees of field I could scan. But that meant constantly moving my head from side-to-side. Generally speaking, movement is not good for hunting.
I decided to place a bet that deer would come from one direction based on a working hyposthesis I had - so I focused on one 45 degree quadrant in my field-of-view instead of alternating back and forth over the whole 90 degrees.
It suddenly occurred to me that placing bets is what we do in life all the time. Without a reasonable working hypothesis about something, it is hard to accomplish your goals and other things that maybe you have never done before, or in solving some problem you can’t figure out. Humans are betting machines; entrepreneurs even more so.
Sure enough, soon after the sun set, and just before the world went dark, a young buck walked into my field-of-view. Luckily for the deer, however, my marksmanship skills leave much to be desired.
Nevertheless, my unconventional hunting position and instincts were spot-on. The bet I placed, given my analysis of the field, the wind patterns, etc., was actually correct.
I joked that if my son (a much better marksman than I) were shooting, we would have been a successful team this day.
In Antonio Garcia Martinez’s book, ‘Chaos Monkeys’, there are many interesting, entertaining and even painful anecdotes of high-stakes gambling as a tech entrepreneur in Silicon Valley. Martinez even refers to Silicon Valley as a casino (pg. 494), lest we ever forget that the House always wins! Also evident in his story telling is the importance of surrounding yourself with a good team.
Martinez is a PhD from the UC Berkeley Physics program. He starts his career as a quant at Goldman Sachs. We learn from him that the average salary for Goldman Sachs employes in 2005 is about $521k! A quick search reveals that a Software Manager can earn around $700k there now.
Building upon professional knowledge gleaned while at Goldman, Martinez parlay’s his skills into building high-frequency trading platforms in support of ad revenue. Note: we talked about high frequency trading in our Dream 10X Episode 27 discussion of the Michael Lewis book.
Martinez and two co-workers from Adchemy (Matthew McEachen and Argyris Zymnis) go through a YCombinator batch and get funding for their startup company, AdGrok. Their previous employer, Adchemy, eventually pursues legal complaints against the triad, which YCombinator’s founder, Paul Graham, helps in making go away. Connections matter, and powerful connections are even better.
Having one (or more) good employment lawyers on speed dial can help you avoid bad situations when starting your own company, selling your company, and getting hired by companies. It can be a cold, nasty, brutish world in Corporate America.
On page 114-115 Martinez talks about cap tables and how they work, which I found interesting.
The founders of AdGrok (the author and his two co-founders) sold their company to Twitter for around $5 million yet walked away with basically nothing, save for new jobs at Twitter and Facebook. Not the end of the world, and with future upside I’m sure, but somewhat disheartening nonetheless.
My Key Takeaway
My biggest takeaway from this book is the importance of a good (software) team. Cindy and I had a discussion about the importance of good teams many years ago. We thought it might be interesting to start a recruiting firm that focused on recruiting and placing teams of people instead of individuals, because creating highly-functional, stable teams is really, really hard to do.
Enter YCombinator. Identifying highly-functional teams that can solve nearly impossible problems is one of the things YCombinator is really good at. And as I learned in this book, buying highly functional, entreprenuerially minded teams is one of the things startup culture is all about in Silicon Valley.
The most salient paragraph in this book, from my perspective, posits a primary reason for why big companies buy startups:
Why do Facebook and Twitter acquire piddly little companies like AdGrok, FriendFeed, and Aardvark?…By hybridizing their corporate DNA with the pluck and daring of the startup entrepreneur, they revitalize their internal cultures and add traits not typically found among their recruitment fodder (i.e., smart but obedient engineering grads).Pg., 341, ‘Chaos Monkeys’
Perhaps the team is even more important than the tech?
Two large facets of success are:
The ability to make well-informed, calculated bets.
Having a strong, stable team that you work well with.
Neither of these are science, and both are incredibly difficult to cultivate (and maintain). But if, as an entrepreneur in Silicon Valley, you can bring elements like these together in your startup for long enough to sell to one of the big companies, you might be lucky enough to get a job with one of them…
podcast learning hacking startup adgrok adchemy twitter facebook matthew mceachen argyris zymnis betting teams placing bets hunting silicon valley high frequency ad trading high frequency traders ycombinator paul graham initial public offering ipo software technology netflix