I religiously follow a very selected group of blogs run by venture capital funds. I make it a point to catch up on them on a weekly basis. One of them is Collaborative Fund’s blog. Every bit of their website and blog makes them stands out in the venture capital community. Everyone at Collaborative fund is such an eloquent and insightful writer. There hasn’t been a time when I haven’t reflected on and learned from their blog posts.
One of the partners is Morgan Housel. He previously worked as a writer and an analyst at Wall Street Journal and Motley fool. I have enjoyed learning from Morgan’s blog posts and tweets. One thing that I have admired the most about him is his ability to ask thoughtful questions to others to get insights out of them. Most recently, he interviewed Brent Beshore, the CEO of Adventur.es, a private equity firm that owns family run businesses, pools profits from existing businesses and funds new acquisitions with very little debt. That interview, along with Hunter Walk’s interview style blog posts, motivated me to kick-start an interview series. To get the ball rolling, I decided to turn tables on Morgan and interview him.
Here we go —
Sar: Imagine you had the power to single handedly set up the higher education system from the ground up, how would you design it?
Morgan : Two things.
First, I think it’s nuts that almost everyone thinks K-12 education should be government paid — a public good — but we still view college as a luxurious extra, somewhere between mostly and all paid for by the private sector. This was probably reasonable 100 years ago, when the majority of jobs were based in physical labor rather than cognitive talents. But it’s nowhere near true today. A bachelor’s degree today is the equivalent of a high school diploma 30 or 40 years ago. So the first thing I’d do is make state college — both community and public four-year — tuition free in all 50 states. This would cost less than $70 billion per year, which is less than 2% of federal government spending — to say nothing of state contributions.
The second thing I’d do is make college less theoretical and more hands-on jobs training. Less social science general-eds, more internships and town hall Q&As with industry veterans.
Sar: One of my favorite statements made by Bezos is “Anybody who doesn’t change their mind a lot is dramatically underestimating the complexity of the world we live in”. I go back to that statement from time to time and reflect on small and big things I have changed my mind on. Where and how do you think we should draw a line between being fickle minded (or indecisive) and being adaptive to new information and perspectives.
Morgan: It’s a great question that’s hard to answer. I struggle with it myself. I love the saying “Strong beliefs, weakly held,” which is a similar idea. I think a lot of it has to do with recognizing your own propensity to become emotional instead of objective. When I look back at the things I’ve changed my mind about, they were topics that I originally felt incredibly strongly about. I was 99% sure I was right. I would get angry when people disagreed with me about them. That should have been my sign that my belief was based more in emotion than logic and fact. I try to use that as a framework today. I like to ask the question, “What is something you strongly believe that’s likely wrong?” It’s an absurd question, but if you’re honest with yourself you’ll find something that you believe strongly in based off cultural beliefs, not hard facts.
The other element to this is changing your mind when the world changes, rather than finding your own flaw. Which should be easier but is probably harder and rarer. Old truths die hard.
Sar: I remember the first time we spoke on Twitter. I shared a short post I wrote on the idea of luck vs skill attribution in success and process vs outcome driven mindset in decision-making and career progression. I would love for you to share your thoughts on how college students and recent graduates can be mindful about correctly attributing success to luck or skill and having a repeatable system for increasing the odds of professional success.
Morgan: I think separating skill from luck is one of the most important, but strikingly hard, things we do. Most people’s brains are wired such that they tend to attribute all success to skill and all failure to bad luck, even when evidence is overwhelmingly contrary. It’s also hard to recognize luck because you have to dig so deep to find its roots. Is Bill Gates skilled? Oh my gosh, yes. But he was also born a white man in America to wealthy parents. That’s luck. Of course, most white American males with rich parents become Bill Gates. But it’s hard to imagine what Bill Gates would turned into if he were born, say, in Berlin in 1923.
I don’t know of a surefire system to increasing professional success other than working your ass off, being nice to people, and trying to solve people’s problems. Those three aren’t a guarantee of success but they increase the odds.
Sar: What does you filter mechanism for what to read, what not to read and what to share look like?
Morgan: I rarely buy a book that someone didn’t recommend, and so many smart people recommend books these days that it’s becoming easy. People like Patrick O’Shaughnessy, Tadas Viskantas, and Michael Batnick all read incredible amounts and share their best books and articles with their followers on Twitter. It’s invaluable.
In terms of what not to read, I follow Charlie Munger’s advice. He once said, “I’m not burdened by bad books.” He feels no shame reading 10 pages and giving up if the book isn’t connecting. I’m similar. It’s not worth your time to keep slogging through a book that isn’t doing anything for you.
Sar: Naval Ravikant recently tweeted “Networking is overrated. Become the first and foremost the a person of value and the network will be available whenever you need it”. While that tweet went viral, I know of a few influential people who disagreed with it. What is your take on networking and what advice do you have for people who are just starting out in their professional journeys in the context of knowing the right people.
Morgan: Networking is just like a relationship. In both, you can’t fake your admiration for the other person. It has to be genuine, or it isn’t going to work out. Exchanging business cards with someone doesn’t put them in your network. Becoming friends with them does. Unless you have a genuine bond with someone they’re not going to be open and honest with you, so the relationship can fall apart easily. Everyone who I consider “in my network” are people who I’d want to be friends with even if I didn’t work anymore. I think it has to be that way.
Sar: You transitioned from being a writer and analyst to a venture capitalist. What do you think is least known about that transition and the challenges and benefits that come with it?
Morgan: I think this is true in every profession: There are things that you can’t understand until you’ve experienced them first hand. It’s like Mark Twain said: “Hold a cat by its tail and you learn something you can’t learn any other way.” No matter how much I study or write about investing as an outsider, there’s something about being “in the trenches” that you can’t learn until you’ve done it. On the other hand, being a writer for 10 years let me view investing through a completely unbiased, unfiltered lense that I think helped shaped how I view investing now in a positive way.
Sar: What is the least appreciated aspect of venture capital?
Morgan: In public markets you just have to identify good deals. After that, anyone can buy the stock without any effort. In private markets you not only have to identify good deals, but then you have to win your way into those deals. If you had a crystal ball that told you what the next Uber or Airbnb would be, but you also had no connections or social skills, you wouldn’t get very far as a VC, because you wouldn’t have access to great deals even if you wanted to invest in them. That’s the biggest difference between public and private markets.
Sar: What do you disagree the most on with the high profile people in Silicon Valley?
Morgan: Bitcoin. But they’re mostly very nice people.
Sar: What have you have changed your mind on in the last decade?
Morgan: I’ve come to better appreciate the role of luck in success, especially massive success. Virtually all self-made successful people are grinders who think differently and took huge risks. But the number of things that need to go right to be a one-in-a-million success are so great, and so many of those things are outside of your control, that wherever you see massive success you also know luck is in the room. Maybe it’s hiding, or maybe you don’t know it’s name. But it’s there. Ten years ago I gave luck almost no weight, and I correlated success and wealth almost one-to-one with brilliance.
If you use Twitter, Morgan is a must follow. If you like reading blogs, Collaborative fund’s blog is a must. Doesn't matter if you are not into the startup world. If you don’t like reading blogs, their blog is a good way to change that.