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Things I Struggle With

There's a great interview out there with VC investor Josh Wolfe of Lux Capital. If you haven't heard it, I highly recommend giving it a listen before or after you read this. Like all valuable learning opportunities, it spawned questions that stayed with me for awhile, and highlighted a bunch of things that, quite frankly, I struggle with. These include:

1) This is who you're up against. Host Patrick O'Shaughnessy often makes the joke that his show should be called "This Is Who You're Up Against" because there are some scary talented folks out there. If you're at all normal, it should make you insecure to realize that your competitors are very, very good. I wrote about this recently in a post called "How Buffett Became A Midwestern Manjusri", coming to the conclusion that it was desirable (but hard) to focus on a circle of competence despite the temptation to do otherwise (see more below). But I think there are two other possibilities that I didn't mention in that earlier post. First, as Patrick points out, you don't have to just compete with these people - you can collaborate with them! In fact, Josh mentions in the interview that one of his early investors was Stan Druckenmiller. Consider for a second that my former boss Scott Bessent said, "Stan may be the greatest moneymaking machine in history. He has Jim Rogers' analytical ability, George Soros's trading ability, and the stomach of a riverboat gambler when it comes to placing bets." So what's the greatest moneymaking machine in history doing allocating money to others? Like many people who have built successful money management businesses, Druckenmiller excels at picking people as much as picking investments. Collaborating with these people has no doubt sharpened his own game over the years, and is a trait worth mimicking. Second, it's a wonderful thing to be able to learn from interviews like this (even if they fill you a bit of envy). There's no better way to improve yourself than to learn from interviews like this or from the "eminent dead", in Charlie Munger's words. I've covered some of these ideas here and here.

2) Flutter all ways and fly in some. Philip Wakem, in George Eliot's "The Mill On The Floss", laments his tendency to "flutter all ways and fly in none." Poor Philip, for better or worse, is a dilettante. While Josh jokes in the interview that he runs Lux so that he doesn't have to focus, he also talks about the obsessive research that led to several wildly successful investments. This a reminder to myself more than anything that breadth is wonderful - and helps you to avoid boring people (at least in one sense of the phrase) - but is unlikely to be the path to extraordinary investing results. Carving out that circle of competence is a helpful exercise for most people. Or to draw on another metaphor I've used before, we need strong investing core muscles. "Powerful movement should be generated from the core. The importance of the pelvis for power generation is easy to miss when watching great athletes or dancers, because our attention tends to be drawn to the periphery of the body, where skillful and intricate gestures are made at high speed. But these movements originate in the center." So before focusing on your investing glamour muscles, make sure your investing core is strong.

3) Don't let the circle be a noose. Ok, so focus is good, and a circle of competence is helpful. AND YET - sometimes creating that circle of competence can be stifling, and makes you no different than anyone else competing in that narrow sphere. How is Lux competing? Yes, through extraordinary creativity, deep research and a valuable network. But it's also creating another structural advantage by crossing the imaginary boundaries that hem in most investors. Most allocators want to funnel money to a fund that fits neatly in a specific bucket, but trying to fit into those buckets almost guarantees mediocre results. Did I mention I struggle with trying to balance these things?

4) Actively seek out randomness & luck. Trying to tease out luck and skill is something that I think about all the time. Josh has some wonderful stories about randomness and luck in the interview. But of course, you can really generate your own luck - and openness to new people, experiences and opportunities is the best way to do that. Josh's desire to meet everyone and read everything suggests that something more than luck is at play. While I read widely, I know I could do a much better job at meeting new people. So what's the struggle? As always, there's an opportunity cost to meeting everyone, which is the amount of time left to cultivate deep relationships with your existing network, not to mention managing the rest of life.

5) Do you have to have something broken? Josh puts his finger here on a troubling - and most likely correct - suggestion that many extraordinarily successful people are driven by "something broken" inside them. I once heard (second-hand) a hedge fund allocator say that, when looking for potential managers, he looked for "men with bad relationships with a domineering father." That's an utterly depressing thing to hear. Given how much time I spend trying to develop positive mental and moral habits (not necessarily successfully, but some of which have clear investment consequences), it's uncomfortable to hear this line of thinking (even if it's true - see Justine Musk's comments on "freaks and misfits who were forced to experience the world in an unusually challenging way"). And if you're hoping to raise a child, do you want your child to have that relentless drive, even if means "a sort of hole inside" them?

Like I said, I struggled with so much in this interview. I hope you struggle with it too.

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