Thursday, May 12, 2005

The First Post

Blogging is an amazing way to share.

My first blog, a family blog, proved so easy and succesful that I have decided to start a personal blog to share my ideas and experiences.

I hope to use this blog to share with friends and colleagues thoughts and ideas on life, the venture capital industry, start-ups, and other fun things worthy of discussion.

The first post will introduce a book that is simply remarkable, Fooled by Randomness, by Nassim Nicholas Taleb. For a good synopsis - see the following blog. The book centers on the "hidden role of chance in life and in the markets." As an investor, it is particularly apropos as one tries to identify systematic methods of creating value via investing. Investors and investees like to believe that the investment world is deterministic with clearly understood cause and effect. Understanding causal drivers of value helps to create repeatable models for investment that scale both across time and inviduals in the firm. Nassim challenges us to be very careful in overascribing reason and logic to an outcome. Too often, investment outcomes are the result of randomness rather than science, ie being lucky rather than good.

He illustrates his point by comparing the world of investors to a large sample of coin-flippers. If you start with a large enough sample, someone will manage to flip heads for many months in a row. While others drop out, the surviving "flipper" will take on magical qualities and others will study his background, methods, and secrets for achiving such success. Then, of couse, he will flip tails one day and "blow up."

Nassim's book instills a deep sense of humility in the reader and a recognition that time and chance are often at the root of success. I strongly recommend reading his book. Let me know what you think.

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