I enjoy hearing about new decision making frameworks. I want to share two:
Clip #1 from Lex Fridman (podcaster/researcher) on Jeff Bezos (founder of Amazon) talking about decision making here
Clip #2 from The Investor’s Podcast Network on Chamath Palihapitiya here
16:43 is a good start and gets interesting around capital allocation at 23:42-27:12.
The section on value from 27:12-30:10 is an interesting view but has a few nuances baked in there.
From 30:10 through 34:03, the DCF / valuation ideas are helpful and the Amazon example.
And then on position size (through ~38:43) is actually the most interesting part of the podcast.
- On the point on Amazon, he is referencing the presentation (PDF here, can be found on Scribd) he gave in ‘16 at the Sohn Conference and during his podcast with Shane Parrish (podcaster) he mentions an ex-Social Capital analyst Sakya Duvvuru who came up with this thesis, who now runs an tech investment firm.
- Note: On his point at 23:42, keep in mind he is speaking from a mindset of a venture capital investor so his perspective reflects what he hopes is successful in this type of investing, which is one of many types so be wary about translating too much to different types of investing. This concept can also relate to Bezos’s idea of “one-way vs. two-way door decisions” and what decisions you can make fast (to iterate) if reversible and what decisions you should make slowly.
- The first part basically makes the case that product matters most and people matter less which is rather interesting because it is a simple conclusion that isn’t easy to reach (in my view).
- I actually like Chamath talking about bias here because it happens all the time and probably will as long as humans are around making decisions based on judgement.
- Last takeaways from Chamath’s ideas:
- Not too related, but leaning more toward you need to find the 1-3 things that need to work as well or better than you expect to drive growth vs. planning for 7-8 things to come together.
- Layer in more over time as you get more conviction.
- What matters is how parabolic your winners go and how much have you invested/can you invest.
- Taking step away from loss ratio (i.e., how many of your at-bats did you completely miss or strike out on) and spend that time on how improving product innovation accretes value.
- What is the certainty around how that value accretion occurs (certain: if I allocate time/money to X, it will help me grow 5% +/- 2%. uncertain: if I allocate time/money to Y, it will help me grow probably 5% +/- 10%).
