Capital Road: Vol IV

[originally posted in 2015]

It’s that time of the month again — below is a curated list, the best-of-the-best material on the web to help you invest well and live well. Here’s your one-stop-shop to learn, discover, and dig deep into whatever piques your interest.

I hope you’ll forgive my absence with last month’s issue — my second son was born and I spent the month with family. But fear not, this issue is packed with double-shot of great reads.

As always, I hope you find it both enjoyable and useful. If so, please consider sharing it with those in your network who may agree. All feedback is welcome, email matt@channelcapital.co anytime.

Cheers!

“Start as close to the end as possible”
Kurt Vonnegut on “How to write a good short story.” Also for a good life, I think.

IF YOU ONLY READ
3 THINGS,
READ THESE:

MOW THE LAWN

This could have also been called “Don’t sweat the details, but do sweat.” Nothing I can point to has captured by attention more consistently over the last 10 years than this idea of passion vs. duty. This article renewed this interest for me. Here’s a clip, but the whole article is short and worth reading:

“I’ve grown suspicious of the inspirational. It’s overrated. I suspect duty — that half-forgotten word — may be more related to happiness than we think. Want to be happy? Mow the lawn. Collect the dead leaves. Paint the room. Do the dishes. Get a job. Labor until fatigue is in your very bones. Persist day after day. Be stoical. Never whine. Think less about the why of what you do than getting it done. Get the column written. Start pondering the next.”

Reminds me of the word “grit,” which I wrote something about.

13 PRACTICAL IDEAS THAT HAVE HELPED ME MAKE BETTER DECISIONS

This is a somewhat short article from Shane Parrish, but loaded with useful links and big ideas. It’s about what he’s learned about decision making, thought processes that lead to better decisions, and the common biases we all have in different situations.

I read it and knew I’d be referring back to it often…but remained overwhelmed with the amount of information presented. Here’s how I’d distill it even further for those of you who enjoy nuggets:

• Some decisions will be elegant, others will not — The world is too messy for perfection
• Most decisions are like poker, not roulette. It matters what happened last time because people and relationships and markets are messy
• Rules of thumb and intuition can be your best friends…but only after you do the detailed analysis. You have to earn it
• Always define success.
• Calibrate — Record your confidence levels in a decision (90% confident means you should be right 9 times out of 10). If you’re not, ask why and re-calibrate. “It’s amazing how we will assign high confidence to an event we know nothing about.”
• Track probability along with payouts. A 50% probability should give at least a 2x payout:
• Expected Value = (Probability of Success X Payout if you’re right) + (Probability of Success X Payout if you’re wrong)
• We are all overconfident. Even the experts aren’t right much more than 50% of the time.
• Experts are not fooled by small sample sizes. Would you rather invest your money on the recommendation of an investor with an average 20% return on 100 investments, or one with a 25% return on 2 investments?

HERE’S YOUR PRODUCTIVITY HACK:
GO THE F*** TO SLEEP

Ryan Holiday makes a compelling case that “I’ll sleep when I’m dead” should not be the badge of honor we make it. Only 5 to 6 out of 100 people who say they can operate on less than 7–8 hours of sleep can actually do so without sacrificing performance. The Law of Diminishing Returns comes calling, and sleep collects its tax in one way or another. Play the long game and go to sleep.

SHARPEN YOUR SKILLS

HOW TO RAISE MONEY
Long read, but the best you’ll find anywhere on how to raise money. On that note, go ahead and read all of Paul Graham’s essays while you’re there. Required reading for the startup world, but useful for any industry.

WHAT THE NFL DRAFT CAN TEACH US ABOUT INVESTING
You’ll see a lot of the concepts from the “13 Practical Ideas” Shane Parrish article above put into action in this article.

“For investors, there are two big lessons.

• First, the best player does not necessarily make the best draft pick — just as the best company does not necessarily make the best stock to buy. On average the players taken with first-round picks do not provide teams as much value — performance relative to their cost — as players taken in later rounds. Value matters.
• Second, NFL general managers — like investors — pay too much for glamour and neglect duller, solid performers. Specifically, NFL general managers often overpay for early round draft picks, so they can draft an alluring star — just as many investors overpay for glamorous, fast-growing companies and neglect solid but less exciting ones.”

COMMUNICATION
2 RESOURCES THAT MAY HELP:

• A16Z Podcast: It’s How You Say it.
  What words/phrases perform well in a job listing, Kickstarter campaign, etc?
• 10 Tips On Writing from David Ogilvy.
  My favorite: “Never write more than 2 pages on any subject.”

EXPLORE ON YOUR OWN

THE PITCH — podcast

“We find early stage startups, listen to their pitch and help them raise money from our audience of angel investors.”

NATURAL BORN HEROES — book

Love this book, highly recommend it. Same author as “Born To Run,” which is one of my favorite books of all time.

Thanks for reading.
Be well, stay in touch, and do good work.

Matt McPheely & The Capital Road Team