Reason Iteration: 04
Tuesday, 05 September 2017
Rejecting metrics.
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Invest ten million dollars for ten percent of my company.
What?!
What an absurd and unbelievable offer!
But it is precisely this — absurdly unbelievable — that characterizes genius.
Genius questions the unquestionable. Says the unsayable.
Thinks the unthinkable. Demands the undemandable.
Values the invisible. Devalues the visible.
Why should you invest?
Because we are innovating.
Everyone claims to innovate.
But a sure sign of innovation is the absence of metrics.
Once there are metrics, innovation is in the past.
Innovation builds machines that turn inputs into outputs.
These machines generate metrics.
But before the machine is built, there are no metrics.
That is then that innovation happens. In the void.
Churchill said:
Success is going from failure to failure without losing enthusiasm.
As our company, Invisible Technologies, approaches its two year anniversary, I look back on our passage as a journey through hell.
Here are our metrics:
- We have one happy client paying for five processes.
- We have several new clients that we are in a sales and onboarding process with, whom we have built and are building processes for.
- We have five former clients whom we were unable to retain,
for various reasons. - We have a number of technologies that we’ve built for ourselves that we use internally, and upgrade based on internal feedback.
- We have a number of processes that we’ve built for ourselves that we run internally, and upgrade based on internal feedback.
- We have a core team of seven, plus twelve operators around the world, who run our digital assembly line.
There are no more metrics to share at this time. Certainly none that would provide an investor with insight into the essential characteristics of our business model.
There are no metrics, for example, around growth, because we have not yet demonstrated an ability to reliably grow. There are no metrics around retention, other than the fact that we have not yet been able to retain any client for longer than one year — and even that client ultimately left. There are no metrics to validate our assumptions on unit economics or profit margins.
Yet we are able to make these 34 Revolutionary Claims. And we can talk, all day long, about the progress we’re making towards building our technologies, building our operations, and testing our model. But this qualitative progress cannot yet be reduced to quantitative metrics, because metrics are the lagging indicators of innovation.
So what’s the truth?
Are we innovating, or are we not?
Is this company worth investing in, or not?
Is this company going to be worth a trillion dollars someday, or not?
I don’t know.
Anyone who claims absolute knowledge isn’t skeptical enough.
Statistically, the odds are overwhelmingly against us.
But…
I know.
I know we are innovating.
I know we are worth investing in.
I am absolutely sure of it.
It is this alternation between I don’t know and I know that describes the quantum state that innovation exists in. Innovation is between Zero and One, it vacillates, it could go either way. Ultimately, it is an act of will. The innovator wills the creation into existence. Genius speaks into the void.
This uncertain certainty is what should give you confidence in your investment. Clearly, we believe. Otherwise, we would not be here — we would not still be here, triumphant, building with more energy, clarity and inspiration coursing through our veins than at any point in the last two years. And we would not be asking you to invest.
To that multitude, those other companies, giving you metric upon metric, up and to the right, growth in the rate of growth — asking you to invest…
Either they have achieved innovation in the past, so they have done the great thing, they have already gone from Zero to One, and are proceeding to go from One to N…
Or they are not innovating. For it is possible to copy an existing model, have metrics, and call it innovation. But even if there is something new to it, it is not essential innovation. The world is not forever changed. There is yet another AdTech company, yet another acquisition, yet another lending provider, etcetera.
Unknown investor — if you desire to invest in innovation, you will invest in neither. For the former investment is an investment in scaling, not innovation. And the latter investment is an investment in incremental innovation, at best, not fundamental or essential innovation.
Ask yourself: how many companies in a decade truly change the world? How many radically alter the human experience? I reckon about one per decade. Perhaps I am missing a few. But if I am missing them, how could I miss them? Ultimately, if they are changing the world, they are unmissable. You can’t miss SpaceX, Tesla, Facebook, Google, Amazon, Apple. Even these, to what extent do they radically alter the human experience? It remains to be seen.
To claim innovation at all is the boldest claim that a company can make. For to claim fundamental innovation today, in the second decade of the 21st century, is to claim that someday, your company will be a global technology monopoly, supplying something essential that was not available before, something that no other company can supply, something that is deeply and broadly demanded — something that radically alters the human experience, something previously inconceivable.
Our company is making such a claim. The claim itself deserves to be reckoned with: that the opportunity we see is real, that what we are attempting is possible, even in theory.
Investors, it seems to me, spend too little time listening to too many pitches. This may seem like the advertising paradox — half of the money is wasted, but we don’t know which half. No, this is not that paradox.
Time and money are being invested in too many companies, not because investors don’t know which ones will succeed or fail, but because most investors don’t care about essential innovation.
Indeed, most investors care about success, about IRR, about outcomes. So most funds invest in scaling rounds, at later stages. And those that invest at the earliest stages are attempting to guess whether later funds will follow on or not — so they invest conservatively, by making many bets, investing in less risky incremental innovation, and, most of all, investing in metrics.
Everyone claims to innovate these days. But very few companies claim to be radical, revolutionary, world-historical, existence-altering — very few companies, for example, would claim that their technology might save civilization from destroying itself, or bring about a creative renaissance, or privatize world peace. These claims seem absurd and unbelievable — and not nearly technological enough — they are immediately dismissed.
Those companies that do make these claims, and make them seriously, are either crazy, wrong or right. If they seem crazy, it is easy to dismiss them — but what is crazy? It requires crazy to change the world. So even the crazy, or perhaps, especially the crazy, must be taken seriously.
As for determining whether they are wrong or right, it is difficult to discern. You can develop various heuristics for assessing them based on externally visible indicators — your gut feeling about the CEO’s leadership, for example.
Or, perhaps better, you can attempt a logic trap. If you can defeat a company by its own logic, then maybe they’re actually wrong. Maybe, but not necessarily. Why not necessarily? Not necessarily, because it may just be difficult to explain.
In fact, it should be difficult to explain. Innovation should be difficult to explain. It should be strange, it should be hard to articulate. Its landscape should be challenging to navigate. There are most certainly paradoxes involved.
If an investor catches an innovator in a logic trap, it may mean that the innovator is not logical, or has not developed strong logical capacity. But if the innovator has strong logical capacity, but is somehow trapped in a paradox — that is through no fault of their own. Precisely the solving of paradoxes such as this — that is the work of innovation.
Investor posture is increasingly closed. Send me your deck. Show me your metrics. Prove it to me. They spend too little time listening to too many pitches. So lose their ability to judge for themselves. They rely on the metrics, then, once the investment is made, they make sport blogging about trends, and post-hoc rationalizing the innovation that occurred in the past.
They are looking for obvious wins. Metrics that are so powerful, there is an undeniable victory at hand. In rounds like this, they will compete over valuation. But if everyone can see that value has been created, innovation is in the past!
Investing in innovation should be lonely and contrarian for the investor. And the posture required is open. The only way to discern the truth of an innovation is to spend time listening to innovators, really listening to them — and attempting to enter their world, the internal landscape of the problem.
I remember a conversation I had with a veteran investor at a large investment firm. The investor said: “I do not like internal logic. I only like external metrics.” That was a true statement. That is exactly what he likes. That’s what all investors are looking for.
Internal logic is hard to penetrate. Outsiders have to become insiders to develop their own point of view. In the current investment model there is just no way to make outsiders insiders quickly enough for that to happen. A deck and a meeting certainly won’t do it.
Time. I said, Investors, it seems to me, spend too little time listening to too many pitches. Which means I believe they should be doing the opposite. They should spend as much time as possible listening to a few companies — and they shouldn’t listen to pitches at all. They should be attempting to become insiders, to the point where a pitch would be entirely superfluous. The invest must say: “fuck decks”, “fuck metrics”—“let me spend time with you, until I understand your innovation for myself”.
This, of course, risks wasting the venture capitalist’s time — the venture capitalist, that is, the entrepreneur, the CEO, for that is the person venturing to capitalize. So the investor should be doing the work of convincing the CEO that it is worth his time. Everything is backwards, you see, especially words.
“Brilliant thinking is rare,
but courage is in even shorter supply than genius.”
What did Peter Thiel mean by this?
Shame. Guilt. Embarrassment. Unworthiness. Insecurity. Insanity. These are all the emotions that an innovator will feel if an innovator commits to an essential innovation. The entire industry is against him. He cannot play by their rules. No matter how hard he tries, they will not accept him.
To innovate, to truly do it, requires courage above all — for it is not enough to think the beautiful idea or even to build it. To sell it to the market, to sell it to the market requires an all out frontal assault on the market’s values. Because the market does not value the innovation, otherwise it would already exist. It must be made to value it, and that requires the innovator, above all, to stand his ground, alone. To believe his own truth, even when no one else believes it — and to say to the world that says to him: “you’re wrong”, “no, you’re wrong.”
Now we come to it. The essential reason.
Why should there be no metrics?
Never before in history has this innovation been attempted.
My company is building the world’s first general Synthetic Intelligence.
To operate the world’s first Digital Assembly Line.
Not only this has never been done.
It has never even been conceived of before.
So who is to say that we should be anywhere other than we are?
Precisely where we are?
Who is to say that our metrics should be other than what they are?
Or that we should have metrics, when we do not?
In the winding path of innovation,
who is to say anything other than — you are where you are supposed to be.
There are reasons, good reasons, for why I am where I am,
for why my company is where it is. It is certainly not for lack of effort.
These reasons make sense to me and provide me with a clear path to solve the remaining problems between us and scaling.
Why don’t we have more clients? Because the essential accomplishment we are attempting is to place many cooks in the kitchen. That is, we are building a coordination technology. Humans do the work, and technology coordinates the humans. So we are attempting to put as many humans in the kitchen as possible, to achieve a meal. This seems inefficient, but at scale, it allows for hyper- and meta-specialization. When the technology does not work, as in, now — before the innovation has been fully accomplished — in its early trials, when the machine still sputters, what is the result? The result is the exact same result you would expect from placing too many cooks in a kitchen: a cluster-fuck.
We’re in the business of turning cluster-fucks into orchestras, so it is no wonder to me that we have a long history of cluster-fucks. So I go from failure to failure without loss of enthusiasm — because after each cluster-fuck, I diagnose it, learn something new, and upgrade the machine.
This is science. True science, that is. As opposed to the pretend science of all of our pretend metrics, which flock to numbers as to safety. Science is not scientism — an irrational retreat from the qualitative to the quantifiable. The scientific spirit is a learning spirit, that takes a hypothesis, an idea, learns from failure after failure without losing enthusiasm, and refines the hypothesis until it is demonstrated or disproven.
So the innovator that seeks to be scientific does not flee in fear from those things which are hard to measure — but rather uses his powers of observation to discern things from experiment which escape others.
Most of all, science is contrarian and undemocratic. No matter how many people say you are wrong, ultimately the scientist is judged by the final result — which is unpredictable and may be an unknown number of months or years in coming. Until the hypothesis is determined, the scientist must continue his research however he can, by seeking partners in those who value the act of science itself — which is always a leap into the unknown.
The most scientific thing in our scientific age is that science called innovation, for which there are no metrics.
Insiders can see where they have come from,
Can see where they are going — but even they face the fog of war,
Even they are in the quantum state.
Outsiders have no basis for making evaluations.
They do not even know what it is they are evaluating.
Because, by definition, essential innovation is obscured, concealed,
Until it is revealed.
So,
Between an investor and an entrepreneur,
Both of whom understand the essential nature of innovation,
The shortest argument is also the best:
Trust me.
Trust me.
That is as good a heuristic as any other, for an outsider.
Otherwise,
Come see for yourself.
No decks. No metrics.
Spend time as a member of the team, then decide if you will:
Invest ten million dollars for ten percent of my company.
