What happens if it works?
Making decisions with imperfect or incomplete information is the defining characteristic of most business and investment decisions, particularly in the small business arena. Detailed due diligence or research can improve the odds of making a good decision, but certainty is very difficult to come by. Consequently, especially in a field like venture capital where the failure rate is quite high, it is important to have unbounded appreciation for the potential of new ideas to be truly revolutionary. In a lengthy interview with New York magazine, Marc Andreessen succinctly outlines the importance of this mindset. From the article:
“I’m maybe the most optimistic person I know. I mean, I’m incredibly optimistic. I’m optimistic arguably to a fault, especially in terms of new ideas. My presumptive tendency, when I’m presented with a new idea, is not to ask, ‘Is it going to work?’ It’s, ‘Well, what if it does work?’ That stance is something I work very hard to maintain, because it’s very easy to slip into the other mode. I remember when eBay came along, and I thought, ‘No f*cking way. A f*cking flea market? How much crap is there in people’s garages? And who would want all that crap?’ But that was not the relevant question. The eBay guys and the people who invested early, they said, ‘Let’s forget whether it’ll work or not. What if it does work?’ If it does work, then you’ve got a global trading platform for the first time in the world, you’ve got liquidity for products of all kinds, you’re going to have true price discovery.…there are people who are wired to be skeptics and there are people who are wired to be optimists. And I can tell you, at least from the last 20 years, if you bet on the side of the optimists, generally you’re right.”
We believe there is an important lesson here when thinking about investing of any type. A significant majority of the research and due diligence related to the deal process involves analyzing and protecting against downside scenarios, i.e. “is it going to work?”. Andreessen’s perspective is an important reminder that in a world of rapid change, asking “what if it does work?” is just as important, can have a major impact on the risk vs. reward dynamics of any opportunity, and is a driving force behind much of the innovation we see today.