© 2011+ Andrew Hsu

Filed under: investment

Life In The Long Haul

There are a lot of parallels between great trading/stock picking and a proper world view. What springs to mind is the difference, as discussed in the investment classic “Reminiscences of a Stock Operator,” between a speculator and an investor. 

Speculators are risk-takers and "buy the trend" whereas true investors pick carefully and are in for the long haul. The financial markets are in so much trouble today because of the very human tendency to look to the short-term and panic whenever things go wrong or stock prices go down. There's strong herd pressure to follow the trend and rush to the current area of excitation.

The book's protagonist, Livingston, is a self-admitted speculator, but his savvy sets him apart and allows him to be a great stock picker. Among these qualities are a more austere, less emotionally-attached mindset for the market. The ticker tape is impartial - it doesn't care how you feel. That's his genius - he could look within himself and understand his mistakes, rather than blame the market. 

This is also a good way of approaching life and of becoming a fountain of innovation. Try to resist the siren of the masses - market psychology - and come up with fundamental insights into how the world works. That's what leads to breakthroughs. Don't be a short-term thinker, and don't "fight the tape" - become more self-aware and a better person. Keep the confidence in your long-term plan and vision, and enjoy the journey along the way.

Focus on Value, Not Dilution

Here’s something that Gideon Yu told me. Gideon is a partner at Khosla Ventures, previously CFO of Facebook, partner at Sequoia Capital, CFO of Youtube. 

He said that when building a startup, you should do everything within your power to grow the company and build the product and valuation and gain traction and social proof, completely independent of any dilution issues. 

As I think more about it, this is really great advice. It’s natural for entrepreneurs to not want to give up any equity in “their baby” and if they have to do so for investment, they do so grudgingly. Rather, what the entrepreneur should focus on is building out the product, growing the company with as much speed as possible, and investors will come knocking at your door - you won’t be beholden to the VC world.