Sam Altman’s conversation with Tyler

Tyler Cowen recently hosted a conversation with Sam Altman, who until recently was the longtime President at Y Combinator, a well known startup accelerator. Below are my thoughts on some of the points made:

I think it is important to have strong views about the world, and it’s a shame that most people don’t.

I don’t fully agree. I do think having stronger views makes it more likely that people listen to you, which is a good thing for your influence, but potentially bad for everyone else if you’re basing your views on weak evidence. Our society seems to have moved towards more extremism in politics, economics, social issues etc [1]. As I’ve written before, I don’t think most of our beliefs stand under scrutiny since we don’t question ourselves enough. However, most people seem to have a strong view on everything and are unwilling to change them. Hence, if you’re trying to get attention, opinionated beats objective, as Byrne Hobart writes here. And I think getting attention and influence is a major driving factor for people. Moderate views may be more accurate on average but won’t get you as large an audience. It’s not a surprise Sam has this belief though, given that the fat tail nature of VC investing makes having stronger views almost a necessity in that industry.

Almost every venture capital firm gives advice they never follow themselves. They don’t build differentiated products. They are not network-affected businesses. They don’t try to build a brand and a community. And they don’t try to make something that gets better the bigger it gets and have the scale effects that anyone would tell you they want in a business.

I’m not in venture, but this is an interesting point that I think scales to the wider investment community as well. The qualities that investors look for in a good investment (competitive advantage, good tech, reliable process, reliable returns, cheap price etc) are usually not present in an average investment company. Just look at how everyone uses Bloomberg despite data quality and user experience issues, how little of an edge there is in professional investing for large-cap stocks, or how expensive investment products are.

we will, over time, figure out how to get another 10x and then another 10x after that. Someday we will fund all the companies in the world, all the good ones at least. But it’s unclear where the scaling limits are.

My initial reaction was skepticism. A 10x size from where they are now? The return on capital should erode with size. After a while of thinking about it, it seems more plausible, just based on current geographic limitations.

I know in my heart that there will be technological change that will happen at a rate that the companies can’t do or require a level of risk they can’t take. It has been a bad bet to bet against new companies for centuries, and I think that will keep happening.

This seems reasonable. Competitive advantage gets eroded away, as a graphic like this shows. You read stories about the largest trends missed by incumbents (PC, mobile, cloud computing etc) which makes for fun reads retroactively where people laugh at the incumbents, but I don’t think the missed opportunities at that point are ever an easy decision to make. The point below on “moving the needle” also shows why incentives might not be aligned in big companies.

And growth feels good. It does mask a lot of problems, but there definitely are individual instances where you’d be better off with slower growth for whatever reason.

Unfortunately, I think incentive alignment in VC results in a growth at all costs mentality most of the time.

about the only advantage that startups have or the biggest advantage that startups have over large companies is agility, speed, willing to make nonconsensus, concentrated bets, incredible focus. That’s really how you get to beat a big company.

You often hear ‘doesn’t move the needle’ in the investment or business world, where someone complains that an opportunity could be interesting but would be too small to affect the overall return profile of the fund or company. This structural issue leads to opportunity for smaller companies to enter and scale. Perhaps the market may not grow to the extent they were hoping (group discounting? segways? palm pilots?), perhaps it might (social media, ride sharing, live streaming). [2]

I think a vision that someone feels compelled to make happen in the world is probably the most important of a super successful founder. Then this idea of relentless resourcefulness […] You need to be a great communicator, which I think is a very underappreciated skill, because you have to convince so many people to join you on this quest

Conviction in your alternate view of the world where you’re successful, the drive to do whatever it takes to get to that state, and the ability to convey this narrative to other people. Or put another way, know what you want, how to get to it, and who you need for it. I don’t think any of these three are easy, and having high conviction in the first is particularly difficult.

I think one thing that is a really important thing to strive for is being internally driven, being driven to compete with yourself, not with other people. […] But if you’re competing with yourself, and all you’re trying to do is — for the own self-satisfaction and for also the impact you have on the world and the duty you feel to do that

I’m conflicted on this. I think most successful people truly believe that the product, company, idea that they’ve constructed has helped the world, and they get self-satisfaction from that [3]. But I don’t think they’d be willing to give up the money and status they currently have post-product creation, to go back to a life of obscurity. If people were in it just for self-satisfaction, then why have we not seen more of them choose to give up their fame and fortune after they have made an impact? It’s rare that a person who’s made that impact on the world refuses to accept the fame or fortune that goes along with it, hence why stories such as Grigori Perelman or Satoshi Nakamoto are enthralling [4]. I think that relative comparisons to a peer group matter, since a lot of life is signalling.

These personality traits of determination and communication and the ability to articulate a vision for the world and explain how you’re going to get that done — I used to think that that was so hard to assess in 10 minutes, it was maybe impossible to try, and YC interviews used to be like an hour. I now think that most of the time, we could get it right in five minutes.

This is counter-intuitive to me, would love to know more about the 10 minute process and how success/failure of the process itself was evaluated. The obvious first order reaction is to think that this biases founders that are more charismatic. But since charisma matters, as mentioned about in the point about convincing others, should you overindex on this factor? But if everyone knows that charismatic founders are better, than perhaps the ones that aren’t are underappreciated relative to the ones that are?

People are more convinced by imagery than facts. That’s the other side of nuclear energy.

An important point, not just about energy and the environment, but about human psychology and how to persuade. Facts by themselves are ineffective at persuasion [5]

I played a lot of poker in college, and I think I learned more about life and business from that than I learned in college. I would not say I’m a great poker player, but I’m pretty good. The thing that makes me, I think, good about that is getting good at quickly evaluating risk.

Another interesting poker player to follow is Annie Duke, who came up with the best way of differentiating luck vs skill I’ve seen so far - Can you intentionally lose?

I have really been able, in the last few years, to take more time to (A) just do nothing with people that I love, and (B) marvel at everything in life and figure out how to look at things for the first time again. That has been a source of great beauty.

Important enough to be a subject of its own post in the future, but people seem to value relationships highly when reflecting on their lives. Yet we spend more time at work than with friends or family, which sounds backward to me. I’m still trying to frame this as it regards to regret minimisation and how to better approach this conflict.

And all of us, myself included, are much more affected by what other people think of us and our ideas then we like to admit.

This loops back onto my point above where I think that despite people building things for themselves, at some point they do a relative comparision to others and want the approval of peers. It’s an interesting view as to whether co-working spaces help or hinder startups

I don’t do this as much anymore as I used to, but I used to make it a point — I would try to travel 12, 16 weeks a year, and I would try to meet people in other contexts or just observe the world way outside the US.

I’ve come to think this as well and wish I could travel more [6]. I fear that I have limited perspective when I don’t meet new people with a vastly different upbringing. One alternative scalable way of getting differentiated perspectives is putting myself out there publicly to get feedback, hence this blog.

Footnotes

1. I don’t have a large amount of evidence to back this up, but studies like this seem to back this up. Then again, you hear stories about how personal insults have always been the case in politics
2. Structural issues that restrict an investor base’s ability to invest in a category are potential opportunities, though that edge could become known and eroded over time. e.g. the tipping point between investment grade and high yield credit, ‘sin stocks’, illiquid securities. But you have to think about if a catalyst is needed to get your return, and what will catalyse the change in opinion.
3. Put another way, everyone views themselves as the star of their own show and are making their own positive impact on the world. The evil psychopath that does evil for it’s sake is rare. What’s more common is the bad person who views himself as a good person
4. And the exception rather than the norm by far; was difficult for me to think of more prominent examples.
5. I’ve not watched the Netflix flat earth documentary, but this anecdote by a flat earth believer stands out:

   “What we found is, is when we turned on that gyroscope we found that we were picking up a drift. A 15 degree per hour drift,” Knodel says, acknowledging that the gyroscope’s behavior confirmed to exactly what you’d expect from a gyroscope on a rotating globe. “Now, obviously we were taken aback by that. ‘Wow, that’s kind of a problem,’” Knodel says. “We obviously were not willing to accept that, and so we started looking for ways to disprove it was actually registering the motion of the Earth.”

6. Don’t we all though.

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