You’ve probably all seen this picture. The 2019 Mount Everest summit season has become famous for a high amount of deaths and reports of long lines of climbers waiting to complete the final summit.
Too often investors act like these climbers. Instead, they should act like Mozart. In this post, I will tell you why.
Institutional Contrarianism: When climbing the world’s highest mountain enters the mainstream
The summit of Mount Everest was first reached in 1953 by Edmund Hillary and Tenzing Norgay. This success came almost 70 years after it was first suggested the feat might even be possible. Unsurprisingly, the summit of Mount Everest captured the world’s collective imagination in a way that few endeavors had before, or since.
And there was no putting the genie back in the bottle.
A line of hundreds of climbers waiting on the summit is what happens when climbing the world’s highest mountain enters the mainstream. What was once the domain of a chosen few lofty dreamers has become the world of Fred from El Paso. And Mo from two neighborhoods over. Now, that is maybe a little bit of an exaggeration, but a Sherpa guide has reached the summit of the mountain 24 times (the most a non-Sherpa has reached the summit is American David Hahn who has reached the summit 15 times).
Venture capital bears a striking resemblance to Everest. Everyone claims to be trying to operate on the edge of what is possible, but when everyone is swimming against the current, is anyone really?
Contrary is the biggest buzz word in venture capital today. No, the irony is not lost on me. The cult of contrarianism was seemingly started by Peter Thiel and his oft-posed question of “what is something you believe that those around you disbelieve?” In his book Zero to One, Thiel encouraged people to come up with fundamental insights about the world by looking at it through a different lens than others. I am a big fan of this way of thinking.
But it has warped into something different altogether. It has become the very evil it sought to destroy.
It has institutionalized.
At some point, everyone trying so hard to go against the crowd just becomes a herd moving in the opposite direction.
Everyone pays lip service to being a contrarian, but how much of them actually do it? From what I have observed, some. But not many. This Institutional Contrarianism becomes the very thing it claims to oppose. There are few leaders in a new space, but many followers. People are interested in latching on to the work others have done and seek exposure to hot spaces without necessarily having a strong perspective on them.
How do you break out of the trap of Institutional Contrarianism? How do you strive for true originality?
We look to great creators of the past for answers.
Create like Mozart: Tapping into the power of Instinctual Originality
A book I have learned a lot from is Impro by Keith Johnstone. This book is ostensibly about improvisation in theater but actually has much more far-ranging lessons. You may recognize it from the annals of FinTwit where it is oft-cited for its teachings on physical presence and interpersonal positioning. These lessons are great, but I have found that it has just as much, if not more, to teach us about learning and thinking.
Recently while reading I came across a section on originality that I think offers some striking insights towards solving our problem of Institutional Contrarianism.
Johnstone on originality in theater:
Anyone can run an avant-garde theatre group; you just get the actors to lie naked in heaps or outstare the audience, or move in extreme slow motion, or whatever the fashion is. But the real avant-garde aren't imitating what other people are doing, or what they did forty years ago; they're solving the problems that need solving, like how to get a popular theatre with some worthwhile content, and they may not look avant-garde at all!
Similar to the avant-garde movement, venture capital investors too often find themselves pursuing what is fashionable instead of what is truly differentiated. By definition, a space cannot at the same time be fashionable and contrarian. One need only look at any tech news site to see the dynamics of fashion trends at works. Entire sectors and technologies fluctuate between golden child one moment and untouchable the next. Blockchain. VR. AI. Greentech. All have had, or are having, their moment in the sun. All likewise have at some point been cast aside.
The crux of the issue is that you cannot generate abnormal returns in any asset class by acting the same way as everyone else. When a “contrarian” trend becomes the fashion and everyone starts flooding into the space, you can guarantee that valuations will skyrocket even as the number of quality opportunities diminishes.
As Johnstone says above, truly original ideas will often hide behind a sheen of the mundane. In hindsight, it is easy to craft a narrative around why companies like Uber and Airbnb were so transformative, but at the time they seemed anything but. Plenty of incredibly smart, successful investors passed on some of the greatest investments of the past decade (for proof just check twitter any time a tech company goes public).
So how can we tap into this true originality of thought? When asked where his ideas come from, Wolfgang Amadeus Mozart replied:
Why my productions take from my hand that particular form and style that makes them mozartish, and different from the works of other composers, is probably owing to the same cause which renders my nose so large or so aquiline, or in short, makes it Mozart's, and different from those of other people. For I really do not study or aim at any originality
Therein lies the secret. One cannot be original by trying to be original. Striving to be contrarian leads you to follow the popular fashions of the day and will inevitably lead to mediocrity. The path to true originality in life and business can only be found by accepting yourself and leaning into the things that make you unique and different. I call this Instinctual Originality.
Ok, Erik, great. Just emulate Mozart. No problem.
It is not as hard as it sounds.
First, accept who you are. All your faults and all your greatness. Be aware of them and honest with yourself about them.
Next, ignore the mainstream. Easier said than done, but possible all the same. Don’t buy the hype. Always ask why and act from principles and fundamental thinking.
Finally, create from a place of Instinctual Originality. Originality is not some external mountaintop that we can scale, it is inherently inside each of us. Let it flow from you. Don’t pursue it. Listen to the voice inside of you. There is a reason that our best ideas often come in the shower or on a run. We already know the answers.
We just need to listen.