Luck Over Logic

LPs and Investors should internalize that luck is going to be an increasingly important driver of the track records for Investors who are chasing startups building on top of known technological new S-Curves.

Right now the biggest consensus new technology early in its adoption curve is AI and it’s estimated that there are 70,000 AI startups globally.

5-10 years from now, only a few of these 70,000 startups will become generational companies. And each of these companies will have been backed by a few dozen Angel, Seed and Early Stage Investors.

Some of these Investors will have done incredible work that allowed them to spot the perfect team building the perfect company at the perfect time. A few might even have repeatable processes that will allow them to find the next generation of winners when a new S-Curve emerges.

But the truth is that most will have gotten lucky. Luck takes many forms and Investors can work to increase their luck surface area, but luck misses an important feature that’s important to world class Investors – repeatability.

And this is OK. It’s how a well functioning Startup ecosystem works. Luck plays an important role in many Investors’ careers and therefore shouldn’t be ignored.

But mistaking luck for skill is dangerous in the long run. Survivorship bias will manufacture many “luck based track records” that some Investors will repackage to the world as genius.

The truth is that very few people on the face of the planet can repeatably spot generational winners when they’re super early, especially when there’s a Cambrian explosion of startups simultaneously emerging in a space.

My advice: Internalize the difference between luck and skill and do your best to be honest with yourself if you happen to get lucky somewhere in your Investing journey. It’s not a bad thing…it’s just a bit of randomness that makes the Investing game more challenging and interesting!