Tag: Grit

Federer at Dartmouth

Recapping “tennis lessons” from Roger Federer’s 2024 commencement address at Dartmouth.

I am a big believer in collecting mental models from various disciplines in life, and as part of that, I look to learn from top sportspersons. So I naturally found the “tennis lessons” Roger Federer shared in his recent commencement address at Dartmouth to be particularly insightful.

In addition to capturing some defining experiences and approaches from Roger’s life, the speech was also filled with some amazing one-liners. I always find these to be really useful as they help us cognitively index, remember, and recall powerful concepts that others have experientially learned.

Here are some powerful ideas from the speech that stayed with me:

1/ “Effortless is a myth”

The truth is, Roger had to work really hard to make it look easy. A lesson for all of us chasing excellence in our respective fields – you have to embrace hard work before you become an expert.

2/ “Everybody can play well for the first 2 hours”

The real game starts after that, when the body is tired, the mind wobbly and the discipline fading. This highlights the importance of stamina, and of grit, in life.

3/ “My warm-ups at the tournament were so casual, people didn’t think I was training hard. But I had been working hard…before the tournament…when nobody was watching”

The importance of prep, putting in the reps, breaking a sweat. Excellence during the most crucial moments in life is a result of all the work put in during the years prior.

Reminds me of the famous General Patton quote – “He who sweats more in training bleeds less in battle”.

4/ “Belief in yourself has to be earned”

Roger didn’t explain this thought much, but my interpretation is this – self-belief is a by-product of the work you put in to go deep into a skill, and of the chances & risks that you take to make yourself better.

5/ “I beat some of the top players I really admired by aiming right at their strengths”

Roger tried to beat the baseliners from the baseline, beat the attackers by attacking, and beat the net-rushers from the net. He did this to amplify his game and expand his options, preparing for scenarios where one strength breaking down could be replaced by another one.

6/ “In tennis, there can be many types of talent”

Roger cites some of them – grit, discipline, patience, trusting yourself, embracing the process, managing your life, managing yourself. Also mentioning that everyone has to work on these things.

I would add that these are talents not just for tennis, but also for life.

7/ “You can work harder than you thought and still lose”

Tennis is a brutal game where at the end of a tournament, only one player gets a trophy while everyone else gets on a plane, thinking “how the hell did I miss that shot?”.

Life is going to be a roller-coaster for all of us. It’s how you manage and behave after losing a game, is that defines how big you will eventually win.

8/ “In tennis, perfection is impossible”

Roger shares some really interesting stats from his career – in the 1,526 singles matches he played, he won almost 80% of these matches. BUT he only won 54% of points across these matches. So, even the greatest of all time tennis players barely win half of all the points they play!

Why is this important? Roger says it teaches players to not dwell on previous points and to play each point on its merit. In other words, stay in the moment and play each point as if it’s the most important point in the world.

PS: like me, if you love learning from sportspersons, then I highly recommend Open – Andre Agassi’s autobiography. It helped me through some of the lowest points in my life.

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Staying In The Ring Long Enough

While the key to generating outlier returns in any asset class is to be non-consensus-and-right, the “right” can take a long time to play out. Case in point: Bitcoin.

With inflows into Bitcoin ETFs gaining momentum, the price of Bitcoin has reached ~$52k. Driven by tailwinds of broad-based institutional and retail adoption, a $100k price point appears to be an eventuality, with the imagination of believers now extending to $500k levels (Cathie Wood’s Bitcoin price predictions don’t seem that outrageous anymore!).

Was recently discussing this with an old friend who has been a super-early adopter of Crypto (from the $100-200 BTC price days!). As I congratulated him on what I presumed were “giant payoffs from his early conviction”, he said something interesting:

Even those who got into Bitcoin very early, very few of them have been able to hold on to it during the down cycles.

He was alluding not just to people holding Bitcoin, but even those holding Coinbase stock, including employees who worked there. As the SEC cracked down on the company, combined with the FTX scam and plunging price of Bitcoin, even the most ardent believers in Coinbase ended up selling.

Since then, the US landscape for Crypto has completely changed (read my post: Bitcoin ETFs and The Challenges of Digital Gold). With Binance out of the equation and the regulator proactively bringing all Bitcoin activity onshore and under its domestic purview, Coinbase has emerged as the dominant exchange infra backbone for Bitcoin. This has resulted in the stock being up ~128% in the last 6 months!

So why am I doing this hindsight analysis? I think it highlights a concept I think about a lot, especially given its relevance to my job as a venture investor:

To generate asymmetric returns, you need to have the capacity to stay in the ring long enough for your high-conviction yet non-consensus beliefs to play out.

As I wrote in my post ‘An Investing Framework to Find Startup Diamonds‘, the key to generating benchmarking-beating returns in any asset class is to be non-consensus-and-right. However, there is a hidden nuance in this. The “right” can take a long time to play out.

Benjamin Graham, the Guru of value investing, has taught us that any security’s price should ultimately converge to its intrinsic value (calculated by discounting its future cash flows or DCF). However, he doesn’t give any guarantees as to when this convergence will happen. As the OG investor Joel Greenblatt says:

If you do good valuation work, the market will agree with you eventually. You just don’t know when.

Joel Greenblatt

This is a critically important point. Having a strongly held, non-consensus belief is necessary but not sufficient. Translating this belief into actual returns requires having enough staying power (personal and professional) to withstand the gyrations of Mr Market till its view converges with your own.

This also applies to the frequently discussed topic of the importance of timing for a startup. Essentially, in hindsight, every outlier startup seemed to have started at just the right time to be able to get massive market adoption from some sort of secular tailwind. Think of Uber as leveraging that moment in time when smartphones got GPS capabilities. Or Zoom leveraging the rise of remote work through Covid lockdowns.

I have a strong view on this. I believe narratives around timing are all post-facto. Even the best founders and investors can at best, only build strong conviction on a long-term secular trend from first principles. It’s impossible to predict exactly when this trend will reach a tipping point. Brian Armstrong (Coinbase Founder) and Fred Wilson (USV, first investor in Coinbase) spotted the power of Bitcoin early. Still, they could never have predicted the continued prevalence of zero interest rates for a decade, rampant money printing, rise in national debt, and ultimately, Covid as a tipping point for Crypto.

However, what was in their control was having the conviction to stay in the game and keep building for a decade till the market started agreeing with them. For startups to survive this long, this means:

(1) Founders need grit,

(2) Investors need patience; and

(3) The company needs a continuous cash runway.

That’s why the more outrageously non-consensus the founder’s thesis is, the more I advise such founders to watch their burn as:

Having enough runway is key to staying in the ring. Runway comes from either the ability to periodically access capital markets and/or control burn to make the capital last longer. The former is often not in the founder’s control. The latter always is.

I use this Bitcoin/ Coinbase mental model to keep reminding myself to be extraordinarily patient with my non-consensus bets as a venture investor and also to keep reminding portfolio founders about the importance of staying in the game. From a picking perspective, this means indexing on “grit” as a critical founder trait while evaluating new investments.

Want to leave you with this quote from John Maynard Keynes, the father of modern macroeconomics:

Markets can remain irrational longer than you can remain solvent.

John Maynard Keynes (via a Howard Marks memo)

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AI Musings #5 – Opportunists vs Believers

Sharing some observations and working hypothesis on Opportunist vs Believer founding teams in AI.

My biggest challenge as a venture investor in AI right now is figuring out which of the following 2 camps a particular founding team belongs to:

Opportunists – who are trying to leverage this moment in time when the market has massive curiosity about AI.

vs

Believers – who have high conviction, and are truly mission-driven about AI.

This is a critical evaluation point for these early AI deals. As previous super-cycles have shown us, a bubble-bursting trough in the space is inevitable in a few years (perhaps as soon as 3-5 years?). It will be brutal like previous resets – capital will get reallocated to the winners and dry up for the rest, exits will be on brutal terms, customers will tighten their belts, early-stage talent will flee and the general sentiment will turn from greed to fear.

In my experience, Opportunist founding teams are less likely to survive this trough. It will require grinding out on fumes and focusing on real customer problems vs vanity metrics and perpetual fundraising. It will need gut-wrenching decisions that sacrifice short-term gratification so that the long-term upside can be captured. It will require possibly resurrecting the company many times from the dead.

Being able to do all this requires extremely high conviction deep down in the gut. Founders who are Believers will have this conviction in their DNA, and when the cycle turns negative, this will become their competitive advantage.

Given this is turning out to be a key evaluation point for AI deals, have been thinking through what leading signals can be used to spot Believers with higher probability. Here are some working hypothesis thoughts on this:

[Disclaimer: am just thinking out loud here so please take this with a pinch of salt. This is nowhere near any gospel of truth, nor do I have significant experiential validation around these points given we are literally in the first wave of AI deals].

1/ Pre-ChatGPT AI builders – likely to have been working in AI much before ChatGPT was launched. They were most likely building with ML, NLP, and neural networks in a Big Tech team, a lab, a university, or some sort of R&D/ academic environment.

2/ Pre-AI domain experts – likely to have been working deeply in a specific domain/ industry/ sector/ function from pre-AI days and are now adopting LLMs to carry forward their domain work and solve customer problems that were previously unsolvable or unviable.

3/ Young tinkerers – likely to be fresh grads who started building AI-native products as a hobby during university, maybe as part of a side hustle, or even just out of intellectual curiosity. They would have likely built products and hacked a few early users even without “doing a startup”.

These are only some of the personas I have been thinking through. As I meet more teams, I will keep adding to this list.

If one looks at how the early days of Web 1.0 played out (eg. in eCommerce and Search), most first-movers ended up dying. The 2nd generation companies leveraged both the market that was created by the 1st gen, as well as learnings from their failures, to create new categories and emerge as viable businesses.

History doesn’t repeat exactly but often rhymes, thus requires being even more thoughtful about which companies to back in this 1st generation of AI. In my case, as a US-India corridor investor, there is an additional complexity to think through – how will AI companies being built out of India compete with those in Silicon Valley? Who is most likely to be stronger in which part of the AI stack?

With domestic data being of strategic importance to each country and the rise of country-specific models, is AI going to be an extension of the globally decentralized software product/ SaaS story of recent years? Or will there be opportunities in ring-fenced, domestic AI in each major geography?

These questions and unknowns are what make the present times in AI investing both interesting and challenging at the same time. To manage this context, I am trying to be open-minded, learn fast, and think from first principles as much as possible. But at the same time, balancing this default-optimism stance with being non-trigger-hungry, consciously thoughtful, and taking the time to build personal conviction on each opportunity.

PS: check out the previous post #4 in the AI Musings series – How To Differentiate As An AI Applications Startup?

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Sports And Humility

Sports can be a cruel teacher for even the best of us, as India’s recent heartbreaking defeat in the Cricket World Cup final showed. However, if approached with an open mind, there are none better ways of practicing and getting better at humility and grit.

One of the reasons I am a big believer in playing sports is because it’s one of the few things in life that forces a player to accept defeat with humility. Every sport is a microcosm of how life actually plays out – the best plans don’t work out, huge highs are quickly followed by huge lows, the Davids often end up beating the Goliaths, and given all this, the best players focus on process over outcomes (read my post: Conquering Uncertainty, Dhoni & Vinod Khosla Style).

The recent soul-crushing defeat of India at the hands of Australia in the final of the 50 overs Cricket World Cup was a perfect example. A rampaging team full of superstars, playing in home conditions and backed by the richest and biggest cricketing engine the world has ever seen, was comprehensively outstrategized and outplayed by a team that had most of its stars way past their prime, whose innate strengths were unsuited to the local playing conditions, and which had scrapped its way to the final.

Having grown up seeing many of the previous World Cups, 2003 in particular, there were a few things that were making me nervous about India’s chances even before the final game. Classical cricket analysts have always talked about the Law of Averages being particularly strong in cricket. Being a student of investing, I also believe in Mean Reversion and therefore, this Law resonates with me. India was coming into the finals with a 10-win streak, the longest winning streak ever at a World Cup. This stacked the Law of Averages against it, and ideally, I would have liked to see them have a bad game before the final.

There is another reason why India not getting challenged at all during this unbeaten run bothered me. Regular readers of my blog would know that I am a believer in overcoming failure via grit as being the #1 leading signal of success in life (read my post: Storyteller vs Scrapper Founders). As Mike Tyson’s famous quote goes:

Everyone has a plan until they get punched in the face.

Mike Tyson

Success in life boils down to having the muscle memory to throw counter-punches once your Plan A has failed. This is where most people give up. Unfortunately, in my experience, the only way to build this strong muscle memory is to go through repeated failures, to operate in scarcity, to be the underdog in the shadows, essentially – “to get repeatedly punched in the face by life”.

As opposed to India, which won 10 games on the trot with a specific Plan A largely working each time, Australia got punched in the face many times at the beginning stages of the World Cup. This forced the team to develop ways to counterpunch, even while dealing with unfamiliar playing conditions and a set of aging players. Having the agility to come up with Plan Bs and Cs on the spot during game time perhaps became a necessity rather than a luxury.

The beauty of adversity is also that it brings people together, creating deep bonds and trust under conditions of high pressure. Look at how Pearl Harbor united the US like never before, ultimately creating the likes of the Manhattan Project in record time. This is likely what happened within the Australian team too, unlike India, whose team dynamics never really got pressure-tested before the final.

Of course, teams can only overcome adversity when they have a basic foundation of grit in place. This is where the national sporting culture of Australia built over generations comes in. A healthy sporting culture gives importance to systems and processes, has a high tolerance for failure, and puts teamwork over individual brilliance. More importantly, the fans and general audience also imbibe this spirit, having the maturity to spot these aspects and applaud them over one-off wins and losses. This leads to the entire engine, from players and coaches to sporting boards and fans, being aligned on a particular philosophy of playing sports, what a company would call ‘Values’.

Admittedly, a lot of this analysis has hindsight bias and emotions baked into it. I don’t want to be too harsh on Team India, as they actually played superb cricket over several weeks, displaying strong leadership, courage, and individual brilliance. However, this unexpected defeat does highlight that more work still needs to be done in crafting the right sporting philosophy within the country’s national fabric. A set of values that frees players from the pressures of winning and losing, and rather than dealing with public expectations and the dreaded “what will happen if we lose?” fear, helps them unlock their individual skills while also bringing them together as a team to deal with unexpected punches in the face.

Closing out with another story. We attended the Thanksgiving Warriors vs Spurs game yesterday. As part of a youth program, my older son got the opportunity to do one post-game free throw on the Warriors court. He ended up missing the shot and spent the next few hours whining about it. As I comforted him while talking through how missing and making these key shots is the beauty of sports, it took me back to the World Cup final heartbreak that happened 8,000 miles away a week back. Hence, this post! And why I will continue to actively encourage my kids, as well as our entire household, to devote significant time and resources to the pursuit of sports.

PS: enjoy this awesome reaction from Giannis Antetokounmpo, star player of the Milwaukee Bucks, when a reporter asked him on his “failure” at winning the championship.

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