Dear Friends,
You’ve may have realized that this is no longer a weekly publication. After four years of consistent deliveries, I’m giving up on publishing weekly and expect to distribute Declarative Statements every 2-3 weeks, but still hitting publish on Sunday morning.
Thank you for continuing to read and engage with me, and I look forward to many of you continuing to share your thoughts in response!
Today's Contents:
Good Reads: Sensible Investing
Obviously The Future & My Younger Self
Song of the Week: Used To Be Young
Good Reads: Sensible Investing
Fewer Losers or More Winners. Latest Memo from Howard Marks.
This is one of his best of the past couple of years, and I recommend a full read. Here are my favorite parts.
I feel strongly that attempting to achieve a superior long-term record by stringing together a run of top-decile years is unlikely to succeed. Rather, striving to do a little better than average every year – and through discipline to have highly superior relative results in bad times – is:
less likely to produce extreme volatility,
less likely to produce huge losses which can’t be recouped and, most importantly,
more likely to work (given the fact that all of us are only human).
Simply put, what [General Mills’] record tells me is that, in equities, if you can avoid losers (and losing years), the winners will take care of themselves. I believe most strongly that this holds true in my group’s opportunistic niches as well – that the best foundation for above-average long-term performance is an absence of disasters.
Second, risk control, on the other hand, consists of declining to take risks that (a) exceed the quantum of risk you want to live with and/or (b) you wouldn’t be well rewarded for bearing.
And these graphs (yes, he’s used these before, but almost 20 years ago).
Rather than implying that taking more risk – moving from left to right in the graph – assures higher returns, this new way of looking at the relationship suggests that as you take more risk, (a) the expected return increases, as per the original version above; (b) the range of possible outcomes becomes wider; and (c) the bad possibilities become worse. In other words, riskier investments introduce the potential for higher returns, but also the possibility of other less-desirable side effects.
Putting it together for those of us in venture/startups: the problem with high prices in early funding rounds is that investors are not rewarded enough for the significant risk they are bearing.
Generative AI’s Act Two. From Sequoia.
It's worth the entire read. Below is the punch line and why applications of generative AI technology that are embedded in B2B GTM may be the best bet.
Generative AI is not lacking in use cases or customer demand. Users crave AI that makes their jobs easier and their work products better, which is why they have flocked to applications in record-setting droves (in spite of a lack of natural distribution).
But do people stick around? Not really.
AND
User engagement is also lackluster.
The Risks of Money-Market Funds Need Careful Watching. If a financial tremor comes along, investors might flee to FDIC-guaranteed deposits. William Cohan in the FT
The flood of cash into money market funds is worrying several people I speak to regularly on Wall Street. “No one is willing to say the truth,” one longtime finance veteran told me by email. “There is too much money parked in these funds and there really are no safety nets. People have run in a panic from banks into higher yielding instruments without understanding them.” And in the midst of the SVB meltdown, Treasury secretary Janet Yellen said: “If there is any place where the vulnerabilities of the system to runs and fire sales have been clear-cut, it is money market funds.”
The punch line: Make sure you know if you are in a government money market fund or a prime fund (with likely slightly higher returns). And realize that the return being offered comes with risk.
OTF & My Younger Self
Two weeks ago, I launched a podcast series called Obviously The Future. Arvind and I interview an expert guest each week with a strong perspective on a trend that will play out over the coming years. Our first episodes include:
The Formula For Greatness with Sir Michael Barber. I consider this a foundational conversation going over tactics, lessons, and reflections that I learned while young and continue to apply today.
Empowering Parents: School Choice and Technology with Joe Connor. This clearly articulates the opportunity and movement toward Education Savings Accounts and the demand for diversity in schooling options. I’ve already had multiple founders reach out to me about how ESAs are a potential game-changer as a sales channel for innovative, efficacious EdTech products. They are a way to disrupt a system that suffers from severe regulatory capture.
My Younger Self is a concept I’ve found powerful over the years to give advice or pass learning to my younger self - and sometimes to advise the older version of me for things I should do today. It started with a list of book recommendations; now, we ask every guest to recommend a book to their younger self. Below is from Michael Barber.
Personal written reflections are important, too. Kobe Bryant wrote a letter to his younger self; Maya Angelou also wrote a letter to her younger self. They are so different. Each letter is distinct to the individual. Going forward, I’ll periodically publish a reflection on personal or professional advice.
My first contribution: ‘I Won Because of You’. Here I write about managing emotional energy, inspired by watching Daniil Medvedev at the US Open.
Song of the Week: Used To Be Young
I’m not ashamed to say I liked Miley Cyrus’s latest release. She’s bummed she’s turning 30. It’s a bit more mid-life crisis than coming of age, but that’s okay. I appreciate her reflection and marking of a new era.
“Used To Be Young” by Miley Cyrus
I know I used to be crazy
I know I used to be fun
You say I used to be wild
I say I used to be young
You tell me time has done changed me
That's fine, I've had a good run
Selfie of the Week
This summer at Avalanche VC, we added an analyst and, in the spirit of keeping up with the times, our own ‘teenager-in-residence.’ This is Matthew and me meeting IRL for the first time. Matthew is now a sophomore at Duke. He reached out via cold email in the spring during his freshmen year. I’m always impressed by proactiveness, and we were in the early days of figuring out podcast/media strategy. What better than a GenZ to help us get smart fast?
That was just the beginning, and Matthew has input into our understanding of the mindset of high school and college students and how they think about the future. The other thing I have found helpful is being on the spot to explain what I’m doing and why from first principles. Teaching someone else your expertise is the best way to solidify and innovate your beliefs, processes, and judgments.
Thank you to Matthew for helping strategize and edit the podcast and beyond.
Aside: Song’E Napule is the best Pizza in the village, and it’s not even close.
Thanks for reading, friends. Please always be in touch.
As always,
Katelyn