An Extremely Unconventional Investor

My top 3 lessons on investment from Chamath Palihapitiya


What is the next best thing to having a time machine? I am certain that it is YouTube. 12 years ago I knew very little about Chamath Palihapitiya and didn’t follow him then. Now I am watching his interviews on YouTube and enjoying the feeling of time travel. It is an opportunity to see Chamath with his Facebook, angel investment and Social Capital fund experience still fresh. These videos are from the times well before his involvement with SPACs which came later. But already then he had built a reputation of being an unconventional investor.

Here are my 3 takeaways after watching several interviews with him:

Lesson #1

The ability to say or to write a good “no” is a critically important skill for any investor. There are only 2 good possible responses you may give after reviewing a pitch deck. The first one may say that this business idea is completely outside our investment focus because, for example, we do not make investments in the healthcare sector. The second one confirms that it is an area that we like but we do not believe in this particular idea for the following reasons — and list 3–4 very specific things. The best case outcome after this would be that the team goes away, thinks it over and reassesses their approach; the worst case — it will start a dialogue.

Lesson #2

Poker, as Chamath admits, is a teacher of life. He, of all people, should know this — as an avid player, he is said to have finished 101st out of 6,865 participants in the World Series of Poker Main Event.

In poker, like in the world of startups, there is a very short feedback cycle. When playing poker you learn to take risks, love risks and make decisions under ambiguity. Sometimes you win for the wrong reasons, sometimes you lose for the wrong reasons. You learn to recognise these cases and get used to the swings — to winning and losing while maintaining the courage to continue trying. In addition, poker offers an excellent environment where to train and refine your skills of reading people.

Lesson #3

Chamath believes (please keep in mind that these conversations were recorded more than 10 years ago) that healthcare, education and financial services are the sectors most open to disruption. He blames the education system for the massive gap between the jobs available and the skills of people seeking employment. He is not very sympathetic about bankers either: “People in banking are smart enough to be greedy but not smart enough to be useful”.

And, as a final thought, in a more recent conversation, Chamath noted that it is OK to have Henry Kissinger on the startup’s board, but it is a major red flag when all the board members are like Henry Kissinger. For this very reason, he never invested in Theranos.

For those willing to watch the full interviews and select their top lessons here are the links — https://www.youtube.com/watch?v=VHslS0QPMSc&list=WL&index=7https://www.youtube.com/watch?v=U_g9G6s5rJw and https://www.youtube.com/watch?v=59uTUpO8Dzw.

This note was first published on Medium.com on 10 September 2024.