Mike Maples – Below the Line with James Beshara

Key Takeaways

  • When you have kids, they owe you nothing. They didn’t decide to have you, you chose to have them.
    • Expecting gratitude from your kids is just a form of manipulation
  • Do less, but better
    • Many people get too frantic, trying to go in 10 different directions all at once, instead of doubling down on ONE thing and sticking to it
  • Lessons in Decision-Making
    • Most decisions are one of two types – 70/30 or 51/49
      • If it’s 70/30, you know what you need to do – you’re just, for whatever reason, not courageous enough to follow through on it
      • If it’s 51/49, it almost doesn’t matter which one you pick
    • “Quite often, decisions are more simple than you realize – it’s the willingness to follow through that really matters more than anything else”
    • Stop putting your decisions off – “Courage doesn’t grow with time” 
      • Very often you know the right thing to do – go for it
  • When meeting a potential mentor or connection, the questions you ask are of the utmost importance
    • Aim to ask questions probing the frameworks they use to look at the world, how they problem solve, and how they make decisions
  • Advice for VCs – “It’s less important to be the best expert. It’s more important to know the best expert and have good taste as to who that is.”
  • Low interest rates set by the government are allowing many Fortune 500 companies to borrow money in order to buy back their own stock (this increases its price and simulates business growth)
    • This money could be used in better ways – like investing in new products, breakthrough ideas, and job-creating innovations
  • Robots aren’t eating jobs, they’re eating the need for people to join companies
  • The standard of living had increased ~14 fold from 1850 to 2000
    • “That’s more abundance than has ever been created in all of history combined”
  • Look out for “scissor statements” online
    • These are controversial statements (often written by AI) primed for engagement
    • Every time you read a news headline, consider if it’s been planted to divide readers
      • Don’t let your lizard brain be so quick to activate your anger towards the other side of an issue

Books Mentioned

Intro

  • Host – James Beshara (@jamesbeshara)
  • Mike Maples (@m2jr) is a partner at Floodgate
    • He’s widely considered to be one of the greatest technology investors of all time (he’s an early investor in Twitter, Cruise Automation, Chegg, Lyft, Okta, Twitch, and more
  • James and Mike are drinking Recess

Seed Investing

  • On being a seed investor:
    • “When you get it right, you just get to see these companies come out of no where and make a huge difference”
    • “Massive outcomes for startups really are a rare event. If you get to work with even one of them, you’re really fortunate. There’s about a 0.1% chance you go the distance the way some of these companies have.”
  • Mike likes to get involved with these companies EARLY:
    • He was involved with Twitch when it was known as Justin.tv, Twitter when it was known as was Twttr, and Lyft when it was known as was Zimride
    • “It’s fun to be more of a co-conspirator than an investor, I like to get involved with these companies before there’s a parade to jump in front of and give them as much unconditional love as I can early on”

A Few Lessons Mike Learned From His Parents

  • Mike grew up in Oklahoma
  • “My dad taught me so much about how to think about life and to understand why it’s important to be honest and  hard-working”
  • “They instilled in me that I could pretty much do whatever I wanted, as long as I was willing to work for it and be honest about it”
  • “When you have kids, they owe you nothing. They didn’t decide to have you, you chose to have them.”
    • Expecting gratitude from your kids is a form of manipulation
  • “If your kids turn out not so great, you probably don’t deserve as much of the blame as you give yourself. And if they turn out great, you probably don’t deserve as much of the credit either.”
    • This is similar to startups as well (from a VC’s standpoint)
  • “You have what you have – there’s always going to be some people who have more than you, and some who have less”
    • Don’t fall into the trap of learned helplessness/ “woe is me” EVER – the fact that you even get to live at all is such a great gift 
    • “Every day’s a gift, make the most of it”

Do Less, But Better

  • This was something else Mike learned from his parents. Here’s how he explains it:
    • Back when he was 5, Mike participated in a fishing contest with his dad
    • His dad knew that everyone would be constantly scrambling around the lake to try and catch the biggest fish, but he had a different strategy:
      • “He knew we’d be better off if we thought carefully about the type of fishing spot we should be at, and just stayed there the whole time. We may not win…but he thought out best chance at winning was to just pick a spot and stick to it.”
    • Low and behold, Mike and his dad won
  • “This is such an important lesson about life and the value of focusing… being confident in your decision when you do the work of making the decision”
  • This also relates to work:
    • Many people get too frantic, trying to go in 10 different directions all at once – instead of doubling down on ONE thing and sticking to it
  • Another way of looking at it:
    • “Think about helping folks get ahead who are behind in this world… you’d almost be better off picking ONE person who you’d have an impact on”
      • The best way to have an impact (for whatever cause) is to do less, but better
  • “Think big, act small, and increment your way there”

Some Background

  • Mike went to Stanford for his undergrad
    • After graduating, he worked as the product manager of digital media at Silicon Graphics
    • He then went on to Harvard Business School and afterwards headed to Austin to work for a few startups 
      • In Austin, Mike was involved as a founder and operating executive at back-to-back startup IPOs, including Tivoli Systems (acquired by IBM) and Motive (acquired by Alcatel-Lucent)
  • Mike’s path to venture investing
    • Mike got connected with John Thornton at Austin Ventures in the early 2000s and decided to create a VC microfund, specializing in companies who were only seeking $250k-500k
      • Mike got started with $15 million (he had quite a bit of beginners luck at first)
        • There just wasn’t much competition at the time (compared to the billions that are raised today from ~850 seed funds)

Lessons in Decision-Making

  • Most decisions are one of two types – 70/30 or 51/49
    • If it’s 70/30, you know what you need to do – you’re just, for whatever reason, not courageous enough to follow through on it
    • If it’s 51/49, it almost doesn’t matter which one you pick
  • People don’t make the wrong decision because they don’t have the facts/the necessary framework, they do so because they let their emotions get attached to the decision in a way that interferes with their judgement
  • “Quite often, decisions are more simple than you realize – it’s the willingness to follow through that really matters more than anything else”
  • James bring up a quote – “The only wrong decision is no decision”
    • You can sit there deciding all day long, but the quickest way down the path is to make the leap – you can course correct later if need be
  • Stop putting your decisions off – “Courage doesn’t grow with time” 
    • Very often you know the right thing to do – go for it
  • “You know the answer if you’ve done the work upfront…but knowing the right answer isn’t really the issue, it’s more about the will to decide”
  • James recalls learning from a fellow investor – “If you’re deliberating constantly on a really hard decision, it’s probably because it really doesn’t matter what you choose”

Have a Mix of Deliberate and Emergent Strategies

  • “It’s good to have a plan, but life has a way of not conforming to it. You want to have a strategy and agenda that you’re pursuing, but secrets kind of emerge and bubble up all around you, and sometimes the secret that emerges is better than the secret you were pursuing and you need to have the presence of mind to know life just presented you with a bigger secret.”
    • You need to be willing to switch paths
  • “If I hadn’t of thought this way, there’s no way Floodgate would have happened, I just would have kept looking for jobs at big VC firms”

Use Your “Free Moves” as a Student (and advice on mentorship)

  • When you’re in school, use your “free moves”
    • It’s much easier to meet with people you want to meet with as a student compared to when you’re just “another guy in Silcion Valley”
  • An example – as a junior at Stanford, Mike made it his goal to meet Bill Campbell (which he eventually did)
  • But what was key, Mike realized – “If Bill is nice enough to take time with me, I’m going to be really careful of what questions to ask him”
    • Too many people try to meet people for access to their connections
    • Instead – meet people to learn more about the frameworks they used to look at the world (the way they problem solve and make decisions, etc.)

Hang Around the “Seers”

  • Mike likes spending time nowadays with people he terms as “seers”
  • “A lot of the great investments I’ve made, it wasn’t that I saw the company for what it was, it was more that there was somebody very brilliant/technical) and they advised me to take a look at a certain company and I trusted their judgement”
    • For example – Leah Busque from TaskRabbit introduced Mike to the Lyft founders
    • “I really enjoy trying to find the set of people out there in Silicon Valley who have the Jedi skills of knowing what’s going to happen and what’s interesting.”
      • Very often these people are able to reduce complex problems down to first principles
  • Around these people – you NEED to ask the right questions (the kind that tease out their secrets)
    • “You should be trying to ask questions that lead you down roads where you might get hit by the lucky truck”
  • Some examples of these kinds of people:
  • “It’s less important to be the best expert, it’s more important to know the best expert and have good taste as to who that is”

Investing Lesson – The Enemy of Good Deal Flow is Good Deal Flow

  • Ultimately deal flow becomes your enemy – good investing is like bird spotting
    • If you constantly have a river of deals coming your way you’re prone to staying in reaction mode (aka reacting to the current)
    • Instead – you should be looking up in the trees, trying to spot a bird no one’s ever seen before
      • How? – Talk to the seers and have an idea of what you’re trying to look for before it comes to you
  • As an investor, you should always been in close contact/talking with the people who are near the cutting-edge/what’s new
    • But the problem – as you age, you tend to lose contact with this crowd
  • Bill Gates has said – “The poison of success is when you get the idea that you can’t lose. That’s when you lose the biggest.”

If Mike Could Start All Over…

  • “If I could start over today from scratch, the problem I think would be fun to chase would be how to fund someone like Elon Musk to go from 0 to 1″
    • Just consider the insane amount of time Elon has had to put into funding Tesla (on top of everything else he’s doing)
      • “It’s absurd that Tesla’s still alive”
    • “I would love to find a way to fund 0 to 1 projects that seem impossible, but if pulled off have a transformative effect on the world…things that seem like an impossible dream, but if you have the right money and funding mechanism, you could do it”

Low Interest Rates and Fake Growth

  • “We’ve progressively moved away from ‘sound money'”
    • This started ~10 years before the Great Depression when the Fed began manipulating interest rates
      • Why did they start doing this? – To impact how much money was/wasn’t being borrowed which would in turn affect the economy
  • “For most things in this world, price is set by supply and demand – money should be no different”
    • “When an interest rate is set, it should be based on what the bank believes to be the valid price for money based on the supply & demand”
    • “What is the most important thing to price in the entire economy? – Money”
  • Due to the low interest rates that the government has set, many Fortune 500 companies are borrowing money to buy back their own stock 
    • Last year alone, $800 billion was used in this way
    • IBM alone has now borrowed $100 billion to do this
      • This money could be used in better ways – like investing in new products, breakthrough ideas and job creating innovations
    • The result of this- fake company growth (by increasing a company’s stock price)
    • When you buy back your own stock – you’re not doing anything for the employees (you’re just jacking up the share price)
    • So the side effect of this – “Most of the innovation at Fortune 500 companies are at best sustaining innovations or efficiency innovations where they’re trying to remove labor from certain processes”
  • “I believe that the lack of soundness of our money has done way more to create wealth inequality than most people realize”
    • If interest rates were set by supply and demand, they’d certainly be higher (and so would the investment returns for many citizens)

We’re Shifting to a New Kind of Capitalism

  • The quality of life for those in poverty is increasing – we can’t deny this 
  • The standard of living had increased ~14 fold from 1850 to 2000)
    • “That’s more abundance than has ever been created in all of history combined”
    • Corporate capitalism (characterized by mass production and mass distribution) were largely responsible for the previous increase wave in quality of living
    • “Network capitalism” (a term Mike coined) will be responsible for the next – which leverages mass computation and mass connectivity
  • Related – Check out Our World in Data, a site stared by Max Roser (James recommends following him on Twitter

Robots Aren’t Eating the Jobs, They’re Eating the Need for Companies

  • “I don’t believe robots are going to eat the jobs as much as they’re going to eat the need for people to join companies”
    • Mike is looking froward to technology giving solo-entrepreneurs the tools to not need to have a job (help finding work/clients, aid them with a billing system, etc.)
      • “I think that is way more likely to happen than everyone being out of work”
      • “I think there’s going to be a bull market of side hustles soon… From your iPad you can start recording a podcast, publish written word to anyone around the world….it’s mind blowing what we’ve done over the last 20 years for the individual” – James
  • Mike is fan of the book – The $100 Startup by Chris Guillebeau
    • It talks about how people can start businesses WAY more easily than they realize

Scissor Statements

  • Check out this article –  Sort by Controversial
    • The post explores about how AI (created by an ad-tech company) is being used to create controversial statements primed for engagement online – Mike calls these “scissor statements”
  • Examples of scissor statements:
    • “I think somebody in their high school years was assaulted by Kavanaugh”
    • “I think Colin Kaepernick was right/wrong to kneel during the National Anthem”
  • “It terrifies me that in the 2020 election scissor statements may be generated the way social media marketing was used to help Obama get elected”
    • These statements are intentionally designed to pit people against one another
      • Why does this matter? – these statements can be used to create divisions that bring your core constituency closer to you
  • One of Floodgates core values – “Seek truth over tribalism”
    • Whenever an emotionally charged topic comes up, the natural place to go is your tribe
    • BUT as an investor, feelings don’t matter – the facts (truth) is what does
    • This also related to taking ego out of the decision-making process
  • The takeaway – every time you read a news headline, consider if it’s been planted to divide readers
    • Don’t let your lizard brain be so quick to activate your anger towards the other side of an issue
  • Related to this – check out the Joe Rogan interview with Renee DiResta where they go much more in depth about the above

Additional Notes

  • “I’d say I’m more of an introvert, but I like people” – Mike
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