Finding Genius Page 8

  Genius, according to those who have documented it, goes beyond IQ or raw intellect. It is developed through creativity, intuition, and a heightened resilience to achieve the extraordinary.

  Finding Genius

  Gladwell, Grant, and Isaacson approach genius after it is has already been exhibited for the world to see or after the geniuses have willed their creations into existence. They tell stories of human excellence for the world to hear and learn from. However, a few groups of people — teachers, athletic scouts, grantors — define their living on spotting genius before qualities of grandeur have even manifested themselves. Venture capital is one such field, founded on attempts to find genius before an entrepreneur has proven to be an original or an outlier. There are patterns that set entrepreneurial geniuses apart and this group of individuals hopes to capitalize on those patterns.

  A successful venture capitalist thrives on being able to find genius in its rawest form, using little data or insight, multiple times over their career. As Nicholas Chirls of Notation Capital says, ‘finding a genius once or twice is lucky, doing it repeatedly is true validation that you’re equipped to do this.’ Venture capitalists will succeed or fail on their ability to make quick judgments, with limited information, based on trends they have observed in the past, and as Isaacson observed of Steve Jobs, through intuition over intellect.

  Fred Wilson, the founder of Union Square Ventures (USV), reiterated this claim that an investor’s ability to use intuition and recognize patterns is what will define their career. Wilson is a career venture capitalist whose fund’s partnership has made select investments in entrepreneurs it believes to possess entrepreneurial genius — Jack Dorsey of Twitter, Patrick Collison of Stripe, David Karp of Tumblr, Mark Pincus of Zynga. The USV thesis has been refined over decades of backing successful entrepreneurs. So too has the intuition of its partners — an intuition that is difficult to capture or mimic, but something I hoped to better understand.

  Fred Wilson believes ‘that someone is either born an entrepreneur or they’re not.’ Wilson expresses an openness to being challenged on this belief given that the ‘judgments’ he will make on people and entrepreneurs will be some of the most important decisions he will make as a venture investor. Based on a career that has spanned over 25 years, Wilson wrote in his blog (AVC) of the inherent qualities that to him, define entrepreneurial genius:

  ● A desire to accept risk and ambiguity, and the ability to live with them

  ● An ability to construct a vision and sell it to many others

  ● A confidence bordering on arrogance

  ● A stubborn belief in one’s self

  ● A magnet for talent

  Fred’s comments guided my conversations with dozens of other investors who have led investments in companies such as SpaceX, Facebook, PayPal, Tesla, Airbnb, Lyft, Uber, Twitter, Pinterest, and others. These investors are part of the best venture funds both in the U.S. and internationally and include men and women from diverse backgrounds and experiences. The questions remained the same, but the answers varied. Does entrepreneurship fall within the age-old debate of nature versus nurture? Did these men and women who invested in founders agree with the qualities and patterns presented by Wilson to describe genius entrepreneurs?

  Investors such as Keith Rabois, Paul Graham, and Ben Horowitz largely agree that genius begins to manifest itself earlier in life through anecdotes of unique tenacity and competitiveness. Rabois argues that the founders he has worked with, or invested in, across arguably some of the most successful technology companies — including YouTube, Twitter, Opendoor, Yelp, LinkedIn, and PayPal — would definitely score high on an IQ test because their minds must see connections and patterns that others do not. Yet IQ alone, according to Rabois, is not the trait that drives successful founders. High IQ is a common foundation on which the characteristics set forth by Wilson begin to reveal themselves.

  The Antifragile: Accepting Risk and Ambiguity

  The antagonist to Wilson’s entrepreneurial genius is the individual who is obsessive and rigidly focused on the structured path of conformity. These are not the outliers or the originals, but the ordinary. Even with high IQ some of these men and women choose to pursue stability or wealth. They can be incredible additions to a team in the early years of a company and add value to a growing organization, but the founders themselves must be accustomed to a healthy level of uncertainty and be able to ride the ups and downs of starting a business with poise. FirstMark Capital’s Rick Heitzmann, an investor in companies such as Airbnb, StubHub, Pinterest, Riot Games, Upwork, and others, elaborates on this:

  “The biggest thing that frustrates me about entrepreneurs is that every quarter, I sit with founders who want to be entrepreneurs that have potentially groundbreaking business ideas, but they say, ‘I currently have a certain quality of life and do not want to leave my job. If you give me funding, I will leave my job and work on this full time.’ You can start a company while you’re working another job and often times that may be smarter, but in order to secure financing there is a requirement of commitment. There are far too many tourist entrepreneurs (“wantrepreneurs”) who do not want to take much risk. They want to make excuses and hedge themselves from failing. It is hard to back that type of entrepreneur.”

  Heitzmann says he has made mistakes in the past by investing in these types of individuals and has refined his questions and intuition about founders to test their endurance. Ellie Wheeler of Greycroft shares that ‘tourist founders’ have become a trend in recent years:

  “Because the technology media covers success and financing events, there are still too many people who don’t understand how hard it is to go at being a founder alone. There are those people that are tourists — they see starting a company as hot, they see it as a get-rich-quick scheme, typically they use a lot of lingo. They don’t have the unique insight or experience but they’re coming at it because it’s a shiny new object and they don’t have staying power. It becomes very obvious when you’ve seen it thousands of times.”

  The ‘overnight success’ story where smart people believe they can cash out from an entrepreneurial endeavor within months of starting is a common, but misplaced, expectation. Success to these entrepreneurs is defined as the path of least resistance, and in the event the company faces the slightest rejection, the founder pulls the escape cord and jumps to the next opportunity. Entrepreneurship requires staying power and venture capitalists invest in those founders who have the staying power for that seven year, or more, holding period. It is on the founder to demonstrate this level of commitment and according to Heitzmann, it is on him to ‘develop a sense of intuition as to which types of founders will demonstrate a healthy appetite for uncertainty, but not chaos.’

  In Antifragile: Things that Gain from Disorder, Nassim Taleb discusses how some individuals endure through uncertainty. Taleb writes that there are some people who can be more intelligent than others in a structured environment. They can exhibit that IQ that Rabois and Wilson mention in environments built on repetition where there are clear indicators of success. Traditional schooling, he writes, has a ‘selection bias as it favors those quicker in such an environment, and like anything competitive, at the expense of performance outside of it.’ Taleb explores structured environments versus ambiguity, and there are parallels to the entrepreneurs described by venture capitalists. He explains:

  “Although I was not yet familiar with gyms, my idea of knowledge was as follows. People who build their strength using these modern expensive gym machines can lift extremely large weights, show great numbers, and develop impressive-looking muscles, but fail to lift a stone; they get completely hammered in a street fight by someone trained in more disorderly settings. Their strength is domain-specific and their domain doesn’t exist outside of ludic, extremely organized constructs. In fact, as with over-specialized athletes, their strength is the result of a deformity. I thought it was the same with people who were selected for training to get high
grades in a small number rather than follow their curiosity: try taking them slightly away from what they studied and watch their decomposition, loss of confidence, and denial… I’ve debated many economists who claim to specialize in risk and probability: when one takes them slightly outside their narrow focus, but within the discipline of probability, they fall apart, with the disconsolate face of a gym rat in front of a gangster hit man.”

  It is difficult to break away from organized constructs. Despite Silicon Valley’s best efforts to upend the status quo, most children and young adults operate on structured educational paths that train our minds to choose the defined path set in front of us in order to succeed.

  According to some of history’s greatest biographers of extraordinary individuals (Taleb, Isaacson, Grant, Gladwell), venture capitalists behind the geniuses who founded Tesla and Apple, and the founders who shared their stories for Disruptors, shying away from conformity or structure and having the experience of enduring hardships is what wakes up a person’s inner-genius. It is through unstructured paths and experiential wisdom where intuition begins to form, as Jobs experienced through unique, differentiated experiences. Similarly, an entrepreneur’s tenacity and ability to live with ambiguity or risk does not magically appear when they decide to start a company. According to Rabois, tenacity appears earlier in the founder’s life and is something an investor should dig for:

  “People like Max Levchin (PayPal, Affirm), Peter Thiel (PayPal, Founders Fund), Reid Hoffman (LinkedIn), Joe Gebbia (Airbnb), Brian Chesky (Airbnb), Chad Hurley (YouTube), Jack Dorsey (Twitter, Square) are all entirely different founders with different skill sets. It is hard to say that a singular definition for genius can be attributed to all these people. The one common thread between them, however, is something Paul Graham (Y-Combinator) talks extensively about: being relentlessly resourceful — a modified version of tenacity. These founders, when I’ve worked with them, have this unrelenting energy, a feeling like they’ll never be defeated. I believe people are not born with tenacity but by a certain age, it has been built into them. There are examples in your background of where you’ve used heroic energy and refused to lose. My goal as an investor is to learn about those. I’ll do calls with old colleagues, classmates, teachers, coaches to hear about those. That tenacity does not suddenly show up when you’re 25 years old. You either just don’t accept excuses and prevail, or you accept excuses. I can tell fairly quickly who is who.”

  Genius founders are amongst the world’s most impatient, unsatisfied people — with themselves, with markets, with the status quo. It’s not always that the world has put them in positions of conflict, but instead, they themselves seek out conflict or discomfort. They have always put themselves into challenging situations — competitive sports, academics, coding competitions — and may have competed in some extracurricular activity. They thrive amidst discomfort, stress, and challenge, and have always had that since they were eight years old until the time investors meet them. Someone’s tenacity is one of the top things investors like Rabois is looking for when they are making an investment.

  The risk and ambiguity of entrepreneurship met with the tenacity of disruptive founders has been personified through stories of founders such as Vin Vacanti of Yipit who endured 13 failed prototypes before landing on a profitable data-driven enterprise. Then there’s Nihal Mehta who declared bankruptcy at 22 after a startup failure prior to founding Local Response and going on to launch Eniac Ventures. And Rabois tells of Joe Gebbia and Brian Chesky of Airbnb. Gebbia described the most ambiguous point of a startup to be the ‘trough of sorrow’ where an entrepreneur is tested most. After the initial excitement of Airbnb’s vision petered out, the founders of Airbnb went through an 18-month period of being completely broke and owing over $15,000 on their credit cards. A series of rejections from venture investors set them back further. As the founders altered their product and approach to the market, they endured through this trough and found innovative ways to stay afloat. Gebbia says that most entrepreneurs fail during this point because they cannot, or are unwilling, to endure the uncertainty. Rabois recounted a quote in which Gebbia said:

  “I think most people fail when they’ve hit the trough of sorrow. If you can get through the trough of sorrow, you can get through all the adversities of starting a company. The trough of sorrow makes or breaks people. The key to success is finding your way out of the trough of sorrow, where an entrepreneur’s true mettle is tested.”

  Josh Wolfe of Lux Capital, a venture fund that has built its reputation on investing in moonshot ideas and businesses, shares a similar perspective on founders and the adversity they face. In an interview with Term Sheet, Wolfe said:

  “In a founder, we love when there is something to prove. The best founders that we back have an indistinguishable flame that usually comes from some sort of adversity… there’s something that made them feel like an outsider. And there’s this indistinguishable drive that they want to prove other people wrong. It’s interesting because success, achievement, and wealth never put that fire out. I think it’s this broader secret to societal progress if you can spot these rebels who are fueled by the passion that comes from some dysfunction that happened early…. I find that people who are born into circumstances where they had silver spoons, everything was handed to them, or they come from great wealth, more often than not, don’t have the same kind of drive.”

  How can entrepreneurs grow and thrive through ‘volatility, randomness, disorders, risk, and uncertainty’? The Antifragile entrepreneur is one who will bend, but not break. As Josh Nussbaum of Compound sees it, an antifragile entrepreneur is ‘one that thinks about their business decisions in a way that will allow them to make mistakes, but not cost them, or their investors, the entire company’ or create the ‘chaos’ that Heitzmann alluded to. The genius entrepreneur is antifragile because they have demonstrated a willingness and persistence to thrive through the ups and downs of entrepreneurship and the uncertainty of the process, while having a calming effect on the vision and mission of their organization. Taylor Greene, a partner with Collaborative Fund, explains how he approaches entrepreneurs and their tolerance for risk:

  “I’m trying to find entrepreneurs who walk the line between risk-loving behavior and reckless behavior. Entrepreneurs that take calculated risks are the best entrepreneurs and if I can hear those stories, it compels me to invest. It will never be the perfect calculation. They have just enough imperfect information to make a decision to move forward and they know when to move forward and move it in a different direction. They’re scientists with a hypothesis to prove it out or prove it wrong. It’s a series of decision points and you’re looking for the people with that mentality.”

  Wolfe expands on this by talking about the ‘risk fallacy’:

  “I actually believe there is a narrative fallacy that people are totally wrong in thinking that entrepreneurs are these great risk-takers. I believe that the very best entrepreneurs are risk-killers. They’re thinking, “How do I achieve what I want by eliminating every risk along the way?” The best leaders of companies are able to imagine failure and prevent it from happening.”

  Given that uncertainty is inevitable with running any startup experiment, genius founders possess a high degree of adaptability. Ilya Fushman, a partner with Kleiner Perkins and an investor in Slack, recognizes that many of the great businesses of our generation, including Slack, are the products of pivots where founders adapted quickly given new learnings or challenges. Fushman argues that genius founders are constantly adapting to changing teams, markets, and concepts, furthering the idea that the best founders are those who thrive in unstructured environments.

  Adaptability, according to Fushman, is often something that the most pedigreed founders lack. Fushman elaborates on this with a contrarian view from the rest of the venture capital industry:

  “It is easy to invest in companies with central casting. Central casting being the pedigreed Ivy League, followed by a great busine
ss school, with some consulting or financial industry time, and then they’ve decided to build a company. But a lot of them are not good investments because those people also often don’t have that risk tolerance. We want to invest in the underdog founder who has consistently adapted to new conditions and defined their own definition of success or made their own path.”

  Future Makers

  “Mediocre VCs want to see that your company has traction. The top VCs want you to show them you can invent the future.”

  Suhail Doshi, Founder of Mixpanel

  The New Yorker, 2015

  Spark Capital, an early stage venture fund established in Boston in 2005 with a growing presence in New York and San Francisco, boasts early investments in companies such as Twitter, Oculus, Tumblr, Wayfair, Slack, Warby Parker, and Cruise Automation. Cruise Automation, an early bet on autonomous driving, sold to General Motors for $1 billion just six months after Spark Capital made its initial investment, and has been behind GM’s innovation for autonomous vehicles. Oculus was sold to Facebook for $2 billion in 2014, and Twitter and Wayfair, two ‘startup’ ventures Spark backed at inception, have had initial public offerings valuing the companies at $14 billion and $3 billion, respectively. Collectively, the geniuses existing within Spark’s portfolio of companies are shaping the future of industries. Spark’s prior successes paved the way for it to raise its fifth investment fund of $450 million to continue investing along the same themes as it did when it began.

  Andrew Parker, a general partner with Spark Capital, began his career in New York City at Union Square Ventures, under the mentorship of Fred Wilson. With Spark, Parker has led investments in companies such as Kik, Upworthy, and Tumblr. Tumblr, founded by David Karp, sold to Yahoo for $1.1 billion in 2013. When asked about these investment decisions, Parker explained that when he is sitting across from a founder, the first thing he is looking for to identify ‘genius’ is an ability to be a ‘future maker’. While Wilson described a similar quality as someone who is able to construct a vision and sell it to others, Parker takes this thinking one step further: