Left vs. Right Brain Investing
Zeno's Paradox and suspending logic in order to be right
I’ve always been of the opinion that if you can see both sides of the coin at the same time you are better prepared than most. Part of this is checking one’s biases. Part of this is having empathy, or the ability to see the world through another’s eyes.
When I wrote The Fuzzy and the Techie, I sought to remind modern readers of a duality, and continued need for human and machine, humanities and science, in how we approach many things in life and business. With the rise of technology many were quick to jump to conclusions. STEM, science technology engineering and math, was heralded as the antidote to future irrelevance and life-long job security. In the race to shout out the answer, many jump past logic toward irrational and over-exaggerated conclusions. The “contrarian” point I made was simply to remind people how far they had jumped over the other aspects of life, history, philosophy, psychology and motivations that make any endeavor in science or technology meaningful. Fast forward seven years since writing this book, the thesis is even more true today, and has been adopted by many universities such as Virginia Tech to guide thinking.
A decade ago I saw colleagues pass on Square because “the world was moving toward near field communication (NFC)” and who needed a plastic card and an iPad to process payments. We passed on my now co-founder Matt Brimer’s company General Assembly because “education was moving online” and he was building brick and mortar. “Brick and mortar,” they said, “is dead.” In the race toward autonomous vehicles I saw my friend Shoaib Makani co-found Keep Truckin,’ now known as Motive, that helped move truck drivers from paper logbooks to engine logging devices (ELDs). Most people said, "truck drivers are all going to be unemployed as the world moves to AVs.” A decade later Shoaib runs a multi-billion dollar company. And while many say, “well AVs might not work on the roads yet but they’ll work in highly predictable work environments like factories,” I’m excited to back companies like Phantom Auto which again take a middle path of Human + Machine, believing that AI is not going to get anywhere near full automation anytime soon. They’re disaggregating blue collar labor from location and enabling remote operation of factory equipment like forklifts, not relying fully on automation. Interim ideas win.
Good investing is about being contrarian and right. If you’re consensus and right you’re simply a lemming following the flock. If you’re contrarian and wrong you’re a maverick lost in your own ego, unable to accept reality or the humility required to reset. Good investing is about recognizing overhangs or logical jumps society makes, and honing in on truth, the mean between extremes, the balance between two dialectical opinions. Good investing is about limiting ego and logic.
I was recently reminded about Zeno’s Paradoxes, and I thought the parallels were so apt to the world of investment. While Zeno proffered a number of brain stumpers, his parable about Achilles and the Tortoise resonated with me. If one takes movement to be divisible, whereby Achilles moves halfway to the tortoise as the tortoise moves forward, and then Achilles moves halfway to the tortoise as it again moves incrementally forward, and one takes this logic ad infinitum, the logical conclusion might be that Achilles is always halfway to the tortoise. He never actually catches up, though he gets incrementally closer and closer. The difference in their positions would asymptotically move toward zero, but in no purely logical world would Achilles ever just blow past the tortoise and win the race, which would be the conclusion of most any child you might ask to explain what would happen.
Good investing is often quite similar. Left brain investing by logic often falls into the trap of Zeno’s Paradox. The thing you think should happen just never quite seems perfect. The team isn’t quite strong enough. The traction isn’t quite there. The valuation is just a bit too high to support the easy decision. If only things were a little different you could see it working. If only you were a little earlier you could rationalize the valuation. If you hold onto control too tightly, you will logic your way out of doing the deal. Left brain investing is great for growth-stage investor mindset. One looks at every angle and forecasts every downside explaining why it doesn’t make sense to invest. But if you hold the steering wheel so tightly as a pre-seed investor, if you fail to suspend logic to believe that the crazy can in fact happen, you might end up with a portfolio of safe doubles, but you’re never going to find true outliers. If the world is logical and calculating, you need to be skeptical and open to be different.
Early stage investing I would argue is much more right-brain rooted. You observe the rules of the system, the properties of what logic would suggest with your left brain, but then you also try to squint your eyes and engage the childlike lantern, rather than spotlight, thinking. You try to move past the raw logic that would tell you that Achilles never catches the tortoise to come to the reality that “of course Achilles catches the tortoise, and beats it by a mile.” Any child can tell you that, and so could Michael Pollen, who writes all about suppression of the ego to get to lantern thinking.
When we get too caught up in left brain investing we argue our way out of the obvious rather than “listen to our intuition.” What is intuition but the pattern recognition to see the obvious, that Achilles beats the tortoise, logic be damned. Most of my best investments have had this je ne sais quois where people ask, “why did you make that decision?” and you explain that there was a set of characteristics or heuristics enabling a logical leap, a jump into right brain land where people who are too deterministic or rules-based simply aren’t comfortable. The best investor lives in rules-based left brain land until rules be damned, they can’t stand to ignore the obvious any longer, and they jump to the conclusion no one else will admit. Achilles wins.
The best companies are contrarian and right, and logic alone would never get you there. Founders move fast, and have a resolution about them that sees past logic, past the need to control outcomes with reason. Similarly the believers in these companies also had the humility and childlike wonder to believe that the logical impossibility was in fact the only way the world was going to go. To them it was as obvious as Achilles beating the tortoise in a race. We all need to observe our own limitations and biases in how we approach problems. We need to ask ourselves, “how do I see the other side of the coin, how do I question my own logical impediments to get to the obvious answer?” The biggest outliers are hiding in plain sight.
This is what logic, or anti-logic, I attempt to bring to Everywhere Ventures. For more thinking on decision making in venture capital I’d also recommend my good friend Burak Büyükdemir, the founder of Startup Istanbul’s, musings on the subject, entitled “The Investor Mindset: How to Harness the Power of Intuition.”