Is investing an individual or a team sport?
and why Bitcoin is a religion
guy who went to Wharton voice: at Wharton, we learned that the intrinsic value of a stock was the discounted value of expected future cash flows. There's a lot of fuzziness in the analysis - predicting the future is hard - but in general your valuation should be based on reality, guided by a dispassionate economic analysis. Cute.
I've come to think of investing to have both individual sports and team sports. Individual sport investing prioritizes secrecy and proprietary analysis. You might assemble a research team, crunch data from countless vendors, or interview hundreds of customers, but ultimately, your insights are yours alone. This analysis is individual not in the sense of doing it alone but rather in that sharing your best ideas dilutes their value, as your alpha is lost the moment others discover it.
On the other hand, team sport investing is about collective belief and engagement over fundamental analysis. Early stage startups exemplify this: there is no fundamental value besides the team. A single pivotal customer, talented engineer, or enthusiastic investor all can materially alter the company's trajectory. SaaS startups especially rely on convincing their customers not that they're perfect today, but that they can eventually solve the customers' problems uniquely well.
Bitcoin is an even more pure example: Bitcoin doesn't even have any pesky fundamentals such as "earnings" or "share dilution" to worry about; it's just vibes. Being a small holder of Bitcoin put you on the team just as much as a big holder of Bitcoin, and you're just as incentivized to try and make the number go up. Anyone can become a believer, anyone can worship at the altar. A Bitcoin holder can run their own conferences, build L2 chain technology, or even bribe a world leader to adopt crypto, to try and grow its value.
A shareholder of, say, United Airlines, would have a difficult time personally driving more traffic to United or improving ground operations (unless you are the Apple ops team chartering every business class seat for SFO<>HKG daily). In fact, if you tried to run your own marketing campaign promoting United, you'd get a cease and desist!
Anybody can buy Bitcoin too, which makes the potential market of the Bitcoin religion infinite - US public equities have restrictions on buyers too, and private equities are even more difficult. One lesson is that the more potential buyers of an asset, the more valuable it tends to be - there’s some probability that any given individual might buy it. The SEC tries to counterbalance this by scrutinizing public companies and restricting private ownership of companies to accredited investors, but crypto solves this.
Even passive index investing is a team sport: buying the S&P 500 index makes you part of Team America. The richest global investors and the most important voting demographic (Boomers) are all deeply invested in the big American corporations. They have too much to lose to allow the markets to go down too far; it's too big to fail (so just buy the dip?).
The best advice I got when building my startup was, "all of your early customers know you're faking it, and they don't care - they're just betting that you can solve their exact problem eventually." They're placing a bet that you’ll eventually solve their specific problems. Recognizing customers as stakeholders and incentivizing them accordingly can become a critical differentiator, especially as SaaS markets get commodified and intensely competitive.
Imagine formalizing this by offering all your customers equity or upside participation in your startup, not just Gildan t-shirts. Today, this happens in a more informal fashion with BigCo corp dev teams, but institutionalizing the equity incentives for all your contracts would be genuinely innovative. Think this startup is doing really well? Bring your business over and share in the upside. Not legal or financial advice! A team that can figure this out now would have a huge advantage in sales.
The synthesis of this is knowing when to think as an individual and when to think as a team. I believe now that startups need a great team *and* have the right mindset. Too often I see folks who are working in the right direction but without the technical skill to execute (Forbes 30 under 30 founders), or really great technical folks who overindex on dispassionate market analysis (takes one to know one). Getting the right pieces here is the only thing that matters.