Design as a Negative Signal?
I listened to this interview with Gabe Leydon, a game designer, last year, and still think about it often (very high signal for interestingness). In particular, his view that an emphasis on design is a negative signal:
It’s very interesting, but I actually see [the emphasis of design] as a bad sign. We’re basically running out of new ideas. The economy is just becoming more and more psychological and it’s less about innovation and more about understanding your condition as a person and then building a product around biological and psychological reflexes rather than a teleport machine that can move you around the world.
He expands on this:
If I made up a teleport machine and it was the size of an arena and it was covered in slime and smelled really bad or something, I don’t think anybody would care. There’d be a line around the block. Everybody would just jump in and they would think it’s the greatest thing ever. But over time we kind of would make it smaller, and then the artists would come in and try to make it look nicer and feel better. And once you kind of get to that design phase, Silicon Valley’s been in for about 10 years, there’s only so much you can do to make something look better.
And this as a potential investing principle:
Anything that’s just growing like crazy and totally broken, just put all your money there because obviously when it gets fixed, it’s going to be better. […] [T]hat’s how I look at it, where’s the space that’s just totally screwed up and it’s still working? That’s what you want to be involved in.
A few thoughts:
This definitely applies to big innovations and that much of the startup world is indeed more in the design stage rather than working on step-change technological progress. Although the deeper I get into the tech world, the more optimistic and excited I am at what companies are building, not the other way around.
In a way, this isn’t really a new idea - Peter Theil’s famous quip, “we were promised flying cars and all we got is 140 characters” is from 2013. But more importantly, good design can be more than incrementalism so I’m not convinced that good design = bad is as a “rule” from an opportunity perspective.
“Poor design but growing” isn’t a reliable investment strategy because design usually wins and that is where most of the money is made (e.g.: Apple and smart phones). So it might be useful for identifying new innovations early on, but not necessarily on where specifically to place your bet on that innovation. But still, this is a good thought exercise and a useful heuristic to keep in mind.
I also think this can apply to individual companies: if you build an innovative product or MVP and it is ugly and clunky, but people still love it for the core function, you’re probably on to something.
The CEO of IAC gave a good example of this recently:
So we just started experimenting in that. We started in one state, we built the product, we started shipping the product. We shipped it in ugly boxes with terrible packaging, with whatever, but just to see. And people appreciated it, and so now we’ve got beautiful boxes we’re starting to ship, in more states. And then we go from there.
Which is an important point: if design isn’t already a fundamental part of the product, it certainly needs to be on the roadmap so that the company won’t be steamrolled by another company that comes along with better design.
All that said, what are the emerging spaces or companies that have poor design and have not yet been “gamified”, but are still working and growing like crazy? Gabe mentions crypto as one, which makes sense given huge user friction, high fees, and bad UI (although quickly getting better). Any others?
Intensity Delta Addendum
One of the main points of my recent Intensity Delta post is that time is the best intensity delta of all, largely because most people simply don’t think long term and/or can’t act on it due to structural reasons.
Another key reason why time is the most powerful delta is that rigor has increased for short-term investing, whereas long term rigor has declined, making it even more achievable to have a time-based intensity delta in the first place.
Gaurav Kapadia, founder of investment firm XN, made this point in a recent interview:
Patrick: Has rigor declined, do you think, in general, in public markets specifically over your career?
Gaurav: A hundred percent. Not even close, in my opinion, or I think rigor has shifted. I think the rigor that you see on a short-term basis is very high, because as so much of capital has moved into organizations that are compensated on shorter-term cycles, as well as shorter-term results, the amount of rigor, whether it’s data science, analytical capability on that is super high. The time horizon has shrunk a fair amount. Medium and long-term rigor has declined a ton and short-term rigor has gone up a lot, almost like what I think increased the opportunity for XN.
Also from this interview: “You need to decide if you want to be in the AUM hall-of-fame or the IRR hall-of-fame” is a great line. To me, IRR is the obvious choice yet many (most?) firms choose AUM.
This is great. Worth the two minutes.
Highlights from things I’ve read:
“Instead of telling people what I think of a proposal, a product, a feature, whatever, I ask them instead what they think. Were they thrilled with it? Absolutely love it? Most of the time I would hear, “It’s okay,” or “It’s not bad.” They would surmise from my facial expression that this wasn’t the answer I was looking for. Come back when you are bursting with excitement about whatever you are proposing to the rest of us.” - Amp It Up (Frank Slootman)
“It’s amazing how much you can learn about someone when they get caught in the rain! Some will run with their hands over their heads, others will smile and take a deep breath while enjoying the wind. What does this say about one’s relationship to discomfort? The reaction to surprise? The need for control?” - The Art of Learning (Josh Waitzkin)
“Continually looking for the meaning of life is like looking for the meaning of toast. It is sometimes better just to eat the toast.” - The Comfort Book (Matt Haig)