First rule of first principle thinking, do not use first principle thinking when a mental model is available

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On Designing Antifragile

World has found a new interest in understanding antifragile again. With the onset of a pandemic, global survival is at risk.  Everyone is pondering how could we have built an antifragile health system, financial back bone and an economy. 

Antifragile is not a theory. It is a set of heuristics at best. Antifragile is a property of a system. 

Everything can be thought of as a system, humans, humanity, an organization such as a village, apartment association, government, stock market and several more. Studying a system is not easy. Understanding the component of a system does not help in understanding the system. For example knowing about a neuron does not help in understanding the brain. Similarly knowing an ant’s behavior is not useful in understanding the ant colony. 

A system is called antifragile when upon getting shocks from outside makes it stronger. 

Antifragile does not fit into nice scientific theory. Carrot hardens in boiling water while potato softens.  Fire increases in wind while candle wick blows out. This is hard to understand for logic or a linear thinking mind. Same stressor makes some systems fragile and others antifragile. 

To understand Antifragile, one must first understand ‘Black Swan’. And to understand  ‘Black Swan’ you must understand ‘Fooled by Randomness’

And thereafter to design antifragile system you must learn about ‘Skin in the Game’ as an important design tool. 

Fooled by Randomness 

Fooled by Randomness is where people see patterns where none exists. Confusing noise for signal or vice versa. Also known as attribution bias. It is mistaking luck for skill. People that become successful attribute their success to their skills. While they attribute to luck, for failures that they face. Safer bet however is to assume that it was only partly true.  World only celebrates the stories of those who came on top, we discount the role chance may have played in helping the winner get there.  The lottery winner will be invited to give a keynote speech and he will champion to buy lotteries and never give up. This is Survivorship bias. 

Decision making under randomness therefore requires a full rethink. One must not look at outcomes  to evaluate the quality of decisions.

In the world of randomness, It is not the presence, absence, frequency of random events but the magnitude that is more critical in making decisions. 

Scientists, engineers & economists are the most prone to not understand randomness. They clutch to the formulas of math without letting the reality give context to equations. The fundamental limitation of science that they forget is that science is right only until it is proven wrong. Folks working in extreme domains recognize it, entrepreneurs, small business, actors, traders, cab drivers etc. They know it through experience. 

Investors and founders therefore are better off to write down their process to learn from how much of their success was skill and how much it was luck. 

The most actionable piece from this knowledge about randomness is to decide to never play Russian roulette. Russian Roulette is a game where you put a gun with one bullet and five empty chambers on your head and shoot. If you live then you get $10m. The probability that you may survive is a huge 5/6, or 83%, but the consequence of failure is death. You become a statistic.

Black Swan 

As humans we live life looking into the rear view mirror of experiences and beliefs. We are confident that which we have not experienced or thought before does not exist. 

Black swan challenges this fallacy. It says that absence of evidence does not mean evidence of absence. Black swans are not always bad, it can be both a treasure or a landmine. Thumb rule of navigating life should be that you must expose yourself to positive black swans and reduce exposure to negative black swans. Black swans exist in different levels, black swans at an individual human level and at the humanity level. 

This understanding of black swan is something that must be taught to everyone that studies science. For all those who think science can save us and believe science like god don’t understand what are the limits of science. Scientists are people that should be constantly looking for evidence that shows that their theory is wrong. Normal folks let that burden be carried out by the scientist and willfully believe that the new theory is universally true i.e across time. 

Normal brain can’t muster emotional energy and go after things that it has doubts about. That is why scientists must have emotional certainty but intellectual uncertainty. 

How to make something antifragile. 

We must design systems that are going to survive shocks, they must infact thrive under stress. Today’s systems such as economy, banks, markets are neither resilient or antifragile. To make them antifragile following heuristics must be kept in mind. 

Units must be fragile – One counter intuitive premise to start with is that for a system to become antifragile, its unit must be fragile. Humanity is antifragile because humans are fragile. For the banking system to be antifragile, individual banks must be fragile and allowed to fail. Yet we do the exact opposite for sick banks. 

Trial and Error – Allow the system to learn through trial and error as opposed to being driven by theory.  Give small shocks that may tear its individual units. Just like how muscles become strong through strength training.  Key in this is that stress given should not create ruin events because then after that it is game over. 

Option, Convex – Expose to option, a convex one. In any option if there is more upside than downside it is called convex option. Options that provide unlimited upside while taking limited downside exposure. Just like how an angel investor bets an affordable portion of wealth on startups.  Downside is all money may be lost, upside is that the startup could become the next Google. 

Lindy Effect  –  Old wisdom is better than recent insights. if something has survived for long then it is more likely to survive for longer. 

Remove not add – It is better to keep things simple as opposed to making it complex. Before adding anything new, remove an existing one.  Also called via negativa. via negativa simply means for survival eliminate all things that would kill you. Greatest contribution in life is by removing what we think is wrong. In life antifragility is reached by not being a sucker.

Do no harm – In complex system understand that first instinct should be that of doing no harm. 

Redundancy – Do the exact opposite for just in time efficiency, pad with redundancy. Always have a buffer. In the investment it is called margin of safety. 

Skin in the game – Keep risk transferers away, i.e folks that do not have skin in the game. Always look for skin in the game. In an interaction with others (family, work, market, life etc) when the other does not have skin in the game then it does not lead to a convex option for yourself. Never ask anyone for their opinion, ask them what they have in their portfolio. Don’t get on a plane without a pilot as that is without skin in the game. People who had religion have survived, it brought cohesion: people who eat together hang together. 

Avoid Ruin Risk – If you die playing, a billion dollar prize money is not worth it — In a strategy that entails ruin, benefits never offset risks of ruin.  Most rational thing therefore do is to avoid systemic ruin. 

Some of the heuristics described above when actioned on a system increase the odds of that system to be antifragile.

Product Nation, first decade

Nation means an imagined community. It stokes a certain pride in every human who belongs in it. Prefix it with Product and that makes it even more elite. In business terms it means climbing up on the value chain. Which in turn means more margins, more visibility and more power.

I heard the word Product Nation first inside a motley crew that was responsible for organizing the largest conference on building products from India. Ten years have passed since then and that sprout of an idea called Product Nation is a toddler now.

Lot has been learnt in this decade.


Take away for founders

  • “Playing in India market, Pay close attention to the regulator “
  • “Affordable bet for founder is not same as investor“
  • “IPO is not liquidity for the founder.”
  • “Second time founders swear not to build Vanity startups. Learn from one, work with them closely”
  • “Valley Playbook don’t work for India, even though they get funded. It is not adequate to win”
  • “Capital will not be the bottleneck. But being equity efficient is more critical to keep control”

Take away for limited partners, investors in funds

  • “If you think of India as the India market alone then you view it with only one eye”
  • “In IT services Indian were masons of software. Now not only they are becoming designer architects of the new global products but they can do it all from India“
  • “Axis of global product software generation is no more based out of Valley”

This additional sight is required to see the full picture of India and its role globally.

Take away for policy makers

  • “Not to think 5 year windows for policy but think 20–30 years”
  • “Allow time for policies to work and don’t create new ones that limit the impact of a previous one”
  • “When creating a policy beware of second order effects. More importantly beware of Iatrogenics”

1 – Product is not same as Engineering

Founders especially those from engineering background realize eventually that weaving code together is engineering not product. Silicon valley celebrates 10X engineer, had even invented new words like ‘product engineer’. But product goes beyond that.

Building a product involves a category understanding, shifting to a problem first mindset, sculpting the packaging and framing the right pricing model to position the product. And most important of all is cracking the product distribution. It requires sticking the neck out and make a bet on what a customer might want. While doing so making sure there is no over building.

Left to themselves engineers would want to build a new electric Porsche, a beautiful, next generation technology, hand crafted creation that make them proud. And it may sell only a few hundred. What is needed instead is a Toyota Etios. Something that meets expectations and delivers promise. This may sell in hundreds of thousands or even millions.

This is the key lesson learnt again by many founders new and old. I heard Suresh Sambandam of Kissflow once say that

“First 3 years was figuring out that we should have not built the infrastructure business from India. The next 3 year was in realizing that doing world class engineering is not the same as doing a world class product” 

2 – Bleeding edge is not our comparative advantage

Every startup hub in the world envies Silicon Valley and desires to copy it. Country governments allocate budget and sponsor PhD scholars to study this and replicate. However such copying never works.

Keith Rabois paraphrasing Peter Thiel’s ‘Zero to One’ mindset says this for how investors that win do.

“All investors are assessing their best comparative advantage, Andreesen and Khosla are technology wave investors, Mike Moritz is good at assessing people, there are market based investors. If you copy another investor, it makes no sense. It’s less about investors copying one another but it’s more about what their specific comparative advantages are and how they maximize or optimize for those.” 

Same applies for startup hubs. Each region must find its own comparative advantage.

Looking back it turns out that understanding the local needs of the market and delivering better is not enough. Also that Indian founders have no edge in doing this compared to other founders from outside India.

Google of India is Google not Guruji. Facebook of India is Facebook not Minglebox. WhatsApp of India is WhatsApp and not Hike

Also building bleeding edge technology startups is not where the unique comparative advantage lies for Indian founders. For most of the decade no bleeding edge Indian startups have ever become big. It is only recently some of the bleeding edge startups found landing spots . Good recent example is Reverie Technologies that did pioneering research and technology on Indian language (better than Google’s work) that led to its eventual acquisition by Reliance Jio.

Saas is where comparative advantage for Indian startup ecosystem lies at a global scale. In Saas distribution does not depend on relationship based selling. Here the location of where software gets made and distributed from does not matter. 

Comparative advantage will continue to be the most important question of the next two decades of the Product Nation growth. Some are therefore considering should India as ProductNation be instead called as SaasNation

3 – Global front office moved to India

Kanwal Rekhi once said that

“One in two billion dollar enterprise company in Valley has an Indian founder in it.“

Each of these companies had their engineering center i.e their back office in India. Due to the tailwinds supporting Saas, many of the emerging Saas companies have their back office and both front office in India. Founders are present only occasionally or move very late to Silicon Valley. Examples are Druva, Zoho, Freshworks.

This trend is only going to be more prevalent of the future global software product companies.

4 – Playing before designing game

In the first decade founders learnt crawling, now it is time for running. Companies such as Druva, Zoho or FreshWorks survived and succeeded in well entrenched categories, a.k.a Red Ocean.

Building new categories is a different game play a.k.a Blue Ocean. While there have been great attempts no breakouts so far. Next wave of companies such as Whatfix will win big where they are designing their own categories and also the rules of the game.

5 – Regulation first is the local game

Investors placed a lot of faith in the growth of local digital market in India. Lot of these investments led to consumer surplus. End consumers had a great time receiving discounts, offers over online shopping, cab ride and food orders.

No one however found a successful working business model that the stock market will approve of. By the time it could be figured, incumbents ended up changing the rules of the game through twisting the arms of regulation.

I once heard Nikhil Pahwa of Medianama once lament

“Thanks to all the change in regulation e-commerce is harder now than Mobile VAS was 10 years ago. “

Eventually every Indian market gets regulated

While Digital Transformation will happen in India but it will not be led by startups. It will be steered by incumbents. The paint industry blue collar jobs will transform and move to digital but it will most likely be led by AsiaPaints than a mobile first craiglist like startup.

Bharat opportunity will happen but through the hands of an incumbent because they are stronger and better player in a regulation first game.

6 – In the name of help, they make it hard

One of the last jobs of a government should be in market making. However every government overestimates its role.

No industry body, think tank would take the courage to publish this fact due to its political overtones. More startups have withered due to governments than those that have benefitted.

Many groups of people have tried to shape policies that can help startups. It is a frustrating process for addressing the smallest of problems. Then there are big industry level problems. For instance, there are only 11 product IPOs in the last 11 years. Instead of fixing the liquidity friction, policy has focussed its efforts in things that can lead to selfie moments of bureaucrats and founders. It is also so un-coordinated that effort of one policy team cancels the others. For example creating StartupIndia on the one hand but terrorizing with AngelTax.

In policy circles it has become a well known joke

“In policy you make 2 steps of progress forward and 2.1 steps backwards.” 

Best help a government can do in market making is to do nothing. It should continue to serve the function of protecting citizens.

7 – Lee fixel saved the fountain spray

When Lee Fixel invested in India first he was branded a casino capitalist. But thanks to him the entire venture capital industry that was being questioned for returns got two decades worth of lifeline to continue.

According to research by Prof Thillai Rajan, “Mean returns of Indian PE-VC asset class is 13.25% in the decade 2008–2018”. Prior to that there was no data to even study it. In the US these return average 15–20%.

In the previous decade, i.e 1997–2007, many reputed global VC firms that came to India bolted back due to inadequate returns. In the time period 2007-2017, about $16b of investment by VC had been done in India. Only $4b had been recorded as exits. By orchestrating Walmart Flipkart acquisition in 2018 Lee added $17b to the tally of exits to take it to $21b. Else the 13.25% return of the VC asset class may not have been possible

He showed how to capture value, spread wealth to startup employees and saved the entire VC Industry in India. Lot of venture capital therefore will continue to be available.

8 – One in many is not the same as Many in one

A startup ecosystem’s maturity can be measured by how balanced are the terms between founders and investor collectives. Is it lopsided one way ? Silicon valley saw the balance favored the founder while in India the exact opposite was true a decade ago. That has changed gradually, Initial years saw many founders celebrate a fund raise. Experience has taught that it comes with obligation which when not fulfilled can take the control away.

Founders have learnt that control is as important if not more than capital. Because the game played by founder and investor are different therefore the averages are different a well and cannot be compared.

Average outcome of a gladiator is not the same as the ringleader outside the game. If in a game gladiator dies, it does not matter what the winning prize is because he can’t play the game again. For the outside ring leader even if one bet is off there are others that can still take a shot at the reward.

“Meaningful investor outcome is not usually the same as meaningful founder outcome.”   

Economist are giving it a new sophisticated name, “Entrepreneurship is not ergodic”. Nassim Taleb said it long ago that entrepreneurs do not play russian roulette.

Taking affordable bets is critical for founder anywhere. In India now we have rich class of second time product founders who take bets that keep control of their fate in their hands.

9 – Building Commons is hard

In a new economy where markets don’t form on its own it is argued that well meaning folks must come together and pay it forward. However building a commons, driven by a community is hard. Open source software created GPL license to protect the commons and therefore preserve ‘paying it forward’ contributors. This does not extend well to non-code based communities.

Every year new communities kick start however they fizzle out in a few years. In the last decade I have witnessed three communities breath its last in my arms. Have attended the last rites of three more. When commons become big, it attracts fascists. If the commons is not protected those fascist take over.

Tragedy of commons is an age old human problem, not solved well. The first decade of Product Nation saw that it has not solved this well for itself.

New ones continue to emerge and they continue to be hopeful.

10 – Race to the first billion dollar ARR (annual recurring revenue)

One of the most exciting things now is that there are many contenders for the first to get to a billion dollars in ARR. Druva is at $100m, Freshworks is at $200m while Zoho is at $500m. Between them there is a race to get to the first billion dollars in ARR. Once the first one does it, floodgates for the rest to follow will open up.

In conclusion

“Nations are born in the hearts of poets, they prosper and die in the hands of politicians” – Allama Mohammed Iqbal.

Founders are the poets of Product Nation. They shoulder the responsibility of ushering India as Product Nation to its adulthood in the next two decades. Responsibility of the rest is to be their cheerleader and affirm them.

When looked through a global trillion and billion dollar market cap lens it looks like a tiny speck now but they have done well to set the foundation for the next stage.


First published in medium –

Best Indian Founder

of 2018

or the entire last decade 2008–2018

Is Undoubtedly Lee Fixel of Tiger Global.

Every founder attempts to create value. It is not that hard. If money is handed out for a purchase, it is bound to create a consumer surplus. As Bill Gurley, legendary VC at Benchmark Capital says

To turn it into a business it is critical to capture some of that value back. Best founders are those that are good at capturing value after creating it. Capture that value for themselves, investors and employees.

Employees even in a typical valley based startup don’t make much money. As Hunter Walk, VC at Homebrew Capital says

Lee made two of his employees near billionaires and close to 200 others multi-millionaires.

When Lee first moved into India he was branded a casino capitalist. But thanks to him the entire venture capital industry that was being questioned for returns got two decades worth of lifeline to continue.

As per the research by Prof Thillai Rajan in 2018, “Mean returns of Indian PE-VC startups investment is 13.25% in the decade 2008–2018”. In the US these return average 15–20%.

In the previous decade, i.e 1997–2007, many reputed global VC firms that came to India bolted back due to inadequate returns. In the next decade till 2017, about $16b of investment by VC had been done in India. Only $4b had been recorded as exits. By orchestrating Walmart Flipkart acquisition in 2018 Lee added $17b to the tally of exits to take it to $21b.

Else the 13.25% return of the VC asset class may not have been possible.

For just that one reason he must be celebrated.

Even technology natives like Google, Microsoft, Intuit, Yahoo have a poor track record in integrating and digesting an acquisition. It will be harder for a non-digital incumbent like Walmart. It is anyone’s guess whether Flipkart will be an albatross on Doug McMilon’s (CEO of Walmart) neck. Chemistry between Walmart and Flipkart culture seems like water and oil, not something that is easy to mix.

But that is a story for another day.

A tremendous amount of wealth transferred into the hands of commoners who could have otherwise not imagined hitting such a jackpot.

For his stellar performance, we cherish Chris Gayle as our top IPL player. Similarly, Lee Fixel is our best Indian startup founder.

He showed how to capture value, spread wealth to startup employees and saved the entire VC Industry in India.

Disclaimer: I am in no way connected to Lee Fixel or Tiger Global. Have never met him. Neither did he influence any of our common friends to write this 🙂

Just admiration for someone who fueled a new reality.

Indian SaaS Drumbeat

Change is easy to miss, hard to get right.

Policymakers take pride in thinking that they create markets. Many believe that the 1992 World Bank report which called India as likely software superpower was responsible for the creation of $150bn IT services industry.

In emergent systems like markets, it is hard to say which inputs change the outcome. Internet was an important ingredient, the outsourcing industry was an unintended consequence of the internet. It made it possible for sending back office (R&D and Support) from US to distant parts in the world where it created efficiency.

Thomas Friedman, renowned New York Times journalist was quick to declare this in his book as World is Flat. He said “Several technological and political forces have converged and that has produced a web-enabled level playing field that allows for multiple forms of collaboration without regard to geography or distance, soon even language”

He was only half right. Ten years since his claim the Indian IT industry at $150 billion is only 10% of the $1.2 trillion US market.

What started with Internet will get completed with the cloud. Cloud enables to move front office i.e sales & marketing of software as well.

Business model type change is most potent.

As the world moves sales process from selling to assisted buying, front office need not be where the customer stays but where it is the most efficient to set it up. For the customer, there is no difference whether the software he buys is built, marketed from Alabama (US) or Alwarpet (Chennai). This decimates existing business models.

Business model changes are second-order effects, most fail to notice it initially. Leaders that do and act before others emerge as winners and those that do not perish.

Satya Nadella’s rallying phrase to lead Microsoft into the future is “Mobile First, Cloud First”. However after becoming the CEO, he did not hesitate to write off the big $8 billion Nokia acquisition while continuing to do big investments in the direction of cloud based business. LinkedIn at $22billion was one of the biggest acquisition for Microsoft in its entire history. Mobile is a big tectonic shift but do not create a business model change. Cloud on the other hand does.

Adobe was a leader in the PC application business. In 2007 its Rich Internet Application strategy was lead by a heavy client server led thinking. However, as recession-hit consumers stopped upgrading to their apps in 2011, they had to burn their boats to shift to an entirely cloud-based business. Fast forward seven years today Adobe & Shantanu Narayen serve as the ideal role model of a public company CEO that can navigate a business model change of cloud-based business.

New markets, technology changes are critical tailwinds to be in tune with however it is one that is related to business models that change fortune.

Change has global consequences

The business model change enabled by the cloud is called SaaS (Software as a service). It was earlier called as ASP — Application Service Provider a term coined by research firm IDC that meant software that can be rented

The first such software application that can be rented was built by Jostein Eikeland of Telecomputing in 1995. Like the pivotal moment of Wright brother’s first flight, no one noticed it. Not for several years until 1998. It is only in 2003 with the founding of Salesforce that SaaS found its way in business lexicon.

“It takes 30 years for a new idea to seep into the culture.” is a famous quote from Futurist, Stanford Professor Paul Saffo.

23 years since start SaaS has come far along, farther than how many trend watcher would have estimated. In 2018 roughly about one-fourth of software revenue is SaaS. At its current growth rate, it won’t be a surprise within a decade all software revenue is dominated by SaaS.

The world would be truly flat when more than half of that SaaS is from India.

When a helium-powered flight sporting a tagline #failsforce circles around San Francisco’s tallest building of Salesforce and creates a crack in it, it is quite telling on ‘Happy Feet’ of SaaS dance will play out.

When Mario plays Soccer

Can he become a Super Mario?

Everything about the future is so clearly visible when looked through the rearview mirror.

Wish I knew what influenced outcomes for a tech startup founder in India.

When you look back decade-long to sketch the picture from 2007 till now, leaving out the frenzy of funding peaks & disappointment three distinct picture emerge.

In all cases, the rules of the games for Indian founder are not apparent. The game itself is very different.

First in how consumer technology businesses are built, second how enterprise business evolves. And the third in how technology led acquisition happens.

Software is eating an unevenly distributed world of India

Wiliam Gibson, the famous science-fiction author has said, “The future is already here, it’s just not evenly distributed”

When you spread technology on the world, the thinnest layer gets cornered in emerging markets like India. Combine that with what Andy Rachleff, founding investor of Benchmark Capital has noted “Software is eating the world” it is easy to make sense of consumer tech in India.

It turns out that

Google for India is Google. Not Guruji as Sequoia had thought.

Facebook for India is Facebook, Not Minglebox, Sequoia’s second such bet.

WhatsApp for India is WhatsApp. Not Hike as Airtel had thought.

Jury is still out on whether Amazon for India will be Amazon. (Looking at the skeletons that are tumbling out of Walmart India’s closet, the last word on this may be by Amazon)

Also, the Jury is still out on whether Ola will be Uber of India. Only time can tell.

In a winner takes all market, only one rule exists. Become biggest & largest at any cost. Not just in that geography but globally.

If you are not #1 then you don’t exist.

You can exist for 2 years, maybe 5 years but after a decade only the last man standing residues in the mind.

Once a category is taken, it is better to go after a new one, AgriTech is the flavor of today. Or invent a new one like the mobile mediated ‘Handyman Services’

In all this as Bill Gross, founder of Idea Labs says, timing matters more than anything else.

TIming is the difference between IndiaPlaza & Flipkart.

Selling to Assisted Buying

There is a bigger story than cursory ones on Freshdesk & Zoho reveal.

In 2009 all SaaS revenue as a % of Enterprise Software globally was very small, less than 3%. In 2018 SaaS revenue is more than one-fourth of total Enterprise Software revenue. Given the rate at which SaaS is growing, it will not be a surprise if 90% of revenue of all global Enterprise revenue turns SaaS in the next decade.

This is happening because of an important shift, shift in how software purchase process happen. It has moved from selling to assisted buying.

This shift has provided a big edge that Zoho & Freshdesk leverage. If the product trial experience is good enough, price not too large you can close sales remotely sitting in any part of the world.

Sales acquires a new meaning here, it is not being the door to door roaming water filter salesman, but the sales assistant inside Levi’s jean showroom helping customers try out a fitting and gently nudging them to make a purchase.

In this type of sales, you don’t always be closing, you land quickly and always be upselling. Here the product has to take the lead on triggering emotions and do the initial sell by itself.

Enterprise software never had a winner takes all behavior. Many companies in a category can co-exist sustainably. Several Indian startups have therefore mushroomed in global SaaS

Fear meets greed on a treasure hunt journey

Only a handful of startups grow like a rocket ship to become some of the largest companies in the world.

Majority of them walk down the path of an acquisition. Whether planned or forced this entire process looks like dark art.

Walmart tried partnering with Airtel and Tata group independently to gain entry India and both failed, It felt the heat in the US with Amazon and China market was shut to outsiders. Getting into India was crucial in defining the new phase of the company their stake in the $100b+ market of global online retail.

Billions were at stake for Flipkart, smart late-stage investors pushed the right emotional buttons at Walmart to extract a huge strategic multiple.

In a much smaller case, AthenaHealth from Boston was heading for mobile-first world, their gap in mobile product offering led them to pay $60m in cash to Praxify in Pune. Or most recently Nutanix’s repositioning in the market from hardware box to SaaS company in the public market led them to make a spate of acquisition including the acquisition of Bangalore based Minjar.

In the startup land, a key thing that is missed is what happens in the terrain outside is more important than what happens inside in the making of the startup’s engine.

When a large technology company goes after the same future that a small startup is heading, a lot of emotions get triggered amongst all the players.

A heady concoction of fear and greed inside the large company trigger conditions for the acquisition of the startup to unfold.

This is mostly serendipity and sometimes engineered

A challenge for Indian founders is that even when aligned on the future direction conversations of merger and acquisition don’t happen.

This is because startups don’t come on the radar of the global corporations often enough.

Which explains the lackluster M&A ecosystem in India.

Therefore, it is important to know the play

As is the game, so is the play.

If playing in a winner takes all market, must find a way to be the biggest & largest not in just a geography but in the entire world. And Time it right.

In enterprise software, it is about nurturing a product led, inside sales DNA not the suitcase hogging salesman tribe of the yesteryears.

Finally, for technology-first business, with an acquisition as a likely outcome, it is creating the condition for coming in the radar of a strategic.

Not getting the game being played will see the Mario do a lot of activity.

Which may err into a foul and not becoming a SuperMario.

Great marketers create TED, Bad marketers create FUD

NN Taleb, Naval & Seth Godin are top thinkers of our time. What distinguishes Seth from others is his ability to take original difficult ideas and visualize it for a commoner. He is careful to remove the overtone of intellectual sound in what he says and does not scoff at those who don’t get it even after simplifying.

He is amongst rare few who can straddle across the different levels of first principle, mental model and metaphorical thinking. Seth explains new ideas in a way that even a kid can understand and be moved enough to act.

In his latest book #ThisIsMarketing he crescendos through all his previous marketing work, Permission Marketing, Purple Cow, Tribe, Knock Knock, Marketers are Liars, MarketingSeminar and many more.

With “ThisIsMarketing” Seth has resisted the temptation to create a how-to guide and insisted on providing a compass on how to do great marketing. Marketing that leaves a marketer fulfilled and turns marketing a calling of duty.

Bad marketers create FUD (Fear, Uncertainty and Doubt)

Novice that has misunderstood or relegated grandfathers of marketing that have not caught with changes in Marketing and everyone within that spectrum need ThisIsMarketing.

Great marketers create TED (Tension, Education and Delight)

Seth poses bold questions that are bound to change anyone’s attitude towards marketing.

These questions are also going to create a lot of ruckus to the current ace practitioners of marketing.

For instance, he exposes that long tail is a scam pulled over the independent artist. And that authenticity is one of the biggest myth that is peddled by marketers. I have been shaken on my own belief about “Authenticity”

The entire book can be summarized as Seths Revised Marketing Manifesto. Last section of the second chapter can be used word by word to describe this manifesto he gives to the world.

Ideas that spread win

Marketers make change happen, for the #SmallestViableMarket

By delivering, anticipated, personal and relevant messages that people want to get

Marketers don’t solve company’s problem, they use marketing to solve other people’s problem

They have empathy to know that those who they seek to serve don’t want what the marketers want, don’t believe what they believe, don’t care about what they care about. They probably never will.

At the heart of our culture is the belief in status. In our self-perceived understanding of our role in any interaction, in where we are going next.

We use status roles and our decision about affiliation and dominion to decide where to go and how to get there.

Persistent, consistent, and frequent stories, delivered to an aligned audience, will earn attention, trust, and action.

Direct marketing is not the same as brand marketing but they are both based on our decision to make the right thing of the right people.

“People like us do things like this” is how each one of us understands culture, and marketers engage with this idea every day.

Ideas move through a slope. They skate through the early adopters, leap through a chasm, slog their way to the masses. Sometimes.

Attention is a precious resource since our brains are cluttered with noise. Smart marketers make it easy for those they seek to work with, by helping position the offering in a way that resonates and is memorable.

Most of all, marketing begins (and often ends) with what we do and how we do it, not in all the stuff that comes after the thing is designed and shipped.

Your tactics can make a difference, but your strategy — your commitment to a way of being and a story to be told and a promise to be made — can change everything.

If you want to make a change, begin by making culture. Begin by organizing a tightly knit group.

Begin by getting people in sync.

Culture beats strategy — so much that culture is strategy.


Visualized notes for the entire book in a slideshare here

Entire book chunked into key principles that marketers must do captured in a tweetstorm here.

My 10000 hours in M&A and Indian startups

Many months ago I had read this wonderful tweet by Kanyi Maqubela‏, a young VC from Colloborative fund on 10,000 hours of his being a VC and I thought to myself that is good way to document one’s learning.

Last 18 months my stint was as a Fellow-In-Residence (M&A) at iSPIRT (startup think tank), I spent my time on a big hairy audacious goal of leveling the M&A ratio of Indian startups to that of the Israeli ecosystem. Given the current market coordination failure of cross border M&A I had to challenge many assumptions underlying an investment banking model and run several different experiments. As part of it co-hosted two edition of StartupBridge India conference at Stanford in Dec 2016 & 2017. While I am yet to become an expert on the topic of M&A, like Kanyi here are my 10,000 hour reflections.

First and foremost, folks involved in M&A like to call it an art and they try to complicate it perhaps so that they can make a profit from that complexity. Personally, I found it to be quite straightforward.

“M&A is the story of when fear meets greed on a treasure hunt journey.”

Few things that make sense now did not before

Big corporation cannot innovate, startup rarely crack distribution and grow into a big corporation.

Every corporation big or small wants to innovate, in a large corporation market rewards it for being execution focused which means that it sheds innovation muscle. For it despite a best-articulated strategy of horizon planning (H1, H2 & H3) for innovation, acquisition is the most successful H3 strategy for innovation. Cisco proves the rule, and maybe Apple is an exception.

Why boring sounding companies also get acquired

Yesterday technology incumbent acquires a today technology startup. Today technology incumbent acquires tomorrow technology startup.

There is a supply and demand mismatch of startups between India and Silicon Valley.

Silicon Valley corporations wants to acquire the latest fads and trend, say a cutting edge AI & Machine learning startup now. Indian startups on the other are most prevalent in building business & workflow apps and must, therefore, look beyond the valley.

On who decides and influences

Corporate development folks are like the eyes and ears, and they should have seen and heard about the startup. It is the heart (VP Engineering or Product) and mind (SVP, GM, CEO) that makes the decision.

Experts may know but the novice may not

Companies are bought, they are not sold

Buying a product is different from buying a company; it is much closer to the sale of Art. Value is in the eyes of the buyer, and different buyer means different price. Therefore, the price is always discovered through an auction

It is not scale-invariant

The dynamics of < $1m, $1–10m, $10–25, $25–100m, >$100m are all completely different. Experience and lessons from one do not translate well to another.

Some startups may never sell

Yes, every company in the world is up for sale at the right price. But there are the fisherman type entrepreneurs who as a matter of principle will never sell. Does it bode well for them, only time will tell.

Big Corporates are from Mars and Startups are from Venus, it is a colossal failure of communication.

Corporate describe their product, their sector, and the world they see using a map, and their strategic leverage is winning in that map while startup founders focus inside to describe the guts on the glory of their product with microscopic detail.

It is a people business

Companies do not buy other companies; it is people that buy from other people. Past relationship and the new strong connection all contribute way more than anything else.

Product brand is different from a Company brand.

The two are conflated again because startups like to talk about microscopic details while strategics like to describe the map

Investors have an end game; it is useful for entrepreneurs to have one too.

Entrepreneurs only focus on next fund raise and never think about their end game, but it is in their best interest to do so. Every investor in the 4th year & 7th year of fund brings up a pivot question for a startup inside her portfolio. Investors have a cycle of 10 year by which time they have start returning the money, in the 4th year they want know if a startup is candidate for IPO or more suitable for M&A. In the 7th year again if the startup did not do an IPO, they want to decide if they should mentally write it off for their fund returns. Entrepreneurs unaware of this can get adversely affected.

Lead is to a customer what PSP (Potential Strategic Partner) is to an acquirer

What a lead is to a customer, a potential strategic partner is to an acquirer. For the former, sales lifecycle may take two months; the latter takes two years. Thus one has treat this as a complex sales process with such long lead cycles.

You won’t get a marriage proposal when you are a terminally ill cancer patient.

Startups start a strategic partnership or acquisition conversation way late in their journey, with just a few months away from the end of their runway. It is exactly the worst time to go out in the market due to both signaling as well as weak negotiation leverage reasons.

When you have an offer, two is one, and one is none.

Just like in a fundraising situation, when you have an offer, the value gets determined through a reverse auction process. Startups must have multiple offers in hand.

It ain’t done unless it ain’t done.

Managing own psychology during the process is very critical. A combination of euphoric possibilities and the uncertainty almost grinds execution to still not just for the founder but the entire team. It is very important to put rhythm of making progress. It is at the time of a deal that the velocity of growth should be historically highest for high valuation of the deal.

My own biggest surprises.

Word ‘Exit’ is a misnomer

It is not an exit, but an entry for scale or growth. A startup can do well on solving problem & product, aligned with a strategic, it can solve distribution.

Most Corp Devs become VC’s

Corporate Development career seems to be the least rewarded in finding mispriced optionality. No wonder most people seem unfulfilled and hence find VC as the next logical career option as that allows them to set the incentive structure right for themselves.

Big old Indian corporates do not have technology FOMO

Indian corporates are not threatened by technology, nor do they have FOMO. At least not yet. It may be quite some time before ‘Dabur’ might act like ‘Gillette’ and cough up a billion dollar to sweep a new business model.

Indian products are world class in engineering and product

Indian Startup Product and engineering in sectors they operate are world class; they beat Silicon Valley and their Israel counterparts. In the last few years, they are beginning to catch up on marketing, positioning and packaging themselves well.

Balancing between fighting fires and strategic thinking is universal to startups.

Coaching startups on the importance of packaging is hard. A universal trait applies to SV/Israel startup, nothing specific to India.

Bad exit problem is poor entry problem

My biggest Aha has been that a bad exit problem is not just a structural issue but also a manifestation of bad entry, i.e., initial venture allocation thesis.

Things no one will talk about explicitly.

Importance and significance of geography in the discovery of strategic conversation.

Startups, investors have grossly underinvested in that. One of the biggest differences between Israel and India startups is the investment in Israel<>US bridge including efforts by the government. StartupBridgeIndia is some headway doing once a year match making, Israeli startups do this every month

It is indeed questionable that 2007 vintage funds from India have 20% IRR at the end of 2018. There are not enough M&A or no supportive public market.

Raising more funds reduce optionality for startups, and it removes meaningful exits for founders

A series A investor would typically expect 10X of the post funded valuation for an acquisition deal to be attractive, for series B it is 4–7x, for series C it is 2–4x.

Venture capitalism is anti-fragile, a VC may be not.

I am convinced that structurally, the system will take care of itself. As NN Taleb says Entrepreneurship is anti-fragile, but entrepreneurs are fragile. Similarly, venture capital is anti-fragile, but individual investors are fragile. It is not surprising that no Indian venture investor is on the global Midas List.

Most frustrating parts

Most startups handle inbound poorly, they underwhelm or overprice themselves leading to wasted cycles for corporates & startups and everyone involved. First-time folks initially stumble but learn after 3–4 failed discussions.

In every deal conversation there is an awkward situation where the board & investors incentive are aligned with the founder and the team, it is the founder who must step in to make the right decision for himself and the investors.

Indian regulation is most poorly optimized for exits and acquisition. Every founder may hire top lawyer their money can get, and it may still not help.

One must find a deal buddy, a recently exited entrepreneur who can advise on dealing with misaligned incentives and how a recent regulation issues must be resolved etc.

Finally four things any startup must think about

if M&A ever crosses their mind.

  • What is the map in which the startup & corporate is operating?
  • What is the narrative of the startup and the unique competitive leverage it possesses?
  • What Air Game will help the startup come on the radar of the Corporate/ Strategic?
  • Ground game — Who in the network can broker trust to kick off an initial conversation between strategics and startups to explore partnerships?

A useful book to read further is Magic Box Paradigm, a framework for startup acquisition

CoCreation — important keyword

The most critical tool that an entrepreneur has in his arsenal to change the trajectory and valuation of any deal is co-creation, yet it is poorly employed and understood.

After a startup has built a stable product via a well-assembled team, it is useful to invest in the strategic partnership.

In addition to the book linked here is a handy deck I created for startups to help think through the process of activating strategic partners

NN Taleb talks to mother nature, translates for rest of us. Skin in the game, latest episode

NN Taleb talks to mother nature, translates for rest of us. Skin in the game, latest episode

Skin in the game (SITG) was one of my most anticipated book. @nntaleb is nothing short of genius, it is as if he has conversation with nature and then translates that for rest of us mortals.

The book is still very hard to read but keeping his ‘looking the part’ principle I am not going to judge this for readability. It must be said though this is certainly not for 10 year old but the sophisticated reader but they also need to remember past 3 books and concepts from there.

SKIN IN THE GAME (SITG) — One cannot understand ‘SKIN IN THE GAME’ unless ‘ANTIFRAGILE’ is understood. ANTIFRAGILE cannot be understood unless we know how we conflate luck and skill and are FOOLED by RANDOMNESS. One cannot appreciate RANDOMNESS unless BLACK SWANS are appreciated.

Lets first recap BLACK SWAN

It points out a key ILLUSION. Life is navigated by us as a blind person with rear view mirror used for steering forward in the journey. Rearview mirror of past experiences and belief shape the mirror and the picture we see.

That is why VISION IS MOST CLEAR IN REARVIEW IMAGE — A forward looking vision is most beautifully explained through the rear view mirror. This is also referred to as the hindsight, narrative bias. A successful startup will tell the story how clearly they had the vision of where they are today.

BEST STORY TELLERs are STILL BLIND — One must keep in mind that Leaders are people with charisma that can tell the best story showing the mirror but they may not have any skills in navigating forward, as ill-equipped as the rest of the folks.

It is OK TO BE INSPIRED but FOLLOW THE ACTION — Don’t be swayed by story tellers, take choices that expose you to treasure (upside) and avoid land mines (downsides). Must keep in mind treasure take longer, land mines explode immediately.

LEARNING IS THROUGH TRIAL AND TINKERING — Since one cannot see or perceive the future through any human sense organ, only way to navigate is through trial and error. [All great discoveries has happened only that way, not inside academia or government]

HUMILITY > KNOWLEDGABLE — Don’t become arrogant of absence of an unknown and when you encounter it do not fear it but bow in front of it and pray to it. Some of the oldest wisdom advocated that.

LABELLING HELPS COMPREHENSION — Any new thing can only be understood if there is no to reference it. Lets label the event or thing that we don’t know but can affect us in good or bad way a black swan and be humble about it.

BLACK SWANS exist and they can either benefit us immensely or kill us.

BLACK SWAN translated in HINDI would be NAVAGUNJARA

SYSTEM IS DIFFERENT THAN UNIT — There can be black swan at the individual level but also at the entire system (humanity) level. One of the key confusion about black swan has been the difference between the two.

Next lets go over FOOLED BY RANDOMNESS


FOOLED BY RANDOMNESS is mistaking luck for skill.

SURVIVORSHIP and ATTRIBUTION BIAS hurts LEARNING — What successful think they made happen could be because of role of luck and chance ? Self attribution boosts ego & self worth but blinds learning

Many PROFESSION are GOVERNED BY CHANCE — In many domain probability plays a huge role , ex — venture, movie, books. For every Shahrukh Khan, Brad Pitt, Mark Zuckerberg, Stephen King there are 100s of wannabe.


VOLATILITY, RISK, UNCERTAINTY & UNKNOWABLE — There is known known, known unknown and unknown unknown and the unknowable.

RISK as LABEL mean MANY THINGS — Different people have different definition of risk. For example using averages, relying on standard deviation as risk has had huge perils. Accountants have drown, funds like LTCM have blown nobel prize winners


RISK AND UNCERTAINTY are MENTAL MODELS — Label of ‘Risk’ for ‘known unknown’ and ‘uncertainty’ as unknown unknown are useful ones to navigate situations. This way it helps differentiating between betting on horse races and star trek races. No one has or can study star trek races.

SCIENCE less CAPABLE THAN ATTRIBUTED, POPPERISM — There are only two types of theories, one that is wrong and other yet to be proven wrong


REPEAT AFTER ME — Absence of evidence is not evidence of absence — Refer to black swan thread again

Think about GOOD or HARM not PRESENT or ABSENT when it comes to black swan — Randomness can be good, great and harmful, we like it when it is harmless.

USEFUL in TRICKY DECISIONS — Burdani’s donkey that was perfectly equidistant between water and food can be saved from dying if a small nudge is given

WHAT YOU SEE IS NOT WHAT IT IS — Randomness is not completely random, they can be explained through path dependence.

NOT ACCEPTING RANDOM makes ONE LEGGED MAN — Guy who does not know that life is random and live it through picture in the mirror shown by others is like one legged man in ass kicking contest

RANDOMNESS EXPERIENCED teaches BETTER than PROBABILITY THEORY — Folks like cab drivers, movie actors, entrepreneurs know it intuitively, academics call it the probability.

AWARENESS SUFFICIENT UNDERSTANDING NOT NEEDED, INFACT ONE CANT UNDERSTAND IT ALL — If you are aware enough to be not fooled by randomness you have better odd to survive and succeed, understanding not needed.

IN THE SPACE BETWEEN BAD LUCK and YOUR RESPONSE LIES you POWER — If you don’t succeed remember that you have have no control on how luck behaves with you but you have complete control on how you respond to luck (bad) when it meets you.



WHAT SURVIVES or THRIVES — If life is so random and one can be fooled by it then how does one navigate it ? Anything that has survived and thrived over time can give heuristics. To better understand something it useful to give it a label, call this ANTIFRAGILE

MANY LIVING SYSTEM ARE ANTI-FRAGILE Humanity as whole has survived and thrived time thus labelled antifragile, other examples are hydra, entrepreneurship


HEURISTICS ARE NUANCED — Humanity is antifragile has survived, humans are not they are mortal. Broader takeaway is that heuristics that apply to the system do not directly apply to its unit.

SYSTEM IS NOT THE UNIT — True for any system, knowing a neuron does not tell about brain, knowing an ant movement does not explain the colony, knowing one human bias does not say how market will behave.

IT IS THE MAGNITUDE — Recounting lesson from randomness, it is not the presence, absence, frequency of random events but the magnitude that is more critical.

WHAT IS TIME INVARIANT in NATURE — Lindy effect, if something has survived for long then it is more likely to survive for longer. It is not a theory but phenology, empirical time invariant observation.

SCIENCE CAN’t see NATURE fully. — Lindy effect at surface sounds un-scientific yet it is quite the opposite, points to limitation of science & human understanding. Nature is right till proven wrong, a scientific theory is not right until proven otherwise

OLD WISDOM > RECENT INSIGHT mostly — Grand mother’s insights advice are way better than that of a doctor, banker or scientist but still grossly undervalued

HUMAN LANGUAGE AND UNDERSTANDING very LIMITED — Like the greek story of Pastoral’s tile why the dog prefers a certain tile, many things in life are beyond language and human understanding. Survival is > than Knowledge


FOR SYSTEM ANTIFRAGILE, UNIT MUST BE FRAGILE — Another key heuristics is that for humanity to be antifragile (survive) humans are fragile

FOR SYSTEM ANTIFRAGILE, UNIT MUST BE FRAGILE — Another key heuristics is that for humanity to be antifragile (survive) humans are fragile

HOW CAN I THE INDIVIDUAL BE ANTIFRAGILE — Remember humans are story telling monkey, learning via tinkering is the only learning, have optionality- change mind any time & expose to convexity (more upside than downside), any human group is complex system with 2nd order consequences

HOW CAN I THE INDIVIDUAL BE ANTIFRAGILE 2— via negativa (remove things) for complex systems, avoid via positiva (don’t add) as new creates iatrogenics (unintended harm), beware of risk transferers, look for skin in the game. pad with redundancy

HUMANS are STORING TELLING MONKEYS — Humans are story telling monkeys, referred in the green lumbar fallacy., a situation where one mistakes source of necessary knowledge (greenness of lumber) for another less visible from outside, less tractable and narratable.

SHAPE YOUR LIFE REAR VIEW mirror through EXPERIENCE for BEING ROBUST — As humans we experience life through rearview mirror of stories & past experience and not in touch with randomness of the future. Tinkering and learning is the real learning as that helps be more antifragile

BELIEVE A SINNER more than a VIRGIN — He who has never sinned is less reliable than he who has sinned and recovered

OPTIONALITY >> KNOWLEDGE — At individual level anytime you have the ability change options, it is optionality. If you have optionality then you don’t need knowledge, skills, insights.

EXPOSE TO CONVEX OPTIONS In any option if there is more upside than downside it is called convexity.

VIA NEGATIVA a POWERFUL TOOL for BECOMING ANTI FRAGILE — via negativa simply means for survival eliminate all things that would kill you. Greatest contribution in life is by removing what we think is wrong. In life antifragility is reached by not being a sucker

SKIN IN THE GAME for a CONVEX OPTION — In an interaction with others (family, work, market, life etc) when the other does not have skin in the game then it does not lead to a convex option for yourself.

RISK TRANSFERERS, people WITHOUT SKIN IN GAME have spread like PLAGUE in MODERN SOCIETY — In many aspects of life such risk transferors exist (bankers, academician, politicians, big company marketer/sales guy)

USE SKIN in THE GAME as COMPASS of LIFE, in INVESTING — Never ask anyone for their opinion, ask them what they have in their portfolio. SKIN IN THE GAME (in LIFE THREAT POSSIBILITIES) Don’t get on a plane without a pilot as that is without skin in the game.

SKIN IN THE GAME (in DAILY LIFE INTERACTION) Never let another person frame the question, in every question an answer is planted. Never respond to a question straight that does not make sense to you.

REDUNDANCY second PRINCIPLE for making SYSTEM ANTIFRAGILE — Next build redundancy, a margin of safety, avoiding optimization, mitigating (even removing) asymmetries in our sensitivity to risk

WEIGHTLIFTING , MUSCLEs BUILD through REDUNDANCY PRINCIPLE — Building muscle through weight lifting works because muscle develop more redundancy under condition of periodic stress and rest.

BEWARE OF Iatrogenics. Adding something to complex system creates un-intended harm. So as principle first do no harm, absence of evidence of harm does not mean no harm. Second the application of effects is non linear

BARBELL STRATEGY FOR CONVEXITY and THUS ANTIFRAGILITY — A dual attitude of playing it safe in some areas (negative black swan) and taking a lot of small risks in others (positive black swan) will help be antifragility. This approach is called barbell strategy


ANTIFRAGILITY is ABOUT SURVIVAL, to be individually be antifragile exposure is more important than knowledge, modify your exposure to treasures and learn to get out of trouble.


SKIN IN THE GAME is a PRINCIPLE for DESIGNING ANTIFRAGILE SYSTEM. The book is a continuation from the book Antifragile (thing that survives and thrives with time), skin in the game is one of the two key heuristic introduce earlier, the other one was redundancy.

SURVIVAL IS THE ONLY RATIONALITY THAT EXISTS. Anything that hinders one’s survival at an individual, collective, tribal, or general level is irrational. With this enhanced definition skin in the game mean there being enough downside for individual that protects the system.

NATURE CARES FOR SURVIVAL, HUMANS CRAVE for MEANING — Not everything that happens happens for a reason, but everything that survives survives for a reason. Our body sense organs are optimized for survival not for sense making.

HUMANS ARE STORY TELLING MONKEYs — For them it is easer to sell a larger bigger than life than to describe the boringness of daily reality. Reality does not listen to stories but humans do most certainly investors do


OTHER MONKEY BIAS is RECENY BIAS — Also as humans we are prone to the availability heuristic, by which the salient is mistaken for the statistical.

STRESS TO FRAGILE UNITS MAKE THE SYSTEM ANTIFRAGILE — However any system that is not subjected to stress where individuals do not have skin in the game, the system does not become antifragile.

RISK TRANSFERERS are WINNING IN MODERNITY — We have been for long having system where people without skin in the game are winning by transferring risk. They are the biggest threat to system antifragility. You can never cure structural defects, system corrects itself by collapsing

LESSONS about SKIN IN THE GAME in examples of ONE SIDED ABSENCE, INTENSITY, CHANGE AGENT, EMOTION TRIGGERED — Employment and employee, religion, halal cut, gene adoption, language adoption, hatred of the privilege all teach about skin in the game

SKIN IN THE GAME, real CHANGE AGENT (MINORITY RULE) — A kosher (or halal) eater will never eat nonkosher (or nonhalal) food, but a nonkosher eater isn’t banned from eating kosher. It takes a small minority to have deep skin in game to bring change in a system

SKIN IN THE GAME, ABSENT SIDE can make SLAVE of the PRESENT SIDE — Someone who has been employed for a while is giving you strong evidence of submission. Employees stick to an employer because they have a reputation to protect.

SKIN IN THE GAME, ABSENT SIDE -> SLAVE of PRESENT SIDE — Dog vs wolf, the feeling of false stability. A dog’s life may appear smooth & secure but in absence of an owner, a dog does not survive. Most people prefer to adopt puppies, not grown-up dogs; unwanted dogs are euthanized.

SKIN IN THE GAME, ABSENT SIDE can make SLAVE of the PRESENT SIDE — The best slave is someone you overpay and who knows it, terrified of losing his status. One sided extreme skin in the game can lead the other to do total capture.

SKIN IN THE GAME , LONGEVITY OF SURVIVAL is proportional to INTENSITY — Religion (as a system of people) teaches that strength of a creed did not rest on “evidence” of the powers of its gods, but evidence of the skin in the game on the part of its worshippers.

SKIN IN THE GAME , LONGEVITY OF SURVIVAL is proportional to INTENSITY — People who had religion have survived, it brought cohesion: people who eat together hang together. The length of survival of something (an idea) is proportional skin in the game in it (some time literally)

PROGRESS WITHOUT SKIN IN GAME cause RESENTMENT — People resent when risk transferrers rise the top, they root for those that have had skin in the game.

SOLVE FOR ENVY DESIGN SYSTEM FOR RICH TO BECOME POOR — Therefore true equality is equality in probability. A dynamic (ergodic) equality takes into account the entire future and past life that is rich can become poor and poor can become rich

SKIN IN THE GAME,OLDER SYSTEM > MODERN SYSTEM less AGENCY — Older system designed skin in the game to preserve the system. Building falls, builder killed. Modernity has advisors, bureaucrats that are away from reality. Beware of someones advice if he does not has downside for it

SKIN IN GAME as COMPASS of LIFE, BELIEVE ACTIONS — In interacting with someone check what someone does rather than what he says as that is true indicator of skin in the game

SKIN IN GAME as COMPASS of LIFE, WATCH OUT FOR RISK TRANSFERERS — Whenever the cost takes longer to manifest but (small) benefit can be demonstrated people game the system. Example Bankers & CEO’s

SKIN IN GAME as COMPASS of LIFE, ACROSS TIME BE ETHICAL — When dealing with others below in a hierarchy as you would want above you to treat you you bring skin in the game across time.Treat your parent the way you would want your child to treat you, go to friends funeral

SKIN IN GAME as COMPASS of LIFE, REAL SKIN IS WHAT OTHER is AFRAID to LOSE, ASK FOR IT. In an interaction with others that get affected by skin in the game what matters isn’t what a person has or doesn’t have; it is what he or she is afraid of losing.

BACK TO CENTRAL QUESTION, NAVIGATING RANDOMNESS OF LIFE — Rationality does not depend on explicit verbalistic explanatory factors; it is only what aids survival, what avoids ruin.

USE SKIN IN THE GAME FOR SURVIVAL to navigate life that presents with a series of good and bad random events

SHED THE ‘SCIENCE LIKE’ FOCUS instead FOCUS on RANDOMNESS, SUPRESTITIOUS MAYBE BETTER THAN SCIENTIFIC — The scientific may criticize the superstitious however a superstition that survived is risk mitigation for a risk that has long been forgotten.


ONE MORE THING ABOUT RANDOMNESS is ERGODIC — A situation is deemed non-ergodic when observed past probabilities do not apply to future processes.

IF YOU DIE PLAYING, a billion dollar PRIZE MONEY is NOT WORTH IT — In a strategy that entails ruin, benefits never offset risks of ruin.


When the beard (or hair) is black, heed the reasoning, but ignore the conclusion. When the beard is gray, consider both reasoning and conclusion. When the beard is white, skip the reasoning, but mind the conclusion.

Naval is a honeypot for first principle thinkers

Naval is a first principle thinker, his ability to think about anything deeply and articulate them in the most lucid way is unparalleled, very rare to find an individual like this. Many have interviewed him on their respective blogs, podcasts and conference. Several of these places have curated nuggets of his thinking, here is my own curation of notes that I refer to from time to time.

Naval’s thoughts

On Principles, Skills

Decision Making — You make good decision when it becomes an instinct ; when faced with many pick the difficult one

Learning — Teaching forces learning; Mastery must be pursued for its own

Negotiation — He who cares less wins

Managing Time — Do a 2 factor authentication on time commits

Speaking — Speak as you write and vice versa; eliminate inner monologue, hear your own voice, know your subject stone cold

Wisdom — Prune bullshit ; is measured by calm in uncertainty; is discarding vice return to virtue ; Life is a single player game ; Know when to enter the game and exit the game

Happiness — Is a skill ; Is a desire ; Is a contract with self

On Wealth creation

Comes with owning a business ;

Earn with mind not time ;

Is both luck & skill, early luck is preferable but gives bad habits ;

Be optimistic while being a contrarian ;

is like poker game, cards you are dealt and hands you play ;

Seek mis-priced optionality ;

Is about timing and your own time horizons ;

Patience trumps cleverness ;

Investing as angel is like winning a six digit lottery but knowing one digit.

On Health

Subtract not add ; hard workout easy day ; Nutrition quality control > quantity control


Sapiens ; Tao of Seneca ; Tools of Titans ; Tribe of Mentors ; Meditations ; Reality is not what it seems ; Elephant in the brain

During the exercise of making my notes what I found even more fascinating is the other deep thinkers that Naval attracts, the mind stretch that they further create over Naval’s initial thoughts. Some of my additional notes of these folks below.

Tribe that he attracts


“Only the individual transcends” — @naval

Ponder more

“There’s no community that’ll get you there. Everybody’s journey is unique. We all have to find the sources that speak to us.When you start going your own way, you start to disconnect from your friends and family because they have a consensus model of who you are. And they don’t want you to deviate from that model. “ — @Steve Maxwell


“If you attack someone’s identity, you shut down all conversations with them.” –@naval

Ponder more

“How tightly our ego grips to concepts & labels we hardly ever examine.” — @amirmotlagh

Sovereign Individual

“Logic of violence determines the structure of society” –@naval

Ponder more

“Logic of violence is not about ease but desire to assimilate — evolution on v. long scale, a desire to create families for humans” — @Alexandroulykos


“Uncertainty, not outcome, is the root of stress.” — @naval

Ponder more

“Outcome leads to even more uncertainty” — @lpolovets

“Possible uncertainty is the by product of expectation.” — @henocki

Your game

“The problem with getting good at a game, especially one with big rewards, is that you continue playing it long after you should have outgrown it” — @naval

Ponder more

works both ways. Problem with being bad at a game with high rewards is that you continue playing long after you should have given up.-

“Life is a single player game.” -@naval

Ponder more

“With no owner manual. Multiple controllers at the start. Single controller for the self actualized.” –@henocki

Correlation and Causation

“Correlation isn’t causation but neurons that fire together wire together. Thus the confusion.” –@naval

Ponder more

“Evolutionary, getting too many false positives is more beneficial than getting too many false negatives. Hence the bias.” — @DellAnnaLuca


“Desire is a contract that you make with yourself to be unhappy until you get what you want.” -@naval

Ponder more

“once you get “what you want”, and realize it didn’t make you happy, it’s time to rethink the terms of the contract” — @fortierfinance

“To be without some of the thing you want is an indispensable part of happiness” @xochinla

“People who live far below their means enjoy a freedom that people busy upgrading their lifestyles can’t fathom.” — @naval

Ponder more

“Not wanting something is as good as having it.” @L1AD

“Less is more, more or less” @StatusQuont


“Instead of treating events as wins or losses, ask “Did I learn something I can apply in the future?” If not, you must treat it as a loss.” — @naval

Ponder more

“Experience is what you get when you didn’t get what you wanted.” — @Melinda Byerley‏

Bias is what happens when you get what you wanted” — @Shane Johnson‏

There is no such thing as a failed experiment, only experiments with unexpected outcomes. — Buckminster Fuller” — @Alexander Wolfe‏

Ponder more

“If you hit a wrong note, it’s the next note that you play that determines if it’s good or bad.” — Miles Davis” — @Mr Mircea

Self Improvement

“Reading my old blog posts makes me cringe. The posturing is so obvious.” — @naval

Ponder more

“By the time you realise that your father was right, you will have a son who thinks that you are wrong — Charles Wadsworth”


“Wisdom is understanding the long term consequences of your actions.” — @naval

Ponder more

“Understanding the long term consequences of your actions so much that you drop wisdom and become a fool.” — @Mr Mircea


“Understand technology to reformat reality”- @Naval

Ponder more

“Opium does not need PR” — @Akira

“Every year the minimum IQ needed to destroy the planet decreases.” — @Akira

“Technology doesn’t change what people want in the world, it just removes the use of violence to get there.” — @naval

Ponder more

“Everyone wants the same things. People only differ on the ways to get them, and on the proxies used to measure progress.” — @DellAnnaLuca

“In tech, small-stakes iterated games can suddenly turn into high-stakes single-move games. That’s when the knives come out.” –@naval

Ponder more

“When scale of what’s at stake is greater than the overton window of those involved” — @Unamusedchimp


“Money is a consensus hallucination, a bubble that never pops. That’s why people get tulip mania. If you’re right… “ -@naval

Ponder more

“It may surprise some that calling something a “cultural construct” isn’t that same as calling it meaningless. Money is cultural construct.” — @existentialcoms


“Earn with your mind, not your time” — @naval

“If you’re leveraged with capital, code, or people, and own equity, then good decisions have a much larger earning impact than hard work” — @naval

Ponder more

On the other hand, higher leverage narrows your margin for error. It turns a small mistake into an existential threat.

Investing time/money behind someone? — Do you like them? — Can they teach you something you want to learn? — Good economics? If so, invest. @naval


“Consensus” is just another way of saying “average.” — @naval

Ponder more

“Icecream Principle — Tell 10 people to get ice cream with one condition; they all have to agree on one flavour. That flavour is going to be chocolate and or vainalla every time. Groups of people don’t agree on whats cool or interesting, they agree on what’s easy to agree.” — @Patrick Buggy


“You get paid for being right first, and to be first, you can’t wait for consensus.” — @naval

Ponder more

“You can wait for a consensus of early adopters, though this is risky” — @paulg

“You can be right first and not see a dime for your efforts. You get paid for creating consensus first.” @mr_james_c

Best investing attitude is contrarian, patient, informed optimism. As @m2jr says, “non-consensus and right.” –@naval

Ponder more

“Even better when the entrepreneur builds a company that way!” –@Mike Maples (m2jr)


“Wealth creation is an evolutionarily recent positive-sum game. Status is an old zero-sum game. Those attacking wealth creation are often just seeking status” — @naval

“But what if economists have it all wrong, that self interest is primarily about status, and only incidentally correlated with wealth?”- @naval

Ponder more

“Envy is a much more evolutionarily plausible self-interest mechanism than greed because it is more robust.” — @egfalken

“What’s the most effective way to allocate assets? An auction. The least? A lottery. Which resembles inheritance most closely? “ — @mmay3r

“but what’s the most effective way to incentivize wealth creation? Gives the opposite answer. Incentives and Disincentives all the way down” — @naval

“When everyone is sick, we no longer consider it a disease.” -@naval

“Then it is culture” — @amusechimp

Bitcoin is a decentralized timestamp/messaging protocol that when implemented and stable results in a value storage system “ — @Desantis

“You can tell what is constraining someone in life by who they judge” @Tiago Forte

“The more you sweat in training, the less you bleed in combat.” — @Samuel Gil


“Discipline is the proactive form of laziness, You create systems and routines to remove the need of reactive planning and thinking” — @AJA_Cortes

“Large number of young people break *any and all* imaginable rules that exist in society, profession, academia.” — @_lordmax_

“Life needs noise, when the rule is rule breaking, the reaction is socialism @mwilcox

“Be sure your dreams and goals are your own. Society has this funny way of corrupting your operating system.” — @TheHappyPhilosopher‏

“Culture is not your friend.” — @RedPillTrading

There are 29 folks that are there in the above list

@Steve Maxwell , @amirmotlagh , @Alexandroulykos, @lpolovets , @henocki , @L1AD, @DellAnnaLuca, @fortierfinance , @xochinla , @StatusQuont, @Melinda Byerley‏, @Shane Johnson‏, @MrMircea,@Unamusedchimp,@Akira,@existentialcoms,@Patrick Buggy,@mr_james_c,@paulg,@Mike Maples ,@egfalken,@mmay3r ,@amusechimp,@Desantis,@Tiago ,@Samuel Gil,@AJA_Cortes,@_lordmax_,@mwilcox

First principle thinking is going beyond metaphors, mental models and involves asking deeper ‘why’ question recursively till one can’t do it any further. To every such thought it is important to reflect on counterpoints so that the original thinking can be strengthened. As @VBrunsch points out it is important to do it actively. I don’t know whether Naval does such a practice proactively or not, who am I to ask or judge. I personally find this tribe helpful to challenge Naval’s thoughts for myself. When I think the thoughts Naval introduces, several times this tribe is source of an anti-thesis that help me move beyond admiration of Naval to appreciation of the thoughts and then eventually to add my own thinking to make my version.

Bhajan, Gita and Veda level thinking of CryptoAssets and Token Economics

Bhajan, Gita and Veda are hindi words when translated into english it stands for Metaphor, Mental Model & First Principles level of thinking.

As I was explaining blockchain, bitcoin, ethereum to few folks interested in ICOs I found it useful to explain it through above three levels of focus. Being a new space there is ton of information out there, folks end up mixing all different level thinking and it confuses more than clarifying.

Not just blockchain any novel or unprecedented topics it is useful to dial focus with the above depths of thinking.

To define something at Bhajan (metaphor) level is to ask if it passes the ‘Grandmother’ test for comprehension and ‘Chinese whisper’ test of repeatability.

Bhajan (Metaphor) Level

Gita (mental model) level is arriving at the right mental model for something that makes it tractable to address most aspects related to it. Farnamstreet blog is a treasure trove for thinking about mental models in general in life.

Gita (Mental Model) Level

In the Veda(first principle) level everything is questioned, sometimes recursively till one runs out of question and asks what has changed in the most fundamental way and how to adjust our understanding of current mental model.

Veda (First principles) level

99 % of the world operates at the Bhajan (Metaphor) level, < 1% like Charlie Munger attempt to learn the Gita (Mental model) level, a very tiny fraction amongst philosophers, scientists & certain type of entrepreneurs (Elon Musk) question in first principle.

Key point of my explanation to ICO interested folks was that enthusiasts can suffice with Bhajan (metaphor) level of understanding, most investors may operate at Gita(mental model) level but entrepreneurs and investors must operate at Veda (first principle) level & easily traverse all the the three or it may end up being too risky.

Few things that stood out for me when thinking about cryptoassets

  • We don’t have very good Bhajan (metaphor) yet in the cryptoassets world.
  • No other space like crypto where the changes across Bhajan (metaphor), Gita (mental model) & Veda (first principles) level are so interconnected and rapidly changing.
  • Regulator who eventually decides something to be legal is most often a Gita (mental model) level thinker and gets swayed by strong Bhajan (metaphor) movements. (Ex – Net Neutrality)
  • Veda (first principles) level thinkers are public intellectual or thought leaders, thought leaders usually have an agenda. So when following someone here have to make this distinction

There are many good thinkers out there in the crypto space and it is attracting some of the best thinkers towards it. Below is my mental map of the various type of thinkers that are out there. How would you revise it ?

Veda thinkers — Naval Ravikant, Nick Szabo, CryptoMedici, Zhao, Vitalik Buterin

Gita level thinker — Ari Paul, Fred Wilson, Andreas Antoupolous, Chris Burniske, William Mougayar

Bhajan level thinkers are most of the blogs and youtube videos out there.

Rajesh Jain

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