“First, to calculate the expected value of an investment don’t use the average (also called the arithmetic mean); use the geometric mean. The difference is simple, but powerful.

Imagine you have three investment options, each equally likely. They return 100%, 50% and 0%. The arithmetic mean/average/expected value is 50%: (100+50+0)/3. The geometric mean is 0%: cubic root of (100500). The Kelly criterion says don’t invest. Quite a different result.

Second, size your investment properly. Invest too much and bankruptcy looms. Bet too little, and your returns won’t amount to a pile of beans.

How do you calculate how much to bet? Kelly criterion says to bet more the greater your edge and the likelihood of success.

KC = W - (1-W)/R

KC = kelly criterion (the percentage of your balance sheet to invest) W = probability of winning R = win/loss ratio…”

Tom Tonguz

Professional venture capitalists use it…

Until next year,

You Man,

Max Cantor

There are a lot a cautionary red flags for you VCs and investors, and as I’ve been saying for some time: there’s a lot of them like that.

How many red flags ? Too many…

“The founders openly favored signing up the most physically attractive designers, saying they would be more appealing to clients.”

Courtney Rubin

“What had more important ramifications for the company’s future was Santos’ singular focus on press, with nearly all profits — at least in the early days — going to marketing.

CR

Yep…”design for all ethos.“

How “secretly” they get…

“Several months after the [VC] funding, Santos also stopped sharing details about the company’s health. According to five former employees, stats like how many hours were sold and how many designers they had signed up had been shared at weekly all-hands meetings. (In one of the company’s early offices, they had even been written on the wall, near the company’s core values: “Be the Solution,” “Dream Smart,” and “Keep It Fun.”) But according to ex-employees, this stopped suddenly in 2016, and the all-hands meetings themselves became much less frequent. “Everything got a lot more secretive,” says one ex-employee.

CR

Sure, seniority counts…backwards.

“Soon, not a single staffer from the early days remained.

…By employee estimates, 75% of the leadership team that started in 2018 didn’t end 2018 with the company.”

CR

Nothing wrong with laying off staff while you’re living large…

“On June 21, Santos — sitting alone under a crystal-accented chandelier in the office — put three-quarters of the company on what was supposed to be temporary unpaid leave, maybe two weeks, he said, according to former employees who were there at the time. (The other quarter of the company stayed on for minimum wage.)

By July 22 [2019], most employees had gone a full month without pay — meanwhile, Santos’ husband Instagrammed a photo: A six-bedroom, $1.6 million home the couple had just bought in East Hampton, complete with two ponds, a tennis court, and a Jacuzzi.”

CR

“Design for a client’s workspace,” [Santos] wrote, adding that he always did his best thinking in nature. “For all my obsessive planning, preparing and orchestrating, life unfolds as it will,” he wrote. “Almost entirely out of my control.”

CR

WWID ? What Will the fleeced Investors Do ? That money ain’t coming back…

60%+ of this blog’s readership are people that work in technology: engineers, product developers, editors, etc. I thought it would be useful to link to Y Combinator’s top alumni company list of all times (by valuation).

When you click on the link, besides the names and profiles of the listings, there’s a link to that company job webpage. So, if you’re looking for a job, apply. Good luck, readers !

I’m just going to list the first 20 on that list:

1. Stripe
2. Airbnb
3. Cruise
4. DoorDash
5. Coinbase
6. Instacart
7. Dropbox
8. Ginkgo Bioworks
9. Gusto
10.   Flexport
11.   Rappi
12.   Brex
13.   Reddit
14.   Gitlab
15.   PagerDuty
16.   Checkr
17.   Segment
18.   Docker
19.   Scale
20.   Faire

Sometimes I throw my counter-parties a bone [no sweetener] to see if they bite.  If they don’t bite I go back to square one. What’s the difference between a bone and a sweetener ? A sweetener is something you cannot take back. A bone, if not accepted, leaves you under no obligation than you were before you offered it.

Case in point of a brilliant negotiator: Rex Tillerson, ex-Exxon CEO known to employ “temper tantrums and silent stare-offs” {WSJ) “Anger is a strategy, not an emotion.” Tillerson avoided “projecting American superiority” when negotiating in far-flung places, he was “keeping it real” avoiding the emotional factor that would erode fair dealing.

“Keep your eyes on the prize”, “Negotiating is a lot like dating”, you often hear. In dating, women make the man prove himself.  Is that what you need to do when making deals ? Make the other party prove themselves ? It depends. If you want an emotional decision, make them prove themselves, but if you do not, stay away like hell. Patriotism or nationalism are not emotional motives to be triggered lightly. If you deal with the Russians or the Chinese and evoke nationalism, you quite possibly pulled the wrong lever. The host is always right in the host country.

At the negotiating table, everyone needs to be able to tap into their resources. If where [they] are right now is a pain point, I encourage them to let it out. “I’m here to help.” I make it sure my counter-party knows that. If I’m dealing with a party that’s so white-shoed they’re sparkling, stick a fork in it and you’re done. People “dry as a dead dingos donger” are not my favs.  I like to build people up. If someone looks like they’re helpful but unsure of themselves, I want to see them empowered. In negotiations, if you empower people, you may have already won.