Last week, I had the chance to catch up with Brad Feld over lunch while he was camped out at Union Square Ventures. It was great to finally sit down and chat with Brad face to face, as we'd played "email tag" far too often in recent months. We missed each other when I was in Boulder in March, and then I couldn't get free in July when he was last in the city.
Alas, good things come to those who wait and we riffed about myriad topics in between bites of delicious sandwiches at 'wichcraft. One of the topics we touched on was a recent post Brad made on AskTheVC:
Q: What is the one common element you’ve seen in successful VC’s?
A: (Brad) This is an easy one. Before the snarky ones in the crowd answer “nothing”, I’d suggest that its “optimism.” I have yet to meet a successful VC that isn’t optimistic about the future and the companies he is involved in. I particularly like the Wikipedia description of optimism, which is “the overarching mental state wherein people believe that things will more likely go well for them than go badly.”
We were in agreement that Optimism is a quality universally required by successful venture capitalists. But what about public equity investors like yours truly? Is SKEPTICISM the appropriate analog for public equity investors?
- Skepticism
- skep·ti·cism
- Pronunciation:
- \ˈskep-tə-ˌsi-zəm\
2 a: the doctrine that true knowledge or knowledge in a particular area is uncertain b: the method of suspended judgment, systematic doubt, or criticism characteristic of skeptics
There is certainly an argument to be made for skepticism as a necessary trait of successful public equity investors. Company management will always tell you things are going great, until they're not. The next time a management team signals problems BEFORE a thoughtful analysis of the fundamentals warns us will be the first. Aspire for the best, but prepare yourself for the worst.
But the more I think about the idea the less convinced I am that skepticism, by itself, fits the bill. I also think successful public equity investing requires pragmatism, decisiveness and circumspection.
What do you think? And what qualities do you believe all investors share? I can think of many qualities that successful venture, private equity and public equity investors have in common.
bradfeld vc optimism traits skepticism investing publicequity woodrow enterprise irregulars
Decisiveness is the hardest to be sure; and I think it's what separates great investors from good investors. I'm of the mind that the key to consistent decisiveness is a belief in your individual investment process. Institutionalizing a process from screening to diligence to buy/sell discipline is critical to navigating the markets effectively. I get better at it as I get older, but I'm not sure you ever perfect it.
Posted by: Jason Wood | November 22, 2007 at 10:44 PM
Jason - ditto - it was great to finally share a sandwich and hang out after all those emails.
For your readers - my "disclaimer" is that I'm not a public market investor, have decided that I have no interest in playing the stock market, and as a result don't own any public stocks directly (I have money with other managers who own plenty of public stocks, but in those cases I'm investing in the managers.)
The traits of the "managers" that are the most effective are consistent with skepticism, pragmatism, decisiveness, and circumspection. Interestingly, decisiveness is the one that I usually find the weakest (or most lacking) - and it seems to correlate with a lot of inappropriate reflection (e.g. I should have held that stock longer; I should have sold sooner.)
The great ones are circumspect about the past and use it to inform their future, but it doesn't seem to have any linkage to decisiveness.
Posted by: Brad Feld | November 22, 2007 at 09:43 AM