Power of Potential - Zero Man
"you know what potential means?"
“Ain’t done nothing yet.” (Hat Tip to Brent Weeks)
Potential is a wonderful thing, it is the promise of something exciting , almost un-quantifiable. People are fascinated with potential, valuing it more than expected value. One of the clearest examples of this is the NFL draft, where veteran proven players are often traded for highly speculative draft picks, because you could get the next Peyton Manning, if only. The strange thing about potential, and draft picks, is football is a highly quantifiable game, and over time you can see the average value of those high draft picks, and about as often as you get Peyton Manning for the very expensive top pick, you can get Russell Wilson or Tom Brady for much less cost and risk, or even trade that high pick for a proven quantity reducing risk even more.
The lure of the golden ticket remains strong though, and people get quite excited about the power of potential. Its exciting when you are looking at football, hot new start-ups and more. The best predictor of future success is past success, in football, in start-ups, almost everything.
So knowing this, should you scorn potential. No, potential is exciting, and can pay off, but don't bet the farm on it. You should be taking asymmetric risks but you should make those risks asymmetric in your favor.
When investing, look for things unfairly discounted, aim for the margin of safety. Look for the team that has done it before.
For yourself, what does it mean? It means start to get out and produce. Bill Gates built a lot before he started Microsoft. Mark Zuckerberg was a great coder who used it all over his life before Facebook. Reid Hoffman, worked at Apple, and Paypal before he founded linked in.
Find what you are aiming to do, and start to produce things that help you get there. You build skills, and a track record, you become less risky as an investment for an employer and an investor, and you also have learned by doing, one of the most effective ways to learn.
So it is great to have potential, but if you do, go out and do something.
“Ain’t done nothing yet.” (Hat Tip to Brent Weeks)
Potential is a wonderful thing, it is the promise of something exciting , almost un-quantifiable. People are fascinated with potential, valuing it more than expected value. One of the clearest examples of this is the NFL draft, where veteran proven players are often traded for highly speculative draft picks, because you could get the next Peyton Manning, if only. The strange thing about potential, and draft picks, is football is a highly quantifiable game, and over time you can see the average value of those high draft picks, and about as often as you get Peyton Manning for the very expensive top pick, you can get Russell Wilson or Tom Brady for much less cost and risk, or even trade that high pick for a proven quantity reducing risk even more.
The lure of the golden ticket remains strong though, and people get quite excited about the power of potential. Its exciting when you are looking at football, hot new start-ups and more. The best predictor of future success is past success, in football, in start-ups, almost everything.
So knowing this, should you scorn potential. No, potential is exciting, and can pay off, but don't bet the farm on it. You should be taking asymmetric risks but you should make those risks asymmetric in your favor.
When investing, look for things unfairly discounted, aim for the margin of safety. Look for the team that has done it before.
For yourself, what does it mean? It means start to get out and produce. Bill Gates built a lot before he started Microsoft. Mark Zuckerberg was a great coder who used it all over his life before Facebook. Reid Hoffman, worked at Apple, and Paypal before he founded linked in.
Find what you are aiming to do, and start to produce things that help you get there. You build skills, and a track record, you become less risky as an investment for an employer and an investor, and you also have learned by doing, one of the most effective ways to learn.
So it is great to have potential, but if you do, go out and do something.
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