One of the best investment theses of the past decade was: Software is Eating the World.
If you invested in software, you did quite well.
And within this thesis were multiple other ones. Take for example, “the shift to the cloud”. Investing in AWS or Azure (or rather, Amazon & Microsoft) was also incredibly lucrative.
Before that thesis, there was: invest in the smartphone home screen. See Uber, Airbnb, and Instacart.
Before that it was: invest in Web 2.0. See Google, Facebook, Netflix, etc.
And before that it was: invest in companies building computer hardware and websites: See Apple, Cisco, Amazon, and more.
These groupings are reductive, but that's the point. If you're riding a strong enough trend, then you're going to be able to be reductive because nuance is a rounding error. You have a higher margin of safety. Mistakes get washed away.
Luke Gromen has this great example on the Grant Williams Podcast of how he examines big trends and their narratives. He evaluates the strength of a narrative based on whether the average person on Wall Street would be confident enough to go to their boss or client and pitch the story. You want the narrative to be easy to say, highly digestible, and importantly — directionally accurate. Those are the three magic ingredients.
To put in another way: it should be easy to sell, easy to buy, and right.
You want the narrative simple enough so that the speaker is confident sharing it; you want the narrative straightforward enough that the listener can easily understand it; and the narrative also needs to be supported by a mountain of nuanced debate and discussion that often happens behind the scenes.
That's how I think about Deep Currents — the deep trends driving serious change, similar in strength to the movement of our oceans and the tectonic plates. It rightfully invokes feelings of overwhelming power and inevitability. They're the things you can't stop once they start.
This is what you should be investing in, especially if you're in an asset class marked by illiquidity and long holding duration. And this is what you should be aligned with if you're building a company. Otherwise you'll become squashed by bigger waves.
Startups are notoriously impossible, so why not give yourself the best chance possible? Ride the bigger wave. It will eliminate many of your mistakes and will carry you further than you can paddle.
And if you're really good, your own momentum will likely create an even bigger wave.
All you have to do is find it and ride it.
Did Nike benefit from this great wave of fitness or did they create it?
It’s both. It was the TIME Magazine article and book on jogging, but it was also because Nike made it cool.
— Acquired Podcast on Nike
Yes, Jeff Bezos is a showman. Some of his techniques may represent a shoot-from-the-holster approach and, as is always the case with successful start-ups, there was a certain amount of luck involved. As Kaphan noted in his email to me, “Amazon’s rapid growth covered over a large number of sins. Given the magnitude of some of the mistakes, I think the company’s survival is at least in some significant part due to luck.
— Early Amazon Employee
But that's the point. If luck is always going to be involved, why not align with it, channel it, and let it help you?
The outside world can push you into Day 2 if you won’t or can’t embrace powerful trends quickly. If you fight them, you’re probably fighting the future. Embrace them and you have a tailwind.
— Jeff Bezos
