Happy Friday.
Knowledge
Wrongful Convictions - The Canadian Startup
As it currently operates, the Canadian start-up scene does not support startups. It suffocates them. In many respects, Canada is a protectorate to the United States. What begins south of us invariably comes to us much later. Canadian's tech ecosystem is no different.
Here are some reasons why:
Angels
Start-up scenes need Angel investors to accelerate. Without fast-moving, pre-institutional capital it is hard to have ideas move in an impactful direction. Angels, however, are not all created equal. Like most things, performance is zero-sum. You are either good or you are bad. Canada suffers from bad angel investors.
Good Angels are playing an infinite game. They are contributing to a community; not in order to win something definite, but to earn the right to keep participating in the scene. They play the infinite game of growing their status within a growing community, which is a very good thing.
Bad angels waste founders’ time a lot. They’re always asking for something; either for P&Ls and business plans, or suggesting introductions that are clearly for the Angel’s social benefit rather than for the founder’s. Bad Angels care a lot about milestones.
Good angels are built from large exists within the community of start-ups. Angels who’ve made their starting nest egg from founding or growing a startup of their own understand the infinite game because they’ve played it. And they want to keep playing it because they like it. Angel investing is how you continue to do this.
Canada doesn't represent a community of large exists. As a result, it is missing the ingredients that create an ecosystem that fosters large liquidity events (i.e. big exits for start-ups). Inevitably, communities that lack liquidity events become obsessed with obtaining them. They end up locked into an environment where bad angels continue to stifle the chances of liquidity events. The Canadian tech ecosystem has fallen deep into this negative feedback loop.
Deal Speed and Founder Leverage
The most visceral difference between the Canadian startup investing scene versus the Bay Area is speed. It is not an incremental difference: they operate on entirely different time scales. Bay Area startups can go from initially announcing their pre-seed round to closing an oversubscribed round of SAFE notes in 72 hours. In Canada, you’re generally lucky if you can get a deal done in 3 months.
Why is this bad? Because start-ups optimize for how to get funded. If seed deals take 3 months, founders will build companies that look good under that microscope. They optimize for determinate games that show definable wins given the time horizon. They strive for measurable and deterministic outcomes. This is bad because what founders should be focusing on is open-ended growth. Start-ups are a bet that the future will be radically different from the present. They need lofty goals to discover what that future is. Rapid deal speed gives founders room to find exactly what kind of future they want.
Canadian tech is stuck playing definitive games. Lasting innovation is built in the infrastructure that surrounds innovation. If Canada wants to re-create the Bay area, it must re-create its infrastructure.
Wisdom
Goals are for Losers
I mean this literally. If your sense of achievement is tied to hitting some distant milestone, every moment you are not there, you are a loser. If you fail to achieve the goal, you solidify yourself as an even greater loser.
What should be put in place of goals? Systems.
Using nudges to shape our choice architecture is a system. Automating routines and low-priority choices is a system. Surrounding yourself with the right people is a system. Using systems instead of goals redefines how we think of ourselves. Every day we follow our systems, we are a winner. Like habits, systems represent things you do consistently. They are the manifestation of your values, beliefs, and visions.
For example, a runner might set the ambitious goal of running a marathon in under three hours. Instead, the person could create a system that is built around training five times a week and logging the result of each session. Every day you train you are a winner.
Don't be a loser. Use systems instead.
Goal-oriented people exist in a state of continuous pre-success failure at best, and permanent failure at worst if things never work out. Systems people succeed every time they apply their systems, in the sense that they did what they intended to do.
- Scott Adams
Insight
Infinite Leverage - What is it?
We are currently living in an age of infinite leverage. Our actions can be multiplied a thousandfold. The rewards for genuine intellectual curiosity have never been higher. Leverage has historically come in the form of Capital and Labour. We now have a third type of leverage: Code (or software). Efficiency is being as leveraged as possible so you can have the greatest impact with the least amount of effort. With a leveraged worker, judgement is far more important than how hard you work.
Leverage either requires permission or is permissionless.
Labour
Labour leverage is: other humans working for you. It is the oldest form of leverage, and actually not a great one in the modern world. Managing other people is incredibly messy.
Cost = wage.
Permission = Somebody has to decide to follow you.
Capital
Every decision you make gets multiplied by money with capital as its form of leverage. Capital scales and is a more modern form of leverage. If you are good at managing capital, you can manage more capital much easier than you can manage more labour.
Cost = debt, or hard work to accrue enough capital.
Permission = someone has to give you money.
Code (or Software)
This is the most interesting and most important form of leverage. It is products that have no marginal cost of replication. This is a new form of leverage. This was only invented in the last few hundred years. It started with the printing press, accelerated with the use of broadcast media and is now abundant with the internet.
Code and software applications allow you to multiply your efforts without the need to involve other humans or receive money from other humans.
Cost = nothing.
Permission = permissionless. They don’t require somebody else’s permission for you to use them or succeed. Coding, writing books, recording podcasts, tweeting, YouTubing - these kinds of things are permissionless.
With the new form of leverage, the gap between the levered and unlevered will only increase. Methodically apply, increase, and compound leverage until you sit on a mountain of levers.
Tweet
Today
Random Find
This is in Danish.