- On my 59’th anniversary on this planet, here are 59 things I have learned. Many of which I now wish I had learned earlier in life.
- The Obstacle is the Way
- Every great Hero had a guide.
- Maintain a bias toward action.
- External things can’t fix internal issues.
- Happiness is a choice
- Apply the Eisenhower Box to my To-Do list.
- Maintain a “not do” list
- In our journey, we never arrive.
- You only have one problem in this world. What is the next right action.
- The best (anything) is a paid for (anything).
- Between procrastination and burnout is Flow. Find the flow.
- Our minds are free and clear. Unless we take on debt
- Value what is under your means and you will always be satisfied.
- Value giving more than receiving.
- Explain complex topics to a six year old and everyone will understand.
- We feel fast and think slow. Give yourself time to think.
- Don’t believe everything you think.
- Deal with it. Don’t deny it.
- Just keep living.
- The actions you choose are your journey. Thoughts and emotions are the weather.
- Endless pleasure becomes it’s own form of punishment.
- the only thing truly in your power is your own reasoned choice.
- What is Happy? absence of attachment or desire.
- Formula for the good life? Acknowledge limited information, values and biases. Make the best decision you can. Detach from the outcome. Repeat until dead.
- When someone triggers you, respond with “When you…, I Feel…, because my mind tells myself a story that…
- Self imposed prisons include anger, resentment, envy, regret.
- You don’t control the world around you, only how you respond to it.
- Practice the Pause
- Stay Curious
- Actions reveal values
- I create all meaning in my life.
- The brain is a pattern matching machine. Pay attention the patterns you train it with.
- Make your bed in the morning so when you come home regardless of the quality of your day, you will see a success.
- Keep a pen and paper by your bed.
- Non-action is an action.
- Kindness is never a bad response.
- Understanding > being right.
- Creation > Consumption
- What if the opposite were true?
- Stories trump “facts”
- Play to your strengths.
- Separate the message from the messenger.
- Simplification > Optimization
- How many shit sandwiches are you willing to eat to get what you want?
- Get comfortable with probabilistic thinking.
- Do you want to be happy or right?
- Discard weasel words from your life.
- When triggered, ask one question: Is my reaction helpful?
- You will never regret taking the most favorable view of a situation.
- Having Judgement is essential, Being Judgmental is a choice.
- Have strong opinions, weakly held.
- Practice the Hudson Bay Start.
- Accept all bids for connection.
- Maybe what we want sucks.
- Your mileage may vary.
Category: Musings on a Well Lived Life
All Martin’s musings on how to and what a well lived life is and means.
9 Everyday words that F*ck up your life.

For many people these days, life seems F*cked. While your life may in fact be f*cked, I know without ever meeting you that your words are compounding the problem. How you TALK about life makes all the difference in how you EXPERIENCE life.
Here’s some self-talk that blew through my brain recently: “I am stuck. Nothing really bad has happened, I am proud of the good things in life, but then one day it all got stuck somehow. I should try to not regret what is or was, yet I regret so much. I need to make some progress. I can’t go on like this. I must get going again, but can’t figure out how. What now?”
What am I supposed to do with that tornado of shit? Some words drive the action forward. Some words make us total lethargic couch potatoes. When life seems F*cked and you are stuck, your language is likely full of these couch potato words (like that last paragraph) that f*ck up your life even more.
A couple years ago, my friend, Dave Asprey, the father of Biohacking, introduced me to the concept of Weasel Words. Weasel because they are noncommittal. I was surprised to discover that some of my own seemingly harmless words were, at times, imprisoning me in a Cul De Sac of inaction and indecision. I am not talking about the stuff that the asshole in my head spews. I am talking about deviously ordinary words many of us mindlessly slip in every day. Especially when we believe we are in a positive mindset and making progress, these little devils can sap the life out of everything. They are insidious because we are unconscious of their negative power. By becoming conscious of these words and minimizing their use, I got out of the Cul De Sac of inaction and you can too.
Here are nine everyday words to minimize, especially when you feel F*cked. These words sabotage your life by destroying your agency. Your rational ability to choose which actions will make up your path through life. As you become conscious of these culprits and start to weed them out of your life, you will notice a visible change in your ability to get going again. Action will become Effortless. You will also notice a change in how you feel about yourself as your confidence for action grows. After describing how they impede action, I will suggest some replacement words and share a couple of hacks I have used to exorcise these villains from my life. Here are the culprits:
- Was / Is / Are / Am
- Need / Have To / Must
- But
- Try
- Should
- Can’t
- Proud
- Good / Bad
- Regret, could have
Becoming aware of my own use of these words has been an important part of my waking up and becoming conscious. When I find myself using some of the worst offenders, I endeavor to observe rather than indulge the judgemental thoughts (I just had to rewrite that from “try not to be judgemental”). The words are neither good nor bad in and of themselves. The issue is in the context and the intention behind their use as opposed to other words that could be used. In the political sphere, a person is usually trying to dodge a direct question purposefully with misdirection. We have all seen that. On a personal basis and between people, we tend to use weasel words to achieve what seem like very valid goals including:
- Avoidance of pain to self or others. The ego doesn’t like to fail and is unsure of outcomes. So it says things like “I will try.” Success is then the trying not the doing. Lowering the bar. This is basically a natural defense mechanism. So it is when we beat around the bush with bad news to a friend. We are “trying” to spare them pain. But many times the pain just gets elongated, delayed, or suppressed.
- Avoidance of responsibility. Again, ego doesn’t like to fail or be responsible for anything that it could fail at. So it shirks responsibility at every chance. “I” will do something is hard, “we” will do something shares the responsibility around and gets off my shoulders alone. So do politicians. They want to please as many voters of different stripes as possible so saying platitudes keeps them out of hot water. We are so used to this behavior from politicians that in many ways an in your face guy like Trump is a refreshing alternative to many people.
- Narrowing of alternatives. The ego also doesn’t like the paradox of choice. Too many choices means hard work will be required to decide between the alternatives. Not only could you choose incorrectly leading to pain and failure (see above), but the work to make the decision is difficult in an of itself. So we say we “can’t” or “Have to” or “Need to” do something. That means it is an imperative with no other alternatives. The only way. The narrow path can seem attractive versus the hard brain work of sifting through alternatives.
Recognition that the ego is just doing its job to protect me from pain and increase the chances of success has enabled me to be much less judgemental of my own use of these words. When encountering my own use of a weasel word I ask myself
- Is this word phrasing serving my higher values (or just my ego/fear)?
- Is there an underlying issue which my ego is trying to avoid here?
- Is there a way to reframe the sentence which is more in line with my higher values?
My personal reason for becoming aware of these words and working to get them out of my vocabulary is because they typically are impediments to action, destroy motivation, debilitate and discourage me from moving forward in life. I have decided that brain energy spent on them is generally wasted and I would rather spend that energy on actually accomplishing something rather than the avoidance.
“The things you think about determine the quality of your mind. Your soul takes on the color of your thoughts.”
Marcus Aurelius
I know what you are thinking. You are thinking “I am a badass! I never get stuck!” or “I like those words, they make me feel all safe and comfortable (on the couch).” Or my favorite: “Those words accurately describe my reality! Are you telling me to deny my feelings?”
When I was a kid, every time I came within 3 feet of a cupcake I wanted to eat it. It was usually my mother slapping my hand away. “You can’t have that!” I hated my mother then. Of course, I COULD eat the cupcake. My mouth and stomach are working just fine, thank you. SHE was the only one stopping me. It was her fault my life was f*cked.
Today it is my own brain slapping my own hand. Do I hate myself? When I used to say to myself “you can’t eat the cupcake,” yea, I did hate myself on some level. My nervous system channeled my mother’s voice along with the related rage. Today, I have changed the words and the experience is completely different. The words I now say to myself are: “you CAN eat the cupcake if you want AND there will be consequences. Would you rather have the cupcake or the consequences?” This slight change of wording changes the experience completely. My mother is no longer involved. It is not about the past, but the present. From “my life is f*cked”, to “I have the agency to choose how I experience life.”
My personal goal is to reduce the use of these words by 50% next year. As with “Do This” posts, your personal mileage may vary. Your goals may vary. Everyone though can benefit from a little more consciousness in relation to our vocabulary and how it reflects the stories in our heads. Be aware. Be precise. Be awake.
Let’s look at each Weasel Word in more detail.
Was / Is / Are / Am
“Steering perception? I am! Inviting contradiction? I am! So this is the way the game is played. I am I!”
Queensryche
The other day my 5 year old said,
“Daddy, I am hungry.”
“Hello hungry, I am daddy.”
“No, daddy, I am really, really hungry!”
“Oh, I understand. You are Harper and you FEEL hungry.”
A scowl was on Harper’s face.
Check that. Harper scowled.
When we say “I AM” we raise the stakes to the existential level. What AM I without the thing I just said I AM? The core question is, does this particular event really need the stakes raised so high? Do you really have a gun to your head? 99.9% of the time the answer is no and raising the stakes creates additional stress that servers very little purpose.
All forms of “To Be” can sabotage us in two very different ways: Limiting Options and Giving Up Agency.
- Limiting Options. When we say “I am X”, we are limiting the universe that is ourselves to one thing, “X”. The subject, “I”, is at that moment only ONE THING, “X”. Regardless of if we judge “X” to be a good or bad thing (more on that later), by attaching it deeply to our identity, we ignore all other aspects of our identity at that moment. We make ourselves smaller. We are also constraining the universe of possible actions to “X”. Life becomes smaller still. Life can begin to feel like a never-ending game of whack-a-mole. I am hungry. Eat. I am tired. Sleep. I am bored. Open Facebook. Change becomes possible when we become conscious of options, lots of options. “I am” limits options.
- Giving Up Agency. When we assign part of ourselves to something or some else, we can unconsciously give up. Give up responsibility. Transfer agency from ourselves to the thing or another person. When Harper said, “Daddy, I am hungry.” The explicit implication was, “and you need to solve my hunger problem.” There she stood, in a kitchen full of food within arm’s reach, expecting some else to feed her. Of course, I fed my 5-year-old. When I tried it with my wife, she pointed to the refrigerator with “I just got some more turkey that you like.” Despite my best puppy-dog eyes, she was having none of the transfer of agency.
- Agency is also transferred by the passive voice. The passive voice is evasive and changes the subject of the sentence from ourselves to someone or something else. The passive voice can let us off the hook, direct attention elsewhere, avoid responsibility for action. In “A scowl was on Harper’s face”, the “scowl” is the subject and “Harper’s face” is the passive object being acted upon. In “Harper scowled,” Harper is the active subject engaged in the action of the verb “scowled.”
When you find yourself sabotaged by some form of “To Be”, try these two hacks
- Use “Experienced” instead. “I experience hunger” has much less existential dread than “I am hungry”. Both are correct. Choosing the one which embraces more options, invites more possibilities will unF*ck your life.
- Switch to active voice. “Harper scowled,” allows her the freedom to stop scowling or continue. It is her choice. She has agency.
If “To Be” was a family member, it would be your alcoholic uncle who lost his job, divorced your aunt, got addicted to opiates, rode his motorcycle across Africa, and made $10M in the stock market last year. “Hello, my name is Ned, I am an alcoholic.” Yes, and so much more.
Need / Have To / Must
“Don’t believe everything you think.”
Byron Katie
Beware of “inordinate attachments,” St. Ignatius of Loyola
Harper continued,
“I need something to eat.”
“I have to eat lunch right now!”
“I must have a yogurt and a sandwich, or I will die!”
I started to say “I bet you…”, but caved and made her lunch.
I have fasted a couple times for a week or more. I have 100% confidence that my daughter would not die from starvation in the next six hours. Saying “have to” raises the existential stakes on the trival. Makes the trivial existential. Is that what you really want to do?
These words sabotage us by removing agency, proposing only a single solution and making the temporary existential.
- Removing agency. When we say we “need” or “have to” do something, do you really have any choice? Someone or something has made the choice for us. For Harper it was the feeling of hunger. Hunger removed Harper’s agency to make any other choice than to eat. I could think of a million things to do in the next hour, Harper could only think of one, she had given up agency.
- “Must do” is a similar cousin. There are very few things you “must do”. Breathing. Beating your heart. the truly existential stuff. When you tell yourself you “must do” something, you are removing agency, removing choice. It seems like there are no choices. But there are always choices. Even on eating. You could fast. And breathing. You could hold your breath. Don’t let your language steal your agency.
- Single solution. The verb in these sentences becomes the one and only solution to the problem. It becomes an “inordinate attachment”. Of all the options in the world, saying you have to do X limits them to a single solution.
- Make it existential when it likely is not. Our minds pay special attention to anything that might kill us. While this was very helpful when we were being chased by lions, there are very few truly existential threats in our world today. Yet we create them every time we use Need, Have To, or Must. These words raise the stakes to the existential level. Do you really want to raise so many things to the existential level so often? Why? Do you really need that extra level of vigilance for an afternoon snack?
When you find yourself sabotaged by Need/Have To/Must, try these words instead:
- Pause. Whenever you find yourself ramping up the existential stakes, pause. Ask yourself in that moment if that is really what you want to do. Is this really a moment of crisis? If it is, fine. 99.9% of the time it likely will not be life or death.
- Replace with “want to”. “I must eat,” is false and disempowering. “I want to eat,” is true and empowering. I am experiencing hunger and want to eat. I can eat now or later, yogurt, a sandwich, anything. I am in no danger of dying and my nervous system is not on high alert. I have not shot my body full of stress hormones that are not necessary.
- Replace with “get to”. I Need To eat implies an existential crisis. I Get To eat is an open opportunity. Opportunities are experienced differently by the nervous system than threats. Make your experience and opportunity not a threat.
If “Need / Have To / Must” were a family member, it would be your 30-year-old cousin with a dozen failed relationships. “I must have the perfect man.”
But
“There is nothing either good or bad, but thinking makes it so.”
Shakespeare
My college daughter came through the door with her suitcases and dropped them with a huff. Home or the summer.
“Hi Finn! How are you?”
“I am great. Watched a movie on the plane. But I am really tired and hungry. You have anything to eat?”
Great, another hungry one.
“I am glad your trip went well and I hear you are hungry. I make a mean yogurt and sandwich plate. How does that sound?”
“Oh, that sounds good. But I was really in the mood for pasta with butter sauce.”
Frowning a bit I said, “Ok, i will make you pasta with butter sauce.”
While I knew that Finn liked the sandwich plate AND wanted pasta instead now, my nervous system felt the rejection when she said “but.” The nervous system feels the disregard for everything before the “but”. In order to not tilt myself, I had to so some mental karate to reframe the conversation myself. A situation that could have been avoided if Finn had not used the “but” in the first place.
“But” sabotages your life by completely negating whatever was just said before it. We often want to agree with people to “be nice” while using the “but” to express our true feelings.
- Hides a negative emotion to “be nice”. When someone says something we disagree with, we will often start out the reply by agreeing with them to be nice. And then we throw in the “but.” When I heard Finn’s “but”, i frowned. My nervous system took it for exactly what it was, a total repudiation of everything else that was just said. Everything before the “but” is discounted when you say it. While Finn was trying to be nice, the “but” sabatoged her whole objective.
- Denies that BOTH are often true. I know Finn likes yogurt and a sandwich. Yet that day she was feeling like pasta. That is fine. I can handle that. I want to make her what she is in the mood for. I am 100% certain that my suggestion “sounds good” AND she wanted something else. Why say “But” which triggered my frown when BOTH were true?
I have tried this for the last three years whenever I feel a “but” coming on and it works miracles.
- Replace “but” with “and.” I have yet to come up with a situation where “and” is not a better word. “Oh, that sounds good AND I was really in the mood for pasta for pasta with butter sauce.” No trigger. My suggestion was affirmed, she does like yogurt and sandwich, AND she wants something else. No problem, off to the kitchen.
If “But” was a family member, it would be your well meaning grandmother at Thanksgiving. “The turkey is nice, but a bit dry for my taste.”
Try
“Do. Or do not. There is no try.”
Yoda
My kids found some videos online of other kids having fun on huge tire swings hung from massive trees. We have some big trees in our yard, so they asked me
“Can we try a tire swing in our yard?”
“Yes, I will build us a tire swing.” I replied.
When it was all put together strung between two massive pine trees in the side yard, they asked “Can we try it?”
“There is no try, only Swing or No swing.” I replied.
“Try” can feel like a safe word. “Trying” can feel like taking action, But it is not. It is the opposite of action.
My 10 year old, Madison asked, “Dad, why is “try” a bad word?”
“I didn’t say it was a bad word. It is just often the wrong word to use. It is imprecise. It doesn’t answer the question at hand.”
“But sometimes I say “try” when I am scared to do something.”
“Yes, I understand and yet you still have to decide later about what scares you right?”
“Oh yea, I get it now.”
Score one for Dad.
Many times when we say “try” we are actually uncertain of the outcome, or our ability to succeed, so our brains want to hedge. While this can feel like a “safe” strategy to avoid pain, it does not move us forward in any meaningful way.
“Try” sabotages us and fails to move action forward in two ways:
- “Try” gives your brain a pass on the real action. All actions have potential consequences. The ego wants accomplishments without consequences. To tick off tasks. To have “wins”. Your brain gives the ego these “wins” by confirming that your life is moving in the directions of your beliefs and values. When we make commitments to do something our ego registers the “win.” A commitment “to try” can FEEL like a win, when no actual action is being committed to nor consequences risks. “Trying” has no consequences. It is 100% inaction. It is a liminal state. In between. Not forward or backward. “Try” is simply another loop around the Cul de Sac of inaction.
- “Try” presupposes failure. “If you tell yourself that you’re going to try staying on diet or try to read the book, you’ve subconsciously already planned to fail.” my friend Dave Asprey points out. With failure imminent, the action is effectively prohibited. Who wants to take action with failure all but assured?
When you find yourself using “try”, take one of these three concrete actions instead.
- Decide immediately. When my kids asked could we “try” a tire swing in the yard, my answer was “Yes I will build one.” What if I said I would “try to build one”. The kids might have liked that answer, but I was not committing to ANYTHING. If you are ready to “try” something say exactly what action you will or will not take. Instead of “try” say “I will” or “I won’t.”
- Break it down into small steps. If the thing you are thinking about “trying” is big, hard, expensive or somehow you need more information to decide, break it down into small steps which you are able to accomplish with an “I will.” With most decisions, there are small steps that can be taken to make progress toward the big “I will or I won’t.” If I was unsure about the tire swing, I would have said “I will research tire swings.” After collecting the research information I would be in a better position to decide on the larger project. Commit to the small steps you can.
- Postpone the decision. Sometimes you are not ready to make a decision and there are no small steps that make sense to take immediately. Rather than say you will “try” something when you plan to do nothing, just say you will postpone the decision. For example if my kids had asked me for a tire swing in the dead of winter, I might have said, “Let’s decide in the spring.” A delay with a concrete timeline is always better than the open ended “try.”
If “Try” was a family member, it would be your 30-year-old bachelor nephew with a college degree working for minimum wage at a call center. He has been “trying” to get his life together since graduation.
Should
I mentioned the tire swing project to my wife.
“Yea, you should do that.” said she.
“I am going to hang it up next week,” said I.
“Ok, well I get to do the laundry now.” she continued.
“I am jealous that you get to do the laundry today, I get to mow the lawn.”
There are “shoulds” around us all the time. From ourselves and others. When my wife said I “should do” something, I had the opportunity to agree with the “should” and continue the inaction, or decide immediately. I decided immediately and told her when I would be doing the swing. Our lives moved forward. If I had agreed to the “should” we would have been stuck in the cul de sac. It sounds like we “should” do something, but when will we decide? Why prolong the inaction?
“Should” sabotages us in a similar way that “try” does. It delays action, removes agency, implies guilt and provides false confidence.
- Delays action. It sounds like action, but it is not, similar to ‘Try.” Saying you “should” do something is not committing to any action at all. Only to the intent of some future action.
- Removes agency. Personal agency is when you make your own decisions. By saying you “should” do something, you give up your own decision ability. Who will decide then? It is purposefully unclear. You have removed your responsibility to decide (agency) by stating the obvious, that you “should” decide at some point.
- Implies guilt, shame. There are heaps of guilt and shame when I don’t do things I feel I “should” do. Why set yourself up for that pain? Why compound the inaction with guilt and shame?
- Gives false confidence. Should can come with a huge helping of self righteous superiority, without having actually done anything. I said I “should” do it, and that feels like action, so I am better than you because I “should” do something. Should can feel like action while letting you off the hook for any actual action. This false confidence will blow up further down the line when the action must be decided. It is a short term salve.
- Reveals a Value Gap. “Shoulds” are not about the events or actions being contemplated. They are about the stories in your head about what you value in life, your fears of a moral gap between what you believe and your fear of the uncomfortable truth that what you “should” do may not turn out, may be hard, may have unforeseen consequences. My values tell me I “should” do something, yet my fear tells me to be scared. Who wins? Should opens up the gap. Notice it. Resolve the gap by deciding between the value and the fear. One will win even if you are unconscious of it.
When you find yourself wanting to say “should”, try these tactics instead:
- Approach like with “try”
- Decide immediately. Do or not do. There is no should.
- Break down into small steps. If the big thing is too much to commit to, break it down and do or not do the small steps along the way.
- Postpone. Inaction is an action. When it is conscious. If you need more information or simply are not ready to decide, admit that and put it off.
- I often find myself wanting to say “should” when I fundamentally want to hedge. If you want to hedge, hedge. Delay. Say you will decide next week. Be honest that you can’t commit now. Don’t should.
- Replace “should” with “Want to”, “Choose to”, “going to” or “get to” to move the action forward or be more honest about the action. i “should do” something vs “I Want to” do something. The want to is a factual statement, it does not imply guilt or give up agency. It is 100% accurate and allows action to follow.
If should was a family member, it would be your goth highschool pothead cousin. She says she “should” get her life together at some point. And yet she has not.
Can’t
We have a ice bath at our house, basically a cattle trough with cold water and ice in it. I like to jump in for three minutes after a work out to reduce inflammation and speed up recovery. I have been dropping hints to my wife about it.
“I can’t. Too cold.”
“I understand you don’t like being cold. Neither do I. And I blast through that fear because I know it is good for me. You can do it.”
“Stop being such an asshole. Don’t push me. I can’t.”
“If one of our daughters were at the bottom drowning, could you jump in and save her?”
“Of course I could.”
“So you Can, you just don’t want to. Isn’t that more correct?”
“Yea, I just don’t want to.”
“Can’t” is one of those words that can ramp up a small fear into the existential category unnecessarily. It is absolutist. No way, no how. That is often not true. My wife had done the cold plunge before. She could do it. She just didn’t want to at that time (I had lowered the temp). Growth comes when we push ourselves outside our comfort zone. Can’t keeps us in our comfort zone and hinders growth.
“Can’t” sabotages us by making the ordinary existential, limiting our options and is often a lie – a denial of reality.
- Make the ordinary, existential. Few people “like” being cold. Yet our ancestors without fire or clothes were cold and hungry most of the time. Today most of us have become habituated to being a comfortable temperature and well fed most of the time. So we tell ourselves we “can’t” leave our comfort zone. What if the power fails? What if we become homeless? Would you immediately die, or would you adapt? We can leave our comfort zones. We are unlikely to die outside them. Ordinary stress doesn’t need to be ramped up to the existential level.
- Limiting our options. Can’t is absolute. All options are off the table. You have removed all agency. When I mentioned a drowning kid, my wife agreed she “could.” So could she under other circumstances? Of course. Why limit your options with your choice of words?
- It is often a lie. One of the primary reasons to pay attention to the words you use is to avoid telling yourself lies. To avoid escaping reality unconsciously. If there are circumstances under which you “can” do something, even if extreme, then “can’t” is a lie. Why lie to yourself?
When you find yourself wanting to say you “can’t” do something, try these words instead.
- Replace can’t with will or will not. If you don’t feel like doing something just say it. Don’t lie to yourself. “I can’t get into the cold plunge.” is a lie. “I won’t get into the cold plunge,” is true.
- Replace with “Can and don’t feel like”. This is also true. Both are true. You can get into the cold plunge AND you don’t feel like it right now. Stick to the truth.
- Pro tip: add a time frame to the statement to allow yourself the freedom to change you mind later. Leave the door to growth open. “I don’t feel like a cold plunge right now, ask me again next week.” Feelings are like the weather. The come and go, change over time. Leave the door open to decide you can do something later.
If “can’t” were a family member, it would also be your black-clad, pale-faced gothic pothead highschool cousin. “I just can’t deal with it all.” You can and you have decided to deal with it by becoming an outsider and smoking pot.
Proud
My daughter came home from 4th grade with an art project.
“Look Daddy, I got an A+! Aren’t you proud of me?”
“Let me see your project.”
She presented it with a proud smile, angling for a “proud”.
“Oh, this looks like it took a very long time to do. Tell me about it.”
She rambled on for quite a while.
“Madison, I am impressed with all the hard work you put in and how creative you are. I am grateful you teacher recognized that too with the good grade. I look forward to seeing more projects in this class.”
In today’s environment where kids get participation trophies for everything, “proud” has also become much overused. I consciously limit the use of it to increase the impact when I do use it. I also am very conscious of what to be “proud” of. Outcomes are outside our control. To be proud of an outcome puts the focus on the outcome, which is by nature beyond our control. I tend to reserve “proud” for the process, the effort. Those things are within our control and can be repeated, therefore are worthy of encouragement and pride. I am proud that my daughter works hard and has a positive work ethic, not that she got an “A.”
“Proud” sabotages life by its over use, focus on outcomes, and discouraging action.
- Over use. Too much use of “proud” can diminish it’s impact, like participation trophies do. If you get a trophy for being on a team, what is the reward for excelling? Why pursue excellence if you parents will be “proud” no matter what? Don’t give anyone a trophy for the trivial.
- A focus on outcomes. When we are “proud” of outcomes, we become more attached to them. Yet outcomes are outside our control. The process can be within our control. Be very conscious of what you are “proud” of.
- Discouraging action. Sometimes we avoid action unless it gets the “proud” moniker. If I get proud for some actions and the few times i don’t, i don’t want to do that “unproud” action anymore. Pride can turn into a drug we are addicted to. It can set the bar for action too high. Why set yourself up for inaction?
When someone is fishing for a “proud” try these two strategies
- Give 1 for every 10. When you have the impulse to express pride, deny it 90% of the time
- Compliment the process. Focus praise on the process not the outcome.
If “proud” were a family member it would be your grandparents. They are “proud” of even very trivial things. “Oh, you picked up your room. I am so proud of you.”
Good / Bad
A little miffed about not getting a “proud” out of me, my 4th grader continued.
“Did I do good?” “Some of my classmates art was really bad.”
“Do you like it? Are you happy with the effort and how it turned out?”
“Yes.”
“Then it’s good!”
Earlier this year the same 4th grader and I got Covid.
“I have Covid, that’s bad right?”
“Why do you feel it’s bad? Covid is just doing what a virus does, it doesn’t know anything about you. It could even be good because we are going to build immunity. It is a fact that we have Covid, I don’t see any reason to pile on with judgements about it either way.”
“Yea, that makes sense, it’s just Covid.”
Our egos love judgements. Good and Bad are judgements. They are not facts. “I have Covid,” is a statement of fact. Many times these judgements don’t serve us well. You did an art project, put your heart into it and are happy with how it turned out. Why let your experience of that be clouded by someone else’s judgement of the outcome who had no part in it? I came down with Covid. That is a fact. Does placing a judgement on it change the fact of Covid? Judgements add emotion, many times unnecessarily. While this is a natural, we can choose to react differently, or not at all.
Judgements like “good” and “bad” can sabotage us by disabling action and pulling us out of reality into a Victim or Hero mentality.
- Disable action. Judgements can become a drug like outcomes. I want good. I don’t want bad. I avoid actions that lead to bad and want more action that leads to good. Once a judgement is in place, it becomes harder to deal with the facts, especially if that judgement is “bad.” Judging Covid as “bad” makes getting through it and doing the work to get better harder. Even the judgement of “good” can disable taking risks in the future. If I had said my daughter’s art was “good” how would she feel about the next art project? “What if it is “bad”?” she might think. I did “good” the last time, so maybe I will rest on that outcome.
- Victim or Hero mentality. Either state is a fantasy, not reality. We are never just one or the other. They both take us out of reality. Yet reality remains and we eventually come crashing back into it. Covid is just Covid. I am not a victim nor a hero for getting it. Covid just is.
The reframe includes:
- Stick to the facts. Simply leave out the judgement. The nervous system recognizes the feelings of “good” and “Bad”. Just leave them out. Let yourself experience the facts of the situation without any critique. This happened, stick with that. “I have Covid.” Full stop.
- Turn it around. When you feel a strong judgement coming, stop and turn it around. “Covid is bad.” What if Covid is good?” What are the upsides of it? Could the opposite be true? Simply stopping to recognize the possibility of alternate reactions can keep us stable and better able to deal with the facts of the situation.
- Replace with “useful.” Everything that happens to us is an opportunity to learn and grow. This growth is stunted by judgement. Next time you find yourself wanting to judge, try replacing the judgement with useful. “I have Covid and it is useful.” I can learn more about health, I will develop antibodies, I will be able to tell others about my experience. I will grow.
If “Good/Bad” were a family member it would be the bloviating uncle with the Mercedes and too much debt, living way beyond his means. “I have a good car, a good house and very, very good shoes.” “Being out of fashion is bad.”
Regret, could have
About a week after my 4th grader’s art project, we were sitting eating a snack.
“I regret that art thing I did. I could have done it differently.”
“Madison, think about what you just said for a second. You told me you did the best you could. It seems to me that you couldn’t have done it differently because you didn’t. The question answers itself. Tell me what you learned and would do differently next time.”
Madison went on for about half an hour about how she would do things differently next time. Empowered to learn from the project she got very creative. Regret and could have’s are judgements, not reality, they hinder progress. By staying curious she could grow.
Regret and could have sabotages us by compounding negative emotions and judgments and confounding future action.
- Compounds negative emotions and judgements. Every time you bring up the past, especially negative emotions, your nervous system feels the pain again. Your nervous system has a very hard time differentiating between the memory and the real thing. In fact, reliving negative emotions just makes them stronger. If you in fact took an action or made a decision in the past that you have a negative experience of, why keep it alive?
- Confounds future action. Negative emotions are warning flags when similar situations come up again. Would Madison be excited about another art project if she regretted the last one or “could have” done better? This barrier is unnecessary and doesn’t serve any constructive purpose.
To exit the negative emotional spiral, focus on what you learned.
- Replace with “learned from.” When we learn something, we are empowered to grow and do things differently the next time. Many things, like art projects, are two way doors. We can open them again and go back through.
- **Pro tip, Regret minimization as a visualisation.** While I work to avoid offering regret for the past, I have found that for current decisions or future planning, regret visualization can be helpful. Scores have been written about how Jeff Bezos left a high paying career to start Amazon because he feared he would regret not doing so later in life. The idea is to visualize yourself 5 or 10 years in the future after making a major decision. Would you feel a tinge of regret for not taking the risk? Even if you failed? Knowing that you are likely to fail? For many of the big decisions, regret minimization can be a very useful visualization.
If “Regret” were a family member, it would be your 50 year old spinster aunt still pining for her highschool sweetheart. “I regret not marrying Chad.” Her whole life has been colored with that regret. Could she have? No because she did not.
Remember the self talk that blew through my head before?
“I am stuck. Nothing really bad has happened, I am proud of the good things in life, but then one day it all got stuck somehow. I should try to not regret what is or was, yet I regret so much. I need to make some progress. I can’t go on like this. I must get going again, but can’t figure out how. What now?”
Lets try that again with the recommended changes:
“I am experiencing some stuckness. Nothing really has happened, there are plenty of the good things in life and then one day it all got stuck somehow. I will not regret what is or was. I will make some progress by making a detailed projects list tomorrow. I can get through anything that doesn’t kill me. I will get going again and the project list is the next right action. Now I have a plan.”
In the first paragraph I was asleep, a passive victim of the world. Victimized by my own words. Same life. Second paragraph I accurately describe the feelings and come up with an action plan to move forward. I am awake. I have agency. This is a switch you have control over. Use it.
Karma is real
I received a message on LinkedIn yesterday. It read:
Martin! It has been like 23 years since we met in Silicon Valley. I so enjoyed our connection. You still in digital media? How have you been?”
A couple clicks reminded me of our connection and the memory popped into my head of a couple of drinks at a conference reception. Didn’t think anything of it at the time. One of the maxims I keep top of mind is:
Respond with Kindness
Martin Tobias
I remembered our conversation. He was pitching me a start up and I showed curiosity and was impressed by his authenticity and passion. While I didn’t invest, I gave him kind attention. Apparently he appreciated it and remembered for 23 years.
Respond with Kindness. It will pay you back 100X.
Reframing a guiding principle today.
“I hope you don’t get what you want in life, because then you are Fucked.”
Martin Tobias
For over 20 years, this phrase has been one of my guiding principles. Today I am softening it.
Why soften it? I want my guiding principles to be in the positive frame, not the negative. While this has been great click bait and jolts the system, it does so by triggering a visceral emotional reaction: “What do you mean not get what I want? Isn’t that the point of life?” That reaction is why I like the principle, but I don’t want to relive the negative shock every time I hear it.
While I haven’t figured out exactly how to reframe this principle, something along the lines of :
- “Process goals are what you want in life”
- Process goals trump outcome oriented goals.
- I hope your goals support your values.
- The [[good life]] is a process not a goal.
Basically, the value of the positive frame in most things I do has risen in my value stack, and I am reframing whatever I can in that way. Give it a try.
My Angel Investment funnel

Over 8,000 companies received pre Series A funding in 2019. 2020 is on pace to surpass that. How does one separate the signal from the noise? Over 25 years of Angel Investing, I have made every mistake there is and built a process from all that learning. This is the process I use to select deals for my Angel List Syndicate. Here is how I do it.
The top of the funnel is not every possible deal, you must apply a filter. The first filter is my personal network built over decades as an LP in over a dozen Venture funds, Angel investor in over 100 companies, CEO having raised over $500M for my companies (and all those venture and banking relationships), Founder of the Angel network Element8, and all the management and investor relationships over that time. From that network, I see thousands of deals a year.
The second filter is the Meta Themes I have found deliver outsized returns when present. They are listed below. If you want to get into the weeds, there is a very detailed dive into it on my blog.
- Software eats everything
- Great founders figure shit out
- Disruptive innovation creates new markets
- Platforms win
- Americans are lazy
- Invest only when I can be helpful
- Invest along other very smart, committed people.
After screening hundreds of deals through the Meta Themes, less than a hundred get the concentrated diligence process and end up with a weighted score. With every check I write of any size, I want to have a greater than 80% confidence in a 10x return on my capital. If you want to get into the weeds on the ranking algorithm, head over to this blog post. There are 5 major risk areas for every startup. I assign a confidence level from low (weak, unprepared, or insufficient) to high (easy, will crush it). The five components are:
- Management (50% weight)
- Product (10% weight)
- Market (10% weight)
- Regulation (10% weight)
- Terms (20% weight)
Less than a handful make it through to writing a check. My check size goes up along with my confidence interval. I usually write checks up to $50,000 between 80-90% confidence. Over 90% confidence, I will write checks up to $1M either alone or with friends and other smart investors. These are typically the deals that go through my Syndicate.
PS: Major Errors I have made.
While there is likely a whole post on errors I have made in the course of decades of Angel investing, the major ones that have cost me the most capital are listed here (in stack ranked order).
- Weak management. Management that can’t execute and pivot over time. Most management have nice looking resumes, but until you dig deeper and understand how they execute and the kind of culture they create, you won’t understand if they are up to the startup challenge. Everyone has an idea. The winers out execute everyone else.
- Underfunding. Most startups run out of money before they find a product/market fit. Many startups fundraise hand to mouth, never gaining enough capital to mitigate the big risks of the business. Underfunding can also be caused by overspending by management on the wrong problems at the wrong time (see above).
- Big Market, unclear entry strategy. I have fallen in love with large market size numbers, we all do. Without a clear product path to enter the market with some sustainable advantage, the market size doesn’t matter. Without product/market fit, the size is irrelevant. Also, if the “market” is already big, there are likely lots of competitors, a red ocean. There are better returns creating a new market with your product.
- Me to products. Never invest in a follower. Unless there is some geographic, language, or market reason. There has been alot of money made copying innovation from the US in Europe for example. But copying a product in the same market tends to lead to low returns for investors. Invest in the leader, category creator.
- Following investors without personal theme fit. I started out Angel investing with an “any good deal” strategy. How did I decide if it was a “good deal”? If other “smart” investors were in it. You will never know why other investors write checks, or even if they are “smart”. Plenty of “smart” people put money into Theranos. They all lost their money playing the momentum of others without doing their own thinking.
My Meta Investment Themes
In addition to being asked how I decide to invest, I am often asked WHERE I look for investments. The short answer is where I have an ADVANTAGE. Some kind of information, insight, or talent advantage that is not available or at least non-obvious to others. The long answer is the rest of this post.
If you like my approach, consider investing with me through my syndicate.
I love games of all sorts. Sometimes I play games without even understanding the rules being at a clear disadvantage. Tennis with my daughter who played on the Varsity team. SlapJack (whatever that is) with my 9 year old. Wall sit competitions. “Who can hit the softest” with my 5 year old. When the stakes are low and there are other benefits to playing, count me in.
As the stakes rise, especially into the tens of thousands in Angel Investing, I want an advantage. This is why I stopped actively trading public stocks. I had no advantage against the professional traders in the market. While I am approaching the 10,000 hour level in poker, I rarely sit down at a poker table full of professionals, I would be at a serious disadvantage over time.
Having far exceeded the 10,000 hour rule over decades of Angel investing, I have found an advantage when I follow these seven Meta Themes. I search for investments that fit 5 or more of these Themes. While I occasionally do invest with a looser fit, (say in an extremely strong founder outside technology), approximately 90% of my Angel risk capital is deployed in line with these Themes.
- Software eats everything
- Great founders figure shit out
- Disruptive innovation creates new markets
- Platforms win
- Americans are lazy
- Invest only when I can be helpful to company
- Invest alongside other very smart, committed people
Great software significantly reduces market friction and creates new markets and value. Bezos is right: “Your margin is my opportunity”. Amazon’s software ate retail. Ebay’s software ate the classifieds business. Online banking software ate retail banking. Uber software ate the taxi market. Redfin’s software enables efficiencies that they pass onto customers while remaining profitable. Software “eats” another industry when it delivers greater value at lower cost. In eating an existing industry, the best software can actually grow bigger babies. There are 100x more people hiring drivers through Uber than anyone who ever took a taxi. I buy stuff on eBay which is NOT available locally, new purchases that are impossible without eBay. This is especially true when your competitors’ core assets are not software or technology based.
I have a friend who started shorting Amazon around $300 saying Walmart was much more profitable and had better physical assets. Yea, but those physical assets were costly, not scalable, and created friction in the retail process (get in car, drive, check out lines, etc.). Amazon’s core assets were software which fundamentally reduced customer friction allowing Amazon to grow sales much faster than Walmart. Software won. Investors in Amazon have been rewarded with orders of magnitude greater returns than investors in Walmart (a $10K investment in both in 2000 would yield approximately $100K for Walmart and $9.2M for Amazon) by mid 2020 (a $10K investment in Amazon’s seed financing would be worth over $1B).
Not all software “eats” another industry. Many software companies are competing against other software companies. That is not eating, that is competing in a red ocean. These can still be great companies, but the greatest software companies “eat” an inefficient, slow industry.
I recently invested in a company that has replicated the therapeutic effects of most drugs and over the counter medicines (anything with a non-covalent bond method of action) in software. They have double blind placebo controlled scientific proof that it works, and patents. Yes, software may eat one of the most profitable industries on the planet, pharma. Didn’t see that one coming did you? I was looking for it.
Investing in “software eats…” ideas tends to produce superior returns.
Great Founders figure shit out.
“Everyone has a plan, until they get punched in the mouth,” Mike Tyson said. A startup founder is going to get punched in the mouth over and over again. Great founders can take the punches and figure out how to win anyway.
Management commands a 50% weight in my decision process for a new investment because of this Theme. A start-up is a journey through a land of incomplete information with limited resources. Opportunities abound and resources are limited. Great management is skilled as guiding the ship through the journey. This is a constant decision process, under pressure of where and how to allocate limited resources. Great founders pivot often. They attract other great people. They inspire customers. They modify their original plan to meet the engagement they find in the market.
I often ask founders to explain a failure (or two) as well as a success. How a founder talks about failure and success is very instructive. During the failure, were they animated, doing every next right action they could think of? Or paralyzed. Are they accountable for their part, or do they put blame or not credit on others? How much did their actions contribute to the success and how much was right place right time? Many founders from successful companies overvalue their contribution to the prior success and underestimate their own role in failures. I avoid these founders. Great founders are very self aware of their strengths, weaknesses, and those of their team. Great founders are very accountable for their actions.
Disruptive innovation creates new markets.
How big was the ride share market before Uber? The cell phone market before iPhone? Premium coffee before Starbucks? Streaming video before NetFlix? Great innovation allows people to buy stuff they never thought they needed. This is the Blue Ocean Strategy. While the “Software eats…” theme is looking for technology companies disrupting traditional businesses, this theme is looking for innovation to OPEN NEW MARKETS.
So I look for category creators. The first brand to reach scale in a new category, or the early start up who could possibly create a whole new category. This is related to the “winner take most” fact behind category creators. The followers of Ebay, Amazon, Netflix, etc. all have crumbs compared to the category creators.
Platforms win.
Platforms exploit network effects and investments in integration to create outsized value and make replacement very difficult. Amazon is a platform. Microsoft is a platform. Facebook is a platform. Slack is a platform. Zillow is a platform. Adobe is a platform. Apple is a platform. Google is a platform. Cisco is a platform. SalesForce is a platform. Shopify is a platform. Coca Cola is a platform. Cargill is a platform. A platform is any company which has very deep customer relationships, controls multiple parts of the value chain, has a shared infrastructure across multiple product lines, has an ecosystem connected to products and services, and continues to deliver new innovation into the ecosystem.
Very few start-ups ever reach platform scale. Those that do are deliver orders of magnitude greater returns to their investors.
Most start-ups are solving a niche problem. These can be great investments and I have made good returns with best of breed companies with a single product. And the absolute best returns have come with companies that were able to become platforms. So I keep an eye out for those.
Americans are lazy.
While I would like to believe consumers are rational and make considered choices, I have found that whatever product enables the the consumer to be the most lazy usually wins. Even if it is more expensive. If it is less expensive, you have a unicorn. Why drive to Walmart when you can One Click Amazon from your couch? Who go to movie theatre when you can sit in your underwear on your couch? Drive through coffee that costs 100x making it at home? Starbucks crushed that.
While this is somewhat true across the world, this theme is on steroids in America. Americans are always looking for the easy, quick solution. The One pill, The One Diet. The One Click purchase. While there is much snake oil sold this way (don’t invest in those), the companies that actually deliver a quality product that enables laziness tend to win.
Invest only when I can be helpful to the Company.
I have found Angel investing to be a two sided conundrum. The best companies can easily raise money, so why would they take mine? I have more opportunities than capital, so how do I convince the best companies to take my money? While a company may look great in the deck, if I can’t come up with three ways to help the CEO before my call with him, I will pass. Being helpful to the company will improve their chances of success, growing my investment. Startup companies always need help. Customer, employee, business development, product development referrals and review.
I recently invested in a consumer products company selling paleo baby food. While outside my normal technology focus and failing a number of my major themes (Software eats.., new markets, etc.), I had kids, a paleo influencer wife with a huge network, and some retail relationships for business development. I made the investment and delivered the influencer network and retail leads. The company exceeded their sales projections for the next three quarters and just closed an up-round at 3x the valuation I invested at. Being helpful is good insurance after the investment.
Remember, these themes are all about how to improve the odds that the Angel investment returns 10x or more. Investing in companies where I can be materially helpful improves the odds materially.
Invest alongside other very smart, committed people.
Lets unpack that a bit. There are three key words here: “alongside”, “very smart”, “committed.”
As an Angel I am rarely the lead investor. That means I am following other investors who have done some level of diligence. You are always “alongside” other people, so you better figure out who they are and if they have a track record of good decisions. The deeper their diligence, the deeper their relationship with management, the more confidence I have. Some Angel investors will blindly follow other name brand investors, and companies will often roll out their name brand investors to attract others. I am aware of this trick, and dig deeper. Figure out who you are in the boat with. People just along for the ride (momentum players), or thoughtful, driven people?
There are smart people and then there are Very Smart people. Bill Gates, Jeff Bezos, Elon Musk, Steve Jobs are all Very Smart. Very Smart people are the top 5% of smart people. When I was at Microsoft, when someone was called “smart”, that was translated “average” (everyone there was “smart”). But “Very Smart”? Ok, you better listen to her. Investing with smart people is a given, table stakes. Investing alongside “very smart” people has produced outsized returns for me over the years.
I always want to know the level of commitment from my co-investors. What is the ratio of their check size in this deal to their net worth or typical investment? The higher the ratio, the stronger the commitment signal. Also, how active are they? When was the last time the CEO spoke to them. I once looked a deal where the CEO was shameless flogging a name brand investor. During the call I asked the CEO when the last time he talked to the name brand investor was. “Actually never, one of his team made the investment.” Pass. That is not commitment. In fact it is dis-honest for the CEO to flog the name which signals a deeper issue with the CEO.
“Crowdfunding” platforms, while significantly increasing access to products and even angel deals at very low levels of risk capital, simultaneously put your investment alongside the masses of not so smart, not very committed novices. That is on reason I prefer the Angel List platform as a Syndicate Lead.
Summary:
These seven Themes are the top level filter every deal goes through in my Angel investing funnel. If a deal ticks 5 or more or a couple super strongly, I move the deal down the funnel to “how to decide”. These themes have given me and advantage over time and kept me out of investments where I do not have an advantage. While there are plenty of people making money in areas where I don’t have an advantage, they likely have animating themes in those areas which give them an advantage. For those areas, I invest in Venture Funds with competent managers. I can’t have an advantage everywhere.
If you like the approach, invest with me in my syndicate.
How I decide on Angel Investments

I have invested millions of dollars directly in over 100 startups over the last 25 years. Many more through Venture funds and other syndicates. I am often asked how I decide to write the check. Well here is my process which has produced a 3.5X return on capital (so far). This is my process for an investment of $50K or less. The process for larger checks is the same but requires a higher confidence score (>90%). This is basically an investment specific application of my Next Right Action decision framework which I use for all decisions.
If you like the approach, join my Syndicate and invest with me.
Minority investments are bets. Bets are by definition risking capital with incomplete information. You should bet when you have a high degree of confidence in a positive outcome (10x capital for an Angel investment) based on a sufficient amount of incomplete information you have at the time of the decision (bet). You should not bet if you don’t have the basic information to form a hypothesis with a high degree of confidence. You should not make any bet when you are not willing to loose 100% of your money (even a small chance of an existential threat is too much). You should bet when you have sufficient information to form a reasonable hypothesis with a high degree of confidence.
In many games, like poker, collecting the basic information can be very challenging. For the angel investor, the company should have all the basic information in a 20 minute pitch or call with the CEO. They may be bluffing, and you have to adjust your confidence level if you detect that.
The process takes less than an hour to collect all the information and make a decision. Remember my Next Right Action framework is Problem, Explore, Hypothesis, Action. For an investment the problem is “Should I write a check?” Explore is diligence, collecting the basic information. There are only two Hypothesis, invest (confidence > 80%) or not invest (confidence < 80%). And only one binary action. Invest or not invest.
So most of my time on an angel investment is spent in “Explore” to collect the basic information to produce the confidence interval which will drive the action decision. There are three steps.
- Read the pitch deck.
- Hear pitch from CEO (or read investment memo from the lead investor)
- Rank deal on 5 (weighted) key start-up risks. Write check if deal scores > 80% confidence of a 10x return.
The first two steps are self-evident and take 30-45 minutes. It is important to talk to the CEO or at least a lead investor you trust who knows the CEO well because 50% of the confidence interval is based on your trust and confidence in management’s truthfulness and ability to execute.
While you may hear many different approaches to investing from thematic, to momentum, to the shotgun, etc., I look at the 5 major categories of risk and score each based on my confidence (from 1-10) that the company is weak (1) or strong (10) in this area. Management is weighted 5x for 50% of the weight, terms are weighted 2X for 20% and the rest are equal-weighted for 10% each. Max score is 100. If funds are available, invest in companies with a score of 80 or more (>80% confidence). Pass on all rest.
5 Key Start Up Risks
Management: The start-up bet is first and foremost a bet on management. They run the company. Management’s ability to execute over time in a fast-changing environment is the single biggest predictor of success or failure.
I only invest in CEOs who have a resilience practice of some sort. Startups are a firehose of problems and opportunities. Management needs some “reset” practice that puts them into flow doing some non-work thing so that the subconscious can make sense of the work stuff. And your system 2 can get a break from work. Burning the brain on work 100% of the time is a well-worn path to burn out. I don’t want management to burn out. For me, meditation, mowing the yard, going for a walk with my kids, surfing, fixing the motorcycle, and riding the bike give me the reset. Most great leaders had some kind of resilience practice. For Seneca, it was writing philosophical letters to friends and family. For Epictetus, we can infer it was weight lifting. For Marcus Aurelius, it was hunting and possibly wrestling. For John Cage, it was mushroom hunting. For David Sedaris, it’s walking back roads and picking up trash. For Herbert Hoover, it was fishing. Reading, boxing, biking, surfing, swimming, puzzles, coding, journaling, golfing – whatever it is, management need something to take your mind off work. It is a critical skill.
Management of a startup is a “wear many hats” problem. You must LOVE the firehose and thrive on figuring shit out. I started my first company after a career as a programmer. I had never hired anyone, raised money, signed an office lease, created a sales and marketing organization, or basically any of the things that would take up 90% of my time as CEO. I wore all the hats and figured that shit out. I hired a very smart programmer with a PHD and put him on bug fixes. He complained about fixing other people’s code and just wanted to write his own. He was out of his comfort zone and didn’t want to even tilt his hat a little. Not the right mentality for a startup.
Prior success in similar stage startups is a plus. Success at a big company and the first time in a start-up is a minus. Look for obvious holes in management. Technical founder when it will be a sales-driven company? Given that every management team will need to grow, how ready is access to top talent? Is the stage and company attractive to top talent? What is the culture like? Will the CEO share responsibility, or is it a follow the leader culture? Who are the “fundable” management team members? the more fundable team members, the higher my confidence in management.
Examples that Increase Confidence in Management:
- Prior startup success through superior execution
- Resilience practice
- Meritocracy culture driven by KPIs and dates
- Multiple “fundable” management team members
- Management with proven track record of attracting A team members
- Management is thoughtful, accountable, and trustworthy
- Management can explain prior failures and what they learned
Examples that Decrease Confidence in Management:
- First time CEO out of large company as mid level decision maker
- Strategic positions missing (CTO in tech driven company)
- Follow the leader culture.
- “B” players in key roles
- Lacking recruiting network
- Management relies on market projections and external indicators for goals and drive
- Management has not displayed growth from prior failures
Sample ratings:
1: First time CEO from Big company, used to be a CFO. Weak technical co founder, no marketing team, consumer sales channel.
5: Second time CEO (prior success) with new team in a market tangential to what they worked in before with tier 2 investors backing them.
10: Third time CEO with two successful exits working with a complete management team that she has worked with before and known for more than 10 years in a market they have competed in before and been backed by tier 1 Venture capitalists prior.
Product. What stage is the product in? Can it be built? Is version 1 the right set of features? Are they building the product they are passionate about. I recently heard a pitch from a company who had a clear vision of a transformational product. But it was too hard to build so they wanted to start with a different product to”make money now” and build their vision later. Pass. Build your dream product. Build it in logical stages sure, but don’t do the easy thing. Tesla wanted to build electric cars for everyone but the market wasn’t ready. So they build electric cars for rich people and started building the supply chain and innovations to drive toward a car for everyone. It was a logical path to the promised land.
Single product companies also tend to loose to platform companies over time. If your product fills a small niche in an ecosystem, and customers start to want it, eventually others with deeper customer ties in the ecosystem will copy your product and replace (or buy) you. Facebook is a platform not a product. Slack which started as a product has become a platform and is now much harder to dislodge despite others in the ecosystem copying the features (microsoft, facebook, etc.) Products that have network effects are superior to products without network effects. Products that require other users to be useful, that reward connecting new customers, etc. are superior to products sold to individuals one at a time.
If the product is creating a blue ocean, expanding a market instead of competing for one, my confidence goes up. What was the market for ride hailing services before Uber? The product created the market. The product/company that creates a new product category ends up with a far greater share than the followers. Invest in product category creators, not competitors in crowded markets.
Every product must fundamentally remove some friction in the market. The core invention should depend on technology which is innovated in the company. Amazon used technology to fundamentally reduce friction in retail. It took traditional retail with their physical locations as their primary assets a long time to adapt, and most did/could not follow because their core assets were not based in technology.
The 10x rule applies. A new product must be 10x better to get people to change. Back in the early days of search I used AltaVista and Yahoo. When Google launched, I tried it and the results were 10x better. I switched and never looked back. What will be 10X better than Google? Hard to imagine, especially since Google understands the 10x rule and keeps going.
Examples that Increase confidence in Product:
- Clear MVP with short term product roadmap that fits in the funding window.
- Customer demand, especially wait list, for MVP
- Measurable metrics on friction reduction from product.
- Network affects apply – product is a platform
- Product creates a blue ocean (its own market)
- Category creator
- Clear product milestones, questions within the funding window
- Efficient customer feedback loop to development
- Very short, limited scope development sprints
- Product is in the power position in the value chain.
Examples that Decrease confidence in Product:
- Scale of MVP too large and complex.
- Building an “easy” product for short term $$, not transformational product
- Product has only a few feature differences from competitors
- Product innovation not key to competitive advantage (sales channel is, or marketing, etc.)
- Category follower
- “fishing expedition” product development
- Long, complex development and release process
- Product not designed for customers to leave it easily
- Product is an add-on or incremental product to others in the value chain
Sample Ratings:
1: Complex product vision with long development cycle going against established competitors with limited innovation (10-20% better) and easy to copy innovation.
5: 2-4x better specialist product in emerging market with some traction, little opportunity for protection or branding or network effects, enterprise sale.
10: Leading platform company with huge viral component, virtuous cycle already going and proven, creating market demand for new product category, clearly reducing market friction by an order of magnitude or more, clear customer pull for product, proprietary, protectable technology key to innovation.
Market. How big is the market for the product? Does the existence of the product expand the market (see Uber)? Does the market have a clear leader? Do customers show a willingness to buy innovation? Why now? What is the mega trend that the existing competitors are missing that the company sees that they can capitalize on now. The fact that a market is growing at double digits a year is not a reason to be in it. Why does this market need YOUR product NOW? Is there a clear path to $$? Does the company have an active pipeline? Is there a thin edge of the wedge to get into the market? How do you get to market? Direct to consumer? Enterprise? use a Chanel? influencers? Is there a Blue or Red (competitive) ocean market? What mega trends that you see in the market are you betting on? Are these trends long term or short term? Betting on market rebound from COVID is short term. Betting on Moores law is long term. The expansion of work from home is long term. Telemedicine is long term. Selling to hospitals is short term.
There also has to be a product/market fit. The right product at the right stage of the market. A very innovative product in a market which doesn’t buy innovation will languish. Determine the switching costs in the market. Is it easy for customers to switch? or Hard? How much of the product/market fit has been proven by the company to date? How long will this take? The product/market fit should also be exploiting a long term dislocation or trend also. I remember talking to lots of start ups who wanted to do banking for the emerging cannabis market using existing banking infrastructure and taking the new market risk for higher fees. Banking is an incredibly efficient business and traditional banks were prohibited by regulations to be in it. But those regulations could change quickly and the arbitrage would disappear quickly. Since the start ups did not bringing innovation to the market, simply taking risk, their market would evaporate quickly. I passed.
Examples that Increase confidence in Market:
- Blue Ocean, product innovation creates new market space
- Efficient, cost effective channels to customers.
- Many diverse market segments (industries, customer sizes, etc.)
- Positive CAC:LTV which can scale
- Way customers like to buy matches way customer sells
- Customer revenue goes up with product purchase.
- Customers proven desire to embrace change, new products
- Consumers can pull product into Enterprise (apple)
- Proven product/market fit
Examples that Decrease confidence in Market:
- Customer concentration (small number of customers control most of market)
- Many look alike customers
- Customers change adverse
- Enterprise market for SMB focused startup and vice versa
- Few or expensive clear leveraged channels to customers
- Too large geographic market for startup (world wide for small company)
- Enterprise only sale.
- Way company wants to sell is mismatched with how customers want to buy
- Customer revenue not affected by product.
- Risk adverse customers
- Unproven product/market fit
Sample Ratings:
1: Small market not growing (<$1B) with customers averse to change. Like selling software to municipalities or healthcare.
5: Growing market (> 10%/year) with clear leader (s) taking 70%+ share and a few concentrated customers. A few possible new segments but all very small, company has early traction in some of these early markets and customers.
10: Product creates its own market demand. Many market segments, company innovation expands market to 10x or more new customers. Customers show proven desire for new product or service, can switch quickly. Can prove positive CAC:LTV very easily. Clear leveraged channels to reach customers.
Regulatory. Many investors never consider the potential regulatory hurdles facing startups. Uber faced serious ones. So do everyone in Healthcare (the FDA). Facebook and Microsoft did not until they got huge. While some investors see regulatory hurdles as a positive (healthcare) because they are expensive to get over and may come with market exclusivity and ability to print money for some time (drug discovery), i see regulatory hurdles as generally negative for the investment decision. You can have the most innovative product in an amazing market and the regulators can tell you you cant sell it, or could stop you from selling it (see Uber in California recently or AirBNB). A complex regulatory environment or unclear regulatory framework lowers my confidence that the company can clear the regulatory hurdle. How many biotech companies have consumed $100M investor dollars and failed to get approval for their drugs? Most. Take the recent interest in psychedelics. Lots of investor and consumer interests. Very murky regulatory framework, in fact criminal penalties for getting it wrong. Until the framework or mega trend toward clear regulations are in place, I am unlikely to invest directly in products. In unclear regulatory markets like psychedelics, it is often better to invest in the early media properties, or unregulated parts of the market very early (I have one of those).
Examples that Increase confidence in Regulatory:
- No clear regulatory body
- Clear lack of regulation of similar products
- Many similar products in market without regulation.
- Clear, inexpensive mature regulatory framework
Examples that Reduce confidence in Regulatory:
- Regulatory “grey area”
- Company success depends on regulators “looking the other way”
- Growing trend toward regulation driven by existing bad actors
- Existing, clear regulatory body
- Many level of possible regulation (city, county, state, federal, etc.)
- Immature regulatory framework subject to sudden shifts.
- Politicians attention in market likely to cause knee-jerk regulation during black swan event.
Sample ratings:
1: Product clearly requires complicated, expensive regulatory approval. Like an FDA approved drug.
5: Regulatory framework unclear, but others are selling into the market, regulation may come but it has not yet and profits could be made before regulation comes. Like early stem cell therapy, Hemp products, supplements. No clear regulatory body yet.
10: No obvious regulatory hurdles on the horizon. Facebook and Microsoft early. Many companies selling unregulated products into markets, or completely new product in new market.
Terms. What are the terms of the deal. This includes price, pro rata rights, share class, co-investors, is the deal “hot”, and more. I recently found a company with an 8 management team, a 10 product, 10 market and 8 regulatory but the terms were 2. The company was based in Canada (where Americans have problems owning shares), they were selling common shares without any pro rata rights, no top tier investors (all retail) and was over priced relative to traction and comps. If the terms had been 8 or above I would have likely invested $500K. With crappy terms, I invested $50K.
At every point in the life cycle of a company investors should expect higher returns for higher risk and this should be reflected in the terms. In poker this is called “pot odds”. What is the expected return for the capital I am putting in versus the odds of that return? If I have a 20% chance of winning and I am getting more than 5:1 on my money (basically the return odds outweigh the win odds) I should make the bet even with low odds of winning because the implied return will be worth it. In the very early stages, pre-seed, seed, you should have a very high confidence of a 10x or better return. At $100M valuation, with a-lot of risk washed out of the business, you should expect a 2-3x return. The terms should reflect the risk/reward gamble you are taking.
I put co-investors into the terms section. If they have already committed to the terms of the round. If I am following other smart investors who have approved the terms, it increases my confidence that the terms are fair and appropriate. I also check the “smart” investors check size against their bank roll. A common tactic of unscrupulous companies is to name drop smart investors with “undisclosed” investment sizes. Active investors may write small checks just for laughs and may hot have really engaged in diligence or verifying the terms. I looked at a deal once that was touting Peter Thiel as an investor (he put in $250K). The size was so small relative to Thiel’s bankroll that it didn’t improve my confidence in the deal that much (but I am sure other investors were swayed).
Positive investor terms include low valuation versus comparable stage companies, low valuation versus mature companies, pro rata rights, preferred shares, capped notes, interest on notes, redemption rights, voting rights, top tier, smart co-investors and a trusted partner doing diligence.
Negative investor terms include common shares, high valuation relative to comps, a “hot” deal where you are pressured to decide quickly, uncapped notes, and lackluster co-investors.
Examples that Increase confidence in Terms:
- Terms approved by credible co-investors who performed significant diligence.
- Preferred shares
- Pro Rata rights
- Valuation at a discount to comparable stage companies recently
- Limited investment allocation due to oversubscription of Terms
- Pari Pasu preferences (for early investors)
- Redemption rights
- Minority blocking rights
- Weighted anti dilution
- Revenue traction implying low multiple vs public comps
Examples that Decrease confidence in Terms:
- Lack of Tier 1 co-investors
- Premium valuation to comparable stage companies
- Common shares
- lack of pro rata rights
- Stacked preferences (last money in, first money out)
- No minority voting rights
- Ratchet on later rounds without weighted anti dilution
- Revenue traction implies high multiple vs public comps.
Sample Ratings:
1: Small investment into a late stage company trading at a premium to public comps. I actually saw one of those on Angel list from a top syndicate.
5: Reasonable valuation relative to stage and traction, without pro rata rights and few followable co-investors.
10: Sub $10M valuation, preferred shares, pro rata rights for company with >$1M revenue growing > 100% a year, profitable with amazing co-investors. I have actually done a handful of these terms.
So there it is, my high level framework for making Angel Investments. This is by no means exhaustive, but it is directional. The key is to quickly assess the 5 risk areas and determine a confidence level that the investment can deliver a 10X return within 5 years. If > 40 (80%), I write the check.
If you like the approach, join my Syndicate and invest with me.
How much money should I raise?
This is a question that I get multiple times a week talking to CEOs of startups. Having raised over $500M for my own startups and invested in over 100, here is my best advice.
Decide the two or three most important measurable questions your company has to answer in the next 12 months, calculate a budget to get those answers. Double that amount. That is how much you should raise.
Why?
The #1 question every start up must answer is “Is this a good business?”. This high level question has many subcomponents which must be answered methodically. Lack of a method, distractions, in my experience, is the #1 reason for start up failure.
Startups are all opportunity, you can do anything you want, innovate all over the board. Except you can’t. You have limited capital. So you must decide what are the most important Next Right Actions to take given the limited resources. I spoke with a startup this morning who laid out 10 ways they could grow the company from $10,000/month to $100,000. That is too many. Investors don’t want to fund a fishing expedition. Lack of focus wastes time and money. I said pick two, budget them and get back to me.
Budgeting is also always a tricky thing. Maybe the two ideas you pick to grow don’t work. So you need extra money to pivot and try something else before you run out of money.
The other critical part is measurability. What are the EXACT KPI’s I am funding with this investment? Revenue growth? Downloads? COGS reduction? Which metrics are most important NOW to answer the top level question of “Is this a good business?” At each phase of the company, these questions are different. When you have a napkin and an idea the questions include: “Can I build a product?”, “Will anyone buy it?”, “Can I sell it profitably?”, “How much does it cost to get a customer?”. These are seed stage questions. If the answers to these are affirmative, the next questions include: “Can I scale customer acquisition profitably?”, “Is there a channel that can fuel growth?”, “What is the next level of cost reduction?”, etc. All of these questions must have measurable outcomes. Without measurement metrics, you don’t know if your investments are working or not. A fundable question is “Increase revenue from $10K/month to $100K/month within 6 months in my home market with a CAC/LTV > 1:3 and a gross margin > 70% with an investment of < $500k.” Compare this to “I want to raise $500K to try and increase revenue.” The first one is clear and can be answered within a funding window. The second one is a fishing expedition which has no end and is likely to fail.
In my experience, companies that have clear measurable questions they need to answer for the business within a funding window are the most successful.
Common fundraising errors I see:
#1 Not raising enough to answer meaningful questions. Funding the burn rate rather than making meaningful progress. Many early startups have rolling fundraising, taking small checks from whoever comes in the door. While this is easy money and can keep the lights on, it rarely is enough to answer the BIG questions and make progress on the fundamental questions.
#2 Lack of focus, chasing the shiny thing. Distractions which don’t make progress on the fundamental questions. Like considering foreign expansion too early. Or putting all your resources behind ONE BIG COMPANY MAKING DEAL.
#3 Expecting investors to grow your business. While many investors can be helpful, they do not and will not understand the business as well as management. Good investors will not compensate for bad management. As CEO you should pick the most helpful investors you can, but in the end execution stays on you.
Glossary: Assume
One of my first memories of wisdom, an eternal truth that run true and would be useful over time, came from my high school debate teacher, Terry Rose.
“Never Assume anything.” Terry said, “It makes and “ass” out of “u” and “me”.”
The poetic ring to the quip helped it stick all these years.
Oxford dictionary says “suppose to be the case, without proof.” It is that lack of proof, the presumption of correctness that is checked when you pause the “assume”.
Assumptions are those things that I take for granted. Things I assume. Now many times I may believe there is ample proof or I have received ample proof in the past, so these assumptions are usually not totally without proof. In fact I couldn’t go through a day without assumptions about all sorts of things like behavior of other drivers on the road, the path of the sun, available credit on my credit card, the tire pressure on my truck, the charge level in my motorcycle battery, endless.
I have found Terry’s shocking quip useful over the years for two reasons.
- I remember it whenever I am around “assume” or an “assumption”. His voice in my head.
- It causes me to pause and make sure I am not making an ‘ass” out of “u” and “me”. Just a slight pause, to question the assumptions. To check the assumptions. Make sure they apply. Make sure no one is going to be an “ass”.
Most of the time, this pause results in a little more exploration of the issue and a clearer decision being made. Just a moment is all it takes.
Take the moment. Don’t let assumptions make and “ass” out of “u” and “me”.
Remember Martin: The problem is often not the problem.
“I am super stressed out about living on campus at college, I think I want to live off campus,” my daughter said as I picked up the Facetime call.
My neck got tight. Eyes narrowed. Child in danger, get ready to fight.
I pulled up the Next Right Action worksheet in my head and started through it. Pause. Let her talk. As she talked, I explored. Problem: How to switch from on-campus to off campus 10 days from start of semester. Finding apartments, getting room/board refund, roommates, etc…
“Don’t give me any of that Stoic bullshit, just listen to me.” she says.
Process interrupt. Error. Error. The problem was suddenly unclear. Maybe it was not solve the on/off campus tactical details. That problem would not be solved on a 15 minute Facetime call anyway. The acute problem was that she was stressed and needed some empathy and venting RIGHT NOW. After that she may be ready to move toward solving the on/off campus problem, but her FIRST problem was not THE problem.
So I listened. Put all problem solving on hold. Many times the best solution to a problem is to exit the problem solving loop at Explore and just be curious and listen.
After we both calmed down, we brainstormed a couple of things to explore to get more information to solve the on/off campus problem. We are going to talk again in a couple days. While THE problem of stress and venting was not 100% solved (she was still worried), it was reduced probably 70% and that is progress.
Remember Martin: Look for THE problem behind A problem.