“We live in the age of nonlinear returns. So there’s no point in fighting over the small pie before it’s fully baked, especially in the tech business.”
— Naval
“We live in the age of nonlinear returns. The upside is always bigger in the future, and the upside can be 100x, 1,000x, 10,000x bigger.
So there’s no point in fighting over the small pie before it’s fully baked, especially in the tech business. Anyone who’s been in for a while will tell you that it’s power law distribution of returns: their number one winner is worth more than numbers two through N put together.
Number two is bigger than three through N put together and so on. In investing, that means that you’re looking for that one grand slam outcome. You’re not looking for the company that gets sold early. Even if it was a successful sale, it’s still not going to be that number one or number two in the power law.
The same way when you’re doing deals, the most important thing is your time. You have to keep your time and your optionality available. So if you’re going to give that up, it only makes sense to do that for something that has that opportunity to be 100x or 1,000x on your time or on your capital.
So there’s no point in fighting to divide up small spoils. It just doesn’t make sense.
Now, sometimes the big spoils come out and then the knives hit the table, and then you see people get greedy. In those cases, you do have to defend yourself. Unfortunately, business is war by other means, and so that does happen.
I’m not going to say it’s all hunky dory and everybody gets along. A lot of times you will get ripped off and you do have to stand up for yourself — sometimes just on principle so that you don’t get taken advantage of in the future. But generally speaking, I think you want to focus on the upside and you want to preserve your time and your reputation and your mental health — your peace.
So if you are in a situation where you are being taken advantage of, and you know that if you don’t solve this you won’t sleep at night for the next year, you do have to fight. But if you feel like, ‘I can walk away from this and I can recover my time and I know not to work with these people again,’ or ‘I know that these stakes are too small to bother fighting over,’ then you just don’t do it.
Generally, I think people spend too much time splitting hairs on small stakes and not enough time focusing on the big upside. And the big upside is entirely where it’s at.”
