Will Bill Joy be a successful venture capitalist? How about any of the other technology celebrities who have joined the venture industry? (See this month’s cover story.) Your guess is as good as mine. But one thing I am certain about is that it makes perfect sense for venture firms to bring in “outsiders.” Firms that do so-and foster an environment that is supportive of new ways of thinking-will be amazingly successful.
Here’s why. It’s not enough to be right. You need to be right and non-consensus, as Howard Marks of Oaktree Capital Management points out in the chart below. If you bet right but bet along with the crowd you’ll enjoy a modest return. But if you bet right and against the grain, you’re going to be there first. And, as we all know, the first money in enjoys the biggest reward.
This line of thinking isn’t new. Oscar Wilde was singing the praises of nonconformity before the turn of the 20th Century. What’s amazing to me is that so few people have the courage to be individuals or, at the very least, be supportive of those who are.
Case in point: Billy Beane, general manager of the Oakland A’s. He’s been tremendously successful by taking a non-consensus approach, but he is still derided by his peers, who would have us believe that his success is the result of luck. They can’t stand the idea that the common wisdom they subscribe to is wrong. Certainly one can argue with Beane’s approach to baseball, but you can’t argue with the fact that his team’s success is the direct result of his taking a fresh approach to the game instead of following the well-worn base path of those who came before him. Andy Rachleff of Benchmark Capital tells me that he and his partners believe Moneyball, Michael Lewis’s amazing book about Billy Beane’s remaking of the A’s, is the best venture capital handbook around.
To look at the world in a different way and have the courage to tell others what you see is very much the realm of the artist. It is one of the few places where not conforming is celebrated. But it doesn’t have to be that way, nor should it be.