Why solving extremely hard problems and being patient is not only the key to the future but also the best financial option…
*** This article is inspired by Chamath Palihapitiya’s investment approach***
Chamath Palihapitiya, the founder and CEO of Social Capital, noted in his annual letter to his investors in 2018 that “[i]n our first seven years of business, we have repeatedly found that high returns and a positive societal impact often go hand in hand”. He noted this after delivering a whopping 720% gain from 2011 to 2018. During the same time period, the S&P 500 has returned around 280% in the same time period.
Social Capital’s mission is pretty straightforward:
“At Social Capital, our mission is to advance humanity by solving the world’s hardest problems. We believe that empowering entrepreneurs who seek to improve the lives of the people around them is the best way to create more opportunity globally” (Social Capital).
The high returns should not be a surprise: Only a few companies are brave enough to solve the world’s hardest problems. Those companies face only a few competitors. These companies are tackling seemingly impossible challenges that may need to face extremely steep climbs and trouble raising capital from more traditionally-minded investors. But since they go where no one else wants to go initially they will be rewarded tenfold. Once they have established the product-market-fit, they truly create some unique than just merely participating. Others will be forced to play the same customer acquisition game on an accelerating treadmill.
Already Theodore Roosevelt noted that “[n]othing in the world is worth having or worth doing unless it means effort, pain, difficulty…” (Theodore Roosevelt). Therefore, entrepreneurs need to follow their uncompromising conviction to create something completely new.
Unfortunately, most companies follow the traditional path and are competing for the very same thing. Competition means very often not necessarily any real differentiation but rather doing the same thing again and again. This leads to an unprofitable trap. That’s why Peter Thiel, a famous startup investor, claims that “competition is for losers”.
Obviously, it is very hard to find new and unique business opportunities and it is extremely hard to be always changing an established and successful organization. There is nothing wrong with initially copying successful people and businesses. Most people probably would be better off with this approach at the beginning. So find what inspires you and follow it. Really invest in it. Copy it. But never forget to think for yourself. Maybe one day you will find an unusual truth and mission that inspires you.