Yesterday I wrote about startup wealth and randomness and got a lot of good comments. One of them led me to an important way of summarizing my argument about the role of randomness:If the world were a simulation and you ran it many times, you would see a company like WhatsApp emerge many times. But only a few of the runs would have the same founders (ditto for the name of the company, the exact implementation, etc)While I wrote the post specifically about startup founders, employees and inves...

Yesterday I wrote about startup wealth and randomness and got a lot of good comments. One of them led me to an important way of summarizing my argument about the role of randomness:If the world were a simulation and you ran it many times, you would see a company like WhatsApp emerge many times. But only a few of the runs would have the same founders (ditto for the name of the company, the exact implementation, etc)While I wrote the post specifically about startup founders, employees and inves...

I have been writing a lot about wealth and income inequality and I am reading Thomas Piketty’s Capital in the 21st Century (review forthcoming as soon as I am finished). So it seems appropriate to ask how I feel about the wealth being created by tech startups for entrepreneurs, early employees and investors (which of course includes VCs like myself). I have hinted at this here on Continuations in the past in a post about Twitter but it is worth clarifying. I believe that a large component of ...

I have been writing a lot about wealth and income inequality and I am reading Thomas Piketty’s Capital in the 21st Century (review forthcoming as soon as I am finished). So it seems appropriate to ask how I feel about the wealth being created by tech startups for entrepreneurs, early employees and investors (which of course includes VCs like myself). I have hinted at this here on Continuations in the past in a post about Twitter but it is worth clarifying. I believe that a large component of ...

As someone pointed out in a comment to my previous post, simply using RAND() in Excel gives you independent random variables. That’s perfectly OK for situations where the risks are not closely related to each other. For instance, the if you are trying to project the cost of bandwidth, the uncertainty in the growth of your traffic is likely to be independent from the uncertainty around the price per TB of data. But in many cases, risk is correlated and ignoring that correlation or relying on h...

As someone pointed out in a comment to my previous post, simply using RAND() in Excel gives you independent random variables. That’s perfectly OK for situations where the risks are not closely related to each other. For instance, the if you are trying to project the cost of bandwidth, the uncertainty in the growth of your traffic is likely to be independent from the uncertainty around the price per TB of data. But in many cases, risk is correlated and ignoring that correlation or relying on h...

Went to see Horton Hears a Who with the kids, who had a blast. Afterwards we talked about things that you can’t see, can’t hear, can’t smell and yet exist (despite the kangaroo’s insistence to the contrary). This was great fun with the conversation ranging from bacteria to magnetic fields. But we did not touch on something even more profound simply because it is too abstract for the kids (and as I have come to realize, for most adults too): probability. We live in a world in which randomness ...

Went to see Horton Hears a Who with the kids, who had a blast. Afterwards we talked about things that you can’t see, can’t hear, can’t smell and yet exist (despite the kangaroo’s insistence to the contrary). This was great fun with the conversation ranging from bacteria to magnetic fields. But we did not touch on something even more profound simply because it is too abstract for the kids (and as I have come to realize, for most adults too): probability. We live in a world in which randomness ...

Following up to yesterday’s post about randomness, Excel provides a very easy tool for modeling probability. Just insert =RAND() into a cell. This will generate a new (pseudo) random number between 0 and 1 each time the spreadsheet is recalculated. For most business modeling one wants to have a discrete distribution of values with a subjective probability distribution. For instance, in projecting out the cap table of a company one might have three possible valuations for the next round – low,...

Following up to yesterday’s post about randomness, Excel provides a very easy tool for modeling probability. Just insert =RAND() into a cell. This will generate a new (pseudo) random number between 0 and 1 each time the spreadsheet is recalculated. For most business modeling one wants to have a discrete distribution of values with a subjective probability distribution. For instance, in projecting out the cap table of a company one might have three possible valuations for the next round – low,...