Chamath: this is what makes great companies

Technology investor Chamath Palihapitiya’s Annual Letters are always anticipated. In his 2021 Letter (published 2022), the Canadian-American billionaire reflects on what has worked for him as founder of venture capital firm Social Capital.

“Attract and partner with founders who are, above all else, hyper-focused on finding product-market fit, and then willing to scale this fit with superhuman resilience and persistence, no matter the distraction.”

“While that may sound glib and obvious, the past decade has taught us that these attitudinal and psychological characteristics dominate the makeup of the most successful founders… we’ve become increasingly better at learning how to identify who has it and who doesn’t.”

“We’ve learned (the hard way) the price of investing in companies and founders who don’t exhibit these traits… failed startups and founders uniformly reveal the same shortcoming: they are easily distracted by whatever priority is popular at the time.”

“This can be a technology fad [or] social cause. [But] no amount of virtue signaling or focus on non-product issues will make a company successful… identity politics, especially when doggedly pursued, are usually a reliable signal that a company isn’t focused enough to win big."

“As a result, the level of discipline and focus required for success can make a founder seem, at times, aloof, detached, or even callous to some of their employees. But through a different lens, this hyper-focus can also be invigorating for employees, partners, and customers.”

“We may never know if Tom Brady or Michael Jordan could have become the best at what they do if they only practiced four days a week or refused to play unless teammates met arbitrary designations of height, weight, or likeability. But we do know the counterfactual.”

“They were obsessed with winning, they were ruthless with their regimen, and their insane expectations elevated everyone around them. The result? Undisputed GOATs [Greatest of All Time] of their respective crafts.”

“In theory, every company starts with the same potential, but few actually achieve it. Why? Because doing so requires the founder to choose to be obsessed with what their customers want and need, even when doing so will make some of those around them uncomfortable.”

Bottom line: “Ultimately, it's up to each founder and board of directors to decide what their company stands for and, even more importantly, what it doesn’t stand for. Without this clarity, you will only achieve a shadow of your potential.”