Investing on Instinct

Why the best deals are done with no data at all

It took less than 12 months for Sequoia Capital to turn $11 million dollars into $495 million with its investment in YouTube. Interestingly, the investment memo for the deal has, by my estimation, roughly 23 grammatical errors. It is riddled with spelling mistakes, misplaced words, poor punctuation, and mislabeled competitors. Nevertheless, this document’s thesis returned 44x cash-on-cash returns in the space of an NBA season.

When Jack Ma pitched Masayoshi Son in 2000 for an investment in his fledgling ecommerce site Alibaba, “He had no business plan, zero revenue,” Son said in a later interview. “But his eyes were very strong. I could tell from the way he talked, he has charisma, he has leadership.” This is very clearly a stupid investment thesis. Saying you got lost in someone’s eyes and gave them 20 million dollars would cause most limited partners to panic. Despite the dumbness, or perhaps because of it, that investment returned 4,500% when Alibaba went public at a $90B valuation. The stake ballooned up to $150B in value at one point—not bad for simply swimming in the depths of Jack Ma’s irises.

In an even more impressive display of gut-based ROI, throughout my life I had always stated I would take my time when it came to dating. My hypothesis was that you need four seasons, a road trip, and an extended visit with the inlaws before you could make up your mind. Nevertheless, within 90 days of my first date with my partner, I told her I was going to marry her. 

Note: Her response was “nice of you to say that” lololol. Took her a bit longer to come around. We tied the knot in less than a year of us being “official.” 

When people asked me how I knew she was the one, perhaps expecting me to list off a formula I had made, they were always surprised to hear my answer—I just knew. (What can I say? I have a reputation amongst my friends for being a formula guy.) There was no criteria, no hurdle rate for this choice, which is arguably the most important decision someone can make. It was pure instinct. Something deep within me knew almost immediately that she was it.

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