On Inertia

If I have seen further than others, it is by standing upon the shoulders of giants.

-Isaac Newton

Newton's First Law of motion states that an object at rest stays at rest and an object in motion stays in motion with the same speed and in the same direction unless acted upon. Newton’s first law of motion describes inertia, which is the tendency to remain unchanged. Most people’s lives can be described by inertia. Once pointed in a direction, people tend to go in that direction. People rarely stop or change directions. It’s easy to go down a set career path and get used to a comfortable life. It’s rare to give it all up for something new and uncharted.

There’s personal inertia. “We either need to get married or break up”, i.e. we either need to be together forever or never see each other again. When friends tell me this, they usually get married. It makes sense because that’s where the inertia is. Unless a force acts upon them to not get married, marriage is the natural next step of the relationship. 

Going against inertia is almost impossible. If a sales prospect doesn’t want a product, it’s extremely hard to sell them. The product has to go with what they want in their life. If you’re selling engagement rings, you want to reach out to those thinking of proposing. In theory, you should be able to sell the best engagement ring of all time to someone who isn’t thinking of proposing. But if they aren’t proposing, they aren’t going to care about the charming salesperson nor the quality of the engagement ring.

Momentum stalls during select life moments. A common break of momentum is when moving somewhere new. In a new place, personal inertia goes to a standstill. Finding community becomes a necessity. You have to be the force acting upon yourself to get out there. Same with taking time off between jobs. The most powerful forces in life are your closest personal relationships (friends, family, partner), where you live, and your occupation. The fewer forces you have acting upon you, the freer you are to move in any direction. 

Startup companies have their own inertia. Their initial inertia is to not move and to not grow. You need extreme force to get them moving. I equate starting a company to pushing a boulder up a mountain. You aren’t sure how tall the mountain is. You can’t see the top. There’s work to do once you reach the top, but it’s running down a hill. Many things start to run themselves and you have to become more reactive as the business scales. It’s usually more of the same with incremental improvements, and the core business running on autopilot if done properly. The greats look ahead and see future obstacles on the path and divert or in extreme cases stop the boulder and trek a new mountain. The same way Andy Grove pivoted Intel out of their core business of memory and into microprocessors in the 1980’s.

The great man theory of history has fallen out of favor. It’s the theory that a few great people in each generation push history in a certain direction. The alternative theory is that the UK would have had someone fill the role of Churchill sans Churchill, Germany would have had a Hitler sans Hitler, France would have had a Napoleon sans Napoleon, what Einstein discovered would have been discovered without Einstein and so on. My first inclination is to think that’s defeatist. It’s something losers say to feel better about being losers. At the same time, there is some truth. We would have eventually discovered the laws of thermodynamics without Newton… but how much longer would it have taken us? Or did Newton’s discoveries change the course of history, eventually giving rise to the Industrial Revolution and stopping us from potentially falling back into another Dark Age? We’ll never know.

There’s the entire subject matter of imagined communities and alternative histories that we make up. But that’s the problem, they’re all made up. There’s no way to test these things out. If the US nuked the Soviet Union before they developed an atom bomb, it could have saved millions of lives, stopped nuclear proliferation, and created greater prosperity in the world… or it could have caused countless horrible unforeseen consequences. We don’t know, and I doubt we ever will. We can only look back at history and see how the momentum shifted.

I hate momentum funds. They’re everything I think is wrong with the VC space. It’s people who are openly admitting that they aren’t thinking for themselves. They’re saying “this is hot, so I’m going to jump on”. They’re followers. I’m extremely anti-follower, but maybe I’m too anti-follower.

The merit of momentum funds is that others tend to follow on as well. If you’re early, even if you’re wrong, your investment can go up and make a profit as long as it’s sold before the crash. Working in late stage secondaries, I constantly dealt with people who were chasing what’s hot. What everyone else is talking about or what recently had positive news. It was FOs and institutions chasing a quick buck. And sometimes, it worked. 

Momentum can be a smart play in other asset classes. If house prices are going up one year, the chance of them going up the next year is huge and the same with the opposite. Momentum is the biggest indicator in real estate. 

Momentum investors in crypto bothered me the most. Probably because they didn’t know about crypto until recently and didn’t understand all the intricacies, while everyone in tech already talked about crypto years before. They didn’t understand the fundamentals of the incentive structure. At the same time, the momentum investors were correct in how generating awareness of crypto added a ton of value to the asset class. Followers can be more powerful than innovators.

It’s positive to step back and see where inertia is taking us in life. Where are we applying the most force? Don’t let inertia dictate your life.