- Rational VC
- Posts
- the rational letter
rational vc .com
Podcast, essays, and investments.
Every episode we explore a Lindy book, and find ideas you can use in business and life.
Cyrus Yari
April 2024
Last week, Professor Nassim Taleb tweeted about the latest Rational VC podcast episode discussing The Black Swan. Naval Ravikant liked it, and several best-selling authors, folks with huge audiences all shared it around, which we’re super grateful for.
We had more podcast audio plays in one week than the entire year combined. We’d been in the top charts of many countries before, but had never broken into the Top 40 charts of the Anglosphere (most competitive market) until last week.
It is a 3-hour podcast megasode, discussing the masterpiece by Nassim Nicholas Taleb.
We like to keep our podcast niche though ("1,000 true fans" a la Kevin Kelly model) so screw the impressive numbers. Since pivoting since ep #50 we're really enjoying it again. "Do what feels like play to you but looks like work to others". No one cares about interviewing yet another insufferable VC/founder about "hOw tO 100X gRoWtH", no one goes back to listen to those episodes a year from now.
We spend 40+ hours preparing for each episode now. These are to serve as timeless wisdom and remain relevant decades from now.
The greatest investors in history also happen to be the greatest thinkers and polymaths, multidisciplinary (Taleb, Munger), who spend a lifetime thinking very broadly and understanding many different models from many different disciplines, while developing sound evergreen heuristics. Unlike the notion that "X" VC or founder is a genius because of "Y", which is all horseshit and fooled by randomness.
As with all of Taleb’s books, they are to be studied, not read. Go back to them once a year, all of them. The Incerto Series is a masterpiece, hence why its philosophies and teachings have shaped our brand since inception many years ago (along with Poor Charlie’s Almanack).
Without further ado, let’s get into my mini essay that accompanies this megasode…
Before I was even a possibility, a twist of fate altered the course of our family’s future. My mother had been expecting, but due to a car accident in Iran, that pregnancy did not come to term. Had things gone differently, I wouldn’t be here today. Thankfully, my mother emerged from the accident without harm.
Four months after I was born in Iran, my widowed maternal grandmother was diagnosed with spinal cancer, which left her disabled from the spine down and with a prognosis of about four years. My mother cared for her mother for the four years, and once she passed, there was nothing holding my family in Iran, especially given the severely degrading post-Revolution conditions. Entropy of an 8,000 year old great empire right in front of our eyes.
Things were getting more difficult for us every day, and we fled. We came to England as refugees, or London to be exact. We slept in the airport for the first 3 days, and then in migrant hostels for a few months. We lived the typical low-income immigrant life.
Even at the tender age of 3 or 4, I was witnessing unsettling events like stabbings in my hometown in Iran, almost daily conflict, and the loss of hope all around me due to the regime’s oppression. Despite being a high-cortisol environment, there was a sense of familiarity for the young child—it was home after all. The stress intensified when I was uprooted from Shiraz, the historic capital of the ancient Achaemenid Persian Empire. I was relocated to a grey, foreign land with damp, rat-ridden accommodations, far removed from family, friends, and everything familiar. Just months after arriving in the UK, I developed asthma, hay fever, eczema, and a host of other health conditions. Fortunately, I’m now a bulletproof tank (antifragile) but that was due to all the nutrition and exercising I did since my teens; my health gained from the positive stressors, but I digress, let’s keep the focus on Black Swans… Antifragile is the next essay ;)
Aged seven, I was diagnosed with Meningitis B, and was hospitalised for a week. I had no idea what was going on at the time of diagnosis of course, being my jolly self in the doctor’s office. Upon hearing the news, I recall my uncle (resident translator at the time) running to the bathroom from shock. At the end of the week in the hospital, my family were told that had this boy been Caucasian, he would have likely been dead or suffered serious complications such as brain damage or hearing loss; genetically the strain of meningitis wasn’t as deadly to say someone from the Middle East (or a scrawny Shirazi kid with a head double the size of his body).
Life did eventually get better over the years, but only very slowly, and then suddenly all at once due to positive Black Swans (unpredicted of course, which is the whole notion of Black Swans). Needless to say, the journey has been full of bumps in the road. Some things were so painful—and embarrassing—that I’d rather not write them here and will discuss in my old age! As for education, my schooling was in itself a horror. The secondary (state) school I attended was so bad that they permanently closed down the sixth-form (12-13th grade) not too long after I graduated. The school was ranked 'inadequate' (worst rating) by government body Ofsted in 2011, as one of the worst in London at the time, and government intervention was required. The school's main function was to produce criminals and teenage parents. Fortunately while juggling side-businesses as a teenager (like eBay stores and London’s largest under-18’s events company) I managed to graduate with the highest grades in my class and went on to a Russell Group university (which was apparently important to an Iranian mum).
“I started out in life with two great advantages: No money and good parents.”
Then while at university studying a full-time degree, I held a full-time aggressive cold-calling sales job to make some money. Little did I know this would cement my sales skills and be instrumental in future opportunities and in life (another unpredictable Black Swan). After university, some of you know the rest of the wild ride, or can look at my LinkedIn (the most cringe normie-thought platform out there).
All the depressing stories from the past I’ve shared (negative Black Swans) are now thankfully overshadowed by positive Black Swans. Positive Black Swans because in all the years of humanity, I happen to get a disease just when modern medicine and healthcare are available to cure it (themselves Black Swans as a result of scientific discovery and tinkering).
And how about my dear mother being adamant in 1997 that we had to move to the UK mostly for my future? Had I remained in post-revolution Iran, I may as well have been dead given how much life would have sucked. My mother then proceeded to enrol me in Saturday Persian school months after arriving in the UK, despite severe financial constraints. This is where I met Iman in the playground October 1998. That one move you cannot put a price on. And we haven’t even got to the other moves yet.
Positive Black Swan because the internet (one of the biggest Black Swans) broke out when I was a kid, and I was fortunate enough to get a computer in my early teens. I have since been terminally online, accessing knowledge, people, skills, jobs never before possible in history for someone where I come from.
My entire life is full of Black Swans. How does a boy from a rough part of Shiraz—who, mind you, shouldn’t even be here because his unborn older brother was in a car accident, and who himself was at death’s door at a young age in a London hospital—end up in a place like this? That is, becoming part of Silicon Valley Bank’s founding team in London as a banker, later building internet businesses, co-investing with some of the world’s leading venture capitalists, and later becoming a senior software engineer at Tesla without having the conventional technical background others had, among many other achievements.
Let’s take the Silicon Valley Bank job for example, which had thousands of applications for the position to be in the Founding Team. They gave a talk at my university, which I missed as I was totally unaware. Later seeing the email in my inbox about the event, I emailed our department’s career advisor who’d organised it, and told her I’d like to apply to the position but missed the event. She referred me. Had the internet not existed, I probably wouldn’t have bothered to contact her about this (the act of an email outreach itself being an asymmetric bet with low downside taking just seconds of input, yet potentially very high upside, as in my case).
Then once referred, I blew them away in all the interviews, mostly because bankers are intellectual yet idiots “IYIs” as Taleb says, and perception is reality; I just leaned into my street-smarts and sales skills (which I honed in a rough neighbourhood and on a ruthless sales floor because I needed money unlike other Econ students who were going to festivals), combined with my several weeks’ internet research of how to wear a suit immaculately (in another life I would’ve been the derekguy @dieworkwear on twitter - I was better dressed than all the senior bankers combined). Then the job itself was really an extension of all these skills which I crushed. I ate Etonian Oxbridge types (IYIs) for lunch before eventually getting bored and leaving, much to the shock of their shallow golden-handcuffed minds as I was mere months shy of the superficially prestigious “VP” title.
“Adversity has the effect of eliciting talents, which in prosperous circumstances would have lain dormant.”
I could go on all day about how fortunate I’ve been with respect to all these positive Black Swans. You’ve been exposed to many of your own in your life. We are typically blind to these. These achievements may not seem impressive to most, but knowing where I came from and the conditions growing up, I’m writing this as a reminder to myself (I can typically sound ungrateful pushing for the next thing) as to how blessed I’ve been, and how far I’ve come. Mind you, I’m just warming up, much like the Achaemenian Darius the Great before his ascent to the throne, starting as a mere spearman (wouldn’t be a Cyrus Yari essay unless I found a way to link it to the Achaemenids).
My intention now is to try my best to conservatively minimise my exposure to negative Black Swans, and maximise my exposure to positive Black Swans. Whether it’s in health, wealth, relationships, or any area of life, I now aim to apply this lens.
For years we’d praised Naval Ravikant’s ideas around leverage (he is incredible and much of the reason Iman and I optimise for the leverage multipliers of media, capital & code) but upon re-reading Taleb’s Black Swan, one realises Naval then got much of those ideas himself from Taleb.
We don’t like prescriptions here, but if we are to give some examples of taking advantage of serendipity (positive Black Swans, shout out to the phenomenal Nat Eliason for the 6 summary bullet-points below):
Position yourself in an industry with small losses and huge wins, like venture capital, publishing, scientific research, or movies.
Don’t look for the precise and local, don’t be narrow minded, don’t try to predict, just move in the right direction.
Seize any opportunity, or anything that looks like an opportunity. Positive Black Swans can only benefit you if you are exposed to them. Work hard in chasing such opportunities and exposing yourself to them. Go to parties!
Be skeptical of any precise plan within Extremistan (government planning)
Do not waste time trying to fight forecasters or other people platonifying Extremistan.
Put yourself in situations where the favourable consequences are much greater than the negative ones. Not necessarily more likely, but more life changing.
And here is Naval’s version of this from a tweet back in 2018:
Our mere existence is a Black Swan; the odds of becoming a human being are "400 quadrillion to one". It’s impossible to be here. Simultaneously one should hold the thought that in the 13.8 billion years of the universe’s existence, our ~100 years here is irrelevant in the grand scheme of things - we are a speck of dust.
“We are nothing but a fart in the wind in the cosmos of time.”
“Imagine a speck of dust next to a planet a billion times the size of the earth. The speck of dust represents the odds in favour of your being born; the huge planet would be the odds against it. So stop sweating the small stuff. Don’t be like the ingrate who got a castle as a present and worried about the mildew in the bathroom. Stop looking the gift horse in the mouth—remember that you are a Black Swan.”
This is why I never put anyone “successful” on a pedestal and I’m never fussed around “big shots”. While we all work hard and have skills, there is infinite luck (Black Swans) involved in their journeys. Here we also see the idea of Black Swans connecting with Fooled by Randomness (our prior episode) where the masses salivate at a Twitter thread or LinkedIn post on “Here are the 10 steps to how I exited my unicorn startup” - all total horseshit and useless of course because even if every move was copied to a T, the outcome would be entirely different.
A Black Swan has three characteristics:
It is an outlier beyond the normal range of expectations because nothing in the past could point to it being likely to happen.
It has a massive impact.
Despite #1, we create explanations for it after the fact, making it seem “explainable and predictable.”
Such events can be classified as positive, as in the case of the sharp rise of the internet, or negative, as in a world war.
The central idea of the book concerns our blindness with respect to randomness, particularly the large deviations. It is easy to see that life is the cumulative effect of a handful of significant shocks retrospectively, but not prospectively. Black Swan logic makes what you don’t know far more relevant than what you do know. What is surprising is not the magnitude of our forecast errors, but our absence of awareness of it.
You shouldn’t particularly care about the usual. For example, if you want to get an idea of a co-founder, life partner, or friend’s temperament, ethics, and personal elegance, you need to look at them under the tests of severe circumstances, not under the regular rosy glow of daily life. Just the same way you cannot assess the danger a criminal poses by examining only what he does on an ordinary day.
Lastly, some personal favourite quotes from the book:
“I don’t run for trains. Snub your destiny. I have taught myself to resist running to keep on schedule. This may seem a very small piece of advice, but it registered. In refusing to run to catch trains, I have felt the true value of elegance and aesthetics in behavior, a sense of being in control of my time, my schedule, and my life. Missing a train is only painful if you run after it! Likewise, not matching the idea of success others expect from you is only painful if that’s what you are seeking. You stand above the rat race and the pecking order, not outside of it, if you do so by choice.”
“You stand above the rat race and the pecking order, not outside of it, if you do so by choice.”
“Quitting a high-paying position, if it is your decision, will seem a better payoff than the utility of the money involved (this may seem crazy, but I’ve tried it and it works). This is the first step toward the stoic’s throwing a four-letter word at fate. You have far more control over your life if you decide on your criterion by yourself.”
“Ideas come and go, stories stay.”
“The problem with experts is that they do not know what they do not know.”
“The writer Umberto Eco belongs to that small class of scholars who are encyclopedic, insightful, and nondull. He is the owner of a large personal library (containing thirty thousand books), and separates visitors into two categories: those who react with “Wow! Signore, professore dottore Eco, what a library you have! How many of these books have you read?” and the others - a very small minority - who get the point that a private library is not an ego-boosting appendage but a research tool. Read books are far less valuable than unread ones. The library should contain as much of what you don’t know as your financial means, mortgage rates and the currently tight real-estate market allows you to put there. You will accumulate more knowledge and more books as you grow older, and the growing number of unread books on the shelves will look at you menancingly. Indeed, the more you know, the larger the rows of unread books. Let us call this collection of unread books an antilibrary.”
“The inability to predict outliers implies the inability to predict the course of history.”
“Black Swans being unpredictable, we need to adjust to their existence (rather than naïvely try to predict them). There are so many things we can do if we focus on antiknowledge, or what we do not know. Among many other benefits, you can set yourself up to collect serendipitous Black Swans (of the positive kind) by maximizing your exposure to them. Indeed, in some domains—such as scientific discovery and venture capital investments—there is a disproportionate payoff from the unknown, since you typically have little to lose and plenty to gain from a rare event. We will see that, contrary to social-science wisdom, almost no discovery, no technologies of note, came from design and planning—they were just Black Swans. The strategy for the discoverers and entrepreneurs is to rely less on top-down planning and focus on maximum tinkering and recognizing opportunities when they present themselves. So I disagree with the followers of Marx and those of Adam Smith: the reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or “incentives” for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can.”
Without further ado, check out our 3-hour episode, where we cover everything from Mediocristan vs. Extremistan, Fat Tony, the triplet of opacity, the narrative fallacy, silent evidence, the dangers of domain specific knowledge, sucker problems, and much, much more…
If you were forwarded this essay and would like to receive our next piece in your inbox, make sure to subscribe by adding your email below:
If you want to find out more about us and see everything we do, check out our website here: