Tom Matlack takes a look into his own mind. The results? Well, see for yourself.
Why Math Matters
To be honest, I didn’t think all that much about math until I was in one of my first business school classes. The guy at the front of the room—one of the world’s top experts on the statistical modeling of the spread of HIV-AIDS—started filling the chalkboard with numbers and symbols, all having to do with the chances of contracting a then-still-deadly virus during unprotected anal sexual intercourse.
That got my attention.
Ever since then I have thought of math like a language, not unlike French or Chinese. The difference is that we all live it and speak it often without knowing how important it is to our daily lives.
As a man, I have gotten very far in this world by realizing that simple fact: Math is wicked important, whether you are looking for a date or trying to make your first million or trying to save the world from an epidemic.
Staring at all those complex equations about anal sex, I realized I am pretty good at math. My brain is wired to think that way. But the most important revelation I’ve had in the 20 years since is that complex math is useless. What really matters is what is simple—stuff like multiplication and addition.
Any business plan can be reduced to a set of numbers for revenue, expense, and profit. To calculate those requires addition and subtraction. You can look at growth rates, which require a bit of multiplication. But the most important issue is profit—how much you have now, how much you expect to have in the future. And based on what you expect to have in the future, what that worth is now.
People talk about multiples of profit, or cash flow, as a way to value companies. That multiple is a shorthand way of expressing how fast the market believes profit in that company will grow in the future.
That’s the sum total of the math I use as an investor, venture capitalist, and man.
What is my belief about how profit (or AIDS, or unwed mothers, or the incarceration of black men) will grow in the future? How does that compare to what the market is saying? And what can I do to affect that rate of change?
Math is crucial, like it or not. Just don’t make it complex. Keep it so simple you can do it in your head.
It’s All About People, Stupid!
Let’s get one thing straight. Great leaders are really good at two things: having a very specific vision of what they want to accomplish, and having the ability to attract amazing people who are way smarter than they are to get those accomplishments done.
There’s a misconception that great leaders should be macho, brilliant, and arrogant. Nothing could be further from the truth. Humility is absolutely required, particularly with regard to your own limitations. It’s not what you do know that will kill you, but what you think you know but are delusional about.
So, in looking at a business idea as a venture capitalist, the most important question is about people. Who is the leader? Is he or she a straight shooter? Does he or she have a very specific vision? Is that person charismatic enough to attract people who are much smarter than he or she is to get the job done?
Great people in a bad business will find a way to thrive. Bad businesspeople with the greatest idea on the planet will screw it up.
When it comes to goodness, I’ve always thought it to be an inside job. We each have to figure it out for ourselves. But to fix the inside you have to look outside for examples of people who have the answer to whatever problem is vexing you as a guy: depression, addiction, marriage, fatherhood, meaning.
When it comes to who is going to inspire you to deal with the inside stuff, you really can’t judge a book by its cover. In fact—for me, anyhow—it’s been men who look incredibly different than I do—a Hispanic prisoner in Sing Sing, a combat photojournalist, a gay victim of abuse—who have been the most important in my journey so far.
There’s one thing that’s common between great business leaders and men who have helped me figure out as least part of how to be a good man: They tell the radical truth about themselves. There’s no sugarcoating, no denial, no covering up out of self-pity or embarrassment. They rip the Band-Aid off and get down to the important stuff.
So I try to do the same, whether helping to run a bank in Mexico or talking about my own life to men who have lost their way.
Risk is Your Friend.
In the investment world, there are two main kinds of risk: “beta,” which refers to the risk associated with the overall market, and “alpha,” which refers to idiosyncratic risk that is uncorrelated to anything but you. I love alpha and hate beta.
The world is a risky place. Life is a risky endeavor. That’s why it’s so darn cool. The sooner you come to terms with that, the better off you will be. Hiding under a rock really won’t do you much good. I have friends who are stockpiling gold to protect against the coming apocalypse. “What the fuck are you going to do with gold after the world blows up?” I always ask them. “Shave off slivers of your gold bullion to try to persuade food rioters not to kill you? Not sure that is really going to work.”
Hiding under a rock to avoid risk doesn’t work.
One of the benefits of having lived a life with plenty of failure, both personal and professional, is that I am not afraid to take risk. Many people don’t stick their neck out because they are afraid to lose what they have. In poker it’s called “playing tight.”
But for long stretches of my life, I quite literally have had nothing to lose. If I flip a coin, it’s heads I win or tails I lose…and then I dust myself off and find another coin as fast as I can.
I’ve often said after a particularly successful event in my business career, when the whole world seemed to move in my direction, causing a lot of wealth creation, “It’s better to be lucky than smart.” And I actually believe that. Luck does play a part in what happens to you in business and in life; there’s just a ton of shit that is out of your control.
But there is one way to make sure you are never going to be lucky: to get so damn smart you shoot yourself in the foot.
I was the CFO of a $2 billion company with 5,000 employees. I liked to say that I never took an accounting class (that’s not quite true), wasn’t a CPA, and certainly didn’t know debits and credits. Most of the time, when I invest in a company, I know precious little about the industry—and what I do know I try to forget.
There’s a concept in meditation of looking at the world with fresh eyes—meaning with no preconceived notion of what you will see. I try to apply that to my business career and to my life.
In business, the worst thing you can do is to know too much; worse yet is to know what everyone else thinks about a certain business area and decide to follow him or her like a lemming over the cliff. It’s a recipe for disaster in that it shuts off your ability to make real-time judgments and think creatively.
So I try to stay stupid. I don’t read too much about what other people are saying about a particular industry, even after I have made a significant investment. I try to keep my own eyes fresh.
That’s true in life too. I try not to listen to what strangers are saying about me or about the things I care most deeply about. I try not to carry what happened yesterday into today. I try to wake up every morning stupid, fresh, ready to see what is going on right in front of me, with no preconceived notion of what that might be.
I no longer have an office outside the home. I have a study in our attic that my wife designed complete with a day bed. My greatest pleasure is dropping my kids off at school and then coming home, going up to my study, and pretending to read a book while I drop off for a morning nap.
Come to think of it, I haven’t done that in a while. Gotta get back to that.
Laziness as an investor—and as a man—goes along with this idea about surrounding yourself with good and inspiring people. Manhood and leadership in our culture are so wrapped up in doing. I would argue that success in both realms is just as much about not doing.
“But what if you have big aspirations as a man or leader of some big business?” you might ask. My response is that being lazy is even more important. You aren’t possibly going to do it all yourself, and the more you try, the deeper into the woods you are going to get.
The key to success is to set a well-defined vision of where you want to get, find amazingly good people to tackle big chunks of achieving that success, and get the fuck out of the way.
I am pretty bad at actually doing pretty much anything. But I am good at keeping track of whether or not people who are working for me are doing what they aspire to, holding them accountable, cheering them on, and busting their asses when appropriate.
Perhaps more important is my experience that things never go the way they are supposed to. Inevitably there are these key moments when the success or failure of my endeavors will be determined by how I respond to an unanticipated but critical decision, generally forced upon me with a time fuse and only partial information.
If I have my hands in the minutiae of actually getting stuff done, constantly over everybody’s shoulder when my input really isn’t needed, I will not have the ability to get the big decision—the one that will determine my fate—right. I might not even see that there is a crucial decision that must be made to save what we are trying to do.
So I delegate like hell—to the great annoyance of everyone from my wife to my business partners—and take lots of naps. Not because I don’t care, but because I care probably too much. I need to stay out of the way of the people I have asked to take responsibility for getting real shit done. More important, I need to get ready for those critical moments that need heightened attention, throwing my whole being into trying to figure out the big picture issue that must be resolved correctly—even if that requires a ton of pain—in order to get to the Promised Land.
I know that goes for business, but I think it also goes for pretty much any manly endeavor. Bide your time. Delegate. Rest up. Keep your mind clear of detail. When the time comes, you will be all there for what matters most: a sick kid, a friend in need, or a marriage on the rocks. You’ll know when it’s time to get off the day bed and bring your best self—the thing that truly does matter.