What I learned losing (half) a million dollars.

Riffing off of Jim Paul’s 2013 classic “What I Learned Losing a Million Dollars,” let’s dig into one of my more recent – and really rather painful – failures in the world of “investing.” For your enlightenment and entertainment, of course!

Because while it’s all well and good to celebrate our successes in life,i lest my dear readers think that I’m “smart” much less that I “never suffer adversity,” I can comfortably assure you that any semblance of success I’ve so far achieved has mostly been down to right place, right time, and a bit of delayed gratification.ii So it is that I’ve seized the opportunity to throw my chips in “early” on all sorts of weird schemes – from AAPL in late ’99 to BTC in early ’13 to NFTs in early ’21 – but of course I’ve also managed to give a decent fraction of these fortunes back to the house along the way. The particular hole in my wallet that we’ll be discussing today is my “investment” in a local start-up business.iii

So without further ado, here’s what I’ve so far learned from the last two years of this rather unpleasant experience:iv

1. I’m not a VC. I don’t seem to have the right temperament or people skills to do this particular kind of investing, probably not the right kind of chip on my shoulder either.v

2. VCs are not actually cool and I don’t actually want to be like them. Fuck Chamath and his All-In cronies. Fuck Andreessen too.

3. VCs win by spreading lots of bets around. Ironically I knew this and had turned down previous start-up pitches with this exact logic, only to toss this particularly prudent approach right out the window when I thought that I had the Midas touch at the peak of jpeg summer 2021, thinking that my shit didn’t stink. FTR my shit most definitely stinks.

4. Software isn’t eating the world. Despite its occasional (mood affiliated) spookiness, it’s mostly just another lottery, if one that’s the envy of the world. Evidence of this can be seen in both migration patterns towards the United States as well as youth interest in influencerism.vi But that doesn’t make it sustainable. Just look at the birth rates.

5. Status is expensive. I went into the pitch meeting with a potential investment size in my head and then promptly 25x’d just to (apparently) prove to one of my former mentors that I could. News at 11, status ain’t cheap! But by golly there are more durable ways to prove that kind of point, including watches, clothes, cars, art, etc.

6. Education is also expensive. Not that it should be free. We either win or we learn, innit.

7. Mark-to-market wealth does not equal liquid wealth. And as previously mentioned, I happened to be pretty damn high on my own supply with the former metric when this deal was pitched. Timing is the only thing!

8. It’s not enough to just invest with your chequebook. In this case, I had no special skills, knowledge, or connections to offer the start-up team. That wasn’t enough.

9. It helps to know the people and teams you’re investing in for a few years. In this case, I didn’t know the founder very well before the investment and only slightly better now, and I didn’t know our mutual acquaintance (my former mentor) as well as I thought I did. This was a mistake and I was likely more of a mark than I realised at the time.

10. Heart isn’t enough to make up for lack of guts and brains.vii In this case, the founder didn’t deeply understand the industry he was trying to address (not that I did either) but nor was his heart-first and moral-sounding approach enough to prevent burnout and to sustain him through inevitably difficult times.

11. A start-up with a moral-sounding mission that’s too early for adoption is functionally equivalent to an amoral-sounding mission that’s too late for adoption.

12. A solo founder is a lonely founder. Yin needs yang and founders need co-founders, which was unfortunately lacking in this instance.

13. It’s good practice to write a one-pager before making this kind and size of investment.viii

14. Little provincial towns on the Canadian prairies are not tech hubs, they’re natural resource plays. I need to position my local bets accordingly!

15. Bespoke p2p social networks are really, really hard to bootstrap. I’m not even sure what the necessary skills to pull this off look like in general, but at least now I’m pretty confident that a middle-aged former restauranteur in a garage ain’t it.

16. Not all problems can be solved bottoms-up by p2p networks. Some problems are best solved by top-down government policy, eg. FDR’s War Production Board for building B-24 bombers every 59 minutes during WWII. The “problem” this start-up aimed to solve, in hindsight at least, was probably more in the public policy wheelhouse than the p2p network space.

With this absolute train-wreck of an investment in the rearview mirror, the show must go on! I still need to invest my shekels somewhere and I’ll probably be happier if I do so successfully. Though to be fair to my more degenerate tendencies, the amor fati part of me always seems to subconsciously recall that neither side of my family had a pot to piss in as recently as the 1950s, so what if I lose it all?ix Wouldn’t it give my life so much more meaning if I had to do it all over again… and then actually pulled it off?

These philosophical and ultimately self-deprecating considerations aside, I hope you enjoyed this sliver of insight into the trials, tribulations, and ego-centric flailings of this particular “investor”, because this was hardly the first and very unlikely to be the last such instance of house-sized losses. I’ve only elected to dig into this one a little deeper on these pages because it’s already somewhat public with meatspace connections and it hit the ol’ ego from a sharper angle that usual.

Not that I’m “embarrassedper se, but it’s slightly incredible how money can have so little meaning and so much meaning all at the same time. It can take a lifetime of hard work to earn just a little, or just a few moments of indiscretion to fritter away mountains of it. Indeed, numbers on a screen don’t feel like much… until they’re gone.

In any event, it’ll be a lonnnnng time before I invest in anything anyone directly pitches me again, much less a locally-based app start-up that doesn’t make anything physical. And at the very least, I’ll come out the other side of all this having a little more humility about my abilities as an investor, capital allocator, and possibly even judge of character. Everyone’s a genius in a bull run, y’know?

Perhaps George said it Best when he said: “I spent a lot of money on booze, birds, and fast cars. The rest I just squandered.”

To less squandering ahead!

  1. Especially in the public domain! I mean what else is the Internet for?
  2. I don’t even consider myself a “hard worker,” at least not on any given day, but I’ll happily keep showing up month after month, year after year, compounding what positive effort I can in the direction of my whatever North Star I’m heading towards.
  3. FWIW I blew a similarly sized hole in my wallet on NBA Top Shot despite an intense month of “research” and many a feverish night scanning the market for “deals”, but at least from that I was able to level-up and make timely moves into Larva Labs, XCOPY, Mitch F. Chan, Tom Sachs, Cai Guo-Qiang, and many more. In the Wild West sometimes we just have to roll the dice! Just ask Nasty Nate:

  4. This list will hopefully be updated as time progresses and I better digest the damage done.
  5. Anyone who’s the slightest bit driven to climb the hierarchy of needs has a chip on their shoulder, it’s just that each chip is a slightly different shape. It pays to know the shape of yours lest you get fooled into copytrading someone with a totally different kind of chip only to discover that you’re much less satisfied with “success” than you imagined.
  6. Much to Mr. Todd’s chagrin (via Insider):

    Entrepreneur Chaymae Samir asked kids whether they would prefer 1 million followers or £1 million ($1.2 million) in cash in a recent TikTok, and all three said followers. […]

    “Because kids have access to so many of their millionaire gamers and influencers on their TikTok, they’re like, whoa, £1 million is not that much,” Samir said. “It’s very entrepreneurial, even how they thought about it, they were like, OK, if I have 1 million followers then I can turn it into maybe more than £1 million.”

    So maybe half a million little eensy weensy Canadian dollars really doesn’t register? On one hand, yes! At least in the sense that I could “afford” to lose it without losing my house, job, etc.

    On the other hand, tell that to the GT2RS that isn’t in my garage as a result. Talk about unfair!!!1 

  7. Via Chat:

    The “head, heart, gut” trichotomy is often used informally to describe different ways in which people make decisions or perceive the world. It’s not a recognized scientific model, but it can be helpful for understanding differences in people’s approaches to life.

    Head: People who are described as “head” types typically rely on logic and rational thinking. They’re often analytical, thoughtful, and tend to make decisions based on facts and reason. They may be more likely to detach from emotions in order to understand a situation objectively.

    Heart: People who are seen as “heart” types often rely on emotions and feelings. They’re typically compassionate, empathetic, and passionate. They tend to make decisions based on how they or others might feel as a result, prioritizing emotional responses over purely logical ones.

    Gut: Those who lean towards their “gut” are likely to rely on intuition or instinct when making decisions. They might not always be able to explain their reasoning process, because it’s not entirely based on logic or emotion, but rather on an inner sense or instinctive feeling. These individuals might be seen as spontaneous or instinctive in their decision-making.

    Most people likely use a combination of all three approaches depending on the situation, but may have a natural or preferred style.

  8. Which at least I did with my only-slightly-more successful BTCW investment…
  9. Though to be fair to my maternal grandparents, they had a very productive and affluent life before the Nazis rode roughshod over everything.