Last week, many investors were blown away after FTX’s valuation went from $32 billion to zero in one minute in New York. VCs wondered: “What the hell happened?And they still wonder,Wait – did I do something wrong? Is it me?”
Why yes, actually it’s you.
People are led to believe that investors are, for the most part, bright, data-driven people who carefully examine the financial underpinnings of the companies they invest in. There is little room for emotions such as jealousy or the fear of missing out (FOMO). Of course not. And these people investing billions of dollars certainly have their eye on the ball, right?
Well, not exactly.
In a surprisingly honest tweet today, former SoftBank COO Marcelo Claure, who stepped down in late January after a reported battle over pay, had this to say about the FTX fiasco:
This is from the same man whose former company also invested heavily in WeWork, another spectacular example of poor investor judgment. Steve Jobs once said, “Everything around you that you call life was made up by people who weren’t smarter than you.” Jobs talked about building products at the time, but apparently this also applies to the people who fund the startup ecosystem.
While it’s good that Claure was so open, honest and thoughtful, maybe we should all remember that investors aren’t smarter than anyone else. They are humans after all, and their classic lack of self-awareness coupled with the myopia of adventure enthusiasts may be the problem. Most of the investors and the founders they invest in are white males, and you get double points if you went to Stanford, Harvard, or MIT. These people are handed the mantle of genius in everything they do and touch. It is rarely, if ever, predicted that the next Warren Buffet will be a black man.