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Past results don't help tomorrow
Past results don't carry
Sports make the point. LeBron's championships and MVPs mean nothing in the Olympics: he has to go play, do it on the floor, and people are going to come at him.
Even people who have generated incredible results face a fresh choice of what to go after next. What they did before might help them win something they otherwise wouldn't have, but they still have to pick it.
How Sequoia applies it
Sequoia applies this by not celebrating past successes or leaning on them, and by treating being only as good as its next investment as a literal truth. The business has a lot of failure in it and very long feedback cycles, so the firm looks for people whose competitiveness stays strong through both success and failure.
Doug Leone always reminded the firm that there is no protecting a lead: in the prevent defense, you lose.
Do top-performing funds stay on top?
S&P Dow Jones Indices publishes a Persistence Scorecard that tracks whether funds in the top quarter of performance stay there in later years. Its reports have generally found that few funds remain there. Statisticians call part of the reason regression to the mean, a term Francis Galton introduced in 1886 after studying the heights of parents and children.
Why does the prevent defense backfire?
In American football, the prevent defense places extra defenders deep to stop long passes late in a game. It gives the offense short throws underneath, so the offense can move the ball steadily downfield while the clock runs. Coaches and announcers have criticized it for decades with the quip that it mostly prevents the defense from winning.
Why are venture feedback loops so slow?
Companies backed by venture funds commonly take many years to reach a public offering or an acquisition, so a firm may wait most of a decade to learn whether one bet worked. Funds are commonly set up with a ten-year life, often with extensions.
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