Five For Your Hive: A Damn Good Bet

Founders Fund, Multiplane Camera, Brad Pitt, The Stress Factory, Bet on Yourself

A Damn Good Bet

Billionaire investor Peter Thiel once wrote about an important law that investors tend to overlook in a portfolio of companies: seek investments with “the potential to return more than the sum of every other investment made." In 2005, Thiel's venture capital firm, Founders Fund, made the first outside investment of $500,000 into Facebook for a 10.2% stake of the company. In eight years, on May 18 2012, Facebook went public with a market cap of nearly $100 billion, returning "more than all the [investments] combined." The second-best investment, Palantir, "returned more than the sum of every other investment aside from Facebook." Only a handful of companies could do that, which earns them the name unicorn. And so, Thiel developed two rules for investors. First, “only invest in companies that have the potential to return the value of the entire fund,” which again, is extremely restrictive because unicorns rarely come by. Second, because the first rule is so critical, “there can’t be any other rules.” This applies to everybody—financial investor or not—because everybody is an investor of their time, their mental energy and their physical energy. So everyone has to make a bet on the matters they’re convicted of, or the things they believe in. Ninety-nine percent of it could be a flop, but the remaining one-percent could be a damn good bet—so good that it overshadows all the bad bets and return the value of everything you’ve invested in.

83 Minutes Were All That Mattered

In 1923, Walt Disney's first studio, Laugh-O-Gram studio, went bankrupt. He then started Disney Brothers Studio and continued to produce another 400 cartoons despite it being ridiculously expensive to finance. By 1937, the studio was, again, on the verge of bankruptcy—the audience were getting bored with flat, two-dimensional cartoons that felt emotionless and empty. Desperate to make his next film a big hit, Disney bet on his camera department. He wanted "to find a new way to use the technology of the time” to create the feeling of depth. To spice up the emotions and experience of the film, the film-makers had to take the audience "through the story at key moments rather than [forcing them] to statically observe it." So, Disney tasked his crew to build a new kind of "multiplane camera" that could create the illusion of 3D "by manipulating up to four layers of animation." This was an agonizing process: "The 12-foot tall apparatus," Neal Gabler writes in the biography of Walt Disney, "required at least four men to operate it—though depending on the difficulty of the shot, there could be as many as eight men." And since no one had used such a machine before, the animation process "slowed to an excruciating crawl”. Suffering through "the broiling heat generated by the eight 500-watt bulbs needed to light each layer of animation," the arduous process concluded on December 1st, 1937—six days before the film’s first sneak preview. Disney’s bet turned out to be a damn good bet. The film earned $8 million in the first six months of 1938 and transformed Disney Studios: all company debts were paid off, employees got bonuses, and a new state-of-the-art studio in Burbank was purchased (still there today). An Oscar turned Disney from famous to full-blown celebrity. After several hundred hours of film, multiple failures, unrelenting naysayers, and the premonition of another bankruptcy, the 83 minutes of Snow White and the Seven Dwarfs were all that mattered.

Simple Math

Just as with filmmaking and animation, actors too have to make bets on the film they’re working on. Some would go on to win awards. Some would stay stagnant. Some would hide in the shadows, never to be seen again. “I’ve been banging away at this thing for 30 years,” Brad Pitt once said, “I think the simple math is, some projects work and some don’t.” Some were good movies and some were bad movies, but “there’s no reason to belabor either one,” he says, “just get on to the next.”

The Stress Factory

Before Chris Rock performs at big venues, he would test it out at small clubs. As soon as the joke was released into the crowd, the comedian would get a visual report on the joke’s effectiveness just by observing their reactions and the listening to the intensity of the laughter. “When I start a tour, it’s not like I start out in arenas,” Rock once said, because intimate venues allow comedians to bet on their jokes, where it “may disappoint 30 drunk people…but won’t hurt your reputation with HBO.” Instantaneously they would know which are the “good” jokes and the “OK” jokes and the “bad” jokes. Rock “performed at this place in New Brunswick called The Stress Factory” where he ran about 40 to 50 visual reports in preparation for the damn good jokes to be shared on Netflix is a Joke.

Bet on Yourself

Entrepreneurs and business owners, Thiel writes, make a major investment just by spending their time working to build a company. And for the rest of us—whether you’re an animator, an actor, a comedian—everyone chooses a career and acts on the belief that the kind of work they do will be valuable decades from now. We’re all investors. But because “life is not a portfolio”, an entrepreneur “cannot diversify himself” by running multiple ventures at the same time in hopes that one of them will become the next Facebook, and you and I cannot diversify ourselves by keeping multiple careers. So, you must focus and make that one bet—the bet on yourself—which has the potential to return more than the sum of every other investment you’ve made. This is simple math. And yet, if it fails, don’t belabor it. Just get on to the next. If it works out—if it turns out to be a damn good bet—it will overshadow all the bad bets.