Risk and Reward Are Not Obvious

I went to business school in the mid 80s. Investment banking was hot. The leveraged buyout craze was on. Junk bonds were hot. Everyone wanted to work on wall street.

I was obsessed with venture capital and had worked in a small venture firm the previous summer and had gotten an offer to work full time in venture capital for $60k per year with no bonus and no incentive comp. I also had gotten a job offer from an investment bank at $125k per year with a bonus opportunity of $250k.

Those investment banking job offers were all over the business school and almost everyone I knew took them. They all went on amazing summer vacations and showed up on wall street in September 1987. In October 1987 the stock market crashed and by December many of my classmates were out of work.

I took the VC job, made basically enough to live and work in NYC for ten years (subsidized by The Gotham Gal's income), but I did set myself up for Flatiron and then USV.

I told this story in a comment to my MBA Tuesdays post and figured it was worth posting as a full blog post. Risk is not obvious. And reward is not obvious. Don't do the obvious thing. Because I can assure you it rarely works out as planned.

#Random Posts

Comments (Archived):

  1. Julien

    Contrarian investing!

    1. fredwilson

      yes indeed

  2. NS

    Reminds me of the Black Swan book by N. Taleb where it could be great going for the moment but one could fall off the cliff down the road. Better to do what one really enjoys rather than be unhappy and work for a gain that may not materialize.

  3. Keenan

    Another title of this post could be – Follow your heart not the money!Some of the most sage advice you’ve ever given on this blog . . . And you’ve given a lot.Great post!

  4. David Noël

    Timely post. I just watched Inside Job yesterday, the documentary about the meltdown, in which a big part of the film covers Wall Street comp and bonuses. Watching the movie made me angry and happy at the same time – happy because startupland and the impact it has feels miles away from big money – yet close in some way.Inside Job is like an ad for not joining Wall StreetHere’s the trailer: http://www.youtube.com/watc

    1. kidmercury

      with goldman money driving the current dot com bubble, i think silicon valley is in the process of selling its soul to wall st. the valley will plead ignorance, though. who could’ve known?

      1. fredwilson

        Sadly I agree with you on this Kid.

      2. Donna Brewington White

        Wow, Kid.

      3. Blsavini

        And who is going to be expected to pay for these mistakes? “The citizens” are running out of resources, AND, finally beginning to become POed.

        1. kidmercury

          unfortunately the citizens are neither upset nor educated enough, but as egypt, libya, etc are illustrating, we are getting there.

          1. Dave W Baldwin

            This applies (sort of), the Best Buy commercial offering the buyback, as in the 3D TV without need for glasses.People are becoming smarter and the ol’ develop a product and force everyone to buy that product for the next 10 years with the lowest number of improvements is over…Which goes with what I’ve tried to communicate in my wishy-washy way.The revolution is happening as people learn to spend and per Fred’s post on lowering the threshold for venture investment, we can communicate/push with the social media.No blood…just watch politicians be what they are….

  5. Mwiya

    Does USV take on interns?

      1. Mwiya

        Thanks David, working on/at a startup at the moment. Building social hub on the cloud. Thanks for the link though, very timely coz I’m still in Business school 🙂

    1. fredwilson

      nopebut we are thinking about a winter intern next year

      1. Mwiya

        I’m sure who ever get the placement will be a very lucky individual!On another note, I’m writing my Masters thesis on the extent to which venture capital affects the internationalisation strategies of startups and the effect of this on startup and venture fund returns if any. I’ve got some great information thus far, but was wondering if you had any special insight regarding any particular places that would be rich information sources? 🙂

  6. Dan Lewis

    I went to law school, graduated in 2005. When I went in, the top 10-20% of my (hardly top-tier) law school was making $125k plus bonus their first year out. Nearly 100% of top-tier law school grads (outside of those who chose to go into public sector or public interest jobs) were in that pay grade.Experience didn’t matter If you spent your second law school summer at a top 100 law firm — a job you received based almost entirely on your first-year grades, even if you had literally no work experience whatsoever — you were near certain to get an offer. A summer class of 50 students would end up with 49 of them, if not 50, getting offers. And those who didn’t get an offer were getting “cold offers” — basically, offers in name only which they knew to decline, but were there so that on subsequent job interviews, they could claim they had an offer. (That this didn’t have significant game theory implications has never ceased to amaze me.)And job security was the same. In most all cases, you were given a ton of time — seven, perhaps 10 years — to audition to make partner. If you didn’t, you were politely instructed that it’s time to move on. Being let go for almost any reason was rare, to the point that we’d joke that law school was for would-be bankers who were risk averse, willing to trade the potential $1MM bonus in exchange for long-term job security.Oops.

    1. andyswan

      LOL classic. In 2000 I was at BU law. I looked around at the expectations of every single person in my class, then multiplied that by 3 classes, then multiplied it by a zillion law schools. Plus, half of these people were, well, not very bright.I believe the quote at the time was that there were more people in law school at that moment than were in the entire law profession.I started to wonder if there could ever be enough demand to sustain such supply, regardless of Congress’s ability to create work for their own.Turns out leaving a full ride to start a dot-com during the bubble burst of late 2000 wasn’t as risky as I had originally feared.

  7. andyswan

    At 33 I’m just starting to figure out how much things change. And not the obvious things like technology, but the entire world and power structures.The shifts are only marginally predictable even within the most stable systems ever devised. I’d feel like a schmuck if I believed I am 32 years away from withdrawing money monthly from my 401ks and IRAs as I kayak down viagra river.At the end of the day, you’ve got to own your own life. Realize that those who promise to protect you and pay you more than you’re worth are using you for something. Create that which you want to own and control, and die a man of honor.

    1. ShanaC

      You’re 33?

      1. andyswan

        Yes…. higher or lower than you thought?

        1. kidmercury

          i too was surprised to hear you are 33. i thought you were older. mainly because based on reading your comments it seems to me that you are further along in life than most current 33 year olds in america (at least based on my perception of things). i would’ve guessed you were in your late 30s or early 40s.

        2. ShanaC

          lower, by a lot….

          1. andyswan

            Damn…..I’m going to need to start writing my age!

    2. Dave W Baldwin

      I woulda’ thought older also due to your comments.What shines is exactly what you explained above. My two older brothers (51 &52) are stuck on the government tit and everything is about that magic kayak. Drives me nuts.Obviously they think I’m nuts because the thought of retirement in no way registers in my head.You’ll do well, just don’t get too tied down with all the stuff your community is going to throw on you.

  8. DonRyan

    Go with your gut and do what you love. Good call.

  9. LIAD

    You went into VC because you loved it. You followed your passion, listened to your calling.I don’t think this is a post about risk or reward, they clearly didn’t play a part in your decision. It’s a post about listening to your heart, going with your gut – and being the better for it in the long-run.No-one on their death bed ever wished they had chosen to earn more money at the expense of a more meaningful and fulfilling life.

    1. fredwilson

      i reblogged this quote from the same threadhttp://fredwilson.vc/post/3…

    2. Alex Murphy

      “No-one on their death bed ever wished they had chosen to earn more money at the expense of a more meaningful and fulfilling life.”There is nothing more true than this. Do what you love, the way you love it, with those that you love.

      1. JLM

        At almost every way station in your life you look back and reflect and wish you had paid more attention to something and had applied yourself better and had a few more laughs.Don’t look backwards.Look forward.Identify all the stuff you want to do and then go do it.Live with no regrets but learn to live better than you can afford.

        1. fredwilson

          look forward is my mantra. been doing it since i was very young. i got a gift very early on. my dad was in the army and we moved every year. i learned that what was gone was gone. and i had to meet new friends and look forward, never back.



    3. Matt A. Myers

      I’m in Toronto right now.Met with a friend who I haven’t spent much time with and where we both almost desperately needed to catchup with eachother.We met this morning and went to a vegetarian restaurant called Fresh that I hadn’t ever been to. Then we went to High Park for a lovely walk. Then we hitup Starbucks and chatted some more. I showed her my projects, she was excited and offered to help me whenever things were ready and she’d do whatever she could to help. This made me happy because I want her and other friends to be closer to me, to have a reason to bring them closer to me; It’s pretty selfish in fact, but it’s mutually beneficial and leads to enjoyment. We then went to a yoga class to a studio I hadn’t been to. We then went for sushi. We then went to see Black Swan (fucked up, but good).One thing during this day I realized is about 40% of the conversation was my work related, ideas and my excitement; I apologized to her but she said she didn’t mind. It made me realize I’ll be happy when I can regularly, probably on a daily basis, live and breath in a vocal and interactive way with people (in the flesh) with plans and planning for things to be developed over the next year, two, three, etc..But I also realized recently too I was putting my personal life on hold too much.I’m planning to do yoga teacher training now. I was hesitating on the decision in case my projects moved along faster, and if I got angel or other investment and would perhaps have to move – but I realized that was making me unhappy. I’m always one for personal development and improvement, and now that I’ve decided and realized how to put my personal self first I feel like life will start to be much more meaningful and fulfilling – even though the pieces have always been there, I was just struggling with what order to put them into place.I know the above seems obvious, but it’s tough to realize and pull yourself away from something that excites you so much. It’s been a bit detrimental lately though with having the ideas flowing but not the people and resources to channel them all into to get them done. I know it will come though. For now I foster my friendships, my immediate work-relationships, and foster my personal development.This feels like a blog post…

      1. Donna Brewington White

        This may seem like a crazy response at first — but I once heard that addicts (including alcoholics) stagnate at the same stage of emotional and relational development they were at when the addiction began. In my 20s, I was a bona fide workaholic and this had a similar effect.I fully understand the need to immerse oneself for a season to accomplish a goal, but work can become a drug and inhibit our personal development if we let it — which in the long run inhibits our work. It’s important not to let personal development go by the wayside.So, anyway, just very much agreeing with what you said above!

        1. Matt A. Myers

          Thanks for the concurrence. 🙂

      2. William Mougayar

        Hey Matthew,You should consider moving to Toronto…:)

        1. Matt A. Myers

          Hehe. Give me a few months, and a meeting with Extreme Venture Partners and that could soon be a reality – though cost of living is higher in Toronto, but much larger talent pool. 🙂

  10. Pascal-Emmanuel Gobry

    “I may not have gone where I intended to go, but I think I have ended up where I needed to be.” — Douglas Adams (of Hitchhiker’s Guide fame). That quote is on my Facebook profile. It encapsulates my life more than I would ever have thought.You went where you intended to go after b-school but something tells me many of the twists and turns after that weren’t anticipated.

    1. Kelley Boyd @msksboyd

      +1 on that quote. My FB quotes are more of a reflection on who I am than most other indexes of “me”.

  11. Harry DeMott

    So to play devils advocate here: what you are saying is to go into investment banking these days! There’s no one more reviled than i-bankers and their world is imploding – no bonuses for many of them 120 hour work weeks – just awful bosses – you know Old Testament sort of pain.On the other hand – VC is hot hot hot. Have an idea and get funded with non capped converts at $10M pre. Sequoia partners getting $1B a piece on Google and YouTube. Liquidity galore in secondary markets so you don’t even need Wall Street to get out rich.Enough joking. Nice post.I think Keenan and others have it right below: “Follow your heart and not the money!”Now the question I would ask you is this: when you were in business school – how many of your compatriots were obsessed with anything other than making money? How many really knew what they wanted to do? Who they wanted to work with? Very few people are that self aware at a young age. It usually takes getting out and seeing the world a bit – perhaps becoming disillusioned at what you are doing – before you can get to where you want to be.BTW: Speaking of poems about roads I thought I would add my favorite. This one from J.R.R. Tolkien from The Hobbit. (I’m doing this from memory so excuse any errors):The road goes ever on and onDown from the door where it beganAnd I must follow if I mayPursuing it with weary feetTill other roads and pathways meetAnd whither then, I cannot say.

    1. fredwilson

      i hadn’t thought of i-banking as a contrarian move. but it very may well be

  12. CliffElam

    I remember thinking something like that when I turned down the Microsoft job offer in the early 90’s (hey, Quarterdeck was obviously gonna kick their heinies!) for a hot startup. And I was, in my head, being risk averse because I was coming out of a failed startup.The startup didn’t make me rich, but I did meet my wife, so in honor of the MS stock I didn’t get I call her the $5M wife. Most people think that refers to the cost of her PhD….-XC

    1. fredwilson

      a great return on investment

      1. CliffElam

        True. Twenty years of a good marriage and three great kids.Thanks.

  13. Kate Huyett

    This post really resonated for me – I joined private wealth in fall 2005 (after having declared I would never go into finance) because I was fascinated by the process of Google going public and that forced me to reexamine my stubborn stance on finance.After the Bear Stearns quant funds blew up, I simultaneously applied to business school and networked like crazy to get myself to a capital markets job in NYC. I got both but opted for the job, because I thought incredibly highly of the group that hired me and figured I could always go back to school. I started in NYC in debt capital markets a week before Lehman failed and then had a front row seat for the unfolding of the financial crisis and recession. Probably the two most excitin years in the bond market’s history.When the capital markets stabilized I again looked at school but am instead working for NYC-based startup HowAboutWe because the NYC tech scene felt like it was at an inflection point and I didn’t want to miss it.My point here is that risk is incredibly different for everyone, and for me, the biggest downside risk is regret. That said, I agree with a comment from one of your readers earlier this week about life not being an NPV of future expected cash flows, nor should it be a simple series of carefully hedged risk/reward plays.

  14. paramendra

    “…..subsidized by The Gotham Gal’s income….”Now we know how you did it.:-)

    1. fredwilson

      she’s writing a book that is partially about thisthe woman behind the successful man who contributed as much to the success but doesn’t get any of the credit is not an often told story, but it is an important one

      1. Kelley Boyd @msksboyd

        +1. Though I think you are a standout as a husband who often highlights his wife and her contributions. Perhaps not so much as how they impacted your trajectory to success (though I do recall reference to your difficult choice between ski bum and Wharton being mentioned ;>) but as her own person. I admire that about you as a couple. You both obviously are dedicated to promoting each others causes and helping each other reach desired goals. Add to that the benefit of longevity and there is likely nothing you can’t accomplish together.

        1. fredwilson

          I’m a big fan of partnerships

          1. Benjamin Neuwirth

            Agreed. I’m in b-school now and working on startups, and couldn’t do it without the emotional and financial support of my fiance. She even cleaned the house today while I did homework! 🙂 This support is hard to value but for me it comes down to two things:1. I get to try and find and follow my passion2. If I get distracted I immediately feel guilty because I am doing it on someone else’s dime, and I quickly get back in line.

      2. Donna Brewington White

        “she’s writing a book”Very exciting news!

      3. RichardF

        couldn’t agree more

      4. paramendra

        If you think Fred Wilson is impressive, wait until you meet The Gotham Gal. ….. That is how I felt when I got to meet her in person. http://goo.gl/fb/aZ3b0

      5. Matt A. Myers

        I have writings of my experiences and memories of the few women and their influence in my life so far that I will include in an autobiography I eventually do.They’ve been teachers, they’ve been support – and it’s included multiple hardships. My life wouldn’t be where it is today without them though.It’s important for me to remember those experiences and lessons, and I want them to know and be remembered for how much of an impact they’ve had on me, even though they may not be able to be apart of it now.P.S. I look forward to reading her book, so please do make sure we know about it – I’m sure you will without being asked though. 🙂

  15. William Mougayar

    But where’s the rest of the story? “In October 1987 the stock market crashed and by December many of my classmates were out of work.” Didn’t many of them rebound and happily lived thereafter? The crash is a bump. There are many bumps that could come in life, from any given direction. In the long term, it’s how you survive these bumps, and how they make you stronger, more resilient, and smarter. And bumps open up new opportunities.Risks and rewards aren’t obvious because,- assuming all things being equal (i.e. being smart and working hard), you’ve got to sprinkle on top of that a bit of luck and good timing.

    1. fredwilson

      many of them stuck it out and eventually landed new wall street jobssadly

  16. PhilipSugar

    The lesson here is pursue your passion.There are some people that truly have a passion to be lawyers or iBankers or consultants.But the fast majority I’ve found really just wanted to make a lot of money.As I’ve said that’s why they pay so much money. If people only come to work for you for the money you better pay well.Nobody sits there and says I need $150k to start as a SCUBA instructor in Turks and Caicos.I think the key question you have to ask yourself is do you want to retire? If that is all you look forward to that is a sad existence.After I sold my last two companies people told me to take time off. The reality was I was working harder than ever at two jobs: wrapping up my commitments to the buyers and starting a new company.I already know what I’d do if I sold my current company.None of these are “Thunder Lizards” and I don’t care. I consider myself to be one of the luckiest people in the world.I’m not disparaging the tons of hardworking people that toil at jobs…..but they’re not here reading a post about their love which is work on a Sunday morning.I like your Sunday morning posts…

    1. fredwilson

      sunday morning musings

  17. Peter Kim

    Similar story – a good friend of mine graduated from HBS in 2001 and took a job at Enron. By the end of the year, his entire cohort was laid off. He still had a job…because unlike the others his position was with Enron Wind. :)I haven’t been following your series closely, but perhaps there’s a related lesson to be told about expected value and risk tolerance.

  18. OurielOhayon

    i assume entrepreneurs who quit a job for a unknown path never do the obvious thing. the only real obvious thing is that they are passionate in something that does not seem obvious to others

    1. fredwilson


  19. pankaj013

    Reminds me of “connecting the dots” commencement speech that Steve Jobs gave at Stanford 2005. http://www.youtube.com/watc…. You cant connect the dots looking forward, but they connect when you look backward. You just need to believe in the dots and that they will connect somehow in the future.

    1. Graham

      Great quote from the Jobs commencement speech: “You have to trust in something – your gut, destiny, life, karma, whatever – because believing that the dots will connect down the road will give you the confidence to follow your heart, even when it leads you off the well-worn path, and that will make all the difference.”

  20. andrewparker

    This is funny in the context of the *intense* demand for venture job openings today. The open slates at Spark have ~200 apps submitted. I’d say most people applying are doing it not for the money (wall st, or Greenwich, is still a more lucrative place to be…), but by your story’s lesson, all ofthese applicants should be running for greener pastures.

    1. fredwilson

      VC is not the best way to make money

      1. Jose Paul Martin

        Totally totally agree with that!

      2. Alex Murphy

        Neither is being an entrepreneur. 🙂 90%+ failure rate … worse than weathermen.

    2. Chris Kurdziel

      This is a thoughtful insight and raises an interesting question. Is the ultimate lesson of the post in favor of a contrarian approach to making choices or in favor of pursuit of passion? What happens when the two are at odds?It seems in this case that Fred followed his passion (pursue VC) and it just happened to be the contrarian approach at the time. I think there’s merit to both lessons above, but if they both point in different directions (ie, VC jobs are hot and coincidentally happen to align as an area of passion for someone), I would argue that the passion should still guide decision making. As Peter Thiel has said (I may be paraphrasing), “You can’t just be contrarian. You have to be contrarian and be right.”

  21. Jan Tervonen

    I would assume that those who were out of job by December 1987 weren’t out of job forever?What do you do when you fall? You get up!

    1. fredwilson


  22. Guest

    Our former professor at a course called “applied imagination” was talking about “go beyond the predictable” – do you know the quote everything popular is wrong…?

  23. Dan Ramsden

    Another reason that risk/reward is not obvious is that investment banking and institutional venture capital are in certain respects not as far apart as may seem. Both are in a sense financial intermediation services, for which both are compensated with fees. Call it a work fee or retainer or commitment fee or management fee, the difference is mainly one of nuance. While “keeping the lights on” such fees also reduce risk, and in some cases quite substantially… and in some cases maybe entirely. In retrospect, looking at the timeframe referenced by this post, both institutional private equity and investment banking have benefited enormously from global liquidity that had to be managed. Whether the risk and reward has been commensurate for the service provider is not obvious for sure.

    1. Jose Paul Martin

      Dan, I look at it slightly different. With private equity / venture capital – we ‘get into bed with our investment’ – by investing in the company (sometimes with the pe firms own money for alignment of interest with the LPs). Whereas with investment banking its more like a ‘quickie’ – do the transaction and get your fees, and move on.

      1. Kate Huyett

        Investment banking at its best is not at all about the quickie – it’s about doing the right thing for your client over the long term. If done right, an advisory relationship lasts years and results in a wealth of opportunities rather than a one-off transaction.

        1. Jose Paul Martin

          True. ‘at its best’.Unfortunately, I see very few firms on wallstreet really taking their clients into consideration. I tend to go with Dan on the length of the financial inter-mediation service and the fact that balance sheet is often used.I think we should ask ourselves the question, if an ibank can afford to pay that sort of salary and bonus – where is it coming from? Alot of what happened in the ibanking scene few years back was just this… Make money while the sun shines, damn the consequences!I’m not saying pe firms were immune, they had a lot of free money to play around with, highly leveraged plays were killing the firms they invested in.

      2. Dan Ramsden

        The issues are all a matter of degree. Size, speed, structure all make a difference. (In banking too, by the way, one also has to live with the consequences of transactions, not only because of client relationships but also because the balance sheet is often used.)

  24. Michael Langer

    What kept you from taking the “bigger job” at the time?

    1. fredwilson

      i was bitten by the VC bug

      1. Michael Langer

        Sounds like it turned into a chronic condition…good for you.

  25. Jan Tervonen

    I find it surprising, if an investment banker (or anyone else for that matter) getting a job which must be called a 9-5 job, although the working hours might be something else, would consider any risks being involved when getting the job. I’m not an expert here but I always though that the number one reason people are working for someone else is that they see it basically risk free. They’re after security and peace of mind: regular paydays, holidays and/or whatever other days they’re getting.

  26. Jose Paul Martin

    Interesting topic, for sure I’ve come across the same situation – whether to leave Merrill Lynch and pursue my MBA, and then jump into consulting… or just to continue. I quit ML just before the dot com bust… in hindsight, that was really a good thing to do… now I’m into private equity… and I dont regret my decision at all!

  27. ReedMR

    Fortunately I got the same lecture in an entrepreneurship class as a first year. I walked the line a little as a banking fellowship recipient but I came out of the summer certain that I didn’t want the offer. One of my MDs told me that I was too entrepreneurial for that job and she was right. I’m back in financial services but this time building a startup financial services firm and hope to work with startups for the rest of my life!

  28. BradDorchinecz

    Lots of parallels in navigating your career to starting a company. What appears as the obvious, most lucrative path at first almost never is the ultimate way to go. You need to adapt to changing environments and evolving markets.I think you hit on what is most important – having a vision of what you want to do, following your heart and not selling out for the easy, obvious choice at first.

  29. baba12

    Would your decisions been different if you did not come from a family that was dependent on you, or you had to send money to take care of your folks, brothers and sisters etc.I think in hindsight the decisions you made have served you well. But it is possible that it could have gone the other way too. You made decisions based on being smitten by a bug and it was not necessarily rational/logical etc yet it was something you felt deeply. I am also sure you probably said to yourself”if this does not work out” you have plan b always.I think having that plan b in your mind is important for everyone, but it is not always easy if you are unidimensional, which you are not.

  30. Emeri Gent [Em]

    If I knew what was obvious, there would be no need for this comment to think about it.The obvious thing is then often a retrospect; it is only obvious after the fact especially if the obvious thing happens to be a visionary thing. To do the visionary thing is not on the surface at all an obvious thing, but it is often very much related to our individual capacity for insightful and intelligent risk, because the obvious thing is governed by our vision.This I feel is that often an ignored inner voice which may sit in direct conflict with expediency or immediate expectation and which itself navigates barriers that are no-go decisions due to reasonable logic or blocks due to our own realization of time and energy realities, but our inner calling is not at all obvious until we have chosen to follow it.Therein I see exist those critical life decision points that I believe ferment the rare revolutionary capacity to approach risk as an evolutionary inner capability that opens the door to visionary reward. Of the few that may have this, many may not choose to pursue.Achievement I feel is not a visionary reward but a relationship that enables people to engage obvious things. Obvious thing in this case can only occur around an oasis of a vision, and it is only in the abyss that a few see something obvious that will become an anchor or leverage point for life achievements to weave its relational magic around.The rarity of the visionary thing is that life orders itself naturally and I believe our inner calling organizes naturally in tribe, team or talent. Order appears from the abyss and the visionary reward is that which will eventually take on a life of its own, for such risk-reward order is merely a seed awaiting fertile imagination.We can refuse that invitation if we so desire for such visionary reward is invitation for a few who recognize that between risk and reward is the very meaning, value and purpose of the life we may or may not seek to create. Life will seek to invite but it is we who have the freedom to accept or reject this invitation to create that relationship born of risk and reward.Life, as I think about it, is not conditional on our refusals but our failure to recognize and appreciate what could have been; and in that “could have been” (not just regrets) exists in those “obvious things” we have refused. Kudos then to those who have followed their own inner guidance and in so doing liberated achievements which are always relational.[Em]

  31. JLM

    One of the most exciting things about life is the myriad of choices and interesting things one can invest their own time and capital in.I think we all have 5-7 “careers” in us if we are willing to follow our instincts and roll the dice.This is enhanced by the further opportunity to do if for others, or to do it with others or to do it on your own.It is further flavored by whether you are single, married or have a family. This is a huge impact on how we view the world.Each phase of our lives can be new, refreshing, energizing and rewarding.

    1. Donna Brewington White

      “I think we all have 5-7 “careers” in us…”When I first realized this, it was pretty liberating! Even within a particular career, there are phases of that career — for instance the same profession as an employee and then as self-employed, as in my case.What has been especially liberating is the idea of life as a series of seasons which has allowed me to invest more fully in the phase of life I’m in without being overly concerned with what opportunities I’m bypassing — particularly, with reference to child-rearing.What floors me is that there are people not much older than me who are actually beginning the winding down process when I feel like I am still really just getting started.

      1. JLM

        Wait until you have the empty nest and you regain and can focus all of your energy plus the refrigerator does not magically disappear all of your vittles!One of the most ironic things about life is that you can keep getting better at everything you do. You just have to stay in good health, energetic and challenged.Not to be contentious but it is easier to compete against 20 somethings than it is to be one.

  32. Alex Martsenyuk

    “Choose a job you love, and you will never have to work a day in your life.” – Confucius

    1. fredwilson

      That’s great

    2. PhilipSugar

      I remember meeting Jim Koch (Sam Adams Founder who uses that quote) at WhartonBusinessSchool after he quit from BostonConsultingGroup to start the company. Brought a handtruck of beer to class.

      1. Alex Murphy

        That would be a great class.All things are better with beer, especially Sam Adams.

    3. Dborland

      Wonderful philosophy, but Confucius? I’m amazed at all the quote attributions that make no sense that I see on the internet. In the time and place of Confucius, who had a choice of jobs? Highly unlikely that Confucius ever said that.

  33. Bob Monsour

    I too went to b-school in the mid-80s (’86-’89, night time at UCLA). I was working as an engineer (and co-founder) of a bootstrapped startup at the time and needed to get the b-school know-how. When the ’87 crash hit, many at b-school were freaking out. It was a very interesting time as we were building a fabless semiconductor company at the time. We went on to raise 2 VC rounds in ’88 and ’89, and went public in ’92 (we changed from semis to software and built the Stacker disk compression product; what Fred would call a “bridge” technology, solving the intermediate pain of too little hard disk space when Windows began to come on the scene; little did we know how quickly disk technology would catch up to us; and now we have things like dropbox where I just signed up to a 50GB cloud space; incredible).You really can’t tell how the environment will change around you. And fortunately, when you’re in overdrive working at a startup, you are so focused on your area that you push all of what seems to be irrelevant aside.

  34. sigmaalgebra

    I’ll try to evaluate the risk in just qualitative terms:Jobs.A person needs a career that will either make a lot of money quickly or last for about 40 years. For some of the past 100 years, it was easy to believe that there could be a good career from a good education and then a good job in a corporation.From about 1960 to 2000, it grew from a suspicion to fully clear that such a job had little chance of lasting for 40 years because too many companies failed to meet the challenges of globalization, new technology, or new competition (direct or near substitutes).You avoided all that. Good.Making money.There’s a powerful, general rule in the US in making a lot of money: Have to take something that isn’t very valuable, make it or see it become very valuable, and keep a significant fraction of the value created. E.g., can’t work for a salary, can’t just sell one’s time by the hour, and have to be where there are some rapid changes in value.Investment banking doesn’t look too good according to this rule.A lot of people didn’t see this rule; apparently you did. Good.Venture capital.By the mid 1980s, some people had shown that there could be a good career in venture capital. More generally, NYC was the financial capital of the world where there was no shortage of money being made in ‘investing’ of various kinds. So, venture capital in NYC had a chance.Apparently you saw that. Good.Still, making money in venture capital in NYC was difficult since overall Silicon Valley and Boston long did better just in venture capital. Silicon Valley had Stanford; Boston had MIT; and for decades US aerospace projects pushed a lot of money at those two universities and areas so that they had a lot in technology. In NYC, cost of living was higher; there were other ways to make money; and there was much less emphasis on aerospace.Information technology.The main idea of a computer has been that people should think and computers should work. So, computers have been a path to automation which is one of the better paths to economic productivity and wealth. So, information technology has looked nearly monotonically increasingly good since Hollerith to the present.You picked information technology. Good.In addition, you work hard, know all the basics well, put in a long and beneficial ‘apprenticeship’, have a sensitive BS detector to reject BS, collect a lot of data on the leading edge of the business ‘environment’ you are in, understand the user side of the Internet well, have “fingertip-feel” for the consumer-facing and ‘social’ aspects of the Internet, formulate good ideas such as barrier to entry from ‘engaged’ users and Freemium, and readily get exceptionally good understanding of that environment. Good.DiversificationDue to your portfolio, you can do well even if only one-third of your companies do really well.So, you lower your risk. Good.With that many good moves, your risk was not so high.Net, if you weren’t doing well, the rest of NYC would be worse off than in the Great Depression! :-)!!

  35. Ab b

    Good one Fred !!

  36. Alex Murphy

    Fred,I find it (as I know many others do) awesome to hear more about your background.Taking the road less traveled is how you find the best places. As you pointed out, the obvious thing is not always safer, but one thing it always has is less potential. I think the parallel can be shown in baseball. If you swing for the fences, you are more likely to strike out. If you don’t swing, you might get a base on balls, you might strike out, but you will never hit a home run and you will get far fewer runs.Your choice in ’87 was the entrepreneurial choice. Hearing stories like yours, like Mark Suster’s, and others that walk the walk before talking the talk is awesome. It helps everyone that reads these blogs in ways that are not explainable. Some combination of inspiration, direction, and support.Perhaps you should go back and change your answer in the TechCrunch interview regarding the best decision you ever made in business … choosing Venture over Banking.

    1. fredwilson

      I’m having fun with the trolls in that TC thread

      1. Alex Murphy

        LOL.I really don’t understand the community there. A lot of piss and vinegar. Both are gross on their own, and when combined they seem to be even worse. Amazing difference between the community here and, well, the lack of community there.Makes me think about your bridge tech post … AOL, a bridge company in the Dial up business tries to pivot and become a Media company with TW, fails, tries again through purchases of companies like TC and seems to continue to fail to foster a real community environment. Too bad. It would be great for the DC community if AOL would succeed, hopefully they start to turn the corner. Maybe Huff post will help with that.

        1. ShanaC

          I keep thinking in the back of my head that we really need to wait out that situation. Nokia never started out making phones (not the greatest example, I know) and the first ad agency was originally a newspaper….it is totally possible they could make the pivot.

        2. sigmaalgebra

          AOL doing well? Would, could, and should, but I don’t think so:Their broad problem is that they have a new direction and, meet the new direction, same as the old direction. So their core problem is:Their content can’t compete with the content on the rest of the Internet.I try to explain and support this claim:Sure, for a while with TC and HP they can compete for now and for maybe as long as another week, month, or year, but look at the ‘big picture’; I mean, just take a glance; don’t need a comprehensive, deep view, just a glance. I’ll start to explain with an analogy borrowed from ‘The Music Man’: “I wouldn’t last long in the shoe business if I tried to sell one size fits all shoes.”.So, with HP, AOL is trying to sell ‘one size fits millions content’. TC is more ‘focused’ but not enough.To connect this shoe analogy with AOL, AOL is forgetting, for the second time, McLuhan’s “The medium is the message.”. The old “medium” of old media, e.g., as at TW, needed the “message” one size fits millions, and that resulted in (1) broad, superficial content (2) by generalist contributors and (3) low quality, that is, “a great wasteland” that nearly no one liked well.In particular, for any interest X and any such content about X, any person A who knows much about X will conclude that the content is at best superficial and often just badly wrong. So for person A, that content about X is ‘suckage’. In short, for person A the content is not good.Shoes have many sizes, styles, colors, types, etc. Quite broadly, as for shoes and much more, if can take the whole ‘market’ or whatever, partition it into small pieces, and focus on each piece individually, then can get a better fit overall. Semi-, pseudo-, quasi-amazing, but true.So, with the new “medium” of the Internet and with various parts of it, I claim that the new “message” will be:(1) focused, meaningful content (2) by specialist contributors and (3) high quality.Then for each person A and for each of their interests X, on the Internet there will be meaningful, high quality content on interest X from specialist contributors that, then, will totally knock the socks off the “great wasteland”. About time. Good riddance. RIP. Just what was it about their great wasteland they thought I would like?To support this claim, with some irony, a reader need look only at their screen as they read this claim and see content on the relatively narrow interest of information technology startups that has some of the highest quality in all of media. AOL can’t compete and neither can TC, VentureBeat, Fortune, Forbes, Bloomberg, WSJ, or HBS. For this interest, similarly tough to compete with Steve Blank or Mark Suster.Sure, AOL could seek to hire Fred, Steve, or Mark. But I do remember something about a recent leaked AOL memo about wanting to pay the current poorly paid contributors less; then the Fred, Steve, and Mark pay grades are a bit above what that memo had in mind. :-)! With irony, old media can’t hire Fred, Steve, or Mark but can get their content, and more, for free. Brave new world that has such situations in it. Also on this point, AOL is a bit slow on the uptake.With more irony (it is so ironic to see irony bring down the towers of old media so heavily populated by English majors so partial to irony) athttp://techcrunch.com/2011/…at TC we can see:Rip Empson, “Levchin and Gurley Say That Next Big Company Will Capture The Interest Graph”, Feb 17, 2011.So, TechCrunch, Levchin, and Gurley got all excited at a Goldman Sachs conference.Their main point is:’Interest graphs’ will be more important than social graphs.I would say we could support this claim from what I said about focused content. So, broadly, from 40,000 feet up, they are correct. But apparently they didn’t study the same parts of graph theory I did! I wouldn’t discuss such ‘interests’ in terms of a ‘graph’. :-)!!Still, this TC piece is getting to a crucial point about both shoes and new media: Good focus on each interest of each person.For the irony, this TC piece describes the fundamental problem of TC, AOL, and old media — the need for focus they can’t meet. And for the content, they can’t afford to pay for it, but it is available for free.



  37. optiquezt

    Fred, would be interesting to hear what kind of feedback you got when you were trying to land a VC job while in business school.

    1. fredwilson

      I was advised not to try

      1. optiquezt

        Same here. The often repeated advice was: “work for a startup” (I did). Do you ever look back and think about doing that instead of going straight to Euclid?

  38. Mark Essel

    Luckily I’m blind to the obvious, so there’s only coincidence to catch me doing the obvious thing :).What’s the obvious thing for Fred Wilson of 2011+?

    1. fredwilson

      Going to work at facebook

    2. Donna Brewington White

      Blind to the obvious…ha ha…me too, Mark. Always feel like I’m missing something, but also kind of glad that I am.

  39. Guillermo Ramos Venturatis.com

    Monk and the Riddle: the art of creating a life while making a living?

    1. Ravi Trivedi

      Its my favorite book too, and provides a great way of thinking about how to choose your career.

  40. daryn

    I lean contrarian, but it’s worth saying that sometimes when everyone you know and trust tells you that you’ve got a bad idea, it is because you do.

  41. ShanaC

    Corrolarry – be open to new experiences, because you don’t know where they will take you. Certain risks that you thought were there are an illusion, and others you don’t know about in advance are there.

  42. Andrew Weber

    William Sahlman, who teaches Entrepreneurial Finance at Harvard Business School, has a great case called ‘Some Thoughts on Career Management’ (http://bit.ly/fqdycH ); the case echoes many of the ideas expressed in the original post and in the comments. I took Sahlman’s class at HBS in 1993 and the career advice he gave back then still feels perfectly relevant today. The gist of his message, expressed much more eloquently in the case, is that the most likely determinant of success in a venture is direct, relevant experience (e.g. Fred’s long experience in the VC world prepared him for the success he’s had at Flatiron and USV). He says that if you want to be a banker or a consultant, more power to you, but that if you want to be an entrepreneur or to run something, don’t go be a banker or a consultant because that won’t prepare you to be successful in those worlds.Great quote from the case, which speaks to taking a contrarian approach:”the easier it is to enter [a] business, the lower the probability that the opportunity will be exciting. Moreover, there has always been a negative correlation between the number of MBAs entering a given field and the subsequent economic health of the industry. This fact should give pause to students entering industries from investment banking to real estate to the Internet.”

  43. Wally

    If you made $60K/year in the mid 80’s, adjusting for inflation that’s the equivalent of making $120k now. Must’ve been a real struggle.

    1. Alex Murphy

      Coming out of b-school, when everyone is getting an inflation adjusted salary of $250k, choosing $120k is not necessarily the obvious one …Today, Entrepreneurs are making similar choices forgoing potentially larger short term salaries in lieu of the chase for the pot at the end of the rainbow.The point was never about it being a struggle, it was about the choice that wan’t the obvious one.

    2. kidmercury

      oh snap…..+1

    3. fredwilson

      my wife made a lot of money in the garment business. she was an entrepreneur and i was learning to be a VC

  44. Emil

    It would be the same even without 1987 crash.There is noone mistaking more then the one who always make rational choices.The only thing we realy own is our time. Everything else is borrowed.

  45. Matt A. Myers

    I realized at a fairly young age I have been on a different path than most people. I see it as an exponential path whereby my longer term efforts and slow growth and knowledge and skill development will end up at least in a higher plateau than the average person say going through a standard education could achieve.The obvious thing has never worked for me.I can understand the obvious thing too easily.I like to think a lot, and I get bored pretty easily.Complex things give me something to think about, and I like to connect everything to everything else which lets me think through them even more! Hurray!Conclusion: Complex things challenge me, and I don’t like being bored.

  46. Boris Wertz

    I always thought that the best way to take decision was to follow your passion and do what you really wanted to do – the monetary aspect usually follows.

    1. fredwilson

      not always. my younger brother wanted to be a musician. it’s hard to make money in that line of work. it was his passion though.

      1. Boris Wertz

        Fair enough – there are definitely some exceptions to the rule where supply of talented and passionate people is just too large: music, acting, advertising and PR, fashion,…

  47. doğal taş

    sudden popularity of electronic readers and digital books have already changed the book business from top to bottom — and the revolution has hardly started.http://www.dusakabin.eu

  48. Darrensim22

    Pursuing passion, ideas & the dream of making a creative/disruptive dent in the world – may not lead to immediate monetary payouts but certainly a life well spent! Thanks for making a difference!

  49. Donna Brewington White

    Wow, can’t tell you how much I relate to and needed this post, Fred.I won’t blame my crazy thoughts on you, but if I succeed, you’ll get partial credit for inspiration!Thanks.

  50. Steven Cohn

    I follow the rule that there are three stages to a career:1. Learning2. Earning3. Giving (back)i believe that early in your career, you should optimize phase 1 to position yourself for phase 2, which positions you for phase 3, where you can maximize your impact on the world.personally, i have taken several salary decreases in my career, for jobs that helped me round out my skills. and every decision has worked out well. coming out of b-school, i went into sales. a very un-common path. but now every one of my b-school friends wishes they had a sales background/training. i remember telling the mckinsey recruiter that i wasn’t interested, she was perplexed at my decision to say the least.it was my sales skills that helped me be successful when i pivoted on my first start up.

    1. Pedro Moore

      excellent rules Steven!

    2. fredwilson

      such a great formula. too bad we don’t have a giving word that rhymes withlearning and earning

      1. Stephen

        I was thinking the same thing.

      2. Justin Singer

        Learning, earning, returning?

        1. fredwilson


        2. fredwilson


  51. Gabe

    Type your comment here.Could be your best post – ever… Thank you.

  52. giffc

    You went into VC at a really interesting time Fred. I’m going to make a generalization, but starting in the late-nineties, I suspect a lot of would-be-banker MBAs went into VC because they thought it would provide the excitement of entrepreneurship without the risk, and still deliver a great paycheck. I further suspect some regretted not doing banking/hedgefunds when the returns over the next decade didn’t bring the big paychecks they wanted. I wonder if the next decade will clear the ranks back to those who are really dedicated, and ideally increase the percentage of entrepreneurs-turned-VC as well.I tried banking myself at Broadview (now Jefferies), and it was quite fun for a bit and a great learning curve, but ultimately I knew I would go nuts.

  53. Dave W Baldwin

    Was glad to find the discussion below that really matters. Since hindsight is always 20/20, I’d say the Gotham Gal is the one to thank.

  54. Search Engine

    Very, very true, if riskand reward were equal, then everyone would be a success in life. Just take more risk, and you will get more rewards.obviously we know that this is not true.

  55. steve miller

    I had a somewhat similar experience. . . .Straight out of college I went to work for a management consulting firm. . . I put myself thorugh college and graduated with a lot of debt so needed to make money. . . I worked there for two years and then got an offer to join a buyout fund as an associate (this was Boston in 1998). The offer was a base of $90K with bonus potential of $100K. I instead took a public service fellowship to work for NYC government for a year. . .paying me. . .gulp. . .$25K. . . .At the end of the fellowship, I knew I wanted to work at a private equity fund and cold called every fund in NYC I could think of. . . .That’s how I ended up working at Flatiron Partners :-).

    1. fredwilson

      great story steve

    2. fredwilson

      great story steve

  56. Carl Rahn Griffith

    So true, Fred…

  57. Dave S

    “Don’t do the obvious thing. Because I can assure you it rarely works out as planned.”Inspirational, maybe, but nevertheless a silly quote. Things usually work out as planned. Human beings are smart. If plans rarely worked out, we wouldn’t bother making them anymore.

  58. Ido Salama

    This post is the reason I read your blog every day.

  59. fredwilson

    great quote

  60. fredwilson

    you are an entrepreneur, unemployable

  61. Matt A. Myers

    I’m missing the spousal support piece, I know it’s important but it will come with time. I’m developing good emotional bonds with friends and good people though; I’m sure this is how I will end up with whomever I end up with.

  62. fredwilson

    It isn’t finished

  63. Mark

    Gold. Absolute gold.

  64. JLM

    Spouses are great. You fall in love and all it costs you is every penny you ever make for the rest of your life!

  65. Donna Brewington White

    Matthew — I don’t think having a spouse is the important thing, but that if/when you do have one, you realize that if she is not supportive of your dream/goal it’s pretty much dead in the water.It’s better if she can understand the actual dream/goal but if she can’t, then it still works if she believes in you. That, and also has a tolerance for risk.BTW, even with a supportive spouse, the support of good friends is invaluable. So, all those bonds you’re forming will have a significant place even when you meet that special someone. Trust me.

  66. Matt A. Myers

    Money’s just a concept. Money is just people’s time. 🙂



  68. Matt A. Myers

    I definitely can see the need of someone believing in what I’m doing, even if they can’t fully understand it; But I have wondered if they’d need to understand in order to be in a longer-term relationship.I can see there being too many variables where a situation could exist where they wouldn’t need to understand, but just be supportive.I’ve wondered though too if I’d need someone who’s capable of me bouncing things off of – but that could be friends and colleagues.I have a lot of aspirations, not just business-related, and I think whomever I end up will have to be pretty special and dynamic. :)Edit: I somehow posted this reply on your wrong comment! 😛

  69. ShanaC

    if you look at what they sell, it isn’t just burgers. Salads, breakfast food, etc. That was the pivot.

  70. Matt A. Myers

    Who remembers the pizza they sold? 🙂

  71. baba12

    Wonderful, all in & shall see if it works out. Having to be able to help family out limits one’s ability to take risks. I think when a person is a “trustafarian” have the best seat in the house to be able to take risk, question is do such folks understand the power and do they do good with it.

  72. Donna Brewington White

    So, so true.

  73. Matt A. Myers

    Cool. I’ll try to connect with you this week. It’s been awhile. 🙂