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How We Achieve High Conviction
Steel Perlot only backs and builds in areas in which we have high conviction. So how do we get there? 1) We measure in decades, We research and study the fields we think are going to be relevant several decades from now. We do not measure in years; we measu...
Steel Perlot only backs and builds in areas in which we have high conviction. So how do we get there?
1) We measure in decades
We research and study the fields we think are going to be relevant several decades from now. We do not measure in years; we measure in decades. That puts us at a distance from other funds, who tend to have 5- or 10-year cycles for their investments. We are thinking about synthetic biology in 2040 and about space logistics in 2050. That involves a deep and rigorous process of research, meeting with experts in the field and around it, and a look at how technology in that field has developed over time.
2) What needs to be done?
Once we’ve developed some assurance about a given field, we ask ourselves a series of “working backwards” type questions: If we believe that distributed financial systems will be ubiquitous in 2045, what needs to happen now and in the intervening years to make that a reality? We think of this as translation—taking a future state and then working through the steps that need to happen to get there.
This exercise, too, is about rigor—and about avoiding rosy projections and gauzy pitches. We are looking for specific, deliberate technological advances that need to happen in order for our thesis to be proven right.
3) What can we back and build?
If we’ve satisfied conditions 1 and 2—we have certainty about a future technology and a granular view of how to get there—then we think about our role in the commercial opportunities. What is Steel Perlot going to do about this problem set, if anything? If we are going to something, will we build, or will we invest?
In either case, we want to match high leverage with our highest convictions. Do we believe that the commercial opportunities can scale and compound? Do we believe that a given technology has the potential to touch billions of people, whether by becoming a network, a platform, or an essential technology?
This tripartite framework has skepticism baked into its design: We do chase the latest widget, because we can’t be sure that fads will be transformative nor that they will compound. But where we spot those opportunities, see the path forward, and identify the potential for compounding, we will move—and move quickly.