Entrepreneurship Podcast post

Risk Reduction with Alex Dang

George Grombacher May 13, 2024


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LifeBlood: We talked about risk reduction, how VCs make decisions, when to double down and when to cut bait, the danger of the sunk cost fallacy, how better decision making can benefit Fortune 500 companies and individuals alike, and how to get started, with Alex Dang, Venture Partner, CEO, Amazon Product Leader, McKinsey Partner, and author.       

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You can learn more about Alex at TheVCMindset.com, and LinkedIn.

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https://amzn.to/44IIZ3a 

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Our Guests

George Grombacher

Alex Dang

Episode Transcript

george grombacher 0:02
Alex Tang is a venture builder. He is a CEO and Kinsey partner and he’s the author of the venture mindset. Welcome to the show, Alex. Thank you, George, excited to have you on, tell us a little about your personal lives more about your work, what motivated you to put pen to paper to

Alex Dang 0:19
write the book. Of late. I look, I think actually believe that the most fascinating facts about anyone’s life is are not mentioned on his or her resume. So I actually started writing a book that became author after my career at McKinsey. And after in my startup, a cancer complex, I started to write the book when my son was born, he is now 16 months old. And trust me, that was kind of an interesting journey to write the book and see my son growing. And in some cases, I had to spend some time with him on my lap, writing a chapter or two in different coffee shops, and it’s way different circumstances. But the idea behind the book is pretty straightforward. I live in Silicon Valley in a small town, San Carlos surrounded by Tomoko enterpreneurs, venture capitalists and AI scientists, and they are building the future. And as an advisor, and as someone who built multiple businesses within Amazon, I feel that this knowledge has to be shared, there is something different about the way how VCs and many venture backed companies make decisions. So we partnered with my friend and my co author, alias traveler, who’s a professor from Stanford focused with his focus on venture capital, and his research all about venture capital. And we partnered together to write this book, to share principles, how VCs make decisions. And we do believe that this book is about VCs, but not for VCs. But it’s actually for anyone who is making important high stakes decisions in their life in their career, and business. That’s, um, now glad that the book is almost published. So it’s May 21, when the book is going to be published.

george grombacher 2:14
Excellent. And did it work out the way you wanted? Or is that remains to be seen,

Alex Dang 2:19
you may imagine that, for any product of that kind, You’re never satisfied to 100%. And obviously, we have to cut some content by our editors, we work with Penguin Random House. And they are pretty strict about the length. And they basically said, Hey, guys, you have to kill your darlings. And we do believe that that’s the right approach, we actually write about this approach in our book, that you are surrounded by so many ideas. And ideally, you test all of them, maybe hundreds of ideas, but you cannot pursue all of them. At the same time, what you will have to do is to kill your doubts, you will have to double down on some of the ideas which are promising, which are resonating, and kill or quit the ones which are not working well. So hopefully, we’re not quitting these ideas. But we’ll keep some of these ideas for our maybe book number two. Yeah,

george grombacher 3:11
appreciate that. So as you are, the term is not boiling the ocean, but it is taking an immense amount of knowledge and distilling it down perhaps Perhaps perhaps that’s that’s a better term. Between you and your writing partner? Did you have to do any research? Or was this all just stuff that you knew, and it’s just putting it all together?

Alex Dang 3:33
The whole book is based on lots of research conducted by Delia and his team at Stanford, that’s a pretty comprehensive research about probably the largest one around venture capital and venture capital, how they make decisions. It’s one of the largest surveys of all VCs, who are the researchers Bell going through every single stage from where the ideas are coming from, how the decision is made within Venture Capital Partners, which is typically a very small team of people who are making many important calls, because after invest, there is no return have to wait and then either double down or quit, and how long it takes to exit or to IPO the company. It’s also based on my stories from trenches. That’s what intrigued me that many of the principles which VCs used are utilized in very note, well known companies like Google or Amazon. And we decided to combine it all together in one book. So all the learnings from research from he’s in my board experience from my advisory experience, we combined in one book and hopefully it will be useful and full of anecdotes and stories, because that’s I think, is critical to not just to present your facts and numbers, but also to demonstrate how each story plays out in the real life.

george grombacher 4:59
Yeah, Appreciate that we all like to see facts and numbers to back up whatever claims that we’re making. But it’s the anecdotes and the stories that really bring it to life.

Alex Dang 5:09
So just think about the tool or app that we currently use when we as we record this podcast, it’s called Xu, the company would not exist without a few VCs, and we interviewed them, who decided to back the company, when so many apps already exist at a time think of Skype or Google, they all have their own teleconferencing apps to communicate with each other via internet. Still, a few VCs decided that, Hey, Eric Yuan, and his team can do something different. And they did that just less than 15 years ago, meaning that we would not have zoom and would not have many other products like Uber, or Apple Watch, or Maderna as a vaccine manufacturer without VCs. So there is something in the way that VCs make decisions that allow them to find and fund such ideas very early on, they make these important bets. And we call them in our book, home run punters, you can call them jackpot hunters as well, they do search for such outliers, which will return them their language, the whole fund, meaning that they will generate, not just 20% return, not just 40% return, but 10x 100x. And we do believe that the same approach should be utilized not just by large fortune 500 corporations and managers of such companies, but also in our daily lives, when we make career decisions, or other important decisions, which may require some uncertainty or risk.

george grombacher 6:52
Appreciate. So kind of building on the the homerun idea Moneyball came out however, many years ago that detail the Oakland A’s so sort of your neck of the woods and talked about the analytical side of baseball versus the traditional go by feel? How does that? How does that play into to your research, I

Alex Dang 7:13
may surprise people who are familiar with VCs, but they’re not deep into the weeds of the what’s actually going on here, that VCs do not really like risk that much. Some of them call themselves risk reduction engineers. What they do they try to cast they take so many risks, they make a bet on the team. And our business plan, too often just literally scratched on that written on a piece of paper on a prototype. So therefore, they have to understand how to navigate these risks and how to manage all such risks. And there are a few principles. For instance, one of them is say no 100 times, which means that actually your initial reaction to the idea could be No. And way more often you will have to say no, in order to find the one which may become a homer. It’s actually backed by statistics earlier and his team reviewed, how many deals has to be reviewed in order to find the one which will become potentially a unicorn. And it’s 101 to one, it varies across different stages, different sectors industries, biotech is different from tech, but an average it’s 101 to one, which literally means that you have to so say no 100 times. That’s one of the principles, which is pretty analytical in terms of the approach you have, they have to search for the reasons why not to invest in the first place. Another principle is that after you make an investment, or you decide that the idea that you decided to pursue worth it, you have to still review that again. And again, I can refer to my Amazon experience. When we were launching any ideas we first tested them, we first piloted them, sometimes in a single zip code, sometimes in a single state to see whether it resonates with a customer, if customers actually love the service or experience or new product. And if they do, then we double down. So that’s another principle double down equipped, which I already referred to earlier today, that you do not have to pursue all of the ideas, but the ones which truly resonate. You have to do

george grombacher 9:34
the sunk sunk cost fallacy. How do you how do you think about that?

Alex Dang 9:41
Oh, well, that’s such a typical behavior of so many senior executives in larger corporations. And to be honest, I think that this could be one of the reasons why fortune 500 and less of these companies, if you compare the one today with the one One which was originally published, you will see that there are only only 10%, or around that number survivors in that list. So too many companies disappeared. And one of the reasons is that too often, they just stick to the plan that they had, in the very beginning, they have this notion of failure is not an option. And that’s a very wrong strategy whenever you pursue new ideas or innovative ideas, why? Because you have to actually fail often enough. That’s the idea, which will drive you in your search and your pursuit of homeruns, I actually use this very tactical thing I can share with your audiences that in my office at Amazon, I always had press releases of my successful launches, as well as of my failed budget. My team would appreciate that, but in some cases, they will just ask, why would you publicly discuss your favorites. And the reason for that is that I’m not afraid of my favorites. And I want them not to be afraid of those. And Jeff Bezos, who used to be the CEO and the founder of Amazon, he was actually proud of his failures, because failures should scale with the scale of your business and your ideas, if you never fail, and it means that you probably, you’re not taking enough risks. So this is the principle.

george grombacher 11:25
So if you’re not failing, it means you’re not taking enough risks you’re holding on for way too long. And that will slowly but surely, destroy your company.

Alex Dang 11:35
Totally. Again, I mean, it will be so many companies, which will dedicate part to various decision making to way more traditional mindset, which is the right thing to the because for day to day operations, you do not need things your mindset for to keep your supply chain working, you do not need venture mindset. But whenever you face things like or ideas like AI, artificial intelligence, or revote it, or some disruption in terms of the supply chain, or the need to completely reinvent the way that your product is delivered to your customers. That’s the moment in time when you have to switch gears when you have to switch from your traditional mindset to way more flexible, and we believe way more efficient mindset of venture capitalists. They just demonstrate that that’s the way that they had to develop their decision making process in order to be successful, because that’s the environment that they live in. And therefore we can learn a lot from them

george grombacher 12:39
is the idea to be perfect, or just to get as close to great decision making as as one possibly can.

Alex Dang 12:48
You may imagine that in the world of innovation, there is no such word as perfect, just because it’s all about MVP as we call it here in Silicon Valley or minimum viable products. So thanks that would work, work well and satisfy the customer need. But the same time will be always work in progress, because you’ll learn on the way. And that’s our piece of advice to larger organizations is that they will have to test and learn. And that is the right mode to experiment. We also give the same recommendation to people across other decisions in their lives. They do not have to bet the farm, they may not have to switch from one career to another. They may just explore new gates light with a book, I trust me, I never imagined myself a book author, if you asked me 10 years ago would say Well, that’s absolutely impossible. I’m not a writer, by no means but the same time what we did, we just tried to write a sample chapter in Baroda. And we presented the sample chapter, these ideas that we talk to our clients. Now we put it on paper and discussed with some book agents. And they said, Wow, that’s a pretty cool stuff. Let’s double down. And we did exactly that. And so it all starts with a small experiment that you dedicate only a percentage of your time to, but then if it works, then you may become and you become your gig. And that’s when the time is to perfect that and to make sure that it’s actually polished and readily available to be published. I

george grombacher 14:24
appreciate that. So, wisdom comes through experience, it comes from maturity, it comes from learning from others. So you’ve gone through the exercise of writing the book and 16 months or however long it’s been your partner did this exhaustive research and now people have it in their hands. And I think that we all hope that that we’re able to learn from others mistakes and and to glean wisdom from from others. How good are you at that? Then How good are most VCs at that?

Alex Dang 15:04
Well, learning from mistakes is something that certainly is a part of the VC journey, just because otherwise they would waste the whole fund. Some VCs that will give you one example They even created, so called anti portfolios. And some of them are publicly available. What is it? It’s a page where a very big recently, they listed all of their missed opportunities, companies that they rejected, which eventually, including zoom, or Google became truly truly transformational companies. Think about that. How often do you publicly discuss your failures are this kind of the failures of omission rather than commission thinks that they missed on the way I think no one is truly proud of their failures. But certainly that there’s a lot to learn from such failures. And obviously, in book writing, it was all about planning. And obviously, we made many mistakes on the way including committing to probably pretty strict timeline. But again, that’s part of the process is to learn on the go. Polish your style, find your voice, and hopefully, the result will be enjoyable. Yeah,

george grombacher 16:20
I appreciate that. I appreciate that. So the book is going to be live when the show certainly airs. Do I now identify as an author? Alex?

Alex Dang 16:33
I do. I certainly Yeah. Now added to my LinkedIn profile, we start that so many facts are not mentioned on LinkedIn. This is the one that I certainly will post online, and it’s already there. But look, I mean, it’s all of these bets are very long term. And my piece of advice or suggestion to my team members, as a mentor to my clients is whenever you deal with innovative stuff, new stuff thinks that we’re you’re creating something from scratch some unknown paths, that you have to be patient, and you have to think long. That’s what helps to make right decisions. Because think of my peers and colleagues from Amazon, when we discussed the your annual bonuses, I think what really mattered is that you worked for Amazon, that you experienced so many amazing businesses, and that your long term value is increasing, that you do deliver impact that you build phenomenal relationships as a result of that work. That’s why when you start to think long term, you see that the point that your annual bonus will be so small compared to the true impact of what you’re doing. So we hope that the book and its impact will be seen, not just the day when it’s going to be released. So hope, certainly I will be very excited. And when the first time I kept the book in my hands, that was an amazing moment. But the true appreciation, the true value is still going to be delivered years head when the book will hopefully generate some ideas and will help people to make better decisions, and especially high stakes decisions. That was our goal, and hopefully we’ll achieve it. Yeah,

george grombacher 18:18
well, I think it’s a I think it’s an incredible goal. And I’m confident you’re going to have a really profound impact in that area. Because we’re hit with so many different things. And people want our attention, they want our money and they want our time. And the better we can be at making good decisions about things saying yes to fewer things, and no to at least 100 things as it would be is probably going to position us for long term success. In terms of art, how important is what the company is doing to a VC as they’re looking to fund it versus that fundamentals of the actual business itself?

Alex Dang 19:09
It that’s amazing that we asked this question, George, because we actually had a research piece of research that addresses that specific questions. What do VCs actually pay attention to? When they make an investment? What is important? What made a company that they made an investment in? truly successful? So and here’s the results. What was the most important factor for a VC when they looked at the startup? What was the key success factor? It’s amazing to learn that that’s team we call it jockey versus the horse jockey meaning that the team which is leading the start of not just the founders, but the whole founding team, the first engineer, the first designer, the first is that person. This is plan of course matters and all the horse factors I eat product business model, the engineering component of that, of course, that matters. But if you have to ask if you if when you ask a VC, what truly became the success factor, it will be always the team. And why is that? Because when you deal with some uncertain environment, you do not know what kind of problems the team and the company would face. To some extent, you actually do not really know whether the product that they start with will be the product that they will end up with. And I knew glitch was a startup. tiny speck was the name of the startup glitch was the name of a game that they published. And you would never probably you never heard about that name before. But now we know the company which originated from that idea as slack and the birth was on the team. That’s the reason. The that’s the reason why so many startups pivot NBC still continue to make a bet on that team. And on that startup, because the bet is on the team. So think about that, from, say, a large corporation perspective. Normally the process is with the opposite, is start with the business plan, you discuss financial modals discuss very specifically PLC build the distribution strategy. As a partner at McKinsey, I went through that so many times. But then only the last question after the business plan is approved would be who would actually lead this idea? Oh, by the way, let’s start hiring for this idea for this phenomenal business. This is the wrong approach. You have to start with the team. So that’s why to address your question, what did you pay attention to pay attention to the team? And we think that when you deal with any uncertain environment, and your risky environment, you have to do the same way you have to think team first.

george grombacher 21:51
I love it. Well, Alex, thank you so much for coming on. Where can people learn more about you? How can they engage with you? Most importantly, where can they get their copy of venture mindset?

Alex Dang 22:01
So the copy obviously, you may imagine, as someone who worked at Amazon, I have my own preference. And that’s Amazon as a shrine member. And I worked hard to make sure that it is accessible for from different countries. There is a UK version you asked version so you can find your version. But obviously, it’s also available in brick and mortar retailers as well. So you can go to Barnes and Noble and other retailers. And I’m absolutely happy to stay in touch with people. I believe in the principle of paying forward and I love to help people if I can. Sometimes by just spending 1015 20 minutes with someone, it may change someone’s life or career. So yeah, they anyone can find me on LinkedIn. And we’ll be happy to stay in touch

george grombacher 22:45
with you enjoy as much as I did show Alex your appreciation and share today’s show with a friend who also appreciates good ideas. You could find Alex on LinkedIn, I will certainly link that in the notes and then get your copy of the venture mindset wherever you buy your books. But certainly Amazon is wonderful place to do that. We will link that in the notes as well. Thanks again, Alex.

Alex Dang 23:04
Thank you, George.

george grombacher 23:05
Till next time, remember, do your part by doing your best

Thanks, as always for listening! If you got some value and enjoyed the show, please leave us a review wherever you listen and we’d be grateful if you’d subscribe as well.

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Believing we’ve each got one life, it’s better to live it well and the time to start is now If you’re someone who believes change begins with you, you’re one of us We’re working to inspire action, enable completion, knowing that, as Thoreau so perfectly put it “There are a thousand hacking at the branches of evil to one who is striking at the root.” Let us help you invest in yourself and bring it all together.

Feed your life-long learner by enrolling in one of our courses.

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Episode Transcript

george grombacher 16:00
So if I want my iPhone, and my Tesla and my Bitcoin to work, we need to get the metal out of the ground.

Pierre Leveille 16:07
Absolutely. Without it, we cannot do it.

george grombacher 16:13
Why? Why is there a Why has production been going down.

Pierre Leveille 16:21
Because the large mines that are producing most of the copper in the world, the grades are going down slowly they’re going there, they’re arriving near the end of life. So and of life of mines in general means less production. And in the past, at least 15 years, the exploration expenditure for copper were pretty low, because the price of copper was low. And when the price is low, companies are tending to not invest more so much in exploration, which is what we see today. It’s it’s, it’s not the way to look at it. Because nobody 15 years ago was able to predict that there would be a so massive shortage, or it’s so massive demand coming. But in the past five years, or let’s say since the since 10 years, we have seen that more and more coming. And then the by the time you react start exploring and there’s more money than then ever that is putting in put it in expression at the moment for copper at least. And what we see is that the it takes time, it could take up to 2025 years between the time you find a deposit that it gets in production. So but but the year the time is counted. So it’s it’s very important to so you will see company reopening old mines, what it will push also, which is not bad, it will force to two, it will force to find a it will force to find ways of recalibrating customer, you know the metals, that will be more and more important.

george grombacher 18:07
So finding, okay, so for lack of a better term recycling metals that are just sitting around somewhere extremely important. Yeah. And then going and going back to historic minds that maybe for lack of technology, or just lack of will or reasons, but maybe now because there’s such a demand, there’s an appetite to go back to those.

Pierre Leveille 18:33
Yes, but there will be a lot of failures into that for many reasons. But the ones that will be in that will resume mining it’s just going to be a short term temporary solution. No it’s it’s not going to be you need to find deposit that will that will operate 50 years you know at least it’s 25 to 50 years at least and an old mind that you do in production in general it’s less than 10 years.

george grombacher 19:03
Got it. Oh there we go. Up here. People are ready for your difference making tip What do you have for them

Pierre Leveille 19:14
You mean an investment or

george grombacher 19:17
whatever you’re into, you’ve got so much life experience with raising a family and doing business all over the world and having your kids go to school in Africa so a tip on copper or whatever you’re into.

Pierre Leveille 19:34
But there’s two things I like to see and I was telling my children many times and I always said you know don’t focus on what will bring you specifically money don’t think of Getting Rich. Think of doing what you what you like, what you feel your your your your your, you know you have been born to do so use your most you skills, do what you like, do what you wet well, and good things will happen to you. And I can see them grow in their life. And I can tell you that this is what happens. And sometimes you have setback like I had recently. But if we do things properly, if we do things that we like, and we liked that project, we were very passionate about that project, not only me, all my team, and if we do things properly, if we do things correctly, good things will happen. And we will probably get the project back had to go forward or we will find another big project that will be the launch of a new era. So that’s my most important tip in life. Do what you like, do it with your best scale and do it well and good things will happen.

george grombacher 20:49
Pierre Leveille 21:03
Thank you. I was happy to be with you to today.

george grombacher 21:06
Damn, tell us the websites and where where people can connect and find you.

Pierre Leveille 21:13
The it’s Deep South resources.com. So pretty simple.

george grombacher 21:18
Perfect. Well, if you enjoyed this as much as I did show up here your appreciation and share today’s show with a friend who also appreciate good ideas, go to deep south resources, calm and learn all about what they’re working on and track their progress.

Pierre Leveille 21:32
Thanks. Thanks, have a nice day.

george grombacher 21:36
And until next time, keep fighting the good fight. We’re all in this together.

Thanks, as always for listening! If you got some value and enjoyed the show, please leave us a review wherever you listen and we’d be grateful if you’d subscribe as well.

You can learn more about us at LifeBlood.Live, Twitter, LinkedIn, Instagram, Pinterest, YouTube and Facebook.

Our Manifesto

We’re here to help others get better so they can live freely without regret
Believing we’ve each got one life, it’s better to live it well and the time to start is now If you’re someone who believes change begins with you, you’re one of us We’re working to inspire action, enable completion, knowing that, as Thoreau so perfectly put it “There are a thousand hacking at the branches of evil to one who is striking at the root.” Let us help you invest in yourself and bring it all together.

Feed your life-long learner by enrolling in one of our courses.

Invest in yourself and bring it all together by working with one of our coaches.

If you’d like to be a guest on the show, or you’d like to become a Certified LifeBlood Coach or Course provider, contact us at Contact@LifeBlood.Live.

Please note- The Money Savage podcast is now the LifeBlood Podcast. Curious why? Check out this episode and read this blog post!

We have numerous formats to welcome a diverse range of potential guests!

  • Be Well- for guests focused on overall wellness
  • Book Club-for authors
  • Brand-for guests focused on marketing
  • Complete-for guests focused on spirituality
  • Compete-for competitors, sports, gaming, betting, fantasy football
  • Create-for entrepreneurs
  • DeFi-for guests focused on crypto, blockchain and other emerging technologies
  • Engage-for guests focused on personal development/success and leadership
  • Express-for journalists/writers/bloggers
  • General-for guests focused on finance/money topics
  • Lifestyle-for guests focused on improving lifestyle
  • Maximize-for guests focused on the workplace
  • Numbers-for accounting and tax professionals
  • Nurture-for guests focused on parenting
  • REI-for guests focused on real estate

Feed your Life-Long Learner

Get what you need to get where you want to go

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