There is a conversation going on right now on Twitter between people whose views I respect: Chris Dixon, Eric Paley, Rob Go and Michael Karnjanaprakorn (and yes, I had to look). An analogy has been made, disputed and discussed about how VCs are like product managers, rather than product designers. That is to say, serial makers of bets, easy to do, hard to do well, and generally commodity.
I think some of the confusion in this discussion is that the analogy is directionally fine but ultimately tangential. The analogy I prefer is that being a VC is actually more like being an actor than it is like a lot of other things. Anyone can act, but very few can do it well. And generally speaking you know that Meryl Streep is a great actress and Jessica Alba isn’t, but you can’t necessarily say why or what they do differently in a measurable way. Similarly it’s hard to extract what exactly the good VCs do differently than the mediocre ones (although many have tried and will bend your ear with their theories). VCs get returns, which ultimately determine the good ones from the bad ones, but that’s retrospective scoring with plenty of variability (read: luck). Acting is the same – plenty of cruddy actors get paid a lot of money to do it (Paul Walker still gets paid to do movies).
Ultimately what this is about is technical skill versus non-technical skill. Acting is a non-technical skill (although that’s not to say there isn’t technique, talent or work involved). Because it’s simply doing things that everyone naturally does anyway, anyone can be a bad actor. VC is the same. When you truly boil down the job, it is essentially two things – choosing investments and serving as a Board Director. And both of those are non-technical skills. Anyone could point to companies and say (like the guy in Little Britain), “I want that one”. And anyone can show up to board meetings and render opinions. Because VC is fundamentally a job of judgment. And just like with acting, despite being non-technical, some people are really good at it and most people are not.
Compare this to truly technical professions. Acting is non-technical, but music is highly technical. If you don’t know how to play the trumpet you will not be able to play it badly, you will most likely to unable to produce a sound at all. Software development is technical. There are good software developers and there are bad ones, but lay people cannot write bad code – they wouldn’t know how to begin.
I would argue that both product design and product management are technical skills, and thus easily distinguishable from VC and less distinguishable from each other. Both are rigorous and both require specific knowledge to execute at all, to say nothing of well. And I’d argue that neither are commodity, although I’d agree that one is scarcer than the other.
Seemed easier to blog this than to break it up into 140-character chunks.