Who is Chamath Palihapitiya?

Image source: Time

Chamath is a former Facebook executive who became a venture investor.

He was born in Sri Lanka and moved to Ottawa at the age of 6.  He did electrical engineering at the University of Waterloo. He is currently based in San Fransisco.

While still employed at Facebook, he made investments on the side in companies such as Palantir, Pure Storage, and Bumptop (which was bought by Google).

In 2011, he left Facebook to start his fund, The Social+Capital Partnership with his ex-wife.  In 2018, he shut his VC funds to new investors.

In the past year, he raised six SPAC. Including one that had merged with Virgin Galactic.

He is also a minority stakeholder and board member of the Golden State Warriors.

No doubt, he has lived a successful life as an investor. So what can we learn about how he invest? Luckily, he often shares his thoughts on investments from many avenues, such as from his Twitter page.

Strategy #1 – Invest in The Winner

It is easier to buy the winner of a particular industry and let it grow over time instead of trying to find a company that will be able to outperform the current top company.

Strategy #2 – Focus on Behavior and Psychology

Chamath said we can have the best model or analysis in the world but if we panic, we lose.

And everybody has a plan until they get punched in the face.

The most important thing we can do to maximize the odds of success is to figure out what, if any, behavioral advantages we can have or can create ourselves.

What rules can you live by that will prevent you from doing something stupid especially when everyone is losing their mind?

Strategy #3 – Buy Companies, Not Stocks

When Chamath buys stocks, he views them as buying companies. It is like hiring a great CEO to work for us or our family. We can rest well knowing that Bezos, Musk etc. are on the job.

He said it is not true for all CEOs so we have to decide accordingly.

Strategy #4 – Buy Companies That Can Potentially 10x in 10 Years

For Chamath, if he is not willing to do that, he will not buy it. His goal is to become disciplined in a process and repeat this process.

Strategy #5 – He Tries Not To Look At Prices Every Day

He prefers to look at the annual report vs quarterly earnings.

He said that if he becomes too short-term focused, he is his worst enemy and he will overthink, overreact and underperform his potential.

Once we have bought a company, the hardest decision is no decision, patiently waiting to be right. Hence, he tries not to look at prices every day because he said the market price and the truth are not always the same. Looking at daily prices makes it harder for him to see the difference between the price and the truth.

Conclusion

In conclusion, Chamath’s investing style is ultimately not about looking at technical patterns or stock charts. He looks at the business and he tries to understand and invest in businesses, not stocks. Once he is vested, he let the CEO do their job, and he targets companies that could potentially 10X in 10 years. Most importantly, he understands that investing is a game where we must identify our behavioral edge and not do stupid things.

Disclaimer:

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