Tim Draper: downside analysis and the possible upside
Richard asked Tim Draper about costly mistakes. Draper described missed investments and then separated two questions: what could go wrong, and what might happen if the company succeeds.
Fear has a research job
Draper said fear can help identify possible failures. In the same answer, he recalled investments that had looked difficult at the beginning, including a car company entering a capital-intensive industry. He used those recollections to explain how he considered opportunity alongside the obstacles.
Regret and a failed investment
Draper said some opportunity-driven decisions had failed without becoming decisions he regretted. He distinguished regretting a decision from losing money on an investment.
In Tim Draper's words
"use your fear to figure out you know what could go wrong but then always invest for what if it works" (Tim Draper, the recorded interview with Richard C. Wilson)
How to use this
- Write the failure scenarios and the successful outcome separately.
- Keep the investment decision distinct from how a past decision feels in hindsight.
Questions and answers
What question does Draper add to downside analysis?
He adds what if it works, asking about the outcome if the company succeeds.
What did he say about failed decisions?
Some investments failed, but he did not regret the opportunity-driven decision to make them.