Trajectory over intercept

We tend to overestimate the short-term, and underestimate the longer-term and power of compounding. 

One advice that has served me well when making decisions - whether on choosing my next job, making a hire, investing in a stock or idea, or pursuing an interest - is to focus more on the trajectory, rather than where the options are right now. An article that I read recently advices to pick "springboard careers" - the ones that take you to the next job or life that you want. Chamath Paliapitiya advices to evaluate stocks by as a multiple of their expected revenue in 3 years. 

Investing 101: Whether it’s been my job, my life or my investing, I’ve learned that ”longterm-ism” is an important key to success.

I’ve gotten the most back when I invested my time, vulnerability and money with very few short term expectations but many long term ones.

— Chamath Palihapitiya (@chamath) September 17, 2020

Consider 2 companies - Company A is valued at $300M and Company B is valued at $1B. You have a choice to work at either company. A offers you ~$100K in equity and B offers $150K. B is larger and provides you a few more perks and higher base. A is growing at 30% and B is growing at 10%. 

In 3 years, A would have doubled to $650M and B would have grown by 30% to $1.3B. Your equity in A would be worth $220K and B's would be $200K. With A, your career growth would have likely doubled as well - you'd have seen, learned and achieved more things. With the experience, you can then move to B or another company at a more senior level. 

If you work in tech, this steep trajectories are common. Thanks to how software and technology continues to eat the world, there are multiple companies growing exponentially - so there is a high opportunity cost of working in a slower company, especially earlier in your career. 

The hard part with this advice is predicting trajectory. 

How do you predict trajectory?

The first trick is to focus on growth and longer-term when making impactful decisions. Most people don't. 

Past and current growth rate (and rate of growth rate) are often good indicators of the future. Growth often provides momentum for more growth. It's rare for companies, especially at later stages, to speed up if they have started slowing down. [Both Apple and Microsoft are good counterexamples and their turnaround can be attributed to dramatic leadership and market changes.]. Also make sure that the growth is "sustainable growth" - many startups show growth numbers by selling $10 at $9, have business models where economics don't improve with scale, or operate in limited markets. 

Look for companies that demonstrate both ambition and craft. They think big and operate in a large, growing market. Their current business and product are high quality and appreciated by customers and industry experts. 

Look for where more smart and ambitious people are concentrated. If many of them have chosen an option, then maybe it's a good one. And even if it doesn't pan out, you personally grow with a network of smart people. 

Keep a pulse on larger and long-term market trends. Bet on companies that go with these trends. I like Jeff Bezos's approach of predicting "what isn't going to change", rather than trying to guess what is going to. 

You will make mistakes. Quit early and cut losses when things aren't going well. With both stocks or jobs, people err on holding on to bad choices, even when there are better alternatives.