Epistula #14: The Hubris of Timing
Why being right about the future isn't enough to capitalize on it.
Timing is one of the most critical aspects in investing. Any investment, and any portfolio, can be made — or broken — by great or terrible timing. Even seemingly mundane things largely outside of an investor’s control, like when they graduate, when they start investing, or when they retire, can have a massive impact on their lifetime returns.
But in reading about our industry, I’ve noticed that timing is one of the least-discussed topics. This feels like a miss.
I want to share two thoughts about timing in investment management. The obvious caveat is that this focuses heavily on the kind of investing Deciens does: very early-stage companies, usually with a tech or tech-adjacent bent.
Thought 1: Cash burn is an implicit bet on the timeline of technology adoption.
In the 1990s, we had pen computing — signified by Palm, Apple’s Newton, and General Magic — and networked computers at scale (i.e., the internet). The inevitability of these concepts was clear. But it was unclear when these ideas would come into their own. When would technological infrastructure, price, content, distribution, and other factors align to enable widespread adoption?
For the internet, it really took until the mid-aughts for that to happen, requiring a giant capital bubble and its subsequent implosion. For mobile computing, it took yet another decade for iOS and Android to become the dominant platforms. And it required technological shifts like multi-touch user interfaces and the widespread rollout of 3G cellular networks.
“Being too far ahead of your time is indistinguishable from being wrong.”
The Perils of Being "Right but Early"
When people invest in these speculative ideas and encourage companies to operate at significant deficits, they are implicitly investing in two distinct things. First, they are investing in the prospect that the speculative idea will prove to be correct (however defined). Second, they are investing in the timeline for when those ideas will prove correct — the timeline defined by the company’s runway and its ability to extend it. Being right on the trend and being wrong on the timing — with a company that is not self-sufficient — is tantamount to being wrong. As Howard Marks famously noted, “Being too far ahead of your time is indistinguishable from being wrong.”
Just look at General Magic and the litany of internet companies that were “right,” early, cash consumptive, and worthless.
Conversely, investing in self-sufficient companies affords tremendous flexibility, adaptability, and, by extension, an appropriate degree of intellectual humility regarding timing the maturation and adoption of any given technology. In our portfolio, we consistently preach the virtues of eliminating existential funding risk. That, of course, protects our equity investment. But it also hedges against the risk of being wrong about the exact timing of adopting any particular technology. Given that I was born without the gift of prophecy, making such errors seems inevitable and something our investment process can and should account for.
Modern Case Studies: VR, AV, and AI
Virtual Reality: Since the term “virtual reality” was coined in the 1980s, its history has been littered with companies, large and small, betting on when VR would mature and when consumers would adopt it. Meta spent over $100B building an entire ecosystem that has found marginal adoption at best. They are now retrenching on that mistimed bet, firing the 20% of the company associated with it, and likely regretting renaming their entire corporation after it. The technology and value proposition are still not there — and, in my opinion, may never be.
Autonomous Vehicles: Another idea decades in the making, self-driving cars may finally be taking hold, with Waymo, Zoox, Tesla, and others deploying large-scale fleets in cities across the US and beginning to expand internationally. But Zoox is an instructive example. The company made a massive bet on how quickly it could develop and commercialize an autonomous driving system. When that timeline didn’t come to fruition (and these things always seem to take longer and cost more than people think), they had to find a buyer to be their white knight. In this case, it was Amazon. Zoox was right about autonomous vehicles. It simply ran out of time to be right on its own terms. If they had built their AV program on top of a business that was free-cash-flow generative, like Tesla or Waymo within Google, they could have afforded themselves the years and capital they likely needed to reach the promised land (of autonomy).
Artificial Intelligence: It's very clear that AI portends one of the biggest shifts in technology since the release of smartphones, or maybe even the internet. But the timing of its adoption and the pace of high-quality revenue growth are the biggest bets of them all. Investors across the capital structure — venture capital, growth equity, buyout, venture debt, private credit, and public markets — are falling all over themselves to fund it across the entire value chain, from power and chips to data centers and drones. You name it, the topic du jour is AI.
But what happens when the rate of adoption (and revenue) falls short of expectations? What happens when investors are no longer willing to subsidize meteoric burn rates? What happens when the returns on equity are simply not good enough, given the costs of capital, risk, and illiquidity?
If success takes three years instead of one or five years instead of three, the difference in timelines does not seem material in the grand scheme of things. That delta, however, may be unsurvivable if you are a company constantly hoping someone will finance you, ideally at ever-more-inflated valuations, and will continue to do so on company-friendly structures. And even if capital is still available, Deciens, as an early shareholder relatively low on the capital structure, has to constantly worry about the possibility of having the value of our equity investment decimated in a punitive financing, as these surely will be. Seeing all our time, energy, and capital wiped out by other investors who ride off with large profits built on our largesse is surely a fate worse than the company just liquidating.
This timing risk sits with the company, but it operates just as ruthlessly, and differently, at every level of the capital structure — including for the investors writing the checks. That brings me to my second point.
Thought 2: You can be completely correct about a thesis, but wrong about timing, and potentially destroy all your returns.
Amazon went public in 1997 at $0.075 a share. During the dot-com bubble, it peaked at $2.50 per share in December 1999. If you put $100 into the stock at IPO, it would be worth approximately $320,000 today. But if you bought just before the bubble burst, it took until early 2010 just to get back to the $2.50 per share high-water mark. (Note: since going public, Amazon stock has undergone three stock splits. For this example, I am using only split-adjusted figures to compare apples to apples.)
The Long Wait for Recovery
Amazon is, admittedly, a cherry-picked example — a long-term winner and one of the few generational companies created during the irrational exuberance of the dot-com boom. It took Microsoft until 2016 to return to its dot-com bubble high. And Microsoft is no slouch. It took Cisco a full 24 years — until 2024 — to get back to its high-water mark (according to data by Red Lotus Capital).
When you buy a stock and when you sell it really matters. You could have been completely right about Amazon, e-commerce, and the internet in December 1999, and still not made a dollar for more than a decade.
I see this happening in today’s market. A lot of stock buyers, especially in the private market, will be correct in their thesis around AI, defense tech, space tech, autonomous vehicles, whatever the flavor of the week happens to be. And they will lose money. Likely a lot of it. Maybe even every penny. The price you pay, the security you buy, the company, the capitalization, the macro environment, and, of course, the timing — all of these and many other factors play big roles in whether an investment actually makes money for its stakeholders. Investors should never confuse or conflate the correctness of a thesis with its ability to create returns, let alone risk-adjusted returns in excess of an investor’s cost of capital.
Standing When the Future Arrives: The Deciens Defense
“At Deciens, our defense against hubris in timing is simple: we demand capital efficiency. We have no interest in subsidizing melted wings. ”
The internet, in my humble opinion, is one of the top five most transformative technologies ever created. It generated untold wealth and many multiples of that amount in consumer surplus. And yet many, many people who invested in the internet lost their shirts. And that continues from the dawn of the internet in ~1994 straight through till today. AI will be no different. It will be one of the top five most transformative technologies ever created. It will generate untold wealth and a correspondingly greater amount of consumer surplus. And yet many, many people will lose their own and others’ fortunes.
We have always believed that the only way to make real money in venture capital is to be non-consensus and correct. That is as true today as it was when modern venture capital started in 1974. But the best way to ensure you are correct is to avoid being judged on a specific, overly rigid timeline. To do that, you must avoid living under the proverbial financing gun. At Deciens, our defense against hubris in timing is simple: we demand capital efficiency. We have no interest in subsidizing melted wings. Instead, we partner with founders who build businesses that can afford to wait for the future to arrive, positioning them to stand when it finally does and reap the rewards. Timing matters.
