"Are early stage investors and venture capitalists better than an algorithm? This paper suggests that the answer to that question is ‘no’. Although venture capitalists outperform the broad stock market quite significantly, most of this overperformance is driven by only a subset of their investments. An algorithm can prune out the investments that are ‘predictably bad’. This increases returns by approximately 7–41%, creating an even larger magnitude of outperformance versus the stock market. The author believes the reason for the poor investment decisions is the over-weighing of the characteristics of the founders of startups. Interestingly, I wonder if there is a repeated interaction component that might be at play – if you back the founder during a failed investment, the founder might accept you as an investor in the future when they’ll have a more successful investment."https://www.nominalnews.com/p/new-research-highlights-decemb...
threeseed|1 year ago
Apparently this is why Sequoia is backing Musk with x.ai.