Author: @mattigags

Compiled by: Deep Tide TechFlow

Unknown truths

"Fast learning, slow memory. Fast proposing, slow processing. Fast is discontinuous, slow is continuous. Small and fast systems guide large and slow systems through the accumulation of innovations and occasional revolutions, while large and slow systems control small and fast systems through restrictions and stability. Fast captures our attention, while slow possesses true power."

Excerpt from (Rhythm Layering: How Complex Systems Learn and Keep Learning)

Narratives are not designed for investors or founders, but rather for consumers and traders. For long-term investors, focusing on narratives is not the best strategy. Either get involved at the beginning of an event that has the potential to become a narrative, or wait until the situation clarifies before acting.

As cryptocurrency rose to fame for creating enormous wealth in a short time, many entrepreneurs flooded into the field between 2017 and 2021. Founders in this industry gradually shifted focus from solving real problems to pitching to venture capitalists (like us) to leverage the flow of attention. And we were drawn in.

The founder culture in the cryptocurrency space has shifted from focusing on substance to focusing on process. Everyone has started to mimic the same routines and previously effective buzzwords. However, when everyone is using the same methods, the effects diminish.

We do not believe that relying solely on processes will yield good results. Imagine if everyone is doing KOL marketing, how do you stand out among many adopting the same strategy? Intense competition quickly consumes growth opportunities.

In our conversations with founders in the cryptocurrency space, we found that genuine curiosity is becoming increasingly rare. Many start from buzzwords and narratives, trying to build products, or just raise funds around these. As a result, their presentations have instead become their "products."

People often mistake fashion for culture. They rely on those ephemeral narratives rather than building from fundamental principles. With increasing imitation, many products ultimately become homogeneous. Founders and investors often forget how to think independently, as in the cryptocurrency space, the clamor and trends seem to be the quickest path to wealth.

In the cryptocurrency industry, no one builds monopolies because everyone is competing on narratives. To establish a monopoly, inspiration and motivation must come from the grassroots.

Thus, answering the question "What are we looking for?" has become increasingly simple, even though we have taken many detours. What we seek is genuine curiosity and unique beliefs that are not influenced by fashion (fast). We believe that to create something great, one must be able to deeply construct and integrate their ideas and products on a cultural level.

Buzzwords and narratives are like fashion, easily replicated and imitated. Note that during frenzied times, everyone ultimately does the same thing because they only focus on superficial aspects. Founders often think, "I am discovering X," where X is the trendy buzzword or the concept that fits the narrative.

Most founders achieve true innovation through serendipitous experimentation. The core almost always originates from genuine curiosity. Their approach is, "I am studying this problem, let's see what we discover." This is a solid foundation for building meaningful results. Ideally, it also means discovering an unknown truth.

You go against the trend.

This might just be a revision of Peter Thiel's "secret" concept, but here is our perspective. If you listen to the various discussions and narratives happening now, which do you think are the truly obvious truths, and which are the obvious lies? What are the truly non-obvious truths, and what are the non-obvious lies?

The distinction between what is obvious and what is not can be reinterpreted as popular versus unpopular, or as knowable versus unknowable based on existing data. Taking cryptocurrencies from 2021-23 as an example:

The obvious truth:

Cryptocurrency will be affected by interest rate hikes. DeFi yields are not sustainable. Conflicts are unfavorable for cryptocurrency.

The non-obvious truth:

FTX is a criminal organization. L2 causes liquidity fragmentation. Stablecoins are the product-market fit of cryptocurrency.

Non-obvious truths require unique insights, while obvious truths can be observed from a distance, yet still lack absolute certainty, as nothing is absolutely certain. The distinction between the two is not necessarily binary, but more likely a continuous state.

Here is an example of placing these concepts into a 2x2 framework:

So, in the false narratives and claims of that period, what things were obviously not going to happen, and which were harder to predict?

Here is what we got:

Looking back, these concepts seem clear. And looking forward, everything is full of uncertainties, but by assessing the beliefs of founders when building products, one can see the independence of their beliefs. Because if a founder forms opinions solely based on obvious facts, and the product is not based on any non-obvious truths or fallacies, how can it grow into a great company, project, or asset?

Some people talk about counter-intuitive thinking, but it is not an ideal way of thinking. While a hypothesis might seem contrary to consensus, it is not derived from observing consensus and forming an opposing viewpoint. Hypotheses should be analyzed from fundamental principles without being influenced by consensus.

The above examples are on a macro level, but let’s analyze a specific successful cryptocurrency project in recent years. If you were lucky enough to receive promotional materials for Solana in 2019, you could analyze them as follows using the 2x2 framework.

The non-obvious truth hypothesis played a positive role in the development of Solana. It brought the discussion of modular versus monolithic architecture into focus, which was not common before. In the past, most people were accustomed to thinking in modular terms. Solana also wisely identified sharding technology as a dead end.

In the process of entrepreneurship, being able to identify the content of each quadrant is very helpful. If your insights only stay within the obvious realm, you may not have unique value and are merely competing for market share with numerous competitors.

If your beliefs are entirely reliant on non-obvious things, you may be building in a vacuum, possibly lacking market demand, or just guessing blindly (if you are aware of this, that is fine).

If you build products based solely on truths, you may not recognize issues in existing products or patterns. And if you build solely on erroneous assumptions, you might create problems that do not exist, such as believing that creator income is uneven or that the commissions of market leaders are too high.

Ideas worth exploring

Those who innovate out of genuine curiosity tend to solve problems best. Utilizing our 2x2 framework to analyze your unique insights can help clarify your positioning in the market and the value you can provide.

The way to execute unique beliefs is as important as maintaining curiosity. While great ideas are rare, excellent execution is equally scarce. The ability to quickly launch products and iterate is a rare capability. Often, not relying on standard manuals at the beginning, but instead choosing personalized paths that cannot be scaled temporarily, is a worthwhile approach.

Best practices and operational manuals can indeed be useful at the right time, but should not be overly relied upon in the early stages. Using them only when the timing is right allows the market to naturally build narratives and buzzwords around your product.

Many entrepreneurs often get it backward when starting — they focus on buzzwords first. Perhaps most founders are like this. But for early-stage startups, substance is most important, and processes are merely tools to help scale substance.

Rather than saying, "I am discovering X," a better mindset is, "I am solving this problem, let's see what the outcome is." This is almost an aesthetic pursuit. In other words:

"Without reliance, with nothing to lose... in this mindset, only do those things that are truly reasonable: no hidden fears, no moral constraints, no rule restrictions, no potential shackles, no subtle concern for the forms of those around you, and most importantly, no concern for oneself... His actions do not have guided images, no hidden powers; he is simply free..."

…when we are completely unguarded — in those moments, our most important things will emerge… consciously striving to reach this state, or pursue freedom, or become anything, the semblance brought by such effort will always undermine it." — Excerpt from (The Timeless Way of Building) - Christopher Alexander