Sports Metaphors and Venture Investing

I originally wrote this for my Field Study in Private Equity class, but I wanted to archive it here as well:

I recently heard that the difference between a sport and a game is that
you can intentionally lose in a sport. Try to intentionally lose at
craps, you can make the odds bad, but you can't ensure a loss. Now some
sports have more skill (signal) than luck (noise), for instance I can
never get lucky and beat Usian Bolt, but I just might get lucky and upset the world champion of Poker. So poker has a lot more noise in it than does running.

Ok,
what does this have to do with venture you're asking. Simple, while
venture investing may not be a game (you could intentionally lose), it
is a very noisy sport. There are a whole lot of factors outside your
control that contribute to you wins or losses. Add to that the effect
that winners get earlier looks at better deals, and can get access to
deals based on their reputation that others might not, and it really
becomes tough to distinguish luck from skill.

Anyway, with the
signal to noise ratio so low it will be hard to tell who really has
talent vs. those that got lucky, at least if one is only looking at
returns. If you want to be a runner then you'll probably want to find a
different line of work; maybe this explains the large vc poker league in the valley.

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