Choosing the right ladder
David Peterson

I came across this tweet by Aaron Renn last week and found myself nodding along. So I wanted to interrogate why Renn’s story about the importance of choosing the “right hierarchies” seemed to intuitively resonate with me and the work we do here at Angular.

If I’m not mistaken, what Renn is referring to in that tweet is an idea that Tyler Cowen and Daniel Gross introduced in their book Talent: How to Identify Energizers, Creatives, and Winners Around the World, about the importance of finding people who “climb the right hierarchies.”

Here’s the relevant passage:

Knowing how to perceive and climb the right hierarchies is one of the most stringent but also most universal tests available. It requires emotional self-regulation, perceptiveness, ambition, vision, proper sequencing, and enough order in one’s activities to actually get somewhere. Whenever you see signs that a candidate has this skill, look much more closely. If anecdotes suggest cluelessness about hierarchies, give that person a significant downgrade, at least for all jobs requiring ongoing initiative and learning over time.

The way I read this is that everyone is climbing a ladder in life, and choosing the right ladder to climb has a significant impact on where you end up. As a result, if you care about identifying people that will “win,” then you ought to care about identifying people that are focused on climbing the right ladder for whatever goal they’re seeking to achieve.

This is obviously relevant if you’re actively identifying talent in your role (whether you’re an investor backing founders or a founder building your team). But it’s also relevant if you’re a founder trying to figure out the optimal strategy for your company.

Something we say at Angular is that we back founders that have global ambitions for their businesses. What that usually means is figuring out the US market as soon as possible. This isn’t universally true. There are businesses - good businesses - that don’t require focusing on the US from the beginning. But in my experience, those are few and far between. And it’s because of exactly this dynamic that Cowen and Gross have identified.

The US is the market that matters. It’s big and homogenous, meaning you can grow for longer without needing to globalize. Companies are (generally) more willing to experiment with new technology, and have the budgets for it. As a result, yes, the US is the market with the toughest competition. But it’s also the market where you can grow the fastest and compound your learning (and your revenue) to improve more quickly. Once you start climbing the ladder, you’ll either fall off, or you’ll learn how to climb faster. In other words, it’s the market where you’ll learn whether or not you can actually make it.

If you spend your time climbing the ladder in a different market, you might win. But you’ll win at the wrong game. And your competition in the US will eventually show up and, having compounded their learning and revenues for years, clean your clock.

Again, this isn’t always true. Especially for businesses that can still be massive at a regional scale (e.g. neobanks). But, in general, the rule holds.

This core insight is true for ideas as well. If you want to build in a specific industry, you need to be “in the flow” of that industry. If you want to build a core piece of technical infrastructure, you need to embed yourself with people who are on the cutting edge of that technology. In this case, climbing the right ladder isn’t about choosing a market, it’s about surrounding yourself with the people (researchers, technologists, entrepreneurs and customers) that exist within the hierarchy you care about. This is particularly true for areas that are evolving quickly, like AI, where groundbreaking developments are a daily occurrence.

Critically, you can do this from anywhere. We live in a globalized world. You don’t need to be based in San Francisco to build in AI, despite claims to the contrary. But you do need to get plugged into the right conversations. Because if you’re going to play the game, you may as well play it to win.

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ENTERPRISE/TECH NEWS

The (former) best bromance in tech. From cash to compute power, Microsoft has played an integral role in OpenAI’s success. Sam Altman has gone so far as to call the partnership with Microsoft “the best bromance in tech”. However, it’s reported that their partnership has started to fray. “Financial pressure on OpenAI, concern about its stability and disagreements between employees of the two companies have strained their five-year partnership, according to interviews with 19 people familiar with the relationship between the companies. That tension demonstrates a key challenge for A.I. start-ups: They are dependent on the world’s tech giants for money and computing power because those big companies control the massive cloud computing systems the small outfits need to develop A.I.”

Vertical AI. BVP examined why the future of AI is vertical and how AI is unlocking markets that were previously impenetrable for traditional SaaS companies. According to BVP, vertical AI could surpass traditional vertical software by reaching larger markets and offering new capabilities. They even predict that “Vertical AI’s market capitalization will be at least 10x the size of legacy Vertical SaaS as Vertical AI takes on the services economy and unleashes new business models uniquely capable to serve this category.”

Farming on Mars. With SpaceX’s recent catch of the Starship booster, humanity is one step closer to setting foot on Mars. However, Mars remains uninhabitable, and a critical challenge in terraforming the planet is learning how to grow food in its soil, rich with toxic salts called perchlorates. “For NASA, that’s a devastating issue. The ultimate goal of the agency’s Artemis program is to land astronauts on Mars. And for the last decade, the agency has pursued a long-term plan of establishing an “Earth independent” human presence on the Red Planet. More ambitiously, if less plausibly, Elon Musk, the chief executive officer of SpaceX, has stated that he expects a million people to live on Mars in the next 20 years. Any notion of an independent Mars means the perchlorate problem must be solved, because humans have to eat. Resupply missions are, by definition, Earth dependent, and hydroponics are inadequate for feeding people in large numbers.” Scientists have discovered some promising solutions to being able to farm the soil on Mars, such as developing specialized greenhouses, utilizing soil treatments to mitigate toxicity, and experimenting with crop varieties suited to the hostile conditions on Mars.

HOW TO STARTUP

DevTools lessons. Jack Bridger interviewed over 100 DevTools founders and summarized the key lessons in a fantastic write-up. The main takeaway is the importance of understanding users deeply by listening to their needs and feedback. On how to actually go about listening better, our friend Adam Frankl shared some key advice: create a technical advisory board of up to 50 stakeholders and speak to them frequently – at least once a month ideally. Another great lesson shared in the post was from David Mytton, the Co-Founder of ArcJet: “It's not that building a good product is easy, it's just that engineering founders probably know how to do it. But that's only 50% of building a startup - the other 50% is building the commercial growth engine, and that's much, much harder! As a second time founder, that's what I'm trying to spend most of my time on: how can I get more people to try the product?”

AI eating software. Software has been eating the world for quite some time. However, Accel’s latest Euroscape report solidifies that the new era is upon us: AI is the main value driver of the tech world – and it’s eating software. The report highlights the massive amount of capital tech companies have invested in AI. The tech titans (Google, Meta, etc) are investing in the tens of billions in AI, AI majors (OpenAI, Anthropic, etc) have received billions in funding, and AI challengers (Mistral, Safe Superintelligence, etc) have received hundreds of millions of funding. Gil tweeted his thoughts on how this massive tech investment affects early stage market. “It's not that capital is not important, it's just the capital arms race in most spaces is essentially unwinnable by any player not able to raise $1B+. So if a company really views capital (or H100s or whatever) as an important success driver, it's probably just not relevant for most early-stage funds. Probably not for Series A either. Only the platform firms should play.”

HOW TO VENTURE

Boom and quiet bust. Jason Lemkin reported that, while AI is fueling a boom in VC, there’s also been a quiet bust of the VC industry. Per the latest Pitchbook-NVCA report, the number of VCs investing is down a staggering 62% from its peak in 2021 – and 25% since 2023. The top VCs are still able to raise capital, but most VCs are struggling. “The Haves are still running a version of the 2021 playbook, just focused on AI. And the rest? It’s kind of like 2014-2016.”

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