Relationship Liquidity
Haaave you met so-and-so?
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They say we’re the average of the 5 people we spend the most time with. The same is true of the content we consume. You are the average of the 5 writers, 5 albums, or 5 artists that you spend the most time with.
I see the cultural impact of my media choices in most aspects of my personality and mental models. Just with movies alone, my wife will be the first one to tell you that what I say or how I act is riddled with references to things like Angels In The Outfield, Uncle Buck, Shrek, Ferngully, Pulp Fiction, Remember The Titans, and on and on. Unfortunately, much to the chagrin of any adult who went through their teenage years, this is also true of the 5 TV shows that you were obsessed with when you were 14, no matter the quality.
For me, that's shows like Scrubs, The Office, Chuck, Veronica Mars, Firefly, or How I Met Your Mother. That last one is where I get today's subtitle and graphic. Throughout the show, there is a game for one character to get another character to meet people called "Haaave you met Ted?". I probably haven't watched an episode of the show in almost 10 years, but when I started thinking about today's topic, that game popped into my head.
Let's dig into some thoughts on a conversation I had this past week about building meaningful relationships in every aspect of life.
Side Note: I don't love using Barney Stinson as an analogy because the character hasn't really held up over the years (and is in the midst of an attempted redemption in a spin-off show). But the comparison is what popped into my head, and it holds up sans the womanizing 🤷
[Marketplace] Liquidity
The concept of a marketplace is a fundamental part of human history for as long as people have been engaging in trade. Some estimates put the arrival of the first physical marketplace at 3000 BCE when zoning in particular areas pushed commerce into a central location.
Marketplaces are just as intricately connected to the history of the internet. When people were initially getting online in the early 90's, one of the very first activities revolved around marketplaces. Potentially one of the first, ever, online marketplaces launched in 1982! The Boston Computer Exchange.
Some of the biggest internet businesses have been marketplaces: eBay, once worth $80B, Alibaba, once worth $600B+, and obviously Amazon, worth over $1 trillion. The years after 2008 gave rise to new marketplaces, like Uber, Doordash, and Airbnb that, rather than buying and selling things, they enabled buying and selling services. Delivery, transportation, experiences.
Even social companies like Facebook and Google were built around a marketplace of sorts. They, instead, referred to them as network effects. But the idea is very similar to a marketplace. Participants on both ends that want something out of what takes place in the middle.
In marketplace fundamentals, there is a concept called marketplace liquidity. The combination of how much supply you have, how much demand you have, and how well those two things line up.
In particular, I liked this quote from Julia Morrongiello who was at Point Nine:
"Liquidity is the lifeblood of marketplaces. It is the efficiency with which a marketplace matches buyers and sellers on its platform. One could say that a marketplace without liquidity has no real product because the ability to transact on the platform IS the product."
Every interaction has some kind of middle ground. Every marketplace, every transaction, every network, every relationship. Every interaction has aspects that increase or reduce friction. There are things (forces, companies, people) in the middle that either add to or take away from that friction.
Everyone Is A Marketplace
Relationships are tricky things. They are simultaneously the most important, most complex, and most universal aspect of the human experience. People use short-hands to understand a massive and complex world when it comes to relationships:
"Over the last few hundred millennia, humans have developed societies too large for people to know and recognize one another individually. Members of such societies depend on markers of identity to spot compatriots — clothes, languages, habits, cuisines, and belief systems. Identity and markers of identity are central to the human experience."
The kinds of patterns we use to prioritize relationships lead to a lot of insulated cultural bubbles. In the world of venture and tech, there is a sometimes intense focus on relationships over any kind of meritocracy. The call to do away with "warm intros" has plenty of merit, though that's a slightly different conversation.
While almost every institution and industry could do a much better job of rewarding merit over proximity, there will always be a critical aspect of relationships in everything you do.
People accept jobs, take meetings, do favors, ask questions, and offer help almost always because of who they know. "Knowing someone," can mean a lot of different things. People do respond to people they've never met before, but there is still an aspect of "knowing" that usually explains why that person responded.
I've written before about the art of cold outreach:
"The most important thing to do, far in advance of needing to reach out, is to communicate your vibe online. Writing, tweeting, making videos or doing podcasts. My biggest struggle with creating content online was feeling like it would just be shouting into the void. But when you start having lots of these conversations, you realize that these conversations get easier when you have a body of work to communicate your interests and perspectives, in hopes of attracting like-minded people."
Even just "communicating your vibe online" is a form of allowing someone to "know" you. It's similar to the identity-based short-hands people use to recognize their "compatriots." Whether someone has seen me on Twitter, or has read my writing, or even just knows about Contrary, all of those can be effective ways for someone to know me, and therefore be more likely to engage.
Whether you know someone as a friend from childhood, or from a previous job, or church, or an event—every person represents a marketplace sitting in between any number of people you know and any number of people you know that other people you know would like to also know.
The question isn't really "are you a marketplace?" You are. Everyone has participants sitting on either side of them, and they're the only middle ground. So-and-so might never meet such-and-such unless I facilitate the relationship. The question, instead, is how good of a marketplace are you?
Increasing Relationship Liquidity
I don't profess to be any sort of networking guru or superconnector. In fact, I'd give the majority of the credit for this post to a good friend of mine who is probably one of the most well-networked and thoughtful people I know. Before turning 30, my friend was rubbing shoulders with Fortune 500 CEOs, billionaires, media moguls, and religious leaders.
As I've thought about how to become a better "marketplace" for relationships, I first wanted to step back and reflect on the "why." Relationships are supposed to be genuine human connections. Unfortunately, there is an ocean of "thought leadership" out there that make these human experiences into rote transactions.
The only way to avoid making these kinds of interactions cringey beyond all reason is to focus on value creation, never value capture. Be a genuine human being who wants to connect people because you like these people, and you think their lives will be better as the result of meeting each other. If you're doing it in hopes of getting value out of those people, go touch some grass, cause you might be a scrub.
As I started to unpack some aspects of what seemed to be logical ways to increase relationship liquidity, these are the three things that came to mind for me, often because they come up when I'm talking to my superconnector friend:
Natural Curiosity
"Start Where They Are"
Specialization
Natural Curiosity
I've written before about curiosity. I'm thoroughly convinced that it is one of the defining characteristics of any successful person in any field (though, not as much for cats):
"The most curious people I know are constantly paying attention to how things work. Creativity is often remixing the things around us, but in order to remix we have to experience. We take in information, experiences, and perspectives, and then roll them into something new. 'The whole is greater than the sum of the parts.'"
Being curios is, I think, the starting point to building any relationship. People talk a lot about the importance of things like listening, and asking good questions. But if you're able to be genuinely curious, you're likely to find yourself listening intently and asking good questions quite naturally.
Curiosity, though, has its limitations. One person, however endlessly curious they may be, cannot hold an endless amount of information in their head. Dunbar's Number is the go-to explanation for the limitations of an individual's potential network; 150 people.
"[Dunbar] proposed that humans can comfortably maintain 150 stable relationships—relationships in which an individual knows who each person is and how each person relates to every other person. Dunbar explained it informally as "the number of people you would not feel embarrassed about joining uninvited for a drink if you happened to bump into them in a bar."
While it's true there are limitations to these types of "stable relationships" with all the interpersonal political context, that is more a subsection of your network of relationships, rather than the limitations. Instead, many people think about their relationships as concentric circles.
For the inner circle? My friend Sam Hinkie describes how he thinks about the people he wants to be the closest to: "Am I the first person they call after they find out they're having a baby? Or getting fired from their job? Or moving to a new city?"
Outside your Dunbar's Number of close relationship, you see that vibing again. Think of the people you know (or know of) who are always writing, creating, and collaborating online. I'd wager you see them as pretty well connected. It's because they’re putting their vibes out into the universe and attracting the likeminded!
And the more curious you are, the more capable you are of broadening the depths of diversity in that group. People from all kind of disciplines, backgrounds, cultures, and specialties can be potential relationships because you're not just curious about X. You're just plain curious.
This is one reason, I think, that high volume sales roles or sourcing-heavy investing roles can be a double-edged sword. You get very good at being very curious about a very specific type of person. But the institutions that value the ability to "build a funnel" won't typically reward you for being generally curious. They only reward you for being specifically curious. And that can work for a while, but will ultimately be limiting for your network.
"Start Where They Are"
When I was 19 years old, I served a mission for The Church of Jesus Christ of Latter-Day Saints. Many people have a lot of "opinion baggage" about this kind of stuff, in either positive or negative directions, but my experience as a missionary shaped a lot of who I am. Some critics of religion in general, and in particular door-knocking religions, like mine, ask the question of why we feel the need to convince other people of what we believe?
And granted, I believe that everyone, not just religious people, exist on a spectrum when it comes to their own opinions. Most people exist somewhere between converting or convincing people. What most critics think of missionaries as doing is convincing. Going out to argue people into submission; pushing them to believe in a different God. And some do. But in reality, the most successful way to bring people to see what you see and believe what you believe is to convert them.
Maybe this feels like semantics, but I think it’s important to every relationship, because everyone has a point of view, not just about religion. You believe something about which companies are exceptional, which causes are worthwhile, what behavior is appropriate, and on and on. The stories we tell are justifications for what we choose to believe.
For me personally, I prefer to help convert people just by doing my thing and living my life. Like I said last week: "I try and use my writing as a way to unpack my own thinking. Decisions are made not in what I write, but in what I do as a result of that thinking." I don't want to argue to convince people, I want to live my life, exude my vibes, and engage with the people who want to engage.
When I left on my mission, my Dad wrote me a letter filled with life advice. In it, he shared one perspective that I've never forgotten:
"Listening and understanding people's lives is a prerequisite. If you start where they are, not where you want them to be, the process goes smoother. Too often missionaries are focused on teaching rather than learning. You will need to learn where they are in order to teach what they need to progress."
I think the same principle holds true in building any relationship. If you're raising money, you might want an LP or a VC to see you as a valuable promise of returns. If you're trying to hire someone, you might want that candidate to be convinced that your company is their next big opportunity. If you're trying to invite a big-shot to come to your event, you might want them to appreciate how great the event will be.
But that's not how relationships are built. Relationships are built, first, from listening and understanding. Understanding where someone is in their life, what makes them tick, what are their hopes and dreams, and then finding ways to fit into that, and add value to their life. That's how relationships are made.
Specialization
Finally, there is this idea that I refer to often. Clayton Christensen had a framework called "jobs to be done." I've written before about how venture firms need to better articulate what they're good for. But the same idea is true in relationships. You need to be able to articulate why someone would want to know you, respond to you, or spend time with you.
Going back to the idea of "everyone a marketplace," I love this quote from Sarah Tavel on how different marketplaces have been really successful:
"When you have a marketplace that's picking off a particular vertical, a particular niche, you can create liquidity in a way that the bigger marketplace can't. Because A, you stand for something different. [And] B, you can create these experiences that are discovery experiences that are more specialized, and therefore create more liquidity for this particular use case."
Lots of people have lots of relationships with lots of other people. The question is not "why should people have relationships?" The question is "why should this specific person want a relationship with me?" What do you have to offer? The better you can articulate that, the more effectively you'll be able to add value to other people's lives.
And all of these things compound. The more curious you are, the more able you are to understand where a specific person is. And the better understanding you have of them, the more capable you are of articulating what you could do to bring value into their lives.
Be Human
In conclusion, I want to reiterate a point I made earlier. As I wrote this post, I found myself grimacing a few times. I don't like the feeling of boiling down relationships to things like "4 sure-fire ways to get people to like you." When you read books like "How To Win Friends And Influence People" you might feel the same feelings of cringe.
But when you actually read that book, these aren't magic methods of peacocking. These are genuine human behaviors that everyone would be better off if they adopted. Not just because they can more effectively connect with people, but because if you're genuinely interested, and asking questions, and admitting when you're wrong? Then you're going to be a better person!
So even as terms like "relationship liquidity" and "network funnel" sound cold and calculated, remember that these are just principles to illustrate frameworks for living your life. My intention is to unpack my own thinking of how I'm working to better build relationships. Hopefully it's helpful to others who are thinking about the same things.
What Am I Reading?
How To Predict The Future by Brad Feld and William Hertling
Pretty impressive overview of the process that William Hertling used to predict a number of different technological shifts.
Company Building In The Curiosity Phase of AI by Michael Dempsey
Charting the adoption of different technology and understanding their evolution is always interesting to me. Technology waves are legitimate forces, and Michael does a good job touching on where we are at the moment in AI.
“In the Curiosity Phase of an emerging technology, Founders must at times ignore the seemingly endless user demand and instead litigate each decision they make with a lens for building long-term defensibility and value.”
He shared these charts demonstrating where the curiosity phase exists along several adoption curves for new technology, and I think it’s pretty illustrative of the moment in time. A while go my friend Mark Valdez turned me onto a similar concept.
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Always a blessing to read your perspectives and insights. I love how you integrate the human way and condition into the world of finance and investing. And just to remind us of the fundamental and foundational importance of being human... thank you!
Amazing!!!