Information Bottlenecks Bring Opportunities To You

I was given a task that would change my thinking forever.

When I was working as a Summer Associate an early-stage VC fund, I was given a task that seemed impossible from a surface level. I needed to determine who were the ideal syndicate partners for the fund over the next 10 years.

At first I didn't know what I should be looking for, so I started looking through the network of the people at the fund. Identifying who the individuals were we may be able to do deals with. Upon first review of the proposed people, the Managing Director stopped me. He knew I was missing the point.

He said "Noah, in business information is worth its weight in gold. We're looking to get connected to new flows of information."

They wanted to build new syndication networks. The point of this task was to see who was leading the most deals in their industry. Understand where these deal were flowing through. Nurture relationships with these people that saw a ton of AI startups because those people had already established themselves as information bottle necks.

Their point was to start building the Partners at the fund into information bottlenecks of their own.

It changed my whole perspective on information and business as a whole.

Becoming an information bottleneck meant that opportunities started to naturally flow to you.

The closer to the source you get, the less diluted the information is. It becomes easy to make decisions when the whispers you hear are the extraction of purified truth.

Information is constantly being exchange, but the choke points are the only places that matter.

Most people believe that if they stay up to date with what's going on in the news currently, they are in the flow of information.

To a certain extend they are, but that's only once the information has left the bottle. The more people it passes through the less arbitrage opportunities there are to act on the knowledge you possess. By the time it reaches the mainstream, it's been simplified for the masses to understand.

In a world of infinite knowledge, everybody is getting their information from somewhere.

They consume it. They digest it. They repurpose it.

You must go upstream for your information. Getting to the throat of the bottle before that information leaves it.

You can predict future trends by applying this.

In October 2022, I became aware of ChatGPT. This was before it was even released to the public. I was reading all about it and talking to people who had early access to the beta version. It became very obvious to me this technology was going to go mainstream.

I was able to learn about GPT-4 as well by talking to the same people that had early access before the public got to try it.

The only reason I got into AI 3 years ago, was because I started placing myself in positions to get the information before it was out.

You can begin to apply this to your own career too (it's contextual to where you're at though).

5 places to start becoming an information bottleneck:

1) Patents

When companies are working on anything innovative they'll file patents to stop others from stealing their work. This is all public information. If you skim these, you can quickly learn about what the biggest companies are doing to drive forward your industry.

The best part about it? Engineers are VERY creative with the way the name new things. For example, Ford filed a patent titled "hydrogen fuel tank mounting system". Often times you don't even need to read the whole document to know what they are working on.

If you want the simplified version, or inspiration on where to look, I often read the Patent Drop newsletter.

2) The Directional Arrow of Progress

Technology continues to follow a directional arrow which becomes clear looking at the past innovations.

It always becomes more powerful. Devices get smaller. Tech gets closer to our bodies.

If you start to backtrack what the innovations in your respective industry was at different points in time, then you can project what the direction may be moving forward.

You can start to look for the people driving the changes in your industry and begin building relationships with them.

3) Online Forums

Online communities like Reddit, Blind, or Hacker News are now the places that news breaks onto the internet. New information is introduced everyday into niche communities by people that are entrenched in the depths of industries.

Look at the Gamestop mania that happened 2 years ago. Some people got extremely wealthy from the arbitrage opportunity that existed with from the information that broke in the subreddit Wallstreet Bets.

In crypto the same phenomena occurred. People made hundreds of thousands of dollars trading NFTs and alt-coins from information they learned in niche online communities.

It's a skill to be able to filter the signal from the noise in these communities, but when you can it really pays off.

4) Change Physical Locations

Now, I realize that not everyone may have the luxury of doing this. Your location matters more than you believe though.

In the late 90s, Silicon Valley was just beginning to take off. Living somewhere between San Francisco and San Jose put you at an immediate advantage because most of the people living there were working on computers and software. You would get all the information early.

These geological hotspots exist for every industry. Location have always been idea incubators throughout history.

  • Paris during the Enlightenment.
  • Florence during the Renaissance.
  • Greece during the Platonism era.

Moving to the places that are now incubators, or visiting frequently, helps you meet people that are immersed in the industry. They hear things from others and being around them keeps you ahead of the trends.

5) Smart Friends

It's talked about so much, but it needs to be reiterated.

Having smart friends gives you a leg up on the information you're receiving. Smart people tend to naturally gravitate towards the bottlenecks of information as they continue to learn more about the topics they're interested in.

They'll talk about the cool things they're learning for the first time. Having smart people around allows you to bounce different ideas off them and find the interesting patterns they all seem to start learning about.

It never fails to be friends with people that are life long learners.

My hope is that with these 5 things in mind, you can begin to piece together how to position yourself in the flow of information for the industry you're building in.

FOOTNOTES

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