When we founded the firm in 2015, we fell in love with the name Juxtapose because we both deeply believed in the power of juxtaposition. We remain strong proponents of the value that can be gleaned when observations, especially those that are counterintuitive or high contrast, are placed in close proximity with one another.
Any end-of-year transition will feature some valuable juxtapositions, but we think this is especially true heading into 2023. As part of our own year forward planning, our team put together some of the most interesting macro and micro juxtapositions coming out of 2022, and how they’ll impact our firm's path forward. We hope these insights both challenge, and affirm, some of your perspectives as you embark on the new year.
On behalf of the team,
Jed Cairo and Patrick Chun, Juxtapose Founding Partners
Juxtaposition #1
In 2022, the cost of capital went up, which changed everything…
AND
That’s exactly what is supposed to happen.
While the sudden, drastic changes in interest rates and asset prices we saw last year felt like an unexpected shock to the system, this is actually how economic cycles work, and have worked, for hundreds of years. In 2022, the value of growth versus profitability, and the time horizons for investment and experimentation, shifted to reflect a new macroeconomic reality. Cheap capital funds innovation and experimentation, but it also leads to excess. When the cycle turns, excesses reverse themselves, and as Warren Buffett said, “Only when the tide goes out…” – you know the rest.
Juxtaposition #2
Up through 2022, cheap capital meant that capital-intensive strategies were viable, and industries were seemingly all being transformed by VC-fueled disruptors...
AND
Last year reminded us that, as always, cycles come and go.
Capital intensive strategies can work, but being heavily dependent on capital availability means that you have to time entry and exit points well, and there's real risk that capital becomes prohibitively expensive or unavailable at exactly the wrong time. For businesses that aren’t profitable, these swings can be challenging at best and existential for many. If your strategy was built for only a bull or bear market, it’s going to be the wrong strategy for most of those years. Great companies usually take a decade (sometimes decades, plural) to build and will inevitably have to thrive (or at a minimum, survive) through cycles. A reminder for all that focusing on secular, evergreen value creation is the safest place to play.
Juxtaposition #3
In 2022, general asset price deflation swamped fundamental value, driving down the valuations of “good” and “bad” companies alike...
AND
This further underlined the value of experienced CEOs, especially ones that have lived through cycles and know how to navigate building from the bottom of one.
Great companies saw their values fall in 2022 in a way that “set them back years.” In moments of inflection like this one, macro will swamp micro, and that can be discouraging, especially for those leading impacted companies. Great leadership ALWAYS matters, but one could argue it matters even more when times require ruthless prioritization and creativity, and when it becomes harder to be the equilibrium machine and cheerleader that one’s company needs. When things are up and to the right, it’s hard to separate talent from tailwinds, but when things are tough, you are reminded once again that experience really counts, especially as the margin of safety gets razor-thin. Pattern matching, acting early, and balancing boldness and cautiousness become more important than ever.
Juxtaposition #4
In 2022, the frenzy of nearly guaranteed up-and-to-the-right outcomes fell away, disheartening many talented people, including experienced operators and up-and-coming leaders, who entered the tech world for the first time…
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This means that if you are building something great and real, now is the time to build the leadership team of your dreams.
It is an amazing time to go out and build a world-class team. Golden handcuffs, which even just a year ago looked impossibly attractive, have less sheen to them now, and the truly entrepreneurial are more likely to be open to make new moves. This is an environment that requires conviction, long-termism, and passion to take risks. People with these attributes are exactly the right ones to bring on as a foundation for a durable, impactful leadership team.
Juxtaposition #5
At the start of 2022, everybody was tempted to do more…
AND
We were reminded, again, that more is not always better.
In a world where everything you touch seemingly turns into gold, it is hard to avoid the temptation of doing a lot. This is true even for a firm like ours, where a foundational guiding principle is to do few things and do them well. But 2022 was yet another reminder that real value creation requires dedication and focus. Neither effort, nor time, are infinitely scalable resources. Being good at what you do, and putting your energy into things that matter, is even more important when times get tough.
Juxtaposition #6
In 2022, we were reminded that doing anything hard, is well, hard...
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It was a much-needed reminder that staying committed is a lot easier when you are working on something that you care about and find fulfilling.
The last year reminded us of a harsh truth: doing anything of fundamental value is hard. Raising money is hard. Hiring and retaining (top tier) talent is hard. Attracting customers (profitably) is hard. Dealing with macroeconomic cycles is hard. Building a company of enduring value is... hard.
However, the silver lining to this (never super fun to confront) realization is what it means for those who have found something they are willing to commit to: you have real, sustainable competitive advantage. Caring for, and being willing to work on, something hard (and something deemed too hard to be worthwhile to another) is a form of true edge.
Juxtaposition #7
By the end of 2022, we exited a point in time when it was almost impossibly easy to start a high-flying business...
AND
There’s a good chance that people will look back at the end of 2022 (and surrounding quarters) as one of the best times in history to have started a disruptive company.
We’re coming out of a time period when cheap capital was free-flowing, new investors were entering the venture and growth equity ecosystem, and irrationally high public market valuations supported what felt like a near-endless investment in innovation. We saw the start of a shift last year, and we believe we will continue to see the downstream impact of that shift in 2023. Despite it becoming much harder (and theoretically higher risk) today to start a business, what that also means practically is that there is more availability of talent, more forced discipline, and less puffed air in the ecosystem. While capital has retreated temporarily, it will be in no shortage for great companies. For committed, hard-nosed entrepreneurs, now is arguably the best time to be starting a business, especially if one has the right experience, access to talent, and accumulated advantages. We are in an environment that will demand (and ultimately reward) rigor, focus, and results, where competition from both early-stage and incumbent companies will be less abundant, and where exceptionally talented people are available.
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