“The loudest voices in the room are seldom the best investors, the people sharing the best knowledge. Sometimes the people who are the quietest are sharing some of the most interesting insights.” – David McDonough

David McDonough (@DavidMcDoughnut) is Founder/CEO of Commonstock, a platform that securely connects to multiple brokerage accounts to give a social aspect to investments and empower everyday investors. He previously worked at Google in product strategy and ventures, and was an Investment Analyst at Greenspring Associates.

To listen to David’s bonus interview and learn more about his habits and routines, click here.

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Chapters

David’s background leading to Commonstock
Commonstock’s mission and setup
How Commonstock is serving modern investors
The future of social investing
Making investing accessible to all
The NFT movement
Lessons for new entrepreneurs

Learn More About This Topic

NFTs, Explained

This light-hearted explainer from The Verge is a great place to start learning about NFTs.

How the blockchain is changing money and business

This 19-minute TED talk with Don Tapscott gives a good intro to how the crypto-world is changing the world of investing.

The Eisenhower Matrix

In his bonus interview, David discusses how his team uses Todoist and the Eisenhower Matrix to prioritize tasks. Here’s a basic overview of how to implement this for your team.

The Common Stock Blog

Keep up with the latest investment trends with Commonstock’s weekly blog.

Impact Investing with Sir Ronald Cohen on Outlier Academy

David talks about how modern investors affect business by choosing to invest in companies that align with their own beliefs. Check out our interview with Sir Ronald Cohen, all about impact investing.

Transcript

Daniel Scrivner:

Hey, outliers. Welcome to another episode of Outlier Academy, a show about the misfits, rebels, and idealists shaping our world and the influences and lessons that propelled them to the top of their game. I'm Daniel Scrivner and on the show today, we sit down with David McDonough of Commonstock. Who's building the data and communication layer that can sit on top of any investment account. Members can hook up everything from their crypto positions held at Coinbase, to their stock and option positions at Robinhood or Interactive Brokers, alongside things like their retirement account to get a complete picture of their assets. And how that unlocks anyone to be able to share the investments they're making as transparently as they'd like while following the trades of others and learning from the smartest minds on the platform. I think what Commonstock is building is revolutionary because as FinTech platforms have exploded, we all now need a way to see everything that we own in one place.

Daniel Scrivner:

And why shouldn't that be somewhere we can follow great investors that we trust and see what they're investing in as well. To learn more about Commonstock visit commonstock.com, where you can also join for free. You can find our show notes with our favorite quotes, links, and clips from this episode at outlieracademy.com/44. For more from Outlier Academy, please follow us on Twitter and subscribe to our new YouTube channel at youtube.com/outlieracademy. Every week we share a few of our favorite clips from the latest episode. Subscribe, and we'll notify you when new episodes drop each week. And now let's jump in with David McDonough.

Daniel Scrivner:

David, thank you so much for coming on Outlier Academy.

David McDonough:

Well, it's great to be here. Thanks for having me.

Daniel Scrivner:

So I've been looking forward to this interview for a long time, and as I've been thinking about it, thinking about what we'd discuss, it's just become more and more interesting. So as a long-winded way of saying, I'm incredibly excited to talk today. So thanks again for making time. And I thought maybe the best place to start, we don't need to spend a ton of time here, would just be for you to share just a quick sketch of your background. Kind of giving people a little bit of a snapshot of your journey leading up to founding Commonstock.

David McDonough:

Yeah, of course. And it's a, I guess a relatively circuitous journey. I grew up in DC on Capitol hill. My parents were in government and politics. And graduated from college in 2008 into the financial crisis. I was planning on going to medical school and I was saving money for med school. When the global economy collapsed, all my friends went to Lehman and Bear Stearns. And as I was saving money I started this miniature investment club with my friends, having never been interested in markets or economics or finance. And I think primarily because of dumb luck, I got in at the bottom. I bought Citibank for a dollar. And what's similar to a lot of this new generation that's investing now who started during the pandemic trough, I got started when stocks were cheap and they went up and I realized, wow, this is actually more so than the making money, it was the learning about how markets worked, reading quarterly reports.

David McDonough:

My friends and I would meet every morning and I was like our "tech analyst", which sounds super silly. And we would just talk about trying to understand businesses, kind of trying to predict the future and the performance of the underlying stocks that we bought were our scoreboard. I fell in love with economics, with finance, with business and scrapped medical school, went to work at a VC fund, got an unpaid internship there, did tech investing and loved it. Taught myself to code, moved to Google.

David McDonough:

And then in 2015, when Robinhood rolled out, I realized this was probably going to take capital markets mainstream. And I looked at my own journey learning about business and finance and realized that I learned so much because I was interested in it with my friends. And also I wanted a way to amplify the knowledge of people who actually knew what they were talking about. And so I started building Commonstock in 2000, I want to say 2017 is when I left Google to build this full time. And it's been remarkable to watch retail this transformation, this cambrian explosion, since as it goes mainstream. And it's I think an exciting place to be certainly, but I think still just the beginning. So hopefully that gives some context.

Daniel Scrivner:

I think that's a fantastic overview. And the one thing I wanted to ask about there was, it's fascinating that idea of having an investment club that you would get together and chat about. I feel like today, I don't know, Twitter feels like an investment club a lot of times, depending on who you follow. Was there anything that you took away from that experience or still lingers with you, sits with you, about that time of kind of investing together, talking about that stuff together?

David McDonough:

It's interesting. It's something that is either obvious or not obvious to most people, but for me it was psychological. In college, a lot of my friends went to school in Connecticut. A lot of my friends were hyper focused on going to Wall Street. And to me, finance was very academic and boring, and people just wanted to make money. And everyone says you need to learn personal finance and learn business, but it wasn't until I started talking to my friends and bantering about it in just everyday language where I realized, oh, this is actually really interesting. Economics is actually cool.

David McDonough:

And it's unbelievably interesting to learn about how we decide on inflation, like the market baskets of things, micro- versus macroeconomics. And it really just taught me about incentives. And my biggest takeaway was you can try to teach people by giving them a textbook, how to learn the fundamentals of investing, but learning by doing is 10 to 100 times more powerful. And just by getting a little bit of skin in the game and talking about it with my friends, I learned so much more viscerally and so much more powerfully. And that's been my number one takeaway from those early investment clubs.

Daniel Scrivner:

Yeah, it's fascinating. And it reminds me of a quote. I'm going to butcher it. Maybe I can link it in the show notes, but it's kind of from Aboriginal culture and just this idea that knowledge isn't real unless it's in your bones. That you really do have to experience that. And that's always really resonated for me. So it's interesting to hear that part of your journey. So now I think it'd be great to shift and just flesh out a little bit about what Commonstock is. Obviously I've spent a bunch of time researching it. And we're going to dive into a bunch of interesting vectors, because I think there's a lot of pieces of it to explore, but just to start out, do you mind sharing just kind of mission, elevator pitch and a couple high level numbers to give people a sense of where you're at and what you're building?

David McDonough:

Yeah, of course. So the mission is to improve the world's financial health by making market knowledge easier to access and easier to share. And something that I learned, my parents didn't really teach me as much, and I certainly didn't learn in college, was by getting skin in the game and by amplifying people who knew and amplifying trusted information, I was able to learn the life skills. I kind of learned about capitalism. This is going to sound really ridiculous to a lot of people, but it wasn't... Warren Buffet talks about this too, it wasn't until I bought those first few shares of Citibank that I realized, oh, there's a whole new class of wealth of, you can make money while you sleep. And so the mission of Commonstock, because I'm just a regular person, is to try to increase the knowledge of those concepts. And you talked about Twitter and Reddit as these de facto investment clubs now. Where I think there's room for a lot of improvement because there's so much noise. There's so much misinformation.

David McDonough:

I wanted to build something like those, but where it's signal over noise and you can actually trust the source of knowledge and you can link your brokerage. And so Commonstock is this communication layer, this social network that sits on top of every brokerage. We're not a brokerage, we're not a custodian. We let you link your existing brokerage, whether it's Robinhood or E-Trade or Fidelity or TD Ameritrade. And we then let you share your portfolio by percentage only. Share in real time when you buy or sell a stock or an option or a crypto, we plug into Coinbase.

David McDonough:

You can write a very quick post on why you bought or sold something and tell your friends. You can write a more long form detailed analysis, due diligence, on Apple's earnings report. You can chat with your friends. And it's basically, I wanted to apply this meta layer of brokerage data to a social network, to amplify the knowledge of the people who actually know what they're talking about. And so that's where it is right now. And that's, I think, where we're heading is continuing to build out this social network that sits on top of every stock and crypto brokerage or exchange.

Daniel Scrivner:

And I know, in terms of scale, you guys have a staggering amount of assets linked to the platform. Can you share any kind of high level numbers, feel free to anonymize them slightly, of that scale? And I'd also be curious, just the number of accounts connected on average per user.

David McDonough:

And one of the interesting things that I've learned is just how money scales. And we are still in the build mode and we have really not done any intentional growth or go to market. And it's happened all organically through sort of network driven and/or viral growth. We have now have had billions of dollars connected to the platform across all of these different brokerages. And that has been staggering for me to see. There are people with tens of millions of dollars in their Robinhood account. There's this narrative that is a common misconception that retail is all very young, poor kids in their parents' basement, but that's just not what we're seeing. We're seeing portfolio sizes with a median of 40K and an average of upwards of 400,000 based on real money accounts. And our average number of accounts connected per person is 1.5.

David McDonough:

So generally what we will see is people will link their Robinhood account, which is a more active account, which they actively self direct. And then they might link a more passive account for long term buy and hold, and then they might also link their Coinbase account for the crypto aspect. And so it's really interesting to see how people handle different types of brokerages, different asset classes, the options trading on one might be easier, then you also might link your Vanguard for your 401k to manage some of that. So we're seeing very engaged investors who are aware of how they manage different portfolios and manage different levels of risk. It's fascinating.

Daniel Scrivner:

It's fascinating. I think it's really interesting to kind of dive a little bit deeper into what it means to build a brokerage and custodian agnostic communication and data layer, as you call it. Which is super interesting in what that unlocks. It makes me think a little bit about Mint and my experience using Mint, which was helpful for seeing all assets in one place. But I found in my experience it actually much more heavy handed on the kind of cash flow side. And it's interesting that Commonstock, one, it can really be this window and two, all of your assets, all of your investments in one place, with being plugged into what other investors that you respect and admire are doing. And so I'm curious, I guess what I would want to know a little bit more about is, when users come and connect all their accounts on the platform and start using Commonstock regularly, what does that unlock? What does it deliver for them that's moving the needle?

David McDonough:

So there's a number of different things. I think right off the bat, one thing that's interesting is, for me, I have both Robinhood and Coinbase linked and it's interesting to see there's never been really an easy way to show your stocks and your crypto in one place. And one aha moment that we've commonly heard from users is, "Wow. I bought Tesla and Zoom at IPO and I also bought Ethereum and Bitcoin early on and my portfolio, I can finally see the top five holdings by weight," and this is me speaking for myself, is actually Tesla, Zoom, Bitcoin, Ethereum. And that's actually a good mix of risk in early buy and hold.

David McDonough:

And then a new emerging asset class, being able to see things like Solana just absolutely taking off and overtaking a lot of the equities. Being able to realize when you get a real time alert when you buy or sell something or when there's a dividend reinvestment, how often these movements are happening and get some insight into, whoa, I didn't realize that this was such a large percent of my portfolio, maybe I should take some of these gains or pair this back.

David McDonough:

Being able to see the entire picture. I think Mint, I used Mint when I was 20 and at the risk of aging myself, the frustrating thing about Mint was it felt like homework, it was telling me in my early twenties, "Hey David, you're spending all of your money at bars every week. Or restaurants." Thanks, Mint, I'm aware, I don't have money to spend on anything else really. That's what my friends are doing. I can't really save anything. And this is what I would love for Commonstock to do as you talk about this, as we sort of segue into embedded finance, which I think is what you're alluding to, is I see a world where just like Mint, just like Venmo, there's a way to engage with your money and make it very easy and intuitive to understand, whoa, I have way too much.

David McDonough:

Easy and intuitive to understand, "Whoa I have way too much money in this high risk thing." Or, "I have not enough exposure to crypto or to tech," or "I'm overweight blue chips, which are under-performing," is a very coming thing that we hear is getting a wholistic picture of your risk and your exposure to different asset classes, and then frankly being able to benchmark that against other peers at your stage of your personal financial journey. When I was using [Menta22 00:13:32], I was doing the same thing as all of my friends. We were poor right out of college, and spending all of our money at bars. We were kind of benchmarking against each other. Now that I'm in my mid-30s, I'm benchmarking against my peers in their mid-30s, and what's the right level of risk. I think there's a really fascinating dynamic happening right now where we see instead of spending your money at bars, young people, and this is fantastic, young people are spending their money on the stock market.

David McDonough:

That's incredible. They're taking higher risk bites because they're younger. They're in that accumulation phase. We're seeing people who are more advanced in their career, people who are retired saying, "Whoa, this is too risky. You shouldn't be doing this." I think what's really important to do to get better information is to benchmark against your peer group, and that's where Commonstock has come in very handy. I can't compare my portfolio to my dad's portfolio. He's in a very different stage of life. Someone who's 20 might have a different risk appetite than me. So, being able to compare with your friends, your smart friends, and see how they performed and say, "Oh, wow. I am very risky compared to most of the people in my peer group," has been super valuable.

Daniel Scrivner:

That's fascinating. I'm curious, it makes me think about traveling back in time. You're at Google. It's 2017, and you're making the decision to leave to go and build Commonstock. I'm curious, one question I always love asking founders is if there was an "aha" moment or an insight that you had that made you think, "I need to leave now and go and build this?"

David McDonough:

Yes. There are a few different things. I think my background has made me uniquely valuable for this journey, where I kind of would say... I grew up very comfortably. Where I went to college, I would say kind of wealth adjacent. I got exposure to the Wall Street crowd that I beforehand didn't really know existed. The "aha", there were a few over the course of the five years after graduation, one of which was as I'm trying to teach myself personal finance and economics, and markets, realizing that anywhere that people talk about the stock market on the Internet will almost always descend in the chaos and pump-and-dumps, and you'll get these spammers and gurus, and snake oil salesmen. God, I really wanted a way to force people to kind of put their money where their mouth is and say, "Okay, if you're so good at always beating the market, link your brokerage and prove it. And then I'll be able to listen to you and trust you." I wanted to add this layer of trust to social networks that I think have been missing, because I think there's a bit of a perverse incentive that rewards more caustic or controversial takes. I wanted to add this layer of quality.

David McDonough:

I was at Google and I was teaching myself to code and trying to teach myself finance and markets, and realizing that open forums like... I was in the early Reddit, the SubReddits, early Wall Street [inaudible 00:16:25], which is a very different dynamic. I saw this white hot energy and excitement around self-directed investing. This was as Robin Hood started to take off I realized I had this "aha" moment that commission-free trading is going to force the hands of other brokerages and usher in a world where it is more accessible, where prior to Robin Hood when I just graduated, I had to set up an e-Trade account. I had to fax them my paperwork with wet signatures and physical checks. I had to pay $12.00 per trade. It took me two or three weeks to get that set up. If you could remove those barriers and you could provide access to an entirely new generation of people to the capital markets, and it was free and beautifully designed, if there was a white hot energy of excitement with that friction, imagine what it would look like without that friction.

David McDonough:

I started getting added to group chats, and I was at Google in G-Chat in our team at Google. People were bantering all day about markets. I started realizing, this is what people are spending their time on. They have segued out of fantasy football and into focusing that research and that time on understanding markets and businesses because it's even more healthy. They're learning and they're improving their financial health, which is unbelievably powerful and exciting. For the right nerdy group of people, that's where I started building this first version of Commonstock where I wanted people to be able to link their brokerage and kind of verify their performance, and then be able to more easily share it in a way that didn't reveal their entire dollar amounts, but shared on a relative basis, "Show me your skin in the game. Prove it, so that I can actually trust what you're saying."

David McDonough:

Those creators, by the way, this was a really unique insight that I had when I started doing some of this research and talking to the early creators before creators were a thing. The best investors were like, "I'm dying to share my holdings, because I can let my game speak. I am getting drowned out by all the overly loud marketers." The loudest voices in the room are seldom the best investors, the people sharing the best knowledge. Sometimes the people who are the quietest, but are sharing some of the most interesting insights, I wanted to really let their performance do the talking. I think those are the three, I know I said two, it's basically there's no way on the Internet to verify or sort of add a level of quality and trust to market conversations. I realized how engaging and fun it was to learn about this stuff with my friends. They were a class of people who were looking to share their portfolio and their knowledge in a healthy and cooperative way. I wanted to enable that.

Daniel Scrivner:

Those are really interesting points, especially that last one about how creators have kind of emerged in the investing community. Something I've always admired about being a part of the investing community is whether it's talked about explicitly or not, there's a lot of reciprocity built into it. The best investors super openly publish their annual letters or annual reports. Warren Buffet obviously comes to mind, but there are many, many others: Chamath at Social Capital is another example. There's an extremely long list of investors whose annual reports I read. It covers everything from endowments to people managing hedge funds. Just this idea that they share those in part obviously for their investors, but I think investors generally love sharing those ideas, and they love seeing what other people are thinking, what they're noticing, what they're investing in, what they're excited about that they're seeing.

Daniel Scrivner:

I think as we think about this generational shift, I think that's really wonderful how much interaction and communication is kind of built into the platform that you're building. In the household I grew up in, we didn't talk about money and we definitely didn't really talk about investing. It's interesting that it's becoming a social thing. I think part of that is people are now getting to invest in their interests, and so it's much more personal, where it didn't used to feel personal at all. I think another piece is it feels like it's moving from a single player game to a multiplayer game, which is a huge fundamental shift. I'm curious, do you have any interesting perspectives that have bubbled up for you around that generational shift and what that means?

David McDonough:

Oh, man, this is where I could really go off the rails. Dude, you're poking the bear. There's just so much that I get excited about here. One thing you alluded to that I hear this constantly from the more established, even hedge fund investors and the more experienced Wall Street people is, "Why would you ever want to share your trades? Why would you ever talk about money like this?" Venmo seemed crazy. Like, why would you ever share that you're sending money to someone? Why would you ever share your portfolio, even by percentage? There's been this fascinating shift from investing in markets as a zero sum game, where if I buy something I don't want to share, that's like my secret sauce of information, to a non-zero sum game where it is multiplayer, it's collaborative. You're seeing even hedge funds and mutual funds, Cathie Wood and Jim Altucher probably two of the pioneers here where they're realizing, "Hey, it's actually more powerful if I be transparent about my thinking and what I'm doing."

David McDonough:

I think that's the way that markets are trending and will go, is it's not about hiding what you're doing and being secretive. That's the old school thought. You're seeing this especially with NFTs and crypto. It's more about community and building consensus, and building a following for the people that love their Peloton bike, or love this NFT, or love this crypto token. Elon has done better than almost any other CEO at building a community and excitement around his product and his company. Someone had a great tweet that "Vibes are the new fundamentals." There's some truth to that. When you compare that with my parents who did not obviously grow up with social media, if you are talking to this with a friend this weekend, if you are 25 or 30, your entire life is almost transparent. You grew up on Instagram, and Twitter, and now TikTok and all these newfangled things. Then, you're sharing very openly what your life is like, and money is no different where it's a totally new approach, which I would argue is way healthier than "Hey, here's what I'm thinking about saving versus investing versus... Here's my risk appetite," and people are very open about it.

David McDonough:

It almost brings people closer together, I think, to be able to share the Brené Brown vulnerability of "This is me. This is my financial state. It's not good or bad. This is just who I am," I would love to improve. There's that openness of... I think what is so fascinating amongst younger people is the willingness to say "I am not perfect in my investing journey. I'm just getting started. I'm trying to learn. Here's where I currently am. Help me improve." That hunger to improve is something that in my parents' generation was nonexistent. You were very buttoned up and you would never share or talk about those things externally. I think that's insanely healthy, and I think the other layer of this is the current generation is growing up in a very different economic situation than the Baby Boomer crowd. My parents, who I love very much, are totally different... To buy a house, even myself, I am coming to you from my rental in San Francisco realizing it's still very hard for me to imagine buying a house, and if you're young...

David McDonough:

My parents were able to have a steady job and buy a house at 25 or 30, but if you're 25 or 30 now, the price of that same home is two or three times as expensive, if not more. So, you need to take riskier bets to accumulate wealth versus the approach that worked for our parents' generation. It's a combination of a completely different economic state for young people. The psychological world that they grew up in where transparency is the norm, not the exception, and the ability of for the first time ever, this what I call "Information Liquidity" where it's more powerful in markets to share your thoughts and your thinking, and your positions because you can build some more consensus and build momentum around that. I think those are three interesting dynamics that I have been tracking that all have created this perfect storm of new market participation and new styles.

Daniel Scrivner:

You did a great job mapping that out. One thing you touched on that I think is really interesting, is that it feels like generationally investing has moved from being this prescriptive thing, where you went to some professional, they told you what to do, and then you literally just gave them your money and then they did that. They did that with your money. It feels like the latest generation is really embracing this permission-less investing where it's much more about taking their own ideas, the ideas from their friends, the ideas from their social network, the brands and companies that appeal to them and investing there. Do you have any interesting perspectives on that?

David McDonough:

Oh man, again, stirring the pot. My super hot take here, I want to give a little bit of context in the background for capital markets in general, where Wall Street and capital markets, as we know it, from after the Depression in 1929 to 1970 roughly, markets were very boring. It was just like accounting, banks and speculative investing were totally separate, and there were all these rules and regulations. In the 1970s, there were two key things that happened. We deregulated capital markets, and-

David McDonough:

... Things that happened. We deregulated capital markets and allowed for a lot more speculation, which is good. And we also ... Milton Freeman created the Freeman doctrine of businesses no longer existing for the sake of the community; they exist for the sake of the stockholder or the corporation. It's the stockholder versus the stakeholder. And that gave companies like Enron the permission to take very wildly risky bets that could justify because it would make stockholders more money even if it hurt the community. And the deregulation allowed for the financialization of our economy that had never existed before and so for the first time from 1970 to 2010-ish or even 2020, over these 50 years ... Prior to that, every big market move was primarily a geopolitical event and since then, every big market correction has been finance-driven or a market ... A Wall Street-driven event.

David McDonough:

And you can look at stagflation, you can look at the housing bubble, you can look at the tech bubble, and increasing the amounts of leverage and the riskiness of those bets had created this industry of ... There's a great chart that I'll share where you can watch the pay go steeply parabolic from 1970 where it used to be full parity with the rest of the economy and then Wall Street's pay became 10X more than the regular economy.

David McDonough:

And for the first time ever, recently what we ... And by the way, over the past 20 years as retail investing became a thing, there is this, in my opinion, nefarious narrative that is very paternalistic, as you said, which is, "Markets are way too risky for the regular person to do. It's too complicated, you don't really get it. Give me your money, we will manage it for you. And yeah, sure, we'll take a little bit off the top."

David McDonough:

What I think is the most fascinating of this paternalistic permission, as you said, the permission to invest thing is when you step back and realize, "Hang on, so what you're asking is for us to concentrate all of our money into your account so that you get to make more money off of it and it creates this rampant inequality that's been running for the past 50 years. But, by the way, you keep screwing it up, too, as a ..." And this is a gross generalization, but as a whole, institutional investors are the ones that get over-levered or overly concentrated their risk and caused these crashes. Distributed retail investing has never caused any sort of massive market correction or recession because that risk is distributed healthily amongst millions of people.

David McDonough:

What finally has happened over the past few years is, in a very large way, people realizing, "Hang on, for the first time ever I can take control of my own finances and also, I have an informational advantage because I have boots on the ground and I know what product my friends are using, I know what products I, myself, am using and I want to invest in the things that I believe in. And that is almost more valuable than what CNBC or Bloomberg or the fund manager tells me I'm supposed to invest in or how I'm supposed to invest." And it's evolving very rapidly into crypto and NFTs.

David McDonough:

I think that we're seeing this brand new approach where the vast majority of people have realized, "Wait, I don't need permission to do this?" The pernicious narrative of a pat on the head, "This is too risky for you. Regular people shouldn't be allowed to do this," has been turned on its head and realized from the data we see on comments doc, self-directed investors actually out-perform the hedge funds over the past few years. And who's to say whether that trend sticks, but I think it will. I think we've seen a totally foundational change in the way that markets operate because there's been this influx of new capital where self-directed investors have gone from under five percent to over 30% of the market and that is unbelievably healthy.

David McDonough:

Instead of concentrating in the entire market by volume in a few institutions, it's now being distributed back to the vast majority of people all over the country and world who get more direct access and don't have to pay a fee for somebody who is, at the end of the day, just going to put them into an ETF that reverts their performance right back to the mean. And by the way, this opened the can of worms that I also believe is that ... I'm not saying that you should never let professionals handle your money. I'm just saying there is a difference between not giving permission to regular people to invest versus acknowledging it's healthy to have some of your money in a self-directed brokerage, A, because we need people to get exposure to how businesses and markets work.

David McDonough:

My very hot take in all of this is the value of markets is much less the dollar size of your portfolio but the knowledge that you gain over the years that compounds. And so starting at 20 and understanding inflation ... The fact that there are teenagers on TikTok talking about Jerome Powell and the Fed is mind-boggling where usually that conversation wouldn't happen until you're well into your 30s or 40s. If that knowledge compounds for that generation of people ... I think for the first time people have realized they don't need permission to be engaged with that type of knowledge and to make moves based on it.

David McDonough:

I can keep going forever on this and I know I'm probably rambling. It's so exciting for me to see ... on mass to see people realize the traditional gatekeepers of access to this upside have been bumped out of the way and that there's still a very important, healthy place for institutions in capital markets but it's very healthy for regular, self-directed investors to make up a very large portion of capital markets. That's the way it was prior to 1970 and the pendulum is swinging back to that right now, which the people who craft the narrative because they run these funds and are incentivized to manage that money and get those fees are going to continue saying, "This is too risky. These are all examples of things that are too dangerous."

David McDonough:

But the data that we see is actually counter to that, which is that regular self-directed people are making intelligent decisions with their money. They're not putting their entire net worth into the riskiest asset all at the same time. That's not an actual thing that's happening. They might buy one or two shares of Game Stop to participate in a Six Sigma event, but they're going into that eyes wide open knowing, "I want to have a little bit of exposure to this very high risk thing. It might be a fraction of a percent of my portfolio but the upside of that, just like classic portfolio theory ... The upside of that is asymmetric and I have the vast majority in professionally managed 401-Ks or passively managed ETFs or indexes." And it's actually a very thoughtful, intelligent approach that we're seeing, at least. And I think it's really exciting to see that happening.

Daniel Scrivner:

One thing you alluded to that I think would be really interesting to explore a little bit more is just this idea that over the last five years ... But I feel like it's really, for me, at least from my perspective, been compressed in the last two to three years ... We've seen a massive explosion of platforms and it's everything from new brokerage models, whether that's Robin Hood or Public, but you've also seen crypto exchanges and platforms take off like CoinBase and Coin List. I've seen things like Fund Rise where you can buy fractional ownership in real estate. I've seen the same thing in the collectible market, whether you're look at Rally ... We did an interview recently with one of the co-founders of Rally that I thought was fascinating. It's a fascinating space that's growing really, really quickly.

Daniel Scrivner:

And then you're also seeing new alternative things, whether that's DeFi, whether that's NFTs that are starting to take off. And so I'd be curious to understand a little bit of the amount of interest you've seen both in alternative investments as well as, specifically, things like, say, NFTs.

David McDonough:

We're seeing incredible interest. And I think this is the thing that I get most excited about ... The thing that I get most excited about that we've barely scratched the surface on is it feels like we're moving in this direction where almost everything could be an investable asset, from art to, as you said, wine, to shoes to JPEGs of NFTs to crypto, Web 3.0, traditional stocks, options. It's amazing. I would imagine ... I was not alive in 1970 but I would imagine if someone said, "We're going to create these derivatives," which are a totally new asset class, I'm sure, at the time ... I know at the time it was like, "This is too speculative. This is too risky. What is ... This is a newfangled thing. It's not an investment. This isn't legit. You can't do this."

David McDonough:

And I'm sure you would look at the same now where instead of those new asset classes only being available to a small few on Wall Street or financial firms or country clubs, now Rally and Otis are creating very broadly available ... "I can buy Jordan Shoes and I can invest in a Lamborghini." And I think ... We are seeing on Commonstock ... And it's honestly ... The challenge, for us, is to keep up with all of these asset classes. This is why I think the broker agnostic approach is so critical because we can add NFTs, we can add tokens, we can add any different asset class eventually through the use of an API as everything becomes embedded and everything becomes investible. We are no longer beholden just to traditional equities and that's where I get very excited when I think of my own approach to markets and investing is ...

David McDonough:

I had a great conversation with one of the greatest investors of all time who worked at a VC fund and before that worked at a hedge fund; one of the top two VC funds. And he was talking about how we have this leaderboard on Commonstock that shows the top performing investors over a certain time period. And again, the goal for Commonstock is to amplify the people who actually out-perform the market. And, of course, we want that to be on a risk-adjusted basis. But he looked at this leaderboard and he was pushing back. He was like, "Well, it's not really fair because a lot of the leaderboard are people who have been invested in tech stocks or crypto or different asset classes that aren't necessarily just equities." And I had to take a pause.

David McDonough:

Well, how do you define the best investor? If the people who have been buying and selling who were able to predict the future of Web 3.0 and were buying Ethereum and BitCoin and Solana and the people who were early investors in art or in wine, what makes them any different than you buying equities? Why do you get to decide what counts as investing, what counts as not investing?

David McDonough:

That's where we're seeing this new world, this new approach of seeking out the opportunities and the upside that exist outside of traditional realms. And it's been interesting to watch institutions follow retail because retail is the first to discover NFTs. And then you got institutions like Visa going in and buying NFTs playing the follower, not the leader. And I just think that's going to continue to expand as we get more broad access to the ability to make everything something that you can invest in. That's where Commonstock and, I think, other layers that are ... That's why I think embedded finance is the future where, ultimately, the custodian, the people that manage the actual asset underneath, will become less important. And it's the way that you interact, like OpenSea is a great example; this fascinating layer on top of all of the NFT world. That's where I think it gets interesting.

Daniel Scrivner:

One thing I am super interested to ask you would be your vision of what Commonstock looks like, say, five to 10 years out. Because I think we're starting to see these alternative platforms emerge. We're starting to see now, with Commonstock, this new layer being built on top of it that unlocks, I think, some really interesting things. I'm curious, from your perspective, what does Commonstock look like in five to 10 years? What are people connecting to the platform? What sorts of investments does the average user on your platform have? What does that picture look like to you?

David McDonough:

Yeah. In five to 10 years, my vision would be for Commonstock, specifically, but I think broadly, the place that you manage your underlying assets, whether it's your dollars, your crypto, your NFTs, that will be one place. And there's a separate place that you engage with it. I think of Venmo ... I barely go to my Wells Fargo account anymore. I use Venmo to send and receive money to my friends. The future, to me, is this layer that sits on top of every ...

David McDonough:

... for me is this layer that sits on top of every financial institution, and I think of this group of 20 to 35 year olds, really upping the ceiling to try to include myself in that generation. When you think of them going to buy a house in their mid 30s, they have this new portfolio that includes art, wine, tokens, sneakers stocks, options. They've invested in their friends' rolling VC fund on AngelList. There's just this new world of diversification that has never existed before, and it's across all of these fragmented brokerages and custodians.

David McDonough:

There has to be one place that services all of that and aggregates all of that, and that's how you can engage with it and interact with it. Otherwise, I think back to the early days of credit cards, or at least my own experience, where I've got like 10 different credit cards and different logins, and that's why Mint was valuable. Different bank accounts and different funds; I don't don't even know where it all lives. How do I track all of it?

David McDonough:

And so I think it's going to be really exciting to see a new generation take a completely new approach to improving their financial health by getting exposure to high risk things like an NFT. I have a very close friend I spent this weekend with. My buddy, Zach, basically is putting together almost an ETF for NFTs. How could you put together a way you could create a syndicate to buy NFTs, this new thing that's happening, and we can now pool our money and we can go in on wine or we can go in on, oh my gosh, this GIF is going to go crazy, this CryptoPunk is going to go wild.

David McDonough:

So there's access to totally new investment vehicles, and there needs to be a way to engage with them and share information and knowledge. The thing that I think is lagging behind really, to hopefully land this plane, is it's great to see Reddit massively increase exposure to capital markets. We badly need ... if brokerages have democratized access to finance, I want Commonstock to democratize access to the knowledge of these financial instruments, quality knowledge.

David McDonough:

And I know democratizing is overused, but even with NFTs, with all these new asset classes, we urgently need the knowledge and the insight to keep pace. That's where I think this meta layer, again, overused buzzword alert, Metaverse of knowledge and insights that sits on top of every asset class will be where users spend all of their time.

Daniel Scrivner:

I think that's a fascinating view of the world. And I was so excited for this conversation exactly for what we've been talking about because I've seen this explosion in investable asset classes, we've seen this movement for people to take their money and invest it in their values and invest it in what matters to them, and I think from my perspective, I just continue to see just fascinating, bizarre and interesting niche, little things.

Daniel Scrivner:

Like recently, I was looking at a private ETF, so it's not publicly traded, but you would be able to invest in it privately, that does something really interesting to me, which is it helps farmers be able to purchase organic land because in the US, we still have a very small percentage of total farm acreage that's dedicated to organic farming, and it's really difficult to make that change. It's really capital intensive to make that change, and so here's an ETF that's focused on that opportunity.

Daniel Scrivner:

I think that's one narrow example, but I'm seeing that just all over the place, and so it's fascinating when you zoom out because I just feel like there's an incredible amount of activity happening in the larger ecosystem, and in my mind, it really points to what you're doing. Feels like the last wave of innovation that we saw was this massive launch of platforms that are focused on different verticals, that are focused on different interests.

Daniel Scrivner:

And to me, it feels like the next wave is that now consolidating back and people being able to have a central platform where they can go, where they can see everything that they own in one place, and they can wrap their heads around that, follow people that are interesting to them, and it just feels like a really critical, important piece of infrastructure that's missing today. It's interesting that what you're building is right at the intersection of that.

David McDonough:

I think this actually ties back to this non-zero sum aspect of markets right now. What we've seen a ton of on Commonstock is what I call economic activism, where when Nike backs Kaepernick, the fundamentals of their business haven't changed, but we see a rush of new young investors buying Nike stock, just saying, "Hey, I agree with you. I love this. I'm in. I want to support you as a company for doing the right thing." Same thing with GoDaddy. When GoDaddy banned white supremacy websites, we saw a flood of young investors buy GoDaddy stock.

David McDonough:

It's amazing to watch. You can draw these parallels to Hertz and Kodak to GameStop to crypto, where people are investing in the projects like Loot. They're investing in the things that they just believe in and want to exist, and they're not going to invest in the things ... like vapes are uncool and not healthy anymore. So it's amazing this economic activism where large groups of people are voting with their wallet, ESG portfolios, climate change, the things they believe in. It's remarkable and it's really powerful and it's exciting. So, very excited to see where that moves.

Daniel Scrivner:

Yeah, you and me both. This has been a fascinating conversation. I mean, we've zoomed way, way out. We've gotten really into the weeds on what you're building. We've talked about some of the generational shifts that are happening, the explosion in platforms. So, I think the question I would ask to help close out the interview is you've been building now for something like five years. I know from any entrepreneur, every year, really every quarter often feels like a year's worth of developments and frustrations and wins and learnings all happen in a very short period of time.

Daniel Scrivner:

But for you, you've been at this now an extended period of time, and you're working on something interesting that's really at this inflection point. And so I'd be curious if you could share a lesson that you've learned that you would pass on to an entrepreneur listening to this podcast.

David McDonough:

Oh, boy. How much time do we have?

Daniel Scrivner:

Take as much time as you want.

David McDonough:

It has been almost five years now. Honestly, it was probably a little bit early, but I wouldn't have it any other way. I was talking this weekend about just ... It is such an unbelievably, and I know this is overly cliche, it's such a hard journey, and you've gone through this yourself. The learning curve is so obscenely steep, and it feels like for me, one of the things that I've learned, the hardest part of building a company or a startup or building really anything from scratch I argue is 95% psychological.

David McDonough:

It is, you're going to have constant challenges and problems that you don't even really know are challenges. It's not about designing or writing the right code. Those are actually very straightforward challenges. It is about managing your own psychology over years and the sheer amount of work and the amount that you have to learn on the fly, the mistakes that you're going to make on a regular basis, and a mix of both the humble approach of, "I have so much to learn," in parallel and at the same time somehow with, "I believe so strongly in this idea and this direction and this future that I'm going to continue to basically just run my head through walls."

David McDonough:

And you're going to feel the swings of great elation and absolute despair, and you have to modulate and find a middle ground at the end of the day, something that feels like it's going to kill the company probably won't. Something that feels like you've made it, you probably haven't and just continue to move the ball forward and learn. And for me, this is not hustle porn. I think it's very trendy to start a company, but you have to just absolutely, unequivocally love what you're doing, and you have to commit to even if this is a colossal failure and we don't make any money, it goes bankrupt, will this have been rewarding and valuable?

David McDonough:

What is your actual goal? For me, the classic Jeff Bezos, minimizing regret approach. Taking a shot on goal to try to improve people's financial health, I'll never regret taking that shot. I'll always regret the action not taken. The amount that I've learned, the impact that we've already had on people's lives. For me, my ultimate scoreboard is just can I have as much impact as possible on as many people as possible, and it is hyper difficult and it is absurdly challenging, but it's also wildly rewarding when someone one comes to you, as they have on Commonstock, and said, "Hey, you made me a millionaire because I saw this investment memo and I learned about an asset and I bought it and it went up 10X."

David McDonough:

It sounds crazy, but that is worth its weight in gold. To me, it's just there's nothing like improving other people's financial health or helping other people make money. To me, that's what it's all about. You have to take those small wins to get through all of the challenges as the team grows. Now you've got 40 people looking to you with different questions and different ideas of how to improve.

David McDonough:

There's always a new challenge to overcome, and that's just part of the ride. You have to take this out of body experience and say, "Oh, this is the part where you hyperscale the company and everything feels chaotic," and then you keep the train on the rails and get it back online and get everyone rowing in the same direction, and then you come them out the other side and impact more people and it's worth it.

David McDonough:

So, I don't know. That's a little bit rambling, but just the psychological challenge and the ability to manage that and continue moving one foot in front of the other in the right direction, you'll usually end up in the right place.

Daniel Scrivner:

That was incredible, and I'm so glad you brought up the psychological piece because I know from talking with a lot of entrepreneurs, I know from my own experiences, especially turning around a company for a couple of years, that the psychological side, which is really linked to the emotional side, it can just be a brutal experience.

Daniel Scrivner:

I actually saw a quote recently from Leo from Susa Ventures that had a tweet a while ago saying something like that he thought what was going to be helpful early on was helping founders with tactical things, and what he really learned was that the biggest piece of the puzzle was much more psychological and emotional. So I love that you brought that up. Just to close out the conversation, where can people find Commonstock online? Where can they go to sign up?

David McDonough:

Commonstock.com. We've got a web app and an iOS app in the app store or @JoinCommonstock on Twitter, and you can find me, @DavidMcDoughnut, on Twitter. There's a bunch of Us and G-Hs. It's confusing. I need to clean that up, but thank you so much for having me. You know how much I love brainstorming about this stuff.

Daniel Scrivner:

Well, thank you so much for the time, David. This has been one of my favorite conversations in a really long time. I deeply love what you're building, and I'm excited to see how it evolves over the next few years. So thank you so much for the time.

Daniel Scrivner:

For links to everything Dave and I discussed as well as our favorite quotes and clips from the episode, visit OutlierAcademy.com/44. For more from David, listen to the short bonus episode that follows this one where I dive into everything from David's habits and routines to the tools he loves, his favorite books and so much more, all in less than 20 minutes.

Daniel Scrivner:

And if you enjoyed this episode, visit OutlierAcademy.com to explore more incredible interviews with guests like Scott Belsky, Kevin Kelly, and the founders of Titan, Rally, Primal Kitchen, and so many other companies. There you can also sign up for our free weekly newsletter, Outlier Debrief, where every Friday we share our highlights from the latest episode, as well as a few of our favorite articles, headlines and moments from that week. Thank you so much for listening. I'll see you right here next week on Outlier Academy.

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Bonus David’s Habits, Influences, and Life Lessons – David McDonough of Commonstock – Outlier Academy

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Daniel Scrivner:

Hey Outliers. We're back with David McDonough of Commonstock, to dive into everything from his habits and routines, to the tools he loves, his favorite books and so much more, all in less than 20 minutes. Let's jump back in with David.

Daniel Scrivner:

David, welcome back the second bonus portion of the interview. Thank you so much for the extra time.

David McDonough:

Of course. Glad to be here.

Daniel Scrivner:

So just to build off, I always like to ask some opening question that kind of connects this with the main interview. And we just spent almost an hour talking about Commonstock. So the kind of question I wanted to ask you is, how has being a part of Commonstock, being a part of that community, using that to follow other people to share your investments changed the way you think about investing or changed your investment returns? Just kind of insights there, I think would be really interesting.

David McDonough:

Yeah. In a multitude of different ways. I can think of a few examples. It has given me exposure to assets and even asset classes that I didn't know existed. For me, a lot of it is discovery of certain crypto projects, or equities, or ways of thinking about the world. Thinking about Coinbase being under priced because the market is worried about fee compression. Learning about Mike Maples, one of our investors, wrote a great article about Filecoin, which I had never previously known about and it was interesting to dive into that. It's changed the frequency with which I transact. It's changed the way that I view my portfolio side by side all the different asset classes, options, equities, ETFs and crypto.

David McDonough:

Now seeing this discussion about NFTs, being able to have a finger on the pulse of what people are buying and selling, seeing what's trending, seeing DogeCoin. It's also given me a healthy dose of regret that I bought DogeCoin way back in the day when Robinhood first decided to support it. I think I had 100% return and sold it three years ago. And then to watch DogeCoin go nuts early this year, and see the data and see that what's trending has been really interesting. So just realizing a big part of actual investing, whether it's professional or self-directed, is just being tapped into what the trends are, what markets are doing.

Daniel Scrivner:

A bunch of high quality data sources, which is always really hard to find. So now we'll transition into some of the questions just around kind of habits, routines, tools. And I'm curious, we haven't talked about this yet, but what does your daily routine look like? And are there things that you try to do that just help you show up as your best self? I think back to talking about that steep learning curve of being a CEO, the mental side of the equation, I've always just noticed, at least for me, habits and routines is something I've leaned into more when I'm in those stressful periods.

David McDonough:

I will avoid going into the, well, I wake up at 4:00 AM and then I meditate for two hours.

Daniel Scrivner:

Yeah, you can leave that out.

David McDonough:

I'll start and work backwards. One routine that's probably crazy that I do is I try to go for a two mile run every night. And I like running late at night just because running in the morning sounds crazy. You're not really loose. I grew up on the hill where there were so many tourists, I had to run at night. But I found going for a run clears my head at the end of the day, gets the endorphins moving. For some reason, I feel like I have a lot of my best ideas while I'm on a run, just being able to detach, being able to step away and see a larger picture. I read a lot of newsletters each morning. Basically I wake up and I will try to triage via Twitter and a few email newsletters what's happening in the world, what's happening in markets, what's happening in the tech and VC world, and now crypto.

David McDonough:

And then nowadays I'm actually in a lot more meetings. A year ago, I was in Figma doing design. I was reaching out to users. I was doing research. I was talking to creators. Now a lot of what I do is, my job has changed and I focus on the company org structure, I focus on our long term strategy and I focus on being the best spokesperson, recruiting, building the team. That's my new job. And a lot of it is just learning those new roles. Now I have more of a manager schedule where I don't get to design, and Figma and build things myself. I still try to keep those skills fresh, but I'm no longer, I've been banned from actually doing any coding, which is probably for the best.

Daniel Scrivner:

That's probably a good place to be in the company. You mentioned newsletters. What newsletters do you follow? And are there any you really enjoy?

David McDonough:

Honestly, the one that I've read since I started was Dan Primack, back in the days when it was PE Hub. And now at Axios, I think Axios has done a great job.

Daniel Scrivner:

He's a great writer.

David McDonough:

He's awesome. And so I try to read that every day. And then I try to not get too overloaded with newsletters and Twitter. Actually one of the habits and routines is I actually kind of segment email responding. I think trying to avoid the pernicious trap of always feeling like you need to be on demand responding at all times, whether it's Slack or email, has created a less than productive approach. And I try to answer emails in batches at the beginning of the day, middle of the day, if there's anything urgent, and then last thing at night.

Daniel Scrivner:

Along those lines, are there tools that you rely on? These can be physical tools. I mean, we talked about the amazing camera setup you have. This can also be software tools. What tools have you nerded out on or do you just really enjoy using?

David McDonough:

I nerd out on pretty much every productivity and tech gadget tool. Honestly, one of the most valuable has been, I use WHOOP to track my sleep and my heart rate. And again, this is a pretty long marathon of a job, and making sure over time I can add some metrics, like, am I getting enough sleep? Is my heart in a good spot? Just making sure I'm taking care of that baseline so that I can do my best work. I have an iPad Pro that I love taking notes on. And I also just hired, we just had an amazing chief of staff, Courtney, join. And we've been using something called Todoist, where we use an Eisenhower matrix, which is four quadrants.

David McDonough:

The top left, let's say, is urgent and important. The top right is important, not urgent. The bottom left is not important, but urgent. And you basically just, we whittle down just what we need to work on is that urgent and important. And if it's in another quadrant, we either schedule it or give it to someone else to take care of. And so we've been using Todoist for that, and that's been unbelievable. That mixed with this Eisenhower matrix approach to really prioritizing has been a huge unlock and it's been exciting.

Daniel Scrivner:

Do you do the Eisenhower? Yeah, I know that framework. We'll definitely link it in the show notes, because I think it's a great reminder for anyone who needs a refresher. Do you guys do that via tags? Do you just go and triage and kind of move those into different categories? What's the system using Todoist?

David McDonough:

We have four columns, and the far left column is this sort of urgent to do and we are on the same dashboard. And the best part of my day is when I get to check something off as done, and then Courtney gets an alert that I've done something. And so it's like boom, take care of another, not going to get in trouble for not finishing something I need to do. Because I think one of the challenges, not just as CEO, but as anyone at an early stage startup is understanding the difference between what feels like work, but is actually kind of just busy work, and what is actually going to move the needle and move the company forward. And making sure both for me as the CEO, but everybody on the team is at all times asking themselves, is this the highest leverage, most important thing that I should be doing right now? If not, someone else should be doing it. And it's a constant battle just for myself, but also to remind the team to make sure you're doing that

Daniel Scrivner:

Constant battle's the right word. How do you think about your superpowers? And I know that that may be a loaded term. But the idea is really all of us have things that we're just wired to do really well, and we also have things that we're wired to not be particularly great at. On the positive side of that coin, what do you feel like when you're doing it or when you hear from others, you're just performing at your highest level? What is a super power for you?

David McDonough:

There are a few different ways to frame this. I think ultimately my superpower, that I think of as a superpower, and I'm sure people would give me feedback otherwise, but for any founder or builder, I think empathy is the most critical unlock. It is a secret weapon, where if you have the right empathy and that skill to, whether it's talking to an investor, talking to a user, talking to a customer, literally at a partnership, being able to very quickly understand the pain points, or the motivations, or the incentives of the person you're talking with. And you're not manipulating them. It's just, I think for me, the way that I grew up, I kind of grew up in inner city DC and would go between a lot of different strata of social classes, and the ability to understand, I think really well understand different motivations and incentives, and be able to just connect with people, again, this isn't like you're trying to game the system.

David McDonough:

It's, this person is incentivized by understanding how to improve their investments. If you have that empathy, which for me, it played out in being able to empathize with this mass of regular self-directed investors who were tired of being told they can't do this and wanted to learn and directly participate in capital markets, which is a great thing, that empathy showed me, whoa, there's a big market here. That empathy gave me the ability to talk to investors. It's frankly, empathy is a fancy way of just kind of talking about sales. Anytime you need to close somebody, you just genuinely build a relationship with them and understand what makes them tick, what makes them happy. You don't need to be the traditional boiler room salesperson. It's just, hey, I want to build rapport with you. I think you're interesting. Hopefully I can help you accomplish something. Here's what I think I can do to help you, and tap into the drive of the person you're engaging with.

David McDonough:

That, for me, from both product fundraising, anytime you jump into a fundraising conversation, understanding the motivations of the other person, what makes them tick, what they're excited about and steering the conversation towards that is, I think genuinely what I enjoy doing the most and has also been kind of the most valuable.

Daniel Scrivner:

I love that you brought up empathy. It hasn't been brought up before. And yeah, I think you're totally right. It's not a tactic. It's a state. And if I think about it in my life, I think all of us want to build great relationships, not just with our significant others and the people that are really close with us, but the people we engage with every single day, the investors we bring on our cap table, or the companies you invest in. And so I love that answer. On the flip side, what do you struggle with just personally and how have you gotten better at that over time? Or how do you kind of, I don't know, put checks and balances in place on yourself?

David McDonough:

What I struggle with, I think is a, this is a cop out, also a power, but I've got so many ideas. I am your classic, you have a gazillion ideas guy. You gotta let me fly. I think that was a Talladega Nights quote. Will Ferrell from somewhere. But I mean, there's so much running around. There's so many features, and products and ideas that I want to build. And trying to be focused, making sure that I'm focused purely on what is going to move the needle most right now. Again, I'm the chief offender there and have surrounded myself with extremely talented people who are able to help create sanity out of the chaos of, here's a great idea. Here's a great idea. We could do this. This is a trillion dollar idea. And make sure that I write those down and I chew on them, but I don't let those become distractions for me or the team.

David McDonough:

And I would love to spend all day designing gifts and animations, because it's really fun for me to do. I've got a great idea for an upvote animation. Not a great use of my time, not the most important thing right now. So being aware that my job is changing and that I need to give away my Legos to trust other people who can do those things better, and also focus on the things that really matter the most.

Daniel Scrivner:

Yeah. That's really well said. It sounds like this is something you've clearly thought about and worked on a lot, and I'm guessing you've had coaches or other figures that have helped you with.

David McDonough:

I have a great coach and clearly have gotten a lot of feedback from other teammates.

Daniel Scrivner:

Yeah. Well, and I empathize, because I think I'm wired very similarly. I'm curious, and I'll ask both these questions at once. We kind of separate them out, but for some people, one resonates, maybe the other typically doesn't. But if you think about either critical figures in your life, and these could either be historical figures that you just looked up to, you read about, you just really admired, could be figures that you have close to you, or could be books, are there figures, historical, personal, books that have had an influence on you? And what's that influence in? What would you recommend to others?

David McDonough:

I have to give a shout out to my parents. Obviously they're the ones who I wouldn't be here without them giving me sort of all the opportunity in the world. And definitely non-traditional parenting probably, but it set me up really for success and they did an incredible job, in terms of giving me the freedom and the leeway to do whatever I wanted. And as long as I did it with all of my best effort and ability, they're fully supportive. Let's see, historical figures, modern. This one is, I think Elon is a very polarizing figure that I think is fascinating, because he is someone who has had all these very big swing ideas and has been able to execute on things that really move the needle. I also think there's probably room for improvement in how he communicates them and how he shares them.

David McDonough:

I think taking really big bets despite how challenging they are, if they're going to try to change the world and improve, again, these cliches, sort of really make the world, and not even this world, other worlds a better place. One book that I loved is Finite and Infinite Games. And I was talking about this this weekend. There's a movie called Arrival, that on the surface is about aliens, but it's about so much more. It's about basically the idea of our concept of time and the nature of life, where let's say you knew in advance that, I don't want to add any spoilers, but you knew in advance how challenging a startup would be that might not work, but over the course of that journey you were going to impact so many different people and improve people's lives, would you still do it? Is it worth it? If you could see how your life was going to play out, what would you change? What would you do the same in terms of minimizing those regrets?

David McDonough:

As a politics junkie, I'll avoid getting too deep into politics, but there are definitely certain politicians and presidents that I think have had profound impact on changing things for the better. I think Obama, for a lot of the flack that he gets, did an incredible job trying to change healthcare. It was a massive challenge. And surely there's a lot more room to improve it. But things like that, taking big bets that move the needle, to me, and that's on both sides of the aisle, I believe the same thing, I'm pretty much right down the middle, but I think those are things that I get really excited about. That's what gets me fired up to do all the hard work is to really try to improve and change things is exciting.

Daniel Scrivner:

And I love that through line of just really admiring and appreciating people, maybe just appreciating is the best word. Appreciating people that can take big bets, especially in public, because I think that all of us have ideas that we think are profound or have visions of ourselves and what we can do that excite us, or at least most of us do. But I think to do those in public, to get all the flack for them, to have people pile on with kind of a negativity and hot takes when you're still executing on it, and to persists through it and to continue to build stuff, I think is really, really impressive and is an underrated skill in some ways. We always ask the same two closing questions and I'm really excited to hear your answers to these. The first one is, if you can share a favorite failure? And you can take that any direction that you want. I think something that maybe from the outside looking in probably wasn't a success, but for you was a huge success for one reason or another.

David McDonough:

Honestly, a lot of my best failures have been jobs that I didn't get, which at the time felt crippling and like, oh my gosh, my career is over. From going to medical school or getting a job on Capitol Hill. I can point to so many different jobs that I was like, this is my dream job. If I get this job, I'm set for life. And didn't get those jobs. Didn't get a job working in politics. And it opened the door. In hindsight, for me, I've been rejected constantly from both fundraising, career wise. Actually, when I was at Google, all I wanted to do was work at Google Ventures. I would interview constantly, and would try to position myself. Thought it was the coolest, best job I would ever have. And I just didn't have what it took and never was able to really get past the interview stage, probably deservedly so.

David McDonough:

But that ticked this fire in me, well, you know what? Maybe they're right. I haven't proved myself. I need to build something. And so I started building little venture websites, and then all of that snowballed into what's now Commonstock. And so getting rejected by Google Ventures, getting rejected by every other VC firm that I wanted to work for, I was like, all right, you know what? Screw them. I'm just going to go build something myself and they're going to have to give me their money, and then we'll see who gets the last laugh. And I'm petty like that. And so it's turned out to work okay so far.

Daniel Scrivner:

Yeah. We all have that side. And it prevented you from being a boring venture capitalist, so that's the upside. And then on the flip side, we always ask people this question, what is your definition of success? When you think about it and kind of totally zooming out from just what you're building.

David McDonough:

My definition of success is, I think I touched on this earlier, impacting as many people as possible in the biggest way possible that I possibly can. And I think that is just what gets me fired up to go to work every day is, whether it's improving one person's life on a daily basis, or hundreds, or thousands, or millions, that is something, to me, that's money and physical things are just not exciting. And I know that sounds super cliche. I bought a used car last year and it's exciting for the first week or month. But no matter what, those things are going to get old. It never gets old hearing, hey, you helped me improve my knowledge, or you helped me improve my portfolio or make more money, or you helped me buy a house. And even if Commonstock doesn't become financially rewarding for me or our investors, same thing with our team.

David McDonough:

There are a group of people who have rerouted their lives to join this crazy mission and will do literally anything it takes to help improve their knowledge, to help improve their lives, to make sure that they're looked after, and have a good, positive impact on their lives, have a good, positive impact on our users, ideally on our investors as well and the people who invest in our investors. I think that scalability, the exponential potential for impact, to me, is why I love startups, is the chance for me to create and have an almost exponentially increasing impact on people that is really challenging, but very rewarding. And that's how I kind of measure success is the number of people that I can positively impact. And it might be a few people, might be millions hopefully by the end of the day, but that's what I love doing.

Daniel Scrivner:

I think you're at the right place, right time with Commonstock and I love what you're building. Thank you so much for all the time. This has been just one of the best interviews. So I really appreciate it, David.

David McDonough:

Well, likewise. You can tell I love rambling about this stuff because I get so excited. But thanks for having me. Great to jam. Happy to chat anytime.

Daniel Scrivner:

If you haven't yet, listen to David McDonough's deep dive interview on Commonstock in episode 44. For links to everything we discussed, as well as our notes and takeaways from this episode, visit outlieracademy.com/44. There you can also find more incredible interviews with guests like Scott Belsky, Kevin Kelly, and the founders of Titan, Rally, Primal Kitchen and so many other great companies. There you can also sign up for our free weekly newsletter, Outlier Debrief, where every Friday we share a few highlights from the latest episode, as well as our favorite articles, headlines and moments from that week. Thank you so much for listening. I'll see you right here next week on Outlier Academy.

On Outlier Academy, Daniel Scrivner explores the tactics, routines, and habits of world-class performers working at the edge—in business, investing, entertainment, and more. In each episode, he decodes what they've mastered and what they've learned along the way. Start learning from the world’s best today.

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David McDonough

#51 How They Built It: Commonstock - Building the Investment Platform to Rule Them All | David McDonough, Founder & CEO

#51 How They Built It: Commonstock - Building the Investment Platform to Rule Them All | David McDonough, Founder & CEO

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Bonus David’s Habits, Influences, and Life Lessons – David McDonough of Commonstock – Outlier Academy

#51 How They Built It: Commonstock - Building the Investment Platform to Rule Them All | David McDonough, Founder & CEO

#51 How They Built It: Commonstock - Building the Investment Platform to Rule Them All | David McDonough, Founder & CEO

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Bonus David’s Habits, Influences, and Life Lessons – David McDonough of Commonstock – Outlier Academy

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