Fundamentals Versus Basics
And why the distinction matters
I’ve trained senior investors, start-up leaders, and UFC fighters. With all of them, I focus on fundamentals. Sometimes, when I explain my teaching methodology, people conflate that with an emphasis on basics. I don’t teach basics; I teach fundamentals. What is the difference?
Basics implies a lack of depth (i.e., a basic understanding of something or getting the basics of an idea), whereas fundamentals are about critical concepts with broad applications (i.e., understanding something at a fundamental level).
For example, let’s say I am teaching cap tables:
Basics: Me saying that a cap table is a ledger the reflects ownership of a company and that ownership changes as funds are raised.
Fundamentals: Teaching someone how to understand and leverage the key cap table mechanics that are relevant for any round of funding they will need to model out. Beyond mechanics, a fundamental understanding of cap tables requires understanding the key motivations of the parties around the table.
The difference between basics and fundamentals becomes extremely clear when you need to do an advanced application of the concepts. An understanding of the basics (even a strong understanding) will not prepare you for the advanced topics. A strong knowledge of fundamentals will.
For example, if you understand the fundamentals of cap table mechanics extremely well, modeling something like a pay-to-play with a pull-through will not feel extremely daunting. Similarly, if you know SAFE conversion mechanics extremely well, stacked SAFEs will not be much more of a challenge.
Where People Get Stuck: In the interviews for my class, I will occasionally have people tell me that they’ve mastered the basics and want to focus on the more advanced topics right away. Sometimes, they (1) mean fundamentals and (2) have mastered (or are extremely strong in) fundamental concepts. When someone says they want to do something more advanced, I ask what more advanced means to them. Often, these people will mention areas that would not feel advanced if they were as strong in the fundamentals as they are presenting.
These students can struggle in the course because they are somewhat tuned out when I am teaching the fundamentals and then feel lost when we get to the more complex topics that rely on them having listened to the fundamental mechanics hit on earlier. Truthfully, when I see this play out in an interview, I am often a bit hesitant to accept the person as a student, as I’ve seen this story play out enough times that I want to avoid it. This dynamic plays into something I’ll cover another time: why I don’t often take on analysts as students.
Where This Came From: My focus on fundamentals comes from coaching athletes. When working with professional athletes, the focus is usually on doing a few things at a world-class-level rather than doing a bunch of things somewhat well. In the martial arts world, most of the best have a limited number of moves they use consistently, but they do what they do better than anyone else. Often, the things that they are doing are built on a strong understanding of the fundamentals behind what they are working on. I strongly believe in this approach and use it when training people on financial topics, too. I’ve seen it play out well consistently enough to believe in the method.
Conclusion: To be clear, I teach advanced applications of fundamentals in my courses. That said, I think the power of building strong fundamentals before going to advanced applications cannot be overstated. If you’re curious to learn more about what I teach and how, you can read other posts on this Substack and go to my course’s website. Thank you for reading!