The Rise Of Startups… Or not

They call it a Cambrian moment. These days, every city worth its salt comes with a startup ecosystem: co-working spaces and accelerators mark emerging hubs across the United States and around the world. Since The Social Network, high school students have grown up with the legend of the college dorm room startup as a central narrative. From healthcare to insurance to banking to food, it seems as though there is a startup for every piece of our economy today, and 10 more behind each one. They seem to be everywhere. 

In recent years, the number of new venture capital firms has exploded, raising to hundreds of new fund formations a year. My Limited Partner friends tell me they see 300+ new fund pitches per year. Accelerators are rising follow-on funds, athletes are raising side project funds, and scout programs are launching as standalone platforms to fund the early stage.

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About Proprietary Networks

They are the among the only lasting advantages in business – particularly in the fast-moving technology environment. And the question about how to grow one is one of the most common pain points for someone early in their career, particularly if they did not get lucky and choose the right company to work for, where the network was built-in for them. So here’s a word: most people wrongly focus on the “network” side of the equation before the “proprietary” side. It’s relatively easy to guess somebody’s email address. And it’s a toss up who will respond to a cold email. It’s relatively easy to meet a luminary – attend the right conference, hang around after she speaks, you may get 5 minutes. But if you do this before the “proprietary” part, you’re getting it backwards. Proprietary, in this context, means you are known for something. You are useful, have an expertise, or even Continue reading "About Proprietary Networks"

About Proprietary Networks

They are the among the only lasting advantages in business – particularly in the fast-moving technology environment. And the question about how to grow one is one of the most common pain points for someone early in their career, particularly if they did not get lucky and choose the right company to work for, where the network was built-in for them. So here’s a word: most people wrongly focus on the “network” side of the equation before the “proprietary” side. It’s relatively easy to guess somebody’s email address. And it’s a toss up who will respond to a cold email. It’s relatively easy to meet a luminary – attend the right conference, hang around after she speaks, you may get 5 minutes. But if you do this before the “proprietary” part, you’re getting it backwards. Proprietary, in this context, means you are known for something. You are useful, have an expertise, or even Continue reading "About Proprietary Networks"

“Insurance Is Sold, Not Bought.”

In an influential 1979 behavioral economics paper, Daniel Kahneman and his colleague Amos Tversky developed “Prospect Theory” as a way to make sense of decision-making. The summary of the paper was, if I may, that humans do not make optimal decisions, which normative (”should”) frameworks suggest, but instead have irrational aversion to certain losses, and minimize the probability of other losses. Here’s an example: 
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Here, Kahneman (via Thinking, Fast and Slow) outlines the cases where a decision-maker irrationally minimizes potential losses versus maximizing potential gains. As the theory goes, humans sometimes choose to be risk-averse, even it results in an unfavorable outcome. The opposite also applies: we sometimes are risk-seeking even if it results in an unfavorable outcome. The intersection of actuarial science and behavioral economics purports to find itself in the bottom right box. You choose to buy insurance, which is $1 more than the statistically-adjusted cost Continue reading "“Insurance Is Sold, Not Bought.”"

“Insurance Is Sold, Not Bought.”

In an influential 1979 behavioral economics paper, Daniel Kahneman and his colleague Amos Tversky developed “Prospect Theory” as a way to make sense of decision-making. The summary of the paper was, if I may, that humans do not make optimal decisions, which normative (”should”) frameworks suggest, but instead have irrational aversion to certain losses, and minimize the probability of other losses. Here’s an example: 
image
Here, Kahneman (via Thinking, Fast and Slow) outlines the cases where a decision-maker irrationally minimizes potential losses versus minimizing potential gains. As the theory goes, humans sometimes choose to be risk-averse, even it results in an unfavorable outcome. The opposite also applies: we sometimes are risk-seeking even if it results in an unfavorable outcome. The intersection of actuarial science and behavioral economics purports to find itself in the bottom right box. You choose to buy insurance, which is $1 more than the statistically-adjusted cost Continue reading "“Insurance Is Sold, Not Bought.”"

MAYA: Most Advanced Yet Acceptable

Two anecdotes stuck out to me in Derek Thompson’s Atlantic post about “The Four-Letter Code to Selling Just About Anything.” First, the concept that people prefer the image of themselves in the mirror to that in photos. I certainly do, and often feel like I look lopsided in photos. But that makes sense, since I’m seeing the mirror image of what I’m used to seeing. I imagine the same applies to the phenomenon of hearing one’s voice (which happens far less often). If you are used to hearing it come from your own mouth, with the baritone coming from your lungs, the nasally effect manifesting in your own nose, et cetera, that is be the familiar sound and so something close, but not quite there, is jarring. Second, the clustering of popular names: Derek describes research done by Stanley Lieberson which concludes that “Most parents prefer first names for Continue reading "MAYA: Most Advanced Yet Acceptable"

MAYA: Most Advanced Yet Acceptable

Two anecdotes stuck out to me in Derek Thompson’s Atlantic post about “The Four-Letter Code to Selling Just About Anything.” First, the concept that people prefer the image of themselves in the mirror to that in photos. I certainly do, and often feel like I look lopsided in photos. But that makes sense, since I’m seeing the mirror image of what I’m used to seeing. I imagine the same applies to the phenomenon of hearing one’s voice (which happens far less often). If you are used to hearing it come from your own mouth, with the baritone coming from your lungs, the nasally effect manifesting in your own nose, et cetera, that is be the familiar sound and so something close, but not quite there, is jarring. Second, the clustering of popular names: Derek describes research done by Stanley Lieberson which concludes that “Most parents prefer first names for Continue reading "MAYA: Most Advanced Yet Acceptable"

Timing and Infrastructure

Over the holiday I was catching up on the unread articles in my browser (time to switch to Pocket/Instapaper… there were almost 100) and I bumped into this one by Bloomberg collecting venture predictions for the most important trend of 2016. I really liked Rebecca’s comment: “2016 was the year the internet quietly sped up″ and haven’t been able to get it out of my head. In the venture community, we often credit Amazon Web Services – and the rise of cloud computing more generally – as an inflection point in the startup industry, as a founder could build a technology company for the cost of a subscription to EC2, instead of having to buy and maintain their own servers and manually include CPU, memory, PCI components, et cetera. This is the difference between $10,000+ for your own hardware and $100+ for access to a subscription. The floodgates burst open with Continue reading "Timing and Infrastructure"

Considering Economic Recovery

The rise of populism, right-wing candidates, and unpredictable jingoism has been correlated in the past with financial crises (quite closely, in fact). My friend Cathy did a great job of exposing this correlation, and noting that perhaps we shouldn’t be surprised about what’s happening in Austria, in Britain, in Italy, France, Germany, and of course the United States. But the surprise, for me, lies elsewhere. A broad swath of U.S. economists would have claimed, as recently as weeks ago, that the 4.3% national unemployment rate, hundreds of thousands of new non-farm payroll based jobs created every month, and slow but steady GDP growth were representative of an economy in steady hands, in good and improving shape. While the global financial crisis “wiped off 13% of global production and 20% off global trade" including scores of defaulted mortgages, student loans, and Continue reading "Considering Economic Recovery"

Considering Economic Recovery

The rise of populism, right-wing candidates, and unpredictable jingoism has been correlated in the past with financial crises (quite closely, in fact). My friend Cathy did a great job of exposing this correlation, and noting that perhaps we shouldn’t be surprised about what’s happening in Austria, in [Britain], in Italy, France, Germany, and of course the United States. But the surprise, for me, lies elsewhere. A broad swath of U.S. economists would have claimed, as recently as weeks ago, that the 4.3% national unemployment rate, hundreds of thousands of new non-farm payroll based jobs created every month, and slow but steady GDP growth were representative of an economy in steady hands, in good and improving shape. While the global financial crisis “wiped off 13% of global production and 20% off global trade" including scores of defaulted mortgages, student loans, and Continue reading "Considering Economic Recovery"

USA, 2016

Well, here we are. President-Elect Trump. This past week, I met with a few executives from a portfolio company to discuss the implications of a President-Elect Donald Trump. The conversation really struck me, particularly a few pieces: At a personal level, they felt compelled to protest and organize, to take a stand against hate and separation. They felt guilty that it seemed like a mutually exclusive choice between being effective business leaders while also showing moral courage through their personal expression. They worried that creating a space for political dialogue might distract employees from work, but also that discouraging that space was even worse. They worried that creating a safe space for political dialogue might exclude those who voted against the rest of their peers at work, in whichever direction. It got me thinking: as a leader in a business, what responsibilities, or opportunities, do you have to your employees Continue reading "USA, 2016"

Community-based networks

As recently as last year, smartphone sales globally grew 14%, and while that growth has slowed this year, it is a growth rate on over a billion devices, meaning over 100 million new devices hitting the market per year. That is an extraordinary shift, invites a new paradigm for connecting our world that we are still just beginning to understand. If putting a personal computer in every home enabled the creation of the Internet economy (Amazon, Google, Facebook), putting a personal computer in every pocket in the world is enabling the creation of a new economy as well. At the infrastructure level, we have seen the self-driving car race serve to develop a data transmission control protocol like TCP/IP. Indeed, microsatellites, fiber optic and ethernet cables, CCTV networks, and mapping services like Waze and OKHi, will continue to add robustness to the core infrastructure layer, as well. The application Continue reading "Community-based networks"

Patient as Customer. Student as Customer.

I was having a discussion with my wife this week about this topic – she is in medical training right now, so when she comes from the hospital the topics are always interesting.  If you consider someone as a patient, there is a sacred, Hippocratic, oath that defines the relationship. The white coat represents more than a simple transaction, but a level of trust, honor, and responsibility that we have built into our society. As an outcome of that, however, sometimes a doctor takes a paternalistic view on their relationship with patients: they know what’s best, and that’s that. On some level, I’m sure you have witnessed this. And for the most part, it’s good, right? But that’s not how a capitalist relationship works. In a customer-based relationship, the work is in service of the customer, who is always right– so, the exact opposite. It is their money, after Continue reading "Patient as Customer. Student as Customer."

Patient as Customer. Student as Customer.

I was having a discussion with my wife this week about this topic – she is in medical training right now, so when she comes from the hospital the topics are always interesting.  If you consider someone as a patient, there is a sacred, Hippocratic, oath that defines the relationship. The white coat represents more than a simple transaction, but a level of trust, honor, and responsibility that we have built into our society. As an outcome of that, however, sometimes a doctor takes a paternalistic view on their relationship with patients: they know what’s best, and that’s that. On some level, I’m sure you have witnessed this. And for the most part, it’s good, right? But that’s not how a capitalist relationship works. In a customer-based relationship, the work is in service of the customer, who is always right– so, the exact opposite. It is their money, after Continue reading "Patient as Customer. Student as Customer."

Race and Providence

The 19th Century was notable for being the last century of chattel slavery, and the transatlantic slave trade sailed its final voyages over these years. Chattel slavery is a unique and important moment in history. It is unlike any other slavery, in that you were owned forever. You couldn’t earn your way out of it. If you escaped, you were in fact in violation of the law, and your children, and their children, and their children were fully slaves. It is entirely an invention of European monarchs and early European governments. So don’t get it confused with any other slavery, past or present. It was very different. And truly, truly evil. Even those that fled to free lands, internationally or in the North, were often either kidnapped and returned, or even tried in the court of law as property rightfully owned by their brutal masters. To that point, a prominent
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Risk at Sea

I’ve been reading Freaks of Fortune, a wonderful book on the history of the modern insurance industry. It’s a fascinating survey of the emerging capitalist threads of the 19th Century and their implications for the world in which we live. There are too many points to summarize or opine on for one short blog post, but a few concepts jumped out at me (quoted as screenshots below). i’ll split them up into a few posts, so that I can tell the stories well. First, modern insurance came from underwriting a very specific peril, universally understood to be the most dangerous thing about commerce: the sea. Disease at-sea, storms, navigation errors, sharks, and pirates were the biggest threat to commerce originating in London, where the insurance industry had its origins.  The concept of a ‘risque’ (sic) was a financial asset representing the insurance interest in the face of perils
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Seriously, What’s Up With Sweden?

At 9.5 million people, the country’s population is somewhere between Michigan and New Jersey. It’s slightly bigger than New York City. It’s GDP per capita is high, but not in the top 10 (depending on whether you’re using purchasing power parity or nominal GDP), and lower than the United States’. And yet, if you look at the last 10 years of technology activity coming out of that country, they have a stunning number of companies that either have $100M revenue or 100M users. And in the B range, the numbers are maybe even more startling. In the last 10 years, they have Mojang (to Microsoft, $2.5B), Spotify (private, ~$10B), Skype (to eBay, $2.5B), King (to Activision, $5.9B), Klarna (private, ~$2.5B), mySQL (to Sun, $1B) to name a few off the top of my head… It’s incredible. I’m not the only one whose noticed this. A Continue reading "Seriously, What’s Up With Sweden?"

Things We Make, Things We Grow

A few months ago i was having breakfast with a mentor and investor of ours, who said something very interesting to me: “When I was young, I used to think there was a distinction between ‘things that are made’ and ‘things that are grown’. I no longer believe in that distinction, which is a profound change.” As I thought about it, I realized I was the same way, but hadn’t realized it: on my old view, some things were made: paper, plastic, titanium, polyester, etc. And other things were grown: wine, meat, milk. But why? After all, wine is amino acids, ethanol, sulfur dioxide, yeast, and so forth. Similarly, meat is simply a cocktail of amino acids (these are important), carbohydrates, water, triglycerides and other lipids. Where it gets interesting: to-date, most biotechnology innovation has been considered in the context of drug discovery for pharmaceuticals, and most life science innovation has been Continue reading "Things We Make, Things We Grow"

Things We Make, Things We Grow

A few months ago i was having breakfast with a mentor and investor of ours, who said something very interesting to me: “When I was young, I used to think there was a distinction between ‘things that are made’ and ‘things that are grown’. I no longer believe in that distinction, which is a profound change.” As I thought about it, I realized I was the same way, but hadn’t realized it: on my old view, some things were made: paper, plastic, titanium, polyester, etc. And other things were grown: wine, meat, milk. But why? After all, wine is amino acids, ethanol, sulfur dioxide, yeast, and so forth. Similarly, meat is simply a cocktail of amino acids (these are important), carbohydrates, water, triglycerides and other lipids. Where it gets interesting: to-date, most biotechnology innovation has been considered in the context of drug discovery for pharmaceuticals, and most life science innovation has been Continue reading "Things We Make, Things We Grow"

An Open Letter On Donald Trump’s Candidacy.

Along with 150 of my peers in the technology industry, I signed an open letter organized by Alec Ross regarding the upcoming election. Reprinted in full below, shareable link here. — We are inventors, entrepreneurs, engineers, investors, researchers, and business leaders working in the technology sector. We are proud that American innovation is the envy of the world, a source of widely-shared prosperity, and a hallmark of our global leadership. We believe in an inclusive country that fosters opportunity, creativity and a level playing field. Donald Trump does not. He campaigns on anger, bigotry, fear of new ideas and new people, and a fundamental belief that America is weak and in decline. We have listened to Donald Trump over the past year and we have concluded: Trump would be a disaster for innovation. His vision stands against the open exchange of ideas, free movement of people, and productive engagement with Continue reading "An Open Letter On Donald Trump’s Candidacy."