Some Lessons I Learned from the Dotcom Bubble for the Coming Crypto Bubble


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I spent a bunch of time at Consensus and Token Summit this week. If it wasn’t clear before, we are headed into a crypto currency bubble. Now a bubble isn’t in and of itself a bad thing. In fact almost every wave of technology has brought with it a financial bubble phase (eg care for Railway Mania in Britain). During this phase a lot of financial capital flows into a sector which finances real innovation and accelerates the buildout of physical infrastructure. The same will be true for the crypto currency bubble and the buildout of the decentralized Internet (see my recent quote in the Economist).

Now what was eye opening to me is how young most of the players in the crypto currency space are. Many of them were not around as either entrepreneurs or investors in the Dotcom Bubble. So as someone who was, I thought I Continue reading “Some Lessons I Learned from the Dotcom Bubble for the Coming Crypto Bubble”

Uncertainty Wednesday: Probability Distribution


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So far in Uncertainty Wednesday we have limited ourselves to looking at examples with only two states of the world and two possible signal values. When I introduced this I explained that these combine to form four elementary events and we looked at the basic requirements for assigning probabilities to these and the axioms that probability should then follow. 

Now let’s forget for a moment about the origin of our elementary events and simply look at any set S = {A, B, C, D, E, F} where the members are elementary events, or states of the world, or signal values. Now a probability distribution across the set S, is simply a set of values such that for x ∈ S

0 ≤ P(x) ≤ 1

and

∑P(x) = 1 where the sum is over all x ∈ S

Quite clearly there are infinitely many probability distributions that are possible (this was also already Continue reading “Uncertainty Wednesday: Probability Distribution”

Who Controls our Attention? Separating Aggregation/Discovery from Publishing


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This weekend brought us both a big New York Times piece titled “The Internet is Broken: @ev​ Is Trying to Salvage It” and a Guardian article about Facebook’s guidelines for content moderators. Both speak to the question of who controls content on the Internet and how that control impacts our attention. Ev makes the point that extremes attract more attention compared to a more moderate or balance view. Therefore advertising based systems, which require attention which they then partially resell (that’s the fundamental nature of advertising), are unlikely to ever be the best guardians of human attention. One alternative are subscriptions, but for that to really work for news, commentary, or even just friends’ status updates we need to separate aggregation/discovery from publishing. 

One of the great breakthroughs of the web was that it brought us permissionless publishing. We no longer required a gatekeeper publisher but instead Continue reading “Who Controls our Attention? Separating Aggregation/Discovery from Publishing”

Vocational Schools and Getting to the Knowledge Age: Finding a Calling


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I recently listened to a talk by David Autor about employment and technology. He praised the high school movement as being incredibly forward looking for addressing the rapid decline in farm employment. When asked about what the equivalent would be today, David answered “vocational schools.” Now as it turns out my Dad was a teacher at a vocational school in Germany where the apprenticeship system has been maintained throughout the Industrial Age. I learned a ton from my Dad about technical drawings and the workings of drills and lathes.

Based on observing my Dad and his students, as well as my thinking and writing in World After Capital, I think David is right about “vocational” but in the original sense of the word. Vocational comes from Latin “vocatio” which means a call or summons. What we need “vocational” school to be is a way of finding one’s calling. A calling Continue reading “Vocational Schools and Getting to the Knowledge Age: Finding a Calling”

Uncertainty Wednesday: Intro to Measuring Uncertainty


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We have covered a lot of ground in Uncertainty Wednesday but we have yet to talk about measuring uncertainty. While most discussions introduce such concepts as mean and standard deviation early on, I have held off on them on purpose in order to develop a more comprehensive view of the sources of uncertainty and a hopefully better understanding of probability. Now is a good time to start thinking about how we might measure uncertainty.

Take our super simple model again of a world with only two states and two signal values. Now let’s think about the factors that go into uncertainty.

The first factor is the probability between the two states. If there are only two states and one state is extremely likely, then you face less uncertainty than if each state is equally likely. So that’s one aspect of uncertainty that we will want to make precise. It would Continue reading “Uncertainty Wednesday: Intro to Measuring Uncertainty”

Thoughts on Regulating ICOs


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It appears that regulators are looking into ICOs, the Initial Coin Offerings by which many projects are raising financing at the moment. Regulators are rightly concerned with people losing money in speculative projects that fail to deliver or worse yet in outright scams. As regulators think about how to approach this area it will be important to keep a few things in mind:

  1. Coins are sui generis. Coins are not equity, although they share some aspects of equity. Coins are not a pre-purchase, although they share some aspects of a pre-purchase. Coins are not currencies, although they share some aspect of currencies. Etc.for other currently regulated securities. Applying an existing regulatory framework to coins will be detrimental since it will not fit their unique characteristics.
  2. Coins are global. This is not a US phenomenon. The issuance and purchase of coins is happening all around the world. A Continue reading “Thoughts on Regulating ICOs”

DREAMELIA


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I am super excited to be backing our daughter Katie’s film project on Kickstarter. She is making a horror movie about what it’s like to be a teenager. Which sounds about right. Joking aside, here’s the premise:

At sixteen, Amelia is almost free of the torment of her cutthroat New York City private high school. To her little group of friends, she’s the perfect student, bound for a prestigious Ivy League college, but beneath the surface things are bubbling over. Since her mother’s death, Amelia’s father’s has buried himself in his work and left Amelia to raise herself. School is her escape… until she’s roped into a cheating scandal with the richest kid at school.

Innocent and facing repercussions, Amelia agrees to counseling and is prescribed Syrenaphyn, a powerful anti-depressant that transports Amelia into a new world of ease. While Amelia sees this new world as beautiful, we see Continue reading “DREAMELIA”

Uncertainty Wednesday: Day Off for USV Portfolio Summit


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I am taking the day off from Uncertainty Wednesday because today is our portfolio company summit. It is a day I look forward to every year where many of the founders and CEO of our portfolio companies come together. 

We have been holding this unconference style for many years. The day maximizes the room for small group conversations around topics that have been generated by the participants. The net result is a high quality and open exchange of experiences and opinions, which contributes to strong relationships that last through the year. One of the key messages we want people to take away from is that they are not alone but have a strong peer group they can access any time.

There will also be a couple of topics that we will dig into with the entire group. Two years ago we covered blockchain. Last year we had an extensive Continue reading “Uncertainty Wednesday: Day Off for USV Portfolio Summit”

Macron Wins in France: Time for an Independent / a New Party in the US?


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I was happy to see Emmanuel Macron solidly defeat Marine LePen in yesterday’s French elections. What is most interesting about his victory is that he started his movement En Marche! only last year. The received wisdom in the United States is that it is impossible to get past the two party system. If someone wants to become President, they have to run either as a Democrat or a Republican. I am not sure this is true anymore and arguably Trump, while running as a Republican, did so – at least initially – against the support of the party.

With the rise of social media a lot has changed. It has become possible for a candidate to take their message directly to the people. And if that message resonates with enough people it will also be covered by the existing traditional media channels. Trump demonstrated that amply here in the United Continue reading “Macron Wins in France: Time for an Independent / a New Party in the US?”

Matching Donations to Planned Parenthood


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Today the House may be voting on an act that would have the effect of taking away access to healthcare for many Americans. If it passes that will happen through a variety of mechanisms which make care too expensive for people to afford. For over 100 years one way that women have had access to affordable care has been through Planned Parenthood.

There are many different ways in which we need to fight for a better healthcare system, one that brings down the cost of care and is accessible to all in need. The most promising avenues for this will take years to play themselves out, including growing the innovative services provided by companies such as Human Dx, Nurx, and Clue that we have invested in at USV.

In the meantime though today and through end of day Friday, SusanAmyJoanne, Brad, Fred and I Continue reading “Matching Donations to Planned Parenthood”

Uncertainty Wednesday: Independence (Coin Flipping)


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In the last two installments of Uncertainty Wednesday we looked at the concept of independence and concluded that it was actually quite a strong assumption. Now as one of the comments pointed out, independence is normally introduced in the context of a repeated coin flipping, where it is generally assumed that the outcome of the next coin flip is independent of the prior coin flip. When the independence assumption holds it means that no matter how long a sequence of coin flips I give you, you can do no better with your prediction for the next flip than saying 50% heads and 50% tails.

Now we had previously looked at coin flipping through the lens of our framework. At the time I had pointed out that a coin flip is a signal about the machinery producing the coin flip. So now we can restate the independence assumption about coin flips Continue reading “Uncertainty Wednesday: Independence (Coin Flipping)”

May Day 2017: A New Social Contract with Basic Income


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Last Friday morning I appeared on a panel about the future of work. This is of course a topic I have covered extensively here on Continuations and is a central subject of my draft book World After Capital

One of the key recurring themes that I hear in this context is some version of “We just don’t know what’s going to happen.” This comes up for instance with regard to how quickly some jobs will be automated and where possible new jobs might come from in the future. This strikes me as a huge and misleading cop out because first, we do know what is happening, second we know what has happened in the past and third, we need to figure out what we want to happen now! Because “what’s going to happen” is not the result of some deterministic process of history or technology but will be the Continue reading “May Day 2017: A New Social Contract with Basic Income”

Uncertainty Wednesday: Independence (Cont’d)


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Last Uncertainty Wednesday, I introduced the concept of independence. I ended the post by asking whether independence was likely to be a strong or a weak assumption. To answer this let us look at the possible values for elementary events. And for that purpose I will show a different way of looking at those that I should have probably introduced a long time ago, when I first presented the 2 states, 2 signals model, defined probability, and related the probability of elementary events to compound events. I was lazy at the time because this involves a diagram but it will be helpful as we go forward:

image

We show the states of the world and the signal values as a 2×2 matrix. Each value inside the matrix is the probability of an elementary event such as P({AH}), meaning the world is in state A and we receive signal Continue reading “Uncertainty Wednesday: Independence (Cont’d)”

Time to Explore Alternative Ownership Structures for Network Effects Businesses including Twitter


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At Union Square Ventures, network effects have been central to our investment thesis for a decade. From an investor perspective network effects are one of the few, possibly the only, source of sustainable competitive advantage in a world where almost everything else can be copied quickly. But we also early on recognized that this has the potential for setting up a deep conflict between companies that operate networks and the participants in those networks: the value to shareholders can be increased through rent extraction from the network. And with many network effects companies reaching near monopoly status the potential for harmful rent extraction has grown. Harm can come in many forms, such as directing too much attention towards commercial use or suppressing innovation.

One response to this problem of how to be a good steward of a network has been my advocacy for the Public Benefit Corporation. I participated in Continue reading “Time to Explore Alternative Ownership Structures for Network Effects Businesses including Twitter”

Venture Capital is a Capacity Industry with Boom and Bust Cycles


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A long time ago when I worked as a management consultant, I did a study for Lafarge which has a huge cement business. The study involved real sleuthing as we were trying to determine the operational capacity of cement plants owned by others and under construction all around Europe. At times I felt like a spy as I was hanging out counting trucks going in and out of facilities and sidling up to engineers who worked there as they were getting coffee before work.

Why all the sleuthing? Well, Lafarge understood well that cement was a capacity industry with boom and bust cycles. They wanted to figure out where the cycle was in order to figure out whether or not they should build more capacity themselves. The cycle in cement looks something like this: construction in a region heats up increasing the demand for cement. Since supply is inelastic the Continue reading “Venture Capital is a Capacity Industry with Boom and Bust Cycles”

Uncertainty Wednesday: Independence


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Last week, I provided a recap of what we have covered so far in Uncertainty Wednesday. To go on from here we need to introduce some more concepts that are usually covered earlier but that I believe will make more sense in the framework that we have now established. The first one of these is the concept of independence. Two events are said to be independent if “the occurrence of one does not affect the probability of occurrence of the other.”

Now is a good time to remember that in our simplest model we have four elementary events AH, AL, BH and BL which represent all the possible combinations of the world being in either state A or state B and us receiving either signal H or signal L. We then figured out the probability of events, e.g. P(B), in terms of the underlying probabilities of the elementary Continue reading “Uncertainty Wednesday: Independence”

“No One Really Knows” – No Need for Alarm about How Neural Nets Work


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There’s been a lot of handwringing recently about how we don’t really understand deep neural networks. The MIT Technology Review even published an article with the sensationalist headline “The Dark Secret at the Heart of AI.” It head the subheading “No one really knows how the most advanced algorithms do what they do. That could be a problem.”

Well sure it could be a problem, but let’s get one important point out of the way: no one really knows how people do what they do, yet we have them do all sorts of things every day. People drive cars. People diagnose diseases. Does it matter that we don’t know how they do it? 

And no one really knows how existing large scale software systems work either. By that I don’t mean that we don’t understand small components of these systems. I mean no one can grasp the whole Continue reading ““No One Really Knows” – No Need for Alarm about How Neural Nets Work”

Copying and Competition in the Tech Industry


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Yesterday Instagram announced that it has 200 million users for stories, which exceeds Snapchat’s 160 million users from their S-1 filing. Never mind that nobody outside these companies knows what those user definitions really mean or how to compare them. This has nonetheless rekindled a debate about copying that periodically arises in the tech industry. For a previous instance, take the outrage over Rocket Internet’s copying of US businesses for Europe and also Asia. If you want to go much further back you have the long running feud between Apple and Microsoft over copying from each other in the PC era.

The copying debate suffers from a great confusion because most people ignore the importance of market power. Copying happens all the time in all industries. Hardly anything is ever truly new and most products draw on inspiration from the work of others (including researchers, remember the role of Xerox

image

Continue reading “Copying and Competition in the Tech Industry”

Uncertainty Wednesday: Recap


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Today in Uncertainty Wednesday I want to provide a big recap of the series which I started last August. The key takeaways so far should be that

Reality itself is not directly accessible to us. All we have to go on are observations and explanations.

Uncertainty exists because there are limits on observations and explanations.

Limits on observations include a fundamental limit, limits on resolution, measurement error, cost, and impact on the observed reality.

Explanations too have a fundamental limit.

The fundamental limits on explanations and observations mean that we always face irreducible uncertainty, even if there were no randomness in the underlying reality.

We then examined two examples: a hypothetical fortune telling machine and the flipping of coins.

Based on these examples I introduced the simplest possible model that lets us start to formalize the above: a world with two possible states and two possible Continue reading “Uncertainty Wednesday: Recap”

Changing Everything: Basic Income is Not Enough


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One of the criticisms leveled against Universal Basic Income is that it is too big a change. But if anything it is not enough of a change. Why? Because it is just one part that needs to change and human societies are systems of interlocking parts. That means many other parts will need to change also. Importantly we have already changed everything about how humanity lives twice already.

In the transition from the Forager Age to the Agrarian Age, humanity went from migratory to sedentary, from promiscuous to monogamous, from flat societies to hierarchical ones, from animism to the great world religions. In the transition from the Agrarian Age to the Industrial Age, humanity went from living in the country to living in the cities, from large extended families to nuclear or no families, from the importance of commons to the predominance of private property, from making and growing things Continue reading “Changing Everything: Basic Income is Not Enough”