Request for Statecraft

The health of a society is largely determined by its cultural and social technology. While technological and industrial development can certainly mitigate problems and enable solutions, we can’t transcend the realities of civic society entirely.

There’s no denying that odd things are happening in 21st Century America. Would our grandparents have expected the wealthiest, most influential nation in history to experience peak rates of depression, drug use, and loneliness? Robert Putnam noticed that we “bowl alone” in 1995, and predicted the decay of social capital foreshadowed by the decline in civic participation. The Red Cross, local Rotary Clubs, and parent-teacher associations just aren’t what they used to be.

What do we make of this trend? The challenge of statecraft is as old as the state itself. In the modern era, attempts abroad to engineer culture from a top-down perspective have yielded mixed results. The Islamic world has experienced its fair share of turbulence in attempting to integrate with the Western economic paradigm while holding onto its customs. Likewise, China has attempted to design a cultural regime suited for a more robust social fabric, partially under the direction of Wang Huning’s social engineering. But the Western world is not positioned for such top-down governance. The American tradition of civic society has always been bottoms up — a robust landscape of both small communities built by everyday individuals, and private institutions constructed by visionaries.

In Silicon Valley — where the primary business objective is industrial and economic innovation, at least in theory — investors occasionally promote a “Request for Startups” to call attention to fruitful areas of development ripe for funding. To complement this with innovation for better civic development, I humbly put forth a Request for Statecraft.

Internet-first education

15 years ago, Sal Khan began uploading lectures to YouTube after tutoring his cousin. It turned out that high-quality lectures delivered by an MIT and Harvard-educated polymath were in high demand. He incorporated Khan Academy to upload more free educational content, and over two billion views later, he’s developed a suite of tutorials and quizzes covering the full K-12 curriculum.

During Khan Academy’s early years, the implications were staggering. Why listen to a lecture from your high school teacher when you could instead learn from the absolute best in the world? The world of education would surely change forever.

The first experiment in this pedagogical theory was the “flipped classroom,” where students would watch video lectures at home, and solve problems in class with the support of their teacher. This way, they’d get the best lectures coupled with the hands-on help that parent’s can’t offer during homework.

Yet, as of 2023, nothing has materially changed. Students are not able to use the internet to get help from the best rather than the closest teachers available.

What lies ahead? It’s hard to know whether the future will look like online self-paced K-12 content, networks of homeschoolers that meet up for in-person social experiences, tools making it easier to start small private and charter schools amidst a restrictive regulatory regime, or rejection of the K-12 model entirely in favor of skill-focused adventures participating in the real economy.

Regardless, children are our future, as the saying goes! And they are much more capable than we allow them to demonstrate.

Revival of the third place

Where do we go to even participate in the civil society that we discuss? Not church (attendance has halved since the ‘60s), the gym (everybody listens to music with headphones), the coffee shop (designed for laptop workers, if not the drive-thru), or volunteering (I haven’t heard of any volunteering events in years).

It’s no wonder there’s such a cultural emphasis — and willingness to take on suffocating debt — for the classic 4-year college experience. Campuses are perhaps the only place today with a strong focus on building lifelong relationships across a wide cross-section of contexts. The rich assortment of student orgs, classes, Greek life, dorms, and shared facilities make for excellent social lubricant. And that’s not to mention the feeling of being a part of a special enclave hand-selected by an “admissions department.”

Luckily there is a deep history of successful examples to take inspiration from. Again, gathering places are as old as society itself! The ancient forums and bathhouses, French salons, and Junto Clubs have all played critical roles in the social fabric of their respective civilizations.

As much as Soho House, the Members’ Clubs known for catering to the nouveau riche of Instagram, is mocked by outsiders, the core premise is wonderful. People lack a place to eat, work, play, and socialize. And Soho House provides that with a supposedly curated set of peers. While country clubs have morphed into expensive golf courses, I’ve been pleased to notice a number of new social club upstarts launch near me in Los Angeles.

A future where everybody can choose from a vast selection of Soho Houses to call their home is a far healthier one. Small experiments, whether it be applying a private membership model to your local corner coffee shop, or banning cell phones from the gym, are good places to start. Every enterprising small business owner can play a role in this grand experiment.

Matchmaking, not swipe-making

All is fair in love and cyberwar. As young singles struggle to find ways to organically meet, dating apps have become central to the quest for love. But nobody is particularly happy with the status quo. Both men and women are filtered by appearance and brief quips, with wanton disregard for the virtue of one’s character. Critical context that drives our natural dating psychology — reputation of potential dates with their peers, and the energy and kindness that can only be proven in genuine situations — is completely erased.

So where do singles turn when the “digital forums” just don’t work? The answer has yet to reveal itself, but it surely will when the right visionary comes along.

Perhaps lessons from the above section on third places can inspire a departure from the “swipe model.” Or maybe incentive alignment is the key: monthly subscription fees are doomed to become gamified, but a $10,000 fee paid after the first year of successful marriage is more attractive to both companies and hopeful singles. Manual matchmaking could be due for a comeback as well. Your parents may no longer know the other eligible youth in town, but a professional may have the magic touch.

With the huge success of the incumbent near-monopoly Match Group, initial capital should be attainable for credible attempts towards competition. And riches will be waiting on the other side.

Radical health policy

We all see the surface-level symptoms of widespread obesity, but ailments such as metabolic disorder and autoimmune disease invisibly affect millions more.

But this should be no cause for pessimism: we know exactly what diet and lifestyle is good for us, and we have the means to attain it! The problem — as per usual these days — is simply a question of the political will and coordination needed to get the ball rolling.

I am in favor of banning everything traditionally found in convenience stores, for example, but that’s a near-impossible policy to implement on a large scale. We all know how Mayor Bloomberg’s “Big Gulp Ban” attempt enraged libertarians and mega-corporations alike. So start small! If Ojai, California can ban chain retailers to favor local businesses, why can’t a similar town ban corporate processed products, not just brands? Mayors, city council members, and municipal leaders: take radical action and see what sticks!

There are many permutations of such interventions. Regulating toxic foods is one avenue, taxing all things unhealthy is another. Or maybe Michelle Obama was right that youth holds the key: rigorous P.E. classes focused on real hardcore daily workouts might set students up for a healthy life. Her Let’s Move campaign was the last public outcry for better health, but tragically the First Lady only had the power to run commercials and talk to the media rather than implement a revolutionizing system in-line with her vision.

Systematic enablement of rising stars

The stars of generations past often clawed tooth-and-nail to find their way in the world. Few epitomize this like Thomas Sowell, perhaps the most prolific economist alive today, who has written over 45 books. While he was able to make it through a childhood without electricity and running water, dropping out of high school after moving to Harlem, and getting drafted during the Korean War, another Thomas Sowell may not have had such a fortunate fate.

Today, we do a wonderful job of identifying talent early and fast-tracking them to elite society. From a financial aspect, some select colleges are essentially free for those who aren’t rich. Programs like the Thiel Fellowship offer patronage to up-and-coming entrepreneurs, and has resulted in the creation of companies worth billions.

But where are the patronage networks focused on politics, law, art, media, and more? They surely exist, though incentive structures currently limit what’s possible. A venture capitalist can invest in a 17 year old prodigy and pay for it with capital from a fund. The next Justin Bieber can similarly print money for the agent that finds them on YouTube as pre-teens. But can the same be said for the next Antonin Scalia? Or the next Oprah Winfrey? Better programs for sourcing top talent early and helping them to spend time with luminaries in their industry rather than make it through the traditional education and credentialing system should exist in every field.

Next-gen content delivery

The classical definition of “freedom” is less oriented towards unconstrained liberty to act, and more oriented towards the “disciplining of desire” to make the achievement of the Good first possible, then effortless. This is counter to the Silicon Valley libertarian ethos of lettings users interact with content however they want, regardless of how addicting or toxic it is.

The babysitter of a 10 year old neighbor of mine recently described the TikTok and YouTube feeds of the child and her friends. While not as unchained as Reddit or Twitter, some of the content was certainly high in quantity while low in quality. Mild sexualization, violence, and negativity were pervasive. But no parent reasonably has the time to police every moment or wants to cut kids off from what their friends are doing.

There are many available strategies for making content delivery more responsible. Let’s start with a browser that only surfaces content whitelisted by designated adults or paid curation services. Or even apps that remove algorithmic functionality and require high-intent search. More drastic action can be taken at the policy level to combat the unhealthy aspects of social media, both in terms of content standards and peer-to-peer social elements that have spiked depression rates in teens.

While kids are most vulnerable, adults are not safe from content addiction either. It’s challenging to interact with others in the real world when messages, emails, grocery apps, shopping, and more parts of daily life take place on phones and computers. Once my laptop is opened for a task, it’s too easy to fall deeper down the rabbithole. I happily purchase a set of single-use devices that physically restrict my access to the internet. Imagine a device hard-wired to only access email accounts and personal notes. Amazon’s Kindle product is useful for reading, but e-ink tablets for use cases such as ordering DoorDash and updating calendars have been well within the limits of affordability for years.

Your office closes after-hours. Why doesn’t your company-issued laptop simply turn off from 8pm-8am too? Software-defined constraints can force the rest that makes workers both happier and more productive. Again, this is trivial from a technological perspective. It is fully a problem of vision and coordination.

Think of this not as Ludditism. The internet is simply a tool to do what we want. Personal computers have been handy tools for half a century now, and a Cambrian Explosion of new devices more aligned with our psychology would free us to more easily live as we please.

There are a number of companies, including venture-backed Silicon Valley startups, working towards the problems mentioned above. But that is far from the only path. As noted in the beginning, the American civic tradition includes a rich mosaic of institutions. Non-profits, foundations, partnerships, corporations, and local governments can all find opportunity in the areas for American Statecraft discussed. Technology is not the bottleneck. Onwards!

What VCs are Building in 2023

This article originally appeared in TechCrunch here.

As discussed in my previous post Nth Layer Investing, the venture game is changing.

We are never going back to the days where firms can win by being the only term sheet on the table — the industry has raised too much capital for that to be possible for the most exceptional startups.

As VCs continue to financialize themselves as the hedge fund and private equity industries did in decades past, VC firms must win with information advantage, or by building the power and founder relationship to beat competitors head-on.

Offering startups more money at higher prices was recently a popular way to secure allocations in desirable companies. Whether such decisions were backed by rigorous and compelling data was often questionable, though.

Regardless, there are indeed legitimate, hard-earned info asymmetries that lead to unique deal access: exceptionally intimate founder relationships, superior sourcing processes, the capability to synthesize clear-eyed theses, and so on.

There are also ways to win in purely competitive scenarios where VCs have material info their peers don’t, but I wouldn’t bet on the vast majority of firms getting much more than the marginal allocation left over by Andreessen, Sequoia, and other sophisticated firms.

In any case, it seems clear to us that the winners in venture over the next decade will be full-stack firms that continue to “financialize” the industry, and boutique firms that crush it with specific networks or knowledge-bases. Looking deep to the “Nth Layer” of each startup is the only way forward.

So, how are firms evolving with this in mind? There are a handful of approaches I’ve kept an eye on:

Collecting dealflow: it takes a village

Sequoia innovated with their Scout program years back. In hindsight, it feels obvious that plugged-in operators tend to have first look at founders spinning out to build a company. But at the time, the dealflow strategy was rather unique.

These days, as most firms have either copied or considered copying the scout program structure, the deaflow becomes more commoditized. We’re approaching the limit on how much firms can offer scouts in terms of carry or check sizes. There’s limited loyalty, and dealflow often finds itself quickly propagating around anyway.

The advantage is no longer in the concept of a scout program, rather new ways to find more dealflow than an internal team could ever source on their own.

AngelList has done a wonderful job with Rollup Vehicles (everyone can be an angel), SPVs (everyone can be a GP), and funds/subscriptions (everyone can be an LP). The data gathered by owning this infrastructure is nearly unparalleled, and enabling this functionality makes a difference to those that use it.

Firms that consistently write small LP checks in emerging managers have also done a great job of “buying” dealflow at large scale — a16z for example systematically evaluates the investments made by angel, “micro,” and seed funds they back. What an excellent way to get a scoop on future rounds before any formal processes are run by founders.

These represent two extremes: tools like AngelList “arm the masses” of the tech world, while a16z’s strategy works well for those with billions to invest.

I expect firms to be highly intentional and experimental finding new ways to organize external sourcing networks with new incentive structures.

Network analysis: thinking smarter, not just bigger

As venture firms of all sizes gather lists of personal contacts, lists of event attendees, lists of Substack subscribers, lists of Twitter and LinkedIn connections, and more, the need to understand rather than orchestrate a VC’s network becomes clearer.

The techniques for doing this are rather powerful given how simple some of the actual analysis can be. A precocious high school student could learn how to compute various traits of a network graph. One of my favorite examples is this post about a hypothetical analysis of 1772 New England’s social networks, which shows how trivial it would be to find Paul Revere’s centrality, and nip the American Revolution in the bud. (I really do recommend it, it’s a whimsical read with deep relevance to the modern digital world.)

I often think back to the First Round post on Chris Fralic’s networking style. The tactics of developing a personal network have become reduced to a science. Many have since optimized these methods. But actually operationalizing that at the firm-level at a scale beyond the individual is far from a solved problem.

With tools to analyze networks, not just build networks, VCs can supercharge sourcing and make sense of the noise in a world where everybody seems to have some role in the venture ecosystem as described above.

What do these tools look like, specifically? I’ll split that out into it’s own section.

Software tools: eating venture, like everything else

Salesforce, Affinity, the infamous Superhuman plus Airtable deal tracking combo, and other tools have emerged as core parts of the VC stack. But clearly, we have not reached the “end of history” when it comes to operating a firm.

The hedge fund and private equity worlds started out with relatively simple tools for diligencing companies. These days, it’s common for analysts to write code in Jupyter notebooks, not just edit cells in Excel. Some firms have built out proprietary data pipelines feeding into models with a combination of homegrown and procured information streams.

Obviously, VCs pasting data from LinkedIn to Salesforce is not the future.

Crossover firms such as Coatue have already applied the hedge-fund lessons to venture capital. Coatue invested in DoorDash*, for example, partly because the firm put together a sophisticated model of restaurants ranked by growth efficiency and competitive relevance. This was a game of data and computation, not one of spreadsheet modeling.

Founders — especially those in the early stages of company-building without the time or resources to construct their own market intelligence systems — can materially benefit from such support.

With a focus on sourcing and internal ops, some firms are quietly building software for custom-designed workflows. These come in a few forms:

  • Web-scraping tools to automatically gather new startup leads. See as a productized version of this.
  • Dealflow management that helps teams work together rather than individually. Consider how the network graph analysis described above might work with a custom system rather than Salesforce.
  • Community tools that connect portfolio founders, scouts, friends of the firm, and more. YC’s BookFace platform was years ahead of its time.

While it seems like a no-brainer addition to any firm’s ops cadence, I’m actually pessimistic on the adoption of software. VCs tend to be non-technical. It’s rare for General and Managing Partners that lead the firm to have the competence to hire and manage a product org.

The second reason I’m pessimistic is that engineering, product, and design teams must be paid out of management fees. As we all know, many managers pocket their 2% fee as a hefty salary. The simple reality is that many managers will not want to take a significant pay cut in the short term to better empower the firm in the long term. (I would love to see data on how returns correlate with manager’s ratio of salary to total management fee stream. I’m sure some LP has crunched the numbers at some point.)

Platform 2.0

While tech is becoming an increasing focus of value add, platforms aren’t going away. The traditional platform stack (events, talent, customer development, PR) does move the needle, if not sporadically as founders focus on different priorities over time.

Tracking the investment that firms make in their platforms is best done by tracking talent flow. TechCrunch Managing Editor Danny Crichton joined Lux Capital as Head of Editorial. Sequoia’s VP of Data was formerly the Head of Data at Rubrik*, one of the best enterprise software companies. There are many similar examples.

This is an old trend that’s been developing for years since the start of the platform era, but there is much room to grow.

Highly-focused vertical-specific efforts have also been successful (think Jason Lemkin building Saastr’s annual conference with 10k+ attendees focused on SaaS). Canonical events and industry platforms have yet to be built in other spaces seem to be on the roadmap for other operators. Winning some vertical can give an enduring edge in sourcing and winning deals.


At the root of these software and platform efforts is the need to build hard power, not just brand and network expansion.

We’ve spent time productizing at Contrary. Our jobs site Startup Search aggregates thousands of job seekers and helps direct them to high growth companies, including our portfolio companies. We built Contrary Research to make some of our private market analysis open to the public and useful to others. These are efforts are highly scalable compared to everything else we do, so we’re doubling down in 2023.

Though not strictly a venture firm, I do appreciate that AngelList spun out Wellfound, their own hiring marketplace. NFX created Signal, a marketplace/aggregator of both early stage startups and investors. Nobody has quite dominated the market yet, and whoever does will reap enormous rewards.

SignalFire has raised nearly $2B with the mission of constructing an all-in-one data-driven platform. Their Beacon Talent product lets founders target potential recruits, and is paired with market intelligence capability meant to help founders make product decisions.

I will always reference Hacker News as the all-time great product in the venture world. How much would YC pay for HN if it was owned by someone else? One can credibly argue that HN is worth as much as globally-recognized news outlets, say $300M, simply because HN monetizes incredibly well through YC’s venture fund.

Any firm with AUM north of $500M should have at least one idea or asset worth productizing. Money is no object at that point. There is much to build — we’re just getting started!

Open questions for GPs and LPs alike

As much as 2023 will be a year that pushes firms to deliberately differentiate themselves, none of the above is strictly needed to deliver stellar returns.

For LPs thinking about the decade to come, I wonder:

  • Is there room for anybody in between small emerging managers and large multistage ecosystems? What happens to the generic mid-size firms that can’t play for small non-competitive allocations, but also can’t win against larger, more developed firms?
  • To what degree is there loyalty between founders and investors? Are all of these innovations secondary to simple factors such as brand and deal terms? If GPs build a truly close personal relationship with founders, do they need “value add” to win the deal?
  • Is there an enduring edge in platform value-add, or does the GP ultimately make or break the portfolio? I can think of many cases where founders have chosen investors solely on the basis of moving fast and asking the most insightful questions.

As I said: we have certainly not reached the “end of history” in venture. Regardless of one’s view on the questions above, we can all agree that some action must be taken to stay relevant on a long enough time horizon.

*Contrary is an investor in this company through one or more affiliates. This is not investment or financial advice. See for more information.

The Veblen Economy

In May 2021, Bernard Arnault temporarily became the world’s richest man

Owning 6% of LVMH directly plus a 40% stake through parent company Dior, his wealth is spread across the most iconic luxury goods brands.

Arnault’s business stands out next to the other titans topping the Forbes Billionaire’s List. Bill Gates put a PC in every home. Larry Page and Sergey Brin made the web accessible. Jeff Bezos made retail quicker and cheaper at global scale. All of these businesses are effective continuations of the industrial age: making more things, cheaper, and with greater accessibility. This is ironically antithetical to the expense and intentional exclusivity that the luxury industry runs on.

As a conglomerate, LVMH represents the rising tide of the category. The amount of wealth in the world has exploded in the 21st century:

“The number of global millionaires could exceed 84 million in 2025, a rise of almost 28 million from 2020” says Credit Suisse.

While your average “millionaire next door” won’t be buying a high-end Porche and Chanel bags, there is undeniably large and growing demand for luxury quality and consumerist social status.

In developed markets (like the US where nearly 40% of the world’s millionaires live) there becomes a point where utility — low prices, high quantities, accessibility — are no longer needed. 

So, what happens when some people consume for utility, and others for luxury?

Party like it’s 1899

In the throes of the Second Industrial Revolution, the West expanded productive capability faster than ever before. Unsurprisingly, the wealth creation process that lifted so many out of poverty in the West also generated a class of nouveau riche in what was otherwise a post-aristocratic society.

Norwegian-American Thorstein Veblen became known for his work observing this process, integrating economic and social theory. At the time, the field of economics was primarily focused on neoclassical production, distribution, and consumption of goods and services. There was no unified theory to explain the habits of the (relatively) rich. Why were a class of people so engaged in “unproductive” activities such as sports, or formal etiquette procedures?

Veblen’s work culminates in his 1899 book The Theory of the Leisure Class, which explores the stratification of social class, and the “conspicuous” consumption and leisure patterns that characterize a life of excess.

Wikipedia features a Veblen quote that well-summarizes a core evolutionary principle of humans and animals alike:

In order to gain and to hold the esteem of men it is not sufficient merely to possess wealth or power. The wealth or power must be put in evidence, for esteem is awarded only on evidence.

Such evidence comes in many forms. In centuries past, it could mean having the time and resources to participate in basic leisure activities such as hunting or reading. It could mean the maintenance of costly, intricate family rituals or cultural traditions. It could mean donation to charity. Today, I’m sure you can imagine a number of ways in which wealth, power, and status are expressed at great cost of time and money.

At this point, you may begin to see where this line of thinking is headed. While Thorstein Veblen was one of the first to articulate the economics of this growing social phenomenon, the economic development of our world has only continued to compound in the century following The Theory of the Leisure Class’s publication.

Investing in Veblen Goods

So, what happens when the “Bezos Economy” continues to bring costs of goods down, and the “Arnault Economy” brings costs of goods up for the purpose of greater exclusivity?

Both modes can operate in parallel. Taking the classic demand curve chart from Econ 101, we can show that a product category such as watches can find market in both the high-end (Rolex) and mass-production (Swatch) segments:

You can imagine a world in which every product category makes its way into the “Veblen Zone” of the demand curve. Let’s list a few examples that have recently turned into status or entertainment uses rather than utility. 

  • Stock trading. The Robinhood GameStop/AMC gamified market-manipulation culture has turned into a social phenomenon. It’s about having fun using excess cash to speculate, not about driving serious returns with cash you rely on.
  • Software tools. My friend Jeff tweeted about the idea of “luxury software” back in 2019. Who can pay $360/year to send email with the same features that Gmail supports?
  • Employment. Certain professions now pay more in status than they do in cash. Without naming names, think of the internet’s favorite journalist who attended a Swiss boarding school growing up, and now accepts an unlivable wage to write for a prestigious newspaper.
  • Consumer lifestyle. Peloton, despite recent financial troubles, sells a $1,500 stationary bike and a $3,500 treadmill. I understand that the product offerings are unique, but certainly there’s an aspirational and social status element to this pricing. Short sellers have lost enormous sums of money comparing Peloton to commodity fitness products.4

While it’s easy to sound critical of the above products, that’s not my intention. This is a purely descriptive economic model.

As the raw amount of wealth in the world grows, most categories will eventually be Veblenized. It’s been speculated that seemingly utilitarian sectors like education or healthcare are already generating performative consumption in some cases. Of course, not all education or healthcare is Veblenized, but it’s hard to ignore “education as entertainment” such as Masterclass, for example. The Masterclass experience is not about tangible, utilitarian results, as much as it’s about the pleasure of listening to celebrities talk about the craft with your excess time and money.

LVMH-style industries have entered the Veblen Zone long ago. This begs the question: what else would a savvy observer expect to split into separate commodity and luxury tracks? Travel, entertainment, art, and food are a few others that come to mind when hearing the phrase “conspicuous consumption.” My core theme here is that everything will eventually be Veblenized with sufficient time and global wealth. The logical argument can be summarized with a simple syllogism:

  1. With increasing wealth, societies start using goods and services for the core purpose of signaling resource, time, and cultural abundance.
  2. Everything from designer clothes, to gamified finance, to overly-expensive college degrees, to absurd (and costly) diet trends can be used for such signaling.
  3. Therefore, the entire economy will be “Veblenized” as sufficient abundance is produced.


There are many ways to frame the coming trends. One lens may be that of global “inequality.” The value proposition of a Peloton might not click with the average Indian, for example, but India is quickly catching up in terms of development. Indian companies like Zepto already afford convenience over access to goods.

China is a massive driver of LVMH’s revenue — in fact, Asia generates more revenue than the US despite being a poorer country, nominally.

I would expect that as different geographies develop, each locale’s culture would drive different forms of Veblenization. While Chinese may buy designer clothes with excess earnings, Texans will buy unnecessarily large pickup trucks. And San Franciscans will organize increasingly extravagant camps at Burning Man, partially for the fun, and partially for the Instagram photo opportunity. Identifying the cultural trends associated with resources and time for leisure may be challenging at the micro-level (individual products or services) but can often be obvious at the macro level (categories that attract spending).

Beyond geographic and national lines, I expect “status subcultures” to continue forming their own feedback loops that dictate how the leisure class allocates themselves. This concept has been directionally articulated with phrases such as the “creator economy” which allude to cohorts of interest-based groups with extremely high affinity, status hierarchies, and willingness to pay to participate.

Ultimately we’re in the early innings of the Veblen Economy. By no means do I suggest an eventual “end of commodity” as epitomized by the Walmarts and Amazons of the world. Jeff Bezos nails the eternal pursuit of Normal Goods well in this response to the question “what will change in the next 10 years?”

“That’s an interesting question. And a very common one. I get asked it a lot. But I almost never get the question ‘What’s not going to change in the next 10 years?’ 

And I submit to you that that second question is actually the more important of the two — because you can build a business strategy around the things that are stable in time. In our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. 

It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff, I love Amazon; I just wish the prices were a little higher.’ ’I love Amazon; I just wish you’d deliver a little more slowly.’ Impossible.”

While he is spot-on within Amazon’s domain, I’m not sure he would have predicted the ways in which Robinhood or Peloton have become products of leisure over utility.

Industrialization reigns the global order in 2022. But the Veblen Economy continues to sprout in parallel. The future divergence and intersection of the two economies will be a source of change, profit, and oddity to last a lifetime.

Startups to Work At

Here are a few of the companies I bet my capital and career on. Some of my favorites aren’t on this list because they’re private/unannounced, but these are all startups I’d be excited to join myself!

Email me if you’re a job-seeking engineer or experience startup-builder and want me to ping a founder for an intro to you.

Zepto — the fastest growing company in India’s history. They have the most compelling metrics I’ve ever seen, and the team is nothing short of prodigious (Aadit and KV are still only 19 years old despite crossing $100M in revenue). They’re hiring everyone who cares about logistics and consumer retail experience in India.

Modern Intelligence — most “AI” companies are actually infra software or labeling companies. Modern is actually an AI company, meaning they sell models to the DoD for applications such as tracking human traffickers, or flagging shipments containing Russian weapons. Read my post about them here. They are looking for talented AI/ML researchers to develop new models with important real-world applications.

Stealth enterprise SaaS company — this is a Series B company building a next-gen product in the world’s biggest software market. The executive team has previously scaled companies from nothing to unicorn status, and managed technical orgs at companies you know of and respect. If you like “unsexy” spaces with 10x more user-friendly products and data, this one’s for you. They are hiring for everything.

Ramp — slightly later-stage than other companies on this list. But the team is known for building a quality product remarkably fast. They have one of the most entrepreneurial team cultures I’ve come across. While Ramp and Brex have great competition with each other, the market still has enormous room to grow.

Miter — it’s well known that “real world” industries like construction have experienced stunning “cost disease” over past decades. Miter is building all-in-one payroll, HR, compliance, etc for contractors. If finances become digitally legible, businesses can make construction cheaper, faster, and easier.

This is an incomplete list. There is a wide set of startups that me and my teammates at Contrary have high-conviction in. If you’re an engineer or experienced startup-builder, email me info about yourself, and I or someone on my team may be able to personally chat, suggest startups to meet, and make introductions.

First Principles Interviewing

In software engineering, there’s a famous interview question that simply asks: You open your web browser, type in “” and hit Enter. What happens next?

A student might talk about how your browser checks a cache and then asks a DNS server for the appropriate IP address to send a request to. A veteran engineer might go into far more detail about recursive vs root nameservers, Google’s backend load balancing or CDNs, TLS authentication, details of JS libraries, etc.

Of course, if you really wanted to, you could even describe how light in fiber optic cables is multiplexed to physically deliver data to your local network. The purpose of the question is to see how far down the rabbit hole you can go.

As it turns out, this is an excellent category of interview question for all roles. I recommend that founders build an intentional “First Principles Question” into their interviewing process to weed out the “intellectual yet idiot” types that are smart on paper but not in practice.

This is not something you need for all roles, but is important for any role requiring genuine innovation, complex problem spaces, interdisciplinary work, or critical decision making. Anybody can study for an interview and come prepared or polished, but nobody can fake understanding and sound first principles.

Examples and Best Practices

My friend Saneel interviewed for a mechanical engineering role at a great “hard tech” startup. During the final round talk with the CEO of the company, he was asked two questions.

First, he was asked to derive the equation for a line from scratch. “y = mx + b” is such a simple equation that we were taught back in middle school. But where does this actually come from? If you’re curious, I’ve linked one solution here.

Apparently many PhD engineers who have done advanced math still struggle with this question. Asking yourself “what really is a line” is not something most people have done before.

The second question was to name an exponential equation. Everyone technical knows “e^x” from the natural logarithm or Euler’s identity. My friend gave that as his answer. The CEO then said “ok name another one.”

Similarly, it can be surprisingly hard to think of a second exponential equation that gets used in the real world. If you’re the sort of person who draws knowledge from your homework and exams, nothing may come to mind. If you’re the sort of person with an expansive yet intuitive grasp of mechanical engineering, you might be able to think of another exponential pattern somewhere.

Each business has different needs. That said, here are a handful of questions I might ask someone depending on the circumstance. Feel free to use these as inspiration for your own purposes.

Each question is very straightforward, but surprisingly difficult to answer completely and correctly:

  • Why has natural selection never created an immortal organism?
  • Why does the stock market value grow much more quickly than GDP? 7% vs 2% is a vast gulf in the world of compounding. In fact, since it’s possible to produce more goods without actually making a profit, you would think that GDP grows faster.
  • What does a parabola, aka quadratic equation (ax^2 + bx + c), describe?
  • Why does kinetic energy increase quadratically with velocity instead of linearly? You would intuitively expect it to be linear like momentum.
  • Why does anyone bother to vote given that no individual will influence an election?
  • Why are capital gains taxed differently from earned income? There are actually several reasons for this. One of them being that capital investments are diluted by inflation over time, which should be accounted for fairly.
  • How would you design a governance system for a Mars colony?

What I plan to do as we hire other investors at Contrary is have an entire interview where we talk about something wholly unrelated to startups and investing. If someone studied philosophy in college, go deep on a topic there. If they worked in DC, get their take on the political landscape. Some companies already do this, but very few keep digging until they hit bedrock.

My last comment here is that taking First Principles Interviewing seriously can be an important cornerstone of your company culture. Interviewees are constantly evaluating you as a company just as you evaluate them as a candidate. Great people want to work with great people, and taking the effort to talk through foundational questions can breed a culture of learning, ambition, and clarity.

What do you optimize for?

Advice depends on context, assumptions, and what you’re trying to optimize for. Much of it boils down to “this is what worked for me so take it with a grain of salt and try to calibrate it for you.” Useful advice either tries to account for differences between people or include generalizable principles for how you should think about something.

People will try to make these adjustments doing something  like “focus on what you like the most and are best at.” Although I think that spirit is right, it frames the problem in a counterproductive way. “Focus” is often understood as “follow a set plan towards this goal and do what you think you should be doing to succeed.”

I think this is the wrong type of optimization.

There are two things I optimize for which I’d like to explore here: interestingness and serendipity.

First, “interesting.” You may have noticed that what’s interesting to you has changed over time. Why is that? Keep in mind that interests are distinct from talents. Do interests change for the same reason that mathematically-inclined minds tend to be interested in formal logic but not painting, while artistically-inclined minds tend to be interested in Broadway but not software engineering? Is what we’re generally curious about related to things that give us happy fulfilling lives?

My take on this is that “interesting” is a heuristic for all of the things we need: usefulness, novelty, personal fulfillment, etc. Not only do interests change over time, we seem to jump between intense focuses and binge something until we suddenly stop caring about it. Our brains need some way to choose what to learn about. This idea has been studied in a more in-depth and rigorous way than I’ll argue here — check out this paper for instance.

You can probably relate to this real life anecdote: in high-pressure situations, I’m intensely interested in specific problem-related information and career-focused things like how to deploy code with Docker to save me time. It’s critical to note that I’m genuinely interested in that sort of stuff and I don’t explore it for external reasons. I’m just inexplicably more curious in that moment. When I have more free-time and no responsibilities, however, I find myself thinking much more about food, politics, my next workout, philosophy, music, or stand-up comedy. All things that don’t accomplish any specific goal but still enrich me as a person (a fact my humanities professors are always so ready to remind me of!)

The point is, interests aren’t just a luxury. They serve a useful purpose that you should consciously consider when organizing your life.

Second, “serendipity.” This is a major theme of Reid Hoffman’s The Startup of You  and Marc Andreessen’s career guide. The thinking is that breakthrough opportunities usually present themselves through random chance. Maybe you happen to stumble across the right problem at the right time and think “hmm, why hasn’t anyone solved it this other way?” or your friends decide to go to Denny’s at 3am to discuss a business idea. Seemingly small and innocuous moments lead to truly exciting opportunities.

I’ve already directly observed this in my own limited experience. I attribute pretty much every major success of mine to pure luck (with the prerequisite of hard work pouncing on an opportunity when I see it):

  • 100k-download Android app: I spent months toying around with different programming tools and just happened to stumble upon a great tutorial and project idea I liked. I also randomly played around with a bunch of different marketing techniques for fun.  Only one of many happened to stick and things just naturally snowballed from there. It was a low-quality app that I happened kill it because I had failed at plenty of other projects before it.
  • College: originally I could only see myself at a some “elite coastal school” (staying in the Midwest, I’ve since been telling myself it’s more like “coastal-elite school.” Hah!) but luckily I decided to serendipitously apply to a bunch of schools I didn’t really care about. If I didn’t go out of my way to stir some up random luck, I wouldn’t have gotten an offer from UIUC that put me in a top CS program and saved me a quarter-million in tuition over my next-choice option.
  • Contrary: I randomly saw a Facebook post and decided to cold email Eric.  If I hadn’t been on my phone that night or if I hadn’t decided to spontaneously write a note, I wouldn’t have gotten the amazing and humbling chance to help build a venture fund.
  • Friends: One year in college I went on a trip to Silicon Valley organized by my school. I wasn’t super excited and had actually turned down the chance to go the year before, but I decided I could use a little more serendipity in my life. There I made a great friend. Through her, I made some more friends. One of them became my roommate for the next few years. He introduced me to many other cool people. Again, the original trip was just serendipity at work — there was no goal or process involved, but super valuable relationships grew out of it.

I’m sure everyone has similar stories of pure chance turning into something incredibly meaningful. Yet most people would probably have taken the above examples and focused on some sort of process or execution that made the most of the opportunities.

Think of it this way: we spend most of our lives doing things. Working towards goals. Learning. Talking. We do a great job of carrying out whatever it is that we’re trying to optimize for. We really don’t give ourselves enough credit. These two heuristics help you broaden the opportunities you come across and choose which ones matter most. That’s at least half the challenge — the rest comes naturally.

Existential Risk and Effective Altruism

The Effective Altruism movement is a philosophy and social movement that applies evidence and reason to determine the most effective ways to benefit others. In recent years, organizations like GiveWell and the Bill & Melinda Gates Foundation have helped to popularize the core concepts of Effective Altruism.

They support the idea that charity should be done with a strictly analytical mindset. Under the assumption that all living creatures have some level of sentience, Effective Altruism tries to minimize the sum of all conscious suffering in the long-run. Pretty straightforward.

This problem usually reduces to some basic number crunching on the ways in which people suffer and the cost necessary to mitigate that suffering. For example, it costs about $40,000 to train a seeing eye dog to help a blind person live their lives. It also costs about $100 to fund a simple surgery which would prevent somebody from going blind. It should be self evident that resources are limited and that all people’s suffering should be weighted equally. So choosing to spend limited resources on a seeing eye dog is considered immoral because it would come at the cost of ~400 people not getting eye surgery and losing their vision.

This sort of utilitarian thought is fairly intuitive. To help quantify reduction of suffering across a diverse set of unique actions, health economists and bioethicists defined the Quality-Adjusted Life Year (QALY), a unit measuring longevity, discounted for disease. A perfectly healthy infant may expect to have 80 QALYs ahead of them, but if that child were born blind, they may have, say, 60 QALYs ahead of them (in this made-up example, blindness causes life to be 75% as pleasant as a perfectly healthy life).

Traditional charity tends to be locally focused—you’d deliver meals for elderly people in your town or support a soup kitchen for the homeless. Considering Effective Altruism principles, however, you’d probably come to the conclusion that you can almost always save more QALYs from disease by funding health problems in impoverished African or Asian areas. In general, the more analytical you are in your giving, the more you choose to spend on this sort of giving opportunity.

As philosophers become more and more rigorous in their approach to Effective Altruism, you’d expect them to continue tending towards provably high-impact spending opportunities. But many moral philosophers actually argue that we should instead focus our attention towards mitigating existential risk, dangers that could potentially end human civilization (think doomsday asteroid collisions, adversarial AI, bio-weapons, etc.).

Here’s the basic argument: when trying to maximize the sum of positive sentient experiences in the long run, we need to consider what “long run” could actually mean. There are two cases. 1) humanity reaches a level of technological advancement that removes scarcity, eradicates most diseases, and allows us to colonize other planets and solar systems over the course of millions/billions of years and 2) humanity becomes extinct due to some sort of catastrophic failure or slow resource depletion.

In the first case, humans would live for millions/billions of years across thousands of planets, presumably with an excellent quality of life because of the advanced technology allowing this expansion. Call this 10²³ QALYs (1bn years * 1k planets * 1bn people per planet * 100 years of life per person). Of course this scenario is unlikely—a lot of things need to go right in the next several thousand years for this to happen. But no matter how small the odds, it’s clear that the potential for positive sentient experience is unfathomably large.

It’s worth noting that in the second case, the upper limit is likely on the scale of thousands of years. Philosophers argue that by that time we’ll have colonized other planets which significantly decreases the risk of any given disaster affecting the entire human race. So our second case future-QALY estimate is about 10¹⁶ (10bn human lives * 10k years before extinction * 100 years per life).

Given these rough estimates, we can do some quick algebra to find the probability threshold that would make it worthwhile to spend money mitigating existential risk: 10¹⁶ / 10²³ = 0.0000001. So if the chance of some catastrophic disaster is more than one in ten million, it’s more cost-effective to mitigate that risk than support the lives of people currently suffering.

So how do the best-estimate numbers actually work out? The Oxford Future of Humanity Institute guessed there’s a 19% chance of extinction before 2100. This is a totally non-scientific analysis of the issue, but interesting nonetheless. The risks of non-anthropogenic (human caused) extinction events are a little easier to quantify—based on asteroid collision historical occurrences and observed near-misses, we can expect mass (not necessarily total) extinction causing collisions to happen once every ~50 million years.

A compelling argument supporting a non-negligible chance of extinction is the Fermi Paradox. If intelligent life developed somewhere else in the galaxy, it would only take a few million years to travel across the entire galaxy and colonize each livable solar system. That’s not much time on cosmic and evolutionary scales, so where are the aliens? Either we’re the first life form to civilize, or all the others died out. Many astronomers studying this topic think the latter case is more likely and we have no reason to say we’re any different.

Regardless, there’s an uncomfortable amount of uncertainty surrounding the likelihood of existential global catastrophes. Although the philosophical and mathematical underpinnings of this idea are well understood, nobody knows how to pick the right numbers. Since it’s so hard to imagine what the right probabilities are, it can be argued that we should hedge against the worst-case downside. Traditional charity focuses on eliminating poverty and health problems which only accelerate the course of human development. This choice can be visualized:

Spending on Existential Risk has a very small chance of avoiding a huge downside

Traditional charity spending only shifts the human development curve

These pictures are good at explaining the magnitude of risk involved and the sentiment of those that argue for funding Existential Risk research over traditional charity.

So how should you choose to effectively allocate your resources to do good? That’s still a tough question. I’d highly recommend reading The Most Good You Can Do. Most folk involved in the Effective Altruism movement (myself included) would suggest supporting GiveWell or The Centre for Effective Altruism. But if the idea explained in this essay is powerful enough, consider the Centre for the Study Of Existential Risk.

Thoughts? Tweet me at @whrobbins or find my email at!

Impact of Blockchain: Smart Contract Based Incentive Compensation

Most examples of potential blockchain applications focus on making something more efficient. OpenBazaar is like eBay but without fees. Edgeless is an online casino with no edge (duh). That’s all great, but I’m always on the lookout for ways in which blockchain tech can make a more structural impact on the way we do things. Here’s an idea that I’d love to hear some thoughts on:

Problem: incentive plans in finance are hard

Performance based compensation for traders and portfolio managers is, in theory, a great way to align everyone’s incentives and reduce the overall system’s risk. But the problem with bonuses and incentive schemes is that they often look short-term and reduce downside risk to traders but leave the upside unlimited.

Say you’re a trader who has a $100k base salary with an annual performance bonus that increases by some amount for every percentage point that the trader beats the market index. This is a common scheme and it generally works alright.

But unethical and careless traders can game the system by taking on excessive risk. If you invest $25mm in risky assets (like investing in cryptocurrencies, ironically) that have potential for huge upside and huge downside, there are two possible outcomes:

  • The investment a huge success. You make $100k salary and a $2mm bonus. The company you work for makes $20mm+.
  • The investment a huge failure. You still make $100k salary (still not bad!). The company you work for loses $20mm+.

Say the asset you invest in will plummet in value with 0.9 probability and skyrocket with 0.1 probability. Then the expected value of making the trade is about $300k from your perspective, but about $-20mm from the company’s perspective.

Clearly this is massively unbalanced and will incentivize risky behavior that could have rippling effects in the firm as well as the overall economy.

Potential solution: smart contracts that track true long term performance

The ideal incentive compensation plan would track a trader or portfolio manager across their entire career and between employers and pay based on the true long-term performance of their trades/portfolio. There are a few obstacles to this:

  1. There’s no mechanism for a firm to effectively compensate people who no longer work for them
  2. Employees don’t want to wait until the end of employment to get a bonus
  3. It’s hard to track the performance of a portfolio over long time periods and compare it to an index (there’s too much noise from changing interest rates, inflation rates, economic cycles, etc.)

Making investments through a smart contract or DAO token would enable companies and employees to pay out based on some arbitrary function of investment performance. Instead of just cashing out on an investment’s performance with an annual bonus, the value of a smart contract / DAO token could accurately, easily, and securely be pegged to the investor’s performance across an entire career. This could help solve problems 1 and 3 listed above.

Traders could work knowing that a series of short-term risky plays would absolutely not be in their interest. Incentives of the firm and individual would be aligned much more effectively and this could help mitigate financial crises.

Problem 2 is more tricky to address. One potential solution would to create a market of these bonus contracts/tokens. Users could look at a portfolio, assess it’s risk spread instead of value, and make bets on whether the bonus plan is likely to be stable. Of course this market would be effectively facilitated by a smart contract or DAO! I don’t know if this idea has been explored before by existing financial institutions—please let me know if you’re familiar with it!

What’s next?

I think it’s way too early to begin building something similar to what I’ve described. There’s no way to effectively track the performance of generic assets over time because most trades take place on private/opaque platforms. This would become feasible if DAOs and blockchain marketplaces become far more common. Hopefully that’ll be the case and someone will pursue this concept—it’s important to think more about financial risk and stability as economies and (crypto)currencies become more globalized.

Thoughts? Tweet me at @whrobbins or find my email at!

The Flawed Economics of Robinhood: Why Users Are Better Off Without It

Robinhood has been getting more traction and press coverage recently. It’s catching on with some of my friends from school and I’ve gotten into interesting conversations over Robinhood’s value as a business. The purpose of this post is to explain why I think Robinhood will hurt its own users despite its well-intentioned mission to “democratize access to the financial markets.”

Note: this post ballooned into a 2000 word essay. Skip to the TL;DR at the bottom if you don’t want to spend 4–8 minutes going more in depth.

A Random Walk Down Your News Feed

Retail investors (non-professionals) can’t beat the market in the long run. This phenomenon has been well documented and I am not aware of any compelling evidence contradicting it. Active retail investors also tend to perform worse than passive investors in the long run. This doesn’t mean that everyone will lose money—it means that if an investor’s portfolio grows 5% in a year, it’s highly likely that they could have made more (say 8%) just by buying a simple index fund and holding it.

Most traders use some mix of a few common trading strategies:

Fundamental Analysis

This refers to the idea that traders should focus on the intrinsic value of a security when making decisions. If a company is selling stock at $5 per share, you should only buy if you can expect to earn $5 in dividends over the entire course of the company’s lifetime.

Famous investors like Warren Buffet don’t buy anything that isn’t priced cheaper than the underlying asset’s value. This is the only rule you as a consumer need to follow unless you really know what you’re doing. The hard part is determining what the true value of an asset is.

Technical Analysis

This refers to the idea that quantitative indicators, historical market data, and social/psychological/political analysis can help you predict where the price of a stock is going. If you can tell when the right time to buy and sell is, the actual price and valuations of an asset don’t matter.

In practice, this is extremely difficult to do well. The vast majority of day traders lose money trying to predict how other people will make trades. But for certain (highly advanced) firms, this strategy is amazingly profitable. This philosophy also plays a part in how bubbles form—if speculators think that they can make money with an investment, they’re often willing to overlook prices that are way above the true value of whatever it is that they’re buying.

Throwing Darts

Alternatively entitled “buying Apple, Berkshire Hathaway, and whatever company I like seeing on my Facebook News Feed.” Needless to say, this is a losing strategy. But a non-negligible number of people still run their portfolio this way.

Throwing darts has been especially tempting the past several years because markets have been doing so well overall. It’s easy to be encouraged by modest returns but equally easy to forget that putting money into an index fund would be at least as profitable and less work.

Which of These Strategies Works Best With Robinhood?

Two of these strategies (not the third) are valid investment theories. There is a lot of debate over which is more viable, and real-world professional investors sit somewhere on the spectrum between fundamental and technical analysis.

But all three strategies are doomed to underperform using Robinhood. Remember the fact that retail investors already can’t beat market indexes. Robinhood doesn’t provide any information or systematic advantage to reverse users’ predisposition to poor performance. I’d guess that it’s even harder to make informed decisions because there will always be lower quality information available to users on a mobile-only platform.

The lack of quality financial information will let users rely more on irrelevant news seen on social media, their friends, and their guts to make decisions. That’s not good.

Robinhood’s Product and Strategy

“Democratize access to the financial markets.” What does that mean? Are markets not already accessible to the masses? There are plenty of brokers who let you set up an account for free with low minimum balances and small trade fees. Does Robinhood’s beautifully designed mobile app and free trades policy really democratize things? There are two groups who seem to think that it does:

Retail Investors: Millennials and Generation Z

Robinhood is one of most elegant and aesthetic apps on the market right now. It has smartwatch companion apps, a fun intro video, and creating an account takes less than 4 minutes.

Robinhood as a company is clearly in touch with modern product expectations. People my age want to go through the full user experience on mobile, start to finish, with as few exceptions as possible.

The actual features are similarly streamlined. The premium account option, Robinhood Gold, gives users access to more advanced trading options and margin lending (loans from the broker that amplify the profits or losses you’ll make).

So do these features help people access financial markets? Sure they do. But that’s not necessarily a good thing knowing that retail investors underperform averages.

Robinhood markets their margin lending as a way to “get up to 2x your buying power.” There’s no mention of risk or the financial mechanics of margin lending. It just sounds like a great way to make more money—“buying power” is such a positive and harmless descriptor. People without the proper experience will get burned by this unless the loans are better explained.

I’ll ignore the lack of tools available to users (Quicken integration, export to Excel, ability to easily manage many diversified holdings) because they can be easily implemented in the future. But even that wouldn’t solve the underlying issue with mobile-first stock trading: it’s too hard to fit all the relevant information into a 5″ screen. The charts are overly simplistic and making an informed investment decision requires more detailed research. Of course users could do research on a computer and just execute the trade on their phones, but that defeats part of Robinhood’s value proposition. So it’s in Robinhood’s interest to convince users that they can get by with mobile alone (again, this will make it easy for users to under-educate themselves and speculate).

Low Table Stakes Investors

A quick Google search found data showing that the average Millennial saves less than 8% of their income and has a net worth between $-20k (debt) and $20k.

Zero commission on trades and no minimum account balance is clearly an advantage for these users. It removes the biggest barrier to entry. Robinhood markets itself as a way for low stakes consumers to get started in investing.

As a quick aside, there’s even doubt that the free trades are a net benefit for users. Slippage is the difference between the price of a trade as it’s ordered and the true cost of trade as it’s executed. Paid trades with larger firms are generally thought to be executed more efficiently and more likely to trade at the the best price. So over time, depending on trading volume and portfolio size, users could theoretically be better off just paying for each trade at with a different broker. But Robinhood could definitely improve this over time if it is a real problem now so I don’t hold it to them.

It’s hard to get more into this topic without making hand-wavy judgements about what people should or should not be able to do. I know for sure that users attracted by the low fees and lack of minimum balances are likely to have a weaker financial safety net. This is why the SEC requires that investors be accredited before investing in risky unregulated securities like startups. Since part of Robinhood’s success depends on people taking out loans (more on this later), I feel that appealing to low-stakes consumers approaches a grey area, especially when the product is designed to be as easy as possible (you only need to tap your phone 3 times to make a trade!)

Anyone who can’t afford fees or minimum account balances simply should not take the risk of trading stocks. There are cheaper and safer investment opportunities out there. Again, people should be able to do whatever they want. But I think it’s worth speaking out to prevent Robinhood from convincing these potential users to actively trade.

Even the name “Robinhood” makes users feel like they’re empowered to take control of their own financial future and able to beat the pros at their own game. At risk of sounding like a broken record, this is impossible (well, highly unlikely on average, to be more accurate.) Of course Robinhood makes all of the appropriate disclaimers crystal clear but the brand seems to signal that active trading is a good idea.

The Fundamental Flaw

As I mentioned above, Robinhood doesn’t earn revenue by executing trades. It makes money through interest on users’ uninvested funds, “Robinhood Gold” which includes access to margin lending and advanced trading features, and interest on margin loans.

Putting the advanced features aside (I imagine that a subscription to after-hours trading access and instant deposit of funds is relatively cheap and only scales with respect to the numbers of users), Robinhood’s success is dependent on maximizing (a) the amount of money left in accounts as cash, and (b) margin loans.

[Update: I’ve also learned that Robinhood sells order flow to hedge funds who then make money off the spread. This is fine, but it supports the idea that Robinhood is incentivized to encourage active trading.]

Knowing that Robinhood users are highly likely to underperform the market or even lose money, Robinhood’s success metrics are inversely related to users’ success metrics. The more cash users store in their accounts, the more interest they are losing out on. Worse, users will lose more and more money in aggregate as they increase leverage on their investments using margin lending.

I consider this to be a fundamental flaw in Robinhood. I just don’t see a way for both Robinhood and its users to be financially successful under this business model.

Robinhood’s Long Term Vision

A world where Robinhood succeeds in fully “democratizing access to the financial markets” is a world that’s less stable than the one we live in now.

Frankly, I’m surprised that most Robinhood users aren’t more cautious of participating in the stock market. Millennials (Robinhood’s core audience) were hit hard by the recession. I suppose that several years of recovery has erased memory of previous bubbles — markets have maintained strong, steady recovery growth between Robinhood’s 2013 launch and now.

If playing the stock market from the comfort and convenience of your iPhone became common, markets would become more volatile and susceptible to bubbles. I haven’t met any Robinhood users who express this concern which is even more worrisome, in a way.

Most people think that bubbles are caused by banks and the government. In some cases this may be true—consumers weren’t the ones giving out subprime mortgages and building complex financial instruments in the 2000s. But bubbles are definitely possible in the broader economy. Look at the Japanese bubble in the ’80s for example. The Japanese real estate market was valued at just over $20 trillion. That’s just over one fifth of all the world’s wealth at the time. Clearly an island that’s 5% the area of the U.S. could not possibly have that much intrinsic value. Yet the bubble continued to inflate.

A more recent and fitting example is Bitcoin. Cryptocurrencies are interesting to me because they seem to be used and understood most by consumers. Banks and governments weren’t particularly interested or involved in blockchain tech until recently. It was mostly speculative consumers who drove the price of BTC over $1000 in 2014. About a year later, after a peak and crash cycle, BTC was priced around $350. Luckily Bitcoin was (and still is) too small to affect the overall economy.

The point is that people en masse aren’t always rational. Only a small fraction of the population can spend the time to read up on finance, economics, and current events. So an economy where every college kid, lawyer, salesperson, Uber driver, and stay-at-home parent is encouraged to actively invest is bound to experience the unreal highs of a bubble and, of course, the disastrous crash of the pop.


  • It’s widely accepted that the average investor cannot beat market averages in the long term.
  • Many studies have shown that index funds and passive investing are the most successful strategies for users. This is the opposite of what Robinhood encourages.
  • Robinhood markets itself to consumers with the least financial experience and risk tolerance.
  • Robinhood’s success is largely dependent on users taking out margin loans that amplify the profits or losses of a trade.
  • Because we know that the average retail investor is not likely to succeed actively trading, Robinhood’s margin lending will hurt users in aggregate.
  • This means that Robinhood’s value proposition and incentive structure are fundamentally misaligned with the best interests of users.
  • Robinhood’s vision is to “democratize access to the financial markets”
  • But a world where everyone uses Robinhood to make their own investment decisions would be less stable and more prone to speculation/bubbles. History has shown that the masses are unable to see when prices are too disconnected from the intrinsic value of an asset.

A Clever Malware Tactic and Why There’s Nothing You Can Do About It

As the owner of a mildly successful Android app, I sometimes get emailed about advertising, marketing, or acquisition opportunities. The messages usually propose some sketchy advertising partnership or pitch me some SEO work, and they’re pretty easy to weed out and ignore.

How I found a scam

I recently had an interesting encounter. It started off with another cold email. For context, I’m trying to cash out on my app by selling it.

Hi Will

I would like to purchase your brick breaker app listed on

My offer would be USD$500

Please let me know if this acceptable

Thank You,


Interesting. Not too many red-flags popping up yet. I responded quickly. School’s about to start and if there’s opportunity for a deal, I want to get it done ASAP (so don’t judge my utter lack of negotiation!).

Yes, I can accept that offer.

What information would you like from me?

A couple hours later:

Hi Will,


Do you have screenshots for

1. Total lifetime installs

2. Current installs by user by country breakdown

3. Total current installs

So I send the screenshots and get this back:


Thanks for the screenshots.

Let’s proceed with the purchasing with the agreed price of USD500

I have the following payment methods available

1. Bank transfer/wire

2. Credit card

3. Skrill

4. Paypal

Let me know which method is comfortable for you and we can proceed with payment and app transfer



Hmm, it feels like we’re jumping the gun. Any competent businessperson would ask about IP rights or obligations. I forwarded the email chain to a friend with some comments:

But their website is a shell and was registered on Aug 7 [actually it was registered 2.5 yrs ago, I misread the record] through DomainProxy according to the whois

Can’t find any info on the leadership of this company

The time zone places them in Asia. But the names on the website/emails are gabriel, calvin, and tony which aren’t Asian

The wire transfer requires my acct numbers which is a bit sketchy

The other payment options can be reversed super easily

I think that finding apps then offering to buy them is an uncommon scam strategy

I’m not sure what their desired endgame is. Steal the app by reversing payments? Get my acct. number for the wire, then print checks with it?

I start doing more in depth research on this guy. Not much comes up when I scour the web for his personal information and business records. I manage to convince him to chat over Skype, and we talk about his background and what he plans to do with the app.

I can’t get a single substantiative answer to my questions. As far as I can tell, everything he told me was a lie. Clearly this guy’s not legit. But at this point I’m too curious. What’s he up to?

A few more back/forth inquisitive emails accomplished nothing. I finally responded:

Hi Gabriel,

I’ve decided to not move forward with the deal.

You said that your company has been around for 10 years [on the Skype call] when it’s only been around for about a month. I’m not sure what exactly is going on (swapping the app out for malware?), but I can’t be a part of it.


He sent back a few emails weakly defending himself and offering a different shell company to try and back his reputation. Here’s the smoking gun (emphasis mine, of course):

Could you enlighten me as well what is the real concern about? As the app purchase does not reveal any of your personal information and it is alright if you don’t wish to provide the original source code.

What’s going on, and what this means for broader security risk

Here’s the scammer’s game-plan:

  1. Find an Android app with a lot of users
  2. Purchase that Android app
  3. “Update” the app with malware (you don’t even need to buy the original source code!)
  4. ???
  5. Profit

This concerns me for two reasons.

I’ve had 3 “online advertisers” with non-existent reputations contact me in the past couple of months looking to buy Brick Breaker Free. I never had a problem with that previously, so it looks like this strategy is catching on. This also implies that it’s profitable.

Second, users can’t do anything to fight this scam. One day, you’re playing a fun game on your phone. The next day, you update to the latest version (I’m sure it’ll mention “bug fixes” or something similarly innocuous) and BAM! Malware.

From the development side, I know how tempting it is to just sell an app without due diligence. It’s not hard to see through these people’s shenanigans, but what if someone doesn’t know what to look out for, or what if they just don’t care? What if the scammers become more sophisticated and well-versed in business etiquette?

I just don’t see any way to easily prevent this from occurring.

Thoughts? Tweet me at @whrobbins or find my email at!