Why Ownership Graphs Matter

This is a post about hidden complexity and creative governance structures. It is not a post about politics.

As the 2018 midterms came and went, there was a lot of talk about tax, corporations, and visions for a more prosperous society. I think the most interesting policy discussions aren’t actually about policy as much as the rhetoric, coalition-building, and choice of landmark-issue: one debate that caught my eye was over SF Proposition C. Perhaps the most salient point made by supporters of the tax was that it only affects the biggest billionaire-owned businesses in the city. Normal people won’t get taxed.

Implementation (gross receipts instead of something like net income?) and assumptions (what does everyone’s responsibility mean?) aside, the idea that taxes on big businesses actually tax wealthy people is surprisingly unclear.

Let’s assume that we want to tax rich people who own large companies. A quick Google search shows that Marc Benioff only owns 4% of Salesforce. So only $0.04 of every tax dollar is taken from the pocket of Marc. Where does the rest go?

Huge chunks of publicly traded companies are owned by asset managers like BlackRock, Vanguard, and StateStreet. In fact, the “Big 3” are the largest shareholder in almost 90% of S&P 500 corporations. And that’s only looking at a few firms: going back to the Salesforce example, 83% of Salesforce is owned by some sort of institution! So most of the tax burden falls on asset managers.

Next, one might argue that by taxing institutional investors, you’re taxing a different set of rich people which is fine… Except that the asset managers usually make money by charging a small percentage of AUM. The actual gains or losses are passed on to individuals, pension funds, endowment funds, 401(k)s and anyone else letting institutions manage their money. Keep tracing that back and you end up taxing individuals.

This is almost vacuously true for any tax, I’m merely observing that this concept doesn’t make its way into policy discussion.

So then who are those individuals? What’s particularly interesting is where they’re located: big businesses that fall under Prop C are mostly owned by people outside of SF. The city is effectively taxing people who live elsewhere! This would actually be very clever if it were intentional.

I wish I knew more about the precedent this sets and how lawmakers think about this. It would be absurd to impose a sales tax for someone in another city, example.

If anything, then, it should be the other way around: tax small local businesses-owners, and not big external business-owners. They’re the ones that actually live in SF. It’s hard to continue down this rabbit hole without regressing into some sort of unsupported speculation on tax policy. To be clear: I don’t actually think we should only tax small local businesses. The point is that even simple policy ideas have counterintuitive real-world effects.

Finally moving on from the Prop C example, let’s say that we had a complete ownership graph of whoever owned a big business. What could you do with that? Might you tax only the individuals in SF who own a share of a Vanguard index fund that owns a share of [insert big SF business]? Are there other creative governance or tax structures you could invent?

Is the complexity of such a graph a feature or a bug? (E.g. does it hedge financial risk or dangerously pool risk in a way we don’t understand?)

This puts aside the practical issue of how you could actually build such a graph. Would mandating the publication of relevant info prevent good things from happening such as the hostile takeover of poorly managed companies? How far can you get with info you could gather as a private party? Does BlackRock have interesting internal research based on their client data?

If you have ideas on any of the above, shoot me a tweet, email, or text!

What I do know, however, is that this serves as an excellent reminder of 1) the surprising absence of policy in politics and 2) the complexity of seemingly straightforward policy.

Social Spaces on the Internet

Update: I made a video explaining these trends in more detail!

From The Palace to League of Legends, social spaces on the internet are defined in part by the technology supporting the medium. There are a number of trends that will reshape online social spaces in the next several years:

  • Everyone now has phones in their pockets at all times
  • Voice and facial recognition is becoming more mainstream
  • AR and 5G will enable more content rich apps
  • Norms around IRL interaction are changing (e.g. Pokemon Go. More on that here.)
  • Better batteries and graphic chips make mobile streaming and gaming more reasonable
  • Infrastructure and dev tools for mobile apps, streaming, and games are getting much better at all levels of the stack

We’re seeing early hints of these coming together with Fortnite, for example.

We can take a look at Fortnite’s predecessors to better understand how things have changed. Call of Duty, Halo, Battlefield, etc. had very similar features. 5-10 yrs ago, friendships were forged remotely over private lobbies, zombies, boosting, team-based S&D, deathmatch, co-op story mode, etc. You’d go home from school alone (or with one friend for split-screen) and rendezvous with everyone else online. Fortnite’s ‘hangout spot’ effect is really nothing new. But it is special, in my view, for three reasons:

1) Seamless cross-platform functionality. I don’t know how Fortnite was built, specifically. But it’s amazingly scalable. The ability to play on your computer, Xbox, or iPad removes location/situation as a barrier. Plus you don’t have to deal with the entry costs of a full console. This means there’s no bifurcation between Xbox Live and PSN, or more generally, mobile and console. In the past, you couldn’t play with friends unless they were on the same ecosystem — try convincing mom to buy you a whole new console. Fortnite overcomes this large barrier by working well everywhere by default.

2) Relatively simple mechanics. First Person Shooters are usually super complex. The cartoon-like mechanics lower the computational load (good for cross-platform engineering!) and soften the learning curve. Reducing hardware constraints and making the theme more mass-appealing grows the addressable market. Plus a larger segment of the market can actually compete from day one. This bumps retention and virality.

3) Better customization with skins, emotes, etc. The OG FPS games had basic customizations like 4-letter “Clan Tags” that let you identify with a group or “Clan” of players. There was limited ability to make your gun a different color or your character look different. This was a brilliant yet nascent way to encourage and support “hangout spot” socialization. Fortnite takes this to another level with the numerous skins, weapons, and emotes you can earn or buy. You’re not just using the gun or clan-tag your friends have as you would in the OG FPS games. In Fortnite, you’re expressing yourself with an individual aesthetic that you design. That’s a powerful way to build engagement.

I think Fortnite is a great example of distilling the best of past titles into one simple, focused game. The monetization and design is eerily reminiscent of pure-mobile games too. Adding an in-game currency (V-Bucks) that distances USD from in-game goods is a classic mobile revenue strategy. In the past, console and mobile were pretty distinct ecosystems with hugely different economics and distribution systems. It looks like the two will begin to merge. I expect Fortnite to be one of the first, but not the last!

But Fortnite is just one example. There are a lot of levers to pull when it comes to online spaces: accessibility, identity, ease-of-use, social norms, the possibilities of the medium, the focus created by a central activity/goal, and the things you can signal can all influence the way that users interact online.

I expect the traditional and mobile distribution and monetization models to continue merging, and new or underused (e.g. Houseparty or group FaceTime) social spaces to continue picking up users. That’s partly why I’m so bullish on tools like Discord — some media don’t support “social space functionality” but are still great to build community around. Discord adds that social space layer.

I wonder whether we’ll converge into one unified, app-enabled social space a la the Facebook/Oculus/Snow Crash vision. The trends listed above makes me think that we’ll tend towards a variety of smaller single-purpose spaces with richer content. This is supported by the current social media landscape. Each big social space — Reddit, Twitter, Snapchat, Facebook, iMessage, FaceTime, Instagram — owns a unique “job to be done.” Current fragmentation is a feature, not a bug. More context on that concept here. We haven’t converged into the single unified platform that some thought we would 20+ years ago, and I don’t see anything that will change that going forward.

The 21st Century’s Greatest Innovation

Here’s an interesting question: what is the single most impactful innovation of the 21st Century? Take a second to think about it.

Most of my friends say something like the internet or mobile phones. The problem is that most of what we think of as “technology” is really a composition many of individual inventions. The internet was made possible by great innovations at every level of the stack, from physical infra up through applications. Plus some new tech was simply made possible by cost curves falling to a certain level — that’s not quite a specific invention if you ask me.

To take a step back, what do we value when assessing impact? In my view, there are a few different “impact categories.” Specifically, most of what affects the world can be attributed to economic growth, political power, and side-effects like environmental changes or social norms.

How should we think about impact that derives from multiple technologies?

My unpopular opinion is that the most impactful technology of the 21st Century has nothing to do with software, hardware, or the traditional tech sector. I think shale oil extraction has been the most useful invention by a wide margin.

Let’s explore some of the ways that shale oil extraction makes a dent in the way the world works:

Economic: US oil production doubled in just 10 years, between 2007 and 2017. As you can probably guess, oil prices plummeted. (To be fair, this was partly due to increased Saudi production.) This played a role in the global recession recovery, and adds an estimated 0.5% to 1% to global GDP growth. Considering that economists left and right complain that growth in the developed world is so slow,  a 0.5-1% bump is incredible. I struggle to find any recent innovation that comes close to that. (Public-key encryption or perhaps relational databases may have made the cut 50 years ago.)

Geopolitical: The US has large shale rock formations. Tapping into them unlocks a huge amount of oil. But the process of shale extraction is more involved and expensive than traditional drilling so it’s only profitable when oil hits a certain price point in the market. When that price point is hit, however, we have as much oil as we need. This effectively caps the global price of oil at $70-90 per barrel which is below the break-even line for the budgets of the major oil production-dependent nations. This means that the US has much more economic and political leverage over the OPEC members. Since the other top oil producers — Saudi Arabia, Iran, Iraq, Kuwait, Libya, Russia, etc. — are all notorious for illiberal geopolitics and egregious human rights violations, the shale oil pricing dynamic gives American liberalism more power on the global stage. That’s rather impactful if you ask me!

Environmental: The negative impact of fossil fuels is often discussed and well-documented elsewhere, so I won’t belabor this point too much. There’s actually a very compelling argument for the “growth over environment” school of thought too. See this book or its summary for more. I’m not sure which viewpoint is better, but in either case, the magnitude of impact is clearly big.

We can even try big-picture comparisons between oil and something as massive and ill-defined as “the internet.” According to this McKinsey report, the internet accounts for ~21% of GDP growth in developed countries which yields a ~0.5% boost in GDP if you assume a 2.5% growth rate. Compare this to the 0.5-1% number mentioned a few paragraphs above, and you’ll find that lower oil prices may cause more growth than the entire internet! I’d take the report with a huge grain of salt, but the orders of magnitude are most likely correct.

The point here is that the traditional tech sector is not the most important part of our economy and our lives. The most wealthy companies in the world may be tech companies, but they represent an enormous amount of concentrated value. Most of what drives real-world wealth and opportunity isn’t (yet) linked to the pixels of our screen.

The Paradox of Compound Interest

I have a nasty habit of asking myself “how much money would I have in 30 years if I didn’t buy this thing?” It’s much harder to justify a $10 omelette or a $500 plane ticket if that money would compound into $50 or $2500 by the time my future kids are growing up.

Founders have the same problem: (source)

 “Equity capital is expensive. Every time you do a raise, you dilute.”  I like to tell a story about the young company founder who told me he was very proud of his expensive new Herman Miller Aeron chairs in his conference room during the Internet bubble. He bought them with cash that had recently been invested  in his company by some new investors. When I explained to him how much the chairs would eventually cost if the company went public someday via dilution the expression on his face turned from a smile to a frown. Dilution maters. Do the math. People say Warren Buffett can tell you nearly exactly how much income you have forgone if you show him an expensive toy. It is a bit unnerving actually, since he does the math in his head. When someone shows a founder some expensive office space with a beautiful and expansive water view they should immediately think: dilution!

That new MacBook for your first employee would cost tens of thousands of dollars in equity dilution if you have a VC-acceptable exit. And it’s not like consumer goods generate much utility on a long time-horizon — a nice pair of earbuds will yield the same benefits whether you listen to them now or in 20 years.

But then the fundamental problem arises: how do you justify spending money on anything beyond the most bare-bones necessities?

Remember that personal growth also compounds.

Qualitatively, our relationships, memories, and perspectives are all valuable, gratifying things to have. Much more so than any financial asset, I’d argue. In the internet-enabled tech economy, our personal qualities are becoming more leveraged than ever. 

With that in mind, it becomes much more reasonable to spend on education, travel, friends, and vanity. But where do you draw the line? I suspect this contributes to why some people take on crushing debt to go to a higher-ranked college than they’d otherwise go to.

It also seems irresponsible to set your personal burn rate equal to your income. Should we spend more? Or less? Or spend extravagantly on the few things most conducive to growth or happiness then cut everything else entirely? This assumes, questionably, that we know how to distinguish between what does and doesn’t cause personal growth!

When starting a company, I agree with the conventional wisdom that you should focus on minimizing burn. The entire point of an early-stage startup is to figure out the potential growth rate of your product when it fits with the market. In personal matters, I tend to think we should instead focus on growth rate. We know with high certainty that (thoughtfully) spending on ourselves will lead to experiences and friendships that make us a better person over time. The point is that drawing a clear dichotomy between the two cases helps avoid a common pitfall: it’s easy to merge work and life then burn startup cash needlessly or fail to invest in yourself.

Getting Good at Startups

Given that I spend most of my time nowadays working with first-time founders and students interested in venture, I figured I’d write a post covering my common advice on getting really good. If anything, this serves as an exploration of trade-offs I’ve dealt with at one point or another.

Although I learned the most exciting and nuanced tips and tricks from talking to great people, there’s still a ton that you can do on your own. I’m constantly amazed at how young some top startup nerds are. There’s so much content out there that you can get learn surprisingly fast if you separate the signal from the noise. Apologies in advance if this turns into a sales pitch on joining a startup and focusing on getting really good at one thing.

Principles

As is true in everything, there are many different ways to be really good. In general, I think we bias towards covering our weaknesses and being well-rounded. Especially if you have a strong deliberate practice/growth mindset. But if you want to be really good, it often helps to be the absolute best at one or two things, and merely acceptable at the rest. You could spend most of your time building a great network. Or becoming a top-tier salesperson. Or learning the detailed history of Silicon Valley and the empirical results of what works when building startups. It doesn’t really matter what you choose. But it’s incredibly hard to do everything when so young.

One useful strategy here is to prioritize the skills with a strong snowball or halo effect. If you get very knowledgeable about one specific vertical, you can be known as “the X guy/girl” for your X of choice. Then you have an excuse to talk to people and build cool things. Or if you focus on building a network of smart, like-minded people, it’ll get much easier as time goes on. Having an already strong network makes future networking easier and frees up time for other pursuits.

I think there’s not much choice to be had in your comparative advantage. You should do what you do enjoy the most. I can’t stand “networking” so I focus on what I do best: reading, learning, and expressing interesting viewpoints to friends. Building a reputation around knowing a little about everything has made the other relevant startup/venture skills easier to get.

Read the right materials

I’m a big fan of Semil Shah’s post about context as a tool for having good ideas and operating effectively. Most knowledge is subtle and not specifically written down.

The best way to get context is to follow current and historical thought. I’d read through all the classics: Paul Graham, YC, a16z, First Search, Founders at Work, Hacker News, tech Twitter, AVC, Above the Crowd, Chris Dixon, Brad Feld, Elad Gil, 20 Minute VC, and many other that I’m forgetting.

The raw volume of freely available content is humbling. I used to be bummed that I got rejected from MIT, but there’s a silver lining that I’m extremely grateful for: I have a huge amount of time to focus on stuff beyond coursework. Of course CS@Illinois is no walk in the park but I have a lot more flexibility to sit down and consume whatever info I want. Being careful about 1) minimizing “gen ed” time sinks that could be replaced with short books and 2) cutting out extracurriculars I’m not in love with has made a huge difference in productivity and happiness.

With a small number of brillant exceptions (Jason Lemkin on Quora, Vitalik Buterin on Medium, to name a couple), everything on Hackernoon, Quora, CNET, Business Insider, etc. isn’t worth the time. I find that Techcrunch, WSJ, Recode, etc. are fine for keeping track of big picture stuff, but you don’t learn much from them. Newsletters like LAUNCH ticker, Term Sheet, and StrictlyVC are better.

I’m a staunch supporter of learning things completely outside of your field. Not just “tech, but in a different vertical.” Really out there. Think political science, biology, military history, ethics, law, and comedy. More on the importance of this here.

Starting something

This is definitely the best way to learn every skill you need in entrepreneurship and venture. I’ve always known that I have more of an investor personality, but literally all of my mentors told me not to go straight into venture. I was nearly stubborn enough to ignore them but luckily I found the ideal startup internship and jumped on that opportunity.

Let me say: I’m amazed at how much I learned in just three months. It really is the fastest way to learn. I’d try to go as late-stage as possible as long as you can do a little bit of everything. The startup I was at had 7 people. I’m very fortunate to have done everyone’s job at some point.

To take a step beyond my own personal experience, there are a few specific characteristics to unpack from the generic term “startup.”

The speed of execution helps keep things challenging and interesting. There’s more room to experiment, the feedback loops are tighter, and you’re forced to overcome perfectionism and ship quickly.

The extra responsibility of a startup role adds a very qualitative sense of purpose or necessity. At a big tech company, you don’t need to worry about most of the little details, but those tiny parts of the business add up quickly. The utter lack of a safety net or acceptable “not my problem” scenario is a forcing function. You’ll have to think hard about asking the right questions and prioritizing.

Finally, there’s an enormous value to working on small teams that don’t build narratives. Outside of a company, all you know are the stories. It really is mind-blowing how revisionist or over-simplified most info is. Part of this is to build prestige among outsiders. It sounds better if the challenges you overcame were scary and hairy. It’s also because some things like interpersonal conflict and doubt of the company mission can’t be shared externally. That’d violate norms or expose confidential info. By being on the inside of the machine, you know all the juicy details of what’s happening. That was much more valuable than I had anticipated.

If you want to start something of your own, working at a startup is a no-brainer. Hop between startups each summer (and each semester part-time!) If you want to go into venture, I do think the empathy and tactics you learn are worth the time doing something other than your eventual goal. The street-cred doesn’t hurt either.

Investing

One of my major learnings over the past couple years at Contrary has been the value of getting as much real practice as possible. If you’re asking yourself “is this founder in the top 10%, 1%, or 0.01% in terms of clarity of vision?” you need to have enough data points to draw a normal distribution in your head and decide how much of an outlier the founder is.

This also applies to metrics. Is a 5% week over week growth rate good or bad? Is there a big difference in benchmarks between verticals? What CAC is reasonable for this sort of product? The answers to these questions depend on experience and are hard to observe from the outside of the decision-making room.

Talking to a very large number of founders also helps you understand the edge-cases that pattern matching and percentile-ranking don’t cover. What if a founder is a management consultant who taught themselves to code, and is building a social app which has historically been a questionable category? How do you begin to reason from first principles if you don’t have much info to go off of? You develop a valuable intuition for different situations by talking to as many people as possible.

Another thing to optimize for is the “legitness” of the investing you’re doing. Other founders/investors have suggested building a Fantasy Portfolio where you choose startups you know about and pretend that you invested. This is fairly popular in the public markets. It works better there because you have access to much of the same information as other investors, and you always have the option of investing in public markets. A Fantasy Portfolio helps prove that you can find companies, but convincing them to take your money is a different ballgame.

Through a handful clubs or nationwide student organizations, you can give out grants or invest small sums of ~20k. While these are a good way to build a network and meet founders, you can’t learn as much on the decision-making or value-add side. Working on a returns-driven team with larger check sizes (ideally over 6 figures) forces rigor. Just as exams force you to study and thoroughly learn the material in a way that lectures and homework can’t.

Of course I’m biased, but I think Contrary is the best way to do that while still in school. It’s much better than working remotely for a venture fund doing diligence work, in my opinion. Joining a VC in the summer would be best, but I don’t think it outweighs the opportunity cost of joining a startup when school’s out.

 

3 Questions on Tech Companies

I was recently given a few interesting questions on big-picture tech and investing principles. Here are some thoughts:

On big tech co defensibility

I think many investors over-weight for the theoretical aspects of a moat and under-weight practical ones. To be fair, good investors use mental-models to understand and generalize concepts. But it’s very difficult to discount an idea that is conceptually elegant though flawed in detail.

Network effects are the top-of-mind example here. In my view, Facebook — the poster-child of network effects — isn’t nearly as defensible as other tech giants that have ecosystem effects (Google search is much better partly because of data harvested from peripheral businesses like Android and Gmail) or brand equity (Coca Cola is otherwise indistinguishable from Pepsi).

A trite, tweet-sized rebuttal to FB’s moat would sound something like “how did MySpace’s network effects turn out? Or AOL’s, or Yahoo’s?” While NFX are great when you have them, they disappear just as fast once the flywheel starts spinning in the other direction.

I can imagine FB’s core social utility being split off into a number of separate products. We saw this with Instagram before FB acquired them. We saw Snap fill the private/ephemeral need, and not even FB’s massive network effect could save Poke from massive failure.

I also think FB is acutely aware of this: they’re investing more in video streaming to lock content-creators to the platform. They’re also drawing inspiration from WeChat with Messenger by tying in tools to make it a platform rather than a social network feature.

Mark Zuckerberg is one of the last people I’d want to bet against. But I can say the same for Bezos, Page, Brin, etc.

On the most important characteristics of founding teams:

Of course the ability to attract talented hires and being hard-working are useful traits. Solving a burning problem in a large and growing market is great too. Just as being tall is useful to a pro basketball player. I view these more as prerequisites, not forward-looking predictors of success.

Many investors and operators alike seem to favor category creators — companies that build something totally new. Zero to One, as Thiel would say.

But historically, many of the best companies were not the first to the punch. Going by market cap: Apple did not build the first computer or smartphone, Amazon was not the first to sell things online, Microsoft wasn’t the first to make an OS, Google was just a clone of Alta Vista, and Facebook was like MySpace or Friendster.

Even smaller companies like Flexport or Quora can be glibly described as “freight forwarding, but with software” or “Yahoo answers, but with good content.”

To be clear: this does not (and should not!) diminish the achievements or impact of any tech companies. I’m actually humbled by how transformative incremental changes can be. I see this as a testament to the power of pure focus and insightful iteration on the learnings of others.

There are probably other characteristics higher on the list of greatness principal-components. But this is one of the most underrated and misunderstood in my opinion.

On evaluating teams:

First, I look for something wrong with the team. Not to find a reason to pass, rather to make sure that they’re not “too perfect” or cookie-cutter. At risk of sounding like an armchair philosopher, founders with a vision for something truly innovative will look a little strange or contrarian. Founders simply following trends generally opt for more traditional or “prestigious” career paths before starting a company. As a quick aside, I think this is what tech people get at when they use the “don’t hire people who went to business school” mantra as a shorthand for describing outsider-ist tech culture.

Second, I try to understand how the team will continue to attract stellar people both inside and outside of their current areas of expertise. There are a lot of potential levers to pull here. Perhaps everyone is super cool or brilliant (or both!) and other great people will want to just be around the team. Or maybe the founders are respected engineers who only have street cred with other engineers, for example. Then how will they recruit and retain salespeople?

Third, I want the team to be thoughtful about the cultural diversity vs tribalism paradox. Especially in the early stages, teams need to be able to move quickly, be agile, and have laser-focus on the vision. To get through the early-stage grind where you spend all your time with the same people, it helps to be “like-minded.” As you grow, however, that can incubate serious problems (Uber) and you’ll have a harder time cultivating different viewpoints and skill-sets. Ideally founders have thought through this and will be able to handle the team culture through different stages of the company lifecycle. You could even generalize this to being deliberate about scale and knowing how to learn about management.

Questions

Simply listing my interests doesn’t quite encapsulate everything I’d like to share. Instead, here is a list of the questions that much of my reading and thinking revolves around. Let me know what catches your interest and start a conversation with me! Tell me what questions I should be asking.


  • Why are prediction markets not more common? There is only one popular PM category. (The financial markets)
  • Will we tend towards socialism as a function of wealth like Western Europe? (What makes up American exceptionalism?) What causes it? Is industrialized society a temporary exception which will revert back to forager or evolutionary-past social structures? (context)
  • Will our institutions account for signaling? Or is it really the Hansonian elephant in the brain? In which cases will we figure out how to pretend to give people what they pretend to want, and actually give them what they actually want.
  • Does environmentalism matter given that it’s often a direct trade-off with development? Alternatively, why is growth so good?
  • What’s the best replacement for religion in a secular society?
  • How do we solve social problems (e.g. obesity, homelessness) given that interventions have historically done little compared to economic development? Which categories of problems (mental illness, potentially) will not get better because of external trends?
  • How can we describe and teach worldviews? Few debates hinge on facts — you can rationalize your way to anything. Worldview is what sets opinion on topics.
  • How much is pre-determined by personality and cognitive traits? (e.g. political worldviews, career paths, and perhaps most disturbingly, happiness levels)
  • How do we better curate information? The web has given us access to nearly everything. Markets (reputation/aggregation platforms) help surface content, but content regresses towards the mean. “Republics” and “benevolent dictators” (editors and curators) are better than democracy (platforms) in this case. How should we think about the tradeoffs of the different systems?
  • How do we better understand and detect the difference between false feelings of insight and true understanding (e.g. Feynman’s experiments with LSD)
  • Assuming that empathy and coalitional signaling are why we’re becoming more progressive (see above), what, if anything, would stop or reverse that?
  • What should we think about the half-life of knowledge?
  • What would effective unschooling look like? Can that be generalized to most of the population, or would it only be worthwhile for X% of kids?
  • Will the Sovereign Individual thesis come true, or will we centralize more (or fall victim to authoritarianism)?
  • Will we tend towards a Malthusian-style Repugnant Conclusion, or shrink to a more “normal” population?
  • Why is so little time spent on choosing what to do relative to time spent doing? How can we change that?
  • Exactly how much knowledge is lost because brilliant people are “sponge” personalities rather than people who love to create written content?
  • How can we uncover information that’s obscured by narratives, without having to learn by direct experience?
  • What views are the free will assumption not compatible with? (e.g. our justice system assumes free will, but would still be consistent with absence of free will under a utilitarian interpretation).
  • How should we think about views where our philosophical conclusions differ from our intuitive conclusions? There are opinions I can only construct rigorous philosophical arguments against, but I still side with my emotion/intuition when it comes time to make a policy “final call.”
  • Why is art, music, etc. pleasurable? There’s a strong argument for why they exist (Geoffrey Miller) but what makes them so uniquely emotional?
  • What are all the political and rhetorical tactics that politicians, media, leaders, etc use? I should really start writing these down.
  • How can we use internet technology to foster “learning by observing”? I think “learning by doing” is overrated and “learning by shadowing the best” is way underrated.
  • What factors determine or create cultural influence?
  • Is the Paul Graham “what you can’t say” heuristic better than the Thiel contrarian heuristic?
  • Where do our stated preferences diverge from revealed preferences?
  • Is the unexamined life worth living? (context)
  • What do panics, especially of the moral and financial varieties, tell us about what’s actually going on?
  • Why do we focus so much debate on trivial issues and what can we learn from infosphere’s various importance-focus differentials?
  • How should we think about the consistency of our philosophical frameworks and our intuitions? Should we try to rationalize our way to internal consistency or be pluralist and accept that intuition can go beyond pure reason? What are the implications of each viewpoint?
  • How do we separate values, policy, and culture? In what ways are they inextricably linked?
  • More questions TBD

Request for Startups

There just isn’t enough enough time in the day to take advantage of every opportunity. Below I’ve listed some ideas that I wish I could start in another life. I’d invest in all of them if the right team is committed. Let me know what you think! I could dig into these ideas for hours.

A dating app for hyper-targeted Reddit-style subcommunities

There are two competing trends I’ve observed in the dating space: 1) an absurd number of niche dating services have small communities, and 2) it’s difficult to filter for what you actually care about on the popular platforms like Tinder or OkCupid. Match Group, the owner of Tinder, Match.com, and OkCupid, has tried to cover the major user segments at the brand level. Is there a way to cover more user segments and give users more choice at the app level?

Nearly all new dating startups are cookie-cutter and terrible. I’m interested in a platform that solves the filtering problem by offering a marketplace of user-generated subcommunities, a la Reddit. There would be an “everyone pool” or master-list of profiles to sift through, paired with the option to “join a circle” such as tall people or neoliberals who enjoy the theatre. I’m skeptical of top-down data science that matches people together based on survey questions — I think letting users generate their own taxonomy could lead to interesting results and potentially form a lasting differentiation. The default “all” list helps users join the platform, and the unique subcommunities lock users in.

A usable prediction market

I don’t understand why there aren’t more prediction markets (primer on the concept here). The prediction markets that do exist — the financial markets — are incredibly impactful and employ millions of people. Interesting PM use cases include prediction-based corporate governance structures, better predictions of real-world events, and more accurate securitization of private risk.

I was excited by the launch of Augur, but nobody really uses it. I haven’t worked out why Augur — or a centralized service for that matter — hasn’t caught on. Sports betting is a technically a form of prediction markets and that’s a huge industry. I see no reason people wouldn’t enjoy on similar real-life events (will Kanye run for president and get more than 500k votes?) I think that a prediction market with a Robinhood-esque ease-of-use or social features could get big. (Perhaps this is something that Robinhood should just build on their own!)

This could take the form of a consumer-focused product, or a toolkit for companies to integrate prediction markets into their own products. (Beware, this is a slippery slope leading to Futarchy. Kidding.)

Better tools for remote teams

Zoom, Slack, and G-Suite have made managing remote teams much easier over the past several years. I can’t imagine leading Contrary without such convenient ways to work and communicate. But there are still unsolved problems. Documenting everything for your team through a wiki or messenger is slow and painful enough to not get done most of the time. And you can’t look over at someone’s desk to see if they have a minute to chat. We need better information collection (some companies have attempted auto-transcription of meetings) and less ambiguous/distracting ways to get someone’s attention remotely.

The holy grail of remote tech is feeling like you’re with someone IRL. No matter how much time I spend with Contrary’s venture partners over calls or text, the friendships don’t feel quite right until we meet in person. When seeing someone in-person I’ll feel like we’ve been friends for a while. But in-person interaction is that final stepping stone. This seems to be an artifact of how we’re built as humans. Getting around that somehow would be huge since team culture is so important.

Online mega church

Senior citizens are often lonely, immobile, and religious. They’re also very loyal customers. You can read more of my learnings about seniors here.

Think of how successful some televangelists have been. And they just sell videos. Now that seniors are quickly adopting mobile devices, you can layer on Netflix-like content selection, social features to build community (and network effects!), on-demand streaming, interactive components, in-app donations, etc. Just as middle schoolers can practically live their social lives in Fortnite teams or CoD lobbies, on online religious gathering place could be the killer app for seniors.

Tools or a platform for job offer negotiation

Most college kids don’t negotiate their job offers. I think that’s a colossal mistake because 1) wages tend to be sticky so a marginal difference in starting salary will add up over a career, and 2) an extra few thousand dollars saved now will compound into 5x that by the time the students’ future kids are growing up. Every little bit of cash matters early on in life.

I think there are a couple causes of this problem. College students may not know that they can negotiate offers, or they may be too timid or anxious about risking their offer. Even though in reality, nothing ever happens to the offer and employers won’t think less of you as long as you’re not overtly greedy. Or maybe students are just burned out after 4 years of hoop jumping and want to put the job search behind them.

I don’t know what the best model would be. Career coaching is available to most students, but nobody uses it and it’s got a mediocre reputation. The school cares about getting you in a job, not optimizing those little comp details (similar to the real estate agent incentive problem). There are a couple product angles you could take. First, you could offer an end-to-end job hunting service that closely coaches you on what to say to recruiters (don’t be the first to name a salary number! Blame a family member for needing time to think and compare!). You’d charge a percentage of bonuses you can negotiate to de-risk from the user’s perspective. Second, you could create a library of example emails, Glassdoor-like negotiation benchmarks (some companies are more flexible than others), and a community for navigating the post-offer process which is crowded out by resources for the job-seeking process. Paid access to such a library would be clearly ROI-positive from a user perspective in theory, but I bet it’d be hard to market in practice.

The long term vision would be to slowly eat more and more of the recruiting “stack” and eventually match users with companies. You already know how Indeed, WayUp, etc. work. I think there’s an opportunity to build lasting value-add by being a uniquely trusted brand that is on the job-seeker’s side from the start (helping with negotiations), and by having a better understanding of why employees do or do not accept an offer since you’re involved in that process.

High quality food vending machines

Consumers want 1) convenient food, 2) better quality than fast food, and 3) more unique or “local” eating experiences. The rise of fast-casual, food trucks, and single-purpose micro-shops supports these trends. But there are a couple problems you run into in the food industry that make restaurants bad fits for venture. Margins are low, the businesses are not scalable, and the moats are dependent on brand and food. I want to take the food truck craze one step further with automated vending machines that cook food within them. You’d start with simple (but restaurant-quality) foods like dumplings. The machine would have an internal steamer to cook the dumplings on the spot. To maintain freshness, you’d have a full-time employee prep ingredients and deliver them to all of the vending locations. You could expand into pizza, eggs + hashbrowns, shawarma, etc.

The key thing here is keeping quality up — most vending machine food is bad. But if customers would walk up to a machine on their morning commute and get fast-casual quality meals, you may even be able to charge a premium. Of course there would still be a cost challenge: the machines would be expensive, and you still need to hire someone to do constant maintenance and restocking. That’s mitigated by the lack of labor cost on a per-machine basis. This would be really hard to grow, but I think the market is so big that the slog would be worth it.

A robust way to signal conformity and conscientious  

I’m a fan of Bryan Caplan’s The Case Against Education. It argues a viewpoint that may seem obviously wrong or even upsetting, but is very difficult to actually find steel-man refutations of. To oversimplify one component of the book’s thesis, education signals three things: intelligence, conformity, and conscientiousness. Of course we have the SAT or IQ tests to show off intelligence. But you can’t show a potential employer that you’re conformist enough to be an obedient employee and conscientiousness enough to get the job done.

That’s a big part of why we spend tens or hundreds of thousands of dollars and 4 prime years on education. If there were a stronger, more honest signal of conformity/conscientiousness, then you could potentially skip the brute force signalling that makes up much (most?) of modern education.

(If you’re thinking “but what about everything you learn?” then I agree that’s also part of school, but go read the book. There are some incredible empirical results that may sway your viewpoint.)

I’m purposely leaving this proposal vague. There are a lot of different angles you could try. Perhaps a company should build a stronger reputation system that tracks detailed feedback across employers (hiring managers rarely call references beyond your most recent job). Or you could build a more comprehensive marshmallow test for adults. Or something totally different that I’m not alluding to here.

A socially acceptable, well-branded nootropic

I’m worried that nootropic vitamins and supplements will go the way of Google Glass, Segway, and Soylent: useful products, but something you’re a little too embarrassed to use. Cutting edge research-based companies tend to have very utilitarian marketing strategies (WTF is a ketone ester and why do I need it?) and the nootropic/supplement/IMF/biohacking space isn’t really “cool” or consumer-ready yet. I assumed that the company formerly known as Nootrobox, now HVMN, would be the ones to make it happen. Maybe timing isn’t right, or their execution was off.

Consumers seem to gladly regulate themselves using drugs (coffee, alcohol, and nicotine, specifically) so I don’t think there’s anything fundamental preventing nootropics from happening. Vitamins are common too. I can’t explain why drugs and vitamins haven’t been combined into a mainstream nootropic. It has to be the marketing. (Semi-related: Kin is a startup I’m excited about).

Competition Matters Less in Software

What is it that makes software startups so able to disrupt incumbents? Why does competition seemingly matter less in software compared to other industries?

Software companies are very maneuverable. Especially new entrants. There are relatively small CapEx requirements to maintain existing products so pivoting and expanding doesn’t require as much of a operational/financial tradeoff as compared to non-tech. You can keep your previous product running for next to nothing. Plus you can instantly push new changes to existing users.

Software can instantly scale to fill any niche or unlocked growth opportunity. The marginal cost of servicing a new user is basically zero, and it’s instant. Larger companies are held back by old processes, bureaucracy, hyper-focus on a larger revenue stream, etc.

Network effects (which many competing tech companies rely on) can be unraveled. I’ve always had the hardest time arguing this point. Friends have pushed back against me, saying that the whole point of a network effect is that it can’t come undone easily. I wasn’t quite articulate enough to counter that argument, but Marc Andreessen says it well in Elad Gil’s book:

Marc: I think network effects are great, but in a sense they’re a little overrated. The problem with network effects is they unwind just as fast. And so they’re great while they last, but when they reverse, they reverse viciously. Go ask the MySpace guys how their network effect is going. Network effects can create a very strong position, for obvious reasons. But in another sense, it’s a very weak position to be in. Because if it cracks, you just unravel. I always worry when a company thinks the answer is just network effects. How durable are they? To your point on data network effects, I would just say that we don’t see it very often. We see a lot of claims, and very little evidence. The reality is, there’s a lot of data in the world, and a lot of ways to get data. We have not seen very many data moats that actually make sense, even in science.

You can G2M through many channels. Technology companies often go to market through several different hyper-focused channels. All you need to do is find one LTV/CAC positive channel and pour money into it. Non-software companies are often stuck having to do generic lifestyle marketing and branding which doesn’t easily attribute or confirm ROI.

Software is less tied to external forces like regulation, macroeconomic trends, and cultural norms. I’d argue that the whole point of some software companies is to get around or hedge against the effects of these things. Software firms compete more so on product and distribution.

Software is feature-driven. Coke and Pepsi taste the same in blind trials — their slow-changing brands and distribution drive sales. If a software company builds a better feature set, they can win customers on the basis of their product or service’s functionality .

Data is fungible. Users can switch between WordPress and Medium, for example, at will and with no cost. This is a part of what drives software companies to be platforms: if your value is the aggregation and network effect rather than the info itself, users have a cost to switching (fewer eyeballs)

Great software companies tend to be category creators. I disagree with the Thiel view that startups must go zero-to-one or have a grand secret — most amazing businesses can be reframed in incremental terms, like Netflix is just TV but online, or Facebook is MySpace but for your college friends. Most software companies simply don’t compete much on price or quality. To be fair, this point is a bit of a truism: categories tend to be defined by the most prolific companies, not vice-versa.

All I’ve done here is enumerate the some factors in play. The challenging part is figuring out how these different forces work together, in which situations they appear, and what properties of the market emerge from them.

Of course these points are simplified. Many enterprise software companies, for example, have strong lock-in effects on data. It’s very difficult to export your task management or CRM tooling into another system. Perhaps digging more into these exceptions would make for a good followup post.

Agree or disagree with anything written here? Have something to add on? Shoot me an email (will@thisdomain) or tweet (@whrobbins)!

Senior: My Summer at Umbrella

As I’m sadly nearing the end of my time at Umbrella and looking forward to my senior year of college, I wanted to write down some of the interesting things I’ve learned this summer.

I originally joined with one personal mission: add as much info as possible to my understanding of what I want to do with my life. The role was for a wear-every-hat gap-filler. And I really liked the team — I could see myself fitting in well with the culture. To be honest, I wasn’t in love with the problem space at the time, but it was new and mildly intriguing.

As the summer went on, however, I ended up becoming rather interested in senior living. Growing old creates problems in basically every part of your life, and most modern tech-enabled companies aren’t designed to work with seniors. I’m increasingly convinced that there are a truly gigantic number of opportunities and interesting problems out there.

Starting with some things about seniors in general:

The financial calculus is harder. Many seniors live on fixed income and have a lot of uncertainty surrounding how long they’ll live and whether or not they’ll have unexpected medical costs. This makes seniors reluctant to spend on anything that’s not necessary.

Word of mouth carries lots of weight. Seniors are very deliberate in evaluating their experience as customers. It can take weeks for seniors to get comfortable enough with a product to recommend it to friends — and they often have a smaller set of people they talk to. These dampen viral coefficients for a nascent single-player company like ours. It’s unknown how strong word of mouth will be for a more advanced senior-focused tech product. On the flip side, careful recommendations often have a higher impact and make friends likely to convert.

Trust and security are huge concerns. A disturbing number of Umbrella’s members have been previously scammed by unethical contractors or even had their bank accounts emptied by fraudsters. Some sales leads aren’t comfortable giving us a credit card number or basic personal info, and for good reason given the level of abuse targeting seniors. Figuring this out across marketing, sales, and product has been an interesting challenge.

Serious attention to detail. There were multiple occasions where I’d talk to a potential customer and say something like “we charge $29/month,” then after talking for another few minutes, I’d reiterate that “Umbrella only costs $30 bucks a month.” Then I’d inevitably be interrupted: “wait, I thought you said $29, not $30?” Inconsistent information over the phone and sloppy landing pages are a big turn-off.

It’s harder to consistently communicate. While most of us are available through text, email, or phone calls, seniors often only use one or two of the three. It can be tough to design a system that works when any given user might require that you use a specific channel.

You can’t take all tech product concepts for granted. Ideas like recurring subscriptions (what if I don’t use it this month?) and on-demand work (so who are these people just showing up?) are alien. Seniors usually don’t keep up with tech news that might familiarize them with companies like Uber or Netflix, so you can’t even rely on common context to build a brand image and value proposition.

Bad design is really really bad. You can’t hide much behavior (linking an address to a map application, for example.) Hamburger menus, swiping, and press-and-hold are out of the question. Animations are probably too confusing as well. Other complex products may be able to get away with those design elements, but not Umbrella. Building a crystal-clear interface that is acceptable to everyone on the seniority-spectrum is hard.

You earn a lot of goodwill, at least as far as tech companies go. Serving seniors is a strong mission that unifies potential partners, customers, and teammates. While still one hell of a challenge, BD/sales/recruiting gets 3% easier. And that can make a huge difference.

Your customers love you more than you thought was possible. One of the best parts of working at Umbrella has been the immediate and significant impact we’ve had on our members. Every week we’d get a call or note saying “I don’t know what I’d do without you,” or “Umbrella is a godsend.” It’s a lot easier to push through an intractable bug in your code when the users are so genuinely grateful for what you’re doing.

You work with lot of fascinating characters. Seniors don’t seem to care what anyone thinks of them. Between the hilarious age-gap moments, borderline-crazy 500+ word emails, and heartbreaking reminders of our own mortality, seniors are by far the most human group of customers I’ve ever served.


Thoughts on the space overall

There are a couple strong tailwinds that make me very bullish on senior-focused startups.

First, seniors are becoming more and more digital. While plenty of our members don’t have email addresses or cell phones, that’s changing — fast. You can easily Google around for trends and stats here. By the time a startup begins to scale up several years from its starting point, this will be much less of an issue. So now is a probably a great time to get rolling.

Second, unique senior-specific UX and sales challenges create a surprisingly solid moat. Think about everything I listed above — I suspect that X but for seniors will be a viable startup idea generator. We already see early hints of this from GoGoGrandparent, the Uber for seniors that went through YC. (They’re double dipping on the idea generators: Uber for X and X for seniors!)

I’m convinced there will be several $1bn+ companies out there focused on senior verticals. One of the running jokes at the office was that an online megachurch would be an insanely profitable business. While that’s not a business we would ever want to build, just remember how successful televangelists are. Add on the scale of the internet, modern phone/tablet distribution, and social-network-like community features and you’ve got something huge.

AARP is investing $40mm in senior-focused companies. I’ve also heard more non-specific but senior-related chatter recently from mainstream VCs. I’m looking forward to seeing how the space develops! Let me know if anything catches your eye.


Shoutout to Sam, Lindsay, Emma, Erin, Samra, Caroline, Megan, Manuela, and David for a summer that went by way too fast! I’ll miss you all ❤