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.

Nth Layer Investing

When David Ulevitch tweeted a screenshot of this post by Lead Edge Capital, I had a laugh. It’s quite true that companies report the best metrics they can conjure.

When taken from the perspective of an investor in public companies, this commentary is understandable. We all remember constructs like WeWork’s Community Adjusted EBITDA.

From the perspective of an early-stage entrepreneur, however, there are many unknowns. Good cash profits may be an end-state for the business, but other leading indicators must be used to understand and communicate the reality of the business and its future.

Lead Edge describes metrics well, though a business goes beyond its metrics. Imagine a list of layers from 1 (the most lagging indicator, cash profit) to n (the most leading indicator of all, the vision and initiative of the founder). It may look roughly like:

1. Cash profit
2. Revenue
3. Rate of revenue change over time
4. Product development that will secure future revenue
5. Velocity of product development that will lead to greater capability
6. Quality of team that will execute that product velocity
7. Ability of team to hire great teammates
… and so on …
n. Vision and initiative of the founder

It’s crucial to remember that this is an information problem. Just because an iconic company like Amazon once had no profit (and at the very beginning, no revenue or product!) does not mean that it won’t amount to something great in the end.

For an outsider looking in, the more layers deep they can accurately observe, the more accurate their predictions about future outcomes will become. In theory, with a proper understanding of each layer 1→n, investors, hires, and founders alike could see the future, if not for unexpected external events such as changes to a market, technological changes, or economic factors.

A fun exercise may be assigning a “lag time” to each layer. For a generic startup, perhaps cash profit is a decade lagging from action taken today. It takes a while for team quality to become product quality, to become sales quality, and so on. Perhaps revenue is a year or two lagging from product development.

The investment process of one firm that focuses on hypothetical layers 1-5 would have a strictly longer “lag time” having their assessments (in)validated than a firm that figures out how to properly see and analyze layers 6-7 as well, as long as both firms are on par in terms of decision-making capability.

Many of the entrepreneurs I work with are well aware of this reality. The best investors will offer the most attractive terms when they can look towards the nth layer and see the core of the organism that is a business for what it really is. Likewise, the best hires will want to join something special as early as possible if they can pull back the curtain and see what’s about to happen. Deeper understanding of each layer leads to efficient markets, and helps everybody while hurting nobody.

In the long run, entrepreneurs benefit from the robust nature of “nth layer conviction.” If an investor backs a startup because of its growth metrics, the investor may lose conviction if circumstances change. But if the conviction comes from the nth layer, the founders themselves, support networks will tend to have more enduring support through the inevitable bumps in the road.

The responsibility to strive towards “nth layer thought” is shouldered by everyone. Entrepreneurs should take great pain to communicate the entire stack to those who can hear and synthesize the message.

Given a stack that’s well-communicated by entrepreneurs, investors need to act on information that’s more qualitative than quantitative in nature. This comes in a number of forms, for example:

  • Aligning decision-making process — ultimately one investor on a team is likely to have 10x the visibility into the deeper layers of a company. Giving that one investor leeway to act on that information is critical, since the qualitative data is harder to communicate than the surface level quantitative metrics. For example: Benchmark famously has the partnership vote on deals, but the lead partner still has the authority to invest even if the rest of the partnership does not reach a majority Yes vote. The partners trust each other to know the truth and act on it when there’s an intangible spark that’s hard for newly-introduced colleagues to understand.
  • Spending time with teams more than data rooms — there is certainly room for innovation in the “relationship business.” The venture world tends to rely on rotating guests of dinner guests to mix and match potential future founders. But observing founders beyond formal events and pitch meetings is an art that has yet to be mastered.
  • Building deep context long before funding events — at Contrary, we take great pain to build deep personal relationships with founders years before they start companies. We’ve even made large growth investments in late-stage unicorns having known the founder since they were an undergraduate student. Building the formal systems to engage with founders, executive teams, and early hires personally requires a degree of preparation and longevity to be successful, but when it works, the information advantage is profound.

Luckily there is strong financial incentive for an investor to gain an edge. We will never go back to the era where truly exceptional companies would receive a single term-sheet in the early days. The venture ecosystem has significantly professionalized (and capitalized) itself over the past decade. Modern investors need to either 1) generate superior relationships and power to win deals that are known to be high-quality by others, or 2) generate the information advantage to build higher conviction earlier. Failing to do one of these will lose deals, and lose money.

What better way to win than by being a Nth Layer Investor rather than a 1st Layer Investor?

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.

Creating Product Stickiness

How should we think about competitive moats for companies like Spotify that aren’t quite marketplaces yet still have data and multiple parties involved? Is defensibility (or lack thereof) inherent to the market structure, or can you create stickiness out of thin air? Is there another category of defensive strategy yet to be fully explored?

For Spotify, the traditional network effects model doesn’t quite work as it would for Facebook or Twitch. Sure, you have consumers on one end that incentivize labels to add more content to the platform. You can also add original content, or build things like playlists that are mildly high-friction to transfer.

But labels can raise prices until they capture most of the value. Competing platforms can offer the same content at a different price. And switching-cost fundamentally doesn’t get stronger with scale. In fact, product friction often incurs a tradeoff between usability and stickiness.

Spotify ultimately leans heavily on product design, branding, loyalty, and other forms of “weak moats”.

But I think there’s a whole set of stickiness strategies that companies big and small can exploit to raise switching costs and slowly eat more and more of the user stack.

Example 1: “blank slating”

We’ll stay with music streaming products for now.

The data you generate when playing music can only be so useful: Spotify can personalize playlists to fit your tastes, but Apple Music can easily do so too, especially if you import your playlists. Both companies have large data sets to make recommendation engines good. As much as you think you’re a musical snowflake, most people’s tastes aren’t actually that unique.

But what Apple Music will never have is the list of songs you have saved but have not listened to in a while. So Spotify can always hand you a radio station full of “favorites you haven’t listened to since last year” that perpetually surfaces novel yet nostalgic content.

This relies on data that cannot carry over between competing products. It’s a tree rooted within the bounds of the walled garden. If you switch services, that entire set of data insights becomes a blank slate.

Example 2: “stored data”

Literally every talking point I’ve heard about Superhuman relates to 1) speed, 2) keyboard shortcuts, or 3) the “luxury software” effect.

You may assume that I’m another VC Superhuman evangelist, but I’m surprisingly lukewarm user. Many apps like Spark have plenty of keyboard shortcuts and add-on features. I find myself spamming the ESC key more than I should, and I really wish I could have all accounts in one view like I can with other apps.

But this post isn’t about the pros and cons of different email clients. It’s about untangling which features actually contribute to a business model that’s unbeatable in the long-run.

The most salient elements of Superhuman’s moat are the ease of use, favorable aesthetic/UI, counterparty profile panel, and handy features like read receipts, reminders, and send later.

Unfortunately speed, aesthetic, and simple features are not very defensible. Spark is already ahead on half these dimensions, plus they have team functionality.

What is defensible, though, is the long list of emails you’d like to be reminded about and the emails you currently have queued to send at a future date. Followups and executing planned outbound are both very important.

“Stored data” must be painstakingly carried over to another service. Or slowly transitioned over time. In either case, the user just doesn’t want to make a switch.

If I were on the product team at Superhuman, I’d be doing everything I could to make Reminders and Send Later first-class citizens. Both in the typical email use-case, but also in the “Note-to-self On Steroids” use case.

The beauty of this stickiness-driver is that it’s pulled out of thin air. There’s no trade-off to be made.

(At this point you might be thinking “wait, what about the exclusivity? The invite system! The elusive prestige of a private product!” Sure. The status/signaling element is valuable right now. Just as it was for Facebook when FB only existed at Ivy League schools. But that sort of moat is more of a growth-hack than a form of long-term defensibility. Nobody thinks FB is elite or exclusive anymore. It’s the opposite.)

Lessons learned

I’ve had a tough time coming up with original examples above. At the concept’s core: there are sometimes small niches where you can increase product stickiness without making a friction/usability tradeoff. That’s what contributes to defensibility where there is otherwise not much.

Facebook might inherently be a network-effects driven social product. Spotify and Superhuman have to work a little bit for it. But it can be built!

Whether it’s the “blank slating” approach, the “stored data” approach, or something else entirely, your job as a founder or PM is to find subtle ways to create product-driven stickiness out of thin air.

Reinventing the Wheel

Every once in a while, Silicon Valley is ridiculed for reinventing the wheel. You’d think there are only so many wheels left to reinvent, but apparently we’re still in the first-bite phase of software eating the world.

There are plenty of examples. Dropbox famously reinvented FTP servers. Lyft reinvented public transportation. Kindle reinvented libraries. Soylent reinvented, well… Soylent. People-free this time.

Why do pessimists think this way? Of course there’s general ignorance. But the pattern of criticism seems too specific to be random. It’s also lazy to assume that Valley outsiders “just don’t get it.”

So what subtleties are lie behind the curtain? There are a handful of relevant things I can imagine:

  • Aversion to changing norms
  • Dispersion of existing power hierarchies
  • Setting precedent, e.g. about public vs private services
  • Cost of switching platforms/infrastructure

As I’ll mention later, each of these can be reverse-engineered to find ways to solve problems and capture value. But first, let’s walk through some examples of these ulterior motives playing out.

Lambda School is the most recent and striking example of such criticisms. Check out this hit piece published by none other than The Guardian.

It’s so interesting because there’s some grain of truth to each gripe, even if it’s not coherently argued by the journalists covering it.

On changing norms: LS is guilty of the same crime as the Thiel Fellowship. Normalizing alternative career paths and dropping out is scary to a lot of people. Although it can be a positive signal in the Valley, it’s rightfully a strong anti-signal elsewhere.

On dispersion of power hierarchies: not only are universities and modern hiring pipelines vulnerable to LS-style disruption, literally everyone with a college degree stands to lose out too because such credentials are largely (but not entirely) zero sum. Read Bryan Caplan’s excellent book The Case Against Education for more on this. Even if its title is gratuitously provocative.

On setting precedent: LS, much like Airbnb and Lyft, is a lightning rod for statist vs individualist conflict. It’s the charter schools debate playing out at the college level. You’d be reasonable to assume that LS-style thinking will seep into many parts of society, and that could be very good or very bad depending on your viewpoint. For one of those groups, it’s best to explain this away as “nothing new here — ISAs already exists in state-run form in Germany.”

On switching cost: If you’re enrolled in college or sourcing talent based on university talent or credentials, your life simply gets harder. Either you switch to LS which incurs sunk-cost and hassle, or you don’t and you might be on a suboptimal path.

My point is that both operators and investors should think more deeply about the “reinventing the wheel” trope. It’s a hint about the structure of underlying incentives.

I don’t think any of this is intrinsically good or bad. I do however think it’s perfectly natural.

There are a couple different lessons you could draw from this post. On the surface level, visceral gut-reactions are probably more rational than you’d otherwise think. That’s important to consider when building and communicating a product.

Taking it one step further, you can follow these patterns to find wheels actually worth reinventing (meaningful startup ideas). This framework can help you filter through such ideas. Otherwise you’d just waste your time tearing down Chesterton’s fence everywhere you look.

Addendum: The Pessimists Archive is an excellent podcast that dovetails well with these themes.

Analyzing Venture Opportunities Part 2: Thinking About People

This is a followup post. See Part 1: the Product and Market!

“Founders matter most” is one of the most prolific philosophies in early stage VC. Most investors agree that the best companies are started by incredible people with ideas that aren’t so exciting at first glance.

Airbnb is one of the canonical examples here. Notice that most rejections cited the product or market. It’s possible that Team was the issue and some investors lied to not burn bridges, but I don’t think that’s likely given PG’s recommendations and the team’s storytelling ability.

So how should we think about early-stage teams when the product or market haven’t proved themselves yet? Here are a few things I look for. You can use this as a scorecard or checklist:

Deliberate learning. How does a founder take feedback? Are they coachable? Will they adjust to feedback in real-time? Best of all, do they aggressively seek out feedback when none is offered?

Recruiting ability. There are many ways that you can build a “recruiting unique value prop.” People like Saku are smart enough that I’d work for them to access novel, interesting ideas at the office. Other founders (think Steve Jobs) sell a magnetic vision. Some have a track record or network that makes success seem certain. Many strategies work. It’s a question of whether or not the founder is exceptional enough at whatever strategy fits them and the business.

Urgency/GSD/raw energy. Smart people can fall into the trap of being too intellectual rather than action-driven. Making the right decisions for the right reasons is obviously important, but at the end of the day, founders need to push hard and go fast for years.

Being very blunt or forward. It’s always a “no” when you don’t ask. Blunt and forward personalities tend to get straight to the core issue, put more shots on goal, and find common ground more quickly in my experience.

Making use of tools. Does the founder use software or people to be relentlessly resourceful? Have they hacked anything to their advantage? Do they use a relationship manager to be amazing at followups? Do they send over a link to instead of a 40 character long Google Drive link? Have they automated energy-draining activities by scraping websites for sales leads? Reinventing the wheel indicates many many bad things like inflexibility and lack of prioritization. Founders should focus on their comparative advantage.

Being good (but not necessarily great) at everything. Hiring for “spikiness” is common advice. I think looking for what’s exceptional about someone and evaluating them on that dimension generally works well assuming they meet the minimum hustle/culture bar. But founders quickly become “editors” more so than “writers” as their companies scale. A strong intuition across all fields helps identify talent and align the company’s various specialists. This is partially why having a complementary cofounder is so important. (To be clear: founders should still be spiky, but those spikes should ideally be additive rather than trade-offs with other traits.)

Founder-market fit. People aren’t blank slates. What experience and personality traits are best for this business and team? Marketplaces may need hustlers, for example. Does the founder understand this and consider it in team-building plans? One big challenge is determining whether this company is the right fit or whether the founder is just a hammer that sees a nail. (E.g. I know the music space really well and I like math so I’m gonna start a music analytics company. Is this good, or is it just the random-chance combo of the things they happen to know best?

Are the cofounders ready to marry each other? This was alluded to above, but team dynamics matter a lot. Is there a complementarity? What happens if they get a divorce? A surprising number of companies have done very well despite cofounder relationships ending.

Do I want to partner with this person for 10 years? Investors (hopefully) spend a lot of time working with founders as a sounding board, advice-giver, and connector. If you’d have a hard time working with a founder for whatever reason, it’s probably not worth making the commitment.

What did I forget to mention? What metrics or litmus tests do you use to think about founding teams? Say hi! Email/Twitter on homepage.

Why Ownership Graphs Matter

This is a post about the surprising absence of policy in politics and the complexity of seemingly straightforward policy.

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.

Imagine 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! There are certainly more unique and interesting ideas related to ownership graphs.