Posts from 2016

What Did And Did Not Happen In 2016

As has become my practice, I will end the year (today) looking back and start the year (tomorrow) looking forward.

As a starting point for looking back on 2016, we can start with my What Is Going To Happen In 2016 post from Jan 1st 2016.

Easy to build content (apps) on a cheap widespread hardware platform (smartphones) beat out sophisticated and high resolution content on purpose built expensive hardware (content on VR headsets). We re-learned an old lesson: PC v. mainframe and Mac; Internet v. ISO; VHS v. Betamax; and Android v. iPhone.

And Fitbit proved that the main thing people want to do with a computer on their wrist is help them stay fit. And yet Fitbit ended the year with its stock near its all time low. Pebble sold itself in a distressed transaction to Fitbit. And Apple’s Watch has not gone mainstream two versions into its roadmap.

  • I thought one of the big four (Apple, Google, Facebook, Amazon) would falter in 2016. All produced positive stock performance in 2016. None appear to have faltered in a huge way in 2016. But Apple certainly seems wobbly. They can’t make laptops that anyone wants to use anymore. It’s no longer a certainty that everyone is going to get a new iPhone when the new one ships. The iPad is a declining product. The watch is a mainstream flop. And Microsoft is making better computers than Apple (and maybe operating systems too) these days. You can’t make that kind of critique of Google, Amazon, or Facebook, who all had great years in my book.
  • I predicted the FAA regulations would be a boon to the commercial drone industry. They have been.
  • I predicted publishing inside of Facebook was going to go badly for some high profile publishers in 2016. That does not appear to have been the case. But the ugly downside of Facebook as a publishing platform revealed itself in the form of a fake news crisis that may (or may not) have impacted the Presidential election.
  • Instead of spinning out HBO into a direct Netflix competitor, Time Warner sold itself to AT&T. This allows AT&T to join Comcast and Verizon in the “carriers becoming content companies” club. It seems that the executives who run these large carriers believe it is better to use their massive profits in the carrier business to move up the stack into content instead of continuing to invest in their communications infrastructure. It makes me want to invest in communications infrastructure honestly.
  • Bitcoin found no killer app in 2016, but did find itself the darling of the trader/speculator crowd, ending the year on a killer run and almost breaking the $1000 USD/BTC level. Maybe Bitcoin’s killer app is its value and/or store of value. That would make it the digital equivalent of gold and the likely reserve currency of the digital asset space. And I think that is what has happened with Bitcoin. And there is nothing wrong with that.
  • Slack had a good year in 2016, solidifying its position as the leading communications tool for enterprises (other than email of course). It did have some growing pains as there was a fair bit of executive turmoil. But I think Slack is here to stay and I think they can withstand the growing competition coming from Microsoft’s Teams product and others.
  • I was right that Donald Trump would get the Republican nomination and that the tech sector (with the exception of Peter Thiel and a few other liked minded people) would line up against him. It did not matter. He won the Presidency without the support of the tech sector, but by using its tools (Twitter and Facebook primarily) brilliantly.
  • I predicted “markdown mania” would hit the tech sector hard and employees would start getting cold feet on startups as they saw the value of their options going down. None of this really happened in a big way in 2016. There was some of that and employees are certainly more attuned to how they can get hurt in a down round or recap, but the tech sector has also used a lot of techniques, including repricing options, reloading option plans, and moving to RSUs, to mitigate this. The truth is that startups, venture capital, and tech growth companies had a pretty good year in 2016 all things considered.

So that’s the rundown on my 2016 predictions. I would give myself about a 50% hit rate. Which is not great but not horrible and about the same as I did last year.

Some other things that happened in 2016 that are important and worth talking about are:

  • The era of cyberwars are upon us. Maybe we have been fighting them silently for years. But we are not fighting them silently any more. We are fighting them out in the open. I suspect there is a lot that the public still doesn’t know about what is actually going on in this area. We know what Russia has done in the Presidential election and since then. But what has the US been doing to Russia? I would assume the same and maybe more. If your enemy has the keys to your castle, you had better have the keys to their castle. And as good as the Russians are at hacking into systems, the US has some great hackers too. I am very sure about that.  And so do the Chinese, the Israelis, the Indians, the British, the Germans, the French, the Japanese, etc, etc.  This feels a bit like the Nuclear era redux. Mutually assured destruction is a deterrent as long as both sides have the same tools.
  • The tech sector is no longer the belle of the ball. It has, on one hand become extremely powerful with monopolies, duopolies, or nearly so in search, social media, ecommerce, online advertising, and mobile operating systems. And it has, on the other hand, proven that it is susceptible to the very kinds of bad behavior that every other large industry is capable of. And we now have an incoming President who doesn’t share the love of the tech sector that our outgoing President showed. It brings to mind that scene in 48 Hours where Eddie Murphy throws the shot glass through the mirror and explains to the rednecks that there is a new sheriff in town. But this time, the tech sector are the rednecks.
  • Google and Facebook now control ~75% of the online advertising market and almost all of its growth in 2016:

  • Artificial Intelligence has inserted itself into our every day lives. Whether its a home speaker system that we can talk to, or a social network that already knows what we are about to go out and purchase, or a car that can park itself and change lanes on the highway automatically, we are seeing AI take over tasks that we used to have to do ourselves. We are in the age of AI. It is not something that is coming. It is here. It may have arrived in 2014, or 2015, but if you ask me, I would put 2016 as the year it had its debut in mainstream life. It is exciting and it is scary. It begs all sorts of questions about where we are all going in the next thirty to fifty years. If you are in your twenties, AI will define your lifetime.

So that’s my rundown on 2016. I wish everyone a happy and healthy new year and we will talk about the future, not the past, tomorrow.

If you are in need of a New Year’s Resolution, I suggest moving to super secure passwords and some sort of tool to manage them for you, using two factor authentication whenever and wherever possible, encrypt as much of your online activities as you reasonably can, and not saying or doing anything online that you would not do in public, because that is where you are doing it.

Happy New Year!

Blockchain In 2016

Nick Tomaino has started a new publication called The Control to provide “high brow” (my word not his) reporting on the Blockchain sector. If Coindesk is the TechCrunch of the blockchain sector, Nick wants The Control to be The Economist of the sector. Here is how Nick describes his ambitions for The Control.

The Control will be a largely free site so that the content can be consumed broadly on Reddit (very important for the blockchain sector), Twitter, and Facebook. But you can become a member of The Control. And you can even become a patron of The Control for $5/month. I wish that I could support The Control for 0.005BTC a month instead of $5/month. So does Nick. Maybe that will happen someday but using Medium as his publishing platform limits what Nick can do in that regard.

Anyway, all of this is context for my recommendation of Nick’s 2016 Blockchain In Review. I generally agree with all of it.

Here are the three big takeaways for the blockchain sector in 2016:

  1. Bitcoin is becoming like digital gold, or the reserve currency of the blockchain sector. We had a gold standard for a long time while confidence in fiat currency developed so this relationship makes sense to me. The conservatism of the Bitcoin core developers (good or bad depending on where your views lie) has caused much of the blockchain sector innovation to move to other Blockchains. But this conservatism builds confidence and that was rewarded by a return of the BTC/USD to the highs last seen three years ago.
  2. Ethereum had a tough year in 2016 but has emerged as the platform of choice for the development and deployment of blockchain tokens. If there is a second blockchain to bet on, I think it is Ethereum.
  3. There are some new blockchains emerging that appear interesting like Zcash and Steem. There are plenty of others that are vying to become interesting. Many/most of these blockchains are funding the development of the technology using tokens and crowdsales. This activity became quite common in 2016.

2017 is looking to be a quite interesting year for new blockchains, tokens, and blockchain based applications. I expect we will see a lot of all of that in 2017. I am most excited to see if proof of stake emerges as a viable alternative to proof of work in 2017. That would be huge for the sector.

Here are a few forward looking posts for Blockchain 2017:

From William Mougayar on Coindesk

From Andrew Keys of Consensys

I will write more about this in my twin posts at year end on looking back and looking forward. They are coming over the weekend.

Data Wins

Whenever people ask me which company I think will win the self driving car race, I say Tesla.

And the reason is that they have more data.

And when it comes to training machines to do what humans do, more data is better than more software engineers.

Bloomberg has a good post on that today.


One of the issues in all of the concerns about “fake news” is the way headlines are used on the Internet. Newspapers and magazines certainly took the construction of headlines into account to drive readers into the stories. But on the Internet, headlines have become that and more. They are the links themselves that fly around the Internet and “convert” someone into coming to your site and reading a story. They are “clickbait.” If we want to address the veracity and authenticity of content on the Internet, we might want to start with headlines.

I’ve had my issues with headlines for years. Many years ago, I allowed a number of publications to repost content I write here at AVC on their online publications. The publication that does that most frequently with my content is Business Insider. You can see the hundreds of posts that BI has republished on my author page at Business Insider. When they started doing this maybe seven or eight years ago, I would notice that they would leave my post intact, verbatim, but rewrite the headline. It would drive me crazy because I view the headline as an integral part of my post. I think about the words I use to title my posts. So I would send them angry emails and most of the time they would change it back. But it was a lesson in the difference between a headline that I liked and a headline that would drive clicks.

I also have seen hundreds of stories written about me, USV, and our portfolio companies that have sensational and often inaccurate headlines followed by stories that are essentially correct and well reported. It drives me nuts but I don’t often do much about it.

It makes me think that someone, or some company, or some open source community ought to build software that parses headlines and the stories that follow and rate them for how well the headline represents the article. That “headline veracity ranking” could then be offered to anyone who presents headlines to readers. That would be social media like Facebook, Twitter, Reddit, etc. That would be email applications and browsers. That would be search engines. Etc, etc, etc.

It would be nice to see some competition in this sector so that one company doesn’t become the arbiter of what is an accurate headline and what is not. That doesn’t sound like a good outcome. But if this is done via open source, or is community powered in some way, this could be a very helpful tool in getting publishers to behave and represent their stories accurately.

And that would be a wonderful thing for the Internet.

New Economics

I am tired of the classic left/right perspective on society, policy, and politics. I realize that markets are an incredible tool to allocate resources efficiently. And I also realize that markets are subject to failure and we need to protect our society from these market failures. I am not a purist on either side of this debate and I find the hard core advocates on the far left and the far right impossible to take. I believe orthodoxy is one of the worst human traits.

So I enjoyed reading this post on “new economics” and I particularly like this table that shows the difference between traditional economic thinking and new economic thinking:

The post goes on to explore how these new economics thinking will eventually impact politics, policy, and society at large.

One particular example reminds me of our work at USV on “Regulation 2.0”:

First, rather than predict we should experiment. Policymaking often starts with an engineering perspective – there is a problem and government should fix it. For example, we need to get student mathematics test scores up, we need to reduce traffic congestion, or we need to prevent financial fraud. Policy wonks design some rational solution, it goes through the political meat grinder, whatever emerges is implemented (often poorly), unintended consequences occur, and then – whether it works or not – it gets locked in for a long time. An alternative approach is to create a portfolio of small-scale experiments trying a variety of solutions, see which ones work, scale-up the ones that are working, and eliminate the ones that are not. Such an evolutionary approach recognises the complexity of social-economic systems, the difficulty of predicting what solutions will work in advance and difficulties in real-world implementation. Failures then happen on a small scale and become opportunities to learn rather than hard to reverse policy disasters. It won’t eliminate the distortions of politics. But the current process forces politicians to choose from competing forecasts about what will and won’t work put forward by competing interest groups – since it is hard to judge which forecast is right it is not surprising they simply choose the more powerful interest group. An evolutionary approach at least gives them an option of choosing what has been shown to actually work.

I also like this bit about the tolerance for failure:

A major challenge for these more adaptive approaches to policy is the political difficulty of failure. Learning from a portfolio of experiments necessitates that some experiments will fail. Evolution is a highly innovative, but inherently wasteful process – many options are often tried before the right one is discovered. Yet politicians are held to an impossibly high standard, where any failure, large or small, can be used to call into question their entire record.

I don’t think the way we do things in startup land should be a model for how everything should work, but there is a lot to be learned from the way the tech sector works. Innovating, trying new things, measuring the impacts of these new things, and evolving leads to forward progress. And when something fails, we accept is as a lesson learned, not something to be embarrassed about (or fired for).

If the worlds of economics and politics are moving in our direction, I am very pleased and optimistic about that.

Happy Hanukkah and Merry Christmas

I’m not writing today and tomorrow as we are celebrating the year end holidays with family. Happy Hanukkah and Merry Christmas to all of you.

Fixing The Internet

Walter Isaacson wrote a blog post last week suggesting that the Internet is broken and outlining how he would fix it. I think that most of his suggestions are currently being built using blockchain technologies. Here is his list (in italics) and my reactions to it.

1) Create a system that enables content producers to negotiate with aggregators and search engines to get a royalty whenever their content is used, like ASCAP has negotiated for public performances and radio airings of its members’ works.

While not “a system to negotiate”, services like our portfolio company Mediachain‘s platform will provide much of the underlying infrastructure for this to happen.

2) Embed a simple digital wallet and currency for quick and easy small payments for songs, blogs, articles, and whatever other digital content is for sale.


3) Encode emails with an authenticated return or originating address.

While not blockchain based, standards like DKIM and SPF in the email sector provide some of this today. I am also excited about a blockchain based identity later like the one being built by our portfolio company Blockstack.

4) Enforce critical properties and security at the lowest levels of the system possible, such as in the hardware or in the programming language, instead of leaving it to programmers to incorporate security into every line of code they write.

Blockchain based applications can use the underlying security of the blockchain (using sophisticated cryptography) to achieve higher levels of security in their applications.

5) Build chips and machines that update the notion of an internet packet. For those who want, their packets could be encoded or tagged with metadata that describe what they contain and give the rules for how it can be used.

I am not sure you would need a chip or a machine to do this.

The bottom line for me is that we don’t need to build a new Internet to fix the issues Walter articulates in his blog post. We just need to continue to build new capabilities on top of our existing Internet. And, right now, the biggest potential contributor to those new capabilities is the blockchain.

What Has Gotten Into Bitcoin?

Bitcoin is up 16% this month:

And it is up 86% YTD 2016:

Obviously there is more demand for the leading digital currency than there is supply of it right now.

My guess is this is speculation driven (the more it goes up the more traders want to bet on it) and does not represent any fundamental change in the usage of Bitcoin. The USD transaction chart doesn’t show any massive increase in transaction volume this year.

But whatever the cause, Bitcoin is on a tear going into the end of 2016. Seven years in, there are no signs of this slowing down.

Going Back In Time

I woke up to an awesome holiday gift today. Sitting in my inbox was an email from Greg Galant. Greg had read about the missing Positively 10th Street podcasts from 2005-2007 here on AVC a few weeks ago. So he dug up an old hard drive and found five episodes in his iTunes folder. And he sent them to me.

I just listened to the first episode of the bunch which we did with our kids right after they came back from eight weeks at summer camp in August 2005. It was like going back in time. USV had just gotten going, Twitter didn’t exist but that team was working on a podcasting service called Odeo.

Podcasting has come a long way since then and so has our family. But like pulling out an old family photo album, the ability to go back and hang out with our family as it was eleven years ago is pretty fantastic. So thanks Greg.

And if you happen to have any files in your iTunes folder with a name like this [8-21-05 Positively 10th Street.mp3], please send them my way. I have renewed hope that I may be able to collect all of them eventually.