Posts from policy

The “Losing Jobs To China” Discussion

I am bothered by the ongoing discussion about how the US has allowed China (and other lower cost countries) take our manufacturing jobs. That is true, of course. But it does not address the larger context which is that manufacturing is becoming more and more automated and many of these jobs will not exist at all anywhere in a few more decades.

We are now well into a transition from an industrial economy to an information economy. It seems to me that part of that transition was the move of industrial jobs to lower and lower cost regions in an ongoing march to reduce costs. But that march may end with massive automation and very little labor in the manufacturing process. That means that these low cost regions that “stole our jobs” will also lose these jobs eventually.

The US and a number of other countries around the world are building new information based economies. That is the long term winning strategy.

So while we can critique our leaders (business and political) for giving up on the manufacturing sector a bit too early, I think the US has largely played this game correctly and will be much better off than the parts of the world that have taken the low cost manufacturing jobs from us.

But we don’t hear any of our political leaders explaining this. I wish they would.

Conversation with General Keith Alexander

I follow Emily Chang’s Studio 1.0 podcast on SoundCloud. It’s very good.

She recently sat down with Former NSA Director General Keith Alexander to discuss privacy vs. security and why there needs to be more collaboration between Washington and Silicon Valley in the on-going encryption debate.

I enjoyed the conversation and you may too.

Privacy Absolutism

The Gotham Gal has been pushing me to write this post for a few weeks. Privately with family, friends, and business colleagues, I have been saying that I believe the tech industry’s position on end to end encryption, locking everything down, securing our devices, and making it so only we can unlock them is the wrong path. I touched on this issue last month but that was more of a “what do you all think” kind of post.

I very much like what the President said in Austin late last week. To quote:

Before smartphones were invented, and to this day, if there is probable cause to think that you have abducted a child or you are engaging in a terrorist plot or you are guilty of some serious crime, law enforcement can appear at your doorstep and say we have a warrant to search your home, and they can go into your bedroom and rifle through your underwear to see if there’s any evidence of wrongdoing,” he said. “And we agree on that, because we recognize that just like all of our other rights … that there are going to be some constraints we impose so we are safe, secure and can live in a civilized society.

I do not think that because we now have the technology to lock things down (strong encryption) and because the industry that develops and maintains all of this technology has a strong libertarian bent that we should just abandon the framework that has worked in our society for hundreds of years. If society thinks someone is doing something wrong, and if law enforcement can get a warrant, there should be a mechanism to get access to our devices.

I would love to see the tech sector work to figure out a smart way to address this issue. My partner Albert has suggested an approach on his blog. There are some interesting approaches that are already being used in cold storage of bitcoin that could be applied to this situation.

But my meta point here is that I am saddened by the tech sector’s absolutist approach to this issue. The more interesting and fruitful approach would be to think about the most elegant solutions and build them. Because, as the President warned in Austin last week,

I am confident this is something we can solve, but we’re going to need the tech community, software designers, people who care deeply about this stuff, to help us solve it. If everybody goes to their respective corners … what you’ll find is that after something really bad happens, the politics of this will swing, and it will become sloppy and rushed and it will go through Congress in ways that have not been thought through, and then you really will have dangers to our civil liberties.

End To End Encryption

I’ve been trying to figure out what I think about a bunch of things that keep cropping up. Yesterday it was ad blocking. Today it is end to end encryption. This community is really helpful to me. It is like having another set of colleagues to bounce ideas off of. So thank you for that.

Tim Cook wrote a public letter to Apple’s customers yesterday explaining his position on the San Bernadino shooter case.

He correctly states that “This moment calls for public discussion” and so hopefully that’s what we are going to do. I’d like to see our Presidential candidates start talking more about this too. It is one of the single most important issues that our society faces in the coming years.

He goes on to say that:

For many years, we have used encryption to protect our customers’ personal data because we believe it’s the only way to keep their information safe. We have even put that data out of our own reach, because we believe the contents of your iPhone are none of our business.

That is not an open and shut case to me.

Of course I’d like the contents of my iPhone to be out of reach of everyone other than me. But if that means the contents of the iPhones of child pornographers, sex slaverunners, narco gangsters, terrorists, and a host of other bad people are “none of our business” then that gives me pause.

I don’t think we can have it both ways. We have to choose one way or the other.

My partner Albert has written publicly on this issue and he comes out in favor of being public with our data and not going down a crypto “rat hole”. Here are some of his relevant posts on the topic:

Sept 2013

Jan 2014

Aug 2015

But many of the other folks at USV feel very differently and are more supportive of an end to end encryption world.

I lean in Albert’s direction. But I also see logic in the arguments that Tim Cook makes against opening up a back door to the iPhone.

So I am struggling with this issue this morning, and I imagine many others are too.

So let’s talk about it. What is your take on end to end encryption?

Network Equity

Our portfolio company LaRuche is leading an effort in France to allow platforms to share the equity in their businesses to the broader network of participants on their platform. As more and more businesses leverage the power of networks to create economic value, there is a question of whether the network participants should share in the value they help create.

Reddit has expressed a desire to share equity in Reddit with its community and went as far to announce that intention when it raised capital in the fall of 2014. The last I heard, Reddit had put those plans on hold in anticipation of more regulatory clarity around this issue.

Regulatory clarity is what is lacking, both in the US and in other countries, and France is no exception. Marc-David Choukroun, co-founder and CEO of LaRuche, wrote a tribune in Les Echos, the leading financial newspaper in France, explaining his views on the issue. I’ve pasted a translation of it here:

Long seen as the future, the sharing economy is now accused of being responsible for all society’s ills. In response, some experts on the new economy have suggested that platforms should be transformed into cooperatives. But is that really such a good idea?

By Marc-David Choukroun, CEO of The Food Assembly (La Ruche qui dit Oui !).

Not so long ago, the sharing economy was seen pretty much universally as a sort of magic bullet for the social and environmental crises of our times. Then, all of a sudden, the tone changed. The new economy was blamed for a whole swathe of ills, including widespread job insecurity, excessive commercialisation, and generalized fraud. The spectre of “Uberisation” is hanging over the world. The problem is that, while attempting to apply this concept to just about anything, we foolishly let the debate become polarised between the partisans of California-style capitalism and the white knights of the common good.

In the midst of this great wave of criticism, which has often been justified but sometimes excessive, the following idea is increasingly being put forward: that online platforms should be transformed into cooperatives. Give or take a few details, is the sharing economy not a form of unconscious mutualism? Indeed, leading specialists in the new economy met recently at a conference entitled “Platform Cooperativism” in New York to debate this question.

There are upsides to the idea: after all, the concern of fair sharing of value between users, freelancers and platforms themselves is a fully legitimate one. But I am rather afraid that this idea may be a bit more difficult to put in place than it seems. As things stand, the structure of a cooperative involves a lot of complications that make it ill-adapted to digital companies.

In 2011, I co-founded a collaborative platform called “La Ruche qui dit Oui !” (“The Food Assembly” in English). At the time, the concept of the “sharing economy” hadn’t yet emerged. And to be quite honest, we didn’t care much about labels. We knew that if we were to have any chance of taking the slightest bit of ground from the giants of food distribution, we could not afford to remain just one more “local food” initiative. And if, as we say in start-up jargon, we were to “scale up”, then the form of a commercial enterprise was a must.

Is there a legal structure that is perfectly suited to this sort of hybrid entity, somewhere in between a conventional business and a network? We very seriously considered the cooperative option a year ago. The conclusion was clear: as things stand, the idea doesn’t really stand up. The form of a cooperative involves a certain number of requirements that are complicated, and above all incompatible with managing an innovative start-up. Firstly, their governance is arduous and complex, while agility is needed. And secondly, the diversity of statuses and motivations in our network – some are guided by a spirit of activism, while others are simply seeking some extra income – is one of the strengths of our model. Another major difficulty is that the shares in cooperatives are fixed at their nominal value of issue, which is just inconceivable for a growing start-up(*).  

It is also difficult for cooperatives to raise funds, as the complexity of their structure tends to deter investors, yet the costs of developing and maintaining a platform are far from negligible: the largest collaborative platforms employ hundreds of developers. It is therefore best to avoid economic purism and one-size-fits-all solutions.

That does not mean that the issue of sharing value fairly should not be raised – far from it. It is evident that the success of a collaborative model relies largely on the commitment of the members of its community of contributors. It would be fair to be able to involve this new type of entrepreneurs in the company’s capital. In an economy that involves more and more freelancers, this is even a key issue.

Yet instruments to reward them already exist and simply need to be adapted, such as stock warrants for business creators (bons de souscription de parts de créateur d’entreprise, BSPCE) in France. These are stock options that can be awarded free of charge to the employees of a company. To strengthen our ties with the freelancers in our network, this instrument could simply be expanded beyond employees alone – for a new sharing of risk, a new sharing of value is needed. A cooperative system compatible with the digital economy still needs to be built, so let us start by laying the first foundations.

Marc-David Choukroun is a co-founder and the CEO of The Food Assembly (La Ruche qui dit Oui !).

(*) On this specific point, it is important to note that a number of exceptions are possible, complicating matters further still.

Like many political debates, there are many views on this issue. The purists would like to see cooperativism strengthened and applied to these platforms. Others want to regulate these platforms to protect the workers/freelancers in a union style model. But the middle ground, which seems more sensible to me, is to allow platforms an easy and elegant way to share their equity with network participants so that the broader ecosystem can share in the value these platforms are creating.

I hope the French government sees the wisdom of this approach. It would be great if governments around the world, including, of course, the US government, would evolve the legal and taxation frameworks around the sharing of equity so that network platforms can choose to share the value creation with their broader ecosystem.

Wifi In The Subways

I’ve been writing about wifi in the subways since 2005. Ten+ years later we still don’t have ubiquitous connectivity in the NYC subway system.

On Friday, NYS Governor Andrew Cuomo and Tom Prendergast, Chairman of the MTA, announced plans to accelerate the rollout of TransitWireless to all 278 underground subway stations so that all of them have wifi by the end of 2016.

They also announced the addition of USB charging ports on subways cars with 200 getting them this year and another 400 getting them next year. And they also announced plans to replace the MetroCard system with a mobile payments system that uses smartphones and smartcards.

It is great that the MTA is finally getting serious about joining the 21st century. If you live in other parts of the world or the US, or if you are a New Yorker who travels a lot and uses public transportation (like me), you know that none of this is particularly cutting edge. Many transit systems around the world have had this technology for years.

I would like to applaud Governor Cuomo’s focus on infrastructure in the past year. The investments in LaGuardia, Penn/Moynihan Station, the new rail tunnel under the Hudson, the local regional rail systems, and now, the subways, are all critical investments that NYC has needed to make, but has not made, in this century.

But if we can go back to wifi in the subways for a minute, I am pretty disappointed that we are not being more aggressive with the wifi rollout. Why stop at the subway stations? Why not put wifi in all of the tunnels throughout the city. When you ride the subways, you spend more time in the tunnels than the stations. If we want our kids to be able to do their homework and their reading (and their coding) on the way home and the way to school, wiring the stations will not be enough. We need to wire up the entire system.

And the TransitWireless system is too hard to log into all of the time. It should be wide open wifi that all phones can connect to immediately without having to log in. I never use TransitWireless because it’s a pain in the rear to log into and by the time you log in, the train has arrived and you are on your way. Why do these companies who build out supposedly free wifi systems always make them so damn hard to access. If its free, make it wide open and easy to use.

Finally, while I’m on a rant, why don’t we have a single SSID, NYCWIFI, that all of these free and open systems use. So once I connect in one place, I will automatically connect in every place. Then local shops and restaurants could also use that SSID and we’d slowly but surely build a single massive open and free wifi network around NYC.

So, while I am pleased about the accelerated rollout of TransitWireless and the other big infrastructure investments that the Governor is pushing, I don’t think we are thinking nearly big enough yet. Internet connectivity is a requirement to do business, to learn, and to stay connected to friends and family. We need way more of it in NYC and we aren’t getting it fast enough.

Video Of The Week: Albert and Peter Kafka

This isn’t actually video, it’s audio, but it’s a good one and so I’m making it the video of the week. My partner Albert and Peter Kafka talked a few weeks ago on the Recode Decode Podcast. Peter is one of my favorite tech journalists. He’s been around for a long time, he knows his stuff, and he asks hard questions and is appropriately cynical. He’s the real deal.

What Is Going To Happen In 2016

It’s easier to predict the medium to long term future. We will be able to tell our cars to take us home after a late night of new year’s partying within a decade. I sat next to a life sciences investor at a dinner a couple months ago who told me cancer will be a curable disease within the next decade. As amazing as these things sound, they are coming and soon.

But what will happen this year that we are now in? That’s a bit trickier. But I will take some shots this morning.

  1. Oculus will finally ship the Rift in 2016. Games and other VR apps for the Rift will be released. We just learned that the Touch controller won’t ship with the Rift and is delayed until later in 2016. I believe the initial commercial versions of Oculus technology will underwhelm. The technology has been so hyped and it is hard to live up to that. Games will be the strongest early use case, but not everyone is going to want to put on a headset to play a game. I think VR will only reach its true potential when they figure out how to deploy it in a more natural way.
  2. We will see a new form of wearables take off in 2016. The wrist is not the only place we might want to wear a computer on our bodies. If I had to guess, I would bet on something we wear in or on our ears.
  3. One of the big four will falter in 2016. My guess is Apple. They did not have a great year in 2015 and I’m thinking that it will get worse in 2016.
  4. The FAA regulations on the commercial drone industry will turn out to be a boon for the drone sector, legitimizing drone flights for all sorts of use cases and establishing clear rules for what is acceptable and what is not.
  5. The trend towards publishing inside of social networks (Facebook being the most popular one) will go badly for a number of high profile publishers who won’t be able to monetize as effectively inside social networks and there will be at least one high profile victim of this strategy who will go under as a result.
  6. Time Warner will spin off its HBO business to create a direct competitor to Netflix and the independent HBO will trade at a higher market cap than the entire Time Warner business did pre spinoff.
  7. Bitcoin finally finds a killer app with the emergence of Open Bazaar protocol powered zero take rate marketplaces. (note that OB1, an open bazaar powered service, is a USV portfolio company).
  8. Slack will become so pervasive inside of enterprises that spam will become a problem and third party Slack spam filters will emerge. At the same time, the Slack platform will take off and building Slack bots will become the next big thing in enterprise software.
  9. Donald Trump will be the Republican nominee and he will attack the tech sector for its support of immigrant labor. As a result the tech sector will line up behind Hillary Clinton who will be elected the first woman President.
  10. Markdown mania will hit the venture capital sector as VC firms follow Fidelity’s lead and start aggressively taking down the valuations in their portfolios. Crunchbase will start capturing this valuation data and will become a de-facto “yahoo finance” for the startup sector. Employees will realize their options are underwater and will start leaving tech startups in droves.

Some of these predictions border on the ridiculous and that is somewhat intentional. I think there is an element of truth (or at least possibility) in all of them. And I will come back to this list a year from now and review the results.

Best wishes to everyone for a happy and healthy 2016.