Posts from Politics

The Twitter Contradiction

So everyone around here knows I’m bullish on Twitter and we own a lot of stock. So take all of this in that context please.

I just don’t understand the narrative around Twitter. “It is in trouble. It isn’t growing. It’s time has come and gone. The kids all use Snapchat and Instagram.”

That last part is true, to a degree. But it isn’t as simple as that.

The presumptive Republican nominee for President of the United States has largely conducted his campaign on Twitter and in massive public appearances that feel like rock concerts. He has avoided the traditional media channels and taken his message direct to the people on Twitter. Not on Facebook. Not on Instagram. Not on Snapchat. Not on Pinterest. Not on his website or mobile app. On Twitter.

My brother in law and I watched the best basketball game of the year so far on Saturday night. Steph Curry was unreal. And he won it with a few seconds left in overtime with a bomb from something like 40 feet that everyone knew was going in. And what happened next?

This:

And this:

And this:

Steph’s opponents expressed their appreciation for what he is doing on Twitter in the moment. Not on Facebook. Not on Instagram. Not on Snapchat. Not anywhere else. And you don’t have to be on Twitter to see that. You can see that here and many other places.

Here’s the thing about Twitter. You don’t need to be logged into Twitter to see these tweets. You can see them on Twitter logged out. Or you can see them embedded in other places on web and mobile or on TV and elsewhere. You only need to be logged into Twitter to tweet.

So anyone who is focusing on the logged in monthly active user number is missing something bigger. Twitter is where people who have something to say go to say it. And right now we are witnessing Twitter being used for what is arguably the biggest thing out there. A run for President of the United States.

That is the contradiction of Twitter.

Fun Friday: The Culture Caucus Podcast

My friend John Heilemann (Bloomberg Politics, Game Change, etc) and his friend Will Leitch (Deadspin, etc) have launched a podcast called Culture Caucus. They are going to talk about sports, television, film, and culture at large and its intersection with the body politic.

The first episode has two parts. The first part is about the changes in late night television shows, who is rising and who is falling, and how politicians think about going on these shows. I sat through the taping of this part and I found it fascinating. The second part features me talking about tech and Twitter.

It’s a long podcast, almost an hour in total. Here is the first episode. I hope you enjoy it. You can follow Culture Caucus on SoundCloud here.

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.

What Happened In 2015

Last year in my What Just Happened post, I said:

the social media phase of the Internet ended

I think we can go further than that now and say that sometime in the past year or two the consumer internet/social/mobile gold rush ended.

Look  at the top 25 apps in the US:

top 25 apps

The top 6 mobile apps and 8 of the top 9 are owned by Facebook and Google. 10 of the top 12 mobile apps are owned by Apple, Facebook, and Google.

There isn’t a single “startup” on that list and the youngest company on that list is Snapchat which is now over four years old.

We are now well into a consolidation phase where the strong are getting stronger and it is harder than ever to build a large consumer user base. It is reminiscent of the late 80s/early 90s after Windows emerged as the dominant desktop environment and Microsoft started to use that dominant market position to move up the stack and take share in all of the important application categories. Apple and Google are doing that now in mobile, along with Facebook which figured out how to be as critical on your phone as your operating system.

I am certain that something will come along, like the Internet did in the mid 90s, to bust up this oligopoly (which is way better than a monopoly). But it is not yet clear what that thing is.

2015 saw some of the candidates for the next big thing underwhelm. VR is having a hard time getting out of the gates. Wearables and IoT have yet to go mainstream. Bitcoin and the Blockchain have yet to give us a killer app. AI/machine learning has great potential but also gives incumbents with large data sets (Facebook and Google) scale advantages over newcomers.

The most exciting things that have happened in tech in 2015 are happening in verticals like transportation, hospitality, education, healthcare, and maybe more than anything else, finance, where the lessons and playbooks of the consumer gold rush are being used with great effectiveness to disrupt incumbents and shake up industries.

The same is true of the enterprise which also had a great year in 2015. Slack, and Dropbox before it, shows how powerful a consumerish approach to the enterprise can be. But there aren’t many broad horizontal plays in the enterprise and verticals seems to be where most of the action was in 2015.

I’m hopeful that 2015 will also go down as the year we buried the Unicorn. The whole notion that getting a billion dollar price tag on your company was something necessary to matter, to be able to recruit, to be able to get press, etc, etc, is worshiping a false god. And we all know what happens to those who do that.

As I look back over 2014 and 2015, I feel like these two years were an inflection point, where the underlying fundamentals of opportunity in tech slowed down but the capital rushing to get invested in tech did not. That resulted in the Unicorn phase, which if it indeed is over, will be followed by an unwinding phase where the capital flows will need to line up more tightly to the opportunity curve.

I’m now moving into “What Will Happen” which is for tomorrow, so I will end this post now by saying goodbye to 2015 and hopefully to much of the nonsense that came with it.

I did not touch on the many important things that happened outside of tech in 2015, like the rise of terrorism in the western world, and the reaction of the body politic to it, particularly here in the US with the 2016 Presidential campaign getting into full swing. That certainly touches the world of tech and will touch it even more in the future. Again, something to talk about tomorrow.

I wish everyone a happy and healthy new year and we will talk about the future, not the past, tomorrow.

What Didn’t Happen

Last year, I ended 2014 with What Just Happened and started 2015 with What Is Going To Happen.

I’ll do the same tomorrow and friday, but today I’d like to talk about What Didn’t Happen, specifically which of my predictions in What Is Going To Happen did not come to be.

  1. I said that the big companies that were started in the second half of the last decade (Uber, Airbnb, Dropbox, etc) would start going public in 2015. That did not happen. Not one of them has even filed confidentially (to my knowledge). This is personally disappointing to me. I realize that every company should decide how and when and if they want to go public. But I believe the entire startup sector would benefit a lot from seeing where these big companies will trade as public companies. The VC backed companies that were started in the latter half of that last decade that did go public in 2015, like Square, Box, and Etsy (where I am on the board) trade at 2.5x to 5x revenues, a far cry from what companies get financed at in the late stage private markets. As long as the biggest venture backed companies stay private, this dichotomy in valuations may well persist and that’s unfortunate in my view.
  2. I said that we would see the big Chinese consumer electronics company Xiaomi come to the US. That also did not happen, although Xiaomi has expanded its business outside of China and I think they will enter the US at some point. I have a Xiaomi TV in my home office and it is a really good product.
  3. I predicted that asian messengers like WeChat and Line would make strong gains in the US messenger market. That most certainly did not happen. The only third party messengers (not texting apps) that seem to have taken off in the US are Facebook Messenger, WhatsApp and our portfolio company Kik. top social apps year end 2015Here’s a shot of the app store a couple days after the kids got new phones for Christmas.
  4. I said that the Republicans and Democrats would find common ground on challenging issues that impact the tech/startup sector like immigration and net neutrality. That most certainly did not happen and the two parties are as far apart as ever and now we are in an election year where nothing will get done.

So I got four out of eleven dead wrong.

Here’s what I got right:

  1. VR has hit headwinds. Oculus still has not shipped the Rift (which I predicted) and I think we will see less consumer adoption than many think when it does ship. I’m not long term bearish on VR but I think the early implementations will disappoint.
  2. The Apple Watch was a flop. This is the one I took the most heat on. So I feel a bit vindicated on this point. Interestingly another device you wear on your wrist, the Fitbit, was the real story in wearables in 2015. In full disclosure own a lot of Fitbit stock via my friends at Foundry.
  3. Enterprise and Security were hot in 2015. They will continue to be hot in 2016 and as far as this eye can see.
  4. There was a flight to safety in 2015 and big tech (Google, Apple, Facebook, Amazon) are the new blue chips. Amazon was up ~125% in 2015. Google (which I own a lot of) was up ~50% in 2015. Facebook was up ~30% in 2015.  Only Apple among the big four was down in 2015 and barely so. Oil on the other hand, was down something like 30% in 2015 and gold was down something like 15-20% in 2015.

Here’s what is less clear:

  1. Bitcoin had a big comeback in 2015. If you look at the price of Bitcoin as one measure, it was up almost 40% in 2015. However, we still have not see the “real decentralized applications” of Bitcoin and its blockchain emerge, as I predicted a year ago, so I’m not entirely sure what to make of this one. And to make matters worse, we now seem to be in a phase where investors believe you can have blockchain without Bitcoin, which to my mind is nonsense.
  2. Healthcare is, slowly, emerging as the next big sector to be disrupted by tech. The “trifecta” I predict will usher in an entirely new healthcare system (smartphone becomes the EMR, p2p medicine, and a market economy in healthcare) has not yet arrived in full force. But it will. It’s only a matter and question of when.

So, I feel like I hit .500 for the year. Not bad, but not particularly impressive either. But when you are investing, batting .500 is great because you can double down on your winners and stop out your losers. That’s why it is important to have a point of view, ideally one that is not shared by others, and to put money where your mouth is.

Knee Jerk Reactions

Warning: This post is going to generate a debate in the comments that will likely be upsetting. Don’t wander into them if you can’t tolerate strong opinions. That said, free speech and passionate debate is a cornerstone of the world the terrorists want to destroy and I am proud of the fact that it happens here daily.

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I’ve held back on commenting on the horrible events in Paris last friday night, thinking that I don’t have much to add to the discussion. But as horrible as that night was, the knee jerk reactions that are now coming out of the mouths of supposedly rational people are even more horrible. As my partner Albert asserted this past weekend,

Turning against Muslims or against refugees is a terrible response as it only confirms the apocalyptic ideology of the attackers

The knee jerk reactions of politicians and governments to terror attacks over the past twenty years have not helped the situation and have likely fed necessary energy into the jihad movement. I am not a student of martial arts, but I do understand the principal of using your opponent’s energy against them. I believe the terrorists are doing a wonderful job of turning the energy of the free world against us. And we have to stop letting them do that.

So what should we do instead? Drink champagne. Go to a football match or a Knicks game. Sit at a cafe and have an espresso. Go see live music or perform live music. Have sex with someone you love no matter what their gender is.

And what should governments do? I am with Albert that we should continue use our considerable investment in data science to infiltrate and understand these terror networks. I want to print something he wrote in that post over the weekend because I agree with it completely and can’t say it any better:

But I am staunchly for collective intelligence. Collective intelligence in this case against terrorism, but also more broadly against crime and most importantly as a basis for improving education and healthcare. I cannot see how society could avail itself of the benefits of collective intelligence in any form of government other than a transparent democracy. And conversely it makes no sense for democracy to deny itself those benefits.

Insisting on privacy because we fear our own governments will continue to pit citizens against secrecy-seeking governments in a spy versus spy society. Many will protest that we are already there. Maybe so, but why double down on a mistake? Snowden’s revelations have given us a unique opportunity to start over. I would pardon Snowden on those grounds alone.

Governments can and should tell their citizens what information they are collecting and how they are using that information. And companies should disclose which of these programs they participate in. Any and all such programs should have oversight by elected politicians and transparent reporting on their scope and effectiveness.

As for the potential for collective intelligence to help, we see it all around us on the Internet. From the uncannily accurate do you know so-and-so suggestions on Facebook and LinkedIn to the related products on Amazon. I can also observe the effectiveness of collective intelligence from behind the scenes in many of our investments and in particular with Sift Science which does fraud detection. Combining a lot of data really does work.

Democracy, human rights and progress through critical dialog and collective intelligence. We need all of those more than ever.

That’s what I think we should be doing. I do not think we should be demonizing religions and people seeking refuge. Demonizing is the behavior the terrorists want to see from us. We should not let them have that victory.

Fun Friday: Daily Fantasy Sports Services Debate

The NY State Attorney General shut down FanDuel and DraftKings earlier this week, saying this:

Our investigation has found that, unlike traditional fantasy sports, daily fantasy sports companies are engaged in illegal gambling under New York law, causing the same kinds of social and economic harms as other forms of illegal gambling, and misleading New York consumers … Daily fantasy sports is neither victimless nor harmless, and it is clear that DraftKings and FanDuel are the leaders of a massive, multi-billion-dollar scheme intended to evade the law and fleece sports fans across the country. Today we have sent a clear message: not in New York, and not on my watch.

So, let’s debate this in the comments and we can use the new Twitter polls to quantify the debate.

Trickle Up Economics

For something like 30 years, we have been hearing about trickle down economics in which we lower tax and other burdens on the wealthy, these wealthy individuals invest in the economy, and the benefits of those investments “trickle down” to the middle and lower class. That may well be what happens when the burdens are lowered on the wealthy, but as we all know the wealthiest in the US are gaining ground on everyone else and have been for a long time. This is not a critique of trickle down economics per se. There are other things going on, including a transition of value from labor to capital as a result of technological progress, that are driving the gains of the wealthiest right now.

I would like to propose another approach that I call “trickle up economics” in which we lower the tax and other burdens on the lower and middle class, we invest in educating their children (and them), we make sure they have the skills to get good jobs in the economy of the future, and we make sure they have access to things like good transportation, safe neighborhoods, healthy food, quality health care services, etc that are required for them to be fully functioning citizens in our society.

If we do all of that, we will have a stronger workforce and a more entrepreneurial and innovative society, and that will drive wealth creation in the US that will “trickle up” to the wealthiest people in the US.

The american dream has always been about opportunity. You start out with nothing and through hard work and a good body and mind, you make it and lead yourself and your family to a better life. That, by the way, is the story of the Gotham Gal and me. We arrived in NYC in 1983 with not a penny to our names. Nada. Nothing. I am not even sure how we came up with the security deposit for our first apartment. But we had good educations and had secured good jobs. And we worked for everything we have. We made it.

I am so optimistic about the United States and our economic prospects. I am optimistic about our people. I just want to see us invest in our people. All of them. Because I am sure if we do that, the benefits will trickle up throughout society.

Fun Friday: Debate Recap

I don’t know how many AVC community members watched the first Republican debate(s) last night, but I did and I thought it might be fun to talk about them today.

I’ve never been taken by Trump or Bush and wasn’t last night either.

I thought Kasich and Rubio were the best of the bunch. Kasich because he’s real and substantive and Rubio because he’s impressive and articulate.

I’m curious what others thought. If you didn’t see the debate, you should still feel free to weigh in. It’s fun friday afterall.