Zero And Negative Interest Rates

Larry Summers has a post in the Washington Post about the incredibly low interest rate environment we are witnessing right now.When you consider the effects (slim as they are) of inflation, there are cases where the rates borrowers are paying are zero and even negative.

That means the lender is happy to get back less than they lent because they think that’s a better deal than they can get elsewhere. Think about what that says about the mindset of lenders (or holders of capital assets writ large) right now.

My partner Albert has written a book called World After Capital in which he argues that what has been scarce until now (capital) will no longer be scarce and that we will move on to other forms of scarcity. 

When capital is abundant and when you are getting paid to access it temporarily that leads to a very different set of decisions.

What we don’t know is whether this is a temporary situation (as Larry Summers hopes and policy makers are attempting to ensure) or a more permanent situation as Albert envisions. That is an important question.

Hacking Amazon Echo

My friend Stephen and I have been talking about hacking the Amazon Echo so it can be a front end to our Sonos systems. Stephen decided to make it more than talk and downloaded some code on Github and stitched together a system that works. I was at his house yesterday evening and he showed it to me. Here’s a blurry video taken from a phone that shows it in action.

Stephen’s system uses the cloud based Skills interface to parse the commands, then sends instructions to some of that Github code running on Amazon’s Lamba cloud based code execution service, which then sends instructions to a local server on Stephen’s laptop that runs the code that controls the Sonos locally on his home network. It’s a kludge for sure, but it works and I am going to get this hack working on my Sonos system over the next few weeks.

But the whole experience got me thinking about hacking the Echo to do other things. The possibilities are endless.

Here’s an idea for some enterprising engineer out there. We own some bungalows in Venice that are rented out on Airbnb and VRBO. We have a Sonos Play in each of them. And we have a Google Doc that has frequently asked questions on it hanging in the kitchen of each bungalow. What if there was an app for Amazon Echo that could take in that Google Doc, parse the frequently asked questions and answers, and train Alexa (the voice command interface in Amazon Echo) to answer the frequently asked questions. That would get me to swap out the Sonos Plays in each bungalow for Amazon Echos. And Airbnb could promote that app to all of its hosts.

Anyway, there are all sorts of things that would be fun to make by hacking Echo. And I suspect they will. These voice based devices could be the next big platform for developers to make things on.

The Online Club

I recall reading a history of The Beatles and as it is told, they developed their performance skills playing in rock clubs in Hamburg Germany in the early 60s. They played night after night and developed a style and technique that formed the essence of the band for the next decade.

I thought of that today when I read a NY Times piece on our portfolio company YouNow.

My long time friend Steve Greenberg, a thirty year veteran of the music industry, is quoted in the piece talking about one of his young developing stars who performs on YouNow:

In the old days, an artist would have to find some club to get good about relating to an audience. With YouNow she can just go online and play, whether it’s for hundreds or thousands of people, and get real-time feedback.

What used to require moving to Hamburg and playing clubs every night can now be done in the comfort of a teenager’s bedroom, it seems.

Mission Driven Founders

I’ve written many times about how I/we prefer to invest in mission driven founders vs mercenary founders. The former starts a company because they see a problem they feel compelled to fix. The latter starts a company because they see an opportunity to make money. There is nothing wrong with the latter. It is likely the reason that the vast majority of companies are started. But we prefer to invest in the former because there is an extra something going for a founder who starts with a mission. It leads to more tenacity, more passion, more feel for the product and market, and ultimately a higher probability of success.

For role models for the mission driven founder we need to look no farther than the founding fathers and the opening line of the Declaration of Independence, published 240 years ago today:

When in the Course of human events, it becomes necessary

The key word being necessary. These people had had enough and NEEDED to forge a new path.

So when thinking about starting a company, ask yourself if it is necessary. That will tell you a lot.

The Summer Doldrums

We are entering the summer months when things move slower in the investor community. This is true of venture capital, but it is also true of other investment sectors as well. Summer vacations slow things down and investors also use the time to step back a bit and evaluate how the first half of the year has gone and plan for the second half.

I know many companies don’t like to raise capital in the summer months. While I understand that approach and it is conventional wisdom, I think the contrarian approach of raising in the summer can also work.

Raising money in the summer months will go slower and can be frustrating as you lose weeks at a time to vacations. Partner meetings are harder to get scheduled. And trying to get multiple potential investors on the same time frame is nearly impossible.

But the benefit of raising in the summer is that you are not competing with as many other companies to get the investor’s attention. You can more easily rise above the noise in the summer. Investors don’t take the summer off, they just slow things down a bit. So if you need to raise capital in the summer or just want to, you can make it work. You just need to allow more time for the process and be patient and flexible.

One advantage of raising in the summer is that you can take care of fueling the tank when things are slow with customers and be ready to step on the gas in the fall when things pick up again. The last four months of the year are often a sprint to the finish line and using up some of that energy raising is often suboptimal.

So if you find yourself in the market for capital this summer, don’t fret. But be prepared for a slog that doesn’t move as fast as you’d like it to. It’s the doldrums after all.

Funding Friday: Wine and Cheese

It’s that time of the week for some fun around here. This week in the spirit of a holiday weekend, I am going to point everyone to some crowdfunding campaigns around the wine and cheese theme.

Here’s a wine glass that supposedly is impossible to spill:

And here’s a family farm that wants to bring goat’s cheese from its farm to your table:

Here’s an equity crowdfunding project for a company called Splash Wines that’s a modern day wine club

And if you just want to purchase some wine and cheese for your holiday weekend, I recommend this cheese plate and wine sampler from Mouth.com (The Gotham Gal is an investor).

Have a great holiday weekend everyone.

Diversity and the Blockchain

Two of my favorite things are coming together at the MIT Media Lab (another favorite of mine).

The Media Lab is hosting a bootcamp on blockchain technologies for underrepresented minorities and women.

The blog post announcing this event is here.

I will reblog the top part of that post:

The MIT Digital Currency Initiative is excited to announce a week-long intensive bootcamp covering key cryptocurrency concepts for women and underrepresented minority (URM) students. The event will take place at the MIT Media Lab August 21–26, 2016. The Kapor Center for Social Impact and Xapo have generously donated $70,000 to cover each student’s flights, hotel and other expenses to cover the cost of the bootcamp.

To apply for the program, click here. NOTE: all applications are due by July 11th.

If you are in their target group and want to work in the blockchain sector, this has your name written all over it. Make sure to apply by July 11th.

The Candidates’ Tech Agenda

Hillary Clinton laid out her tech agenda yesterday. You can see it here. I like much of it, particularly the emphasis on getting our kids the skills they need to be competitive in the 21st century. I am so with her on that.

I googled Donald Trump tech agenda and found nothing substantive. I would encourage the Trump campaign to do something similar so the tech sector can see what these two candidates think the nation’s tech agenda should be for the next eight years.

We have so many important issues that are centered in technology that face our country:

  • cybersecurity
  • privacy
  • STEM education
  • broadband policy
  • wireless broadband policy
  • open internet
  • data rights
  • patent policy
  • copyright policy
  • immigration policy

Those are just some of the big ones in my view.

Hillary told us where she stands on most of them yesterday.

I would like to know where Trump stands on them too.

AFSE Commencement Speech

Four and a half years ago, in January 2012, I announced on this blog that New York City was opening a new high school called the Academy For Software Engineering (AFSE).

Yesterday, AFSE graduated its first class. 110 of the 120 students who enrolled four years ago made it to graduation. And each and every one of these students took four years of computer sciences classes on their way from enrollment to graduation. It was a proud day for me as it was for them and their families.

Seung Yu, AFSE’s founding and current school principal, asked me to give the commencement speech. That was an instant yes.

So I stood in front of the graduates yesterday and talked about three things that have helped me in my professional life.

Here is the draft I wrote. As I got into it, I ad libbed a fair bit, but this is certainly the gist of what I said to the graduates yesterday:

Now for some parting advice for all of you graduating seniors. Listen up, I am going to tell you my secrets of success in business. This speech isn’t really about your family life. I could go on and on about that too but I would just say that you need a balance between your work life and your family life. You need to focus on both and they support each other. A healthy home life makes for a healthy work life. You need both.

So with that, I am here to tell you that the secret to success in your career comes down to three things, take risks, work hard, and get lucky.

You are all risk takers. You chose AFSE as eighth graders when the school literally did not exist. I remember what it was like back then. Parents would tell me “I can’t send my child to a school that doesn’t exist”. Guidance counselors would say “I can’t recommend that school to my students” I would hear people say things like “girls can’t go to a school like that” or “you can’t teach coding skills to every student”. And I am sure you heard the same things. But you came anyway. And standing here today, I will tell you that you attended and graduated from one of the top 25 high schools in NYC. I don’t know if there are actual rankings, but it is my belief that if you measure high schools on things like attendance, graduation rate, regents scores, AP scores, SAT scores, colleges attended, and reputation, AFSE would be an elite high school. One of the very best. And you went there and graduated from there. You took a big risk and it paid off for you. Keep doing that.

I have taken a bunch of risks in my life. I grew up in an army family and I broke ranks and decided not to go to West Point where my dad and his dad went. Instead I went to MIT, even though my parents could not afford to send me there. I worked in a research lab and sold donuts and coffee every morning to pay my way through MIT. I followed my wife Joanne and moved to NYC after college when my dad told me it was too expensive to live here. I went to business school and paid my way by teaching computers to my classmates. I took at job in venture capital when nobody knew what that was instead of going to work on wall street with the rest of my classmates. When the Internet emerged in the mid 90s, I left my safe job and started a new venture capital firm after my wife Joanne had quit her job to raise our three kids. When the Internet blew up and we lost most of our money, I started another venture capital firm and spent almost two years flying around the country spending money we really didn’t have trying to convince people to give me money again to invest in the Internet. I invested in social media when people said you could never make money in it. I invested in crowdfunding when people said that nobody would do that. I invested in Etsy when people said you could not compete with eBay. All of those risks paid off. Every single one of them. Thankfully my wife Joanne backed me every single time when I wanted to take those risks. She believed in me and believed in those bets. She hung in there when times were tough and made it possible for me to take these chances. We are an example of what happens when you hang together and take risks together.

I am not suggesting you take silly risks. I am suggesting you take calculated risks. Each and every time I took a risk there were people telling me not to do it. I listened to them. I did not disregard their advice lightly. I thought about it. And many times I have decided not to take a risk. But when, after listening and carefully considering the risks, my gut tells me to take a risk, i do it.

And then once you do that you have to work your ass off. I get up every morning at 5am. I have worked half a day by the time I get to the office at 9am. I still do that at age 55 when I have no need to anymore. It is what I do. I work hard. Because if you are going to take these risks, you have to work hard to make them pay off. This is not the lottery. You don’t just buy a ticket and sit back and see what happens. You take a risk and you work every day to make sure it comes through for you.

You all have worked hard. You have studied for the regents, the AP exams, the SATs, you have learned hard things like writing software. You have seen that hard work pays off. Keep working hard. It’s the only way to get somewhere.

But taking risks and working hard is not enough. You have to get lucky too. Luck is not just catching a lucky break. You have to be able to recognize it as such. You have to prepare your mind to recognize the lucky break when it comes your way. The Internet emerging as a massive financial opportunity in the mid 90s was my biggest lucky break. But I had put myself in a position to take advantage of that lucky break by deciding to work in venture capital ten years before that, by working hard to get better at my craft, and by paying close attention to the emerging areas of technology. I saw the Internet for what it was long before most people did. That was my luckiest break but I also knew it and jumped on it.

Everyone gets lucky breaks in their life. I can’t tell you when your lucky breaks will come. But I can tell you that they will come. You must be able to see them for what they are, you must be in a position to act on them, and you must not miss them. Pay attention, look carefully, and be prepared for your lucky breaks.

So that’s it. That’s my secret for a happy and productive career. Take risks, work hard, and get lucky. You have already done all three. Keep doing it.