Why We Spend So Much Time On Policy Stuff

Last month I wrote a post mentioning that we have an activist in residence at USV. And I write a lot here at AVC about the policy stuff we have been working on. It might seem to some that we are more like policy think tank or adovacy organization than a venture capital firm. I think that is somewhat true. We make a lot of early stage investments and we work hard with those companies to help them succeed. But if you hung out at USV, you would see that we spend a lot of time on policy stuff. And that begs the question "why do you do that?".

The short answer is that Brad, who I founded USV with a decade ago, has felt from day one that policy and governance will be as important as technology in shaping what the market looks like in the coming years. And that, of course, will shape how impactful our portfolio companies are, and that will ultimately shape our returns. And we are in the returns business.

The longer answer has to do with the power of networks, which are central to our investment thesis, to be an economic force in society. These networks will reshape markets, lower costs, bring efficiencies, and disrupt the ways that things are done. And those who are incumbents in today's model will fight these networks tooth and nail, because they threaten their incumbency. And that will lead to policy fights. We want to get out ahead of all that as much as we can.

I have not seen much written about this coming change. So I was pleased to see a post by Om Malik yesterday that laid all of this out clearly and succinctly. Om says:

the challenges of the connected future are less technical and more legislative, political and philsophical. The shift from a generation that started out un-connected to one that is growing up connected will result in conflicts, disruption and eventually the redrawing of our societal expectations.

This redrawing of societal expectations is likely to be the political battle of our time. Om goes on to talk about this in the context of the labor issues that Uber is having in San Francisco. That is a good example of what happens when networks and the data they produce reshape a market that has been operating in a traditional framework.

We are at the start of this battle between incumbents, be they black car drivers or cable companies or government itself, and the network driven upstarts. And we have many of those upstarts in our portfolio. So our policy work is ultimately an investment in the success of our portfolio companies. And that is why we spend so much time on policy stuff.

#Politics#VC & Technology

Comments (Archived):

  1. markslater

    i find that the problem is with those that think in absolutes. Markets very very rarely get exploded (music). Those that think in absolutes are most of the time dead wrong.taxis are a perfect instance of a market that will “evolve” and not “explode”. The challenge for investors is that they want to bet on explosion (outsized returns) but often settle for evolution.Trying to force the explosion when there should be evolution (gradual or radical) will prove very costly to startups who by their very nature only have one path to go down.

    1. howardlindzon

      good point mark

    2. fredwilson

      agreed. that is one of the reasons we invested in Hailo which works with regulated markets (yellow cabs in NYC, black cabs in London)

      1. markslater

        i can tell you first hand that you are correct – i was in with boston hackney captain last week and the difference of his view between the taxi apps was very telling…..

        1. fredwilson

          i am very happy to hear that Mark

          1. markslater

            but he loves us πŸ˜‰

    3. Richard

      The other mistake being made is thinking that the battle lines have been drawn (uber vs yellow cab). The issue is one of scale . If companies take the groupon approach that scale and market domination are its goal (which is required for a publicly held co. ) then groupon is an incumbent. We are still evolving from a corporate pseudo winner take all approach. How this evolves is as important an issue as anything over the upcoming years.

  2. William Mougayar

    It was obvious since your last Hack Society day that policy advocacy was going to be a focus, and you are doing it.Empowered users on large online networks are a force to be reckoned with. The revolution is right here, not just in countries with oppressive governments. It’s sad that government is becoming now the “enemy”- here with policy, and abroad with excessive power and autocratic regimes.

  3. Brandon Burns

    Take down the cable companies and broadcast providers next, please.

    1. William Mougayar

      There’s a long list of dinosaurs (except for our own FG) ….

    2. jstylman

      Yes, the cable companies & broadcast providers suck… no disagreement here.Still, we have a government that is fighting wars around the world for for an energy source that can’t be sustained… at home, institutions like healthcare and education that are profoundly broken… banksters raping our financial system with no consequence for their behavior… we’re being poisoned by food, inc and big pharma, while our liberties being systematically stripped away… as long as we can watch 500+ channels, it’ll all be ok.I applaud USV taking a leadership position in their areas of expertise. I just hope it matters when all is said and done. The optimist in me says it’ll (a) be a stepping stone to more systemic reform and (b) inspire others, especially young people to become activists. We’ll see…

      1. fredwilson

        Thanks Josh. That is great to hear

      2. Brandon Burns

        now you’ve made me feel bad!

        1. jstylman

          Apologies Brandon, that wasn’t my intent at all. It’s a hot button…I do realize we live in the United States of Entertainment and I’m totally hypocritical in a lot of ways (I love my HBO too), but it’s troubling to see these as the types of issues people rallying around, when our infrastructure – physical and morally – is crumbling around us.

          1. Brandon Burns

            I’m just kidding. I don’t really feel bad. And I agree with you, there are a lot of pressing issues that need fixing.I just think the cable / broadcast situation is somewhat-easy low hanging fruit. :o)

  4. andyswan

    Venture capitalists using government as a tool to benefit their portfolio.Incumbent corporations using government as a tool to retain their unnatural monopolies.Government confiscating savings of citizens. Government legislating the British press for the first time in 400 years. Government attempting to remove the rights of citizens to protect themselves, or drink the sugar-water of their choice.It’s almost as if the founders were onto something when they tried to strictly limit the power of that government tool. Almost as if they knew how dangerously it could be used.But here we are, each pathetically begging 536 men in a far away city for that one little thing that we need from them….. like an infant crying for the teet. “We’ll give you more authority over us, we’ll increase your monopoly on the use of violence… just let us have this one thing, Big Brother!!”Gross.

    1. fredwilson

      or just to leave us alone. it is not always about asking for something. although i guess you could say asking to be left alone is asking for something

      1. andyswan

        Welcome to the libertarian cause πŸ™‚

        1. Kirsten Lambertsen

          Genuine question for you: why don’t Libertarians just go for it and be anarchists? Where’s the cutoff? I ask honestly as some of my best friends are anarchists (and libertarians) πŸ™‚

          1. Carl Rahn Griffith

            People have become so anodyne there’s no fight left in most of them.

          2. Kirsten Lambertsen

            I agree with that.

          3. andyswan

            Because in general we believe that there are 3 essential roles of government: To protect people from violence internally (policing), to protect citizens from violence externally (naitonal defense) and to administer justice/resolve disputes.

          4. William Mougayar

            …and to lay down some infrastructure services, like highways, sewer, etc.

          5. Kirsten Lambertsen

            That’s right. We tried it the other way before the turn of the 20th century, and every rich guy in San Francisco had his own cable car line going only to his house.

          6. kidmercury

            roads have already been sold and privatized via tolls and meters. but because government had an exclusive right to build and sell these roads, the price ended up being a lot higher.

          7. raycote

            oh and don’t forget healthcare !:-)

          8. William Mougayar


          9. Matt A. Myers

            So you realize taking care of people (healthcare, education) helps protect you from internal violence, right?

          10. Matt A. Myers

            Will this ever be replied to? OP surely will deliver!

          11. CJ

            Upvoted for the Reddit reference!

          12. Matt A. Myers

            Not sure it started there — but you’re clearly part of the popular crowd if you visit Reddit! πŸ˜‰

          13. Kirsten Lambertsen

            We can’t pull from the killing people budget to pay for the healing people budget. Sorry. Get your priorities straight.

          14. Matt A. Myers

            Because all those bad guys might come over overseas and hurt us, thereby making all of the work towards making people healthy irrelevant …!

          15. Kirsten Lambertsen

            Whew. It felt like you and the other Super Friends would never get here πŸ˜‰

          16. Charlie Crystle

            yep–you build your part of the highway, I’ll build mine, see how it comes out. it would look like the healthcare sector (a debacle for quite some time)

          17. CJ

            Exactly which is why this system never works. People do what they feel and no one ever feels like doing what someone else wants. And then when they do, they join up and form a government and start telling others to ‘want’ to do what they’re doing. LOL It’s a human impossibility but some of the ideals are sound. The key is stripping them from the whole and administering them to the current sickness called capitalistic democracy.

          18. kidmercury

            there are examples of private roads already. http://www.lewrockwell.com/… as usual they are cheaper than government roads.

          19. ShanaC

            but they don’t have as many travelers (aka no one wants to go there)

          20. ShanaC

            then you get in the question of what is justice

          21. raycote

            “administer justice/resolve disputes”doesn’t that just about cover everything ?

          22. JLM

            .Governments exist to do for society collectively what its citizens cannot do individually. Nothing more.I cannot have my own Army — though I really think I could — so the government provides for the national defense by raising an Army.JLM.

          23. LE

            “(naitonal defense)”Educate also, no?

          24. kidmercury

            personally, i view anarchism as the ultimate ideal, but unobtainable. i also try to avoid the word because it is misunderstood and associated with violence (which ironically is the domain of the state).

          25. Kirsten Lambertsen

            I agree it’s misunderstood.Ideals are usually not obtainable. It’s the striving for them, the process, that matters.In general, I don’t like any approach that involves a ballistic shot at a certain target. I think the best outcomes are from cybernetic calibrating along the way.

          26. JLM

            .I admit to not having any even remote inkling as to what you are saying but I love the way you have said it.Well played!JLM.

          27. Kirsten Lambertsen

            Ha ha! Ok, I guess you’re not so bad. Ha!

          28. ShanaC

            because some of us are paternalistic libertarians and recognize a place for the government. Still, I supsect the most hard care are anarchists in all but name

          29. raycote

            anarchists ?they come in so many flavours !I like the ones that are well organized πŸ˜‰

          30. Kirsten Lambertsen

            LOL. Love.

      2. kidmercury

        the tech industry wants immigration benefits for startups, a national broadband plan, and generally supports obama. you guys ask for a lot of stuff.

        1. Kirsten Lambertsen

          Not compared to the massively subsidized old skool industries in this country.

          1. kidmercury

            the biggest subsidies go to the banking industry. the banking industry used these subsidies to inflate tech valuations. infographic: http://thumbnails.visually….so, the trickle down of subsidies went to the tech industry very early on. from this perspective they are getting lots of subsidies. and they’re certainly not acknowledging it or trying to change policy that drives the bubbles they love so much.

          2. pointsnfigures

            might disagree, only on who gets the biggest subsidies. The agriculture industry gets a pantload.

          3. yepi kizi


        2. fredwilson

          there is a lot more i would like. those aren’t my most important issues. what i really want is a new regulatory framework based on data transparency and permission vs the gatekeeper model that we use in regulations now

          1. William Mougayar

            Are there a few senators or reps that are open to these new ideas? It strikes me that they would be the go-to segment. They listen to each other. Same as when Issa stirred things up to defeat SOPA.Who are those “few good men/women” in government? Start with them. I think change will come by pushing from the outside AND pulling from the inside at the same time.

          2. takingpitches

            The FTC and DOJ antitrust division are potential allies as 1) they philosophically like to see more competition 2) are open to hearing the economic arguments of how a new technology will improve the lives of customers 3) are willing to submit comments and amicus briefs in courts and at local regulatory agencies where these issues really play out.As an example, see FTC comments regarding taxi hailing apps at the Colorado PUC.I do a ton of this work. If anyone needs any advice on this front, please feel free to holler. Happy to help.

          3. William Mougayar

            It seems like lots of help is needed πŸ™‚

          4. ShanaC

            Yes, but if you look at the way way the DOJ and FTC talks about economics, it is pretty clear they don’t see it the way consumers do

          5. takingpitches

            Interesting. Expand please.

          6. ShanaC

            see this planet money episode: http://www.npr.org/blogs/mo… The way they think about branding and pricing is not the way a consumer things about a monopoly

          7. takingpitches

            thanks for the link. am a fan of other planet money episodes that I have heard, so look forward to this one.

          8. CJ

            There are none unless you have enough money to buy them.

          9. William Mougayar

            I hope that’s not the case!

          10. takingpitches

            There is an arc — such as airbnb went through — that goes from not asking permission, to turning a blind eye by putting responsibility on its users, to engaging with regulators.Timing is everything. You cannot do the engaging with regulators too early until you have empowered and excited your own customers and suppliers who find value in your network, because otherwise the incumbents will kill you at the latter.You need to line up your own interests (particularly empowered suppliers who demonstrate that the existing rents are going to narrow interests) to line up against the existing interests or you are going to get killed with the regulators.

          11. JamesHRH

            What percentage o Americans want financial, health & legal data transparency, IYO?

          12. LE

            “new regulatory framework based on data transparency”Transparency assumes that people will independently be able to use what they see instead (as we see) simply agree without vetting what some internet influencer tells them to think. Because they don’t have the ability or knowledge anyway to do that many times.You see this often. Somebody whines about some bad shit they see (with limited vetting of said bad shit) then a bunch of lemmings go off half cocked agreeing with the premise not even knowing if it’s true.This is like students protesting the war in vietnam without recognizing larger american goals that brought us to having a war in vietnam in the first place. That doesn’t mean the students aren’t right what it means is that the students from their perch have no way of knowing exactly what is going on behind the scenes in those decision that are being made by the government.

        3. andyswan

          Let’s not forget about wanting healthcare offloaded onto the taxpayer.

          1. kidmercury

            and the gun control stuff — my favorite! hahahahahaha…..1.6 billion rounds of ammo for DHS, none for you and me……

          2. CJ

            Versus having it offloaded on the taxpayer through the indirect means of price hikes. Semantics really.

        4. CJ

          That’s only because it’s regulated do you have to ask for the regulations to be changed. If we’re being technical about it…

          1. kidmercury

            agreed, although the tech industry calls for re-regulation more than they call for de-regulation. there isn’t much support for libertarian ideology or candidates amongst the top dogs of tech — where they put their money, their vote, and their speech illustrates this quite clearly. their stance makes sense, as the bankers would lose their subsidies if de-regulation gained power, and so no more easy bubbles.

          2. CJ

            Agree about re-regulation but I think that’s because de-regulation seems to be a no-go in our society. When something is de-regulated competition dies and monopolies emerge. In Illinois we’ve de-regulated the Telcos, I’ll be damned if you can get decent DSL from anyone but them though. Semantics. I want regulations that enforce fairness in the absence of a fair environment enforced by natural competition.

      3. Charlie Crystle

        “There are two novels that can change a bookish fourteen-year old’s life: The Lord of the Rings and Atlas Shrugged. One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world.The other, of course, involves orcs.”

        1. JamesHRH

          LOL – any single point of focus philosophy is stunted, Atlas sure qualifies.

          1. JLM

            .Every bit of thoughtful writing has a thimble full of wisdom.Atlas Shrugged has a boat load.JLM.

          2. JamesHRH

            I agree, but if you swear totaly allegiance to the philosophy, and shut off other sources of wisdom, you max out at a thimble full.How many self made successes of the last 40 years benefitted from the existence of public institutions (e.g. schools, police, courts) or usage of public assets (highways, ports,)?Atlas just doesn’t stand up to scrutiny, if it is used as your Bible.

      4. LE

        “or just to leave us alone.”Government is needed to protect people who can’t protect themselves.Generally as the population of a “something” grows you need some rules and government in place as a result of the rule of large numbers (my rule) more things will statistically happen with a larger group. [1]The high school I attended was small and we had very few rules and also a well behaved student body. But in the local public school it was quite different. They had all sorts of rules that were necessary because a) the population was larger and b) more things happened with that large population that were identified and needed to be protected against. c) A different group of people in the population.States. Why are taxes high in NJ? One reason is certainly the fact that over time shit happened (that didn’t happen in Montana) that caused the government to put rules in place (and have to pay people to enforce those rules). Things that wouldn’t happen in a state with only 100 people, statistically. (Of course there are other reasons but this is definitely one that came into play no doubt.) I’m sure someone will come up with an example to refute this but if you think it through it makes sense.Look what happens after school shootings or 911? Government reacts to try and make the outlier events not happen again which all costs money. Over time all those nickels and dimes add up. Ok now we will put more guards at schools and spend money teaching teachers to fire guns to prevent something with an extremely low probability of happening that last decade wasn’t even on the radar.[1] Then like a cancer it grows out of control over time.

        1. JLM

          .Re NJ taxes:Because it is a cesspool of corruption? Cesspool. Corruption.JLM.

    2. Kirsten Lambertsen

      I think it’s all in your perspective.What else are we all supposed to do, except “use” government?This is how our system is supposed to work. The more involvement by everyone, the better. That’s how we signal the people we hired to keep the lights on what we want them to do.The challenge is in making sure that people who don’t have the luxury of time to spend on talking to our gov’t also get heard. Things get interesting when those people find or get the time and make it a priority.I don’t see anyone who is involved in activism as pathetically begging. In fact, I think people like the folks at USV are accepting a responsibility. They are putting back into the system. In a way, I’ve hired them to engage with govt for me, because I don’t have the luxury of time or resources.

      1. andyswan

        Of course it’s all perspective. Some people think that government is a tool to be used against others for their own monetary gain, while others do not.It’s quite simple really. And the former now out-vote the latter…so here we go down the path to the kind of #Utopia that requires walls to keep people IN.

        1. Kirsten Lambertsen

          Well, I’d disagree that anything is that simple.Dude, did you downvote my comment? That’s just mean! LOL

          1. andyswan

            No I don’t downvote comments.

      2. JLM

        .There are those — please count amongst this group our Founding Fathers — who think that government should provide collectively only those things that society cannot provide individually while injecting a bit of an organizational framework and comity.There are those who think that government should be a blunt instrument for confiscating the wealth or work of others to provide direct support for those who would opt not to work as diligently as their peers.Today the role of government has swung way too far in the direction of penalizing success in order to reward sloth.It is government which has created the great chasm between the makers and takers.It is the politicians who have harnessed this alchemy magically transforming this confiscatory practice into votes thereby ensuring their own perpetuation as a permanent ruling class.This is destroying our national and natural instincts for growth and advancement. The American Dream is being smothered by disgusting slave masters feeding the ravenous masses on the work of others.JLM.

        1. Kirsten Lambertsen

          Sigh. Every time AVC conversation turns to politics, I start to lose my faith in humanity. The negativity is suffocating, the hyperbole deafening.I think I need to go watch some cat videos…

          1. JLM

            .Yes, I agree completely — imagine those extremists who want to balance the budget, consult the Constitution and keep the value of their own labor.Extremists all.They should just willingly put their heads into the noose, snug it up and conform.After all that is what made America great right? Conformists? Not rebels.Sigh.JLM.

          2. Kirsten Lambertsen

            Disenchantment: complete.

          3. ShanaC

            there are some very strong conservative opinions here, and yes, it drives people away. So do some the strong liberal positions.I just wish there was more respect on each side, but that means going into the fundamentals of what you all mean

          4. Kirsten Lambertsen

            It takes great restraint to not get snarky when assaulted by snark. I just have to remind myself that these discussions never change anyone’s mind. There’s almost nothing more unsatisfying than playing handball against a curtain.

          5. JLM

            .I am completely offended — both personally and professionally — by the notion that any idea as fundamental as balancing the budget, adhering to the Constitution or retaining the fruits of one’s labor would even be identified as “conservative” when they have such a complete and total grounding in the writings of the Founding Fathers.These are not even new or novel ideas. They are a plain spoken recitation of the utterances of the men who founded the country.If your ideas cannot play in the heavyweight class, then indeed step to the sidelines and let the larger ideas have a go at each other.There is nothing personal or disrespectful or snarky about any of these ideas or the manner in which they are delivered.One of the problems with liberals is that they have a complete intolerance for any idea that is not identical to their own and have very, very thin skins.You need to get over it and engage in normal discourse.JLM.

          6. ShanaC

            a) I didn’t say any of thatB) I find everything you say to be equally true about conservative positions as well.c) i’m not a liberal, I’m a paternalistic libertarian – http://en.wikipedia.org/wik…d)if we’e going to have this discussionNo where in the constitution does it say “we need to have a balanced budget”I also find it very odd that you would say that Modern liberals as defined in the US meaning would be against others having the fruits of their labors. Fundamentally, liberals don’t necessarily have position on keeping the fruits of ones labor – if anything if you read die hard liberal sites one of the main complaints that as a middle class person, it much harder to keep the fruits of ones labor than if one is wealthy.This is neither here nor there though. The fact that you post the comment above proves my point – the site discussion today is not going to discuss the underpinnings of liberal or conservative philosophy and where any of us should think these philosophies should be

        2. raycote

          I think the financial industry does a great job of proving just how fuzzy that line between MAKERS and TAKES can be.

          1. JLM

            .The government does society a disservice when it attempts to pick winners and losers.In the recent madness, Wall Street caused many of the problems, got some sack cloth and ashes and re-emerged unchastened and stronger than ever.They took what government let them.Why not? The US Treasury is just an arm of Goldman, no?JLM.

          2. LE

            Son of Blankfein getting married:http://www.nytimes.com/2013…I got a kick out of the fact that he is pursuing an MBA and will go to work for Bain.Imagine the doors that open when you are the son of a Blankfein. Must take all the fun out of things. It must be like knowing you will always sink the ball in the basket w/o having to even try hard.

          3. takingpitches

            at least some of the people I know with such parental pedigrees are completely unaware. there is one guy I know that the associates called Double. He was born on third-base, somehow back-tracked to second, but walked around and interacted with others fully convinced that he had hit a double,

          4. LE

            In the movie “Born Rich” http://www.imdb.com/title/t…a young Ivanka Trump said she didn’t understand why people were so nice to her something like “I don’t have any money my parents do” I think she was about college age.Worth watching on netflix and also the other Jamie Johnson movie was good as well.

          5. Jim Peterson

            Funny. I’ll have to borrow this saying!

    3. Carl Rahn Griffith


    4. ShanaC

      I hate to say it, but the idea of a monopoly or a corporation is unnatural. So is the idea of money, or government

    5. raycote

      Democratic-Governance like any other other tool has its services and disservices.The trick of course is in collectively fine tuning that razor’s edge.Surely democratic-governance too will improve as the network effect takes hold and forces us to rewrite our institutional structures and values ?

    6. JLM

      .Only in contemporary America could someone who favors balancing the budget and following the guidance of the Constitution be called an “extremist”.JLM.

  5. LIAD

    Policy matters get super interesting when Nation States & Sovereign Governments are the incumbents.Dept of Treasury released initial guidance on Bitcoin yesterday – http://www.fincen.gov/statu…Looking forward to USV having Bitcoin comps in their portfolio so they can start fighting that good fight too.

    1. fredwilson

      me too. thanks for that link. i had not seen it yet.

  6. JamesHRH

    I STRONGLY recommend The 500 Year Delta – http://www.amazon.com/The-5… .It provides a simple, strongly researched and powerful description of the drivers of this change.The world is trickling down – things that only ultra rich people did 50 years ago are common in the middle & lower economic stratas (travel to Asia anyone? nanny / housekeeper?).The microslicing / shattering of societal institutions is underway and will be the predominant theme of the 21st century.You are very, very right to focus on this issue and Om has, as usual, perfectly identified the focal points: philosophy, policy & politics (my favorite definition of politics is: ‘things people do when they feel they are about to lose something….’To the ramparts, my friends!!!! πŸ˜‰

  7. takingpitches

    Networks are perfect to take some power away from guilds/licensing organizations that have had cartel-like powers to control supply delegated to them by the government. Think ABA, AMA, etcNetworks can solve the quality issue better, and also allow supply expand to empower both consumers and crucially producers of these services…As I have said, networks are a better talent elevation/talent discovery/talent accountability tool where designed right.But these cause big battles. For example, we are engaged in creating a strategy to get around obstacles that the ABA has put in place to outside funding of legal services, which limits competition and innovation.

    1. Matt Zagaja

      What barriers do you speak of? As far as I’m aware it is perfectly legal for someone to fund someone else’s lawsuit.

      1. takingpitches

        Non-lawyers cannot have an ownership interest in a law firm.

        1. Matt Zagaja

          Oh yes, I can see where they can cause issues.

          1. takingpitches

            outside funding of lawsuits is also on unstable ground. some jurisdictions are moving to limit such funding (not saying there aren’t good arguments to do so), but there are also serious and unpredictable issues that could come up with waiver of attorney/client privilege through involvement of a third party. the legal precedent involving that issue is very much unsettled…

          2. Matt Zagaja

            In my legal profession class they told us that as far as third parties are concerned the best thing to do is take the money and not involve them otherwise. That does seem like a potential issue, but I have a hard time imagining situations where a third party would need to be intimately involved in the details of a lawsuit, even if they are funding it. I suppose the big thing would be attempting to ascertain if there is a point where the funded client (presumably plaintiff?) has interests that become adverse to the funders?

          3. takingpitches

            when you are funding a law suit — like in PE when you are buying a company — you like to do due diligence before making the investment and try to ensure the decisionmakers make the right decisions after the investment. Both activities threaten the privilege.

        2. ShanaC

          why is this a bad thing? I’m already annoyed with congress being beholden to others interests, I’d like my lawyers to be exempt from that in order to be good lawyers to me

        3. LE

          Not an ownership interest but they can profit by supplying the infrastructure to the lawyers (offices, equipment, non attorney labor) and make money by putting in a place a system whereby they make money as a fixed rate plus based on some other performance metric (similar to malls which charge on merchant sales figures). Same as with physicians or practice management.

    2. JamesHRH

      This is far from the most pressing issue in the US legal system, no?

      1. takingpitches

        in my view, new systems of talent elevation across industries — and how rents get re-divided to micro-entrepreneurs given one cannot count on the old job for a life model anymore — is the most important macro-economic issue there is.(Albert Wenger has a good series on this, which for some reason, has been interrupted.)Figuring out how this thesis plays out in my corner of the world — the law — is the mission of my work, and hence my post. That’s the background of my comment, nothing less, nothing more.

  8. CJ

    Jay-Z said it best, Politics as usual. I wonder how far along we could be technologically if not for the dreaded guardians of change.

  9. Richard

    As we continue to quantify society, i expect that issues of defamation will begin to play a much larger role.The elements that must be proved to establish defamation are:a publication to one other than the person defamed;a false statement of fact;that is understood asa. being of and concerning the plaintiff; andb. tending to harm the reputation of plaintiff.As you can the barriers to defame are low. Expect this issue to pop is over the next decade.

    1. Matt Zagaja

      I have to strongly disagree on this one. Unless you were a victim of a statement of libel or slander per se, you have to show your damages to recover any monetary award (see http://www.law.cornell.edu/…. Furthermore public figures (and limited purpose public figures) have the high bar of “actual malice” to clear before they can recover damages for defamation. Unless you are a celebrity or there has been lots of actual damage people tend not to sue on defamation torts because of this high bar, not to mention the associated costs of hiring an attorney. In many states (CT included) you cannot sue on them in small claims court, you have to go through the regular civil courts.After reading the links you might be prompted to ask what about bad yelp reviews or klout scores? Statements of fact are protected, as are statements of opinion. At the end of the day many of these algorithms output opinions based on the facts. Therefore they don’t fall into defamation, even though people might rely on them to make decisions.

      1. Richard

        All true , but neverbefore has an online comment carried do much weight. it is the equivalent of paying 50k 20 years ago to take out a full page ad in the nyt. A Texas couple who filed a defamation lawsuit over three years ago against anonymous posters on the Internet forum Topix.com won a $13.8 million judgment from a jury.

        1. Matt Zagaja

          Without details I’m not really sure what exactly your point/conclusion is here. Do you feel the award was excessive? Are you are surprised or dismayed anonymous posters can be unmasked if they commit wrongs?

        2. ShanaC

          this was handled previously. See, Orthomom – NYS threw out that case.(and I voted in the election that case deals with)

  10. takingpitches

    From a story in the Economist two weeks ago on the so-called “sharing economy”:”The main worry is regulatory uncertainty. Will room-renters be subject to hotel taxes, for example? In Amsterdam officials are using Airbnb listings to track down unlicensed hotels. In some American cities, peer-to-peer taxi services have been banned after lobbying by traditional taxi firms. The danger is that although some rules need to be updated to protect consumers from harm, incumbents will try to destroy competition. People who rent out rooms should pay tax, of course, but they should not be regulated like a Ritz-Carlton hotel. The lighter rules that typically govern bed-and-breakfasts are more than adequate”

    1. takingpitches

      From the same story, AirBNB’s shift in approach:”Having previously taken the position that it is up to hosts to ensure that they are complying with local laws and taxes, Airbnb has recently shifted its stance in response to a growing regulatory backlash. In October 2012 it appointed David Hantman, previously the head of government relations at Yahoo, as its head of public policy. He says Airbnb is now working with governments around the world β€œto clarify and even change” the patchwork of laws that apply to its hosts. β€œThe more policymakers and neighbours learn about our service, and the better they understand it, the more they realise that this activity should not be prohibited,” he adds.”

    2. fredwilson

      this is why we are pushing regulation 2.0 so much

      1. William Mougayar

        Someone should organize a big Regulation 2.0 conference to increase the volume on this. Gov 2.0 stuff didn’t go too far.

  11. kidmercury

    endeavors that seek to effect policy changes beneficial to the tech industry while remaining willfully ignorant of broader political issues are doomed to failure — deservedly so. the tech industry has been a complete and utter failure in its policy endeavors and it will continue to embarrass itself until it operates in awareness of the larger political paradigm rather than ignorance borne out of a short-sighted selfishness.at this point though we are late in the game. there will be a revolution within 15 years (I would wager in a shorter timeframe); it is only a question whether this revolution will be predominantly violent or non-violent, as well as who will win. strategies that live in awareness of this reality and are designed to work with the trends driving it are the only ones that have a chance of succeeding.9/11 was an inside job,kid mercury

    1. Carl Rahn Griffith

      Much of the tech industry is no more important than the white-goods sector.

    2. Richard

      Cyprus barely made the headlines. Americans protest? I doubt it.

    3. JLM

      .I agree more with you than you do with yourself.JLM.

  12. Roger Ellman

    The authors of “Rethinking Money: How New Currencies Turn Scarcity into Prosperity” speaking on Bloomberg radio the other day, about how various Time Banks in the US were given a favourable judgement deciding that there is no tax liability when people trade time spent, rather than pay to exchange labor, make interesting points about the usefulness of alternative currencies running alongside the main monetary units used within a country. One favourable judgement, one step forward.I think this example is a useful one. It may contain the ingredients, the reasoned arguments, that can be applied also to other “new” things, technology, services and more.It is also very helpful to seperate the Fear Of The New from the wishes of the entrenched ( people once found the idea of a 30 MPH train journey a bit frightening – too fast…horse-drawn delivery services were not enthusiasts of this competing new technology). They need seperate consideration to be effectively signed up as supporters rather than detractors.

    1. JLM

      .The whole world of barter is an interesting economy unto itself.While I am cheering for the interpretation of time bartering you describe, it has no chance of withstanding scrutiny any more than the first tax related barter cases — also decided in favor of barter originally.Barter operated under the radar screen for a long, long time.The barter economy has some very vigorous and vital markets — witness the exchange of real estate particularly luxury real estate. This is a huge and interesting slice of the economy. It is virtually untaxed. Primarily because it has gone unnoticed.It is further more interesting because it has inventory which goes unvalued by its expiration of time — the classic barter marginal return issue. If a property sits idle is it better to get a little bit of revenue — given that the overhead continues whether it is used or not.This arbitrage opportunity is huge and is one of the big benefits of a barter exchange which has control of both the inventory and the customers (members) and has thereby a virtual currency with which to fill “lost” or “unfilled” inventory.JLM.

    2. ShanaC

      oof, this makes bartering more complicated depending on billing. it also makes it possible to arbitrage

      1. JLM

        .Barter exchanges are quite easy and simple.A barter exchange member identifies a good or service that it is willing to deposit in the exchange. The barterer does so and makes the deposit.The exchange creates a virtual currency to allow this good or service to become transferable, values the deposit, credits the depositor’s account and advertises the good or service as being available to be withdrawn by other members.The depositor has a credit in his account held in the virtual currency, thereby allowing him to purchase other goods and services from the exchange.Another barter exchange member withdraws the good or service and has his account debited for the value of the withdrawal.At some future date, the debit must be made good through money, virtual currency, goods or services.The barter exchange keeps the books, administers the business and takes a cut.The big question becomes — how is this all taxed and when?A big thing to remember is that the business can effectively be conducted in “before tax” dollars if done well. Meaning your dollar goes about 25-50% further in this methodology.JLM.

  13. rich caccappolo

    Totally agree – and this is a key reason why huge industries like education and healthcare (and banking to a large degree) have not been disrupted…yet. Large incumbents in these industries use regulation and lobbyists and elected officials to squash disrupters

  14. jason wright

    policy, polity, power.there was a time when elites were defined by their interconnections of privilege, through education and church and creed. in a world where everyone is connected how does an elite redefine its privilege? through policy. yes, it’s a scrap. Oh for the simple life.

  15. iamronen

    great thinking and wonderful action … however at the root of it all is a rotting concept “we are in the returns business” which may taint, compromise and distort your efforts. You are doing a right thing for a wrong reason.It would be a sad historical perspective if you were to succeed in your “returns business” at the expense of the underlying potential values of the companies in which you invest.It would be a fantastic disruption if the underlying potential of the companies in which you invest were to encourage you to reshape the business you are in.

  16. kenberger

    there is a very seminal work written in 1997 called “Rise of the Stupid Network”, about why the best networks are NOT the intelligent ones once imagined, and why they are pretty tough to actually be allowed to get built. http://www.isen.com/stupid….as you can see on that page, it was written while the author was an AT&T employee, and ATT has since demanded he remove the post.

  17. Matt Zagaja

    This is interestingly timely, yesterday I testified in front of the Connecticut legislature’s GAE committee in support of a Joint Resolution urging Congress to overturn Citizens United (http://www.zagaja.com/2013/…. In my testimony I touched on the issue of ROI of policy advocacy. It’s almost negligent not to do it.That being said, while I tend to worry about corporations exerting too much influence, it is my general position they should participate and have some kind of voice. Not all policy from corporations is bad, but it’s hard to come up with some kind of bright line rule. In general I think special tax exemptions are poor policy, but I feel like I can support Google arguing for greater protection for stored communications or Uber for a new taxi service.

    1. JLM

      .The Citizens United case was decided by the Supremes.The notion that it can be “overturned” by the Legislative branch is borderline silly.Sure they can attempt to legislate around it in some form or fashion but they cannot overcome the First Amendment implications — corporations are legally “people” in the public square and entitled to their rights of free speech including political free speech.The bigger and better issue is simply campaign finance in its entirety.Frankly, I have more confidence in the corporate world than the 50% of idiots who are simply takers and rely upon government as a sugared teet to be sucked dry.JLM.

      1. Matt Zagaja

        Of course they can overturn it, see Article V of the United States Constitution:The Congress, whenever two thirds of both Houses shall deem it necessary, shall propose Amendments to this Constitution, or, on the Application of the Legislatures of two thirds of the several States, shall call a Convention for proposing Amendments, which, in either Case, shall be valid to all Intents and Purposes, as Part of this Constitution, when ratified by the Legislatures of three fourths of the several States or by Conventions in three fourths thereof, as the one or the other Mode of Ratification may be proposed by the Congress; Provided that no Amendment which may be made prior to the Year One thousand eight hundred and eight shall in any Manner affect the first and fourth Clauses in the Ninth Section of the first Article; and that no State, without its Consent, shall be deprived of its equal Suffrage in the Senate.

        1. JLM

          .Haha, a Constitutional Amendment?My bad, I was dealing with the “real” world. Please accept my apology.Yes, I am sure that it would be a piece of cake to get a 2/3s majority in each house And what a walk in the park to get 3/4s of the States to ratify it. Indeed, why not?Perhaps you would favor a simple Constitutional Convention — the last one in 1787 was a huge success though we have not had one since.Come on, reality — it’s what’s for breakfast.Well played.JLM.

  18. Brandon Kessler

    I think Om’s post was powerful because it didn’t just talk about startups versus big incumbents, but also the (inevitable?) effect on our workforce and economy. Albert’s posts on employment seem relevant:http://continuations.com/po

    1. fredwilson


      1. Brandon Kessler

        Will we see virtual rats as a symbol protesting web startups ON other web startups? Swap out your twitter image with a virtual rat… Curious what @albertwenger thinks.

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  20. JLM

    .I applaud activism of all types — engagement at all levels.The challenge is to know where to start and stop.Is it advisable to be engaged in only discrete policy issues or to take a larger view and look to “politics” writ large as the driver of the policies — all policies — themselves.Work on the issues individually and abstractly or work on the leadership holistically?To take Fred’s initiative — work on issues which impact the USV businesses or elect leaders who will be good for all business?JLM.

  21. Steven Kane

    Have you yet had a situation where policies you favor because you are “in the returns business” conflict with policies you favor because you are a human being?You know I am extremely in favor of you being in the returns business. Amen. And I trust you personally, intrinsically.But “policy stuff” coming out of businesses is usually called lobbying.And even the most altruistic people and motives can become distorted by the profit motive.Couple cases in point. Oil companies are hugely successful lobbyists and we routinely decry their influence. But oil companies counter that they have extremely altruistic motives, and they do — supplying inexpensive, abdundant, readily available energy to the human race. Imagine where we’d be without cheap energy! But the profit motive prevents them from recognizing or acknowledging that fossil fuels are short term beneficial and long term harmful. Likewise, I would argue, the big pharma companies, which spend trillions on curing E.D. (first world problem) but almost nothing on curing malaria (third world problem).And lately I have been annoyed bordering on alarmed by how Silicon Valley (broadly speaking) conflates their own profit motives with “what’s best for humanity” — for example, the now implicit assumption that “innovation” is a societal good no matter what, or that “innovation” and “the future” takes automatic precedence over any other concern, eg “the present.” Its an extreme example but I have a friend who is obsessed with shipping Kindles to remote villages in Africa. Not malaria nets. Not clean water systems. Kindles. And, of course, gasoline generators to power them.So, I’m curious — have you yet experienced a conflict between good policy for “returns” and good policy for humans?

    1. FlavioGomes

      Sugata Mitra comes to mind. Kids teach themselves with access to technology.http://www.ted.com/talks/sugata_mi…Those kindles might kindle the desire to build their own nets and water systems.

      1. Marian Mangoubi

        but that’s a long term solution to an immediate need. if they don’t have the nets now, they may not live to build their own nets and water systems

    2. fredwilson

      great question steve.i would not lobby against privacy legislation even though the legislation might be bad for our portfolio because i believe that society needs to have rules around what big companies do with our personal data.i would lobby for ehailing in NYC because i think it would be great for everyone (cabbies and passengers) if we could hail a cab on our phoneso yes, we do think about that a lot at USV. Brad always says “can we take the moral high ground?” on this issue. if we can’t, we don’t get involved.

  22. ShanaC

    Does anyone beyond me find the original om article disturbing in terms of our representation by data being a large popularity contest? Measuring workers can be a GIGO problem

  23. hungrygardener

    This has incredible implications in emerging markets; especially in sub-Saharan and southern Africa. You are going to see knowledge passed up and down the connectivity chain with not only economic impact but political as well. One simple example: imagine a villager in Uganda entering name of her town in simple $10 phone and being able to see $ on water projects funded by World Bank (via open government data) in her area and then “witnessing” whether or not the funds where well spent or stolen. Huge implications across emerging markets.

  24. Dave W Baldwin

    Moving from the generation not connected to the generation connected is a long transition.The mention of engaging Senators (and Reps) is right on. To have a bigger impact will require patience and organization. If someone were to state positions in short easy to read fashion, these positions could be sent to everybody’s Sen/Rep. The key is NOT to go beligerant, but be firm and straight forward. Then when you get the standard response, answer back.This would require organization in a network where you can share what you’re doing with others in your own network.This is the only way around the stated feeling of helplessness because everything required involves big cash when engaging Congress.

  25. William Mougayar

    We need to “invert” the government-citizen relationship. Instead of us, citizens being at the government’s mercy, they should be the ones working for OUR agendas and priorities.The special interests groups have more power than the individual voters together- and that is the real issue.Al Gore is laying it all out in his last book.

    1. Kirsten Lambertsen

      +1 I applaud your courage in mentioned Al Gore in this forum πŸ˜‰

      1. Carl Rahn Griffith

        He invented the Internet! (Al, not William, that is).

  26. Jim Adler

    Great post Fred. This has been my charge working at the intersection of technology and policy for more than a decade. If technology is about knowledge, policy is about wisdom. Unfortunately, knowledge has been scaling exponentially and wisdom merely linearly. We need to change that. Such is the subject of my latest post, “The Geeks, Suits, and Wonks Convene at Strata”: http://jimadler.me/post/450



  28. John Revay

    “activist in residence”That in of itself sounds disruptiveOnly at our favorite VC firm

  29. pointsnfigures

    I am late to this party,but reading the comments have been interesting. What’s really interesting is that no one has talked about what the economic incentives of government itself are. Do we think it’s immune?The founders set up the Constitution to protect the people from govt. That’s why the founding docs talk about inalienable rights.Govt, no matter which party runs it-always encroaches upon freedom of individuals. It’s just like a business, and needs to grow by taking taxpayer dollars to increase revenues, increase headcount and breadth. Governments are not immune to all the economic forces that stimulate growth of business-and because they have almost zero constraints, they can defy the laws of economics sometimes.90% of the VCs and entrepreneurs I run into caucus with the Democrats. Yet, the Democrats encroach on civil liberties and choice (for individuals) even more than the Republicans. Both parties have crony capitalism built in.Industries, unions, firms all lobby for regulations that slant the playing field in their favor. Only the small nimble startup can smash it up. But, startups can only do so much-which is why Fred is right. It’s good business to pay attention to what the hell they are debating in the brown paneled rooms in DC (and your state and local govt too).One stroke of the pen can kill you. Look at Intrade. Check out the fight Uber has. Look at what they did to Microsoft.Why shouldn’t we just remove ALL restrictions on bandwidth, spectrum etc and let it be a free for all. It’ll be messy for a while but businesses will figure it out and consumers will get the best deal.I know from personal experience what the legislators can do to you. Try riding a massive position in the futures market while they are debating sometime. Each sentence can cost you thousands of dollars before you can blink.That’s why I don’t understand the recoil by many at a more libertarian party. Less government means less lobbying for favorable regulation. It means entrepreneurs and companies can fight it out in the trenches. Who ever creates the most value efficiently wins.What are you afraid of?

  30. pointsnfigures

    I don’t know if anyone saw this or not. Don’t buy Gold, Buy Bitcoin. That’s what they are doing in Spain.

  31. andyswan

    Everytime I hear the word “progressive” I check to see if my wallet’s still there.

  32. kidmercury

    peer progressive is a made up word that has no meaning and no clear implications.

  33. kidmercury

    USV’s thesis is invest in large engaged networks. that’s a business strategy that contains no implicit reference to policy. if it cannot be boiled down to 3 sentences or less, it’s not clear enough. on top of that, at the end of the day, these “peer progressives” vote for and financially support politicians who support CISPA, SOPA, war, deficit spending. they make no effort support anything else, aside from the occasional blog post to complain about what they voted for. sounds pretty normal to me.

  34. kidmercury

    in my opinion, a person or group’s stance is determined by three things:1. who they gave money to2. who they voted for3. what they say and who they endorse (and what they don’t say)look at the people who invented the ambiguous, lacking-a-succinct-definition term peer progressive, and see who they voted for. did they vote for candidates who were pro SOPA? did they give money to those candidates? of the few candidates that were openly anti-SOPA, did they bother to mention this or endorse this at all? if they contributed/supported to both pro and anti-SOPA candidates, how was the balance divided?you’ll find they supported the pro-SOPA people and scarcely gave a mention to the few anti-SOPA politicians. they may cite it as unrealistic to support anti-SOPA candidates, though i find it humorous they find it sufficiently realistic to make up their own ambiguous term instead and champion it as a viable political cause.

  35. kidmercury

    i feel slightly uncomfortable citing names because it could be construed as an abrasive personal attack. if you read my comment, ask yourself who is using the term peer progressive, and observe where this dialogue is taking place, it should not be too hard to get the idea.but let’s flip the question, since you can provide some evidence too. who uses the term peer progressive and can honestly say the bulk of their political efforts were directed towards candidates who did NOT endorse SOPA, PIPA, CISPA, ACTA, etc?