Witch Hunts and Public Data

I was reading a thread on Hacker News this morning and came across this gem of a comment:

One of the consequences of a public transaction chain is the great potential for witch hunts. Here's one of the first examples, but it surely won't be the last.

The backstory here is a couple researchers posted a paper suggesting that Satoshi (the inventor of bitcoin that nobody knows) had done a large transaction with the founder of Silk Road. That was picked up by the New York Times last weekend. Well it turns out that was not what happened. What happened in fact was this.

When things are public, like the bitcoin block chain where all the transactions clear, then people can and will look at the public data and speculate on what it means. We saw this happen as well with all the public smartphone photos that were taken and published during the Boston Marathon bombing earlier this year.

I realize that the collateral damage from this activity is the potential for reputations to be smeared and real damage to be done to entirely innocent people. But I think radical transparency is, over the long term, a force for good and not evil. And I believe we will see more of it not less.

In our weekly meeting on monday, my partner Brad suggested we start looking for accounting systems that allow businesses that operate entirely on the web and mobile to start publishing their financial data publicly in real time. His assertion was that by making your business totally and completely transparent to users, customers, employees, and suppliers, you will increase trust and that will lead to a more sustainable relationship with all those parties over time. So we are looking for that now. If you have something like that or have seen it, please leave a comment here.

But more than just accounting and payment systems, I think we will see all the systems we use in our lives become more transparent over time and the data that becomes public as a result will provide countless opportunities to be analyzed, optimized, and yes, sensationalized. No good comes without some bad. That's the way forward progress works.


Comments (Archived):

  1. jason wright

    the one factor that will never change is the human one, the one that can never be entirely transparent. It’s part of what makes us what we are, the most complex entity in the publicly known universe.The Satoshi persona will always be subject to random and repeated ‘reconfig’ until s/he decides to end the myth and become the legend.

    1. JimHirshfield

      There’s truth to that. An exception might be politicians (NOT saying they’re transparent). Most candidates for President of USA disclose their finances – at least their tax returns. I don’t think Romney did, however.

      1. Matt A. Myers

        It wouldn’t be hard, given you know you’re going to do this, to re-structure your finances and networth on paper.. so it’s really all for show.

        1. JimHirshfield

          Just an edge case example perhaps. Not making this my steak in the ground point. Just demonstrating to @jasonpwright:disqus that there are cases where finances are purportedly made public voluntarily.

      2. Kasi Viswanathan Agilandam

        Not at all … when it comes to Policies …especially foreign policy … they have to be big time the opposite.

        1. JimHirshfield

          I thought we were talking about company finances, not everything being public.

      3. PhilipSugar

        Why bring partisan politics into this? One can google your question and get the NYTimes answer that yes he did: http://www.nytimes.com/2012

        1. JimHirshfield

          My mistake. I wasn’t trying to be partisan. I was just being misinformed. :-/

    2. PhilipSugar

      A wonderful fact to reflect upon, that everyhuman creature is constituted to be that profound secret and mystery to everyother. Dickens

  2. Tom Labus

    It’s a giant leap of faith to go real time with your finances especially if you are struggling and under the gun.

    1. Kasi Viswanathan Agilandam

      IMHO it is more of ‘confidence’ than faith….faith can take you to translucent and not the extent of transparency Brad is talking about..

    2. Dave Pinsen

      True. But I’ve seen some profitable, publicly traded, nano cap companies take forever to file unaudited quarterly financials. A little more timeliness and transparency with those companies wouldn’t hurt.

      1. Tom Labus

        No question, delayed financials is sending up a flare that you’re in trouble

    3. MickSavant

      Is it even possible to go real time? That implies a LOT of work. Imagine the effort that goes into quarter close being applied every day. We talk about how short term focused companies are, managing quarter to quarter. Imagine how much worse that would be.

      1. Tom Labus

        Guidance should always be long term but tough to do these days. You can get whacked big time for anything. Which makes Bezos and AMZN all the more amazing

    4. Anne Libby

      And some people, insiders, aren’t ready for real time finances.I’ve experienced a range of resistant behaviors when sharing financials. (And also experienced the benefits of people understanding, too.)

      1. Tom Labus

        Unleash some weird politics too

  3. Matt A. Myers

    More often than not, a good solution will have some negative side-effects that merely requires another good solution to be added for counter-active measures – and not the dismantling of the first good solution.

  4. Kasi Viswanathan Agilandam

    We need masks only to hide our bads/shames. If you are doing good and great then you tend to be more transparent.But be warned it is very hard to be totally transparent….but hey…people who take on very-hard jobs only make a difference or dint on this earth. Good luck.

    1. JimHirshfield

      But Kasi, many companies hide their financials for competitive purposes; not bad or shameful. I’m not saying that’s necessarily a valid reason to hide your financials (competition), but it is another reason.

      1. Kasi Viswanathan Agilandam


        1. JimHirshfield

          Yeah, competitive = fear

          1. Anne Libby

            It’s not all fear, though. It’s also about the drive to excel.

          2. JimHirshfield

            Competitiveness is indeed tied to a drive to excel. But competitiveness as a reason to hide your company’s finances? I’m not sure there’s evidence to show that that leads to excelling.

          3. Anne Libby

            Oh, agree. Just responding to “competition= fear”…We’re complicated machines!

    2. Anne Libby

      Self-awareness is a limiting factor for “transparency.”

  5. Matt A. Myers

    Re: “[…] completely transparent to users, customers, employees, and suppliers, […]”Don’t you see this leading others to squeezing you to your margins?Imagine if USV did this with their investments/investing? How does that look?

    1. JimHirshfield

      They’d likely look awesome as compared to the deal terms some less reputable VCs dish out.

      1. Matt A. Myers

        Right, though in the VC ecosystem, isn’t the ability for “shitty terms being functional/possible” as way of business in part because of the overall how we don’t support each other in society? If there was a really good idea, road map laid out, costs outlined, etc. and it just needed $1 from 1,000,000 people to get started – and if it was something I’d love and find useful, I’d surely pay the $1. And if there were 10 such projects that would add value to my life, I’d pay $10.I’m also talking from a frame of reference where if we all were taken care of – shelter, food, other needs met (to allow for a good quality of life) – that this pressure wouldn’t be on us so much, and there would be the time to plan things out, to network, to gain the support of others, etc.. instead of “oh shit, I’m running out of money and I won’t be able to pay for my shelter and food, I better try to get VC even though I’m badly positioned.”Society would be so much more productive.. blows my mind to think we’re not there yet, yet I understand that most of us are currently caught in a web and system of fear (money and time scarcity) – and it’s hard to learn new ways under those conditions, it reenforces behaviour you need to survive in today’s structure, blocking or disabling creativity. Fear’s a fucker.

        1. JimHirshfield

          Sounds like communism. It’s been tried. Unfortunately, humans gonna be humans —> favoritism, corruption, selfishness….

          1. Matt A. Myers

            – Transparency helps with that – and those are all issues with governance and community, sense of community, etc..- Not everyone will be ready for it all at once. Some people will try to maintain their power, even if it means keeping their society in relative desolation.- Curated networks allow this to be possible.I’ll be sure to send you the the link to the signup / application form once it’s ready. 😉

    2. Kasi Viswanathan Agilandam

      Matt … one can run nude if he/she wishes to do so … but can’t compel their family to run with them :-).

    3. Dave Pinsen

      In investing, what counts more is returns net of fees.

    4. fredwilson

      We do

      1. Matt A. Myers

        I guess it’s just not in an easily digestible form or place then.And it’s also a gain/benefit for your particular VC business, however not for all the others – though you’d need the others data to show more of the value of your offerings, no? At least in a quantitative sense.

      2. PhilipSugar

        You publish every single transaction you are contemplating before you complete it?

    5. Julien

      “Your magin is my opportunity”. Squeeze your margins yourself before someone more agile comes and does it for you!

  6. JimHirshfield

    I think it would be very helpful if startups exposed their finances in a crowd sourced fashion. Imagine all the free advice they’d get.More mature companies could get vendors bidding competitively for their business if it was known, for instance, how much they spent on office supplies.And so on.

    1. Matt A. Myers

      Imagine all of the competition they’d gain who’d gain the same insight. This is why companies are built behind closed doors or semi-private networks of advisors, boards, etc.. all who have some gain or incentive usually for that specific company they’re helping to be successful and beat out competition. In a crowd sourced fashion, they’d get a quantity of advice, not necessarily quality advice.

      1. JimHirshfield

        For sure on the quality vs quantity issue.But how does my company lose if my competitors know I’m spending say, $30k per month on employee compensation? Aren’t we all better off if I know my competitor is paying $7000 on rent?The above type data points can create opportunities for me to save money on expenses (find an office with cheaper rent). But I don’t think any of that data will mean my competitors will sell more or build a better product than my company.

        1. PhilipSugar

          Are you kidding me? Lets take your rent example: Doing well the landlord will want to charge you more. Doing poorly? She will make you the entire term pay upfront. Rinse and repeat for every transaction you do.I know how much you are paying people? Pretty damn easy for me to make better offers.Want to do this little thing called sell your product (I know that is a quaint idea these days) I’d like to pay you your COGS.

          1. JimHirshfield

            I agree with you, but only in a scenario where there are a few parties participating in the openness. With scale, the landlord wouldn’t be able to get away with the tactics you describe. There would be other landlords vying for my business. To a certain degree, this already exists in that there is sufficient transparency of rental prices, so landlords need to be aware of market rates. And as is common practice, landlords already demand to see occupants financials.

          2. PhilipSugar

            If your finances were bad, the only place you could rent would be in the ghetto.

          3. JimHirshfield

            That’s true today under the current modus operandi. What’s your point?

          4. LE

            Transparency also doesn’t allow you to adjust pricing to take advantage of each situation differently and maximize profit. Unless of course you publish bracket pricing and play games with that. I’m glad that car pricing isn’t fixed. That way the other guy subsidizes my discount.Before those apartment books came out with pricing in the 80’s when I was in the printing business I came up with that idea to have a book with only apartment pricing and ads. I ran the idea by one of my customers (owned several large buildings) and they told me that it would never work in Philly because the building owners wanted to control who lived in the building and if they published pricing they couldn’t jack up the pricing to keep out the undesirables (or something like that). I dropped the idea at that time. Later of course this became an entire business that worked and it is quite common today. The lesson I learned was of course to ask more than one person. (The other idea that I almost did was advertising on self service gas pumps which was shot down by the ad agency for Sunoco who was a customer and told me their pumps were sacred and it was a no go). Later of course there was advertising on pumps. And I’m sure every guy has thought “why no ads above urinals?”.

          5. pointsnfigures

            Detroit isn’t that bad.

          6. PhilipSugar

            You are right. Bad is way too nice of a word to describe Detroit.

          7. pointsnfigures

            I brought my Kevlar here for Thanksgiving!

          8. LE

            Which is why it’s idealistic because you aren’t going to get that situation most likely. What is going to be the event that causes everyone to follow the path of transparency?

          9. JimHirshfield

            Don’t know.

          10. Matt A. Myers

            These betters offers already happen. Bigger companies like Google, who have the resources to pay more, do so.It think it comes down to people working where they want, on problems they want, with people they want.That’s why a lot of people start their own company.

          11. LE

            Lets take your rent example: Doing well the landlord will want to charge you more.I had that exact example with a tenant. They were always crying poor and that they were not doing well. Then one day I walked in and talked to some of the sub tenants asking how they liked being there (was an art gallery that rented out rooms in the gallery). The sub tenant gushed about how lucky they were to get in and that there was a waiting list but they knew somebody or something like that (iirc). This was 23 years ago. The place is still open and thriving.Doing poorly? She will make you the entire term pay upfront. Rinse and repeat for every transaction you do.Yeah I will have to assume that Jim has never run a business and is thinking idealistically.I remember when I was a kid and my father (an importer) had a heart attack. First thing he said was “if they find out in Israel that I’ve had a heart attack my credit will go down and they won’t send me merchandise”.I know how much you are paying people? Pretty damn easy for me to make better offers.Not only that but the rise in executive pay over the last few years (timeframe?) is directly related to rules of disclosure which ended up in penis envy among executives knowing what others were making.http://www.newyorker.com/ta…This isn’t a coincidence: the drive for transparency has actually helped fuel the spiralling salaries. For one thing, it gives executives a good idea of how much they can get away with asking for.

  7. Matt A. Myers

    Relating to transparency of financial transactions..I see potential in Bitcoin, though I am still worried about its adoption without other key things in place, mainly a way to largely de-value prospector’s coins somehow.I believe this could only happen through a curated network of people who will only trade with other active users – however there is a conundrum, as it’s likely hard to spend $100 million in Bitcoin, and people like keeping pools of money – however that money is from the value going up, because of everyone else joining in – and not because of the actions of those individuals; Perhaps they’ve helped perpetuate the Bitcoin system to help increase its value, e.g. prospecting, though this inherently isn’t a great reason to allot someone the power that currency holds.Perhaps another way or multiple ways are needed or possible, by de-valuing “under-used” Bitcoin — though value never disappears, it merely redistributes amongst the whole – sort of a universal law such that you can never destroy matter or energy – and so the value of that de-valued Bitcoin returns to the whole.My preference is that we can trace money flows, even if somewhat anonymous. I suppose there could be voluntary self-reporting as to what you own.Do I want to take money that was created due to a forest being irresponsibly cut down? Or someone who’s involved with certain and severe illegal activity? If money flows are public then you don’t allow $300 million of drug cartel money to be laundered through a bank to be untraceable or unknown. You could in essence make that money valueless due to its associations. It could create an interesting divide based on people’s core values and morales – those who actively care about their actions and their implications, and those who don’t?I’m intrigued by the idea that money could become political, and where accountability could actually come back into play – so money is no longer faceless and disassociated from its source.Accessibility is inherently important to the success of anything. I agree that people need education and awareness related to it – and as that grows, then there will be easier ways of accessing and reaching the purchase points, and more transaction points will exist.I still can’t figure out why any businesses would start taking Bitcoin, except for if they’re trying to ride the wave to a 100x return or increase on its value.

  8. Mark Birch

    I have personally believed that such transparency is a good thing. Let the light shine as they say. Unfortunately, such principles run up against human ambition. There will always be those that look for the angle, chase the opportunity, bend the rules, and get a leg up.That being said, I believe our notions of privacy are about to face the hard realities of technology. We are only on the cusp of this transition now, and it may simply be by fiat that what we believed would always be private will indeed become publicly available and searchable. Financial, health, business transactions, markets, ownership, movement…nothing will be private.

    1. Matt A. Myers

      This is why trust is of utmost importance. And we have very little amongst each other and especially with our governments.

  9. Kevin

    That makes a lot of sense. The world and internet have moved dramatically in the direction of transparency and openness, and that is a natural fit in many ways .. But, I can’t help but think that only startups who appreciate the meaning of it and existing companies who are successful would do it. Would as truffling companies president or CFO be in a rush to publish in real time?In slightly related news, if anyone can actually explain a Bitcoin to me, that would be cool. No matter how many times I read about it I don’t truly get it.

    1. Anne Libby

      I set up a hackpad for articles/videos about bitcoin. I’ve mowed through all of the 101 stuff, and it’s making sense. (@pointsnfigures gave us some more advanced info, all of which I haven’t gotten to yet.)https://hackpad.com/Bitcoin…Anyone who can help by adding more info, articles, please join!

  10. Anthony Serina

    There is the assumption that if the data and information is made public, people will even care to look at it. I highly doubt it. What I think is more realistic is that as governments, companies etc. become more transparent big media will take the information and create rhetoric that both political parties, left & right will use. It will then be accompanied by big pictures and catchy headlines and that is how the majority of people will consume the “open data.”

  11. William Mougayar

    This sort of transparency could be a feature of existing systems. You could mark some data as public, and it would get revealed accordingly.Would USV lead by example & provide new transparency to your funds operations for example?

    1. fredwilson

      Our data is public because some of our investors are required to make it public via FOIA requests

      1. William Mougayar

        Yes, but it’s difficult to put together in one place. Why not provide it directly from you, along what you started with the interactive vintage charts?I think public data should serve a positive purpose. In as much as it does and teaches others, without harming the originator, then it could be a good thing.

        1. Matt A. Myers

          “[…] my partner Brad suggested we start looking for accounting systems that allow businesses that operate entirely on the web and mobile to start publishing their financial data publicly in real time […]”Wouldn’t this encompass that? Or it should IMHO.

          1. William Mougayar

            maybe. i wasn’t sure.

      2. MickSavant

        Would you make your calendar public, including attendees and locations? The president is required to do this.

  12. Carl Rahn Griffith

    Such transparency would be great – opacity is still far too the norm, with mark-to-market far from dead and buried…

  13. PhilipSugar

    First you can do this right now. Put all of your info in quickbooks online and setup a user called [email protected] and password: password. Make all permissions read only.I think you are a total fucking moron with no operating experience if you do that however.It must be nice not to spend one’s days negotiating with customers, vendors, and employees.Because if you do you would see what a disaster that would be.People mistake honesty with transparency.

    1. markslater

      i agree. in the startup world there is a “fake it till you make it” period which is highly reliant on the tenacity of the entrepreneur to convince the big guy to give the small guy ‘just a shot”. The type of transparency you speak of would pervert the view of the big guy potentially.”oh you have 5,000 a month in revs and 9 months of cash left? – why would i bother….”

      1. PhilipSugar

        And once you’ve made it you have the opposite side of the coin.

        1. markslater

          aghh the paradox of success…..darwin was correct.

        2. LE

          You want to be seen as doing well but no so good that people come marching in the door wanting raises. Management of information is really critical in business that is for sure.

    2. LE

      Put all of your info in quickbooks online and setup a user called [email protected] and password: password. Make all permissions read only.Forgetting whether this (public data) is a good idea or not (it’s not that’s for sure) if you were going to do this you would have one account that you use and another that you copy the data over (read only) that is public. Exposing the same system that you use even with a read only account simply invites potential problems.I think you are a total fucking moron with no operating experience if you do that however.Well I would go the route of saying “if something doesn’t make sense there must be something about it you don’t understand”. [1] But I tend to agree with the “no operating experience”. And the wording you used is pretty accurate as well. It reminds me of people who think guests don’t look in their medicine cabinet. Just because they don’t look in medicine cabinets or, most importantly, don’t have that level of curiosity. I think they call it “haven’t been around the block”.[1] For example (and this most likely isn’t the case) spreading disinformation by being transparent.

    3. Elia Freedman

      I sure wouldn’t want to work for a company that did that.

    4. MickSavant

      I think the “real time” aspect of this is pretty naïve as well. I’m not in corporate finance but a number of my friends are. One of my friends is the controller for a start up that just got acquired. From what I have seen very little can be done in real time. Real people have to make judgement calls about revenue recognition and perform manual analysis to come up with financial results at the close of a quarter.

    5. Kasi Viswanathan Agilandam

      You nailed it …. @philipsugar:disqus all through the discussion I was also confusing between ‘honesty and integrity’ with transparency ….and between ‘companies financial-ONLY transparency to total company transparency’ …On a lighter note … ex-Prime Minister of India once said on a public address on TV telecast”What do you want me to do in the name of transparency … run nude right in front of all of you right now??”.

    6. fredwilson

      the idea comes from working with peer network companies where the users create the product. and i think someone will do this and will be incredibly successful doing it.the mere fact that you make such ridicule of the idea tells me it is a very good one.

      1. PhilipSugar

        Ha! Perfect Judo move.The virtual equivalent of a co-op but instead of fruits and vegetables something like electronic content?Analogous to Esty providing the virtual market space?Ok, this platform we are discussing on could be a good example.Well played. Reminds me of my fraternity days wrestling with an Olympic Class Greco Roman Wrestler. Despite all my size and strength I always remember ending looking up at the ceiling on my back.But as the self appointed cranky old man. I hate when people tell me I need to be completely transparent and work to accomodate the “special needs” of the younger generation.Happy Thanksgiving.

  14. awaldstein

    I’m not in on this one.I certainly want to know where, how and with what things are made. And that’s my personal responsibility to my customers as well.Opening up my books, honestly, seems counterproductive in almost every business scenario I can think of and honestly irrelevant to my customers or partners needs.I must be missing something.

    1. Julien

      Secrecy is probably not a competitive advantage in the VC businesses. I believe being a great VC is about being able to maintain relationships on the long term with entrepreneurs but also investors and even partners.Flawless execution, strong and longlasting relationships, on the other end are the greatest competitive advantage one can build in this ‘industry’.

      1. Matt A. Myers

        This is actually how it would work with the rest of transactions in the world in all industries.You would get something or a service from someone or continue to get it because of their reputation and the relationship that exists – the quality that you heard they have (word of mouth, etc) and quality you know they have through experience, etc..It’s just it’s terrifying to try to think of how this would function or look when we’re all dependant on the current system, used to it – “comfortable” with it – running in survival mode, with the arguably false or exaggerated pressure of scarcity.The alternative being fully taken care of, and then your character (the base of your reputation, merely stories coming from your character) dictates or leads to the relationships and connections you build – think of it like how celebrities get treated, but imagine if it was for specific knowledge you had or teachings you offer – how good you are at helping others – and not because you’ve been in movies that entertain people.Or bringing it back to the VC world, USV will get more deal flow, be in higher demand, because how they seem to treat others.

        1. Julien

          Exactly. It’s terrifying because it means that no-one can ‘hide’: which I believe is a recipe for meritocracy.

          1. Matt A. Myers

            But wait, is meritocracy more or less terrifying than the current system where it’s for-profit businesses – some of which who profit from war and keeping systems like patents going so they can maintain their power/profits?Not sure if you’re seeing meritocracy as a positive or negative outcome?If no one can hide, though we have a compassionate society and we treat people in a kind and compassionate way, then you’d not need to worry about hiding? Taking care of everyone is in part how that compassion is put into practice, though there’s more to fostering / facilitating that.

      2. awaldstein

        Secrecy is the decision to withhold information.Peoples health issues, the % I give my affiliates for distributing my products, are private in my thinking. These are not secrets, they are personal and private.Whether you use natural materials in your product or make your products in a factory with child labor and don’t tell me, that is secret and wrong.This is never 100% this way or that, but some stuff is useful, others is not.I manage my businesses by that choice of what to share, based on what is right to share and certainly what help me define who I am to the market in my unique way.

        1. Julien

          I understand, and i do too keep many things private, but I hope I can also “release” them at some point when I feel like this won’t be used against me/my business.It’s too early in the process and many people *would* use your health issues against you or the % you give to your affiliates against you… but eventually, once people are more used to sharing and reading about those, these probably used as much against you.We had a recent story in France where one of our lady ministries (secreaty of state equivalent) went public about the fact that she’s fighting cancer. 10 years ago this would have never happened. Some people would have probably said that she should have taken a leav of absense to cure herself, that she probably could not deliver her best work… etc. Last week, people mostly thanked her because we *all* know someone who’s been sick and who kept working and delivered their best work no matter what.Things are changing, and fast.

          1. awaldstein

            I’m with you Julian 100%.My point is that to your example, it is the person’s choice to disclose. And I think that more and more will as more and more do.To have other people disclose that you have cancer is to me completely wrong.To have someone within my company, disclose financial or customer information is not wrong, it’s a crime, As it should be as well.I think this always ends in nuances. I think we all exaggerate the positive and spin the negative. We chose to disclose that which draws the picture of ourselves we want the world to see.

          2. Matt A. Myers

            “To have other people disclose that you have cancer is to me completely wrong.”Is it more the possible outcome / actions that may occur if people knew something like that? E.g. Calls from funeral homes or lawyers for will documents, other businesses?

          3. awaldstein

            I believe in personal volition Matt.That is prime.

          4. Matt A. Myers

            Not disagreeing with you, at least not in this instance. :)Volition or will, can lead to others being hurt of course. For things like murder, we send them to jail and hopefully prevent them from doing that further.However, what is the affect when – in an environment where not everyone is taken care of properly as a foundation – that money/resources are pulled away from the ecosystem as a whole?There’s nothing inherently wrong with profit – and I do agree with you, you should be able to make the decision to keep that information private if you choose. I’m just thinking through the scenarios.It would be great if all big companies were working towards solving, in a sustainable non-harmful way, all of the world’s problems, and doing so efficiently. I’d be fine with profit then, as then it’s going back into helping people. It’s just an issue when not everyone is being taken care of.

          5. LE

            if all big companies were working towards solving, in a sustainable non-harmful way, all of the world’s problemsOther than PR bullshit that’s not the function of a business. [1]Anymore than a bus or a pig can fly.[1] Like the purpose of a sports team is to win the game. That’s why it exists.

          6. Matt A. Myers

            Winning while hurting others isn’t my definition of success, unless those opted into it.

          7. Matt A. Myers

            Once a competitor gets big enough then they’ll just use the economies of scale moves to knock you out of business, which then leads to a small few competitors taking all of the profits – and lessening distribution of profits / income – and a bigger problem, pulling them away from local economies, which in part is why people move to big cities, because they have to – that’s where the money is for jobs from the big companies, which leads to other service jobs existing in those cities. Big cities inherently aren’t a problem and are good, though can reach the same scenario and values it creates in a different way.

          8. awaldstein

            I have absolutely no idea what you are saying Matt 😉

          9. Matt A. Myers

            It was a bit long of a sentence …Or can’t tell if joking with use of the 😉 ….

        2. Matt A. Myers

          Re: Affiliates – Perhaps that business model would no longer or could no longer exist – maybe it wouldn’t need to exist.Couldn’t it be argued that not disclosing your profits is a secret and wrong too? Should you be making $100 billion a year to do with what you please, when the world and its population is in a pretty shitty state right now? Just theoretical question. I don’t know the answer. If the world wasn’t in the “shitty state” it’s currently in, I wouldn’t care if you were making were making $100 billion a year; The argument that we’re slowly moving there doesn’t hold for me, especially when the companies currently making these $100s of billions are doing so, and maintaining it, in part through monopolistic systems like patents.Do the benefits for the whole outweigh the benefits for the individual? Does the whole matter more than the individual – assuming you’re part of the whole, if something is better for the whole, it’s better for you then, too, right?If there is no $ to be gained through pure transactions (cost of X resource is the same for everyone), then the added value is the You Ingredient – who you are, your character / reputation, etc.. the brands you created or aligned yourself with.

          1. awaldstein

            Disagree.It is your choice to remain a private company. You pay taxes. That is how it should be to me.It is my choice if I am doing well to donate to causes I believe in, to take percents of profits and publicly make that part of what my customers buy into.The idea that people don’t want to or shouldn’t make money by being part of the distribution chain (as you imply) doesn’t seem right nor make any sense.We are on opposite sides of the table on this one.

          2. LE

            Should you be making $100 billion a year to do with what you please, when the world and its population is in a pretty shitty state right now?It’s your money and you can do with it what you want.Besides if you give your money away people are still going to take issue with how you spend your money. Don’t you think that some people would take issue with Fred putting money and/or time into a chess team vs. some of the other problems that could be solved with that money or time?My personal favorite is Gates of course spending money overseas instead of in this country. Or something that I would find more important to spend his money on! That I don’t even spend my own money on! So that is “the public” and one of the reasons that you should just do whatever you want. Because people will never be happy with how you spend your money. And another reason to not disclose what you spend your money on.

          3. Drew Meyers

            “Should you be making $100 billion a year to do with what you please, when the world and its population is in a pretty shitty state right now?”The world is always in a shitty state. The way we live is not normal relative to the rest of the world. http://www.wri.org/sites/de

          4. Kasi Viswanathan Agilandam

            The way you live is normal and perfect normal … the rest of the world has to catch up to where you are :-).

          5. Matt A. Myers

            I highly disagree. We’re just at the extreme of edge of what capitalism leads too. It isn’t a healthy system. There is a natural balance inbetween that I believe is possible to bring to the world relatively quickly.

          6. Matt A. Myers

            There are systems that lead to every other cost in our society constantly increasing, which require us or our businesses to exploit the Earth (or rather benefitting those more who do a “better” job of exploiting) in order to perpetuate the system and increased costs, and pressures on the quality of our living.We can change these systems though. And we can bring the beneficial systems for survival and health to the rest of the world.Cost is a concept, though time is infinite – and resources are infinite too if we explore space and gather what we need. Time is money, money is time. With enough money we can get anything done (it’s a way of organizing and directing resources, human and other), and so therefore with enough time we can accomplish anything.We can accomplish it all at incredible speeds as well, as long as populations are healthy, and as long as it is done in a sustainable way – and reducing other frictions that exist to help maintain the status quo, which is not a good system.

      3. Matt A. Myers

        To add to my other comment, as an example closer to home.If your neighbour made really good jam, or has eggs, etc.. and you liked the neighbour – they were friendly, kind, helped you however — you’d rather buy from them than perhaps another neighbour or somewhere further.The one issue here is the cost of transporting goods, which currently increases the cost of a good, therefore buying a good from further away cost more money. However I believe in the future, much like with the internet costs are relatively $0 per unit (digital bits) once the infrastructure is in place, that transportation and accessibility will work in the same way, or that we should / need to create this infrastructure to exist to gain and take advantage or put these network effects into place / into existence.Mimicking virtual reality to bring its efficiencies back to the physical world. Lovely!

      4. JamesHRH

        Agreed, but secrecy can reduce headaches.

      5. William Mougayar

        Open data could be useful for benchmarking purposes.

    2. JimHirshfield

      Think of Kickstarter. Does the desire to see the company/product being pitched make you want to help them succeed? I know, it’s not full corporate finances exposed, but it’s the visceral reaction that I’m pointing to. Add to that all the other openness of the Kickstarter pitches and maybe there’s something to this opinion that openness is a good thing. Food for thought.

      1. awaldstein

        I agree that transparency is a great thing. I practice it myself personally and in my businesses to a degree. I make a choice.My point, to your example, is that yes, when I support Kickstarter projects, I tend to invest where there is clarity on how the money will be spent and the results. No question.But, does it help me and do I care (other than curiosity) to understand the books of Disqus at a detailed level? Honestly, none of my business.When I consult, I gladly sign NDAs on this type of information as I consider it private and rightfully so.

        1. PhilipSugar

          I think people mistake the word transparency for honesty and integrity.Those two are really important, but they are a subset of transparency. I agree it is very hard to be dishonest if you are completely transparent, but that does not mean you cannot be honest and have integrity if you are not completely transparent.Fred asserts he is transparent. I assert he is not. If you were completely transparent you would say we think Twitter is a good idea and we are thinking about investing in it as soon as that was happening months before actual money was invested.Almost every VC in the world would die for that information.So I can be transparent in that I post end result: my release notes to the world (I do). However that does not mean I have to disclose my finances.So Fred can be transparent in that he can post his end result (financial results) to the world, but not the inputs that get you there.

          1. Matt A. Myers

            Although it’s helpful and valuable for them to share (and they too gain further by doing this) how they got there.

          2. awaldstein

            Great distinction.No argument here.Have a great holiday.

          3. LE

            Fred asserts he is transparent. I assert he is not.I think what you are reacting to more is the naivety of people who assign a greater value of honesty and respect to something that someone does without realizing that it’s not what it seems necessarily.Not that that person doesn’t deserve respect. But not what appears to be the blind trust and respect as a complete and perfect halo.Anyway on a continuum Fred is way way over in the transparency area that is for sure.

          4. PhilipSugar

            I completely respect Fred and agree he is WAY more transparent than most. I’d like to think the same of myself.If people can see you are struggling the will want C.O.D. terms which just exacerbates your struggle.If they see you are doing well, they will want better terms and realize that it doesn’t make sense for you to try and hold the line.That is for everyone customers, suppliers, and employees. Sorry that is the way it is.BTW: I am the only one that answered the question and you added a salient point to my answer.

          5. ShanaC

            the law forces him not to disclose

          6. PhilipSugar

            Really? Which one? What law prevents him from posting his meeting schedule?

          7. ShanaC

            it is a signaling issue – he could be seen as manipulating a private market

          8. fredwilson

            i think i actually did that

      2. Elia Freedman

        I would argue that a Kickstarter project is releasing no financial data at all. They are releasing a minimal revenue goal and pricing. The latter is something every company that charges money releases publicly and the former says nothing about how the money is spent and what kind of profit to expect from the totality of transactions.

        1. JimHirshfield

          How many startups do you see announce how much they raised in their seed round? Kickstarters do that in real-time as they raise their seed round. As pointed out earlier, it’s not full financials by any stretch. I was using it more as an example of how transparency works in a Kickstarter’s favor.

          1. pointsnfigures

            Early on when I was learning this game, people told me to never say what people raised, or at what valuation.

          2. Elia Freedman

            I see your point. I never saw dollars raised as financial data, though, even though technically it is financial. I always saw dollars raised as a vanity metric.

          3. JimHirshfield

            I agree on the vanity metric to some degree. But given that projects/companies live or die based on this metric, I think it’s more than vanity.

      3. LE

        I think the “flyer” that people take and low risk on a kickstarter investment is much different than in serious “real life” with a large financial decision.It’s easy to be “mr big balls” over small amounts of money. Now let’s say someone is building you a new house or making your wedding party. You may be interested in knowing that they don’t have a pot to piss in and could go belly up for sure. But it is not to their advantage to lay out their finances so you know they might not be able to complete their commitments. And if they did and you went ahead you’d be (in Phil Sugars words) “a moron”.Kickstarter (on the individual level) is small potatoes. So it’s easy for people to be all touchy feely about the $70 they wasted on some nonsense.

      4. Full Sail Ahead

        Anita Sarkeesian kickstarter proves that stupid people will give money to equally if not greater stupid people.Now let me donate some money to Save the Whales so i feel better for the liberals and all their whales. *sniff*

    3. Elia Freedman

      I absolutely agree. Look at the hubbub over Everpix a few weeks ago. Everpix released some financial data along with its closing and suddenly the company was being ridiculed for the decisions it made. I don’t want or need that kind of criticism from my customers, nor do I need them (or anyone else) knowing how I spent money except the few of us on the inside. It’s not their business.

    4. LE

      and honestly irrelevant to my customers or partners needsLikewise I wouldn’t want to know every guy my wife looked at or what her every thought was during the day either.

    5. JamesHRH

      I think that the biggest issue is for truly innovative companies.Variations from the norm create storms.It appears that you have to have the mad PR / social skills to exist in the 21st century.

      1. awaldstein

        Thanks…I get bye and honestly love working in today’s world.

      2. ShanaC

        I don’t think that is going to change at all

    6. ShanaC

      can you think of a scenario when it wouldn’t?

      1. awaldstein

        I can’t think of any situation where I want to open my books to the public honestly.I’ve done many % to charities off of products and marketed the results. Not the same thing.

    7. Aaron Klein

      I understand where Fred is coming from with this. It’s an interesting idea.But I think the core issue here is that data is one of the most undervalued assets most companies have. Most don’t know how to use it well, but even those who do tend to underestimate its value.Case in point: if I figure out a way to deliver X product for 10% lower cost than my competitor, I don’t want them to figure out that my margins are higher. I want to reinvest that 10% into growth for a LONG time before they figure it out and adopt my approach.Peter Thiel is famous for saying that the best companies are ones that “know something is true but almost no one agrees with them.”It is when your competitors know exactly what your success rate, growth rate and profit margins are that they throw out their preconceived notions and say “hey, these guys know something is true, and we had darned well figure out what it is so we can believe it too.”

      1. awaldstein

        Really well said.I agree with you.Creating and understanding your business metrics as the other side to customer value and satisfaction is the language we speak to win.Fred is on to something I’m not completely getting as to me, intent in business is everything.I open up conversations to understand my customers and to make them part of who I am.Fred has shared knowledge here on avc to make the world of financing and startups a more understood, transparent place. For the greater good of all, including himself.Business metrics. Yours or mine. I share with care.

    8. William Mougayar

      I guess it depends how it’s done.If it’s going to aggravate you, No. If it contributes to some greater good, why not.It’s probably an experimental thing right now. Need more examples before judging.

      1. awaldstein

        Need to make certain we are having the same conversation.I”m all about being out there on the web for certain. It’s core to my brand.I’m all about the greater good, as long as it is powered by the personal one.But, I’m talking about business metrics, payroll and accounting being public.I stand ready to be convinced but am not getting how the core to my business of what and how, and margins of what I do, is either public information or in any way a greater good.

    9. fredwilson

      well i could have/should have given more context. brad was specifically thinking about peer network businesses where the users produce the product as well as use it.

      1. awaldstein

        My bad Fred actually for jumping as I knew there must be an intent behind.Have a great Thanksgiving.

  15. Christina Cacioppo

    More support for Brad’s point: a recent NBER paper (http://www.nber.org/papers/… showed that more voluntary disclosure by public companies increases the values of those companies, primarily by lowering the cost of capital.This makes some intuitive sense, too – adding in more information decreases the risk premium investors demand

    1. Matt A. Myers

      There’s the factor to consider that those companies that are disclosing this information know it will be valuable for them to do so, whereas those who haven’t yet, perhaps not.

  16. Julien

    It will be hard in the long term to praise the transparency enabled by BTC if we’re still not sure WHO created that and for what reason.

  17. Julien

    I’ve just read a bunch of comments and more than ever I am convinced that transparency is a very strong divider. You’re either “this is the best thing in the long term” or “this is the worst thing”.Yet another reason why BTC is so polarizing.

    1. fredwilson

      that’s my conclusion too. i am very much in the former camp. as is my entire partnership.

  18. Salt Shaker

    Isn’t too much transparency antithetical to the backbone and theories of capitalism? Some things are better off not being shared or disclosed. Too much transparency in biz can negate competitive advantages. What am I missing here ?

    1. LE

      What am I missing here ?You’re not missing anything.Sure you can use transparency to your advantage. But not if you total business experience consists of something you did in college or high school or if you are only book smart.Anyway just like an attorney advises a client to “not say anything” fearing they don’t know enough to know what to say or not to say it goes the same with transparency. If you are inexperienced you are only going to invite problems because you won’t know the nuance of the “some things better not shared”. The devil is in the details. You don’t know the details.

      1. Salt Shaker

        Agree “the devil is in the details,” but revealing seemingly innocuous info for one party can unquestionably be a strategic advantage for another. Like most biz decisions it’s all about assessing risk/reward, but smart, well run companies usually figure it out on their own w/out having to hold hands w/ industry competitors/colleagues. Maybe it’s how I’m wired but, figuratively speaking, I like “Hunger Games.”

    2. fredwilson

      in all my readings and teachings about capitalism, i have never once heard anyone say you have to be confidential in your dealings

      1. Salt Shaker

        i’m hardly an economist, but I’m having trouble digesting the word transparency without context. I think honesty, integrity, taking the moral high ground and having strong business ethics are more impt than transparency. I guess I need to read a bit more on this topic. today’s dilemma: how transparent do I need to be over turkey dinner w/ family :). Happy holidays!

    3. James Ferguson @kWIQly

      Perfect competition presupposes perfect information and underpins all free market arguments. Capitalism is a poor approximate but better than communism.

  19. Chris Mottes

    I use http://www.e-conomic.com for my accounting – all online and mobile, works well enough though browsers still are a limiting factor in some cases.

    1. fredwilson

      i will check it out

  20. Chris Mottes

    PS – they are a Danish company

  21. Cromwell Coulson

    While there are many reasons a early stage company with little revenues or product may not want to provide transparency of their financials, the best reasons to ignore that advice is transparency builds trust. For an established company that wants investors to commit and hold equity capital, customers to rely on their products, employees to want to make a career there and other stakeholders such as suppliers, partners, the press, regulators, etc to better understand them, regular transparency of disclosure is an imperative. What is awesome about the Jobs Act is that it is removing the previous requirement that private companies be confidential regarding their financials when raising capital. This will allow non-SEC registered companies to use their financials to get the same benefits from public financial disclosure as public companies, visibility, valuation, greater access to capital, more liquidity and a trusted reputation built on a track record of transparency.

  22. stevebrewer

    Reminded of this article: http://www.forbes.com/sites…”But here’s the key idea: competition occurs at multiple levels simultaneously, and the winner at any one level generally succeeds by suppressing destructive forms of competition at the level below.”Is it an advantage for an organization to be transparent if others aren’t? If not, how does society foster this cooperation?

  23. howardlindzon

    awesome discussion. we shoot for this at some level on stocktwits by not allowing messages to be erased. there is so much more to do here.

    1. pointsnfigures

      But, you don’t put Stocktwits financial information into the public domain. I think that’s what the post is arguing.

    2. fredwilson

      stockchat and snapchat. opposite sides of the coin!

  24. MickSavant

    Wasn’t this called Beacon by Facebook, when if you purchased something on Amazon it let all of your friends know what you bought? There was more to it than that, but I recall the whole thing being scrapped over user complaints.If Amazon or one of the banks I use or mint.com made my transaction history part of a public block chain it would be my last day as a customer.

  25. Dave W Baldwin

    Whew! The replies are going all over the place. I’d say the first step is to establish a guideline of what is to be made public and keep this in the finanacials to start with. I really don’t see where the “secret sauce” is relevent because the observer is wanting to know the money in/out. You really don’t have to put in the new office furniture order specifically.The first thing that came to mind since the subject was Bitcoin would be a running piece that has Bitcoin running in real time on a chart. You also have other charts showing vs. other commodities, precious metals, S&P or whatever. Also the ability to bring up the Bitcoin real time to the other things people bring up from the past showing their real time in relation to Bitcoin real time. Finish that off with a good pool of knowledgeable opinion/lesson regarding this Bitcoin phenom working in the intro/lessons regarding how Bitcoin works.

  26. JLM

    .This is an interesting and very complex discussion. As a guy who has run large private and modest sized public companies for 33+ years, I have a bit of experience which advises extreme caution.First, “financial information” is a loaded term. It can mean income statement, balance sheet and statement of cash flows but the real issue is whether these numbers are audited and what disclosures come with them.The issue of disclosures is probably more important than the numbers themselves. Public companies filing SEC Form 10-Q (quarterly and typically “reviewed” but not audited) and Form 10-K (annual filing and always “audited”) also file page upon page of required disclosures — stock based comp calculations, management compensation, revenue recognition policies, litigation, reserves, etc.The real valuation aspects are in these disclosures which are almost always “defensive” in nature. Look at a typical SEC Form 10-K and see for yourself.I would not really want to look at a financial statement without the disclosures.Case in point — in the recent Obamacare customer count reports they counted as “done” any customer who had placed an insurance policy in their cart whether they went forward or not. This recognition policy is fraudulent to say the least. It was in the disclosures.Shareholders of any enterprise are entitled to review books and records of their company — in Delaware (where many companies are chartered particularly public companies) this is Delaware Code Sec 220 Inspection of Books and Records.One can only inspect for certain specific reasons — to determine the pecuniary value of securities held, to investigate mismanagement by the company or to investigate Board misconduct being the big three. This makes the exchange with the company — which you own as a shareholder — a bit testy but it exists nonetheless.There is a fiduciary issue here also in that if shareholders believe their interests are better served by keeping such information confidential — a not unreasonable thought in my view — then management cannot unilaterally decide to disclose information for some “feel good” reason. Shareholders are “entitled” to the info but the general public is not.Unaudited and shallow information — information provided without appropriate disclosures — may give rise to the wrong conclusions. The dark side of the mirror from “material non-public information” being “misleading material public information” which somehow induces an individual to make a decision that ultimately inures to their detriment.The securities laws dealing with financial disclosure are fairly well litigated and settled law — look at SEC rulings and you will see that disclosures are an area of primary emphasis.I would caution very careful thinking before deviating from the current practices. Any company can make any proper disclosures and if a private company wants to mirror the required reporting of a public company, they can do just that but the notion of releasing unaudited financial information without footnoted disclosures scares the crap out of me.JLM.

    1. Anne Libby

      And I would also say that operationalizing “transparency” as an organizational value is more complicated than just saying it.It’s all transparent until you have to let go of someone (or make a particular deal, or create/defund a product, etc)…and the people are upset, angry, or otherwise displeased that this happened without their knowledge.Then you’ve damaged trust. So those who seek to hold transparency as an organizational value had best define exactly what that means…

      1. JLM

        .The issue of personnel actions is a wildly contentious legal arena and I would never ever disclose such matters beyond the obvious legal and privacy issues.Many times you cannot get it right because it’s a train wreck and one’s views are colored by whether you are on the train or a bystander.JLM.

        1. Dave W Baldwin

          I think a guideline has to be established. Too much transparency leads to too much volume. A real time breaks down into multiple timelines. If there is too much, it makes the bigger picture jumbled.If it is agreed that the number of employees is a requirement, then changing from 124 to 123 cannot be hidden.

        2. Anne Libby


          1. Anne Libby

            the @JLM:disqus comment I affirmed here is gone?

          2. JLM

            .Hmmm, how very strange. It is indeed. I did not delete it or otherwise remove it.WTF, Disqus?Perhaps the NSA is back on my case?JLM.

          3. Anne Libby

            Probably a user error, by me. I thought I replied to the other thread we were chatting in…Or NSA is getting us both!

          4. Anne Libby

            hah, now it’s back there. Time for me to logoff…

          5. JLM

            .The NSA was only “borrowing” it?JLM.

    2. Cromwell Coulson

      JLM – Interesting view considering your company’s last disclosure for Q1 has no footnotes. http://littlefield.com/wp-c…Since Littlefield Corp/ (OTC Pink: LTFD) de-registered from the SEC in February we have have it marked as a No Info company.http://www.otcmarkets.com/s…Fine for a company to save money by not being SEC reporting, but better for investors and our marketplaces if they keep making adequate current information publicly available. We make it very easy for companies like yours to continue to offer transparency http://www.otcmarkets.com/s…CCDisclosure – I am CEO of OTC Markets Group that operates the OTCQX, OTCQB and OTC Pink marketplaces for 10,000 U.S. and global securities.

      1. JLM

        .Uhhh, Cromwell, been gone for over a year. Not my deal for a long time. Sorry.Expect better research from someone in your position.JLM.

          1. JLM

            .Sigh. Keep reading. Have not been on the Board since Nov 2012.Again, expect a bit better research from someone in your position.JLM.

          2. JLM

            .This would seem to be a pretty damn good example of how folks can be mislead by incomplete public data, no?Irony, you mean bitch.No offense taken BTW.JLM.

          3. Cromwell Coulson

            JLM – You are right. I should have dug deeper. Stopped reading at the last press release saying you were still on the board. You are also right about the problem of incomplete public disclosure as when companies have information on their web site it is hard to tell when it changed, and there is a tendency to bury bad news (such as former CEO leaving the board). SEC reporting provides a good continuous disclosure framework and we are trying to replicate a less complex version with our Alternative Reporting Standard for companies not required to be SEC reporting but want to make adequate current information publicly available.

          4. JLM

            .Don’t be too hard on yourself, not a big deal in the greater scheme of things.It would be a mischaracterization to suggest that my departure from the Board was a “bad” thing. I was only entitled to be on the Board as a term of my Employment Agreement.Boards need fresh blood from time to time.I think that public companies should be compelled to report publicly. One can’t have it both ways — access to a public marketplace and the compartmentalization of information.This only leads to trading which is based on imperfect information and purposely so.Companies cannot be allowed — this from a guy who ran public companies for over a decade — or trusted to make adequate disclosures. No differently than we should be allowed to send in whatever we think is our “fair” tax burden.It is the Board which requires the tazer in the neck. The Board represents ALL shareholders. The Board elects the management. The Board oversees the managers they have selected.Shareholders have to be able to count on Boards to discharge not what they “want” to do but what is required by their duties of loyalty, care and extra care.These companies have elected to be public and they should be held accountable to the investing public or they should not be public.Shareholders should be able to speak to their employees — both the Board and the management — and demand answers and accountability.I have a fairly low opinion of small company boards and management in general.JLM.

          5. Cromwell Coulson

            Simple idea that all publicly traded companies should be compelled to make public disclosure, but it is a little more complex if you tie trading to disclosure. This is because many companies that do not require capital take a more dismissive or even predatory view towards outside investors than you do. We see companies go dark as part of a strategy to depress share prices so they can slowly buy out their outside investors. The public trading market provides an alternative price to investors and allows them to sell their shares to an activist outsider instead of just the company. I would take the view that public companies and their affiliates should not be able to trade in public markets or based on those prices unless they make disclosure public, but leave the market choice to outsiders no matter what the company discloses. Shares are property and for an outside shareholder the right to sell or otherwise dispose is an important right.

          6. JLM

            .Of course, you have hit the nail squarely on the head: “predatory”.The fundamental violation of trading on “material non-public” information should never be allowed to be overlooked.JLM.

    3. ZekeV

      Good perspective from a seasoned operator, as always. I agree that selective disclosure can be quite misleading, taken in a vacuum. But, if the purpose of disclosure is not aimed at investors but at everyone else, I’m a little less concerned about gaps. There can be reasons to disclose incomplete info. For example, and I know this is a little wacky: bitcoin gambling sites. Best practice for a bitcoin gambling site is to disclose publicly the wallet address they use to receive all funds, and from which all payouts flow. Thus, customers are able to ascertain independently whether the odds are behaving as advertised. Of course, there is plenty of room for fraud, and that info is not enough to invest in a business. But, it serves a purpose nonetheless. If I were a betting man, I’d rather bet on a site that discloses this info than one that does not.

    4. fredwilson

      yes, that is exactly the point of this post. the public blockchain information did lead to wrong conclusions. but i think by pushing the needle on this area of innovation, we can get better at this. disclosures and audits are a pain in the ass, create a ton of overhead, and maybe there is a better way. i think there is.

      1. JLM

        .While audits do, in fact, create a bit of work they are absolutely essential for the instances in which they are either required or appropriate. Audits are like personal physicals which may reveal an underlying cancer. They are not the enemy of more complete or fuller disclosure.In retrospect the accounting irregularities at some of the biggest financial frauds — Enron, Worldcom — were in the footnotes. Everyone glossed over them.I am completely with you that companies have a great opportunity to increase their reputation through a consistent, accurate communication plan. This is a strategy to improve reputation management and not financial reporting.The term transparency is not the same as integrity. Selective transparency is a bed fellow of old fashioned propaganda.Case in point — the Sec of HHS does not “know” how many folks are signed up for Obamacare in every state? Really? If I were Sec of HHS, I would have a real time chart accessible on my phone showing just that. Who would not?The other issue is one of “touting” — the selective disclosure of positive information to influence the perceived value of a security. Touting almost always entails an issue of selectivity.Sure, the info selected is good but they failed to give you the offsetting bad info.I must say that I personally have a grave wariness as to selective disclosures.Like many things, the virtue of an idea is often compromised in its application.JLM.

  27. Guest

    It’s SENSIFIED rather than sensationalized that making accounting and payment systems more transparent potentially opens up?This is an area of innovation that’s a double-edged sword. On the one hand it would increase ordinary citizens’ ability to spot and alert potential issues (cash and other asset bubbles that trigger global financial crisis) when the professionals may have a vested interest not to do so.Conversely, it also exposes the company whose accounting and payments are being publicly scrutinized en masse (and not by qualified accountants) to a level of discomfort and competitive disadvantage.I do agree with the real-time component, though.Quarterly and annual reporting isn’t as useful.

  28. Mroberhozer

    In what might be a severe case of the optimisms, perhaps the witch hunting aspect of this openness will decline as the ubiquity of openness increases. These stories are bound to come out in regards to new approaches, with early adopters thinking of ways to (ab)use the data, and the witch hunt aspect is eventually grown tired of or proven wrong ; but should this openness become the modus operandi to larger groups (early/late majority, etc), the “witch hunts” should either reduce in quantity or in relevance.

  29. ShanaC

    One of the long tail issues about radical transparency on an individual level is that it becomes harder to be transparent and true to yourself. Some things are not meant for public consumption.As much as the Book the circle hits this idea over the head, it does make this point very effectively.

    1. baba12

      The question what is meant for public consumption or not is what we are constantly battling. If we truly are transparent then is there any intrigue and if there is no mystery is there any desire to seek out that what is not transparent.In different cultures different pieces of information are deemed to be private.

      1. ShanaC

        very true.

  30. William Mougayar

    Dang…10 years ago, I was going to write a book called The Open Corporation, and started blogging about it, circa 2004 my old website:

    1. Drew Meyers

      Re-start? 🙂

      1. William Mougayar

        interesting evolution now.

    2. Anne Libby

      In the 90s I recall lots of articles in Inc Magazine about firms with “Open Book Management.” (And there was a book or books by that title?)

  31. takingpitches

    “Everyone loves a witch hunt as long as it’s someone else’s witch being hunted.”Same often with calling for others to be radically transparent.

    1. PhilipSugar

      I love this comment.

  32. Salt Shaker

    Sorry to digress, but in the spirit of transparency and openness I wanted to share with you a track from a great recording artist I recently discovered named Trixie Whitley. She’s the daughter of the late Chris Whitley, whose 80s LP “Living With The Law” is one of my personal favs. I decided to share as it’s beneficial to all and doesn’t compromise any strategic/competitive advantages. http://www.youtube.com/watc

    1. fredwilson


  33. Friv juego

    Many thanks for the article information sharing. This sort of transparency could be a feature of existing systems. You could mark some data as public, and it would get revealed accordingly. thank you.

  34. Ben Longstaff

    I wonder what would happen if government spending and the parties involved were publicly tagged in the block chain so the public could audit spending, could the potential of being audited by citizen accountants change the behaviour of government employees to reduce wasted spending?

    1. Anne Libby

      And campaign spending, too…

    2. fredwilson

      there we go. you are the first person in this thread to understand what i am talking about.

      1. Ellie Kesselman

        Fred, we already have substantial, and granular, open data due to Gov 2.0 initiatives. We even have FEC $ data, although super-PACs obscure a lot, and muddy distinctions between lobbying/advocacy funding at state v. national level. I digress, re @annelibby:disqus ‘s comment. Anyway, citizens already have the means to detect mild, and flagrant waste of public funds. Many have done so, e.g. Sunlight Foundation/ Little Sister/ OpenSecrets, using Data.gov, state and county datasets accessible by API and other methods residing in a plethora of public Github repositories. Even official audit organs of the state, the GAO and bi-partisan Senate inquiries, are increasingly impotent, despite their publicized findings, e.g. JLM mentioned Enron. A staggering amount of graft was revealed there, yet criminal and reputational consequences were negligible for many parties involved. Extant public data has been sufficient; public tagging in the block chain doesn’t seem more likely to reduce government waste.

    3. AgeOfSophizm

      this could potentially provide an answer to the question “who’s watching the watchers”

  35. hypermark

    Personally, there is a “triangulation” discussion worth having on the line between transparency (the best antiseptic is sunlight), “privacy” (my business is not your business) and “security” (what you don’t know can hurt you).This touches a number of domains from the government keeping us safe from evil-doers to the financial industry, general business practices and the rise of the cloud.A great book on the topic is The Transparent Society by David Brin.

    1. fredwilson

      i am adding it to my reading list. thanks

  36. pointsnfigures

    Contrary to some opinions being espoused by certain television and newspaper commenters these days, free markets and less control are not anarchy. Free markets are really really messy. But, they are the most efficient.Only problem with Fred’s thesis on accounting is when companies spend money on covert strategic initiatives. I may not be doing anything illegal, but don’t want my competitors to decipher what I am doing.

    1. Ellie Kesselman

      True. “Open accounting” would remove the significant benefits of non-disclosure enjoyed by (usually small or family-owned) businesses whose stock is not exchange-listed. That would give competitive advantage to larger companies. If this were implemented in real-time, you’d lose first mover advantages.If reporting were automated, compliance-related costs born by businesses might be minimal; enforcement would be expensive, as always.

  37. Steven Kane

    Sorry but, of course this post begs the question: Then will USV itself publish/make transparent its own financials?

    1. fredwilson

      they are out there on the web because a number of our LPs are FOIA compliant public entities. i guess we could go farther and just put our quarterly reports on our website. we do have to be careful because even though we want to be radically transparent, not all of our portfolio companies do, so we would need to redact or otherwise hide individual portfolio company data

      1. marccanter

        Indeed this is the first thing I thought about when I read this post “How much of his own dogfood will Fred eat?”And indeed Fred – you gave the perfect answer. Now if you could have been more honest with my claim of ageism several years ago – maybe a few grey hairs would be employed now.Your every word is hung on, and you lead a world of smart, state-of-the-art investors and stakeholders.So I see it as almost a RESPONSIBILITY that you (Fred Wilson) “out” the pervasive (stupid) ageism that permeates this industry and shoots the proverbial Startup kids’ toes off his foot – each and every time they pass-up or ignore valuable advice, consulship and mentoring – by hiring those older-then-themselves – to play decisive strategic advisory and management roles in Startups.If this problem could be fixed, then we’d be well on our way to solving racism and sexism – as well.IMHO

        1. fredwilson

          There is plenty of gray hair in our portfolio MarcBut I agree with you more than you agree with yourself http://www.businessinsider….

          1. marccanter

            And I agree that you agree – having earlier seen this post – but refrained myself from gloating – since I’m the new kindler, gentler Marc Canter.Also – all my grey hair is in my beard, keeping my youthful 40ish look and feel appearances, even though the years have flown safely over my head.Keep up the good work – and think of us old guys – when next you’re thinking about fresh, contrarian opinion being required at any of your portfolio companies….I’m looking for something “to do.”

  38. Rick Mason

    While I think that it is an admirable idea to embrace Jack Stack’s case for open book management, sharing with your customers is a step too far.Anyone remember Bipply? I am sure you do Fred because it was started by a Twitter co-founder. People shared their spending habits by linking their credit cards with the site. It was a dismal failure and I would imagine that doing what you propose would be an even bigger mistake.A few years back Peldi from Balsamiq got a lot of publicity for his startup by sharing his actual numbers on his blog. However once he became profitable he stopped sharing.

    1. PhilipSugar

      Ah, you must be over 40! I am too. I too once was young and gullible and tried that one, loved his book. You know how they say experience is the result of bad judgement…..well I have experience in this area. That is why I am so passionate about posting.

      1. Rick Mason

        Yes and I practiced open book management as well once with decidedly mixed results. It’s like Socialism, sounds nice as a theory but not in actual practice.

    2. fredwilson

      he wasn’t a twitter co-founder. just a friend of Ev’s

  39. Drew Meyers

    This is a wireframe I did almost 2 years ago…when I was still trying to design the “Zillow of travel”. This was one of the data acquisition ideas I toyed with.

    1. fredwilson

      that’s great

      1. Drew Meyers

        Twitter…for what you are spending your money on. A business could use it to be transparent about their finances…would just need to add the other side of incoming revenue. Well, eventually, the people spending money with company X would tag the fact they did so, and that would automatically stream into company X’s revenue numbers without them doing so.But what’s the hook to get people to use such a platform to record their transactions?

  40. Joe Wallin

    Fred, I love the idea…thanks for articulating it. It would indeed be a dramatic thing for a business to do.

  41. Dan

    Checkout this 2min video: in-application accounting via APIhttp://subledger.com/blog/r…

    1. fredwilson

      that’s awesome. that’s very close to what we are looking for. thanks so much for sharing it.

  42. MikeG

    Estonia is the poster child for transparency and openness for electronic data. Based on a technology called KSI (Keyless Signature Infrastructure) every transaction whether ATM, Internet or Mobile is independently verifiable in the same way that bitcoin transactions are verified by wide agreement by users of the bitcoin system. Indeed every digital event on every computer on every network has the same verification properties of bitcoin transactions.

    1. fredwilson

      that is cool. i need to learn more about this.

  43. rich caccappolo

    one of the challenges of reporting accounting system information is the time delay of receipts of data from partners and providers. I’m not sure all companies would want to share this information in a transparent fashion but I am sure we wish we could all receive it in real-time and today we just don’t. No one has a system for commercial data that is as good as those we use for tracking traffic. That may change, but it is not here today

  44. marccanter

    The notion of transparency as an element of the platform – is a key component of the “Digital City” Citizen Dashboard design.As an “economic development and workforce training” platform – Digital City Mechanics’ Digital City project strives to utilize government dollars in a more efficient manner. One of the key ways to do this – is to transparently display how funding and grant money is utilized – and also to specifically document each and every job – created because of the Program.So a Digital City instance – in say Kansas City – would display a “Job Board” which will display jobs created in the Kansas City area because of the Program. This “because” doesn’t always mean “hired and paid for” by the Program. It could mean a job placement somewhere, a project or gig procured off of our built-in ‘GigPeer’ network of job offerings. Or it could mean a part-time employment opportunity which a partner or sponsor brought to us.But if we have anything to do with helping the worker get hired and paid – then we’ll take credit for it. And publicly display it on our Job Board. The listing would include meta-data on the kind of job or task(s) it entailed, what skill sets and intangible assets one requires to do the job effectively, the beginning – AND ENDING date of the job – and most importantly – at what rate did the job pay the worker – and with what – if any – accompanying benefits the job provided.Each and every job = for full display – to show how WE utilize government (Federal, State, County, Muni) or Foundation) funding.

  45. arikan

    How would radical transparency affect an individual? Regarding to this topic, you may want to check out this software / net artwork I’ve done from 2008 http://burak-arikan.com/myp

  46. Chad Kruse

    @fredwilson:disqus Any updates to this? You mentioned Brad/USV may start looking into systems/services that could actually make real-time transparency a reality. Wondering if you guys came across anything useful.We don’t have the time to roll our own, so we’re hoping someone has already cracked the nut.If there are any enterprising young entrepreneurs out there thinking about this space, there are 1.5m companies in the US that do this already (albeit not real time)…they’re called nonprofits. Sure, it’s compelled transparency, but dig around and you’ll find a lot of orgs that want to do it both voluntarily and in a way that makes the output useful (and not with the usual 4-16 month tax reporting delay).You could probably even pitch someone like the Kauffman Foundation to fund it.Happy to serve as an early adopter for any providers out there. Feel free to contact me: [email protected]

  47. Matt A. Myers

    In our current society, though I believe that can be different once (if?) we create an environment that more fosters compassion – and even just the ability to feel compassion more easily, meaning removing the fear of survival which leads to all kinds of disconnectedness.

  48. Kasi Viswanathan Agilandam

    Yes so true …I read Gandhi had a tough decade… proving that …he can always be surrounded by girls but still control his urges …

  49. fredwilson

    Which is a shame

  50. William Mougayar

    Health data in aggregate form is very important.

  51. Kasi Viswanathan Agilandam

    I had a similar argument with my college mate (1988)… he was arguing for ‘all same, everything same, no-competitive,…etc., etc., world” … I told him that would be ‘so boring’ everyone will commit suicide …what is the point of living,then.

  52. JimHirshfield

    That was supposed to be communism, wasn’t it?

  53. Matt A. Myers

    Hold up.. Why do you assume there’d be no competitiveness? You can still have a layer of business competitiveness, and there will still be peer competitiveness – being a better person to attract others, etc..And thoughts leading to non-existence (suicide) aren’t inherently a result of boredom, boredom which perhaps you could more view as not feeling connected to others, and therefore feeling loneliness in a detrimental way. I see so many more opportunities that will exist for connecting with others, with a vast array of interests, when everyone is taken care of. And I imagine a world where public transportation is global / worldwide, and you can go from any part of the world, to anywhere else – and it being a right to be able to do so; You’ll have to manage this to prevent unsustainable situations – environmental destruction, etc. – though it’s possible.

  54. Kasi Viswanathan Agilandam

    ‘secret sauce’ yes … to that … just about an hour ago I was advising my team not spell out the name of the ‘imaging filter” we are using ….I asked them to use the term ‘enhancement 2’…just to keep the name of the filter not to reach any competitors ears….

  55. Matt A. Myers

    I honestly don’t historically know enough about what ecosystem structure was attempted then. I do however know what technology we have today, our automation capabilities, our human resources and knowledge base, our organizational capacities (internet), etc.. and the world being more global now, I believe the world is prime/capable for a society where it’s in our best interests to take care of eachother. The basic ROI on helping others is peace and connection, and the fear that there’s not enough to go around is based on scarcity. Once we take care of our own fears and scarcity, it will be much easier to digest and see the value in connecting with the broader world around us, and not scary, not worried about scarcity.

  56. pointsnfigures

    Works in theory…..; ). But, they keep trying versions of it again and again…

  57. Matt A. Myers

    Unfortunately the way most of that is interpreted is skewed by a lack of nuanced understanding, however it is better than nothing – and a start to begin with.

  58. awaldstein

    I’m the only one Charlie 😉

  59. pointsnfigures

    One of the reasons I am against government run health care is the fact they will know everything about me. A long time ago, a friend told me to pay for all my medical procedures in cash-never use insurance. So I have.

  60. William Mougayar

    And imagine if you could analyze yourself vs. others.Doctors will hate that because you’ll have more data than they do; but I predict their role will change, or at least part of it.

  61. Cam MacRae

    anonymizedImagine if such a thing was possible…

  62. pointsnfigures

    FDA just got rid of 23andme. Don’t want people to jump to conclusions on test results…..stupid. FDA is way too powerful. Unchecked federal bureaucracy. A crowdsourced FDA would be better.

  63. Kasi Viswanathan Agilandam

    not really…. he was challenged to lead his life that way as a part of ‘transparency’ …he put (or forced to put…i donno) his personal life also under the ‘transparency bucket …