Posts from September 2018

Farsighted

My friend Steven Johnson has a new book out called Farsighted.

After attending a book talk he did on Thursday night, I put it on my Kindle and started reading it last night.

The book is about decision making, specifically “life-altering decisions” with long-term consequences.

In classic Steven fashion, he combines a detailed look at academic research and science on the topic with stories and real-world examples.

For example, he kicks off the book with the decision NYC made to fill the Collect Pond in 1811, which ultimately led to the creation of one of the most famous ghettos, the Five Points neighborhood.

We all make big and important decisions in our lives and in our business. So this is a topic that should be relevant to everyone.

I am already enjoying reading it and I suspect you all will too.

#life lessons

Reinventing Education

Alibaba founder Jack Ma has announced that he plans to retire at age 54 and turn his attention back to education. He started his career as an English teacher.

It seems, from reading the piece I linked to and a few other news reports, that Jack Ma is inspired by what Bill and Melinda Gates have done.

So am I.

Bill Gates attended AFSE, a school that the Gotham Gal and I helped to start seven years ago, this spring and he wrote this recently about that experience.

Many have criticized the work that the Gates Foundation has done in education over the years.

But my view is different.

Bill and Melinda are investing, learning, evolving, and adapting their efforts.

Just like we all do in life.

Bill’s visit to AFSE showed him something he liked. He was inspired by it, wrote about it, and I suspect it will influence the way he thinks a bit.

Like Jack Ma, Bill and Melinda are relatively young and have so much capital to invest in education and their other target areas.

The impact people like Bill, Melinda, and Jack can and will have on education around the world is immense.

And we need it.

Education is provided very unevenly on planet earth.

A high-quality education is easy to come by if you are wealthy and/or live in a wealthy country.

But even in the US, a very wealthy country, we have much of our population receiving a poor or uneven education at best.

I see this in the NYC public school system where I do most of my education philanthropy.

We have 1.1 million public school students here in NYC and many of them are not getting the education they need and deserve.

The reasons for this are many and the solutions are hard.

But I see amazing things happen in the middle of this mess and I know that we can help more kids get a better education and we are doing that.

Reinventing education requires not just working inside the established systems, it means working outside of them and ultimately rethinking them and replacing them.

But all of this has to happen in parallel. We cannot let the existing systems falter and fail our children while we are busy finding better ways.

At USV, we have a number of exciting portfolio companies that are rethinking how education should work. Companies like DuoLingo, Quizlet, Codecademy, Skillshare, and Top Hat.

Part of the answer is backing entrepreneurs like the ones behind these companies to come up with better, less expensive, and more available education solutions for our globe.

And part of the answer is changing the way employers think about education. At USV, we do not require any sort of degree to work for us. But we require skills, knowledge, and curiosity. Many larger companies are starting to do the same.

The internet and technology writ large are making it a lot easier for someone to learn something. But we have barely scratched the surface of what is possible. Twenty-five years after the emergence of the web browser and the commercial internet, education still works largely like it did back then.

That is going to change, is changing, and I am very excited for it to happen.

And I am happy that massively successful people like Bill and Melinda Gates and Jack Ma are focusing their capital and productive energy in this area.

I am too.

#hacking education

Video Of The Week: Elon Musk on Joe Rogan Experience

I have never been as obsessed with Elon Musk as many are in the tech sector. We own two Tesla cars. We pre-ordered Tesla’s solar roof tiles several years ago but have not yet received delivery of them. I appreciate his ingenuity and creativity and we like the Tesla products we own. We are not and have never been shareholders of Tesla or SpaceX.

With all of that disclosure, I want to share the video of Elon’s appearance on Joe Rogan Experience as the video of this week. Much has been made of Elon’s decision to take a puff on a tobacco/weed joint on the show. I don’t make too much of that. I’ve been around people smoking pot since I was a teenager and I think it is a lot like alcohol. I believe it is fine if it is done responsibly and appropriately and I am pleased that it is becoming legal in many states around the country.

What is more interesting to me in this video is how introspective and thoughtful Elon is in this interview, particularly about the role of AI in our society and the likely impact of AI on our world in the coming years. It is a lengthy conversation, but worth watching if you have some time this weekend.

#machine learning

Feature Friday: Android Smart Notifications

With the new version of Android comes intelligence around mobile notifications.

If you tend to swipe away notifications from a particular app, Android eventually asks you this:

I told Android to keep showing these project updates to me even though I tend to swipe them. I like to see these but don’t often click on them.

I would say that most of the time, I select “Keep Showing” but some of the time I do choose “Stop Notifications.”

I love the idea of a smart operating system that learns how you want to use it and adapts to that versus forcing you to do the configuration manually and that is where Google is clearly going with Android.

You can really see it in the latest version of the OS.

#mobile

Investment Risk Tolerance By Gender

Our portfolio company Stash, which offers a super simple mobile investing app and has roughly 2.5mm users, did some analysis on male and female users to see if there was a material difference in risk tolerance between men and women on their service.

The conventional wisdom is that men are risk takers and women are more conservative.

Stash found that there really isn’t much difference between male and female users of their service when it comes to risk tolerance.

And they found that women are more tolerant of the highs and lows that come with being an investor.

Check out the data here.

#stocks

Retaining vs Deleting Emails

Conventional wisdom is that deleting old emails regularly is the best way to avoid issues down the road.

My experience has been different.

I’ve been involved in a few legal matters over the years where email discovery has been done.

Going back and re-reading emails you sent years ago is a pretty enlightening experience.

What I have found is if you have the right intentions and act reasonably and responsibly, old emails often show that to everyone and can be valuable.

Being able to go back over old emails is also a great way to jog a foggy memory.

So while I understand the challenges with having a lot of written and discoverable emails “on file”, I would argue they they often can be quite valuable.

#life lessons

Back To School

Growing up, I always enjoyed the up and down patterns of work and play.

Back to school in the fall, a solid winter break, back to school for winter and spring, and then a long summer break.

Just as you were getting burnt out on school, a break would come along.

By the end of the summer, you were ready to go back to school and there was an excitement about it.

That doesn’t exist so much in the adult work environment unless you live in parts of the world where a long summer break is part of the picture.

As The Gotham Gal and I have moved beyond our child-rearing years, and found a way to work from wherever we are, we are recreating that childhood rhythm for ourselves.

We are wrapping up our summer today and heading back to the fall season in NYC.

It’s a bit like that back to school feeling, with a new lunchbox, some new clothes, the possibility of some new friends, and an excitement about all of that.

#life lessons

Human Capital

Today is Labor Day in the US. It is a day to celebrate labor, the union movement, and the role of the worker in our economy and our society.

I have always struggled with the idea that labor and capital are intrinsically opposed to each other.

It is obvious that workers have been taken advantage of by employers since the dawn of an industrialized society and possibly/probably for much longer than that.

But does it have to be that way?

In the tech sector, we typically issue between 15% and 25% of the company’s stock to the employees and we keep granting this equity as the company grows and expands.

And it is also the case that the tech sector is largely a non-unionized industry.

There are large portions of a tech company’s workforce that are in short supply, most notably software engineers and other technical positions where demand outstrips supply and has for as long as I have been working in this sector.

So there are things about the tech sector that are different from other large industries and I’ve always felt that human capital (as we like to call the people in the tech sector) is more valued in tech companies than traditional industries.

But when a tech company stumbles and starts bleeding cash, one of the first things to go is headcount.

Capital demands that a company have a profitable outlook or it will not flow to a company.

So there are fundamental economic realities that put capital and labor in opposition to each other at times.

But both capital and labor want sustainable companies that grow and prosper.

So it can be the case that labor and capital work together and succeed together.

And that has largely been the case in my career in the tech sector and I enjoy that feeling of shared success.

#VC & Technology

Peak Valley?

The Economist has a cover story this week called Peak Valley.

The article suggests that Silicon Valley’s lead as a hub for innovation has peaked and other regions are rising. It ends with the concern that innovation more broadly has peaked.

I somewhat agree with “the rise of elsewhere” narrative and disagree that innovation has peaked.

Our experience at USV has been that we can and do find high impact startups to invest in outside of Silicon Valley but that we find just as many in Silicon Valley.

In our first four funds spanning the vintage years of 2004-2014, we have had twelve very high impact startup investments. Seven of them were from outside of Silicon Valley and five were from Silicon Valley. The seven outside of Silicon Valley came from NYC (four), Pittsburgh, London, and Austin. Each of the funds we raised and invested during that period have had at least one high impact investment in Silicon Valley and at least one outside of Silicon Valley.

But our data set is small. We made investments in a total of sixty to seventy startup companies in that period. And we don’t invest in Asia, South Asia, Africa, The Middle East, and Latin America so we don’t touch large swaths of the area outside of Silicon Valley. And we are based in NYC so we have a home-court advantage there.

My point is that it has always been possible to build a high impact startup outside of Silicon Valley and invest in it too. But if we were to stop looking for investments in Silicon Valley, our opportunity set would be significantly reduced.

What is true is that Silicon Valley has gotten extremely expensive to operate in. We see that across many dimensions. Valuations of startups in Silicon Valley are significantly higher than outside of Silicon Valley. Cash compensation for employees is significantly higher in Silicon Valley than outside of Silicon Valley. Equity compensation for employees is significantly higher in Silicon Valley than outside of Silicon Valley. And the cost of living for employees in Silicon Valley is much higher than outside of Silicon Valley.

All of that means that capital (both human capital and invested capital) needs to achieve a much higher return on input in Silicon Valley than outside of Silicon Valley, all things being equal. I am not sure all things are equal though and that is really the rub.

Silicon Valley has always had one important advantage over other regions when it comes to the tech sector. There is a much higher density of talent, capital, employment opportunity, and basic research in Silicon Valley versus other locations. When I say density, I mean physical density. If you walked a mile, how many tech companies would you pass along the way? That metric in Silicon Valley has always been higher than elsewhere and still is. So even though the return on capital (human and invested) has significant headwinds in today’s Silicon Valley, it is still a lot easier to deploy that capital there. And I think that will continue to be the case for a long time to come.

The Economist piece ends with the observation that some macro dynamics (large incumbents capturing the lion share of the economics in tech and bad governmental policy toward tech) are making innovation harder. While both observations are correct, I do not think we are seeing any downturn in global innovation. What is happening outside of the US, particularly in Asia, is amazing and there are many new sectors that are just emerging now that will drive innovation in new and exciting directions. Things always look darkest right before the dawn and I believe we are seeing the dawn of a number of important new sectors. And I think Silicon Valley is on to all of them and will make a play in all of them. But so will many other regions around the world.

#VC & Technology