Posts from Current Affairs

Videoconferencing's Moment

I am going to spend much of today in my Zoom room participating in several meetings around the country and around the world.

If you look at Zoom’s stock price over the last month, since the outbreak of the Coronavirus, you will see that the market thinks that I am not the only one who will be doing that.

The combination of limiting travel due to Coronavirus fears and the desire to lower carbon footprints tells me that we may have reached videoconferencing’s moment.

Maybe attending a meeting in person is a thing of that past and video’ing in is our future. If so, we may look back at this winter of 2020 as the moment that happened.

#Current Affairs#Web/Tech

Breaking Up Big Tech

With the news that two-thirds of Americans favor breaking up big tech combined with the news that Liz Warren (the biggest advocate of the idea) has broken out of the pack in Iowa, I thought I would return to this topic.

I wrote about this back when Liz first put the idea forward.

I am in favor of reigning in the monopoly/duopoly/oligopoly power of the large American tech companies. I am also in favor of reigning in the power of large tech companies that are not resident in the US.

Doing one without the other is bad policy and could give large tech companies outside of the US (particularly in Asia) a competitve advantage.

A better approach, as I advocated for in my earlier post on this topic, are policies, like the European’s GDPR, that would impact all companies doing business in the US equally.

I do not love GDPR. It is overly bureaucratic and for the most part has resulted in all of us robotically opting into being cookied everywhere.

But users do have a right to online privacy. We also have a right to self sovereign identity and ownership of our data.

Apple is offering Sign In With Apple in iOS13 to help us reduce our reliance on signing in with Facebook and Google. That’s great but it just replaces one boogyman with another.

What we need is an open sign-in protocol in which users control their sign-in keys and also all of the data we create and have created over the years once we are signed in.

Government can force industry into a regime like that with regulations that dictate that tech companies of all sizes adopt such approaches.

That is what we should be doing to reduce the market power of big tech instead of breaking them up. That is because their market power comes from this single sign-on oligopoly and the data that comes with it.

Government should not dictate the design of such a protocol or any of the technology that is required to produce such a regime. The market can and will do that once the requirements are put in place. We have much of what we need already in the form of cryptography and user centric wallet infrastructure.

We just need a forcing function to get big tech to adopt these technologies, which they won’t do on their own because they will reduce their market powers. Which is exactly why we need to do this.

#crypto#Current Affairs#entrepreneurship#hacking government#law#mobile#Web/Tech

Video Of The Week: Overcoming Sprawl

I have been fortunate to work for the last 25 years in the Flatiron District of NYC, which is a mixed-use neighborhood (office, retail, residential) that has excellent mass transit options (three major subway lines converge at Union Square), great biking and walking streets, and a feeling of vitality that is infectious.

So this video I watched this morning rings very true to me. I think cities around the world (both new cities being built in Asia and existing cities looking to transform themselves like Los Angeles) can and will adopt policies that limit sprawl and get us back to living with other people in mixed-use environments that make us happier, more productive, and more sustainable.

#climate crisis#Current Affairs#NYC

The American Dream

It has been 243 years since our founding fathers signed the Declaration Of Independence and the great American experiment began.

These words form the moral backbone of our country and represent our core values:

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness

We have not always lived up to these values. Slavery and the treatment of the Native American Indians are glaring examples. And there certainly have been other moments where America has not lived up to these values.

However, it has been my experience, over fifty-seven years living in the US, that we try to live to these values and that the notions of freedom and equality are deeply rooted in the culture of America.

Which leads me to the American Dream, the notion that there is economic opportunity for all, regardless of who you are and where you come from.

That has been my experience personally. I worked my way through college, arrived in NYC at the age of 21 with not a penny to my name, but with a job waiting for me, and I made the best of that.

It is also my experience in the venture capital business. I have seen people without a college education pursue their dream and come out a winner. I have seen people with broken English make it with hustle and ingenuity.

But again, there are gaps in this record of opportunity. It is not as easy for a young black woman growing up in Brownsville to find economic opportunity as it is a young white man growing up in Palo Alto. There are many parts of America where life has gotten harder for the current generation relative to their parent’s generation.

But what makes America special is that we believe that isn’t right and it should be addressed. And I see it being addressed in my work on the education sector and beyond. I am hopeful that we will see a meaningful dent in many of these opportunity gaps in my lifetime.

It is fashionable these days to bemoan what is wrong with America and there is much that is wrong. But I prefer to stare at what remains right about America and celebrate it, particularly on our birthday.

#Current Affairs

What Is Going To Happen In 2019

Hi Everyone. Happy 2019.

Today, as is my custom on the first day of the new year, I am going to take a stab at what the year ahead will bring. I find it useful to think about what we are in for. It helps me invest and advise the companies we are invested in. Like our investing, I will get some of these right, and some wrong. But having a point of view, a foundation, is very helpful when operating in a world that is full of uncertainty.

I believe and have been telling those around me that I think 2019 will be a “doozy.” I think we will see major dislocations in the leadership of the United States, a bear market in stocks, a weakening economy, a number of issues with the global economy including a messy Brexit and a sluggish China. All of this will lead to a more cautious stance by investors in the startup economy. And crypto will not be a safe haven for any of this although there will be signs of life in crypto land in 2019.

Let’s take each of those in the order that I mentioned them.

I believe that we will have a different President of the United States by the end of 2019. The catalyst for this change will be a devastating report issued by Robert Mueller that outlines a history of illegal activities by our President going back decades, including in his campaign for President.

The House will react to Mueller’s report by voting to impeach the President. Which will set up a trial in the Senate. That trial will go so badly for the President that he will, like Nixon before him, negotiate a resignation that will lead to him and those close to him being pardoned for all actions, and Mike Pence will become the President of the United States sometime in 2019.

I believe this drama will play out through most of 2019. I expect the Mueller report to be issued sometime in the late winter/early spring and I expect an impeachment vote by the House before the summer, leading to a trial in the Senate in the second half of the year.

The drama in Washington will have serious impacts to the economy in the United States starting with our capital markets.

The US equity capital markets enter 2019 on shaky ground. Though the last week of the year brought us a relief rally, the markets are dealing with higher rates, some early indications of a weaker economy in 2019 (possibly due to higher rates), and, of course, the potential for the drama in Washington that we’ve already discussed. Here is a chart of the S&P 500 over the last five years:

I expect the S&P 500 to visit 2,000 sometime in 2019 and then bounce around that bottom for much of the year. This would represent a decrease in the S&P’s trailing PE multiple to around 15x which feels like a bottom to me given the recent history of the equity markets in the US:

S&P PE Multiple (source http://www.multpl.com/)

Interest rates have been rising gradually in the US for the last three years. The Fed has taken its Fed Funds rate from essentially zero three years ago to almost 2.5% today:

Source: https://www.macrotrends.net/2015/fed-funds-rate-historical-chart

The rates that are available to consumers and businesses have followed and I expect that to continue in 2019. Here is a chart of the interest rates on the three most popular mortgage products in the US:

Source: https://www.amerisave.com/graphs/

When it gets more expensive to borrow, marginal projects don’t get funded. And what happens at the margin has a much larger impact on the economy than most people understand. No wonder the President wants to fire the Fed Chairman.

I expect the combination of higher rates, uncertainty in Washington, and storm clouds globally (which we will get to soon) will cause business leaders in the US to become more cautious on hiring and investment. Consumers will make essentially the same calculations. And that will lead to a weaker economy in the US in 2019.

The global picture is not much better. The eurozone is about to go through the most significant change in decades with some sort of departure of the UK from the EU (Brexit). It remains unclear exactly how this will happen, which in and of itself is creating a lot of uncertainty on the Continent. I don’t expect most businesses in Europe to do anything but play defense in 2019.

Probably the biggest unknown for the global economy is the resolution of the ongoing trade tensions between China and the US. It seems inevitable that China will make some concessions to the US to resolve these trade tensions. But, of course, what happens in Washington (first issue) may impact all of that. In the meantime, the uncertainty around trade and exports hangs over the Chinese economy. China’s GDP has been slowing in recent years as it achieved relative parity with the US and the Eurozone:

Source: https://tradingeconomics.com/china/gdp

Any significant trade concessions from China could impact its growth prospects in 2019 and beyond, which will take the most powerful engine of global growth off the table this year.

So all of that is a pessimistic take on the broader macro environment in 2019. How will all of this impact the startup/tech economy?

The startup/tech economy is somewhat immune to macro trends. Many startups and big tech companies were able to grow and expand their businesses during the last financial downturn in 2008 and 2009. Some very important tech companies were even started in those years.

The tech/startup economy is driven first and foremost by technical and creative (ie business model) innovation. And that is not impacted by the macro environment.

So I expect that we will continue to see big tech invest and grow their businesses and do well in 2019. I expect we will see IPOs from big names like Uber/Lyft/Slack, although I also expect those deals will get priced well below the lofty expectations they have in mind right now. Some of that will be because of weak equity markets in the US, but it is also true that most of the IPOs in 2018 also priced below the lofty “going in” expectations of founders, managers, boards, and their bankers. The public markets have been much more sanguine about value than the late stage private markets for a long time now.

However, I do think a difficult macro business and political environment in the US will lead investors to take a more cautious stance in 2019. It would not surprise me to see total venture capital investments in 2019 decline from 2018. And I think we will see financings take longer, diligence on new investments actually occur, and valuations to come under pressure for even the most attractive opportunities.

But all of that is going to happen at the margin. I expect 2019 to be another solid year for the tech/startup sector as we are in a possibly century-long conversion from an industrial economy to an information economy and the tailwinds for tech/startup vs the rest of the economy remain in place and strong.

Any set of predictions for 2019 from me on this blog would not be complete without some thoughts on crypto. So here is where my head is at on that topic.

I think we are in the process of finding the bottom on the large, liquid, and lasting crypto-tokens. But I think that process could take much of 2019 to play out. I expect we will see some bullish runs, followed by selling pressures taking us back to retest the lows. I think this bottoming out process will end sometime in 2019 and we will slowly enter a new bullish phase in crypto.

I think the catalyst for the next bullish phase will come as the result of some of the many promises made in 2017 coming to fruition in 2019. Specifically, I think we will see some big name projects ship, like the Filecoin project from our portfolio company Protocol Labs, and the Algorand project from our portfolio company Algorand. I think we will see a number of “next gen” smart contract platforms ship and challenge Ethereum for leadership in this super important area of the crypto sector. I also expect the Ethereum open source community to ship a number of important improvements to its system in 2019 and defend their leadership in the smart contract space.

Other areas of crypto where I expect to see meaningful progress and consumer adoption happen in 2019 are stablecoins, NFT/cryptoassets/cryptogaming, and earn/spending opportunities, particularly in the developing world.

There will also be pressure on the crypto sector in 2019. The area I am most concerned about are actions brought by misguided regulators who will take aim at high quality projects and harm them. And we will continue to see all sorts of failures, from scams, hacks, failed projects, and losing investments be a drag on the sector. But that is always the case with a new emerging technology that allows anyone to set up shop and get going. Permissionless innovation produces the greatest gains over time but also comes with the inevitable bad actors and actions.

So that’s where my head is at on 2019. Do I sound pessimistic? I suspect I do, but I am not. I am incredibly optimistic, like my partner Albert and can’t wait to get going and make things happen in this new year. It is going to be a doozy.

#blockchain#crypto#Current Affairs#digital collectibles#economics#employment#entrepreneurship#non fungible tokens#Politics#stocks#VC & Technology

Fourth Feelings

I’m sitting here on a park bench outside my favorite coffee shop, where I’ve been writing my daily posts for the last week and a half on my phone, and I’m staring at our flag.

Normally, a scene like this on the Fourth Of July fills me with pride. I love America, all that it has stood for, and what it has represented for me and for many others.

But today, I’m not feeling that pride. I am not proud of what America has been showing to the rest of the world and I’m not proud of the decisions we have made and the direction we have taken.

I am saddened. Deeply saddened.

Because this post is about my feelings and not meant to be about anything more, I have closed the comments.

I do care about how all of you are feeling today but I would prefer that you post those feelings on your own social media accounts and leave mine for me today.

#Current Affairs

Your Data Is My Data

This piece in Recode explains that Cambridge Analytica built an app that 270,000 people used to amass profiles on 50 million people.

That’s not very surprising because we are talking about networks here.

This is a network graph that my colleague Jacqueline made of my twitter network a few years ago:

In our online life, we are connected to a huge number of people.

If I get access to your email inbox, I am going to see emails with thousands of people.

Which is what makes this privacy/data sovereignty stuff so important.

When your data is taken without your knowledge/permission, it is not just your data that is taken.

It is the data of thousands of other people, often the people closest to you.

That sucks.

This is one of the many reasons I am hopeful about an Internet 3.0, a decentralized system with data security and integrity at its core.

#blockchain#crypto#Current Affairs#personal security

Twitter TV Ad

I believe the ad Twitter ran at the Oscars last night is their first TV ad.

If so, I am a fan.

It was an anchor to a hashtag conversation and took on a topic of cultural relevance.

It speaks to the power of Twitter to be a force for good in the world.

I understand that Twitter is used by all sorts of bad people and for all sorts of bad things.

That is the challenge of operating a real-time, open, global communication system.

But it is also true that Twitter is used by all sorts of good people and for all sorts of good things.

And the ad reminded me and everyone of that last night.

Disclosure: My wife and I are long TWTR.

#Current Affairs