Posts from policy

Over the last year, the SEC has been investigating a significant number of token offerings that took place in 2017. While some of those offerings were scams or worse, many of the ones that are being investigated by the SEC are serious projects, started by some of the top cryptographers and computer scientists in the world, and backed by the leading token funds and venture capital firms in the US and around the world.

Sadly, the SEC looks at crypto tokens and sees securities that they want to regulate as such. They cannot seem to understand that not all of these assets are securities, they cannot seem to understand that most are commodities, currencies, or utilities like frequent flyer miles. They cannot understand that crypto tokens are unlike any assets that have come before them and that crypto tokens need new regulatory structures. They cannot understand that their unwillingness to come up with new rules paired with their “regulate by enforcement” strategy is hurting the crypto sector, pushing it offshore, and is causing most of the new projects to raise capital outside of the US and/or put together legal structures that look like Frankenstein monsters.

I have seen this play out in multiple projects and also in the exchange sector, which I posted about over the weekend. For as long as I have been involved in the crypto sector, I have been advocating and advising that companies work with the SEC, cooperate with them, and educate them. But that has not worked. I am frustrated. So are many others. Even one of the SEC Commissioners has gone public with her frustrations.

One of the crypto projects that the SEC has been investigating, where I have had a front-row seat, is the Kin project that was birthed by USV’s portfolio company Kik, where I am on the Board.

Kin is a digital currency (not a security) that is in use in over 40 mobile apps now. Last month over 1mm users earned Kin in one of those mobile apps and over 300,000 users spent Kin in one of those mobile apps. Kin is one of the most used crypto currencies in the world.

And yet the SEC won’t agree to settle with Kin on reasonable terms. Instead they want to force Kin to become a security, which would decimate its appeal as a digital currency. Imagine that a user had to go to a securities brokerage firm like Schwab to purchase a token in order to be able to use Apple’s App Store. That is crazy and yet that is essentially what the SEC wants Kin and many other crypto projects to agree to do.

So today, Kin has launched DefendCrypto.org which is a crowdfunding effort to fight the SEC in court. Kin has contributed $5mm worth of BTC, ETH, and Kin to the effort. And others are contributing their crypto assets as well. You can do so here. I have contributed a number of my crypto tokens to the effort this morning.

Whatever funds are raised by DefendCrypto.org will be used by Kin to fight the SEC in court, to help secure a favorable ruling that could well set a precedent for the entire sector. Any funds that are left after this legal battle will be set aside for other similar legal efforts in the crypto sector.

It is my hope, and Kin’s hope, that DefendCrypto.org will be an inspiration for the many other important crypto projects that are silently battling with the SEC to come public and raise capital from the crypto sector for their fights.

The SEC is regulating by enforcement, not new rulemaking, and worse, they have taken a divide and conquer strategy. It is time for the crypto industry to come together and fight back. I hope that Kin’s efforts with DefendCrypto.org represent a watershed moment/movement that will pressure the SEC to think and act differently toward this important new sector.

I wrote this tweetstorm on Friday when I read the blog post about Poloniex’s decision to geofence certain assets away from US customers, driven by the SEC’s recently published framework for digital assets.

Airbnb has been operating in NYC and NY State for about ten years now and yet we still don’t have comprehensive home sharing legislation on the books in NY State. The reason is that the enemies of Airbnb, mostly the hotel employee unions, have been fighting Airbnb’s existence in NY State very effectively in Albany.

Many of the largest cities in the US and around the world now have comprehensive home sharing legislation on the books. It makes sense. It allows homeowners to share their homes legally and earn extra income but it also protects neighbors and neighborhoods from bad actors who abuse the system.

It is time for the folks in Albany to join that group and put fair and balanced and serious home sharing legislation on the books.

The good news is that we have good comprehensive bills before both houses of the state legislature right now.

Assemblyman Joseph Lentol and Senator James Skoufis have recently proposed comprehensive regulations for short term rentals in NY State.

An increasing number of New Yorkers rely on home sharing services not only when they travel, but also for the additional income they generate by opening up their homes here in New York.

The bills proposed by Lentol and Skoufis will create fair and restrictive rules to govern short-term home rentals in New York. Existing NYC legislation has unfairly penalized everyday New Yorkers for sharing their homes and left many confused about the law.

The proposed legislation bans short-term rentals in all affordable housing and also limits NYC residents to listing only one home. The bills also mandate data-sharing with New York City to boost transparency and enable NYC agents to target and take action against bad actors abusing the system.

The proposed legislation also allows Airbnb to collect and remit taxes on behalf of its users. Currently, NY State is missing out on badly needed tax revenue.

It is time for the NY State Legislature and Governor to pass clear and commonsense legislation to safely and responsibly regulate the home sharing industry. I would like to acknowledge Assemblyman Lentol and Senator Skoufis who have the common sense and courage to lead the way.

Earlier this week, Kara Swisher interviewed Kate Crawford and Meredith Whittaker, who run NYU’s AI Now Institute.

It is an interesting and thought provoking discussion. I don’t personally love Kate and Meredith’s answers on how society should be thinking about these issues. They feel very “20th century” to me.

But regardless of what you think about their particular take on the issues, I do think we all ought to be paying a lot of attention to AI and its impact on and role in our society. It is important.

Well it looks like NYC is finally going to get congestion pricing, a technique used successfully in a number of cities around the world to reduce the number of cars on the road and increase the investment in mass transit.

The concept is simple. Tax cars coming into the center of a city and use those tax revenues to invest in other ways of moving people in and out of the city.

I have been a supporter of this idea going back to the Bloomberg era in NYC when it looked like we were going to get congestion pricing and then it fell apart due to political opposition.

I wrote about congestion pricing late last year when a report came out from the Governor’s committee on metro area transportation which recommended congestion pricing and increased investment in the MTA.

I think this is the right policy. We need to create financial disincentives to drive in NYC (with the proper exemptions like people with disabilities) and we need to invest more in mass transit.

This will be good for the tech sector in NYC, where employees largely use mass transit to get around. Julie Samuels, Exec Director of Tech:NYC, explains why in more detail in this op-ed.

I do have concerns about giving billions of new tax revenues to the MTA which has not been great at using the billions we have already given them to deliver better mass transit. I mention those concerns in my post late last year.

But we should not let perfect be the enemy of the good. NYC needs congestion pricing and we need it now. It will reduce traffic in lower and midtown manhattan and it will provide the resources we need to modernize and improve our mass transit options.

If we could couple congestion pricing with structural reforms of the MTA, then we would be really cooking with gas.

Many people who follow tech know that Spotify has filed a complaint with the European Commission regarding the challenges that Spotify has doing business in the iOS app store.

I am very sympathetic to Spotify’s complaint. In my post last week on The Warren Breakup Plan, I wrote:

The mobile app stores, in particular, have always seemed to me to be a constraint on innovation vs a contributor to it.

Spotify has a huge user base and brings in billions of dollars of revenues every year but it has a challenging business model. Let’s say that 70cents of every dollar they bring in goes to labels and artists. That seems fair given that the artists are the ones producing the content we listen to on Spotify. But if they also have to share 30cents of every dollar with Apple, that really does not leave them much money to build and maintain their software, market to new users, pay for servers and bandwidth, and more.

You might say “well that’s what they signed up for” and you would be right except that their number one competitor is Apple. So their number one competitor does not pay the 30% app store fee, meaning that they have a competitive advantage.

But this is about more than money. If you look at the web page Spotify put up to explain how challenging it has been to do business with Apple, you will see numerous instances of Apple not approving app upgrades.

We see this with our portfolio companies a fair bit too. Apple has complete control over what gets into their app stores and what does not. And the process can be arbitrary and frustrating. But that is how it works and our portfolio companies are reluctant to make any noises publicly for fear of making their situation with Apple even worse.

I am not a fan of Warren’s idea of breaking up companies like Apple.

I like my partner Albert’s ideas better which he expressed in a tweet last week:

A better set of policies to restore competition in the digital age would be (1) consumer right to API access (2) consumer right to side load apps (3) restored ability for small companies to go public / sensible regulation of crypto currencies. https://t.co/4bOFTnZ5NK

— Albert Wenger (@albertwenger) March 12, 2019

If it was the law of the land that any company could side load any application onto the iPhone or any iOS device, including third party app stores, we would have a much more competitive market with a lot more innovation, and Spotify would not have to go to the European Commission to deal with this nonsense.

Elizabeth Warren made news this weekend with her plan to breakup Google, Amazon, and Facebook (and also Apple).

Let me first say that I am sympathetic to Warren’s position. I particularly don’t like the way that Google, Apple, and Amazon use their market power in search and in their app stores to display their own products. The mobile app stores, in particular, have always seemed to me to be a constraint on innovation vs a contributor to it.

However, as you might imagine, I don’t love her proposal. I don’t think breaking up companies solves anything. And lots of rules on paper don’t either.

What we need is a competitive marketplace where new entrants have a chance to beat out old incumbents.

And I think we are on the cusp of that with crypto and the innovations in and around it.

This tweet exchange explains my high level view here:

we are on the cusp of a new architecture, based on a user's control of their own data, and monetized via protocol tokens, that will unseat all of these monopolies in time. the massive increase in ICO-based fundraising, largely outside of the US, is the counterweight to this.

— Fred Wilson (@fredwilson) March 9, 2019

I also quite like Mike Masnick’s much longer take on Warren’s plan.

What we need are policies that make it easier for startups to raise capital (like supporting ICOs instead of clamping down on them) and policies that open up the proprietary data assets of the big incumbents (like giving users control of their own data assets). Those sorts of things along with the never ending march of technology will do the trick I think.

NY State Senator Michael Gianaris is leading the efforts to stop Amazon from opening up a large presence in the borough of Queens in NYC.

I get that this makes for good politics at some level. Standing up for the taxpayer and expressing outrage at a massive tax giveaway to the one of the wealthiest companies in the world, run by one of the wealthiest people in the world, makes for great stump speeches.

But there is one problem with all of that. The voters and taxpayers in Queens, particularly the minority voters and taxpayers, approve of Amazon’s move to Queens by very large margins.

The very people that Gianaris and others like Ocasio-Cortez represent and are “standing up for” want Amazon in Queens by large margins.

What the voters and citizens of Queens seem to understand is that this is a once in a decade type opportunity to change the face of a borough and a city.

As historian Kenneth Jackson explained in this excellent NY Times Op-Ed piece yesterday, history shows that the economic fortunes of cities change quickly with once dominant industries moving on and new ones arriving. This is a fantastic opportunity for NYC to cement its role as a leading tech sector and one that should not be missed. There is no guarantee that the NYC of tomorrow will be as vital as the NYC of today. We have to work to make it so and this effort to recruit Amazon to NYC is exactly the kind of work which will make it so.

My friend Kathy Wylde also penned an important argument in favor of Amazon in yesterday’s Daily News. Kathy explains that Queens has been planning for this sort of thing in Long Island City for over a decade and many of the issues that the rabble rousers are raising have been considered, planned for, and are already being worked on.

In my view, politicians like Gianaris and Ocasio-Cortez are being irresponsible and reckless in their opposition to Amazon while playing politics with something that is without question good for NYC, good for Queens, and good for their voters. Their voters know it and so should they.

I was talking to a friend about AOC’s proposal to increase marginal federal rates to 70% to fund investments in fighting climate change. My friend said he was disappointed that she didn’t propose a top federal rate of 83.25% so that the marginal rate in NYC would be 100%. He was joking but his remark is important because it speaks to the nuance of the marginal rate, something AOC and her followers don’t really understand as much as they claim.

It reminds me of a heated conversation I had with my kids and their friends during our family ski trip over the year end break. Our kids, like most millennials I know, are struggling with the notion of capitalism at any cost and the massive income and wealth inequality that we are witnessing.

This headline I came across on Twitter today kind of sums it up well:

.@AOC: Economic system that allows billionaires is “immoral” https://t.co/qINA2oXiwu pic.twitter.com/Z3mSVRXuti

— The Hill (@thehill) January 22, 2019

I am in the business of helping founders start companies which results in some of them becoming billionaires. Contrary to what some think, my wife and I aren’t in that club ourselves. But I know a fair number of billionaires and I have had a front row seat to the process of them going from not having a penny in their pockets to billions on their balance sheet.

And we are participants in the “economic system that creates billionaires.” I do not think it is immoral and I do not think billionaires are immoral. I do think the inequality that we allow in our country is immoral.

To me, these are two different things. And that is the gist of the discussion I was having with my kids and their friends over the year end holiday. They asked me why I don’t believe in massively raising taxes on the rich to pay for all of these new social programs that the candidates on the left are proposing.

I am a fan of many of these social programs, like medical care for all, like more affordable education for all, like new approaches to what we once called “welfare” and now is taking shape as Universal Basic Income. I have been called a communist, a socialist, a liberal, and more on this blog and all of those labels could be accurate in someone’s mind. I believe that society must find ways to support the basic needs of everyone, which include wellness, knowledge, and income. That we do not is immoral. That we allow billionaires is not.

I am a capitalist and a business person. I understand that increasing taxes on the wealthiest leads many of them to move their income and assets to lower tax jurisdictions and can be counter productive, particularly when you go beyond a certain threshold. I also understand that government is bloated and there are many places where we could cut spending to fund these new innovative programs that could help counter the immoral wealth imbalance we have in our country.

I believe that technological revolutions, like the industrial revolution and the information revolution, create opportunities for entrepreneurs to reimagine how the economy should operate. Those entrepreneurs, like Rockefeller, Carnegie, Morgan, Bezos, Page, Zuckerberg, build very powerful monopolies and amass billions.

As these revolutions reimagine how the economy should operate, many people lose jobs, can’t find jobs, find themselves in lower paying jobs, and there is real dislocation that results. And you get this “immoral wealth imbalance.”

The one part of the economy that seems immune to re-imagination is the government. If we were to force it to go through the same technological revolution that the private sector is going through, we would see massive efficiencies, and massive job losses, that would free up a huge amount of capital that could be used to pay for things like medical care for all, affordable education for all, and some amount of income for all.

That is what I am for. That is what I explained to my kids and their friends that I am for.

Times of change are times of change. And we can’t change some things but not everything.

I will end with a story from a book I read a few years ago. The book is called The Prize that was written by Dale Russakoff and is about the effort by Chris Christie, Cory Booker, and Mark Zuckerberg to fix the broken Newark NJ public school system.

The story takes place at an anti-charter school rally. Dale meets a woman who is protesting against the charter schools that are replacing the district schools. As she is talking to this woman, she explains that she is late to the rally because she had to spend all morning in line trying to get her child into the new charter school in her neighborhood. Dale is perplexed. Why would she be protesting charter schools if she is that committed to getting her child into one? The woman explains that most of her family works in the district schools and will lose their jobs if the city moves to charter schools.

And that’s where we are. We are not willing to move away from the things of the past to get the things of the future. So our elected officials decide to try to give us both and we struggle with how to pay for it all.

I am not for the emerging progressive Robin Hood narrative. I am certainly not for the entrenched conservative Let Them Eat Cake narrative. I am for a new narrative that understands that everything must change if we are to find ways to support everyone in our society.