Posts from Politics

What Happened In 2017

As has become my practice, I celebrate the end of a year and the start of a new one here at AVC with back to back posts focusing on what happened and then thinking about what might happen.

Today, we focus on what happened in 2017.

Crypto:

I went back and looked at my predictions for 2017 and I completely whiffed on the breakout year for crypto. I did not even mention it in my post on New Year’s Day 2017.

Maybe I got tired of predicting a breakout year for crypto as I had mentioned it in my 2015 and 2016 predictions, but whatever the cause, I completely missed the biggest story of the year in tech.

If you look at the Carlota Perez technology surge cycle chart, which is a framework I like to use when thinking about new technologies, you will see that a frenzy develops when a new technology enters the material phase of the installation period. The frenzy funds the installation of the technology.

2017 is the year when crypto/blockchain entered the frenzy phase. Over $3.7bn was raised by various crypto teams/projects to build out the infrastructure of Internet 3.0 (the decentralized Internet). To put that number into context, that is about equal to the total seed/angel investment in the US in 2017. Clearly, not all of that money will be used well, maybe very little of it will be used well. But, like the late 90s frenzy in Internet 1.0 (the dialup Internet) provided the capital to build out the broadband infrastructure that was necessary for Internet 2.0 (the broadband/mobile Internet), the frenzy in the crypto/blockchain sector will provide the capital to build out the infrastructure for the decentralized Internet.

And we need that infrastructure badly. Transaction clearing times on public, open, scaled blockchains (BTC and ETH, for example) remind me of the 14.4 dialup period of the Internet. You can get a taste of what things will be like, but you can’t really use the technology yet. It just doesn’t work at scale. But it will and the money that is getting invested via the frenzy we are in is going to make that happen.

This is the biggest story in tech in 2017 because transitions from Internet 1.0 to Internet 2.0 to Internet 3.0 cause tremendous opportunity and tremendous disruption. Not all of the big companies of the dialup phase (Yahoo, AOL, Amazon, eBay) made a healthy transition into the mobile/broadband phase. And not all of the big companies of the broadband/mobile phase (Apple, Google, Facebook, Amazon) will make a healthy transition into the decentralized phase. Some will, some won’t.

In the venture business, you wait for these moments to come because they are where the big opportunities are. And the next big one is coming. That is incredibly exciting and is why we have these ridiculous valuations on technologies that barely/don’t work.

The Beginning Of The End Of White Male Dominance:

The big story of 2017 in the US was the beginning of the end of white male dominance. This is not a tech story, per se, but the tech sector was impacted by it. We saw numerous top VCs and tech CEOs leave their firms and companies over behavior that was finally outed and deemed unacceptable.

I think the trigger for this was the election of Donald Trump as President of the US in late 2016. He is the epitome of white male dominance. An unapologetic (actually braggart) groper in chief. I think it took something as horrible as the election of such an awful human being to shock the US into deciding that we could not allow this behavior any more. Courageous women such as Susan Fowler, Ellen Pao, and many others came forward and talked publicly about their struggles with behavior that we now deem unacceptable. I am not suggesting that Trump’s election caused Fowler, Pao, or any other woman to come forward, they did so out of their own courage and outrage. But I am suggesting that Trump’s election was the turning point on this issue from which there is no going back. It took Nixon to go to China and it took Trump to end white male dominance.

The big change in the US is that women now feel empowered, maybe even obligated, to come forward and tell their stories. And they are telling them. And bad behavior is being outed and long overdue changes are happening.

Women and minorities are also signing up in droves to do public service, to run for office, to start companies, to start VC firms, to lead our society. And they will.

Like the frenzy in crypto, this frenzy in outing bad behavior, is seeding fundamental changes in our society. I am certain that we will see more equity in positions of power for all women and minorities in the coming years.

The Tech Backlash:

Although I did not get much right in my 2017 predictions, I got this one right. It was easy. You could see it coming from miles away. Tech is the new Wall Street, full of ultra rich out of touch people who have too much power and not enough empathy. Erin Griffith nailed it in her Wired piece from a few weeks ago.

Add to that context the fact that the big tech platforms, Facebook, Google, and Twitter, were used to hack the 2016 election, and you get the backlash. I think we are seeing the start of something that has a lot of legs. Human beings don’t want to be controlled by machines. And we are increasingly being controlled by machines. We are addicted to our phones, fed information by algorithms we don’t understand, at risk of losing our jobs to robots. This is likely to be the narrative of the next thirty years.

How do we cope with this? My platform would be:

  1. Computer literacy for everyone. That means making sure that everyone is able to go into GitHub and read the code that increasingly controls our lives and understand what it does and how it works.
  2. Open source vs closed source software so we can see how the algorithms that control our lives work.
  3. Personal data sovereignty so that we control our data and provision it via API keys, etc to the digital services we use.
  4. A social safety net that includes health care for everyone that allows for a peaceful radical transformation of what work is in the 21st century.

2017 brought us many other interesting things, but these three stories dominated the macro environment in tech this year. And they are related to each other in the sense that each is a reaction to power structures that are increasingly unsustainable.

I will talk tomorrow about the future, a future that is equally fraught with fear and hope. We are in the midst of massive societal change and how we manage this change will determine how easily and safely we make this transition into an information driven existence.

Break The Internet Tomorrow

Tomorrow, I am going to take AVC offline to show the FCC what the Internet will look like if they repeal the Net Neutrality rules.

It is part of a collective action called Break The Internet.

If you want to join me in this protest, you can get what you need here.

Hopefully, the Verizon shill who runs the FCC will get the message.

The End Of Net Neutrality As We Know It

I have written about net neutrality frequently here at AVC. I believe that for as long as we have local monopolies and duopolies for last mile broadband internet in most parts of the US, we need our federal government to actively reign in the broadband providers from doing things that are anti-innovation, anti-consumer, and pro-big business. For much of the last decade, the internet crowd has been a force to be reckoned with on this issue and we fought for and won good net neutrality rules that were put in place and defended in court. If you are a long time reader of AVC, you heard me advocating for and celebrating these wins.

The times have changed. We have a pro-big business team in the White House and at the FCC who are hell-bent to overturn those hard fought for net neutrality rules. We should fight them in these efforts, just like we have fought for these rules at every turn. Here are some things you can do:

But even as we fight for net neutrality, we also should be investing heavily in efforts to reduce our society’s reliance on the big cable and telcos for our broadband internet. That’s the core problem here.

So, in addition to fighting for net neutrality, here is what you should be doing:

  1. Don’t use an ISP who won’t commit to following basic net neutrality rules if you have a choice. Our portfolio company Tucows has a subsidiary called Ting that provides fiber broadband in some parts of the country and they are committed to following basic net neutrality rules no matter what the law says. Use an ISP like that if you can.
  2. Report abusive behavior and business practices by your ISP to the FCC. This will become even more important if the FCC overturns net neutrality.
  3. Join a mesh network or multiple mesh networks. Peer to peer wireless is our best long-term solution to the monopoly/duopoly issue.
  4. Look for blockchain projects that are seeking to solve the mesh networking issue and support them. The token-based incentive business model is a powerful way to bootstrap p2p mesh networks. This piece from 2015 explains that well.

I believe that technology is ultimately a better solution than regulation to market failures like the monopoly/duopoly issue in last mile broadband and I am confident that we will get the technology to solve it soon enough (certainly in my expected lifetime). But until that happens, regulation is a good tool to keep things moving in the right direction. That’s why I have supported net neutrality and will continue to support it until the technology arrives in the mass market to address the underlying problem.

Update On Stock Options/RSUs Issue

I just saw this on my twitter:

This means that the Senate has now made the tax reform bill a win for those who work in startups instead of a loss.

I’m thrilled and I want to thank all of you who called your elected officials and those in the Senate Finance Committee who clearly understand the importance of equity compensation to the startup model.

Don’t Tax Options And RSUs Upon Vesting!

The current draft of the Senate Tax Reform Bill would tax stock options and RSUs upon vesting.

Currently, stock options are taxed upon exercise and RSUs are taxed upon release of the underlying shares.

This is a HUGE deal to everyone who works in companies that partially compensate their employees with these two equity instruments.

What this would mean is every month, when your equity compensation vests a little bit, you will owe taxes on it even though you can’t do anything with that equity compensation.

You can’t spend it, you can’t save it, you can’t invest it. Because you don’t have it yet.

Taxing equity compensation upon vesting makes no sense.

I have seen many employees leave companies and not exercise their vested stock options. It happens all of the time.

That should be a clear enough example to the lawmakers that vesting should not be a taxable event.

But, sadly, I don’t think this is really about what makes sense. It is about politics.

The US Senate, particularly the Republican leadership, needs to hear from you, the employees who will feel the pain of this change, that it is wrong.

Otherwise, I think this provision could become law.

And that would be the end of equity compensation in startups as we know it.

If this provision becomes law, startup and growth tech companies will not be able to offer equity compensation to their employees. We will see equity compensation replaced with cash compensation and the ability to share in the wealth creation at your employer will be taken away. This has profound implications for those who work in tech companies and equally profound implications for the competitiveness of the US tech sector.

So, what can we do about this?

First, we have to move fast. The tax reform bill is moving quickly with a goal of getting it done before year end.

This particular provision, which was in the House bill and was taken out last week, will be considered by the Senate as soon as TODAY.

So, please reach out to your Senators and let them know that they “must remove Section III(H)(1) from the Senate Tax Cuts And Jobs Act”.

The best way to do that is to call their office and speak to the staffer who handles tax reform for them.

Here’s a short explanation of how to do that.

Please do it today. This is really very important to everyone who works in tech.

Election Day

It’s election day and I’m going to stop by the polls this morning and vote.

It would be easy for me to skip the polls as there is not much at stake in NYC this year.

Mayor de Blasio is going to get re-elected fairly easily as he has no strong challengers.

The same is true of the other citywide officials and most city council members, including mine.

But I am going to vote in spite of all of that.

I think one of our biggest problems in our country is voter apathy.

So I am going to demonstrate against that by showing up and voting in an election with little to nothing at stake.

Guns And Mental Health

Another mass shooting and the outcries that we must do something return.

I do think we need to do something and I am a fan of more gun safety regulation.

But we also need to enforce the laws that are on the books already.

I would imagine that the Las Vegas shooter used an illegal weapon last night.

Why can’t we enforce the laws that are already on the books?

And the people who commit these horrible crimes are mentally ill.

Anyone who could turn a gun on innocent people is clearly not right in their head.

So while we fight for more gun safety laws, a fight that is hard and where little ground has been gained in recent years, we should also fight for better healthcare for mental illness.

A Nightmare

I don’t know why we call them Dreamers. Because they get to pursue the American Dream? Don’t we all?

These kids, or adults as many are now, were brought to America by their parents and have lived here for most of it.

That we would even think that they should not be here is abhorrent to me.

We can talk about their parents, who came to the US illegally, but we should not be talking about their kids.

These people did nothing wrong, broke no laws.

As my partner Albert, an immigrant, wrote on his blog yesterday:

The blame for this situation though rests with Congress and past Presidents who have failed to make any meaningful progress on immigration reform. Right now, it is worth remembering now that the DREAM act has been around for 16 years. There have been multiple attempts to pass it with at varying times support in the House and Senate, but never the two at the same time, including a bipartisan filibuster that included 8 Democrats. The opposition by Democrats often arose because they wanted comprehensive immigration reform or nothing.

We have our elected officials to blame for not addressing this issue and fixing it a long time ago.

I for one expect them to fix it, to put the other immigration issues aside, which they never seem to be able to do, and address this one.

This is about our morality, our decency, our humanity.

Fix it.