Category: Startups

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Internet Culture Politics Startups

Day 232 and Human Being & Citizen

There is a famous line from Plato’s Apology that sums up the central dilemma of human organization. It’s also the title of my favorite college course at UChicago.

Who is a knower of such excellence, that of human being and citizen

Socrates asks us to consider how an individual’s highest calling conflicts with the group. We actually haven’t made a ton of progress on resolving the issue since antiquity.

I’ve been watching crypto struggling with the Human Being and Citizen Problem as governance in decentralized systems because a pressing issue. Much of crypto doesn’t really have philosopher kings, despite startup land’s affection for the willpower driven CEO, because a lot still happens in the commons. Open source and all.

I’ll be curious how we proceed and resolve these issues of individual versus group intensives as DAOs get explored. The corporation with its board and executive structure is being pushed back. But we haven’t figured out how to coordinate yet.

Vitalik has been exploring moving beyond coin voting for decentralized projects in recent posts. The incentives for public goods has generally been economic in the crypto space. We coordinate on commons by being driven by selfish incentives.

Gitcoin is working through shared governance structures beyond itself with a DAO of DAO concept emerging out of Kevin Owoki’s Egregore metaphor. Though I’d personally avoid using occult old Enochian terminology (egregore is a shared manifestation come from the minds of multiple people) as no one wants to accidentally manifest an elder god

Speaking of elder gods, we are all fighting Moloch the god of coordination failure. In popular imagination Moloch is usually defeated by a world historical great man. We love the great man theory of history. One visionary dude leader slays Moloch. Humanity gets coordinated! Hooray! Historians generally agree that great man theory is too simplistic. So however these problems get solved it’s probably not going to be one great savior.

Categories
Emotional Work Startups

Day 230 and Punishment

I wish I understood why we feel the need to punish ourselves sometimes. What is it about human nature that makes us abuse ourselves? Oh we deserve it. It apparently has a social purpose as well according to Psychology Today

Self-punishment tends to serve a dual purpose as it not only relieves internal feelings of guilt but impacts how others perceive us as well.

I’ve been feeling guilty. This month is the two year anniversary of me selling my last company Stowaway to a private equity firm and pursuing a medical leave to diagnose and treat my spinal condition ankylosing spondylitis. It was a happy ending, at least mostly, with the company being put into better hands than mine. But I still felt guilty.

I felt bad I didn’t live up the expectations of our biggest dreams. I felt guilty I didn’t 100x the capital for my venture investors. I felt guilty that my colleagues had dedicated so much to me and I had failed to deliver on the outcome we had dreamed of in our early days.

So punishing myself seemed like the right thing to do. I deserved to be sick. I deserve to be in pain. I deserved for the whole world to read about my experience and my failures. I deserved to be shown in public as a weak sick woman. It sounds so abusive when I write it out. Like I thought I deserved to be tortured. But maybe that’s exactly what I felt.

I am trying to unearth why I have the self limiting belief that punishment is what I deserve. As it’s more than just the circumstance of selling a startup and not seeing the results I wanted. It’s got to be deeper than the rationalizations I’ve given.

I’ve practice family systems therapy. The basic premise is that our childhood informs how we react as adults. And by healing the rough patch’s or even traumas of those times we can live the life we choose. For me I felt abandoned as a child. I wanted my father in particular to be emotionally available. But it just wasn’t to be. But I held on to the idea that I must have deserved to be abandoned. But of course it had nothing to do with what I did or did not deserve. It wasn’t about me at all.

Now I remember that I am a capable, brilliant and above all reliable person who needs to accept what I can be and not be bound by what I learned in failure. Finding that and turning it into your superpower is where the real success comes from.

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Finance Startups

Day 216 and Annihilation

My parents were hippies. Thanks in particular to my mother’s great interest in the spiritual world, I spent time in ashrams, communes and retreats as a kid. One was a great big sprawling former summer camp in the Catskills. I adored spending time there.

There is something amusing about being in a Christian family who has decided to study Kashmir Shivaism in an old Borscht Belt resort. But it was thanks to these adventures in expanding our minds and spiritual horizons that I learned about Shiva the Destroyer. And Shiva has had a profound impact on how I think about startups.

I won’t get into the full theology of Shiva but he creates, protects and transforms the universe. His power is set against the goddess Shakti (sorry Parvati can’t get into your whole deal) for a kind of death and creation in one balanced whole. To this day, I chant Shiva’s mantra “Om Namah Shivaya” when I mediate. It more broadly has a meaning of the “universal consciousness is one” which I tend to interpret as ego death. Shiva is the destroyer of my ego for which I am grateful.

The idea that creation and destruction were interlinked, and indeed matched, spoke to me as a child. Some kind of pre-rational understanding of the first law of thermodynamics. Energy is neither created nor destroyed. Maybe Shiva and Shakti are just godhead metaphors for the eternal spiral of creation and destruction that we’ve come to dimly understand thanks to the study of physics. I’m neither a theologian nor a physicist.

But I am a business person. Shiva lead me to appreciate the economist Joseph Schumpeter. You see, metaphysics aside, I took the lesson that destruction wasn’t inherently bad quite to my heart. That sometimes, for new things to be formed in the world, old manifestations needed to be destroyed or transformed. Schumpeter’s gale or, more commonly, creative destruction, held my imagination.

I thought to myself “dismal science my ass!” Economics has dedicated an entire discipline to the study of apocalypses and the utopia’s that are created in their wake and we call it good business management. Wealth by way of eschatology. Obviously I was hooked.

According to Schumpeter, the “gale of creative destruction” describes the “process of industrial mutation that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”

Startups are known for their creative destruction. Small changes and innovations slowly, and then all at once, implode and destroy old ways of doing business. if we are lucky more wealth is created in the process. Sometimes enough to change entire cultures and people for the better. And sometimes not. But if there was ever going to be a god of startups I think it would be Shiva.

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Aesthetics Internet Culture Startups

Day 213 and Kobayashi Maru

I don’t believe in the no-win scenario

Captain Kirk

If you cannot win by playing by the rules, then change the rules. If you are nice Iowa farmboy named James you will probably get away with it. Or a cartoon character named Calvin with a stuffed tiger named Hobbes. There is no cheating in Calvinball because the rules are constantly changing.

I’ve been thinking a lot about shitposting this past year as it becomes a kind of social sport in venture capital and startup Twitter. I’m a big fan of the shitpost as I think making elaborate “jokes but not quite jokes” can be an exercise in vulnerability and honesty.

But who gets to be honest and what rules will be broken if the wrong person says the true thing is quite telling. I have a medical procedure that is going to take a lot out of me this week so I’ve been resting at home in preparation. This has meant I’ve watched a lot of television. I’ve been binge watching Downton Abby the period drama about Edwardian Aristocrats coping with changing social standards as modernity bears down on them. It’s a drama about “manners” which please lots of agonizing over who and what is right and proper. The class structures are so codified they are literally written down. No seriously they kept books about peerages! Check out Burke’s. Fucking wild.

It all seems a bit ludicrous as an American but I’ve got to imagine social institutions I consider completely normal will look utterly baffling in a hundred years too. And much of the way those social mores change is when someone decides that playing by the rules is a no-win scenario. Sometimes the game is so codified that no one but people who have been trained and advantaged their entire life can be winners. When that happens the only way anyone else can win is to change the rules.

Or as Spock might have said to Kirk. “You cheated.” But is it cheating when it’s a no win-scenario? If by changing the parameters the game you open up entirely new possibilities maybe it’s a good thing. Sure, Star Trek does an excellent job of showing us the emotional and moral limits of never having to face failure and it’s consequences. But what if without rejecting the premise of the Kobayashi Maru you could have never known success or change?

I think shitposting might be a bit of social Calvinball or some social media variant of the the Star Fleet ethics test. People with some power use it to great effect. But a lot of people with some talent and an eye towards improving their social position leverage shitposting. They change the rules of what can be said. They make a game of truth telling and shift the rules of the game. This isn’t a finished theory by any means but as I’m determined to slowly think my way through a grand unified theory of shitposting you can expect a lot of notes and works in progress on the topic here.

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Startups

Day 203 and Living Rent Free in Our Heads

There are two kinds of startup teams. The ones that forgive each other, and the ones that don’t. If you are very lucky, everyone forgives each other in time. But for the ones that can’t forgive each other, the pain of the experience is a curse. Your failures and weaknesses live in each others’ heads rent free. And that sucks.

I understand how the curse of the unforgivable startup sins get cast. I understand the pain of having people in your life that you cannot imagine forgiving because their sins against you feel too big. Startups are exactly the kind of place where forgiving seems impossible. Why? Building something new is painful.

New life, new business, new art. It hurts to birth something from nothing. Those laws of thermodynamics seem to indicate that energy doesn’t get made or lost, so sure, getting an idea to come into reality has to have an energy cost that comes from somewhere. I’d argue with startups it comes from our will. Maybe our soul. If you aren’t into that then money and time. It has a cost is what I’m saying and we pay it. And when we feel we’ve paid those costs unfairly it’s hard to forgive those whom we blame.

When you’ve given so much of yourself to make a new reality, the pain of it not succeeding is real. It hurts to realize we’ve failed. To come headfirst at the possibility that your sacrifice was for nothing is existential. That the energy you took to build something was for nothing.

With existential problems you’ve got two choices. Face who you are and your part in it or blame it on someone else. It is a lot harder to own existential yourself. If we are feeling like a victim there are people who we can blame. We hired wrong. We had cofounder issues. We couldn’t collaborate well. We had cultural mismatches.

There are endless reasons our failures are shared. And it’s true. Failure never has a single point. It wasn’t just you. But it’s not your cofounder or your teammates fault either. You have to forgive them. They have to forgive you. If you don’t they will live in your head rent free forever. And no one wants that. Find a way to forgive. Find a way to own your own existential failures. It’s not worth losing people over.

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Finance Startups

Day 202 and Show Me Anything

I’m lucky to see work from founders at the very earliest stages. If you have a problem you are solving for chaotic world I’m generally interested in seeing it even if it’s just in the idea phase. But you have to show me you’ve got a plan to build a product. Any product is fine. Just show me something! Show me how you have the capacity to build even if you suck at it.

Bobby Goodlatte captured some of the sentiment I feel on the subject well with this exasperated Tweet.

What’s a “builder”? Show me something. Anything. Just show me one pixel you’ve created. That’s what a builder is. That’s why PM’s don’t qualify.

Sometimes it can feel hard to build something, anything, when you are very experienced. This is a problem I’ve seen across all kinds of impressive people. Academics, government folks and higher end finance folks, former c-suite executives. They know what good looks like so anything they can physically make with their own two hands will all look like crap.

I’d even go so far as to suggest there is an inverse relationship between how much you obfuscate your lack of existing product and your credentials. There are other corollaries on that basic theme. How comprehensible your product is right now is inversely related to how extensive your service layer is at the moment.

I see a lot of brilliant, extremely credentialed people solving big problems, but because making money is important they will pitch what amount to service companies without an existing product. But they will use extensive jargon and hand waving visionary opportunities to hide the fact that there isn’t any product layer yet. Which is weird because like eventually I’ll find out right? You wouldn’t want to trick your investors on the state of play.

I’d encourage you to stop trying to hide that fact. Don’t be embarrassed that you can’t make things to your standards. None of us can. New things always look like shit. Just own up to that reality and you will find more help from folks who will want to help make it better. Stop showing me CAGR and TAM and possibilities as a way of hiding that you haven’t built a product yet. It’s ok. You don’t need to have built something great yet.

Admit it. Show me some wireframes and a roadmap. I’ll take that way more seriously. In fact, I’ll probably overweight you showing me exactly what you do have and how you plan to use funds to improve it. That’s how much startup people value just building the damn thing.

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Startups

Day 190 and Neutrality

One of the more influential pieces of art on my worldview is the science fiction comedy Men in Black. Yes you read that right. My philosophy is underpinned by a speech by Tommy Lee Jones.

1500 years ago everybody knew the Earth was the center of the Universe. 500 years ago everybody knew the Earth was flat and 15 minutes ago you knew people were alone on this planet. Imagine what you’ll know tomorrow

I don’t really know shit. I know enough to know I don’t know shit. My mother had a favorite bumper sticker “ask your teenager while they still know everything” which at the time as a teen I found a bit insulting and now as an adult think was quite astute. The more I know the less I know for sure.

Because I’ve slowly come to realize that knowing can be a crap shoot I keep odd company. Arguably bad company. I follow some truly outrageous people on Twitter. I follow hard right partisans and tankie left wing socialists. I follow folks with deep convictions on the irredeemable evils of technology and the most ebullient techno-optimists. It’s hard to talk me into not keeping an eye on all view points. Sure I think some folks are dead wrong but how do I know I’m not one of them?

Not knowing things for certain as saved my life. Medicine has a tendency to interpret data as absolute. Biometric markers and test results can for some doctors have as much authority as a papal decree. Anyone who has been told “well your test results are normal” while still feeling like absolute shit will know how frustrating this can be. Plenty of data points look absolutely normal before a system cascades into failure.

We don’t know as much as we need to believe we know. Our craving for certainty as humans is a significant weakness. The venture capitalist who insists that some metric will determine a crucial outcome is a favorite trope of mine. As if favorable CAC/LTV ratio functions as a warding spell or an attractive margin structure offers protection against a changing consumer preferences. Knowledge isn’t magic. Superstition can just as easily apply to P&Ls as poltergeists.

I find it best to remind myself to take a neutral when approaching entrepreneurs. Maybe I don’t know. Maybe everything I’ve ever known was particular to my circumstances, bias, education quirks or just plain randomness. Maybe one small insight will shift the grounds underneath me and reveal entirely new frameworks for interpreting reality. The unknown unknowns have a habit of springing themselves when you least expect.

It’s often tempting to throw opposing viewpoints into buckets that are easy to dismiss. Venture investors are notorious for this. We dismiss folks for any error we spot. We deride their data. We applaud ourselves for spotting cracks in their plans. Resist this tendency. We must always retain the neutrality of perspective that allows us to change our mental models. What we know to be true might be a lie. We may lack a key piece of context that would unlock a cascade of understanding that changes our entire perspective.

This is why the adage “strong beliefs weakly held” can be so key to success. Changing our minds is a strength. It’s hard to admit to ourselves we’ve gotten something wrong especially if we sunk a lot of time, money and reputation into it. But would you rather be right or successful? Feeling superior can be a delight but not if it gets in the way of what we want in life.

Categories
Preparedness Startups

Day 189 and Cascades

One of the reasons we named the fund we invest out of Chaotic Capital is because I’m obsessed with cascade failures. In complex systems one small change can ripple out in unexpected ways. As players scramble to accommodate these shifts, opportunities for power realignments emerge. This is particularly exciting in systems that are man made as we can only create so much complexity in mechanical systems (unlike biological ones). Most startups are built on technology or engineering that are simple complex systems.

The absolute best description of the risks of a cascade comes from the science fiction television program The Expanse and a botanist named Prax. He is describing a failure in the hydroponics system (which both feeds the people and produces oxygen) on a space station on the moon Ganymede.

Because it’s simple it’s prone to cascades. And because it’s complex you can’t predict what is going to breakdown next or how.

While I’m a doomer and a prepper so it was bound to happen, it was this insight from Prax got me into hydroponics. Cascades and chaos and lettuce fuck yes!

But jokes aside, we’ve got a number of complex systems under strain right now. Supply chains, the financial system, our power grids coping with climate change, and even unemployment benefits are all examples of simple complex systems that are experiencing cascade failures.

I’m not in the mindset to lay a Grand Unified Theory of Simple Complex Systems tonight, because I did experienced one today. Colorado just set another heat record today and my air conditioner crapped out. As I set about closing blinds and checking electrical breakers I worried about how my own survival and comfort depends on cascades not occurring.

What if it had been electrical and my refrigerator went out and not just the air conditioner. Then my $5000 a dose immunosuppressant would go bad. If I can’t have that my spine will swell. Then I’ll be in too much pain to walk. Sure this isn’t a simple complex system exactly but I think it beneficial to go up and down the systems that keep our lives intact. If one system goes down do you survive?

This used to be a topic which we all shied away from. Then the pandemic happened and preppers like myself didn’t look quite so whacky. We told stories about the systems thinking that went into basic preparedness. We got a Nellie Bowles Styles piece. It was a lot of fun. But it belies the seriousness with which the topic of preparedness should be approached.

You probably aren’t prepared for some of the cascades that come as the works gets more chaotic. And no we cannot predict it. Shit is way too complex. It’s fucking chaotic as hell. So get some bottled water. I’ve made it easier. Here is what I keep in my go bags. Do it before the next cascade hits. You won’t regret it. I think Prax would agree.

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Startups

Day 182 and Operating Capital

Popular culture portrays Silicon Valley and the startup space as one where capital is king. But it’s not the kind of capital you might be envisioning. Money (literal capital) is less of a driver of success than your social capital. And a specific type of social capital is overlooked.

The people with the most social capital aren’t necessarily founders or venture capitalists. It’s the career startup operator that has a good reputation that matters. They have a type of social capital I call operating capital.

There is a reason the team slide matters in a pitch. Who you know and how much they like, respect and trust you has a lot more to do with what deals get done. Part of this is related to luck and timing. The most talented people aren’t always the ones that have big hits. In fact, we correlate failure more strongly to overall credibility.

This makes spotting who has the most status in startups tricky. In industries like finance, money keeps the score. In consumer packaged goods, it’s what brand team you were on. In startups, the score is tricky to quantify value. We’ve developed an elaborate system of social capital signaling that determines who is considered valuable. But within that social capital status in-group you will find that the executive team layer has some of the most pull as founders and board members build working trust with them over years.

Because we value operators as high social status individuals we build our social status signifiers around your proven capacity to problem solve. How you solve problems can make or break a startup.

And we need all kinds of thinking. We need system thinking, (ops), a knack for keeping talent motivated HR), an ability to drive excitement and warp reality (marketing and PR) and obviously you have to be able to make shit (product and engineering). The people with these capabilities are the ones that accrue the most operating capital. Find those high status people and you will never be far from a startup that may have a shot at the big time.

Categories
Finance Startups

Day 181 and Thesis Trends

As I was putting down scratch notes for Chaotic.Capital’s thesis yesterday on the types of businesses we like I thought I’d do a bit more stream of consciousness writing to discuss some of the mega-trends that I see driving returns over the next decade.

Embedded Functionality

We think more and more businesses will be born of the embedded functionality inside protocol layers or data sets. Many protocols have functionality embedded across different layers of utility and functionality. For instance, the new consumer bank is an API at heart. The protocol layer is the API and the embedded functionality is the financial services layers enabled through the protocol or application layer. Need another example. Retail sales data and demand trends give rise to fashion retailers. Think of StitchFix, the clothing brand is the embedded functionality of its aggregate trend, recommendation and demand data set.


Unbundling Trust

Trust based networks rule businesses like insurance, retail banking, law and financing. But what if trust was unbundled from institutional nexuses of power. What if we built trust from value creation instead of value extraction. DeFi wants to build permission-less trust based on a protocol. Its entirely possible we bundle trust back into the wisdom of crowds and markets. Wall Street Bets is an aggregate source of unbundled trust. Figuring out what layers can be stripped away for more efficiency and what layers we need for safety and peace of mind are unsolved problems.


Data Ingestion Is Value Creation. The more capacity we have for data collection the more demand we will have for data ingestion and processing. While we can say sure businesses rely on the protocol and data and that unbundles trust, that’s not the full picture. We will need people who make sense of the chaos for the muggles. Ordered systems give the impression of serendipity for their users (an introduction on a social network, a recommendation for a loan, an outfit customized for you) but the work required to intake and order the data to create value for users is a big hairy problem. And there is a lot money to be made in those. Centralization may come at this layer especially in user experience.

Flexible Asset Weighting.

We are also interested in businesses that know where they stand with capital needs for their business. If you are executional business you need a thin layer of assets to succeed. To quote Roy Bahat “hot swap” startups are executional businesses. A slim horizontal physical layer to take advantage of low financing costs means return on equity is greater for these asset light businesses. If it’s deep innovation then you can be asset heavy. We like those just fine too. But knowing where you stand and anchoring your business case on your asset weighting can give you an edge. That lets you be capabilities based and find opportunities, particularly as debt as is in a commoditization cycle.


All of this is to say we are thinking across a number of system level problems to unearth startups that will give flexibility to individuals, organizations, industries and hopefully the entire economy. Incumbents won’t see who is coming to beat them because they won’t recognize the new predators. They prioritize value systems that at won’t remain true as systemic chaos erodes inefficient businesses and institutions.