Categories
Finance Startups

Day 1376 and Q3 2024 Investor Update & Market Analysis for Chaotic Capital

Welcome to the Q3 2024 update for chaotic.capital LPs. I’m choosing to post a selection of our reporting publicly so prospective founders and LPs can see our thinking.

You may be invested in chaotic.capital because we invest in ideas that adapt humanity to our new chaotic era.

Enabling resilience in the face of unexpected & rapid change is our lodestar. It’s a simple heuristic that yields a complex thesis: that technology is a tool for increasing leverage. 

In addition to these investor letters, you can always visit jfredrickson.com, where I write every single day about whatever I’m thinking about. You are also welcome to DM me on Twitter @AlmostMedia or text me on Signal any time.

Q3 was another strong quarter for chaotic.capital. Our ability to identify and back founders early remains core to our success and we’re seeing it both with the inbound flow from founders (as seen in the two new deals we did this quarter) as well as the progress from our existing portfolio, with four new markups this quarter and substantial business progress on those and others.

The markets are increasingly focused on power and compute. What was once a contrarian focus on energy, infrastructure, crypto, and artificial intelligence has now become a core narrative among informed investors.

We believe the future of compute—particularly in relation to crypto and AI—will increasingly be viewed as a basic right, not a privilege, as these technologies scale to mass adoption. 

As governments grow more cautious about debt and monetary risk, individuals and organizations will turn to trustless systems to ensure secure transactions and autonomy.

This is why we focus our investments in the space on foundational layers that will power the next generation of applications.

With portfolio companies like Squads providing on-chain economy tooling, Kuzco reducing reliance on intermediaries while creating an open market, SFCompute pricing compute and creating spot markets, and Chroma becoming the go-to choice for open source vector databases, we see the intersection of crypto and AI creating secure, scalable systems for individuals and organizations alike.

Access to compute is quickly becoming synonymous with freedom of speech and, ultimately, the freedom to transact. 

These open trustless systems enable efficient transactions and verification, a crucial development as geopolitical multipolarity continues to rise, and more people need to ensure their interactions are secure without reliance on the state.

While Americans might not yet fully appreciate this, we’re seeing growing demand for these alternative systems and open models from those who are navigating increasing regulatory pressures and instability.

Europeans, whose governments are deploying strict limits on AI models are beginning to understand, those from countries facing geopolitical uncertainty (e.g., Israel, Ukraine), live it already, and those in countries with unreliable currencies and legal systems have been navigating anarcho-tyranny for decades.

But it can be precarious in the US as well, in California it was only the intervention of a veto from Gavin Newsom that prevented SB-1047 from restricting compute and hobbling the development of open source models.

Looking forward, this ability to access compute at scale may well parallel the right to transact. As nations confront their own risks, network state behaviors will become more prevalent, driven by the need for secure, decentralized systems that ensure autonomy in an increasingly unpredictable world.

We’re excited about the future of chaotic.capital and the opportunities ahead. As always, I’d love to talk about any of this with your discussions with you, so feel free to reach out. We’re just getting started, and there’s much more to come.

Categories
Emotional Work Politics

Day 1365 and Good News, Bad News

It seems to be an absolutely awful week on Planet Earth. War, natural disasters, and human venality are on full display. It’s hard to even read the news, political or otherwise.

In contrast, I am myself in a good news place. I have a few leftover health issues as I leave behind the bout of respiratory issues (Covid’s legacy) but am otherwise full steam ahead.

Because I am so busy I find myself offline and missing things. It’s all good news in my world. And then I come back online to check feeds and it’s just all bad news.

I feel the privilege of it but I am also proud to have this stability. We made choices so our lives could be this way. We value preparedness and the calm that comes from planning.

I wish more people could live this way. Focus shouldn’t be reserved for a select few who can make good big life choices. That can be luck of the draw.

I do believe however it’s possible for many more of us to narrow focus so we can let small good choices compound. It’s good to appreciate the value of limiting your attention to your own priorities.

There is an argument to be made that only once you have steadied your own life can you look outside. Given how crazy the outside world can be give yourself the chance to have good news in your life. There will always be bad news.

Categories
Aesthetics Politics Preparedness

Day 1362 and Hilux Drip

The right to repair movement is a worthy effort fighting the banal evil of planned obsolescence.

If you aren’t familiar with the term, it’s an economic and industrial design strategy to deliberately make products with shorter functional lives to “shorten the replacement cycle” aka make you buy a new one.

If you are a user of Apple products (as I am) then you are probably familiar with its reputation for degrading service. They are paying out to the tune of 500m for the practice.

But right to repair issues and planned obsolescence doesn’t just happen in electronics. It’s a problem in auto repair and home appliances too. Repairing a broken part can be more expensive than buying a new item.

And it’s getting worse. Computer chips are now in everything from your refrigerators and dishwasher to your car. Consumers reasonably loathe the increased complexity and challenges of repairing major purchases when everything is “smart.”

At this point I’m willing to pay more money for appliances with zero smart features and physical controls for everything. @ Kelsey Hightower

And I fear most of our regulatory climate is dedicated to making this problem worse. When Japanese automakers first come to the United States their vehicles had longer lifespans so American carmakers were forced to respond by building more durable products. That was a positive thing.

But geopolitical tensions being what they are the, U.S. Commerce Department proposed a national security ban on certain Chinese and Russian-made car parts from U.S. roads The motive is to protect American consumers from digital surveillance and hijacking. But who knows what gets caught up in the effort as we could be allowing in parts that make it easier to repair our own cars.

If we learned anything from Japanese cars it’s that allowing competition was an unalloyed good. There are cars I wish we had in America like the iconic Toyota Hilux. Here is a synopsis from Perplexity on why the Toyota Hilux is considered to be so durable. It’s got a robust chassis, a simple design that is easy to repair, minimal electronics and high quality components.

But you can’t own a Hilux in America. Why? The “Chicken Tax,” a tariff on light trucks, was imposed by the United States in retaliation for tariffs placed by other countries on American chickens.

But maybe it’s good we Americans can’t have a light truck that is easy to repair and designed to last. The internet has a long lore of memes dedicated to the car’s use in revolutions. You certainly wouldn’t want Americans getting any ideas about that.

A viral parody meme about why the Hilux is the choice for insurgents

Categories
Culture

Day 1335 and Open Season

We are so close to being out of the long horror that is Summer. I’m ready for a change. I can almost taste it. The temperature hasn’t really dropped yet but the shortening of the days feels like a balm to my nervous system.

Yet oddly it wasn’t nature that cued me in. I saw a tweet from a New Yorker complaining about the 7 train not running on the first weekend of the U.S Open.

With unpredictable and uncanny seasons off from the baseline of my childhood, it can feel like I rely on cultural markers for seasonal shifts more than temperature changes.

I grant a chill in the air may come at random when you live in the high variance mountain West so maybe it fits that a complaint from a city is a better marker as to last call of summer. They like in concrete and need the reminders. Tennis in New York means fashion week is just around the corner.

I’m ready for the season to open. I look forward to pilgrimages to the cities to keep business turning. But I’m going to enjoy one the last weekends before we are all called back to the churn of industry. For those lucky few who harvest I pray for bounty.

Categories
Travel

Day 1325 and Road Warrior Season

I’ve begun booking some of my fall travel. Much as living the good life in Montana is pretty much paradise, one is obliged to make pilgrimage to the main cities in which business is done.

Some juggling of priorities will be involved as Asia and Europe compete against home turf cities like San Francisco and New York. Plus we have conferences in some pretty weird places from rural Wyoming to South Beach Miami.

I am resting today and enjoying running the logistics of the fall season through my little packing and organizing rituals. I enjoy thinking through the logistics of grooming and dressing more than I do working through the health and medical routine.

It’s nice to daydream about the cold fall. I put on a cashmere sweater and pulled out my bags as I thought about the return of the cold and the return of work. I can’t wait. I better catch up on sleep while I can.

Categories
Politics Startups

Day 1322 and You Can Just Do Things

The older you are the more you begin to accept the way things “are” in the world. We’ve come to accept layers of professionalism between us and the real work of the world as we go about pursuing our own comparative advantage.

Surely someone is handling the bits we are not as this is an advanced civilization right? I fucking wish.

I don’t wish to disparage our expert managerial class but we are all human. The experts are just operating from past biases and some of them haven’t been updated in quite a while. The people in charge might even be quite wrong.

Sometimes things are much easier than you imagine. I remember being asked when fundraising for a cosmetics business about the relative challenge of sourcing manufacturing.

The bias ten years ago was that there must be exclusive manufacturers who make the nice things they sell at department store. Turns out any idiot who can underwrite a purchase order to buy anything they like for an astonishing array of things.

Now maybe you think ok but not all businesses are like this right many businesses have regulatory challenges and someone responsible must be in charge of all of that.

Surprise those are regular people too. And most of them have LinkedIn profiles now. Everything from the bureaucracy at the Department of Energy to the local zoning board is one like now

I spent a few years on a community board that oversaw liquor licenses in lower Manhattan right after Trump was elected as I wanted to be a more active participant in my own democracy.

Turns out a lot of life goes on at the local level and the levers of democracy go through having your papers in order. American life has a lot of paperwork. If you wanted to serve alcohol at your establishment you went through me and a couple other normal citizens at the liquor board

Most businesses spent small fortunes on laws to manage the paperwork of doing business. It was expensive and time consuming and I looked at a lot of Michelin caliber restaurant business plans.

I did everything I could to make sure a license got through. Most of the board had a similar attitude. We’d redo applications on live at a meeting sometimes which made them go for hours. But generally the goal was to get permits approved and have there be no issues that could trip the business up.

I felt I had a civic obligation to be more involved in helping people just do things. You can get through the paperwork.

I want Zoomers to do their best to convince the older people living in the past to help us update our priors. You can just do things.

You can find a laboratory for a formula or a factory for parts. You can find the regulators and local people on board and convince them of the soundness of your plans. You can just do things. Even if someone says something is hard you can probably do it. Even impossible things might have a chance if you just keep working the problems.

Categories
Startups

Day 1318 and Intention

I am experiencing a peace about the future I didn’t fully expect to find. I’ve been lucky enough to have a number of long term efforts start to paint a picture of success.

I began a process of examination of my last several years somewhere in the last half decade as I prepare myself and my work the next stage of growth. I’ve made a number of fairly significant decisions as my idea of where the future is headed and how I myself expect to live in it. A lot of these choices are public and revealed preferences. I don’t make it a secret.

I’ve been considered a doomer only because I think one has to look with calm and clear eyes at the problems in front of you. Only then can you really build optimism about your capacity to improve. Being merely positive isn’t a bad thing, but positivity is only driving you towards success if you are planning realistically. A good attitude is just a starting point.

I’ve taken things slowly. Sometimes it feels painfully so. But the intentions I had to be prepared to live in a more chaotic world means I live a stable life now even as daily uncertainties exist for everyone.

My intention is to approach building the future with optimism. The problems are large but I work with many focused and sober minded people who actually can and do build solutions. Fighting the future won’t do much. But who says it’s got to be a fight? Maybe we can bring on better things.

Categories
Community Politics

Day 1317 and The Circus Came To Town

I am hunkering down for a Friday evening at home. Batten down the hatches, secure the chickens in their coop, turn on the security system and lock the doors kiddos because the circus is here.

Former President Donald Trump is hosting a rally in Bozeman Montana tonight and I would like to keep my distance from the circus. There are naturally rallies, counter rallies and protests to go along with the main event.

We don’t live in the town of Bozeman thankfully but comfortably far enough into rural county land that we shouldn’t be bothered.

Nevertheless when something big comes to town, and it’s harder to imagine something bigger than a political rally, it can get in the way of basic routines like grocery shopping or picking up prescriptions at the pharmacy.

I was doing a few errands over the lunch hour and traffic was crawling as trucks decked out in flags paraded through town. It was actually quite festive even if it slowed everything down.

Trump is speaking at 8pm and already by noon the rumor on local chats and news websites was that the indoor arena was nearly full with early arrivals.

There is a portion of 19th street where local farmers sell fruit and vegetables on the side of the road. Today it was packed with booths selling Trump paraphernalia instead of cherries or sweet corn. I

think the most astonishing flag I saw was “Cum-Allah Harris” but it was otherwise your usual MAGA fair with lots of signs for local Republican candidates as well.

Slow traffic and roadside flag sales

I didn’t get any close up pictures as I was trying to avoid the scene but I did a little bit of looking as I drove by. I’m hoping it brings good business to restaurants, bars and motels though in truth August is already so popular a time to be in Bozeman we don’t really have much capacity.

I’m safely back home long before anything has kicked off and I indeed to keep it that way. Don’t invite trouble and trouble won’t find you. But I look forward to hearing stories from friends and neighbors. Maybe I’ll watch the livestream.

Categories
Community Emotional Work

Day 1293 and Pollyanna

I’m a millennial who was mentored professionally by Generation X. Boomers rarely factored into my early work life. Even when I reported to the C suite and a board it was still mostly Gen X.

My Gen X mentors had a watercolor landscape of gentle layered cynicism that painted a picture I just didn’t quite see. I don’t have the temperament to see the worst in people and I still believe I could reshape institutions. I felt the biggest difference between myself and my mentors was that I was a bit of a Pollyanna. Many Millennials are earnestly optimistic.

That’s kind of a funny statement as I’m known amongst my social circle for my interest in what happens when things go wrong. I live in Montana in a small farmhouse with a solar grid. My husband who works in Bitcoin. I named my venture fund chaotic. My revealed prefences don’t scream “belief in the future” at first blush. I was taught that being prepared is how you end up with good outcomes.

Cynicism clashes with my belief that good outcomes are possible. Not only can we get wins but have to do so. There is no way out of our problems that is not through.

And I’d rather face that reality with a smile and a belief system in my fellow man. Better to endure regular disappointments than to never know the joy of things going well.

I want to approach the future as one that I can personally shape. Being allowed to contribute to a network that works collaboratively appeals to me because it’s fundamentally an optimistic vision. We can coordinate through all kinds of mechanisms for consensus.

Despite the cynicism of Gen X I am confident I wouldn’t have the dream of networked collaboration if their hackers and engineers hadn’t shown me we could build something better. Maybe that’s not cynicism but realism. And I hope that the realist camp contains lots of Pollyannas. Don’t stop believing and hold on to that feeling.

Categories
Emotional Work

Day 1270 and Chin Up

I’d like to maintain some degree of optimism about, well, everything. And yet I am struggling to maintain attitude control.

I like a little joke about navigating in space because I’m the sort of dork who enjoys science fiction books with lengthy digressions about spin and 3 axis stabilization.

But equally I do think it’s important to keep your chin up. Or nose up. It depends on whether you are piloting your emotions or a some other type of craft. It’s going to be forced metaphor post.

There is no need to crash yourself by getting disoriented navigating a situation in which you have some coordinates. It’s possible to calculate what’s going on and get yourself going in right the direction.

I am trying to do so by articulation, which yes is meant to be read as navigation joke, but is really just another goofy way of saying that writing helps me straight myself out.

So I am doing my best to keep my chin up emotionally and keep navigating what’s in front of me. It’s certainly better than a crash.