I recently started reading Energy and Civilization: A History by Vaclav Smil. The book begins describing the first forager civilizations. Being a forager sucked. You went around hunting with your tribe for food. If you killed an animal or caught some fish, you could eat and live another day to do it all over again. If you didn't, you'd die. As I was reading this section, I went to the Museum of Anthropology in Mexico City. It's amazing. If you haven't been to Mexico City or the Museum of Anthropology, you should absolutely go if you can. In it, there was an exhibit that chronicled the evolution of Mexican civilization from foragers to an agrarian one. It reconfirmed my suspicion that being a forager totally sucked.
For all the right reasons, public sentiment towards crypto is spiraling. Scammers, ponzi schemes and the like are being exposed daily, and unfortunately it's coming at a real monetary cost to unassuming ecosystem participants. Alas, it is easy to be a critic when things are so painfully awry. I am by no means a crypto-absolutist, nor am I an outspoken skeptic. I think the most prevalent use case for crypto today is speculation in the form of a global casino that operates 24/7. There are a few other use cases and projects that cross the chasm and provide real value to network participants like Helium, but they're the exception, not the rule. But I still want crypto to succeed and remain long-term bullish and optimistic.
Crypto is a potentially very important innovation within the technological revolution that is the information age. It's important because it has the potential to deliver a rather utopian end state to the proliferation of software as it continues to eat the world and infiltrate our daily existence. I want it to succeed because I would like to see the following ideals exist and believe that crypto is well-suited to support them:
A structurally sound alternative to incumbent control:
One of the most important Fundera board meetings I ever participated in took place in 2016. We were reviewing sales productivity metrics and one of our independent board members, Phillip Riese, asked about our compensation plan. When we explained that everyone was paid a healthy base salary and that we didn't need a bonus plan because everyone was super sharp, talented, mission-driven and cut from a different cloth, jaws hit the floor. I was promptly reprimanded and then pat on the head for my naivety. It was then that I learned a critical lesson: incentives drive behavior.
It's a phrase I find myself repeating over and over again. I learned it well while building Fundera. Need to solve a problem? Hit a target? Do something spectacular? Incentives work wonders. Incentives are one of the most powerful tools people have to inspire the behaviors needed to drive desired results. They are deeply embedded in virtually all systems: political, economic, social, environmental, etc. Sometimes incentives produce phenomenal outcomes, and sometimes they create havoc. They are a double edged sword as too much focus on driving short and medium-term results can come at the expense of long-term mission and vision. For operators, a balanced scorecard can help to mitigate detrimental effects.
One industry where incentives can create misalignment between businesses and customers is venture capital.
I recently started reading Energy and Civilization: A History by Vaclav Smil. The book begins describing the first forager civilizations. Being a forager sucked. You went around hunting with your tribe for food. If you killed an animal or caught some fish, you could eat and live another day to do it all over again. If you didn't, you'd die. As I was reading this section, I went to the Museum of Anthropology in Mexico City. It's amazing. If you haven't been to Mexico City or the Museum of Anthropology, you should absolutely go if you can. In it, there was an exhibit that chronicled the evolution of Mexican civilization from foragers to an agrarian one. It reconfirmed my suspicion that being a forager totally sucked.
For all the right reasons, public sentiment towards crypto is spiraling. Scammers, ponzi schemes and the like are being exposed daily, and unfortunately it's coming at a real monetary cost to unassuming ecosystem participants. Alas, it is easy to be a critic when things are so painfully awry. I am by no means a crypto-absolutist, nor am I an outspoken skeptic. I think the most prevalent use case for crypto today is speculation in the form of a global casino that operates 24/7. There are a few other use cases and projects that cross the chasm and provide real value to network participants like Helium, but they're the exception, not the rule. But I still want crypto to succeed and remain long-term bullish and optimistic.
Crypto is a potentially very important innovation within the technological revolution that is the information age. It's important because it has the potential to deliver a rather utopian end state to the proliferation of software as it continues to eat the world and infiltrate our daily existence. I want it to succeed because I would like to see the following ideals exist and believe that crypto is well-suited to support them:
A structurally sound alternative to incumbent control:
One of the most important Fundera board meetings I ever participated in took place in 2016. We were reviewing sales productivity metrics and one of our independent board members, Phillip Riese, asked about our compensation plan. When we explained that everyone was paid a healthy base salary and that we didn't need a bonus plan because everyone was super sharp, talented, mission-driven and cut from a different cloth, jaws hit the floor. I was promptly reprimanded and then pat on the head for my naivety. It was then that I learned a critical lesson: incentives drive behavior.
It's a phrase I find myself repeating over and over again. I learned it well while building Fundera. Need to solve a problem? Hit a target? Do something spectacular? Incentives work wonders. Incentives are one of the most powerful tools people have to inspire the behaviors needed to drive desired results. They are deeply embedded in virtually all systems: political, economic, social, environmental, etc. Sometimes incentives produce phenomenal outcomes, and sometimes they create havoc. They are a double edged sword as too much focus on driving short and medium-term results can come at the expense of long-term mission and vision. For operators, a balanced scorecard can help to mitigate detrimental effects.
One industry where incentives can create misalignment between businesses and customers is venture capital.
Ride It to the Sky
Ride It to the Sky
Life got better as humans developed the skills necessary to stay put and farm land. And then it proceeded to get even better as we found new ways to adapt to the world (or adapt the world to us) over time. We invented things - tools, medicines, technologies, governance, and more - and through centuries of trial and error as we accumulated knowledge these things interacted with one another, compounding to make life even better, faster.
Every day we are surrounded by chaos and proclamations that the world is heading towards irreversible catastrophe. There's a lot to be upset and despondent over, but lately I've been forcing myself to zoom out and appreciate just how blessed we are to be alive right now. We've come unfathomably far over such a short period of time in the grand scheme of human history. It's an absolute miracle and testament to the ingenuity and perseverance of humans. So while we face very real risks both presently and in the future, I believe they are surmountable, and that at the end of the day we will find a way to continue to progress.
Life is hard and can be unpleasant when you're constantly reacting to the bombardment of "Everything is Fucked!" It is so much more pleasant and productive when appreciating and acknowledging our collective and continuous progress. The climate crisis, pandemics, the erosion of democracy - all of these things are very real threats to our existence and our ability to make progress - but we are well equipped to tackle them and continue on our trajectory of constantly doing spectacular things.
Azeem Azhar
does a good job illustrating the problem in his book
. The gist is that a handful of executives at tech companies control a majority of our data that's lodged in silos and influence our daily lives significantly more than most of us would like to acknowledge. Crypto is a logical and viable way to decentralize that consolidated power. If the history of business is the bundling and unbundling of services, crypto can be a force for unbundling (or disaggregating).
Users are owners: Today's incumbents have created some of the most impressive businesses in history on the back's of their users (who received and continue to receive impressive value from them). One of the things I love most about crypto is the notion that network participants can become owners of the networks they help build through token incentives. To date these token incentives have had a rather perverse impact on most projects (i.e. participants game projects early on to earn tokens in the hopes of selling them off without really caring much for the longevity of the service itself), but the idea is powerful and wonderful. Here's a nice piece by Fred Wilson about token business model innovation.
Democratized governance as a coordination experiment: In addition to being user owned, most crypto projects have a stated end goal of being governed by their users. This is a fundamental premise of DAOs, and some projects have done a nice job handing off the reigns to their users. There's something fascinating about this. There are a lot of obvious downsides, but the notion of democratic governance for the most important internet protocols and services is a fascinating experiment. If you want to dive deeper here's a great podcast featuring Joel Monegro.
Transparency and composability can accelerate the pace of innovation: Crypto is open source by design, and it's composable so I can mix and mash existing applications however I'd like. Imagine if you could take the pieces of Google, Twitter, etc. that you love most, combine them and then build something new that you'd like to use on top of them. Being able to assemble internet applications like legos is a powerful tool for rapidly building and testing new applications. Here's a deeper dive by Linda Xie.
There are other aspects of crypto that I like (namely that it's fun and that DeFi can create a more inclusive global financial ecosystem), but these are the ideals that I value most and would like to see flourish in the real world. Crypto is the most viable foundation for them. I don't know if it will happen. For all the capital and time that has been deployed in the space by brilliant builders and investors, it certainly has not fulfilled its promise. But the future is still there for the taking, and I remain optimistic.
**Sometimes I like to revisit these articles that helped me understand how important crypto can be:
The fundamental interests of most founders are oftentimes directly at odds with those of their investors. It's worth stating that I am huge fan of venture capital. I've worked with many firms and partners across GroupMe and Fundera that I deeply respect. It's a remarkable tool to create something out of nothing and build and scale businesses. That said, for most founders and employees, optionality is an important thing to preserve in order to optimize for beneficial financial outcomes. But VC makes almost all of its economic returns on a handful of outlier grand slams. 3-5x returns on any individual company are nice, but they do not make or break an individual fund. They're rounding errors at the end of the day. But a $50-$100 million outcome can be economically life changing for founders and employees that haven't over-capitalized and own a meaningful percentage of their companies. This is a unique friction that exists in the industry, and it's critical that founders are cognizant of its existence.
Once you fully grasp the concept you begin to notice how incentives influence virtually every institution in our society. For instance, this insight from Palmer Lucky will make your head spin.
When you're frustrated with the way something works, this realization helps you get to the bottom of why things are the way they are in the first place. For people who like to reason in first principles, it's a powerful tool to get to Why.
Now when I set out to build something or tackle a problem that's loaded with complexity, one of the first things I try to understand is the role and influence of incentive structures.
Life got better as humans developed the skills necessary to stay put and farm land. And then it proceeded to get even better as we found new ways to adapt to the world (or adapt the world to us) over time. We invented things - tools, medicines, technologies, governance, and more - and through centuries of trial and error as we accumulated knowledge these things interacted with one another, compounding to make life even better, faster.
Every day we are surrounded by chaos and proclamations that the world is heading towards irreversible catastrophe. There's a lot to be upset and despondent over, but lately I've been forcing myself to zoom out and appreciate just how blessed we are to be alive right now. We've come unfathomably far over such a short period of time in the grand scheme of human history. It's an absolute miracle and testament to the ingenuity and perseverance of humans. So while we face very real risks both presently and in the future, I believe they are surmountable, and that at the end of the day we will find a way to continue to progress.
Life is hard and can be unpleasant when you're constantly reacting to the bombardment of "Everything is Fucked!" It is so much more pleasant and productive when appreciating and acknowledging our collective and continuous progress. The climate crisis, pandemics, the erosion of democracy - all of these things are very real threats to our existence and our ability to make progress - but we are well equipped to tackle them and continue on our trajectory of constantly doing spectacular things.
Azeem Azhar
does a good job illustrating the problem in his book
. The gist is that a handful of executives at tech companies control a majority of our data that's lodged in silos and influence our daily lives significantly more than most of us would like to acknowledge. Crypto is a logical and viable way to decentralize that consolidated power. If the history of business is the bundling and unbundling of services, crypto can be a force for unbundling (or disaggregating).
Users are owners: Today's incumbents have created some of the most impressive businesses in history on the back's of their users (who received and continue to receive impressive value from them). One of the things I love most about crypto is the notion that network participants can become owners of the networks they help build through token incentives. To date these token incentives have had a rather perverse impact on most projects (i.e. participants game projects early on to earn tokens in the hopes of selling them off without really caring much for the longevity of the service itself), but the idea is powerful and wonderful. Here's a nice piece by Fred Wilson about token business model innovation.
Democratized governance as a coordination experiment: In addition to being user owned, most crypto projects have a stated end goal of being governed by their users. This is a fundamental premise of DAOs, and some projects have done a nice job handing off the reigns to their users. There's something fascinating about this. There are a lot of obvious downsides, but the notion of democratic governance for the most important internet protocols and services is a fascinating experiment. If you want to dive deeper here's a great podcast featuring Joel Monegro.
Transparency and composability can accelerate the pace of innovation: Crypto is open source by design, and it's composable so I can mix and mash existing applications however I'd like. Imagine if you could take the pieces of Google, Twitter, etc. that you love most, combine them and then build something new that you'd like to use on top of them. Being able to assemble internet applications like legos is a powerful tool for rapidly building and testing new applications. Here's a deeper dive by Linda Xie.
There are other aspects of crypto that I like (namely that it's fun and that DeFi can create a more inclusive global financial ecosystem), but these are the ideals that I value most and would like to see flourish in the real world. Crypto is the most viable foundation for them. I don't know if it will happen. For all the capital and time that has been deployed in the space by brilliant builders and investors, it certainly has not fulfilled its promise. But the future is still there for the taking, and I remain optimistic.
**Sometimes I like to revisit these articles that helped me understand how important crypto can be:
The fundamental interests of most founders are oftentimes directly at odds with those of their investors. It's worth stating that I am huge fan of venture capital. I've worked with many firms and partners across GroupMe and Fundera that I deeply respect. It's a remarkable tool to create something out of nothing and build and scale businesses. That said, for most founders and employees, optionality is an important thing to preserve in order to optimize for beneficial financial outcomes. But VC makes almost all of its economic returns on a handful of outlier grand slams. 3-5x returns on any individual company are nice, but they do not make or break an individual fund. They're rounding errors at the end of the day. But a $50-$100 million outcome can be economically life changing for founders and employees that haven't over-capitalized and own a meaningful percentage of their companies. This is a unique friction that exists in the industry, and it's critical that founders are cognizant of its existence.
Once you fully grasp the concept you begin to notice how incentives influence virtually every institution in our society. For instance, this insight from Palmer Lucky will make your head spin.
When you're frustrated with the way something works, this realization helps you get to the bottom of why things are the way they are in the first place. For people who like to reason in first principles, it's a powerful tool to get to Why.
Now when I set out to build something or tackle a problem that's loaded with complexity, one of the first things I try to understand is the role and influence of incentive structures.
