Risk at Sea

Leave a comment

I’ve been reading Freaks of Fortune, a wonderful book on the history of the modern insurance industry. It’s a fascinating survey of the emerging capitalist threads of the 19th Century and their implications for the world in which we live. There are too many points to summarize or opine on for one short blog post, but a few concepts jumped out at me (quoted as screenshots below). i’ll split them up into a few posts, so that I can tell the stories well.

First, modern insurance came from underwriting a very specific peril, universally understood to be the most dangerous thing about commerce: the sea. Disease at-sea, storms, navigation errors, sharks, and pirates were the biggest threat to commerce originating in London, where the insurance industry had its origins. 

The concept of a ‘risque’ (sic) was a financial asset representing the insurance interest in the face of perils at-sea. Our modern concept of risk, particularly in a financial sense, only made thin and vague sense to many 19th century merchants. The economy before the first industrial revolution was made up almost entirely of individual local craftsmen, artisans, and farmers. There were uncertainties associated with crop yields, but not much else when it came to commerce, and certainly not such that it had to be organized. Dutch East India Company, the first corporation, and the organization to establish one of the earliest ever stock exchanges**, became a corporation in the first place as a way to diversify risk of individual ships encountering peril at sea. 

As seafaring trade grew, risques became a more popular asset, but the concept behind them needed to be argued for, even by the industrialists who wanted to extend rail lines or expand oil territory. The president of the Board of Chicago Trade had to present to Congress on the value of risk-taking and speculation in markets as late as 1892: 


As the concept of risk itself took on a more philosophical, cultural point of view, it’s application thusly broadened. We take risk for granted today, but it’s fairly new, and still not evenly understood or appreciated—a big part of what makes Silicon Valley so successful. Often, in describing how I think about investing in and working on startups, it feels as though I am describing alien concepts, particularly when I speak about a power distribution curve. Indeed, if I could point to any one cultural condition that is endemic to the Silicon Valley that I haven’t seen anywhere else, it is this: the incredible amount of fault tolerance. We have optimized conditions for creating hypotheses, and learning whether those hypotheses have merit. Edison’s quotation feels appropriate, to this point: “I have not failed. I’ve just found 10,000 ways that won’t work.”

Even still, I continue to believe that in Silicon Valley we don’t take nearly enough risk. We pattern match, and optimize for downside, and subconsciously try to validate our myopic positions, and engage in highly social and lemming-like behavior. I’m guilty of all of those things as much as anyone. But I happen to believe that the old saying that there are only a dozen great startups per year (is that the latest number? it keeps rising) would be dramatically higher, if we were willing to take more risk. I think the bulk of the responsibility on this note falls to LPs and GPs. If we funded more “unproven” managers or more “contrarian” founders, I’m convinced that we would find more amazing companies. Risk is a powerful force, and we have only started truly learning about it in the last 3-4 generations. We have learning yet to do.

**Florentine and Venetian merchants also purported to have a version of a stock exchange in the early 1400s, as well, if you’re curious about this stuff, too. But check out Freaks of Fortune, first. 

Seriously, What’s Up With Sweden?

Leave a comment

At 9.5 million people, the country’s population is somewhere between Michigan and New Jersey. It’s slightly bigger than New York City. It’s GDP per capita is high, but not in the top 10 (depending on whether you’re using purchasing power parity or nominal GDP), and lower than the United States’.

And yet, if you look at the last 10 years of technology activity coming out of that country, they have a *stunning* number of companies that either have $100M revenue or 100M users. And in the B range, the numbers are maybe even more startling. In the last 10 years, they have Mojang (to Microsoft, $2.5B), Spotify (private, ~$10B), Skype (to eBay, $2.5B), King (to Activision, $5.9B), Klarna (private, ~$2.5B), mySQL (to Sun, $1B) to name a few *off the top of my head*… It’s incredible.

I’m not the only one whose noticed this. A group of researchers at Wharton pointed out the fact that the country has supported an incredible amount of startup activity with infrastructure and private equity dollars at many stages of development. As the study points out, “More than 94% of the population is online with the fourth highest usage in the world. Over 91% of the population accesses the Internet at least once a week.” The most popular job in Sweden is “programmer”… As early as 1994, the government was providing tax breaks to families to buy personal computers. Indeed, they made a big top-down investment in technical education and infrastructure, and that has contributed to their success.

They are not alone on this front: South Korea has a large pool of unicorn successes: our partner LINE, our partner Jay’s company Nexon, Daum/Kakao, Naver, Coupang, and many more. And the country’s technical education is rigorous and their national technical infrastructure as thorough as anywhere in the world. A thin reading would conclude that this is the key to Sweden’s success, and the story stops here. I don’t agree. Korea has 50 million people, and their successes are largely consumer internet, while the companies coming out of Sweden touch almost every piece of the innovation ecosystem. I think something special is happening in Sweden.

Look at the Billboard Top 10 today. Look at it last year. Or the year before. Or every year since 2008… And then 1999 and 2000. The common thread? Max Martin. He is a Swedish music producer who has produced Britney Spears, The Weeknd, Justin Timberlake, Taylor Swift, her bff Katy Perry… you name it. I noticed, a few years back, when someone from the music business told me about this strange aberration in modern pop music’s lineage, that Sweden is also notoriously good at making pop music (see: ABBA, Ace of Base, Miike Snow, Robyn). Like billion dollar software companies, they punch well above their weight. 

I then found this quotation from Max Martin, saying that he had: 

public music education to thank for everything.

It turns out that Sweden has a nationwide, government-funded, music theory, composition, and performance after school program. So, every single kid in the country grows up knowing what it’s like to start with a piano as an unintelligible blob of black and white, to learning the basic architecture, to some of the more sophisticated methods, to recreating great works, and finally to pure composition. Does that process not sound like learning to code, or messing around with circuits until you can create a dancing LED wall, or taking an idea, pulling together the resources and turning it into $1b of market capitalization? 

A truly phenomenal entrepreneurial ecosystem requires infrastructure, investment, and patience, yes. But I believe that there is a *strong* link between Sweden’s music education program and their later amazing success in entrepreneurship. Entrepreneurial ecosystems are *cultural* as much as they are purely technical, or technocratic. And the cultures of radical collaboration, risk-taking, persistence in the face of likely failure, and a celebration of creativity are highly endemic to pop music production, as they are to tech. Perhaps those cities that are looking to generate a robust and successful tech ecosystem should consider thinking a bit further outside the box.


Pacific Standard covered the music education phenomenon beautifully here: https://psmag.com/swedish-pop-mafia-222786f8b551#.sw5b4wxy7. My favorite quotation was: 

IN THE 1940s, CHURCH leaders and cultural conservatives in Sweden rallied together around a solemn mission: to safeguard the country’s youth against the degenerate music — the “dance-floor misery” — that was being piped in from America.

So, we owe the likes of this and this to those church leaders and cultural conservatives. Ironic, don’t you think?

Things We Make, Things We Grow

Leave a comment

A few months ago i was having breakfast with a mentor and investor of ours, who said something very interesting to me: “When I was young, I used to think there was a distinction between ‘things that are made’ and ‘things that are grown’. I no longer believe in that distinction, which is a profound change.”

As I thought about it, I realized I was the same way, but hadn’t realized it: on my old view, some things were made: paper, plastic, titanium, polyester, etc. And other things were grown: wine, meat, milk. But why? After all, wine is amino acids, ethanol, sulfur dioxide, yeast, and so forth. Similarly, meat is simply a cocktail of amino acids (these are important), carbohydrates, water, triglycerides and other lipids.

Where it gets interesting: to-date, most biotechnology innovation has been considered in the context of drug discovery for pharmaceuticals, and most life science innovation has been exactly what it sounds like: concerned with the design of living organisms: botany, zoology, and so forth. But an amino acid isn’t alive: it is a building block of life, an organic compound (carbon-based) but is not itself alive. What if, instead of growing meat through a womb or an egg, we just grew it in vitro, using organic chemistry? What if, instead of growing elderflower in the ground and grapes on vines, we simply put amino acids, ethanol, yeast, glucose, and other sugars into a series of chemical processes to make gin and wine?

Our initial investment in Hampton Creek over 3 years ago opened our eyes to the opportunity to use biochemistry to, at comparable and often lower cost, mimic naturally occurring processes in food. They ultimately launched a mayonnaise, cookies, safe cookie dough, and will be introducing a broad line of products which don’t contain processed eggs, but taste just as good because, in fact, the chemical processes have been recreated through pea proteins and other isolates. Since then, we have been fortunate to invest in Modern Meadow, Impossible Foods, and Ripple Foods, all of whom have created opportunities to transform the manufacturing, production, and creation process for products that would otherwise have been ‘grown’, into products that are made.

This really matters. The American obsession with cows is destroying our environment. The carbon emissions from red meat are greater than our total car usage on an annual basis. The sheer amount of land and water used for grazing fields for cows represents an incredibly inefficient use of our space and energy. And, on top of that, meat is really not that good for you.

It doesn’t stop here; in fact, the story starts here. Organic compounds and the living beings that result from them, will increasingly be made, not grown (or raised). This is an environmental win. In *many* cases, because of the sheer inefficiency of the natural processes we rely on to get the scale that consumer require, it is also *cheaper*, and every one of the companies mentioned above is less than a half decade old. It is early days for this space. The food will get ever more delicious, the leather ever more soft, the wines more complex, and our society better.

(There is a singularity, humanoid implication to this train of reasoning, but I’ll save that for next time.)

An Open Letter On Donald Trump’s Candidacy.

Leave a comment

Along with 150 of my peers in the technology industry, I signed an open letter organized by Alec Ross regarding the upcoming election. Reprinted in full below, shareable link here.

We are inventors, entrepreneurs, engineers, investors, researchers, and business leaders working in the technology sector. We are proud that American innovation is the envy of the world, a source of widely-shared prosperity, and a hallmark of our global leadership.

We believe in an inclusive country that fosters opportunity, creativity and a level playing field. Donald Trump does not. He campaigns on anger, bigotry, fear of new ideas and new people, and a fundamental belief that America is weak and in decline. We have listened to Donald Trump over the past year and we have concluded: Trump would be a disaster for innovation. His vision stands against the open exchange of ideas, free movement of people, and productive engagement with the outside world that is critical to our economy—and that provide the foundation for innovation and growth.

Let’s start with the human talent that drives innovation forward. We believe that America’s diversity is our strength. Great ideas come from all parts of society, and we should champion that broad-based creative potential. We also believe that progressive immigration policies help us attract and retain some of the brightest minds on earth—scientists, entrepreneurs, and creators. In fact, 40 percent of Fortune 500 companies were founded by immigrants or their children. Donald Trump, meanwhile, traffics in ethnic and racial stereotypes, repeatedly insults women, and is openly hostile to immigration. He has promised a wall, mass deportations, and profiling.

We also believe in the free and open exchange of ideas, including over the Internet, as a seed from which innovation springs. Donald Trump proposes “shutting down” parts of the Internet as a security strategy ― demonstrating both poor judgment and ignorance about how technology works. His penchant to censor extends to revoking press credentials and threatening to punish media platforms that criticize him.

Finally, we believe that government plays an important role in the technology economy by investing in infrastructure, education and scientific research. Donald Trump articulates few policies beyond erratic and contradictory pronouncements. His reckless disregard for our legal and political institutions threatens to upend what attracts companies to start and scale in America. He risks distorting markets, reducing exports, and slowing job creation.

We stand against Donald Trump’s divisive candidacy and want a candidate who embraces the ideals that built America’s technology industry: freedom of expression, openness to newcomers, equality of opportunity, public investments in research and infrastructure, and respect for the rule of law. We embrace an optimistic vision for a more inclusive country, where American innovation continues to fuel opportunity, prosperity and leadership.

On Failure

Leave a comment

Financial economist and famed venture capitalist Bill Janeway says, of the conditions for innovation: “economic growth has been driven by successive processes of trial and error and error and error.” Failure is core to the innovation economy. It is taken as an article of faith in Silicon Valley vocabulary to “fail fast, fail often”. 

A successful brainstorming exercise can be described as a process of throwing many ideas against the wall and seeing what sticks; inherent in that is an assumption that most ideas won’t stick. Venture capital funds invest in a large quantity of companies with the expectation that a substantive percentage of them will go bankrupt. To this point, there would be no Amazon, and perhaps no Google, without the dot-com bubble. Failure is a key ingredient of innovation. But something doesn’t add up.

I have failed numerous times in my career in technology. Dropping out of college was less of a triumphant moment, more of a shameful one. Shutting down a company was a statistic for the Kauffman Foundation, but resulted in broken friendships, lost jobs, and intimidating debts. Even the successes––raising millions of venture capital dollars, delighting tens of thousands of customers, growing our businesses––were chock full of insecurity, financial difficulty, and in some cases physical pain. What made it odd, most of all, was that it was very hard to admit to having failed. Everyone around me was “killing it’ and their businesses were “going viral” and their companies were “crushing it”. All the while, the panelists and speakers were talking about celebrating failure, and how important that is.

Failure is not uncommon, either: the statistics on mass incarceration, suicide rates at colleges, student debt default rates in the United States are ample evidence of this. Failure is necessary for innovation, but failure is not good. Celebrating failure, and claiming it as gospel, does a disservice to those who know it all too well; it leaves out those who are marginalized, underrepresented, and often expected to fail. We need a reframing of the conversation. We need to tell our students, our entrepreneurs, our future innovators: failure is not good. But failure is okay. And to that point, we need to make failure okay.

Silicon Valley doesn’t have a culture of failure, but of failure in the context of success. If you fail once, you haven’t failed forever. If you fail once, you can still succeed ultimately. This is an important nuance, and one that I know intimately. In the moments where I failed, my family, my peers, my investors, my bosses, and my employees, retained a conviction that things would work out eventually. In this way, the financial support, the emotional and psychological support, and the relentless optimism of Silicon Valley is the key ingredient to our innovative success. In that context, the “error, and error, and error” part of the “trial and error” is underwritten by the whole community. And those are the moments where we make things great.

Our Culture Is Evolving Us

Leave a comment

Woe be to this phrase: “We need to catch up soon!”

Found in a beautiful, if tragic, essay in the Atlantic from last fall. It talks about how adult friendships are hard!

It struck a personal note to me, on a few levels: the first, because my wife and I are entering that phase of life where we’re trying to decide if we’re going to end up in a suburb or in a city, or something else. As the debate goes, we both strongly agree we don’t need much space, but we want community, proximity to family, convenient amenities, and safe spaces for our future children. (And, crucially, racial and socioeconomic diversity.) Even now, comfortably ensconced in a Manhattan high-rise, we think about this question constantly. Homeownership is moving further and further away for those in our generation, and even if we are ever so lucky as to own, if that doesn’t change soon, in what kind of community will we raise our family?

Second, adulthood is lonely, man! I am fortunate to have very close friends from college, high school, even primary school, who I’ve kept in very close touch with over the years. We plan regular trips, communicate over the phone, plot ways to intertwine our lives. But it’s not like late-night hallways of the dormitory, or outside the dining hall before meals. Indeed, as this great Vox article posited, as I have heard in other forms before, that “The key ingredient for the formation of friendships is repeated spontaneous contact”

And then there is, of course, my digital community, which I have grown to love in its strange deformities and varying states of ‘pseudofamiliarity’. I can always trust *someone* to be viewing my snaps, favoriting tweets, or snarking in my comments section. (Never change, y’all.) I am rarely alone on the internet. And I suspect this simple fact drives more social media behavior than any other. Of course, this has dark downsides, and sometimes I feel like my digital friendships are a drug – at best, an elixir, at worst a narcotic – rather than a nutrient. Dulling the pain rather than feeding the soul. “Do it for the likes” is funny, but also kind of awful, right? My left thumb is deforming under the tyranny of the endless scroll.

So what to do?

For one, I want to see more people in person, more regularly. Pheromones and mutual laughs and shared meals are the stuff of life. When my wife and I do double dates, we have such a blast with them. On the rare occasions that we host, our home fills with warmth. Get-togethers that are transactional, ‘networky’ and professional are interesting, but not in this way. I want more real. One way I do strongly believe it can happen is through the change afoot in our physical footprints. AirBnB’s success has outpaced my very optimistic expectations, and I think that company is still *very early*. To think that we can stay in strangers’ homes all over the world at scale gives me hope that mobile technology, internet culture, and the information age can indeed revive our sense of community, can push trust back into our society. This does not come without its bumps, like any progress. But it feels like progress nonetheless. But can we bring back the dorm? Or, call me crazy, can we bring back the campfires of our ancestors? 

There are companies launching across the world experimenting with co-living: our recent investment in Roam Co-Living reflects a point of view about the future that we believe can resolve some of these issues, which I believe many of us commonly face. Roam is an international co-living subscription, where with one lease, you can live in cities all over the world. Today you can stay in Bali, Miami, and Madrid, with Buenos Aires and London soon to follow. We want community more than we think we do. The fact that new social networks relentlessly launch and find ever more creative ways to connect us is only evidence of this. And for the critical phase post-school and pre-children (and likely even for parents, though I can’t speak for them) without the church, union hall, and increasingly even water-cooler at work, we simply need people. When I reach retirement age and begin contemplating the last decades of my life, I believe these feelings will have changed in tone but not direction, which will likely be all the more intense, and with worse consequences

We are the first species which has used “culture” to affect our evolution. This has been the case for generations, and on the eve of artificial intelligence we may be reaching another inflection point. But it should serve as a reminder that our living patterns are fully of our own making; they are products of our development of agriculture, the dominance of city-states, and the persistent effects of racism. In the process, we have evolved into becoming more sedentary, socially isolated from each other, and tied to one physical location. Perhaps a series of new innovations in real estate (both how living quarters look and what they’re used for) can do something to undo the destructive aspects of this trend. Perhaps our culture can reformat our physical spaces once again, but this time for a world more reflective of our inherent ubuntu. 

On Demography and Economy

Leave a comment

Lately, the hottest topics in the technology community have been focused on municipal regulation of drones and cars, federal regulation of labor markets and health insurance, the IPO window, and the scary dominance of FANGAM. And always, it seems, there’s the topic of China and India, and their growing influence in the global technology market.

In a conversation with Morgan Housel week before last, however, we ended up taking a very different tack to our conversation. On his view, and I’m paraphrasing, if there’s any one fact that has had an outsized influence on the health of the American economy over the last quarter century, it is that the average consumer reaches their prime spending years at ~age 35, and leaves it at age ~55. The Bureau of Labor Statistics measures it as follows, below: 


It makes sense. At age 35 you are likely have 10 years of work experience, and so are a manager or director within your organization. You likely are starting a family, or may have one or two kids already, so planning on buying a home, if you haven’t already. By 55, your kids are likely no longer in the house, either in college or in many cases out of college, you are starting to shift into a lower gear, perhaps planning out retirement in the next 10-15 years, hopefully finishing your mortgage. Right.

Second piece of the puzzle: the size of this demographic – call them the ‘prime spenders’ – has not been fixed in time. As we all know, the post World War II era was a crackin’ time for babymaking in the United States. The Baby Boomers were the largest generation in the history of the country. The 1970s, not quite so much. The economy was slow, morale and confidence were low, population growth was sluggish. And then, of course, the 1980s! The LBO boom, the widespread tax cuts, economic reforms, end of the Cold War, and, well, the Baby Boomers became new parents 🙂 

There are no shortage of metrics we could use to track the ‘health’ of the American economy, but if you ran most of them against this chart (credit to Morgan Housel) I bet you’d see heavy correlation. It is, simply: how big was the prime spending population during that period? When it balloons, we do better. When it shrinks, we do worse. Simple as that.


If you layer on the waves of immigration lately, the Millennial demographic is ballooning even further. In her 2015 “State Of The Internet” report, Mary Meeker made reference to the Millennial Generation as being the cause of the rise of Uber, AirBnB, and the rest of the peer economy. We were fortunate to have caught some of this trend with our early investments in Lyft, Kickstarter, Skillshare, and others.

But we Millennials are growing up! We are thinking about families, deciding how we want to pay for our homes, making important decisions about our kids’ livelihoods, if we want to live in houses at all, which city we want to live in, and which consumer brands we’ll be putting our faith in. So what makes a Millennial different? How will we shop? Where will we want to live? Will we own our homes? Will we buy crossover SUV’s? For the next 20 years, the businesses that achieve massive scale will need to understand us very well, because these answers may determine the fate of the next decade of our economy more than who wins in November.

The big 20th century brands on which our parents grew up – Coca-Cola, McDonalds, Ritz Carlton, Chevrolet, et cetera don’t hold natural sway over us the way they did over our parents. We like intimate, authentic, local, organic, natural. We like stories that tug at our heartstrings, paint a picture of the kind of cool that internet natives recognize. We instinctively recognize that the planet is in peril at our hands, and want to put our money where our mouth is. Sustainable brands are aspirational brands. Strong social-mission resonates with consumers in this generation. We value meaning and purpose above all. 

At Collaborative Fund, when we say that we are looking for brands that are focused on values, a strong social mission, being aspirational about culture, pushing the world in a positive direction, we are speaking directly to the largest demographic in American history, who are about to become the largest prime spending group in American history. And call me crazy, but this sounds like good business, indeed.