Trusted Brands

November 6th, 2018by Nick Grossman

Today is election day.  I’m on a plane today, so I voted early, a few days ago.  I cast my vote and it felt good. I marked my paper ballot with a marker (for optical scanning) glued it shut into a sealed envelope, and handed it to a volunteer who placed it in a secure case.  I left with a sense of confidence that my vote had been placed, and would be counted fairly.

Unfortunately, many Americans do not have the same confidence, often for good reason.  As Zeynep Tufecki wrote in the NYT last weekend in The Election Has Already Been Hacked:

“the legitimacy of an election depends on the electorate accepting that it was fair, that everyone who tried to vote got to vote and that every vote counted. Lose that, and your voting system might as well have suffered a devastating technological attack.

Unfortunately, in much of the United States, we are no longer able to assure people that none of those things has happened. A recent poll shows that 46 percent of the American electorate do not think their votes will be counted fairly, and about a third think it is likely that a foreign country will tamper with the results.”

Put more generally, America’s most important product, our democracy, is developing a trust problem.

I have been writing about trust for a long time. It is an essential ingredient for institutions (civic, corporate, etc) and also for technology platforms.  It is famously hard to earn and easy to lose.

In the most recent iteration of the USV investment thesis, we explicitly call out the idea of “Trusted Brands” as a key component.  This has been somewhat controversial, because — obviously — it’s premature to declare that any early-stage startup is a trusted brand.  But what we mean by this is not that it’s already a widely trusted brand, but that it’s architected to be a trusted brand.

“Trusted Brands” is also controversial because in startups, things change. For example, while for a long time many considered Google (or really, insert nearly any other large tech company here) to be a trusted brand, initially because of the super useful/helpful services it provides, and then through it’s mantra of “don’t be evil” — it’s safe to say that today, many people (both consumers and b2b users) may not feel the same way.  

So, “Trusted Brands” is both aspirational, and potentially fleeting. 

By “architecting for trust“ we mean two things: 1) a business model where the platform and its stakeholders are aligned; and/or 2) a technical architecture that makes tampering/hacking/meddling difficult or impossible, even for the creators of the system.

On business model alignment: this one gets trickier the more stakeholders you have, and typically as tech platforms grow and expand, so does the breadth and variety of stakeholders.  But core decisions can be made, early on, that align interests as much as possible — for example, see Andy’s post about our recent investment in Scroll, and how they are attempting to align interests in the publishing industry.

On technical architecture: most of the work in the crypto/blockchain space is based on this concept, and many have taken to a mantra of a “can’t be evil” as a counterpoint to the arbitrary decisionmaking that is possible in traditional platforms — this is at the heart of the “centralized vs. decentralized” debate.  But even in “regular” apps, technical design decisions, particularly around how data is stored/processed/shared/accessed, can go a long way towards building trust.

What we can safely say is that we are suffering from trust problems on a number of fronts.  On the tech platforms side, it’s things like data breaches, abuses of market power, shady privacy practices, harassment and abuse, etc etc.   On the institutional side, it’s relevance, capacity, efficiency, technological capability, corruption, and fundamental integrity.  Not a small or simple list of challenges to face.

The technology we build is really the foundation of our lives, and even the two “sides” I discuss here (traditional institutions and tech platforms) are getting blurrier by the day.  Given all that, what we mean by “Trusted Brands” is that establishing and sustaining trusted products / platforms / systems / institutions / brands is more important than ever, and we believe that the efforts that do manage to earn our trust over the long term will be the most important and valuable.

Suffering, self, and service

October 29th, 2018by Nick Grossman

The massacre in Pittsburgh is heartbreaking and awful, and another example of the extent to which society seems to be fraying.

The Pittsburgh attacker spent a lot of time on social media sites that stoked his fear, isolation and anger.  I think about the internet a lot, and while the internet has the ability to help us form a better understanding of “we” (global humanity), it can also cultivate a strong sense of “them” (the dangerous other), as this case demonstrates.

In other words, we are simultaneously increasing our capacity to understand one another through connectedness and information, and fracturing along tribal lines, increasing the sense of distance and disconnectedness.

I am no scholar of Buddhism, but have been interested recently in the Buddhist notion of the relationship between “suffering” and the “self”.  In a nutshell, the concept is: suffering is an essential human condition, and it is primarily brought about by our sense of self and how events impact us as individuals (jealousy, greed, wanting, disappointment, etc).  Meanwhile, there actually is no “self”, as everything in the universe is connected.  Therefore, if you can release your focus on the self, you can dissolve the suffering. (Here is a good overview of these concepts.)

I think about these concepts in the day-to-day: for me they manifest in all the little moments of going about my work and getting things done.  Often times, I feel a resistance welling up, often manifested as fear, which I have written about, but more generally I think the culprit is the self-centered thinking.  When this happens, an idea that works for me is actively seeking to replace thoughts of the self with thoughts of service: take the suffering that comes from seeing things through the lens of your individual self, and redirect it to the service of others.  When this happens, I can physically feel the “suffering” melt away.

My own examples are of course trivial compared to the broader environment of fear, suffering, and violence.  But I would like to think that we have the potential as humans to re-knit the ties that bind us together, somehow.

Building a meditation routine

October 22nd, 2018by Nick Grossman

I wrote recently about the challenge of turning plans into routines.  One of the activities that is the most impactful for me is meditation.  I cannot say that I have a perfect meditation routine, but I can absolutely say that when I do do it, it makes me feel great, immediately.

There are a bunch of good tools out there to help build a meditation routine.  I have found that guided meditations are the easiest to start with, since they give you a framework and something to react to, but can also be hit-or-miss in terms of fit.

The very first guided meditation that really worked for me was this 6-minute body scan, by my friend Paul Fulton.  If you have never meditated and are looking for an easy way to feel it out, this is a great one to start with.

I have also used a bunch of apps to help build the habit.  Insight Timer has both a library of guided meditations as well as a very nice tool for building your own meditation timer (complete with punctuating wood blocks, bells, etc).  My current go-to is Simple Habit, which has very nicely curated sets of meditations.  All the apps in this space try to help you out by visualizing your “streak”, which if I’m honest only kind of works for me.

In terms of building my own routine, what I struggle with the most is finding the right time.  If I can manage to do it first thing in the morning, that’s what works the best, in terms of teeing up a good mindset on the day.  But I have also found that tucking it in in spare moments (especially with guided meditations under 10 minutes long) also works — for me, often times on trains and planes.

Meditation, like aerobic exercise, is magical in that it is both mental and physical.  I walk away feeling calmer, clearer, more focused, and more energized.  It is incredible, really.  So I am a bit surprised and a bit bummed that I have not yet managed to make it a bedrock of my every day.  Working on it.

Trauma

October 18th, 2018by Nick Grossman

Just about two years ago, my wife’s parents were hit by a truck while crossing the street.

The past two years have been both difficult and wonderful.  Wonderful in that two people who were on the brink of death following the accident are still with us (her mother in particular has had a miraculous if incomplete recovery from a shockingly awful head injury) – and also wonderful in that the experience brought us closer in some ways.  Difficult in that not only was the recovery an overwhelming ordeal, but the life that we / they are left with now is fundamentally different, an in some ways, permanently broken.

Life happens slowly and quickly. It continues to amaze me how change both accretes imperceptibly over time, and also comes crashing through in instant bursts.  In this case, that one moment, at around 7pm on Sept 29th, 2016, was an inflection point for the family.  I think we all still have some amount of PTSD at this time of year, when it gets colder and dusk comes earlier, and every dark crosswalk feels like a danger zone.

I was talking to a friend this week whose family suffered an even more awful trauma several years back — a trauma which shook the family and altered the course of their existence and their relationships.  In that case as well, the longer-term outcome both horribly bad, but with some silver linings.

Every person, family and community has small and large versions of life-altering trauma.  Bullying, sexual assaults, suicides, natural disasters, accidents of all kinds, gang violence, political violence.

I would like to think that in each case, there is an opportunity for some surprising growth, resiliency, antifragility.  And no doubt in some cases there is.  But what I am sure of is that sometimes awful things happen really quickly, and they can change everything.  I don’t know that there is any way to be ready for this, expect perhaps to expect it.

Plans vs. routines

October 9th, 2018by Nick Grossman

Sunday night over dinner, my son, parents and I were discussing the saving / investing system we set up for our kids in the spring. The idea was/is: set a monthly budget for purchases (in their case, mostly online movies, tv shows and games), and include a really healthy interest rate (20% monthly) to encourage savings. What a great idea! I got lots of really nice feedback on the post back in March.

My son described the system to my parents, but instead of describing the concept, as I just did, he described the reality: we set the budget, did it for a few months, and then basically forgot about it. So, rather than teach my kids a valuable lesson about saving and investing, I thought them how weak my own follow-through can be. Ouch.

It reminds me of a psychology study that found that announcing a plan is, in fact, detrimental to seeing the plan through — because, you get a nice dose of good feeling by announcing the plan, so much so that you lose the motivation to actually do it. This is, of course, problematic, and to be avoided.

If I’m honest, I can think of plenty of times where this has happened to me. I’ll refrain from listing them all out here, but trust me, there are more than a few examples. Looking back, the times I have been the most successful at seeing something hard and long-term all the way through are the times when I have just done it and not said anything about it. Show, don’t tell.

The holy grail is when something goes from being a plan to being a routine. Routine is so powerful, and yet somehow, sometimes, so elusive. At USV, we have built-in routine in some very useful ways — most notably, around our Monday team meeting (similar to most investment teams). The cadence is valuable and sets the tone for a lot of our work.

I have personally found it harder to get good routines going when it comes to writing, exercise, and a bunch of other things I think are important. Generally speaking, I find myself to be more bursty than reliably consistent. It is something to work on (but not talk about until it’s done…)

The adjacent possible

October 1st, 2018by Nick Grossman

Dani and I have been spending a bunch of time recently thinking about the relationship between applications and infrastructure.  It’s a little bit of a chicken and egg situation.  You need infrastructure to build apps, but often times you don’t really know what kind of infrastructure is needed until you build some apps.

For example, we didn’t get AWS (the infrastructure) until we had Amazon (the app).  Often times, the early innovators need to build all the infrastructure themselves in order to build the app they want to build.  And then that helps lead the way for the next generation of infrastructure: taking what was built for a killer app and offering it up to everyone.

One of my favorite books is Steven Johnson’s Where Good Ideas Come From — punchline is: innovation is typically not a single “eureka” moment, but rather an accumulation of many years of cumulative discovery.   This blog is an example of one of my favorite ideas in the book, the “slow hunch” reinforced by the “commonplace book“.  Another idea from the book is the Adjacent Possible: essentially, that we can innovate only with what we can see and touch today.  But by innovating at today’s edge, we continually stretch the boundary of what’s possible:

The strange and beautiful truth about the adjacent possible is that its boundaries grow as you explore them. Each new combination opens up the possibility of other new combinations.

For more on how this concept applies not only to “web 3” (crypto/blockchains) but how it played out looking back at the history of technology (internet 2.0, planes, cars, etc), here is our post.

Getting the chills

September 24th, 2018by Nick Grossman

One of the greatest things Frannie and I have in common is that we get the chills from music — typically at the exact same time, triggered by the same musical… something.

For me it starts  at the back of my neck, and if it’s really good, it spreads all over my back, head, and chest — if it’s really really good I end up with tears in my eyes.  I get it the most from vocal solos and tight harmonies, in particular R&B, gospel, and certain musicals. 

It’ll happen and the two of us will look at each other and be like, wow.   

Apparently this is not just a random thing, but there is actually a lot of science to it.  I never really looked into it until today, but it even has a name: Frission, or more colloquially, a “skin orgasm”.  Here is a good overview of the phenomenon, and here is a ton of assembled academic research on it.  There is even a subreddit devoted to it.

I experienced it this morning on my train ride into NYC, and of course immediately thought to blog about it and include a clip that attempted to communicate it.   As I read more about, a few things stood out: first, not everyone experiences it — estimates vary but somewhere around half of people feel some sort of frission response that can include chills, welling throat, tears, etc.  Second, the experience is not just about music but also about meaning — often times particularly sad passages cause the experience (eliciting a deep-seated survival instinct), so it often requires at least some conscious or sub-conscious attention to lyrics. And third: musical context matters — it is often the result of a musical build-up over the course of a song, and an isolated passage on its own might not have the same effect.

Given all that as setup, here is the one that got me today.  The closing number from The Greatest Showman (which happens to be my daughter’s favorite album right now, so is playing constantly in our house).  The part from 3:18 to the end is the kicker, but it’s probably best to start from the beginning to get the whole build.

Best with good headphones, loud.  Curious to know if others get it too.  Enjoy!

The utility infielder

September 22nd, 2018by Nick Grossman

My favorite baseball player is Brock Holt, and has been since his first season with the Red Sox back in 2013.  Here is me last month wearing my Holt jersey that I wear to every game (note the #26 that he started out with, before it was retired for Wade Boggs a few years ago — Brock wears #12 now):

What I love about him are two things: 1) he does everything, wherever and whatever needs to be done, and 2) he plays with the best brand of baseball energy: hustle. He gets things done, when they need to get done, with nothing but positive energy.  It’s beautiful, and I picked up on it the first time I saw him play, back in 2013.  He is the ultimate utility infielder.

“Utility Infielder” can be somewhat of a derogatory term, because it basically means that you are not enough of a star to be a starter at any one position. But in my view, a great utility infielder can be the glue that holds a team together, and Brock is the best example of that I can think of.

The challenge of being a utility player is that nothing is guaranteed, nothing is certain, and nothing is defined. You might play first base one day, third the next, outfield after that. And then maybe not play for a week — and then get tapped to pinch hit in the bottom of the 9th with the game on the line.

For example, over the last month or so, Brock has done a bunch of pinch-hitting (coming into a game for a single at-bat), and has been Mr. Clutch, getting a bunch of big hits and home runs, including the pinch-hit homer that clinched the Red Sox playoff spot.

A great utility infielder can play any position, and play it well — well enough not only to get by, but to make great plays, consistently.  Here is a Brock Holt highlight reel, consisting mostly of plays from 2014 and 2015.  You’ll notice highlights from every position — not just infield but all the outfield positions too.  It also happens to include him hitting for the cycle, ending, of course with the most difficult of all to attain, the triple:

https://www.youtube.com/watch?v=7UwKSTD4s90

Lastly, a great utility player must do more than just make plays on the field — you’ve got work to do in the clubhouse and in the dugout, to keep the vibe up and the energy good.

My favorite Holt example of this was back in April of this year.  It was 34 degrees and the Sox were down 7-2.  I was at the game with a friend and our kids; the dads were ready to throw in the towel but the kids had faith and wanted to wait it out.  Brock Holt came to bat, and surprised the entire stadium when his walk-up song was “I Will Always Love You” by Whitney Houston (the really loud part at the end).  The whole stadium woke up and laughed.  He flied out, but that sparked a 2-out rally where the Sox scored 6 to take the lead.  It was amazing. Afterwards, Holt said: “It worked. It worked. It got us going.”  That’s what I’m talking about.

I guess I feel a kinship with Brock Holt, and high-hustle utility infielders everywhere, because I have always thought of myself as a one too.  Basically every job I’ve ever had, my approach has been: I’m just going to be helpful and do whatever needs to be done — and enjoy it.

There is a definite risk in being a utility infielder, in that by helping a little bit everywhere, you never get awesome anywhere.  That is a real risk. But my experience has more been that if you do everything and anything that needs to be done, do it well, enjoy yourself, and do your best to make your teammates better, opportunities will present themselves.

#proudutilityinfielder

Fear

September 21st, 2018by Nick Grossman

I have been helping my son, who is in 4th grade, with his math — specifically, multiplication.  He feels like he is a little bit behind, so we are working on it so he can get more comfortable.  It is going well now — we have gotten into a routine of spending 15 minutes per night doing a worksheet or a game, and talking through the math.

But when we first started, just a few weeks ago, it was much harder.  He really really resisted getting started, or engaging with it at all.  When it was time to start, he would shut down, turn away, and basically do anything so that we would not focus on the work.

I got a bit frustrated, because it felt like he was being his own worst enemy — basically making it impossible for himself to learn.  This is true, I think, but the more profound truth is that he was afraid.  Getting started was scary. Not knowing things was scary.  Knowing that he might be faced with not knowing things was scary.  Of course that’s what’s going on.

It reminds me a bit of when I was his age.  For me at the time, the thing that did that to me was writing.  When it came to sit down and write anything for school, I just completely stopped up.  My brain went blank.  It was inconceivable to me that any ideas, let alone words, sentences, paragraphs and pages, might come to be.  I remember sitting with my mother at her computer, with her doing her best to coax any kind of progress out of me. I was my own worst enemy — stuck, and afraid.

I feel it to this day. Sometimes I don’t want to open my inbox, or read that document I know I need to read, or open that envelope on my desk.  Of course, once I break through and do it, it’s fine. But there is sometimes a barrier of fear that gets in the way of even starting anything.

What I have found through my work with mindfulness is that step 1 is just recognizing it.  Noticing that sensation and saying, “oh, hey, there you are again”.  That is the first step to being able to work through it, rather than being owned by it. 

It has been a long time since I have felt the level of paralyzing fear that I saw in him, but now that I think about it, I know it and recognize it.

What’s profound about this to me is that sometimes the thing you think is the problem is not actually the problem.  Once you are able to identify the real problem, it’s much easier to find a way through.  Fear, I think, is often the problem behind the problem, and sussing that out and working on it directly can unlock a lot of situations.

Form factor

September 4th, 2018by Nick Grossman

Over the past few weeks, I have varied up my computing habits a bit.  For a laptop, I have been using a Pixelbook, and I have also been spending more timing using an iPad Pro for work (vs my default of using a Mac laptop for everything).

What I have discovered is that the form factor of the device I’m using matters a lot in terms of what kinds of work it supports best.  Both devices have exactly the same apps, but the experience on each couldn’t be more different.

For example, the iPad (the 10.5″ Pro model in particular) is great for long-form reading: I use Pocket to gather articles (from wherever I am – phone, tablet or computer) and when I want to sit down and read, I do it on the iPad.  And beyond reading, email on the iPad is possible, but forces you to write shorter responses.  So it’s both good for deep reading and also good for quick email processing.  That combination has been working great for me.  

I have been trying to avoid reading — especially at home, when I am around my family — on my phone.  There is something about the posture you take when you read on a phone that is both uncomfortable and anti-social.  Hunched over, hands up, squinting down.   By contrast, reading on the iPad feels more like reading a book or a newspaper – open, relaxed.  Not only is the reading area a better size, but it feels more like a “public” device, in the sense that by reading it you aren’t lost in the private world of your phone.

The Pixelbook (google’s new chromebook) is great in a different way.  What is nice about the Pixelbook is how simple login and setup are (especially if you are a heavy google apps / google chrome user).   You just sign in, load up some web apps (and many enterprise desktop apps such as Slack and Zoom work just as well as Chrome apps) and you’re good.  It feels very lightweight and efficient. Low overhead, lean and mean.  When I log into the Pixelbook I feel ready to go.   (There is also an added security benefit to using a Chromebook for work – sign-in can be protected by 2FA).

It just goes to show that the form factor / design / packaging of a system (device, app, etc) really matter so much in terms of how it can / should / will be used.  Maybe this is obvious, but it has really struck me lately.

A little, and then a little more

August 15th, 2018by Nick Grossman

Back in May, I had what ended up being a major hand surgery — repairing a torn tendon and in the process reconstructing the end of my pinkie by grafting tendons borrowed from my ring finger.  As a result, I am now recovering from two injuries — the pinkie itself and the ring finger that was the donor.

What I have learned is that most surgeons under-sell the recovery process.  Surgery is invasive and often causes as many problems than it solves.  In my case, the scar tissue from the surgery is a huge barrier to recovery — it is currently stopping my tendons from “gliding” correctly, which is what lets you actuate your fingers in both directions.

So I have been going to occupational therapy for the last few weeks to work towards regaining motion in my hand.  It’s really 8 distinct projects to regain fluidity on both tendons on each of 4 knuckles (3 in my pinkie and one in the ring finger).

The progress has been slow – each session I find out how many degrees of motion I have gained (or lost) in each knuckle, in each direction.  It is frustrating, because especially in the area of the major reconstruction, it is hard to feel any motion or progress.

But I realized today that even in the worst spot there is at least a wiggle.  And working that wiggle — even a tiny bit — gets you a little farther along, and enables a little more.  So I have to believe that progress is possible and work the wiggle so that tomorrow I can work it a little more.  

Like with a lot of things, it is hard to accept that progress happens slowly and incrementally, rather than quickly and fully.    But I am trying to remind myself, that like with everything, we are working with compound interest and that the goal is to get a little better every day, and then build on that.  Easier said than done, of course, but important to remember that that’s how things usually work.

Layers

August 13th, 2018by Nick Grossman

A central concept on the internet is Layering.  Each of the protocols in the internet stack talks to the layer directly above and below it — new protocols can be added as long as they speak the language of their layer.  Protocols at one layer can be upgraded so long as they don’t break compatibility with the layer above or below it.  This architecture maximizes interoperability and allows for a great deal of flexibility.  The shape of the layers has been described as an hourglass, like this:


(credit: University of Calgary)

Beyond layering at the protocol level, we have gone on to build layers at the infrastructure and application levels.  Infrastructure like AWS and Cloudflare, software libraries like Node, Rails, and jQuery, services like Twilio and Stripe.  To build an application today, you do not need to go build a data center (or many of them), think about how to manually process HTTP requests, or write bare-metal adapters to the payments or telecom systems.

In the crypto/blockchain space, we are just at the very beginning of establishing layers. I think it’s safe to say that today’s blockchain landscape looks more like the early days of AOL, Prodigy and Compuserve (standalone, disconnected networks) than like the open, interconnected internet.  A major reason for this is the introduction of cryptocurrencies and tokens, which provide a strong incentive — for now at least — for starting new networks and maximizing value of existing networks.   But, as teams continue to build, and continue to build the same things over and over again, layering seems both inevitable and needed.

Within blockchains, layers delineate networking (libp2p as a leading tool), consensus (tendermint, hashcash and others), applications/smart contracts, and perhaps indexing/search (something everyone is doing on their own right now, but that thegraph is looking to solve as a layer).

Perhaps the most interesting question is how different blockchain systems may layer together.  Cosmos and Polkadot are building systems for interoperable blockchains via a hub-and-spoke model, with shadow assets pegged to outside chains for interoperability.  Interledger is attempting to be a more universal cross-ledger (ledger, meaning blockchains and otherwise) protocol, akin to TCP/IP in the core internet stack.

How these systems interconnect, and layer atop one another, seems like a fundamental question as we move from the speculative phase to the functional phase.  We are just now beginning to get glimpses of it.

Minimum Viable Economy

July 30th, 2018by Nick Grossman

One of my favorite things about the cryptocurrency / blockchain space is that our conception of “what it all means” is still very much in flux. Nic Carter just published a nice analysis of how the functional narrative around bitcoin has changed over time – (roughly) from e-cash, to e-gold, to private currency, to a reserve cryptocurrency, to a programmable shared database, and on. (FWIW, at USV, our “aha” moment was in 2013 when we started thinking of bitcoin as a protocol, rather than just a payments system). Point is, we are still figuring this stuff out as we go.

It is a particularly interesting time right now because many of the projects that were born in the ICO boom of 2017 are starting to launch — each with its own token. For example, EOS last month and Augur this month. So that means we will finally get to see some natural experiments in real-world token economics and what it takes to make a token economy work from scratch.

The launch of Ethereum showed us that cryptonetworks can be used to create smart contracts and new kinds of assets, and that an economy could develop around the creation of these assets and the execution of the contracts. Relative to the original e-cash vision for Bitcoin, the economy inside of Ethereum is narrow (not buying potato chips with Ethereum), but it is actually still rather quite broad — you can use ETH to purchase broadly useful services on the network.

The other day, someone asked me: why wouldn’t every new project create their own token, rather than using a larger existing token (like BTC, ETH, Steem, etc)? My answer was: for the same reason that some countries use their own currency: because they can. In other words, the economy is strong enough to support its own currency. Whereas other, weaker nations just adopt USD/Euro etc – they don’t have the critical mass to support their own currency. I think of this as Minimum Viable Economy. (I am sure there is a technical economics term for this)

Looking at cryptonetworks, the question, then, is: what is Minimum Viable Economy? I think the answer depends a lot on the shape of the network / economy; for example (from harder to easier):

    1. currency/medium of exchange use case: minimum viable economy is actually quite large, because a currency is only useful to the extent that merchants and other parties adopt it. So, for cryptonetworks aiming for a real currency use case (buying potato chips), the bar is super high.
    2. “narrow network” payments use case: think of a p2p payments use case like Venmo. In order for venmo to work, I don’t need every deli and online store to accept it, I just need my friends to be on it. Still a high bar, but considerably lower than “full economy”
    3. single-purpose network use case: many of the cryptonetworks that are launching now are what I think of as single-purpose networks, or single-purpose economies. Functional networks like Filecoin, Livepeer or 0x. In these networks/economies, there is a single market — for storage, compute, trading, etc. These networks/economies are the most unusual and new — meaning, historically, it would never have made sense to have a separate currency for buying electricity, and a separate one for buying gas, and for buying orange juice, etc. But for global computer networks operating on global universal standards, it may be that a single currency with a single market of buyers and sellers, may, in fact, work. In the single-purpose network, the Minimum Viable Economy is the smallest — just sufficient density on the supply and demand sides of the market — similar to what it takes to launch a traditional marketplace platform like Lyft of Airbnb. Still very hard to accomplish, but more akin to launching an app than starting a country.

As Dani was looking at UBI on the blockchain, we discussed this concept a bunch – at least some aspects of blockchain-based UBI resemble the currency use case – a basic income currency is only actually useful as long as it is accepted by merchants (similar to EBT/food stamps).

I am probably most interested in the third category, because whether/how it works will have the most bearing on the future of computing, web infrastructure, and application development. In practice, a lot will depend on the friction involved in transacting in many currencies (easier for computers than for humans), and on the still unknown impacts of programmable token exchange and cross-network interoperability on liquidity and token value.

Across each of these three categories (and surely more), we will no doubt be getting some lessons in Minimum Viable Economy over the coming year.

The path to decentralization: self-destructing companies

July 2nd, 2018by Nick Grossman

In June, the SEC gave some of its most concrete guidance to date that cryptoassets can start out as centralized projects, possibly initially sold under securities laws, and eventually become “decentralized” and thus no longer sponsor-controlled, and no longer sold or transferred under securities laws.

It makes sense that a decentralized protocol does not fit the definition of a security.  There’s not a clear single issue or promoter (for purposes of reporting, etc); tokens are often generated on an ongoing basis (which would constitute a “continuous offering” and related registration requirements); tokens are generated on a fully peer-to-peer basis in the protocol (potentially implicating independent nodes as transfer agents or broker dealers, or requiring those as middlemen); not to mention how all of the above are complicated by new issues like forking.

Of course, all of this leaves some open questions on what exactly constitutes decentralization, but I am confident we will work through those to come to a usable definition.  For example, “is the network forkable” is one simple (but incomplete) heuristic.  Another is: “would the network continue operating if the initial sponsor went out of business”.

This second one is perhaps the most concrete, and I believe the the net effect of the SEC guidance is that we will begin to see protocol development companies (the initial “sponsors” of cryptonetworks) set a course to intentionally self-destruct.

How this is done, exactly, will remain to be seen. Already we have seen a company / foundation split as one way of setting the protocol in the hands of a long-term custodian that is not the initial sponsor.  Some projects may bake self-destruction into their initial charter (and any associated coin offerings or distributions); others may make self-destruction part of the protocol software development roadmap.

But regardless of mechanism, I believe many projects will begin to contemplate their “path to decentralization” — that is the takeaway from the SEC guidance, and a self-destructing company (leaving behind only an autonomous, decentralized protocol) is the logical result.

This is going to be a messy process. For example, the recent launch of the EOS network demonstrated some of the challenges of handing off a protocol and network to the community.  But luckily we will get to see many more real-world experiments as projects move out of the fundraising phase and into the build->ship->decentralize phase.

Trust and fairness

June 20th, 2018by Nick Grossman

I was at an event last night, where the moderator, Preeti Varathan from QZ observed that there seemed to be a lot of cynicism in the blockchain / crypto space — in other words, that the whole thing was essentially premised on a distrust of existing systems (fiat currencies, large internet companies, etc).

It’s an interesting and I would say correct observation, but it’s also not the whole story.  In addition to the distrust angle, there is also an innovation angle (though it is related to the distrust angle), which I’ll get to at the end.

But to focus on this question of distrust: a few weeks ago, I was in Amsterdam for the TNW conference, doing a number of things on their “hard fork” track for crypto/blockchain projects.  Two conversations stood out:

First was David Schwartz from Ripple, who gave what I thought was a fantastic and clear introduction to cryptosystems — David’s main point was that cryptonetworks are about fairness.  You set the rules (in code) and once they are set, everyone plays by them on even footing.  No one has the ability to rig the system once it is up and running.

If this sounds a lot like a description of democracy and the rule of law, I think that’s intentional.  The framers of the United States had very similar goals — escaping a system that felt “rigged” and set up a rules-based system that had decentralization (3 branches of government, federal vs states, house vs senate, etc) and checks and balances built in.

So why is there a pressing need for fairness (in money, in tech platforms) today?  The original bitcoiners were escaping what they saw as unfair depreciation of fiat currency due to inflation — they were digital gold bugs who wanted a real store of value.  Beyond that, there is a generation of application developers who don’t trust the platforms they are building on — developers have a keen appreciation of power dynamics and know when they are getting screwed.  And beyond that, there is an even larger macro distrust and erosion of institutions brewing — for example I hope that the US can hold on to its own (relatively) fair, rules-based system of governance, but that seems as threatened as ever.  So there are plenty of reasons to be cynical and distrusting, both of traditional finance, technology and government.

On to the second conversation was that same day, at dinner with a number of Dutch citizens.  One gentleman made the point that “life is pretty good here, and we like our centralized institutions”.  Anyone who’s been to Amsterdam can probably relate.  Here is a picture from near where we were staying:

It’s ridiculously beautiful and every time I’m there I am struck by how happy the Dutch seem to be — cruising canals by boat, riding bikes everywhere, healthy chubby babies in tow.  Even their teenagers are happy.  I am obviously being flip here, but the point is — when things are good, or seem to be good, there’s little perceived need to change the system.

To the last point about innovation: the thing that I am most excited about here (and I think I speak for most of us at USV) is what a decentralized asset/contract/data layer means for innovation. Because cryptosystems are open source, extensible and forkable by default, and because they operate on rules-based systems without arbitrary centralized control, we now have a wide open environment for innovation, both at the infrastructure and the application layers.  We are still so early in seeing what that will actually mean in terms of services that business and consumers can actually use, but we are building a very exciting foundation.

Compound interest goes in both directions

June 7th, 2018by Nick Grossman

There is no shortage of writing and punditry about the power of compound interest.

As usual Naval has a pithy tweet about it:

I have been thinking about this a lot lately —  in the context of work, health, family, finances etc.  And more specifically, how compound interest is not just something that works for you, but it’s also something that can (and more than often, does, speaking globally) work against you.  I think of it like this:

Ways that compound interest can work for you:

  • You eat well and exercise every day – each month you are x% stronger and healthier
  • You’re able to save – each month you’re x% wealthier
  • You invest in friendships – each month they get x% stronger
  • You work hard, help your teammates, and contribute to your team’s success – each month you become x% more valuable
  • etc.

Ways that compound interest can work against you:

  • You get stuck in a debt spiral and every month are x% farther in the hole
  • You feel overwhelmed at work and each month get x% farther behind on your inbox and your projects
  • You ignore your friends and each month get x% more distant
  • You’re around bad people and bad things happen – you go to jail and meet more bad people, and more bad things happen
  • etc.

In other words, when things are good, they tend to get better.  And when things get bad, they tend to get worse.  This is a horrible paradox.  (Reminds me a bit of The Pursuit of Happyness which illustrated this beautifully and painfully).  I would argue that “health”, defined broadly, is about getting to the right side of the curve, where your efforts are not only making you net better, but they are contributing to potential exponential improvement thanks to compounding interest.  And getting away from the left side of the graph, where every day, every moment, has the potentially of compounding the badness.

Last week, I was talking about this with Darsh, focusing on the importance of helping people (ourselves and others) get to the right side of the curve.  Given the dynamics here, it is often a generational issue.  For example: my great grandfather was murdered in Russia for being a Jew.  That’s about as bad as things can get – getting murdered for being who you are.  My grandfather immigrated to the US, penniless, and died of cancer at a very young age.  My father grew up on welfare, in a difficult home, but managed to graduate high school, learn to program, and then ultimately start his own business.  I went to college (first one on that side to graduate) and now work at an amazing place in an amazing industry.  The climb from absolute terror, to extreme poverty and difficulty, to relative comfort has taken at least 4 generations.  And even so, I didn’t learn about the compounding nature of money and other wealth as a kid, and am just working on teaching it to my kids now.

A question, then, is how to short-circuit the cycle of negative compounding interest — getting at least “to zero”, so that the riptide is no longer pulling you under.  Because if you can’t do that, it’s very hard to start to benefit from positive compounding. It is for this reason that I am a fan of universal basic income and other systems that give people a boost.

One thought on that is, to work on positive compounding interest wherever you can — that might be work, health, savings, relationships or something else.  That’s why I am so excited about our investment in Stash – they are singularly focused on helping individuals achieve compounding financial interest through saving and investing – even just with $5.

With that, I will hit publish and hope for some initial returns on intellectual capital in the form of this blog post….

just_work = true

April 30th, 2018by Nick Grossman

One of my former colleagues, Rob Marianski, and I used to have a running joke — we would be building and debugging something, and he’d finally say, “Oh, so you just want me to set just_work = true?”.  That was over 10 years ago, but it still gets me every time for some reason.  (as an aside, I have always thought justworkequalstrue.com would make a great blog name, and actually bought the domain for Rob a few years back — still waiting for that first post, Rob…).

But the idea of things “just working”, automatically, and without friction, is magical and exciting.

I mention it because of where we are today in the crypto/blockchain space.  99% of the attention recently has been on ICO hype and the financial use cases of crypto (fundraising, trading, payments, tokenized assets, etc) — but I believe we are about to turn the corner and get a taste of what kinds of new online user experiences will become possible because of this technology.  This is where it’s going to get fun.

just_work = true will be the foundational element of this experience.  Here is what I mean, by way of a few examples:

1) Browsers with identity and money built-in:  the browsing experience will be directly tied to identity and payments, and any app will be able to natively, frictionlessly, tap into both.  Users of Toshi, or Brave, or Metamask, or Blockstack are already getting a taste of it.  Because all cryptonetworks are built around public key cryptography, and the private key is both your identity and your wallet, when you have a public/private keypair built into the browser, you can do lots of things — be “logged in” everywhere, control & provision your own data, make seamless and flexible payments and payment arrangements (e.g., subscriptions).  Imagine the entire web working as seamlessly as Amazon and Apple do today.  As you surf the web, there will be less logging in, fewer passwords to remember, fewer forms to fill out — it will just work.

2) Portable digital assets: I wrote about this previously, but the interoperability of blockchain-based digital assets is going to be a big thing.  Because assets on blockchains are public, open and available, they can exist across many websites and applications.  The suit of armor you build in world of warcraft could be used as collateral for getting a blockchain-based mortgage — maybe that’s a ridiculous example, but the idea is that these assets are open, interoperable, and natively portable — which means things will “just work”, across the web, in ways that aren’t possible today.

3) Automatic dev / deploy environments: my colleague Albert described a story recently where his son participated in a Solidity hackathon — the time from setup to deploy was vanishingly short, since all of the deployment infrastructure is part of the open Ethereum network.   No need to set up accounts at amazon, heroku, stripe, etc to get started — just write a contract, buy some ether for gas, and publish it, and you’re online.  We’ve never had a development / deployment environment this drop dead simple, and as blockchain dev tools mature further, it will get even easier.

I mention all of the above just as a thought exercise.  It is easy for folks in this space to focus on issues like privacy and “freedom” — and while these things do matter to some users (especially technically-minded power users), I don’t believe this technology will unlock mainstream opportunity until we begin to surface the magical capabilities that make everyday users feel like “wow, it just works”.

 

 

Focus

April 12th, 2018by Nick Grossman

Ryan Caldbeck is on fire on Twitter right now.  Ryan is the CEO of our portfolio company CircleUp, and he just joined Twitter for the first time earlier this year and is, I may say, feeling very comfortable in the medium.  Over the weekend he put up a great diagram-oriented tweetstorm with a bunch of gems in it. I will focus on this one:

Focus.  It is one of the most common topics of discussion with startups, at board meetings, in pitches, etc.  Are they/we/you doing too much?  Everyone wants to win at everything, right now, so there is always an inclination to do more.  Saying yes is easy; saying no is hard.  Saying no means FOMO.  Saying yes means opportunity cost (which is a little harder to internalize)

As broad as it may seem, the USV investment thesis is about focus.   Over the years, that focus has a) helped us develop a deep experience and specialty in a certain kind of company / investment and b) saved us lots of time by making it easy to say no to lots of things.  Today, we are seeing a new round of that kind of focus — I am particularly aware of it in areas like crypto/blockchain, where the groups/funds that are hyper-focused in the space and hyper engaged are way ahead in terms of their learning and network.

This is as true for individuals as it is for companies.  Here, it’s maybe even harder.  Who am I?  Who do I want to become?  What will get me there?  Closing off any potential door is painful.  But on the other hand, slowly progressing along a number of fronts is a recipe to get you nowhere.

In order to have focus you have to have conviction.  That the thing you are focusing on, while not being everything, is enough of a thing to chew on for a long time — and is important enough a thing that if you really succeed at it you’ll accomplish what you want to accomplish.

It’s really not easy, but experience and repeated observations say that it’s really important.

Finding your discomfort zone

April 4th, 2018by Nick Grossman

I have been down in DC the last few weeks, among other things, talking to lawmakers and regulators about cryptonetworks and cryptocurrencies.  As part of that, I’ve been spending a lot of time with attorneys — specifically securities attorneys — getting into depth on issues like the definition of an “investment contract” and case law like Howey, Reves and Forman.

Separately, I’ve spent a bunch of time over the past 9 months helping USV portfolio companies getting ready for the EU’s new privacy regulations, the GDPR.  As part of that I have spent a bunch of time with tech teams, attorneys and others unpacking not only what the regulations require in different cases and what it will take for companies to comply, but trying to think about ways to make data security and privacy compliance easier for small startups, assuming that new regulations in the US are looming.

This is not a post about cryptocurrencies and whether all ICOs are securities, or about how we should be thinking about solving privacy and security problems online.  It’s about getting comfortable in that sweet (& sour) spot where you know a little (or a lot) less than everyone else in the room about whatever problem you are trying to solve.

I am not an attorney, am not a PhD computer scientist, am not an economist or monetary policy expert, and am not an MBA and don’t have a background in finance. Yet every day I find myself in the middle of some set of issues drawing on all of these specialties, typically with people who are seasoned experts in one area or another.   It can be intimidating, but it’s also incredibly stimulating and exhilarating.

There have been many times during my career where I have stood at that crossroads and had an opportunity to either stay in the comfort zone or wade into the discomfort zone (starting at USV 6 years ago was one of those moments).  I’d like to say that I’ve always headed straight to the discomfort zone, but I can’t say that that’s true. It has taken time for me to get comfortable being uncomfortable.

One of the great things about working in the discomfort zone is the ability to be honest about your limitations — in a room full of lawyers, leading with “i’m not a lawyer and you guys are the experts, so…” can be really freeing.  Once you can do that, you can open yourself up to lots of interesting and important situations.

A while back, I tried using this heuristic for prioritizing my time: what’s the hardest thing I can be working on right now?  That has helped me guide myself to the discomfort zone more and more, which I will keep doing as much as I can.