Fin15

Fin advice designed in twenty 15

[continuations]

Getting Past the Dominance of the Nation State

One of the important topics that I have not yet addressed in World After Capital is the role of the Nation State. So I am gathering up some of my thoughts in a post first. I believe it is critical that we get past the dominance of the nation state as the key organizing principle in the world. That doesn’t mean doing away with nation states (at least not overnight), but gradually de-emphasizing their importance.

Here are my arguments for why we need to de-emphasize the Nation State:

1. Nation states, true to their name, tend to emphasize the interests of a particular nation above others. The “America First” policy pursue by Trump is a prime example of this. As I have written repeatedly in World After Capital, by emphasizing superficial differences, this goes against the fundamental need for humanity to focus on our commonality.

2. As a first approximation problems today come in two forms: global and local/regional. The nation state sits uncomfortably between the two. Global problems include climate change, infectious disease, corporate and individual taxation. These cannot be solved by any one nation state. Nor even by a small group of them. They truly are global in nature. Conversely, problems such as transportation, education, healthcare can and should be solved at the local or regional level. This problem is particularly acute in a country with the size and diversity of United States.

3. We are in a time of profound change and as such we need more experiments on anything that doesn’t absolutely require global coordination. The Nation State is too large a unit for good experiments. Take education as an example. Having a national policy makes little sense at a time when technology is fundamentally changing how learning can occur.

4. Information technology allows new approaches to regulation through transparency. In many instances what the federal level role should be is provide requirements for transparency of and interoperability between local/regional policies. This means we could have a significantly smaller Federal Government in terms of the number of direct employees, size of agencies and body of regulations.

One reason to be excited about a truly decentralized internet, including decentralized yet consistent state (aka blockchains) and crypto currencies, is that these technologies have the potential to help us get past the Nation State. These decentralized systems are not constrained by the existing boundaries. They are truly global in nature, connecting all of humanity.

Taking nation states as a given permanent feature of humanity is mistaking a short period of history for something permanent. I grew up near Nuremberg in Germany and it is useful to look at a historic map of the area from around the year 1200.

It shows a large number of tiny principalities that had their own rulers, spoke widely varying local dialects, used different currencies, etc. Over time these fused into larger units and in the early 1800s Franconia became part of Bavaria. Today Bavaria is part of German, which in turn is part of the EU. This process of change and and should continue on a global scale.

How should we determine at which scale to address a particular problem? The key principle here is the one of “subsidiarity”: decisions should be made at the lowest possible level. Since we have one global atmosphere we need to make some decisions globally, like how many greenhouse gases we should have. But staying with the same issue, the actual ways of achieving a limit should be decided a lower levels, such as regions.

Given that all of the most pressing problems – climate change, infectious disease, taxation, death from above – are global, now more than ever is the time to get past the dominance of the nation state.

[fin15hq]

Scott Morrison: Don't tell Australians to invest in Coal

Scott Morrison should shut his mouth — it’s your Super

We should get really pissed off when politicians start telling fund managers what they should do with our money.

Scott Morrison and his politician mates want us to invest our super in coal — Fin15 wonders why

The Australian Government continues to work for big corporations when it comes to Australians’ superannuation. This goes back to Bill Shorten’s FOFA (Freedom of Financial Advice) legislation which handed billions of dollars in fees back to the big banks and made it unaffordable for Australian’s to get independent financial advice.

That is something we at Fin15 are working hard to change .

We believe that coal is bad for the environment and destroying our planet. So why would we invest money into making our future worse?

Besides that the world is moving rapidly to a low carbon economy — one without coal. Solar is also getting cheaper and is now competitive on a cost basis to coal. Coal demand from China is dropping and a quarter of EU states have closed their remaining coal power stations. India is using it as an energy hedge and their Adani mine they are developing in Queensland is simply designed to put downward pressure on coal prices by dramatically increasing global demand.

You see whilst demand is falling supply is going up. That makes for a dumb investment.

But of course politicians have ‘more important’ things driving their agendas than our future. They have corporate friends (or is it masters?) they need to keep happy and their mates in the coal industry are under pressure because so many smart investors are saying “why would I invest in an industry that will likely be dead in 50 years”.

When there is a rush for the exits and big corporations are under pressure from all sides and need their politician friends support. We saw George W Bush tell Americans to investing in property as the huge cracks in the US housing bubble became visible. Then we saw Howard tell Australians the Aussie share market was the best investment in late 2007 as the GFC began.

Now ScoMo wants to tell those who control our super that they should be investing your money in coal.

If he is saying that right after BHP reported an $8.3 billion dollar loss we should be wondering how bad the situation really is for these companies.

We at Fin15 think about long term financial confidence because our clients are investing for over 30 years and why would they want to put their money into an industry that could be gone by then?

We have seen the Ethical and Environmentally Sustainable investing can outperform and you can do this in a really well diversified way. Unfortunately Australians get a really raw deal when it comes to diversification for their super. That’s something we but that’s a post for another time.

[continuations]

My GEL 2016 Talk (Video)

Here is my talk from the wonderful GEL conference earlier this year covering some of the ideas from my draft book World After Capital

[fin15hq]

The average 20yr old Aussie has 5k in super = $50k at retirement

Our team just got out at the University of Wollongong and surveyed a bunch of uni students. Many didn’t know that if they have worked for 5 years part time at a bunch of jobs they probably have over $5,000 in a bunch of accounts just sitting there (the average for 20–24 year olds).

Many also thought financial advice in Australia would cost them thousands.

We know to be successful we need to be affordable and we want to get it down to just 15 minutes of your time online, whilst being available on campus if you have questions or want to meet us.

So here is what we at Fin15 are doing:

1 — We find your super and create a personalised plan for FREE.

2 — If you like the plan we consolidate that super and then manage it (if you are under 30, a student at the University of Wollongong and have less than $20k in all your superannuation accounts…

…it will cost you $100 per year! and

3 — We will get your insurance sorted out

4 — And we will save your super more money than the $100 it will cost you

5 — And even though we look for good performing environmentally sustainable and ethical investments we only recommend funds with low fees.

The survey told us some REALLY valuable information about our customers. The problem is that Aussie uni students don’t know they can get financial confidence that is affordable.

Early on we are going to let students come in and see us in the iAccelerate building on campus if you want specific questions answered — just please let us know before you come in so we can find a time and directions.

The average lost super account has $10,000 sitting in it with 20 year olds often having large amounts from the multiple jobs they’ve had — these funds are getting eaten up in fees.

What you don’t know is that once we launch you can actually get that super consolidated and put into investments that aren’t doing bad shit around the globe.

This means better returns, more appropriate investment allocations and you get to feel good about what your money is doing.

Plus if you haven’t seen the news lately showing all those rip off insurance products that you are paying fees for that are often worthless — the big banks don’t want you know about that do they.

We know that 20–24 year old Australians have on average $5,000 in their super. But most of you have no idea how much money you have in each of your accounts. Many of you don’t even know how many super funds you have.

Talking with some of you has really given us better insight into what you don’t know and that many of you would use our service considering it will actually end up saving you money.

Right now we are focused on helping UOW and we are planning on launching in September. If you have any questions or would like us to find your super and come up with a plan please go here and we will help you out.

[fin15hq]

University of Wollongong Students really do want access to professional financial advice especially with superannuation

[fin15hq]

So excited to make iAccelerate @uow our home

[continuations]

The Coming Paradigm Shift in Manufacturing

The Star Trek replicator stands as the ultimate dream of on-demand manufacturing. The bad news is that despite advances in 3D printing we are many breakthroughs (including nearly abundant energy) away from realizing that dream. The good news is that we are finally finding ourselves on the cusp of a paradigm shift in manufacturing away from mass production to fast, low cost, small series (including single part) capabilities.

The shift is being led by a new crop of startups, including Plethora (metal parts), PCB:NG (circuit boards), Unmade (knitting) and Shapeways (3D printing). The common theme among these is that they are focused on automating pre- and post-production processes. For instance, Plethora has created software for translating a CAD drawing directly into the right sequence of instructions for a CNC Mill. PCB:NG has figured out how to feed a pick and place machine for runs of just a few boards. And Unmade can drive a knitting machine right from the design of a scarf or sweater.

In 3D printing, our portfolio company Shapeways has invested massively in making pre- and post production more efficient.  For instance, in pre-production, there is a task called tray planning, which involves figuring out which parts should be printed together in one print run and how those parts should be oriented and combined to achieve high density. In post-production, there are tasks such as breaking parts out of the block of material, cleaning, dying and packing for shipment.

Why is this happening now? On the demand side, the long tail has been growing driven by consumers who want customized products, hobbyists and makers who want custom parts and innovative hardware startups. This demand growth is absolutely critical as without it there is no payoff to automating pre- and post-production. On large production runs the pre- and post-production cost gets amortized over a large number of identical parts and so is irrelevant to the cost per part.

On the supply side, the core manufacturing machines have become completely computer controllable. Switching seamlessly from one part to a completely different one next is straightforward on a CNC mill and even on a modern knitting machine. But what has remained hard is figuring out how to go from the design to the code driving the machine, getting the right supplies into the machine and removing, finishing and shipping parts. 

The OEMs of mills, pick and place machines, knitting machines, and even 3D printers have done next to nothing to address pre- and post-production. That’s because until recently these machines were used by companies that were largely mass manufacturers. The automation of pre- and post-production is now getting cheaper through improvements in software and also advances in robotics. For instance, optical recognition of parts is going from costly and error prone to being achievable with low cost cameras and off the shelf hardware.

Plethora, PCB:NG, Unmade, Shapeways and others represent the leading edge of what is possible. To date they account for a tiny fraction of all manufacturing. But I am excited that they are showing the way past mass manufacturing to a future where stuff is made only when someone actually orders it, is customized to their needs and is produced in geographic proximity (reducing shipping costs).

[continuations]

Contestable Markets in the Age of Network Effects

Network effects are central to our investment thesis at USV. We believe that they provide one of the few (the only?) source of sustainable competitive advantage. We have also been outspoken about wanting to limit the power that these network effects provide to winning companies. One proposal that I have made is to shift more power to the edge of the network by giving humans the right to be represented by a software bot.

It is useful to think about how contestable a market with network effects is. The concept of contestable markets was first developed by Baumol. The idea is that even a market with relatively few companies (including possibly a single dominant company) could be quite competitive *if* there is a credible threat of new entrants. The three characteristics of perfectly contestable markets are

No entry or exit barriers

No sunk costs

No technology advantage for incumbent

It turns out that this increasingly describes many digital markets.

Consider messengers as an example. Even though messengers have a strong network effect, with cloud computing and rented hardware there are very few entry or exit barriers, sunk cost or technology advantages for incumbents. As a result it has been difficult to monetize messengers (with the proviso that if they achieve deep integrations such as WeChat, then there are barriers to entry).

Messengers have an extra challenge in that they (largely) deal with ephemeral content. Between having the graph in the phone book, no investment in past content and minimal learning curve, endusers are free to explore new services. Incidentally this could also turn out to be a challenge for Snapchat as there is no archival content (yet).

On demand car services, such as Uber, Lyft, etc. may turn out to be locally contestable. It is unclear how much of a cross city network effect exists (despite what we as frequent travelers might think – and even among frequent travelers many go to only a few cities, so can easily have a few apps installed). There are local players competing already and new entrants being started including Juno in New York city and the Waze Rider in Tel Aviv.

Protocols, such as say SMTP for email, make markets extremely contestable. Despite the dominance of a few email providers the services are free and even advertising monetization is minimal. This means that other existing network effects are susceptible to increased contestability should standards emerge. That’s why work on standards for messaging, transportation, payments, etc. is so important and new blockchain based protocols are worth exploring.

[continuations]

You Are Not Alone (USV CEO Summit)

Today is our annual get together for USV portfolio company CEOs. A few years back, when we first started building out the USV network, we switched to an un-conference format. Gary Chou who first started to bring portfolio companies in the network pioneered this. Gary’s insight was to create an opportunity to talk about issues in small groups of peers and start a dialog which can then continue throughout the year.

Having been a CEO myself, the hard thing is the feeling of being alone. It is easy to succumb to that even if you have surrounded yourself with a really strong team. There are decisions which only you can make and have to make. Some of those decisions will decide the trajectory of the entire company for everyone who has worked on it or invested in it. And that is a lot of pressure.

It helps tremendously to have a small group of people you trust who are in the same position or have been in the same position. This is only partially or maybe not at all about getting their judgment as an input. It is about sharing your particular dilemma with someone who fully appreciates its complexity and weight. That’s the emotional resonance from which we draw strength.

I am looking forward to listening in on some of the discussions that will take place today. I will learn from those conversations but more importantly each one is an opportunity for someone to receive and build the support they need as CEO.

[brycedotvc]

In Their Shoes

Elizabeth Warren was on fire last night. 

She orchestrated a searing Tweetstorm aimed at Trump. As my timeline filled with retweets of gems like this, I decided to dig in and see what conversations her tweets were generating. Wading through the @ mentions of her various tweets, my stomach began to turn. The hate and vitriol hurled at her from cowards behind keyboards was truly disgusting. 

It was only last week, I’d watched this video of men reading mean tweets directed at women sportscasters. Not a day has past that I haven’t thought about it. 

I have 4 daughters and this is the world I send them into every day. 

Seeing women experience this kind of verbal abuse and harassment in real time lends a perspective most men should allow themselves to see and feel.

It’s seeing and feeling and experiencing what others, not like you, have to go through that can change perspectives and reshape tightly held beliefs.

In her book, Lean In, Cheryl Sandberg emphasized how critical a loving and supportive partner was to a woman’s ability to succeed in life and in the workplace. Today, she posted on reflection and how her views on partner support had changed in her first year as a single parent:

I did not really get how hard it is to succeed at work when you are overwhelmed at home. 

I did not really get how hard it is to succeed at work when you are overwhelmed at home.

Being a mother is the most important—and most humbling—job I’ve ever had. As we rightly celebrate motherhood, we should give special thanks to the women who are raising children on their own. And let’s vow to do more to support them, every day.

A worthy pledge! 

But one that can only be felt and sincerely advocated once a glimpse of the sacrifice and struggle of a single parent is experienced. 

To begin that journey of change required walking in those shoes first.

I went on a bit of Twitter ramble this afternoon related to the news that Dropbox was tightening their belt and cutting back some employee perks. I shot off a few zingers, lobbed a few snarky @ replies, then went back to working around the house. 

Those 20 min of armchair quarterbacking have caused more reflection than I’d anticipated. I work with many first time CEOs growing companies and facing challenges they’ve never faced on a daily basis. For the CEO of Dropbox, this is not only the first billion dollar business he’s run, but its likely one of the first jobs he’s ever had.

How easy to sit back and be critical of the decisions being made when there’s no skin in the game and you’ve never walked in those shoes? 

From my experience today, too easy.

The web can be an incredible empathy machine if we’re open to reading, listening and experiencing life in their shoes. 

[continuations]

The Future of Programming

I learned how to program on this Apple II over 30 years ago. Over that time period – as a first approximation – programming has stayed the same. Yes, I have learned new tools and new programming languages, but programming still amounts to typing a bunch of text into an editor in a syntax that’s generally easier to read for a machine than a human. That is about to change dramatically.

When I teach programming to novices I introduce it by saying: programming is just telling a machine what to do. You already know how to tell people what to do – you do it many times a day. Now you will learn how to do the same for machines. I then point out the ways in which computers are not like humans: first, that they are literal requiring a highly specific syntax and second, that they have fewer built-in capabilities than most humans.

Let’s start with the second part. The dream of easily reusable components is an old one in programming dating back to the emergence of object oriented programming in the 1960s (yes, that’s the 60s and thus half a century ago). I have a feeling some folks will want to get into a lengthy debate on how amazing some of those systems were. Smalltalk, anyone? But the truth is it never really worked. Not in a way that transformed programming.

Now though we are finding ourselves in 2016 and the components we were looking for have arrived in full force. They are called services. I am not talking about the current excitement around microservices, which is a gigantic headfake (*). What I mean are services such as Twilio for communications, Dwolla for payments, Clarifai for image recognition, Ziggeo for video recording and so on (disclosure: all examples are companies I am an investor in). These are all services that as a programmer let me do amazing things with just a few lines of code. It is because of services like that people can now build and launch something meaningful in the duration of a hackathon.

That act of assembling the components into a new whole though, still happens largely through exactly the kind of programming we have always done. But here too change is on the way. For instance, Zapier just announced much more powerful ways of combining existing services with minimal programming.

While that’s a huge step forward, we won’t stop there. We have also had recent breakthroughs in understanding natural language and in capturing it directly from speech. This has given us services such as Apple’s Siri, Google’s Now, Microsoft’s Cortana and Amazon’s Echo and for messaging service the great bot rush of 2016.

So finally, after all these years, programming will change. We will all be able to program just by saying things. “When a customer’s bill payment is overdue by more than 60 days send a text message asking for a video recording explaining the reason for the delay.” Don’t think we will get there? Well, for quite some time it looked like this wouldn’t happen either:

As an investor I therefore continue to be excited about component services that are required to make this future happen as well as the glue between them. We are not quite there, but the future in which we are all programmers is arriving.

* The excitement about microservices and, for that matter, containers is a headfake because very few people need to build services. Most people will script, assemble or otherwise consume services.

[startupljackson]

How to get rich in tech, guaranteed.

Today’s NYT article on how employees sometimes lose out is a great read. Employees who like that, might also like Hunter’s article from last week on (not) getting rich at startups. This is the follow up I intended to write for the latter.

I talk to people looking for their next gig on a regular basis. It’s fun to match awesome people who don’t want to found companies up with companies who need awesome people. One question I get asked over and over again in various forms is, do you think I’ll get rich from startup X?

My first piece of advice for startup job seekers is that equity, all things equal, you can’t pick ‘em. On a risk-adjusted basis, startups are likely to be about the same. If there is information that a company has significantly de-risked, it will be priced in. Despite the market often being very wrong, you are unlikely to outsmart it.

If you want to get rich, your best bet on a risk-adjusted basis is to join a profitable and growing public company. Google for short. Make $200-500k all-in a year, work hard and move up a level every 3-5 years, sell options as they vest (in case you joined Enron), and retire at 60, rich. This plan works every time.

Beyond the sub-market salary you’ll receive for joining a startup, there are no financial guarantees. Your equity is probably worthless. The whole damn thing might fall apart any time. The hours are long. A lot of shit won’t work right. Etc.

But, as far as I know, startups are the only way to get 20 years of experience in five. The reason to join a startup is because you are awesome, you’re willing to work hard, and you don’t want to wait 20 years to be making decisions that impact the business.

And if you go in with this mentality, even when startups fail, you succeed. If you put five years into building a company and team, you will end up with a great network of talented and motivated people, lots of first-hand experience, and often some management experience as well.

Worst case, your next step could be going into Google at the VP level it would’ve taken you 15 years to get to joining out of college to “inject some startup DNA,” and catch up on salary within a few years. Unless this internet thing is a fad, that job will always be there for you.

But for all that is good and holy, don’t join a startup for the fucking money.

Sundry advice on picking a startup:

Be clear on what you want. Do you want to join pre product-market fit, or post? Do you need a salary, if so, how much? Do you care about vertical or role? Location? Travel? Etc. Most people that end up in the wrong job didn’t think through what their ideal job was before looking.

Run a process. Most people fail at this. Startups are interviewing you, but you’re interviewing them too. Write down your criteria. Look at 200 startups, contact 50, do first interviews with 20, move forward with 5, pick between 2-3 good options. If you’re passive, or only talk to a few companies, you’ll be choosing between limited options. You can get 200 plausible startups in a couple hours.

Focus on good people/culture. Above all else, my observation is that when you find good people (high-integrity, smart, hard working, etc) and a compatible culture, you end up happy, even if the company fails. When you ignore suboptimal people fit because you think the product is sexy or you’ll make money, you end up sad.

Accept fair comp. Many people are unrealistic on comp. They want an early-stage experience with Google salaries. It doesn’t work that way, and startups often suck at explaining that. Talk openly with startups about what they can pay you, what they’ve raised, what your needs are, and what milestones will lead to higher salary. Keep in mind, you might be the first person to take a salary and the founders might have been working for two years. Sure, it’s a 50% haircut for you, but for them it’s a big chunk of their first round.

Expect to earn it. Some startups will hire a dev and call them CTO. That doesn’t make them a CTO. If you want to be a CXO, say so up front, but expect to earn it. Entering a startup is a lateral move with unlimited upside. Tell the startup where you want to be, and set milestones that give you what you want that make the company successful. Now you’re a CXO.

Discount the vertical. With a few role exceptions, what you’re actually making isn’t that important. Assuming the company is making something people want and you’re delivering a ton of value, most people can be as happy making enterprise cloud infrastructure as social networking tools. Business development is business development. Do it with/for people who do not suck.

Understand the basics of the business. You shouldn’t try to become an expert, but you can ask some basic questions. What is the valuation of the company, and what’s the valuation for your purposes? How much has the company raised to date? How much money does the company have in the bank, and what is the net burn rate? What milestones does the company need to hit to get to the next round?

This is good to know so you can roughly assess the business. But it’s also a great way to understand how you fit in. Can you help with the core problems the company needs to solve?

Bias towards transparency. Companies can’t be expected to share every single detail with employees, especially potential hires. But, in general bias towards companies that give employees info to make informed decisions You should, for example, know what percent of the company you own. Trust is a two way street, and if the company lies to it’s employees, it’s hard to maintain that trust. Life is too short to watch your back inside the building.

[fin15hq]

Another win for the banks that sucks for the rest of us

Let’s have better regulation around superannuation and financial advice. This is what we at Fin15 are passionate about.

So we get really pissed off when we see new regulations designed to do the exact opposite.

It seems pretty clear the big banks are calling the shots here and that this is a continuation on from what has occurred under the previous Labor Government with Bill Shorten’s #FOFA.

The political spin from politicians is that these changes protect the public. This is complete bullshit - the reality is the opposite.

You see the big financial institutions didn’t want independent financial advisors protecting their customers from inappropriate products. They especially didn’t want to keep paying a big % of their fund management fees to do these independent advisors to advise them on the most suitable products.

So guess what - the advisors got publicly blamed and then paying advisors fees from the funds for providing this advice. How about instead of the funds paying we make the clients pay.

“Wouldn’t it be better for the public if they had access inexpensive financial advice?”

See this is genius - the banks got to save huge amounts of money and now only rich people could afford to be protected from their inappropriate products. As a bonus the unions were happy because the industry funds, run in part by the union officials, didn’t pay these fees and so weren’t being recommended.

Of course the scandals escalated because the banks didn’t have to worry about the advisors anymore - their clients couldn’t afford them (although it seems they couldn’t afford not to have them).

“How many more people have their super invested inappropriately because of #FOFA?”

Well it seems that is not enough and we need to make it better for the institutions and worse for the public. How do we do that? We put a former CEO of a big bank in charge of a review... and we make more recommendations that make it more onerous for advisors. In other words we make advisors more expensive... but it goes much further than that.

If you have followed any of the news on the financial advice scandals in recent years and you didn’t know who ASIC was you may think they work for the banks. They don’t - they are the regulator. When a regulator starts working with the companies they are supposed to regulate this is known as a captured regulator.

I would assume that the banks would be ecstatic that ASIC is being given more power. In fact if there is one area the banks would want ASIC to have more power in it would be with products. Specifically being able to change products they deem to have significant risks.

I mean come on - everyone knows what this means. Every time a Startup or smaller competitor comes up with a product that is threatening to the big banks you can bet ASIC is going to get a call from a bank and then that startup is going to get a call.

You may say “oh ASIC isn’t going to do that - they are their to protect the public”. Well I would love to see ASIC standing up for the public more - but to do that you would have to restructure ASIC - no recommendations on that!

It’s not just ASIC. You would think the ATO would let advisors who have received permission from their clients, to do a super search. That would mean advisors could help their clients consolidate their super and find super they’ve lost. Ahhh - no that’s only available to the funds.

They can’t go tear down FOFA - But they can change this rule which would be great for startups (admittedly like us) in this area. It would be much easier for us to then help clients with their super (and a lot less work for the individual which is a big reason why they don’t get this sorted).

We hear all the time that both the Liberal and Labor parties want Australia to be a leading place for startups as well as with our huge pool of super that these investors should be protected. There is a huge amount of spin on this.

But their actions say otherwise. If we want a strong financial innovation in Australia and then these startups can launch into ASIA - well we can’t have the government shutting down those opportunities for innovation.

And if we want superannuation to be better protected we need to support high quality, independent advisors.

[continuations]

Land, Capital, Attention: This Time it Is the Same

We have had all these innovations and have always found new things for people to work on. This is the Lump of Labor fallacy all over again. You are a Luddite! What makes you think this time is different?

This is the rhetoric aimed at people like myself who argue that we need to fundamentally rethink how the economy and society work because digital technologies changing the world. I have taken to replying “you are correct, but you are looking at the wrong time frame.” What all of the above objections share is that they look at a relatively short part of human history. If you look at a larger arc then a different picture emerges.

There have been two fundamental scarcities in human history and we are now moving on to the third. Each time the scarcity shifted, due to a new technology, we had a massive dislocation. So yes, this time is the same, scarcity is shifting again and with it we are experiencing another such massive dislocation.

The first scarcity to emerge was land. We started out as hunter gatherers and eventually developed planting and harvesting and domesticated animals. Agriculture is the first massive technological change. We were horrendously bad at agriculture at first — no surprise it was a brand new technology. If you haven’t done so already, I highly recommend reading Sapiens by Yuval Harari. He has a terrific set of chapters on the agricultural revolution that makes clear just how bad we were and how much worse people in early agrarian societies were off compared to their hunter gatherer ancestors.

Because we were so bad at agriculture, land was scarce. It could barely support the people living on it. But it generated just enough local surplus to support the emergence of rulers and armies. And that of course meant one thing for several thousand years: fights over who owns what land. More land meant somewhat less scarcity and a bigger army. Land ownership and control became highly concentrated.

The ruling elites everywhere came from and represented the owners of land. This setup persisted even as the next big technology arrived in the form of machines and industrial production. The transition to industrial society was a horrific dislocation exactly because the political elites were still representing land interests. This is how we wound up with numerous revolutions and ultimately two world wars. Even Hitler’s mad ambitions were still about land — the Nazis pursued “Lebensraum” (room to live), when the real scarcity had already shifted to capital.

We had already become relatively good at agriculture which resulted in a lot of people being “freed” up to move to cities. But industrial production was only getting started and once again, like early agriculture, we were horrendously bad it. Early factories had harrowing working conditions and were massively polluting the environment. A lot of capital investment was required and capital was scarce because there wasn’t much of it yet and capital markets were underdeveloped. So we had lots of unemployment and boom bust cycles (similar to famines in early agricultural mono societies that depended on a single crop).

As it turned out markets were good at producing and allocating capital. That’s why capitalism eventually beat other systems such as communism and socialism during the industrial age. And it also turned out that capital and labor were long-term complements. The owners of capital needed labor to make that capital productive. And workers required a job in order to earn a living. Entrepreneurship and further technical innovation resulted in massive gains in the standard of living. This process is still playing itself out in less developed parts of the world which are being lifted out of poverty.

We now live in a world that has moved almost entirely to capitalism even in China. And much like land before it, the ownership of capital has been concentrating along the way. Only 1% of the global population now controls about 50% of all capital. And in another critical historical parallel, the ruling elites everywhere directly or indirectly represent the interests of capital. Capital has replaced land as the factor against which policies are measured. Take quantitative easing for example, which is aimed at reducing the cost of capital on the belief that this will continue to create jobs.

But the new technological disruption has already arrived and it is digital technology. This is a new set of machines and networks. Unlike their earlier predecessors they are universal machines which as they get better can eventually do anything. And the results are that capital and labor are no longer long-term complements which has been driving down labor’s share of the economy and depressing wages. Digital technology even means that less and less capital is required for most endeavors (see for instance how much cheaper it is to start a new company today than it was even a decade ago). Capital is no longer scarce and labor even less so.

Where is the new scarcity? It is human attention. With birth rates thankfully decelerating almost everywhere, peak population is finally a possibility. We all have only 24 hours in the day and we need to work, eat and sleep. That puts a hard limit on how much human attention exists. At the same time digital technologies are producing unprecedented amounts of information that we could pay attention to. On Youtube alone 100 hours of video is uploaded every minute. Increasingly you can measure how valuable something is by how much attention it controls (e.g., Google, Facebook, etc).

And just like previous scarcities one of the reasons that attention is scarce is that we are bad at this new technology. As society we have lots of information locked up through copyright and patents instead of making it available to everyone. As individuals we too often lack a purpose other than making money and we will happily watch another cat video in our limited free time than read a challenging book. Over time we will get better at all of this and it will let us achieve amazing things as humanity, including free education and healthcare for everyone and cleaning up the mess we have made of the planet. But none of that will happen as long as we keep ourselves trapped in a belief that capital is scarce and that everyone needs a job.

So yes, this time is the same. Once again technology is fundamentally shifting scarcity and the ruling elites are controlled by the prior scarcity, this time capital, which is trying hard to maintain its power. The sooner we all begin to understand this, the better our chances of a peaceful transition. The longer we wait, the more we will be like the land owners who didn’t get industrialization and led us down a path of violent change.

[fin15hq]

Seriously - this is a must read ✌🏽️

[fin15hq]

Why your Super suffers because of China (hint: It’s very bad advice)

Ok - so I’m stating the bleeding obvious here - China doesn’t need so many commodities anymore (we have known that for a long time) and so commodities prices have collapsed.

This is a simple case of: If X happens then Y happens.

And if Y happens (commodity prices collapse) then we all know -Z happens (the Australian stock market collapses).

Z also effects the Australian economy (E) obviously.

Ok - so the job of an investment manager is to diversify your risk.

This is basic stuff ladies and gentlemen.

So why are huge chunks of your super invested in Australian equities and why is that more so than international equities?

This is either a case of A: Incompetence or B: Greed.

The answer is B - Australian financial institutions want money invested in their companies on the ASX to raise the share price (and therefore bonuses, benefits etc…) There are even standards (% allocations) your advisor should adhere to.

So X = Y = -(E) + (-Z) = your super value falls.

And this is a clear demostration of incompetent risk management. When the value of everyones super falls that means less money not only into the stock market but other forms of investment like loans to businesses.

It feeds back into the economy!

This is also the economy where you have your job.

That is why when we launch Fin15 won’t be putting your money into Australian equities - we may get some stick from the regulators on this but isn’t it time someone did the right thing with your money?

[startupljackson]

defaulting to positive

“Don’t care what they may say We got that attitude.” - Attitude, Kool AD

I got this uplifting note in my inboxes this morning. No doubt you received it as well.

What I love about Silicon Valley—what I believe makes it a special place—is that the default is to give encouragement. Whether you’re starting company to share what you had for lunch, or your jam is to make art from garbage, the default response you get from friends is some version of “I am into the idea of you being into your idea. Go do it!” Encouragement is the default.

This, in my mind, is Silicon Valley’s single most important cultural asset, accepting failure being the more often discussed compliment. It’s why we have more startups than anywhere in the country, more not-for-profits, and why this town ended up with a weeklong naked group vacation in the desert (hey, some things are the cost of doing business).

The cost of this optimism is relatively small. By definition, the people who “don’t have what it takes” rarely get past bootstrapping, bad ideas rarely make it past seed funding, and in the end the experience and perspective gained by these founders makes them great contributors in other startups. Nobody has empathy for a founder’s struggles like someone who’s been there.

Most people have a chief hater inside their heads telling them they’re doomed. It costs you exactly zero to tell them how you think they could get their crazy idea to succeed, instead of the ways they will probably fail. If you’ve ever quit a job to work on a startup and had your mom tell you it was a bad idea, you know how meaningful a bit of encouragement can be.

Besides, maybe you’re just fucking wrong.

[fin15hq]