Ideology and Dogma are often hard to distinguish. Strongly held ideas can often come across as a “sales pitch” for a self-serving belief. They can also be the basis for transformation and innovation. The difference between a con artist and a visionary is clearly in the eye of the beholder. And the ability to tell the imposter from the revolutionary is key to determining what we think and do.
So in this week’s editorial, I want to drill down into the essay written by Elizabeth Yin from the Hustle Fund, about decentralized startups, and the Economist profile of Peter Thiel.
The profile starts out by characterizing Thiel thus:
He co-founded PayPal, a payments platform that, as a young libertarian, he hoped would undermine the world’s monetary system. Instead it gave him the money to bestride Silicon Valley, a place he disdains. He was the earliest outside investor in Facebook, a tech giant on whose board he remains, though he mocks social media. As a hedge-fund manager, he bet on an economic meltdown in America ahead of the financial crisis of 2007-09, but called the bottom of the market too soon.
It goes on, in reviewing Max Chafkin’s new book about Thiel - The Contrarian - it reports Chafkin’s view that
“he portrays his subject as a tax-avoiding “nihilist” whose right-leaning ideology is mostly aimed at increasing his wealth and power.”
And then criticizes Chafkin
And yet strangely Mr Chafkin, a business writer, only obliquely refers to the most intriguing business story. Between the lines, a picture emerges of an erratic visionary whose work, however creepy, isn’t done. Mr Thiel is applying the radicalism that inspired PayPal to cryptocurrencies and decentralised payment platforms. The “Make America Great Again” schtick that drew him to Mr Trump has led to investments in military, surveillance and space technology that have helped double his net worth in the past year. His yearning to reclaim Silicon Valley from software-loving peaceniks and return to its roots in the cold-war military-industrial complex is bearing fruit—and spreading beyond California.
Enter Elizabeth Yin. In her excellent essay The Rise of the Decentralized Startup she imagines a future in which startups are not highly centralized legal entities with equity holders and investors but rather mission-driven clusters of part-time contributors gathered around a Distributed Autonomous Organization, a DAO.
I think we will see many more DAOs formed in the coming years, and reiterating what I mentioned in 2018
, I do think that some form of crypto will disrupt traditional VCs over time. But I also think decentralized startups will start to appear even without “typical crypto components”. There will be startups formed around missions that don’t start with founders nor involve crypto but have radical transparency. There may also be decentralized startups formed without Discord channels (personally, I’m unclear how anyone, myself included, can do deep work anymore with so many Discord channels) and just rely on wikis / Notion pages / Mirror / etc to document what work is being done without minute-by-minute chatter. I think we will see startups formed with people who work at multiple places simultaneously or are all contractors – such as how Gumroad is set up
. And in that scenario, the need to raise so much money for the company actually becomes *less important*, because you don’t always need funds to cover someone full time and compete with much crazier full-time offers from FAANG companies. This mitigates the fight for talent issue.
Silicon Valley is full of people, across the political spectrum but most are liberal and libertarian at the same time. This vision, shared by Thiel, is of an end to the startup, and the rise of networks, platforms, DAOs, where value is delivered and held in tokens, not shares. The evolution of technology to a place where automation and value are interwoven is a commonly held view of reality.
Jeremy Allaire, quoted in the New York Times piece about impending government control of Crypto via regulations, is one of the people innovating against this broad vision. His company Circle is a major part of the stable coin known as USDC, and is poised to provide a global, digital, version of the US dollar, run by a private corporation and its partners, opening up the possibility of free global money flows without intermediaries, or at least less of them. Circle has raised over $700m in private funding and is valued at $4.5 bn in its SPAC agreement with Concord, run by the PE Firm Atlas.
The Economist quotes Thiel as saying:
“If ai is communist, crypto is libertarian,”
In reality, the end of government and its replacement by autonomous governance is an entirely legitimate end goal for humanity. It is not capitalist or communist or even libertarian. It is inevitable. For that reason, the introduction of politics into discussions of progress and innovation does nothing to clarify the path or the goal or its desirability. Governments will try to stop, slow down or control but ultimately cannot prevail. Ultimately we (humans) will not need them.
And ideological labels are entirely unhelpful. Technology is real. It is a major part of the productive energy we humans have created. AI is a tool, crypto is a tool. As are databases, the internet, and cloud services. Together they are making the world a smaller place with fewer intermediaries and giving us all the hope of a truly great future in which we, as individuals, all benefit from a collective infrastructure that helps us live long and meaningful lives.
Venture Capital is a key driver for this innovation and its growth and capacity to return more capital for more growth will be an important engine of progress until venture capital itself is automated. And it will be :-). Check out Signalrank Corp for more about data driven capital allocation. (https://signalrank.co
More in this week’s video