Look on my works, ye Mighty, and despair!
A few Peter Thiel related links.
First, some bits from his Reddit AMA today, one of my favorites to date (I bolded the questions for easier reading).
What do you think about NSA/Snowden and the impact on cloud, security, and general startups in the USA?
It is a much-needed debate.
BTW, I don't agree with the libertarian description of the NSA as "big brother." I think Snowden revealed something that looks more like the Keystone Kops and very little like James Bond.
The first thing an intelligence agency should do is counter-intelligence, and the NSA could not even figure out that there was something suspicious about an IT person downloading all those files. And once they knew Snowden had done this, they apparently still couldn't figure out what all he had taken...
It was inappropriate that the US was tapping Angela Merkel's cell phone. But I suspect that this was news to Obama as well. And more generally: the NSA has been hovering up all the data in the world, because it has no clue what it is doing. "Big data" really means "dumb data."
Why do you think more wealthy people don't fund anti-aging research? What do you think could be done to encourage them to do more?
Most people deal with aging by some strange combination of acceptance and denial. I think the psychological blocks to thinking about aging run very deep, and we need to think about it in order to really fight it.
So, unrelated question, but I'm just curious--- What was your reaction to THE SOCIAL NETWORK movie?
The zero-sum world it portrayed has nothing in common with the Silicon Valley I know, but I suspect it's a pretty accurate portrayal of the dysfunctional relationships that dominate Hollywood.
...what is one thing you believe to be true that most do not?
Most people believe that capitalism and competition are synonyms, and I think they are opposites. A capitalist accumulates capital, and in a world of perfect competition all the capital gets competed away: The restaurant industry in SF is very competitive and very non-capitalistic (e.g., very hard way to make money), whereas Google is very capitalistic and has had no serious competition since 2002.
Hi Peter.. if you were not from United states, do you believe you could reach the same position as you are now?
One can never run this experiment twice, but...
I was born in Germany and my parents emigrated to the US when I was 1 year old. I think Germany and California are in some ways extreme opposites -- Germany is pessimistic and complacent, California is optimistic and desperate. I suspect my life would have turned out very differently had we stayed in Germany.
Peter, what's the worst investment you've ever made? What lessons did you learn from it?
Biggest mistake ever was not to do the Series B round at Facebook.
General lesson: Whenever a tech startup has a strong up round led by a top tier investor (Accel counts), it is generally still undervalued. The steeper the up round, the greater the undervaluation.
What is your view on bitcoin? will it replace the current financial system we have?
PayPal built a payment system but failed in its goal in creating a "new world currency" (our slogan from back in 2000). Bitcoin seems to have created a new currency (at least on the level of speculation), but the payment system is badly lacking.
I will become more bullish on Bitcoin when I see the payment volume of Bitcoin really increase.
Can you comment on how you think artificial intelligence may change society in the coming decades? And what you think we can do to increase the chance that these changes will be positive?
I think AI is still a fair ways off. But the economic questions (e.g., how will this impact our work?) are secondary to the political questions (e.g., will AI be friendly?).
The development of AI would be as momentous as the landing of extraterrestrials on this planet. If aliens landed, the first question would not be about the economy!
You've spoken a great deal about stagnation and a fair amount about what institutions and individuals might do tocombat it. What advice do you have for adapting to it? Short of becoming an entrepreneur, what does the prospect of technological stagnation mean for how average individuals should invest and plan their lives?
If our great expectations about the future are not realized, then we need to save way more than we are doing today. China (with 40% savings) is perhaps more "rational" than the US (with about 0% savings), at least in a world of general stagnation.
I have heard stories about you at PayPal not wanting to hire MBA's. And now we all know your stance on college. I have 2 questions.
Why did you refuse to hire MBA's?Do you think there needs to be a change in K-12 education to lessen the demand for college?
1 no absolute ban, just think most MBA's tend to be high extrovert/low conviction people -- a combination that in my experience leads towards extremely herd-like thinking and behavior 2 yes, I think K-12 should give people enough skills to be able to contribute towards our society -- it is failing because it does not even come close to this
How do you combine your libertarian politics and your Christian faith? Is there a contradiction you struggle with or do you see no conflict at all?
To think of Christ as a politician might be the easiest way to get him all wrong.
The theological claim that Christ is the "son of God" is also the anti-political claim that Augustus Caesar (the son of the divine Julius Caesar) is not the "son of God." So I think that Christ should be thought of as the first "political atheist," who did not believe that the existing political order is divinely ordained.
Now, I think that there is lot of resonance between political atheism and libertarianism, even if they are not strictly identical...
Did Anton Chigurh kill Carla Jean Moss at the end of No Country for Old Men?
Probably. But the real issue is that Chigurh did not overcome chance himself.
"No Country for Old Men" is the movie that chapter 6 of my book is directed against.
You mentioned in the Tim Ferriss Podcast that you think when startups fail it is simply a tragedy. Do you think anything can be taken out of it when the unfortunate does happen?
Unfortunately, not very much... Failure is typically so overdetermined that people never learn all the reasons for which they failed.
How important do you feel social responsibility is as a contributing factor to a companies success?
A sense of mission is critical, but I think the word "social" is problematically ambiguous: it can mean either (1) good for society, or (2) seen as good by society.
In the second meaning, it leads to me-too copycat companies. I think the field of social entrepreneurship is replete with these, and that this is one of the reasons these businesses have not been that successful to date.
Look at the Forbes list of the 92 people who are worth ten billion dollars or more in 2012. Where do they make money? 11 of them made it in technology, and all 11 were in computers. You’ve heard of all of them: It’s Bill Gates, it’s Larry Ellison, Jeff Bezos, Mark Zuckerberg, on and on. There are 25 people who made it in mining natural resources. You probably haven’t heard their names. And these are basically cases of technological failure, because commodities are inelastic goods, and farmers make a fortune when there’s a famine. People will pay way more for food if there’s not enough. 25 people in the last 40 years made their fortunes because of the lack of innovation; 11 people made them because of innovation.
One of the smartest investors in the world is considered to be Warren Buffett. His single biggest investment is in the railroad industry, which I think is a bet against technological progress, both in transportation and energy. Most of what gets transported on railroads is coal, and Buffett is essentially betting that after the 21st century, we’ll look more like the 19th rather than the 20th century. We’ll go back to rail, and back to coal; we’re going to run out of oil, and clean-tech is going to fail.
Think about what happens when someone in Silicon Valley builds a successful company and sells it. What do the founders do with that money? Under indefinite optimism, it unfolds like this:
- Founder doesn’t know what to do with the money. Gives it to large bank.
- Bank doesn’t know what to do with the money. Gives it to portfolio of institutional investors in order to diversify.
- Institutional investors don’t know what to do with money. Give it to portfolio of stocks in order to diversify.
- Companies are told that they are evaluated on whether they generate money. So they try to generate free cash flows. If and when they do, the money goes back to investor on the top. And so on.
What’s odd about this dynamic is that, at all stages, no one ever knows what to do with the money.
On the technologically-accelerating civilization:
How big is the tech industry? Is it enough to save all Western Civilization? Enough to save the United States? Enough to save the State of California? I think that it’s large enough to bail out the government workers’ unions in the city of San Francisco.
Finally, a link to Thiel's new book Zero to One which releases next week. It's a collection of a lot of what he taught in CS183 at Stanford. For a taste, revisit notes from the class as compiled by Blake Masters.
As with all high level tasks, your brain generalizes simple, component parts (like turning letters into words and words into sentences) so it can focus on more complex tasks (like combining sentences into complex ideas). “We don’t catch every detail, we’re not like computers or NSA databases,” said Stafford. “Rather, we take in sensory information and combine it with what we expect, and we extract meaning.” When we’re reading other peoples’ work, this helps us arrive at meaning faster by using less brain power. When we’re proof reading our own work, we know the meaning we want to convey. Because we expect that meaning to be there, it’s easier for us to miss when parts (or all) of it are absent. The reason we don’t see our own typos is because what we see on the screen is competing with the version that exists in our heads.
Good read over at Wired.
But even if familiarization handicaps your ability to pick out mistakes in the long run, we're actually pretty awesome at catching ourselves in the act. (According to Microsoft, backspace is the third-most used button on the keyboard.) In fact, touch typists—people who can type without looking at their fingers—know they've made a mistake even before it shows up on the screen. Their brain is so used to turning thoughts into letters that it alerts them when they make even minor mistakes, like hitting the wrong key or transposing two characters. In a study published earlier this year, Stafford and a colleague covered both the screen and keyboard of typists and monitored their word rate. These “blind” typists slowed down their word rate just before they made a mistake.
Touch typists are working off a subconscious map of the keyboard. As they type, their brains are instinctually preparing for their next move. “But, there's a lag between the signal to hit the key and the actual hitting of the key,” Stafford said. In that split second, your brain has time to run the signal it sent your finger through a simulation telling it what the correct response willf eel like. When it senses an error, it sends a signal to the fingers, slowing them down so they have more time to adjust.
I'm a touch typist, and I find myself doing exactly what the passage above notes when I make a typo. It's fascinating to understand how that happens.
After a terrible bout with RSI early in my career, I switched over to a Kinesis Advantage Contoured keyboard with my desktop at home and for use with my laptop at work. For ergonomic reasons, the Kinesis moves certain frequently used keys to new places, like backspace, space, delete, and the command/ctrl/alt triumvirate.
However, when I switch back to a conventional keyboard, like the one on my laptop, my brain just subconsciously knows to point my fingers at different spots for those keys. I don't have to think or concentrate, it just happens.
The brain can be an amazing thing.
- Keystroke dynamics: “The behavioral biometric of Keystroke Dynamics uses the manner and rhythm in which an individual types characters on a keyboard or keypad.The keystroke rhythms of a user are measured to develop a unique biometric template of the user's typing pattern for future authentication. Raw measurements available from almost every keyboard can be recorded to determine Dwell time (the time a key pressed) and Flight time (the time between "key up" and the next "key down"). The recorded keystroke timing data is then processed through a unique neural algorithm, which determines a primary pattern for future comparison. Similarly, vibration information may be used to create a pattern for future use in both identification and authentication tasks.”
- Privacy-enhancing keyboard: A digital keyboard that randomizes the arrangement of its keys so that snooping technology watches where your fingers pressed down on your phone screen can't guess your password.
So how can games provide insight into real life problems and politics?
The two groups don’t really realize this yet, but game designers and policy makers are doing exactly the same thing. Both groups have these giant populations that are so big that you can’t sit down and talk to everyone about exactly what they want, so you get this mass of information and opinions. And your job is to look out at this sea of people and figure out what would make them happier and then design a bunch of rules that does that. How do you handle player vs. player combat? How do you handle the market? How do you handle conflict between players? Those are all political problems. Many game designers function like lawyers or policy makers. The policies may be very different, but they are in the same business.
Do you think there are opportunities for each side to learn from the other?
I think that the opportunities go in one direction. I think that game designers should not take anything from the policy makers, because policymaking is so bad. Think about this, we’re going to implement a change to health policy that is going to involve one sixth of our economy. No game designer would ever do something like that without testing it, but we go forward without tests all the time in real life. I think that real world governments have a lot to learn from the way that game designers develop patches, how they talk about that process, how they implement it, and how they do the actual work to figure out what that patch will be.
What about the economic world? How can big business use games to improve their business?
Well, you’re stepping over that live wire called Gamification, and I don’t want to give anyone the idea that Gameification is a reasonable strategy for businesses. The basic idea is that you have all these people doing data entry, and if you just give them badges every time they do something, then magically they’ll love their job. That’s not how human behavior works. I think that we can do a much better job of making the lives of everybody in the real world feel more meaningful, but that’s not Gamification, that’s a cultural change. Figuring out how to do that is the tough problem, but giving everyone badges is a weak attempt to make your company a more enjoyable place. What’s going on here is basic human motivation. The gaming industry knows more about engaging people than any other industry right now.
From an interview with Edward Castranova, a telecommunications professor at the University of Indiana.
We are still a ways off from the popular dystopian sci-fi scenario of being citizens of a corporation rather than a nation-state, but some companies are already arguably more powerful than many countries, certainly on the scale of economic throughput. That's why it's still valuable to debate and discuss the ethics of some of the largest companies in the world. The policy decisions technology companies like Facebook, Google, Amazon, Uber, Apple and other behemoths make have massive effects in society, and they've been under a lot of scrutiny. Some of the outrage is trivial and overblown, but in the grand scheme of things I'm glad people challenge and question these companies publicly. For the companies, the consequences usually just consist of PR headaches that blow over eventually when the energy of the initial fury dissipates.
Operating under the aegis of “maximizing shareholder value” isn't much of an ethical foundation.
Ramzan Kadryov, the head of the Chechen Republic, has just under a half million followers on Instagram. A quick glance shows he's a frequent poster, up there with the best of this digitally extroverted generation.
So when he lost his iPhone at a wedding, recently, it turned into a big deal.
So what happens when Kadyrov's tool for using his Instagram, his iPhone, goes missing? According to Russian human rights group Memorial, Kadyrov misplaced his phone at an opening at the "Shira-Yurt" museum near the village of Germenchuk on Saturday. The museum, a model of a traditional Chechen village, was celebrating a wedding that day.
During the wedding, there was an announcement over loud speakers that Kadyrov had lost his phone, according to Memorial. After the guests went home, the human rights group says that over 1,000 people, including children, were called back to answer questions about the phone. Memorial says that most were only able to return home in the morning.
Kadyrov's office has denied the claims, but Radio Free Europe/Radio Liberty say they spoke to a number of local officials who were able to confirm the incident.
Someone needs to set Kadryov up with Find my iPhone.
I find the phenomenon of older famous people who are active on social media endlessly intriguing. It's not just the dissonance of older people using newer technology. Do these people need the incremental validation of their own popularity in the form of thousands or millions of followers? Or maybe Kadyrov is just really into photography?
Jay Frank of FutureHit.DNA notes that for music labels, a streaming music customer is “now worth nearly 15% more than the person who bought music either digitally or physically.” In this third industrial revolution, that's not surprising. Streaming music services are the logical service for this age of abundance while purchasing music made more sense in the age of scarcity, however artificial that scarcity was.
Frank recommends artists face facts about the economics of this new age.
IT TAKES LONGER TO MAKE MORE MONEY
As Ethan points out, it took an “indie pop/rock group” 34 months to make more money from streaming than they did from sales. Some artists will do it in less time, and others in more time. Either way, the artist has to take the long view. It’s certainly easier and much better to run a music business with the money coming in quickly with an up-front sale. However, if you believe in your music and have patience, the long run pays off. In this way, the recorded music business will quickly resemble its partners in publishing. In another way, with many artists being financially irresponsible, is it so bad for them to get their money slowly over a prolonged period?
THE MONEY GOES TO MORE ARTISTS THAN EVER BEFORE
A person buying $14 worth of CDs a year has the money going to 3 artists at the most (3 CDs x under $5). A person buying $14 worth of downloads a year has the money going to maybe 18 artists at the most (18 downloads x $.79). However, $16 worth of streaming revenue conceivably goes to as many as 3,200 tracks (3,200 streams x $.005). Even if you take an assumption that a person does 100 listens of one artist in a year, that’s still spread out over 32 artists in a year, or nearly double the max average for download sales. As I’ve reiterated before, the real issue facing artists with streaming is that the very access that allows them to make money means the pie gets sliced thinner. There’s more money, but it just goes to more artists.
THE SONG HAS TO LAST A LONG TIME
Disposability of a song only works if you work it extra hard while it’s hot. If an artist/song takes 34 months to make more money, then the song needs to be relevant for those 34 months. No longer can you stiff a consumer who buys something and only listens to it a couple of times. Now, those listens need to reoccur and do so over a prolonged period. This also means continually marketing content to ensure it stays relevant.
The first two are just reality. The last one is curious: how does one create a song for repeat playability across the years? What are the qualities of such a song? One can ask the question another way: do some artists knowingly create music that is disposable? That would only seem to make sense if it was easier to do so, otherwise why wouldn't one want to create something longer lasting? All things being equal, you'd prefer the longer cultural relevance and a revenue stream that more closely resembles an annuity.
Despite the great consumer experience that is streaming music, I'm less bullish on the financial attractiveness of that industry. Companies like Pandora, Spotify, and Rdio will all suffer from the wholesale transfer pricing problem. The labels have a unique asset, the digital streaming rights to millions of songs, that all those companies require to survive, and the labels will continue to adjust the pricing to squeeze all the margin out of the business.
There is a path forward. Video sites like Netflix, Hulu, and Amazon all suffered through the same problem as studios licensed back seasons of shows for exorbitant fees, often to multiple buyers who ended up with undifferentiated offerings on which to charge meaningful subscription fees. Still, all of them had to license a meaningful enough library, let's call it tonnage, to serve as a base for a service. From there, all three turned to financing original content that they'd own exclusively as a means of differentiation.
The music streaming services may have to take a similar approach and compete with the labels head to head in working with artists directly to handle the jobs further up the value chain like production and marketing. I've long thought Spotify, as the leading streaming service in subscribers, should become a music label of its own.
It's a costly road, and the payoff is not immediate, but at least it offers the possibility of future profits which might never materialize given the terms the music streaming services have to work with now.
Fascinating article on the phenomenon of fast fashion, much of it tied to the an area of downtown Los Angeles known as the Jobber Market.
In the 2000s, the first major wave of second-generation Korean immigrants— kids who had grown up around their parents’ showrooms—started hitting adulthood. They headed off to American universities to study business, or to schools like Parsons to acquire skills in design, marketing, and merchandising. “They are going to fashion schools everywhere—in Paris, London, Milan, L.A., and New York, all over the world,” says Tommy Choi, a 15-year veteran of the Jobber Market.
On their return to Los Angeles, the kids revamped their family businesses: re-branding, creating company logos, building out showroom spaces to make them appealing to American wholesale buyers, and setting up sleek websites. Their Americanized cultural identities and native English skills allowed Jobber Market businesses to communicate fluently with domestic department-store and retail buyers. And their design, marketing, and merchandising skills allowed companies in the neighborhood to start making clothes on the cutting edge of fashion.
Competing against retailers that were still observing the three-month fashion cycle, Forever 21’s buyers only needed to show up daily in the Jobber Market and choose from a smorgasbord of fashion-forward designs, all ready to be shipped that day. If the company’s buyers did not agree with one vendor’s price, all they had to do was go next door, where a similar design could likely be had for cheaper.
There’s one more important part of the picture: Fast fashion did not just arise from a new intergenerational division of labor within Korean fashion businesses. It also arose from a new distribution of risk in the industry, with much of it falling on the shoulders of the Korean and Mexican families near the bottom of the production chain. For the fast-fashion suppliers in the L.A. Jobber Market, consumer demands are unpredictable and the market is highly volatile. Wholesalers live at the mercy of retailers who set prices and squeeze profit margins; families must invest cash and put thousands of styles into production before knowing what will sell. Everyone in the Jobber Market tells me about the stress, likening the business to gambling at a casino.
So much to unpack in that story, well worth reading.
I had no idea cycle times for fashion could be so short. One more advantage of “made in the USA”: the ability to rapidly reduce cycle time in an industry where trends can be fleeting.
At some point, perhaps manufacturing shops in the Jobber Market move down the apparel value chain and start selling direct to consumers? I need to wander through that neighborhood the next time I'm back in L.A.