Alternative Institutions

Will the Next Unicorn be a Distributed Autonomous Organization?

With the recent talk of reddit being cannibalized by bitcoin technology, I thought it a good time to post something I’ve been thinking about for a while. Could a completely decentralized startup one day rival the likes of Google, Facebook and Amazon?

Within the bitcoin world there’s a common understanding that the most valuable thing about bitcoin is not the monetary currency but the underlying “blockchain” technology that the bitcoin currency runs on. For those unfamiliar, you can check out three heavily-funded ventures creating infrastructure that would enable anyone to program applications on the blockchain that go way beyond monetary currencies: Ethereum,Swarm and Blockstream.

One such application is what’s known as a “Distributed Autonomous Organization,” which is an organization like a corporation, government or NGO, but which has no central leadership and uses internet technologies to organize and function. Examples of DAOs that you are familiar with include open-source software systems like Linux; terrorist organizations like Al Qaeda; communities like Anonymous; and …

From Wall Street to Main Street

My TED Talk on the Magic of Crowdfunding

Why Crowdfunding Changes Everything

I have a new column on Unreasonable.is, which is where this five part series is published:

  • Part 1: The JOBS Act will unlock $30 Trillion in long-term investment capital that can legally be invested in startups and small businesses through crowdfunding portals.
  • Part 2: Currently, investors have a stranglehold on the fundraising process. Once the JOBS Act is implemented, there will be a leveling of the playing field in which entrepreneurs and citizen-investors control the process.
  • Part 3: Investment crowdfunding enables individuals to invest in companies they are passionate about, and in so doing, outperform professional investors.
  • Part 4: “Do you want to sell sugar water for the rest of your life or do you want to come with me and change the world?”
  • Part 5: There is a second revolution coming: investing directly in people. When it collides with crowdfunding, this will create a perfect storm….

Revenue Sharing

In my last blog entry I talked about the perils and evils of debt for both the lender and debtor.  Here I’d like to discuss an alternative which I believe could replace the entire concept of debt.

Revenue sharing, sometimes referred to revenue-based finance and income-contingent loans, is just recently starting to take off. The White House is making a big push for income-based repayment of student loans.*  And at least two private (and highly capitalized) startups are launching soon to provide revenue-based financing options for individuals who agree to pay a portion of their future income in exchange for cash upfront.

With U.S. consumer debt topping $2.5 Trillion and student loans now totaling over $1 Trillion, it’s no wonder that there’s a lot of interest in revenue-based finance. Let’s look at several common debt scenarios and see how they could be different — and better for all parties — if they were based on revenue-sharing instead.

There are many ways to structure a revenue-share …

Lo@n, D*bt and Other Four-Letter Words

Prior to the mid-19th century, those who could not pay their debts were routinely tossed into prison.  Actually, you can still go to debtor’s prison in Germany, Greece, China and Dubai.  In the United States, two of the signatories to the Declaration of Independence (James Wilson and Robert Morris) were incarcerated for their unpaid debts.  In theory, the U.S. abolished such practices in the 1830s.  But six states still allow you to be arrested and detained indefinitely until you “work it out” with your creditors.

And while we humans seem to have a visceral negative reaction to welshers, our disdain for bad faith lenders goes deeper.  Condemnation of usury dates back to the Vedic texts in ancient India, and is condemned as well in all the other major religious texts in the world.  Islamic law (Sharia) prohibits the charging of interest at all, and considers the practice to be one of the seven heinous sins, right up there with murder and “unlawfully taking an orphan’s …

The Economics of Abundance

Here are some things I used to believe:

  1. The power of the free market comes from competition
  2. If you are nice to someone, you will be rewarded commensurately
  3. A penny saved is a penny earned
  4. The more scarce something is the more valuable it is

I no longer believe these statements to be true.  To understand why, I’d like to share a little of my journey as an entrepreneur and investor.

In the mid to late ’90s I was working on a startup and getting my feet wet as an angel investor in Silicon Valley.  I, like everyone I knew, was an adherent of the Chicago School of Economics and the Efficient Market Hypothesis.  One of the mantras of this religion is that

The invisible hand of the marketplace will feed us all, but we have to compete vigorously with one another for it to work its magic.

Signing a Non-Disclosure Agreement on a first date — that’s not just good business, but a moral …

Education 2.0

In what turned out to be the most popular TED talk of all time, Ken Robinson asked us to wake up and smell the coffee: our system of education is stuck in the Industrial Revolution where it was invented.  Moreover, it’s killing creativity, crushing spirits, and preparing students, not for success and wellbeing, but rather unemployment and dysfunction.  Waiting for Superman confirmed this this, adding that the public schools in the U.S. are bankrupt, both financially and morally.

Yet, all around the world, there are signs that the Berlin Wall of education reform is crumbling. Here are a few shining lights:

TEDucation

No single institution or movement has done more to spark educational change than TED.com.  Hundreds of millions of people are watching their videos and learning from inspiring individuals sharing ideas and experiences that cannot be learned in a traditional school environment.  And there’s an acceleration effect because many of the talks are about education and the transformation that’s going on in …

Investing in Superstars, part 4

[NOTE: I updated this post with more detailed examples]

Background: part 3part 2 and part 1.

In the interview with Jon Gunn in Part 3, I mention that I’ve been thinking of what “version 2” of the Personal Investment Contract might look like.  Here’s the model:

  1. Investment Amount – Same as before, intended to give the individual some time to pursue their passion (or figure out what that is) without having to worry about how to support themselves.
  2. Maximum Return – The cumulative total amount that the investor can receive as return on their investment.  If and when this amount is reached, the contract is over.
  3. Annual Exclusion – The amount of annual income the entrepreneur can make without having to share any of it with the investor.
  4. Minimum Revenue Share – The minimum percentage of gross income the entrepreneur returns to the investor after deducting the Annual Exclusion.

Following are some examples of various different career paths and uses for a …

Investing in Superstars, part 3

For the background to this post, start with part 2 and part 1.  The follow up is part 4.

I get a lot of questions from folks who are interested in learning more about Personal Investment Contracts and so I felt it was time to synthesize some of the most common ones and give you some answers.

Who is the first person you invested in?

A film maker named Jon Gunn.

What is your relationship with Jon outside of this investment?

He is my brother-in-law, and a former business partner of mine in an instructional DVD company we co-founded with Phil Gordon.  I’ve also invested in a couple of his independent films.

Why did you invest in Jon directly?

I have been a big believer in his talent for a long time.  None of the ventures I just mentioned though have made me any return on my investment.  Phil had been suggesting for a while that if we simply invested directly in …

Complex Adaptive Monetary Policy

Complex Adaptive Monetary Policy (CAMP) is, in essence, a reconciliation of Keynes’ top-down view of macroeconomics with Hayek’s bottom up view.  The particular details of the proposed policy below are not as important as the recognition of the fundamental forces at play and empirical evidence that we are at a very dangerous chaos point in history.  Both Keynes and Hayek have deep truths to tell, and we discount one or the other at our collective peril.  For those who want a primer on the great debate, this rap battle sums it up better than any text book could.  Now on to the idea…

The fragility of the global financial system (as measured by the US dollar) is a function of the gap between rich and poor.  In the past, only a small ruling elite could decide to use capital to purchase all of the following: food/clothing/shelter; savings; insurance; personal free time; investment; starting a business; buying a private jet; leverage/volatility; political influence; fame.  Today an …

Getting Things Undone

Have you ever felt overwhelmed by your inbox, meeting schedule, and list of phone calls to make or return?  Have you ever wished you could include a wide audience in your one-on-one communications so that we could all benefit from wisdom of the crowd?  If so, you might like my new policy for all business-related communications.

Email

  • Non-private: instead use Accelerating Possibilities FB Group.  (and I don’t do FB private messages).
  • Private: I read every email but only respond if I feel it’s truly a private matter and I’m interested in responding.

Phone & Video Chat

  • Non-private: Create a Vokle Event and post the subject of the discussion to the FB group above.  If I can make it, I will, but hopefully others will join you regardless.
  • Private: Email me your phone number and I will put you on my list of people to call when I have time.  I can’t promise if/when I will call you though.

In Person Meetings

  • Non-private: Try me at 

Scientific Singularity?

A couple of weeks ago Kevin and I went around on the topic of whether or not science is “broken”.  We came to the point of agreeing that we have different basic assumptions of what constitutes “utility”.  And because of this, while we could agree that each of our arguments made sense logically, we ultimately end up with opposite conclusions.  After all, for something to be broken it means that it once served a purpose that it no longer is able to serve due to mechanical/structural failure.  And to have a purpose means that it has value (i.e. utility) to someone.

So whether science is broken or still works depends your definition of utility.  Kevin and I agreed on a measurement for scientific utility, based on (a) how well it explains observed phenomena, (b) how well it predicts new phenomena, and (c) how directly it leads to creation of technologies that improve human lives.  We can call it “explanatory power” or EP for short.  …

Investing in Superstars, part 2

For the background to this post, start with part 1.  The follow up is here: part 3part 4.

In a subsequent post, I’ll talk about some lessons we’ve learned.  In the mean time, what questions would you have, either as a prospective investor or investee in the above scenario?…

Is Science Broken?

By this I mean just what you think I mean.

Is science dysfunctional (i.e. functioning against its stated purpose) and could it be fixed?  I will leave it to you to determine what science’s stated purpose is, though by any standardly accepted definition, I claim that science is broken.  I’d like to run an experiment here to try to either change my belief or solidify it.

In the comments below, I invite you use the Like buttons to vote on what you believe.  You have only three boxes to choose from: Broken, Not Broken, and Undecided.  I respectfully ask you to first use the appropriate Like button and only then add your arguments/comments/questions if you have them.  Also, please categorize your arguments/comments/questions by making them replies to of one of the three top-level boxes (if you “think outside the boxes” I will delete your comment; sorry it’s my experiment :-)

In order to begin the debate, I will refer you to two blog entries which …

A New Cancer Mentality

This interview was done as part of the New Cancer Mentality initiative:

New Cancer Mentality is a grassroots organization focused on giving cancer patients a virual townhall to ask their questions to leading oncologists and researchers about their work. Furthermore, New Cancer Mentality focuses on bringing about collaboration between researchers as well as giving researchers an online forum to share their views and what needs to be done to cure this disease.

If you’d like to learn more or join the movement, check out blog and contact David.…

The Age of Radical Transparency

On Tuesday I went on Annie Duke’s internet TV show to talk with her and Jason Calacanis about Wikileaks and what the implications are for the future of privacy.  I made some radical claims:

  1. Privacy is dead: it’s only a matter of time now before we all have to face this eventuality.
  2. In a radically transparent society, personal willingness to share everything is a source of power/wealth; unwillingness is a personal liability.
  3. In a world with strong privacy rights, the exact opposite is true.
  4. We’re all better off in a radically transparent world than one with strong privacy rights; this is true whether you look at the individual, the corporation, or the sovereign nation.
  5. Worse than both extremes is where we are now, in transition, where some have privacy and others don’t.
  6. Those who insist on having privacy will have to pay an increasing price for it; and because of #5, this is a good thing.
  7. In the mean time, as the walls of privacy

Towards an Economy of Abundance

In A World of Goodies, I tried to explore the implications of creating a currency based not upon scarcity but on abundance.  The concepts in that piece were only half-baked and I’d like to bake them a bit more here.  I’m hoping you will help.

The first task is to make the sharp distinction between the economics of scarcity and the economics of abundance.  Books could be written on the topic, but I’ll sketch what I mean and hope you get the basic idea.  All economic theories you are likely to have heard of are based on the assumption that we live in a world of scarce resources.  Commodities markets allocate those resources based on price equilibrium, but in the end the market does not actually create any new value.  The supply of oil in the world, for instance, is already set, and it’s limited.  As we approach that limit it becomes scarce, and the price (i.e. marginal value) goes up.  More fundamentally, with …

Project Runway

I meet a lot of social entrepreneurs who are just starting out and have the following dilemma.  They are full of energy and creativity, but they don’t have a single tangible project or venture yet that they feel they can commit to.  What they need is the time and freedom to explore the possibilities, brainstorm with a community that believes in them, talk to everyone they can, and get practical experience working on cool projects that their friends are doing, without needing to draw a salary.  What they is need some runway… the modern day equivalent of backpacking around Europe or joining the Peace Corps.

Here’s a quote from Kickstarter, one of my favorite platforms for accelerating possibilities:

Kickstarter is focused on creative ideas and ambitious endeavors. We’re a great way for artists, filmmakers, musicians, designers, writers, athletes, adventurers, illustrators, explorers, curators, promoters, performers, and others to bring their projects, events, and dreams to life.

Wouldn’t it be great if the creative …

The Innovation Summit

My new favorite worldchanger is the Spirit of Innovation Awards.  In short, high school students from around the country solve real-world problems and compete for awards and opportunities (like access to venture capital and mentorship).  Here’s an example:

I am working with founder Nancy Conrad on creating a self-sustaining, growing funding mechanism to expand the mission.  Might be an endowment, might be for-profit investment fund, might be an incubator, might be some combination.  We need to talk to people who are veterans of funding innovation (VC, hedge fund and angel investor types), who are as passionate about the mission as we are, to figure it all out.

What the mission doesn’t say, but what I believe, is that this will change the educational landscape permanently and profoundly.  There a a million “ideas” for how to fix the broken system.  The only way change actually will happen is through setting up subversive alternatives that the discontent (that’s you and me) can switch over to …

$100,000 Reward: Y Prize

Inspired by the X Prize, Y Combinator’s “Startup Ideas We’d Like to Fund” and Kickstarter, I am offering a $100K prize in three parts:

$10K for Crowdsourced X Prizes Platform

  • Allows anyone to offer a cash prize for achieving a goal they want achieved
  • Allows anyone to pledge additional dollars to someone else’s already-offered prize
  • Uses crowdsourcing to vet which goals are worthy of public prize offer and which get top billing
  • Uses crowdsourcing to determine if/when a prize gets awarded
  • Has been used to award at least five prizes of one thousand dollars or more
  • Does not have any pending lawsuits alleging that the platform violates U.S. federal or state laws
  • Has an opinion letter from a U.S. law firm that the system does not violate U.S. federal or state laws

Note that this is different from Kickstarter in that (a) it’s the donors who set the goal not the recipient; (b) Kickstarter does not use crowdsourcing in its vetting …

Four Ways to Fix a Broken Legal System (TED 2010)

This was one of my favorites of the year.…

Investing in Superstars

This is the first in a four part series.  The other are here:  part 2, part 3part 4.

Imagine you are in your early twenties, out of college several years and your best friend, who recently came into an inheritance of $300K cash told you they could think of no better way to invest the money than to invest it in you.  Not the company you started, not as a loan, but invest it in YOU, as if you were a startup.  In return your friend said all they wanted was 3% of your gross income for the rest of your life.  Do you think you would take it?

Now what if your friend said that they didn’t care what you did with the money or how much you made each year.  If you wanted to sit on a beach in Nicaragua learning to surf, go work in the Peace Corps, stay at home and do your art projects, …

Daniel Nocera’s Gift

I just saw the most important talk I have seen in 300+ TED, Pop!Tech, etc talks that I’ve watched.  And at the risk of hyperbole, I will say that the worst case scenario is that Daniel Nocera simply wins a Nobel Prize (and yes, I’m willing to bet at even odds that it happens in under 10 years from today).  But if the system is able to scale through replication, it will be at least as important as penicillin in terms of ending human suffering and will have a bigger impact on the world as a whole.  Here’s why:

  • Input: Water (clean, saltwater or dirty water)
  • Outputs: Electricity + Pure drinkable water
  • By products: nothing (other than what was in the water)
  • Resources required to assemble: all abundant and most have substitutes
  • Knowledge required to assemble: simple
  • Cost to assemble: relatively cheap

Essentially what Nocera has done is reverse engineered and re-created a super-simplified photosynthesis process.  It’s a closed loop (i.e. autocatalytic) so …

Switching Government Service Providers

Ever wish you could reinvent the entire systems of government you live under without starting a costly war, revolution or having to win an election?  No?  Well, Patri Friedman has (wondered, that is).  And so has a growing number of seasteaders, ordinary folks (and the occasional PayPal billionaire).  Or to be more precise, as Patri explained at this year’s Idea Project confab [sign up now for next year, it may sell out quick!] they believe we should at least get to choose from some reasonable options.  Currently your choices are some form of democracy, autocracy, or theocracy.  And switching costs are high.

What if you wanted to start your own sovereign nation in a tucked away corner of earth somewhere?  Problem is, every piece of land more than a few feet above sea level is already claimed by governments, private individuals or commercial interests.  Enter, the high seas.  Turns out there’s nothing stopping you from going out to international waters, building a platform, giant …

A Theory of Scalability

One of the hidden themes of The Feast this past week has been how to scale successful social ventures.  This has been on my mind a lot recently as I have been working informally with both Self Enhancement, Inc. (SEI) and Decision Education Foundation (DEF) on this puzzle.  SEI is extremely successful in the Portland locale where they began 25+ years ago, achieving 98% high school graduation rate (working against hard socioeconomic realities).  Like with many models that are very successful “in the small”, the biggest challenge is to translate that same success to larger scales (e.g. all across America, or all around the world).  DEF is attempting to build scalability into its model from the start, and has found that this is extremely challenging.

In thinking about this I am reminded about a duet of innovators who spoke at the Pop!Tech conference last year about scaling.  Both Bunker Roy and Paul Polack have some profound lessons to teach us about scalability.  You will …