Trust
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 …
Alternative Institutions, Cooperation, Economics, Incentives, Interventions, Investing, Markets, Scarcity / Abundance, Social Capital, Trust ,
Here are some things I used to believe:
- The power of the free market comes from competition
- If you are nice to someone, you will be rewarded commensurately
- A penny saved is a penny earned
- 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 …
Adjacent Possible, Alternative Institutions, Competition, Cooperation, Economics, Incentives, Investing, Invisible Etiology, Markets, Scarcity / Abundance, Social Capital, Social Entrepreneurship, TED, Trust ,
[NOTE: I updated this post with more detailed examples]
Background: part 3, part 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:
- 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.
- 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.
- Annual Exclusion - The amount of annual income the entrepreneur can make without having to share any of it with the investor.
- 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 …
Alternative Institutions, Cooperation, Happiness, Incentives, Innovation, Interventions, Investing, Psychology, Scarcity / Abundance, Social Capital, Social Entrepreneurship, Trust ,
“Never doubt that a small group of thoughtful, committed, citizens can change the world. Indeed, it is the only thing that ever has.” (Margaret Mead)
“Be the change you want to see in this world” (Gandhi)
There is an idea virus within American culture that has the power to destroy. The idea is that technology and innovation are fundamentally good. Whether you consider yourself a technologist, an entrepreneur or a scientist (all labels I use to identify myself at times) I’d like to propose an alternative to to this idea and an inoculation against the virus.
Observation #1: Innovation amplifies whatever values and beliefs are held by the innovator.
For instance, if I value my time, I might invent the first clock, or start a business to create time-management products, or devote my life to unlocking deep mysteries of the physics of time. And if I believe clean drinking water is a fundamental human right, I might invent a new method of water purification, or …
Culture, Innovation, Interventions, Invisible Etiology, Psychology, Trust ,
Based on an informal assessment and polling I’ve done recently, here’s what we fear:
- Identity
- LOSING ONESELF
- Death / Pain / Insignificance
- BEING WRONG
- Self-Exploration / Failure / Change
- INAUTHENTICITY
- Being Found Out / Self-Expression / Lying
- Control
- EMOTIONAL
- Power / Anticipation / Fear-Itself
- OTHERS
- Intimacy / Just Doing It / (Lack of) Freedom
- THE UNCONTROLLABLE
- Disaster / Crisis / Unknown-Unknowns
- Authority
- RIGHTS
- Being Unworthy / Unmet Expectation / Meaninglessness
- MORALITY
- Unfairness / Inequality / Injustice
- RULES
- Doing it Wrong / Shame / Guilt
Each of us has a unique profile of what fear is depending on how we related to various value dimensions (intrinsic, extrinsic and systemic). For me the scariest are: (1) Unknown-Unknowns (2) Power (3) Being Wrong (4) Self-Expression (5) Injustice
How about you?…
Agency, Causality, Cognition, Emotion, Happiness, Health, Interventions, Invisible Etiology, Psychology, Self-Fullfilling Prophecy, Trust ,
Are you someone who has been given (and accepted) responsibility for someone else’s well-being? Maybe you are an elected official? A board member? A parent? A friend? If so, you may resonate with the following realization I just had about my own successes and failures in the role of Representative.
I used to believe that what a Representative does is to act and react as if they were the one being represented. I felt like my job was to get inside their head, and channel them, sort of like a medium or a conduit. The problem with this though is it always ends badly. Why? Because it’s an impossible job.
Nobody can speak for you, as if they were you. Sure, if you know one another really, really well, then at times it can seem as though they read your mind, know what’s in your heart. But the times I have been most frustrated in any relationship is when the other person believes and acts …
Agency, Cooperation, Government, Management, Trust ,
When I was in Silicon Valley in the 90’s the joke was that you couldn’t go on a first date without having your love-interest sign a Non-Disclosure Agreement; after all, they might be working on a competitive venture.
These days when I’m hit with the “I’d love to talk to you about my startup, will you first sign this NDA?” my first reaction is to laugh in their face. I know instantly that they don’t get it and are doomed to failure. While the NDA may once have been a necessary tool, in today’s environment (and increasingly so) it’s a hinderance to ultimate business success. If you don’t get this, I’m not going to waste your time trying to convince you otherwise. You’ll either learn the hard way or prove me wrong. Either outcome is fine by me.
But if you do get it, and you also encounter this old-school naiveté, I invite you to do what I do, which is to thank the person …
Creativity, Culture, Innovation, Investing, Mutual Knowledge, Scarcity / Abundance, Social Capital, Trust ,
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:
- Privacy is dead: it’s only a matter of time now before we all have to face this eventuality.
- In a radically transparent society, personal willingness to share everything is a source of power/wealth; unwillingness is a personal liability.
- In a world with strong privacy rights, the exact opposite is true.
- 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.
- Worse than both extremes is where we are now, in transition, where some have privacy and others don’t.
- Those who insist on having privacy will have to pay an increasing price for it; and because of #5, this is a good thing.
- In the mean time, as the walls of privacy
…
Agency, Alternative Institutions, Asymmetry, Cooperation, Culture, Emergence, Government, Incentives, Interconnectedness, Mutual Knowledge, Non-linearity, Politics, Psychology, Singularity, Social Capital, Society, Socio-technical systems, Stability, Technology, Trust ,
This is the first in a four part series. The other are here: part 2, part 3, part 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, …
Alternative Institutions, Incentives, Innovation, Investing, Social Entrepreneurship, Trust Alternative Institutions, Incentives, Innovation, Investing, Social Entrepreneurship, Trust,
NPR’s On The Media recently had a series of interesting segments on the future of the internet:
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A theme that ran through was how the security and utility of the internet is threatened by the complete lack of built-in trust mechanisms. How do you know you can trust who you are dealing with online? How do you know what information to believe that you read online? How do you know your online accounts are not completely compromised by hackers right now, and that your bank account isn’t being drained as you read this?
Many people rightly fear that legislating or enforcing new internet protocols to address these issues would lead us down a slippery slope, trample our basic rights of free speech and freedom of assembly, and would ultimately toss …
Interconnectedness, Markets, Networks, Social Networks, Socio-technical systems, Trust Interconnectedness, Markets, Networks, Social Networks, Socio-technical systems, Trust,