Imagine a World with No Physical Need Constraints

Thought experiment: Posit a world in which all material needs are provided for free, by robots and material synthesizers. Housing, energy, health care, food, transportation–> All delivered to everyone for $0, by machines. Zero jobs in those fields remaining. What would be the key characteristics of that world, and what would it be like to live in it?

First, it’s a consumer utopia: Everyone enjoys a standard of living that kings and Popes could have only dreamed. Fifth, all human time, labor, energy, ambition, and goals reorient to the intangibles: the big questions, the deep needs. Human nature expresses itself fully, for the first time in history.

Without physical need constraints, we will be whoever we want to be. The main fields of human endeavor will be culture, arts, sciences, creativity, philosophy, experimentation, exploration, adventure. Rather than nothing to do, we would have everything to do: curiosity, artistic and scientific creativity, new forms of status seeking (!).

Imagine six, or 10, billion people doing nothing but arts and sciences, culture and exploring and learning. What a world that would be. The problem seems unlikely to be that we’ll get there too fast. The problem seems likely to be that we’ll get there too slow.

Utopian fantasy you say? OK, so then what’s your preferred long-term state? What else should we be shooting for, if not this? Finally, note the “thought experiment” nature of this stream — this is an extrapolation of ideas, not a prediction for the next 50 years!

Clarification: I’m not talking about Marxism or communism, I’m talking about democratic capitalism to the Nth degree. I’m not postulating the end of money or competition or status seeking or will to power, rather the full extrapolation of each of those.

Source – Tweets: 1,2,3,4,5,6,7,8,9,10,11,12,13,14


Human Potential

The flip side of the “robots eat all the jobs” theory not being discussed: The current revolution in the “means of production” going to everyone in the form of the smartphone (and tablet and PC) + mobile broadband + the Internet: Will be in almost everyone’s hands by 2020. Then everyone gets access to unlimited information, communication, education, access to markets, participate in global market economy.

This is not a world we have ever lived in: Historically most people in most places cut off from these things, usually to a high degree. It is hard to believe that the result will not be a widespread global unleashing of creativity, productivity, and human potential. It is hard to believe that people will get these capabilities and then come up with absolutely nothing useful to do with them.

And yet that is the subtext to the “this time is different” argument that there won’t be new ideas, fields, industries, businesses, jobs. In arguing this with an economist friend, the response was “But most people are like horses; they have only their manual labor to offer.” I don’t believe that, and I don’t want to live in a world in which that’s the case. I think people everywhere have far more potential.

Source: Tweets – 1,2,3,4,5,6,7,8,9


Refuting the “Robots Eat All the Jobs” Theory

One of the most interesting topics in modern times is the “robots eat all the jobs” thesis; best book on topic: The Second Machine Age: Work, Progress, and Prosperity in a Time of Brilliant Technologies. The thesis is that computers can more and more substitute for human labor, thus displacing jobs and creating unemployment. At core, this is Luddism  — “lump of labor” fallacy, that there is a fixed amount of work to be done.

The counterargument is Milton Friedman: Human wants and needs are infinite; there is always more to do. 200 years of history confirms. To avoid the Luddite mistake, you must believe “this time is different”, that either (a) there won’t be new wants and needs (vs human nature), Or (b) It won’t matter that there are new wants and needs, most people won’t be able to adapt to contribute and have jobs in new fields.

While it is certainly true that technological change displaces current work and jobs, and that is a serious issue that must be addressed, it is equally true, and important, that the other result of each such change is a step function increase in consumer standards of living.

As consumers, we virtually never resist technology change that provides us with better products/services even when it costs jobs. Nor should we. This is how we build a better world, improve quality of life, better provide for our kids, solve fundamental problems.

Make no mistake, advocating slowing tech change to preserve jobs = advocating punishing consumers, stalling quality of life improvements.

So how then to best help individuals who are buffeted by producer-side technology change and lose jobs they wish they could keep? First, focus on increasing access to education and skill development — which itself will increasingly be delivered via technology.

Second, let markets work (voluntary contracts and trade) so that capital and labor can rapidly reallocate to create new fields and jobs.

Third, a vigorous social safety net so that people are not stranded and unable to provide for their families.

The loop closes as rapid technological productivity improvement and resulting economic growth make it easy to pay for safety net.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15,16


American Kids in the 19th Century

The Wild Children of Yesteryear

Outstanding piece in NYT on what American kids were like in the 19th century — eye opening:

“American children of the 19th century had a reputation. Returning British visitors reported on American kids who showed no respect, who swore and fought, who appeared — at age 10 — ‘calling for liquor at the bar, or puffing a cigar in the streets,’ as one wrote…


“There were really no children in 19th-century America, travelers often claimed, only “small stuck-up caricatures of men and women….


“The story of every 19th-century empire builder — Carnegie, Rockefeller, Vanderbilt — seems to begin with a striving 10-year-old. “

Source: Tweets – 1,2,3,4,5


Lump of Labor Fallacy

Economists call it the ”lump of labor fallacy.” It’s the idea that there is a fixed amount of work to be done in the world, so any increase in the amount each worker can produce reduces the number of available jobs. (A famous example: those dire warnings in the 1950’s that automation would lead to mass unemployment.) As the derisive name suggests, it’s an idea economists view with contempt, yet the fallacy makes a comeback whenever the economy is sluggish.

– Paul Krugman in 2003 “Lumps of Labor

Source: Tweets – 1,2,3,4,5,6


Consider the Tractor

Consider the development of the tractor, which mechanized virtually all of agriculture over the 20th century. Somehow new desires and demands sprung up for new kinds of manufactured goods, many of pure entertainment value, and people stayed employed and real wages kept rising.

Capital Eats the World – by Suresh Naidu

Source: Tweets – 1,2,3


The Risk and Return of High-Tech Startups and Venture Capital

Heading into our 5th anniversary Annual Meeting next week, the risk and return of high-tech startups and venture capital on my mind…

My rough estimate of my personal “success” (positive vs negative outcome) rate of bets on new products and companies is ~60-65%. Meaning, of course, my “failure” (negative vs positive outcome) rate is ~35-40%, i.e. I’m wrong about several things at all times.

Per Tversky/Kahneman loss aversion, the negative outcomes weigh much more heavily on my mind. The key challenge = manage own psychology. Per Taleb antifragility, the saving grace of my business is: Each loss capped at 1x, but wins can scale to 1,000x and even beyond.

I am also blessed in having partners and colleagues over 20 years and today who are often better at picking than I am. I envy my hedge fund friends who can fully implement “strong views weakly held” and trade out of bad positions any time they want. However, because we make hard commitments for 10+ years, we can win from sleeper hits that take longer to develop. That’s very satisfying.

On balance, progress is made. But the emotional rollercoaster never stops! Our entire field is constantly exhilarating and terrifying. The other saving grace is seeing people we work with develop, succeed, and flourish. Enormously fulfilling, makes it all worthwhile.

Commenters correctly point out that for VC (more than other fields), to calculate “success” rate, must account for great opportunities passed, i.e. total “at bats” = decisions made to pull trigger whether they worked or not, plus decisions to pass on big wins one could have had. So “at bats” probably more like 120%-140% of # of decisions made to invest. It knocks the overall “success” rate down a fair amount. Humbling!

The counterargument against counting “misses” is that success in investing has nothing to do with hitting every good opportunity. But still! 🙂 And ultimately, in both startups and VC, “success” rate (batting average) means nothing; slugging percentage means everything.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10,11,12,13,14,15


Stance on Net Neutrality

Since people asked, my own “strong views weakly held” personal stance on Net Neutrality: We need to somehow both retain permissionless Internet innovation and telcos ability to get a return on capital for network investment.

My preferred policy route would center on promoting regulation/deregulation and incentives for more last-mile broadband competition. I see the potential for at least 5-way last-mile broadband competition, at least in non-rural areas:

  • A: Cable
  • B: Telco
  • C: Google Fiber
  • D: Mobile carrier networks LTE and beyond
  • E: Wifi and future derivatives

There are a whole bunch of things that could accelerate and enhance C, D, and E. We should identify and do those things ASAP. One key topic is wireless spectrum; need to get a lot more in the hands of both mobile carriers and into unlicensed classification. Wifi in particular seems underestimated: If a lot more/different spectrum were available, it could go much faster and longer range.

In addition, there are a variety of new ideas including satellites/drones, Steve Perlman’s DIDO, etc.; we should warmly embrace those. With sufficient local competition, regulatory pressure much reduced: If one provider plays games, consumers can switch to another.

Source: Tweets – 1,2,3,4,5,6,7,8,9,10


The Great Under-Appreciated Miracle of the iPhone

photo credit: Christopher Chan - cc

photo credit: Christopher Chancc

The great under-appreciated miracle of the iPhone — couldn’t make a reliable phone call for approximately 3 years, yet it was a glorious success anyway!

Question: To what extent was that the origin of the current phenomenon of users abandoning voice calls in favor of texting + social networks? The ultimate rope-a-dope marketing strategy. “Aha, you thought you were buying a phone? Guess again!!”

Could that rope-a-dope marketing strategy work in other fields? Video games? Cars? Banking? Health insurance?

Source: Tweets – 1,2,3,4,5


Theories on Valuing Companies

The conventional view of how to value companies:

(1) Analyze the company + its financials + future cash flows;
(2) Calculate the correct valuation.

What actually happens:

(1) Observe current market valuation;
(2) Construct theory and model to explain that valuation.

In this way, George Soros’s theory of reflexivity is exactly correct. Fundamentals influence prices which influence fundamentals which influence prices which influence fundamentals… ad infinitum.

At the cyclical top, high prices drive creation of theories to explain infinite future glory; negative investors and analysts get fired. At cyclical bottom, low prices drive creation of theories to explain permanent future misery; positive investors and analysts get fired.

Therefore, a boom in theories of how everything’s a bubble and certain to crash is evidence of a cyclical bottom, not a cyclical top. Therefore, Efficient Market Hypothesis is correct if for “all information” you substitute “all information, theories, noise, and bullsh*t”. Since we are social animals, the challenge of actually standing outside of the herd is brutally hard. Pressure to conform is constant/intense.

Further Reading:

Famous paper well worth reading: “The Limits of Arbitrage

Another famous paper well worth reading: “Noise” by the great Fischer Black

Tweets – 1,2,3,4,5,6,7,8,9,10,11