Henry Oliver asks:
In what ways are writers and entrepreneurs similar? Why doesn’t publishing have more of a VC structure and attitude? Could authorship be made more productive and better quality with VC in publishing and theatre? Are movies better at this?
Publishing has one feature in common with venture capital, namely that most financed undertakings are failures and the most profitable successes can be hard to predict in advance. Furthermore, publishers are always on the lookout for the soon-to-be-hot, hitherto unpublished author, the next Mark Zuckerberg so to speak. And books, like software and also successful social networks, are rapidly scalable. You can sell millions with a big hit. But here are a few differences:
1. A lot of VC is person-focused. The VC company builds a relationship with a young talent, and in some cases the hope is that the second or third business makes it, or that the person can be steered in the proper direction early on. Authors, in contrast, are more mobile across publishers, and the publisher usually is buying “a book” rather than “a relationship with the author.” Some wags would say that a publisher is buying a title, a cover, and the author’s social media presence.
2. Entrepreneurs commonly have more than one VC, but authors, for a single book, do not have multiple publishers.
3. For the vast majority of books which do not make a profit, this is evident within the first three weeks of release or perhaps before release altogether. The publisher may drop its resource commitment to the author very quickly, and even yank the PR people off the case. This further loosens the bond between the talent (the author) and the funders of the talent (the publisher). In contrast, VC rounds can last five or ten years, with commitments made in advance and possibly a board seat as part of the deal.
4. Venture capitalists will introduce their entrepreneurs to an entire network of supporting talent and connections. Publishers will edit and advise on a manuscript, but it is much more of an arm’s length relationship, and a publisher might do very little to bring an author into any kind of network.
5. The major publishing houses are clustered in Manhattan, just as the major venture capitalist firms are clustered in the Bay Area. But the publishers don’t find a pressing need to have their authors living in or near NYC, though for some other reasons that is convenient for the author doing eventual media appearances.
6. Publishers often care a great deal about an author’s preexisting platforms, such as Twitter followers or ability to get on NPR. Venture capitalists realize that a very good product can overcome the lack of initial renown. When Page and Brin started Google, they didn’t, believe it or not, have any Twitter followers at all. In fact, you couldn’t even Google them.
This hypnotist charges half a bitcoin for helping you remember your lost cryptocurrency password…
“If you’ve got, you know, $100,000, $200,000, $300,000 worth of bitcoin in a wallet and you can’t get access to it, there’s a lot of stress there,” he says. “So it’s not just as simple as saying, okay, we’re going to go do a 30-minute hypnosis session and enhance your memory.”
Miller declined to specify the exact number of participants in his bitcoin password recovery program or how much money he’s recovered, citing client confidentiality. However, he says that there are currently “several people” in his program, who are experiencing varying degrees of success.
Generally, a person who created their password more recently will have an easier time unlocking this memory, he says. Likewise, a client who is feeling low stress will have an easier time remembering their password than one under high stress.
Miller is located in Greenville, South Carolina.
For the pointer I thank Nick Glenn.
That is the topic of my latest Bloomberg column, worth reading as an integrated whole. Here is one excerpt:
The stories have so much religious significance that it is easy to miss the embedded tale of technology-led economic growth, similar to what you might find in the work of Adam Smith or even Paul Romer. Adam and Eve eat of “the tree of knowledge, good and evil,” and from that decision an entire series of economic forces are set in motion. Soon thereafter Adam and Eve are tilling the soil, and in their lineage is Tubal-Cain, “who forged every tool of copper and iron.”
Living standards rise throughout the book, and by the end we see the marvels of Egyptian civilization, as experienced and advised by Joseph. The Egyptians have advanced markets in grain, and the logistical and administrative capacities to store grain for up to seven years, helping them to overcome famine risk (for purposes of contrast, the U.S. federal government routinely loses track of assets, weapons, and immigrant children). It is a society of advanced infrastructure, with governance sophisticated enough to support a 20 percent tax rate (Joseph instructs the pharaoh not to raise it higher). Note that in modern America federal spending typically has run just below 20 percent since the mid-1950s.
Arguably you can find a story of quantitative easing in Genesis as well. When silver is hard to come by, perhaps because of deflationary forces, the Egyptian government buys up farmland and compensates the owners with grain.
Most of all, in the Genesis story, the population of the Middle East keeps growing. I’ve known readers who roll their eyes at the lists of names, and the numerous recitations of who begat whom, but that’s the Bible’s way of telling us that progress is underway. Neither land nor food supplies prove to be the binding constraints for population growth, unlike the much later canonical classical economics models of Malthus and Ricardo.
There is much more at the link.
Arlington officials say Amazon’s arrival will boost the number of visitors staying in hotels, motels and other lodgings. Starting in June 2019, 15 percent of any increase in its “transient occupancy tax” would go to Amazon, if the company meets specific targets for how much office space the new headquarters facility occupies.
The agreement says Amazon needs to occupy 64,000 square feet of office space by July 31, 2020, in order to qualify for the 15 percent payment. The required amount of space increases to 252,800 square feet by July 31, 2021, and to 5.576 million by July 31, 2034, the last year of incentive payments.
Here is more from WaPo.
When Google conducted a study recently to determine whether the company was underpaying women and members of minority groups, it found that more men than women were receiving less money for doing similar work.
The surprising conclusion to the latest version of the annual study contrasted sharply with the experience of women working in Silicon Valley and in many other industries.
In response to the finding, Google gave $9.7 million in additional compensation to 10,677 employees for this year. Men account for about 69 percent of the company’s work force, but they received a disproportionately higher percentage of the money. The exact number of men who got raises is unclear. [TC: I don’t fully understand the metric here.]
But the study did not tell the whole story of women at Google or in the technology industry more broadly, something that company officials acknowledged.
Pedestrian deaths plummeted from 6,482 to 4,109 from 1990 to 2009, federal figures show.
Fatalities then rose 45% from 2009 to 2017.
Link here. Who is the least cost avoider here? Here is my earlier post on liability and United Airlines. And here is another Coasean parable: “Guy Asks If He’s Wrong To Make Obese Man Pay Him $150 For Taking Up Part Of His Seat On A 5-Hour Flight.”
I don’t (yet?) agree with what is to follow, but it is a model of the world I have been trying to flesh out, if only for the sake of curiosity. Here are the main premises:
1. For a big breakthrough in some area to come, many different favorable inputs had to come together. So the Florentine Renaissance required the discovery of the right artistic materials at the right time (e.g., good tempera, then oil paint), prosperity in Florence, guilds and nobles interested in competing for status with artistic commissions, relative freedom of expression, and so on.
2. To some extent, but not completely, the arrival of those varied inputs is random. Big breakthroughs are thus hard to predict and also hard to control.
3. A breakthrough in one area increases the likelihood that further breakthroughs will come in closely related areas. So if the coming together of the symphony orchestra leads to the work of Mozart and Haydn, that in turn becomes an inspiration and eases the path for later breakthroughs in music, not just Mahler but also The Beatles, compared to say how much it might ease future breakthroughs for painting.
4. Some breakthroughs are very very good for economic growth, such as the Industrial Revolution. But most breakthroughs do not in any direct way boost gdp very much. The Axial age led to the creation of significant religions and intellectual traditions, but the (complex) effects on gdp are mostly lagged and were certainly hard to see at the time.
5. Even if Robert Gordon is right that we will never have a new period of material progress comparable to the early 20th century for improving living standards, the next breakthrough eras still might be very important.
6. One possibility is that the next breakthrough will be some form of brain engineering. People might be much happier and better adjusted, but arguably that could lower measured gdp by boosting “household production” in lieu of market activity. At the very least, gdp figures may not reflect the value of those gains.
7. Another candidate for the next breakthrough would be institutional changes that make ongoing international peace much more likely. That would have some positive effects on gdp in the short run, but its major effects would be in the much longer run, namely the prevention of a very destructive war.
8. Judged by the standards of the last breakthrough, the current/next breakthrough is typically hard to see and understand. It almost always feels like we are failing at progress.
9. When a breakthrough comes, you need to ride it for all it is worth. Arguably you also should embrace the excesses of that breakthrough, not seek to limit them. It is perhaps your only real chance to mine that mother lode of inspiration. So let us hope that Baroque music was “overproduced” in the early to mid 18th century, because after that production opportunities go away. For that reason, “overuse” of the internet and social media today may not be such a bad thing. It is our primary way of exploring all of the potential of that cultural mode, and that mode will at some point be tamed and neutered, just as Baroque music composition is now dormant.
10. Progress in (many forms of) science may be more like progress in Baroque music composition than we comfortably like to think. But I hope not.
Yes, the Sam Altman of Y Combinator and Open AI. We even got around to Harry Potter, James Bond (and Q), Spiderman, Antarctica, and Napoleon, what is wrong with San Francisco, in addition to venture capital and the hunt for talent. Here is the transcript and audio. Here is one excerpt:
ALTMAN: I think our greatest differentiator is not how we identify talent, although I will answer that question, but the fact that we treat our own business — we run Y Combinator in the way that we tell our startups to run as a successful startup, which almost no venture capital firm does.
Almost every venture capital firm gives advice they never follow themselves. They don’t build differentiated products. They are not network-affected businesses. They don’t try to build a brand and a community. And they don’t try to make something that gets better the bigger it gets and have the scale effects that anyone would tell you they want in a business.
We at Y Combinator always say we want to get a lot bigger because this is a network effect, this is a network that matters. Most venture capital firms will say out of one side of their mouth, “Oh no, smaller is better,” because they don’t want to work more. Then they’ll tell all their businesses, “The network effect is the only thing that matters.”
Many people are as smart as we are, think about the world in similar ways. But I think we have internalized that we run our firm the same way we tell our startups to operate, and we view the most important thing that we do is to build a network and a network effect.
COWEN: Let me play venture capital skeptic, and you can talk me back into optimism.
ALTMAN: I might not.
COWEN: Let’s say I say, tech has had a stream of big hits: personal computer, internet, cell phone, mobile. You’ve had a lot of rapidly scalable innovations become possible in a short period of time. We’re now in a slight lull. We’re not sure what the next big thing is or when it will come. Without that next big thing, won’t the current equilibrium require a higher rate of picking the right talent than venture capitalists are, in fact, able to do?
ALTMAN: I will talk you out of that one, happily. The most expensive investing mistake in the world to make is to be a pessimist, and it’s a common one. I think that’s actually the most common mistake to make in life. It is true that we are in a lull right now, but it is absolutely, categorically false that — unless the world gets destroyed in a very short term — that we will not have a bigger technological wave then we’ve ever had before.
COWEN: Why can’t I be an optimist but not an optimist about VC? I think new ideas will come through established companies. They’ll be funded by private equity. They’ll happen in China. But the exact formula where you can afford to make so many mistakes because the hits are so big — to what extent does VC rely on that kind of rapid scalability that may not come back?
COWEN: Young Napoleon shows up. What do you think after 5 minutes?
ALTMAN: How young? Like 18-year-old Napoleon or 5-year-old?
COWEN: Before he’s famous, 21-year-old Napoleon.
ALTMAN: From everything I’ve read that would be a definite yes. In fact, the best book I read last year is called The Mind of Napoleon, which is a book of quotes about his views on everything. Just that thick on Napoleon quotes. Obviously deeply flawed human, but man, impressive.
That is the new and excellent and I am tempted to label definitive book by James W. Cortada. The author worked at IBM for thirty-eight years, a reasonable qualification to attempt such a tome. Here is one excerpt:
It is difficult to exaggerate the importance of the Social Security win to the evolution of IBM. That one piece of business, along with its effects on other agencies and businesses, wiped out the Great Depression for IBM. That transaction handed IBM a potential market of 20,000 other companies that would need to process social security data. When the books were closed on IBM’s business in 1937, revenue had increased by 48 percent of 1935’s, and by the end of 1939, by 81 percent of 1935’s.
And then for the 1960s:
IBM’s System 360 was one of the most important products introduced by a U.S. corporation in the twentieth century, and it nearly broke IBM. A short list of the most transformative products of the past century would include it…
On April 7, 1964, IBM introduced a combination of six components, dozens of items of peripheral equipment, such as tape drives, disk drives, printers, and control units, among others; and a promise to provide the software necessary to make everything work together — a mindboggling total of 150 products…manuals describing all the machines, components, software, and their installations and operation filled more than 50 linear feet of bookshelves.
But later on, by the 1970s:
With ten layers of management, each with staffs, it was probably inevitable that bureaucracy would grow.
The research and background context is amazing and the book is readable throughout. You can pre-order here.
That is the topic of my latest Bloomberg column. Here is one bit:
Psychologist Daniel Kahneman, who is also a Nobel laureate in economics, has written and co-written a number of papers on happiness in which he distinguishes between enjoying the moment and having an overall sense of satisfaction with one’s life. As it turns out, these two variables often diverge quite dramatically…
My tentative conclusion from all this: Online life is inducing us to invest less in our memories and long-term sense of satisfaction. It is pretty obvious from human behavior that, right now, the internet is doing more to boost short-term pleasures.
The more negative take would be that online life is obscuring our understanding of our own lives. I do not go that far. After all, humans make analogous choices about balancing short- and long-term happiness when they have one child rather than four, or when they sit on an exercise bike rather than get on a plane to Paris. Those aren’t the wrong decisions for everybody.
The solutions include pro-natalism and more travel:
There is so much talk about regulating or controlling the internet. Dare I suggest an alternative approach? Use public policy to help shift the balance of ease back toward life satisfaction and the formation of longer-term memories. Make it cheaper and easier to have and raise children. Use the education system to support more study trips abroad. Think about how to ease the pursuit of long-term life satisfaction.
There are plenty of human imperfections behind our online choices. As we respond, why not accentuate the positive — and keep the freedom to choose?
There is much more at the link, please do read the whole thing.
I am very excited about my next book, due out April 9:
I view this work as an antidote to many of the less than stellar arguments circulating today. It looks like this:
Table of contents
1. A new pro-business manifesto
2. Are businesses more fraudulent than the rest of us?
3. Are CEOs paid too much?
4. Is work fun?
5. How monopolistic is American big business?
6. Are the big tech companies evil?
7. What is Wall Street good for, anyway?
8. Crony capitalism: How much does big business control the American government?
9. If business is so good, why is it disliked?
Here is part of the Amazon description:
An against-the-grain polemic on American capitalism from New York Times bestselling author Tyler Cowen.
We love to hate the 800-pound gorilla. Walmart and Amazon destroy communities and small businesses. Facebook turns us into addicts while putting our personal data at risk. From skeptical politicians like Bernie Sanders who, at a 2016 presidential campaign rally said, “If a bank is too big to fail, it is too big to exist,” to millennials, only 42 percent of whom support capitalism, belief in big business is at an all-time low. But are big companies inherently evil? If business is so bad, why does it remain so integral to the basic functioning of America? Economist and bestselling author Tyler Cowen says our biggest problem is that we don’t love business enough.
In Big Business, Cowen puts forth an impassioned defense of corporations and their essential role in a balanced, productive, and progressive society. He dismantles common misconceptions and untangles conflicting intuitions.
Here is the publisher’s home page. Definitely recommended…and if you are a regular MR reader, no more than five to ten percent of this book has already appeared on this blog.
With whom would you like to see me do a Conversations with Tyler? Please restrict your suggestions to the living.
Haiti’s tourism sector is up in arms over recent travel warnings from the U.S., Canada and France that have led to at least one booking company — Expedia — blacklisting the country’s two international airports and hotels as illegal.
People seeking to book flights and hotel rooms on Expedia and subsidiaries Travelocity, Orbitz, Hotwire and CheapTickets are being blocked from doing so following violent protests that erupted on Feb. 7. Though Haitians were shuttered in for more than a week, with schools and businesses closed, international carriers like American, Spirit and JetBlue kept flying.
But Expedia didn’t seem to care…
The block, said an Expedia spokesperson, is linked to the State Department Level Four travel warning.
“Once governmental advice reaches a certain level of travel concern, we take action to close off destinations on our sites,” said Philip Minardi, director of communications for the Expedia Group. The block will remain in effect until the advisory lifts, he said.
Here is the full story, I find this troubling. On top of everything else, State Department Level warnings are inefficiently sticky.
An excellent and original economic history of venture capital, with lots of new material, brought together in a convenient and readable form. Here is one excerpt:
…nineteenth century whaling can be compared to modern venture capital in at least three respects. First, whaling was the archetypical skewed-distribution business, sustained by highly lucrative but low-probability payoff events. Voyages often lasted several years and and covered geographic areas in the search for elusive whale pod. The long-tailed distribution of profits held the same allure for funders of whaling voyages as it does for a venture capital industry reliant on extreme returns from a very small subset of investments. Although other industries across history, such as gold exploration and oil wildcatting, have been characterized by long-tail outcomes, no industry gets quite as close as whaling does to matching the organization and distribution of returns associated with the VC sector.
The book also covers VC in the Industrial Revolution, to what extent Mellon and Morgan can be thought of as venture capitalists, the institutionalization of venture capital in the 1950s, how the limited partnership structure came to VC, the roles of Intel and Genentech, Sequoia Capital, and the growth of a true Silicon Valley ecosystem.
How about this?:
During the 1970s, San Jose State University was graduating more scientists and engineers than Stanford or Berkeley, while local community colleges within the California system provided crucial access to technical training programs.
Recommended to anyone with an interest in the topic, you can pre-order here.