Danny Crichton on Innovation, Finance and Foreign Affairshttp://www.dannycrichton.com/2014-09-18T00:00:00-07:00Depression, Suicide, and the Future of Mental Health2014-09-18T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2014-09-18:blog/2014/09/18/depression-suicide-and-the-future-of-mental-health/<p>I lost a good friend in San Francisco today to depression. He had been battling his illness valiantly for years since I knew him in high school. He was brilliant, hilariously funny, and someone who I always looked forward to having dinner with. He had so much potential to offer the world with his intellect, and we are all worse off without his presence. </p> <p>As many of you know, I think mental health remains one of the most under-examined areas for research, creativity, and innovation that we have today. Depression is one of the leading causes of death in this country, and yet, we still treat it much the way we have for decades: with drugs whose effects we barely understand. Irving Kirsch, one of the leading experts in the field at Stanford, said last year, "One hundred years from now, people will look back at the age of giving SSRIs and they will have a reputation that's akin to bloodletting."</p> <p>There has to be a better way.</p> <p>There have been a handful of startups like Teletherapy and 7 Cups of Tea that have started to address this area. But so much more can be done. I hate it when entrepreneurs ask me how they can make a difference in a reasonable period of time for a lot of people, and then begin to focus on things like aging. This area is so under-explored, we don't even know if there are ways of dramatically improving the lives of millions of people with just some lines of code.</p> <p>My friend was an engineer, and I can't think of a better way to remember his legacy than to take his problem-solving ethos and apply it to one of the most important health problems today. Rest in peace.</p>Should Workers Own the Algorithms?2014-08-21T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2014-08-21:blog/2014/08/21/should-workers-own-the-algorithms/<p>GigaOm's David Meyer <a href="http://gigaom.com/2014/08/18/in-the-on-demand-economy-flexibility-isnt-control-and-algorithms-wont-protect-workers-rights/">wrote a very nice analysis</a> on Monday in response to my article on whether <a href="http://techcrunch.com/2014/08/17/algorithm-overlords/">algorithms are replacing unions as the future of workers' rights</a>. </p> <p>Meyer makes the fair point that owners have rarely done what is in the best interests of their workers in the past, and so the concept of "flexibility" that I trumpet isn't <em>really</em> about control over one's working life. At the end of the day, the owners of technology platforms like Uber still wield disproportionate power over workers and their livelihoods.</p> <p>This got me thinking on a hypothetical question: why can't workers, through their representatives, write the algorithms behind work allocation?</p> <p>This isn't a crazy proposition. Workforce algorithms are simply methods to solve an optimization problem given a set of objectives. When owners control these algorithms, efficiency tends to be the most important goal, but we can imagine other objectives like most stability or most flexibility to be acceptable.</p> <p>For example, Uber's data shows that it needs a certain number of drivers in a certain part of the city at certain times. If workers controlled the algorithm, it would meet those requirements, while also prioritizing certain policy goals. So, we could prioritize having as many different drivers on the road as possible, having the most senior drivers on the road get the most hours, prioritize the highest-ranked drivers, etc. </p> <p>Since Uber is fundamentally a network, the idea is that it shouldn't care where the drivers come from as long as they show up when and where they are supposed to.</p> <p>As another example, Starbucks <a href="http://www.nytimes.com/interactive/2014/08/13/us/100000003053788.mobile.html">got into hot water last week over its scheduling practices</a> following a bruising article in the New York Times. The company was criticized for the instability of its work shifts, which damaged families and made it hard to schedule child care consistently.</p> <p>If workers controlled the algorithm, then there could be ways to ameliorate these issues. The workers could vote for policies that allowed them more flexible schedules, ensured that they don't have to close and open the same store (called clopening), and focused on schedule stability so that child care arrangements were easier to make.</p> <p>Again, Starbucks runs as a franchise model, where baristas are theoretically interchangeable between shifts and stores. It shouldn't care <em>who</em> actually does the work, beyond that the number of workers recommended by its data actually show up.</p> <p>In terms of engineering, these problems aren't hard to solve. Companies with large workforces already use algorithms to assign workers to tasks, and so having those algorithms written by someone else wouldn't be impossible. The larger issue is with integration, and ensuring that algorithms match business expectations, but even here, the company has the ability to set the context for the algorithm, and so this can be solved as well.</p> <p>The real challenge will be finding consensus on the actual policy choices that the algorithm requires. Should an algorithm prioritize scheduling stability for mothers with newly-born kids? How about for workers with the most seniority? These policy choices are hard to reconcile, and workers who today complain about company policies may find it nearly impossible to build the system that meets all of their objectives. Indeed, there may even be some empathy built here at just how challenging it can be to efficiently allocate thousands of people.</p> <p>That efficiency issue leads to one final point though. All of these allocation problems and their effects on workers are a direct result of a business culture of cutting every last percentage point of expenses. Even 2-3% more slack in the system would lead to significantly better outcomes for workers than today's systems. Cutthroat competition is the ailment here, and the algorithms are only as good as the context in which they are run.</p>In cutting foreign exchanges, Obama Administration demonstrates short-term thinking2014-07-14T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2014-07-14:blog/2014/07/14/in-cutting-foreign-exchanges-obama-administration-demonstrates-short-term-thinking/<p>One of the great advantages of being a superpower like America is that everyone has to care about you. I see this all the time in a relatively small country like Korea, where news from a Congressional sub-committee's decision about the peninsula may never get a line of print in a newspaper in the US, but is front-page news here locally.</p> <p>As the former Prime Minister of Canada, Pierre Trudeau, once said, "Living next to [the US] is in some ways like sleeping with an elephant. No matter how friendly and even-tempered is the beast, if I can call it that, one is affected by every twitch and grunt."</p> <p>With the rise of China globally, and countries like Turkey, Indonesia, India, Brazil and others more regionally, America's absolute dominance is waning. Students, business leaders, politicians, and academics now have a choice on where to spend their energies. If you are an African college student, do you learn English and head toward the West, or do you learn Chinese and head toward the East? That decision is still likely weighted toward English — for now — but the answer is not nearly as obvious as it once was.</p> <p>America has to adapt to a world where people have a choice on where to study and do business. It needs to engage the world by sending more of our citizens abroad to ensure that we have dense personal networks worldwide, while also encouraging as many people as possible to come to the United States and bank their futures in our country.</p> <p>That obviously means improving our immigration system, but we also need to work on policies designed to get Americans traveling outside the country.</p> <p>Which leads me to the news this last week that the Obama Administration is changing how we think about student exchanges through the State Department. <a href="http://chronicle.com/article/State-Department-Moves-to/147687/">The Chronicle of Higher Education wrote that</a> (paywall) the Obama Administration hopes to refocus the State Department's current education and cultural programs to better meet our policy objectives.</p> <p>The key quote comes from Evan Ryan, who is the head of such programs as the Assistant Secretary of State for Education and Cultural Affairs. "The real impetus for these programs is to make sure that exchanges are really tied to foreign policy and foreign-policy goals, making sure that they can be responsive to where we are in terms of what we’re trying to accomplish," she said to the Chronicle.</p> <p>As a brief aside, you might wonder who Ryan is. As head of educational programs, you would expect her background to focus on teaching or research, which are the mainstays of her office. <a href="http://eca.state.gov/about-bureau/about-assistant-secretary">Reading over her biography</a>, you can see that her work history includes scheduling for first lady Hillary Clinton, scheduling for senator Hillary Clinton's campaign, communications for John Kerry for President, and (domestic) intergovernmental relations for President Obama.</p> <p>But I digress. The problem with Ryan's analysis is that our foreign-policy goals are always shifting, even though the fundamental purpose of such exchange programs is everlasting. The goal of the today's State Department is to transform these long-term, meaningful programs into ones designed for short-term "success."</p> <p>What does this look like in practice? The Chronicle continues about a new program for African civic leaders:</p> <blockquote> <p>In many ways, the program is the opposite of Fulbright, or at least of the well-known Fulbright scholar program, in which American and foreign participants spend up to a year abroad teaching or conducting research.</p> <p>For the leadership program, the overseas stay is short (six weeks for most participants), is focused on developing a single region of the world, and <strong>is not technically an exchange because it only brings Africans to the United States and no Americans go abroad as part of it</strong>.</p> </blockquote> <p>This is a policy designed for a world in which the United States is the monopoly superpower. That world doesn't exist anymore.</p> <p>I am a former Fulbright scholar in South Korea, where I worked with a dozen grad students at KAIST and two dozen or so people in the startup industry in Seoul and in Daejeon. Today, I am a writer based in Seoul, covering startups. Fulbright was the impetus for me to engage with the rest of the world, and today, I have presented at several conferences and talks in Asia, spreading the message of entrepreneurship and Silicon Valley. This is fundamentally good for the United States and its public diplomacy efforts.</p> <p>We have to create a space for programs that don't have immediate short-term objectives, but have tremendous value in the long-term. We see this same situation with research funding in the sciences, where there is now greater emphasis to fund research that will create jobs rather than just produce knowledge. That's in spite of the incredible historical evidence that producing knowledge is incredibly beneficial for the economy.</p> <p>We need to adapt to multipolar world that is coming, rather than design our policies for a world that no longer exists. Double-digit cuts to Fulbright and other useful programs just shows how little we understand the world that's coming.</p>The Challenge of Korea's Narrow Political Culture2014-06-26T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2014-06-26:blog/2014/06/26/the-challenge-of-koreas-narrow-political-culture/<p>This week, South Korean President Park Geun-hye's second candidate for prime minister, Moon Chang-keuk, <a href="http://www.washingtonpost.com/world/asia_pacific/s-koreas-prime-minister-nominee-withdraws/2014/06/23/2e8116bc-fb42-11e3-9f27-09f20b8bfd1a_story.html">pulled his name from consideration</a>, following outrage over comments he made about imperial Japan's occupation of Korea. This follows <a href="http://www.reuters.com/article/2014/05/28/us-southkorea-politics-idUSKBN0E80T520140528">the collapse of the candidacy of Ahn Dai-hee</a>, a former judge who made an income of $1.6 million after his return to the private sector late last month.</p> <p>For the president, the loss of two candidates for prime minister has hit hard. Polls show that <a href="http://english.yonhapnews.co.kr/national/2014/06/20/72/0301000000AEN20140620004400315F.html">approval ratings for the president have declined sharply</a> over the past few weeks, and are at their lowest point since Park assumed office. The loss of political capital so early in the administration portends significant difficulties in the coming years for Korea's government.</p> <p>But beyond the polls, the withdrawals of both candidates illustrates a growing problem in Korea: the exacting expectations of political candidates for office. This is a real challenge, both for Korea as well as for many established democracies like the United States. Due to the rallying effect of the Internet as well as an aggressively adversarial political culture, candidates are now put under an unbelievable amount of scrutiny.</p> <p>That scrutiny would seem useful; after all, politicians holding ministry portfolios or senior government positions are entrusted with powers that few others in society wield. But as the bar has moved higher for candidates, the number of candidates that might have a shot of making it through the political system has narrowed.</p> <p>The United States has not been immune to these kinds of political purity tests. We can see this effect most keenly on the Supreme Court, where jurists who hope to one day be nominated by a president avoid stating a controversial opinion on, well, anything. Take Elena Kagan for instance. Despite being the dean of Harvard Law School, she had written a <a href="http://online.wsj.com/public/resources/documents/kagan0509.pdf">grand total of 19 publications in her entire career</a> according to her confirmation papers, with many of these outside of legal argument.</p> <p>However, Kagan's generation of jurists was prepared for this environment. Kagan received her JD in 1986, just one year before the infamous confirmation hearings that derailed the appointment of Robert Bork to the Supreme Court. It is not hard to see how she and others of her generation adapted to this heightened scrutiny by reducing their publications and narrowing their fields of inquiry.</p> <p>This problem is particularly acute in Korea, because its societal norms around candidates have changed so quickly that there hasn't even been a generational shift in the politicians to adapt to these new standards. The kinds of activities and behavior that were acceptable in the political class just a decade ago are now completely forbidden. That means that almost any candidate who could potentially be a candidate likely has some baggage associated with them, whether it is cozy business-government relations, past comments, making money after government service, illegal school registration, tax avoidance, and the list goes on.</p> <p>My concern runs deeper though, as the rise of social networks and the Internet's indelible memory could make this situation even worse in the future. What happens to the next generation of politicians who have college party pictures used against them, or their words in a high school newspaper?</p> <p>Are we converging on a system that puts only the most boring, unsuccessful, uninteresting, and ultimately useless people in power? What does it say when the United States can't put one of its top humanitarians, Paul Farmer, in charge of its primary international development agency because he can't get through the vetting process. <a href="http://kristof.blogs.nytimes.com/2009/08/10/update-on-paul-farmer-and-usaid/">As Nicolas Kristof wrote at the time</a>: "if a saint like Farmer can’t get through, who can?"</p> <p>I joked on Twitter that Korea's third prime minister candidate is likely to be a charm. But by charm, I meant exactly the opposite. I half expect a person in a coma, as that is likely to be the only candidate that has a chance of making it through the gauntlet.</p> <p>In order for democratic societies to function, we as citizens, whether in the United States, Korea, or anywhere else, need to create more space for people to engage in politics, even if they don't necessarily have a sterling record. While in office, integrity is keen, and failure to maintain a high standard should be met with swift punishment. But let's tone down the animosity to every chink in the armor of a candidate's past, and instead engage them more substantively on the issues they hope to address. We need to build a better politics.</p>What no one asks about college admissions data2014-04-09T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2014-04-09:blog/2014/04/09/what-no-one-asks-about-college-admissions-data/<p>The news has been all over the press – Stanford's admissions rate has now reached 5%, and its implications for college applicants is clear: everyone is screwed.</p> <p>This is false. As everyone knows about admissions, the aggregate admissions rate has almost no value to any student, since every student is bucketed into different groups with radically different acceptance rates. Athletes aren't facing a 5% acceptance rate, nor are legacies or development cases. Intel Science Talent Search winners aren't facing such long odds to success. </p> <p>This thinking that everyone has an equal chance reminds me a lot of startups, where talk of a "lottery" persists. This is also false. Startups have uneven probabilities of success, much as applicants to college have uneven probabilities of success. People need to stop looking at an aggregate admissions statistic, or the chance of going from conception to a billion dollar company if they want to find success. The reality is, 95% of efforts are going to end in failure. The key is to find the reason why you should be disproportionately chosen, in applications and in a startup.</p> <p>That said, despite the flurry of articles on admissions rates these past few days, there doesn't seem to be any depth of thinking about these statistics. Here are two questions I would love answered:</p> <ol> <li> <p><strong>What is the makeup of the applicant pool?</strong> Admissions officials have been trying to increase the diversity of applicant pools for years through outreach events, etc. Are these programs working, and thus the applicant pools are becoming more diverse, or is it the opposite, that we are just getting applicants from the same groups we have always gotten them from in the past. You can't glean this from a single aggregate statistic, but it would seem to be really important, particularly since there are so many legal battles over affirmative action these days.</p> </li> <li> <p><strong>How many applicants are elite, marginal, and rejects?</strong> The New York Times writes this sentence in <a href="http://www.nytimes.com/2014/04/09/us/led-by-stanfords-5-top-colleges-acceptance-rates-hit-new-lows.html">their story about the declining admissions rates</a>: "Admissions directors at these institutions say that most of the students they turn down are such strong candidates that many are indistinguishable from those who get in." I am getting really tired of this trope. There aren't suddenly 45,000 elite students that have been generated in Stanford admissions, something that the admissions director admits <a href="https://alumni.stanford.edu/get/page/magazine/article/?article_id=66225">when he says that 20% would not make it academically on campus</a>. Thus, I am curious how we can break the pool down to those candidates that should obviously receive admission, those who are marginally likely to be admitted, and those who never had a chance. Just because the admissions rate is decreasing does not mean that the applicant pool is increasing in quality (the "mixture" or "composition" problem in statistics).</p> </li> </ol> <p>There is a lot more to this story than reporters seem to give it credit. Given the history of admissions (<a href="http://www.amazon.com/The-Chosen-Admission-Exclusion-Princeton/dp/0618574581">here is a multi-hundred page book called The Chosen if you are interested</a>) and the important place that these gatekeepers hold in our society, one would hope for a little better critical analysis of what is going on.</p>Website Owners, Stop Controlling my Copy and Paste2014-03-20T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2014-03-20:blog/2014/03/20/website-owners-stop-controlling-my-copy-and-paste/<p>Tried posting a quote from <a href="http://www.smithsonianmag.com/smart-news/over-900-workers-have-already-died-building-qatars-world-cup-facilities-180950088/?no-ist&amp;1">this article on Smithsonian Magazine about worker deaths in Qatar</a>. I copied a sentence as I usually do when I post to Facebook, and was surprised to discover this additional text:</p> <blockquote> <p>Read more: http://www.smithsonianmag.com/smart-news/over-900-workers-have-already-died-building-qatars-world-cup-facilities-180950088/#KfGyIi6xpuTPLdSD.99 Give the gift of Smithsonian magazine for only $12! http://bit.ly/1cGUiGv Follow us: @SmithsonianMag on Twitter</p> </blockquote> <p>Good grief! Not only do they force me to link to the article (which I might add, I had already added), but they included a link to their subscription page, and a Twitter reference to boot.</p> <p>This is unacceptable. Why should someone who happens to see a headline on my news feed be accosted for cash? Wouldn't the best people to try to get to subscribe to a magazine be those who read the article and thought it was interesting.</p> <p>You can see an interesting conversation about how to add this sort of feature to web pages <a href="http://stackoverflow.com/questions/2026335/how-to-add-extra-info-to-copied-web-text">here on StackOverflow</a>. I was curious how a site could control your clipboard, since that would seem to be a major security violation. The trick, apparently, is to change the selection in the screen itself. Thus, when you select text, the Javascript adds additional content elements to the selection behind the scenes, so that when you copy and paste, the added text is copied as well.</p> <p>Nifty. My question is, can we develop a means of stopping this manipulation?</p>Two Posts on TechCrunch2014-02-01T00:00:00-08:00Danny Crichtontag:www.dannycrichton.com,2014-02-01:blog/2014/02/01/two-posts-on-techcrunch/<p>For those who did not happen to catch them, I wrote two posts on TechCrunch this week:</p> <ol> <li><a href="http://techcrunch.com/2014/01/28/blowback-silicon-valley-is-now-public-enemy-1/">Silicon Valley Is Now Public Enemy No. 1, And We Only Have Ourselves To Blame</a></li> <li><a href="http://techcrunch.com/2014/01/31/the-complete-quantitative-guide-to-judging-your-startup/">http://techcrunch.com/2014/01/28/blowback-silicon-valley-is-now-public-enemy-1/</a></li> </ol> <p>I will be writing more in the upcoming – drop a line if you have any ideas you would love to see covered. </p>How far can Bitcoin take us?2014-01-23T00:00:00-08:00Danny Crichtontag:www.dannycrichton.com,2014-01-23:blog/2014/01/23/how-far-can-bitcoin-take-us/<p>In a popular story published in Dealbook, venture capitalist Marc Andreessen <a href="http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/">discussed his views</a> on the popular virtual currency Bitcoin. The article is a good, decently level-headed discussion on the current Valley thinking about Bitcoin and its potential. </p> <p>One thing that bothered me though was this line early on in the article: "What technology am I talking about? Personal computers in 1975, the Internet in 1993, and – I believe – Bitcoin in 2014."</p> <p>References to these sorts of "revolutions" or "waves of technology" are always interesting to me as an on-and-off again historian of science and technology. Revolutions are never point events, but rather process events – they have significant antecedents and gestation periods, and their effects are often time-delayed.</p> <p>Take the personal computer. It is actually really hard to point to exactly when the PC revolution took place. Was it the launch of a specific model, the development of a particular piece of software, or maybe a particular marketing campaign that made it take off? The answer, of course, is no. The PC developed over two decades (possibly more), and over the years, the hardware and software co-evolved, supporting each other in growth.</p> <p>Now take the internet. The internet has been in existence since the 1960s, and email has been available since the early 1970s. Andreessen uses the year 1993 as his benchmark, but the National Science Foundation didn't even allow commerce on the internet until 1995. The internet is still evolving today, and it is almost two decades later.</p> <p>Now, what about Bitcoin? Clearly, the currency has a huge opportunity given the number of digital transactions going across the web. The question I have is more mundane though – how much of an improvement does Bitcoin make over existing transactions, and are there new transactions or other software that can be built with Bitcoin that makes it a "fundamental" platform technology.</p> <p>For existing transactions, most of which can be served with existing technologies, the main benefit is cheapness, and potentially less painful checkout processes. Since Bitcoin works essentially like cash, questions related to your billing address, credit card numbers, expiration dates, etc, can all be eliminated. Cheaper fees disproportionately affect international currency transfers, which will be far easier in a Bitcoin world.</p> <p>The key question then is around the creation of new transactions. Andreessen writes:</p> <blockquote> <p>"A third fascinating use case for Bitcoin is micropayments, or ultrasmall payments. Micropayments have never been feasible, despite 20 years of attempts, because it is not cost effective to run small payments (think $1 and below, down to pennies or fractions of a penny) through the existing credit/debit and banking systems. The fee structure of those systems makes that nonviable.</p> <p>All of a sudden, with Bitcoin, that’s trivially easy. Bitcoins have the nifty property of infinite divisibility: currently down to eight decimal places after the dot, but more in the future. So you can specify an arbitrarily small amount of money, like a thousandth of a penny, and send it to anyone in the world for free or near-free."</p> </blockquote> <p>This is an interesting scenario, and there are certainly some other classes of transactions that are possible, but I feel the field here is so much more limited than the potential that came from the internet and the personal computer. The reality is, commercial transactions today are actually pretty decent for those in the developed world.</p> <p>We are certainly going to hear a lot about Bitcoin in the coming months. But before we start comparing it to the PC and internet, let's realize that the world we are envisioning here is likely still a <em>long</em> time away.</p>Korean Human Jaw Plastic Surgery Sculpture a Thing of Unusual Wonder2014-01-22T00:00:00-08:00Danny Crichtontag:www.dannycrichton.com,2014-01-22:blog/2014/01/22/korean-human-jaw-plastic-surgery-sculpture-a-thing-of-unusual-wonder/<p>There isn't too much to say about this unique sculpture sitting out here in South Korea. Other than the human jaws, I guess. </p> <figure><img src="/images/20140122_HumanJaws.jpg"><figcaption>JAWS – Coming to a Theater Near You! Photo taken from 시사주간.</figcaption></figure> <p>One plastic surgery clinic in Gangnam, in order to demonstrate its extensive patient list, received more than its share of marketing publicity after commissioning this scupture made from human jaws. Gangnam is a popular area for plastic surgery, and advertisements are nearly overwhelming when walking through its busy streets. Clinics are always looking to get one jawbone, er, leg up on the competition.</p> <p>Police here in Seoul are investingating the clinic to determine if the clinic failed to properly dispose of any of the remains, a violation of the medical health laws.</p> <p>Ironically, the fact that they have removed so many jaws doesn't really demonstrate their capability of building beautiful faces. After all, the fact that vampires drink blood doesn't make you an expert serologist, nor does getting a Communications degree from Stanford mean you can give post-game football interviews in any sort of fluent way.</p>What you can't show in a South Korean movie poster2014-01-20T00:00:00-08:00Danny Crichtontag:www.dannycrichton.com,2014-01-20:blog/2014/01/20/what-you-cant-show-in-a-south-korean-movie-poster/<p>In a famous routine from 1972, comedian George Carlin presented the <a href="http://www.youtube.com/watch?v=lqvLTJfYnik">"seven words"</a> you can't say on television (ironically, you also can't say them on this blog!). Carlin was lambasting the FCC's censorship regime, which at the time felt more reminiscient of the 1950s than the far more permissive culture of the 1960s. </p> <p>Here in Seoul, such controversies are fairly frequent given the tighter sexual mores on the public airwaves. Still, a controversy this week over the movie poster for Pompeii has had many here questioning where censorship builds a safer public discourse, and where it flagrantly denigrates the fundamental right to freedom of speech.</p> <p>In Korea, all movies are expected to go to the <a href="http://www.kmrb.or.kr/kmrb_2010/english/">Korea Media Rating Board</a>, which determines the ratings for domestic and foreign films and posters, as well as other types of media. Unlike in the United States, where film ratings are handled by the Motion Picture Asssociation of America (which is privately owned by the six major motion picture studios), Korea's rating board is publicly owned and operated by the national government.</p> <p>So, what do the film judges have to object to? Take a look at the poster for Pompeii that was originally submitted in Korea:</p> <figure><img src="/images/MoviePoster2.jpg"><figcaption>The originally submitted poster for Pompeii</figcaption></figure> <p>You might be wondering, what exactly is the problem with the poster? According to the translator of the film, the issue is that the couple is too intimate in the picture, foreshadowing that most horrible of actions, S - E - X (got to watch those censors!). Here is the new poster, which presumably I will start to see in subway stations all over Seoul:</p> <figure><img src="/images/MoviePoster1.jpg"><figcaption>The modified poster for Pompeii</figcaption></figure> <p>I am almost certain my high school prom allowed a shorter distance between opposite genders than what is depicted in here (4 whole textbooks!). For a country that has one of the lowest birth rates in the world, and a government that believes that babymaking is one of the highest priorities, maybe a little more smooching in the movies is just what the doctor ordered.</p>Why elitism still matters in crowdfunding2013-09-27T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2013-09-27:blog/2013/09/27/why-elitism-still-matters-in-crowdfunding/<p>Oh no, the barbarians are entering the sacred domain! The Securities and Exchange Commission has truly opened the floodgates with <a href="http://www.sec.gov/News/PressRelease/Detail/PressRelease/1370539707782#.UkXGLWRASzA">the repeal of the prohibition on general solicitation</a>, so I expect to be completely destroyed in T-Minus 60 days. I guess I am supposed to feel some sort of fear from startup crowdfunding platforms, considering their ultimate goal is to disrupt venture capital, and by extension, me.</p> <p>And yet, I have no fear.</p> <p>I do not doubt that crowdfunding investment platforms will have an impact on venture capital. I strongly support allowing anyone to invest in a broad range of private securities. Democratizing finance means making finance open to more investors, even those who are supposedly less sophisticated because they don't already have money (the definition of an <a href="http://www.sec.gov/answers/accred.htm">accredited investor</a>). Start-ups will ultimately be the beneficiaries here by allowing non-traditional investors into their rounds who might offer special skills, networks, or ideas to propel a fledgling company forward.</p> <p>But the "secret" to this industry is that it is fundamentally a hits business.</p> <p>This is very different from investments like equities, where <a href="http://www.forbes.com/sites/rickferri/2013/04/04/index-fund-returns-get-better-with-age/">returns on index funds are often quite compelling</a>. Sure, one can dump all of their money into Facebook, or Amazon and reap a great reward. Yet, it is just as easily to lose massively with such a strategy, which is why research continually shows that most people are better off picking a stable index fund to hold over the long-term.</p> <p>Venture capital investing is the complete antithesis of this approach. <a href="http://jackealtman.com/pay-attention-to-power-law-distributionshttp://www.avc.com/a_vc/2009/04/the-venture-capital-math-problem.html">Returns in venture are marked by a power law</a>, in which one or two investments out of 30 will often carry an entire fund. Placing your capital in fewer, but higher quality companies can actually create significant increases in returns. This is the reason why funds that greatly expand have a hard time maintaining their returns – the fund ends up investing in a worse average selection of companies than before.</p> <p>This is the danger when I hear people comparing venture to <a href="http://en.wikipedia.org/wiki/Moneyball">the strategy of moneyball</a>. There really is no arbitrage in the start-up environment, because there is no lower price for start-ups.</p> <p>To see the economics clearly, let’s take an example like the developer tools space. Many VCs are hesitant to invest in developer tools, for the simple reason that the market for these companies is bounded, and the price of acquisition for these companies stays in the double digit millions. Many of the founders in this space, rightly, bootstrap their companies. But let's say you wanted to create an arbitrage strategy here. The only way to do so would be to buy a large percentage of the company for limited dollars (think like 33% for 500k) in order to make the investment sensible from a returns perspective. Few entrepreneurs would take that deal, nor would VCs like it because their fund sizes would have to be tiny to make the economics come out well for them as well.</p> <p>The reality is, in a power-law distributed investment asset class, winning <em>does</em> mean giving money to the best founders. It is fundamentally an elites business, and it will be almost impossible for anyone but a handful of top venture capital firms and angels to get into such deals over the next few years.</p> <p>You can see this change even in AngelList's own approach to their platform. From the beginning, the company has focused on allowing anyone to invest in any company – a truly democratized platform for startup investing. This week though, they <a href="http://blog.angel.co/post/62093033947/introducing-syndicates">introduced syndicates and managers</a> – essentially, bringing the middlemen back into the equation after they originally tried to disrupt them.</p> <p>AngelList is correct – the part to crowdsource is the limited partner side of the equation, rather than the deal sourcing side. My mother in Detroit is not likely to run into the next Mark Zuckerberg, but she could definitely fund the VC who could. For the first time, you don’t have to run a multi-billion dollar endowment to be able to invest in high quality start-ups.</p> <p>Different asset classes have different characteristics. Some are open to any investor with the money and the belief to make a trade. But venture capital is not like this, and it is important that we understand the difference. No one wants to talk about elitism in crowdfunding, but at the end of the day, the goal is to build wealth for everyone. A little elitism goes a long way to democratizing finance.</p>Blind Spots: The Most Underinvested Areas of Venture2013-09-24T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2013-09-24:blog/2013/09/24/blind-spots-the-most-underinvested-areas-of-venture/<p>One of the most rewarding, yet peculiar, learnings about working as an investor in venture capital is that you constantly see clusters of start-ups spring up around the same problem. Indeed, one of my proofs that Silicon Valley is an efficient market is that these problems are seemingly identified by everyone at the same time, and so the difficulty in investing is simply choosing the best of the breed and moving on.</p> <p>In the past year, I have seen clusters form around loyalty cards in local businesses, analytics APIs for mobile, and new designs for resumes, just to name a few that come to mind. None of the founders I have met in these clusters are “me-too” – they seem to have legitimately all come to the same problem from personal experience or through asking the right questions to a target customer. That’s innovation working correctly.</p> <p>The peculiar part of this observation is how many obvious problems don't seem to get a cluster of start-ups at all. Sometimes these problems, some examples of which I’ll discuss shortly, are not small at all. In fact, I would go so far as to say that these blind spots in the market are where all the future value will be made in innovation. Many of the category-defining companies of the past few decades were all built around problems most people didn’t even know they had.</p> <p>Why do some problems get a bevy of start-ups, and others seem to languish untouched? I think there are several key reasons, including that some problems are actually quite difficult, and founders lack specific experience in that area.</p> <p>The one that bothers me most though is blindness. There are problems that have been here for years, that lack high quality solutions, and that have huge markets. Yet, no one seems to touch them at all.</p> <p>Let me give two examples:</p> <h3>1. Mental Health</h3> <p>The US economy spends roughly 1% of GDP on mental health every year, between therapies and pharmaceuticals. Millions of Americans today face debilitating mental illness, including substance abuse, depression, bipolar disorder, phobias, and the list goes on. Current treatments are lackluster at best, and actively harmful in the worst cases. And, the treatments we have are barely technological at all. For a great read on the subject, check out <a href="http://www.amazon.com/Anatomy-Epidemic-Bullets-Psychiatric-Astonishing/dp/0307452425">Anatomy of an Epidemic</a> by Robert Whitaker.</p> <p>I was really pleased to see that <a href="http://www.7cupsoftea.com/">7 Cups of Tea</a> graduated from the most recent YC batch this summer. They are attempting to make it easier to get counseling online by connecting a patient with a therapist live through the internet. This is an important problem in this space, and I wish them the best of luck.</p> <p>Yet, there are so many more problems to be solved in this space. How can we use computer vision and other graphics to help patients overcome their fear of spiders or heights? Is there some sort of simulation technology that can assist a returning soldier with the effects of PTSD? I realize the government has large research budgets in some of these areas, but that doesn’t mean Silicon Valley should ignore them.</p> <h3>2. Religion</h3> <p>There are many ways to describe religion, but one definition might be a community of believers, centered around some sort of belief system or ideology. Religion is one of the most powerful institutions in our society, and Islam and the Catholic Church each call more than a billion people as members (larger than the size of Facebook to make a point here).</p> <p>Outside of Scientology, the Flying Spaghetti Monster, and ChristianSingles.com, there hasn’t been a lot of innovation around this area. That’s unfortunate, because in this social world, there seems to be a perfect opportunity to create a system of beliefs or at least some technology-based improvements to the way that religion can be ministered. Why isn’t there a “marketplace” for priests (yes, I just said that) where you can find a priest that matches your interests and religious preference? Could be entirely charity based, or could be free. Why are guided confessionals (a form of talk therapy which connects to mental health) not available over the web? The app Whisper only takes you so far here.</p> <p>When I tell some of my friends about this, I actually don’t get blank stares – I think when these problem spaces are pointed out, people almost immediately see them. That is the blindness I am talking about. If you have other blind areas, I would love to hear them. Perhaps we need an AngelList for blind problems focused on discovery. God, I have been listening to too many pitches.</p>Disappearing Ladders2013-09-22T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2013-09-22:blog/2013/09/22/disappearing-ladders/<p>What do we do when there is no path to building a career?</p> <p>It wasn't so long ago that job training was a core component of almost any career path. When factories hired new grads, there was an expectation that the staff would train the new worker to use the machine tools, to properly evaluate the tolerances of finished goods, and to understand the overall process of how the factory operated. Indeed, unions often put heavy priority on training in their collective bargaining agreements.</p> <p>The same pattern could be seen before in law, medicine, and other professions, where new graduates were often given years to build their skills and reputations under supervision in apprenticeship-like positions. Corporations built management training programs to ensure that in 10-20 years, they had talent coming up through the ranks that was prepared to handle the complexities of their businesses.</p> <p>All of that is changing, and it doesn't bode well for younger workers just entering the workforce. In law, <a href="http://www.theatlantic.com/business/archive/2013/04/the-jobs-crisis-at-our-best-law-schools-is-much-much-worse-than-you-think/274795/">upwards of a quarter of graduates <em>from the top 25 schools</em> are underemployed</a>. That is a staggering waste of talent. The same is true in financial services – <a href="http://online.wsj.com/article/SB10000872396390443524904577649830558256586.html">Goldman Sachs permanently canceled its entry analyst program</a> just a few years ago, and now only hires among its intern population. Factories are also refusing to train new workers, expecting them to have already received job training at specialized and expensive technical schools.</p> <p>This is the problem I am calling the "disappearing ladder." The gateways to many careers have now largely disappeared for younger workers, and it isn't clear to me that any new system has replaced it. These ladders are disappearing across all industries, in both "middle class" and "upper class" professions.</p> <p>The underlying causes of this labor shift are numerous and complex. One overarching cause is the increasing transparency of many industries. Take law for instance. A few decades ago, white shoe firms had the ability to command any price they selected, and clients were willing to pay for their services without question. There has always been grumbling, but the 2008 financial crisis fundamentally changed the dynamic between firms and corporations. Now, the billable hour is increasingly disappearing in exchange for negotiated comprehensive fees – and the cuts are often being borne on the youngest members of the team.</p> <p>Associates at Big Law firms command salaries around $160,000 per year these days. Their replacements are charging $9 to $20 per hour through flexible legal staffing firms. The greater transparency for clients means that they are putting pressure on cutting such costs, as the value of these new grads is far less than their price.</p> <p>This increasing transparency in billing is even hitting the consulting business. Clayton Christensen, of <em>Innovator's Dilemma</em> fame, wrote this week <a href="http://hbr.org/2013/10/consulting-on-the-cusp-of-disruption/ar/1">a long review in HBR describing the coming disruption in the strategic consulting industry</a>. He argues, in my view correctly, that clients are becoming more sophisticated in how they engage with professional services. They increasingly want modular bills, and they only want to pay for the services that they think are valuable.</p> <p>The increased sunshine on what have traditionally been opaque industries leads us back to the "superstar" labor economy that has come into clarity over the past two decades. There has not just been transparency related to billing and pricing, but also to quality and performance of every knowledge worker. Companies, clients and individuals do not just hire firms and other institutions anymore; rather, they prefer to hire individual practitioners and pay heavily for their expertise.</p> <p>This benefits the 20-year veteran of an industry with an independent practice, who is able to command billable hours approaching the four digits. Top partners at professional firms are similarly getting paid in the millions of dollars per year. For those at the top of their profession, they accrue a disproportionate amount of the spoils, and the proportion is only increasing with further innovation.</p> <p>Unfortunately, no one at 22 years old has the ability to command that kind of attention. Younger workers need training, mentorship, and experience to be able to do more and more sophisticated work over time.</p> <p>Another component of this labor shift is the increasing speed of disruptive technology. This is certainly true in law, where start-ups like RocketLawyer, LegalZoom, and e-discovery companies have disintegrated the floor in legal wages. In consulting, renewed pressure by technology start-ups is putting pressure on hiring as well. As Christensen writes: "Consider the disruption that technology has already introduced. The big data company BeyondCore can automatically evaluate vast amounts of data, identify statistically relevant insights, and present them through an animated briefing, rendering the junior analyst role obsolete."</p> <p>Perhaps the most insidious cause, though, is the changing corporate culture toward training. Experts suggest "investing in your people" and that "retention is critical." Yet, few companies are willing to foot the bill when it comes to training their staff, nor are they willing to provide engaging assignments to their employees over the long haul.</p> <p>There are many other causes that I am electing not to analyze. This breathtaking transformation of how talent is developed is coupled to many changes we are seeing elsewhere in society. Trustees and politicians are placing enormous pressure on universities to build up job training programs and connect seniors with jobs at graduation. The call for major-specific scholarship programs, the declining budgets and enrollments in the humanities, and the increasing number of trade and technical schools all point toward the needs of the modern student for immediately marketable skills.</p> <p>The changing notion of training is also affecting the length of tenure of employees. The lifetime employment bargain between corporations, who would foot the bill for training, and employees who agreed to stay, has now completely disappeared. There used to be a bit of camaraderie and collective ethos here, in which companies felt responsible for workers and in turn, workers held loyalty to the company. Now, even Google and McKinsey are cutting back on paying for education outside of the company, expecting workers to pay for their own development.</p> <p>Frankly, I don't have a normative valence on these changes – I don't think it is clear yet whether this new labor market culture is better or worse than before. I understand that the cuts in wages increases market efficiency, and that such changes have happened to many industries before. What does worry me, though, is the almost complete lack of solutions and pathways available to our young workers to build their careers.</p> <p>Some suggest that new grads should take work into their own hands. They should take more unpaid internships, and take on free clients to build portfolios in order to get higher paid work (designers on Dribbble, for instance). But unpaid internships are competitive. Think about that. <em>There isn't even enough unpaid work to go around.</em> We don't even have to get into the financial unsustainability of doing work for free for any significant period of time.</p> <p>Some others suggest that the solution is to build a start-up. Indeed, I think the changes in the labor economy, coupled with the increase in crowdfunding resources, has forced more to consider that approach. With fewer options for development, I think a greater number of people are seeing start-ups as the way to get the broad-based knowledge that used to be taught in a variety of career paths. Why compete aggressively for one of the very few positions in a company or firm when you can start a business and probably learn more in the process?</p> <p>Unfortunately, start-ups for many are a poor substitute for a cohesive learning agenda. As I discuss repeatedly, it is very hard to discover what we don't know. The holes in our knowledge are rarely identifiable, for the obvious reason that we can't search Google, "what don't I know about term sheets" or "what don't I know about marketing." One part of the benefit of apprenticeship models is that experienced practitioners would fill in those gaps for workers.</p> <p>So today, we live in a world where an enormous number of young workers work at jobs that pay measly wages (if at all), and highly experienced workers command greater and greater salaries, with no path to move from entry-level to senior-level. That is the disappearing ladder.</p> <p>As someone who works with start-ups, sometimes conceiving business models, I truly believe this is one of the most critical problems facing our society today. It is not enough to create the next flexible staffing start-up. Rather, we need to dig deeper and try to build out the rest of the labor market model we see in the world today. How can we build scalable training programs, coupled with engaging work and a decent salary, so that the young workers of today have a shot of being the superstars of tomorrow? I hope that question gets answered before the last ladder disappears.</p>Should you have Institutional VCs in your Seed Round?2013-05-15T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2013-05-15:blog/2013/05/15/should-you-have-institutional-vcs-in-your-seed-round/<p>One of the most common questions I get as a VC from seed-stage company founders is "Should I take money from institutional VCs in a seed round?" That's a difficult question, and every start-up is going to have their own approach in answering it. I'll try to work through what to think about in this post.</p> <p>Any time a company raises a venture round, investors are curious to know whether the current investors in the company are also participating. The reason is simple: the investors who probably know the company best are the ones already on the cap table. They get the investment updates from the CEO, and should be intimately familiar with the business and its future prospects. Thus, their further investment in the company sends a strong signal of how current investors see the business performing. If they are attempting to increase their ownership, it indicates they are bullish on the company. If they are trying to avoid putting more capital into the company, that is probably a sign that the company is no longer a good investment.</p> <p>This is one of the most visible signals for a company raising capital. Its importance should not be understated.</p> <p>When it comes time to raise a seed round, many company CEOs try to game this signal by placing only angels and micro-VCs in the syndicate – essentially, any investor that doesn't have the capital base to offer more money in a future round (or so little that it isn't material). In other words, they prevent their company from sending a negative signal, since none of their investors could participate in a future round even if they wanted to.</p> <p>The downside to this approach should be obvious though – while you limit your downside, you also eliminate your upside. Angels are almost always enthusiastic supporters of all of their companies, for the simple reason that they only get an equity investment when a Series A round is completed when using a convertible note structure. They have strong incentives to sell a company's vision as hard as possible, since otherwise, their investment is worthless. However, that also means that the signal from seed-stage investors is quite weak. Their vote of confidence is not through capital, but rather through words.</p> <p>Start-up founders are in the risk business, and yet, they often have an aversion to the calculated risk of adding an institutional investor to their seed round. Institutional investors are going to have a choice when the company is ready to raise its first equity round – do we lead the investment, or do we pass? Either choice is of great consequence for the company. If they lead, the investment process is significantly shortened for the founders - saving enormous time early in the company's life cycle. Founders also need to consider the current funding climate where the growth of Series A investments has not increased as fast as the growth of seed rounds. Moving from seed to Series A is now the most difficult step in a typical start-up's financial path.</p> <p>If the VC passes though, it could be very difficult to recover while seeking capital. A negative signal like a pass from a sophisticated investor is likely to add significant doubt in any partnership meeting that discusses the company - regardless of the actual value of the company itself. It's like applying to college, and one of your letters of recommendation is negative. It is memorable, and that is not good.</p> <p>That's the gamble though. So what are the primary decision criteria on whether to add an institutional investor? There are several considerations:</p> <ol> <li> <p><strong>How strong is your relationship with the VC firm?</strong> The most important criteria the depth of the relationship between your company and the VC firm. The ideal situation here would be for the VC firm to completely understand your idea, have strong partnership support for the company's long-range vision, and a good personal relationship with everyone that might have a say in the future funding of the company (lead partners, associates, etc.). If this relationship is strong, there can be a lot of benefits to adding the VC firm into a round, including connections like finding strong co-investors in future rounds.</p> </li> <li> <p><strong>What is the deal setup?</strong> How much of a seed round the VC firm wants to take (and the founder wants to give) is the next criteria. In a convertible note structure, many firms these days are more hesitant to write large checks without the benefits of equity. Giving a small stub to a VC firm, or even better, several firms, may be the right strategy because large institutional VCs today are less involved with companies with check sizes below $500K. In other words, their negative signal is limited, since they didn't make that much of a bet on the company in the first place, and probably didn't track the company that well. For start-ups looking to raise larger amounts of capital, particularly those companies that are trying to work on big problems that take a long time, it may be advantageous to raise a larger seed round in the low millions of dollars that is an equity round. That way, there is much more limited signaling risk, since the firm is already deeply invested into your success.</p> </li> <li> <p><strong>What's your risk tolerance?</strong> The funding climate for start-ups has changed. Even if a VC firm that seed invested passes on your company, they may provide good contacts to the rest of the investment community that drives the process forward. It is not unheard of for firms to pass for reasons outside of company performance – maybe the firm has changed strategic direction, or the partner on the deal is interested in something else. Again, there is a gamble here like everything in start-up life.</p> </li> </ol> <p>There is no right answer on whether to add institutional investors. I would say that there is a strong aversion to having institutionals among founders in Silicon Valley, although that has changed more in the last year as founders understand the current investment climate better. Build relationships with angels, micro-VCs and institutionals, and see what options make you feel most comfortable.</p>Why the Possible Waze Exit is So Important to Israel's Ecosystem2013-05-14T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2013-05-14:blog/2013/05/14/why-the-possible-waze-exit-is-so-important-to-israels-ecosystem/<p>Rumors continue to swirl that Facebook is currently negotiating a buyout of Waze, the popular social mapping app. The app was founded by three co-founders, Uri Levine, Ehud Shabtai, and Amir Shinar, and is based in Israel with an office in Palo Alto. As part of a potential Facebook acqusition, the Palo Alto team would be merged into FB's Menlo Park office, while the Israel team would be used as a launching point to launch Facebook's engineering efforts in that country.</p> <p>TechCrunch today ran an article that discussed whether the creation of the Facebook office would harm the nascent start-up community in Israel. <a href="http://techcrunch.com/2013/05/13/a-rumors-of-a-1bn-exit-swirl-around-waze-what-effect-will-it-have-on-israel/">The article's author, Mike Butcher describes a conversation</a>: </p> <blockquote> <p>Because, he says, although the Waze R&amp;D center could be a beach-head for a full-blown Facebook R&amp;D shop, and thus good for Facebook, “it could have catastrophic effects upon local early stage startups’ ability to compete on salaries and benefits.”</p> <p>His argument is that if a big company like Facebook stays away, then the Israeli tech ecosystem is more likely to be able to “push more innovation” towards Silicon Valley, which would be in the “best interest of both the local startup industry and Facebook.”</p> <p>Certainly, such a large acquisition inside such a relatively small country could well change the successful dynamics of the Israeli eco-system. If it became a mere engineering centre for Facebook, Apple and Google, the implication is that we might not see quite the same levels of startup activity as we’ve seen emerge in the past from Israel.</p> <p>That is almost certainly overstating the ‘problem’. It’s more likely that the experience of being inside these big tech companies in Israel is more likely to create a virtuous circle of new entrepreneurs, spin-outs and new projects. Plus, more eyes and ears on the ground for potential acquisitions.</p> </blockquote> <p>Indeed, one should be cautious with the labor market in a country of 7.7M (which is smaller than the size of the Bay Area). It is true that slight changes in the available jobs could dramatically change the price of wages, which in turn, could equally affect the growth of the start-up ecosystem.</p> <p>This reasoning is deeply flawed though, which Butcher points out but not nearly strongly enough.</p> <p>Exits are <strong>everything</strong> in venture, a point that I seem to have to make to people far more frequently than I expect. Entrepreneurs (minus some exceptions) want to get rewarded for the risks they are taking in launching their business. Venture capitalists want to have strong returns by putting money in fast growing companies that eventually lead to liquidity. Even governments benefit from the exits, since taxes aren't collected until the underlying securities are liquid (Facebook's IPO, for instance, greatly helped the California state budget).</p> <p>Waze and the building of a new Facebook engineering center in Israel won't harm the ecosystem – it will <em>dramatically</em> improve it. By showing that Israeli companies are capable of building billion dollar businesses in the consumer space, the country will not only attract more investment than before, it will attract more in-flow talent from places like Europe where such exits can at times be difficult to reach. Not only will Waze not harm the local ecosystem, it may be just the kind of fuel for the fire that leads to Israel becoming a key innovation center with a stature equal to that of Silicon Valley.</p> <p>Not all exits are necessarily good – many acqui-hires are not positive for the founders or the investors. But a billion dollar acquisition of a mobile app? Yes please.</p>Why we need data rights2013-04-22T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2013-04-22:blog/2013/04/22/why-we-need-data-rights/<p>Data is becoming the central force for change in society. As we increase the sophistication of our analytical tools, there is more and more pressure on decision makers – whether in companies or in government – to utilize data and "insights" in their deliberations. Unfortunately, this opens up many of these decisions to a dangerous hack: controlling access to data can easily determine the outcome of major decisions. Just take a look at some of the recent stories where manipulating data access was key to a decision:</p> <ol> <li> <p><a href="http://www.nytimes.com/2013/04/07/us/taping-of-farm-cruelty-is-becoming-the-crime.html">Several states have or are considering passing laws that restrict the ability to film slaughterhouses.</a> Perpetrators would be subject to punishment that could include being placed on a terrorist list. Video tapes of slaughterhouses are one of the key pieces of evidence for animal rights groups to push policies that encourage humane treatment of animals. By banning videotaping, these legislatures are trying to control the debate on animal rights by limiting the evidence that can be introduced.</p> </li> <li> <p><a href="http://www.slate.com/articles/health_and_science/science/2012/12/gun_violence_research_nra_and_congress_blocked_gun_control_studies_at_cdc.html">For years, the National Rifle Association has used its lobbying powers to prevent the collection of gun data by the government</a>. Furthermore, the Centers for Disease Control have been banned by law from considering any research into firearm violence and its effect on human health. Again, access to data becomes key to a major policy issue, in this case gun violence. Without gun data, policymakers are forced to choose actions based solely on argumentation and rhetoric, without the deep scientific research that would lead to the best outcomes.</p> </li> <li> <p>Federal funding of comparative effectiveness research on healthcare in the United States is <a href="http://www.raps.org/focus-online/news/news-article-view/article/3089/looking-to-change-us-approach-to-comparative-effectiveness-research-pcori-staff.aspx">contingent on researchers not making formal recommendations about different medical treatments</a>. This sort of research is used to show that two treatments – which may have widely different costs – have the same efficacy in patients. It is one of the best ways to reduce medical costs, since it prioritizes using the most effective treatments, not necessarily the most expensive. By preventing data on this sort of research from being released, pharmaceutical companies can continue to lobby doctors to choose more expensive, yet less effective therapies.</p> </li> </ol> <p>It is clear to me that one of the most important civil rights issues of the coming decade will be around access to data. As data becomes the key leverage point in many policy and business debates, the politics surrounding data will only continue to heat up. If you don't want a particular decision to be made, you don't have to argue against it, but merely ensure that the data needed to prove it is prevented from being collected in the first place.</p> <p>These data rights are intimately entwined with the need for a right to the Internet, which is an on-going goal of many activists. But we need more than mere access to the web as our goal. We need a more extensive set of rights and principles enshrined in law and in business ethics to ensure that the best policies and decisions are being made. These rules include:</p> <ol> <li> <p>A strong rule against political meddling in research funding agendas. Neither the Congress nor the President should have the ability to politically influence the outcomes of research through either funding or policy mechanisms. Right now, the Food and Drug Administration already has this political insulation given its status as an independent agency fiercely protective of its freedom to operate. Other research agencies like the National Science Foundation, the Centers for Disease Control, and the National Institutes of Health should have similar protections.</p> </li> <li> <p>Business schools need to teach the politics of data, and the ethical importance of ensuring that all possible data is being considered in business decision-making. Many business leaders are simply unaware of how data is manipulated (or are doing the manipulation themselves). Greater emphasis of this issue in core management classes would greatly help business performance.</p> </li> <li> <p>More widely, we as a country need to have a greater debate on what information we have a right to access. Wikileaks was the first splash in this area, but now that the news story has tapered off, we have failed to sustain the deeper discussion that this leak of classified materials prompted. The First Amendment enshrines a variety of freedoms, but access to data is not one of them. We need to modernize our legal thinking around this issue to include the right to access data that doesn't fall into some exceptions like national security or trade secrets.</p> </li> </ol> <p>The rise of Big Data opens up a number of policy quandaries that we must confront in the coming years. It is crucial that we start considering the politics of data more fully, and carefully calibrate our thinking and our laws to ensure that decisions are made with the best possible science – not just based on the power of those with levers to the data itself.</p>Hiatus Over2013-04-20T00:00:00-07:00Danny Crichtontag:www.dannycrichton.com,2013-04-20:blog/2013/04/20/hiatus-over/<p>Springtime is in the air, and so is the annual cleaning of this blog. I have taken a break over the past few months to consider what I want to focus on in my work, and in my writing. That process has now been completed, and with any luck (and a little bit of tea), new posts will begin to emerge on this website.</p> <p>I want to indicate a couple of changes to the editorial content and the website for those who have followed me through all of the iterations of my website over the years.</p> <ol> <li> <p>I have changed the name of my blog over the years from Informed Skeptic, to Danny Crichton, and now, "Hacking VC." I think this new title best describes what the focus of my writing will be in the coming year, namely thoughts and ideas that come from my work as a venture capitalist in Silicon Valley. There will also be some code examples occasionally as I learn new programming languages and libraries over the next couple of months and years. In addition because I cannot restrain myself, I will also include a random smattering of foreign affairs and politics in here. Sorry in advance.</p> </li> <li> <p>I have refreshed the theme (yet again). There is now more focus on the content, with a greater width for columns as well as a simpler design. I'll never stop tinkering with the layout, but I like where this is right now.</p> </li> <li> <p>I have started using Twitter more – you should <a href="https://twitter.com/DannyCrichton">follow me</a> if you haven't already.</p> </li> </ol>Brief Blogging Hiatus2013-01-31T00:00:00-08:00Danny Crichtontag:www.dannycrichton.com,2013-01-31:blog/2013/01/31/brief-blogging-hiatus/<p>It has been almost two months since I last posted on this blog. That is a surprisingly long time for me, considering I have been blogging for almost 5 years now, almost without a single month being missed (the last gap was during the endgame for my undergraduate thesis).</p> <p>This last month has been a month of change – new goals, new tasks, new home (having moved to SF this past month). As I execute on my goals for 2013, I realized that the amount of time that I spend on this blog is out of proportion to my own personal benefit from it. I intend to come back to this blog at some point in the future, but for now, it is going on hiatus.</p> <p>As always, I am available by email. Send a note if you have something to say. Otherwise, hopefully regularly scheduled programming will return soon.</p>The Danger of Models of Development (or, how culture really matters)2012-11-26T00:00:00-08:00Danny Crichtontag:www.dannycrichton.com,2012-11-26:blog/2012/11/26/the-danger-of-models-of-development-or-how-culture-really-matters/<p>How portable are models of economic development? When people talk of the <a href="http://en.wikipedia.org/wiki/Washington_Consensus">Washington Consensus</a> or the <a href="http://dealbook.nytimes.com/2011/01/28/what-is-the-beijing-consensus/">Beijing Consensus</a>, they are indicating a set of economic approaches toward development that include deep cultural connections. America's approach of privatization and deregulation has brought immense prosperity to the country over the past century (even if we may have moved the edge too far in the past few years). Likewise, China's approach to state-centered economic growth is merely an extension of an extremely long history of bureaucratic development.</p> <p>One of the economic theories that have been put forward to address this is <a href="http://www.people.fas.harvard.edu/~phall/VofCIntro.pdf">varieties of capitalism</a> - an approach that seeks to consider countries in terms of holistic systems of production - one in which individuals interact in a system of institutions that all work together in synergy. Thus, the United States has strong patent rights, strong rule of law, entrepreneurship, libertarianism, deregulation, etc. - the change of one of which would be incompatible with the others.</p> <p>The theory has many problems (namely, reverse causality), but it highlights a true danger in economic development: economies grow organically, and it is nearly impossible to graft on a new industry or approach and expect it to be successful. One only has to look at the demise of Silicon Valley clones around the world to see how difficult copying a set of economic institutions can be.</p> <p>Daniel Altman (who I seem to beat up a little too much), wrote another article for Foreign Policy in which he discusses the increasing levels of <a href="http://www.foreignpolicy.com/articles/2012/11/26/africa_s_human_capital">human capital development in Africa</a>. His statistics are quite interesting, but one thing I thought was interesting was the on-going comparisons to South Korea.</p> <blockquote> <p>For example, in overall human development as judged by the United Nations Development Program (UNDP), Madagascar now sits where the Republic of Korea did in 1980, on the cusp of its export boom. And a closer look at the data reveals many more examples of progress.</p> </blockquote> <p>and</p> <blockquote> <p>As Korea showed starting half a century ago, vast natural resources are not a prerequisite for rapid growth. With better education and health come higher productivity, rising wages, and greater buying power. To plan for this growth, companies will need to use a long time horizon. One way to do it is by laddering the marketing of their products in parallel with increases in living standards.</p> </blockquote> <p>We must be cautious about trying to mimic the success of one country in other parts of the world. While South Korea's success could quite possibly be transplanted to other areas in Asia, it seems hard to believe that its approach will work well in a region as diverse and different as Africa. It is the cookie-cutter approach that I believe has most harmed development in the past, and it is the individualization of development plans that offer the most hope for a better future for humans across the world.</p>Book Forum - The Syrian Rebellion by Fouad Ajami2012-11-23T00:00:00-08:00Danny Crichtontag:www.dannycrichton.com,2012-11-23:blog/2012/11/23/book-forum-the-syrian-rebellion-by-fouad-ajami/<p>Syria is the worst kind of crisis - simultaneously heart-wrenching yet mostly ignored by the international community. One cannot help but see the photos of the destruction (for a great selection, <a href="http://www.theatlantic.com/infocus/2012/11/syria-in-ruins/100402/">see this gruesome slideshow from the Atlantic</a>) and want to do whatever it takes to try to direct the crisis to its end. The on-going destruction reflects our own psychology and helplessness, a failure of the modern international system to protect human rights in the face of pure evil.</p> <p>Yet, the complexity of such situations - the <em>ambiguity</em> of a society that seems so distant, so impossible - is perhaps the most interesting story. The lack of action by Western powers from America to France does not reflect a missing capacity for power projection, but rather a lack of willpower on the part of politicians who abdicate their role of moral leadership.</p> <p>This issue gets at the heart of <em>The Syrian Rebellion</em> by Fouad Ajami. Ajami complains, almost bitterly, about an Obama administration that simply refuses to put the effort behind the Syrian opposition like it did in Libya just a few months earlier.</p> <blockquote> <p>There was no shortage of alibis for American passivity: America did not know the protagonists and couldn’t trust the Free Syrian Army, there was no United Nations Security Council resolution authorizing foreign intervention, and more. On February 26, Secretary of State Hillary Clinton, in an interview with CBS in Rabat, the Moroccan capital, all but took away any hope that there would be rescue for the Syrians. It was a stunning performance, a measure of the ability of power to avert its gaze from places in trouble. (Ch. 9)</p> </blockquote> <p>This sort of frustration is perhaps obvious for a neoconservative-affiliated scholar like Ajami, who was one of the major supporters behind the Bush administration's wars in the Middle East. And really, who can blame him? The scenes of horror that are coming to us from Syria boggles the mind and challenges our very conception of human decency. The situation <em>cries out</em> for action, any action.</p> <p>And yet, that is precisely the danger of intervention. For all of the right-wing attacks against Obama about "leading from behind" in Libya, the strategy was incredibly sound. Augmenting Libyan forces in their own strategy and tactics with international military forces, thereby allowing local, on-the-ground troops to choose their own destiny in the military campaign, allowed American policymakers to defer to knowledgable generals without the sort of fog of war that proved so costly in Iraq.</p> <p>What are the options in Syria? Ajami notes that Syria has been the cradle of Arab nationalism for decades, and savors its sovereignty after years of colonial domination. The Syrian opposition forces, while certainly welcoming of assistance, hardly desire to request help from their former colonial masters to win the war. This relationship is even more complicated given who the opposition represents, namely, the former Muslim Brotherhood and other Sunni Islamists.</p> <p>I am an interventionist, and I generally subscribe to the Responsibility to Protect (R2P) doctrine. But I also believe that diving into an ambiguous situation could be far more costly than anticipated. This isn't the Hutu and Tutsis in Rwanda, or the Serbs in Srebrenica. There was clarity in both cases, a moral path illuminated for all to see.</p> <p>Despite Ajami's attempts, I finished <em>The Syrian Rebellion</em> with less conviction to intervene than I did before starting the book. Despite the horrors perpetrated by the regime, it is unclear what the next government would be. Assad's regime is gruesome, but would the next phase really be better? Interestingly, the same question gets asked about Iraq, and it is not at all clear what the answer is, even today. "It depends" is probably the right response.</p> <p>Syria gives me strong echoes of the Congolese war of the past two decades, which started in the fallout of the Rwandan genocide. Despite on-going international intervention, the war continues unabated, with little solace coming to the heart of Africa. The sad reality is that the environment described by Josef Conrad more than a hundred years ago in <em>Heart of Darkness</em> remains a startlingly close depiction of Congo today.</p> <p>After years of strife, it is hard for countries to rebuild and move forward. The civil infrastructure is lacking, and the sort of normal course of society simply can't function without the centralizing effect of the strongman dictator. Iraq's transition to democracy has been difficult precisely for this reason, similar to Congo and today, Syria. Despite the length of Hosni Mubarak's tenure as leader of Egypt, his regime never stamped out the vibrant political culture that today is completely lacking in Syria. The transition for Egypt will still be difficult, but manageable.</p> <p>This state of affairs isn't lost on Syria's neighbors. Israel, which has faced decades of treats from Syria, remains relatively mum on the affairs happening across the border. Ajami describes the situation well:</p> <blockquote> <p>True, no binding peace accord had been made with the Syrians, but the Assads had delivered the most quiet of borders. There was no way of knowing who and what would replace this Syrian regime. Populism and chaos could threaten that subtle working relationship developed over four decades. (Ch. 6)</p> </blockquote> <p>So, what are the next steps for Syria and the international community? More efforts directed toward China and Russia seem obvious, if perhaps futile given the results of the last UN resolution on the outcome in Libya. Turkey has slowly evolved into a more aggressive foe of the Assad regime, and could be used as the launch pad to provide greater assistance for the Syrian opposition.</p> <p>But it is the opposition itself that has the most power in this engagement. They set the tone, and could provide the political space to allow for intervention. Reducing the ambiguity of the new government, providing better support and political representation of the minorities who benefitted from Assad, and building a clear consensus on human rights would go a long way to assuage the fears in foreign capitals of engaging in the crisis. It is their future, and they have quite a bit of control on the outcome.</p> <p>For the rest of us, vigilance is needed. Despite the atrocities underway, it can be all too easy to read the latest story on Black Friday (Wal-Mart strikes!) and develop a shroud of silence around the events transpiring in the Middle East. These changing battle lines are never easy to follow, but we have a responsibility to keep the pulse on the issue and ensure that the story doesn't disappear. As we have learned from so much evil in the past, these situations can go from horrible to hell almost overnight. We have to learn these lessons, and continue to push for a pluralistic, democratic Syria that works on behalf of all of that country's stakeholders.</p>