I enjoyed tonight's talk by Peter Thiel at NYC Junto, on "How New Technologies Thwart Government and Promote Freedom". Junto is a libertarian-focused discussion group organized by Victor Niederhoffer. I've been following Peter's writing for a while, since we overlap directly in our interests in investing and in online networks. Peter is President of Clarium Capital Management, an investor in both LinkedIn and Facebook, and was co-founder and former CEO of Paypal.

Peter started with two questions:

1) Let's assume libertarian view is correct. Why aren't more people libertarian?

2) What do we do about it? How do we make the world more libertarian?

Answers to question 1

- maybe libertarianism is not in peoples' interest

- lack of education

- [Cf. Bryan Caplan's book, The Myth of The Rational Voter]

Answers to question 2

When Peter was an undergrad, he might say:

- Education

- Go door to door

- Convince people to vote for candidates

But as he got older, he saw this is very hard to do.

(highlight of the evening: Victor Niederhoffer's toddler son wanders around Peter's legs at this point)

An IQ test for libertarians: ask them how optimistic they are. The more pessimistic they are, the smarter they are.

One solution: move control of money from the government to individuals. But you cant do this via plebiscite. If there was a form of money that government couldn’t measure or track, you'd have a powerful alternative. This insight was genesis of Paypal in late 1990s.

In mid 90s, several companies were creating alternative currencies: Cybercash, Digicash, etc. All of the initial attempts were going out of business. Money has a network-like aspect. How do you create a new currency when no one else is using it?

All these efforts had run aground against this rock. So Paypal started by leveraging against existing systems: credit cards, checks. Send money to anyone with an email address. Started with 24 employees at Paypal. Preloaded accounts with $10. Started to spread. We grew at 5-7% compounded daily.

Einstein, "Compound interest is so miraculous it could only be created by G-d".

Initial theory was very idealistic. In reality we ran up against many obstacles, the first of which were customers. Massive amounts of emails/customer service inquiries.

Spring/summer 2000: discovered bad people are out there. Whole wave of fraud, including Russian mobsters, tried to exploit Paypal. Someone threatened Peter's mother unless PayPal unfroze his account. Then that person ended up shot dead.

Found dystopian website in Former Soviet Union: "Carders World". A carder is someone who steals financial information on people. This was a marketplace for personal financial information. They had a manifesto saying that they were going to take down the capitalist system. Paypal information was there.

2001 period: next obstacle was government. Initial Paypal strategy was to ignore government regulations—'we are not a bank'; ' none of these laws apply to us'. If we rolled this out quickly enough, the government couldn't stop us. "If you have a world where everyone is a criminal, you have to change the law."

Visa/Mastercard tried to come up with rules to prohibit Paypal from using their service. Government was even slower. Radical technological change must be fast.

In 2001/02, when company went public, things really hit the wall. The person investigating their S-1 thought that his job was to stop companies from going public. "He was demoted in government, which is a really extraordinary thing to happen."

Businessweek article said that state of Louisiana hadn't quite signed off on this. SEC investigator told Paypal management that state of Louisiana was going to shut this down. So in middle of roadshow, Peter had to track down government regulators in Louisana and convince them that Louisana did not want to get reputation as a particularly backward place. "So within 2 days, we managed to get that stopped. At the time we had 100,000 Louisana users."

"We are now in 100 countries. 3^rd largest payment brand after Visa/Mastercard in the world. "

How successful were we? Paypal currency is still denominated in national currencies. If you only have one form of currency, you're beholden to the issuer of that currency. Our initial vision inspired in part by Argentinean economic turmoil. If you can force competition between governments, you'll have stabler currencies.

Early 1980s: high inflation rates all over the world. Since then, it's gone down almost everywhere. Forms and symbols can persist well after the substance is gone, e.g., Queen's face is still on UK currency. Technology has been a very powerful force for decentralizing things.

1960s Time magazine cover: picture of 1 big computer that could run the world. Cf. Hal 2001. Computers as a force for centralization is a classic image. In the 90s, power shifted to individuals.

Famous early example: Soros distributing fax machines throughout Eastern bloc.

If everyone becomes a currency dealer thru Paypal, it changes the world.

So much has changed. For example in 1971: it was illegal to own gold and other currencies in the US. 1971 Treasury Secretary said, "It's our money---we can print as much as we want and it's the rest of the world's problem". You can't imagine Hank Paulson saying something similar today.

Power is shifting ineluctably away. Will technology continue to be a force for decentralization?

Why did 1960s vision of centralized computer not happen?

Peoples' ability to process information is flat, but the amount of information has gone up dramatically. So the only solution is decentralization. This is also why Moscow can't set the price of potatoes in Vladivostock.

You may be able to approximate information processing to a problem solveable in polynomial time---and then you have AI, and the 1960s vision of a centralized computer processing everything.

By 2050, we could have thousands of different countries. We have 10-20 years to push as hard and far as we can in direction of more liberty.

Q: How do you prevent Paypal from being used as electronic hawalla---form of terrorist financing?

A: We have protections in place---abide by Patriot Act.

2002: first year number of printed checks in US went down.

Q: question about Second Life and inflation

Q: question about goldmoney.com

A: The problem with gold is that when you really need it, it's not there. In 1933 the government confiscated all the gold bullion in the US.

Q; How do you promote libertarianism?

A: When I was young I tried to reduce the demand side (demand for regulation), but then I saw it was much too hard. So now I focus on the supply side. If I expand the supply side (e.g., more options for currencies), I reduce the amount of government in the system.

I want to promote change without being obliged to go through an election or plebiscite.

Governments are losing power to inflate because of technology. The risks are now tilted to deflation, not inflation. A deflationary environment is hard to invest in, because you can't just lever up and pay things off in cheaper dollars. Private equity and real estate are bad ideas in a deflationary environment. Donald Trump's argument is that you should be short dollars by going long real estate, is disastrous.

Q: How does Facebook promote libertarianism?

A: Facebook will be the dominant next media company . Since the old media companies are non-libertarian, this in itself is good.

Hedge funds are a way to bet against stupidity of governments.

Q: Could you comment on US visa policies and their impact on competitiveness.

He commented that once a tipping point happens, it's impossible to go back. Once the camel's back is broken, it can't be healed. Right now the marginal tax rate in NY is ~50%. In London it's 0%. So it's compelling for a hedge fund to set up shop in London, not NY.

There's a definite shifting of centers of quality overseas. It's happening faster in finance than in technology, but it is happening. (Audience member mentioned that Microsoft is setting up research centers in Canada and elsewhere specifically because they cant bring the researchers they hire into the US.)

Events | Leadership and Management | Public Markets Investing | Securities Research | Social Software

Jason Alba at JibberJobber added a JibberJobber profile to the Virtual Handshake social software company wiki. Barbara Safani writes,

A successful job search campaign requires exceptional organizational and follow-up skills. Jibber Jobber provides an easy to use interface that takes the drudgery out of the job search process while improving efficiencies and accelerating search activity.

What I like about Jibber Jobber is that it addresses a clear need among job-searchers: managing their job search and all of the people and companies with whom they interact during the course of their job search. The great majority of people I meet have very primitive personal CRM systems--often as primitive as a shoebox of business cards. So there's a large opportunity to provide people with more sophisticated tools. Jibber Jobber's challenge is that it is so narrowly focused on the job search, whereas every professional needs a personal CRM tool (e.g., Act, Microsoft Business Contact Manager, etc. They may find that they successfully penetrate the job-seeker market, then at some point rebrand and target the broader professional market.

Career Acceleration | Leadership and Management | Personal Productivity | Social Software

Kathleen Reidy has posted a useful survey of M&A in the blog and wiki software markets.

Social Software

If you want to avoid the lines, Techcrunch writes how to cobble together an iPhone equivalent for free.

Personal Productivity | Social Software

Charlene Li writes that Forrester just released a report on "How Consumers Use Social Networking Sites". 

"Social networking sites like MySpace and Facebook have seen tremendous growth over the past two years, attracting a young and engaged audience. Frequent users of these social networking sites not only engage in more activities and have a more positive attitude about these sites, but they are also far more interested in profiles from their favorite companies. Marketers interested in reaching their audiences on social networking sites should: 1) dispense with traditional Web marketing tactics, 2) encourage "friending," and 3) regularly refresh content."

more...

Social Software

I am prone to agree with Robert Frank's argument in "A Career in Hedge Funds and the Price of Overcrowding". 

"[The market for hedge fund talent] is what economists call a winner-take-all market — essentially a tournament in which a handful of winners are selected from a much larger field of initial contestants. Such markets tend to attract too many contestants for two reasons.

The first is an information bias. An intelligent decision about whether to enter any tournament requires an accurate estimate of the odds of winning. Yet people’s assessments of their relative skill levels are notoriously optimistic. Surveys show, for example, that more than 90 percent of workers consider themselves more productive than their average colleague.

This overconfidence bias is especially likely to distort career choice because, in addition to the motivational forces that support it, the biggest winners in many tournaments are so conspicuous. For example, N.B.A. stars who earn eight-figure salaries appear on television several nights a week, whereas the thousands who failed to make the league attract little notice....

A second reason for persistent overcrowding in winner-take-all markets is a structural problem called “the tragedy of the commons.” This problem helps explain, for instance, why we see too many gold prospectors, an occupation that has much in common with prospecting for corporate deals. In the initial stages of exploiting a newly discovered gold field, adding another prospector may significantly increase the total amount of gold found. Beyond some point, however, additional prospectors contribute little. The gold found by a newcomer to a crowded field is largely gold that would have been found by existing searchers."

more...

Career Acceleration | Leadership and Management | Private Equity Investing | Public Markets Investing

I enjoyed speaking at the recent Web 2.0 New York conference.  I have posted an expanded version of my slide deck on "Web 3.0: Where Are We Headed?"  My thanks to Sutithi Chakraborty for her help in researching this topic.

Social Software

In our latest FastCompany column, we summarized best practices in managing virtual employees at Evalueserve:

...Daigle observed that the virtual structure eliminates many political issues: "Not only do we not have much of the water cooler, idle time type of communication, and resulting issues -- we don't have time for it. I think there is some truth that the four of us [of the EVS management team] have got by without serious conflicts over 6 full years because we're somewhat forced (by geographic non-proximity) to stay out of one another's way, trusting each other to execute. Despite being geographically dispersed, all four senior managers are actively involved in both sales and operations, in touch via email, instant messaging, and phone daily. However, because we are distant we are forced to act independently and to focus on execution."

Career Acceleration | Leadership and Management | Personal Productivity

Our new parent company, Evalueserve, is highly dependent on email for internal and external communications.  They also hire every year hundreds of recent graduates (particularly in India, China, and Chile) who are usually not familiar with the protocols of business communication via email.  The guidelines below, crafted by my Evalueserve colleague Ramakrishnan M., provide guidelines from which many other companies would likely benefit.  All new employees at Evalueserve/Nitron are asked to hold by these rules. Corporate Email Guidelines     Address  --   Ensure that the “To” and “CC” boxes are left blank, while typing the mail content, so that the message is not sent accidentally. Type the client’s mail id the only after the mail has been written, QCed and accepted. --   It is best to avoid BCCs in business mails   --   Maintain Protocol for “CCs”, i.e., first mention the Client name, and then CE name.     Subject     --   Provide a Subject. The subject should be brief and to the point. --   Ensure that the subject is changed appropriately when replying to old mails   --   Mention the project charge code in the subject of status updates/deliverables/call summaries etc to the client. This is very important from a tracking perspective. Going forward, please follow the nomenclature given below:             o        EVS Deliverable, June 9, 2005 - XYZ-US-B-001 - Brief Project Title             o        EVS Call Summary, June 9, 2005 - XYZ-US-B-001 - Brief Project Title             o        EVS Status, June 9, 2005 - XYZ-US-B-001 - Brief Project Title   Salutation    --   Mails should start with “Hi XYZ,” (including the comma)             o       Choose “Hello”, if the client is based in Europe or if the relationship is more formal             o       You could also write “Hello Mr. Last Name” if you do not know the person too well and wish to be extra formal              o       The best way to decide how to address the client is to follow the way he/she addresses us    Body    --   Provide a suitable reference or background/context (This is with reference to your mail dated …) --   Please categorize all the points into appropriate buckets --   Use “bold” , “italics”, etc. to highlight important points or headings/topics . Avoid using CAPITAL LETTERS. This is considered as angry/rude/arrogant.   --   Ensure that the subject matter is MECE (Mutually exclusive and collectively exhaustive) --   Be crisp, and to the point --   Especially be clear about action points due from the client’s side, as well as from EVS side --   Broadly, all project-related mails should cover .                o        The objective of the project             o        The work done             o        Clarifications needed             o        Plan of action             o        Red Flags (if any)  --   Follow the EVS template for guidance on how to categorize sub-sections in the email --   Use standard EVS bullets --   Avoid full stops at the end of bullet-points if it is not a complete sentence --   Avoid contractions, such as “let’s” , "pls"  –use full forms “let us” , "please" etc.  --   Be extra careful when copy/pasting from multiple mails             o        Select all the text, make the font “Arial, 10” with color “automatic” or “black”             o        Ensure all signatures (from others) have been removed in the final mail   --   Always propose a tentative solution when you need to get the client’s go-ahead; Let him/her get back with an alternative way, if need be             o        This way you show that you are thinking on your feet             o        You are not sitting idle, waiting for the client to hand-hold you             o        This is applicable to time for a conference call as well – always propose a tentative time.  Please be sure to add conference bridge details   --   Avoid any form of ambiguity.  Indicate concrete time (date, time, with time zone) for all deliverables             o        If possible, avoid EoD ("End of Day") India Standard Time; this does not tell the client much (especially if he hopes to work on it). Instead, write 09:00 PM IST             o        Monday (June 06, 2005) – no “early next week” or “Monday” or anything incomplete             o        06:00 PM CET – Be clear about timeframes. For assistance, use http://www.timeanddate.com/             o        Even if the client uses wrong terms (EST instead of EDT, for instance), be sure that you use the appropriate term     --   Use your discretion on whether to reply to old mails or start new mails             o        If client’s chain/previous comments need to be referred, use the old chain               o        If it is a fresh mail/deliverable, start afresh             o        Please be very careful that no internal mail exchanges are sent across unless necessary    Complimentary Closing   --   Mails should end with “Thanks and regards,” or “Best regards,” (including the comma) --   Ensure that your signature (with updated extension number) is included --   Ensure every aspect of the signature is consistent with the EVS standard --   Mention your first name at the end (even though the signature is right below that)    Last, but not the least   --   Ensure that you run a spell-check before delivery  - please activate automatic spell check option in your Outlook configuration. --   Ensure that you read the mail twice before sending. Think critically and revise suitably. Check not only the grammar and spelling aspects, but also the tone. Ensure that you don't sound rude. --   Ensure that you check and confirm that the document attached is the right one . If it is a spreadsheet deliverable, ensure you have brought the cursor to the beginning of each page using 'Control+Home' combination. Also, the document should be saved with the cover page active, so that it opens with that page when the client receives it.

Career Acceleration | Social Software

I hope that some of you can join me at the conference below---I'll be on the panel discussing user-generated content. Web 2.0 NY  - June 14, 2007

Combined with Local Ad World & Madison Ave. 2.0

Collaborative & Social Tools applied to Business & Media Web 2.0 Business Models with far-reaching influence Disruptive new technology and business applications How AdSense is fueling the Land Grab on Madison Ave. Why NY Digital matters as post-Industrial economy puts Advertising ahead of manufacturing How to raise Capital and grow your Web 2.0 enterprise Must attend for: Media, Advertisers, Agencies, Entrepreneurs, Digital Marketers, Tech Co's, Investors and Educators. Esther Dyson to Keynote Web 2.0 NY Summit Industry pioneer, visionary and backer of Flickr and Meetup speaks at Web 2.0 NY Summit. Shawn Gold, SVP MySpace                                         Other Speakers and companies like Michael Dubin (Yahoo), Jack Myers (Myers Report), Shelly Palmer (TV Disrupted), Kara Nortman (Interactive Corp.), Shaival Shah (Oddcast), Seth Haberman (Visible World), Doug Perlson (TargetSpot), Jenny Mullen (OgilvyOne), Andrew Weinreich (MeetMoi), Connie Connors (HitTail), Wayne Reuvers (LiveTechnology), Andrew Bloom (Spot Runner), Chris O'Brien (MotionBox), Allan Grafman (AllMedia Ventures), David Teten (Circle of Experts) Gregory Galant (RadioTail), Steve Rosenbaum (Magnify), Bob Rustad (Collarity, Dylan Charles (Crimson), Dusty Wright (Culture Catch), David Marder (Eurekster),