UX > EX: the painful truth about customer obsession

Publishing this memo I shared with Teamfellows.

Everyone agrees with good-sounding principles until they experience their downsides.

“Working out is healthy!” Haha, yes! Yes!

“So hit the gym!” Well this sucks.

“Hire slow!” Yes! Yes!

“There’s this seat you’re dying to fill. And it’s going to remain empty for at least six more months, because you want to find the perfect person for it.” Oh.

One such example on my mind these days is the principle of “customer obsession.” It’s hard to disagree — of course we should serve our customers!

But then the rubber meets the road. “We have to delay this launch for another two weeks, because it doesn’t quite meet our bar yet.” Ah.

The most compressed expression of this idea is “UX > EX”, pronounced “UX is greater than EX.” It means that user experience is more important than employee experience.

Yes, optimizing for the customer does make your life harder, which is why they pay you. So when you find a new way to make the customer’s life easier at the expense of your own, you should celebrate — you just found a way to make more money!

In fact, the greater the pain, the more you should celebrate — not just because you found a big problem to solve for customers, but also because there’s a place where competitors won’t be able to follow you.

This is a way to leave behind the ones who are less customer obsessed, have less tolerance for pain, or have been more compromising in their hiring — the ones who put EX before UX.

General Magic and Silicon Valley Common Wisdom

I strongly recommend General Magic, a documentary about the eponymous company, founded in 1990 with a clear vision of what smartphones could be, and how huge they could be. It built one of the most impressive teams in Silicon Valley’s history to make this vision a reality: its alumni went on to do things like building the iPod, iPhone or Apple Watch at Apple, becoming the first CTO of the US under Obama, or founding Android.

Their “smartphone” was decades ahead of its time, letting you do many of the things you can do today on the Web — like booking a flight ticket, doing email, or checking your calendar — before the Web even existed.

And that’s one of the key conclusions of the documentary: General Magic was too early, and their product too expensive, especially for the “Joe Sixpack” they were targeting. Their device sold poorly, and the company went out of business.

One thing I especially appreciated about this story is that it’s a great illustration of several principles that are now common wisdom in Silicon Valley — things like launch early, talk to your customers a lot, keep your product small…

And before I lay them out, I do want to recognize that what’s obvious today might have been anything but at the time. I still have an immense admiration for what General Magic tried to accomplish — hindsight is 20/20, and commenting is a lot easier than building.

1. Early is the same as wrong

When something fails, we’re fast to conclude it was a bad idea. But many ideas fail not because they’re dumb — they’re just too early. Marc Andreessen often points out that most of the poster children of the dotcom bubble’s exuberance could be successful companies today.

Two common examples are Pets.com, which sold pet supplies online, and Webvan, which delivered groceries. Both raised hundreds of millions in the early 2000’s, later to come down in a crash. To this day, folks still refer to them with a chuckle. “How people lose their minds in a bubble!” But both these ideas eventually did succeed, only 15 years later and in different companies — Chewy’s currently worth $10 billion, and Instacart $7 billion.

So I do think that poor timing was a big contributor to General Magic’s . But I don’t think it was as unavoidable as the movie makes it seem. Case in point is Palm, which had the same vision as General Magic, released their product just a year later, and was a commercial success. So why did General Magic fail where Palm succeeded?

2. Don’t try to boil the ocean

I think the key difference is that GM bit off more than they could chew, where Palm focused on a small, realistic product.

General Magic practically built their own mini Web in partnership with AT&T. Their phone let you do things like checking your email, reading the news, booking flight tickets, playing games… In comparison, the Palm Pilot 1000 looked like one of those personal organizers that kids would later go crazy about (or was it just me? I was a weird kid.) It had a total of four ”apps:” calendar, address book, notes, and todo list. That’s it.

“I think he’s a life hacker,” my mother said in a sob

In tech, this idea is captured in the concept of the Minimum Viable Product (MVP). Followers of the Lean Startup Church exhort entrepreneurs to build the very smallest product possible that can still be a business.

I feel ambivalent about this idea, which people often use to build bad products, or worse, become intellectually lazy. They’ll mis-interpret the concept of MVP as “there’s no point trying to predict the market’s reaction to your product! Just launch and see what happens!” But one of the most important jobs of a founder is to navigate their idea maze, which entails having a strong opinion on what the future can be, and how your startup can bring us there — not throwing a bunch of half-baked pasta on the wall and see what sticks.

I’d like to think there’s a happy medium between the MVP accolytes and companies like General Magic that try to boil the ocean. I think it would go something like this: come up with a big bold vision, be it only because it’ll make hiring easier. And then, take the smallest step towards that vision that still can be a business — but no smaller. I think it is Patrick Collison who said that moonshots are just a lot of pragmatic steps taken one after the other.

3. Talk to users

General Magic’s head of marketing described their target customer as “Joe Sixpack.” And they realized that “Joe Sixpack really doesn’t have email” only after their $1,300 (2019 dollars) smartphone hit the shelves.

It seems like it was pretty late to make this realization, making me wonder if the General Magicians spent enough time talking to their users.

Lots of people think that “you can’t validate truly revolutionary ideas by talking to people.” They’ll go on to talk about Steve Jobs, or quote Henry Ford’s “if I’d asked people what they wanted, they would have said a faster horse.” (Ford never said that, and Apple does a ton of user research.)

And it’s true that deciding what to build is your job, not your users’. But the first step to solve a problem is to understand it deeply. And the best way to do that is to talk to your users, who are more familiar with the problem than anybody. The insight is often compressed as “talk to users about problems, not solutions.”

4. The importance of good managers

General Magic was one of those tech companies that didn’t believe in managers.

That they could ship such a huge product with no managers seems unbelievable, and speaks to the passion and talent of the General Magic team. But they still failed.

Now, this is going to be a bit self-serving, but one managerial function that I feel GM was especially lacking was Product Managers. All the points above — don’t be too early, ship a small product, talk to your users — knowing all this is really the job of a Product Manager.

Startups don’t need to hire PMs immediately. They have to remain scrappy, and founders need to learn about their users, market, and product — so they shouldn’t outsouce any of these in the beginning. But GM had hundreds of employees when they shipped, more than big enough to benefit from having PMs around.

5. Big companies ain’t your buddies

To their credit, General Magic realized they couldn’t pursue their huge vision alone. So they signed strategic partnerships with companies like Sony, AT&T, Motorola, Philips, Apple…

These partners brought credibility, expertise, and capital. But I think that they actually had a net negative contribution to General Magic. As a startup, there are three reasons why you may want to avoid partnerships with big companies.

First and most importantly, they slow you down. Big companies have too much time and money to waste. Speed is a startup’s biggest advantage, and it should be protected at all costs.

Second, big companies steal ideas. Initially, General Magic was very secretive about its work, which I think was a good idea — again, big companies have infinite money, and can get users from day one through their existing businesses. The only reason why they can still lose against three guys in a garage is speed, speed, speed. (This asymmetric race between startups and incumbents is sometimes summarized as: can the startup get distribution before the incumbent gets innovation?)

Startups can use every month of head start they can get in this race. So it was weird for GM to be so secretive, and then open their books to Apple — which did end up releasing a competing product, the Newton.

Third, these partnerships come with strings attached. For example, when the Web started blowing up, General Magic didn’t catch the train — in part because it was competing with AT&T’s walled garden.

Now, when you’re trying to get something off the ground, you can’t always decline the wads of cash some giant company is throwing in your general direction. But if you really have to deal with the devil, you should at least try to keep him at arm’s length.

6. What makes Silicon Valley special

The movie starts by asking: can you really call General Magic a failure?

Sure, it went out of business after selling like 3000 units, mostly to their friends and cousins. But its vision did eventually become a reality.

And what a vision it was! You really can do everything with your smartphone. Take and see your tens of thousands of pictures; access the sum of human knowledge; listen to all the music and watch all the movies that exist; keep in touch with friends; read the news; play games; manage your business… The existence of just one of these devices would be a miracle of human ingenuity. That billions of people have gotten them, in just 10 years, is simply unprecedented — no product that impacts our lives so deeply has been adopted faster than the smartphone. It’s remarkable that General Magic could see all of this, this early.

Not only was the vision prescient, two General Magic alumni had central roles in eventually making it a reality: Tony Fadell would go on to lead the iPhone project at Apple, and Andy Rubin would found Android.

So, General Magic did go out of business after spending hundreds of millions of dollars. But this money at least bought an expertise that came to good use, only 20 years later. Which I think points to a strength of Silicon Valley: its network is so tight, its opportunities so plentiful that no experience goes to waste. Your company goes down, and before you know it you get a phone call from Steve “Jesus” Jobs, asking you if you’d like to cross the street and take up your work where you left it. Economies grow through the buildup of human capital, and Silicon Valley is like the perfect machine to build that capital, accumulate it, and preserve it when things go wrong.

People here tend to take this from granted. But it does not happen everywhere.

How Apple Sells Software At Hardware Prices

I ran this poll the other day on Twitter:

The answers highlight a point I often make: that when people buy an iPhone for $1,100, they’re really paying $600 for a phone, and $500 for iOS, making it the most expensive consumer software in the world.

This also means Apple’s business is more software than hardware. Of course, if you ask them, the company will reject the dichotomy. “We want to make great products,” they’ll say in a calm British voice, “which entails integrating software and hardware.”

But good hardware isn’t a moat, and it’s been a long time since the hardware of Android phones has become better than that of iPhones. Fanboys will retort that that’s because Apple wants to make sure everything is absolutely perfect before shipping, and that they sell a ton of phones, a scale which comes with significant supply chain challenges.

But Samsung sells almost twice as many phones as Apple, and they were still years ahead shipping “phablets,” edge to edge displays, and multiple cameras (which pictures are still immensely better than the last iPhones’).

I’m sure most iPhone customers would love to get these hardware innovations, and they’d probably switch to Android, if it wasn’t for, well, Android.

The tech industry has cooled down a lot on hardware businesses over the last few years, which take a lot more time and money to get off the ground, don’t scale as well, and, worst of all, have no moat. If you design a good hardware product, you’ll just get cloned into oblivion by Shenzhen, which will move faster and sell their product for cheaper. Adding insult to the injury, the theft will often come from your own Chinese suppliers — and you’ll have no recourse against them.

But Apple seems to have found a way to get software-like margins in a hardware business: by packaging both together. Nobody would ever buy an OS for $500 — but psychologically, buying a phone for $1,100 feels different.

But of course, throwing code into something doesn’t magically give it 70% margins. No software can give a moat it doesn’t have to a hardware business. In the case of iOS, the moats are the App Store’s network effects (developers build for the platform with users, who adopt the platform with developers, who…), and the costs of switching to Android.

(There’s a case to be made that Apple actually also has a moat on hardware, thanks to its brand. That’s how they make so much money on the Apple Watch and the AirPods, both of which are now bigger businesses than the iPod ever was — despite their having no meaningful software ecosystem.)

In short, the way to give software-like margins to a hardware business — or, conversely, to sell software at hardware-like prices — is to:

1. Build software with a moat (I didn’t say this would be easy)

2. Bundle it with hardware

3. Leverage your hardware’s new moat to price it higher

4. Profit

The Efficiency-Destroying Magic of Tidying Up

In his seminal book Seeing Like a State, James Scott describes what he calls “high modernists:” lovers of orders who mistake complexity for chaos, and rush to rearrange it from the ground up in a more centralized, orderly fashion. Scott argues that high modernists end up optimizing for a system’s legibility from their perspective, at the expense of its performance from that of the user.

Indeed, that love of order is above all else about appearances. Streets arranged in grids, people waiting in clean lines, cars running at the same speed… But everything that looks good doesn’t necessarily work well. In fact, those two traits are opposed more often than not: efficiency tends to look messy, and good looks tend to be inefficient.

Efficiency ain’t pretty

This is because complex systems — like laws, cities, or corporate processes — are the products of a thousand factors, each pulling in a different direction. And even if each factor is tidy taken separately, things quickly get messy when they all merge together.

The chaotic look of structural orderliness shouldn’t be so surprising. Intellectually, we do understand that appearances are misleading — things don’t have to look as they are, nor be as they look. But intuitively, we all remain hopeless slaves of appearances, no matter how often we were misled by them.

This natural messiness of efficiency is demonstrated by recent advances in industrial design. When a God-level AI takes over in a science fiction book, it often remakes the world in its image: full of straight lines, smooth acceleration rates, and lots of chrome (AIs love that stuff). But as we start using algorithms to design things, we get results that look a lot more chaotic than that, confirming that our intuitive preference for “straight line” designs has nothing to do with performance — it just comes from our limited ability to reason about more complex solutions. Ironically, it’s us humans who think like robots.

An evolved antenna design, Hornby et al 2006. This is orderly — it’s straight antennae that really are messy.

This is a messiness similar to that you’d find in nature — which makes sense, since both these algorithms and nature are optimizing for efficiency.

I submit that we should look with suspicion at simple-looking systems. The physical world is like a river in which a thousand streams come rushing — it is supposed to look messy.

Again, this insight applies to any complex system. For example, a city can look as messy as an anthill. But really, it’s a beautiful equilibrium that evolved to satisfy a thousand competing constraints: topology, weather, people’s traditions, skills, wealth, preferences… Planners may make their maps look better when they use zoning to separate the city into business, residential, and commercial neighborhoods, but they also destroy a subtle, efficient balance. They forget that the only activity that goes on in any city is that of people living their lives, which requires all the activities above — preferably in close proximity. Splitting a city into residential, commercial and business zones is like throwing dough, cheese and pepperoni into the different compartments of a bento box and calling it a pizza.

An urban planner’s dream pizza

Speaking of pizza. One good example of an attempt to avoid the high modernist fallacy is Amazon’s “two pizza teams,” set up to run like small companies and encouraged to use the tools and processes that make sense at their level. The outcome can be messy — new Amazonians who come from more centralized companies often complain about the chaos there. But I, for one, would choose chaotic success over tidy failure any day.

Interestingly, other managers often pick the latter. They’ll see a dozen teams, each using different project management software, and lament: “what a mess! No one even knows what everybody else is doing!” They’ll then resolve to “put some order in here,” by mandating every team uses a single company-wide tool. But teams had been using different tools for a reason. Maybe they’re in different businesses — for example, hardware and software groups have different needs. Or their members could just have different preferences, which matter too — people are more productive when they use tools they like! It can be okay to sacrifice a company’s productivity so as to increase the coordination between its parts — so long as one makes this compromise with their eyes wide open. Unfortunately, managers all too often look only at the upside of such changes, and ignore their downside.

“Please clean up your room,” asks the mother. “Fool,” retorts the three-year-old with an eerily deep voice. “Can’t you see the beauty in my glorious chaos?”

I’m not suggesting all chaos is good. But when you hear someone suggest we put some order into a system, there should at least be a red light flashing in your head. Before you touch anything, you should make sure that mess is not concealing a deep order, by answering the following questions:

  • How much information is contained in the system’s current state? What constraints are expressing themselves through it? For example, when throwing dice, where they land depends on how you threw them. You do lose this information when you take the dice and put them back into a box — and that’s probably fine. But in the case of a city, its structure is the function of all the factors mentioned above — most importantly, its people’s skills, means and preferences. When you use zoning to impose your arbitrary aesthetic upon people, you block them from shaping their environment so it fits their lives.

  • How old is the system? How malleable is it? How strong are the forces put on it? The older a system, the more malleable or subject to strong forces, the least likely it is to be truly chaotic — and the more careful you should be when messing with it. That’s because its components had the time, ability and stimuli to order themselves into a stable configuration. Crystals are a good example of this. Take some randomly arranged molecules, keep them warm enough so that they remain mobile, and put them under high pressure for long enough, and they’ll spontaneously self-organize into one of the most orderly structures in the Universe.

  • Finally: who is complaining about the chaos? If outsiders complain, but people living inside the system seem happy with it, it probably means that the chaos is serving them right, and that it’s just foreign eyes who are unable to perceive its underlying order.

This is a special case of Chesterton’s Fence, which states you should never take down a fence before knowing why it was put up. Here, I propose Scott’s Law: never put order in a system before you understand the structure underneath its chaos.

Software, the Tough Tomato Principle, and the Great Weirdening of the World

Marshall McLuhan’s theory that “the medium is the message” famously describes how media are not neutral. Rather, a medium’s nature has a deep impact on the very content of its messages.

One misunderstood aspect of the theory is that it applies to all technology, not just media: any “message” (in the broadest sense of the term) ends up changing so it fits better the system surrounding it. One example is how researchers re-engineered tomatoes so they fit mechanical harvesters better. From Seeing Like a State:

Spurred by the wartime shortage of field labor, researchers set about inventing a mechanical harvester and breeding the tomato that would accommodate it. The tomato plants eventually bred for the job were hybrids of low stature and uniform maturity that produced similarly sized fruits with thick walls, firm flesh, and no cracks; the fruits were picked green in order to avoid being bruised by the grasp of the machinery and were artificially ripened by ethylene gas during transport. The results were the small, uniform winter tomatoes, sold four to a package, which dominated supermarket shelves for several decades. Taste and nutritional quality were secondary to machine compatibility.

This is counter intuitive. Most people think of tools as designed around their material, not materials around their tools. But in practice, tools and materials are constantly reshaping each other.

Benedict Evans talks of a more modern example in iPads and Tablets Growth:

[M]oving to new devices and form factors involves new software experiences, and new software also often both creates and requires new business processes. It’s hard to spend a day creating a 20-slide sales report on an iPad, even now that MS Office is available for iPad. But actually, that sales report should be a SAAS dashboard that takes 10 minutes to annotate. It will take time for those business processes to shift to enable more corporate tablet use.

In the beginning, new form factors fit existing workflows. Then, workflows fit the new form factors.

This is a powerful effect, and I find it strange that there is no name for it apart from the misunderstood “the medium is the message.” So I’ll just go ahead and call it the Tough Tomato Principle: we make tools so they accommodate the world; until the world remolds itself so it accommodates our tools.

Once you’re aware of the phenomenon, you start seeing it everywhere. Restaurants and museums optimizing for their “Instagramability.” Game developers for their games’ “Twitch spectator experience.” Online articles for search engines and social media. And even hotels for Google Maps discoverability. I could go on and on.

The Valley of Mismatch

The Tough Tomato Principle is not a mere side effect of innovation. It’s necessary for the new technology to express its full potential. You can’t use your shiny new tomato harvester until you’ve got the tomato that goes with it.

One famous example of this is how factory owners initially failed to realize the benefits of electrification because they didn’t adapt their plants to its new logic. They just replaced their old steam engine by a big electric motor driving their plant’s steel shaft, and it would be decades before they finally started rethinking the plant around the new technological paradigm. As BBC puts it:

Factories could be cleaner and safer – and more efficient, because machines needed to run only when they were being used.

But you couldn’t get these results simply by ripping out the steam engine and replacing it with an electric motor. You needed to change everything: the architecture and the production process.

Every new technology goes through this “valley of mismatch:” it’s becoming more widespread, but people are still using it under the logic of the old paradigm. You could see it with TV, when the first shows were just recorded radio talks or theater plays. Or with automobiles when they were still called “horseless carriages” — their driver sitting at the same height as on a horse-drawn carriage, even though there is no horse to see over. It takes a while to discover the messages native to a new medium.

(Incidentally, I think one of Apple’s greatest strengths is its ability to cross the valley of mismatch. I used to own a smartphone running Windows Mobile 6, years before the iPhone came out. The one thing that was good about Windows Mobile was its name: it really was Windows, on mobile. It had scroll bars, a Start menu, and even a cross button to close “apps.” The genius of the iPhone was in its hundreds of new UI mechanics that we now take for granted: inertial scrolling, multitouch, apps closing automatically, switches instead of checkboxes, etc…

But even Apple designers can’t cross the valley of mismatch in one shot, and it took 6 years before they moved away from skeuomorphism and its textures of wood, leather, and shiny plastic.)

One instance of the Tough Tomato Principle is particularly interesting: when people are the tomatoes that have to fit their new technological paradigm. And now that we’re crossing the valley of mismatch of our new software paradigm, I want to explore how human behavior is changing to fit the machine.

The Industrial Revolution and the Organization Man

The industrial revolutions reshaped us in a similar way it did the tomato. In both cases, we couldn’t make our new machines flexible enough to fit reality. So we reshaped reality to fit the machines instead. Our rigid tools remade us in their image and created the cookie cutter “Organization Man,” captured brilliantly by Taylor Pearson:

It’s a man, not a woman. He’s white, standing somewhere between 6’0 and 6’2. He has a strong chin and medium length light brown hair parted on the left.

He walks from one meeting to the next wearing a dark suit with a pressed white dressed shirt and dark Oxford dress shoes. His wrist holds a watch – nice, but not extravagant, with a brown leather strap and a gold-rimmed face.

I do not mean to demean the machines, which have made us healthier, safer, and better educated than we’ve ever been. I think these benefits were more than worth the costs.

But the costs were real, and they were that of a great uniformization. The logic of economies of scale led to a reduction in the customizability of our products, or as Henry Ford put it: “any customer can have a car painted any color that he wants, so long as it is black.” Taylorism and division of labor led to a dumbing down of tasks, and the imperative for efficiency to a tight coupling of our activities. Our movements got synced like that of rowers on a galley, plowing to a drum’s beats.

Mad Men is a vivid illustration of the lifestyle rigidity imposed by the age of mass production. It shows a “white list” world, where people only tolerate one narrow way of living and shun everything else. You can’t be divorced, vegetarian, or homosexual. You wear your dark blue suit and live in the suburbs with your wife, three kids, dog and barbecue.

Software — A Different Kind of Revolution

This brings us to software. It is the most fluid, adaptable technology we’ve ever invented (there’s a reason it’s called software).

No technology is neutral — they always come with constraints influencing their messages. But software stands out from previous revolutions in that its fluidity lets the world break out of its straitjacket. And as mankind expresses its true nature, we discover it is a lot weirder than suspected.

How does the Tough Tomato Principle apply to the software revolution? The answer lies in an unprecedented explosion of variety in three major aspects of our lives: our consumption, work, and production.

On the consumption side, software means a world where no two people have the same experience. We all used to walk the same aisles of the same Walmart. Now we all see our own Amazon, which aisles adjust dynamically to each of us and even from visit to visit.

We used to watch the same 4 channels on TV. Now we have YouTube, its billions of channels and a programmer smart enough to know which ones we’ll like.

We don’t even see the same food menu anymore — try comparing what you and a friend see when you open Uber Eats.

Beyond what we consume, software has been revolutionizing the way we work. It’s made communication free and asynchronous — so working together doesn’t mean working at the same time. You can work whenever you want.

And of course, that communication is free and instantaneous regardless of its distance. So working together doesn’t mean working in the same office either. You can work from wherever you want.

I know, remote workers have been just around the corner for 20 years. And they are on the rise, but we’re still crossing the valley of mismatch, trying to apply the logic of the old paradigm to the new one. For now, remote work still means “just like colocated work, only with worse image and sound.” And as VCs like to repeat, it takes a 10x improvement for a new solution to replace the status quo. We need to find the workflows native to remote before it can replace colocation. You’ll know we’re there when we replace “Slack isn’t working for this — let’s meet in person?” by “in person isn’t working — let’s meet in VR?”

But it’s not just about remote work. The gig economy worker and the digital nomad are two examples of lifestyles that are native to this new paradigm. Each just has to press a button to start making money. Each works when and from wherever they want. And each gets paid in direct proportion to their output.

You can find the aesthetics of the software paradigm even in big companies. Casual attire, tattoos and office dogs are supplanting the organization man and his blue suit.

As I mentioned, the software-native worker is rewarded in more direct proportion to their work. That’s because software makes it much easier to measure and attribute that work to someone. In practice, it means the factory no longer needs to run as slow as its slowest gear. Each gear can spin as fast as it fancies, and be rewarded according to it.

Some will say that this measurability also comes at the cost of our privacy. But you rarely need your government-issued ID to do things online — something less true of the physical world. Software is anonymous by default.

This leads me to the last big thing the current paradigm shift is changing in our lives: what we can produce. This change is happening in three ways.

First, this anonymity reduces the reputational downside of experimentation. You can come up with any name — say, Satoshi Nakamoto — put your idea out there, and make billions without ever revealing your true identity. If it doesn’t work out or if it attracts too much controversy, you can always create a new pseudonym. A perk, again, exclusive to the digital world.

Second, software makes geography irrelevant. It used to be that for anything to exist, it needed its fans to live close to each other. Now, you just need to find 1000 true fans, and they can live anywhere in the world. As Kevin Kelly puts it:

[I]f even only one out of million people were interested, that’s potentially 7,000 people on the planet. That means that any 1-in-a-million appeal can find 1,000 true fans. The trick is to practically find those fans, or more accurately, to have them find you.

The final way software is changing what we can produce is by killing gatekeepers. Most people think this is important because of the efficiency gains of cutting the middle-man. But more importantly, removing gatekeepers means you don’t need to run your idea through a dozen filters before showing it to its final consumer. People get the uncut stuff directly — in all its glorious weirdness.

Paul Graham writes in The Power of the Marginal:

A couple years ago my friend Trevor and I went to look at the Apple garage. As we stood there, he said that as a kid growing up in Saskatchewan he’d been amazed at the dedication Jobs and Wozniak must have had to work in a garage.

“Those guys must have been freezing!”

That’s one of California’s hidden advantages: the mild climate means there’s lots of marginal space. In cold places that margin gets trimmed off. There’s a sharper line between outside and inside, and only projects that are officially sanctioned — by organizations, or parents, or wives, or at least by oneself — get proper indoor space. That raises the activation energy for new ideas. You can’t just tinker. You have to justify.

Software is making us all Californians: it’s like a giant heat light, turning the world into a marginal space where experimentation needs no justification.


We’re currently witnessing the emergence of a final piece that was missing to this whole picture: a currency native to software.

As I said, the Internet removed gatekeepers — but in one direction only. You may not need to ask for permission to distribute your content anymore, but you do need permission to get paid. If the payment gatekeepers don’t like you, you’re outta luck.

So unapproved works could exist; their creators just couldn’t make a living from them. Which means the Californization of the world only held for side projects, the ones people could spend time on without getting paid.

Cryptocurrencies are starting to change this through the permissionless-ness and anonymity they enable. And here again, the Tough Tomato Principle applies. Cryptocurrencies aren’t just another way to buy the same old things. They’re a new kind of soil in which a different kind of life can sprout.

One recent example is this group of North Korean defectors raising $27mm for their revolution by selling visas to their future country. This could never have existed before crypto — and it shows the emergence of politics native to software.

If you thought the Internet was strange, wait until cryptocurrencies get more widespread. You’ve only seen the side projects so far.

A Tumultuous Transition

As always, the transition is meeting some resistance, coming simultaneously from the bottom and from the top.

From the bottom, a lot of people simply dislike the aesthetics of the software world. They wish the tech-native millennials could just be normal. And it’s true that once one has internalized the infinite flexibility offered by software, it can be hard for them to resist the exhilarating temptation to rethink every aspect of their life from scratch. Looking for the boundaries of their new-found freedom, they often end up throwing the baby with the bathwater, wholesale dismissing all form of tradition.

It’s the same phase as the college kids who just moved out of their parents’ place. They decide to live life as it’s meant to be: by partying six days a week, eating cold pizza and beer for breakfast and sleeping until 2pm. It takes them a while to understand the reasons why their parents imposed these constraints in the first place.

Today, you can see that phenomenon in 35 years-old techies living with 15 roommates; drinkers of Soylent; consumers of nootropics; or adopters of ketogenic, paleo, or intermittent fasting diets.

As to the top-down reaction, it’s taking a bit longer, but is going to be much stronger. The biggest authority of them all is starting to realize that it too is subject to the winds of software that are making a lot of legacy power structures less relevant. You can tell we’ve passed the “oh shit” moment when you see tech CEOs having to testify before Congress. The fighting is natural — the fish wriggles hardest when it’s out of the water.

But needless to say, the genie is not going back into the bottle. Things are just getting started, and I, for one, welcome the software-induced great weirdening of the world.

Thanks to Kevin Kwok and Zack Kanter for reading drafts of this.

Five Promises of Micromobility

Disclaimer: I’m a product manager at Uber. This piece represents my views only, and not those of people working on behalf of Uber.

A wave of electric scooters and bikes has been taking over American cities in the past year. People have been dismissing them as toys (which alone should tickle your interest) or a fad. But there’s a lot more to them than that, and I’d go as far as to say that I’m more excited about the potential 20 years impact of micromobility on cities than I am about that of self-driving cars.

Like autonomous vehicles, electric bikes and scooters are an order of magnitude cleaner and safer than human-driven cars. But unlike self-driving cars, they also bring order of magnitude improvements in space and energy efficiency, on top of being very cheap. And we can deploy them today.

Any single one of these improvements would be a game changer in and of itself, the kind that car companies would spend billions to pursue. Bundled together, they’re an innovation like we see only once a century.

1. Cleaner and more energy efficient

I hope we agree that global warming is a Really Big Deal — probably the one biggest issue we’re facing as a civilization. I’m not saying that scooters are a silver bullet for it. But they’re a big part of the solution. Transportation represents 28% of greenhouse gas emissions, and micromobility can shave a big chunk off of that by eating the sub-2 miles trips making up 40% of urban rides (source).

The reason, in short, is that these new modes are electric and super lightweight. Internal combustion engines are only 35% efficient, losing the rest in heat. Then, only 5% of that energy go into moving the passenger — the other 95% move the car.

So, the overall efficiency of a car is 0.05 * 0.35 = 1.75%. This means that for every gallon you pour into your tank, only 2 ounces are used to move you. The rest is either lost in heat or used to move your car.

Compare that to electric scooters, which convert 85% of their energy into movement and weigh around 30lbs, making their overall energy efficiency over 70%.

Again, car companies would kill to improve their cars’ efficiency by 10%. Here, we’re talking of a 4000% improvement.

2. More space efficient

You may have seen these images highlighting the abysmal space-inefficiency of cars.

This is how much space 60 people take when they drive, walk, bike, or ride a bus.

This picture is not staged: it’s a school in Copenhagen, where bikes are parked during school days, and cars the rest of the time. 8 cars are taking the same space as 120 bikes.

This is what I find hilarious in people complaining about scooters “taking too much space.” It’s a typical case of what Bastiat calls “The Seen and the Unseen.” You see the space the scooter takes, but not that saved by replacing a car. If you care about space, you should love bikes and scooters.

I know, scooters are sometimes in the middle of the sidewalk, and cars aren’t. But that’s easily solvable by building more bike racks and dedicated parking spaces, which cities are starting to do.

These new vehicles don’t save space only by being smaller. They also allow riders to keep a shorter safety distance between each other. By some estimates, these two factors combined result in traffic bandwidth that’s up to 10x greater.

This makes micromobility one of the most compelling solution to our traffic problems. And to illustrate how big of a problem it is: a 2015 study by the Texas A&M Transportation institute and INRIX finds that (emphasis mine)

In 2014, congestion caused urban Americans to travel an extra 6.9 billion hours and purchase an extra 3.1 billion gallons of fuel for a congestion cost of $160 billion.

To put these numbers in perspective:

  • 6.9 billion hours is roughly 9,000 lives, or the equivalent of three 9/11s per year
  • $160 billion is 0.8% of the American GDP
  • 3.1 billion gallons are 2.1% of the country’s yearly fuel consumption

I may already have said it, but this is a very big deal. Solving this traffic problem alone is worth investing dozens of billions of dollars. Talking about micromobility, you find yourself mentioning this kind of perk just in passing, as one of your five bullet points.

3. Safer

Now, I know this one may be a bit contentious — I too read the articles about bike fatalities. But here’s how I see the situation: someone’s riding their bike, a car kills them, and people view the bike as the problem.

I brought together this very scientific table to describe the real problem.

If we reserved a whole neighborhood to bikes only, or just built a lot of bike lanes in it, I guarantee the accidents rate would go way down. In fact, The Netherlands ran the experiment. Can you guess from the chart below when it started building bike lanes everywhere?

Source: Statistics Netherlands (CBS)
Source: Statistics Netherlands

Yes, the early 70s, after which road fatalities decreased from 3500+ in 1971 (including 400+ children) to 640 in 2010 (including 12 children). That’s a reduction of 82% in overall fatalities and of 97% in children fatalities (children are overrepresented in road fatalities since drivers can’t see them).

This is why I think that accelerating the adoption of micromobility is more than an exciting business opportunity — it’s a moral imperative. If we can save dozens of thousands of lives every year just by building a ton of bike lanes, what are we waiting for?

4. Making the world city a better place

I know it’s become cliché in Silicon Valley to say that you’re #ChangingTheWorld. I think one big reason why people roll their eyes when they hear this is that it’s often said by companies working in the “world of bits.” Not that there’s anything wrong with these businesses, I do believe they’re impactful. But they remain these abstract entities “in the cloud,” pictures behind the glass in your pocket.

Transportation companies are different. They’re actually deeply rooted in the real world — in atoms.

If you tell me you’ll change the world, and then you give me a better compression algorithm, I’ll be like “yeah I kinda see it if I squint really hard.” But I won’t need to squint if you tell me you’ll change the world, and then you go on to save thousands of lives per year; give back to everyone the hours per week they’d have spent in traffic; decrease greenhouse gas emissions by a double-digit percent; and turn American cities into, like, utopian Smurf villages.

(In general, I do believe innovation in the world of bits is overrated, and innovation in the world of atoms underrated. But that’s for another essay.)

And to illustrate the depth of the impact I’m talking about; behold these comparisons of the same Danish streets, before and after they reserved them to bikes and pedestrians. That’s what changing the world looks like — in less than 30 years.

Historical pictures from the Amsterdam Archives. Recent ones by Thomas Schlipjer.

These changes are not just aesthetic. They also have a deep impact on local economies — increasing footfall and the revenue of local businesses. This in turn also translates in higher real estate value in these neighborhoods.

(To read more about the impact of micromobility on local economies, check out Lawlor 2014’s “The business case for better streets and places”.)

This impact makes intuitive sense. Cities are about communities. And cars are about isolating you and putting you in your own bubble. Innovation in the car industry consists in making this bubble as thick as possible: better noise isolation, better suspensions, better speakers…

Micromobility vehicles are the contrary. When you ride a scooter, you’re not isolated — you’re in the city. Driving a car is boring — that’s why we’re trying to automate it. Riding a bike is fun — even more so when it’s electric! (It’s hard to convey this to people who’ve never tried it, but the experience of riding a pedal-assist bike truly is exhilarating.)

I find it funny that Americans visit Europe and extol its charming, lively streets, and then go back home to build the same sprawling suburbs where one needs to drive just to go grab breakfast.

This is one common thing disappointing tourists in the US. They expect to see a big metropolis with skyscrapers everywhere, shops open 24/7, and tons of life in the streets. When they arrive, they rapidly find out that there isn’t much Manhattan in the US, apart from, well, Manhattan.

Go to Houston, Denver or Salt Lake City — even their city centers during week-ends are mostly dead. My favorite example of all is Los Angeles, which in John Lennon’s words is just a “parking lot where you can buy a hamburger for the trip to San Francisco.”

Picture a friend took landing in LAX. The space dedicated to parking in Los Angeles County is more than 4 times the size of Manhattan (source)

Going around American cities as a pedestrian, one feels like a second-class citizen. The cities were visibly designed for cars, with pedestrians a mere afterthought — when they’re lucky to be a thought at all. The absence of visual diversity makes walking boring, of any shade structure unhealthy, and of places to seat painfully clear that one is not supposed to hang around for too long, like giant signs saying “move along, nothing to see!”

Cities used to be living places. Cars turned most of them into dead spaces instead, with tiny islands of life here and there. I find it unbelievable that we’ve come to see this as the only possible option, and exhilarating to contribute in changing this.

5. Micromobility as a force for economic inclusion

People need transportation options to access earning opportunities, mainly located in unaffordable cities. Today, the cheapest option is public transportation. But there remains a “last mile” problem: how is one to access the nearest station when it’s sometimes miles away? Solving this will need an option with much greater traffic density than public transportation, at a much lower price than cars. Micromobility fits the bill perfectly.

This must be why these new modes of transportation are so overwhelmingly popular amongst lower income groups, as suggested by this survey of 7,000 people by Populus Group in their report on micromobility.

“It’ll never work in America”

When I make these points, people often tell me that that’s all well and good, but could never happen in the US. “American cities were just designed around cars — we’d have to rebuild the whole country to change this!”

But cities like Amsterdam, too, were re-designed for cars in the first half of the 20th Century, leading to a sharp increase in road fatalities and decrease in bike ridership.

This engendered the fierce activism of the “Stop the Child Murder” (“Stop Der Kindermoor”) movement in the 1970s. People took the streets, blocked wide arteries with bicycles, and pressured politicians to build more bike lanes.

Mark Wagenbuur / BicycleDutch

(If you’re interested in learning more, take a look at the excellent article on Cycling in the Netherlands on Wikipedia.)

Politicians eventually folded, and the impact was significant. Bike ridership nearly doubled in just a couple of years, showing that the reason why people stopped biking was not that they didn’t want to (even in a country with as cold and wet a climate as The Netherlands). It’s just that we wouldn’t let them.

It did not take rebuilding the whole city — just building bike lanes, lots and lots of bike lanes. Neither did it take decades for it to start bearing fruits — just a couple of years.

There is no reason why the same change could not happen in the US. The capital is there. The talent is there. And the capacity for change is there. Look at how fast gay marriage became legal — from 0 states supporting it in 2001 to all 50 of them in 2013. Or look at marijuana, which may be getting legal even faster.

If you’d asked people in 2000, who would have thought that these two things would have happened so quickly? I know I wouldn’t. And I think the US will surprise us again, this time in how quickly and drastically it’s going to reshape its cities in the next 20 years.

And if you want to do more than read about it, send me an email (florent at uber) — we’re hiring.

The best companies to start a career in tech

Every time someone, and especially a new grad, asks me for recommendations of companies they should apply to, I point them to the excellent yearly “Career Launching Companies List” from Wealthfront.

It’s become somewhat of a truism in the Bay Area that the best companies aren’t the super early startups (too likely to fail and probably terribly mismanaged) nor the big companies (too strong a pressure to specialize, which is good for the company but not necessarily for you; often moving too slowly; teaching skills that only apply to that specific company; and less room for growth both financially and career-wise), but the ones right in the middle — those getting out of startup mode and on their way to become huge.

Every year, Wealthfront puts out their list of startups falling into this category, and I find that’s an excellent starting point for anybody starting a career in tech.

Own the Demand

Disclaimer: I’m a product manager at Uber. This piece represents my views only, and not those of Uber, fellow employees, managers, customers, clients, suppliers, investors or people working on behalf of Uber.

In The Internet Economy, Chris Dixon remarks that:

When evaluating an internet company’s strategic position (the defensibility of its profit moat), you need to consider: 1) how the company generates revenue and profits, 2) the loop in its entirety, not just the layers in which the company has products.

For example, consider the different entities involved when you make a Google search:

  1. Your browser
  2. Your OS
  3. Your computer
  4. Your ISP
  5. (A bunch of WAN stuff)
  6. Google’s ISP
  7. Google’s servers, including their own OS, networking stack, hardware, etc…

Every layer here between you and Google represents some control they give up over the end-user experience and relinquish to the owner of that layer: Firefox for the browser, Apple for the OS and computer, Comcast for the ISP, etc… That’s one big reason why Google gets into the business of building OSes (Android, Chrome OS), computers (Chromebooks), browsers (Chrome) and even took a stab at taking over your Internet access (Google Fiber, Google Fi).

It’s not just Google either. Most web giants have been making similar (though less successful) attempts at taking over their complements. Think about the Amazon Fire phone or the Facebook phone. Sometimes companies will try to outright bypass the entire stack and go directly to their customer — that’s one big strategic impetus behind the Amazon Echo. There’s no pesky computer, OS, or browser built by other people. All is controlled by Amazon.

All these giants are keenly aware that they’re building their castle on somebody else’s yard; and they’re afraid that the floor may drop out from under them. You can find one recent justification for this fear in Apple’s last release of iOS and MacOS, which significantly curtails the ability of online advertisers to track your online whereabouts. That’s Facebook’s bread and butter we’re talking about! Other famous examples are Facebook basically killing Zynga in 2012; or Twitter a bunch of 3rd party clients.

In short, if somebody successfully inserts themselves between you and your customer, they can exercise tremendous control over you, including taking a big chunk of your profits or outright killing you.

This is one key insight in Ben Thompson’s famous Aggregation Theory: modern marketplaces get their power from aggregating the demand side. And that’s a much better position than the old way of trying to own the supply side.

(A simple way to explain the idea is through Brussels sprouts. Given a choice, would you rather own the world’s supply of Brussel sprouts, or its demand? I say you should pick the latter. Owning all the supply would allow you to dictate your own prices, which is nice; but it would also require owning all the land on which Brussels sprouts can grow. That would be absurdly expensive and a nightmare to operate efficiently, on top of being quite a precarious position. How do you know you haven’t forgotten one piece of land somewhere? Or stay ahead of innovations like indoor farming? Controlling all the demand for Brussel sprouts, on the other hand, gives you the same pricing power, without the need to own and operate all that land.)

There’s this famous comment that “Uber owns no cars; Airbnb no real estate; Facebook no content; and Ebay or Alibaba no inventory.” If you can get away with being 1% as capital-intensive as your competitors while extracting greater profits, why wouldn’t you do it?

Another reason to focus on demand is that it can pull supply much more effectively than supply can pull demand. It is not the case that “the world will beat a path to your door if you build a better mouse-trap” — but if you gather everybody with a mice problem in one place, I guarantee it will soon turn into a convention for better-mouse-traps inventors.

Modern marketplaces do spend a lot of their attention on supply; but invest even more in their demand. Uber is a two-sided marketplace, yet its mission statement used to be “transportation as reliable as running water, everywhere and for everyone” (is it now “We ignite opportunity by setting the world in motion”). Airbnb’s mission is “belong anywhere.” You’ll notice both are addressed to the demand side. Uber could have gone with “turn your car into an ATM” or Airbnb “monetize your unused space.”

If given the choice to own all my inputs except demand, or own only demand and no other input, I’d pick the latter in a heartbeat. Look at e-commerce, for example.

There is a clear divide between the companies owning demand, and those owning anything else.

3 final examples to illustrate my point…

Ecommerce, Facebook and Google

Retail is the largest spender in online advertising by a very wide margin. So you could argue that Facebook and Google’s “e-commerce arms” are amongst the very largest e-commerce companies in the world — all while holding no inventory nor managing any logistics. The search giant is aware of its dependence on e-commerce; Larry Page and industry analysts often identify Amazon as Google’s largest competitor.

Kylie Jenner’s Cosmestics Empire

Forbes recently published this widely circulated article about how Kylie Jenner built a $900M e-commerce cosmetics empire, all while outsourcing every aspect of her business — except marketing (emphasis mine):

Her near-billion-dollar empire consists of just seven full-time and five part-time employees. Manufacturing and packaging? Outsourced to Seed Beauty, a private-label producer in nearby Oxnard, California. Sales and fulfillment? Outsourced to the online outlet Shopify. Finance and PR? Her shrewd mother, Kris, handles the actual business stuff, in exchange for the 10% management cut she takes from all her children. As ultralight startups go, Jenner’s operation is essentially air. And because of those minuscule overhead and marketing costs, the profits are outsize and go right into Jenner’s pocket.

Basically, all Jenner does to make all that money is leverage her social media following.

Which of all these companies do you think earns the fattest profits? Which do you think is simplest to operate? My bet is on Kylie Jenner’s business, for both.

Apple’s $9B Search Engine Business

Goldman Sachs analyst Rod Hall reckons Google will pay $9B to Apple this year to remain iOS’ default search engine — an amount that could go up to $12B next year (source). By comparison, Microsoft’s search engine Bing generated $7B in revenue in 2017. So Apple’s “search engine business” is 28% larger than Microsoft’s — all while, you know, having no actual search engine.

Go West, Young Man

If you’re in tech, you need to move to San Francisco. The advice holds especially if you’re a student, not having dug your roots too deeply anywhere yet.

There are several reasons why you want to come here:

The Opportunities
All the coolest companies you’ve heard about are here. In a radius of roughly 30 miles, you’ll find Airbnb, Amazon, Apple, Facebook, GitHub, Google, LinkedIn, Salesforce, Slack, Stripe, Twitter, Uber…  And all of them are hiring (shoot me an email!). There is no place in the world with a comparable density of exciting, impactful projects, maybe to the exception of Beijing — but certainly nowhere in Europe.

Any engineer here with even a little experience at a startup receives a constant stream of phone calls and emails from recruiters. I’m not saying this to show off: ask anybody from San Francisco to show you their inbox. 1-3 recruiting emails per week is normal.

Beyond the opportunities you’ll receive personally, tech is currently reshaping the whole world — and San Francisco is at the center of it. I feel lucky every day, getting to witness what’s happening here. It’s often compared to the renaissance in Florence during the 15th century.

Some people get super annoyed when you say this. They’ll tell you talent is everywhere and curse about those damn Americans who think they’re the center of the world. I don’t mean to be insulting, and I agree talent and energy are everywhere. It is true that several tech ecosystems around the world are blooming — including Paris. But statistics like the amount of Venture Capital invested support the thesis that nowhere comes close to the Bay Area yet. Which leads me to…

The Money
You’ll earn more here than you would anywhere else. The difference is especially stark if you don’t come from the US. The entry salary for a software engineer who’s straight out of school hovers around $110k per year. If you’re good, it’s not uncommon to see software engineers with 5-6 years of experience make $300k-$400k per year in total compensation (which includes your base salary, yearly bonus and stocks). I know several people making this kind of money in big companies. Looking at it from the outside, getting into Apple / Google / etc looks intimidating, but it’s a lot easier than you’d think.

Compare these salaries to what you’d get anywhere else in the world. Straight out of school, a software engineer in France would be lucky to earn 45k€ ($52k). Interns make more than this here — those in Paris will make around $1k per month or less.

And yes, life in SF is much much more expensive than in, say, Paris. But in my experience the difference in compensation more than makes up for it. Don’t take my word for it: check out Numbeo, a crowdsourced database with the cost of living of a bunch of cities in the world. Its page comparing San Francisco to Paris states that you need to earn 46% more to live the same way in SF as you would in Paris. So these $52k in Paris translate to $76k in SF — still less than many interns here. And there is no way you’d ever get these $300-400k packages I mentioned in Europe.

The People
If you decide to move here, it means you probably have more ambition than average. Consider that everybody else you’ll meet in the Bay Area will share that with you. The self-selection effect is strong, and you’ll met the smartest, most energetic and ambitious people you’ve ever seen. The phenomenon tends to feed on itself — enthusiasm is contagious.

When I arrived, I met a guy who told me “the difference between French and San Franciscan entrepreneurs is that the French build startups to have a job, San Franciscans to change the world.” The insult stung, and was definitely an exaggeration, but the second part contains a little bit of truth. It really is surprising how big Californians allow themselves to think. Entrepreneurs here will tell you they want to cure cancer, colonize Mars, or disrupt the trillions-of-dollars car industry. They’ll make you reconsider what you can aim for.

California is stunning. It’s sunny year long — some people actually say they miss seasons, though I certainly don’t. You can drive just 4h and see some breathtaking landscapes in Tahoe or Yosemite, or just 1.5h North or South and find yourself in the middle of gorgeous woods. The food is great, San Francisco’s streets surprisingly walkable (something rare in America), and people very nice and welcoming.

But… The Rent
Of course, San Francisco’s got a couple of downsides too. Everybody complains about the rent, for good reason. Because of some absurd zoning regulations forbidding anybody to build anything in about 70% of the city, there’s a massive housing shortage, translating into some of the highest rents in the world (and some of the lowest skylines for a city that prosperous). Expect to pay easily $2500 per month for a studio. If you find a roommate, you can find a small room for about $1600/month (as of 2018). Again, the salary more than makes up for it if you’re a software engineer, but you’ll have less living space than you would anywhere else.

The Monoculture
People complain about what they call the “monoculture” here. The high-rents chased away anybody who couldn’t earn the big bucks, like artists. If you hang out in New York or Paris, you’ll meet lawyers, teachers, artists… Here it’s all tech, tech, tech. Not necessarily a bad thing if, like me, tech is your passion. I for one love hearing stories about how my favorite products are built “behind the scenes.” But some people crave more diversity of conversation topics.

Starting a family
The high cost of living makes it very hard to start a family too. I sometimes feel like SF is a game where you have 10 years to become rich. If you win, you get to stay longer and start a family. Otherwise you have to leave and the mayor personally comes to kill your tiki torch. Statistics do show that the Bay Area is one of the regions with the fewest children, relatively to its population, in all of America.

The Public Infrastructure
San Francisco is the poorest managed city I’ve ever visited. The homelessness rate is very high, the sidewalks disgusting (if you live or work near the center, you’ll see human feces and syringes on the ground almost every day), and you often find tents lined up in the street. I don’t mean to blame the homeless; their situation is absolutely tragic, and is largely a result of, again, the artificially inflated cost of housing. But it’s not just the homeless. Roads are in a terrible state, public transportation is slow and unreliable, there is a lot of traffic, and even the electric grid is bad (there can be occasional power cuts during the couple of weeks of rain every year).

A pattern I’ve noticed is that newcomers here tend to fall in love with the city at first sight. That “honeymoon phase” will last 1-3 years. After that, they stop noticing the kind of people they encounter and the opportunities they’re exposed to on a daily basis here, and start minding the rent, bad public transportation, and human feces.

But the good news is: if you don’t like it here, you can always leave! 3 years in SF will not only have been an amazing experience you’ll always remember; they’ll pay dividends for your whole life. I know some people who went back to France after 6-7 years (often to start a family), and they told me that having a “Silicon Valley” stamp on their resume earns them a 10-20% premium on the offers they get in Europe.

And it’s surprising how quickly one can build a network here. I met someone the other day who used to live here and moved back to Paris. Common acquaintances kept popping up in the conversation. I was astounded when he told me he’d only been living here for 3 years, and left more than 10 years ago! Maybe it’s true that “you can check out any time you want, but you can never leave.”

The Roots
“But moving to San Francisco is so hard!”, I often hear. And it’s true — especially getting a visa can be quite an ordeal.

My objective in this post is to convince you that you need to move to SF. There are already tons of articles out there on your options as far as visas are concerned, so I won’t get into too much detail about that. I’ll just say that if you qualify for it, the J1 visa is probably your best bet to get your foot in the door. O1 visas are great too, and easier to get than most assume.

Nobody said it would be easy, but it’s more than worth it. And if you think it’s hard now because you have a lot of things going on wherever you are, tell yourself that it’s only going to get harder with time, especially if you’re a student. Roots only get deeper. When I moved here, I jeopardized my small development agency (ended up closing it shortly after moving — remote is hard) and my relationship with a girlfriend I’d moved in with and had been dating for 3 years (broke up shortly after moving too — remote is hard!). All for a place where I had no network, and no plans.

I tried hard to convince a couple of friends to come. One of them is a technical genius, and I don’t use the word lightly. He’s like Rainman smart. These friends told me something like “I agree, I’ll come eventually, but I can’t now. I’ll come when the time is right.” 6 years later, as I predicted, none of them have come, and their roots have gotten deeper. They built companies or careers, took mortgages, got married…

Today, a couple of them admit they made a mistake.

They wish they’d seized their chance to go West.

Mind the Moat, a 7 Powers Review

The Lindy Effect has become my top heuristic to decide what to read next. This phenomenon describes how some things tend to live longer, the longer they’ve lived — to speak plainly, if something has stood the test of time it must be important. When you’re tempted to read a book published only 2 years ago, chances are you’re just sitting downstream of the author’s self-promotion efforts. Not that there’s anything wrong with self-promotion, but it doesn’t correlate well to the quality of the book.

But one must know when to override their favorite heuristics, which is what I did with 7 Powers. Written by Hamilton Helmer and published in 2016, the book came to my attention as a recommendation from an avid reader who I knew shared my preference for tried-and-true publications. It became more compelling as I saw its glowing reviews from folks I respect like Peter Thiel, Patrick Collison, Reid Hastings, Daniel Ek, and Mike Moritz. But what really convinced me is that it’s about competitive strategy, and more specifically moats. Moats fascinate me, and I know my understanding of them still has important deficiencies.

Moats are those barriers that protect your business’ margins from the erosive forces of competition. It doesn’t matter how revolutionary your product is: even if it literally changed the face of human civilization, you’re going to get nothing for it if anybody can sell it too, arbitraging profits away. The whole surplus of the revolution will go to the consumer, and none to you. Charlie Munger phrases it this way:

When we were in the textile business, […] one day, the people came to Warren and said, “They’ve invented a new loom that we think will do twice as much work as our old ones.” And Warren said, “Gee, I hope this doesn’t work because if it does, I’m going to close the mill.”


He knew that the huge productivity increases that would come from a better machine introduced into the production of a commodity product would all go to the benefit of the buyers of the textiles. Nothing was going to stick to our ribs as owners.


And it isn’t that the machines weren’t better. It’s just that the savings didn’t go to you. The cost reductions came through all right. But the benefit of the cost reductions didn’t go to the guy who bought the equipment. It’s such a simple idea. It’s so basic. And yet it’s so often forgotten.

Silicon Valley tends to reduce moats to network effects. But a simple look at Fortune 500 companies will tell you that there exist some other very powerful moats out there. The success of commodities sellers like Kraft Heinz, Procter & Gamble, or the Coca Cola Company has certainly shown me there was a gap in my understanding of them.

7 Powers did help fill that gap. It’s a simple, straight to the point framework with enormous explanation power. Let’s see what those different “powers” are.

1. Economies of Scale

This one is pretty straightforward, but has become so well-known it’s almost overlooked. If you have very low marginal costs, you should benefit enormously from scaling — an advantage you should juice for all it’s got. That leads to companies trying to “get big fast,” not because of scale for its own sake, but because it can serve as a weapon and bring enormous profits.

Helmer uses the example of Netflix (him and Netflix CEO Reed Hastings seem to be best friends or something). One pivotal strategic moment for Netflix was their investments in originals. Before that, they had to negotiate exploitation rights on a case-by-case basis. Their holders were largely oligopolistic and hence in a position to suck all the margins out of their business. Spotify had the same problem with labels, and it’s not super fun to have to hand 70% of your revenue to a handful of suppliers, before all other expenses.

Tren Griffin calls this “wholesale transfer pricing power“, and this is Porter’s supplier power at play: once one of your suppliers gets a monopoly over one of your necessary inputs, they’ve basically turned you into their serfs. You’ll still have to sweat to find customers, raise money, and do all the other unpalatable things that come with operating a business. They’ll get to keep the best part, which is the money. That’s one big reason why restaurants aren’t profitable: they’re in a commodity business, and their rent is a fixed cost that they have to pay every month no matter what. This is also why the most successful restaurants tend to own their walls.

Being #1 pays, especially in those industries with very low marginal costs. Suppose you’re Netflix. You have 100M subscribers, and each original costs $100M — so, $1 per subscriber. Now, consider your competitor Hulu, with 20M subscribers. Delivering the same value as Netflix costs them $5 per sub, 5 times as much! That means that you can allow yourself to spend more on marketing; better content; superior user experiences; more experienced people; and even be less efficient, and still beat them.

Economies of scale are the defining forces of the software industry. Marc Andreessen, paraphrasing Jim Barksdale, puts it this way:

Here’s the magical thing about software: software is something I have, I can sell it to you, and after that, I still have it.

Building software costs the same regardless of the number of people buying it. That results in a massive scale advantage, as described by Bill Gates:

At Microsoft, our only ‘hammer’ is software…. It’s all about scale economics and market share. You can afford to spend $300 million a year improving it and still sell it at a low price.

2. Network effects

Network effects are very à la mode these days. Either because some entrepreneurs are desperate to look like the next Facebook, or because they don’t understand network effects, they’ll tend to twist the word in all sorts of ways until it seems like their business has a network effect (if you squint really hard).

The most common misconception is that network effects = virality = positive feedback loops. But none of those 3 things are the same. The simple definition is that your business has a network effect if the experience for your customers gets better as more customers join in. Virality means that each user you sign up will tend to attract more users in turn. For example, those terrible online games that used to spam your friends’ walls on Facebook didn’t have network effects — they had virality. At the end of the day, your own experience as a player was the same regardless of how many other people played.

Network effects are a very important topic in tech businesses, and expanding on them is worth its own blog post — if you’re interested in digging deeper, I recommend this a16z deck.

3. Counter-Positioning

Counter-positioning is the practice of developing your business model such that incumbents have conflicting incentives preventing them to compete effectively. For example, competing with you could hurt one of their other businesses. As Helmer admits, it’s very close to Christensen’s disruption theory, with less of an emphasis on technology and “attack from underneath.”

One example of counter-positioning is what digital cameras did to Kodak. Most people blame those failures on the incompetence or complacency of the incumbent. “Everybody knew digital photography was coming! Those dinosaurs were stupid not to get onto it first!”

Theories like Christensen’s, and Helmer’s counter-positioning, propose an opposite explanation. The incumbent is unable to respond to the disruptive threat not despite but because of its expertise and business savviness. In Kodak’s case, the disruption was two-fold: with the technology, and the business model.

From a technological perspective, digital cameras sucked, even for the mass market. The first models I saw as a kid had a resolution of 320×240 (that’s 0.07 megapixels), terrible lenses, and could hold something like 20 pictures (on a floppy disk!). It was an interesting “toy” for the super early adopters market, but not for professional photographers, Kodak’s bread-and-butter. Of course, they knew digital photography would get better. But put yourself in the shoes of Kodak’s execs during the yearly budget planning. It’s hard to take away some precious dollars and talents from your cash cow, and give them to that inferior thing which your customers are scoffing at.

The gotcha is that those technologies are often actually superior on some other dimension, and can offer features that the status quo just could not match, even with all the R&D in the world. That often comes at a cost on some other dimension — which can be fine for the market segments that don’t care about them. Christensen says these segments are “over-served” and that the disruptor is “attacking the incumbent from underneath.”

The exclusive feature of digital cameras was developing your picture right after you took it and, most importantly, for free! Digital pictures would get sharper with time, but analog would never get free, unlimited roll. And this was a very big deal, especially for professionals.

My father used to own a publishing house with a dozen small newspapers. He lugged around _entire trash bags full of camera roll_to be developed, every week-end, spending tens of thousands of dollars a year on roll and development. When digital cameras became good enough, he immediately spent the big bucks on them. It was a shock to learn he’d spent $20k on a camera and a bunch of lenses, until he explained to me that it would actually pay for itself in just a couple of months.

Which leads me to the other kind of disruption, that of the business model. Not only were digital pictures low-quality, that “free roll” also made it a super lousy business for Kodak. They made most of their profits selling high-margin camera roll. That gave that division a lot of political influence inside the company — and Kodak got successful to begin with by cutting unprofitable lines of business, to instead focus its limited resources on cash cows.

That’s why it’s often said that Christensenian (which is totally a word) disruption is not technological, as much as a disruption in the value chain. Technology can change as much as it’d like, as long as your customers remain the same. Your company grew around satisfying these customers, so if a better way to serve them emerges, chances are your organization will be able to go after it.

But some paradigm shifts are different. At first, the new tech is completely uninteresting to your existing customers, and replacing your existing product with it might reduce your margins and result in a net negative. But, on the very long term, it grows in performance and satisfies more and more of your buyers, and the larger total addressable market often more than makes up for the lower margins. Those are the shifts that can bite you, if your natural answer is to stick to your guns and “flee upmarket.”

4. Switching Costs

Stickiness of your product can protect you from the forces of competition if it locks your customers in. You can milk that moat and even deepen it by up-selling extra features, integrations, consulting, overpriced training, etc… 

Helmer uses the example of SAP which, over time, can build deep roots inside your organization. Switching to another solution can be a months-long effort costing several millions of dollars, and much more in missed profits if done wrong.

Vendor lock-in is a big reason why enterprise software is so terrible and overpriced, other reasons including:

  1. The person who buys the software is not the same as the one who pays for it, and is not the same as the one who uses it. Per Milton Friedman’s classic matrix of “whose money’s being spent” / “who’s it being spent on,” that’s a sure way to buy crap for a lot of money. Sometimes, on the contrary, the software’s purchaser is over-incentivized on the measurable costs savings, at the expense of the immeasurable product quality.

  1. The software is optimized for must-have factors like compliance, complicated workflows, rule engines, permission management, etc… and UX takes a backseat to them.

  2. Companies often lack processes to re-evaluate their software purchasing decisions. I’ve seen some spend millions of dollars a year on software that hardly anybody ever used. But it was nobody’s job to reconsider the decision, and so they kept paying for it. Would you work hard on improving your product if you had a solid bedrock of such revenue?

Some other examples of customer lock-in include:

  • IBM, which still made over $1B per year with Lotus Notes in 2013. I heard the IRS’ codebase also largely runs on IBM’s PowerPC mainframes. Selling to the government can often be the guarantee of a lifelong rent for a tech company.

  • Gmail. You’ve already given your email address to all your friends and used it to sign up to hundreds of services. Gmail’s UI isn’t bad enough to justify the hassle of switching all this.

  • Photoshop, or complicated tools in general. In this case, the customer lock-in rests in the sunk cost of mastering a complex tool and learning its idiosyncrasies.

5. Brand

One of the most powerful and durable kinds of moat, as well as one of the most complicated and lengthy to build.

Brands are so powerful that they seem to be Warren Buffet’s favorite kind of moat. He’s placed famous bets on household-name brands (Heinz, Coca Cola, See’s Candies…) that build upon fundamental human preferences, and have been around for long enough to capture distribution channels (a closely related kind of moat I’ll talk about later). This keeps them growing by default, as long as they don’t screw up (Munger’s famous via negativa definition of success: not failing for long enough).

Some of the most powerful brands in the world sell commodities, like L’Oreal, Louis Vuitton, Diesel, Levi’s, Rolex, etc. This is no coincidence, and highlights one of my favorite mental models: to develop a skill, look for lifeforms that had no choice but to excel at it. The Wright brothers, designing their 1st airplane, famously spent a lot of time observing and studying birds.

(Another example is 3M. They reportedly developed compression bandages to fight ulcers, inspired by the skin of giraffes’ legs, which never develop any despite the extreme pressure on the veins of their 18-foot bodies. Likewise, if you want to learn how to differentiate and build a world-class brand, seek inspiration from the companies making a killing selling ultimate commodities.)

There is a positive feedback loop at play with brands and distribution channels. The more people know your brand, the more they expect to see it on the shelves of their favorite store, giving you more leverage over it. That allows you to get better deals with these stores — which, in turn, act as a channel for people to discover your brand, furthering its reputation, etc etc…

A lot of ink is flowing these days about the impact of the Internet on brands.

First, brands have that faculty described above to grant you leverage over distribution channels. This effect is practically nullified by the Internet’s infinite shelf-space.

Second, one of the fundamental functions of a brand is to signal quality, by getting the company to play an iterated game instead of a single move game. In game theory, this can be an effective way to get out of Pareto suboptimal equilibria. For example, turning the famous Prisoner’s Dilemma into an iterated game changes the optimal, rational strategy from (Defect, Defect) to (Cooperate, Cooperate).

Single move interactions can lead to market failures, as in the example of the Market for Lemons. You should read the Wikipedia entry if you want the whole spiel, but the gist is that there is going to be a race to the bottom in quality in a market with these 2 characteristics:

  1. Varying degrees of product quality
  2. Information asymmetry: the seller knows the quality of their product, but the buyer cannot inspect it.

Brands break that dynamic and make it a rational move to sell high quality items, since skimping on quality would hurt sales over the long run by damaging the seller’s reputation. By investing a lot on advertising and exposing itself to you again and again, a seller wants to signal: “we care about our reputation. We’re looking to build a long term relationship, and we’re never gonna give you up, never gonna let you down, never gonna run around, and desert you.”

The Internet demolishes this effect, by connecting a product’s prospective customers with its current ones. Who needs a brand when you’ve got ratings? I don’t need you to spend millions of dollars on ad campaigns. I can just ask all your current customers over there exactly how satisfied they are with your product, and how it’s holding up over time. This is a much cheaper and more direct way to break the information asymmetry.

This does not mean brands will die. The recent emergence of successful brands selling commodities online, like Anker with batteries, is a sign that there is still room for them. But it means that they might be less powerful than they once were. I suspect that the era of monster brands might have been a short parenthesis in the history of markets, closed by Amazon and other aggregators.

Another reason why brands might always be a thing is that the Internet isn’t touching one of their other fundamental functions: signaling. People want to show that they have money, or that they care a lot about the environment. And there will always be companies like Tesla to cater to these needs. The only way I could see the Internet change this is the extreme scenario of complete cultural fragmentation, where people share so few references that signaling becomes impossible. But I don’t see this happening any time soon. We need cultural Schelling points, and I see no reason why we’d be unable to develop them, short of us becoming a galactic civilization.

6. Cornered Resource

A company corners a resource when it somehow gains preferential access to it. Resources can be material as well as human: some firms have gotten so good at acquiring and retaining extremely educated talent from microscopic pools that one could argue they’ve effectively cornered that market — like Google with AI PhDs.

One famous example of a cornered resource is DeBeers and diamonds. Other examples include:

  • Intellectual property, like Disney’s on their characters, or Apple’s on iOS
  • Regulatory capture, an especially vicious form of cornered resource
  • Stronghold on distribution channels

7. Process Power

Leaving the least obvious power for the end: process power. Helmer uses the example of Toyota, which beat GM on its own turf despite incurring sizable tariffs and shipping costs. Worse, Toyota’s leadership was always extraordinarily transparent about its processes, giving interviews and even tours to American automotive executives, telling everybody about the Toyota Production System (TPS), Kanban-based just-in-time manufacturing, “Kaizen” continuous improvement, and workers allowed, nay expected to stop their part of the production line to fix the deficiencies they identified.

They even created a joint venture with GM in Fremont, California, and trained some of their workers in Japan. But they kicked their ass all the same.

Helmer’s point is that process can contribute to product quality, customer satisfaction, sales… And remain completely irreproducible. As such, it can constitute a powerful strategic asset.

A process is not just boxes and arrows on a PDF file, or a fancy list of principles in bullet points. It is deeply embedded inside the organization, permeating its culture. The bullet points are only very high level descriptions of the principles at play. These principles are developed and applied in a myriad of ways which form their own ecosystem within each company, and are not documented in any form. At Toyota, one could say that nobody, including Toyota’s own leadership, understands their process. They just know they’ve set up certain conditions, recruited certain people early on, encouraged some broad categories of behavior while discouraging others, rinsed and repeated for 10 or 20 years, and now they have this ecosystem that produces these results. One could no more reproduce it by visiting their plants and reading HBR than they could learn to play tennis by reading books about it.

The funny thing is that, from an insider’s perspective, you just do thing as usual, not noticing anything special happening. Meanwhile, on the outside, the process looks like some voodoo producing inexplicable results, with outsiders engaging in a cargo-cult replication of your ways and clumsily translating your values in their own lingo. I certainly feel that way with tech. I have no direct experience in any other sector, so I can’t speak for what we do differently than them. But I do see all those old conglomerates spending dozens of millions in consulting, to get presentations with words like “digital convergence” and “innovation economy” all over the place, and end up promoting some guy “Chief Digital Officer” or worse, “Chief Innovation Officer.”

I’d urge any entrepreneur to get familiar with the 7 powers and adopt them as one of their key mental models. You can use it like you would go down a “moats checklist,” and see if a business has the potential to sustain high margins. That works to analyze the structure of whole industries a well.

But before closing, I need to make the mandatory side notes about the interplay between culture and strategy, and the relative importance of strategy and execution.

People have been repeating Peter Drucker’s “culture eats strategy for breakfast” so much that it’s become almost trite. Strategy isn’t something one can design from the top of their ivory tower, spewing out a massive Powerpoint presentation and corporate slogans like Moses coming down from Mount Sinai. Your actual strategy is the one you end up implementing, and it’s concretized by the way you spend your money and attention. Like Gloria Steinem said: “we can tell our values by looking at our checkbook stubs.”

All this starts with culture. When there is a clash between the Tower’s strategy and the Square’s culture, the latter will almost always win. A recent example is Alphabet and Project Maven. The company’s top leadership decided they would start working with the Pentagon on a contract worth $250M/year and possibly unlocking a much larger, $10B deal to build the US army’s entire cloud infrastructure. But Google employees disagreed, and ended up having the upper hand. Google dropped the contract.

It’s not like culture and strategy were these two separate things, one coming from the bottom, the other from the top. Instead, they are deeply interwoven. Strategy is a million small decisions made every day at all levels of the organization. Companies document few of those, and can’t even measure them. In this way, one can look at culture as a sort of meta-strategy: shaping your culture is the strategy that makes the strategy.

Finally, about the importance of strategy and execution. First, the line between those is not always that clear, as explained just above. But the distinction does exist. There is this dogma in Silicon Valley that “ideas are a dime a dozen, what actually matters is execution.” Sure, strategy is worth exactly zero without some muscle to back it up. But I dissent with the majority, and believe more and more that, on the margin, strategy is far more important than execution. Cemeteries are full of startups with poor strategy and brilliant execution — and the Fortune 500 full of giants building exactly the right products, though in a very crappy way.

IBM executed on the IBM PC with the discipline of navy seals, reaching market at scale with an amazingly executed product in just 12 months. But they made the mistake of leaving the OS to a tiny startup called Micro-Soft, which made a killing from the blunder, and made the other good decision not to give exclusivity to IBM. On the contrary, they built their OS such that it could run on equivalent PCs. As a result, IBM got stuck with its beautiful commodity in a low-margin business that it recently had to exit. And Microsoft built its empire on Windows, which was inferior to the competition in many regards, but benefited from strong network effects (software running on top of it, today we call them apps), high switching costs, and economies of scale.

I find that the principle also applies on the level of one’s individual career. If you want to be successful, working on the right thing is what matters most. I’ve seen brilliant engineers who cared about their craft like Japanese sushi chefs — documenting every aspect of their work, testing their feature thoroughly on several platforms, instrumenting and optimizing their code to make sure it runs smoothly and has no memory leak, etc… who got stuck for years, while other engineers with poorer technical skills worked on projects with a direct impact on the business, and earnt back-to-back promotions. Some cynics perceive this as dysfunctional politics — I think it’s a healthy replication of the way markets actually work. Deciding what to work on is the most important part of your job, whether you’re an entrepreneur, a manager, or an engineer.

Nobody Cares

A friend was commenting on how active I was on Twitter, telling me how he held back from posting anything online, out of shyness. I answered that that was my default mode as well, and, I suspect, that of most people. I get shy and afraid of what people could think about me, or I self-censor after imagining the worst way a tweet could be interpreted.

(It sometimes does seem like some people make a deliberate attempt to misrepresent what you’re saying. That, or they’ve spent so much of their lives imagining monsters that they now see them everywhere. Speaking to them, you feel like they’re fighting a mental chimera, instead of addressing your points.)

When I find myself engaging in too much self-censorship, I remember one of the most liberating facts I know: that nobody cares.

An extreme example I can think of to illustrate this point is politicians, who seem able to get away with anything. Embezzlement, sex scandals, you name it. They make national headlines, are the shame of the country for a couple of days, and everybody is sure their career is destroyed forever. Then, they disappear, come back onto the scene after a year or two, run for senator, and win (I hear it can even work when you run for President[reference needed]).

I don’t mean you should be an immoral scoundrel — rather, I want to demonstrate how people really don’t care. These politicians’ entire careers rests upon their reputation, and that of their enemies upon making sure that they don’t get back on their feet. If even they can recover from those scandals, what do you think is the worst that could happen to you (whom, again, nobody cares about) after you’ve made some stupid statements?

Nothing at all. I don’t mean that people won’t remember — I mean that they won’t even notice. Most content is already bad, so yours will just be drowned in that ocean of mediocrity that people scroll through all day. Even better: since it’s bad, it’s not going to spread very far. You’ll be benefitting from a selection effect, where your best content will receive a lot of exposure, and your bad content simply go unnoticed.

This is an asymmetrical game where bad moves cost almost nothing, and good moves are worth a lot. Logic dictates that, playing such a game, you should roll the dice as long as they let you. The board game Monopoly was designed to give people an intuitive understanding of the way markets could supposedly tend towards toxic monopolies — I wish somebody designed a board game to make people understand that life is positive-sum; that the downside of most moves is never really as steep as it seems; that the upside can be unbounded; and that the best thing one can do is make as many moves as possible. In Marc Andreessen’s words, “optimize for the maximum number of swings of the bat.”

Adding a bit of nuance: It’s not that people will never notice your screw-ups — they’ll just do so at such a low frequency that it can safely be rounded to 0 when you’re getting started. And, even when they do, their noticing is largely inconsequential. But, sure, you may get slapped on the wrist from time to time if you post often enough, or to a large enough audience.

I’ve been the subject of Twitter mobs at least 3 times — but that’s after 10 years and almost 14,000 tweets (I also happen to be a child-eating monster, which some people object to). That’s less than once every 3 years, and nothing material happened to me or my career; if anything, it’s allowed me to grow a thicker skin. Even without this silver lining, the upside of “thinking out loud” is more than worth the bit of controversy you’ll have to endure from time to time.

By posting more of your thoughts publicly, you get to steelman your theories, meet people who think alike, build more shared context with those you already know, have interesting conversations, and receive great recommendations (you’d be surprised how much better humans still are at making those than machines).

I do wish more people were active online. The whole promise of the Internet was that of an infinite, vibrant, open forum of ideas. Instead, there seems to be a mass exodus towards private communities — they surely are where I get the most meaningful, genuine interactions, and hear the most original ideas today. This makes me wonder how many eye-opening insights we’re all missing out on, uttered in conversations that should have happened in public. Some people welcome this as a natural evolution of the Internet — I perceive it as the tragic entering into a new Dark Age, and find the silence of some of the most brilliant minds out there deafening.

So, the low frequency of backlashes mentioned earlier does amount to a lot, when you get as much visibility as these folks do, or start representing something to the world instead of just being taken as an individual. When you’ll have written as much as they have, inspired as many people, and taken as much crap, you’ll have an excuse to get shy. Until then, remember the good news: nobody cares about you.

A Long Week-End in Mexico

I took a trip to Mexico City over the long weekend — it was my first time there, and I absolutely loved it. The city surprised me in many ways, and didn’t match at all the picture in my mind. I was expecting dry landscapes scattered with cacti, and instead I saw what was undoubtedly the most green and lush city I’ve ever visited. Almost every street is bordered with a continuous line of tall, luxuriant trees, and there are potted plants  in every shop, café and restaurant.

The general mood in the streets is calm, peaceful, and at the same time vibrant, joyful, and insouciant. People don’t hurry around or push each other like they do in New York City. They smile easily and don’t get impatient if you take too long to decide what you’ll order, or if you don’t speak their language. There is a general feeling of dolce vita: people stroll, kids play, and there is often music playing from storefronts and balconies… The street is a place of life, instead of a mere corridor used to get from A to B, like in the US. To be fair, the amazing climate certainly helps.

(As an aside, there is something to be said about this insouciance, inside a country reputed to be dangerous. In America this is contrasted with downright paranoia and over-caution. A friend recently told me the story of an acquaintance of his, who got arrested by the police for leaving his 9-years old child unattended for a couple of minutes in a public park in SF. Compare this to the many groups of kids who were safely playing football in squares in Mexico City, with minimal adult supervision. Coming to America, I was expecting to meet reckless cowboys chewing tobacco. Instead, I saw skinny-jeans wearers who will never jaywalk, leave their kids unattended, or go to work if it’s raining outside — though that last one might be specific to California.)

To my embarrassment, I was also expecting a dangerous city. I wasn’t exactly thinking I’d get mugged in just 3 days, but we can all be nervous when our only exposure to a new place has been through network news outlets. Even in the most cosmopolitan cities one can always feel when they’ve wandered into the wrong neighborhoods. I felt none of that in Mexico City, even walking in small dark alleys at night — I certainly felt a lot safer there than I do in San Francisco. I also saw much fewer homeless people, and the few I encountered did not seem as terribly mentally ill, or drug addicted to as an extreme degree. 

Speaking of not speaking their language, this was one thing that disappointed me: almost everybody there whom I encountered speak absolutely no English — and by that I mean, are unable to count up to five.  I don’t mean to sound elitist, rather I’m genuinely curious as to why this is. You would assume a relatively poor country (their GDP per capita is $9k, one sixth that of the US), sharing a border with two of the most wealthy states of the wealthiest country on earth, would deem it useful to learn their language — especially when it’s so grammatically simple, and shares the same alphabet as them. Incidentally, this English illiteracy also exists in Spain, the only European country I’ve visited where people did not commonly speak English. I speak almost no Spanish myself (although a huge percentage of words are cognates in French), which made it quite hard to communicate with them. This hindered my trip, cutting me off from any meaningful exchange with locals — next time, I’ll try going with a Spanish-speaking friend. I enjoyed the city so much that I’m considering learning some Spanish, just in case I decide to extend my stay there someday.

One thing that will certainly bring me back to Mexico is the food. There really aren’t that many Mexican restaurants where I grew up in France, and I’ve just learnt that what San Franciscans call Mexican food is, indeed, very different from the real thing. First, the food in Mexico City is generally a lot less spicy than one would expect, and a lot less spicy than its Californian counterpart. Second, the ingredients are fresh, and of very good quality. The guacamole especially tastes completely different, probably as a result of using avocados of better provenance. 

A lot of these meals are consumed in Izakaya-like shops in the streets. Those abound, contributing to what seems to be a huge informal economy. One can buy just about anything from corner vendors, most of which don’t accept credit cards — I’d be surprised if much taxes were paid on these transactions. I couldn’t help but think of the inefficiency represented by all those vendors (about 2 per block!), standing all day next to their carts, only there to put cash in a leather pouch and hand a product to a customer who could easily have taken it themselves. Their omnipresence reminded me of Tokyo’s vending machines — I guess the reason they haven’t been automated yet is because their labor is just so cheap. In any case, they add a lot of charm and life to the streets.  

Despite the relative pleasingness of the city, some things are still there to remind you that you’re in a relatively poor country. Although the streets were extremely clean (much cleaner than SF’s), some neighborhoods right in the center of the city have a pungent stench of sewer throughout the day. Everybody warns you not to drink the tap water, huge construction machines are active right next to pedestrians, electric and phone cables installed in a hodgepodge manner, and, the unforgivable sin, the Internet connection was dreadful.

Despite any expectation I may have had, I had a blast, and I can’t wait to explore more of that beautiful country. I can’t believe it’s taken me this long to get there in the first place, especially when it’s a mere 5h flight away from SF. Next time, maybe Puerto Vallarta, or Cancún.

(all pictures by @ludoviclandry)

Favorite Books of 2017


Einstein: His Life and Universe

Definitely the best biography I’ve read this year. It combines details into what’s probably the most incredible intellectual adventure of the 20th century — we’re talking of a guy who single-handedly upended physics as it was understood, alone from his patent office in Switzerland — and insights into the personality of the man behind it. Shed light on aspects of Einstein I knew nothing about, and taught me what an awesome human being he was, just as as much as he was a genius physicist.

Benjamin Franklin: An American Life

Another one from Walter Isaacson. The advantage of reading the biographies of people like Benjamin Franklin is that they make you learn about both the life of a man, and the historical period they had a part in shaping — in this case, the American Revolution, which I know way too little about — in a way that I find much more relatable than history books.

How Breakthroughs Happen

Makes the case that innovation is more about the combination of existing ideas in novel ways, than the fundamental breakthroughs people imagine, and talks of “technology brokering:” gathering ideas, practices, and technologies from seemingly foreign fields, so as to bring them together, and sometimes create a whole new one.

Technology brokers are characterized by their connections to multiple small worlds and, further, by their connections to worlds that otherwise share few connections between them. Network theorists use the concept of range to describe the breadth of connections any one person may have in a network, as measured by the number of non-redundant ties […]. Technology brokers attempt to maximize their range of connections because by doing so they are in a better position to be the first to see how the people, ideas, and objects of one world may provide valuable solutions in another.

This made me think of this article, The No. 1 Predictor Of Career Success According To Network Science: 

According to multiple, peer-reviewed studies, simply being in an open network instead of a closed one is the best predictor of career success.
In the chart, the further to the right you go toward a closed network, the more you repeatedly hear the same ideas, which reaffirm what you already believe. The further left you go toward an open network, the more you’re exposed to new ideas. People to the left are significantly more successful than those to the right.

I believe this highlights a weakness of the Silicon Valley ecosystem, which is becoming increasingly monocultural. Much of this is due to the insane, NIMBY-induced rents (a 1 bedroom in downtown San Francisco now costs easily $3,500 per month), making it impossible for all but the wealthiest to stick around — those wealthiest tending to be the ones who work in tech. The silver lining is that you not only increase the concentration of tech people, and with it the frequency of valuable serendipitous encounters, you also make the most driven people self-select to migrate to this small area, ready to sacrifice personal comfort, for the hope of participating in building something impactful.

But this also comes at the high cost of building this echo chamber everyone complains about. I don’t have any data to support this claim, and the human memory is notoriously bad to detect that kind of pattern, but I do feel there’s been a noticeable decrease in the originality / craziness of people around, in just the 5 years I’ve been here. You still see wicked smart, brilliant, ambitious, hard-working people, but you’ll find those in NYC too, whereas the Bay Area used to have its own, special breed of weird people, in a good way.

That article above also contains an amazing quote, related to technology brokering, from a Wired interview Steve Jobs gave:

Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something.

It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new things. And the reason they were able to do that was that they’ve had more experiences or they have thought more about their experiences than other people.

Unfortunately, that’s too rare a commodity. A lot of people in our industry haven’t had very diverse experiences.

So they don’t have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one’s understanding of the human experience, the better design we will have.

Exit, Voice, and Loyalty

One of those classics I just had to read, after having it recommended to me one too many times. You can check out my full review here.


The Lessons of History

The best way to describe this book is through its introduction:

Since man is a moment in astronomic time, a transient guest of the earth, a spore of his species, a scion of his race, a composite of body, character, and mind, a member of a family and a community, a believer or doubter of a faith, a unit in an economy, perhaps a citizen in a state or a soldier in an army, we may ask under the corresponding heads—astronomy, geology, geography, biology, ethnology, psychology, morality, religion, economics, politics, and war—what history has to say about the nature, conduct, and prospects of man. It is a precarious enterprise, and only a fool would try to compress a hundred centuries into a hundred pages of hazardous conclusions. We proceed.

From Third World to First

The memoirs of Lee Kuan Yew, the hero (and I don’t use the word lightly) who served as Singapore’s Prime Minister for over 3 decades, bringing about the miracle he describes in the title of his book: transitioning “from third world, to first world, in a single generation.” Lee thought of the issues of his time in a crystal clear, all-encompassing fashion that’s nothing short of fascinating, and his book is replete with interesting anecdotes, giving a rare peek on the small quirks of the world leaders he frequented closely over several decades.

Of course, it’s also quite a lesson in leadership, from someone who led what must be one of the most amazing success stories of the 20th century, and Lee’s philosophy of extreme pragmatism is a challenge to the most ideologically minded out here — I know it did challenge me.



This is probably the one best book I’ve read in 2017, and will be one of those books I revisit every couple of years.

Ray Dalio is the founder of the famous hedge investment firm Bridgewater, and this is a concentrate, in a mere 300 pages, of the principles he’s built for himself over a lifetime.

Principles has, by a very wide margin, the highest signal to noise ratio I’ve ever seen in a book. Dalio has an extremely analytical, methodical mind, and it shows: the book is structured in bullets and sub-bullets, written in a clear and concise fashion, no word being unnecessary nor prose overly flowery. I’d share some excerpts here, but would end up quoting half the thing.

Peak Performance

A recommendation by @sknthla. It’s one of those easy-to-skim books that try to pound a couple of simple, valuable insights into your skull:

  • Progress happens by alternating periods of intense stress with deep rest, the latter being just as important as work — and world class performers taking it just as seriously.
  • That “stress – rest” cycle happens at all levels, and, at the lowest one, the authors recommend alternating short periods of work (around 1 hours) with 5-15min breaks.
  • All ways of resting are not made equal, the best ones being:
    • Meditating (doesn’t have to be long, 15min).
    • Social activities, i.e. hanging out with friends.
    • Walks in nature. Apparently, and I’d be curious to see if those results replicate consistently, merely staring at pictures of nature have a positive impact on the brain’s learning ability.
  • The work that counts is the one that’s painful. It’s going to sound cheesy, but “no pain, no gain” is definitely true, or, like Mohamed Ali said “I only start counting when it starts hurting.”
  • An excellent way to make progress is to deliberately seek out challenges that exceed your ability, just enough to be challenging, and not so much as to be overwhelmingly stressful. Make it harder if you’re completely in control, and dial down a notch if you’re overly anxious.
  • Perceiving stress as a challenge instead of a threat will make a huge, direct impact on the progress you make. Growth mindset yada yada.
  • Routines and habits are important. To get in the zone faster, develop routines for before and after your work sessions.
  • Never multitask: put your phone away (just having it in sight, or feeling it in your pocket, apparently has a measurably negative impact on your focus), and if necessary block websites using utilities such as SelfControl.

Heroes on the Shoulders of Giants

Epistemic status: I’m outside of my circle of competence when it comes to AI. That said, most of this post is just logical reasoning, independent of AI-specific knowledge.

François Chollet (whom you should definitely follow on Twitter) writes about “The Impossibility of Intelligence Explosion.” Here’s his TL;DR, although I’d encourage you to go read the whole thing:

  • Intelligence is situational — there is no such thing as general intelligence. Your brain is one piece in a broader system which includes your body, your environment, other humans, and culture as a whole.
  • […] Currently, our environment, not our brain, is acting as the bottleneck to our intelligence.
  • Human intelligence is largely externalized, contained not in our brain but in our civilization. We are our tools — our brains are modules in a cognitive system much larger than ourselves. A system that is already self-improving, and has been for a long time.
  • Recursively self-improving systems, because of contingent bottlenecks, diminishing returns, and counter-reactions […], cannot achieve exponential progress in practice. Empirically, they tend to display linear or sigmoidal improvement. […]
  • Recursive intelligence expansion is already happening — at the level of our civilization. It will keep happening in the age of AI, and it progresses at a roughly linear pace.

I think the piece makes a couple of brilliant points — I love the idea of “civilization as an exocortex” — but I disagree with some of those points, or think they still allow for the possibility of a future intelligence explosion. Here’s my take on this.

1. We’ve already gone exponential

François Chollet writes:

[Y]ou may ask, isn’t civilization itself the runaway self-improving brain? Is our civilizational intelligence exploding? No. Crucially, the civilization-level intelligence-improving loop has only resulted in measurably linear progress in our problem-solving abilities over time. Not an explosion.

I disagree, and think that yes, we’ve already been going exponential, by a lot of metrics.

This is the historical population of the world (although some say that this should soon start looking like an S-curve, the world having already reached peak child):

Now, here’s the World GDP (or GWP) per capita across history, in 1990 dollars (from Wikipedia’s “World Economy” article):

Remember, this is per capita, so the curve represents growth in productivity itself, rather than in population. And this is over a very short time span! 500 years isn’t much compared to the ~10,000 years that human civilization’s been around for.

And this is limited to humans, who, in the grand scheme of the Universe, are an extremely recent phenomenon. You may already have heard of Carl Sagan’s “Cosmic Calendar,” compressing the Universe’s chronology from 13.8 billion down to a single year. On this timeline, life doesn’t appear until September 21st, multicellular organisms December 5th, and anatomically modern humans before December 31st, 11:52PM. Agriculture, which many historians consider the beginning of human civilization, doesn’t start until 11:59PM, and 32 seconds.

In his article on “quantitative macrohistory,” Luke Muehlhauser writes:

[M]y one-sentence summary of recorded human history is this: Everything was awful for a very long time, and then the industrial revolution happened.

This industrial revolution, on the “cosmic calendar”, doesn’t start until 570 milliseconds before midnight.

So, sure, if you look at it on the timescale of a single human, things are moving kind of slowly. But, remember: it’s a miracle we’re seeing anything move at all! For most of human history, one could have time-traveled 100 years into the future and been able to function normally, barely noticing any difference (except for the way those punks are now tying their hair with 2 bones instead of 3).

To wrap this point up: on the grand timescale of the Universe, nothing happened for a very long time, and then all of a sudden, life developed. From this point already, staying on the scale of the Universe makes it hard to tell events apart, so we need to zoom into this thin sliver. There, we can see, again, not much happen, and then all of a sudden, mammals develop, including apes. Zooming further, not much happening, and then human civilization! Zooming in, not much, and then industrial revolution!

You get the idea: not only do I think the singularity can happen, I think we’re already living in it.

If there ever is a computational singularity, where nanoseconds will be to those machines what millennia are to us, they’ll summarize not only human history, but even our modern times, as “nothing happened, and then there was the seed AI”. Our “can you imagine Earth was around for 600 million years before any life developed?” will be their “can you imagine they used to sleep for 8 hours a day?”, 8 hours being as unfathomable a duration to them, as 600 million years are to us.

(I realize I’m grossly anthropomorphizing what would actually be completely alien entities, but it’s fun, and you get my point.)

2. Individuals are the ones pushing things forward

Chollet writes: (emphasis mine)

An individual human is pretty much useless on its own — again, humans are just bipedal apes. It’s a collective accumulation of knowledge and external systems over thousands of years — what we call “civilization” — that has elevated us above our animal nature. When a scientist makes a breakthrough, the thought processes they are running in their brain are just a small part of the equation — the researcher offloads large extents of the problem-solving process to computers, to other researchers, to paper notes, to mathematical notation, etc. And they are only able to succeed because they are standing on the shoulder of giants — their own work is but one last subroutine in a problem-solving process that spans decades and thousands of individuals. Their own individual cognitive work may not be much more significant to the whole process than the work of a single transistor on a chip.

Those “standing on the shoulders of giants” points never sit quite right with me, especially when it’s used to de-emphasize the importance of individuals. It’s true, to some extent: we all leverage the progress civilization has made before us, so that we can move it forward ourselves.

But to the extent we’re all standing on those giants’ shoulders, why do so few of us achieve anything noteworthy? Is it only about luck and circumstances, aka “being in the right place, at the right time”?

I think circumstances matter, but they’re not the main factor. Again, at the time when scientists made some of the greatest discoveries, many people were arguably in the right circumstances, indeed, often much better than the ones of the researcher who ended up making the breakthrough. Einstein is the canonical example: how come this clerk, stuck in some patent office in Switzerland, was the one who discovered special relativity, when so many others had tenure, with more time to think about that stuff than him, access to more content, more brains to pick from and have fascinating conversations with, and sometimes with entire teams and laboratories at their disposal?

Newton, too, had his famous “annus mirabilis”, when he discovered the laws of gravity, and differential and integral calculus, while trapped at his parents’ place in the countryside, to avoid a plague epidemic.

If anything, it sometimes seems like the only way to have any impact is to know when to stop shoulders-climbing, and start working on your own thing, like the researchers in those two examples did. After all, those shoulders know no top: you could dedicate your entire life to a single field, without having exhausted the discoveries that have been made in it. In the words of Richard Hamming:

There was a fellow at Bell Labs, a very, very, smart guy. He was always in the library; he read everything. If you wanted references, you went to him and he gave you all kinds of references. But in the middle of forming these theories, I formed a proposition: there would be no effect named after him in the long run. He is now retired from Bell Labs and is an Adjunct Professor. He was very valuable; I’m not questioning that. He wrote some very good Physical Review articles; but there’s no effect named after him because he read too much.

I agree the work civilization has done before you matters, but the importance of individuals still seems under-appreciated by most people. It takes only one person, sailing further than others did, to push the frontier forward for everybody else. In this sense, civilization actually moves as fast as its fastest member. We only need one Columbus to unlock access to a whole new continent, one Einstein to get the insights required to develop lasers and nuclear power, one Darwin to gain a new understanding of life.

(As an aside, this “bias towards action”, required to have any impact, appears to me as one of the greatest strengths of Americans. It is so easy to lose oneself in a pointless hoarding of knowledge, and be frozen into inaction by “what ifs” and “things we could have missed”. Americans, with their “shoot first, ask questions after” ethos, seem to appreciate that one should start doing something before they completely understand it.)

3. Brains are the bottleneck

François Chollet continues:

[T]he current bottleneck to problem-solving, to expressed intelligence, is not latent cognitive ability itself. The bottleneck is our circumstances. Our environment, which determines how our intelligence manifests itself, puts a hard limit on what we can do with our brains — on how intelligent we can grow up to be, on how effectively we can leverage the intelligence that we develop, on what problems we can solve. All evidence points to the fact that our current environment, much like past environments over the previous 200,000 years of human history and prehistory, does not allow high-intelligence individuals to fully develop and utilize their cognitive potential.

I agree with this, except when it comes to the frontier. If you broadly define intelligence as the ability for an entity to control its environment then, by and large, one’s intelligence sits outside their brain: 99% of one’s ability to control their environment is dependent on the ticket they pulled in the lottery of “in what century will you be born”, with less than 1% determined by their IQ.

But that civilization was, in the first place, built and shaped by individuals, just as much as they were in turn shaped by it. When it comes to pushing the frontier, and redefine what the next centuries will mean for the generations living them, the bottleneck lies in these individuals. Here, I echo Peter Thiel’s rejection of technological determinism, according to which “progress will happen, no matter what.” For better or for worse, I think that, regardless of the current cultural momentum, the fate of the world still lies in the hands of individuals, and the actions and decisions they’ll make.

From a more concrete and “micro” standpoint, ask entrepreneurs what’s the current bottleneck holding their companies’ growth back. Some will say it’s market adoption, or capital, proving Chollet right in his emphasis on contextual factors. But in AI, almost all will say it’s the brains: there just isn’t enough talent to go around, and articles abound about the piles of money they’ll throw at the good ones when they find some, with commonplace 7-figures packages.

Like Charlie Munger says:

I like artificial intelligence, because we’re so short of the real thing.

4. AI scales in a way humans can’t

Still from Chollet’s post:

An overwhelming amount of evidence points to this simple fact: a single human brain, on its own, is not capable of designing a greater intelligence than itself. This is a purely empirical statement: out of billions of human brains that have come and gone, none has done so. Clearly, the intelligence of a single human, over a single lifetime, cannot design intelligence, or else, over billions of trials, it would have already occurred.

But of course, everything had never happened, until it happened for the first time. You could equally have said “it’s an empirical observation that no human can run 100 meters in less than 10 seconds, since nobody’s ever done it before”, until Usain Bolt showed up.

Chollet continues:

Will the superhuman AIs of the future, developed collectively over centuries, have the capability to develop AI greater than themselves? No, no more than any of us can.

But once we’ve got that Seed AI, nobody’s talking of making only one of it. The thing with artificial intelligence is that, unlike its natural counterpart, it can actually scale, horizontally as well as vertically. When AlphaGo won its matches against world-champion Lee Sedol, many were quick to point out that:

The distributed AlphaGo system uses about 1 megawatt, compared to only 20 watts used by the human brain.

Which, according to those observers, makes the comparison unfair. However, like Benedict Evans says, “unfair comparisons are the most important kind.” The game doesn’t care how energy-efficient you are: you either win, or you lose. If anything, this seems to earn AlphaGo more points: in AI, once we find something that works, we can just throw a bunch of chips and megawatts at it, and watch it become even better. It’s often pointed out that the technologies behind today’s AI renaissance, like gradient descent, convolutional nets or deep learning, had actually been around for a long time, and just started becoming effective once we had enough computing power to feed them.

On the other hand, how do you think 50,000 humans, consuming a total of 1 megawatts, would have performed against a single AlphaGo? The closest thing I can think of is the Twitch Plays Pokemon experiment, where 1.2 million players took 394 hours to complete a game that a single kid can complete in about 25 hours.

(For the record: I don’t think all we need for the singularity to happen is more computing power. We probably need a lot more theoretical breakthroughs to get there. All I’m saying is: once we’ll have made those breakthroughs, and built this “seed AI”, we’ll be able to flip a switch, and get a million more of it, something you can’t do when you find a really smart human.)

To summarize:

  • Looking at history over a large enough time scale, it’s clear the complexity of the Universe is already exploding exponentially—from subatomic particles, to atoms, to molecules, to life, to organisms, to civilization. An intelligence explosion would sit in the continuity of this phenomenon.
  • Individuals are the ones pushing civilization forward, although they’re also leveraging the progress it’s made before them. Civilization tends to move as fast as its fastest member, since it only takes one of these individuals to push the frontier forward for everybody else.
  • Hence, the quantity, and especially quality, of available brains are the bottlenecks standing in the way of progress…
  • … and the first AI to surpass human intelligence would lift those bottlenecks, unlocking an intelligence explosion.

Thanks to Dan Wang and Kevin Simler for reviewing the draft and providing suggestions.

Book Review: Exit, Voice and Loyalty

Exit is an important part of capitalism: by allowing consumers to take their money anywhere they please, it trims out inefficient firms, drives productivity and quality up, and prices down.

“One thing people underestimate is how markets don’t allow anyone to do anything except make better and better products.”
– Bill Gates

“If we don’t produce better shoes, faster, and at a lower price than Bob just next door, consumers will flock to him and we’ll be bankrupt before we know it!”

The mechanism is so crisp, so simple, and yet so powerful, that it’s one of the first ones most people, including billionaires and economists, resort to when thinking about markets.

But Hirschman makes the case that exit doesn’t have the monopoly over quality-improving, price-reducing forces, and proposes an alternative: voice. The reasoning goes as follows: even if I have a monopoly, if I keep producing goods or services of low quality, or at too-high a price, my customers will keep complaining about it, which can have unpleasant outcomes, such as attracting the attention of the regulator. Voice is a lot more messy than exit, but it works – in fact, it works because of its messiness.

The rest of the book is about the interplay between those two forces, voice and exit. In most cases, exit gives strength to voice: nobody cares about your complains if you have no better alternative. But in other cases, exit can downright be counter-productive, i.e. hurting quality and driving prices up. Those are the cases where firms or institutions are insulated from the signals exit send them, most of the time because they’re public entities, and so just don’t care much about profits.

The problem (and this is one of the most powerful points made by the book): in those instances, exit can provide an escape hatch to the most demanding customers, who then don’t make their voices heard by the firm, where voice is precisely the only thing that could get it to change. Those entities, for this reason, could even want the exit of those most demanding customers, who, if they stayed, would be nothing but pains in the ass. In the case of private firms, the existence of alternatives not only helps their case in anti-trust lawsuits (“we’re not a monopoly! look at those little guys in the corner who kinda compete with us if you think about our market in this arbitrary way”), it also drives the most demanding – and so potentially most vocal – customers away, leaving them with a bunch of docile customers who care a lot less.

But sometimes, the customers who remain don’t do so just because they’re docile, or non-demanding, but because they just can’t afford the higher quality, more expensive alternative. In this case, voice becomes the last resort of the powerless, and it can, when they organize themselves on a sufficient scale, actually be quite powerful.

Hirschman gives the example of public and private schools: if a public, free school decreases in quality, the most quality-conscious (or least price-conscious) parents will be the first ones to exit. This would result in a lower income for public schools, who would give a damn if they were, well, private. But since they’re funded by the state, mostly regardless of their financial performance, they don’t care about running at a loss – in fact, maybe they prefer it this way, so they can present themselves as the “steward of the poor, last bastion of the powerless” etc etc.

But what they do care about, since this deep-pocketed funder of theirs is subject to democratic forces, is the discontent of its customers. If a bunch of angry parents were to go in the streets tomorrow, chanting slogans about how public schools were but of bunch of stupid, corrupt incompetents, that would attract attention, and they might lose some funding or, more likely, be put under more stringent supervision. Hence, exit, by first trimming down the people who care the most, at the expense of their voice, actually contributes to the public school’s worsening quality.

This also means that there is something qualitatively different about the higher-quality, higher-price option in a market, which will gather the voices of the most demanding customers, serving as fuel in its quality-improving engine. Perhaps this is the reason why we hear so many people complain about problems with their iPhone, and so few with their Android, despite iOS being so obviously superior to it *ducks for cover*

An interesting application of Hirschman’s theory is how it applies to politics. If the market’s got exit, politics has votes, and, to a large extent, voice competes with votes just as much as it does with exit: if a voter isn’t happy with their party, they can either cry about it and try to “change it from the inside”, or give their vote to somebody else.

And, in the same way that, in the markets, voice will be the last resort of the captive customer, it is too the one of the captive voter. Now, since votes don’t cost anything, and everybody, rich and poor, get exactly one of them, who are those “captive voters”?

Think of political offerings as a one-dimensional spectrum, with everybody equally distributed along it, from left to right, depending on their opinion. Political parties need to get as many votes as possible to get elected, and people just vote for whatever party sits closer to them on the spectrum. In that case, political parties will try moving as close to the center of the spectrum as possible, which will make them capture more of those middle-votes. That also means they’ll drift further from their most extreme constituents, but nobody cares, since they’re still closest to them and so will still get their votes.

And this, according to Hirschman, is the reason why the most extreme voters are the most vocal: not just because they’re pissed off and there is something soothing in having everybody hear about it (although I’m sure there’s some of that too), but because they’re the ones least empowered by the democratic system, and since their vote isn’t going to get them anywhere, they’re left with nothing but their voice.

Now, like firms, political parties are both vote-maximizers, and, to a lesser extent, discontent-minimizers. Sometimes, they’ll overshoot in the latter direction (listening too closely to the extremists), at the expense of their votes-gathering.

(I usually try to read as little about politics as I can, since so much of it is pure signaling. For that reason, I’ll let people who are more knowledgable than me in this topic expand on how this applies to the last US elections, and more specifically the Hillary-supporters-Bernie-bros interplay, which I know next to nothing about.)

Now, loyalty. By delaying exit, loyalty tips the scale towards voice. Loyalists will tend to exit less, and complain more, than non-loyalists. Even if they exist, they will do it for radically different reasons than other people: when non loyalists exit, they then “couldn’t care less” about the fate of the firm they left behind. On the contrary, loyalists often resort to exit as another form of voice, and, in the case of the boycott, even make it explicitly contingent upon some action taken by the firm.

In that case, it could be argued that the person wasn’t loyal to the firm in the first place, but rather to some ideal it perceived the firm to stand for. This to me highlights the power of the narrative, that can become a self-fulfilling prophecy: by taking a public commitment to some mission of social value, a firm will attract those believing the most in it, who, through their voice, will hold the entity accountable to this ideal. This made me think of Muhtar Kent’s “A brand is a promise. A good brand is a promise kept.”

By and large, I don’t think I agree with Hirschman’s main point, i.e. that voice can be a substitute to exit, and that exit can sometimes even hurt quality and prices by muting out voice. Sure, you may be able to find some situations where, on the margin, that is the case, but I find them more interesting as counter-intuitive edge cases than as sizable phenomenons in the world. You can find those edge cases if you look hard, but the vast majority of the time, preventing exit is a net-negative, even accounting for the voice that comes to replace it.

The fact that exit could hold certain firms back says nothing about the counterfactual, which is the improvement in quality that would happen in the firm customers would be leaving for, and that is incentivized to fill up the gap left by the incumbent, to get those dissatisfied exiters’ money. Maybe Western Europe would have slightly improved, had people stayed put instead of leaving to America in the 18th and 19th centuries, but that doesn’t mean it was worth missing out on the opportunities offered by the new continent.

Prosperity, offered to you by exit

Even if voice was more effective, I wonder about its negative externalities. Voice implies flooding the meme space with messages of dissatisfaction, spreading them everywhere, including to people who aren’t the least concerned about the matter. Who would want to live in that negative cacophony? Exit, by comparison, is a lot quieter, cheaper and doesn’t even require people to be literate or articulate enough to voice their concerns. All it requires is for them to put the detergent bottle back onto the shelf, and pick another one instead.

You could also argue voice to be a zero-sum game, to the extent that influencing public opinion is the very way it gains its power, and that there are only so many messages large groups of people can be exposed to in a given day. Exit doesn’t know those limits on its bandwidth, and so scales much better.

Another power of exit, especially when it comes to community, is the ability to strengthen both sides: the deserted and the new group. Two factions stuck together in the same group will be doomed to pull in reverse directions, each canceling the efforts of the other in a tug-of-war that yields nothing but immobility (ohai congress). Decoupling them can allow each to evolve in the direction it would prefer, and so to increase their coverage area, and speed of exploration, of the tree of possibles. Many people describe this as one of the greatest forces of cryptoassets: like Chris Burniske said, Bitcoin’s forks have made it transition from 2 warring parties in a single country, to 2 different countries with a single party each.

(Imagine how great Twitter would be if, instead of being stuck in intestine wars, which I assume is the reason why its product is at a standstill, true believers could get their “Twitter classic” that’s stuck in v0.1, with 140 characters, favorites still being favorites instead of likes, chronological timelines, etc… And the rest of us an actual modern product, with full algorithmical timelines, no character limit, and God knows what else innovative people could come up with if they didn’t have to spend their time arguing.)

Finally, even assuming that voice could bring improvements to existing firms, exit works in a radically different way: instead of trying to improve unsatisfactory, inefficient firms, it kills them, until only satisfactory ones remain. If voice is like a single firm doing dead-lifting, exit is like an entire ecosystem being subject to natural selection. And, no matters how much crossfit a fish does, it’ll just never be as good as lizards when it comes to crawling on rocks – if rocks-crawling is the last trend.

For that reason, I think exit is one of the greatest forces for good, and creating new escape doors is one of the highest leverage activities one can engage in. That’s one of the reasons why I’m so excited about blockchains: they break up monopolies, and create a new permissionless paradigm for innovation. Likewise, VR can break monopolies over space, by creating an infinite amount of it, allowing more experimentation, and models we can’t even think of today.