Multiple inputs to the biggest ideas, remote hiring, venture capital's remake and more
The future of innovation is global. We discuss it here.
Story of the week
This month, I was struck by the history of GPS. GPS today is the backbone of a range of services we depend on every day. Its existence depended on a cross-pollination of ideas, and specifically of two people: Albert Einstein And Gladys West.
“Albert Einstein, whose theories of special and general relativity both play an important role, and Gladys West, a still-living and largely unheralded Black woman whose scientific contributions enabled us to understand geodesy and the shape of the Earth well enough to make GPS technology possible.”
Was not just fascinated to learn about how GPS works, but the importance of multiple reinforcing ideas. Gladys West, a hidden figure and heretofore under-appreciated technologist, was crucial in the development of this breakthrough technology.
This is the nature of some of the best global innovations around the world.
Remote work considerations
Remote work has accelerated rapidly through the pandemic. As I’ve written about before, this has many benefits for workers and startups. Yet it has caused new challenges for global startups.
For those looking to move back to 100% in person it is contributing to a hiring crisis. Remote work is a powerful way to more rapidly scale your team. “Highly skilled tech workers, for the most part, are not leaving the workplace — the money right now [in technology salaries] is simply too good (salaries have risen in some cities by as much as 10 percent). They are, however, leaving the workspace, in droves, to work remotely.”
To retain a workforce requires managing career progression, which is more challenging in a remote context. “Remote work is often favored by established employees who know their manager, are comfortable in their role and want to balance work with family responsibilities or other personal obligations. For those just starting their careers, working in isolation can make fitting into an organization — and eventually progressing up its ranks — more difficult.”
My two cents: for many jobs, particularly individual contributor roles, remote work can be more efficient. This does not remove the need for human interaction. The pandemic made us swing all the way from one equilibrium to the other. The future will be more hybrid - based on the company culture, product, geography, team and leadership style of the founders.
And by the way, remote may have some ancillary outcomes. As I shared with the Financial Times: ““As the future of work changes, it insulates start-ups to some degree on how and when they pay for people’s transportation,” says Alex Lazarow. “Remote work gives you more flexibility to manage the burden.”
Is venture capital facing its Minsky Moment? “Hyman Minsky was a 20th-century economist whose ‘financial instability hypothesis’ is probably the best-known explanation for the boom and bust cycles that characterize public financial markets.” He discovered that unique opportunities for return disappear: “Knowledge spreads, technology diffuses, and arbitrages disappear. Markets asymptote towards ever-greater efficiency.” Yet people still know what they know and don’t change behavior even as potential returns decrease. “Faced with a 1/10 reduction in expected value for an opportunity, many institutional portfolio managers will actually 10x their exposure to the opportunity, so as to maintain their dollar P&L.” This drives increased risk (and the illusion of safety) until everything comes crashing down… until the cycle repeats itself. That’s why I believe it is so critical for venture to look beyond the tried and true models - different industries, geographies etc.
Innovation is borderless. More than 90 startup ecosystems are home to a billion-dollar startup. “And it isn’t just that startups are scaling internationally—increasingly, global startup ecosystems are home to the largest global players. For example, the largest edtech in the world is in India, the largest neobank is in Brazil, and the largest superapp is in China. Today, innovation is happening in interconnected waves: The best ideas are coming from anywhere and scaling everywhere.” In that vein, I wrote this piece outlining three business models that are scaling internationally while playing out in local markets.
A common question/criticism for Web3 (particularly in emerging startup ecosystems) is asking whether applications getting built have real world impact. The counter-argument is that we’re presently in the infrastructure building phase and we’ll see applications built over time. Great piece on the myth of the infrastructure phase. “We are not in an infrastructure phase, but rather in another turn of the apps-infrastructure cycle. And in fact, the history of new technologies shows that apps beget infrastructure, not the other way around. It’s not that first we build all the infrastructure, and once we have the infrastructure we need, we begin to build apps. It’s exactly the opposite…What we see in the sequence of events of major platform shifts is that first there is a breakout app, and then that breakout app inspires a phase where we build infrastructure that makes it easier to build similar apps, and infrastructure that allows the broad consumer adoption of those apps.”
The market has been seesawing, and particularly valuations have come down quite a bit. What does this mean for a startup that raised at 100x revenue? “Hearing about 40x, 50x even 100x startup revenue multiples last year wasn’t uncommon….What are those startups going to do if they are worth not 100x their recurring revenue, but, say, 8x?”
It isn’t just startups that have scaled around the world, it is also venture capital. Interesting research on Carta’s portfolio. A few highlights: first funds were larger last year than ever before (210 new funds vs 119). LP shift showed signs of growth of support in emerging managers. Crucially, the interesting finding was where new funds were created. “While California and New York remain dominant in first-fund origination, both states saw a smaller percentage of the total number in 2021. Declines in New York (six percentage points) and California (four percentage points) mark a shift of ten percentage points to other states. Increases in Texas (two percentage points) and Florida (three percentage points) account for half of the gains outside California and New York.”
I have written about the rise of embedded financial services as a new way to distribute financial products. You may not go to your neighborhood bank, but instead work with brands you know and trust. I was astounded to learn about the amount of interest among incumbent banks to power the movement.
Should you write a non-fiction book? I published a piece recently and the debate continues.
Book of the month
This month I read George Soros: A Life In Full. I shared some deeper thoughts on the piece here, and sharing a summary thread below.