Monthly Reading, May 2021

Res Extensa #10: How Pipe is innovating in funding, Solidity and the global computer, a Honduran charter city, and more

Welcome back!

I’m trying a new thing as part of the newsletter: a digest of recent interesting bookmarks from around the web the past month. There are plenty of curated link list newsletters out there, so I’ll try to keep mine less frequent, higher quality, lower quantity, with commentary in between. Let me know what you think.

I have a plan to resurrect regular blogging on this summer, so stay tuned there for more consistent new stuff.

💬 Interview with Patrick Collison, co-founder and CEO of Stripe

Is there a topic you don't find deep thought on in a PatrickC interview? The guy is a bottomless trove of information and ideas on essentially every subject.

In this one with Noah Smith, a few pieces stood out...

On principal-agent problems:

Mancur Olson was, I think, right in his focus on institutional dynamics and how principal/agent issues and collective action problems seep into our systems over time. For example, the FAA was probably pretty good in its early days... to enable a successful aviation sector, there are lots of public goods to be provided in the domain (clear rules around airspace, air traffic control, navigational aids, airports...) and very few would argue that the optimal amount of aviation regulation is none. On the whole, the US did a great job of fostering aviation technology, and the people who went to the FAA in the early days were motivated by the right things — a desire to support and enable a burgeoning aviation sector. Today, the FAA is a sprawling, stodgy, entrenched bureaucracy. It has about 45,000 employees represented by multiple unions; there are lots of countervailing constituencies with vested interests to protect; there are endless accumulated outdated rules.

(see Olson’s book The Logic of Collective Action)

On diversity in science policy:

Overall, my single biggest science policy suggestion would be to pursue far greater structural diversity in our mechanisms. More different kinds of grant making institutions, more different kinds of research organizations, more different career paths for participants, etc. That's not easy to do — bureaucracies by their nature seek to standardize which this fosters homogeneity.

On war & whether or not it drives scientific progress:

I think that demand pull is real (I've tweeted a few times recently about how Schmookler's view of the world is underrated compared to Schumpeter's) and it's clear that war can certainly accelerate some technologies. The atom bomb is the obvious example but there are tons of examples from WWII — scaled-up penicillin manufacturing or plasmapheresis, for example. They were pretty significant! Vannevar Bush suggested that medical advances made during the war may have saved more lives than were lost during it. That said, I'm ultimately very doubtful that war is necessary or anything close to the best way to achieve scientific breakthroughs. (See Field's book here too.) And even if World War 2 (for example) was unusually effective at fostering scientific invention, the relevant reference class is presumably something between "all wars" or "all wars likely to involve developed countries today" — with respect to those, I think the EV in either research productivity or (more importantly) broader welfare looks very negative.

As always, Patrick delivers with some great nuggets.

💸 Pipe It! Platforms, Funding, and the Future

The equity funding model has been the bedrock of tech company upstart and growth capital since, well, forever. One downside: equity is dilutive. Raise enough money, and founders end up owning a fraction of what they could by the time they go public. Founders own much less of their business with successive capital raises, same for VCs.

Pipe is an amazing new outfit riding the growth of SaaS and providing a capital mechanism anchored on trading recurring contract revenue for growth capital. When a company sells a recurring contract for $50K per year, this predictable revenue pipeline can be used as collateral on an open market. This provides a non-dilutive way for companies to raise money, and for investors to bid on recurring contracts.

Pipe's a classic case of innovation: no fundamental technology needed to be invented, it only required a re-architecture of the business arrangements create better incentives for both sides.

Alex Danco's take here is specific to what this means to platforms. Large platform companies like Salesforce, Shopify, or Microsoft have cash to deploy, and are fostering ecosystems of startups building on top of their platforms. And equity investments are illiquid for too long to be compelling for these situations.

Platforms are the Production Capital of the internet age. We’re still in the early days of internet platform businesses - including Shopify, but also think Salesforce, Microsoft, Okta, Stripe, Plaid, you name it - creating this incredibly rich and almost “self-serve” environment where small startups can gain access to powerful embedded tools and services.

If Shopify itself wants to deploy its dollars somewhere, what better place than to fund and stimulate expansion of your ecosystem participants?

Solidity, CryptoZombies, and a programmable world computer

Crypto technology is still associated in the public consciousness with currency and gold rush speculation. Slowly catching on, though, is the true power of blockchains and their other applications.

NFTs, DeFi, and "DApps" are growing in exposure, but still tiny in terms of grand, long-term potential. It's an exciting time to take part in something new and innovative like the web3 movement. Coming into crypto as a novice, it's easy to get wrapped into currencies, tokens, and financial applications. But this is only the first of thousands of future applications of the underlying technology.

A better description of Ethereum I recently heard is that it's a decentralized, “programmable world computer". When put in those terms, it's clear that the possibilities are sky high for interesting, novel applications.

I've been tinkering with Ethereum's Solidity programming language, which is used to write programs (smart contracts) to be executed on the blockchain. CryptoZombies is a fun introductory tutorial to learning Solidity. If you're getting into programming, it feels like Solidity and Ethereum are the technologies of the future.

🏙 Prospectus On Próspera

Scott Alexander breaks down the story behind Próspera, an experiment to build a new city, or archipelago of cities, in Honduras by purchasing land and starting over without the host country's corrupt, backward, and perhaps-illegitimate governance structure.

Charter cities are a popular topic in libertarian circles, and I've dabbled a bit in the Charter Cities Institute's podcast. The concept is reminiscent of the privatized burbclaves from Snow Crash, but maybe without the robotic sentry turrets or barcode identification tattoos.

The free market-centric builder in me is intrigued by the potential of exiting our existing polities into "ground-up" projects with clean-slate legal frameworks, built on modern tech for things like starting businesses, building, education, health care, and more. But my bottoms-up systems side is highly skeptical of the ability to generate the vibrancy of an organism like a city through brute force.

I suppose the charter cities crowd would rebut that skepticism with the claim that they're only setting the system in motion through legal and economic foundations, then letting market dynamics grow organically from there. But still, I hear the utopian dreaming about creating new cities and get visions of high-modernist failures like Brasilia or Chandigarh. But the successful SEZs around the world, directionally similar to charter cities, show promise.

Can you tell that the website for Próspera isn’t for a tech startup?

🔬 The Overedge Catalog: New Types of Research Organizations

Sam Arbesman started this project to catalog novel types of research organizations that don't fall squarely into the traditional academic (like CSAIL) or government molds (DARPA, NIH). Things like the old corporate labs from the PARC or Bell Labs days, where for-profit and academic enterprises overlap.

Some examples include Stripe Press, Dynamicland, Numenta, and Protocol Labs.

Thanks for reading and hope to see you back here soon.