DATA4AMERICA Unplugged

A podcast exploring the intersection of government, technology, and the future.

Michael Gibson

Session 2

Co-founder and General Partner @1517 Fund, former VP Grants @Thiel Foundation, Oxford, writer @MIT Technology Review, poet-philosopher-VC

Hosted by: Chris McCoy  

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Transcript

0:00 [data4america theme]
0:10 Chris McCoy: Hi! This is Chris McCoy, the executive director at Data4America. Welcome to Unplugged—where we sit down with interesting people to explore the intersection of data, technology, the government, and the future. Today's session is with Michael Gibson, general partner at 1517 Fund. He is the former Vice President of grants for the Thiel Foundation, a cofounder of the 20 Under 20 Program, and a writer for the MIT Tech Review. He went to Oxford, and he is a true philosopher turned venture capitalist. Let’s get it started. Good to chat with you, Michael Gibson.
0:48 Michael Gibson: Nice talking to you, Chris.
0:50 CM: Where did you grow up?
0:54 MG: I grew up in Greenwich, Connecticut. It’s about an hour’s drive outside New York City. It was always an affluent suburb of New York City, but, in recent times, it’s become the hedge fund capital of the world. It’s a beautiful, safe place, but, to me, it’s the most boring place. I went to public school there, then to NYU for undergrad.
1:19 CM: Technology has been something you’ve increasingly gotten involved with in your career. What were your earliest experiences with technology? When did you get introduced to it?
1:33 MG: I was just a passive consumer of things throughout college. I thought I’d be a professor of philosophy, and I was working toward a Ph.D. I would buy the latest Mac and get the latest cell phone. I didn’t really deep dive into anything until I left grad school. In 2006 I dropped out of my Ph.D program. My first real job was as a writer for Technology Review, MIT’s alumni magazine; it has a bit of national distribution as well.

That was my first deep exposure into the wide breadth of advances in different areas of technology. I didn’t have a beat. It’s a small team. They publish stories on the web every day and there’s a magazine they put out every month. It was a lot of fun for me because I got to cover a lot of different things, like quantum computing, solar energy, and new startup ideas. I’d have to do some investigative research and put something together. It was actually really helpful to have a lot of people on staff at MIT I could call on. If I was writing on quantum computing, I could reach out to a professor on campus and say, “Hey, can I talk to you?” about whatever announcement had come through. I got to learn a lot.

There’s also a cultural piece, too. I was just immersed in this, so I started to pick up on the types of people working on things. It was 2006, I think, when I did an interview with Max Levchin, one of the cofounders of PayPal. He had won an award in 2002 from Tech Review, so this was for a retrospective article saying “Hey, what have you been up to since?” In interviewing him, I asked him, “What would you do differently? You sold PayPal to eBay for $1.5 Billion.” He said he took a year off, traveled the world, and it was the worst year of his life. I was really struck by that. I asked, “What do you mean?” and he said, “I wasn’t producing ­ only consuming ­ and all my friends were out there creating great companies.”

So, I said, “Okay, who are your friends?” I didn’t know who the PayPal Mafia were. This was how I discovered them. His friends were building rocket ship companies, electric car companies, leading hedge funds, venture capital funds, and social networks like LinkedIn. It overcame me in a way. Here were a small group of people who had built extraordinary value in a short period of time. The were so creative. I loved this idea of production versus consumption ­ that you could find more fulfillment in building things than relaxing on a beach. I found that very appealing, and that was the key fork in the road in my life. Suddenly, I wanted to learn more. More broadly, the more you learn about the history of mankind, and the history of the west, and the United States in our current predicament... A lot of it comes down to our lives being made better by progress in science and technology. Those are the two pillars of economic growth that make our lives better. Coming to realize that, understanding what the engines are just became more and more appealing to me.
5:57 CM: You’re one of my favorite people in Silicon Valley to just have a beer with and talk about the future. Your lens is so different than your average exceptional person: you apply deep historical themes across Western civilization and Eastern philosophy. You’re so interested and curious. When did your interest in philosophy and the history of the world start? Take me through that.
6:38 MG: I thought I’d become a professor, but the secret was that I didn’t only want to be a professor. When I was 18, or 19, I read Tom Wolfe. I loved his journalism. It’s just incredible. I think The Right Stuff is one of the great works of American literature of the 20th century. If you open up the back flap of the book and see the tiny little biography with the writer’s picture, it says that Tom Wolfe has a Ph.D in American Studies from Yale. In pure imitation and admiration, I thought, “He’s so smart, maybe I need a Ph.D to write that well.”
7:48 CM: When you were growing up as a kid, what did you dream of being?
7:50 MG: This is one of my regrets in life. I don’t know what I got out of it, other than maybe a work ethic and an exercise regime, and maybe it’s the only way to learn how to work on a team, but I played tons of basketball. I’d play every day for at least an hour and a half.
8:10 CM: Point guard?
8:12 MG: Yeah. I say it’s a huge regret because I’m 5’8”. I had no chance of playing in college. When it came down to it, I wasn’t that fast. I was good, but not in comparison to the top percent that goes on. I harbored some of those dreams in high school.
8:36 CM: Clearly philosophy and sports don’t go hand in hand. They’re like oil and water.
8:46 MG: The life of the mind never became real to me until college, to be honest. Maybe it’s hypocritical. There’s this weird paradox in my life in that I worked on the Thiel Fellowship and saw a lot of the problems in higher education, but I learned a lot on campuses. It gave me time to read stuff that I found interesting and thought-provoking, and I did find that useful. Maybe it was a maturity thing, too; I wasn’t ready to read anything but fantasy and war novels until I was 18, 20 years old. There was another group of writers I always admired as well. I always had this respect for TS Eliot and even Ezra Pound, to some extent. Even though they were very modernist in their style, they drew on the works of the classics and seemed to make allusions and references, even in Latin and Greek. Then I had a deeper respect for the system of education that used to require everyone to learn Latin and Greek. I don’t know why I assumed there was wisdom in that. Even though I had left many schools in the past, it just appealed to me. I started learning Latin and Greek in college and dove deep into that. I have a Masters in Classics, where I just encountered the works of Plato and Aristotle, as well as obscure works like Heraclitus and the Stoics. I started to become interested in the philosophy itself. In the study of that, I transferred from studying the classics to studying philosophy directly. I didn’t want to just produce research for college professors and teach classes. I really didn’t want to teach classes, so it’s kind of funny that I ever wanted to be a professor. It sounds arrogant to say, but I wanted to be part of public debates, be an intellectual of sorts, and write articles that people found interesting.
11:28 CM: I can see your experience studying the classics and wonder what the modern day version of that looks like. Many of those conversations take place on the internet, behind closed doors, but it’s cool how you found yourself directly in the middle of it.
11:50 MG: It’s pretty interesting. Even studying philosophy and working in Silicon Valley is a bit of a cliché at this point. Everything I just told you Reid Hoffman does ten times better in his own life. I think he went to Oxford, actually finished his degree and wanted to be a public intellectual, then got involved in technology. He’s very good at what he does. Peter Thiel studied philosophy as an undergrad. I think there are a number of other founders who have as well. You see other things percolating. People like Tim Ferris get interested in stoicism and do a lot of podcasts on that. A lot of this stuff is in the air out here.
12:47 CM: No question. It shows in up in products, where the product you invent becomes entirely different than what the next person invents based on your deep worldview. The philosophers of Silicon Valley are the best entrepreneurs, and I think there’s a reason why. Even Naval on AngelList; if you look at how he built that out, he’s not imposing a system on top of investors or entrepreneurs. He’s just providing access and making it more democratic. It’s very philosophical. I’m a huge fan of philosophy majors. I wish philosophy was something that I studied more when I was younger.
13:32 MG: What did you study?
13:37 CM: Everything was armchair, though I got more interested in my later twenties in how the world works and why it works. I think it was getting connected with Marc Andreessen and reading his book recommendations, like The Sovereign Individual.
14:02 MG: It’s interesting that a lot of these books that people recommend are works of history or philosophy. It’s very rare to meet someone in Silicon Valley who actually recommends a business book.
14:13 CM: Except Zero to One, right? [laughs]
14:20 MG: Which is nightlighting as a philosophy book.
14:23 CM: No question. Those things shape how you think about the world and how you spend your time. When I talk to people, if it seems they don’t have a unique lens on the world, my interest level isn’t as high. I’m very inspired by people who see things differently and are willing to put some risk on the table to see them through. Silicon Valley does seem to attract that type of person.
14:49 MG: I think that’s the only reason Peter Thiel hired me. He hired me to work on the hedge fund’s research team, and then to help him teach a class that winter at Stanford Law. I met some people who worked for Peter at a water festival called Ephemerisle. I’d been doing work for the Seasteading Institute, and when I interviewed for the role it changed over time.

By the time I interviewed with Peter, it was, “Hey, do you want to help out my team and help me teach this class?” The only reason he hired me is because he’s a collector of unique perspectives. He has so many Ph.D dropouts, you just kind of wish he’d hired one Harvard MBA because everyone is such a contrarian. It’d be nice to have one kind of vanilla management guy so you don’t have to reinvent the wheel sometimes.

I think it’s part of Peter’s genius, though – I’m not flattering myself – that he’s always looking for people with unique worldviews who are able to synthesize across disciplines. In our interview, we didn’t even talk about finance. A lot of Libertarian thinkers believe in this sort of methodological individualism, where there are no groups - just a lot of individuals making choices. Peter and I both agreed that this was a mistaken assumption. We were talking about Emile Durkheim and some of René Gerard’s work on social dynamics and group behaviors. Coming to work for Peter Thiel felt like I was working on the best collegiate seminar in the world.
17:12 CM: So you went to Oxford and came out to San Francisco to work with Peter.
17:24 MG: I left Oxford and worked at MIT at the Tech Review for a year. I was actually in LA for a bit doing freelance work. I was trying to write and work in entertainment, actually, so the opportunity to work for Peter came out of the blue. When I showed up to work on my first day, Jim O’Neill of the Barr Group came to my desk and said, “Yeah, we’ve got to go to Peter’s house. Last night on a plane ride from New York back to SF, we got this idea: we’re going to pay kids to leave school to work on stuff. We’ve got to announce it today at TechCrunch Disrupt.”

We got in the car with Peter and we went to the convention center where the event was. We’re backstage. We're asking, “What do we call this thing? What are some of the details? What is Peter going to say to say to the world?” Then he gets onstage, and he’s interviewed by Sarah Lacy - you can see it on YouTube - and he announces the Thiel Fellowship as if he’s been thinking about it for months and months. I think some of the ideas were in the air, but it was just incredible to see such swift action and innovation in a short period of time. I was a part of that idea, I guess, from the beginning, and that became more and more a part of what I worked on when I was working for him.
19:06 CM: Let’s dive into education a bit. I know you have some strongly held views on what education should look like. Do you see the problems of America’s education system in other parts of the world, or are they uniquely American?
19:24 MG: I think the most uniquely American piece is this crazy Hunger Games style tournament to get into top tier colleges. It distorts the incentives all the way down the educational system. Parents are worried about what kindergartens or preschools their kids get into because they think that if their kids get on the wrong path at that age, they’ll never have a chance of getting into Harvard or an Ivy. What kids do - over their summers, on vacations, the types of charity work they’re involved in, and the groups they join are pursued less out of intrinsic motivation and more because kids and their parents think it’ll impress the admissions committee of a college.

I think that has altered behavior quite a great deal in the US. I don’t think that same mania is part of education systems even in Canada or the UK. You get it, but not to the same degree. I think the opportunity costs aren’t the same, so in the US, education is very expensive and subsidized through federal loans and other programs. In other countries, it’s just directly subsidized by the state, so it’s a little different. I worry about this concept of excellent sheep - the idea that people become very good at pleasing the system and turning themselves into the type of person that the system loves. It creates this homogenous class of people that aren’t very creative but are very excellent at following rules.
21:32 CM: It riffs on Marc Andreessen’s famous quote: “If you don’t want jobs to be replaced by robots, then stop teaching students like robots.”
21:43 MG: That’s exactly it. A lot of our educational ideas came out of the industrial revolution, and some of the patterns we see are the vestiges of that system. The idea that everyone of the same age is in a grade, and they all march forward year by year together. By contrast they could be learning at their own rate in all sorts of different subjects. The school year is still tied to the farming season so people have time off to work. It’s very strange that all that is still around.
22:30 CM: The ideas behind the Thiel Foundation are pretty revolutionary. A comparison would be baseball. You could be a high school student, get drafted, and go straight from high school to the pros. It makes sense because you get $500 thousand, a million-plus dollars as a signing bonus. You’ve been credentialed. You’ve made it.
22:58 MG: You’re touching on a very important point. It’s very hard to measure skill and knowledge and talent. With baseball, I think the reason high schoolers can get drafted is because they’ve gotten much better at gauging talent. One of the great things for geeks who love sports is following the players and their stats and trying to come up with predictive analytics for understanding the game. It’s really neat that you can measure talent that way.

The BA itself is supposed to be this broad thing. It credentials you as someone who has a set of skills, but we can’t exactly say what and we can’t even tell you to what extent. There are professions where you can measure skills, or where outcomes are either good or bad. If you’re an engineer, you can build things and prove your worth. In those types of professions, we’re going to see this type of unbundling. People with talent will be vacuumed up irrespective of whether or not they have authentication from some kind of educational body. If you look at CS, I think this is starting to happen. A lot of big companies are perfectly willing to hire people without college degrees if they have the engineering background. I meet people who are taking internships at Facebook and Amazon and those types of companies and are making $30k a summer. It often ends with an invitation to stay. I think this is the case because they can measure the skill directly.
24:57 CM: I see the future, kind of where the stack gets collapsed, where there’s a Facebook University, a Google University, a Disney University. They become an alternative track for secondary and postsecondary education with a direct path into those organizations and/or ancillary organizations.
25:17 MG: I think it’s tied to measurement, I really do. We’re in this day and age where the only measurements we have are tests. We have a midterm and a final, or a standardized test, and that’s the only measurement. In the ideal world you’re measured and tested on your competence every day. Your weaknesses are addressed over time and you see improvement. The thing that drives me nuts is time becoming a proxy measurement of skill. You spend four years around a clock tower on a college campus, and that’s supposed to mean you have skills, since we can’t measure them. You take classes that are measured by the hour. You take so many hours’ worth of credits. The exams themselves are hour-long. If we somehow found a way to measure things outside of time, or more directly in and of themselves, I think we’d be able to unbundle a lot of things in the university system.
26:28 CM: And we’d have just complete chaos.
26:31 MG: In a good way.
26:37 CM: Let's dive into some of the ideals behind the Thiel Foundation, the big things within education, and what you seeing the future being.
26:46 MG: The Thiel Foundation focuses on trying to advance the leading frontier in any field. It's usually related to science and technology but sometimes politics. One component of that was the Thiel Fellowship, which was meant to address education. The core idea was what I alluded to - this idea of excellent sheep - that as a country it’s become the case that it’s assumed that the only path to an extraordinary, fulfilling career is through the four-year degree at a major college. The idea of the fellowship is that the idea of this monolithic path is just wrong. If you look at Silicon Valley, there’s a long, storied history of people doing things without college degrees. The big names – Jobs, Gates, Zuckerberg on down - had fulfilling careers without college degrees. The fellowship became a way to validate that and shed light on the issue.

When we launched it we didn’t realize it would get the media attention than it did. The phrase “bubble in higher education” was in the air at the time - that’s how people had discussed it. That autumn and winter, when we launched that program, it became a lightning rod for the issue. It was extraordinary how much attention we got in a good way. It really provoked a debate and became a national issue. Even to this day it’s discussed in the campaign for the presidency: what do we do about these student loans that are now, in aggregate, more than $1.2 trillion? The outstanding cost of college education is an issue now that every presidential candidate has to address.
28:54 CM: It’s nice to see that these issues are actually being addressed and we’re getting outside of the traditional norms of what education is. The Thiel Foundation and Fellowship is quite disruptive. It disrupts teaching unions and folks in the rust belt’s ideas of what it means for their kids to have a chance at success. Looking at income in 1988 vs. 2013, there’s a 20% change in all family income. For working-class citizens it’s been a 52% change. For the middle-class, a 90% change. Meanwhile, the top 10% has had a 75% gain. The models of education that we’ve bet on and taken loans for are failing our generation, and generations after us, and generations before us as well. Politicians are finally taking that on, but the Thiel Fellowship actually did something about it.
30:15 MG: When you look at these trends, one thing that people will point out is that in from the upper-middle class on up, the one thing people all have in common is a college degree. The way technology has advanced, it brings great returns to high-skill, high-knowledge workers and has a bias against low-skilled workers. A counter-argument to the Fellowship is “Everyone needs a college degree! There’s no way you’ll compete in this high tech economy without a lot of skills and knowledge!” What I think we can show – I’ve moved on from the program, but I’m still part of the mission – is that it’s possible to have high skilled labor that doesn’t have to be authenticated by a university. It is possible to get those skills without that.
31:19 CM: I just saw that $100 million was going into a school for 18-30 year olds in Fremont, California. You learn to code full-time.
31:38 MG: No kidding, wow. It’s Not that everyone has to become a computer engineer, but one of the big failures of education policy is that K-12 is tough and college is tough, but no one, absolutely no one, seems to care about lifelong learning or education for people displaced by technology or trade. Frankly, I don’t think there are solutions out there, either. A lot of job retraining programs out there are terrible, and it’s a big glaring problem that will become worse as people lose their jobs to technological change.
32:16 CM: Agreed. If you were president of the United States or a senator, what’s the one idea you’d introduce to America with regards to education?
32:34 MG: I’d change the accreditation process. I think the barriers to entry - to starting a new university or school - are just way too high. I can’t give a rundown in detail off the top of my head, but it is very hard to start a new school, and especially a university. I’d look deeply into the loans for college. One immediate problem is that as soon as the government gives out a loan or subsidizes anything, universities raise the cost to match whatever the government’s provided. It is very problematic.

There are other issues as well. For instance, people who are studying majors that don’t have immediate job opportunities upon graduation, like sociology. I don’t hate sociology, but it doesn’t seem to lead to a career as readily as something like computer engineering - or any kind of engineering. I think it’s a little crazy that people are taking on these massive loans and allowed to study any subject independently with these loans. There needs to be a tighter feedback system.
34:06 CM: I’m starting to explore what it looks like to directly incentivize areas where there are genuine skill deficits, and what it’s like to even introduce direct incentives for academic achievements in schools around the country. If you’re a kid in a school in inner-city Chicago, what does it look like to give you $5 for an A?
34:32 MG: There’s an economist at Harvard who ran some pilot programs in New York, Roland Fryer. He tried to incentivize various parts of the learning process. I can’t remember the outcomes; some things were counterintuitive or less robust than others.
34:54 CM: This was the idea that I’d play with: what would it look like if we spent eleven or twelve thousand dollars per student per year? What if we added a thousand dollars per year, and incentives didn’t just go to students, but to teachers? It’d be split, so you’d actually have collective incentives for achievement. Certain areas could be weighted higher than others; math and science for instance. We’re just unbundling and rebundling ideas in education where it involves increasing the budget. You’re not going to change unions, but can you go over the top and introduce or change incentives that drive behaviors? I’ll send it to you, I’d love to get your feedback.
35:44 MG: We’ve got to bust teachers’ unions up. They’re just a barnacle on the system that’s so resistant to any kind of innovation or change. I wish there was more competition. I wish we saw smaller experiments that could be scaled up.
36:05 CM: So you’re working at the Thiel Foundation, helping run the 20 Under 20 Fellowship. Then you move into venture capital with the 1517 Fund. What inspired the move?
36:25 MG: I was on the leadership team of the Thiel Fellowship for nearly 5 years. It was a grant given to nearly 20 individuals per year to work on something outside of college. Some people pursued scientific research, other people pursued nonprofits, but a fair amount of people worked on startups. After 4 ½ years or so, we started to see how these companies were tracking, and the top seven companies were tracking extremely well; these were companies founded by our Thiel Fellows. In aggregate right now, they’re worth more than $1 billion in market cap, they’re tracking strongly to series C and D rounds of funding. This is led by companies like OYO Rooms in India and Upstart here in the US. All that value and creativity had led to some very great opportunities.

The Thiel Foundation is a nonprofit. We weren’t making investments, but nevertheless, here were these great opportunities we saw come through the program. On top of that, me and my colleague Danielle Strachman were doing a lot of the work that angel investors and seed investors usually do beyond investing money. We were helping provide strategic and product advice. We helped people make hires. We’d open our Rolodex, help people raise their rounds, and meet mentors who could help them out.

Because of that, we saw these opportunities and realized, “Hey, the Fellowship is strong, but here’s this opportunity. If we could raise outside money we could make investments not only in Thiel Fellows, but in a wave of younger and younger people working in technology who are getting started earlier.” We saw tail winds there, and we thought there’d be more opportunities, so we decided to start raising money.

We left our operational roles and jobs at the Thiel Foundation last spring and launched 1517. We call it 1517 because, in a way, we see it as scaling up the mission of the Thiel Fellowship. 1517 refers to the Protestant Reformation - the year Martin Luther nailed his 95 Theses to the church door. Peter had written an op-ed compared the current university system to the corrupt church of the 16th century, so I was reading up on some of that.

If you look at Martin Luther, he was protesting against the church’s minting money by selling this piece of paper called an Indulgence. This was an official writ that somehow saved your soul if you handed over cash. You could buy them for your loved ones, too, and it was a major source of revenue for the church. They built these grand cathedrals. Even St. Peter’s is built on revenue from indulgences.

Likewise, we reference the Paper Belt. We see universities as part of that. Today, they’re selling a piece of paper at great cost, minting a lot of money doing it, and building cathedral-like structures: it’s called a diploma. We thought it was bullshit in 1517 that you could save your soul with a piece of paper. Likewise, we think it doesn’t make sense now. I think there are ways of having extraordinary careers outside of buying this piece of paper. We got started over the summer, we have raised about $20 million, and we’ve been making investments since August.
40:30 CM: What excites you about a company? What’s yours and Danielle’s thesis behind backing it?
40:41 MG: Our thesis is who over what. Unlike a lot of firms, we focus on specific people. We’re working with younger entrepreneurs. Often we meet them on college campuses. We visit a lot of hackathons and hacker houses. We go to a lot of events at college campuses. People will come through the Thiel Fellowship network: the alumni ecosystem and peer to peer fellows. What they all share in common is that they tend to be pretty young. It’d be very rare that we’d hear a pitch from someone we’ve never met before that we make an investment in shortly after.

We get to know and evaluate people we work with over a longer period of time. We like to track people across the years, so if we get to know someone on a campus when they’re 19, and they’re starting something when they’re 21, we hopefully have a good sense of their character. We make investments at the earliest stage possible – pre-seed and seed – and a lot of the time, there’s no proven financials for those companies. Maybe they’ve got a few customers or pilots, but the business model still has some validation points it’s got to hit. What we have to look to at that point is “How strong is this team?” That’s what we’re always looking for, first and foremost. Do they have the intelligence, creativity, grit and perseverance? Those aren’t the things you can ask about in a single meeting. That’s why we love to try to see how they’re playing out in the field over some period of time.
42:28 CM: Do you have any investments in the clean energy space?
42:35 MG: No investments in clean energy. I don’t think that’s out of some dogmatic thesis, but just because we’re focusing on a certain group of people. There are some industries where to get started requires a whole bunch of Ph.Ds with a background in photonics or photovoltaic cells. It’d be hard for us to find someone with the knowledge at a young age, so we do limit ourselves. There are other things like healthcare, medical care, and life science. A lot of those ideas come out of university research, and to get grants at those earliest stages, you need Ph.Ds and BAs and other credentials. It makes it harder for the people we work with to make advances in those areas. We have made two investments in healthcare companies, but the barrier is high.
43:46 CM: I have a good recommendation for you. I was having a conversation with the US Chief Data Scientist DJ Patil last week. He was describing how at the White House Science Fair, there was a kid who learned machine learning using a MOOC. DJ said that this kid designed the best algorithm on the planet for detecting cancer. That’s the kid you’ve got to fund.
44:16 MG: I love that people have the ability to learn these things on their own. That’s one of the strange things about education; MIT currently offers all of its courses online, so if you’re motivated and had someone to help you out when you had questions, you could go through all that material and have the equivalent of an MIT education anywhere in the world. I’m starting to see more and more people like that. Maybe not to that caliber, but I routinely meet people now who were learning how to code since they were 10 and now have eight years experience at 18.
45:03 CM: They have the position not just to rethink things, but to productize them.
45:11 MG: I think cancer detection and machine learning is going to be a really hot field. A lot of it is based on image recognition, and these computers are starting to outperform humans, even if it’s an eyeball test, like radiology. I think the technological change will be there, but the problem will be the technical and regulatory change. How comfortable will people be with doctors and radiologists giving way to computers?
46:14 CM: Diving into a bit into your work with 1517 is really inspiring. I’m constantly on the lookout for kids that I want to send your way.
46:25 MG: Anyone who reads this or hears this, feel free to reach out. We just have an email, me and Danielle. We’re the only ones here: info@1517fund.com. People can always reach out to us. Because the costs of production are decreasing so rapidly, we often meet people who just need a little bit of help to move from idea to prototype. When I’m traveling or when we go to hackathons, we give out little $1k grants to people at that stage, usually on the order of about 50 per year, which sometimes makes me feel like Johnny Appleseed. A lot of the time, people just need validation. We meet people in the Midwest, they’ve got ideas, and they’ve got the knowledge. It’s not even a thousand dollars, but here are two people from Silicon Valley saying “Hey, I should work on this.” We’ve seen a few of those grants turn into fully-fledged companies, and I think three that we’ve funded. They went from a thousand dollars and an idea to fully-funded seed companies with 2-12 employees.
47:57 CM: That’s inspiring, I love what you’re doing. If you could adopt somebody to run for office and actually serve in a high-level position, who’d be that person and why?
48:14 MG: It’s terrible. I can’t propose anyone other than someone like Gary Johnson, even though I couldn’t go issue by issue and tell you why.
48:31 CM: How about someone in the private sector? An entrepreneur? Venture capitalist? Philosopher?
48:40 MG: Great question. The reality is how much difference can one person make? I can’t remember the exact statistic, but in any election there’s some small turnover. Let’s say a Republican takes power and there’s a switch from Democrats losing their jobs, but something like 98% of all federal government employees still keep their jobs, no matter what. I’d want this person to be steeped in economics and political theory and public choice. I’d want them to be pro-technology.
49:37 CM: How about Peter Thiel?
49:40 MG: I have thought about that. He’s precluded for running from office because he was born in Germany.
49:52 CM: Could he be a senator or congressman?
49:54 MG: He could be a governor of California, a senator.
50:00 CM: Lord Peter.
50:01 MG: One of the more charismatic things about Peter, at least when I first discovered him and heard him speak, was his biography. He’d clerked for a federal appeals court, then interviewed to have a role on the Supreme Court with Scalia. I don’t know who else he interviewed with, but he ended up not getting that role, and it seemed to be a big turning point for him.

Through his PayPal days it was this story of overcoming regulators; I think they had to go state by state, but the product was growing so fast that the regulators couldn’t keep up. There’s some crazy story around the eBay-PayPal deal that the Governor of California, at that time he was Attorney General, had sent some hostile letter to PayPal. However, he’d sent it snail mail, which meant it came long after the deal with eBay went through. Peter had worried that if it had been an email and it’d arrived before the deal had gone through, it would’ve caused all sorts of trouble.

Peter’s story with PayPal was that technology could subvert or get around anything. It was a space of positive activity outside of government where a small number of people could solve a problem with something that could be a public good. This represented a really optimistic path for people who wanted to have a positive influence on the world and didn’t want to have to deal with congressmen and courts. Peter was like this renegade who was outside politics.

One of the great things he wrote was on his Reddit AmA to promote his book, Zero To One. Peter’s a Christian, and someone had asked him how he reconciles his Christian beliefs with his political views, and he gave this extraordinary answer. He said that because Caesar and all the emperors saw themselves ordained by divinity, they saw themselves as the son of God. Jesus saying that he was the son of God was a way of him saying he was rejecting the authority of the Roman government, and in a way he was the first political atheist. He didn’t believe in the divine authority of the Roman rulers, and in a way Jesus represented this libertarian view. I thought it was very clever.

So yeah, there was this political atheism to startups and technology. You didn’t have to affect change through the voice mechanisms of voting and complaining and protesting. You could just find solutions on your own, take justice into your hands, and create good things. That always appealed to me, so I guess that’s why I haven’t been thinking, “Oh, if so and so was in power we’d be okay.” I guess I’ve grown very skeptical of the classic work of Exit, Voice, and Loyalty; Balaji Srinivasan made that famous in respect to technology with a talk at Y Combinator. You can think of reforming institutions in terms of these two mechanisms, Voice and Exit. Voice is what people have been focusing on for decades because it’s been the only channel of influence. Technology and science can lead to exit options that improve things for everyone, so that’s where my focus and hopes are.
54:30 CM: You’re a libertarian talking about the government. Define being a libertarian. What does it mean to you, and how did you arrive there?
54:40 MG: There are people who see freedom and liberty as a means and people who see it as an end in itself. I’m more in the camp that looks toward the effects and consequences of things, especially on the scale of political institutions. I came to libertarian thought just because it espoused the principles that I thought would lead to the most human flourishing and the richest, highest standards of living. That’s what appeals to me about it.

There are a lot of counterintuitive ideas; if you study economics, you start to learn the power of markets to solve problems. The people who really love freedom in and of itself tend to either come from reading Ayn Rand or even Rothbard, that school of thought. I came to these ideas when this kid I knew in college said, “If you want to talk about political philosophy, there are two modern philosophers that everyone has to read. Those are John Rawls and Robert Nozick, these two Harvard professors who debated what is justice and had opposing takes on it. He told me to read their books, and so when I read Nozick’s Anarchy, State, and Utopia, it was incredible fireworks of ideas popping everywhere.

If you read Rawls, he’s an impressive, very methodical thinker, but I find him dry as dust and boring. Nozick’s style of thought, which drew on all these different disciplines, these footnotes that would become rabbitholes into these other topics, they were just so exciting, and that’s what pulled me in. If I think about my most idealistic side, it really originates in the last section of Nozick’s book. A lot of people read Anarchy State and Utopia and focus on anarchy and state, mainly state because It’s Nozick’s arguments against Rawls’ theory of justice.

But the most overlooked part is Nozick’s theory of utopia, where he lays out the failed utopian ideals of the past and proposes a market for utopias. The real utopia would be this meta utopia where all these different experiments are being tried out and the costs for entry and exit are zero, so if you’re not part of the community you found rewarding and fulfilling and meaningful it’d be easy for you to find one that better met your values.

I just found that really inspiring, and that’s what drew me to the Seasteading Institute, which was originally a concrete manifestation of Nozick’s ideas. Maybe the other people involved had read Nozick, but what appealed to me was that it was an expression of that theme. We don’t see innovation in government because we’re out of land. There’s nowhere new, we can’t overthrow governments, and there’s no new entry because there’s nowhere to build something new. If we had that, it’d be a real boon. We’d be able to try new ideas out.

So I am libertarian and I would prefer to live In a classically liberal society with the rule of law, and strong contract and property rights, and sound money - even competitive money - and other standard issues. But, most of all, I would prefer to live in a world where the libertarian-ish people had a society that was libertarian while the communists and socialists had their own society and could try those experiments.

In political theory, there are all sorts of ideas as to what justifies the authority of a democratic government. Some people say it’s hypothetical consent, or tacit consent. I want to live in a world that is actually as consent-based as possible. If you do have a choice on the types of communities you can live in, I think it’s a much better place. I don’t want to say no one should be a socialist or a communist - I want people to be able to try those things out. I also wish there was a place that was more in line what with I thought was best.
1:00:14 CM: We touched just a bit on the concept of Exit and Voice. Can you explain that concept?
1:00:25 MG: It’s a framework of great, tidy concepts to describe the market process versus internal processes for reforming institutions. Voice represents this idea that in an institution we can affect change by voting for people, writing letters to leadership, and demonstrating in public spaces. All of these are ways to use our voice to tell people we want them to change. Sometimes that can work really well. Exit represents voting with your feet. If you don’t like the way Starbucks Coffee tastes, you don’t have to write a letter of complaint to the CEO. You can choose to leave the store and never come in again. That exit is a check on Starbucks – if people aren’t buying the product, and they’re walking out, the revenues go down. That form of exit becomes a way of helping Starbucks become better, and if they don’t, they go out of business.

Albert Hirschman wrote the framework, it’s called Exit, Voice, and Loyalty, and in his book, he says that people don’t give enough credit to voice and loyalty as being important factors in helping institutions stay healthy, but in effect the answer is that we need all three. I think voice becomes even more powerful when there’s the risk of exit. One way that policies could improve would be if people chose to leave because things were getting bad.

The US is a nation of immigrants, and people do choose to vote with their feet. Sometimes the feedback isn’t enough and the country continues to rot. For the people who get to leave, I think it’s very beneficial for them. I do like to see things in terms of that framework. I even apply it to startups, I think if you look at the competition between medallion-based taxi companies - the status quo - versus Uber and Lyft, which offers a reputation, credit-based system, I see these as two competing systems of government. With your mobile phone you exercise your exit option from the medallion system into the Uber/Lyft system, and you see change. Uber and Lyft are obviously superior to the old system, but people who prefer that can stay within it if they want to.
1:03:51 CM: What’s going on in Austin with Uber and Lyft, and how does that scale around the country and globe? Do you see more cities choosing exit for Uber and Lyft?
1:04:12 MG: I can’t remember what the exact details of the burdens were that Austin wanted to put on Uber and Lyft. I think it had to do with fingerprinting drivers - all sorts of constraints. Because they lost the vote on this topic, they’re no longer going to operate in that town. On the other side of the equation, I think there are vested interests - the current cab companies, people who fund cab companies - I think they’re doing their best to prevent this competition. It looks like they won in Austin, but they’re going to lose in the long run. Eventually Lyft and Uber won’t have drivers, just self-driving cars, so there won’t be drivers to fingerprint. Whoever those vested interests are protecting the status quo are going to be erased in the future.
1:05:17 CM: It feels like a negotiation a bit. The city’s taking a bit of the power and saying to come back in six months.
1:05:26 MG: The optimistic view I have in that instance is only good if the regulators don’t kill driverless cars. I guess California was contemplating passing a rule that would require every autonomous vehicle to have a driver in it, which is an oxymoron, but it would deeply hurt the business models of self-driving fleets if they had to have a human sit there. I think we are in a race between politics and technology, and I hope that technology moves in a positive direction so fast that regulators can’t squash it before it spreads everywhere. I think our standards of living will improve if that’s the case.
1:06:22 CM: Final question: you sit on the board of the Seasteading Institute. What has being involved with that project been like? How has it progressed? Connect it to the concept of exit and voice.
1:06:36 MG: The Seasteading Institute has come a long way since its inception. A lot of the ideas behind it are now pretty widely disseminated. I think where the institute has struggled a bit is in the caricatures of the ideas. It’s funny in some ways, but in others it’s unfortunate, because it’s never really been about creating a Galt’s Gulch paradise for rich people to secede to. It was really driven by this idea of helping that exit dynamic or even just letting people try new things.

There’s no frontier anymore. How do we create a new frontier? I think its future is about that, and I think that message is still spreading. There’s a book coming out by Joe Quirk and Patri Friedman - it should be released this fall, I believe - and it’ll be interesting to see the debates around that. On the intellectual side, the organization has done quite well; what’s hard is that the technology is just not there yet for creating big enough platforms in the open ocean for people to live on. There are cruise ships and oil rigs, but they all have these business models that sustain them.

In the organization and with people affiliated with it, we’ve been looking for ways to make things work. One of them has been to partner with a host country to create a platform within the 12 miles off the coast, which makes it within territorial waters. That would mean that the platform doesn’t have to withstand the troubles of the ocean – waves, winds, weather, and so on – so it might be more feasible in that situation. I know Randy Hencken, the leader of the organization, has been meeting with lots of potential host countries looking for an opportunity, and one might well materialize in the next few years, but it certainly has been a struggle. I’m optimistic, though in the long run, there are a lot of challenges ahead.

Counter to the trend in politics of strongmen, and people like Trump, and far-right parties in Europe - Putin, etc. - a countervailing force is this return to smaller-scale systems of governance. You see secession movements in Europe, people wanting to leave the EU, the Brexit vote. Maybe we’ll see people break off and try new things.
1:09:56 CM: There’s one thing certain about today: tomorrow isn’t going to look like the past.
1:10:10 MG: In the law school class I taught with Peter, one day the subject was, “In fifty years, do you think there will be more than 193 countries, less than 193, or just 1?” That question is an interesting way to approach a political forecast of the future. One thing that’s certain is that it’s probably not going to be 193. Is it going to be more or less, and what drivers will push it?
1:11:09 CM: There could be more NATOs, governing bodies for groups of countries, and within America regional alliances so that transportation like high-speed rail could become a thing. It’s going to take bold leadership rooted in economic theory and not emotion. This election cycle has been a little discouraging.
1:11:42 MG: It’s gonna be fun.
1:11:50 CM: Really loved talking with you, Mike.
1:11:52 MG: Great talking with you.
1:11:56 CM: I really enjoyed that interview with Michael Gibson. Michael’s become a good friend, and we’ve had many late nights discussing the future of the world. It was really cool to get him on our podcast. Thank you for listening. We have a number of guests lined up, and as always would love your recommendations. Just email them directly to me at chris at data 4 america dot org and we’ll be in touch with them. I hope that you enjoyed this podcast as much as I did. If you did enjoy it, I would love if you shared it with your friends through Facebook and Twitter, through messaging platforms. You can send them to data 4 america dot org slash unplugged. We’re now on SoundCloud and on iTunes, and sharing helps. I want to give a special shout out to our donors, our board of directors, and the many people who have helped build Data4America from the ground up. It’s still the first inning, there’s a long way to go, thanks for your support. Have a great day.

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Greg Ferenstein
Unplugged: Episode #1
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