How The Future Might Look

favela luxuryOver the past few months I’ve been forming a thesis about where the world is heading. Much of my thinking comes from seven important books. Two of the most important authors who have influenced my thinking are Nassim Nicholas Taleb and Jaron Lanier. Many of the ideas that follow are theirs. And when Taleb’s and Lanier’s ideas intersect, you get very interesting hypotheses.

I’ll be expanding on my thinking over the next few blog posts, but I’ll start with some of the important ideas  that I think are at the core of where the world is heading. Understanding these ideas will be very important  if you want to succeed in the world going forward, or if you want to try to influence or change our future.

The Taleb Distribution – 99/1 instead of 80/20

The Pareto Distribution, better known as the 80/20 rule, states that 80% of the effects come from 20% of the causes. For example, in most businesses 20% of clients will generate 80% of the income, 20% of clients will generate the most customer service requests and so on. Taleb argues that we’re moving to a 99/1 distribution, away from 80/20. This shift has profound implications for our economy and society.

Little to No Skin in the Game

Entities are using big data and big computers to create businesses that introduce risk into the system, but don’t actually take on any of the risk. Instead they radiate it out to everyone else, taking all the benefits and leaving others with the downside. Think big banks, healthcare marketplaces, Facebook, outsourcing firms.

Siren Servers

Lanier coined this term to describe companies that use strong computers to suck up data and make money solely on information asymmetry, that have no skin in the game, radiating out new risk into the system. This new business model breaks with old entrepreneurial traditions: now the winners win solely because they have the strongest, fastest and most powerful computers, not because of innovation or value add. It’s arbitrage.

Strongest servers used for control

Whether its from governments like the US and the NSA or strong, overbearing policing, or large companies like wall street or web giants, the strongest servers will use their power to exert control.

Much of this control isn’t really done by algorithms, but people believe in technology, rather than humanism. For example, online dating sites claim they have an algorithm that matches people based on compatibility. In reality the algorithm “works” because it throws lots of people who want to get married together. Marriages are bound to happen. But people believe its the computer and give up control.

De Facto Monopolies

As power and money concentrate around the most powerful computer and radiate risk away from themselves, they create de facto monopolies. For example, Amazon automatically lowers its prices if there is a lower price anywhere it can find, then raises it if there isn’t a lower price anymore. They do this because they have the best data and the most powerful servers. They are willing to take a low or no margin on an item until you go out of business.

Amazon is not stopping you from starting a competitor. But you cannot compete on price. What used to be a monopoly is now just good business and competition. It’s moving toward a de facto monopoly. I expect this to happen in other industries.

Meritocracy used to excuse pretty much anything

As things go to 99/1 and de facto monopolies arise that radiate away risk from people who have little to no skin in the game, the winners will use merit and hard work to justify their outsized rewards. Since these companies are not using traditional, overt anticompetitive practices, the winners will justify their gains by meritocracy: anyone could have done it. It will be used to justify the commoditazation of work and the elimination of traditional levees.

Non Monetary Compensation

Facebook with 0 users is worth $0. Facebook with 1.1b users is worth $122b. It needs our free data to function. Yet its controlled by one guy and only a tiny percentage actually involved get monetary compensation. The rest get the equivalent of candy. The new bread and circus.

Taken one step further, in ten years robots are doing most basic surgeries. All benefits accrue to the software company that created the software. How’d they program this software? By watching real doctors perform hundreds of thousands of surgeries. But do these doctors get any compensation from the new data driven robots that needed their data to create the program? No. This will repeat across most industries.

Shrinking Markets

In a 99/1 world, where information is free and people aren’t paid for their data inputs, and as technology, powerful servers and de facto monopolies begin to emerge, markets will begin to shrink. These technologies cut out the middle men and people needed to do work. Sounds great and it is short term, but at scale, only the powerful handful have any monetary compensation and the rest have candy and no money to live, let alone purchase the winner’s goods.

Massive Inequality

The world will look more like South America, with massive physical, emotional, economic divisions between haves and have nots. In South America the top few percent almost never come in contact with the rest of the population, besides in service jobs. They don’t have the same culture. They don’t eat the same food. Follow the same sports. Watch the same tv shows. See the same movies. It might as well be two different worlds. Without a common experience, the haves lose empathy for their fellow man.

The metafication of everything

Everything we do is now broken down into tiny data pieces, mixed up and then put in a schema. Barriers go down, but we lose context. Do we lose truth with the lost context?

I understand this post sounds bleak and is very incomplete, but I don’t think all is lost. I’ll continue expanding on these ideas over the next few weeks in additional blog posts, including some ideas on how we can get off this track, and if we can’t get off the track, what some of the best strategies might be to survive in this type of a world.

Please add to the discussion.

Three News Articles

I was featured in three different news articles this week for three different ideas and I thought I’d share.

Dealing with digital Afterlife – Financial Times

Emma Thomas interviewed me for an article about people with interesting jobs, focusing on the digital death space. My favorite part where I talk about the impact that working with digital death had on my outlook on working and living. It makes no sense to me to be working on things that don’t really matter, like an iphone app for fart noises or other fairly useless ideas. If you have the ability and drive to do a startup, do something that matters.

The Most Interesting Entrepreneurs in Chile

An article talking about different people in the Chilean entrepreneurial ecosystem. There are clearly better homegrown Chilean entrepreneurs than me, but it’s fun to be on the list.

La Condonería: Condones y educación sexual a un click de distancia

This article in PulsoSocial (spanish) talks about one of my new projects, an ecommerce site that allows people to buy condoms online in Chile. I’m really enjoying this project mostly because of the blog and chat we have. Most people didn’t have a well developed sex education course in high school or college, so we answer basic questions that we get via our chat in blog post form. It’s been one of our biggest successes so far and makes selling a product much more interesting and rewarding.

Seven Important Books

Over the past nine months or so I stepped back from writing and threw myself into reading. I took a trip into the classics, reading Wealth of Nations, Crime and Punishment, Brothers Karamozov, 1984, Brave New World, The Autobiography of Benjamin Franklin, some light fiction and fun non fiction, but what I’ve really been interested in lately is the intersection between technology, our economy and how it’s changing our culture, both for the better and for worse.

I’ve started to formulate a thesis. And I don’t really like the conclusions that I’ve been reaching. Over the next few weeks, I’m going to be writing about what I think might be going on, why its happening and how it may affect our present and our future. These are the key books that I’ve read that have shaped my thinking.

World

Antifragile – Nassim Nicholas Taleb

Taleb’s follow up to best selling and paradigm breaking The Black Swan, Antifragile, is probably the most important book in the past decade, if not longer. I found myself smiling and nodding in agreement throughout the book. And I’ve found that if someone’s read this book and enjoyed it, I’ll likely be their friend and share a similar world view.

Taleb creates a new word: antifragile – things that grow stronger from stressors. Humans get stronger from mild stressors. A glass vase does not. The restaurant industry does. Wall Street does not. Taleb shows that lack of skin in the game, the agency problem, micromanaging and a lack of understanding of real risk is causing our world to be more fragile when we should be orientating toward antifragile approaches.

Shorter: My Rules for Life in The Guardian.

You Are Not a Gadget – Jaron Lanier

Lanier invented the term Virtual Reality and has been involved in Silicon Valley since the very beginning. And he thinks technologist have gotten it all wrong. We’ve built technology that serves technology, not technology that serves humans. Our iPhones control us, not the other way around. And it’s wrecking our culture and economic future.

If you can’t read the book, read his oped in the Wall Street Journal, World Wide Mush.

Who Owns The Future – Jaron Lanier

In Lanier’s follow up, he talks about how technology is accruing massive returns for those who have the biggest, most powerful servers, not those who have the best ideas or give humans the most benefit. This techification eliminates the middle class and pushes economic returns up to a small group and gives the rest candy. Facebook without any users is worth $0. So why do so few people as a percentage earn money using Facebook?

If you can’t read the book, read his NY Times piece Fixing the Digital Economy.

Coming Apart – Charles Murry

Murry shows how the US has developed extreme income inequality that’s led to a small, super rich upper class that’s both physically and culturally separate from the rest of the population, similar to Latin American and other oligarchical countries. His description of how the US looks today is spot on and some of the consequences of income inequality, but I don’t buy his social root causes. I believe a similar pattern is taking place globally.

If you can’t read the book, read his Wall Street Journal piece The New American Divide and then Ross Douthat’s What Charles Murry Gets Right from the NY Times.

US Specific

Rise of the Warrior Cop – Radley Balko

Balko traces the militarization of US police forces from the US’s birth to present day and shows how the drug war and now terrorism fears have turned a police from traditional beat cops who knew everyone in their neighborhoods into body armored, automatic weapon toting, tank driving para military forces that have eviscerated the 1st and 4th amendments, wreaked havoc on families, killed innocents and brought terror the american households, all without even doing anything to lower crime.

Shorter: Why Did You Shoot Me? I was just reading a book! from Salon.

Three Felonies a Day – Harvey Silvergate & Alan Dershowitz

The US federal law system is now so vague that we all commit at least three felonies per day and the only reason we don’t get prosecuted is that we haven’t run afoul of a politician, a bureaucrat, or a prosecutor or even just gotten unlucky. Rise of the Warrior Cop interplays very well with this book. While I don’t recommend reading this book for pleasure reading, as its clearly intended for technical attorneys, the thesis is spot on.

These two books together paint the picture of why I’m very worried about NSA spying. Between a militarized police force, a government that collects all of our data and a criminal justice system that can indict you with lifetime jail time for living a normal life, we’re well on our way toward a police state.

Shorter: You Commit Three Felonies A Day from The Wall Street Journal.

Fiction

Super Sad True Love Story – Gary Shteyngart

A dystopian, but extremely readable look at what the future might look like where everyone’s always connected to the internet, we’re constantly alone together, the government monitors everything, the US is a banana republic and everyone is rated on everything via metadata. Read it.

Startup Chile Application Round 9 Help

20120904-start-up-chile-logoStartup Chile just opened the 9th round of applications this week and will stay open from now until October 1st with the winners being announced December 9th. In the round eight application process 1500+  startups from more than 60 countries applied for the right to come to Chile for $20m Chilean pesos (US$40,000). Chile invited 100 of the 1500+ companies who applied and they will begin to arrive in the next months.

Startup Chile has become more competitive as the number of applications has grown. Round eight saw applications grow and more than 1700 companies will likely apply to Round 9. More than 1000 companies have already gone through the program since the pilot round in 2010.

It’s a great program, especially for entrepreneurs who are bootstrapping or already have developed a product but need more time to figure out the correct business model for their business. It’s a perfect fit if you’re looking to target the South American market.

My company, Entrustet, was part of the pilot phase of Start-Up Chile and I’ve been in Chile since November 2010. I blogged extensively about my experiences in the program and in Chile, along with advice on how to get selected for Start-Up Chile. I tracked down the stats from the pilot round companies a year later, which was published on The Next Web. I also wrote Startup Chile 101, the book that will tell you everything you need to know about living, working and doing business in Chile and Chile: The Expat’s Guide

Since the third round, I’ve helped startups review their applications and prepare them to get accepted into Startup Chile. Overall I’ve now reviewed, 35 applications for prospective Startup Chile teams and 20 have been accepted.

Round 3 – 6/9 66%
Round 4 – 3/4 75%
Round 5 – 3/6 50%
Round 6 – 3/6 50%
Round 7 – 5/10 50%
Round 8 – 3/5 60%

Overall: 23/40 58%

In rounds five through eight, 6.2% of applicants were accepted into the program and 52% of the applications I’ve reviewed have made it. Many companies that have applied as many as three times previously were accepted after we worked together.

I can help you craft an application that emphasizes the criteria that the judges are looking for, correct your grammar into perfect English and give you the tips you need to have the best chance at getting selected.

If you need help with your application, please contact me. Editing, writing, review, advice. I charge a small flat fee to review and edit your application, plus a larger success fee if you are selected for the program after I’ve helped you.

Want help? Got questions? Want a quote? Email me: nate at nathanlustig dot com or fill out my contact form.

Note: I WILL NOT write paid letters of recommendation.

My Talk From The Forward Technology Festival

Last month I gave a talk at the Forward Technology Festival in Madison. The format was Pecha Kucha, which means that you get 20 slides that automatically move forward every 20 seconds. I gave my presentation on How I Evaluate an Opportunity and talked about the lessons I’ve learned from ExchangeHut, Entrustet, Startup Chile and various other business ventures. Pecha Kucha is harder than it looks and this version was 100x better than my first crack at the format. Check it out here:

Chile: The Expat’s Guide Released!

I’m excited to announce that my newest book, Chile: The Expat’s Guide is now out and available for purchase on Amazon! The book gives you the inside scoop about living, working and traveling in Chile from my perspective as a foreigner who has been living in Chile for the better part of the last three years. Whether you’re traveling to Chile for pleasure, coming for business, studying abroad or relocating, reading the book will arm with the knowledge you need to make the best of your stay.

chile expat guide

I cover everything from Chilean culture, history and food to practical tips on where to live, where to go out, dating, travel and much more. Rate five stars on Amazon, the book is 216 pages chock full of the useful information you’ll need to enjoy your time in Chile.

The book comes with a companion website that includes my most updated restaurant guide, service providers that will be useful while you’re in Chile and tips and tricks to survive in the Chilean jungle. For more information, check out the Chile Expat’s Guide website for a full table of contents, the introduction and much more.

Special Offer! If you purchased my first book about Startup Chile, I’m offering 50% off the electronic version. Shoot me an email with a picture of you reading the book and I’ll send you a discount code!

buy startup chile 101 amazon

2013 Forward Technology Festival Starts Tomorrow!

forward techThe 4th annual Forward Technology Festival starts tomorrow in Madison, Wisconsin and runs until August 24th. This year’s version of the Festival has a record 19 events over 10 days and it’s likely that over 5000 people will attend. Although the August 21st’ Forward Technology Conference sold out today, there are still a multitude of ways you can participate in the festival.

The Festival’s  goal is to bring Madison’s technology community together to put on events for a statewide and regional audience and gives people from the community a chance to learn about Wisconsin’s tech community and connect with people from around the state.  There are events for entrepreneurs, investors, technologists, programmers, scientists, makers and anyone who’s interested in the world of tech in Wisconsin. Whether you’re already in the industry or are interested in learning more, I’m confident you’ll enjoy many of the events.

The Festival kicks off tomorrow with the Capital Entrepreneurs Open Social, a chance to hang out with some of Madison’s top entrepreneurs, and the High Tech Happy Hour Pecha Kucha presentations about lessons learned through entrepreneurship. I’ll be speaking about my startup story at the hthh event.

Thursday brings the Badger Startup Summit, an event that invites Wisconsin native and UW alumni entrepreneurs to come back to Madison to connect and share experiences. I’ll also be sharing my experiences about doing business in Madison and Chile, along with a stellar group of Badgers.

I’m also especially excited about the Wisconsin Startup Showcase, Rep. Ron Kind’s panel on Entrepreneurship, the Sector67 Mixer and High Tech Happy Hour. It’s amazing to see how far the Forward Technology Festival has grown since year one in 2010 and I can’t wait for it to kick off tomorrow! Be sure to check out the Forward Tech Festival website to find some events you’re interested in.

Special thanks to Matt Younkle, Bryan Chan , Marc Brakken and Rachel Whitmore for doing the lion’s share of the organizational work!

How To Deal With A Smart, Disruptive School Kid

Or how to deal with a kid like me.

Growing up, I was a teacher’s worst nightmare. I was really smart. I got high standardized test scores. I read books. I went to a top public high school, so I had all of the advantages. But I “never realized my potential” in school.

sleeping in class

I got bad grades. I disrupted class. I challenged teachers’ authority. I slept through class. See preferred technique above. I got the right answers but refused to show my work. I got my first detention in 1st grade music class for tripping a friend, but skipped it to play in the intramural soccer championships. In second grade, I refused to learn cursive because “we’ll never need to use it.” In fourth grade, I refused to write in my assignment notebook because I would finish my homework in class.

In fifth grade I made a teacher’s life miserable because she called people living in Africa in the 1500s “African American” and I never let her live it down. In sixth grade, I flunked art class. In seventh, I got kicked out of an english class for the final two months of the year because I made the teacher cry. In 8th grade, I was written up seemingly 100 times.

In high school, one teacher threatened to flunk me even though I had an A average on my tests because I “wasn’t a good class citizen and didn’t participate in class.” Another teacher referred my case to the guidance counsellor because he thought I had a disease because I slept in his class so much. I even got a death threat from another student because I got a higher grade on my term paper and he couldn’t fathom that I was smart because I didn’t add anything in class. And that’s just scratching the surface.

Why? Because I was a smart boy. I was bored out of my mind. I hated the rules. I didn’t care about the process, just the end product. I was messy. I didn’t have good penmanship. I didn’t like to sit still. I thought I was smarter than the teachers, and in some cases I was.

I was also struggling find my place with my peers, so I took on the role of the class clown. And I was good at it. I challenged authority. I pointed out when teachers were wrong. I did the bare minimum. I made their lives miserable because they were boring me to death.

By the end of high school, I wanted to go to a college that as I liked to put it “treated me like a number, not a name,” where I could do my own thing. I went to Wisconsin, found things I was interested in and have been successful since then.

For some smart kids, school is terrible. It tries to beat the creativity out of you. It tries to make you conform. To write and draw between the lines. Luckily, school never had a chance with me. Many of my smart friends had similar problems. And I’ve met kids and parents who have this same problem today.

So how should schools and parents deal with smart kids who are like me? Here’s a list of ten things parents can do to help their smart kids survive school.

1. Find teachers who are willing to work with you

My parents were at wits end, but they constantly demanded that teachers find challenging work for me, or give me alternative assignments. For example, in fifth grade I read 400 page biography of Jackie Robinson and wrote a book report instead of reading a 75 page book that was assigned. Or in 8th grade when a teacher agreed to let me do my own research papers on topics that I wanted. Thanks Ms. Marco, Ms. Keane, Mr. Lauasser, Mr. Gilbert and more.

2. Demand that your kid learns on his own

My parents didn’t really care what my grades were, but if I wasn’t reading and writing on my own outside of school, I was in trouble. Make a deal with your kid that you’ll relax a bit on grades if they continue to learn outside of school.

3. Tell your kids it’s not acceptable to disrupt other kids’ learning

Although I didn’t always follow this rule, I knew I would get in trouble at home if I was disrupting class for others. That led directly to my sleeping in class kick.

4. Teach Life Lessons

My parents explained that while I may be smarter than some of my teachers and that I was bored, life isn’t fair and that I’d have bosses or businesses dealings with people who were unfair, not as smart as me and where I didn’t get to set the rules.

5. Find a non academic outlet outside of school

My parents pushed me to take up reffing soccer at age 12. It gave me power, responsibility and someone to scream at me when I screwed up. It kept me in line. Check out programs like Exosphe.re, Sector67100state and others in your area.

6. Find what interests your kid and let them work on it

I wrote stories about hockey and soccer. I learned math from baseball stats. I loved learning about foreign countries. I put most of my effort into learning through things I liked. Play to their strengths.

7. Let them fail

Your kid is likely arrogant. Let him fail. I refused to write in my assignment notebook and I forgot my work a few times. My parents didn’t make excuses for me and made me take lower grades.

8. Force him to accept the consequences of his actions

Don’t let him blame other people when he fails and things go wrong.

9. Help him learn from his mistakes

Don’t “I told you so” him. It won’t work. Say “maybe it would have been better if you did X next time” and leave it at that. Your kid is smart. He gets it. He just doesn’t want to admit it.

10. Plan for the long run

My parents always told me that they would be furious if I got bad grades that didn’t let me get into a decent college. They tolerated lots of bullshit as long as I kept decent grades. Set your long term expectations clearly and demand that they follow them.

Did you ever have these problems? How did your parents and teachers deal with you?

The Best Computer Backpack

The Booq Boa Squeeze is the best computer backpack you can buy. I bought mine  in 2010 after reading Fabrice Grinda’s post and my Booq Boa is still going strong after almost three years.

It’s lightweight at 2.9lbs, compact, durable and comfortable.  It easily fits my MacBook Pro and charger, my Kindle, my notebook, pens, papers and other assorted working materials. And if I’m in a pinch it can also hold a water bottle, a sweatshirt another random possessions in its multitude of pockets. I get compliments on its style about 50% of of the time I travel through airports.

If you’re in the market for a backpack, I highly recommend you try out the Booq Boa Squeeze.

booq boa squeeze

My Investment Thesis

One of the biggest lessons I’ve learned over the past two years is that I must have an investment thesis to evaluate my opportunities. Without one, I succumb to the  entrepreneur’s disease: taking on too many seemingly good opportunities and doing none of them well. A good example of someone who has a clear investment thesis is Fred Wilson, who only invests in startups that are “building large networks of engaged users that can disrupt big markets.”

So here’s mine, whether as a founder, advisor or investor, in no particular order. A project must:

  1. Make money (business) or be self sustaining (nonprofit)
  2. Solve a real problem
  3. Makes peoples’ lives better in a real, measurable way
  4. Give me a platform to talk about the things I believe in

If an opportunity doesn’t fit these points, I’m not interested. No social photo apps. No group texting. No opaque finance deals. No businesses that exist solely for making money. There are enough good opportunities for me that I know I can both work on projects that make money and that make the world a better place. Nothing else.

Do you have an investment thesis? If so, what is it?

My main projects I’m working on right now all fit this criteria:

Entrepreneurship Courses in Chile

An organization that teaches entrepreneurship to Chileans who want to launch a business. We’re currently teaching classes in three Chilean universities, launching an online course and making our content available to as many Chileans who want to learn as possible. We are changing people’s lives by empowering them to take control of their lives. The program works and many of our students have launched profitable businesses, both in tech and traditional industries.

La Condonería

An online store that sells condoms with home delivery. Previously, the only way to purchase condoms in Chile was to go to a pharmacy, take a number, wait in line and then ask the pharmacist for condoms while all of the other clients are watching you. Sometimes the pharmacist looks at you condescendingly, other times other customers look at you disapprovingly. The process is embarrassing, especially for Chileans who live in a culture where, in many families, sex is still a taboo, a somewhat shameful activity, even for someone in their mid 20s. Most schools don’t have sex education. So many Chileans just don’t buy condoms, especially women. I have friends who drive 3+ miles away from their house to buy condoms just to not run into anyone they know. Plus they’re about double the price of condoms in the US. The system is broken, so we’re fixing it with La Condonería.

Startup Chile 101

I wrote the book to help people have a soft landing in Chile and avoid making the mistakes I made when I first got here. The book is the guide book I’d wished I’d had before I came to Chile and will make sure people have as good of an experience as I did.

Forward Technology Festival

After South By Southwest in 2010, I decided Madison should have a tech festival just like Austin. So along with two friends, we started The Forward Technology Festival. August 2013 will be the fourth festival. It gives me the platform to talk about entrepreneurship in Wisconsin and outside of the coasts.

Capital Entrepreneurs

In 2008 Madison, WI, didn’t have a good place for entrepreneurs to get together, so along with a few other entrepreneur friends, we created Capital Entrepreneurs, a way for entrepreneurs to share their experiences and get to know each other. Five years later, it’s growing like crazy and has more members than ever. It gives me the chance to interact with a group I care about.