02

Aug

Anti-Realist Reality

In Anarchy, State, and Utopia, Robert Nozick presents an often referenced thought experiment. Drawing from Descartes, Nozick describes the situation that we may simply be a brain in a vat (pictured to the right for your amusement) that is merely receiving electrical impulses via wires and a computer. A more contemporary version of this idea is presented in the Wachowski Brothers’ movie, The Matrix (the most awesome film ever made). In essence, in the universe of the Matrix, the world we call reality is a simulation presented to us by supercomputers. Our actual physical bodies are sitting in jelly-filled pods hooked up to a variety of probing wires.

One of the many “bad guys” in the movie is a character named “cypher” who decides to betray his friends in order to return to the “falsified” world of the matrix. Our natural reaction is obviously to hate this guy’s guts. Not only does he betray his friends, but he seems to be a coward. He can’t stand “reality”, so he tries to retreat to the “fake” world of the Matrix.

But after pushing aside the instinct to think that deciding to live in the Matrix is a dishonorable choice, we realize that our initial reaction might be too hasty. Maybe looking into the philosophy of the oft confusing Immanuel Kant might help.

“According to [Kant], our perception and understanding of the world is a result of filtering or molding of our sensory impressions througha priori intuitions (of space and time) and a priori concepts (such as causality). Such “pure forms of sensibility and of understanding” impose on us a certain basic view of the world, independently of (i.e. without regard to or appeal to) any content of sensation. They are structural preconditions of, respectively, any perception and any conceptual understanding, which therefore to a certain extent determine our thoughts without any reference to experience, which means effectively ‘subjectively’ (in one sense of the term, i.e. at least not objectively).”

 -Avi Sion

  Kant argues that the world we perceive is filtered through metaphorical goggles that we can never remove. These goggles are defined by our various senses and mental capacity that are the bridge by which we experience the world. Due to differences in each human’s (and possibly even living being’s) goggles, he/she perceives reality to be a different thing (in the case of people these differences can be mere minutia). What another organism (take for example one that has none of our five senses, but five completely different receptors) perceives reality to be would be completely different from what you and I defined it as.  In fact, the way we experience reality can never be completely “unfiltered” (unless we can magically become super brains that overcome the biases of cognitive constraint and senses), because our inherently limited senses are the only way we can define the real world. We are all led to have our own unique definition of what reality actually is.

Therefore, we start to come to the conclusion that “reality” isn’t as objective as we often think it is. Reality then can only be defined by subjective and imperfect receptors in the brain, thus making it impossible for there to be one absolute “reality” every organism agrees upon. Once we realize that we can no longer define reality as a set of static descriptions, what will this new subjective reality be grounded in. All we can say that reality is unique for each person/organism and that each personal reality is defined by the sensory inputs they are experiencing.

Take for example a comparison between your and a schizophrenic person’s reality (I’m going to assume for the sake of the example you aren’t currently talking to yourself). In his world, he might be talking to a his friend on a park bench. But in yours, he is just sitting there mumbling to himself. Our reaction is to think that this “imaginary” friend is non-existent in an absolute sense i.e. he does not exist in any reality. But, the schizophrenic person can sense his friend and believes him to be sitting right next to him. So, we can say that this “imaginary” friend is actually real. He might not exist in your reality per say, but he definitely exists in a reality, that of the schizophrenic.

Then what do we make of the Matrix. The supposed real world that we like to ground ourselves in, is still experienced in the same way you would live in the Matrix. Through electrical impulses sent to your brain. Using the subjective reality view, our personal reality is dictated by the senses we perceive. Thus you cannot say that the Matrix is not a true reality in itself. For those who have broken out of the gelatinous vats, the Matrix is no longer a real world. They have changed their goggles (by choosing the red pill and going down the rabbit hole as Morpheus says) and now each perceive reality to be something different. But those in the system aren’t living a lie. Their reality is just as “real”. We might just think that because it is transparently deterministic that it is fake, but what is to say that our reality is not as deterministic.

Thus why Cypher is trying to do, is restore his old goggles and return to the old reality. He isn’t returning to some false fantasy world, he is merely changing (or asking for a change) in the way he perceives the world so that he can exist in a reality that he finds more comforting. If anything he understands that the Matrix is as real as the world Neo is trying to save. Unfortunately, he still tried to kill all of his friends, which in itself takes a massively strong believe in moral relativism to clear him of his “bad guy” title.

292 days ago Short URL Comments

philosophy

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27

Jul

Moral Hazard in Venture Capital

Normally, we tend to think that if more money is being offered to you, you would be a fool not to take it. Continuing with the topic of the disenchantment of venture Capital (see here), I think its important to note how dangerous this mindset can be.

 In economics, moral hazard is often associated with   insurance and government financial support of people/companies. If after your first quarter of intro to micro you realized that walking in the footsteps of John Maynard Kenyes was of no interest to you, you might not have come across the concept. In short, Moral Hazard is when “ the actions of one party may change to the detriment of another after a transaction has taken place” i.e. after a deal happens the incentives of one of the parties shifts in a way that is harmful to the other (It’s actually a really interesting concept, which you can look into more beginning here).

The classic example given (like I said before) is someone buying car insurance. In many cases, the second you realize that the costs of getting into an accident will not all be paid by you, you are more willing to take risks when driving. It’s not that you’ll start drifting on major streets, but you will probably begin to speed a little more and push yellow lights a little longer. But as you do this, you become more susceptible to damaging your car, which leads to the insurance company probably having to pay out more to repair cars. In short, the insurance company has  somewhat protected you from risk and thus you are able to take more chances, because it’s less likely you will have to pay out big bucks if you destroy your car.

But you might be thinking, how does this even relate to venture capital. Getting too much funding is similar to getting insurance. You’ve now increased how tolerant you are to negative outcomes ( e.g. if your product doesn’t seem to catch on you still have the resources to continue working). Not as much (but still a lot) rides on the success and failure of many of the things you are trying to complete in the startup process. Failing somewhere doesn’t mean that your company no longer has enough resources to continue operating, and now you have the luxury of messing up more. Basically, you have extended your startup’s runway for a decent amount of time and you now have the ability to become complacent. David Heinemeier Hansson describes the situation here.

Interestingly, you no longer have as much pressure motivating you to stay up past midnight perfecting your product, or taking that extra meeting even though it’s on a saturday morning. It’s very similar to what happens to the new car owner. You can now act in a lot riskier way, except in this case the riskier thing to do is not squeezing every ounce of effort out of yourself. Companies that don’t adapt fast enough die, and that’s a fact. So losing the hunger and passion you use to drive your startup is the surest way to kill off an idea with potential. The problem is that we often need some kind of pressure to prevent us from constantly giving 100%.

In his book The Start-up of You, Reid Hoffman analyzes how detrimental a shift like this can be. He describes the phenomenon of the fall of Detroit. Basically, once car companies began to dominate the automobile market, they became to self-assured and no longer felt any pressure to continue to work hard. Over time, they failed to adapt and quickly fell behind international competitors. The deserted city of Detroit is their gravesite.

But let’s not throw the baby out with the bath water, without venture capital we probably wouldn’t have all of the amazing startups that we all love today. The key (like in all situations) is moderation. It’s about being careful about how much capital you are taking on and being aware that too much could be just as bad as too little. And while there is no formula to help you figure out the correct amount, being aware of how you will probably be affected by accepting vast amounts of money will prevent you from getting blindsided by a creeping sense of complacency.

298 days ago Short URL Comments

Startups

18

Jul

Behind Every Successful Person Lies a Pack of Haters

Interestingly, there’s one characteristic at the heart of success in almost any field ranging from Hip-Hop/Rap to Entrepreneurship to living a fulfilling life (according to certain philosophies). The one simple yet extremely powerful trait is “letting haters hate”. In a more serious sense, it’s all about not letting critics and outside influences control what you do and being true to yourself. Don’t get bogged down by “the norm” or people spewing criticisms of your unconventional ways (if anything that’s normally a good sign).

On the most simple level, hip hop embodies the “I’ll just do me” personality i.e. I’ll be who am regardless of what other people say. A hilarious yet relevant review of Kanye West’s Theraflu talks about how his “swag” just keeps rising like a missile, because he doesn’t let the public attacks on his personality and career stop him. Yes he does go over the top some times (sorry Tswift), but his career has been characterized by his constant pushing past the boundaries of traditional/accepted hip hop. Instead of summarizing the amazing argument as to why Kanye is one of the most influential artists of our time, you can read the reddit post here. (Tl;DR Kanye began/contributed to almost every trend in hip hop over the past 7 years). One of the biggest factors behind his success is that he was able to continue doing what he felt was right regardless of what other people said. That is why he was such a revolutionary hip hop artist.

On a basic level, a very similar idea is at the center of Sartrian Existentialism. Among the many ideas presented in Jean-Paul Sartre/Simone De Beauvoir’s writings, the most important is that we create the meaning behind our lives. They argue that there is no inherent purpose in life and that instead, we each create our own purpose. As a result, we each create our own value systems by which we evaluate our lives and actions. On a basic level, the belief is put forth that we should not let other people and societal influences determine how we value things and how we live our lives. A truly fulfilling life is one that doesn’t let “haters” tell you how to live. Similarly to the example of Kanye, it is about acting on what you believe and even in the face of criticism continuing to be true to yourself.

Lastly, there are several examples of how dismissing “haters” is the key to becoming a successful entrepreneur. I mentioned once aspect in my post, Nietzsche for Entrepreneurs. (Summary: Don’t let negativity slow you down, just roll with the punches). But, there is an even more important lesson. The people who think differently and unconventionally are the ones that truly change the world. Because Steve Jobs has become worshiped so intensely, this idea has become more popular (so I won’t spend too much time talking about it). But famous Stanford philosophy alumni Peter Thiel and Reid Hoffman constantly harp on how important it is to be a contrarian if you want to be successful (for sources see either Class notes from Thiel’s startup class or Reid Hoffman’s book). One of the most important traits of a successful contrarian, is the ability to put aside people’s criticisms and judgement and continue working on whatever you feel is right. Thus, brushing of haters is key to building the confidence to remain true to your ideas and self.

It’s not that you don’t have the ability to become amazing, the problem is that from time to time we always let others discourage us from being as awesome as we can be.

 

307 days ago Short URL 1 Comment

Startups

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10

Jul

VC’s are Becoming the New Ivy League

As more and more people are dropping whatever they are doing to start their own company, established Venture Capital process is becoming eerily similar to college admissions. While I was lucky enough to survive the gauntlet that is university applications, I didn’t make it out completely unscathed.  Most students who go through the overly stressful process agree that applying to schools has become much more than trying to figure out where you will continue your education. What I’m afraid of, is that a very similar thing is happening with VC firms.

On their most basic level, both top VC’s and top universities promise to give people the resources and mentorship necessary for them reach their full potential. Each one offers a slightly different environment and way of providing their candidates what they need. In return, they are hoping that the people they “accept” will do amazingly well and in turn bring money back to the institution (via the rising value of equity/donations back to the school). Both also proudly boost frighteningly low admittance rates.  But overall, both VC’s and top universities do provide a lot of value to the people they end up taking in (this might be up for debate).

The problem is that both of these institutions are starting to take on other roles as well. As they both have become increasingly popular and prestigious, their names start to hold a lot of value. Having dealt with hundreds of “where are you going to school?” questions as well as constantly dealing with people that order their college list according to US News’ ranking, I’ve seen first hand how universities have become a label. It is one of the first (and sometimes only) things that people use to evaluate and judge you, and that has unfortunately encouraged many people to seek the affirmation of a top university.

Although not nearly as intense, I feel like I’m starting to see a similar trend in startups.  To prove an idea’s worth people feel like they need to plaster the logo’s of the the investors that back them on their webpages (like the kid that has to constantly wear the apparel of his ivy league school) or use the names of their backers as often as possible (like the college name dropper everyone hates). Some even feel the need to get funding from an awesome VC, even if they don’t need money (I do acknowledge that VC’s provide a lot of other resources besides funding as well). Observers are affected in a similar way.  One of the first things a person might look at when applying to work at a startup is who has backed it. Even I’ll admit, when I see that a company is funded by Sequoia or AH I’ll start to think its a cooler project than previously thought.

In part, its because we trust the opinions of partners/admissions officers at top universities. They probably have a pretty good idea of what they are doing and have picked a lot of successful people. But at the same time, we need to make sure that they don’t become a seal of approval that universally determines whether a person/idea is capable.

And even though venture funding is probably one of the best paths to getting your startup off the ground (crowdfunding might give it a run for its money), we should hesitate before putting too much belief in the VC system.  A lot people think that Peter Thiel’s argument that there is a bubble in higher education is going slightly overboard. But, there is definitely something too it. Maybe a similar problem is happening in the case of venture firms i.e. it is seen as the best institution for most cases, when in fact many people would benefit by taking a different route (debt, bootstrapping, etc). This might be one of the (several) reasons that venture capital is broken, which has been argued here, here, and most famously here.

And while I know that the VC process will never become close to as bad as university admissions, I hope that something prevents it from beginning to go down the same path.

315 days ago Short URL 1 Comment

Startups

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09

Jul

No Money, No Problem

Nobody would argue that in the past decade (or two), there has been a massive explosion in the number of companies and startups being created. Everywhere you turn, a small group of co-founders is releasing its new product and clamoring to be featured on TechCrunch. Even Quora has become invaded by an incomprehensible amount of founders,CEO’s, and CTO’s of unheard of upstarts (I feel like its more common than not fora person to mention starting a company in their Quora handle). This boom has definitely not gone unnoticed, and the explanations seem pretty straight forward. The most common cited reasons for this rise in interest are the massive increases in ease of entry, the possibility to strike it rich, and of course the “social network” effect.

One of the factors, that is never given credit as probably the most influential, seems to be somewhat overlooked. In the history of humans/markets, people never clamored to start businesses that are not built to inherently monetize.  It would seem almost illogical to a person of another era to hear that people are quitting jobs and devoting their lives to ideas that just let people share pictures or strings of text. Founders could spend years building a product and not even begin to charge anyone anything. Legitimate businesses needed costumers (or at least people who would ideally become costumers) before making moves.  There are exceptions, but you would probably get decent amount of weird looks when explaining your business.

Today, one of the biggest reasons behind the explosion of new companies is that people just need an attention grabbing idea, some really smart people, and a decent amount of luck.  Many of the valley’s newest companies aren’t businesses. They are ideas that can monetize. What I mean by this is that they are focused around an idea (meeting new people, sharing thoughts, etc) and have built on a money-making-aspect as an attachment.  A business model is not at the heart of Facebook, Twitter, or Google. They are merely great ideas that have over time built-in great ways to make profits.  But if you stripped down any of these multi-billion dollar companies to their most basic function, it is to provide a cool service for free.

Advertising is the strongest catalyzing agent enabling ideas to become valid companies. It allows all of these eyeball catching webpages to use what they do best (capturing people’s attention and information) as a way of becoming more than a free service.  Online ads have probably allowed more ideas the opportunity to become startups than any other factor.  It is probably the easiest way for a non-business idea to become viable (obviously doing it right is no walk in the park, but it seems like the option to monetize off of advertising is always present).

Thus, at the core of this boom in new companies is one change.  You no longer need to create a business to start a company, you just need a (really really) good idea and a plan to build on monetization once you get covered by TechCrunch for the third time.

316 days ago Short URL Comments

Startups

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