A Discussion with Albert Wenger
A Discussion with Albert Wenger
Thoughts on a ‘World After Capital’
Thoughts on a ‘World After Capital’
Last month I had the chance to talk with venture capitalist Albert Wenger to discuss some of the ideas in his book, World After Capital. Albert is a partner at USV and previously the president of del.icio.us and an angel investor (Etsy, Tumblr). In keeping with his views on information freedom, he was generous enough to allow me to share our talk.
What followed was a macro-level discussion that covered everything from universal basic income to science-fiction, from individuals to civilizations. Because his book is available online in full (draft version), the questions I ask assume some familiarity with it. World After Capital is essentially an argument that we are in the middle of a civilizational transition point. We went from agrarian to industrial and now we are on the edge of the Knowledge Age, in which much of our economic need is met and the allocation of our attention will be more important. Towards the end, the book advocates for policy changes such as universal basic income and rethinking privacy laws and attitudes. It’s a thought-provoking read and I strongly recommend it.
In the interview, there were several great entry points to more specific topics. I’ve embedded links to references here, both ones we discussed in conversation and my own.
The transcript doesn’t start right at the beginning. We started off talking about philosophy and economics, specifically the focus the ancients had on the good life and how much of that wisdom is lost to us in modernity. We also covered Marx and agreed that we appreciated his insightful diagnoses of capitalism’s problems more than his solutions. The problem was that technology wasn’t advanced enough to support his vision, probably not even into the 1970s. He briefly mentioned a book by the Skidelsky brothers and I brought up a seminar I took with Michael Sandel about capitalism, finance, and luck…
AW: …the first element of luck is to be born when we’re born. [Bill] Gates wouldn’t be Gates if he had happened to be born in the 15th century.
TK: That’s what Warren Buffett always says, that he’s lucky to have been born into a society where capital allocation was rewarded tremendously.
AW: Right, something he turned out to be good at. I called into a Boston radio show a year or two ago and some entrepreneur, she called and said, “I built this business all by myself!” Well did you build the roads on which your customers come to your business? This idea that at this point in time, that you have done anything entirely by yourself is ignoring everything that civil society around you has done. It’s ignoring everything that the many generations of humanity that came before you have built so that you can build this one thing now.
TK: You’re standing on the shoulders of giants.
AW: Right, generations of giants. And generations of regular human beings who did whatever little job they did and did it well that allowed us to be here today.
TK: So I wanted to build off World After Capital because everything that you’ve written there is publicly available. After rereading the book, I was curious about these eras: Agrarian, Industrial, Knowledge. Each age passed when their feedstock becae abundant. Once land is not a limiting factor for food, it frees up surplus time and economic activity. You move to capital, and now that capital is becoming abundant you’re arguing that attention is scarce.
AW: Right.
TK: To get a sense of what it means for attention to be scarce, what would it mean for attention to be abundant?
AW: That’s a great question. I think it’s easy to answer for individual humans. For individual humans, once you have found a purpose in your life, and you have figured out how to free yourself so you can apply yourself to that purpose, I think at some level you are no longer attention-constrained. Obviously you have some constant demands on your attention from the apps on your phone, people around you, and so forth but I think you’ve taken a great step towards not really having constraint on attention.
I think the #1 constraint on attention today for individuals is that they’re busy and they’re not thinking about this fundamental question of the good life. As a result they’re leading a life where at some point they have a big midlife crisis. Or they get to the end of their life and they have all these regrets about things they didn’t do. I feel incredibly fortunate because I travel a lot by airplane. If I fell out of the air tomorrow I wouldn’t think, “oh shit, there are all these things that I always wanted to do that I haven’t done. There’s this big project that I wanted to work on that I didn’t work on.”
I think answering your question at the aggregate level is much harder. The reason is because we know so little about the universe. I’m about halfway through the third book of Cixin Liu’s The Three-Body Problem trilogy of sci-fi. He’s a Chinese author, first big sci-fi author to be translated into English. It’s an absolutely fascinating set of books because it deals with what people call the Fermi Paradox which is as you know, “hey there all these habitable planets out there, all these stars out there. Why is it that we seem to be the only intelligent ones around?”
The answer in his book is not very reassuring. It’s that there are a lot of other civilizations out there which are much more advanced and they’ve gone dark. Largely, they’ve gone dark because they didn’t want to make themselves the target of even more advanced civilizations that would destroy them. Meanwhile, he calls us the children. We’re out here sending our electromagnetic signals into the sky. I’ve defined shortage or scarcity as something that will eventually not allow us to meet one of humanity’s basic needs. And so attention is going to be scarce until we really feel well-established in this universe which I think we are long, long way away from.
There was a decisive moment in my childhood when I learned that eventually the sun was going to expand and absorb the Earth and die of heat death when the universe expanded. And I had this sudden sense of futility like “what are we all doing here if our histories will not continue indefinitely?” It was only more recently when I realized that we’re not condemned to stay on this Earth, so to speak. I mean the Earth is amazing and beautiful don’t get me wrong but it’s knowing that if we apply ourselves and continue to apply ourselves we can in fact eventually live on Mars or in space or whatever. To me that’s a really important insight. And that speaks to attention.
TK: That’s really interesting you brought that up. I feel like a lot of teenagers have this existential crisis and ask, “what’s the point of life? What’s the meaning of life?” One of the things I looked to was science fiction, a lot of Asimov.
AW: The Foundation series.
TK: Yeah, the Foundation series, which I only started reading in college. I do remember reading though his powerful short story about entropy, called the “The Last Question.” It seems like there are some cosmic constants that in the future would limit the lifespan of human civilization.
AW: But the beauty is they don’t. I think, at least based on what we know today.
TK: There’s no reason to be fatalistic. But even so, how do you find meaning in a finite life? To me a finite individual life seems analagous to finite human civilization and if you can find purpose in the former…
AW: I think that’s a lot harder. I think it’s a lot harder. I think it’s quite easy to find purpose in contributing to the Knowledge Project if you believe the Knowledge Project has a very long timeframe. But I think, and this is part of what happens in The Three-Body Problem, if you were confronted with a more imminent wipeout of all of human civilization it would be very hard to find meaning.
TK: It’s the Children of Men problem.
AW: Yeah. If we found out today that human civilization had another five years, some ticking timebomb, I think it’d be very hard to find any meaning in life. Other than engaging in hedonism.
TK: That makes sense because the urgency you have about accelerating the Knowledge Loop is based off the belief that we’ve only tapped so little and we should have massive future potential.
AW: It’s somewhat symmetrical because there are incredible opportunities but also incredible threats that we’re treating like children. Sir Martin Rees, the Astronomer Royal of the UK, has this book where he lays out five different ways we can all get wiped out from forces in the universe that are completely beyond our control, and that’s not even counting aliens which…
TK: Supernovae, gamma ray blasts…
AW: Exactly. With our currently, fairly in-between advanced technical civilization, where we’re somewhat advanced but not super-advanced, a big comet strike would set us back massively. The Earth can support seven billion people because of our technical infrastructure. That technical infrastructure today is not resilient to a big comet strike.
So when you compare that with all the brains in hedge funds figuring out how to trade milliseconds faster than the other guy, to eke out a few cents… which is the other guy’s loss. That’s a zero-sum game. That’s a terrible waste of human attention, just terrible. Some of the smartest brains that could be working on climate change, infectious diseases, on how to get into space, all those things.
TK: Last summer I interned at a hedge fund and the research you do is proprietary. So if I have an insight about a company and I don’t share that…
AW: You’re effectively taking away money from someone else.
TK: Right, from a less sophisticated counterparty. And you think about thousands of hedge funds replicating similar research processes, maybe not discovering anything.
TK: So let’s talk about the obstacles then. I really liked the part in your book about psychological freedom.
AW: That goes back to the beginning of our conversation. I think that’s where the Buddhists and the Stoics were ahead of us in some ways. They understood that what you think today, how you think, how you control your brain, will influence the way you react to events in the future.
TK: Let me ask you a three-part question: 1) how did you become aware of the urgency of that issue 2) how did you try to achieve and how do you protect your own psychological freedom and 3) how do you think technology can empower us to take back and maintain psychological freedom?
AW: Well, let me start with the end. I think one of the most foundational steps is to just educate more people about what we now know about the brain. There’s this strange thing where you can go through high school and you have physical education, economics, math, but where’s the owner’s manual to your brain? “Now we’re all going to sit down and meditate. Now we’re going to sit down and breathe slowly and slow down our heart rates.”
These are really important things. Some people will learn because maybe they perform and they need to learn how to calm themselves down before a performance. I had my first exposure to this when I was quite young because in Germany I joined the local rifle club. I shot pistol and firing a pistol at a target is all about slowing down your mind. It’s all about not pulling the trigger intentionally. You want the shot to break as you gradually increase the pressure on the trigger and you just want to keep the gun in a general target zone. A lot of the techniques for that are learning how to slow down your breath very methodically. That’s when I had my first exposure to that.
Frankly, I kind of forgot about it after that for a while. I went through college and things got more hectic. I went through business life and things got more hectic. I actually didn’t think very much about it until I had a fair number of clashes with our kids. I can be stubborn, kids can be stubborn, and it could escalate. There was one of those moments where it escalated pretty badly and I had this sudden realization like, “I’m supposedly the adult in the room here. So why can’t I deescalate?” And it was clearly because it was the lower parts of my brain taking over. The second it was over, 10 minutes later, I was like, “that was the stupidest thing.” But in the moment, I just couldn’t do it. It was this sense of being hijacked by the emotional part of your brain.
That was about five years ago and that’s when I started to talk with some people I met along the way. There’s this woman in San Francisco named Michelle Gale. She had done some work for me reviewing some management teams. She’s very much a mindfulness advocate. Through her, I met a woman here in New York who is the author of a book called The Conscious Parent. And then I started reading some of the literature and remembering all the breathing techniques that I had used when I was a child learning how to shoot in target practice.
You also asked how can technology help us, software that lets you shut your device down. The easiest, best feature is the DND [do not disturb] button. I put my phone on DND all the time. And then it also has an off button. But I do think there’s other technology. Apps like Headspace. I think there are ways that people can use technology but ultimately it is about the transformation of the brain.
The brain is our ultimate technology for the self. That’s the wonderful thing about the Stoics and the Buddhists. They already knew that there are external events that happen to you, but you live inside of your brain. It is the combination of the external event with your reaction to the external event that really determines your reality. Just coming back to that insight time and time again can be critical. Ultimately, it is about the brain and technology can help us shape that. But so can ancient technologies like breathing, like meditation.
TK: And on the other side there are people using technologies to manipulate us.
AW: Oh, absolutely. I think that is the biggest analogy between the transitions from the Agrarian to the Industrial Age and the Industrial Age to the Knowledge Age. When the people who were in power at the end of the Agrarian Age saw what industry could do, they didn’t think, “here comes the Industrial Age, the constraint has shifted to capital.” They thought, “we can have tanks and battleships so we can have more land.”
And today when people look at this phone, many people don’t go “we should make as much knowledge available to as many humans as possible,” they go “how can we build the next Snapchat, next Facebook, next multi-billion dollar market cap company.” And we at USV are part of that system but one thing we’ve done purposely is we’ve kept our funds very small so we don’t need to maximize for stock market value. We can try and find things where we believe we can have a big impact.
TK: Do you think there needs to be a large-scale social change? I’m thinking of the legal profession or the medical profession. They have professional codes of conduct and ethics. The other day I was reading this article about UX/UI and the writer was making a case for design ethics saying, “we know how to take advantage of our consumer’s interaction with our product. Should we have a code of ethics that governs how we choose to do that?”
AW: Sure, there are all these UI dark patterns, and most of them have been developed for video games to maximize their addictiveness, to maximize the amount of time spent in-game. And I think there’s nothing wrong with having a code of conduct. There’s evidence to say that that actually has a meaningful behavioral impact. But I think it can’t stop there.
To me a lot of it is about, “what is the power structure of the world?” And if you take physicians for example, they all in theory have a code of conduct. But we’ve also created a system where they hold a lot of power and their financial incentives aren’t necessarily aligned with making the patient healthy, right? So you have a code of conduct but then you also have financial incentives that make them think, “hey I should really run 7 more tests on this person,” or, “I have this brand new MRI machine that I need to finance so I should run an MRI scan on every person that walks through the door.” It’s very easy to undermine any good you might have done with the code of conduct.
TK: When financial incentives and ethics clash, the people in positions of power often respond to criticism by pointing out their fiduciary responsibilities to parties like shareholders. Do you think then that the traditional corporate structure is an obstacle to accelerating and entering the Knowledge Age?
AW: On the finance side, what is an obstacle today is that there are very large, highly concentrated pools of capital and the incentives of the people managing them are very much towards short-term gains, to the detriment of all other aspects. And I think that is a problem. Whether that’s a Blackrock or a Fidelity, these massively concentrated pools. That’s the highest-order problem. What’s nice is that we’re living in a world where we can already see the green shoots of what alternatives will look like. Funding mechanisms like Kickstarter or Patreon and now cryptocurrency/tokens. I always believe that ideally you have two or three things working simultaneously. So you have 1) building new things and 2) regulating the existing thing. Mostly I like the kind of regulation of the existing thing that really lets the new thing grow. I like the type of regulation that is pro-innovation, opposed to pro-incumbents.
TK: What’s your read of the landscape now? Are you pessimistic short-term?
AW: I think it’s an extremely mixed picture. My big concern continues to be that most politicians who are in power or seeking power do not have a clearly formed view that there is a transition. That the Industrial Age is in fact over, we’re past it, and there’s a failure to have a narrative about what the new age should look like. As a result, most politicians are incrementalists. Most politicians don’t have a bold plan for the future. They have small tweaks to the existing system.
There are enough people now who are like, “wait a second, you’ve been tweaking this system for the last 20+ years and where I sit things have not been getting better. They’ve been getting better for you city elites but they haven’t been getting better for me and so why should I keep listening to the ‘hey all it’s going to take is a little more quantitative easing and maybe a job training program and we’ll be fine.’” That’s how we end up with people like Trump. That’s how we end up with ISIS. I mean the difference between Trump and ISIS is only in how far back they want to go. Trump wants to go back 50 years to some imaginary great American past and ISIS wants to go back hundreds of years to some imaginary…
TK: Caliphate.
AW: Caliphate. But neither one of them is forward-looking. People are receptive to their backward-looking messages is because there is no forward-looking alternative. The forward-looking alternative is hollow. It’s more of the same. People think more of the same hasn’t been working so why would more of the same work now?
TK: I think that’s what I’m trying to feel out. I want to try and help articulate a stronger, more substantive vision of what our future is and in doing so make a case for it. That’s one of the points in your book I agreed with most, otherwise people regress and spurts of populism — although I don’t actually love that term — nativist, regressive tendencies will come up in reaction.
AW: Yeah. It’s like, “I got the answer and the answer is to go back to the past.” And people are like, “oh yeah, the past!” What’s interesting is, and maybe this is something I should mention in the book, the way memory works is that we are built to remember the past as better than it actually was. I think the evolutionary reasons for that, I mean if women would remember the exact pain of childbirth they probably would never, ever have a second child after their first child.
TK: There’s actually this great book, Stumbling Upon Happiness, by a Harvard psychologist…
AW: Gilbert.
TK: Gilbert, yes. Daniel Gilbert. He talks about how the way we remember memory and use those memories to make decisions are not rational per se.
TK: Where would you direct the attention of someone just graduating from college?
AW: Well, I definitely think that startups and venture capital are an important vector for change and innovation. I think there’s a new vector for change and innovation that doesn’t depend so much on VCs and that’s the cryptocurrency and token offerings. Totally the Wild West right now and that probably won’t last. But there still is a fundamental innovation in the world here and if I were a young investor today I would really focus a lot of attention on that field.
TK: I bought some Bitcoin a few months ago, ended up selling it. Coming from the perspective of public securities, the price movements of cryptocurrencies are crazy. Where do you think it will settle? Not in terms of price but the whole state of it.
AW: Oh I think it’s incredibly hard to know. I try and always look at the probability distribution. This is why I’m writing the Uncertainty Wednesday series. I think one of the big things that clouds people’s judgment is that they try to think of one path instead of the many possible paths. Once you think about the many possible paths you’re much more likely to want to look for strategies that perform well across a wide set of paths, not about the one path you think is most likely. Sometimes you want to also place directional bets, absolutely. That can be a subset of your strategy, highly directional bets. But then you want to have an overall strategy that is for lack of a better word, antifragile.
So I think there’s a whole range of possible outcomes here, from all the early cryptocurrencies going away completely due to massive, deep, not understood flaws or some progress in quantum computing. I mean if we have a thousand qubit, fully-coherent, qubit quantum computer tomorrow all the technology that Bitcoin and Ethereum, well not all of it but much of it, will be useless. The whole public/private key cryptography that they’re using is not quantum-resistant. There are new quantum-resistant techniques that we know but we can’t use them until we have a quantum computer. Conversely, the classical techniques are useless the second we have a quantum computer.
I do think fundamentally the idea that we can have completely decentralized systems is profound and that is going to stick around. Now trying to forecast exactly what those will look like and whether they’ll be built on Bitcoin or Ethereum or something totally different… I think that is much, much harder.
TK: That makes me think of your blog post about nation-states. What do you think is the appropriate political unit in all this decentralization?
AW: I do think that we need one global unit for certain topics. This goes back to the earlier part of the conversation. There are problems that can only be solved at the global level. As long as one country throws massive amounts of CO2 into the atmosphere, we’re not going to get on top of our CO2 problem. Similarly, with things like infectious disease, not every country needs to participate but the vast majority of countries need to participate. Enough so that you can contain an outbreak and manage it, enough so that we’re all working on vaccines. The fact that we hadn’t actively been working on an Ebola vaccine boggles the mind. Thankfully some people in Canada were.
TK: This is a relatively new problem right? Because you can just fly from Africa to Canada now and as long as you can do that, your institutions need to adapt to that reality.
AW: Oh, absolutely. I also believe that every higher level of government should be kept as thin as absolutely possible, whether that’s the UN or some successor to the UN. It should have real policy-making ability, global policy, but very narrow. Like here’s the amount of particulate or greenhouse gases you can emit. And then you go figure out how you get underneath that threshold. I think it’s really hard to design these systems in a way so that they don’t grab more and more power over time.
For example, I personally believe the US federal government is way too large. I think the federal government does many things where I go, “why is this a federal issue?” Why do we have a federal education policy? To me it’s a total states rights thing. States should decide on their education policy, possibly even regions. If you think about the massive change that we’re going through right now, why do we think that D.C. is going to figure out what the right education policy going forward is? That’s just a totally nutty idea.
So, yes. This is why I think reading sci-fi is helpful because one of the big problems that we are having at the moment is this misaligned perception of what our real problems and opportunities are. Too small-scale. Sci-fi allows us to think on a bigger, grander scale and I think that’s very important.
TK: Finally, what are some unanswered questions that you’d love to see more work done on? Both theoretical and empirical?
AW: I think more work on the monetary system and in particular, the ideas around currencies that are issued to people and can disappear.
TK: The concept of demurrage?
AW: Right. Things like the Wörgl experiment, this guy named Gesell. I think there’s a lot of confusion in the world about money. Mainstream economics sort of has an accepted view of money that I think is wrong.
TK: So you have more of an Austrian view?
AW: Essentially even more fringe. Silvio Gesell, the Wörgl experiment, and currencies that are focused on circulating as much as possible. Trying as little as possible to have the currency itself become an object of wealth collection. I think that’s really interesting. Related questions to that are wealth taxation. It all comes back to how a basic income could be financeable.
This interview has been edited and condensed. Thank you to Albert for his time and his candor.
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