Super LP

Dispatches from the Disruption, Part 2

Here's the second half of last week's post:

Now, let's get back to one of my favorite topics: disregard for convention.  A wise man once told me that most investors follow a set of rules that typically make them middle-of-road, B-level investors, but in breaking their rules they can become either  A-level investors (rarely), or (more frequently) C-minus investors.  And indeed, I've always been a bit insouciantly petulant about rules, but as far as guidelines go, but I've got to give James Montier from GMO a tip of the cap for The Seven Immutable Rules of Investing:

1. Always insist on a margin of safety

2. This time is never different

3. Be patient and wait for the fat pitch

4. Be contrarian

5. Risk is the permanent loss of capital, never a number

6. Be leery of leverage

7. Never invest in something you don't understand

And, generally, those are pretty darn good rules.  The value investor in me swoons.  But the Californian in me wonders if these rules are little more than a wind-break against the perennial gales of creative destruction?  In this zip code, after all, those rules are more honored in the breach than in the observance.   And surely, if investors had followed those rules exclusively all along, we'd still be communicating via horse-mounted couriers as we farmed the Appalachian Watershed with oxen, oppressed by the inexorable tyranny of the seasons and the immutable fright of nightfall.  Instead, we live, work, and play in ways that are scarcely recognizable to our parents and would've been unimaginable to our forebears.  Much of that progress was financed by the investors who broke their rules; some made mints while most didn't.

Now, I don't mean to critique value-oriented investing, as assets need an anchor around which to contextualize their valuation.  But if the last century, with its optimists triumphant, suggested anything to us, maybe it's that the value of businesses isn't really the discounted value of their dividends?  Perhaps businesses are better thought of as portfolios of options, some of which are very long-dated and way out-of-the-money.  And maybe the central wonder of the American economy, with California as its exemplar, is that it offers the best framework for capturing the random forward lurch of progress?  After all, the US economy, more so than that of any other nation, seems geared around exercising profitable options while letting unprofitable ones expire, often (and hopefully) cheaply.  This asymmetry is getting even more acute as value chains continue to fragment and the cost of hatching and nurturing an idea continues to drop.  The resulting left- and right-tail opportunities may be hard to differentiate from each other, but those who are unafraid of being wrong and alone will give themselves the electric opportunity of being right and alone. 

I love working on a street thick with start-ups and it's been fun to watch these companies strive and stumble and pivot and grow.  I love visiting them when engineers are piled up on top of each other in a too-cramped space; its a visceral and sensory experience when a startup finds its cadence.  The old east coast value investor in me wonders aloud, "who would invest in this stuff?  It's bananas!  These guys are violating at least four of The Seven Rules!" 

But the west coast Chris hears an echo of Steinbeck's description of Cannery Row: "[Silicon Valley] in California is a poem, a stink, a grating noise, a quality of light, a tone, a habit, a nostalgia, a dream."

Dispatches from the Disruption, Part 1

[Apologies for the self-indulgent post, back to investment soapboxing next time!]

Three years ago, I moved to California to open a new office in Palo Alto for my firm.  (You'll notice I never name my outfit in the blog; that's not because I'm trying to be coy or an attention-hog.  Rather, I've always tried to keep the blog "personal" so as not to run afoul of some regulatory trap for the unwary and embroil my employer in undeserved controversy.)

Anyhow, I'd already been spending 80 days a year on the west coast, meeting with entrepreneurs and investment managers, so it just made sense to make the leap.  When a then-six year-old Miss LP started matter-of-factly calling me "Weekend Dad," I knew it was time to gather up the brood and light out for the territories to follow in the footsteps of pioneers, gold rushers, dust bowlers, and dot com-mers.  At the time, I told our CEO that when our lease was up in three years time, either we'd need a lot more space because we'd been able to plant a potent seed in a fertile landscape, or we'd need no space at all, because the experiment hadn't succeeded.

Turns out that the truth lies somewhere in between, boring as that sounds. California may forever be a sunny and ample land, but for a dynamic investment firm with a global, multi-asset class perspective, other coasts and climes beckon and geographic footprints need to be reassessed from time to time.  And in our reassessment as the lease-end approached, we decided to close the office . . . and I decided to stay out here and, sadly, part ways with my firm in doing so.

And here’s another boredom-inducing tidbit: there's no drama or backstory to tell.  My firm tried to lure me back East; I thought about it, talked to the family, gazed for a while at a nearby grove of redwoods imperial -- as a son of Whitman's Brooklyn, I'm endlessly captivated by the stalwart trees of the West -- and politely declined.

I've had a blast working for my company; they're good people pursuing an important mission.  It's been a great seven years, but the allure of California is just too strong; I've been mesmerized by this magical place, and I don't think I'll ever leave.

I don't really know what did it: the weather is the easy throw-away answer, but maybe I've been beguiled by the succession of start-ups that I've hosted here in the office?  Or it could be the open architecture of relationships out here.  People seem to network for sport, and, if you're at all credible, you're a phone call or two away from anyone.  Perhaps I've been enchanted by my neighbor who walks his home-built robot each morning, or that Miss LP asked me to clean out the garage because she wants to invent something in there?  But, ultimately, it's the energy and intensity of the people here.  Everyone seems to be Working on Something Disruptive.  And it's not just the entrepreneurs, it's the investors, too.  There's a disregard for convention that seems to define the Very Idea of California; we're not only struggling over the size of the slices of the pie, but we're also trying to figure out how to make the pie bigger.  Hector St John de Crevecoeur could've scarcely imagined California when he wrote Letters from an American Farmer in 1782, but his words seem to presage all the Golden State would offer: "Here individuals of all races are melted into a new race of man, whose labors and posterity will one day cause great changes in the world.  Americans are the western pilgrims."

The inquiring reader asks: "what's next?"  Here's the best answer your humble narrator can offer: I'm not sure yet.  I've got a bunch of plates spinning, some of which could be really interesting, and I'm spending time with as many smart people from as many different walks of life as I can get plugged into.  The blank sheet of paper beckons and Walt Whitman's words echo: "I, now thirty-[nine] years old in perfect health begin / Hoping to cease not till death."

 

Private Equity Lessons from the Subway

So I've been riding the New York subways pretty frequently lately.  Between annual meetings, conferences, and the entrepreneurial scene, there's been a lot to do in The Big Apple this fall.  And every time I hop on the train, it takes me back to my childhood.  You see, a quarter-century ago I rode the subway to middle school.  Imagine that: a 12 year old with an overdeveloped sense of adventure and a transit pass that offered unlimited access to the lurid expanses of Metropolis!

(Let me take a moment to apologize to Mr. Criscuolo and my other afternoon-class teachers.  A fake bellyache and a hangdog look was all I needed to get permission from the school nurse to go home after lunch.  And as my time in middle school began to wane, I started scooting out about once a week in an effort to see the entire city, one subway stop at a time . . .)

But, despite my school-skipping, I actually did learn stuff on the subway, my very own classroom on rails.  And who knew I could apply those lessons to private equity and even investing more broadly?  Only recently have some of those lessons come into focus.  Let me run you through five scenarios and their associated learnings in what may be the first in a series of "Lessons From The Subway":

* * *

Scenario #1: Have you ever been barreling through a tunnel on the local train as an express pulls up alongside you between stops?  For several seconds, the two trains hurtle down the tracks together side-by-side before the local starts its inexorable deceleration into the next local station while the express pulls away, charging ahead to the next express stop.  For a moment, there's an intimacy with some of the passengers in the express train.  It's almost a voyeuristic feeling, like looking into someone's living room window; sometimes you even make eye contact with one of the passengers in the other train.  Do not give that person the finger or stick your tongue out or make menacing gestures.  There's a chance that they will get off at the next stop, wait for the local to pull in, and kick your behind.

Lesson: Life is a multi-period interaction.  What happens at one moment resonates into the next.  Even the most random encounters can presage subsequent ones.  Don't be a jerk and always have integrity.  Why soil the canvas?

 

Scenario #2:  Your train pulls into the station on one of those muggy summer days that seem all the hotter and more acrid below ground.  Car after car blurs by, stuffed with people; as the train starts to slow, one car is nearly empty.  But hold on a second; today's not your lucky day, the day you get a seat for the long ride.  Rather, the odds are that the air conditioning simply isn't working and that car is hotter and stuffier than August in Houston.

Lesson: There's information in crowds.  While one never wants to be a lemming, there can be limits to being a contrarian.  Sometimes, leaning against the gales can work, other times, it just gets you windburn and a face full of leaves and other wind-blown detritus.

 

Corollary / Scenario #2a:  Speaking of reasons why cars might be empty, sometimes there's an, ahem, stinky dude on a train car that clears out all the people.  Again, there's a reason that train car is empty and, odds are, that funky cat is going nowhere.

Lesson:  If something stinks, it's likely that the stink will linger, no matter how you try to rationalize away that hinkey feeling about, say, the GP that does't feel right or the story that doesn't quite hang together.  Trust your nose.

 

Scenario #3:  Don’t give the finger to a policeman. Ever.  Catch me sometime offline and I'll tell you a story . . .

Lesson:  The people who make and enforce the laws know and understand them far better than you do.  And even if they're wrong, they're right.  And they can make your day a lot more aggravating than you can imagine.  You get a lot further by smiling and saying "yes, sir" than you do by being petulant.  This may be a good thing for our industry to remember as the shadow of regulation lengthens across our sun-kissed land of private investments.

 

Scenario #4:  If someone starts talking to you on the train, it's likely that they're a looney toon, but there's a chance that they're lost or want to talk about something interesting.  Subway philosophers end up having a lot of things to say, some of which are worthwhile.  Once, though, I talked to old Brit about what to see on holiday and he gave me a 50p coin as a souvenir.  It was the coolest thing I'd ever seen.  Another time a kid told me about a pizzeria over on Ditmas Avenue that had a Space Invaders game that would give you 10 credits if you held the coin return while you put in your quarter.  Needless to say, I became the master of Space Invaders that spring.

Lesson:  Be generous with your time.  You have to be careful, but you never know what you might find out.

 

Scenario #5:  Every mass transit system seems to have a few stops that are central nexuses (nexi?) of the tangle of lines that ferry people to the disrparate and far-flung reaches of their city.  At these stops the trains disgorge their contents and refil with cats connecting to elsewhere.  Jay Street - Borough Hall in Brooklyn was the one that occupied my imagination (where exactly does that exotic A train go?  Why do people write songs about it?) but 42nd Street/Grand Central and Fulton Street/Broadway-Nassau were other such network nodes, full of hurly-burly.  Here's the thing: if you're leaning against the door and not paying attention as the train arrives at one of these stations, you're likely to get pushed out.  And getting back in to your train can be as challenging as swimming upstream with the salmon. 

Lesson: Don't block the exits!  Sometimes, people need to get off the train.  There may indeed be better connection options for them (like West 4th Street,) but sometimes people need a bird in the hand instead of two in the bush.  This is a big concern right now, as I worry that GPs may be suboptimizing exits, but if there's an A train waiting at Jay Street, it probably makes sense to hop off the F train and change, because you never know if you'll wait in vain at West 4th for a delayed A train that never comes . . .

 

 

Summertime . . . (and micro-VC)

It's been a slow summer on the blogging front . . . but I've got a couple of posts on better articulating a fund's value proposition and surmounting fundraising challenges that I'm going to put up right after Labor Day.  I'm just trying to be helpful . . . providing a public service and whatnot.

In the interim, I thought I'd share an iPhone pic that I took at a July 4th concert not far from St. Johnsbury, Vermont.  Of course, that town is named for Hector St. John de Crevecoeur, author of the seminal 1782 work, Letters From An American Farmer.  In that book, de Crevecoeur famously asks: "what then is this new man, this American?"  His answer presages the two centuries of progress that followed:

"Here individuals of all races are melted into a new race of man, whose labors and posterity will one day cause great changes in the world. Americans are the western pilgrims."

* * *

Speaking of great changes in the world, here's a link to a Q&A at PEHub on micro-cap VC I did this morning:  http://bit.ly/cTUPwB

From PEHub.com

Q&A on Micro-VC Funds, With Someone Who Actually Invests In Them

We’ve spent a lot of time lately discussing micro-VCs, including last week’s news on Floodgate ($73m fund close) and 500 Startups (new $30m fund being raised). So I spent some time discussing the phenomenon with Chris Douvos, who invests in mico-VC funds through his role as a managing director with The Investment Fund for Foundations:

How long have you been investing in micro-VC funds, or super-angel, funds??

We’ve been active in this space since around 2005, and have invested over time in several of the archetypal managers.

Who are those archetypical managers?

Well, the main one is someone we actually haven’t given money to: Ron Conway. He’s created a fantastic ecosystem. But we’ve backed some of the people who have taken types of things he does and refined them a bit. For example, one of our earliest investments was in First Round. We think those guys have brought an aggressively thoughtful approach to the challenges of investing in seed-stage companies.

I love the O’Reilly AlphaTech guys, whose differential is that they’re leveraging the larger O’Reilly ecosystem. In the case of O’Reilly or First Round or Floodgate, they’ve created brands around themselves that magnetizes interesting people. That helps them punch above their weight.

How do you define a micro-VC fund?

I was at a Silicon Valley Bank shindig the other day, and people were talking about segmenting the space. “Who is a super-angel compared to a seed-stage VC, etc…”

To me, what initially attracted me to the space is that it was about people who had found that the arithmetic was on their side. They were recognizing some really meaningful trends at certain types of startups – capital efficiency and the fast cycling of ideas at IT/Internet companies – and were typically people with some sort of entrepreneurial background with a bit of investing experience thrown in.  They saw a capital gap that they could fill by being nimble in the sense of traditional angels, but also bring a level of activity and DNA-setting that was the hallmark of more institutionally-focused funds.

The idea wasn’t necessarily to supplant VCs, but to be a value-added early processor of companies. The startups would be far better off for having this earlier participation, and then traditional VCs would bring their own skills to the table.

[remainder after the jump]

The Gatsby Funds

In my younger and more vulnerable years, I must have read The Great Gatsby a dozen times.  Maybe more.  And I loved and identified with the humble narrator, Nick Carraway.  His thousand mile journey to New Haven from Minnesota was much further than my hundred mile one from Brooklyn, but we shared the same occasional outsider's bewilderment at the antics of the eastern elite.

And yesterday, as I sat out on the deck of the Rosewood Sand Hill gazing up at the thin wafer of the moon rising out of the verdant hills and ascending the sanguine sky I wondered what Nick would've thought of this place.  Because sometimes I wonder if Silicon Valley is the modern version of Fitzgerald's Jazz Age playground.  Call it East Egg 2.0.  

But there are days on which it feels like there's a hush about the place; the raucous energy is muted and the punchbowls seem to have gone missing.  Sure, the future's still under construction here; the quiet is punctuated by the staccato tap-tap of programmers and designers working on the new new thing as cooling fans whir in the distance.  But there's a whiff of introspective stillness like that to be found on crisp autumn evenings after the grand shore places have closed for the season.

And maybe that stillness is the melancholy realization that the receding tide will beach some of the dinghies in the harbor.  Some even suggest that the venture business should shrink by half.  But which half?  There's a pandemic of bellyaching about "the venture asset class" among LPs, but I suspect that most investors will keep coming back . . . remember, most Americans hate Congress, but love their Congressman.  I think the venture business is the same way.  

But I'm always asking myself, "what do I need to believe to believe that a particular fund will be successful?"  There are a lot of good investors out there with compelling stories; in fact, there are probably more than I could invest in if I had three lifetimes.  But there's a whole other swath of the business for whom heroic leaps of faith are necessary; the arithmetic of their funds doesn't quite work, or they need too many outcomes to come out just-so, or the IPO market needs to be bubble-icious once more.  Like Jay Gatsby's, their reality is an idealized and stylized rendition of a sloppy present; it's not necessarily a false rendition . . .  just a hopeful one.  And it occurred to me as I pondered the imponderable future that the last few paragraphs of the book capture the challenge facing these funds, The Gatsby Funds, better than I ever could:

And as I sat there brooding on the old, unknown world, I thought of Gatsby's wonder when he first picked out the green light at the end of Daisy's dock. He had come a long way to this blue lawn, and his dream must have seemed so close that he could hardly fail to grasp it. He did not know that it was already behind him, somewhere back in that vast obscurity beyond the city, where the dark fields of the republic rolled on under the night.

Gatsby believed in the green light, the orgastic future that year by year recedes before us. It eluded us then, but that's no matter - tomorrow we will run faster, stretch out our arms further . . . And one fine morning -- 

So we beat on, boats against the current, borne back ceaselessly into the past.

Founder Visas: A Good Idea

I hate to admit it, but I'm not a fan of Indian food.  And it’s not just Indian food, it’s almost any ethnic cuisine.  You see, my immigrant parents aimed to fully assimilate: I’m named Chris, because that was the most popular boychild name at NY Hospital in 1972, I was encouraged to play baseball because it was the National Pastime, and nobody likes apple pie as much as me.  Nobody.  And since my parents emigrated from different countries - thrown together by fate in Bryant Park on a sunny afternoon in 1970 - there was no "local cuisine" at home.  For better or worse, my tastes were more influenced by the cuisine of Oak Brook, or Northfield, Illinois than by the food of anyplace else.

But there I was, eating lunch at Saravana Bhavan in Sunnyvale (ahh, the things we endure on our spouses' birthdays!) when I started noticing the t-shirts from local start-ups and NASDAQ 100 companies that stood out like a dense chain of barren, monochromatic islands among a colorful, undulating sea of saris.  I wondered how many of these foreign-born tech-sters would still be here in one year's time?  Three years?  Five years?  Because in case you haven't noticed, America is facing a brain drain unlike any in our history. 

America?  With a brain drain?!?  Whoa!  Now, there are a ton of reasons for it, but a key one of them is the byzantine complexity of our immigration laws.  (Check out Manu Kumar's compelling success story to get an idea of the challenges faced by immigrant-entrepreneurs.)  But hey, immigration laws are complex because people bemoan the loss of jobs to immigrants; that's a debate that's been going on since the earliest days of the Republic and it's not one that I'll get into here.

But I will say that I'm a huge fan of Paul Graham's Founder Visa idea.  Why not allocate 10,000 of today's existing visas specifically to people who want to come here to start companies?  I get the whole H-1B controversy, but if someone's here to plant and nurture an entrepreneurial seed in the most fertile soil in the world, let's let them try before they go do it elsewhere and we find ourselves in a Dust Bowl.  Anyhow, if someone is trying to start a business, they won't be competing for jobs; the Founder Visa envisions prohibiting these cats from working for existing companies.

And indeed, the impact of these immigrant-founders on the economy is profound.  If entrepreneurship is as American as apple pie, then it's got a coconut burfi, a fortune cookie, some strudel, and a maybe a cappuccino or Tim Hortons double double on the side.  Some estimate that a quarter of all US start-ups are founded by people born elsewhere while over half of Silicon Valley's are launched by immigrants.  These companies aren't just creators of hundreds of thousands of jobs; they're part of the very idea of America, the America where anything is possible.

And that very idea of limitless possibility animated prior generations of immigrants as they helped forge a mighty nation.  Their memorial was the New Colossus that stands in New York Harbor.  And like those immigrants of yore, this generation of nation-building immigrants deserves a monument.  Wouldn't it be fitting for their symbol to be a virtual one, not a physical one?

So, you Twitter-heads among the readership: send a tweet using the #StartupVisa hashtag and include @2gov (or register on 2gov.org - see Eric Ries's post here for instructions).  Lend your voice to the clamor seeking to preserve one of the pillars of American entrepreneurship.

Getting Out of the Doghouse

Hey, finance professionals: we've got a problem.  Really we do.  In case you haven't noticed, the Great Recession of 2008/9 has a Villain (with a capital V) and it's you and me.  I know, I know, we did nothing wrong; we're generally decent, hard working, well-intentioned souls who humbly ply our trade in a peculiar, esoteric, and well-paying corner of the economy.  But we don't actually produce anything tangible, which makes us an easy target when a lot of people who do actually manufacture real "stuff" are out of work.

And, indeed, the demagogues swirl like turkey vultures seeking carrion.  Who is blameworthy for the sad state of affairs in this country?  The cry rises from the frenzied mob: Banks!  Private Equity Firms!  Mortgage brokers!  Investment banks!  Venture Capitalists!  Money Managers!  MBAs!  (Barney Frank busies himself handing out torches and pitchforks while Timmy G and the Treasury crew ready the shackles.)

But even our friends are enemies in this battle: over the summer I helped a cousin work through a mortgage refinancing.  Some Excel whiz-bangery did little to clear up a confusion born of too many options marinated in too many layers of uncertainty.  "Forget the spreadsheet; what's the best choice for me?" asked my cousin.  "It depends," I replied, dusting off an all-purpose answer.  "What do you think the future holds?  How long will you live there?  Are rates going up or down?  What will your tax situation be?" etc., etc.  "It's all so confusing," was the reply.  Then, my cousin's tone changed to bewildered frustration: "you finance people have made this stuff so complicated, and each choice seems like another opportunity for people to get ripped off."

And then it hit me: the average person doesn't want life to be an HBS case.  The Socratic method may work well in air-conditioned, wi-fi enabled classrooms with sage professors guiding a meandering discussion, but people live in the real world where decisions have consequences and costs -- sometimes big ones, sometimes immediate ones.  And all of the optionality increases anxiety, not to mention adding complexity to once-simple account statements.  I know some pretty smart people who just don't understand their cell phone bills.  The dis-utility of complexity has exceeded the utility of choice optimization. 

But we can help, finance people!  And burnish our tarnished communal reputation at the same time!  Here's my modest proposal: what if everyone in finance, insurance, and real estate committed to doing a few hours a month of pro bono work?  Maybe we could participate in "office hours" for half a weekend day once a month?  We could use bank branches; after all, the government owns a lot of 'em now.

Sure, you'd have to pass some good Samaritan protections so that lawsuits wouldn't ensnare the well-meaning, but imagine the good (and goodwill) that would arise from an army of savvy people helping oldsters understand their cable bills, helping young couples think about their mortgage options, helping college graduates set up their 401k plans.  Anything that has to do with money and is even remotely intimidating would be fair game.  (Of course, it would have to be a marketing-free zone.)

You could even make it a continuing education requirement for the first five years after attaining professional licensing or designation like a CPA, CFA charter, Series 7, CLU, or CFP, with subsequent participation encouraged.  I suspect the idea of ongoing participation could elicit some chortles on the 5:26 out to New Canaan, but remember, guys: that cat next to you from Ropes & Gray's New York office could be coming back from a day at the NYC Family Court Legal Service Project.

My old buddy, the Prof, suggested making some threshold of pro bono activity a requirement for FDIC insurance.  He even had the idea of creating the equivalent of "patient advocates" for thornier cases.  Maybe we could establish industry-funded fellowships to support laid-off or on-sabbatical professionals.

You could even imagine some kind of clearinghouse for people that incorporated the best of Web 2.0: feedback ratings, maybe even a "bid system" for appointments or specialists.  Think of it as a mashup of Craigslist, eBay, Google Maps, and us.  You could even throw in Twitter for good measure.  We can fix this, we have the technology.

Now the last thing I want is to create more bureaucracy and regulation.  But we have to realize that the regulation train has left the station and is bearing down on us at full steam.  And indeed, there are a lot of folks in the chattering classes who would portray finance professionals as the looters that smashed the storefronts of the economy, cynically plundering from the earnest masses.  Maybe the best thing we can do for ourselves and the economy is to pick up a broom and start sweeping up the mess.  

Random Thoughts from Denver Airport

So, I've got a more fulsome post (at long last) coming later this afternoon, but in the interim, I had to get some things off my chest:

[insert rant here]

First: if we're going to have national healthcare, particularly a program that's paid for by a small subset of taxpayers, we need to ban the sale of cigarettes yesterday.  Either that, or tax 'em at like $15 per pack.  Anything less creates a huge principal-agent problem.  While we're at it, let's do something about Mixed Martial Arts.  Do we really want kids watching this stuff on ESPN and then going out behind the trailer and practicing a sport whose usual loser's outcome isn't graceful defeat, but rather a hospital visit?

Second: Why is anyone surprised that the savings rate continues to climb (some say it might soon exceed 10%)?  Sure consumers are de-levering, but savings rate is also a function of people's expectations of future disposable income, no?  And disposable income is a function of income and tax rate.  People may have differing expectations on income, but one thing we can probably all agree on is that taxes are going up, up, and away.  As we used to say in Brooklyn: BOHICA.

Last: no matter how low my expectations get, United Airlines never ceases to underwhelm.  Once, I expected courtesy, then I hoped for indifference, now I just want to get home without interacting with any more of their employees or having them bark at us over the intercom.  How does an airline that treats its customers so cynically stay flying?  Remember the old phrase, "one bad flight attendant can bring down an entire airline?"  When did people stop caring?  It's that pesky principal-agent thing again . . .

[end rant]

Systemically Important

It's been thrilling to watch the Green Revolution unfold on Twitter.  It reminds me of those sweltering days of Tienanmen long ago.  You see, back then there was a Chinese immigrant-owned business over on Church Avenue and the fax machine in the back groaned nonstop as it disgorged furtively-sent messages on curly-thermal parchment.  Unofficial word of officially-banned events crept out of the top of the machine as a half-dozen men crowded around, anxious for news of home and breathless at each pause in the transmission.  Every break in the traffic gave smoke-stained fingers the chance to tear off the latest pages, place them on the backup fax (connected to a telephone jack in an apartment upstairs by a hundred feet of frayed cord), and relay the fresh news on to another clutch of emigres in Boston, Honolulu, Vancouver.

Such was the Fax Americana.  Technology in the service of information, democracy and freedom.

So here we are again, two decades later, watching voices from the other side of the globe cry out.  And with each Tweet, it becomes more evident that the United States has outsourced the public face of its foreign policy to Silicon Valley.  Of course, this is happening just as the bureaucrats in DC are contemplating a raft of regulations aimed at the types of firms that fund the companies that allow the administration to exercise soft power.  Ironic, no?

There's even talk in some quarters of venture firms being tangled up in yet more onerous regulations targeted at firms that pose systemic risk to the financial system.  Funny: the way I see it, the only systemic risk that Silicon Valley poses is to opacity and oppression everywhere.

Gratitude

A quick detour from Private Equity, if you'll indulge me (I'll be back on the PE train later in the week with a post on out-years risk).

In college, I won a roshambo to attend a cocktail party honoring William F Buckley.  Time with Bill was always part symposium on the evils of statism, part english lesson, and part comedy hour.  We kiddos around the room may not have agreed with all (or, in some cases, much) of what Bill said that evening, but we could all agree that WFB was a renaissance man and a gentleman.

Anyhow, Bill had just published a book on the topic of mandatory national service, Gratitude: Reflections on What We Owe to Our Country.  His call to service was based not only on a sense of responsibility, a sense of duty, but also on a belief in the soul-nourishing benefits of contributing to something larger: "Materialistic democracy beckons every man to make himself a king; republican citizenship incites every man to be a knight." Service to one's society summons forth "the better angels within our nature." (quotes cribbed from Ted Sorensen's NY Times review).

WFB believed that a mandatory year of service would help shape a national ethos, a sense of solidarity, an appreciation of common cause, an affirmation of civic pride; service was about community.

Yet in the two decades since the book's publication, society has become much more disparate and far-flung.  For many today, "community" comprises a hodge-podge of fellow-travelers in the digital ether; some spend too much time on their "social networks" that they ignore the old-school social network: those who live around them, in their neighborhood, their city, their state.  Sure, virtual communities are communities of interest, but your IRL (ahem, In Real Life) community really needs you to help make things better.  That's why I'm so supportive of President (elect) Obama's USA Service Initiative (and here).  Who knew that WFB and BHO who be so sympatico?  I'd love to see the idea of service made compulsory.

Serving together, working shoulder to shoulder with a fellow countryman, this is the essence of citizenship; it's intimate, it's loving.  Service and love are inseparable and they're part of the Promise of America. As always, Whitman nailed it:

COME, I will make the continent indissoluble;
I will make the most splendid race the sun ever yet shone upon;
I will make divine magnetic lands,
With the love of comrades,
With the life-long love of comrades.

I will plant companionship thick as trees along all the rivers of America, and along the shores of the great lakes, and all over the prairies;
I will make inseparable cities, with their arms about each other's necks;
By the love of comrades,
By the manly love of comrades.

For you these, from me, O Democracy, to serve you, ma femme!
For you! for you, I am trilling these songs,
In the love of comrades,
In the high-towering love of comrades.