The Medium Post is the Message

Two Truths and a Take, Season 2 Episode 18

Hi all, quick note from me: as some of you probably anticipated, I’m foreseeing in the not too distant future I may have to stray from the “Every Sunday” promise of the newsletter. (Lots going on at Shopify, as you probably know!) So until I figure out what the right schedule ought to look like, assume “Most Sundays” but that I may skip weeks as necessary. Thanks as always for reading!

Last year I wrote a post called The Audio Revolution which I hope you’ve read; I’m quite proud of it and I enjoyed writing it a lot. Although it was far from my most widely read post (I don’t think it hits top ten), it’s probably the post I get the most questions about. (We talked about it for a good while on my recent podcast with David Perell.) 

One question I hear a lot is that people still have a hard time wrapping their head around the famous Marshall McLuhan line, The medium is the message. It’s a genuinely hard concept! You can’t explain it in a few easy sound bites. In The Audio Revolution I went through the idea in depth, but today I want to share another quick illustrative example from a world that I imagine many of you know well: the VC scene. VC content marketing has evolved from hot towards cool media formats (and the rise of VC meme twitter), particularly in early stage and micro-VC funding, and it makes sense. 

Hot versus cool: a quick refresher

As a background, here’s the basic primer on Hot versus Cool media formats. Go back and read The Audio Revolution for a real explanation, but the main two variables you need to remember when you think about Hot and Cool are Engagement and Participation. Whenever we process incoming information, our brain doesn’t always grab and decode the entire sample: sometimes we process the whole blast in high resolution, but other times we “scan” it, and fill in gaps with our own context and genre conventions. 

Cool media are low in engagement (we’re only pulling in a low-resolution sample) and high in participation (we’re actively completing the picture). Cool media formats are often multi-sensory, and make a good stage for messages and messengers that invite the audience to fill in context: think “Yes We Can” on the Obama campaign, for instance. A good litmus test for cool media (e.g. Twitter jokes or group chats that are all punchline and no context) is “Do you have to know the genre conventions to effectively participate?” 

Hot media are the reverse: are high in engagement (we take in the entire dose of what’s being communicated) and low in participation (we don’t do a lot of filling in gaps). Hot media formats typically saturate one single sense, and make a good stage for messages where you know exactly what’s being communicated, even if it’s not expressed literally in words; think Make America Great Again. Hot media doesn’t require any genre fluency: it just yells at you, like a Facebook post or a Youtube feed. 

Ok, now what does any of this have to do with venture capital?

Communicating Knowledge versus Fluency

In the market for startup fundraising, where founders and VCs go through a kind of dance to evaluate each other and choose one another as partners, a lot of things have to get communicated in a short period of time. Some of these things are essentially knowledge.  You have to communicate vision, product, traction, strategy, tactics, and questions: all as a way of working out whether this is an investment that makes sense. Hot media formats, like a business plan written in text, are a good way to communicate this stuff. They’re direct, high-intensity, and they saturate the reader with information. They convey engagement.

But there’s something else you have to communicate too, and that’s something I call fluency. Fluency is a much cooler concept: something closer to “we know how this works.” It doesn’t mean “here are a bunch of facts”, it’s more like “I know how to fill in gaps." You’re demonstrating your familiarity and ability to find the lowest-energy path through a process, whether it’s fundraising or company-building. They convey participation.

Fluency isn’t communicated best with hot media, it’s communicated with cooler media, like a powerpoint slide deck. The point isn’t to communicate high-intensity information; it’s to invite the audience to participate, fill in contextual gaps, and demonstrate; we both know this dance. Let’s dance. 

Which is more important? It’s a matter of opinion, but it’s probably also varied across the last several decades of startup history, and by stage as well. In the old days (30+ years ago), you had to build a lot of stuff yourself. There was no AWS, and no wealth of open source software infrastructure to leverage: in the old days you needed deep knowledge of this stuff, whereas now there’s a premium on simply knowing what leverage is out there for you, and how to fluently put it to work.

On the other hand, you could probably argue the reverse has happened for go-to-market effort and business development. In the old days, startups faced so much inertia just trying to get anything started that “business fluency”, relationships, and dealmaking ease mattered a lot - so much so that it was standard practice for VCs to kick out the founder upon investment and replace them with a mature executive.

Today, it’s not like those skills or networks are less valuable, but they’re not such a hard barrier as they used to be. Fluency used to be seen as a hard prerequisite to get anything done at all, whereas now it’s still valuable, but for a different reason. There are so many startups now, and there’s so much leverage available to anyone who wants it, that fluency matters simply as a way of outcompeting the swarm of hopeful competitors trying to outrace you for a seed investor’s attention. In contrast, by the time you’ve made it to Series A or B, then you’ve already made it past the selection barrier - the literal stuff matters again.

VC content marketing, from podcasts to memes

In the old days (20+ years ago), VCs didn’t really need to market themselves much at all. Dealflow happened behind closed doors, via close personal introductions. But these days, VCs put effort into their acquisition funnels just like every other business. 

One of the logical ways you can do that is by content marketing. If you have a bunch of smart partners at your firm and you want to broadcast that fact, you can publish smart content that advertises those brains, as a way of communicating to entrepreneurs: Here are all our great ideas. Here is a blast of brainpower. Here is a firehose of content. You’re communicating hot information here, so you’ll probably be well-suited by hot media formats: text writing (blog posts), or maybe audio (podcasts). 

The firm that most of you probably thought of here is Andreessen Horowitz, who really established the “VC as content marketing factory” model. Sure enough, the two media formats that they use most of all are writing (their extensive collection of blog posts) and audio (the excellent a16z podcast), and the messages they communicate came from people like Marc Andreessen or Benedict Evans, who are super smart and blast you with fast, high-intensity, uncompressed information. 

A16Z’s website looks like this:

In 2020, we kind of take for granted that this is what VC content marketing often looks like. But it represented a shift that’s more radical than you might initially appreciate. The Old Guard VCs that a16z sought to disrupt, although not “cool” in the trendy sense, certainly espoused cool values and signalling. Relationships and experience mattered, and the VC replacing the founder at Series A with a mature CEO codified this priority set: we care about fluency.

A16z rejected this aesthetic in a lot of ways, notably in their insistence that technical founders could become great CEOs with training. Hot media, like text blog posts and podcasts, are a great way to communicate this point of view - in fact, the choice of media itself communicates a lot more than any individual post. “Fluency is something you can learn; technical talent and vision is rare and valuable.”

A16z won in a lot of ways; particularly in mainstreaming acceptance for technical founder-CEOs. But meanwhile, for a whole variety of reasons (particularly the growing importance of social capital as an early-stage subsidy for startups), the super-early stage funding landscape evolved a reaction back the other way, towards cool, and towards fluency.

Contrast the a16z approach with an early stage VC firm you may have heard of called Shrug Capital. Shrug is walks a fine line between “this is an outright parody of venture capital” and “sure, but you know what, it’s working.” Niv Dror, who runs Shrug, does not explicitly broadcast how brainy he is, or what his in-depth theses on anything are. Nobody at Shrug writes long Medium posts, saturated with information.

Instead, Shrug has a desktop calendar of funny venture tweets, encourages potential founders to communicate over iMessage (their slogan is “text us, it’s easier”) and charmingly makes fun of the VC establishment in a way that’s genuine and hilarious. 

Shrug Capital’s website looks like this:

Memes may look un-serious, but they're a great Cool Media format. They’re a joke template where you’re already familiar with the setup; the punchline varies. So our brain has to do a lot of “filling in” in order to assemble the full picture. Our brain is in feed-forward mode; we're filling in 90+% of the message with our own expectations of what's there. It's all punchline; we provide the context.  Fluency is the main currency.

A16z’s main marketing currency is Hot Media like writing and audio; Shrug’s is definitely cooler media: images, inside jokes, and especially memes. The first is obviously more “serious” than the second. But the Shrug strategy isn’t stupid. It selects for fluency really well, and at really early stage, that’s probably the right call again.

Here’s where we can actually get to what we mean by The Medium is the Message, illustrated by these contrasting VC content marketing approaches. Engaging with a16z block text writing or fast, wordy podcasts means engaging with Hot media, where your brain gets activated in a high engagement, low participation mode. The message that this media communicates, independently of whatever the content was about, is: Are you smart? Brains matter. 

Whereas Shrug Capital and its kind, and to be honest a lot of early-stage funding (and even some established VCs!) communicates something that’s actually closer to the old guard VCs in a lot of ways: relationships, ease, and fluency matter. Cool media don’t ask Are you smart? They don’t care about your densely written business plan, or your saturated podcast. Cool media asks: Are you fluent? Knowing the genre conventions matter. 

It’s frustrating, but there’s some established wisdom here. If you asked me to invest in one of two founders - one is a super smart genius, the other is super fluent in how startups work - look, I’d pick the second founder every time, and honestly, so would you. Your ability to leverage what’s out there, and exploit the processes and infrastructure that already exist for launching startups, is more important than the originality or sophistication of your ideas at early stage. 

This doesn’t mean “being smart doesn’t matter”; it just reflects that building a startup means standing on the shoulders of giants. Founders who can demonstrate fluency can show they appreciate this, and will proceed accordingly, even in ways they may not even understand. A founder who engages with a VC firm through memes is probably going to get this, oddly enough.

As a take-home message here: the specifics of an a16z podcast, or of a Shrug Capital meme, are of much less importance than the choice of media format used to communicate them. The podcast itself communicates something different than what the meme format communicates. They both convey different meaning, and they convey it so well that they actual content probably matters less than the media format does. 

Things to read: a Thought provoking thread on the unbundling of equity, the blog post on Pizza Arbitrage everyone read, a new pre-print journal article in Cell that might explain how a lot of people have “Silent Covid” with few symptoms. 

And finally, in this week’s comics section: we had a pretty fun game this past week of “Ruin an X by changing one letter”, including in startup land - here’s my favourite reply I’ve seen for “Ruin a startup by changing one letter”:

Good luck funding that.

Have a great week,


Debt: the First 5000 Years

Two Truths and a Take, Season 2 Episode 17

I recently read Debt: the First 5000 Years by David Graeber, and it has stuck on my mind for a while. It’s one of those “Everybody is wrong about X, here is what you’ve missed in plain sight” -type books; as Chamath would put it, “often wrong, but never in doubt.” It’s worth summarizing here, both because I think you’ll find it interesting, and also because I’m enjoying the challenge of synthesizing all of these ideas together into a compact format. 

A lot of people strongly disagree with his work (see the end), and I’ll admit that I got a lot more critical as soon as we entered territory where I know something about the subject material. But that doesn’t mean I didn’t appreciate the book: I really liked it, and it made me think a lot. It reminded me a bit of reading Freud or Girard: it’s impossibly grand in scope, and some of the explanations are pretty ridiculous, but the observations are gripping and uncomfortable. So here’s a summary of what I took away from it.  

The origins of money

The book opens with a strong statement: our conventional origin story for money is totally wrong. 

Here’s the version of the story we’re usually taught: Before money, commerce happened through bartering. If I had extra wood and you had extra grain, we could negotiate and swap for mutual benefit and both be better off. In popular narrative, bartering and trading fundamentally makes us human. Adam Smith famously wrote in The Wealth of Nations: “Man is an animal that makes bargains: no other animal does this - no dog exchanges bones with another.” 

Bartering only works so long as there’s a “coincidence of wants”: we both want what the other has, at the same time. So we invented money as a way to solve the coincidence of wants problem. Instead of having to rely on coincidence or stockpile something that everyone in the village might want for means of exchange, we could instead use tokens or coins. Here’s a pretty typical passage from an economics textbook: 

Where the range of traded goods is small, as it is in relatively unsophisticated economies, it is not difficult to find someone to trade with, and barter is often used. In a complex society with many goods, barter exchanges involve an intolerable amount of effort. Imagine trying to find people who offer for sale all the things you buy in a typical trip to the grocer’s, and who are willing to accept goods that you have to offer in exchange for their goods. 

Some agreed-upon mediumof exchange (or means of payment) neatly eliminates the double coincidence of wants problem. 

In this view, money is an abstract representation of scarcity that we invented in order to suit our commercial needs. In The Wealth of Nations and other influential books, we enshrine these examples of local economies “evolving” currency based on whatever they had at hand: Newfoundland fishermen using cod as currency, European villagers using metal nails as currency, and so forth. But the main form that mattered were coins, whose scarcity was objectively fashioned out of precious metal. Coinage, consequently, ushered in the evolution of banking, and then banking’s killer app: credit. 

To summarize this view, the foundation of the human economy is built on bartering and swapping for mutual benefit: it makes us human, and let us specialize. Money and coinage evolved as an abstract representation of scarcity, in order to facilitate that bargaining. And then credit and banking evolved on top of that. 

According to Graeber, that narrative is fully false, and has the story backwards. 

If you went back in time to a prehistoric village and asked, “how do you solve the coincidence of wants problem?” they’d look at you strangely: “What? We don’t have that problem. If I need grain and my neighbour has it, he gives it to me, and then I owe him one.” This idea, “I owe him one”, is simple and powerful: the fundamental unit of commerce isn’t a unit of scarcity, it’s a unit of obligation: the IOU. Credit didn’t come last, it came first. 

Although I have not independently done my homework to verify this, if you ask Graeber, he’ll tell you that most anthropologists support this view: there is little evidence that “barter economies” ever actually existed in early civilization. In contrast, there’s a lot of evidence that these early societies had sophisticated local economies long before coinage: not because they were good negotiators, but because they got by perfectly well by using the IOU as a fundamental unit of account. IOUs may have become denominated in some reference terms, but no literal medium of exchange is actually necessary in a system like this. 

Accordingly, the “myth of barter” is a false inference: we look back from today (where everything in our life is denominated in dollars) and think, “okay, they must’ve had some early substitute.” Anecdotal examples of prisoners using cigarettes as improvised currency are beloved by economists, but don’t actually tell us anything about the past: those prisoners grew up with modern money, so it’s natural that they might go recreate it. 

But in communities where most people know each other, if you never had hard currency in the first place, you might get by perfectly well without it. You’d go through everyday community life with the IOU system, and then resort to barter or other commercial rituals on the occasion where you’d trade with strangers. This system worked well, and it reinforced localism: so long as trust was the dominant unit of commercial account, efficient economies could scale up to around the size of a city, then faced diminishing returns thereafter.

So then where did money come from? 

The economist’s perspective goes: “okay, we can see that money made commerce work better, therefore we must’ve invented money in order to improve commerce.” But many anthropologists and historians argue that’s not what happened. The IOU system works perfectly well for debts that can be repaid. Money evolved to solve a different problem, which is how to deal with debts that could not ever be repaid. We’re not talking about commerce here. We’re talking about religion, and debt to God. 

This argument also makes a lot of sense once you think about it: the original driving force behind money and precious metals wasn’t trade, it was tribute. Tribute isn’t ever repaid, so the IOU system doesn’t work. So we needed something else, and that’s where precious metals and coins emerge on the scene.

Graeber argues that we have the wrong idea about the basic life cycle of currency in early history, and for that matter, until a few centuries ago. The average life cycle of early coins was not facilitating trade among stranger after stranger. A typical coin or precious metal object might be exchanged once or twice, but then promptly deposited at the local temple or church as tribute, where it would then remain permanently. 

That second model feels more consistent with historical and anthropological record than the first one. Ordinary people simply did not use coins that much, even in early civilizations that did evolve coinage, because the IOU system worked so well. Again, they very well may have quantified their IOUs in terms of currency, simply for convenience, but that doesn’t mean they actually used currency for trading. 

When they did use coins, it was primarily around two kinds of debts. First, “eternal debts”: occasions like religious tribute, dowries at weddings, and other monumental occasions where large social or moral debts were taken on or transferred. Second, “injurious debts”: settling wrongs in situations where trust has broken down, and one party is seen as “in the wrong”, and compelled to pay what is effectively tribute to the injured party. Neither of these have anything to do with commerce.

So what happened? How did hard currency take over commerce? During the Axial Age (the last few centuries BC) we saw the rise of Roman, Indian and Chinese empires that all evolved hard currency systems that infiltrated all of commerce. Economic historians usually describe this evolution as logical steps into advanced civilization. But Graeber will tell you otherwise: hard metal coinage comes from violence, war, and as he calls it, the “Military-coinage-slave complex” of empire. 

Early “soft” credit systems may have supported remarkably large and sophisticated economies, but there was one thing they couldn’t pay for very well: war. First of all, you can’t pay armies in IOUs, because they’re too mobile: when you march to faraway places, credit effectiveness diminishes with distance. But the main reason is more cruel: metal coinage is a really effective way to economically enslave a conquered nation. 

The way it works is: your army marches on another nation, conquers it and seizes their riches. Then you demand further payment from the people you’ve just conquered; either in the form of outright debt (for “damages incurred”), new taxes, or both. Since you’re in power, you can demand those tax and tribute payments be fulfilled in your own hard metal currency, with interest. The conquered people now have to somehow obtain those physical coins in order to pay their taxes, which puts them at an enormous disadvantage in trading: they must accept any terms they can get for their own labour. What looks like a “global free market”, facilitated by universal coins, is really just debt peonage. The coins don’t facilitate; they restrict. 

Graeber’s broader point is that all debt, especially interest-drawing debt, is intimately related to its enforcement mechanism. IOUs don’t exist in a vacuum; they’re made in societal context. In an economic system where money is fundamentally a unit of trust, the rules around recoupment and enforcement of debts are made in an environment where people generally know each other, so we see recurring features like strong creditor protection and pretty sophisticated dispute resolution. In contrast, when money is a hard, fungible unit of scarcity, enforcement isn’t a matter of trust; it’s a matter of force. When your enforcement mechanism is state-backed violence, lenders and debtors have a pretty different relationship. 

The Two Sides of Money

At this point, we’re ready to understand the two main theses of the book. The first thesis is concerns the duality of money, as both a unit of trust and a unit of scarcity. Money will always be some of both. Each “side” of money is a positive feedback cycle. The “unit of trust” side is a reinforcing cycle of merchant power, trust, and localism. The “unit of scarcity” side is a reinforcing cycle of military power, debt peonage, and empire. (You can probably guess which side he prefers.)

It’s helpful to articulate this thesis as essentially “Anti-Adam Smith.” The Wealth of Nations describes a world of commerce that’s founded on the idea that people are free to choose how they want to work, with currency as a universal intermediary. Graeber would counter that genuinely free trade, when it historically occurs, is usually transacted in IOUs, not hard currency. When hard currency shows up, it’s usually in a military or colonial context. He would probably summarize it: “If it’s a free market, they aren’t using silver. If they are, it isn’t a free market.” 

The second thesis of the book is that these two positive feedback cycles are not in equilibrium with each other. World history has progressed in cycles where one has dominated, then the other. Early civilizations had thriving commercial economies on the IOU system, while gold and silver became valued as religious tribute. Then during the Axial age, metal became commercial money. The rise of coinage coincided with a rise in organized military power and empire building in Rome, India and China, as I mentioned before.

The Middle Ages saw a swing back to the old ways of doing things, where precious metals were largely confined to tribute while free trade flourished under the IOU system. Of course, the “Middle Ages” did not mean the dark, forgotten years where Western Europe didn’t do much; the rest of the world flourished between 600 and 1500, particularly the Middle East, Central, and East Asia. 

Here we spend a lot of time talking about free trade under Islamic rule, and how commerce worked in an environment where lending money at interest was forbidden. I’ve repeatedly heard the assertion that usury laws historically held back banking and commercial evolution, but Graeber (as usual) paints a different picture here. By all accounts, the Islamic world at this time did indeed see free trade flourish for hundreds of years, with little violence. To Graeber, this again shows the triumph of the IOU system. With ordinary people free from the weight of interest payments or the restriction of coinage, they were actually free to pursue Adam Smith’s free market ideal, while the foundation of debt was mutual trust and not state-sponsored enforcement.

As before, precious metals were still around - just not really in commerce. For the most part, gold and silver got stockpiled in monasteries and temples, or was minted by kings primarily in order to fund armies for local conflicts. “Recoinage” was a relatively frequent occurrence, where kings had to recall and reissue currency to fund their conflicts because there simply wasn’t enough metal circulating - too much was stuck inside the temples. I’d mostly heard before that recoinings were economically disruptive events. But maybe they weren’t. Ordinary people didn’t hold any coins, and didn’t transact with coins, so they probably didn’t care. 

Then the world turned back towards empire again. One bit of world history I’d never heard before reading this book, which Graeber nominates as “the  most consequential twist of history that no one remembers”, is how China turned away from the IOU system and went back to precious metal currency in the 1400s. (Remember, by the way, that for most of world history the Chinese economy was the biggest and richest in the world, and was always connected to everyone else.) 

China switching back to gold and silver set off a chain of events that changed everything. Everyone else suddenly had to go find precious metal, and lo and behold, Europeans had just "discovered" a whole lot of it in Central America. You probably know what happened next, which is 500 years of unthinkable brutality, conquest and empire-building.  The precious metal positive feedback cycle went into high gear, and dragged the world along with it. The mercantile, free trade era was over; the globalized colonial slave trade was in.

As we approach current-day history, we get into increasingly documented territory: the world wars, the rise of America and the US dollar, and our move off the gold standard in 1971. Graeber tentatively calls our current period “The beginning of something yet to be determined”, and he first published the book in 2011, fresh off the financial crisis. I’ll leave you to read the book if you want his take on our current world, which I mostly don’t agree with, but it’s interesting and consistent with the rest of the book. 

It’s also hard not to read this book in the context of what’s going on with Bitcoin right now, which is basically a pure, digital expression of money as fungible, abstract scarcity, where interpersonal trust has been fully engineered out of the picture. (If you’ve read my other stuff on cryptocurrency you may have a sense of my stance on this.)

Not everybody likes this book, and it has some vocal critics like Jeff Hummel and Brad DeLong. (Thanks to Barry Cotter for these links.) Tyler Cowen has a good one-line summary: "The book overinterprets early historical evidence and falls apart as it approaches contemporary times, still it has a vitality which many other tracts lack.” I think that’s a pretty fair summary. The really early stuff, no one knows; it’s all guessing. The current-day part, in my opinion, is written way to ideologically and really distorts the way that modern corporations work, in particular. Still, he’s arguing it honestly, and I appreciated the book a lot. 

In this week’s reading, here’s a good piece from Gavin Baker on why it pays to be Number One on the internet, how Number One brands are continual thorns in the side of Google and Facebook, and why it’s so important to establish omnichannel customer acquisition:

Scale and loyalty are more important online than offline, which drives most of the “winner take most” reality of the internet | Gavin Baker

Here is a neat tidbit from Gary Basin on how abundant choice often seems like a better idea than it actually is. It resonated a lot with me, since one of the recurring themes in my writing is variety of choice as both a driving factor for the abundance flywheel, but also as a driver of emergent scarcity.

Choice is like junk food | Gary Basin

Good news from the energy front, from Ramez Naam. I remember when he wrote this original series on renewable energy projections in 2015, back when he put up optimistic projections that overshot anything the “serious people” were forecasting. Five years later, he’s back to let us know that even his wildly optimistic forecast understate what’s happening to the world’s energy mix (although even so, solar alone won’t fix climate).

Solar’s future is insanely cheap (2020) | Ramez Naam

And finally, in this week’s comics section, here’s a little genius for you:

Have a great week,


Funding the future, the Two Torontos, and the Audio Revolution - with David Perell

Two Truths and a Take, Season 2 Episode 16

Hello everyone! This week we have a special newsletter issue - it’s a podcast, with my friend David Perell. This turned out as one of my favourite podcast episodes I’ve ever done, and I hope you get to listen to it. 

Funding the future | Alex Danco & David Perell, North Star Podcast

It’s a hefty hour and 45 minutes long, so we cover a lot of stuff, but there are three main topics of conversation. Here’s how I’d summarize them:

First 40 minutes: Funding the future

This is a topic that should be pretty familiar to anyone who reads this newsletter regularly, and it covers ideas that I’ve written about in posts like VCs should play bridgeDebt is comingSocial capital in Silicon Valley, and The social subsidy of angel investing. The main thesis we explore here is how the idea “We shape our tools, and then they shape us” applies to the relationship between startups and venture capital. 

Modern VC is remarkable in that it’s gotten so good at solving a specific problem (which is an existential barrier to getting startups off the ground) we sometimes forget the problem exists. That problem is: when you’re building the unknown future, you cannot really know the ultimate value of what you’re trying to build, and you can’t really know how much capital you’ll have to raise to get there. Therefore, as you start out, you cannot know the value of your own equity, even though it’s the main thing you have to sell. 

Modern VC has evolved to solve this problem in a particular way, by creating a reflexive path for bootstrapping companies forward with valuations that are not really bets on the company itself, but rather bets around a series of milestones that unlock a next round, and then a next, until eventually we recursively arrive at a business that can be properly valued. It works really well. The modern startup community was largely built on this methodology. 

However, it’s come at a price- and here’s where the “we shape our tools, and then they shape us” idea comes into play. We initially invented this model in order to fund a particular type of startup, but now the funding model works so well that all venture backed startups are explicitly designed with this model in mind, from day one. Annoyingly, the model allows no room for experimentation: if you deviate even slightly, it sends a signal that something’s off. 

It’s a complex system, and it works. But the price we pay for this success is a lack of diversity in our startup landscape, and an increasingly narrow definition of what success looks like for entrepreneurs who opt into this model. I’m hopeful that in the coming decade, founders will start to chafe against these constraints. 

Next 30 minutes: Cities, the suburbs, and the two Torontos

Then we switch gears and talk about something totally different, which is cities. On the first podcast David and I recorded together, we also talked about cities a lot. And although I don’t usually write about this stuff, a few newsletter issues that come to mind are Why I don’t love light rail transit and What happens if building more housing doesn’t work?

We start out with a recurring observation of mine, which is that the core identity of downtowns versus suburbs have quietly switched places. The fundamental appeal of living in a city, at least to me anyway, is in the happy chaotic diversity. There’s a lot of joy in the unplanned exuberance of all kinds of different people with different backgrounds making a living by contributing in their own way. Cities are classically the place where there’s the greatest density of this kind of exuberance. 

In a way, downtowns have become a victim of their own success. As urban revitalization pushes rent higher, the mosaic of small businesses that made these downtowns so interesting in the first place get pushed out and replaced by chain establishments that can afford the rent. But in the suburbs, that diversity still thrives. Go to any strip mall, and you’ll find better restaurants, more family-owned businesses, and a wider range of services than you get downtown anymore. 

You can see this effect clearly in Toronto and its surrounding suburbs. There are really two Torontos. There’s the Inner City, which is dense and rich, and embodies the first stereotype you’ve probably heard about Toronto (that it’s a giant real estate bubble.) Then there’s the Outer City, which is the more interesting part.

The outer city of Toronto - Scarborough, Northern Etobicoke, North York, plus the surrounding cities like Mississauga and Pickering - is where you’ll see how Toronto is the most diverse city in the world. It’s young: there are kids everywhere, and you get an unshakeable sense that they are the future. It’s also an environment originally built around the car, although many current residents don’t have one. So there’s an aspirational romanticism around the freedom of driving that’s straight out of 50s Americana, although you’d never mistake it for a Normal Rockwell painting. 

The “Toronto Sound” expresses this landscape really well. It’s a different branch of hip hop and R&B compared to American artists, best exemplified in the sound and aesthetic of two record labels: OVO (Drake) and XO (The Weeknd). It’s slow, moody music that’s crafted to sound good while driving. In the podcast, I share my belief that the most important aesthetic inspiration in Toronto culture - even more important than the Raptors - is the 401, the massive highway that spans the outer city. 

Toronto is a city that has a hard time telling its story, mostly because it’s such a young city, and still growing up. A third of the new immigrants to Canada come here, and the “average Toronto experience”, if there is such a thing, is distinctly inner-suburban: oriented around distance and sprawl, as before, but hardly homogenous or middle-class. The best place to experience it is at a suburban strip mall: surrounded by windswept concrete and utterly unfriendly, but filled with dozens of family businesses and hundreds of people from every possible background, making up a complete community that you’d never find in the Jane Jacobs-branded downtown neighbourhoods. It’s hard to describe. You should just go. 

Last 30 minutes: The Audio Revolution

We wrap up by talking about a specific essay that I wrote last year, The Audio Revolution. It’s hardly the most read post I’ve written in the past year (I don’t think it even cracks top ten), it's probably my favourite. If you haven’t read this, please do! I won’t recap it again here, but in the podcast we go a bit deeper into a few areas, including how to understand Marshall McLuhan’s enigmatic (but profound) line The Medium is the Message, the famous Nixon versus Kennedy debate story, and why audio as a “hot” medium (and headphones as a private delivery vehicle) meaningfully contributed to the last decade of politics. 

Hope you enjoy the episode! 

First off, there’s some really good stuff in this Twitter thread, if you’re looking for a new book to read:

Here is a fabulous post on tiny layout changes making a big difference:

A case study of complex table design | James Long

And finally, in this week’s comics section: Ashley Feinberg has done it again, folks. This week, the mystery of The Flush: with the United States supreme court forced to hear arguments over the phone during Covid times, a mystery justice was caught in a classic work-from-home caper: flushing the toilet without muting your phone. Who was it? Ashley investigates:

Have a great week everybody,


Download Cards, "eCommerce", and Covid Commerce

Two Truths and a Take, Season 2 Episode 15

In June 2011, my band The Fundamentals headed out for our first multi-week long tour, playing shows across Canada. It was a wild time: we were opening most of the shows for an Australian band called the Resignators, and we found out halfway through the tour that their guitarist had been one of the founding members of GWAR. (If you know, you know.) We also fell victim to a couple of pretty bad van breakdowns, including one at the end where we got stuck in a tiny logging town in northern Ontario for about a week. All in all, it was a 10/10 summer. 

There was one issue, though: we had a hard time selling our music. That’s not ideal. We came up with a workaround, but it wasn’t a great one; and I got to thinking about it a bunch this week as I’m settling into my new role at Shopify.

Here was the problem: 

In the old days, the way that music worked was you recorded a demo tape, you took it to a record label, and if they liked it, they’d put up money for you to go record an album. Recording wasn’t cheap, so you needed a label to put up that cash. Then you’d go on tour, play shows to promote and sell the album, and then the record label would make most of the profit but you’d still get paid if you were a hit. 

In the 2000s, two things happened. First, the internet took off and we all started downloading music: first from Napster, then from whatever file-sharing P2P network of choice, then iTunes. The economics of the whole business got threatened, so record labels had to get a lot more careful with how they spent money. Second, recording got cheaper. You could record, mix and master something decent-sounding for a few thousand bucks - a lot better than before, although still not quite friction-free. 

As a consequence, the relationship between bands and record labels got rearranged a bit, and not really in the band’s favour: it became an increasing expectation that bands would bring an already recorded album to a record label, and the label would decide if they liked it or not. If they did, they’d manufacture and distribute it for you, and then send you on tour. 

We were in that boat. We had not yet recorded a full-length album, because we weren’t quite there yet. We had a pretty good EP that we’d recorded (an EP is like a short album), we wanted our fans to listen to it, and we needed to make some gas money. We had our product, and we had fans who wanted the product. The problem is that you can’t really charge all that much for an EP; like 5 bucks max is considered reasonable. But after designing a cover, printing and manufacturing the album, and shipping, we’d be barely breaking even - without the scale of a record label, we’re stuck paying retail for our own product. 

The frustrating thing here is that we owned the digital recordings, and most people listened to these files digitally. The CD form-factor itself was an unnecessary obstacle, except for it did one really important job: it gave us something to physically sell at our shows. But that’s a steep tradeoff: we could only sell something if we were willing to surrender any profit on it. 

In the end, we found a solution that was both perfectly reasonable, and at the same time, perfectly silly: digital download cards. 

I couldn’t find any old pictures, but you can imagine them: they were nice, laminated cards with our name and artwork on it, and a code you could use to download an mp3 of our music. They were a lot cheaper than CDs, and they did the job: they moved a digital file from our computer to their computer, and moved money from them to us. They were a small but nice physical item that fans could take home from our show. They checked off every box we needed.

They look right on paper. If you’d asked us to spec out a solution to the problem, this is probably what you’d get. But they were also … just, wrong. We sold some, sure. They did the job we asked them to do. But it was a job that didn’t make any sense anymore. 

In hindsight, we can see that period of time was exactly the inflection point out of the pre-internet world of music, where bands played shows in order to sell their music, and into the post-internet world of music, where everything streams for free, and bands effectively give away their music so that you’ll come to their shows. Our digital download cards were a pretty accurate snapshot of a single point in time, but they 100% missed the line that emerged out of many points over time.

I’ve been keeping this story in mind over the past week as I get onboarded and acquainted with the big internal machine inside Shopify. Our mission is to make commerce better for everyone. The individual jobs and tasks associated with that mission are vast and complex; on my team, Shopify Money, we have enough work to do to keep us busy for years before we run out of really obvious things to make. This is a good thing. 

A lot of commerce today is still made up of “analog parts”: the equivalent of physical CDs, still around from another world, but who are mostly still here out of inertia. But another big chunk of commerce today is made out of download cards. We’re in the middle of this big transition from pre-internet commerce to post-internet commerce, and in the middle, there’s this period we call “eCommerce”. 

eCommerce is made of download cards. It’s a collection of bits and parts and products and services, all of which work fine and do a job that makes sense in the old context, but just aren’t necessary anymore. Or, at least, they won’t be necessary eventually. They gets the job done, but aren't the best or final form of anything. 

Soon there won’t be anything called “eCommerce", or any sharp distinction between online or offline merchandising for most of what we buy. I think this should be obvious to anyone who spends any time in this world. The COVID lockdown has accelerated this transition; not because it’s tilting more transactions towards the internet, but because it’s making really clear that no one actually cares about the difference between online versus offline. The core of interaction between the merchant and the customer really is the same. If we’re lucky, the outcome of all of this won’t just be more online commerce, it’ll be better commerce.

That being said, the urgent priority right now is to help businesses make it through the Covid crisis, right now, without dying. For businesses like us, it means shipping a lot of online workarounds and hacks to help out. For merchants and customers, it means embracing these workarounds that support business as usual in any way possible. This is good, but it’s potentially misleading. It’s like a huge sign that Digital Download cards have product market fit, when really, they’re just a notable but misleading passing point in the context of a broader transformation.

“Covid Commerce” is what we have to do right now, but we should be mindful that some of the things we’re building, in hindsight, will be download cards. They were necessary in the moment, they replicated the job faithfully, but they’re not the future. Hopefully as we get back to normal, we’ll have made enough progress on what actually matters in commerce that we can move past them soon enough. 

Permalink to this post is here: Download Cards, “eCommerce” and Covid Commerce |

First thing this week: I’m guessing that some of you are into watches. If you are, I highly recommend this blog from my friend Howie, who’s a watchmaker in Vancouver:

The Dialed-in Watchmaker | Howie Woiwod

(Also, if you have a watch that’s precious to you and that needs repair, you should get in touch with Howie about it. He will do a better job than anyone you know.)

Here are a couple timely callbacks to older issues:

First off, this piece by Packy McCormick with an interesting take on what I’d written on positional scarcity a while back:

Wackos and Zoomglüts (What Hey Arnold can teach us about supply gluts) | Packy McCormick 

Second, here’s a graph on how the Covid crisis rapidly changed our grocery / restaurant spending dollars (original tweet here), which isn’t surprising in that it shows that things changed (obviously they did), but more the fact that this massive shift away from Cooking as a Service takes us to a ratio we haven’t seen since… 1997. That’s not that long ago! Goes to show how much things have changed in the past 25 years. 

Here’s an interesting piece on a huge but often overlooked reason why the biggest companies have an advantage over everyone else: they’ve become the de facto regulators of smaller companies. 

The new gatekeepers: private firms as public enforcers | Rory Van Loo, Virginia Law Review

And finally, for this week’s comics section: folks, we’ve got a really good one this week. The original tweet is fine, but it’s the retweet that, uh, ok why don’t you just work out for yourself what happened:

As Zack put it, I do honestly feel bad for whatever social media intern hit that retweet button. But you know what? I’ve been laughing about this for two whole days now. And now so can you. 

Have a great week, 



Two Truths and a Take, Season 2 Episode 14

Hello everyone! I have some big personal and professional news: I'm joining Shopify.

In my mind, Shopify is the most interesting company in the world right now. If you took everything I've ever written about scarcity and abundance, about technology, friction, complexity, and antifragility, and expressed it in a business, you'd get Shopify. They're an accelerant of the future of commerce, and a lifeline for this present crisis.

This is their moment. 

Beyond Survival

My grandfather, Léon Danco, loved small businesses and the entrepreneurs who ran them. He dedicated his career to meeting entrepreneurs, learning about what they made, how they did it, who their customers were, and what delighted them. While the mainstream business community obsessed over mega-scale conglomerate firms and corporate efficiency, he appreciated how much our world is built by small family businesses and their employees, doing what they loved to do, really well. 

He especially cared about helping entrepreneurs navigate a major transition in the life of their business: passing it off to the next generation of leaders. This is a scary moment. Your life’s work is at risk; you have to embrace the future while preserving what made your business unique and special. In a scary moment like this, goal number one is to make it through alive. Goal two is to make it through stronger than ever. His most read book is called Beyond Survival. 

Today, small business merchants everywhere have similar stakes in front of them. Hundreds of thousands of small businesses are fighting to survive another week; tens of millions of people are out of work, and must find a way to recast their life’s work into something they can sell. This is an inflection point: the past is over; the future is beginning. It's the same challenge: don’t just survive; go beyond survival. Come out of this stronger than ever. 

Every merchant has to rise to this challenge all at once. It's about more than surviving. There's zero doubt in my mind who would be my number one draft pick I'd want on my side: Shopify, obviously. It's not even close. 

New Defaults

Concealed in this crisis, there's some great news. This moment may be harrowing for small business entrepreneurs and merchants, but in this crisis there is decades-scale opportunity. COVID just closed the book on the 20th century, and on every “default setting” for small businesses. Defaults matter: they set our expectations, put us on a trajectory, and establish path dependence for everything that comes after. 

If the default is It takes your full-time effort to start a business, then only people who can afford to leave their jobs can start businesses. 

If the default is You don't know what's going to happen, then you'll stick with what's established, rather than what's unique about you. 

If the default is The world is full of friction; then running your business means fighting friction every day, not doing what you love.

If the default is Growing businesses means more complexity, then embracing your success becomes a mess of tradeoffs. 

We don't need those defaults anymore. It's the 21st century; we can do better. Shopify is a coordinated effort, and a bet: we can build a platform and a launch pad for entrepreneurs with a vastly better set of defaults. If we can do that, merchants will go do incredible things with the opportunity. So far, it's working. 

Shopify Money

So what am I going to be doing at Shopify? In the short term, whatever it takes. We're in battle mode right now; that means whatever it takes to get merchants through this crisis and out the other side in even better shape than they were before. And to be honest, that could change week by week as the situation on the ground evolves. 

That being said, I can give you a preview of a few things I'm excited to be working on. 

I'm joining the Shopify Money team, led by my friend Kaz Nejatian, which is building a new foundation for how we fund small businesses and their growth. This team is executing at a rate that defies belief right now. With merchants everywhere facing a cash crunch, the Shopify Money team has been rolling out a lending product at a rate of one country per week (last week was Canada, the week prior was the UK) which in tech might seem pretty good, but in lending that's like ludicrous mode. 

Oh, and by the way, it's the fastest, most founder-friendly financing you can get anywhere. Shopify knows everything about your business, so funding it should be ridiculously simple. If you're built on Shopify from day zero, you should never worry about financing your business, ever. (If you’ve read my newsletter, I think you see the opportunity here. When I was at Social Capital, we spent a lot of time thinking about "Capital as a Service", and how to build a future where growth and success pre-paid for themselves. Well, guess what?)

Another project I'll be working on might surprise you, and I'm looking forward to telling you more about it soon enough - Shopify's membership in Libra. Libra is going to catch a lot of people by surprise. It has a lot of armchair critics in tech, both in Silicon Valley and in cryptospace; and you know what, that's exactly how I like it. Libra has a big mission to fulfill, and Shopify is a critical piece of that mission. I'm tremendously excited to help make that happen. 

It's Time to Build

So: what does that mean for the newsletter, and the book, and my dumb tweets, and everything else?

First things first: the newsletter will absolutely continue. It's important for me to keep sending this out; although I may have to dial back the schedule a bit. I enjoy the weekly cadence, though, so I'll see what ends up working. We've had a fantastic run of issues over the past year, and I have every intention of keeping up that trend. 

Second: Scarcity in the Software Century, the book I've been working on. Everyone I've spoken to at Shopify is excited about this book and its direction. We'd like to publish this book as a part of the Shopify world at some point; it'll make a great fit. The book has a home. However, for the time being, there are more important things to do than write books. It's time to build. The book will be there to pick back up when normal life resumes. If you were a supporting subscriber of the book project, keep an eye out for another email about this. 

Third: my tweets. I'm afraid they will continue. Please be warned that as I start spending more time with Kaz, they may get even worse. 

I've tremendously enjoyed this past year of writing, thinking, and taking time to really develop my thesis set for where the world is moving, and what we ought to do. It's been a real privilege to get to do that, and I'm glad I did. But that year is over. It's build time now. And it's a no-brainer decision for where I want to go do that. 

It's really an added bonus for me that Shopify happens to be a Canadian company in my own back yard. I really care a lot about the Canadian startup and tech scene, which has a lot of great ingredients but has been missing some of the big successes that an ecosystem needs - the last time we had a win this big was RIM. Canada is a great place to build a company like Shopify: it's understated, it's out of the spotlight, and it gets things right a lot of the time. 

My first day is tomorrow. Drop me a note on Twitter to wish me luck! 

In other reading material this week:

Here’s that post everyone was talking about this week, which as advertised, was quite good and I enjoyed a lot:

When Tailwinds Vanish | John Luttig

I liked this post because it consisted of a lot of pretty sensible observations that have almost all been made before - you find yourself nodding along, thinking, well yeah, that’s happening, that’s going to happen. But the sum total of it all is pretty clarifying, I think. The big question now is to what extent new tailwinds - accelerating eCommerce, better payment and financial infrastructure, the growing “Metaverse” that’s emerging before us during the pandemic - will supersede the old ones.

Another good piece I enjoyed this week was Byrne Hobart’s newsletter on Airlines:

How airlines explain the economy | Byrne Hobart, The Diff

His stuff is really high-quality, and I finally subscribed to the paid version of his newsletter after really not having any excuse to not do it for so long. You should too.

Here’s an interesting story from the music business:

You have a TikTok Hit! Now quick - change the title | Elias Leight, Rolling Stone

This makes total sense! So it’s really hard to know which of your songs might go viral by surprise, and now we have an added challenge, which is that with TikTok, it’s not even songs that are going viral - it’s ten-second segments of songs. Artists are adapting to this new world by exploiting a degree of freedom that nobody realized was there - your song title. Make those lyrics in that 10 second clip the title of the song!

And finally, this week’s Comics Section, the tweet that made me laugh the hardest:

Have a great week,


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