WeWork could win

Snippets 2, Episode 18

So. WeWork, in whose co-working locations I’m sure many of you have spent time, is going public. It’s going for it at a time where – if you believe the news – the world economy is threatening to take a substantial dive. The business is valued like a tech company (in that it is hemorrhaging Softbank money for now) and the IPO prospectus is magnificently bold and vague about tech, mission, aggregation, community, and all sorts of scalable-sounding things.

But it’s quite unlike a tech company in that it’s selling something with distinctly non-software margins: office space. It’s also quite unlike a tech company in that it’s bringing along 33.9 billion dollars worth of lease commitments as it goes public. In its early years, WeWork enjoyed substantial discounts on these commitments (as is common in commercial real estate), but now they’re starting to come due in full and oh boy do they hurt. Can the unit economics work out in the long run? Can this business work?

So I set out this week with a goal of convincing myself that WeWork can plausibly win. And I think I almost got there? I’m not sure I believe they’ll win, but I do genuinely think that WeWork is disruptive – in the real sense of the word disruptive. Don’t believe me? Read on. 


The We Company S-1 is like Tech’s version of the Mueller Report. It’s a Rorschach test that shows you whatever you were looking to see. If you previously believed that WeWork is a burning bag of dog turds, then you probably still think that, except now with numbers. If you previously believed that WeWork is actually a genius power move, then you probably still think that, except now with numbers. 

There are so many S-1 breakdowns out there this week I’m not going to link to them all, save one: Byrne Hobart’s piece What is We!? Understanding the WeWork IPO. This piece is a good place to start, particularly since it dispels some of the hyperventilation around who-sold-what-to-whom that happens a lot whenever tech people read about a business in any other industry. For instance, yes, it’s actually quite reasonable for Adam Neumann to borrow money from WeWork, spend that money buying office buildings, and then lease those buildings back to WeWork. That’s basic separation of high-multiple and low-multiple assets; software people just freak out because they’ve never heard of the concept of a “low multiple asset”. 

But anyway, back to our black and white questions. Is WeWork a bubble, or is WeWork an arbitrage? Is WeWork equity a real estate proposition, or a technology proposition? The WeWork S-1 repeatedly insists that it is a tech company, and ought to be valued like one. But where are its software margins going to materialize from?

Scale? I don’t buy it; not in the “we will achieve software margins at scale” sense. WeWork’s revenue comes from renting office space, and their cost of goods sold is… buying and/or renting that office space. That’s a perfectly fine business model, but it’s not revolutionary. Yes, there are services you can offer along with office space, but unless those services have software margins and can be effectively bundled into the WeWork office offering (a huge assumption) then we aren’t there. Network effects? Also no. There is zero advantage to joining the WeWork network because your customers, competitors, or friends are on it. 

Aggregation? Come on. Commercial office space isn’t like buying diapers on Amazon or watching TV shows where the big variable cost is customer acquisition. Sure, WeWork may have a great brand and therefore be able to acquire tenants more cheaply than some random office manager. But that’s not the same as “WeWork is the choke point through which some critical mass of commercial real estate must pass.” I have seen some interesting ideas around how WeWork subscriptions might be an effective aggregator for other adjacent businesses like health insurance; that’s definitely a neat idea, but it’s not the core business. 

A pretty but unhelpful diagram from WeWork’s S-1 filing explaining how they’re going to make all the money

The prospectus also helpfully includes several other key trends they indicate will drive “The Re-Invention of Work”: Urbanization, Globalization, Independent Workforces, “Flexible Solutions” (by which they basically mean, “shorter leases”), Workplace Culture, and “Sharing Economy”. (What? Who wrote this?) So, what, then? 

I think a reasonable way to look at WeWork’s opportunity is as follows: 

As software and the internet transform the workplace and eliminate friction from the commercial office space market, tenants increasingly resemble one another, and can be served in standardized ways. The more “atypical” a company’s needs (small, fast-growing, multi-region, seasonal, whatever), the more this matters: any customer can now be an easy customer. Shopping for square feet, whether it’s for a day or a decade and for one person or a thousand, is now all pulling out of the same bucket – just like Airbnb transformed short term residential real estate in a way where $200 / night and $2000 / month now have to compete with each other directly; as they should have all along, but never could before.  

There’s an opportunity here to become a global scale low-cost, low-friction provider of office space. Professional office managers have always “used every part of the cow” in terms of carving up buildings and cash flows in order to optimally make everybody happy, but as friction and differentiation between one type of tenant and another type of tenant goes away, there’ll be an opportunity to create a low-end, good-enough, globally ubiquitous class of office space that can make money basically by squeezing as many tenants into as few square feet as possible while being able to juice occupancy by guaranteeing low rates for any duration of lease, for anybody, anywhere. 

Despite the branding and the Instagrammable colour schemes and the beer on tap, WeWork is not a premium product. The fancy fruit water certainly helps reassure tenants that “you’re in a good place; you’ve made it; this is career success”. But don’t fall for it. WeWork is low-end on the main dimension that matters for commercial office space, which is what is the bare minimum of square feet that an employee needs, and what are the cheapest ways to distract employees from the fact that they’re working in an open-concept cattle pen? The lofty rhetoric around community and enlightenment are a key part of maintaining kayfabe. How are employees supposed to keep up the self-delusion if media coverage of WeWork is all about their tremendous cost-cutting efficiencies?

However, that doesn’t mean that WeWork is strictly a low-end product among all elements of performance that tenants care about. WeWork’s competitive advantage is that it’s lower-friction than anybody else. It’s fast, it’s standardized, it works for you, you can get an affordable office space today if you need. They do genuinely live up to their branding as a “tech company” along this element of performance. Software and the internet don’t make WeWork space any cheaper or nicer, but they do make it available faster, with less friction, than any incumbent can match.

WeWork is genuinely “disruptive” – in the original Innovator’s Dilemma sense. They are a low-end disruptor, providing an inferior but good-enough product to cost-sensitive customers who are overserved by traditional corporate office space, but underserved along a new element of performance (speed, flexibility, standardization, “space-as-a-service”, whatever you want to call it.) If you’re an incumbent who makes money by selling square feet, that’s not attractive for you to compete with. The better move for incumbents is to retreat upmarket, and not poison their income statement by renting discounted desks one by one to freelancers.

Ignore everything else. This is the important part of the story. 

Now, here’s where it gets fun: how will WeWork keep up an economic moat in this new world, and sustain an attractive multiple on earnings (once it has them?) If it’s a race to the bottom, what’ll stop other people (particularly incumbents) with cash, experience, and other advantages from simply diving in after them?

Well… would you want to compete with them?

I have a thought here that I can almost say with a straight face. If WeWork can raise a giant pile of cash in its IPO and then not die in a multi-year recession starting any time now, it could find itself in a position where no one else is able to raise and money and get off the ground to compete with them without dying first. All the while it’ll be able to scoop up even more cheap commitments while times are lean, back-loaded in the usual way. That could actually turn into a real economic moat, like the classic example of trying to fund a second storage locker business in a town that already has an existing, massive storage locker facility. There’s just no point. 

That back-loading typical of commercial office space contracts may turn out to be important. If they can get really fast at spinning up offices and filling them with tenants who all pay full freight (cheap as it might be, relatively speaking) then that’s positive cash flow. WeWork gets cash in the door before they start having to pay it back as cost of goods sold to their own landlords. It’s really scary to compete with a business that is operating at revenue break-even but cash flow positive, if you’re starting from behind.

I suspect WeWork is banking on this being a key aspect of their economic moat. If they can get really fast at spinning up offices and get to enjoy a few years of actual, bona fide positive cash flow from each before their COGS comes due, and assuming that speed of spinning up offices for these kinds of businesses is proportional to how big you are (reasonable, I think) then it becomes formidably difficult for anyone else to break into this low-end, good-enough market before too long. (The assumption here, by the way, is that new entrants will not be able to play comparable cash flow games because they don’t have the deployment experience, scale, or order book to actually extract those few years of cash. Their revenues will only materialize as their costs do, too.)  

Note, by the way, that this is crucially different from businesses like Uber and Lyft, who also face criticism for not being differentiated or having an economic moat in any given location. The difference has to do with switching cost for customers. When Lyft enters a city where Uber is already operating, you can start poaching riders and drivers on day one, since there’s effectively zero switching costs for either. But with office space, there’s substantial switching cost. If you want to poach tenants away from WeWork, it’s going to take time as their leases run out and they move spaces; during which you’re losing that key window in which you can generate the positive cash flow that makes the whole thing work.

This is the most un-software like moat possible: “You can’t compete with us because you’ll die first.” Their S-1 might be conjuring up this incredible fiction of software buzzwords, but… I mean, so what? Is the goal for them to conjure up some impossible software-margin pipe dream, or is the goal for them to win? 

It takes a whole lot of stones to say, with a straight face, that you’re raising money for a business that’s going to command 30x multiples for a bunch of fancy sophisticated tech reasons, and then use that money to build a wall out of one dollar bills. But… but… what if it works! Just think about the case studies there’ll be; about how everyone missed this because we read the WeWork S-1 expecting it to show, “no one can compete with us because we’re so great”, but then it actually turned out to mean, “no one can compete with us because we’re so terrible.” That’s real disruption!

This might be one of the most pure, uncut disruption theses I’ve ever seen, the more I think about it.  It’s especially sweet given how Silicon Valley has somehow convinced itself that “disruption comes from the high end now”, or whatever people said to twist the Innovator’s Dilemma into knots just so they could say that Tesla and Uber were disruptive. I’m already enjoying how fun it’ll be to remind people: “and the real disruptor was… WeWork, all along.”

Does it mean it’ll work? lol no. Genuine disruption usually doesn’t work out, especially without some major technological force that differentiates the underdog, rather than pure low-end disruption economics. The majority of smart people reading through this S-1 have concluded that WeWork will blow up as soon as things turn south, and I mean, they’re probably right. But it’ll be super fun to see if the disruption thesis turns out to be right. I’m certainly watching with interest. 

There’s only one real take-home message from this, by the way. If you look at a business and your takeaway is “this business is terrible!”, before you write it off completely, ask: “could this be disruption?” It just might be.

Permalink to this post:

OuiWork? The quick case for WeWork as a disruptive business | alexdanco.com


This week’s special: two iconic regional foods:

How butter chicken roti became a Toronto classic | Karon Liu, The Toronto Star

The cult of the Chopped Cheese sandwich, New York’s most enigmatic icon | Justin Bolois, First We Feast

Other good reading links:

The arc of collaboration: why Slack is an else statement, there is no distinction between productivity and collaboration, and the opportunity to become Discord for enterprise | Kevin Kwok

Three years of misery inside Google, the happiest company in tech | Nitasha Tiku, Wired

Navy reverting destroyer ships back to physical throttles, after fleet rejects touchscreen controls | Megan Eckstein, USNI News

How a vanity plate reading “NULL” backfired big time | Jack Morse, Mashable

Have a great week,

Alex

The players are the artists; the game is the venue

Snippets 2, Episode 17

As a general rule, I try to read everything that Matthew Ball writes about media at REDEF. His work is high-quality, perceptive, and I always learn something. So I was surprised, but also intrigued, when I found myself objecting to his most recent post on gaming:

The Mirage of Cloud Gaming: cloud gaming as the new “thing” in the media industry | Matthew Ball, REDEF

The essence of the post is as follows:

-The video game industry, which is big, profitable, and a perennial bellwether for what’s going on in tech generally (all true things!) is gearing up for a monumental shift towards cloud-based gaming platforms like Google Stadia. In the future, we’ll stream games just like stream Netflix. Our PCs and consoles will really just be I/O terminals. 

-People in the gaming industry are excited about this shift because it’ll grow the gaming industry along the two dimensions that count: number of subscribers, and annual revenue per user (ARPU). Ball disagrees: he doesn’t foresee this happening, mostly because existing game systems already work really well, and streaming doesn’t reduce that much friction relative to status quo. It’s unclear who these new users will be, or who will spend more on games because of this.

-That being said, Ball still sees a path by which streaming games can grow the market: by changing what kind of gameplay is possible. Massively participatory multiplayer games, better eSports, better audience experiences, and other such things can be improved in a cloud gaming paradigm where we get to rethink game design from scratch. So if cloud gaming does create any growth, expect it to come from these kind of creative initiatives. 

Here’s the thing. I don’t disagree with any of Ball’s takeaways. I think it’s all well-thought out and reasonable, especially the third point which comes close to capturing what’ll really happen. My issue with the post is that it misses the biggest, most important trend that’s happening in gaming right now, right in front of our faces.

In my opinion, this trend is so important that in ten to fifteen years the business model for most of gaming will be radically different than it is today; in a shift of comparable magnitude to when we moved from purchasing games to subscribing to them. That shift is:

The next great business model of gaming is one where we subscribe to people, not to games. Games will still make lots of money, but in the way that concert venues make money. The future unit economics of video games won’t be Subs x ARPU; it’ll be GTV x Take Rate.


In order to get there, let's first connect some dots between three important trends:

First: the rising popularity of e-sports, streaming, and the general phenomenon of people watching other people play video games. Just like music or sports, watching talented people play and perform can be just as fun as playing yourself. It’s entertaining in a different way, but it’s much more accessible: you don’t need any skills, equipment, or even full attention; all you need is the ability to watch.

There’s a whole spectrum of watching other people game. On one side you have hardcore e-sports, where serious gamers with ridiculous skillsets square off against one another in NBA-sized arenas, and the gameplay itself is centrally situated. On the other side, which I find way more interesting, you have streamers who are more like talk show hosts. The main activity is really the hosts and their guests bantering, having a good time, and generally being fun to watch; the games are sometimes central but sometimes in the background; they're a pretext for everybody being there, but not always the main event. Twitch has really brought this towards the mainstream over the past couple years. 

Second: the star power of streamers like Ninja, who own their own audiences and have real leverage over the platforms that host them. Microsoft turned heads earlier this week by luring Tyler “Ninja” Blevins, one of gaming’s biggest stars, away from Amazon’s streaming platform Twitch and onto their own, Mixer. If you are over age 30 and have no idea what this means: this is a bit like when Howard Stern moved to Sirius XM satellite radio and brought his huge, loyal audience with him. 

As streaming comes into its own as a new form of entertainment, a whole new generation of talent on Youtube and Twitch have devoted fans who care more about the streamer (who is the star artist) than about the particular game they’re playing. Crucially, you don’t have to be a mega-star in order to make money off of streaming. The format is turning out to be perfect for the “1000 true fans” lifestyle business model, where fun hosts with modest but dedicated fan bases can earn a real living doing this stuff, powered by platforms like Twitch, Patreon and Discord. I am absolutely convinced this trend will take off even more in the next couple years.

Third: the “Fortnite isn’t a game, it’s a place” phenomenon. As originally articulated by Anoop Ranganath and Owen Williams, a lot of new games - and especially Fortnite, the biggest one of all - are embracing their product role as a place you go to have fun with your friends, rather than a challenging game you try to beat. It’s spelled out in Fortnite’s business model: the game is free to play, and users pay money in-game for upgrades of all kinds for their characters, like skins for their equipment and fun dance moves. Crucially, none of these upgrades influence actual gameplay. Players aren't spending money to gain a competitive advantage of any kind; they’re spending money in order to look cool and have fun. It seems silly, but Fortnite sold a ridiculous $2.4 billion (!) worth of this stuff last year. Money talks. 

Fortnite has its stars too, but they’re aren’t necessary: it can be just as fun with a group of friends. The game is primarily about people, not just gameplay; their business model admits as much. The game, as we’ve seen before, is a venue where you go have a good time, perform and goof around with your friends; it happens to be successful because it’s a really fun venue. 

Something interesting is happening at the intersection of all of this. The gaming industry has a compelling new product format that people love: performers. The customer is someone who cares about specific people, and will spend time and money in order to watch and experience and play with those people; the game is there, and it’s important, but the people are more important. 

Meanwhile, the dominant business model paradigm for video games over the last decade and a half does not work well for this new product format. We evaluate games in terms of how many subscribers the game can hold onto, and how much ARPU the game is able to sustainably extract from those users, either through subscription fees or in-game purchases. But all of the interesting growth in gaming is in a format where the primary “subscription dynamic”, if you will, is between person to person (friend-to-friend, or fan-to-star), rather than from person-to-game. 

I mean, think of it this way. When a star Twitch streamer gets a million people a month to watch them play Mario Kart, the game doesn’t really win from that in the way it should. The best a game can hope for out of this streaming session is good exposure that’ll translate into more gameplay down the road. I mean, they’ll get it, but that seems like a non-ideal way to think about your business. As it currently stands, the games are getting supremely outmaneuvered by platforms like Twitch, who thoroughly understand the performer-centric dynamic of how gaming works now and were built this way from day one.

Gaming’s next great business model has to embrace the trend of people subscribing to other people, and make money in a way that comes naturally and doesn’t fight the fact that star performers are the ones with the power. The simplest way I can articulate this is that the great games of the future will look something like concert venues. They’ll be the place where you go hang out with your friends, see you favourite performer, and have a good time. And then while you’re spending time there, the game will make money off of you in all sorts of addictive and socially compulsive ways, much like concert venues make their money by selling alcohol. 

The next natural business model of gaming is emerging today on Twitch. Consider streamers like The Go Off Kings, who I primarily know from their hosts’ Twitter accounts but have followed curiously into the streaming world a bit. You immediately notice how the game (with the Twitch stream layered on top) is like a venue where everybody goes to see Jesse, Rob, Stefan, and their guests perform, and how naturally and fluidly it monetizes. For example, in addition to fans subscribing to support the hosts, there's a soundboard where viewers can pay $5 a pop in order to insert sound effects at inopportune moments - which is a) hysterically funny when done right, b) a way of monetizing viewers that doesn’t feel phoney or forced at all, and c) a totally natural thing to do when you’re hanging out somewhere with your friends - show off, have fun, and spend a little money on entertainment. Not all of gaming will look exactly like this, of course, but it’s a peek at the future for sure.

As it stands today, most of this is happening on Twitch, rather than in the game itself. (Fortnite, as always, is ahead of the curve as an exception and is building out many of these features in-house.) It’s not hard to imagine how much richer and more interesting things could be if the game designers incorporated this “venue capacity” directly into the fabric of the game itself. As fun as Twitch is currently, it’s limited as a format to a few hosts broadcasting to a large number of limited-ability viewers. Things will really take off when game designers start really building and monetizing their games as platforms to host, facilitate, and monetize interpersonal behaviour at the everyone-to-everyone scale. Fortnite has figured this out, even though they’ve only scratched the surface of what is possible.

The biggest question, then, is how will games differentiate themselves and become hits in this new business model? There are a few possible ways. First is an obvious one: be the most fun venue. A game that’s super fun to play will do better than one that isn’t. Another clear way, as this week’s news makes obvious: offer star performers an attractive format for them to make money off their fans, and lots of features to help them do so. Concert venues have figured this out a long time ago. They provide star artists with everything they need to monetize their fanbase (like selling them concert tickets and merch), and in exchange, take a reasonable cut. They also sell the crowd stuff directly, for a big fat 100% take rate. I have no trouble imagining that smart game designers will be able to create these features in a way that’s just as good as Twitch, if not better (since it’s integrated directly into the game rather than layered above).

I can even imagine a scenario where game platforms might offer other kinds of less glamorous but necessary services for artists to succeed at scale.

Think “security” for super-popular streamers, where moderating and policing the stream is handled by the venue rather than by the artist. I’m just spitballing here but I can think of all sorts of useful services that a game might be able to provide, at solid service margin, to mega-popular streamers who need to manage their newfound popularity. 

By now, finally, we can circle back and see how the shift to cloud gaming is a necessary step for the gaming world to pivot towards this new business model. The value of streaming platforms like Stadia and gaming engine building blocks like Amazon Lumberyard isn’t just making game development easier, it’s also standardizing them so that artists can easily and effectively take advantage of what’s there. (Think concert venues all using the same standard XLR microphone cables, so that a touring artist can quickly and confidently jack in their own equipment and be up and running in minutes.) 

Something magical will happen when streaming artists are able to insert and carry over their own signature effects, equipment, and maybe even game mechanics into whatever game they’re streaming that day, and audiences recognize the continuity from game-to-game and appreciate it. Imagine if, back when Ninja had Drake on as a guest, Drake did something silly like carve “Property of the 6ix” onto Ninja’s shield, and then the shield retained that marking in subsequent days, and in other games. Or in more competitive gameplay, that same shield keeping a running competitive tally of who’s won how many matches, or who has bragging rights for some specific accomplishment - across streaming sessions and especially across games. Even with ordinary gaming among friends, once you get hooked on "being able to take your stuff with you", there is absolutely no going back to the old “static” format. No way.

One of the most important ways that streamers maintain a loyal audience that tunes in every night is with inside jokes and references that you had to be there for last week to understand; once this mechanic gets inserted both within and especially across games, I don’t see how any games without this capability could seriously compete going forward. You can’t really do this without cloud gaming. If everybody’s desktop client has to sync and reload constantly just to maintain state, everything’ll break. Cloud gaming will let this happen, and the new people-oriented business model will drive it to happen faster.

Ultimately, the future business of gaming isn’t based on maximizing Subscriptions times ARPU. It’ll be maximizing Gross Transaction Value times Take Rate. Games of the future will still lean on their own design and creative gameplay to command a high take rate, but they’ll need the cloud to bring down friction as much as possible, in order to spur as much GTV as possible. As with mobile gaming, most high-end games will be free to play soon enough; any lever you can pull to increase traffic and GTV will get pulled.

Cloud gaming will, indeed, grow the gaming market - and as Ball writes, it’ll grow the gaming market not through more subscriptions or higher ARPU, but by changing the mechanics of how games themselves work. The key to understanding how, though, is by seeing what’s in front of us in plain sight. The future business model of gaming is one where the subscription relationship that matters is between artists and their fans; friends and their gaming partners; people and other people. The game is the venue. And I’ll bet the venues that get it right will make a whole lot of money. 

Permalink to this post is here:

The players are the artists; the game is the venue | alexdanco.com


A few good reading links:

Mud Maker: the man behind MLB’s essential secret sauce for making baseballs | Emma Baccellieri, Sports Illustrated

The billionaires behind World Wide Technology, the secret tech Mecca in America’s heartland | Lauren Debter, Forbes

An attempted heist at Coinbase was scary good, even though it failed | Mike Orcutt, MIT Technology Review

And three of my favourite Twitter threads from this week:

On the brilliant differences between the French and Quebecois dubbed versions of the Simpsons | @matttomic

Notes on Mark Leonard’s investor letters from Constellation Software | @TravisWiedower

Making bread with 4,500 year old Egyptian yeast | @SeamusBlackley

Have a great week,

Alex

Catch Up Episode: Book writing, links and more.

Snippets 2, Episode 16.

Hello everybody! This week is a bit of an odds-and-ends catchup week: an update on how my book writing project is going, a few notes looking back on previous newsletter issues and what has happened since then, and a whole bunch of reading links that I enjoyed over the past month. Look for regular issues to finally return next week. Thank you for your continued readership during our parenthood hiatus! 


As you know, I’ve started the process of writing the book I’ve been thinking about for the last year: Scarcity in the Software Century. I’ve been writing first drafts of chapters and releasing them week by week; if you want to receive these first drafts, as well as help me think through and revise the book as it gets written in real time, you can sign up here:

Scarcity in the Software Century

One well known truth about writing (which Casey Newton was happy to affirm in our interview the other week) is that the reason why you write a first draft is so that you can look at it, throw it out, and then write the real thing you always intended to write but didn’t know it. It’s been really fun going through this process with Scarcity in the Software Century, as the last few months (especially July, being fully at home in a state of new parent sleep deprivation) have been a really good time for me to reflect, revise, and ultimately hone down what this book is going to be. The challenge is how to take a complicated subject full of abstract nuance and boil it down into a book full of comprehensible themes and talking points that can find paperback appeal. 

The added complication, which I’ve been enjoying but presents its own challenge, is the fact that I’m making these first drafts publicly available (well, semi-public; you have to be a subscriber. But still.) I think it’s ultimately going to improve the final product, but it’s been interesting writing chapters week after week that I know are not going to necessarily make it into the book by any means, but are a necessary part of constructing the scaffolding for then writing the real book. If this is interesting to you, I’d love it if you subscribed - both for the support and also for the extra eyeballs. People’s comments so far have been really helpful!

All in all, the hardest part has been coming up with a one sentence explanation for when people ask, “what is your book about?” After trying out various answers, the one I’ve liked the best is, to put it simply, “it’s a book about why software makes things better, but also makes things worse.” At first this was really a throwaway placeholder answer, but I’ve come to like it. Especially when phrased as two questions, which if you think about it, really are the two questions we need to grapple with right now: Why does software make things better? And why does software make things worse? These are simple questions but their answers are really complicated and really important! And they’re what my book is trying to answer. 

You can find an updated summary and week-by-week outline, which tells a pretty good picture of what I’m writing this book about, here:

Scarcity in the Software Century | alexdanco.com 


Looking back on some previous issues: 

A few weeks ago, one Snippets reader pointed out astutely that there is an alternate explanation for a lot of the Tether story that fits with many of the patterns we’ve talked about: people trying to evade capital controls. Well, right on cue, a story came out this past week on that very topic: 

Millions in crypto is crossing the Russia-China border daily. There, Tether is king | Anna Baydakova, Coindesk

First of all, keep in mind the source. That’s all I’m going to say about that for the time being. That being said, this is a neat story and it does make plausible sense for where all of this Tether volume is coming from - with a convenient explanation timing-wise that all of this money transfer used to be done in BTC but then moved over to USDT right after the crash in 2018. I’m willing to be convinced that this a real potential use case for Tether (albeit an illegal one), and therefore a potentially legitimate source of trading volume. 

The thing is… it’s just a little too convenient an explanation. None of this is actual reporting; it’s “A crypto entrepreneur told us this was happening and now we are restating it as fact.” The big Mic Drop moment of that piece was the line, “Nobody here cares if Tethers are backed or not”, as if that’s this shocking but magically coherent explanation for why all of a sudden, one day, a big network of number of people all agreed to switch from Bitcoin to Tether, (which, conveniently, is why Real USD / BTC trading is way, way down) that happens to resolve a whole bunch of inconsistencies for which the New York State Attorney General will be looking for explanations. Anyway you can probably expect another post on this at some point. 

Also, there’s some really interesting discussion a few days ago on Hacker News about my post Cooking as a Service from a little while back.  Enjoying all the hypotheticals; hopefully you will too.


And finally, some of my favourite reading links from the past few weeks:

Commenting the Tour de France is an ironman sport | Louis Bien, SB Nation

Why Kodak used a different calendar from the rest of the world, got top secret nuclear clearance, and more (Thread) | @Foone

Thoughts on Facebook’s Libra Coin | Preston Byrne

Interoperability: fix the internet, not the tech companies | Cory Doctorow

The false narrative of the Fall of Rome mapped onto America | Sarah E Bond, Hyperallergic

Elvis Costello’s 500 most essential albums in music history | Far Out Magazine

The repressive, authoritarian soul of Thomas the Tank Engine & Friends | Jia Tolentino, The New Yorker (who, by the way, has a book coming out this week called Trick Mirror: Reflections on Self-Delusion that I’m so very much looking forward to reading. I think it’s safe to say it’s my most anticipated pre-ordered book of the year.) 

The Battle of Grace Church: a riot among the one percent over Brooklyn’s oldest nursery school | Jessica Pressler

Tech journalism’s ‘on background’ scourge | Brian Merchant, Columbia Journalism Review

Goals and rewards redraw the brain’s map of the world, representing physical space in a way that reflects personal experience | Jordana Cepelewicz, Quanta

The sinkhole that saved the internet: keeping the “kill switch” alive is the only thing preventing another WannaCry outbreak | Zack Whittaker, TechCrunch

Have a great week, 

Alex

An Interview with Casey Newton from The Verge

Snippets 2, Episode 15

Welcome back to the Summer Interim newsletter issues! If you haven’t read them yet, be sure to check out previous interviews with Zachary Sun from Tierra Biosciences, where we talk about synthetic biology and the future off biotech startups, and Jonathan Hsu from Tribe Capital, who shared wisdom from Tribe Capital on how they quantify product-market fit in promising early-stage businesses. 

This week, I’m delighted to have Casey Newton as a guest on the newsletter. Casey is one of my favourite people to follow on Twitter, read from, and learn from - both in his position as a journalist and editor at The Verge and also just as a generally astute observer of Silicon Valley society. 

Casey has been writing at The Verge for the past six years, and in that time he has established himself as one of the most-read people covering Silicon Valley, particularly among people inside trying to make sense of it all. This past year, his work led him to one of the thorniest issues at the fault line between tech, policy and human nature: the question of how, if at all, Facebook ought to be moderating the content that gets shared on their platform. And if they ought to be doing so, as they are currently, who are the people carrying out this work, and what kind of human cost is getting shunted out of sight, away from public consciousness?

Casey’s two pieces to date on the human toll of content moderation have been stunners, and if you haven’t read them yet I urge you to do so:

The Trauma Floor: the secret lives of Facebook moderators in America | Casey Newton, The Verge, February 25 2019

Bodies in Seats: At Facebook’s worst-performing Content Moderation site in North America, one contractor has died, and others say they fear for their lives | Casey Newton, The Verge, June 19 2019

Another great way to read Casey’s writing is to subscribe to his newsletter The Interface, which comes out every Monday through Thursday at 5 pm Pacific: 

The Interface: a daily newsletter about Facebook and democracy | Casey Newton, The Verge

Thank you so much to Casey for coming on, and I hope you enjoy our conversation as much as I did.


You cover a lot of interesting stories about tech and social media, and you’ve recently emerged as one of the most insightful and must-read people covering Facebook. Facebook is such an enormous, multifaceted phenomenon - it’s one thing for us, quite another for our parents’ generation, and a whole different company entirely for people in other parts of the world for whom it is practically the entire internet. Who do you think of as your target audience, and who are they among Facebook's sphere of influence? How has that influenced the work you’ve done, which has been phenomenal? 

Well thank you! Like most reporters, at a high level I want to reach as many people as possible. That means writing for a handful of big, loosely connected audiences: readers of The Verge, tech workers, policy makers, other journalists, and whoever platform recommendation algorithms serves my links to. When I’m publishing a big feature, I’m hoping that it will land in front of all those people and then some.

At the same time, I’ve become increasingly focused on building a direct distribution channel to readers who share my interests. In the fall of 2017 I started a newsletter, The Interface, which covers the intersection of social networks and democracy. It’s aimed at current and former employees of the companies I cover the closest: Facebook, Google, Twitter, and Snap. One, employees are often in the best position to address the problems I’m exploring in the newsletter — and to tell me things I don’t already know. And two, they’re an influential group! The fact that I have their attention helps attract the eyeballs of the other people I really want to reach: other tech workers, policy makers, journalists, and anyone else interested in the subject matter.

Writing The Interface with platform employees in mind has shaped every aspect of the product. It has to be useful to some of the smartest people in the world, which makes me take the role of curator really seriously. I read many more articles than I ever link to, and now regularly turn down pitches from talented reporters whose work falls outside my coverage area or doesn’t seem like it would interest the average social network product manager. The newsletter also has to be good company — no one wants to be screamed at in their inbox every day, even when their company is screwing up. And so while I write a lot of company criticism, I try to do it with a light touch.

I often refer back to a notion that there are two kinds of interesting stories: “We’ve seen this before” and “We haven’t seen this before”. Which of these do you think the Facebook Story™ circa 2019 falls into, and has that changed since you’ve been covering them?

For the most part, in 2019 Facebook strikes me as a “we haven’t seen this before” story. This wasn’t always true; in 2007 I thought it was basically a MySpace also-ran.

Today, Facebook is a company where a large handful of former top executives, along with co-founder Chris Hughes, have come forward to express grave reservations about the company’s effects on the world. That’s a brand-new phenomenon for Big Tech.

Think about it: Facebook now has more than double the number of users than Catholicism has adherents; the network enables members to communicate with very little friction at a global scale; and it’s governed by algorithms that even the people who built them do not completely understand. (Or rather, they can’t fully explain the outcomes of the algorithm’s behavior.) Moreover, we still don’t really comprehend the sum total of Facebook’s externalities. To what extent has it enabled the surge of right-wing populism around the world? How should we consider its role in the spread of hate speech and the incitement of violence in countries like Myanmar and Sri Lanka? Would Trump have won in 2016 if Facebook didn’t exist? 

We’ll likely be debating those questions for a long time to come. But we also get new clues every week, and connecting those dots has become one of my favorite pastimes. 

People often say that “people who can tell stories rule the world”. It seems to me that we’re at one of those historical inflection points where the ability to speak convincingly about what is going on and how we ought to feel about it are shifting towards an entirely new kind of competency and expertise on the part of the storyteller. The world (including the tech world we live in) is getting super complex!  So on the one hand, this compounding complexity makes it harder for journalists, PR people, salespeople, storytellers of all kinds, to actually have a complete understanding of what they’re talking about. But on the other hand, that very same complexity gives their stories more power: people need a narrative; they need explanations that make sense to them. How do you see this playing out in terms of the relative standing and roles of different kinds of storytellers in our industry, like journalists versus PR people and founders versus gatekeepers or whomever? 

It’s definitely a historical inflection point. The internet made publishing trivial, which is rewriting a lot of the relationships you describe. That has been an unqualified boon to me personally — The Verge couldn’t exist without it, obviously, and newsletters wouldn’t seem as interesting in a world where platforms had created sustainable business opportunities for publishers. 

The inflection point has also been really good for startups and big tech companies. The rise of content marketers and influencers have given them friendly new channels to promote their work — ones that won’t ask the more difficult questions that journalists will. Most founders still want to get legitimate press eventually, but I now regularly see founders avoiding us altogether. (TikTok in particular is blazing a trail on this front — the company has said almost nothing to American reporters, while reportedly spending $1 billion to acquire users in the United States.

So: good for some individual journalists, for creators, and for companies. At the same time, I think it’s been hard on average citizens and news consumers. There is much more high-quality information available to them at their fingertips, often for free, than there ever has been before. But there’s also an incalculable amount of bullshit all around them — much of it being pushed by those  influencers and content marketers and PR people. There are now six PR people for every working journalist in the United States, by the way, and it feels like most of them are in my inbox daily. Meanwhile, the US media industry has shed more than 3,000 jobs so far this year. 

All of that sucks, but I’m a chaos-is-a-ladder person, and so I think of this issue mostly in terms of opportunity for individual journalists. A weird phenomenon in our current era is that while trust in institutions is generally declining, trust in individuals is increasing. A journalist can become of those trusted individuals — either by gaining access to a big platform perch (anchoring a CNN show, say) or by developing deep expertise on a subject of growing importance. Either way, there are new ways to win now. Ezra Klein is one of my heroes here — he blogged so much about health care in the early 2000s that when the national spotlight turned to the subject in the Obama years, he was primed to become a leading voice in the discussion. I’m basically running the same playbook, substituting social networks for health care and a newsletter for blogging.   

In a similar vein, I’d love to hear what you think about how the relationship between startups and the tech press has changed. What’s new and different, and what’s the same as it ever was?

Same as it ever was: most founders crave attention from the press, and have no idea how to get it. And so they overpay big PR agencies to blast boilerplate emails to every conceivable outlet and hope for the best. The much better approach, particularly at the early stages, is for founders to email a handful of reporters who they respect directly and build relationships that begin long before the eve of a product launch. 

What’s different: the press is much less likely to give founders the benefit of the doubt about the inherent goodness of their product. Founders should expect to get a lot more questions about privacy, data storage, and the likely secondary consequences of their work. Who’s going to lose their job if this thing is successful? That’s a question that gets asked a lot more these days.

I’d also argue that the difficulty of getting coverage has likely gone up. When the iPhone was new, we couldn’t get enough new apps. Nowadays … it feels like there are enough apps. The areas where startups are focused these days are generally less sexy to reporters. (My apologies to the insurance industry.) And enough of the world is literally on fire that journalists’ attention is harder to come by. (Also, did I mention that 3,000 of them lost their jobs this year?)

Let’s talk about San Francisco. Every other week we get some brain genius take on whether San Francisco is dying, or becoming Monaco, or that this is just another chapter of what’s been happening there for a hundred fifty years. There’s no doubt that there’s a pretty distinct angst that’s saturated the place. Not just the inequality, the housing crisis, the homelessness; but also rich people problems like the social scene being so dominated by one monoculture, and all sorts of classic New Money Problems where the new Tech Titan power is constantly being pitted against the older, established power of aging hippie millionaire homeowners. Has anybody really captured this zeitgeist well? What is it that people with power in San Francisco really want? 

Oh man, I have no idea. I’m the stereotypical gay guy who showed up here in my 20s, took one look around, and decided I would live here the rest of my life. And nine years later, the city just feels incredibly brittle — like the middle class emptied out, and now the place is just waiting for some moderately heavy blow to shatter the whole dream. 

The Twitter timeline captures this better day to day than any individual work I’ve read. You see both the outsized successes and the grim failures (homelessness increased 30 percent over the past year, according to one count). For the connective tissue, you have to turn to books — and let me be extremely annoying and recommend two that haven’t come out yet. In Mike Isaac’s “Super Pumped,” Uber is depicted as a company that uniquely could be born in San Francisco, because of its tight concentration of wealthy smartphone users and subpar transit and taxi infrastructure. And yet it’s also a place where amoral thugs could access unlimited amounts of capital while remaining all but indifferent to the many negative externalities of their work. It comes out in September, and it’s a must read.

I also just started reading Anna Wiener’s “Uncanny Valley,” a memoir of life here during the coming tech boom. I’m still in the early chapters, but the picture it paints of San Francisco is despairing and surreal — which is how it feels to me a lot of the time.

All that said: I can’t imagine living anywhere else. San Francisco has been incredibly good to me, and whatever it takes to get the city back on a more sustainable course, I’d like to be part of the solution.

Finally, I’d love to hear any writing tips you have. What was advice that you were taught, whether in school or otherwise guided by other writers, that has stuck with you? Anything you’ve figured out for yourself about what makes you most productive at getting words on a page? What are characteristics of other people’s writing that you enjoy? If someone were to start writing their own blog or newsletter for the first time, what would be your one piece of advice as far as the writing part is concerned?

This is a request for a graduate level seminar in journalism, and you’re not paying me enough for this assignment for me to comply with it. So I’ll just say two things here that may be of some help.

One, revel in the shitty first draft. Whenever I’m confronted with a blank page for too long a time, I’ll write a placeholder sentence. (In the case of this answer, I might have begun the first paragraph with “Joke about the length of Alex’s prompt.”) For reasons yet to be answered by science, it is 100 percent easier to edit a sentence than to write one in the first place. This holds true even when the “sentence” you’re “editing” is barely more than a string of keywords. So if you find yourself stuck: write out the keywords. You’ll finagle a sentence out of them much faster than if you simply wait for the perfect sentence to spring from your fingers. 

Two, my advice to new bloggers and newsletter writers is to focus on the narrowest slice of a big subject that you can get away with, and then go 30 percent deeper than you had planned to originally. The world has more than enough hot takes; what it’s starving for is wisdom. The best way to serve your audience is to break off some chunk of a subject no one else has thought to examine yet, and then spend more time with it than anyone else is willing to. To borrow a crypto analogy that I stole from Eugene Wei talking about social networks, this is your proof of work. 

You should be skeptical of any blog post that contains fewer than 1,000 words, including your own. Concision is a worthy goal, but it’s a virtue unlikely to deliver you many benefits early in your career. As a new writer you’re likely to publish relatively infrequently, so you want to make sure your punches are big and heavy when they arrive. (Eugene Wei is a master at this approach, incidentally.)

When we meet a new writer we’re looking for an originality of voice — a freshness of perspective. The blog era produced many writers who achieved this aim with stylish prose and a frequent application of exclamation marks. I suspect the newsletter era will be more likely to reward those whose perspective originates from original research and synthesis.  


Thank you once again for the time and for all of your answers Casey! Stay tuned next week for another issue of Baby Interim Snippets. 

Have a great week, 

Alex

An Interview with Zachary Sun from Tierra Biosciences

Snippets 2, Episode 14

Hi everybody! We’re continuing with our series of Interim newsletter issues during the first few weeks of having my daughter at home. In the meantime, we have a fun series of interview issues with some great guests. Last week we heard from Jonathan Hsu of Tribe Capital, who talked about quantitative diligence in venture capital investing, and how to numerically assess product-market fit in early stage companies; if you missed that issue, be sure to check it out.

This week, we have Zachary Sun from Tierra Biosciences, a phenomenally interesting company with whom I worked while I was at Social Capital and am lucky enough to get to stay in touch with. Tierra is blazing ground in a new field of biological manufacturing called Cell-Free Systems Biology, a really interesting new way to discover, test and engineer new molecules that do useful things for us in the world.

In a nutshell, biomanufacturing generally means engineering living systems, like cells, to mass-produce some sort of chemical product that’s useful. This is how we make crucial products like insulin. The good news about this strategy is that cells are already very good at making these things, so a large part of biomanufacturing is figuring out how to get these cells to do what they naturally “want to do” in controlled conditions. The hard part is that living systems are incredibly complex. It can be very hard to understand what’s going on when so much of what happens inside a cell is outside our realm of understanding.

Cell-free systems biology, where Tierra is a pioneer, is a potential solution for that problem: figuring out how to strip away most of the parts of the cell, while preserving a few essential features, in order to simultaneously increase our control and knowledge over what’s going on in our engineered system while also increasing the sphere of possibility for what we can make. The idea is to engineer a system that takes advantage of the basic functional capacity of a cell, without necessarily using the cell.

If you like, you can think of cell-free systems and other stripped down biological platforms as a little bit analogous to breadboards we can build hardware setups on, or maybe even the very first microprocessors like the Intel 4004. The earliest “computer-on-a-chip” processors were severely underpowered compared to their mainframe and minicomputer competitions, who already handled existing workloads for enterprise customers not unlike the way that drug manufacturers already use engineered cells to do jobs like synthesizing insulin today. But their simplicity was also powerful: writing software on top of generally programmable hardware changed the world of computing, even if it seemed simple at first. Could stripped down cell-free systems open a similar door for the world of biology? Maybe; we’re sure going to try.

Tierra is quite early-stage, but they’re a company that gets me particularly excited and I love thinking about the sheer amount of potential that Tierra and others in their field are capable of unlocking. Zach has graciously offered to chat with us this week about it.


Why does the world need Tierra Biosciences? What are you building, and what are you trying to achieve with it?

At Tierra, we care a ton about finding new molecules from Nature. We rely on natural products every day - think antibiotics, chemicals, herbicides, or even the enzymes in laundry detergent. We make these now using biomanufaturing. However, we're also finding it harder and harder to find new molecules, even though we know Nature has so much biological and chemical diversity out there to mine - some 1 trillion microbes exist by some estimate. Problems like antibiotic resistance are the result of our inability to find new molecules.

Nature has the instructions to make its molecules in DNA, and at Tierra we've built the world's fastest translation engine to take that instruction set and re-create those molecules. We're doing this by removing the cell out of the equation, which is called a cell-free system. This is pretty important, since many of the instructions come from microbes we don't even know, let alone know how to grow - from all that next-generation sequencing data we've collected that blueprint the 1 trillion organisms out there. We accept that biology is complex; we resign ourselves to the fact that we may not know what (else) we need to make this molecule other than the DNA. To get around that, we make every cycle through our system as fast and efficient as possible; we collect data on every run to learn from both successes and failure; and we utilize different cell-free chemistries to represent different biological complexity, to experimentally determine what works (and do learning to make the next cycle better). This is at its core hard-tech - we make the molecules, not just simulate them - so we can actually test things, not just speculate.

Tierra is part of a new wave of businesses that I think of as “21st century manufacturing companies”, where what really sets you apart among other tech companies is that you want to make real, physical product. They’re very small products, but they’re still physical products. For the uninitiated, what are some of the steps and processes that go into biomanufacturing, however you’d like to define that, and what’s different than it was 5-10 years ago?

The concept of bio-manufacturing, let's define that here as using a microbe (or components thereof) to make a product, is not necessarily new; we've been converting rice into alcohol through fermentation for 5,000 years, and converting sugar into insulin for 40 or so.

At its core, you need an input (or food source). Typically, this is sugar, but it can also be waste products (think flue gas or agricultural waste), or even light if you're using algae. The microbe (or components thereof) take in this food source and convert it to a product through a genetic instruction set that is either native (think yeast to alcohol) or programmed in by humans (think using bacteria to make insulin). It take a good amount of time to program in the genetic instructions, and then to make yields high enough to make it worthwhile to do for most products.

It's only in the past decade we've really had the ability to "turbocharge" the process per-se - to be able to sequence DNA to be more sophisticated of what to engineer, to be able to synthesize DNA as those building blocks, and to be able to implement automation and genome engineering tools (think CRISPR). We've also been humbled a bit; in the late 2000's, as a field we thought we could make anything using this bio-manufacturing process, including oil, only to realize the engineering cycles are quite long and biology is still fairly unpredictable. I'd say the past 10 years has seen a balance of more abilities with an acknowledgment that costs (in time and money) for doing bio-manufacturing can be quite high. We're seeing now many more successes by companies selectively choosing items to bio-manufacture with high margins, like perfumes and fragrances.

“Cell-free biology”, if you were to sum it up, is really all about taking the highly complex system that is the cell and stripping it down to something more manageable that still has some basic function intact. How do you think about the “job” that you want cells to do?  

By using cell-free biology, we're trying to balance out accepting the parts of a cell we may not want to, or be capable of understanding - all the complexity and regulation that goes on in the background - while still conducting engineering. The goal here is to be able to answer your hypothetical questions (eg. Does this pathway make a molecule? Does this piece in a genetic circuit work?) in the most similar context of a cell that doesn't involve actually engineering a cell, since engineering a cell is quite painful.

For our applications, cell-free systems do the job of the cell we're most interested in - translating an instruction set, encoded in DNA, into a product, either proteins or small molecules that proteins create, and providing the "supportive environment" (the things in the cytoplasm composed of stuff we may not necessary understand) to make this all happen. Every cell-free system relies on the classical central dogma, transcription and translation, to do the first part. The "supportive environment" part, and composition of the cell-free system, will range depending on what microbe it's made from and how we process the microbe into the cell-free system.

In this sense, we really just use cell-free systems as a data collection method that produces our desired product. We get the cell-free system to do the translation step through a combination of rapid testing cycles and learning from successful and failed cycles. That data can then be ported to cells, which are great at self-replicating in a way cell-free systems can't; or can remain in cell-free if the item produced is toxic or otherwise hard to engineer for cellular production.

So, when I took molecular and cell biology in college ten years ago, we were taught a way of thinking about biology that is now quite out of date. We were taught this pretty rigid viewpoint of Central Dogma of Cell Bio (DNA —> RNA —> Protein), where RNA was basically just this temporary placeholder for information and that’s it. We were taught a pretty traditional concept of the cell. So my question is: what do you think has been, or ought to be, the biggest shift in our basic conceptual understanding in how we think about and how we teach molecular & cell bio?

It’s a good question. My molecular biology class was a little bit longer (15 years now?) but sounds like we learned a lot of the same “simplistic” understanding! I’m not sure how it’s taught today; I fear that it may be more of the same, but I think people are starting to appreciate more that the cell is a lot more complex that a model can predict; and even things that are simple, such as the central dogma, are not as rigid as they seem as we figure out the multiple uses of RNA.

Perhaps we're seeing a humbling of our ability to really fully "understand" bio, and we're starting to really see how complex biology really can be. When you build things by evolution (like biology does) rather than rational design, this starts to make sense. A humbling moment for me was seeing all the excitement of sequencing the human genome (and a ton more genomes), only to find that regulation is way more complex than we thought before; that "junk DNA" is not junk DNA at all, but rather things we may not understand.

I'm hoping that appreciating this complexity a bit more is a change, though again, not having taken a molecular bio class recently, it’s hard for me to say.

I worked in a lab when I was a graduate student, but I’d be pretty lost in many modern labs today, simply because the tools we have available have accelerated so much: they’re so much more powerful, and have automated or facilitated so many of the routine tasks that used to take dozens of hours of somebody’s time. What are a key handful of technological accelerants that have really changed bench work and make what Tierra does possible?

This is an interesting point; actually, despite all of the tools out there I'm still surprised by how much of a "drudge" factor there is ongoing in labs. The tools that are developed are developing at such fast pace that even for someone at the cutting edge it's really hard to be up-to-date at all times in all fields, and since wet lab science is so interdisciplinary this challenge becomes even harder.

A good example is in cloning DNA; only in the past 8 years have we seen game-changing new techniques arise (eg. Golden Gate, Gibson Assembly), as well as the ability to print DNA (eg. Twist) and manipulate small quantities of reagents extremely precisely (eg. Labcyte Echo). These techniques, services, and instruments have really changed the way we run our whole platform front to back. While these techniques may be known to those steeped in the field in synbio labs, they also impact labs in other biology fields that will inevitably use molecular biology techniques, but they're all still relatively niche.

There's also been a push to automate cloning, by platforms such as Transcriptic and UW Biofab. However, cloning itself can be so complicated that inevitably humans have to get re-involved to get things past the finish line.

One really interesting thing happening in synbio right now is the creation of a "stack" per-se, an infrastructure layer that help people implement cutting-edge tools in a streamlined manner. I'm thinking integration between DNA Cad tools (eg. Genome Compiler, now in Twist; and API hook-ins) to delivery of DNA in Echo plates that allows seamless usage on automated platforms. Hopefully these types of things will lead to standard workflows that really save people time in the field.

There’s been a general sense that Bio could be the next major frontier for early stage investing and building, like where software or the early internet was a few decades ago. I think that’s accurate, but right now most of the value we’re building now is still quite forward-looking, speculative, and requires some leaps of imagination to get right. A lot of these new bio companies aren’t doing drug development, where it’s like, “if we successfully invent a new Alzheimer’s treatment, we’ll make a billion dollars, and if we don’t, we make zero dollars.” There are questions around product market fit; there are researchers and companies pondering, “we’ve built something interesting, but we aren’t sure what it’s good for yet.” How would you describe the challenges and opportunities facing an early-stage bio company today, and how are they similar and different to software startups, or old-school biotech companies?

This is probably the question that keeps me most up at night. Finding product market fit is one of the biggest challenges of startups in this field, especially as these new technologies have the ability to be quite disruptive to current markets. For us at least, finding initial market traction for utilizing our tech has been pretty critical to validating a "use case." Balancing that traction with a fundamentally disruptive thesis - that molecules are not found correctly, that new technologies will change the way we find new matter - will be quite important moving forward.

The other point here worth mentioning is that biology is fundamentally expensive to do, unlike software now (but probably like software and hardware in the heyday of the internet). Government support for pushing these technologies to the point of commercialization has been really critical. For us, it's been pretty critical to give us time to hone our platform while identifying product-market fit, as in a bio-space, which is inherently hard tech, you really have to do both to be successful.

The path to Product Market Fit for synthetic bio companies like Tierra is hard, but we're all here because we believe the potential impact can be enormous. Building these early platform technologies, like early computing or the early internet, hopefully pay off big time when we reach a tipping point and see an explosion of new applications built on the fruit of many years of labour. If you peer into the future, what do you think will be the biggest applications of synthetic and cell-free biology that people may not often think about, and what do you think will be Tierra's biggest impact on the world should you succeed?

Good question. I'm pretty bullish on cell-free biology, and wrote an article on what I see the field can do. When I think of Tierra in specific, I think our contribution will be two-fold. In the long term, we're aiming to help bring new molecules to market, and we've already seen cases where we've been able to accelerate the discovery process with our commercial partners. Again, we've seen what natural products can do in the past, like the antibiotics revolution, so one can imagine the impact that would have on society in the future. In the short term though, at Tierra we've really been pushing the envelope on cell-free engineering. We're already getting those in the synthetic biology field itself to think outside-the-cell per-se, and accelerate their engineering cycles. By speeding up the design-build-test cycles, this should help accelerate the R&D happening in the whole synthetic biology field.

Big thanks to Zach for the thoughtful answers, and if you’re a biology graduate who’s looking for a really awesome way to make the jump from the lab to the startup world, they’re currently hiring for a Research Associate position in the Bay Area. If you or someone you know is looking to make that career evolution, you should jump at this chance: this would’ve been a perfect job for me out of grad school and I’m sure there are some of you for whom that’s also the case. Take a look, and forward along to friends who might be interested.

We’ll see you next week for another baby-intermission Snippets interview issue.

Have a great week,

Alex

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