“Experts” won’t be first

Posted on November 14, 2017. Filed under: blockchain, startups, venture capital |

I distinctly remember the moment I became enamored with the application layer of mobile computing. The year was 2006…it was pre-iPhone, but I had just gotten a fancy job at General Catalyst Partners, and with it came my very own Blackberry. For the first time I could kind of access all of the internet from my phone, and I got a taste for what native smartphone experiences like Blackberry messenger had to offer relative to the apps on dumb phones.

I started imagining what apps might look like that could be built for a smartphone and began to develop a thesis at the firm around what I was calling “mobile information capture.” This wasn’t an easy path for me to champion at the firm. At the time, GC had built quite a brand and track record investing in the pre-smartphone mobile ecosystem with investments in companies like Jumptap and M-qube, and there were two very analytical, well respected members of the team, John Simon and Brad Hoover (who btw is now CEO of Grammerly…go Brad :), who kind of owned mobile at GC. I remember Brad in particular having talked to thousands of mobile companies…to the point where any new mobile deal that came into the firm would get “Hooved,” and take it’s place in a very intricate mapping of the entire ecosystem. The best things would surface to John, and they would lead our investments in the space.

I worked on my thesis for a while, through the launch of the first iPhone in 2007, and as I built conviction around the investment opportunity I remember presenting it at our annual partner offsite as the most interesting new market for us to focus on as a firm. My ideas were well received, but I remember distinctly being told by our mobile guys that “smartphone penetration was nowhere near where it needed to be to focus on the application layer of these platforms.” I wish I could remember the penetration at the time and the 5 year projections they espoused, but needless to say, those projections were wrong and our very expertise in the pre-app days of mobile investing was what blinded the firm to very valuable investments in the subsequent few years.

I don’t tell this story to brag about my rightness, but rather as a cautionary tale to those that insist that it is “too early to invest in the blockchain’s application layer” today. I should define application layer in this context, less as the thin smidge atop the “fat protocol” that’s been articulated by others, and more as protocols or varying “fatness” and depth in the stack that organize non-technical actors to participate in a network, marketplace, or behavior together. Some of the smartest experts in blockchain, who have been investing in and around the blockchain for 6 or 7 years…will state plainly that infrastructure is in focus and it’s too early for apps. Many followers of their expertise, will parrot such phrases, and the investor ecosystem as a whole will develop consensus around that idea, but I have to say…I hear these statements and they remind me of the “mobile guys” in 2007. It’s not because the analysis is wrong…objectively infrastructure tends to precede applications in developing markets, and there are gating challenges to consumer and business adoption of protocols being developed today…but as the mobile pundits of the early 2000s will tell you…early killer apps have a way of sneaking up on the experts.

Conservative market wisdom says “no applications are really being used today”…and therefore it is going to be a long time before any application is used widely…but that is not how I see things at all. I think it’s more like “no application is being used today (cough bitcoin), but some protocol that traverses the infrastructural & application layers in the stack, simultaneously and in a deeply integrated fashion, will be used widely, by surprise, and quite abruptly to the chagrin of patient experts.”

I could be wrong about this, I often am. I’m no expert, just a dedicated student, but to be closed to the possibility that the market matures in a more uneven way than whatever graph says “wait” seems foolish to me.

I’ve heard similar “wait” narratives, again from very very smart investors, around blockchain protocols that organize human work: “It’s too difficult to invest in protocols that interface with humans, I’m only investing in systems that coordinate machines.” Again, not a dumb analysis, especially given the multiple well respected blockchain systems that organize machine work around storage, compute, or bandwidth, but it’s just not convincing to me in a world where the entire collective consciousness in the space turns over weekly, sometimes with giant step functions on the back of a single creative design…there’s too much horsepower and experimentation and creativity pointed at the possibilities of bottom up organized human/labor systems to negate the possibility that someone is going to get it right, securely, and quicker than expected.

Architectures that usher in any of these “farther out” possibilities may not look like what we see today. Experimentation around offchain vs onchain functionality, the spectrum between centralization and decentralization, and new game theoretic and economic designs for contribution and authentication of value all present the possibility of worm holes into next year’s future showing up tomorrow.

In such a state of flux I prefer to remain quite open to radical and “too early” possibilities…and although I’m not an expert with a fancy brand or firm behind me, I’d be happy to invest in you if you are taking a swing up the stack or out of the bounds of today’s popular protocol flavors: jordan.cooper@gmail.com