A lot is made of the Like button, of the societalimpact of the dopamine-inducing blue thumbs-up. But as a generally reserved social-media poster, and only sporadic “liker”, I am relatively indifferent.
Far more sinister, in my mind, is the infinite scroll, and its auto-play video cousin – on Facebook, Twitter, YouTube and friends.
Not because of the clear connection with the culprits’ business models – where eyeballs and time spent drive ad impressions, which drive revenue. That much is understandable – these are publicly listed companies.
I think the problem I have is that it is playing on a particularly human vulnerability, evolving as we did in a world of scarcity, rather than abundance. Where evolutionary pressures favoured repetitive behaviours, as in general things would run out. Make hay while the sun shines, because at some point autumn will come.
But on the endless tracts of social media the sun is always shining, without respite. And instead of introducing patches of shade, where travellers might rest, or step away from their smartphones, our social media overlords have built a desert, where users stagger towards an imagined oasis that never comes.
Meanwhile the new demi-gods of TikTok have learned their predecessors’ worst habits, as video after snack-size video plays off into the distance.
We are in the dog days of the digital summer. The onus is on us as users to find shelter, or to escape the desert altogether.
I’m going to break the fourth wall here for a second, or whatever the equivalent is for writing. I have a working list of “things I might write about”, which I keep in Notion (of course). One thing that has been on that list since March 11th is the topic of Crypto Spring – the idea that we might be recovering from the bear market of 2018 and early 2019, into the next cycle of crypto ebullience. Indeed Fred Wilson decided to call the same thing in May. I can’t remember why I didn’t get round to writing about it in March, but I do remember the reason I was thinking about it, as the ecosystem seemed to worry less about the price of things, and focus more on building things. For me, the excitement around Austin Griffith’s burner wallet was emblematic of the new wave of optimism.
In the last couple of months the market seems to have noticed as well, and this week the price of Bitcoin once again surpassed $10,000 (update: $12,000), so perhaps I am too late already, and Crypto Spring has sprung.
The early days of this new run have some of the hallmarks of the last – news outlets reporting on it, people saying the institutions are coming, eToro adverts in my Gmail. And some things are different – certainly Facebook’s Libra announcement has thrown an interesting spanner into the works. I just hope that this time round a little more has been built when the dust settles. I hope there are more actual users or even customers on these new platforms. And I hope that excitement for building with the technology that I saw in March continues.
Needless to say, yes, it would have been smart to put everything I owned into Bitcoin on March 11th, next question please.
The quoted tweet is from 2015. What was a hilarious punchline four years ago looks like it may become our reality by the end of the year (give or take a ball pool). Certainly disquieting, in terms of where we are. But it is also kind of amazing – anything is possible, in the words of Kevin Garnett.
The second is this article by Tanner Green (hat tip to Matt Clifford), which sketches out a potential table of contents for an imagined history of our time, from 2004 until 2020, which Tanner anticipates will be a type of turning point. It is the coming of age story of my generation. Speculative for sure, and US-centric – I think the primary challenge is knowing which proposed chapters will stand the test of time, and which will simply be quirks of history. And the latter sections have quite a few question marks (“The Trials of Donald Trump, 2018-202? (? pages)”). But always sobering to try and see today through tomorrow’s eyes.
Market sentiment is tricky, particularly when it turns. You could argue that Tech (capital T, whatever that means) had a good run, but it has certainly stumbled in recent years, as the halo of promise made way for a shadow of uncertainty.
Is there a moment we can point to where the sentiment around the tech industry shifted to negative?
And yet I write mid-way through a banner year for tech IPOs, as stalwarts continue their strong 2019 and new direct-listing Slack closes its second day of trading to general acclaim.
One could argue that there are larger macro factors at play. But regardless, the financial markets at least are out of step with the popular narrative on Tech, and it will be interesting to see whether that divergence continues. There is a line of thinking that the industry still hasn’t taken ownership of the problems it faces; I wonder if a reckoning in the stock market would be required for Tech executives to take notice.
* I don’t know whether this phrase exists so please indulge me.
It is London Tech Week this week apparently. It was also CogX from Monday to Wednesday, which I think is unaffiliated. It all feels a little like a technology Valentine’s day, fabricated and promoted by conference organisers to extract money from startups and interested people.
I found myself in possession of some free CogX tickets, so went along to a couple of talks on Tuesday and had a bit of a wander about.
Being there with no specific agenda, I wondered what it was that my fellow attendees were hoping to get out of the conference.
As an attendee, a conference is ultimately about encounters, whether those encounters are with ideas, individuals or organisations. These encounters can be formal (i.e. part of the agenda of the conference), or they can be informal (enabled by the structure of the conference, but not part of the agenda). They can be anticipated and planned by attendees in advance (“I really want to go to that talk”, “I want to meet that person”), or they can be serendipitous (“I wonder what’s happening in that tent”, “what brings you to the conference?”). Then the outcome of those encounters can be learning, selling (yourself or your business), or just enjoyment (god forbid).
Reflecting on it, I was at CogX to encounter some new ideas via the formal talks, not really feeling like networking that day (shudders). There was one talk I wanted to attend as I knew all the speakers, but the others I picked as the mood took me, so I suppose I erred on the side of serendipity. And my intended outcome was somewhere between learning and enjoyment. By contrast, I had breakfast with someone who was there largely to meet individuals informally and serendipitously, to recruit people for their business (so a “selling” outcome).
Looking around the event and peering at some name badges, the attendees were a very diverse bunch, and no doubt had a wide range of goals (and therefore requirements for the conference). And even two attendees with the same generic goal might have very different requirements. For example if two people are there to learn about artificial intelligence, and one is a secondary school student while the other is a machine learning engineer, the same keynote presentation will struggle to serve them both.
I am therefore interested in how conference organisers think about maximising the utility for their attendees, as they run the risk of trying to please everyone, and ending up pleasing no one. And similarly how do conferences balance ambitions to grow attendance (and revenue) against the likely diminishing and potentially diluting returns as they expand beyond their initial audience.
When you buy food from the supermarket, you expect to be able to see what is in it. You don’t necessarily want to to check every item you buy for its percentage of sugar or unsaturated fat (or whatever), but you want to have the option. What if you are allergic to something? What if you are watching your weight? You might want to know what you are putting into your body before you eat it.
We don’t have the same expectation when we are choosing digital products. Sure, there are terms and conditions and privacy policies, but nobody reads them, and in any case do they even contain the salient information? We don’t know if we are exposing ourselves to ad-based monetization, or an infinite scroll attention-vortex, or addictive gamification. We don’t know if our activity is being mined for future recommendations, or how our data is being stored or shared, actually. But we wilfully let these applications into our minds and our lives, even though we don’t know what’s in them.
I’m not saying regulation is required. But I do think technologists should think carefully about what they are putting into their products, outside one-eyed KPIs. And I think as users we should be thoughtful about what we eat. So to speak.
A foundational premise of this blog post is that jokes are better when you explain them in excruciating detail, so can we all get on board with that please.
If you are denizen of tech Twitter, you have probably heard of Superhuman. For those of you fortunate not to spend time on the Hell website: it is an email client, self-proclaimed “the fastest email experience ever made”. It has achieved its Twitter fame through a combination of invite-only exclusivity, high profile advocates and admirers (mostly proclaiming via Twitter), some noteworthy quirks (one-on-one onboarding, a $30 per month pricetag, beautiful pictures when you hit inbox zero), as well as what is apparently a genuinely transformative email experience.
I say apparently because I wouldn’t know – I am an Android user for my sins, so even though I managed to wangle a coveted invite (I know right), I was rebuffed at the final hurdle: there isn’t an Android app yet. My email signature will not indicate that I am Superhuman, at least not for a while.
In a fit of pique, I wondered whether maybe, just maybe, $30 was a bit much for just, like, sending email? Did I even want to see nice pictures at inbox zero? Why would I want an onboarding where someone else critiqued my emails? Was it actually all just about getting a golden ticket, and telling the world about it?
And thus, NormalHuman was born: the email experience you already have, just with a sprinkling of exclusivity.
I know what you are thinking: this is kind of weird, why are you explaining this quite shoddy attempt at satire? Cool your jets, I’m getting there. Because this post is actually an ode to the internet.
Everyone knows that the internet has revolutionised and democratised access to information blah blah blah. All manner of entities, from individual hackers to not-for-profits to big corporates have brought us products and services that are almost like magic, achieving a mix of fortune and fame along the way.
What I think is less well understood is how easy it is in 2019 for a person with an idea to bring that to the world at speed, with internet scale (even if that idea is a half-baked internet parody), thanks to a mix of tools, community and a little bit of luck. Let me break this thing down for you.
The tools
I’m not suggesting that Normalhuman.net is a groundbreaking thing. It is actually quite simple: it is a single page website, with a sign up form, some nice pictures and transitions, a $5 card payment option, and some analytics tracking in the background. I guess what is significant is that ten years ago, that would have been quite an undertaking, requiring a chunk of time and at least some custom development. Today, it took a couple of hours of messing around with some user-friendly point and click tools.
The hub of the whole thing was built on Carrd. For those who don’t know it, Carrd is the world’s simplest one-page website builder, by one-man powerhouse AJ. I have been using it for a couple of years, and I have huge respect for how the platform has developed in that time – it has added some great new functionality, but it has done that while remaining incredibly simple, staying true to its core use-case (easy to make single-page sites). If you have never made a website before, and want to put something of your own on the internet, I can’t recommend a better place to start – it was my first port of call, and I was off the mark.
I wrote some slightly irreverent copy. But a few word jokes does not a good satirical website make. I needed to beef that sucker up.
Superhuman has an access request form, so Normalhuman had to have one too. The act of a couple of minutes in Carrd, linking up a dusty old Mailchimp account I once set up. The internet doesn’t need another wax lyrical about bootstrapped Mailchimp, so I will simply say: it was easy to do.
Given the wonderful aesthetics of Superhuman, I had to make sure my stock photo game was up to scratch. I hadn’t come across Unsplash before, but their photos were beautiful so I snagged a few for Normalhuman, plus their simple embedding API was just what I needed. I got some nice transitions going, and the whole thing started to look kind of professional. We were cooking on gas.
I wasn’t sure what to do about the endorsements from high profile people, a compulsory component of every wannabe unicorn website – I didn’t feel like I could put real people’s faces up there. Fortunately I was reminded of the slightly chilling thispersondoesnotexist.com, an endless stream of AI-generated faces. I could put a face to a quote with impunity (sorry computers).
I talked to a friend of mine, who said I should add a card payment option in there. Carrd of course has a seamless payment integration with Stripe. I thought why not? And added a $5 widget (proceeds to go to Wikimedia). It was my first time using Stripe. Having worked on a couple of payment integrations for bank wires and credit cards in a previous job, it was kind of uncanny how easy it was to go from no Stripe account, to accepting payments. Truly a wonderful user experience.
Then, in a moment of optimism, I added Google Analytics tracking. Needless to say this was also very easy to do in Carrd.
Not going to lie, I kind of gave up when I got to designing the logo. It is the number eight. Don’t ask me why.
The community
Having made a joke website, it could have gone the way of some of my previous satirical efforts – URLs passed on to like-minded friends, otherwise largely forgotten. But I thought I might as well prod it out into the world, so I did two things. Firstly, I created a Twitter account, and secondly I posted it on Product Hunt.
I’m by no means an active Product Hunt user, but I think it is an interesting community which surfaces some cool stuff (I read their daily email). I’d never “hunted” anything before, but thought it might get some attention if I was lucky – the VC Starter Kit (a masterpiece) had done pretty well on Product Hunt, so there was some precedent for joke websites. I Hunted it, pushing it out into the void.
Back to Twitter, where I have only recently started engaging and posting things on my personal account, having spent a decent chunk of time lurking. While I have some issues with the platform (not for now), it does spark some really interesting conversations, and I have really appreciated the fact that you can engage directly with people a world away. It was in the hope that I tweeted my Product Hunt page, and tagged @Superhuman.
A little bit of luck
So NormalHuman got lucky a couple of times. The Superhuman team saw my tweet, and they seemed to get it. A couple of them followed my Normalhuman account, and retweeted or liked or whatever it is one does on Twitter. The site got some traffic over a few days (~4K people!), some people gave me their email address to apply for access. I got a nice feeling that some people had seen the thing I did, and thought it was ok. Which is about all one can reasonably hope for. I was pretty happy with how it had all gone, and was trying to explain to my family what it was (“so if you follow Tech Twitter…”), when I checked Google Analytics – about 1,000 people were concurrently on the site.
Interesting.
To Twitter!
It became apparent that Benedict Evans had included the link on his weekly newsletter, which goes out to >100K people, which explained the sudden influx of traffic. As a reader of said weekly newsletter, it was kind of cool to see my joke website included. I emailed Benedict, who informed me that it was one of the most-clicked links that week. Still not sure what to do with that one.
But I am sure that it totally obliterate my previous metrics, with a halo lasting for a little while as some other people picked it up. As of writing, >17K people have visited the site, >2.5K people have applied for access, and, in the most miraculous outcome of all, 18 people paid $5 for lifetime membership, with all profits to go to the Wikimedia foundation.
Spot the moment the newsletter landed
So that was all good fun.
Some miscellaneous thoughts I may unpack a bit more later: Twitter is an incredible place to spread information (or disinformation). Newsletters with large readerships are a powerful tool. People are pretty willing to give out their email address. People are mostly up for a laugh.
To people who visited the site: I hope it made you smile (I know it’s not like ha-ha funny, we’re in wry smile territory here and that’s ok).
To people who applied for access: I am sorry that I don’t (currently?) have an email client to offer you. GDPR mandates that I let you delete that data if you want, just hit me up if that is the case @GetNormalhuman.
To the people who paid $5: you are absolute angels. I will be making a payment to Wikimedia forthwith.
To team Superhuman: kudos for being cool about it. If you will still have me, I’d love to give the service a try, even just on my old Macbook Pro.
To Benedict Evans: thanks for the boost, that was fun.
To AJ and all the people who made the tech I used: thank you for the leg up. Keep doing what you do.
I am conscious of course that this kind of wide-eyed one-eyed optimism has lead to all sorts of issues for technology companies big and small. There is much more nuanced and thoughtful reflection to be done. But I had an enjoyable micro-experience of the positive power of the internet, and I wanted to share it here.
Andy Matuschak put out a very interesting piece recently, “Why books don’t work“. While the title is slightly clickbait-y, the content is a substantive and thought-provoking argument that non-fiction books are not actually good tools for conveying knowledge. That the central premise of book-based learning – “people absorb knowledge by reading sentences” – is not generally true*. Instead, people depend on “metacognition” (thinking about what they are reading) to actually absorb and internalize what they have read, which is not something that comes easily. And even those books which appear explicitly designed to facilitate learning (e.g. textbooks) depend on context to actually act as useful learning tools, whether that context is a course, a classroom or a discussion group.
The prescribed antidote is fortunately not an accepting shrug, but instead that this is an opportunity to “make new forms… it is possible to design new mediums which embody specific ideas”. To improve on the book medium “so that its “grain” bends in line with how people think and learn”. Matuschak acknowledges that this is a tall order, but proffers Quantum Computing, an initial attempt with his collaborator Michael Nielsen.
Matt Clifford included the piece in his weekly Matt’s Thoughts In Between newsletter (subscribe!), with the salient observation that this is a bet on human design in the face of the evolved book medium (which is often a brave bet to make). But books are a technology that haven’t changed in millenia (even e-readers try to mimic paper as much as possible), while our means of information transmission have transformed and proliferated unimaginably. Now seems as good a time as any to reconsider this cornerstone of human knowledge. And while Matuschak’s piece says “it doesn’t even necessarily mean abandoning paper”, I do think if something replaces the medium, it will likely be dynamic and tech enabled.
With these thoughts fresh in my mind I was interested to come across Going Critical, by Kevin Simler, which weaves interactive simulations into a very interesting piece on diffusion through a network. The piece is interspersed by illustrative examples that deepen understanding of quite complex phenomena in a very intuitive way. I recommend you give it a read.
This particular approach worked very well, and was very memorable. But I think what struck me was how appropriate it was to the specific topic, but that it wouldn’t necessarily be generalisable. Which lead me to a general observation: I think that if something does replace books, it won’t be another monolithic medium, but a rich mixture of forms. Kevin shared a rangeof hisinspirations. I look forward to seeing others’ explorations, and may even break out of the box myself.
*In a perfect and slightly ironic illustration of this phenomenon, I found myself having to revisit the original article quite a bit to remember the details, having read it a few days ago.
On my laptop, my tabs tend to be related to what I am currently working on. I can deal with that. On my phone they tend to be a mixture of things I hope to read in the future, and some things which I have read already and thought were good, but which I didn’t know what to do with. That is a bit more bothersome, because it is accretive over time, so now I have loads.
The good news is I now have a place to find closure, right here on the internet. Thank you for witnessing my decluttering, where I Shut It Down to browser-tab-zero.
This has been in my tabs for a while; it’s an article I have re-read a couple of times. The toy / hobby / weekend metaphor for good startup ideas is pretty well-known by now, but it is always worth revisiting. I like the idea of a good startup idea being predicated on a secret, and of moving from uncertainty to value creation. I feel like the transition of technology from bits to atoms is still pretty nascent, which is exciting. Meanwhile the market-size narrative challenge for startups is evergreen. The importance of getting rejected often is hard to internalize, but I see the value (in setting ambitious goals). While the parting message for entrepreneurs (“get ready to feel sick to your stomach for the next five years”) can certainly be considered fair warning.
A long one but a good one, a chimera of several talks Munger made in the early 90s, where he highlights biases which lead to bad decision-making. Far from an academic study (as he himself acknowledges somewhat gleefully), it nonetheless (or perhaps as a result?) is very thought-provoking.
He starts with the always underappreciated power of incentives (“I think I’ve been in the top five percent of my age cohorts almost all my adult life in understanding the power of incentives, and yet I’ve always underestimated that power”), before making his way via the biases of loving and hating, through man’s dislike of inconsistency and doubt, touching on the dangers of optimism, and loss aversion (“Deprival Superreaction Tendency”), as well as ways in which “leaders … display followership akin to that of teenagers” due to Social Proof Tendency. The Twaddle tendency has an entertaining bee-based comparison, but it all comes together with the “Lollapalooza Tendency”, which considers the potential dangers when many different tendencies are brought to bear at once. An irreverent waltz, and worth a read on a long train ride or equivalent.
Something of a classic, and certainly a phrase that is now part of Silicon Valley lore. People were presumably talking about Delight prior to 2013, but I like how it is described here (“You should take extraordinary measures not just to acquire users, but also to make them happy… existing conventions are not the upper bound on user experience”). Pithy warnings too, about relying on Big launches and partnerships
It’s interesting to see companies like Superhuman push the “do things that don’t scale” approach even further in 2019 (1 to 1 onboarding for a consumer internet product). Paul hasn’t written an essay since 2017, which is a shame (though he is alive and well on Twitter).
Not an article, but a collection of intro-to-AI notebooks. It recommends using Google Colab, which I had last used when it was very much an internal-only Google tool, so cool to see it in the wild. A few topics still waiting to be covered, but a nice starting point nonetheless.
Much is made of the importance of good decision-making. In this piece Joshua Rothman breaks down the things that make that difficult, with his decision to become a parent as a case-study.
Decisions are often more gradual than they are discrete (“it’s a momentous choice, but I can’t pinpoint the making of it in space or time”), are often are limited by past choices (so-called “bounded rationality”), and can’t be understood on a single scale. There is certainly scope to improve decision-making (“scenario planning … seeking out diverse perspectives on the choice, challenging your assumptions, making an explicit effort to map the variables”), as we “ask ourselves what we value, then seek to maximize that value”. But it becomes more difficult once you realise that what we value might shift over time in a way that isn’t always predictable (“Why should today’s values determine tomorrow’s?”).
This is probably why people “are in fact more casual and cavalier in the way they handle their big decisions than in the way they handle their ordinary decisions”, in the words of Edna Ullmann-Margalit. Certainly food for thought as you think about your own decisions and those you observe others making, both before and after the fact.
A bit rogue I suppose, but I am always interested by the sponsor-suggestions for hackathon-type projects, as it tends to capture what is top-of-mind in a given industry or companies. It’s been cool to see the evolution and growth of the MakerDAO stablecoin project, so I was interested to see their areas of focus – in this case wallets, lending and zero-knowledge proofs.
A well trodden path, but some good thoughts in this one. I particularly like “Tools inside a big company” and “Revisit ideas that were too early”. “Understand how teens communicate” is sadly probably beyond me at this point (I am not sure I was that in touch when I was a teenager myself…).
A tour de force. On the evolution of the retailer algorithm, from the “bounded” physical world of Walmart to the “unbounded” digital world of Amazon, and the importance of the third party-marketplace in the new world (vs the old world’s vendor selection model). On how Amazon’s need to grow at internet scale made it necessary for them to become a “platform; that is, an aggregation of resources made available through a series of interfaces“. On the edict from Jeff Bezos, for all teams to build as if for external customers, to enable the business to transform into, and scale as a platform (“Platforms became part of the algorithm”). A dissection of Ads, designated a misstep (but one that may be “impossibly addictive”, given the revenue). And a riff on the risks of its “Wild West for sellers”. I definitely share Zack’s parting sentiment: “I remain fascinated to see what will happen next.”
I have been thinking quite a lot recently about the future of work and closing supply-demand gaps in labour markets. Nesta have a bunch of interesting articles on the topic, and this one is right on:
“although 75.3 per cent of adults in the UK are in jobs, this headline figure masks some deep inefficiencies and problems of stagnant pay, social mobility and productivity and major failures in the transition to work”
The sell is for their Open Jobs project, which aims to address issues with data, policy and pilots.
Taken from a talk given to the Female Founders Conference, it’s all good stuff. Make something people want, know if you are default alive, keep expenses low, and more. YC content is pretty pervasive these days in startup-article-land, but that’s probably because they know what they are doing.
Fascinating dissection of the negotiations between the UK and the EU in the aftermath of the EU referendum, and how the UK were outmanoeuvred time and time again. Bloody red lines, cherry-picking and Barnier.
I don’t know much about them, but I like what they are doing (“We publish fully digital Guides to high-stakes, complex subjects”). One to keep an eye on.
On Rawls and the importance of reciprocity in liberal societies: a proposal that American society has in recent decades seen “the failure to achieve—or even to strive seriously to achieve—an ideal of reciprocity”. A suggestion that this failure has contributed to the rise of Trump in a manner predicted by rather than contradicting Rawlsian liberalism, as “U.S. institutions have come closer to maximizing the position of the best-off group than to maximizing the position of the worst-off group”. Interesting, but definitely on the academic end of the spectrum.
I first came across Eugene’s Status-as-a-Service article in February, which I also recommend. This piece introduces Invisible Asymptotes, where a single factor limits growth beyond a certain point unless addressed appropriately (if it can be), starting with Amazon’s first: shipping cost (which people hate to “to literally an irrational degree”) . A whistle-stop tour through tech Royalty’s varied and different invisible asymptotes, some more practical words of advice, plus some reflections on the asymptotes in all of our lives (“In my experience, the most successful people I know are much more conscious of their own personal asymptotes at a much earlier age than others”). An interesting way to think about potential and future growth in all walks.
And that is that. My phone feels lighter already, thanks for closing down my tabs with me. Until next time.
An Income Share Agreement (ISA*) is a personal financing instrument where repayments are determined as a percentage of someone’s income for a specified period, an equity-type alternative to personal debt for individuals. It’s something of a hottopic, having been adopted by some high profile coding bootcamps, and a lot of the interested folks came together on Wednesday for the Life Capital Conference, hosted by Slow Ventures, Village Global, The Information, and Cooley.
It was a packed agenda in a packed auditorium. It is still a nascent industry, so the discussions were mostly forward looking, and were variously practical (how do we make this work right now) and expansive (what is the possible future for this thing). It highlighted some of the progress already being made, as well as some of the challenges.
Equity for individuals?
While “equity for individuals” is a catchy tagline, it doesn’t necessarily describe how ISAs are actually working at the moment.
From a practical standpoint, ISAs today predominantly provide funding for education in return for a fixed percentage of personal income (revenue) for a set period of time, where the income is above a certain annualised threshold, and where the total amount repayable is taxed. This is different to equity investment. I will leave aside the troublesome ownership implications of “equity” when applied to an individual.
Benefits of ISAs
The benefits of ISAs were well understood and articulated throughout the panel conversations. One of the core premises is incentive alignment: everyone involved wants the ISA recipients to do well. A significant benefit for the individual is risk reduction: if things don’t work out, they have to pay less back (or nothing at all). There are also opportunities for improved accessibility, affordability and outcome transparency not offered by conventional borrowing.
Happy even if it goes well
As a student attending a coding bootcamp, downside protection is a significant advantage, when compared to a conventional loan. Aanand Radia of University Ventures described an ISA as “a loan with an insurance wrapper”, which resonated, but Barry Cynamon’s “insurance where you pay the premiums afterwards” captured the behavioural challenge of ISAs, where if you have a good outcome (i.e. you earn a good salary), you have to pay more, after the fact. One of the core challenges with ISAs is this cross-subsidising across a cohort of students, where the more successful students pay more (often a lot!)
Ensuring people are happy “even if it goes well [and they have to pay a lot more]” is one of the key communication challenges facing ISA providers. In this case the successful students are paying for the downside protection they didn’t end up using, but it was pointed out by Ashu Desai of Make School that this was not an easy thing to put a value on. Multiple panelists highlighted the importance of students being well-informed and “bought in” to the collective nature of ISAs because of this dynamic, understanding that the ISAs work as a kind of income tax (Sam Lessin, who hosted the event, even noted that as taxpayers, we are already participating in an Income Share Agreement by another name).
This has lead to the natural concern that ISAs will suffer adverse selection, where students with a lower chance of success are more likely to take an ISA. Purdue University’s Mary Claire Cartwright indicated that their research showed that there was no adverse selection, having compared their ISA students and those taking regular student loans. I understand that this would be reassuring, but I find it quite surprising that this would be the case: companies that take equity financing are different (and often more risky, with more volatile outcomes) than companies taking debt financing. As an individual with predictable outcomes, a loan is probably a better option, while for someone with a bit more volatility, an ISA is a much more attractive option. If this is not being reflected by those taking ISAs at Purdue, it says something about human psychology, or a lack of appropriate information. Perhaps both.
Accessibility
ISAs are a significant enabler for accessibility, as they can be offered to people who otherwise might not be able to access finance (and might therefore be excluded if the ISA is for an educational course). This is an undeniably powerful benefit, particularly in the case of coding schools and the tech industry, which has an acknowledged problem with diversity and access.
Though a word of caution – while some credit checks used for conventional loans are exclusive (based on historic income and credit worthiness), affordability decisions on the basis of significant existing debt are still likely relevant for individuals taking on an ISA.
Incentive alignment
The incentive-aligning power of ISAs was much discussed throughout the day. It is definitely very powerful for vocational schools’ payday to be aligned to the paydays of their students. However I worry that it might drive a one-dimensional money-focused approach to student success. With a conventional loan, the lender’s concern is that the borrower has a certain threshold of income where repayment is affordable. Anything beyond that is just upside for the borrower. While for an ISA, higher and higher salaries are even more rewarding for the ISA provider. I wonder whether that might motivate schools with ISAs to focus purely on placing into positions with higher salaries, rather than thinking about other things that contribute to happiness and fulfilment in a job (particularly given research that indicates that incremental income above a certain threshold doesn’t contribute any more to happiness).
We do definitely understand the power of the outcome-based nature of ISAs. In the work we are doing at Vested we are excited by the possibility of an outcome-based loan, providing downside mitigation without requiring significantly more from the highest performers.
Headline risk and regulation
One of the prevalent concerns amongst participants was the risk of one or several bad actors taking advantage of students with usurious ISAs, and the associated headline (and existential?) risk for the industry. This likely drove the excitement over potential ISA regulation, a strange occurrence at a tech conference (as Austen noted on Twitter). Local and national legislators were represented on panels, in Adam Boman of California State and former congressman Luke Messer, who both indicated positive progress on that front. As a Brit, I am familiar with the quasi-ISA used for university financing by the government, and I definitely see the potential for state-enabled post-secondary ISA-funded education. I wonder whether legislature in the States will make moves in that direction, or remain focused on privately funded ISAs.
Sam Lessin was one voice in favour of a considered approach towards regulation, thinking carefully about any legislation that is too prescriptive based on ISAs as they currently exist, for example mandating caps or minimums or terms. “Let’s not make short-term trades that might handicap us in the long-term”.
Bundling and unbundling
The ascent of Lambda School has done much for the profile of ISAs. Austen Allred’s discussion with Will Quist highlighted the interesting way in which the Lambda School model is both an example of bundling and unbundling. Austen acknowledged that traditional universities layer in things that Lambda does not (the housing, the extra-curriculars), while Lambda School just focuses on the “I want a job” part of the university experience. The best choice for the student depends “which bundle is the student choosing”. In this sense, Lambda School is an example of unbundling education, but at the same time, Austen described their vertically integrated “underwrite, teach, place” model as key to their success – bundling up three pretty distinct competencies.
Must be the money
Given the (relatively) embryonic stage of the ISA market, it is not surprising that source of investor capital was a common topic, with schools from Holberton to Lambda talking about funding ISAs with their own equity. Tonio DeSorrento of Vemo described the outside capital evolution that almost all ISA businesses would go through, from philanthropy to novelty to impact to hedge funds to municipal money, based on the evolution of rate of return and track record. University Ventures are currently the largest provider of ISA financing in the world, but as they themselves noted, for the success of the industry that couldn’t remain the case.
Future for ISAs
A lot of participants were clear that ISAs were not a replacement for student loans, and both would likely co-exist in the future. There was a prediction that in 5-10 years, ISAs would be the same size as private loans, in dollar terms. Richard Lee of Leif predicted $500M in ISAs originated in five years time. Austen suggested that, however guaranteed their outcomes became, they would never switch to debt (“Debt is fundamentally opposed to the lambda model”), and will instead just work to drive the cap down.
At least offering an ISA was expected to become table stakes, in terms of offering affordable post-secondary education. “300 universities will offer ISAs in five years time” per Andrew Platt of Vemo. “If your vocational school doesn’t have an ISA, you are dead in five years” per Austen. We are certainly currently seeing a chain reaction in coding schools that is a move in that direction.
It will be interesting to see if that continues to other vocational skills – sadly Austen and Will’s discussion didn’t have time to fully cover Lambda’s ambitions beyond bootcamps, which are substantial. Austen did note that the model would likely look similar but slightly different in nursing, for example.
There was general agreement that growth of ISAs in the future could contribute to much improved outcome data for educational institutions, to enable applicants to make better informed decisions about their education.
The focus of the day was very much on educational financing, though the “Imagining the future” session took a more expansive view, with Dani Grant, Sam Lessin and Erik Torenberg. Were current models “too practical” – why have a cap on repayment? Why can’t individual teachers be motivated and remunerated in this way? What if individuals in a cohort or community (Stanford grads, say) cross-invested in one another to normalise our outcomes? This is apparently something which apparently already happens in high-stakes poker games. Dani Grant of USV wondered wether we would we be kinder to each other, if we were cross-invested. But there was general acknowledgement that we maybe were not ready for the “out there” version quite yet.
So what, for the future of ISAs? Tonio DeSorrento was optimistic, anticipating “a Cambrian explosion of ISA businesses”, though he wryly noted that the Cambrian explosion took 25M years. Those in the room seemed hopeful it might all happen a bit sooner than that.
* British readers will be confused by this acronym, which in the UK refers to tax-free Individual Savings Accounts
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