20VC Slow Ventures' Sam Lessin on How VC Forces Certain Companies To Exist and Makes It Difficult To Finance Others, Why Cities Won't Let Scooter Companies Be Profitable and Why Dapps Are A Concern and Where Emphasis Should Be Placed In Crypto

In this episode of "20 Minutes VC," host Harry Stebbings reconnects with Sam Lessin, founding partner at Slow Ventures and co-founder of Fin Analytics. Lessin, a former VP of Product Management at Facebook, discusses the evolution of venture capital from angel investing to institutional, emphasizing the significant shift in investment mindset and economic implications. He also explores the future of work, highlighting the symbiotic relationship between AI and humans and the necessity for improved productivity and measurement in knowledge work. The conversation touches on the challenges of pricing and investing in crypto, the global impact of decentralized technologies, and the societal trade-offs between security and freedom in the age of fake news. Lessin shares his optimism for consumer app innovation and his recent investment in Fetcher AI, a recruiting optimization tool. Throughout the discussion, Stebbings and Lessin delve into the broader implications of technological advancements on society and the economy.

• Harry Stebbings expresses his enjoyment in building friendships with respected and admired individuals through the podcast.
• He introduces Sam Lessin, a returning guest and founding partner at Slow Ventures.
• Slow Ventures has an impressive portfolio including Robinhood, Gusto, Pinterest, Casper, and Postmates.
• Sam Lessin is also the co-founder and co-CEO of Fin Analytics.
• Harry thanks Matt Mazio for introducing him to Sam three years prior.
• He discusses Brex, Terminal, and Cooley as valuable services for startups and venture capital.

"But to the episode today. And I love doing the show for many, many reasons, but building friendships with incredible people who I really respect and admire has to be the single biggest joy."

The quote highlights Harry Stebbings's appreciation for the connections and friendships he has built through hosting the podcast.

• Sam Lessin started as an angel investor and transitioned to venture capital.
• He invested in startups like Venmo, Birchbox, and Makerbot.
• Slow Ventures began as a group of friends cross-investing and later formalized into a fund.
• Kevin Colleran took the initiative to raise outside capital and establish Slow Ventures as an institutional fund.

"So Kevin Collron, who's kind of the managing director of slow, basically stepped out and said, look, I think we should turn this into a formal fund and raise outside capital and not just have this be kind of a group of friends doing this."

The quote explains the transition of Slow Ventures from a casual investment group to a formal venture capital fund under the direction of Kevin Colleran.

• Moving from angel to institutional investing changes the investment mindset.
• Institutional investing involves managing LPs' expectations and scaling investments.
• The economics of venture capital fund investments differ significantly from personal investments.
• The size of successful exits needs to be much larger to be relevant to a fund's overall performance.

"Now, the problem once you start scaling up is all of a sudden a $5 million exit to an individual is great. A $5 million exit to a 200 million dollar fund is basically irrelevant."

This quote illustrates the scale and impact required for investments to be considered successful within a large venture capital fund, contrasting with personal angel investments.

• Sam Lessin focuses on the potential for investments to grow tenfold or a hundredfold.
• There is a common underestimation of how large niche markets can be, especially in a global context.
• Market sizing is crucial, but it is also important to recognize that not all markets can achieve infinite growth.

"Look, I mean, whenever I'm doing an investment, the first question I ask myself is, how does it become ten times larger and has it become 100 times larger?"

This quote reveals Sam Lessin's approach to evaluating the growth potential of an investment opportunity, emphasizing the importance of scalability in his decision-making process.

• Sam Lessin argues for a symbiotic relationship between AI and humans, rather than viewing it as a competition.
• The real progress in knowledge work comes from reorganizing work and focusing humans on tasks that require human traits, while surrounding them with machines for leverage.
• He references historical examples, like the industrial revolution, to illustrate the necessity of rethinking work structures to harness technological advances.

"What you had to do was reorganize the factory floor, change how work was done, change what parts of work people are focusing on, and then you get the unleash of massive productivity gains, massive increases in quality, et cetera."

The quote emphasizes the need for structural changes in the workplace to fully realize the benefits of new technology, drawing parallels with historical shifts in industry.

• Harry Stebbings notes the difference in the speed of adoption of new technologies compared to the past.
• The conversation suggests that the rapid adoption rate influences the dynamics of the human-computer relationship.

"You mentioned the industrial revolution there. The one thing that strikes me as very different now to then is simply the speed of adoption."

Harry Stebbings points out the accelerated pace at which new technologies are adopted in the modern era compared to historical technological revolutions.## Adoption and Evolution of Technology

• Historical examples illustrate the gradual adoption of new technologies.
• The electric motor took 40 years to be integrated into factories.
• Factories had to be restructured for the electric motor to realize its full potential.
• The adoption of AI might be faster but is not immediate.
• People often overestimate short-term changes and underestimate long-term impacts.

"It takes about 40 years for the electric motor to be adopted into factories."

This quote emphasizes the slow adoption rate of transformative technologies, using the electric motor as a historical example.

"Maybe it's 20 years for AI or 15 years for AI to be adopted, but it's also not tomorrow."

Sam Lessin suggests that while AI adoption might be quicker than past technologies, it will still take considerable time.

• The concept of a knowledge work cloud parallels the compute cloud.
• Traditional company processes are decentralized and laborious.
• Centralization in the cloud offers on-demand services and increased efficiency.
• Knowledge work will evolve from ad hoc processes to a structured system.
• Machines and tools will support humans to focus on uniquely human tasks.

"The future of work probably looks a lot more like this kind of cloud metaphor..."

Sam Lessin envisions a future where work is centralized in a cloud-like system, allowing for more efficient use of human resources.

• Measurement is crucial for understanding and improving work processes.
• Finn is developing measurement technology to understand knowledge work.
• Measurement allows for individual coaching and system optimization.
• The goal is to maximize productivity and quality of work.

"Measurement is the key. I mean, you get what you measure..."

Sam Lessin discusses the importance of measurement in managing and improving work processes, especially in the context of knowledge work.

• There's a need to increase productivity in the West to maintain competitiveness.
• Technology is essential for improving productivity and securing jobs.
• Many people overestimate their actual working hours due to distractions.
• The goal is to work efficiently and enjoy quality leisure time.

"The answer is, in the west, we work very little."

Sam Lessin points out that actual working hours in the West are less than perceived due to various distractions and breaks.

• Future opportunities will be abundant but different.
• Steady, repetitive jobs will be threatened by AI.
• Creativity and innovation will be more valuable in the job market.
• Parents should encourage children to pursue what they love.

"I think there's no question there's going to be abundance of opportunity."

Sam Lessin expresses optimism about future work opportunities, emphasizing the importance of creativity and passion.

• Crypto is seen as a way to complete the unfinished project of the Internet.
• The Internet lacked secure, decentralized systems for memory and identity.
• Crypto offers the possibility of secure, decentralized databases and identities.
• Centralization and decentralization cycles are a natural part of technological evolution.

"What crypto really fundamentally is... is that secure ability to have secure, decentralized private memory and secure, decentralized private identity."

Sam Lessin explains the fundamental purpose of crypto as providing secure and decentralized systems for digital memory and identity.

• Despite the decentralized nature of crypto, centralized services may emerge.
• Centralized applications could layer on top of the blockchain, similar to the Internet.
• The balance between centralization and decentralization is a continuous cycle.

"The world kind of revolves around cycles of centralization and decentralization in all sorts of forms."

Sam Lessin acknowledges the ongoing cycle between centralization and decentralization in technology, suggesting that the same may occur with crypto and blockchain technology.## Centralization of Decentralized Systems

• Decentralized systems tend to centralize at different layers.
• Centralization can lead to issues such as information manipulation and reliance on centralized social services.
• China is an example of a society that trades freedom for security through centralized control of data.
• The importance of having a base layer in technology that allows for a trade-off towards freedom and away from security.

"ll decentralized things end up centralizing. Right? You talk about bitcoin mining. People have stories around that, or Coinbase or things like that. Look, there'll be some of that. There's no question."

This quote highlights the tendency for decentralized systems to eventually exhibit some degree of centralization, as seen in the context of bitcoin mining and platforms like Coinbase.

"I just think that a fundamental level, it's really important to be able to revert all the way back from a human society standpoint to a level which is kind of far more how the real world works..."

The quote emphasizes the importance of maintaining the ability to revert to a more decentralized state that mirrors natural human societal interactions, as a safeguard against the potential dangers of centralization.

"They're really trading in a lot of ways, freedom for security. I think it's important with crypto that there be a base layer where you can trade for freedom and away from security in a lot of places."

This quote discusses the trade-off between freedom and security in the context of China's centralized control approach and the role of crypto as a base layer that could potentially prioritize freedom.

• Current infrastructure, like Ethereum, cannot support large-scale dapps effectively.
• The focus should be on establishing a scalable, secure, and decentralized database before advancing to smart contracts and dapps.
• Cryptocurrencies represent a simple form of a database with the potential to scale for more complex data storage.

"There's no question Ethereum cannot support anything of scale."

The speaker, Sam Lessin, asserts that Ethereum, as it currently stands, is not capable of supporting large-scale decentralized applications (dapps).

"Is there a globally secure, decentralized database I can trust? And that works at scale in a lot of ways."

Sam Lessin emphasizes the necessity for a secure and scalable decentralized database as a foundation for further development in the crypto space.

• Investing focus is on protocols rather than dapps due to scalability and infrastructure concerns.
• Pricing investments in the crypto space can be based on market demand or potential for significant returns (10x to 1000x).
• Considerations for pricing include competitive dynamics, open-source nature, and defensibility.

"I generally don't invest in dapps. Again, we're much more focused on protocols."

Sam Lessin explains his investment strategy, favoring foundational protocols over dapps due to the current limitations of the infrastructure.

"One is you price things based on what the market will bear... The second thing that I always go back to is this ten x 100 x math..."

Sam Lessin describes the two primary methods he uses for pricing crypto investments: market demand and potential for return on investment.

• Silicon Valley remains a technical powerhouse but is not the exclusive center for crypto innovation.
• Globalization has led to significant contributions from other regions like New York, Israel, and Asia.
• Crypto is considered the most globalized tech revolution to date.

"I do think Silicon Valley is a powerhouse... But it's not clear to me that this is where the answer is in the way that it has been for other things."

Sam Lessin acknowledges Silicon Valley's influence but questions its singular role in the future of crypto, given the global nature of the industry.

• Skepticism about the profitability of electric scooter companies due to city regulations.
• Cities are unlikely to allow scooter companies the same level of profitability as ride-sharing companies like Uber and Lyft.
• The market for scooters is not a winner-take-all scenario and may be highly fragmented.

"I don't think the cities are going to let the scooter companies be profitable or be meaningfully profitable."

Sam Lessin expresses doubt about the potential for electric scooter companies to achieve significant profitability due to anticipated restrictions from city governments.

"I don't think it's a winner take all market... It's going to be highly fragmented unless the cities regulate it in a way that they only allow a few competitors."

Sam Lessin discusses the competitive landscape for electric scooters and the impact of potential city regulations on market dynamics.

• Societal choices between security and freedom are accentuated by technology.
• China's choice for high security at the cost of freedom contrasts with the freedom-centric approach of crypto.
• The rise of fake news and algorithmically generated content forces explicit decisions between security and freedom.

"I think this is the challenge of our time, is that we have, in the physical world of the high friction environment, built societies where we make choices about how free we want to be and how secure we want to be."

Sam Lessin discusses the fundamental societal challenge of balancing security and freedom, which is exacerbated by the binary nature of technology.

"The freedom argument would be, I think, is the crypto story, which is going to be basically saying, look, it's actually really scary in a lot of ways, but it does choose freedom over security."

Sam Lessin highlights the role of crypto as a technology that prioritizes freedom, despite the potential risks associated with such an approach.## Impact of Technology on Social Trust and Truth

• The proliferation of technology has led to a breakdown in social filtration systems.
• There is a shift from relying on physical media artifacts to bolster truth to a social distributed trust world.
• The advent of algorithms that can create fake videos and photos challenges our concept of truth.

"Truth has always been social. For the last 150 to 200 years, we've relied on these physical media artifacts in order to bolster truth or share it more broadly."

This quote emphasizes the historical reliance on physical evidence to validate truth and hints at the upcoming challenges in an era where such evidence can be convincingly fabricated.

• Concerns about society's ability to adapt to technological changes and reexamine foundational structures like the constitution.
• The Western world may struggle with centralized, authoritarian approaches to technology, such as the handling of genetic records.
• The potential for Western societies to fall behind in technological revolutions due to privacy values and frameworks.

"I don't think that we have the social structures to do that very well in the west."

Sam Lessin expresses concern about the Western world's lack of robust social structures to effectively discuss and adapt to rapid technological advances.

• The need for more philosophers to think through the issues brought by new technological capabilities.
• Philosophers are as necessary as programmers in navigating the ethical and social implications of technology.

"I think we're going to need more philosophers as much as we need more programmers as we kind of think through the issues that these kind of new technological superpowers are kind of bringing to our world."

Sam Lessin highlights the importance of philosophical insight to address the complex societal issues emerging from technological advancements.

• The blame placed on distribution channels like Facebook and Twitter for issues arising from content dissemination.
• Technological determinism suggests that the outcomes are a result of the systems' capabilities.
• The teams at social media companies are doing their best despite the unwinnable position they are in.

"I think they're kind of like this incredibly centralized focal point of a lot of fear and confusion and anger."

Sam Lessin suggests that social media companies are unfairly blamed for broader systemic issues and are doing their best under difficult circumstances.

• Operating as both an investor and a founder provides valuable insights that improve performance in both roles.
• Being an investor offers a broad perspective, while operating provides deep understanding.

"I'm a huge believer in investing and operating at the same time. I think being an investor makes you a much better operator, and being an operator makes you a better investor."

Sam Lessin advocates for the dual role of investor and operator, arguing that the experiences complement and enhance each other.

• A desire to see a resurgence in consumer apps, which have been in a downturn.
• The need for a new platform or breakthrough to enable the next wave of consumer apps.

"I would love to see some form of consumer apps come back."

Sam Lessin expresses a wish for innovation in consumer apps, acknowledging the current stagnation in that sector.

• The most recent investment in Fetcher AI is due to its potential in optimizing the recruitment process.
• Fetcher AI combines artificial intelligence with human interaction to improve hiring efficiency.

"The most recently publicly announced investment is a company called Fetcher AI, which is effectively AAI or artificial artificial intelligence for recruiting."

Sam Lessin explains the rationale behind his investment in Fetcher AI, highlighting the company's innovative approach to recruitment.