What Technology Wants
Mental models to navigate the increasing complexity of investing in new technologies, plus the usual best of tech Twitter this week.
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I hope you’ve enjoyed your weekend thus far.
I watched Wales - Australia (rugby) in Cardiff yesterday, which was mighty. There was so much energy around, the city was buzzing. The Welsh are some of my favourite people.
This week, a guest piece from my friend (and Odin shareholder) Peter Zhegin.
Peter is a full time growth-stage tech investor at Sistema.vc. He also runs Approx.vc, a syndicate investing in pre-seed and seed stage engineering and data science-heavy startups, alongside Sergey Bartunov (DeepMind) and Evgeny Gokhberg (Re7 Capital). Anyone can apply to join Approx.
I am cross-posting this piece from Peter’s blog, Enthusiast.ai, which you should definitely go and sign up for!
We’ll dive into Peter’s thoughts further down. But first…
📰 Best of the Internet
Funny tweets and interesting bits of content from the last week or two.
The Empire Strikes Back
The big news in tech this week was a DAO of 17,000 people almost buying one of 13 super-rare original copies of the US constitution at a Sotheby’s auction.
In a comic book twist you couldn’t make up, they were secretly outbid by Ken Griffin, the billionaire CEO of hedge fund Citadel. Griffin is already known as the enemy of the little guy, having bailed out GameStop short sellers earlier this year.
Every great story needs a villain.
The DAO came together and raised over $40 million in under a week. I invested personally, and it was a fun experience. Unfortunately, the Ethereum gas fees make the whole thing financially pretty nonsensical at the moment. As Alex Cohen noted, traditional SPV’s are still much cheaper than investment DAO’s
Nonetheless, it was a testament to what can be done through the power of community.
I am still figuring out the implications of blockchain technology for investing in private companies. We have looked at building on Web3 rails at Odin, but couldn’t really find a good reason to do so (for now), other than marketing. That may change.
You can go deeper on DAO’s in these great pieces from The Generalist and Not Boring.
I also recommended Balaji’s conversation with Sam Harris a couple of weeks ago. Here he is again on Tim Ferris’ podcast. Well worth a listen. The same things we think about a lot at Odin: community, governance and investing.
How to Pre-Seed
A good little thread from Cyrus. We’ll be sharing a full-length piece from him in the next couple of weeks!
Now, over to Peter…
How do you find the next big thing?
Ask what technology wants.
Searching for the next big thing is more challenging than ever before, as the tech ecosystem expands at an unprecedented rate. This expansion is captured by investment databases. PitchBook, for example, tracks 138 emerging spaces.
These spaces are split into sub-segments almost ad infinitum; deep tech, for instance, includes nine sub-categories, according to Dealroom, another database.
And it's not just expansion. The complexity of technology itself is also increasing. Within some themes, '... moving the needle even slightly... requires enormous knowledge of two very hard and disparate fields' and the dual PhD problem emerges.
It’s all a bit…overwhelming. As investors, we are flooded with information. The challenge is how to make sense of this flood.
An immediate approach might be to identify those themes that trend through frameworks like Tech Trends Index by McKinsey, Hype Cycles by Gartner, or heatmaps by CB insights. But trends come and go at breakneck speed. Almost everything trends in one way or another. It ceases to have meaning and can't help us choose things to focus on.
An alternative is to view the world through the prism of things that are constant, rather than things that change
As Jeff Bezos once noticed:
'I almost never get the question: 'What's not going to change in the next ten years?' And I submit to you that [this] question is actually the more important … - because you can build a business strategy around the things that are stable in time.'
In his book 'What technology wants', Kevin Kelly explores how the tech ecosystem ('technium') evolved and concludes that it '... became so dense in feedback loops and complex interactions that it spawned a bit of independence.' Being independent, the ecosystem gains its own desires. These desires are relatively constant over time.
Kelly lists thirteen constant “desires” that technology exhibits. They urge the technium towards increasing efficiency, opportunity, emergence, complexity, diversity, specialization, ubiquity, freedom, mutualism, beauty, sentience, structure, and evolvability.
In Kelly’s own words, '... this list of exotropic trends can serve as a sort of checklist to help us evaluate new technologies and predict their development.' The more a particular technology expresses and extends these desires, the more inevitable it is.
It is not an easy task, however, to benchmark themes/technologies against these thirteen tendencies. The tendencies don't have clear definitions. Kelly mentions that there are at least 42 theoretical definitions of complexity, for instance. The relative importance of the tendencies to each other is also not known, so calculating the 'inevitability score' is hardly doable.
Kelly proposes we use approach things qualitatively:
‘Using this perspective we might ask, is large-scale petrol-fed agriculture inevitable? … I would say as a rough first pass that mechanized farming was inevitable in that it increased the merits of energy efficiency, complexity, opportunities, structure, sentience, and specialization. It does not, however, support increasing diversity or beauty. According to many food experts, the problem with the current food-production system is that it is heavily dependent on monocultures (not diverse) of too few staple crops (five worldwide), which in turn require pathological degrees of intervention with drugs, pesticides, and herbicides, soil disturbance (reduced opportunities), and overreliance on cheap petro fuels for both energy and nutrients (reduced freedoms).’
My intuition is to use a similar approach when analysing themes/technologies for the purpose of investing, to decide which one to explore further (see an example below). Since the number of themes/technologies is growing rapidly, and my angel investing bandwidth allows me to cover a limited number only, a tool to keep discipline is required.
Another option is to apply the list to test or expand the investment thesis for a theme that you’ve already selected. I believe using the list with technologically complex domains makes even more sense; it puts them in a broader context and does not require deep domain expertise. For instance, thinking about database technologies through the lenses of opportunity, emergence, and mutualism expanded my view on open source software development without requiring me to become an open-source expert.
Obviously, the checklist is not a silver bullet. It's very qualitative and subjective, and could hardly fit an investor who prioritises deployment velocity.
I find it useful, however. It helps me keep discipline and provides a fresh perspective on startup land. I hope it will work out well from a financial standpoint too. I'll continue to apply ideas from 'What technology wants', explore other ways of thinking about technologies, and write about my journey.
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Kudos to Andrew, Mary, and Patrick who helped me a lot with this note. If you find anything embarrassing in it, it means that I did not listen to them carefully.
Based on my application of Kevin Kelly’s checklist, mental health tech seems inevitable, while on-demand grocery delivery does not. The tech ecosystem, based on this checklist, will likely provide more support to a technology that leans, among other things, towards complexity, freedom, beauty, structure, and evolvability.
Output generated by the checklist expands my thinking about these two themes/technologies. To me, all user-generated data from mobile phones, wearables, and other devices will be used for healthcare purposes for decades to come. However, on-demand grocery delivery in its current form might be an intermediate step towards robotic delivery or, to the future with 3D-printed/home-lab-grown food.
NB: All above does not state that on-demand grocery delivery is a wrong investment opportunity. It just helps to navigate the opportunities space for an investor with limited resources and a long-term view.
That’s all for this week folks.
Thanks Peter for allowing us to share content from his blog! If you’d like to share a guest post with the Odin community, feel free to drop me an email :-)
If you’d like to join our private community and access syndicate investment opportunities and events, share some more information with us.
Want to set up an SPV? Learn more here. ⬇️