Two Points For Honesty
w.241 | SVB State of the Markets, EdTech VC is Dead (Long Live EdTech VC), K12 Fiscal Cliff, The Canary, The Unincorporated Man
Dear Friends,
I’ve been off the last few weeks as I moved apartments and managed the back-to-deal-making rush. But I’m back now and have a backlog of content and thoughts to share. It’s going to be an exciting fall!
Today's Contents:
Sensible Investing: Trends
Local Government Dysfunction and Opportunity
Extras: The Unincorporated Man Book Review
Song of the Week: Two Points For Honesty
Sensible Investing: Trends
SVB State of the Markets H1 2024 - This is an excellent data and trends analysis set. It’s not even worth cherry-picking the graphs because the narrative is that good.
Edtech VC is dead! Long Live Edtech VC! EdTech Insiders had a nice piece summarizing the dynamics in that segment. This clear-out process is healthy for the ecosystem and makes market dynamics more favorable in the long term.
Resignation Letter. Jerry Neuman retires from venture and explains why.
So why quit? Three reasons. First, I’ve felt for a few years now that the startups I’m seeing don’t seem so much like progress as just shopkeeping. This isn’t a dig: there’s money to be made razoring a thin slice off a huge market, and there’s certainly less risk in that than there is building a market from scratch. But it’s just not that interesting. The excitement I had as a 14-year old in 1979 trying to understand everything there was to know about computers, because this was something that could radically improve people’s lives, I just don’t get anymore. And not because people’s lives, the people who have access to the tech, aren’t better, I think they are (although this, of course, has not been as unalloyed as I imagined as a 14-year old.) But because I think the tech is no longer improving lives, it’s just maintaining the current status quo. It just feels, I don’t know, done.
Consumers As a New Class of Payor from a16z on healthcare. Interesting trend: The portion of healthcare spend covered directly by consumers has shot up in the last several years—as of 2022, total out-of-pocket healthcare expenditures reached $471 billion.
Local Government Dysfunction and Opportunity
Navigating Uncertainty and Preparing for the Fiscal Cliff in K12 from Charter School Growth Fund. This document pulls no punches about the dire state of US K12 in the next year; it shows how the school system is facing a fiscal cliff driven by demographic decline (fewer kids = smaller enrollment) and tax revenue decline.
The education system insists on being a job-creation program. Half of all funds have gone to labor costs. I doubt many systems have gained efficiency and found ways to eliminate the cost of disease.
My cautiously optimistic takeaway is that this dire situation opens up the opportunity and provides a potential catalyst for moving to more decentralized education systems with lower staff overheads, greater system efficiency, and more localization. We cannot afford this cost disease to continue.
From Red Tape to Red Carpet: Procurement tech makes selling to the largest customer in the world easy. Linda and I published this essay this week in Obviously The Future.
Tyler Tech’s Odyssey Software Took Over Local Government and Courts in Bloomberg. Not pretty.
On a positive note:
The Canary. (If you open Safari, there is no paywall; here is the 65-page PDF). This is a beautifully written long-form article by Michael Lewis in The Washington Post about Chris Mark of the Department of Labor. He also nails one of the challenges of our time in public service:
Democratic government isn’t really designed to highlight the individual achievement of unelected officials. Even the people who win the award will receive it and hustle back to their jobs before anyone has a chance to get to know them — and before elected officials ask for their spotlight back. Even their nominations feel modest. Never I did this, but we did this. Never look at me, but look at this work! Never a word about who these people are or where they come from or why it ever occurred to them to bother. Nothing to change the picture in your head when you hear the word “bureaucrat.” Nothing to arouse curiosity about them, or lead you to ask what they do, or why they do it.
They were the carrots in the third-grade play. Our elected officials — the kids who bludgeon the teachers for attention and wind up cast as the play’s lead — use them for their own narrow purposes. They take credit for the good they do. They blame them when things go wrong. The rest of us encourage this dubious behavior. We never ask: Why am I spending another minute of my life reading about and yapping about Donald Trump or Kamala Harris when I know nothing about the 2 million or so federal employees and their possibly lifesaving work that whoever is president will be expected to nurture, or at least not screw up? Even the Partnership seems to sense the futility in trying to present civil servants as characters with voices needing to be heard.
Who is Chris Mark? Led the development of industry-wide standards and practices to prevent roof falls in underground mines, leading to the first year (2016) of no roof fall fatalities in the United States. A former coal miner.
And 60 pages later, you will learn more. :)
Sir Michael Barber was named Advisor on Effective Delivery to the Prime Minister in the UK—his dream job. He will work on the new “Missions Delivery Unit.”
Labour's national missions are: securing the highest sustained economic growth in the G7; making Britain a clean-energy "superpower"; halving serious violent crime; breaking down barriers to opportunity; and making the National Health Service "fit for the future."
Extras
LLMs and Expertise
As Tyler Cowen smartly observed, “the marginal product of LLMs is when they are interacting with well-prepared, intricately cooperating humans at their peak, not when you pose them random queries for fun." The more expert you are, the more you will learn from LLMs.
My favorite undergrad philosophy professor, Michael Hooker, used to cite Jean Piaget, who observed that if you work to become an expert in one thing, however narrow, you gain the ability to be an expert in other things — you’ve trained your brain to organize knowledge effectively. Piaget was the world's expert in classifying freshwater mollusks at age fifteen.
One of Palmer Luckey’s favorite books, The Unincorporated Man
I decided to try it after it was mentioned in last week's profile of Luckey, and the idea of self-ownership is at the core of my investment thesis. The book itself is good but not great. While the subject matter and the futuristic setup are certainly worth considering, the writing and plot drag at times. It’s an easy read, and that can be nice. Two interesting tidbits:
In a world where everyone has publicly traded stock, the only people who can say what they want are (1) when your stock is so low it doesn’t matter or (2) when you truly own yourself (or a supermajority).
There is a ChatGPT-type avatar tutor but society views it as a tool for kids, and adults should be weened off them as it’s seen as immature and almost dangerous to have the reliance.
Summary of The Unincorporated Man
Justin Cord, a successful industrialist, was secretly frozen in the early 21st century, is discovered and resurrected. His health is renewed and he is vigorous younger body, as well as the promise of wealth and fame. In the future he awakens to, by law everyone is incorporated as a publicly traded corporation at birth, with shares that can be bought or sold like stocks. Having been born before the existence of this law, Cord remains the only unincorporated person in the world. Justin cannot accept only part ownership of himself, even if that places him in conflict with a civilization that extends outside the solar system, to the Oort Cloud and beyond.
Song of the Week: Two Points For Honesty
Here on YouTube.
Lost and Gone Forever is the only Guster album I’ve listened to intensely. There are many great songs to choose from, but I always like the title and message of Two Points for Honesty.
“Two Points For Honesty” by Guster
If that's all you will be, you'll be a waste of time
You've dreamed a thousand dreams, none seem to stick in your mind
Two points for honesty
It must make you sad to know that nobody cares at allSelfie of the Week
I went off glamping over Labor Day weekend in Clayoquot Wilderness, a sound in Vancouver Island, Canada. I highly recommend it for next season, and the USD’s strength vs. the CAD is helpful.
In the spirit of keeping this section of the newsletter light, I’m leaning into the wide-leg pants trend. Life is better without wearing skinny jeans. I’m particularly pleased with this new pair of jeans that I picked up recently. It’s a light blue wash when I’ve exclusively worn black, gray, or white for the last 10-plus years. NO BLUE JEANS for a decade! “Too unserious,” said my younger self.
Here’s the kicker. Last week, I was complimented on these jeans by a teenage girl, entirely unprompted. Everyone who knows anything knows that this demographic is the only true arbitrator of cool and stylish. I don’t make the rules. They are hyper-aware. The compliment made my entire week.
Thanks for reading, friends. Please always be in touch.
As always,
Katelyn