There is no shortage of writing and punditry about the power of compound interest.

As usual Naval has a pithy tweet about it:

Play iterated games. All the returns in life, whether in wealth, relationships, or knowledge, come from compound interest.
— Naval (@naval) May 31, 2018

I have been thinking about this a lot lately — in the context of work, health, family, finances etc. And more specifically, how compound interest is not just something that works for you, but it’s also something that can (and more than often, does, speaking globally) work against you. I think of it like this:

Ways that compound interest can work for you:

• You eat well and exercise every day – each month you are x% stronger and healthier
• You’re able to save – each month you’re x% wealthier
• You invest in friendships – each month they get x% stronger
• You work hard, help your teammates, and contribute to your team’s success – each month you become x% more valuable
• etc.

Ways that compound interest can work against you:

• You get stuck in a debt spiral and every month are x% farther in the hole
• You feel overwhelmed at work and each month get x% farther behind on your inbox and your projects
• You ignore your friends and each month get x% more distant
• You’re around bad people and bad things happen – you go to jail and meet more bad people, and more bad things happen
• etc.

In other words, when things are good, they tend to get better. And when things get bad, they tend to get worse. This is a horrible paradox. (Reminds me a bit of The Pursuit of Happyness which illustrated this beautifully and painfully). I would argue that “health”, defined broadly, is about getting to the right side of the curve, where your efforts are not only making you net better, but they are contributing to potential exponential improvement thanks to compounding interest. And getting away from the left side of the graph, where every day, every moment, has the potentially of compounding the badness.

Last week, I was talking about this with Darsh, focusing on the importance of helping people (ourselves and others) get to the right side of the curve. Given the dynamics here, it is often a generational issue. For example: my great grandfather was murdered in Russia for being a Jew. That’s about as bad as things can get – getting murdered for being who you are. My grandfather immigrated to the US, penniless, and died of cancer at a very young age. My father grew up on welfare, in a difficult home, but managed to graduate high school, learn to program, and then ultimately start his own business. I went to college (first one on that side to graduate) and now work at an amazing place in an amazing industry. The climb from absolute terror, to extreme poverty and difficulty, to relative comfort has taken at least 4 generations. And even so, I didn’t learn about the compounding nature of money and other wealth as a kid, and am just working on teaching it to my kids now.

A question, then, is how to short-circuit the cycle of negative compounding interest — getting at least “to zero”, so that the riptide is no longer pulling you under. Because if you can’t do that, it’s very hard to start to benefit from positive compounding. It is for this reason that I am a fan of universal basic income and other systems that give people a boost.

One thought on that is, to work on positive compounding interest wherever you can — that might be work, health, savings, relationships or something else. That’s why I am so excited about our investment in Stash – they are singularly focused on helping individuals achieve compounding financial interest through saving and investing – even just with $5.

With that, I will hit publish and hope for some initial returns on intellectual capital in the form of this blog post….

One of my former colleagues, Rob Marianski, and I used to have a running joke — we would be building and debugging something, and he’d finally say, “Oh, so you just want me to set just_work = true?”. That was over 10 years ago, but it still gets me every time for some reason. (as an aside, I have always thought justworkequalstrue.com would make a great blog name, and actually bought the domain for Rob a few years back — still waiting for that first post, Rob…).

But the idea of things “just working”, automatically, and without friction, is magical and exciting.

I mention it because of where we are today in the crypto/blockchain space. 99% of the attention recently has been on ICO hype and the financial use cases of crypto (fundraising, trading, payments, tokenized assets, etc) — but I believe we are about to turn the corner and get a taste of what kinds of new online user experiences will become possible because of this technology. This is where it’s going to get fun.

just_work = true will be the foundational element of this experience. Here is what I mean, by way of a few examples:

1) Browsers with identity and money built-in: the browsing experience will be directly tied to identity and payments, and any app will be able to natively, frictionlessly, tap into both. Users of Toshi, or Brave, or Metamask, or Blockstack are already getting a taste of it. Because all cryptonetworks are built around public key cryptography, and the private key is both your identity and your wallet, when you have a public/private keypair built into the browser, you can do lots of things — be “logged in” everywhere, control & provision your own data, make seamless and flexible payments and payment arrangements (e.g., subscriptions). Imagine the entire web working as seamlessly as Amazon and Apple do today. As you surf the web, there will be less logging in, fewer passwords to remember, fewer forms to fill out — it will just work.

2) Portable digital assets: I wrote about this previously, but the interoperability of blockchain-based digital assets is going to be a big thing. Because assets on blockchains are public, open and available, they can exist across many websites and applications. The suit of armor you build in world of warcraft could be used as collateral for getting a blockchain-based mortgage — maybe that’s a ridiculous example, but the idea is that these assets are open, interoperable, and natively portable — which means things will “just work”, across the web, in ways that aren’t possible today.

3) Automatic dev / deploy environments: my colleague Albert described a story recently where his son participated in a Solidity hackathon — the time from setup to deploy was vanishingly short, since all of the deployment infrastructure is part of the open Ethereum network. No need to set up accounts at amazon, heroku, stripe, etc to get started — just write a contract, buy some ether for gas, and publish it, and you’re online. We’ve never had a development / deployment environment this drop dead simple, and as blockchain dev tools mature further, it will get even easier.

I mention all of the above just as a thought exercise. It is easy for folks in this space to focus on issues like privacy and “freedom” — and while these things do matter to some users (especially technically-minded power users), I don’t believe this technology will unlock mainstream opportunity until we begin to surface the magical capabilities that make everyday users feel like “wow, it just works”.

Ryan Caldbeck is on fire on Twitter right now. Ryan is the CEO of our portfolio company CircleUp, and he just joined Twitter for the first time earlier this year and is, I may say, feeling very comfortable in the medium. Over the weekend he put up a great diagram-oriented tweetstorm with a bunch of gems in it. I will focus on this one:

9/ So many people told me to focus even after I thought we were focused. They were always right. pic.twitter.com/GZeXzzNqnX
— Ryan Caldbeck (@ryan_caldbeck) April 7, 2018

Focus. It is one of the most common topics of discussion with startups, at board meetings, in pitches, etc. Are they/we/you doing too much? Everyone wants to win at everything, right now, so there is always an inclination to do more. Saying yes is easy; saying no is hard. Saying no means FOMO. Saying yes means opportunity cost (which is a little harder to internalize)

As broad as it may seem, the USV investment thesis is about focus. Over the years, that focus has a) helped us develop a deep experience and specialty in a certain kind of company / investment and b) saved us lots of time by making it easy to say no to lots of things. Today, we are seeing a new round of that kind of focus — I am particularly aware of it in areas like crypto/blockchain, where the groups/funds that are hyper-focused in the space and hyper engaged are way ahead in terms of their learning and network.

This is as true for individuals as it is for companies. Here, it’s maybe even harder. Who am I? Who do I want to become? What will get me there? Closing off any potential door is painful. But on the other hand, slowly progressing along a number of fronts is a recipe to get you nowhere.

In order to have focus you have to have conviction. That the thing you are focusing on, while not being everything, is enough of a thing to chew on for a long time — and is important enough a thing that if you really succeed at it you’ll accomplish what you want to accomplish.

It’s really not easy, but experience and repeated observations say that it’s really important.

I have been down in DC the last few weeks, among other things, talking to lawmakers and regulators about cryptonetworks and cryptocurrencies. As part of that, I’ve been spending a lot of time with attorneys — specifically securities attorneys — getting into depth on issues like the definition of an “investment contract” and case law like Howey, Reves and Forman.

Separately, I’ve spent a bunch of time over the past 9 months helping USV portfolio companies getting ready for the EU’s new privacy regulations, the GDPR. As part of that I have spent a bunch of time with tech teams, attorneys and others unpacking not only what the regulations require in different cases and what it will take for companies to comply, but trying to think about ways to make data security and privacy compliance easier for small startups, assuming that new regulations in the US are looming.

This is not a post about cryptocurrencies and whether all ICOs are securities, or about how we should be thinking about solving privacy and security problems online. It’s about getting comfortable in that sweet (& sour) spot where you know a little (or a lot) less than everyone else in the room about whatever problem you are trying to solve.

I am not an attorney, am not a PhD computer scientist, am not an economist or monetary policy expert, and am not an MBA and don’t have a background in finance. Yet every day I find myself in the middle of some set of issues drawing on all of these specialties, typically with people who are seasoned experts in one area or another. It can be intimidating, but it’s also incredibly stimulating and exhilarating.

There have been many times during my career where I have stood at that crossroads and had an opportunity to either stay in the comfort zone or wade into the discomfort zone (starting at USV 6 years ago was one of those moments). I’d like to say that I’ve always headed straight to the discomfort zone, but I can’t say that that’s true. It has taken time for me to get comfortable being uncomfortable.

One of the great things about working in the discomfort zone is the ability to be honest about your limitations — in a room full of lawyers, leading with “i’m not a lawyer and you guys are the experts, so…” can be really freeing. Once you can do that, you can open yourself up to lots of interesting and important situations.

A while back, I tried using this heuristic for prioritizing my time: what’s the hardest thing I can be working on right now? That has helped me guide myself to the discomfort zone more and more, which I will keep doing as much as I can.

As readers of this blog can tell, I’ve been spending a lot of my time recently focused on cryptonetworks and blockchains, and in particular, working through the complex legal and regulatory issues involved.

Explaining what cryptocurrencies, cryptonetworks and blockchains are is hard to do. As Naval recently said on twitter:

It is the mark of a genius to explain a complex topic in a simple way. https://t.co/17vfhQB9uK
— Naval (@naval) March 12, 2017

One person who is able to describe this complex topic remarkably simply is Peter van Valkenburgh from Coin Center. A few weeks ago Peter testified in the House on a committee exploring cryptocurrencies and so-called ICOs. His 5-minute description of the “true innovation” here is crystal clear and worth watching: