Polarization and the Crisis of Legitimacy

I just wrapped up Ezra Klein‘s book Why We’re Polarized. I highly recommend reading it, especially if you’re interested in why the political climate is so dysfunctionally stupefying today. I’m a big fan of Ezra. His podcast is the only one I really listen to somewhat consistently, and I think he does an exceptionally good job explaining things in a very digestible way. I generally agree with his worldview and I’m usually interested in the things he has to say.

The gist of the book is that politics has really become defined by our identities, and as a result it has led to a state of polarization that threatens the future of our democracy. I’m not going to spend time digging into the problems he very convincingly discusses. If you’re interested, Bill Gates has a good review of the book and here is another one from the The New Yorker.

It is worth noting that I am not a political pundit, nor am I an expert in politics. But I do have strong opinions and believe that national politics is a critical and defining instrument for making continued progress as a country and civilization.

I firmly believe that we are facing a crisis of legitimacy in the US government. The past two Republican presidents lost the popular vote. Mitch McConnell blocked Barack Obama from appointing a Supreme Court Justice because it was an election year, then proceeded to ram through three Supreme Court Justices under the Trump presidency, one of whom assumed her seat weeks before the 2020 election. Justice Thomas’s wife participated in the January 6 insurrection, he has refused to recuse himself from relevant issues, and is leading the Court to overturn established law that has come to define progress in our country (most recently with Roe and with near certainty more to come). The House is gerrymandered to oblivion, it is exceedingly difficult to vote in many states, and by 2050 roughly seventy Senate seats will represent 30% of the country’s population. Furthermore, the filibuster makes it impossible for legislators to do their jobs and too easy for a minority to completely obstruct any legislative agenda.

Today, we effectively have tyranny of the minority and for lack of better words, that is fucked up. It is not democracy. It makes me furious, it stifles progress, and it makes me to feel as if the current state of the government is a sham. Ezra notes that Republicans shouldn’t want this because you don’t want a majority of the country rising in revolt and disobeying the rule of law. But it’s impossible to believe in the rule of law when a minority imposes it upon a majority. A crisis of legitimacy is bad for everyone. The erosion of democracy is bad for everyone. And the most frustrating thing is it’s really difficult for me to believe that most elected Republican politicians actually care. I sometimes think there is a reasonable chance we are careening towards a Handmaid’s Tale type of dystopia. I would have considered myself crazy to publicly say that a year ago, but polarization in national politics and the way we operate as if national politics is an all-out war has convinced me otherwise. I’d give it a 50% chance that democracy survives.

Now I am optimistic that we get it together and continue our long history of making progress, but I am also realistic. If you were to ask me if there were “glory days” that exemplify the best of times, I’d still point to today. As Ezra says: “The era that we often hold up as the golden age of American democracy was far less democratic, far less liberal, far less decent than Today…And the institutions of American politics today are a vast improvement on the regimes that ruled well within living memory. If we can do a bit better tomorrow, we will be doing much, much better than we have ever done before.”

So how do we make tomorrow better than today and ensure this grand experiment of the US government continues to make progress? Ezra highlights a handful of solutions that I vehemently support. First and foremost, he recommends doing away with the electoral college. This is an obvious move that is a long time in the making. My favorite piece of literature on the topic is Let the People Pick the President by Jesse Wegman. One of the common misconceptions is that in order to do this it requires an impossible-to-achieve Constitutional amendment. It doesn’t. Under the National Interstate Popular Vote Compact states can agree to throw their electoral votes to whichever presidential candidate wins the popular vote. It can be entirely controlled by state legislatures and advocates for democracy should be spending considerable more time and money trying to achieve this. Republicans may lament that they’d never win the presidency but that’s just not true. Two of the most popular governors in the country are in blue states (Maryland and Massachusetts). They’d just have to run on policies that more people supported. It’s been done before and will happen again.

The second solution is to “combine multimember districts with ranked-choice voting. Under this system, states would break into electoral zones represented by multiple members of Congress.” Ranked-choice voting is a tool that needs to be more broadly utilized. It gives a voice to more people and enables candidates who actually represent different interests and identities the opportunity to thrive. If there’s one political thing I think Andrew Yang is doing well it is advocating for this change. It’s also the reason Lisa Murkowski, arguably the least polarizing Republican in the Senate, is able to retain her seat and more effectively represent her constituents in Alaska. Ranked-choice voting increases the likelihood that national politics actually has proportional representation, and can ultimately foster a much needed multiparty democracy.

Improving the functionality of the Senate comes down to the obvious and commonsense move of eliminating the filibuster (here’s a more in depth case for it), and giving Washington, DC, and Puerto Rico congressional representation which is long past due. Rules should also be rewritten to make it easier for the minority party to bring full bills to the floor. The Senate is arguably the most dysfunctional legislative body. The fact that a minority of the members can filibuster virtually every piece of legislation is preposterous. Elected officials should be able to enact the agenda for which they were elected to office. If it’s unpopular, then they will be voted out of office and another party can enact their agenda. This is the way a well-functioning government should work. I also believe we need term limits for Senate members. Too much time is spent focused on consolidating and retaining power as opposed to serving the interests of constituents. If a President can only serve two terms, then members of the most important legislative body should be limited to two terms as well.

With regards to democratizing politics, we also need to make it easier to vote with tools like automatic voter registration and universal vote-by-mail systems. As Ezra notes, “Too much of American politics is decided by efforts to restrict who votes or, as in gerrymandering, to manipulate the weight those votes hold.” Suppressing votes is diametrically and ideologically opposed to Republicans’ love of free markets. Voting should be easy, not hard. That would encourage healthy competition.

Last but not least, the Supreme Court needs reform. Democrats who object to this notion should be booted from office and replaced with officials who do. One solution Ezra recommends is to expand the court to fifteen justices: each party gets to appoint five, and then the ten partisan justices must unanimously appoint the remaining five. Until all fifteen are agreed upon, the Court wouldn’t be able to hear cases. Also institute term limits here. Lifetime appointments are absolutely ludicrous.

All of these solutions are primarily focused on national politics (which is what the book focuses on), and don’t touch on local politics which are also critically important. I would like to see more time, effort, and money spent on these issues. I’d also like to see members of both parties unite around them, or at least every Democrat support them. They are worth fighting for and in concert with one another they very well may be the antidote the United States so direly needs to course correct the path we are on and steer us towards a future that is continuously defined by forward progress and experimentation.

Coaching and Therapy

Founding a company is hard and mentally taxing. There’s plenty of literature out there about entrepreneurship’s emotional toll. Not only are the odds forever stacked against founders, but they deal with a seemingly insurmountable pile of problems: people problems, market problems, product problems, customer problems, etc. There are always fires.

One of the ways I learned to cope with the highs and lows of the roller coaster was to simply become numb to it all. I’ve had multiple board members share that I never seemed happy when things were going “up and to the right,” and that I never seemed fazed when we were facing an existential cataclysmic meltdown. I don’t particularly think this is a good thing – it’s important to be emotionally present to acknowledge and celebrate wins (although I think I probably did an adequate job here since I was surrounded by people who were good at this). But I do think it’s fine when dealing with the lows. I’d rather a steady hand in times of turmoil.

There are two tools I wished I used more frequently to better manage myself and improve as a leader: coaching and therapy. I look at them as two distinct practices, but sometimes one may use a single practitioner for both. I’ve engaged with a variety of executive coaches, but my favorite has been Jason Gore from Neuberg Gore. I even brought in multiple coaches to work with our leadership team at Fundera which was an excellent investment and something I recommend other founders do if they have the resources.

In my experience, what has made coaching work for me, and specifically my relationship with Jason, is focusing on very actionable situations. When I had to prepare for difficult conversations with teammates I’d rehearse them with Jason. When I had to figure out how to customize my management style, or even whether to adapt it to certain people, I’d workshop it with my coach. He equipped me with a variety of super effective tools that made my life easier as a leader and manager. And having that sounding board that could advise me every other week or so while being somewhat embedded in my management/leadership flow and cadence was super helpful. You have to make so many decisions as a founder; it’s really comforting and useful to have someone to consistently dig into and help with the most important ones. In retrospect though, what makes for an effective coach, at least for me, is someone who can help me confidently do the things that I like least (i.e. having hard conversations, quickly) while strengthening the things I do well.

I never did therapy while building companies but I wish I had. I started around a year ago after a mentor I deeply admire recommended it. He had been doing it for decades. I asked him why and he said, “So I can understand why I feel the way I do, hone in on what makes me happy, and do more of that.” I liked that so I took the plunge. It was really hard for me to get into for the first couple months. But then something clicked and I started to pay attention to my emotions (which I had spent the past decade attempting to suppress in the workplace for the sake of my mental health and operating capabilities). Identifying emotions is difficult, but now I am getting better at being able to do it in the moment. And when I can identify how I feel and why I feel that way, I can better understand my behaviors and proclivities. That alone is an extremely powerful tool to have as an entrepreneur – the ability to recognize how you feel in the moment and how that feeling may influence your behavior. I wish it was one I was able to to consciously use, or at the very least even be aware of, over the course of my early career.

If coaching is about doing, then therapy is about feeling.

Coaching and therapy are expensive, but I think the combination of the two is a powerful one for entrepreneurs. It’s cliche to say you have to invest in yourself, but you really do. You just cannot do the job for an extended period of time without having a sound mind (and ideally a sound body, too), you will simply wither away and grow to resent the things that make life and building things beautiful and enjoyable. I’m grateful for having the opportunity to use these practices day to day. I think they make me better at what I do, happier, and a better person.

Foraging for Progress

I recently started reading Energy and Civilization: A History by Vaclav Smil. The book begins describing the first forager civilizations. Being a forager sucked. You went around hunting with your tribe for food. If you killed an animal or caught some fish, you could eat and live another day to do it all over again. If you didn’t, you’d die. As I was reading this section, I went to the Museum of Anthropology in Mexico City. It’s amazing. If you haven’t been to Mexico City or the Museum of Anthropology, you should absolutely go if you can. In it, there was an exhibit that chronicled the evolution of Mexican civilization from foragers to an agrarian one. It reconfirmed my suspicion that being a forager totally sucked.

Life got better as humans developed the skills necessary to stay put and farm land. And then it proceeded to get even better as we found new ways to adapt to the world (or adapt the world to us) over time. We invented things – tools, medicines, technologies, governance, and more – and through centuries of trial and error as we accumulated knowledge these things interacted with one another, compounding to make life even better, faster.

Every day we are surrounded by chaos and proclamations that the world is heading towards irreversible catastrophe. There’s a lot to be upset and despondent over, but lately I’ve been forcing myself to zoom out and appreciate just how blessed we are to be alive right now. We’ve come unfathomably far over such a short period of time in the grand scheme of human history. It’s an absolute miracle and testament to the ingenuity and perseverance of humans. So while we face very real risks both presently and in the future, I believe they are surmountable, and that at the end of the day we will find a way to continue to progress.

Life is hard and can be unpleasant when you’re constantly reacting to the bombardment of “Everything is Fucked!” It is so much more pleasant and productive when appreciating and acknowledging our collective and continuous progress. The climate crisis, pandemics, the erosion of democracy – all of these things are very real threats to our existence and our ability to make progress – but we are well equipped to tackle them and continue on our trajectory of constantly doing spectacular things.

Why I Want Crypto to Succeed

For all the right reasons, public sentiment towards crypto is spiraling. Scammers, ponzi schemes and the like are being exposed daily, and unfortunately it’s coming at a real monetary cost to unassuming ecosystem participants. Alas, it is easy to be a critic when things are so painfully awry. I am by no means a crypto-absolutist, nor am I an outspoken skeptic. I think the most prevalent use case for crypto today is speculation in the form of a global casino that operates 24/7. There are a few other use cases and projects that cross the chasm and provide real value to network participants like Helium, but they’re the exception, not the rule. But I still want crypto to succeed and remain long-term bullish and optimistic.

Crypto is a potentially very important innovation within the technological revolution that is the information age. It’s important because it has the potential to deliver a rather utopian end state to the proliferation of software as it continues to eat the world and infiltrate our daily existence. I want it to succeed because I would like to see the following ideals exist and believe that crypto is well-suited to support them:

  • A structurally sound alternative to incumbent control: Azeem Azhar does a good job illustrating the problem in his book The Exponential Age (read my review here). The gist is that a handful of executives at tech companies control a majority of our data that’s lodged in silos and influence our daily lives significantly more than most of us would like to acknowledge. Crypto is a logical and viable way to decentralize that consolidated power. If the history of business is the bundling and unbundling of services, crypto can be a force for unbundling (or disaggregating). Here’s a good Albert Wenger article on why this is important.
  • Users are owners: Today’s incumbents have created some of the most impressive businesses in history on the back’s of their users (who received and continue to receive impressive value from them). One of the things I love most about crypto is the notion that network participants can become owners of the networks they help build through token incentives. To date these token incentives have had a rather perverse impact on most projects (i.e. participants game projects early on to earn tokens in the hopes of selling them off without really caring much for the longevity of the service itself), but the idea is powerful and wonderful. Here’s a nice piece by Fred Wilson about token business model innovation.
  • Democratized governance as a coordination experiment: In addition to being user owned, most crypto projects have a stated end goal of being governed by their users. This is a fundamental premise of DAOs, and some projects have done a nice job handing off the reigns to their users. There’s something fascinating about this. There are a lot of obvious downsides, but the notion of democratic governance for the most important internet protocols and services is a fascinating experiment. If you want to dive deeper here’s a great podcast featuring Joel Monegro.
  • Transparency and composability can accelerate the pace of innovation: Crypto is open source by design, and it’s composable so I can mix and mash existing applications however I’d like. Imagine if you could take the pieces of Google, Twitter, etc. that you love most, combine them and then build something new that you’d like to use on top of them. Being able to assemble internet applications like legos is a powerful tool for rapidly building and testing new applications. Here’s a deeper dive by Linda Xie.

There are other aspects of crypto that I like (namely that it’s fun and that DeFi can create a more inclusive global financial ecosystem), but these are the ideals that I value most and would like to see flourish in the real world. Crypto is the most viable foundation for them. I don’t know if it will happen. For all the capital and time that has been deployed in the space by brilliant builders and investors, it certainly has not fulfilled its promise. But the future is still there for the taking, and I remain optimistic.

**Sometimes I like to revisit these articles that helped me understand how important crypto can be:

Incentives Drive Behavior

One of the most important Fundera board meetings I ever participated in took place in 2016. We were reviewing sales productivity metrics and one of our independent board members, Phillip Riese, asked about our compensation plan. When we explained that everyone was paid a healthy base salary and that we didn’t need a bonus plan because everyone was super sharp, talented, mission-driven and cut from a different cloth, jaws hit the floor. I was promptly reprimanded and then pat on the head for my naivety. It was then that I learned a critical lesson: incentives drive behavior.

It’s a phrase I find myself repeating over and over again. I learned it well while building Fundera. Need to solve a problem? Hit a target? Do something spectacular? Incentives work wonders. Incentives are one of the most powerful tools people have to inspire the behaviors needed to drive desired results. They are deeply embedded in virtually all systems: political, economic, social, environmental, etc. Sometimes incentives produce phenomenal outcomes, and sometimes they create havoc. They are a double edged sword as too much focus on driving short and medium-term results can come at the expense of long-term mission and vision. For operators, a balanced scorecard can help to mitigate detrimental effects.

One industry where incentives can create misalignment between businesses and customers is venture capital. This thread by Rob Go does an excellent job illustrating the point.

And this Dan Primack observation succinctly explains the oppositional dynamics.

The fundamental interests of most founders are oftentimes directly at odds with those of their investors. It’s worth stating that I am huge fan of venture capital. I’ve worked with many firms and partners across GroupMe and Fundera that I deeply respect. It’s a remarkable tool to create something out of nothing and build and scale businesses. That said, for most founders and employees, optionality is an important thing to preserve in order to optimize for beneficial financial outcomes. But VC makes almost all of its economic returns on a handful of outlier grand slams. 3-5x returns on any individual company are nice, but they do not make or break an individual fund. They’re rounding errors at the end of the day. But a $50-$100 million outcome can be economically life changing for founders and employees that haven’t over-capitalized and own a meaningful percentage of their companies. This is a unique friction that exists in the industry, and it’s critical that founders are cognizant of its existence.

Once you fully grasp the concept you begin to notice how incentives influence virtually every institution in our society. For instance, this insight from Palmer Lucky will make your head spin.

When you’re frustrated with the way something works, this realization helps you get to the bottom of why things are the way they are in the first place. For people who like to reason in first principles, it’s a powerful tool to get to Why.

Now when I set out to build something or tackle a problem that’s loaded with complexity, one of the first things I try to understand is the role and influence of incentive structures.