Silicon Valley:
Ironically Local
Everybody knows that Silicon Valley is the hot hub for start-ups. You can’t find such a high density of founders, VC capital, and tech talent anywhere. The network effects driving people here are stupendous. As more people arrive, the incentive to come only grows. The only natural checks are skyrocketing prices. But in a cheap money regime such as we have, this is no obstacle. Indeed, there is one tech hub to rule them all.
In fact, in SF itself, it is deeply cliche to mention startups. So many people work in tech startups, or just 1 or 2 connections away from one, as to have drastically altered the culture of the city. Startups pervade the air; they pervade the culture. It’s everywhere. When people ask me what I do, I explain that I’m a programmer at a startup. The answer is so stereotypical as to elicit eye-rolls. “Yea, you know, programming stuff” I say weakly. In SF it’s typical.
Silicon Valley is supposed to be this massive hub of innovation. It is supposed to be hallowed ground for tech. Here dwells the Internet God, to whom so many programmers make daily sacrifice. And the maw of VC capital is ever-hungry. It pulls smart people here like an insatiable vortex. As the vortex grows, it accelerates too, like a blackhole consuming a star.
However here lies an enduring irony. A worldwide network allowing for communications between anyone, anywhere, the Internet was supposed to destroy barriers. Online, location and nationality were not supposed to matter. It was supposed to be more egalitarian, distributed, decentralized, and cheaper. That the Internet should lead to a central hub such as Silicon Valley is a sick cosmic joke.
The old barriers, it appears, were not so weak as expected. National and legal boundaries have proved sticky. How do you pay someone in Bangladesh quickly and efficiently? How do you build a business with someone in Morocco whom you’ve never met? How does one surmount the legal and financial barriers that come with building a business, when the collaborators live in separate countries, thousands of miles apart?
Traditionally, there was no good answer. Transnational companies existed, of course, but they required significant resources to keep distant international branches. And generally a transnational company would still have a single, originating national identity, such as Dutch Shell, German Volkwagen, or American Apple. Startups, on the other hand, almost always had to originate in a single place, within a single community. It is often necessary to move to Silicon Valley because that’s where the startups are. Even in the age of the Internet, location governs.
Working remotely is a growing trend in the right direction. Already we have seen the gains that can be had through an openness to hiring highly qualified individuals living in faraway places. This is a form of arbitrage, perhaps the same money can buy superior talent if it is not in San Francisco. Better tools are making remote work even more efficient. But it still doesn’t get at the heart of the problem. Generally companies hiring remote offices themselves still have a central office. Very few companies consist entirely of remote workers. Thus remote workers usually yield peripheral gains to companies still ultimately circumscribed to a single place.
Startups should be able to leverage the same arbitrage between distant founders as has been harnessed with remote workers. Programmers in Siberia should be able to hook up with founders in South Africa to form and run a company, remotely. They should be able to pay out ownership to contributors in Bolivia, who may then earn dividends and voting rights. Limiting the scope for human interactions within small geographic areas, even such excellent ones as San Francisco, severely limits potential opportunities. We all know that the number of connections in a network scales with the square of the connected nodes. How many brilliant ideas were formed from two geeks bumping into each other in Silicon Valley? How many more have been missed, because the Siberian programmer had no way of collaborating with his Bangladeshi business-soulmate?
The greatest obstacle is trust. How do I manage a profitable business with a partner who lives in Indonesia? Who has legal jurisdiction? How do I trust him, or any of the other owners whom I’ve never met? If I’m a contributor, how do I know I will actually be paid? Or that someone hasn’t fudged the balance sheets? Where is our capitalization listed if we are a small, remote, international startup? How do I know what’s mine is mine? How do I trust ciphers on the internet?
The lack of easy solutions to trust has led people to rely on old methods, namely, meeting in person. Our primal, personal sense of trust is still paramount, even in the digital age. It is also much easier to operate under a single national jurisdiction, with a single set of laws, than to wrestle with transnational legal issues, even if it means limiting the potential pool of contributors. Almost all businesses have made this unconscious trade, clarity of trust in lieu of a broader scope of participants.
My company, Assembly, is working on solving exactly these problems. Our modus operandi is to allow anyone, from anywhere, to start a business. We aim to simplify the issues of legal and financial trust as much as possible. We want to allow talent arbitrage, like between the missed connections of the Siberian and Bolivian founders who could never have met otherwise.
On Assembly, users may create a business together from anywhere. As they contribute useful work, they earn ownership portions of the business as partners. If the business is profitable, Assembly distributes the income to all the owners. Owners have corporate governance rights, such as establishing the value of tasks, and others.
At all times, we have tried to utilize the latest technologies to make things as trustless as possible. We have inscribed all the ownership distributions as equity on the Bitcoin Blockchain. There no one, even we, cannot counterfeit it. We handle all disbursements of profits. We withhold taxes, at the right amounts, on owners’ behalf. Businesses built on Assembly exist within its legal umbrella, resolving legal ambiguity between international partners. Businesses can do just about everything they could ordinarily do, including getting bought out. But in being built on Assembly, they had a much broader pool of contributors, who may all be enriched, than they could otherwise have gotten. And this is accomplished with minimal legal and financial headaches.
Assembly itself is the only trusted party. This is a major advantage, because the risk from other users is greatly minimized. While all the partners may manage money and collaborate on business decisions, you need not trust some anonymous programmer in Belgium. You need only trust Assembly: a publicly visible company.
Cryptography supports our mission of making it easy to collaborate trustlessly. We’re looking at advanced ways of collectively controlling money, using Bitcoin multisignature techniques, such that partners manage money without having to trust each other. We have even paid out users in Bitcoin when they requested it. Think about that. Users did productive work online. They earned ownership, which was represented immutably in the Bitcoin Blockchain. Then, no matter where they were, they got paid monthly profits either in Bitcoin or Dollars. They weren’t paid for work. They were paid profits out of equity they own; they will be getting paid for a long time to come. And we do it the right way, correctly withholding taxes and respecting SEC rules regarding partnerships. That’s awesome. That’s the future.
Talent arbitrage is already happening. One of our most active users is an individual in Africa who earned more than $1,200 last month from working on Coderwall. This is publicly visible information. Other partners working on Coderwall don’t need to worry about whether they got paid the right amount. The financials are all public. But they can see all the productive work that has been accomplished.
The user received $1,200 last month because he has earned about 5% of Coderwall as a working partner. He is some guy in Africa who, by working on the Internet, owns 5% of a profitable web company. The $1,200 he got last month is only last month’s share of the profits. He could stop working right now and continue to earn his 5%. He basically has an annuity. In Africa he could probably retire, if he wanted to, with a respectable standard of living. That’s insane.
It works on the other side too, from the perspective of owners of existing companies. By putting your product on Assembly, you have access to developers, designers, and contributors from around the world. While you could pay someone in SF a hefty lump sum to fix software, you could pay someone in Siberia equity in the software instead, at any amount you can mutually agree upon. By paying people with equity they become invested in the fate of the company. You don’t even need cash on hand. If your business is good enough, people will be willing to be paid in its equity. It’s a free market.
The Silicon Valley hub is thriving due to network effects. But those network effects are a symptom of persistent inefficiencies in the way businesses work. They’re missing out on less well-connected talent from around the world. In the true spirit of the Internet, a few hubs should not dominate. Build it decentralized. Represent ownership directly with strong cryptographic methods. Pay them digitally in seconds. Open the doors to people who don’t live in San Francisco. Make business-building across borders easy. Let a thousand flowers bloom and we’ll see marvelous things.
Follow me on Twitter @abarisser
