Introducing Aligned Capital

sam cassatt
9 min readNov 15, 2019

Today I announced the launch of Aligned Capital, a new investment firm designed to anticipate civilization-scale, evolutionary changes in human behavior, and to invest in their core technologies.

Aligned With What?

We stand at a critical juncture with respect to several of our institutions. Tellingly, only 1 in 5 people currently believe “the system is working” for them. To me this means that the spring is coiled for momentous, stepwise change to take hold. That change can be disruptive and rapid, especially if it coincides with the emergence of new technologies that actually offer better alternatives.

As Buckminster Fuller said, “You never change things by fighting against the existing reality. To change something, build a new model that makes the old model obsolete.”

This process of deconstructing and reconstructing institutions may be the primary mode of evolution for our species. The deconstruction can be painful and chaotic, but in the reconstruction there is immense promise. I believe the most significant investing opportunities of our time will be found in the reconstruction of institutions using new technologies.

In contrast, the current venture industry is logically a random walk through areas that are potentially profitable, aimed at targets like the third-largest-market-cap laundry delivery company (sorry to whoever that is). And while we need that sort of thing for capitalism to function, that is not my goal.

True to its name, Aligned Capital seeks to align capital with stepwise changes in human behavior that solve civilization-scale problems with high leverage, where energy is clearly pent up due to a mismatch between people and their institutions. I hope it is also aligned with you. And I hope others who are similarly inspired will join me in this endeavor.

Three Institutions on the Edge

There are three areas where it is most obvious to me that the institutions are broken, i.e. they not serving their purpose of helping us achieve our goals to the best extent possible.

  1. The global financial system: Our recovery from the most recent financial crisis is not yet certain. Ray Dalio, the founder of the most successful hedge fund on the planet, is telling us that “The world has gone mad and the system is broken.” Blockchain technology is well on its way to providing alternative rails for the financial system.
  2. Physical and Mental Health: Suicide rates in the US are the highest they’ve been since WWII, and we have an opiate addiction epidemic. Real advances in the science of longevity promise to improve our healthspan as we experience a generational shift from treating symptoms to enhancing wellness with technology. Consumer technology can help people enhance and measure their health. New (and some old) compounds are promising to revolutionize treatment of depression, addiction, and PTSD.
  3. Artificial Intelligence and Human Beings: Facebook and YouTube algorithms are influencing elections, and causing addiction and depression. Zuckerberg is called before Congress, and Twitter is banning political advertisements. Calls for censorship and erosions of privacy are increasing. Fake news and deepfakes amplified by tech are confounding our sense-making. This is with primitive AI — imagine the future.

The Global Financial System

I have spent much of my life seeking out the moments of wonder cherished by scientists and other lovers of knowledge — the ones that make you go, “This is going to change everything!” One of those moments has rippled throughout my life for the last five years: the day in 2014 when I first sat down with Joe Lubin, and he described Ethereum to me in technical detail. I immediately realized just how ambitious, elegant, and utterly world-changing this project would be.

We, and an increasing number of avant-garde technologists, theorists, and general limit-pushing people went on to build the company ConsenSys, as well as seed the Ethereum ecosystem with the tools, design patterns, and capital necessary to birth such a large idea — the construction of a new, open-source, permissionless substrate for global economic activity. While there is still far to go, the Ethereum community is now thriving and well on its way to realizing its goals. Its market participants are strong and getting more mature each day.

As Chief Strategy Officer at ConsenSys, I had a hand in shaping that inchoate ecosystem, and I am enormously grateful to have been part of that moment in history. Today I also announced that I am stepping down from that position. I will continue on as an advisor to ConsenSys, Joe Lubin will be an advisor to Aligned Capital, and I look forward to our continued collaboration in all things Ethereum and beyond.

What brought me to Ethereum and ConsenSys was a sense that the institution that is our global financial system was in trouble, and the belief that through revolutionary technology, we could meaningfully reshape that institution. At the time, in the wake of the 2008 financial crisis, public sentiment towards the financial system was at a low. This would give rise to the Occupy movement, a reflection of the intuitive dissatisfaction that was felt when people realized we had just given trillions of dollars in bailouts to the same people that had gotten us into the mess. That sentiment was also reflected in the Bitcoin genesis block on January 3, 2009 (the first ever block in “the blockchain”), a response to the fact that the “chancellor [was] on the brink of [a] second bailout for banks.”

The bitcoin genesis block and the headline it references

Institutions like the financial system form to reflect our desires and goals as humans, and to support us in those ends. They transcend the lifetime of an individual, and are a kind of external memory system for our species. No single person or small group can carry all the information about how we fairly and productively coordinate our economic output (the financial system), or stay physically healthy (the healthcare system). But when an institution no longer serves its purpose as our reflection, it creates a market gap for its disruptors. In this case, it seems to be blockchain technology.

In the information age, as products and services are increasingly made out of bits more so than atoms, I suspect that institutional reformation might look more like a disruptive product than a violent revolution. It might look like a blockchain-based financial system being so much better, cheaper, faster, and more accessible than the existing one that it just outcompetes the incumbency. Given that your average millennial would rather visit the dentist than a bank, I think we might be onto something with a digitally native financial infrastructure.

If we take seriously the notion that things we want are increasingly made out of information rather than physical matter, we have to consider some knock-on effects. And we should take this seriously, because it seems to be happening. The top five largest US companies by market cap went from being mostly producers of physical goods in 2008, to producers of software in 2018.

Because information is replicable practically infinitely and quickly, it also seems to be lessening time and resources necessary to scale. WhatsApp had 35 engineers at the time it was acquired by Facebook, serving 450 million customers. They had 50 by 2015, serving 900 million.

Another effect of the fact that information is very easy to replicate and can spread very rapidly is that it’s nearly impossible to control using our existing institutions. Nearly every attempt to do so has failed. In the early 90s, the “crypto wars” refers to an attempt to regulate encryption technology like it was a munition, and restricting its export. That is something very difficult (probably impossible) to do when open-source software can be printed on a t-shirt (see below).

The DeCSS algorithm, which allowed people to circumvent the copy protection on DVDs, was similarly banned. People were prosecuted for just linking to it on a website — also something doomed to fail when it can also be worn as a fashion statement (also see below).

The RCAA eventually grew tired of fining grandmothers for their grandchildren’s use of Napster and then Bittorrent to share music. Perhaps because they realized, now that these technologies were decentralized, there was no single point of failure, and thus no way to effectively control them.

The RSA and DeCSS algorithms printed on T-shirts

Bitcoin and Ethereum have now done the same thing for money and financial products of all kinds. Decentralized finance (aka DeFi) promises to bring composable, permissionless components of a financial system online at an increasing pace. These comical failures of institutions are what happens when they are simply fundamentally incompatible with the new information age. They are designed to deal with atoms and we are consumers of bits. I think we will need some new institutions, once built from the ground up to assume that information tends to be free.

How an institution deals with that will be its success or failure.

Aligning AI and Humans

One way that we could fail would be to take extremely reactive approaches to dealing with this mismatch between information being difficult or impossible to control and the institutions surrounding that. And it’s easy to see how we could go down that route. Zuckerberg is getting called before congress to explain why his advertising algorithms can be used by those with political aims to influence elections. Here’s a secret: nobody well versed in digital advertising was surprised by Cambridge Analytica at all — that’s just how it works. Shhhh!

We are already dealing with the effects of algorithms, or simple artificial intelligences, on our society. Filter bubbles can radicalize people. Deepfakes and fake news can confuse our ability to discern truth. The contents of your Facebook feed is mathematically optimized to addict you and sell you products, and some experimental versions intentionally make you depressed.

These issues will be difficult to tackle with our existing toolsets. Attempts to control information propagation usually fail. But the end result needs to be that AI is aligned with our goals. That might mean that Facebook decides to implement algorithms that act in your best interests, but I doubt that will come to pass. This is a huge market gap for AI alignment.

The space in between our society waking up to this problem and the real solution is likely to be poorly implemented calls to regulate speech more heavily, and continued invasions of privacy. These will exacerbate the already existing markets for privacy technology, anti-censorship technology, and eventually AI alignment tech.

Mental and Physical Health

Mental health has reached a crisis point along a number of dimensions. We have the highest rate of suicide in the US since World War II. We also are in the midst of an opiate addiction epidemic. Simultaneously, newer generations have created a market for wellness and ongoing enhancement, contrasted with the fix-the-symptoms model of the traditional medical community.

Mindfulness technology, sleep technology, and biofeedback devices are gaining in popularity and comprise the growing Transformative Technology ecosystem. This market is early, and we are at the beginning of what we can accomplish as we advance neuroscience, biosensing technology, and our understanding of the biological bases of the mind.

Right now, many compounds are being tested and pushed through FDA trials that promise to revolutionize how we approach mental health. Studies at top universities have shown that psilocybin can have powerful effects on depression. Investors like Peter Thiel are already catching onto this trend.

Late stage FDA trials being funded by MAPS have demonstrated that MDMA is an order of magnitude better at treating PTSD than existing treatments. And many novel compounds wait in the wings. This market is nascent and extremely early, and I’m sure extremely disruptive to our models of mental health.

An increasing amount of successful science has been aimed at increasing healthspan (as opposed to life span). The doctors and researchers responsible essentially consider aging to be a disease and urge others in the medical community to do the same. It is not hard to imagine that fighting aging (which is essentially fighting the degenerative processes of our body) will lead to many advances in the health of normal people. Technologies like NAD+ and research on senescence are only the beginning, as we begin to revolutionize health and wellness.

Taken together, I think healthcare and mental healthcare are in for some disruptive new entrants.

Conclusion

Let’s get aligned! If these ideas animate you as much as me, please reach out to info@aligned.capital and let’s get started.

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sam cassatt

Founder @Aligned Capital, Former Chief Strategy Officer @ConsenSys