Warning: This is a long article so if you have ingested cannabis recently you may not make it through to the end. 😉 Come back after you sustain for at least 24 hours.  Reference: “Attention, memory and learning are impaired among heavy marijuana users, even after users discontinued its use for at least 24 hours”- “The Residual Cognitive Effects of Heavy Marijuana Use in College Students,” Pope, HG Jr., Yurgelun-Todd, D., Biological Psychiatry Laboratory, McLean Hospital, Belmont, MA

I put these notes together because the topic of cannabis is coming up at holiday parties and in discussions with friends and family.  I personally want to be knowledgeable on the subject because we live in Washington DC where cannabis use has been decriminalized.  I walk in the morning each day and see many people openly using it as I stroll along the waterfront–I have no issue with this, but I do take issue with users NOT having all the information about the impact of cannabis on their health (especially people under 25–more below).  I also think that there is a lot of confirmation bias occurring as I discuss the subject with others.

Let’s start with the confirmation bias by reviewing something similar from 1991 when 60 Minutes ran a story about the potential benefits Americans could potentially get from drinking more red wine.  Morley Safer stated that “the (French) farmers have been eating a very high-fat diet, it seems, and yet they don’t get heart disease,” “the explanation of the paradox, may lie in this inviting glass” – and demand for red wine spiked!  –what did I do?  I loaded up on red wine.   Yet the American Heart Association reported that many of red wine’s benefits, including antioxidants and HDL, can be obtained through other fruits and vegetables and no “direct comparison trials” had been conducted “to determine the specific effect of wine or other alcohol on the risk of developing heart disease or stroke.”  Why do I bring this up? Simply to help you understand ‘confirmation bias’– the tendency to search for, interpret, favor, and recall information in a way that confirms one’s preexisting beliefs or hypotheses.  People tend to interpret ambiguous evidence as supporting their existing position.  The effect is stronger for emotionally charged issues (politics, alcohol, and weed) and for deeply entrenched beliefs especially if you are personally involved.  I believe this same thing is happening with cannabis and many people are ignoring the issues and, more importantly, the ‘known’ unknowns!

So what facts do most people know… what facts may they not know… and what is currently unknown (or what do we know that we don’t know–the ‘known’ unknowns)?

Let’s review the facts that most people DO know

The main psychoactive part of cannabis is tetrahydrocannabinol (THC), a chemical compound known as a cannabinoid, which is one of 483 known compounds in the plant, including at least 65 other known cannabinoids (but there might be up to 113). Cannabidiol (CBD) is the second most referred to cannabinoid.  CBD is generally known as the cannabinoid that does not have intoxicating effects like those caused by THC and may have an opposing effect on disordered thinking and anxiety produced by THC.  

There are 3 species of cannabis: SativaIndica, and Ruderalis. Sativa is widely accepted as being indigenous to Central Asia, Indica may have originated from the Hindu Kush mountain range and Ruderalis is native to central and Eastern Europe and Russia. Indica strains generally provide a sense of deep body relaxation. Sativa strains tend to provide a more energizing experience and the effects of Ruderalis are minimized by its naturally low concentrations of THC.  Note that how Indica & Sativa make users feel has not been scientifically proven. Ruderalis is attractive to breeders because of its auto-flowering trait.  When medical cannabis dispensaries promote their products, they will report both the amount of THC/CBD and the strain I=Indica, S=Sativa and H=Hybrid of the 2 other strains. Usually, they will also report the symptoms and conditions as seen in the figure.

Beyond cannabinoids, cannabis also contains “Terpenes” the fragrant oils that give cannabis its aromatic diversity (berries, fuel, Lavender etc.). These oils are secreted in the flower’s sticky resin glands. Terpenes are by no means unique to cannabis; they can be found in many other herbs, fruits, and plants as well. Like cannabinoids, terpenes bind to receptors in the brain and give rise to various effects. Different harvests may demonstrate dramatically different terpenoid profiles due to variances in growing and curing techniques. Myrcene is the most abundant terpene in cannabis, which is where it’s mostly found in nature. It can make up as much as 65% of total terpene profile in some strains. Limonene is the second most abundant terpene in all cannabis strains, but not all strains necessarily have it. Linalool is the most responsible for the recognizable cannabis smell with its spicy and floral notes. Caryophyllene has a spicy and peppery note. Alpha-pinene and Beta-pinene smell like pine trees. Alpha-bisabolol has a pleasant floral aroma. … and there are many more Eucalyptol, Trans-nerolido, Humulene, Delta 3 Carene, Camphene, Borneol, Terpineol, Valencene, and Geraniol.

As of November 2018, 33 states and the District of Columbia have broadly legalized cannabis for recreational (The District of Columbia, California, Colorado, Maine, Massachusetts, Michigan, Nevada, Oregon, Vermont, and Washington) or medical use under certain circumstances.

Many state politicians are moving to legalize cannabis because:

  • Their constituents (funders and voters) are pushing for it (62% of voters want Cannabis legalized)
  • The tax revenues are sorely needed by the state governments (Study: Legal cannabis could generate more than $132 billion in federal tax revenue and  1 million jobs)
  • There are too many people incarcerated for cannabis possession costing taxpayers a fortune (Stats: Number of people arrested in the USA for a cannabis law violation in 2017: 659,700; Number of those charged with cannabis law violations who were arrested for possession only: 599,282 (90.8%); Cost’s taxpayer ~$15.9 Billion/year).
  • Having a safe source of cannabis that’s not contaminated with pesticides or laced potentially with other drugs will save lives.

Several medical benefits have been proven:

  • In June 2018, the food and Drug Administration (FDA) approved the use of a medication containing cannabidiol (CBD) to treat two rare, severe, and specific types of epilepsy — called Lennox-Gastaut syndrome and Dravet syndrome — that are difficult to control with other types of medication. This CBD-based drug is known as Epidiolex. A study published in 2017 found that the use of CBD resulted in far fewer seizures among children with Dravet syndrome, compared with a placebo.
  • Evidence suggests that oral cannabinoids are effective against nausea and vomiting caused by chemotherapy, and some small studies have found that smoked cannabis may also help to alleviate these symptoms.
  • Evidence to date suggests that cannabis could help to treat some mental health conditions. Its authors found some evidence supporting the use of cannabis to relieve depression and post-traumatic stress disorder symptoms. That being said, they caution that cannabis is not an appropriate treatment for some other mental health conditions, such as bipolar disorder and psychosis.
  • Another comprehensive review of the evidence, published last year in the journal Clinical Psychology Review, revealed that using cannabis may help people with alcohol or opioid dependencies to fight their addictions. But this finding may be contentious; the National Academies of Sciences review suggests that cannabis use actually drives increased risk for abuse, and becoming dependent on, other substances.
  • review from the National Academies of Sciences, Engineering, and Medicine assessed more than 10,000 scientific studies on the medical benefits and adverse effects of cannabis. One area that the report looked closely at was the use of medical cannabis to treat chronic pain.

A lot of people with “Doctor” in their titles say there is “evidence” that cannabis has a lot of positive medical benefits.   Websites are reporting benefits such as weight loss, prevent diabetes, fight cancer, treat autism, heal broken bones, treat ADHD, slow Alzheimer’s disease, treat STDs, help OCD, improve skin, replace viagra, lower blood pressure etc…  I’m not saying these items are not true–they are just NOT proven like Safer’s red wine story above.

And finally, many people are medicating, self-medicating or just enjoying cannabis.  (USA: 22.2 million, International: 158.8 million)

What most people DON’T know?

There has NOT been a lot of research—Why? We know a lot about how alcohol impacts the body because researchers have been doing studies for years (more).  But we don’t know more about the impact of cannabis on the body primarily because the U.S. Drug Enforcement Administration (DEA) considers cannabis a Schedule I drug, the same as heroin, LSD, and ecstasy, and likely to be abused and lacking in medical value. Because of that, researchers need a special license to study it.   Hopefully, this turns around soon given Sen. Chuck Grassley (R-IA), a longtime ardent cannabis legalization opponent, is stepping down as chair of the Senate Judiciary Committee potentially paving a path forward for cannabis legislation in the 116th Congress and Sen. Lindsey Graham (R-SC) is taking over.  Graham is significantly more open-minded about medical cannabis and other common-sense reform measures than the current chairman is. Grassley refused to let any cannabis bills come to a vote as Judiciary chairman, Graham has cosponsored of legislation to protect legal medical states from federal interference, supported the reschedule of cannabis and supported the removal of cannabidiol (CBD) from the list of federally banned substances.

How cannabis impacts the brain. Cannabis acts on the body’s endocannabinoid system. Great video here. A great scientific description of cannabinoids here and here. We have cannabinoid receptors all over the brain and endocannabinoids are released naturally by the body to perform certain functions. For example, the hypothalamus releases them to stimulate appetite.  Guess what?  THC (tetrahydrocannabinol) also binds to these receptors—ever hear of the ‘munchies’?  The cannabinoid receptors are special receptors within the endocannabinoid system in the brain. The cannabinoid THC molecule activates particular cannabinoid receptors. These receptors, called CB1 and CB2 (there may be many others found in the future), work like a lock and key when flooded with cannabinoids after a user ingests cannabis.  CB1 receptors are found primarily in the brain, more specifically in the basal ganglia and in the limbic system, including the hippocampus and the striatum. They are also found in the cerebellum and in both male and female reproductive systems. CB1 receptors are absent in the medulla oblongata, the part of the brainstem responsible for respiratory and cardiovascular functions (likely why you can’t overdose easily on cannabis). CB1 is also found in the human anterior eye and retina. CB2 receptors are predominantly found in the immune system or immune-derived cells with the greatest density in the spleen. While found only in the peripheral nervous system, a report does indicate that CB2 is expressed by a subpopulation of microglia in the human cerebellum. CB2 receptors appear to be responsible for the anti-inflammatory and possibly other therapeutic effects of cannabis.  Cannabinoid receptors are activated by three major groups of ligands (a molecule that binds to another molecule) endocannabinoids, produced from within the body, synthetic cannabinoids (such as HU-210),  and plant cannabinoids (such as CBD & THC).

There are potentially big negative impacts

  • Cannabis can be addictive to some people  The ‘dependence’ scenario is known as a Cannabis Use Disorder. The definition is that you’ve become dependent on it psychologically, or physiologically. About 9% of cannabis users become addicted to it. Cannabis Use Disorder in school often causes a dramatic drop in grades, truancy, and reduced interest in sports and other school activities. In adults, this disorder often is associated with work impairment, unemployment, lower income, welfare dependence, and impaired social functioning. Higher executive functioning is impaired in Cannabis Use Disorder which contributes to school and work impairment. This disorder also significantly decreases motivation at school or work. There is an increased risk of accidents while driving, at sports or at work.
  • Overdose is not likely but you can end up in the hospital… Cannabis is not in the same category as opioids that cause respiratory depression and stop breathing but it can cause hyperemesis (continuous vomiting) and increase a user’s blood pressure significantly. It can cause a user to feel paranoid and get acute psychosis and a small percentage of people may develop a long-term illness but much more research is needed.
  • It has a bigger impact on a young persons (under 25) brain. Jodi Gilman published research on 18-to-25-year-olds that showed differences in the brain’s reward system between users and non-users.  Gilman has also concluded (research) there is evidence that cannabis use, especially when initiated at a young age, (perhaps due to the effects of delta-9- tetrahydrocannabinol on cannabinoid (CB1) receptors in the brain) may be associated with worse verbal memory and altered neural development. Gilman is also reported that young adults with early-onset cannabis use had learning weaknesses and delayed recall.
  • Chronic bronchitis. There is substantial evidence of an association between long-term cannabis smoking and an increase in the frequency of episodes of chronic bronchitis. (see NASEM report referenced below)
  • Vehicle crashes. There is substantial evidence of an association between smoking cannabis and an increased risk of motor vehicle crashes. (see NASEM report referenced below)
  • Low birth rate. There is substantial evidence of an association between maternal cannabis smoking and low birth weight. (see NASEM report referenced below)
  • Schizophrenia and other psychoses. There is substantial evidence of an association between smoking cannabis and developing schizophrenia and other psychoses. The most frequent users are at the highest risk. (see NASEM report referenced below)

What is yet to be known?

We don’t fully understand the endocannabinoid system and how it is involved in certain functions (like psychosis, schizophrenia, and anxiety).  We don’t know why the response to cannabis varies so much across people. For example, some people report getting paranoid when they use cannabis and others report that it helps with anxiety.  Why?  We do know that some people have imbalances in their endocannabinoid system (under/overproduction of natural cannabinoids) in certain conditions but we don’t know exactly why.

We don’t understand what makes one user feel one way or another.  Just saying Indica is relaxing and Sativa is a stimulant is not accurate and has never been scientifically proven.  Many researchers believe that the different and diverse effects of cannabis are derived not from the genus, but from the Cannabinoids and Terpenoids produced by the plant as it grows as well as the user’s specific endocannabinoid system at the time of use.

We don’t know how to dose cannabis or how best to ingest the drug. We don’t know the appropriate doses for an individual’s physiology, or how best to take it (smoke it or use an edible).  Most medical cannabis prescriptions just get users into the dispensary but don’t say exactly what to buy and how much to take–try that at the CVS pharmacy…

We don’t know if cannabis impacts a users’ short-term memory, mood control, attention, and motivation. We know cannabis affects the hippocampus (the part of the brain that stores memories) and empirical evidence show that it may impact the ability to recall and retain information in the short term and it makes it hard to remember things, but this research is just starting.

We don’t know a lot about the impact of cannabis on the young brain. The brain is more susceptible to permanent effects of drugs if you’re younger (under 25) but in regard to cannabis is it how early it started, how frequently it’s used, the higher the dose and how bad is the impact? Unknown…  According to Krista Lisdahl, an associate professor of psychology and director of the Brain Imaging and Neuropsychology Lab at the University of Wisconsin at Milwaukee–In studies of those chronic, heavy users, “we see cannabis users have slower processing speed, worse memory and learning scores on certain tests, poorer sustained attention,”. There are also links to depression and sleep problems in some of those users, and some heavy users show brain changes linked to poorer emotional control or memory. These changes have been particularly observed in people who began using cannabis before ages 16 or 17. (more here).

We don’t know how genes play a role Scientists have identified genes that increase susceptibility, but there may be others and we are just at the beginning of understanding that.     

We know very little about the interaction of cannabis with other drugs. The Mayo Clinic lists the following ‘possible’ drug interactions: Alcohol, Anticoagulants and anti-platelet drugs, herbs and supplements. CNS depressants, Protease inhibitors, Selective serotonin reuptake inhibitors… However very little is known.

We don’t know much about each of the cannabinoids (see appendix). Per Ryan Vandrey, an associate professor of psychiatry who researches cannabis at Johns Hopkins Medicine “We know a lot about THC and we’re starting to learn about CBD”  “Out of about 400 [compounds] we know a decent amount about two.” The unknowns about what various cannabinoids do and how they interact with each other create plenty of questions about the best ways to use medical cannabis. That means there’s a lot to learn about which compounds might contribute to psychoactive effects and which might potentially have medical uses.

The National Academies of Sciences, Engineering, and Medicine (NASEM) has released a thorough report that answers what claims are well-grounded and what claims are not. The report is based on more than 10,700 abstracts of papers published in peer-reviewed journals since 1999. Download here.

These notes are not about legalization—in fact, legalization is good (especially at the federal level) if it allows scientists to better understand cannabis and its impact on the brain.  These notes are about understanding what is known and what is unknown so you can make a reasonable decision on your own personal use now that cannabis is being decriminalized across the country. You don’t want to be one of those people that said—no one told me that smoking tobacco caused cancer.  Especially when scientists suspected it as far back as 1898.  Remember science blunted the power of the tobacco industry and prevented nearly 800,000 cancer deaths in the United States between 1975 and 2000. 

Please keep in mind that there are a number of moving parts in the cannabis equation.  There are the cannabis cannabinoids (science has only really studied 2 out of the >100 that may exist), the cannabis terpenes (>100 most not studied in regards to impact on health), how the cannabis is ingested (smoked, edible), how much cannabis is ingested (mg), your cannabinoid receptors (we know of 2 but think there are more), your endocannabinoid system (not well understood by science yet it is believed to regulate and balance things like nerve functions, stress recovery, inflammation levels, immune function, energy intake and storage, cell life and the circulatory system), and your specific DNA–not to mention interaction with other things you have taken.  So don’t say “people have been smoking it for 100’s of years”, “I like to get high and it’s not having an impact on me”, “It’s healthier than drinking” without understanding that you are getting involved with a very complex drug that is not well understood.

If you are going to use cannabis know your facts and stay up on the science or risk being one of the “No one told me cannabis caused…” of the future.

Stay up to date on cannabis research by leveraging the NIH.gov site.




Appendix 1: Here is a list of the most well known cannabinoids:

        Cannabichromene (CBC) – non-psychoactive and does not affect the psychoactivity of THC. CBC has shown antitumor effects in breast cancer xenoplants in mice. More common in tropical cannabis varieties.
        Cannabichromenic acid (CBCA)
        Cannabichromevarin (CBCV)
        Cannabichromevarinic acid (CBCVA)
        Cannabicyclol (CBL)
        Cannabicyclolic acid (CBLA)
        Cannabicyclovarin (CBLV)
        Cannabidiol (CBD) – CBD does not have intoxicating effects like those caused by THC, and may have an opposing effect on disordered thinking and anxiety produced by THC. Cannabidiol has very low affinity for the cannabinoid CB1 and CB2 receptors but is said to act as an indirect antagonist (blocks or dampens a biological response) of these receptors. At the same time, it may potentiate the effects of THC by increasing CB1 receptor density or through another CB1 receptor-related mechanism.
        Cannabidiol monomethylether (CBDM)
        Cannabidiolic acid (CBDA)
        Cannabidiorcol (CBD-C1)
        Cannabidivarin (CBDV) – usually a minor constituent of the cannabinoid profile, enhanced levels of CBDV have been reported in feral cannabis plants from the northwest Himalayas, and in hashish from Nepal.
        Cannabidivarinic acid (CBDVA)
        Cannabielsoic acid B (CBEA-B)
        Cannabielsoin (CBE)
        Cannabielsoin acid A (CBEA-A)
        Cannabigerol (CBG) – is non-psychoactive but still contributes to the overall effects of Cannabis. CBG has been shown to promote apoptosis in cancer cells and inhibit tumor growth in mice. It acts as an α2-adrenergic receptor agonist, 5-HT1A receptor antagonist, and CB1 receptor antagonist. It also binds to the CB2 receptor.
        Cannabigerol monomethylether (CBGM)
        Cannabigerolic acid (CBGA)
        Cannabigerolic acid monomethylether (CBGAM)
        Cannabigerovarin (CBGV)
        Cannabigerovarinic acid (CBGVA)
Cannabinols and cannabinodiols
        Cannabinodiol (CBND)
        Cannabinodivarin (CBVD)
        Cannabinol (CBN) – the primary product of THC degradation, and there is usually little of it in a fresh plant. CBN content increases as THC degrades in storage, and with exposure to light and air. It is only mildly psychoactive. Its affinity to the CB2 receptor is higher than for the CB1 receptor.
        Cannabinol methylether (CBNM)
        Cannabinol-C2 (CBN-C2)
        Cannabinol-C4 (CBN-C4)
        Cannabinolic acid (CBNA)
        Cannabiorcool (CBN-C1)
        Cannabivarin (CBV)
        Cannabitriol (CBT)
        Cannabitriolvarin (CBTV)
        Delta-8-tetrahydrocannabinol (Δ8-THC) – The principal psychoactive constituent of cannabis
        Delta-8-tetrahydrocannabinolic acid (Δ8-THCA)
        Delta-9-tetrahydrocannabinol (THC)
        Delta-9-tetrahydrocannabinol-C4 (THC-C4)
        Delta-9-tetrahydrocannabinolic acid A (THCA-A)
        Delta-9-tetrahydrocannabinolic acid B (THCA-B)
        Delta-9-tetrahydrocannabinolic acid-C4 (THCA-C4)
        Delta-9-tetrahydrocannabiorcol (THC-C1)
        Delta-9-tetrahydrocannabiorcolic acid (THCA-C1)
        Delta-9-tetrahydrocannabivarin (THCV) – prevalent in certain central Asian and southern African strains of Cannabis. It is an antagonist of THC at CB1 receptors and lessens the psychoactive effects of THC.
        Delta-9-tetrahydrocannabivarinic acid (THCVA)
Miscellaneous cannabinoids
        10-Oxo-delta-6a-tetrahydrocannabinol (OTHC)
        Cannabichromanon (CBCF)
        Cannabifuran (CBF)
        Cannabiripsol (CBR)
        Cannbicitran (CBT)
        Dehydrocannabifuran (DCBF)
        Delta-9-cis-tetrahydrocannabinol (cis-THC)
        Tryhydroxy-delta-9-tetrahydrocannabinol (triOH-THC)

Your First 30 Days As CEO

Congratulations!  You have been brought in by investors to repair or scale a struggling tech company.  The investors still believe in the company and need an experienced operator to right the ship.

The investors likely brought you in because either the company is shrinking or not growing (see Figure 1 for likely scenarios) and the investors have decided the problem was leadership. Or, perhaps the outgoing CEO was tired or didn’t have the skills for the next level of growth.

Figure 1: Turnaround Scenarios

Regardless, you now have the job so you better have done your homework before accepting the role.  You hopefully understand the financial situation, why the CEO departed, individual board members’ views of the company’s opportunity/risks/expectations and the ownership (cap table).  You should have also fully digested all available news, analyst research, competitive positioning, and GlassDoor feedback. Oh, and find the date of the next board meeting. After all, you do report to them.

Figure 2

Your job is to lead the company, find growth, scale the organization (In figure 2–move the company from A to B) and do a stupendous job communicating to all the stakeholders.

You need a 30-day plan.

But Be Careful.  You must learn quickly, but you don’t want to bring down the entire organization doing busy work as you come up to speed.  Be respectful of people’s time and leverage the finance team as much as possible versus customer-facing employees.  Realize that you are an unknown to the ecosystem; all people know about you is what is online. In other words, they will have judged you before they have ever met you.   Be careful not to undermine your new management team by going a couple levels down in the organization without their consent, and be careful not to engage in speculative discussions (spitballing half-baked ‘what if’ ideas) that could easily be misunderstood.  And above all else, in the first 30 days, provide no directives unless you are forced to, and then only move forward with the thoughtful involvement of your team.

Note: McKinsey wrote a great article about the time between accepting the CEO role and starting the job.  You can find it here.

First Step: Broadly communicate your vision of a better company

Help the employees understand why you took the job and your approach. It’s too early for specific plans however you should convey the values that you will use as a framework for making future decisions. Be clear about your management style so everyone is not wasting energy trying to figure out how to please you.

Here is an example of Dara Khosrowshahi’s first message to employees at UBER.

Second Step: Get your team together

Face to face is best (because you want to take a temperature of the team dynamic) but if you are geographically dispersed then make the best of it.  Go around the room (or call) and ask the team to speak to the following in 5 minutes or less:

  • Introduce themselves (how long they have been at the company and something personal like what they enjoy doing in their free time).
  • The top 3 things they must get done in the next 30 days and who on the leadership team they are working with on the task- no detailed explanation for each or discussion (only clarifications if necessary).
  • Something they want to know about you.

You should go last and provide as many answers to their ‘something to know about you’ questions as possible and then explain how you will proceed with your next 30 days of learning.   Your goal is to get introduced to the team dynamics, understand some of the cultural norms and help lay some groundwork so they understand how you think and what the next few weeks are going to look like.  You might also find that there are a couple of surprises hidden in the team’s top 3 priorities that you need to understand more clearly in a 1-on-1 discussion.

Third Step: Schedule 1-on-1’s

Start collecting data ASAP. Start with your management team, then meet with as many individual sales representatives as possible as they will have the best understanding of the market, then meet a minimum of 10 customers and partners (see the ‘be careful’ section above…).   Try to get a true idea of the culture –not just what you read on https://glassdoor.com.  The culture is made up of all the stories employees, customers and partners talk about when you’re not around–so it takes time to understand.

Be consistent with the questions you ask–Here are some suggestions:

The remaining steps are in no particular order.  Your goal is to get enough information to begin to understand the culture, the people, the customers, the partners, the issues, the opportunities, and the risks.

— “Once the information is in the 40 to 70 range, go with your gut.” – Colin Powell

Finance: Dig into the financials and the KPIs

Go over all the standard financials (Income statement, balance sheet, P&L, budget, forecast etc.) in detail looking for anything that does not meet the standard KPIs. 

  • For Software as a Service (SaaS) businesses leverage all the well-known metrics and KPI’s (CAC, LTV, MRR, Churn etc..)–you can find all the metrics and KPIs here.  Specifically look for any KPI’s that are out of range such as a low LTV to CAC ratio (LTV should be >3x CAC) or when months to recover CAC < 12….  Great site for deep dive on SaaS financials here.
  • For traditional businesses leverage old school KPI’s found here.

Finance: Go deep on expenses

Review 20% of the expenses that make up 80% of the spend.   Tag each expense with its corresponding revenue impact and its significance as best you can… With an immature team, this may be difficult but give it a go.

Then chart out the expenses and prioritize quadrant’s A and B so you know what the team can cut if they either needed to invest in something more important OR had to ensure a minimum of 2 months of working capital available for payroll.

Finance/Sales: Go deep on current contracts

Look at the 20% of the contracts that equate to 80% of the revenues.  Dig into as many as possible and look at their profitability, % of business, terms, risks, upside and most important their significance to the company.

Chart the contracts out so you can visually see how they map to the organization.

Contracts in Quadrant A you should understand the issues and determine if there is any way to renegotiate.  Quadrant B – How can we get the cost down ‘per account’? Quadrant C – How can we get the cost down ‘overall’.  Quadrant D – Ask: How do we do more of these?

Finance: Go deep on AR and AP

Accounts Receivables (AR) and Accounts Payables (AP) – You want to ensure you understand any large outstanding receivables or payables that are behind and could impact near-term cash flow.

Finance: Break up the P&L

Break out the natural categories of a P&L and look into the company’s performance per sector, per vertical, per product/service.   If professional services are sold break out into separate P&L (more).  You need to understand where the company is financially strong and where they are struggling. 

Finance: Budget vs. Actuals

You need to figure out the budget process and how well the team has done. Are they always behind budget? are they always exceeding? Or are they on target?  Each result tells you something different.

Finance: Understand banking, legal, accounting, tax and insurance relationships

These third parties should be consultants to the company–you need to gauge if they are being used in this way.

Sales: Do a deep dive on sales stages

Start with the stages outlined in the CRM but realize there may be other stages that have not been programmed into the CRM for a multitude of reasons. Do a deep dive on every stage looking for people involved… processes involved… business logic… and data.

What are all the ways a lead finds its way into the CRM? How long does it take a lead to be contacted? Who contacts? What do they say? How is this recorded? What analytics are available? What business logic is used to turn a lead into an opportunity? Who makes this decision and why? How long does this take? What stages does an opportunity go through in the company? Who all touches an opportunity from the time its created to the time it’s closed? When does an opportunity become a ‘dead deal’? Why? Who makes this decision? Are there analytics on how many opportunities die and why?

This list will be long but it will uncover many hidden gems.

Sales: Do a pipeline review

…of each appropriate segment (example: Enterprise versus Small & Medium Business (SMB))

For the Enterprise segment you want to figure out how well the team understands their customers’ business, the competition, how tight of a solution sales process exists and to get a general sense of the potential of the organization.

Try to review the top 80% of the revenue opportunity by account representative.  If possible also look at history (closes since start) to see how well they have done for the company and what types of discounts are being applied.  Comparing that history to the current velocity/deal revenue is also key.

Dig into the deal dynamics and see if the team understands (Pain) i.e. what is making the customer buy? (Power) How well does the rep know the person empowered to write a check?  If the deal is 40% or higher do they have a written commitment in email? (Vision) How well the rep knows how our solution would fix the problem and by when. (Value) Does the rep know how much our solution would this save (or make) the customer? (Control) What are the next steps w/dates? …and if the company is using Solution Selling read a few of the ‘Sponsor Letters’ & ‘Evaluation Plans

For the SMB segment, look more at velocity and the process surrounding the business.  Compare the rep history to the pipeline.  Spot check a few of the bigger deals.  Understand the link between marketing and the SMB sales team–are there any gaps (example: when a prospect fills out a form how long before an action).  Understand the automation, the CRM and all the tools surrounding the process.

For channel deals you want to understand the registration process (if one exists) and how well the channel opportunities are managed and if there is ever any negative competition between the channel and the sales teams.  Compare the history to the current deals and stack rank the top partners to ensure you know who they are and setup exec to exec meetings as soon as possible.

Sales: Pipeline Post Mortem

Identify why we are losing/winning and find the trends… Understand customer churn. Understand the number of deals (and revenues) we lost in the past 12 months and why.  Understand who (competitor) we are losing to (or winning against) consistently.

Marketing: Conduct a simple Customer, Employee, and Partner anonymous satisfaction survey

Have your marketing team pull together 3 quick surveys using Google Survey or another tool like SurveyMonkey.  Add your own personalized message to each of the outgoing messages introducing yourself.

If the company already does these surveys that is a great sign.  If so, there is no reason repeat these surveys just dig into the feedback AND also understand how the feedback is incorporated into leadership/management strategy, product planning and HR/Sales/Marketing/Support process changes.

Marketing: Marketing Review (Product, Place, Promotion, and Price)

It will take time to learn how well your marketing team is managing the website, the social networking presence, event marketing, landing pages, and paid advertising. However, it is always eye-opening to find the gaps in the data (“we don’t track that…”).

Find out how traffic is getting to your website and what is it costing the company:

Understand the social networking activity:

Understand how much events are costing the company and how the team is tracking success:

Understand Google/Bing ad spend and ROI:

Understand what landing pages are the most successful and why:

Sales/Product/Marketing: Understand the market

Understanding the Total Addressable Market (TAM) is key to any business.

Here is an example of how one group measured how many companies in the USA were potential targets (dark blue) based on employee count and vertical industry–just using US Census data.

Sales/Product/Marketing: Understand the competition

Read everything you can about your competitors.  If you can afford Gartner research buy it…  You need know your enemy.

Know your strengths and weaknesses: if you know the enemy and know yourself, you need not fear the result of a hundred battles. –Sun Tzu “The Art of War”

Product: Product Review

Learn as much about the product(s) as you can… Take training, use the product(s), read any patents etc… There is no need to be an expert, but you should understand the nuances of what your customers are purchasing, complaining about and why.

You need to also understand the product development and DevOps processes as they currently exist (high level).  What tools (Atlassian, Jenkins, Kubernetes, Docker etc…), what hosting providers (AWS, Azure, Google etc..), what languages (C, golang, etc..), what third-party services are integrated into the solution (CRM, Database, OpenSource projects etc..).

Assuming the team leverages Agile (if not, you need to dig into why) you should understand the sprint cycle (1 week, 2 weeks etc.), burndown, and velocity.  Does the team use LEAN startup practices such as the MVP concept?

You should understand how well the team is performing Agile (how long are standups, are they documented, how retrospectives are done, does the team use business value points). You should also get a view on how well the team is doing continuous delivery and if they are measuring items such as ‘Commit to Deploy’ metrics.  It’s important to also understand how the team manages with defects and bugs.

Finally, if some of the team is offshore, or part of a third party, it’s important to dig into how well those groups are integrated into the teams to get a sense of productivity.

Product: Review Product Backlog with Product Owner

Now that you understand the product, go deep on what the Product team is working on and why.  Try to get insight on how well the plan correlates to the market needs. If the team is using Story (Business) Value points validate these with what you are learning from the rest of the team and from customers (If not, then clearly understand how they are prioritizing the market needs as this is SUPER critical for success).

Support/Product/Sales: Review Customer Support Issues

Customer support excellence can be the key to customer renewals, product backlog prioritization and upsell/cross-sell sales if used appropriately. Dig into the issues, the timeliness and quality of resolution and understand how those issues are used in the organization.

“Your most unhappy customers are your greatest source of learning.”  — Bill Gates

Human Resources: Understand Employee Performance and Rewards

Your Human Resources team should be able to provide you a list of roles in the company and their compensation bands and then a list of employees for each role with their date of last performance review (and rating)–if not, you have more work to do…   You’re looking for how mature the HR processes are… How people are rewarded… Are you paying market rates… and most importantly turnover rates.

Human Resources: Understand Recruiting

Hiring qualified employees is hard and hiring the best is difficult.  Hiring the best is going to be key to future performance gains.  How well is your team set up to hire the best?

Human Resources: Understand HR Policies and Procedures

Review the employee handbook and all policies and procedures.  Some examples: Logical access policies, Incident response plan, disaster recovery plan.  If the organization is SOC 2 certified review the audits.

All Teams: Understand the risks

Risk management is something that must be done continually.  Doing it well can be the key to success if you need to make a quick pivot in the future.  If the team is not doing this already you need to add it to your 60 to 90 days list.

You: Report card

After 30 days you’ve learned a great deal and hopefully formed some opinions about the people, processes, and product(s).   It’s a good idea to record it all on a report card–not to be shared but to refer back to periodically and reflect.  Write down why you rated each group the way you did as it will be helpful to use this as you continue your journey.

Now it’s time to lead! You and your team now have to determine what actions are required to grow the business.

Reference the figure below–You’ve likely been brought into the company in the ‘production stage’ either in A (the company has not achieved Product-Market Fit and is surviving on Professional Services revenues or Other People’s Money) or in B (the company has reached Product Market Fit and it’s time to tune the organization for growth).   Likely it’s going to be somewhere in between, however, the key is to now have a good idea on where to focus your energy for the next 60 days because you can’t do everything (A. Innovation management and Product/Program management or B. Leadership and Sales/Marketing management).

–“People… Process… Product…” — The Profit

It’s easy to be overwhelmed at this point–the business is going to start coming at you fast.  Customers, prospects, managers, partners, analysts, board members, bankers, attorneys etc… will all want a piece of your time.   The issues at hand will require time… Scheduled event and meetings will require your time.  Your job–not to become reactive to the demands on your time (remember the ‘Big Rocks’ story from Stephen Covey?)–project manage your schedule to where you continually reprioritize the demands on your time and STAY PROACTIVE.  Remember, you have a job to do and that is to ignite growth in a company that has not been growing–that means doing something different and if you become reactive to these demands you will become part of the problem. I’d recommend 2 actions now–Schedule a leadership team offsite and get into the right frame of mind by re-reading that old book on your shelf called The Five Dysfunctions of a Team.  You’re also going to feel like diving right in and starting to provide guidance and poking harder at the items you rated low in your report card–just recognize how disempowering this may seem to the team.   You have to get your hands dirty–that’s required but at this point in your journey, you need to lead vs. manage. The next 60 days are going to be difficult.  You may need to tighten up the people, processes, and temperament of your leadership team.  You and the team will need to determine what to prioritize and de-prioritize… and then change management comes with its own cultural challenges.

A preliminary view of the next 60 days in the role…

  • Communicate with the board – As you develop your boardroom relationships, you must view the directors as neither friends nor confidants, but as bosses who hold you personally accountable for the success of the company. By actively investing in director knowledge and relationships—through one-on-one contacts, e-mail updates of corporate progress, and distribution of background material, for example—the best CEOs turn board meetings into participatory discussions rather than show-and-tell sessions by management. A new CEO who is open with—and creates the opportunity to collaborate with—their directors will be more likely to garner support from these bosses. – HBR 
  • Help your managers understand your expectations in regards to ‘leadership’.  If Management is about systems, processes, policies and resources and Leadership is about vision, inspiration, values, and people then the basic premise is that ‘Leaders deal with management shortfalls’. Basically, leadership is required when the systems & process do not work…. Leadership is required when the policies are not applicable or do not exist… Leadership is required when there are not enough resources to accomplish the task… (more)

“You are entirely responsible. It all comes down to you.” Extreme Ownership

  • Begin to introduce your team to strategic planning (if necessary)

You will quickly begin to understand how well the troops understand what the company’s Vision and Mission are and if it means anything to them (example: Microsoft’s Vision/Mission is “We believe in what people make possible. Our mission is to empower every person and every organization on the planet to achieve more.”). You will also quickly find out how well the teams know the goals they are trying to achieve, their strategy for achieving the goals, and how they are measuring success toward those goals.  If you find gaps up and down the chain it may be time to do a bit of work on your strategic plan.

  • Begin to introduce your team to innovation planning (if necessary) — Perhaps leverage Blue Ocean Strategy

If you find that the company is competing head to head with others and losing share it may be time to look at creating uncontested market space that can create new demand or break the value-cost tradeoff.

  • Depending on where your team scores on the report card it may be time to begin to introduce a new way to approach the business.  Here are some of my favorite tools:
  • Introduce your team to SCRUM (not just the product team)

Good luck, I can’t wait to see you ringing the NASDAQ bell someday soon!

Other articles you may find of value:

  • Now you’re in charge: the first 100 days (here)
  • Five Myths of a CEO’s First 100 Days (here
  • Assuming Leadership: The First 100 Days (here)

Where are the bloody entrepreneurs?

For many years’ scientists have researched Parabiosis (transfusing young blood into aging animals) to bring stem cells throughout the body back to life, helping to heal damage, replace cells, and increase organ function. 

Medical overview found here.

Many interesting findings resulted from the research such as:

  • 2005: Thomas Rando’s (Stanford University) research showed that older tissue seemed to contain the same amount of stem cells as younger tissue. Rando swapped the blood of young and old mice. After five weeks, Rando found an astonishing reversal: The younger mice had started aging, their stem cells lagging and their muscles dragging. The older mice, however, were hyped up on new cells that made their livers youthful, their hearts stronger, and practically reversed aging.
  • 2013: Amy Wagers and Richard Lee found that a protein from the blood of young mice can reverse the symptoms of heart failure in older mice. They showed that the protein GDF 11 appeared to act on skeletal muscle stem cells and enhance muscle repair. (this study disagrees)
  • 2014: Researchers found that higher levels of the hormone oxytocin in young blood stimulate muscle growth. Factors in the blood also seem to stimulate stem cells in many organs to start dividing again. This in effect, brings stem cells throughout the body back to life, helping to heal damage, replace cells, and increase organ function.
  • 2014: Saul Villeda, Tony Wyss-Coray and their team found that exposing an old mouse to young blood can decrease apparent brain age. The effects were seen not only at the molecular level, but also in the structures of the brain, and in several measures of learning and memory. In this case, the effects were controlled by a specific protein in the brain known as Creb (cyclic AMP response binding element), although the stimulating factor in the blood was not identified.
  • 2016: Irina Conboy’s research team used a blood exchange technique between old and young mice, without surgically joining them. When they received old blood, the muscle strength of young mice decreased, and the growth of their brain cells slowed down. A protein known as B2M (beta-2-macroglobulin) may be involved in this process, although it does not appear to be elevated with age-possibly acted on by another signal from the older blood.
  • 2017: Hanadie Yousef at Stanford University identified a protein called VCAM1 that increases with age and causes signs of aging when injected into young mice.
  • 2017: (study) A protein in the brain, Tet2, declines with age, but mice whose brains have been given a boost of Tet2 are able to grow new brain cells and they improve at mouse-learning tasks.  Such a boost in Tet2 can be provided by the presence of young blood because in these experiments, old mice who are joined to young mice in a parabiosis have an increase in Tet2 in their brain.

So, if it works in mice, what about humans? This is a little trickier because of the lack of research, risks and, regulatory challenges that we will get into, but 2 companies are pioneers in the field:

  • Alkahest (http://www.alkahest.com ) – Tony Wyss-Coray (board member), a neurobiologist studying Alzheimer’s disease at Stanford University has done research where plasma from young donors (aged 18-30) was transfused into patients with dementia (results of a trial).  Alkahest announced in 2016 that it had used human teen blood, injected it into old mouse blood, and remarkably reversed aging. From tired, slow, and decrepit, the elderly mice suddenly had sharp memories, renewed cognition, and were exercising with the vigor of youth. “Wyss-Coray’s lab analyzed many of the 700 protein factors circulating in the blood to determine how such factors could affect stem cell function over time. They found that they could determine a person’s relative age by analyzing these factors.” (more).
  • Ambrosia Plasma (https://www.ambrosiaplasma.com) – Jesse Karmazin’s company Ambrosia is transfusing plasma from people aged 16-25 into people aged 35-92. They found that those who had been treated with young blood had lower levels of several proteins known to be involved in disease, namely carcinoembryonic antigens (which increase in cancer patients) and amyloid (which forms plaques in the brain in Alzheimer’s disease patients). Ambrosia transfuses plasma into patients for a ~8k price (here). Video (here)–From the video you can glean that this takes ~2 hours and they have found after 1 treatment a 20% reduction in amyloid (a starch like protein that is deposited in the liver, kidneys, spleen, or other tissues in certain disease) + lower cholesterol and lower inflammation biomarkers.  That being said, an update posted here reported that “…none of the results so far are either large enough or extensive enough to definitively be something other than the placebo effect, chance, or other items such as a patient making lifestyle changes”.

Beyond Wyss-Coray and Karmazin there are several others doing incredible research in this area.   Here are just a few and their referenced papers:

  • Conboy IM, Conboy MJ, Wagers AJ, et al. (2005) Rejuvenation of aged progenitor cells by exposure to a young systemic environment. Nature 433:760-764.
  • Brack AS, Conboy MJ, Roy S, et al. (2007) Increased Wnt signaling during aging alters muscle stem cell fate and increases fibrosis. Science. 317:807-810.
  • Villeda SA, Luo J, Mosher KI, et al. (2011) The aging systemic milieu negatively regulates neurogenesis and cognitive function. Nature 477:90-94.
  • Vileda SA, Wyss-Coray T (2013) The circulatory systemic environment as a modulator of neurogenesis in brain aging. Autoimmunity Reviews 12:674-677
  • Villeda SA, Plambeck KE, Middeldorp J, et al. (2014) Young blood reverses age-related impairments in cognitive function and synaptic plasticity in mice. Nature Medicine 20:659-663.
  • Smith LK, et al. (2015) Beta-2 microglobulin is a systemic pro-aging factor that impairs cognitive function and neurogenesis. Nature Medicine 8:9320937
  • Kanya Honoki, (2017) Preventing aging with stem cell rejuvenation: Feasible or infeasible? NIH
  • Castellano JM, et al. (2017) Human umbilical plasma proteins revitalize hippocampal function in aged mice. Nature 544:488–492

So, if there is both proof and pioneers pushing the envelope why is not more being done given the importance of the subject? Basically, it comes down to the science is still not well understood however what is not apparent is why there seem to be very little dollars available for research.

You would also think that there would be more entrepreneurs pushing into this area given that it’s a classic marketplace problem that is well understood.   Find and pay young 20 somethings to donate blood/plasma (they need money) and then find wealthy 70 somethings to purchase the blood/plasma transfusions.   The lack of interest may be due to the risks such as:

  • Complications: Blood transfusions are generally considered safe, but there is some risk of complications. Mild complications and rarely severe ones can occur during the transfusion or several days or more after. Reactions include:
    • Allergic reaction – which might cause hives and itching, and fever.
    • Infections – Blood banks screen donors and test donated blood to reduce the risk of transfusion-related infections, so infections, such as HIV or hepatitis B or C, are extremely rare.
    • Acute immune hemolytic reaction – Your immune system attacks the transfused red blood cells because the donor blood type is not a good match. The attacked cells release a substance into your blood that harms your kidneys.
    • Delayed hemolytic reaction – Similar to an acute immune hemolytic reaction, this reaction occurs more slowly. It can take one to four weeks to notice a decrease in red blood cell levels.
    • Graft-versus-host disease – In this condition, transfused white blood cells attack your bone marrow. Usually fatal, it’s more likely to affect people with severely weakened immune systems, such as those being treated for leukemia or lymphoma.
  • Mortality: A Canadian study published in the July 11 JAMA Internal Medicine found an elevated risk of mortality from blood donated from young (17-20) and female donors–About an 8% increased risk of death from any cause.
  • Disease: Irina Conboy, a neurologist at the University of California, Berkeley and who’s research is mentioned above, says that frequently exposing older people to foreign plasma may be unsafe because hyperactivation of their immune systems could lead to autoimmune or inflammatory disease. (more)
  • Cancer: Higher stem cell replication rates also bear the risk of cancer. (more)

After all, most tech entrepreneurs don’t want to be responsible for hurting anyone (i.e. Silicon Valley’s ‘do good’ mantra).

The second reason entrepreneurs probably don’t push into this area is due to the PR backlash.  Mario Macis, an economist at the Johns Hopkins Carey Business School who has studied incentives for blood donation said: “Even though it’s legal, it’s still considered not totally moral or ethical to pay cash to blood donors.” It’s like handing out blood money and the FDA worries that paying donors would jeopardize the safety of the blood supply. If money were on the line, donors may lie about their health or their risky behaviors.   Here is just one of many examples that Ambrosia Plasma has had to endure since its founding: (example).  Several countries such as Australia, France, the UK, Japan, and New Zealand all have made compensation for blood donation illegal (more).

The third reason entrepreneurs may not be interested in this space is the fact that advertising is prohibited.   A spokeswoman for the Food and Drug Administration says the agency “regulates the collection and manufacture of blood and blood components to help protect the health of the blood donor and to ensure the safety, purity, and potency of the blood product.” While it’s not approved specifically for anti-aging treatments, like other drugs, it can be prescribed for so-called off-label uses as long as there are no advertising or efficacy claims involved.

Ambrosia Plasma purchases their plasma but to do this at scale a company would need to create their own blood bank (that adheres to the WHO guidelines), hire a knowledgeable physician (plasma is a prescription drug) several nurses and a research staff. Link to how to start a blood bank and the associated business plan. To get such a startup off the ground would require several million dollars and as noted above much more risk than most venture capitalists would care to accept.

After looking into the subject for some time I am left to wonder 2 things.  1.  Why isn’t more government/corporate research money going into such an important subject? and 2. What if matching the age of the donor and the end recipient is super important? Could we be currently harming young people that receive blood from an older donor?

Update: FDA puts out warning. (here)

Is cryptocurrency here for good?

<These notes assume you understand Bitcoin, Public/Private & Permissioned/Permissionless & federated blockchains, consensus concepts, side chains, ICO/STO, stable-coins, utility/app-payment/security tokens and smart contracts.  If you don’t please review the following notes (1) and (2).>

It’s hard to argue that the cryptocurrency world is not here to stay when you see…

  • Tech luminaries (Andreessen, Dixon) come out and say “[Crypto tokens] will soon be seen as a breakthrough in the design and development of open networks, combining the societal benefits of open protocols with the financial and architectural benefits of proprietary networks.” I listen and want to participate. (more)
  • a crypto-market cap of $194 Billion dollars (8/14/2018)
  • big finance (Goldman Sachs, JPMorgan, Morgan Stanley, HSBC, Citigroup, Barclays, Credit Suisse, Deutsche Bank, UBS, Fidelity Investments, BlackRock) getting on board (more).
  • countries (To date Senegal, Tunisia, Marshall Islands, Venezuela and many others testing the concept more) and central banks (Caribbean) issuing or considering their own cryptocurrencies.
  • regulators stepping in (more and more)
  • Intercontinental Exchange (ICE) and Starbucks getting involved (Bakkt)
  • Coinbase having more users than Charles Schwab (more) – “Charles Schwab reported 10.6 million active brokerage accounts for October, in contrast with 11.7 million users in October for Coinbase, the leading U.S. platform for buying and selling bitcoin.”

…but this market it difficult (complex tech + complex economics + the science of network effects) with many overlapping layers (Coins such as Bitcoin & Ether, Stable-coins, Utility tokens, Security tokens etc..) and too many speculators (Tim Draper).

Putting private permissioned blockchains aside for the moment (this will be a follow-on note) I tried below to outline all the basic arguments for and against cryptocurrencies such at Bitcoin & Ether AS WELL AS the tokens that rely on the success of currencies such as Bitcoin & Ether.  I will eventually use this as a rough way to determine if this is a fad or a true economic tidal wave…

  • Pro #1: A cryptocurrency such as Bitcoin or Ether is a more effective/efficient currency than FIAT (it’s scarce (Bitcoin has 21M ceiling yet fiat is easily printed), easily divisible, durable (a ledger entry that exists on computers around the world versus fiat that slowly loses value due to inflation over time), fungible, recognizable, can’t be counterfeited, highly portable (without a need for a bank), permissionless (versus fiat where you need permission to send dollars to some nations like Russia), decentralized (versus fiat that is controlled centrally) and most importantly programmable (which fiat is not)).
    • Con: Speed: Public permissionless blockchain networks are slow and currently do not scale to yield transaction throughput on the scale of Visa (1700 tps)—Bitcoin is ~7 tps and Eth is ~10 tps (more)
    • Con: Proof of Work Consensus systems use enormous resources: Public permissionless blockchain networks (especially those that use PoW consensus) require enormous resources (bandwidth, memory, and CPU). The ledger is shared and maintained by every node of the network. To be a node in the network, one needs to download the whole ledger/blockchain and keep it on their system. Distributing a ledger potentially consumes over a hundred times the energy of single databases. Scaling up from relatively niche use could be impossible.  Also, for cryptocurrencies that using proof of work (mining) as their consensus mechanism–If the market value of the reward for mining drops below the cost of mining, then miners will stop mining, and nobody will process transactions.
      • Rebuttal: Proof of Stake consensus systems and Layer 2 solutions
        • Con-Rebuttal: Proof of Stake may be more expensive than Proof of Work—see this.
    • Con: Cryptocurrencies are not a “stable” store of value. They operate less like a “currency” and more like a “stock” whose price fluctuates. What % of today’s BTC is being used to purchase services? Less than 1%?  With crypto there is no certainty of its future value–in order to be money, you need to be able to price products & contracts in it… but none of these things can be done with crypto when its price is so volatile. Artificial scarcity is essential to cryptocurrency’s value but works against making it a viable medium of exchange.  Why would you buy a soda with Bitcoin if one day it’s $1, the next $5, and the day after that $10?
      • Rebuttal: In economics, something has value if it checks the following two boxes: scarcity and utility. Scarcity means that something has a finite supply. In the case of bitcoin, the cryptocurrency has a set cap of 21 million bitcoins. Cryptocurrency’s utility lies in the fact that no government, bank or single person has control over it hence it can’t be toppled by corruption at the top.  Gold has underlying utility value in applications such as semiconductors and jewelry. Real estate has underlying value for building, farming, and mining, among others.  Cryptoassets have an enormous amount of potential underlying utility value, promising to disrupt just about everything, including payments, record keeping, legal contracts and many other industries.
        • Con-Rebuttal: Crypto is not scarce–it can be forked off. There are 1500 current currencies and new ones every day.   Maybe the network is scarce today much like MySpace was many years ago, but bigger/better networks will constantly be created.  Yet there is only 1 gold.
      • Rebuttal: Volatility is currently high, but volatility is what happens when a market is trying to figure out what the price should be–it will eventually flatten out. Stability is earned with time. The volatility issue is self-correcting.
    • Con: Deflation is bad. Bitcoin caps out at 21 million total BTC in circulation; Litecoin at 84 million LTC. These fixed supply mechanisms give them deflationary characteristics over the long term.
      • Rebuttal: Ethereum (ETH) chose to uncap the total supply of their coins and opt for long-term, pre-determined issuance schedules. No-cap cryptocurrencies are thus inflationary in nature. The risk with inflationary crypto assets is that new, future coins entering the market will reduce the value of existing coins by increasing the supply relative to demand.
      • Rebuttal: A crypto asset with deflationary characteristics could theoretically be a better store of value because existing coins are protected from future supply-based dilution.
    • Con: Cryptocurrency is not ‘required’ for anything other than ransomware payments or illicit dark-web purchases! With fiat—governments require it for citizens to pay taxes.  Who requires crypto?  Without the requirement of use you will never know the demand (i.e. supply/demand) hence you will never have a stable price given speculators currently drive the demand not use of the currency.
      • Rebuttal: Crypto may not be required but is a necessity in the developing world (more)
    • Con: Country-specific monetary policy is required for a stable society, to offer benefits (Social Security, Medicaid, Medicare) to its population and to finance wars
      • Rebuttal: Cryptocurrency and monetary policy are not mutually exclusive. (more, more, more)

So, this might be where ‘stablecoins’ get interesting and bypass most of the issues outlined above…  

    • Con: Credit and cryptocurrencies play poorly together.
      • Rebuttal: Cryptocurrency and credit are not mutually exclusive as seen with the announcement of Bakkt.
        • ConRebuttal: “it’s also a double-edged sword because it’s likely the beginning of Wall Street creating financial claims to bitcoin out of thin air (and not backed by actual bitcoins), which could offset some of Bitcoin’s algorithmically-enforced scarcity.”-Caitlin Long
    • Con: Fragmentation: like Linux, many cryptocurrencies are open-source causing new currencies to appear quickly. There are 1500 current currencies and new ones every day.
      • Rebuttal: The network is the value not the currency/code.
        • Con-Rebuttal: Maybe the network is scarce today much like MySpace was many years ago, but bigger/better networks will constantly be created.
    • Con: Lost keys: Cryptocurrency stored in a public permissionless blockchain can be lost forever if someone loses their key. Hence, most people won’t want to maintain their own private keys, and if you don’t maintain your own private keys, cryptocurrencies are essentially no different from fiat money held in banks.
    • Con: Quantum computing: The entire blockchain assumes that hash problems take a constant time to solve. If someone can solve a hash problem even slightly faster, then the whole blockchain system fails to work.
      • Rebuttal: This is fear-mongering-any potential security risks are solvable (more and more and more)


Maybe there is enough value in the Pros below to bypass all the Cons above…


  • Pro #2: A coin such as Bitcoin or Ether can be used for low-cost international money transfers: The current system is a multibillion-dollar industry that exploits immigrants with fees (Western Union skimming a %). With cryptocurrency, the transfer fees are negligible, and the transfer times are near-instant.
  • Pro #3: A coin such as Bitcoin or Ether can minimize government intervention: Allows citizens to not have their capital tracked by governments as a means of control in the case of 1) Seizure resistance by badly acting governments and 2) Ease of transport of currencies across international boundaries (cryptocurrencies allow you to cross a border with literally a billion dollars in your pocket)
    • Con: Won’t pass regulatory scrutiny: Governments won’t tolerate the loss of monetary control. The US government specifically is not going to allow wide-scale movement of money within the United States in which it can’t identify the sources and uses.  Governments also won’t tolerate illegal commerce (especially if used for terrorism).   Eventually, societal pressure to regulate cryptocurrency will increase as more fraud (example: market manipulation) is discovered. Most people want strong governments, and strong governments want to control their own currencies.  Net: Governments can make the use of cryptocurrency illegal (much like what the Saudi’s did with Bitcoin more).
    • Con: Requires Pro #1
  • Pro #4: A token based on a coin can be a better way to fund an open source network to allow it to compete with a proprietary network (Facebook, Google, Amazon, Microsoft, Apple, Netflix etc.). A token can 1. fund the operating expenses required to host the network (Bitcoin and Ethereum have tens of thousands of servers around the world that run their networks) 2. provide shared computing resources (including databases, compute, and file storage) 3. incent network participants (developers, users of the network and investors)
    • Con: Requires Pro #1
  • Pro #5: A cryptocurrency (coin or token based on a coin) can provide for the ability to sell digital goods: For example Music & Photography
    • Con: Requires Pro #1
  • Pro #6: A token (based on a coin) can be used to replace the need for a central bank:
    • Con: Well-run central banks succeed in stabilizing the domestic value of their sovereign currency by adjusting the supply of the means of payment in line with transaction demand.
    • Con: Requires Pro #1
    • Con: Bank of International Settlement’s very negative view



Want to live longer—get skinny and find some young blood!

As I age I get more interested in the science of longevity.   However, like blockchain there are more lies than there are truths and the internet is filled with the promotion of quackery.   There are however several areas of promising research.   As I build my research I will keep these notes updated on the subject.

1.      Parabiosis-Replacing old blood with young blood


Several years ago, researchers found that there were compounds in the blood of young mice that could awaken old stem cells and rejuvenate aging tissue in old mice.   The researchers focused on a protein called GDF11 and found that it revived stem cells in old muscles, making old mice stronger and increasing their endurance.  It also looked like the blood of young mice altered the brains of old mice with new neurons in the hippocampus (a region of the brain that is crucial for forming memories) and also spurred the growth of blood vessels in the brain.  Researchers also found that by injecting GDF11 alone into mice had an impact, although the change was not as large as that from parabiosis.

Later research found that the enzyme Tet2 (ten eleven translocation methylcytosine dioxygenase 2), a known regulator of gene activity linked to several age-related diseases, was responsible for the enhanced cognitive functions in the adult mouse brains.  It seems that some circulating factor in the blood was able to change the level of Tet2 in the brain.

There is still a lot of research required given some caution that waking up stem cells might also lead to them multiplying uncontrollably.

More: http://www.frontlinegenomics.com/opinion/23471/young-blood-magic-or-medicine/

2.      Caloric Restriction

Undernutrition without malnutrition has been found to be one of the most successful approaches to life extension in laboratory settings. Researchers have been able to extend the mean and maximum lifespan of laboratory rats by 40% or more.  It is theorized that the longevity extension has to do with an activation of survival mechanisms that have been evolutionarily conserved to protect an organism from stress. A small human study of 60 healthy seniors receiving an average of 1500 kcal/day for a period of 3 years found significantly lowered rates of hospital admissions and a numerically lowered death rate than an equal number of control volunteers.

The downside of caloric restriction in senior citizens relates to decreases in muscle mass, strength, aerobic capacity and bone mineral density.


3.      Gene Therapy

Mitochondria serve a variety of critical functions within the cell including supplying cellular energy, cell signaling (communication process that governs basic activities of cells and coordinates all cell actions) and metabolism (conversion of food/fuel to energy to run cellular processes, the conversion of food/fuel to building blocks for proteins, lipids, nucleic acids, and some carbohydrates, and the elimination of nitrogenous wastes.). However, a mild disruption of the mitochondrial function has been shown to increase lifespan.   It is theorized that by manipulating insulin metabolism (such as through the development of calorie restriction mimetic drugs) may modestly slow down aging.  This has to do with two hormone receptors–the receptors for insulin and IGF-1 (these receptors signal the uptake of energy and growth).  Drosophila melanogaster3 (a mutation in the gene that encodes the insulin/IGF-1 receptor) results in higher longevity.


4.      Drug: Rapamycin, an immunosuppressant and anti-cancer drug

The Navartis drug Rapamycin has been shown to extend lifespan in mice.  The drug is a biological agent discovered in the soil on Easter Island.


5.      Drug: Metformin

Metformin is an old generic diabetes drug known for its blood sugar lowering properties and for being quite safe and has been found to stall the aging process in animal studies.


6. Drug: RAD001 and BEZ235, cancer drugs

RAD001 is used to fight cancer and prevent rejection in organ transplant patients. The other, known as BEZ235, was developed as a cancer drug. Both drugs, known as TORC1 inhibitors, affect a crucial cellular pathway that plays a role in the immune system and other biological functions. Similar drugs were previously linked to extending the lifespans of lab animals.



How to Sell US Federal Customers (& Investors) On Your Company?

Sarah Djamshidi, President and Managing Partner of SpeedShift Ventures asked me to be part of a panel at the AFCEA Small Business Innovation Summit. The title of the session is “Communicating Value” and it is described as a session where the audience will “Gain valuable insight and tips for crafting a persuasive elevator pitch to help you win more business. Venture capitalists and government decision-makers explain what sells them on a small businesses solution.” My role on the panel is to explain to the audience the entrepreneur’s perspective—net/net: What’s worked for me in the past. 

Here are my prep notes for the session:

The AFCEA organization primarily supports US federal government organizations and many of AFCEA’s Small Business members are professional services firms and product startups.  I’ll use the Solution Selling framework to outline an approach for selling to the Public Sector, but recognize, the context is a bit different than selling to the Private Sector.   The framework of Solution Selling — Pain, Power, Vision, Value and Control (PPVVC) works in both verticals but how it is approached is different.

I find that walking through all the elements of Solution Selling can be a good way to prepare a persuasive elevator pitch for any potential new customer (or investor).


In the Private Sector, pain is usually expressed as a specific, measurable dollar amount (example: employee turnover is costing the company $1M a year) with corresponding symptoms (15% turnover versus a goal of 4%).  In the Public Sector, the identification of “Pain” can be the same or even more drastic like loss of life—in any case, it may not be in dollars.   The key is that you need to understand your customer’s pain and have empathy for their situation and be credible in a conversation about the subject.


You can’t sell something to someone who doesn’t have the authority/ability/money to buy. Talking to anyone else other than the decision maker is merely a sponsorship conversation to diagnose the pain and prepare to have a discussion with the decision maker.  However, what is challenging is that VIPs in the Public Sector are rarely the real decision makers.  The real decision-makers are the people who have the legal authority to spend our tax dollars, negotiate, purchase, and sign their name on the government’s behalf on the contract.  It’s very important for you to identify the real decision-makers and to spend the time to build strong relationships so that they feel comfortable doing business with your company.

Go to conferences, vendor outreach sessions, one-on-one meetings, every place that sponsors and decision-makers have the chance to meet, shake hands with and look eye-to-eye with the people who buy what you sell. These targeted people may have various titles such as contracting officer or specialist, technical specialist or program manager.


The decision makers not only need to understand how your service/product performs within their organization but believe that the capabilities presented will solve their pain for less investment than the pain costs. (example: we will lower your turnover to 5% thus saving the organization $1M at an investment of only $50k).  As stated before, in the Private Sector this is usually Return on Investment (ROI), however in the Public Sector this could be saving lives or even being reelected.    The point is that you need to be able to articulate your value to the audience.


Sponsors and decision makers need to gain an understanding of how your solution will work within their organization to solve their “Pain”.  When positioning your company be efficient, but don’t talk fast.  Know your audience and stay natural, yet confident — not scripted.  Be able to articulate the problems you solve and the solution in your audience’s context, as well as, your competitive advantage. Use facts that resonate, talk about the team and most importantly talk about references.  Don’t get too technical, never get defensive and don’t lie–EVER! (if you ever heard the phrase ‘fake it till you make it, wipe it from your memory’).

For an example of positioning refer to this Shark Tank example.

For something more fun (yet less realistic) but related to Public Sector check out Tony Stark selling to the DOD here

Sit down and write out your company’s elevator pitch in the most efficient wording possible: The problem (Pain), your solution, your target market, your competition and competitive advantage.  Describe your team, your business model, your traction (references) and if appropriate your financials.   Then practice this elevator pitch over and over and over until you can pivot it confidently to any decision maker, prime-contractor, sponsor or investor in under 60 seconds. …BUT Here is the thing to keep in mind–The real world of sales doesn’t work like SharkTank.   If you started yammering about your solution to someone ‘on an elevator’ without context it will make them get off at the next floor.  Remember J. Gitomer’s saying “People don’t like to be sold to but they love to buy” “Rather than selling, take a look at buying. Would you rather know how to sell, or would you rather know why people buy?”–This is the Art of sales–you have to be comfortable, confident and casual in your approach to people.  Customers are not objects… They are people.  Here is an example of a casual approach that worked on me (an investor in http://www.gel-e.co):

  • Customer (investor): “So why are you at this meeting?”
  • Entrepreneur: “We’ve got a unique product that stops bleeding fast.”
  • Customer (investor): “Stops bleeding? Really?”
  • Entrepreneur: “Yup. Using safe, naturally occurring biomaterials too.  We design wound treatments for a variety of applications and patients, spanning from surgical gels to bandages for patients on blood-thinners experiencing routine nuisance bleeds.”
  • Customer (investor): “That’s an interesting idea, my son deals with bloody noses all the time.  Will it help with this issue?”
  • Entrepreneur: “Yes, and much more! Hey, would you like to see it in action?”

“Tell me, and I will forget. Show me, and I may remember. Involve me, and I will understand.”–Confucius


This is where things get tricky regarding the process of selling to the Public Sector versus the Private Sector.   In the Private Sector, you would ensure your customer has a clear, written and agreed upon process about how to buy from your company at each step.  You would be presenting the buyer with a draft evaluation plan for their approval including a written checklist including what is going to happen in the process, when it will happen and who is responsible for deliverables.  In the Public Sector, there is a defined process set forth in laws and called out in the Federal Acquisition Regulation (FAR)—DFAR for the Department of Defense.   This set of laws both make the sales process longer and costlier but also drive you to ‘control’ the process in a different way.

Let’s review some of these differences beyond what was mentioned previously:

  • Government customers use purchasing vehicles–this vehicle could be as simple as a government credit card, it could be as complicated as a 200-page response to a Request for Proposal (RFP) or a pre-approved contract called a GSA Schedule. Certain types of contracts even limit the amount of profit you can earn and the amounts and types of costs you may recover.  You must know what purchasing vehicles your customer’s agency would use to buy your services and products and how to get on those contracts or partner with a firm that is already on them or better positioned to win a future contract.   Leverage the tools that the SBA, the Office of Small Business Utilization (OSBU) and the GSA provide to identify potential teaming partners (Subcontracting Directory and eLibrary sites to identify potential teaming and subcontracting partners) and stay on top of FedBizOpps.gov. Recently Other Transaction Authority (OTA) contracts seem to be the hip new thing in some acquisition circles.  If your customer supports OTA contracts you need to understand how to best leverage the vehicle because it could minimize the length of the sales process dramatically.
  • Government contracting authorities must require certain certifications and compliance such as FedRAMP and NIST 800-171. You must know what is required and have a plan to fulfill these compliance hurdles—you will be asked if you comply and if you do not have a plan you will not be taken seriously.
  • The Federal Government needs to spend their current fiscal year budget by the end of September. You need to understand both the timing of the contracts as well as the US Federal budget process and the opportunities and risks associated with the process (example: continuing resolutions).  The process is much slower than that of the Private Sector and you need to be able to financially make it thru the process.
  • The Federal Government has small business set aside goals. You need to understand what these are for your customer’s agency and if they are going to help or hinder your success.

Sales is 49% art and 51% process (“Control”) …   The 49% art is defined in how good you are at articulating value plus how well your team can deliver value.  The 51% process is how you project manage all the nuances of the sale and make more money than you invest in the process.

A great elevator pitch can only come from a person that understands, and has empathy for, the customer’s Pain; can articulate a confident Vision with Value to ALL decision makers; understands the procurement landscape enough to project manage the sales process (Control).

Georgetown — what’s wrong?

We found the end of the rainbow… the pot of gold was at The Wharf, Capitol Hill, and The Navy Yard…

Something is going on in Georgetown that doesn’t make any sense to the residents–Even with the strong demographic data and the strength of the “Georgetown” worldwide brand–retail businesses are pulling out and real estate prices appear to be stagnating… Why? Poor city leadership? Other areas (The Wharf, Capitol Hill, 14th Street, Navy Yard etc.) pulling all the investment away? Unreasonable landlords?  Retail, in general, is hurting? The Business Improvement District (BID)? Other?

The “Georgetown” Brand

If you travel outside of the United States everyone knows about “Georgetown”–Maybe it’s the movies… the university.. or just the legacy of the area.    Georgetown’s brand is almost as strong as that of “Washington DC”–and more stable from the looks of Google Trends.

georgetown trends.png

Demographic Data

If you review the stats Georgetown (20007) is one of the best demographics in the city.  The area has a higher income than other more trendy zipcodes and pays more taxes per resident.

Here is how we compare to The Wharf (20024) and Capitol Hill (20002):

more from BID on demographics of the area.

So why is retail pulling out? 

Commerical Real Estate Issues

If you read the Georgetown Business Improvement District’s (BID) market report and annual report things seem great but if you just walk up Wisconsin Ave you will see that it’s starting to look like a ghost town.  Here are a few pictures from my jog one morning–you can see all the open properties here.

Here are also a few from M Street that just popped up

If you compare Georgetown to other “hot” parts of Washington DC such as The Wharf and or Capitol Hill in regards to Commercial Real Estate here is what you will see:

  • 20007 has 111 commercial real estate spaces for lease, representing 299,768 sqft space. 12 buildings are available for sale.  In the last 30 days, 20007 has had 15 new spaces come on market.  https://www.officespace.com/zip/20007
  • 20024 has 13 commercial real estate spaces for lease, representing 210,929 sqft space. 2 buildings are available for sale.  In the last 30 days, 20024 has had 3 new spaces come on market.  https://www.officespace.com/zip/20024
  • 20002 has 148 commercial real estate spaces for lease, representing 836,116 sqft space. 37 buildings are available for sale.  In the past 30 days, 20002 has had 5 spaces leased and 28 new spaces come on market.  https://www.officespace.com/zip/20002

…it doesn’t look that bad overall but if you walk up Wisconsin Ave you will see that the numbers don’t make sense–something else is eroding this area.

…AND you might not find a convenience store like WaWa replacing high-end Restoration Hardware at The Wharf or in Capitol Hill. (more)

Is the same issue impacting residential real estate? 

Residential Real Estate Market Stats

It’s starting to look as if what is going on in the commercial market may also be impacting residential real estate prices.   Let’s compare Georgetown to The Wharf and Capitol Hill on Zillow–ouch! Georgetown comes up as “Cold”.   Zillow’s algorithms are not always great on prices but this indicator is just a bit troubling…





If you read articles like this https://www.bisnow.com/washington-dc/news/neighborhood/georgetown-gaining-momentum-with-office-retail-activity-despite-new-waterfront-options-77816 in Bisnow you will think that things are going great but then again, just take a walk on Wisconsin Ave north of M Street and you will think you are in Detroit.

Is the poor maintenance of the side streets a result of the same problem? or is it unrelated?  

Taking care of the sidewalks

I saw one of our older residents fall on the sidewalk the other day due to a loose brick–given Georgetown’s aging demographic this can’t be good.  …Then there are the trees that no one seems to be trimming.

Where is SMS Holding’s Block by Block –when is their contract up for renewal?

What about the increase in the homeless population–is this related too?

Taking care of the homeless

…this is sad and seems to be getting worse.  The city numbers reflect it getting better but for any resident of Georgetown that is out on a Friday night, it sure seems like it’s getting worse.

So, What is going on?

Plain and simple, there is not enough attention being focused on the details.  At a macro-level there seems to be no issue but if you have lived here long enough you realize that something is wrong.   The city needs to have a dialog, with action, about 1) the retail issues in Georgetown–specifically on Wisconsin Avenue 2) maintenance of side streets 3) the homeless.  Washington DC, in general, is booming (it’s Number 8 in the Best Places to Live in the USA).  Hot areas like The Wharf, Capitol Hill, 14th street, The Navy Yard are getting the city’s attention.   It’s almost like city officials see Georgetown on autopilot–and why not… the Georgetown BIDs numbers look great —but the city needs to look deeper… it’s about the details.

Details Matter:   “The first thing Wooden did was sit them down and teach them how to put on their shoes and socks. Doing this properly, Walton said, was the initial lesson for “everything we would need to know for the rest of our lives.”


Separate out Wisconsin Ave and M Street in Georgetown from the broader area and focus attention on the retail issues–Spend time on some of the innovative concepts outlined in this paper ‘How to revitalize your city or town’ (here) specifically for these 2 streets.  Another idea is to work with Georgetown University’s MBA program.

Some items that stand out in other publications:

  • How To Revitalize Your Local Main Street (here)
    • “Encourage Entrepreneurs”
  • 12 Strategies That Will Transform Your City’s Downtown (here)
    • “Does your city have public policies (like tax abatements, grants, and other special incentives) to promote downtown development?”
    • “Create a permanent public market”
    • “Create a branded downtown entertainment district”
  • How cities can revitalize dying urban spaces (here)
    • “Details Matter” <<this is why BID needs to be addressed.
  • Street Life After Retail: 5 Scenarios That Imagine the Future (here)
    • “A legislated tax-penalty for street-level vacancies”
  • How Cities Can Save Small Shops (here)
  • Street Retail Looks to Malls in Figuring Out Ways to Cope With Big Rents (here)
    • Idea for retailer: “ask for terms long found in shopping centers—low base plus a percentage rent (meaning the retailer pays the landlord a certain percent of every dollar in sales over a certain threshold).”

What are your ideas?

Blockchain: A lot of money, momentum and hope… but what is real?

This ‘note’ is to help me (as a long-term investor & entrepreneur considering an investment of time and other-peoples-money) know what variables to consider before moving forward with a blockchain &/or cryptocurrency project.

<These notes assume you understand Bitcoin, Public/Private & Permissioned/Permissionless & federated blockchains, consensus concepts, side chains, ICO/STO, stable-coins, utility/app-payment/security tokens and smart contracts.  If you don’t please review the following notes.>

I’m sure we will look back on this time and ask how we got here… History may likely unfold something like the following:

  • 2010: Bitcoin engendered the anti-establishment types
  • 2012: Bitcoin’s growth engendered the speculators
  • 2013: Bitcoin’s blockchain technology and opportunity caught the eye of the Silicon Valley entrepreneurs (‘can we build a better cryptocurrency’ and ‘what else can we do with blockchain’)
  • 2014: Marketers and VCs saw the opportunity then smart money became interested
  • 2018: Smart money gets in
  • 2018: Everyone is talking about “Blockchain” regardless if they understand it or not
  • 2019: The market went boom and the bubble burst
  • 2020: Startup-survivors, corporation and governments began to use the technology for huge productivity gains

…but who will survive and why?  What variables do we need to keep an eye on to ensure we are not a casualty of an impending market disruption.

Variable 1: Trust: Bitcoin engendered the anti-establishment types

Nakamoto’s Bitcoin whitepaper pushed on a major anti-establishment hot button by pointing out that Bitcoin operates outside of government control: “The root problem with conventional currency is all the trust that is required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust”.

Other’s hope that the underlying technology ‘Blockchain’ will allow for any transaction or data transfer to be completed through peer-to-peer computer networks, with no need for third parties like Central Banks, Amazon, Facebook or Google (see more here). Early on, it attracted those who distrust established authority.

However, it’s not just fringe anarchists any more… Citizens across the globe are losing trust in government, media, and businesses.   Just take a look at Edelman’s latest Global Trust report.

It could be the perfect time for a bit more flattening of our world by software…  Trust in the institution is a variable to keep an eye on – as it is at the heart of what drives blockchains success.

Variable 2: The amount of money speculators are investing in the market

From a cryptocurrency market cap perspective, we are talking about billions of dollars. See here.

…but we are still nowhere near the size of the problem we had in 2000-2002 (Dotcom bubble).  More here. However, the speculators continue to move the momentum forward regardless of risks of the market.  This momentum in many ways helps make the hard changes required a possibility.

Variable 3: Developer interest

If you follow the developers, you will know where the tech market is going.   Here is a quick graph from Google Trends that shows blockchain job searches versus devops job searches—currently there is a lot of growing demand.

Variable 4: Venture Funding

From https://www.coindesk.com/bitcoin-venture-capital/ you can see that there is a healthy growth curve:

Variable 5: Smart money (Institutional Investors)

Keep an eye on what groups like Fidelity (more), Wellington (more), Morgan Stanley (more) and others are doing in the crypto space.

As an example, Barclays and Mastercard are both filing and getting awarded patents (more here and here).

Variable 5: “Blockchain” hype – everyone must have one…

In looking at Google Trends again you can see a clear hype cycle with blockchain in regard to searches in general as compared to other technologies shaping our future such as IoT and Machine Learning.   Clearly, mid-2017 was the start of the generalist mania.

Never forget what a blockchain provides: an immutable & decentralized ledger and a blockchain needs to keep those properties using a decentralized network with the following prerogatives:

  • Distribute the ledger — Validate
  • Append to the ledger — Work
  • Incentivize the user’s needs — Token

If it’s anything else, be skeptical…

I always say follow the developers but in this case, it’s tricky because so many entrenched camps have formed primarily due to how much money is at stake.  Once the big money (examples: Tim Drapers, Andresen Horowitz, financial svc) get involved they promote what they have invested in and then the social networks/media outlets jump on the marketing bandwagon.

The key to seeing through the hype is to follow the key mindshare leads in each area and not the media/venture capital/financial market promoters.  Follow key industry projects as close as possible (examples). Follow what governments are doing around the world.

You also must understand the tension that blockchain and cryptocurrencies create in the marketplace and watch how they respond to the threat.  Some examples:

  • Centralized institutions that are vulnerable to disruption, such as banks, will dig in. They are protected by existing regulations, which are ostensibly imposed to keep them honest but inadvertently constitute a compliance cost for disruptive technology. Those regulations, such as the burdensome reporting and capital requirements that the New York State Department of Financial Services’ “BitLicense” imposed on cryptocurrency remittance startups, become barriers to entry that protect incumbents.
  • Large companies like Google, Facebook and Amazon won’t sit idly and let their central portals be replaced by decentralized platforms. (more here)
  • Government’s won’t allow their currencies to be replaced by cryptocurrencies. Especially those government’s whose currency is the reserve currency.
  • Government’s won’t let their privacy laws be broken, for example, the new General Data Protection Regulation in the EU.

Variable 6: Timing – we are early!

In general, you must be cautious when:

For now, let’s go with Victoria Lemieux’s definition from the Verge article linked above until we have something official from the ISO: “In general, if the transactions are gathered together in blocks, and it is blocks that are secured on the chain using cryptography, and it is designed to be tamper-resistant and produce immutable records, the system qualifies as a blockchain.”

Variable 7: Count the REAL ‘use-cases’

For a list of blockchain use-cases refer to this article—you can choose if they are REAL or not.

In general, what can we do now, that we could not do before?  For example, before Bitcoin, nobody could own an asset in the digital realm. Since copying digital content is easy to do and difficult to stop, providers of digital products such as audio files or e-books never give customers outright ownership of the content, but instead lease it. Bitcoin showed that an item of value could be both digital and verifiably unique. Now we can represent any property title or music track as an entry in a blockchain transaction.

Variable 8: Architecture flaws in the underlying platforms

Always keep in mind that paradigm shifts have architectural issues—but it doesn’t mean those issues will stop the momentum—these issues just need to be understood and risk assessed.   For example, the internet was built on an insecure foundation, Linux had platform fragmentation issues, Open Source had many issues.   As you see with all elements of crypto and blockchain there are strong arguments about underlying flaws across the board.  For example:

  • Ethereum & block size – Ethereum has an architectural flaw that may catch up to it and all that runs on it—its’ no cap on block size https://hackernoon.com/the-ethereum-blockchain-size-has-exceeded-1tb-and-yes-its-an-issue-2b650b5f4f62 –What does this mean for all the tokens built on top of Ethereum? More here on Ethereum’s scalability issues.
  • Bitcoin’s block time – The average block time for Ethereum is significantly less than Bitcoin’s: 12 seconds versus 10 minutes. This translates into more block confirmations, which allows Ethereum’s miners to complete more blocks and receive more Ether.

Variable 9: Decentralization

Blockchains need three properties:

  • Scale – The ability to support many users
  • Consensus – The agreement between each node on the validity of transactions.
  • Decentralization – A state of affairs in which there are many nodes and no one entity controls the system

In most cases, blockchain developers are only able to focus and succeed in two of the three properties necessary for decentralized blockchains.  For instance, blockchain developers can have a system that scales and reaches consensus, but it will be at the expense of full decentralization.

Its relatively easy to see how distributed the major coins are in the crypto-market (here is a good example: https://arewedecentralizedyet.com/ ) but what are the right ratios for new tokens or permissioned networks?

As blockchain matures measuring decentralization will be key.  Read here and here and here for more.

Also, keep in mind that decentralization is at multiple levels–for example, ~70% of the Bitcoin (12k) nodes are in China (more).

Variable 10: The single point of failure

When building a private blockchain you must look closely at the architecture and the business model to see if there is a ‘single-point-of-failure’ (SPoF).   For example, if you are using Hyperledger’s ‘ordering service’ does it create a SPoF—some think so?  What’s the value of a distributed database if there is a SPoF?  You have to also look at the business model –as an example: In a regulated environment the regulator has to be able to roll back a trade and that inherently makes them a SPoF.

Variable 11: ‘Store of Value’

Old school billionaires like Gates and Buffet say cryptocurrency has no ‘store of value’ so they are not currencies.   Others challenge the argument (more here and here).

The US Federal Reserve Chairman Jerome Powell made it clear (here) during testimony in front of Financial Service Committee of the U.S. House of Representatives (“The House”) with the following comments:  “if you think about what currencies do, they’re supposed to be a means of payment and a store of value, basically, and cryptocurrencies are not really used very much in payment. Typically, people sell their cryptocurrencies, and then pay in dollars… In terms of a store of value, look at the volatility, and it’s just not there.”

From a worldwide banking perspective, you can review the Bank for International Settlements (BIS) Annual Economic Report found here where they specifically call out “The second key issue with cryptocurrencies is their unstable value”.

Variable 12: Is the token/coin a security? (The SEC on tokens and Howey test)

The US take at the moment (from SEC William Hinman) is that Bitcoin and Ethereum are not ‘securities’ but most all ICO tokens likely are..  What does this mean for companies like Ripple with XRP?  Who knows but the impact of how the SEC deals with these companies and regulations needs to be watched closely.

Variable 13: The success of tokenizing a physical asset

There is a lot of discussion around tokenizing physical assets such as land, art, diamonds etc. however there are many issues such as how different countries laws impact ownership of assets.  Many of the issues are outlined in this article: here.


Words Matter…

Great leaders don’t lie and categorize/label whole groups of people as bad. Do great presidents? What we have going on right now is a bit surreal and worthy of debate.  Regardless of your support or hate for President Trump, the question I am asking is — are the POTUS’s words having a negative impact on society?

I’m quite surprised that more CEOs, organizational scientists, executive coaches, and leadership development consultants are not broadly discussing the consequences to society of poor ‘Integrity and Honesty’ and ‘objectifying’ entire groups of people.

In a recent HBR.org study “Has high ethical and moral standards” was the number one competency expected of a leader. Given the large number of false statements made by the current POTUS and the competency’s recognized importance, I would have expected more of a debate on the subject. I recently read a great book by Dan Ariely, author of The Honest Truth About Dishonesty that leads me to believe that the impact on society is bigger than one would expect.   “Once an environment has had dishonesty introduced, that new normal spreads.” People start thinking things like, “Well, everyone else is doing it”.  “It’s been proven that you can take someone who is basically an honest person, put them into a system where the person running the system is corrupt, and they conform. They cheat more and start stealing. If the leader of the system is saying things are corrupt, the leader sets the tone.” Any good leader knows that if a Sr. manager in an organization is dishonest the managers under that person need to be looked at as well.  What does this say about the future ethics of our executive staff, Congress, and future state/local leadership? If the behavior that at one time made society feel uncomfortable starts appearing reasonable and standards start loosening to fit common, lesser standards, then our society is on the descent.

Here is an example of where lack of ethics takes our society… other leaders failing us: Democrats call out Maxine Waters for encouraging incivility

Now… then there is the ‘objectifying’ large groups of people…  What is the impact on society of the leader of the free world by referring to large groups of people as “rapists” and “terrorists” (some of this can be found here)? Another great book I read long ago is “Leadership and Self Deception: Getting out of the box” by the Arbinger Group.  The essence of the book is that when people categorize others in a society as objects versus human beings with feelings, thoughts, and needs then it’s easier to hurt them.

Here is the result of prominant leaders treating entire groups of people as ‘objects’ versus human beings: Charlottesville: Race and Terror 

Anyone that has ever lead an organization understands that words have a tremendous impact.  Our public sector leaders need to shape up or ship out.

Using Ripple to understand valuation, risk and the SEC in the brave new world of blockchain

Given XRP is one of the more successful cryptocurrencies and Ripple (the XRP sponsor) has an incredible list of backers/board members and has been in business since 2012, they seem like a good company to use to take a deeper dive into the mechanics of the crypto market and analyze where some of the liabilities exist.

First, let’s go through a little background-In September of 2016 it was announced that Ripple raised $55 million USD in funding at a valuation of $410M USD.  The XRP token according to Chainfx was trading at $.007 USD on Sept 1, 2016.  Given there are 100B total tokens & 39.25% are in the market.  The market cap of XRP would have been $700M near the time of the valuation.  Today the XRP market cap is near $53 billion USD.

More from Quora.com on Ripple’s valuation from David Schwartz, Chief Cryptographer at Ripple  “As Michael Nadolillo point out, Ripple did not create XRP. XRP existed before Ripple did.

As for how you value a company like Ripple, it comes down to two components. First is how to value the XRP that Ripple holds. The second is how to value whatever else Ripple might do that might materialize as shareholder value.

Presumably, the current price of XRP reflects some fair prediction of the value of XRP. If it was an unreasonably low estimate of XRP’s value, we’d expect people to buy it and cause the price to rise. Similarly, if it was an unreasonable high estimate, we’d expect people to sell and cause the price to drop.

So we can take the amount of XRP that Ripple holds and multiply it by the price of XRP to get a fair market estimate of the value of Ripple’s XRP. But you have to remember that Ripple will have to use some of the value of that XRP to incentivize partners, pay employees, and so on. It will not all materialize as value to Ripple’s shareholders.

Of course, some of that expenditure may translate into revenue beyond XRP for Ripple. For example, Ripple might trade XRP (or use revenue from XRP sales) to acquire equity in other companies. Ripple might use XRP (or revenue from XRP) to form new ventures that generate value from sources other than XRP.

So some multiplier has to be used to represent what fraction of the value of Ripple’s XRP you think will materialize as shareholder value. The challenging thing is that there doesn’t seem to be any good, objective way to agree on what this multiplier should be. I’ve seen knowledgeable people place it at 15% and I’ve seen them place it at 85%.

The market cap of XRP is not really a meaningful number for computing Ripple’s value though it does give a general idea of the economic importance of XRP compared to other digital assets. Ripple doesn’t own all the XRP, so the value of all the XRP doesn’t really relate to Ripple’s value.”

Ripple is essentially a high-value service that provides the ability for institutions to send money globally using the power of blockchain.   They have the RippleNet messaging systems for enterprises to use for cross-border payments and it does NOT require XRP–Ripple execs have even mentioned that XRP is not essential to Ripple’s business case (it’s just an add-on).  The execs have also mentioned that the ‘old’ cross-border payment systems cost ~20 basis points but with Ripple, customers could have a 6-basis point improvement using their platform without XRP.  With XRP there is an additional 2-basis  savings (note: this doesn’t take into account volatility of the XRP currency).

You have to wonder, does Ripple want to be the first non-sovereign private central bank leveraging cryptocurrency?

Ripple says they have 100 banks using their platform however it’s difficult to tell if those institutions are just kicking the tires or are they building out production systems.   You would think that these customers already have a ton of resources engaged in the ‘old’ way of moving money around for multi-national corporations and they make a ton of money doing it the ‘old’ way.   Also, these old-school banks and corporations are mostly risk-averse and if they think there are regulatory issues they will wait until those are clearly worked out.

Is XRP centralized or decentralized?

As opposed to Bitcoin, XRP does not seem all that decentralized–that may be a huge problem for the SEC… or maybe not.

  • Ripple says they are committed to decentralizing the XRP ledger and divesting operating control and giving up control of their validator nodes.
  • Bitmex did a report on Ripple / XRP where they downloaded the node software and all keys came from Ripple and they are in control of the consensus system.
  • Past CEO Chris Larson (17% of total) and current CEO Brad Garlinghouse (6.3% of the company) own a large share. (see here)

The most important point here is that most all cryptocurrency projects are going to start out centralized and then go to decentralized—it just seems to be taking Ripple a while to get there (it must be difficult). What makes this troubling is the market cap is huge and MOST IMPORTANTLY – the SEC has recently reported the following.  In this speech, William Hinman emphasized that “decentralization” is what makes Ethereum and Bitcoin NOT securities (absence of a “central actor” or third party who meaningfully determines “the enterprise’s success.”).  That can’t be good for Ripple.

Does Ripple need XRP?

Ripple may be a different animal (if they are really building a non-sovereign private central bank) however their platform seems like a permissioned system (private Blockchain) and tokens are not even necessary given the actors involved trust each other.   A permission-less system needs a token to incentive behavior because there are no middlemen.

If this is the case, the issue here is that they sold XRP to retail investors when was meant to be used by banks.

Is having a cryptocurrency worth the headache?

I guess all this boil down to is having XRP worth all the hassle when it only provides a 2 basis point saving for customers?

It seems that Ripple already has a great deal of interest and momentum from industry (MoneyGram is even interested). However, the cryptocurrency model seems to have lead to plenty of legal headaches (beyond what the SEC may bring in the future).  There is a lawsuit with R3 where Ripple granted options for billions of XRP at less than 1 cent in 2016 to incent R3’s banking network to adopt the platform.  Ripple canceled the option and now it’s in court.  There is also a class-action lawsuit against Ripple (see Bloomberg article here).  And there are other strange troubling issues–See the case of Jeb McCaleb family member froze funds at node level to get 1m back…

On top of all this, it also seems that even with all the success this company is having they are having difficulty getting listed in the most powerful exchanges (more here).

Bottom line – it may be worth the headaches IF the currency is what is funding the growth and the company can use this momentum to actually change a giant old school market.   It’s difficult to tell from the company’s quarterly reports where the revenue is coming from but you have to believe (after reading some of the background articles listed below) that the primary source of revenues is from the sale of XRP.

Net Net: If Ripple can steer clear of the SEC then maybe it was worth it and they will accomplish a sea change in the financial market.   …and just maybe the SEC sees the long-term upside in having this industry change!

Background reading: