Longreads + Open Thread

Longreads

• The NYT has a look at Russia's surveillance of dissidents and activists, based on hacked records. One thing that's striking is just how labor-intensive this kind of system is. Especially when dissent is organic, the only way a government can stop it is to track it at a local, specific level, but that means either finding clever ways to trawl through text automatically or having a huge bureaucracy. And even then, people's real views will tend to slip through—the euphemism treadmill moves so fast that a high-headcount government department can’t keep up.
• Startup clusters don't just happen in software: in Japan, there's a growing number of in the materials and chemicals industries. Part of what creates a startup cluster is when there's a big customer, or category of customers, that can be accessed by smaller ones. Silicon valley started out with a heavy defense slant, but eventually got plugged into the consumer economy. In Japan, the high value-added industrial export sector is relatively larger, so it's a better category for new companies to sell into. (Via Undervalued Japan.)
• The Hollywood Reporter covers how streaming is changing the economics of documentaries. Documentaries seem to play a bigger part in how people think about streaming than in what they actually watch (Google Trends shows that at the peak of its popularity, Jiro Dreams of Sushi had about 4% of the search volume of Family Guy). But this still makes it valuable content; documentaries may be especially appealing to people who don't stream a lot but are insensitive to the cost. Like any industry, scaling up has changed norms, and figuring out whether the old rules still make sense is a gradual and difficult process. (Via Abnormal Returns.)
• A16Z has a guide to funding when capital isn't cheap, mostly focusing on ways to structure a deal so it doesn't look like a down round, when a down round is exactly what it is. Financial engineering is most valuable when there's little debate about the shape of the probability distribution of a company's value, but lots of debate about where the value will fall within that distribution. For a sufficiently early company, the odds that a clever liquidation preference will matter to portfolio returns are minimal (if you're thinking about the liquidity preference of a Series A deal, the investment wasn't a winner), while later on this can be a material contributor. This piece is most relevant to companies that were doing well for a while (so they're big enough and mature enough that complex financing structures are worth it) but aren't doing as well as they used to be (so they want a way to nominally preserve their valuation). Fortunately for fans of elaborate transactions, such companies are especially common right now.
• Gergely Orosz has a detailed, thoughtful look at the collapse of events startup Pollen. This is a very good argument for the "cockroach theory" of corporate malfeasance, that any single example of egregious bad behavior is part of a pattern. Or perhaps the Ian Fleming theory: "Once is happenstance. Twice is coincidence. The third time it's enemy action."

Books

• Grocery: The Buying and Selling of Food in America explores the grocery store business from the perspectives of history, grocery store operators, food suppliers, and more. The author clearly cares deeply about the food system, worries about the American diet, enjoys fine dining—and is happily impressed by the grocery business, prepared foods, prepackaged carbs, and all. What's especially fun about this one is that it reports lots of myths about grocery stores, and then offers the counterargument. Yes, it's nice for grocery stores that milk is in the back so you have to walk past other products to get to it. But it's also convenient to have a refrigerated, high-turnover product somewhere other than in the middle of the store.

Diff Jobs

Companies in the Diff network are actively hiring right now. Contact us if you're interested in hearing about:

• A company with a new spin on building a VC portfolio—great opportunity to make an early career pivot out of banking/research and into venture. (US, multiple locations)
• A crypto fund seeking experienced developers (C++/Python). (Remote)
• A company fixing healthcare data is looking for a forward-deployed engineer—someone who can understand healthcare users, integrate systems, and find new ways to automate their work. (Remote, US)
• A new spin on the online dating business, with a different structure from traditional online dating (both in terms of outcomes and economics) is looking for a founding engineer. (LA)
• We're always interested in talking to programmers, data scientists, product managers, and bizops people. Even if we don't have a role right away, it's good to chat early so we know what to keep an eye out for.

On the hiring side, right now the biggest imbalance we see is among experienced financial professionals (analysts, investment bankers). If you're hiring for that skillset, it would be great to chat and see how we can help.

Open Thread

• Drop in any links or comments of interest to Diff readers.
• In 1962, when Walmart was a tiny company, Sam Walton was busy learning about how he could use computers in his business (and spying on the competition on weekends). As this reply notes, computers were already a big business then, but got unimaginably bigger. Which is a fun topic to speculate on: what's an industry today that's already responsible for a few large companies, but that will be 100x as impactful in the future?

Reader Feedback

Last week's post called attention to the rise of subtitles-on viewing. Nathan Taylor sees some other consequences:

1) sound mixes bury voices. eg, in the movie Dune you can't hear what anyone says. In the theater they were ordered to run the sound super loud (as per director intent), so it was somewhat possible to hear. But at home you really need subtitles.

2) foreign language content becomes native language content. This is a big deal. Since the user experiences all languages as subtitles, there's no experience difference with foreign language content. So in fact my daughter when she was younger got angry at us if we watched Naruto in english and insisted on subtitles to properly experience it.

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