This guide covers that whole spectrum, though possible not at the most abstract. While I won’t be tackling “when should I add a new person”, if you start with “how do we define the role” it can be a helpful inversion: if you can’t define the role, you’re certainly not ready to hire for it.

I’m mostly focusing here on hiring for startups after they have some money in the bank and likely >25 people (approximately). It’s a “paint-by-numbers” guide to kickstart how you think through hiring that can establish good hiring hygiene. Remember to not get too bogged down in process: process is only value accretive inasmuch as it helps you move faster; too many people like process for its own sake, which is a trap. Documenting this full process is helpful in either “low-trust” environments (it’s a person’s first time hiring) but also in distributed or remote environments, where written communication is much more important to team cohesion.

The first few times you do this it might take a couple of iterations to get right, but once it’s ingrained in how you think it should take no more than an hour to complete for a role you’re familiar with. Naturally, it’ll take much longer if you’re hiring for a role outside your area of expertise, where you don’t even know what you’re looking for let alone how to vet people. (In that situation, the time investment upfront will save you a lot of anguish later.)

With all of that out of the way, let’s get started.

First, role definition: what business outcomes does this role own?

If we add the ideal version of this person, what will be true of the business in 30 days, 90 days, and 180+ days? What are the outcomes we need them to achieve over each of those time horizons? What problems do we need them to solve?

Focus on outcomes, not inputs. This goes both for your internal and external (read: the public job description) language about a role. You don’t have to use the exact same language (some things might be sensitive and for internal consumption only) but focus on outcomes in both cases. A given role will have multiple outcomes it needs to achieve over varying time horizons.

Depending on the level of the role and the stage of development of the startup, the scope and detail of these outcomes can vary wildly. For example, good framings of outcomes:

• We 5x our monthly signups in the next 12 months while remaining within a 1 year payback

• We improve funnel conversion by 10 points by end of year

• We improve 3mo revenue retention by 5 points by end of year

• We improve the quality of communication across the company by 20 points as measured by the question “I feel like I know what matters to my team and the company” in CultureAmp quarterly (starting point: 58) by end of year

• We achieve an SLA of 95% responses to job candidates within 24 hours by end of Q3

Bad framings look like:

• We deploy 3 new growth channels

• We hire 4 people under this person to build our product team

• We switch to Rippling

• The new hire creates a weekly report on CAC by channel for the executive team (this is an output, not an outcome)

Be rigid on the outcomes but flexible on the methods. Why? Because this both focuses on the right things — the impact on the business — and communicates autonomy to candidates. It says: “we trust you to do things the most effective way possible”. It doesn’t mean you abdicate oversight or responsibility for their actions, but it does say “we are a team that values leverage and action above process and box-checking”.

It could be that you have strong priors on what the right answer is in some situations, but that doesn’t need to go in the job description. For example, it might be right that the executive team needs a weekly report on CAC by channel, but reading that in a job description doesn’t get anyone excited about a role, and it if it’s in the internal language about the job it sends the subtle message that this person is an order-taker, which is the last thing you want in the culture at a startup.

Other things you need to align on internally, that might need to be reflected in the language of the job description:

• How autonomous do we expect them to be vs. how much mentoring and help will you be able to give this person? The earlier the company is, the more you’ll need to weight autonomy.

• How much individual contributor work vs. manager work will there be now, 3 months from now, or 6+ months from now? (It’s optimal to hire someone based on their trajectory, not where they are at a point in time, so feel free to hire someone you think can be excellent at the things you have line of sight to but could be a gamble — one that you’re willing to take! — at the longer-term things. You’ll generally know within 3–6mo whether this is someone you want to give leverage to or whether you need someone else for the next layer up of abstraction. Also, if your company is growing rapidly it could both be true that you have a good employee and the company’s needs are growing faster than their abilities.)

• What’s the hiring budget, and is there alignment between what you’re willing to pay and what problems we want this person to solve?

Second, design the vetting process

There are 3 main tools people use to assess candidates. I’ll list them in descending order of information quality:

• References (and referrals, especially from trusted sources)

• Work samples (and case studies)

• Interviews

If you get a screaming hot referral for a role from someone you trust intimately you can accelerate a lot of the interview cycle to get to an answer. But remember to always trust but verify. You still need to ensure the candidate can do what you need (which is why defining the role comes first before doing any outreach) and that the candidate wants to do what you need. And trust yourself first: you know what your business needs, so even if it’s a high priority referral if it doesn’t feel right don’t rush to hire.

You need to codify what you’re looking for in a role into a rubric. A rubric might look something like this:

Next, distill that rubric into vetting methods to assess each element. Some of this might mean pre-writing interview questions to be used on all candidates for the role, but it goes beyond questions: some rubric elements might really demand a work sample, case study, or presentation to your team to assess effectively. Others might only be revealed in reference checks to get a longitudinal understanding of a person’s behaviors. Don’t assume everything can be assessed in an interview. Remember to also sketch examples of what good or bad responses to different vetting methods might look like, so the hiring team is aligned on what a good candidate actually behaves like.

(I’ll write separately about how to conduct a good reference check and how to design an effective case study.)

It’s easy to design a rubric (and vetting methods) for a role you’ve hired successfully before or one within your domain of expertise. It’s much harder to do so for anything outside of that. For example: if you’ve never hired lead data scientist before, and that’s your first data science hire ever, you may not know what an effective lead data scientist looks like. You also won’t know what some common false positives are.

To solve this, call up people you respect in the domain you’re hiring within to get their help. Describe to them the business outcomes you want to achieve with this hire and ask them what they would look for, what they would avoid, and how they would vet candidates. If necessary, pay them a consulting fee to help screen or to conduct interviews for you, especially if proper vetting requires asking technical questions that you’re ill-equipped to assess.

Once you have the rubric and vetting methods defined, design the logistics of your hiring funnel. Literally: what’s the order of operations and who is responsible for which part? Don’t forget to build in space for the hiring team to sell the candidate on the role and the company, and for candidates to ask the hiring team questions. This isn’t a one-way street.

Finally: be flexible how you approach hiring. Depending on the company, the role, and the market, sometimes you can put a take-home skills assessment early on in the funnel. Other times you’ll need to do a lot more selling before a candidate is excited enough to put that work in.

Finally, define your sourcing strategy

The best option, as mentioned above, is warm referrals. They can come from employees, friends of the company, investors, customers, and more. And remember, trust but verify.

Beyond that, if you’re doing cold outreach, focus on companies that have faced the challenges you’re going through to find the most likely analogous candidates. They might have different job titles, so be sure to prioritize the work being done (and the competencies that indicates about a candidate) above an exact title match.

Sourcing is difficult partially because the default strategy is undifferentiated: cold outreach, blasting away at people’s LinkedIn or email inboxes. One of the best longer-term hiring investments you can make is in your company’s brand as an employer. If you can show potential investors that you’re a talent magnet and attract exceptional people (especially by your Series B), that is a strong signal of a high quality company.

That’s plenty to get started with, and I’m sure there are parts I’ve left out or got wrong, so feel free to respond with comments, suggestions, and additional advice!

This is not always true. In fact, it’s the exception rather than the rule.

Here’s the quick test you can use: does the NFT’s— or the series of NFTs’ — core functionality derive from another product? If no, then you have PMF.

What does this look like in practice? Companies like RTFKT that create NFTs where all the value is in owning the item itself, like a real-world piece of art or a fashion accessory, can count NFT sales as product-market fit. People are buying the NFT for its own value. The NFT’s utility doesn’t rely on its use in a game or an owner’s ability to compose it with other NFTs: it is purely in owning it and showing it off, of being a member to an exclusive club of “people who own this thing and have this taste”. It has value as a pure social signifier, independent of its functionality in a game world.

Items don’t have to be unique or 1-of-1. The same logic can apply to a series of NFTs such as CryptoPunks, Bored Apes, Azukis, and more. The value of a CryptoPunk might be a function of the value of the collection (much as the value of a Van Gogh might be correlated with other Van Goghs), but a CryptoPunk’s value is that it’s a CryptoPunk, not that it has specific functionality within a game world. (I’m going to leave aside the question of “What’s the appropriate valuation for a CryptoPunk or for a company making an NFT series?” That’s outside the scope of this post.)

In contrast, let’s examine spaceships in Star Atlas or land in the Sandbox. The functionality of land in the Sandbox is entirely dependent on the game; without the game and without people playing the game the land is meaningless and has no value. The same is true of spaceships in Star Atlas: with no game the NFTs have no utility and no value (except the probability-weighted estimate of future value). While many web3 advocates maintain that web3 games are better for consumers because because you “own” your assets and can move them between ecosystems (therefore conferring a persistence to their value), there are vanishingly few examples of this in practice. Developers, so far, don’t want to be encumbered with supporting assets designed for different use cases, with different in-game stats and non-compatible models, and from which they derive no revenue.

(As an aside: that might be an interesting user acquisition vector: take the assets from a defunct game, build a new game around them, and notify the asset-holders of the newfound value! That, however, necessitates all the assets be on-chain, and as of yet there are few NFTs that are stored entirely on-chain. A character model from Halo, for example, is far too large and complex to be stored on-chain. You could store the stats — health, damage, whatever — but a tens- or hundreds-of-thousands-of-polygons 3D model, plus all its textures, is far beyond current capabilities to store on-chain.)

One could posit that it’s possible for an asset in a game world to have value outside of that game world — e.g. if you have a dope Star Atlas spaceship, that’s indicative of the fact that you’re really invested in the game — if the game fails, that value would drop precipitously. And when web3 games have shut down in the past, that tends to be what happens. By way of illustration: F1 Delta Time minted rare NFTs representing specific drivers, tracks, and cars, that sold for up to $270K, but most of them have dropped to near-zero value (or have ceased trading, making their value indeterminate) since the game shut down. (While F1 Delta Time went out of business because of an IP dispute, not specifically because of unsatisfying gameplay, it is nonetheless a reminder that NFTs don’t have value without a functioning game. And one imagines that if the game was doing well — lots of users, lots of engagement — that it would’ve been unlikely to shut down in the first place. The people who own the F1 brand aren’t arbitrary and capricious and wouldn’t end a project that was making them good money.)

What are people actually buying when they buy land in the Sandbox or spaceships in Star Atlas? They’re buying a lottery ticket, a speculative bet on the future value of the assets in the game or app. Just because a game sells millions of dollars of NFTs before it launches does not, in any way, guarantee its future success. It might make that future success more likely — NFTs trading for record valuations will get a lot of press and a lot of people talking about a game and that attention may lead to more players — but it is marketing, not product that people are buying into. If the app isn’t launched yet, the only utility of those assets is their speculative value — the ability for the owner to sell it for more later — since by definition you can’t use them in the app itself yet.

Pre-launch NFT sales don’t confer any information about that future product’s growth, retention, engagement, or resulting future value creation. All the company has proven is that it can sell tokens and a vision of a future state — that it’s very good at storytelling, but not that (a) it can ship the product or that (b) when the product ships, it’s something people actually want. In other words: the project has proven it can raise money, but not that what it’s building is actually useful.

Being good at marketing an idea and being good at executing that idea are two very different things. There are many stories of companies that did exceptional marketing but never delivered a useable product, or whose products, when delivered, greatly underperformed expectations: Juicero, Clinkle, Theranos, Coin, Quibi, and many more litter the graveyard of startups with grand ambitions, massive funding, and nothing to show for it. People wanted to believe in them, but they didn’t deliver on their promises. Those who pre-ordered a Coin card saw the product demo video and thought they wanted the product, but when it finally arrived it turned out not to be as useful as they thought. When you were a child, did you ever get really excited by a toy commercial, begged your parents to buy you the toy, and then when you got it, barely played with it? That’s exactly what can happen here. Beware indexing heavily on NFT pre-sales as indicators of consumer demand for an end product. It just might be a mirage.

Detractors argue that NFTs in general have little value for a variety of reasons: you can copy images infinitely so there’s no scarcity value; you’re just buying a pointer to an image and you actually own nothing because it’s not stored on-chain; blockchains themselves are immoral both from an environment footprint and because they introduce artificial scarcity to computing, which has a heralded ability to reduce the marginal cost of an additional copy of something to zero; and so on.

One relatively superficial objection is that it takes less talent and virtuosity to create an NFT (or, specifically, something that looks like a Bored Ape) than it does the Mona Lisa, but (a) modern forgeries are virtually indistinguishable from the genuine item (and that’s why people pay so much at Christie’s–for validation of provenance and ownership history — hey, wait a second, that sounds familiar!), and (b) artistic technical ability is by no means a guarantor of success or value in a work of art. This is true across art types: there are plenty of virtuoso guitarists, bassists, and drummers who are only modestly commercially successful and marginally influential outside of a small group of cognoscenti, and conversely there are plenty of far less technically accomplished musicians who are substantially more commercially successful and culturally impactful.

So, instead of refuting general reasons why NFTs are not valuable, what are some reasons Bored Apes specifically are valuable?

One could hand-wave about how a Bored Ape is a unique pass to be a member of an exclusive club, but that’s slightly missing the mark. The same would be true of a Soho House or Equinox membership, but those aren’t worth quite as much. Sure, you could make an argument that the number of Bored Apes is limited; but first of all, it’s not: they’ve also launched dogs, Mutants, and more may be on the way to create different tiers or sub-communities. And second, the number of Soho House or Equinox members is also limited, in practice, by the number of physical club locations (and the yield function of how often people go in; if it gets too crowded, membership loses value and members churn). So, limited supply of memberships on its own isn’t a complete explanation.

On top of that, the current utility of a Bored Ape real-world club membership is quite limited. All there is (known) right now is a series of periodic in-person events and the promise of a real-world clubhouse in the future — nowhere near the utility one would get from a worldwide series of members’ clubs like those operated by Soho House or Equinox. Bored Ape members are paying for membership significantly based on the expected value of this future utility — and the future utility of being part of a members’ club, no matter how exclusive, isn’t that high (especially when you consider that the most well-known members of the club may not ever show up). Even if you apply a probability-weighted discount factor, no one’s paying $250k for the mere attenuated possibility that someday they might be in a room with Steph Curry, Post Malone, or Justin Bieber. (If that’s what you really want, there are cheaper and more direct ways to do that — especially if you’re Justin Bieber himself.)

The balance of the value people are paying for derives from the social signaling value of owning a Bored Ape. In other words, “how much am I willing to pay to claim the social cachet that would accrue to someone who has this asset associated with their identity?”

A piece of art is worth millions of dollars not because it has any objective empirical functional value (it doesn’t necessarily create a stream of cash flows for the owner), but because that’s what people collectively believe it’s worth. That worth could be constructed out of the emotional impact of a given work, its historical importance and influence, its rarity, or simply the fact that one wealthy person wants to signal to other people that s/he has specific taste or values or has achieved a certain level of wealth.

Art across the wealth spectrum and across formats performs this function. It’s why people wear concert t-shirts or buy band posters, or even buy custom assets in CS:GO or Fortnite: they’re signifiers that advertise to other people the owner’s values and personal tastes. High-end cars and fashion are the same thing: part utility for the owner, part signaling to an audience.

Two factors that define the social signaling value of art are the size and the relevance of the audience to which one can signal. For example, if you own a Lamborghini, that has limited value because only people who see you driving it (and who can identify you while doing so) witness and take in that social signal. Fashion is similar: largely limited by line of sight and the people in your immediate vicinity. However, if that audience is well-targeted to be other people you care about impressing, who share your values and would be suitably impressed by such a display — say, at the Met Gala — the investment in the objects and their display makes social economic sense. Your display isn’t just visible to the people at the party, but to everyone who consumes the memes syndicated from that party via the media.

This is, obviously, how advertising works: people pay to have their idea viewed by an audience that’s likely to be receptive to it. The better targeted the audience, the more an advertiser is willing to pay per impression. Most of the ideas being commercially advertised are “your life would be better if you bought this thing” but there’s no reason you couldn’t just advertise “witness me” or “I am fashionable” or “I am generous” and so on. This is exactly why NFTs are uniquely interesting: they take a previously physically limited audience and virtualize it while maintaining the link to the owner’s identity. They remove physical barriers to memetic spread and enable identity projection at the speed of the internet.

Visual art is the closest analog to NFTs. On one end of the spectrum, art is extremely private, only being witnessed by visitors to one’s home, but at the other end its public exhibition performs a noblesse oblige function for the person who owns it. Take, for example, Ken Griffin’s numerous contributions to the Art Institute of Chicago. Wealthy people can afford to buy highly-regarded pieces of art and share them with the public. That art, on display, is often (but not always) tagged with the collection whence they came, reminding the viewer of both the owner’s wealth (that they can afford to own this) and their generosity (that they make it available to everyone). You can look at, say, Basquiat’s Boy and Dog in a Johnnypump at the Art Institute and immediately connect that piece of art to Ken Griffin.

This isn’t a purely cynical ploy, though. Think about how much more it means to see a concert with your friends than alone. There’s an element of truth to it giving people pleasure to share things one values with other people, as a means of perpetuating the meme that thing represents. But for art that’s limited in supply — like a unique Basquiat — having more people experience it can increase its value: the spread of the meme increases the value of the authentic original object.

NFTs are like that but on a grander scale. Instead of being limited to the people on the sidewalk or the people visiting an art gallery–which are somewhat strict physical real-world limits–anyone with an internet connection can see that, yes, this is the genuine item, and it’s owned by this particular person. The audience size for your social signal has gone way, way up, and if your NFT is part of a collection that has high memetic value — as Bored Apes have very much captured the zeitgeist of the first wave of NFTs — then the value of your signal isn’t just a single idiosyncratic jpg, but a whole cultural moment.

How much is that worth — the ability to broadcast to the connected world your participation in (and contribution to, by way of building the community of) a cultural movement that could be as important as pop art, Studio 54, and the internet revolution rolled into one? Upwards of a quarter of a million dollars to some people.

And in the grand sweep of history: doesn’t that sound cheap?

I will choose creating over consuming. When given the choice to read a book or to write, I’ll choose writing more often. It’s too easy to get stuck in read-only mode and to try to inhale information. There’s effectively infinite information, and at a certain point you hit severely diminishing marginal returns. Plus, consuming information is only one mode of learning; another mode is learning how to use that information to create something new. If you never practice the creation side, are you really doing anything? Progress is only made through creation. Since my trade is one large of people, memes, and ideas, writing is one of my most important tools for creation. Therefore: more writing this year.

I will choose in-person over virtual. We all spend so much time in front of little glowing boxes. It was true before the pandemic, and for the past two years I’ve spent more time in front of screens (large and small) that ever before because the alternative was either risky or unavailable (depending on the state of lockdowns). Now that COVID-19 is better understood and I’ve seen the impact greater isolation has had on me, I’m going to make a conscious effort to spend more time with people (friends, family, coworkers, and more) in-person rather than on calls, Zoom, etc. I feel physically better after having spent time with people physically — whether it’s working, playing, or just hanging out. It certainly takes more effort to see people, but I know it’s worth it.

I will choose relationships over entertainment. In the waning months of 2021 I realized I spent a lot of my non-work, non-productive time engaging in somewhat solo entertainment: reading books, watching movies, playing video games. There were some complications in life — the spread of the omicron variant, worse weather in December — but I definitely overcorrected into solo mode. So, in 2022 I will invest more conscious effort into building relationships and not let my relaxation time happen passively. That means more dinners with friends, more seeing people to do things, more trips with people, and just more connection in general.

I will choose experiences over routine. A lot of my favorite parts of 2021 were when I chose to eschew my normal habits, comfortable and productive as they might be, and did something out of the ordinary: random trips to NYC, LA, and Miami; a festival in Mexico; and so on. While it’s great to be home and have all its conveniences and comforts (my home gym, my Bay Area friends, all my productivity tools; and it’s cheaper, to boot, since I can’t Airbnb my place), having unique experiences has been all too rare the last 2 years. So, I’ll invest more in them while I can.

I will choose letting go over holding on. Whether this means getting rid of old clothes, letting go of relationships that no longer serve me, letting go of narratives I have about myself or other people, or letting go of anger or negative emotions, having fewer attachments is a major goal of mine for 2022. Attachment makes anything worse, whether it’s attachment to something that feels good (addiction) or attachment to something that feels bad (suffering). Attachment clouds decision-making because the outcome you’re fixated on might not even be the best one for you — it’s just the one your mind is stuck on. Letting go of what “should” happen or what you “should” do is freeing. You’re no longer blinded to what is possible by what your mind has convinced you is “correct”. 2022 will be the year of letting go.

So there you have it. My five core goals for 2022. What do you think? What are yours?

Doing psychedelic therapy on a regular basis. This supported literally every other thing on this list. I first started doing psychedelic therapy sporadically in 2019 and only made it consistent in 2021. As with going to the gym and working out, consistency is the key to results. I previously felt like I would often go 2 steps forward, 1.5 steps back, but now I’m seeing way more positive change. Thanks to it I’m now more secure, more focused, more in touch with my intuition, and happier on a daily basis.

Psychedelics have helped me truly know what I need, what my body needs, and what brings me joy. They’ve brought me clarity in difficult relationships, life decisions, work situations, family stuff, and more. They help me identify my own habits, patterns, and fears so I can defuse and change them. By establishing a cadence to my psychedelic work, I’ve been able to make more consistent progress and experience more persistent improvements that impact nearly all aspects of my life. (I’ll be writing more about this subject separately soon!)

Prioritizing sleep. If I’m not well-rested, nothing else matters. I can paper over that with caffeine to get work done if I absolutely need to, but I’ve found that caffeine has its own negative side effects for me. Which brings me to…

Cutting out caffeine and seeing its true impact on my body and mind. Caffeine is a crutch that helps me be productive when I need to be. Sometimes, work demands that, but I’ve found it’s not something I want to rely on consistently to just return me to baseline because of its negative side effects. It deadens me to what my body needs both physically and emotionally; I say yes to more things because my mind narrowly focuses on getting things done, rather than understanding what the right things are to get done; and, to boot, the crash at the end is horrible.

It’s like wearing blinders. This is a pattern I’ve found in stimulants as a general category. Eliminating them except where absolutely necessary has made me much happier on a daily basis.

Cutting out alcohol. I’ve never been a big drinker; I only really used to drink when I went out to nice dinners or for a friend’s birthday or similar celebration. But I’ve always found it leaves me sluggish, I sleep worse, and I’m mentally foggy — which leaves me primed to want to use caffeine. Alcohol and caffeine are like the yang to psychedelics’ yin: while I find that psychedelics generally give me greater clarity and sustainable, long-term life satisfaction, alcohol (or depressants generally) and caffeine (or stimulants generally) create short-lived, volatile peaks and troughs. On a whole, my baseline happiness and well-being is greater without alcohol and caffeine.

Spending more time in warm places. And warm doesn’t just mean Miami of Hawaii — it could be New York City in the summer for all it matters to me. Whether it’s the vitamin D, spending more time outside or in nature, or just the attitudes of people living in warm weather, it gives me energy and my baseline happiness improves. This means San Francisco, unfortunately, is not the optimal place for me from a weather perspective if I’m in only one city for 52 weeks. Thankfully, I’m not tethered to SF every week of the year. I enjoyed the 2 weeks I spent in NYC in July immensely, and no two week span in SF matched that. (That said, I still wouldn’t want to live through another NYC winter; and it’s supremely hard to replace the people I love in the Bay, so I’m content to continue to call SF my home base for now. It has plenty of other positives!)

Working with colleagues in person. I’m more productive, more motivated, and happier. Especially at an early-stage company, it’s critical to create team cohesion, enable communication, and build a felt sense that you’re all in it together. I’m planning much more of this in 2022.

Reducing news consumption. This includes news websites as well as Twitter and podcasts. Most information just isn’t that important. News creates its own addictive feedback loop: once you see how much you’re “missing”, you feel like you need to stay on top of it. But in reality, very little of it ever matters. I couldn’t tell you what was in the Axios newsletter I read a week ago; 95% of it wasn’t relevant to me. So, save yourself the time and mental space and focus your effort elsewhere. I hate to be that guy, but there’s something to be said for the Lindy effect.

Reading more books. Or, generally, engaging my long-form attention more. So: books, not Reddit or Twitter; movies, not YouTube. This is the flip side of cutting out news consumption: it created more time for me to act with intention on things I really valued. I plan on taking this a step further in 2022 by choosing creation over consumption. Everyone needs to balance information in with creation out, and right now my balance is too far on the side of consuming and integrating information and not enough on using it to create outputs (be they personal or professional).

Writing more. Smarter people than me have noted that writing helps you think by forcing you to articulate what’s going on inside your head. Once you put it down on paper, it’s easier to identify holes in your thought process. If you exercise that muscle more, you get better at rigorous thinking in general. I’m pleased with how much it helped me in 2021 and I’d like to keep pushing it forward in 2022 by being more public with the fruit of my labor. I’ve drafted a number of posts to 90% completion that I’d like to finish up and publish, which brings me to a 2022 goal: less overthinking, more creation, and being more okay with imperfection. (I’m way too concerned with wanting my end product to read like what it would be if I had been writing for years already, without realizing that if I don’t just put the reps in I’ll never get there in the first place!)

Prioritizing beauty and joy. I made a number of decisions this year that were impractical on the surface but gave me and the people who mattered in my life so much delight. I went on vacations with friends, I paid people surprise visits, I gave silly gifts, I wore fantastical clothes, I put new art in my home, I immersed myself in music, I danced unselfconsciously, I cried watching movies, I wrote people cards, I told friends I loved them, I gave a deeply meaningful toast at a friend’s wedding, and oh so much more. I chose what resonated with my heart, and it rewarded me so, so much. It’s an investment that compounds, and thanks to it I’m more excited than ever to embark on the new year.

Wishing everyone an exuberant 2022. There’s so much potential in a new year!

That music still holds a special place in my heart. There’s plenty of research about how music has a particularly acute effect on a maturing mind, and your musical tastes are really solidified in your late teens through early twenties. So yes, I still listen, but now on Spotify; I still go to the shows, even though they are more sporadic and populated less by energized teens careening off each other and more by swaying mid-thirty-something hipsters who will still sing along and cheer loudly, holding on to the last few vestiges of their fading youthful exuberance. But those songs still matter, they still ignite something authentic within each of us.

The Music Business Sucks

When I was young I used to think the music business was pretty straightforward — band makes music, I buy album, band gets paid; band goes on tour, I buy ticket, band gets paid. But as I grew up and some friends went into the music business, either playing in bands or tour managing or any of a number of other ancillary functions — and when I went down the rabbit hole to understand music rights ownership and piracy and turned all that research into my senior thesis — I realized the truth was a lot more complicated. My relationship with any of my favorite bands was mediated by hundreds or thousands of people representing dozens of competing interests that all take a slice of the music pie. From recording to touring to marketing and promotion (radio play, concert promotion, meet-and-greets, fan clubs, and more) to even merchandise, everyone extracts their pound of flesh. The result is that even if you really love a band and do what you can do support them, a lot of artists struggle to get by.

That’s the rub: people love music, but all too often musicians can’t making a living off that. Fundamentally: The ability for professional musicians to make money is limited by the number and variety of channels through which they can monetize their art. So: people stream music, go to shows, buy merch, pay for fan clubs (or Patreons), buy vinyl, buy posters, and on and on. But there’s only so many shows you can attend, t-shirts you can buy (do you really want a whole wardrobe of band t-shirts?), and vinyls you can own leaving aside the fact that maybe you don’t want the clutter). The most egregious offender here for imbalance between pleasure and remuneration is music streaming: no matter how deeply I love a song, it gets compensated at the exact same rate as a song I listen to in the background while paying bills online.

Music royalties are a structured product: there are statutory rates at which songwriters, performers, etc. are compensated whenever their music is paid on the radio (or streamed online). If you buy the royalty rights to a song, you’re basically buying an income stream for the life of the song’s copyright. And while one song’s income streams might be somewhat unpredictable, if you buy the rights to a bunch of songs’ income streams in a portfolio you wind up with more stable, predictable cash flows. This means you can model the expected financial return of buying a portfolio of music royalties — and borrow money to buy them to leverage your return. As a result, private equity loves buying and selling portfolios of streaming rights:

Lawrence Mestel, a US record industry veteran who earned his spurs at the likes of Island Records, Arista and Virgin Records, was one of the first to recognize this. A decade after establishing his music publishing and talent management company Primary Wave, the firm launched its first investment fund in 2016, raising US$300 million. That was followed in 2019 with Primary Wave Music IP Fund 2, which collected more than US$500 million. The funds have purchased the rights to music from Bob Ezrin, Dave Navarro, Culture Club and Whitney Houston to name just a few. The firm acquired an 80% stake in the song catalog of Stevie Nicks, for a reported US$100 million in December 2020.

(Seriously, just google “private equity music streaming rights” and endless pages just like this one pop up. While the quote above is about recent deals, this has been going on for decades.)

Enter Royal

Private equity funds don’t have any particular affinity for a band. They don’t care if they’re buying the rights to Lizzo or Creed, all they care about is that they can buy the asset for less than the discount cash flows they’ll receive from the asset (and the terminal value if they sell it).

But individual fans? The ones who go to the shows, sing along, buy the shirts, blast the music at full volume with the windows down? The music means so much more to them than just some financial asset.

In the most basic terms: for a given song, a fan of the song (or even just of the artist) is willing to pay more to own that royalty than is coldly economically rational. That’s because, to the fan, owning the song isn’t about return: it’s about connection with the artist; it’s about art that means something to them; it’s about their identity and how they show that to the world. And that matters way more than money.

This is true of many kinds of art. Why is a Rothko worth tens of millions of dollars? Not because it necessarily generates revenue, but because of what it makes you feel. (Or, because the buyer values the signaling of what owning a Rothko says about them, their taste, who they are, and what they value. Or both.) But the point is: art never has been a strictly economically rational pursuit. The fact that private equity firms buy and sell rights to portfolios of song royalties is more a historical aberration than the norm. Musical patronage has existed for hundreds of years, where wealthy fans supported musicians’ livelihoods and enabled them to create the art we all get to enjoy. Royal is revitalizing and democratizing this relationship, empowering not just wealthy fans but all fans to support their favorite musicians’ creative process by enabling them to own the royalty rights to their favorite musicians’ songs.

By stripping that connective, emotional element from music’s valuation, private equity firms fundamentally undervalued it. They temporarily turned art into a commodity. Now, Royal is restoring what was lost. And people are starting to notice: they just raised $55M from a whole host of artists, musicians, and forward-thinkers to pursue this huge mission, one that’s only truly been unlocked by the power of web3.

Why does web3 matter? Tracking and paying out royalties has historically been a complicated process that varies depending on many factors. You have to be able to track where a song is played, in what format, via what platform, for what purpose — and split revenues between all the parties involved from the musician to the producer to the record label. The big advance that Royal harnesses is the ability to codify all this logic in a contract on the blockchain and move towards automating the collection and disbursement of all these royalties. Previously, it would have been cost-prohibitive (from the perspective of the amount of work and infrastructure that would be required to make this product function) for Royal to exist. Now, all that administrative overhead can be moved to a computer program, and the world gets a little more human.

Technology is an amoral force, often a mirror for humanity. Sometimes it fosters disconnection — for example, by turning art into numbers on a spreadsheet, fodder for a leveraged buy-out. Other times it enables us to remove noise and cruft from our lives and focus on what makes us truly human: the feelings we can share with each other. I’m excited for the future Royal is building, and I’m awestruck by the possibility for all kinds of technology to get us out of our own way and help us forge deeper, more meaningful relationships with one another. Music is a wonderful place to start.

The Technological Game Has Changed

The first issue existing manufacturers face is that the basis of competition in cars is changing — and not necessarily how you would immediately think. No, it’s not electric vs. gasoline drivetrain. It’s that software and computing is becoming a core part of the driving experience.

Most cars on the road these days are good enough for most people. By and large, they will get you and your family and cargo from point A to point B safely, efficiently, and comfortably. The industry has basically hit a plateau of mechanical innovation, and any incremental mechanical improvements are quickly copied and commoditized (e.g. side-impact airbags, double wishbone suspension, an extra 50 hp or 5 mpg). There’s very little anyone’s doing, mechanically, in the mass market, that’s actually unique.

While Tesla is excellent along all these technical measurements (insanely fast, insanely safe, insanely efficient), it did things that incumbents could not quickly copy because of the way it chose to build cars: with computing and software as a top priority.

Tesla is a technology company at heart and it shows. Tesla built over-the-air update functionality into the Model S from launch, and as a result you can now download an upgrade that adds the ability to summon your car to you. Meanwhile, when Ford’s MyFord Touch infotainment system was panned by consumers, customers could either install an upgrade to improve it via USB stick or have a dealer do it for them. Similarly, when Chrysler found out hackers could remotely disable a Jeep while it was driving, they had to issue a recall that required either a dealer visit or a similar USB-based update process. Tesla has been able to address some of its issues completely via over-the-air updates and is the only manufacturer that has publicly stated it is updating core engine control unit software over-the-air.

Incumbents commonly outsource components like anti-lock braking, electronic stability control, and power train systems to suppliers like Bosch and Delphi. Those systems all have significant compute components that major manufacturers chose not to develop in-house because their core competency was in vehicle design, assembly, and marketing, not in software design. Now the consequences of those outsourcing decisions are coming home to roost, and the result is a poor experience for car owners and an inability for manufacturers to quickly respond.

Tesla’s software prowess, illustrated

It takes years to design a car. The Tesla Roadster took 5 years from concept to small-scale production run, even with significant help from Lotus on parts and production. A new model on an existing platform and utilizing an existing powertrain takes 2–3 years to develop, but developing a new powertrain and chassis would greatly lengthen the time needed. Even if incumbents saw the success of the Model S when it launched in 2012 and decided it was the future of cars, there’s no guarantee they will have anything directly competitive (from a software perspective) on the road this year or next.

Cars are big, expensive, complicated, and highly regulated. Rebooting how you design a car is one thing. Rebooting your business model at the same time is a entirely different game.

A New Business Model

While Tesla faced massive challenges when it started work over a decade ago, it also had the opportunity to build a modern car company from the ground up. This meant not just designing a car from scratch, but also creating the best business model to sell that car.

Existing car companies are, for better or for worse, locked in to their business model. By law, they are not allowed to sell cars directly to consumers: dealers must act as intermediaries. But because of how the dealer franchise laws are written, the fact that Tesla didn’t already have dealerships allowed them to forgo creating them in the first place. [1]

This is important because electric cars don’t make much economic sense for dealers. Dealerships make the majority of their profit on financing and maintenance. Electric cars may still need financing, but they certainly don’t require anywhere near as much service as their gasoline-powered counterparts. There are far fewer moving parts, which means fewer parts that can wear out and fewer fluids that need regular replacing. Add to that the fact that Tesla can solve an increasing number of issues via over-the-air software updates, and the economic benefit of having physical dealerships erodes significantly.

Beyond economics, the lack of dealerships is a significant organizational advantage for Tesla. Manufacturers and dealerships have a somewhat adversarial relationship: manufacturers sell cars to dealerships, who then sell to end consumers, so dealers are the manufacturer’s immediate customer. This creates inefficiency: customers generally can’t order the exact car with the options they want; they either pick from what’s on the lot, or hunt around for the closest car to their ideal that’s available.

To paraphrase Steven Sinofsky, companies ship their org chart [2]. The existing problems with the car manufacturer business model and end product are a reflection of the fragmented interests of the manufacturer, its parts suppliers, and its dealership network. Currently, manufacturers need to satisfy dealers first and consumers second. The result is a market of largely mediocre products that leave consumers uninspired. But there may yet be a silver lining for manufacturers in an unlikely form: declining car ownership.

Renting to the Rescue

Ironically, the trend away from buying cars and towards ownership-as-a-service might be what saves incumbent car manufacturers. Several of them are already investing in alternative ownership models: Daimler owns Car2Go, a Zipcar competitor that offers one-way rentals within its cities; BMW recently launched ReachNow in Seattle, offering hourly rentals; and Audi launched an on-demand concierge rental service in the Bay Area. Transportation is a “job to be done,” and the smart money is betting that car ownership will shift to a service model going forward: Uber’s valuation is predicated on its ability to replace car ownership for a growing share of the population.

That doesn’t change the fact that software will be the crux of competition in the new world of transportation. Software is mostly shaping the experience of driving (and, increasingly, riding in) a car through functions like blind spot monitoring, lane assist, and, eventually, full autopilot. It will also be the means through which people manage their access to transportation, either through managing ownership (Drive, Beepi (et al.), Tesla) or access (Tesla Summon, Uber, Lyft, Zipcar).

Whether any manufacturers can develop enough direct consumer relationships to challenge Uber (or Google, or Apple) in the on-demand car space remains to be seen. While they certainly have enough resources to throw at the problem, those relationships are currently mediated through dealerships — a potential speed bump that Tesla wouldn’t have if (or when) it offers an on-demand product.

But it’s unclear how quickly that will matter: today it may be feasible to live primarily on Uber and Zipcar if you live in downtown San Francisco or New York, but it still doesn’t work as a full-time car replacement for most people in L.A. or even Menlo Park. While technology moves quickly, the built world is slow to change. Until we have more advanced and more widespread self-driving technology (and the regulations to support it), most Americans will continue to own their own cars. In the meantime, Tesla is better positioned than any other manufacturer to dominate consumer imagination — and demand.

[1] The New Yorker did a brief history on dealer franchise laws a decade ago. The takeaway is that in the 1920s and 30s, manufacturers strong-armed dealers into buying products they wouldn’t be able to sell. This led dealers to turn to state governments for protective laws to make up for their lack of leverage. Since most of these laws were written to regulate existing dealer-manufacturer relationships, Tesla often isn’t covered. As a result, in most states Tesla is allowed to sell directly to the public. But in some states, like Indiana, dealers are lobbying legislators to re-write the dealership laws to force all car manufacturers to sell through dealers, although this has received a lot of push-back from Tesla supporters. Other states like Texas, Michigan, Arizona, Connecticut, and West Virginia have pre-existing bans on direct sales.

[2] Sinofsky’s comment is itself a paraphrasing of Conway’s Law.

Most early stage companies who hire Chief of Staff roles would be better served by hiring stronger senior leadership. There are usually only 2–3 things that really, really matter at a given time at an early company, so hire 2–3 exceptional leaders to own those problems and forget the Chief of Staff. Hiring a Chief of Staff at the Seed or Series A stage (or even Series B) sends the message that the CEO thinks they need to do it all themselves. If you hire a Chief of Staff, at best that will buy you a couple more months of staying on top of everything — barely. You’ll tread water at best, and the fundamental problem still isn’t solved: your teams and functions aren’t scaling, and you don’t have capacity to lead all of them.

One common fault line that has emerged since the beginning of 2020, accelerating the Chief of Staff trend, is the shift to remote-first work. More junior teams (and leaders) struggle in a remote world. In an in-person world, a founder/CEO can get by with having managers with 6 total years of experience reporting to them. Teams can skate by with informal cross-team communications in an in-person world because people can fill in the gaps at lunch, at the water cooler, at someone’s desk, etc. Remote work wipes all of that out. You have to rely on formal communication channels, both up-and-down and across teams. This is where junior management breaks down and more experienced management excels.

Here’s the dirty secret: with better senior leadership, you don’t get much better decision-making. That skill reaches diminishing marginal returns after a decade or so of experience in startups (often less with the best people). But you do get better management abilities, which means better team leadership, better managing upwards, and better coordination across the company. If you hire senior leaders focused in each of your company’s critical areas — the areas that really matter in the next 12 months — that will do far, far more to improve both your company’s execution and your ability to stay on top of things than hiring a Chief of Staff.

What does “more senior leadership” look like? Don’t hire anyone more junior than Director-level to lead a function: at that level, they’re still hungry enough to roll up their sleeves and execute, yet they’re experienced enough to effectively communicate upwards and across the team. Communication is really the thing many founder/CEOs are solving for with the Chief of Staff role: they don’t feel on top of things, so they hire a Chief of Staff to solve for that. (Or, in the other primary motivator: there are point problems that need to be solved that the existing team can’t handle, in which case the solution is still the same — hire better leadership.)

We lionize founders and CEOs and some actually believe they are the company. In most cases — especially when you’ve raised money, have customers and a team, etc. — this is simply not true. The CEO or founder is not the company, but they are the ones who build the best leadership team. That leadership team is what enables the CEO to both (a) get the information they need to make decisions and (b) execute in all functions.

Jack Dorsey is an exceptional founder and CEO, but his secret isn’t that he’s a superhuman who does everything; his secret is he recruits excellent executive talent who enable him to do everything he can do. (How do you think he runs 2 public companies? It’s certainly not because he works twice as many hours.) Steve Jobs never had a Chief of Staff (certainly not in the contemporary Silicon Valley sense)— but he did have an absolutely world-class leadership team that made Apple what it is today, and continued to run the company just as well after he passed.

If you’re tempted to hire a Chief of Staff, ask yourself: why do you really need this person? What problems in your company do you actually need to solve? If you’re underwater in any area of the company that’s critical to your success between now and your next fundraise milestone, that’s a sign that your leadership in that area isn’t meeting the bar and you need to upgrade it. Making those key hires will do orders of magnitude more to speed your company up vs. hiring someone 2-4 years out of college to act as an extension of you — which, by the way, also replicates your faults, not just your strengths.

Don’t hire a Chief of Staff.