Episode 189 - Start It Up
Published July 21, 2015
SPECIAL GUEST: Eliot Peper. We're joined this episode by entrepreneur in residence and author Eliot Peper, to talk about the amazing, intense, and transformative world of startups. Eliot's series, Uncommon Stock, is all about startups, the same kind of thing that some of our favorite shows (& past topics) like Silicon Valley are about. Join us on this strange trip into another world, and find out how these unique companies are changing our world. Recorded 7/14/2015.
Mike & Matt's Recommended Reading:
Eliot on Twitter
Eliot on Facebook
Uncommon Stock: Version 1.0, by Eliot Peper (Book one of the Uncommon series)
Uncommon Stock: Power Play, by Eliot Peper (Book two of the Uncommon series)
Uncommon Stock: Exit Strategy, by Eliot Peper (Book three of the Uncommon series - due 7/29/2015, available for preorder)
Future Crimes, by Marc Goodman
More coming soon...
Alpha: Welcome to another episode of Robot Overlordz, episode #189. On the show we take a look at how society is changing, everything from pop culture reviews to political commentary, technology trends to social norms, all in about thirty minutes or less, every Tuesday and Thursday.
Mike Johnston: Greetings cyborgs, robots, and natural humans. I’m Mike Johnston.
Matt Bolton: And I’m Matt Bolton.
MJ: And joining us on this episode is Eliot Peper. Eliot, thanks for joining us.
Eliot Peper: Thanks so much for having me on the show.
MJ: To start off, could you give our listeners a highlight of your background?
EP: Yeah, absolutely. So in school, I actually studied diplomacy, so I studied international affairs, and I always thought it would be really fun to work for the UN and maybe negotiate climate change agreements or something. But once I started doing it in school, it was not a good fit. I was actually sort of bored out of my mind, the details of applying bureaucratic policy. On the side, I started working for a startup. It was a tech startup based in San Diego and they actually did waste-to-energy gasification, so it as a plasma arc gasification technology that allowed you to take garbage and turn it into electricity. After a while, I realized that I actually was enjoying that a lot more than I was more course work, so I ended up spending a lot more time working for the startup outside of school than I was in school. Eventually I joined up with a few friends from that initial startup, where we started our own company called Insight Access where we advised cleantech firms on market entry into Latin America. From there, I got recruited into being an entrepreneur-in-residence at a venture capital fund based in San Diego. So they would, as venture funds do, make bets on early stage entrepreneurs that are trying to commercialize new technologies, and my job as an entrepreneur-in-residence, was to both help them choose what companies to bet on, do the due diligence to make sure they were the right team, and then also be a drop-in operator to help those companies pass their growth milestones as they mature. I had a lot of fun doing that. Then me and my wife decided to take a sabbatical. So, we took nine months off and did a whole bunch of international travel, which was a lot of fun. While we were on the trip, I finished writing my first novel, which was called “Uncommon Stock: Version 1.0,” and it’s a tech startup thriller. It’s an adventure about two kids that drop out of college to start a new tech company and end up getting drawn into a huge money laundering ring. When we got back, I got a publishing offer on that first novel, and so since then I’ve been writing books that are tech startup thrillers. I do that about half the time and then the other half of the time I’m still a strategy adviser to a number of tech startups. So, I’m working both on the fiction and the non-fiction side of trying to figure out what might happen next.
MJ: So you’ve got a book coming out in August now, right?
EP: Actually, just before. So yeah, my third novel comes out on July 29th.
MJ: Okay, and that’s the third novel in the “Uncommon Stock” series?
EP: That’s right. It’s a trilogy, so it’s also the final one.
MJ: Would you say that’s kind of drawing on your own background pretty heavily?
EP: Yeah. One of the things I realized working with tech startups was that there’s a lot of great business non-fiction out there, so there are a lot of books and articles that you can read if you’re an aspiring entrepreneur or a technologist that talk about the lessons that people learned building a company. So it’ll be like, “Hey, I started this company, we created this software, we were successful, and here’s what I learned at the end of the day.” Those can be really useful because they can give you context to put your own life decisions into. But they also sort of miss something, because if you’re working in the startup world there’s a huge human aspect to working in a fast-paced highly technical environment. There’s big egos, like big personalities; there’s a lot of wild success, scorching failure, money being won and lost, impact being made on the world and disappearing. And internally, there are betrayals. Most startups fail because co-founders have fights, not because they were wrong or their product doesn’t work. So, there’s this really interesting human element to what it actually is like to go through the process of building a company, particularly a technology company, and I think a lot of business non-fiction misses that because it’s focused on the intellectual conclusions that you can draw from going through it but not on actually revealing the human experience along the way. And so my hope was, by writing some fiction that takes place in the startup world, that that would give a sneak peek, as it were, into the minds and the lives of people who are working in the startup world.
MJ: That seems really interesting to me. Certainly, I haven’t heard of any other books particularly doing that. Matt and I have been big fans of shows like—
MB: Silicon Valley.
MJ: Yeah, Silicon Valley, and I’m actually, at the moment, watching Halt and Catch Fire, which I think a little bit deals with that. It sounds like you do think that the book market didn’t really have anything like that. What do you think the TV versions of those kinds of stories get right or get wrong, having had that experience yourself in that world? For Matt and I as viewers, we’re always curious: How much of that stuff is accurate?
EP: Yeah, that’s a good question. I have watched Silicon Valley, I have not yet watched Halt and Catch Fire, although I’ve heard good things about it, so I will watch it, I guess I can report back then. But Silicon Valley actually launched maybe the same money as my first novel, so that was actually quite fun because they came out at the same time and it was fun to play off of each other. But I’ve loved HBO’s Silicon Valley. I mean, there have definitely been some reactive folks in Silicon Valley who I think get offended probably because the jokes hit a little bit too close to home. [laughs] But, I mean, I don’t know, I think it’s a great show, I love it, I think that they do a really fun job drawing on all of the ridiculous situations that really do happen all the time. And so, yeah, I fully enjoy it. Most of the things in that show… Here’s the best way to put it: When you look at HBO’s Silicon Valley, my guess is when you look at Halt and Catch Fire, when you look at The Social Network movie, or when you look at my books or anyone else’s out there, the one thing I can tell you is that fact is stranger than fiction and that I have seen way weirder and crazier things happen in the actual startup world, or just the world in general, than what any of my stories or those stories capture. So, that’s sort of what I find the most interesting just because it’s a creative challenge to try to match reality.
MB: I’ve worked for a startup before but I’ve never worked in the actual Silicon Valley, but it always struck me as having some sort of a ring of truth just in the way that they do that show. Obviously talking to you, it seems like it’s at least somewhat accurate.
EP: Yeah, I think they do a good job. And actually, my books are not set in Silicon Valley. They’re set in Boulder, Colorado, where there’s a burgeoning tech scene there. So yeah, absolutely, I think it’s probably a truism among startups. [laughs]
MB: Why did you pick Boulder? Just because, or…?
EP: For a couple reasons. One was because I was living in San Diego—now I live in Oakland, but I was living in San Diego at the time and I had done a lot of work for startups down there, and so I was sort of interested in not doing the cliche. Like, if I’m going to write about startups, like “Hey, what if it wasn’t based in Palo Alto?” So, that was half of it. Then the other half of it was it seemed like it was a really good fit for the character. So the CEO is a college student, she’s very active, so she loves rock climbing and running and these kind of things and is also really ambitious, so it just seemed like Boulder would be a good fit for her, that actually might be where she would’ve chosen to go to college in the first place.
MB: Okay, so maybe you’re a big Mork and Mindy fan or something. [laughs]
MJ: So, what has the reaction to the book been like so far?
EP: It’s been really cool. I was actually very pleasantly surprised. So, the first reader was Brad Feld, who is within the tiny goldfish bowl of tech and venture investing, he is one of the big fish. He runs a large venture capital fund actually based in Boulder called The Foundry Group. I had shared early drafts of the book with him and he was very encouraging, which meant a lot to me, and he actually started a new publishing company based in Boulder called FG Press and invited me to have the first book be their first title. After it was released… Yeah, I’ve been very moved by the respond. We’ve had people from industry, so like CEOs of tech companies who love it and reach out to me, telling me how it resonated with them, which is pretty special; like, as an author, that’s pretty weird and fun. And on the other side, one of the things that I’ve found to be really interesting is I’ve had tons of cold outreach from people who are totally, like, this isn’t their world—from all over the world. Like, I had one woman from Kenya who emailed me, just talking about how the book was entertaining and sort of helped her think about the challenges she was facing working for an NGO that worked with the Kenyan government, and that it was fun to get this peek into the world of tech startups where she had never worked before. So, I think that’s sort of the fun part about having a more mainstream page-turner, is that hopefully it makes the world of tech startups more accessible to people who might never have even been interested in them before in the same way as HBO’s Silicon Valley. Some people might watch it because they work for a startup, but many people just watch it because it’s funny. So yeah, in terms of response, I’ve been humbled. It’s been really fun.
MJ: Do you think seeing things like that in popular culture, whether it be books or TV shows or movies, is starting to move that startup culture beyond just Silicon Valley and into other places? You mentioned Boulder, and I know in the Chicago area Matt just recently attended a meetup that I’ve been going to regularly, of sort of a startup incubator here. There’s various efforts, it seems like, all around the country and the world to start up a startup culture, I guess. Do you think that kind of media is accelerating that?
EP: I hope so. Actually, you guys might find this interesting: Brad, the investor I mentioned before, wrote a book called Startup Communities, which is essentially the go-to text on exactly what you’re describing, and he’s spent a lot of time in communities around the world basically proselytizing exactly that. If you’ve ever done a Startup Weekend, or if you’ve heard of that program, they were a big part of that, too. So, I think that that’s very true, that some parts of the culture around startups are now starting to spread and people are integrating entrepreneurial attitudes into their daily lives. And, on the other hand, I think part of the interesting thing about it is that it’s also just a reflection of attitudes that are already changing from a broad-based perspective. I’m always amazed at how entrepreneurial Americans are in general. Like, we’re sort of a culture where if there’s a problem, you fix it, right? You don’t sit there and say, “Oh, I’m just going to complain about this and someone else should fix it and I’ll just sit by the wayside.” I feel like that’s something that’s pretty cool and pretty special about this country in the sense that a lot of people will get up and try to fix something if they see it’s broken, or make something better if they can see how that might be possible, and not just sort of depend on a greater power to try to do that for them later. So I think that half of it is some of that culture is maybe expanding in its unique way from the world of Silicon Valley and other places like that. And another is just that I think a lot of people in the world, maybe because of some of the technological changes we see more generally just in terms of IT, internet, communications technology everywhere, that it allows individuals to sort of rediscover entrepreneurialism in themselves.
MB: Obviously you’ve worked in a lot of startups and things. Is there anything, any one piece of advice you could give for people who are doing a startup? I’m sure there’s a common denominator when they fail. I know the one I worked for, I know why they failed, despite having a lot of money. [laughs]
EP: [laughs] Yeah, it’s sort of ironic how sometimes money is not—like, investments is only a proxy for success, and not a very good one. I think that the biggest thing, and I think actually I’m guilty probably of creating more of this, as are what we just talked about, like the Silicon Valley culture, the tech startup culture is sort of growing in mainstream prominence. I think part of what is damaging about that is that if you are thinking about starting a business for yourself, suddenly it seems like you need to go out and read every blog post and watch every episode of Shark Tank, do all of these things and know all of the buzzwords in order to be successful; and get all this social validation that everybody thinks your idea is good before it’s worth making a bet on or pursuing yourself. I think that’s probably the biggest failure in the growth of that Silicon Valley culture, because the best entrepreneurs start from first principles, right? So, you think about what’s broken in the world, and then once you investigate that problem enough and figure out ways to fix it for yourself, maybe then it becomes apparent that that has commercial application and that it’s worth building a business around. But I think that you should undervalue what the mainstream media thinks. So, don’t worry about reading TechCrunch, don’t worry about going out there and trying to get everybody to say your idea is good. I remember Brian Chesky, who’s AirBnB’s CEO, that he recently published an article, he took the actual body of the emails of rejections for investment for AirBnB in their seed round or something. You can see his emails, and many people would try to pitch their idea to people either for investment or to customers or to potential employees, and when people say, “Hey, that’s stupid,” they’re like, “Ah, shit. Well maybe I’ll go back to my day job.” I think that the entrepreneurs that are the most successful, they see something that’s broken in the world and they choose to base their actions on their own analysis rather than depending on others for validation. So, Brian knew that despite the fact that all these investors who theoretically knew much more than him, despite the fact that they passed and told him that they weren’t interested, that that didn’t mean that it wasn’t worth it.
MB: I actually did see that article, it was very interesting. It just goes to show that if you have a good idea, if people can’t see your vision it doesn’t mean that it’s not a good one.
MJ: Eliot, one of the things that I found interesting about “Uncommon Stock” was the whole money laundering and drug cartel connection. I’m assuming you did some research on that then in writing the book?
EP: Yeah, absolutely. I talked to a number of friends who worked in counterintelligence and who worked for the federal government in anti-money laundering and for banks, and what’s sort of ironic… First of all, everything in the book is possible, and not even particularly unlikely. But the other interesting thing is just how vulnerable our financial system is. I actually was sort of scared out of my mind—talk about fact is stranger than fiction, right? Have you guys followed the OPM hacking scandal that has exploded over the past few months?
MJ: I have.
EP: It’s the same problem. The problem in the financial and the problem at OPM was that you had these huge legacy computer systems where things have been fixed with bandaids since the ‘60s, if not before. And so sometimes you’re literally running an entire system where the foundation is code written 40 years ago where the actual source code is lost and the person who wrote it is dead and you only have the executable code. Nobody really understands how it all fits together, and when there’s a problem you hire a consultant or someone to come in and fix just that problem and not actually go to the source. So, the financial world is full of that and, unfortunately, that makes our financial institutions way more vulnerable than we think. That is also made more serious by the fact that large companies, and financial institutions in particular, don’t want to disclose when they’ve had a security breach because they know that if Bank of America says, “Hey, we got hacked,” that suddenly every Bank of America customer everywhere is going to freak out. So, they are very hesitant to disclose anything that even they discover, and the fact is they’re probably not even discovering half of what’s happening. Doing the research to inform the book was worrying, let’s put it that way. [laughs] And I think that the other half of it and that the book sort of plays with is that that’s the technical aspect, that’s sort of like the technical side of the vulnerabilities that our financial system faces, and that’s worrying because so much of our economy depends on our financial system. But the other thing that the book sort of plays with that comes at it from a different angle is that there’s a lot of political gaming that goes around particularly in the financial industry. So, everybody is aware of the recession and the reforms that happen afterwards and how many of those reforms were structured by X bankers to benefit future bankers. It’s a tough place to play in because everybody is always trying to try new financial instruments, which then means you need new regulation or regulators don’t understand how they work. It creates this atmosphere of complexity that makes good governments really, really difficult. So even if you have the best person in charge of making the right laws, it’s not always obvious what the right laws are to make. And there’s a lot of grey area, for lack of a better word, corruption, that happens in financial rulemaking that is sort of esoteric enough that it doesn’t often trickle into the mainstream press, but nevertheless has implications that impact every single American.
MJ: It doesn’t really seem to get reported on in the mainstream press a whole lot. I remember reading not too long ago a couple scientists had taken some equations they come up with for… I want to say for dark matter, and they had applied them to money laundering and the shadow economy and all of that dark money that’s out there in the financial system, and they come up with a figure that was something like six or seven times what anyone had ever estimated it was before. I think I mentioned that story to a couple of people and no one had really heard of it. I want to say I read it on Slashdot somewhere. I guess I’m curious, in having done that research, what you think—it seems like, climate-wise, politically in the US maybe we’re starting to consider a little bit the drug war and all of that money that’s out there in those illegal areas, that we’re maybe starting to think that it might be time to bring that into the light. Whatever that means, whether it’s legalization or decriminalization, whatever that means, what do you think about that? It looks like the beginning of a trend. I’m not going to say that we’re going to get there for sure in any kind of timeframe, but at least that’s what it has looked like to me and Matt when we’ve talked about this.
EP: Yeah, do you mean about financial regulation or do you mean about drug decriminalization as a policy to try to improve trafficking?
MJ: I guess I’m more interested in that shadow economy becoming a part of the real economy and what that might do for our economic outlook.
EP: Sure. Fundamentally, shadow economies suck. [laughs] I mean, they suck for pretty much everyone except the very few players who are the bosses of the shadow economy. Globally—I wish I had the numbers in front of me, they’re shocking; and, in fact, if you guys want a reading recommendation, you and everybody listening should read “Future Crimes” by Marc Goodman. It’s about all of these things in phenomenal detail. He’s an advisor to the FBI on exactly these issues and it is phenomenal and terrifying. But the black market financial world worldwide is something like 12% of the global economy, which is insane, right? That’s literally more than $1 out of every $10 is shadow economy money. That’s scary. That’s scary obviously if, say, you are on the wrong end of a drug cartel. It can ruin your life and it creates all of these ripple effect criminality that goes out from there. But it also sucks for just a middle class family living in Oklahoma because it means that all of that money, first of all, there’s an even bigger cost basis for society because of all of the enforcement dollars that has to go to managing that as a problem, and also because there’s no tax base on that money at all to help pay for other social services like schools for your kids or anything else. So on the policy side, I’m a bullish supporter for marijuana legalization and other efforts like those because they bring shadow economies into the real economy. That means more transparency and those businesses can actually be regulated and that they contribute, as corporations should, to the community that they live in both from a tax perspective and that also they follow the rules of how we’ve organized our legal lives so that they provide healthcare for their employees or what have you. So, I’m a big fan, generally, of those efforts.
MJ: What is the one thing about how all of this stuff is affecting society that most excites you right now, that you really would like to see just cranked up to 11 on impacting society?
EP: Honestly, I think that the most fundamental piece, the thing that I find most exciting, is that individual people like us, the endless conversation, and that your listeners are getting more interested in these issues. Because the reason why the bad guys in my books get away with what they get away with is because most people just don’t care. They don’t choose to make those kinds of issues a priority in their lives, or that learning about and understanding what those issues is important. I think that that, to me, is exciting, that we’re even having this conversation because of a book that, to be perfectly honest, is meant to be entertainment. So the fact that we’re actually talking about that and that maybe a couple of your listeners might get curious and might get skeptical when they read the next New York Times about a new piece of financial legislation or what the banks are doing, that you might at the end of that article stop and ask yourself a few questions about what’s really going on behind the scenes… Because ultimately that’s how those kinds of changes happen, is when people educate themselves about it and then press for change. And I think that that’s true on the human side of making sure that our regulatory system and our private sector come to a good balance to make sure that these issues are dealt with and managed. And it’s also true on the technical side, right? Like, I really hope that more of not just our financial institutions but our public institutions and any company at all maybe take a step back and think about whether the next fix they make should be more fundamental than a bandaid.
MJ: Okay, so the book comes out July 29th, correct?
EP: That’s right, correct. It’s called “Uncommon Stock: Exit Strategy.”
MJ: And where can people, if they’re curious to read more about your writing or the other books, or just you yourself, where can they find you online?
EP: The easiest place to find me online is my blog, it’s my name, EliotPeper.com. The books are on Amazon, or wherever you like to buy books, they’re available. You can also find them on my website. I have a little newsletter where fans of the books can stay in touch for when my new ones come out and get some behind-the-scenes stuff. I’m also on Twitter @EliotPeper and on Facebook, or pretty much anywhere you want to find me.
MJ: Well Eliot, thanks for joining us tonight.
EP: Again, thanks so much for having me on the show. This has been a lot of fun.
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MJ: Thanks everyone for listening.