CivTech Scotland wants to procure what no one knows exists

Here’s a tale of two organizations. When it comes to banking, I can walk up to an ATM anywhere in the world, slide in a card, hit a couple of buttons, and walk away with cash, often in less than 20-30 seconds. It’s magical, but so quotidian that we easily forget the vast technical infrastructure that powers this experience.

Now, try to walk into a government agency to get service done. You often need to get a ticket and wait, often for an hour or more. During a recent trip to the New York Department of Motor Vehicles, I ended up getting sent to four different lines, all of which were independent, and because of a computer malfunction, the whole place was being run by people pointing and shouting.

The dichotomy between those two experiences is, fundamentally, a difference in procurement.

Before you run to get coffee (or whiskey, for that matter), let me say this: procurement is the sort of extremely boring but absolutely vital task that is both the barrier but also the opportunity for making the DMV and other government services more like the ATM. New initiatives around the world are trying to rebuild procurement from the ground up, with entrepreneurship at their core. One initiative I’ve spent time with recently is CivTech, based in Scotland.

CivTech, a component of the digital directorate of the Scottish government, is a sort of two-sided marketplace connecting startup founders with government agencies. Agencies sponsor challenges, and startups compete to be the best at solving that challenge, potentially winning hundreds of thousands of dollars and a reference customer. Those startups are organized into batches, with the program launching its third batch shortly (applications are due July 2nd).

Alexander Holt, head of CivTech, is an energetic true believer that startup innovation can transform government services. For him, the key question for public agencies is “how do you procure what you don’t know exists?”

In the classical model of procurement, an agency drafts a Request for Proposals (RFP) that spells out exactly what the agency is looking for from vendors. Then, whoever bids lowest on the RFP will usually get the contract. The disconnect is that agencies rarely know what solutions they need, and Holt says that often leads to disaster. “We are writing specs that we don’t understand, and we are looking at the solution, not looking at the problem,” he said.

Holt wants to completely change that process. Instead of presenting a solution and asking for implementations, he wants agencies to present problems and keep an “open mind” about what a solution might look like. His message to agencies is “don’t give us a solution you think you need, but give us a problem you think you have.”

Then — and this is a major difference from traditional procurement — he encourages agencies to select several teams (usually three) to build pilot projects that could solve the problem. The idea is to get a better sense of what solutions exist, and also learn how the companies function. “You get an understanding of their capacity and more importantly, their culture, and that is really important,” Holt explained.

After a few weeks of building, the agency can choose to work with one company, and help them launch their product. The model is fast, since startups are iterating rapidly in competition with each other, but also cheap. As Holt said, “The other benefit for the challenge sponsor is that the amount of time that the companies are putting in versus what you’re paying them is 10 times cheaper,” than conventional procurement models.

CivTech wants to educate the next generation of civic entrepreneurs

For startups participating in the program, CivTech hopes it can provide them with legitimacy and a first customer for their business. By the end of the program, “you have a first reference client, which is the government, that allows you to keep your equity 100% and your IP 100%,” Holt said. Plus, the program connects its startups to citizens to accelerate the innovation feedback loop.

While the team has a bold vision, the program had humble beginnings. The first cohort launched in June 2016 within days of Brexit, which radically redefined the future of the United Kingdom and Scotland along with it. The program also faced its own procurement challenge around finding a home, eventually signing a lease for its first batch less than an hour before launch.

The program has grown rapidly since its inception. It had just 6 challenges during its first batch, but this time around has 10 challenges from a diverse set of agencies, including Scotland’s health service and illicit trade agencies.

Transforming procurement and therefore government won’t happen overnight, but a change in mentality is the key to imprinting entrepreneurship and startup culture on bureaucrats. Holt said that his message is always consistent: “show me the law, not the rule.” Laws are much more flexible than we think, and changing procurement doesn’t start in the legislature, but in the acquisition office of every public agency.

NXP-Qualcomm $44b deal to clear China as Trump authorizes $50b tariffs

The U.S.-China trade battle enters an important new phase. The South China Morning Post is reporting that China’s Ministry of Commerce will clear Qualcomm’s pending $44 billion acquisition of NXP Semiconductors. One independent source also conveyed the same news to TechCrunch, although there has been no official word from Qualcomm, NXP, or China at time of publication.

That acquisition was expected to close months ago, but the Chinese government repeatedly delayed its assent to the deal as part of its on-going fight with the Trump administration over the future of bilateral trade. China’s ministry remained the last competition authority worldwide pending to approve the deal, and presumably it will close rapidly now that antitrust review has been completed.

The news of the approval broke just as the Wall Street Journal reported that the White House has authorized $50 billion in tariffs on Chinese goods. The final list of goods that will be subject to the tariffs has not been released, although TechCrunch has done a data analysis on the last set of tariffs that focused on aluminum and steel imports. Direct news from the White House is expected Friday.

There has been a studied response and counter-response between the two countries over trade the past year, as both Presidents Trump and Xi Jinping sought high ground over the spat. The most recent set of issues has concerned ZTE, which was offered a reprieve by President Trump only to have its fate brought to Congress for a decision this week.

In my analysis on ZTE’s potential death sentence, I wrote this afternoon that:

Ironically — and to be clear on this view, I am not getting this from sources, but rather pointing out a unique strategy vector here — it might well be Qualcomm that uses its DC policy shop to try to save ZTE. Those lobbyists protected Qualcomm from a takeover by Broadcom earlier this year, and it could try to make the case to Congress that it will be irreparably damaged if legislators don’t back off their threats.

The timing of the approval for Qualcomm could come with an understanding that it help ZTE with its Congressional woes. Qualcomm has already agreed to form a strategic partnership with Baidu in the interim around AI and deep learning, which one source said to me was part of a package of concessions offered to placate Beijing.

Without a doubt, the news will prove a rare bit of relief for Qualcomm, which has been buffeted by challenges over the past year, including its hostile takeover battle with Broadcom and ongoing patent lawsuits with some of its biggest customers like Apple. Shareholders are likely to be enthusiastic with the outcome, and the stock was up 3% in after hours trading following the news.

The acquisition of NXP is expected to provide a new set of technologies and patents for Qualcomm, particularly in strategic growth spaces like automotive, where Qualcomm has been weak on its product side.

3,000 journalists covering Kim-Trump this week is WTF is wrong with media

Media businesses are in the dumper. Every week, we hear of new layoffs, budget cuts, diminished editorial quality, and more, way more. And yet, somehow, miraculously, more than 3,000 journalists managed to find the funds to travel to Singapore to cover the Kim-Trump Summit Extraordinaire this week.

How many journalists got to see the summit activity? From Politico: “Most notably, the number of American journalists allowed to witness the meeting between Trump and Kim was limited to seven — a smaller group than would usually be present for such a summit, and one that excluded representatives from the major wire services” (emphasis added).

It’s a huge news story, a major historical moment in the relations between the DPRK and the United States, and one that portends massive changes in that relationship going forward. The event should be fervently covered by the global press. Yet, 3,000 seems a stupendous number of people to cover an event so scripted and managed. Journalists watched from a warehouse and even got so bored, they started interviewing each other rather than, I don’t know, a source.

I notice this same dynamic watching the keynote videos of any of the top tech companies — there are hundreds if not thousands of journalists covering these events from the audience. Exactly how you build a unique story sitting there, beats me.

In media, one of the most critical qualities of a great story is salience — how important a story is to a particular audience. Tech readers want to know everything happening at an Apple keynote, just as much as the whole world is curious about what shakes down in Singapore. It makes sense to have a density of journalists to cover these events.

The problem in my mind is the sheer duplication of work, when the increasingly precious time of journalists could be spent on finding more differentiated or unique stories that are under-reported. In Singapore, how many English-language journalists needed to be there? How many Chinese-speaking or Korean-speaking journalists? I’m not suggesting the answer in aggregate is one each, but certainly the number should be fractions of 3,000.

Journalists taking pictures of a TV screen of Kim and Trump. How is this journalism?

I have given a lot of thought to subscription models in media the past few weeks, arguing that consumers are increasingly facing a “subscription hell” and fighting against the notion that paying for content should only be the preserve of the top 1%.

Yet, if we want readers to pay for our content, it has to be a differentiated product. This makes complete sense to every participant in industries like music, or movies, or books. Musicians may cover other artists, but they almost invariably try to perform original music on their own. Ultimately, without your own sound, you have no voice and no fanbase.

Nonetheless, I feel journalists and particularly editors have to be reminded of this on a regular basis. Journalists still cling to the generalist model of our forebears, rather than becoming specialists on a beat where they can offer deeper insights and original reporting. Everyone can’t cover everything.

That’s one reason why people like Ben Thompson at Stratechery and Bill Bishop at Sinocism have grown to be so popular — they do one thing well, and don’t try to offer a bundle of content in the same old way. Instead, they have staked their brands and reputations on their deep focus. Readers can then add and subtract these subscriptions as their interests shift.

The biggest block to improving this duplication is the lack of cooperation among media companies. Syndication of content happens occasionally, such as a recent deal between Politico and the South China Morning Post to provide more China-focused coverage to the U.S.-dominated readership of Politico . Those deals though tend to take months to hash out, and are often not ephemeral enough to match the news cycle.

Imagine instead a world where specialists are covering focused beats. Kim-Trump could have been covered by people who specialize in Singaporean foreign affairs (as hosts, they had the most knowledge of what was going on), as well as North Korea watchers and U.S.-Asia foreign policy junkies. Clearinghouses for syndication (blockchain or no blockchain) could have ensured that the content from these specialists was distributed to all who had an interest in adding coverage. No generalists need apply.

This isn’t an efficiency argument for further newsroom cutbacks, but rather an argument to use the talent and time of existing journalists to trailblaze unique paths and coverage. Until the media learns that not everyone can become a North Korea or Google expert overnight, we are going to continue to see warehouses and ballrooms filled to the brim with preening writers and camera teams, while the stories that most need telling remain overlooked.

Netflix and Alphabet will need to become ISPs, fast

This week completely scrambled the video landscape, and its implications are going to take months to fully understand.

First is the district court’s decision to approve the merger of AT&T and Time Warner announced just moments ago. That will create one of the largest content creation and distribution companies in the world when it closes. It is also expected to encourage Comcast to make a similar bid for 21st Century Fox, further consolidating the market. As Chip Pickering, CEO of pro-competition advocacy org INCOMPAS put it, “AT&T is getting the merger no one wants, but everyone will pay for.”

But the second major story was the final (final final) repeal of the FCC’s net neutrality rules yesterday that will allow telecom companies like AT&T to prioritize their own content over that of competitors. In the past, AT&T didn’t have all that much content, but the addition of Time Warner now gives them a library encompassing Warner Bros to TBS, TNT, HBO, and CNN. Suddenly, that control over prioritization just got a lot more powerful and profitable.

The combination of these two stories is spooking every video on demand service from YouTube to Netflix . If Comcast bids and is successful in buying 21st Century Fox, then connectivity in the United States will be made up of a handful of gigantic content library ISPs, and a few software players that will have to pay a premium to deliver their content to their own subscribers. While companies like Netflix and Alphabet have negotiated with the ISPs for years, the combination of these two news stories puts them in a significantly weaker negotiating position going forward.

While consumers still have some level of power — ultimately, ISPs want to deliver the content that their consumers want — a slow degrading of the experience for YouTube or Netflix could be enough to move consumers to “preferred” content. Some have even called this the start of the “cableification” of the internet. AT&T, for instance, has wasted no time in creating prioritized fast lanes.

That world is not automatic though, because Alphabet, Netflix, and other video streaming services have options on how to respond.

For Alphabet, that will likely mean a redoubling of its commitment to Google Fiber. That service has been trumpeted since its debut, but has faced cutbacks in recent years in order to scale back its original ambitions. That has meant that cities like Atlanta, which have held out for the promise of cheap and reliable gigabit bandwidth, have been left in something of a lurch.

Ultimately, Alphabet’s strategic advantage against Comcast, AT&T, and other massive ISPs is going to rest on a sort of mutually-assured destruction. If Comcast throttles YouTube, then Alphabet can propose launching in a critical (read: lucrative) Comcast market. Further investment in Fiber, Project Fi, or perhaps a 5G-centered wireless strategy will be required to give it to the leverage to bring those negotiations to a better outcome.

For Netflix, it is going to have to get into the connectivity game one way or the other. Contracts with carriers like Comcast and AT&T are going to be more challenging to negotiate in light of today’s ruling and the additional power they have over throttling. Netflix does have some must-see shows which gives it a bit of leverage, but so do the ISPs. They are going to have to do an end-run around the distributors to give them similar leverage to what Alphabet has up its sleeve.

One interesting dynamic I could see forthcoming would be Alphabet creating strategic partnerships with companies like Netflix, Twitch, and others to negotiate as a collective against ISPs. While all these services are at some level competitors, they also face an existential threat from these new, vertically-merged ISPs. That might be the best of all worlds given the shit sandwich that we have all been handed this week.

One sad note though is how much the world of video is increasingly closed to startups. When companies like Netflix, which today closed with a market cap of almost $158 billion, can’t necessarily get enough negotiating power to ensure that consumers have direct access to them, no startup can ever hope to compete. America may believe in its entrepreneurs, but its competition laws have done nothing to keep the terrain open for them. Those implications are just beginning.

Automated dev platform CircleCI expands to Japan, first office outside U.S.

CircleCI is on something of a tear. The company’s continuous integration and deployment build platform is used by hundreds of thousands of developers around the world to create their own software. It has also received $59 million in venture capital funding, including a $31 million Series C earlier this year.

As it looks to continue growing, the company is expanding its global footprint. It has opened its first international office outside of its SF headquarters in Tokyo, Japan. As part of the opening, CircleCI is intending to eventually build an office of 4-5 employees and create partnerships with local companies.

The company has experience in the geography, with several remote workers stationed there. It’s also the third largest market for the company, after the United States and the United Kingdom, where it works with local companies like CyberAgent and DeNA.

“We are really excited about Japan, excited about global,” CEO Jim Rose explained. “Japan has been a market that has had its own momentum, and it has had speed that has picked up over the years.” Rose joined CircleCI as COO in 2014 through the company’s acquisition of Distiller, and became CEO in 2015.

CircleCI has had a bottoms-up sales model, where developers can install Circle on their infrastructure anywhere around the world. The company’s message has been heard widely, with roughly 35-40% of the company’s gross revenues coming from global customers according to Rose.

However, CircleCI’s product is not just click-and-install. It’s also a whole new way of managing software in a cloud-native environment, which means that developers and managers are increasingly needing to work together to migrate legacy codebases from old models to cloud and Git-native ones. “What we have seen over the last six quarters is that that practice is starting to embed itself in large enterprise,” Rose said.

However, that education, training, and cultural change has been tougher in non-English speaking markets like Japan. Rose says that once a company gets beyond the first step of installing a system like Circle, “there is another step of socializing the product inside of those companies,” and “those efforts require local knowledge.” The hope is that a dedicated, localized team designed to bridge that gap will help CircleCI cement its products in developers’ workflows.

While the U.K. is the second-largest market for the company, the company chose Japan to launch international expansion since it’s English language resources have proven adequate so far, and complications from Brexit make strategic planning in Europe more complicated.

“There are a lot of moving parts around Brexit and GDPR and whether you can approach them as a single market or multiple. At the very least, you have to approach the UK as its own market separate from the EU,” Rose explained. CircleCI is still determining the right way to setup its international expansion in Europe to encompass successful markets for the company like Germany, France, and the Nordic countries.

Rose sees the company eventually increasing the share of global revenues to 50%. Japan then is just the start of intensifying global expansion for the company.

M17 delays IPO debut after pricing this morning on NYSE

M17 Entertainment, a Taipei-based live streaming and dating app group, priced its IPO this morning on the NYSE and was expected to open trading today according to their final press release. But with just a little more than two hours to go before market closing, it’s still not trading, and no one seems to know why.

An interview I had scheduled with the CEO earlier this afternoon was canceled at the last minute, with the company’s representative saying that M17 couldn’t comment since its shares were not yet actively trading, and thus the company remains under an SEC-mandated quiet period.

M17 has had a rocky non-debut so far. Originally targeting a fundraise of $115 million of American Depository Receipts (shares of foreign companies listed domestically on the NYSE), the company concluded its roadshow raising less than half of its target, for a final investment of $60.1 million. The company priced its ADR shares at $8 each, with each ADR representing 8 shares of the stock’s Class A security.

My colleague Jon Russell has covered the company’s rapid growth over the past three years. It was formed from the merger of dating app company Paktor and live streaming business 17 Media. Joseph Phua, who was CEO of Paktor, became CEO of the joint M17 company following the merger. Together, the two halves have raised tens of millions in venture capital.

M17 provides live streaming and dating apps throughout “Developed Asia”

The company’s main product is a live streaming product where creators can build their fanbases and brands. Fans can purchase virtual gifts to send to their favorite artists, and those points are proving to be extraordinarily lucrative for the company. The company, according to its amended F-1 statement, has seen tremendous revenue growth, netting $37.9 million of revenue in the first three months of this year. The company has also been able to attract more live streaming talent, increasing its contracted artists from 999 at the end of December 2016 to 7,719 at the end of March this year.

That’s where the good news ends for the company though. Despite that revenue growth, operating losses are torrential, with the company losing $24.8 million in the first three months of this year. The company in its statement says that it has $31.4 million in cash and cash equivalents, giving it limited runway to continue operations without a strong IPO debut.

User growth has been mostly stagnant. Active monthly users has increased from 1.5 million to 1.7 million between March 31 of 2017 and 2018. What the company has succeeded in doing is monetizing those users much better. The percentage of users paying on the platform has more than doubled over the same time period, and the value of those users has increased more than 40% to $355 per user per month.

The big challenge for M17 is revenue quality. Live streaming represents 91.4% of the company’s revenues, but those revenues are concentrated on a handful of “whales” who buy a freakishly high number of virtual gifts. The company’s top ten users represent 11.8% of all revenues (that’s $447,220 a user in the first three months this year!), and its top 500 users accounted for almost a majority of total revenues. That concentration on the demand side is just as heavy on the supply side. M17’s top 100 artists accounted for more than a third of the company’s revenue.

That concentration has improved over the past few months, according to the company’s filing. But Wall Street investors have learned after Zynga and other whale-based revenue models that the sustainability of these businesses can be tough.

Finally, one complication for many investors wary of the increasing use of dual-class stock issues is the governance of the company. Phua, the CEO, will have 56.3% of the voting rights of the company, and M17 will be a controlled company under NYSE rules according to the company’s amended filing. Class B shares vote at a 20:1 ratio with Class A share voting rights.

All of this is to say that while the company has had some dizzying growth in its revenue numbers over the past 24 months, that success is moderated by some significant challenges in revenue concentration that will have to be a top priority for M17 going forward. Why the company priced and hasn’t traded though remains a mystery, and we have reached out for more comments.

Subscriptions for the 1%

We are in a subscription hell. Paywalls are going up across the internet, at aggregated prices few but Jeff Bezos can afford. The software I used to pay for once now requires an annual tax, because … “updates.” We are getting less every day, and paying more for it, all the while the core openness that made the world wide web such a dynamic and interesting place is rapidly disappearing.

I’m not a subscription hater. Far from it: subscriptions are vital, because they provide sustainability to the content and software I care about. Regular, recurring income helps make the business of creation more predictable, ensuring that creators can do what they do best — create — rather than stress about whether the next book or app is going to generate their yearly earnings.

Greed, though, has managed to make subscriptions deeply unpalatable. Sustainability has become usurious, with news subscriptions jumping in price and app developers suddenly demanding a fee where none existed before. This avarice for our wallets though is not misdirected. Ultimately, one group of people is to blame for this situation, and it isn’t the bean counters in the accounting department.

It’s us.

And by us, I mean the proverbial 99% consuming public who refuses to pay for any content or software — except for Netflix or Amazon Prime, of course.

Just take a look at the abysmal conversion rates for online content. The New York Times gets 89 million uniques per month, but only has 2.2 million subscribers, excluding crossword and other app subscribers. The Guardian has 800,000 financial supporters, but about 140 million unique visitors at a peak a few years ago. Last year, the Wikimedia Foundation received donations from 6.1 million donors, yet just the English language edition of Wikipedia received 7.7 billion page views last month. That’s 1,300 April page views per annual donor.

The implied conversion rates here are in the very low single digits, if not lower. And that’s no surprise given the extreme lengths people go to get content for free. A friend of mine uses AWS to rent IP addresses to reset his article meter on popular news pages, allowing him to download web pages through a Singapore data center using a custom command line utility. Engineers who make hundreds of thousands of dollars are suddenly tantalized by the challenge of trying to break through a porous paywall. I have less technical friends Googling URLs, setting up proxies, and other tactics to get to the same outcome.

The problem with these minuscule conversion rates is that it dramatically raises the cost of acquiring a customer (CAC). When only 1% of people convert, it concentrates all of that sales and marketing spend on a very small sliver of customers. That forces subscription prices to rise so that the CAC:LTV ratios make rational sense.

What we get then is a classic case of economic unraveling. A company could offer an affordably priced subscription, but users hesitate, and so the company tries to do more marketing initiatives, which raises the cost of the subscription. That makes the vast majority of users even less willing to purchase it, so marketing gets more budget to go after the highest spending consumers.

Before you know it, what once might have been $1 a month by 20% of a site’s audience is now $20 a month for the 1%.

That’s basically the math of the New York Times. Last year, the company generated $340 million in digital-only revenue from 2.6 million subscribers (including derivatives like crosswords and cooking). That’s $155 a user on average annually, or about $13 a month. The Times had an implied conversion rate of about 2.5% from my earlier calculations. If they could convert 20% at the same sales and marketing cost, they could charge $20 a year and get the same revenue (maybe $22 for added credit card processing fees).

The entire subscription economy is ultimately a 1% economy — it’s focused on a very small subset of users who have demonstrated that they are willing to pay dollars for content. The most likely factor that someone is going to buy a subscription is that they already have a subscription to another service. And so we see pricing that reflects this reality.

There is a class of exceptions around Netflix, Spotify, and Amazon Prime. Spotify, for instance, had 170 million monthly actives in the first quarter this year, and 75 million of those are paid, for an implied conversion of 44%. What’s unique about these products — and why they shouldn’t be used as an example — is that they own the entirety of a content domain. Netflix owns video and Spotify owns music in a way that the New York Times can never hope to own news or your podcast app developer can never hope to own the audio content market.

Yes, we are living in a subscription hell, but it is also heavily a product of our own decision-making as consumers. We want content and software for free, and in fact, we will go to ridiculous lengths to avoid paying for it. We will protest ads and privacy-invasive tracking, but we will never support the business model that would make that technology obsolete. Even when we will consider buying a service, we will wait so long and make the conversion so expensive that a huge chunk of our individual revenue will simply evaporate in sales and marketing costs.

The solution here is to become more intentional about aligning our content spending with what we read, use, watch, and hear. Put together an annual content budget, and spend it liberally across the publications and creators that you enjoy. Advocate for pricing that makes sense for you individually, but also convert more easily when you find something that you like. The friction has to lower on both sides of the marketplace for the 20% to supplant the 1%.

I don’t want a world filled with gilded walled gardens designed to ensure that the 1% have the best information and entertainment while leaving the rest of us with clickbait fake news and bad covers on YouTube. But creating content and software is expensive, and ultimately, businesses are going to sell to the customers that pay them. It’s on all of us to engage in that market. Maybe then this subscription hell can freeze over.

A Google I/O conversation

Hey Google, what happened at Google I/O today?

Artificial intelligence.

Okay, that’s non-specific. I heard Android P was released today. What’s new?

Artificial intelligence.

Hmm. Has Google added any features to make battery life longer on Android?

Artificial intelligence.

Let’s move on. What about the brightness settings? I heard there was something new there too?

Artificial intelligence.

How the hell can brightness use artificial intelligence? And why do you only say one thing? Let’s move on to some apps. What’s new with Google Maps?

Artificial intelligence.

Photos?

Artificial intelligence.

Lens?

Artificial intelligence.

News?

Artificial intelligence.

Gmail?

Artificial intelligence.

Gboard?

Artificial intelligence.

You are the worst assistant ever. Did Google update Assistant at all?

Artificial intelligence.

Argh. I heard Google released a lot of dev tools today. What’s ML Kit about?

Artificial intelligence.

And Duplex?

Artificial intelligence.

And tensor processing un…you know never mind. I get the damn picture. At least you still call Google Research Google Research right?

Artificial intelligence.

No, it’s called Google Research.

Artificial intelligence.

Dammit they rebranded. You know, you are the very definition of a PR drone.

Artificial intelligence.

Wait, you’re not human?

Artificial intelligence.

You pass the Turing test.

Technical ignorance is not leadership

There is a peculiar pattern that I have noticed among elites in the United States outside Silicon Valley, which is the almost boastful ignorance of technology. As my colleague Jon Shieber pointed out today, you can see that ignorance among congressmen throughout the whole Facebook/Cambridge Analytica saga. Our president has rarely sent an email, and seems to confine his mobile phone activities to Twitter. One senior policymaker told me a few months ago that she doesn’t know how to turn on her computer.

Such a pattern is hardly unique to politics though. Hang out with enough business executives, lawyers, doctors, or consultants, and you will hear the inevitable “I don’t really do the computer,” with an air of detached disdain.

Yet it isn’t just the technical challenges that this class avoids, but anything to do with implementation in general. In the policy world, wonks spend decades debating the finer points of healthcare and social spending, only to be wholly ignorant at how their decisions are actually implemented into code. There is an elitism in policy between those who make the decisions and those who implement them, just as much as there is a social distinction between corporate executives and the people who have to carry out their directives.

In many ways, this disdain for the technical mirrors the disdain for math, where the phrase “I’m not a math person” has become sufficiently ubiquitous in the U.S. as to be covered regularly in the press. Being bad at math is a way to signal that someone isn’t one of the worker bees who actually have to care about calculations — they just read the reports prepared by others.

Yet, that ignorance of technology is increasingly untenable. Decisions are only as good as the implementation that results. Marketing isn’t a plan, it’s a system of feedback loops from the market that need to be adjusted in real-time. It’s one thing for politicians to sign a bill into law, but another to ensure that the bill’s intentions are actually encoded into the software that powers government.

The gap between decision and implementations was at the core of a conversation I had this past week with Jennifer Pahlka, who founded and heads Code for America, a nonprofit whose mission is to bridge the divide between government and technologists.

To show how far a policy and its implementation can be, she pointed me to Proposition 47 in California. That initiative, which was passed by voters in 2014, was designed to allow individuals to retroactively expunge or reclassify certain nonviolent felonies to misdemeanors, allowing individuals to become eligible again to work, vote, and receive some government benefits.

Yet, several years after the approval of Prop 47, a single digit percentage of eligible people have taken advantage of the program. The reason is classic government: incredibly convoluted paperwork, which is exponentially worse since every one of California’s 58 counties has to implement the program independently. “If you are a voter and you voted for a specific referendum,” Palhka explained, then you expect a certain outcome. But, “if none of the benefits that you expected to change” materialized, then cynicism mounts quickly.

To help bridge the gap, Code for America launched Clear My Record, a service designed to automate many of the steps involved in the Prop 47 process and make it more accessible. It’s just one of a bunch of services that the group has launched to improve government services ranging from food assistance through GetCalFresh to improving case manager communication through ClientComm.

Palhka’s mission isn’t to just offer point solutions for specific government programs, but to completely overhaul the latent anti-tech culture of government officials. “Digital competence is core to successful government,” she explained, and yet, “If you are a powerful person, you don’t have to understand how the digital world works … but what we are saying is that you do have to care.” Her goal is straightforward: “how do you get policy, operations, and tech to all work together?”

While Palhka and her organization focuses on the public sector, their framework is perhaps even more important to the private sector. There isn’t a company today that can survive without technical leadership in the C-suite, and yet, we still see an astonishing lack of awareness about the internet and its potential from corporate executives. Software increasingly intermediates all relationships with customers, whether though digital commerce or enterprise services. If the software is bad, no amount of decision-making in a mahogany-paneled board room is going to change it.

The good news is that ignorance has an easy solution: education. The computer is not some mystery box. It’s well-documented, and all kinds of resources are available to learn how they work and how to think about their capabilities and nuances. If someone can run a multinational company, they can probably ask smart questions about algorithms or machine learning even if they don’t realistically implement the linear algebra themselves.

CEOs, senators, and other leaders are synthesizers — they rely on staff to handle the details so they can focus on strategy. We would never trust a CEO who brushed off an accountant by saying “I don’t do cash flows,” and we shouldn’t trust a CEO who doesn’t understand how the internet works. Changing times require adaptable leaders, and today those leaders need tech literacy just as much as our grade-school children do. It’s the only way leadership can move forward today.

Enterprise wasn’t ready for blockchain, so Manifold brought its ledger to consumers instead

While the cryptocurrency craze last year brought more consumer attention to blockchain technology, the future of this movement will be in the enterprise. Blockchain’s true potential is its ability to replace the archaic and centralized infrastructure that powers everything from payments to land registries with digital-first, decentralized, and trusted networks of data.

Skepticism, though, abounds. Jamie Dimon, CEO of J.P. Morgan Chase, has called bitcoin a “fraud,” only to walk back those comments later. He has more recently said that blockchain is “real”. The challenge of course is it is exactly people like Dimon who ultimately control the destiny of blockchain in the enterprise. Without leadership from the top, few CIOs and other buyers are willing to consider such a wildly disruptive new technology.

That has been the experience of Manifold Technology founder and CEO Chris Finan and his co-founder Robert Seger. The two have an intelligence background, with Finan working at DARPA and Defense more broadly and Seger working at the NSA. Seger would go on to become CTO of Morta Security, which was acquired by Palo Alto Networks, while Finan became director of cybersecurity legislation for the White House before heading to the Valley and working at Impermium, a cybersecurity startup acquired by Google.

Taking advantage of their backgrounds, they got together in 2014 to try to connect blockchain into the enterprise. “We wanted to be the Cisco of enterprise blockchain providers,” Finan explained to me. “We were looking at what we can do to leverage cryptography to build the picks and shovels.”

Over the next few years, they built out a distributed ledger technology built on top of Amazon Lambda. The idea was that serverless technology like Lambda could offer quick scalability to a blockchain from day one, without requiring the kinds of decentralized technology adoption seen in cryptocurrencies like Bitcoin. “In that way, we try to let Amazon handle this scalability for us,” Finan explained.

There was just one problem: enterprise hasn’t gotten on the blockchain bandwagon yet. “They don’t want to buy a blockchain, they want to flip a switch and have it,” Finan said. He didn’t see institutions looking to migrate their infrastructure to a blockchain model, and “we found ourselves to be an engine manufacturer in a sector that wasn’t buying many engines.“ Even worse, “you definitely see VC interest in the enterprise infrastructure market definitely waning” when it comes to blockchain.

Stymied by the enterprise market, the team started investigating whether it could build consumer applications on top of its infrastructure. What they came up with is Volley, a blockchain-backed augmented reality marketplace to buy and sell goods, which is currently in beta and available in the Apple App Store. This new direction connected with investor appetites, and the company raised a $7 million series A from MalibuIQ, Westlake, and other investors.

The idea of Volley is that current online marketplaces for goods are filled with scams and other security issues. To improve trust and safety issues, Manifold has built a reputation system for buyers and sellers so that transactions are decentralized, but trusted. “We wanted to make it very expensive to make a fake account,” Finan said.

Using augmented reality, the app allows users to explore their world and see things for sale. The hope is that at scale, the app would show users hundreds of things all around them that they might purchase, from the backpack of the person in front of them to a car parked on the street. Right now, the technology only works with iOS and the ARKit library, with the company hoping to launch an Android version shortly.

Finan believes that a consumer marketplace is a near-perfect application of blockchain. “There has to be some sort of need for independent trust guarantees,” he said, which requires that a marketplace be filled with people who don’t trade often with each other and has goods that are not trivially cheap to replace if fraud were to occur. In addition, he believes you have to have “auditability” as well as high throughput for blockchain to make sense.

It’s easy to be cynical about two cybersecurity veterans diving into the consumer world. While Volley has to prove itself as a potential consumer winner, to me what makes the investment here more interesting is that there are two ways to win. Volley itself could become an interesting consumer play, or Volley might help to prove out Manifold’s serverless blockchain technology, which could find renewed adoption in the enterprise in the future. It’s the sort of hedged bet that investors are making in the blockchain space, as we await the further maturation of this brand new market.