Scooters, remote workers, ethics, the future of fintech, etc.

Editor’s Note: refocused newsletters

It was another dizzying week here at Extra Crunch as you will shortly see in this newsletter.

One change that we are making: we are simplifying our newsletters to keep you better informed on what is happening on Extra Crunch. We are merging the daily, weekly, and article editions of this newsletter into a “roundup” format that will come out twice per week. The goal is to keep the signal high, and the noise in your inbox low.

To control which newsletters you receive from Extra Crunch (and TechCrunch more broadly), feel free to go to our newsletters page while logged in. And as always, if you have feedback, do let me know at danny@techcrunch.com.

Scooters may kill the sharing economy?

TechCrunch’s scooter aficionado Megan Rose Dickey dived into the current state of the scooter market, and came back decidedly non-plussed. Scooters seem like a viable solution to the last-mile problem of urban transportation, but the reality is that the sharing economics behind them are weak, and huge regulatory barriers are being erected that will almost certainly slow their advance. Even worse, sharing may disappear entirely:

What’s not clear at this point in the early days of micromobility is if people are adopting the shared model or simply just adopting new forms of transportation. This is where the question of shared versus ownership comes in.

“Do you get your own one of these things — a board, scooter, bike — or do you just assume super high availability and find that more convenient? Buried in that are a lot of other things,” [Shaun Abrahamson, managing partner at city and mobility-focused VC fund Urban.us, said]. “People have vehicles as sort of a fashion accessory. Maybe you want to tweak it for more performance. Having what is effectively a fleet vehicle, which will be more optimized for ruggedness, is not optimized for performance. It’s not an extension of self-expression.”

Audio Lyft-off(s)

This week we had many conversations about Lyft. On TechCrunch’s Equity podcast, Kate Clark and Alex Wilhelm discussed the latest ups-and-downs with Lyft’s IPO, and you can read the transcript here as a member benefit.

We also conducted an Extra Crunch exclusive conference call with Kate Clark and Kirsten Korosec on Lyft, discussing the company’s past and future. If you missed the call, you can read the transcript here. From that conversation:

Kirsten [Korosec]: So something to keep an eye on. It reminds me a lot of a company I write a lot about, which is Tesla, and I’ve been covering them for years. And it’s one of the most volatile stocks, and their investors, they certainly have large, institutional investors, but the number of fanboys that they have with smaller investors, either prop up the share price sometimes or add to that volatility, and I’m kind of really curious to see if that happens with Lyft. If you go to a shareholder meeting at Tesla, for example, it’s filled with people who are passionate about the brand and its CEO, Elon Musk.

And Lyft and possibly Uber, if they end up finally going through with their IPO, you can see that potentially happening because people feel very strongly about the brand and also the service it provides. So I’m curious to see how this all sort of shakes out. And I tend to take the view that I invest personally in mutual funds and things like that. I don’t invest in any of these companies, but the long, patient view tends to be the better one, and trying to catch a falling knife, as investors have told me, is never really a good idea.

Uber’s bad press and media leaking with Mike Isaac

Talking about ridesharing and transcripts, one experimental feature we have been trialing with Extra Crunch is offering transcripts of popular podcast episodes relevant to the membership. This week, we have the transcript of a ‘This is Your Life in Silicon Valley’ episode interviewing the New York Times’ Mike Isaac on Uber’s situation with the press. Isaac also talked about the process of acquiring leaks:

Sunil Rajaraman:

So you cover Facebook. You cover a lot. One thing I’m really curious about is just not speaking specifically about Facebook but the companies you cover, Uber, et cetera. Tell me about leaks. So employee leaks, so there’s this whole phenomenon of you get these leaks. Are they increasing? How does a leak even work? I mean, I don’t have any sources obviously, but just tactically speaking, when someone leaks something to you, how does that even work?

Mike Isaac:

I have found, you know what’s really funny? Historically Facebook is not a leaky company. They have actually had a really good reputation for being super tight. It’s hard to break in there. And I’ve written about them for probably like 10 years now. I starting writing about them in 2010.

Jascha Kaykas-Wolff:

That’s back when everything was happy.

Mike Isaac:

Right, no, when Facebook was still like cool, when youngs were on it, when it wasn’t just old guys like us farting around and taking pics. And so back in the day, you sort of like bought into this cult of Facebook. Everyone loved it, and all the people that were there working there really liked it. The thing that I notice with companies, and I wrote about Uber last year during its insanity and downfall is that leaks are just a symptom of bigger problems inside of the company.

When people leak, when people talk to people like me, it’s because they’re usually unhappy or they have some sort of motivation to do so because they’re trying to get some sort of result. I mean, that’s one of the reasons: They’re trying to get some sort of result. So Facebook is having, if you just watch the news, more leaks than they ever had probably in their history, and that’s because people are just not happy. And they’re starting to really grapple with the idea that maybe things they’re doing are not all good, or maybe the company is not entirely a positive force for the world.

Remote workers are themselves a tech hub

If you are sick and tired of ridesharing and want to get away from the urban hubs (or just rainy San Francisco), remote work might be just the ticket. Our writer Sherwood Morrison dives into the growing clout of remote workers in the tech industry:

Moving around slowly, on the other hand, can offer significant benefits. Matt Mullenweg, whose startup Automattic is the second-largest remote company, advises approaching travel strategically. “With proper planning, travel can allow you to bootstrap community in different locations, connect with customers, meet non-traditional investors or advisors, and recruit talented colleagues outside of the normal fishing grounds of the internet giants. Something closer to ‘slowmad’ than ‘nomad’ is probably the right approach,” he told TechCrunch.

ICYMI: Niantic EC-1 Part 2 (Pokémon GO edition)

We sent out an article-specific email this week, but in case you didn’t catch it all (hah!), TechCrunch editor Greg Kumparak published his second part of the Niantic EC-1, focused on the challenges the company experienced in building and launching Pokémon GO. I have part three in my hands as I write this, and I’m looking forward to publishing the final two parts of this popular series.

How the public cloud has helped startups

Niantic nearly failed in its launch of Pokémon GO due to scaling struggles with Google Cloud. Our enterprise writer Ron Miller discusses the issue of the public cloud and its relation with startups, finding that the alternatives always seem better than they really are:

There have been multiple attempts to break the Amazon hegemony around the cloud market, including the aforementioned competition from Microsoft and others. Perhaps the most visible open-source attempt was OpenStack, which was launched as a joint open-source project between Rackspace and NASA in 2010. The mission was to come up with an open-source way to manage public and private clouds. One of the primary motivations for this was that companies were looking for a way to take advantage of the public cloud without getting dependent on these commercial systems, which primarily meant AWS at the time.

While OpenStack worked in its own way, it never really gained as much traction as was hoped at the time, beyond some high-profile customers like the telecom market, along with Walmart and Comcast.

Wall Street’s Peter Kraus wants to kill the ETF

Legendary Wall Street investor Peter Kraus’ next mission is to go after the passive investment industry typified by index fund giant Vanguard and startups like Wealthfront. With his new venture Aperture, he wants to bring back the mutual fund — yes, that antiquated investment model — for a new generation of investors. Our fintech writer Gregg Schoenberg has the two-part interview and the scoop on this latest financial innovation (read part 1 here, and part 2 here).

GS: I agree with you on that and took note when you launched some fulcrum funds at AllianceBernstein. But to me, the story here is that you would lead with mutual funds in a new entity in 2019. Can you go deeper on that?

PK: As I said before, ETFs are essentially derivatives. To put it differently, the ETF is a representation of a basket of securities that is publicly disclosed to the whole of the ETF. When you buy and sell the ETF, what happens is the underlying securities have to actually change hands. In order for these underlying securities to change hands, two authorized persons independent of the ETF literally have to buy and sell those securities.

GS: For those that don’t understand the inner workings of ETFs, which is basically everyone on the planet, what is the importance of that distinction?

PK: It is illogical to believe that someone can charge zero for a product, make no revenue and continue to offer that product forever. There is an underlying assumption that this liquidity or exchange process happens seamlessly at a very low cost to you, the holder of the ETF. When the markets are benign, that pretty much happens. But when markets become volatile, though, then the buyer and the seller of those underlying securities could be saying to themselves, “What’s the price of that security?”

GS: Where does that lead?

PK: Maybe I have to widen out the bid-ask spread, so now the cost is getting bigger. Maybe one of them says, “You might fail to deliver that security, so I’m not actually going to make a market in that security or I’m not going to accept that as a transaction.”

Defining tech ethics

One of the underlying themes of the past few years has been the increasing power — and therefore responsibility — of technology and the companies that harness it. More fundamentally though, how do we define tech ethics? What does it mean to be ethical when we are building products for the future? TechCrunch’s local humanist and ethicist Greg Epstein put together a roundtable with three leading scholars to discuss the meanings and contours of tech ethics today.

Dark data and startup compliance

Once you get past ethics, how do you actually create systems of compliance? We have two pieces on that front this week.

First, startup attorney and founder Daniel McKenzie put together a comprehensive overview and checklist of all the regulatory matters required of startups in their first years of existence. This is a continuation of his Startup Law A-to-Z series that we have been running the past few weeks on Extra Crunch.

Second, Lisa Hawke discusses the rise of dark data (data that isn’t visible to companies) and its implications for regulation and compliance. As data continues to flood into startups, how do you manage risks of data that you often cannot see? Hawke writes:

What are some specific risks and challenges related to dark data? These can range from producing evidence in litigation (e.g. ediscovery) to a company’s ability to adhere to applicable regulations, such as data preservation and privacy laws. For example, GDPR presumes organizations know exactly what data they hold, making it important to understand if the company stores dark data (and where it is). It’s also important to consider security risk, which boils down to the fact that an organization can’t secure something if it doesn’t know about it at all (or where it is).

The future of media is going to be tough on consumers

Our media columnist Eric Peckham discussed the future of media with Northzone’s Pär-Jörgen Pärson. Northzone has become one of the leading media investors in Europe and around the world through their tenacious focus on the end user, and Pärson offers frank opinions on the state of affairs in the industry.

Peckham: Were there things that you predicted would happen in media, say five years ago, that didn’t happen?

Pärson: My hopes were too high that the established media houses would see the dangers of jumping into bed with Facebook and Google. [That they would see] they were being totally sacked and undermined by those companies. Instead, the response has been extremely shortsighted, not even tactical and definitely not strategic. I think they have even shortened their lifespan over the past five years. I thought that they would fight back in at least some sort of productive way. But they’re just laying down flat to die.

Income share agreements and the future of education finance

Eric’s other passion besides media is education. He and I spent a good hour talking about the future of an increasingly popular new form of education financing known as the income share agreement. ISAs are being used by edtech startups like Lambda School in order to increase access to education while also improving incentives for the provider to offer a first-rate program.

Eric: When you see people talk about this on Twitter they frame it as like venture capital or angel investing for individuals. And that’s not what it is. I mean, you could approach it from that perspective. But none of the programs out there that I’ve seen are doing that and most likely there will be regulation that prevents you from doing that. It’s pretty standard that these have a cap on the total amount of money that can be earned back – somewhere in the 1.5x to 2.5x range.

It’s not about making money off one outlier student, it’s about investing in all the students who are part of a certain program – a class in a university or a software development boot camp. Within that portfolio, some students are financial losses and some of profitable, and by diversifying your risk you hope to net a stable return. The better the education program, the better market terms for ISAs.

Snap, gaming apps, and the Asia chat business model

If you have made it down this far, you are a badass. Our final piece this week zoomed in on Snap’s announcement that it will start to prioritize gaming as part of its new engagement model. TechCrunch’s intrepid Asia reporter Jon Russell compared Snap’s new initiative to existing chatting apps in Asia, and finds some hope in the model:

Social games won’t bring new users to Snap — blockbusters like Fortnite, PUBG or Apex Legends are what moves the market — but they might galvanize existing groups and increase engagement. Ultimately, it really depends on the quality of the titles.

Thanks

To every member of Extra Crunch: thank you. You allow us to get off the ad-laden media churn conveyor belt and spend quality time on amazing ideas, people, and companies. If I can ever be of assistance, hit reply, or send an email to danny@techcrunch.com.