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Peter Diamandis event in Vancouver (X Prize, Singularity University)

Peter Diamandis talk for EO Vancouver (April 14, 2014)

Earlier this week I was invited to a talk by Peter Diamandis at the Vancouver Aquarium (thanks for the invite Praveen). I read a lot about Peter and his activities over the years but I had never attended one of his talks, so I was very excited to see him in real life.

In case you don’t know Peter Diamandis, he is a well-known serial entrepreneur who among others co-founded companies like the X Prize Foundation and Singularity University. He is both an engineer (MIT) and a physician (Harvard) who thrives on disruptive technologies that can change the world and outer space. And he is a great speaker!

The event was extremely inspiring to me and was probably among the best presentations that I have ever seen because of the topics he discussed. It’s one of those talks where I could imagine that one might end up quitting his/her job right after the presentation – at least when you happen to work for a large company in a job where you are not doing anything that could potentially change the world. I am lucky that in my daily business life I am able to make a difference in at least some of the investments that we do, but not nearly as much as Peter is doing.

In his talk Peter discussed 3 topics, Exponential Technologies, Incentive Competitions and Abundance. I will try not to go into too much detail, but just write down some of his statements and examples, and combine those with my own thoughts.

Exponential Technologies

The world’s biggest problems are the world’s biggest opportunities. Humans are linear thinkers but technology is exponential (=doubling year over year), which leads to disruptive stress and opportunities: 10 years from now 40% of the Forbes 500 companies will likely no longer exist!

As a VC I see new ideas every day and I see the world changing around me, but most people are so focused on their daily lives that they totally miss what’s happening out there. Especially large companies underestimate the rate of change in technology, they think that they can keep up with their R&D, but that’s a big mistake.

A good example is the digital camera. The first digital camera was developed in 1976. Between 1976 and 2014 the resolution of a digital camera increased 1000 times, the camera has become 1000 times lighter and the device is 1000 times cheaper. That means that current cameras are 1 billion times better than the first ones developed. But the exponential growth does not stop here of course, technology keeps on improving so in a few years from now resolution, size and price will be many times better than they are today. Fascinating!

The same thing you see with sensors, they are so cheap and small nowadays compared to just a few years ago, that they can be used for things that nobody thought of before. Artificial intelligence and robotics are other examples where you see exponential growth. My kids may never need to get a driver’s license because by then all cars will drive themselves. Is that boring? No, not only does it save you a lot of time (it’s like having a private driver, something I sometimes miss from China), but autonomous cars can race as well as you can see in this YouTube clip.

Artificial intelligence develops so fast that supercomputers like Watson can now easily win game shows like Jeopardy from human beings. Last month at SXSW Watson was given 35,000 cooking recipes and information about 1000 chemical flavor compounds. Based on this it created amazing recipes, for example with unusual combinations of chocolate, coffee and garlic. A normal chef would likely never try these, meaning that Watson is in a way more creative already than expert human beings. And this is just the beginning!

Peter gave 5 critical insights that he discusses with multinationals that are spot on in my opinion:
– The rate of innovation is exploding
– Innovation comes from everywhere
– If you don’t disrupt yourself, someone else will
– Competition is no longer a multinational overseas
– If you depend on innovation inside your company you are dead

So where do you source your innovation? Well, for example through incentive competitions!

Incentive Competitions

I am not sure if Peter is the inventor of incentive competitions, but for sure he is the one who made the concept big with the X Prize Foundation. It basically means that you define a challenge and give a huge prize for the person who can first solve the problem. The first and probably most well-known example is the Ansari X Prize for the first team that would be able to send a 3 person crew to space (=at least 100 km altitude) twice within 2 weeks. The winner would get $10 million. The result: 26 teams participated and together spent more than $100 million, and within 8 years a team won the prize. In total there were 10 billion media impressions worth more than $120 million because of the competition!

X Prize

It turns out that giving a huge incentive can solve a lot more challenges that otherwise may be neglected, and that’s what Peter is working on with the X Prize Foundation. He focuses on big problems, for example putting people on the moon (the Google Lunar X Prize, $30 million dollar prize)or finding better ways to clean up oil spills (the Wendy Schmidt Oil Cleanup X Challenge, the winner improved the technology by a factor 6!).

Other examples of prizes that have been launched or will soon be launched are for example a prize to increase global literacy, a competition to make carbon dioxide from waste into an asset, one to predict earthquakes, and a prize to cure Alzheimer’s.

It’s amazing to hear him talk about these grand challenges. Big companies are not interested or not smart enough to solve these problems, but incentive competitions might do the job. They tap into the world’s smartest people and cost a fraction of what it would cost corporations to try to do this.

Incentive competitions can be used for both local and global problems, and for that reason Peter helped to co-found another company, HeroX. This business calls itself the world’s problem solving platform and already has quite a number of interesting ideas and challenges on it. It’s as simple as defining a goal, fund the challenge (through name sponsors for example) and others might solve the problem. I love the idea!

Abundance

The third and final theme that Peter talked about was Abundance: the future is better than you think. This is also the title of a book that he wrote (and that I bought but did not read yet), in which he argues that the progress that we make in exponential technologies will allow us to make greater gains in the next 20 years than in the past 200 years. Every basic need of all human beings on this planet can soon be met and we will live in a world of abundance.

Abundance - The Future is Better Than You Think - Peter Diamandis & Steven Kotler

I tend to be a bit more pessimistic about whether we can achieve this, but according to Peter that is likely because of the negative tone in the media. He says that media are drug pushers: we are fed massive amounts of negative news, because that’s what people pay more attention to. The ratio of negative to good news is 10:1 according to him.

I feel we are on a downward slope in the way we rob our planet from its natural resources and hope it’s not too late to make changes. But Peter is very optimistic and is sure that technology will solve all problems.

Energy? The sun provides 5000 times as much energy as we need, we just need to find a way to tap into it. Not enough water? We are close to new technologies that can make salt water or even highly polluted into drinking water for just 1 cent per liter. Three billion people will come online in the next 10 years and because of the Internet we will able to tap into their collective minds to find solutions for the world’s problems.

I for sure hope he is right, and given his achievements he may very well be. It’s quite something what he has done in his life so far and he keeps on working on new things. Like I said at the beginning of this post, I am very inspired by him and I hope to learn more from him at a Singularity University program later this year.

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Bitcoin price predictions

Government banning BTC picture

(Picture source: Reddit)

This is not investment advice, but just my personal opinion!

After China made it even harder for Bitcoin exchanges to do business the price dropped significantly today. Lots of people who don’t follow Bitcoin on a daily basis are probably afraid that this is the beginning of the end, but I completely disagree with that. This blog post gives some background on what I see happening in the market right now and where I think Bitcoin prices will go.

The past couple of days I was in New York City for the Bitcoin conference there (see here for coverage on Coindesk, day 1, day 2). It was a very different conference from the ones that I attended in Las Vegas (Dec. 2013) and Miami (Jan. 2014), because the audience were mainly people from the financial world and lawyers.

Bitcoin is growing up quickly and not everybody likes that. The Bitcoin pioneers love the cryptocurrency because they do not like the financial system and want a (semi-) anonymous currency. However, the recent months have shown that the financial system is slowly getting interested in Bitcoin and governments are starting to regulate it. That is something the early adaptors are not too happy with, but which is probably unstoppable.

New York Bitcoin Conference (April 2014)

A few pioneers who were at the conference were clearly not amused with what was said on stage in most of the panels and keynotes, and in a way I felt a bit sad for them. They truly believe in freedom without regulations, and they had not expected that Bitcoin would develop in the direction of a regulated asset. At least they probably got rich from the coins they mined or bought when prices were still at much lower levels.

I think regulations are a good thing if Bitcoin wants to become a global currency or a new asset class. At the Miami conference I already mentioned on stage that I think regulations are necessary in order to make Bitcoin big. Without it venture capitalists will be hesitant to invest in it and the financial institutions won’t touch it. I therefore think it’s positive that there is some more clarity on how Bitcoin will be treated and taxed by financial authorities. The downside is of course that people will need to pay taxes on their Bitcoin (capital gains tax), at least in the US.

Now that initial regulations are in place I think a new era of Bitcoin has started. The past 4 months have seen a gradual decline in Bitcoin prices, mainly due to the potential ban of Bitcoin in China, but also due to the non-stop flow of negative news about Bitcoin. A lot of the early entrepreneurs turned out to be frauds, crooks or criminals, and even some of the newer ones seem to be doing the same thing (unfortunately the CEO of the Cyprus Bitcoin bank NEO BEE seems to be the next example).

Most of the decline in price is due to the fact that speculators left the market and that the Chinese BTC holders are selling their coins. People see the news, don’t fully understand it, get scared and decide to sell their holdings. Typical behavior in a market crash.

Bitcoin has shown that it is quite resilient. After the Mt. Gox disaster many people predicted the price would go back to mid-2013 levels ($100), but that did not happen. Each time the price dropped others started buying. That happened for a while at the $400 support level, but that was broken today. Nobody knows what will happen over the next days (especially China news can give BTC another dip), but because there is a lot of smart money waiting to buy in I think it might be back above $400 sooner rather than later.

The short term is not so interesting, however. Where it gets interesting is what will happen to prices once Wall Street gets on board. After the New York conference it’s not a question anymore of whether it will happen but only of when it will happen. It seems almost inevitable to me.

Panel at the NY Bitcoin Conference 2014

And what does that mean for the long term price of Bitcoin? In my opinion it’s simple: the only way is up! It’s Economics 101, supply and demand. There are currently only 12.5 million BTC on the market, which gives BTC a market cap of around $5 billion. That is nothing, it’s about the same as the value of Youku Tudou right now. But if you compare how much the media and analysts write about Youku Tudou and how much they write about Bitcoin it is clear there is a huge discrepancy there!

Out of these 12.5 million BTC maximum 1 million coins are in the float (meaning that they are not stored in cold storage wallets by investors, but that they can be traded). If Wall Street gets in these firms will not invest just a million dollars in the currency. They may start off relatively small with maybe $20-50 million in BTC for the early firms. But what will happen if a few firms would do that?

It’s simple, if supply is more or less fixed and demand goes up, the price has to go up. I learned that an order of 1000 BTC (less than $400,000) can already move the Bitcoin price up by $10. What will happen if people try to buy 10,000 or 100,000 BTC? The price will have to go up. The float is too small and in order to convince others to sell BTC the price has to go up even further.

The exact same thing happened when China entered the Bitcoin game in October and November this year: the price went up 10 times from $120 in early October to $1200 in early December because of increased demand. In my opinion this will happen again, but then the price won’t stop at $1200.

When will this be? That’s anybody’s guess, but I would not be suprised if we will see the start of it this year already. What’s needed is a trigger, until then the price might remain quite flat. It looks like Bloomberg might add Bitcoin data to its terminals in the near future, which could be the first trigger for the financial world. Once prices start increasing they may quickly go up 5-10 times again, just like a few months ago. A price of $3000-4000 at the end of this year is therefore not unlikely if instruments to invest in BTC become available (they are not there yet).

At a cocktail party at the SecondMarket office in New York City

At a cocktail party at SecondMarket’s headquarters in NYC

At the conference predictions were made about the long term fair value of Bitcoin and insiders like the Barry Silbert (CEO of SecondMarket) think that the price may go to $500,000 or even $1 million per coin if BTC becomes a new asset class. These figures are mind boggling right now, but because BTC is so scarce and truly unique it may indeed happen one day (within the next 10 years according to some well known people in the Bitcoin space). I personally don’t see that happen yet, but because of limited supply and potentially huge demand it is theoretically possible.

For me buying BTC is almost comparable to buying a call option right now: there is limited downside (you can lose your investment, but not more than that), but the potential upside is virtually unlimited. And Bitcoin has an advantage over a normall call option in that there is no expiration date!

Despite the lower prices and all the problems Bitcoin faced over the past months I remain extremely bullish on the cryptocurency. The New York conference convinced me even more of the fact that more regulation will be a very positive thing and could lead to a price explosion.

Rockefeller CenterRockefeller Center, NYC

There are still risks that Bitcoin could be ‘banned’, but the more regulators and governments learn about Bitcoin the smaller that chance is. There is also a chance that other altcoins could take over, but because of the network effect I don’t really see that happening either. A fatal flaw in the Bitcoin protocol is still possible of course, but it’s more and more unlikely and the community has shown that they can solve these problems if they occur.

We live in interesting times and I will keep following Bitcoin news closely over the next couple of months!

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Lost iPad

I lost my iPad mini

The Find My iPhone app

When we were staying in the Legoland Hotel 2 weeks ago I could not find my iPad mini. I looked everywhere for it, but it seemed I had lost it somehow. I knew I had used it the night before in our hotel close to Disneyland, but I was quite sure that I had not left it in the room. I used to travel so much that I have a standard routine of checking my hotel rooms before checking out and I normally don’t forget anything.

Luckily I had the Find My iPhone app installed on my laptop, so I ran it to see where my iPad was. Turns out it was still in the Hyatt Regency next to Disneyland. I had not idea how I could have missed it and I questioned Scott whether he had hidden it somewhere. He had done that once with my iPhone: I thought I lost it in Whistler but he had hidden it in his playroom and had totally forgotten about it.

I remembered using the iPad before going to sleep the night before. I normally read the New York Times from the next day (that’s the advantage of living in the Pacific Coast time zone) and that’s what I did there as well. But I could not remember what I had done with it after that.

Hyatt Regency, Garden Grove, CA

Hyatt Regency Orange County

I called the Hyatt Regency to check whether they had found the iPad, but they said the cleaning staff had not seen it and there was no iPad at lost and found either. I normally tip the cleaners well (also when leaving the hotel), so I hoped that they would hand in an iPad that they would find.

With the Find My iPhone app you can play an alarm on the iPad, but because it was quite late already I decided not to do that. New guests had checked into our suite already and I did not want to wake them up or scare them late at night.

The next morning we called hotel security again and they sent someone to the room. There were no guests present in the room, but the security person did not want to enter. He listened at the door while we played a sound on the iPad, but he said he did not hear anything. My app, however, showed that the iPad was still in the hotel and very likely still in our room (the app is quite accurate with the location).

I decided to forget about it, but when the kids were in bed at night I started to play the sound again remotely. From about 8 pm to 10 pm I played the iPad alarm every 15 minutes, but nobody seemed to hear the device. I put a text on the iPad screen as well, offering a $100 reward to the person who would find it (in case the cleaners had found it and had hidden it this may be an incentive to hand it in).

The next day we drove to Palm Springs. I could see on my iPhone that my iPad’s battery was draining quickly, it was below 10% during the drive and less than 5% after we arrived in Palm Springs. I had sort of given up on the iPad and wanted to remotely wipe all data and apps from the device before it would be completely empty. But right before I did that I decided to let the alarm sound one more time.

Three minutes later my wife’s phone range and guess what: someone had heard the sound and found the iPad! A woman from Florida had checked into our former room and heard a sound coming from the room safe. Turns out that the iPad had ended up against the back wall of the safe, and I had not seen it while emptying it. The safe had been closed the day before, so security could not hear the sound.

My iPad mini was found!

My iPad was found!!!

I was very happy, especially because I had almost given up on the device. I offered the finder the $100 reward, but she said she was not interested in that and was just happy that I had my iPad back.

By sheer luck my parents had just landed in Los Angeles and would drive by close to Disneyland the day after, so I gave them a quick call. They did not mind to make a short detour and picked up the iPad for me the next day.

When I installed Find My iPhone a while ago I didn’t really think the app would be very useful, nor that I would ever need it. But it turned out to be the most ‘valuable’ app that I have, because without it I would have lost my iPad.

I was thinking about changing my iPhone and iPads to Android devices because of Apple’s rejection of all Bitcoin wallets (I hate Apple because of this and think they made a huge mistake), but after this experience I have become a bit more reluctant to change. Does Android have apps like this? I assume they do, but do they work as well as Apple’s own app? I have tried to switch to Android several times already over the past years (and some of these attempts are recorded on this blog), but so far I always went back to Apple.

Interestingly, after losing my iPad mini and finding it back I started using it more frequently. When you don’t have something you suddenly realize the value of it. I mainly used it for the New York Times and occasionally for Twitter, Facebook or to try out a new game. But now I also put NextIssue on there (Netflix for magazines) and I synced my Spotify playlists with it. Last night I was on a flight from Vancouver to New York and spent half the flight reading magazines on my iPad while listening to Spotify!

If you have iOS devices and don’t have Find My iPhone installed, do it right away. It’s free and it just works!