Selected Passages from Paper Belt on Fire

Paper Belt on Fire is a book about the venture capital fund 1517 started by Michael Gibson and Danielle Strachman, two people involved in the creation of the Thiel Fellowship.

The book itself is worth reading if you're interested in startups, higher education, or the inner workings of how to raise and deploy capital into technology companies.  

Highlights

On applying to be a CIA field agent:

Next came the second round, which included an IQ test, a personality test, a statement of values, a set of essay questions, and a list of the books I was supposed to use as sources in my answers. I still have the booklist. Here are some of the titles, many deeply critical of the CIA's activities and failures: Steve Coll's Ghost Wars, a meticulous history of the Taliban and the rise of Osama Bin Laden in the 1990s; the impassioned Imperial Hubris by Michael Scheuer, the former head of the Osama Bin Laden unit at the CIA's counterterrorism center; and strangely, I thought, a spy novel set in Beirut concerning the U.S. Embassy bombing – Agents of Innocence by David Ignatius.

On creative centers:

Era by era, innovation has been concentrated geographically, like a hive. Since the First World War, America has been the leader, the Bay Area in particular in the latter half of the 20th century. But before that, Victorian Britain led the way, and before that, it may have been the Netherlands, and then earlier, Renaissance Italy, and before that Fujian China, Rome, and Athens. The historical record shows all creative clusters, businesses, and institutions age and then eventually collapse, unless they are renewed by the dynamics of competition and new entry. In my writing, I argued there's no reason to suppose this decline won't happen to laws, social policy, and even the spirit of a culture, as vested interests poison the sources of creativity and thicken the barriers to entry.

"Up to now" was the key phrase. If the United States stopped innovating, there was no one left to keep the flame burning. China may have begun to quicken its development, but its expansion was merely catch-up growth: it is far easier to copy than to invent.

Instead, new nations, like the United States at its founding, offered the most hope because they could experiment with new rules and weren't beholden to the accumulating coalitions that had largely bent the political system to their own selfish ends.

No particular topic, I just thought this was a nice quote:

It is worthwhile, I've found, even when light is absent, to face in the direction it might emanate from.

On employee incentives:

Peter [Thiel's] house was part of a ring of homes that circled the reflecting pond of the rotunda. He lived about 400 yards from the office. He encouraged all of us to do the same. Employees were granted an extra $1,000 per month in rent if they lived within a half-mile radius of the office. It meant we were more likely to come in early, stay late, or take a surprise meeting on the weekends. It had the added effect that we would all show up to the same watering holes after work to knock off a few drinks and gossip, tell war stories, argue over the jukebox, and have a few laughs. As far as employee benefits go, I always thought this was a wise one.

On selective patent enforcement:

Hoffman wanted to see the technology deepen and broaden freely, so early on he acquired the patent for the invention of the online social network with Marc Pincus, the founder of Zynga, paying $700,000 to an extinct company called sixdegrees. A virtual social network seems like more of a concept than an object such as a telephone, but there's still a patent on its invention. It was a defensive purchase, because competitors like Yahoo! might have out-bid him for it and then used the patent to shut him and the others down. But since Hoffman and Pincus refused-very generously-to enforce the patent on others, it also meant companies like Myspace and Facebook could grow.

On the impact of small-grant giving:

Over the years we've given out hundreds of these $1,000 grants, often in places like this with Noah. They work best when they're unexpected. One time in Detroit, a guy and his girlfriend cried when I told them I was going to send them $1,000 right then and there. They needed the money to buy parts to build a prototype and had no way to get started without it. Now, in truth, it's quite rare for these grant recipients to start companies that last. But I'm still surprised by the hit rate. There are something like twenty companies in our portfolio today that started as a $1,000 grant. That's incredible-to me, at any rate. Oftentimes the founders say they never would have started the company without it. And in many cases, they say it wasn't necessarily the money, but the fact that there were these two people from Silicon Valley, now here in Chattanooga, telling them they should try something they were afraid to test.

On selective contract enforcement in Silicon Valley:

Now, even though we had a legal right by contract, we could never take the company to court to enforce it. That kind of antagonism would sour our reputation with startups we might work with in the future. They might decide not to accept our investment lest we sue them at a later stage. In addition to that fear, investors also don't want to undermine their own cashstrapped company with legal bills. So we have one of the strange dances in Silicon Valley, where companies agree to legal rights and then back out of them without penalty because they know their investors can't enforce them.

On public debate:

Luther's ninety-five theses were written as a "disputatio," which meant that he was announcing that he was open to debate his claims in public.

On the importance of decentralized governance:

In Renaissance Europe, no one controlled the entire continent. In China, the emperor did. When the emperor banned ocean exploration, it was banned everywhere. But Europe was fragmented into a maze of frontier enclaves, ethnic anomalies, duchies, kingdoms, and city-states.

If innovation was banned in one place, an inventor could flee to a rival kingdom to develop it further, as Leonardo Da Vinci once moved from Italy to France, or as Benedict Spinoza moved from Spain to the Netherlands.

The competition between all these European principalities meant reactionary societies lost out over time. No interest group within a single society could ever thwart progress on the continent as a whole. In China, the opposite was true. There was no getting around the state, and there was no competition. "If technological progress is ephemeral and rare, multiplying the number of societies in which the experiment is carried out and allowing some measure of competition among them improves the chances for continued progress," Mokyr writes in The Lever of Riches, his now-classic treatise on technological creativity and economic progress."

"As long as some societies remain creative," he concludes, "others will eventually be dragged along."

On special economic zones in China:

The more impressive know-how China is perfecting is the ability to build experimental cities. With its program for special economic zones, it has prolonged the existence of a frontier.

After the success of Shenzhen, it created six more zones. Taken together, this could be the most successful anti-poverty program in human history, as hundreds of millions of the poor have been lifted out of poverty in a mere twenty to thirty years. And this gets down to the problem that dawned on me as we traveled from Hong Kong to Shenzhen. The dynamism of the frontier is a truth America once knew but has now forgotten. California was so innovative a place in the 20th century, not because of the weather or because of some special policy, but because it was basically a fresh special economic zone where vested interests could not block experimentation. There was no political opposition to scientific and technological progress.

On experimental cities:

Back in 2013 Larry Page, then CEO of Google, took to the stage at the annual Google I/O conference and offered a vision for a new social philosophy, a way to reopen the frontier. Page wondered aloud if old laws and rusty institutions were slowing down the rate of technological progress. His argument was that we were missing discoveries because we couldn't run small-scale experiments with wild technologies like flying cars and drones.

"There are many, many exciting and important things you could do that you just can't do because they're illegal or they're not allowed by regulation," he said. His solution wasn't to propose a change to the laws of San Francisco or Mountain View. That was impossible. Instead, Page proposed something far more radical. He suggested building a new experimental city somewhere in America that would operate by a different set of rules and regulations from the rest of the United States. It would be a laboratory to run experiments.

If only we could "set aside a small part of the world," he said, in which "a few people can try out different things and not everybody has to go."