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Across that last couple months, people noticed that Nazis were using Substack to distribute and monetize Nazi ideology. A bunch of writers who publish on Substack got upset, and asked the company leadership to do something. Substack said it would not ban the Nazis, then said it would, then it did some tokenized hand waving and didn’t really do much in the end. This was followed by a few high profile writers announcing their departure from the platform (most notably, Casey Newton’s newsletter, Platformer).

Substack doesn’t have a Nazi problem. They have a platform problem.

This has been a long time coming, since over the last three years Substack has taken their simple services business, and pivoted to being a social platform business. But with the promises and rewards of a social network, comes all the headaches. Nazis put this in stark reveal, because most of us agree that Nazis = bad. But the core challenge is not the Nazis, it’s content moderation.

Initially, Substack was a service provider. They solved for two needs that most web2 platforms don’t provide: The ability own your network/audience (you can’t take your Instagram followers with you to another platform), and the ability to have a direct market relationship with your network (charge them $ for your native content).

Substack bundled two existing protocols — the SMTP based email newsletter, and Stripe’s payment rails — to create a tidy, easy to use, low friction way for writers to distribute their work to an owned network, and charge those people directly for the content. The company took a 10% fee on monetization. Simple.

Substack enabled writers to unbundle themselves from traditional publishers, and re-bundle as micro-media companies with a direct subscriber and financial relationship with their readers.

The trade offs between building your business on top of a service provider’s protocols VS building on top of a platform, is self sovereignty and freedom of speech VS network effect, amplification, and being subject to centrally controlled content moderation.

Originally, Substack was a way to monetize your existing social graph (mostly Twitter followers). You had to bring your network with you. In their attempt to create organic in-network growth, they built and shipped features to the product that pivoted them from being a service provider, to a platform, including cross network promotion, discovery, and social network elements.

As they’ve remade themselves into a social platform, they have ignored the central tenet of platform operation: If you run a platform, your core product is content curation and moderation.

Nilay Patel perfectly articulated this tension this back in October 2022, writing about Twitter, “The essential truth of every social network is that the product is content moderation, and everyone hates the people who decide how content moderation works.”

Service providers don’t give recommendations, they doesn’t promise their customers they will get them new followers or subscribers, and they are not trying to build a social network that can generate network effect for its users. Substack is doing all of those things. Substack is a platform.

The life cycle of every internet platform to date, is they build and scale ignoring the role of content moderation, get in trouble for bad content moderation, and then either start moderating, or die. The Substack founders have spent the last couple years righteously telling us that none of these issues would ever apply to them, because all the problems on the internet were caused by ‘algorithms’ and advertising, which they assured us they would never have.

But platform fate is inexorable, and if you build and scale a social platform, sooner or later you have to curate and moderate it.

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The platform problem is best solved by turning it completely upside down.

First is scale: Substack undermined its core value proposition of allowing each creator to stand on their own in the market, by trying to connect them all together on a central monolithic platform.

Second, is by making curation a core value proposition of your community. Curation is a deeply creative act. It removes noise, to bring focus. Curation creates shared identity — it fosters community.

Most of the time when we reach for the short hand of “community” we are trying to define a group of people who think they are working towards a common vision for the future, but who don’t actually agree on the protocols or values that will enable them to be there together. If we want to build a community with enduring value, we have to be specific. We have to create edges. Curation, and moderation, are edges.

When you lead with curation, you create shared value and safety. And by allowing micro-social networks to be independent, you give people agency to leave individual spaces, without feeling like they are walking away from their entire social network.

Don’t like the Nazis? Don’t subscribe to the Nazi newsletter. But when the Nazis can grow and monetize their newsletter by getting exposed to everyone on the platform of newsletters, then the platform operator has a stake, and a responsibility. Casey Newton felt like he had to leave the Substack Platform, because he was in the same cross promoted interconnected social space as the Nazis. Casey doesn’t feel like he has to quit the internet because there are Nazis on the internet. By taking his network off of the Substack platform, and creating a container (website) for them on the open internet, he has created a boundaried space where there are no Nazis, because his team curates what is allowed on that node of the internet.

Substack designed themselves into this corner. Their muddled approach is trying to straddling the structures of a monolithic web2 social platform, and possibility that is exist for connection within internet based self-sovereign micro-social networks.

Social fulfillment is found in relationships, in the joy of being with your people. What we crave is connection. The internet’s core feature, is creating connections that were previously unimaginable. Let’s curate micro-social spaces, that bridge on-line and in-person, where we feel deeply seen and connected to each other, through a shared vision for what is possible.

Being good at firing people — from your company, and your life — is foundational to collaborating with high performing people, and building world class teams, and shipping incredible work.

Here is why

1. You have to experiment with people.  No one, not ever, has ever had a 100% success rate at hiring great team members. No matter how good your recruiting, screening, and selection process is, you’re going to have misses. If an Premier League team never cut players, never made adjustments to their starting lineup, and never made substitutions mid-game, they would quickly become the worst performing franchises in the league. If you are bad at identifying when someone you hired is a poor fit for your company, you dramatically increase the stakes of each hire, and make the inevitable mis-hire far more costly. There is no championship team without a lot of cuts.

2. Being good at letting people go, builds trust and reduces fear amongst the rest of your team.  When you let someone go, other employees watch how you treat that person. Everyone on your team at some point thinks a version of, “I might get let go some day.”  Watching you be clear, respectful, and supportive to the person you are letting go, will elevates fear.  Fear destroys personal and team performance. Fear is a bad motivator. Being good at off boarding someone when they are not a good fit, is key to enabling the rest of your team to feeling secure, trust your decision making, and focus on doing their best work.

3. You have to get the wrong people off the team, to make room for the right people.  This is one of the biggest hidden costs to keeping someone on longer than you should. You close yourself off to the possibility of hiring a rare talent to fill their role. Each day that you keep someone on past the point where you were clear they are a bad fit, is a day you could be working with someone else who is truly great. It’s an active vote against the future success of your company.

4. People who are currently failing at their job, are not having fun, and will drag down the energy and performance of the rest of the team. If you have a good screening process, it’s unlikely that you hired someone who is truly incompetent. They are likely just not a good fit for your company’s culture, or the role you hired them for. They will be happier at a job or company for which they are better matched.  You are doing everyone a favor by graceful and supportively off boarding them.

5. If you’re the founder, CEO, or part of high-level leadership, one of your core responsibilities is making decisions no one else in the stack can. This means that you get all the hardest, stickiest decisions. You have to get good at making hard choices — even with imperfect information. There are few areas that better exemplify this, than firing and layoffs. If you want to be a great leader, you have to get good at letting people go.

6.  Off boarding people is just like any other skill; you can’t get good at it without practice. Just like no one has ever been perfect at hiring, no one was born perfectly skilled at ending relationships. You have to learn through trial and error (mostly error). It’s going to suck more in the beginning. You’re going to feel bad, and they might feel bad. But you’ll never learn how to do it gracefully and with a high level of integrity, unless you fucking try.

7. My experience has been that the majority of my stress comes from not taking action over something that I could have some impact or control over. To say it another way, my stress is mostly from ignoring things that I should not be ignoring. Avoiding letting someone go, when the time has come, is a near perfect example of this. Take action. 

8. Our culture is conflict adverse. But conflict is where all the really important change and growth happens. High performance companies have good cultures around conflict, and use it as a feature, not a bug in their team dynamics. If you want to be good at leadership, you have to get good at conflict. We convince ourselves that putting off dealing with a low performing collaborator will enable us to avoid the uncomfortable feelings, shame, and self-doubt we are experiencing. Address the situation — take the needed action of getting the person out of their current role, either into a different position in the organization, or more likely, letting them go.

9. Fear gives bad advise. When you are feeling afraid or avoidant of a situation, usually the solution involves moving towards that thing, as a way to get through it to the other side. The more you do this, the easier it will get. This is one of the big gifts of being responsible for of lot of hiring and firing — it makes you face your fears and build experience having hard conversation that are necessary to moving your company’s mission forward.  If your a founder or high level executive, this is one of the most important skill you can develop.  

10. Putting off firing someone, means you are dealing with the same problem over and over again, rather than moving on to new problems.  You are reinforcing failure. Do you know what the a good working definition of insanity is? Doing the same things over and over again and expecting different results. You are taking up valuable time and capacity dealing the same shit, when you could be solving new and more important problems.  Move this one off your plate. Let the person go.

12. This one in particular goes out to the founders. Early stage startups are weak link sports: when the team is small, total effectiveness and morale is going to be dramatically impacted by the lowest performing person. Your chances of success are less than 10%.  Whatever you’re afraid of around letting someone go, is nothing compared to the failure of the entire company. You’re job as the founder is to make the hard decision that no one else can — to cut through the noise, and emerge clear signal.  Everything sucks, some of the time.  You wanted this job and getting good at letting people go, is part of that job.  

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This morning, as I’m writing this, this sun is shining, in a way that is making me feel like anything is possible. Life is short, let’s be in the joy of doing big, important, hard things — fully and authentically.

I’m moving into the week, excited to be challenged, excited to be asked to grow.  I started my day by climbing in the cold plunge for three minutes, because everything feels easier after I’ve done that. My calves are sore from a the hard run I did yesterday, and my dopamine levels are high. Here’s to this day, this week, this life. 

Now let’s get after it.

The Macro Forces Impacting Housing Affordability In the Hudson Valley

Here Is My Thesis: If we don’t take immediate and scaled steps to stabilize, protect, and actively supply side manage housing affordability in Kingston, we will see the cost of housing soar in the coming years. As housing prices rise, it will limit who can afford to live here, pushing many current residents out, and resulting in Kingston losing our cultural, racial, and economic diversity.

I believe there is an oportunity to take a deep and wide, ambitious approach to actively managing the affordability of housing in Kingston. I think if we do it right, it will make Kingston one of the most desirable places to live in the region.

Background: The macro social-migration, housing development, and economic trends that have lead to a shortage of housing in cities nationwide

First, let’s talk about what got us into this situation — where affordable housing is a defining issue of our time.

The fundamentals of what is leading to a lack of quality affordable housing in Kingston, and cities around North America is a complex combination of factors. At the heart of the issue, we find a classic supply and demand imbalance, which has been decades in the making

For approximately 30 years, between 1950 and 1980, there was a government sponsored exodus of [white] people from cities all over the country. This lead to there being an excess of housing stock in American cities. These out-migration trends reversed around 1980, and cities’ populations have been steadily rising for the last 40 years.

Urbanist Alan Ehrenhalt calls this change “The Great Inversion,” a shift where cities and suburbs have traded places over the last four decades. Generation x and y’ers have been moving to the large cities in droves, but especially the urban centers on the three coasts — San Fransisco, Seattle, New Orleans, New York City, Boston, Los Angelas, Washington D.C., etc.

The job market has changed as well. In 1978, the U.S.’s manufacturing employment peaked, and in the decades since factories have left US cities, seeking cheaper labor (mostly abroad).

The expectation of lifetime employment with one company has long since faded. Today, many generation X and Y workers derive their long-term “job security” from a large network of social and professional ties that lasts from one company to the next. The density of cities favors this regular employment movement.

The barrier to entry for entrepreneurship has also plummeted. The capital costs needed to found a company and launch a minimum viable product are much lower than just a decade ago, let alone a generation ago.

The reason this all has lead to an affordable housing crises in nearly every large city in North America, is that while people have been moving back to the cities, we have not been building anywhere near enough new housing.

As one example, From 2010 to 2015, Los Angela, CA added 157,900 new jobs and 236,318 residents. The number of new units of housing added during the same time period didn’t even come close to keeping up — 40,014 units — or one new home for about every 5.9 new residents

Similar stories can be found in the numbers about every other major city on the coasts.

This has created supply side pressure, which has driven up housing prices. This market context has in turn raised the stakes for landlords and developers to flip rent controlled units to market rate, either by eviction or lease buyout, among other predatory practices of getting people out of their homes.

While most large coastal cities in the US have realized they have a housing supply crisis, and are trying to build their way out of it, in most cases they are just too late. They are short too many units of housing. Even the aggressive development targets set by mayors (like in NYC and LA) are not adequate to stabilize rental pricing, let alone lower prices.

As the cost of housing has crossed over thresholds of un-affordability in large cities, a new exodus has been triggered. Class privileged college educated knowledge workers employed in high paying industries (tech, design, finance, etc) are still flocking to these cities, but tens of thousands of people are also being priced out, and push out. Many of these cities (San Fransisco, LA, Seattle) are transitioning from being socioeconomically diverse spaces, to having two classes of citizens: upper-class knowledge workers living in market rate housing, and a service class, living in rent controlled or subsidized affordable housing. Cultural diversity is what helped make these cities great, and their lack of affordability is gutting out their social souls and culture.

From One City Another

As people are being priced out of the tier one cities, or choosing to leave them because they don’t like how their cultural landscapes is changing, most are moving to one of three places:

1. The suburbs outside of the city they are being priced out of, then commuting back into the urban core for work
2. Another large metropolitan area, elsewhere in in country, usually in the south or mid-west (e.g. Houston, or Minneapolis) where the cost of living is still affordable
3. A smaller city, in the region of the large city they have been priced out of

This last one is what is one of the reasons why we are seeing so many people move from NYC to the Hudson Valley in the last few years.

State of Housing in Kingston — The Early Stages of an Affordability Crises

Kingston already has the early stages of an affordable housing crisis in motion. In 2009, Ulster County adopted the Three County Housing Assessment Needs Study, which stipulated that to meet the affordable housing gap, the City of Kingston would need to build 1,005 units of affordable housing by 2020. Since that report was published, the city has only added 55 units of affordable housing.

That study is almost a decade old, and was executed before the rate of Brooklyn-to-Kingston migration really hit its stride. Chances are that given the accelerated rates at which people have been relocating to Kingston in the last few years, the number of additional affordable units needed is even larger than projected in the report.

In 2017, 35% of households in the Kingston metro area could not afford the median price of housing. The subset of the population that is feeling this presure the most, is the 38% of Kingstonians who rent, who as a group, have half the median income of home owners in the area.

Cost of Living Makes or Breaks a City’s Culture, because it changes who can live there.

A city’s residences access to affordable housing is the cornerstone to the urban space being diverse, and socially and economically vibrant.

The widely held definition of housing affordability, is for any given resident/household, if they are spending more than 30% of their take home income on housing, they are housing insecure.

Anyone paying more than 30% will likely face challenges providing their family with the rest of basic necessities at a good standard of living — quality food, transportation, access to healthcare, education, etc. Households that are paying more than 30% also have little or no disposable income, so they are not able to participate fully in the local economy.

People who don’t have access to quality affordable housing lead lives that are measurably harder than if they had access to housing that cost less than 30% of their income.

One of the core challenges is that many of the forces causing the lack of affordable housing in Kingston are macro (regional and national trends), but the solutions have to be developed at the municipal scale (with the support of county and state governments).

As a city, and a community, if we take some ambitious and immediate steps to actively managing the affordability of housing in Kingston, I think we can increase the standard of living here, while maintaining affordability. This would in turn fuel economic development as a diverse group people, entrepreneurs, and buinesses base themselves in Kingston because of the city’s high quality of life.

Kingston is going to change in the coming years, the question is whether we are going to take an active role in managing that change, so that Kingston can be an inclusive, charming, and truly modern small city.

From the first time I logged onto Kickstarter in 2009, I saw crowdfunding as a game changer for the the world of startup funding. I am excited by the advent of platforms and changes in regulations that increasingly democratize and widen startup’s access to seed capital.

Websites like Kickstarter and Indigogo have popularized the donation and reward based models of crowdfunding. Kickstarter just announced last week that $1 billion has been raised on the platform, half of that in the last 12 months. Crowdfunding as an industry has only been tracked for a few years now, but the third annual Crowdfunding Industry Report (due out later this month) is expected to show the industry growing by 80%+ for the third year in a row.

Most crowdfunding follows one of four models:

1. Donation Based Crowdfunding: Contributions go towards a cause with nothing offered in return, other than funders feeling like they helped make something happen

2. Reward Based Crowdfunding: Backers receive a tangible item or service in return for their funds. Private companies have parleyed this method by pre-selling first runs of products to raise the money they need to manufacture.

3. Equity Based Crowdfunding: Investors receive an ownership stake in the company

4. Lending Based Crowdfunding: Contributors are repaid for their investment over a period of time

Today, most crowdfunding is donation or reward based, because of regulatory restrictions that, until very recently, made it illegal for private companies to offer anyone other than accredited investors ownership stake in exchange for financial investment.

(An accredited investor is someone who has earned more than $200,000 for the last two consecutive years or has more than $1,000,000 is assets, not counting their primary residence.)

A New Era…Maybe: The JOBS Act

In 2012, Obama signed into law the JOBS Act. The law included a section that changed many of the restrictions that had stopped companies from using crowdfunding platforms to offer unaccredited investors a chance to invest in private businesses in exchange for shares in the company. The law also instructed the Security and Exchange Commission (SEC) to propose new regulations for crowdfunding based investing, which they released for public comment in October. Unfortunately, as proposed, the rules would stifle many of the new possibilities because of the increased regulation they would put on businesses that used crowdfunding platforms to solicit investments from unaccredited investors.

“Boo, Hiss” said I, when I read this. As it turns out, I wasn’t the only one. Startups and entrepreneurs have lead the charge urging the SEC to scale back the proposed regulations that would make it prohibitively complicated and expensive for most small startups to crowdsource investments. I hope the SEC listens.

Who Will Likely Benefit The Most From Equity Crowdfunding?

The Short Answers: Broadly, everyone. Specifically, startups, not amateur investors.

I understand why the SEC is hesitant to say that anyone can invest in any private business who figures out how to use Kickstarter.

The fundamental issue is that seed stage startup investing in hard, complicated, and incredibly risky.

I see the SEC trying to strike a balance between opening up new market mechanisms of funding for private companies, and protecting middle class Americans from losing their scant resources on shaky or fraudulent investments. I hope they air on the side of less regulation, because if they won’t give us a chance to experiment, we won’t find out how substantially it could change the startup funding world.

Key Dynmanics I Think Will Impact Equity Crowdfunding

Self Directed Amateur Investors Usually Lose Money
Fundamentally, public stock exchanges like the New York Stock Exchange, are giant crowdfunding markets. And generally when non-professional investors try to pick individual stocks to invest in, they lose money.

One of the reasons mutual funds exist is so that non-professional investors can have their money pooled and invested by professional fund managers. This kind of “mutual fund” model could potentially work well to give non-professional investors a way to participate in seed funding private startups in specific markets (i.e. tech startups).

One drawback is the likelihood this type of approach would trigger new regulations that would add cost and burden to private company accepting investments from these funds – which would give the funds a significant disadvantage compared to accredited investor funds or angel investors. Also, the mutual fund model would fundamentally not be crowdfunding, and would not leverage may of the other benefits of crowdsourcing (like aggregated decision making).

Basic Math: Power Laws
Startup investing returns usually obey power laws. For most venter capital funds and angel investors who seed fund startups, most (or all of) their returns come from a very small number of their portfolio companies, which experience exponential growth in valuation. It is typical in profitable VC funds for the top performing company in the fund to be worth more than the rest of the companies in the fund combined.

The core issue this reveals is that even professional investors get it wrong most of the time. But they have the capital and time to build a portfolio with enough startups that they have a chance of getting a breakout hit.

It could be coutnerargued that that crowd sourcing the process could be better at finding and vetting investments and greatly increase the number of successful startups. But power law math will likely play a role in one way or another.

All or Nothing Group Dynamics
Startup investing tends to live in the extremes of being very oversubscribed or very undersubscribed. This has been a driving dynamic on platforms for accredited investors like AngelList. Most startups on the site that are soliciting funding offers receive little attention. Investors are often hesitant step up and invest first, but once a few investors commit (especially ones with a good track record), other investors often rush to get a piece of the pie for the opening funding round.

This also related to the point I made above about power law – the top performing companies are often oversubscribed. For a platform to successfully facilitate equity based crowdfunding, it will have to solve the problem of amateur investors getting push out of oversubscribed funding rounds by bigger players.

Over/under subscription tipping points are also highly present in donation and reward based crowdfunding. On Kickstarter, 80% of projects that successfully raise 20% of their funding goal, reach their full funding goal by the end of the campaign. Early funding gives a project social credit.

First Who, Then What
If you ask successful seed investors (angel and VC), they will tell you they primarily invest in great people. Without great people behind them, great ideas are usually worthless. Its very hard to evaluate the founders/startup team without meeting them in person. It would be challenging for professional startup investors, let along amateurs to evaluate online.

The counterargument to this challenge is that in the aggregate, the crowd can outsmart individual professionals, even with few or no direct interactions with the founding team.

The platform that can offer the best evaluation mechanisms that can be easily understood and build on aggregate vetting will likely be the most successful.

Tying It All Together
All of these points combined are why I think that as we see equity crowdfunding grown in the coming years, small level amateur investors are unlikely see significant financial returns from participating, but it will be a big gain for the startup ecosystem as a whole.

The End.