Paul Smalera

Below is an unedited transcript of the video interview I conducted with Fred Wilson of Union Square Ventures:

PAUL SMALERA, Technology Editor Reuters.com: Today I had a great chat with Fred Wilson of Union Square Ventures. Check it out.

Let’s start with Bitcoin. It’s captured the imagination of tech blogs, there’s been a big price spike, dozens of posts all over the internet. And your own blog is full of savvy readers; I was reading through the comments on it. One of them said, ‘I haven’t even followed Bitcoin because I don’t really understand it quite frankly.’ Can we start there? Can you just tell us from your point of view what Bitcoin is?

FRED WILSON, Union Square Ventures: Bitcoin is a digital currency.  It’s a currency like the dollar or the euro or the yen. But it’s different in a couple of important ways. One is that it’s not based on faith in a commodity like gold or in a government like the US government. It’s based on faith in a mathematic formula. What underlies Bitcoin is math really and there’s a finite amount of Bitcoin that could be created; 21 million Bitcoin in total. We haven’t created all the Bitcoin yet because Bitcoin gets mined like gold would get mined.

Mined in like a computer has to crunch through a program?

To make it simple, computers are searching for matches of block chains and it takes a lot of processing power to do it and when you get a match you own that Bitcoin. People mine Bitcoins and they either keep them, own Bitcoin, or they sell them, exchange them for dollars or yen or they conduct transactions with them.

This week Fred Wilson of Union Square Ventures sat down with me for a video interview (part of Reuters’ Tech Tonic: Interface series) to talk about a wide variety of topics: Bitcoin, wireless spectrum auctions, Airbnb, immigration, the New York City mayor’s race, even his wife Joanne (the Gotham Gal), and a few others. Why so many topics? Fred’s simply one of the most thoughtful technology investors working today, and peppering him with as many different questions as possible can help us learn how he thinks.

Fred often cites “pattern recognition” as the main job of a venture capitalist, and I think I got a pretty good sense of Fred’s pattern: he understands the mechanism behind a company or technology, and figures out whether his firm can help that company grow. In this interview, he’s an insightful and persuasive defender of the interests of the tech industry, because he very sincerely believes in its ability to do good for people.

Do you think Fred’s take on technology’s promise is accurate? Watch and share the interview and let me know in the comments.

Boxee CEO Avner Ronen recently sat down with me for a wide-ranging video interview on the state of television, and its future. His company just released a $99 device that uses the Amazon cloud to give its users an infinitely-sized DVR. If it takes off, the Boxee TV could fundamentally change the way cable customers consume content -- and the way they pay for it. Users will also be able to watch their recordings from devices like the iPad. Can Boxee play nice with an industry it's trying to disrupt? Ronen says yes. But between the Aereo lawsuit and the Apple TV rumor-mill, it's a crowded, competitive landscape. So, can the company keep competing with the next generation of startups that have the television industry in their targets? Please watch, and find out:

Why does Amazon please Wall Street so much? The company treats shareholders with a disregard that borders on contempt. (CEO Jeff Bezos is “willing to be misunderstood” which means he really doesn’t care if investors understand the business, as we’ll see.) Yet when it announced that profits last quarter fell 45% year-over-year, the stock price saw a healthy bump. Meanwhile, many tech companies, like Apple, which had a high-profit, high-margin quarter, found their stocks punished. Perhaps this is a sign that Wall Street is finally embracing the idea that, for tech companies, growth comes first, even at the expense of profit.

If that’s what’s going on then the Street has started to adopt the ethos of the Valley, specifically of one its most prominent sages: Harvard Business School professor Clay Christensen. The godfather of disruptive innovation, Christensen is often quoted chapter and verse by technology company founders and venture capitalists alike. Christensen studies how established, high-flying technology companies like Amazon and Apple conduct business, to determine if they are ripe for attack from low-margin, startup competitors. His thinking can help shed light on why the market loves Amazon, which is, after all, a barely profitable conglomerate of loosely related businesses that is growing at a bonkers rate. But basically, his theories all comes down to profit margins, and how companies spend their money.

Amazon’s razor-thin margins — just 1.9% for all of 2012 — are, according to Christensen’s theories (and some other Amazon watchers), the company’s key weapon defense against disruptive competition. Not just in defending itself from whatever competitors exist today, but also from competitors that might exist tomorrow. Christensen writes in his seminal book, The Innovator’s Dilemma, that disruptive companies generally start at the low-end of the market, serving customers with cheap, low-margin products that established companies have neglected, in their endless quest to move upmarket, increase profit margins, and please investors.

The New York City Marathon should be run on Sunday. Not because it is easy, but because it is hard. This is unpopular to say in the hours since New York Road Runners club CEO Mary Wittenberg, with Mayor Michael Bloomberg’s support, announced the marathon would go on. Anger and outrage have been the prevailing emotions on TV call-in shows, on social media and in media reports on the controversial decision.

Staten Island, home of the marathon’s starting line, is a disaster zone. The south shore has been wrecked, and residents are rightfully scared and angry. In many cases, their basic needs for food and shelter, let alone their pleas for security and recovery efforts, have not all been met. Many residents say the city police and fire departments are nowhere to be found or are not penetrating deep enough into neighborhoods that need help. Borough President James Molinaro has called the American Red Cross a “disgrace.”

Many also say the Federal Emergency Management Agency has been absent from the recovery effort. Rumors of armed robbery by criminals dressed as utility company employees have spread like wildfire online. Yet the NYPD says that, with out-of-state help, it has searched Staten Island for victims and survivors since the storm abated, and would likely complete the search Thursday night. The aid situation seems to be rapidly improving.

Is it possible in the year of our Lord 2012 that leadership still isn’t well understood? In 2012, despite business journalism’s fetishization of Steve Jobs, the most successful leader ever, whose apotheosis was Walter Isaacson’s doorstop, Steve Jobs, a biography of the half-Syrian, bearded man who built the world’s most valuable company, brick by brick, and found himself, like an earlier CEO of sorts, with legions of devoted apostles, some powerful enemies, and an inextinguishable legend? Is it possible, despite the endless streams of management self-help articles burbling out of Fast Company, Inc., Harvard Business Review, Businessweek, Fortune and the blogs of droves of self-appointed leadership gurus, we need more advice? And is it possible despite the emails – so many emails, Jesus wept – those emails that aggregate all this content using algorithms and intern labor, and slice it up so that the middle manager in Minnesota and the lawyer in Los Angeles and the new media marketer in New York are all .0058% more likely to click through to a relevant article? Is it possible, really possible, the answer to our prayers is another book on leadership?

It is, thinks Clay Christensen. Business folks – the unquenchable consumers of all that content – have been taking the paradoxes of leadership, because they are so familiar, for granted. When they do this, they ruin their companies and then they ruin their lives. Like that subway step everyone tripped over for years without noticing, they take for granted that the well-worn grooves on our society’s pathways are the right ones to be in. They don’t watch the road to see when a turn they are on is about to become rutted, or when they might hit mud and tip over. They feel, like the pioneers, safe in a wagon train, but then something goes wrong, and they are very alone, very fast. They need the wisdom of a pioneer who has crossed the valley, and studied the path.

Paradox one: Leading is usually about getting people to go someplace difficult and new, even if (or precisely because) they’re perfectly comfortable and prosperous where they are right now. Paradox two: A leader can’t just motivate people to change, she has to persuade them to actually take the journey, and care about its success or failure. Paradox three: Even if a leader succeeds, there’s no guarantee she will get any credit, or gratitude for the services rendered. Except for the millions of dollars in compensation some business leaders make, the magazine cover stories and books written about them, the hobnobbing with President Obama, being a leader can be the most thankless of tasks. Of course, if you do it wrong, you get shown the door.

Still. Celebrity, money, power – hard to shed a tear, it’s true. But pay attention, for a moment, before we get to the personal, to the failures of business leadership. The landscape is littered with the carrion of companies that blew it; high fliers that flamed out. If leadership can be occasionally rewarding, it is far more often the case that business leaders, even ones who have been coronated by adoring customers and media, end up, over the long haul, stumbling and failing. To put it in more fruitful terms: For every Apple, there is a Blackberry.

BOULDER, Colo. — One of the most resonant talks I heard at last week’s Big Boulder conference was also one of the shortest. In about twenty minutes, Brad Feld, who is without exaggeration the godfather to the Boulder startup community, explained exactly why it is that Boulder feels like a town on the verge, and why it’s teeming with startups. A lot of it has to do with Feld himself.

It’s not just that Feld is a co-founder of Techstars, the nationwide startup incubator that got its start in Boulder, or that the college kids — and lately, mid to late twenties startup veterans — flock to Boulder in hopes of getting a few minutes of his time to discuss their ideas. It’s not just that Feld’s Foundry Group scored big with an exit on Zynga, though that credibility certainly helps. And it’s not just that he picked Boulder as some magical perfect place to be a startup Mecca. In fact when I asked him why he moved there from Boston, he said, laughingly, it was because, “my wife told me she was moving to Boulder.” He figured he had better go along.

“Happy warrior” is usually a phrase reserved for politicians on futile crusades, but the four principles that Feld talked about that make Boulder a burgeoning startup locale are ones that he seems to embody, not just talk about. And as to my earlier post, wondering where and whether Boulder needed a billion dollar startup (or founder) to justify itself, Feld more or less shrugged it off. If that outcome is a natural result of the principles Feld sees as key to keeping Boulder a great place to found a company, then great. If it’s not, I get the sense no one, he least of all, would mind very much.

The two speakers from Twitter — Ryan Sarver and Doug Williams — had just left the stage at Big Boulder, a data conference I’m attending in Colorado, when Twitter, the service, went down Thursday. Neither of them have anything to do with keeping the service up and running, but the restless audience probably still would’ve thrown the hotel-provided notepads and candies at them if they could’ve. Such was the level of dissatisfaction about the Twitter platform’s outage yesterday — and let’s face it, any day a service we rely on goes out, even when the crowd in question doesn’t consist of users and consumers of social big data, and the odd journalist.

The outage may have been poorly timed for Sarver and Williams, but the incident speaks to a larger problem the companies represented in this room are facing: building on top of social platforms.

Consider Zynga. The high flying gaming company, built primarily on top of Facebook’s Open Graph, has faced record lows in its stock as investors have lost some confidence in the company’s ability to continue growing. Or consider just about any other company, social or not, that is trying to reach its fans and customers in the social media world.

“I’m not interested in working on this unless it’s going to be a multi-billion dollar idea. If I thought this would be a hundred million dollar company — what’s the point?” – Anonymous entreprerneur discussing his startup. Overheard in front of Ozo Coffee, Boulder, CO.

I’m in Boulder, Colorado for a few days this week to attend Big Boulder, a conference devoted to the social side of “big data.” Gnip, the company hosting the conference, is one I’ve written about before. They’re doing the plumber’s work of connecting all the firehoses of raw, public user data from social media companies like Twitter and Tumblr up to clients that want to derive insights from the wisdom of these online crowds.

A quick note on the definition of “big data.” Generally speaking, it’s the sort of data set that’s so huge, even running a simple report on it won’t tell you anything interesting. For example, if you could ask the IRS for a list of all the 25-30 year olds in the U.S. that paid taxes last year, you’d get back a list, alright. But what would be useful about it? On the other hand, if you could filter that list by several other factors: did they pay capital gains, did they owe over six figures in taxes, what is their self-reported job title, and so on, you might end up with a list highly correlated to young, dot-com millionaires and billionaires, like Mark Zuckerberg. And you might cross reference that list against all the other data sets you can find on them: where they live, where they shop, where they travel, what they watch, eat and listen to. It’s all out there.

Facebook is having a vote on changes to its privacy policy. Not that you'd know it.

Voter turnout has always been a problem for developed nations, but what about developed social networks? Facebook, with its 900 million users, is often written about as if it were the personal prelature of its founder, Mark Zuckerberg. But Facebook itself prefers the term “ecosystem” – with good reason. Facebook’s engineers provide the basic conditions for life – the agar at the bottom of the social-media Petri dish. In turn, it's developers and users who really craft their own worlds, their own experiences of Facebook – not Facebook itself. And whatever world they craft, it can only exist in the laws that govern the Facebook universe. Who ultimately decides those laws? Facebook.

Given that reality, it’s amazing that most users don’t care a lick about the vote happening on the site, right now, today, over proposed changes to Facebook’s privacy policies. Nor did they care much about the last vote over the site’s Terms of Service, which happened in 2009. Of course, it’s hard to care about something you don’t know is happening. Even though the vote is making the news here and there, there’s no inkling of any promotion on Facebook itself about what sounds like a rather important site event.