What Blockchain Startups Can Learn From Uber About Politics
10.10.2018

In 2011, when Uber was a young startup fighting for survival against the entrenched power of the New York taxi and limousine lobby, its then-CEO, Travis Kalanick, turned for help to Bradley Tusk. A former deputy governor of Illinois who had served as Michael Bloomberg’s campaign manager, Tusk was a veteran swamp-wader. He came up with a plan to win over the public, the media, and finally the city council. Like no other startup before, Uber weaponized its customers, turning them into potent grassroots advocates who could exert pressure on corrupt or indifferent government officials.

With Tusk’s help, the ride-hailing app proceeded to break through in New York, D.C., Denver, Chicago, Las Vegas, Miami, Massachusetts, Pennsylvania, and other cities and states nationwide. Tusk turned those successes—and his rapidly appreciating equity in Uber—into a consulting firm and a venture fund, both of which specialize in tech startups that are facing political challenges. In September, Tusk published his first book, a memoir-cum-strategy guide called The Fixer: Saving Startups From Death by Politics. If he isn’t the foremost expert on how tech companies can fight off political attacks, he will do—as the saying goes—until the expert gets here.

Bradley Tusk

Today, politics is more complex than ever. Companies can’t solve all their problems merely by hiring the right lobbyist anymore, says Tusk. “If you can quietly, through the inside game, get what you want done, that’s fantastic. But assuming that it’s going to become more public, you need other capabilities. That’s where our company comes in.”

We meet in a 14-person conference room at Tusk’s office in New York’s Flatiron District. From the eighth-floor window I can see the carved French limestone facade of a Beaux Arts condo tower. Tusk has made good, and he looks it. Despite the miles on his face—and the evident strain of promoting his new book—the clean-shaven 45-year-old CEO has the virile air of a happy warrior. In seeming defiance of fall, he wears white trousers, red Nike sneakers, and a short-sleeved navy T-shirt.

I sit down hoping that Tusk will open his playbook and share some insider knowledge. He doesn’t disappoint. He makes the most of our time, talking on fast forward about the political outlook for blockchain, why New York is worse for startups than it once was, and what it would take to get President Trump into cryptocurrency.

Politicians have a hard time putting themselves in the shoes of entrepreneurs, and vice versa. What can they do to bridge that gap?
The entrepreneurs sometimes want to bridge it because they need the politicians for things. A handful of politicians want to bridge it, either because they genuinely care about creating jobs—like when I worked for Bloomberg, creating tech jobs in New York was a big priority for him—or because the politicians want to raise money from startups. Although startup culture isn’t really one that gives a lot of money to politicians.

Both sides have a really hard time understanding the metrics that matter to the other. Founders say, “I’m right on this issue. The market proves it. My fundraising proves it. My customer research proves it. So why isn’t the politician doing it?” Because politicians care about fundraising, poll numbers, media attention—effectively, the next reelection. If the things you need don’t impact any of those things, they don’t care.

You’ve written that after nearly 20 years of working in politics, you knew too much “to maintain faith in the system.” What disillusioned you?
The people who run for office literally can’t live without the validation that comes from holding office and running for office. It is their oxygen. So asking them to make a decision that would reduce their chance of keeping that job is like asking you or me to stop breathing. They can’t do it. As a result, whenever they look at an issue, they say, pretty simply, “Am I more likely to get reelected or not get reelected if I do this?” It’s like us saying, “Am I going to breathe or not breathe?”

Take your average Republican congressman from Florida. He probably knows that an assault-weapons ban is not a bad idea. Probably doesn’t want people toting AK-47s around his district. But the turnout in his primary is 12 percent—in addition, it’s gerrymandered, so whatever happens in the primary is the general election—and of that 12 percent, half of those voters are members of the NRA. Which means that even though he knows the right thing to do is to have an assault-weapons ban—and even though he knows most of his constituents would want that—all that matters is that 12 percent who vote, and he’s not going to piss off 50 percent of them. The inputs that politicians are given dictate all of the outputs. As we run campaigns for our portfolio companies, a lot of our job is to figure out how do we affect the inputs.

One of the ways you did that for Uber was to institute “Travis’s Law,” which said that it was better to enter a new market with or without permission, build a customer base, and then turn those customers into grassroots advocates to keep politicians from shutting Uber down. Could a similar strategy work for crypto startups?
Potentially. Uber worked really well because of a few things: One, we had a lot of scale, so we could pretty quickly get 50,000 or 100,000 voters to weigh in. Two, the juxtaposition between taxi and Uber was so significant that once you hailed an Uber, you were like, “I don’t want to have to go back to taxis. At least I want the option to keep using Uber.” So you had motivation. With crypto, the scale is smaller. You just don’t have as many people engaging in crypto as you have engaging in ride-sharing. But. They’re passionate. So I think a good corollary would be FanDuel. Do you know them?

A little bit, yeah.
FanDuel is daily fantasy sports. We’re investors, and we ran a bunch of campaigns around the country to legalize daily fantasy sports. Not unlike crypto, it’s a narrower world of customers, but the guys who do play it, they fucking love it. Right? But not only did they not know who their state representative was, half of them didn’t even know that such a thing as a state rep even existed. When we explained, “If you want to keep playing this game, you need to tweet at this person, you need to email this person—” [Tusk repeatedly bangs on the table for emphasis—] they did, and we passed our bills.

So I think that’s how crypto can do it. We work in the politics of crypto quite a bit, and it’s a challenge that people who are attracted to crypto tend to be fairly anti-system. So it may be a little less in their nature to want to engage in the political process. But, conversely, if you don’t engage in the political process, you might not be able to use crypto at all. You kind of have to. If you’re buying crypto, you probably don’t believe in the system that much to begin with, [but] the system can still shut you down.

If “Travis’s Law” could work for crypto, though, would it be ethical?
You know, it really depends. One [thing to think about] would be, what does the law say? Take Bird, the scooter company we’re investors in. There are markets where the law doesn’t say we can’t have electric scooters, so we go in. There are markets that say we can’t have electric scooters, and we clearly have to change the law. Is what you want to do explicitly prohibited, permitted, or neither? If it’s neither, then you have to [ask], “If I move forward and someone thinks that I shouldn’t have done it, what kind of penalties am I looking at?” Having a scooter confiscated: no big deal. Five to seven years in a medium-security penitentiary, that’s a problem.

The blockchain industry as a whole has a relatively good political path in front of it, putting aside cryptocurrency.

So it’s about risks and consequences?
And then also, who are you disrupting? If you’re disrupting powerful entrenched interests that have a lot of money, they’re going to make life harder for you. And crypto kind of does and doesn’t. On one hand, it is an existential threat to the banks, on the other hand it’s not. So it’s a little bit of both, right? And lastly, what are the attitudes of the regulators, the politicians? You have some politicians who are probably terrified by crypto—

Like the guy worried about the Antichrist
Yeah, exactly. That would be the No. 1 example. And then you have others who are intrigued by it. So a lot of what startups have to do in any sector, but especially crypto, is be able to analyze all of these questions in the context of each jurisdiction.

What is the biggest political challenge facing the blockchain industry?
The blockchain industry as a whole has a relatively good political path in front of it, putting aside cryptocurrency. You will need laws changed to say that the transmission of records over a blockchain is now a legal way to transmit property deeds or wills or whatever else. But we should be able to win those campaigns. The hardest one, the one that I’m working on, is voting, because it’s so threatening to so many people in power. I think the biggest challenge [for the blockchain industry] is to bifurcate itself from crypto. So, yes, crypto uses blockchain, but it’s [just] one of many, many applications. Blockchain has to be able to distinguish itself. That’s really important. And we’re not seeing enough of that yet. Assuming that can happen, the political path for most blockchain functions is not terrible.

Crypto is a whole different ball game. You need some rules put in place on a federal level, because right now there’s no way to distinguish the good guys from the bad guys. You have plenty of legitimate exchanges and legitimate currencies and really good ideas, and then you have fraud. And right now it’s hard for the average consumer to know what’s what. And so everyone’s at risk and everyone looks bad. I’m an investor in Coinbase. I’m an investor in Circle. I have equity in Ripple. I want regulation, because those are really good companies, and I want them to be seen as legitimate. And in some ways it takes cracking down on the bad actors to validate the good actors.

But regulation can only go so far?
This is a very hard existential question: How do you regulate a currency that by definition is meant to avoid sovereignty and avoid traditional boundaries? What you would want [for] crypto, ideally, is some set of global protocols that China and the EU and the U.S. and everyone else all adheres to, because the reality is, [cryptocurrency] is supposed to transcend boundaries, right? That’s the whole point in the first place.

Right.
So it’s one of the trickier ones. But for those in crypto reading this who are feeling bad for themselves, [there are similar challenges] if you’re in autonomous vehicles or drones or legal cannabis. There are a whole bunch of sectors that are really new and have the same problem: there are no rules and we’ve got to figure out what they should be.

Does that mean throwing crypto under the bus to save blockchain?
No, I don’t see why you would need to. Look, I have investments in both. They’re both important to me. I see them as different things for different purposes. I think crypto in some ways is more ideological, and blockchain is more functional. Right? People are so disillusioned with institutions—with government, with media, with Wall Street, with the Church—that trust is in a vacuum, not just in the U.S. but globally, and it’s got to go somewhere. So the notion of a currency that isn’t controlled by those institutions is really appealing to a lot of people, including me.

Yeah, for sure.
Human nature has evolved in a way where people don’t want to be totally subjected to the [control] of centralized governments, centralized institutions. Blockchain is basically just a really, really good way to get stuff from point A to point B, right? It’s a smart, logical, safe way to do it. You and I could probably sit here right now and name a dozen potential applications for blockchain, but in a year we’ll be able to name 30, and in five years maybe 1,000.

Crypto is going to require something of an ideological fight, because it’s as conceptual as it is practical. [We should] make blockchain as tangible, practical, and non-ideological as possible. Just make it the plumbing. No one cares about the plumbing.

You’re working on blockchain voting?
Yeah, I’ve invested a lot of my time and money in this. The inescapable conclusion I’ve reached after 20 years in government and politics is that if you want immigration reform, climate change legislation, gun control, whatever it is—you have to change the inputs that the politicians are getting. What I found in our work with FanDuel, Uber, Bird is that if you give people the ability to advocate politically from their phones, they will do it. And then the third leg of the stool is, blockchain allows you to offer mobile voting safely and securely—I would argue more securely than the current status quo. We started with the state of West Virginia. They offered it to deployed military in the primary in May, and they’ll be doing it again in the general election in November.

Will it still be restricted to deployed military in November?
Just military, yeah. Because the notion is: These people literally put their lives on the line to protect our right to vote, and their votes never count—because they get mailed in after the election, when everything’s long decided. So there is a lot of frustration within the military itself, and this is a solution to that problem. It’s also really hard to object to these people having an easier time voting, right?

That’s the starting point. We’re negotiating with a few different jurisdictions right now to do some municipal elections next year. Those will probably also be for niche groups—deployed military, maybe the disabled, ’cause it’s hard for some people to get to a polling place. And I’m paying for the costs to administer these programs.

You personally?
It’s Tusk Montgomery Philanthropies, but it’s me. It’s my money. There’s no distinction. Overall, if there’s one contribution that I can make to society, it’s probably this. Because I don’t think it’s possible to have a non-polarized, functioning democracy unless you have radically higher [voting] participation. I don’t think you can have that without making it available [on mobile devices]. And I think blockchain is the only way to do that.

Coinbase, which you’ve invested in, recently opened a New York office that it wants to grow from 20 to 150 employees in the next six months. Is New York still a good home for tech startups?
It is, because it’s New York. It’s the global home of media; it’s the global home of finance. And the amount of incredible human talent and capital here is unique. That’s all the good news. The difference is Bloomberg would have been all over Coinbase: “Okay, how do we get you from 20 to 150 [employees] in six months? What do you need? Do you need help getting permits? Do you need help reaching talents? Let’s feature you on 311 so you can reach people.” Whereas with de Blasio, it’s “lose my number.” So it’s not that startups can’t succeed here, but rather than having a really willing and eager partner in the city, they’re now on their own.

You've got to pay attention to the other side, even if you think they're stupid. They often are stupid. But it doesn't matter.

Big VCs like to say “software is eating the world.” But, as you write in your book, “You can’t eat the world without pissing people off.” Tech giants certainly get a lot of hate these days. How can blockchain companies avoid that?
You have to understand what matters to politicians, what matters to regulators, what matters to people who influence public opinion. And it may not be what you care about, but if you’re totally naive to that, then you’re going to end up pissing them off and you’re going to antagonize them into screwing with you. You’ve got to pay attention to the other side, even if you think they’re stupid. They often are stupid. But it doesn’t matter.

Anything else?
It really helps to be a part of the broader community around you. One reason why many startups in tech hubs like San Francisco or New York end up with political problems is that, yeah, Airbnb may be a great product and a lot of people may take advantage of it, but the people who work at Airbnb and most Airbnb hosts don’t vote in municipal primaries. By being so disengaged from local politics, you have no influence over local politics. You can’t afford to ignore it.

On the flip side, here’s the tremendous opportunity: Most people don’t really understand what blockchain is. So you can define that proactively. You can say, “Hey, state government, here are five ways you could serve constituents better, save money, work faster—and we’ll work with you on this. We’ll donate the technology.”

What value do VCs bring to the blockchain sector?
I think some [VCs] will develop really deep expertise to be able to help with things like recruiting or governance. [Crypto companies] are still companies, right, and they still need to be able to function in normal ways, so smart board members aren’t a bad thing to have. But is it possible that a lot of traditional VCs won’t find a home in the crypto world? Yeah. I think it is.

What would it take to get Donald Trump or the Tea Party folks to come out in favor of crypto?
I don’t think it’s as hard as people might think. Put Trump aside for a second, because it’s hard to know what Trump really believes. Take the Tea Party. I don’t agree with a lot of it, but I believe it’s genuine, right? A lot of that on the far right is systemic distrust. They don’t trust Wall Street, they don’t trust the government, they don’t trust the media. With some reason, by the way. I think you can say the same thing about Elizabeth Warren and Bernie Sanders and the progressives, too. And crypto offers a home for a lot of those people. Both the far left and the far right could be really strong political advocates for crypto, and to me that’s an area worth focusing on.
Assuming Elizabeth Warren runs for president—I’m not in touch with her, but if I were, I’d say, “You can be as anti-Wall Street as you want and still be pro-crypto. And then you’ll have a job-creation platform, you can probably raise some money, and it fits with your agenda.” Now, maybe she’d throw me out of the room if I said that, but I think it’s logical.

Warren’s hobbyhorse is the big banks and their role in the financial crisis. Are there systemic risks of similar concern in crypto?
No, because no one at the moment is too big to fail, and it’s too decentralized to create that same kind of risk. But, look, a story just came out that said Coinbase is looking at an $8 billion valuation [while raising] a half-billion dollars from Tiger [Global]. Which is great, right? But some of these platforms could become so big that if something went fundamentally awry, the impact on consumers could be so significant that the government would have to step in and bail them out or handle it in some way. Which is why you do need regulation. Right? It shouldn’t be punitive regulation or dumb regulation, but if you’re going to be a fiduciary for all these people’s money… By the way, the people that we deal with want to get it right. The people in crypto world who most want to avoid all regulation are the ones that you have to wonder about in the first place.

This interview has been edited and condensed. Photo courtesy Bradley Tusk.