Why Coinbase is Half-Right, and What it Should Learn from Facebook’s Failings
This week Coinbase CEO, Brian Armstrong, published a Medium post reaffirming its mission to “create an open financial system for the world” and announcing that Coinbase would not be a politically active company, except where it helped further this mission.
He writes (emphasis his),
Coinbase’s mission is to create an open financial system for the world. This means we want to use cryptocurrency to bring economic freedom to people all over the world. This is difficult and important work, and every employee at Coinbase signed up because they are excited about this mission.
I realized at some point this year that many employees were interpreting our mission in different ways. Some people interpreted the mission more broadly, to include all forms of equality and justice. It makes sense if you believe that economic freedom is not possible without equality for all people. Others interpreted the mission more narrowly, believing that we were trying to create infrastructure for the cryptoeconomy, and that yes, this would create more equality of access for all people, but we weren’t trying to solve all forms of inequality in the world.
The narrower interpretation is how I intended the mission to be understood. I don’t think companies can succeed trying to do everything. Creating an open financial system for the world is already a hugely ambitious mission, and we could easily spend the next decade or two trying to move the needle on global economic freedom. We will keep building the most trusted and easy to use financial products that help people access the cryptoeconomy, so everyone can get the benefits of this new technology and we can bring more economic freedom to the world.
He goes on to explain how this was communicated internally — most notably no political discussion or expectations that Coinbase will support any political causes, except those which further the Coinbase mission. Additionally, yesterday, it was reported that Coinbase is offering 4–6 months exit package for every employee not comfortable with its mission.
This is not an easy thing to do at a time when politics and activism have never been more palpable and necessary. Nor is it an easy thing to do at a company like Coinbase, which is built on a technology with crypto anarchist roots and which, I assume, employs many politically active people with a wider range of ideologies than you average tech company. From everything I’ve heard about him, he is a smart person and I don’t believe he miscalculated the blowback he would get by publishing.
And blowback he got. Like most things today, it was a polarizing issue with people in the tech community quickly moving into their camps. Some defended and applauded the move while others were ready to video narrate his coming execution. This tweet from Felix Salmon sums it up well:
This post is to explore why he is making this specific “risk the company” type of move right now, and hopefully come away with a better understanding of what he is thinking. CEO’s do not take bold moves like this lightly, therefore it is important to know why. If someone is attempting to build a new financial system for the world, I kind of want to know what they’re thinking.
The first thought is the obvious one, and the one he stated — that political discourse at Coinbase has become distracting and contentious and there have been employees who would like to see Coinbase take on a more activist voice in the larger political discussion. I am sure this is true, if only because I know it is true in many companies right now. It’s an Election Year, a politically volatile and scary time, and many people are working remotely. The move to more digital communication channels for discussion increased political discussion outside the enterprise and surely it is doing so inside. Yet it would seem that if it were just productivity that was a concern, it would be something that could be addressed internally and reassessed after Election Day as things started to hopefully cool down a bit. But it wasn’t addressed internally. It was a blog post to the entire world, now.
The fact that he reaffirmed his mission in that post and it was the title of the post is very significant. To me it says that in order for crypto to grow, he believes it must become more secular and shed its political and religious past. And for Coinbase to be the one to lead that transformation and fulfill their mission, they must metaphorically burn their own zealots and radicals. While it may seem counterintuitive, there is no better time to do that than now, when your announcement will get noticed by everyone. In every way, this was a political statement. It was the announcement of a doctrine.
Coinbase has always strived to be crypto for the normals. I could be wrong but I always have seen JP Morgan aspiration in them — down to the color and branding. There is also a real desire for a more secular crypto regime in the community. The best example being Facebook Libra, which has been a spectacular failure. In fact, when I look at Coinbase, I can’t help but see Facebook. Which is my problem with the announcement.
If crypto is the internet of money, then Coinbase might be Facebook. Both are network portals to a much bigger/messier/complex open network built on open protocols. Just as Facebook is/was the gateway (turned gatekeeper) to the internet for many people, the same can be said with Coinbase and crypto. They also eerily share similar missions, as well. Facebook’s original mission was, “To give people the power to share and make the world more open and connected”. Here’s a snippet from Zuckerberg’s letter in the Facebook S1 from 2012:
Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected.
We think it’s important that everyone who invests in Facebook understands what this mission means to us, how we make decisions and why we do the things we do. I will try to outline our approach in this letter.
At Facebook, we’re inspired by technologies that have revolutionized how people spread and consume information. We often talk about inventions like the printing press and the television — by simply making communication more efficient, they led to a complete transformation of many important parts of society. They gave more people a voice. They encouraged progress. They changed the way society was organized. They brought us closer together.
Today, our society has reached another tipping point. We live at a moment when the majority of people in the world have access to the internet or mobile phones — the raw tools necessary to start sharing what they’re thinking, feeling and doing with whomever they want. Facebook aspires to build the services that give people the power to share and help them once again transform many of our core institutions and industries.
There is a huge need and a huge opportunity to get everyone in the world connected, to give everyone a voice and to help transform society for the future. The scale of the technology and infrastructure that must be built is unprecedented, and we believe this is the most important problem we can focus on.
We hope to strengthen how people relate to each other.
As a mission-based company, Facebook has unquestionably been a failure. Even if you don’t blame Facebook for any of the current issues and level of polarization in the country and broader world, it’s hard to argue this mission got anywhere closer to being fulfilled. Perhaps the best example of Facebook’s failure is that the fact that we are more polarized then ever is one of few things we can agree upon .
Coinbase, also seems to imply that it will need to rely on the same institutions it seeks to disintermediate, displace, and/or disrupt in order to fulfill its mission. Facebook also need to rely on these institutions. It needed traditional media to build its news feed and interest graph. In turn got publishers hooked on a certain type of content that performed well, incentivized them to shift resources to video, and then charged them for distributions to their audiences. The content payola ad model then disrupted them further, as any fly by night media operation could access similar levels of distribution simply by paying Facebook. If these organizations are run by government or political operations they don’t have the same operating models, financials or ROI calculations either. Facebook, by making news distribution completely fungible, enabled those who wished to divide us to do so by exploiting the trusted connections Facebook originally sought to build. News is inherently political, and Facebooks mission was squarely focused on changing the way it was distributed. It was and still is in the news business, whether it liked it or not.
Coinbase is no different. Like news, money is also political. In fact, there are few things more political than the distribution of money. Both are inherently political entities with a mission that is politically charged. Counterintuitively this means that Armstrong’s point is a valid one — that Coinbase should not be politically active as a company. This is best observed through our most trusted news outlets. The NYT does not allow their employees to donate to any political causes or express their political views. They wouldn’t be trusted as an institution if they were. While some have expressed concern over this, most will argue that this is a good thing when all other institutions are crumbling under the weight of politicization. In the terms of money, the Federal Reserve is also another place where we do not want to see political activism, the mere sniff of political activism in the feed could send markets tumbling.
Both trusted news outlets and trusted monetary regimes are better off without political activism because they are political by existing and must derive their value through trust — both for financial and social shareholders. To stay on mission, however, they have replaced political activism with strict standards and values by which they operate in order to ensure that their mission does not only serve itself. In the case of the NYT these values are journalistic standards, integrity, and truth. In the case of the Fed, it’s the dual mandate — low unemployment and low inflation. Even Google has a “Don’t be Evil” mantra that has actually worked well for them. Facebook and Coinbase have not expressed such values, with Facebook being unwillingly to admit that it should until very recently.
This is what is missing in the Coinbase post. This is what people should be upset about. Companies can choose whether or not to be politically active or not, and companies we great activist missions can exist and fulfill them. Armstrong could be nothing like Zuckerberg and Coinbase could be nothing like Facebook, however the similarities between the two companies are worth thining about. It’s not going to be easy, both have network effects and any values they communicate will undoubtedly get politicized and potentially risk the network itself. In some ways, it’s going to be harder for Coinbase as crypto is way more political already, and they need more government support early on. In other ways it will be easier. If Coinbase is to be an important company with every person as a stakeholder, expressing values and standards often and early on are important, so we can evaluate how it’s fulfilling its mission and trust that it is committed to the greater good it says it is. An ambitious active political mission without any values other than what helps fulfill the mission itself most closely resembles fascism, and I don’t believe they see themselves as fascists.
This was originally posted on my blog here.
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