The Capital Note

Understanding Jack Dorsey

Twitter CEO Jack Dorsey testifies remotely during the Senate Commerce, Science, and Transportation Committee hearing Does Section 230’s Sweeping Immunity Enable Big Tech Bad Behavior?” on Capitol Hill, October 28, 2020. (Greg Nash/Pool via Reuters)

Welcome to the Capital Note, a newsletter about business, finance, and economics. On the menu today: understanding Jack Dorsey, Facebook bans #StoptheSteal, the Fed eyes Bitcoin and Tesla, and an anecdote from Twitter’s early days. To sign up for the Capital Note, follow this link.

Jack Dorsey: Censor in Chief

Twitter founder Jack Dorsey in many ways represents the countercultural ethos of the early Internet. A yogi with a nose ring and an impossibly long beard, Dorsey spent his youth writing emo poetry under the pen name JakDaemon. (“In the beginning, there was Jack. And Jack had a groove.”) His resume described him as a “grassroots hacker,” living in a “chaotic cruise of crypto anarchy, pseudonym federations, 4AM hacks, viral dispatch, reputation taggers, temporary autonomous zones, colony/clan workforces, urban cores, and corporate disorder.”

Dorsey’s early self-image is in keeping with the vision of the cypherpunks, early adopters of the Internet attempting to keep it out of the hands of centralized authorities. The architects of the early Web envisioned a peer-to-peer system in which users warehoused data on their own servers. The transfer of money and information could be conducted freely between individuals, outside the control of governments and large institutions. As an open platform for the dissemination of information, Twitter was initially in keeping with that vision. Indeed, in 2015, Dorsey claimed that Twitter “stands for freedom of expression.”

Now, this grassroots hacker finds himself in the unlikely role of Censor in Chief, having banned President Trump from Twitter for inciting violence. Leaving aside the merits of the ban, it’s not quite what we’d expect from the preacher of crypto anarchy. Has he simply matured? He was, after all, a kid when he wrote the poems.

But Dorsey hasn’t let go of the dream of an open Internet. His Twitter bio, which reads “#Bitcoin,” is a testament to his commitment to a decentralized payments system. In recent days, Dorsey has also used his Twitter account to promote Signal, an encrypted messaging app with the explicit goal of resisting censorship. Meanwhile, in his capacity as CEO of payments company Square, Dorsey is lobbying against cryptocurrency regulations proposed by FinCEN. Square’s statement on the proposed regulation argued that “people should have the ability to participate in financial systems easily and equitably.”

It’s tempting to see Dorsey as an opportunist, interchangeably invoking the language of freedom when it’s convenient. I’d venture a more sympathetic reading: He realizes the inherent constraints of the client-server Web model, in which large platforms will inevitably receive backlash, and potentially legal action, for failure to moderate. Twitter and other social networks are in a bind: If they moderate, they’ll anger a critical mass of their user base; if not, they’ll likely be regulated into oblivion. With Democrats firmly in control of the federal government, Twitter and its peers have cast their dice.

Unlike his fellow social-media CEOs, though, Dorsey is well hedged: If there ends up being a meaningful exodus from the centralized Internet, it will likely be to the crypto world, in which Dorsey has invested large amounts of time and money.

Around the Web

Facebook Removing All Content Mentioning ‘Stop the Steal’ (via the Wall Street Journal).

Bloomberg’s Brian Chappatta argues that the Fed is eyeing regulations of Tesla and Bitcoin:

Now, the central bank hasn’t said directly that it’s worried about the surging price of Tesla shares and Bitcoin, and it likely never will. But the undertone from last week’s round of speakers could be interpreted as an early sign that the Fed’s third mandate beyond maximum employment and stable prices — financial stability — is starting to weigh on some policy makers heading into 2021 as the stock market gets compared to a lucky slot machine.

Random Walk

Today’s random walk takes us to a story from Twitter’s early days, when Dorsey was debating whether to sell to a larger company. Excerpted from Jeffrey Bussgang’s Mastering the VC Game:

More money provides more runway and room for mistakes, but at the cost of some additional dilution. Dorsey recalled a conversation he had with Netscape founder and angel investor Marc Andreessen. “Marc advised us very early on to take as much money as we could, because a recession was coming and everything was going to hit the fan. And this was in early 2008, maybe the end of 2007. And he’s like, ‘I know you’re worried about dilution, but just try to get as much money as you can, build a war chest so you can weather the storm, because the storm is coming.’”

Timing and your own personal commitment are both important factors. Twitter’s Jack Dorsey gets asked the question every day—when will Twitter exit? He explained to me his views on this issue in a way that reinforces my thesis that the best entrepreneurs don’t focus on the money, they focus on their dream for the business.

“You always have to go back to the question, ‘Is exiting the right thing for the product?’” Jack explained. “There were many times in our history when, technology-wise, we weren’t up to snuff and we could have used more infrastructure. We could have used the resources of a Google or a Facebook or a Yahoo! But until you feel like you’ve completed some aspects of the vision, it just doesn’t make sense to hand it over. If you have that idea and you’ve more or less seen the end of it, and now you’re just racking your brain trying to figure out how to push it any further, the product might be better off in the hands of someone else, because you’ve done what you can. That’s basically what it comes down to for me. Are you done? If you are, then exit. If you’re not, keep going for it.”

— D.T.

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