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2017-09-27 10:45:03
State of the Art: When Tech Disrupts Wealth and Stability, ‘Angels’ May Be Solution

Jason Calacanis cuts an unusual figure for a financial savior in Silicon Valley, where it’s fashionable for the world’s richest men to feign embarrassed modesty about their wealth and power.

Mr. Calacanis, an entrepreneur and investor who claims to be worth more than $100 million, harbors no such restraint. He is a rich man who often behaves like the caricature of a rich man — a brash, big-talking native New Yorker who flaunts his cars (“I have all the Teslas”), humblebrags about a popular podcast he hosts (he guesses it makes about $1 million in annual revenue, “but it’s not about the money, it’s brand-building”), and even promotes his own branded paper coffee cups.

“Have you seen my new cups?” he asked by way of greeting during an interview last month. “I love my cups. They’ve got my tagline: ‘Do The Work.’”

Mr. Calacanis, 46, admits his personality is not for everyone. “Most folks think I’m lucky, some say I’m a complete fraud, and a handful think I’m a brilliant hype man, and I don’t agree with any of them — I agree with all of them,” he writes in his new book, published in July, whose full title is a mouthful: “Angel: How to Invest in Technology Startups — Timeless Advice From An Angel Investor Who Turned $100,000 into $100,000,000.”

Yet there is something refreshing and clarifying about Mr. Calacanis’s frankness regarding his tech-fueled riches. He states plainly what many in Silicon Valley believe but are too politic to say — and which has lately been dawning on the rest of the world: that the tech industry is decimating the rest of the planet’s wealth and stability.

Its companies — especially the Frightful Five of Apple, Amazon, Google, Facebook and Microsoft, which employ a select and privileged few — look poised to systematically gut much of the rest of the economy. And while Silicon Valley’s technologies could vastly improve our lives, we are now learning that they may also destabilize great portions of the social fabric — letting outsiders wreak havoc on our elections, fostering distrust and conspiracy theories in the media, sowing ever-greater levels of inequality, and cementing a level of corporate control over culture and society unseen since the days of the Robber Barons.

People in tech have been discussing these issues since the 2016 presidential election, and they are now pushing many initiatives to broaden their industry’s gains. Just this week, many of the largest tech companies pledged $300 million for computer science education.

Still, Mr. Calacanis is offering a much more dismal view of the disruptions caused by tech — and a more radical, if also self-serving, plan for dealing with it. To survive the coming earthquake, he advises, you need to radically re-examine your plan for the future — and you need to learn Silicon Valley’s ways rather than expect to defeat it.

“Most of you are screwed,” he writes in “Angel,” arguing that a coming revolution in robotics and artificial intelligence will eliminate millions of jobs and destroy the old ways of getting ahead in America. “The world is becoming controlled by the few, powerful, and clever people who know how to create those robots, or how to design the software and the tablet on which you’re reading this.”

Mr. Calacanis is not wholly optimistic about where all this change will lead. “In my mind, candidly, we’ve got a 70 percent chance of figuring out this massive sea change without starting a full-on revolution in the streets, like we saw in Greece or Egypt, or any other place where unemployment among young adults breaks 20 percent,” he writes in “Angel.”

Be warned: One reason that Mr. Calacanis is willing to diagnose this economic ill is that he is also selling a prescription that he claims will alleviate it.

His book is intended as a guide for getting into the business of investing in very young tech companies at their earliest stages, known as “angel investing.” Mr. Calacanis is peddling a kind of populist movement for investing — he wants doctors, lawyers and other wealthy people, and even some in the middle class, to bet on start-ups, which he says is the best way to prepare financially for tech change.

“I want to inspire 10,000 people to become full-time angel investors,” he says.

Financial advisers I spoke to were not won over by Mr. Calacanis’s advice. They called his method indistinguishable from gambling, and they warned that the potential gains were not worth the risks. Invest in start-ups with your “fun money” but not the money you are counting on for your future, advised Spencer Sherman, the founder of Abacus Wealth Partners.

Even other tech investors aren’t sold on Mr. Calacanis’s movement. Hunter Walk, a partner at the seed-stage fund Homebrew, said ordinary investors would be better off putting their money into public tech giants rather than gambling on small firms. “Unless you’re willing to lose all your money, you shouldn’t do that,” Mr. Walk said.

Mr. Calacanis genuinely believes that investing in start-ups is good advice; he has even offered his three children a chance to skip college and to use the tuition money on betting on start-ups. His 7-year-old daughter, he said, is leaning toward taking the deal.

But like other recent populist movements, Mr. Calacanis’s isn’t without its apparent grifts. Mr. Calacanis runs a “syndicate,” a kind of investing club in which people co-invest their money alongside his bets. The book, he says, led to a surge in new investors on his syndicate — and if those investments pay off, Mr. Calacanis gets a 20 percent cut of his co-investors’ returns.

Not that he’s shy about any of this. “Of course, I plan to make a great deal of money in these revolutions,” he writes in “Angel.”

You could call his attitude chutzpah, or you could call it hustle, which is a quality Mr. Calacanis has in spades. He grew up in a working-class family in Brooklyn and writes that he spent much of his youth wondering, “What would it be like to be rich?”

He got his start in the 1990s as a reporter covering the budding internet industry in New York. Later, he helped found Weblogs, one of the early digital media companies, which, in 2005, he sold to AOL for $30 million. Along the way, he made dozens of connections — he casually name-drops every big name in tech — and now, as an angel, he parlays those connections into “deal flow,” getting early access to invest in the best start-ups.

In 2009, the venture capital firm Sequoia enlisted Mr. Calacanis as one of its “scouts,” an informal network of entrepreneurs who look for promising companies on the firm’s behalf. As part of that program, Mr. Calacanis invested $25,000 on a friend’s crazy-sounding tech-enabled cab company. The friend was Travis Kalanick; the company was Uber. And despite that company’s recent turmoil, the deal has turned into Mr. Calacanis’s biggest win as an angel by far, worth about $100 million on paper.

One charge against Mr. Calacanis’s advice is that his wins aren’t widely replicable — not everyone can make a fortune off their friends’ billion-dollar ideas, after all.

But Mr. Calacanis isn’t suggesting that people enter the angel business expecting to get rich quickly.

“Look, I’m going to wind up being the GOAT,” he said, using internet-speak for Greatest Of All Time. “You don’t read a book by Michael Jordan or LeBron James and expect to start playing basketball like Michael Jordan or LeBron James.”

Instead, he outlines a careful and systematic approach for newcomers to the angel business. He said people should start slowly, first as part of syndicates like his. Those deals will help newbie investors get exposed to other investors and tech founders, which will bring them access to bigger and better deals. He said repeatedly that this would take time and effort — people should be willing to spend 20 hours a week on their investments, and if they really want to hit it big, they should be willing to move to Silicon Valley.

And he is frank about the risks. The book begins with an all-caps disclaimer warning, “DON’T READ THIS BOOK IF YOU CAN’T HANDLE LOSING YOUR MONEY INVESTING IN THE RISKIEST ASSET CLASS ON THE PLANET: START-UPS.”

But to Mr. Calacanis, the risks are worth taking. The world seems to have lost its moorings; it’s changing in ways that none of us can predict anymore.

So shouldn’t you do something big? As Mr. Calacanis argues: “No gamble, no future.”