(Content note: I try to keep my blog significantly more profanity light than my normal vocabulary, but “asshole” is being used as a term of art in one of the links this post is based on, and I will follow that usage).
As you’ve doubtless heard by now, Patreon are currently tilling their users into the soil with a major change that largely screws over people who rely on the $1-2/month donations (which is largely how I donate on Patreon).
Christie Koehler offers an extremely lucid explanation for why they’re doing this: It’s to avoid financial regulations that would cause them to be classed as a “money transmitter”, which would be significantly more onerous. They are not explaining this because if they admit to knowing it then it potentially increases their liability.
How did they get away with being classed as a money services business so far? Well, basically by ignoring the problem and hoping the problem would ignore them. It’s the standard startup thing: Ignore the regulations until you can’t, then either comply with or attempt to change the regulations.
I’ve been cooling a bit on regulation over the last couple of years. I still fundamentally believe that we need something to fetter the runaway optimisation process that is the free market (though I’m definitely also not on team full communism now), but I think it’s increasingly clear (at least in the UK and the USA. I’m less clued in on politics elsewhere, though even where it seems better I’m not sure it seems better enough) that whatever it is we’re doing right now isn’t working, and the current generation of governments is fundamentally untrustworthy to create regulation (see: Attempts to regulate crypto by mandating back doors).
Anyway, all these thoughts were bouncing around in my head and they latched on to something seemingly unrelated that I read a while ago (and very strongly agree with): The idea of an asshole filter (Ironically, I support the author on Patreon at a $2 level, to publish on Live Journal, another platform with a history of tilling their users into the soil).
The idea of the asshole filter is this: If you have strongly defined boundaries which you erratically enforce, then you will mostly be surrounded by people who are willing to violate those boundaries.
And it occurred to me that regulation and startup culture are currently interacting in exactly this way, especially in anything remotely fintech or employment related: There are large regulations which it is profitable to ignore, and we are erratically enforcing them. Thus many of the startups who succeed are the ones who are prepared to violate boundaries for as long as they can get away with it.
This isn’t a Fully General Theory Of Why Startups Are Mostly Assholes – e.g. I’m not currently aware of any regulations Twitter is skirting the boundary of (though I suspect that a lot of news agencies are probably using it to do an end run around various social norms of reporting if not regulations – it’s basically an environment where they can lie as much as they do in the headlines and get away with it because character limit. Maybe 280 will help with that? Note: 280 won’t help with that) – but I suspect it accounts for a lot of the worst behaviour. If we create an environment where only assholes can win, we probably shouldn’t be surprised when assholes take advantage of that to win.
I’m not sure what to do about this. In many ways the fact that current regulations are not enforced on small businesses is a feature – requiring full regulatory compliance from day one basically means you’re never going to successfully start a business due to the level of overhead required to comply with it. Sometimes this is even formalised in terms of size requirements on businesses, which would at least help make regulation less of an asshole filter though wouldn’t do anything to stop users getting tilled into the soil as soon as the regulation kicks in.
In theory this could be fixed with better regulation (maybe with strictly less regulation, but it’s not like I trust the banks to behave themselves if unregulated either), but right now I don’t trust our governments to do anything that is obviously in people’s best interests, let alone things that require a complex argument based on social dynamics to even notice might be an improvement. I also have literally no control over what our government does despite ostensibly living in a democracy, so even if this were a solution there wasn’t anything I could do about it.
So the best I can offer is a word of warning: That hot new startup that is doing something that nobody else is offering despite there being many players in a similar space? It’s probably because they’re assholes, and even if they’re not right now, success is probably going to force them to till you into the soil.
That doesn’t mean you can’t use them, but maybe you shouldn’t unless you want to look forward to becoming fertiliser.