
Inside Coinbase’s Executive Turmoil: Conflicting Visions - otoburb
https://www.theinformation.com/articles/inside-coinbases-executive-turmoil-conflicting-visions?pu=hackernews4fm0af&utm_source=hackernews&utm_medium=unlock
======
throwaway21earn
The article doesn't take sides but I will. They're better off without Balaji
Srinivasan. His startup Earn.com was a pivot of an earlier startup 21.co which
was transparently stupid. Earn.com was also bad and didn't deserve an exit. I
suspect shenanigans orchestrated by Andreesen Horowitz there.

Coinbase's expansion into regulatory gray areas threatens their main
competitive advantage as the safest and most stable large regulated crypto
business. If they keep chasing that sweet ICO scam money instead of focusing
on compliance and institutional investment it will destroy them in the end.

~~~
the_watcher
> His startup Earn.com was a pivot of an earlier startup 21.co which was
> transparently stupid. Earn.com was also bad and didn't deserve an exit.

Would you mind elaborating? Genuinely asking, I can't find much about this
from Googling, most of the coverage is around the acquisition.

~~~
otoburb
Might be regional differences in Google results. Quick googling from North
America yields the following results about 21.co's initial bitcoin chip design
& mining operations[1], and then the pivot to Earn.com "social network
tokens"[2][3]; also in Balaji Srinivasan's own words[4].

[1] [https://techcrunch.com/2015/05/18/what-is-21-co-really-
doing...](https://techcrunch.com/2015/05/18/what-is-21-co-really-doing-an-
excerpt-from-digital-gold/)

[2] [https://techcrunch.com/2017/09/20/21-co-announces-a-token-
sy...](https://techcrunch.com/2017/09/20/21-co-announces-a-token-system-to-
get-people-to-join-its-paid-messaging-network/)

[3] [https://www.coindesk.com/meet-earn-com-21-rebrands-social-
ne...](https://www.coindesk.com/meet-earn-com-21-rebrands-social-network-
shift-away-bitcoin)

[4] [https://medium.com/@balajis/the-
turnaround-2d145589d814](https://medium.com/@balajis/the-
turnaround-2d145589d814)

~~~
the_watcher
I found articles about _what_ the companies were, but didn't see much on why
they were so bad that they don't deserve an exit and that their badness is
enough to declare that Coinbase is better without the founder. Plenty of
companies fail, but do something interesting enough to justify an acquisition
solely focused on ensuring the founder works for you.

~~~
throwawaydi02
21 spent years talking about their secret revolutionary new mining chips,
which ended up being a lot worse than the chips made by smaller scrappier
companies. They raised over 100 million dollars, and probably lost most of it
mining unprofitably.

There's nothing wrong with a failed startup, but this was a poor copy of
miners and mining chip producers with much less funding and in some cases
bootstrapped to profitability. The only thing that set 21 apart was an amazing
ability to razzle-dazzle VCs.

After failing to mine Bitcoin profitably themselves, 21 came out of stealth
mode with a staggeringly stupid product: mining chips for toasters. The idea
was that you would buy a toaster (or lightbulb or something) with one of 21's
mining chips and it would waste energy while mining miniscule amounts of
Bitcoin. This was ridiculous on its face, since the amount of Bitcoin that
could be mined on these chips was far less than you could simply buy for the
cost of the electricity (not to mention the chip itself). Also, this amount
was too small to even be transferred, given Bitcoin's transaction fees!

I'm not exaggerating, this product was never, and could never be viable. Still
Balaji was able to razzle-dazzle the tech press into trumpeting it as some
sort of innovation.

Once this failed, they re-branded as Earn.com and started making a grab-bag of
Bitcoin hackathon projects, such as paying you Bitcoins for reading spam, or
answering quizzes. This was always an extremely uninspiring and ultimately
non-viable product, but at least it wasn't complete vaporware.

Then Coinbase, a very successful and competent company, threw away $100
million to help 21's VCs recoup their failed investment. The only explanation
that seems rational is that Balaji had some very compromising footage of Brian
Armstrong at the a16z holiday party.

I'm not sure about his past career (some biotech thing), but Balaji's legacy
in crypto is to waste enormous amounts of money on blatantly ridiculous
boondoggles. It's unfortunate that Coinbase wasted so much time and money
perpetuating this.

~~~
heymijo
I followed these guys pretty closely back then and this is close to my
recollection as well.

One addition I had to check on, which confused me at the tilt was how Balaji
was so closely involved in 21 yet also a partner at Andreesen Horowitz, which
I had read about their daily and weekly routine and was clearly a full time
job.

Balaji went from founder to "advisor" of 21 pretty quickly, becoming a partner
of a16z in the interim. After things went to shit at 21 he went back as full
time CEO. Reasons for how that went down are speculative. The results are not
though. The exit is real but wow is it questionable. Conflicts of interest
seemingly all over the place. I don't know who else is on Coinbase's cap table
but I'd love to hear their takes on the acquisition.

You can read Balaji's congratulatory take in his own words on what he did
here. [0]

I also recall Balaji positioning himself for a position in the Trump
administration which saw him scrub his entire twitter history. If anyone
recalls more details from that episode feel free to add them.

[0] [https://medium.com/@balajis/the-
turnaround-2d145589d814](https://medium.com/@balajis/the-
turnaround-2d145589d814)

------
Traster
It sounds like this is a great example of how 1 bad hire can destroy an entire
company. It sounds like Brian Armstrong is not suited to be a CEO. If you
don't have your own clear vision for the company, and instead leave it to your
subordinates it's only natural that you'll end up with multiple people pulling
in different directions.

~~~
mbesto
> It sounds like this is a great example of how 1 bad hire can destroy an
> entire company.

It sounds like this is a very myopic view. My favorite quote is quite apt here
"Assigning single factor causation to the output of complex adaptive system is
a triumph of hope over experience."

Here's my theory - Coinbase had explosive growth largely due to tailwind
effects of the BTC craze several years ago. Since crypto trading has basically
flattened coupled with competitors entering the market, then Coinbase is
likely no longer growing and may in fact be doing less revenue than it was
previously. Company's start to scramble when they cease to grow. Stakeholders
double down. Employees start looking elsewhere. Executives make brash
decisions based on emotions. etc etc.

~~~
repomies691
> Company's start to scramble when they cease to grow. Stakeholders double
> down. Employees start looking elsewhere. Executives make brash decisions
> based on emotions. etc etc.

However also similar stuff is happening in growing companies because of other
factors. Also companies often survive quite well even if they don't grow that
much.

To me it seems like coinbase is still in a very sweet spot. Crypto markets are
not going away, and coinbase helds massive first-mover advantage. No matter
how much they will fuck up on exec level, they will probably still make good
revenues if they just can keep their current service running.

~~~
wslh
> However also similar stuff is happening in growing companies because of
> other factors. Also companies often survive quite well even if they don't
> grow that much.

That is true but in the crypto scene there were many [extreme] layoffs and
closings connected to the last "crypto winter". We can mention big names like
ConsenSys, Bitmain, Steemit, SpankChain, and ShapeShift so it is not difficult
to think that Coinbase was also impacted.

~~~
repomies691
SpankChain, wtf is that?

Anyway, I don't think crypto winter should be a problem for most exchanges.
Unless you predicted future way off and hired too much on 2017 rally. Before
2017 volumes were minisculous compared to 2018 still - business should be good
unless the company spent money like crazy.

------
tempsy
Every crypto company is trying to find the right balance is between innovation
and (perceived) compliance, so it's less that there's "conflicting" visions as
to where to draw the line, per se, and more that Coinbase hired way too many
extreme type A C-level executive types in a short period of time in 2018. When
you add a bunch of new leaders all at once you're going to get conflict.

------
typenil
I'm surprised to hear there was a conflict. It seemed to me like they were
going with the corporate finance direction.

I left Coinbase when they gated basic payments behind an additional level of
verification. They blocked you from sending crypto in Coinbase, but either
forgot or ignored that you can transfer to GDAX and send it off anyway.

------
devit
"Why not both?"

The problem seems more like that those executives had little people skills
(empathy, negotiation, non-violent communication, etc.), or no incentives to
apply them, rather than a fundamental issue with pursuing multiple goals at
once.

------
filleokus
OT: Recently quite a few really great articles by The Information have
surfaced at HN. Probably because of the generous "unlocking" of otherwise pay-
walled content. Per [0] they are apparently self-financed:

> Unlike most other news sites, we don’t have venture capital or corporate
> owners. I own the publication.

Although their stories provide high value information to high value
individuals / decision makers [1], I feel genuinely happy to see an example of
a new good quality original journalistic platform surviving. Or perhaps even
thriving.

[0]:
[https://www.theinformation.com/about](https://www.theinformation.com/about)
[1]: Compared to stuff like investigative local news where the monetary value
of a single story is so much lower, but perhaps requiring similar amounts of
journalistic effort.

~~~
wpietri
This is a well-written article, and I do love good journalism. But I am
personally skeptical of The Information, because the person who owns it is
literally in bed with a founder/VC:
[https://www.theinformation.com/reporters/sam-
lessin](https://www.theinformation.com/reporters/sam-lessin)

My skepticism is compounded by the fact that his startup repeatedly spammed me
at an address I give only to friends, and I definitely never gave to him. I
presume he pulled it out some mutual friend's address book when they signed up
for his startup. But despite many rounds of discussion, they'd never tell me
how they got that address. And after all that discussion, he then started
spamming it from his VC fund.

~~~
stereobit
Just file a GDPR request

~~~
wpietri
Can I do that as an American?

------
contingencies
<kraken-first-employee>Contingencies' capitalist pizza rule: For any group of
humans larger than one pizza can feed, greed will eventually trump
idealism.</kraken-first-employee>

Now, who's for robotic noodles? :)

~~~
manbearpiggy
what so two people?

------
harryh
My view:

The entire cryptocurrency ecosystem is fundamentally a grift, so it's not
surprise that we see lots of unsavory behavior: power grabs, people cashing
out early, an unwillingness to work together, a lack of coherent vision. And
that's not even getting into the outright fraud and massive theft we've seen
at other crypto exchanges.

When there is no long term, because it's all just a scam, you do whatever
you've got to do to make your money in the short time available to you.

~~~
repomies691
Oh, please tell me how that kind of activity is nonexistant in non-crypto
companies. Come on, this same stuff happens everywhere where money is
involved.

~~~
CharlesW
> _Oh, please tell me how that kind of activity is nonexistant in non-crypto
> companies._

It's not that unethical and illegal activities don't happen at non-
cryptocurrency companies, but you don't have to be paying a lot of attention
to see that it's happening at a very different scale among cryptocurrency
companies.

~~~
repomies691
If you look for example at this story, it is not about being unethical. More
like leadership problems with coinbase.

What would you consider vastly unethical that coinbase has done? And vastly
different scale than traditional finance companies?

To me as their customer their have been always simple and transparent, the
fees have been simple to understand and visible, etc. Can't say same about
traditional finance companies I have been using.

~~~
CharlesW
> _What would you consider vastly unethical that coinbase has done?_

I was responding to harryh's thread about the cryptocurrency ecosystem in
general rather than Coinbase specifically, which I perceive to be about as
trustworthy as cryptocurrency exchanges get.

That may not be a _super_ high bar :^) so I appreciate you sharing your
experience.

