Wefunder ran a program called XX from 2018-2021, designed to be the first check invested in very early founders. I wrote this to the Wefunder team in 2018 when we first created the XX. Now that we’re doing to get back to doing something like this again, I’m publishing it.

A mentor once taught me an interesting trick.  For any complex decision - particularly one where multiple people are involved - separate of all of your assumptions into paragraphs, started by "I believe..."   The conclusions usually flow out of it.  If there's a disagreement, each person can go decide which belief they disagree with, and then debate the root cause of the disagreement.

So here we go.

The Golden Age

I believe we’ve lived our entire lives in the most golden of golden ages by any objective global measure. It is fraying at the edges.

I believe civilization will collapse if economic growth stops.  By economic growth, I mean progress and wealth creation – that belief, among even the poorest, that their kids will be inevitably better off. Otherwise, we’ll fight over who owns the pie in a zero-sum world. Democracy won’t withstand the strain. Best case, we stagnate like the Qing. Worst case, a millennium of dark ages. Golden ages do not last forever. This has happened before.

I believe if America falters, the world will soon follow.  After the UK passed the baton, America has been at the forefront, exporting our ideals and ideas to the rest of the world, allowing the rest of the world to “catch up”. For 75 years, Pax America has kept the world at relative peace.  This is an anomaly. And this is fading. History did not end in 1989. Liberal democracy has not won. It is losing ground. Totalitarianism is on the rise again.

I believe each generation has to fight the same battle over again.  America’s greatest prior threat was the Great Depression followed by the defense of the liberal order in WWII. The Greatest Generation rose to the occasion. Their sacrifice led to decades of growth and equality. Now, it is our turn to extend the golden age. Our job should be easy in comparison.

I believe what made America special was optimism and a can-do attitude, the hubris from over 200 years of barely uninterrupted progress.  This is fading.

Capitalism & Democracy

I believe capitalism has led to the greatest wealth creation in history.

I believe capitalism best exploits human flaws for the greater good, by giving those humans the proper incentives.  Incentives rule human behavior. There is no clearer a/b test then North and South Korea… or East or West Germany…. Or even Mao’s China to today’s China.

I believe capitalism sows the seeds of its own destruction. It must continually be ‘corrected’. I believe capitalism – unfettered – concentrates wealth and power in the hands of the few.  All boats might rise higher at first.  But then some boats get 16-inch naval guns.

I believe concentrated wealth and power corrupts the system.  Power and wealth are rarely given up willingly (George Washington and Cincinnatus excluded). Those with power use it to defend their own interests and build moats to keep out those pesky pirates with new ideas.  (Regulatory capture, Google/FB hoovering up engineers and startups, housing, education, etc.)

I believe overly concentrated wealth/power – at some point – will lead to civil war. Even if all boats rise, humans are more concerned with relative wealth and fairness, rather than absolute wealth.  If enough citizens do not feel like they have a fair shot at an equal stake in the system, faith in the rule of law and institutions will collapse.  What is left is sheer physical power: who has the guns, and which demagogue who can inspire them to be used.

I believe our system of democracy – historically - has proven resilient enough to make these corrections to capitalism, despite the power of money in our politics.  I don’t believe totalitarian systems of government can make those adjustments over a century.

I believe, for a stable system that lasts more than a century, capitalism and democracy must be linked. Both feature the bottom up wisdom of the crowd, rather than centralized planning. If one fails, the other eventually will too.

Creative Destruction

I choose to believe the universe is a simulation, designed to produce some mystery result we are not evolved enough to comprehend.  It is it in iterative loop – where the old destroys the new – until that outcome is achieved.  Supernova’s destroy trillions of lifeforms, but seed new stars, and new life. Life on each planet is a war where the strong lifeforms literally eat the weak ones, adapting and evolving... or dying.  Civilizations of organisms rise, have a golden age, and then get conquered by stronger ones.  Startups rise, get old and slow, and then get destroyed.  This is the nature of the universe.  Evolve or die. Can’t step in the same stream twice.

I believe destroying the old and stagnated – who often have power - is a political battle. Yet, creating something of value, that is better, that people want, is what changes minds. The political battle accelerates the change, so it happens in years instead of decades or centuries.  The faster the loop, the more progress.

I believe small groups of super-aligned humans make the greatest impact in the world, the fastest. I believe even the best run large organizations can’t compete with small groups of humans, no matter how many billions of dollars they may have, if there is an even playing field.  Of course, large corporations do everything in their power to ensure the playing field is not even.

I believe the meaning of my life is to help the new and inspired destroy the old and stagnated. I believe we can help create help create tens of thousands of new businesses that otherwise would not exist… or get killed in the cradle. This is a business, political, and cultural battle.

America in 2018

I believe Trump’s election was a jarring warning sign that something is very unhealthy with our system, where there is an incredibly large segment of our population that is feeling disenfranchised, ignored, and left out.  During the Obama years, the liberals along the coast rationally knew something was not quite right, but it didn’t really impact our lives.  Now, it’s in our face every day, and we must deal with it.  So we will. This is why democracy works.

I believe this is partly due to rapid social and cultural change that are being resisted by an older generation… that are further enraged when they are called racists because they are not PC enough. This is not my personal battle to fight.

I believe this is partly due to an uneven distribution of talent, an education system that has been too slow to adapt, and a generation that can’t easily be retrained. How are we supposed to re-train a factory worker in his 50’s to be a programmer?  This is also not my personal battle.

I believe this is partly due to geography being destiny, while social mobility is decreasing.  Growing up in West Virginia to a family of coal miners in a very different life experience then growing up next to Stanford and getting your first computer to start coding in 5th grade.  I believe that, while most of this is above our pay grades, there is something very impactful we can do here.

I believe we can make a measurable impact on economic growth, social mobility, and education.

I believe we can primarily do this by inspiring more potential founders to start their own businesses  – particularly, the ones who are less privileged and overlooked.

Wefunder: Reg CF

I believe the current incarnation of Wefunder has made an impact.  We’ve invested $70 million and created 25,000 new investors.  Money matters.  Money from customers – those who believe in you – matters even more.  We should be proud of what we accomplished.

2025 update: Now about a billion dollars invested

I believe with some regulatory reforms, the current incarnation of Wefunder will make an even greater impact.  There is adverse selection with crowded cap tables, 12g, and no testing the waters.

I believe when those reforms happen, there will be an inflection point where Wefunder core can grow 3X year over year in 2019.

2025 update: This happened post reforms.

I believe those reforms are just the start.  Those reforms simply place us on a more even playing field with more traditional investors.

I believe the most important thing we can do is to “add more value” to the money.  We should not be dumb money.

I believe we can do a lot more with by building software that helps the crowd of investors feel involved.  This will add some value.

But I believe we can have the greatest impact by empowering a smaller circle of “experts” or “founders” or “operators” to invest as the first money in. I believe this is what can create thousands of more companies,  and help them succeed, so that can later use Wefunder Core when they are ready.

I believe this is a far better “sales” strategy then spamming business owners, albeit a longer-term one.  We will get higher-quality companies that want to work with us.

I believe this is what will cause founders to think of Wefunder fondly.  Everyone remembers the first person who believes in them.

Wefunder: XX

I believe all that matters is how much we change the lives of founders.  I believe all else is secondary.  If we spot and change the trajectory of founders, all else follows.   YC proved this.

I believe we can create 10,000 companies that otherwise would not exist.  I believe some of them will be unicorns.  I believe some of them will fail, but then create a unicorn on try #4.

I believe it will take 3 years for the outside world to even notice if we are succeeding.  It took YC 5 years to hire their first partner (after Dropbox, Airbnb, and Stripe).

I believe XX can have a very long-term horizon and grow organically. I don’t believe we need to prematurely rush it.

I don’t believe it is possible to replicate Silicon Valley in another American city in our lifetime.  I believe it takes at least 3 generations to develop an ecosystem that powerful.

I believe that Silicon Valley will only continue to accelerate its advantage (unless tech giants & housing kills the region) compared to other cities.

I don’t believe if we fund a 2 person software company in Des Moines that ends up on a Google-like trajectory, they will stay in Iowa.  They will likely be drawn to SF or NY as they scale from 2 to 10,000.

I do believe we can lower the gap between today’s Silicon Valley and the rest of the country.

I believe we can spread the values of “pay it forward” and risk taking.

I believe we can provide seed capital – meant to invest in risky startups - across all geographies, even if they stay there or not.

I believe this will make a big difference in giving more founders their shot.

I believe we can help inspire thousands of potential founders to start their business.  I think there is an unlimited pool of founders, if they are given the right nudge at the right time.

I believe the primary way to inspire a potential founder to start is a face to face meeting with a local investor who believes in them, helps them think bigger about what is possible, gives them good advice, and invests money to prove they believe in them.  That single person can change a person’s life.

I believe if we want to create thousands more founders, we should create thousands more investors who can inspire those founders.

I believe we can redefine what an “investor” is.  It used to be a rich white guy (mostly in SF) who sold a company, and would invest $25k+ per deal.  We can make it a non-wealthy local founder a few years ahead who invests $1000 (and unlocks $10,000 from a fund).

I believe most traditional angel investors outside SF and NYC give horrible advice to startups and cause them to die premature deaths in the cradle.  They are focused on the wrong things – IP, instant revenue, risk adverse, etc.  Newbie startup founders follow this bad advice because they don’t know better.

I believe – when it comes to the quality of advice – the wealth of the investor should not be a factor.  Just because you have money doesn’t mean you know anything about startups.

I believe founders a few years ahead running companies with operating experience make better investing decisions on pre-seed and seed.  They are on the ground and know what to look for in formidable founders.

I believe giving more power and influence to the “local legit investors” so they can outcompete the “horrible angel groups” will be the most impactful way we can make a difference.

I believe uniting the 10 people in a city and giving them far more influence and power  – who may not be wealthy by actually know what they are doing – can create a powerful early-stage startup ecosystem within 3 years.

The Batch Model

I believe the batch model is the best way – by far - to spark a strong community.  We make strong friendships through shared experiences.  These friendships last well beyond.

I believe the batch model is the best way – by far – to stay on true north:  do everything we can to transform founders into better versions of themselves.

I believe the primary way we create high-potential startups is through education.  A 3 month program is simply a highly a highly concentrated educational program.  We educate people in batches for a reason: K12, college, and then grad school.  We learn most from our peers.

I believe being surrounded by good people – in the real world – is what causes learning to accelerate. If you are the smartest person in a room, find a new room.  We are the average of who we surround ourselves with.

I believe good people don’t like being the worst in the room.  If they feel they are underperforming, they will get better.  Since everyone feels this way, everyone gets better.

I believe weekly accountability inspires us to get better. I believe artificial, external deadlines (like the end of the program) inspire a startup – both the founders and their employees – to get a ton done, faster.

I believe one full-time ‘partner’ can change 10 startups over 3 months, in a way that changes their trajectory.

I don’t believe this can be done remotely.

I believe real-world, face to face meetings:

• build stronger & more meaningful relationships

• Make us happier & more fulfilled

• Are much more valuable for founders (higher bandwidth)

I believe after these real-world relationships have been created, the online community will be far more powerful.

I believe if we just invested in companies through a network of scouts, and hooked them up with a mentor online every new and then, we won’t make that startup any better.  That is, we won’t provide much value.

YC

I believe YC is best optimized to find the highest potential ~250 startups per year, around the world, that have the best shot at being unicorns.  I don’t believe we can compete with them among this talent pool, even if we take 0% equity.  If YC accepts them, they should go to YC.

I believe our focus should be to find startups that should be in YC one day, and then get them in YC.  This would add value to YC and the founders.  This means we can’t charge much equity.

I believe YC still takes some risks on clueless teenagers with no traction (i.e,, 2005 Justin Kan).  But, as their acceptance rate has decreased from 3% to 1.5%, and they have capped out at ~125 per batch, I believe they must be taking less chances.

I don’t believe their picking ability has improved 2X in the last 3 years.

I believe there are potential Airbnb’s – startups that could have been Airbnb – if YC had picked them, that have since died – a funeral no one came too.

I believe there are founders that could be “YC-Caliber” much faster, if guided. I believe the potential number of startups that are “worthwhile” to exist greatly exceeds 250 per year.

I believe the number of unicorns can exceed 10 per year.  I believe the greatest obstacle is founder education, and that we can make a difference on that.

I don’t believe online programs like Startup School move the needle enough. 

I believe it’s more powerful if we can figure out how to scale face-to-face interactions, on the ground, across the country.

Wefunder is from Mars; FINRA is from Venus

Wefunder is regulated by two government agencies: the SEC & FINRA1.

In 2016, when our industry was legalized, I was naive and idealistic. I remember thinking: “We’re the good guys - we have nothing to worry about! I can’t wait to work with our regulators! Let’s share all of our data in real-time and be super transparent! We’re all going to create this industry together to make sure it works really well! ”

I still retain some of this idealism with the SEC2. Over a decade, we’ve interacted with top-tier staffers with excellent judgment, all working as best they can within the mandates of their political masters. In all of our conversations, and hundreds of pages of letters, we’ve seen the SEC staff listen carefully and wrestle with complex issues.

On the flip side, dealing with FINRA has felt like getting repeatedly punched in the nuts, with no referee who will put a stop to it. Each time FINRA takes a swing, I’m forced to spend between $50,000 to $500,0000 on lawyers. Like a rat undergoing electro-shock therapy, I’ve been conditioned to avoid my torturer.

It felt like we were dealing with incomprehensible aliens (the Borg?). Until recently, I didn’t put much thought into why. The individual members of FINRA are decent people, so why is the collective output of the organization so bad?

I now believe that it’s because Wefunder and FINRA have polar opposite cultures. FINRA is rules-based; Wefunder is principles-based.

Wefunder’s culture is Do The Right Thing for the Investor. When the law is ambiguous, as it most often is in our new industry, we default to the spirit of the law - the underlying principle. How would our wise, common-sense grandmothers judge us?

FINRA, in contrast, has lost touch with the underlying principles. This has led FINRA to absurd outcomes, like demanding we do things that are unequivocally worse for investors (more on that in a future post).

How could this be?

I don’t have an inside look at FINRA’s culture, but I can make an educated hypothesis: the bureaucracy has collapsed under the weight of complexity, the incentives are wrong, and the well-intentioned employees within FINRA don’t have enough power to change course. We’re all trapped by the system.

How can government agencies perform better?

Instead of directly targeting FINRA, let’s go up a level: how could we improve government so it performs better? Different government agencies have varying levels of effectiveness - what separates the good ones from the bad ones?

I believe in regulation and a better, more effective government. That said, when the government is ransacking a private home to kill a pet squirrel3, I think we can agree something is wrong. The output of our bureaucracy is leading to results that many of the officials in the system know is kafkaesque. Yet, no one has the power to stop it.

There is much talk these days around limiting the power of the administrative state. Whether you support that or not, the Supreme Court has already started to roll back administrative power4 and will continue to do so through the 2020s.

Here is my controversial belief: With whatever power remains after the Supreme Court is done with them, the employees within these agencies must be given more power to be able to use common sense judgment. But in turn, government officials must be held directly accountable. That’s the path for better government.

Isn’t that a paradox? We want the government itself to have less power, but the employees within the agencies more power? If we want a better-run government, yes! What’s holding society back is not enough officials are authorized to use common sense!

Let’s talk about the squirrel. Peanut the Squirrel was rescued as a baby by Mark Longo after his mother was killed. He couldn’t survive in the wild, so for the next seven years, Peanut lived happily with Mark in an animal sanctuary in New York.

When Mark learned that New York requires a permit to keep a pet squirrel, he filled out the paperwork… but alas, before the permit was approved, someone complained to the New York State Department of Environmental Conservation (DEC).

Officials from four separate New York State agencies conferred. An investigation was launched. A judge signed a search warrant. Over 10 police offers, investigators, and wildlife officials conducted a 5 hour raid, ransacking Mark’s home until they found Peanut, who bit one of the wildlife officials trying to kidnap him. A wildlife official then decided to kill Peanut to test for rabies. No more cute squirrel: problem solved.

Everyone was “just following orders”. No one had the power to stop the juggernaut and say, “Hey, maybe justice is best served if we help Mark get his permit faster?”

In Everyday Freedom: Designing the Framework for a Flourishing Society, Phillip Howard writes:

American government is missing the critical component of accomplishment: human choice on the spot. America is suffering from a vacuum of authority. Public officials have lots of power, but it’s largely negative. Officials can say no (and many seem to relish doing so), but they can’t say yes. American government is failing not because officials have too much power, but because they have too little…. But restoring judgment to official decisions does require trusting a system of government rooted in human responsibility.

The recipe for a high-performing organization is simple:

• Raise the hiring bar to seek out only the best;

• Hire fewer, more talented people, but pay them more;

• Continually train them on underlying principles;

• Design their incentives to lead to just outcomes;

• Give them the freedom and personal agency to use their best judgement;

• Most importantly, hold them accountable, and when serious mistakes are made, fire those with continual bad judgement.

This is not how our government currently works. The biggest problem is lack of accountability. The Supreme Court is addressing separation of powers, to ensure the agencies are accountable to the voters. But within the agencies themselves, it is nearly impossible to fire poor performers. In fact, over 99.5% of all federal government employees received a rating of at least “fully successful” on their performance evaluations. That’s quite unlikely to be true in reality.

If there was more accountability, we could restructure government to give more freedom and power to officials to use their best judgment.

The SEC is one of the better run government agencies. The staff is more highly compensated and is stocked with top-tier talent. Their culture is more principles-based. And even the SEC union (yes, the SEC staff is unionized) has an entire cartoon series to make fun of the lack of freedom the Staff has within their own organization:

That is the irony of all this. The officials themselves feel the oppression within their own bureaucracies. We’re all slaves to the machine.

How can Wefunder best operate in this environment?

It’s fun to think about how government can be reformed to work better. But my job as CEO is less fun: I must operate Wefunder safely within the vast machinery of government power that could crush us, while always doing right by our customers.

I’ve always known intellectually that the law is not black and white. But running Wefunder for a decade has made me feel it more acutely: despite thousands of pages of rules, no one knows with 100% certainty what is legal. No matter how many rules are created, they can never cover the complexity of reality. A principles-based system is the only workable solution.

Our job is different than our regulators. We have customers that demand we solve their problems, now. Even if a regulator was willing to offer guidance, we can’t wait multiple years for them to decide what we should do. Our customers will be harmed if we don’t act: in their mind, the buck stops with us.

When we have to make a decision where the law is ambiguous, my guiding principle has always been, “What is the spirit of the law? What is the law trying to accomplish? What is best for our customers?” We decide accordingly.

This has worked well with the SEC, which is also more principles-based, and with the good judgment to interpret those principles correctly.

It has not worked at all with FINRA.

A specific example

This may all seem too abstract without specific examples. The problem is that the examples are all overly complex to be understandable in a short essay. But I'll give one issue (of dozens!) a go. Please bear with me:

* Wefunder helps companies raise money from their customers

* Companies raise money with two laws called "Reg CF" and "Reg D"

* FINRA regulates Wefunder only for the "Reg CF" portion

* When companies raise money from Reg D and Reg CF investors, we place the total amount raised on the same terms - across both laws - on their profile. We put how much they raise from each exemption in a tooltip.  

* FINRA, judging only from a Reg CF prism, claims this is misleading. They want only the Reg CF number displayed. They threaten to fine us. 

* We counter that is it misleading not to combine the two numbers. Obfuscating the "Reg D" raise harms investors. If it's equity, investors must know how much dilution the company is taking on. Or, if it's a loan, an investor needs to know how much debt the company will have to repay. These are critical numbers to an investing decision.   

* We pay our law firm tens of thousands of dollars to respond to FINRA on this point. There is no resolution two years later. 

There are dozens of similar disagreements much like the one above.  

So what are we to do when the law is unclear? We must do what our principles demand. We don’t harm our customers to “cover our ass”. We must have faith that the rule of law will ultimately treat us fairly, if we always focus on adding value to society.

And if FINRA disagrees? I’ve now come to the seemingly cynical conclusion that our system of justice is best described as power meets power. But it’s not cynical. It’s the best thing about America. If I was in China and disagreed with President Xi, I could be disappeared and have all my assets appropriated. In America, when we believe our government is in the wrong, we can fight for what is right. Power adapts to power, and citizens with constitutional rights are the most powerful force of all.

I was inspired by Over Ruled: The Human Toll of Too Much Law, written by Supreme Court Justice Neil Gorsuch. It tells the stories of normal people that are treated unfairly by our government. They stand up at great risk to themselves and change the system. The book concludes:

Democracy doesn’t depend just on a people equipped with the knowledge necessary to engage in the hard work of self-government… It depends on the courage of men and women willing to stand up, even at a high personal cost, to defend the right to democratic self rule, equal treatment, life, liberty, and the pursuit of happiness that belong to us all…. Nor is it necessary to reach back to great figures in history. The stories of the men and women whose stories fill chapter after chapter of this book inspire us, too. Often against high odds, they have struggled to realize a little more of the Declaration’s promise in their own times and places… We stand in awe of them. They are our real hope.

I didn’t set out to battle the government. I’d rather focus on building our business and creating value for society. But if fate calls on us to be the ones to spearhead the fight, we should be honored for the chance to stand beside the heroes in that book.

First, Yes, Some Rules are Required

I don’t want to overstate the case: rules are required, but we aim to keep them to a select few. Every rule we create sends a message—it implies we don’t trust someone’s judgment1 or value their freedom to act. That’s a tall order.

Before creating a rule, ask these questions:

• How frequent and costly is the problem? Weight it against the trade-offs and unintended consequences. We don’t want to override the judgement of our team for a problem that happens rarely - unless it could bankrupt us.

• Will the rule work in practice? Here’s the paradox: you’re creating a rule because you don’t trust the team’s judgment. Yet, if that’s the case, you must also assume the stupidest person will be the one to apply the rule. Especially for subjective problems, it’s often better to directly fix why there is a lack of trust.

• Can we automate it in code? If the rule is objective, then automating it can reduce the cognitive load on team members. But be careful: the straightjacket may create a Kafkaesque experience for our team or customers.2

• Who has the authority to break the rule? Every rule can be broken if circumstances warrant: we never want our team to mindlessly apply rules that don’t make sense. If exceptions are frequent, rethink or discard the rule.

• Does the rule address the root cause? Most rules tackle symptoms rather than the underlying problem (i.e., the principle). Dig deeper. Go down the rabbit hole. If you’re addressing symptoms, you could justify countless rules. When rules are created to address symptoms, the rule is arbitrary - perhaps hundreds of equally important rules could have been created, but this was the issue that happened this week. Why is this one more necessary?

That last point—addressing the root cause—is key. Rules that don’t solve the core issue often create more problems than they fix.

So how do we tackle root causes? More context and better intuition.

A proposal for an intuition-building machine

Ok, so you’ve decided not to create a rule! But you were tempted! How can we best help the rest of the team handle this issue better in the future?

The easy answer would be to slot it in the next training session. Once a quarter we’ll all trudge into a room, we’ll all sit there, and you’ll tell everyone.

I don’t think that actually solves the problem.

Instead, we should design for our culture and the talent we aim to recruit. If we continue to hire right, our team will demand personal agency - they are self-directed learners, driven to succeed and grow, who want ownership of their own “curriculum”.

We should also have living system that can rapidly evolve and improve each week. We learn best from each other as we do the work.

Here is the system I propose. Because I’m a little strange and find such things ironic and amusing, I’ve created my own bureaucratic jargon.

• “Lesson” : Whenever you learn something important, write it up. Keep it as concise as possible; a paragraph can do.

• “Corpus” : Each role has a Corpus of all the relevant Lessons. It must be able to be read front-to-back in under an hour.

• “Principle” : Each Corpus is organized into a set of no more than 10 Principles, serving as chapters. The Principles should be easily memorized.

• “Knowledge Drop” : An announcement when proposing to add a Lesson to the Corpus, meant to spark a discussion.

• “Corpus-Master” : Only the Corpus-Master can add or delete a Lesson to the Corpus.

• “The Culling” : Every so often, the Corpus-Master calls for a Culling, to cut back Lessons or re-organize Principles to keep the Corpus sharp and focused on what is most important. The entire team discusses and contributes to the culling.
  

This puts the responsibility on each team member to contribute to their living storehouse of knowledge3. We all collaborate together, in real-time. We all own it.

Realistically, we expect the team to remember the principles, but not memorize all the lessons. These are stored in the subconscious and re-enforced through lived experience. The lessons are simply there to help accelerate that process.

A hypothetical example

One day, our compliance team learns something new about a company fundraising on Wefunder. Their page implies that they have a signed contract with a venue that will host their shop, but what they actually have is a letter of intent. Our compliance team believes the founder had no intention of misleading investors. They used imprecise language.

How do we stop this from happening again? We could opt to create a new rule, something like: “If company claims to have contract that is important to their raise, though shalt ask to see contract”.

This fails my test to create a rule: One, it requires a well trained team member with good judgement to interpret the rule - an inexperienced team member will apply it stupidly (as nothing was done to build up their intuition). Two, anyone actually committing fraud can easily create a fake contract. But most importantly: this is a symptom of a broader root cause: thousands of equally important rules could be created if the underlying problem isn’t addressed.

So, instead of creating a rule, Bob creates a Lesson and Knowledge Drops it in Slack. The team discusses whether to include it in the Corpus. During the debate, someone points out that this best fits inside a Principle in the Account Manager corpus: “Educate founders that everything they say has to be objectively true”.

After Bob rewrites the lesson to fit better in that Principle, Corpus-Master Jill agrees to add the Lesson in that section of the Corpus.

Everyone who participated in the debate refined their intuition in real-time. Future hires can read the Corpus and store that lesson somewhere in their subconscious, ready to spring forth the next time a founder uses language that isn’t precise enough to be objectively true.

But…. what about legal rules!

A perceptive reader with a legal background will quickly notice a major challenge: our well-meaning regulators have created thousands of pages of rules that we are legally bound to follow. These laws are mandatory and cannot be ignored.

As a result, we must operate in two modes—one aligned with our internal principles and another that takes into account the regulatory ocean we swim in.

There is a wide cultural chasm between how a top-performing startup operates and - sadly - how our government and lawmaking has evolved over the last 50 years.

In Part III, I’ll talk about why this gap exists and how we handle it.

The circle of life.

Wefunder seeks to avoid this fate. Instead of defaulting to a new rule, we err towards trusting our team to make decisions guided by principles.

Why? Rules-based systems collapse under complexity. Humans can only remember a limited number of rules, but reality demands navigating countless if-then-else scenarios to make smart decisions. Creating a rule can feel satisfying for the rule-maker — it gives the illusion of a job well done — but it undermines team culture and, counter-intuitively, makes more serious mistakes more likely.

Human cognition is limited—we can only focus on one thing at a time. When we fixate on complying with rules, we lose sight of the more important underlying principle. More damning, research shows that when our conscious mind is preoccupied with rules, it disrupts the development of 'tacit knowledge'—the instincts and subconscious know-how that drive good decision-making1.

To get the best out of our team, they can’t be treated like cogs in a machine. When humans are treated like robots, they start feeling sad and unfulfilled. Sad humans get lazy and demotivated. We’re bad at being robots - we don’t have their perfect-recall memory and CPU horsepower. Most of us crave the power to use our God-given intuition and judgement. That’s where we shine.

To survive against the brutality of Mother Nature, our species was forced to evolve our intuition. Note that I didn’t say reason or intelligence. Those are quite helpful too! But our intuition is the short cut that helps us navigate through bewildering complexity so we can focus our conscious mind on what truly matters.

Intuition has a bad rap - its colloquial meaning can seem unscientific or arbitrary. I’m talking about the dictionary definition: “the ability to understand something immediately, without the need for conscious reasoning.” Our rational brain can’t handle the overwhelming number of variables our intuition effortlessly processes in the background. Without it, our conscious mind collapses under complexity.

Intuition is shaped by every interaction we’ve ever had in our entire lives, all stored fuzzily in our subconscious. Our brain is a massive pattern matching recognition machine that feeds on our lifetime of data. Pattern-matching... perhaps it’s not a coincidence that latest advancements in AI are built on the same premise? Is it more effective to program millions of individual rules for a self-driving car or teach it to recognize the patterns that govern the world around it?

If intuition improves with more "data", Wefunder must do a better job of feeding our team’s brains with the right experiences. This is how we’ll make better decisions as we scale. This is how we can attract top talent who demand the freedom to use their judgment. It’s the foundation of a principles-based system—and the only way it can work. But this is far more challenging than relying on a rules-based system. Creating a rule is so much easier!

When we were an 8-person startup all working at the same table, building intuition was easy. Lessons were shared instantly, everyone was driven and motivated and aligned, and no one had ever left the company.

Now, the challenge is far greater: we must continue to hire smart driven people with good judgment. But, more importantly, we need to build systems that can help us all continue to refine and share our intuitions.

Have you ever thought, “OMG! I can’t believe SoAndSo did that! That was so stupid!!!!” If it keeps happening, perhaps we’ve hired the wrong person. We hire at the right end of the bell curve: not everyone is born with the same quality biological computer or the drive to improve it by feeding it with good data.

But, far more often, when I think, 'How could they be so stupid?!', I know that it was my fault. I’ve failed to create a system to builds their intuition.

In Part II, I’ll dive into how we can build those systems. Most companies would call this "training", but that’s normal HR-speak. Top performers don’t want training sessions where a "teacher" lectures at them. Instead, our culture thrives on self-directed learners. We all can take ownership of shaping our own 'curriculum'—a collaborative, ever-evolving living document that continually stuffs our minds with more wisdom.