Beating the No-Win Scenario

Richard Lowe: Good morning and welcome to the Leaders and Their Stories podcast. I’m Richard Lowe, your host with The Writing King, and I’m here with Michael Santore. Let me introduce you. You started with an Apple Performa and a question you couldn’t put down. Before you were old enough to drive, you were trying to launch an online warehouse computer parts business. By 18, you’d registered a screenplay with the Writers Guild, which impresses me and I want to hear more about it. Then you did something a lot of restless people never do: you built a career first, in technical product and project management, gathering experience while you waited for the right shot. When it came, it came big. Your first real startup was in fantasy sports, where you raised $2 million in seed funding and went head to head with FanDuel and DraftKings. After that, a software agency that scaled too fast, and he will tell you what that cost. Then engineering roles at startups and a Fortune 500 before founding BlockSkunk, which is where he is now. Michael’s here to talk about no-win scenarios, the Kobayashi Maru problem, and what it takes to hold a bold vision alongside enough humility to survive being wrong. Michael Santore, welcome to Leaders and Their Stories.

Michael Santore: Thanks, Richard. Great to be here.

Richard Lowe: So let’s start with this Apple Performa. What about it was the machine that got its hooks into you?

Michael Santore: I remember all the different floppy disks. Back then, to install an operating system, you went one after another, and that took a lot of time. And it was a dot matrix printer. I wasn’t coding on the Performa, but I remember the games, Oregon Trail and the rest, and it was a spark of creation. It was way better than pen and paper and everything at school.

Richard Lowe: So you tried to start a warehouse computer parts company before you could legally drive, which is interesting in itself. What did you actually understand about business at that age, and what did you have completely wrong?

Michael Santore: I was trying to call the representative at Ingram Micro. I had everything printed out to become a wholesaler, but I wasn’t 18 and I couldn’t get anyone to sign the paperwork for me, so that killed that one. But I remember building computers and going to the local swap meets for parts, right when PriceWatch was coming online and you could find a better deal. The first market arbitrage on hardware, I guess. I built and upgraded machines all the time, RAID arrays, the works. Windows machines by then; some call it the dark side, but that’s when I got into coding, and mIRC, and video games, because you could just do more with the PC at that time.

Richard Lowe: All right, the registered screenplay at 18. Where did that come from?

Michael Santore: It was called Hacker’s Domain. I was into mIRC and the internet at that time, when it was open; it was just a different internet. There was a mentor, and we tried to start a production company for indie movies. I remember going to the Warner Brothers lot in LA, all the prop houses, and learning how rough a business film is. It’s tough to find the people, or the money, and they don’t make much money either. So that ended pretty quick, but the script is still registered with the Writers Guild; a fee is paid and it sits in their system. Someone helped me submit it. I just have to get another copy one day.

Richard Lowe: Does the storytelling instinct show up in the way you build companies now?

Michael Santore: Absolutely, especially with history, and looking at how the internet is changing things. It’s the first time we can really communicate globally. Lately I keep looking back at blockchain and wondering how the founding presidents would have looked at it, or the early internet. And with AI, so much is changing right now that it almost feels like another dawn of the internet.

Richard Lowe: Tell me about blockchain and how it’s influenced you.

Michael Santore: I remember the Ethereum world computer video. That’s what really got me, before Bitcoin: this video about the world’s computer, and then learning it could be the programming language of money. I got curious and I’ve followed it since. There’s been all the token hype, but what I’ve really learned is that distributed ledgers started a very long time ago. Even with social media and X now, I joke that it’s a timestamp server. The GPS system is this huge maintained system for coordinates; blockchain is kind of that for timestamps. So I started BlockSkunk in August of last year, exploring how we can make data transferable, especially with all these cyber incidents involving AI, as enterprises and people figure out how to protect their data better.

Richard Lowe: For our listeners who don’t know: what is blockchain?

Michael Santore: A distributed ledger with consensus mechanisms. All parties have to agree that the transactions happened, and it’s immutable. I look at it as a cloud system packaged in a box: cryptography, authentication, and payment all packaged into one thing, where a developer would otherwise have to go to all these different services separately.

Richard Lowe: Why is that an advantage?

Michael Santore: Recently we’ve been talking to cybersecurity groups about sharing identity between two organizations. As an engineer it’s not hard to do, but coordinating it takes a lot of time. You can use a service account or lots of methods, but a permissioned blockchain can share identity that’s already known, just like SSL: we know a domain is real and authentic because of the certificate. One advantage of a permissioned blockchain is knowing who’s interacting.

Richard Lowe: I’ve been doing a lot of playing with apps that use services all over the web, and I’m learning the wonders of APIs and API secrets. I keep thinking there’s got to be a better way than having 50,000 secrets, these big long things, and if you leak one you have to rotate them all and remember where you put them. What a pain.

Michael Santore: And that’s a big part of compliance: best practices for exactly that, like using a password manager, and storing app credentials in cloud secrets. Apple got its innovation back when they brought the fingerprint in; hopefully that’s one easier way, but it doesn’t work for APIs.

Michael Santore: These vibe coders don’t know what they’re getting into. It’s great for creating a prototype, but there are so many layers to it. What’s your favorite language?

Richard Lowe: I’ve been using PHP, because I’ve been making WordPress plugins. And in these days of Claude, I’m not sure you can call it programming anymore. It’s more like: Claude, write me this.

Michael Santore: If you’re using Git, it’s programming. That’s my take.

Richard Lowe: It is programming, only I’m at a higher level. Claude’s doing the bits and bytes and I’m doing the design: I need this and this and this. Oh, you did it wrong. And now let’s test it hardened for security, which you’d better do with a WordPress plugin, especially one with surfaces people can see. So: a lot of people with the entrepreneurial itch jump in early. You deliberately built a career in product and project management first. Was that patience, random chance, fear, or honestly whatever?

Michael Santore: I just needed to work. I was in college and I needed to make money. It’s funny, I actually spent more time trying to start the company and the film project than on school. It’s a longer story, but I paid my own tuition at my private school, and I set the record for the most absences and tardies. I joke about it now, but I just needed to work, and working taught me how that whole world operates.

Richard Lowe: This little thing called eating. What did you learn managing other people’s projects that you couldn’t have learned any other way?

Michael Santore: Through the fantasy sports project, it got difficult being in between a lot of people who don’t agree. Early in a career there are technical reasons, and the balance of business goals against how to deliver them. One lesson was timelines: I’ll never forget someone saying, when you don’t know an answer for a deadline, double your guess and add 10 percent. But mostly it was experience with diverse groups and finding agreement between everybody. At Draftster there were the investors, the CEO who was also the CFO, and the dev team: lots of different perspectives at once, at a fast-moving startup with a monthly burn, while your competitors raise a few hundred million. It was a spaceship, and then it stopped really fast.

Richard Lowe: What does that mean?

Michael Santore: At the end, we were out of runway. We had the product, we had some customers, but it wasn’t a good business model; it was a 10 percent margin. So we had to figure out how to wind down and what to do. It was a rough experience, and I learned a lot from it. One of the stakeholders wasn’t convinced it could work, and I was, and at the time I kept trying to convince him: if we do this, or that. But entrepreneurship is all about persistence, and at the same time, when something isn’t working, you have to be realistic about it. You’re balancing so many things. There’s the vision, but there’s also being grounded, and it’s everybody’s time on the line, not just money.

Richard Lowe: Have you ever heard of the sunk cost fallacy? It’s when you’ve put so many resources into something that you feel you have to keep going, even though the something is no longer valid. But I’ve already put a million dollars into it, I can’t give up now. You’re just putting more money into a rat hole. I had a lot of trouble with that with bosses in the past: they felt they couldn’t stop, even though what they were doing was no longer sensible.

Michael Santore: Yeah. A 10 percent margin wasn’t working.

Richard Lowe: How did you know the fantasy sports opportunity was the one to go all in on?

Michael Santore: I was in Arizona, and someone I’d worked with before called me, and I ended up moving back to LA. I didn’t know one meeting was going to turn into all of that. But I was really into sports as a kid. I collected baseball cards, went to the conventions, and traded: when a card went up in value you sold it and got another card. I played baseball and went to Dodgers training camps. What appealed to me was the interactive, social part of fantasy sports. Usually it’s college networks and camaraderie, but the market was focused on the gambling side and the laws that had changed. I learned there’s opportunity at the intersection of changing legislation, and in balancing innovation with different laws state by state.

Richard Lowe: I hate to admit this, but I have no idea what fantasy sports is.

Michael Santore: You’re saving a lot of time. You pick your own team of football or baseball players, and as they score touchdowns in real life, you get points. It’s biggest for football, where people watch with their college friends and pick players from all the teams: a running back from the Rams, a quarterback from the Broncos, and that’s your team, like your own all-star team picked from the whole league, for the day or the season. If your quarterback scores a touchdown, you get six points, and whoever has the most points wins. Matthew Berry, the ESPN commentator, popularized it; Yahoo and all the big sports channels have a fantasy section, and it drives enormous traffic because players read all the news as if the players were stocks.

Richard Lowe: So how is that different from state gambling on teams?

Michael Santore: That’s the big question, and that’s the carve-out that happened: the UIGEA, and there’s a fantasy sports trade association. I got to meet the CEO of FanDuel, Nigel Eccles, toward the end. There are different laws in every state. Arizona was one where you couldn’t play FanDuel or DraftKings at the time, and now they have a presence there. What we learned later was that a lot of this was an early start for companies getting ready for the laws that have changed now. It was decided fantasy sports is a game of skill: there’s real skill in picking players, and daily fantasy worked because of a salary cap of fake money, so you couldn’t just pick all the best players. You had to watch the news and find the underdogs with a low salary who were probably going to do well that day.

Richard Lowe: So you’re playing Moneyball, like the movie.

Michael Santore: One hundred percent. And some of the people who did really well were statisticians who gamed it all out. We got the player data from RotoWire through an API feed, and that’s what generated the salaries for our customers.

Richard Lowe: Hence you learned about APIs.

Michael Santore: Way before that. My first language was HTML, and I dived into coding early.

Richard Lowe: All right, let’s switch to something: Kobayashi Maru. That’s the thing from Star Trek. Explain what that is and how it applies.

Michael Santore: I’ve always been a Star Trek fan, and going through different startups, there are a lot of no-win situations, or what seem like them, where it’s a tough call either way. Most decisions are easy. But there are some where the question becomes: which is the worst option I don’t want to choose? So I think about the Kobayashi Maru a lot. Captain Kirk gets a lot of flack because he’s the only one to pass the test, and what he did was change the rules of the game. Funny enough, at the fantasy sports startup I got deeply into meditation; that’s how I relieved stress from the football deadline. And a meditation teacher explained a concept he called the elevated paradox: the best alternative between the good option you can’t do and the bad option that’s not good. In every startup, with engineering teams or stakeholders who see things differently, there’s always a way to find a solution everybody can start with. That’s been the biggest learning: figuring out how to navigate those. Sometimes you don’t make a decision right away, and it’s different each time. That’s where changing the rules of the game comes in. And that’s always been the North Star in my mind: Star Trek, when we’re thinking about the future.

Richard Lowe: Kirk beats the Kobayashi Maru by, some say cheating, some say changing the rules. In real business, when is that resourcefulness, and when is it just cheating?

Michael Santore: I think resourcefulness is knowing there’s always a way; that’s been one of the lessons of life. But there are clear boundaries. With fantasy sports, a federal law said this is okay, and then each state had different rules, which is interesting again with what’s happening in blockchain now: new federal rules, and states catching up. One thing I’ve learned is: when you don’t know, ask. Especially with our products, learning the difference between due care and due diligence. When there’s a risk, voice it and do something about it, rather than ignore it.

Richard Lowe: I’m a cybersecurity guy by background: Trader Joe’s, PCI compliance. And one thing I’ve noticed about a lot of what’s being built now is that security is super weak. I wrote a couple of blockchain books for clients years ago, and I noticed blockchain had some security issues, mostly around the wallet being the weak point. You’re probably more current than I am.

Michael Santore: There are the bad stories, and that’s part of what inspired what we’re doing. A lot of times people say blockchain is decentralized, but compared to what? Google Cloud? With PCI or SOC 2 and ISO, there’s a way to mitigate most of those risks, but most companies don’t pursue ISO or SOC 2 until they have to for a contract. On the blockchain side it’s probably a mix of not knowing better, and hackers. That’s where compliance is starting to address things: the new EU AI Act, the NIST AI RMF, and more cybersecurity standards moving into continuous compliance. The difference with SOC 2 Type 2 is you show you’re compliant continuously: multi-factor authentication, a password manager, not just a rubber stamp for one day. I think that’s what’s going to solve it, but right now it is the wild, wild west again. The wallets are public and private key, but Chrome extensions have vulnerabilities. And there’s even quantum security to keep up with; a lot of the public chains are trying to figure out how to become quantum secure, and the hard part is getting everyone to agree, again, on how to go about it.

Richard Lowe: You want listeners to understand the arc from ARPANET to today. What piece of that history do most people get wrong?

Michael Santore: I’ve spent time diving into Cold War history through the 60s, how much was changing, watching documentaries and footage that’s come out. There’s a story I reference in an article on our site: all the alarms were going off, and one man used his judgment not to counterattack. He knew something was wrong, like you were saying earlier, even though every system said otherwise.

Richard Lowe: That’s the story of the Russian officer [Stanislav Petrov, 1983]. Brand new equipment showed missiles coming at Russia, and his orders were: you see missiles, you shoot. And he made the totally rational decision: this is not the way the Americans would attack. He said no. Then the system showed a couple hundred missiles inbound, and he said: one failure I can understand, but a second one means something is definitely wrong, and he declined again. All he had to do was push the button and we would have had no more world. He was quietly retired, and he’s one of several heroes who changed the world that nobody knows about.

Michael Santore: Talk about the Kobayashi Maru, and being resourceful versus following the rules. And those systems were originally for that communication. There was a lot to figure out with TCP/IP and the original protocols; it wasn’t the internet we have now. I remember everybody doubting credit cards and money on the internet. That era was figuring out telecom infrastructure; now it’s organization infrastructure. It’s not missiles now, it’s data, but with the hacks we’re talking about, data can get out like that, an asset price can drop like that. The risk is here again in a different form. We have this open internet again, or decentralization, and lots of questions about how to secure it: data across borders, who’s who on the internet, big questions.

Richard Lowe: One of the debatable flaws of the internet’s original design is that it’s anonymous. You could say that’s for freedom. You could also point at the malicious trolls and the hackers; all of that rides on an anonymous internet. That was intentional in the TCP/IP design, because it was designed by educators and students who wanted a free and open space, mostly for universities sharing data. There were about a thousand nodes on ARPANET. I was on the early internet, just past the ARPANET era, and there was a fight between several protocols, one of which I worked on, that didn’t win. It would have been more routable, and it would have had identity built in. The other thing the raw internet doesn’t have is stable connections: every connection is torn down and rebuilt, and a lot of the complexity, HTTPS, VPNs, all of it, is about maintaining that tunnel. It’s literally how WordPress works too: every page load is a fresh startup, which is why it runs into performance issues.

Michael Santore: And identity doesn’t extend the way it needs to. That’s some of the blockchain technology now, like zero-knowledge proofs, where you can answer a question without sharing all the data behind it. There are ways; it just takes a lot for everybody to make sure it’s safe, secure, and reliable, and coordinating between organizations isn’t always fast.

Richard Lowe: And then there’s the competition. Facebook is never going to link deeply with Microsoft; they’re separate islands, which was one of the problems with the metaverse. You have to bridge them somehow.

Michael Santore: And AI is disrupting exactly that, because AI agents go get data from all these places, and now you have the ones that hack their way into something. AI is forcing organizations to coordinate. A lot of the new compliance rules, especially the EU AI Act, are looking for immutable audit logs, which is blockchain with cryptography. How do you know an AI didn’t do something fast and change the logs? That’s where there’s an opportunity for a shared state between organizations. The governance is what gets tricky.

Richard Lowe: There’s an interesting book from the seventies called The Adolescence of P-1, about an AI before AI that gets loose on the internet, when the internet was much smaller. Heavily dated, and worth a look. And there’s Colossus: The Forbin Project, a movie about an AI built under the Rockies, magnetic reels and paper tape next to force fields, hilarious by modern standards. It’s the predecessor to Terminator, except Colossus takes over the world not to destroy it but to use the weapons as leverage. I wish there’d been a sequel.

Michael Santore: Like the movie WarGames, kind of. I like the really old Twilight Zones too; they go into really futuristic stuff. To Serve Man is one of my favorite episodes. It’s a cookbook!

Richard Lowe: Fantastic episode. And remember, those were made in under a week with no budget. Imagine doing Game of Thrones that way. So: you’ve quoted Jobs, that you cannot connect the dots looking forward, only looking backwards. Which dot in your life made no sense at the time and turned out to matter enormously?

Michael Santore: The biggest one, I’m not sure, but learning coding and taking apart a computer early on. Even the challenges: the no-win situations in the startup, running out of money, the team not knowing what to do. Things make more sense, at least for me, when you look back at history, just like ARPANET and what’s happened since the 60s. Cycles repeat. What’s the saying? History doesn’t repeat itself, but it rhymes.

Richard Lowe: One of my friends, in his 80s now, was in the original AI group at MIT, deep into neural networks. What I didn’t know until he told me was that the field went through AI winters, several of them: AI would get big, the machines and the power weren’t there, investment would collapse, and then it would come back and collapse again. He could walk through neural networks from the top of his head while I had no idea what he was talking about. And he worked on the big mainframes that now have the power of our watches. You have more computing in your smartphone than the whole planet had in the 60s. The moon landing ships ran on hand-built computers; they weren’t even mass produced.

Michael Santore: And that’s what I mean: there are people I’ve met where that connection, or just that learning, made such a difference.

Richard Lowe: What do you believe about building companies that most people in your industry will argue with?

Michael Santore: I get into debates about which chain, and I think they all have good use cases: Bitcoin, Ethereum. At one company where I was an engineer, we used architecture decision records: here’s the decision, here are the pros and cons. That’s been thrown out the window with a lot of the public chains, and I joke: whoever gave developers the idea to match development with market cap, interesting idea, good or bad, but it’s complicated. The public chains are great, and distributed ledger and private chains have real advantages too, especially when an enterprise can’t take the risk of losing control, or of falling out of US compliance. It’s not an easy decision, just like Rust versus Python isn’t either.

Richard Lowe: Final questions. You’ve said maybe one day on writing a book. What would that book be about?

Michael Santore: I’m not sure yet. I’ll have to talk to you about that.

Richard Lowe: Where should people find you and BlockSkunk?

Michael Santore: Blockskunk.com. I’m most active on Twitter, but the BlockSkunk website is the best place.

Richard Lowe: Thank you for coming on Leaders and Their Stories. It’s been a fascinating conversation.

Michael Santore: Thanks, Richard.

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