(Photo: Facebook)

Last August, TechCrunch broke the story of Shirley Hornstein, a Photoshopping fabricator who ingratiated herself into Silicon Valley circles by name-dropping nonexistent connections. Her behavior eventually prompted Founders Fund to file a complaint to stop her from claiming she worked for them.

Following that report, Betabeat published claims that Ms. Hornstein, a former roommate of TechCrunch community manager Elin Blesener, was also guilty of credit card fraud, duping at least one former employer (Giftiki) as well as personal friends. Billing statements--provided by a friend who urged Ms. Hornstein to seek help--showed that "Shirls" used a stolen credit card to buy a plane ticket twice.

At the time, Ms. Hornstein declined our requests for comment. But almost five months to the day later, we received an email response. "Thank you for reaching out for my side of the story back in August. While I wasn't able to comment then, I have taken the last few months to process everything and have now commented publicly," she wrote today, pointing us to a new post on her Tumblr.

"I have spent the last 26 years (or, my entire life) lying to, deceiving and manipulating everyone around me, including myself. It finally, publicly, and devastatingly caught up to me last year and I made the decision to stop," Ms. Hornstein wrote under the title, "An Honest Apology." Ms. Hornstein says she has sought professional counseling and wants to "seek forgiveness from those I have wronged, repair any outstanding damage, and learn to speak honestly from my heart."

Ms. Hornstein (Photo: Facebook)

This week, the world was introduced to Shirley Hornstein: an ersatz entrepreneur who Photoshopped and name-dropped her way through Silicon Valley. For at least a year and a half, Ms. Hornstein has been trading on flimsily fabricated connections to powerful tech investors, startups, and celebrities--always depending, as TechCrunch first reported, on the optimism of strangers.

"She told people she had the authority to approve up to a $1 million investment from Founders Fund. That was her line," an investor from Los Angeles who recently moved to San Francisco told Betabeat, recounting the time Ms. Hornstein cajoled a pair of young entrepreneurs into pitching her on a Saturday, convincing them on Sunday that she had already heard back from the board with good news.

The fact that Ms. Hornstein's roommate was TechCrunch community manager Elin Blesener also helped "legitimize her," the same investor added.

For more credible (or at least Google-able) proof of her position in the tech world, there was this blog post Ms. Hornstein wrote on Women 2.0, which has since been deleted, touting her connections to Founders Fund and Dropbox. It opened with an anecdote about that time she got angel investing advice from Marissa Mayer.

Image doctored by Ms. Hornstein (top), Original image (Photo: TechCrunch)

As part of yesterday's exposé, TechCrunch revealed that Founders Fund filed a legal complaint against Ms. Hornstein in December for her "efforts to improperly trade in on Founders Fund's good name and reputation," leveraging, in particular, a made-up friendship with Sean Parker.

The startup world's collective schadenfreude at Ms. Hornstein's unstable nest of lies could be chalked up to a guilty conscience. "Seems like everyone is besties with Jack Dorsey and Dennis Crowley," Warby Parker's Lane Wood wrote in defense of Ms. Hornstein. "Someone went to the same party, took a photo and regaled their friends about how 'down to earth' person X was or how Person Y is just as much of an ass as all the rumors say."

Betabeat has spoken to multiple sources, however, who say that Ms. Hornstein's deceptions may have been more egregious than exaggerating her social status or professional network. They allege that Ms. Hornstein is also responsible for repeated credit card theft. The incidents occurred both in her personal life and at at least one startup where she was employed.

We obtained screenshots (posted below) of receipts for two airplane tickets and a monthly BART pass, as well as gChats and emails from former friends of Ms. Hornstein's, all related to fraudulent charges worth thousands of dollars that she made by allegedly stealing her friend's credit card numbers.

That alleged theft first occurred during a trip to Vegas, where Ms. Hornstein also accumulated other debts she has yet to repay, including the cost of a hotel room, as well as a last minute ticket to a Cirque du Soleil show for former TechCrunch writer Paul Carr. Ms. Hornstein alleged the two were dating, which is patently false. Unsurprisingly, Mr. Carr never materialized at the show. He would turn out to be the second bold-faced name Ms. Hornstein claimed to be involved with. First, she told acquaintances she was engaged to NHL player Ryane Clowe, with her public tweets to the star confusing even sports fans on niche hockey forums.

Betabeat also spoke to a reputable source within the Silicon Valley tech community, who alleged that Ms. Hornstein committed a similar theft--using a company credit card, this time--to steal thousands of dollars from her employer. That source, who only spoke under condition of anonymity, did not want to name the company, but based on the timing of the theft, we were able to confirm that the incident happened at Giftiki, a small startup that lets you pool your money to buy better gifts, which was acquired by LaunchRock earlier this month.

"[Ms. Hornstein] got access to company credit cards and actually bought things at charity auctions in the thousands of dollars," said the source. As a marketing consultant, "she was given the credit card to buy some refreshments and so forth because they were doing an event. She retained the credit card information and used it on her own behalf." The company and its investors threatened to prosecute Ms. Hornstein if they weren't repaid, but Ms. Hornstein repaid the debt. Her employment was subsequently terminated. "I can corroborate the fact that she was stealing," the source added.

After Ms. Hornstein left, the startup still declined to prosecute for fear that it would reflect poorly on Giftiki, perhaps assuming that once caught, she would be too scared to try again. "The problem," said the source, "is that she just raised her head somewhere else and created more problems."

Ms. Hornstein did not respond to repeated requests for interviews from Betabeat. But the more closely you look at her fragile "house of cards," as one source put it, the more it seems to evoke the familiar tropes of Startupland, distorted through a funhouse mirror.

Self-described builders, doers, and world-changers make skepticism a dirty word if you're "one of us." Safe inside the virtuous bubble, everyone is willing to lend a hand, only latching on to Ms. Hornstein seemed to drag companies down. Rubbing elbows with newly-minted millionaires fosters a sense of possibility and promise, yes, but also pressure to match that overnight success or be left behind. In a rapidly striating sector, no one wants to look like they're on the bottom rung.

Giftiki was operating out of RocketSpace, a coworking spot in San Francisco that also temporarily housed Zaarly, a peer-to-peer marketplace app based in Kansas City. Prior to working at Giftiki, Ms. Hornstein worked at Zaarly as a marketing consultant. (Although she gave herself a promotion to "head of operations and community," in that since deleted Women 2.0 post.) The source said someone from Zaarly tried to warn Giftiki about Ms. Hornstein, but Zaarly cofounder Eric Koester said he had not heard anything to that effect.

"She was with us for 51 days," Mr. Koester said, adding that no fraud occurred during her brief tenure. "It wasn't a long stint and there was nothing mischievous to report other than it wasn't a good fit."

Ms. Hornstein, sources said, invariably brought up her Founders Fund connection within a few minutes of meeting someone. Often, she also mentioned being one of the first employees at Dropbox, the popular cloud storage service. Nearly every source we spoke to mentioned the longstanding rumor in Silicon Valley that Ms. Hornstein also allegedly stole from Dropbox during her time there. In the comments section on TechCrunch's post, Jose Miguel Castello, owner of Don't Retail, wrote:

"Hopefully one of Dropbox's employees in the know will share the story about how Shirley used Dropbox's paypal account to pay for several thousand dollars of her own expenses?"

However, we were unable to track down any evidence to support that claim and Dropbox has not responded to inquiries from Betabeat.

Ms. Hornstein, her friends said, employed the same tactics she used to dupe startups in her personal life--promising parties at Sean Parker's house or Founders Fund's ear for a potential idea. Lily Himmelsbach, director of operations at Let's Gift It, a gifting startup based in New York, first met Ms. Hornstein at a party in the East Village. The two later overlapped at Zaarly.

During a business trip for Zaarly in Kansas City, Ms. Hornstein went through the elaborate ruse of breaking up with Mr. Clowe--the NHL star, whose giant engagement ring she had been wearing--crying on the phone in her hotel room for hours. As Ms. Himmelsbach later learned, there was no one on the other end. "I think she's a good and well-intentioned person, but she's deeply troubled and needs to get help," Ms. Himmelsbach said.

The investor from Los Angeles, who mentioned Ms. Hornstein's standard $1 million Founders Fund line, said he first realized "Shirls" wasn't who she said she was during an elevator ride up to a party at the San Francisco home of a mid-level Google employee. Ms. Hornstein went on and on about Mr. Clowe, not realizing that the NHL player was married engaged to and had a child with the investor's ex-girlfriend.

Unfortunately for Ms. Himmelsbach, she and a group of friends did not realize the extent of Ms. Hornstein's dissembling until that trip to Las Vegas. Ms. Hornstein told the group that she would surprise them by dropping in on their vacation. Once Ms. Hornstein arrived, however she claimed the hotel wouldn't let her book a room with a foreign credit card. (Ms. Hornstein had identified herself as a German national.) The group let her stay in an extra room they had booked, with the promise that she would pay them back.

The day after that Cirque du Soleil show, Ms. Himmelsbach returned to her room to a missing credit card and a note from Ms. Hornstein saying she had to rush back to San Francisco for an emergency board meeting. When Ms. Himmelsbach checked the charges on her card from Las Vegas, there was a purchase for a monthly BART card in San Francisco made near the airport. Michael Herzog, who was also on the Las Vegas trip, found an even more troubling charge on his corporate card, which he still possessed: a ticket back to San Francisco, purchased in Ms. Hornstein's name. Her landing time coincided with the purchase of the metro card.

When Ms. Hornstein was asked about the missing credit card via gChat (a portion of that conversation is screencapped below), she responded, "shit I hope it wasn't in my stuff somehow," later adding, "but I did somehow have michael's id that next day so i dunno haha."

Last October, Ms. Hornstein announced a trip to New York City via Facebook. Sure enough, there was another flight charge on Mr. Herzog's card, this time to New York, booked in Ms. Hornstein's name. (He did not cancel the card because of the number of other services it was already synched up with.) After being confronted, Ms. Hornstein confessed to the theft, but still has not paid back the debt or responded to the email (below).

gChat conversation between Ms. Hornstein and Ms. Himmelsbach

BART receipt via Ms. Himmelsbach

Email from Mr. Herzog to Ms. Hornstein

Despite these alleged thefts, Ms. Hornstein's record is relatively clean, although not spotless. Running Ms. Hornstein's name through the civil records of the California Superior Court in San Francisco turns up three results: the Founder's Fund suit, which TechCrunch has covered in detail, as well as two other cases.

One is a collections suit, filed in March 2011. It's fairly straightforward, alleging that Ms. Hornstein failed to pay off an $1,869.43 debt on a Bank of America credit card. In October, the court ruled that Ms. Hornstein must pay up, but the trail goes cold in December 2011 after the collections agency is serve her with a summons.

The small claims complaint is similarly penny-ante in scale, but perhaps more indicative of what was to come. On October 28, 2009, a Lisa Di Santo filed suit against Ms. Hornstein, accusing her of breaking a contract to sublease her apartment to Ms. Di Santo--then refusing to return $1,400 in pre-paid rent. In the complaint, she alleges:

"Shirley broke our contract and has refused to refund the rent money that i paid to her, up front, in the amount of $1,400.00. Cornelia is her mother, who is the cosigner on her lease , with whom i have had numerous conversations with. My first communication with Shirley was 8/26/09 and the last time I heard from her was 9/26/09."

In February 2010, the court ultimately ruled in Ms. Di Santo's favor. A source who asked for anonymity told Betabeat Ms. Hornstein once said, "My parents are really worried and my mom wants me to come home."

Why, we asked Ms. Himmelsbach, did she think Ms. Hornstein targeted the tech sector? "Maybe because it's not that hard to get into and once you're in, it's pretty easy to climb the social ladder," she responded. "Unfortunately she wasn't building anything except a fake product, which was her life."

Ms. Himmelsbach pointed out that the startup sector is also remarkably collaborative. "I've worked in a couple different industries and I've never met people who are so willing to lend a hand, saying, 'Grab a cup of coffee, let's go talk.' It can be a total stranger. I think everyone is open and maybe that's to our disadvantage. I mean it's just kind of a wake up call to go, hmm, who else is as full of shit as this @Shirls character."

Kelly Faircloth contributed reporting to this article.

We will continue to pursue this story as it develops, so please reach us by email with any information: tips@betabeat.com.

(Illustration: David Saracino)

The situation on Alyssa Vance’s couch would have been best described as a cuddle puddle—a tangle of hair-petting and belly-stroking and neck-nuzzling, seven people deep. It was Friday night in late June in the living room of her one-bedroom apartment at The Caroline, a “white-glove service” building in Chelsea. Ms. Vance, a transgender former Google intern with the lips of a Renaissance statue, sat somewhere near the middle next to her girlfriend, Alice. Snuggling up on either end were a neuroscience Ph.D. from Columbia, a Yale grad student in applied mathematics, and a redhead in from Berkeley who “sells drugs on the Internet.” Across the room, a row of white chairs laid out expressly for Ms. Vance’s 21st birthday party stood abandoned in favor of the handsy human octopus.

The Observer hovered near the drinks table. Next to us, a ponytailed programmer from Morgan Stanley nibbled on a family-sized Trader Joe’s chocolate bar as we both stole glances at the pile-on.

The partygoers had a more solemn connection than their youthful PDA might suggest. They were all disciples of the blog Less Wrong, so named because “We try to be as least wrong as possible,” as one guest later explained. Despite describing itself as a forum on “the art of human rationality,” the New York Less Wrong group, which holds weekly Tuesday meetups and boasts almost 300 people signed up for its mailing list, is fixated on a branch of futurism that would seem more at home in a 3D multiplex than a graduate seminar: the dire existential threat—or, with any luck, utopian promise—known as the technological Singularity.

The Singularity, a term first coined by mathematician and science fiction writer Vernor Vinge, refers to the point in time when man will create a machine capable of superhuman intelligence, shortly after which, he told a crowd of NASA scientists in 1993, “the human era will be ended.” The concept was subsequently popularized by best-selling author and entrepreneur Ray Kurzweil, known for his embrace of cryonics, or freezing one’s body with the hope of thawing it out, no worse for the wear, when conditions seem ripe. Mr. Kurzweil adopted the term to describe his predictions about the exponential growth of computer technology and its eventual merger with mankind. “By the 2040s and the 2030s, we will begin to augment our neocortex directly,” he told The Observer. “You’ll be talking to a hybrid. You won’t easily be able to separate, Oh, that came from my non-biological side.”

As unsettling as that sounds, Mr. Kurzweil sees it as a potential solution to the planet’s woes. “People look around and take a linear perspective and think we’re gonna run out of energy and water,” he said, suggesting that reverse-engineering the human brain could unleash unfathomable powers of intelligence to address what ails us. (He discusses the subject in more depth in his upcoming book, How to Create a Mind: The Secret of Human Thought Revealed, out in November.) “The reality is that we’re going to become those machines,” he added. “That’s why we create them, to compensate for our own limitations.”

Such pronouncements have made Mr. Kurzweil a lightning rod for AI enthusiasts. In June, the tech blog Gizmodo hosted a party in his honor on the roof of Gawker’s Soho headquarters. It was a swanky affair for such a sweltering night. Rectangles of pizza and cross-sections of pork belly were passed around as Mr. Kurzweil assured the crowd that “optimism is a self-fulfilling prophecy.”

No one from the Less Wrong meetup group was invited.

Mr. Yudkowsky, left, and Mr. Thiel

Considerably more radical than Kurzweil, Less Wrong is affiliated with the Singularity Institute in Berkeley. Both were cofounded by 32-year-old Eliezer Yudkowsky, an eighth-grade dropout with an IQ of 143 (though he claims that might be a lowball figure). The messianic Mr. Yudkowsky also helped attract funding from his friend Peter Thiel, an early Facebook investor and noted libertarian billionaire whom Forbes pegs as the 303rd richest person in America. The Thiel Foundation, Mr. Thiel's philanthropic group, has donated at least $1.1 million to SIAI, more than four times its next largest donor. (The nonprofit’s Form 990 from 2010 shows assets of $462,470.)

While Mr. Kurzweil has generally been viewed as the Singularity’s chief standard-bearer, on the geekier fringe, that distinction belongs to Mr. Yudkowsky. “I have been seriously and not in a joking way accused of trying to take over the world,” he humble-brags on his OKCupid profile.

SingInst or SIAI, as the institute is known, was founded in 2000 to further research on “technological forecasting, human rationality, and architecting safe artificial intelligence.” Although the contemporary futurist movement has largely been a Bay Area phenomenon, the New York Less Wrong meetup group—a motley crew of libertine twenty- and thirty-somethings with impressive jobs and developing social skills—represents something of an East Coast bureau, and is the largest and fastest-growing group in the Less Wrong community. The New York group's upcoming plans include a Humanist open mic night on the Lower East Side and a trip to a co-ed Russian sauna in the Financial District.

SIAI is not to be confused with the more commercially-minded Singularity University, which counts Google, Cisco, and Nokia as corporate backers and has spun out dozens of startups. That organization, which has plans to go for-profit this year, is focused on giving a boost to emerging technologies that are market-ready now, and in spurring thinking about how we can harness them for the future, whereas SingInst’s organizing principle has a more apocalyptic cast. Technological advancements in machine learning, it argues, are hurtling towards to the creation of a self-improving artificial intelligence--one that can program itself to be smarter and smarter still. If the world doesn’t work to ensure the emerging AI is “human-friendly” and shares our values, it will destroy us all.

If Singularity University is the Mitt Romney of futurist advocacy groups—sleek and corporate—then the Singularity Institute is Ron Paul, scruffy and unhinged (and, incidentally, another beneficiary of Mr. Thiel’s largess).

“The AI is smarter than we are, so it would kill everyone. Or it wants all our resources, so of course it’s going to kill everyone,” Zvi Mowshowitz explained as the assembled rose from the couch to whoop it up to show tunes and eighties pop hits. Mr. Mowshowitz, who lives a couple floors up at The Caroline with his girlfriend (the neuroscientist), has jet black hair and an easy, childlike grin. He was wearing a electric blue gym shorts and a homemade T-shirt commemorating his reign as a professional champion of the Magic: The Gathering fantasy card game. Mr. Mowshowitz is currently working with Ms. Vance and Jaan Tallinn, the renowned Estonian programmer behind Skype and Kazaa, on a personalized medicine startup. “People come up with really bad arguments for why the AI wouldn’t kill everyone,” he continued. “‘Well, killing everyone—that’s like Terminator, so John Connor will stop it, right?’ The answer is no, John Connor will die! John Connor is dead!”

The Judgment Day narrative makes it easy to see why it's been satirized as “the Rapture for nerds.” Mitch Kapor, cofounder of Lotus Development, also drew a religious parallel, calling it “intelligent design for the IQ 140 people.”

“I’ve made my peace with the fact that, you know, this is not going to last,” Mr. Mowshowitz said, looking out the window at weekend traffic on Sixth Avenue as though it would all disappear. “We have a very dysfunctional civilization right now. There are better things that could be done.” By the drinks table, his girlfriend sang along with The Lion King’s “I Just Can’t Wait to Be King.”

The people behind SIAI know that the end of the world as we know it sounds like a downer, so they are actively engaged in reframing Armageddon. On the webpage “Why Work Toward the Singularity,” SingInst offers a gloriously transcendent vision of AI as mankind’s salvation. If we are able to develop a “friendly” superhuman intelligence, then it could do everything from curing cancer to accelerating scientific research to eradicating hunger. Meanwhile, cohorts focused on anti-aging, nanotechnology, longevity and transhumanism are at work on genetic therapies and body-hacks that will extend our lifespans beyond those of the vampire population of True Blood.

Mr. Mowshowitz calls it escape velocity. “That’s where medicine is advancing so fast that I can’t age fast enough to die,” he explained. “I can’t live to 1,000 now, but by the time I’m 150, the technology will be that much better that I’ll live to 300. And by the time I’m 300, I’ll live to 600 and so on,” he said, a bit breathlessly. “So I can just . . . escape, right? And now I can watch the stars burn out in the Milky Way and do whatever I want to do.”

Many members of the Less Wrong meetup group are hopeful enough to have invested in cryonics; some are even cryonics counselors. At the party, Ms. Vance, who glided around the room with the head-bob and muffled laugh of a very polite alien, interrupted Mr. Mowshowitz to share the business card of a “cryo life insurance guy.” Not necessary; he was already covered.

Convincing people that the world is about to be thoroughly upended has never been an easy or rewarding task, and the singularity cadres have adopted some canny marketing techniques to help the medicine go down. Branding themselves as “rationalists,” as the Less Wrong crew has done, makes it a lot harder to dismiss them as a “doomsday cult.” The Singularity Institute itself is making a similar leap, spinning off what it’s calling The Center for Applied Rationality, which hosts summer camps for math olympians and rationality “mini camps” in San Francisco.

Michael Vassar, the former president of Singularity Institute, who stepped down in January to pursue his idea for a personalized medicine startup--later bringing on Mr. Mowshowitz and Ms. Vance--admitted the nonprofit had learned to hide some of its more radical ideas, emphasizing rationality instead.

As Mr. Yudkowsky put it, “There are plenty of people out there who would be interested in cognitive science-based thinking skills who wouldn’t necessarily buy into the whole ‘save humanity’ thing.”

Mr. Yudkowsky’s most successful stab at attracting young cadres to the cause was a 1,000-page fan fiction project called Harry Potter and the Methods of Rationality, which substitutes scientific method for magic and has received, at last count, as many as 5 million hits.

So eager are Singularity adherents to keep the discussion upbeat that Mr. Yudkowsky instituted a ban from the Less Wrong forums of a particularly insidious discussion thread, ominously nicknamed “the Basilisk,” after science fiction writer David Langford's notion of images that crash the mind. In the initial post, a prominent Less Wrong contributor mused about whether a friendly AI—one hell-bent on saving the world—would punish even true believers who had failed to do everything they could to bring about its existence, including donating their disposable income to SIAI. It seemed like little more than a harmless thought experiment, but rumor has it that the discussion thread was deemed a danger to susceptible minds and exorcised from the blog after a reader had a nervous breakdown.

The Observer tried to ask the Less Wrong members at Ms. Vance’s party about it, but Mr. Mowshowitz quickly intervened. “You’ve said enough,” he said, squirming. “Stop. Stop.”

Indeed, the last thing Less Wrong wants to do is freak anyone out. On the contrary, one of the group’s missions seems to be to empower its less socially well-adjusted members and teach them to cope with the various challenges presented by the here and now. In this sense, the whole movement owes a little something to its Bay Area forebears, the New Age and self-actualization movements of the 1960s, 70s and 80s.

“Our primary source of value is helping young nerds become engaging and extroverted—and occasionally more muscular,” Raymond Arnold, a Less Wrong member and 3D animator with an advertising firm in Manhattan, explained a few weeks after Ms. Vance’s party. The Observer had stopped by Mr. Mowshowitz’s apartment, a few floors up at The Caroline, for the group’s weekly Tuesday session. As we knew from the mailing list—a constant stream of emails extolling the Paleo diet, recounting post-hike “massage puddles” and offering extra tickets to The Dark Knight Rises—this three-hour meeting would be “Rationalist therapy” for one of the members, a chance to get guidance on productivity, dating, and work.

“You’re playing on hard mode,” one of the members assured their fretful subject for the evening, borrowing a video game analogy.

“Really?” he asked.

“Really.”

Ultimately, the group’s most effective recruitment technique has been providing its members a friendly community—sometimes very friendly—complete with those cuddle puddles. Indeed, for a movement focused on transcendence and the eventual shedding of our mortal “meatsacks,” futurists can be a kinky bunch. Particularly out in the Valley, where many futurists “co-house,” a sexualized aura prevails and many members practice polyamory, taking multiple sex partners.

After all, if the world is coming to an end, why not enjoy ourselves while we have the chance?

Indeed, while Mr. Yudkowsky isn’t quite a techno-utopian in the Kurzweilian vein, some of the lengthy discourses on the Less Wrong blog revolve around “fun theory,” or imagining what we would do if we were immortal.

While long-term thinking about the Singularity tends to be “very idealistic and smart and visionary,” according to William Eden, who helped found New York's Less Wrong chapter, in the near-term, devotees are focused on maximizing the moment, “trying to make more money, have more sex, all of the very basic monkey drives.” Mr. Eden has since relocated to Palo Alto to work for Azumio, a developer of biofeedback health apps funded by Founders Fund, a venture capital firm founded by Mr. Thiel.

Like a number of key Singularity theorists, Mr. Eden also moonlights as a personal coach. He and his wife Divia recently released a series of videos and training sessions called Effectiveness for Geeks.

Eden is not his given last name. He and Divia, who was also part of the Less Wrong meetup group, made up a new one at their wedding this year, which was officiated by Mr. Yudkowsky. One source described the couple as the “JFK and Jackie O. of the Singularity,” though the comparison would be more apt if Camelot were a hippe commune on the Pacific Coast.

For a time, the Edens lived with Patri Friedman—the grandson of economist Milton Friedman and a friend of Mr. Thiel—and his wife in a co-housing situation that they dubbed Tortuga. (Mr. Thiel has also invested in the Seasteading Institute, Mr. Friedman’s attempt to erect a new kind of government atop a bunch of oil rigs in international waters.)

The foursome's adventure was well documented on Shannon Friedman’s LiveJournal, although all have since have moved out. After her separation from Mr. Friedman last August, Shannon has been dating Mr. Yudkowsky, though not exclusively. “I am now down to only three boyfriends ;)” she wrote on her blog in March. “They’re all very casual. Adam describes my relationship with Eliezer as two eight-year-olds on a playground. We banter and play and hot tub.”

Incidentally, Ms. Friedman also offers life-coaching services under the same brand as the Edens.

Not surprisingly, many futurists are also partial to mind-expanding substances. “If I cut down to once/week of pot smoking with possibly the occasional hallucinogen if I can get them working, then that’s only 1-2 nights of altered state/week,” Ms. Friedman wrote last year. On Twitter, Mr. Friedman, whose children were part of the Edens’ wedding party, has wondered if he was taking too much ProVigil, the anti-narcolepsy medication often used as an energy enhancement drug.

As Mr. Vassar explained, “They probably don’t have a relatively mainstream life because why would you, out here?”

Asked whether polyamory was part of the New York scene as well, Ms. Vance said it was uncommon. “I’d certainly say that we don’t think ‘poly’ is morally wrong or anything,” she noted, adding that the California contingent had taken the idea quite a bit further. “In one of those [co-]houses, I saw a big white board on the board with a ‘poly-graph,’ a big diagram of who was connected to whom,” she said. “It was a pretty big graph.

“I won’t claim that our exact culture is the best for everyone, because it’s not,” Ms. Vance went on, “but physical contact is something that I think an awful lot of people do need more of.”

That is, until we shed our physical bodies altogether!

“People being happy helps a community grow,” Mr. Yudkowsky said. “I don’t think I ever understood why it was that to save the world you needed people being happy around each other until I visited New York. Nobody wants to hang out with you if you’re not happy.”

-ntiku@observer.com

A version of this story appeared on the cover of  July 25, 2012 issue of The New York Observer. 

Mr. Lewis.

Topguest, a loyalty program that relies on social media check-ins, was acquired by Switchfly in December. It took about six months before the two companies were fully integrated, which is when Topguest founder Geoff Lewis waved goodbye. Mr. Lewis, a New Yorker by way of Canada and San Francisco, joined Founders Fund—one of Topguest's investors—as a principal last month.

"For me it was less a decision to move to the investor side broadly, and more of a decision to join Founders Fund in particular," Mr. Lewis told Betabeat in an email. "I’m proud of what we built with Topguest, but it’s not the type of product that will dramatically change the world for the better. Coming off of Topguest, the question for me was how can I help to make a much bigger impact in a way that’s well leveraged?"

A much bigger impact in a way that's well-leveraged. That's entrepreneur-speak for you. At Founders Fund, Mr. Lewis will focused on consumer Internet startups with the potential to be the next Facebook or Spotify, but he's looking for world-changing companies in any space, at any stage, with any product, and in any region, he said.

"Founders who cannot imagine doing anything other than what they’re working on right now should get in touch," he said. He's at Geoff@foundersfund.com or @justglew.

Founders Fund was attractive because the firm's partners are "deeply committed to backing transformational companies that if successful, will change the world alongside becoming multi-billion dollar businesses," he said. The fund is invested in SpaceX, for example.

"It’s no secret that being a VC is much, much easier than being an entrepreneur, yet you still get to contribute – albeit in a small way – to the creation of meaningful companies," he said. He's wary of the hype cycle that comes with consumer products, though, where good investments are hard to find. "I’m the lucky guy who gets to try," he said.

"When we were seeking financing for Topguest, I was struck by how few VCs had actually co-founded and led startups themselves. That’s a problem I want to help solve," he said.

Mr. Liu

Yesterday Knewton, the Union Square-based online education startup, announced a $33 million Series D round led by Founder's Fund, the VC firm co-founded by Peter Thiel. That might explain why Betabeat heard Mr. Thiel's fellow co-founders Ken Howery and Luke Nosek were throwing a pre-game party Friday night in New York.

Existing investors Accel, Bessemer and FirstMark also participated in the round, along with Pearson, an education publisher, putting Knewton's valuation higher than $150 million, according to TechCrunch. Another New York City-based education startup, 2Tor (get it??), raised $32.5 million earlier this year. But what sets Knewton apart is the adaptive learning algorithm the company developed, which figures out student's weakness and can be applied to any type of curriculum.

Indeed, after trying its platform out in test prep, Knewton is now being used by all 10,000 incoming freshman at Arizona State for an online math readiness course.

Betabeat talked to COO David Liu about why Knewton isn't making teachers obsolete, how its adaptive learning algorithm works, why Mr. Thiel would invest in an education startup and why Mr. Liu thinks Knewton is, basically, going to take over the world of personalized education.

It seems like there's a lot of buzz around online education startups recently. There's 2Tor, Veri, Code Academy, and General Assembly may even get into the game.

We definitely see ourselves in the center of it. We have this huge industry now transforming to digital and it's not enough. E-books are not going to disrupt an industry. But it is a very fundamental step that needs to happen for the traditional materials industry—getting it online is a huge step. Once you do that, Knewton becomes incredibly viable for a lot of these content providers because what we do is we take content and tag it and break it down to a very fundamental level.

That's where adaptive learning comes in?

To give you an example, we take, let’s say a text book in geometry, and we break that down. If we know you’re weak in a concept, we’ll look within geometry. We’ll find maybe you have issues with triangles. But maybe it’s not just triangles, it’s right triangles. Then we’ll go all the way down to the Pythagorean Theorem. We will know because the content is tagged at such an elemental level that we can reformulate that content back to you based upon what you do on our system. One half of it is breaking the content down to that level, no one else is doing that.

How do you tag a text book down to that level?

We have a template. We used to do it manually, but certainly auto-tagging is something that’s being done today. Even the largest publishers in the world are beginning to automate a lot of that work. Just doing that is the first step. Then you have to put it into a hierarchy, you have to put it into what we call a "knowledge graph," which kind of formulates what concepts goes before another, what comes after. So that’s a little bite of our proprietary stuff.

How do you know where a student's weakness is?

What we also do on the front end of that is we’re measuring and we’re processing thousands of data points an hour on every student on the system. They are answering questions, and what we call assessments on questions. Or how much time they’re spending on a piece of video content. Or how much time it takes for them to read through content. Whether they’re moving faster in the morning or in the afternoon or in the evening. Imagine what a user does on Facebook or Netflix, we’re doing the same thing in terms of measuring what data they’re producing on the system when they’re on a digital course that we’re powering.

This is where the algorithm comes in?

We’re taking all that information, we put it into our algorithm. Then based upon where you are in the course or where you’re supposed to be--or based on your individual ability as a unique student--we then produce that next bite-sized piece of content that you need to master. What we’re finding is that a lot of people in the industry are beginning to throw around the term "adaptive learning," but we’re really one of the few companies that actually does adaptive learning this way. Most companies when they talk about adaptive learning, they’re talking about adaptive testing, that’s been around for years. If you get a question wrong, it gives you an easier question.

Well, you mentioned Netflix, which has faced a lot of pushback from the old guard. Are you going to make teachers obsolete?

We’re absolutely not making teachers obsolete, we’re taking all the dirty work out of teaching so that professors can spend a lot more time teaching instead of trying to pour inefficiently through data—or even not even having access to data about individuals in their class. We’re so incredibly precise and surgical about understanding how individual students are progressing, so we can highlight those individual problems so quickly so professors can come in and do with the class what they do best and that’s instruct and teach.

That's how they're using Knewton at Arizona State?

That's what Arizona State saw first with our college readiness course and now we’re powering a blended learning first year math course across the campus. What they found was that the data was just as valuable as the technology. We’re able to now create a user profile of each student, confidential to the professor, obviously, and they’re now able to make sure during a semester that students can progress as quickly as they need to. Of course the learning outcome is what we’re all interested in. We want to make sure that the kids are learning and that they’re learning in the most efficient and effective way. When they jump into another course, after they take another one of our courses, you don’t have a cold start. So when the student comes in that professor already knows their strengths and weaknesses.

Is Knewton going to focus on the college market from now on?

We started out by proving the efficacy of the technology in test prep and we sold those courses ourselves and now we’re in higher ed, licensing the technology to universities and building some of these courses for universities so they can see the power of platform and the technology. The next step is to continue to broaden this out so that we can now power any content provider’s content and education so that we’ll be powering the materials part of the industry.

Why focus on materials?

That does a couple of things. One, you don’t have to change what people are doing today because text books still drive a ton of syllabuses in any course of study. It’s the big flow of how education content is being distributed, but now electronically and through the cloud. The second thing this does is drive big adoption of the platform much faster. So while we can still and will go school to school, the materials space, the materials industry, big publishers and all the rest hit millions of students all at once at different schools all around the world. That’s where I think the potential of this becomes very powerful because we can revolutionize that industry very very quickly.

That's where the API comes in?

We’re on our way in the next year or so to opening up our platform where any company or individual will be able to come in and begin to build just unbelievable courses using our technology. So we’ll have a toolkit just like any another API provider and you’ll be able to build a business or build a textbook, if you will, with the world’s best content in it, including publishers, nontraditional publishers, and even open education resource content from an MIT or Code Academy, we want to power all that.

What are Knewton's revenue streams?

Well we’re still working on all this stuff, so our business model overall is to license our technology. We’re a tech platform and we license that technology. When we open up our platform it’ll be a freemium model platform, so that if you’re a non-profit and you don’t charge for content, we’re not gonna charge you access to our APIs, but if you are a business then we’ll charge you some variable rate to have our technology.

If your platform is offering content, wouldn't materials companies like Pearson want a cut?

For a publisher, I suppose that we would license it to the publisher and then share in the revenue. I mean they’re interested in making their content and their course solutions much more effective, so you know ultimately hopefully it will change the economics of their business as well.

Peter Thiel has been very local about his lack of faith in the power of a formal college education. Why go with Founder's Fund?

We’re incredibly thrilled. Founder's, outside of Peter Thiel’s comments about education, I'm just commenting on Founder's on a higher level, they believe in investing in companies that can change the world in their respective industries. Look at Tesla, look at Palantir, look at SpaceX. So we’re incredibly thrilled to be working for them because they believe we’re that type of company for education.  Ultimately we want to be able to provide personalized learning and better outcomes for every person on the planet. It’s a big, big meaty kind of vision and we’re gonna build many paths to that goal.

Do you find it surprising that Founder's would be looking an education startup at all?

With respect to Peter Thiel’s comments, again I’m not gonna comment on his earlier comments. I think what they’re interested in as a firm is to really fundamentally improve, big big markets that have been under-performing. I think that’s really all he wants to do. So I think it’s a great statement about us that they found something that they believe can actually make that change.