The subtitle starts like this: "Even the worst-run startup can beat competitors if investors prop it up."
This is clearly written by someone that has little to no startup experience. As someone that has spent 15 years as a founder I can tell you that the opposite is true: I have seen startups racking in seemingly endless funding only to be beaten by much smaller / less well funded competitors that happened to have better strategy or execution. The examples are endless, more recently we heard about Quibi ($2B funding!) failing, Yik Yak, WeWork etc
There are markets that are capital intensive, and others that are really commodity spaces where winner takes all (Uber comes to mind) but for the most part, the smartest VCs in the industry will tell you that you should worry about strategy and execution, not raising a ton of cash which creates a bunch of problems on its own.
This depends on the market structure. If your competitive advantage is product/market fit, it matters how you run the startup. If you are selling a commodity at a loss in order to acquire a market share, all that matters is the depth of your pockets.
And, well, if your competitive advantage is access to legislators to carve out special legal exemptions for yourself [0], good luck competing with that, mom-and-pop startup.
You're free to dislike prop 22, but what you're describing is really nothing like what actually happened.
The special carve-out in this scenario was AB5, which was specifically designed to target Uber & Lyft (effectively every other industry you can imagine was made exempt from it).
And the "access to legislators" was non-existent, that is literally the point of ballot propositions. Apparently these companies tried to work with legislatures first but they were unwilling to compromise. But anyone with a few signatures can put up a ballot prop in California without any special connections, and that's what they did. It was then approved by a majority of voters, it's hard to frame that as some kind of shady backroom deal.
Lastly, it's pretty hard to imagine a mom-and-pop startup this might hurt. It hurts the legacy taxi industry but that is the very type of intrenched interest with their own special rules and special access to legislators that we're better off without. Any new rideshare or delivery app competitors get all the benefits of prop 22 that incumbents do.
This is true, except that the "selling commodity at a loss" and "legal exemptions" examples both presuppose that you already have product-market fit for the commodity you're selling or the thing you're getting an exemption for. If people fundamentally don't want what you're selling, aggressive pricing and legal lobbying will only lead to you killing yourself that much faster.
This is something we tend to take for granted with already-successful companies, but there was a time when everyone — even Uber and DoorDash — were struggling in obscurity to build something people would use.
Maybe? Car services and taxi services kind of already validated product market fit long before Uber, lyft, etc.
While yes, they have some benefits that people like, but it's not clear that those services would have been able to compete against existing services without heavily subsidizing to undercut existing market players.
By "legislators" do you mean members of government? You linked to a California proposition, which any citizen can create:
"In a special election held on October 10, 1911, California became the 10th state to adopt the
initiative process. That year, Governor Hiram Johnson began his term by promising to give
citizens a tool they could use to adopt laws and constitutional amendments without the support
of the Governor or the Legislature. The new Legislature put a package of constitutional
amendments on the ballot that placed more control of California politics directly into the hands of
the people. This package included the ability to recall elected officials, the right to repeal laws by
referendum, and the ability to enact state laws by initiative."[0]
The article describes in detail how the WeWork saga decimated the coworking industry, but you don't care because that doesn't match your experience and you don't depend on coworking spaces. That is really cold.
I've been working with startups part or full time since 1991 and am amazed at how disruptive they are to the markets in which they participate. Getting a huge pool of money and then spending it to achieve dominance in the shortest possible time does lots of damage to markets, in particular in makes the bootstrapping path nearly impossible since customers can't compete with investors.
Are you arguing that WeWork hasn't outcompeted any other office space leasing companies thanks to its funding? The article revolves around testimony from firms that WeWork beat.
Also, even if we assume WeWork is an aberration, "beat" here is on a long timescale, after all. There are by now plenty of tech companies that have been around more than a decade having never made a profit. At some point you have to accept that the market dumping these firms are engaging in, does in fact lead to less well capitalised firms being unable to compete.
Ehh, of all the industries that exist in the world, I find it pretty unlikely that the office space industry is going to be monopolized by a company that is price dumping, and that this is going to put everyone else in the office space industry out of business.
Fair point. Given their business model, it seems like the whole segment of co-working (renting long term leases and reselling as short term ones) never really made sense to begin with. (Despite it being to many people's advantage, including myself).
I wonder if it has more of a place in a post Covid world? At least some companies are interested in divesting themselves of office space and going 100% remote. A flexible office space arrangement or even just a small space that can be rented to meet with clients sounds like it could be useful.
I'd say they aren't enforced because they are really vague and thus hard to enforce, and if they weren't, all sorts of things would be different and weird. For instance Google might not exist (the search engine) because for the first few years of its life it was basically giving the web search engine away for free and hoping to make money by selling search appliances for intranets. That business plan didn't work out and they eventually pivoted to making money on the main search engine.
But what if they'd not been allowed to do this and been forced to charge for web search from day one? With no ad network and without being allowed to take VC money to build up traffic, they'd not have been able to establish a market for ads and thus, would have had to rely entirely on revenue from search appliances, which was tiny. Search would have ended up dominated by their competitors simply because they could never bootstrap themselves to the point where they'd be interesting to advertisers.
So this stuff is complex and even though there seems to clearly be a problem here with VC money subsidising broken businesses forever that suck all the oxygen out of the room, it's unclear that governments effectively setting prices is better (after all, setting price floors is a form of price control). SoftBank will eventually run out of money unless Son finds another Alibaba. Government controls don't run out like that.
> unless Son finds another Alibaba. Government controls don't run out like that.
Thanks, you made me think. You might be right. An unsubstantiated part of me wants to think that oil being pegged to the dollar and the dollar being pegged to nothing is the ultimate root cause. What allows western aligned funds like Softbank to accumulate so much mis-managed money that WeWork is even a thing. I feel like this whole thing will collapse and Bitcoin will look honest in comparison.
Well, oil is traded in dollars but not pegged to it. To be pegged to it, there'd have to be a constant oil price but the price floats freely.
SoftBank is something of an aberration caused by the growth of China. Son would have lost all his wealth in the first dotcom bubble but he sprayed so much money around he got in on Alibaba early, and it turned into the Chinese Amazon. Or at least, that's the uncharitable view. The charitable view is that placing a lot of bets on a lot of firms and hoping one gets huge is a perfectly valid strategy to create wealth, and Son reaped the rewards. However, the risk involved is huge. Lots of people lost lots in the dot com bubble because they sprayed money around and did not find that magic lottery ticket.
Chiming in, as a founding member of a venture backed startup, the idea that our success is guaranteed strictly because of the capital investment is honestly a bit insulting. If only that were true, I wouldn't have to worry about half of my compensation being worthless — a statistical likelihood.
> the idea that our success is guaranteed strictly because of the capital investment is honestly a bit insulting
Nobody but you has that idea. The article is a story about other companies who have maybe shown indications that some can "run amok" with an influx of capital, at the expense of all other stakeholders, including the user.
This article is not a story about you or the non-corporal entity you are birthing and even pretending for a minute that it is, is just silly.
This isn't about your success, it is about the failure of others. WeWork is dying a protracted death, but it did a huge amount of damage to coworking providers before it blew up. You seem to be arguing that disrupting markets is okay as long as failure eventually happens, but that dynamic causes a lot of suffering and waste.
> I have seen startups racking in seemingly endless funding only to be beaten by much smaller / less well funded competitors that happened to have better strategy or execution
The usual rags-to-riches feel-good story.
Reality is more nuanced, and "worst-run startup can beat competitors if investors prop it up" is true most of the times.
It seems like the opposite cliché of "Endless VC funding leads to success over better alternatives" is just as much of a fantasy.
After all, people with little marketing experience on Hacker News often believe a marketing budget is the only thing that separates huge success from complete failure.
Exactly, the number of startups which have failed or never even got a chance to start because they had to compete with an unprofitable VC-backed unicorn is unfathomably greater.
Isn't this the sort of meta-hack that should(or is?) be illegal? I thought selling your services at a loss to specifically drive competitors out of markets was illegal? If it's not, should it be? Once capital has accumulated, there is really no effective way to compete if these practices are allowed.
I don't think that's how it's presented. It's running at a loss now to grow and be profitable later. That could be by driving out your competition, or it could be like facebook, where a gazillion dollars went in before the ad money came online. The story they tell themselves it the latter.
The ecosystem it creates, however, doesn't matter whether it's the former or latter. It drives out competition because VC's can make up the difference in a lack of profit.
That's why the title doesn't fit. Unfair advantage is raw capitalism, not a distortion of it. What you're talking about is government interference in the markets, which is a form of socialism, which is a big no no in our society.
Why do so many people confuse supply-side economics propaganda with reality?
Government interference in the market isn't socialism, it's regulation. It's not socialism when the government ensures that companies have to compete fairly amongst eachother, minimise environmental hazards, safety test pharmaceuticals or respect labour laws. Even anti-trust laws or price controls aren't socialist. They're collectivistic, because they look after the greater good, but so are charities, some churches and , ideally, the justice system. None of those are "socialist".
Socialism (and only the statist variety, at that) is when government owns (part of) the means of production, and not even always in those cases, either. The US postal service isn't "socialist", it's a state-run public service. NASA isn't "socialist", it's a government agency funded with public funds.
Government intervention in our markets is the rule, not the exception. Whether we call it ‘socialism’ or ‘stabilization’ is simply a matter of who is making the sales pitch.
The New Yorker author responded. I tend to agree with his response. Quoted below.
> Benedict - thanks for your tweet. I'm a fan of your newsletter. Although VC might have a specific and limited definition in your book - as a certain kind of professional - it has a pretty common use in the vernacular: People who invest in start-ups, at a variety of stages, in the hopes that company will prosper. You may not respect the people who invested in Theranos, and you might not consider them part of your industry, but they were VCs. They were acting like VCS. They were investing in a start up in the hopes the company - and their investment - might prosper. They were evaluating companies and making bets. And while I would never call you or anyone else 'lazy', I've always appreciated the intellectual rigor you've brought to your writing. If you'd like to engage, I'm absolutely willing to do so. Calling me an intern or lazy, however, seems beneath us all. (Besides! There are some great interns!)
I think its a decent argument and I partially buy it! But i worry it falls down partially due to generalization and maybe over-inclusion.
So I'll take the opposite side. Does "acting like VCs" by "evaluating companies and making bets" make you a VC? That kinda just seems like investing though right?
it starts sounding like "no true scotsman" though. If one sails, one is a sailor. Being duct-taped to a mast might not count as sailing though. If one invests in early-stage startups that are believed to have growth potential... I guess you can try to promulgate a different definition of what makes a VC, but if it starts sounding too much like "Those who act WISELY are VC's, those who act unwisely are not", or even "those who hobnob with us at parties are VC's, those who go to other parties are not" (Oh, they were on the East Coast not the West!), I'm not sure how objective or useful that is, for other than propaganda purposes.
What is the VC industries understanding/definition of VC then? The tweet thread doesn't leave me clear on it.
Wikipedia says "Founded in 2003 by 19-year-old Elizabeth Holmes, Theranos raised more than US$700 million from venture capitalists and private investors." Google theranos venture capital you can find plenty more references. Evans suggests it's a "straight fuck-up by fact-checkers" to do so, which seems overly-defensive and just plain odd to me.
This seems like a really weak argument IMO. Isn't Rupert Murdoch a venture capitalist in this context? He cut a big check to a startup (Theranos) with high growth-potential in exchange for equity. How did Murdoch's investment in Theranos not qualify as VC? It seems like Benedict is trying to argue that Murdoch isn't a VC because he isn't known typically as a VC. Instead of explaining his argument, he simply compares this to "summer intern" work. It should be pretty easy to make the distinction between VC and whatever Benedict considers Murdoch without resorting to attacking the reporters.
He’s just being nice. In reality, what he’s really saying is that Rupert Murdoch is dumb money. Seeing the success of VC and trying to copy it, but only doing it at the most superficial of levels.
To be fair, in recent years, a lot of dumb money has entered into the VC scene. Again, mostly from traditional incumbents attempting to emulate without understanding the bigger picture.
If you exclude all the dumb VC investments after the fact then sure the industry looks awesome. The problem is making distinctions beforehand. Exclude non investment fund VC’s and you exclude most of the best investments and keep a lot of cruft. Net result professional VC’s under preform the market.
Include non professional investors and you get successes like George Forman and a ton of far less successful athletes etc. which on net also under preform the market.
The entire article is about how "dumb money" is distorting things. The distinction between dumb and smart money is irrelevant - VC money is distorting the economy in a way which benefits a handful of large investment firms and destroys many viable businesses.
In the time between a fool acquires money and becomes destitute they can topple governments, commit genocides, destroy ecosystems and generally terrorize billions of people. I don't care about a billionaire losing everything on craps. I care greatly about idiots usurping democracy in coups, force feeding propaganda through willfully oblivious social media companies, and other melt
methods.
A part time carpenter is still a carpenter. Evans claim wasn’t that Murdoch is an amateur. His claim was that Murdoch was categorically not involved with VC.
If you write an article titled "Electricians Are Turning Homes Into Firetraps" and then cite the fact that I improperly swapped out an outlet in my home as evidence that I'm an electrician, you should expect pushback.
If it works equally well for Uber or Lyft or WeWork, then trying to shoehorn Theranos in since it's a spectacular fraud that doesn't really fit the definition was a bad decision.
That's rarely a sign of a piece that makes a strong argument.
Theranos is mentioned three times in the article, and always in the company of more cogent examples of VC-funded companies- Juicero, Uber, and WeWork. The quibbling over Theranos really does look like a distraction away from the main points of the article.
Unless by rich people you mean lottery winners and Instagram influencers, the truly rich people have top financial education, trust funds and top wealth management companies that keep their wealth growing so they can't make mistakes.
Those wealth management companies charge significant fees and typically do not beat the market once fees and legal expenses are considered.
If you look at any list of the truly rich, it is almost all 'new money', of those that are beneficiaries, the money was inherited relatively recently (such as the Walton family).
The goal of a wealth management company (targeted at the very wealthy) isn't just "I want to beat the market". A wealthy enough person can live a comfortable life on savings account interest and still be wealthy when they die. The goals end up being a) beat inflation enough to cover my expenses and b) protect from any risk of not being wealthy".
There are quite a few problems with the Forbes 400 list, most notably it does not in fact capture the wealth of the 400 wealthiest people/families. A lot of old money is left off these lists because...well it's old money and they don't want the publicity.
There are a bunch of other things to consider, for instance diversification of wealth has fundamentally transformed since the early 1900's and wealth management is on a completely different level than even 20 years ago, let alone 120 years ago. Not to mention the legal innovation to protect estate value that has been going on.
I'll also point out that the people on that list are generally not using Fidelity, Vanguard, or Hancock as their wealth management services. They are using private family offices or firms like PDT Partners that are directly accountable to those families.
If that was the case then why there are so many zombie companies? I would say USA will lose considerable power over the coming years because of their bad economic management.
Zombie companies are the result of a low inflation policy. If you want to keep your company going you can just borrow a lot of money for almost nothing.
There are a few of them because wealth concentrates upwards. Their mere existence as dynastic families proves that wealth does not always flow downwards but persists in an American aristocracy that stands out of public view and allows us to pretend otherwise.
> There are a few of them because wealth concentrates upwards.
Is your argument really that all wealth is already owned by some dynastic elite and that's why nobody else can get to that level? That is nonsense.
Wealth outside these is gigantic. We constantly see economic growth that creates wealth, and new fortunes for people. Somebody in tech should really understand this, and these new rich often actually more influential and richer then some of these dynastic elite.
> Their mere existence as dynastic families proves that wealth does not always flow downwards
That's not what me or parent argued, nice straw-men.
Who cares if the projects keep going while VCs throw away their money. The only time throwing good money after bad decisions pays off is when you get bailed out by the government.
This article hits the nail on the head. The financial system is not working. Also there are VC-funded zombie companies everywhere. Just look at Snapchat or Uber. Never made a profit in a decade but they have ridiculously high market cap.
What kind of investor puts their money into a business which has a decade long track record of losing money and no profits in sight? In a system which is notorious for incentivizing short term gains... It doesn't add up.
QE. All the low risk high quality debt is effectively cleared by governments in order to 'stimulate' the economy. Well, after enough years of pumping enough stimulus in, the economy starts to look like someone on a perma-high who can't come down. That's what we're seeing here: totally irrational behaviour caused by an apparently endless supply of free money. Track it back far enough and you end up at the central bank.
Amazon took 20 years (mas o menos) to turn a profit. Tesla took 15ish or so?
A lot of people have clearly latched onto something Jeff Bezos said a long time ago in an interview, which was, "Get big fast." The whole goal with Uber is to utterly crush all competition until they're the only game in town. The only other explanation for Uber is that they're banking on self-driving cars and are hoovering up data from the app towards that goal.
Uber only has one way to win, no matter what, beat every other taxi company. They either do that by running every other taxi out of business, or find their Holy Grail of self-driving taxis.
Do investors have the stomach to fund Uber until either of those things happen, though?
Not sure why you would even mention publicly traded companies for your point. Now the actual stock market, comprised of millions of individual investors, is propping up those market capitalizations. The VC delivered them to their IPO, and the market accepted them, so clearly they did something right as far as they are concerned.
There is some truth to what the author writes, but it's not absolute.
Softbank's Vision Fund basically exists to invest with that thesis. That an extremely well-funded and basically competent team will outlast all competitors and eventually own the market. Then they will have monopoly pricing power and become extremely profitable.
It hasn't worked out that way for them.
The article is no so much wrong as it is an oversimplification.
That scene in Silicon Valley where Hendricks gets chewed out for trying to make a profit is extremely accurate.
The current system that we have is a miscarriage of Capitalism, where the HOPE of future profits is more valuable than the skill and competence to make a profit out of the gate, the way, you know, a grocery store has to before it goes under in two months.
Basically it's a giant pyramid scheme. A bunch of VCs throwing companies around like hot potatoes until the biggest idiot ends up with an overvalued load of crap.
I run a small website that generated higher profits than AirBnB, Uber, Lyft, WeWork, Lime, Pinterest, Slack, Snap and Zillow combined. In fact, it generates more profit in a day than they did in the last decade.
This article gets a lot wrong. For one, it calls Rupert Murdoch and Betsy DeVos VC and I think that's a real stretch of the term VC. Everyone likes to point out Theranos as an example of Silicon Valley Hubris when in reality no respected SV institutions put money into it.
I think you're flirting with a no-true-scotsman argument. VC can mean everything from "seed fund" to "private equity" to "family funds". Giant investments at later stages are frequently from institutions that don't do early stage investments.
And Tim Draper, at least, invested in Theranos. Theranos isn't as much an indictment of Silicon Valley as news articles say, but it's still a bad look.
Years ago I worked at a small, like 5-7 person startup in soma where we were surprised to find Rupert himself personally come by, later send some chiefs to do due diligence, and cut us a check. We worked with a few of his brands after that.
It didn't feel different than any other VC experience I've seen as an employee, whether that was A16z, Sequoia, etc. If it looks like a duck...
The article is primarily about WeWork and the VCs that invested in it. I don't get why so many comments in this thread are about the Murdoch/Theranos stuff which hardly features. WeWork had "real" VC backing and 95% of the text is the story of WeWork. If anything the weak point of the article is it perhaps focuses on WeWork too much and generalises from that to the whole VC industry, which may or may not be valid, I don't know. But judging by the conspicuous lack of discussion of the meat of the essay visible in this HN thread, I'm guessing either most people didn't read the article or there is enough truth to it that arguing minor semantic points is the best we can do.
You arbitrarily restrict the definition of VC to only institutions in Silicon Valley and then further gatekeep with the word "respected" institutions, which are presumably those that a-priori meet your preferred definition by not investing in Theranos? No True Scotsman indeed.
Everyone's pointing out Theranos, but if you remove it, the article isn't any weaker. Any important incorrectness that actually counters the article's point?
> A venture capitalist (VC) is an investor who provides capital to firms that exhibit high growth potential in exchange for an equity stake.
I have a friend who invested $10k into another friend's startup. Is he a VC now? If you want a term that refers to all investors we already have one - it's "startup investors".
VCs are mercenaries - they invest someone else's money and they are responsible to return the money in 10 years or bust. They take board seats, they try to drive when things get tough, they try to push companies to the breaking point because 10 years are fast approaching.
This sets them apart from FFFs or Angels, for example. Or even from Investment Bankers.
You've redefined VC here, but not for any useful reason. Putting money into a risky company is "venture capital". It's literally capital for a new venture.
The distinction you're making is between institutional and individual investors. It's worth talking about the difference between institutional and individual investors, but it's all venture capital.
One of the long running problems in capitalism or indeed economics in general is the so called agency problem where in this case you entrust Benchmark as an agent to invest your money wisely but it can be in their interests to throw it around wildly as long as they can collect 2% on assets invested or similar. Not sure exactly what the solution is.
Surely the answer is to set management fees to zero and demand that investors are paid entirely from a percentage of the ROI. And maybe that ROI is defined as dividends ... although that part might be going too far (under this definition an early investment in Google would be a writeoff).
I think (and hope) this era of unfettered partying and bro-culture capitalism is finally coming to an end (with the WeWork debacle and even a bit of Theranos finally permeating the public view). And of course, Rona forcing everyone from line engineers to hedge fund managers to take stock of their lives (and finances).
Yes, the cycle moved from 80s Wall Street into tech (a bit in the 90s but like 2014-2019 or so just felt like a giant party in the startup world). Who knows where it goes next.
It's just capitalism.
Like read ONE(1) book please for the love of god.
Concentrating a lot of wealth in the hands of few people who then have complete power over what human endeavor gets funded, and potentially given insane financial advantages over more virtuous competition, to obtain monopolistic positions.
It turns out : this is bad, empirically.
Of course any analysis a priori would have also netted this result.
Monopolies (or even high concentrations) of power are bad, whether that's financial or legal or whatever. However, democratization can redistribute that power back amongst the people. The goal should be to work towards nearly even power, which prevents the abuses in power. If the government was controlled by the people, its "monopoly" wouldn't really be one, because it couldn't be abused by those who wield power within it.
How are we supposed to fund new capital-intensive ventures otherwise? The government just subsidizes everything at the taxpayers' expense? (Welcome to Canada and Europe.) The government just picks winners in advance? (Welcome to the PRC.)
Capitalism is supposed to reward people that were able to succeed from previous ventures, or alternatively allow people to voluntarily pool more modest amounts of capital together. Everything gets distorted in the real-world, of course.
Running unprofitable companies at a loss with no clear plan for making money (apart from the Pinky and the Brain plan of taking over the world) is not how capitalism is supposed to work, and only persistently low interest rates and a global savings glut have ever facilitated it.
This used to be called dumping, and was a crime.
The new part is that the companies don't even make any money at their core business.
Take Hailo, an uber-like startup that operated a franchise model. They made money, were expanding slowly and profitably, and followed the laws.
They were driven out of business by Uber who still (ten years later) have not made any money, and have been subsidised by deluded pension funds looking to juice their returns.
Whatever that is, it's not capitalism, which at base is a system designed for people to invest money in the hope of getting more money back in the future.
Hailo was capitalistic, Uber is some kind of weird mishmash of communism and hipsterism. It's like the performance art of capitalism; all of the trappings and none of the substance.
(For Uber, substitute your least favourite unprofitable unicorn).
However it works is how it works. Capitalism absolutely devolves into the corrupt oligopolies we have today, where businesses capture government and entrench their position and power over everyone else. Strong organized labor and various forms of social democracy can resist these trends, but what's happening in America is just Capitalism running its course.
You can't take "well this is happening but it's not real capitalism" even though everyone's calling it capitalism. It's capitalism. Capitalism is busted and rewards greed and concentration of wealth.
It doesn't take a galaxy brain super genius to figure out that an economic system that relies on infinite growth doesn't exactly pan out in the long run, and what we're seeing in America today is just the late effects of the capitalist system that we allowed to run rampant because apparently any amount of socialism is communism and scary because reasons I guess.
>Capitalism is busted and rewards greed and concentration of wealth.
Capitalism always had a cyclical nature presumably because humans are cyclical. Things go wrong and then they go right and then they go wrong in an endless cycle. It's like an engine that breaks down every now and then. You can fix it and you should.
>It doesn't take a galaxy brain super genius to figure out that an economic system that relies on infinite growth doesn't exactly pan out in the long run
Capitalism doesn't rely on infinite growth. It drives growth by rewarding increased productivity and innovation. However, since it does so through monetary rewards it is entirely possible that government policies make it easier to acquire money through non innovative or unproductive means. QE and low interest rates are a pretty good example of this. That money can be used to acquire competitors or simply stay alive for much longer.
Rewarding greed would indicate that the companies would be making money in some unwholesome way (e.g. selling formula milk to mothers in countries where there is no decent water, leading to the deaths of babies). Ditto concentration of wealth.
What I'm giving out about is the opposite, where money is thrown at these deeply unprofitable ideas which keep expanding on the basis of the greater-fool theory.
That's a really big departure from what capitalism used to mean, and I think it's worth calling this out.
> Who cares. That's where capitalism is now because letting it run rampant created and caused this.
So you're not engaging with my argument, and just spouting off anti-capitalistic talking points (which I would agree with, if they were any way germane to the points we're making here).
I'm not sure there's much point in engaging further with you. Have a great day :)
But if all businesses are run at a loss, the entire system will collapse, so the system requires some companies to be run profitably.
I still maintain that structurally unprofitable companies are an abberation caused by negative interest rates, and I don't think it would be recognised as capitalism by time travellers from the 70s.
>But if all businesses are run at a loss, the entire system will collapse, so the system requires some companies to be run profitably.
Not if all the businesses are monopolies. The concentration of wealth allow for an ever greater capture of markets as well as the government that would reign in their monopolistic behavior. This should be obvious with what just happened with Uber, who successfully bought legislation to defend their unprofitability but movement towards monopoly, and has large executive overlap with the former Obama/soon-to-be Biden administrations.
>I still maintain that structurally unprofitable companies are an abberation caused by negative interest rates, and I don't think it would be recognised as capitalism by time travellers from the 70s.
Maybe its not an "abberation," but fiscal policy put in place to further the wealth and power of existing Capital owners? It's also irrelevant in practical terms what people 50 years ago called something versus today. Countries, businesses, religions, ideologies etc both persist and change, regardless of whether they remain recognizable to anyone at a given point in time.
> Not if all the businesses are monopolies. The concentration of wealth allow for an ever greater capture of markets as well as the government that would reign in their monopolistic behavior. This should be obvious with what just happened with Uber, who successfully bought legislation to defend their unprofitability but movement towards monopoly, and has large executive overlap with the former Obama/soon-to-be Biden administrations.
Are you joking?
You seem to be making some kind of corruption argument around large companies, which I think is fair. That's not what I'm saying though.
I am saying that if company A earns $90 and spends $100, then the extra $10 must come from somewhere (normally further investment).
As a thought experiment, I noted that this would not work if every company spent 10% more than they earned, because where would the money come from? You seem to say that this doesn't happen because the businesses are monopolies.
Can you clarify your argument on this specific point further, as I really don't understand it?
The point of capitalism is that people with capital get to make decisions about what to do with it. They don't have to put it into things that make money, they just need control over it.
Yeah, structurally unprofitable companies are not capitalistic, as they do not facilitate the accumulation of capital.
There's a transfer of capital to service users and employees (and definitely executives), but this is dependent on the infusion of external capital (as the company does not produce enough capital to fund its own activities).
I feel like either I have gone crazy, or the world has.
In the context of this article and conversation, you are saying that companies that give away their product, for too low of a price, and too cheaply, in which consumers benefit too much is.... parasitic?
Giving things way to people for less than they are worth may not be good idea, but I don't think I would call that parasitic.
You make it sound like the companies who run this shit are penniless, they're not, they're making millions of dollars of actual cash. There's no charity going on here.
By force, eventually. Those daring to have their own interest in mind instead of the greater good should receive a healthy struggle session and their wealth confiscated. For all mankind!
Or its just a matter of not letting bad players to ruin all the game.
Too many greedy blood suckers will drain and kill the cow eventually.
The word here is balance to have a sustained long running system that can benefit the maximum number of people.
It doesn't need to be a false dichotomy between what it is now and stalinist Russia comunism.
Note: the blood suckers is not the whole of the capital market of course, they produce value. The problem is some players and some practices..
The article doesn't say that VCs shouldn't be self interested. Nowhere does it say that greed, for lack of a better word, is bad. The herd mentality of the VCs investing in WeWork wasn't about greed, or self interest. It was about Kool-Aid, a term the article does use.
The point of the article is that it is this Kool-Aid thinking which deforms actual capitalism.
A handful of "too big to fail" companies will get freshly printed bailout money, while the small business owners destroyed by COVID lockdowns will be told to go work minimum wage at Walmart, that was exempt from lockdowns from day one.
And for the rest of us, well, wages won't go up to match the freshly created dollars, but prices will.
Bank bailouts happen because people don't want to lose their bank accounts and the money within them. Yes you can claim insurance but since everyone is doing that you can expect to wait months until you get your money back.
I don't see that your comment actually contradicts the comment you're responding to. So I think you're being unnecessarily nasty to the person you're responding to.
I mean, do you think the fact that the Dems are pushing for a 3T stimulus, contradicts the statement that the Biden administration will bail out banks and let regular people be screwed?
Maybe that's your logic, but it's not clear (and if that is your logic, I'm not sure you're right).
My statement is that the Biden administration doesn't get to appropriate funds, Congress does. And if we're looking for an oracle to tell us precisely how the coming Congress will appropriate those funds, we have two example bills right in front of us that we can look at to tell us in detail what the priorities of a Democratically-controlled and Republican-controlled Congress will probably look like.
> My statement is that the Biden administration doesn't get to appropriate funds, Congress does.
Bailouts of the 2008 variety involve the Treasury department, so the Biden administration would be a big part of any future bailouts of that ilk.
If your point is that Biden can't act unilaterally, and Congress is part of it, sure. I mean, is that your point? What is your point? Being nasty to people?
> two example bills right in front of us that we can look at to tell us in detail what...
I don't think anybody was arguing with you about that. But maybe I just can't follow the thread of the argument anymore.
Both parties were behind the 2008 bailouts. Both parties screw people. Both parties would most likely support more bailouts, and/or other corrupt things. We don't need the two stimulus bills to confirm or deny either of those facts. I don't see how they are relevant.
> We don't need the two stimulus bills to confirm or deny either of those facts. I don't see how they are relevant.
There is a specific pair of bills available on the Internet. You can read them and determine how much scope they leave the Biden administration to implement bailouts that you disagree with. You could even lobby your Congressperson to improve that aspects and remove flexibility from the executive. Doesn't that seem extremely relevant?
No because they aren't corporate or bank bailouts.
My notes (from early November) indicate that the bills are about 1/3 healthcare spending, 1/3 state and local government spending (i.e. "bailouts" of those governments), and 1/3 unemployment benefits. Not sure how accurate or up to date those notes are.
I would presume that corporate or bank bailouts would be separate bills that don't exist right now.
I could be wrong about any of this but my point is, what you think is obvious, isn't, so maybe we should be nice to one another.
> You could even lobby your Congressperson to improve that aspects and remove flexibility from the executive.
Why say something like that? I mean, you know it isn't true, and so does everybody else. Unless you think I, personally, am a huge bank? I'm genuinely curious why you think saying something like this helps. I mean, do you actually think a Congressman gives a shit about what a normal person says? They don't. For every 1 of me, there would be 1,000 demented idiots writing to them (who they also don't care about).
What you're suggesting is that Congress could potentially pass new bills. And my point, going up to the top of the thread, is that Congress -- and not the Biden administration -- would be the one making this decision. You can get a flavor of what they might do by looking at their past decisions.
What you're doing instead is hypothesizing without evidence that they'll do something that they have demonstrably not opted to do -- and also implying cynically that the partisan makeup and/or public pressure on Congress will not change the outcome. This despite the fact that we have months of Congressional action from both parties to examine, and none of it bears out your predictions.
What puzzles me is that many people understand it, they understand that Trump would not have done the bailouts, but they still voted for Biden over Trump. Their hatred for Trump's personality was somehow a stronger factor than the very grim economic consequences affecting them personally.
I'm working on some arbitrary science project. I have ongoing serious, well informed, disagreements with my colleague about how to proceed. Sometimes we later find out he's right, sometimes I'm right, sometimes we're both wrong.
Should I instead hire my neighbors two year old because my colleague and I disagree?
There's a different perspective as well. Let's say you have one colleague that speaks his mind all the time. Sometimes he says dumb stuff, sometimes suggests useful ideas. And another colleague, who's very nice and polite, agrees with everything you (and others) say, but he only does it to get optics points and is actually plotting how to replace you with someone cheaper.
This is happening here and now. Tech monopolies are commoditizing human labor, and social justice/immigration policies use noble excuses to bring in lower bidders into the commoditized market. This hurts everyone's well-being, this creates unnecessary tension between groups that are forced to compete directly instead of operating in separate market segments, but hey, the figurehead behind the operation sounds like such a great guy, when he reads his speeches from a teleprompter.
I just don't understand this. A R-controlled congress agreed to bailouts that Trump could have vetoed. A stimulus went through, and the majority of Americans agree it's a good thing (not saying it was or not, economically speaking). Biden also wants to do a stimulus, so am I missing something?
You're not missing anything - people see the world through a filter of their biases. The Trump administration & a republican congress also passed significant tax-cuts for corporates, which were pretty milquetoast[1] for everyone else. To add insult to injury, the corporate tax-cuts are permanent, but the one for the "rest of us" expires in 2021, IIRC.
1. IIRC, there was a teacher who complained at a senator's town hall that her $17 annual tax savings were worthless, and he retorted that she could use it to treat herself to a burger. To be completely honest, I can't recall the exact amount - or suggested purchase, but both were laughable.
Trump already did the bailouts with the PPP loans, which largely went to big businesses and fraudsters and by muscling the Fed into intervening in corporate markets. There is very little difference on economic policy when it comes to screwing the working class in the United States.
Believe it or not, I grew up there and I saw where the road to excessive centralization leads. And it's kinda spooky to see the West recreate every fallacy of USSR, sincerely believing that this time it will be different.
> it's kinda spooky to see the West recreate every fallacy of USSR
Centrally-planned production targets for industries? Price controls? Strict control of information by the government? Single-party government? Prevention of emigration? Government harassment and persecution of intellectuals? Abolition of private property?
I'm not really seeing any of that here in the West. What are you referring to?
I'm not American so I could be wrong on this, but wasn't it the Trump administration that passed the previous stimulus package that disproportionately benefited the largest companies?
From what I could gather, there was the PPP program [0] that had a restriction of "no more than 500 employees per location". Hence, it applied to small businesses, but bigger businesses segmented into several physical locations also made use of it.
It did not result in redistribution of the market, since it did not explicitly lead to closing of businesses. If the program did not exist, small business would be forced to close, while the big segmented businesses would be more likely to stay afloat. So if you transactionally compare the "PPP" vs "no PPP" scenarios, the "PPP" scenario is better for small businesses.
2008-style bailouts, and the lockdown exemptions that California is doing, specifically benefit big businesses. If the big businesses were not bailed out in 2008, they would go bankrupt, opening market share to smaller players. If the COVID lockdowns affected big and small businesses the same way (say all restricted to selling essential items only), the market share of small shops would not be transferred to Walmart. Instead, the market itself would temporarily shrink.
Perfect example of what disinformation does to Americans. You are better informed than more than half the American nation. And sometimes is not even the lack of information but the desire to believe one narrative over another.
> they understand that Trump would not have done the bailouts
There is no evidence to support this statement.
The economy is fucked, regardless of who is president. It was fucked in 2008, it was fucked leading up to 2008, it's been fucked since.
It's a humpty dumpty nobody can put back together again. Least of all, people on the internet who think a single decision is somehow a deciding factor in any of it.
Hatred of Trump's personality was cultivated daily for four years by the DNC media. This was arguably a way to defuse populism, in much the same way Bernie Sanders was arguably a pied piper to nowhere for socialist leaning Democrats.
We have an interesting period of history ahead with globalists versus populists all over the western world.
What type of businesses investors back will arguably divide into those two factions also, basically nationalist or offshore.
> I better use some Tic Tacs just in case I start kissing her. You know I'm automatically attracted to beautiful—I just start kissing them. It's like a magnet. Just kiss. I don't even wait. And when you're a star, they let you do it. You can do anything. Grab 'em by the pussy. You can do anything.
On the one hand, yes it should be read as a metaphor, like “grab ‘em by the balls” not a literal statement, and the media lets people write criticisms as though it was literal all the time, which is bad.
OTOH, the metaphor means “do something excessively forward like kissing someone out of the blue” which is also pretty bad. The clarification just means he’s a chronic harasser and not a sex criminal. It’s not much better. I understand why no one wants to go to bat for the clarification—even clarified, it’s still harassment.
He was not using it as a substitute for "grab em by the balls"
> I better use some Tic Tacs just in case I start kissing her. You know I'm automatically attracted to beautiful—I just start kissing them. It's like a magnet. Just kiss. I don't even wait. And when you're a star, they let you do it. You can do anything. Grab 'em by the pussy. You can do anything.
The full quote is inconclusive but consistent with my hypothesis that he’s not endorsing sudden crotch grabs but endorsing unwanted advances like kissing and fondling. It’s still really gross and harassment.
You mean Trump cult personality? I am usually centrist with give and take from both the left and the right, but lately Republicans stroke me as braindead on most attempted conversations and they don't seem to be waking up from this spell.
McConnel is the walking corpse. Trump could've gotten more legitimate stuff done if that old turkey wasn't just blatantly ignoring democrats all the time. Trump even wanted a bigger 2n stimulus than the democrats...which they would've happily agreed to.
Yes I did pretty much mean attacking 'Trump personality cult'. I wasn't arguing for the blue or red team, I was making a broader point about future funding in the western world's current political climate. I regard the DNC as effectively the Republican party circa 2000 right now though, and there are two giant vacuums left by what are/were arguably strawmen in Sanders and Trump.
In some sectors of the economy, we haven't had capitalism for decades. The economy is highly artificial. It turned into a giant ponzi scheme and it constantly needs to use media to brainwash its participants in order to give legitimacy to fickleness. Fickleness and fragility is what you get when you have a system founded on an infinite debt bubble which keeps spreading itself thinner over time.
People literally have to go insane to get by in this insane system. The industries which are closest to the money printers are incoherent and have nothing to do with capitalism.
Gee,where have I seen this strategy of using private capital to subsidize a deliberately unprofitable business just long enough to drive all of its competitors out of business so they can form their own duo/monopoly before? VC yielded like this it isn’t creating innovation or anything of value, it’s perverting the spirit of capitalism.
I agree this is not how capitalism is supposed to work in the spirit of the version that many democratized nations were sold. But I also agree with another downvoted post, in that this has become the expected behavior. I guess the point is that VC didn’t start this fire, it’s just the latest incarnation of what seems to be the endgame of capitalism. Proponents of capitalism sell a version of it where innovation and efficiency are rewarded through a kind of economic Darwinism where the fittest survive. But it isn’t hard to find examples that show it is capital itself that drives success and allows the unhealthy and unfit to prosper at the expense of superior competitors or even entirely alternative industries.
Google isn't expecting to win any endgame with gmail. They're already monetizing it and as a consequence, it is profitable already and has been for quite some time.
You just literally stated what the end game was: monetize all uses of email, everywhere.
Remember what Google's overarching goal is supposed to be? "Organize the world's information," IIRC, with the subtext of "... and monetize it." This is literally what gmail is to email.
Google has not driven out all competitors with GMail. They have a (very) comfortable business in GMail with a plurality not even a majority of the market.
I'd say expanded is probably the better term to use here. I don't think finance is really moving to SV. The weather is great, lots of great, important companies, and the investing climate is insane, but "finance" as it is in NYC is more global in nature. I think SF will continue to rise as a peer to NYC but I'm not sure I force anything supplanting NYC as the finance capital. Proximity to trading platforms, and a quick flight to Europe, for example, are some of the unsung benefits.
I think its the opposite. People are weighting the events of 2020 far too lightly.
The American identity is under siege... being told where you can and can't go, and under what conditions (mask / no mask), is totally alien to an American, and I don't know why it would shock anyone, anywhere, that understands even the slightest bit about our culture to hear this.
And that's just one small aspect of the cultural component of this pandemic.
No... 2020 is going to change the entire world, or more accurately, COVID-19.
EDIT: Oh yeah, Morgan Stanley is already issuing guidance that 2021 is going to be a commercial real estate bloodbath, lol, so, you know... there's that.
Not to mention the huge influx of people into flyover states once they realize New York is only a nice place to be if you can actually go out and do shit. If you can't do any of the shit that New York is known for, why would you live there?
This is clearly written by someone that has little to no startup experience. As someone that has spent 15 years as a founder I can tell you that the opposite is true: I have seen startups racking in seemingly endless funding only to be beaten by much smaller / less well funded competitors that happened to have better strategy or execution. The examples are endless, more recently we heard about Quibi ($2B funding!) failing, Yik Yak, WeWork etc
There are markets that are capital intensive, and others that are really commodity spaces where winner takes all (Uber comes to mind) but for the most part, the smartest VCs in the industry will tell you that you should worry about strategy and execution, not raising a ton of cash which creates a bunch of problems on its own.