Are you suggesting that YC's success is because of the long-term US monetary policy climate?
That's a very incorrect suggestion. It reminds one of how people like to pretend that Elon's money is because his family had an emerald mine. Do you think that a significant percentage of wealth inheritors go on to immigrate across the world and invent electric cars and reusable rockets? Same thing with YC and the investment climate.
This is not specific to YC, but there is no way a company like Uber would be around in a high interest rate environment. You don’t get to burn 32B, keep reducing scale, and still be unprofitable unless the market is flooded with money and it has nowhere to go.
The pandemic period was the best example - monetarily, that was the last 12 years compressed into a 2 year window. The amount of money in the system was so immense that anything and everything was being funded at absurd valuations.
YC's success is due to a combination of luck, skill, and yes, the most juiced bull market in a century. That last one is less of a factor than one might think though. Everyone has benefitted from easy money. So if were a primary factor then every early stage investor would have a 6% unicorn hit rate and that's clearly not true.
I'm not an insider and I don't personally know any of their principals. But I have followed their work and read what they write, and I am absolutely certain they are considerably above the mean when it comes to intellect and operational ability.
I also suspect they have benefitted to some greater or lesser extent that is unknown to me from connections in government. But like it or not thats part of how the game works, so if you want to be at the top of the game you have to play ball.
Palantir is one of their big successes because the government has chosen to pay them for big contracts; a government who thought differently might have not only declined to do that but shut down their whole operation as fundamentally harmful to regular citizens. Likewise Uber and AirBnB built their whole business pretty knowingly on open violations of the law; a government faithfully representing its citizens' interests might easily have decided to shut that down (as e.g. the government of Japan did; both companies barely operate here). Those are just the biggest names that come to mind; I'm sure there are similar things at every level in their portfolio (e.g. not so long ago there have been stories about YC funding a malware distribution company and a company that makes illegally usurious[1] loans; at the time dang claimed pretty vigorously that YC didn't and wouldn't fund companies that do that, but the evidence that they did fund the company and the company was doing that seemed pretty irrefutable).
[1] when lending to veterans, which the company in question did
Well this is different. Palantir is a defense contractor, their biggest customer IS the government. So of course connections matter for Palantir. My question pertains more to start ups in general.
There are countless ways that government connections could be very useful if you're trying to ensure the success of portfolio companies, especially if they're operating on regulatory frontiers.
Nudging policymakers in a favorable direction on legislation that could effect your portfolio is the most obvious, but there are tons of other examples as well.
I'm not arguing that this is a primary driver of YC's success (I don't know the extent, if any, of their government influence), but you'd be silly to think that political connections can't benefit an investor.
For the simple fact that investment leverage scales super-linearly with investment size, I think you may have mis-judged how much the market affects valuations.
Elon did not invent electric cars. Elon also did not found Tesla. He was an early investor, ousted the real founders, and started calling himself a founder.
He also did not invent reusable rockets. (And that's beside the fact that these don't exist yet - it is but a dream at the moment.) He funneled a large amount of taxpayer money into SpaceX, while not really improving much on anything (he _promised_ costs savings, but did this really happen?).
What he did invent is the snake oil salesman pitch. Oh wait, actually... he did not invent that either.
Elon M and his well-wishers moved the needle to where it is today. You can't even compare the achievements of Elon M's backers to Meta's or Apple's big stupid bag of cash inflated by overworked subcontractors in China, and India next.
Looking at forbes 400, 22% have backgrounds with inheritances up to 1 million, 11.5% over 1 million, 7% over 50 milllion, and another 21.25% earned their way onto forbes 400 through inheritance alone. So that leaves 22% of forbes 400 maybe not having inherited that much, although the category is shared with people who inherited up to 1 million.
That's just regarding inheritance, there's also the simple side effects of growing up in a wealthy family such as having the best educational (read: networking) opportunities money can buy, having the best healthcare on earth, being well fed, etc.
I think thus it's very easy to guess that Elon would not be a hundred billionaire, or billionaire at all, if he was the exact same brain born to some working class family in south africa.
> I think thus it's very easy to guess that Elon would not be a hundred billionaire, or billionaire at all, if he was the exact same brain born to some working class family in south africa.
There are many brilliant people in South Africa who are born into wealth and none of them have reached the same heights as Elon Musk.
Even if it were the case, wouldn't your argument then predict that there would be many people MUCH wealthier than him because they were born into the vast riches and privilege that is America and Europe?
Sure but he grew up in river oaks, the local rich neighborhood to me, and his family had a massive ranch. So his rich parents made him work for spending money, dude grew up in a rich family. Didn't his family also invest a couple hundred thousand in Amazon's early days?
Ugh, I'll be honest, I'm kinda tired of this "debate." We're really going to keep peddling the myth that any hard working joe can pull themselves up by their bootstraps and become a billionaire? That's the tale we're telling with a straight face in 2023?
I don't know why you are falsely implying that Musk's money is not due to great initial capital. If that was true, it would mean that capital for investment doesn't matter, which in turn would mean that we could just as well place a 100% tax on all wealth above a certain level without any detriment.
It doesn't though, since your claim is bullshit. Elon's wealth is absolutely based on his parents' success.
He got a $20K investment from his dad for his first company, Zip2, in 1995. That's about $40K in today's dollars. X.com/paypal success seems to have happened in spite of him, not due to him. He got billions from it because he had been lucky enough to be one of the early investors.
I'm not actually saying that he's not a great business tycoon, he clearly is based on track record. Plenty of people have the kind of base resources he had without amounting to anything. Either they don't bother to even try or are too stupid or too unlucky too succeed. His parents wealth is still the catapult that launched him to his current success.
There are plenty of people who could have done what he's done but did not because of lack of resources.
If a rich great childhood was sufficient to build great businesses, then shouldn't we expect a middle-class childhood to be sufficient to build a decent business?
But a lot of middle-class people try and fail to create any kind of business.
The reason is that it takes more than money and education to build a business.
Money and education are necessary to build a great business, like electricity is for your home, but insufficient, as your home also needs good construction, running water, etc.
$40k today is not a lot even for a lot of middle class… basically his parents gifted him an equivalent of a slightly nice new car.
With X.com he did quite a bit than invest as all of the other cofounders left prior to launch. By the time they merged with cofinity Elon was the only one of the original team.
You seem to be conflating "necessary" vs. "sufficient".
Elon's inherited wealth and excellent upbringing were necessary for his Tesla and SpaceX success, but far from sufficient.
If a good rich childhood was all that's necessary to commercialize electric cars, reusable rockets, and fast satellite internet, then we'd have a lot more of these kinds of amazing products as millions of people have good rich childhoods.
