fellow econtalk/cumtown (well more red scare) listener here..
The latest feed refresh used to make me feel "Wow how will I have time to listen to all of these!" whereas now its "God do I really want to listen to any of these."
I guess previously we were all starved of interesting long form conversations (or socialist edgelords) but now we're reasonably satiated and like anything else it has to be good to hold our attention.
I still find a good econtalk pod is one of my greatest pleasures - russ & munger episodes particularly.
I just got back from shenzhen where I purchased a handheld ultrasound probe with built-in screen about the size of a really chunky smartphone for $1800 with wifi & connection to ios/android
Off-topic - but currently in India and the uber experience is absolutely amazing.
The handful of times we have used taxi drivers, none of them can find the place where we are staying even with written directions in english and in hindi or even with a hindi speaking person instructing them via the phone. There is always some niggle over pricing and whatever you pay them they claim you are shortchanging them.
With uber they go to the right place EVERY TIME, there is no haggling at all, they dont try to angle for tips but are very grateful if they get tipped. It is a complete gamechanger for travel in these areas.
In Boston it's practically the opposite experience. Cabbies almost always know exactly where I'm going and the fastest way to get there, because they've logged the hours necessary to learn Boston's confusing street system. Uber drivers are usually flipping between at least 2 GPS systems, and frequently get lost, confused, and turned around. The rider experience has really dropped off now that any Joe can make a few bucks as a part-time Uber driver.
Yes, in 3rd world countries, Uber is an improvement of several orders of magnitude over traditional cabbies and cab companies. Even moreso for tourists. For this reason I think they'll hold steady in these regions even if there is a big change in their economics in the future.
Efficient market theory is based on the fact that when you leave people to their own devices, they tend to do a far better job and be better off than if you try to help them. Basically everyone agrees on that.
So why do we accept efficient market theory for basically everything, yet when it comes to currency someone has decided that we need elaborate schemes of variable government decreed micromanagement in order for things to work?
In terms of keeping things simple and letting the market decide, the perfect currency would be global, unable to be printed or manipulated, of a fixed amount, so that external interference is impossible, and people knew exactly what they were dealing with at all times. The closest we have is gold (and maybe bitcoin).
>yet when it comes to currency someone has decided that we need elaborate schemes
Money is a commodity, and the demand for it changes over time. Do you really believe that we should have the same "amount" in circulation as we did 200 years ago?
>unable to be printed or manipulated
Think of money as a concept. It's a means to perform financial transactions, nothing more. My ability to perform such transactions shouldn't be constrained because we haven't "cut down enough trees make paper", or "dug enough metal out of the ground" or "solved enough mathematical puzzles".
>"My ability to perform such transactions shouldn't be constrained because we haven't "cut down enough trees make paper", or "dug enough metal out of the ground" or "solved enough mathematical puzzles"."
Why would it? You simple sub-divide each unit until you have the necessary precision (this works for physical currency, too). I'm really curious why you think a lack of growth in the money supply would hinder you from making a transaction?
Really, government-mandated inflation is nothing more than obfuscated stealing (or wealth transfer). Think about it: If it were simply a matter of "we need more physical(or virtual) money in circulation so that the transactions will flow" then the logical (and fair) solution to that would be to simply apportion some sort of "income" to each individual based on their current capital. But that's not how they designed it, and based on that, it shouldn't surprise anyone that there are many out there who feel that inflation is unfair to a large majority of people.
Take land - demand for it changes over time, the exact same amount is in circulation as there was 200 years ago, the value goes up as population increases and it becomes more scarce, why can't money be the same?
>Take land - demand for it changes over time, the exact same amount is in circulation as there was 200 years ago, the value goes up as population increases and it becomes more scarce
Why is that a good system? Why should people who happened to be here before our time have an inherent economic advantage by owning land? Wouldn't the world be a better place if we could cheaply create all the land we wanted?
The world is not fair, period. You can't expect individuals to work their asses off to strive for something better for themselves and their children, only to turn around and complain that their children suddenly have "inherent economic advantage"... followed by a swift call to somehow "fix" that so that everyone is equal all over again.
Oh yes, of course. Some individuals did some rather bad, questionable things to get an advantage in this world. But until you can prove that all "well-off" individuals did that, you have no moral ground to stand on.
>But until you can prove that all "well-off" individuals did that, you have no moral ground to stand on.
I have no idea what you're talking about.
Are you telling me that if we had the technological wherewithal to "create land" at will, you wouldn't use it? That you'd recommend we continue to deal with land scarcity? If not, why would you recommend those same actions when it comes to money?
>"Are you telling me that if we had the technological wherewithal to "create land" at will, you wouldn't use it?"
See, land is not the same as money when discussing inflation. But most of my comment was directly discussing plain money-printing or inflation, not land-creation. And if you really must know: if we had some magical-fairy-powers to create a physical resource out of thin nothing (with no cost/effort), then I think land ownership would be the last thing we'd have to worry about. You've effectively created a post-scarcity economy.
>"If not, why would you recommend those same actions when it comes to money?"
Please re-read my initial comment. Your entire argument rested on individuals having an unfair advantage simply because they were "be there before" us. And I basically told you that you'd be stealing from honest, hard-working peoples' children by devaluing the value of their possessions.
Wait - but quantitative easing usually involves buying back government bonds (in recent times it has also involved buying riskier instruments like collateralized debt obligations (eg. bundled mortages from freddy mac/fannie mae))
But government bonds are issued by the government as a form of govt debt to finance the federal government deficit.
So doesn't that mean that money IS being printed to finance government deficit? It's just that it goes through a slightly convoluted path to get there?
Total vaporware.. consumers vastly overestimate the value of their own attention and assume it can fund expensive things like this. If it can be ad supported why do you need to pay $10 for the "app" via kickstarter?
Has anyone considered the grameen model of peer pressure lending in P2p marketplaces?
You signup with your facebook account, it records all the details of your facebook friends, and if you go into default on your loan for more than 3 payments then it starts contacting your facebook friends automatically and stating that unfortunately you were unable to keep up with your debts and could your friends chip in some money to help cover things??
the threat of losing face would probably decrease default rates significantly, therefore allowing a decreased interest rate to be charged.
Not to be overly emotive, but honestly, fuck Sam Altman on this one.
If a person founds or cofounds a company worth >5million, they should become a millionaire and have lifetime financial security. The VC already in all likelihood already has lifetime financial security.
VC's bank on an 80-95% failure rate, so they are basically sacrificing lifetime financial security for 9/10 of their founders in order to increase the likelihood that 1/10 will be a bit more miserable and therefore work harder to increase the chance of a big exit.
As a founder of a company that's raised $25M combined over our seed, Series A, and Series B, I think Sam's coming from the right place. We raised a $2.5M seed round and a $7.5M Series A. At no point during our seed and Series A (the time period you're talking about) would it have made any financial sense for the founders to cash out even a penny. We felt this way because we had and still have genuine intentions of building a huge company, and every penny should be invested in growing the company. If we had instead felt differently, we would have tried to cash out some of our equity (which we didn't), and that should have been a red flag for investors to stay away.
There's nothing wrong with trying to build a company to flip it for a few million in a year. Even better if you can do it without taking any outside money. If I were even an angel investor though, I would run away if I had any suspicion that that was the case.
Also, if your company is worth $5M on paper due to investor term sheets, there isn't any really meaningful way you can achieve financial security unless you sell almost your entire stake in the company, which investors obviously wouldn't want to partake in. $5M from a term sheet doesn't meant $5M of liquidity.
As an aside, I think your reply is incredibly immature, but I'm not going to use that as an argument for why you're wrong.
Congrats. You guys have a great product and deserve your success.
Tomorrow Youtube or Twitch could expand their offerings to include your business model and you may find yourself irrelevant within 6 months.
I had a liquidity event last year in which I had the opportunity to sell either none, a part, or all of a holding in a product I strongly believed in for $6 million. I cashed out $2 million, kept 2/3rds equity. Since then, despite my belief in the product, it has lost most of it's value. I am very relieved (as is my girlfriend!) that I took (some) money and ran.
When you are young you can feel a sense that success is inevitable and you want to keep doubling down, but there are a truckload of people in their late 30s and 40s and 50s for whom things just never quite worked out who would give anything for the security that a couple of million dollars provides.
Wait: doesn't the third graf of this comment answer your original question upthread? You cashed out 2MM, which came directly out of the hides of investors, who lost most of their investment. How is this a good story? When you take substantial money from an investor, your job is to earn them a return. That's not a moralism; it's definitional.
I "got liquid" 2 years ago. I don't have to worry about whether I served the best interests of my investors, because we didn't take funding. If your instinct is to say "fuck VC", you shouldn't be taking their money either.
>If your instinct is to say "fuck VC", you shouldn't be taking their money either.
This is a key takeaway I think. If you take investor money, you de-facto lose the "creating value" monopoly despite the fact that the founders are in fact the ones who are creating value (by building the business) - not investors.
What happens is causation gets muddled, so an investor can always say "well it wouldn't have happened without me!" when that might not have been the case. No one will ever know though.
When you execute a business plan that can't possibly work without a runway bought with millions of dollars of someone else's money, there's some pretty clear causation.
This appears to be a story about someone who created no actual value walking away with 2MM.
That's fine; it's not per se unjust. It's just not, like, a moral imperative that it happen that way.
Also: speaking as someone who has been doing startups since 1995 and only recently had a significant success: I call total bullshit on the idea that founders "bet their lives". We're some of the most employable people in the world.
>I call total bullshit on the idea that founders "bet their lives".
So much this. It is one of the most annoying parts of the startup narrative that technology workers who spend parts of their career building companies are taking huge risks or that it is in someway abnormal to give up salary now for deferred compensation later (every person who gets a graduate degree full time does this).
In fact, the first time you raise an A round, you get more employable, even after the business fails.
It's like the opposite of betting your life.
About the worst thing you can say is that there's an opportunity cost from not starting a different more successful startup or not landing a job that would be the envy of 99% of employed Americans.
You need a scanning electron microscope to see the violin playing the sad song for VC-funded startup founders.
Say Tim Cook cashes out $50 million in Apple stock today. Say in a year that same stock was only worth $40 million.
Would you then say that he walked away with $10 million more than the actual value he created?
The point here is that at the time the founder cashed out his $2 million in equity, it had a value of $2 million. Not zero, not nothing. And the financiers obviously agreed, and took that equity in return.
You can't judge the deal by the direction the value took later.
It's hyperbole, fine. But the marginal value of the same million dollars to the pro investor and the founder are wildly different. To one it's a shrug, to another it's a life-changing amount of money.
I'd also be interested in seeing the expected lifetime outcomes. Taking a hit for several years, every few years, is probably not as wonderful as you're making it out to be on the average.
There will always be competition. I'm a huge fan of both YouTube and Twitch. I spend most of my leisure hours watching videos on those sites. They may enter the space, but even if they do, they'll have a long way to go before they can make us irrelevant. If we were ever to become irrelevant, it would most likely be due to other things, not those players.
The mindset here is that financiers owe company founders financial security. Financiers are rich. But, relative to the economy, so are founders, even out-of-the-money founders. Why are they uniquely deserving of redistribution? Why aren't we instead arguing for a 95% tax on VCs that funds job training for people in the manufacturing economy?
Because the founders have created the business and have created several million dollars of value (based on the VC's own valuation). Why should they not be able to cash out for a lifetime of financial security?
Clearly they didn't solely create the business, because they had to take other people's money to do that. Why should we single them out for special treatment?
if the founders create the value, why would you give them a chance to leave with discounted future profits before the value is realized in a real (not discounted) profit stream?
If profit isn't there, value is theoretical. You're just taking money from the VC (and the business' growth). You may find future rounds harder to fund.
So amazon's market cap of 144b is theoretical because they don't have profits? And bezos should be paid enough salary to survive but not so much that he is no longer "hungry"?
First, Amazon's valuation is theoretical. Their valuation is so detached from their fundamentals and so dependent on a narrative about their future performance that Matthew Yglesias describes them as "a charity benefiting American consumers funded by Wall Street".
Second, there's no valid comparison between the A-round valuation of a startup and Amazon, a giant publicly traded company with a decades-long track record and huge cash flows. Mutual and pension fund managers invest in Amazon. To a first approximation, none of those managers directly value startups.
Just out of interest, is there a company which provides covert early exits for founders? For example I meet with a founder, they sign a contract saying secretly that they will give me a share of their equity in 2 year's time or whenever a major liquidity event occurs, and in return I pay them an amount based on current valuation?
I have heard of loans either secured by or "based on" shares of privately-held startups. I have no idea how common this is -- probably pretty uncommon.
I would be interested to know (1) what the legal and regulatory implications of such a deal would be, and (2) what the implications would be with respect to the deals the founder would have signed with regard to the equity they were holding.
My suspicion is this couldn't be done without causing problems in one or both domains, but I don't base that on anything solid.
Really? Most early investors make 90+ % of their return from the tiny fraction of investments that become huge. If the founder is willing to cash out for current market value, doesn't that imply the founder doesn't believe the equity will quickly grow 1000-fold? And if the founder doesn't think the company will become huge, wouldn't the investor be foolish to think so?
This isn't about squeezing the founders, it's about passing on stuff that might be glittery, but probably isn't the mother lode.
If the founder is willing to cash out for current market value, doesn't that imply the founder doesn't believe the equity will quickly grow 1000-fold?
I don't think it is that simple. The reality of startups is that there is too much happening in the market to accurately predict outcomes based solely on actions of the founders.
Given that, a smart founder probably should hedge this inherent market risk by liquidating so that in the case of a failure, given the high percentage chance of that, they aren't destitute and can start something else/get a job.
Arguably an investor should look at this as a prudent strategy given the risk profiles. Unfortunately there are too many confounding factors for it to be seen as a "rational" economic decision. Investors want fanatics and such behavior is way more pragmatic than fanatical, so it signals that the founder isn't rabid for full tipped scale risk/reward balance.
I think red flags start flying if founders are doing this and spending time on other things, but just as a general case it seems very rational to liquidate some portion early if given the opportunity.
The latest feed refresh used to make me feel "Wow how will I have time to listen to all of these!" whereas now its "God do I really want to listen to any of these."
I guess previously we were all starved of interesting long form conversations (or socialist edgelords) but now we're reasonably satiated and like anything else it has to be good to hold our attention.
I still find a good econtalk pod is one of my greatest pleasures - russ & munger episodes particularly.