Tim O'Reilly Asks If Venture Capital Is Doing More Harm Than Good (techcrunch.com) 186
Tim O'Reilly is the founder of O'Reilly Media (formerly O'Reilly & Associates), and is credited by Wikipedia as helping to popularize the term open source. But Techcrunch reveals what he's learned about venture capital from his work with Bryce Roberts (O'Reilly's investing partner at early-stage venture firm O'Reilly AlphaTech Ventures).
"At a minimum, O'Reilly — who bootstrapped his own company, O'Reilly Media, 42 years ago and says it now produces 'a couple hundred million dollars in revenue' yearly — provides a lot of food for thought." Tim O'Reilly: The typical VC model is looking for this high-growth company with exit potential, because it's looking for this big financial return from an IPO or acquisition, and that selects for a certain type of founder. My partner Bryce decided two funds ago [to] look for companies that are kind of disparaged as lifestyle companies that are trying to build sustainable businesses with cash flow and profits. They're the kind of small businesses, and small business entrepreneurs, that have vanished from America, partly because of the VC myth, which is really about creating financial instruments for the wealthy...
The talent pool is just much greater [when you look outside of Silicon Valley]. There's a certain kind of bro culture in Silicon Valley and if you don't fit in, sure [you could find a way], but there are a lot of impediments... I've been really disillusioned with Silicon Valley investing for a long time. It reminds me of Wall Street going up to 2008. The idea was, "As long as someone wants to buy this [collateralized debt obligation], we're good." Nobody is thinking about: Is this a good product...?
It's part of the structural inequality in our society, where we're building businesses that are optimized for their financial return rather than their return to society.
"At a minimum, O'Reilly — who bootstrapped his own company, O'Reilly Media, 42 years ago and says it now produces 'a couple hundred million dollars in revenue' yearly — provides a lot of food for thought." Tim O'Reilly: The typical VC model is looking for this high-growth company with exit potential, because it's looking for this big financial return from an IPO or acquisition, and that selects for a certain type of founder. My partner Bryce decided two funds ago [to] look for companies that are kind of disparaged as lifestyle companies that are trying to build sustainable businesses with cash flow and profits. They're the kind of small businesses, and small business entrepreneurs, that have vanished from America, partly because of the VC myth, which is really about creating financial instruments for the wealthy...
The talent pool is just much greater [when you look outside of Silicon Valley]. There's a certain kind of bro culture in Silicon Valley and if you don't fit in, sure [you could find a way], but there are a lot of impediments... I've been really disillusioned with Silicon Valley investing for a long time. It reminds me of Wall Street going up to 2008. The idea was, "As long as someone wants to buy this [collateralized debt obligation], we're good." Nobody is thinking about: Is this a good product...?
It's part of the structural inequality in our society, where we're building businesses that are optimized for their financial return rather than their return to society.
Its bigger than that. (Score:5, Insightful)
Tims right, but I think the problems bigger than that. Capitalism as a whole is an evolutionary measure whos utility function is "Is this maximising profit for owners". And that means inherently its utility function is different for working folks whos utility function is more along the lines of "can I make enough to pay my obligations and have enough left over to enjoy life all the whilst minimizing how long I have to do this shit?l", and that puts the people who own businesses and those who work for businesses at an inherent contradiction that ultimately is going to end up very messy.
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Re:Its bigger than that. (Score:5, Interesting)
That's fine and well to acknowledge the benefits of capitalism that have contributed to improving our human condition. However, capitalism replaced social orders that existed before it. Perhaps the rise of capitalism was not the end of history, and there can/will be further improvements that are better.
I'm not going to propose what said improvements will be. Too many people died as the result of ideologues in the last century who decreed that it was 'historically inevitable' the the creed they espoused would rise to power.
But it's still a valid point to ponder what might be an improvement 'beyond capitalism.' Slapping people down because Capitalism has historically provided good to humans is short sighted.
Re:Its bigger than that. (Score:5, Informative)
That's fine and well to acknowledge the benefits of capitalism that have contributed to improving our human condition.
It wasn't the capitalism that did that, it was the technology.
PS: People still lived in abject squalor for 200 years after the industrialists had made their fortunes.
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Did you know that in the middle ages, a "day's work" was either sunrise to noon or noon to sunset? If you worked sunrise to sunset, that was TWO days work. Also, everyone had Sunday and saint's days off. Saints days came along about every three days.
If Capitalism was still functioning as Smith laid it out, it might be a good thing, the modern economic system doesn't even pretend to follow Smith's description anymore.
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By the same reason that they continued to live in abject squalor, and even worse so, during the first years of industrial capitalism? As long as you're practically owned by someone, whether it is by law or by economic dependency, they can essentially squeeze you dry and have no reason not to do so.
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Re:Its bigger than that. (Score:4, Interesting)
Nobody put a gun to anyone's head to make them leave the farm and go to work in a factory. They did so to improve their standard of living.
No, they din't need to put a gun to the Joad family's heads, they left on their own after they were effectively dispossessed as a byproduct of industrialisation and a drought. They got "tractor'd out" as they put it. I know it's only a piece of fiction but worth remembering in these discussions anyway.
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Also, industrialists paid the nobility in England and Scotland to increase rents and/or straight run people out of villages that were near a thousand years old so that they could have more hands to work in the factories in the cities. Not for the benefit of the people, but because they needed to raise production without increasing cost, aka, profit.
So, capitalism was not responsible for the increase of happiness by itself. There was altruism, and the general increase in the rate of knowledge sharing, which
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Of course they could have stayed on the farm... oh wait, no, they could not because their labor was replaced by machines. They had the great choice between starving to death on a field and getting worked to death in the factory.
But hey, at least they had the free choice!
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The only times in history when people lived in abject squalor were when they were slaves (Perfect capitalism everything is for sale), or during the early industrial revolution, when a few people got very very rich
I suspect you mean the Medieval world when people were not very free, and did not live in luxury, but were mostly OK
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Add to that the working class during the Guilded age, dust bowl, Great Depression, and many other times in fairly recent history.
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No, I've seen quite a few people living in abject squalor today. It probably isn't surprising to see it in significant amounts in some parts of the world, but it *is* surprising to see it in significant amounts in North America. Statistically, there's at least one family living in squalor in pretty much every population centre bigger than a small town in North America. And most major cities probably have dozens or hundreds.
Honestly, some slaves were probably better treated than the poorest people are in tod
industrial capitalism (Score:2)
nearly all people lived in abject squalor until the development of industrial capitalism
1. Did they actually? Or are you simply having some very superficial impression that you got from media that was written during the industrial age and wanted to make a point to cast the past as some dark age?
(For fun read the Dung Ages [tvtropes.org] on TvTropes).
2. Here around, modern day northern/central Europe which IS NOT pure industrial capitalism, but also incorporate quite some moderate socialism, begs to disagree (specially compared to what you get in the US).
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Well, obviously the informal economy doesn't produce much GDP, as GDP only accounts for officially declared revenue. So maybe you should look for better metrics.
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Gross domestic product ... equals expenditure, value added in production, or income generated within the territory of a country.
Zero distinction between "informal" and "declared" income, which is understandable because I don't see how you could possibly meaningfully make that distinction for ancient civilizations.
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Re:Its bigger than that. (Score:5, Interesting)
Actually, most people lived in abject squalor even after the development of industrial capitalism. It wasn't until unionization started to spread that conditions improved in the mid to late 1800's, and perhaps people should well remember that this was driven by republican ideals such as social equality and honest labor (see Ricardian labor theory and the American Revolution) which is incompatible with industrial capitalism.
So your argument fail on all points.
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Time to take your head out of your ass.
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Cool story, bro. How do you explain the fact that nearly all people lived in abject squalor until the development of industrial capitalism?
The problems of capitalism are shared by just about any social construct which includes competition with other humans. When a family can live on a modest piece of land surviving on subsistence farming and a small amount of trade with close neighbors, their life would be quite nice throughout human history. It only takes a few hours of work per day to live this way even with pre-industrialized farming technology.
But as soon as you have people competing for resources, things aren't as rosy. Whether it is capi
Re: Its bigger than that. (Score:2)
It's inherent to death or something akin to death.
If there is no difference, there is no potential. Without potential, there is no driving force. No force, nothing happens. You can apply this to everything in the Universe.
Equality of outcome, in Nature, is available, as far as I know, in two instances. One is a random number generator, but you have to wait infinite amount of time for all states to express themselves identically. At best you get perfect 'white noise'...not terribly useful.
The other is the hy
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Cool story, bro. How do you explain the fact that nearly all people lived in abject squalor until the development of industrial capitalism?
There is no such thing as perfect in a game theoretic world, perfection is a transient concept of which the definition disappears and is replaced with a new one the exact instant it's obtained (or more likely, before obtaining it.) Capitalism is a tool to make a particular type of society achieve greater heights with a better quality of life for the population, we're clearly no longer that particular society. Hanging onto tools like some kind of zealot doesn't do anyone any good, not even yourself.
Re:Its bigger than that. (Score:5, Informative)
Well, the modern corporation is based off the Dutch East India Company and, if you look at their history, you can see why the modern corporation is a bad idea. And VC get called vulture capitalists for a good reason.
Re:Its bigger than that. (Score:4, Insightful)
However, if companies *pay tax*, then some of the money they make via their cut-throat methods is used to build schools, hospitals and whatever else. This could be described as the "socialist percentage" of a mixed economy. The more tax paid, the more "socialist" the economy. Government corruption aside, this is how businesses contribute to society as a whole, rather than their owners.
When companies stop paying tax, or shuffle money around so much that they're not (really) paying tax in the location in which they operate, then they are indeed "vulture capitalism" at its worst. Even multi-nationals that don't really "hide" their profits all that much in their chosen country of residence are vultures everywhere except that one country.
Multi-national corporations are now (probably) the largest influence on capitalism that we have. That's a relatively new phenomenon, because whilst multi-nationals have been around for donkeys years, they have been offset by vast armies of locally-grown national businesses. Now, not so much. This new situation is one that the governments of the world will need to tackle (collectively) or else individual countries (or regions of those companies) will see the "money being sucked out of them" (something, to some extent that's already happening pretty much everywhere).
Product design (Score:4, Insightful)
Not related to VC or startups, but that's exactly the same thought I had a few days ago on where product design took a wrong turn.
It's no longer about "What products do people need" but rather about "Are there some idiots who would buy this?"
I noticed that according to the declaration of ingredients both a beef soup and bacon bits were indeed vegan. The fact that they were not labeled and marketed as vegetarian alternatives (which would have been honest and not at all uncommon) is basically trying to trick people into buying that stuff.
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Wow. WOW. Where do you get this?
C'mon, are you delusional or deceptive? What you describe here would be true if there was actually a real competition left in the market. Care to show me a market where this is the case? In fact, most relevant markets are dominated by a very tiny number of corporations with "agreements" that are bordering on cartels, though I am not sure what side of the border they are sitting on.
Please, get out of your fantasy world of a perfect capitalist world. Yes, that would be nice if
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Because it's more profitable to sell 100 units with 20 bucks profit than 50 with 30.
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My industry, audio. In the headphone space, it's dominated by Apple/Beats, Sennheiser, and Bose. In the home audio market, it's dominated by Samsung/Harman, Amazon, and SONOS. Those are all the multi-billion dollar monsters who consume probably 75% of the entire market.
The remaining 25% of the markets are occupied by hundreds of thousands of small firms, some with a few hundred employees, some with 1. Most tend to actually survive and make a profit, enabling their owners/employees to enjoy a decent life
Re: Product design (Score:2)
Nice post!
I'm looking, in the Netherlands, to become a customer to a company like yours. I'm only interested in high quality headphones, particularly earplug type as I commute and cycle a lot.
I've been on (top models) Sennheisers forever but often I'm frustrated by the choices of the big companies.
For example I have quite significant difference in the ear canals due to surgery so having custom made molds would be great. The other frustration is with cables and plugs as I simply won't move to Bluetooth and m
Re:Product design (Score:5, Insightful)
Except that's not really happening anymore - you can sell any damn thing on Amazon, and the minute your ratings start to plummet, just change your company name to ditch your shitty reputation. It's happening all the time, and these lowball players are driving most of the decent players out of the market.
Look at MP3 players on Amazon. Almost every product that you'll see is from a company that you've never heard of. Many of them will be the exact same player under 3 or 4 different names.
The only 'real' player I see in that list of crap is Sandisk (and their stuff DOES still work, thankfully).
So while I'm not sure I agree with Tim, I sure as hell don't agree that the market is really working at this point.
Re:Product design (Score:4, Insightful)
I think the failure here is Amazon unintentionally shielding bad players from consumer response. While I know this is not actually the case, consumers buy from Amazon based on Amazon reputation. It should be up to Amazon to stop bad players within their ecosystem.
Re:Product design (Score:4)
Some people will sell cheap shit, and go out of business when their reputation crashes. Others will offer quality products, and prosper over many years. Many vendors do very well by examining their customer' needs in great detail.
-jcr
Why go through all that work when you can just acquire a company that has that good reputation, switch to selling cheap shit, and ride that reputation out as long as you can. When it inevitably tanks due to the crappy products (which could take years during which you've sucked all those extra profits out), simply sell off the hulk and move on to the next victim.
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I think the VC model was shown to be BS when Uber arrived - the whole premise was "take over the taxi industry and then we'll be super rich". Being a better taxi was not part of the game, nor was trerating employees or customers or investors fairly.
That was the better end of it, from that grew all the insanely never-profitable companies like deliveroo, who still get a ton of VC money to "disrupt" the market to the extent that the VCs can walk away after manipulating the system so that these companies appear
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I agree, but from my experiences with Uber, they did end up with a better taxi.
More reliable, safe against drivers taking advantage of tourists, option to reduce costs by sharing routes, cashless only model reduces risks of robbery (for the driver) while leaving a complete paper trail for the tax authorities.
I wouldn't mind if that model wouldn't be cheaper than a traditional taxi.
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The problems with it aren't "better", when their drivers are arrested for rape, they have to be forced to carry disabled passengers etc. The things you mention alreayd exist for taxi - except the option to share, which won't happen with Uber either.
The only real difference is that its a bit cheaper. Which I think is why people defend it.
but the biggest concern really, is that it just doesn't make any profit. it isn't an actual business, just a vehicle to rip off consumers, employees and investors so the VCs
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You can't compare that as that completely lacks the flexibility of Uber/Taxi
The booking/tracking app is an added value compared to having to call a taxi that "will be here in 15 to 50 minutes"
And what I absolutely don't get are those rape cases. I won't doubt that they happend, but how stupid would you have to be to do that! With Uber, it is absolutely clear when and where the victim got into whose car! I somehow can't understand how that not ended up as an improvement of rider safety. It's like burglars st
Yes! (Score:5, Insightful)
The primary issue is that the corrupted tax code has allowed people to amass fortunes of unimaginable wealth. The tax code used to work as a safeguard against avarice but it was disarmed in the 1980s. As a result there is a positive feedback loop that promotes individuals that are solely interested in monetary gain, consequences be damned. The result of increased wealth has been increased influence that's deeply corrupted our political bodies.
Everything has been geared toward advancing avarice, not society and it shows.
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"The primary issue is that the corrupted tax code has allowed people to amass fortunes of unimaginable wealth."
And yet, you'd be hard pressed to find politicians willing to concede that a flat tax (exempting those under a poverty-level income) would be an equitable solution to our corrupt tax laws. Instead, we have a federal tax code with about 4,000 pages. You want to close loop holes, create a flat tax.
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Yeah it's totally equitable for Bezos to pay 40% and the guy working at the grocery to pay 40%. I mean, 40% is 40% right?
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Alberta, Canada's richest Province, has (had?) a flat tax (10%), are they ever in debt instead of being like Norway with a trillion in the bank. Very high unemployment before the pandemic too.
https://duckduckgo.com/?q=albe... [duckduckgo.com]
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And yet, you'd be hard pressed to find politicians willing to concede that a flat tax (exempting those under a poverty-level income) would be an equitable solution to our corrupt tax laws. Instead, we have a federal tax code with about 4,000 pages. You want to close loop holes, create a flat tax.
That's because they have a bunch of idiotic middle class people convinced that they're rich instead of satiated poor people. A flat tax geared toward taking from parasites would involve something like a 2m net worth cutoff before taxes even start (from where we are now, anyway - being a game theoretic system it will necessarily require change once it starts to get better in order to stay better and stay ahead of corrupt actors within the system,) instead they push for a flat tax targeting what the middle c
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The average Federal tax rate for the rich has stayed the same for the last 40 years,
Yes... but no. What they did there was lump in the 0.01% with the 1%. This makes it easy to mask the radical drop in taxation. Those numbers also exclude exemptions to find the effective tax rate which is strikingly different. Combine this with tax dodges via tax shelter schemes and you get a radically different picture.
You need only look at wealth distribution to understand there is a problem: https://i.insider.com/5835b3e5... [insider.com]
It's easy to lie using only some information but it's hard to lie with all of
High-tech culture (Score:5, Informative)
I think VCs do some good, but I also think their mindset of hyper-growth followed by quick exit is harmful.
I ran a small software company for 19 years. By the time I sold, we had about 1000 loyal customers who loved our product and were doing about $2M/year in sales. We had 12 employees with very low turnover.
The company was completely self-funded and had no debt. By my standards, this was a huge success. By Silicon Valley hotshot standards, it was an abject failure. Different values, different metrics.
Re:High-tech culture (Score:4, Insightful)
By my standards, this was a huge success. By Silicon Valley hotshot standards, it was an abject failure. Different values, different metrics.
It's a failure if you took a 70% chance it'll flop and it gave a 200% ROI. Because if you invested in 10 companies you'd pay in 10*100 = 1000 and get back 3*300 = 900. Maybe you gambled on one company and tripled your money but then that's luck. That's essentially what venture capitalists do, they buy your business plan and sales pitch, scratch their lottery ticket and end up with a winner or a loser. Either way they're done, off to find new promising tickets to scratch. Which is why they care so much about the upside, they already know it's a gamble but they want to know the prizes. No point in a high risk gamble without a high reward to match.
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Except it didn't flop and the ROI was much, much higher than 200%.
The other thing is that you're only looking at venture-capitalist metrics, which is ROI from flipping the company. You completely neglected 19 years of running a profitable company that was an incredibly fun place to work, with smart, interesting people working there. VCs can't even begin to comprehend that, let alone factor it into their calculations.
Well, obviously it is. (Score:3, Insightful)
Profit is harmful by its very definition. That is its entire point. To take stuff from people without giving back something equal in return, with a little legitimate exchange tacked on, solely to avoid being officially a crime.
In an actually healthy market, with that magical "invisible hand" actually working, as libertarians always proclaim, profit by definition would have to be zero. ... the "better" "the market" is doing, the further away from "stagnation", aka stability, it is, the more sick and damaging to society it is.
So the higher the profit margins
That is the core delusion that makes an otherwise well-intentioned philosophy such a scourge in real life.
(Oh, and before you communists, socialists, anarchists, democrats and theocrats grin ... yes, in theory you all want everyone's best and should result in the same thing ... and in practice I've got a delusion for each of you, to point at as your core fallacy! :)
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Profit is not harmful by definition. Profit motivates entrepreneurs to take risks.
I would not have started my company if there weren't a prospect of good profits. That means several good jobs wouldn't have been created. That would have been a net loss for society.
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The value of something to you is not the same as its value to someone else. Equality is not a simple math equation when it comes to goods and services.
One wonders about VCs (Score:3)
They do have the money, but it is not so clear that they do have a brain - most of us still remember how many millions these idiots sank in the fairly obvious fraud that Theranos was. And this is just the most egregious example among many others, less egregious ones, especially from the early 2000s.
Yes, they have the money - and not much else.
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They do have the money, but it is not so clear that they do have a brain - most of us still remember how many millions these idiots sank in the fairly obvious fraud that Theranos was. And this is just the most egregious example among many others, less egregious ones, especially from the early 2000s.
Yes, they have the money - and not much else.
Sadly, investing in frauds can be profitable, even if you know they are frauds, if you are in early enough. You just need to get enough people to buy in so you can cash out before the fact that it is a fraud comes to light. Even better if you can keep the charade up long enough to make it to IPO.
Not the Idea but the implementation (Score:2)
Like most things in life. It isn't the idea or theory behind VC but how they implement their work.
Some VC will pump money into a company, and hope they will get a return out of it. Others will give them money, but be very involved in what is going on.
Each investment will need to be treated differently. As different companies had different business models. However if the VC see there are production problems. Perhaps they shouldn't pump more money directly into it. Perhaps they can guide the company owner
Flawed consumerism (Score:4, Interesting)
Americans like to think that rich people create jobs but 'Shark Tank' television proves VCs want to sell whatever isn't nailed-down to make their 15% RoI. Improving lives or creating jobs is an accidental side-effect.
The point of capitalism was creating efficient supply chains. Originally, everyone produced something so there was a limit on sales and thus profit. Then arbitrage became the point of capitalism: Buying something because someone wanted it more. Because human want is endless, the result has been pricing bubbles with the predictable illiquidity, mass bankruptcy and macroeconomic collapse.
This flawed consumerism now drives the world and it's impossible to prevent "want" being monetized.
It's the Internet Stupid (Score:2)
Tim O'Reilly like everyone who was present at the rollout of " fibre to the bellybutton" Internet stood this beast up with what they could. Tim et. al. succeeded. Kudos. It took open source and a hell of a lot other tech to spin the Internet into existence and keep it spinning.
NOW that the Internet is standing on all fours, it no longer needs spun and the deal is done. Everyone got rich who put their life work into the great party line, always on, available everywhere. Venture capitalists busted their a
Not a VC problem (Score:2)
Blaming venture capital for this problem is like blaming pencils for wrong answers. Rather the problem is the motivation of the venture capitalists and how they pick what to back or invest. Most businesses benefit from venture capital but end up selling their soul to get it, so the problem lies with both the VC barons and the startups who accept the outrageous terms.
It does lead to wilder boom and bust cycles (Score:3)
Having lived through the First Dotcom Bubble of the late 90s and the Second (slow motion) Dotcom Bubble of the teens, I'd say you get much wilder swings because of venture capital. It's amusing that the two bubbles shared so many parallels yet were different. First bubble, anyone putting anything on the web was getting funded and it led to 24 year old CEOs going hog wild with the VC money to get eyeballs. Second bubble was based around using phones, the cloud and survellance technology to disrupt industry and get customers/eyeballs. Both led to a huge run-up with everyone desperately to slap a "tech" angle onto anything that had a tiny toehold on anything computer related. WeWork and Theranos are good parallel examples of TheGlobe.com and flooz.com back in the day...it's all about revenue extraction and IPOing or getting out before the VCs cut you off.
The VC issue I agree with O'Reilly about is the promotion of the fake it till you make it culture as something to be emulated. It's not even the bro culture of acting like a successful businessman even if you aren't...it crosses over into con-artistry. This latest bubble has been all about move fast and break things, minimum viable product, we'll fix that next sprint, etc...just get something out the door to show the investors. While no one wants to go back to waterfall, the speed should come down from Warp 9 to something reasonable...unfortunately VCs won't wait for their money and this drives to "pump out whatever crap compiles" mindset.
I observed this back in the dotcom days (Score:3)
Just doesn't seem like a positive outcome for anybody.
Can be a negative to innovation (Score:5, Interesting)
My industry (online video sharing) was harmed by VC's
In 2004-2007 I operated one of the, if not the first UGC video sharing services on the net (Vidiac.com powering 4,000+ domains with UGC video sharing including StreetFire.net, FreeVideoBlog.com and more). Before YouTube came along we had a number of competitors like Stupid Videos.com, Big-Boys.com (became Heavy), Veoh and some others started to come up, but all of us were working on a funding model.
My team was lucky since we were all ex-AT&T Backbone Engineering and we all knew how to do streaming bandwidth cheap, we were able to make a modest break even ad-supported business. Approx 20% of our users would click on the companion ads to our videos and that paid for the service.
Then YouTube came along, saw the rising video sharing market, took millions in Sequoia Capital funding and launched an ad-free video site. While 20% of my users were clicking off to advertisers paying my bills, 20% of YouTube users would stay on YouTube and find another video to share increasing virility. Moreover, we didn't have the money for big lawyers like YouTube had, and couldn't understand why they would allow users to post pirated content like Steven Colbert clips.
On the tide of VC funding and pirated content, we watched YouTube over a 12 month period slowly surpass our 2M streams per day and build an impossible market leadership position. We began loosing uploaders to YouTube because YouTube became more popular, and virility and views became more valuable to our users than quality or features. (Even if the View numbers were horribly faked by YouTube for the first year, in the end no-one cared because thye liked seeing big numbers getting bigger).
so my Company took VC. We went from being a small profitable company (4 people running a website and video service serving 8M monthly active uniques), to a 'typical VC business' with 25 people running in the red but making big news.
The problem is that VC's are amoral and they what is in the best interest of the balance sheet.
When we saw the need for what would eventualy become 'Patreon' we were blocked from doing it because our investors felt the risk was outside the core business. When the community uploaded 'non brand safe content'....ya know Speeding on a car-video site.......our advertisers sought to discourage this content in favor for unpopular 'Brand Safe' TV content. If the Advertisers want it then sales wants it. If Sales Wants it, the investors want it. Suddenly we were no longer chasing innovation a new market, we were chasing a magazine model, but hey al the other VC's in UGC video were doing it to from YouTube to Veoh, so suddenly the founders aren't 'Professional management' because we aren't following our 'Peers' but instead want to do what the users want.
Anyhow, there is a lot there, but net-net Once you take VC you have committed to an exit whether you like it or not. For us, even though the business could have gone back to being a small profitable 'Multi Channel Network' servicing the needs of our community. But because our sales team couldn't compete with Time Magazines Sales Team in a Sachi and Sachi pitch meeting, that is the reason the company 'was no longer worth it' and investors parted it out and sold it, they want home runs, not base hits. So Vidiac got bought by Magnify, StreetFire fired the founders and installed 'Proffesional Management'; to merge it with Car Domain. and After a solid 10 year run, StreetFire was finally turned off by Motor Trend in 2018.
We watch the move 'The Social Network' and really focus on the 1 in 10000 start-ups that shoot the moon, but that is not the reality of VC investing. Only 1 in 10 investments will have a Successful next round (not an exit, rather a successful next round of cash). Companies like Facebook can go through a dozen rounds of finance befor
Re:We all love the guy, but... (Score:4, Insightful)
If VCs want to waste their backers' money on stupid ideas.
Two things happen as a result of this: a) business that work now need to be more profitable to make up for VC waste b) there is less incentive to be a business that works, as you can get funding anyways.
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Sure, but the people that play the "VC" game (on both sides) don't really affect us.
Apart from providing amusing news stories about how stupid people with money can really be.
(All they have to do is ask somebody who knows tech stuff whether an idea can work or not...it's that easy to save billions of $$)
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Sure, but the people that play the "VC" game (on both sides) don't really affect us.
You're joking, right? Silicon Valley routinely targets extant industries for consolidation (e.g. Amazon, Google, Uber, etc) and/or extortion (Yelp is probably the most obvious example.) Silicon Valley corporations are wrecking the whole world, it most certainly affects us. The fact they claim to be trying to help everyone or make the world better while doing it is just rubbing salt in the wounds of everyone outside their shit-eating parasitic social circle.
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Actually, they affect "us" quite a bit. Because of the insanity in the VC firm world, it is much harder today to get angel or small-VC (sub $5 million) funding for businesses. As the chase for unicorns continues to grow, and more-and-more outlandish valuations to pass on to the next sucker, it starves the small end of the market. Small businesses, to raise capital, are forced to push and justify impossibilities in terms of market size, growth, and share. If you want to actually be honest anymore, it's n
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Yes they do. Their big numbers and big profits speak for them and the messages they send ripple out.
Despite not having real solutions, stability, or sustainable practices they'll rocket to being something everyone is talking about with business practices that sound new and innovative but are really just the brainchild of a college kid who lacks the experience to know better. Execs jump on these ideas and push them out in real companies. Similarly they look toward unsustainable rates/numbers/etc pushed by th
Re:We all love the guy, but... (Score:5, Insightful)
Two things happen as a result of this: a) business that work now need to be more profitable to make up for VC waste b) there is less incentive to be a business that works, as you can get funding anyways.
and c) they screw over existing businesses and/or industries that can't operate for years at loss like a VC backed upstart
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Re:We all love the guy, but... (Score:5, Insightful)
My original point had nothing to do with unrelated business. However, since you brought it up, VCs are allocating capital. Capital represents resources that otherwise could be directed toward growing stable and productive businesses. Instead, it is being squandered on chasing unicorns. So you are paying for it by lost growth.
Re:We all love the guy, but... (Score:5, Insightful)
You misunderstood what I said. Out of all businesses that get VC funding, ones that work need to be more profitable as a result of VC needlessly wasting money on failed business.
My original point had nothing to do with unrelated business. However, since you brought it up, VCs are allocating capital. Capital represents resources that otherwise could be directed toward growing stable and productive businesses. Instead, it is being squandered on chasing unicorns. So you are paying for it by lost growth.
VCs are basically the same as film studios: they don't know why the successes succeed and the don't know why the failures fail, otherwise they'd only fund successes, right? And, like film studios, when they see someone make a success, they all rush to fund a copycat - which usually fails because it's already been done by the first lot who are still wondering why it worked for them.
The problem, as has been said, is that at the moment VCs can borrow huge amounts to throw at their investments. This doesn't change their ability to back a winner but it does mean that even the failures are big enough to seriously distort the market while they die.
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It bothers me when people I know can NORMALLY see beyond 1 logical step at a time still end as partisans.
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Someday, maybe, you'll have those idiotlogical blinders knoced off, maybe when you get evicted for non-payment of rent.
VC owns the companies. Then they a) overcharge; b) underpay the employees (leading to churn); c) they cut benefits, and d) finally, they dump the company, taking their money, while leaving the company with such a heavy debt load that it's going to go under.
Why, yes, I did work for a company that was bought by VC, then sold, right before I retired last year.
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business that work now need to be more profitable to make up for VC waste
This is assuming that the businesses that work are operating in the same sphere as VC companies which most are not.
There are different ways to invest in businesses. The VC way is to invest in 10 businesses with the assumption that 9 of them will fail and the 10th will be a 20 bagger to make up for the losses. You can make the same amount of money if you invest in less risky plans that are less likely to end up with a 20 bagger but also less likely to fail. You can see this play out at places like lendin
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This is assuming that the businesses that work are operating in the same sphere as VC companies which most are not.
This is a blatant lie. VC backed companies almost never create new things, they target extant industries to be consolidated, strongarmed, and/or outright extorted. Silicon Valley has not contributed to society in general, they are simply a group of wealthy people who sap the wealth from a great many smaller corporations spread around the country to ensure the profits end up in their own pockets. They are parasites contributing nothing to society, plain and simple.
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Except for the fact when a VC puts money into a business, it will often spark others too to put money there as well.
These Finance "Experts" are not really as smart as they think they are. A few get lucky and invest into a fast growing company where they get a huge return, most will get moderate return. Most people will just do what the big guys are doing. So a BIg Name VC put money into this startup, They will too. So if this startup couldn't deliver or people really didn't like the the idea, and go bus
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So who cares about a bunch of rich people loosing money.
You're a fool if you genuinely think it's rich people losing money on these things. They're financial instruments which consolidate wealth from small companies around the country to give to wealthy people through instruments that they report massive losses on for tax evasion purposes.
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No, you missed the entire point.
There are lots of ideas that are nowhere new stupid - but they don't generate a profit for a time that is longer than the VC's attention span.
A lot of those businesses are huge enterprises today and have a history going back several generations. Heck, a couple of the most valuable companies today would have been a bad choice from the perspective of a VC who wants to make a profitable exit within a reasonably short time.
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If VCs want to waste their backers' money on stupid ideas, it's no skin off anyone else's nose if they do. Tim's wrong on this.
Tim may be wrong on his central thesis, but you are quite wrong that the manner in which wealthy people spend their money doesn't affect the rest of us in significant ways. Whether it is how they choose to lobby politicians or what projects they spend money on, all of these have very measurable effects. Some good and some bad.
I didn't read Tim saying society should do something to prevent VCs from wasting their backer's money; just that he believes it is doing more harm than good.
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No moron, Tim is not wrong. VC is only used to create "financial instruments for the wealthy". Capital is no longer used to invest in a company. It is looking for big financial return from an IPO or acquisition. It's not interested in a business model that builds a sustainable business with cash flow and profits.
Look up financialization of the economy sometime and educate yourself.
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I imagine that many VC's would argue that the best way to get a "big financial return from an IPO or acquisition" is to come up with a "business model that builds a sustainable business with cash flow and profits". Because who wants to buy a business that has no hope generating profits?
Now maybe that isn't always true in practice, but I don't think it's fair to say it's universally false either.
Re:We all love the guy, but... (Score:4, Insightful)
Because there's little financial feedback from a sustainable business if what you have are tradeable stocks. You could make a reasonable income from the dividends over time. But you could make a LOT more by demanding that the company has every quarter's earnings be higher than the previous, and demand that they do what needs to be done for short term growth. If the company wants to slow down and stabilize the business then you punish them by dumping their stock. Periodically you voice concerns that they have too many employees, too much vacation hours on the books, too much health care being paid, so maybe we can cut back on head count, offshore some work, and shore up those quarterly numbers!
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You just skimmed the summary didn't you?
At no point did Tim say VCs shouldn't be able to invest their money how they want, he only stated that type of investment isn't good for society in general.
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If VCs want to waste their backers' money on stupid ideas, it's no skin off anyone else's nose if they do. Tim's wrong on this.
Money is a tool to facilitate trade within a society, it's pure parasitism to try to acquire it at the expense of society. The things Silicon Valley pumps out erode freedom, liberty, and privacy; often while lying to people about some nebulous concept of "doing better" as they do it; in order to see trust funds of wealthy people grow at the expense of whichever industry and/or subset of the population is targeted by a given company.
TL;DR: it's literally "skin off everyone's nose."
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Capitalism gave us the internet
Wasn't the internet developed by the government?
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As a way to share communications between the capitalist military vendors and the independent colleges for military applications.
Because Communist states never pour metric craploads of money into the military or have military driven industrial goals.....
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Capitalism gave us the internet
Actually, that was the military.