7 ms·

As they always say, this time is different. My opinion is that the tech sector has greatly expanded since 2000, not just in amount of investment available, but

As they always say, this time is different. My opinion is that the tech sector has greatly expanded since 2000, not just in amount of investment available, but also types of business tech companies are actually in. So maybe there is a web/ad bubble and it might pop, but how much that affects individual company is more nuanced. Unsophisticated investors might still lump Google/Twitter/Tesla/AMD into the same "tech sector", but they will find the signal they receive is very mixed and difficult to analyze.

vonklaus 11y ago
i have been thinking about this a lot. Peter Theil talks a lot about paypal when they were burning cash, but they had finally started to get the business fundamentals together. He calculated, i am approximating but it was close to, 80% of the companies worth came after 20 years. My thinking is that public markets are shitty, so almost all of the value capture takes place way before a company is worth it, it stays private a long time, goes public, then slowly grows for 5 years fails to adapt and dies. Look at google. They know search is about to change majorly, they have already spun into a meta-architecture. Doing things quickly, capturing that value, and then adapting is the only way to survive. If you do adapt enough to survive, you are a conpletely different conpany than when you started. If you dont, all the value has been captured by provate markets, the company gets sluggish, and isnt that profitable for "retail investors". Amazon sort of the one exception. They saw the world how it is now over 10+ years ago, and are still competing and incrsting in growth because thats how you win. You have to own all the infrastructure, so you dont have to work as hard. Either way, uber is more like ebay than like lyft. Sectors have subsectors because everything is close to winner take all. You analyze by looking at what the smart people are doung. Stripe = infrastructure Aws = end to end automated everything Google is organizing as a think tank/incubator Ycombinator is funding smart crazy people who move fast.
- fweespeech 11y ago
  > My thinking is that public markets are shitty, so almost all of the value capture takes place way before a company is worth it, In a public market, capitalism [generally] prices things appropriately so its hard to make a killing on it. But, you can still make money. That is the basic function of a fair market and its important it continues to exist.
  - vonklaus 11y ago
    I studied economics in school, however I was always a sub par student. The market is very very efficient at what it is optimized to do, I don't think "fair" has any objective meaning in a diff of the bid ask spread, but I get your point. To drill down on my assumptions, the market is optimized to price things based on what people are willing to pay which is supply v. demand, i am not disputing that. What I am saying is that the price people pay for things is based on information which is distributed highly asymetrically. Information is siloed efficiently by large brokers (of information) and even then, is largely narrow. Barriers to entry have never been lower here, but also facing massive follow on lag time. You can build a search engine than google could when it started, but you will be using mostly their tools e.g webkit, v8, big query, tensorflow or something by a similar entity or OSS. So pricing information is based on what uninformed people are doing in a market. So the price is not in line with reality to the extent of how the same actors would act with all people knowing the same thing. Everyone on an airplane pays a different price for their seat. That, in my eyes, is "fair" but unimportant. However, public markets serve as liquidity for companies. I have been asking myself what the point of them really is. Volume of traded firms shares must keep being traded, because people need liquidity. However, companies no longer need public markets to get started and grow. So investors obviously expect an exit, but companies have shorter lifespans, they also are no longer insulated from global macro trends. Obviously, "public markets" will end soon and be replaced with "markets". Trade restrictions will get lifted as markets open globally. People will still not know how to participate and this will be bad short term. Long term good obviously. So I guess what I am saying is, a large part of the economy is a private market, public markets are more risky, less valuable and cater to people who have an asymmetrical advantage of eithet information or positioning, so why the fuck would anyone bet on them? Because a diversified portfolio has gone up for the last 10 years? Makes no sense, they aren't nearly as useful as they once were. The pricing mechanism of markets is no longer calibrated correctly. Edit: meant to say that was the bubble. Markets have to exist because companies are already sold into them, however, good companies don't go public but people keep putting more money into the bad companies equity. So something line twitter coyld fail, or even lehman, GE isnt even faring that well. So these mediocre assets are being driven up as people put money into their shares, but their discretionary spending goes to private companies. As I said, i am not like an economist or something, so I dont really understand what the fuck is going on, but 1) it seems pretty insane and 2) it seems like no one else has any idea either.
- schlumpf 11y ago
  > almost all of the value capture takes place way before a company is worth it Then almost all of the investment risk must similarly take place way before a company is "worth it". Unless you are proposing the divorce of expected risk from expected return.
  - vonklaus 11y ago
    I mentioned this below, but I disagree. I am not talking about Y Combinator or pre-seed stage funding. Companies are raising E rounds. Shitty companies are raising 10m a rounds. * There are a shitty companies that are getting funding say raising ~20m in an A round. * There are publicly traded companies that are in bad shape, GE, Twitter, Dropbox, Evernote can't even make it to the IPO and Yahoo. * In between this, is where public markets were useful. They provided large scale liquidity for companies that needed to expand (often globally). Similarly, public investors needed to deploy excess capital to save for their futures. * Now, the stock market is full of failing legacy companies and the pipeline of good companies is diverted. I am pretty bullish on Uber for example. While technically the IPO wouldn't touch the >7-10 trillion in the s & p, do you notice anything odd about this graph?[0] Bad companies are going public and failing, the pipeline of good companies are mostly staying private. Pricing, risk and market calibration are so out of wack that the last decade looks like this ^V^v so, not really sure how to make a risk tl;dr I would feel more comfortable participating in Ubers previous funding round than buying apple, one of the s&p toip 50. I was going to break down risk adjusted return, but I am not phenomenal at math nor finance, but again I found it pretty fucking insane. The sharpe ratio is like "Risk Free Rate" ( 0-0.3 - "average return" ) / stdDev So basically, in my super (likely incorrect) view, you have a pool of shitty assets that are largely correlated in a massively volatile timeperiod. This number is your control. Then you measure against the degree you will beat the risk free rate, a negative number basically. Seems insane, but never was top in finance. https://en.wikipedia.org/wiki/S%26P_500_Index#/media/File:S%26P500_(1950-12).jpg https://en.wikipedia.org/wiki/S%26P_500_Index#/media/File:S%...
- tedmiston 11y ago
  > Look at google. They know search is about to change majorly, they have already spun into a meta-architecture. In what way is search about to change majorly? To me that seemed more like a way to keep experimental projects without affecting Google as a stock.
  - grp 11y ago
    I don't have the answer but for my experience, I nearly don't use search engines anymore since approximately 2 months. I've got some handful websites for what I want to do with a computer and that's all. By the way, I search more in bookstores than on internet (maybe for quality not quantity, don't know). Web disappoints me, kind of full of emptiness now. I do not think it's representative.
  - vonklaus 11y ago
    My personal opinion is that open sourcing googlebot[0] and tensorflow, as well as a the numerous other tools like elastic search and frameworks like hadoop make it pretty easy to make narrow search tools. So someone like me, a pretty shitty programmer, can use an language built on top of googlebot, like nodejs, and just index the stuff I care about and instead of that information being returned to google, I can just send it back to bots viewport directly and not even see the webpage, just the info if I want. The problem is discovery (what google solved in 1999), no one knew where to find websites, like not even info, just what sites even were on the web. This is a huge pain point again because while there are a lot of great websites there are a ton of shitty ones. This is pretty obvious if you look at sites like reddit or hacker news. They are developed around the idea of aggregating good resources because there are so many it is overwhelming. So, I think, that of the 50% of the people that are already running googlebot, some subset will start probably using it to get info they care about. Eventually, someone will write code you can use to make this easier for normal people, and then google whill either sell the silos of info to them instead of advertising, or use it in it's new meta structure to solve big problems. [0]http://ipullrank.com/googlebot-is-chrome/ http://ipullrank.com/googlebot-is-chrome/ [1]http://www.sitepoint.com/browser-trends-august-2015-chrome-exceeds-50/ http://www.sitepoint.com/browser-trends-august-2015-chrome-e...
- ehnto 11y ago
  I am interested in your comment about search changing drastically. How do you feel search is changing and how do you see that affecting Google and other large players?
  - vonklaus 11y ago
    Answered below. edit: I am interested, to get feed back on this positive or negative. I, and likely google, see the internet as a big RSS feed. Right now, companies are starting to crack down on bots, except google, but as discovery changes I think this will too. Generally curious about this.

vonklaus 11y ago

i have been thinking about this a lot. Peter Theil talks a lot about paypal when they were burning cash, but they had finally started to get the business fundamentals together. He calculated, i am approximating but it was close to, 80% of the companies worth came after 20 years. My thinking is that public markets are shitty, so almost all of the value capture takes place way before a company is worth it, it stays private a long time, goes public, then slowly grows for 5 years fails to adapt and dies. Look at google. They know search is about to change majorly, they have already spun into a meta-architecture. Doing things quickly, capturing that value, and then adapting is the only way to survive. If you do adapt enough to survive, you are a conpletely different conpany than when you started. If you dont, all the value has been captured by provate markets, the company gets sluggish, and isnt that profitable for "retail investors". Amazon sort of the one exception. They saw the world how it is now over 10+ years ago, and are still competing and incrsting in growth because thats how you win. You have to own all the infrastructure, so you dont have to work as hard. Either way, uber is more like ebay than like lyft. Sectors have subsectors because everything is close to winner take all. You analyze by looking at what the smart people are doung. Stripe = infrastructure Aws = end to end automated everything Google is organizing as a think tank/incubator Ycombinator is funding smart crazy people who move fast.

fweespeech 11y ago
> My thinking is that public markets are shitty, so almost all of the value capture takes place way before a company is worth it, In a public market, capitalism [generally] prices things appropriately so its hard to make a killing on it. But, you can still make money. That is the basic function of a fair market and its important it continues to exist.
- vonklaus 11y ago
  I studied economics in school, however I was always a sub par student. The market is very very efficient at what it is optimized to do, I don't think "fair" has any objective meaning in a diff of the bid ask spread, but I get your point. To drill down on my assumptions, the market is optimized to price things based on what people are willing to pay which is supply v. demand, i am not disputing that. What I am saying is that the price people pay for things is based on information which is distributed highly asymetrically. Information is siloed efficiently by large brokers (of information) and even then, is largely narrow. Barriers to entry have never been lower here, but also facing massive follow on lag time. You can build a search engine than google could when it started, but you will be using mostly their tools e.g webkit, v8, big query, tensorflow or something by a similar entity or OSS. So pricing information is based on what uninformed people are doing in a market. So the price is not in line with reality to the extent of how the same actors would act with all people knowing the same thing. Everyone on an airplane pays a different price for their seat. That, in my eyes, is "fair" but unimportant. However, public markets serve as liquidity for companies. I have been asking myself what the point of them really is. Volume of traded firms shares must keep being traded, because people need liquidity. However, companies no longer need public markets to get started and grow. So investors obviously expect an exit, but companies have shorter lifespans, they also are no longer insulated from global macro trends. Obviously, "public markets" will end soon and be replaced with "markets". Trade restrictions will get lifted as markets open globally. People will still not know how to participate and this will be bad short term. Long term good obviously. So I guess what I am saying is, a large part of the economy is a private market, public markets are more risky, less valuable and cater to people who have an asymmetrical advantage of eithet information or positioning, so why the fuck would anyone bet on them? Because a diversified portfolio has gone up for the last 10 years? Makes no sense, they aren't nearly as useful as they once were. The pricing mechanism of markets is no longer calibrated correctly. Edit: meant to say that was the bubble. Markets have to exist because companies are already sold into them, however, good companies don't go public but people keep putting more money into the bad companies equity. So something line twitter coyld fail, or even lehman, GE isnt even faring that well. So these mediocre assets are being driven up as people put money into their shares, but their discretionary spending goes to private companies. As I said, i am not like an economist or something, so I dont really understand what the fuck is going on, but 1) it seems pretty insane and 2) it seems like no one else has any idea either.
schlumpf 11y ago
> almost all of the value capture takes place way before a company is worth it Then almost all of the investment risk must similarly take place way before a company is "worth it". Unless you are proposing the divorce of expected risk from expected return.
- vonklaus 11y ago
  I mentioned this below, but I disagree. I am not talking about Y Combinator or pre-seed stage funding. Companies are raising E rounds. Shitty companies are raising 10m a rounds. * There are a shitty companies that are getting funding say raising ~20m in an A round. * There are publicly traded companies that are in bad shape, GE, Twitter, Dropbox, Evernote can't even make it to the IPO and Yahoo. * In between this, is where public markets were useful. They provided large scale liquidity for companies that needed to expand (often globally). Similarly, public investors needed to deploy excess capital to save for their futures. * Now, the stock market is full of failing legacy companies and the pipeline of good companies is diverted. I am pretty bullish on Uber for example. While technically the IPO wouldn't touch the >7-10 trillion in the s & p, do you notice anything odd about this graph?[0] Bad companies are going public and failing, the pipeline of good companies are mostly staying private. Pricing, risk and market calibration are so out of wack that the last decade looks like this ^V^v so, not really sure how to make a risk tl;dr I would feel more comfortable participating in Ubers previous funding round than buying apple, one of the s&p toip 50. I was going to break down risk adjusted return, but I am not phenomenal at math nor finance, but again I found it pretty fucking insane. The sharpe ratio is like "Risk Free Rate" ( 0-0.3 - "average return" ) / stdDev So basically, in my super (likely incorrect) view, you have a pool of shitty assets that are largely correlated in a massively volatile timeperiod. This number is your control. Then you measure against the degree you will beat the risk free rate, a negative number basically. Seems insane, but never was top in finance. https://en.wikipedia.org/wiki/S%26P_500_Index#/media/File:S%26P500_(1950-12).jpg https://en.wikipedia.org/wiki/S%26P_500_Index#/media/File:S%...
tedmiston 11y ago
> Look at google. They know search is about to change majorly, they have already spun into a meta-architecture. In what way is search about to change majorly? To me that seemed more like a way to keep experimental projects without affecting Google as a stock.
- grp 11y ago
  I don't have the answer but for my experience, I nearly don't use search engines anymore since approximately 2 months. I've got some handful websites for what I want to do with a computer and that's all. By the way, I search more in bookstores than on internet (maybe for quality not quantity, don't know). Web disappoints me, kind of full of emptiness now. I do not think it's representative.
- vonklaus 11y ago
  My personal opinion is that open sourcing googlebot[0] and tensorflow, as well as a the numerous other tools like elastic search and frameworks like hadoop make it pretty easy to make narrow search tools. So someone like me, a pretty shitty programmer, can use an language built on top of googlebot, like nodejs, and just index the stuff I care about and instead of that information being returned to google, I can just send it back to bots viewport directly and not even see the webpage, just the info if I want. The problem is discovery (what google solved in 1999), no one knew where to find websites, like not even info, just what sites even were on the web. This is a huge pain point again because while there are a lot of great websites there are a ton of shitty ones. This is pretty obvious if you look at sites like reddit or hacker news. They are developed around the idea of aggregating good resources because there are so many it is overwhelming. So, I think, that of the 50% of the people that are already running googlebot, some subset will start probably using it to get info they care about. Eventually, someone will write code you can use to make this easier for normal people, and then google whill either sell the silos of info to them instead of advertising, or use it in it's new meta structure to solve big problems. [0]http://ipullrank.com/googlebot-is-chrome/ http://ipullrank.com/googlebot-is-chrome/ [1]http://www.sitepoint.com/browser-trends-august-2015-chrome-exceeds-50/ http://www.sitepoint.com/browser-trends-august-2015-chrome-e...
ehnto 11y ago
I am interested in your comment about search changing drastically. How do you feel search is changing and how do you see that affecting Google and other large players?
- vonklaus 11y ago
  Answered below. edit: I am interested, to get feed back on this positive or negative. I, and likely google, see the internet as a big RSS feed. Right now, companies are starting to crack down on bots, except google, but as discovery changes I think this will too. Generally curious about this.