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The article is not mentioning that QE flooded the capital markets with money globally. Money which mostly sits idle (they are so desperate that they buy bonds

The article is not mentioning that QE flooded the capital markets with money globally. Money which mostly sits idle (they are so desperate that they buy bonds with negative interest rates). This over supply of money and the lack of investment targets, eased raising of money for VCs. More money, more VCs, more funding, more pressure on VCs to deliver returns, less interest in radical new ideas. In other words VCs got an incentive to look for proven business models to invest in. That also explains the success of angel.co. I think the bigger problem is that capital allocation for new startups is broken. There is so much free capital in the market, and only a tiny percentage makes it into startups, globally ca $120bn per year. Compared to trillions of dollars floating free in the markets, that's a drop in the ocean. Venture activity is also concentrated in a few places. It isn't widespread enough. -> capital allocation for new ideas is ineffective and inefficient, the current model of investing isn't sufficient anymore.

redy 9y ago
> The article is not mentioning that QE flooded the capital markets with money globally. I don't know why Americans keep going on about QE. It makes absolutely zero sense. Do people seriously think QE causes low interest rates? I mean this is pure bunk and yet it's repeated over and over like an article of faith. > More money, more VCs, more funding, more pressure on VCs to deliver returns, less interest in radical new ideas. Literally the opposite is true. If money were cheap and plentiful it would lead to bigger risks. But yes, now is a tough time to be a startup. It has nothing to do with QE. The reality is if you're not Google/Amazon/Apple/Facebook then you've got a long road ahead of you. But this sort of "lucrative stagnation" isn't unique to tech. Look closely and you will see this in virtually every industry. Highly profitable incumbents deploying various tools to kick out startups and competition. These incumbets then go on to command *very( high profits. This absolute triumph of return on capital is probably not a good thing [1] (unless you happen to be an executive at one of the various titans that rule the industry). Look, this isn't rocket science. You've got: - An extremely slack labor market which is causing a thousands of young men to drop out of the labor market and play video games. [2] - An extremely slack labor market which is causing unprecedented decreases in labor mobility and entrepreneurship. [3] - An extremely slack labor market which is causing enormous increases in household debt. (What the Great Financial Crisis was really about.) [4] - An extremely slack labor market which leads to corporate profits and inequality not seen since the Gilded Age.[5] - An extremely slack labor market which has led to what is probably negative wage growth as prices rise. [6] (That's just the UK but I'd say the US is probably 2-3 years behind the curve.) Add in the rise of China and you've got a perfect storm for a severe economic dislocation in the West as most of the population is tossed to the wolves of unemployment. So if you really want to see more startups, more entrepreneurship, more labor mobility, heck, simply more labor, you might do better than to keep going on about QE. [1] https://www.economist.com/news/briefing/21695385-profits-are-too-high-america-needs-giant-dose-competition-too-much-good-thing https://www.economist.com/news/briefing/21695385-profits-are... [2] http://www.ssc.wisc.edu/~nwilliam/Econ702_files/abch.pdf http://www.ssc.wisc.edu/~nwilliam/Econ702_files/abch.pdf [3] http://rooseveltinstitute.org/wp-content/uploads/2016/07/Declining-Entrepreneurship-Labor-Mobility-and-Business-Dynamism-A-Demand-Side-Approach.pdf http://rooseveltinstitute.org/wp-content/uploads/2016/07/Dec... [4] https://www.nytimes.com/2017/05/17/business/dealbook/household-debt-united-states.html https://www.nytimes.com/2017/05/17/business/dealbook/househo... [5] https://www.nytimes.com/2017/07/06/opinion/wage-inequality-income-growth.html https://www.nytimes.com/2017/07/06/opinion/wage-inequality-i... [6] https://www.ft.com/content/6d248d02-4885-37d6-b00d-c6117c0dcd73?mhq5j=e1 https://www.ft.com/content/6d248d02-4885-37d6-b00d-c6117c0dc...

redy 9y ago

> The article is not mentioning that QE flooded the capital markets with money globally. I don't know why Americans keep going on about QE. It makes absolutely zero sense. Do people seriously think QE causes low interest rates? I mean this is pure bunk and yet it's repeated over and over like an article of faith. > More money, more VCs, more funding, more pressure on VCs to deliver returns, less interest in radical new ideas. Literally the opposite is true. If money were cheap and plentiful it would lead to bigger risks. But yes, now is a tough time to be a startup. It has nothing to do with QE. The reality is if you're not Google/Amazon/Apple/Facebook then you've got a long road ahead of you. But this sort of "lucrative stagnation" isn't unique to tech. Look closely and you will see this in virtually every industry. Highly profitable incumbents deploying various tools to kick out startups and competition. These incumbets then go on to command *very( high profits. This absolute triumph of return on capital is probably not a good thing [1] (unless you happen to be an executive at one of the various titans that rule the industry). Look, this isn't rocket science. You've got: - An extremely slack labor market which is causing a thousands of young men to drop out of the labor market and play video games. [2] - An extremely slack labor market which is causing unprecedented decreases in labor mobility and entrepreneurship. [3] - An extremely slack labor market which is causing enormous increases in household debt. (What the Great Financial Crisis was really about.) [4] - An extremely slack labor market which leads to corporate profits and inequality not seen since the Gilded Age.[5] - An extremely slack labor market which has led to what is probably negative wage growth as prices rise. [6] (That's just the UK but I'd say the US is probably 2-3 years behind the curve.) Add in the rise of China and you've got a perfect storm for a severe economic dislocation in the West as most of the population is tossed to the wolves of unemployment. So if you really want to see more startups, more entrepreneurship, more labor mobility, heck, simply more labor, you might do better than to keep going on about QE. [1] https://www.economist.com/news/briefing/21695385-profits-are-too-high-america-needs-giant-dose-competition-too-much-good-thing https://www.economist.com/news/briefing/21695385-profits-are... [2] http://www.ssc.wisc.edu/~nwilliam/Econ702_files/abch.pdf http://www.ssc.wisc.edu/~nwilliam/Econ702_files/abch.pdf [3] http://rooseveltinstitute.org/wp-content/uploads/2016/07/Declining-Entrepreneurship-Labor-Mobility-and-Business-Dynamism-A-Demand-Side-Approach.pdf http://rooseveltinstitute.org/wp-content/uploads/2016/07/Dec... [4] https://www.nytimes.com/2017/05/17/business/dealbook/household-debt-united-states.html https://www.nytimes.com/2017/05/17/business/dealbook/househo... [5] https://www.nytimes.com/2017/07/06/opinion/wage-inequality-income-growth.html https://www.nytimes.com/2017/07/06/opinion/wage-inequality-i... [6] https://www.ft.com/content/6d248d02-4885-37d6-b00d-c6117c0dcd73?mhq5j=e1 https://www.ft.com/content/6d248d02-4885-37d6-b00d-c6117c0dc...