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People perform services or produce goods for their community, and they are given resources in exchange for their efforts (aka "return"). Unfortunately, we are

People perform services or produce goods for their community, and they are given resources in exchange for their efforts (aka "return"). Unfortunately, we are now tainted with a lust for more. And then we ask how to get 10x more (aka "return") before we even think about what it is we are providing. We all just want to be "rich", and all we can think about is the end, not the means. Then we must read articles like these - the likes of which do not provide any practical insight on how one should live a fulfilling life. It's all about just waiting for numbers get bigger.

Boothroid 9y ago
Quite. Moreover and with apologies to Marx, where is this 10x coming from? The simple fact is that it's the fruit of other people's labour that is being appropriated.
aaavl2821 9y ago
I wasnt quite sure what the point of the article was, but if the author is a VC, his job is to turn his LP's money into more money. If it is a seed fund, the only way for him to fulfill his obligations to his investors / do his job is to invest in companies with 10x potential, most of which will fail. His goal is to generate a return of 15-20% a year for his investors, and his strategy is to bet on 10x companies with expectation that most of those will be 0x so ultimately it is greed driving all this (wanting uncorrelated above-market returns), but VCs aren't making 10x -- if they're lucky and good, most funds will make 2-3x overall over a 10 year period -- which is what youd get if you bought S&P 500 index funds 10 years ago
csa 9y ago
VC math dictates that they need roughly one 10x (or higher) company to make up for a couple of roughly break even companies and several companies in which no money is returned. You can twist the nobs a bit to adjust returns, but ultimately the 10x and higher companies define the returns of pretty much every fund. The rest of the companies are just noise in terms of influence on ROI. Note that this is why VC is sort of a deal with the devil -- you need to be a 10Xer, or you rapidly become much less interesting. This article is just about the math of those returns that factor in things like dilution. Many people fail to account for this, and I have seen some spectacular failed estimates of YC returns when people somehow think that YC still owns 7% of a huge multi-round company. I don't really see this as a "lust for more" type of article.
nine_k 9y ago
Look at the billionaires who spend their fortunes on charity. Do they give back to the community? Would they be able to give that much back were they not be able to make so much on their investments? Being rich and living a fulfilling life are orthogonal concerns, once you're out of the poor-and-starving territory. This means that both can be achieved independently, including together.
- csin 9y ago
  I don't have an opinion on the moral aspect of being a billionaire. I just want to point out that billionaires don't just magically create more money for charities. Someone had to lose that money. For the sake of simplicity, lets say... Goods & services were priced optimally to reduce the middle classes disposable income. The billionaire throws the poor-and-starving a bone every now and then. Should the middle class have more disposable income? Or should charities get their bone? It's a matter of philosophy. Being rich is being in control. You get to decide who gets your money.
  - nostrademons 9y ago
    Someone had to trade the money that ended up in the billionaire's pocket. Presumably they received something of more value to themselves than the money, otherwise they wouldn't have made the trade. This applies on the employee side too: employees have the option to go into business for themselves and take their skills directly to the marketplace, but they make a choice to trade surplus profits beyond their salary back to their employer, usually for the security of knowing that they'll continue to receive a paycheck even if those profits never materialize. This was a very conscious choice for me last time I took a job - I looked at it as "Well, I'll be doing the same thing I was as an entrepreneur, but my employer bears the risk of it not working out in the market" - though I suspect most people don't think like that. It is a choice, though, and once I felt like taking more risks, I left.
    - speedplane 9y ago
      You gain other intangibles being an employee... namely training, working within an industry and learning customs/norms, and meeting people. I was an employee for years before I left to do my startup. I definitely thought about the purely monetary risk/incentive issues you raise, but I thought about many others: - if I stay longer as an employee, will my training make my startup more successful? - am I prepared to be alone, not relying on a boss to tell me what to do and provide guidance on my work quality? - will I become isolated running my startup not relying on an employer for exposure? - will being so independent make me more motivated or less? There's no question I thought about monetary risk/reward, but it's so difficult to calculate any risk/reward with any new company. Often, all you have to go on are these softer questions that you have to answer for yourself.
agumonkey 9y ago
Little anecdote. With the rise of racial tensions I got interested about violence against jews (among others) and absurd claims on their financial lobby etc. Some told me that jews were segregated in middle ages, only allowed as clerks, thus their presence in finance. Someone then corrected me, saying it's in the ballpark but not true. The reason why jews ended up in banks, is that Christians (and probably other groups/religion) despised loans with interests, usury. They saw it as immoral and fake value (as opposed to work). But it was allowed for other non christian groups to lend money as long as interests weren't indecent (say 5%). From the few I read, jews had a long history of being clerks and were good at math and bookkeeping (at a time where education was rare) so they fit the bill (sic) perfectly. There are a lot to say about the dynamics there, associations, then violence, cycles. Now reading this in the 2000s I was shocked that the old church guys didn't allow to profit from another's need and multiplying money for nothing. It felt so much more humane, social.. honorable, candid.. And that the subject of money was sensitive even that long ago; somehow amazing. Nowadays banks, finance, ROI, etc etc are all unquestionable, but it used to be different.
- Veen 9y ago
  The prohibition against usury that used to be part of Christian practice hasn't died out everywhere: it's still forbidden in the Islamic world (Riba[1]), which is why there are Sharia-compliant banks[2]. [1]: https://en.wikipedia.org/wiki/Riba https://en.wikipedia.org/wiki/Riba [2]: https://www.citywealthmag.com/news/britain-has-more-islamic-banks-and-lenders-any-other-western-country https://www.citywealthmag.com/news/britain-has-more-islamic-...
  - agumonkey 9y ago
    Quite ironic how old organization schemes were not devoid of useful ideas.
justicezyx 9y ago
Everyday we are seeing human greed defy basic common sense of how work and rewards should work. I am deeply questioning Human's future on this planet. Hopefully Musk can get to Mars sooner. I think my children might need that to survive.
ericd 9y ago
And then we ask how to get 10x more (aka "return") before we even think about what it is we are providing. What the investor is providing is their money, with the understanding that they most likely will never see any of it again. In the event that the person they gave it to is successful, though, the bargain is that they get to share in the success. Without the potential for the 10x to pay for the vast number of failures the math just doesn't work, and the investors are better off keeping their money for themselves. And then entrepreneurs have to save up their own funding before starting anything.
jriot 9y ago
I completely agree here. Most of the replies state that the VC provides a return on the investment of other people's money. Which then leads me to question, why do we need to invest money? If you have enough money to live comfortable and all your needs and wants are provided, why invest to get more? Number becoming bigger is exactly the point. Most of what is being provided is utter nonsense. Life would not stop if 99% of the services provided ceased today. Life might be uncomfortable, particularly those living in cities without means to provide food for yourself beyond a week. However, would still continue. A much different life, but life nonetheless. More fulfilling is a debate on the purpose of life, but I am sure as hell certain 100% of the issues we concern ourselves with today would become a non-issue.
Waterluvian 9y ago
Money can be a tool or a high score. I maxed out three years into my career, the amount of money I felt I needed to make. All I've been doing now is trying to figure out how to work less and maintain that income. What I want is a 20% paycut and every Friday off in addition to the weekend. But it's seemingly not compatible with this world.
- moneytide1 9y ago
  " But it's seemingly not compatible with this world." I was told by a ~50 year old yesterday that the Christmas holidays used to be two weeks. That means that it was common for businesses to close for an entire two weeks, instead of one day. Now, it's all about the maximum grind. https://chriskresser.com/busyness-badge-of-honor-or-cultural-disease/ https://chriskresser.com/busyness-badge-of-honor-or-cultural...

Boothroid 9y ago

Quite. Moreover and with apologies to Marx, where is this 10x coming from? The simple fact is that it's the fruit of other people's labour that is being appropriated.

aaavl2821 9y ago

I wasnt quite sure what the point of the article was, but if the author is a VC, his job is to turn his LP's money into more money. If it is a seed fund, the only way for him to fulfill his obligations to his investors / do his job is to invest in companies with 10x potential, most of which will fail. His goal is to generate a return of 15-20% a year for his investors, and his strategy is to bet on 10x companies with expectation that most of those will be 0x so ultimately it is greed driving all this (wanting uncorrelated above-market returns), but VCs aren't making 10x -- if they're lucky and good, most funds will make 2-3x overall over a 10 year period -- which is what youd get if you bought S&P 500 index funds 10 years ago

csa 9y ago

VC math dictates that they need roughly one 10x (or higher) company to make up for a couple of roughly break even companies and several companies in which no money is returned. You can twist the nobs a bit to adjust returns, but ultimately the 10x and higher companies define the returns of pretty much every fund. The rest of the companies are just noise in terms of influence on ROI. Note that this is why VC is sort of a deal with the devil -- you need to be a 10Xer, or you rapidly become much less interesting. This article is just about the math of those returns that factor in things like dilution. Many people fail to account for this, and I have seen some spectacular failed estimates of YC returns when people somehow think that YC still owns 7% of a huge multi-round company. I don't really see this as a "lust for more" type of article.

nine_k 9y ago

Look at the billionaires who spend their fortunes on charity. Do they give back to the community? Would they be able to give that much back were they not be able to make so much on their investments? Being rich and living a fulfilling life are orthogonal concerns, once you're out of the poor-and-starving territory. This means that both can be achieved independently, including together.

csin 9y ago
I don't have an opinion on the moral aspect of being a billionaire. I just want to point out that billionaires don't just magically create more money for charities. Someone had to lose that money. For the sake of simplicity, lets say... Goods & services were priced optimally to reduce the middle classes disposable income. The billionaire throws the poor-and-starving a bone every now and then. Should the middle class have more disposable income? Or should charities get their bone? It's a matter of philosophy. Being rich is being in control. You get to decide who gets your money.
- nostrademons 9y ago
  Someone had to trade the money that ended up in the billionaire's pocket. Presumably they received something of more value to themselves than the money, otherwise they wouldn't have made the trade. This applies on the employee side too: employees have the option to go into business for themselves and take their skills directly to the marketplace, but they make a choice to trade surplus profits beyond their salary back to their employer, usually for the security of knowing that they'll continue to receive a paycheck even if those profits never materialize. This was a very conscious choice for me last time I took a job - I looked at it as "Well, I'll be doing the same thing I was as an entrepreneur, but my employer bears the risk of it not working out in the market" - though I suspect most people don't think like that. It is a choice, though, and once I felt like taking more risks, I left.
  - speedplane 9y ago
    You gain other intangibles being an employee... namely training, working within an industry and learning customs/norms, and meeting people. I was an employee for years before I left to do my startup. I definitely thought about the purely monetary risk/incentive issues you raise, but I thought about many others: - if I stay longer as an employee, will my training make my startup more successful? - am I prepared to be alone, not relying on a boss to tell me what to do and provide guidance on my work quality? - will I become isolated running my startup not relying on an employer for exposure? - will being so independent make me more motivated or less? There's no question I thought about monetary risk/reward, but it's so difficult to calculate any risk/reward with any new company. Often, all you have to go on are these softer questions that you have to answer for yourself.

agumonkey 9y ago

Little anecdote. With the rise of racial tensions I got interested about violence against jews (among others) and absurd claims on their financial lobby etc. Some told me that jews were segregated in middle ages, only allowed as clerks, thus their presence in finance. Someone then corrected me, saying it's in the ballpark but not true. The reason why jews ended up in banks, is that Christians (and probably other groups/religion) despised loans with interests, usury. They saw it as immoral and fake value (as opposed to work). But it was allowed for other non christian groups to lend money as long as interests weren't indecent (say 5%). From the few I read, jews had a long history of being clerks and were good at math and bookkeeping (at a time where education was rare) so they fit the bill (sic) perfectly. There are a lot to say about the dynamics there, associations, then violence, cycles. Now reading this in the 2000s I was shocked that the old church guys didn't allow to profit from another's need and multiplying money for nothing. It felt so much more humane, social.. honorable, candid.. And that the subject of money was sensitive even that long ago; somehow amazing. Nowadays banks, finance, ROI, etc etc are all unquestionable, but it used to be different.

Veen 9y ago
The prohibition against usury that used to be part of Christian practice hasn't died out everywhere: it's still forbidden in the Islamic world (Riba[1]), which is why there are Sharia-compliant banks[2]. [1]: https://en.wikipedia.org/wiki/Riba https://en.wikipedia.org/wiki/Riba [2]: https://www.citywealthmag.com/news/britain-has-more-islamic-banks-and-lenders-any-other-western-country https://www.citywealthmag.com/news/britain-has-more-islamic-...
- agumonkey 9y ago
  Quite ironic how old organization schemes were not devoid of useful ideas.

justicezyx 9y ago

Everyday we are seeing human greed defy basic common sense of how work and rewards should work. I am deeply questioning Human's future on this planet. Hopefully Musk can get to Mars sooner. I think my children might need that to survive.

ericd 9y ago

And then we ask how to get 10x more (aka "return") before we even think about what it is we are providing. What the investor is providing is their money, with the understanding that they most likely will never see any of it again. In the event that the person they gave it to is successful, though, the bargain is that they get to share in the success. Without the potential for the 10x to pay for the vast number of failures the math just doesn't work, and the investors are better off keeping their money for themselves. And then entrepreneurs have to save up their own funding before starting anything.

jriot 9y ago

I completely agree here. Most of the replies state that the VC provides a return on the investment of other people's money. Which then leads me to question, why do we need to invest money? If you have enough money to live comfortable and all your needs and wants are provided, why invest to get more? Number becoming bigger is exactly the point. Most of what is being provided is utter nonsense. Life would not stop if 99% of the services provided ceased today. Life might be uncomfortable, particularly those living in cities without means to provide food for yourself beyond a week. However, would still continue. A much different life, but life nonetheless. More fulfilling is a debate on the purpose of life, but I am sure as hell certain 100% of the issues we concern ourselves with today would become a non-issue.

Waterluvian 9y ago

Money can be a tool or a high score. I maxed out three years into my career, the amount of money I felt I needed to make. All I've been doing now is trying to figure out how to work less and maintain that income. What I want is a 20% paycut and every Friday off in addition to the weekend. But it's seemingly not compatible with this world.

moneytide1 9y ago
" But it's seemingly not compatible with this world." I was told by a ~50 year old yesterday that the Christmas holidays used to be two weeks. That means that it was common for businesses to close for an entire two weeks, instead of one day. Now, it's all about the maximum grind. https://chriskresser.com/busyness-badge-of-honor-or-cultural-disease/ https://chriskresser.com/busyness-badge-of-honor-or-cultural...