2 ms·
Think of society as a very slow (this is key) networked system, subject to the same kind of feedback loops and manipulations we can perform in computer networks
by neffy 8y ago
Think of society as a very slow (this is key) networked system, subject to the same kind of feedback loops and manipulations we can perform in computer networks, just progressing in human time over years.
Now within this system there are two strategies to run a company, #1) employ people, make a product, sell it for a profit, rinse, recycle, keep going for decades if you´re good.
Or #2, for a short (but longish in human terms, several years at least, remember it´s a very, very slow system, and hey interest rates have been really low now for a decade), borrow money, employ people, make a product, and sell it for less than it cost to make.
Eventually with #2 the borrowed money runs out, but until it does you stand a more than decent chance of beating #1, and since you borrowed the money you can throw some great parties with it along the way.
For extra thrills and lolz, borrow the money from the banking system, so that when you can´t repay it, you crash the entire country with a credit crisis. Note there isn´t necessarily as clear a division between the two strategies as we might want, most companies need some kind of startup capital, and have to borrow that from somewhere.
- gcb0 8y agoit used to be called investor diligence. if a small startup was selling at a loss like Microsoft can, nobody would be crazy to have their money there. now big finance saw they just need unicorns, not actual business models, so everything and anything is fair game and stocks are less sound than Vegas.
- dredmorbius 8y agoThough VC is technicaly equity rather than debt. Rather than borrowing, it induces a follow-on investment, capital, revenue and market (in cases), recruiting strength and other mindshare effects. The smart money knows the exit strategy (and more importantly: timing ), the dumb money thinks it does, the hopeless money has no idea what exit strategy is. The effect is similar to the debt model you describe, though structured differently.