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Comes close to an important point, and then misses it completely. The problem is not that Saudi money would get them influence at new U.S. tech companies. The

Comes close to an important point, and then misses it completely. The problem is not that Saudi money would get them influence at new U.S. tech companies. The problem is that Saudi money is getting pushed into "tech" companies that have unsustainable business models, and this is sucking all the oxygen (e.g. available developers) from other projects that could accomplish more. Imagine two startup ideas. One, could be profitable, and eventually turn into a $100million company that does something useful. The other, will never be profitable, but makes promises of being worth $40billion. Which one gets the (inexperienced VC) money? The second. Which one would be a long-term bonus for the U.S. economy? The first. That is the problem; too much money from Softbank (much of that from S.A.) pushes all the developer and other resources into goofy ideas that will end up going bust, instead of more rational ideas that could be long-term useful.

golergka 7y ago
Well that just means that a rational investor would make a killing amid this chaos, wouldn't he? So, we have to assume that for the last decade, not a single VC in the industry have been rational enough to pick up easy money everybody else is overlooking?
- wayoutthere 7y ago
  There has been too much easy money flying around the VC world for the last 30 years that people have literally forgotten how to operate any other way. People have lived entire careers in this environment, so the rational move for them is the current status quo. But the paradigm is shifting. Where will we end up? My money is on early 20th century style oligarchic capitalism, but that’s not a very appealing proposition for a lot of people.
  - tossAfterUsing 7y ago
    > My money is on early 20th century style oligarchic capitalism I've been enjoying the historical context in this book. I'm not surprised to be liking the book, but i'm pleased to be getting a better understanding of what the early 20th century space was like. https://www.goodreads.com/book/show/36448501-the-bitcoin-standard https://www.goodreads.com/book/show/36448501-the-bitcoin-sta...
    - wayoutthere 7y ago
      I wholeheartedly disagree with any decentralized approach to national economics. Not because it wouldn’t work, but because it would. Money is power only because power likes it that way. But power is power, and a decentralized monetary supply does not serve the powerful. They will attack it with every weapon they have (which is basically all of them) to ensure it doesn’t happen until they control it. In the early 20th century, the rich owned gold mines. Once we moved off the gold standard, they simply took that wealth and put it into the fiat system by owning companies. Even if we do end up on a nominally crypto-backed monetary system, I would expect any governance (even decentralized) to favor the incumbent wealthy as much if not more than our existing system.
      - Nasrudith 7y ago
        I look at it in a systems way. If it /doesn't/ serve those with any actual wealth to back the currency to use it then the question becomes why would anybody use it? I don't see how it could work at all even without some vague nebulous bogeyman stopping it. It brings to mind the conspiratorial "big Pharma is withholding the cure" thinking while ignoring that selling the cure would make them way more, that the long term treatment is competitive, and a cure effectively monopolizes the whole segment of drugs and treatments. The real reason cures are rare is because they are /hard/. With large buy in from lesser concentrations of wealth it could be a "peso" at best - something used by lesser wealths to trade to their localized advantage but lacking the power of big movers.
      - thatfrenchguy 7y ago
        > Even if we do end up on a nominally crypto-backed monetary system, I would expect any governance (even decentralized) to favor the incumbent wealthy as much if not more than our existing system Because they can own all the GPUs/ASICs/whatever you'll use as proof of work / proof of stake for your cryptocurrency ?
      - tossAfterUsing 7y ago
        > I wholeheartedly disagree with any decentralized approach to national economics. do you then agree with only a centralized national economics? what does that even look like?
- rossdavidh 7y ago
  Well, if the available resources are being bid up by billions going into goofy ideas, then the cost to the "rational" investor has gone up. The resources for the $40billion startup didn't get created out of thin air by the Softbank money, they got taken from a finite pool, and thus are unavailable for other startups. Softbank pushed money into the startup space, but didn't add any real resources, so it just distorted the ability of the market to allocate them appropriately.
- rolltiide 7y ago
  A rationale investor is not moving enough money to make a difference The sustainable project isnt providing liquidity for 20 years if it even gets enough capital to execute at all, whereas the Softbank FOMO project will in 5 years after they are involved. You are betting on founders and their network, not their idea.
- imtringued 7y ago
  I don't see how that follows. Usually what happens is that those sustainable companies are copied by another company. This is perfectly fine but then that second company uses it's access to VC money to eliminate the competition. The sustainable company will have to close shop and years later the unsustainable company will close as well. Meanwhile the VCs don't care because some unicorn investment got them 20x returns.
3131s 7y ago
Why are you so sure that only one of these things is a problem?
- rossdavidh 7y ago
  Good point, could be both. But the distortion effect is the one that bothers me more, because it doesn't just impact the companies that take Softbank money, but more generally distorts the whole startup space. But sure, could be both.
- chibg10 7y ago
  There's a lot of Saudi fear mongering in tech media and it is not undeserved in some ways (MBS is a brutal authoritarian), but I'm not sure what interests people think the Saudis have in tech firms other than getting a return on their investment. As bad as MBS is, it's not like he has some secret plan to spread Saudi values throughout the world. In fact, he's actually a liberalizing force in SA (economically and socially at least, although not politically). And Saudi Arabia, unlike e.g. China, isn't attempting to remake the world order to revolve around itself (and its authoritarian rulers). So while I understand the sentiment "I don't want to accept money from Saudi Arabia for my start-up because of their human rights violations", I have a hard time understanding why one would fear Saudi Arabian board members would abuse their seats for geopolitical influence purely due to the fact that Saudi Arabia has little to gain in the geopolitics department from tech companies.
antoniuschan99 7y ago
that's basically wework vs regus
thorwasdfasdf 7y ago
Well, there's a vast oversupply of talent out there, so I don't think that investment in unsustainable business models will prevent investment in better areas. VCs will pick the business models that are most likely to succeed. If the most likely ones to succeed aren't doing well, it's because there aren't any better ones (or at least none that have been discovered or made legal thus far).
- NotSammyHagar 7y ago
  is that meant to be a sarcastic comment? there's a vast undersupply of programming talent, that's why salaries go up. people are attracted for the super expensive cities like seattle and sf because there's companies importing them.

golergka 7y ago

Well that just means that a rational investor would make a killing amid this chaos, wouldn't he? So, we have to assume that for the last decade, not a single VC in the industry have been rational enough to pick up easy money everybody else is overlooking?

wayoutthere 7y ago
There has been too much easy money flying around the VC world for the last 30 years that people have literally forgotten how to operate any other way. People have lived entire careers in this environment, so the rational move for them is the current status quo. But the paradigm is shifting. Where will we end up? My money is on early 20th century style oligarchic capitalism, but that’s not a very appealing proposition for a lot of people.
- tossAfterUsing 7y ago
  > My money is on early 20th century style oligarchic capitalism I've been enjoying the historical context in this book. I'm not surprised to be liking the book, but i'm pleased to be getting a better understanding of what the early 20th century space was like. https://www.goodreads.com/book/show/36448501-the-bitcoin-standard https://www.goodreads.com/book/show/36448501-the-bitcoin-sta...
  - wayoutthere 7y ago
    I wholeheartedly disagree with any decentralized approach to national economics. Not because it wouldn’t work, but because it would. Money is power only because power likes it that way. But power is power, and a decentralized monetary supply does not serve the powerful. They will attack it with every weapon they have (which is basically all of them) to ensure it doesn’t happen until they control it. In the early 20th century, the rich owned gold mines. Once we moved off the gold standard, they simply took that wealth and put it into the fiat system by owning companies. Even if we do end up on a nominally crypto-backed monetary system, I would expect any governance (even decentralized) to favor the incumbent wealthy as much if not more than our existing system.
    - Nasrudith 7y ago
      I look at it in a systems way. If it /doesn't/ serve those with any actual wealth to back the currency to use it then the question becomes why would anybody use it? I don't see how it could work at all even without some vague nebulous bogeyman stopping it. It brings to mind the conspiratorial "big Pharma is withholding the cure" thinking while ignoring that selling the cure would make them way more, that the long term treatment is competitive, and a cure effectively monopolizes the whole segment of drugs and treatments. The real reason cures are rare is because they are /hard/. With large buy in from lesser concentrations of wealth it could be a "peso" at best - something used by lesser wealths to trade to their localized advantage but lacking the power of big movers.
    - thatfrenchguy 7y ago
      > Even if we do end up on a nominally crypto-backed monetary system, I would expect any governance (even decentralized) to favor the incumbent wealthy as much if not more than our existing system Because they can own all the GPUs/ASICs/whatever you'll use as proof of work / proof of stake for your cryptocurrency ?
    - tossAfterUsing 7y ago
      > I wholeheartedly disagree with any decentralized approach to national economics. do you then agree with only a centralized national economics? what does that even look like?
rossdavidh 7y ago
Well, if the available resources are being bid up by billions going into goofy ideas, then the cost to the "rational" investor has gone up. The resources for the $40billion startup didn't get created out of thin air by the Softbank money, they got taken from a finite pool, and thus are unavailable for other startups. Softbank pushed money into the startup space, but didn't add any real resources, so it just distorted the ability of the market to allocate them appropriately.
rolltiide 7y ago
A rationale investor is not moving enough money to make a difference The sustainable project isnt providing liquidity for 20 years if it even gets enough capital to execute at all, whereas the Softbank FOMO project will in 5 years after they are involved. You are betting on founders and their network, not their idea.
imtringued 7y ago
I don't see how that follows. Usually what happens is that those sustainable companies are copied by another company. This is perfectly fine but then that second company uses it's access to VC money to eliminate the competition. The sustainable company will have to close shop and years later the unsustainable company will close as well. Meanwhile the VCs don't care because some unicorn investment got them 20x returns.

3131s 7y ago

Why are you so sure that only one of these things is a problem?

rossdavidh 7y ago
Good point, could be both. But the distortion effect is the one that bothers me more, because it doesn't just impact the companies that take Softbank money, but more generally distorts the whole startup space. But sure, could be both.
chibg10 7y ago
There's a lot of Saudi fear mongering in tech media and it is not undeserved in some ways (MBS is a brutal authoritarian), but I'm not sure what interests people think the Saudis have in tech firms other than getting a return on their investment. As bad as MBS is, it's not like he has some secret plan to spread Saudi values throughout the world. In fact, he's actually a liberalizing force in SA (economically and socially at least, although not politically). And Saudi Arabia, unlike e.g. China, isn't attempting to remake the world order to revolve around itself (and its authoritarian rulers). So while I understand the sentiment "I don't want to accept money from Saudi Arabia for my start-up because of their human rights violations", I have a hard time understanding why one would fear Saudi Arabian board members would abuse their seats for geopolitical influence purely due to the fact that Saudi Arabia has little to gain in the geopolitics department from tech companies.

antoniuschan99 7y ago

that's basically wework vs regus

thorwasdfasdf 7y ago

Well, there's a vast oversupply of talent out there, so I don't think that investment in unsustainable business models will prevent investment in better areas. VCs will pick the business models that are most likely to succeed. If the most likely ones to succeed aren't doing well, it's because there aren't any better ones (or at least none that have been discovered or made legal thus far).

NotSammyHagar 7y ago
is that meant to be a sarcastic comment? there's a vast undersupply of programming talent, that's why salaries go up. people are attracted for the super expensive cities like seattle and sf because there's companies importing them.