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> WeWork, WagLabs, and most VC investments contribute absolutely nothing of value to the world. If they didn't exist, no one would even notice their absence. T

> WeWork, WagLabs, and most VC investments contribute absolutely nothing of value to the world. If they didn't exist, no one would even notice their absence. The irony of posting this on Hacker News... Snark aside, to a first approximation, voluntary monetary transactions happen when one party gives another party something of value. If you move money around and end up with more than you started, that's because you moved money around in ways that provided real value to people. Now obviously this is an incredibly crude approximation, but the onus of proof is firmly on you to prove that VCs aren't providing value to the world. And please don't go the "I only said most investments contribute nothing of value" route, unless you also have a way to only pick startups that'll actually provide value (hint: if you knew how to do this, you'd be richer than Masayoshi Son).

TheOtherHobbes 7y ago
No, that isn't true at all. In this economy you make the most money by creating the perception of value through psychological manipulation. Actual use-value creation is different and economically secondary. WeWork is a perfect example. It's an IPO-brand - barely failed, but it was close - instead of a sustainable business. Like competitor IWG/Regus. This why branding and marketing are a thing. You use them to increase the perception of value. An unbranded widget or service can have identical use-value to a branded one, but the perception of value can be manipulated to make one far more expensive. As for VCs - VCs are destroying value, because VC culture is geared towards unicorn farming and IPO cash outs, not stable-but-unspectacular business development. See e.g. https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ https://techcrunch.com/2017/06/01/the-meeting-that-showed-me... There's a huge amount of potential value being lost because sustainable but unspectacular businesses are starved of growth funding. There's very little capital available anywhere for these businesses. Banks won't touch them, they can't go straight to IPO, and VCs aren't interested. In fact VCs are mostly a subset of the investment industry, which makes its money from client fees, not from returns. Clients are tolerant of mediocre returns as long as there's the prospect of a lottery-winning unicorn jackpot somewhere in the portfolio. As for Masayoshi Son - I have no idea what his game plan is. Nor does anyone else, clearly.
shoo 7y ago
I appreciate this is framed as "incredibly crude approximation", but here's a contrived counter example to try to highlight ugly detail that language such as "providing real value" may gloss over: > If you move money around and end up with more than you started, that's because you moved money around in ways that provided real value to people. If I drive the getaway car for my friend's bank heist in return for a 30% cut of the spoils, we can argue I'm moving money around in ways that provide real value to other people (where by "people" we specifically mean my bank-robbing friend). > providing value to the world By "providing value to the world" do we mean "providing value to at least one other person ignoring other parties who may have lost value"? I think as a general rule of thumb it is quite dangerous to conflate "profitable activity" with "providing value to the world".
- TheOtherHobbes 7y ago
  That's a good point, and one that can't be made often enough. Conventional accounting excludes externalities, including consequential losses to third parties. AirBnB can pride itself on "providing value" but in fact it massively distorts local economies, and has a very detrimental effect on the availability of affordable long-term rentals. Tenants in that market suffer directly because their rents are higher, and there are fewer properties available to them. That's a net cost to them, as a group, and of course it doesn't appear on AirBnB's accounts. If you want to claim you're "providing value" the burden of proof is on you to provide an economic summary that accounts for externalities and is demonstrably non-zero-sum. Doing this realistically would reveal that many corporations are essentially rent-seekers, oligopolists, and trivial arbitrageurs, not value creators. IMO it's going to be impossible to avoid making this change to accounting standards - probably by the middle of the century, at the latest. Which is good, because genuine value creation is a wonderful thing and deserves all the support it can get.

TheOtherHobbes 7y ago

No, that isn't true at all. In this economy you make the most money by creating the perception of value through psychological manipulation. Actual use-value creation is different and economically secondary. WeWork is a perfect example. It's an IPO-brand - barely failed, but it was close - instead of a sustainable business. Like competitor IWG/Regus. This why branding and marketing are a thing. You use them to increase the perception of value. An unbranded widget or service can have identical use-value to a branded one, but the perception of value can be manipulated to make one far more expensive. As for VCs - VCs are destroying value, because VC culture is geared towards unicorn farming and IPO cash outs, not stable-but-unspectacular business development. See e.g. https://techcrunch.com/2017/06/01/the-meeting-that-showed-me-the-truth-about-vcs/ https://techcrunch.com/2017/06/01/the-meeting-that-showed-me... There's a huge amount of potential value being lost because sustainable but unspectacular businesses are starved of growth funding. There's very little capital available anywhere for these businesses. Banks won't touch them, they can't go straight to IPO, and VCs aren't interested. In fact VCs are mostly a subset of the investment industry, which makes its money from client fees, not from returns. Clients are tolerant of mediocre returns as long as there's the prospect of a lottery-winning unicorn jackpot somewhere in the portfolio. As for Masayoshi Son - I have no idea what his game plan is. Nor does anyone else, clearly.

shoo 7y ago

I appreciate this is framed as "incredibly crude approximation", but here's a contrived counter example to try to highlight ugly detail that language such as "providing real value" may gloss over: > If you move money around and end up with more than you started, that's because you moved money around in ways that provided real value to people. If I drive the getaway car for my friend's bank heist in return for a 30% cut of the spoils, we can argue I'm moving money around in ways that provide real value to other people (where by "people" we specifically mean my bank-robbing friend). > providing value to the world By "providing value to the world" do we mean "providing value to at least one other person ignoring other parties who may have lost value"? I think as a general rule of thumb it is quite dangerous to conflate "profitable activity" with "providing value to the world".

TheOtherHobbes 7y ago
That's a good point, and one that can't be made often enough. Conventional accounting excludes externalities, including consequential losses to third parties. AirBnB can pride itself on "providing value" but in fact it massively distorts local economies, and has a very detrimental effect on the availability of affordable long-term rentals. Tenants in that market suffer directly because their rents are higher, and there are fewer properties available to them. That's a net cost to them, as a group, and of course it doesn't appear on AirBnB's accounts. If you want to claim you're "providing value" the burden of proof is on you to provide an economic summary that accounts for externalities and is demonstrably non-zero-sum. Doing this realistically would reveal that many corporations are essentially rent-seekers, oligopolists, and trivial arbitrageurs, not value creators. IMO it's going to be impossible to avoid making this change to accounting standards - probably by the middle of the century, at the latest. Which is good, because genuine value creation is a wonderful thing and deserves all the support it can get.