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Neither Theranos nor WeWork were trying to solve rich people problems.

by tinco 6y ago

lumost 6y ago
arguably, they solved a problem of where to stick money to try and get a greater than x% return. To do so both companies took on insane levels of risk by trying to solve impossible business/science problems on the basis that they could maybe just spend enough money and fake it till they made it. In WeWork's case some rational investors may have thought that they'd end up with a monopoly on B-tier office space as a failure mode.
- jjoonathan 6y ago
  Right, the fact that the market is chasing such high risk investments when there's lots of obvious low-risk work that needs to be done means that the low-risk work has gotten "frozen out" of the economy. Poor people problems aren't problems, as far as the economy is concerned. Still, WeWork and Theranos are only examples of the "bubble" side of the effect, not so much the "freezing out" side, and they don't really illustrate the contrast between unworthy, overfunded endeavors and worthy, underfunded endeavors. I originally had a more visceral, abstract example that did a much better job, but it was attracting so many drive-by downvotes that I decided to retire it while I searched for better wording/examples. Here is the original: Economists invite you to ignore this effect by conflating "value" (the economic notion, which is weighted by wealth) with value (the philosophical notion, which isn't, at least not to the same degree). For example, consider the prospect of feeding starving African children. This action has 0 "value" -- the market will not pay you to do this because the kids have no money with which to pay you -- even though the prospect has loads of value in the philosophical sense. Now consider the prospect of merging up the banks so that they can charge higher fees and offload risk to the federal government. This action has loads of "value" -- it gives investors a return, at scale, and investors have lots of money, so their opinion counts heavily -- even though this prospect has zero or negative value in the philosophical sense. Because it is weighted according to wealth, the economic notion of value diverges from the philosophical notion of value in proportion to inequality, and with exploding inequality, that's a big problem.
- blaser-waffle 6y ago
  > they solved a problem of where to stick money to try and get a greater than x% return That is literally any company, be they large or startup, that is trying to attract investment. These were both "disruptive" types that had the backing of a few notable investors and interested parties, and looked juicy to those who could stomach the risk. Theranos was trying to solve blood testing problems, to make them quick, cheap, and to disrupt the handful of companies that dominate the medical testing field. The whole idea was that poor folks could get a cheap, reliable blood test at Rite-Aid. WeWork was an REIT designed to resell coworking space to low-to-mid scale clients; rich people and big companies aren't getting coworking space, they're just getting their own private offices.
deleted 6y ago
[deleted]

Neither Theranos nor WeWork were trying to solve rich people problems.

by tinco 6y ago

Neither Theranos nor WeWork were trying to solve rich people problems.

arguably, they solved a problem of where to stick money to try and get a greater than x% return. To do so both companies took on insane levels of risk by trying to solve impossible business/science problems on the basis that they could maybe just spend enough money and fake it till they made it. In WeWork's case some rational investors may have thought that they'd end up with a monopoly on B-tier office space as a failure mode.

jjoonathan 6y ago
Right, the fact that the market is chasing such high risk investments when there's lots of obvious low-risk work that needs to be done means that the low-risk work has gotten "frozen out" of the economy. Poor people problems aren't problems, as far as the economy is concerned. Still, WeWork and Theranos are only examples of the "bubble" side of the effect, not so much the "freezing out" side, and they don't really illustrate the contrast between unworthy, overfunded endeavors and worthy, underfunded endeavors. I originally had a more visceral, abstract example that did a much better job, but it was attracting so many drive-by downvotes that I decided to retire it while I searched for better wording/examples. Here is the original: Economists invite you to ignore this effect by conflating "value" (the economic notion, which is weighted by wealth) with value (the philosophical notion, which isn't, at least not to the same degree). For example, consider the prospect of feeding starving African children. This action has 0 "value" -- the market will not pay you to do this because the kids have no money with which to pay you -- even though the prospect has loads of value in the philosophical sense. Now consider the prospect of merging up the banks so that they can charge higher fees and offload risk to the federal government. This action has loads of "value" -- it gives investors a return, at scale, and investors have lots of money, so their opinion counts heavily -- even though this prospect has zero or negative value in the philosophical sense. Because it is weighted according to wealth, the economic notion of value diverges from the philosophical notion of value in proportion to inequality, and with exploding inequality, that's a big problem.
blaser-waffle 6y ago
> they solved a problem of where to stick money to try and get a greater than x% return That is literally any company, be they large or startup, that is trying to attract investment. These were both "disruptive" types that had the backing of a few notable investors and interested parties, and looked juicy to those who could stomach the risk. Theranos was trying to solve blood testing problems, to make them quick, cheap, and to disrupt the handful of companies that dominate the medical testing field. The whole idea was that poor folks could get a cheap, reliable blood test at Rite-Aid. WeWork was an REIT designed to resell coworking space to low-to-mid scale clients; rich people and big companies aren't getting coworking space, they're just getting their own private offices.

deleted 6y ago

[deleted]