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The Unicorns Fell into a Ditch

• umeshunni 6y ago
  The title is a reference to this series of slides in the Softbank earnings presentation: https://imgur.com/a/90bxNjo https://imgur.com/a/90bxNjo https://group.softbank/system/files/pdf/ir/presentations/2019/earnings-presentation_q4fy2019_01_en.pdf https://group.softbank/system/files/pdf/ir/presentations/201...
  • MattGaiser 6y ago
    SoftBank could have saved money on all the high resolution graphics...
    • jacquesm 6y ago
      They could have saved a lot more by not doing so many stupid investments.
      • blobbers 6y ago
        Think of all the stupid jobs that wouldn't have been created if they didn't make their stupid investments. There'd be a total collapse in the stupidity market.
      • ChuckMcM 6y ago
        Pedantically, that statement isn't fair, an investment is only stupid or genius in hindsight, at the time it is just a choice. They could have saved a lot more by making better choices about what to invest in. :-)
        • jacquesm 6y ago
          Fair enough.
        • AnimalMuppet 6y ago
          I'm not sure I agree. I think some of them were stupid at the time of the investment. The larger the wishful thinking component, the more likely it's a stupid investment.
          • ChuckMcM 6y ago
            I hear you. I did an experiment post dot com crash which was to add notes in my journal about investments that were announced. I added my own evaluation next to it as 'makes sense' or 'doesn't make sense.' That helped me contextualize my looking back at things. I did this after I had turned down a high level engineering job at Netscape pre-IPO because, in my evaluation, every time they tried to charge money for their main product "Communicator" nobody would buy it, and I felt the market for their ecommerce server software was competing against a free alternative. That choice, leave Sun (an Internet powerhouse) or join a startup that couldn't sell its primary product, I considered the leave Sun choice 'stupid' at the time. It cost me about $7M in theory because that is what my options would have been worth (and yes they would have vested before the crash hit). Since I spent an unhealthy amount of time self criticizing my "choice mistakes" I took it upon myself to figure out if I was being realistic or not. My experience, based on my journal notes, was that I was wrong about half the time. So my criticism was unwarranted. It also helped temper any unrealistic feelings about my own abilities based on successes that were, largely luck driven.
            • AnimalMuppet 6y ago
              That's... sobering. But were you wrong about Netscape? Or were you right, but it took the market long enough to catch on that you left a lot of money on the table? I think the latter, but would defer to your opinion if you disagree.
              • blobbers 6y ago
                You can try to make better decisions, but it's hard to have better timing. While, a gut feeling or a statistic for the market's rationality curve might be possible, it certainly seems wiser to make better decisions. In today's economy Netscape's value would be in its user base in the same way one would expect chrome to be valuable. In the data marketing world, nothing is really free.
  • zacksinclair 6y ago
    Holy shit. They actually put that into a slide deck? Wow
    • gnicholas 6y ago
      I once saw a presentation with a slide that said “failure = success”. Yes, I am aware that this happened on HBO’s Silicon Valley, and no that’s not where I saw it.
    • seph-reed 6y ago
      Check out the Pepsi logo design doc if you want a real laugh: https://www.goldennumber.net/wp-content/uploads/pepsi-arnell-021109.pdf https://www.goldennumber.net/wp-content/uploads/pepsi-arnell...
      • aunlead 6y ago
        Attraction Theory: The Pepsi Proposition Establishment of a gravitational pull to shift from a “transactional” experience to an “invitational” expression. Is this for real!! I had to look up Pepsi's current logo to believe this. They paid $1 million for the logo (https://www.cbsnews.com/news/pepsis-nonsensical-logo-redesign-document-1-million-for-this/ https://www.cbsnews.com/news/pepsis-nonsensical-logo-redesig...)
  • eli_gottlieb 6y ago
    So they're saying one out of every three unicorns infected with the novel coronavirus will emerge as a winged unicorn?
    • pkilgore 6y ago
      "While reading a post on hacker news, a Softbank earnings call presentation caused me to google the difference between a unicorn and a Pegasus" is just one of those sentences that sounds Insane in prior to 2020.
      • bentcorner 6y ago
        | no wings | wings ---------+----------+-------- no horn | horse | pegasus ---------+----------+-------- horn | unicorn | alicorn
        • riffraff 6y ago
          Notice "alicorn" is actually the name of the unicorns' horn, historically. At some point people started using it for winged unicorns, presumably because "Ali" would be Latin for "wings" but this seems a recent development.
          • duaoebg 6y ago
            I wonder if it’s My Little Pony related
            • egypturnash 6y ago
              MLP popularized this usage but it predates that.
        • m463 6y ago
          sudo pacman -S ponysay ponythink this is awesome
        • BerislavLopac 6y ago
  • rubidium 6y ago
    And that wasn't even the craziest slide of the presentation. "Information Revolution - Happiness for Everyone" I had to wipe the coffee off my screen.
    • aabhay 6y ago
      That’s not the first time that slide has appeared on a Softbank deck. In fact, that deck is nowhere close to being the most insane SoftBank deck.
      • ashtonkem 6y ago
        Maybe they should hire someone to come up with normal slides, it can’t be good to be seen publicly losing money hand over first and making slides that look like they belong on Wait But Why.
      • tim333 6y ago
        I quite like the "Information Revolution - Happiness for Everyone" aspiration. Just needs a bit more work.
  • hiharryhere 6y ago
    Slides 50-54 in that second link are wild.
• irrational 6y ago
  That story about the pizzas was crazy. Especially the end where you have the doordash driver in on it, just pretending to deliver the pizzas. At what point would Doordash notice? A thousand pizzas? A hundred thousand pizzas? A million pizzas?
  • rhacker 6y ago
    I read that story elsewhere today, but I was left with a few holes - when the door dash driver pays for the pizza, was it their own personal credit card, or was that a door-dash issued card? That was the missing part for me. I think that they would notice at some point, and potentially trigger a fraud lawsuit - at some point the terms of service that all these people are agreeing to - would probably cover fraud. But even if not covered in the terms of service, one would probably still lose a lawsuit based on the fraud alone.
    • Apocryphon 6y ago
      These hyper-growth chasing startups are too busy to notice, not to mention they have their own lawsuits to worry about. https://www.thedailymeal.com/eat/n-out-sues-doordash-delivery-service-mishandling-food/111215 https://www.thedailymeal.com/eat/n-out-sues-doordash-deliver...
    • MattGaiser 6y ago
      > a door-dash issued card? DoorDash issues something called a Delight card.It is basically a prepaid debit card.
    • skrtskrt 6y ago
      I mean they are knowingly reselling something for less than it costs them, without ever touching the product, and they have no agreement at all with the restaurant owner that could stipulate "hey when you sell the pizza it has to meet these criteria". They specifically avoided letting the restaurant owner know that they were being sold through DoorDash, which is sketchy and definitely would lose DoorDash some sympathy about being "defrauded". I just can't see fraud here, only a giant company that is built on losing money intentionally creating a system that loses money with zero guardrails. Then people just... used that system exactly as it was.
• jpm_sd 6y ago
  Modern VC investing, in a nutshell: > In the new economy of user growth, you don’t have to worry about making a product that people want because you can just pay them to use it, so you might end up with companies losing money to give people things that they don’t want and driving out the things they do want.
  • caseysoftware 6y ago
    ^ This is a really interesting perspective. If we take this line of reasoning, then the various unicorns didn't detect and ride user behavior but used their massive piles of cash to distort it in non-sustainable ways. Now that the cash is drying up, people are bouncing back to the old patterns and approaches. I wonder how many of those alternatives disappeared/closed in the meantime?
    • ivanbakel 6y ago
      Which is exactly the goal of those unicorns in the first place. Once you've smothered the competition in investor money, you're free to raise prices to profitability and beyond. Like ripping out Detroit's streetcars just to sell more cars.
      • economicslol 6y ago
        >Once you've smothered the competition in investor money, you're free to raise prices to profitability and beyond. That's the theory at least. How much can Uber realistically raise their prices before people realize that yellow cabs or driving themselves is just too much cheaper to ignore. So they'll have to massively increase prices and subsequently kill off their own userbase. It's a lose lose and I don't think any of these companies expecting to pull this off will survive.
        • qppo 6y ago
          I have never once called an Uber because it was cheaper than alternatives. It's more convenient, reliable, and except for certain times transparent about pricing. They can increase the prices significantly and I will continue to use them over cabs.
• jcdavis 6y ago
  > The actual nerdy economics joke there is in the second paragraph, which takes the form: Two economists are walking down the street. One of them sees a $20 bill on the ground. As she bends to pick it up, her colleague says “don’t bother, if that was a real $20 bill someone would have picked it up by now.” She replies, “no see this was left here by a consumer tech startup trying to maximize user growth; their Monthly Active Picker-Upper numbers are doubling every two months.” She picks up the $20 bill and the startup raises money at a $2 billion valuation. Matt Levine truly is a poet
  • three_seagrass 6y ago
    I keep wishing he would do a podcast, even if it only released every two weeks.
    • deleted 6y ago
      [deleted]
    • blahbhthrow3748 6y ago
      The Odd Lots podcast is very similar and Tracy and Joe are also very funny. Matt actually appears in a couple episodes (he has a really deep voice I didn't expect)
  • duxup 6y ago
    Intended or not I like the line about "if that was a real $20" as sort of a subtext of how sometimes in economics you see predictions or explanations assuming people or businesses are somehow assumed to be logical. The $20 just couldn't be real because who would do that? But of course they do that and the expectation that being logical pays off or how we expect the market to work is all out the window.
    • magicsmoke 6y ago
      Economics is a post hoc explanation for how the market works. It's not like somebody came up with the theory of how a market should work and then built one, like you would a computer. Rather, markets existed back in the middle ages before economists did, increased the wealth of its participants, and economists later appeared to explain why that was the case. Nowhere is the prerequisite that this system is the result of logical design.
• ackbar03 6y ago
  I was asking this question a few days ago, are any of these large food companies still going to exist as they do today? Everybodies basically annoyed with them except maybe the customer but then again he's being subsidized by underpaid gig workers, restaurants, and vc money, and all the while the company itself still can't turn a profit
  • reverend_gonzo 6y ago
    For what its worth, even the customer is getting annoyed. I've had multiple cases where a a driver stole my food or mixed up orders. Sure, the company will fix it and refund you, but you're hungry now. I now only order from places that have in-house delivery drivers, or I go pick it up myself.
    • MattGaiser 6y ago
      >mixed up orders. Sure, the company will fix it and refund you, but you're hungry now. I'm not terribly picky, so I am ok with the free meal with the promise of another.
    • acdha 6y ago
      That's what got us to stop, too: a few years back we stopped using e.g. GrubHub and Eat24 because they were not only really late (over an hour and, memorably, once never showing) but lied about it blaming the restaurant, not knowing that I'd called them first and confirmed that our order had been ready as scheduled. They tried to offer credit on a future order until I told them my next call was going to be the credit card company.
      • Nextgrid 6y ago
        The same happens with the delivery companies here in the UK like Deliveroo, Just Eat and Uber Eats. That is not a mistake or technical error either, someone intentionally wrote code to do "if no driver is assigned for > 5 mins, pretend like it is and update the web UI to say the driver is there". I wrote about my experiences with these services (relying on them daily as I can't be bothered to cook) in another comment: https://news.ycombinator.com/item?id=23096601 https://news.ycombinator.com/item?id=23096601
• code4tee 6y ago
  The first .com implosion was broadly marked by companies that lacked revenue getting crazy valuations. The current “.com” implosion is broadly being marked by companies that do have “revenue” but only by using VC cash to create “fake markets.” The whole story of buying pizzas from a normal pizza shop for $20 and selling them for $18 through your “app” is the stereotypical example of the current .com implosion. Anyone can sell $2 bills for $1, but that’s not a business and no you can’t “make it up on volume” because the only reason people are using your app is because you’re selling something for a crazy low unsustainable price. The take home lesson from the current unfolding implosion is that a great product does not magically just equal a great business.
  • JumpCrisscross 6y ago
    I like this. The takeaway from .com was revenue oriented. The takeaway from this bust is unit economic oriented.
    • sailfast 6y ago
      Maybe? It seems that it is more about whatever metric VCs are excited about is what will lead to the next bubble. What are you measuring? Revenue? Is it viral coefficient? Is it revenue per customer? Is it lifetime revenue above acquisition cost? Whatever it is that lands you the round will be the place that money gets burned to goose the metrics until the dollars run out or folks realize it was a phantom.
  • ngngngng 6y ago
    Even when the numbers aren't arbitrage it's appalling. Friends of mine will regularly order $8 of food for $20 delivered. And these companies still post massive losses after all that markup. Meanwhile Walmart abandoned their RFID automatic checkout system because RFID tags cost more than the markup of bananas, their most commonly sold item.
    • OkGoDoIt 6y ago
      Indeed, the price of food delivery apps is insane. I really don’t know where all the money is going. How can they overcharge so much for food and yet still have a loss? In addition to the service fee, delivery fee, and what you pay in tips, the actual price of the food items is sometimes (often?) more expensive in these apps than on the restaurant’s own menus.
• dreamcompiler 6y ago
  Old VC model: 1. Invest billion$ in startup. 2. Profit. New VC model: 1. Light billion$ on fire. 2. Matt Levine critiques the height and coloration of your flames. 3. There is no step 3.
  • projektfu 6y ago
    Old VC model was invest $80M in startup, profit, IPO. Now it’s a billion here, a billion there....
    • altoidaltoid 6y ago
      Pretty soon you're talking about real money
• scep12 6y ago
  > You have insanely large pools of capital creating an incredibly inefficient money-losing business model. It's used to subsidize an untenable customer expectation. You leverage a broken workforce to minimize your genuine labor expenses. The companies unload their capital cannons on customer acquisition, while this week’s Uber-Grubhub news reminds us, the only viable endgame is a promise of monopoly concentration and increased prices. But is that even viable? Are there historical examples of this strategy working? I can't think of any off the top of my head. Uber's bet is that the desirable customer experience (quick, cheap delivery) is tenable with both 1) scale and 2) new technology that drives prices down. In the long run, I think they're right: For #1: When you consolidate two (or more) local delivery operations that do the same thing, you can increase the efficiency of your operation as a whole. For #2: The big question is: can they stay solvent long enough to see autonomy or other delivery technology come to fruition? I have serious doubts about this. I expect we'll see Uber slowly raise prices to keep the business sustainable.
  • agacera 6y ago
    In Germany, Takeaway [1] bought most of the competion and the small players quit (like Deliveroo) since they couldnt compete... well looks like this is actually working: https://corporate.takeaway.com/investors/results-and-reports https://corporate.takeaway.com/investors/results-and-reports Prices were raised and I doubt restaurants and delivery guys are making more money in this scenario than they used to. [1] https://corporate.takeaway.com/ https://corporate.takeaway.com/
  • samtp 6y ago
    > For #1: When you consolidate two (or more) local delivery operations that do the same thing, you can increase the efficiency of your operation as a whole. The problem with that is delivery services have a fixed cost per order that does not significantly decrease just because you are fulfilling more orders, especially across multiple regions. You can group multiple orders per delivery, but the amount you pay the driver can only go so low before it is not viable for them to work for you.
    • scep12 6y ago
• TrackerFF 6y ago
  lmao, they actually put those pics in their presentation.
• dsalzman 6y ago
  Podcast version here! https://anchor.fm/talking-money-stuff/episodes/The-Unicorns-Fell-Into-a-Ditch-ee7shc https://anchor.fm/talking-money-stuff/episodes/The-Unicorns-...
• N3GROWhipper 6y ago
  They need to cut their labor costs to get things to work. Depeopleing is essential.
• Mengkudulangsat 6y ago
  I was working on fundraising materials for a client that was just-about-to-get-a-term-sheet when lockdown happened. They were reliant on airports and the likelihood of any deal closing soon is slim. Once I detached myself from the project, I took a good look at my financial models. For every $50 the client took in bookings, they had to pass $30 to operators, spend $9 on marketing, 5$ on refunds, and $7 on overheads. The assumption was while operator payouts grew linearly, marketing, refunds and overheads grew sub-linearly. There is going to be this nice breakeven point when everything is going to make sense, if only they procure enough capital to get there. These Uber for X / Casper for X business models are all largely dependent on this belief being true. Whether that's the case or not depends on the unit economics of the market in question. The only way to know for sure is to run experiments. That, I believe is what easy money has allowed in the US - mass experimentation. In my home country, we don't have the resources to even attempt to find answers to such questions.
  • tompccs 6y ago
    This is a subtle and often-missed point. In the markets where they are trying to acquire customers and become dominant, the "Uber-for-X" businesses have negative gross margins. But they will have surely demonstrated (or the investors really are fools) that, once they have saturated a particular market (ie, a region or city) they are unit profitable. The bottom line looks bad because these companies are growing so fast that their balance sheet is dominated by the markets they're aggressively trying to corner, which wipes out the profits from the markets they have already won and proven viable.
    • gowld 6y ago
      It depends if you are Amazon or if you are Uber, doesn't it?
    • TheOtherHobbes 6y ago
      2000 and 2008 proved conclusively that investors are never fools.
    • ponker 6y ago
• evanb 6y ago
  It seems they have fallen into the age-old trap of confusing unicorns with Pegasus.
• ykl 6y ago
  Metacommentary: Every time I see a Bloomberg link on HN, I cross my fingers that it is Matt Levine, and every time it is in fact Matt Levine, it’s pure gold and 100% worth the click. I get the newsletter in my inbox, but since I check HN before my inbox usually, sometimes this is the faster route to some good Money Stuff hilarity.
• shaan1 6y ago
  I think this is normal. Every business goes through ups and downs.
• stephc_int13 6y ago
  A lot of what I am reading lately reminds me of the touches of sarcasm I loved reading back in 1998-1999, just when the bubble popped. Winter is coming, and it might be uglier this time, I also believe this kind of evolutionary pressure is a very good thing.
  • pjc50 6y ago
    Bring back fuckedcompany.com!
    • PhantomGremlin 6y ago
      Pud doesn't seem interested in doing it. (He sometimes shows up on HN). I should have registered fuckedunicorn.com, it was available when I first looked. Someone eventually grabbed it but hasn't done anything with it. Of course, I wouldn't have done anything with it either, so there's that.
  • anticsapp 6y ago
    Hi, don't take this as a challenge or a "cite your source". Didn't the bubble pop 2000-2001? I'm asking because I'm wondering if I am remembering it wrong, I lost my job kind of late but I worked with IBM. The "I got $50K of options!" 22 year olds all got jacked much earlier.
    • jwilliamson 6y ago
      The bubble popped early in 2000. https://upload.wikimedia.org/wikipedia/commons/8/84/Nasdaq_Composite_dot-com_bubble.svg https://upload.wikimedia.org/wikipedia/commons/8/84/Nasdaq_C...
    • stephc_int13 6y ago
      Yeah, I should have written just before the bubble popped. I think we had clearly visible warnings back then, just as we had quite a lot of good warnings recently. In my opinion, the C19 event is only an accelerator.
  • 6y ago
• jariel 6y ago
  Anyone benefiting from the lock-down, like Zoom, is doing well, those that are not, like Airlines and Uber ... not so much. This is mostly a coronavirus story, not a crash story or much else.
• KoftaBob 6y ago
  I would love to sit down with a few of these ivy league educated VCs and get them to explain how they justified investing massive amounts of LP money into blatantly bogus revenue models. If they can come up with anything other than "build a monopoly and then figure it out", I'd be shocked. Look at all of the most prosperous public tech companies, especially the famous FAANG companies. Every single one of those sells a product/service with an actual profit margin (ads, ecommerce infrastructure, cloud services, media, smartphones, operating systems, etc). Not a single one of them got to where they are with the "sell a product/service at a loss and then figure it out later". Why? Because that's an incredibly foolish and reckless use of capital. This is also why I don't like when companies like AirBnB are lumped in with ones like Uber during these "unicorns struggling in the pandemic" discussions. AirBnB has a sustainable revenue model, they were simply affected by an artificial restriction on travel. Uber and DoorDash have no excuse. VCs, if you're listening... for pete's sake stop blowing investor money on this nonsense and invest in actual good businesses.
  • pkilgore 6y ago
    Unfortunately, Monopolies are profitable and we do not yet have the policy/law/political will/experience/all-of-the-above to prevent them for technology-at-scale. Been reading "Goliath" lately by Matt Stoller -- there are some crazy similarities between monopolization in the early 1900s and now.
    • tim333 6y ago
      Maybe natural monopolies like Google or Facebook. I'm not sure if any of the VC trying to buy a monopoly efforts have worked that well? I mean Facebook took investor money but probably would have done fine without it.
• netcan 6y ago
  The thing is, it works sometimes. Facebook IPOed without a business model. Their ad platform was crap, attracting generic banner ad prices. They launched all the targeting tools pretty quick, so Zuck obviously had a a plan... but public investors took the risk. Amazon was a long term example. They were losing money on every sale to be made up in volume (sticking with economist cliches) for decades. Now, they're literally 1000X bigger than the 2 billion dollar picker-uper startup. I agree though. There has been a ton of spend spend-2-to-make-1 MOs running businesses lately... and it is ridiculous. Also agree about Matt. The cat can write. I just think it's worth remembering the rational starting point for all the irrationality. Uber's initial value proposition was: "We are a software platform company. Software platform economics apply, just like Google & Microsoft. We'll scale like software and have a monopoly like platforms." That actually wasn't all that unreasonable. They did scale at a speed that a non-software (or law abiding) company couldn't have. But.. it turned out not to work. Market share didn't translate into monopoly pricing power. Now (or maybe last year), the alternative value proposition is/was: "When self driving gets invented..." This one is unreasonable. Softbank really did go big on some very bad bets huh?
  • Hokusai 6y ago
    > The thing is, it works sometimes. Yes. It does, like to buy a lottery ticket. It is not a good investment thou. > SoftBank really did go big on some very bad bets huh? This is usually a misconception on how betting works. Many people looks at the result and classifies a bet as good if won and bad if lost. The reality is that the best way of looking at bets is from their expected return. A good bet is one with a positive expected return. Sometimes you will lose the bet and lose the money, but that does not mean that it was a bad bet if the expected result was positive. If I bet you 100$ against 5$ that you get heads on a coin toss. That is a good bet for you. If you toss the coin and lose the 5$ that was still a good bet and you should take it again if you have the opportunity. Were Facebook, Uber, Amazon,... good bets? It’s hard to say. What seems easy to see is if they turned into a profit or a lose.
    • lotsofpulp 6y ago
      Facebook, Uber, and Amazon are not comparable at all to WeWork, Oyo, or some others. If you thought some 22 year old with no hotel management experience was within a few years going to rival Hilton and Marriott and come up with the in house policies, procedures, and build up the staff required to go around the world and perform constant quality control, then I have a bridge to sell you. Same thing with WeWork, there's no moat there.
• davefp 6y ago
  A unicorn with wings is an Alicorn, thank you very much.
• netcan 6y ago
  When it comes to these kinds of basket case occurrences, it's a bad idea to try and tweak them to be less bad. There is a reason they occur, and it's not "compliance" or whatnot. The ratings agencies are an obvious example. It's not a matter of integrity, ethics or policies. Ratings just aren't what they seem to be anymore. They're obviously not there for investors to estimate risk. Their main job now is to regulate the financial industry.
• pwdisswordfish2 6y ago
  "In the old economy of price signals, you tried to build a product that people would want, and the way you knew it worked is that people would pay you more than it cost. You were adding value to the world, and you could tell because you made money. In the new economy of user growth, you don't have to worry about making a product that people want because you can just pay them to use it, so you might end up with companies losing money to give people things that they don't want and driving out the things they do want." This "new economy" does not sound like a legitimate one. We often see complaints online about "gatekeeping" in today's US society. This appears to be an attempt for all "economic" activity to be controlled through "investment" by a small number of people desperately searching for returns (because the real economy is in shambles). Destroy competition ("disrupt") and then rent-seek. Proponents once claimed software as a business had infinite upside because the overhead costs are so low. They argued anyone could start a software company. Not today. VC required. That seems to be the general consensus. Why does today's software require so much investment? Low quality work product that "cost" some ridiculous dollar amount in developer salaries which is then "sold" at the price of something like $0.00-3.99. The "value" to be recouped through surveillance of the user. Brilliant. Unicorn is the perfect symbol because all of this is pure fantasy. Money with no place to go. There is no "new economy". There is only the old (real) one that is in dire straits. That is why investors are so desperate. They will try anything.
  • gowld 6y ago
    I know someone losing money handover fist in a VC-backed startup. I know someone else who goes to a day job for socialization and health insurance but makes his real money selling Microsoft Excel and Word macros.
    • nikanj 6y ago
      I feel like Excel with macros is closest to the "bicycle for the mind" vision that we've gotten so far.
    • wyclif 6y ago
      Do you mind saying what his macro business is called? I'm curious about what that kind of business looks like.
• austincheney 6y ago
  This was predictable and the prediction applied more broadly than just tech start ups. Tech investment in general was over saturated. I was predicting last April (2019) that we would be heading into recession within 18-24 months even though we were in the strongest and longest running bear market in history. I wasn’t the only one predicting this as I was seeing several vaguely similar comments here on HN. I had no idea there would be a pandemic, a depression, or that any of it would happen within a year. Investments crashed earlier and harder that I anticipated because the cause of the crash was something I never thought of, but the reaction and result are similar. The reason why people were predicting a recession is that there was/is too much money tied to investment speculation that isn’t reflected in the revenue of a given organization. In more plain terms people were betting on growth even though growth alone couldn’t repay the investments at present, which looks like a Ponzi scheme. The idea of a Ponzi scheme is to bet on growth and then encourage additional layers of investment to drive up the value of the prior layers and then dump it before it implodes, like a game musical chairs. Here are some basic examples: * Uber was a $60 billion unicorn. It was loosing billions every quarter though without any profit in sight and yet people were still investing in it. Now it’s shedding like employees and closing offices. * Amazon is a less extreme and much less obvious example. For one Amazon is profitable, and two Amazon makes money on infrastructure which provides scalable growth. Amazon’s market cap is insane at $1.2 trillion. Amazon generates neither the profit, revenue, sales, or growth to account for anything close to that, which speaks to speculation. As an interesting side note has historically lost money on its retail business and on Prime. It took selling access to its infrastructure to deliver a profit. * For an example of the opposite Bank of America’s stock tanked as a result of the pandemic but it still reported a very strong first quarter a month later. It looks like the bank will continue to perform well in its earning statements even with consumer mortgage and loan forgiveness due to strengths in other banking segments. It will be curious to watch as last week Berkshire Hathaway started dumping its investments in the banking sector. The most notable are its dumping of Wells Fargo and Goldman Sachs that are failing to perform to expectations but it is also the largest single investor in BAC and it is dumping that too. This loss of investments won’t impact current business performance relative to the marketplace in general or to its competitors specifically.
• auggierose 6y ago
  It's that time again :-) https://www.youtube.com/watch?v=I6IQ_FOCE6I https://www.youtube.com/watch?v=I6IQ_FOCE6I
• tim333 6y ago
  You can get the presentation with voice commentary here https://group.softbank/en/news/webcast/20200518_01 https://group.softbank/en/news/webcast/20200518_01 Unicorns in the ditch at 30:30