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Also - It's not the companies competing in the unicorn market, it's the VCs. The reason why there are no competitors to Uber and Lyft, is because the unit econo

by kkotak 6y ago

Also - It's not the companies competing in the unicorn market, it's the VCs. The reason why there are no competitors to Uber and Lyft, is because the unit economy is completely broken. If you're not backed by billions of VC & banking money to let you lose on every transaction, the market doesn't really exist. It's artificially created on borrowed time, cashed out in IPO, and numbers shenanigans. VC's virtual limitless access to capital is dangerously giving them powers to choose winners and losers and control the markets, economies, and the fate of large workforces in the world.

taurath 6y ago
I'll followup on this - its not the VCs, its the lack of investments that give a real return, which makes capital flow towards the higher risk things so it can seek a return.
- adventured 6y ago
  > its the lack of investments that give a real return The stock market has provided a tremendous real return over the decade since the great recession. And it's dramatically safer on average than venture capital. Let's say you waited until the market got back to the old highs (call it mid to late 2012), to put your money into an S&P 500 index - you're up close to 100% in a little over seven years, or 9-10% per year, an amazing return by historical standards, for doing nothing. So no, it's not the lack of investments offering a real return. It's caused by the extreme scale of wealth outstanding now. That wealth isn't overall that desperate for a return, that's why so much of it has piled into government debt yielding zip, and only a tiny fraction by comparison flows into VC. The VC being deployed has scaled with the increase in the pile of wealth in the US and global economy broadly. This is just a tiny subset of wealth seeking a very extreme return in exchange for taking on a lot of risk, not just seeking a good or great (what I think you mean by real) return. They're chasing an Alibaba, Facebook, Google type homerun. It's the literal thing that lured all that money into making a bad bet on Masayoshi Son's fund, his Alibaba riches. It's a diversification into lottery tickets, because hey, you could be a winner, you gotta play to win, only a small number of these lottery tickets are sold, and you know the people that control access to all the tickets.
  - three_seagrass 6y ago
    Yep. The whole reason the SB Vision Fund exists is because some Saudis needed a place to park their oil wealth that traditional markets couldn't absorb.
  - taurath 6y ago
    Stock markets are very high risk though. Not on the same level as VCs, but buying an index fund is imo within one order of magnitude of funding 200 startups in terms of risk. If you can get 8% a year on your $100billion, I think anyone takes it. Its that giant "conservative" investors can't get 4% in bonds, so they move into blue chip stocks. Blue chip stockholders have to run into smaller mid-caps and semi-mature startups. Series B funding has to move to VCs, all to get the same level of yield. > That wealth isn't overall that desperate for a return On the conservative end, pension funds etc functionally need to chase some amount of return or else they start to become insolvent. You can't hold at 0% forever, there's no point in being a pension fund at that point. Right now its not desperate for a return, because its trying to stay alive. But when they were making bets on WeWork its because they were looking for a massive return.

by kkotak 6y ago

taurath 6y ago

I'll followup on this - its not the VCs, its the lack of investments that give a real return, which makes capital flow towards the higher risk things so it can seek a return.

adventured 6y ago
> its the lack of investments that give a real return The stock market has provided a tremendous real return over the decade since the great recession. And it's dramatically safer on average than venture capital. Let's say you waited until the market got back to the old highs (call it mid to late 2012), to put your money into an S&P 500 index - you're up close to 100% in a little over seven years, or 9-10% per year, an amazing return by historical standards, for doing nothing. So no, it's not the lack of investments offering a real return. It's caused by the extreme scale of wealth outstanding now. That wealth isn't overall that desperate for a return, that's why so much of it has piled into government debt yielding zip, and only a tiny fraction by comparison flows into VC. The VC being deployed has scaled with the increase in the pile of wealth in the US and global economy broadly. This is just a tiny subset of wealth seeking a very extreme return in exchange for taking on a lot of risk, not just seeking a good or great (what I think you mean by real) return. They're chasing an Alibaba, Facebook, Google type homerun. It's the literal thing that lured all that money into making a bad bet on Masayoshi Son's fund, his Alibaba riches. It's a diversification into lottery tickets, because hey, you could be a winner, you gotta play to win, only a small number of these lottery tickets are sold, and you know the people that control access to all the tickets.
- three_seagrass 6y ago
  Yep. The whole reason the SB Vision Fund exists is because some Saudis needed a place to park their oil wealth that traditional markets couldn't absorb.
- taurath 6y ago
  Stock markets are very high risk though. Not on the same level as VCs, but buying an index fund is imo within one order of magnitude of funding 200 startups in terms of risk. If you can get 8% a year on your $100billion, I think anyone takes it. Its that giant "conservative" investors can't get 4% in bonds, so they move into blue chip stocks. Blue chip stockholders have to run into smaller mid-caps and semi-mature startups. Series B funding has to move to VCs, all to get the same level of yield. > That wealth isn't overall that desperate for a return On the conservative end, pension funds etc functionally need to chase some amount of return or else they start to become insolvent. You can't hold at 0% forever, there's no point in being a pension fund at that point. Right now its not desperate for a return, because its trying to stay alive. But when they were making bets on WeWork its because they were looking for a massive return.