6 ms·

With all the unspoken but obvious disdain for the ridiculous cryptocurrency schemes, I wonder if the HN crowd will recognize the elephant in the room here. TFA

by z9znz 4y ago

With all the unspoken but obvious disdain for the ridiculous cryptocurrency schemes, I wonder if the HN crowd will recognize the elephant in the room here. TFA illustrates that the venture capital/startup tech scene is arguably the biggest Ponzi scheme in the last 20+ years. Even ignoring the financial losses, most of these companies have operated in a gray or fully illegal manner. So imagine that the financials don't work and the legalities don't work... and yet this is our HN universe. Edit: (added) sorry to offend those of you who work for Uber or other companies which operate on fantasy funding with no actual profitable business model; sometimes I forget the illusion is so strong and people immersed don't know better.

JumpCrisscross 4y ago
> venture capital/startup tech scene is arguably the biggest Ponzi scheme in the last 20+ years Between VC returns, at the top decile (where it outperforms) and broadly (where it simply performs), and the tangible track record of VC-backed companies from SpaceX to Moderna, this comparison is foundationally false.
- p0pcult 4y ago
  Let's just ignore all the externalities created by market-breaking and law-ignoring, tho!
  - cercatrova 4y ago
    Well, I'd rather ride in an Uber than a cab and until very recently stay in an Airbnb rather than a hotel. For better or worse, they truly did disrupt those industries for consumers, much as non-customers might complain.
    - piva00 4y ago
      > For better or worse, they truly did disrupt those industries for consumers, much as non-customers might complain. Ignoring all the suffering caused by the externalities on rental market caused by Airbnb in very touristic areas (e.g.: Lisbon, Barcelona, etc.), it's great for consumers. The issue is that none of these externalities are priced in, there is no compensation or fair counterpart for the victims of these companies. And somehow it all seems ok for some people...
      - s1artibartfast 4y ago
        They aren't externalities and shouldn't be priced in. Should the luddites have been compensated by those who operated mechanical looms? If not, How are the situations different?
        p0pcult 4y ago
        >They aren't externalities and shouldn't be priced in. If people in my city can't afford housing because of AirBnB, it has negative impacts on my city as a whole. This is an externality, which--by definition--is a thing that isn't priced in. An externality is defined as "a side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops by bees kept for honey." >Should the luddites have been compensated by those who operated mechanical looms? UBI advocates might say yes; it's the whole idea that once some threshold of automation is passed, you won't have enough consumers to keep the economy running.
        lmm 4y ago
        > If people in my city can't afford housing because of AirBnB, it has negative impacts on my city as a whole. This is an externality, which--by definition--is a thing that isn't priced in. That's not an externality - the cost of housing is priced into AirBnB costs. Most "pricing out" happens because cities make it de facto illegal to build new houses, mostly because existing owners are quite happy with the resulting increase in their house prices (and renters don't vote).
        z9znz 4y ago
        I don't remember where it was in the US; maybe it was Cheyanne Wyoming or elsewhere, but it was a nature/mountain area popular with tourists. But their city leaders recognized the problem of tourist vs local housing prices, and they created regulation to ensure that there were enough local houses (affordable to locals). The problem in popular tourist areas is that more wealthy people can afford to come and stay for short periods and are willing to pay a lot, so owners of houses and apartments can make more money off tourists than locals. Naturally they choose the higher income option and go with Airbnb (for example). This leads to situations like Aspen, Colorado, where the "local" who work in Aspen have to live 30-60+ minutes away. They cannot afford to live where they work. And it means that in off seasons, these towns are just dead. Many shops close, there's no community, and there's little life. It might as well be a Disneyland which is only open for 8 months of the year. Amsterdam is a hugely popular tourist area. Granted the atmosphere, architecture, and museums are high value; but sadly I think also the weed focus is high (sorry). Whatever the reason, it means a LOT of tourists. In my small 10 years, I have seen an immense growth. Airbnb and cheap airlines like Ryanair have made it far worse. But to your point of housing prices, there has also been a lot of Chinese and other foreign property investment in Amsterdam (where the owners never intend to live there). Of course they seek to rent their properties, and short term rentals like Airbnb are generally more profitable in tourist areas. Still, this is not good for the cities or locals, and whether it's beneficial for visitors or not is effectively irrelevant. The city is nothing without happy locals.
    - z9znz 4y ago
      In Netherlands, most (all?) Ubers are actually cabs. And many of my NL Uber rides have thankfully been in the taxi cars which are well maintained Mercedes E or S class cars rather than some dude's 1995 Toyota Corrola. What Uber did that was great was provide an app where you could call a taxi. How they got ahead was by ignoring regulation which enabled them to provide lower fares and get more business. But Uber could not exist without traditional cabs. Or at least, something would fill the void of Uber if there were no cabs. There are many places in cities where cabs congregate to wait for passengers. Airports are probably the best example. People leaving airplanes often need a ride to their final destination. Imagine if everyone leaving the airport had to find a way to get local mobile service and then call an Uber. Eventually you'd end up with Uber drivers recognizing this need and parking themselves near the airport, ignoring calls, and choosing only nearby airport calls. The taxi industry needed a kick in the ass; there is no question. But all they lacked was a good software company and service. They did not need a fleet of regular dudes who happen to own cars and who get deluded into thinking they can have a real income from driving people around. The news is full of sad stories of people who struggle to get by as Uber drivers.
  - piva00 4y ago
    Here on HN I got a reply some years ago about how these externalities and law-breaking are just the cost of innovation. 20 years into my career in tech I just get an itchy repulsive feeling when I hear innovation. It slowly turned to sound a little too evil.
    - z9znz 4y ago
      I know this feeling, I think. There seems to be a personality type that is willing to entertain wild ideas and ignore "reality". Sometimes that results in actual new possibilities that nobody else was crazy enough to consider before. So there is potential value. But often it just means ignoring reality and reallocating the resources that are available in favor of a few. Tesla was a great company because they proved that electric cars could not only succeed but could accel (and accelerate! ... I do love seeing a family car kick a stupid ICE car's ass on the dragstrip. But they pushed too far, promoting self driving at the cost of lives. And for the anti-government people out there, Tesla would not exist had it not been for government funding. Even so, the guy at the helm had enough chutzpah to believe his own crazy big ideas and follow through with them. Unfortunately, he followed through well beyond the real successes and far into lunatic territory.
  - tptacek 4y ago
    What's "market breaking"?
    - p0pcult 4y ago
      I don't know what the actual economic term is (or if there is one), but what I am referring to is when a loss-running firm undercuts the competition until the competition no longer exists, and then because they have a monopoly, charges more and/or delivers a worse service than previously.
- panick21_ 4y ago
  SpaceX was overwhelmingly funded by Musk and his friends was it not?
  - z9znz 4y ago
    Musk was a visionary, but a visionary without funding is nothing. His funding for Tesla came from the US taxpayers in the amount of $451 million. This turns out to have been a good investment for the US and Tesla and arguably the world in general, because it proved the capability of electric cars (as well as their market desirability). But make no mistake, without that investment and the success of Tesla, Musk would not have a fraction of the "success" he appears to have now. SpaceX is something to appreciate as well, but as they say - it takes money to make money. Building a space company is even more crazy than an electric car company. So to do that, you need a TON of money or a lot of powerful investors (or both). Musk should have sat quietly with his successes in Tesla and SpaceX, but instead it seems he has bighead syndrome. He believes his wealth and success means that he is an expert in everything.
    - cudgy 4y ago
      > This turns out to have been a good investment for the US and Tesla and arguably the world in general, because it proved the capability of electric cars (as well as their market desirability). Did the taxpayers get shares for this investment? If not, I fail to see this as an investment … it would be a gift to Tesla shareholders.
    - panick21_ 4y ago
      This is a highly inaccurate picture. > His funding for Tesla came from the US taxpayers in the amount of $451 million. This is wrong. Tesla was founded in 2003. Around 2009 they received a loan from the DoE for $451 million to build the Model S but this money they only started getting around 2011 if I remember correctly. By that point Musk had already put in 90million of his own money plus some more money from friends. The government just happened to have a program for this and Tesla took advantage. Tesla re-paid this loan in full ahead of schedule, so the DoE made a nice profit on this. And btw, the same program made much bigger loans out for GM/Ford and they still have not paid it it back. > But make no mistake, without that investment and the success of Tesla, Musk would not have a fraction of the "success" he appears to have now. I don't think this is accurate. By that time Tesla had a number of funding option. It might have cost stock payers more or Tesla would have to pay more interest. Tesla might have been slowed down slightly but I don't think it would have changed as much as you suggest. > SpaceX is something to appreciate as well, but as they say - it takes money to make money. Building a space company is even more crazy than an electric car company. So to do that, you need a TON of money or a lot of powerful investors (or both). SpaceX was almost fully self funded. Musk initially wanted to invest 70 million $ but had to invest an additional 20 million $. He got some additional investment but not that much. Until the received the COTS program they had very little ability to raise cash. > Musk should have sat quietly with his successes in Tesla and SpaceX, but instead it seems he has bighead syndrome. He believes his wealth and success means that he is an expert in everything. I think he believes he can become an expert in everything if he focuses on it.
p0pcult 4y ago
The kool-aid is strong in here!
- z9znz 4y ago
  Your comment adds nothing. Care to back up your comment with something of value?
bergenty 4y ago
Uber, AirBnb, Door dash etc. have added tremendous value to my life and society in general. That’s not a Ponzi scheme. At worst you could call it a social wealth redistribution program of sorts.
- p0pcult 4y ago
  >have added tremendous value to ... society in general [citation missing]
  - bergenty 4y ago
    All those rides, vacation housing and home deliveries? It’s not rocket science. I mean people support themselves using Uber/Airbnb alone.
    - p0pcult 4y ago
      You mean, the fucked housing and rental markets? Or perhaps you were referring to the rent seeking on the restaurant industry? Or do you mean the "contractors" who subsidize Uber with their cars? Or was it the taxi drivers whose livelihoods were destroyed?
    - z9znz 4y ago
      Rent-seeking, profiteering people taking local resources inordinately and making a bit extra for themselves? Nobody who has ever lived in a popular (unregulated) area that has a lot of Airbnb activity would ever be ok with this. Suffice to say, your opinion means you are one of these airbnb owners or simply don't know what it's like.
- rjsw 4y ago
  I live next to an AirBnB, it hasn't added tremendous value to my life.
  - z9znz 4y ago
    You aren't enriched by people coming and going all the time, making a lot of random noise, and raising your local property values???
cuteboy19 4y ago
The core of ponzi schemes is recruitment. There is no recruitment happening here, just terrible business
- spaceman_2020 4y ago
  Offering drivers generous bonuses to sign-up, encouraging them to take on loans to buy cars (even extending credit - as they did here in India) - and then pulling it all away, leaving poorly educated drivers with loans they can’t service anymore - that’s the definition of recruitment.
- z9znz 4y ago
  The venture capital investment rounds are absolutely Ponzis. Every round is for a higher valuation, and so every investory knows they are paying more for the same number of shares as a previous round. But they believe that a future scenario (investment round) will increase the valuation such that their investment will become profitable. Show me _any_ startup where an investment round was at a lower valuation than the previous round. Unless you can do that, and show that the company was currently profitable, then it is a Ponzi scheme. Why would an investor invest in something that has no profit? They would only do that if they believed that in the future there would be enough profit to increase their value given the time cost. If you look at Uber, the amount of investment, and the 8+ years of zero profit, the only conclusion you could reach is that each round believed that there would be a subsequent round that would increase valuation and provide a profit for them.
- legostormtroopr 4y ago
  Seed, Series A, Series B, Series C, IPO - looks like there is plenty of recuitment happening.
lmm 4y ago
I think/hope the crime companies are a minority. I wish the industry would do more to root them out, but I guess there's no profit motive in it. I've never understood why the government didn't come down hard on Uber/AirBNB/etc. and those who invested in them. (Isn't this why RICO exists?)

by z9znz 4y ago

JumpCrisscross 4y ago

> venture capital/startup tech scene is arguably the biggest Ponzi scheme in the last 20+ years Between VC returns, at the top decile (where it outperforms) and broadly (where it simply performs), and the tangible track record of VC-backed companies from SpaceX to Moderna, this comparison is foundationally false.

p0pcult 4y ago
Let's just ignore all the externalities created by market-breaking and law-ignoring, tho!
- cercatrova 4y ago
  Well, I'd rather ride in an Uber than a cab and until very recently stay in an Airbnb rather than a hotel. For better or worse, they truly did disrupt those industries for consumers, much as non-customers might complain.
  - piva00 4y ago
    > For better or worse, they truly did disrupt those industries for consumers, much as non-customers might complain. Ignoring all the suffering caused by the externalities on rental market caused by Airbnb in very touristic areas (e.g.: Lisbon, Barcelona, etc.), it's great for consumers. The issue is that none of these externalities are priced in, there is no compensation or fair counterpart for the victims of these companies. And somehow it all seems ok for some people...
    - s1artibartfast 4y ago
      They aren't externalities and shouldn't be priced in. Should the luddites have been compensated by those who operated mechanical looms? If not, How are the situations different?
      - p0pcult 4y ago
        >They aren't externalities and shouldn't be priced in. If people in my city can't afford housing because of AirBnB, it has negative impacts on my city as a whole. This is an externality, which--by definition--is a thing that isn't priced in. An externality is defined as "a side effect or consequence of an industrial or commercial activity that affects other parties without this being reflected in the cost of the goods or services involved, such as the pollination of surrounding crops by bees kept for honey." >Should the luddites have been compensated by those who operated mechanical looms? UBI advocates might say yes; it's the whole idea that once some threshold of automation is passed, you won't have enough consumers to keep the economy running.
        lmm 4y ago
        > If people in my city can't afford housing because of AirBnB, it has negative impacts on my city as a whole. This is an externality, which--by definition--is a thing that isn't priced in. That's not an externality - the cost of housing is priced into AirBnB costs. Most "pricing out" happens because cities make it de facto illegal to build new houses, mostly because existing owners are quite happy with the resulting increase in their house prices (and renters don't vote).
        z9znz 4y ago
        I don't remember where it was in the US; maybe it was Cheyanne Wyoming or elsewhere, but it was a nature/mountain area popular with tourists. But their city leaders recognized the problem of tourist vs local housing prices, and they created regulation to ensure that there were enough local houses (affordable to locals). The problem in popular tourist areas is that more wealthy people can afford to come and stay for short periods and are willing to pay a lot, so owners of houses and apartments can make more money off tourists than locals. Naturally they choose the higher income option and go with Airbnb (for example). This leads to situations like Aspen, Colorado, where the "local" who work in Aspen have to live 30-60+ minutes away. They cannot afford to live where they work. And it means that in off seasons, these towns are just dead. Many shops close, there's no community, and there's little life. It might as well be a Disneyland which is only open for 8 months of the year. Amsterdam is a hugely popular tourist area. Granted the atmosphere, architecture, and museums are high value; but sadly I think also the weed focus is high (sorry). Whatever the reason, it means a LOT of tourists. In my small 10 years, I have seen an immense growth. Airbnb and cheap airlines like Ryanair have made it far worse. But to your point of housing prices, there has also been a lot of Chinese and other foreign property investment in Amsterdam (where the owners never intend to live there). Of course they seek to rent their properties, and short term rentals like Airbnb are generally more profitable in tourist areas. Still, this is not good for the cities or locals, and whether it's beneficial for visitors or not is effectively irrelevant. The city is nothing without happy locals.
  - z9znz 4y ago
    In Netherlands, most (all?) Ubers are actually cabs. And many of my NL Uber rides have thankfully been in the taxi cars which are well maintained Mercedes E or S class cars rather than some dude's 1995 Toyota Corrola. What Uber did that was great was provide an app where you could call a taxi. How they got ahead was by ignoring regulation which enabled them to provide lower fares and get more business. But Uber could not exist without traditional cabs. Or at least, something would fill the void of Uber if there were no cabs. There are many places in cities where cabs congregate to wait for passengers. Airports are probably the best example. People leaving airplanes often need a ride to their final destination. Imagine if everyone leaving the airport had to find a way to get local mobile service and then call an Uber. Eventually you'd end up with Uber drivers recognizing this need and parking themselves near the airport, ignoring calls, and choosing only nearby airport calls. The taxi industry needed a kick in the ass; there is no question. But all they lacked was a good software company and service. They did not need a fleet of regular dudes who happen to own cars and who get deluded into thinking they can have a real income from driving people around. The news is full of sad stories of people who struggle to get by as Uber drivers.
- piva00 4y ago
  Here on HN I got a reply some years ago about how these externalities and law-breaking are just the cost of innovation. 20 years into my career in tech I just get an itchy repulsive feeling when I hear innovation. It slowly turned to sound a little too evil.
  - z9znz 4y ago
    I know this feeling, I think. There seems to be a personality type that is willing to entertain wild ideas and ignore "reality". Sometimes that results in actual new possibilities that nobody else was crazy enough to consider before. So there is potential value. But often it just means ignoring reality and reallocating the resources that are available in favor of a few. Tesla was a great company because they proved that electric cars could not only succeed but could accel (and accelerate! ... I do love seeing a family car kick a stupid ICE car's ass on the dragstrip. But they pushed too far, promoting self driving at the cost of lives. And for the anti-government people out there, Tesla would not exist had it not been for government funding. Even so, the guy at the helm had enough chutzpah to believe his own crazy big ideas and follow through with them. Unfortunately, he followed through well beyond the real successes and far into lunatic territory.
- tptacek 4y ago
  What's "market breaking"?
  - p0pcult 4y ago
    I don't know what the actual economic term is (or if there is one), but what I am referring to is when a loss-running firm undercuts the competition until the competition no longer exists, and then because they have a monopoly, charges more and/or delivers a worse service than previously.
panick21_ 4y ago
SpaceX was overwhelmingly funded by Musk and his friends was it not?
- z9znz 4y ago
  Musk was a visionary, but a visionary without funding is nothing. His funding for Tesla came from the US taxpayers in the amount of $451 million. This turns out to have been a good investment for the US and Tesla and arguably the world in general, because it proved the capability of electric cars (as well as their market desirability). But make no mistake, without that investment and the success of Tesla, Musk would not have a fraction of the "success" he appears to have now. SpaceX is something to appreciate as well, but as they say - it takes money to make money. Building a space company is even more crazy than an electric car company. So to do that, you need a TON of money or a lot of powerful investors (or both). Musk should have sat quietly with his successes in Tesla and SpaceX, but instead it seems he has bighead syndrome. He believes his wealth and success means that he is an expert in everything.
  - cudgy 4y ago
    > This turns out to have been a good investment for the US and Tesla and arguably the world in general, because it proved the capability of electric cars (as well as their market desirability). Did the taxpayers get shares for this investment? If not, I fail to see this as an investment … it would be a gift to Tesla shareholders.
  - panick21_ 4y ago
    This is a highly inaccurate picture. > His funding for Tesla came from the US taxpayers in the amount of $451 million. This is wrong. Tesla was founded in 2003. Around 2009 they received a loan from the DoE for $451 million to build the Model S but this money they only started getting around 2011 if I remember correctly. By that point Musk had already put in 90million of his own money plus some more money from friends. The government just happened to have a program for this and Tesla took advantage. Tesla re-paid this loan in full ahead of schedule, so the DoE made a nice profit on this. And btw, the same program made much bigger loans out for GM/Ford and they still have not paid it it back. > But make no mistake, without that investment and the success of Tesla, Musk would not have a fraction of the "success" he appears to have now. I don't think this is accurate. By that time Tesla had a number of funding option. It might have cost stock payers more or Tesla would have to pay more interest. Tesla might have been slowed down slightly but I don't think it would have changed as much as you suggest. > SpaceX is something to appreciate as well, but as they say - it takes money to make money. Building a space company is even more crazy than an electric car company. So to do that, you need a TON of money or a lot of powerful investors (or both). SpaceX was almost fully self funded. Musk initially wanted to invest 70 million $ but had to invest an additional 20 million $. He got some additional investment but not that much. Until the received the COTS program they had very little ability to raise cash. > Musk should have sat quietly with his successes in Tesla and SpaceX, but instead it seems he has bighead syndrome. He believes his wealth and success means that he is an expert in everything. I think he believes he can become an expert in everything if he focuses on it.

p0pcult 4y ago

The kool-aid is strong in here!

z9znz 4y ago
Your comment adds nothing. Care to back up your comment with something of value?

bergenty 4y ago

Uber, AirBnb, Door dash etc. have added tremendous value to my life and society in general. That’s not a Ponzi scheme. At worst you could call it a social wealth redistribution program of sorts.

p0pcult 4y ago
>have added tremendous value to ... society in general [citation missing]
- bergenty 4y ago
  All those rides, vacation housing and home deliveries? It’s not rocket science. I mean people support themselves using Uber/Airbnb alone.
  - p0pcult 4y ago
    You mean, the fucked housing and rental markets? Or perhaps you were referring to the rent seeking on the restaurant industry? Or do you mean the "contractors" who subsidize Uber with their cars? Or was it the taxi drivers whose livelihoods were destroyed?
  - z9znz 4y ago
    Rent-seeking, profiteering people taking local resources inordinately and making a bit extra for themselves? Nobody who has ever lived in a popular (unregulated) area that has a lot of Airbnb activity would ever be ok with this. Suffice to say, your opinion means you are one of these airbnb owners or simply don't know what it's like.
rjsw 4y ago
I live next to an AirBnB, it hasn't added tremendous value to my life.
- z9znz 4y ago
  You aren't enriched by people coming and going all the time, making a lot of random noise, and raising your local property values???

cuteboy19 4y ago

The core of ponzi schemes is recruitment. There is no recruitment happening here, just terrible business

spaceman_2020 4y ago
Offering drivers generous bonuses to sign-up, encouraging them to take on loans to buy cars (even extending credit - as they did here in India) - and then pulling it all away, leaving poorly educated drivers with loans they can’t service anymore - that’s the definition of recruitment.
z9znz 4y ago
The venture capital investment rounds are absolutely Ponzis. Every round is for a higher valuation, and so every investory knows they are paying more for the same number of shares as a previous round. But they believe that a future scenario (investment round) will increase the valuation such that their investment will become profitable. Show me _any_ startup where an investment round was at a lower valuation than the previous round. Unless you can do that, and show that the company was currently profitable, then it is a Ponzi scheme. Why would an investor invest in something that has no profit? They would only do that if they believed that in the future there would be enough profit to increase their value given the time cost. If you look at Uber, the amount of investment, and the 8+ years of zero profit, the only conclusion you could reach is that each round believed that there would be a subsequent round that would increase valuation and provide a profit for them.
legostormtroopr 4y ago
Seed, Series A, Series B, Series C, IPO - looks like there is plenty of recuitment happening.

lmm 4y ago

I think/hope the crime companies are a minority. I wish the industry would do more to root them out, but I guess there's no profit motive in it. I've never understood why the government didn't come down hard on Uber/AirBNB/etc. and those who invested in them. (Isn't this why RICO exists?)