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> Once you have less skin in the game, it is easier to make bad decisions. The author argues this is due to a) having a capital buffer to cushion you, and b) ha

> Once you have less skin in the game, it is easier to make bad decisions. The author argues this is due to a) having a capital buffer to cushion you, and b) having more time to waste. I don’t see how it follows. People may make worse “penny-wise pound-foolish” decisions when it is their own money. Using done by hand SEO instead of ads to save money for example and it taking longer to get customers, as a made up example.

CPLX 4y ago
Yes the original premise he’s trying to refute can be dismissed far more easily. That argument has as a premise that taking on investment increases risk. For the most part that’s simply not true, having more money in hand reduces risk for a business.
- blitzar 4y ago
  > taking on investment Also means (generally) finding someone to invest, which (generally) means getting your head around your business what you do, what you are going to do next, and what you are going to do with the money, a plan one might say. This plan is then considered by the investing party and if it is total nonsense, no investment.
imtringued 4y ago
There are upsides to raising capital which haven't been addressed by the article that argues against raising capital.
- quickthrower2 4y ago
  The posted article argues against (or exposes) faulty logic, and to do this talks about cashflows but misses the simpler flaw in the argument it critiques.
nmfisher 4y ago
In your made-up example, though, the SEO may build a long-term pipeline whereas the ads are one-and-done. That’s without mentioning the mentality foisted on companies to “just show user growth in the next quarter, don’t worry about profitability”. The devil’s in the details.
- quickthrower2 4y ago
  It sure is, and that is really my point: I don’t think you can say people make worse decisions on “OPM” (other peoples money). It might even be a forcing function that you have to explain what you have been doing to a “boss” of sorts.
kqr 4y ago
It follows, if nothing else, by selection bias. The organisations that did not take on investment and subsequently made bad decisions based on flawed assumptions don't stick around for as long to make further mistakes on the same assumptions.

CPLX 4y ago

Yes the original premise he’s trying to refute can be dismissed far more easily. That argument has as a premise that taking on investment increases risk. For the most part that’s simply not true, having more money in hand reduces risk for a business.

blitzar 4y ago
> taking on investment Also means (generally) finding someone to invest, which (generally) means getting your head around your business what you do, what you are going to do next, and what you are going to do with the money, a plan one might say. This plan is then considered by the investing party and if it is total nonsense, no investment.

imtringued 4y ago

There are upsides to raising capital which haven't been addressed by the article that argues against raising capital.

quickthrower2 4y ago
The posted article argues against (or exposes) faulty logic, and to do this talks about cashflows but misses the simpler flaw in the argument it critiques.

nmfisher 4y ago

In your made-up example, though, the SEO may build a long-term pipeline whereas the ads are one-and-done. That’s without mentioning the mentality foisted on companies to “just show user growth in the next quarter, don’t worry about profitability”. The devil’s in the details.

quickthrower2 4y ago
It sure is, and that is really my point: I don’t think you can say people make worse decisions on “OPM” (other peoples money). It might even be a forcing function that you have to explain what you have been doing to a “boss” of sorts.

kqr 4y ago

It follows, if nothing else, by selection bias. The organisations that did not take on investment and subsequently made bad decisions based on flawed assumptions don't stick around for as long to make further mistakes on the same assumptions.