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Not a mistake. A calculated risk that didn't pan out. The letter says that the takeaway at the executive level is a greater emphasis on building an all-weathe

by jawns 4y ago

Not a mistake. A calculated risk that didn't pan out. The letter says that the takeaway at the executive level is a greater emphasis on building an all-weather business. But frankly, investors often don't want an all-weather business. Lattice is a venture-backed startup. Having an all-weather business means being more risk-averse than you otherwise could be, which limits growth in the good times. Investors want a company that can quickly shed excess weight during a recession and then quickly grow again when conditions are favorable. That's how you get the high growth that attracts VCs. Something tells me that most CEOs who commit to running an all-weather business during this period of contraction will conveniently forget about it when times are better. In fact, they may use similar justification, that their hands are tied. During the downturn, it's "We had to lay these people off to make sure the larger organization can survive," and during a bull market, it's, "We had to grow rapidly to secure additional funding, which is necessary to make sure the larger organization can survive."

KerryJones 4y ago
"Investors don't necessarily want an all-weather business." This may be true for some investors, but the largest hedge fund in the world Bridgewater) is famous for their all-weather fund. That means that those investors do exist. If you take that into account, that means that they chose investors who do not want an all-weather company, and thereby gambled not only with their own personal well-being, but with other people's career's and incomes on a risky bet -- as the top comment said, it was obvious that these rates wouldn't stay the same.
- dahfizz 4y ago
  VC investors don't want an all-weather business. And you don't see very many risk-averse investors who are willing to dump their money into startups.
  - KerryJones 4y ago
    I think that's largely true but not absolutely true. What all investors want is return on capital, what VCs are gambling on is that 1/10 (or 2-3 in a 100) are going to be moonshots, they're taking higher risks and hoping for higher rewards. The dichotomy of "higher risk vs higher reward", however, isn't as real as people feel it is. There are low-risk & high rewards style investing (it's the base premise of value investing, whether focused or not). VCs do not want you to lose their money, and so doing something that is predictably bad is not what they want. They do want you to go for moonshots... but again, this is predictably bad. I think you'll be harder pressed to find a company that has continued to do well by over-hiring through pandemic times.
- vrc 4y ago
  Bridgewater hasn’t been performing great in the recent years, despite their funds maintaining a large pool of AUM
  - KerryJones 4y ago
    "despite their funds maintaining..." -- the largest the AUM, the harder it is to make good returns. This is well documented/commented by all the large fund holders. It is significantly easier to make good returns with less money. First google'd item on the subject: https://www.yahoo.com/video/warren-buffett-huge-structural-advantage-162315080.html https://www.yahoo.com/video/warren-buffett-huge-structural-a...
pm90 4y ago
> Something tells me that most CEOs who commit to running an all-weather business during this period of contraction will forget about it when times are better. Bingo. It will be very interesting when the interest rates climb back down, to see how many CEO's will actually be hiring conservatively. One nice thing: we now have public documentation of their apology letters, so it will be quite a PR exercise to go back on their words. But I'm sure the consultants they hire will come up with the right kind of spin.
klooney 4y ago
> A calculated risk that didn't pan out. As a perennial negative Nancy, I'm pretty skeptical of this over "irrational exuberance". Every five to ten years everyone thinks that they are at the start of a brand new normal, where everything will be up and to the right forever, and then, oops that wasn't right. People were being a little silly about the pandemic boom, we should just say that and not give out passes for being a part of the crowd.
jeffwask 4y ago
> But frankly, investors often don't want an all-weather business. So many of these startup aren't build around a solid sustainable business model but around an exit. Fuck the employees, fuck the customers, all leadership cares about is making it to an exit so they can all cash out. They all saw an opportunity to accelerate that cash out during the free money, everyone is a unicorn years, unfortunately most of them were never going to cash out and now that no one is throwing free money at them to keep their pipe dreams afloat, the employees and customers take the brunt of their greed while they waltz off to their next boondoggle.
- brewdad 4y ago
  Same as it ever was.
  - jeffwask 4y ago
    I don't know that I agree. I think it's gotten significantly worse under the VC/PE monstrosity that has grown over the last decade. The dishonesty has been ratcheted up and there are more Shkreli's, Bankman-Fried's and Holmes's dominating the conversation.
    - Apocryphon 4y ago
      It's not even outright scammers. Fast just completely collapsed within months because apparently no one was watching the burnrate.
      - jeffwask 4y ago
        It's mind boggling. The amount of money being thrown at these "companies" and how quickly the burn it with nothing to show at then end. The principles then move on unscathed and someone writes them another check.
vrc 4y ago
I’d invest in index funds and similar boring vehicles, not VC, if I wanted a reliable growth business. Perhaps venture into PE if I was feeling saucy and had access. It’s the reality where we reap what we sow

by jawns 4y ago

KerryJones 4y ago

"Investors don't necessarily want an all-weather business." This may be true for some investors, but the largest hedge fund in the world Bridgewater) is famous for their all-weather fund. That means that those investors do exist. If you take that into account, that means that they chose investors who do not want an all-weather company, and thereby gambled not only with their own personal well-being, but with other people's career's and incomes on a risky bet -- as the top comment said, it was obvious that these rates wouldn't stay the same.

dahfizz 4y ago
VC investors don't want an all-weather business. And you don't see very many risk-averse investors who are willing to dump their money into startups.
- KerryJones 4y ago
  I think that's largely true but not absolutely true. What all investors want is return on capital, what VCs are gambling on is that 1/10 (or 2-3 in a 100) are going to be moonshots, they're taking higher risks and hoping for higher rewards. The dichotomy of "higher risk vs higher reward", however, isn't as real as people feel it is. There are low-risk & high rewards style investing (it's the base premise of value investing, whether focused or not). VCs do not want you to lose their money, and so doing something that is predictably bad is not what they want. They do want you to go for moonshots... but again, this is predictably bad. I think you'll be harder pressed to find a company that has continued to do well by over-hiring through pandemic times.
vrc 4y ago
Bridgewater hasn’t been performing great in the recent years, despite their funds maintaining a large pool of AUM
- KerryJones 4y ago
  "despite their funds maintaining..." -- the largest the AUM, the harder it is to make good returns. This is well documented/commented by all the large fund holders. It is significantly easier to make good returns with less money. First google'd item on the subject: https://www.yahoo.com/video/warren-buffett-huge-structural-advantage-162315080.html https://www.yahoo.com/video/warren-buffett-huge-structural-a...

pm90 4y ago

> Something tells me that most CEOs who commit to running an all-weather business during this period of contraction will forget about it when times are better. Bingo. It will be very interesting when the interest rates climb back down, to see how many CEO's will actually be hiring conservatively. One nice thing: we now have public documentation of their apology letters, so it will be quite a PR exercise to go back on their words. But I'm sure the consultants they hire will come up with the right kind of spin.

klooney 4y ago

> A calculated risk that didn't pan out. As a perennial negative Nancy, I'm pretty skeptical of this over "irrational exuberance". Every five to ten years everyone thinks that they are at the start of a brand new normal, where everything will be up and to the right forever, and then, oops that wasn't right. People were being a little silly about the pandemic boom, we should just say that and not give out passes for being a part of the crowd.

jeffwask 4y ago

> But frankly, investors often don't want an all-weather business. So many of these startup aren't build around a solid sustainable business model but around an exit. Fuck the employees, fuck the customers, all leadership cares about is making it to an exit so they can all cash out. They all saw an opportunity to accelerate that cash out during the free money, everyone is a unicorn years, unfortunately most of them were never going to cash out and now that no one is throwing free money at them to keep their pipe dreams afloat, the employees and customers take the brunt of their greed while they waltz off to their next boondoggle.

brewdad 4y ago
Same as it ever was.
- jeffwask 4y ago
  I don't know that I agree. I think it's gotten significantly worse under the VC/PE monstrosity that has grown over the last decade. The dishonesty has been ratcheted up and there are more Shkreli's, Bankman-Fried's and Holmes's dominating the conversation.
  - Apocryphon 4y ago
    It's not even outright scammers. Fast just completely collapsed within months because apparently no one was watching the burnrate.
    - jeffwask 4y ago
      It's mind boggling. The amount of money being thrown at these "companies" and how quickly the burn it with nothing to show at then end. The principles then move on unscathed and someone writes them another check.

vrc 4y ago

I’d invest in index funds and similar boring vehicles, not VC, if I wanted a reliable growth business. Perhaps venture into PE if I was feeling saucy and had access. It’s the reality where we reap what we sow