7 ms·

Higher rates will lead to the next generation of great tech startups

52 points by metaphor 4y ago

thinking4real 4y ago
Or maybe modulating the macro economy as perversely as was done for covid simply created a bunch of chaos that needs to settle before the regular economic growth continues considering we’re nowhere near scientific, engineering or mineral extraction ubiquity
082349872349872 4y ago
I am hoping higher rates will change the style of startups: https://app.pressnt.net/post/77/ https://app.pressnt.net/post/77/
- automatic6131 4y ago
  This (your?) writing style is certainly entertaining, but it's also hard to understand and sadly light on detail and explanatory power.
  - 082349872349872 4y ago
    It's deliberately light on detail because (in the absence of feedback) I'm not at all sure it isn't just Old Man Yells At Cloud. Shorter prediction: at higher interest rates, having low turnover but insane margin is worthwhile[0]; at low/no interest rates, having insane turnover but low margin is worthwhile[1]. These two distinct paths to profit encourage very different styles. Does that make more sense? [0] so an average startup looks like a "heist team" that uses specialised, even abstruse, technology to reach liquidity; the "sure, it was an unholy lashup of common lisp and javascript, but it sold" syndrome [1] so an average startup looks like a "hustle" that depends more on network effects and ecosystem than key competencies; the "we're X for Y" syndrome
    - automatic6131 4y ago
      That makes perfect sense, but it would have been even better if the why could be explained (in an easier to understand fashion, in the blog post :) )
ant6n 4y ago
I’m not sure energy costs will go to zero soon. We need to reduce our dependence on fossil fuels, and a major component appears to be that we need to internalize the cost of co2, for example by way of taxing co2. This may result in increased cost for energy until the market with renewables and storage capacity saturates, which may take a while. Also, computing itself may not get much cheaper, there are concerns that Moores law is slowing down. Perhaps the cost of computing will plateau for a while.
scarface74 4y ago
Where was the first great wave? In the last decade, what tech company has gone public and been consistently profitable besides AirBnB?
- rapsey 4y ago
  Most of the value was captured by Apple, Amazon, Google and Microsoft. They are smart enough to capture any incoming technology wave. Mobile, cloud computing and now AI. Startups get crumbs.
  - scarface74 4y ago
    Startups can’t compete on those vectors. The capital requirements to compete in hardware and cloud are immense . Hardware is hard. As much as I hate to admit it. Musk pulled it off twice even though I think Tesla is going to be crushed by the incumbents. Besides the Tesla infotainment system is second rate compared to a low end Nissan Sentra with AirPlay/Android Auto
- namdnay 4y ago
  Datadog?
  - scarface74 4y ago
    > consistently profitable. They lost money the last two quarters.
deleted 4y ago
[deleted]
langsoul-com 4y ago
The marginal cost of energy is NOT going to zero. Have you seen today's power bills? Unless there's a way to exact energy from nothing, energy will Always require input to produce output. That would lead to waste as well. So it can never be zero. Solar panels, green energy ain't free, they cost minerals to create and maintain.
- arcturus17 4y ago
  Maybe with fusion, but that's a long ways off. The article talks about a much shorter term, and explicitly mentions current-gen energy tech. As I said in the sibling comment the bills of GPU-based compute do not suggest to me they are trending towards zero, either.
  - rapsey 4y ago
    Yup neither of these predictions make sense. No historic parallel and no curent or near future market reality supports it. Even if someone figures out net positive fusion. You still have to build these facilities and they sure as hell are not going to be cheap. Fusion even if possible is highly questionable to ever be cost effective.
- Gigachad 4y ago
  Even if we massively lowered the cost and made it almost free, it wouldn’t make that much of a difference because we would all just increase usage until energy became the limiting factor again
- Grimburger 4y ago
  The wholesale power price in my country is consistently negative during the day time. I think we have maybe 60% coal/gas power overall.
  - Ekaros 4y ago
    Hmm, this actually leads me to wonder would there be future in scalable loads? Or technologies supporting these? Basically developing software and hardware that can scale up and down based on power costs even real time. So if you can wait on your computation you could save money by suspending it periodically.
arcturus17 4y ago
I don't think this makes a rigorous or compelling case on better startups being formed during above-average rate periods, at all. There doesn't seem to be enough data in the article to show correlation, even less causation, between high-rate environments and the emergence of better startups. The rise of the great wave of startups like Apple, Microsoft, etc. probably had very little to do with interest rates. Also: > Second, complementing this new energy model is a shift away from Moore’s Law and CPUs to the proliferation of GPUs. This would support scaling Moore’s Law through parallelism, which favors applications of machine learning and AI. As a result, the marginal cost of compute will go to zero. And here I am looking at the sticker prices of cloud GPU computer and going: really. I won't deny there's an era of AI products and apps coming with the emergence of OpenAI, Huggingface, etc but I'm not sure the societal or economic value will outweigh the costs, or that marginal costs will go to zero. I mean, yea, training AI models will go the way of traditional software, where marginal cost of distribution tends to zero: you build/train once (or a constant number of times), and you distribute infinitely. But the ground-level reality seems that many startups will foot higher compute bills than ever to get started.
- fidgewidge 4y ago
  Cloud GPU costs are way higher than actual GPU costs though.
somethoughts 4y ago
I thought the Silicon Valley cycle was more like: 1.) Near the end of the boom cycle, the smart tech investors stop playing the game as valuations get out of wack and puts money into reserves. 2.) The dumb tech investors, that joined at the later stages of the boom, play as long as they can and then the write downs start happening. 3.) The incumbent tech companies also start slowing down and letting go of people indiscriminately and the top talented engineers now become free agents who sell their highly appreciated stock options. 4.) No longer beholden to golden handcuffs, the free agents are free to execute on their side projects while living off their stock option cash-outs and severance. And many perhaps even convince former coworkers who are bored and struggling through multiple rounds of indiscriminate layoffs as well as other engineers laid off from the competition and other flailing startups to join them on this new "cool idea". 5.) The next generation is born as the business plans and prototypes around those "cool ideas" start to come together and the smart VC money sees more realistic valuations.
- frozenport 4y ago
  Not clear if the next generation is formed from from over paid "free-agents" executing on their side projects.
  - somethoughts 4y ago
    Of the 30K FAANMG employees laid off thus far in Silicon Valley, it will just take a handful of them to lead the next generation. Not to mention the fully vested, two decades of FAANMG experience veterans now free to try their hand at full time angel investing.
    - EGreg 4y ago
      That last part is key!
- cloutchaser 4y ago
  How are sequoia funds doing these days? If your point would be correct it would suggest these types of old VCs have already gotten their money out in some insider trading phase. They didn’t. And they just lost $400m on just FTX. Their portfolio is massively down too. How is SoftBank doing? The biggest of them all? They are at record losses. Despite your Marxists leanings, life is not about exploitation and rich vs poor. It’s an easy assumption to make, but it’s completely wrong.
ipsum2 4y ago
FYI to people unaware, the author of this piece, Chamath is an opportunist and possibly commits fraud. https://www.newyorker.com/magazine/2021/06/07/the-pied-piper-of-spacs https://www.newyorker.com/magazine/2021/06/07/the-pied-piper... https://www.protocol.com/bulletins/chamath-palihapitiya-clover-health-spac-doj https://www.protocol.com/bulletins/chamath-palihapitiya-clov...
- EGreg 4y ago
  Also huge early adopter of bitcoin
  - tb84 4y ago
    Is that supposed to be a bad thing?
    - EGreg 4y ago
      Well, it’s probably how he built a lot of his wealth. Then he moved on to SPACs. I regard Bitcoin as a speculative bubble, I myself have known about it since 2011 and back when it was $10-50 did not consider it a bubble, because I thought it would become a medium of exchange: https://magarshak.com/blog/?p=148 https://magarshak.com/blog/?p=148
      - tb84 4y ago
        > I regard Bitcoin as a speculative bubble So do I; shame it turned out this way. I also like the reference to Gresham's law in your post. Spot on, almost a decade earlier.
- lvl102 4y ago
  This is what happens when some idiot gets lucky getting hired by FB. No one liked him there. This guy literally failed his way to “success.”
fedeb95 4y ago
X and Y happened at the same time in the past. X is happening again. Does X cause Y, so that Y becomes expected? I will leave this question open, trusting it doesn't need an answer.
- themitigating 4y ago
  No obvious but you're ignoring evidence in the article and simply a generalized notion of the situation
victoro 4y ago
we are intently focused on what we anticipate will be the two biggest drivers of the next decade: The first is the marginal cost of energy going to zero. I anticipate that this is the dumbest thing I will read from a supposedly serious person in the next decade. Predicting a 0 marginal cost of energy is basically predicting a post-scarcity society... in the next decade... thanks to solar and wind. Oh and a wee-bit of natural gas thats somehow going to be magically piped out of the ground and transported to power plants free of charge... I guess by the same good folks who will be manufacturing and maintaining all of the solar panels and wind turbines free of charge... How is one even supposed to seriously discuss or critically examine an article when its conclusion is that we'll build a perpetual motion machine in the next 10 years?
- lpapez 4y ago
  Agreed, I saw those two predictions and closed the tab immediately. Was a interesting article up to that point but it's evidently bonkers and/or naive.
- goodcanadian 4y ago
  Perhaps, you have misunderstood the meaning of "marginal cost." It does not mean that there is zero total cost. Marginal cost is the cost of producing the next kWh. Once my solar panels are installed (not necessarily cheap at all), the marginal cost of producing power is essentially 0.
  - typon 4y ago
    Maintenance of the power inverter, batteries, wiring, and the panels themselves means that marginal cost is not zero, and as long as we don't know the solution to entropy, will never be "essentially" zero.
    - tuatoru 4y ago
      All of those things happen the same, and cost the same amount, whether 10 kWh are produced or 11 kWh. The marginal cost of the last kWh is zero for these items. There is thermal wear on the power management and voltage step-up electronics, but it is small unless design parameters are exceeded in going to 11. So maybe those components would have to be replaced ten milliseconds earlier than otherwise.
_448 4y ago
What articles like these fail to mention or take into account is how much of this funding is via government grants and how that springboards the whole ecosystem. The early silicon valley was more supported by government grants than private funding. The modern day examples of that is Tesla and SpaceX.
EGreg 4y ago
The marginal cost of energy isn’t going to zero anytime soon. However, higher interest rates do lead to the next generation of great tech startups, and I recorded a video last months explaining why startups are a GREAT class of investment in this environment: https://m.youtube.com/watch?v=4qFuZcaNuRI https://m.youtube.com/watch?v=4qFuZcaNuRI Would love feedback from those who had time to watch it
primax 4y ago
People in this thread should refresh themselves on the concept of marginal cost before commenting
- JumpCrisscross 4y ago
  I’d assume the definition of entropy is more germane to the ludicrousness of zero marginal cost energy. Keep in mind the author is Chamath, the SPAC dude.
iancmceachern 4y ago
It seems like I always see articles with titles like "(whatever is happening in the financial world today) will lead to the next generation of startups". It's a truism.

52 points by metaphor 4y ago

Or maybe modulating the macro economy as perversely as was done for covid simply created a bunch of chaos that needs to settle before the regular economic growth continues considering we’re nowhere near scientific, engineering or mineral extraction ubiquity

082349872349872 4y ago

I am hoping higher rates will change the style of startups: https://app.pressnt.net/post/77/ https://app.pressnt.net/post/77/

automatic6131 4y ago
This (your?) writing style is certainly entertaining, but it's also hard to understand and sadly light on detail and explanatory power.
- 082349872349872 4y ago
  It's deliberately light on detail because (in the absence of feedback) I'm not at all sure it isn't just Old Man Yells At Cloud. Shorter prediction: at higher interest rates, having low turnover but insane margin is worthwhile[0]; at low/no interest rates, having insane turnover but low margin is worthwhile[1]. These two distinct paths to profit encourage very different styles. Does that make more sense? [0] so an average startup looks like a "heist team" that uses specialised, even abstruse, technology to reach liquidity; the "sure, it was an unholy lashup of common lisp and javascript, but it sold" syndrome [1] so an average startup looks like a "hustle" that depends more on network effects and ecosystem than key competencies; the "we're X for Y" syndrome
  - automatic6131 4y ago
    That makes perfect sense, but it would have been even better if the why could be explained (in an easier to understand fashion, in the blog post :) )

ant6n 4y ago

I’m not sure energy costs will go to zero soon. We need to reduce our dependence on fossil fuels, and a major component appears to be that we need to internalize the cost of co2, for example by way of taxing co2. This may result in increased cost for energy until the market with renewables and storage capacity saturates, which may take a while. Also, computing itself may not get much cheaper, there are concerns that Moores law is slowing down. Perhaps the cost of computing will plateau for a while.

scarface74 4y ago

Where was the first great wave? In the last decade, what tech company has gone public and been consistently profitable besides AirBnB?

rapsey 4y ago
Most of the value was captured by Apple, Amazon, Google and Microsoft. They are smart enough to capture any incoming technology wave. Mobile, cloud computing and now AI. Startups get crumbs.
- scarface74 4y ago
  Startups can’t compete on those vectors. The capital requirements to compete in hardware and cloud are immense . Hardware is hard. As much as I hate to admit it. Musk pulled it off twice even though I think Tesla is going to be crushed by the incumbents. Besides the Tesla infotainment system is second rate compared to a low end Nissan Sentra with AirPlay/Android Auto
namdnay 4y ago
Datadog?
- scarface74 4y ago
  > consistently profitable. They lost money the last two quarters.

deleted 4y ago

[deleted]

langsoul-com 4y ago

The marginal cost of energy is NOT going to zero. Have you seen today's power bills? Unless there's a way to exact energy from nothing, energy will Always require input to produce output. That would lead to waste as well. So it can never be zero. Solar panels, green energy ain't free, they cost minerals to create and maintain.

arcturus17 4y ago
Maybe with fusion, but that's a long ways off. The article talks about a much shorter term, and explicitly mentions current-gen energy tech. As I said in the sibling comment the bills of GPU-based compute do not suggest to me they are trending towards zero, either.
- rapsey 4y ago
  Yup neither of these predictions make sense. No historic parallel and no curent or near future market reality supports it. Even if someone figures out net positive fusion. You still have to build these facilities and they sure as hell are not going to be cheap. Fusion even if possible is highly questionable to ever be cost effective.
Gigachad 4y ago
Even if we massively lowered the cost and made it almost free, it wouldn’t make that much of a difference because we would all just increase usage until energy became the limiting factor again
Grimburger 4y ago
The wholesale power price in my country is consistently negative during the day time. I think we have maybe 60% coal/gas power overall.
- Ekaros 4y ago
  Hmm, this actually leads me to wonder would there be future in scalable loads? Or technologies supporting these? Basically developing software and hardware that can scale up and down based on power costs even real time. So if you can wait on your computation you could save money by suspending it periodically.

arcturus17 4y ago

I don't think this makes a rigorous or compelling case on better startups being formed during above-average rate periods, at all. There doesn't seem to be enough data in the article to show correlation, even less causation, between high-rate environments and the emergence of better startups. The rise of the great wave of startups like Apple, Microsoft, etc. probably had very little to do with interest rates. Also: > Second, complementing this new energy model is a shift away from Moore’s Law and CPUs to the proliferation of GPUs. This would support scaling Moore’s Law through parallelism, which favors applications of machine learning and AI. As a result, the marginal cost of compute will go to zero. And here I am looking at the sticker prices of cloud GPU computer and going: really. I won't deny there's an era of AI products and apps coming with the emergence of OpenAI, Huggingface, etc but I'm not sure the societal or economic value will outweigh the costs, or that marginal costs will go to zero. I mean, yea, training AI models will go the way of traditional software, where marginal cost of distribution tends to zero: you build/train once (or a constant number of times), and you distribute infinitely. But the ground-level reality seems that many startups will foot higher compute bills than ever to get started.

fidgewidge 4y ago
Cloud GPU costs are way higher than actual GPU costs though.

somethoughts 4y ago

I thought the Silicon Valley cycle was more like: 1.) Near the end of the boom cycle, the smart tech investors stop playing the game as valuations get out of wack and puts money into reserves. 2.) The dumb tech investors, that joined at the later stages of the boom, play as long as they can and then the write downs start happening. 3.) The incumbent tech companies also start slowing down and letting go of people indiscriminately and the top talented engineers now become free agents who sell their highly appreciated stock options. 4.) No longer beholden to golden handcuffs, the free agents are free to execute on their side projects while living off their stock option cash-outs and severance. And many perhaps even convince former coworkers who are bored and struggling through multiple rounds of indiscriminate layoffs as well as other engineers laid off from the competition and other flailing startups to join them on this new "cool idea". 5.) The next generation is born as the business plans and prototypes around those "cool ideas" start to come together and the smart VC money sees more realistic valuations.

frozenport 4y ago
Not clear if the next generation is formed from from over paid "free-agents" executing on their side projects.
- somethoughts 4y ago
  Of the 30K FAANMG employees laid off thus far in Silicon Valley, it will just take a handful of them to lead the next generation. Not to mention the fully vested, two decades of FAANMG experience veterans now free to try their hand at full time angel investing.
  - EGreg 4y ago
    That last part is key!
cloutchaser 4y ago
How are sequoia funds doing these days? If your point would be correct it would suggest these types of old VCs have already gotten their money out in some insider trading phase. They didn’t. And they just lost $400m on just FTX. Their portfolio is massively down too. How is SoftBank doing? The biggest of them all? They are at record losses. Despite your Marxists leanings, life is not about exploitation and rich vs poor. It’s an easy assumption to make, but it’s completely wrong.

ipsum2 4y ago

FYI to people unaware, the author of this piece, Chamath is an opportunist and possibly commits fraud. https://www.newyorker.com/magazine/2021/06/07/the-pied-piper-of-spacs https://www.newyorker.com/magazine/2021/06/07/the-pied-piper... https://www.protocol.com/bulletins/chamath-palihapitiya-clover-health-spac-doj https://www.protocol.com/bulletins/chamath-palihapitiya-clov...

EGreg 4y ago
Also huge early adopter of bitcoin
- tb84 4y ago
  Is that supposed to be a bad thing?
  - EGreg 4y ago
    Well, it’s probably how he built a lot of his wealth. Then he moved on to SPACs. I regard Bitcoin as a speculative bubble, I myself have known about it since 2011 and back when it was $10-50 did not consider it a bubble, because I thought it would become a medium of exchange: https://magarshak.com/blog/?p=148 https://magarshak.com/blog/?p=148
    - tb84 4y ago
      > I regard Bitcoin as a speculative bubble So do I; shame it turned out this way. I also like the reference to Gresham's law in your post. Spot on, almost a decade earlier.
lvl102 4y ago
This is what happens when some idiot gets lucky getting hired by FB. No one liked him there. This guy literally failed his way to “success.”

fedeb95 4y ago

X and Y happened at the same time in the past. X is happening again. Does X cause Y, so that Y becomes expected? I will leave this question open, trusting it doesn't need an answer.

themitigating 4y ago
No obvious but you're ignoring evidence in the article and simply a generalized notion of the situation

victoro 4y ago

we are intently focused on what we anticipate will be the two biggest drivers of the next decade: The first is the marginal cost of energy going to zero. I anticipate that this is the dumbest thing I will read from a supposedly serious person in the next decade. Predicting a 0 marginal cost of energy is basically predicting a post-scarcity society... in the next decade... thanks to solar and wind. Oh and a wee-bit of natural gas thats somehow going to be magically piped out of the ground and transported to power plants free of charge... I guess by the same good folks who will be manufacturing and maintaining all of the solar panels and wind turbines free of charge... How is one even supposed to seriously discuss or critically examine an article when its conclusion is that we'll build a perpetual motion machine in the next 10 years?

lpapez 4y ago
Agreed, I saw those two predictions and closed the tab immediately. Was a interesting article up to that point but it's evidently bonkers and/or naive.
goodcanadian 4y ago
Perhaps, you have misunderstood the meaning of "marginal cost." It does not mean that there is zero total cost. Marginal cost is the cost of producing the next kWh. Once my solar panels are installed (not necessarily cheap at all), the marginal cost of producing power is essentially 0.
- typon 4y ago
  Maintenance of the power inverter, batteries, wiring, and the panels themselves means that marginal cost is not zero, and as long as we don't know the solution to entropy, will never be "essentially" zero.
  - tuatoru 4y ago
    All of those things happen the same, and cost the same amount, whether 10 kWh are produced or 11 kWh. The marginal cost of the last kWh is zero for these items. There is thermal wear on the power management and voltage step-up electronics, but it is small unless design parameters are exceeded in going to 11. So maybe those components would have to be replaced ten milliseconds earlier than otherwise.

_448 4y ago

What articles like these fail to mention or take into account is how much of this funding is via government grants and how that springboards the whole ecosystem. The early silicon valley was more supported by government grants than private funding. The modern day examples of that is Tesla and SpaceX.

EGreg 4y ago

The marginal cost of energy isn’t going to zero anytime soon. However, higher interest rates do lead to the next generation of great tech startups, and I recorded a video last months explaining why startups are a GREAT class of investment in this environment: https://m.youtube.com/watch?v=4qFuZcaNuRI https://m.youtube.com/watch?v=4qFuZcaNuRI Would love feedback from those who had time to watch it

primax 4y ago

People in this thread should refresh themselves on the concept of marginal cost before commenting

JumpCrisscross 4y ago
I’d assume the definition of entropy is more germane to the ludicrousness of zero marginal cost energy. Keep in mind the author is Chamath, the SPAC dude.

iancmceachern 4y ago

It seems like I always see articles with titles like "(whatever is happening in the financial world today) will lead to the next generation of startups". It's a truism.