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The opposing case: >..the incentives of a managerial class are not the same as the incentives of the lone entrepreneur. They have different timelines, risk pro

The opposing case: >..the incentives of a managerial class are not the same as the incentives of the lone entrepreneur. They have different timelines, risk profiles, and diversification/skin in the game. The managerial class is often motivated by a huge salary, so they’re more likely to play it safe to preserve their job. Even if the companies fail, they’ll get extremely rich. They’re just trying to hang on for as long as they can. Owners however are often motivated by their equity, so they’re more likely to think in the long-term interests of the company. https://eriktorenberg.substack.com/p/burnham-elon-and-the-revenge-of-entrepreneurial https://eriktorenberg.substack.com/p/burnham-elon-and-the-re...

ShamelessC 4y ago
Seems logical, also doesn't reflect reality in my experience. Founders want to piss off an incumbent enough to be bought or IPO. Founders also seek social reward. Once you're in the one percent, your motivations are completely detached from the rest of us. You're encouraged to consider yourself as a wunderkind playing high stakes poker in order to raise money, as this is the only real signal investors latch onto. Disruption itself is a game of usurper; not one of business fundamentals. The agents still act "rationally" (in their own best interests, supposedly), but those interests are defined differently than suggested.
- monero-xmr 4y ago
  Plenty of founders go public early and raise large capital. Biotech, energy firms, and electric car companies recently. Tech startups are pretty unique in that they need huge amounts of capital from private markets for a long time. It requires a higher risk-reward story to be told leading to moonshots.
  - ShamelessC 4y ago
    Sorry I didn't qualify that we're talking about tech founders on the technology forum.
  - fallingknife 4y ago
    Tech companies actually need much less capital to scale than other industries. Which is why VC focuses on software, and why tech founders are so much richer than founders in other industries. The problem is that once the VC industry reached its peak, the capital itself became a competitive weapon. If startup 1 only really needs $10 million in capital to reach profitability, the VCs can't make that much money off of it. So they will fund startup 2 with $100 million over several rounds, and almost certainly knock startup 1 out of the market just by scaling faster. That means startup 1 essentially has to raise and burn massive amounts to grow as rapidly as possible, even if they would prefer to go with the $10 million to profitability plan that would be considered the only sane route in any other industry. And it leads to the almost unbelievable to anyone in finance outside of VC situation of investors being pissed that a company isn't burning cash fast enough.
rqtwteye 4y ago
I think founders thought about the long term when companies were growing slowly by earning money and then reinvesting it. At least in SV with the amounts of available investor money they are incentivized to make a company look good for a few years and then cash out enormous amounts of money. There doesn’t seem to be long term thinking of the company as a sustainable business.
- efitz 4y ago
  Exactly. I think that the problem is the “constant growth at any cost” model.
horns4lyfe 4y ago
Twice now I’ve watched up close as founders mismanaged companies into oblivion while chasing Silicon Valley clout. Those companies crashed and burned while the founders still got rich. That quote might apply to normal entrepreneurs, but not to the VC funded nonsense we see now.

ShamelessC 4y ago

Seems logical, also doesn't reflect reality in my experience. Founders want to piss off an incumbent enough to be bought or IPO. Founders also seek social reward. Once you're in the one percent, your motivations are completely detached from the rest of us. You're encouraged to consider yourself as a wunderkind playing high stakes poker in order to raise money, as this is the only real signal investors latch onto. Disruption itself is a game of usurper; not one of business fundamentals. The agents still act "rationally" (in their own best interests, supposedly), but those interests are defined differently than suggested.

monero-xmr 4y ago
Plenty of founders go public early and raise large capital. Biotech, energy firms, and electric car companies recently. Tech startups are pretty unique in that they need huge amounts of capital from private markets for a long time. It requires a higher risk-reward story to be told leading to moonshots.
- ShamelessC 4y ago
  Sorry I didn't qualify that we're talking about tech founders on the technology forum.
- fallingknife 4y ago
  Tech companies actually need much less capital to scale than other industries. Which is why VC focuses on software, and why tech founders are so much richer than founders in other industries. The problem is that once the VC industry reached its peak, the capital itself became a competitive weapon. If startup 1 only really needs $10 million in capital to reach profitability, the VCs can't make that much money off of it. So they will fund startup 2 with $100 million over several rounds, and almost certainly knock startup 1 out of the market just by scaling faster. That means startup 1 essentially has to raise and burn massive amounts to grow as rapidly as possible, even if they would prefer to go with the $10 million to profitability plan that would be considered the only sane route in any other industry. And it leads to the almost unbelievable to anyone in finance outside of VC situation of investors being pissed that a company isn't burning cash fast enough.

rqtwteye 4y ago

I think founders thought about the long term when companies were growing slowly by earning money and then reinvesting it. At least in SV with the amounts of available investor money they are incentivized to make a company look good for a few years and then cash out enormous amounts of money. There doesn’t seem to be long term thinking of the company as a sustainable business.

efitz 4y ago
Exactly. I think that the problem is the “constant growth at any cost” model.

horns4lyfe 4y ago

Twice now I’ve watched up close as founders mismanaged companies into oblivion while chasing Silicon Valley clout. Those companies crashed and burned while the founders still got rich. That quote might apply to normal entrepreneurs, but not to the VC funded nonsense we see now.