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I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Maybe become profitable and pay off the VCs then don't

by 0xpgm 3y ago

I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Maybe become profitable and pay off the VCs then don't go public? Then you can resist the pressure for growth quarter by quarter, and remain the 'right size' that your internal culture demands. Did Valve corporation do something like that?

raincole 3y ago
I'm really surprised that SideFX has only 169 employees. It's biggest competitor, Autodesk, has 13,700 employees. Of course Autodesk has a lot of products and SideFX has practically one so it's not a very fair comparison. But my point is that SideFX is a living evidence that if you want to stay reasonably small you can. SideFX was been existed for 28 years, so we can safely assume it has a positive cash flow.
- michael-online 3y ago
  I agree, I'm in awe of SideFX and have a lot of respect. They've proven you can do a lot by being in touch with your users and being half-decent at what you're doing.
tavavex 3y ago
I think Valve does have a reputation for having this type of model. They've famously expressed an intention to not go public or sell the company to anyone else. This is also what leads to them being a fairly small and selective company that can afford to cherry-pick employees, and that also has an allegedly more employee-friendly culture than others. Just like the recollection in the original post, they might have that "infinite abundance" mindset - their initiatives in game development, hardware and VR are probably subsidized by Steam many times over.
- poisonborz 3y ago
  I would argue that they made a really good early bet with Steam which rakes in enough profit that they can keep this (or whatever) mindset. They never really had competition in the PC space. If they would need to come up with new and better products each fiscal year they would look very different.
  - Ntrails 3y ago
    I feel like you could have said the same about google or facebook. They made a dominant early platform and could have comfortably lived off that success? There are a bunch of companies trying to compete with valve. They are not behind any more of a moat than anyone else.
    - gloryjulio 3y ago
      For some reason steam is really just better than anything else combined. Maybe except gog as it's drm free
    - adrianN 3y ago
      Did Google or Facebook do anything that is not "living comfortably off early success"? AFAIK they had a very poor track record in monetizing anything they built in the last ten years or so.
      - lmm 3y ago
        I think that's their point. If Google or Facebook had stayed with a Valve-sized team and stuck to their knitting, would they really have made any less money?
        sokoloff 3y ago
        Would this preclude buying Instagram? That was considered expensive at the time, but I think was a great buy for them and is a significant part of keeping Facebook competitive now and for the next half-decade. Facebook marketplace and groups are other successful (IMO) sub-products that might not get built if "stick to your knitting" was the mantra.
      - antupis 3y ago
        both had slump but I think Facebook has been much better shape after Zuck did layoffs and pivoted away from metaverse. Llama and Meta Smart Glasses both feel like groundbreaking products.
    - 3y ago
- keyringlight 3y ago
  Valve had the advantage of Newell/Harrington starting the company with a pile of money from being former MS staff, which gave them the ability to say "when it's done" for their first game. As the resulting first game was a hit and they didn't owe much (if anything) to their publisher Sierra [1], from that point on they've kept rolling the success forwards. Being a private company there's no details I'm aware of on how much has been taken out of the business, although Harrington left not long after Half-life. [1] I vaguely remember a legal dispute when Valve did release steam years later as Sierra were being cut out.
- amadeuspagel 3y ago
  There's a classic tweet I remember about Valve, about someone who finally learned who his boss was the day he fired him.
- briffle 3y ago
  I remember the forums (and slashdot comments) just hammering valve for thinking of creating steam and introducing DRM to their games, and that they would never, ever use it because of that. But Valve has had an awesome record of using it responsibly, and its kind of amazing I can log in, click and 60 seconds later be playing a game I bought in 2003.
- EasyMark 3y ago
  Mullvad ( a much smaller company) seems to have a similar set of goals and values. Not everything needs to be under the umbrella of a 800lb gorilla multinational. I hope that some of those entities can learn to be more creative rather than trying to reduce everything to something bean counters who need to report quarterly gains or get fired. It disincentivises taking risks at all.
jjav 3y ago
> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. If you go public, no way to prevent it. You have to stay private. But if you took a lot of VC money (and gave them board positions) that's going to be difficult.
eru 3y ago
> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Google (and Facebook etc) are controlled by their founders (some even as majority shareholders). There's no blaming financial markets here. Facebook was even happy to set fire to a giant pile of cash in pursuit of the 'metaverse', a project that approximately no investors wanted, but that was dear to the heart of their founder.
- rapnie 3y ago
  > Facebook was even happy to set fire to a giant pile of cash in pursuit of the 'metaverse' I always saw it more as priming the market. Throw out this idea, with the apparent weight of Meta behind it, and see how the market jumps on it (or not). If it goes well, Meta as initiator can easily ensure they stay in the lead, gobble up startups and such.
  - tech_tuna 3y ago
    I see it them taking a risk and while I thought it was a silly idea, I applaud them for trying. It's hard to imagine Google taking a risk like this, which is the crux of this post and these threads.
  - eru 3y ago
    That's plausible, and perhaps what Mr Zuckerberg had in mind? But investors, or at least their opinion aggregated via the share price, had a different opinion at the time. (Investors are often happy to bet on speculative things, as long as they have a positive expected value.)
- deltaburnt 3y ago
  Their employees and executives make the majority of their income from RSUs. You can't exactly run a company if your entire workforce gets a huge pay cut each year from a poorly performing stock.
  - refurb 3y ago
    That’s a great point as well. People blame investors but at FAANGs the workforce itself are investors and very important ones since they’ll bail if the stock stops going up.
bitcharmer 3y ago
> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Yes, just don't hire MBAs with fetish for shareholder value
- refurb 3y ago
  You think employees will stick around when their vested options are underwater? It’s not the MBAs alone that demand an increasing stock price.
JeffSnazz 3y ago
> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Growth and private investment are part and parcel.
roenxi 3y ago
There is actually evidence that the market doesn't demand growth - https://fred.stlouisfed.org/graph/?g=JpB4 https://fred.stlouisfed.org/graph/?g=JpB4 suggests that the market is chasing the base rate of monetary creation. If a company isn't "growing" at ~5% p.a nominal, it isn't tapping into the money hose. What would be the point of owning it?
fuzztester 3y ago
>I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Many companies used to do that both in the US and other countries. Some probably still do. SAS Institute (well-known maker of statistical and other software) did, for many years, last I checked. Don't know if they still are that way. Update: Looks like they are: https://en.m.wikipedia.org/wiki/SAS_Institute https://en.m.wikipedia.org/wiki/SAS_Institute [ In July 2021, the Wall Street Journal reported that the semiconductor giant Broadcom was in talks to acquire SAS.[37] In a July 13, 2021 email, SAS CEO Jim Goodnight stated that the company was not for sale.[38] ]
- cool_dude85 3y ago
  If SAS is the paragon of a company not pursuing growth at all costs, then maybe we do need to start looking at quarterly metrics. As a customer their business model sucks and they are doubling down on "either we're a solution for your whole enterprise or else."
  - fuzztester 3y ago
    Why does their business model suck for you as a customer? Interested to know.
    - cool_dude85 3y ago
      Little capacity for code sharing and lack of reasonable tools to do so. That and the fact that newer statistical / ML techniques are extremely expensive mean that if you wanted to do e.g. a transformer you'd have to either pay out the nose or roll your own from scratch. That and my department of about a dozen can't justify the cost to upgrade to their more enterprise focused, cloud ready new version Viya, but there's not really an upgrade path for 9.4 other than minor maintenance releases. Since no young new hires come in with SAS experience and the whole thing seems like a ticking clock, we decided just supporting Python for new development is a better plan.
- jasode 3y ago
  >I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. >>SAS Institute (well-known maker of statistical and other software) did, for many years, last I checked. Don't know if they still are that way. Update: Looks like they are: No... SAS Institute actually wanted to go public earlier in 2020 and then 2024 but they've now pushed the timeline back again to 2025 because of market conditions: https://www.google.com/search?q=SAS+Institute+ipo+2025 https://www.google.com/search?q=SAS+Institute+ipo+2025 Instead of a "no growth" philosophy, the founders Goodknight and Sall have been trying to spread the narrative about SAS's "recent growth" after losing money in 2020 so potential investors will be receptive to an IPO. : https://www.prnewswire.com/news-releases/sas-charts-path-to-ipo-readiness-301344331.html https://www.prnewswire.com/news-releases/sas-charts-path-to-...
kmlx 3y ago
> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. the way i understand it the problem is the product and the market that you’re selling into. for example: Renaissance Technologies LLC has $130Bn AUM with 310 employees.
KoftaBob 3y ago
> pay off the VCs then don't go public? The massive return on investment that VCs aim for comes from the public market valuing the VCs shares of the company much higher than what the VCs paid for it when they invested. How do you replicate that without going public?
- zucked 3y ago
  Unpopular opinion - avoid taking VC cash at all costs?
nonameiguess 3y ago
Financial markets in general do not demand this. As someone else said, the return expected is just a basic risk-free rate plus some compensation for the added risk of owning equities instead of treasuries, which isn't nothing but it doesn't mean you need to double in size every year indefinitely. The problem for FAANGs and Tesla is their valuation was predicated on indefinite rapid growth. Once you have that valuation, the only way to keep it is to actually grow at the rate the valuation priced in. If you don't, the price will drop and all of the various directors and high-level employees whose compensation is largely in the already heavily-priced stock will lose a lot of net worth. This isn't a problem for all publicly-traded companies. It's a problem specific to a very small number of extremely highly-valued companies whose value was based upon the expectation that they would grow very rapidly. Venture capital is another matter entirely. Being far riskier than owning publicly-traded equity shares, they do demand outsized growth from every investment. But venture capital is hardly ubiquitous. Outside of software devs, all small business owners I've ever known would not have even tried to consider it. If they need money, they ask their parents or a bank.
refurb 3y ago
It’s not the “growth at all costs” mindset at all. It’s growth period. It’s easy to have a “hire smart people to do whatever” culture when the money is coming in hand over fist. Your investors don’t care. But when the goose that lays the golden egg dies, nobody is going to hand over money to get a 2% return. Might as well just buy treasuries with zero risk and a higher return. You’re flipping the cause and effect. It’s not the demand for growth that changes a company, it’s the companies business changing such that the money doesnt come in via fire hose any more. That demands culture change to show that you actually are doing something productive.
sotix 3y ago
> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. My grandfather founded a construction company that became quite successful and remained privately owned by him. When it was time for him to retire, he sold the company to the employees who turned it into a worker cooperative. They have since seen wild success and many dozens of people have made some incredible amounts of money. The culture my grandfather established remains present. I believe the key was never going public and therefore avoiding being controlled by external investors with no stake in the company’s culture.
- zucked 3y ago
  Bingo - you hit the nail on the head. Keeping the investor pool small and close-in is how you avoid this. If you go public, eventually you will succumb to this "growth above all" mindset, even if your culture was set up to resist it. I appreciate all that publicly-traded companies have contributed to society, but rarely is "going public" ever not the first sign of an objectively downward trend of the company trajectory.
EasyMark 3y ago
I think you have to have a separate entity(ies) that is strictly eggheads trying new shit. They need a big budget and have to keep the bean counters away, otherwise they will steal all the soul out of the enterprise. That's why so many thing come out of places like universities and NASA, you don't have bean counters killing the soul of the engineers/scientists. I'm not saying that situation is always possible, just putting out a theory. Also a lot of the low hanging fruit in science and math has already been discovered/invented, so it gets harder. This is where I hope AGI comes in, even if it's risky.
majani 3y ago
It takes a super special set of conditions to be able to bootstrap a >10 billion dollar company like Valve. Most >10b companies need immense capital injections to work

by 0xpgm 3y ago

raincole 3y ago

I'm really surprised that SideFX has only 169 employees. It's biggest competitor, Autodesk, has 13,700 employees. Of course Autodesk has a lot of products and SideFX has practically one so it's not a very fair comparison. But my point is that SideFX is a living evidence that if you want to stay reasonably small you can. SideFX was been existed for 28 years, so we can safely assume it has a positive cash flow.

michael-online 3y ago
I agree, I'm in awe of SideFX and have a lot of respect. They've proven you can do a lot by being in touch with your users and being half-decent at what you're doing.

tavavex 3y ago

I think Valve does have a reputation for having this type of model. They've famously expressed an intention to not go public or sell the company to anyone else. This is also what leads to them being a fairly small and selective company that can afford to cherry-pick employees, and that also has an allegedly more employee-friendly culture than others. Just like the recollection in the original post, they might have that "infinite abundance" mindset - their initiatives in game development, hardware and VR are probably subsidized by Steam many times over.

poisonborz 3y ago
I would argue that they made a really good early bet with Steam which rakes in enough profit that they can keep this (or whatever) mindset. They never really had competition in the PC space. If they would need to come up with new and better products each fiscal year they would look very different.
- Ntrails 3y ago
  I feel like you could have said the same about google or facebook. They made a dominant early platform and could have comfortably lived off that success? There are a bunch of companies trying to compete with valve. They are not behind any more of a moat than anyone else.
  - gloryjulio 3y ago
    For some reason steam is really just better than anything else combined. Maybe except gog as it's drm free
  - adrianN 3y ago
    Did Google or Facebook do anything that is not "living comfortably off early success"? AFAIK they had a very poor track record in monetizing anything they built in the last ten years or so.
    - lmm 3y ago
      I think that's their point. If Google or Facebook had stayed with a Valve-sized team and stuck to their knitting, would they really have made any less money?
      - sokoloff 3y ago
        Would this preclude buying Instagram? That was considered expensive at the time, but I think was a great buy for them and is a significant part of keeping Facebook competitive now and for the next half-decade. Facebook marketplace and groups are other successful (IMO) sub-products that might not get built if "stick to your knitting" was the mantra.
    - antupis 3y ago
      both had slump but I think Facebook has been much better shape after Zuck did layoffs and pivoted away from metaverse. Llama and Meta Smart Glasses both feel like groundbreaking products.
  - 3y ago
keyringlight 3y ago
Valve had the advantage of Newell/Harrington starting the company with a pile of money from being former MS staff, which gave them the ability to say "when it's done" for their first game. As the resulting first game was a hit and they didn't owe much (if anything) to their publisher Sierra [1], from that point on they've kept rolling the success forwards. Being a private company there's no details I'm aware of on how much has been taken out of the business, although Harrington left not long after Half-life. [1] I vaguely remember a legal dispute when Valve did release steam years later as Sierra were being cut out.
amadeuspagel 3y ago
There's a classic tweet I remember about Valve, about someone who finally learned who his boss was the day he fired him.
briffle 3y ago
I remember the forums (and slashdot comments) just hammering valve for thinking of creating steam and introducing DRM to their games, and that they would never, ever use it because of that. But Valve has had an awesome record of using it responsibly, and its kind of amazing I can log in, click and 60 seconds later be playing a game I bought in 2003.
EasyMark 3y ago
Mullvad ( a much smaller company) seems to have a similar set of goals and values. Not everything needs to be under the umbrella of a 800lb gorilla multinational. I hope that some of those entities can learn to be more creative rather than trying to reduce everything to something bean counters who need to report quarterly gains or get fired. It disincentivises taking risks at all.

jjav 3y ago

> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. If you go public, no way to prevent it. You have to stay private. But if you took a lot of VC money (and gave them board positions) that's going to be difficult.

eru 3y ago

> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Google (and Facebook etc) are controlled by their founders (some even as majority shareholders). There's no blaming financial markets here. Facebook was even happy to set fire to a giant pile of cash in pursuit of the 'metaverse', a project that approximately no investors wanted, but that was dear to the heart of their founder.

rapnie 3y ago
> Facebook was even happy to set fire to a giant pile of cash in pursuit of the 'metaverse' I always saw it more as priming the market. Throw out this idea, with the apparent weight of Meta behind it, and see how the market jumps on it (or not). If it goes well, Meta as initiator can easily ensure they stay in the lead, gobble up startups and such.
- tech_tuna 3y ago
  I see it them taking a risk and while I thought it was a silly idea, I applaud them for trying. It's hard to imagine Google taking a risk like this, which is the crux of this post and these threads.
- eru 3y ago
  That's plausible, and perhaps what Mr Zuckerberg had in mind? But investors, or at least their opinion aggregated via the share price, had a different opinion at the time. (Investors are often happy to bet on speculative things, as long as they have a positive expected value.)
deltaburnt 3y ago
Their employees and executives make the majority of their income from RSUs. You can't exactly run a company if your entire workforce gets a huge pay cut each year from a poorly performing stock.
- refurb 3y ago
  That’s a great point as well. People blame investors but at FAANGs the workforce itself are investors and very important ones since they’ll bail if the stock stops going up.

bitcharmer 3y ago

> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Yes, just don't hire MBAs with fetish for shareholder value

refurb 3y ago
You think employees will stick around when their vested options are underwater? It’s not the MBAs alone that demand an increasing stock price.

JeffSnazz 3y ago

> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Growth and private investment are part and parcel.

roenxi 3y ago

There is actually evidence that the market doesn't demand growth - https://fred.stlouisfed.org/graph/?g=JpB4 https://fred.stlouisfed.org/graph/?g=JpB4 suggests that the market is chasing the base rate of monetary creation. If a company isn't "growing" at ~5% p.a nominal, it isn't tapping into the money hose. What would be the point of owning it?

fuzztester 3y ago

>I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. Many companies used to do that both in the US and other countries. Some probably still do. SAS Institute (well-known maker of statistical and other software) did, for many years, last I checked. Don't know if they still are that way. Update: Looks like they are: https://en.m.wikipedia.org/wiki/SAS_Institute https://en.m.wikipedia.org/wiki/SAS_Institute [ In July 2021, the Wall Street Journal reported that the semiconductor giant Broadcom was in talks to acquire SAS.[37] In a July 13, 2021 email, SAS CEO Jim Goodnight stated that the company was not for sale.[38] ]

cool_dude85 3y ago
If SAS is the paragon of a company not pursuing growth at all costs, then maybe we do need to start looking at quarterly metrics. As a customer their business model sucks and they are doubling down on "either we're a solution for your whole enterprise or else."
- fuzztester 3y ago
  Why does their business model suck for you as a customer? Interested to know.
  - cool_dude85 3y ago
    Little capacity for code sharing and lack of reasonable tools to do so. That and the fact that newer statistical / ML techniques are extremely expensive mean that if you wanted to do e.g. a transformer you'd have to either pay out the nose or roll your own from scratch. That and my department of about a dozen can't justify the cost to upgrade to their more enterprise focused, cloud ready new version Viya, but there's not really an upgrade path for 9.4 other than minor maintenance releases. Since no young new hires come in with SAS experience and the whole thing seems like a ticking clock, we decided just supporting Python for new development is a better plan.
jasode 3y ago
>I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. >>SAS Institute (well-known maker of statistical and other software) did, for many years, last I checked. Don't know if they still are that way. Update: Looks like they are: No... SAS Institute actually wanted to go public earlier in 2020 and then 2024 but they've now pushed the timeline back again to 2025 because of market conditions: https://www.google.com/search?q=SAS+Institute+ipo+2025 https://www.google.com/search?q=SAS+Institute+ipo+2025 Instead of a "no growth" philosophy, the founders Goodknight and Sall have been trying to spread the narrative about SAS's "recent growth" after losing money in 2020 so potential investors will be receptive to an IPO. : https://www.prnewswire.com/news-releases/sas-charts-path-to-ipo-readiness-301344331.html https://www.prnewswire.com/news-releases/sas-charts-path-to-...

kmlx 3y ago

> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. the way i understand it the problem is the product and the market that you’re selling into. for example: Renaissance Technologies LLC has $130Bn AUM with 310 employees.

KoftaBob 3y ago

> pay off the VCs then don't go public? The massive return on investment that VCs aim for comes from the public market valuing the VCs shares of the company much higher than what the VCs paid for it when they invested. How do you replicate that without going public?

zucked 3y ago
Unpopular opinion - avoid taking VC cash at all costs?

nonameiguess 3y ago

Financial markets in general do not demand this. As someone else said, the return expected is just a basic risk-free rate plus some compensation for the added risk of owning equities instead of treasuries, which isn't nothing but it doesn't mean you need to double in size every year indefinitely. The problem for FAANGs and Tesla is their valuation was predicated on indefinite rapid growth. Once you have that valuation, the only way to keep it is to actually grow at the rate the valuation priced in. If you don't, the price will drop and all of the various directors and high-level employees whose compensation is largely in the already heavily-priced stock will lose a lot of net worth. This isn't a problem for all publicly-traded companies. It's a problem specific to a very small number of extremely highly-valued companies whose value was based upon the expectation that they would grow very rapidly. Venture capital is another matter entirely. Being far riskier than owning publicly-traded equity shares, they do demand outsized growth from every investment. But venture capital is hardly ubiquitous. Outside of software devs, all small business owners I've ever known would not have even tried to consider it. If they need money, they ask their parents or a bank.

refurb 3y ago

It’s not the “growth at all costs” mindset at all. It’s growth period. It’s easy to have a “hire smart people to do whatever” culture when the money is coming in hand over fist. Your investors don’t care. But when the goose that lays the golden egg dies, nobody is going to hand over money to get a 2% return. Might as well just buy treasuries with zero risk and a higher return. You’re flipping the cause and effect. It’s not the demand for growth that changes a company, it’s the companies business changing such that the money doesnt come in via fire hose any more. That demands culture change to show that you actually are doing something productive.

sotix 3y ago

> I wonder if there's a way to prevent the growth at all costs that is demanded by the financial markets. My grandfather founded a construction company that became quite successful and remained privately owned by him. When it was time for him to retire, he sold the company to the employees who turned it into a worker cooperative. They have since seen wild success and many dozens of people have made some incredible amounts of money. The culture my grandfather established remains present. I believe the key was never going public and therefore avoiding being controlled by external investors with no stake in the company’s culture.

zucked 3y ago
Bingo - you hit the nail on the head. Keeping the investor pool small and close-in is how you avoid this. If you go public, eventually you will succumb to this "growth above all" mindset, even if your culture was set up to resist it. I appreciate all that publicly-traded companies have contributed to society, but rarely is "going public" ever not the first sign of an objectively downward trend of the company trajectory.

EasyMark 3y ago

I think you have to have a separate entity(ies) that is strictly eggheads trying new shit. They need a big budget and have to keep the bean counters away, otherwise they will steal all the soul out of the enterprise. That's why so many thing come out of places like universities and NASA, you don't have bean counters killing the soul of the engineers/scientists. I'm not saying that situation is always possible, just putting out a theory. Also a lot of the low hanging fruit in science and math has already been discovered/invented, so it gets harder. This is where I hope AGI comes in, even if it's risky.

majani 3y ago

It takes a super special set of conditions to be able to bootstrap a >10 billion dollar company like Valve. Most >10b companies need immense capital injections to work