5 ms·
Investments as gift cards that can only be used at the investor is essentially quid-pro-quo, anti-competitive, and should be illegal. That goes for AWS, Microso
by rubiquity 3y ago
Investments as gift cards that can only be used at the investor is essentially quid-pro-quo, anti-competitive, and should be illegal. That goes for AWS, Microsoft, and anyone else doing it.
- lotsofpulp 3y agoWho is being harmed? Were the owners of Anthropic unable to refuse the deal?
- chowchowchow 3y agoIt does create a misrepresentation of the valuation as AWS is able to represent the investment as the retail price ($2.7B) while actually they're only parting with the COGS for the AWS services (<$2.7B).
- dmix 3y ago> It does create a misrepresentation of the valuation as AWS is able to represent the investment as the retail price ($2.7B) Represent it where? In 3rd party journalists who cover it? Or on public market financial statements?
- nicce 3y agoAssuming that Amazon got some shares based on the stated value, and if the value is misleading, they got more shares than they should. It includes the profit-value, defined by Amazon itself, that Amazon is getting from running their own servers. Not the real, actual costs.
- chowchowchow 3y agoTaxes seem like one possibility for this to be taken advantage of. Invest $X, get $Y kicked back, but calculate losses or gains against the higher $X basis.
- kolbe 3y agoI would be curious to see an actual full accounting of a transaction like this if you know of one.
- loeg 3y agoIf the credits displace other paying retail customers, they're worth retail.
- toomuchtodo 3y agoYou could potentially file a securities fraud suit if you own Amazon shares (standing) and can find a firm willing to run with it. Not joking, that is the only path to recourse if you take issue with how this is represented. (not legal or securities law advice)
- stale2002 3y ago> It does create a misrepresentation of the valuation So the harm is that some massive VCs with billions of dollars to spend on their investments, might be a bit more confused about what someone else's "real" valuation is? They are qualified investors. I think they can do the work on their own to correct it to the "real" valuation.
- dimask 3y agoThis is beyond the point, these practices cause economic bubbles and when such bubbles grow too much eventually they pop and a lot of other people pay the price.
- stale2002 3y agoOther firms who think that the price is too high could simply.... not invest in those companies. I am not sure what is confusing about this. If a company is too expensive, the qualified investors who are spending their investment dollars are free to not buy equity in those too expensive companies. They manage billions of dollars! I am sure they can figure out how much a company is actually valued! They aren't going to be "tricked" by some valuation scheme that randos are pointing out in HN comments.
- matthewaveryusa 3y agoIsn't that just really shrewd investing on Amazon's end though? Just because you've identified the win-win doesn't mean it's illegal? In fact it's what investments should look like: companies that invest in other companies for the synergies.
- nescioquid 3y agoIt seems they could have made the same investment without the misrepresentation - or are you trying to say the misrepresentation itself is shrewd?
- theturtletalks 3y agoIt would be illegal if Anthropic can't sell those AWS credits on the open market which I'm thinking they can't. You're equating this to a stock swap but that is not the case.
- skhunted 3y agorubuquity’s comment said that it should be illegal; not that it was illegal. In order to close a loop hole or an unintended consequence one must first be aware of its existence. I don’t know enough about the topic but it does seem wrong, at a first glance, for this sort of accounting to be legal.
- usrusr 3y agoDoes valuation have any legal implications or is it just a number people can pat themselves on the back for until they can't? Genuine question, I don't know (but you can probably guess what I suspect)
- orsenthil 3y agoFancy math, but this is still money that is reported, and accounted for in the earnings. So, it is the reality.
- tikhonj 3y agoSure, it misrepresents the valuation in the same way that deal structuring (liquidation preferences/etc) does in cash investments. The valuation you get by multiplying the cash value of the investment by the equity that was sold is just a marketing number, it isn't inherently meaningful.
- WheatMillington 3y agoThe investment value to Anthoropic, which is what matters, is $2.7b.
- rubiquity 3y agoInvestors of Amazon who are buying a false reality of AWS revenue growth.
- echelon 3y agoThis is no different than investing in an internal effort.
- uoaei 3y agoNo it's not, because Anthropic's profit is reported by Anthropic, not incorporated into Amazon's books.
- rubiquity 3y agoInvesting in an internal effort is an operational or capital expense that may do nothing if ineffective, decrease costs if effective, or create a revenue stream. These forced spending arrangements are revenue drivers. It is not the same.
- skybrian 3y agoIt could be thought of as quantifying the investment. Investors don’t value internal investment at zero. A vague idea that there is more to come is why tech companies have large P:E ratios. A stock’s valuation mostly consists of guesses about what the future will bring. Sometimes there are more numbers quantifying aspects of those guesses. Revenue is supposedly about the present, though. If some of the revenue comes indirectly from AI companies spending Amazon’s money, it’s a little odd. Maybe not materially so, though, when total revenue is above $500 billion a year?
- HarHarVeryFunny 3y agoHow is it misrepresenting? Amazon didn't just give the money with one hand, and take it back with the other. They bought a stake in Anthropic, although no-doubt the bulk of that money will also come back as AWS revenue! Sounds like a double win for Amazon. There should also be a lot of future AWS revenue from inference, not just training. I'm jealous of these companies that are able to invest in Anthropic, especially at current $18B valuation. FTX just sold 2/3 of their 8% stake in Anthropic at the same valuation, with the bulk of that going to a Saudi wealth fund, and some to Fidelity funds. In comparison to Anthropic's $18B valuation, latest investment rounds in OpenAI are at $100B. I'm curious which of these anyone here would prefer to invest in, at these valuations, if they were given a chance ?!
- kolbe 3y agoLPs of VC funds whose managers use a misrepresentative investment price to mark up their portfolio.
- adrr 3y agoThats why you look at the cash flow part of the financial statement.
- kolbe 3y agoHow many LPs have access to a financial statement for all of the portfolio companies of their VC fund?
- lotsofpulp 3y agoThey are free to negotiate access. Otherwise, they can join the rest of us in buying SP500.
- kolbe 3y agoYou clearly understand how these things work. We should defer to your brilliance for all of this.
- adrr 3y agoI am willing to bet pension funds LPs have full rights to audit all financials and audits or portfolio companies. There will be no way to determine valuation of their investment if they can’t evaluated the underlying assets.
- kolbe 3y ago(1) Pension funds don't have LPs (2) Pension funds often are LPs, and they're widely refereed to as "dumb money" because they would be the last entity to do anything remotely intelligent. (3) Private companies often do not even produce the kind of information talked about here, let alone do they give it to their investors, let alone do those investors pass the information along. If you are "willing to bet" on all those things, then I can see why casinos are so profitable.
- deleted 3y ago[deleted]
- paulddraper 3y agoFor sure it's quid pro quo. That's the definition of any business transaction :) But can you elaborate how in-kind investment is anti-competitive?
- throwaway74432 3y ago"I'll help you with my resources, for a stake in the company" should be illegal? Please explain?
- infinghxsg 3y ago[dead]
- deleted 3y ago[deleted]
- qwertox 3y agoIt shouldn't be illegal if it is open to any company capable of also offering such a deal. Isn't the Microsoft - OpenAI deal an exclusive one?
- paxys 3y agoYou paying a company money and them giving you a product in return is quid-pro-quo, so should that be banned as well?
- deleted 3y ago[deleted]
- JKCalhoun 3y agoCrazy times. Meta, Alphabet, Amazon, Microsoft — massive companies jockeying for control over AI, gobbling up startups. Tycoons, robber barons, Gilded Age... Like we're living in an H.G. Wells novel he might have written had he imagined electronic brains.
- belter 3y agoBut if they achieve AGI, I will ask the AGI to build me a better model...
- razodactyl 3y agoTheoretical end goal which will ensure a company's future but reality is never straight forward. If AGI is achievable (I'm thinking likely given the right circumstances) then we'll see the same end result just like the current open source models floating around everywhere. That said. I highly recommend checking out what Cohere's up to. Their Command-R model is pretty good and their infra. is fast.
- WheatMillington 3y agoYou're basically saying that partnership and exclusivity contracts should be illegal. The business world as we know it would cease to function.
- e3bc54b2 3y ago'Partnership' is another word for collusion, but that is indeed the slippery slope I see here. There's a fine line somewhere and I'm not sure multi-billion dollars of dependency-creating deals are on the right side it. Besides, partnership implies equality, which, again, I'm not seeing here.
- scarface_74 3y agoSo the alternative would be that AWS created its own Anthropic equivalent and that Anthropic bought its own servers? Collusion has a very specific legal definition. If Amazon and Microsoft agreed not to compete in each others cloud market or decided not to compete on price, that would be “collusion”
- victorbjorklund 3y agoWould you say the same about say a freelance developer that "invests" 500 hours of work in exchange for X% stake?
- TeaBrain 3y agoThat this is quid pro quo doesn't in itself imply anything unusual. Your comment could be rephrased as "investment through the use of a company's resources is an exchange of business". Quid pro quo can be used to describe an illegal exchange involving a politician, as it could be considered political bribery, which may be why you thought there was some negative implication in the term, but there is nothing unusual in a business exchanging the use of its own resources for an investment or partnership in another company.