4 ms·

Forget moonshots, investors want profit now

26 points by petethomas 3y ago

orionblastar 3y ago
To profit, you need to have a working business plan. You can't have an Underpants Gnomes plan: Step 1: Steal underpants Step 2: ? Step 3: Profit! Here Step 1 is building an app or website for most startups. What is step 2? You skipped it. Step 1 is the Moonshot, Step 2 is how you profit from the Moonshot.
- ggm 3y ago
  1) convince gnomes having no underwear is shameful, if caught by pixies. 2) steal underpants 3) offer replacement underpants at a low price, based on washing and dying the stolen underpants 4) profit.
  - ggm 3y ago
    This is also not dissimilar to the "replacement light bulb" scam where you go around the street with a box of one houses lightbulbs, replacing the neighbours with your boxes contents, and then rinse and repeat for every house for one low low fee..
    - selcuka 3y ago
      At least in the other scheme they wash and dry the underpants.
neonate 3y ago
https://archive.md/w6qAR https://archive.md/w6qAR
WorkerBee28474 3y ago
A better title would be "Forget Moonshots. Investors Want Profits That Will Actually Exist"
waihtis 3y ago
As proven by all the AI wrapper startups raising enormous seed rounds
- JumpCrisscross 3y ago
  > all the AI wrapper startups raising enormous seed rounds Aside from Cohere, don't they mostly have massive and rapidly-growing revenues?
  - guappa 3y ago
    A massive revenue that is dwarfed by massive expenses isn't "profit"
    - ein0p 3y ago
      Depending on the trajectory of both P&L it could still be worthwhile
      - waihtis 3y ago
        So moonshots it is then. I think we just demonstrated the typical investor though process here quite well!
        ein0p 3y ago
        Moonshot is when those trajectories are not yet known and won’t be known for quite some time. A good example is nuclear fusion. This is something else: risky but clearly tractable innovation.
        JumpCrisscross 3y ago
        > moonshots it is then Moonshots involve fundamental technology risk. LLMs are no longer unproven technology--the problems are in scaling and product-market fit.
        3y ago
PHGamer 3y ago
now that the borrow rate has gone up and dollar has strengthed. they arent competing against 0% inflation so less need to go into risky plays. in some ways this helps the economy because it allows people to focus on what really matters but in other ways a bunch of people who were employed because of low interest rates about about to lose their jobs. Plus makes month to month operations more expensive with the higher cost of borrowing for companies (which most do now)
- portaouflop 3y ago
  > allows people to focus on what really matters What really matters is the hardest philosophical question ever posed. But if you mean „quality work“ or „useful products“ I have yet to see evidence. If you mean „shady grift“ or „lying till my ass falls off“ then sure
  - flakeoil 3y ago
    In this sense I guess "what really matters" is businesses and business models which can survive without free money. Zero interest and money thrown at you by VC's is basically no different than the bad parts of socialism. It just sounds better.
- Rinzler89 3y ago
  >a bunch of people who were employed because of low interest rates about about to lose their jobs You're making it sound like the alternative would have been for all those people to have been unemployed if those zero interest rates would not have happened. No, the alternative was, as the market is being corrected right now, is these people working in older, more established businesses and economic sectors with steady growth, that are based in reality instead of gaming meme hypergrowth "to the moon" businesses, which are laying them off right now. There's tones of jobs open in the "un-cool" sectors.
ArtTimeInvestor 3y ago
The market indeed seems to put rather little value on growth these days. Example: Google. Their p/e ratio of 30 seems low if you assume that they will keep growing like they did for the last ten years. Which was about 19% annually. At a p/e of 30, to outperform a ten-year bond at current rates, they would have to only grow at about 3% or so from now on.
- worik 3y ago
  > Their p/e ratio of 30 seems low if you assume that they will keep growing like they did for the last ten years. Yes. So the P/E ratio is a bit high?
- JumpCrisscross 3y ago
  > At a p/e of 30, to outperform a ten-year bond at current rates, they would have to only grow at about 3% or so from now on This implies zero equity risk premium, to say nothing of single-stock risk.
  - ArtTimeInvestor 3y ago
    There is no asset without risk. If you hold bonds, you are long fiat. Which can be devalued on a whim. Avoiding single-stock risk is simple. You buy another stock.
    - JumpCrisscross 3y ago
      > no asset without risk That doesn't follow in any way from the concept of a risk premium [1]. [1] https://en.wikipedia.org/wiki/Risk_premium https://en.wikipedia.org/wiki/Risk_premium
      - ArtTimeInvestor 3y ago
        Exactly. The "risk free rate" does not exist when it comes to the purchasing power of an asset. And the purchasing power is what matters to an investor. The 4% bonds pay you might be somewhat "risk-free" when it comes to "getting your investment back and 4% on top of it". But it is likely to have been devalued. And often to a large extend.
anonzzzies 3y ago
Not in my world and I live in the EU! People raise millions and 10s of millions here for stuff that is nonsense and cannot be done. As someone said already here: openai wrappers that do something intended in <5% of cases but the millions will solve that by insert-some-shite-fine-tuning-rag-bla. And when at meet-ups people actually tell me that investors will pay whatever for an ai wrapper demo (I saw a few last month that were not even that; just faked) and a few $ charts.
- atoav 3y ago
  I am not even sure if I find that good or bad. There are other things people invest into that have more problematic consequences. For example I'd like to have someone explain me how housing can be both a good investment for rich people and a commodity people can afford — the way I see it these are fundamentally incompatible goals. One is about making housing prices go up, so your one investment gives you more profit, the other is about building enough to keep the prices stable (or even going down).
  - flakeoil 3y ago
    The problem is that currently (at least until the interest rates went up to a reasonable level) housing was a (too) good investment for the rich. Prices just went up and up without any added value. This made houses expensive for the ones who wanted to buy a house to live in. The main profit should instead only come from the actual building of the house, by a construction company, and selling it the first time to someone who wants to live there. This is where value add comes from. Higher interest rates fixes this.
    - consp 3y ago
      > Higher interest rates fixes this Yet prices keep going up and up and up and up. Just slap a massive fine (I mean tax of course but that is just semantics) on any profits from a second or higher house. And dont start with the "you can't change the rules of the game in play"; sure you can, you just dont like it.
omoikane 3y ago
Instead of replacing "moonshots" with "show me the money", I think we should try "roofshots". https://web.archive.org/web/20160715152958/https://rework.withgoogle.com/blog/the-roofshot-manifesto/ https://web.archive.org/web/20160715152958/https://rework.wi...
Animats 3y ago
That article claims way too much from too little data. Tesla does have a serious problem with pricing. Electric vehicles have become cheaper, and nobody can mark up electrics the way they did a year or two ago. Tesla had to cut prices. But not enough. BYD now sells more electric cars than Tesla. BYD now has a good US$20,000 electric car, and they're selling it in Europe, Mexico, South America, and of course China. Not in the US only because of import restrictions. Tesla's factory in Shanghai is way behind schedule and work seems to have stopped before much was built.[1] The Hertz/Tesla debacle has been embarrassing. Tesla is an auto company, and has the operating problems of an auto company - competition, parts and service, and reliability. Tesla is way overvalued for an auto company. And no, the "autonomy" thing won't save Tesla. Everybody has Level 2 now, and the driving assist systems from Mercedes and Ford (Level 3) are considered better than Tesla's. Waymo, of course, has level 4 and taxicabs running around. [1] https://www.youtube.com/watch?v=IqQ0uuazqbk https://www.youtube.com/watch?v=IqQ0uuazqbk
olliej 3y ago
I mean “investors” in the WSJ sense always want either profit now, even if it tanks the company in the long term, or BS hype wagon to drive the stock up, again regardless of the long term impact. The WSJ acts as though the only portion of the economy that matters is the profit produced by rent seeking investment firms and hedge funds.

26 points by petethomas 3y ago

To profit, you need to have a working business plan. You can't have an Underpants Gnomes plan: Step 1: Steal underpants Step 2: ? Step 3: Profit! Here Step 1 is building an app or website for most startups. What is step 2? You skipped it. Step 1 is the Moonshot, Step 2 is how you profit from the Moonshot.

ggm 3y ago
1) convince gnomes having no underwear is shameful, if caught by pixies. 2) steal underpants 3) offer replacement underpants at a low price, based on washing and dying the stolen underpants 4) profit.
- ggm 3y ago
  This is also not dissimilar to the "replacement light bulb" scam where you go around the street with a box of one houses lightbulbs, replacing the neighbours with your boxes contents, and then rinse and repeat for every house for one low low fee..
  - selcuka 3y ago
    At least in the other scheme they wash and dry the underpants.

neonate 3y ago

https://archive.md/w6qAR https://archive.md/w6qAR

WorkerBee28474 3y ago

A better title would be "Forget Moonshots. Investors Want Profits That Will Actually Exist"

waihtis 3y ago

As proven by all the AI wrapper startups raising enormous seed rounds

JumpCrisscross 3y ago
> all the AI wrapper startups raising enormous seed rounds Aside from Cohere, don't they mostly have massive and rapidly-growing revenues?
- guappa 3y ago
  A massive revenue that is dwarfed by massive expenses isn't "profit"
  - ein0p 3y ago
    Depending on the trajectory of both P&L it could still be worthwhile
    - waihtis 3y ago
      So moonshots it is then. I think we just demonstrated the typical investor though process here quite well!
      - ein0p 3y ago
        Moonshot is when those trajectories are not yet known and won’t be known for quite some time. A good example is nuclear fusion. This is something else: risky but clearly tractable innovation.
      - JumpCrisscross 3y ago
        > moonshots it is then Moonshots involve fundamental technology risk. LLMs are no longer unproven technology--the problems are in scaling and product-market fit.
        3y ago

PHGamer 3y ago

now that the borrow rate has gone up and dollar has strengthed. they arent competing against 0% inflation so less need to go into risky plays. in some ways this helps the economy because it allows people to focus on what really matters but in other ways a bunch of people who were employed because of low interest rates about about to lose their jobs. Plus makes month to month operations more expensive with the higher cost of borrowing for companies (which most do now)

portaouflop 3y ago
> allows people to focus on what really matters What really matters is the hardest philosophical question ever posed. But if you mean „quality work“ or „useful products“ I have yet to see evidence. If you mean „shady grift“ or „lying till my ass falls off“ then sure
- flakeoil 3y ago
  In this sense I guess "what really matters" is businesses and business models which can survive without free money. Zero interest and money thrown at you by VC's is basically no different than the bad parts of socialism. It just sounds better.
Rinzler89 3y ago
>a bunch of people who were employed because of low interest rates about about to lose their jobs You're making it sound like the alternative would have been for all those people to have been unemployed if those zero interest rates would not have happened. No, the alternative was, as the market is being corrected right now, is these people working in older, more established businesses and economic sectors with steady growth, that are based in reality instead of gaming meme hypergrowth "to the moon" businesses, which are laying them off right now. There's tones of jobs open in the "un-cool" sectors.

ArtTimeInvestor 3y ago

The market indeed seems to put rather little value on growth these days. Example: Google. Their p/e ratio of 30 seems low if you assume that they will keep growing like they did for the last ten years. Which was about 19% annually. At a p/e of 30, to outperform a ten-year bond at current rates, they would have to only grow at about 3% or so from now on.

worik 3y ago
> Their p/e ratio of 30 seems low if you assume that they will keep growing like they did for the last ten years. Yes. So the P/E ratio is a bit high?
JumpCrisscross 3y ago
> At a p/e of 30, to outperform a ten-year bond at current rates, they would have to only grow at about 3% or so from now on This implies zero equity risk premium, to say nothing of single-stock risk.
- ArtTimeInvestor 3y ago
  There is no asset without risk. If you hold bonds, you are long fiat. Which can be devalued on a whim. Avoiding single-stock risk is simple. You buy another stock.
  - JumpCrisscross 3y ago
    > no asset without risk That doesn't follow in any way from the concept of a risk premium [1]. [1] https://en.wikipedia.org/wiki/Risk_premium https://en.wikipedia.org/wiki/Risk_premium
    - ArtTimeInvestor 3y ago
      Exactly. The "risk free rate" does not exist when it comes to the purchasing power of an asset. And the purchasing power is what matters to an investor. The 4% bonds pay you might be somewhat "risk-free" when it comes to "getting your investment back and 4% on top of it". But it is likely to have been devalued. And often to a large extend.

anonzzzies 3y ago

Not in my world and I live in the EU! People raise millions and 10s of millions here for stuff that is nonsense and cannot be done. As someone said already here: openai wrappers that do something intended in <5% of cases but the millions will solve that by insert-some-shite-fine-tuning-rag-bla. And when at meet-ups people actually tell me that investors will pay whatever for an ai wrapper demo (I saw a few last month that were not even that; just faked) and a few $ charts.

atoav 3y ago
I am not even sure if I find that good or bad. There are other things people invest into that have more problematic consequences. For example I'd like to have someone explain me how housing can be both a good investment for rich people and a commodity people can afford — the way I see it these are fundamentally incompatible goals. One is about making housing prices go up, so your one investment gives you more profit, the other is about building enough to keep the prices stable (or even going down).
- flakeoil 3y ago
  The problem is that currently (at least until the interest rates went up to a reasonable level) housing was a (too) good investment for the rich. Prices just went up and up without any added value. This made houses expensive for the ones who wanted to buy a house to live in. The main profit should instead only come from the actual building of the house, by a construction company, and selling it the first time to someone who wants to live there. This is where value add comes from. Higher interest rates fixes this.
  - consp 3y ago
    > Higher interest rates fixes this Yet prices keep going up and up and up and up. Just slap a massive fine (I mean tax of course but that is just semantics) on any profits from a second or higher house. And dont start with the "you can't change the rules of the game in play"; sure you can, you just dont like it.

omoikane 3y ago

Instead of replacing "moonshots" with "show me the money", I think we should try "roofshots". https://web.archive.org/web/20160715152958/https://rework.withgoogle.com/blog/the-roofshot-manifesto/ https://web.archive.org/web/20160715152958/https://rework.wi...

Animats 3y ago

That article claims way too much from too little data. Tesla does have a serious problem with pricing. Electric vehicles have become cheaper, and nobody can mark up electrics the way they did a year or two ago. Tesla had to cut prices. But not enough. BYD now sells more electric cars than Tesla. BYD now has a good US$20,000 electric car, and they're selling it in Europe, Mexico, South America, and of course China. Not in the US only because of import restrictions. Tesla's factory in Shanghai is way behind schedule and work seems to have stopped before much was built.[1] The Hertz/Tesla debacle has been embarrassing. Tesla is an auto company, and has the operating problems of an auto company - competition, parts and service, and reliability. Tesla is way overvalued for an auto company. And no, the "autonomy" thing won't save Tesla. Everybody has Level 2 now, and the driving assist systems from Mercedes and Ford (Level 3) are considered better than Tesla's. Waymo, of course, has level 4 and taxicabs running around. [1] https://www.youtube.com/watch?v=IqQ0uuazqbk https://www.youtube.com/watch?v=IqQ0uuazqbk

olliej 3y ago

I mean “investors” in the WSJ sense always want either profit now, even if it tanks the company in the long term, or BS hype wagon to drive the stock up, again regardless of the long term impact. The WSJ acts as though the only portion of the economy that matters is the profit produced by rent seeking investment firms and hedge funds.