4 ms·

To be honest, I think "vendor financing" is still a very risky premise. Vendors may be positioned to know how a customer is doing, but they're also incentivize

by zymhan 6mo ago

To be honest, I think "vendor financing" is still a very risky premise. Vendors may be positioned to know how a customer is doing, but they're also incentivized to overestimate how well a customer is going to perform. GE Capital (edit: and GMCA) is a great example of how seemingly reasonable vendor financing can cause the lender serious problems.

skybrian 6mo ago
The risks are different, but there's no getting around that the value of any investment is based on future cash flows and that's speculating about the future. To the extent that Google and Anthropic are competing for AI business, Google is somewhat hedged against Anthropic winning market share. They still get data center revenue and they own equity, so that’s a consolation prize. On the other hand, it’s increasing Google’s investment in AI, in general.
cowsandmilk 6mo ago
GE Capital was not just vendor financing and its serious problems were not due to vendor financing. I don’t think it is a great example in any way.
Spooky23 6mo ago
GE Capital was a different creature, riding the line of fraud in some ways. They misapplied accounting rules and had to write down or capitalize over $20B for long term care insurance.
- zymhan 6mo ago
  That's what brought them down, but that could bring down anyone. My point is that vendor financing turns non-finance companies into finance companies, and brings along a huge can of worms.
  - Spooky23 6mo ago
    That’s fair. You become vulnerable to a guy like Jack Welch. The vendor financing stuff I saw (as a junior / intern at a supplier) in those days was a reflection of that culture. They’d lease capital equipment through GE Capital, and pack it with other stuff to the limit of their accountants appetite for risk. (You can usually roll 20% of the value into services or peripheral stuff) I remember one deal where we had to run around and buy office supplies and tools with a corporate card. I did 4 Honda Civic of laser toner. GE was reporting their own capital equipment and office supplies as revenue on the Capital side. :) But that is penny ante stuff in terms of what they did. The AI stuff is a shady variation of that, but likely far worse as we’ve fired all of the watchers.
- throwaway2037 6mo ago
  I don't know the full the history of this story, but I honestly wonder if type of scandal is still possible in the United States. After Enron and Worldcomm, the US introduced Sarbanes-Oxley reporting regulations. Additionally, after the Global Financial Crisis of 2008/2009, there was a dramatic increase in regulations for banks (of all kinds) and insurance companies.
  - HappMacDonald 6mo ago
    .. yet today we have Kalshi, Polymarket, et al.
    - lotsofpulp 6mo ago
      Those are private gambling businesses akin to a casino, not publicly listed businesses subject to the aforementioned regulations.
      - HappMacDonald 6mo ago
        GP said: > there was a dramatic increase in regulations for banks (of all kinds) and if I can deposit funds, make "investments" (gambling or not.. to me most stock investments are gambling anyway since they pay out in dividends based on quarterly profits) and withdraw money, that is at it's core a bank. However, in these and many other cases they are now effectively unregulated ones. Partly because the executive branch responsible for said regulations have their hands in the pie.
        lotsofpulp 6mo ago
        >and if I can deposit funds, make "investments", and withdraw money, that is at it's core a bank. Not according to pretty much all countries. When a depositor is making investments, that is called a brokerage, not a bank. But these gambling websites are not making investments either. Also, with the transition to digital currency, banks don't really have the same purpose anymore of storing and guaranteeing people's access to their money, now that money is entries in a digital ledger and there is no risk of losing the money (outside of political risks where someone edits the database). They have been obviated, but the system persists. >most stock investments are gambling anyway since they pay out in dividends based on quarterly profits This is not true, publicly listed companies' boards regularly choose to vary dividend amounts based on longer term cash flow, and you will be sorely disappointed if you are expecting dividends to land in your account as a function of quarterly profits. And how do you expect a business to work if it did not vary dividends? No business knows the future, and dividends are the same as owners paying themselves a profit, so if owners do not know how much profit there will be in the future, how can dividends be a "known" quantity? They have to be based on profits, they literally are the owners distributing the profit amongst themselves Any venture in life is gambling, just like people exploring the oceans and traversing continents without knowing what was ahead of them was gambling. But that is a different type of gambling than risking money with no effect on the outcome such as on the aforementioned gambling websites and casinos.
everly 6mo ago
$40 billion is about a quarter’s worth of profits for Google. They make that much every 3 months, what’s the risk
- throwaway2037 6mo ago
  Hat tip. Great point. To quote J Paul Getty: "If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem." In this case, yes, the investment is large, but not bankrupting for Google if it goes wrong.
throwaway2037 6mo ago
> To be honest, I think "vendor financing" is still a very risky premise. Are you aware that all heavy industry in all highly developed nations make extensive use of vendor financing to sell their products? Siemens is a perfect example of a well-run, stable, industrial giant. They offer vendor financing for large purchases. Same for the "heavies" (Mitsubishi, Kawasaki, IHI, Hyundai, Doosan, Hanjin) in Japan and Korea. If anyone is interested to learn about the damage that the financialisation of General Electric (USA) brought upon itself, you can ask ChatGPT to tell you the story. It is too long to repeat here. Here is a sample prompt that I used to remind myself: > I am interested in the history of General Electric and the trouble that their financing units brought in the early to mid 2000s. Can you tell me more?
- HappMacDonald 6mo ago
  Are we replacing "Let me google that for you" with "Here is a prompt to feed ChatGPT" now? Edit: I am not asking whether ChatGPT is better than Google Search, I am asking after the standard dodge of citing one's sources.
  - jona-f 6mo ago
    Yes, cause google has been giving crap results long before chatgpt was a thing and it only got worse. Before ai it was "let me google that on reddit for you".
  - exoverito 6mo ago
    Yes.
  - OJFord 6mo ago
    It's a good use case really – it'll tell it differently according to what it knows about your background, if you 'just Google it' you'll get the same maybe-appropriate results as anyone else.
  - 2ndorderthought 6mo ago
    Google search has gone way down hill after they nerfed it and then did nothing to prevent the flood of AI slop seo websites. So unfortunately, instead of sharing links everyone now gets sent to the inefficient text generator that hallucinates nonsense and will color the average summary of a topic by whoever trained it and your most recent chat history instead.
to11mtm 6mo ago
Assuming you mean GMAC, their biggest losses were not so much a result of vendor financing as branching into the real estate market.

by zymhan 6mo ago

skybrian 6mo ago

The risks are different, but there's no getting around that the value of any investment is based on future cash flows and that's speculating about the future. To the extent that Google and Anthropic are competing for AI business, Google is somewhat hedged against Anthropic winning market share. They still get data center revenue and they own equity, so that’s a consolation prize. On the other hand, it’s increasing Google’s investment in AI, in general.

cowsandmilk 6mo ago

GE Capital was not just vendor financing and its serious problems were not due to vendor financing. I don’t think it is a great example in any way.

Spooky23 6mo ago

GE Capital was a different creature, riding the line of fraud in some ways. They misapplied accounting rules and had to write down or capitalize over $20B for long term care insurance.

zymhan 6mo ago
That's what brought them down, but that could bring down anyone. My point is that vendor financing turns non-finance companies into finance companies, and brings along a huge can of worms.
- Spooky23 6mo ago
  That’s fair. You become vulnerable to a guy like Jack Welch. The vendor financing stuff I saw (as a junior / intern at a supplier) in those days was a reflection of that culture. They’d lease capital equipment through GE Capital, and pack it with other stuff to the limit of their accountants appetite for risk. (You can usually roll 20% of the value into services or peripheral stuff) I remember one deal where we had to run around and buy office supplies and tools with a corporate card. I did 4 Honda Civic of laser toner. GE was reporting their own capital equipment and office supplies as revenue on the Capital side. :) But that is penny ante stuff in terms of what they did. The AI stuff is a shady variation of that, but likely far worse as we’ve fired all of the watchers.
throwaway2037 6mo ago
I don't know the full the history of this story, but I honestly wonder if type of scandal is still possible in the United States. After Enron and Worldcomm, the US introduced Sarbanes-Oxley reporting regulations. Additionally, after the Global Financial Crisis of 2008/2009, there was a dramatic increase in regulations for banks (of all kinds) and insurance companies.
- HappMacDonald 6mo ago
  .. yet today we have Kalshi, Polymarket, et al.
  - lotsofpulp 6mo ago
    Those are private gambling businesses akin to a casino, not publicly listed businesses subject to the aforementioned regulations.
    - HappMacDonald 6mo ago
      GP said: > there was a dramatic increase in regulations for banks (of all kinds) and if I can deposit funds, make "investments" (gambling or not.. to me most stock investments are gambling anyway since they pay out in dividends based on quarterly profits) and withdraw money, that is at it's core a bank. However, in these and many other cases they are now effectively unregulated ones. Partly because the executive branch responsible for said regulations have their hands in the pie.
      - lotsofpulp 6mo ago
        >and if I can deposit funds, make "investments", and withdraw money, that is at it's core a bank. Not according to pretty much all countries. When a depositor is making investments, that is called a brokerage, not a bank. But these gambling websites are not making investments either. Also, with the transition to digital currency, banks don't really have the same purpose anymore of storing and guaranteeing people's access to their money, now that money is entries in a digital ledger and there is no risk of losing the money (outside of political risks where someone edits the database). They have been obviated, but the system persists. >most stock investments are gambling anyway since they pay out in dividends based on quarterly profits This is not true, publicly listed companies' boards regularly choose to vary dividend amounts based on longer term cash flow, and you will be sorely disappointed if you are expecting dividends to land in your account as a function of quarterly profits. And how do you expect a business to work if it did not vary dividends? No business knows the future, and dividends are the same as owners paying themselves a profit, so if owners do not know how much profit there will be in the future, how can dividends be a "known" quantity? They have to be based on profits, they literally are the owners distributing the profit amongst themselves Any venture in life is gambling, just like people exploring the oceans and traversing continents without knowing what was ahead of them was gambling. But that is a different type of gambling than risking money with no effect on the outcome such as on the aforementioned gambling websites and casinos.

everly 6mo ago

$40 billion is about a quarter’s worth of profits for Google. They make that much every 3 months, what’s the risk

throwaway2037 6mo ago
Hat tip. Great point. To quote J Paul Getty: "If you owe the bank $100, that's your problem. If you owe the bank $100 million, that's the bank's problem." In this case, yes, the investment is large, but not bankrupting for Google if it goes wrong.

throwaway2037 6mo ago

> To be honest, I think "vendor financing" is still a very risky premise. Are you aware that all heavy industry in all highly developed nations make extensive use of vendor financing to sell their products? Siemens is a perfect example of a well-run, stable, industrial giant. They offer vendor financing for large purchases. Same for the "heavies" (Mitsubishi, Kawasaki, IHI, Hyundai, Doosan, Hanjin) in Japan and Korea. If anyone is interested to learn about the damage that the financialisation of General Electric (USA) brought upon itself, you can ask ChatGPT to tell you the story. It is too long to repeat here. Here is a sample prompt that I used to remind myself: > I am interested in the history of General Electric and the trouble that their financing units brought in the early to mid 2000s. Can you tell me more?

HappMacDonald 6mo ago
Are we replacing "Let me google that for you" with "Here is a prompt to feed ChatGPT" now? Edit: I am not asking whether ChatGPT is better than Google Search, I am asking after the standard dodge of citing one's sources.
- jona-f 6mo ago
  Yes, cause google has been giving crap results long before chatgpt was a thing and it only got worse. Before ai it was "let me google that on reddit for you".
- exoverito 6mo ago
  Yes.
- OJFord 6mo ago
  It's a good use case really – it'll tell it differently according to what it knows about your background, if you 'just Google it' you'll get the same maybe-appropriate results as anyone else.
- 2ndorderthought 6mo ago
  Google search has gone way down hill after they nerfed it and then did nothing to prevent the flood of AI slop seo websites. So unfortunately, instead of sharing links everyone now gets sent to the inefficient text generator that hallucinates nonsense and will color the average summary of a topic by whoever trained it and your most recent chat history instead.

to11mtm 6mo ago

Assuming you mean GMAC, their biggest losses were not so much a result of vendor financing as branching into the real estate market.