3 ms·
Not only is this argument wrong, the /opposite/ is true. Buyouts are actually the /engine/ of innovation. They're the fuel. The oil. You know this yourself. J
by ekpyrotic 13y ago
Not only is this argument wrong, the /opposite/ is true.
Buyouts are actually the /engine/ of innovation. They're the fuel. The oil.
You know this yourself. Just take a quick look at Silicon Valley - it's a hotbed of innovation. If you believed this argument, you'd expect to see a dirge of new businesses & a desert of new ideas. That's just not true. We have wearable tech. Quantified self. Bank challengers. News extractors. And things that don't even have names. The place is full of vibrant startups & new ideas. Just compare it to the energy, banking or agriculture sector.
So, why is the argument wrong?
Because buyouts /liberate/ innovative entrepreneurs from their old companies so they can go onto to found new startups - new startups that push the envelope again. San Fran is full of serial entrepreneurs who skip from one place to the next - first, revolutionising auctioning. Then, payment processing. Then, something else.
Just look at the PayPal mafia: http://en.wikipedia.org/wiki/PayPal_Mafia http://en.wikipedia.org/wiki/PayPal_Mafia
What if PayPal hadn't been bought out. YouTube might not have existed. Nor LinkedIn. Nor Palantir. SpaceX. Yelp. Yammer.
Buyouts lets these innovative people sell-up - at the right price - and move on. Not only that, but they allow them to move on with additional capital that they can plough into their next venture.
If buyouts didn't happen as often, entrepreneurs would have to wait another 3-5 years - or even longer than that - for an IPO. It would lock in capital, and enterprise would suffer. Plus, an IPO is mighty expensive & just not right for some businesses.
Entrepreneurs would be locked into their first companies.
This 'lock-in effect' is exactly what happens when Governments raise Capital Gains Tax - the tax on the profits of selling a business. If it's harder (or more costly) for an entrepreneur to cash out and move on, they stagnate - and so does innovation. This is a well-known and studied phenomena: http://www.fas.org/sgp/crs/misc/R40411.pdf http://www.fas.org/sgp/crs/misc/R40411.pdf
Acquisition don't suffocate innovation.
Acquisitions are the oil of the economy.
- frostmatthew 13y ago> The place is full of vibrant startups & new ideas. While there are certainly exceptions the vast majority of startups are not very innovative. Having some slight twist on sharing photos or sending messages or analytics isn't innovation.
- chromatic 13y agoRedefine "innovation" as "generate money for VCs". Then anything which lets you sell eyeballs to advertisers (or metadata about eyeballs to advertisers) becomes innovative, if you do it at the right scale.
- ekianjo 13y agoThat's not really the meaning of innovation, though.
- freshhawk 13y agoThe second highest comment here (when I'm writing this anyway) contains this sentence: "Innovation is a vehicle for the creation of wealth." So it's not an uncommon meaning. Delusional, but not uncommon.
- frostmatthew 13y ago> So it's not an uncommon meaning. Delusional, but not uncommon. "Innovation is a vehicle for the creation of wealth" isn't defining innovation as creation of wealth, it's saying [innovation as defined] is a vehicle...
- freshhawk 13y agoThe full quote: "Innovation is a vehicle for the creation of wealth. Innovation is in and of itself fairly worthless. The only reason the concept of innovation is so popular is because of the value (and the valuations) we put on companies who are seen to be innovating" I don't see how that can be interpreted that way in context.
- frostmatthew 13y ago> I don't see how that can be interpreted that way in context. It's not an interpretation...chromatic suggested Redefine "innovation" as "generate money for VCs" and you apparently agree with that as a possible (though delusional) definition by the user you quoted - I disagree with that quote as attempting to define innovation. Let's replace the word innovation with chromatic's definition in what you quoted: "[generating money for VCs] is a vehicle for the creation of wealth. [generating money for VCs] is in and of itself fairly worthless. The only reason the concept of [generating money for VCs] is so popular is because of the value (and the valuations) we put on companies who are seen to be [generating money for VCs]" I do agree with you defining innovation as generating money for VCs is delusional, I just disagree with what you quoted as an attempt to define innovation.
- michaelochurch 13y agoWhat if PayPal hadn't been bought out. YouTube might not have existed. Nor LinkedIn. Nor Palantir. SpaceX. Yelp. Yammer. They'd still be founded, but by other people. The connections game is zero-sum. If those people didn't have the connections the Paypal Mafia bought them, someone else would.
- bsder 13y ago> The place is full of vibrant startups & new ideas. Except that enormous numbers of these startup ideas are all about undercutting existing businesses and creating a race to the bottom rather than adding value. WhatsApp removed any profit from SMS. Its revenue is a rounding error to Facebook. Facebook will start running ads on the service, they don't have any choice. Now, even if you want an ad-free SMS service, that won't be an option. Lyft is directly competing against taxis. They do this by laying the liability for what they do at the feet of "contractors" who now bear the burden (and generally just ignore it) So, the legitimate services that have to pay tax, liability insurance, training, and licensing are now at a disadvantage relative to the newcomers. If Lyft wanted to actually add value, they could set up a taxi fleet and provide the kind of quick, GPS response that people want. But, you see, that's real work and won't have anywhere near the margin for a quick VC exit. There is innovation in the valley. It's just not in the "social" companies.