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"Piketty converts the entrepreneur into the rentier. To the extent capital reaps high returns, it is by assuming risk (over the broad sweep of history real rat

"Piketty converts the entrepreneur into the rentier. To the extent capital reaps high returns, it is by assuming risk (over the broad sweep of history real rates on T-Bills are hardly impressive)." The high returns entrepreneurs and investors can receive is a result of capturing winner-take-all market opportunities. Mark Zuckerberg, for instance, took very little risk in the scheme of things. I heard a talk by a Sequoia partner once. He said that their investing philosophy is pretty simple: Look for billion dollar market opportunities, and invest in the team/company most likely to capture that market. Thanks to Sequoias's reputation and contacts, they can attract the top entrepreneurs and thus earn extraordinary returns. Risk has little to do with it. Much of the risk in startups actually comes from the fact that the market opportunities are usually pretty obvious, so there are a bunch of startups competing for the space, and only one or two can win. There are some entrepreneurs who take on genuine technology or market-existence risk, but this tends to be the exception these days.

yummyfajitas 12y ago
VC is hardly an investment category full of good returns at all. http://blogs.reuters.com/felix-salmon/2012/05/07/how-venture-capital-is-broken/ http://blogs.reuters.com/felix-salmon/2012/05/07/how-venture... And given that VC returns tend to be based on a small number of long tail hits, I have no idea how you could say "risk has little to do with it".
- henrymercer 12y ago
  Risk has little to do with it for the top firms (like Sequoia) that have built the networks and reputation to attract the top companies. Yes, they take some risk on individual companies, but across their entire portfolio the risk is not that great compared to the expected value. The VC industry is winner take-the-best, just like the tech industry as a whole. The top firms are not taking risk proportional to their reward. It is true that the VC sector underperforms. That is because the lower tier firms are just pretenders. They are funding second tier companies, and second tier companies are not good enough in these winner-take-most markets. These firms should shut down and limited partners should stop burning their money by investing in them. My disagreement with Piketty (judging from the summaries - I haven't read him yet), is that the cause of inequality is not capital versus labor. The cause is the rise of winner-take-all-dynamics, which causes stratification within sectors.
  - henrymercer 12y ago
    Also I should note that I am not saying their is no risk in investing. Even for Sequoia there is risk. I am that the the risk that exists does not cause high returns. I am that this statement is wrong: "to the extent capital reaps high returns, it is by assuming risk." Sequoia reaps returns by avoiding risk, if it had even better vision into markets and companies it could reap even higher returns.
capz 12y ago
He dropped out of college to build a start-up taking on Myspace and Friendster, two well-funded incumbents. Furthermore, Zuckerberg didn't have the wealth or family connections of say, the Winklevii. I don't really like Zuckerberg, but to minimize the risk facing him and his investors is kind of ridiculous.
- henrymercer 12y ago
  At the time he took leave from Harvard (which was not dropping out), the company already had offers for $500k in seed money at a $10 million valuation. The chance that going full-time on Facebook would end up worse than staying at Harvard was remote. Even if failed, the experience and connections would have been far more valuable than two more years at Harvard.

yummyfajitas 12y ago

VC is hardly an investment category full of good returns at all. http://blogs.reuters.com/felix-salmon/2012/05/07/how-venture-capital-is-broken/ http://blogs.reuters.com/felix-salmon/2012/05/07/how-venture... And given that VC returns tend to be based on a small number of long tail hits, I have no idea how you could say "risk has little to do with it".

henrymercer 12y ago
Risk has little to do with it for the top firms (like Sequoia) that have built the networks and reputation to attract the top companies. Yes, they take some risk on individual companies, but across their entire portfolio the risk is not that great compared to the expected value. The VC industry is winner take-the-best, just like the tech industry as a whole. The top firms are not taking risk proportional to their reward. It is true that the VC sector underperforms. That is because the lower tier firms are just pretenders. They are funding second tier companies, and second tier companies are not good enough in these winner-take-most markets. These firms should shut down and limited partners should stop burning their money by investing in them. My disagreement with Piketty (judging from the summaries - I haven't read him yet), is that the cause of inequality is not capital versus labor. The cause is the rise of winner-take-all-dynamics, which causes stratification within sectors.
- henrymercer 12y ago
  Also I should note that I am not saying their is no risk in investing. Even for Sequoia there is risk. I am that the the risk that exists does not cause high returns. I am that this statement is wrong: "to the extent capital reaps high returns, it is by assuming risk." Sequoia reaps returns by avoiding risk, if it had even better vision into markets and companies it could reap even higher returns.

capz 12y ago

He dropped out of college to build a start-up taking on Myspace and Friendster, two well-funded incumbents. Furthermore, Zuckerberg didn't have the wealth or family connections of say, the Winklevii. I don't really like Zuckerberg, but to minimize the risk facing him and his investors is kind of ridiculous.

henrymercer 12y ago
At the time he took leave from Harvard (which was not dropping out), the company already had offers for $500k in seed money at a $10 million valuation. The chance that going full-time on Facebook would end up worse than staying at Harvard was remote. Even if failed, the experience and connections would have been far more valuable than two more years at Harvard.