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> Of course, I don't think it's a direct analogy. But it seems that partly what makes YC successful is also what makes BH successful. In what way? Yes, they

> Of course, I don't think it's a direct analogy. But it seems that partly what makes YC successful is also what makes BH successful. In what way? Yes, they both invest in companies, and the investments represent people trying to figure out how to make money and beat their competitors. But there are a lot of differences in the details (Buffet has a source of stable income that people trust him to reinvest; Y Combinator makes money sporadically when other investors decide to buy their companies). They're about as similar -- to me -- as football and bowling. Sure, both sports have balls, but there are a few relevant differences.

dluan 12y ago
It takes good hand-eye coordination to throw a touchdown and bowl a strike.
maxlybbert 12y ago
I feel like I should add http://www.econ.yale.edu/~af227/pdf/Buffett%27s%20Alpha%20-%20Frazzini,%20Kabiller%20and%20Pedersen.pdf http://www.econ.yale.edu/~af227/pdf/Buffett%27s%20Alpha%20-%... (alpha is supposed to measure how much better a manager does compared to the market, http://en.wikipedia.org/wiki/Alpha_%28investment%29 http://en.wikipedia.org/wiki/Alpha_%28investment%29 ). Compared to ordinary investors, Buffet's alpha is consistently high. He looks like a genius. But if you change the definition of alpha based on his strategy, his alpha ends up being much lower. Personally, I don't think that diminished Buffet in any way: he came up with the strategy, after all; but it does show that his investments work because he's doing something different than the competition. And, again, Y Combinator is also doing something different than the competition (or at least, different from what the competition was doing when YC launched), but it's also doing something wildly different from Berkshire Hathaway. BH invests in a small number of mature companies, YC invests in many small and risky companies. I would be interested to see what kind of personalized alpha YC manages to get (and, even, what kind of generic alpha they have). I don't know if they publish their investment numbers, so I don't know if it would be possible to calculate.

dluan 12y ago

It takes good hand-eye coordination to throw a touchdown and bowl a strike.

maxlybbert 12y ago

I feel like I should add http://www.econ.yale.edu/~af227/pdf/Buffett%27s%20Alpha%20-%20Frazzini,%20Kabiller%20and%20Pedersen.pdf http://www.econ.yale.edu/~af227/pdf/Buffett%27s%20Alpha%20-%... (alpha is supposed to measure how much better a manager does compared to the market, http://en.wikipedia.org/wiki/Alpha_%28investment%29 http://en.wikipedia.org/wiki/Alpha_%28investment%29 ). Compared to ordinary investors, Buffet's alpha is consistently high. He looks like a genius. But if you change the definition of alpha based on his strategy, his alpha ends up being much lower. Personally, I don't think that diminished Buffet in any way: he came up with the strategy, after all; but it does show that his investments work because he's doing something different than the competition. And, again, Y Combinator is also doing something different than the competition (or at least, different from what the competition was doing when YC launched), but it's also doing something wildly different from Berkshire Hathaway. BH invests in a small number of mature companies, YC invests in many small and risky companies. I would be interested to see what kind of personalized alpha YC manages to get (and, even, what kind of generic alpha they have). I don't know if they publish their investment numbers, so I don't know if it would be possible to calculate.