>This makes me ask an even more fundamental question: is the structure and business model of most VC firms today unfit for solving complex problems sustainably and long-term?
Was it ever actually fit for that? The VC economy basically always served one type of company, consumer-focused "lifestyle" or service 'technologies', and nowadays a lot of the institutions like a16z just appear to turn into straight up media outlets.
VC success in the industrial sector, biotech, military or scientific applications has always been muted compared to the kind of money that flows into the leisure/consumer/entertainment economy.
If you want to solve complex problems bet on Darpa or academia or bring back the corporate research lab whose demise is one of the real big problems today.
+1. the author's quote (and statements like it) seem to have this underlying unspoken assumption that VCs are the sole vehicle through which new ideas become businesses. that always bothers me. VCs are a small asset class that chases returns and are not the vehicle through which all global innovation should occur. if that's the reality today, then it's more of a policy problem. institutional LPs have fiduciary responsibility to returns, not a mandate to solve long term difficult problems in industries the VCs they are paying don't understand.
> Was it ever actually fit for that? The VC economy basically always served one type of company, consumer-focused "lifestyle" or service 'technologies'
You're too young. Old VC's funded a lot of hardware (networking, graphics card and microprocessor) companies, for example.
This, of course, tied a up massive amount of capital and took 7-10 years to reach a liquidity event. And had a bunch of grouchy people called "engineers" who would tell you to fuck off or leave your company if you treated them too badly.
Then the web took off.
It was in the the DotBomb and the aftermath that VCs became useless lottery players who want to spend nothing, take all your equity and have their companies be unicorns in 18 months or die trying.
> Old VC's funded a lot of hardware (networking, graphics card and microprocessor) companies, for example.
Yeah, venture capitalists were already funding companies like this in Silicon Valley (hence its name) a half a century ago, long before the days of the consumer internet:
> they're only media outlets insofar as it helps support their primary business model.
Sure, but isn't that the objectionable part? The core conceit of capitalism is free competition and that multiple participants on a level playing field optimizes outcomes (in the form of greater overall wealth, better products, etc.).
Investors are needed for liquidity, but if some investors gain enough market power that they can change the outcome of businesses that seems deeply suboptimal and runs counter to the core conceit of capitalism.
On the extreme end this would include flooding the field with so much money as to effectively wipe out competitors - including ones with superior technology/product. On the milder end it would include crowding out the marketability of less well-backed competitors by using media clout. Both seem like things very large VC firms do on the regular (though to be fair, not at all unique to a16z).
There's an implicit assumption you are making where your "Return On Investment" measures $$$ and what I believe the article is trying to say is that is exactly the problem and you should be measuring something else
> If you want to solve complex problems bet on Darpa or academia or bring back the corporate research lab whose demise is one of the real big problems today.
Isn't that what FAIR, Deepmind, and Google Research are for? (mostly AI focused, though the latter also dabbles with Quantum Computing and tons of other stuff)
I would agree but the I think the list is pretty short. Honeywell deserves a mention as well. But I don't think there is anything with the impact of Bell Labs today or even close.
Given the resources that these companies have there should be a dozen research labs with genuine scientific freedom. If you look at the way people describe the atmosphere at Bell Labs it's hard to find something like it today.
VCs are just cogs in the wheels taking us from an "Ownership Society" to a "Sharecropper's Society," as Buffett once put it. Private Equity buying up housing, is just the latest worrying trend in a troubling trajectory with excessive debt, centralization of power, concentration of wealth, etc.
Speaking of this, an entire new construction neighborhood near where I live was just purchased, with all of the for-sale signs replaced with leasing info signs. You will own nothing, but you will not be happy about it.
I'm in a traditionally mexican east Austin neighborhood. I used to see a lot of houses bought by techies. Yes it was 'gentrification', but at least they lived in them and often eventually started families.
In 2021, the 6-7 in my neighborhood which have sold for record prices are sitting empty with 'for lease' signs. Checking the property records they are all some under a different named LLC.
It won't work. We're facing another 2008 but writ large, and if that plays out in a similar way, we'll see people move in together so that not only will housing prices drop through the floor but rents as well.
A lot of this is to diversify out of equities which will soon crater ala 1929. The problem is that hundreds of empty track houses don't have value either. I think they know that; I think they feel they don't have much choice. Desperate times.
And thank the neomarxists and communists for that.
Capitalist society -> Slowly institute communism -> Slowly destroy economy to reduce purchase price of assets (real estate, infrastructure, industrial businesses) -> Elites with cash stockpiles buy those assets at low cost -> Power & wealth further centralized -> Just before moving economy/society towards Capitalism, sell off public property (such as natural resources) to your cronies -> Reimplement capitalism, now with more power than before.
Wash, rinse, and repeat, until you reach your desired level of wealth centralization in the hands of the "Qui?"'s
I know there's a lot of media saying this headline but This is actually false. checkout Stephan graham, he's got a post on this on Youtube where he investigates it deeply and finds that an extremely tiny percentage of houses are being bought up by private equity.
Honest question from outside of the western world: is it really private, as in, the end beneficiaries are "evil rich" people with net worth over $10m? Or are those investment funds that hold the pension plans and life savings of the western middle class?
Private Equity means investment funds structured as limited partnerships that buy companies and asset classes that aren't publicly traded.
Amazingly enough, pension funds are allowed to park money with them. For whatever reason, unlike endowments, which are heavily restricted in what they're allowed to invest in, pension funds can invest in nearly anything they want to.
But they're still called private equity, which has nothing to do with who is allowed to give them money to invest.
It's the second one. This kerfluffle was started by Blackrock moving into real estate. Blackrock is a retail investment-management company that everyone from the middle class up invests with.
So, it's not really "you will own nothing and be happy about it", but rather "you will own 0.1% of 1000 houses rather than 100% of 1 house, and be happy about it."
You can think of venture capital as privately financed stimulus package focused on a few sectors. So its actually necessary for the growth of an economy.
PE on the other hand is more of the rent seeking behavior (buying cash flows) that we should really worry about.
>You can think of venture capital as privately financed stimulus package focused on a few sectors. So its actually necessary for the growth of an economy.
>PE on the other hand is more of the rent seeking behavior (buying cash flows) that we should really worry about.
You don't think that VCs are buying future cash flows with their investments? Do you think they're just giving out free money because they're feeling generous?
I don't know about Europe, but in the US a lot of this relates to the fundamental inefficiency of the suburbs.
In NYC already, paying smoeone on an e-bike to deliver 10 meals in one short trip is way better, but why stop there. There is no reason we cannot bring back the old pneumatic tube delivery systems of yore (and expand them according to 100-year-old sci-fi too).
Conversely, none of that could ever be possible in the suburbs, and your doomed to waste your life in traffic in pay a poor immigrant to do so on your behalf.
all joking aside i sent myself a « pneumatique » a year or so before the system was shut down. I had to go to the post office to send it and I picked it up from the other one (rode the Métro to get it). Otherwise a courier would have transported it, I suppose (I don’t remember). In any case it was pretty inefficient by then and the ramification due to subsequent construction makes it impractical.
> Are these new companies taking advantage of this ancient zoning?
Somewhat? Overall I'd argue no. We know gig economy companies are most "profitable" (i.e., light less money on fire per transaction) in dense cities, so I imagine if they have a magic lamp they'd wish for people to live in denser environs generally.
But the inefficiencies of suburbia does in some ways resemble a "broken window" kind of economy - entire businesses and industries to fulfill needs that only exist because of an intense root inefficiency.
This is not unlike health care, where entire industries spring up around inefficiencies that arguably should not exist - and the industries will fight any systemic reforms that make them obsolete.
These gig jobs don't promote inequality, they fight inequality.
Without the gig apps, rich people are driving themselves to the store to buy their groceries and poor people are not being paid. With the gig apps, rich people are giving cash to poor people in a mutually beneficial manner.
These apps help find more convenient and mutually beneficial ways that rich people can exchange money for services. If you have an unequal society, you would want to promote as many of these situations as possible. Each one is an opportunity to spread wealth around and reduce inequality.
Getting your own groceries may feel more egalitarian, but it does nothing to help poor people. Hiring them to get your groceries actually puts money in their pocket.
You could make the same argument about sharecropping in the Jim Crow South.
For the gig economy to actually "fight inequality," it would have to ultimately lead to reduced inequality. I've heard plenty of arguments that gig work is low-paying and enables employers to subvert traditional worker protections, but nothing suggesting that it's closing the gap between the rich and poor.
You know, gig economy jobs were dignified work until assholes like this guy started calling them "servants."
I'll risk being a bit savage on this one because his entire perspective presumes that the people he is encountering in the gig economy are living under a false consciousness that they are his equal, but that they aren't and they have no hope of it because to him there is no obvious route from their "there" to his "here." It takes a second, but he's not worried about peers, he's concerned about mercifully distant others, presumably to sell some kind of framework that reduces to just listening to him.
Yes, there it is. He asks, "is the structure and business model of most VC firms today unfit for solving complex problems sustainably and long-term? Do we need a rethink the VC business model more generally? A first starting point could be a strong embrace of ESG principles — if done correctly and beyond a simple tick-box and reporting exercise."
The ESG principles he's advocating need to be "done correctly," which reminds me of another perfect framework I can't name off hand that requires its hosts only do it correctly for it to solve their problems, and I understand historically it has required some initial attrition.
Most working people are smarter, more competent, and funnier than sleazy academics reduced to peddling frameworks and governance, and the author and his peers would benefit from being a bit more mindful before airing such patronizing concerns. Servants indeed. What a git.
Please. Let's stop trying to virtue signal a bunch of work-dignity nonsense under the guise of humility, and pearl-clutching over using words like "servant"
Gig work is a dead-end for its laborers. People with non-gig jobs - even "shitty" ones - actually have career advancement opportunities. They can leverage their qualities and hard work towards greater earning potential, rather than having it get wasted. Nothing like that exists in the gig space and that's by design.
Gig work gives workers in crappy jobs personal leverage because they can always find work if they need it and don't have to take abusive situations. The real reason institutionalized people are against gig work is because it makes individual workers less dependent on those who exploit them both financially and politically. If someone offers you everything but dignity, I'd recommend checking their bone fides.
That's some pretty 2015 lingo though, but I'm hep to that. :)
> The world’s most powerful VC investors are funding an economy where technology allows a ‘ruling class’ to command an ‘underclass’ of servants with the swipe of an app.
The author is British, interestingly one of the few society that's actively protecting it's monarchy. You can't be more layered than that: you'll never ever be like these people, and the British people see nothing wrong with it nor these people having servants. They actually prefer it! But the little guy having someone deliver him lunch, that's "problematic".
> 85% of Uber drivers are from Black, Asian or other underrepresented backgrounds (similar statistics can be found for Lyft drivers in the US). In 2018, almost 60% of gig workers in the UK were 18 to 34. We talk about people working in dark stores and dark kitchens, out of sight, out of mind — exactly like the servants who waited on Western aristocracy (and colonialists) in the past.
Is this by design? Why else allow so much unskilled migrants?
(1) VCs have mostly funded the employment of well educated white collar workers. How else do computer science graduates get paid $120-150k 2 years out of college in the US?
(2) There are horrible employers of low skilled workers out there. You ever tried to work in a restaurant kitchen in a city like NYC? You're being paid $25-40k to do absolutely brutal work for brutal hours. Nobody talks about this because there are no evil rich investors involved - just hard working business owners. The divide has always existed. It's just more news worthy now and has a large brand in front of it. Delivery companies are at least offering some level of competition in this horrible labor market.
There is an important distinction for many workers between the hard labor ina restaurant and the hard labor done for Uber for X.
There is a chance with diligent effort that you can become manager for the restaurant or even start your own. The restaurant is even notionally liable for unemployment and minimum wage laws. Uber for X means permanent hard labor at low wages with no possibility for advancement or improved conditions.
I fail to see how this new "servant economy" isn't an improvement on the unskilled labor sector.
It's never been easier for someone who needs to work two jobs... to work two jobs; one with weekly hours and another you can do whenever is convenient. It has never been easier for a student to make some cash when it's convenient for them and with no weekly obligation.
These are improvements on jobs that already existed and new jobs altogether.
We should probably be focusing on how to provide more upward mobility and access to education instead of demonizing improvements to an economic sector which will always exist.
> It's never been easier for someone who needs to work two jobs... to work two jobs
People fought for 40 hour work week. If everyone works more hours it will kill productivity and also just suck.
I am with you that this stuff is an effect not cause of declining worker power, but the fear this will further erode old victories is genuine and shouldn't be dismissed.
Ultimately, yesterday's worker power is not a substitute for a lack today, but (hopefully) once that is somehow fixed, it is really important to turn these norms stuff back.
I wasn't talking about people needing to work more than 40 hours. I agree, exceeding that shouldn't become normal.
I'm talking about the people who have to take care of their kid, so they can't work the usual 9 to 5. They got 28 hours from target, but they do need some more money, so they do UberEats at night.
I'm talking about the student who really can't work in the day because they have to study and attend classes. Hell, sometimes they can't even work at night due to their group project and their team members slacking off. Well, now they can just Uber when they have time instead of committing to a schedule at the local Subway.
> but the fear this will further erode old victories is genuine and shouldn't be dismissed.
It should be dismissed because it shows the old “victories” were simply a happenstance of labor supply and demand. It is exposing the fact that there was not really a victory in the sense of it being codified into law.
Any effort trying to blame VCs (or any business) for low wages or quality of life at work is a waste of time, as it simply requires a legislative solution.
I think this is a great response. It isn't creating upward mobility, but it is creating flexibility for those who want to pursue it, and improving previous service jobs. We can separately try to figure out how to create more upward mobility systematically while we do these small improvements. I am often against these companies and how they operate (and still think there is improvement to be made) but this framing changed my perspective a bit.
Readit News
Was it ever actually fit for that? The VC economy basically always served one type of company, consumer-focused "lifestyle" or service 'technologies', and nowadays a lot of the institutions like a16z just appear to turn into straight up media outlets.
VC success in the industrial sector, biotech, military or scientific applications has always been muted compared to the kind of money that flows into the leisure/consumer/entertainment economy.
If you want to solve complex problems bet on Darpa or academia or bring back the corporate research lab whose demise is one of the real big problems today.
You're too young. Old VC's funded a lot of hardware (networking, graphics card and microprocessor) companies, for example.
This, of course, tied a up massive amount of capital and took 7-10 years to reach a liquidity event. And had a bunch of grouchy people called "engineers" who would tell you to fuck off or leave your company if you treated them too badly.
Then the web took off.
It was in the the DotBomb and the aftermath that VCs became useless lottery players who want to spend nothing, take all your equity and have their companies be unicorns in 18 months or die trying.
Yeah, venture capitalists were already funding companies like this in Silicon Valley (hence its name) a half a century ago, long before the days of the consumer internet:
https://en.wikipedia.org/wiki/Silicon_Valley#Venture_capital
Back in 1968, VCs were funding Intel. And Intel IPO'ed only two years after being founded, so investors weren't pouring money into it for very long.
Source: https://en.wikipedia.org/wiki/Intel#Origins
Just noting that they're only media outlets insofar as it helps support their primary business model.
The media play is to push brand recognition, influence the startup scene in a way beneficial to VCs, influence politics, etc.
Sure, but isn't that the objectionable part? The core conceit of capitalism is free competition and that multiple participants on a level playing field optimizes outcomes (in the form of greater overall wealth, better products, etc.).
Investors are needed for liquidity, but if some investors gain enough market power that they can change the outcome of businesses that seems deeply suboptimal and runs counter to the core conceit of capitalism.
On the extreme end this would include flooding the field with so much money as to effectively wipe out competitors - including ones with superior technology/product. On the milder end it would include crowding out the marketability of less well-backed competitors by using media clout. Both seem like things very large VC firms do on the regular (though to be fair, not at all unique to a16z).
Isn't that what FAIR, Deepmind, and Google Research are for? (mostly AI focused, though the latter also dabbles with Quantum Computing and tons of other stuff)
Given the resources that these companies have there should be a dozen research labs with genuine scientific freedom. If you look at the way people describe the atmosphere at Bell Labs it's hard to find something like it today.
I'd say the vast majority of VC money is "dark" money.
Investors who fund military technology don't spend a lot of time on PR.
I can't imagine any kind of irrigation company every being larger than Uber for example.
Deleted Comment
Speaking of this, an entire new construction neighborhood near where I live was just purchased, with all of the for-sale signs replaced with leasing info signs. You will own nothing, but you will not be happy about it.
In 2021, the 6-7 in my neighborhood which have sold for record prices are sitting empty with 'for lease' signs. Checking the property records they are all some under a different named LLC.
A lot of this is to diversify out of equities which will soon crater ala 1929. The problem is that hundreds of empty track houses don't have value either. I think they know that; I think they feel they don't have much choice. Desperate times.
Deleted Comment
Capitalist society -> Slowly institute communism -> Slowly destroy economy to reduce purchase price of assets (real estate, infrastructure, industrial businesses) -> Elites with cash stockpiles buy those assets at low cost -> Power & wealth further centralized -> Just before moving economy/society towards Capitalism, sell off public property (such as natural resources) to your cronies -> Reimplement capitalism, now with more power than before.
Wash, rinse, and repeat, until you reach your desired level of wealth centralization in the hands of the "Qui?"'s
I know there's a lot of media saying this headline but This is actually false. checkout Stephan graham, he's got a post on this on Youtube where he investigates it deeply and finds that an extremely tiny percentage of houses are being bought up by private equity.
As devs, what do we do about it?
Honest question from outside of the western world: is it really private, as in, the end beneficiaries are "evil rich" people with net worth over $10m? Or are those investment funds that hold the pension plans and life savings of the western middle class?
Amazingly enough, pension funds are allowed to park money with them. For whatever reason, unlike endowments, which are heavily restricted in what they're allowed to invest in, pension funds can invest in nearly anything they want to.
But they're still called private equity, which has nothing to do with who is allowed to give them money to invest.
Deleted Comment
So, it's not really "you will own nothing and be happy about it", but rather "you will own 0.1% of 1000 houses rather than 100% of 1 house, and be happy about it."
Deleted Comment
You can think of venture capital as privately financed stimulus package focused on a few sectors. So its actually necessary for the growth of an economy.
PE on the other hand is more of the rent seeking behavior (buying cash flows) that we should really worry about.
>PE on the other hand is more of the rent seeking behavior (buying cash flows) that we should really worry about.
You don't think that VCs are buying future cash flows with their investments? Do you think they're just giving out free money because they're feeling generous?
In NYC already, paying smoeone on an e-bike to deliver 10 meals in one short trip is way better, but why stop there. There is no reason we cannot bring back the old pneumatic tube delivery systems of yore (and expand them according to 100-year-old sci-fi too).
Conversely, none of that could ever be possible in the suburbs, and your doomed to waste your life in traffic in pay a poor immigrant to do so on your behalf.
all joking aside i sent myself a « pneumatique » a year or so before the system was shut down. I had to go to the post office to send it and I picked it up from the other one (rode the Métro to get it). Otherwise a courier would have transported it, I suppose (I don’t remember). In any case it was pretty inefficient by then and the ramification due to subsequent construction makes it impractical.
Somewhat? Overall I'd argue no. We know gig economy companies are most "profitable" (i.e., light less money on fire per transaction) in dense cities, so I imagine if they have a magic lamp they'd wish for people to live in denser environs generally.
But the inefficiencies of suburbia does in some ways resemble a "broken window" kind of economy - entire businesses and industries to fulfill needs that only exist because of an intense root inefficiency.
This is not unlike health care, where entire industries spring up around inefficiencies that arguably should not exist - and the industries will fight any systemic reforms that make them obsolete.
Indeed, the analogy that comes to mind is the growing use of air conditioning worldwide to cope with global warming.
But I think it's not just the suburbs. I live in a neighborhood of detached houses, yet I don't need delivered meals or a cleaning service.
https://www.pipedreamlabs.co/
Labor isn't anywhere near expensive enough to make it succeed as the network bootstraps.
Without the gig apps, rich people are driving themselves to the store to buy their groceries and poor people are not being paid. With the gig apps, rich people are giving cash to poor people in a mutually beneficial manner.
These apps help find more convenient and mutually beneficial ways that rich people can exchange money for services. If you have an unequal society, you would want to promote as many of these situations as possible. Each one is an opportunity to spread wealth around and reduce inequality.
Getting your own groceries may feel more egalitarian, but it does nothing to help poor people. Hiring them to get your groceries actually puts money in their pocket.
For the gig economy to actually "fight inequality," it would have to ultimately lead to reduced inequality. I've heard plenty of arguments that gig work is low-paying and enables employers to subvert traditional worker protections, but nothing suggesting that it's closing the gap between the rich and poor.
I'll risk being a bit savage on this one because his entire perspective presumes that the people he is encountering in the gig economy are living under a false consciousness that they are his equal, but that they aren't and they have no hope of it because to him there is no obvious route from their "there" to his "here." It takes a second, but he's not worried about peers, he's concerned about mercifully distant others, presumably to sell some kind of framework that reduces to just listening to him.
Yes, there it is. He asks, "is the structure and business model of most VC firms today unfit for solving complex problems sustainably and long-term? Do we need a rethink the VC business model more generally? A first starting point could be a strong embrace of ESG principles — if done correctly and beyond a simple tick-box and reporting exercise."
The ESG principles he's advocating need to be "done correctly," which reminds me of another perfect framework I can't name off hand that requires its hosts only do it correctly for it to solve their problems, and I understand historically it has required some initial attrition.
Most working people are smarter, more competent, and funnier than sleazy academics reduced to peddling frameworks and governance, and the author and his peers would benefit from being a bit more mindful before airing such patronizing concerns. Servants indeed. What a git.
Gig work is a dead-end for its laborers. People with non-gig jobs - even "shitty" ones - actually have career advancement opportunities. They can leverage their qualities and hard work towards greater earning potential, rather than having it get wasted. Nothing like that exists in the gig space and that's by design.
That's some pretty 2015 lingo though, but I'm hep to that. :)
The author is British, interestingly one of the few society that's actively protecting it's monarchy. You can't be more layered than that: you'll never ever be like these people, and the British people see nothing wrong with it nor these people having servants. They actually prefer it! But the little guy having someone deliver him lunch, that's "problematic".
> 85% of Uber drivers are from Black, Asian or other underrepresented backgrounds (similar statistics can be found for Lyft drivers in the US). In 2018, almost 60% of gig workers in the UK were 18 to 34. We talk about people working in dark stores and dark kitchens, out of sight, out of mind — exactly like the servants who waited on Western aristocracy (and colonialists) in the past.
Is this by design? Why else allow so much unskilled migrants?
(1) VCs have mostly funded the employment of well educated white collar workers. How else do computer science graduates get paid $120-150k 2 years out of college in the US?
(2) There are horrible employers of low skilled workers out there. You ever tried to work in a restaurant kitchen in a city like NYC? You're being paid $25-40k to do absolutely brutal work for brutal hours. Nobody talks about this because there are no evil rich investors involved - just hard working business owners. The divide has always existed. It's just more news worthy now and has a large brand in front of it. Delivery companies are at least offering some level of competition in this horrible labor market.
There is a chance with diligent effort that you can become manager for the restaurant or even start your own. The restaurant is even notionally liable for unemployment and minimum wage laws. Uber for X means permanent hard labor at low wages with no possibility for advancement or improved conditions.
https://en.m.wikipedia.org/wiki/Workers'_compensation
Remember, it's fashionable to bash on "Big Tech" these days.
https://twitter.com/doctorow/status/1424034689799516161
It's never been easier for someone who needs to work two jobs... to work two jobs; one with weekly hours and another you can do whenever is convenient. It has never been easier for a student to make some cash when it's convenient for them and with no weekly obligation.
These are improvements on jobs that already existed and new jobs altogether.
We should probably be focusing on how to provide more upward mobility and access to education instead of demonizing improvements to an economic sector which will always exist.
People fought for 40 hour work week. If everyone works more hours it will kill productivity and also just suck.
I am with you that this stuff is an effect not cause of declining worker power, but the fear this will further erode old victories is genuine and shouldn't be dismissed.
Ultimately, yesterday's worker power is not a substitute for a lack today, but (hopefully) once that is somehow fixed, it is really important to turn these norms stuff back.
I'm talking about the people who have to take care of their kid, so they can't work the usual 9 to 5. They got 28 hours from target, but they do need some more money, so they do UberEats at night.
I'm talking about the student who really can't work in the day because they have to study and attend classes. Hell, sometimes they can't even work at night due to their group project and their team members slacking off. Well, now they can just Uber when they have time instead of committing to a schedule at the local Subway.
It should be dismissed because it shows the old “victories” were simply a happenstance of labor supply and demand. It is exposing the fact that there was not really a victory in the sense of it being codified into law.
Any effort trying to blame VCs (or any business) for low wages or quality of life at work is a waste of time, as it simply requires a legislative solution.