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The venture capitalist's dilemma

newsletter.mollywhite.net

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Re: The venture capitalist's dilemma

#31

Post by 1vuio0pswjnm7 »

lifeisstillgood wrote: post #2

> that those controlling massive amounts of capital and power in our society are not the smartest, or most level-headed, or most altruistic among us. This seems to be the telling quote - and is to me the point. We are missing democracy in control over at least half of the spend in society. It's going to be weird, but we need democratic control over companies, as well as government. No idea what it's going to look lik…

Agree that is the best line. She is putting it lightly. Many of these people are socially inept. The resulting problem is what I call "misallocation of capital".

Re: The venture capitalist's dilemma

#32

Post by surgical_fire »

foverzar wrote: post #29
surgical_fire wrote: post #26

Earlier quoted context omitted.

> And it just so happens that the current system we came up with - a mixed market with a strong, democratically elected public authority, yet freedom for individuals to pursue taxable profits This is naive to the point of absurdity, when the rich and powerful quite often are gifted loopholes for the profits to not be taxable, with a wink and a nudge from the "democratically elected public authority". I would certainl…

> the rich and powerful quite often are gifted loopholes for the profits to not be taxable. Those loopholes aren't free and their nature is typically temporary. One example would be tax cuts in exchange for committing to provide N jobs.

Nothing is more permanent then temporary loopholes.

They exist only for long enough time until the next loophole is put in place.

> One example would be tax cuts in exchange for committing to provide N jobs.

Gotta love this one. Trickle down economics at its best. "Thanks for going through the trouble of getting richer by expanding your business. Here's some extra tax exemptions for your sacrifice. The silly peasants will pay taxes in your stead".

Re: The venture capitalist's dilemma

#33

Post by cornholio »

matthewdgreen wrote: post #20
cornholio wrote: post #15

Capital is just another name for power and powerful people fight to maintain and accumulate more power - welcome to the world, summer child. It's woefully naive to expect individuals to give that power up for social-positive goals, it practically never happened throughout human history. We achieve social-positive goals by behaving as a society and limiting what the powerful can do with their power - democracy, market…

We didn’t just “come up with that society”: many aspects of it were deliberately constructed because previous iterations failed badly. Deposit insurance, which is the subject of this post, was a depression-era phenomenon that came into existence because many banks failed catastrophically. Many other aspects of our modern society, from old-age pensions to welfare to our global defense alliances, were also born of simi…

Of course it didn't all spontaneously emerge, it was a result of a long political struggle of the masses against those in power; I was condensing for brevity and specifically mention existing room for improvement. I disagree though with your the read of the article. In the author's own words:

> I would probably argue that venture capitalists are not good for society regardless of what they’re investing in. ... I am feeling particularly secure in my opinion on the investor class after the shitshow we just witnessed ... > People are realizing that despite the hundreds of billions of dollars being deployed each year by venture capital firms in pursuit of “innovation”, the world doesn’t really feel hundreds of billions of dollars better off for it.

The sentiment here is clear, and has nothing to do with rolling back old-fashion regulations. Rather, it's a pure and unadulterated call against investor freedom and profit driven innovation. It's, dare I say it?, a call for economic Stalinism: stripping the "investor class" of their power to direct economic activity, investment and innovation. The author is silent about the implications of those ideas, but let's just say the historic record is not excellent.

This is what I reacted to, and I'm telling the author to chill, go a little easier on that thick ideological slurpee, perhaps read a little more and come back when they come to appreciate the finer nuances of how society really works.

Re: The venture capitalist's dilemma

#34

Post by chii »

ncallaway wrote: post #9
roenxi wrote: post #6

I broadly like the things Molly is bringing attention to, but there are some problems here: 1) This is presenting a bank run like it is a bad outcome for the people involved. It isn't obvious why that would be so; SVB is now one of the safest banks to park money in, and the dust hasn't settled but it seems plausible to me that the bank equity holders and directors are part of some incestuous Silicon Valley relationsh…

> If the game is set up so that everyone rich gets a bail out, you'd have to be an idiot not to take the bailout. But that's explicitly *not* how the game was set up. The game was set up so everyone gets insured up to a limit, and if you're rich enough to be beyond that limit, then you should be paying market rate for insurance on those funds (which is, like, a thing they could have done). They chose to forego insura…

> you should be paying market rate for insurance on those funds

which, if you bought short term treasuries, you can easily just get that safety for "free" (aka, there's no such a need for insurance, unless you believe the insurers are safer than the US gov't).

Having it at a bank should've been equivalent, since you can make the bank's scale of economies in the buying/selling of short term treasuries to make it even easier (dare i say, even transparent). However, when a bank does this, they want to squeeze even a tiny bit more profit, and thus, instead of buying the requisite amount of short term treasuries, they bought long dated bonds/treasuries, which is insanely risky.

The VC depositor should've been financially savvy enough to look at their bank and see this, so i argue they did not deserve the bailout beyond the existing mandated FDIC one. it's causing moral hazard in the banking sector.

Re: The venture capitalist's dilemma

#35

Post by surgical_fire »

cornholio wrote: post #28
surgical_fire wrote: post #26

Earlier quoted context omitted.

> And it just so happens that the current system we came up with - a mixed market with a strong, democratically elected public authority, yet freedom for individuals to pursue taxable profits This is naive to the point of absurdity, when the rich and powerful quite often are gifted loopholes for the profits to not be taxable, with a wink and a nudge from the "democratically elected public authority". I would certainl…

[flagged]

> You can easily test the strength of that illusion by living for a time in almost any non-OECD country

I lived in both sides of the fence, don't worry.

> just that we need to appreciate what we have and not talk out of our behinds about the oppression

Yes, I'm thankful to be able to discuss with you how badly we are screwed without fear of getting even more screwed.

What else should I be thankful for that our benevolent ruling class gives me? That they don't behead me and put my head on a stake?

You seem to mistakenly believe that I would like to burn down the system to live under a Khmer Rouge 2.0. I just don't live under any illusion that our ruling class is benevolent. That they exert their power through political influence and crony capitalism instead of just coming to my house and murdering my family is not something to be thankful for.

Re: The venture capitalist's dilemma

#36

Post by breck »

polygamous_bat wrote: post #27
blippage wrote: post #23

[flagged]

> VCs, and capitalists in general, put money at risk in the hope of generating wealth above their initial capital. , absent the internet-controlled juice-squeezers. You're so close to getting the point, yet so far. The whole point of the article is that there is nothing in the VC handbook that has anything to do with the "benefits society" part of your "They produce goods or services that benefit society" statement.…

We have a form of slavery around today, and it is indeed how most tech billionaires became billionaires: http://www.breckyunits.com/an-unpopular-phrase.html

Re: The venture capitalist's dilemma

#37

Post by foverzar »

louwrentius wrote: post #25
blippage wrote: post #23

[flagged]

> VCs, and capitalists in general, put money at risk in the hope of generating wealth above their initial capital. They produce goods or services that benefit society, absent the internet-controlled juice-squeezers. VCs hoarding even more capital doesn't contribute anything to society, they are all 100% rent-seeking juice-squeezers. They are a huge example of why capitalism is so broken. > Society has benefited great…

> of people like Bill Gates and his contemporaries like Elon Musk only show why people should never be allowed to own billions

Does it really? Honestly, it's hard to take such sentiments seriously when you start mentioning these particular "hype" billionaires.

For one, it seems like most spite comes of expecting them to act like some godly idols, instead of like some dudes. But largely, it's just that there are so much worse examples, dealing in so much worse things.

You just can't help but wonder if the person actually grasps the scale, or if the whole thing boils down to distaste of someone's character and behavior.

Re: The venture capitalist's dilemma

#38

Post by roenxi »

ncallaway wrote: post #9
roenxi wrote: post #6

I broadly like the things Molly is bringing attention to, but there are some problems here: 1) This is presenting a bank run like it is a bad outcome for the people involved. It isn't obvious why that would be so; SVB is now one of the safest banks to park money in, and the dust hasn't settled but it seems plausible to me that the bank equity holders and directors are part of some incestuous Silicon Valley relationsh…

> If the game is set up so that everyone rich gets a bail out, you'd have to be an idiot not to take the bailout. But that's explicitly *not* how the game was set up. The game was set up so everyone gets insured up to a limit, and if you're rich enough to be beyond that limit, then you should be paying market rate for insurance on those funds (which is, like, a thing they could have done). They chose to forego insura…

If the rules are what are advertising before the crisis then we'd have evidence of that by now. They are not the rules. The rules are that money will be printed and bailouts given. There are a lot of things that might surprise us, but the fact that the response to a crisis turned out to be a bailout was always a given.

Libertarian means they should acknowledge that these bailouts are making everyone worse off. But if we're going to do the bailouts anyway? I want libertarians to be first in line. There is no point letting authoritarians gain an advantage because of theoretical considerations; there were ample opportunities for the libertarian solution to be bought in from 2007-2022. They weren't, so at this point there is no reason for the brunt of the damage to fall on people who believe in freedom.

Re: The venture capitalist's dilemma

#39

Post by Calavar »

aleph_minus_one wrote: post #16

There can always happen the situation that customers of a bank want their money that they deposited there back. In the insurance sector, the situation that a singular event (say, a hurricane) causes damages to a lot of customers at once is a well-known phenomenon, named a "cumulative event". Every insurance company has to model this and thus there exist mathematical tools for this such as copulas: https://en.wikipedi…

> which was given to the bankers by the customers to be held in safe custody

That simply not how banking works. Many individuals think of banking that way, and they can because FDIC insures their deposits for up to $250k. (Which for the average person might as well be infinite.) But companies are supposed to understand and manage risk better. A corporate bank account is not and has never been a black box to just dump your funds in without worry.

Re: The venture capitalist's dilemma

#40

Post by lordnacho »

cornholio wrote: post #15

Capital is just another name for power and powerful people fight to maintain and accumulate more power - welcome to the world, summer child. It's woefully naive to expect individuals to give that power up for social-positive goals, it practically never happened throughout human history. We achieve social-positive goals by behaving as a society and limiting what the powerful can do with their power - democracy, market…

> And it just so happens that the current system we came up with - a mixed market with a strong, democratically elected public authority, yet freedom for individuals to pursue taxable profits - is the one that seems to work the best, because it pushes powerful people, both politicians and capitalists, to cater to the needs of society if they need to maintain their power. It's not an utopia, human nature has not changed and some would chain other people up tomorrow like in medieval times if they could get away with it, yet it works remarkably well.

I think the conclusion I'm coming to, at least for now, is that while that is in fact the system that we owe much of our current wealth to, it is not necessarily the system we currently live under. Yet we do have a society that likes to pretend it is still the system.

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