The 'Startup Boom' is a disguised jobs fair for big corporations

I think the truth might actually be worse. I don't think that `the startup boom is really a disguised job fair for big corporations`. The dirty little secret is that startup scene is an arena and entrepreneurs are the gladiators. Big lumps of money, that seem imaginary to them are dangled in front of their eyes, and they're introduced to former gladiators that have attained fame and glory and were able to buy their freedom, all for the purpose of encouraging the gladiators to fight to the death. Some die and some succeed and are compensated nicely. Very few attain fame and glory, but enough to keep the ranks of new recruits full.

But of course, it's the owners of the arena, the big corporations who make the real money. Not necessarily from the gladiators themselves, but from the fight. The startup scene is a testing ground, a lab, for Big Corp. It tells them which way the market is going, it tests risky territory. And if something seems to work, Big Corp. snatches it right up. If in the past big research divisions had to test new ground, all on the company's dime, now startups are voluntary crash-test dummies, shooting for a big prize.

And the economics are simple: if the king wants to find a big treasure buried somewhere in the woods he could pay a thousand villagers $1000 each to look for it, or he could offer $0.5M to the one who finds it and let the villagers volunteer for the job. He gets the same work done at half the cost, one villager turns rich and inspires the poor masses, getting a lot of love and attention, while the king still gets to keep the treasure while giving the villagers a fake hope of changing their fate. Simple, really.

So the dirty big secret is this: the startup scene isn't a job recruiter for the big companies, but a way to get workers for free. It's a far worse form of exploitation.

Sorry for all the metaphors.

The real question, I think, is when investors are figuring out whether to go into the startup scene, what are the dominant influences on their decision?

If there's a long tail of Airbnbs that drives most of the expected profits generated by an investment strategy, then the status quo understanding of things--buy a bunch of lotto tickets, and make a bundle when one hits the jackpot--is probably an accurate representation of the market strategy.

If the median investor isn't going to make any money from getting a big hit, though, it's a different story. Most value is going to come from talent acquisitions. In which case, the article is right, and the incredible sea of funding available today is effectively a pooled set of resources by big corporations that are funneled to VCs in exchange for recruitment and building of effective teams. Which would make VCs the best-compensated HR managers in history.

There's also no reason both can't be true. Maybe the majority of profits are generated by Dropboxes, but the typical VC understands that those are lotto tickets and is relying mostly on the latter scenario.

It is worthwhile for big companies to acquire talent because of the way investors in the public market value the stock of large companies. Investors don't care much about a few million spent on acquisition that happened 2 months before they get the earnings report. They care far more about future growth and how the company will achieve it.

But that's not the point! Whether or not the author is right about the facts in this case, successful exploitation always benefits everyone; it's still unjust. If you're used to making, say $30K a year, and I give you $90K to work for me and generate a profit, of, say, $100M, then everybody is happy but you were still exploited. The big question is whether its considered exploitation if the exploitee does not feel exploited. I think many people would say yes. Many would even agree that truly successful exploitation not only hides itself from the exploited, but makes him feel content and even empowered. Pragmatists would say that a happy exploitee with some bucks in his pocket is better than a miserable pauper. Idealists would say the opposite. But any way you look at it, this is not a simple situation by any means.