The fundamental problem with Silicon Valley’s favorite growth strategy
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Re: The fundamental problem with Silicon Valley’s favorite growth strategy
#2>Would incumbent transportation companies have had more time to catch up, leading to a more competitive market?
i'm not sure that in general incumbents catching up leads to increased competition, i think it leads instead to the incumbents protecting their position and using it to stop the innovation and the resulting threat of disruption.
In case of Uber it wasn't about incumbents per.se., it was about regulators. The blitzkrieg allowed to crush regulators and thus increase competition by adding "ridesharing" into the mix.
Similar thing of using your huge weight to crush a chokehold on the industry happened when Jobs took control over phone apps away from the telecom companies.
Re: The fundamental problem with Silicon Valley’s favorite growth strategy
#3The fundamental problem with capitalism (not just in silicon valley) is that access to capital is what defines winners and losers. Of course I'm being simplistic and there will always be underdog stories, but the reason any company becomes as big as it is, is capital, plain and simple.
The immediate effect of gaining massive capital is tremendous. Outcompeting for both workers as well as getting to market sooner is an obvious benefit. The ability to lobby in government against potential roadblocks of whatever it is that you're doing is another. Just from the word itself, capitalism is rigged for those with capital.
Further down the line though, you are now beholden to this immediate level of investment, and as this article shows, this is where problems arise.
Re: The fundamental problem with Silicon Valley’s favorite growth strategy
#4On Monopoly: It has been a though I have for some time. I wonder how could they not form monopolies. Who has 4-5 taxi apps on their phone? Who has 2-3 social profiles? Who has the habits of jumping from a searching engine to another? A minority. Their product are almost natural monopolies.
They are very difficult to fight against monopolies because when they have user commitment, the need for the product is filled entirely by one company. In addition, it is very difficult to make the user change, it's part of a habbit.
I might be wrong there. Just a though I had, but interesting to discuss. Is it really possible to avoid monopoly with these products?
Re: The fundamental problem with Silicon Valley’s favorite growth strategy
#5There's a broader historical perspective that's missing in this article.
The Second Industrial Revolution (1870-1914) was much like today. You had extremely rapid growth of new industries fueled by widespread availability of capital; a pervasive bubble economy punctuated by massive stock market panics & depressions; rapid development of new technologies; widespread fraud & corruption; a feeling that the common man was missing out on these developments (hence the term "The Gilded Age", a reference to it being shiny on the surface but dull & black inside); a widespread populist movement; political discontent; and globalization. And these technologies proceeded in overlapping waves: ironclads were replaced by steel ships; steel made steam engines possible; steam paddleboats replaced sailing clipper ships; propellers replaced paddles; steam turbines replaced triple-expansion engines; oil replaced coal in boilers. It was not uncommon for a ship to become obsolete before she entered service in the early 1900s.
The effect of the mass availability of capital during this time period (other than in destabilizing society) was to dramatically increase the rate of adoption of these new technologies. Without the massive capital influx into railroads, it's doubtful that there'd be enough of a market to drive widespread adoption of the Bessemer process, which made steel cheap enough to use in ships & skyscrapers. Without the mass capital investment in shipping, it's doubtful that there'd be an impetus to develop & perfect the steam turbine or switch from coal to oil as a fuel. Without demand first from the kerosene lighting industry and then from the shipping industry, it's doubtful that there would be gasoline (then a waste byproduct of petroleum refining) to fuel the automobile industry.
Similarly, O'Reilly's looking at Uber and Lyft at this snapshot in time and lamenting that their market power is preventing new ridesharing companies from entering. But the point is not to perfect ridesharing; it's to replace it. Uber and Lyft are arguably already obsolete, with Waymo in active testing in Arizona and California, and will be replaced shortly by self-driving cars. It's doubtful that self-driving cars are the endgame either; I suspect that we'll see intermodal transportation pods that move people & cargo through and between cities automatically.
The point of massive capital investment is to get us to the future faster. It'll be wrenching and cause massive societal dislocation - the first industrial revolution gave us wars of nationalism for the US/Italy/Germany, and the second gave us 2 world wars, the fall of centuries-old dynasties, Communist revolutions, and eventually the Holocaust. But we don't really have a choice.
Re: The fundamental problem with Silicon Valley’s favorite growth strategy
#6On Monopoly: It has been a though I have for some time. I wonder how could they not form monopolies. Who has 4-5 taxi apps on their phone? Who has 2-3 social profiles? Who has the habits of jumping from a searching engine to another? A minority. Their product are almost natural monopolies. They are very difficult to fight against monopolies because when they have user commitment, the need for the product is filled en…
Interesting thoughts, really.
But maybe change contexts—would you call Coca Cola a monopoly? Certainly Pepsi gives them a good run for their money, even if they aren't as large technically speaking (I have no idea).
I mean, people will always have their preferences. I'm not sure if that makes for a monopoly on its own.
How much that preference is formed by the company's inherent pursuit of a monopoly, well...
I'm not sure if it's that different from other contexts, or if it is.
Re: The fundamental problem with Silicon Valley’s favorite growth strategy
#7"blitzscaling isn’t really a recipe for success but rather survivorship bias masquerading as a strategy."
That says it all. Really, that's how YC works - fail fast and cheap, profit from the survivors. Great for VCs, not so much for the cannon fodder.
"We have reserves."
Re: The fundamental problem with Silicon Valley’s favorite growth strategy
#8On Monopoly: It has been a though I have for some time. I wonder how could they not form monopolies. Who has 4-5 taxi apps on their phone? Who has 2-3 social profiles? Who has the habits of jumping from a searching engine to another? A minority. Their product are almost natural monopolies. They are very difficult to fight against monopolies because when they have user commitment, the need for the product is filled en…
There are a number of options, and not all of them are splitting the company into a bunch of fully co-equal units, which is a process that works better when things cover an area.
In telecom, it was typical, due to regulation, that you'd have different parts of the business that couldn't interact at all. I wasn't permitted to talk to people with certain badges because of their business unit. You could easily do this with the advertising business for each of these large companies, or split it off entirely, and force that ad exchange to work with their competitors, for instance. You could regulate the news feed so that the pipe was a lot dumber and configurable, so that the company would no longer be allowed to experiment on human psyches.
There are tons of options that don't result in breaking facebook into 12 facebooks. Pulling the advertising out, and regulating advertising in general, is the best solution I've been able to spitball though.
Re: The fundamental problem with Silicon Valley’s favorite growth strategy
#9On Monopoly: It has been a though I have for some time. I wonder how could they not form monopolies. Who has 4-5 taxi apps on their phone? Who has 2-3 social profiles? Who has the habits of jumping from a searching engine to another? A minority. Their product are almost natural monopolies. They are very difficult to fight against monopolies because when they have user commitment, the need for the product is filled en…
Interesting thoughts, really. But maybe change contexts—would you call Coca Cola a monopoly? Certainly Pepsi gives them a good run for their money, even if they aren't as large technically speaking (I have no idea). I mean, people will always have their preferences. I'm not sure if that makes for a monopoly on its own. How much that preference is formed by the company's inherent pursuit of a monopoly, well... I'm not…
FWIW - PepsiCo is far bigger than CocaCola
Re: The fundamental problem with Silicon Valley’s favorite growth strategy
#10The fundamental problem with capitalism (not just in silicon valley) is that access to capital is what defines winners and losers. Of course I'm being simplistic and there will always be underdog stories, but the reason any company becomes as big as it is, is capital, plain and simple. The immediate effect of gaining massive capital is tremendous. Outcompeting for both workers as well as getting to market sooner is a…
> The fundamental problem with capitalism (not just in silicon valley) is that access to capital is what defines winners and losers.
Well yeah, it's fundamental because that's the definition! So it's not a problem. Capitalism works as designed.