Parable of the Sofa

I think emotionally non loaded interactions are possible here.

VCs are in the business of risky business. Their objective is to fund businesses that will grow very large or collapse very fast and where there is lots of uncertainty as to which and where money increases the likelihood of the former outcome. That's the thing they do. The mechanism that they typically use is a note that converts to equity when a certain raise condition is met either by the private or public market.

Someone who goes to them and offers equity in a profitable business that has no intention to attempt to rocketship or IPO is making a mistake. What exactly do you expect them to do here? Give you money in exchange for incredibly illiquid private stock that doesn't pay out? That sounds like a dumb deal. Only a moron would give you money on terms like that.

But that doesn't mean you can't get money. Small business financing is available from banks and the government. And you can do the typical thing of starting successful businesses and selling them off and climbing the ladder. Every day small businesses are sold for values from $1k to tens of millions. They're not valued the same as venture-backed startups because they don't have the same cone of possibility as them.

If you're going to a VC to fund a Ford dealership in Golden, CO you have to be an imbecile. Not because starting Ford dealerships is dumb, but because you're going to a basketball coach and asking him to teach you tennis.

Entrepreneurial people are rare. So when you go to this coach, and he sees you're athletic, he's more likely to say "Why not basketball?" and give you a hundred reasons you should play basketball. That doesn't mean tennis is a dumb sport. Or even that you wouldn't have a better chance with tennis. It means you went to a basketball coach and he wants you to play basketball because your success is also his.

For someone with this guy's reputation, he could easily run the business himself. And it's the same for geohot. He doesn't need venture funding to sell $1 million worth of AI at home devices. It's not contempt from the VC. He's found an athlete, and he knows how to coach basketball. So he wants the athlete to play basketball.

(Yes, I'm annoyed when I want to read an interestingly headlined article that first requires a subscription. Yes, I also use archive.is to get around some outlets' paywalls. That said, I do try to pay for the online newspapers and magazines that I read the most, and I think it's worth nudging others in that direction as well.)

Since small businesses lack "economies of scale" they need fat gross margins to survive. In the USA, both the public and the political leadership was frightened of the slow buildup of inflation from 1960 to 1973, and then the explosion of inflation, into double digit territory, for much of the period from 1973 to 1982. After that experience we had a long era, a whole generation of leadership, where the public and the leadership felt the fight against inflation had to be one of the most important economic fights that the government engaged in. And the fight against inflation had to involve the fight against gross margins. So we, as a society, went to war against small businesses, because small businesses survive on the kind of margins that were seen as causing inflation. By contrast, allowing the spread of companies such as WalMart, which benefits from "economies of scale" and so can survive on razor-thin gross margins, was seen as helping to stop inflation. Likewise, opening up the economy to nations such as China was seen as an important step to limit inflation. The cost structure in China was such that a company in China could have fat gross margins and yet still underprice a company in the USA that had thin gross margins. Thus importing from China became an important part of the war against inflation.

All of this worked for awhile. The era from 1982 to 2008 was known as The Great Moderation, an era when inflation fell and the business cycle moderated. And the era after 2008 also saw rock bottom inflation -- inflation remained under the Fed's 2% target for several years after 2008.

Under President Trump, the USA began to adapt a new economic policy, and President Biden has continued forward with the Trump policies. The new era has seen increasing tariffs on China and a willingness to rethink some aspects of the open trade policies that we followed for most of 50 years. And since 2000, starting under Trump and then continuing under Biden, we have seen several trillion worth of stimulus spending. This has revived inflation, but it has also allowed many small businesses to raise prices and thus re-attain the kinds of gross margins they need to survive.

In general, a society can have the lowest possible prices, or it can have prices that are high enough to support small businesses, but it cannot have both. Since America is a large, diverse nation we will never have agreement about what our priorities should be, but we should keep in mind, we did some real damage to ourselves during the decades that we eliminated inflation and we are gifting ourselves some real benefits during this current era of inflation.

Because they are convenient examples of things everybody in their audience has seen and knows about, and are quite simple too?

One could use dogs for example, to make somebody understand the Platonic Ideas (in this case, dogness), but they have a lot more aspects and variables than tables (even questions about unique personality and soul might creep in, whereas for tables it wont).

Their more expensive ones come with a 25 year warranty and still only cost $2,500: https://www.ikea.com/us/en/p/stockholm-sofa-seglora-natural-...