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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

#41

Post by adventured »

mdorazio wrote: post #34
ghobs91 wrote: post #27

Earlier quoted context omitted.

That's better than a tech landscape with no access to venture capital at all, and startups taking 10x longer to reach critical mass, if they even do. There's a reason why the US tech industry is orders of magnitude larger than the rest of the world, access to capital. Go try to grow a startup in Europe with its risk averse investors, and see how far you get. You'll start to see this effect even more in the biotech sp…

I'm not convinced that access to capital is the sole, or even primary, reason the US tech industry is much stronger than elsewhere. There are many factors like entrepreneurial culture, low corruption, and established/concentrated support infrastructure that seem a lot more important.

It's one of the two or three biggest reasons, and definitely not the sole reason. The modern system of industrial-scale venture capital available in the US - going back widely four plus decades - is rivaled only by China in the last decade. More broadly that culture of risk capital spans every tier, from the smallest angels to the biggest VC firms. The comprehensive nature of it is exceedingly rare among nations. It's also now a very old phenomenon in the US, going back to the earliest days of the industrial revolution (everyone from Tesla to Edison to Ford were financed by what was essentially venture capital).

Most of developed Europe, except for a few nations, scores well on having low corruption, comparable to or better than the US. Western Europe also widely has a strong social safety net that should be encouraging to entrepreneurs from a life-risk perspective (which may actually result in the exact opposite outcome: a culture of lower risk taking; the culture that will install the world's most elaborate social safety systems, is more likely to be one that aggressively dislikes risk-taking). While only a few small nations in Europe are as wealthy as the US, several more are close enough that the difference shouldn't matter. The problem is that capital is overwhelmingly unwilling to participate in venture investing.

The US not-so-secret sauce is: easy access to risk capital + a culture that has historically strongly encouraged entrepreneurial activity + a massive single market with one core language (that is also conveniently the global language of business, media and culture) + reasonable taxation and regulation policies + strong protection of property rights + ease of market access (low tariffs, low trade barriers, a foreigner can easily start/own a US business from almost anywhere) + very welcoming to foreign capital (few capital controls) + an enormous lead coming out of WW2 (which helped the US be the first to the tech epoch, which has buffered its lead ever since) + the global reserve currency + a massive traditional financial system (great for IPOs, stocks, acquisitions, leverage, etc. - it's why Alibaba is on the NYSE) + 19 of the top 20 universities on earth, and four or five dozen more that are world-class + a very successful university meets business development system (which has helped incubate countless new leading companies and technologies) + inexpensive energy + half a century of built-up knowledge, experience, specialization in every tech segment + a long history of immigration policies that allow people to come to the US and pursue their dreams (Japan and China, the #2 and #3 economies, have overwhelmingly shunned foreigners becoming citizens by comparison; the US tech industry wouldn't be anything remotely close to what it is today without the Andy Groves, Nadellas, Elon Musks, Jensen Huangs or Collisons).

That's the short list. It can't be replicated.

Re: The fundamental problem with Silicon Valley’s favorite growth strategy

#42

Post by ardit33 »

new_here wrote: post #23

I’ve read and listened to quite a bit of stuff from Reid Hoffman (Masters of Scale, LinkedIn’s pitch deck etc) and have never found him or any of his advice particularly convincing. Maybe I’m speculating wildly here but it feels like the main thing that made LinkedIn successful was that it was a first mover in the business social network space that used every dark pattern and email notification they could conceive of…

If everything was "just timing and luck", then we would be using friendster, myspace, ICQ, AOL Chat, and bebo today, instead of facebook/twitter/instagram/snapchat/linkedin

There is something more than that, and good execution is crucial, and it is good to know on what worked well, and what didn't work out for both the current winners and past losers.

I think Reid has good things to say about what worked for them back than, and take it like that.

There is no rulebook on startups, as all of them have different patterns, but reading on what worked 2003-2010 (pre-mobile times), is not going to hurt anyone.

Dismissing the success as just being merely 'dark patterns' + timing, seems a bit short sighted.

Re: The fundamental problem with Silicon Valley’s favorite growth strategy

#43

Post by RachelF »

l3robot wrote: post #4

On 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…

Uber and Lyft are both owned by Softbank's investment fund now, so there is a monopoly at a higher level.

They no longer compete in some countries like Malaysia, where one of them has just withdrawn from the market.

Re: The fundamental problem with Silicon Valley’s favorite growth strategy

#44

Post by TeMPOraL »

woolvalley wrote: post #24
l3robot wrote: post #4

On 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…

Most people shop at more than one shop, fly multiple airlines and buy more than one brand of clothing.

That's only because/if one shop/airline/brand doesn't cover all of their needs cheaply enough.

It's not like most people choose multiple providers because they care about health of the competition. From customer's point of view, competition is noise.

Re: The fundamental problem with Silicon Valley’s favorite growth strategy

#45

Post by TeMPOraL »

Animats wrote: post #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."

Even worse for the users. In this analogy, if startups are cannon fodder, users/customers are the blood that gets spilled.

Startups really should have this written on a tin: "We're are experiments to our investors. Our product is an experiment to us. We do not care about you, or helping you, and we will not change the world; our regular marketing copy is just straight-faced lie. The entire stack, from us up to investors' investors, are all running experiments on how to make money fastest."

Now, I'm (somewhat) fine with this. Let experimenters do experimenting. I just hate that the whole ecosystem is consistently lying to regular people.

Re: The fundamental problem with Silicon Valley’s favorite growth strategy

#46

Post by alkibiades »

ardit33 wrote: post #42
new_here wrote: post #23

I’ve read and listened to quite a bit of stuff from Reid Hoffman (Masters of Scale, LinkedIn’s pitch deck etc) and have never found him or any of his advice particularly convincing. Maybe I’m speculating wildly here but it feels like the main thing that made LinkedIn successful was that it was a first mover in the business social network space that used every dark pattern and email notification they could conceive of…

If everything was "just timing and luck", then we would be using friendster, myspace, ICQ, AOL Chat, and bebo today, instead of facebook/twitter/instagram/snapchat/linkedin There is something more than that, and good execution is crucial, and it is good to know on what worked well, and what didn't work out for both the current winners and past losers. I think Reid has good things to say about what worked for them bac…

you proved that not everything is just timing and luck but you didn’t prove that nothing is. The difference between it and myspace is something so much better than it came out that is surpassed the network effect. while there isn’t really anything compelling to replace linkedin in its base feature set that it started with.

Re: The fundamental problem with Silicon Valley’s favorite growth strategy

#47

Post by adz_6891 »

> what is happening today is that the market has almost entirely turned into a betting machine. Not only that, it’s a machine for betting on a horse race in which it’s possible to cash your winning ticket long before the race has actually finished. In the past, entrepreneurs got rich when their companies succeeded and were able to sell shares to the public markets. Increasingly, though, investors are allowing insiders to sell their stock much earlier than that. And even when companies do reach the point of a public offering, these days, many of them still have no profits. According to University of Florida finance professor Jay Ritter, 76% of all IPOs in 2017 were for companies with no profits. By October 2018, the percentage was 83%, exceeding even the 81% seen right before the dotcom bust in 2000.

I thought the end of the article had some of the most interesting content. Amazing how many companies IPO without being profitable!

Re: The fundamental problem with Silicon Valley’s favorite growth strategy

#48

Post by TeMPOraL »

l3robot wrote: post #4

On 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…

On monopoly: I don't really understand the surprise the article seems to show on this topic.

> Most monopolies or duopolies develop over time, and have been considered dangerous to competitive markets; now they are sought after from the start and are the holy grail for investors.

It's not now that they're sought, it's always been that way. Because that's literally the way a business wins this game. That's the holy grail, literally the driver behind competitiveness - the desire to monopolize a market, so that you can comfortably do whatever you want, and earn whatever money you need. That's the very carrot society uses to create entrepreneurs - the name of the game, from society's POV, is to get people working towards monopoly, creating value at low prices in the process, and once the winner is about to emerge, to pull the rug out from under them. The game is a lie, winners can not be allowed. That's the market way to prosperity.

The only thing that's changed is that some people are now not afraid to publicly say they're seeking monopoly. But they've always been seeking that.

--

RE your comment, I sort-of agree. I strongly agree with the observation that I explicitly do not want to have 4-5 taxi apps on my phone, and my life would be much happier if I could just use one. Similarly, I'd prefer to have just one app for public transit, just one app for maps/navigation, and preferably integrate all three categories into single super-app, whose sole purpose is to help me get from point A to point B as quickly as possible. But that's more of an UX issue.

And it wouldn't have to be one app. Just one per user. In a perfect world, all those services - mapping, taxis, public transport - would be available through open APIs, and you could use free or commercial super-apps interchangeably. Services would be serving you, proxied by your super-app, instead of serving you on a plate to their investors. Alas, most companies seem hell-bent on capturing all the value they produce - they have this kind of greed that ruins things. I know that market pressure sort-of forces this to happen, but I wish there was a way to correct this.

Re: The fundamental problem with Silicon Valley’s favorite growth strategy

#49

Post by philip1209 »

l3robot wrote: post #4

On 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…

How many airline apps do you have installed? How many video streaming apps?

Re: The fundamental problem with Silicon Valley’s favorite growth strategy

#50

Post by WalterSear »

WalterBright wrote: post #32
ergothus wrote: post #26

Earlier quoted context omitted.

> That says it all. Does it? Competition and survivorship have long been accepted as the premise of capitalism. What I find more disturbing is that we've been told competition will be to the benefit of the consumer, and this focus on network effects means that companies are looking for a way to stay on top WITHOUT the virtue of providing the best benefit. This leads to Comcast-like situations, with customers that hat…

Comcast's dominance is propped up by regulatory capture, not free market capitalism.

The difference is debatable.
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