Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Tell Sam Altman: I will take your bet

news.ycombinator.com

Post reply on HN
Print view View original

71–80 of 144 posts

Re: Tell Sam Altman: I will take your bet

#71

Post by nostrademons »

vikp wrote: post #60
nicklovescode wrote: post #29

Hi Michael, would you mind explaining your rationale? In particular, why would you believe his bet and still be a VC?

I'm also curious about the general case of people believing that we're in a bubble giving advice to startups. Do they advise that startups keep a really low burn rate and wait it out, or go for broke and raise as much as possible now? Do they advocate certain business models that do better in recessions?

Both. When the last bubble hit, the advice given to startups was:

1.) If you're in a position to raise capital, raise money now, because the funding window may not be open for a long time.

2.) Cut burn rates immediately.

3.) Get to cash-flow positive.

4.) Cut non-essential features, and focus on customers that are willing and able to pay.

It's usually not practical for a startup to change its entire business model (although LoudCloud did it in the first dot-com bust), but they can trim fat, and stop doing activities that aren't absolutely essential to generating revenue.

http://venturebeat.com/2008/10/10/the-sequoia-rip-good-times...

Re: Tell Sam Altman: I will take your bet

#73

Post by tacos »

fleitz wrote: post #57
dvanduzer wrote: post #43

Earlier quoted context omitted.

#3 isn't just a die roll, it's the entire basis of early stage investment. If he loses on #3, YC will either be a shadow of its former self, or Sam will have given himself enough rope to hang himself (as president of YC). This is exactly the sort of thing that everyone making press about investment capital should be willing to do. Sam isn't making a bet about money here, he's making a bet about his reputation as a fo…

That's not true, YC could just have a bad batch, or the economy could be in a serious downturn in 2020. A number of reasonably likely events could cause #3 to be false without any catastrophic loss to YC.

Exactly. I admire Sam's balls but the externalities here are immense. The greatest financial mind of our time built Berkshire Hathaway to $350B over 50 years. GE is worth $250B. Microsoft $340B.

To believe Sam's motley list of companies can either hold onto valuations approaching those "real" companies for five more years, let alone actually generate viable earnings and go public (even at goofy P/E multiples) in line with what GE, Microsoft, or Buffett's candy, ketchup and mac'n'cheese subsidiaries alone make seems ... optimistic at best.

If he loses, might I suggest the book title? "Oops! Brands Aren't Businesses!" by Samuel H. Altman.

Re: Tell Sam Altman: I will take your bet

#74

Post by mod »

foobarqux wrote: post #63
nostrademons wrote: post #59

Earlier quoted context omitted.

Pretty much everything a startup does is find resources that are underutilized and then utilize them for something outside their main purposes. If it is someone who's donating $100K to charity for publicity...well, that's a pretty neat hack, and one that everybody wins from.

Fine, well done. But no one should care that Sam Altman bet that we are not in a bubble against someone who doesn't care much one way or the other but wants his name in the paper.

I doubt anyone really does care.

The only thing I'm really interested in is why sama decided the other bettor had to be a VC. That's a pretty silly requirement.

Anyway this isn't a ballsy bet at all, really. Guys on 2p2 (poker forums) routinely make huge proposition bets that are more fun, interesting, and risky than this--occasionally for charity, as well (though not that often).

Losing this bet will likely do no more to either bettor than losing a $5 bar wager would do to me. Pony up the cash, shake victor's hand, move on with my day and forget about it.

Re: Tell Sam Altman: I will take your bet

#75

Post by [deleted] »

ilyanep wrote: post #27
untog wrote: post #23

Earlier quoted context omitted.

er, yes? How is an article like that pompous?

If the implication here is that Sam Altman and OP are pompous enough to think we care what they think about the state of the Tech economy, then wouldn't the same logic apply to the authors who write "the Tech bubble is bursting! The world is ending!" articles?

[deleted]

Re: Tell Sam Altman: I will take your bet

#76

Post by lvs »

sama wrote: post #28

I sort of love that the person willing to take the other side of this is a Boston-area VC :) I accept subject to verification that you really qualify as a VC, and I can't find a website for Immaculate Conception Ventures. What investments have you made and how large is your fund? If terms from the blog post are acceptable I will enter into longbets.

This is exactly the sort of weak-minded chest-thumping I fully expect to see from venture capitalists. Way to live up to your stereotypes, both of you.

Re: Tell Sam Altman: I will take your bet

#78

Post by pash »

diego wrote: post #14

I'm curious which one of his propositions do you think has a higher chance of not happening, and why. #3 can be phrased as "there is at least one unicorn among these 114 companies" so betting against that is rolling dice. I imagine you're either bearish on 1 and/or 2, or are betting on a macroeconomic event that would bring all valuations down. Could you elaborate?

Note that the bet is the conjunction of those three propositions, so you don't have to think any one of them is particularly unlikely to think that all three of them together are.

For example, if you consider the propositions to be roughly independent, you might believe each one of them is individually nearly 80% likely to occur, yet you'd rationally believe Sam would be more likely than not to lose the bet, since 0.5^(1/3) = 0.794.

Re: Tell Sam Altman: I will take your bet

#79

Post by lettergram »

MCRed wrote: post #38
lettergram wrote: post #18

Pretty confident Sam will win, given the current track record, and baring a complete market collapse.

That's the nature of bubbles. This is a bet about whether there's a bubble or not. IF there is a bubble, of course it's going to look like Sam has a slam dunk win here-- until the bubble pops and then it looks obvious that Sam could not have won. This is irrespective of the bubble popping in 2019 and thus Sam losing the bet and 2021 - where Sam wins the bet but loses the point. The problem with bubbles is that when y…

A bubble would require an investment firm to make an intentionally risky investment with the intention of selling off at the IPO prior to the collapse of the company. This is what we saw in 2000 and in the 2009 housing bubble.

The current state of affairs has companies being bought in cash by other large companies such as Google, Apple, etc. So the public never gets the chance to purchase overly valued stock. Further, of the companies that did have an IPO (Facebook, Groupon, Google) none of them had outrageously high growth. In fact, most of the companies stock values dropped after an IPO (at least initially).

All of those are clear signs we are not in a bubble, as it is financially impossible at this point, regardless of the "nature of bubbles." However, 5 years from now, who knows! The bet was for 2020, not 2016.

Re: Tell Sam Altman: I will take your bet

#80

Post by myth_buster »

MCRed wrote: post #44

I have no idea how this bet will come out but I was not pursuaded by Sam's argument because he did not address the root cause of the bubble. Put another way, he's sitting on the surface of a bubble and pointing out that there's not a bubble rising from that surface. He's saying that there's innovation and the innovation makes these companies more valuable-- on that we can all agree. Whether VC investments are correct…

I mirrored your sentiment in the original thread [0].

> I think this is quite a risky wager. I'm not sure how much of external factors are accounted for. The economists and financial journalists are quite excited about the whole QE and ZIRP effect. It's been deemed an unprecedented experiment. Cheap money has flooded the market. If we look at each industry of itself, most of them are in the similar state. Housing has become very expensive, stocks are at all time high, executive compensation has increased, commercial real-estate is popping up everywhere and the wealth gap is broadening. So when someone looks at statup evaluations and see them getting higher and higher, an expectation of market correction is in order just as it would be with the stock market. Perhaps the inevitable will get delayed once Euro takes up on the QE.

P.S: I think when someone talks about bubble, it doesn't imply that the current crop of startup ideas are bad. It just reflects inflation in the VC market.

[0] https://news.ycombinator.com/item?id=9259224

Post reply on HN