Reaction Wheel

For the same reasons why canal companies got so big, or railways got so big, or steel companies got so big, or oil companies got so big: they had/have in-demand goods and services that solved problems people were/are having.

See perhaps Technological Revolutions and Financial Capital by Perez:

* https://en.wikipedia.org/wiki/Technological_Revolutions_and_Financial_Capital

* https://www.e-elgar.com/shop/usd/technological-revolutions-and-financial-capital-9781840649222.html

* https://www.pwlcapital.com/investing-technological-revolutions/ (via)

A 2021 summary:

> What was especially remarkable about Carlota Perez’s Technological Revolutions and Financial Capital was its timing: 2002 was the middle of the cold winter that followed the Dotcom Bubble, and here was Perez arguing that the IT revolution and the Internet were not in fact dead ideas, but in the middle of a natural transition to a new Golden Age.

* https://stratechery.com/2021/the-death-and-birth-of-technological-revolutions/

> Perez’ theory describes the path a technological revolution, like the Industrial Revolution, takes and the social, economic and institutional changes that go along with it. The jury is still out on the theory, and there are plenty of reasons to doubt it. But if it successfully predicts what happens over the next ten years it will have in good part proved its power.

* http://reactionwheel.net/2015/10/the-deployment-age.html

A list of the top ten companies in the S&P 500 going back a few…

I feel like I'd be a lot more convinced by this if the author made a genuine attempt to understand the conference instead of interpreting his ignorance as proof of tech's "rot".

"brings the next generation of B2C, B2B, B2E platforms to a high qualified partners network supported by a great business model,” you can make the vague assumption that all this gibberish might actually mean something to someone somewhere."

Sure, we have jargon, just like any other industry. For anyone who cares to take 2 seconds, it's really not difficult to understand that B2B is a business selling to other businesses.

"This isn’t meaning, in any of its usual senses, something that exists to be understood, but the zombie signifier, words building and feeding on each other to form a system terrifyingly self-sustaining and utterly opaque."

Again, that's basically how all language works. Language is a self-sustaining thing. I agree that it's opaque, but not uniquely so.

As much as I dislike this article though, I do agree with the basic premise that tech really is filled with claims like “data is the new performance” and an overuse of "innovation", I just don't believe that glorifying your alienation is useful for anyone.

Aside from using Google to understand specific pieces of jargon, we can actually take a step back and understand why it develops in the first place. In a world where companies rely on VC backing, and startup valuations obey a power law[0], entrepreneurs effectively have no…

Nice attempt by Dixon to pattern match, but I think he is substantially wrong on his diagnosis (of some peaceful build out). My recollection of the dot-com bubble is that desktop Internet B2B in the developed world drove the vast majority of VC funding. Specifically, the following markets/opptys (including a greater opportunity with the sum of parts) did not even figure out in the discussion during the dot com time frame

1. smartphone and mobile ecosystem (phones, apps, games etc..)

2. Digital/Search advertising

3. Social networking

4. 1.5 Billion customers in China/SE Asia/South Asia

So it is definitely odd to suggest that some sort of correlation between the dot com bubble and the VC funding now. One of the most astute commentaries on the modern VC funding conundrum was published a couple of days back

http://reactionwheel.net/2015/01/80s-vc.html

It is long but well worth reading. The author makes a very good case that VC funding today is like VC funding in the 1980’s in that

1. Too much focus on competing in established markets (so trying to disrupt existing rental, delivery, hotel systems etc.) instead of trying to create new markets from scratch

2. Trying to flip startups to established companies instead of trying to build out a non-existent market

3. Investment driven by fear of risk instead of looking at risk as the ultimate source of super normal returns.

I think the correct diagnosis of the flattening of the VC investments is that VC’s are now taken over…

This recent TIME article lays out the saga pretty straightforwardly and makes it a bit less confusing.

https://time.com/6342827/ceo-of-the-year-2023-sam-altman/

At least, that was how I felt after reading it.

Basically, within the span of a year, OpenAI transformed from a research lab inside a non-profit that was pursuing a seemingly-Quixiotic dream of artificial general intelligence (AGI)... into one of the fastest-growing for-profit software companies of all time via its creation of the chat-based generative AI category (aka ChatGPT) and its consumer/enterprise SaaS and API offerings.

The board -- or, at least, its 4 remaining non-CEO members -- thought that this was too much, too fast, and too soon, and that there was a narrow window of time where they could slow things down and refocus on the original non-profit mission. They also felt that Altman was a bit of a force of nature, had his own ideas about where OpenAI was going, and treated "board management" as one of his CEO skills to route around obstacles.

Once a board loses trust of their CEO, unfortunately, there is usually only one blunt and powerful tool left: firing the CEO.

And this happens pretty often. As the investor Jerry Neumann once put it, "Your board of directors is probably going to fire you."[1] Boards have very few ways to actually take action when they are worried about a company or institution; firing management is one of the few "course correction" actions they can take quickly.

In OpenAI's…

Tyler, I've been very interested in this development and I have a somewhat fundamental question to you.

I've seen a number of VCs and other pundits recently say things of the form "there's a reason why for decades, there were only bank loans and VC and not much in-between". Eg Jerry Neumann (a NY based solo investor) has a nice twitter rant about it here: https://twitter.com/ganeumann/status/1093961051425697794

If I follow the math in his linked blog posts well (eg [0]), he's basically putting down the hypothesis that there's 3 categories of companies (determined by the alpha value of the power-law distribution they're in):

1. Companies where the risk and the upside potential are small. This is where bank loans are focused.

2. Companies where the risk is enormous but the upside potential is "meh".

3. Companies where the risk is enormous but the upside potential is also enormous. This is where VC is focused, and it's why they're all about finding those few big hits because this covers all the losses (or mediocre performance) of the rest.

Neumann appears pretty confident about this hypothesis; not because he can explain the underlying phenomenon, but simply because until now he's not seen much successful funding for companies that's neither VC nor bank loans. And if his hypothesis is right, then you're targeting companies of type 2: investments with enormous risk (comparable to that of a high-growth startup) but at the same time you're hard-capping your upside at 5x.…

Nice article & loved Kyle's article about the thorny issues surrounding customer acquisition.

I grew up around the industry because my father worked his entire career in it. I've always found it fascinating. Actuarial science is so underrated.
I'm also an entrepreneur and I've previously thought about entering it to disrupt it. If there is one thing I'd add to the main article it's this:

If you look at the data vs all other industries, Insurance is the most profitable industry out there. That's not bad considering the product is manufactured out of thin air.

This is perpetually interesting because to me it kind of destroys one of the central tenets of capitalism. It's a very old industry. If anyone can conjure stuff out of thin air, you would expect there would be much more competition / lower margins in it by now. But there isn't. So the industry is really effective at erecting moats to keep innovators at bay, In my opinion, this is main "value" (cough) that the regulators play in the market. The industry gets away with so much, and it needs reform, but I'd bet against it ever happening. This situation in replicated in every country around the world. That's why it's hard to be a true entrepreneur in the industry. You need an investor with deep pockets to enter the market. You need to verify your brilliant customer acquisition strategy works. Then you need to wage war vs the incumbents.

Bonus content for actuarial nerds looking for a good…