Economists lament the death of 4% annual GDP growth and “The Great Stagnation”. Although there are many secular trends and one-off improvements that have leveled off (demographic dividend, more diverse workforce), the fact remains that on a visceral level, no matter what the experts say, a lot of Americans don’t think that their lives are getting better.
The biggest factor in this is misallocation of capital and talent: The best people doing the wrong things. Money and culture are huge incentives here. VCs are driven by a need to impartially find and deliver returns, but are prone to their own biases and motivations. “Invest in what you understand” is a large one. “Invest in what you don’t fear” is another one. We need to help the world understand transformative tech more, and reduce Black Mirror-ism
The existing VC model is heavily built from 1997-2000 tech bubble 3-5 year IPO exit skeleton companies, with a few modifications. This is why in 2018, in the latest stage of the longest bull market since WW2, we still frequently see land-grab get-rich schemes take the cake. Some forward thinking VCs have stepped up to the bat including YC Bio, a16z Bio, etc. but this hasn’t fully permeated society.
Land grab, zero sum competition in late stage space may be great for 10x+ investor returns when the top firms get in on the winners, but this ends up being a huge waste of talent as 5% better marijuana delivery when there are 5-10 people working on the same approach and fighting each other, is radically different from 5-10 teams in biotechnology working on different approaches because the science is unsolved, and one of them makes the win without having to engage in value transference and destructive competition. That’s the case for working in and investing in these companies. The return on talent and capital will be far higher.
Secondly, this makes sense from both a selfish and altruistic method as well. For a long time, people believed “Bio is too hard”, “Hardware is too hard” ” The FDA will screw you over”. Now it’s those, repeated, with the lessons over-learned, along with “Look at Theranos”. Our media loves sensationalistic and complacency-pleasing headlines. The thing is, the world has changed in these 20 years. We’ve developed the computational and automation techniques that made things VERY POSSIBLE today. The analogy is that delivery a la GrubHub, DoorDash, Uber is possible in the way that WebVan was not before.
We’ve extracted many of the gains from the social media revolution. Many of the later-stage on demand for X companies will achieve their goal no matter what, but they are engaged in a vicious zero-sum game of competition to win their monopolistic moat. Snap may be the last great American social media startup this decade, with a -50% return since IPO.
Who are some other people promoting this view?
Tyler Cowen (author of the Complacent Class), Emergent Ventures
Founders Fund “We wanted flying cars, we got 140 characters”
Pioneer Fund
Age1
Longevity Fund
