The meaning of the Vision Fund | Hacker News Reader

The meaning of the Vision Fund

economist.com

57 pointsnopinsight25 comments

There are a lot of green field opportunities out there — technologies and solutions that will exist but which will need significant capital to get there. I think in 10 years from now we’ll look back on today and say that we were vastly underinvesting in technology and being too conservative given the size of the opportunity to create category defining companies from scratch.

You could have made the same statement any time in human history.

Everything humans now know could have been learned hundreds of years ago if we’d had invested more in science and research.

The technology of the early 23rd century, for example, could be obtained in 50 years with more investment in R&D today.

Of course we could have sped up the rate of innovation with more investment but would have been economically viable. I’m specifically referring to investment by venture capital and the positive returns that will be generated over the next decade.

> You could have made the same statement any time in human history.

How are you so sure of this? To me it sounds too optimistic. It implies that we have been in control for the extent of our history, and I think this couldn't be farther from the truth. In fact, even today I'm feeling a bit pessimistic regarding our ability to overcome challenges such as changes in social dynamics and known/unknown threats introduced by technology.

The question is does a Softbank investment simply increase the price of such investments, with underlying long term value staying unchanged, or does the investment actually increase value by stimulating greater growth in those investments?

That's a tricky one. The fundamental principle venture capital works on is that investment stimulates growth. You invest in a company so that it can grow and make your investment more valuable. But at some point investment becomes excessive and wasteful, as in a bubble. Softbank is so big, it could quite conceivably stimulate a tech bubble all by itself, especially if rival investment firms 'bulk up' to compete.

If that is the case, Softbank's flood of cash into tech will eventually destroy more value than it creates and the prudent response for an investor would be to reduce exposure to the tech market. But of course nobody wants to concede defeat, especially if your withdrawing investment actually makes Softbank's investments more likely to succeed by having a deflationary effect on the bubble.

Interesting times.

At least in markets with insufficient funding available, like in many developing countries, additional investment could potentially make a difference.

Warren Buffett's Berkshire Hathaway is sitting on $70B cash just because he can't find anything worth investing it in. Major corporations have astronomical cash hoards awaiting tax holidays but also not finding any productive use in their waiting rooms across Europe.

They literally just bought 75 million more shares of Apple.

They just announced that they HAD been buying 75 million shares. The SEC would freak the fuck out if BRK tried to buy up that much apple in one day. As would the market. In reality they have been buying it in small chunks over the last several months.

Well, that's how it works, isn't it? You can't just buy the cream, you have to buy the guy who buys the cream...

Because they saw the cash mountain Apple was sitting on.

After Apple announced $100 Billion stock buyback it was self evident to everybody why BRK did what it did.

Berkshire Hathaway buys only when the price is right and they are the opposite of VC investors. They make their best investments when "there is blood in the streets" and other investors are out of money.

News always lament the lackluster performance of BRK before major stock market crash. "Has the Oracle of Omaha lost his touch?"

If you compare BRK stock to SP500, you can see that when there is major correction in the stock market, BRK acquires permanent lead over SP500.

Just go to any finance site and set starting point into

* 10 March 2000 dot-com bubble crash,

* 11 Oct 2007

* or even start of 2011 bear market

and look how the BRK diverges from the SP500.

Buffett said he had $30B waiting for opportunities like you say, and $70B more that he wanted to invest now but couldn't find anything worthwhile.

There is a saying : 'Smart money chases out dumb money'

Great investors are probably not going to invest unless the price is right. If they are sitting on large piles of cash rather than investing in companies, these companies are losing the benefits of their leadership, influence, connections etc. That has to have some adverse effect on these companies

I find the case of Slack super interesting here, they were a completely undifferentiated and uninteresting product with quite a few competitors until they started bulking up on capital and out marketing and out spending their competition. In this case, investment is entirely what made the company.

I still basically think Slack's business sucks long term because Microsoft and Google are basically just throwing Slack into their office suites for free, but their current successful is entirely built on just having more capital than competitors.

I'm curious why you say Slack was undifferentiated. When you use a product many, many times per day in small bursts, small increases in ergonomics and decreases in friction start to add up fast.

But those small increases aren't apparent unless you're using the product many times a day - chicken and egg. The issue is that for many products in this class, churn is so quick that you need to be convinced to stick around long enough for the decreases in friction to actually have time to accumulate. Hence marketing spend.

I was using Flowdock at the time Slack started getting a lot of funding/attention and Slack's lack of threading was the only real difference I saw when I tried it out, which was definitely not an improvement to ergonomics for me :)

My own opinion: this fund has a LOT of debt. At current microscopic interest rates, that is not much of a deal, but it will very well be once interest rates will go up.

They need to make returns quickly to not to sink in interest. This should be mandating their line of action from now.

1. They will be downsizing, and offloading assets.

2. It looks very likely that this is just a gigantic LBO vessel for Son and Saudis

3. And it will be following a standard LBO play - buy, cut out tasty parts, sell to pay interests.

Probably shouldn't have put so much in Uber...

Hindsight 20/20

Paywall. Other link?

Works in incognito

Thank you for this.

http://archive.li/gtkYQ

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