Never Hate. Only Ever Destroy.
gilesbowkett.blogspot.com
gilesbowkett.blogspot.com
And people like Arrington and Graham are on the sidelines with megaphones cheering on the lottery ticket buyers because, it turns out, they are earning a 6% cut on ticket sales.
Also: "a 6% cut on ticket sales"? So... PG and MA get a slice of the money startups spend? Or of the money invested in startups? I think you mean they get a cut of the lottery winnings. Try petitioning the Firefox team to add AnalogyCheck.
I realize his arguments are sort of drummed up for effect, but I thought the analogy between VC and patronage was weak. Its true they were both systems whereby rich people would pay talented poorer people to make things for them, but the further connection - the reason for the payments and the building, doesn't hold up. Do VC's really want to build companies to feel good about themselves, or to show off, or to look better? Only if those companies make money. Pets.com was a stupid idea and if anything the VCs that invested in it have probably never lived it down. Not too successful as a vanity project. Also, the VCs aren't investing their own money, so they are responsible to do more than look good, while those whose actual cash is invested (angel's aside) aren't well known - nor do they appear to seek out reknown.
Anyway - I figure this wasn't a legal case he was pleading, just my .02
I think you misunderstand the VC business. They charge a fee for managing money. Therefore, their business is attracting investment. This is exactly how mutual funds operate as well.
Now, they stand to make money when their funds make money through various incentives and so forth. But by far the biggest incentive is that if they have a home run, they get more money invested, which means more management fees.
So aren't they incented to make money for their investors?
Not really: if they have a string of modest investments, averaging out to making money, they will not attract a lot of capital: the money will flow to the VCs that have name brand hits.
Whereas if they have a ton of total and otherwise embarrassing failures but hit one out of the park, they will get a ton of new money when they start another fund.
Or if their portfolio companies are the darlings of the press, they will get a ton of new money when they start another fund
So...
Their strongest incentives are to own companies that get a lot of press and hopefully get a few really press-worthy hits.
That is a lot like patronage to me.
Patronage is gift culture; its message is: "Look how much I can afford to give away!" A patron patronizes something not merely with a risk of losing money -- losing money is the expectation and practically the goal. VCs, on the other hand, invest in something with the hope that they will eventually have more money than they started with.
You point out that ambitious VCs will invest in riskier propositions to increase their chances of a big hit. But their motivation for doing this is so that the big hit draws more money for the next round. This feedback loop (money -> fame -> more money -> more fame) is not present in patronage, because a patron's fame is not expected to lead to significantly more money.
The big question about using patronage as a metaphor is whether discussing the ways in which Venture Capitalism 'is' and 'is not' like Patronage leads to greater insight.
What do you think?
Giles brings up patronage as an explanation for why VCs -- who are otherwise interested in money -- are not interested in hearing about a profitable microloan business. From the patronage analogy he gathers that they are more interested in power than money, hence their class hierarchy and why microloans are beneath them.
I feel the patronage analogy misses the point because it implies that VCs are somehow not interested in profit. If you follow this logic through, you'd conclude that startups are profit-losing ventures kept alive only for the power trips of VCs. While this may be true in a few cases, I think it is an incorrect conclusion, since VCs are interested in profit (or, at least, their investors are), and there is apparently enough return in startups that investors do not go elsewhere.
There is a simpler explanation for why VCs are not interested in microloans: it is far enough out of their geographic and technical areas that they don't think they could do very well at it.
"Kiva is alone in their business model of online p2p lending to entrepreneurs in developing countries as a nonprofit entity. Other p2p lending sites, like Prosper, Zopa and Lending Club, make lower-risk loans to people in the same country as for-profit entities. Online p2p lending is new and it is hard to maneuver around financial regulations to make higher-risk, international loans as a for-profit entity, which is partly why Kiva formed as a non-profit."
Looks like these "new jounalists" could learn a bit from the New York Times: http://www.nytimes.com/2006/12/10/magazine/10section4.t-6.ht...
I liked this when it started, as it was a little bit of the "behind the scenes" of the products/services I liked learning about. I think it has since gotten a bit out of hand.
Funniest thing I've read all week.
It's as though we've forgotten this on the web though, and re-instituted a hierarchy of who matters that is based on meticulously engineered stacks of grade-A bullshit, which, surprise, surprise, favors peddlers of distraction and get-rich-quick schemes of all sorts. We've replaced "Old Media" with "Tomorrow's Old Media".
Technorati even equates machine-estimated popularity with "Authority", a dangerously loaded word and wholly inaccurate besides. Certainly popularity means something, but it doesn't say much at all about whether any person, even someone in the ostensible target audience, should pay any attention at all.
I personally have no trouble reading it, but pictures of text are not very easy to read for some people.
Also, Blogger is fucking evil, and it eats the > from quoting e-mails, which sometimes is a very time-consuming bug.
By the way mad apologies but I'm actually banning my own blog from my view of Hacker News, using a Greasemonkey script in Firefox. I would seriously kill people to defend my right to post gifs instead of cutting and pasting text, even though I realize it's ridiculous. Reasonable people can disagree, but for the rest of us, there's Greasemonkey.
I have a question for you. If the VCs are the Medicis of the modern age what would our Da Vinci look like? Or our Michelangelo?
How would we recognize greatness amongst us?
Michelangelo did get one of the most prestigous jobs of his time, but what about the rest of the now-recognized great artists - were they more popular than the hacks of their day?