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Comment by binlog | Hacker News Reader

New Constructs is bearish on every tech IPO. Easy to reinforce your bias by selectively looking at instances where they were right, like WeWork, but they also predicted failed IPOs for Spotify (+219%), Uber (+60%), CrowdStrike (+3136%), Cloudflare (+2306%), Palantir (+1991%), Snowflake (+51%), DoorDash (+93%), Robinhood (+187%), ARM (+422%), Instacart (+59%), Reddit (+370%), CoreWeave (+105%), SpaceX (+20%) and lots more.

So whatever your stance on Anthropic this particular analysis is safe to ignore.

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You can be right for the wrong reasons and you can be wrong for the right reasons. The economics of many of these businesses are disconnected from their market valuations, and there are examples of investors outright saying "none of this matters, let's meme together" (most notably, GameStop).

In general, the stock market is in a somewhat weird place because most people in the US who have some money just don't have anything else to do with it. It's not productive to keep it in savings or treasuries, we don't invest in friends' businesses because we don't have friends, real estate is too expensive, we don't collect art or antiques because that's for old people... so YOLO in the stock market it is.

So yeah, I don't think it's wrong to criticize the Anthropic IPO as nearly impossible to justify by anything other than vague hopes and dreams. But that doesn't mean it won't make you money.

You would think any investor would prefer to be informed that the numbers don't match expectations even if they then decide to go ahead anyway. People like to gamble sometimes even though the likelihood of losing money is very high.

> You can be right for the wrong reasons

Also known as a broken clock being right two times a day.

The fallacy is assuming ahead of time that they are actually right this time.

If you start assuming they’re right and also admit that their logic doesn’t support that conclusion, there isn’t even any argument left. You’re just implying that you believe one thing is true and anyone who agrees with you, regardless of the reason, is also correct.

I don’t find that persuasive in any way.

It's not that the stock market isn't overvalued. It is that everything else is more overvalued. Especially real estate.

Friends businesses don't need our money, because banks are generous with giving out loans and friends prefer to keep ownership intact while being in debt instead of diluting it.

WeWork had a massive cost base to offer their service. They had to rent/buy a lot of real estate to serve their customers. None of all the examples you list here except CoreWeave has a comparably high cost base.

All the mayor AI players have to rent/buy a lot of computing power to serve their customers. We're talking costs of 2-5x (or 10x? does anyone actually know?) their revenue. The question is, will they ever be able to pay their cost of revenue and operating expenses? Many people doubt. And we know that they do all sorts of funny book keeping shenanigans like SPVs and delayed deprecation.

What comes on top is, LLMs have no economy of scale. More customers scale linear with higher costs. Will people or companies be willing to pay 5x what they're paying now? Will future frontier models become more cost efficient or less? We simply don't know yet. At this point, it's a gamble.

> None of all the examples you list here except CoreWeave has a comparably high cost base.

Wut? I'm pretty sure SpaceX spends a lot of money shooting rockets into space, and Cloudflare has pretty high infrastructure costs given that a very large portion of all Internet traffic goes through their networks.

True. Cloudflare has a high cost base, but they had and still have a valid business model.

SpaceX is an entirely unique thing, I don't really know what to think of it. I don't see a viable business model there, but I might be wrong. Maybe there is trillions to make in space. Their targets are long shots, but meanwhile they are bleeding money on all their ventures and they ride on the AI wave. The IPO was fairly recent and it might still just implode one day.

but they also predicted failed IPOs

You're discussing something entirely different, which is fine, but you're not refuting anything that the parent poster said.

All they were saying is that they're terrible at predicting risk. Examples were given. It doesn't matter why they're bad at predicting risk, they simply are.

True. All I say is that I agree on their take on Anthropic, although I wouldn't word it as strongly as they do. They may be bad at predicting IPOs, but every once in a while they may be right. ;)

>> Many people doubt. And we know that they do all sorts of funny book keeping shenanigans like SPVs and delayed deprecation.

Every time I see Anthropic and other AI companies getting ready to go public, I cannot stop thinking about the entire Enron debacle and all of their "unique" book keeping shenanigans that has far reaching impact, even to this day.

People keep telling me, "Nah this is totally different man, you can't compare the two!" But is it really??

It fundamentally comes to investments/commitments divided by revenue over certain low number of years. Now add in any financing costs, overhead and actually operational costs.

Math ain't looking pretty. Just like it did not look pretty with WeWork. Might have worked, but still not great business to be in.

Being hyperscaler really does look very high capital and questionable margin bussiness at moment. With lot of competition.

I don't feel like going through the list but Uber definitively botched their IPO. If they are up 60% only since the IPO they are just matching inflation and pretty much below the index.

You dont need to criticize good research, you can just recognize the market can stay gullible, for longer than you stay solvent.

I like to think you can enjoy the ride wave as you are propped above the heads of an hysterical crowd, as they rush to the abyss...Just find some solid tree branch you can latch on, when they realize where the road ends.

It’s not “good research” when they are wrong >50% of the time. If you invested money in every IPO they told their subscribers to avoid you’d be very rich today.

I define good or bad research, based on my time horizon and the time-value-of-money. For example its irrelevant for me how much money Tesla makes, since I judge there only two possible outcomes for the company: bankruptcy or assimilation.

So would you consider putting money into the Tesla IPO a bad investment?

Would you consider putting money into Tulips in Amsterdam on Feb 1636 ?

How can you eat any food to stay alive? Don't you know that in time it rots?

I feel like the market staying irrational/gullible longer than you can stay solvent argument doesn't really make sense when all you're doing is NOT investing in something. It seems an aphorism more suited to puts and calls, puts especially, than it is to deciding not to invest at all.

> the market can stay gullible, for longer than you stay solvent.

This is essentially just what people say when current reality is different from what they want it to be. Sort of an unfalsifiable escape hatch response to “well observable reality contradicts your claim”

It's usually wise advice when someone thinks they can make money by shorting an overvalued asset. Sure you might eventually be right, but in the meantime you'll go broke.

In the long term, in theory, prices should be tied to value, most most of the time the stock market plays more like a casino.

I agree it makes sense in the context of warning people not to short something. But what I am replying to is a person using it generally, not in the context of shorting, to just say “it only looks like I’m wrong because everyone else is crazy and irrational right now, but they’ll come around eventually”. Not exactly a rigorous argument.

Are you using lifetime change since IPO and not accounting for years? SpaceX hasn't beat the S&P for example. Uber hasn't. I didn't check them all but some of these seem to contradict your point?

Criticize the argument, not the speaker.

Their track record is directly relevant.

Wise to critique both holistically, which makes it funny when people want to ignore an individual's or group's track record (especially regarding specific mental models or types of analyses) when evaluating a specific argument

So is Anthropic's. You'd have to be ludicrously gullible to buy 1/4 of the shit Dario says as true

Sure, but is that a negative for the stock price?

Exactly. If everyone else is gullible, it’s a good buy!

just because you can see the mark in your poker game doesn't mean you're not also a mark :-)

No, but is it much of a stretch to say that the valuation and profit/loss are out of proportion?

…which, in a normal sane world, would affect the stock price?

2 trillion is a lot. I’m skeptical, for the same reasons listed in the report.

Its has nothing to do with Dario, and mostly to do with Chinese open weight models.

I think it's probably a negative for the stock price when the CEO thinks his company shouldn't be developing its main product and believes wiggy and false things about what continuing development means. Investors can put up with a lot of things, but an erratic willingness to undermine core business activities is usually not one of them.

>Sure, but is that a negative for the stock price?

I feel like that statement is one of mans' biggest foot-guns in the modern world.

that single sentence has driven the biggest hucksters the world has known to commit the biggest frauds ever perpetrated against man for decades.

If a weather reporter on TV says it's raining every day, and it's not always raining, I can still criticize them on days when it rains without it meaning I don't think it's raining.

Right, if you are in the business of predicting the future your track record of past predictions is extremely relevant.

TFA does not contain an argument beyond reporting on the statement

Track record is extremely relevant when the "argument" is mostly about judgement and subjective opinions.

In fact track record is perhaps one of the most important things of all when deciding wherever to even engage with the argument in the first.

> Track record is extremely relevant when the "argument" is mostly about judgement and subjective opinions.

Ironic given this article is from CNBC, employer of Cramer, host of "Mad Money", who has been so inconsistently wrong that his picks have literally sparked an ETF. Just search using your engine of choice "Inverse Cramer ETF".

I work in finance. Past performance is not a guarantee of future returns, but is a damn good indicator, which is why everyone always wants to see your past performance anyways.

> Past performance is not a guarantee of future returns, but is a damn good indicator,

Unless it's about stock picking, when the winners in one year of doing good stock picking are no better in the next than any other random stock picker.

SJIM lost 15% in a period when the S&P gained 25% (betting against Cramer). LJIM over its lifetime gained 3.7%.

Of course both had too short a lifetime to draw a conclusion due to lack of interest and this was pre-AI so maintaining the positions was difficult. But it’s important to remember that Jim Cramer fails to beat the market, not that he’s an inverse oracle.

Part of their argument is, "Look how reliable the speaker is."

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