Reaction Wheel

If you haven't read this classic about technology deployment from 2015, it's worth a read. https://reactionwheel.net/2015/10/the-deployment-age.html Feels like we're still in the exploration phase of GenAI, but ML seems like it is in the deployment phase.

It does if you aren't a big company person. I suspect the majority of entrepreneurs aren't doing it for the money, they are doing it because they don't fit the traditional corporate mould. The people the media loves to focus on are the outliers. Schumpeter had some interesting insights on this: https://reactionwheel.net/2019/01/schumpeter-on-strategy.html

>> I know nothing about an IPO of RPTL, other than what I've read in the media, but I can guarantee you that RPF will continue to be a non-profit charity, and continue with it's mission. Call me cynical, but you are absolutely clueless. Once shareholders are involved (especially public) the management will be changed. This lovely piece appeared about a week ago here on HN: https://reactionwheel.net/2021/11/your-boards-of-directors-is-probably… The RPi founders will be sacked in favor of profits. All those charitable things done for free will be stopped. The $35 Pi - nobody will mind if we raise that to $50. All sorts of things will change. Maybe not immediately, but they will change. The profit motive goes directly against the notion of a "non-profit" organization. Shareholders want ROI. End of story, end of Pi as we know it.

You’re exactly right. Portfolio size is absolutely the key here. To give yourself a fighting chance of finding an outlier-type return, you need to have some diversification... Gerry Neumann did a great post breaking down some of the math on this[0]. [0] http://reactionwheel.net/2017/12/power-laws-in-venture-portfolio-const…

Can someone recommend me more articles like this? Skeptical of new startups. I am a college student in Europe and I would love one day to start a startup, but I am afraid I missed the good window for starting one, and that the era is sadly over. (Internet is old, mobile 10 years old, I am AI sceptic) Some interesting articles connected: https://news.crunchbase.com/news/venture-capital-peaked/ http://reactionwheel.net/2015/10/the-deployment-age.html

A great piece called "Disruption is not a strategy" by Jerry Neumann (http://reactionwheel.net/2016/05/disruption-is-not-a-strategy.html) illustrates the difficulties of taking the lofty ideas from The Innovator's Dilemma and applying them to new companies. He also makes the observation that Christensen was writing for Fortune 500 CEOs who care about risk management, not upstart companies trying to find product-market fit. I think it's most prudent to acknowledge disruption theory as one of many interconnected factors that influence the outcome of business ventures instead of an unshakable dogma with a dominating impact on all things.

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…

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…

Found in the source code: http://reactionwheel.net/

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…

If, like me, you've never heard of him - > My day job was investing in early stage companies through Neu Venture Capital. I’ve also written a book with my friend Liz Zalman: Founder vs. Investor. And I teach entrepreneurship at Columbia University. I was a co-founder of venture-backed startup Root Markets, ran Omnicom Group’s venture capital division in the 1990s, and was once, long ago, a hardware design engineer on IBM’s S/390 series of mainframes where I designed a very small part of the central processor’s microcode execution engine, which is like the computer in the computer in the computer. https://reactionwheel.net/about

The company board’s sole job is to hire and fire the CEO when appropriate: https://reactionwheel.net/2021/11/your-boards-of-directors-is-probably… However, having been on a team that prepares board materials and also having presented to a company board, I can tell you that the information they receive is extremely carefully managed in a way that allows responsibility to seem to flow downwards rather than upwards. What you see as an IC or as a manager or ever director is extremely different from the cause and effects a board sees in a monthly or quarterly update. Hence they often come to different conclusions than the people in the trenches would. That said, I’m sure this is true for any large organizational unit (government, military, corporations, nonprofits, etc).

Venture Capital moves us between a distribution crazy entrepreneur to a hacker who sits down and creates, instead. Though there’s a lot of chatter about funding the current situation, but this rodeo ain’t for the first time[1]. [1]https://reactionwheel.net/2015/01/80s-vc.html

If you're interested, I think this article does a good job of laying out some of the realities of being a founder who has taken VC capital: https://reactionwheel.net/2021/11/your-boards-of-directors-is-probably…

There have been some good arguments that when the downturn hits, it’ll be less of an exciting and satisfying bubble pop ;P, and more like a slow burn. http://reactionwheel.net/2015/01/80s-vc.html

There was a post on here a couple of weeks ago that spoke about this. Essential reading for indiehackers imo http://reactionwheel.net/2015/10/the-deployment-age.html

Why not. There are no sides here. There are different moats. If you want a more elaborate view: http://reactionwheel.net/2019/09/a-taxonomy-of-moats.html

Here’s some math around power law investing, maybe this post is what you’re looking for? http://reactionwheel.net/2019/01/why-do-vcs-insist-on-only-investing-i…

Definitely very similar, just different level of abstraction. £80m pound fund. Assuming it does 2x in 10 years, with 0% hurdle rate, 20% of carry will be, 16m£? divide it by 20 entrepreneurs and you get £800k. Not bad... One thing going for founders' mutuals is diversification. 100, 500 companies instead of 20 companies should work better for founders, as described here: http://reactionwheel.net/2015/06/power-laws-in-venture.html

Not proof that this happens every time, but some evidence from the 1980s: http://reactionwheel.net/2015/01/80s-vc.html

'And Twitter, and Facebook, and Uber. They all seemed like pretty stupid ideas. Until they weren’t.' From Jerry Neumann, angel investor http://reactionwheel.net/2014/07/betting-ponies.html

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…

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_… * https://www.e-elgar.com/shop/usd/technological-revolutions-and-financi… * 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-revo… > 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…