"One of its main byproducts is the replacement of low-productivity workers with computers."
This is the main fallacy of this article.
It's actually "high-productivity workers", who build technology, which replaces "low-productivity workers". For that to happen, more "high-productivity workers" are required. Do they realize how hard it is to find talent in tech these days? The economy is ever evolving and becoming more efficient. There is really nothing new here, this has been happening for decades and centuries. With some adjustments, this article could be published 100 years ago and probably 100 years into the future.
One problem is that it's hard for people, especially at a certain age to adapt their skill set. So while some sectors are struggling to find employees, others have too many. It's the friction that is created by economy's evolution. But we have to look beyond the cold numbers. This is a social problem. With 8% unemployment rate, an unemployed person is not 8% unemployed, he is 100% unemployed. That's a person like you and me, with family and dreams.
However, I believe that in the future this friction will actually become lower. With technology and internet becoming prevalent, high quality, relevant education will become accessible and affordable. In other words, when education finally becomes part of that "second economy" (and it will), things will get better, not worse.
When this happens, then ironically this "second economy" could actually solve the problem the article says it creates.
Things are changing. Technology is cheaper, internet is prevalent and small organizations disrupt the ways of the dinosaurs. We've seen that with newspapers, we are seeing that with Hollywood and we'll soon see it in education. The dinosaurs are big and powerful, but we all know what happens to them eventually. Sooner or later technology wins. Always.
Having said that I hope Geocoder gets help with PR. I'm no PR expert but the fact that this post is not on their front page is the first bad sign. And the media, which always loves a David & Goliath story, apparently hasn't covered this; that's another bad sign. Swaying public opinion to your side is the way to win this, not litigation. If Geocoder lets Canada Post drag them to court they've already lost.
As a Canadian I'm one of the owners of Canada Post and I hope I lose.
Along the PR lines, it seems like something their local- well, I'm an ignorant American so whatever the equivalent of Congressperson is (the Queen?) - might want to involve themselves in. As it's not actual DB theft, it seems like they are trying to create a monopoly (albeit a very narrow one).
Canada Post is pretty stupid on this one. Even if you type a postal code into Google Maps you get a result.
I could imagine how old and stupid the gov't official is who filed that claim. Canada's a broke country, and the latest government budget has cut a tonne of government jobs, slashed R&D credits, etc.
Canada has the lowest debt to GDP ratio in the G7. We've been in surplus for the greater part of the last decade, and are soon to be back in the black. Broke? I'm not so sure about that.
Unlike the States, Canada does not have a cash-in-cash-out system for our version of Social Security, so many debt to gdp figures you look up online are very, very misleading since we will be in much better shape when the baby boomers retire.
I think the (ignorant) right wing in the States assumes that Canada has its early 1990s fiscal problems because it is has lots of successful social programs that would considered leftist down here. Idiots.
...of whom some 39 percent voted for a Conservative candidate in the last election. The blinkered Sun Media worldview is alive and well here in Canada, and even if it doesn't represent a majority opinion, our first-past-the-post electoral system means it can carve out a majority in the House of Commons and form the government.
As that system has done with six exceptions since confederation (Laurier in 1900 and 1904, Borden in 1917, Mackenzie King in 1940, Diefenbaker in 1958, Mulroney in 1984). In fact ruling parties having over 50% of the votes in Canadian election is the exception rather then the rule.
The only way to make sure the general populace vote = ruling party is to have an American style two party system, and frankly, I've heard very few good things about that. IMO Canada has a decent balance; parties on the fringe either adapt or assimilate, and all parties gravitate to the political centre if they want success. It saves having two powerful parties for long, and prevents the dog breakfest of some countries where there's 15 different names on the ballot.
> The only way to make sure the general populace vote = ruling party is to have an American style two party system
I offer as counterexamples all the industrialized liberal democracies with various forms of proportional representation, in which the composition of the government actually does reflect the general populace vote. They may not be countries in which a single party forms the government, but there's no reason a single party has to form the government, particularly if no party receives more than 50% support among electors.
I have a lot of respect for the parliamentary system, in which voters elect the House of Commons, the House appoints a Prime Minister, the Prime Minister appoints a Cabinet, the PM and Cabinet are accountable to the House. I appreciate that this system has historically included parties, or formal associations among members of the House of Commons to vote more or less along party lines.
However, the parliamentary system also has a long tradition of coalitions among parties, and even of governments being formed by parties that did not win a majority of seats. The basic unit of legitimacy for a parliamentary government is that the government enjoys the confidence of the House.
I was really frustrated during the 2008-2009 constitutional crisis over the widespread public ignorance over how the parliamentary system works. It's frighteningly clear that most Canadians don't understand their own government, which makes the system a ripe target for abuse. Since the 1970s, Canadian ruling parties have steadily concentrated power more narrowly in the PMO, to the point that Canadians have forgotten that they vote for the House, not for the Government.
As a result, governments have increasingly snubbed their nose at the House of Commons - to the extent that the Harper government actually deployed a handbook for disrupting and marginalizing parliamentary committees and absolutely refused to share budget numbers with MPs, triggering an election over their Contempt of Parliament.
During the constitutional crisis, and following the lead of the Conservative Party, far too many Canadians argued with straight faces that a government appointed by a coalition of parties representing more than half the seats in the House and more than half the votes cast would be somehow anti-democratic, while an appointed government that refused to face a confidence vote - the most fundamental litmus test of legitimacy in a parliamentary system - was somehow upholding democracy.
We can no longer afford a system in which a single party with a minority of votes can enjoy a majority of seats and more-or-less absolute power to pass legislation during its term in control of the government. You write, "all parties gravitate to the political centre if they want success", but the current government is busy passing one-sided ideological legislation - like the omnibus crime bill and the new copyright bill - that most Canadians oppose.
If they held seats proportional to their popular support, they would have to cooperate with another party to achieve majority support in the House and we would see more balanced legislation.
I don't think conservatives are ignorant (any more than anyone else, anyway). I tend not to agree with hard line conservatives about the majority of stuff but I also disagree massively with the hard left wing as well. Both groups are reasonably represented in my family, and I tend not to please any of them. But that is probably more because I can be an extremely sarcastic bastard and talk a lot of utter nonsense at times.
This is getting off topic, but it doesn't really matter how Canada is doing financially (from what I hear, we're doing quite fine).
US still has a better standard of living. Canadian housing is getting ridiculous and needs to be controlled. We need cheaper housing. If I were a young person buying a home, I'd rather be buying in California instead of Toronto.
While you can get cheap housing in Sacramento or Stockton, the California equivalents of Vancouver, Montreal and Toronto are just as unaffordable as those cities. Maybe more so. If you think commuting Clarington to Toronto is bad, try Inland Empire to Los Angeles or Union City to San Francisco.
If you're a young person looking to buy a home, you need to have your head examined. Doubly so if it's in Toronto or Vancouver. From research I've done into this, it's really better to just rent, and will be barring either legislation expelling speculators out of the market, or the housing bubble bursting.
Canada has the potential of becoming like USA was in the 1900's. Look at the map and think of all the natural resources to be shared by under 40 million people.
Facebook should open a new savings account and deposit $1.37 million every day. In two years it will have the $1 billion they'll pay to acquire Everyme.
"Everyme uses your phone’s address book for sharing, and if people don’t have Everyme accounts, they can still see and post content through email and text messages."
This is a brilliant way to overcome the chicken-and-egg problem, which is probably the biggest problem a new social network is facing.
I don't want to share my kids' pictures with everyone on Facebook. And no, my mom is not going to join Google+ (nor should she), so having her receive the posts by emails for now is just brilliant.
That would work, but if you want to share with the same people again, you have to retype their addresses, at least with a copy and paste. With a good mobile platform it streamlines the process and can make sharing a much more spontaneous action, and with the concept of a personalized "circle", you also get a more intimate feel than an email thread :)
Facebook supports granular privacy for all posts via friend lists, and will even suggest friends to add to lists.
Want to share pics with just your family? Don't want to turn down a friend request from a coworker, but don't want them to see anything (Restricted list)? Facebook has these features. These social networks are going nowhere.
The lists on Facebook aren't shared. They're just my lists, nobody else can see who they're shared with. Socially this makes them utterly useless, it doesn't form communities. (Facebook groups does this, but it isn't central to the experience, like it is apparently in everyme)
Facebook also requires that everyone you share with has a Facebook account. When I have a party, I have to go and email everyone by hand who isn't on Facebook. You can put their emails into Facebook, but I assume that will make the recipient sign up, so I don't do it.
Both these improvements in Everyme make a lot of sense to me. If only it a) had DuckDuckGo like privacy, b) was truly distributed, c) wasn't for one proprietary OS only.
IMHO "granular" is the problem, not the solution. Unless of course granular can also be easy/native to the core usage pattern. Not sure why FB hasn't cracked this nut yet, but seems like EveryMe is working on getting granular right, which makes it worthy of attention.
I have a question: is this good or bad for the Series B investors? I'm not sure the answer is as obvious as it seems.
2X return overnight is great for angels, but is it good for VCs? From what I understand (correct me if I'm wrong), once VCs have an exit, they can't reuse the proceedings for a subsequent investment. Thus, since VCs like Sequoia are probably looking for 10X returns, they just ended up with a chunk of their fund that underperformed. True or false?
No, VCs generally don't recycle their wins. A VC fund is at it's heart a company that is expected to live for ten years; first raising capital, then investing the capital, and then spending it's final years collecting the proceeds of the exits, as the successful investments get acquired or IPO.
Note: VC firms will have many different funds, each with different origination years, so while the fund might last a very long time, the individual funds are not supposed to remain illiquid forever.
I'd think this would be great for their IRR, because this means they had a capital call a month or two ago, and will be returning double the capital very, very shortly thereafter.
If you invest $20 million and get $40 Million a week later you are extremely happy.
If you invest $15K and get $30K, meh...cause you were probably hoping for life-changing money. So context is everything. Not to mention that Instagram was more than an idea or a famous founder at the time of investment so there was less rick of losing everything.
Good riddance. It's so frustrating to waste countless hours working on a detailed plan that you and anyone who reads it know is wrong. Such a pointless exercise. It is important to have a plan, but not a formal business plan per se.
Here in Vancouver it's not very easy to find talent these days, but I think that it's easier to retain talent.
Compared to SV your burn rate could be lower because salaries are lower and you can get significant government funding (sometimes you get back most of the salary paid to some employees, see SR&ED and IRAP).
When it comes to the ecosystem, especially mentors and angels / VCs, SV wins big time.
Do you have experience with IRAP? I've been aware of it from my student days but now I'm looking at it from the opposite side -- I'd love to hear from someone in our industry who has hired via IRAP.
I don't think you can compare what we see now to the bubble days. Let's look at some key differences:
- In the 90s there were 50 million internet users, now there are over 2 billion. The internet economy is huge.
- It's becoming easier to get seed funding, but it hasn't become any easier to raise series A (some claim it's becoming harder due to the increased number of seed companies chasing those series A dollars). In the bubble days the madness went all the way to the IPO.
- When the bubble burst, people lost faith in the future of technology, or at least in the rate at which it would advance. Now that phones have become computers, books have been digitized, and people rely on technology for every aspects of their lives (even to socialize!), it's pretty obvious that technology is here to stay.
For sure we may see a down-swing. If macro economics go in shambles due a new war or an economic meltdown in Europe, then technology investment will suffer as well. But as opposed to the bubble days, I don't think technology investment will be the cause for such a down-swing. I think we have matured since the bubble and the fact that it was so traumatic (we're still discussing it aren't we?) also helps preventing it from re-occurring.
One of the reasons it is different this time, but still a bubble, is that there is tons of cheap money flowing around the globe, and sophisticated investors are desperately looking for returns. Hedge funds have had big outflows in the last 3 years. That (risk-seeking)money has to slosh somewhere. The total size of the hedge fund world is larger than in 1999-2000.
Also, the concentration of advertising dollars that flows through a few key companies - Facebook, Google, Microsoft, etc., is significant. Ad spending basically drives this whole thing from the revenue side. In 1999 there was less of this money in absolute terms and also the ad and marketing folks had not yet learned how to target ads to users online.
So ads + Quantitative Easing (hope I am not getting too fast and loose here but this is shorthand) means that worthless companies like Instagram can seem strategic to ad delivery platforms like Facebook. And there is so much extra risk capital chasing deals that $1B is nothing to throw away.
PG has been in the right place at the right time, but just because he and his partners do things differently in their business does not mean that the macro picture is not the most important factor.
edit - we have not matured we have just gotten better at online advertising and marketing. But that is arguably a great efficiency for the post-industrial service economy.
Good point. Though I think the top VCs hardly ever lose money on a fund, they just make lower profit margins. In fact Doug Leone of Sequoia once said that they never had a fund that lost money, although in 2002 they almost did [1]. But even if they did, if their investors had consistently invested in their funds over the years, they would have been ahead of the game. So in the long term I believe that top VCs and their investors are going to do well.
If you define losing money as generating a lower rate of return than you'd get by investing in an index fund of the stock market, then IIRC ~3/4 of VCs generate negative returns.
every asset class has a benchmark asset, and you measure the return against it.
the issue is that i don't know what asset class funds would place VC investments in. they could (but i doubt) benchmark against treasuries or whatever.
iirc a sufficiently good vc return is 3x over the life of the fund, which translates to an IRR of maybe 20%.
Since VC investing is supposed to be higher beta, I think an index fund of U.S. small cap stocks would probably be fairly appropriate, possibly with some investments from emerging markets (e.g. Brazil) thrown in. The person who would know exactly the right benchmark would be Paul Kedrosky, I'm sure it's appeared on his blog at some point or another.
What do you mean by "high beta"? LPs are looking for uncorrelated returns. If you want high beta you could just make leveraged investments in an index.
People outside the finance world seem to think beta is the same thing as standard deviation, and forget about the market correlation factor. I think the natural conclusion goes like: beta ~= risk ~= potential reward. It's hard to remember the bit where the ups/downs correlate with the market.
The most common way I've heard the term used is to mean correlation to "the market", meaning "the set of things that you can invest in".
A high beta asset goes up more than everything else when "markets" do well, and a low beta asset less so.
It is common in a multi-asset-class trading environment to make a grab for beta when the belief is that the short term trend for markets is good. Like when there is unexpected positive news flow about the global economy. "Buy some beta!"
My guess is that VC returns are dominated by IPO exits, and IPO exits need institutional and retail demand for equities, which tends to happen in up markets. To the extent that VC returns are directional with the state of capital markets broadly, it seems like calling it a high-beta strategy is reasonable.
I probably used the wrong term. What I meant is that for small cap stocks, there is a very high rate of return over a 20+ year timespan, but in any given year there is a lot of uncertainty. Venture capital strikes me as being similar in that sense.
I agree - it seems true (albeit strange) that only a handful of VCs are making returns that justify the risk. But those top VCs are consistently ahead of the game. I don't think those index funds did very well during the tech bubble burst, when Sequoia almost lost.
This is the main fallacy of this article.
It's actually "high-productivity workers", who build technology, which replaces "low-productivity workers". For that to happen, more "high-productivity workers" are required. Do they realize how hard it is to find talent in tech these days? The economy is ever evolving and becoming more efficient. There is really nothing new here, this has been happening for decades and centuries. With some adjustments, this article could be published 100 years ago and probably 100 years into the future.
One problem is that it's hard for people, especially at a certain age to adapt their skill set. So while some sectors are struggling to find employees, others have too many. It's the friction that is created by economy's evolution. But we have to look beyond the cold numbers. This is a social problem. With 8% unemployment rate, an unemployed person is not 8% unemployed, he is 100% unemployed. That's a person like you and me, with family and dreams.
However, I believe that in the future this friction will actually become lower. With technology and internet becoming prevalent, high quality, relevant education will become accessible and affordable. In other words, when education finally becomes part of that "second economy" (and it will), things will get better, not worse.
When this happens, then ironically this "second economy" could actually solve the problem the article says it creates.