
Ben Horowitz: We Like Dropouts, Insane Ideas, Tiny Markets, No Way To Monetize - iProject
http://techcrunch.com/2013/01/20/ben-horowitz-at-dld/
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tsm
Maybe I lack vision, but I think there's still interesting programs that will
never achieve startup success.

For example, I'm currently writing a Lisp program that uses an LSTM neural
network to compose Scottish fiddle music. As a Scottish fiddler (and composer)
and AI enthusiast, this is an intensely interesting project to me. And it's
certainly an insane idea with a tiny market and no way to monetize. And that's
how it will remain. Scottish fiddling will always be an obscure niche, even
within that community there will never be much demand for new music (and
there's so many buried gems from the 18th century that this will virtually
never change), and any existing demand can be easily fulfilled by the scores
of people--including myself--who compose fiddle music the old-fashioned way.

Unlike Altair BASIC, this isn't a case of somebody creating a product in a
growing industry people don't realize they need yet. Even I--the "founder"--
don't see any potential and realize I'm providing free labor. I'm just in it
because it's a great hack.

tl;dr - Distinguish between "anticipating public demand" and "doing something
only for yourself".

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ghshephard
Flash Forward seven years - tsm is now the CEO of the world's largest machine-
generated entertainment consortium, with their LISP generated performances
routinely topping the charts across the planet.

~~~
Tichy
Exactly - music in the future will be algorithms. (Edit: to clarify, I mean
instead of something like an MP3, you could download an algorithm that creates
music on the fly. Why bother with recordings when you can have the live
composer?)

~~~
PlanetFunk
There's something about that last statement that blew my mind. your own
personal composer, writing your own personal theme music, specifically
designed to catch your current mood, or even modify it.

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breckinloggins
I'd like to call this "Black Swan Hunting".

The idea seems similar to purchasing (wholesale) a crate full of swans (some
of which might merely be dyed black) in the hopes that one of them will be a
genuine black swan.

In many ways, this isn't a new idea. How many car collectors have dreamed
about answering a classified ad for an "old car in the barn" only to have it
turn out to be a Bugatti Type 57SC Atlantic? But the reality is that 99.99% of
the time, it's a rusted out Buick.

It's true we need these "diamond in the rough" hunters out there, and I must
admit that if I had many millions of dollars I would probably set up just such
a "Black Swan Fund", but I've always imagined that I would style it after the
various X-Prize-type competitions that became popular starting around the
middle of the last decade. It seems to me that most such ideas can be funded
"a step at a time".

The other way to do this would be to consider it as artistic patronage. That
way you wouldn't expect a return on your investment other than the creation of
something that might not have been there before. Of course you still keep a
nice chunk of any potential earnings just in case you get lucky. :)

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jacques_chester
> _I would probably set up just such a "Black Swan Fund"_

I think that's what venture capitalists already do.

They place lots of "small" bets. They lose money on most of them. But a small
percentage do very well, and those investments "make the fund" -- that is,
they cover all the other losses and create an overall profit.

I remember when Andreessen Horowitz launched, to great fanfare.

What was their revolutionary plan? To focus on investing in companies that
would turn them a profit.

And people were slapping their foreheads as if this were some great
revelation. "Of course! VC has been run as a charity!"

It's like saying "I am going to start a horse racing fund. I will only bet on
the winning horses".

That's not a statement of investment strategy. It's a statement of wishful
thinking.

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adventured
Actually it was not argued early on by analysts that Amazon would have a hard
time being profitable. It was argued that they would be a lot more profitable
than traditional bricks & mortar because they didn't need the physical stores.
That was supposedly one of their great competitive advantages. This was an
almost universal claim during the early years of Amazon when the bubble was in
full sway.

It was only years later, toward the end of the bubble and after it, that the
claim began that Amazon could / would never make money.

Amusingly, both of these popular analyst points turned out to be false.

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hkmurakami
Sounds more like "We like to invest in college dropouts with insane ideas
going after [currently] tiny markets [that have the potential of growing many
orders of magnitude] with [currently] no way to monetize."

Isn't this basically another way of saying "we only care about home runs, not
singles"?

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tlogan
The interesting thing is how he says "Airbnb, for example, sounds like a crazy
idea" - when I heard about it I did not think about it as a "crazy idea". It
sounded as a great idea - but hard to execute (hotels, regulations, fraud
control, etc.).

But they were not doing one more social network, so it had to sound as a
"crazy idea" for any VC.

It seems definition of "crazy idea" for VCs is "not doing the same thing as
other startups are doing".

~~~
Tichy
I don't get it even now - weren't there already b&b sites before AirB&B? So
what's so crazy - the air part, which they threw out anyway?

~~~
true_religion
The crazy part was renting out an airbed in your livingroom.

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Tichy
Which isn't really their business model now, or is it? That's all just a hype
PR story.

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true_religion
Nope, but when they started their business model was literally "hey we can
sell airbeds in livingroom as an alternative to regular Bed and Breakfasts,
and hotels for sold out concerts, shows, and events".

They just pivoted to something more traditional after spending 1-2 years
trying to make the original idea work.

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ricardobeat
The three companies cited as having 'figured it out' in Q3/2012:

    
    
        Amazon     -$274m
        Facebook   -$59m
        Twitter    ?? (private, supposed not profitable)
    

They make loads of money regardless, but it's interesting to look at.

~~~
krakensden
Amazon is sort of an outlier- they could be profitable if they wanted to be,
but they would rather eat the world.

~~~
cm2012
That is some memorable phrasing.

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frere
What a horrible strategy. Proof that it is better to be lucky than smart.

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jgalt212
All these guys do is make noise. It's been a long time since we can point to a
shrewd investment they've made.

