
SoftBank expects $24B in losses from Vision Fund, WeWork and OneWeb - JumpCrisscross
https://techcrunch.com/2020/04/13/softbank-expects-24-billion-in-losses-from-vision-fund-wework-and-oneweb-investments/
======
riyadparvez
It's funny how it's named Vision Fund and invests in a company like WeWork.
I'd be more forgiving if they have lost money investing in companies working
for techonological breakthrough like nuclear fission or drug research for
incurable diseases. Instead they invested in a real-estate office space
sharing company trying masquerade itself as a tech company.

~~~
loganfrederick
I made this same point when it was announced three months ago that Wag
(another major Vision Fund investment) was struggling:
[https://news.ycombinator.com/item?id=21095990](https://news.ycombinator.com/item?id=21095990)

Yet somehow people still seemed to defend the strategy ("you underestimate
biotech ROI" or "investing in moonshots was not the point of the fund").

Most criticism is invalid because it misses the underlying flaw of the Vision
Fund: If you're going to waste $24+ billion on the Adam Neumann's of the
world, you could not have performed any worse by taking on riskier projects.

It was obvious to everyone that WeWork was going to flop (even if Softbank got
some money back from an IPO, the ensuing stock price crash would've tarnished
their reputation and who knows how quickly they could've exited) and that Adam
Neumann was a con. So the return there was going to be heavily negative.

I doubt $10+ billion into drug research would've yielded as negative of
results, especially in this era.

The only valid critique of our approach I've heard is that it's a logistical
pain to try and spread and manage $100 billion around $5 million at a time.

~~~
duxup
Biotech is a weird space for "tech" like ventures.

Generally actual tech startups don't have a lot of patience.

Biotech research as I understand it is naturally highly iterative and
immediate payouts are rare.

~~~
bsder
> Generally actual tech startups don't have a lot of patience.

This wasn't true in the pre-2000. It was only the DotCom(tm) era that spoiled
VC's who all wanted hits within 36 months.

The history of the valley was the history of _slow_ investments.
Semiconductors are money hungry and slow--yet VC's invested in them until
about 2000.

I would argue a lot of the lack of progress in tech is because all the VC
money is chasing _fast_ returns.

I find Musk insufferable, but, credit where it is due, he put investment money
into two _VERY_ slow industries.

~~~
ericd
Do you know if the standard 10 year fund life was different back then? If not,
I'm curious how that interacted with their relatively slow investments.

Maybe it's just that companies went public at a much earlier stage back then.

~~~
achillesheels
>Maybe it's just that companies went public at a much earlier stage back then.

This. My father worked for a few semiconductor startups in the 80's, e.g.
Xicor. Liquidity events were trivial compared to now. Small company's with
competency and focus could exit with a proprietary tech play which satisfied
everyone all around (founders, vested employees, investors, industry). Rinse
and repeat for two-three decades and we get the foundations for Information
"Tech" startup culture.

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sytelus
I'm actually not happy with this news. They are the only one interested on
some of the long term researchy projects especially in robotics area. In my
opinion, this would be one of the highest impact area in next 10 years given
all the advances in computer vision and reinforcement learning. It will take
time, but imagine, one day, freeing up humanity from the burden of all the
repetitive mind-numbing boring low paying jobs. You might say that people will
lose jobs but I think we will be fine. If you ask where is the $1T business
opportunity that would be powered by AI, I would point to this rapidly
evolving field. To our misfortune most of the big tech with big wallet have
strangely disorganized, if any, efforts. SoftBank is one of the biggest long
term game in this area which believes in this promise.

~~~
jjulius
>You might say that people will lose jobs but I think we will be fine.

I'm curious to hear you expand on your thoughts here.

~~~
IshKebab
He probably means fine in the long term. Nobody laments the loss of farm
laboring or a coal mining jobs now that they are (mostly) gone. In fact the
farm jobs that haven't been mechanised yet (picking apples etc.) are mostly
done by immigrants with no other options.

I did apple pruning one hot summer. Trust me, nobody will miss that job when
machines take over.

~~~
nigerian1981
Tell that to the coal mining communities that were affected by the closing of
coal mines by Thatcher in the 80s. From the reduced expectations of the multi-
generationally unemployed, to the social isolation that a lack of community
services brings, to the paucity of opportunities for both young people and
those who want to change career. 40 years later those communities are still
dealing with the consequences of these actions.

~~~
IshKebab
How many young people living there do you think want to get a job in a coal
mine?

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aripickar
I love the conspiracy theory that masayoshi son is a CIA plant designed to
drain Saudi money.

~~~
nwsm
I've read it as not only "draining" but siphoning it to the US. Even if the US
plays don't work you've injected money into the US.

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rubyn00bie
Moral of the story: extreme wealth is a function of luck, assuming otherwise
will only make you look foolish. Masayoshi Son has tried to prove otherwise
and largely failed. Appreciate your luck, not your ego, you won't make as many
stupid decisions that way.

~~~
graeme
This is not a good moral. You’re generalizing from one example.

Warren Buffett has made many successful investments for example, over a damned
long period. There’s clearly skill in his story. Skill that Masa didn’t have.

~~~
toomuchtodo
[https://www.technologyreview.com/2018/03/01/144958/if-
youre-...](https://www.technologyreview.com/2018/03/01/144958/if-youre-so-
smart-why-arent-you-rich-turns-out-its-just-chance/) (MIT Review: If you’re so
smart, why aren’t you rich? Turns out it’s just chance)

~~~
graeme
This is a computer model.

> So some people are more talented than average and some are less so, but
> nobody is orders of magnitude more talented than anybody else.

It seems likely that in some domains, some people are orders of magnitude more
talented. Assuming this is false begs the question.

~~~
tryptophan
Yeah, its insane to claim talent isn't orders of magnitude apart. I'm probably
a better programmer than 99% of the population, but then I see those insane
luajit or llvm people and realize I'm just another noob.

~~~
adrianN
I think you're misunderstanding talent. You always have to compare yourself to
people who invested an equal amount of time training the skill.

For example I go to the gym regularly (at least before the pandemic). I'm
probably in the upper 10% of the population when it comes to strength. But
compared to the regulars in the gym I'm below average.

~~~
kortilla
Well if you take training time into account separately, then the “talent vs
luck” comparison becomes even less meaningful.

~~~
read_if_gay_
Possibly your skill level isn’t talent + training but talent * training

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katmannthree
From the news articles I've seen I get the impression that aside from an early
investment in Alibaba, SoftBank has a very poor track record. Is that actually
true or typical for VCs, or is it just a bad impression from only knowing
about them from headlines?

~~~
code4tee
Sometimes VCs are a bit like hedge fund traders. They have a lot of terrible
investments but one great one that made them some money and made more people
want to invest. Often though there is little indication the initial one
success was much more than just luck and they then proceed to lose a bunch of
money for the investors that came in based on their “great track record.”

There are of course those that truly do have a great record over a long period
of time but they are much less common. We’re coming off a period where VCs and
others could probably have thrown darts at the wall and made a half decent
return. Now that’s all changed so we’ll see who gets washed out and who can
stand on their results long term.

As I think it was Warren Buffet once said, when the tide goes out is when you
get to see who wasn’t wearing any pants.

~~~
Ididntdothis
As a bank you could probably hire 30 analysts who make random predictions over
a few years. One of them would probably be right and you have your superstar
who can attract clients.

~~~
dtparr
Yeah, there's actually an old sports betting scam that works similarly. You
send out letters to tons of potential gamblers saying something to the effect
of 'The <team>'s games are fixed and I've got the inside info. To prove it,
I'll predict the winner of the first n games' Then each week, you send half
the group one prediction and the other half the other. Whichever half was
wrong, you ignore, and the the 'correct half' you repeat with the next week.
After n weeks, you have 1/(2^n) of your original group who've seen you be
right each week, and at your desired n, you ask for money to keep going.

~~~
mywittyname
It's an interesting scam, but we all know how quickly n grows in this
scenario. You'd need 66k potentials to have one correct guess, per team, per
season in the NFL. And the "winner" of you lottery needs to have enough
scratch to make your scam worthwhile, and be dumb enough to part with it for a
peak of your post-season picks.

~~~
Ididntdothis
I think with some common sense and understanding of the sport you can probably
narrow down things quite a bit.

~~~
KC8ZKF
Point spreads negate common sense and understanding. Remember touts sell you
who to bet on, not who is going to win.

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pkaye
The CEO of the SoftBank did lose a ton of money back in the Dotcom bust. I
guess he is a huge risk taker. From Wikipedia:

[https://en.wikipedia.org/wiki/Masayoshi_Son](https://en.wikipedia.org/wiki/Masayoshi_Son)

>According to Forbes magazine, Son's estimated net worth is US$23 billion, and
he is the second richest man in Japan,[1] despite having the distinction of
losing the most money in history (approximately $70bn during the dot com crash
of 2000).[3]

~~~
arkitaip
Huge risk taker or just a terrible investor?

~~~
mrlala
Both.. I know nothing about this person but very possible he just got lucky on
some really big investments but anything he tries to really do is shit.

Luck is such a huge factor sometimes...

~~~
pkaye
I think his second big chance was Alibaba.

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H8crilA
Masa was given money and lost it _again_? Unthinkable. If he lives long enough
to the next late stage bull market will he repeat his signature move? Will
people let him? Those that read Irrational Exuberance know the likely answer.

This was a good interview, recorded close to the peak of this cycle:
[https://youtu.be/Sa2_VBu0d7k](https://youtu.be/Sa2_VBu0d7k)

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say_it_as_it_is
While this is a great misfortune, consider how SoftBank advanced WeWork
towards IPO. They were selling a pile of overvalued garbage, hoping that that
the rest of the world was as brain dead as its own investors and not notice.

~~~
dullgiulio
I'm pretty sure this all happened in spite of what SoftBank tried so that
investors would not discover how bad WeWork is as an investment.

We could start from the fact that is a real estate company and not a tech
unicorn...

~~~
DamnYuppie
Honestly I was routing for for WeWork to IPO as I had most of my IRA lined up
to short them. Yes you can't short in an IRA but I was going to buy near money
PUTS against them. I was salivating for months waiting for this windfall, too
bad it didn't come to pass :(

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JumpCrisscross
Has anyone estimated how close the Vision Fund is to defaulting on its
guaranteed dividend to preferred investors, _e.g._ the Saudis?

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captn3m0
>The amount of $ 24,000,000,000 would have in 100 Dollar Notes a weight of
240.00 t (217.72 short tons). A single stack of money with 240,000,000 new
banknotes would be 24.00 km (14.91 miles) high und would have a volume of at
least 248,373.60 litres (262,453.46 quarts).

>For transportation, you should already have a fleet of trucks.

[https://1000000-euro.de/how-much-does-a-million-dollars-
weig...](https://1000000-euro.de/how-much-does-a-million-dollars-
weigh/index.php#weigh-dollar)

~~~
hkmurakami
Gotta use the 1000 Swiss franc bills.

~~~
genocidicbunny
At one point the US had $100,000 bills, so that would cut down on the stack
quite a bit. I believe they have all been discontinued now though.

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FartyMcFarter
It should probably be renamed the Double Vision Fund.

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nimitzeoauto
We Work failure was more to do with bad corporate governance and that was the
primary reason Wall street shunned it.

The core problem of VF was pushing companies for growth at all costs which led
to companies not focussing on unit economics, not caring about profitability
and becoming too big to ever take care of those things. Fixing your unit
economics when you are so big is akin to repairing a rocket and changing
direction which it is hurtling aggressively to crash. I hope now entrepreneurs
will try to build sustainable business hoping for an IPO rather than growing
fast to come in eye of VF and take softbank money

~~~
ashtonkem
Was WeWork actually poorly governed, or was it governed extremely well with a
goal other than shareholder value?

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d_silin
I remember several years ago SoftBank has purchased ARM Holdings and everyone
commented on that as a "smart money" move. Where are those smarts now?

~~~
loganfrederick
Compared to WeWork, Uber, and Wag, buying ARM was not their worst idea.

~~~
d_silin
It was definitely a good idea! But they ran out of good ideas very quickly
after that, apparently.

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LatteLazy
The whole point of the Vision fund is to take large longer term risks. Whether
WeWork belongs in that category is a matter of opinion (I think not). But you
can't judge the fund on one investment or one quarter. People here complain
about short termism usually don't they?

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xivzgrev
This does not surprise me at all.

I worked at a company once where the ceo was enamored by Masayoshi (who had
also invested in our company). He asked me to help him with a presentation he
was going to give to masayoshi as part of some kind of competition to be his
protege or something.

I remember thinking the whole thing was strange: why was the CEO spending his
and my time on a personal competition instead of growing the company, but what
did I know, it was literally my first few months in the tech industry. So I
did my duty, got a thanks, and the CEO left the company a month later to parts
unknown.

Him and masayoshi were hype men, and the latter is obviously good at it. But
now we will see if he is great - it’s one thing to hype with unknown track
record, it’s another thing to hype when you have some large losses.

~~~
kick
Masayoshi has actually had a known track-record since about 2000 or so. He's
been the man who's lost the most money in history since about the same.
Seventy-billion dollars!

------
Havoc
Techcrunch doesn't work if you block advertising.com

I guess I don't need techcrunch in my life after all

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ineedasername
The problem is it's simply a whole lot _easier_ to spend $100 Billion when you
do it in large chunks. But then fewer bets means less diversification, more
risk. It doesn't help that Vision has a few large correlated investments.

------
attilakun
I'm confused about the numbers in the report linked in the article:
[https://group.softbank/system/files/news/en/press/2020/20200...](https://group.softbank/system/files/news/en/press/2020/20200413/pdf/20200413_en.pdf)

In particular, the "Change (C-A)" row of the table does not make sense to me.
If it would say "Change (A-C)" (not "C-A") then the "Net sales" and "Income
before income tax" columns would make sense but the rest still would not. Does
anybody know how to read this?

------
microdrum
Maybe the story isn't that many companies they invested in did not work out.
Maybe the story is that they are bad investors.

------
misiti3780
So did Adam Neumann get that 200M consulting contract + the huge ~1B payout as
he departed a few months ago - no right?

~~~
tmh79
Its in court, but softbank hasn't paid the corporate structures that
controlled wework the money noted in their deal. Its pretty crazy that no one
really talks about how weird the weWork corporate structure is:
[https://twitter.com/tomgara/status/1161762187590995974](https://twitter.com/tomgara/status/1161762187590995974)

All of the "deals with wework" are really deals with different parts of this
weird structure.

------
dzonga
softbank and son could've taken the monkey blindfolded approach from a random
walk along wall street and won't have lost 24bn. hell they could've picked 10
kids and asked them to name coolest things they want and they wouldn't have
lost money. you've to be pretty incompetent to lose 24bn

------
fossuser
If you're throwing that much money around why not put it in companies like
Stripe? Even just putting it in existing big players like Apple would have a
good return.

Why dump so much of it in things like Wag?

Did they invest in anything that was actually interesting?

~~~
gok
Satellite internet? Autonomous vehicles? Nvidia and Arm? What's "interesting"
to you?

------
silentsea90
I wish even a tiny bit of the $24B came to my bank account. Where did it go
exactly?

~~~
chewz
> Where did it go exactly?

The $24B is a loss as a result of repricing assets and creating reserves. So
it is just some virtual moves in the balance sheet of Softbank, a record in a
computer essentially. Do not imagine stacks of dollars being burned on some
altar.

------
zaphirplane
My impression is softbank’s profits are based on valuation increase. Where
they kind of drive the valuations by investing in companies.

------
clairity
it should be clear from the mounting evidence like this that having (access
to) capital is no guarantee of efficient allocation.

that's not an indictment of capitalism _per se_ but of plutocracy. the greater
the wealth concentration, the less efficient we become.

~~~
cryptica
This makes sense. Each person has limited bandwidth... If the vast majority of
the wealth becomes concentrated in very few hands, those hands will simply
start making bigger deals.

When you divide an investor's total thinking capacity by the total amount of
money they have to invest, you end up with less thought going into each
dollar. The average amount of thinking per dollar drops and you get less
efficient allocation of each dollar...

Allocating capital is clearly very challenging and yet the argument which
advocates for increased concentration of wealth relies on the assumption that
people are getting better at it on a per-dollar basis.

All evidence would suggest that people are getting worse at allocating capital
on a per-dollar basis. The more dollars someone has, the less they will care
about each individual dollar. An increasingly complex world should require
increasingly more thinking going into each dollar.

~~~
clairity
great exposition. many get so caught up on the government vs corporate
dichotomy when considering excess and waste, but size and scope relative to
human capacity is the better correlate.

------
graeme
Is there a way to buy put options on softbank from north america? Have wanted
to do so for a while, but doesn’t appear possible at my broker.

~~~
swyx
SFBTY is the ADR. but just don't, you have no edge here.

~~~
graeme
Thanks! Not buying, just want to be able to check prices for if/when
volatility drops again.

------
register
I guess that, given the recent trends, their stocks will grow up to the sky.
P.S: I am obviously joking

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helltone
And whatever happened to improbable?

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DyslexicAtheist
Masa is a CIA asset and this is the fastest way to drain money from the Saudis
/s

~~~
LatteLazy
If only...

------
gigatexal
Yikes. I wonder if they will sell Alibaba shares to shore up funds?

------
fronofro
How does SoftBank not go out of business?

------
loufe
I'm curious as I believe I'm fairly skeptical myself, are many people in this
community genuinely surprised by this news?

------
nickpinkston
Wow, how surprising! No one could've seen one this coming!

------
whalesalad
Play stupid games, win stupid prizes.

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pm_me_ur_fullz
Mohammad bin Salman, Yasir bin Othman Al-Rumayyan, Masayoshi Son

debut

Bonesaws-N-Harmony

------
ngngngng
Incredible, with that much money, they could have given every American a
million dollars a month, and still have a lot left over. I feel like a million
dollars could help a lot of families right now.

~~~
atlantacrackers
This is a joke, right?

~~~
kortilla
[https://www.newsbusters.org/blogs/nb/kyle-
drennen/2020/03/06...](https://www.newsbusters.org/blogs/nb/kyle-
drennen/2020/03/06/msnbc-fail-bloomberg-could-have-given-each-
american-1-million)

