

Matt Mullenweg: On the Evolution of Investing - ccc3
http://ma.tt/2012/01/on-the-evolution-of-investing/

======
startupfounder
"...they’re... going to destroy far more more wealth for their contemporaries
than they create for themselves..."

This is the trend, use less and less resources (approaching zero) to make
society more and more efficient. I see both sides of this coin.

The first is that industries need disruption and resources need to be used as
effectively as possible. This will help solve the many problems caused by
resource constraint.

The second is that by disrupting the way current industries are run jobs are
also destroyed. Craigslist disrupts classifieds and hundreds of news papers go
out of business. We all rejoice, but there is a gap that is occurring that is
troubling. What happens to the people who loose their jobs?

There is a gap between people loosing their job and jumping on the new train
that is accelerating. Where does this bring us in 10, 20, 50 years and how do
we bridge this gap?

The answer is (re)education, but where and how? 50% of students drop out of
high school!

Education needs to be disrupted if we ever want to close this gap, the
consequences if we don't are massive and will corrode any progress that is
made.

~~~
ryanwaggoner
_50% of students drop out of high school!_

I don't think this is anywhere close to true on a national basis in the US. Do
you have a source for that?

The Dept. of Ed seems to indicate that it declined from 14% in 1980 down to 8%
in 2009:

<http://nces.ed.gov/fastfacts/display.asp?id=16>

~~~
startupfounder
Ryan, You are correct. The graduation numbers are 74.7% nationally, but in DC
it is as low as 56%!

([http://news.yahoo.com/blogs/lookout/high-school-
graduation-r...](http://news.yahoo.com/blogs/lookout/high-school-graduation-
rates-states-lag-behind-152514652.html))

------
gburt
> going to destroy far more more wealth for their contemporaries than they
> create for themselves.

"Destroy" is not the correct term. It is called creating efficiency. Reducing
resources towards the same end is what increases wealth for everyone. While PG
and the YCombinator crew might not capture all the wealth, they will capture
enough to keep themselves satisfied and continue doing what they do, while
tremendously increasing efficiency in the market and thus making everyone
involved wealthier.

Assuming Matt's surface analysis is actually correct. I didn't put much
thought in to that angle.

------
cs702
In response, institutional investors will do what they have always done:
migrate to other sectors in which startups require substantial amounts of
capital upfront.

At the moment, such sectors include green energy, robotics, medical devices,
biotech, and military weapons -- to name just a few. (Try and launch a new
medical-device startup without capital; it's not possible.)

In all likelihood, there will _always_ be startup sectors that are starved of
capital.

[UPDATE: Edited to correct poor grammar.]

------
jc123
Misleading title. Better to use a term such as "venture capital" because
"investing" is much broader.

Regarding the article, VCs might get disrupted by a large number of smaller
groups pooling together to provide the same amount of massive risk capital.
But what will not be disrupted is the need for massive risk capital to fund
startups such as Facebook, Twitter, Pinterest, etc. There will be startups
with tremendous growth where its monetization engine is non-existent or takes
longer to develop and start running.

------
RockyMcNuts
I think the dirty little secret is that, aside from the top-tier VCs, almost
no one else ever made good risk-adjusted returns, outside of a short window in
the late 90s.

There is disruption going on upstream.

Second markets are disrupting the IPO pipeline.

Independent high-frequency trading has taken over marketmaking from cartels of
floor brokers and banks.

Independent registered investment advisers are disrupting stockbrokers.

Individuals are taking charge of their own portfolios with online tools,
blogs, communities like StockTwits.

Still more cartels and dinosaurs are ripe for disruption.

I don't really agree about destroying wealth. Investment companies are
financial intermediaries. To the extent they are disintermediated and the
process becomes more efficient, the entrepreneurs and investors end up keeping
more of their wealth instead the advisers. The intermediaries who really added
value will still find a role, maybe as entrepreneurs, incubators etc.

In the case of newspapers/music there were institutions that used to pay for
value-added activities that shrank or disappeared. There is a loss of
institutional memory / structure / craft. But arguably there is not that much
value add in most of the investment models that are getting disrupted and what
replaces them is superior.

~~~
firefoxman1
_Independent registered investment advisers are disrupting stockbrokers._

That's definitely one that's under-appreciated. High-frequency trading gets
all the press, but the stockbroker is a dying breed. People want more than
someone who can buy and sell stock for them, since they can do it online
easier and cheaper than with a broker.

I think two things that create large opportunity in this old, ripe-for-
disruption market are personal service and a feeling of security. I know
someone who is an account manager (kind of like a "hedge fund" manager for the
average person) who earns his clients about 3% annually, and he does quite
well. _Three percent!_ The average rate of inflation! But with how volatile
markets are and now quickly financial instruments change, people are really
afraid of losing it all, so they hand their money to an expert to manage.

So anyway, if anyone is looking to disrupt the financial market in the years
directly directly following a crash, personal service and guaranteeing
security seem to be the key strategies.

