
The Upside of a Downturn in Silicon Valley - edw519
http://www.nytimes.com/2015/08/27/technology/the-upside-of-a-downturn-in-silicon-valley.html?hpw&rref=technology&action=click&pgtype=Homepage&module=well-region&region=bottom-well&WT.nav=bottom-well&_r=0
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copsarebastards
> This is a paradox of invention, as well as of investing: Bad times feed good
> ideas, which in turn lead to good times, which breed complacency, waste and
> lots of bad business plans.

These days when I discover a new startup, I basically assume they're riding
investment money for personal income until proven otherwise. The amount of
frivolous startups right now is ridiculously high.

I also think this shows the idiocy of the idea that capitalism rewards
productivity and efficiency. The majority of these startups are doing stuff
that nobody uses now, probably nobody will use in 5 years, and that flat out
won't exist in 10. But that's not stopping lots of people from going out and
making their fortunes doing this. Meanwhile we can't raise the minimum wage
when in fact at least the bag guy at my grocery store is providing a real
service that people benefit from.

~~~
eruditely
>These days when I discover a new startup, I basically assume they're riding
investment money for personal income until proven otherwise. The amount of
frivolous startups right now is ridiculously high.

It's supposed to be an alternate way of working if we follow pg. You're making
it seem like it's a scam when it's a different paradigm of working that
happens to have the optionality of massive growth potential.

There's nothing frivolous about it as long as it's legitimate and can
accomplish what it's setting out to do.

~~~
copsarebastards
> It's supposed to be an alternate way of working if we follow pg. You're
> making it seem like it's a scam when it's a different paradigm of working
> that happens to have the optionality of massive growth potential.

In many cases, it _is_ a scam. Ponzi schemes could also be rebranded as a
different paradigm of working. And if you get out at the right time, a Ponzi
scheme also has the opportunity of massive growth potential.

99% of startups aren't actually doing anything. They're just putting shiny
interfaces on vapor.

> There's nothing frivolous about it as long as it's legitimate and can
> accomplish what it's setting out to do.

It's not legitimate, because it's not setting out to do anything except make
money. Most startups aren't producing anything. I'd use the phrases "lipstick
on pigs" or "turd polishing", except pigs and turds are actually useful. Most
startups actually produce things worse than pigs or turds: they produce
_nothing_ of any value. And of the startups which are actually solving real
problems, many startups actually are are solving problems for people I don't
care for, and are actually actively harmful.

Yes, you can make money and be "successful" as a startup, but to quote Randall
Munroe, "I never trust anyone who's more excited about success than about
doing the thing they want to be successful at."

I'll give you one thing: people's intention when they start a startup isn't
usually to openly steal people's money; they usually at least fool themselves
into thinking they will be providing some real utility. But that doesn't make
much difference to people whose retirements will take a hit when the tech
bubble bursts.

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gluecode
My partners and I created a startup during the last severe downturn. It was
indeed the best time since resources ended up being cheaper for us and we got
a longer runway. We ended up never needed to raise capital and had our exit in
2012.

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rdlecler1
Let's be clear. There are four tiers of companies. The Googles and Facebooks
of the world, that have the ability to pay for talent at whatever cost. The
Ubers that get billions in venture funding who need to compete with this
limited talent pool dollar for dollar. Then there is the 1%ers that are backed
my major VC firms that are having boatloads of money dumped on them. They're
trying to get good talent and they need to pay for it. and then there is the
rest of us. every nickel is our prisoner. Founders pay themselves no more than
they need for rent and food, and often less, and their employees make 2x-3x
what they do because the market will pay 4x-5x. This is a winner takes all
talent war. Companies that spend a lot of money are forced to, and this will
mean that margins at big companies like Google will have to come down. But
this is what the market is demanding. There is still tremendous growth
opportunities In tech. Almost by definition technology implies growth.

~~~
adventured
You missed the radical majority of all existing technology companies:
moderately successful companies that have taken little to no venture capital,
and operate all over the US and the world. Most have been in business for at
least three to five years, are profitably self-sustaining and require no major
venture capital. Most are growing modestly, and are easily able to keep the
lights on and pay real salaries. They have ~$1 million to ~$50 million in
sales.

Those companies make up nearly the entire technology industry across the US on
a number of companies basis.

Start-ups (both big and small) are the minority and so are Googles/Facebooks.

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jondubois
I think the current economic environment has been distorting pretty much every
aspect of the software industry. I think that the next tech bubble will be
both an economic crisis and a technological crisis.

Too much engineering effort has been wasted on overhyped ideas/technologies.
This is true for both the consumer and b2b/high-tech sectors. Everybody is
focused on growth and nobody is willing to invest time to refactor their
increasingly complex systems/achitectures (no one cares about running costs) -
So instead, we just cram all this inefficient mess inside Docker containers,
hook up hundreds of expensive and unecessary external services to it and then
we legitimize this huge pile of expensive junk by calling it a microservices
architecture!

... And then a startup will hire a team of 100 engineers to maintain something
which should otherwise only require 10 engineers.

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danieltillett
Is there any sign yet of a funding pullback? I am not raising funds, but for
those of you who are, are you seeing caution or hesitation from investors?

~~~
shostack
Reading headlines these days, I can't help but feel this is yet another
article trying to foretell the end of the good times.

The market had a correction! This is the end!

People realized China's numbers were not totally accurate! This is the end!

Housing prices in the Bay Area have reached ridiculous levels (again)! This is
the end!

Everyone seems to want us to hit another downturn to be proven right. My fear
is that once the media engine revs up, it can in fact create a self-fulfilling
prophecy.

~~~
dandanisaur
I completely agree with what you said. Media is putting the fear on you. It'll
turn into.. 'Whether you think you can or you can't, you're already right.'.
People will fail simply because they think they will.

Just to note: Facebook just had 1 billion unique users in 1 day (2015). The
year 2000 only had 350+ million INTERNET USERS.

It doesn't help that we are reminded by our predecessor's to watch out for the
impending doom (something that might not have been expected). In the scheme of
things, the context of where technology/internet was at the time was
completely different to now.

~~~
myblake
I think there's a difference between a moderate downturn and a cataclysmic
crash, and since 2000 was especially bad for tech and 2009 especially bad for
everyone we're not used to mild to moderate downturns around here. A downtown
doesn't mean people stop using technology, just that the market conditions
change.

