That accounts from some ways startups can be negatively correlated, but for the purposes of billionaire founders making the Forbes 400, I still say they are all hugely correlated to market conditions that enable crucial funding rounds, M&A events, and IPO events.
Also, if I think startup X sucks, it's not that obvious how I can bet against them and get rich on their dismal failure. But if I think hedge fund Y is doing stupid things, I can take the other side of their trades, and one of us will wind up rich.
"Also, if I think startup X sucks, it's not that obvious how I can bet against them and get rich on their dismal failure."
Compete with them. If you think startup X sucks, then enter the same market, gunning for the same customers, but serve them better.
It's harder to do this than for a financier to short a stock, but that's because everything in finance is higher leverage than in business. The goal of an entrepreneur is to do things better than established businesses; the goal of a financier is to predict which firms will do things better, and then divert capital to them. The actual effort involved in finance is simply a decision, but that decision needs a lot of information to be correct more often than it's wrong. (None of which changes the relative likelihood of wealth concentrating at the top of one of these fields.)
I don't follow. Say a startup comes along and I think the entire idea, space, and sector is doomed to failure. The whole market is a no-go. I can't get rich off the ones I decide will be failures, and it's possible for an entire sector to fail together in a correlated way. Say, Gmail crushes all web-based email startups, or iPhone crushes all startups based on the available 2007-era mobile platforms.
At least in financial derivatives trading, there is a somewhat zero-sum aspect to who is winning and losing money. Every dismal derivatives trade should have some winners on the other side.
Also, if I think startup X sucks, it's not that obvious how I can bet against them and get rich on their dismal failure. But if I think hedge fund Y is doing stupid things, I can take the other side of their trades, and one of us will wind up rich.