So its a rumor of a rumor. Interesting. Personally I don't think its a credible rumor but lets set that aside for a moment.
These guys are a derivative business, generally picking up the value between an idea growing in one market and its arrival in another. Its not a bad place to be but to the extent that it is successful it indicates that the capital system isn't enabling rapid enough expansion of successful businesses, this isn't a steady state.
Think of it this way, company A starts in market X and demonstrates traction, then r-i starts up company B in market Y with the same value proposition and gets traction there. The investors in A don't see this as "validation of our idea in market B" they see it as "we didn't move into B quickly enough". So instead of accruing that value to company A its been diluted into company B. This situation happens when capital markets become so risk averse they start crimping their own ability to capture value. Its an imbalance and lately it was I think enhanced by the questions about how the IMF monetary system is going to resolve out its current tension.
The situation is temporary as once the other factors of fiscal instability are removed, the investors in these companies will be push them to expand into those other markets and take that risk on. That will then make it very hard for R-I to continue operating the way it does today (well it will greatly reduce their success rate) and so they won't be a good candidate for outside investment.
I got to meet a guy [1] who took advantage of scared investors for a living, he bought (and sold) 37 single family homes out of foreclosure in the Bay Area, pretty much from almost every county but more on the peninsula/southern side than the east bay. He said he's on track to quintuple his investment in just under 3 years. He attributes his success not to some special gift of insight, just that he didn't believe that the Bay Area housing market was 'never' going to be the same, and where other investors were too timid to invest he stepped in.
[1] Like many neighbors I tour houses nearby when they are on the market, I met this guy when he was talking with the Realtor showing the house. The broker had been getting questions they couldn't answer about the solar power system on the roof.
These guys are a derivative business, generally picking up the value between an idea growing in one market and its arrival in another. Its not a bad place to be but to the extent that it is successful it indicates that the capital system isn't enabling rapid enough expansion of successful businesses, this isn't a steady state.
Think of it this way, company A starts in market X and demonstrates traction, then r-i starts up company B in market Y with the same value proposition and gets traction there. The investors in A don't see this as "validation of our idea in market B" they see it as "we didn't move into B quickly enough". So instead of accruing that value to company A its been diluted into company B. This situation happens when capital markets become so risk averse they start crimping their own ability to capture value. Its an imbalance and lately it was I think enhanced by the questions about how the IMF monetary system is going to resolve out its current tension.
The situation is temporary as once the other factors of fiscal instability are removed, the investors in these companies will be push them to expand into those other markets and take that risk on. That will then make it very hard for R-I to continue operating the way it does today (well it will greatly reduce their success rate) and so they won't be a good candidate for outside investment.
I got to meet a guy [1] who took advantage of scared investors for a living, he bought (and sold) 37 single family homes out of foreclosure in the Bay Area, pretty much from almost every county but more on the peninsula/southern side than the east bay. He said he's on track to quintuple his investment in just under 3 years. He attributes his success not to some special gift of insight, just that he didn't believe that the Bay Area housing market was 'never' going to be the same, and where other investors were too timid to invest he stepped in.
[1] Like many neighbors I tour houses nearby when they are on the market, I met this guy when he was talking with the Realtor showing the house. The broker had been getting questions they couldn't answer about the solar power system on the roof.