[HN Gopher] SoftBank expects $24B in losses from Vision Fund, We...
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SoftBank expects $24B in losses from Vision Fund, WeWork and OneWeb
Author : JumpCrisscross
Score : 228 points
Date : 2020-04-14 18:50 UTC (4 hours ago)
(HTM) web link (techcrunch.com)
(TXT) w3m dump (techcrunch.com)
| pkaye wrote:
| 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
|
| >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 wrote:
| Huge risk taker or just a terrible investor?
| jhwang5 wrote:
| How do you reconcile calling some one bad at making money,
| when he is worth 26bn.
|
| In all seriousness, luck is >85% of making big money.
| mrlala wrote:
| 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 wrote:
| I think his second big chance was Alibaba.
| JumpCrisscross wrote:
| Has anyone estimated how close the Vision Fund is to defaulting
| on its guaranteed dividend to preferred investors, _e.g._ the
| Saudis?
| microdrum wrote:
| 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 wrote:
| So did Adam Neumann get that 200M consulting contract + the huge
| ~1B payout as he departed a few months ago - no right?
| masonhensley wrote:
| Apparently that payout was in question as recently.
|
| https://www.barrons.com/amp/articles/softbank-may-get-out-of...
| tmh79 wrote:
| 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
|
| All of the "deals with wework" are really deals with different
| parts of this weird structure.
| Havoc wrote:
| Techcrunch doesn't work if you block advertising.com
|
| I guess I don't need techcrunch in my life after all
| register wrote:
| I guess that, given the recent trends, their stocks will grow up
| to the sky. P.S: I am obviously joking
| captn3m0 wrote:
| >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...
| hkmurakami wrote:
| Gotta use the 1000 Swiss franc bills.
| d_silin wrote:
| 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?
| SaxonRobber wrote:
| Investment is gambling, smarts are winning.
| jw887c wrote:
| Softbank is every VC/PE's analyst and associates punching bag
| loganfrederick wrote:
| Compared to WeWork, Uber, and Wag, buying ARM was not their
| worst idea.
| d_silin wrote:
| It was definitely a good idea! But they ran out of good ideas
| very quickly after that, apparently.
| rubyn00bie wrote:
| 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.
| splintercell wrote:
| The problem with "luck not skill" people is that they are
| defining all the elements of skill as a matter of luck.
|
| Bill Gates made Windows which was used by millions of people
| all over the world, well he got lucky because he was born at
| the right place in the right time (a point made by Malcolm
| Gladwell).
|
| Elon Musk/Thiel made billions, well they happen to be at the
| right place at the right time with Paypal. Once you make
| billions, then making more billions is super easy, that's not
| luck, but a function of wealth.
|
| Cope - That's the only explanation for people attributing the
| success of other people as luck. If it's luck then you're not a
| failure, just unlucky, but if it's skill then you have to be
| responsible for your actions and failure.
| achillesheels wrote:
| Acquiring luck is a skill on its own, please see my meditation:
|
| https://www.amazon.com/dp/B06XKPJ9ZY
| Medicalidiot wrote:
| I haven't been impressed with Masayoshi Son. Although I think
| that the majority of successful people put hard work into their
| idea, a significant reason of why they got to the level that
| they're at is because of luck.
| imtringued wrote:
| Hard work is the price of the lottery ticket. You still have
| to win to get the jackpot.
| graeme wrote:
| 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 wrote:
| https://www.technologyreview.com/2018/03/01/144958/if-
| youre-... (MIT Review: If you're so smart, why aren't you
| rich? Turns out it's just chance)
| graeme wrote:
| 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.
| toomuchtodo wrote:
| Talent is important, but luck more so. Without
| opportunity, talent is worthless.
| aussiegreenie wrote:
| Eisenhower said "I'd rather have a lucky general than a
| smart general. They win battles."
| graeme wrote:
| That's different than what your article claimed. It said
| it was all luck.
|
| I have no trouble believing that there is someone
| theoretically more talented than Warren Buffett who a
| less lucky life. I have great difficulty believing
| Buffett is _untalented_.
| viklove wrote:
| You're right, not _pure_ luck -- it 's 99% luck and 1%
| talent. If Buffet was born the child of a goat herder in
| Azerbaijan, he would not be anywhere near the position he
| is today.
|
| Basically, if Buffet's father was anything other than a
| US Rep and businessman, he never would've stood a chance.
| He would be working 40 hour weeks making someone else
| rich like the rest of us.
| sg47 wrote:
| I don't think the comparison is between Buffet and a goat
| herder. It's between Buffet and everyone else that had
| the same money to invest.
| toomuchtodo wrote:
| Any of his investments could've gone bad through no fault
| of his own. You can be the smartest person in the room
| and still get punched in the face, metaphorically, when
| an unknown unknown presents itself. Buffett himself bet
| $1 million that index funds were superior to active
| management (and won) [1].
|
| [1] http://longbets.org/362/
| ericd wrote:
| The best poker players lose hands all the time. But over
| time, they win consistently against less talented
| players.
|
| Talent increases your surface area to catch luck.
| viklove wrote:
| Not if you go broke on your first or second hand. Most of
| us only have enough cash to play one or two hands. If
| you're the son/daughter of a million/billionaire though,
| you get to play way more hands, and thus have a much
| better chance of being successful.
|
| Talent doesn't increase _surface area_ , it increases the
| probability of success. Wealth is the only thing that can
| increase surface area. See the problem here?
| sg47 wrote:
| Why are you going 'all in' in your first or second hand?
| graeme wrote:
| Buffett did make that bet. And he believed it to be true
| for most investors. But he also notably believes some
| investors can do better than the market. See this: https:
| //en.wikipedia.org/wiki/The_Superinvestors_of_Graham-a...
|
| Buffett did have losses! And made mistakes. And you're
| missing the point. I'm not arguing Buffett himself didn't
| have luck. He himself has written extensively about this.
|
| But he also had skill. Luck + skill. Why some believe it
| must be one or the other and not both baffles me.
| viklove wrote:
| He had luck + skill, but he would not be successful if he
| did not start with wealth, from his rich father.
| graeme wrote:
| Sort of. I'd say the best things he got from his father
| were:
|
| * A good upbringing * Early exposure to stock brokering
| (his dad ran a small brokerage) * Being sent to
| university and having his costs covered
|
| Warren actually made the bulk of his early money himself,
| I think. He ran an enormous paper route operation, and
| also repaired and sold pinball machines at a large
| profit.
|
| He started all this around age 11 and it grew from there.
| He had amassed $5,000 by age 14.
|
| But not having to take money out for university made a
| lot of difference I expect. It would have cut his
| compounding. I don't remember him getting much in the way
| of inherited wealth from his father though.
|
| It's been over a year since I read his bio, so perhaps
| I'm misremembering. Happy to be corrected if you have
| specific info.
| [deleted]
| tryptophan wrote:
| 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.
| viklove wrote:
| How many orders of magnitude, would you say? 10x? 100x?
| 1000x? Because billionaires have 10,000x more wealth than
| the average person. Are you saying they're all 10,000x
| smarter than us?
|
| Obviously not. It's pure luck. Well, luck and
| exploitation.
| splintercell wrote:
| > Are you saying they're all 10,000x smarter than us?
|
| You don't make billions by being billion times smarter
| than other people, but by either deploying raw materials,
| or labor or capital to scale billion times more.
|
| But in order to do that, you can't be 1x of the average
| person (generally speaking), but you don't need to be
| billion times better either.
| vsareto wrote:
| I bet I could get a better return by simply running a boot camp
| for financial analysts.
| whymauri wrote:
| Son is a stellar example of failing upwards.
| mbesto wrote:
| His investment history would like a word with you:
|
| https://en.wikipedia.org/wiki/SoftBank_Group
|
| I don't think I've ever heard of someone "failing upwards"
| who's history starts with this:
|
| _SoftBank was founded in September 1981 as a SOFTBANK Corp.
| by then-24-year-old Masayoshi Son, originally as a software
| distributor. They went into the publishing business in May
| 1982 with the launches of the Oh! PC and Oh! MZ magazines,
| about NEC and Sharp computers respectively.[19] Oh!PC had a
| circulation of 140,000 copies by 1989.[20] It would go on to
| become Japan 's largest publisher of computer and technology
| magazines and of trade shows.
|
| In 1994 the company went public and was valued at $3
| billion.[20] SoftBank agreed in September 1995 to purchase
| U.S.-based Ziff Davis publishing for $2.1 billion.[21]_
| dzonga wrote:
| warren buffet wasn't making foolish decisions like Son. anyone
| with the vision fund, could've had a positive return by
| investing in sound businesses. you won't even need to be smart
| like Buffet
| attilakun wrote:
| I'm confused about the numbers in the report linked in the
| article:
| https://group.softbank/system/files/news/en/press/2020/20200...
|
| 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?
| gigatexal wrote:
| Yikes. I wonder if they will sell Alibaba shares to shore up
| funds?
| whalesalad wrote:
| Play stupid games, win stupid prizes.
| riyadparvez wrote:
| 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.
| rchaud wrote:
| The vision was to create a global monopoly by killing off
| competitors with artificially low pricing. They tried the same
| thing with Uber, with some 'driverless fleet' pipe dream thrown
| in for good measure.
| hodgesrm wrote:
| In a way the "global monopoly" vision does not seem very
| different from the Hunt Brothers trying to corner the market
| for silver in 1979/80. The plan is to buy up enough supply to
| create artificial scarcity. [1]
|
| The problem with this approach is that there just aren't that
| many robust, natural monopolies. I think that's been a defect
| in VC investment strategies in Silicon Valley for at least a
| decade.
|
| [1] https://en.wikipedia.org/wiki/Silver_Thursday
| jasonv wrote:
| Honest question: Has that actually worked?
|
| For most Ubers, you also get a Lyft.
|
| iPhone, Androids. (Even granting profit to Apple in
| smartphones).
| DevX101 wrote:
| Uber almost killed Lyft. Had it not been for the 2017
| #DeleteUber campaign that started in 2017, Lyft might have
| ran out of money or forced to concede more US markets.
| dsl wrote:
| It was Uber trying to steal from Waymo that saved Lyft.
|
| Google gave Lyft $1.5 billion in "fuck Uber" money months
| after filing suit against Uber.
| komali2 wrote:
| Crazy how if the executives of Uber hadn't been blatantly
| evil as fuck, Lyft might not exist today.
|
| My partner and I still exclusively use Lyft just because
| we don't like the ethics of Uber
| elliekelly wrote:
| I exclusively use Lyft ever since I asked an Uber driver
| if he also drove for Lyft and he casually mentioned that
| he couldn't pass their background check...
| swyx wrote:
| the nice, short summary of this i saw somewhere is: "Turns
| out money is not a moat."
| imtringued wrote:
| Their tiny little fund isn't powerful enough for that. They
| can try that when they have a multi trillion dollar fund. The
| reason why the vision fund failed is pretty obvious. They
| dump their money into late stage companies without actually
| checking if the business is viable. This strategy works with
| very young companies because initial investments are very
| low. One million here, 5 million there. If 95% of companies
| fail it doesn't matter because there will be a unicorn or
| two. With something like Uber or Wework most of the crazy
| gains are already gone. They are way beyond the seed stage.
| When you invest into them you must be careful and check that
| you are spending money on a company that can actually net a
| return. When you are spending more than a billion each loss
| hurts a lot.
| hkmurakami wrote:
| Mostly the problem is that their portfolio companies
| started fighting each other with the SB cash.
| brandnewlow wrote:
| Why else would you name it Vision Fund if not to compensate for
| the obvious lack thereof?
| maxdo wrote:
| Sadly they just followed online+offline trends. Thought WeWork
| is barely a software company. Their soft is very low and
| horrible feels like it's been written way before WeWork was
| actually funded.
| loganfrederick wrote:
| 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
|
| 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 wrote:
| 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.
| vikramkr wrote:
| For the past few years it was not unusual for a company to
| ipo within 12 months of raising a seed round in biotech. In
| my experience, biotech investors are still using 5 year
| fund horizons etc which make them far far more impatient
| than tech investors. Tech has had private markets willing
| to pour billions in to allow companies to stay private for
| over a decade (airbnb, uber, etc) at huge valuations, while
| biotechs have been pushed to IPO ASAP
| Avicebron wrote:
| I work with several biotech companies, I've observed
| project decentralization also become a large barrier to
| return on investment. Startups often develop a "go virtual"
| mindset prior to a lot of their products being ready for
| deployment. This coupled with the relative complexity of
| novel biotech products can burn through runway and make big
| investments riskier than an ad-revenue supported web
| product.
| aussiegreenie wrote:
| I am working with several medical tech companies. It is
| "true" venture funding. The main company has bone implants
| technology and is a "Billion dollar company" in seven years
| if everything goes well. Even after four years of R&D
| revenue is still 18 months away. And that is in the
| thousands not millions. Full commercial production is about
| four years away.
|
| Here are some the joys:
|
| 1. Long lead times
|
| 2. Highly regulated
|
| 3. Conservative buyers
| goatinaboat wrote:
| _Generally actual tech startups don 't have a lot of
| patience._
|
| The tech that Silly Valley was originally built on was
| hardware with multi-year development cycles. "Tech" as a
| synonym for "ad supported website" is a very recent thing.
| bsder wrote:
| > 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.
| hodgesrm wrote:
| > 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.
|
| Not all of them were slow. Intel IPO'ed slightly over 3
| years after founding. [1]
|
| [1] https://en.wikipedia.org/wiki/Timeline_of_Intel
| ericd wrote:
| 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.
| Zach_the_Lizard wrote:
| It's costlier to be a public company these days in terms
| of regulatory burden, so fewer companies in general are
| going public.
|
| SOX in particular is expensive for smaller companies.
| achillesheels wrote:
| >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.
| Judgmentality wrote:
| > The only valid critique of our approach I've heard is that
| it's a logistical pain to try and spread $100 billion around
| $5 million at a time.
|
| It's almost as if the fund was just a terrible idea to begin
| with. Masayoshi Son is famous for losing more money than
| anyone in modern history.
|
| https://arstechnica.com/information-
| technology/2012/10/how-s...
|
| He made lots of investments but made all his money on
| Alibaba. In my opinion, he's actually a below average
| investor, and that bar is pretty fucking low. And it really
| shows when you look at how horribly the Vision Fund is
| performing. He got lucky once and has cultivated a
| personality around it, and people were dumb enough to believe
| him. He's not the brilliant investor that Warren Buffet is,
| he's the talented con man that Adam Neumann is. Maybe that's
| why he was happy to give him so much money.
| N1H1L wrote:
| SoftBank is also Oyo's biggest investor, and get ready to
| hear about the billions they will lose there too.
| samizdis wrote:
| There was a scathing Scott Galloway piece on OYO in
| January:
|
| https://www.profgalloway.com/oyomfg
|
| "WeWork was an opportunistic infection highlighting the
| poor judgment of SoftBank. Oyo is the beginning of the
| end for Vision 1 as its brand moves from incompetent to
| malefactor.
|
| (And he's referenced it several times in other pieces.)
|
| Edited to add the quote from the linked OYO piece.
| gordon_freeman wrote:
| I had absolutely worst experience at Oyo. I had an
| overnight flight from Delhi to SFO and went there to get
| a few hours of sleep but ended up shouting frequently at
| their unprofessional staff for making too much noise. I
| could not get any sleep and thought I could have been
| better served by just reaching the airport early instead
| of staying at Oyo. Just adding my feedback here to
| illustrate that they have absolutely no oversight to
| maintain the quality standards at the hotels being booked
| by them.
| mkagenius wrote:
| Ritesh Agarwal the CEO of Oyo, is a bigger con-artist(1)
| than his fellow Neuman. Now if you indulge me, I propose
| that he will attribute his failure to Covid-19 and be
| forgiven unlike his fellow Neuman who didn't had that
| luck. Oh and an intereting fact, Sequoia just sold all
| its shares in Oyo, a few months back with a good ROI.
| Sequoia does make money even with con-artist founders.
| They are good.
|
| 1. https://www.livemint.com/Companies/7CN7u5d4i3bfYgBAZLd
| LpM/Wi...
| adventured wrote:
| He got lucky in a big way twice. The reason he was able to
| lose more money than anyone in history, is because the
| first time he got lucky like that was with Yahoo when a
| relatively small investment became worth tens of billions
| of dollars. He failed to sell though and Yahoo of course
| didn't have a sustainable position (unlike Alibaba). The
| epic boom in his Yahoo position is what initially made him
| famous during the dotcom bubble. It started the mythology
| of Masayoshi as a finder of those types of investments.
| sharadov wrote:
| Masayoshi Son seems like someone who started believing
| like Midas, that anything he touches would turn to gold.
| I heard the guy speak, and he seemed full of himself. And
| he's taken Saudi money, I would not want to be in his
| shoes to say the least.
| wolco wrote:
| He is still way better off than your average hs
| commentor. It will be easy to pivot into anything..
| flower shop.. ebay jeans store the sky is the limit.
| ksj2114 wrote:
| It certainly was not obvious to everyone that wework was
| going to flop.
| anm89 wrote:
| It was obvious to anyone that was looking as of about a
| year ago.
|
| It was so flagrantly obvious that it didn't even get the
| chance to make it to the public markets to flop, because it
| was clearly visibly a bad enough idea for everyone to run
| screaming before that was able to materialize.
| siruncledrew wrote:
| It's true Adam Neumann is a con - being a con, though, is not
| industry specific. Elizabeth Holmes is a con and investors
| still wasted their money on Theranos, which was more
| moonshot-esque emerging technology than some office
| buildings.
|
| Every industry has snake oil salespeople, and the Vision Fund
| should have put in more due diligence with their choices.
| lotsofpulp wrote:
| I think the VCs that invested the money into Neumann and
| Holmes are also snake oil salespeople, hoping to to dump it
| off on the public markets during frothy times. Is anyone
| supposed to believe that the smartest people educated at
| the finest institutions in the world don't know how to do
| basic due diligence before throwing their money at
| businesses that don't scale, yet valuing them as if they
| do?
| sjtindell wrote:
| In my opinion very few of the smartest, most successful
| businesspeople attribute their success to anything they
| learned at an institution. There are essentially no
| traditional institutions that can teach you how to be a
| great entrepreneur, identify those people, or help them
| be successful.
| wolco wrote:
| A good entrepreneur knows how to navigate a downturn. A
| successful entrepreneur gets lucky (or puts themselves in
| better positions) and isn't afraid to gamble.
| searchableguy wrote:
| Or that wealth is not an indicator of anything and some
| stupid people are rich because of a fragile broken system
| which doesn't reward based on meritocratic standards
| always.
| matthewdgreen wrote:
| Yes, but the con of Elizabeth Holmes was a case of blatant
| fraud. Obviously investors should work harder to do due-
| diligence that can uncover actively fraudulent behavior,
| but you can understand some people being caught out by it.
| There was very little in WeWork's model that wasn't visibly
| problematic on the surface.
| lotsofpulp wrote:
| According to experienced scientists with decades of
| experience and knowledge about testing blood, there were
| very clear problems with Theranos' claims.
| duxup wrote:
| Yeah there was no technical info on how they overcame the
| issues with actually maintaining the machines... and how
| they operated with so little blood.
|
| Competitors and scientists were pretty skeptical. Word
| has it when they tried to pick up some traditional
| investors and started asking questions they just got BS
| and a lot of those investors walked.
| lancesells wrote:
| From everything I've read and watched on Theranos they
| were committing major fraud. It's hard to blame investors
| where the company itself is creating false test results
| during meetings. As far as I can tell it's way worse than
| WeWork.
| x0x0 wrote:
| In WeWork's defense -- and it's cray I have to say that
| -- you can, in a world where we aren't on covid lockdown,
| stroll into a WeWork and rent an office at the rates they
| advertise. I've even worked in one. It wasn't a great
| experience, but they're definitely not fraudulent or in
| any way really comparable to Theranos.
|
| Not a good investment, but not fraudulent. Whether they
| can make money given their model is a matter for CPAs.
| But they sell a real product at least.
| wpietri wrote:
| Not a fraud for the customers, at least in the short
| term. But I think it made even less sense as a business,
| so I think it's just as much of a con job for the
| investors.
|
| Think of it as akin to a Ponzi scheme. Early Ponzi
| investors do fine. They get paid a real rate of return,
| and often can even withdraw their money. Does that make
| it less of a fraud? Nope. It just means the house of
| cards hasn't collapsed yet.
| x0x0 wrote:
| Fair, but did they lie to investors, or did they just
| sell a (really) optimistic story? Particularly that
| consumer/business preferences would change for tiny
| crappy loud pay-by-the-month offices?
|
| If folks like Vision can't be considered sophisticated,
| and capable of making up their own minds about the
| likelihood of a financial model working, and whether they
| like a somewhat-self-serving ownership structure, I don't
| know who can.
| luckylion wrote:
| > Not a good investment, but not fraudulent.
|
| As in "claiming you're a tech company and inflating your
| valuation isn't fraudulent".
|
| I believe the GP's point was that, if Theranos hadn't
| been a fraud, it was a story that investments made sense
| in. WeWork wasn't, it only "worked" because it was
| essentially a pyramid scheme where the guy at the top
| took the money investors brought in, pissed some off it
| away publicly and then used that to show potential
| investors how great his company was going.
| Animats wrote:
| Wag. Booking for dog walkers. Why did that ever get funded at
| a high level? $300 million in funding?
| oh_sigh wrote:
| What does 10% off the top of the informal dog walking
| economy look like?
| dmix wrote:
| May I draw you a upward line on a chart?
| Spivak wrote:
| I mean this kind of "tech" really only has one trick:
| demand stimulation. Don't get me wrong it's a good trick.
| Facebook and Google are making a killing by doing it.
|
| The idea is just to prove that latent demand for dog
| walking exists and what's holding it back is the fact
| that people who would pay for this service don't know how
| to find someone to do it. Not the craziest idea. There's
| plenty of stuff that I would gladly pay for if I had any
| idea how to find someone selling it.
| vikramkr wrote:
| in return for what? I'd also like to take 10% off the top
| of some industry - let's say off of lawn mowing. Cool, so
| now invest 300 million dollars into my lawnmowing app.
| What value is it providing? what's going to justify that
| 10% of the lawnmower market? I've got to go and create a
| few billion more dollars in value before I can skim off
| some of it and justify a 300 million dollar investment.
| I've got to grow the lawnmower market by 11% or create
| 11% more value before the players in the space would find
| it worth it to give me 10% of it. I don't know if it was
| clear how a dog walking startup was going to do that.
| dipshitlol wrote:
| Likely if you make intelligent investments you don't need to
| market yourself :p
| Barrin92 wrote:
| yup I feel like even in the best case possible, what's the sort
| of civilisational progress you get out of the sharing economy?
| I guess okay you can remove some friction and maybe at the end
| of the day everything is more modular and you're 20% more
| efficient, but isn't something that has an alleged "300 year
| vision", supposed to invest into things that change the world
| fundamentally?
|
| I think it's deeply depressing if one takes a look at the list
| of most valuable startups how much of them is just consumer
| goods or services.
|
| I wish there was a bigger role for engineering and science labs
| like Bell Labs at their peak rather than the dominance that the
| commercial sector has.
| mywittyname wrote:
| I think part of the problem is that the people who get into
| an industry to make the world a better place understand that
| they need to maintain long-term control of their company to
| achieve that goal, and see that traditional VC funding is
| somewhat antithetical to that objective. There's no big
| payout for a VC that takes a minority stake in a company that
| may never go public and whose goals are probably to provide
| low-cost services to poor people in developing countries.
|
| If you're bright enough to change the world, you're probably
| wise enough to anticipate the collision of these two worlds.
| willberman wrote:
| Look at Chamath palihapitiya's description of social capital.
| This is what he states he's attempting to address.
|
| The counter argument is addressed in a debate between Reid
| Hoffman and Peter Thiel where Hoffman's pov is that change
| occurs incrementally and what may not be considered
| revolutionary today (twitter, etc...) would be considered
| revolutionary 100 or so years ago.
| philistine wrote:
| The problem is that only four companies could bring the
| technological improvements you talk about to market. They are
| the only ones because they have achieved monopoly status and
| should be broken up.
|
| Under the current regime, what is SoftBank to do? Buy four
| stocks and call it a day? Or pretend to find unicorns that
| aren't even tech companies?
| petra wrote:
| Not really. Many key technologies are created by startups.
|
| For example, startups are doing a lot in robotics and
| synthetic biology.
| blueline wrote:
| the vision fund is like $100 billion right? you don't think
| that's enough resources to bring about some big change? why
| are only 4 tech companies capable?
| jhoechtl wrote:
| Google, Apple, MS, Amazon?
| N1H1L wrote:
| Add Facebook too. But basically hardware is really
| difficult and we plucked all the easy fruits long way
| back. A small misstep will kill you (eg: Intel and 10nm).
| bsder wrote:
| > But basically hardware is really difficult and we
| plucked all the easy fruits long way back.
|
| Remember the old saw "You only use 10% of your brain."?
| Yeah, that's wrong, but what is almost completely true is
| "You only use 1% of your transistors."
|
| We have a zillion free transistors and they spend all
| their time idle--even on tiny, battery powered
| electronics. We haven't even scratched the surface of
| what to do with all these transistors.
|
| I have two entire Linux machines that communicate in such
| a way merely to _open a door_. And I only feel slightly
| guilty about being that wasteful. :)
|
| Everybody programs embedded hardware with dongles with
| underpowered microcontrollers. Why? Put an entire Linux
| computer behind it (RPi or Beaglebone)--now what can you
| do?
|
| The current failure of tech is lack of imagination. Or,
| perhaps more charitably, lack of competent implementors
| (hardware and software) with imagination.
|
| Transistors are free--now let's build something out of
| them.
| taurath wrote:
| The belief that offices are going to get more fungible is
| rapidly approaching I think, the problem is the "vision" that
| WeWork was selling wasn't actually going to be achieved by
| their business plan. It reminds me of California City,
| California, a master planned city that few wanted to actually
| live in. Tack on the other "We" companies which were clearly
| there to create an ecosystem.
|
| The problem I think still comes down to margins - WeWork
| couldn't figure out how to actually make buildings vastly more
| efficient.
| H8crilA wrote:
| 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
| clairity wrote:
| 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 wrote:
| 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 wrote:
| 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.
| FartyMcFarter wrote:
| It should probably be renamed the Double Vision Fund.
| silentsea90 wrote:
| I wish even a tiny bit of the $24B came to my bank account. Where
| did it go exactly?
| graeme wrote:
| 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 wrote:
| SFBTY is the ADR. but just don't, you have no edge here.
| dzonga wrote:
| 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
| helltone wrote:
| And whatever happened to improbable?
| katmannthree wrote:
| 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 wrote:
| 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 wrote:
| 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.
| aussiegreenie wrote:
| There is an old investment scam where you start with
| sending a few thousand letters with half saying gold is
| going up and the other half saying gold is downing down.
|
| Initially, half the people got "good" investment advice.
| Send another letter to the people who got the "good" advice
| say the US dollar is going up or down spilt equally. Again,
| half the people got "good" advice, so send another letter
| to the people who got two lots of good advice ie a quarter
| of the original number. Continue to send letters to the
| "winners" with half saying buy a commodity and the other
| half to sell the same commodity.
|
| If you started with 2,000 marks after four letters you have
| 250 people who would have made "a very large ROI" if you
| had followed our investment advice. Then you sell them some
| very bad shit or a subscription to your investment
| newsletter.
|
| Morral: Past performance does not mean it will continue.
| dtparr wrote:
| 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 wrote:
| 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 wrote:
| I think with some common sense and understanding of the
| sport you can probably narrow down things quite a bit.
| hodgesrm wrote:
| Turning to baseball there are teams like the '62 Mets
| that really help a fella out when "narrowing." The 2003
| Tigers were not far ahead.
| marcosdumay wrote:
| Why would you send more than 3 or 4 free "predictions"?
| greiskul wrote:
| Yeah, not only you get a bigger pool of victims with a
| few predictions, and the idea is that you want there to
| be games left in the season, so they pay you money for
| the predictions of the rest of the season so they can
| gamble.
| scandox wrote:
| Yeah they made an episode of Alfred Hitchcock Hour based
| on that scam. So it's a golden oldie.
| csomar wrote:
| If you are making lots of trades, you probably will need
| more than 30 analysts. Something close to infinity.
| smabie wrote:
| What hedge funds are you referring to? I ask because in my
| experience, most hedge funds take a much different approach
| than VCs. While VCs bet on low probability outcomes with
| potentially massive payouts, hedge funds usually bet on
| higher probability outcomes with low payouts. There are some
| exceptions, but in general hedge funds aim for a consistent
| return stream. As the saying goes, "bond-like volatility with
| equity-like returns."
| hogFeast wrote:
| That doesn't happen in hedge funds. Most large funds fire
| traders after the first risk limit is hit. When you are
| graded monthly, there is no room for error.
|
| Most of the grousing about hedge funds is because they failed
| to keep with the market...guess who had the last laugh? I
| know one fund in particular that was huge, had big outflows
| because they apparently were out of touch...up 20% this year.
| Another one converted to a family office...they have been up
| 50%+ every year. There is also a big difference between the
| big macro, multi-strategy funds and the equity funds that are
| basically run with no regard for risk.
| d_silin wrote:
| As I mentioned earlier, purchasing ARM was definitely a good
| deal.
| wenc wrote:
| I'm not sure I get that impression from their list of
| investments -- check it out here [1].
|
| The impression I get is that they are into extreme betting so
| for all their good investments (and they have many good picks),
| the gains get canceled by a few extreme bets on bad ones. I
| suppose that qualifies as "bad at investing" by some
| definitions though to me it feels more like "bad at hedging
| risk".
|
| [1] https://en.wikipedia.org/wiki/SoftBank_Group
| tekkk wrote:
| At least I remember them buying and quickly selling SuperCell
| off for a hefty profit. But that could be partly just luck. I
| feel they have had sound investment plans but they've also
| become victims of their own hype. Hype without reality is just
| delusion. And once you get engulfed with the feeling of self-
| satisfaction it is difficult to get rid of it.
| hkmurakami wrote:
| They did great with Yahoo Japan. Also they pressured the
| government into guaranteed solar energy purchase rates and they
| built huge solar farms after the 3/11 Fukushima event.
|
| How did their Sprint investment eventually turn out?
| awa wrote:
| I think uber investment was also working out for them before
| the coronavirus hit (they paid $10B for 15% stake) . Apart from
| that I can think of Alibaba, ARM, Supercell, Flipkart that have
| been successful.
| aledalgrande wrote:
| I read an article a few years ago where it was explained that
| investment is a winner-takes-all market: the top 1% VC firms
| get 99% of the best companies to invest in, while the rest is
| left with scraps (numbers as an example, not real). I am pretty
| sure SoftBank is not in the 1%, no matter how much money they
| have.
| dirtydroog wrote:
| They bought ARM. Quite a good investment I believe.
| revel wrote:
| VC investment is characterized by frequent losses with the
| occasional outsized return. From what I've seen, they have a
| pretty good record with this frame in mind. How do they
| compare, peer-vs-peer? It's almost impossible to say since so
| few VC funds are public and because accounting presentation
| standards can vary wildly.
| nordsieck wrote:
| > From what I've seen, they have a pretty good record with
| this frame in mind.
|
| I've always wondered if this is true over the industry.
| Obviously the top line VC firms perform quite well, but I'd
| imagine there is huge survivorship bias here (much like the
| rest of the actively managed investment industry).
| aussiegreenie wrote:
| >pretty good record with this frame in mind
|
| No, they don't. The average VC does not even return the S&P
| let alone make significate returns.
|
| You always hear about funds making huge profits but that is
| for one particular fund for one particular VC. Even the best
| of them struggle to match 10-year index funds due to their
| cost structure 2+20%.
|
| Large fund make heaps of money for the GP but not for the
| investors.
| say_it_as_it_is wrote:
| 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 wrote:
| 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...
| fossuser wrote:
| 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?
| [deleted]
| gok wrote:
| Satellite internet? Autonomous vehicles? Nvidia and Arm? What's
| "interesting" to you?
| viklove wrote:
| Clout. He wants to prove he's not a one-trick pony, but it's
| becoming increasingly apparent that he is.
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