[scurvy]

I'll stick my neck out on this and say, the author is right and these are the people who are ruining Silicon Valley. Take a look around at the big named "innovators" and you'll notice that they're really "iterators". People building a "business" around a small, incremental improvement in an previously existing process. I refer to this as the HFT, hedgefund incremental approach. Let's pick up nickels in front of bulldozers while the getting is good(1). Get enough money before the bulldozer hits you. This seems like the premise behind AirBnB, Uber, Square, and every other unicorn. Can't wait 3 minutes to order your food at the cafe? Billion dollar business! Can't wait 4 minutes and chat with your companion while you wait for your dinner check to arrive? Billion dollar business! Creating electricity from small, safe, pollution-free hydrogen power cells? Eh, maybe a few hundred milli tops. Not worth it.

It's this kind of quick buck thinking around simple, non-inventive iterations on existing models that are actually killing the Valley. The Valley should be for big ideas and wild bets. Not bets on people to do your laundry for you.

These Wall Street/finance people need to pack up and go back east.

(1) This was the idea behind Long Term Capital Management (LTCM). We all know how well that worked out.

[supster]

I agree with your general sentiment, but I feel like your examples are wrong. Uber has fundamentally reshaped how we view and consume transportation. With the addition of self-driving cars, it has the potential to utterly reshape logistics. Square has completely modernized the dinosaur POS business. As someone who works with a lot of small businesses, I can tell you that Square has really impacted their lives for the better. AirBnB, while I like a lot as a consumer for opening up a whole new genre of places I can stay and feel at home, has admittedly started to devolve into managing a bunch of unzoned hotels. LTCM while insanely leveraged was actually arbitraging an anomaly in Tbills. It was a great business run quite well, right until the Russian gov't defaulted and sent shockwaves through the bond market. That kind of high sigma event is pretty hard to forsee.

[scurvy]

I'm much more interested in the company that brings us self-driving cars (or flying cars) than the glorified taxi company that leverages them. Call me a dreamer. I'll probably die broke and penniless though.

Also, comedic if you think that LTCM was well run. They were sniffing their own flatulence and getting high on their own supply. They employed two Nobel laureates and based their model on those laureates....whose work ended up being completely flawed. How many people use Black-Scholes today? Zip (if they have a clue). You really should read "When Genius Failed" if you think they ran a good business.

[supster]

Fair point, but the company bringing us self-driving cars started off as a glorified search company selling ads on the side. Maybe we should give these companies some time to mature, build a recurring cash base, and replow that back into cool R&D.

[SilasX]

Was LTCM really an example of "great idea, poorly run"? I don't think you can point to any particular management problem, but the core idea. The failure was basically:

"Hey, US government bonds have this bizarre, persistent price premium over equally reliable governments. So we can short the former to buy the latter."

... and then it turned out there was a very good reason for that premium: when people panic, they'll buy up US bonds, not Italian ones, which will destroy any short position, and be catastrophic if overleveraged.

I'm not sure what better management could have done about that, besides, "hey, don't bet the house on this".

[nordsieck]

I'd suggest to you that incremental improvement is generally more important than revolutionary improvement, even if it's distinctly less sexy.

[scurvy]

That's OK. It just doesn't belong in Silicon Valley. Ship it out to XYZ Valley/Alley/Prairie.

I'm also a fan of punctuated equilibrium and cladogenesis as opposed to evolution over millenia. But maybe that's just me.

[supster]

LTCM's main money strategies were fixed income arbitrage based on the difference between on the run and off the run Tbills as well as Merger Arbitrage. Black-Scholes model was not involved in their investing in a significant amount. Business was good until they were too successful (funds copying strategy thus diminishing returns and their capital base grew 8 fold thus harder to deploy capital). Eventually though it was the Russian debt crisis that blew them up, not mismanagement.

[scurvy]

Black-Scholes heavily influenced their model. Read the book. Talk with people who were involved. You'll see how firmly they believed in their incorrect formulas and algorithms. Even up to the morning that they were insolvent, they were trying to raise money and double down on their bets. They absolutely failed at running a business. They had a bad idea and let it run wild rather than calling it quits early on. You can blame it on the Russian or Asian debt crises all you want, but they were going to get hit hard sooner or later. When the fecal matter hits the fan, the correlation of everything goes to 1. If you can't grasp that, you haven't learned the LTCM lesson and no equation or formula will save you.

That said, this post is about people in the Valley making big bets. Not finance people thinking that they can build a better mouse trap for 12 basis points.

[natrius]

What's the difference between a self-driving car and an Uber driver who picks you up on her way to work?

Self-driving cars are just the icing on the cake. Matching travel intent to rides is most of the value, especially when you combine multiple riders into the same vehicle.

[liamzebedee]

Don't downplay the social innovation of Uber though- it's created a worldwide transportation service run completely by a group of ordinary drivers, who need simply a car and a smartphone.

[TeMPOraL]

By "it created" you mean it's a first globally recognizable brand (part of the recognition obviously comes from their blatant violation of local laws). We had lots of similar companies in Europe; as far as I can tell, they even had apps first. They just weren't sexy.

I'm not trying to diminish the effect (for better or worse) Uber is having on transportation market. It's big and it's because of them. But it's not because they were innovative in some way.

[SamReidHughes]

> It's big and it's because of them. But it's not because they were innovative in some way.

I think these sentences directly contradict one another. The reason probably has to do with the idea of what it means to be innovative. There is more to innovation than technology. Marketing can be innovative, and so can fine art, political campaigns, movie stuntwork, and business methods.

[TeMPOraL]

> The reason probably has to do with the idea of what it means to be innovative.

It could be.

Innovative is supposed to mean "featuring new methods/ideas, original". My comment about Uber uses that understanding. But the term has been completely devaluated by marketing now. Seeing what kind of projects get grants under EU's Innovative Economy Programme, "innovation" now means simply doing stuff with the Internet or mobile phones, since they're ~20 years old. You want to build an app? That's innovative. You want to build a website? That's innovative. It doesn't matter that your product is just a clone and does things the same way everyone else have been doing for the past 20 years. It's on-line, therefore innovative.

[venomsnake]

> Uber has fundamentally reshaped how we view and consume transportation.

I live in a European capital. I have been calling cabs by SMS to address for 15 years now. I write starting address, end point and receive in sms the number of the cab and in how many minutes it will be at my door.

Can you point the fundamental difference with Uber?

[SilasX]

That doesn't seem to take advantage of modern IT like Uber does:

1) Keeping a record of driver and passenger ratings (disincentivizing bad behavior on both sides)

2) Streamlined complaint resolution process

3) Remote monitoring of the ride to see if they took an unnecessarily long route

4) Payment being handled behind the scenes so you can just get in and out without stopping to pay (plus not having to do the tipping dance for Americans)

5) Getting updates as the car gets closer

6) (once at scale) Pairing people together on similar journeys to save money (UberPool/Lyft lines).

7) (not sure if the system you refer to had this) The destination already being loaded on the nav when you step in.

8) Edit: plus, apparently they collect a ton of data about rides to estimate where requests are most likely to be and encourage drivers to be there

[supster]

Great, now if you go to a Tier 3 city in China will that work also? Has your SMS cab service built a worldwide network with deep liquidity? Does your cab service account for supply and demand in realtime? Does you cab service experiment in other forms of logistics from helicopters, food delivery, bike couriers? Does that service employ the entire former Carnegie Mellon Robotics department for R&D into self driving cars? If you said yes to all of these, please let me know, I would love to invest!

[venomsnake]

Two of sentences you wrote deal with investment to the future that is not yet implemented - so they cannot change "fundamentally how we view transportation" yet.

Supply and demand in realtime is not an issue, since my town is oversupplied on cabs so a crunch rarely arises. The worldwide network with deep liquidity is useless when we are talking about local service. Those third tier city china drivers will have hard time giving a hand in London if a crunch arises.

Uber is just a gypsy cab with a polished app. Everything else is just in the works.

[leonroy]

That's a little like comparing the classified pages to eBay. Both eBay and uber reduce friction between demand and supply and open up the size of the market far beyond its original scale.

The fact that I can use uber anywhere in the UK or US and have a cab of a particular size and luxury spec, within 10 mins, billed to my card with no messing with cash is incredible.

Their whole experience is as frictionless as possible. I don't much care for some of the attitudes conveyed by uber personnel but I wouldn't discount their achievements.

[noname123]

I'll stick out my neck and say that perhaps the dearth of truly innovative startups is because solving real problems are very difficult. Most of us are pampered because we were told that we were smart because there is a shortage of coding skills. But coding skills cannot solve cancer, invent alternative energy sources nor create self-driving skills (that is AI research).

So we all gravitate towards making a web app to do laundry quicker. However since there is no real competitive advantage to whose web laundry app is better, coders are actually the commodity used by the business/marketing to a race to the bottom of who can raise the money the fastest, do the best viral marketing and creating a cult of persona in the tech press.

I don't mean to be negative but I just want to make a point that it is up to ourselves to learn a new skill-set if we want to solve bigger problems vs. carping about scruples-less businessman exploiting coders whose skills due to agile, coding bootcamps and improved programming toolchains are getting increasingly commoditized.

[jdminhbg]

> This seems like the premise behind AirBnB, Uber, Square, and every other unicorn.

If you can't see the value created by each of these companies, I kinda have to wonder how much you ever get out of your house. Even just the amount of consumer surplus generated by Uber -- not driving home drunk, and not having to wait for a completely unreliable cab company -- is massive. Classifying what they're doing as nickels and bulldozers is so short-sighted it's a little hard to understand as anything other than simple sour grapes.

[TeMPOraL]

Uber is generating consumer surplus by working illegally and disrupting the social trust that is the fabric of society. But whatever. I don't know much about Square, from what I've seem they do seem to be making big improvements in the space. But Uber doesn't do anything new - it's hardly even an iteration. They're just sexy, and created a worldwide brand. In Europe we had tons of local Ubers for years, and even dedicated services for markets like "not driving home drunk" popping up around periods when a lot of people drink (think Ne Year's Eve). The biggest value Uber is bringing is being centralized. A single brand. That has nothing to do with technology, and everything to do with business side.

[jdminhbg]

> Uber is generating consumer surplus by working illegally and disrupting the social trust that is the fabric of society.

The social trust and fabric of society stuff is kind of too funny to even lampoon, but the first half is important: if you can generate consumer surplus by breaking the law, what exactly does that say about the law, and on whose behalf it's working?

[TeMPOraL]

> The social trust and fabric of society stuff is kind of too funny to even lampoon*

It's funny because you probably grew up in a civilization and take it for granted.

> if you can generate consumer surplus by breaking the law, what exactly does that say about the law, and on whose behalf it's working?

It doesn't say anything. You can create consumer surplus breaking any law if you're willing to dump externalities elsewhere, on parties you don't count as consumers. A thief can for sure create consumer surplus by distributing stolen money among friends. So can the owner of a factory enrich the city by dumping toxic waste into a river, driving his costs down but poisoning people downstream.

[jdminhbg]

> It's funny because you probably grew up in a civilization and take it for granted

No, I'm pretty sure that the civilization I grew up in isn't predicated on taxi monopolies for existence.

> You can create consumer surplus breaking any law if you're willing to dump externalities elsewhere, on parties you don't count as consumers.

Go ahead and name the victims of these externalities, without counting the previous rent-seeking oligopoly Uber is displacing.

[TeMPOraL]

> No, I'm pretty sure that the civilization I grew up in isn't predicated on taxi monopolies for existence.

I didn't imply that. We must have misunderstood each other. So which of the following you disagree with:

- trust between people and organizations forms the fabric of society

- fabric of society is sort of important to a functioning society

- breaking the law and getting away with it damages the trust in the rule of law

> Go ahead and name the victims of these externalities, without counting the previous rent-seeking oligopoly Uber is displacing.

A lot of drivers and small companies which don't go around breaking laws for profit. Because that taxi market was all just "rent-seeking oligopoly" is bullshit. Sure, there were a lot of entrenched interests, but there were also a lot of others, some with very similar model to Uber, app included. Also consumers who depended on some unprofitable features of taxi networks that were forced by law in exchange for partial monopoly.

And if you go above just pure profit motive, then it's about society. About the very idea that you're to follow law when conducting your business, or else you'll face punishment. That there are rules to the game and that the government will enforce them successfully. Also, seeing how Uber is such an inspiration for startup world, don't you think we can expect more companies trying to ignore other laws as well? And not every ignored law will be the one you'd be happier without.

[scurvy]

Not waiting, the hallmark of unicorns for an impatient user base. Uber saved your life because otherwise you would have grown impatient, driven drunk, and killed a bunch of people? That's one hell of a pitch slide.

[jdminhbg]

This is what I mean when I say it's hard to imagine that someone who gets out of their house could argue with the value that Uber creates. If you can't see the difference between the uncertainty and wait times you get with a traditional cab company and Uber, you must never have had reason to use it. It's like reading one of those complaints about bicycles scaring horses from turn-of-the-twentieth-century newspapers.

[afarrell]

Uber is making a massive long-term bet: driverless cars.

Hydrogen fuel cells, if practical, would be worth massive investment, but folks who would use them seem to have decided that lithium ion batteries would make more sense and are making a $5 billion investment in that.

There are a lot more smaller companies pursuing small ambitions, but that makes sense: a small company doesn't have the resources to tackle a capital-intensive problem without first demonstrating that it is a somewhat-reasonable bet.

[scurvy]

I was actually referring to hydrogen power on a neighborhood scale, not car. These were just abstract examples, but I guess the HN crowd sometimes gets caught up in the details. It's a byproduct of a flawed communication mechanism.