[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.