[EFreethought]

Son made most of his money with Alibaba. I think he made 500x or 1,000x his original investment. Absolutely crazy.

Almost everything he has done since then has lost money. When I read that he is investing in something, I just assume it will end badly.

[gottorf]

Isn't that basically the venture capital model, though? Your winners go many times X, and the losers become worthless.

[mrandish]

Mayoshi has made a lot of bets since Alibaba. Almost all of them have tanked. Over this amount of time and bets, he should have more winners.

[illuminator83]

About 7 or 8 years ago I worked at a startup which got money from Softbank / Masayoshi Son. Our founder and our CTO went to meet him in LA IIRC to pitch.

They came back telling us he was basically asleep during the pitch meeting which was scheduled for only 10 minutes anyway.

Our business/product really had no chance of succeeding at this point and most knew it. We got some money from Softbank anyway - forgot how much. Our management was basically laughing about how easy it was to get funding from Softbank.

I jumped ship a year later or so and that was good timing.

[EFreethought]

At some point, a good VC would have a second winner.

And if that is the VC model, then are the VCs smarter than everybody else?

[marcus_holmes]

This is one of my arguments that startups are mostly about luck - because smart people who are highly incentivised to pick wimmers, with all the data they need to pick winners, all the people and compute they need to pick winners, can't pick winners.

[mrandish]

> can't pick winners.

Mayoshi Son isn't playing the VC game like most traditional VC funds. He's operating on a massive scale and his LPs are sovereign wealth funds, who can have other geo-political priorities than pure profit.

Some people don't know that the usual VC game is often still be profitable for the VC even if their fund isn't profitable. VCs are investing the money of their LPs (Limited Partners), who are usually very large institutional investors with billions under management (think state pension funds, Harvard endowment). Most of the LP's funds are invested in a diversified blend of safer, lower-return vehicles but they take up to 5% and invest it in high-risk, high-return things like venture capital and hedge funds. But they spread it across a dozen or more firms with different strategies.

So each VC is playing a portfolio bets and their LPs are playing a portfolio of porfolios. The LPs just need one of their 12+ VC funds to be a lead investor on a unicorn win. This math usually works out in their favor (there's now >50 years of data). VC funds charge their LPs a yearly management fee of a few percent of the invested capital - whether the fund makes money or not. Over the 10 year life of a fund, this adds up and covers the VCs overhead and very generous salaries - usually >$500K at larger firms. In the VC's view, $500K/yr isn't getting long-term "rich" but it'll pay for a pretty lux life. Even with the VC taking out fees, the LP's math still works thanks to only needing one VC firm to win and if one or two more of their VC funds just return 2x or 3x. It maths up even better.

When your personal worst-case downside is $500K/yr minimum with substantial upside, it's not a bad gig. However, these VC types are generally top-of-class Ivy League grads, who are clearly very sharp and ultra high-potential - the type who'd expect $500K earning opptys on Wall Street, consulting, investment banking, etc.

[marcus_holmes]

Thanks for the informative reply :)

I think this model and portfolio investment strategy is the result of the fact that VCs can't pick winners, though. They are forced to take this "high-risk, high-reward" position in the portfolio because they can't predict the result of any of their investments, even over a whole fund's worth of investments.

Imagine a world where startup success had nothing (or very little) to do with luck, where you could plug a bunch of standard metrics into a complex algorithm (probably a spreadsheet) and it would spit out an utterly reliable set of statistics on likely return. Something that an actuary could come up with, as they do for insurance/assurance.

In this world, VC isn't high-risk, high-reward. There would be categories of VC fund, some would be lower-risk, lower-reward, others higher risk, and yet others that would be low-risk, high-reward (but priced accordingly).

The fact that we don't have this, and all VC is high-risk, high-reward (and often no reward at all, even across an entire fund), is testament to the fact that we can't pick winners. And the reason we can't pick winners is that startup success is very non-deterministic, i.e. mostly down to luck.

[toomuchtodo]

VC is just gambling with some status and ecosystem participation.

https://markets.businessinsider.com/news/stocks/charlie-mung...

[chii]

> At some point, a good VC would have a second winner.

but you don't make the same type of deduction for lottery winners - surely a good lottery number picker should get a second win sooner or later!

[EFreethought]

Lottery winners do not tell the world they are smarter than the rest of us, or go on podcasts, write op-eds or start websites telling the rest of us how the world should be run.

[cyanydeez]

Or buy american democracy