Higher rates will lead to the next generation of great tech startups

[somethoughts]

I thought the Silicon Valley cycle was more like:

1.) Near the end of the boom cycle, the smart tech investors stop playing the game as valuations get out of wack and puts money into reserves.

2.) The dumb tech investors, that joined at the later stages of the boom, play as long as they can and then the write downs start happening.

3.) The incumbent tech companies also start slowing down and letting go of people indiscriminately and the top talented engineers now become free agents who sell their highly appreciated stock options.

4.) No longer beholden to golden handcuffs, the free agents are free to execute on their side projects while living off their stock option cash-outs and severance. And many perhaps even convince former coworkers who are bored and struggling through multiple rounds of indiscriminate layoffs as well as other engineers laid off from the competition and other flailing startups to join them on this new "cool idea".

5.) The next generation is born as the business plans and prototypes around those "cool ideas" start to come together and the smart VC money sees more realistic valuations.

[_hypx]

I do wonder how much this next generation of innovation will be captured by Silicon Valley investors. A lot of "cool ideas" are either not particularly monetizable, or about stopping existing monetization of products. For instance, turning social media into something closer to non-profit, akin to how Wikipedia works, would be a huge benefit to society.

[frozenport]

Not clear if the next generation is formed from from over paid "free-agents" executing on their side projects.

[cloutchaser]

How are sequoia funds doing these days? If your point would be correct it would suggest these types of old VCs have already gotten their money out in some insider trading phase.

They didn’t. And they just lost $400m on just FTX. Their portfolio is massively down too. How is SoftBank doing? The biggest of them all? They are at record losses.

Despite your Marxists leanings, life is not about exploitation and rich vs poor. It’s an easy assumption to make, but it’s completely wrong.

[arcturus17]

I don't think this makes a rigorous or compelling case on better startups being formed during above-average rate periods, at all. There doesn't seem to be enough data in the article to show correlation, even less causation, between high-rate environments and the emergence of better startups. The rise of the great wave of startups like Apple, Microsoft, etc. probably had very little to do with interest rates.

Also:

> Second, complementing this new energy model is a shift away from Moore’s Law and CPUs to the proliferation of GPUs. This would support scaling Moore’s Law through parallelism, which favors applications of machine learning and AI. As a result, the marginal cost of compute will go to zero.

And here I am looking at the sticker prices of cloud GPU computer and going: really. I won't deny there's an era of AI products and apps coming with the emergence of OpenAI, Huggingface, etc but I'm not sure the societal or economic value will outweigh the costs, or that marginal costs will go to zero.

I mean, yea, training AI models will go the way of traditional software, where marginal cost of distribution tends to zero: you build/train once (or a constant number of times), and you distribute infinitely. But the ground-level reality seems that many startups will foot higher compute bills than ever to get started.

[fidgewidge]

Cloud GPU costs are way higher than actual GPU costs though.

[langsoul-com]

The marginal cost of energy is NOT going to zero. Have you seen today's power bills?

Unless there's a way to exact energy from nothing, energy will Always require input to produce output. That would lead to waste as well. So it can never be zero.

Solar panels, green energy ain't free, they cost minerals to create and maintain.

[Gigachad]

Even if we massively lowered the cost and made it almost free, it wouldn’t make that much of a difference because we would all just increase usage until energy became the limiting factor again

[arcturus17]

Maybe with fusion, but that's a long ways off. The article talks about a much shorter term, and explicitly mentions current-gen energy tech. As I said in the sibling comment the bills of GPU-based compute do not suggest to me they are trending towards zero, either.

[Grimburger]

The wholesale power price in my country is consistently negative during the day time.

I think we have maybe 60% coal/gas power overall.

[_448]

What articles like these fail to mention or take into account is how much of this funding is via government grants and how that springboards the whole ecosystem. The early silicon valley was more supported by government grants than private funding.

The modern day examples of that is Tesla and SpaceX.

[ant6n]

I’m not sure energy costs will go to zero soon. We need to reduce our dependence on fossil fuels, and a major component appears to be that we need to internalize the cost of co2, for example by way of taxing co2. This may result in increased cost for energy until the market with renewables and storage capacity saturates, which may take a while.

Also, computing itself may not get much cheaper, there are concerns that Moores law is slowing down. Perhaps the cost of computing will plateau for a while.

[EGreg]

The marginal cost of energy isn’t going to zero anytime soon.

However, higher interest rates do lead to the next generation of great tech startups, and I recorded a video last months explaining why startups are a GREAT class of investment in this environment: https://m.youtube.com/watch?v=4qFuZcaNuRI

Would love feedback from those who had time to watch it

[primax]

People in this thread should refresh themselves on the concept of marginal cost before commenting

[JumpCrisscross]

I’d assume the definition of entropy is more germane to the ludicrousness of zero marginal cost energy. Keep in mind the author is Chamath, the SPAC dude.

[082349872349872]

I am hoping higher rates will change the style of startups: https://app.pressnt.net/post/77/

[automatic6131]

This (your?) writing style is certainly entertaining, but it's also hard to understand and sadly light on detail and explanatory power.

[iancmceachern]

It seems like I always see articles with titles like "(whatever is happening in the financial world today) will lead to the next generation of startups". It's a truism.

[fedeb95]

X and Y happened at the same time in the past. X is happening again. Does X cause Y, so that Y becomes expected?

I will leave this question open, trusting it doesn't need an answer.

[themitigating]

No obvious but you're ignoring evidence in the article and simply a generalized notion of the situation

[scarface74]

Where was the first great wave? In the last decade, what tech company has gone public and been consistently profitable besides AirBnB?

[rapsey]

Most of the value was captured by Apple, Amazon, Google and Microsoft. They are smart enough to capture any incoming technology wave. Mobile, cloud computing and now AI. Startups get crumbs.

[namdnay]

Datadog?

[ipsum2]

FYI to people unaware, the author of this piece, Chamath is an opportunist and possibly commits fraud.

https://www.newyorker.com/magazine/2021/06/07/the-pied-piper...

https://www.protocol.com/bulletins/chamath-palihapitiya-clov...

[lvl102]

This is what happens when some idiot gets lucky getting hired by FB. No one liked him there. This guy literally failed his way to “success.”

[EGreg]

Also huge early adopter of bitcoin

[victoro]

we are intently focused on what we anticipate will be the two biggest drivers of the next decade:

The first is the marginal cost of energy going to zero.

I anticipate that this is the dumbest thing I will read from a supposedly serious person in the next decade.

Predicting a 0 marginal cost of energy is basically predicting a post-scarcity society... in the next decade... thanks to solar and wind. Oh and a wee-bit of natural gas thats somehow going to be magically piped out of the ground and transported to power plants free of charge... I guess by the same good folks who will be manufacturing and maintaining all of the solar panels and wind turbines free of charge...

How is one even supposed to seriously discuss or critically examine an article when its conclusion is that we'll build a perpetual motion machine in the next 10 years?

[goodcanadian]

Perhaps, you have misunderstood the meaning of "marginal cost." It does not mean that there is zero total cost. Marginal cost is the cost of producing the next kWh. Once my solar panels are installed (not necessarily cheap at all), the marginal cost of producing power is essentially 0.

[lpapez]

Agreed, I saw those two predictions and closed the tab immediately. Was a interesting article up to that point but it's evidently bonkers and/or naive.

[pkkm]

>from a supposedly serious person

The article is by Chamath Palihapitiya, a guy who shamelessly attaches himself to whatever is currently popular. When he's arguing in favor of an idea or movement, that tells you nothing except that it's trendy and can be used for self-promotion.

[shapefrog]

> a supposedly serious person

Its Chamath Palihapitiya. The word "supposedly" is doing a lot of work in that description.

[taneq]

This is what gets me about fusion power being touted as “unlimited free energy.” The cost of the coal going in to a coal fired power plant is a tiny fraction of the final retail cost of electricity. If coal were free, retail power cost wouldn’t go down appreciably. So replacing the coal burner with fusion isn’t going to make it suddenly free from the wall socket.

[fragmede]

The thing is, we are post scarcity for certain goods. If we ignore copyright issues, it costs a few thousand dollars (via Cloudflare R2 and BitTorrent) to distribute a copy of a book to anyone with a smartphone and an Internet connection. If we want to move to a utopian post-scarcity society, we should start good that can be duplicated, basically infinitely, and iterate from there. we'd need to make sure creation of digital goods is still incentivized with some sort of system, but I think that's quite possible if we can manage to revamp copyright. UBI for digital goods!

[thinking4real]

Or maybe modulating the macro economy as perversely as was done for covid simply created a bunch of chaos that needs to settle before the regular economic growth continues considering we’re nowhere near scientific, engineering or mineral extraction ubiquity