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Comment by brown9-2 | Hacker News Reader

This article makes no sense. It's main arguments seem to be:

1. The US Federal Government (based in Washington) gave billions of dollars in bailouts/loans to US financial companies, most of which are headquartered in New York. Technology companies didn't get a bailout in 2001. Therefore, doing a technology startup in New York doesn't make sense.

2. Investors in New York won't want to invest in small startup companies in New York because they have better investment opportunities in the finance industry in New York.

#1 is completely illogical and #2 seems to forget that anyone can invest in anything from any city.

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1. Finance companies get government bailouts and are more likely to succeed. Tech startups don't get govt bailouts and have a high likelihood of failure. Therefore, investing in a finance co is a safer bet. That's the point he makes, and it's logical enough to me.

2. Yes, investors from anywhere can invest in companies from anywhere, but it (obviously) doesn't always work out that way. Finance companies didn't gravitate to NYC by accident. Why would a finance investor fund a co across the country when he can choose from a dozen in his back yard? The world is "small" and "flat" but proximity still matters.

"Finance companies get government bailouts and are more likely to succeed."

You are painting things with a very broad brush. How many hedge funds are there? Thousands. How many of them got bailout funding? Virtually none. How many top tier investment banks are there that got bailed out by the government? 5 or 6? I rest my case...

Besides, Finance is a very vast field. Hence, the words Finance companies means nothing. A hedge fund is, essentially, a startup... and the likelihood of failure is high. By contrast, a bank is anything but a startup. A boutique investment bank and a boutique HFT hedge fund are both "finance companies", but their cultures are more distant from one another than what you can imagine.

You are thinking of GS, MS, City, ML and the like, and generalizing that all finance companies are like that... which is utterly absurd.

I was paraphrasing Zed's article. Maybe Zed was "painting things with a very broad brush". Lets give credit where credit is due.

When finance industry gets into trouble, the govt will step in to fix it. (It may be by bailing out big banks etc.). Indirectly all players in financial market benefit from it. (see the stock market gain from bottoms last year). In this context a financial startup is in a much better position when compared to startups from other domains.

Please define financial startup.

#2 seems well thought out and completely relevant. #1 seems like Zed's funny but inflammatory writing style.

There is truth in that second point. Startup financing is a hands on business. So is HFT. There's probably a reason why a lot of firms engaged in HFT are clustered around lower Manhattan, and it probably has something to do with the necessary capital requirements and the short path to market information.

It should be obvious then that markets are not perfect; they require information to operate and some markets are particular sensitive to the distance from the necessary information. Anyone cannot just invest in anything from any city. Just ask PG.

It's also not just investors. It's the people on the ground writing your code. Zed did mention that.

#1 simply illustrates one of the reasons why rich people without particular interest in technology would prefer investing in finance rather than startups. It's a generalization, but has some truth to it.

In theory anyone can invest in anything from any city, in practice they don't. Investors tend to pick companies that are located relatively close to their offices. That's why the concept of hubs - from Silicon Valley to Hollywood to NYC - exists at all.

Actually, if geography didn't matter, New York would be much worse off, since the costs of living and other inconveniences of being where so many others want to be would make it a relatively poor choice to locate a company.

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