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Comment by untog | Hacker News Reader

Quite simple: investors invested in a company that was going to grow exponentially. Now that it is not growing, they want out.

Which, IMO, is fine. I wish we lived in an environment where Twitter could say "we're making money, we're successful enough, invest if you like what you see", but Silicon Valley is frequently hockey stick growth or death.

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They aren't making money though. They're losing money. They are not successful enough.

Keep in mind that the major drag on profitability for many of these companies is labor/compensation costs and specifically the war for talent that Facebook started in 2011-ish. The 22 year old making $150k all in and their 27 year old boss clearing >$300k? That money doesn't come from thin air. Don't underestimate the degree to which the rank and file talent has benefited from the current ''bubble''. If enough downward pressure is exerted to depress salaries broadly across the board then a lot of these companies will benefit. Note that insofar as part of comp is paid in RSUs then this downward pressure is already being felt as public share prices decline.

Exactly. My only knowledge of Twitter is from a user standpoint, but I've racked my brain for years wondering why Twitter is larger than 100 employees. I can't figure it out.

Neither can they ;)

Because at X thousands employees: Too Big to Let Fail.

Spreading risk and blame, pressure from investors to spend the big raise money, the diplomatic roles that become necessary at a certain size, R&D employees. Mostly political reasons, but reasons nonetheless

However, if things deflate ad revenue is going to go into the toilet, it's largely funded by the same tech companies with huge marketing budgets.

I think a social network is slightly different from the other companies where that argument applies. The Internet was a fun place with 300m people on it, but growth made it better. Same with Facebook. People bring problems, but in general networks are better with more of them around.

Some crotchety old timers might argue that point.

https://en.m.wikipedia.org/wiki/Eternal_September

As a crotchety old timer, I agree completely.

You'd take Usenet over everything else we got from the growth of the network, from Amazon to MP3s?

There's a lot of different distinctions to be made (or argued against) regarding the "who" of the network, rather than the "what".

I think HN comments would be a prime example that simpler-functionality-with-higher-quality-participants is a valued combination.

I'd take fewer people online in general. The number of people that are glued to their smartphones because of all this supposed progress frightens me.

All companies grow exponentially. Any compounded growth is exponential. The k in e^(kt) can be anything. You perhaps meant to say, investors want way-better-than-S&P-and-in-line-with-APPL/GOOG/FB growth?

All companies? Surely some companies have linear growth.

Financial terminology doesn't distinguish between linear and exponential. Linearly growing companies would simply be assigned very low (close to 0 / positive) CAGRs.

I agree. For example, if you spend exactly $1000 on advertising a day, and have no network effects, you will get linear user growth.

Linear growth is not really growth, in a financial sense, as growth is when the derivative (rate of change) is increasing/decreasing. Linear growth by how I interpret it, would have a derivative of zero, i.e. the rate of change is constant, or geometrically speaking, a straight line.

Suppose a company increases their gross revenue by 1MM every year. What do you call that? I'd call it linear, because it will be a straight line on a graph.

That would be linear only if the inflation is 0. Inflation adjusted growth rate will not be fully linear.

> All companies grow exponentially.

No, they don't.

> Any compounded growth is exponential

Not all growth is compounded in a way that fits an exponential curve. Sure, any single interval (two data point) growth will fit some exponential curve, but once you get a second interval, it may or may not fit (or be approximated by) any exponential curve.

Unless you specify an error, all growth can be approximated with exponentials. In fact, by your logic, even investors don't desire exponential growth. Why specifically would they want the growth of their investments to follow the rule that the derivative of the revenue is proportional to the revenue? Investors surely wouldn't mind factorial growth :) . It is just that metrics like CAGR are convenient and very rough approximations of the reality, designed to make the concept of growth intuitively year-on-year. In reality companies don't grow exponentially, we use exponential models to define company growth. The exponential model is fully arbitrary, with the k being as small as you please (linear growth is sometimes even defined by low CAGR numbers like 0.1%, etc.)

> Why specifically would they want the growth of their investments to follow the rule that the derivative of the revenue is proportional to the revenue?

Well, I think more precisely they want the growth to be at least exponential; they'd be happy with super-exponential growth (increasing, rather than constant, k over subsequent intervals.)

They also want a minimum value of k.

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