Facebook's Aggressive Moves on Startups Threaten Innovation | Hacker News Reader

Facebook's Aggressive Moves on Startups Threaten Innovation

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153 pointseqtn71 comments

Half of the top food companies in the world were formed in the 19th century. There were 614 food and drink companies acquired in 2016.

More leading pharma companies were founded prior to 1780 than after 1980 and seven of the ten biggest companies are over a hundred years old. In 2014-15 there were over 100 biotech IPOs that yielded $10B in proceeds.

Tech is going through the same consolidation process that cars, drugs, oil companies, packaged food concerns, and most other industries have. The chances of building a company worth hundreds of billions of dollars is lower. The chance of building a $10-100M business has never been higher.

The founders of tbh made more money that All-Star NBA Champion Stephen Curry did last year. Is that a sign of a weakening startup ecosystem or a strengthening one?

"Shaq is rich," he said, referring to the Los Angeles Lakers' Shaquille O'Neal, "but the white man who signs his check is wealthy. Oprah is rich, but Bill Gates is wealthy. If Bill Gates suddenly woke up with Oprah's money, he'd slit his throat."

How much did Oprah have when he said that?

source: http://www.post-gazette.com/opinion/tony-norman/2004/05/21/T...

Authored in 2004, at which point Oprah had $1.1Bn[1]

[1] https://www.forbes.com/maserati/billionaires2004/LIRO0ZT.htm...

Edit: nvm, the article talks about a Chris Rock quote from the previous year (2003) at which point Oprah doesn't show up on the Forbes website.

Does it matter? The answer is still, “at least an order of magnitude less than Bill...”

3.1 billion is wealthy.

An order of magnitude less than Bill Gates is still outrageously wealthy.

Forbes says there are 1940 billionaires in the world today, that puts anyone over $1 billion in the top 0.0001 percent.

Yep, inequality is not great. The fact that a guy can make $15M in a year by building a social network in the era of FB/Snap/WhatsApp/Instagram is pretty great.

Not trying to take away from your point but I think the company that made TBH were trying to make a hit app since 2013 when they did their seed round:

https://www.crunchbase.com/organization/tbh

It took nearly 4 years of probably not making much before they hit pay dirt with TBH.

Totally fair point!

I still have faith in our ability to escape the ill effects of capitalism that are slowly destroying our industry. See Bitcoin & Ethereum.

Wait, you think bitcoin etc is going to reduce the harmful effects of capitalism?

I always wonder what a better solution than capitalism is. It's not perfect, and it's pretty broken when politics and corporate interests are in bed together. However, we're seeing the ill effects of socialism (Venezuela) like starvation and I prefer the former. Furthermore, the crypto economy might be the closest example we have to "Free Market" capitalism.

Capitalism and regulatory capture aren’t the same thing. Hell, even Adam Smith sternly warned against an environment with too much power imbalance.

The latter is just good old corruption, and it pays no respect to the form of your economy.

I was always intrigued by Georgism (https://en.wikipedia.org/wiki/Georgism) but idk if it would really work in 21st century.

Georgism is a very interesting idea -- however, in its purest form, what is the incentive to invest in land? E.g. to build tall buildings, factories, invest in better farming practices/technology, etc.

Would it not be better to have full property rights, except with externalities captured?

What do Bitcoin and Ethereum have to do with escaping capitalism? Capitalism is an economic system oriented around private ownership[0]. If anything, they epitomize the libertarian/capitalist ideal by providing an alternative to fiat currency, the latter being a statist construct.

[0]: https://www.merriam-webster.com/dictionary/capitalism

Maybe, as part of an overall, integrated strategy.

Cryptocurrencies needs pervasive/critical mass deployment and price/scarcity stability in order to be everyday useful.

I think the greater issue is the "Russian roulette," billionaire-media-legislative corruption complex that has infected many countries to the point of gross inequality (which may lead to a similar repeat of the French Revolution) and ecological collapse (eg Holocene extinction).

tbh was bought for "under $100M", divided among all the shareholders including 4 co-founders.

steph made $35M in endorsement income last year, plus $12.1m salary. he got a raise this year, from $12M salary to $36M salary (plus whatever endorsements). And steph gets paid his millions every year he works, not just a single buyout year.

When you put it like that, it's actually crazy how much money he's making...

It’s supply and demand. There aren’t many people on the planet that can do what he does.

He's only making that money starting this year.

Before, he was only making 44 million over 4 years, making arguably the most underpaid player in the NBA while making them hundreds of millions of dollars. [0]

Also, he only gets to take home half that pay - it's still a lot, but he doesn't quite have the contacts to do the crazy financial structuring that business tycoons and large publicly traded companies do to avoid income taxes. Famously Warren Buffet says that he is paying a lower tax rate than his secretary.

In all honesty, he's worth it, and probably underpaid. The Warriors' management and his endorsement partners pay without a peep. If his value were even marginally close to what they were paying him, there would be a lot of haggling going on.

[0] https://www.forbes.com/sites/vincentfrank/2017/06/06/nba-fin... [1] http://www.businessinsider.com/stephen-curry-salary-taxes-nb... [2] http://money.cnn.com/2013/03/04/news/economy/buffett-secreta...

Right, assume it was $80M like Ben Thompson suggested based on disclosure rules. They raised a seed round, assume that took 20%. I'm guessing there wasn't much of an ESOP so $15M/founder is in the neighborhood.

And yes, Steph Curry made a fortune in ancillary revenue streams. I'd also wager that the founders who split this windfall will make additional money investing the proceeds in other startups.

I don't know how true it is, but I've read a major fraction (most?) of the companies in the S&P100 have been bailed out and saved by the government at one time or another.

You could, you know find out if it was true instead of dropping unsubstantiated information in here.

Everyone buys companies. This is nothing new. If the threshold for Facebook buying companies becomes too low, the startup sphere will be flooded (which to some extent has already happened) and Facebook will stop buying them all (which to a degree is true already). Eventually there will be enough that goes under their radar or enough companies to say no to their offer (e.g. Snapchat) that stuff will get through the buyout-barrier. Everything old is new again, yawn.

If Facebook easily replicating that same feature is enough to significantly hurt the smaller competitor, was it really innovation in the first place?

If you are of the view that ideas are worthless and execution is all that matters, then there is no innovation anymore. Facebook can out-execute pretty much any small startup if they really wanted to go into a space.

Back in my day, Microsoft entering your market was taken as a validation of the market and confirmation that you're on the right track. Being a small player meant you could be more agile than the lumbering giant.

Being small also means you don't have the same opportunity costs on financial investment - where Microsoft could get a better IRR for that investment money, being small means this is the best return you can get.

The only advantage Facebook has in entering an entirely new space is capital, which is not a unique advantage. The unique advantage they have of modifying their social media platform, is that they have by far the largest platform, and if the only differentiation of the smaller competitor can be easily replicated, it will be quite easy for Facebook to compete, without even deploying much capital. Thus, if someone wants to compete with Facebook, there has to be either significant IP, or a feature that isn't as easily compatible with Facebook's platform (note that Facebook also tried to replicate Snapchat early on, but that failed). I am not saying that ideas are worthless, but many are not easily defensible as a business strategy, and I don't see the reason to blame Facebook for leveraging their unique advantage by adding compatible features that have been validated by other companies, nor for deploying their capital to acquire such companies. One could have plenty of ideas for how to leverage a large social media platform, but without access to that platform, and especially if a competing much larger platform can easily replicate such ideas to drive you out of business, there would not be a strong case to make for these ideas being true innovation in the context of business.

With enough money you can replicate almost anything if you want to.

I suppose you could have said similar things about Microsoft in the mid-90s when they would vapor-launch a product to wipe out a threat or soften up a buyout.

The bigger issue is that they bring in startups, have them tell them everything, and then decide not to buy the company. There are many stories floating around about this and it is highly unethical.

I don't know Facebook's policy, but many companies employ 3rd party consultants to do due diligence. The IP is not communicated to the suitor until after the purchase is complete, only an assessment of the quality of the execution. I learned this process first-hand.

Difficulty of replication is not requirement for an innovation. What a stupid question, seriously.

Welcome to Hacker News. Check out the guidelines: https://news.ycombinator.com/newsguidelines.html

It says to not call people names. We can disagree while still being civil.

someone tell vlad about patents

They can't prevent copying features. They need to compete on something Facebook isn't capable of competing. Such as being decentralized and privacy respectful. That's an instant fail for FB.

For example FB can copy features like hashtags all they want, but I won't touch it unlike Diaspora.

Except the alternative is a complete fail from a user standpoint. Decentralized systems are, almost to a rule, not user-friendly.

Privacy doesn't seem to sell.

I have come to an conclusion people who care about privacy don't care about social networks either.

Just an anecdote of course. I have joined diaspora and mastodon twice to fight the big Goliath but every time I have realized I really don't need the social media as such anyway.

Okay, but do we really need a "future Facebook"? Are innovation and creativity in social media really something the world will suffer for a lack of?

In any case, the next big thing is usually not just a better version of the last big thing.

Of course we do. >1 billion people shouldn't have their lives dictated by a proprietary, opaque Skinner's box with no regard for privacy or rights.

What we need to fix that is more of a future "not Facebook", though.

Then they shouldn't use the proprietary, opaque Skinner box. :) It's not like they have a gun to their heads.

It's not so easy. You might have to give up a big part of your social life, depending on how much of it happens via the box.

Neither did the rats.

Some thoughts about the "no one's forcing you to use it" arguments (of which I'm also partial to, having removed myself from Facebook). Humans do have a need to socialise/connect with other humans, just as we have need food and water - we quickly lose sanity in isolation. To give an example, the worst punishment in prisons is solitary confinement (being separated from the other criminals!). The link between social isolation and health problems and ultimately early death has also been demonstrated. It seems to follow from this then that we do really need Facebook to the degree to which they control all means of socialising, and online communication is only becoming more and more primary over time. In other words, imagining the extreme case where FB is only means to connect with the world (and this is their stated mission), we can no longer choose not to use them anymore than we can choose not to breathe and eat, insofar as physiological well being goes.

>It seems to follow from this then that we do really need Facebook to the degree to which they control all means of socialising

And therein is the fallacy. Facebook might be popular, but they are absolutely not the controller of all means of socializing. Everyone I'm friends with on Facebook, I also have the email (and often phone, and often other IM service) contact info.

You confuse generalized control with control in their own walled garden. Anyone is free to step outside of that garden whenever they please.

Not having a facebook account is a negative social signal these days. The gun is metaphorical.

> 1 billion people shouldn't have their lives dictated by a proprietary, opaque Skinner's box with no regard for privacy or rights.

Of course they should not. Or should they? We live in a free society and you are voluntarily participating. Or not. It's your choice. And that's wonderful.

People do not realise, how simple it is to stop. As with cigarettes the real trick is to just not do it anymore. You need some willpower and some plan to cope with the temporary withdrawal effects.

Single datapoint: I briefly used FB for a few weeks about ten years ago, but never saw its value. Today, thanks to dusty email and many other (more open) sites, I have a growing number of friends around the globe and locally.

There are places (like Central Asia), which are already operating in a Free Basics mode in that basically anything beyond facebook is an extreme hurdle to use. But anyone in the western world with lots of choices can stop feeding FB today, if they cared.

your data point of one doesn't really validate that addiction effects people differently and hence different outcomes. My wife stopped smoking for 5 months, then she started again. ooops, some much for just quit and all will be happy in the world.

I agree with you that it's possible to stop using Facebook. It isn't like food or water.

However, Facebook really is, at this point, a clear monopoly. The reason I use facebook is because that's the social network that everyone else uses. If I want to see baby pictures, hear about my friend's band's upcoming show, get updates on how people are doing after the norCal fires, or get trolled politically repeatedly by my insular political bubble, Facebook is the only place where I can do this. The next best network is nearly useless to me - not strictly because it's worse in terms of features or reliability, but because nobody else is using it.

I can't say it's absolutely impossible to do this without facebook - I agree that people can, with effort, patch it together, as you've done.

However, I think the "voluntary" participation aspect you've identified, while not entirely inaccurate, should recognize the coercion that results from a monopoly.

> However, Facebook really is, at this point, a clear monopoly.

But here's a point: The zero-cost marginal cost characteristics of many software businesses makes this sector prone to be monopolistic. Acquire: data, users, or intellectual property and from there, competition will have little chance until a new wave washes clean the shores or you mismanage your company.

So the only way to stop this is to - do what? The political will and instinct, that would be required to redirect technological progress by not allowing monopolies is enormous. Not to mention the economical dynamics that come from companies competing on how to destroy privacy faster.

do you care to become penpals?

It's a good question. I wish innovation could be opened up in more important areas like housing, transportation and healthcare costs. But it's all locked up from laws, zoning, political gridlock and barriers to entry.

it sucks but I don't like houses falling on me, air bags exploding in my face, or experimental drugs... oh wait the healthcare market is too far gone for even regulation to help it.

Three points on this topic:

1) There are worse ways to go than being acquired by Facebook 2) As far as I know, Facebook has been unable to copy/innovate in many areas (unable to copy craigslist, for instance). Their only solution is always to buy a competitor. 3) Monopolies are shit (I'm looking at you, Libertarians)

agree, it is evil to steal and copy with deep pockets, buying competitors are bad, but not as bad as stealing.

i find it interesting that the possibility of facebook being hacked is almost never discussed -- ive never really seen it held up in these comments. everyone discusses endlessly what might happen if a financial institution, an email service, or something else is hacked. equifax is the latest example. the result of these hacks is the disclosure of tons of personal and sensitive data. so why is it never brought up that facebook, like any other company, might be hacked? since they spy on all their users, they must in some way or another store in an unsafe manner all of the chat logs, pictures, private messages, not to mention the damning meta-data extracted from it. i havent used facebook for almost a decade so perhaps im incorrect in assuming that people say private things in private messages?

there ought to be an alternative

People just assume it won't happen because we assume Facebook has deep security expertise. And we assume Equifax got hacked because they (evidently) didn't.

I don't know whether it's a reasonable assumption or not.

They had a security breach in 2011. Private photos (including Zuckerberg's) were released.

The whole premise of the article is flawed. Steve jobs said this before - many of the upcoming social-local-mobile apps ought to be features, not standalone companies. A "check-in" feature-as-a-company is only sellable to investors in silicon valley. It's not defensible in any way, and makes more sense as a feature in an app that people spend a lot of time inside. Foursquare should've sold to Facebook - not because Facebook is evil - because Foursquare a.k.a "check-in" feature, isn't visible or interesting as a standalone company. Enough said

As another user mentioned on a previous article on a similar topic, the main feature that raises eyebrows is Facebook's ownership of Onavo. This allows them to gain an unusual degree of information about traffic flows to competitors and early insight into potential acquisitions in a way that is inaccessible to others. (Onavo is mentioned in the story.)

The future facebook alternative will probably be FOSS, considering it is harder to buy up software that is owned by everyone.

Acquisitions should be regulated.

Facebook can only buy those who want to be bought. Facebook could've been bought out (and many said they should have - which in hindsight would've been a horrific move).

If companies really care about innovation, they can focus on that instead of flipping their companies.

I think money can be a more significant persuader than you are letting on, especially after months of startup stress pile up on a decision maker.

Not just months... but years.

To say that the proposition to be bought is a fair choice is silly when it comes with the threat "otherwise we will copy your business and attempt to crush it to death". Ask Snapchat about that. It's practically a "join us or else".

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