Hacker News Reader

Comment by dcposch | Hacker News Reader

Pretty much every single comment so far is cynical. "No one really wants to know how the sausage is made", lots of money is tainted anyway, it's just PR fluff, etc etc. The classic HN Middlebrow Dismissal in full effect.

Counterpoint: cynicism is too easy. Actually giving a shit is harder, it's uncomfortable, it involves compromise.

Yes, if you refuse investment from any country that has ever violated a human right, you will raise $0. But that doesn't mean all money is created equal, or that Fred Wilson's effort here isnt worthwhile.

He's simply calling for VCs to a) refuse money from the worst offenders and b) be transparent about who their LPs are. He's also calling on startups, founders, engineers etc to demand this transparency, to care who they ultimately working for.

It's a simple ask.

View on HN

> Pretty much every single comment so far is cynical. "No one really wants to know how the sausage is made", lots of money is tainted anyway, it's just PR fluff, etc etc.

It seems like a deeper problem than that, which is that money is fungible. It's the same thing as saying we shouldn't buy Saudi oil. If the only result is that you buy some other oil and the people who would have bought that oil buy the Saudi oil, nothing meaningful has changed.

To get a meaningful result you need one of two things. One is solidarity (i.e. market power), but you never have that in a diffuse competitive market. The other is to do something that isn't fungible. For example, if you actually use less oil (buy an electric car and solar panels, or support nuclear etc.), it makes a proportional difference even at the individual level, because then it isn't a matter of everyone having to act together to accomplish anything, it's a matter of each person doing their share adding up. Then the cost to them is in proportion to how many people act rather than the cost being effectively zero unless you reach a critical mass you can't achieve.

But there isn't any obvious equivalent to that for venture capital. For oil, basically all of the foreign exporters are antagonistic, and burning oil itself is harmful regardless of the source, so everything lines up for that working as a mechanism of retaliation. But if solar/wind/hydro/nuclear/etc. are the alternatives to oil, what is the alternative to money supposed to be?

To get anywhere on that front you need market power, which essentially means something like government sanctions. But we don't do that because we still need their oil. So it seems like we're right back to stop burning oil.

Investment opportunities (which VC firms get the money, what deal flow they have, what investment opportunities the VC has) are most certainly not fungible. So I think it's helpful to think of the deal flow in reverse - even though "someone else can take the Saudi money", that "someone else" most likely does not represent exactly the same investment opportunity to the LPs.

FWIW - I do think your assessment of oil is correct (since oil and money are both fungible). But for venture capital, one side of the investment (startup talent, VC skill and network, etc.) are not fungible.

(elaborated a bit more in a twitter rant: https://twitter.com/ericjang11/status/1054115724996694016)

The distinction you're making matters at the level of individuals. If you're a person choosing a startup to dedicate years of your life to, the choice you make has major consequences for you.

At the level of a huge wealth fund, those details are noise that gets canceled out because the more promise a startup has the more capital dollars are chasing it, so the buy in price is proportional to the value. Arguing that investments aren't fungible is essentially arguing that the efficient market hypothesis is wrong. (Which it can be, but not in a way that seems particularly relevant here.)

Fungibility can hardly be true for the venture capital ecosystem. Many people who wanted to invest in Facebook, Snap, Uber, etc. could not do so.

Founders of highly successful startups (or at least those on a promising growth trajectory) are in practice sensitive to which VCs participate in each round (and I suspect in the next few years they will start to pay attention to LPs as well). The "buy-in" price that you mention is not efficient because some people cannot participate no matter how much they are willing to pay.

Similarly, imagine if Uber wanted to hire a top Computer Vision researcher, and they could not. This hiring situation might not even get noticed by a LP, but an LP would surely notice if a VC was not able to invest their money in the next Uber / Facebook.

> Fungibility can hardly be true for the venture capital ecosystem. Many people who wanted to invest in Facebook, Snap, Uber, etc. could not do so.

Many people who want to invest in Amazon right now cannot do so, because the shares are very expensive. That doesn't mean they're not fungible, it only means the existing owners won't sell for what you're willing to pay.

> The "buy-in" price that you mention is not efficient because some people cannot participate no matter how much they are willing to pay.

If you went to Zuckerberg in 2004 and offered to buy in for the equivalent of Facebook's 2018 valuation, would he really have turned you away?

Early stage startups are sensitive to who invests because early investors typically get seats on the board. The problem with the Saudis was not that they would use their board seats to ruin your company.

> Similarly, imagine if Uber wanted to hire a top Computer Vision researcher, and they could not. This hiring situation might not even get noticed by a LP, but an LP would surely notice if a VC was not able to invest their money in the next Uber / Facebook.

The thing about "the next Uber / Facebook" is that nobody knows who they are yet. And the number of startups who could be them is huge, even though most of them won't. Not being able to invest in a random startup that might become the next Facebook is hardly an issue when there are a hundred more that you can.

I'm a bit confused by the wording, but I think you're trying to say that to a sovereign wealth fund, investment opportunities are essentially fungible because they're allocating their money over a large portfolio. So if one of the big VCs or tech companies won't take their money, another will and in a diversified portfolio that's good enough.

> So if one of the big VCs or tech companies won't take their money, another will and in a diversified portfolio that's good enough.

Right, except that we're talking about smaller companies rather than larger ones, so it's even worse because there are more of them.

Restricting who can own a large publicly traded company which is a part of the major index funds would be... impractical.

Which actually brings up another point. Even if you're selective in who you sell a stake to, what happens when they sell their stake to someone else? Or they themselves get bought out or merge with someone?

I'd guess that you could be required to sign a contract when you buy a stake that says that if you want to sell it or get bought out or merge, they also have to sign the contract. It's not realistic, but I don't see any reason why it couldn't happen.

Saudi Arabia is a counter example to your point: Iran has a considerable amount of oil but because of unrelated geopolitical circumstances, it can't easily sell that to the global market like KSA can. That imbalance has little to do the nature of oil and a lot to do with the KSA-United States' petrodollar and arms deals. The geopolitics of the world put KSA in a position to capitalize on its oil wealth and trade it for influence, not the nature of the product.

Currency may be fungible but the quality of investments an LP has access to are not. The hope is that closing off the best avenues for return in an oversaturated capital market will cause rich people with influence to put pressure on the governments.

Thanks for articulating this better than me in my reply. I also agree the oil / fungibility example was quite bad. Iran vs Saudi Arabia & petrodollar is really straightforward evidence against such argument.

> Saudi Arabia is a counter example to your point: Iran has a considerable amount of oil but because of unrelated geopolitical circumstances, it can't easily sell that to the global market like KSA can. That imbalance has little to do the nature of oil and a lot to do with the KSA-United States' petrodollar and arms deals.

It has little to do with oil and much to do with Trump making the Iran deal a campaign issue and therefore doing everything he can to pressure them into renegotiating. The outlier is Iran rather than Saudi Arabia. Russia and Venezuela aren't having any trouble selling their oil either. Moreover, as Iran's production is down, oil prices are up. This, ironically, actually hurts the Saudis too, because it makes oil less competitive against alternatives in the short term, encouraging faster adoption of alternatives that suppress oil prices in the long term.

And Iran's production is only down because of US-led international sanctions, which clearly falls into the category of market power. But they're also the reason the US can't go after the Saudis at the same time, because until we transition away from oil (which takes time), the US economy is still highly sensitive to oil prices, which are already higher due to Iran. The Saudis are actually doing Trump (not to say themselves) a favor by increasing production during the sanctions on Iran.

Trump is not an important player in this saga (yet, maybe after 2 full terms, if he would get reelected, he will have more of an impact). Iran has been sanctioned and prevented from selling their oil to global markets easily (thus crippling Iran's income and economy) for a long time before Trump and through multiple presidents from both parties. Sure, Trump made the Iran deal a campaign issue but this goes decades back.

Trump is clearly the impetus behind the current international sanctions. They had previously been removed by the UN under the Iran nuclear deal in 2016.

Yes but it is continuation of a long trend that goes back decades and many presidencies. The Obama and Iran deal was a deviation from standard US policy of "Iran bad, Saudis good". So I'm just saying Trump has basically returned to normal US policy on this front, it's not some extreme change of direction.

> It's the same thing as saying we shouldn't buy Saudi oil. If the only result is that you buy some other oil and the people who would have bought that oil buy the Saudi oil, nothing meaningful has changed.

I'm not sure this is true for oil. For example, long standing sanctions against Iran prevented them from selling a lot of their oil and crippled their economy quite a lot (decreasing their income).

The same could be done with Saudi Arabia if there were will to do it (there isn't, western politicians are too intertwined with Saudi money, especially so in US & UK, to a lesser extent in other western countries but without US/UK approval, no action against Saudis will happen).

Oil would come from other countries, they could increase their output while Saudis are under sanctions. I think it's not as fungible as money (and even with money I don't it's 100% fungible as bank accounts can be frozen, again see Iran).

> I'm not sure this is true for oil. For example, long standing sanctions against Iran prevented them from selling a lot of their oil and crippled their economy quite a lot (decreasing their income).

You're referring to international sanctions (i.e. acting with market power), not something anyone can do at the individual level. Not even the US could do it on their own -- if the US put sanctions on Iran by itself, Iran would just sell to Europe or Asia and not care. The only way it works is if nearly everyone agrees not to buy from them.

But the reason countries don't like sanctions on oil exporting countries isn't that they're ineffective, it's that they raise oil prices.

> Oil would come from other countries, they could increase their output while Saudis are under sanctions.

Yes it would, that's normal for a commodity market. When you remove a supplier, the price increases, which attracts new suppliers who may have higher production costs.

But the relevant part of that dynamic is that the price increases. The problem isn't that oil becomes unavailable, it's that your consumers have to pay more for it and the money goes to other countries you don't really want to enrich.

And if you have an international coalition willing to suffer higher oil prices then the much better alternative is a carbon tax, because then you get the money from the higher prices instead of Russia and OPEC, and can use it for things like subsidizing renewable energy or electric cars to mitigate the cost to your consumers and reduce the length of time you have to pay it.

> But the relevant part of that dynamic is that the price increases. The problem isn't that oil becomes unavailable, it's that your consumers have to pay more for it and the money goes to other countries you don't really want to enrich.

Perhaps. But I remember there being very high oil prices (way over $100 per barrel) not that long ago. And there were actually less sanctions on oil countries during the time of such high oil prices.

So I'd question whether the market price discovery works for oil prices very well. It could as well be manipulated by OPEC cartel. I have read articles about Saudis lowering oil price by increasing output because they wanted to put pressure on US shale oil companies to put them out of business.

Oil price has been slowly creeping up again so perhaps the cartel has decided to increase the price.

I think this touches on another thing I've struggled for clarity on lately. How many degrees of separation do you need before you're willing to take investment from someone linked to something you find morally repugnant? 1 degree is relatively clear cut (though can still get muddy depending on how desperate your situation is). Is 2 degrees enough to decide it's ok? 3 degrees?

At a certain stage, it's arguable that benefiting one end of the chain won't result in observable benefit for the other. Where though? And at what stage does the benefit to society of your project outweigh the negatives of where the money that funds it came from?

There isn't a clear line, and there probably cannot be one.

First of all, more than just 'degree of separation' matters. You also need to know what fraction comes from bad sources. If it is 3 fronts stacked, you are still essentially dealing with the bad source.

I see 2 options:

1) Flip it. At what standard do I eliminate e.g. 20% of all funding. Or more generally, plot repugnancy against the percentage of funding sources lost, and pick an optimum

2) Make news matter. It might not feel objective to drop a deal for 3 degrees of separation when you read a story. After all, there is probably other stuff that has 3 degrees of separation. However, by reacting to that news you:

* Outsource information gathering to Journalists, who are specialized and do it for many more people than you * Increasing the impact of journalism. By making investors care about what is written about them.

The second point matters, because fear of bad PR is essentially the only capitalist force that pushes companies towards moral behavior.

Many journalists (and news outlets) are currently fired and not working in the sense you mean, because Facebook made a compelling (and fraudulent) case that millenials only watched videos. Across the industry, news outlets got rid of journalists to repurpose investment in video production.

Fungibility matters if your only goal is to make it impossible for bad dudes to sell their product / invest. But keeping your own hands clean is an admirable goal in and of itself, and certainly concluding "this doesn't make a difference in the grand scheme so why should I care" seems to be the exact kind of cynicism the parent comment was critiquing

The point is that some things make a proportional difference, which at the level of an individual is minimal but make a real impact if 30-70% of people do it, whereas other things only work with a critical mass, which are then still useless even if 30-70% of people do them because you need 70-100% of people to do it for it to be effective at all.

If you as an individual are going to do something, do the first kind of thing.

> nothing meaningful has changed

Except that you don't now have blood on your hands...

If "being able to sleep at night" gets counted as "meaningful", I'd say something has changed.

If the only question you count as "meaningful" is "did we leave any money on the table". Perhaps you should think more deeply about the world...

Thank you for this. It needed to be said.

I tend to agree. I don’t get why people don’t value someone who starts to raise the bar. Even if that’s not high enough, why not see it as something that needs to develop over time?

> I don’t claim to have entirely clean hands in this regard. When we sold our Twitter stock before the IPO many years ago, it turned out the buyer was fronting for gulf interests. I found that out after the fact but that doesn’t absolve me of anything. I could have asked the questions before executing the sale.

^^ That's why. He's "raising the bar" after making money through means that he would find despicable now. "Ends justify the means" is what got us into this mess, and unless he is willing to give away the gains from the arguably tainted money he's just posturing.

People do change. Calling it posturing is premature judgement.

Yes, people change. My concern about people suddenly changing their stance on Saudi Arabia is why now and why only Saudi Arabia. Two major points:

Saudi Arabia is a brutal regime. That didn't start Khashoggi. If we had any doubt, the 50,000 civilian deaths in Yemen should have cemented the brutality of Saudi Arabia. I'm more concerned about people who suddenly decided to consider their moral position after a single US permanent resident (Khashoggi) died, and conveniently ignored the years of brutality leveled upon Saudi Arabia's neighboring civilians.

I'd also challenge whether tsese individuals are also distancing themselves from Lockheed Martin -- the weapons manufacturer selling weapons of Saudi Arabia. Recently a Lockheed Martin bomb was used to kill a bus-full of Yemeni school children...I suppose that is still OK?

Saudi Arabia killing its own citizens is bad. Saudi Arabia killing an American resident, and father of two American citizens, for writing opinions in an American newspaper is closer to an attack. The former is not clearly an American issue. The latter is.

People do change by supporting some of the most violent, racist, and brutal people in the US? Doesn't sound like much of a change to me.

https://mappingpoliceviolence.org/

That doesn't sound like change. But bringing that up makes the judgement less premature. My point wasn't that he was good. My point was that people can change,and that past misdeeds don't necessarily define a person's future actions.

Until he comes out and says "we made $X from doing business with questionable entities, and here's how we gave back $X without lining our pockets", it's posturing.

You don't have to address every wrong you did in order to start doing right.

It's never black and white with people.. and you're not actually looking at the real problem if you're unable to see the nuances.

> It is time for all of us in the startup and VC sector to do a deep dive on our investor base and ask the question that the CEO asked me. Who are our investors and can we be proud of them? And do we want to work for them?

I would extend that question even further: Can we be proud of the gains we've made by working with the investors we've dealt with in the past? If not, how are we addressing the problem?

You can't be forward looking without addressing the past. This is why the moral pleas never really gain traction. If Fred was honest he'd address the elephant in the room by accounting for and giving back the gains. Until that happens, this is empty posturing.

Politicians will do this, this isn't some crazy ask. For example, Cuomo put his money where his mouth is and "returned" the $110K donated by Weinstein through the years:

> “My message to everyone who has current accounts with money from Harvey Weinstein is, ‘Give that money back,’” the mayor added. “Give it to charity. Get the hell away from it.”

https://www.nytimes.com/2017/10/12/nyregion/andrew-cuomo-har...

Except there’s a very large gap between:

* corrupt entity A gave me $X

And:

* corrupt entity B bought Y from me at price $Z at essentially market value.

The amount to return in the first case is obvious. The second is much less clear (since the cash was essentially fungible)

The market value is skewed by the fact that the money is tainted. To put it differently: if real estate wasn't as effective a vehicle for money laundering, prices in places like Vancouver wouldn't have skyrocketed. So while technically people paid "market value", the number is meaningless

You don't have to address every wrong you did in order to start doing right.

By the same token, talk is cheap. AKA "ideas are worthless by themselves."

I think a better ask is to create self-sustaining processes that ratchet to improve the system over time. In a word: regulation. You can't be sure you're consuming ethical meat through consumer pressure alone. You need more eyes in the system, with enough force to be able to see through the veils that the profit motive will put up.

Not everyone in the world can afford "ethical meat" but they still need to eat nonetheless. This is one of the things I have never understood - people that are into concepts like "ethical meat" tend to be left leaning, and people on that side claim to be compassionate toward the poor. Yet it appears from your comment that if you had your way, you would use regulation to force the costs of eating up, which would dramatically affect the ability of poor people to eat.

You can’t simultaneously claim to have compassion for poor people and advocate for regulations that will make their lives more difficult and expensive than is absolutely necessary.

The problem with the global system cracking is that it's pushing this work onto low-information people with mismatched incentives.

If the Sauds have routine trouble getting money into funds they'll resort to tricks that will get them exposure in one way or another. They can acquire a company, they can create their own VP that doesn't list investors but co-invests. It's a never ending battle and one that we're not capable of fairly judging. This should be a Nato / EU / US or UN thing where we have real tools to enforce sanctions.

Just because they have other options doesn't mean the fight is lost before it's begun. We can make this more and more work for them, and keep sending the message. And yes, we can also work to place sanctions on investment from nations that ignore human rights.

If we make better and best into enemies, there's no end to what we can't accomplish.

I usually agree with this line of thinking, and even personally I wouldn't take money from some people like Peter Thiel because of his political actions, but I don't try to get others to do the same. I advocate for systemic or political changes or—if those are hard because of mismatched incentives or low information voters—propaganda, think tank funding, and lobbying to try to fix things.

Take plastics use, for example, it's better to focus energy on banning them completely than to check each and every shampoo personally for microbeads.

Better and best are only enemies in situations where better is multiple orders of magnitude less effective than "best" which I wouldn't even classify as "best" I would call it "a real solution that might not be optimal but fundamentally sees to address the problem in a meaningful and efficient way" because I don't think of things in terms of better and best.

I think the reason I don't is that I studied both software and structural engineering separately. In structural engineering the design goals for non-emergency buildings are 1/10k failure rate over 100 years, with visible signs of failure before collapse.

We need steel girders to deal with illiberal states, not popsicle sticks.

>Take plastics use, for example, it's better to focus energy on banning them completely than to check each and every shampoo personally for microbeads.

The vast majority (>90%) of the plastic waste in the world's oceans comes from a few rivers in asia that run through countries that have minimal to no garbage collection/sanitation services for the cities that border the rivers. Investing in appropriate waste management infrastructure in the countries that need it is the solution to work towards. Plastic bans don't address the fundamental problem.

https://cen.acs.org/materials/polymers/Fighting-ocean-plasti...

That isn't the same issue as microbeads though, because those hit our tributary rivers and lakes where ecosystems are less resilient. But even if you are right (and I'm more than willing to change my mind here) it only speaks to my larger point: Let's focus on the real problems at their source instead of putsing around with micro feel-good-measures.

>Let's focus on the real problems at their source instead of putsing around with micro feel-good-measures.

On that, you and I are on 100% agreement! It is just that in my experience, the real problems are staggeringly prosaic, and thus hard to drum up real support for. Not many people (although I am willing to bet quite a few here on HN!) get excited about proper waste management/sanitation. But it is one of those comparatively cheap things that reaps vast societal and environmental benefit. And plastics provide a lot of benefits for very little cost- it's why they are used so heavily. Switching over to paper packaging would require vastly more energy and resource inputs, for example, and it is not immediately clear that this would, or would not, be a net benefit.

A truly biodegradable plastic that still had the required physical properties of what we currently use would be a big step forward, too.

As a slight aside, I am leery of banning as a first-choice tool for dealing with these kinds of problems. Look at what happened in California when anticoagulant rat and mouse poisons were banned from use. What was an excellent idea (reduce poison loads in the environment, stop additional kill of non-target wildlife) has instead become objectively worse, and the neurotoxin introduced as a replacement has no treatment, unlike the Vitamin K shots that could previously help stricken pets and animals, and is a far more agonizing way to die to boot.

Agreed. There's no effort against bad actors that bad actors haven't tried to work around. Waiting for perfection means waiting forever. The right thing to do is to take the first obvious action, see if things get better, and then iterate.

Exactly! It's not about "tainted" vs. "untainted", it's about setting some limits and trying to be a part of the solution. Doing so puts in progress something that WILL start to shift things. You don't have to be money trail inspector, you just need to be your own ethical link in an otherwise ethically unknown chain.

You're responsible for making a reasonable effort where you think it's important not for the actions of everyone who has ever touched a dollar you're now touching.

Totally agree. I just hope people will take this sentiment and make it more formalized. But people will have to be up to that task. An explicit movement to refuse money from US allies who violate human rights would have to include Israel -- so, a big ask. A centralized outlet that reports who funds who, like we have for political campaigns, requires sweat and tears. Hopefully we'll see more grass-roots organizations made up of tech workers like Tech Solidarity to take this work on.

I can't act as a leader for change like this in the tech startup sector, but I would be very interested and engaged with any leaders who step up.

We will never be perfect. There will be mistakes made, both intentionally and unintentionally.

However, cynicism which demands that we do nothing unless we have a perfect solution prevents us from making any progress and further makes it impossible to get any closer to the perfect state.

Simply asking about where the money you’re getting is coming from is in itself a huge first step that can be built on.

One small step at a time is pretty much the approach that developers and entrepreneurs advocate on HN for nearly every other problem. It should be the approach that we take towards resolving non technical challenges as well.

be transparent about who their LPs are

That would be a deal breaker for many potential LPs, and not because all of them are criminals or despots. Some people just don't like others to know what they are doing with their money.

The bottom line is, if enough VCs take this stance, any bad actor that wants to invest will simply put their money into clean shell companies and invest that way, or partner with other, clean LPs. That isn't cynicism, that is reality. If people want to throw money at VCs, they'll do it - one way or another.

Company leaders don't even necessarily have to decide for themselves. They can just discover the facts and communicate them clearly.

If it really doesn't matter where money comes from, they won't object to doing so.

If it really doesn't matter where money comes from, it won't affect their recruiting or marketing.

On the other hand, if company leaders resist the idea of being so transparent, well, maybe that it is a hint.

We're at a point now where VCs are going to have to start refusing money from nearly everybody foreign thanks to the new CFIUS rules. They're so overly broad in identifying high-tech industries that I think there's going to be a lot of issues over the next couple years of implementation.

> VCs are going to have to start refusing money from nearly everybody foreign thanks to the new CFIUS rules

That isn't going to happen at all. The point of CFIUS is selective enforcement, not broad, strict enforcement. It's the exact same reason anti-trust laws are vague, so they can selectively go after anyone at any time if they so choose. The point is to be able to further control the economy, whenever that is desirable, and to target a given nation for restrictions if it's viewed as politically advantageous. The point is absolutely not to clamp down on all foreign investment.

The point of CFIUS used to be selective enforcement. But the new rules require mandatory disclosures of any foreign investment into a high-tech company.

Saying "giving a shit involves compromise" is exactly the kind of thing that venerates the idea that conscious capitalism is impossible. The irony of this post is that he lists the pension fund of the police, who are responsible for some of the most brutal human rights violations in the US, as a wholesome LP, when for some of us it's just the opposite.

Fundamentally everyone in the business community is worried more about ass-covering as it pertains to their bottom-line, not to any real concern about the implications of who they enrich. That's not to say that there's nothing to be done, but anyways... I won't talk about that here since HN has a pretty nasty reflexive response when you talk about the S word.

Reply on news.ycombinator.com