Sustainable business model means that you can pay your bills from your income (not from investments, since those want payback). It means happy customers and good products. It means that you grow in a reasonable pace, with costs that you'll be able to cover. Investors are a liability, not a feature.
It's rational only in the same way that Vulcans are always logical (as Star Trek writers would have you believe).
Rationality is a tool to help you achieve your goals and realize your values better. Any particular method can only ever be rational relative to some goal one is seeking.
The thing about investing is that you can take advantage of maximizing short-term gains and get out before the investment would crater. So taking advantage of a non-sustainable business model is fine if you can get out before the bill comes due. This is rational, but not sustainable.
If you're running the company, and you care about it, and its employees, then you want something sustainable in the long-term.
But Star Trek writers wouldn't generally have you believe that (they'd have you believe that some Vulcans themselves would believe that and/or have others believe that and/or seek that.)
> Rationality is a tool to help you achieve your goals and realize your values better.
Rationality isn't a tool, it is perfectly optimal goal seeking.
> Any particular method can only ever be rational relative to some goal one is seeking.
Well, no, it's relative to the utility-weighted combination of all of your goals; that is, rational behavior is whatever behavior optimizes your complete utility function, not just addresses one of your goals in isolation.
I think you just agreed with the comment you're trying to disagree with. To paraphrase your comment: "rationality is a tool for achieving one or more goals".
If not a tool, what would you describe it as? Animal instincts - the kind we're hard-wired with - aren't "rational" in the context of human society so being rational is in some sense a choice. The only way to define this away is to extend the definition such that all human behaviour is "rational" because it's meant to fulfill some conscious or unconscious goal. But this definition is useless!
You are wrong.
> To paraphrase your comment: "rationality is a tool for achieving one or more goals".
No, “rationality is a tool...” is not a correct paraphrase of “rationality is not a tool...”.
Rationality isn't a tool for optimization, it is simply a label for perfect optimization of the utility function.
Rationality is, by definition, perfectly optimal, though you describe succinctly why it cannot actually exist, only at best be approximated.
Acquirers are few and far between and rapidly diminish once you cross the $50M mark. Going public is even more difficult. And after all that, once you add in dilution and liquidation preferences, founders can still end up with nothing.
Meanwhile many of these companies can build great sustainable businesses that meet customer needs while making plenty of margin and owning their own destiny. It's a SV cultish attitude to think that VC is the way to get things done, and I've seen way too many founders whose first thought is to raise money before they even have a serious plan for a business.
> there are probably millions of retirees who'll get stuck with all those losses
These statements don't seem to fit together. Dumping losses on retirees doesn't seem rational, it seems sociopathic.
That sounds like a great plan if you're not going to be a retiree in a few decades. Maybe you plan on dying early?
> It's possible to seek evil ends in a rational way.
Teaching people how to kick someone when they're down isn't rational. It just means that you're going to get kicked when you're down, too.
No, I'm saying investing while things are hot, and selling before it cools down is a way to maximize profits. It doesn't require sustainability. There are a ton of millionaires from the Dot Com boom in the early 2000s that got theirs and got out before the bubble broke. It works; it just leaves a _lot_ of collateral damage, so it's not a moral thing to do. But it works. That was my point.
> Teaching people how to kick someone when they're down isn't rational. It just means that you're going to get kicked when you're down, too.
There are a lot of rich people that would laugh at this. I'm not saying it's good, I'm saying it's rational.
And there's a lot of not-millionaires who tried that and missed the window by that much.
> But it works. That was my point.
It works sometimes. But it's unreliable. Maybe you get lucky, and maybe you don't. That's not being rational, that's just plain old gambling. Some people became millionaires from scratch-off tickets, too.
Many of them have been perfectly rational and have had very good impulse control.
It isn't fair to make a post identifying a misused phrase, but then turn around and call investors a liability. Investors are a key part of the process.
While I personally agree with you on what a sustainable business model should mean, investors hold the opinion that actually matters (much like a judge's opinion of what is reasonable is more important than the average armchair expert). Someone has to decide what "sustainable" means, and it is best that the person who decides is the one who stumped up the money.
If you have no investor and the company has grown organically from the initial founding, the only people that stumped up money are the owners or, in a more cooperatively organized company, the people that took less wage to allow for investment in growth. Taking on investment relinquishes control over various features of your company, for example on the desired definition of "sustainable". In that regard, investors are a liability.
What process?
Given how often we hear about founders being replaced as operators, I think it's prudent to not assume the intentions of any investors, and to reassess their likely goals based on their actions on a regular basis.
For a venture capital firm investing $60m into a company and hoping for small sustainable profits isn't a sustainable business model - it's tying your money up in low growth long term investments when that's literally the opposite of what they invested for.
This may not be good for the people who use Patreon, but what you're describing isn't sustainable for Patreon.
A startup is not necessarily guided by sustainability. Amazon lost money for decades. FB never bothered to make money until their IPO. They were not pursuing sustainability at those points. They were betting on growth.
Good things often take a while to take root. VCs aren't interested in that noise.
actually, it does. If you want to keep the same revenue, you need to grow because everything around you keeps becoming more and more expensive - taxes, etc
You'll still want a bit of a rainy-day fund to cover unexpected losses and you'll want sufficient growth to cover inflation. Not growing beyond that is not necessarily a bad sign, it may be a conscious decision. Growth brings its own kinds of problems, stability has its own appeal.
Economic profit, which factors in opportunity cost, does tend toward zero. A sustainable business can exist with no economic profit or loss, but the accounting profits would be in line with standard market rates of return.
Of course, if the business's investors are also its employees (as is often the case for small, privately-held businesses) then any accounting profits can be distributed in the form of salaries... but in that case the investor-employees will expect higher salaries than they would receive as mere employees elsewhere.
Keeping up with inflation does not count as growth. Growth or decline should be calculated in terms of purchasing power (inflation-adjusted dollars), not raw currency.
Is that necessarily so? They can just as well decide that being in control of their work justifies a lower wage than market rate. After all, it’s their business.
The same goes for non-employee investors, of course; one might hold shares in a company (or more commonly, a co-op) not for any direct financial benefit but rather as a way to influence how the organization is run.
but that's what I'm saying : at equal amount of work, expenses keep increasing in time.
Stuff doesn't naturally get more expensive in constant dollars. In fact, except for labor, and very limited resources, it usually gets cheaper over time.