VCs are financing an economy of servants
sifted.eu
sifted.eu
Was it ever actually fit for that? The VC economy basically always served one type of company, consumer-focused "lifestyle" or service 'technologies', and nowadays a lot of the institutions like a16z just appear to turn into straight up media outlets.
VC success in the industrial sector, biotech, military or scientific applications has always been muted compared to the kind of money that flows into the leisure/consumer/entertainment economy.
If you want to solve complex problems bet on Darpa or academia or bring back the corporate research lab whose demise is one of the real big problems today.
I can't imagine any kind of irrigation company every being larger than Uber for example.
Just noting that they're only media outlets insofar as it helps support their primary business model.
The media play is to push brand recognition, influence the startup scene in a way beneficial to VCs, influence politics, etc.
Sure, but isn't that the objectionable part? The core conceit of capitalism is free competition and that multiple participants on a level playing field optimizes outcomes (in the form of greater overall wealth, better products, etc.).
Investors are needed for liquidity, but if some investors gain enough market power that they can change the outcome of businesses that seems deeply suboptimal and runs counter to the core conceit of capitalism.
On the extreme end this would include flooding the field with so much money as to effectively wipe out competitors - including ones with superior technology/product. On the milder end it would include crowding out the marketability of less well-backed competitors by using media clout. Both seem like things very large VC firms do on the regular (though to be fair, not at all unique to a16z).
But I'm still interested in addressing your point:
> if some investors gain enough market power that they can change the outcome of businesses that seems deeply suboptimal and runs counter to the core conceit of capitalism
If a VC's media channel becomes powerful enough (ie monopolistic enough) to decide winners w/o the opportunity for competition, then sure. Though this would require substantially more power consolidation than there is currently. There's enough Tier 1 VC's and of those, the media outlets they operate are certainly not monopolistic enough as to change the business outcome in an unfair way, as currently defined by law wrt monopolistic practices.
If you mean more like "if some investors gain enough market power that they can change the outcome of businesses because they invested so much money", then I still think the same point is true - there's enough capital in diverse enough hands. The most ready example being ride share; there's plenty of them.
Isn't that what FAIR, Deepmind, and Google Research are for? (mostly AI focused, though the latter also dabbles with Quantum Computing and tons of other stuff)
Given the resources that these companies have there should be a dozen research labs with genuine scientific freedom. If you look at the way people describe the atmosphere at Bell Labs it's hard to find something like it today.
I'd say the vast majority of VC money is "dark" money.
Investors who fund military technology don't spend a lot of time on PR.
You're too young. Old VC's funded a lot of hardware (networking, graphics card and microprocessor) companies, for example.
This, of course, tied a up massive amount of capital and took 7-10 years to reach a liquidity event. And had a bunch of grouchy people called "engineers" who would tell you to fuck off or leave your company if you treated them too badly.
Then the web took off.
It was in the the DotBomb and the aftermath that VCs became useless lottery players who want to spend nothing, take all your equity and have their companies be unicorns in 18 months or die trying.
Yeah, venture capitalists were already funding companies like this in Silicon Valley (hence its name) a half a century ago, long before the days of the consumer internet:
https://en.wikipedia.org/wiki/Silicon_Valley#Venture_capital
Back in 1968, VCs were funding Intel. And Intel IPO'ed only two years after being founded, so investors weren't pouring money into it for very long.
Speaking of this, an entire new construction neighborhood near where I live was just purchased, with all of the for-sale signs replaced with leasing info signs. You will own nothing, but you will not be happy about it.
In 2021, the 6-7 in my neighborhood which have sold for record prices are sitting empty with 'for lease' signs. Checking the property records they are all some under a different named LLC.
Never lived in a condo tower, might be the same.
Management gets thousands of dollars every month from each renter. They could absolutely fix it if they wanted to. In this market, they don't get punished for not fixing it, so they let it go and pocket the difference.
Normally I'd be with you here. It's gross what some people think is acceptable in common spaces. Slumlording is also pretty gross, though, and I tend to think it's the larger evil here. By a considerable margin, too.
Because cause and effect can have a non linear relationship in the real world.
People aren’t going to accept having their rent go up 20% next month because a bad apple wrecked some common shared stuff that is peculiarly difficult to restore. People by and large don’t accept non-linear effects when it impacts their wallet negatively.
Thus in fact there is never enough money to repair everything.
Society at large gets around the issue by reserving very harsh punishments in such circumstances, though even now that is declining in frequency nowadays. Rental management do not have any punishment authority beyond taking away a security deposit, if that.
Renters generally benefit from anonymity and limited liability.
Every year the condo board approves and funds at least one round of improvements at my brother's condo, keeping everything looking and feeling fresh. This year it's a refresh of condo front doors, for example.
A lot of this is to diversify out of equities which will soon crater ala 1929. The problem is that hundreds of empty track houses don't have value either. I think they know that; I think they feel they don't have much choice. Desperate times.
I know people who have gotten <2% mortgages, which is like a 0% interest mortgage. These are private individuals. What rates do you think banks the super wealthy are getting?
Nothing can go down until rates go up. Hell BTC went up after the Senate passed a bill that could really curtail adoption of it... because nothing can go down. Money printer go BRRRRRRRRRRR...
When two people move in together so that they now only have to pay 1/2 the rent of a house, that means the rent of each house can double and the occupants can still afford it.
There’s a way this plays out where both home price and rent double, but an increasing number of houses sit on the sidelines empty. Watching the commercial real estate market over the past decade, that scenario doesn’t strike me as outlandish.
Capitalist society -> Slowly institute communism -> Slowly destroy economy to reduce purchase price of assets (real estate, infrastructure, industrial businesses) -> Elites with cash stockpiles buy those assets at low cost -> Power & wealth further centralized -> Just before moving economy/society towards Capitalism, sell off public property (such as natural resources) to your cronies -> Reimplement capitalism, now with more power than before.
Wash, rinse, and repeat, until you reach your desired level of wealth centralization in the hands of the "Qui?"'s
Seems to me that capital accumulation and inheritance is a pretty obvious mechanism to drive that process.
Honest question from outside of the western world: is it really private, as in, the end beneficiaries are "evil rich" people with net worth over $10m? Or are those investment funds that hold the pension plans and life savings of the western middle class?
So, it's not really "you will own nothing and be happy about it", but rather "you will own 0.1% of 1000 houses rather than 100% of 1 house, and be happy about it."
If only that were actually literally true. If I could buy shares in a housing cooperative that allowed me the right to live in any house owned by the cooperative, and when I owned shares equivalent to the market value of a house I could trade those in for full ownership of one house, that would actually be pretty interesting.
Amazingly enough, pension funds are allowed to park money with them. For whatever reason, unlike endowments, which are heavily restricted in what they're allowed to invest in, pension funds can invest in nearly anything they want to.
But they're still called private equity, which has nothing to do with who is allowed to give them money to invest.
You can think of venture capital as privately financed stimulus package focused on a few sectors. So its actually necessary for the growth of an economy.
PE on the other hand is more of the rent seeking behavior (buying cash flows) that we should really worry about.
>PE on the other hand is more of the rent seeking behavior (buying cash flows) that we should really worry about.
You don't think that VCs are buying future cash flows with their investments? Do you think they're just giving out free money because they're feeling generous?
The point is that they risk their own capital to create new opportunities in the economy. 'future cash flows' do not exist.
Which is almost the exact aim of an actual stimulus package.
>Do you think they're just giving out free money because they're feeling generous?
No. Anything that needs to be sustainable has to produce more that it consumes. And that extra production is what people happen to call profit or "exploitation" depending on the envy.
It is like saying the farmer is exploiting the fact that people can become hungry and need to eat.
Or saying that a doctors should not be paid what they want because their primary job should be to heal people.
I know there's a lot of media saying this headline but This is actually false. checkout Stephan graham, he's got a post on this on Youtube where he investigates it deeply and finds that an extremely tiny percentage of houses are being bought up by private equity.
As devs, what do we do about it?
In NYC already, paying smoeone on an e-bike to deliver 10 meals in one short trip is way better, but why stop there. There is no reason we cannot bring back the old pneumatic tube delivery systems of yore (and expand them according to 100-year-old sci-fi too).
Conversely, none of that could ever be possible in the suburbs, and your doomed to waste your life in traffic in pay a poor immigrant to do so on your behalf.
all joking aside i sent myself a « pneumatique » a year or so before the system was shut down. I had to go to the post office to send it and I picked it up from the other one (rode the Métro to get it). Otherwise a courier would have transported it, I suppose (I don’t remember). In any case it was pretty inefficient by then and the ramification due to subsequent construction makes it impractical.
Pneumatic tubes interestingly started out as a bandwidth problem for telegraph operators. You couldn't cram enough operators and telegraph infrastructure into the stock exchange of London or Paris so the telegraph companies would have a dedicated pneumatic tube for sending paper dispatches from the stock exchange a few blocks to the telegraph headquarters, where hundreds of operators would then relay the information over wire.
IMO, pneumatic technology peaked in 1920s Berlin where at the Resi night club you could give someone presents and recreational drugs delivered via pneumatic tube directly to their table.[1]
I collected a bunch of ephemera about pneumatic tube and cash railway systems a while back. Highlights include a viscious scalping, notable passengers (cats, mice, spiders, kids, and the 3rd Duke of Buckingham), and many videos and pictures of surviving systems in operation. Here are my notes.[2]
[0] https://www.nytimes.com/1925/11/21/archives/grandson-of-bret...
[1] https://www.atlasobscura.com/articles/pneumatic-tube-table-p...
[2] https://docs.google.com/document/d/1FHI8AMI74jPrVXBHLjBCwz2x...
Somewhat? Overall I'd argue no. We know gig economy companies are most "profitable" (i.e., light less money on fire per transaction) in dense cities, so I imagine if they have a magic lamp they'd wish for people to live in denser environs generally.
But the inefficiencies of suburbia does in some ways resemble a "broken window" kind of economy - entire businesses and industries to fulfill needs that only exist because of an intense root inefficiency.
This is not unlike health care, where entire industries spring up around inefficiencies that arguably should not exist - and the industries will fight any systemic reforms that make them obsolete.
Labor isn't anywhere near expensive enough to make it succeed as the network bootstraps.
Indeed, the analogy that comes to mind is the growing use of air conditioning worldwide to cope with global warming.
But I think it's not just the suburbs. I live in a neighborhood of detached houses, yet I don't need delivered meals or a cleaning service.
Without the gig apps, rich people are driving themselves to the store to buy their groceries and poor people are not being paid. With the gig apps, rich people are giving cash to poor people in a mutually beneficial manner.
These apps help find more convenient and mutually beneficial ways that rich people can exchange money for services. If you have an unequal society, you would want to promote as many of these situations as possible. Each one is an opportunity to spread wealth around and reduce inequality.
Getting your own groceries may feel more egalitarian, but it does nothing to help poor people. Hiring them to get your groceries actually puts money in their pocket.
For the gig economy to actually "fight inequality," it would have to ultimately lead to reduced inequality. I've heard plenty of arguments that gig work is low-paying and enables employers to subvert traditional worker protections, but nothing suggesting that it's closing the gap between the rich and poor.
I'll risk being a bit savage on this one because his entire perspective presumes that the people he is encountering in the gig economy are living under a false consciousness that they are his equal, but that they aren't and they have no hope of it because to him there is no obvious route from their "there" to his "here." It takes a second, but he's not worried about peers, he's concerned about mercifully distant others, presumably to sell some kind of framework that reduces to just listening to him.
Yes, there it is. He asks, "is the structure and business model of most VC firms today unfit for solving complex problems sustainably and long-term? Do we need a rethink the VC business model more generally? A first starting point could be a strong embrace of ESG principles — if done correctly and beyond a simple tick-box and reporting exercise."
The ESG principles he's advocating need to be "done correctly," which reminds me of another perfect framework I can't name off hand that requires its hosts only do it correctly for it to solve their problems, and I understand historically it has required some initial attrition.
Most working people are smarter, more competent, and funnier than sleazy academics reduced to peddling frameworks and governance, and the author and his peers would benefit from being a bit more mindful before airing such patronizing concerns. Servants indeed. What a git.
Gig work is a dead-end for its laborers. People with non-gig jobs - even "shitty" ones - actually have career advancement opportunities. They can leverage their qualities and hard work towards greater earning potential, rather than having it get wasted. Nothing like that exists in the gig space and that's by design.
That's some pretty 2015 lingo though, but I'm hep to that. :)
The author is British, interestingly one of the few society that's actively protecting it's monarchy. You can't be more layered than that: you'll never ever be like these people, and the British people see nothing wrong with it nor these people having servants. They actually prefer it! But the little guy having someone deliver him lunch, that's "problematic".
> 85% of Uber drivers are from Black, Asian or other underrepresented backgrounds (similar statistics can be found for Lyft drivers in the US). In 2018, almost 60% of gig workers in the UK were 18 to 34. We talk about people working in dark stores and dark kitchens, out of sight, out of mind — exactly like the servants who waited on Western aristocracy (and colonialists) in the past.
Is this by design? Why else allow so much unskilled migrants?
(1) VCs have mostly funded the employment of well educated white collar workers. How else do computer science graduates get paid $120-150k 2 years out of college in the US?
(2) There are horrible employers of low skilled workers out there. You ever tried to work in a restaurant kitchen in a city like NYC? You're being paid $25-40k to do absolutely brutal work for brutal hours. Nobody talks about this because there are no evil rich investors involved - just hard working business owners. The divide has always existed. It's just more news worthy now and has a large brand in front of it. Delivery companies are at least offering some level of competition in this horrible labor market.
Remember, it's fashionable to bash on "Big Tech" these days.
There is a chance with diligent effort that you can become manager for the restaurant or even start your own. The restaurant is even notionally liable for unemployment and minimum wage laws. Uber for X means permanent hard labor at low wages with no possibility for advancement or improved conditions.
Even assuming that only 10% of Uber drivers care about advancement and learn to code that would create 300k new software engineers, far more than Uber could ever hope to employee. In fact this would be more software engineers than the total number of engineers employed by the top 5 tech companies by market cap.
It's never been easier for someone who needs to work two jobs... to work two jobs; one with weekly hours and another you can do whenever is convenient. It has never been easier for a student to make some cash when it's convenient for them and with no weekly obligation.
These are improvements on jobs that already existed and new jobs altogether.
We should probably be focusing on how to provide more upward mobility and access to education instead of demonizing improvements to an economic sector which will always exist.
People fought for 40 hour work week. If everyone works more hours it will kill productivity and also just suck.
I am with you that this stuff is an effect not cause of declining worker power, but the fear this will further erode old victories is genuine and shouldn't be dismissed.
Ultimately, yesterday's worker power is not a substitute for a lack today, but (hopefully) once that is somehow fixed, it is really important to turn these norms stuff back.
It should be dismissed because it shows the old “victories” were simply a happenstance of labor supply and demand. It is exposing the fact that there was not really a victory in the sense of it being codified into law.
Any effort trying to blame VCs (or any business) for low wages or quality of life at work is a waste of time, as it simply requires a legislative solution.
Sure, but not in some exogenous passive way. Market power distorts heavily, and organizing is essential.
> It is exposing the fact that there was not really a victory in the sense of it being codified into law.
No, it was caudified into law. But law, especially a moribund poorly-written elgacy codebase like our law, is no substitute for ongoing power. That is a fundamental illiberalism of our current society, like it or not.
I'm talking about the people who have to take care of their kid, so they can't work the usual 9 to 5. They got 28 hours from target, but they do need some more money, so they do UberEats at night.
I'm talking about the student who really can't work in the day because they have to study and attend classes. Hell, sometimes they can't even work at night due to their group project and their team members slacking off. Well, now they can just Uber when they have time instead of committing to a schedule at the local Subway.
Of course, that is not how it works in the US in the short term, and the gig economy is good in this regard comparison to the terrible last-minute scheduling on-prem unskilled labor has turned too.
Just saying we gotta keep our eyes on the prize long term. Even if you, dear reader, are a well-paid programmer or whatever, remember the powers that be only automate things with the proles don't show up to work, so your interests are aligned.
the students living expenses should also be paid for accordingly, I forgot to make clear.
Sounds like one of those "on a computer" things to me. I know the delivery business is booming everywhere but I am mostly concerned from an environmental point of view because that laziness translates into huge amounts of perfectly good containers being treated like they are only good for one thing only: getting some food delivered to you, my liege
In other words, this is a specific example that blurs class and disposable income lines, and is also arguably just bad judgement/addictive behavior on his part.. no grand plans or social changes, unless you count being lonely contributing to your poor health choices as social change.. yet the service is benefiting from his indulgence, and the economy is "growing" ..
reality is messy and not cleanly in categories
Cooking for loved ones is a joy. Or so I've been told by my wife
This is an oft-repeated claim that never seems to actually exist in real life. One of the original pitches of Uber et al was that it would make the whole system so efficient that drivers would get paid more overall thanks to [insert hand-waving here] technology.
It's been many years since that promise was made and nothing like it has materialized.
For one thing the ability to "batch" things like this is really minimal. You can't put 10 food orders into a single car, because the 6th, 7th, 8th, 9th, and 10th persons will be receiving cold food. Even if you could batch two orders together, that relies on a level of scale that simply isn't reliably replicable (two orders within a narrow time window of each other, to very nearby restaurants, to destination generally near each other). I've personally seen it happen twice.
And then we've also discovered that the delivery gig economy adds a massive new inefficiency that fully offsets the few batching inefficiencies that can be exploited (and then some): idling cars for fast response. It turns out if you want a delivery driver to be around quickly on-demand, you need a lot of cars idling/driving aimlessly, which overall produces even more waste than the status quo.
I swear 99% of all trash I see relates to food take out. I would love some laws demanding that dishes need to be resusable and returend to the restaurant, just like glass coke bottles used to be returned to coca-cola.
https://www.seattle.gov/utilities/your-services/collection-a...
Manufacturing snigle use crap because we are too lazy to improve logistics is just embarrassing on some level.
So many sectors of the economy are about providing services... how is any of this different from working in the restaurant industry? Aren't many restaurants almost equally unprofitable as these VC-driven "servant economy" startups?
I haven't worked in the service industry, but I heard, repeatedly, that the worst part of the job is dealing with clients. May be reducing human-to-human interaction isn't such a bad change for people working in that industry?
I do agree this is depressing but isn’t this also the selling point? A lot of people just want food, etc. with no interaction with other humans or any effort involved. In exchange, they’re willing to pay a slight premium. While I do agree it is rather depressing, I feel it’s more of a question of “have we humans always craved this and now we can deliver it or is there something particularly soul-crushing about modern life that makes this desirable?” rather than a question of “is it ethical for companies to cater to iffy consumer desires?” And I do believe it’s catering to rather than creating consumer demands. We’ve always had hermits, outcasts, people willingly living outside of society with minimal interaction. Perhaps now it is either more desirable or more acceptable to “hermit.”
It's been great for food delivery when the languages you speak don't completely overlap with the worker's at the restaurant. And it's much easier to build complex orders on an app rather than over the phone where the recipient is right next to a busy kitchen.
15 years ago, a “non-servant” making minimum wage would drive my tv in a truck to a store, another non-servant would put it on a shelf, and then a final non-servant would check me out. No one then considered any of them to be “servants” because they were “employees”.
Now someone can be paid a similar amount to those “employees” salaries to bring food to me. The transaction is structured in a way that I pay directly for their labor and people get to have a moral panic about it.
There'd be a lot less panicking if health insurance (and other employee benefits) were resolved in the new normal. These costs have been externalized, and the Servant-as-a-Service companies are pocketing the difference: there's nothing direct about your payments.
Listen I agree low end work is fucked in the US. That's why it's my personal rule to tip 25% of GMV or $7 per order on these services (whichever is more, and I recommend every person who reads this adopt a similar rule no matter how painful it is), but please spare me with the 'Servant-as-a-Service' line - the problem is society and its participants, not the shape an individual job takes.
It's perhaps the indignity and the massive disparity in income that seem distasteful in the richest countries on earth.
What we've seen in the past two decades with the four recessions we've experienced is companies cutting the "good" jobs and never bringing them back. In the overall job market they're replaced with McJobs, so the U3 rate goes down while the U6 goes up or remains steady and everyone rejoices because what the hell is the U6?
McJobs also tend to have pretty high costs to the employees that aren't always obvious or even recognized. Split shifts and variable schedules (and demands for complete availability) make scheduling anything difficult or impossible. Getting child care is expensive. No medical benefits mean anyone not eligible for coverage under their parents' plans (provided they have insurance) mean ridiculous expenses for medical care. Wear and tear of vehicles for commuting to the split shifts or driving self-owned vehicles as a gig is expensive.
Not all jobs need to be careers but we have an environment where most people working a non-career job are just wage slaves.
This is such absurd hyperbole. Show me an economy where a significant number of people didn't have insecure incomes, lack of benefits or do menial work and maybe we can talk about how to recreate that in the modern world.
Problem is, such an economy has never existed. Instead of faux yearning for a "return" to such a mythical system, let's talk about how to make our system better.
Here in Germany and the 'German culture adjacent' countries (Switzerland/Austria/Benelux etc) that culture is still very much intact.
When you turn 16 you can pick up a vocational program in the very large and still healthy Mittelstand, and you have a steady career for your entire life, decent pay, without having to have pretty much any universe education.
The rat-race mentality and cultural divide into the 'cognitive class' and disenfranchised service work is not universal, it's a consequence of the de-industrialization that the Anglosphere in particular went through.
Investors don't ponder philosophical questions about the nature and long term societal implications of their decisions (well, most of them). They chase yield/roi/yoy. VC's aren't immoral. It just happens that some of the economic activities that optimize yield happen to be the so called 'gigs' that the author derides as "the servant economy".
Imagine a city, state or nation held hostage by a "Fraternity" that uses Signal to stage a delivery shutdown in order to make a demand. The demand? Agree to a Standard Delivery Tax that will go directly to the Fraternity.
VC's may create a monster they cannot control.
Is the expectation that these startups will replace human labor with robots/autonomous vehicles in order to achieve profitability?
1. VCs funding a so-called “servant economy” or… 2. The fact that there are these businesses that perpetuate some form of servanthood (to use the author’s parlance)
If the gig marketplaces were bootstrapped, is there still an inherent problem?
The stratification has nothing to do with venture capital. You could argue that VC money makes this industry less stable, and the lack of stability could have a negative impact on "servants", but that's an empirical prediction that I think is less compelling than the moralizing in the article.
That's a serious public policy problem.
This line of reasoning seems like a hand-wave.
I don't see VC's as particularly notable or different than anyone else, but I also feel like I could stand to have my perception loosened up a lot. The above is more than Socratic; I am curious what pieces of the economy, what engines of capital drive humanity towards independence rather than dependence.
The author would rather keep people unemployed and on welfare as to not to offend their sensibilities, such typical fake liberalism.
You probably would argue that "at least they have a job", but the jobs people have shapes the society we life in, stable, unstable, reasonably paid or not
you can get a paying gig with apps even if you don't have a stable job record, prior convictions, bad credit, history of addiction or mental health issues or whatnot, you don't need to pass excruciating rounds of "background checks" and interviews which would filter you out because you're poor or look different
People can raise themselves from poverty and support their family, even with these temp gigs you can pay your bills and avoid eviction, how arrogant and patronizing someone can be to deny people a honest way to make a living
The issue with people discriminated against is discrimination. The solution is not devising some totally new form of employment that has no security, no benefits, etc. so that people we hate can feed themselves. The solution is stopping discrimination (which btw, has been successful...it isn't a panacea). If you offered people doing these jobs the chance to take a normal job that paid the same, they would mostly take it.
And the problem is that many people who work these jobs can't "support their family" (again, ppl do this work because they have no choice). These jobs aren't unlocking some new source of productivity. Uber has not made taxis faster or cheaper. Uber has just unleashed a bidding war where prices get driven down (benefitting relatively wealthy people) as activities that were formerly "jobs" are now self-employed. For people who drive taxis a 10% drop in income is material, for people who take taxis a 10% drop in prices is immaterial. It is that simple.
Because economists and others want to assess the state of the economy, which is influenced by whether people have jobs that provide health insurance, savings, security, stability, etc.
This actually created capitalism first. Liberalism and capitalism are deeply intertwined, and I'm not convinced you can separate them.
Or it could be that some see any attempt to create a more equitable capitalism as full on Marxism.
>road to hell is paved with good intentions.
OTOH, it's far more frequently paved with bad intentions and apathy.
[1] https://www.reuters.com/business/china-market-regulator-boos...
[2] https://www.rfa.org/english/news/china/riders-03042021131132...