joshjkim

At a general level, PE (and really much of capitalism generally) is built around the idea that financial efficiency should be the guiding principle re: capital allocation, so the steelman argument is that PE takes financially inefficient businesses, makes them more financially efficient, and that is good because that's the best way to allocate capital.

a financially inefficient business may be a business that employs more people than it absolutely needs, a business that treats customers/vendors more generously than it absolutely needs to, or even a business that exists as a going concern that would be more financially efficient if sold off for parts or went into bankruptcy.

i personally don't believe financial efficiency should be the guiding principle for everything or really anything, and I believe as a society we should account more for non-financial efficiencies (like treating human beings generously and kindly), and I think it's fine for an inefficient business to continue existing if that means more people have jobs for longer or customers/vendors are treated more generously. fundamentally, i think this line of thinking is dehumanizing, as it views the world (humans, nature, information, knowledge etc.) as resources/materials and not much else.

that all being said, i at least understand the principles and the materialist idea that everything can be viewed as material/resource and why people pursue them (esp because pursuing them effectively can make you fabulously wealthy).

i often say when talking about this stuff with friends: if you're willing/able to see everything (including/especially people) as resource/material, you're well positioned to obtain a lot of material resources/material. whether that's a good thing for you or the rest of the world is another question (and my view is that it's straight up bad).

8VC does some meaningful defense investing - they were founded by Joe Lonsdale (co-founder of Palantir) and they are invested in Anduril, and have some folks on the team who specifically focus on defense.

OT (and pretty random, apologies in advance!) but my company is distributed and might be a good fit for your spouse (we're an international e-commerce marketplace) if interested at all or if she'd like to chat, feel free to hit me up (email in profile!), thanks!

ya, i did the same, took a few tries - i actually ended up reading the pale king first, might be worth trying that. it's shorter (around 500 pages) and i think written in a more digestible/measured manner - still a DFW work, the plots are barely discernible until pretty late in the work but there's less gymnastics to the writing, i like to think because he was more mature at that point but maybe the editor played more of a role since it was posthumous, who knows!

i immediately fell in love with dostoevsky's work (just finished my third read of TBK), but it took me a long time to get into david foster wallace - now, i think of them as very similar. DFW is known for a lot of things (long books, footnotes on footnotes, early death) but to me at the end of the day both infinite jest and the pale king (his posthumous novel) are both incredible works that ultimately deal with existentialism. what made me think of them esp. is your comparison of C&P (cynical) and the Idiot (optimistic).

to me, infinite jest is the cynical but fun work (it's about a lot, but it's a lot about how people use drugs and entertainment and tennis(!) to (unsuccessfully) distract themselves from their larger existential problems), and pale king is the optimistic but more serious work (but with a strange reason for optimism, built in large part around the transcendence of being able to tolerate crazy boredom - it's a post-modern book about IRS employees for heaven's sake. there's a good dose of "we should probably be better citizens" - one of my fave sections describes how US taxpayers view themselves as "consumers of the government" vs. "participating citizens", digs really deep)

i actually like pale king slightly more even tho it's posthumous. it's also shorter (500 vs. 1000), i'd highly recommend starting there, though since you did TBK first, maybe you can just jump into infinite jest no problem =)

a few years back i learned that glassdoor was co-founded by Rich Barton who founded both Zillow and Expedia (another interesting fact I didn't know until then: Expedia was a MS spin-off, Rich Barton built in-house at MS and then Gates and Ballmer gave the blessing to go on their own) - he's also a partner at Benchmark.

Never loved glassdoor but find it useful on a regular basis when hiring (esp. as one data point for comp comparisons when hiring in tech) and seems to fill a need that isn't served elsewhere (essentially yelp for HR, serving both sides), but it's not-very-sexy design made a lot more sense when I thought of it in the lineage of the majorly successful but also not-very-sexily-designed expedia/zillow. in any case, impressive for Barton to have so many successful businesses/exits and still be relatively under-the-radar compared to other comparable founders (maybe because he's based in SEA), definitely someone to follow for those who like to keep track of serial entrepreneurs.

it's normal and you can expect that no matter what, as CEO you'll have phases like this on/off throughout your tenure, for better/worse it is part of the job. that being said, without knowing more details, I'd venture a guess that after 2 years, you are at a size (in terms of customers, volume, team size, etc.) where you may need to start thinking about not just getting shit done, but managing your team more actively (the thing that clued me in on this beside time/revenue is "people need things from me constantly"). there's lot of resources for how best to do this, but overall it all comes down to identifying big picture goals for the business, setting clear direction for your team, identifying metrics for performance, and then allowing your people to operate relatively autonomously but have regular check-ins / reports on performance relative to the established metrics. this can be as simple as well-defined product development milestones, support tickets closed, sales number achieved, customer acquisition targets, etc. it's important to identify the correct metrics, but often times part of that process is just starting with something simple/obvious, being consistent in evaluating, and then being willing to adapt / add / modify as you and the team learn what really matters.

hope this helps, doing similar things at my company now, not easy but once I appreciated it as a new problem set it's been interesting and satisfying to work on. hit me up if you want to chat more, happy to help.

biggest jump ball: Apple/Google/Amazon competing services. spotify deserves real credit for changing how people consume music, and I think that story will serve them well in the short-term, but their biggest risk is Apple/Google/Amazon who provide competing services that don't have any current pressure to turn a profit - Tim Cook basically said "we don't plan to make money"[1], a bad thing to hear from your primary competitor who also happens to be the most valuable company in the world. as i've said before on diff threads, I would not be surprised if Apple announces a big price decrease or other apple music news right before Spotify's first or second earnings report.

still, impressive for them to make it this far, if they can really find a path to profitability that also fairly compensates artists, I wish them the best! I think it's more likely that as apple/google/amazon force them to continue to operate at a loss, downward pressure on their stock will make them a good acquisition target for one of the big tech companies looking to compete with Apple Music (Amazon seems like a real possibility here - a spotify acquisition feels similar in size and scope to their recent WF acquisition, essentially another double-down on their "everything store" vision/story).

[1] https://www.fastcompany.com/40525409/why-apple-is-the-worlds...

you can check this out! https://www.launchaco.com/

also - all of the above applies to the CEO as well, so if you're not already talking to the non-founder board / investors, then I'd guess the CEO is (or should be).

a lot of the comments are about the validity/tenability of your position, and while I overall agree with a lot of what is being said (unfortunately, the fact that an adversarial dynamic has been introduced strikes me as the hardest thing to overcome here, though still entirely possible to overcome) here's a few other things to consider:

1. you can lead without being CEO. early on in the life of a company, co-founders often share CEO-like responsibilities on strategy matters and each will separately own / be responsible for their own domain (so in this case, it sounds like you should own the technical part, and your co-founder may own sales, marketing, fundraising, etc.). i think at this early stage the concern regarding leadership can be managed without explicitly changing title - as CTO and co-founder you should have significant influence and decision-making, regardless of title or equity split. if the problem is that the CEO is trying to steer / control things that they don't have an understanding of that you DO have a much better understanding of, regardless of position / equity you should view your job as helping both your cofounder (and any other people on the team) to understand and get behind the strategy that your expertise and experience tell you is right - this is a big part of leadership, getting people to believe in your vision, and the substantive act of succeeding at that should be more important than title, especially at this early stage. don't think to yourself "I'm not the CEO so therefore I can't lead" - you can! especially if you have good logic / basis for your positions. now, if the CEO is intractable, doesn't understand and doesn't want to understand and you can't convince them or the team, I'd say it's not a good match regardless of position (and truthfully, while you may have good reason to consider your cofounder at fault, I'd also argue that the inability to communicate the strategy / expertise is a at a minimum a joint failure in communication, again, good reason to just call it, as understanding each other is key, esp. at this early stage). this is all to say: you should be able to position yourself as the leader on the things you want to lead, regardless of title, esp. at this stage.

2. the board decides who the CEO is, so they should be making the decision (but proceed with MAJOR caution). the board decides who the CEO is, so i hate to suggest this as it will get very messy, but if you really have deep conviction then you may also want to go to the board (which presumably you are part of, so that's good access). since you are VC-backed, there's a good chance you have a VC on your board, and they can act as tie-breaker - if not, you can still rely on investors who own a controlling interest of the investor's class of shares - even if you did a note, whoever is the "lead" or "leads" and have the most sway can help be a tie-breaker here. the board and investors should have the best interest of the company at heart, and if you can really make the case that the best thing is for you to lead, they can arguably help. the problem here may be that if the CEO led the fundraising efforts, their relationship will investors may be stronger (though I could be wrong here), and there's a good chance that going to the board / investors will only accelerate your getting pushed out. of course if you did the fundraising and own those relationships, it should be easier to make a change. the key thing here is to recognize that this is a big escalation, things will move quickly one way or the other (boards are trained to resolve founder disputes with total urgency), so only proceed if you have total conviction and are not afraid to be pushed out entirely over it. I've seen this go many different ways, and while most of the time this blows up the company, it seems like the company would have blown up inevitably because the board maneuverings were just a symptom of deeper underlying issues that could not be resolved. in a small minority of cases, I've seen this work out, usually because one of the founders gets pushed out and the company is able to recover - of course, works out means from the company's perspective, you could of course be the one who is asked to leave. a secondary effect is that if you lose at that level, those VCs will view you as a trouble-maker, and getting funding may be tough for your future projects (from those VCs, but also others as its a small world). again, this is really the highest escalation you can make, proceed with loads of caution and take into account the very serious risks, and view it as a last resort.

3. cofounders need to trust each other. overall, the key issue here seems to be trust: you don't trust that the CEO can lead, and I would assume at this point the CEO may not trust you to accept their position. while the adversarial dynamic may be impossible to reverse at this point, I think more than anything the only way for this to succeed with both of you involved will be if you can both learn to trust each other, cheesy as it sounds this is probably the most important things to have between cofounders, esp. at this early stage (you are both risking a lot betting on the other, trust and good faith is required). again, might be irreparable at this point, but I think now that you've aired your concerns, you can try to guide that into a productive dialogue that establishing trust of the other, acknowledges both your and the cofounders strengths/limitations, and perhaps you can both begin learning to trust eachother more - that being said, at this early stage where you may need to move fast, the process of developing trust will slow the company down and unless you have some serious financial padding (which you may), that time spent on building trust will be what allow your more already aligned competitors' teams (if any) to outrun you. that all being said, if you just don't trust them and you don't think you ever will, then I'd say either leave or think about option 2 above.

sources: worked with execs and boards of many early stage companies around these kinds of issues, as an outside attorney, general counsel and as a business exec.

even worse for spotify: Tim Cook said that Apple isn't particularly interested in on Apple Music turning a profit - when asked the question directly, he responded: "you're right, we're not in it for the money. I think it’s important for artists. If we’re going to continue to have a great creative community, [artists] have to be funded."[1]

I'd say his stated rationale for not caring about money (artists getting funded) is at best a low priority and at worst total fluff - they don't care because they make money on phones/hardware, and it also long-term allows them to price competitors (like spotify) out of the business (I don't think it's a coincidence that he gave this interview in the days before spotify's F-1 went public). to apple, streaming is an ongoing marketing campaign for their hardware and hey, if it breaks even great, but even at a loss they can make it up in hardware profits.

I would not be surprised if apple is planning to waiting to announce a significant price or other change to Apple Music right before spotify's first or second quarterly earnings report - not very nice, but it would be a pretty smart thing to do.

[1] https://www.fastcompany.com/40525409/why-apple-is-the-worlds...

Native Americans used to live in North America, the colonists who became the United states nearly annihilated the native americans, and certainly annihilated their way of life.

one way scammers make $$ is by using stolen accounts to purchase goods and then re-sell them, but in general they have pretty much one shot before they are found out and the credentials go stale (for their purposes). electronics can be small in size, have high re-sale value and there's already a solid gray market for them, so it's a particularly valuable credential.

i'd also venture a guess that fry's has less effective anti-fraud software/defenses vs. amazon or ebay or other platforms where you can buy electronics - would not be surprised if amazon was good at catching a fraudulent iphone purchase on the first try, whereas fry's might let a lot more slip through.

source: I've been involved with reducing fraud at various marketplace companies.

agreed, very likely a factor as well.

PS - if you want to know more about IPO road, here's a decent summary: http://www.investopedia.com/articles/investing/020916/inside...

if you want to dig really deep (like, 284 pages deep), this lays it all out: https://www.wsgr.com/publications/PDFSearch/IPO-guidebook-3....

per earlier comment, yes, way more volatile because supply/demand will be less managed - as you say, IPO sets price, and this is done when bankers effectively pre-negotiate price and placement amounts with many institutional investors (mutual funds, public pensions, other large alternative asset managers etc.) - this is happening throughout informally (though very informally, since they can't offer the security until SEC registration is complete), but really gets down to details during the IPO roadshow, where the final deal is present and the bankers finalize the allocations to various institutional investors, which is what they use to set the opening day of trading price.

IPOs also require lockups of pre-IPO investors, and the ideal situation is always to have a large number of new well-respected investors take relatively large blocks that they are likely to hold for a long-ish period of time and pre-IPO investors locked up for a at least 6 months, which will introduce some protection against volatility and the stock price going below the IPO price. obviously price can still go haywire, but it's the best a company can hope for in the public market.

IPOs accomplish two concrete, positive things: 1. raise funds and 2. provide liquidity to investors. they also make a company seem more legit (at least in some cases, and in some circles). on the negative side, IPOs expose the company's financials and business plans, are expensive up front and on an ongoing basis to comply with SEC regulations (quarterly and annual reports, proxy statements, etc.), and also open the company up to major scrutiny and attack on the public market, with investors looking at the business performance quarter to quarter and activist investors looking for weak companies to push around (probably the nicest characterization, but you know what i mean).

On the positive side, direct listing basically provides only for liquidity to investors (though of course they can try and raise funds in the public market down the line if they want). In spotify's specific case, they are also probably being pushed by their later stage investors, who's deal specifically contemplates achieving liquidity in the relative short term (the investors did a convertible loan where investor terms improve the longer it takes spotify to go public). In any case, spotify has good brand awareness, so really the direct listing is all about liquidity. On the negative side, since Spotify is a european company, even as a private company it already exposes its annual financials publicly (though only on a delayed annual basis and without as much required discussion of the business), but a direct listing would still open the company up to major scrutiny and attack from activist investors.

in most cases, IPOs are considered motivated as much by fundraising as by liquidity (at least that's what the foudners / investors want you to think), and in fact big investors or founders selling big positions is generally taken as a negative signal (if they "really believed" in the long-term potential of the business, wouldn't they hold it? or so the theory goes). hence the lock-ups that most founders and pre-IPO investors agree to, which guarantee that at least for a set period of time, pre-IPO investors don't dump the stock en masse and introduce massive volatility into the market.

In spotify's case, I think the SEC and the markets will want to look closely at the lock-up periods or other restrictions on sale for various investors, founders and the employees (if any), and try to determine exactly why and on what terms and in what amounts the various pre-IPO shareholders want to achieve liquidity. off the top of my head, there are three main views:

1. viewed generously, you can say: "well, they've been doing this for a long time, built a great business and still believe in the long-term future of the company, but they all want to sell 5% because they are only human, will die someday at some point and can't wait forever to cash out of their business".

2. viewed less generously, you can say: "well, the management and main investors who know the business best are not certain about the long-term potential for the business and so want to cut and run before the downward trend realizes itself, and so we should read their push for liquidity as a negative signal for the business".

3. another very spotify specific case could be: "management believes long term and could give a shit about going public, but TPG and other late investors are demanding this and they have different objectives, and if we can satisfy those without diluting the business, I guess we'll just do that".

of course, it's probably a combo of those and other factors, but as an investor i'd be mostly trying to read and see if this is just earlier investors trying to dump shares because of lack of long-term faith - if so, be weary! on the compliance side, the SEC's main job is just to ensure proper disclosures are made (even if the business is less than ideal), but i'd probably want to see what I can do to minimize the potential impact of the less generous interpretation of motivations and any scenario where pre-IPO investors make a bunch of money by dumping their shares on the less-informed-about-the-business average investor.

"TWC has skin in the game to explore a new channel." <-- IMO, piece that holds it all together. all media cos have a huge interest in finding and maintaining channels-that-are-not-Facebook - newspapers/magazines/print already nearly live/die by FB's feed (mostly the latter...and the living are now trying to figure out ways to diversify, i truly wish them luck!), and TWC needs to figure out a way to avoid that same dependence as video continues to move more and more online. snapchat is not facebook, and that is worth TWC trying to make work!

What people gloss over about soylent on their way to the oft-repeated "it's just like slimfast wtf" point is that it's not the specific product that's interesting/innovative/valuable (it is kinda like slimfast...), it's taking that product to an entirely new and arguably larger market - I have no idea many 20 to 30 somethings working in tech were out there buying slimfast 10 years ago, but I'm guessing (and I could be wrong!) it's fewer than the number of folks who buy soylent today. assuming it can maintain appeal to "hard-working tech folks", then it's arguable that they can also successfully appeal to other professionals in other markets who, again, I would guess were not buying slimfast or other meal/diet drinks. it's all about marketing and "telling a new story", and i don't mean that in a bad way at all - sure, any company can quickly copy the ingredients, but they will also have to sell the same story, which is totally possible but arguably harder to do as well. that all being said, marketing IMO is only so good of a moat and there's only a few co's who really dominate relying mostly on it (coke, hermes, nike to name a few), so i'm not sure the new market and their story is worth this large of an investment, but who knows it very well could be!

A good example of the durability of religion in the heart of SF/tech: Reality SF, a thriving, fast-growing church in the Castro, made up mostly of under-35 tech professionals.

One of my favorite sermons in recent memory is quite related to this topic: it was about "rootedness in community" in the context of SF, and talks about how most people in SF come with a miner's mentality (come here for material gain, extract as much value as possible, then move on), whereas the pastor challenges us to consider a farmer's mentality (invest in the land, care for it in the long run, treat it like a home for the long run - of course, big agra is probably more like mining at this point but you get the point!). highly worth anyone in SF checking the talk out here: http://realitysf.com/sermon/slow-church-we-value-rootedness/

some choice quotes he uses in the sermon that I really loved (admittedly a little romantic, but I think carry some good insight):

"the 20th century will be remembered as an age of wondrous creativity, when Americans voluntarily shattered their lives into distant and dissonant fragments. America's industries learned how to assemble atomic bombs, airplanes, iPads and the genetic codes of life itself in the same era that American society disassembled the ancient overlap of family, food, faith and the field of work. Americans reached for the stars as they withered their roots, inhabited space but lost any sense of place." (David Janzen)

"The failure of the urban promise: That promise concerned human person who could lead detached, unrooted lives of endless choice and no commitment. It was glamorized around the virtues of mobility and anonymity that seemed so full of promise for freedom and self-actualization. But it has failed...It is now clear that sense of place is a human hunger that urban promise has not met...It is rootlessness and not meaninglessness that characterizes the current crisis" (Walter Brueggerman)

[full disclosure: I'm a member!]

This a good start, but I think there could be a lot more thought given to how we should think about monopolies in the context of markets where networks effects are crucial to the business value (aka. Facebook and Google most obviously, arguably Amazon, Apple), because one logical conclusion is that in a market where network effects are a major factor, the biggest network should be best positioned to provide the most value and therefore (assuming it doesn't actively eff things up on other fronts) should continue to grow until it dominates the market...which seems to pretty much be what happened, and it makes pretty good sense for the most part. in these cases, it actually seems BAD to break these networks apart, since their scale is arguably one of its primary values to the customer - this doesn't mean of course that they can't abuse their monopoly powers (I think they probably do to some degree and will continue to), but interesting to think that the traditional "break up monopolies" impulse doesn't make as much sense. this leads me to think it will just be more consumer-protection-related regulation (under the banner of consumer privacy, or maybe even public health, given all the "social media addiction" thought pieces out there these days ha).

(repurposed a prior discussion but arguably more relevant here!)

One thing I've found super interesting/impressive about Snap is that it didn't try to outcompete FB in terms of sheer network size for its usage stickiness, and instead turned smaller, tighter and more private networks into a differentiator, while at the same time providing advertisers/brands with a competitively massive audience - not an easy thing to identify, much less execute on. TBD if that differentiator is enough to keep them alive vs. FB's more traditional network-effect-driven advantage, which will be hard to beat on its own terms. I think Snap's success will depend a lot on its ability to avoid being tempted to play that game (see: Twitter!).

random other thought: this all also reminds me that Mark Zuckerberg has not made a peep about wanting FB to be thought of as a "utility" in a long time (or maybe he has and I just missed it...but couldn't find any recent mentions, see this talk from 2013: https://techcrunch.com/2013/09/18/facebook-doesnt-want-to-be...), probably in part because they are now a lot more at risk than ever before of being regulated like one. Also kind of funny to hear him talk about "we don't want FB to be cool" too, because now it seems like FB very much wants to be cool again now that Snap has become cool and has threatening user counts.

This is a good start, but I think there could be a lot more thought given to how we should think about monopolies in the context of markets where networks effects are crucial to the business value (aka. Facebook and Google most obviously, arguably Amazon, Apple), because one logical conclusion is that in a market where network effects are a major factor, the biggest network should be best positioned to provide the most value and therefore (assuming it doesn't actively eff things up on other fronts) should continue to grow until it dominates the market...which seems to pretty much be what happened, and it makes pretty good sense for the most part. in these cases, it actually seems BAD to break these networks apart, since their scale is arguably one of its primary values to the customer - this doesn't mean of course that they can't abuse their monopoly powers (I think they probably do to some degree and will continue to), but interesting to think that the traditional "break up monopolies" impulse doesn't make as much sense. this leads me to think it will just be more consumer-protection-related regulation (under the banner of consumer privacy, or maybe even public health, given all the "social media addiction" thought pieces out there these days ha).

One thing I've found super interesting/impressive about Snap is that it didn't try to outcompete FB in terms of sheer network size for its usage stickiness, and instead turned smaller, tighter and more private networks into a differentiator, while at the same time providing advertisers/brands with a competitively massive audience - not an easy thing to identify, much less execute on. TBD if that differentiator is enough to keep them alive vs. FB's more traditional network-effect-driven advantage, which will be hard to beat on its own terms. I think Snap's success will depend a lot on its ability to avoid being tempted to play that game (see: Twitter!).

random other thought: this all also reminds me that Mark Zuckerberg has not made a peep about wanting FB to be thought of as a "utility" in a long time (or maybe he has and I just missed it...but couldn't find any recent mentions), probably in part because they are now a lot more at risk than ever before of being regulated like one (see this talk from 2013: https://techcrunch.com/2013/09/18/facebook-doesnt-want-to-be...). Also kind of funny to hear him talk about "we don't want FB to be cool" too, because now it seems like FB very much wants to be cool again now that Snap has become cool and has threatening user counts.

surprised there's not more focus about network effects (a nod and link to "aggregation theory", which is more about distribution), and the fact that any social network's value, is tied to that in a big way, and therefore (at least in theory) most social products or features's value is also tied to the size of the network. so FB's argument could be that the value/benefit of its copying features/products (both to itself and users) should take into account the scale of its network. having tried to open a formatted Pages doc with MS word, I can see MS making a similar argument. Don't even get me started on excel vs. numbers (though excel and google spreadsheets is not TOO bad actually...)

One thing I've found super interesting/impressive about Snap is that it didn't try to outcompete FB in terms of sheer network size for its usage stickiness, and instead turned smaller, tighter and more private networks into a differentiator, while at the same time providing advertisers/brands with a competitively massive audience - not an easy thing to identify, much less execute on. TBD if that differentiator is enough to keep them alive vs. FB's more traditional network-effect-driven advantage, which will be hard to beat on its own terms. I think Snap's success will depend a lot on its ability to avoid being tempted to play that game (see: Twitter!).

Relatedly, I think there could be a lot more thought given to how we should think about monopolies in the context of markets where networks effects are crucial to the business value (aka. Facebook and Google most obviously, arguably Amazon, Apple), because one logical conclusion is that in a market where network effects are a major factor, the biggest network should be best positioned to provide the most value and therefore (assuming it doesn't actively eff things up on other fronts) should continue to grow until it dominates the market...which seems to pretty much be what happened, and it makes pretty good sense for the most part. in these cases, it actually seems BAD to break these networks apart, since their scale is arguably one of its primary values to the customer - this doesn't mean of course that they can't abuse their monopoly powers (I think they probably do to some degree and will continue to), but interesting to think that the traditional "break up monopolies" impulse doesn't make as much sense. this leads me to think it will just be more consumer-protection-related regulation (under the banner of consumer privacy, or maybe even public health, given all the "social media addiction" thought pieces out there these days ha).

random other thought: this all also reminds me that Mark Zuckerberg has not made a peep about wanting FB to be thought of as a "utility" in a long time (or maybe he has and I just missed it...but couldn't find any recent mentions), probably in part because they are now a lot more at risk than ever before of being regulated like one (see this talk from 2013: https://techcrunch.com/2013/09/18/facebook-doesnt-want-to-be...). Also kind of funny to hear him talk about "we don't want FB to be cool" too, because now it seems like FB very much wants to be cool again now that Snap has become cool and has threatening user counts.)

anti-trust enforcement is premised on the existence of some harm, generally related to anti-competitive practices (like price fixing), and it seems like Posner doesn't see a harm there, at least in traditional anti-trust terms. this is not surprising: posner (I would assume) ascribes to the chicago school re: anti-trust, where anti-trust is really all about consumer harm and efficient outcomes for the industry, and on those terms especially hard to see harm since google is "free" to what most people understand as consumers, and even the real consumers (advertisers) don't seem to be banging on the door saying they are overpaying (at least not yet), and google seems to do a decent job of running their ad markets efficiently (that's a total guess honestly, feel free to correct me if wrong!).

on a funnier (and more cynical) level, when posner says "anti-trust is dead" he may very well be giving himself a pat on the back, since he's a leading thinker of the "law and economics" school (usually attributed to u chicago, where posner has long been a professor - his seminal paper on the subject here is pretty amazing: http://m.law.uchicago.edu/files/files/53.Posner.Values_0.pdf) that many give credit / blame for shifting anti-trust's focus away from reigning in corporate power (the traditional "trust-busting" rationale, which was really as much about trying to avoid total capture of government by the big trusts), and instead focus on consumer harm and market inefficiency, which is generally indifferent to the expansion of corporate power so long as they don't gauge prices or do anything blatantly harmful to the market. this shift in focus greatly reduced the scope and practice of antitrust prosecution, and I think posner in general thinks that's a good thing since he's prefer less gov intervention. what's odd to me is that he seems concerned (or honestly, he just seems annoyed ha) about corporate influence on government, but doesn't seem to care that the fact that these companies are able to become so massive is in large part why they are able to influence the government so much...

this is the backdrop to a lot of the interview, good example is when the interviewer asks "Are we only concerned about seeing low prices, and not about other things like capture or having members of the House of Representatives owned by one large company?"

this is just rambling at this point (sorry!), but posner's response here is totally amazing / weird - he seems to basically say the problem is that the court system has been making bad decisions because it has been politicized because appointments are made by politicians, and (at least in part) because money influences politics, the politicians are picking judges for their stances on token political issues, not their abilities. that all makes sense, but his solution is not to attempt make the entire political system less full of shit...but just have other smart judges/lawyers appoint new judges (presumably producing more judges like...him).

he seems to want to simultaenously NOT reign in corporate power at all (or maybe he just doesn't believe it's possible, which is a fair assumption), but still not have corporations influence (at least one branch of) government - feels pretty "cake-and-eat-it-too" to me. not the worst idea, but exposes posner's high view of himself to be both smart and nonpartisan (not surprising and honestly pretty well-deserved) and his arguably naive belief in the ability of judges to be "above the fray" - very few people in general are as intelligent, idiosyncratic and nonconformist as he is - pro market, pro choice, pro drug legalization, pro human organ markets, and frankly he's widely considered a genius (an eccentric one for sure, but that's not an unusual pairing)!

Cisco did this with some success (by some measures at least!): http://www.businessinsider.com/why-cisco-showered-three-men-...

Basically, funded the company of their star engineer(s), and had a put/call (for Cisco and funded co) option based on certain milestones being met.

Deal summaries:

Andiamo (2001): cisco funded 180m, paid 750m to buy.

Nuova (2006): funded 70m, paid 678m.

Insieme (2012): funded 135m, paid 863m.

All founded by the same three engineers. This practice fell out of favor under chambers CEO-ship. Other employees (and execs, most importantly probably ha) didn't like for understandable reasons, but interesting to see similar dynamics play out here, with similar reactions.

it's not quite apples/apples, and the law tries to protect minority shareholders from unfair actions by majority holders, but if the major stakeholders can say "it's in the best interest of the company" with a straight face and not just so the major stakeholders can enrich themselves at the expense of others, it's usually passable. in general, you'd ask lawyers a lot of questions about this, and you definitely take into account the risk of a shareholder lawsuit.

so, it's a lot easier to do this kind of thing when there's a downround and the alternative to these terms is the company shutting down - basically, the new folks diluting old folks can say this is ultimately in the best interest of the company because the alternative is a shutdown.

in the context of MS or FB, both companies were on the up and increasing in value, so harder for the big stakeholders to say pushing out another SH was just about "serving the best interest of the company" with a straight face.

a recap is a pretty general term used to describe any time capital structure is meaningfully changed, but in this case (and oftentimes in the realm of VC-backed co's) it usually refers to a situation where in connection with a new round of fundraising, existing stakeholders have their (preferred stock) rights meaningfully altered, and usually for the worse. this usually occurs in the context of a downround, where the new investor has a lot of leverage and the existing investors are effectively asked to give up some meaningful portion of their rights in order to sweeten the deal for the new investors, either by literally giving those rights up (usually by converting to common stock), or else by granting the new investors some very superior terms that diminish the existing investors rights (like a discount on IPO shares for new investors that existing investors do not get, or a higher-than-usual liquidation preference that supersede existing investors'. in contrast, the "cleanest" fundraising terms would be something like: new investors get the same rights as older investors, just with the price-per-share-based rights adjusted for the higher valuation the new investors bought at. (for reference, here's a good example of a widely read VC post where the term is used with that general framework: http://abovethecrowd.com/2016/04/21/on-the-road-to-recap/)

in some cases, a recap is also formulated to incentivize existing investors to put in more money by setting up a deal where existing investors who don't put in more money will end up with their shares converting to common stock (thereby losing their liquidation preferences and anti-dilution provisions), but those who put in their share (usually pro rata) will maintain comparable preferences to the new investors (or whoever is leading the round). (this is sometimes called pay to play, and it's one of the more common recaps i saw when i was an attorney)

In this case, could be a novel spin on the same dynamics using a convertible note valuation cap: they are raising a down round (their last reported valuation was $300m, so a major down round here), and "Old investors were asked to pony up more money or see their stakes lose their value, according to one person familiar with the matter." it does not go exactly into the mechanism for how the value would be reduced, it might just be through straight up dilution (see note below), but in any case it seems like the ultimate objective is the same: using a new structure to reward new (or returning) investors who are willing to save the company in these (arguably self-imposed!) hard times, and push/punish existing investors who may have lost faith in the company.

one thing I'd note: honestly, they seem to be implying a significant recap, but there's nothing specific in the article that points directly to any particularly unusual mechanisms. In fact, it's possible that this is just be a down round using a relatively straightforward convertible note with a cap, and even in that case the following statements that seem to imply a recap could still be true: "The value of shares that may be doled out to backers later will change depending on the company's subsequent valuation." (that can be true in a regular convertible note deal) and "Old investors were asked to pony up more money or see their stakes lose their value, according to one person familiar with the matter." (weirdly worded, but this could be true for any new infusion of capital). also, for relatively small investments ($5m) on mid/late stage companies, convertible notes are used just because they are fast/easy to negotiate and execute on, so i would not be surprised if this is just something like that - still, a major downround in any case!

as others say, totally legit to criticize the writing of a dead or living writer, they take on that risk when they decide to publish.

mostly here to say: all of DFW's writing is basically a pain in the ass to read, and many folks (including myself) consider that to be very much on purpose - he wrote (posthumously so maybe wrote is the wrong thing to say..) a 550 page book (the Pale King) about the IRS, tax code and boredom (yes, that explicit ha) and honestly, it’s one of my favorite books of all time, though sometimes really boring ha (a choice quote, from an accounting professor to class: “To be, in a word, unborable.... It is the key to modern life. If you are immune to boredom, there is literally nothing you cannot accomplish”).

the fact that you were able to make it through Big Red Son at all (even though you didn’t specifically enjoy it) makes me want to recommend more DFW to you, because not everyone has the will/patience to get through a piece like that in the first place. To that end, I think for a HN audience there are definitely more interesting pieces like:

“Tense Present” http://harpers.org/wp-content/uploads/HarpersMagazine-2001-0... (an exhaustive and IMO awesome essay on the “seamy underbelly of U.S. lexicography” specifically with regard to the actual usage vs. institutional tradition in language)

“Television and US Fiction” https://jsomers.net/DFW_TV.pdf (interesting take on TV, advertising and its effect on society, consciousness and fiction - it was written pre social media and even pre ubiquitous internet, so can feel dated but towards the end feels prescient, esp. as it focuses a lot on one of DFW’s favorite themes: “what we pay attention to and why and how that affects our consciousness”, etc.)

plenty more, but i think those are both good places to start.

(PS: if you like David Lynch or Dostoevsky, DFW has AMAZING essays on each of them too, highly recommend)

RE: financials -

around $400m in annualized revenue as of last summer (http://www.bloomberg.com/news/articles/2015-06-24/dropbox-is...). no recent news of their growth, but I would be surprised if they did more than 20-30% user growth since then (not bad, but not a rocketship anymore...which FTR is totally cool with me, even admirable at this stage!)

Jives with back envelope calcs: 400m+ users, assume 1% paid users = 4m+ paid users. each user pays something around $100/year (8.99/month if you pay up front, 9.99/month if you bill monthly, some legacy cheaper, some business customers). 4m x $100 = $400m. It's actually not a bad business! =)

Not sure about costs, but they are cash flow positive from what they've said publicly (http://www.recode.net/2016/6/14/11937132/dropbox-cash-flow-p...) and that's been confirmed from what I've heard anecdotally/personally from some senior folks over there and some VCs who I think would/should know (and that I trust..ha).

so overall, seems like a solid business, i think the issue now is whether they can grow at a rate that's exciting enough to the market to justify a $10b+ valuation...TBD!

as one kind of comparison (not definitive by any means, just one that we have the #s to do..): box did around 300m in revenue last year (so less than DB), but Box market cap was around 1.5B at that point, so 5X revenue. if you did the same math to DB, we're looking at around 2B market cap for DB...1/5 of their last raise at 10B =/

could be viewed as example of raising at higher valuation than prudent (not unusual ha), but who knows, maybe they'll pull a rabbit out of a hat =)