SoftBank Bet Big on Disruptive Companies. Many Have Not Paid Off. (nytimes.com) 55
Anyone who has taken an Uber, sent a Slack message or enjoyed a free beer at a WeWork owes a little something to Masayoshi Son. The New York Times: Through his Japanese conglomerate SoftBank and a $100 billion investment fund, Mr. Son plowed huge sums into these and other companies that aim to change how people work, travel and live. His investments enabled the young companies to throw caution to the wind and run up big losses as they expanded at a breakneck pace in recent years. Even in the start-up world, where idealism is abundant and losses are a badge of honor, Mr. Son's approach and ambition stood out.
His early bet on the Chinese technology giant Alibaba earned a return of more than $100 billion and cemented his reputation as a farsighted investor. He has outlined a 300-year plan to make SoftBank a leader in artificial intelligence, robotics and other advanced technologies. But this year, his grand designs collided with reality. In what may turn out to be a reckoning for Mr. Son, Wall Street has started running from companies backed by SoftBank and its Vision Fund. The chief executive of WeWork stepped down this week after a botched initial public offering. Uber's stock has fallen nearly 30 percent from its I.P.O. price in May. And shares in Slack, which provides a workplace messaging service, have tumbled more than 40 percent from their first day of trading in June.
His early bet on the Chinese technology giant Alibaba earned a return of more than $100 billion and cemented his reputation as a farsighted investor. He has outlined a 300-year plan to make SoftBank a leader in artificial intelligence, robotics and other advanced technologies. But this year, his grand designs collided with reality. In what may turn out to be a reckoning for Mr. Son, Wall Street has started running from companies backed by SoftBank and its Vision Fund. The chief executive of WeWork stepped down this week after a botched initial public offering. Uber's stock has fallen nearly 30 percent from its I.P.O. price in May. And shares in Slack, which provides a workplace messaging service, have tumbled more than 40 percent from their first day of trading in June.
Because all of those companies are the same (Score:5, Insightful)
They dont do anything unique.
WeWork was a stupid idea to start with, uber is hemmoraging money, and Slack is just IRC with a better GUI.
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Slack is just IRC with a better GUI.
Debatable
Re: Because all of those companies are the same (Score:2)
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Re: Because all of those companies are the same (Score:2)
Worse than IRC (Score:2)
Debatable
Yeah, you're right. It's debatable if Slack is *just* IRC.
Actually, Slack is much worse than IRC.
IRC is an open-standard (though yes, not very standardized), with countless implementations.
You can use public servers.
You can self-host one of the several opensource implementation on you own server.
(It's multi-server in it's design, so you could install a node of your own server at each of your office, and still maintain on-site communication even if inter-site communication is down due to some connection prob
WeWork wasn't really a bad idea (Score:2)
WeWork probably just got squeezed out by other, bigger interests in the rent seeker's market.
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WeWork loses more than $5,000 per customer/per year.
While this is true, it's more because of spending huge amounts of capital on rapid expansion than because they're losing that money at the individual level.
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Exactly.
Heck, WeWork's "model" exists. it's called "Executive Suites"--essentially office rental. As a remote worker, I rent an office because I don't like working from home. So when I was hired, I went looking for a place to work. A quick Google search found 5 places within a five mile radius and about 20 places in a 15 mile radius. So it's not like nobody has thought of this or that there is some huge barrier-to-entry.
WeWork is more about making this sort of thing hip.
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TBOYK is wrong, as usual.
The CEO owns a lot of the properties WeWork rents, and WeWork has been paying far more in rent than they get back from people using their WeWork spaces to work.
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WeWork is losing money in a booming economy.
When the next recession hits, many of their tenants will vacate or downsize, short-term rents will fall, yet they will still be locked into high cost long-term leases.
I was hoping WeWork's IPO would succeed so I could short their stock.
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The main flaw I see was their business model which has a long term 30+ year leases for a space but they rented out to clients at much shorter leases (15 month). Some investors are concerned that this model does not do well in recessions.
The other troubling things that investors didn’t like was the behavior of the CEO. Guess who owned some of the properties that WeWork leased? The CEO himself who owned them under a different company not associated with WeWork. Also stories have come out about other thi
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Not really. The PocketPC had multitasking and copy&paste.
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and Slack is just IRC with a better GUI.
And Facebook is just Usenet with a different UI, and they were hugely successful.
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Fair.
But you could argue that Usenet didn't go anywhere either, since it ultimately served a niche audience.
Facebook improved on it and made it mainstream. And now everyone has the equivalent of a Usenet feed right into their pocket computers.
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Fair.
But you could argue that Usenet didn't go anywhere either, since it ultimately served a niche audience.
Facebook improved on it and made it mainstream. And now everyone has the equivalent of a Usenet feed right into their pocket computers.
Usenet still has better porn than Facebook.
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Nope. Facebook makes zero money being Usenet with a different UI. Facebook makes money being a television or radio station with a more invasive advertising model.
I suppose the dream was that Slack would be IRC with an invasive advertising model, until they realized the barrier to leaving Slack isn't high enough to stem the rage from that approach.
Re:Because all of those companies are the same (Score:5, Interesting)
The founder/CEO of Softbank is touted as a brilliant investor, but his entire list of accomplishments consists of:
He was an early investor in Alibaba, which paid off really well.
He invested in an Indian e-Commerce company and made a lot of money when they were bought by Wal-Mart.
He got lucky a couple of times and everything else has been crap. And people are starting to notice.
From TFA:
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Yeah. Came here to say that business wonks need to learn how to compute the variance of the binomial distribution. It's not hard. Requires the ability to multiply a couple numbers.
Re: Because all of those companies are the same (Score:1)
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We're talking about evaluating an entrepreneur based on counts of successes.
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Just going from memory, SoftBank bought ARM for $32 billion in 2016.
Given the current value of other tech companies, that seems like a pretty shrewd investment to me. When you make risky investments that sometimes pay off 10 or 100 times, you are allowed some failures.
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Back then the value of the purchase was highly debatable. It still is. ARM simply does not make that much money.
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WeWork is actually a great idea, just at the wrong time and too constrained by the traditional real-estate models. They need to be more disruptive though; they play it safe in too many ways where they are likely to be impacted by the broader economy too much, especially when entering into long-term real estate deals at “peak” rent rates.
300 Year Plan? (Score:2)
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There isn't much to disrupt (Score:1)
Remember when 3D printing was the "game changer" that would make traditional manufacturing obsolete?
Hahaha, how naive we were!
I haven't needed a single 3D printed part in all the technical work I've done, and many engineering firms I've worked with all ended up in the same boat. Some places even have a complete 3D printing shop ... that hasn't done a single thing in years, it's all shut down.
Now it's Bitcoin. Or AI. Or Quantum Computing. It's all nonsense, we're at the far end of the logistic curve, there a
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The ironic thing is that I find 3D printing useful, especially for one-offs. Things like battery doors or parts for appliances which are pretty much impossible to find. I wound up printing a case to handle a stack of Raspberry Pis, provide decent airflow, and some basic security with a cam lock. It definitely comes in handy.
Of course, 3D printing was pitched as the cure for all of Mankind's woes, which definitely isn't the case, but it does have its uses, and the technology is maturing, to the point wher
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No silly, 3D printing isn't for you engineering firms. It's for the world! Every person is going to be able to print their own um, coffee cups. And bracelets. And maybe some widget for something or other, sometime. Yeah.
Disruptive, my butt, just greedy illegal unethical (Score:2)
Like what, suddenly all these obvious money making ideas appeared out of thin air, No, these are scams oversold by affluent idiots with little or no connection to any financial reality. The sold the affluent and the government a scam based on how much the rich and the bureaucrats would get in revenue to increase their already excessive incomes, this is the same ancient story, the greedy getting greedier and dragging the whole world down into a cesspool of corruption
You rich people all suck, you're just self
Re:Disruptive, my butt, just greedy illegal unethi (Score:5, Insightful)
So the more likely scenario is some guy got lucky on an investment and other investors were attracted to the one big success while ignoring all of the other failures. Maybe Masayoshi Son even has let it go to his own head where he's convinced himself that he knows what he's doing, or perhaps he's trying to repeat the same things he did previously to replicate the success without realizing that he just got lucky. For whatever reason, humans just aren't wired to approach certain situations objectively and fall into the same tar pits again and again, but even though they would have been better off realizing it initially, at least people are realizing that this guy isn't necessarily all he's cracked up to be.
Re:Disruptive, my butt, just greedy illegal unethi (Score:5, Interesting)
I think you still owe me another 80 seconds on your two minute's hate here, but there's a much more simple explanation. The guy (Masayoshi Son) is an idiot who happened to get lucky once, which people mistook for some kind of foresight or business acumen that simply never existed. I'm reminded of a television program where a guy claimed to have a surefire system to bet on horse races, and he gave instructions to a woman across a series of different races and she won every single time. Eventually he revealed that the trick was just to send different instructions to a large enough group of people and since there's always a winner, you can stumble into looking like a genius by happenstance.
So the more likely scenario is some guy got lucky on an investment and other investors were attracted to the one big success while ignoring all of the other failures. Maybe Masayoshi Son even has let it go to his own head where he's convinced himself that he knows what he's doing, or perhaps he's trying to repeat the same things he did previously to replicate the success without realizing that he just got lucky. For whatever reason, humans just aren't wired to approach certain situations objectively and fall into the same tar pits again and again, but even though they would have been better off realizing it initially, at least people are realizing that this guy isn't necessarily all he's cracked up to be.
sigh ... all of which is based upon greed. The whole system is corrupt and designed to take an excessive amount of capital away from the average person. Affluent people aren't rich because they deserve it, nobody "deserves" the kind of wealth these people have. You, and people like you, are simply in denial, or perhaps because you are already affluent or you hope you be someday. A lot of people have bought into the fantasy that wealth somehow equals effort and creativeness, however, in reality, nothing could be farther from the truth. The truth is most wealth is transferred and not earned, or it's earned from excessive salaries and stock options. The myth of the self made man is mostly bullshit used to justify greed, excessive privilege and ego.
If this was a true "capitalistic' society, everyone would have fair access to capital, which we all know, isn't true. The affluent get free, or almost free loans of vast amounts, the regular joes pay usurious interest rates. The banks enjoy fractional money expansion and use it to support their friends and families. Failures are paid for from the pockets of the taxpayer when the investments fails, and when they don't, the returns are funneled to the already rich and powerful.
We're all mostly just naive wage slaves who are owned by our financial masters. Go ahead deny it, that's what most people do when they can't face the cold hard facts. Clearly, racial slavery didn't work out, so the powerful simply moved on to class slavery.
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I think you still owe me another 80 seconds on your two minute's hate here,
By the way, it's true I hate unnecessary suffering, the systematic inequality, the enormous waste and loss of human potential and life, and I hate the path of destruction the human race is apparently following, however, I'm primarily motivated by love for my fellow people, even the ones making costly, irresponsible and unethical decisions. People cannot learn from their mistakes, if they are not held accountable for them.
Everyone knows you shouldn't spoil your children if you want to encourage them to becom
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oh, and here's a reference for you too ... http://crookedtimber.org/2014/... [crookedtimber.org]
btw, it's minutes, not "minute's"
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The guy (Masayoshi Son) is an idiot who happened to get lucky once
See also: Mark Cuban
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The TV program is "Derren Brown's The System": https://www.youtube.com/watch?... [youtube.com]
Summary: a perfect horse race prediction system can't exist, but someone can be conned into believing in one.
High Risk High Reward (Score:3)
But the big point trying to bet on disruptive companies it is always a High Risk venture. A high Risk venture will cause a lot of big losses.
For most companies out there. The reason for the Status Quo, is because it is rather optimal and most of the big problems have been solved. If you are a good baker, and you put your bakery in a convenient location and price your products accordingly chance are your business will be OK. But you are not changing baking.
Now if your bakery offers a subscription service or something out of the ordinary. Which if it works could change the industry, however failure may kill the company.
And chances are it will take a lot of work to get people to change. People people don't like change.
High Risk High Low (Score:2)
Son gets involved at 10's of billions valuations. He's the greater fool cashing out original investors and making the current Silicon Valley bubble work.
He's running out of money in his first fund (hence his desire to raise a second fund.)
Also, n one of his services have "changed the industry", they are just previous business models with "on a computer" or "on a cell phone" added to the business plan, in the same way we disparage software patents as doing. WeWork does the same short-term space rentals as
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Stop betting on Web x.0 stuff, start real R&D. (Score:5, Insightful)
Here is the problem we have, which is why we are seeing almost zero progress in new technologies. Most tech companies just want to sling ads, and slurp data. If some invention can't do either, it is not trifled with.
This is why we are not seeing any more cool stuff become marketable products.
Maybe Softbank needs to not look at software startups, but consider engineering companies. Companies that can make the quality of life for everyone as a whole worldwide better:
Throw some funding at thorium LFTRs for example, something that can be made by a competent factory and deployed on site in a foolproof way, where it can be set up and maintained by people with a low skill level, and a lot of alcohol in the bloodstream. Solar and wind are important, but safe nuclear reactors are another item that is important. Energy is wealth.
Fund some chemical engineering companies so they can make thermal depolymerization, or depolymerization in general far less energy intensive. That way, plastics can be not just downcycled, but completely broken down into short chain oils, which can be used for diesel fuel, or reused for plastics.
There are many things that need funding, and will produce more long term, long tail gains than the next unicorn, flash-in-the-pan company.
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There are many things that need funding, and will produce more long term, long tail gains than the next unicorn, flash-in-the-pan company.
How are they supposed to make money off of those? Everyone knows to make money you find a start-up, make it a unicorn while making sure you, your VC buddies, and the company founders hold preferred options that vest immediately on an IPO, burn through millions of dollars to get yourself huge market share and an outsized IPO valuation, and then cash out, leaving employees and post IPO stockholders with a shell of a company. It's the American dream!
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Interest rates are close to zero. That means that money is cheap. When money is cheap, it gets thrown at all sorts of crap. That's called a bubble, because it's unsustainable, but while it's inflating everything looks awesome. So much economic growth and prosperity. Eventually the bubble pops and that economic growth slows down or even goes a bit negative for a bit. That's called a recession. When that happens you lower interest rates to get people spending the cheap money again.
This is called the business
Re:Stop betting on Web x.0 stuff, start real R& (Score:2)
The business cycle was made obsolete with the invention of Quantitative Easing.
Now it is turtles all the way down into stagnation.
Even the Brezhnev stagnation took like three decades to kill the USSR.
Re:Stop betting on Web x.0 stuff, start real R& (Score:2)
I hope you're right, but I doubt it. Quantitative easing is what you do when you've made money so cheap that you can't actually make it any cheaper without paying people to take it; so you make more money and toss it into the system so it can be thrown at stupid things. I suspect that strategy will do the same thing as low interest rates in times of prosperity: keep the train chuffing along for a bit longer, and make everything that much worse when it all comes crashing down.
SOFT BANK BET BIG ON NO ASSET, NO PROFIT IDEAS (Score:2)