How Growth Is Killing Tech's Innovation, ft. Robert Evans

searches engines. Skull pulled the trigger, and now a bunch of people are desperately trying to be like, oh, there's this new perperplexity AI or this other AI search engine, like it's much better. And it's like, no, it's slightly better than Google now, but they're all worse than Google used to be. None of this is a step forward. They're just pains in the ass.

investing and venture capital. Those are the ones who are pretty much putting a thumb on the head of innovation that is stopping great companies being built by incentivizing well, kind of a form of slaughter, fattening up pigs to sell to the market, rather than making something innovative.

like make their fortune. You know, some of the companies they back do turn out to be long term profitable, but they don't have to be. If you can just sort of get this IPO where everybody values it super highly for a while and cash out what you have in the company during that period of time. If the company fails a few years after its IPO, if it turns out that like it wasn't really a good business,

you still get rich. Like the key thing is, it's great if you wind up making a successful business in their eyes, but you don't have to for them to make a lot of money, right, They just have to have to be able to get out before you know, the scam reaches its its conclusion, they.

an obscene number later, specifically around crypto. But when it was smaller, investment wasn't done with these ideas of these five, ten, twenty x multipliers. It was I want to put money early into this company because I think they're making a good product that people will buy. The problem was companies like Google and Apple to a lesser extent, but really companies like Facebook getting these massive multi billion, hundred billion

dollar valuations. Suddenly startups stopped needing ten twenty fifty one hundred grand at seed stage and started needing two to five to ten million dollars at the seed or even series A stage. And suddenly venture capitalists started moving away from this idea of good businesses that could last without them, and they started to go into a form of kind of of symbolic capital, investing in things that looked value

but aren't necessarily valuable at their whole. As a result, they create this ecosystem where these companies go through this kind of volatile, irrosive cycle of growth, with the only goal being that they get to a stage when they become someone else's problem, either by listing on the public markets or selling to a much bigger company.

is a great example of this. Right now, they get these articles saying, oh, we've got over a billion dollars in revenue. No one's saying, are you how much you spending to get there? But suddenly, after all of this venture investment, after all of this hype, they're challenging the big dogs of their industry. They're getting in there and they raise more and more money, and then they buy up a few more companies and now they're at this big, fat, nasty penultimate stage when people begin to ask if it

was a good business. And at this point they either have to sell it to someone else or take it public, So the destination may change, but the journey's always kind of the same. You grow, you grow, you try and find a business model, you grow a bit more, and then you face reality. The idea the deal state, by the way, for venture capital is before this point reality

should not interfere with making money. So venture capital pumps millions and billions of dollars into these ideas that might kind of sell a product or a service, but really just resemble something that was worth something in the past. Perhaps the founder is a white guy who looks kind of like Mark Zuckerberg. This is literally a phenomena. In the twenty tens, it was guys who looked like Mark Zuckerberg wearing hoodies. Or maybe it's hey, Uber's a big company.

What if you're the uber for something else, Uber for laundry, for example. Yeah, a lot of those companies die, and what they're trying to do is keep the dance going until someone is dumb enough to buy them, or they can convince Morgan Stanley to help them go public. And the real problem with the value right now is people are conflating the concept of great ideas with things they like and things that might sell, and the result is

less innovative things are happening. These companies that are getting the money Open Aye, getting ten billion dollars mostly in cloud credits isn't making the world better. It's looking a major startup into being a customer of Microsoft and making a product that has yet to really prove itself.

realistically going to be used in some things? Yeah, I'm sure it'll be in some things. This is going to like replace actually making movies? Well, probably not. And that kind of means there's probably a pretty limited amount of money that you're going to make with this right now, Like it's it's it's something that could potentially be a business that is profitable, but could it be a business that is more profitable than the amount of money they

are continuing to shovel and open AI. That actually is still an open question.

that there are no good founders. It's that the funding is coming from an increasingly more centralized group of people who are pretty much and I get everyone's profit seeking, every investor wants a return, But there are venture capitalists out there who just don't care about creating new things. In fact, they're very, very very focused on keeping the status quo going. And that's where Andreason Horowitz comes in. My absolute favorite venture capital firm. You may remember them from Facebook.

nowhere was Andrews and Horowitz more crooked than crypto. The scam that Andreson Horowitz pulled on the crypto markets in twenty twenty one and twenty twenty two should be studied as a financial crime, and indeed it should be one. What it actually is is a way that they managed to turn basically money into more money without ever creating

anything of value. They pumped billions of dollars into these things called Web three companies, which were allegedly new companies that were decentralized, but they were really just shells for a cryptocurrency token that someone could then hype and sell before the sec got aware of the problem. And I really must be clear how few of these companies actually did anything. Let me take a step back, let me explain how cryptocurrency companies made their money in like twenty

twenty one, twenty twenty two. They would put out some a website for the thing, and they would say, we're going to do a decentralized social network and we're going to have this token. This token will reward people for the contributions to the social network. There were like eighty different versions of this idea. That token would then get a financial valuation through trading on various different crypto exchanges Binance or coinbase in many cases. And at this point

you think, cool, what does the company do? And that was the wrong question to ask. The companies don't really do anything, or they're just traditional companies that have created

a token as a means of monetizing a market. What Andrews and Horoids would do was invest in these companies and then receive a massive amount of these tokens at this vastly discounted price, kind of like how it works with stock and startup, and then you would hope, in the case of the stock for the startup, that you could sell it on the public markets or perhaps you could sell to another company. This usually takes about five

to ten years. But what was amazing about the crypto scam was Andrewson Horowitz only had to wait a few months for these tokens, which they had bought at massive discount to list on say coinbase, a major cryptocurrency exchange where Mark Andreson has a board seat. This allowed them to dump all of their investment, which they got at this remarkably small price, onto retail investors, believing that they

were in the ground floor. They basically invested in the stock market, invested in Morgan Stanley, invested in every part, and just funneled money between places. It was completely insane, and they be billions of dollars doing this. I feel crazy whenever I read about this stuff, because it happened in broad daylight.

But I think the real fun scam of this, the thing that makes me laugh but also cry, is that there was a prolonged period where Andresen Horowitz and many venture capitalists invested in building nothing. They found these shell companies that they then filled full of venture dollars. In exchange, they got a bunch of tokens that they were allowed to dump onto the markets. They conned so many people. They invested in Yuga Labs, who makes the board ape Yacht Club.

to make them wildly rich and it didn't. Coinbase, who andresen Horitz invested in, they helped millions of people lose billions of dollars because they did a Super Bowl commercial in February twenty twenty two, which eventually led Well, I think if you invested on that day, if you waited to sell any later than March, you would have lost your shirt. You would have just been at a loss. However, if you'd wait it, it's now back up to sixty seven thousand, So who the fuck knows either way.

one billion dollars that was invested in that entire year. Jeezuz, And none of them have made a real product. Yuga Labs. You laugh at the bored Apoch Club, but that is actually one of the few real products that actually launch.

who don't know round, a company called we Work. We Work's business model was that they would buy or lease a building and they would sub lease it to people, allowing them to run their company out of it or use a coworking space. Theoretically a good idea until you looked at the financials, where it constantly bled money almost immediately because real estate is a terrible investment. Yeah, and

also it was way too cheap. It was way too cheap from the very beginning, so they were always operating a loss.

hundred and fifty million dollars into this company. They claim that there will be community oriented features and that there will be something special about being involved in Flow. Now you think that I'm just being vague. It's been like a year and a half since this company went out and there's really nothing that like out there for it. And I think it's because Adam Newman just was someone that Mark Andreson remembered.

unclogged the toilet or unclogging it yourself. And he was saying that doing so and I quote, shifts your thinking from being transactional to actually being part of a community and feeling like you own something, but you.

But one of the if it's of renting is that if something breaks, you're supposed to just be able to call the owner and they have to fix it. It's not on you if you're fucking ac breaks, it's on them to make it work. And he's saying that like, no, if you if you are responsible for fixing things but have absolutely no ownership of them, it's fine because that makes you part of a community, and that's that's nuts.

I'll just I'll like that stock's worth like thirty dollars. Now, I'll just keep the real money and never repay ye see it, bitch. But this is the thing. This is why, And I think situations like this are where people are going to start really getting black pilled with the tech industry. So I think that you see things like this happening and you think, are they laughing at us? Yeah? Like, is this in a sane world? Adam Newman wouldn't see a single dollar for the rest of his life. Yeah,

he got three hundred and fifty million goddamn dollars. It was immediately a billion dollar company before it done anything. And all they have to show for it is a six hundred and thirty nine unit apartment building for Lauderdale.

and then we cash the fuck out. That's what they're seeing, and they may be right. It may wind up being it like we work made some people a lot of money.

And I think it's because they just are gamblers. I just think they're gambling, and they're gambling based on an increasingly small amount of information because it's been twenty years since they've done something. No there was a company called Noom, which was a weight loss app that connected with coaches and various things. They raised five hundred and forty million dollars in twenty twenty two. Not sustainable and not profitable either.

But also the entire weight loss industry is worth about four billion dollars, So you're saying they are worth that much.

vacuous tech conversations. It was big during the pandemic because everyone was at home and you have people on Mark Andrews and who of course had invested, going on there and saying stuff like, oh, the future of technology is the future and I've won. Wow, Mark, thank you. And there was this weird period where almost every other almost every week, there was some kind of valuation story that would quote unquote league and it would be like, oh,

it's worth two billion dollars. Oh, it's worth four billion dollars now. And then they started disappearing and nothing's really happening, and as people started leaving their houses again after the lockdowns ended, Clubhouse just kind of faded to black. The thing that pissed me off about that was the amount of stories in major media outlets claiming that Clubhouse was the future, the future specifically of radio, which is a

twelve billion dollar industry. Totally yeah, that constantly has trouble making money, not that we know anything about that, but.

cool music. But it's expanded now beyond that. But it's never just been like random unscripted conversations between people who have mics of varying quality. Like that's not particularly a thing that folks have ever expressed a desire for. And it's weird to me that anyone thought that like Clubhouse was going to be interesting beyond a very specific subset of people that wanted to suck these these people's proverbial dicks.

by the way, is really funny. It's ninety percent scams or ninety percent people doing manifestation stuff. It's amazing. But there was a brief period where the venture capital elite had spread around enough journalists and enough people on Twitter that they truly believed this was the future. But if you sat there and really thought about it, there was never a point where it could make money. Like you said,

unscripted stuff, unscripted stuff's difficult. It's very difficult. Even when you have great, really great chemistry with someone, you can trip over stuff as I just did. There are numerous things that can go wrong. And let's just be honest. None of these tech people were particularly eloquent to begin with. Yet based on everyone's conversations, everyone's saying, this is the future, this is how what's our clubhouse strategy? What are we

going to do on Clubhouse? Nothing? Nothing, because you're so boring. But it raised so much money. I think it raised over a billion. It was ridiculous. And yet this is what venture has become, pumping up these very shitty businesses, these non entities, these features rather than products, and the result is that the money is not going to actually innovative things. And I get it. The venture takes risks. The whole point of venture capital is it's risky money.

That's why you buy a half percent or a percent of a company for I don't know, a million dollars just choosing random numbers. There there is a risk to air, and capital is required to get a company off the ground. But the massive, massive amounts of money going into these non entities, into these, in the case of Flow Adam Newman's thing, very boring remakes of already boring and kind of not profitable businesses to begin with. Yeah, the result is that you get a venture capital industry that makes

startups require their existence. You get companies that cannot function without venture capital. You get lossy companies like Uber who get bigger and bigger without ever finding a business model because venture capital keeps them alive until they've completed the dance that less than go public or gets sold to

someone else. And companies like Uber are actually a great example they're taking public and they get these massive windfors from vcs, yet they immediately find themselves in this horrible position where they have to start dancing for the real public markets. That's why Uber has become my chilge is get an Uber in some markets and it's much more expensive,

yet the drivers are making less money. It's because we're in a situation where Uber now has to become a growth that all costs startup, rather than just a venture

backed welfare recipient. And it's just it's a deeply depressing time because people making real companies, people making new ideas, people young people in the tech space are now going into this and seeing that the people getting money are just people that look like other people that have made money before, that have ideas that aren't even particularly good,

but they sound like something you can flog. The amount of money going to AI right now for companies that have no business model at all, let alone a path to revenue, they just don't. They just trying to grow and grow and grow. It's just a deeply depressing time. VCS they put I think forty one billion dollars into crypto between Jerry twenty one and twenty twenty two, and that was all without Crypto ever having done anything. It's what twenty twenty four now, like I just had to

ask that, and Crypto is still not doing anything. There's still nothing. There's still bitcoins worth sixty seven thousand dollars and there's still no crypto use case. The Metaverse, which you would by now have heard an episode about, did absolutely nothing other than rebrand something we'd had for upwards of fifteen years, and they raised one hundred and twenty billion dollars in twenty twenty two. These concepts are what

are getting money. Innovation isn't Innovation is not enough to get you investment these days, and venture capitalists no, the thing that you want to do to a VC is find a way to get them in on a scam that you invented. And that's not going to help this world. It's going to destroy the tech ecosystem if we're not care for. And quite honestly, I have no idea what changes the tide on this other than a major startup dying.

So when right in the rot economy, originally my mate Casey and I were talking about fire and how growth is like a fire if you build a nice, sustainable fire. It will keep you warm, cook your food, sustain your life. But if the only thing you care about is how big your fire is, then all it's going to do is set fire to everything around it, and it's going to require so much more to keep it burning. Eventually

you'll have nothing left. But if you desperately desire that fire, you'll constantly have to find new things to burn, no matter what the cost is. And that's kind of where the markets are at this point. We've kind of turned

the private and public markets over to arsonists. We've created the conditions where we celebrate people like Marc Andresen for making these big investments, these big bets, these big nasty companies that don't do anything, or the even bigger firms like Google and Meta who were just turning against their users and rightly turning against the people, the tens of thousands of people that they regularly fire. Venture capital and the public markets are no longer rewarding good businesses or

good CEOs that run good sustainable companies. They're rewarding arsoness people that can steer the kind of growth that raises the value of an asset, even if that value isn't even attached to the value it provides to humanity. Elon Must's success, everything he's done with Tesla, didn't come from his love of science or that he ended the monopoly of the internal combustion engine. It came from his ability

to manipulate symbolic value, his hypeerman mentality. He worked out in as early as twenty thirteen that anyone in the world in a media outlet would cover the fact that he spoke about anything.

if it's true, doesn't matter if it never happens. Elon Musk promised autopilot for years and years and years until it actually arrived, and then it would arrive in these little bits and chunks, and then it started killing people. Tesla isn't a good company. It's a good stock to buy, and that is a problem. That is where we are right now with the public markets and with the private markets. We're not far behind. So Google summed up a shy. He hasn't paid two hundred odd million dollars a year

because he's a good CEO. Google's destroyed Search. We've been over that at nauseum, and it sucks. You'd think that someone who destroyed the most beloved tech used by billions of people, that has changed people's lives and will continue to do so. This is empirical fact, the damage he has done to the tech ecosystem and his core product, yet he's rewarded. He's paid this obscene amount of money.

The fact that Google's core product is getting worse doesn't matter at all, because Bishai is paid because he finds new innovative ways to increase the growth of the company, even if doing so makes the product suck. And the consequences are that these companies will continue to invest in things that grow the overall revenue of the company or their market share over everything else. They will mass hire, they will mass fire, and they'll do so because there

are no consequences from the market. They don't care. All they want to know is that the company will continue growing. Venture capitalists are just as bad. They don't mind as long as you have enough money to keep going to the next funding round. As long as you can keep growing this symbolic value. It doesn't matter if you hire and fire people around them. It doesn't matter if your product's kind of won key, as long as it's good

enough to flog to someone else. Look at the AI industry, Look how bad chat GBT is at certain things, Look at how bad clawed anthropics one is. Doesn't really matter because AI is the future. We can make money off of that at some point. And I think that this is really the problem, and it's the thing that unites the private and the public markets. We're not building things for humans anymore. We're building things for humans that invest money.

We're building symbolic capital. And when you do that, you will strangle innovation, and you'll do it at scale. You will build tech for nobody. You will build tech that sucks and doesn't do things and burns money, and in the case of AI, probably rainforests. And the result is just a shitty or worse world. Until we see a seismic shift in how investors treat the companies they invest in, both private and public. This cycle is going to continue,

and it's going to make us dumber. I guarantee you that we're going to see every single one of the companies that you've recently seen lay off thousands of people do mass hiring in a year or two. They don't care. They're not punished for this. The labor markets in America don't punish them, the governments don't punish them. They will keep fucking with human capital as much as they can

because they don't won't get punished for it. No one's going to hold it against any startup that's done massive layoffs, even if the CEOs are incredibly well paid and ran the company into the ground. Companies aren't structured anymore to evaluate whether a business is sustainable or good or make something useful. The only thing that they're interested in is making something they can flog.

way people actually use technology. The actual business is in conning other people to think that a business has a value, right, Yeah, Like that that's become the game which is you know, we're doing our episodes on Steve Jobs these next two weeks. A lot of bad things will have to say about him. But he actually did care about, like making a thing and convincing a lot of people to use that thing,

and he was good at that. And it's become so abstracted and so much about just the bezel, just about tricking people so that you can make money before everyone realizes that it's a fucking god. I don't think it's I think it's probably bad for society that that's the best way to make money.

It's at the center of everything. Look, why are so many bosses mad about you not coming back to the office. It's because they bought a bunch of real estate that they never needed or they've leased it, I guess. And then they were like, well, I don't do any real work. And I think what business looks like is when someone's

at an office. Yeah, And it's because we don't really as a society understand what executives do, because we've never asked, We've never really sat and thought, why does an executive get paid so much more than others? What is it that they do? And I think the pandemic and the mass remote work we saw really highlighted that. I think it really showed everyone exactly how big that con was. But I think that I think that we're on the

verge of an awakening to this kind of thing. I think as the labor market becomes so much worse, as so many game studios, for example, lay off so many people, they're going to start realizing the executives are making all the money while everyone does all the work, and none of these people are connected to the product, And we're going to keep building things for nobody other than investors until we're at a point where we have entire business

ecosystems building for nobody. Just look at the crypto industry yea billions of dollars into Look at that. Look at the crypto industry. Look how big that con was. Look how much money went into nothing, went into creating nothing. Because that's where we are as a society, that's where innovation is today. In a real ecosystem, in a real tech ecosystem, the heads of the industry wouldn't be trying to find ways to crow bot ai or crypto or

metaverse into it because the market's like it. They would be saying, I'm not sure that this is a thing, let alone a business model. None of these companies get bled for these bad decisions, and as long as they don't, they're going to keep making them. And I think it's going to and I have a wider theory I have that it's going to take one of the major tech firms dying to change something, and I think it's possible. I think Facebook is, weirdly enough, the one that I

would call first, just because the ad models die. But until that happens, we're just going to keep having these cycles where the markets don't blame anyone for anything other than the consumer. The consumer is made to almost apologize to the vendor. It really sickens me. I think that this is really what this is the joke offying in real time that I get because I've been in the tech industry since two thousand and eight, and I've been

right about games since like two thousand and four. So I've seen tech as a blob go from something that was, oh, you have nerdsy like tech, and people use laptops, to everyone has a phone, to everyone is on some level connected to the tech industry. Now it's impossible to remove from our lives. But now I look around and the things that are being created and the things that are being hyped up, they're not for people anymore. Yeah, and then the actions of the CEOs don't seem to actually

mesh with reality. Why did nobody get fired for over hiring In twenty twenty two, so many companies one hundreds of thousands of tech workers were laid off. How did nobody get fired for just hoarding human capital? How did nobody get fired for that?

as fast. And I think what the tech industry really needs to realize is nothing lasts forever. Nothing lasts forever,

and nothing grows forever other than a cancer. And at some point, this whole growth of all costs economy is working pretty well for now, but at some point the markets will turn on them, because at some point someone has to notice, somebody who is investing has to notice, Wait, are these actually good companies or are they just growing and then contracting, and then growing and contracting and just never really making anything within the pro It's just deeply worrying.

I actually worry about the health of the tech ecosystem long term if we keep pursuing this. We have private companies that are building things to sell to large companies, and large companies that are building things to market their own stock to investors, and at some point a consumer gets served somewhere within that equation, but nowhere near to

the level that it should dictate anyone's choices. A product may be profitable for a while, but there's a line at which profitability comes at the cost of functionality, and your company may simply not be able to grow anymore. Look, a business that can't generate profit isn't a good business, and a business that can never generate a profit deserves to die. These seem like obvious things, but they just

don't apply to anyone other than regular people. And the net result of this rotten economy, this broken thing that rewards people that create symbolic capital, is that it kills innovation. If capital isn't invested in providing a good service by say, a profitable business, it will never sustain things that are

actually useful to society. Companies aren't incentivized at the moment to provide better services or improve lives outside of the ways in which they can drain more and more blood and revenue and growth from customers, and right now the street doesn't care. Just look at Facebook and Instagram, two beloved products that have now grown exceedingly profitable while not

providing the basic function that made them big. And frankly, look if capital wishes to call labor and title as they have so many times, if they wish to treat people like shit. As it stands, the private and public markets are not working for you. They're not building things

for you. They're not building things for anyone. Google, as it stands, is forcing Gemini, their generator of AI, into every corner of their company, not because it's going to make your life better, but because it's going to make them seem more futuristic.

holding my breath. So thank you for listening to today's episode, Robert, thank you for joining me as well, YV. This wonderful, happy episode we've done. It's funny. It's in my day job, my PR firm, I do run into decent companies that are doing well, that actually make more money than their spending,

that actually have business plans. But occasion I talk to someone who just throws like eight buzzwords at me, and they'll have raised this crazy amount of money and you look at them and you're like, am I in the wrong game? Should I be pot? There is this weird sense you're like, am I what am I missing here? And I think that that's what fuels a lot of this, that there are these people getting so rich or nothing. The people like they must they can't be lying.

have fun being poor or yeah. Same basically the same shit about AI, right, it's always and honestly, whether or not there's actually a good product, it's always the same, the same thing, right, like you, Yeah, it's alf fomo.

been probably the most disruptive company of all time. Had Uber tried to scale slower and charged more and had real employee benefits and a paycheck that they gave people, it would have had to grow very slowly and would have cost more in venture dollars, But I think that company would have worth been worth trillions and actually changed the world, like truly, had they used it as a way to actually create a bullwark for labor versus a way to screw workers again and again so venture capitalists

can get rich. It could have been amazing, but that's not how these people are thinking. They're not thinking ten twenty, thirty, forty years. They're thinking five to ten years, so I can get the fuck out of this. Yeah, and it's so oh, it's so depressing because a better world as possible.

dollars and then it collapsed. Because no, that's not how newspapers work, right, That's essentially what Vice was trying to be, And that's not the way that they're not worth money in that way doesn't mean you can't make money off of them. There's a number of papers like the New York Times that are very profitable institutions. It's just you can't. It's not gonna give you that kind of like astronomic or turn on investment that you do when somebody invents a fucking iPhone. It shouldn't have to.