If that were actually true, that all the effort and money going into startups was actually focused on changing the world, then wouldn't it naturally be better to reinvest the money into that system?
Of course the reality, as we all know, is that it's only sometimes about changing the world, and sometimes it's a game to see if you can do it and win.
And since that's the case, it probably is better to channel some of the money to people actually trying to change the world, assuming those organizations are as carefully selected as the startups that generated the money are.
I thought I'd see if I can add some context to some of the questions particularly about our own commitment.
I don't have a view that there's an either-or here on how money can be productively deployed. We have committed to contribute at least half of lifetime earnings from venture capital, in our lifetimes. This is similar to the Giving Pledge that Warren Buffett and others have signed (including John Doerr and Mike Moritz from our world). So there's no requirement that money be contributed to nonprofits now as opposed to later. Each of our GPs will make their own personal decisions, with their families, on timing. But this leaves open the opportunity for some of us to give more actively sooner (like for example Pierre Omidyar has done), whereas others might plow all of our earnings back into for-profit ventures now and for the forseeable future and become active donors later (as Warren Buffett himself did).
So don't think of it as money coming out of the for-profit cycle sooner than it would otherwise -- necessarily. (We did announce a collective $1 million cash donation to six area nonprofits today, but that's hopefully a small part of what we will be able to do over the long run.)
In my own case, my wife and I are active donors now, most notably to Stanford Hospital. But not at a proportion that prevents us from being major personal investors in each of our own venture funds, as well as investors in several other funds and various other kinds of businesses.
I also agree with the commenter that it's not like money vanishes when it goes to a nonprofit. Nonprofits spend money just like any other kind of entity, and that money gets recycled right back into the capitalist system.
So, yeah, you can be for-profit and change the world. Or be for-profit and help people share photos. Changing the world is a pretty big grey area.
I'll confidently bet that Instagram will be "integrated" or forgotten in a few years, relegated to the dustbin of ephemeral "one feature" companies that briefly caught on with hipsters before winning the startup lottery. Meanwhile, SpaceX will still be going strong, revolutionizing private space travel and space cargo delivery, and possibly have achieved tangible milestones toward the first manned voyage to Mars. One company is not much more than an iPhone camera app with a web backend for sharing, is cheap to do, and something that many thousands of developers could do well. The other is doing rocket science, costs hundreds of millions plus, and is staffed by a team of folks of a kind where few can do it well, if at all -- and especially, it now appears, also do cheaply. Humans had tons of pre-existing ways to share photos and "apply cool filters" before Instagram came along. Humanity has very few ways of getting into space (ie, rocket companies), and now SpaceX is one of them. And I respect the significance of democratizing media -- but I felt it was very well democratized in dozens of ways before & without Instagram.
And don't even get me started on Gmail. (kidding!)
Reminds me of some of the recent Valve stories, specifically the anecdote about Doom being the most installed piece of software [1].
[1] For those that didn't know this, see the post below and scroll down to 'Valve is different'
http://blogs.valvesoftware.com/abrash/valve-how-i-got-here-w...
Whether you agree with him or not, Zuckerberg's motivation for Facebook buying Instagram was related to the business of Facebook. Elon didn't make PayPal or Tesla start a rocket division, he set up a completely separate venture with its own goals.
Dependent on the details this should be applauded. Although I think it would be much more interesting if they took part of their money and created grants for companies doing good in the world that would have trouble sustaining profitability.
That is a very interesting idea but I suspect hard to apply in practice. I'd love to see someone try.
One example is that a number of local VCs support our local physical bookstore Kepler's in that way (it would have closed long ago if not for their grants) -- they feel its presence makes the community a better place.
Does Ayn Rand have similar opinions? I'm trying to figure out what you mean by that.
I know many libertarians are in favor of private charity and consider it a virtue, and many of these same people are also fans of Rand, but they should realize that she disagrees with them on this point.
It isn't about the relative virtue of doing this or that.
How much cynicism are you seeing in this thread?
For the record I think this is a really positive move.
My opinion on this would've been different if they said "I am personally giving 50% of my money to charity in perpetuity..."
The other thing you should understand is that top VC firms such as AH (or YC) are not capital constrained. Dumping in twice as much money won't produce twice as much innovation or profits.
That is, of course, correct.
1. The best people are not going to join a firm that's giving away 50% of their management fees and carried interest income.
2. Not enough people & capital means
-Less investments, therefore more risks and less return.
-Less due diligence and monitoring of portfolio companies (again more risks)
-investors hate risk and low returns
That's true up to a point, but only up to a point. You hit the point of diminishing returns pretty early. I wish it were otherwise but there's 40+ years of history that support that theory.
It's not even that there aren't enough potentially great startups. It's that the venture business is a business that scales mostly with people. Each GP can credibly be a primary investor and board member in maybe 10-12 companies at a time. I don't think arbitrarily taking that number up to 20-24 would generate twice the returns, at least without the GP's head exploding in the process.
I agree which is why I brought up the topic of management fees and carry. You need them both to pay for additional people in order to scale your business. (which you addressed in your other comment).
True, but that's not what we're saying. We're saying that the GPs as individuals are going to do that, for the income we would have received in any event. This doesn't affect how the firm allocates fees and carry, and doesn't reduce the incentive for anyone to join the firm who would have joined before.
"We are delighted to announce that the six General Partners of Andreessen Horowitz, with our families, are all committing to donate at least half of all income from our venture capital careers to philanthropic causes during our lifetimes."
http://bhorowitz.com/2012/04/25/our-philanthropic-commitment...
I think it's an extremely positive statement for them to make.
The only way I can read your argument, is that the investment company should stop being generally profitable for the owners, and return more money to the investors. How does this make business sense? It would be like saying "Apple makes profit from selling iPhones, and just gives it away to shareholders. They should really bow to the customers and lower the costs and socialist bullshit to the shareholders". Unless of course Apple share holders are magical unicorns who deserve it, and the partners in a VC firm don't.
Re-read yesbabyyes comment. It makes no argument other than "who are you", "they are famous and accomplished" and "they are rich." It's a poor argument.
Not really. It's like Michael Phelp's 14 gold medals should carry no weight in a discussion of whether or not his butterfly stroke has room for improvement.
No one is arguing that Andreessan is not good at making money. If people were, then your analogy would be correct. People are arguing whether or not his money was put to efficient use in this specific instance (by donating to charity).
Having 14 gold medals does not prove to anyone that your butterfly stoke technique could not be better. Nor does earning a lot of money prove that you always make good decisions with money. Take my $100 toilet paper example. Earning a lot of money through good investments does not make using $100 for toilet paper suddenly unassailable to criticism. Does this make sense?
Having 14 gold medals means that though his butterfly stroke might or might not need improvement, a random punk on the internet doesn't have the authority to make a judgement call.
> Nor does earning a lot of money prove that you always make good decisions with money. Take my $100 toilet paper example. Earning a lot of money through good investments does not make using $100 for toilet paper suddenly unassailable to criticism. Does this make sense?
No it doesn't make sense. Your $100 for toilet paper example is pushing the boundaries of ridiculous which doesn't have anything to with the topic under discussion.
People who haven't earned through investment preaching people who have made a fortune about efficient use of money, money which happens to be their personal money, is just sad.
This criticism should be valid regardless of my identity and credentials?
>> Having 14 gold medals means that though his butterfly stroke might or might not need improvement, a random punk on the internet doesn't have the authority to make a judgement call.
>>> the "random punk" is probably a swimming coach ;)
That's the point. The defense should be valid whether or not the identity of the critic is known.
>>>>> "Michael Phelps sucks. He doesn't know shit about swimming." This criticism should be valid regardless of my identity and credentials?
>>>>>> That's not what I said. I said that the defense should be valid regardless of the identity of the critic.
I don't know what defense you are talking about, and who are these critics defending themselves from, and why are they talking about things they have no fucking idea about, and why do they think "I sometimes drown in my bathtub but my opinions on swimming are as valid as Phelps' because fuck, you can't appeal to authority Even PG agrees with me about appeal to authority being invalid."
All I am saying is:
Does winning 14 gold medals mean Phelps technique is perfect? NO
Does it mean a random punk on the internet can critic him? YES. Freedom of speech and stuff.
Will the opinion mean anything? FUCK NO.
Will it mean anything if the random punk happens to be a swimming coach? FUCK NO.
Will it mean anything if the random punk happens to be a former olympic champion or an olympic coach? IT MIGHT. There are no rules of thumb. Different things work for different people.
The critics are not doing the defending. Let me break it down for you.
jimmyvanhalen criticized Andreessen Horowitz use of money as being a relatively inefficient, compared to re-investing or lowering their fees. That was the criticism.
yesbabyyes defended with "you are a nobody in the investment world" and "you don't have as much money as Andreessen Horowitz, so you don't know what you're talking about." That was the defense.
The defense to the criticism is invalid because (aside from other logical fallacies), it hinges solely on the identity of the critic (jimmyvanhalen) and his personal accomplishments, relative to the entity being criticized (Andreessen Horowitz).
A defense with substance, one that works regardless of identity or accomplishments, would have been an argument as to why donating all the money to charity is helping people more people than re-investing.
http://lesswrong.com/lw/aq2/fallacies_as_weak_bayesian_evide...
If a wealthy self-made person says something about how to make money, that's stronger Bayesian evidence for that actually being a good way to make money then if some random person says it.
It may not make it better, but I think I did it because jimmyvanhalen's argument was, to me, so... Preposterous. As I understand him, he is basically arguing that if you feel that you have money to give to charity, you should give that to whomever gave you that money. I wonder what he feels about my, admittedly ridiculously small, donations to charity. Am I, too, wrong to give? Should I lower my fees and "give" that money to my clients instead?
I just wanted to add that I actually think wealth and investment accomplishments are somewhat relevant in this discussion, regarding your comment on fallacies. Especially given jimmyvanhalen's very strong opinions on what "a VCs job" is, what a16z "should" do, and his confused ending statement on that what they did would be fine by him if they did... Exactly what they are doing.
Don't you agree?
I don't really have an opinion on the actual thing being discussed though, other than my comments back and forth with "paul"
I.e., trolling. Yeah, I know.
Seems that over the last several years or so there has been an uptick in wealthy people using peer pressure to get other wealthy people to give away their money according to some rule of thumb that one groups thinks is right or fair. Wealthy people always gave away money and pressured others at charity events of course. But I don't remember it ever being so public.
I have an objection to this type of peer pressure. Just like I have an objection to Warren Buffet and his "Buffet Rule".
It seems that one of the most downvoted comments below is one where "PR" was mentioned. Was this done for PR reasons. No not entirely. But it also wasn't done anonymously either.
But honestly, how many of them were going to do that with the money, anyway? I agree that charity is better than conspicuous consumption.
I don't see spending money on yachts or jets as negative and somehow the fact that "charity" is mentioned that's automatically positive. People earn a living staffing yachts and jets, they are built by companies employing people. That money circulates further in the economy and provides benefits and is paying for someone's health care and college education.
So to answer your question "Would you rather that they compete..." I would rather they do whatever they want to do with the money they have earned without some kind of movement played out in the press which makes it looks like donating 1/2 to charity is the noble choice to make.
Where do you think money GOES when it is donated to charity? It doesn't disappear. Are you seriously making the argument that it's better for the world that $X is used to purchase an expensive unnecessary item, than actually spending it on things that matter in the world?
"charity" is not some bullshit phrase that means "wasted money". There are a lot of people in the world who make really compelling cases for certain charity money being better spent, in terms of global well being, than almost anything else. See http://www.givewell.org and http://www.givingwhatwecan.org.
For example, if AZ said "Hey users of instagram (or users of AZ product that just sold), we're going to let you decide which cause some of this money goes to," would that create a delta in value from the original proposition?
"Surplus wealth is a sacred trust which its possessor is bound to administer in his lifetime for the good of the community." - Andrew Carnegie
I said "Seems that over the last several years or so there has been an uptick in wealthy people using peer pressure to get other wealthy people to give away their money"
Did you miss this?
Sadly, we do not live in a perfect world. The resources and opportunities we take for granted are the same ones others do not have. Giving others a chance at the life and opportunities that were given to us is probably the wisest investment of all. The returns are deeper than dollars.
I don't know anything about this particular case, but in general many businessmen are complicit in bad philosophy, and sometimes even pay to promote it. That's shameful and harmful.
Business people trade for mutual benefit. That provides value to society even if they never give a dime to charity. And even if they do give a dime to charity, their actual business activities provide more value, both for themselves and others. Businessmen should be proud.
You can find this sort of opinion in the Ayn Rand book _Why Businessmen Need Philosophy_. You might want to read it, and make some effort to reply to its arguments, before dismissing it as wrong enough to dismissively insult in passing.
The mistake being made by many here is concluding that since business can be good for the world, therefore everything that isn't a for-profit business must be a waste. Not all good things are profitable.
OK... fine. But if you aren't going to fully understand Ayn Rand's work, then you don't need to preach to us about how misguided you think it is.
The whole point of discussions like this is to have an intellectual discussion. To dismiss people who disagree with you by accusing them of "preaching" (when they aren't) has no place on HN. (As I'm sure you well know.)
I don't really see this as far off, though. Rand really did believe that it was unethical to be altruistic. Not because it led to negative outcomes, or was inefficient, but because it was, in her view, inherently unethical to be altruistic. The altruistic sentiment was a character flaw at best. She did approve of philanthropy in some circumstances, such as foundations that were set up to advance their founders' views. But it had to be for reasons other than altruism, and it would ideally take into account whether the recipients were "worthy" of the help, not be Christian-style unconditional charity.
Her answer wasn't the consequentialist one that Adam Smith and other market-economy defenders proposed: that self-interest produces the best overall outcome. It was instead somehow more metaphysical, that somehow self-interest is the highest good, and putting any other goods above one's own good is corrupting the greatest good. I see it as a kind of take off on Nietzsche's master-morality/slave-morality dichotomy, except, unlike Nietzsche, she ties it to the free market and commerce. (Nietzsche believed in great people putting their own self-development ahead of the masses, in the elitist sense that if you're better than everyone, you should focus on your own development first... but he considered business and money-making to be a dirty, mass occupation that in no way qualified as "great" or "elite".)
> Her answer wasn't the consequentialist one that Adam Smith and other market-economy defenders proposed: that self-interest produces the best overall outcome.
Correct.
One thing that might be helpful is to understand Rand's view on compromise. She said you can compromise on concretes when you agree on a principle, but you must never compromise your fundamental principles.
For example, if you agree on the principle of trade, you can compromise (haggle) on the exact price or contract terms, and you're still both following a good principle and can both benefit.
But you must never compromise between collectivism and individualism, capitalism and socialism, life and death, freedom and slavery, rationality and irrationality. Those sorts of compromises between opposite principles amount to sacrificing some good that one shouldn't give up, and allowing in some unacceptable evil. Nor should you compromise your values in order to get something that you don't value or value less. That isn't a reasonable compromise, it is surrendering your values and principles for the benefit of others.
Given this sort of view of compromise, it's no good to ever compromise your own life, no good to ever sacrifice yourself. Anything that asks you to do that is evil. If there is a rational trade to make, then make the exchange and benefit, but don't sacrifice yourself for unspecified or vague future benefits which no one is accountable for providing to you.
This is why I find it so interesting that Rand ended up accepting social security and medicare from the government[1]. You seem to know a lot about Rand -- do you have any idea how she justified her accepting government benefits?
1. http://www.huffingtonpost.com/michael-ford/ayn-rand-and-the-...
She actually wrote at length about this issue [1]. That people keep puzzling over it shows that they don't understand AR (which is perfectly fine if they don't claim to understand her), or just want to smear her.
[1] http://aynrandlexicon.com/lexicon/government_grants_and_scho...
The problem with using her novels as an argument for the position is that they only really work in an affective, sense, imo, as implying consequentialist arguments, sort of along the lines of a morality tale or fable: look what could happen if things are done this way, or alternately, if they were done that way. And I think a lot of people do read them that way; the famous "going Galt" plot, for example, is commonly taken as a parable for why bad things will happen if you institute too much regulation and burdening of productive individuals. But she explicitly disclaims "things will turn out better/worse" as a reason to accept or not accept her philosophical/political views, so her novels aren't supposed to be read that way. But they're actually more effective that way! Which is why I think it's so common for fans of Rand to ignore Objectivism and instead read her as more of a general pro-free-market, libertarian author.
(By "principles" here, I mean correct ones.)
That there is really no nuance or context in her novels (or other work) follows fairly directly: these are idealized, metaphysical types, and an empirical or inductive methodology is nowhere in sight. She occasionally claims something about induction, but does not actually follow any such methodology, certainly not in any rigorous fashion.
Can you point to one actual claim made by AR that is in common with Nietzche? I seriously doubt there is one.
Going away from actual claims to mere generalities, yes, AR and Nietzche were both "individualists" in a sense - but in a totally different one. Nietzche in a predatory way, AR in a "mutual trade for mutual benefit" way.
she does not deduce principles from reality, but from metaphysical first principles
She doesn't decduce, she induces, and she does not do it from metaphysical first principles at all. Her core metaphysics is axiomatic, but the rest of her philosophy is inducted from reality. Most of her philosophical essays are just summaries of the results of this process. There is no work that "competely induces" Objectivism. There are a couple of works by Leonard Peikoff that talk about the Objective process of doing this. Until recently, they were only recorded lectures, but "Understanding Objectivism" was just released as a book.
That there is really no nuance or context in her novels
A lot of people don't "get" the novels. Just a few days ago an Objectivist was telling me how mind-blowing Atlas Shrugged is, because there are about "12 layers" (quoting him) of meaning in any given chapter. You would be surprised. It does not appear to be this way on the surface.
Like a lot of people here, I read Rand as a teenager. As a slightly older teenager, I concluded she was an extremist who I think would have hated living in the world that her philosophy would have led to had she been wholly successful (Hobbes' phrase "nasty, brutish, and short" comes to mind).
The point about business transactions being mutually valuable and societally value-add is generally (although not always) true, in my mind, but that doesn't eliminate the need for either government or philanthropy if one wants to live in a civil society.
But, to each her own...
How do you make this leap? It's utterly baffling to me. Giving something away doesn't imply that it was bad to have in the first place.
One could, but one would be wrong :-).