As the Crisis Deepens
That Was The Week 2023, #9
A reminder for new readers. That Was The Week collects the best writing on critical issues in tech, startups, and venture capital. I select the articles because they are of interest. The selections often include things I disagree with. The articles are only snippets. Click on the headline to go to the original. I express my point of view in my editorial and the weekly video.
Content this week from @AlphaSignalAI, @kleinerperkins, @thegeneralistco, @theinformation, @htaneja, @om, @mslopatto, @geneteare,@reidhoffman @garrytan, @techcrunch, @wsj
Essays of the Week
In Their Own Words: What Silicon Valley Bank Meant To The Valley
Video of the Week
The BBC visits CYBERIA Café
News of the Week
Microsoft’s new Power Platform AI copilot will build your apps for you
LinkedIn Adds AI-Generated Profile Summaries and Job Listings
Uber, Lyft Score Victory as California Court Affirms Right to Treat Drivers as Contractors
Startup of the Week
Tweet of the Week
Richard Woolf published “Capitalism’s Crisis Deepens” in 2016. It doesn’t have a lot of relevance here except the prescient title. The collapse of SVB, Signature Bank and the current crisis at Credit Suisse and First Republic are all emblematic of a serious structural problem cause by the Federal Reserve’s rapid rise in interest rates and the low interest paid by long term bonds.
However, even those two phenomenon can only be understood in the context of the previous reality - zero interest rates and free money.
During 2020-2021 interest rates were essentially zero.
The 40,000 or so customers of SVB placed a growing amount of cash into accounts held by the bank, and that cash had to generate interest. Then as rates rose in 2022 and 2023 deposits began to shrink. As the Wall Street Journal explained:
The bank’s assets and deposits almost doubled in 2021, large amounts of which SVB poured into U.S. Treasurys and other government-sponsored debt securities. Soon after, the Fed began raising rates. That battered the tech startups and venture-capital firms Silicon Valley Bank serves, sparking a faster-than-expected decline in deposits that continues to gain steam.
The key cause of SVB issues had nothing to do with SVB but was symptomatic of a fundamental change in global and local markets. The real causes would be the topic of at least one book. But suffice it to say, what SVB did were symptoms, not causes. And the causes extend well beyond SVB.
This week, after Signature Bank was also seized by regulators, Credit Suisse and First Republic Bank have been thrown into the spotlight, needing billions of dollars of support from other banks.
There are now hundreds of banks in a state of turmoil with investors and depositors, and creditors. Their assets are huge, but so are their liabilities. And without deposits, they cannot pay their bills. The chain of support for these profit-challenged entities is now long. Taking the First Republic as an example, the pack of cards looks like this:
First Republic Bank → JP Morgan and others → Goldman Sachs and Others → FDIC and Federal Reserve
The entire infrastructure only works if backed by large depositors and then, as a last resort, the Government.
In this context, the blame game in the Valley this week makes no sense. Some blame VCs for asking for companies to withdraw funds from SVB late last week. Union Square Ventures is singled out. This is nuts. The run on the bank was not theoretical at that point. Prudence required action. Jessica Lessin at The Information disclosed this week that she transferred funds on 9 March while writing about others asking companies not to. She was right to do so.
It is equally hard to blame SVB management. They made decisions that, at the time they made them, were their only option. As billions of new deposits came into the bank in 2020 and 2021, they needed to earn interest on them. Long-term bonds were the best of lots of bad options. The critics do not have an alternative because there wasn’t one.
And selling those long-term bonds at a $1.8 billion loss in order to buy new instruments paying close to market rates of 4% also made sense. The loss would eventually be recovered from the higher interest.
The board of my startup SignalRank recently asked us to consider keeping our cash in Treasury notes and earn 4-5% interest. To do so, we would have done what others were doing - take funds out of SVB. They had to offer higher interest in order to keep customers, and they had to sell loss-making assets to place their capital into better instruments. A rational move.
So, blaming short-term actors for their decisions misses the point. In volatile times, the very structure of an interest-based model creates instability. Banks live in the space between the interest they earn and the interest they pay. If there are dramatic changes in money flows and interest rates it is very hard to make good long-term decisions and the short-term can quickly turn into a crisis.
The scope of this editorial cannot go there, but the very structure of money in circulation (M1, M2, M3) compared to the amount of debt creates a very large schism. There is about $19 trillion of M1 money in the US. Global debt is almost $400 trillion. When times are good, this spread can be sustained. But if all debts were to be called, all bets would be off. Institutions and Governments would fail. Only growth in the real economy, producing real value that backs up the money supply, can close that schism.
That is why innovation and progress are so important. The fundamentals of economics only work when there is growth, otherwise, the debt of the past haunts the inhabitants of the present.
GPT4 launched this week. Reid Hoffman used it to help him write a book. LinkedIn is using it to construct job descriptions and profiles. Microsoft is bringing it into Word, Excel, and Powerpoint. And Google is building its version into Google Workspaces. It is trained on far more data than its predecessor but is still best thought of as a brilliant but flawed friend. I paid up the $20 a month for the pro version and am using it more. There is a lot below about it this week. Enjoy.
Essays of the Week
Venture Capitalists Made a Big Mess of SVB
By Kate Clark
March 16, 2023 3:30 PM PDT
Venture capitalists just gave a master class in how not to handle a crisis.
My sympathy goes out to the founders. They’ve been bombarded with conflicting advice for days, from all-caps emails written by panicked “seasoned” venture investors urging them to pull their funds out of Silicon Valley Bank, to emergency Zoom calls asking them to stand by and support the collapsed institution. Venture capitalists are supposed to help founders, not confuse them. That’s not what happened.
Sure, the implosion of SVB isn’t purely the fault of venture capitalists. The bank made a very bad bet on interest rates when it took an enormous position in long-dated bonds at the peak of the market. Then last week, it made another bad decision when it announced it had sold $21 billion of its securities portfolio at a loss, which sent shares into a tailspin and ignited concerns about the bank’s health.
Those worries led venture capital firms like Founders Fund and Union Square Ventures to encourage their portfolio companies to ditch the bank, helping to ignite a $42 billion bank run and then a takeover by the Federal Deposit Insurance Corp. It's typical for investors at these big firms to offer guidance to founders, and those sounding the alarm said they did so to make sure founders didn’t end up in a life-threatening cash crunch. But the public piling on didn’t do anybody any good.
Worse, some firms offered public statements in support of SVB that conflicted with the advice their employees were privately giving entrepreneurs. And behind closed doors, many venture capitalists were criticizing their peers’ responses to the bank’s collapse, like high schoolers gossiping in the bathroom.
The saga highlighted a growing divide in the VC industry. On the one side are firms like Accel and General Catalyst, whose CEO, Hemant Taneja, has been helping lead a pro-SVB army. On the other are “contrarian” firms like Founders Fund and David Sacks–led Craft Ventures, which have been widely criticized for how they responded to the bank crisis.
That division isn’t helping another big problem for VC: its reputation. It wasn’t stellar headed into this year, when some of the perils of throwing too much money at startups—with too little scrutiny—became apparent in the blowups of failed crypto exchange FTX and e-commerce startup Fast. But last week has done far more serious damage to its image…..
What happens to Silicon Valley without Silicon Valley Bank?
A regional bank helped the tech industry grow. Now it might need to shrink.
By Sara Morrisonsara@vox.com Mar 16, 2023, 6:10am EDT
John Brecher/Washington Post via Getty Images
Sara Morrison is a senior Vox reporter who covers data privacy, antitrust, and Big Tech’s power over us all.
The collapse of Silicon Valley Bank was a big deal. It didn’t just impact Silicon Valley businesses — or the many non-Silicon Valley-based businesses that banked there, including Vox’s parent company Vox Media. The end of SVB created ripple effects throughout the American banking and financial system.
It also showed how some of the practices that made Silicon Valley what it is today contributed to SVB’s demise. And it showed how Silicon Valley might not be the cradle of innovation and the pride of American business culture that it used to be. It was not a good look when some of Silicon Valley’s loudest voices — the same people who decried bailing out student loan borrowers — were begging, some in all caps, for the government to make SVB depositors whole. After days of prominent venture capitalists’ pleas, the government found a way to bail out SVB depositors without using taxpayer dollars. Nevertheless, plenty of people noticed Silicon Valley’s hypocrisy…..
Where the Venture Community Goes From Here
As the collapse of Silicon Valley Bank shows, the tech industry has to come together or risk destroying ourselves.
Taneja is CEO and managing director of General Catalyst.
March 14, 2023 9:00 AM PDT
March 9, 2023, will be remembered as a sad day in Silicon Valley’s history. We have been through crises before—the Japan Inc. fears of the 1980s; the dot-com bubble during which my firm, General Catalyst, was founded; the global financial crisis of the late 2000s; the Covid-19 crisis we’re still getting over. But throughout all of these, we have never cannibalized our own quite like we did last week.
It’s hard to overstate the importance of Silicon Valley Bank to the tech and venture ecosystem. It was foundational in every possible way, making early and well-funded strategic bets on the next generational founders and entrepreneurs that would define the era of innovation most of us have lived in. At the time of its collapse, according to its own website, SVB banked around half of all U.S. venture-backed startups. Given the value those companies have created in terms of job and wealth creation, that is a stupefying statistic. SVB was the go-to resource for nascent businesses when more conservative banks were reluctant to work with them.
To move beyond this crisis, individuals in the tech industry must realize that we are part of an interconnected whole and together embrace radical collaboration.
This makes the events of the last week even more difficult to comprehend. The run on SVB was a textbook result of the myopia and egoism that has swallowed the venture capital industry whole. Its addiction to growth at all costs, disruption first, winner takes all, and moving fast and breaking things has created a false belief that individuals can operate above the ecosystem they inhabit. This past week has proven how incorrect this thinking is. The truth is that we are interconnected and interdependent, no matter what the competitive ethos and cult of personalities may suggest. No member of this community is immune from the impact of other stakeholders, and we have to weave this reality into every decision we make.
The panic created a clear prisoner’s dilemma. It’s not that there were bad actors—there weren’t. There were lone actors. For many venture investors, the urge to support and protect their own at all costs overrode any deeper thinking about the unintended consequences of their advice and actions. What should have been sophisticated, systems-level thinking quickly gave way to the most basic human instinct to act in one’s own self-interest, not out of malice or greed, but to ensure survival.
To be clear, SVB’s leadership is not without fault. They made poor financial decisions and gave even poorer explanations for their actions. But the losses SVB reported should not have been fatal. The value-generating parts of the business remained intact, as did the deep relationships and trust SVB enjoyed with nearly every actor in our industry. Had we all realized this important truth and stopped to consider the consequences of our actions, SVB might still be standing today. We would all be better off.
A Tough Weekend
After three decades of being part of the Silicon Valley ecosystem — as a reporter, writer, entrepreneur, and investor — I thought I had seen it all. The boom-bust cycles, stock market manias, startup insanity, attack on America itself, and the most significant financial calamity in nearly a century — living through history prepares you for every eventuality. Your own struggle with mortality prepares you for the unpredictability of everything. You embrace the impermanence and become one with it. And despite all that, you experience what Silicon Valley has experienced this weekend — a sense of helplessness, a feeling of dread, and, more importantly, a sadness about the fragility of our community.
This past week, the federal regulators took over Silicon Valley Bank. I won’t repeat what has been reported in the media (Insider and Axios have ongoing coverage.) I won’t share how we got there — these two links explain the problem quite well. However, what I will do is share what I am feeling — this might be the worst weekend I have experienced as part of the technology community.
The bad news was like an inflatable marionette outside a car dealership when the dot bomb hit, swaying, falling, and rising with the shifting winds. The exodus, painful as it was, played out over a long period. It was quickly superseded by the American Tragedy of 9/11 when we as a country lost ourselves. The 2008 financial crisis was another rude reminder that Silicon Valley wasn’t as decoupled from the larger economy as we thought. It was still again something we could prepare for by taking preventive measures.
Nothing compares to this weekend. We are in the grip of the unknown. It doesn’t matter who you are — founders or investors — we are all shell-shocked by the suddenness of the events. The same ‘what if’ that has been a source of strength here in Silicon Valley this weekend feels like a noose. And despite many taking preventive actions, hundreds of founders are now wondering if they can make payroll next week. If not, what happens to the employees and those who rely on them for their own employment and financial needs? The spiral of negativity can be self-consuming…..
The Silicon Valley Bank fallout is just beginning
Big banks are winning, the Fed is examining itself, and the VCs are just fighting.
By ELIZABETH LOPATTO / @mslopatto
Mar 15, 2023
Following the collapse of Silicon Valley Bank last week, a lot of companies and entrepreneurs have been making the flight to — at least perceived — safety. That means the biggest banks have been getting more deposits: JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo.
“Everyone is asking, ‘Where should we bank? Where is it safe to bank?’” Ryan Gilbert, founder of Launchpad Capital, told Silicon Valley Business Journal. “When you think you bank with the safest bank in your ecosystem, and they disappeared overnight, you realize it’s impossible to predict an earthquake.” He moved his account to Chase.
“Where should we bank? Where is it safe to bank?”
Startups such as Brex, Mercury, and Meow have also benefited. Brex specializes in corporate credit cards; Meow, in letting people earn interest on government bonds, among other services. (Meow also gives people accounts at BNY Mellon Pershing, another big bank.) “We’ve been flooded with inbounds, and we’ve been working nonstop,” Meow CEO Brandon Arvanaghi told me in a telephone interview. These aren’t just startups or customers from SVB, though that was the initial wave, he says.
”Everyone’s starting to think about counterparty risk,” says Arvanaghi, which is the risk that someone you make an agreement with might not hold up their end of the bargain. If a bank fails, the FDIC isn’t obligated to make good on its loan agreements, for instance. In the case of SVB, the bank has also said it will honor its debt obligations — not a certainty a week ago! — and is even making new loans.
Some companies are putting capital in multiple banks as a way of hedging their bets. But that’s not exactly ideal, either. Banks tend to pay more attention to clients who keep a lot of money in their accounts, says Matt Cohen, a VC at Ripple Ventures in Toronto. Plus, it’s too hard to spread payroll across multiple accounts.
The longer-term outcomes here are hard to sort out. SVB will probably be sold, either wholly or in parts, though probably not to a big bank. Cohen told me that he worries that the losers in all this will be regional banks and that when the dust settles, the big banks will just have gotten bigger.
In Their Own Words: What Silicon Valley Bank Meant To The Valley
March 14, 2023, Crunchbase News
Uncork Capital, one of the earliest seed-stage funds in Silicon Valley, banked exclusively with Silicon Valley Bank. On Friday, it had its 11 bank accounts frozen as news came out that the Federal Deposit Insurance Corp. had taken over the bank.
It was the end of a 15-plus year banking relationship with SVB for Uncork Capital.
“For the last 30 years, they have been a prime facilitator and supporter of the innovation ecosystem,” said Jeff Clavier, founder and managing partner of Uncork Capital, which was previously called Soft TechVC, via email.
“Of course, there are other banks,” said Clavier. “But no one has the deep connections that the SVB community had created over the years.”
Clavier worked to convince SVB to lend to seed-stage startups, something other banks were unlikely to do based on the risk profile of startups.
“That is one of the big reasons that a lot of tech startups were so concentrated with Silicon Valley Bank,” said Miriam Rivera, CEO and co-founder at Ulu Ventures. “They really understood a lot of this market, understand the level of risk, and are willing to make available credit to small businesses,” she said.
Before SVB’s founding in 1983, “it was difficult, if not impossible, for a start-up to secure a relationship with a large, established bank,” Sequoia Capital partner Michael Moritz wrote in the Financial Times on Sunday. “Small west coast technology companies were incomprehensible or insignificant to the large east coast banks whose customers included international airlines, heavy industry and nationwide retailers. Our companies, often started by people in their twenties, were bypassed or ignored.”
Rivera is now guiding her portfolio to engage in strong cash management and retain more than one banking partner. With less liquidity in the market, customers will become more conservative with their spend, she said.
Ulu Ventures banks with First Republic, another regional bank with strong ties to Silicon Valley whose stock was down 60% on Monday. Still, Rivera worked with SVB because 44% of Ulu’s 150 portfolio companies banked there.
‘A critical supporter’
One of the biggest concerns for startups is access to credit, which SVB supplied, Rivera said.
However, early-stage startups with less than $5 million in revenue represented a small portion, only 3%, of SVB’s loan business….
Impromtu - A Book Written by Reid Hoffman and GPT4
I wrote a new book with OpenAI's latest, most powerful large language model. It’s called Impromptu: Amplifying our Humanity through AI. This, as far as I know, is the first book written with GPT-4.
Last summer, I got access to GPT-4. It felt like I had a new kind of passport. My pages were quickly filled with stamps: Over 1,000 prompts. 800+ pages of outputs. Just in the first few months.
With GPT-4, I traveled through light bulb jokes, epic poems, original sci fi plots, arguments about human nature, musings on how AI might strengthen democracy, society and industries. The goal, like in any good trip, was to learn as much about my traveling partner as the place I was exploring.
Earlier this year, I organized my explorations with GPT-4 into sections: creativity, education, criminal justice, public intellectualism, journalism and more. My travelog, Impromptu, captures my treks with GPT-4. These paths will be well-trodden soon (if not already) by others.
I'm writing this travelog both to encourage people to not only get to know GPT-4, but to embrace our choice of how we’ll use it, and explore the different ways this choice might play out.
Impromptu is now available:
Or On Kindle:
Changes at YC
by Garry Tan
YC is known primarily as a place where very early founders create something from nothing by simply applying online and joining the world’s best founder community. When they do, a shocking percentage of them will go on to make a startup worth a billion dollars (on average 6 out of 100 startups in recent batches).
YC is rightly known for early stage investing. In recent years, we have also done some late stage investing. But late stage investing turned out to be so different from early stage that we found it to be a distraction from our core mission. So we’re going to decrease the amount of late stage investing we do.
Unfortunately, this means we will no longer need some of the roles on the late stage investing team. Seventeen of our teammates are impacted today. As we make this change in strategy, we want to acknowledge and express our appreciation for their substantial contributions.
There shouldn’t be any noticeable effect on the companies we’ve funded or on the way we interact with alumni, but if any companies or alumni have questions, I’m here and the YC group partners are here — as always, to help you make something people want.
Video of the Week
News of the Week
TikTok Is in Deep Trouble
The popular Chinese short video app could be banned from the United States very soon.
First Republic Gets Additional Funding From Fed, JPMorgan
Fresh funding gives the bank $70 billion in unused liquidity
By Rachel Louise Ensign, Ben Foldy and David Benoit
First Republic Bank FRC 9.98%increase; green up pointing triangle said it has shored up its finances with additional funding from the Federal Reserve and JPMorgan Chase JPM 1.94%increase; green up pointing triangle & Co.
The fresh funding gives the bank, which was under pressure following the collapse of SVB Financial Corp. SIVB -60.41%decrease; red down pointing triangle last week, $70 billion in unused liquidity. That doesn’t include money First Republic is eligible to borrow through a new Fed lending facility designed to help banks meet withdrawals.
“First Republic’s capital and liquidity positions are very strong, and its capital remains well above the regulatory threshold for well-capitalized banks,” the bank’s executive chairman and its chief executive said in a joint statement.
The infusion is the first such lifeline announced for a collection of midsize banks that have run into trouble in the past week. Silvergate Capital Corp. SI -8.23%decrease; red down pointing triangle on Wednesday said it would shut down after its bet on crypto customers left it with huge losses. SVB was seized by the government on Friday after a bank run. New York-based Signature Bank met the same fate Sunday. Those two closures were the second- and third-largest bank failures in U.S. history….
GPT-4 will arrive next week and will be multimodal
By Ronan Byrne
We knew that GPT-4 would most likely be released in the first half of 2023. Fortunately, OpenAI will not disappoint in this regard. Microsoft, one of the main investors in the startup specializing in artificial intelligence, has confirmed that the world will know the new language model next week. At the moment, yes, they did not reveal the specific day.
Although much of the technical news will be kept until the official announcement, those from Redmond have already advanced a key detail: GPT-4 will be multimodal.
Microsoft’s new Power Platform AI copilot will build your apps for you
@fredericl / 8:47 AM PDT•March 16, 2023
Image Credits: Microsoft
At its virtual “Future of Work” event, Microsoft today announced the launch of an AI copilot — and make no mistake, Microsoft is all-in on using this “copilot” metaphor across all of its products — to Power Apps, Power Virtual Agents and Power Automate. The idea here is to use AI to make using these tools for building line-of-business apps, flows and bots even easier by letting users use natural language to describe what they want to build.
“With Copilot, Microsoft Power Platform is bringing AI-powered assistance into Power Apps, Power Virtual Agents, and Power Automate,” Charles Lamanna, Microsoft’s corporate VP for its low code application platform, writes in today’s announcement. “Makers now have a live in-studio copilot that helps them build solutions and provides suggestions for improvement. To build an app, flow, or bot, you can describe it using natural language and copilot can build it in seconds. It is that easy.”
At its core, this works a bit like using the new Bing or ChatGPT. You tell the Power Platform Copilot what you want and then refine these ideas through a back-and-forth with the bot in the chat sidebar.
In Power Apps, the main low-code tool of the Power Platform, users can now use sentences like “Create a time and expense application to enable my employees to submit their time and expense reports” and it will generate this app for them. But in addition to building these user interfaces and integrations with a company’s data sources, the Copilot can also help users analyze their data and visualize it (Microsoft’s example here is: “What are the most common reasons an inspection fails?”)
Given that Power Virtual Agents is part of the same platform and getting similar updates, it’s maybe no surprise that it’s now also more deeply integrated into Power Apps, allowing these developers to more easily add a chat bot to their apps.
LinkedIn Adds AI-Generated Profile Summaries and Job Listings
Published March 15, 2023
By Andrew Hutchinson
Content and Social Media Manager
As a Microsoft-owned company, it’s no surprise to see LinkedIn looking to add more AI elements into its platform, with Microsoft now seeking to integrate OpenAI’s conversational GPT back-end into virtually all of its apps and functions.
On LinkedIn, that’ll provide new options for creating your LinkedIn profile, while it’s also adding AI-generated job descriptions, as well as new educational opportunities into AI tech, via LinkedIn Learning.
First off, LinkedIn’s adding a new GPT-powered tool that will provide personalized writing suggestions for creating your LinkedIn profile.
As you can see in this example, a new feature within LinkedIn Premium will be the option to generate a headline or ‘About’ summary for your LinkedIn presence.
Tap on the ‘Start’ button, select what you want it to create, and the system will come up with your LinkedIn profile summary, based on your info, and samples from millions of user entries.
The system will use OpenAI’s GPT models to generate these new summaries, which could make it much easier to put together a good representation of your skills and experience, without you having to come up with a creative way to stand out.
Robots Don’t Make Art
The U.S. Copyright Office ruled that unedited AI-generated intellectual property isn't eligible for copyright protection. Believe it or not, that's a good thing.
Broderick is a freelance writer and podcaster who focuses on web culture and technology.
March 16, 2023 9:00 AM PDT
One of the central tensions of the past 30 years when it comes to art and culture has been the need to balance the unbridled creativity afforded us by the internet with the ability of our legal institutions to make sense of who owns it. Since the artificial intelligence revolution began in earnest last summer with the launch of OpenAI’s Dall-E 2, the guiding wisdom has been that these early months of the generative AI age would play out something like the Napster era of the social web: A lot of copyright infringement would happen, eventually companies would get a handle on what is and isn’t fair use, and then finally we’d figure out passable business models for what’s allowed.
Then a few weeks ago, the U.S. Copyright Office ruled that a series of images created by the generative-AI tool Midjourney could not be protected by copyright. The ruling centered on a comic book created by Kris Kashtanova, a machine learning educator from New York, called “Zarya of the Dawn.” According to the Copyright Office, Kashtanova, who wrote the text, is the author of the comic, but not the illustrator, even though they wrote the AI prompts that produced the images within it.
Now that companies have an actual legal copyright standard to work from, they can start investing in projects that leverage AI’s promise.
“The process is not controlled by the user because it is not possible to predict what Midjourney will create ahead of time,” the ruling said—i.e. humans can’t copyright AI images because they didn’t actually make them. It’s a huge blow to the potential future market for AI-generated intellectual property. But it’s also possibly the thing that will take generative AI to the next level as an industry.
AI Will Make Human Art More Valuable
If history is any indication, society will continue to favor the artistic output of people.
KRZYSZTOF PELC MAR 16, 2023 9:00 AM
THE RISE OF generative AI models has led to equal amounts of clapping and handwringing. One worry is that, as Kevin Kelly put it, “artificial intelligence can now make better art than most humans.” So where does that leave us?
The mistake is to assume that the meaning of “better” will stay the same. What’s more likely is that the goal posts will shift because we will move them. We have changed our collective tastes in response to technological progress in the past. We’ll now do it again, without even noticing that it’s happening. And if history is any indication, our tastes will evolve in a way that rigs the game in favor of human artists.
It’s not surprising that in conceiving of a new world awash with AI art, we haven’t accounted for a society-wide change in taste. We tend to assume that in the future we will want the same things we want now, and that only the ability to achieve them will evolve. One famous study dubbed this the “end of history illusion”: People readily agree that their most strongly held tastes have changed over the past decade but then insist that from this point on those tastes will remain as they are. Having presumably reached some peak level of refinement, they can now rest idly in their self-assurance.
In truth, what turns us on and off is constantly being reshaped by a range of powerful social forces, mostly beyond our awareness. Technological progress tops the list because it changes what is easy and what is difficult, and our running definitions of the beautiful and the vulgar are instantly affected by these criteria. When new advances expand the confines of what is possible, collective tastes respond—by wanting to partake of the new abundance and by wanting nothing to do with it.
Mark Zuckerberg Ends the Tech Party
The CEO of Meta Platforms announces a new day in tech: conventional normality.
MAR 15, 2023 10:07 AM EDT
The party's over.
In tech, this amounts to saying that the cool and Zen culture marked by an office transformed into a cozy lounge is over. Used to be we came, we entered and we were at home. The fridge was full; everyone helped themselves. The buffet was permanent.
The employee was in the center. Work-life balance was the principle. The well-being of the employee came first. Companies were required to do everything to put their employees at ease to get the best out of them.
It's all a distant memory now, says Mark Zuckerberg, CEO of Meta Platforms (META) -
The social media emperor just announced the elimination of 10,000 additional jobs, after 11,000 jobs were cut last November. In all, the parent of Facebook, Instagram and WhatsApp has cut 21,000 jobs in four months….
'Year of Efficiency'
It's not just the cuts themselves that's striking here. It's the tone with which Zuckerberg announced the new wave of austerity measures. He adopted the vernacular of the boss of an old-economy company. He was a cost-killer. He was cold. It's isn't personal; it's just business. He was a normal boss.
Tiger Global Writes Down Venture Funds’ Bets by 33% in 2022
The markdowns erased $23 billion in value from its portfolio of startups
By Juliet Chung and Eliot Brown
Updated March 16, 2023 5:07 pm ET
Tiger Global marked down the value of its investments in private companies by about 33% across its venture-capital funds in 2022, according to people familiar with the firm.
The markdowns erased $23 billion in value from Tiger’s giant holdings of startups around the globe, one of the people said. Its private portfolio includes big bets on hundreds of companies including TikTok parent ByteDance and payments company Stripe. In the fourth quarter, Tiger’s newest venture funds lost between 9% and 25%.
While substantial, the markdowns—including $9 billion in the second half of the year—highlight the lag in private markets compared with similar fast-growing public companies. Tech stocks fell sharply last year, yet large venture-capital investors have so far reported more modest declines.
SoftBank Group 9984 -1.45%decrease; red down pointing triangle reported its $48 billion Vision Fund 2 saw a roughly 30% drop in valuations of its private investments between April and December, compared with a more than 50% drop in its publicly traded holdings.
Uber, Lyft Score Victory as California Court Affirms Right to Treat Drivers as Contractors
Ruling preserves gig-economy business model but also paves way for collective bargaining
Uber and similar companies are in a global tug of war with regulators over whether and how to grant more benefits to workers.PHOTO: DAVID SWANSON/REUTERS
Updated March 13, 2023 9:42 pm ET
Uber Technologies Inc., UBER 2.38%increase; green up pointing triangle Lyft Inc. LYFT 6.79%increase; green up pointing triangle and other companies scored a victory with a California court ruling that preserves their independent-contractor model in the state and could boost their efforts to maintain that model elsewhere.
A state appeals court said that workers should continue to be treated as independent contractors under a California ballot measure known as Proposition 22, though it asked that a clause which put restrictions on collective bargaining by workers be severed from it.
Proposition 22, which passed in November 2020, allowed these companies to continue to treat their labor force as independent contractors. A California court deemed it unconstitutional in 2021. Monday’s order reversed parts of that lower-court ruling.Startup of the Week
Startup of the Week
The Remaking of Kleiner Perkins
After 50 years of dealmaking, the historic firm is back at venture’s top table. Sharp bets and renewed focus suggest Mamoon Hamid and Ilya Fushman’s KP may be heading for another golden generation.
If you only have a few minutes to spare, here’s what investors, operators, and founders should know about Kleiner Perkins.
Back on top. In the 2000s and 2010s, the dominant narrative was that Kleiner Perkins (KP) had lost a step. New leaders Mamoon Hamid and Ilya Fushman have instilled a hungry, collaborative culture that has the firm back on fine form. Under their watch, Kleiner has invested in breakout businesses like Figma, Rippling, Glean, Viz AI, and others.
Refinding focus. Rather than adding new initiatives, KP has succeeded by streamlining. Over the past six years, the firm has wound down vehicles focused on cleantech, biotech, China, and growth investing, choosing to focus on early-stage investing. It represents a return to the fund’s roots.
A craft-approach. The last two decades of venture capital have been defined by a question: is this an asset class that can be industrialized? Can venture firms bulk up to the size of investment banks? KP has a definitive answer: no. Rather than running multiple teams, Kleiner is managed by just nine full-time investors.
A continuity plan. Kleiner has developed a strong investing core behind its two managing partners. In Bucky Moore, Annie Case, Everett Randle, and Josh Coyne, KP has a cadre of young partners familiar with the firm’s culture and operations – and capable of leading future generations. This continuity plan is a revival of the firm’s apprenticeship-based model.
Encouraging results. Venture’s lengthy feedback cycle means we don’t definitively know how successful Hamid and Fushman’s stint at Kleiner has been. The early results look encouraging, though. Over the last five years, KP has logged an IRR of 65% and invested in leading businesses like Figma, Rippling, Glean, Productboard, Loom, and many more.
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