Seeing Both Sides
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Reply | Original | Permalink | Share | TweetSorry! Quantitative Easing Won't Work
In a Liquidity Trap although Saving (S) is abnormally high investment (I) is next to 0.
Hence, the Keynesian paradigm I = S is not verified.
The purpose of Quantitative Easing being to lower the yield on long-term savings it doesn't create $1 of investment.
It does diminish the yield on long-term US Treasury debt but lowers marginally, if at all, the asked yield on savings.
This and other issues are explored in my tract:
A Specific Application of Employment, Interest and Money
Plea for a New World Economic Order
Abstract:This tract makes a critical analysis of credit based, free market economy, Capitalism, and proves that its dysfunctions are the result of the existence of credit.
It shows that income / wealth disparity, cause and consequence of credit and of the level of long-term interest-rates, is the first order hidden variable, possibly the only one, of economic development.
It solves most of the puzzles of macro economy: among which Business Cycles, Stagflation, Greenspan Conundrum, Deflation and Keynes' Liquidity Trap...
It shows that no fiscal or monetary policy, including the barbaric Quantitative Easing will get us out of depression.
A Credit Free, Free Market Economy will correct all of those dysfunctions.
The alternative would be, on the long run, to wait for the physical destruction (through war or rust) of most of our productive assets. It will be at a cost none of us can afford to pay.A Specific Application of Employment, Interest and Money
Reply | Original | Permalink | Share | TweetI agree this is a good time to start a new venture - much of the "noise" is out of the market allowing entrepreneurs to focus on their idea and to find great talent.
There is a new site called www.StartUpHire.com - it lists jobs only at VC backed companies. Despire the market slowing, there are still 1000's of jobs at 1000's of startups. A few of these will be the Googles and Amazons of the future.
Reply | Original | Permalink | Share | TweetJeff,
This is a fantastic effort. I actually wrote an Op-Ed for Mass High Tech a few months about about this trend (http://tinyurl.com/7uou32) and feel very strongly about it. I'll check out the site and see how I can help.
Cheers,
Kate
Reply | Original | Permalink | Share | TweetJeff,
You should get a copy of the study BCG did for either for the Chamber of Commerce or the City of Boston on this exact topic. The study identified some of the same challenges that it looks like haven't been solved.
Reply | Original | Permalink | Share | TweetI'm an aspiring entrepreneur who's lived here for a while. I didn't go to school here-- I moved here because it's a tech hub.
I often think about leaving, and I'm considering it. It's not because of any lack of business resources, jobs, entrepreneurial networking, scientific networking, smart people, or anything else you're referring to. It's about a lack of other things: music, stuff to do to unwind, etc.
Boston's culture just feels stuffy. It feels like all everyone does is work and work and study and work. IMHO that's one reason that so many students and others leave for more fun places like California. You need to unwind and have room to breathe, especially if you're going to do something as hard as entrepreneurship, inventing, etc.
If I were tasked to make Boston more attractive for people to stay, I'd try to address that. Unfortunately, those aspects of a place are among the hardest to do anything about. There's no easy answer.
There are only two superficially addressable things that I can think of:
1) The cost of living is too high, which drives out all the artists and creative types and anyone else who isn't an engineer, a high-end professional, or a businessman. The result is too many type A workaholics and geeks and not enough laid back types. The housing bubble really harmed cities like Boston. I've heard of SF having the same problem. I call it "pricing out the soul."
2) Allow things like bars/music venues to stay open later. Many cities allow 4am. 2am is too early for a good concert.
3) Run the T later.... maybe until 4am. Easy fix, though it might be prohibitive for cost reasons. Probably not the right thing to do in the midst of an economic crash, but maybe it could be addressed once the state's budget is in better shape. You could also grant a few more cab medallions to reduce the cost of taxis. Taxis here are outrageously expensive compared to other big cities I've been in (NY, Chicago).
Of course, it's also possible that it's a vicious circle. I've sometimes thought that the reason people don't stay is because people don't stay, and that the transient population is the reason for the lack of things like music and the ever-ephemeral "culture." Aren't those things that people create when they *live* somewhere, as opposed to just going there to work for a while or go to school?
Reply | Original | Permalink | Share | TweetGreat post and comments. A clarification for Peter....the average hold for VC investments is now over 8 years. Unfortunately, this is not by choice as the M&A;/IPO markets have become constipated. IN all probability this will hurt reported IRR's when liquidity events happen.
A sign of a health(ier) market would be a hold period closer to 5 years for early stage investments.
Reply | Original | Permalink | Share | TweetHi Jeff,
Follow up comment. I was thinking about the time of the exit. On average it's now somewhere between 6-8 years. So now a "new" (old) problem rears it's head. A large portion of software has a life cycle that is shorter than 7 – 10 years. What is hot today, may be obsolete by the projected “maturity date” of the “investment”. Obviously infrastructure products have more longevity and smart companies update, extend or expand their products, but if a software company (which requires the least amount of investment in the tech sector) isn’t capable of standing on its own after 5 years, there is likely a much bigger problem than available cash or the price of B or C round stock.
In other words VC exits are now extending beyond the useful life span of the software.
To avoid the "death spiral" of funding obsolete software and gaining "incremental" % ownership it would (should) be everyone's benefit to build to profitability first vs revenue generation.
VC funding should be available for expansion with profitability the main theme.
Any alternative to this will most likely result in the fund becoming "tapped" out.
In essence the VC model is about to change dramatically - 6-8 year exits will have to either improve or get profitable otherwise the VC's will be out of a job.
Cheers,
Peter
Reply | Original | Permalink | Share | TweetInteresting post. Quick question - on average how many VC's re-up on the next round?
I don't have any hard data to support my gut instinct, however with so many VC's investing in "common spaces" where only 3 or so companies will survive does it really make sense to keep some money for the next round.
There's a great post out there by Will Price called - When it goes right what does it take to build a software company? It should be required reading for every entrepreneur. If you can't make it on $10 million you're not trying hard enough.
There's always this insane push to grow revenues - what everyone fails to mention is good old fashioned profits. These will be back in vogue in the coming years. 99% of all the startup's out there have some revenue - only the few really good ones are focused on "measurable, sustainable, profitable revenue from volume". It's those 6 little words that most people ignore that change the game.
The whole world is changing right now, both for the VC and the Entrepreneur - the winners will be those that build profitable companies. For the VC's my advice would be as follows - "beware the C round". See Will's blog mentioned above for reasons why - or failing that simply look at the cap tables of your current investments.
Cheers,
Peter
Reply | Original | Permalink | Share | TweetGreat stuff for startup founders - a real education. I tweeted it.
cheers,
Graeme
www.twitter.com/graemethickins
Reply | Original | Permalink | Share | TweetVery useful post Jeff. Thanks,
Mark
Reply | Original | Permalink | Share | TweetI'm sorry, but shameless plug:
I created a website this weekend. Basically, it's twitter for VC's and Entrepreneurs
I'd appreciate any feedback or participation!
- Scott from VentureDig
Reply | Original | Permalink | Share | TweetThis is a useful concrete post, thanks for it.
One balance point that I think is important to reflect to entrepreneurs is around confidence. There is a tension point between being buttoned up, cool and collected on one end and being a passionate, world-changing zealot on the other.
Ultimately the entrepreneur needs to expose both in the right quantity.
Reply | Original | Permalink | Share | TweetGood point, Peter. I touched on some of these themes in my post on VC Accountability: http://bostonvcblog.typepad.com/vc/2005/10/accountability_.html. But I think giving entrpereneurs more tools to help them conduct their VC due diligence is a smart idea.
Reply | Original | Permalink | Share | TweetDon't forget it's also a two way street. The entrepreneur will also be doing due diligence on the VC. Specifically talking to their other investments, seeing how what terms they got, looking at the quality of the entire investment portfolio, asking questions about their IRR's over the last 8 years.
People seem to think it's all about the Entrepreneur - they simply forget that sometimes it's just as important to be able to say no to money that isn't as smart as it thinks it is.
Cheers,
Peter
Reply | Original | Permalink | Share | TweetGreat piece.I think the trick is to be proactive. We are changing the times instead of times are changing.Cut costs but also keep your eyes and ears open to new opportunities that an economic crisis brings with it.You fight it where you have to and use it where you can to deliver more value in whatever you do!
MenonRK
mGinger
Reply | Original | Permalink | Share | TweetJeff,
I believe one effect of the current market is that more start-ups will chase VC money, because they can't obtain less expensive capital anymore. This may be good for VCs, because the pool of potential investments may become stronger. What are your thoughts?-Eric Shooman
www.TheBostonEntrepreneur.com
Reply | Original | Permalink | Share | Tweetall govt spending is a tax, it can either be a direct tax or an expansion of the money supply, which devalues the US dollar and thus creates inflation. the fact that VCs have lots of money is largely symptomatic of the fact that the fed has grossly overexpanded the money supply, and continues to do so with each bailout.
we got a taste of inflation this year, with food and oil prices rising significantly. this trend will continue, and will likely get to a point where it affects everyone. the sooner we address the real problem -- money supply -- the sooner we'll fix the problem. the longer we resist, the more problems we'll have.
Reply | Original | Permalink | Share | TweetG'day
Just letting you know, there's a typo in the link for Prudent Bear.
Reply | Original | Permalink | Share | TweetI saw the title and assumed this would be commentary on Obama's call for precisely such a position.
"Obama will appoint the nation’s first Chief Technology Officer (CTO) to ensure that our government and all its agencies have the right infrastructure, policies and services for the 21st century."
Reply | Original | Permalink | Share | TweetI think this falls into the common misconception that the government steers the economy. It doesn't and we don't want it to.
See also: France, economic performance of.
Reply | Original | Permalink | Share | TweetThis is a very good article.
Putting myself at the risk of sounding stupid, but isn't what you describe the difference between strategy and tactics?
Kind regards, Jens
Reply | Original | Permalink | Share | TweetJeff, Great article. very insightful as usual. I left a comment on the BusinessWeek site.
I like the Jack Welch quotes. You seem to have a bunch of them. Where do you get them?
Don Dodge
Reply | Original | Permalink | Share | TweetGreat! I was searching for such an offer in business management. As Entrepreneur Environment is taking the world business to one distinct level where there is much competition as to take as an VC. Really an nice article you have provided.
Reply | Original | Permalink | Share | TweetJeff,
Congratulations! Great article! You deserve the BusinessWeek oppurtunity. I love the idea of the leader in an entrepreneurial environment taking on the mentality of a VC. You wrote in a previous post, as entrepreneurs we get "In over [our] heads." As leaders we need to manage the entrepreneurial environment to make sure our employees don't fall below the 80%/20% line. By hiring the right people, controlling the size of the work-teams, and thinking like a VC a productive entrepreneurial environment should prevail.
I too look forward to season 4 of The Office (I think it's the best sitcom since Seinfeld).I look forward to more additions to your blog.
Kind Regards,
Eric Shooman
http://thebostonentrepreneur.com
Reply | Original | Permalink | Share | TweetHow much did you pay as taxes - You can estimate how much you paid as taxes the previous year, and how much more or less will you be paying this year? You can do this by getting the details of the previous year's personal income tax returns and comparing it with your present income tax. All information in this regard are found in form 1040; line 62, which also give detailed information on your total tax liability for the year.
