I replied with:
I guess I’m the same kind of contrarian.
The bifurcation of inexpensive “digital small business” vs venture startups.
Jerry’s tweet was in response to this paper:
the Lerner, Nanda paper/op-ed I mentioned yesterday is partly based on startups being permanently cheaper to start. I think this is a bad assumption
Abstract: Venture capital is associated with some of the most high-growth and influential firms in the world. Academics and practitioners have effectively articulated the strengths of the venture model. At the same time, venture capital financing also has real limitations in its ability to advance substantial technological change. Three issues are particularly concerning to us: 1) the very narrow band of technological innovations that fit the requirements of institutional venture capital investors; 2) the relatively small number of venture capital investors who hold, and shape the direction of, a substantial fraction of capital that is deployed into financing radical technological change; and 3) the relaxation in recent years of the intense emphasis on corporate governance by venture capital firms. While our ability to assess the social welfare impact of venture capital remains nascent, we hope that this article will stimulate discussion of and research into these questions.
SSRN-id3633054.pdf (342.6 KB)
Lots of good discussion in the replies from Jerry’s original tweet. Via Jonathan Libov @libovness, also lead me to this article:
This is going to be a very long quote:
Here’s the hard thing about easy things: if everyone can do something, there’s no advantage to doing it, but you still have to do it anyway just to keep up.
By making Direct-to-Consumer (“DTC”) easier, software like Shopify increases entropy and lowers the probability that any specific company will generate sustained profits.
Tobi borrowed the phrase “arming the rebels” from a geopolitical strategy in which a big, powerful country, safely separated by miles and oceans, supports rebel forces fighting for change in a smaller, poorer, less powerful country by giving them money, arms, and implied support.
Think the US backing the Contras against the Sandinista Government in Nicaragua or the Soviet and Cuban support for anti-apartheid forces in South Africa. If you want to put on your tin foil hat, think the US funding Osama bin Laden and the Afghan Arab fighters in the Soviet-Afghan War.
Shopify is an amazing company full of great people, but Shopify isn’t really arming the rebels .
When every rebel is armed, none really is. It’s like when you played GoldenEye 007 as a kid. Getting the Golden Gun the hard way was dope. Everyone getting the Golden Gun with a cheat code made the game suck.
When everyone has the same plug-and-play tools, the profit flows away from the rebels, and towards the arms dealers, forcing rebels to devise new guerilla tactics to take back profits.
Having just recently really leaned into setting up a Shopify store, and using lots of them that got set up by SMBs during this current pandemic, this resonates.