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What happened to innovation? - Sam Altman


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What happened to innovation?  The word "innovation" itself, that's what happened... such a weasel word compared to "invention".

Plus Sam Altman is the guy who invented Loopt right?

What does he know about innovation?

Or is that his point: Don't make the mistake I made with Loopt?

ba-bam!

I'm just saying. 

Top right is Google, Bottom right is Elon Musk, Bottom left is Kickstarter, and Top left is every startup in Silicon Valley.

Seems like a sweeping generalization.

I'm not sure I agree with the categorical sort of physical vs software, but why quibble.  I certainly don't understand the incredulity of the question... are we somehow supposed to be shocked at one quadrant or another?

I'm saying the whole analysis is sloppy, because as you point out, his axes are not orthogonal.

Also, from the article, this is not true:

Right now in Silicon Valley, most investors are more interested in your growth graph than your long-term plan—i.e., more interested in the past than the future.  Some possible explanations for this are risk aversion and intellectual laziness.  (Actually, it’s a little better than that—compounding growth is an extremely powerful force, and if investors believe growth will keep going at the same rate, then they can be making a very wise decision.)  This focus makes it hard for companies to raise money if they’re doing things that won’t have a growth graph of any sort for years.

Having a growth graph in Silicon Valley these days won't get you funded either. Investors are passing on almost everything,

I work at a company that VCs are practically begging to throw money into, and we've so far turned down all institutional investors and buy out offers. (yeah it's pretty awesome).... But my office shares a wall the the conference room they usually use so I hear quite a bit of the conversations (i'm almost deaf, but the wall is paper thin.. lol). Some of the things I've heard are:

They're sick of games, mobile, social, and other consumer-y properties. Low ROI and even then only in aggregate.

They want originality (tho i find this dubious) or at least something truly compelling.

They HATE startups which are aiming for acquihire.

Security products are HOT.

Patents (and patentability) on real things make them salivate.

Your sampled observations are right on the money regarding my experience of prevailing conditions among VCs this season... and we can expect that to change.  Just not sure when.  Haha!

Yes, they're on a pendulum that ever swings back and forth.

There's just no way to predict when the swing will happen. 

This is about 95% a function of what investors are willing to fund

If Tesla or SpaceX were Musk's first startups he'd have been laughed off of Sand Hill Road

We can all remember as recently as a few years ago when no one would fund Tesla and Elon Musk had to practically bankrupt himself to keep it going.

Investors don't have intestinal fortitude these days, but arguably as a group they never did.

The fundamental insights and experience of innovation, regardless being threatened above by sloppy generalizations, is whether or not an innovation is valued.  And value is always a market function of the number of people willing to adopt and consume an innovation, usually by paying for it (behaviorally by using it, if not financially by buying it). So if an innovation is to reach any significance beyond the narcissism of the inventor that torments the living crap out of her family and friends with it, then an innovation must find a consumer, and the first consumer for any significant innovation is usually an investor who stands up as proxy for all other investors and consumers to come.  

Some above comments presuppose that investor dispositions towards innovations are set with a higher bar of incredulity towards disruptive innovations than incremental ones.  This assumes that individual and collective investor appetites for risk amidst reward are set in some distribution towards products, or industries, or entrepreneurs.  They are not.  It's self-evident that investor appetites for risk range widely and dramatically with just a casual review of recent financial history, regardless whether you choose to focus on the geography of Sand Hill Road, NYC or London.

Institutional and retail investors have and will continue to throw substantial amounts of money at lies and illusions, almost as often as they will financially choke off real, socially impactful and substantive innovations, hindering them from achieving significant market share and profitability, because they're on Shark Tank.  And these dispositions are as often as not determined by external environment factors as they are by the stupid grins, bad haircuts and body odor clinging to the hopeful supplicants standing before them.  

Fortunately for all of us the majority of investors are boring and prefer to play between those two exciting antipodes.  Because here we are.  And innovation is not being starved of capital and is doing pretty well across any and all of the many imperfect markets wherein people with good dollars are seeking better ideas to drive even better results.

Problems?  Problems!?  I don't see no stinking innovation Problems!!!  It's just more innovation everywhere... and if you're not leading it, you're likely in the way of it.

Well said, Rob.

To put it another way, investors would rather do nothing than lose money.

Haha Adam, so true but only at times. I recall too frequently on Wall Street, and beyond, periods when investors would rather do something AND likely lose money than do nothing and certainly keep it.

When the house odds are against you in any decision it's generally called, by definition, gambling.  But when the odds are in your favor it's called speculation. Knowing the difference is just the beginning of becoming a successful investor.  But being successful doesn't mean you are not also at times swayed and overcome by the vicissitudes of emotion, habit and perceived need. In fact, it's the easily successful investors that often fall victim to these traps and, believe it or not, become openly willing to lose their own money rather than keep it. 

What few people physically understand about their cash (and their most recognizably liquid assets) is that they are always at least 100% invested--no matter where it is or what it's in.  Sometimes they're even more than 100% invested and don't know it...like so many of the poor saps in the housing bubble found out.  Professionals easily miscalculate or don't fully understand their exposure and fail to act upon better options to change it when they can. Fewer people still can envision their entire life and sum total of possessions as a complete portfolio, with it's own unique risk reward exposure relative to their other choices.  So compound that ignorance, and thereby increased risk, however many times another person is controlling other people's money in that chain of exposure and you'll see why people tend to act funny at times.

But that's another story.

This is an excellent assessment of why we see so much fear and greed affecting speculation, Rob. 

Om Malik says if Sam Altman can't see innovation, he's not looking hard enough.

http://gigaom.com/2013/06/21/if-you-think-silicon-valley-cant-innovate-youre-not-looking-hard-enough/

software is important

Yes, it's the only thing present in all four of Sam Altman's quadrants.

yep!   and smart people.

Oh right. People!

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