Ryan’s Journal: Losing The Forest For The Trees
by Ryan Pew
I was having a conversation this week about Silicon Valley companies. Some of them are doing amazing things.
When I was job hunting I would look at several and imagine myself there changing the world.
There were several though that also had great funding, great people, but I could not understand for the life of me what they did. They had a great list of customers, but I could not understand the value they brought.
There are two possible solutions to that conundrum.
One, I am just not savvy enough to understand (a very real possibility).
Two, they were full of hype and energy, but not substance. I can imagine that both statements are true when you look at the vast array of companies in the valley.
With that said, have we lost the forest for the trees? Have some companies been so hyped that people continue to pour money into them hoping for a huge payday that may never come to fruition?
Uber is in the news for a variety of reasons, some good, some bad. I recently read an article that Uber and Google are working on flying cars. While the concept of flying cars seems cool… I guess, I am more concerned with the participating companies.
Google provides value, products and that elusive quality, profit. They are well established, have multiple streams of income and could fail at this endeavor and live another day. It’s exciting to see them using their money for grand ideas, but it won’t decimate them either.
Uber provides value and services, but zero profit.
In fact, if Uber was run like a traditional company or household, they would have never even gone to market.
They operate more like a country that can print its own money. They take on debt, lose billions every year, yet keep on trucking.
Venture capital and perhaps greed are what allow this to occur. If they fail at the flying car concept what does it mean for the rest of the business?
I know there are very smart folks who are there and who are invested. I often wonder what their long game is. Do they believe they will become profitable at some point if they hang on long enough?
Another thing to consider is the economy. We have easy money right now with very low rates of interest.
For an investor it makes more sense to go with a high risk investment versus storing it in savings, because they essentially lose money due to inflation.
When the markets tighten does that mean Uber cannot seek out another round of funding?
My point is this.
Have we lost sight of the incremental steps it takes for us to achieve greatness by thinking we can accelerate the whole process with enough capital or am I the Luddite here?
I am a believer that debt can be good when there is a viable business model. I am less impressed though when a company has never turned a profit and had no projections to do so at any point soon, but can be valued so highly. What makes Uber so unique?
I say we need to keep dreaming the big dreams, but also look at the foundation.
Is it built on sand or rock?
Image credit: Artur (RUS) Potosi
