Land ownership, intellectual property and limited liability ownership of companies by individuals are the basic building blocks of capitalism. I.e., property forms guaranteed by the government. Which one of these are being challenged by unicorn startups, again?
I think this is spot on and deserves repeating.
Unicorn startups are changing the way we utilize capital (Uber=cars and labor, Airbnb=property) but they are not changing the fundamental fabric of capitalism. Our legal framework forms the backbone of our society, and regulation/policy is the tool we use to adjust that foundation. Entrepreneurs and investors respond accordingly.
Uber and AirBNB might hire some lobbyists to change a few minor rules in the hoteling/taxi industry, but the really important variables are the distribution of government spending, scope of and resources committed to regulatory oversight, and the tax code.
The article lacks a comprehensive review of the data and its arguments come across as surface level speculation.
IMHO I tend not to agree with the hole "Sharing Economy is The Next Capitalist Revolution" thesis.
The normative argument ("this is a bad thing!") it does less well at. Ownership in these companies is cut off from the rest of the economy, but the Economist seems to think that this trend is only worth reporting if the social issues can be brushed off. They cannot. SeedInvest is not a substantial source of capital on the same level as privately VC funds. Mutual funds, maybe.
These innovations are just a child of capitalism, not something unexpectedly changing it.
Indeed the first example it cites - Uber - is arguably an example of the opposite to the trend it purports to spot... it's a market traditionally dominated by plucky privately held small companies that's becoming centralised under a large company or two that probably will go public. Even if Uber (and Lyft and a couple of others) doesn't IPO they still are and will be owned and managed in a way that resembles a public company more than your neighbourhood cab firm.
I'd give the article more props for identifying interesting but not really connected phenomena in new companies if it didn't include lines like "whereas nobody is sure who owns public companies, startups go to great lengths to define who owns what". The idea that startup share options are more transparent than employee shareholdings in publicly held companies traded on liquid markets is dangerously misleading nonsense that looks really out of place in a publication aimed at the financially literate
When I think of R&D departments these day I think of non-silicon/non-electronic computing, lab-on-a-chip, and maybe some other medtech stuff. I'm under the impression that companies doing these sorts of things are currently a minority of "Silicon Valley entreprenuership".
The difference between VC-backed-startups vs traditional R&D departments is that the first one seems more short sighted, and with a tendency towards a narrow subset of IT problems with high scalability and disruptive potential, while the second one works on a wide array of industries and applications where the parent company already has the benefits of economies of scale.
Good question. A few ideas:
-- ROIC -- Competitive advantage versus peers (hard to measure, but one attempt: http://web.mit.edu/is08/pdf/Parrish.pdf) -- Share of market -- Enlargement of market -- Quality of hiring versus peers
These are the things that can make a company last for centuries. The hunch I was stating -- though admittedly without a clear way to prove it yea or nay -- is that enterprises that invest in small nimble VC-backed technology companies will begin to outperform, on these measures, traditional in-house R&D departments.
Therefore I'd liken start-ups to product team replacements or consulting + validation as seen from a big company's perspective.
A large land owner could raise a small army and supporting farms, then join the local nobility. The land owner and his tenants could then enjoy the benefits of being part of the larger realm.
It looks more like a "service" that destroys a job in which people can support their family and replaces it with another hand-to-mouth subsistence job.
Really the point hinges on your definition of "value". I don't credit these particular companies with adding any particular value to the domains in which they operate, and they are arguably degrading the local economic environments where they operate.
Part of my umbrage with airbnb in particular is personal: I live in the San Francisco Bay Area and I am looking for a new place to live. In the past I've used Craigslist for a long time with very good results, but these days it's very obvious that opportunistic landlords have colluded with airbnb to turn quite a lot of available rental spaces into poorly-managed quasi-hotels.
There are important reasons why we don't allow ourselves to e.g. drive and operate illicit taxis, or run unregulated hotels. We have, collectively, thousands of years of experience with letting to lodgers and hiring porters and carriages, etc.
If you got in your car and started driving people around for money, that's not legal. If you started a hotel in your spare bedroom, that's not legal. Just adding computers doesn't make it legal. Calling it "disruption" doesn't make it legal or right. These companies are criminals, they are extracting money and degrading the domains they operate in, and (as Airbnb's recent appalling ad campaign demonstrates) they are fully up their own asses when it comes to owning up to the consequences of their behaviour.
With any luck at all they will "die" soon and we won't be talking about them anymore.