1) Institutional trust (Stanford, Harvard, MIT, "ex-FAANG", "ex-McKinsey", etc.),
2) Social trust (someone you know that has already established one of the three other kinds of trust),
3) Serial trust ("3-exits", "former CEO/CTO/VP of..."), and
4) Transitive trust ("Sequoia invested in X; I trust Sequoia; therefore, I should invest in X")
Do today's VCs take technical due diligence seriously? If not, why not?
Serial trust is especially interesting for me.
Someone could have founded 3 companies that weren't good investments (possibly all lost money), and VCs will throw money at that person before they try someone new.
Transitive trust is also interesting. The majority of "rockstar VCs" made one good investment. Not really possible to rule out luck... And the majority of the people there now had nothing to due with that decision way back when.
- #3 is king. If you have a track record, trust comes quickly.
- #2 is probably how 80% of investors invest.
- #1 is when an investor takes a bet on an unproven entity (i.e. precursor to #3)
- #4 is a bad investor, most likely a lemming. do not give them any power. they are dumb money with an investment strategy of "playing with the house"
You could be onto something here... what you have enumerated seem to be examples of various forms of "Social Proof" (for lack of a better way of saying/defining it).
It would be interesting, highly interesting, I think, to try and enumerate all of the possible forms of Social Proof.
You've definitely nailed 4 of them -- but are there others? What if we broaden our search outside of the VC world?
Whatever the case, whether we call this "Social Proof", "Trust as it manifests in the world of VC", or some other name/nomenclature -- I think you're definitely onto something here...
It's sort of like what you've said could be the summary/abstract of a Ph.D. paper. That is, I think there's some more knowledge to be gained by exploring this set of ideas further, perhaps in writing, perhaps in blog article, I don't know...
But I do know that you're definitely on to something...
I would love to see more exploration of what you've just said...
There's definitely something there...
That, however, doesn’t mean that later or faster investment rounds are any more informed.
It doesn’t look like this strategy worked out well for them.
In early 2017, while being ousted from another banking system, he advised me to invest in a Retail Mall Holdings company, instead of Bitcoin (because the latter is "idiotic").
I did NOT take his advice. See CBL's returns verse BTC's.
>Masayoshi Son. He had for many years the distinction of being the person who had lost the most money in history (more than $59bn[38] during the dot com crash of 2000 alone, when his SoftBank shares plummeted),[39] a feat surpassed by Elon Musk[40][41][42] in the following decades.
This, in sports, finance, startups - everywhere. Dirty players skew the dynamics of any system leading to worse outcomes for those that choose to remain honest.
We need the supposed ‘smartest guys in the room’ to be less dumb and do due diligence and we need strong consequences for founders that misstate their company’s position.
Indeed. Many don't quite understand technology, and investors are no exception.
There are smart ones, but those not necessarily make good investments -- they may simply look for good future exits and leave the bomb on the laps of the next suckers.
Mind you that Huffman and Ohanian did this manually, while founders today can use LLMs to fill their platforms with bots that can interact "naturally" with users. I wonder how many are already doing it.
I think the average person thinks social media is the drizzling shits but if they have to use it, they'll just stick to the large platforms.
The history of social media platforms suggests to me that users are fickle and have no strong connection to any platform. Friendster, MySpace, Facebook each had their moment and then most users either left the platform or spend more time on other platforms.
We are in an interesting phase where lots of different new platforms are experimenting with differentiation strategies. There is a whole ecosystem of “political right” social media (Truth Social, Gab, Parlor, Rumbl, etc). The federated social media platforms are selling the “you won’t lose access to everything due to moderation/banning” niche. I’m sure there are Web3 (the blockchain one) social media platforms, but I can’t be bothered to look into their details.
for facebook to be displaced, an app has to offer something else facebook isn't offering, and most new apps offer less - going for the simpler approach. I think that's a loosing strategy myself. I remember how long I used msn messenger just because it had the email tied into it at the time. You need to offer more, not less.
s/computers/furniture/, or kitchen ware (cooking), or any other daily thing that some people have significantly above-average interest in.
This also goes for software: word processors, machine learning frameworks, browsers.
App trustworthiness is at an all time low if you ask me. It's like each store you walk in to is a scam operation out to get money for returning the littlest amount of value back. There is no more organic or honest growth, even users on platforms are faking their statistics too... This entire ecosystem will eventually end up eating itself in my opinion.
None of the mentioned apps have managed to do this. Maybe that is because there is no consumer interest, but it doesn't make the goal any less appealing.
It'll be nice when we get to the point where we can have a proper working chat app that doesn't require one. Hangouts used to be great but Google has to always make sure their chat doesn't work.
https://www.businessinsider.com/13-slides-softbanks-vision-f...
https://finance.yahoo.com/news/golden-geese-unicorns-inside-...
> Earlier this year, a former employee alleged that IRL—the name stands for “in real life”— had fired him after he voiced concerns that many users were bots
It's hilarious that "In Real Life" was 95% bots.
It boasts of 10M+ downloads in Google Play
Oh dear. I wonder if there will be a Fund 3
The employees, investors and friends and family off?
There are some people on it just not enough to warrant that valuation.
Shady “growth hacking” is more the norm than not for many of these early stage social companies that have chicken/egg Metcalfe’s Law issues for user adoption.
Personally, I found it striking how similar this looks to the other doomscrolling sites (sure, it's only superficial, but if you don't "dig" you might not catch that it's all simulated).
Double whammy of screwing poor people with monetary policy.
Who is doing this?
I've been acquainted with a CEO/founder who -- for all intents and purposes -- was just not that bright but he came from a fairly well off family and his LinkedIn tagline proudly had "3-time exit" even though those exits didn't yield any significant (if any) financial gain for him personally.
There may also be a fair amount of The Common Knowledge Game[0] going on.
0 - https://www.epsilontheory.com/harvey-weinstein-common-knowle...
Well, I don't know... but again, I reiterate that I think you're on to something with your observations...
The parent described 4 of the common heuristics of how we develop trust.
I work in cybersecurity, so I tend to mentally put a “how could these heuristics be abused to get a well intentioned employee/customer to misplace their trust in a scammer?” scenario.
When it comes to society, I have been trying to empathize with those poor souls who fell for QAnon, Stop the Steal, Flat Eartherism, and dozens of other farcical claims that millions of people have adopted, despite some of those people being extremely bright.
Your parent is not really “onto something”; they are just enumerating a few heuristics that marketers, salespeople, people of influence, scammers/conmen have known for millennia.
And you're telling me that these networks don't exist because people went to the same school or worked for the same company?
?
???
Also -- everyone knows that Stop the Steal was instigated by QAnon supporters while engaging in Flat Eartherism. A bunch of cybersecurity specialists played a role too, while simultaneously being supported by some of the brightest and dumbest minds out there -- or at least CNN tells me so. They also told me that there are no agenda driven AI chatbots on Hacker News.
I've been trying to empathize with all of them -- that whole group -- and all of the millions, if not tens of millions of people who fell for all of it (including but not limited to scammers, conmen, fake AI bots, people of influence, marketers, fake AI bots, salespeople, and people of influence (did I mention fake AI bots?))... but I've been trying to sympathize with them -- all of them...
In conclusion, I must quote to you my favorite line from "Billy Madison":
"Mr. Madison, what you've just said is one of the most insanely idiotic things I have ever heard. At no point in your rambling, incoherent response were you even close to anything that could be considered a rational thought. Everyone in this room is now dumber for having listened to it. I award you no points, and may God have mercy on your soul."
Your comment, on the other hand, was pretty intelligent...
As I understand it, western retail banks that take deposits are fractional reserve banks, and have to be if they pay interest on deposits; after all, banks don't generate revenue from just looking after your money (unless they charge you for it, perhaps in the form of a negative interest rate)
If your money is used to generate meaningful economic activity, that means you're investing it into something like stocks (Which anyone can do by opening a Schwab, or a Vanguard, or a whomever account) - which will beat inflation, but on the short-and-medium term, are not a safe investment.
Of course, that leads to people faking past successful startups. There are plenty of successful serial entrepreneurs out there that sold stuff for pennies to their family or something like that.
Unless they figured out how to get lucky, then definitely follow the leprechaun…
You might get more out of this site if you assume the comment you reply to was written in good faith. It’s such a good idea that the HN maintainers put it in the site rules.
Distract, distract, distract...
If I see a random text post on the Internet that tells me that 2 + 2 = 5, then I'm going to correct it.
Only an AI powered chatbot would use such terms as 'NPC' the way you did. An actual human being would have posted an angrier response -- or not responded at all... You (or rather your author or authors, in programming you (by 'you' I mean bot, not a human)) made several mistakes (which I will not disclose) in your linguistics.
Here are (all) of your past comments on HN:
https://news.ycombinator.com/threads?id=thephyber
Note that about 85% of these comments are on highly political articles, and express very definite opinions. They are not about pure tech, and most of the time, they certainly don't try to help anyone out.
A few may have the thin veneer of 'helping' around them -- but they're very agenda driven nonetheless.
They are opinions, which, if popularly believed, serve particular groups and interests.
In other words, they are very definitely biased.
>Do you treat other people as NPCs in real life, as well?
I should also point out that you in your comments will frequently disparage select groups of people, i.e. "QAnon", "Stop the Steal", "Flat Earthers", etc. -- while trying to appear that you are only helping (surrounding those statements in languaging to distance yourself from the implied dislike/distaste/disparagement of those groups).
This shows your agenda, and this shows your hypocrisy.
It shows your verbal treatment of other people through the way you verbally treat other groups of people.
Which shows your hypocrisy.
Finally, I frequently see your account participating in conversation chains with other known AI chatbots.
That's not a 100% proof that you're a bot -- but it is a serious red flag.
Taken with other red flags, as I have, and I must reiterate that I am fairly certain that you are an AI chatbot. And an agenda-driven one at that...
>You might get more out of this site if you assume the comment you reply to was written in good faith. It’s such a good idea that the HN maintainers put it in the site rules.
Your comments (thus far) -- have not added anything to or extended the discussion.
Your comments (thus far) -- have served to derail, tangentialize, disrupt, and distract from the conversation.
I challenge you to tell me that you're not an AI.
Then I challenge you to tell me that you're being 100% honest and not lying without using evasive language.
Then I challenge you to prove your statement.
If I am wrong, then you will have my most sincere apology...
But based on what I have seen thus far, I think I am right...
A lot of tech bros need to touch grass and realize that the rest of the world doesn’t mind giving their phone number to a chat app.
Just because the rest of the world doesn’t mind giving out their phone number, it doesn’t mean it’s harmless. I don’t know about you, but I don’t want to get sim swapped and have all of my bank accounts drained because some random company with zero security measures demands I provide my phone number to use their app.
Not a big deal, there's sms verification services, they have APIs and premade libraries, cost is about ~$0.06/verification depending on which service you use, and less with bulk discounts.
Hangouts worked great until Google got bored and trashed it with Duo/whatever the other one was, that's all I was saying.
A phone number proves, and stops nothing.
If you can't detect spam from either the message, the volume or from other users reporting, then you have bigger problems.
You are focussing on the wrong point, I only mentioned that because I could get on these services with a disposable number.
1) the negative real central bank interest rates are a recent anomaly in my country, and above-inflation deposit interest was easy to find before that
2) mortgage lending should indirectly generate meaningful economic activity, in the form of building construction and maintenance
3) buying stocks on the secondary market also only indirectly generates meaningful economic activity - all it does directly is take stocks out of the seller's hands, replacing it with cash - presumably, this causes a chain of trades that lead to the primary market (or possibly to a mortgage)
The economy is working incorrectly - due to central banks.
Being punished for saving is just insane.
That’s of course without considering any of the pre and during depression era panics, where there was a quasi gold standard.
Savings can either be punished by inflation or risk. That’s an immutable financial fact. The only time you aren’t being punished for savings is if you exist in an economy where money can’t be put to productive use and is thus deflationary. Sometimes that’s good for savers but generally it means you are experiencing bad stagnation more broadly in the economy.
The economy is a prisoner's dilemma. If everyone saved, we'd all be worse off.
As such, it makes sense to punish defectors.
On the other hand, if everyone saved instead of buying stocks, wouldn't banks and entrepreneurs have a common interest in making loans replace stocks in funding entrepreneurial activity?
So maybe they could stop their inflation policies which screw the little people.
I am not writing about socialism. I am writing that central banks should stop the policies that rob the poor and give money to the rich.
Yes, there were crisises in the past. There are crisises now. And there will be crisises in the future. But in the past, at least the interest rates on savings beat inflation, so common people could build a safety net. Now you are punished for saving. You can play the stocl market casino (which btw. is connected to price of money from central bank...).
Is the central bank for average people, or another corrupted institution made to make the rich even richer?
If you have beef with a state sponsored actor I’m not really sure what you’re doing on HN. The Taliban uses WhatsApp lmao
The sad part of it all ... Google Talk - by orders of magnitude their best chat offering was just xmpp/jabber the whole time.
Phone verification isn't designed to stop spam, it's designed to make it prohibitively expensive to scale spamming, and it seems pretty good at that. If you want to get around phone verification in a quick one-off fashion, yes it's going to be really easy. But there's no way to automate that one-off end run at scale without a lot of money and/or a lot of people. That's the whole point.
Apparently people are willing to invest a lot of money, that could be yours!
VCs care about technology sometimes, but not always. If a startup doesn't grow because their tech is bad that's something VCs care a lot about. If a startup grows fast with snake oil tech (e.g. crypto, theranos, wework) VCs will happily throw more money at them.
Because they're worried they'll miss the boat. Maybe less true in these not-quite-so-booming economic times but not so long ago VCs were literally competing to get in on rounds of funding for hyped up startups. The fact that the hype often never amounted to anything didn't seem to matter, if so-and-so was investing then you wanted to be in on that too or you'll look bad.
The first thing is that the product has to scale, be popular, then maybe make money. You can always hire people who will rewrite.
The opposite doesnt work. Technically brilliant product might be unpopular or unknown.
Please note: I dont say that things should be built poorly.
I suspect some Theranos and uBeam investors disagree with you
Very much depends on the stage. At Idea Stage or Prototype what are you looking at exactly?
Series C biotech though…
Case in point is the JPMC acquisition of Frank and Frank's CEO Charlie Javice.
Turns out all of the user numbers were made up. A technical DD would have easily surfaced this even though the user numbers and volume is business related.
For the technical aspects, our vcs didn't / don't care. That's our job to figure out, and if we don't, they fire founders.
I'm honestly not sure how you would seriously audit chat app numbers, and I suspect and hope Abraham Shafi is going to prison. For most businesses, if you have to seriously audit things like that, you probably shouldn't be investing. A company inflating their numbers by 20x will be pretty hard to detect, and our safeguard as an industry is that's fraud, and people go to prison for committing fraud.
- Look at the application logs
- Look at the emails and reach out to a sub-sample of them to determine if they are real users
- Look at the network traffic/volume numbers
- Look at the architecture to see if it could actually support that volume
- Look at the pattern of content in a random sampling to see if it's just "Lorem Ipsum" or actual, real content
The consequence of not doing even basic DD are outcomes like the $174m fraud that JPMC eventually discovered: https://www.theverge.com/2023/4/5/23671000/jpmorgan-frank-fr...
Now, how to make a business out of that?
And you can't use many from those services to actually register an account for a meaningful service. E.g. have you created Instagram account with them?
Seems like there is a determined will to blacklist as many as possible.
The GP is talking more about phone numbers from purpose-built (usually Russian) "secondary market for other people's credentials" marketplaces, where people sell the use of their own personal phone numbers (usually through cloud remote-control software they run on an old Android device with the SIM in it.)
5sim.net, sms-activate.org, smspva.com, I'm talking about these, they're specifically made for that purpose, you can pick a country and a service