Retirement thoughts Past Present Future

[Gale Hawkins]

I've been in Silicon valley startups for the last 25 years, often in the kind of position where I am dealing with the investors. The more time I spend around VCs the more I realize that they're not smarter than the rest of us, and that those levels of wealth and power usually turn people into spoiled jerks. Their views reflect a very narrow part of society.

Yes making payroll and paying the rent for years maybe where they shine.the most.

Their abilities to find the Elon Musk types year after year boggles my mind.

 

[ponytug]

I've been in Silicon valley startups for the last 25 years, often in the kind of position where I am dealing with the investors. The more time I spend around VCs the more I realize that they're not smarter than the rest of us, and that those levels of wealth and power usually turn people into spoiled jerks. Their views reflect a very narrow part of society.

X2
I started working with VCs when there a still a few that had actually been through the startup process successfully and knew one end of a pencil from the other. A bunch of MBA types moved in and believed themselves entitled, and more knowledgeable, and Lo and behold, their success rate plummeted, and the returns to their investors are generally worse than the stock market. If you are interested, here is the report;

We Have Met the Enemy And He is Us: Lessons from Twenty Years of the Kauffman Foundation’s Investments in Venture Capital Funds and the Triumph of Hope Over Experience

A compelling report out from the Ewing Marion Kauffman Foundation describes how most institutional investors, including larger state pension funds, endowments and foundations, may be shortchanged by their investments in venture capital funds.

www.kauffman.org

The report is from 2012, but nothing in my experience in the decade since suggests that the venture capital investing patterns, or success rates, are significantly different. Mind you, their strategy is to have most investments fail, and have one in ten or so hit it big to pay for enough to generate better than 10% returns across all of the investments, over the ten year run of the fund. (That is returning more than (1+2.6)=3.6X to their investors. {1=the original investment, 2.6 is 10%/yr for a decade} Very few venture funds manage to beat the market.)

I would point to Theranos, WeWork, as examples of large VC investments that went bad in a big way.

https://www.cnn.com/2022/07/07/tech/theranos-rise-and-fall/index.html

WeWork has frittered away $46.7 billion in value as the stock sinks below 50 cents, one of the biggest startup failures of all time, and venture capitalists haven't learned a thing

Beyond Softbank, VCs such as Benchmark and Insight Partners still hold significant stakes in WeWork, as does the company's founder, Adam Neumann.

www.businessinsider.com

I would also point to Elizabeth Holmes as exhibit A for someone who thought (thinks?) that the rules don't apply to her.

Warren Buffet once said that "you can never do a good deal with a bad person." I couldn't say it any better.

All the best,

Peter

 

[California]

I've been in Silicon valley startups for the last 25 years ... more time I spend around VCs the more I realize that they're not smarter than the rest of us ...

I started working with VCs when there a still a few that had actually been through the startup process successfully ... MBA types moved in ... and the returns to their investors are generally worse than the stock market.

I would also point to Elizabeth Holmes as exhibit A for someone who thought (thinks?) that the rules don't apply to her.

Warren Buffet once said that "you can never do a good deal with a bad person." I couldn't say it any better.

MBA here, I couldn't agree more! This isn't where the imaginative people like Musk come from. At best you learn a set of skills that can make a business run smoothly and hopefully grow at a predictable rate, better than the blundering around you see when everybody onsite is a visionary. Startups need this business-management component but it isn't where the inspiration comes from.

And you could learn predatory takeovers etc, or the tricks that Elizabeth Holmes personifies - a glossy presentation concealing a scam, the Enron model of business management.


I don't think there is any better advice for the long term armchair investor than what Warren Buffet said long ago, just invest in the S&P 500 and ignore the market gyrations. This strategy will give a better return over time than what 85% of individual investors accomplish.

Active involvement with a business can have much better returns. Or active research digging down to the level that the public can't see, the Peter Lynch/Fidelity Magellan model. Buffet was speaking to the person who doesn't have an insider's view.

 

[Gale Hawkins]

The first segment of this deals more with how the entitlements for the seniors are sucking out the possibilities of the young generation being able to see things like we saw financially successful wise.

 

[California]

The first segment of this deals more with how the entitlements for the seniors are sucking out the possibilities of the young generation being able to see things like we saw financially successful wise.

It's not the entitlements for seniors that is making life difficult for the coming generations. All the money in the economy is being sucked upwards to the already wealthy.

 

[Gale Hawkins]

It's not the entitlements for seniors that is making life difficult for the coming generations. All the money in the economy is being sucked upwards to the already wealthy.

I have heard that mention but never understood it. Could you and large on it a bit?

 

[California]

I have heard that mention but never understood it. Could you and large on it a bit?

It's been a week or so since I saw a chart that illustrates this, so I couldn't find it for you quickly, but it was a perfect illustration of this. It showed the increase in income for people at various income levels. To oversimplify the bottom fifth saw their income increase by a small percentage while as you moved up the chart to higher income levels, the percentage increase in income year to year, grew substantially.

One example would be the ratio of CEO pay to shop labor pay, it has gone up from something like (example, I don't have the numbers in front of me) 100:1 to 1,000:1, over 30 years. Another example is that minimum wage would be over $25 if it kept up with the inflation in prices needed to live a minimal life - rent, car payments, food.

A couple minutes search ('increase in annual income per income bracket') found the following, illustrating the point:

1. Trends in income and wealth inequality
The growth in income in recent decades has tilted to upper-income households. At the same time, the U.S. middle class, which once comprised the clear majority of Americans, is shrinking. Thus, a greater share of the nation’s aggregate income is now going to upper-income households and the share going to middle- and lower-income households is falling.9

The share of American adults who live in middle-income households has decreased from 61% in 1971 to 51% in 2019. This downsizing has proceeded slowly but surely since 1971, with each decade thereafter typically ending with a smaller share of adults living in middle-income households than at the beginning of the decade.

 

[California]

Some more searching. The chart I saw was about the same as the one on page 7 of this:

(US Congress Research Office)

https://sgp.fas.org/crs/misc/R44705.pdf

------ quote, from the introduction ----

Summary
Income inequality—that is, the extent to which individuals’ or households’ incomes differ—has
increased in the United States since the 1970s. Rising income inequality over this time period is
driven largely by relatively rapid income growth at the top of the income distribution. For
example, in 1975, the average income of households in the top fifth of income distribution was
10.3 times as large as average household income in the bottom fifth of the distribution; in 2019,
average top incomes were 16.6 times as large as those at the bottom.
----- end quote ----

Added:
Down the rabbithole! Here's a source quoted in the above pdf.
More than you ever wanted to know on the subject.

Home - WID - World Inequality Database

Home The source for global inequality data. Open access, high quality wealth and income inequality data developed by an international academic consortium.

wid.world

 

[Larry Caldwell]

That's very interesting. Big spread in the 62-64 age, I wonder if that has anything to do with waiting for Medicare? Am I reading this right that 29% of 70+ yr olds wait that long to retire? And would the large spread be skewed because of premature death?

If you look at the 62-69 group as a whole, you see the results of people taking early retirement because they were frozen out of the job market as they aged. It can be poor health, age discrimination, or other factors, but I have known a lot of people who have just said, "Screw it, I quit!" Medical insurance is certainly the big one. I just had a heart valve replacement. Insurance picked up $140,000, patient responsibility $0.00.

 

[Larry Caldwell]

I've worked this long to get here, why continue to work now?

Retirement does not mean you quit working, it means you quit working for someone else. The only reason to sit around is so they can measure you for a coffin.