Chamath Palihapitiya – founder and CEO of a VC firm called Social Capital – recently penned an op-ed in The Information called: “The Sunk Cost Fallacy and the Future of Silicon Valley.”

Chamath is one of the most outspoken voices in Silicon Valley and is openly critical about the way the industry generally functions today. Here are two excerpts from his op-ed piece:

“Chronic diseases like obesity, diabetes and heart disease are ravaging much of the U.S. and the world. Automation is eliminating the jobs of millions of well-meaning, law-abiding men and women. Weather patterns are increasingly unpredictable, disrupting water and food supplies and displacing millions of people. But despite this trail of breadcrumbs of big problems and big markets, we still find it difficult to fund potentially big solutions. Instead, we keep doubling down on the easy things.”  

“Easy short-term growth is now so highly valued in Silicon Valley that we often overlook technical innovation, sustainable long-term growth and meaningful progress in markets that matter. Every week adds to the corpus of press releases from companies with quick, fleeting growth overcapitalized beyond rationalization. And after too many years of this, Silicon Valley is now typecast as a monoculture of coastal dilettantes who float from one meaningless endeavor to another, tone deaf to real problems.”

Social Capital was founded in response to these criticisms. Their mission is to improve society by using technology to solve big problems – problems like the ones mentioned above.

Another firm with a similar mission is Obvious Ventures. They call what they do #worldpositive investing. Their goal is to only fund companies that deliver social and environmental benefits along with every dollar earned.

It’s interesting to think about how capital gets allocated and whether or not it will result in meaningful benefits to the world. Because this is not just about venture capital. You could substitute venture capital for many other asset classes and ask similar questions.

https://500px.com/embed.js

Chamath Palihapitiya is a Sri Lanka born, Canada educated, venture capitalist in Silicon Valley, who made a boatload of money as one of the early employees of Facebook. He now runs a VC firm called Social + Capital and owns part of the Golden State Warriors.

The other night he was interviewed at a StrictlyVC event in San Francisco and I think that many of his comments would also be of real interest to the Architect This City community. He’s super passionate in interviews and always fun to listen to.

Below is what he had to say about the San Francisco startup scene. It really speaks volumes about what people will put up with in order to live in an awesome place/city that they love. All of his responses below are from this TechCrunch article.

“The city has to be doing more, around transportation, around housing… You have to get rid of the nimbyism and you need to quadruple, if not quintuple, the amount of housing. You need to tell that engineer from the University of Michigan that he can live here on a salary of $80,000.

[In the meantime], we look at our startups, and the minute that they start to spend more than 15 percent of their burn – good money that we give them – on rent, a huge red flag goes up. When they, on a per-head-count basis, are spending so much, we start looking at the productivity of the technical team. And if it’s good but not great and they’re spending this insane amount of money [versus] a different team in Redwood City, we start to ask ourselves: “Are you so convinced that success is going to happen in this city at 1.5x the cost?”

Because for every dollar that someone in Mountain View or Redwood City is raising, you [in San Francisco] have to raise one-and-a-half to two times that just to get to the same point. So you’re cutting your half life in half. To prove that you can take an Uber from some fuckin’ shitty bar to another shitty bar? Like, I don’t understand.”

And here he talks about the possibility of his venture firm also getting into the real estate development business. I couldn’t resist blogging about this.

“We made a big decision with our last fund to build an organization that looks really different than a venture firm, and that organization is going to be this hybrid, bastard stepchild of Berkshire Hathaway and Blackstone and BlackRock.

What I mean by this is that we want to have a large permanent capital base and we want to make really long, discontinuous bets on companies and sectors and trends.

And one of the things we talked about was having a real estate fund …[because] we owe it to our companies to alleviate some of these problems when no one else is going to. If we went and built one million square feet somewhere of mixed use, where you work and live, and we rethink what it means to have a modular living environment for a millennial cohort that wants to work at companies and doesn’t necessarily have kids, we can do that in a way and give that back to our CEOs as a benefit of working with us.

And you can probably make the economics work. Because we only really care about the equity of the company anyways. And the equity in the real estate will take care of itself if you take the 30-year view. So we’re at the point now where we’re like, wow, we should raise a few billion dollars and get into the real estate business and solve this problem systematically for our companies. And maybe in that, it becomes a blueprint for how others should do it. We’re just basically going to act as our own city-state and decide how to do it ourselves.”

It’s interesting to think about what the economics might look like if your primary goal is simply to provide space to your portfolio companies (entrepreneurs) so that they get more (financial) runway and, therefore, have a greater chance of success. I’d love to see that pro forma.

Chamath Palihapitiya – founder and CEO of a VC firm called Social Capital – recently penned an op-ed in The Information called: “The Sunk Cost Fallacy and the Future of Silicon Valley.”

Chamath is one of the most outspoken voices in Silicon Valley and is openly critical about the way the industry generally functions today. Here are two excerpts from his op-ed piece:

“Chronic diseases like obesity, diabetes and heart disease are ravaging much of the U.S. and the world. Automation is eliminating the jobs of millions of well-meaning, law-abiding men and women. Weather patterns are increasingly unpredictable, disrupting water and food supplies and displacing millions of people. But despite this trail of breadcrumbs of big problems and big markets, we still find it difficult to fund potentially big solutions. Instead, we keep doubling down on the easy things.”  

“Easy short-term growth is now so highly valued in Silicon Valley that we often overlook technical innovation, sustainable long-term growth and meaningful progress in markets that matter. Every week adds to the corpus of press releases from companies with quick, fleeting growth overcapitalized beyond rationalization. And after too many years of this, Silicon Valley is now typecast as a monoculture of coastal dilettantes who float from one meaningless endeavor to another, tone deaf to real problems.”

Social Capital was founded in response to these criticisms. Their mission is to improve society by using technology to solve big problems – problems like the ones mentioned above.

Another firm with a similar mission is Obvious Ventures. They call what they do #worldpositive investing. Their goal is to only fund companies that deliver social and environmental benefits along with every dollar earned.

It’s interesting to think about how capital gets allocated and whether or not it will result in meaningful benefits to the world. Because this is not just about venture capital. You could substitute venture capital for many other asset classes and ask similar questions.

https://500px.com/embed.js

Chamath Palihapitiya is a Sri Lanka born, Canada educated, venture capitalist in Silicon Valley, who made a boatload of money as one of the early employees of Facebook. He now runs a VC firm called Social + Capital and owns part of the Golden State Warriors.

The other night he was interviewed at a StrictlyVC event in San Francisco and I think that many of his comments would also be of real interest to the Architect This City community. He’s super passionate in interviews and always fun to listen to.

Below is what he had to say about the San Francisco startup scene. It really speaks volumes about what people will put up with in order to live in an awesome place/city that they love. All of his responses below are from this TechCrunch article.

“The city has to be doing more, around transportation, around housing… You have to get rid of the nimbyism and you need to quadruple, if not quintuple, the amount of housing. You need to tell that engineer from the University of Michigan that he can live here on a salary of $80,000.

[In the meantime], we look at our startups, and the minute that they start to spend more than 15 percent of their burn – good money that we give them – on rent, a huge red flag goes up. When they, on a per-head-count basis, are spending so much, we start looking at the productivity of the technical team. And if it’s good but not great and they’re spending this insane amount of money [versus] a different team in Redwood City, we start to ask ourselves: “Are you so convinced that success is going to happen in this city at 1.5x the cost?”

Because for every dollar that someone in Mountain View or Redwood City is raising, you [in San Francisco] have to raise one-and-a-half to two times that just to get to the same point. So you’re cutting your half life in half. To prove that you can take an Uber from some fuckin’ shitty bar to another shitty bar? Like, I don’t understand.”

And here he talks about the possibility of his venture firm also getting into the real estate development business. I couldn’t resist blogging about this.

“We made a big decision with our last fund to build an organization that looks really different than a venture firm, and that organization is going to be this hybrid, bastard stepchild of Berkshire Hathaway and Blackstone and BlackRock.

What I mean by this is that we want to have a large permanent capital base and we want to make really long, discontinuous bets on companies and sectors and trends.

And one of the things we talked about was having a real estate fund …[because] we owe it to our companies to alleviate some of these problems when no one else is going to. If we went and built one million square feet somewhere of mixed use, where you work and live, and we rethink what it means to have a modular living environment for a millennial cohort that wants to work at companies and doesn’t necessarily have kids, we can do that in a way and give that back to our CEOs as a benefit of working with us.

And you can probably make the economics work. Because we only really care about the equity of the company anyways. And the equity in the real estate will take care of itself if you take the 30-year view. So we’re at the point now where we’re like, wow, we should raise a few billion dollars and get into the real estate business and solve this problem systematically for our companies. And maybe in that, it becomes a blueprint for how others should do it. We’re just basically going to act as our own city-state and decide how to do it ourselves.”

It’s interesting to think about what the economics might look like if your primary goal is simply to provide space to your portfolio companies (entrepreneurs) so that they get more (financial) runway and, therefore, have a greater chance of success. I’d love to see that pro forma.