How do you motivate people? What is the best way to discover new technologies or rather: how do you find the founders of tomorrows companies? This booHow do you motivate people? What is the best way to discover new technologies or rather: how do you find the founders of tomorrows companies? This book is about culture and how a culture of intrepid entrepeneurship was created. There are many lessons to be learned in this book as it provides a history of venture capital which is in essence the history of sillicon valley. Why the Valley? What made that part of the US unique? Was it the hippie culture as is so often purported? Not really according to Mallaby. Venture capital exists somewhere between a company and an entrepreneur; it has the advantages of both but is more flexible and works much more like a network which provides can provide stability to unexperienced founders. This is the real reason why Sillicon valley has succeeded in producing the biggest tech companies in the world.
"The special virtue of the valle's small companies, Saxanian argues, was that boundaries between them were porous, The founder of a disk-drive company would be talking to PC makers, looking for ways to slot his device into their production chains: information on technical standards and design was constantly traded." I kept thinking of Ancient Greece when reading about how this tech cluster worked as Ancient Greece too was a giant cluster of small city-states (roughly 1100) who alternated between competition and cooperation (or to use the language of today: coopetition) In the tech cluster VCs would provice advice and guide the founders into a more stable and profitable business. A VC would have maybe 10 companies in their portfolio but only expect 1 or 2 to be profitable, but those companies would be EXTREMELY profitable. As the years evolved the business also changed and different schools were established. There were planners and improvisers; the results would dictate whose model would be most successful.
Peter Thiel (et al) focused on providing founders with as much freedom as possible. If a technology was truly revolutionary, then how could leaders of today understand it? A founder would need to be a true visionary, capable of going against all norms to create the world tomorrow. This model was built on radical decentralization where the founder is given as much incentive as possible. On the opposite side were companies like Sequoia sought to provide more hands on guidance. I found it very enjoyable to read about the nitty-gritty of business deals and how much creativity is really involved.
Only downside to this book was its length. Mallaby could've cut it down a bit as the biography of every VC just wasn't as interesting as how VC works in practice....more
As an economic student enrolled at university I often found that the theories of economics seldom managed to predict anything (with the exception of aAs an economic student enrolled at university I often found that the theories of economics seldom managed to predict anything (with the exception of austrian economics (which wasnt taught at university)). By writing the history of hedge funds its author thereby shows the flaws of traditional finance which hedge fund managed to make their money. Sebastian mallaby manages to make an aspect history of finance interesting by focusing on the individual hedge fund managers. It gives the reader a deeper understanding of what hedge fonds do (although not all of them actually hedge risk as it turns out).
According to traditional financial theory, the stock market prices evolve according to a random walk (so price changes are random) and thus cannot be predicted. Hedge fund managers however make their living doing just that and after the crash of 1987 the traditional view was finally falisified (which left me wondering why I studied these quaint theories at all). What drew me to this book was the contrarian nature of many managers and the huge risks involved. The success story is often centered around managers who take huge bets (albeit calculated ones) against the market and end up making 'the killing of a lifetime' (to quote Soros).
Mallaby does not romanticize the role of the hedge funds and discusses both the pros and cons of their existence. I would recommend this book to anyone with an interest in financial history and the actual mechanics of how fonds manage to beat markets....more
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