I think it takes a lot of temerity and hubris to look at a 2B raise and assume it's all hype. A16Z has certainly had some misses, but one assumes there actually is some product they're showing behind closed doors that makes this round much more reasonable than it appears from the outside.
If something makes no sense, seems totally crazy, and is being done by a crowd of extremely smart people, you can only assume one of two things: they are actually crazy and frittering away 2B on hype or, just maybe, there's something we're not aware of. If there are only two camps: optimistic and naive or pessimistic and dismissive, I'll choose naive every day of the week.
Anyways, congrats to Thinking Machines and here's hoping they do have something awesome up their sleeve!
Theranos was worth $9B in 2013 money, and it latet turned out that they had literally nothing but hype. Enron was posting $100B revenue the year before it went bankrupt. Bernie Madoff's fund had huge banks as institutional investors. Magic Leap was valued at $4.6B and had some purportedly amazing demos behind closed doors that anyone who witnessed them thought would revolutionize entertainment.
While these are not necessarily typical cases, they show that it's absolutely possible to have gigantic valuations raised from industry experts with nothing to show for it, if you're good enough at lying.
The weird thing about Theranos is that every single expert who knew about the technical details of blood testing basically called out the BS from the get go.
Blood testing for a single condition can involve blood separation via centrifuges, application of various chemical solutions, a multi-step process using varios test strips (each with different specificities/sensitivities). Not to mention some of the offending markers might be so rare in blood that you'd have to draw multiple vials just to get a statistically significant amount of markers.
Reducing just a single one of these tests to an instant test that works with a drop of blood would be a major breakthrough, subject to various medical awards (and lengthy medical trials).
Theranos famously didn't manage to raise VC money, the funding all came from people like Rupert Murdoch and the Walton family.
> a crowd of extremely smart people
I don't disagree with your broader point, but have spent enough time with enough a16z partners to say they're just people. Not outright stupid, but not extremely smart, either. And their error rate is pretty high.
Which...to some extent is by design. It's part of a VC's job to make bad bets. Sometimes the price of getting into a deal at all is getting in on insane terms, but you still do it because that one investment could return the entire fund. Maybe Thinking Machines is a winner, maybe it's another Clubhouse. We'll see.
I do agree for $2bn, but it’s also well known that US and in particular SV VCs will fund ideas and people, I.e. potential, whereas everywhere else funds results.
It’s that culture that creates some spectacular hits, and a vast number of misses. Not necessarily a bad thing, but it’s a different approach and means that the funding doesn’t necessarily suggest the results one might expect.
> they are actually crazy and frittering away 2B on hype
This assumes that being careless with billions can only ever be crazy.
If you're already set for life, why not gamble (including at completely irrational levels) for even more insane amounts of money when the whole thing is just a crazy house of mirrors. Yes, there's value at the heart, but there's also crazy amounts of money being funneled in, lots of opportunity for chaos, lots of chances for legal rug pulls. All of it inflated even further by a fervor of carelessness for any kind of consequences - things like the stock market are completely removed from any kind of fundamentals.
In a fun house of mirrors, that 2 billion could be 2 cents, or it could be 2 trillion. Buy the ticket and have fun!
> A16Z has certainly had some misses, but one assumes there actually is some product
They don’t need to show a product. It’s been demonstrated that with capital and some skill you can train a foundation model. A16Z has the former. Murati has the latter.
Isn’t this the perspective that leads to all bubbles?
What kind of temerity and hubris would it take to believe that the ratings agencies were colluding with the banks to give AAA to Mortgage Backer Securities?
> one assumes there actually is some product they're showing
Can it simply be that anyone who wants to create new competitive models at this point needs billions for training? This isn't a saas where you can whip up a prototype in a month. Rather than having a product to show, I'd guess it's more about an experienced team and some plausible-sounding research ideas.
> A16Z has certainly had some misses,..
Yeah, similar to Trump administration may have had some misses but extremely smart people are doing great things.
Oh it’s going to get exciting indeed!
Could be, or it could be a simple flawed net present value calculation, similar to Effective Altruism.
SBF said if he had a die and it had a 99% chance of killing everyone and a 1% chance of making the world 1 million times happier he would roll the die. Repeatedly. And Silicon Valley loved him.
I think AI is a similar calculation. Humans are tearing themselves apart and the only thing worth betting on is AI that can improve itself, self replicate and end scarcity. I believe that these VCs believe that AI is the only chance to save humanity.
And if you believe that, the net present value of AGI is basically infinite.
> Humans are tearing themselves apart and the only thing worth betting on is AI that can [...] end scarcity
Scarcity, wow...
- There is no scarcity in the rich world by historical standards.
- There is extreme poverty in large parts of the world, no amount of human intelligence has fixed this and therefore no amount of AI will. It is primarily not a question of intelligence.
- On top of that "ending scarcity" is impossible due to the hedonistic treadmill and the way the human mind works as well as the fact that with or without AI there will still be disease, aging and death.
I think they act as if making these bets is the only way to save themselves. None of them care about humanity obviously.
I think they care about the nebulous concept “humanity” as represented by themselves “the light of consciousness”. Humans? Not so much.
Well in that end game of a post scarcity is there a need for humans?
If you were in the top 1% and you don’t need labor anymore because it can be automated.
Even in post scarcity some people will want as much as possible for themselves, if history is any baseline.