Kills Zones And Venture Funding

There is a debate going on about the impact of Facebook, Google, and Amazon’s growing dominance on the consumer internet on the supply of venture capital to entrepreneurs.

Facebook funded this report that was published back in July and concluded that “big tech” was not impacting the supply of venture capital to entrepreneurs.

Ian Hathaway, a researcher who studies venture capital formation, recently published this blog post that challenges that assertion with some data obtained from PitchBook.

I have skimmed the Facebook funded report and read the Hathaway blog post and come away believing, as Hathaway himself does, that we don’t really know because the analyses done to date are not conclusive.

But as a market participant, I can certainly say that we shy away from funding startups that are going up directly against the large tech incumbents.

But we also are attracted to startups that are competing against the big incumbents with a fundamentally different model, like DuckDuckGo in search, or ShopShops in commerce.

So, anecdotally, based on our activity and other venture capital activity that I have observed, I would say that the big tech incumbents have most definitely shaped where venture capital is going and where it is not going. 

That does not mean it has decreased the overall supply of venture capital. It most certainly has not. 

And, I would venture, that big tech is increasingly vulnerable to a number of attack vectors, many of them self-induced, which should be attracting entrepreneurs to more directly go after the core franchises of big tech.

Whether those courageous entrepreneurs will attract the capital they need to launch those attacks is an open question. But I have a fundamental belief in capital markets to do the right thing over the long term and I also have a fundamental belief that entrepreneurs, software engineers, and new innovations will undo these increasingly dominant franchises in ways that regulators will never be able to.

#VC & Technology

Comments (Archived):

  1. Valérie Bolduc

    And what are those attack vectors you mentioned? Keen to know.

    1. jason wright

      government regulators (e.g. the EU Commission) – abuse of power, tax evasion, et.c.traditional media players (the content producer debate – i.e. what now is Facebook?)cyberattacks/ hackers (freelance and state actors due to data concentration)crypto

  2. Mac

    Sounds like you’re fundamentally attracted to entrepreneurs who are not just interested in exploiting the weaknesses, of the elephant in the room, but expanding the size of the room itself. I like it.

  3. William Mougayar

    “we shy away from funding startups that are going up directly against the large tech incumbents.”Today, many such startups are resorting to ICO-based funding that fly below VC scrutiny. Not sure what we will learn there yet, because the movie is still being written, but the failure rates will be high.In general, as a startup or not, it’s not easy to go head-on against an established leader. You must go around them, under them, over them, to their sides, and flank them by landing in uncontested areas, where they are not. Then grow that beachhead into something bigger, gradually. That’s classical marketing warfare applied to business, and it stands the test of times.

    1. Amanda

      The large company usually already identified every possible move someone can make around them, and already chose the most viable path in the entering the market. Especially the ones that still have their founding CEOs (Amazon, Facebook, etc). So I would not consider that strategy warfare or even competition. Can you find niche uncontested areas, that their company ignored because they were lower value or would’ve prevented the company from taking advantage of their larger goals? Certainly, but you definitely won’t be flanking someone with that strategy.

      1. William Mougayar

        I disagree with that premise. History is full of flanking attacks by smaller/newer companies that successfully secure a niche and go from there. There is no way that large companies identify every possible move of the competition. To the contrary, they often ignore smaller companies because they are small to start with, and don’t appear to hurt them so much initially, until they creep up on them.

        1. Amanda

          If you were thinking of a large company from the perspective of one with a professional management team at the reigns, then yes (Walmart or Sears for example). In that case those large companies are already dead anyway. But Fred specifically referenced Facebook, then Duck Duck Go (who’s “competitor” is Google). These companies still have their Founding CEOs involved, so they are innovative monopolies, not just large companies. You’re not getting around them, doesn’t matter what strategy you’re using. Duck duck go for example, would never be able to flank Google. It can only exist as an uncontested niche. Exactly as I said. These companies don’t become vulnerable until 1) the Founder completely disassociates (because this means the vision is finished) and 2) enough time/development has passed in the market. When they are eventually disrupted: they usually aren’t disrupted by competitors, they slowly become irrelevant because something completely new enters the market post-vision completion. That’s not really competition either because it’s not even remotely the same company, much less a niche of that company. That’s also why they need alot of time to become irrelevant post-vision completion, because if you just launched/funded innovative monopoly after monopoly…consumers would never be able to keep up with change.If you could flank them that directly/easily, they wouldn’t be the market leaders to begin with.

          1. JLM

            .Brilliant comment about the continuing involvement of the founders.Revolutions never start on full stomachs, so your comment is tempered by the reality that buying a 747, an island, and acquiring an arm candy show girl mate can eat into one’s creative juices.Still, the founder angle is a smart comment.Well played.JLMwww.themusingsofthebigredca…

        2. Ronnie Rendel

          Flanking attacks are not even needed. YouTube is taking its user base for granted and maximizing ads and profits over user retention – something they will regret soon enough as they kill off their brand.And please somebody liberate us from Android OS captivity – time to rethink mobile OS and open source options are just not good enough (and I don’t think Sirin Labs will give us our next new mobileOS but who knows)

          1. Adam Sher

            In the mobile OS duopoly, Android is the go to for more open-source. Android is in a tough position because I am drawn to the idea that developers can create their own SDK’s based on Android but shudder at the Android OS fragmentation that phones utilizing Android OS incur. There isn’t a true fork from pure Android so every time Google releases a new OS, the developers drop support from their legacy SDKs.There’s a new phone called Light Phone (2) with its own software. I use their first phone as a supplement and bought their second with the idea that I could use that as a solo phone. The comparison is more like Tangerines to Oranges because Light Phone’s feature set is limited compared to Apple or Android OS.The last phone I saw that tried to create its own software was Turing Robotic Industries, which I think is defunct. I just checked, it looked like a derivative of Android with hardware security.

          2. JLM

            .One of the things one has to remember when dealing with shops like YouTube is they have an enormous embedded base of knowledge that may never expire.Other day, I needed instructions on how to disassemble/re-assemble a WWII era weapon. YouTubed it — ten choices of great videos.That embedded base thing is huge.JLMwww.themusingsofthebigredca…

        3. JLM

          .I want to agree with you, and, emotionally, I do, but the problem is that these guys are different. They can play catch up because they have enormous resources and can afford to lose money for a long time.They also control gobs of data that informs them what is working.They can afford to compete on the income statement because they have lots of capital and can bleed the competition to death.JLMwww.themusingsofthebigredca…

          1. LE

            This is exactly true. That is why it’s laughable when people talk (as they did somewhere yesterday) about how Sears could have been Amazon. As if Amazon’s strategy didn’t somehow involve loosing gobs of money over time until they became profitable. Small detail, eh?I honestly can’t believe that someone can talk about a missed opportunity w/o factoring in the availability of funny money and the ability to have big losses (for so many years) as the most important advantage and reason for success…

          2. JLM

            .Back in the day, Sears was THE deal. They used to ship entire houses. There are two side-by-side Sears homes in Wilmington in their historic district. “The Sisters”I used to get my back to school clothes from Sears catalog. There was no real clothing shopping on Army posts when I was growing up.JLMwww.themusingsofthebigredca…

          3. LE

            What do you think about the idea that the one of the things that killed Sears is China? You know the race to get goods out without respect to quality. Because the public (as a whole but not me, you, or Phil Sugar) is stupid and buys crap? That is almost certainly a large contributing factor. Look at Amazon even. What are they selling? It’s like Walmart online. And where it’s not Walmart online it’s all driven by price and not quality.It is so hard for a company today to compete with ‘cheap’ unless they are a niche and a luxury product.

          4. JLM

            .I think Sears caught the Montgomery Wards disease – trying to locate where they wanted without regard to traffic and cross shopping. A product mix which tried to be all things.Sears Craftsman tool line was top notch. Still is.I think they were caught in the bricks & sticks, catalog atrophy before the Internet and just couldn’t adapt.I worked for Mobil when they bought Montgomery Ward and the real estate they acquired – zero book value on the MW books – was worth the entire deal.Somebody will figure out what to do with all that Sears stand alone real estate.You know who has really played the game well — Restoration Hardware. They figured out the huge box retail, the catalog, the Internet matrix, but did it in the reverse direction. They are doing great.http://themusingsofthebigre…JLMwww.themusingsofthebigredca…

          5. sigmaalgebra

            Sears could not be Amazon. Neither could Wal-Mart. And IBM couldn’t be any of Intel, Microsoft, Apple, Netscape, or Western Digital.Why? Because the CEOs just (A) looked at the quarterly numbers and (B) had zip, zilch, zero understanding of or faith in the new stuff, e.g., the Internet, Web browsers, JPG and MPEG files, and a big server farm, all very well done.E.g., at one time IBM had essentially everything in computing. They had OS/2 as a follow-on to PC/DOS. At the time OS/2 was technically nicely ahead of Windows. Then, as Windows raced ahead of OS/2 in essentially every sense, IBM CEO Gerstner stated: “I’m not going to drop $1 billion into another desktop operating system for Intel processors.” or some such. If he had, and for only $1 billion, IBM could have today everything of Microsoft, Apple, Western Digital, Cisco, Oracle, etc.It’s just an old story: CEOs of big companies manage the bird in the hand, even if it is aging and dying, and ignore the rapidly growing little birds in the bush.

      2. JLM

        .I once sat in a room in the Pentagon and reviewed the plans to attack and defend against Mexico and Canada – individually and together. These plans got updated every two years.So, yeah, these companies spend some time considering their vulnerabilities and developing contingency plans.They have an avenue of defense not available to a lot of others, they can just buy their competitors and either grow them or put them down.Even when there is a flanking movement which seems promising, these companies are not going to sit idle. They are going to throw some engineers and money at it and meet the challenge.They are also going to look at other promising core technology and services and knock them off at scale. If it happens to be yours, you may be in deep trouble.JLMwww.themusingsofthebigredca…

      3. sigmaalgebra

        > The large company usually already identified every possible move someone can make around them,You assume way, Way too much. They aren’t nearly that smart.

        1. Amanda

          And yet, there they are. I’ll be waiting here for you to flank Facebook or Google with that competition strategy then. Don’t keep me waiting too long now.

          1. sigmaalgebra

            I was talking in generalities. Your response was aimed at me personally but facetiously.If you have long been reading my posts at AVC, then you might know, and otherwise might not, but here it is: IMHO there’s a LOT of content on the Internet but Google, Bing, etc. are good, there often quite good, for only about 1/3rd of the content, searches people want to do, and results they want to find and are at best poor for the other 2/3rds.The 1/3rd is roughly where a user has keywords/phrases that accurately characterize the content they want. E.g., for the famous key phrase:”we ain’t got no badges”Google givesAbout 26,500 results (0.40 seconds)with a link to…which has a video clip with the famous phrase from the movie Treasure of the Sierra Madre.Likely can also get a link to a full script of the movie.So, if want the famous phrase, a video clip, or the whole movie script, then that key phrase fairly accurately characterizes the desired content.Alas, if don’t want the movie, then what about the other 26,000 results? Hmm ….If are interested in home decorating blogs and use those three keywords, then getAbout 85,000,000 results (0.40 seconds) Now what? That is, what to do with 85,000,000 results?Google, Bing started out and largely remain a fairly obvious computer based version of an old library card catalog subject index.However, the field of information retrieval realized long ago that keywords/phrases could be successful for only a small fraction of information retrieval. Seeing such results, the 26,000 and the 85,000,000, I looked for some new techniques that would do better.I focused on a necessarily central issue, the meaning of the content. Right, doing anything with meaning has long been a Holy Grail problem in computer science. Well, I made some significant progress on the problem.So, … building on some advanced pure math, I did some original applied math derivations for a very different search engine that stands to be by far the best in the 2/3rds. I converted the applied math to efficient running software. Then I designed and programmed a Web server to present users with a simple but quite novel user interface (UI).The total code is 100,000 lines of typing. All the code appears to run quite efficiently and as intended with no bugs. The code looks ready for production to a company with revenue ballpark $12 million a year.Sure, the 2/3rds is of high importance to nearly everyone in the world on the Internet. So, sure, first cut, back of the envelope, my work has a shot at being the core of a company worth $1 T.I’m not really going after the 1/3rd. But Google, Bing, etc. are neglecting my 2/3rds.People in Silicon Valley information technology entrepreneurship who can duplicate or equal my crucial core original applied math research can be counted with shoes on and are more rare than hen’s teeth.No one but NO ONE in Silicon Valley would pay even 10 cents for all my math notes and code — they just will not, Not, NOT, NOT believe that anything like what I’m describing could exist, and they fail to believe because they have no experience and much less understanding of any such role for pure/applied math.Silicon Valley wouldn’t have any faith in my work even if I showed them all the details — nearly no one in Silicon Valley has the pure math prerequisites.E.g., Silicon Valley would leap to conclude that my work HAD to be the best of what they respect most of all, artificial intelligence, which I regard as 99 44/100% absurd hype and which has nothing to do with my work.

          2. Amanda

            It is not intended to be personal, it’s just the way I talk. We all know Google’s core competency (search) has technical flaws, just like everything else. But so you’re basically saying the right code (ie improving the product) packaged as a competitior, could create a $1T company. Am I hearing that right? That argument remains oblivious to what creates value in a market in the first place. I’m also not even sure if that philosophy you just countered with is elusive of Silicon Valley because alot of their tech employees I’ve talked to have the same ways of thinking about how companies are built/value is calculated. But on the AI perspective, yes I’d say that is an accurate portrayal of Silicon Valley. It’s the same with crypto where they just kind of flock together instead of actually looking at technology from the top-down from vision. If I’m making sense.

          3. sigmaalgebra

            For yourWe all know Google’s core competency (search) has technical flaws, just like everything else. But so you’re basically saying the right code (ie improving the product) packaged as a competitior, could create a $1T company. Am I hearing that right?No, you are not “getting that right” at all. I’m not seeing or correcting any “technical flaws” at all.Instead, Google has apparently some really good C++ or whatever programmers, and I wouldn’t try to do better than they did what they tried to do.And for “improving the product” — no, not at all. I’m not trying to improve what Google has done.Again, once again, over again, yet again, one more time, Google is terrific in their 1/3rd of Internet search, the 1/3rd of the content on the Internet, searches people want to do, and the results they want to find. Mostly Google is for searches where a user has keywords/phrases that, with Google’s sorting of search results by popularity or date, accurately characterize the desired content.But, as I mentioned, again, once again, …, long ago the field of information retrieval concluded that searching via keywords/phrases is effective for only a small fraction of the problem, what I called the 1/3rd.So, Google, etc. are neglecting the 2/3rds. Calling this a “technical flaw” is like saying that a BMW has a technical flaw because it can’t fly.But maybe I should insert that my work is intended to be fully safe for work, teens, children, etc., squeaky clean — so, right, there are some parts of Internet content where my work is intended not to apply. Uh, my estimate of 2/3rds is after take out the not safe for work fraction of Internet content.To be still more clear, my work is not intended to compete with Google in their 1/3rd.Again, once again, …, my work is the first good tool for the 2/3rds of Internet content, searches people want to do, and results they want to find where Google, BIng, etc. are at best poor.For understanding the 2/3rds, you will have take my word for it, believe what the field of information retrieval concluded long ago, or just use a little insight: The situation is a little like the classic one of why build a bridge across the river at point A; currently there is nearly no traffic across the river at point A. So, have to look a little, not very much, at the range of Internet content (e.g., first cut, the data types HTML text, JPGs, MPEGs, audio recordings, PDF files, etc.) and at what searches people would like to do. Then replace “search” with get the results they want from, call it, discovery, recommendation, curation, notification, subscription. Then combine this with the necessarily crucial role for the “meaning” of the content and the progress I’ve made on computing meaning. Also note that keywords nearly always make just hash out of meaning.My work is very different: E.g., my users never enter any keywords/phrases. So, this difference is major, in particular, 2/3rds instead of 1/3rd, and not a “technical flaw”.I know; I know; from the point of no keywords/phrases, Silicon Valley might conclude that I have people wearing some funny headset where my software does a Star Trek Vulcan “mind meld”. Tell them that, instead, I’m using artificial intelligence (AI); that’s 100% wrong; but it’s something they will accept; they will nod their heads and believe that their beliefs in the potential of AI are confirmed.Again, once again, …, my work is some original applied math I derived starting with some advanced pure math prerequisites. Some of those pure math guys saw some big ideas. If I’ve seen farther than others in Internet search, then it is “because I stood on the shoulders of giants” — extra credit for knowing the source of this remark; since the quote is a key phrase that is so specific it might accurately characterize the content, Google might be able to supply the source.Even to guess even from the 50,000 foot level at the power of what I’ve done, need some background of examples where some original applied math stood on some advanced pure math prerequisites. For that, need to understand the example and some of both the applied math and the pure math, and that leaves out essentially everyone in academic computer science and the Silicon Valley hacker culture. I’ve taught applied math in college and grad school; similarly for computer science; and from that teaching I have a good basis of understanding of what college and grad students can readily understand; for what I’ve done, Silicon Valley, from Sand Hill Road to Google and Facebook, also Bing, etc., won’t get it.If the math sounds like magic, well, it’s not magic but it can look like magic:The first point is the methodology, by far the most powerful in all of civilization — theorems and proofs. Done with good care, when prove a theorem, have something solid, by far the most solid of anything in civilization, e.g., much more solid that theoretical physics, e.g., Newton’s law of gravity which fails significantly in some high gravity situations. Done correctly, the math never fails.The second point is, using the methodology of theorems and proofs, can go way out on a limb, really way out into the ozone and beyond, into places where “no one has gone before” and where intuition fails yet still have solid results, still as solid as 1 + 2 = 3.I need to insert, the precision of math comes at a price; in the usual sense, math doesn’t generate truth; of course, neither does anything else. Instead, if bring some assumptions to the math, then some math might supply some consequences. But need the assumptions.Then for some shockingly powerful work in applied math, the situation can be that some assumptions common and easy enough to accept in practice actually have some math consequences that with only intuitive methods no one would guess or even believe yet are rock solidly true. In a nutshell, that’s what I’ve done: Some assumptions are sitting there, common, obviously true in practice, but some of the consequences from some advanced parts of pure math are essentially impossible to guess based on only intuitive approaches but are overwhelmingly powerful in my 2/3rds of search.And the work is not C++ code hacking or that baby stuff in Pampers called AI.If you want some examples, okay:(1) Look up my comments here at AVC of the last few days on anomaly detection. I’m starting with complicated data, essentially arbitrarily complicated, both multi-dimensional and distribution-free, yet have false alarm rate adjustable and known exactly in advance and have in a powerful sense, for whatever selected false alarm rate, the highest detection rate of anomalies of any means of processing the data.Part of the result is based on Fubini’s theorem; there is an elementary version in college calculus; there is also a much more advanced version from pure math; at first glance, Fubini’s theorem looks simple, maybe obvious and trivial; but some of the consequences are shocking. Somewhat similarly also for the associative law of matrix multiplication.(2) I did some research in stochastic optimal control, best decision making over time under uncertainty. The results can look brilliant, prescient, beyond belief. For the “optimal” part, that boiled down to Fubini’s theorem.(3) While I was working in US national security supporting my wife and myself through our Ph.D. degrees, the US Navy was in a mad rush wanting an evaluation of the survivability of the US SSBN (sub-surface ballistic missile firing) submarines under a special scenario of global nuclear war limited to sea. They wanted their results in two weeks. Well, in nearly all respects, getting an answer in just two weeks is absurd, but there was a technical report OEG-56 from work in ocean search in WWII that with some seemingly not very severe math assumptions enabled some surprising results. If believe OEG-56 and some easy enough assumptions, then some of the math consequences give some astoundingly precise answers to the Navy’s question.(4) Can work up a multiple choice questionnaire with, say, 200 questions and get the result from, say, 10,000 people. Then can process the data to get on each of the 10,000 people about 14 numbers that, in practice, can be used to provide easy to compute, shockingly accurate approximations to the 200 answers. In effect, at least intuitively, humans are about 14 dimensional creatures. Just why 14 is enough is clear enough empirically but not otherwise. Right, roughly the first of the 14 numbers is essentially IQ.(5) A lot of systems are linear or nearly so. Combine that fact with Fourier theory and can get some shockingly good results. A lot of computing can be needed, but there is the fast Fourier transform that makes the computing commonly hundreds of times faster. There are major national security applications in radar and sonar, but some of the consequences are close to magic for oil prospecting.(6) When storing or sending digital data, commonly a few bits can be flipped, that is, we can get some errors. Well, now in practice we see nearly none of those errors. It turns out, as worked out by R. Hamming at Bell Labs, can use some work in finite fields (like the real numbers but only finitely many of them) to add on a small fraction of extra data and then correct nearly all the errors. That work is crucial in CD/DVDs, TCP/IP on the Internet, error correcting coding in main memory, signals to/from satellites, etc. Just how that all works is in a curious but astoundingly advanced field of pure/applied math coding theory.Again, broadly, starting with available assumptions, some of the consequences from math theorems and proofs can be astounding.For the $1 T, take what Google. etc. are worth from their 1/3rd and then estimate what might get for 2/3rds. Simple enough.

  4. Matt Zagaja

    A big challenge in being in the same space as large competitors is they are not afraid to steal your talent by deploying their massive amounts of capital. Thinking a lot lately about how to explain to our management that big money is here and they need to start thinking differently about compensation or else maintaining a team will be untenable. A tough conversation for folks used to things being different.

    1. Adam Sher

      You’re in the public sector, right? I don’t think you’ll ever be able to compete on price. You can compete on freedom!

  5. Pointsandfigures

    If $SNAP had the killer instinct and some humility they could go after Facebook big time right now.

  6. kidmercury

    the kook market is a big attack vector that i’m very bullish on. fb, twitter, youtube, paypal, disqus, amazon are all banning kook publishers and media — all while the kook audience is only growing, to the point where it has now become the dominant voice of the president’s base and much of the GOP. kookcoin is only a matter of time…..

    1. DJL

      Interesting. The President’s base tends to be attracted to things like: Jobs, lower taxes, better trade deals, fewer regulations, religious liberty., historically high employment for blacks and Hispanics. It is quite telling that the Left characterizes traditional American values as “kook” while promoting every type of fringe idea as mainstream.

    2. jason wright

      Alex Jones is no Martin Luther, but we do need a new church.I’m expecting a major black swan event, that will hasten defections from big tech, but there need to be viable alternatives for that to happen on mass.

      1. kidmercury

        i really think someone will come up with some coin that effectively serves as payment processing and ecommerce for publishers that have been banned from amazon, youtube, facebook, twitter, etc. some of these independent publishers have essentially lost their livelihood, and even those still operating live in fear and are engaging in self-censoring as much as their conscience will allow. this is an opportunity that is practically screaming for a blockchain solution.the other big thing is the upcoming mid-term elections. the tech titans have been banning trump supporters aggressively. if the GOP loses, i can see demand for alternative platforms growing considerably (regardless of whether or not censorship by those platforms is the primary reason for the loss). maybe the same holds true, but from the other side, if the US democrats lose.

        1. Adam Sher

          You don’t need a coin. Patreon seems to be pretty effective.

          1. kidmercury

            patreon has already banned lauren southern and robert spencer. i am not commenting on the quality of their messages, only on the fact that patreon has removed non-violent speech.also worth noting is that in the case of robert spencer, patreon was forced to remove him becase they are using mastercard as a payment gateway. this reveals the structural problem in traditional payments, a problem that digital currencies are structurally designed to circumvent.

          2. Adam Sher

            I wasn’t aware. I see some YouTubers turn to Patreon because they were demonetized (I think that’s the term).

        2. JLM

          .The problem with alternative platforms is that the conservatives are not really as zealous – natively zealous – as the liberals.I went to a big secret powwow in Steamboat Springs some years ago as an invite of Karl Rove when the conservatives were going to rule for a thousand years.Nobody ever followed up on it. Conservatives get shit done and go home. The juice is not in the organization; it is in the results.It is really cat people v dog people. Cat people spend all their time taking pics of their cats. Dog people throw sticks in the water, the dog gets the stick, they go home and watch the NCAA tourney.This is one of the reasons why Trump is so confounding – he’s about results and you can reject him individually. I think of him as chemotherapy – killing the bad shit before killing the good stuff.I wrote this two years ago and could have just copied it today.http://themusingsofthebigre…Leslie Stahl had a lot to say about the third of three interviews she had with him – candidate, president-elect, president. She said he’s grown into the job and wears it with authority.Nobody is ready to be President.JLMwww.themusingsofthebigredca…

          1. sigmaalgebra

            Okay, I’ll be frank and politically incorrect:She said he’s grown into the job and wears it with authority.BS. Sewage. Brain-dead nonsense. Zero perception of reality. Just some insulting garbage to pump up her ego. Ditsy, manipulative, fantasy, garbage.Yes, Trump looks different. But he is still the same Trump still doing the same things. What he has done is superficially tweak his, E. Goffman, The Presentation of Self in Everyday Life. It’s all just a reapplication of his usual leadership skills and techniques with some polishing particular to being POTUS. In a word, he’s being a populist, although he is doing much more.No way can expect irrational, irresponsible, manipulative, CBS “Tiffany Network” pretentious, superficial, fantasy driven ditsy bimbo Leslie Stahl to get any such things correct: Uh, Trump is the real deal, e.g., POTUS in one stroke, first effort at politics, beat 16 Republican primary challengers, on 11/8/2016 made 90% of the newsies look like the fools, in The Ship of Fools, that with so much newsie tribal loyalty to being brain-dead they really are. The newsies just wanted to fit in with the Clinton campaign.What the newsies ignored but Trump understood clearly right away, what careful analysis, e.g., of the Electoral College and the voters in the “fly-over states”, would say.Then Trump picked his issues — tax cuts, immigration, regulations, tariffs, coal, the economic growth rate, the unemployment rates, the ObamaCare mandate, interest rates (the Fed must feel like Trump has pulled all their arms out of their sockets), high level foreign policy contacts with progress on North Korea, Iran, Syria, TPP, Paris Accords, and ISIS, etc. where he could get significant results, especially macro economic results, QUICKLY.On that crucial stuff, Trump hit the ground running, i.e., no doubt had all the ideas worked out well before 11/2016, and ditsy bimbo newsies still don’t see it. Would love to have been in on the conversations when Trump spoke to the CEOs of Foxconn, Toyota, BMW, Mercedes, US Steel, Alcoa Aluminum, major coal companies, major iron ore companies, etc. Of course, we can’t expect ditsy bimbo Leslie Stahl to understand any of this. Or, that’s some of why Trump is POTUS and the people close to Leslie are not.

      2. JLM

        .Alex Jones is an Austin, TX boy. He used to be as normal as khakis and a white button down collar shirt. I used to see him and chat with him with a mutual friend who was on the ATX City Council at a coffee shop around the corner from my house.Bought him a few coffees, not lattes.He became something else when he got on the Internet and began to scream his stories. When he screams, the story drifts into the background and his screaming becomes the story.He is a very smart guy. One of the smartest guys I have ever met. Sometimes, he gets on a subject which is just nuts. But, a lot of the time, he is right on the sweet spot of a story. If you can turn off the sound, the facts are better than the NYT – sometimes, not all the time.Haven’t seen him in a few years. I used to ask him, “They let you out of Shoal Creek for the weekend, Alex?” Shoal Creek used to be a psychiatric hospital located on — wait for it — Shoal Creek, also around the corner from my house. Convenient siting.JLMwww.themusingsofthebigredca…

        1. LE

          Interestingly there are cases that I have experienced with small business people whereby they get crazier as they get older. What happens is they have only a positive feedback loop which encourages them to get more crazy. Possible also is mental decline but I see it more as the positive feedback loop. Because you typically have vendors (sales people) who give you little to no negative feedback and employees who also do not challenge you. Of course with customers the people who pay you money you control the craziness unless somehow it ends up putting money in your pocket. But mostly smoke blown in a positive and affirming manner. This is an observation that I am making based on life experiences – I am sure someone, an academic or psychologist that learned from a book, or someone who spends time writing for a living will try to dispute it.This also happens to larger than life entrepreneurs that are successful or have a great deal of power. Take Musk, Jobs, Branson, Ellison and so on. And of course the President.Then there are those (possibly Alex Jones; I don’t know much about him) that are just playing a role. Kind of like Howard Stern in the early days. A hint of truth but mainly a way to make a living. An actor.One other thing that people like this have in common. They realize that they will never be able to please people so they might as well just be themselves and have some fun.

          1. JLM

            .We all get less inhibited and our GAS meter fails as we get older.The other day I was talking to a 4-star General and he told me I had become more uninhibited since we had last seen each other which was about 10 years ago.I told him it was because I thought I outranked him now in the real world.I cannot really fathom what I give-a-shit about today, plus when you live long enough you realize how much meaningless bullshit we all live through. In many ways, it is refreshing.The more time I spend writing, the more I realize we are all storytellers – we get to make up our own story and star in it.I wish I knew this when I was 22.JLMwww.themusingsofthebigredca…

          2. LE

            I cannot really fathom what I give-a-shit about today, plus when you live long enough you realize how much meaningless bullshit we all live through. In many ways, it is refreshing No see I think that the things that you thought mattered did matter. People tend to be romantic about their life after the fact and after they make it. They then say things that roughly mean ‘wow I worried to much and I didn’t need to’. Well that’s not entirely correct. You ‘you’ did need to worry you are just forgetting after the fact why it mattered at the time. Because most likely if you made it and if luck and hard work plays a part it did.I will tell you one thing about language (my last comment to you that I replied that I forgot to add).When I first met my current wife over 10 years ago I obsessed about every single email reply I made to her. Every single word had to be right. I obsessed over the venue for our first date. I obsessed over many details. You want an idea? I am much older than her. I tried to make sure that I was not in bad lighting at the restaurant which would make me look older. And a host of other things that I thought would make a difference in her perception of me. And guess what? It paid off. No way am I thinking “I worried to much”. I am glad that I put all that effort into things being perfect. It worked out for me and I am happy. I didn’t worry to much. I should have gone to the restaurant in advance (just told her this the other night) to check the lighting before hand.I told him it was because I thought I outranked him now in the real world.What was his facial reaction. I would have given anything to film his reaction his micro expressions.

          3. JLM

            .One of the greatest leaders to have ever walked the earth; for some reason, we have a great connection. Always did. He was a mentor at the time we served together.There are some people with whom you make a personal connection and it just works regardless of your age difference.We were chatting about what a let down it is to be at the top of the food chain in the military – there are only 14 4-stars in the US Army at any time — and then retiring to become a Fox commentator.I met him during Reforger in Germany, the big exercise in the 1970s to reinforce Europe if the Russians came west, when I was the throw away Combat Engineer Cpt asked what I thought about a Corps (3-5 divisions, 50-75K men) river crossing site. The site was on the Rhein, the big enchilada. [My battalion would have to build the bridge.]I said, “That is the most obvious river crossing site imaginable. The OpFor (opposing force) will be waiting in depth to crush us. We won’t even get out of the staging area.” Of course, the G-3 (plans, ops) had been selling the entire staff on the site before I walked in clueless and shivering.In retaliation, I had to take a small recon patrol to the site — a hard, cold, all night walk in the snow — and verify my opinion. They always make the Rangers take the hard patrols. There was a German armor division waiting on the near side in the woods.I managed to insult everybody above the rank of Lt Col in the Corps HQ except for him (Col C-of-S) and the CG (commanding general).Years later, when I was getting out of the Army, he came up from DC and told that story at my dining out. There were three generals at the party and two Colonels who both ended up with 3 stars. It was a night of epic proportions and a complete surprise.You meet a lot of great people in the military. Anybody who gets a star is a top 0.01% kind of guy.JLMwww.themusingsofthebigredca…

          4. sigmaalgebra

            ForI wish I knew this when I was 22.There needs to be a full book shelf of what “I wish I knew this when I was 22.”.Much of it is what I’ve mentioned often, Girls 101 for Dummies — Boys. I had to learn the hard way, pay “full tuition”. The lessons are NOT difficult to describe, but they are often, long, wildly politically incorrect.There’s a current book Ship of Fools by Tucker Carlson. To get an electronic copy, apparently I’d have to install the Amazon software Kindle which I don’t really want to do. So I went to the page of that book at Amazon and read a lot of the reviews. I concluded that basically he was correct but that (A) his data was way too weak, e.g., nowhere near as good as you commonly show at BRC and (B) his causes are too simplistic.E.g., for (B) he keeps saying that the secret to wealth, say, 10 acres in Greenwich, CT., is good SAT preparation, good SAT scores, an Ivy League degree, and a cushy, elite job.I don’t believe it: From all I’ve seen, the secret to wealth, say, 4 acres in Greenwich, CT or 20 acres, or 2000 acres, outside Columbus, OH, is to own and do well owning and running 10-20 franchised fast food restaurants or other Mid-America Main Street businesses. The key is the “doing well owning”, especially the “owning”, and being an employee is several steps down.My conclusion: In all the US economy, with exceptions so tiny as to be nearly invisible, there is nearly no wealth or even much financial security in being an employee. Instead, must OWN something that is valuable or something that is not yet valuable but where work successfully, hard and smart, to make it valuable.Heck, contents of a good version of Girls 101 for Dummies — Boys would be my first such coveted age 22 lesson.The second such lesson would be that financial security comes from OWNING a stable, successful business.A third lesson would be to understand people and their personalities and emotions.Fourth lesson — be good at critical thinking.Fifth, learn to be articulate.Building on the last three lessons, learn to be a good leader of people, i.e., understand the emotions of others, understand what the truth really is or likely is, and be able to communicate well with others who may be too emotional, not good at critical thinking, and in the dark about too much of reality.Realize that the news media is passing out just (A) contemptible junk to get headlines, grab people by the heart, the gut, and below the belt, always below the shoulders and never between the ears, and (B) propaganda paid for by people who want to influence opinions. What is amazing beyond belief is that with (A) and (B) the news media still has a significant audience at all.There are some more lessons.At 22, that list would have done me a LOT of good. I’ve got the lessons now and am applying them except for girls — I’m not going to get married again.The lessons are not very difficult, but they are wildly politically incorrect and usually very much at odds with what is usually passed out.

    3. Girish Mehta

      What is the definition of kook ? (I ask that after reading your comments here for over 5 years kid….)

      1. kidmercury

        i think we can define it as a continuum in which a person who believes that 100% of the stories the american mainstream media (which we can broadly define as new york times, CNN, washington post, and fox news) label as “conspiracy theory” are not true and should be disregarded should have a kook score of 0. conversely, those with believe in every conspiracy ever (including things like dinosaurs not existing, the earth being flat, george harrison and eric clapton being the same person, etc) have a kook score of 100. if your kook score is 50+, i personally feel comfortable calling you a kook. personally, i’d estimate my kook score to be somewhere around the 87 – 93 range.

        1. Girish Mehta

          I was trying to place it on a continuum of independent thinking-skepticism-contrarianism-anti-establishment-conspiracy theory.With the idea that towards the left (independent thinking/skepticism) is good, while moving towards the right is increasingly being contrarian for the sake of being different.But if a kook score of 100 stands for believing the earth is flat and george harrison and eric clapton are the same person..those beliefs don’t fall on the anti-establishment/conspiracy theorist category either. Those beliefs fall in the “Unwilling to see reality for what it is” category.So, if I understand what you mean by kookology, the continuum I mention on the top does not apply ?Separately if a kook score of 100 is what you say it is, why would you be a ~ 90 ? I think you are just having some fun there when you say that.

          1. kidmercury

            i am having fun, but i also genuinely would estimate my kook score to be ~90 using the framework i put forth — simply because most conspiracies i’ve encountered i find to have some degree of credibility.using hte framework you advanced, i do think i’d be far left-leaning, in that i don’t think i embrace kookology for the sake of being different, though that kind of self-analysis is hard to be objective about. i agree that independent thinking should be the primary goal.

          2. Girish Mehta

            Yes.And, often, contrarianism is confused with independent thinking.I try to be skeptical and not cynical. But I recognize that, like you said, it is very hard to be objective about such self-assessments.

          3. JLM

            .Contrarianism is a real thing, but, also, there is the “street is wet” rain v the street sweeper alternative explanation of things.I might not believe it if I hadn’t encountered it.Then, of course, there is Occams Razor.JLMwww.themusingsofthebigredca…

          4. Amar

            @kidmercury:disqus props to you. You live it. It takes a ridiculous amount of independent thinking, first principles analysis on a daily basis to live as a true kook/contrarian. Being a legit kook is on par with with being a legit atheist, And a dedication / decision in life on what matters spending time on.

          5. kidmercury

            thanks for your kind words, i hope i can live up to them and make a bigger impact. the good news is that as the kook trend grows it becomes easier to support it.

        2. LE

          Ironic though that if the story involves sex, children, and/or a hated individual then different rules apply entirely. In that case the story, no matter how bizarre, outlandish, or unlikely, is to be taken extremely seriously. Also very important is whether the story comes from what appears to be someone who has the trapping of ‘just like us’ white America. Man, and/or to a lesser degree a woman, who speaks and acts the way people have decided represents credibility and honesty. Because it is like they are. For extra believably add a degree or two from a top university or a profession to greatly enhance the credibility. [1][1] Assumes being on the accepted and right side of the issue.

          1. kidmercury

            pizzagate is one of hte most important and explosive kook developments of the past two years. involves rape of children. labelled as “conspiracy theory” by NYT, wash post, etc. not hte first story involving rape of children that has been ridiculed by mainstream media (franklin coverup, finders cult, hampstead coverup, donutgate…..)

          2. kidmercury

            did they? here is nytimes’ “retro report” coverage of mcmartin 30 years after:…the mcmartin story got so big they eventually had to at least acknowledge it, especially since the toddlers there contracted STDs. still, though, they deny, ridicule, say the kids made it all up (apparently their imaginations can manifest STDs in real life, as well as other wounds in private parts) and refuse to fully investigate. a full investigation of mcmartin would open the door to a whole underground world of corruption and pedophilia that goes all the way to the highest levels of governments around the world.

          3. LE

            Note the entities mentioned here in this 1990 article on that issue:…In particular what I have called the ‘assumption of legitimacy’ which is, in this case, the media depending on other media almost blindly. That is really the ‘evil’ of the group that you mention. Not their reach to the end consumer but more so how other media takes them seriously and credibly. I saw this first hand. After I got the WSJ to pickup on on a publicity stunt that I did (front page mention) the skies opened and all other media followed. To get mention in other media on another topic all I had to do was forward links to NYT mention and it was like ‘ok he is legit’. Of course I was legit. But they didn’t know that (and yes one of the things was a PR stunt so who is laughing?). Separately the first step in the process was literally social engineering the local big city paper. And it was social engineering for sure. I setup an employee to leak a story to a writer that they met at a party.Your link is a story by Clyde Haberman. His daughter is Maggie Haberman of the NYT. Note this regarding the issue (if true) about what she is all about. She comes across particularly level headed and believable when on TV has that ‘true, believable and fair’ sound that people love.…Scary, no?:showed the Clinton campaign’s use of Haberman to place sympathetic stories in Politico. “[The Clinton campaign] has a very good relationship with Maggie Haberman of Politico over the last year. We have had her tee up stories for us before and have never been disappointed. While we should have a larger conversation in the near future about a broader strategy for reengaging the beat press that covers HRC, for this we think we can achieve our objective and do the most shaping by going to Maggie.”

    4. JLM

      .OK, here’s the thing about kookdom – there are a lot of stories out there that we never get the details of or which we never get the details of for decades.The people at the time of the event know something – not everything – and are ridiculed because they don’t have the complete story or because those who don’t want the story to come out lie about it.The kooks, sometimes, go too far, but they were correct when they were at the launching pad. They just drifted off course and in that drifting they have undermined their own accuracy.I have been involved in a dozen things in my life which I have seen bent and twisted into some “desirable” reality that I knew not to be true at a granular level.So, yeah, color me at the boundary of cynicism-kookdom with a movement to contact in both directions.There is some truly weird shit going on out there.JLMwww.themusingsofthebigredca…

      1. LE

        I have been involved in a dozen things in my life which I have seen bent and twisted into some “desirable” reality that I knew not to be true at a granular level.This is why trials take a long time. The nuance and the details matter. This is entirely lost when events are tried in the media.Funny your writing in this comment appears to drift from your normal style. Almost as if you are not writing it.

        1. JLM

          .Haha, you know I am a writer and write tons of short stories and novellas (plus The Musings of the Big Red Car.) Several have been published.Often when I am writing, I take a break from it and comment on my favorite blogs.Sometimes, I get trapped in my writer’s “voice.” Not often, but sometimes.My voice and my writer’s voice are not quite the same.I wonder if that’s it. I don’t really see it. But, it is me.JLMwww.themusingsofthebigredca…

          1. LE

            In case you are wondering it’s merely a gut composite of what didn’t appear to be your style. I wasn’t looking for it it popped out.I could say the following was an atypical pattern for your comments here:OK, here’s the thingwhen they were at the launching padinto some “desirable” reality that I knew not to be true at a granular level.So, yeah, color me at the boundary of The last one is what got me thinking most likely ‘so, yeah, color me’. Taken as a group sure any of the above maybe you have used.

    5. jason wright

      what’s the etymology of ‘kook’?

      1. kidmercury

        lol that’s a good question. i found this article which i thought was funny:…personally i think it is a funny-sounding term to try to use as an insult, even more so when one considers it is a palindrome.

  7. jason wright

    gravitational collapse?

  8. DJL

    Google – for one – is succeeding because of monopolistic power, not quality of product. The Google search results are being gamed by Google all the time and sometimes are just crappy. But how does an upstart gain search volume when Google owns the mobile OS and increasingly the desktop? I honestly have no idea how DDG is doing it – but I am happy they are making money.

    1. Adam Sher

      It’s a browser plugin so you can still use Chrome. DDG’s first page results are high quality. Naturally the visual presentation is different than Google and it talks time to ge used to it. DDG has an app you need to install for mobile OS’s. It’s a good product, DDG runs less ads than Google at the top of your search result

      1. DJL

        What I meant was how do they get people to use DDG? I’m not sure I have ever seen an ad or reference to them outside of AVC. I guess just the value prop of not being tracked.

        1. Adam Sher

          I looked it up once and then saw a bunch of DDG paid searches following me around Quora and maybe

  9. JamesHRH

    Great post with one caveat:The big tech companies have benefitted from the short development cycle of major tech markets. Each new founder appears to have studied and learned from the past cycle. For example, Zuck’s alpraoch to M&A light years ahead of MS or GOOG, either a market over product philosophy focus that is terrific ( same goes for Bezos, who willl, hundred’s of years from now, be put the Startup Mt Rushmore ).Why does it matter?Because every new market is basically given to a startup by a massive incumbent that is either unwilling or unable to capitalize on the new opportunity. The FANNG folks are making this harder on startups then ever before, with the FB propaganda offensive on availability of VC $ forFB competitors being a prime example.

  10. Frank W. Miller

    Well, the market for social media and related websites might be saturated and no longer in need of venture capital. VC’s are about risk and reward. One of the tenants of that is that you are out there searching for the NEXT thing, not what has already been done. Despite my criticism of crypto, at least you’ve been out there on the cutting edge trying to get their first, doing the home work and taking the chances. Thats what VC is supposed to be about. If somebody wants to reproduce FB or Instagram, they should be looking for funding sources other than VC, its been done before…

  11. LE

    Facebook funded this report that was published back in July and concluded that “big tech” was not impacting the supply of venture capital to entrepreneurs.I am wondering if Facebook did the report with the understanding that it would only be released if the data showed what was beneficial to the point they were trying to make? And what, for that matter, prevented them from hiring multiple firms and picking the report that best said what they wanted to publicize? [1][1] This is similar to my ‘divorce appraisal scheme’. Years ago I was helping a woman who was going through a divorce. She had to get an appraisal on her house for the court. Her husband had to as well. Her husband hired an appraiser. I suggested she hire and pay for two appraisers. She did so and the two appraisals varied by roughly 10% of the price of the house (iirc). She took the lower appraisal and presented that to the court. (She needed a lower valuation because she wanted to remain in the house). The court then split the different between her husbands single appraisal and her lower lower appraisal. The husband didn’t even know there were two appraisals done. So for the cost of an extra appraisal she ended up with more money in her divorce and in her pocket.

  12. LE

    There is a debate going on about the impact of Facebook, Google, and Amazon’s growing dominance on the consumer internet on the supply of venture capital to entrepreneurs.However those companies, like Yahoo of the past, have the resources to also provide an exit to an escape hatch to some companies.

  13. JLM

    .The simple fact that this article is written by a guy in the mainstream of the deal flow is really all a thoughtful person needs to know to embrace the power of the shadow thrown by the big boys.Sometimes, it is impossible to get the right perspective on how big these companies have become.You think DuckDuckGo “competes” with Google? Oh, you little darling, you.Google does as many searches in a day as DDG does in a year.I like DDG because they don’t keep my searches. Not sure why that excites me, but it does register. Nothing else does, but that does.Maybe it’s my searches about the American Allied Siberian Expeditionary Force of 1918. Or the efficacy of stainless steel v galvanized stone hangers in high rise stone faced buildings. I want to keep that stuff to myself and DDG.I want them to be a giant killer. I also think I get a slightly different rank ordering. Sometimes I will use both Google and DDG.But, really, the DDG v Google competition doesn’t amount to wind friction on a Tesla.These big companies are dominant and when they find something that really creates some friction, they will just buy it – talking to you, FB/Instagram.These big companies are so slippery, regulation can’t keep up with them. There is not a single one of them who doesn’t have a skunk works trying to figure out how to modify our behavior on a continual basis.What little the NSA does not know about us, Google and FB do.JLMwww.themusingsofthebigredca…

    1. sigmaalgebra

      ForThere is not a single one of them who doesn’t have a skunk works trying to figure out how to modify our behavior on a continual basis.What little the NSA does not know about us, Google and FB do.The original “skunk works” was at Lockheed that did the SR-71, U-2, maybe count the P-38, and maybe some more.I have really very, Very serious doubts that Google or Facebook have any applied research group of more than just trivial, baby talk competence. Why? Run up the organization chart and too soon will find someone and everyone above them who know not even zip, zilch, or zero about applied research. Typically they have a lot of contempt for research, and essentially never do they have any ability to direct research.How to direct research is well known at NSF, NIH, DARPA, ONR and by high end research university STEM field department chairs and school deans.How to do research is taught in Ph.D. programs at those departments. Typically the students are quite carefully selected, and the results are one Ph.D. per 4 or so entering students to one per 20 or so. That is, the programs are blood baths and make US military special forces, etc. schools, with only 50% flunk out rates, look like fuzzy, bunny play time.Net, taking a person with a really good ugrad STEM field degree and turning them into a good Ph.D. researcher is not easy — we’re talking ballpark 1 in 10, that is, 90% flunk out rates. Commonly the stress seriously damages people for life. Part of the challenge is buried in a comment in D. Knuth’s The TeXBook:The traditional way is to put off all creative aspects until the last part of graduate school. For seventeen or more years, a student is taught exams-man-ship, then suddenly after passing enough exams in graduate school he’s told to do something original.Note: I didn’t get damaged. Why? In K-12, I was socially awkward, and the teachers dumped on me. So, having no real choice, I learned to let their effluent run off my back and, then, in math and science, teach myself. In college, I picked a world class challenging pure math text, learned it, and gave weekly lectures to a prof. I wrote a pure math honors paper. Then early in my career in applied math and computing near DC on national security problems, I furiously and quite successfully taught myself a lot in pure and applied math and computing. E.g., for a while I taught computer science courses at Georgetown University but never really had a course in computer science or any training, etc. Then in some of my career, there were clearly some opportunities to do some work that was at least original with me. Then I found a juicy practical problem in stochastic optimal control, did the first research on a plane trip, did the rest of the research independently in my first summer in grad school, and, except for some polishing, writing, typing, algorithms, and illustrative software, that was my Ph.D. dissertation. Along the way I took on an unsolved problem and found a serious solution, in two weeks, working independently, and later published the result. In some part time work in national security, again in two weeks, I did some nice research — evaluate the survivability of the US SSBN fleet under a special scenario of global nuclear war limited to sea — work was well received.So, I never struggled with research. Pleasing K-8 teachers? Hopeless. Doing good pure and applied math — easy.Both my wife and my brother got Ph.D. degrees. The effort damaged my brother and was fatal for my wife.Net, learning to do research is tough enough with a Ph.D.; a Ph.D. program is the easy way to learn; and a Ph.D. program is a blood bath.Lesson: To do well managing research, need a good Ph.D. and to be good at research.Result: The non-Ph.D. high level managers at Google, Facebook, etc. have no hope at all at doing well managing good research. No hope at all.At least at one time Gates was smart enough to set up N. Myhrvold as the start of his research division.We can see some of the nonsense from Silicon Valley in research as they keep touting artificial intelligence (AI), machine learning, and data science — 99 44/100% hyped nonsense.Computer science has faced a big problem: They are past programming language syntax via Bachus-Naur form, LALR parsing, compiling, and linking, basic algorithms such as in Knuth, and are now at a loss in what to do next. They encountered the problem P versus NP but do not have the math backgrounds to attack it.So, they noticed that there are some problems in applied math that need computing so decided that, then, they, as computing experts, were in a good position to make progress on those problems. Nonsense. That’s too much like saying that an open heart surgeon needs some sharp knives so that a knife sharpener, without further training, has a big advantage in being a good open heart surgeon. Nope. The result so far has been AI and other such nonsense.Bluntly, Google and Facebook in their skunk works will have a super tough time getting past their hacker culture.

  14. sigmaalgebra

    ForBut as a market participant, I can certainly say that we shy away from funding startups that are going up directly against the large tech incumbents.But we also are attracted to startups that are competing against the big incumbents with a fundamentally different model, like DuckDuckGo in search, or ShopShops in commerce. The first is a grand, catastrophic, brain-dead mistake of US information technology (IT) venture capital, apparently not shared by US bio-medical venture capital.To correct this grand mistake, there is an obvious, often applied, standard solution illustrated continually and successfully by US national security. That solution is applications of advanced, original, powerful, proprietary, defensible intellectual property from applied research in math, physical science, and engineering to obtain valuable solutions difficult to duplicate or equal.From all I’ve seen, at such research, beating the US academic computer science community and the practical programmer culture of Silicon Valley, Google, Facebook, etc., and the rest of the computer industry is, compared with what has long been common in applied STEM field and bio-medical research, especially as funded for US national security and by NSF and NIH, no big challenge.Yes, the flip side of this mistake is a grand opportunity.ForBut we also are attracted to startups that … From all I’ve seen, US IT VC is attracted to anything in computing that has traction significant and growing rapidly in a market large enough to permit the startup to achieve a value of $1 billion in five years with further details irrelevant except: US IT VC neither understands nor believes in the value of advanced, original, applied research difficult to duplicate or equal and, instead, believes that all relevant technology is relatively easy to duplicate or equal and not defensible.And, I would venture, that big tech is increasingly vulnerable to a number of attack vectors, many of them self-induced, which should be attracting entrepreneurs to more directly go after the core franchises of big tech. For the “vulnerable”, yes. But for the “attacks”, I have to doubt that any US IT VC firm would ever fund an “attack”. Instead, such VC just wants to buy into rapidly growing traction that is at least a little related to IT but not where anything like a real “attack” is needed.Whether those courageous entrepreneurs will attract the capital they need to launch those attacks is an open question. The capital will be very slow in coming and will essentially never come from anything like current US IT VC.Part of the solution is just the fact that (A) the needed research requires mostly just a good education in research, readily available in the US, (B) some thinking with just paper, pencil, and routine computer access, and (C) a first Web server, for, say, less than $2000, that also has code, likely from the researcher, implementing the results of the research.So far, that situation has occurred so rarely and been publicized so poorly and understood so poorly by US IT VCs that it has not been much recognized. No doubt the limited partners want nothing to do with any such approach to business. So, again, for someone with a good background and good abilities in research and good at practical problem selection, there’s an opportunity.Bluntly the need is to be able to work productively with things that are new, in particular, research. US national security has been doing this for over 70 years; US IT VC believes that research and a dime won’t cover a 10 cent cup of coffee.I do see US IT VC on the way down: There just isn’t enough that is sufficiently new and valuable. E.g., early in the rise of PC computing, could make good ROI investing in a little company that made floppy disk drives. Wow, those days are long gone. And could make good ROI from a simple word whacking program — those programs and the related printers did a great job on the old manual typewriters, but that problem is now quite well solved. As the Internet and Web caught on, essentially every company wanted a Web site, if only as a substitute for a printed brochure. Well, now those sites have been built, and the ROI for building them is now low. As those sites were being built, the servers, e.g., from Sun, were expensive and provided a reason for VC funding; no more since now can buy a much more powerful server for less than $2000 with a lot of powerful Web site and other infrastructure software for free or nearly so. Also with the cloud server farms, a startup with rapidly growing needs can spin up new virtual machines in the cloud in minutes. The local, mobile, social, sharing theme played out.There’s more to do, but it’s not all as simple as a little word whacking program.It’s difficult to know just when research will be crucial, but thousands of years of history show the near stagnation when there is little or no effective exploitation of research.But for now, research is essentially irrelevant for US IT VC since the VCs are essentially unable and certainly unwilling to evaluate original research.