Find the Fast Moving Water(nfx.com)
nfx.com
Find the Fast Moving Water
https://www.nfx.com/post/find-the-fast-moving-water
25 comments
The most interesting part of this article to me is that the author inadvertently makes the case that being in the "fast moving water" isn't sufficient, and personally I don't think it's necessary, either. From the article, the author talks about thinking Cabulous was the fast moving water. It doesn't exist now. He was also impressed with Palo Alto delivery, but comments that of the seven delivery startups that year, only Door Dash survived. The pitch here seems to be "follow the herd and hope you survive".
Better advice would be to move the rock so you flush out all that slow moving water behind it, that is what happen when you disrupt a market. Not very good for the people there though.
I know this isn't really the point of the article, but IMHO it's more interesting... can you really measure water speed just by looking at surface turbulence? What do you do about fast moving but deep streams, or underwater current channels, etc.?
I was just about to say, I was slightly disappointed to find that this wasn’t an article about a novel technique to identify fast moving water (akin to the fact that we can identify the temperature water by the sound it makes when it is poured).
It's one of those interesting examples where Hackernews's dual identities conflict... it's half "interesting engineering stuff" and half "startup culture stuff".
In this case, the article's business stuff made my eyes glaze over, lol, but that random thumbnail and metaphor they used was really interesting. I wish I could find the source of that image... unclear if it's just a mockup that NFX made for the blog, or if there's an actual machine vision water flow classification project somewhere.
My Googling is really failing me this time. I can find articles (scholarly or not) on kayaking, water physics, machine vision... but not at the intersection of the above, and not any other instances of that image or lookalikes. Most of the AI projects out there are classifying aerial images from a bird's eye view, at ocean scale, not "how fast is this water that I'm looking at from shore" scale.
In this case, the article's business stuff made my eyes glaze over, lol, but that random thumbnail and metaphor they used was really interesting. I wish I could find the source of that image... unclear if it's just a mockup that NFX made for the blog, or if there's an actual machine vision water flow classification project somewhere.
My Googling is really failing me this time. I can find articles (scholarly or not) on kayaking, water physics, machine vision... but not at the intersection of the above, and not any other instances of that image or lookalikes. Most of the AI projects out there are classifying aerial images from a bird's eye view, at ocean scale, not "how fast is this water that I'm looking at from shore" scale.
I was wondering the same thing. I know surfers look for rip tides using the surface. I was hoping the article would be about computer vision tools for that
Sort of. To a degree. In a real world environment things are never perfectly uniform but it certainly can be easier to gauge flow if there are things disturbing that flow or visible objects in the flow. Lacking references something like a tidal current can certainly be faster than is obvious. (And people obviously can get caught in rip currents that may not be apparent.)
Under some conditions yes but presumably if you have a smooth flow at speed s and another at s*1.1 then you'd struggle.
"I'm here for one reason and one reason alone. I'm here to guess what the music might do a week, a month, a year from now. That's it. Nothing more. And standing here tonight, I'm afraid that I don't hear - a - thing. Just... silence"
Margin Call
Margin Call
probably apocryphal, but I've heard "what's it doing that for?" is the most common phrase found on aircraft black boxes. I always imagine that someone at LTCM, maybe not Meriwether or Merton or Scholes, but someone, probably uttered that phrase at some point as well.
I watched that movie a few times before I realized Jeremy Irons was prognosticating. I had thought he was admitting he had become blind to the future, which made his decisiveness in that meeting a bit frightening.
It can be both.
If your business is predicting and anticipating moves, and you find that you cannot predict or identify a clear likelihood, often your best bet is to sit out. Warren Buffett has rather famously sat out several rounds of tech bubbles because he couldn't make sense of them.
In the case of Margin Call however another clear interpretation is that Irons is seeing that "the music stops playing", e.g., the game is over.
If your business is predicting and anticipating moves, and you find that you cannot predict or identify a clear likelihood, often your best bet is to sit out. Warren Buffett has rather famously sat out several rounds of tech bubbles because he couldn't make sense of them.
In the case of Margin Call however another clear interpretation is that Irons is seeing that "the music stops playing", e.g., the game is over.
This philosophy works well in truly competitive markets. However, fast-moving water can be artificially generated by throwing a ton of VC / IPO money at a market.
> Three months later, we pivoted into video games on FB, grew quickly to $10M’s of revenue that we didn’t have before, and Saar was proven right
How big are FB video games today? Zynga was purchased for $12.7B when Take-Two's market cap was ~$20B without really impacting Take-Two's market cap meaning that Take-Two purchased a company for $12.7B that the market valued at ~$0 (generously if we assume the following peak of $28B was the acquisition, then the market valued it at ~4B).
My point is that "find the fast moving water" is a greedy search algorithm that is heavily distorted by private capital flows / band-wagon effect. That's why once a market sees 1 serious VC entering it meaningfully you see a massive cash flow as all VCs follow. That doesn't mean that it's actually creating value vs entrepreneurs rushing in to build companies to extract as much value as possible from the "dumb money" flowing in. This also sucks away oxygen from things that might be more durable ideas that are harder businesses to build.
It's useful advice for finding personal wealth in VC markets. I do wish there was some kind of economic model that manages to meaningfully inhibit pure market capital churn while encouraging construction of durable businesses. Probably not possible in the VC space I suspect.
Probably in this analogy, as other mentioned, we should be looking for fast moving deeper water / water that's likely to maintain a forward direction for a long time vs surface water churn.
> Three months later, we pivoted into video games on FB, grew quickly to $10M’s of revenue that we didn’t have before, and Saar was proven right
How big are FB video games today? Zynga was purchased for $12.7B when Take-Two's market cap was ~$20B without really impacting Take-Two's market cap meaning that Take-Two purchased a company for $12.7B that the market valued at ~$0 (generously if we assume the following peak of $28B was the acquisition, then the market valued it at ~4B).
My point is that "find the fast moving water" is a greedy search algorithm that is heavily distorted by private capital flows / band-wagon effect. That's why once a market sees 1 serious VC entering it meaningfully you see a massive cash flow as all VCs follow. That doesn't mean that it's actually creating value vs entrepreneurs rushing in to build companies to extract as much value as possible from the "dumb money" flowing in. This also sucks away oxygen from things that might be more durable ideas that are harder businesses to build.
It's useful advice for finding personal wealth in VC markets. I do wish there was some kind of economic model that manages to meaningfully inhibit pure market capital churn while encouraging construction of durable businesses. Probably not possible in the VC space I suspect.
Probably in this analogy, as other mentioned, we should be looking for fast moving deeper water / water that's likely to maintain a forward direction for a long time vs surface water churn.
> How big are FB video games today? Zynga was purchased for $12.7B when Take-Two's market cap was ~$20B without really impacting Take-Two's market cap meaning that Take-Two purchased a company for $12.7B that the market valued at ~$0 (generously if we assume the following peak of $28B was the acquisition, then the market valued it at ~4B).
I'm not sure that's correct.
If a company worth $10B pays $1B in cash to purchase a gold bar that's worth $1B, it's market cap should not change. That doesn't mean that the gold bar is worthless!
Likewise, if a company worth $10B pays $1B in cash to purchase a company that's worth $1B... It's market cap should not change, either!
The only situation in which the market cap should change is if the purchase unlocks some kind of new synergy between the two companies, that wasn't present when they were separate entities (Or if the shareholders think that the management of the buying company has gone insane.) But that still has zero bearing on the 'market value' of the acquired company.
I'm not sure that's correct.
If a company worth $10B pays $1B in cash to purchase a gold bar that's worth $1B, it's market cap should not change. That doesn't mean that the gold bar is worthless!
Likewise, if a company worth $10B pays $1B in cash to purchase a company that's worth $1B... It's market cap should not change, either!
The only situation in which the market cap should change is if the purchase unlocks some kind of new synergy between the two companies, that wasn't present when they were separate entities (Or if the shareholders think that the management of the buying company has gone insane.) But that still has zero bearing on the 'market value' of the acquired company.
Market cap incorporates valuation of future cash flows. So buying $1B worth of gold should result in a decrease of market cap because the market will typically discount the future value of doing that (ie you should be able to find better growth opportunities). Same goes for mergers - a merger is supposed to get you synergies that grow you more than you’d be able to accomplish by yourself.
> So buying $1B worth of gold should result in a decrease of market cap because the market will typically discount the future value of doing that (ie you should be able to find better growth opportunities).
They bought the $1B worth of gold using $1B worth of cash.
It's true that gold doesn't have future cash flows, but neither does a pile of cash.
> Same goes for mergers - a merger is supposed to get you synergies that grow you more than you’d be able to accomplish by yourself.
A merger not resulting in a stock bump means that the market doesn't think it's a smart merger. My point was that it doesn't mean that the market thinks that whatever you bought was worthless.
If a company spent $1B on a worthless thing (By making a big pile of money, and setting it on fire), you'd expect its market cap to drop.
They bought the $1B worth of gold using $1B worth of cash.
It's true that gold doesn't have future cash flows, but neither does a pile of cash.
> Same goes for mergers - a merger is supposed to get you synergies that grow you more than you’d be able to accomplish by yourself.
A merger not resulting in a stock bump means that the market doesn't think it's a smart merger. My point was that it doesn't mean that the market thinks that whatever you bought was worthless.
If a company spent $1B on a worthless thing (By making a big pile of money, and setting it on fire), you'd expect its market cap to drop.
> To build a truly meaningful company ...
You need to take venture capital money and then grow as fast as possible. This is encouraging founders to take risky paths in order to generate the kind of windfalls that make venture capital investments work out. Much of the time slower growth will be easier to achieve and also more stable and reliable. This serves founders, employees, and clients better than the maximized growth speed model which serves venture capital investors.
You need to take venture capital money and then grow as fast as possible. This is encouraging founders to take risky paths in order to generate the kind of windfalls that make venture capital investments work out. Much of the time slower growth will be easier to achieve and also more stable and reliable. This serves founders, employees, and clients better than the maximized growth speed model which serves venture capital investors.
It's interesting then to think about companies like Cloudflare, Airtable, and Notion which seemingly came out of markets that looked like turbid swamps.
They didn't just follow the flow of the rapids, they somehow created their own rapids?
They didn't just follow the flow of the rapids, they somehow created their own rapids?
feels like a variation on Andreessen’s perspective that the market matters most in startups
https://pmarchive.com/guide_to_startups_part4.html
https://pmarchive.com/guide_to_startups_part4.html
This is a valid perspective for some people/Orgs at some points of their career/growth but what ever happened to "still water runs deep"
I thought this was going to be about a new style of CAPTCHA.
Sorry, but I just don't give a fuck. Some of us like to sit on the edge of still lakes and ponds, maybe go for a swim, enjoy the sunshine, listen the birds and the rustle of the wind. We don't want moving water, let alone fast moving water.
Put more explicitly: feel free to spend your life trying to get rich if that's what floats your boat. Feel free, even, to spend it searching for the excitement of rapidly growing companies in "fast moving water". But be aware that most of us aren't interested, aren't trying to live like that, and have a somewhat negative view of people who do.
(See also: Siddhartha by Herman Hesse, in particular the ferry man)
Put more explicitly: feel free to spend your life trying to get rich if that's what floats your boat. Feel free, even, to spend it searching for the excitement of rapidly growing companies in "fast moving water". But be aware that most of us aren't interested, aren't trying to live like that, and have a somewhat negative view of people who do.
(See also: Siddhartha by Herman Hesse, in particular the ferry man)
Totally cool to enjoy life at the edge of a pond or lake. I say this as someone who enjoys being in fast water. We have to respect each other’s preferences. Anyone who tells you otherwise needs to respect boundaries and diversity.
Your tone made you sound kind a little angry. If that’s true, might want to delve into why. This kind of content is inevitable since people who enjoy fast water naturally output… about outputting.
Your tone made you sound kind a little angry. If that’s true, might want to delve into why. This kind of content is inevitable since people who enjoy fast water naturally output… about outputting.
It's about damage. Specifically the damage caused by (mis?)directing resources (capital, labor, intellectual) towards "fast water", in an explicit search for wealth.
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