Venture Capital Will Change Dramatically in the Next Decade. Here’s What You Need to Know

How will venture capital change in the next decade? originally appeared on Quorathe place to gain and share knowledge, empowering people to learn from others and better understand the world.

Answer by Auren Hoffman, SafeGraph CEO, on Quora:

In the world of venture capital, there will be more winner-take-most markets versus the niche markets of today.

Historically, venture capital firms have been a cottage industry. VC firms are filled with very talented investors who generally have chosen to be VCs (versus founders) because they want a more predictable path to decent wealth, do not want to manage people (or build a large organization), and want to work less (and spend more time with their family and skiing).

In the next decade, we will see the rise of CEOs as venture capitalists who are focused on owning and dominating a niche. We will see more VC firms look more like private equity firms (which consist of people that work insane hours and build very large organizations). And we’ll see the very best VCs increase the products they offer.

We should expect VCs to be much more ambitious. Here are four examples (and there are plenty of others) of very ambitious VCs:

1. Y Combinator

YC is one of the most impressive organizations. They are, by far, the most dominant accelerator. Depending on how you define market share, YC likely has over 70% market share for accelerators. And they may have over 90% of the mind-share (when you think of “accelerator”, you think “Y Combinator”… they are the “Kleenex” of accelerators).

YC has one CEO (Sam Altman) that sets direction (plus two co-founders, Paul Graham and Jessica Livingston, who add guidance). Most VCs are run by a committee of 4+ people.

YC is crazy ambitious. They have multiple funds, work with thousands of companies, have built a super network, are building new science projects, have pioneered OpenAI, and more. YC has a growing staff filled with amazingly talented people (the folks that are attracted to work at YC are top-of-the-line).

In fact, it is really hard to compare YC to any VC (there is just no comparison when it comes to comes to ambitions). YC looks much more like a mini Google or Amazon than it does a venture capital firm. It is entirely possible that YCombinator itself could one day be as valuable as the largest public companies. And expect YC to IPO in the next ten years.

2. Social Capital

Social Capital is not a venture capital firm, it is a 21st century financial institution. They have a high-functioning VC arm, a hedge fund, crypto assets, a public SPAC, and more.

The CEO, Chamath Palihapitiya, is hard-charging and demands performance from those that work for him -; just like any CEO of any great company would.

Social Capital is less of a VC firm and much more of a future Blackstone or KKR. We should expect it to continue to innovate and push the envelop in the next decade.

3. Peter Thiel

Peter Thiel has leveraged his position to start many different projects. He founded at least four successful venture capital firms (and has helped fund many others) including the iconic Founders Fund. He also runs a successful hedge fund and co-founded Palantir Technologies.

Of course, he is also well-known for his non-profit and political organizations he has started including the Thiel Fellows.

Peter Thiel is so much more ambitious than even some of the most well-known venture capitalists.

4. AngelList

AngelList (run by Naval Ravikant) has up-ended seed-stage investing -; they are becoming a dominant platform for discovering new companies. They also have many different products including an impressive recruiting solution.

AngelList is run like a company, not a traditional venture firm. When they wanted to expand their offering, they did what many growing companies do: they acquired a tech start-up. AngelList completed a very successful acquisition of Product Hunt last year. When was the last time a traditional venture firm acquired a company?

-;

VCs have actually been a lot less ambitious than one would expect (given the caliber of people involved). The net-worth of the best performing VC (from being a VC) is 30x smaller than the net-worth of the best performing founder. In fact, many of the super-successful founders that transition to being a VC make less as a VC than they did as a founder.

In the next ten years, we will see the rise of super-ambitious VCs that will build large financial product companies.

This question originally appeared on Quora – the place to gain and share knowledge, empowering people to learn from others and better understand the world. You can follow Quora on TwitterFacebook, and Google+. More questions:

Amazon Founder Jeff Bezos Is Worth Over $112 Billion

Amazon CEO Jeff Bezos has become the first $100 billion mogul to top Forbes‘ annual rankings of the world’s richest people. But President Donald Trump‘s fortune sank during his first year in office despite a surging stock market.

The Bezos milestone, revealed in Tuesday’s release of Forbes‘ closely watched list , underscores the growing clout of both Bezos and the company that he founded in 1994 as an online bookstore. Forbes’ breakdown provided further evidence that serving as president isn’t the most lucrative job, even when most of the rich are getting richer.

All told, the world now holds more than 2,200 billionaires with a combined fortune of $9.1 trillion, up 18 percent from ago, according to Forbes’ calculations.

Although Trump is part of that elite group, he saw his fortune sink by about $400 million to $3.1 billion during his first year in office. The decline left him as the world’s 766th richest person, more than 200 places lower than his 544th spot on last year’s Forbes list.

Bezos seized the top ranking for the first time and has the added the distinction of becoming the first person to break the $100 billion barrier since Forbes began compiling its list in 1987. As of Feb. 9, Bezos’ wealth stood at $112 billion as of Feb. 9, up from about $73 billion last year, according to Forbes.

Most of Bezos’ fortune is tied up in Amazon stock, which soared 59 percent during the period tracked by Forbes.

Bezos has used a sliver of his wealth to buy The Washington Post — a target in Trump’s fusillades against the media — and to finance Blue Origin, a maker of rockets that aim to sell flights into space.

Meanwhile, Amazon has expanded beyond its bookselling origin to become a retailer of almost everything imaginable . It now even sells groceries in brick-and-mortar stores after its $13.7 billion purchase of Whole Foods Markets last year.

Amazon also has built a network of data centers that hosts the online services of other companies, and produces award-winning shows that compete against traditional TV networks. More recently, it branched into health care in a partnership involving Berkshire Hathaway and its CEO, Warren Buffett, whose $84 billion fortune ranks third on the Forbes list.

Bill Gates, Microsoft’s co-founder and an occasional bridge partner of Buffett’s, ranks second on the Forbes list with wealth of $90 billion.

Both Gates, 62, and Buffett, 87, have committed to giving away most of their wealth while Bezos, 54, hasn’t said much about his philanthropic plans.

–The Associated Press

The Carbon Tax: America’s New Political Third Rail

Washington State’s latest effort to enact a carbon tax is about to die on the vine.

The bill would have made Washington the first U.S. state to levy a straight up tax on fossil fuels. But the proposed legislation, which would have needed to clear the state House by March 8, does not have enough votes to even make it out of the Democratically-controlled Senate, says Washington Democratic Governor Jay Inslee, despite the forward momentum in the fight against climate change.

“I would consider this a sea change in the climate fight. It’s come a long way from where we’ve been. We’ve basically shown that carbon policy is within reach,” Inslee told the Associated Press. “On the arc of history, we’re not quite far along enough on the arc. That day will come, but it wasn’t quite here yet.”

In its most basic terms, a carbon tax is a fee imposed on the burning of carbon-based fuels, such as coal, oil, and gas. Each ton of carbon emitted is taxed at a certain rate, with the hope that the extra cost will limit the consumption of fossil fuels and encourage further development of alternative energy sources. Carbon taxes have been adopted in a number of countries around the globe, but the United States is one of the few industrialized nation hold-outs.

The proposed tax in Washington State would have begun in 2019 and initially imposed a $20 per ton tax on fossil fuels. Starting in 2021, the tax would have increased $1.80 per ton each subsequent year until it hit $30 a ton — estimated to be in 2030. In the first two years, the tax was projected to raise $766 million and increase to about $988 million in the next two years.

Despite Governor Inslee’s positive spin, many tax policy experts remain skeptical that a carbon tax has any legs, especially if it can’t even become law in a progressive state like Washington.

“Even in a state like Washington, where you have a governor who is enthusiastically in favor, a Legislature that seems to lean to the idea, this proves difficult to do at least at this point,” Barry Rabe, a professor at the Gerald R. Ford School of Public Policy at the University of Michigan, told the Seattle Times.

Rabe’s words echo a sentiment I heard from Dr. Steven A. Cohen, Executive Director and Chief Operating Officer of Columbia University’s Earth Institute, back in 2015. I asked him what he thought about the likelihood of a carbon tax taking root in the U.S., and he was not optimistic.

“My particular issue with the carbon tax is not that it’s bad or good. I just don’t think it’s feasible here in the U.S. I’m a political scientist,” Cohen said. ” I study how issues get on the agenda and this one has made so little progress and has been met with such resistance that we’re just spinning our wheels to pursue it.”

Cohen is right. Carbon taxes aren’t without their critics. Quite the contrary, in fact. This latest attempt fell victim to many of the same complaints as the others that have come before it. Specifically, the tax’s opponents argue that the government is tinkering with the free market, while wrapping the issue in red tape. The Washington Policy Center’s Todd Myers told the Seattle Times that the bill had too much money going to carve-outs, special interests, and expensive projects that won’t actually reduce greenhouse-gas emissions as promised.

That may be the most black-and-white takeaway from Washington’s exercise: When it comes to this issue, the political landscape is so wrought with land mines that there just isn’t enough support to get a carbon tax done. As The New York Times’ Coral Davenport astutely put it, “Economists broadly agree that taxing the carbon pollution produced by burning fossil fuels is the most efficient way to fight climate change. But politicians agree that it is also a nearly surefire way to get voted out of office.”

But that still leaves a country struggling to find energy solutions.

A carbon tax is always going to rub businesses the wrong way, and consumers are going to wring their hands when they see their energy bills increase. It needs governmental support to make it a reality. But this bill’s imminent failure to pass through Washington’s legislature signals a grave future for the viability of this strategy in the U.S.

Research Has Found That You Need to Make This Much MoneyPer Year to Have ‘Life Satisfaction’

Does earning more money make you happy? According to recent research, certain income levels do make people happier, but there’s a twist in the findings (more on that below).

The study, conducted by researchers at Purdue University on over 1.7 million people as part of the Gallup World Poll found that, in every region of the world, people with higher incomes are indeed happier.

For the U.S., it’s no different. A person making $120,000 or $200,000 is likely to report more happiness with their lives than the person pulling in $40,000.

A twist: Life satisfaction stops after you make a certain amount.

The research found the optimal income for life satisfaction in North America is $105,000 per year. But if your income exceeds that amount, it has been found that whatever you make beyond that level is not associated with greater life satisfaction. In fact, it reduces life satisfaction.

This $105,000 income cutoff is what’s called “satiation point.” A person pulling in $250,000 is no happier and satisfied with his or her life than a person making $110,000. 

Since this study had global ramifications, in many other regions of the world, when incomes rise above the cutoff level for that particular country, life satisfaction gets lower. In Australia and New Zealand, for example, the satiation point is $125,000; and in Latin America and the Caribbean, it’s $35,000. (This chart shows the “satiation point” for different areas of the world in US dollars.)

similar study conducted in 2010 by Nobel prize-winning economist Angus Deaton and psychologist Daniel Kahneman found that the satiation point for individuals in the U.S. then was approximately $75,000 (adjusted to around $84,000 in 2016 dollars, according to this Quartz report).

Conclusion

To recap, the threshold salary for attaining life satisfaction in North America is a household income of $105,000. Once this threshold is reached, further increases in income are actually associated with reduced happiness. (Note: The research also finds that a range of $65,000 to $95,000 is needed for emotional well-being in the U.S. “Emotional well-being” in this case refers to a person’s day-to-day feelings such as happiness, sadness, excitement or anger)

This new survey, however, has found its share of critics that question its accuracy. Dan Sacks, an economist at Indiana University who studies the relationship between income and subjective well-being, isn’t convinced of the results. He tells Quartz that the research “relies on flawed survey questions.”

He references previous research that suggests that just because people say they make a certain amount of money in self-reported polls, it doesn’t mean they actually do. 

There’s also the probability of people answering poll questions about their happiness differently on different days. Someone having a bad day at work one day will have answered the same question differently on a better day. “This measurement error,” states the Quartz report, “makes it difficult for researchers to assess the income-happiness relationship with great accuracy.”

That leaves room for a lot of questions and doubts. What’s your take? Are you more or less satisfied with your life with an income higher than $105,000 per year? 

United Airlines Is ‘Pressing the Pause Button’ on Its Lottery Bonus Program

Ladies and gentlemen, this United Airlines idea has hit some turbulence, and will be turning around right away.

Over the past 72 hours, we’ve seen a firestorm erupt among employees at United Airlines, after company president, Scott Kirby, sent an email detailing a plan to change the company’s employee bonus program–and replace it with a lottery.

If you missed the details of the lottery program, you can find them here. In short, United employees were united: united in opposition to the new policy.

Within hours, there were thousands of anti-lottery comments on the company’s private internal website, plus thousands more complaints on Facebook and even a Change.org petition.

Now, United says it’s heard its employees loud and clear. Earlier today, Kirby sent a second email to United employees backing off on what he’d said in the first one:

Dear United colleagues, 

Since announcing our planned changes to the quarterly operations incentive program, we have listened carefully to the feedback and concerns you’ve expressed.

Our intention was to introduce a better, more exciting program, but we misjudged how these changes would be received by many of you.

So, we are pressing the pause button on these changes to review your feedback and consider the right way to move ahead. We will be reaching out to work groups across the company, and the changes we make will better reflect your feedback.

Appreciatively, 
Scott

To be clear, it’s a “pause,” not a full-throttled cancelation. It’s hard to predict exactly what that will mean–whether it’s a return to the original, apparently much-loved system, or some kind of hybrid, or whether the bonus program will simply disappear.

As others have surmised, it seems United would have saved a lot of money by switching from a universal program to a lottery based one. And, it’s striking that this kind of quick action t have happened a decade ago.

There wouldn’t have been robust internal networks, or Facebook groups, or flight attendants and gate crew reading the stories and posting online via their phones. (And, there wouldn’t have been places like Inc.com, or Flyer Talk, or View From the Wing, or the like, to pick up on the story.)

Within a short time after I posted about this new policy Saturday morning (which was in turn after reporter Lewis Lazare of the Chicago Business Journal broke the news), I was hearing from employees about their objection to the change. One such source let me look at hundreds of employee comments on the internal website, which I detailed here

Now, I’ve had the chance to look at a lot of other comments, in the wake of the “pressing the pause button” email.

While there are a lot of sentiments and nuances, here’s a quick sample that should make it pretty clear how many employees seem to feel about the whole thing.

“THANK YOU!!!”
–Customer Service Rep

“Thank you for listening. Please continue to do so, or as we’re taught in Customer Service, ‘Just ask, then listen’.”
–Customer Service Rep

“Scott, Thank you for listening and including all the stakeholders in the decision.”
–Captain – B-737

“Thank you Scott for listening.”
–Flight Attendant – Domestic

“Thanks for listening… We can all do better when we learn from our mistakes… we got your back if you got ours!”
–First Officer – B-737

“The traits of great managers are to realize when they made a mistake, take responsibility and change course. Thank you for listening to us and restoring faith and confidence in your leadership.”
–Flight Attendant

“Good decision. Thank you.”
–First Officer – B-767/B-757

“Thank you, Mr. Kirby!!! I know we all appreciate you listening to us. Have a good week!”
–Flight Attendant Intl

“Thank you Mr. Kirby…well done and a trait of a true leader. It takes courage to admit that the decision was wrong or not received by the employees as intended.”
–Captain – B-737

“Thank-you for reconsidering and (hopefully) keeping the previous program in place.”
–Captain – A-320

“Thank you for taking this necessary action. It’s nice to know our voices are being heard loud and clear.”
–First Officer – B-777

McDonald’s Just Had the Single Worst Day in Its Company’s History. Here’s What Happened

Have you tried the new not-really-a-Dollar Menu at McDonald’s?

According to the numbers, you probably haven’t. And that’s hurting McDonald’s, the world’s second-largest restaurant chain, to the tune of billions of dollars.

So much so, that McDonald’s just suffered the worst day in its entire history, at least by one metric: the total dollar drop and reduction in value that its stock lost in just one day of trading.

Shares of McDonald’s fell 4.8 percent Friday. The company is still worth $118 billion, so that means it lost enough value that theoretically you could have bought its much smaller competitor Wendy’s with the amount of the loss, and had a lot left over. 

That drop makes this reportedly the biggest one-day dollar decline the restaurant has ever suffered, at least going back to 1972 when data was first tracked.

Meantime, it’s been a rough two months so far. Traders who bet against McDonald’s stock by short selling it have made almost $200 million this year, according to another report.

I feel like I should point out that yes, while people are calling this McDonald’s worst day, it’s purely from a financial perspective. Nobody was physically hurt or anything, although from a corporate point of view it’s the finances that really matter.

The reason behind the drop is twofold, according to analysts: 

First, slow sales of the new “$1 $2 $3 Dollar Menu.” They expected it to boost the top line, and it’s just not working.

Second, an influential analyst’s report that spelled out not just how “disappointing” these sales have been, but also how the bit marketing investment in this revamped menu item may have had a ripple effect that hurt sales of other menu items, too.

The report came from David Palmer, an industry analyst at RBC Capital Markets, as excerpted on Marketwatch:

“Our sense is that the $1, $2, $3 platform stole attention from local marketing, particularly at breakfast, which likely slowed as a consequence. … In addition, we believe the menu’s position as a variety play… lacked the ‘hero’ item necessary to resonate with value-conscious consumers.”

“Lastly, we believe McDonald’s early signaling of this initiative may have invited a flurry of competitor responses and diminished its overall impact.”

That middle line, about the lack of a “hero” item, further explained: There are no french fries on the “$1 $2 $3 Dollar Menu.”

That may be the real scandal. And it makes me a little sad.

Maybe the right word is more “wistful” or “nostalgic.” Maybe you’ll relate in some way.

Years ago, when I was in college, my friends and I kept odd hours. Sometimes we were studying or writing. Other times, we were up to … less productive pursuits.

In the middle of the night in the middle of the week, we’d get hungry. And there was only one place within traveling distance of our college to get anything to eat: the McDonald’s inside a rest area on the southbound lanes of Interstate 95 in Connecticut.

What would starting, broke college students buy in the early morning hours on a random Wednesday? Burgers and fries from the Dollar Menu.

Yes, way back when, when I had almost no money and was starving, Mickey D’s was there for me and my friends. For old time’s sake, I think I’ll stop by and try them out again.

Maybe even splurge a $3 Egg McMuffin. Watch for a new analyst’s report, right?

Here’s the Story of the Stanford PhD Who Allegedly Gamed the Texas Lottery (and Won $20 Million)

I wrote recently about the husband and wife team out of Michigan who figured out how to game the lottery, and walked away with almost $27 million over the course of nine years.

But it turns out there’s a greater mystery in the world of lottery watchers. 

Her name is Joan Ginther, and she won the Texas Lottery at least four times in 10 years, while apparently buying thousands if not millions of dollars wroth of tickets.

Oh, did we mention she has a Stanford PhD in statistics, lives in Las Vegas, and yet repeatedly made the trip to a single store in rural Texas to make many of her purchases?

Yes, the plot thickens. And so far at least, nobody knows exactly how she did it.

There are several differences between Ginther’s lucrative story in Texas and that of Marge and Jerry Selbee in Michigan and Massachusetts.

For starters, there’s the fact that while the Selbees are now very upfront about how they made their millions, and were the subject of a very well written report recently on HuffPost, Ginther apparently went underground.

At last report, she lives in Las Vegas, but I can’t find that she’s ever given an interview. My attempts to track her down for this story amounted to nothing.

So, we’re left with reverse-engineering and speculation. 

By far the best attempt to decipher her strategy that I can find came from the work of Peter Murca, a reporter with Philly.com, who wrote about her at length in 2014.

As Murca tells the story, Ginther likely won her first jackpot in Texas the traditional way: blind, dumb luck, walking away with a $5.4 million jackpot in 1993, payable in annual installments over 20 years.

But Murca’s report suggests the experience led her to turn her Stanford training toward the goal of winning the lottery over and over.

And, after spending a considerable amount of time trying to unpack what she did, he comes to several conclusions.

First, he says, she figured out that while the lottery is ultimately a game of chance, logistics made it possible to ease the odds.

In sum, the fact that the Texas lottery had to ship thousands of scratch off cards to stores all over the state, made it possible for people who pay close attention to track how many tickets had shipped, how many prizes were left, and in which stores the likely winners might wind up.

Second, she may have had help. As Murca wrote:

Anna Morales, a worker in the local water department, filed claims for 23 prizes worth $1,000 to $10,000 in seven games from 2009 through 2012 — about as many as Ginther claimed but in half the time. Another $1,000 ticket was cashed by Morales’ husband, Noe, in 2011.

Pure coincidence seems implausible.

Since neither woman consented to be interviewed, and records don’t show who physically bought each winning ticket, let alone whose money was used, explanations for both women claiming so many winners range from generosity to imitation to teamwork.

Third, she apparently played the game of large numbers.

Meaning that over time, Murca concludes she bought a total of $3.3 million worth of tickets in order to win her total $20 million in winnings.

To be clear, that’s an amazing margin, if she figured this out. But it suggests she had figured out a statistical truth that required scale to come to fruition.

And, Murca says, she likely bit hard into her cost of goods, because many of those $3.3 million worth of lottery tickets were winners– just not for the massive multimillion dollar prizes that make headlines.

A few dollars here, a few hundred there, even a few thousand now and again–and Murca concluded the $3.3 million in tickets might have cost her only about $1 million.

To be clear, we don’t know exactly what happened.

The frustrating part about Ginther’s story is that we can’t wrap it up with a nice bow the way we can with the Selbees, or with the MIT students who also figured out how to game the Massachusetts lottery.

Ginther apparently hasn’t given interviews. (If you change your mind, Ms. Ginther, contact me!)

But I think there’s a lesson, even if it’s one I’d never put into personally with something like the lottery.

In every successful business, the founders either have unique access to private information, or else a unique application that can be executed with public information.

The question for any of us in business is: which strategy works best for you?