You are technically correct BUT when founders see that they get better ROI via the investor model, rather than 'sustainable development', it's technically rational to do just that. All it means is that there are probably millions of retirees who'll get stuck with all those losses, because the investment model depends on the greater fool theory, and if I understand how IPOs work, those are mostly retirement funds.
It's rational only in the same way that Vulcans are always logical (as Star Trek writers would have you believe).
Rationality is a tool to help you achieve your goals and realize your values better. Any particular method can only ever be rational relative to some goal one is seeking.
I think you're both talking past each other a bit. The difference is between maximizing short-term gains and maximizing long-term gains.
The thing about investing is that you can take advantage of maximizing short-term gains and get out before the investment would crater. So taking advantage of a non-sustainable business model is fine if you can get out before the bill comes due. This is rational, but not sustainable.
If you're running the company, and you care about it, and its employees, then you want something sustainable in the long-term.
Yeah but for most people, $$$ is a very important goal and, when sufficiently large, overrides most others. Especially other goals in the professional space.
> It's rational only in the same way that Vulcans are always logical (as Star Trek writers would have you believe).
But Star Trek writers wouldn't generally have you believe that (they'd have you believe that some Vulcans themselves would believe that and/or have others believe that and/or seek that.)
> Rationality is a tool to help you achieve your goals and realize your values better.
Rationality isn't a tool, it is perfectly optimal goal seeking.
> Any particular method can only ever be rational relative to some goal one is seeking.
Well, no, it's relative to the utility-weighted combination of all of your goals; that is, rational behavior is whatever behavior optimizes your complete utility function, not just addresses one of your goals in isolation.
> Rationality isn't a tool, it is perfectly optimal goal seeking.
I think you just agreed with the comment you're trying to disagree with. To paraphrase your comment: "rationality is a tool for achieving one or more goals".
If not a tool, what would you describe it as? Animal instincts - the kind we're hard-wired with - aren't "rational" in the context of human society so being rational is in some sense a choice. The only way to define this away is to extend the definition such that all human behaviour is "rational" because it's meant to fulfill some conscious or unconscious goal. But this definition is useless!
Utility weighting is fine and good, but rationality in the long term is definitely constrained by uncertainty. Rationality cannot be perfectly optimal, because perfection would require closed ended choices. If you don't know the size of a factor like uncertainty, you cannot rationally assign it a utility weight.
They rarely get better ROI. It's true that a small percentage of something huge is better than owning all of something small... but this is entirely contingent on getting huge and that's incredibly rare. Even if you get big, exits aren't guaranteed and many still fall after massive valuations.
Acquirers are few and far between and rapidly diminish once you cross the $50M mark. Going public is even more difficult. And after all that, once you add in dilution and liquidation preferences, founders can still end up with nothing.
Meanwhile many of these companies can build great sustainable businesses that meet customer needs while making plenty of margin and owning their own destiny. It's a SV cultish attitude to think that VC is the way to get things done, and I've seen way too many founders whose first thought is to raise money before they even have a serious plan for a business.
It depends whether you are rationally trying to maximize your own profits at any cost, or acting in a way that is also good for others. It's possible to seek evil ends in a rational way.
> That sounds like a great plan if you're not going to be a retiree in a few decades. Maybe you plan on dying early?
No, I'm saying investing while things are hot, and selling before it cools down is a way to maximize profits. It doesn't require sustainability. There are a ton of millionaires from the Dot Com boom in the early 2000s that got theirs and got out before the bubble broke. It works; it just leaves a _lot_ of collateral damage, so it's not a moral thing to do. But it works. That was my point.
> Teaching people how to kick someone when they're down isn't rational. It just means that you're going to get kicked when you're down, too.
There are a lot of rich people that would laugh at this. I'm not saying it's good, I'm saying it's rational.
> There are a ton of millionaires from the Dot Com boom in the early 2000s that got theirs and got out before the bubble broke.
And there's a lot of not-millionaires who tried that and missed the window by that much.
> But it works. That was my point.
It works sometimes. But it's unreliable. Maybe you get lucky, and maybe you don't. That's not being rational, that's just plain old gambling. Some people became millionaires from scratch-off tickets, too.
