SUPER SMASH-UP BROS.
The ritual behind funding contemporary start-ups reflects how poorly we are planning our collective future.
Welcome to the age of the Cybertruck. If you had a doubt about a future devised by the celebrated figureheads from the mystified start-up scene: look no further. Elon Musk recently unveiled his Minecraft-Madmax-Batmobile with an armored body, bulletproof windshields and a supercharged electronic engine. Pre-orders flooded in as expected, despite the somewhat failed unveiling. During a demonstration of the windshield’s resistance, the window just cracked. Gasp. Tesla's market shares plummeted and Elon Musk lost about half a billion in his own valuation immediately in that moment. Doesn’t that make you cringe? A bit? Do you get the feeling we are on the right track?
Remember Fyre Festival?
Remember Maryanne Rolle— the restaurant owner on Exuma Point (the island on which the Fyre-Debacle ultimately took place)? She ended up losing all her life-savings on feeding all the day-laborers that had built the festival site first and neglected festival guests after. Like so many on the island she was not paid for her tireless efforts over months to put together a festival which would never actualize. While Billy McFarland— co-founder of Fyre and convicted fraudster— managed to haul in and completely shred approx. 30 million USD in investments, even the smallest cogs in the clusterfuck he created, went unpaid. Not only Pamela but everyone who was hired on Exuma Point to help build this late-stage-capitalistic wet nightmare were not paid for months of arduous work.
On the morning after watching those gruesome FYRE-Festival documentaries and feeling hungover from the taste they left, I chanced upon a post on social media. It was published by somebody in the US who ran an incubator for women from marginalized communities. The post commented on the no questions asked manner in which Billy was handed millions. It described on the other hand the rigorous scrutinization given to all her candidates before funding was awarded. Impeccable papers and records, substantial and waterproof business planning and extensive auditing of all documents is a minimum. The typical maximum amount funded: about 10,000 USD. That matches about 0.03 percent of FYRE’s budget. Whomever assumes this only expresses a financial prioritization is wrong. With this blatant double standard for investment, we inadvertently end up expressing our lower appraisal of these women’s ideas, and that they’re less trustworthy and have a significantly smaller claim in shaping our future. What is it that makes us choose Billy and Elon over all others in a heartbeat?
Fyre-Billy— the outburst of privilege he is— needed only open his mouth and fake some numbers to be sufficiently vetted for tens of millions. The damage he created and the theft from poor people he orchestrated wasn’t stopped until it all fell apart in a disastrous and hugely televisable calamity.
McFarland is only one tragic and nauseating punchline of a much greater phenomenon we’ve submitted ourselves to. On the spectrum of the world I call Super Smash-up Bros, reside calibers such as Elon Musk and Jeff Bezos. Not only do they seem impervious to any known or emerging business and public relational dynamic or consequence; they actually are. All they have in common— aside from genitalia and complexion— is a remarkably steep risk curve underlying their decision making. In the scenario they chose for themselves and in which we enable them, it is perfectly normal to have half a billion USD wiped out when a car window breaks in the wrong moment. We have intoxicated ourselves on a high risk bonanza and a familiar sense of business-boy-moxie that gallantly lights this bushfire of financial, logistical and operative risks. The resources at stake that ought to benefit us all collectively, are desperately needed in order to enact any vision of a functional system over the next crucial decades.
Almost none of these supermassive-investment-black-holes have managed to create and establish profitable business models that replenish their operations from their core business. Scaling effectively only means acquiring market shares with utmost aggression. They can scale, but they cannot monetize. Many of them never seem to be really short on funds however. Our societies simply throw money at them. Venture Capital, Investment Funds, private large and small investors. We all end up embracing, affirming and rewarding Elon’s, Jeff’s, Mark’s, Trevor’s, and yes! Billy‘s decision making and risk evaluation. The chase for returns—any returns!—abounds. No time for proper valuation. No scrutiny, no questions asked. Not only are our investment and banking systems are addicted to Super Smash-Up Bros steep risk curves: we all are.
We end up with these strange bedfellows that we hand extensive capacities on deciding how we want our collective futures modeled. Jeff Bezos gets to decide how we consume. Travis Kalanick decides how we look at transportation. Elon is put in charge of how we do space (and brain chips). On top of that, we inadvertently pair them with old, last-century market tactics of shareholder prioritization and dividends. We make them answer not to us but to their investors where their (at times, highly misguided) ambitions are put on steroids. They boom and bust like Mad Max is all over us.
Genuine cognizance is there and it is not to be underestimated.
In its IPO papers, UBER admitted they might never make a profit from their core business. The more we use UBER ride shares, the more the company loses money. Its valuation propped up by venture capital frees them from any consequences that would follow for almost anyone else. They get to continue doing their thing no matter what and we allow them to do what they like best. Giving into their bloodthirst for market shares. Controlling our behavior. Destroying entire sectors and how people used to work and earn their living within those sectors. This is not to advocate against good and desirable change but why these agents of change? We have opened the seals for these riders of white, red, black, and pale horses.
UBER’s target is clear: “We want UBER to be the operating system for your everyday life”(1)— and so the rest of us consent. The mandate is financial and backed from investment banks and selected others. Smash those cabbies into a new precariousness for us, will ya Travis?
The recent case of WeWork starkly foreshadows a paradigmatic change. Backed by Softbank, a multi-billion investor from Japan, who invests money acquired from Saudi-Arabia, the company unraveled over the summer of 2019 before everyone’s eyes. Within six weeks the once 47 billion USD valued company almost went bankrupt. The business model mixed up mid and long term financial risks in a way that the company was just not made to last (pyramid much?). Any change in the real estate market over the past nine years would have been enough to drown the underlying design of the company. Who would’ve thought? The model doesn’t work to a degree that the nine years it has lasted could be considered miraculous had it not been for those petrodollar dealers that kept it going. Softbank’s CEO reportedly met WeWork’s CEO for about 18 minutes before going ahead with his initial investment in the company of 4.5 billion USD.
Another component that plays a pivotal role is referred to as the age of the central banks. Since the last financial crisis central banks have implemented an unprecedented fiscal expansion. Many fiscal instruments once considered only beneficial in the very short term—effectively meaning within disaster mode— have been propped up for years now. Central banks seem to want to wipe out any insecurities in the financial market and have therefore flooded western money markets with cheap money, which recently, again, has led to quakes in the fundamental mechanics of our financial markets (2). Some already prophesize the nearing collapse of a debt bubble that may be larger than what we saw ten years ago.
WeWork deleted an amount of money larger than Jamaica's GDP
For a bullshit business model and some cheap 21st century glass beads. Does it still even surprise that WeWork-founder and CEO Adam Neumann was pardoned with a golden handshake and retired somewhat unscathed? It comes with the picture that Neumann created a cult-like air fueled by erratic behavior in the workplace. Because why not? The adverse effects on the rest of society remain. Have we become so disillusioned in our hope for functional future solutions that we tolerate, even celebrate, these bros?
WeWork was once valued at almost 50 billion USD. Crazy? Crazy. Now, it is valued at about 8 billion USD, which is most likely still too high on the same kind of crazy. The remaining 8 billion. USD is held by Softbank rendering it in almost full control over the company. In some weird eclipse of our common existence, WeWork was once considered the bright future of office jobs and young people rushed to sign up. What? They still hold the real estate though, they still employ the onslaught of resources that are leading nowhere.
WeWork even got the Financial Times to wonder. Somehow, companies have been retreating from public stock markets. Even the little scrutiny and vetting these fora offer, seems to be too much to handle for a lot of these start-ups. After an IPO, stocks often plummet, more money gets burned. In the wake of WeWork we begin to realize that many of these so called market titans— UBER, Lyft, slack, dropbox, fitbit, beyond meat— are all underwater. They all are trading below their IPO prices, at times significantly. It is as if two dysfunctional systems collided and decided to go up in smoke together. Bye start-ups. Bye financial markets.
After Facebook went public in 2012 its release price was set at $38/share. In a matter of weeks it fell under $20. What went wrong? Facebook's stock is remarkable in many ways. It was one of the biggest IPO and later went on to break the record of the greatest loss in history: almost 120 billion USD in one day. CBS reported: Founder and CEO Mark Zuckerberg saw his fortune drop by $15.9 billion to roughly $71 billion. His personal loss alone, if only on paper, exceed the value of companies such as Molson Coors and Macy's, which have market values of $14 billion and $12 billion, respectively(3).
Do you think the Saudis, who’re investing in Softbank, who in turn invested in these young bloods (WeWork and N26), ever expect returns on their investment? Dividends? They don’t.
Many of these huge early-internet-late-stage-capitalism behemoths famously defer ever paying out a dividend. “Companies are staying private for longer and getting funded longer,” says Jim Cooney, head of equity capital markets for the Americas at Bank of America, reads the Financial Times piece further (4). This is where these companies are heading. Where money is truly private and unaffected even by the little control stock markets exert. Sustained by the dark-web equivalent of money, they fulfill their assignments by continuing the paradigm of endless growth and by imprinting their ideas of “how to future” on the rest of us.
Since those early crises, the overall direction of Facebook's stock has been going up. It is now valued at about 170 USD each. Endless internal policy changes in the company made this possible. Ads were introduced to mobile devices soon after the IPO. Algorithms were reprogrammed in order for everyone running a site on facebook to be incentivized to pay more. And now dark money pours into Facebook, to facilitate political campaigns that fuel worldwide populism and populists. We need not wonder about the company’s dark turn emboldening mass data driven manipulation like Cambridge Analytica. We only need to wonder why we created a Pharaoh along the way.
Netflix is nearly 10 billion in debt. By the end of 2020 the company will have amassed another 8-9 billion in debt. A lot of it is owed to content creators, arguably the precariat in the supply chain of gritty documentaries and zesty shows. What’s the exit strategy? Increasing consumer fees hasn’t ameliorated the dilemma for the company. Membership numbers are stagnating. It begs the question: Who will bear the fallout when it happens? The streaming company has maneuvered itself into a corner where the only way out is to be bought at some point and survive until then on people’s trust and investments. There are very few players who could both afford to buy Netflix and would have a vested interest to do so. Disney and Apple come to mind. But they have established their own streaming platforms and unless they’re keen on a merger, they would both be happy to see Netflix go down.
In the art market, the platform Artsy has made a name for itself, with a fresh business attitude and business model no one truly understands.
The platform seeks to facilitate discovery and collection of artworks. Landing on their website, you can contact the gallery for a Warhol with just two clicks. Who’d pay for that to be developed? Exactly! The super-rich! The list of investors includes the Jared-Kushner family, Wendi Murdoch, vampire Peter Thiel and Dasha Zhukova- Russian oligarch Roman Abramovitch’s partner. Artsy is currently valued at more than a quarter billion USD. You threw up in your mouth, right?
The examples are manifold and they are all around (look up Rocket Internet in Germany). What is more profound to realize though, is why we hand out these mandates is not to make money! But rather to shape sectors of productivity and self-expression in the image of these companies and under the directorate of these investors.
Why— and I’ll simply just ask— don’t we invest in real communities? Not those that need to spend gigantic budgets to pretend they are. Why doesn’t even a tiny fraction of unvetted money flow into that incubator for women? Why do we not regain our resources and control over our future and instead leave it to the whims of a new monarchy of business brothers? Elon Musk is new Louis XIV. Jeff Bezos consequentially being Marie Antoinette feeding us Prime-Memberships along with the system workplace abuse of warehouse employees. It’s the cake of our times.
Isn’t Detroit trying to cope with its future with the harsh deck of hands they were dealt at the beginning of this economical epoch? Don’t we expect creative solutions from there? Instead of Hydroponic Warehouses with shareholder dividends, we could invest in Detroit’s sprawling and decentralized guerrilla vegetable gardening campaigns. Not out of romanticism but for our own survival. We won’t get financial return on this investment but we might learn a new tool for a hopeful sustainable future. Saudi-money-free.
Our resistance to do so, says two things about us. Either we can’t imagine these people in Detroit to be our teachers. Or we gave up our hope in small scale functional models in front of the backdrop of a burning planet. Instead, we do what we’ve done so far. We repeat and retreat to the same mistakes we did in affording the most power and most wealth to a group of mostly privileged males. We are enabling UBER-Travis with his UBER-complex to smash all cab unions. Make a new precariat for us, Travis! Make people’s already hard life a bit more miserable, just so we can feel like we’re in the future already… any kind of future, even if it aches just so dystopically.
Instead of trusting our own power to collectively rethink functional approaches for the future, we have handed a financial mandate to a big-boys-club that scales and smashes. Exhales magma and retracts.
We are capable of identifying real communities and their needs and investing in them in order to find functional models.
My hint: look for what sets out to heal. Rehabilitation over restoration (speak: Elizabeth Warren over Joe Biden) will be the inevitable paradigm of our times. If you set out to rehabilitate say a community, like Detroit, you’ll deliver what our modern times demand— healing resources for the many instead of resource exploitation benefitting only the few. Here, you can expect a fundamental return on your investment.
In our addiction for more growth we want to trust the Billys and Travis’ and Marks and Jeffs and Elons and Adams and Peters and Jareds. Enough with it, don’t you think? How many Maryanne Rolle (the restaurant owner from Exuma Point) will we let bear the consequences of another overfunded, under-scrutinized business-bro blow-out? Aren’t we sacrificing urgently needed capacities, space, time and resources that we need to heal our planet, our food, our minds, and our kids who have grown up amidst the superlative of inequality created on this planet? That have seen hyperrealistic asymmetric warfare and forced migration? Let's take SMASH-UP BROS— their endless posturing, their dark money and paper-thin ideas— out of our future.
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