"...they’re... going to destroy far more more wealth for their contemporaries than they create for themselves..."
This is the trend, use less and less resources (approaching zero) to make society more and more efficient. I see both sides of this coin.
The first is that industries need disruption and resources need to be used as effectively as possible. This will help solve the many problems caused by resource constraint.
The second is that by disrupting the way current industries are run jobs are also destroyed. Craigslist disrupts classifieds and hundreds of news papers go out of business. We all rejoice, but there is a gap that is occurring that is troubling. What happens to the people who loose their jobs?
There is a gap between people loosing their job and jumping on the new train that is accelerating. Where does this bring us in 10, 20, 50 years and how do we bridge this gap?
The answer is (re)education, but where and how? 50% of students drop out of high school!
Education needs to be disrupted if we ever want to close this gap, the consequences if we don't are massive and will corrode any progress that is made.
It's too bad that no one is trying to disrupt education (except for Khan Academy, Coursera, Udemy, Lumosity, Knewton, Skillshare, CourseHorse, Inkling, Edufire ...)
I think it's more the status in society of formal education over alternatives rather than education itself that needs to be disrupted. People will still pay for more for the same education if it comes with a piece of paper from a recognised and well regarded institution.
We can only hope that the college bubble will be popped. Otherwise it may take several generations before this elitist attitude toward formal education is out of our systems.
> going to destroy far more more wealth for their contemporaries than they create for themselves.
"Destroy" is not the correct term. It is called creating efficiency. Reducing resources towards the same end is what increases wealth for everyone. While PG and the YCombinator crew might not capture all the wealth, they will capture enough to keep themselves satisfied and continue doing what they do, while tremendously increasing efficiency in the market and thus making everyone involved wealthier.
Assuming Matt's surface analysis is actually correct. I didn't put much thought in to that angle.
In response, institutional investors will do what they have always done: migrate to other sectors in which startups require substantial amounts of capital upfront.
At the moment, such sectors include green energy, robotics, medical devices, biotech, and military weapons -- to name just a few. (Try and launch a new medical-device startup without capital; it's not possible.)
In all likelihood, there will always be startup sectors that are starved of capital.
Misleading title. Better to use a term such as "venture capital" because "investing" is much broader.
Regarding the article, VCs might get disrupted by a large number of smaller groups pooling together to provide the same amount of massive risk capital. But what will not be disrupted is the need for massive risk capital to fund startups such as Facebook, Twitter, Pinterest, etc. There will be startups with tremendous growth where its monetization engine is non-existent or takes longer to develop and start running.
I think the dirty little secret is that, aside from the top-tier VCs, almost no one else ever made good risk-adjusted returns, outside of a short window in the late 90s.
There is disruption going on upstream.
Second markets are disrupting the IPO pipeline.
Independent high-frequency trading has taken over marketmaking from cartels of floor brokers and banks.
Independent registered investment advisers are disrupting stockbrokers.
Individuals are taking charge of their own portfolios with online tools, blogs, communities like StockTwits.
Still more cartels and dinosaurs are ripe for disruption.
I don't really agree about destroying wealth. Investment companies are financial intermediaries. To the extent they are disintermediated and the process becomes more efficient, the entrepreneurs and investors end up keeping more of their wealth instead the advisers. The intermediaries who really added value will still find a role, maybe as entrepreneurs, incubators etc.
In the case of newspapers/music there were institutions that used to pay for value-added activities that shrank or disappeared. There is a loss of institutional memory / structure / craft. But arguably there is not that much value add in most of the investment models that are getting disrupted and what replaces them is superior.
Independent registered investment advisers are disrupting stockbrokers.
That's definitely one that's under-appreciated. High-frequency trading gets all the press, but the stockbroker is a dying breed. People want more than someone who can buy and sell stock for them, since they can do it online easier and cheaper than with a broker.
I think two things that create large opportunity in this old, ripe-for-disruption market are personal service and a feeling of security. I know someone who is an account manager (kind of like a "hedge fund" manager for the average person) who earns his clients about 3% annually, and he does quite well. Three percent! The average rate of inflation! But with how volatile markets are and now quickly financial instruments change, people are really afraid of losing it all, so they hand their money to an expert to manage.
So anyway, if anyone is looking to disrupt the financial market in the years directly directly following a crash, personal service and guaranteeing security seem to be the key strategies.
This is the trend, use less and less resources (approaching zero) to make society more and more efficient. I see both sides of this coin.
The first is that industries need disruption and resources need to be used as effectively as possible. This will help solve the many problems caused by resource constraint.
The second is that by disrupting the way current industries are run jobs are also destroyed. Craigslist disrupts classifieds and hundreds of news papers go out of business. We all rejoice, but there is a gap that is occurring that is troubling. What happens to the people who loose their jobs?
There is a gap between people loosing their job and jumping on the new train that is accelerating. Where does this bring us in 10, 20, 50 years and how do we bridge this gap?
The answer is (re)education, but where and how? 50% of students drop out of high school!
Education needs to be disrupted if we ever want to close this gap, the consequences if we don't are massive and will corrode any progress that is made.