How else to explain the mad dash to invest in Clubhouse at any price? A high price signaled a more competitive round, which meant more social status for getting in.
In some ways, startup equity behaved more like a Veblen Good - one that paradoxically sees more demand as the price goes up - than like an investment. In San Francisco, owning a Ferrari wasn’t nearly as cool as owning pre-seed shares in Stripe or Uber. The social returns to angel investing have a strong geographical network effect, because they require a threshold density in order to kick in. The social rewards of angel investing solve an important chicken-and-egg problem in early stage fundraising that financial rewards do not. Īngel Investors in the Bay Area don’t just invest for the financial returns they also invest for the social returns. In November, back when San Francisco was still more physical place than state of mind and most people associated Corona with lime, Alex Danco wrote an excellent post called The Social Subsidy of Angel Investing. But what if they’re not? Investing in Social Status Soon, serious people argue, things will go back to the way they were. But if recent tech history is a guide, technology’s ultimate impact on finance will be less about further entrenching incumbents it will empower consumers.Ĭonsumers are participating directly in the market in greater numbers than ever before, but every analysis I’ve read treats increased retail participation as a temporary COVID-induced blip, and retail traders as irresponsible and irrational gamblers just looking to have a good time. High-speed trading accounts for an increasingly large percentage of activity, and institutional investors will spend millions or billions on any tech that gets them a slight advantage. Of course, technology has impacted finance. The list goes on.īut despite that, we operate under the assumption that financial markets are somehow different, impervious. A private company, SpaceX, is doing things that NASA can’t. Millions of people now earn livings in the Gig Economy or the Passion Economy. Netflix put a dent in cable’s long standing dominance, and already TikTok and Fortnite threaten Netflix. Software has fundamentally altered nearly every industry.
I’m kind of mad at myself for typing these words right now. With nine years of hindsight, he was so obviously right that it’s cliché to cite it today. In 2011, Netscape and a16z founder, Marc Andreessen, wrote a guest post in the WSJ titled Why Software Is Eating the World.
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