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WeWork proves that (venture) capitalism works

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What’s the lesson of WeWork?

Here’s a startup that has been a darling of Silicon Valley investors for years, whose offices and CEO have been stunningly painted across the covers of major trade magazines and strategically deployed across major tech conference stages, including our very own. At its peak, the company commanded a valuation of tens of billions of dollars and was supposed to be on course for the stratosphere, joining companies like Google and Facebook.

And then it all came crashing down, in literally a handful of days.

It’s easy to point to WeWork’s potentially 75%+ valuation drop, its looming layoffs, the firing of its CEO, and the seeming compression of a whole heck of a lot of investors and employee equity as a sordid disaster tale of capitalism, and venture capitalism in particular. VCs — none more so than Masayoshi Son at SoftBank — constantly overbought, oversold, and overcommitted to a company that had pretty much no business fundamentals whatsoever.

So what’s the lesson of WeWork for venture capital? In a word, nothing.

Venture capitalism is about investing in bold bets with huge, outsized returns. It’s meant to be risk-adjusted, both at the valuation scale but also at a portfolio scale. VCs should be buying equity at the right price to take into account every individual startup’s risk profile while also constructing a portfolio that selects each of those risks for the best overall return.

For WeWork, much of those dollars were driven by SoftBank’s Vision Fund, which seemed to double down again and again on the company, even at loggerheads with its own limited partners. The Vision Fund made a bet, seemingly with reasonable access to internal information, and that bet turned out to be wrong.

But a bet it was.

Many bets in venture turn out to be duds. Sometimes you lose some of your money. Sometimes you lose all of it.

And then sometimes you make it in spades. SoftBank’s Son once invested $20 million into a fledging Chinese ecommerce company called Alibaba. That stake is worth around $100 billion today, excluding an $11 billion stock sale a few years ago that was recognized on SoftBank’s financials earlier this year.

This is the math that Son sees in venture: 111,000,000,000 / 20,000,000 = 5,550x. There is no other asset class on the planet that will turn a dollar into thousands of dollars like venture capital.

WeWork’s woes don’t change this base formula. Nor does the continual drop of Wag, which received $300 million from the Vision Fund and looks to be going through tough challenges.

In any portfolio, there are going to be losses. The infamous J-curve in venture, where losses materialize far faster than gains in the early years of a fund, is alive and well — even at the growth stage.

And WeWork isn’t even dead yet — it still has cash, and it will rebuild. Will it be the largest startup turnaround in history? Possibly. Could it go straight to bankruptcy? Sure. Will the Vision Fund make money? Well, it really depends on that preference stack and a thousand other variables to be determined in the coming weeks, months, and years.

It’s all so early. My guess is that we still have about five years to go before we really start to get sufficient information to evaluate the Vision Fund’s ambitions.

Along this line though, I don’t think I just need to defend venture capitalism though, but capitalism itself.

Matt Stoller, who has made it his mission to target big companies including Big Tech, summarizes the WeWork situation as emblematic of “counterfeit capitalism,” a system of founding story myths and fake growth charts underwritten by venture capitalists trying to build long-term, sustainable monopolistic companies using predatory pricing to kill off competitors.

Yet, that narrative totally misses the point of what capital does, and what investment means. Very, very few companies (venture-backed or not) are profitable from day one. Opening a restaurant requires buying equipment and signing a lease well before any customer walks in through the front door. Ditto for software startups, which need to actually build software before a user will pay for it. Capital investment is the bridge between plans to execution and launch.

The question is how long should a company be unprofitable to goad sales and drive revenues? A decade or two ago, it used to be that companies needed to be profitable to IPO. But why? Why precisely then should a company slow down its investment and clean up its cash flows? Why not earlier? Why not later?

In fact, something great has happened in the last few years in the credit markets: at least some investors are increasingly positioning their portfolios for growth rather than cash flows. They are willing to wait for profits, sometimes for years.

Or, in other words, more and more investors are thinking long-term about the ultimate potential worth of a business.

WeWork could be profitable today. It could shutter its most recently opened locations, condense down to a handful of locations in major cities, and roll around in its positive cash flow. Of course the Vision Fund understands this. But why lock in small gains today when there is so much more potential lurking out there?

We should be cheering this behavior, and not castigating it, even if WeWork itself might turn out to be a dud. The lesson of this whole saga isn’t that capitalism isn’t performing. In fact, it’s precisely the opposite: (venture) capitalism is performing better than ever to invest in future, long-range growth.

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OpenAI Introduces ChatGPT Plus with Monthly Subscription of $20

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Open AI - Chat GPT

OpenAI, the leading artificial intelligence research laboratory, has launched a new product – ChatGPT Plus. The new product is an advanced version of its previous language model, ChatGPT, and is available for a monthly subscription of $20. The company aims to provide a more sophisticated and efficient conversational AI tool to its users through this new product.

ChatGPT Plus is a state-of-the-art language model that uses advanced deep learning algorithms to generate human-like responses to text inputs. The model has been trained on a massive corpus of text data, allowing it to generate coherent and contextually relevant responses. The model is designed to handle a wide range of conversational topics and can be integrated into various applications, such as chatbots, customer support systems, and virtual assistants.

One of the main advantages of ChatGPT Plus over its predecessor, ChatGPT, is its ability to generate responses in a more human-like manner. The model has been fine-tuned to incorporate more advanced language processing techniques, which enable it to better understand the context and tone of a conversation. This makes it possible for the model to generate more nuanced and appropriate responses, which can greatly improve the user experience.

In addition to its advanced language processing capabilities, ChatGPT Plus also offers improved performance in terms of response generation speed and efficiency. The model has been optimized to run on faster hardware and has been fine-tuned to generate responses more quickly. This makes it possible for the model to handle a larger volume of requests, making it an ideal solution for businesses with high traffic websites or customer support centers.

The monthly subscription fee of $20 for ChatGPT Plus makes it an affordable solution for businesses of all sizes. The company has designed the pricing model in such a way that it is accessible to businesses of all sizes, regardless of their budget. This makes it possible for small businesses to take advantage of advanced conversational AI technology, which can greatly improve their customer engagement and support.

OpenAI has also made it easy to integrate ChatGPT Plus into various applications. The company has provided a comprehensive API that allows developers to easily integrate the model into their applications. The API supports a wide range of programming languages, making it possible for developers to use the technology regardless of their preferred programming language. This makes it possible for businesses to quickly and easily incorporate conversational AI into their operations.

In conclusion, OpenAI’s launch of ChatGPT Plus is a significant development in the field of conversational AI. The new product offers advanced language processing capabilities and improved performance, making it an ideal solution for businesses of all sizes. The affordable pricing model and easy integration make it accessible to businesses of all sizes, and the advanced language processing capabilities make it possible for businesses to improve their customer engagement and support. OpenAI’s ChatGPT Plus is set to revolutionize the conversational AI industry and bring advanced technology within the reach of businesses of all sizes.

Visit OpenAI.com to read more and to get the latest news about ChatGPT.

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What can ChatGPT do?

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ChatGPT Explained

ChatGPT is a large language model developed by OpenAI that is trained on a massive amount of text data. It is capable of generating human-like text and has been used in a variety of applications, such as chatbots, language translation, and text summarization.

One of the key features of ChatGPT is its ability to generate text that is similar to human writing. This is achieved through the use of a transformer architecture, which allows the model to understand the context and relationships between words in a sentence. The transformer architecture is a type of neural network that is designed to process sequential data, such as natural language.

Another important aspect of ChatGPT is its ability to generate text that is contextually relevant. This means that the model is able to understand the context of a conversation and generate responses that are appropriate to the conversation. This is accomplished by the use of a technique called “masked language modeling,” which allows the model to predict the next word in a sentence based on the context of the previous words.

One of the most popular applications of ChatGPT is in the creation of chatbots. Chatbots are computer programs that simulate human conversation and can be used in customer service, sales, and other applications. ChatGPT is particularly well-suited for this task because of its ability to generate human-like text and understand context.

Another application of ChatGPT is language translation. By training the model on a large amount of text data in multiple languages, it can be used to translate text from one language to another. The model is able to understand the meaning of the text and generate a translation that is grammatically correct and semantically equivalent.

In addition to chatbots and language translation, ChatGPT can also be used for text summarization. This is the process of taking a large amount of text and condensing it into a shorter, more concise version. ChatGPT is able to understand the main ideas of the text and generate a summary that captures the most important information.

Despite its many capabilities and applications, ChatGPT is not without its limitations. One of the main challenges with using language models like ChatGPT is the risk of generating text that is biased or offensive. This can occur when the model is trained on text data that contains biases or stereotypes. To address this, OpenAI has implemented a number of techniques to reduce bias in the training data and in the model itself.

In conclusion, ChatGPT is a powerful language model that is capable of generating human-like text and understanding context. It has a wide range of applications, including chatbots, language translation, and text summarization. While there are limitations to its use, ongoing research and development is aimed at improving the model’s performance and reducing the risk of bias.

** The above article has been written 100% by ChatGPT. This is an example of what can be done with AI. This was done to show the advanced text that can be written by an automated AI.

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Google December Product Reviews Update Affects More Than English Language Sites? via @sejournal, @martinibuster

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Google’s Product Reviews update was announced to be rolling out to the English language. No mention was made as to if or when it would roll out to other languages. Mueller answered a question as to whether it is rolling out to other languages.

Google December 2021 Product Reviews Update

On December 1, 2021, Google announced on Twitter that a Product Review update would be rolling out that would focus on English language web pages.

The focus of the update was for improving the quality of reviews shown in Google search, specifically targeting review sites.

A Googler tweeted a description of the kinds of sites that would be targeted for demotion in the search rankings:

“Mainly relevant to sites that post articles reviewing products.

Think of sites like “best TVs under $200″.com.

Goal is to improve the quality and usefulness of reviews we show users.”

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Google also published a blog post with more guidance on the product review update that introduced two new best practices that Google’s algorithm would be looking for.

The first best practice was a requirement of evidence that a product was actually handled and reviewed.

The second best practice was to provide links to more than one place that a user could purchase the product.

The Twitter announcement stated that it was rolling out to English language websites. The blog post did not mention what languages it was rolling out to nor did the blog post specify that the product review update was limited to the English language.

Google’s Mueller Thinking About Product Reviews Update

Screenshot of Google's John Mueller trying to recall if December Product Review Update affects more than the English language

Screenshot of Google's John Mueller trying to recall if December Product Review Update affects more than the English language

Product Review Update Targets More Languages?

The person asking the question was rightly under the impression that the product review update only affected English language search results.

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But he asserted that he was seeing search volatility in the German language that appears to be related to Google’s December 2021 Product Review Update.

This is his question:

“I was seeing some movements in German search as well.

So I was wondering if there could also be an effect on websites in other languages by this product reviews update… because we had lots of movement and volatility in the last weeks.

…My question is, is it possible that the product reviews update affects other sites as well?”

John Mueller answered:

“I don’t know… like other languages?

My assumption was this was global and and across all languages.

But I don’t know what we announced in the blog post specifically.

But usually we try to push the engineering team to make a decision on that so that we can document it properly in the blog post.

I don’t know if that happened with the product reviews update. I don’t recall the complete blog post.

But it’s… from my point of view it seems like something that we could be doing in multiple languages and wouldn’t be tied to English.

And even if it were English initially, it feels like something that is relevant across the board, and we should try to find ways to roll that out to other languages over time as well.

So I’m not particularly surprised that you see changes in Germany.

But I also don’t know what we actually announced with regards to the locations and languages that are involved.”

Does Product Reviews Update Affect More Languages?

While the tweeted announcement specified that the product reviews update was limited to the English language the official blog post did not mention any such limitations.

Google’s John Mueller offered his opinion that the product reviews update is something that Google could do in multiple languages.

One must wonder if the tweet was meant to communicate that the update was rolling out first in English and subsequently to other languages.

It’s unclear if the product reviews update was rolled out globally to more languages. Hopefully Google will clarify this soon.

Citations

Google Blog Post About Product Reviews Update

Product reviews update and your site

Google’s New Product Reviews Guidelines

Write high quality product reviews

John Mueller Discusses If Product Reviews Update Is Global

Watch Mueller answer the question at the 14:00 Minute Mark

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Searchenginejournal.com

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