WTF?: What's the Future and Why It's Up to Us

by Tim O'Reilly

Over the years, it became clear to me that many of the companies in the technology industry we are part of were playing by very different rules. They were not getting paid by exchanging goods and services with customers, but by persuading investors to give them money. Perhaps customers would come along eventually, but as long as the company could find investors to finance their next round, perhaps all the way to an IPO or acquisition, a company could just have “users” instead of customers. Early in my career, venture capitalists still funded entrepreneurs in the hope that they would build companies with real revenues and profits, but in the years leading up to the dot-com bust, it seemed that the game had changed. Entrepreneurs were not creating true companies but a kind of specialized financial instrument, a financial bet not that dissimilar to the CDOs that bedeviled the banking industry in the years leading up to the 2008 financial crisis a decade later. I see much of the same misdirection of entrepreneurial energy in today’s overheated Silicon Valley boom. These companies, often sold for billions of dollars, are valued not based on some multiple of their sales, profits, or cash flows, but for expectations of what they might become, promoted like fake news in a market of attention. This effect is central to understanding the hypnotic allure of financialization.