The friend in question is an otherwise intelligent and well-educated young lady. She has had the benefit of an Ivy league liberal arts education, but when it comes to tech or investing, she is, alas, somewhat handicapped.
“Do you know what is a unicorn?” I asked. She did, at least she knew of the legendary animal, the horse-like creature with a spiralling horn in the forehead.
“Unicorn is VC-speak for a start-up with a valuation in excess of US$ 1 billion”, I explained. “At last count, there were 111 unicorns in the world, the most famous of them being Uber, Airbnb and Xiaomi. Unicorns are but one sign of a tech bubble” I cautioned.
- 87% of tech IPO’s were unprofitable in the 2000 bubble. Now the number is 89%. What does this mean? The public at large is investing in companies without a proven business model. Now if that isn’t a bubble, what is?
- A whole bunch of investors and funds are jumping into tech start-ups. VC investments in internet-specific companies are running at the highest levels since 2000. It is time to recall Warren Buffet’s dictum, “Be fearful when others are greedy”.
- When experts you have never heard of start saying “this time it is different”, it is time to run, run, run.
What is fuelling this bubble? As always, a combination of five factors – low interest rates, high levels of liquidity, lack of alternative investments, human greed and a near-fatal absence of historical memory.
The conversation with my friend took place nearly a month ago. I caught up with her this week. Did she invest in the start-up fund? But of course, a cool $50,000. Nothing changes!
Social psychologist Paul Piff, a Professor at University of California Berkeley, has done a large number of experiments to probe how wealth affects our behaviour. His studies include rigged games of monopoly, how people with expensive cars drive and whether wealth is more likely to make us take candy from kids.
In rigged games of monopoly, winners tended to attribute success to skill, completely ignoring how the odds were stacked in their favour. In the experiment with cars, Paul Piff found that drivers behind expensive cars were far less likely (than people driving inexpensive cars) to stop at a zebra crossing for pedestrians. And in the candy experiment, the rich had little compunction in stealing candy from kids.
Psychology experiments however are not like experiments in the hard sciences. They suggest how people behave in staged game settings. Do the findings (of such experiments) point to fundamental truths about human behaviour? Are these findings reproducible?
In a famous study, Professor Brian Nosek at University of Virginia invited 270 of his peers to repeat 100 published psychology experiments. The findings of this study were unsettling for the field of experimental psychology: while 97% of the original experiments reported statistically significant results, only 36% of the replicated experiments did.
However, it does appear that wealth is correlated with being less empathetic, less giving, less compassionate and more likely to engage in unethical conduct. Cause and effect however have not been adequately studied. Do we become rich because we are selfish, or does money have the negative effect of altering our behaviour and thinking?
One thing seems to be clear though, the rich do live by a different set of rules. As F Scott Fitzgerald famously observed, “Let me tell you about the very rich. They are different from you and me”.
Find out more about these studies at the links below:
Bill Gross – founder of IdeaLab, a business incubator focused on new ideas – wanted to know why startups succeed. He researched 200 companies, a 100 funded by his incubator and another 100. Bill’s research revealed that five factors drive startup success.
- Business model
One of these factors, however, has a huge influence on business success. Which one do you think it is? My guess was ‘Team’. Listen to Bill Gross’ TED talk (6 minutes) and find out.
Intriguing new research by Keith Chen, Associate Professor of Economics at the Anderson School of Management, UCLA, reveals that how much we save is strongly linked to the language we speak.
Languages can be classified into two broad categories – ‘Futured’ and ‘Futureless’.
Futured languages treat the future very differently from the present or the past. In English for instance, the past, present and the future are clearly separated – I ran, I am running, I will run etc. Arabic, Hindi, Malyalam are also futured languages. Futureless languages do NOT make a clear distinction between the future and the past or present. Mandarin, Japanese, German, Danish are some of the futureless languages.
Speakers of futureless languages are 30% more likely to save in any year and will retire with 25% more savings than speakers of futured languages. Not only that, they are 20-25% less likely to smoke and 13-17% less likely to be obese. What’s smoking and obesity got to do with savings? Plenty. Smoking and over-eating are negative savings – the pleasure is today, the health expenses will be in the future.
I speak three futured languages (English, Punjabi, Hindi). It’s a triple whammy – whichever language I think in, the future is way too distant to bother about saving money today!
Keith Chen’s TED talk on the subject is fascinating. Do listen.
Highly productive people do not work longer hours. In fact quite the contrary; on an average day they don’t even clock 8 hours. The secret (to productivity) it seems is frequent breaks. Take 15 minutes off every hour and see your productivity soar.
A growing body of research suggests that we have a finite pool of psychological energy. Work too long without a break and this pool of energy gets drained out. Schmooze with friends and colleagues every hour or so, over a coffee, and the pool of energy gets refreshed.
You know what to do now. Mail a copy of this FastCompany article article on the benefits of downtime to your boss. And bring some zing into your work life.