20+ years in tech and finance and I still can’t believe liquidation preferences are legal.
Even among shareholders, a group of insiders in a conference room can self-deal to keep all the money for themselves and screw common stockholders who had no representation in that room.
Without liquidation preferences BrewDog wouldn't have been able to get the investment. They may have been able to get a loan instead, but the interest would've driven them under that much faster and then the creditor, just like the preferred investor, would have priority over other shareholders.
Which isn't to say preference stacks (like debt stacks) can't get absurd when a failing company is doing anything it can to stay alive, but standard investor terms (1x liquidation preference) simply mean you're first in line to get your money back if the company is liquidated for less than the price you paid.
The self-dealing bit is generally already illegal and orthogonal to liquidation preferences.
Liquidation preferences that merely guarantee you get back the cash you put in before anyone else gets anything are a perfectly reasonable protection for investors.
Otherwise, the risk is investors put in $1m for 10% of the company, only for the founder-CEO to decide a month later - perhaps totally genuinely and honestly after initial R&D - that the entire business plan wasn't viable after all and the best thing for stockholders is to liquidate the company... and then walk away, personally, with $900k while returning only $100k to the investors. And obviously because this scenario is possible, there would be great temptation among dishonest founders to "realise" their companies "aren't viable" in order to walk away with all the cash. Something has to protect investors from this outcome, and remove the perverse incentive on founders to promptly liquidate after getting investment. A liquidation preference where the investor gets repaid before any distributions go to other stockholders is one way of achieving that protection; what alternative would you prefer?
As for liquidation preferences with a multiplier (i.e. we get paid back X times our investment before anyone else gets anything), eh, I wouldn't outright make them illegal, but it's less clear to me they are always serving a legitimate purpose, and they may grossly mislead the public about the actual valuation of the company implied by a given funding round AND mislead naive common stockholders and options holders about how much of the company they really own and what they can really expect to make in an exit.
I wouldn’t mind liquidation preferences with a multiplier so long as they are served after the 1x preferences. That way someone can’t come in and reap 900k on a 100k investment while the rest of the shareholders walk away with 1/10th of their investment.
This is actually percisely one of the main ingredients of a "(whatever) free market" - to put in a contract what you want as long as it is not against the law.
How were you screwed? Did they lie to you about liquidation preferences during compensation negotiations? Everyone knows that the most likely value of employee equity compensation in privately held companies is zero.
> Everyone knows that the most likely value of employee equity compensation in privately held companies is zero.
Most people (on the employee side) realize this is true if the company does not make a successful exit but only learn that the company can both exit AND their equity can be erased via dilution and preferences the first time they are screwed thusly.
You've got that backwards. Liquidation preferences typically go to early stage investors who receive special share classes. Those arrangements are fully disclosed to later stage investors. They knew what they were getting into and it's their own fault for making a sucker bet.
Not true (newer investors generally get seniority), but more importantly this is about common shareholders (generally employees and even founders) who never have the opportunity to get liq pref.
More importantly, employees with options are generally not sophisticated enough to realise liquidation preferences may exist and may dramatically devalue the common stock options they have, and even if they are sophisticated enough, they will often have no means to find out what liquidation preferences exist. (They theoretically have information rights that probably entitle them to that info, but companies simply find spurious excuses to refuse books and records requests, knowing no options holder is going to drop six figures on a lawsuit to exercise those information rights.)
By the time most of us are dead, I think we’ll have enough evidence that human systems mostly don’t work (this is a personal realization, just for ourselves, no one will be able to strip you have the realization). If it worked for you, congrats, you were lucky.
What sort of evidence are you looking for? The current general system of free-market capitalism and multiparty democracy has created an unprecedented era of prosperity for those of us lucky enough to live in (relatively) civilized countries. There are lots of problems that we need to fix but on average by almost any objective metric the situation is better than ever.
The thing about people in comfort is that they literally do not understand the concept of one too many on a fundamental level. One dollar is not enough. Similar, one person that goes without, that’s not enough either. You need millions to go without before the wrinkles even show up on some people’s faces.
“One too many” ills shatters the benchmark of “life is good”. Not good enough (that much … you may actually understand).
Can you prove it's not? At this point if anyone wants to propose an alternative then the burden of proof is on them. So far everything else that we've tried has failed disastrously.
I'm not making a judgement either way. You're saying that it's capitalism and multiparty democracy(i would question whether there's a difference between both the parties in the US, does it even count as multiparty?). China's the second largest economy in the world and there's no multi party democracy there.
Yes, if there's one thing I reproach Mark Zuckerberg, it's not that his company will occasionally enable genocides [0], but his crimes against fashion and good taste.
After reading the paper, it’s helpful to think about why the models are producing these coherent childhood narrative outputs.
The models have information about their own pre-training, RLHF, alignment, etc. because they were trained on a huge body of computer science literature written by researchers that describes LLM training pipelines and workflows.
I would argue the models are demonstrating creativity by drawing on its meta-training knowledge and training on human psychology texts to convincingly role-play as a therapy patient, but it’s based on reading papers about LLM training, not memories of these events.
I would not trust a company with no path to profitability with my medical health records, because they are more likely to do something unethical and against my interests, like selling insights about me to other companies, out of desperation for new revenue streams.
This video demonstrates reverse engineering of the x32’s main SoC, audio routing FPGA, and its two Analog Devices SharcDSP chips. By the end of the video the author demonstrates OpenX32[1] routing audio signals and applying EQ to multiple channels.
I’m not a fan of nanny-state policies, but I would support a law that imposes grave consequences for airline passengers found to be in possession of personal baggage following an evacuation.
Because seconds count and lives are on the line, passengers should be trained to treat baggage as if it is radioactive during an evacuation.
> would support a law that imposes grave consequences for airline passengers found to be in possession of personal baggage following an evacuation
My preference would be for a massive fine and one-year flight ban for the first offence, and triple that fine plus one year in jail plus lifetime for a second offence.
In all cases, you’re personally responsible for your injuries and those of anyone behind you.
> “That's a major skill that they're not used to at all,” she said.
i get it but I don’t know if I would catastrophize this, because analog clock reading is borderline anachronistic and can be taught and learned in probably an hour.
30% of NYC public school students are functionally illiterate in high school. There is zero chance you will be able to teach them analog clock in a day and forget about an hour.
this is exactly how I intuitively approach filters as an applied engineer. Does it give a ground path to DC (low frequencies) and pass the higher frequencies, or vice versa. If we change the capacitance how does the frequency response of the divider change?
The bring up of seemingly every tube guitar amp i’ve ever built starts with wild oscillation due to negative feedback from the wrong transformer secondary, aka positive feedback. Gets me every time.
Even among shareholders, a group of insiders in a conference room can self-deal to keep all the money for themselves and screw common stockholders who had no representation in that room.
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