Vultures: Why are vultures dying in large numbers around the world? What else happens when the vultures decline? And let’s ask the question few are comfortable asking: How much is a species worth?
Ventures: Why do well-funded, fast-growing startups die? What else happens when they die? And let’s ask the question that is often ignored: Who wins in the process?
Vultures: Why are they dying?
Few love vultures. They are not generally thought of as beautiful birds. They eat carrion. They fly in ungraceful arcs and hop heavily on the ground. Their other name, buzzard, doesn’t help either
By the way they’re perceived and treated, vultures were never going to be at the top of many lists of favorite birds.
Even so, something strange started happening in the 1990s, and especially in India. Suddenly, vulture populations started to die off for no obvious reason. They weren’t being hunted, didn’t have their food sources suddenly cut off, and weren’t intentionally poisoned. The decline was rapid. Total mortality of the Indian vulture population (and to a lesser degree other populations) has been estimated at 97% – 99% in just 10 – 15 years.
The vultures are dying because of an unexpected consequence of eating carcasses of cattle that had been treated with diclofenac, a painkiller, in their last days of life. Ingesting diclofenac causes kidney failure in vultures, something that was never expected and which took years of forensics to uncover. Even understanding the kidney failure, the related question is, how could this drug make such a big difference in population so quickly?
The problem is, only vultures make vultures.
Indian vultures reach maturity at five years of age, laying only one egg a year. In the best case, where every egg hatches, every bird survives to maturity and reproduces, recovering the lost population will take a long time. In that scenario, assuming no mortality cutting lifespans short and every egg surviving, over 15 years (which I chose since it was the length of time during which the population declined) one vulture then produces 8.75 new vultures (their chicks and their chick’s chicks).
15 year stream of vulture production from above (it takes two vultures to produce one egg, so the math shows partial vultures for next generations). Sum over 15 years = 8.75.
To see the population rebound as quickly as it fell, in this best case scenario, would instead require one vulture to produce 33 to 100 vultures over 15 years. In other words, it will be a long time until the vulture population recovers, if it ever does.
The other question is how widespread must diclofenac be to have killed so many vultures? Here, I’m seeing estimates of very low diclofenac usage in cattle shortly before death, something around 1 in 700 or 1,000. That’s enough though, because many vultures can feed on one dead cow, they feed many times a year, and diclofenac has a high kill rate.
What we have here is a reverse scaling problem. Rather than a problem of fast growth — the more common scaling problem to notice — this is a problem of fast decline. Take the high chance that vultures will eventually encounter a cow carcass with diclofenac and the high kill rate, and combine that with vultures’ low replication rate and the result is population decimation.
(The earlier post on the Cobra Effect also looked at the impact of species propagation as a way to guard against second-order effects in a changing system.)
What else happens when they die?
The second-order effects of the drop in vulture population are also visual. When vultures die, animal carcasses remain on the ground longer. This means that humans then must dispose of the rotting animals, other less desirable scavengers are attracted, and there is more exposure to disease.
In India, the declining vulture populations meant that feral dogs replaced them as scavengers of dead cattle. It’s also been noted that as a result of the greater presence of feral dogs (and I assume their growing populations), many more people have suffered from dog bites and infections like rabies.
Vultures have stomach acid that kills cholera, botulism and anthrax, but that didn’t help them in this case. Nothing the vultures could do would prevent this decline. There was no time to learn to stay away from cattle, which might have happened, for example, if they became sick rather than died from diclofenac.
The worth of a species
If endangered species had a PR unit within their population they’d want to take steps to increase their numbers. Become the symbol of a nation or some powerful group in order to find people who would support the species in tough times. They’d want to be beautiful but not have beautiful feathers or fur that could be poached. They’d want to be big, because people feel worse about killing big animals. They’d want to share something with humans that reminds people of themselves.
This is sometimes called the “charismatic megafauna” effect. Those impressive whales, rhinos, and lovable pandas find themselves with support groups that act to support their habitats and try to limit exposure to poachers (sometimes with mixed results). An animal like a vulture is less likely to find large groups that support it.
There are revenue models that support saving the whales, rhinos, and pandas. People pay to see animals like these in the wild or in captivity. People donate and receive mementos with their favored animal’s likeness. It this possible for something like a vulture?
There are attempt to put an economic value on species, possibly as a way of saving them. The economic loss of vultures in India is estimated at $24 Billion.
Fast-growth Startups – Why do they die?
For some good and bad reasons, people like fast-growth startups. They are somehow more exciting than traditional companies doing similar things, they generate attention, and they let us imagine what the future might be like.
But there are many reasons why a startup, even a well-funded one, might die. Founder troubles. Lawsuits. Broad economic woes. Inability to execute… Let’s look at the mirror image of the vulture situation. Does growing too fast expose some companies to premature death?
How is it possible to grow too fast? Let’s look at just two ways this happens: the search for market share in some transportation services and reliance on paid customer acquisition in direct-to-consumer sales.
Some types of businesses only make sense when there is market consolidation. For example, people don’t want 10 different companies to turn to for rideshare services. At this point, we have around two major rideshare providers in any market. Depending on where you are in the world, this might include Uber, Lyft, Didi Chuxing, or Grab. To have a chance at attaining market share, these companies need to offer service in a broad range of locations. In some markets, rideshare companies have had such competition that they offer discounts, rebates, rewards for referrals, both for passengers and drivers. This can be good for the riders and the drivers for a while, but the discounts are offered with the expectation that once market share has been attained, it is defensible and the economics of the business change, whether through higher prices or lower unit costs.
The companies above grew fast, but when personalized last-mile transportation services like dockless bikes and scooters emerged, we saw more exaggerated growth. To provide access to the dockless bikes and scooters required companies like Ofo, Mobike, Bird, and Lime to own and distribute their devices widely.
With the support of investment and in the search for market share, companies that are in a winner-take-all market like dockless bikes and scooters quickly add new supply and add new service locations. We see this more obviously because these startups have physical assets spread visually around an urban area.
In direct-to-consumer sales, for example in meal box businesses, like Blue Apron (boxes of ingredients shipped to customers), companies face high customer acquisition costs and low customer loyalty. As a result, many of these companies closed when they couldn’t afford to continue to subsidize new customer growth. Others that raised more money and even IPO’d were able to stay operational but still suffer from paying more for customer acquisition than they receive back in gross margin.
While a smaller or localized business of this type might have worked better, or might have at least allowed for improving the situation, expanding service nationally requires logistics, long-distance shipping, competing in different local markets, and managing the cost of food waste. But companies that take so much investment cannot stay small.
Behind the push to grow quickly are the mismatched economic payoffs between investors and founders. Investors need to see growth. They need a path to returns on their investment. It’s essential to exit their positions, whether to acquirers or through going public, for some percent of their portfolio. That small percent needs to return multiples of the value of the rest of the non-performing investments.
Unlike vultures, ventures can be created in a number of ways. The number of people that can be employed and served by a venture can grow quickly. More access to investment means more ventures that can employ and serve more people will be created.
Unlike the vulture population in India, there is no expected or steady-state number of ventures to employ and serve customers. And unlike the “charismatic megafauna” mentioned earlier, while high-growth startups may have big PR groups, they also attract negative press.
What else happens when they die?
Unlike the vultures, which can’t increase egg production or shorten their time to maturity, with ventures the speed of growth can change fast. Investment is the catalyst for that, changing the number of people building solutions and how fast their companies expand.
Before the growth phase some questions receive more focus than others.
Primary questions: Could this company grow to be massive? What are the unit economics (at least at scale)? How do we exit our investment position?
Secondary questions: How much will we need to spend defending the market if others also scale up? What are the costs of streets littered with bikes and scooters? What will these companies displace? Will the unit economics support us through spending on more deployed devices, even with large capital raises? What happens to employees, suppliers, and customers if the company shuts down?
What happens when companies die? Customers are disrupted. Employees lose their jobs. Founders are left without repayment for their risk, assuming they couldn’t sell equity early. The problems with these extreme, quick-scaled businesses creates problems for others operating in the same market. Customers, investors, and employees become scared away from the industry even if organic growth would be sustainable.
The condition of fast, unsustainable growth out of alignment with company stage is sometimes called premature scaling.
Who wins?
When companies compete for market share, the short-term winners are their customers. Customers see lower prices, more availability, and more service options.
These wins might be short-lived, but for a while customers benefit from companies seeking and needing to demonstrate growth. Longer-term these benefits disappear or the costs of too much availability (like streets clogged with bikes and scooters, or too many ads for meal boxes) creates some costs.
Investors may or may not be left without benefit, depending on whether they exited part of their position through acquisition or IPO. They are able to spread their risk across a portfolio of investments.
As an investment it’s preferred to have a low probability of a huge win than a large probability of a small win, the push to grow will continue, even when it increases the chances of a company’s decline, as it’s argued to have done with some dockless bike and meal box startups.
The winners in the process don’t come from the death of individual companies. They come from participating in the potential win of one of a group of companies that strove for faster growth.
Considerations
- Not everything can grow quickly. Is the situation where “only vultures can produce vultures” or where there are many paths to growth with short cycle times?
- Some things, once they decline, take a lot of effort to grow again.
- A mismatch in who wins creates different incentives for or against quick growth.
- Some things can scale so quickly that governments have no ability to manage the other social effects from the growth or potential decline. This can be good or bad.
- The failure of a fast growth startup has repercussions across its customers, suppliers, and employees.
