Losing even more on other portfolio businesses, like Oyo (the hotel chain) is going to hurt.
I hope this gets rid of the "out-raise your competitors and spend ridiculous amounts of money on ridiculous money sinks" strategy forever.
I don't think so. We live in a world now where incredible amounts of capital are chasing returns because of zero and negative interest rate policies. The only solution will be regulation.
EDIT: The more interesting question (IMHO) is what happens when all of that capital has nowhere to go? Is there back pressure? How do accumulators of capital react to such forces?
By contrast, there is a finite supply of regulators, and the people who make the laws that the regulators implement are themselves members of the cadre of hungry ghosts who make up the giant pool of money.
With conditions like those, regulation will be doing extremely well to only be 10 or 20 steps behind the market.
There are smart and creative people, but those are not the people being provided with capital to execute (see: WeWork, Uber, and most other VC unicorns burning out their runway). But, to your point, definitely right regulation needs to catch up. Fingers crossed it happens before the pitchforks come out [1]. Remember, those who hold vast amounts of the world's wealth are a vocal minority [2]. The same holds for the size of groups with exceedingly high wealth in developed countries [3].
[1] https://www.theatlantic.com/business/archive/2017/02/scheide... (The Only Thing, Historically, That's Curbed Inequality: Catastrophe)
[2] https://www.vox.com/future-perfect/2019/1/22/18192774/oxfam-... ("42 million people, or 0.8 percent of the world’s population, have net worths in excess of $1 million. That group — roughly the global 1 percent — controls 44.8 percent of the world’s wealth. So it really is true that a pretty small number of people control nearly half the world’s wealth. It’s just a bigger small number of people than Oxfam’s reports tend to emphasize.")
[3] https://en.wikipedia.org/wiki/List_of_Americans_by_net_worth (The Forbes 400 Richest Americans list has been published annually since 1982. The combined net worth of the 2019 class of the 400 richest Americans was $2.9 trillion, up from $2.7 trillion in 2017. As of October 2019, there were 621 billionaires--a record high--in the United States.)
The finite regulators are confronted with a very small supply of smart, creative people in a position to capitalize. That group is the opposite of almost limitless, it's scarce.
Why can't regulators easily handle the dozens of deals per year that are of particular significance in VC-money terms? Nothing drastic needs to be done to regulate that scale of deals better, it's not that large in quantity. We're not talking about tens of thousands of very large funding rounds per year, that isn't going to happen.
So regulators don't get broad power to approve or deny any business deal based on ad-hoc decisions about whether they think the deal will ultimately be a net positive for the economy 10 years down the line. They get much narrower powers to protect against a specific set of things as laid out in whatever laws comprise their job description. And Congress doesn't usually get involved until after there's already a big smoking crater surrounded by a bunch of upset people.
And don't think that the supply of "smart, creative people in a position to capitalize" is limited to the CEOs of unicorns or anything like that. The supply is actually the total number of entrepreneurial-minded people with an idea and a desire for some capital to help get it off the ground. And the scope of ideas is not limited to silicon valley startups. I'm talking about people the pool of money could throw its funds at, not the (much smaller) set of people it has thrown its funds at in the past, or the (even smaller) set of those people who get bashed in the news.
"JSavageOne 7 hours ago [–]
Corporatocracy is probably the more accurate term, but the term neofeudalism isn't exactly a huge stretch. The only real difference today is that at least in theory a serf can become a lord, but the same power dynamic remains. When chattel slavery ended many of the freed slaves became sharecroppers, bound to the land by eternal debts that could never be repaid. Although they were no longer legally bound to their "masters", for many their lives were not really any better.
Although in principle the monopolies and the government are separate institutions, we all know that the reality is that our politicians are bought out by the corporations, and the regulators are staffed by ex-employees of the very companies they are supposed to be regulating. We used to bust monopolies, but since the 70s or so the regulators have become very lax, and practically every industry has become more consolidated than it's ever been (finance, advertising, airlines, utilities, telecom, agriculture, healthcare, etc).
What's interesting to me is that whenever Google/Facebook does something authoritarian that would seem to violate some principle of liberty we deem sacred (eg. censorship, violating freedom of speech), many if not most of the comments seem to rationalize the corporation's decision as exercising their own free speech. But when you're Reddit with 430M monthly active users, your userbase is the population equivalent of the world's 3rd largest country, and so you're effectively the equivalent of a nation-state. When you're Amazon with 750k employees, then your employees could fill up a city.
Does the principle of democracy only apply to country's governments, or does it also extend to corporate monopolies?" [1]
Better to invest into the Stock Market index until another opportunity opens up.
In many urban environments you’ll see blighted property adjacent to hospitals, etc that is essentially a buffer for future clearance.
It’s a win-win, the institution makes money (at arms length) on the slumlording, and they get incentives to “revitalize” the area when they need a new building.
Of course, the upward trend in prices relies on a bigger fool coming into your market, which of late has been Chinese money.
The counter and historically more persuasive argument from the left is that the falling rate of profit will lead to more war and colonization. It’s hard not to see what’s happening in Yemen and the Saudi’s investment in SoftBank through this lens.
Basically Marx assumption was to take capitalists on their word that the free market will drive profit margins towards zero, coupled with the assumption that a lot of people have a lot of vested interest in preventing their profits from going towards zero and will do almost anything to prevent that from happening.
Saudi have been fighting off and on with the people of that region of 500+ years. Now they have more money. They have always tried to influence what going on there. What is happening there is part of a larger conflict between Saudi/US and Iran as well. How it related to falling interest rates or whatever is beyond me.
And SoftBank simply has to do with the Saudis knowing that Oil money will go away and they are not capable of correctly reorganizing their state, so they think they can just buy stock to finance their nonsense government polices in the long run.
All of this is explained 100x better with an incompetent government that happens to sit on natural resources, rather then some Marxist critic of Capitalism.
The Saudi nation-state did not exist 500 years ago and the regional conflicts have more to do with the recent history of British and American imperialism in the region than any ahistorical, Orientalist casting of eternal conflicts in the Middle East. Should we understand the Nazi's assault on Britain primarily through the lens of Saxon raiding during the Middle Ages?
> And SoftBank simply has to do with the Saudis knowing that Oil money will go away and they are not capable of correctly reorganizing their state, so they think they can just buy stock to finance their nonsense government polices in the long run.
This is literally a vulgar form of the Leninist argument?
It is pretty much standard politics that happens during all political systems, and thus can not be blamed on some theory of capitalist overproduction.
While the Saudi state didn't exist 500 years ago, the roots Saudi power is older then 1744.
My point was more that influence politics in the region is very old and thus any explanation that is derived from some set of economic relations that exist now can not explain most of it.
> This is literally a vulgar form of the Leninist argument?
Leninist argument is about Capitalism, where based on the Marxist theory of over production countries go out to expand the market for their product. They have to do this because on Marxist cycle theory, capitalist production leads to overproduction, and then those products can fall in price so much that there is no more profit, so you need to find new markets.
First of all, this does not apply to Saudi Arabia because that cycle theory really doesn't make much sense for their economy. Saudis do the opposite where the artificially limit the production at all times, so their is no element of a market over-producing constantly.
Saudi does not go to Yemen to buy raw resources, turn them into product and sells them back to the Yemeni, that is how Lenin envisioned it.
If you wanted to make a Leninist type of argument, even if doesn't really fit, you could argue that Saudis invade Yemen so Yemenis had to buy their product. However that makes no sense as Yemen does not consume much oil and are a marginal costumer.
Really the point here is that all these things have been explained 100x better by academc of economics and political science but instead people keep repeating 100 communist propaganda and apply it to ever situation even if it is pretty far removed from the theory of those communists.
And Marx' did not see crises driven by chasing profit as somehow anything unique to capitalism or a criticism, but a general pattern of economic development under any system that growth continues until the growth under a given mode of production gets to a point where further growth challenges the limits of the system and leads to crises that eventually drives change to the system. There's no value judgment in Marx views on that - he saw it as a natural cycle.
If you want to try to apply that, whether you agree it has validity or not, to the Saudis, they are now constrained by the limits of their resource extraction, and trying to address that and continue growth is forcing them to try to convert from a semi-feudal economy where the top layers are all driven by resource extraction, land ownership and patronage, towards a more capitalist economy. The problem they are facing is how to transition their wealth while staying in power, and that creates a dynamic that will be changing based on how secure they feel their position is, and to what extent they are successful in shifting their base of power away from resource extraction.
Given that that's the basic business strategy behind all of these hyper-capitalized startups, I have similar suspicions around food delivery companies. As it stands, I'm guessing that it's affecting me more immediately, too, as restaurants raise their prices in order to cover whatever large cut the GrubHubs and DoorDashes of the world are taking. Similar to how everything's just 5% more expensive now to cover the money that's being skimmed off of every transaction in the form of credit card fees that have been justified to consumers with the promise that they'll give 1/5 of what they took back to you in the form of "rewards".
EDIT: I mean, just go UBI instead of advocating for siphoning sovereign fund dollars from ruthless dictators and unsophisticated investors like Masayoshi Son. Save us all the paperwork and bikeshedding about not being able to afford what we clearly (based on central bank monetary policy) can afford. I will certainly miss the Matt Levine pieces about these folks though.
(And I'm not saying the state shouldn't step in, because these are the typical pathological market states that need some intervention.)
Where I live, we have these services, but I don’t see huge push of Grubhub/DoorDash/Uber. If anything, restaurants are all setting up their own ordering platforms.
Uber is a godsend to millions of people and drivers around the world, to say otherwise in order to drive your political agenda it’s akin to living under a rock.
And if you want some proof, just ask every Uber driver if they would be sad or happy if the service disappeared tomorrow and hear their answers. There is a world out there that lives and thrives thanks to companies like Uber.
I'm curious why you would choose this example. Is somalia a country without a society ?
It's also true that the more fast neutrons hit your fissile matter, the more energy you can extract faster. Yet it doesn't make an atomic bomb work as a viable power source.
The article is from 7 years ago, but it nicely describes the consequences of the larger "sharing economy" that we're experiencing now: https://www.ribbonfarm.com/2013/04/03/the-locust-economy/.
Perhaps what happens is that expensive (i.e., in terms of fees) investment vehicles end up investing in easily available assets (e.g., Uber stock, which is public.)
Anyone know if SoftBank earns carry on this part of the portfolio? Why would LPs want SoftBank to have any funds in a publicly traded asset and pay fees for that?
What's the problem exactly, and how would regulation work to address it?
I feel that people gravely misunderstand capital, interest rate, and so on. Capital accumulation is not the same as expanding the money supply (so taking out a loan) - even if both are somehow denominated in USD. If we have too much financial capital - as you pointed out, chasing returns - that just means its real value depreciates compared to other things. (Eg. capital goods, labor, return generating assets, etc. - That's why we see asset bubbles, and investment in a lot of ventures, that then pays huge salaries.)
But it doesn't matter how much money chases how little, the important thing is the real growth, aggregate demand (total compensation), technological change (productivity), and so on.
There's back-pressure (falling profits, slowing growth, recession, depression, shrinking economy, rising unemployment, a vicious cycle), but also there's always a place for financial capital to go. Namely there are always new ideas to try, there are always things to invest in.
For example, there are always more riskier and more longer term investments, such as education (lending people money to retrain and switch to a higher paying job - a bit like student loans, but a lot more like coding bootcamps). Infrastructure (public transport, energy, housing), and so on.
Profit (real capital) comes from economic surplus, and that comes from technological change (economies of scale, efficiency, etc). And fundamentally it seems advanced economies are very resistant to switch to more efficient forms. ( http://www.vitalsigns.mtc.ca.gov/time-spent-congestion --- and it took a pandemic to try to make home office really viable; see also how much money people spend on healthcare, yet how inefficient it is)
Without real economic surplus a bigger money supply is just inflation. (That's why some people freak out when they see central banks doing quantitative easing, but they forget that central banks look at inflation, and they do QE to keep inflation above 0.)
So eventually, either we invest in big changes to go up the efficiency ladder, stagnate, or worst case the promised new projects don't deliver (because there was not enough aggregate demand to subscribe/buy/rent/use the new shiny thing, or it was not green enough, so it was not a good market fit), eventually the financial sector starts to run out of equity to risk, and we fall into the debt trap that caused Japan's lost decade.
(And that's why central banks all around the world are able to just foot the bill, because it doesn't cause inflation as long as that money is basically just gets rolled over into new loans/bonds/etc. most of it goes nowhere.)
17.7 billion in 2020 dollars is nothing by comparison. $70B then is over $100B in today dollars.
That is like saying "i hope that blackjack player learned to never double down", because they lost a hand.
Why? If you're a startup and a competitor does this and it leads to them losing value, isn't that a good thing for you?
The only people who lose in this equation are the ones who accepted those risks. The market will eventually correct itself.
And, more importantly, also the people who are collateral damage of this. I.e. the people in your or mine neighbourhood. The local restaurants, the local drivers, the local renters.
All this money raised isn't just sitting there doing nothing, it's disrupting markets - the way a disruptor wielded by a Klingon or Romulan would disrupt your body. By the time the disruption ends, your body won't work. These markets won't work either.
1) Restaurants are making extra money they wouldn't have made otherwise, with zero upfront risk of hiring additional employees, capital equipment, etc.
2) Drivers are making extra money on capital equipment they've already purchased and time they would have otherwise not used to be compensated for.
3) Buyers are spending more money on food as a result.
> These markets won't work either.
But no one is forcing people to buy food using food delivery apps. They're actively choosing to do so. I recently ordered a value meal from Wendy's via Doordash. It was nearly twice as much as I would have paid if I walked into the restaurant (because of fees, etc). But I chose to spend that much. At some point, that's unsustainable and I won't be able to afford doing that for much longer.
The only people at a loss here are sharedholders. I'm desperately confused why so many people think this is a bad thing for the common person.
Because it's not sustainable. It's the food market equivalent of stripmining. At some point, the restaurants will collapse or quit offering delivery this way, and you'll be left with less restaurants and more expensive delivery (if any at all), and Doordash will implode. Longer-term, the owners of the company are the only ones benefitting here (worth remembering that when startups talk about an exit, it usually means the top employees dumping the company and getting away with riches; the company is going to eventually die, as intended to).
So what? I'm so confused by this. This is exactly the point of "taking more money than you need". If Uber has a huge warchest of cash it means it can pivot as it pleases. Isn't this good investment advice then?
Or in words that matter to me as a consumer - Uber, an unsustainable company, killed an industry that will not immediately recover when Uber dies.
Narrator: It didn't.
As long as there is greed and speculation, people will continue to fall for schemes like these.
People, especially here on HN, like to talk about how big of a ponzi scheme cryptocurrencies are, but they are just a reflection of other such systems in the offline world. They just happen in time-scales of weeks and months rather than years and decades.