Venture Predation
papers.ssrn.com
papers.ssrn.com
Diapers.com example: "When Bezos’s lieutenants learned of Wal-Mart’s counterbid, they ratcheted up the pressure, telling the Quidsi founders that [Bezos] was such a furious competitor that he would drive diaper prices to zero if they sold to Bentonville. The Quidsi board convened to discuss the possibility of letting the Amazon deal expire and then resuming negotiations with Wal-Mart. But by then, Bezos’s Khrushchev-like willingness to use the thermonuclear option had had its intended effect. The Quidsi executives stuck with Amazon, largely out of fear. The deal was announced Nov. 8, 2010."
https://slate.com/technology/2013/10/amazon-book-how-jeff-be...
To add, Lore's current startup is a premium food delivery service called Wondery that raised $350 million at at $3.5bn valuation last year [2], and it's not profitable too. None of Lore's companies have ever turned profits but he's made enough money to buy the Minnesota Timberwolves...he's the perfect example of venture predation, lol
1- https://corporate.walmart.com/newsroom/2016/08/08/walmart-ag...
2- https://techcrunch.com/2022/06/17/marc-lores-food-delivery-s...
A brilliant strategy! Amazon already owns a Wondery[0] so they can't acquire his.
I don't know about the books in this specific case, but losing money doesn't mean you're into venture predation. You could very well be losing money but also have sound unit-cost to price.
If you have that and still loose money then you are doing other things that get you ahead of your competition that need to sustain their operation with those prices. Either way you use somebody's money to cheat your competition.
That's the principle of investment.
The difference between using money to improve productivity, or make the product more appealing to the consumer, or whatnot, and price-dumping, is that investing is supposed to generate long-term returns, which can benefit the company or consumers. Price dumping, on the other hand, doesn't generate future returns. It generates costs that the consumer will have to repay later.
In the first situation, consumers may benefit from that competition. In the second situation, they inevitably end up losing.
> access to capital at cheaper rates than most countries due to their position as a stock market darling
Last I recall, AMZ uses an internal WACC of 8-9%. That's really only marginally "cheaper" cost of capital than most other mega-cap firms, it's not really a big advantage.
Its cost of capital advantage mostly comes from its access to cheap short-term credit in its retail cash cycle, not the equity market (like you suggest).
> "reinvesting in the business" to bleed competitors dry. Few other companies on the planet have the ability to run negative or break-even margins the way Amazon does.
Costco regularly runs negative or break-even margins in its merchandising. Its language for this is "reinvesting in value" or "reinvesting in price". It can do this, similar to Amazon, because of their membership business.
Walmart also regularly runs break-evens/negative margins in select merchandising lines depending on geography and competition.
How is this not a serious anti-competitive monopolistic practice? Did the Dept of Justice get involved?
Is it a strong arm/shitty tactic? Sure. Welcome to the real world.
[https://www.ftc.gov/advice-guidance/competition-guidance/gui...]
If we want true competition, we need a merit-based society instead of a wealth-based one.
Ultimately billionaires (capitalists) are profiting unfairly off the labor of others. This is obviously an unpopular opinion on a website promoting VC.
If we are talking about non-venture cases, OpenAI+Microsoft is doing the same with ChatGPT.
Could you please expand on your thought? I know some recent conversation has been had about the potential that open source models have to "win" against Big Tech, so I'd love to know how your thought accounts for that as well.
Well if it's running on Azure and using massively overpriced Nvidia data center GPUs I can't imagine anything else would be possible. Then again it's not like there any incentive for OpenAI to increase efficiency as long they get 'free' Azure credits (and it's not like the real cost for MS is anything close to what they are supposedly investing into OpenAI. IRRC that 10 billion was mainly not in actual money)
Amazon.com as a store makes next to nothing as profit.
Who cares what he did to some diaper companies. Are consumers paying more or less because of amazon? Much less.
They basically run amazon.com for no profit and consumers get fantastic deals and cheaper products and more reliable service than ever before.
How much would you have to charge for same day delivery for that many products? Could you get close to Amazon? You would have to rip off you customers so badly just to stay alive.
They are probably generally paying less but Amazon isn't the surefire low-cost provider on the internet the way they used to be. I don't expect the trend of them raising prices to reverse as they gain market power.
> How much would you have to charge for same day delivery for that many products? Could you get close to Amazon? You would have to rip off you customers so badly just to stay alive.
It's not "ripping off" it's just charging customers the actual cost of the service they are getting.
Except their competitors have followed suit with cheaper shipping and online shopping. They are the best, but not a monopoly.
Going out on a limb here, but I'd say the diaper companies.
Some middleman website might have lost out on being able to sell for more money to Walmart, but that was their choice to not to pursue a deal with Walmart.
I am guessing what they were probably concerned about was guaranteeing themselves cashing out at least at Amazon’s offer because if Walmart found out Amazon was backing out of the deal, then Walmart would have had the power to push the price down.
Either way, diapers.com was going to lose to Amazon/Walmart/Target/Costco in the long run, so if they were getting a high valuation simply for being a popular website as online shopping was ramping up, then their best move was to sell while the iron was hot.
This hasn't been true for many years IME, and will almost certainly get worse over time. Companies like Amazon don't fight tooth and nail to monopolize industries because they want to be nice to people, they do it because it results in power they can use to increase profits over the long term. Less competition means that they can ratchet up prices for customers and squeeze sellers/suppliers more. There are only a handful of general stories online these days, largely due to Amazon's actions.
It's too easy to enter the diaper (or whatever) retail market that such a tactic makes no sense.
Really? First time I'm hearing Azure is unprofitable. In fact "Intelligent Cloud" which I assume is mainly Azure is their most profitable business...
If I understand it correctly (probably not) they actually have higher margins than AWS?
This also assumes Amazon doesn’t buy any competitor early on, such as happened with Warby Parker.
It’s usually used as a reason for regulating imports/exports
https://www.investopedia.com/terms/d/dumping.asp#:~:text=Dum....
If you squint right, sure, VC backed low costs could be seen as dumping. But the problem is that also means virtually every startup is dumping, even bootstrapped garage efforts. And I guess any company that reports a quarterly loss is also dumping.
So I think it probably makes sense to treat VC-subsidized startups as a different economic phenomenon that needs different rules than if e.g. Goodyear sells tires at far below cost in California until competitors leave and then they raise the price.
Things like Uber are a typical dumping cases. For years, they charged below their COGS and eventual profitability depended on driving out competition and raising prices.
On top of that, there is nuance as to what goes into fixed v variable, how fixed fixed really is, how good your management accounting system is, how good you are at predicting things like product recalls, or insurance losses, or loan recoveries, or whatever other variables are part of your particular business.
Well yes, because they are selling software or other products which require a very high investment into R&D and have minimal marginal cost...
Other markets don't work like that so I don't think this is particularly relevant especially considering the a huge proportion or the majority of those startups (which received the most VC money) are yet to turn a profit (until they do it's still 'dumping' in this sense).
I think the key difference is how the price for the sold good changes over time, not the net profit for sales. If Your business model is to hold price relatively constant, but only see a profit when you hit your target market share, that's not dumping. It becomes dumping if your business plan is to capture Market share at a low price, and then ratchet up your price once you have displaced competitors.
It's a rather sickening bet though. One would hope they'd lose.
did you not read the article? the entire thing premise is that is not true and there are negative externalities and incentives even if the company doesn't ever make a profit.
Uber and other folks who sell whatever it is they sell at a loss -- with no real expectation (other than driving their competition out of business so they can then hike prices well beyond where those who can actually make a profit charge) always reminds me of this[0].
The ridiculous part is that the link below was a parody when created. Now it's a "business model." Sigh.
Even these things get played. Sometimes driver/rider subsidies get classified as "Marketing expense" rather than cost of goods sold.
Many startups and new projects operate with effectively zero revenue until critical mass, at which point they start charging. Youtube, Meetup, Reddit, G Suite, facebook, craigslist, twitter, linkedin. The list goes forever. These all started as free services without any meaningful revenue. I don't see any difference between these platforms and Uber, which while not free, is also selling below costs.
Not saying whether or not this actually happened, only that it's mathematically totally possible.
The key difference is that startups are rarely selling the same product, to the same people, for different prices at different phases of growth. They're more often selling different products, with different positioning, to different market segments at different times in their growth; where they just happen to call those products "editions" of the same thing.
A common startup lifecycle:
1. get seed capital to build an MVP targeting one distinct market (usually consumers or individual professionals);
2. market (or give away) your consumer-product MVP to price-sensitive early adopters (which is where the initial look of "giving it away" comes from — that's what this market segment demands);
3. wait for those early adopters to educate the rest of the market about what's cool about the product and the brand;
4. meanwhile, use the "social proof" (rather than earnings reports) from these early adopters, as leverage to get a Series A investment; and use it to build a separate, more polished product targeting the enterprise market;
5. use your enterprise product, in combination with a bunch of new sales staff, to reach the non-price-sensitive late adopters. (While continuing to sell/give away the MVP consumer version!)
6. At some point, after achieving traction in both product lines, you can also "trickle down" the benefits of the enterprise product — and integrate process, saving OpEx — by building a new version of the MVP [now "consumer/SMB" product line] using the enterprise product's technology. (It's still a separate product, though, not just a feature-limited version of the enterprise product — there are a lot of things enterprises want that actively get in the way for consumers.)
This is less like Goodyear charging less for tires until they monopolize the market; and more like Goodyear starting off selling car tires, achieving brand recognition there, and then making all their real money by selling semi-truck tires.
A clear example of all six phases (but with bootstrapping in place of VC investment): Microsoft built initial versions of Windows for consumers, at retail prices (or "given away" via OEM channel-partners with steep volume discounts); achieved reach; then reinvested the revenue from that to build a more polished and robust Windows NT for enterprises, and made big money from non-discounted enterprise volume licensing; then "trickled down" the technology from Windows NT to create Windows XP, with the consumer/SMB product now just an "edition" of Windows XP.
i.e., if you sell a widget for more than it costs to manufacture, but unprofitable after you account for indirect costs like R&D and other corporate costs, it may or may not be dumping.
The VC-backed companies like Uber weren't doing this. They were unprofitable even under the standard of price > direct cost. That's pretty cut and dry dumping.
"Scale until you become profitable" in the traditional (and IMO defensible and sound business) sense is about scaling until your margins cover your fixed and indirect costs like R&D (see: Google, Facebook), but that's not the Uber model.
I get why you’re saying it, we’re profiting from it (kinda?), but a spade is still a spade when it’s shaped exactly like a spade, used for digging, etc. regardless of what label marketing slapped on it.
There is a bit of a difference here in that it is private vs gov’t backed (kinda, unless you count fed printing money as gov’t backing, which it wouldn’t require much squinting to do).
If widgets costs you $12 to make and you sell them for $10, you are currently running at a loss.
If you plan to continue selling them at that price and reduce your costs to $8, that's okay.
Whereas if you plan to later raise your price to $15, you're dumping.
Though if you plan to develop super-widgets and sell those for $15, that's okay.
---
Hopefully that makes sense.
That said, a frequent issue is overestimating margins (intentionally or unintentionally). Uber underestimates their fundamental costs, so (intentionally or unintentionally) are dumping.
What's the end game to VC subsidies?
There are many VC-backed businesses where 'Scale until you become profitable' is the end goal.
But there are also many where 'Outlast until competitors leave and then raise the price' is the only plausible profitable future.
I don't think VC's give a damn about long-term profitability. All they want to do is to trick later investors into buying them out. I can't think of a single one of these types of companies that has had a profitable year* let alone make enough profit to recoup their losses.
*I'm excluding AirBNB because their prices are cheap by operating in a legal gray-zone.
Not showing you the price actually makes it more profitable for the end user, not directly for Abnb. By showing price in this way Abnb attracts you, then the end user scams you for a higher price.
But this is different from the 'legal grey zone' OP was talking about. The Abnb hosts should likely be paying local taxes/fees for operating as a short term rental, in which if they were doing so the final costs to rent an Abnb would be higher in most jurisdictions.
If they put a sign on the side of the road or in front of their place, they’d get shut down post haste, but because it’s online it’s easier to turn a blind eye and ask forgiveness, not permission.
Anyway, the essence of it is that running at a loss for a while in order to drive your competitors out of business, then raise the prices, is widely recognized as the kind of market practice that the government is justified in taking action against.
"In 1905, German bromide producers began dumping bromides at low cost in the U.S. in an effort to prevent Dow from expanding its sales of bromides in Europe. Instead of competing directly for market share with the German producers, Dow bought the cheap German-made bromides and shipped them back to Europe."
Surely not the first, but old enough to make the point:
> 7 May 1934, Lewiston (ID) Morning Tribune, “News Behind the News” by Paul Mallon, pg. 4, col. 4:
> The oil men were acting like the peddler who lost money on every sale but tried to make it up on volume.
It's a gigantic game of hot potato that swallows up a gigantic pool of human talent, all for producing stuff that really adds little to no positive to the world.
If they're not disrupting (read: destroying) local economies, they're breaking all local rules and regulations. And despite playing fast and loose with any sense of ethics or legal compliance, they still can't be profitable.
Just end this ponzi.
Literally tens of billions have flowed into startups in just the above two categories. If both were to disappear from the face of the Earth tomorrow, you'd miss them for about 5 seconds.
Am amazing example I saw recently was a startup whose app supposedly helped you break your monthly rent payment into two smaller biweekly payments, except all it did was hold on to part of your midmonth paycheck until the end of the month so you couldn't spend it.
The best part is that was positioned as a way to help low-income people who suck at budgeting, but you had to pay $20/mo for the privilege of using it.
Huh?
> A working toilet is an unmitigated good.
Seems like an opinion, since 'unmitigated good' seems like an impossible thing to prove. Only one counterexample of plausible harm is needed.
> Cars on the other hand have a much more questionable value proposition.
It's even phrased as an opinion.
> Even if cars only contributed in positive ways, they're still not necessary to a functioning society the way that sanitation is.
Sounds like an opinion too.
If none of these are opinions, then can you clarify what you intended them to be?
Ok, where's your example of plausible harm for a working sanitation system?
>It's even phrased as an opinion.
That sentence is, sure. Weird how you left out the supporting examples.
>Sounds like an opinion too.
Why? Because of phrasing? Consider the repercussions of a city having transportation issues vs a city having sanitation issues. Nobody who knows anything on these subjects would say transportation is more important than sanitation.
It boggles the mind you think it's just an opinion that cars are as important as a working sanitation system.
How many cities have car free districts? How many cities have sanitation free districts?
One plausible example of toilets causing harm is if it's a very poor rural area.
The existing outhouse works fine, spending money on getting a toilet and connecting it to running water would not be the wise choice as that money would have been better spent on other things first, such as sending the kids to school, buying them a uniform so they don't get bullied by the other kids, buying a solar panel plus a battery so they have some semi-stable electricity, etc...
i.e. it's impossible for it to be an unmitigated good in the real world, where there's resource scarcity and many uses of said resources.
So unless you have some credible proof otherwise, the default assumption for me and passing readers will be that they are opinions.
Basically, if, say, Jeff Bezos never existed, it seems likely that someone else would have created Amazon, perhaps a few years later, and maybe not quite as good. "Big online retailer" is sort of a natural niche, with a bit of a natural monopoly. So while the classic argument for letting people keep most of their wealth gained in the free market is that they provided a lot of value, maybe that doesn't make as much sense when you consider that if they hadn't done it, somebody else probably would have soon after.
It's obviously impossible to gauge exactly how much excess value someone provided compared to the world in which they never existed, but to round it up to 90% or doesn't seem very accurate.
So it seems like in our current world, there's a winner-take-all effect that a lot of venture-backed startups are trying to exploit. If we were a lot more aggressive in taxing companies like Amazon, my intuition is that it would go a long way toward reducing this effect.
(1) https://astralcodexten.substack.com/p/billionaires-surplus-a...
https://mattsclancy.substack.com/p/how-common-is-independent...
Looks pretty unlikely to me, personally, judging by the low stats on independent discovery
It is highly unlikely that the same path would have been taken by someone else, or that they could have the repeated same results with any combination of those businesses.
While the mom and pop taxi companies and others impacted by it have my sympathy and support, all the regulatory alternatives other than waiting until they achieve a monopoly and then breaking them up seem to cause as many problems as they aim to solve.
The Fed is not distorting anything. It's an anomaly that you can "invest with Uncle Sam" , for the longest time if you wanted to see your money grow you had to take it from your fellow American somehow.
The ability to passively invest with the government is alienating, unsatisfying and creates growth problems to the country that allows it because it subtracts participants from the creative destruction process.
The whole family office concept is something new, back in the day if someone had money they'd just invest in themselves by expanding their own business.
You need to back this up with some serious economic citations
All the stuff that gives the most satisfaction is zero sum.
Only one team wins the Super Bowl, only one NBA team wins the Finals and only one franchise gets to claim the World Series.
You can see it when you look at investors, even the notorious ones, they are rich but mentally they are not stoked or feeling as powerful as athletes who won such trophies.
https://www.kare11.com/article/sports/nfl/superbowl/how-much...
To say nothing of pay and fame - presumably translating to better marketing deals and salaries from improved negotiation positions for simply getting as far as the Super Bowl. Absent other conditions (e.g. worries about exacerbating injuries), chances are you'd show up even if you know you'll lose, and not just out of spite and wanting to make the other guys work for it - but because you'll gain from it, which is a bit counter to the whole "zero sum" thing. Plenty of sport where new records are exciting even when it's simply beating the previous ones.
Totally 0 sum.
This was the Faustian bargain we made. For us, I think it would be hard to argue this was a raw deal as opposed to living the last 15 years dealing with a depression or who knows what.
Once on this path we will just keep kicking the can down the road and let the unborn pay of it eventually.
[0] https://www.bloomberg.com/opinion/articles/2023-05-18/tether...
I like the term "venture predation" better.
But it is just the same thing: predatory pricing applied to a product delivered with high-end customer service.
Edit: Example: $5/month Todo list SaaS that has a 24h customer support telephone helpline
A healthy society progresses slowly like a tortoise, encountering actual tradeoffs that aren't masked by mountains of cash only to ensure cancerous returns for already rich people at the expense of skilled business owners who are actually designing their businesses to handle endgame stressors.
In any healthy competition you have rules around the gear you can use, how many people are allowed in your pit crew, what dimensions your fencing saber can be etc. so that rich people cant buy their way to success to cover up lackluster execution and skill.
And the aura of money extends to customers and blinds their judgment. Few people look at long-term sustainability when choosing a service/product. It's usually about how polished it is, how well it works today, how shiny it looks, how "big" the company behind is. Nobody thinks about whether the business will exist in two years. And few people consider that if they are a customer of a VC-funded business, there is literally no outcome that is good for them: either the company goes bankrupt, or it gets acqui-hired, or it gets strategically-acquired, or (best case but very rare) does an IPO. Even in the case of an IPO the customers generally lose, as the product gets bloated with new features they do not want or need (see Dropbox).
When you run a B2B SaaS, you realize all that with painful clarity.
- Chrome
- VS Code
- LetsEncrypt
- Everything open source
etc. Sometimes I wonder how much this practice distorts the software industry, preventing new innovations from happening. The industry settled on this approach without being forced to, so I wouldn't want legal changes to prevent it either, but it's worth a bit of self-reflection on how much we all love free stuff.
What i don't get it is what the Uber moat is? Why does this need to be centrally planned and controlled? Would an open source and free platform work where drivers got near 100 percent of the sale instead of the 75% they get today.
They already can do that? (and very often do)
"A venture predator is a startup that uses venture finance to price below its costs, chase its rivals out of the market, and grab market share. Venture capitalists (VCs) are motivated to fund predation—and startup founders are motivated to execute it—because it can fuel rapid, exponential growth. Critically, for VCs and founders, a predator does not need to recoup its losses for the strategy to succeed. The VCs and founders just need to create the impression that recoupment is possible, so they can sell their shares at an attractive price to later investors who anticipate years of monopoly pricing."
Everyone on HN knows this is exactly the playbook of many fast-growing VC-backed startups. No need to mention names.
For example, console hardware is loss leader for console makers because they make up for it for every game sold. Google Chrome and Android are loss leaders for Google, but are strategic assets protecting its revenue business.
In both cases, these companies can continue to do that indefinitely (as long as it makes business sense).
Venture-backed companies that are burning cash, on the other hand, are pursuing an unsustainable strategy of predatory pricing to kill off competitors and grab the most of the market.
(obviously, it's not either-or, you can easily name examples from long standing companies or startups doing either)
Really, from the pov of Travis Kalanick and the original funders, Uber is a fabulously successful business.
The original founders and the venture predators made their money. The professional execs at the top running the business now are also making lots of money. It doesn't matter to any of them what happens to competitors, employees and current shareholders.
Yup, that's the entire point of the paper (and it's really clearly written and approachable by non-experts!)
Parent was equating predatory pricing (in general) with loss-leaders, which have nothing to do with the subject of this paper.
Ones higher risk but quite similar.
Not sure what your point is to be honest
Surely, selling at a loss is a risky endeavor, but we see it time and time again that companies selling at a loss get more funding due to their inflated numbers from selling at a loss. Or, it’s only those companies that make headlines and we don’t hear about all the companies going bankrupt selling their services at a loss.
These companies are not profitable. They are still in the loss-making market share acquisition phase. They might be profitable at some point, but that would likely be by increasing pricing to something far less desirable to consumers, negatively impacting growth. AirBnb recently turned a profit but is now more expensive than hotels with often worse service, and they're being regulated out of some markets, so we'll see how it works out for them. Would DoorDash with a minimum $15 delivery fee survive? Uber if it's more expensive than a cab?
Don't get me wrong, I'm happy living large off of VC fund's money. But I'm not brand loyal to any of this stuff.
IPO bag holders, too bad, and I don't see any regulatory need to protect them.
I thought "loss leaders" were specific products sold below cost so customers would buy accessories or subscriptions that have nice profit margins. Like selling cheap printers but expensive ink.
That's different from "sell a dollar for fifty cents until all competitors are dead".
There's also loss leader applied to things like consoles, where they lose money (at first) but make it back on the games.
Consumers are super fickle, and I will happily check a different app to see if I can save a dollar on a $10 car ride
Or I just use google maps which gives me the full menu of available options and how much they cost including scooter and e-bikes as well as transit since I’m normally just interested in the fastest option which is frequently transit.
https://www.macrotrends.net/stocks/charts/CVNA/carvana/net-i...
https://www.macrotrends.net/stocks/charts/CVNA/carvana/marke...
ie assume seller is willing to pay $50 a day to have car sold today (and not have to field calls etc). That means selling a car a month faster is worth $1500. Carvana can borrow the $25K car value at ~5% to pay $100 interest to hold the asset for a month playing the time arbitrage.
I'm finding one thing that seems to be happening generationally (or just in my experience) is that folks are far more willing to pay for convenience/now. That means they'd rather have the $25k and car sold today than have the $1500 in their pocket a month later (and field calls etc).
you could tweak various "fair" parameters like quality and price
but I guess the makers of this were naive and never considered any "unfair" practices like getting cheap cash and wiping out the competition
Strategies viable in 2019 are largely useless to bootstrapped businesses in 2023: the costs of ads even to acquire customers with low spending power is two to three times what it was (e.g. students)
As someone working on a NLP product for education, the pricing and subscriptions are also dropping rapidly, lead by the funded companies entering this niche (the founders almost entirely are non technical recently). The combination of the two is like a jaw - it's unclear what to do when your technology becomes a trend, other than grab and deploy your own funding and use marketing strategies and technical efficiencies to outlast your competition.
Just like a competition for any other limited resource in a capitalist market driven society.
Venture Capital at its best allows a company to take losses until it can achieve economies of scale.
I'd say it turns predatory when even after achieving scale(Like Uber or Amazon) a company still runs an unprofitable business to choke out competitors.
How can you prove this in court? No clue. Maybe the company has to articulate the explicit economy of scale it hopes to achieve and how?
If on the other hand your current prices are never going to be profitable (looking at you, Uber), and your business plan requires that your can raise them a lot without losing sales (because your competitors are gone), that is not legit.
The third factor in all of this is that many companies like Uber weren't really ever likely to become profitable in any scenario, and this was really about taking the cheap VC money while it was cheap. Blitzscaling was just a way of pretending that you would someday become profitable.
I think higher interest rates will get rid of a lot of this.
1. collect underpants
2. ?
3. Profit
Uber and Lyft are great examples. They haven't established long-term stickiness with drivers or passengers. So if either of those groups get offered a better deal they will switch. Therefore it's just a relentless race to the bottom with no sustainable business in sight.
Isnt it ironic that the main thing they teach to the general public is benefits of competition in free markets. But the first thing they teahc to MBA types is to avoid competition by any means possible.
Edit: https://www.readmargins.com/p/doordash-and-pizza-arbitrage
Edit: per reply, “income” would be a better word
Subsidizing a project to make it grow and drive competitors out of the market has been fundamental to the US 'tech sector' since 2008 (eg. YouTube).
One of the requirements in the RFP was "Windows to View Our Home Planet and the Moon".
The last sentence is "They must be present and cannot be substituted".
This is an extremely weak analysis from an economics point of view. The regulator has several options to deal with monopolists if and when they emerge.
If consumers realize benefits in the meantime in the form of cheap products subsidized by VC money that’s a good thing.
Gonna be hard to achieve consensus around "raising fares and lowering driver pay" which is the opposite of what Uber did.
"Uber showed that venture predation works. Uber raised around $24 billion from private investors and used it to subsidize cheaper fares for riders and higher pay for drivers. Uber quickly crushed the taxi companies and acquired a dominant share of the combined taxi-and-ridehailing market.27 But it never developed a superior product or cost efficiency. Lyft, other ridehailing startups, and even taxi companies developed similar apps. Uber had to keep up its below-cost pricing to maintain its market share. In each of the three years before its IPO, Uber racked up losses of $3 billion or more.29 Uber reassured investors by explaining that, once it became dominant, it would be able to raise prices and recoup its losses. In its IPO roadshow, Uber’s executives told investors that they expected the company to earn an adjusted profit." ... "We concede that the “millennial lifestyle subsidy” was fun." ...
Then a lot of handwaving. But no victims other than bad high margin businesses. (There's a theoretical driver that doesn't realize the high pay won't last forever and buys a car, but he can sell it no? And he could read the news about his livelihood and learn that his high pay is at risk).
Btw, you can still take taxis. It'll cost more and pre uber they were very surly or wouldn't show when you called them. The only "regulate Uber" consequence will be higher ride costs and lower paid drivers.
Amazon operates on very tight margins in it's retail business. The ideal case is lots of competition, which would lead to uh... very tight margins among competitive firms. Amazon is just smart enough to get ahead of that. And I think their long term goal has been to operate at such a low cost structure that they have a durable advantage in cost. And then to pour back all their capital back into lowering their cost structure.
So why stop them? In order to subsidize the higher cost company, their private jets and sexual harassment lawsuits?
Capital is very easy to get in 2023. We are not in the time when capital is so difficult to get that you'd need a 2 generation family firm just to build a single factory. At that point spending 5 years to crush your competitor might have made sense. But now it's limited to monopoly markets like cable, and cell phone service. And it might indeed be useful to create more competition there.
Unlike Amazon I think Uber isn't likely to be a great business. There is just no cost structure advantage being built. So they'll either operate on low margins forever or they'll raise prices and we'll get competition in the space of a few years. In either case I would not want to hold Uber stock right now.
I personally benefited from this but I can see the drawbacks.