[HN Gopher] Venture Predation ___________________________________________________________________ Venture Predation Author : miiiiiike Score : 262 points Date : 2023-05-19 15:28 UTC (7 hours ago) (HTM) web link (papers.ssrn.com) (TXT) w3m dump (papers.ssrn.com) | james-revisoai wrote: | A flipside effect to this is advertising and PPC which has | trended up so high overtime, especially in education. | | 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. | maerF0x0 wrote: | This rise of PPC should be matched with targeting efficiency | through tools like Segment etc that are aimed in increasing the | ROI on adspend. It's a resource allocation strategy that drives | the limited supply (ad space above search) to the highest | bidder (ie highest return usage). | | Just like a competition for any other limited resource in a | capitalist market driven society. | nico wrote: | In international trade this is called "dumping", and it's often | considered illegal and most definitely unfair | | It's usually used as a reason for regulating imports/exports | | https://www.investopedia.com/terms/d/dumping.asp#:~:text=Dum.... | brookst wrote: | Eh, there is alot more nuance here. Dumping is typically when | an established company attacks a competitor with temporarily | low prices. | | 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. | lazide wrote: | Hahahaha, 'everyone does it therefore it isn't what it | obviously is' is..... pretty funny. | | 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). | rossdavidh wrote: | I have heard "dumping" used typically when a foreign company | is trying to gain market share by driving domestic | competitors under. So, while they are typically established | companies, they're not established in that market. | | 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. | waboremo wrote: | Not sure how you reach the conclusion that bootstrapped | garage efforts would equate to dumping under these | conditions. Bootstrapped garage efforts, unlike VC backed, | have very little if any runway. They can't afford to. | lesuorac wrote: | I don't think you have to squint very hard to see VC as | dumping. It's why they all follow that common trend of low- | price growth hacking and immediately follow up by raising | prices. | derefr wrote: | > It's why they all follow that common trend of low-price | growth hacking and immediately follow up by raising prices. | | 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. | winphone1974 wrote: | This history is a pretty convenient interpretation. MS | mad big money on their OEM deals and this is after they | were all ready being paid for each IBM machine. They were | also 10-15 years old at this point | [deleted] | dboreham wrote: | That analysis of Windows history is fiction. Plausible | business school fiction but fiction nevertheless. | paulddraper wrote: | What part is incorrect? | Eisenstein wrote: | I am not the person who replied to you and I don't know | to what extent that tale is fiction, but MS was | enormously profitable selling Windows to OEMs and | consumers before NT became a major force. NT was more of | a response to OS/2 than it was some grand plan at | grabbing the enterprise market that was hatched years | earlier. | winphone1974 wrote: | Analysis without facts can be refuted without facts. | fakedang wrote: | There's a clear difference in trade economics between eating | initial losses as a risk to acquire customers (which every | company does, including the one man food truck by your | street), and doing it with a fat war chest backing it with | the only goal being to wipe out the competition. Garage | startups aren't looking to wipe out the competition (yet), | unlike the likes of Google and Uber. | nathan_compton wrote: | "even bootstrapped garage efforts" this doesn't seem to | follow. Bootstrapped efforts don't have the funding to absorb | a lot of loss to get market share. They have to make a | product people will pay for, typically. | CTmystery wrote: | Your parent is confused. There's a difference between | absorbing losses to stay alive while you try to get a | product to market and deliberately losing money per sale | because you want to drive the competitor out of business. | No squinting required. | potatolicious wrote: | Ehhh I dunno if it's really that nuanced. Companies that are | unprofitable, but who sell goods/services above direct costs, | are relatively (though of course never totally) safe from the | accusation of dumping. | | 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. | ethbr0 wrote: | > _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._ | | 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. | Aunche wrote: | > What's the end game to VC subsidies? | | 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. | xp84 wrote: | *Citation needed-- ABNB is so expensive these days, | although they won't disclose half the cost until the | final phase of checkout! | pixl97 wrote: | That's two slightly different things... | | 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. | lazide wrote: | Also, the hosts should be meeting a number of zoning | rules (if we're being honest), meeting building codes for | safety, etc, etc. | | 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. | [deleted] | conjecTech wrote: | No, there isn't much nuance here. Accounting has notions of | fixed costs and marginal costs. The startups you are | referring almost all lose money on fixed costs, but sell | things at per-unit economics which make sense at scale | because they are below marginal cost/COGS. | | 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. | SOLAR_FIELDS wrote: | Circa 2015, Uber charged roughly $30 USD for a trip to the | airport from my house. Now it is usually between $60 and | $70. There has been significant inflation, but $30 in 2015 | is only worth about $38 today. | jeffbee wrote: | The source of Uber's dumping wasn't chiefly VC funds, | though. Uber's ability to price below market was mostly | funded by the residual value of their drivers' vehicles. | mrguyorama wrote: | Uber was charging riders less than they paid drivers for | a long time. That's not "residual in the drivers car", | that's subsidizing their drivers | dboreham wrote: | It's both because they also weren't paying drivers enough | to cover their (actual) costs. | winphone1974 wrote: | That doesn't make sense. If the drivers were operating at | a loss they were subsidizing Uber, not the other way | around. | ninkendo wrote: | No, these can both be true. Uber can charge users less | than they pay the drivers (losing money on rides) while | _still_ paying drivers less than the drivers ' total | costs. Like if I take an Uber somewhere, Uber charges me | $10, pays the driver $15, and the driver's actual costs | are $20 (gas, wear/tear, whatever.) | | Not saying whether or not this actually happened, only | that it's mathematically totally possible. | tshaddox wrote: | Eh, the money is fungible though. It's still VC funding | the massive growth of the company in order to "disrupt" | (which actually means "extract value as fast as possible | from drivers' vehicles, insurance impropriety, etc."). | [deleted] | qwytw wrote: | > Accounting has notions of fixed costs and marginal costs. | The startups you are referring almost all lose money on | fixed costs, but sell things at per-unit economics which | make sense at scale because they are below marginal | cost/COGS. | | 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). | s1artibartfast wrote: | The same phenomenon takes place in traditional Industries | as well without VC investors. If an established company | comes out with the new product, say a medical device, it | might not be profitable until they get their sale volumes | up. | | 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. | TuringNYC wrote: | >> 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. | | Even these things get played. Sometimes driver/rider | subsidies get classified as "Marketing expense" rather than | cost of goods sold. | jjeaff wrote: | The only issue is that companies like Uber are lying to | themselves and their investors that costs will go down | significantly in the future. Both through scale and | advances in technology. Which is true. But rarely true to | the extent to which they believe it. | hgomersall wrote: | Uber aren't selling taxi rides, they're selling shares in | Uber, which is actually what the investors care about. | The bezzle will continue as long as they can convince | people there's a path to profitability. | pydry wrote: | It's a bet not a lie, theyre betting that they can | squeeze out competition and jack up ride prices and jack | down wages. | | It's a rather sickening bet though. One would hope they'd | lose. | bananapub wrote: | > The only issue is that companies like Uber are lying to | themselves and their investors that costs will go down | significantly in the future. | | 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. | qwytw wrote: | Well to be fair Uber is almost profitable at this point | (just -1.78% net margin) so if they actually wanted to | they could be profitable in a quarter or two.. | nobody9999 wrote: | >The only issue is that companies like Uber are lying to | themselves and their investors that costs will go down | significantly in the future. Both through scale and | advances in technology. Which is true. But rarely true to | the extent to which they believe it. | | 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. | | [0] https://www.youtube.com/watch?v=KodqIPMbyUg | 8ytecoder wrote: | They don't even hide this fact. That's pretty much the | unstated goal behind funds like SoftBank funding startups | at well above what the startups even ask for. | danielmarkbruce wrote: | There certainly is nuance. There is nothing magical about | marginal costs - if someone is pricing something at break | even or 1% gross margin and never have any hope of running | a profitable business at that price because of their fixed | costs, it's not different from a competitive perspective - | the price is unsustainable. | | 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. | guywithahat wrote: | I agree, I think dumping makes more sense when a government | is helping and industry produce temporarily low priced goods | to kill competitors, as would sometimes happen with China. | Even a big company like Amazon has a much more finite amount | of resources than a government | paulddraper wrote: | The difference between dumping vs not-dumping is the | _permanence and sustainability_ of the price. | | 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. | wslh wrote: | Startups play the game of customer acquisition costs above the | revenue all the time. If we want to discuss this issues we need | to skip cherry picking. | nickpp wrote: | Fascinating story of how Dow fought a dumping competitor: | | "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." | | https://en.wikipedia.org/wiki/Dow_Chemical_Company | tootie wrote: | We also call it "selling dollars for fifty cents" | eastbound wrote: | "We lose on every item but we make it up with scale." -- the | show "Silicon Valley" | loa_in_ wrote: | Which doesn't really make sense unless you interpret it as | "we make it up with growth." | maxk42 wrote: | Funny to see nobody's mentioned Cloudflare yet. They're not | making any money: This is presumably their exact plan: Offer CDN | services and other web infrastructure services at a loss for a | prolonged period of time until the competition is destroyed, then | jack up rates and eat the market. | teaearlgraycold wrote: | Aren't there other CDN providers like AWS that are pretty | stable? | dceddia wrote: | This coupled with their device attestation stuff scares the | hell out of me. Once enough of the internet is shielded by | Cloudflare, and they only allow access to authorized (read: | uniquely identifiable) devices (or else you have to answer a | captcha on every request)... I just don't see a very good | future for the free internet. | refulgentis wrote: | +1, they really made my eyebrows raise recently. They're | absurdly overaggressive on flagging requests as scraping...and | will sell you a CORS proxy for scraping, with a big fat "I'm a | scraper" tag on it. They get two customers and the web-as- | commons and the scraper are both worse off. | cs702 wrote: | From the abstract: | | "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. | dghlsakjg wrote: | I think the problem is that making a user or service provider | create an account on an app isn't the moat that they think it | is. A lot of these market domination moves only last as long as | the VC money then the competitors are more than happy to swoop | back in. | | 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 | dumbfounder wrote: | You aren't the norm. If you were then Lyft would be doing | much better. How many rideshare apps do you check? 5? 10? My | guess is maybe once in a while you check Lyft if uber seems | high. That's what I do. | zeroxfe wrote: | It's the playbook of any well funded organization trying to | break into a new market. This is the entire premise of loss | leaders, and they're effectively risking their entire capital. | senko wrote: | Yes, but: for a profitable organization a loss-leader is | expected to enable profit-making elsewhere in the org, so a | total sum ought to be positive. | | 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) | boringg wrote: | Theres no difference between what you just described just | that one has an umbrella where its funded by revenue | elsewhere and the other is on VC dollars on the promise of | long term ability for market share and raise prices or | someone else buys organization and continues it as a loss | leader for its ability to get market share. | | Ones higher risk but quite similar. | | Not sure what your point is to be honest | mdorazio wrote: | They are completely different financially. Look at this | way: in a single quarter, the cash flow for a company | with a loss leader strategy will still be positive | because the loss product is offset by other revenue. The | venture predation company will have a massive negative | cash flow no matter what because there is no near-term | revenue to offset the loss. | eastern wrote: | This paper is not about grabbing most of the market etc and | eventually making a profit. As the abstract quoted above | says, it's about creating an illusion that this can be done | so as to sell stock to a greater fool. Uber was quite | successful at this, as were many others. | | 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. | senko wrote: | > about creating an illusion that this can be done so as | to sell stock to a greater fool. | | 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. | wyre wrote: | That's a bit of an exaggeration right? Facebook sold their | headsets at a loss and seem to be doing fine, Uber and | doordash entered into markets without charging fees and look | to doing fine, OpenAI is currently doing that with ChatGPT | and we will see how it goes for them. | | 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. | stubybubs wrote: | > Uber and doordash entered into markets without charging | fees and look to doing fine | | 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. | vharuck wrote: | >This is the entire premise of loss leaders | | 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. | bombcar wrote: | The technical term for "loss leader" usually refers to a | place like a grocery store selling some necessity like milk | at or below cost, because they know if you compare milk | prices and decide to buy there, you'll get other things | once you're in the store. | | 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. | hnburnsy wrote: | Are there any examples of successful companies doing this? | Uber and Wework only cost the IPO bag holders. Have any | Venture Predation companies actually reached supracompetive | pricing levels and recouped the predatory losses enough to | have overall harm to consumers? | | IPO bag holders, too bad, and I don't see any regulatory need | to protect them. | anonu wrote: | I'm part of the problem. I always suspected my Uber ride was | financed with venture money. So i always went with Uber. But i | didn't think ahead to the fact that it would kill off the | competition. | | 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. | HDThoreaun wrote: | Uber's moat is its network. Can't get any drivers if there are | no riders and can't get riders if there are no drivers. This | means you need to start by offering drivers more money than you | make in order for them to use the app. An open source solution | wouldn't be able to get off the gorund. | tomatocracy wrote: | The direct fix for this (which I believe has happened in some | countries) is to ban them from asking drivers to enter into | exclusivity or minimum volume agreements with them. Then | drivers can work for multiple networks. | qwytw wrote: | > Then drivers can work for multiple networks. | | They already can do that? (and very often do) | bogwog wrote: | It isn't the consumer's responsibility to solve this problem. | That's the government's job. | cheapsteak wrote: | The open source and free platform be able to handle the | patchwork of regulations that are now in place that differ | between city to city | AndrewKemendo wrote: | No cause the entire point is that it's a finance game that just | happens to build products | EamonnMR wrote: | Uber's moat is the inertia of its massive customer and not- | employee base making it difficult to enforce the regulations it | has historically flaunted. In that way, it's similar to why | Mastodon can't kill Facebook. | liorben-david wrote: | Losing money while you grow isn't neccesarily bad. | | 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? | rossdavidh wrote: | I think the difference between legit and illegit is whether or | not your competitors have to go out of business for you to | become profitable. If you burn through some cash to get off the | ground, eventually driving your per-unit costs down so that | your prices become profitable, that's legit. | | 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. | revelio wrote: | Easy to criticize but to be consistent you'd also have to | consider non-VC-backed products dumped at below price by regular | companies too, and that would get uncomfortable real fast: | | - 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. | HDThoreaun wrote: | Chrome and vscode are integral parts of Google's and | Microsoft's strategy and absolutely make them tons of money via | increased usage of their main product(search and enterprise | productivity suite). | revelio wrote: | How does VS Code increase usage of Office? | arcticbull wrote: | Recovering your costs through advertising isn't really dumping. | Chrome definitely makes Google way more money than they put | into it. | revelio wrote: | I recall that it wasn't seen that way when Microsoft used | Windows revenues to push IE and crush Netscape. It was called | product tying back then. You don't hear much about it | anymore. | wmf wrote: | Chrome and IE did not have the same business model. If we | look back at Netscape vs. IE they both had predatory | nonexistent business models. | revelio wrote: | Netscape was payware in the beginning? Not sure how | that's non-existent? Even after they were forced to go | free by Microsoft, they were selling servers which are | the compliment of browsers. | wmf wrote: | Did anyone actually pay for Netscape? | Andrex wrote: | Also, outside of Opera, all browsers (that I know of) have | been free for over two decades. | bityard wrote: | This is essentially how Carvana has decimated the private used | car market in my area. Only instead of low product prices, they | offer well-above market value for used cars to private sellers so | that Carvana becomes the only source for a car that fits your | criteria. | WaitWaitWha wrote: | I think Zillow tried to do something like this with properties | in Florida in 2021, and ended up holding the proverbial bag. | busseio wrote: | Still? | maerF0x0 wrote: | if their theory holds true that means private sellers were | massively under negotiating, or that there is a large arbitrage | value between when a seller wants to sell and the days on | market. | | 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). | xp84 wrote: | I agree completely and totally see why people do it. I am | keenly aware of the big spread between trade-in value and | what the dealer will turn around and sell it for -- and yet, | having sold a vehicle a couple of times, I will probably | never do it again. Especially when you consider the risk of | getting scammed somehow in the money transferring process, a | lot of people will eat the few thousand bucks. I don't know | if Carvana will stick around, but definitely see myself going | to them or Carmax instead of Craigslist next time I am done | with a car. | nradov wrote: | Right, the CarMax process is pretty painless and the prices | they pay aren't much lower than what you could get in a | private party sale. I think some HN users might not | appreciate how risky selling a car on Craigslist has | become; there have been many high profile news stories | about sellers being scammed or robbed. Plus with the | increasing levels of violence in many cities more people | (especially women) are simply afraid to meet random | strangers or give out their contact info. | 62951413 wrote: | I sold my old car via CarMax and enjoyed the experience. I'll | go back to them once my car gets old enough regardless of | potential peanuts I might save theoretically. | lotsofpulp wrote: | I do not see Carvana lasting long, at least not if their only | strategy is to pay above market for used cars and getting in | the crosshairs of multiple state regulators. | | https://www.macrotrends.net/stocks/charts/CVNA/carvana/net-i... | | https://www.macrotrends.net/stocks/charts/CVNA/carvana/marke... | | https://en.wikipedia.org/wiki/Carvana | asah wrote: | yyy "cornering the market" is exceptionally difficult to | execute. In used cars for example, other companies could make | a fortune trucking in used cars from elsewhere and selling | them to Carvana... | davepeck wrote: | I assume this is showing up in part because it was discussed | recently in Matt Levine's Money Stuff [0]; it's an amusing (if | short) discussion. | | [0] | https://www.bloomberg.com/opinion/articles/2023-05-18/tether... | burkaman wrote: | It was also today's topic on Cory Doctorow's blog: | https://pluralistic.net/2023/05/19/fake-it-till-you-make-it/ | wslh wrote: | I don't know why this is catching now since it was already | obvious long time ago. I usually hate conspiracy theories but | could only think that a new meme or agenda is catching up. | For Cory, Matt, et al this should be obvious since the dot | com era and in every investment cycle. The greater fool | theory explained part of this. | yieldcrv wrote: | Stop the presses! /s | [deleted] | joshe wrote: | For academics I think this is fine, the whole job is to look for | new extensions of the law. But it shows how very far we are from | any kind of basis for "stopping tech." | | 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. | degreesoffun wrote: | And don't forget Amazon. They aren't venture backed but they have | access to capital at cheaper rates than most countries due to | their position as a stock market darling. They use ultra-cheap | money and a willingness to run negative margins which they refer | to "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. | | 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... | snake_doc wrote: | Amazon isn't unique in this case. Your example is a bit of | cherry picking. These tactics are common in retail | (demonstrated by the fact that WMT, AMZ, and COST are the top 3 | retailers in the world). | | > 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. | [deleted] | peyton wrote: | Yeah negative cash conversion cycle is Amazon's legendary | advantage. A country could compete by being as efficient with | working capital as Amazon. | daveguy wrote: | > 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. | | How is this not a serious anti-competitive monopolistic | practice? Did the Dept of Justice get involved? | lazide wrote: | It wouldn't result in a monopoly or near monopoly in any real | sense, and it's also hard to say it would meaningfully result | in a restraint of trade. It's also hard to say the consumer | would be hurt by free diapers, at least in any concrete way, | and if he didn't add in 'and raise the prices later when | you're dead', it also wouldn't be an easy thing to provide it | wouldn't just be wasting money out of spite. Which is purely | legal. | | Is it a strong arm/shitty tactic? Sure. Welcome to the real | world. | | [https://www.ftc.gov/advice-guidance/competition- | guidance/gui...] | peyton wrote: | Threatening to compete harder is anti-competitive? | willcipriano wrote: | When China makes threats to dump steel at below cost in the | US, politicians call it anti-competitive. | nonethewiser wrote: | You mean when China does dump steel? Literally subsidized | by the government. Thats not really analogous to Amazon. | confoundcofound wrote: | Amazon can finance at virtually interest-free rates due to | their negative working capital. | throwaway290 wrote: | > And don't forget Amazon. They aren't venture backed but they | have access to capital at cheaper rates than most countries | | If we are talking about non-venture cases, OpenAI+Microsoft is | doing the same with ChatGPT. | cheschire wrote: | There's a nugget of an interesting concept here. I would like | to know more, but I would also like to know more from the | folks downvoting you as to why they disagree. | | 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. | throwaway290 wrote: | It seems obvious, they are burning through Microsoft's | money for now (it was said these chatbots cost way more to | run than they make profit) to capture the market and be | able to get thick margins later. | qwytw wrote: | > it was said these chatbots cost way more to run than | they make profit | | 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) | boeingUH60 wrote: | Quidsi founder Marc Lore sold his next company, Jet.com, to | Walmart for $3.3 billion [1]. Both Quidsi and Jet.com were | never profitable, meaning Lore was also playing the game of | venture predation, so hardly any pity from me. | | 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... | pyrale wrote: | > Both Quidsi and Jet.com were never profitable, meaning Lore | was also playing the game of venture predation | | 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. | ilrwbwrkhv wrote: | Being a business owner with actual profits from technology by | selling a useful product, I can never understand the bizarre | emergent properties of our current financial system that lets | folks like Marc Lore to exist. | post-it wrote: | > Lore's current startup is a premium food delivery service | called Wondery | | A brilliant strategy! Amazon already owns a Wondery[0] so | they can't acquire his. | | [0] https://en.wikipedia.org/wiki/Wondery | psadri wrote: | I think his strategy is to exit to Amazon/Walmart/... | abigail95 wrote: | They have money because of AWS, which is a fantastic product in | an extremely competitive market, competing against players who | lose money like GCP and Azure. | | 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. | qwytw wrote: | > who lose money like GCP and Azure | | 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? | paulddraper wrote: | > Who cares what he did to some diaper companies. | | Going out on a limb here, but I'd say the diaper companies. | lotsofpulp wrote: | What happened to the diaper companies? Feel like I see the | same brands of diapers still. Procter and gamble, Kimberly | Clark, etc. | degreesoffun wrote: | > Who cares what he did to some diaper companies. Are | consumers paying more or less because of amazon? Much less. | | 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. | nonethewiser wrote: | > I don't expect the trend of them raising prices to | reverse as they gain market power. | | Except their competitors have followed suit with cheaper | shipping and online shopping. They are the best, but not a | monopoly. | rurp wrote: | > consumers get fantastic deals and cheaper products and more | reliable service than ever before. | | 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. | otikik wrote: | I care because once Amazon kills all their competitors then | they are the only ones selling diapers. And then they can | charge 10 bucks per diaper. | dynrzk wrote: | And then someone sees that people are buying diapers for 10 | bucks and starts selling them for 5. | edmundsauto wrote: | The latency between the observation of a market | opportunity, and actually realizing lower prices at the | consumer level, is significant. Millions of people would | be charged monopolistic prices for the year it would | take. | | This also assumes Amazon doesn't buy any competitor early | on, such as happened with Warby Parker. | winphone1974 wrote: | Except Amazon has the the diaper production locked up, | and we're back where Amazon temporarily sells them for 2 | bucks while you try and get your diaper factory off the | ground. | nonethewiser wrote: | Yet here we are in reality where they did kill the diaper | competitor and we have MORE retailers shipping diapers at a | competitive cost. | joefourier wrote: | How on earth do GCP and Azure lose money when they (just like | AWS) are ridiculously expensive? Like frequently >3x the | competition for VMs and for bandwidth egress, I've sometimes | seen 10x, or charging for things that competitors don't. | qwytw wrote: | Well they don't. Azure doesen't in fact it's the complete | opposite. Not sure about GCP though, but I'd also be | surprised... | DolceVita wrote: | [flagged] | satvikpendem wrote: | Are there any that are actually successful with this strategy? | Uber and Lyft, for one, but they still don't make profit and | aren't really that sticky, honestly, given that people will use | other services if they're cheaper, like Waymo and some new ride | sharing upstarts I've seen around recently. | seanhunter wrote: | I can't escape the feeling that it boils down to the old | classic 3 stage business model: | | 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. | satvikpendem wrote: | Exactly. Well, I'm not complaining at my VC funded rides | though, it's a great transfer of wealth from the rich to the | poor, ie me, lol. | version_five wrote: | There's an interesting article somewhere about a pizza | place that iirc arbitraged VC subsidies by ordering pizza | from itself through some delivery app that was buying the | revenue by selling the pizza below the actual price. | | Edit: https://www.readmargins.com/p/doordash-and-pizza- | arbitrage | satvikpendem wrote: | This was satirized in Silicon Valley too, funnily enough: | | https://www.youtube.com/watch?v=LYu-d6y5HRo | | https://www.youtube.com/watch?v=rdJifVNEKnE | mustacheemperor wrote: | I wonder what the relative scale of that wealth transfer is | compared to the transfer of wealth involved with leveraging | the motor vehicle equity of drivers into profits for | wealthy investors. | | Edit: per reply, "income" would be a better word | satvikpendem wrote: | It's not profits though. Investors are paying more than | the value of the ride to the driver. Now whether that | offsets the depreciation of the vehicle over time, I | don't know the numbers on that. | ClumsyPilot wrote: | > 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. | lotsofpulp wrote: | Not ironic because buyers and sellers have opposing | interests. | anigbrowl wrote: | I think Google is like that. Imagine going from such a lofty | initial mission to running an advertising spot market. | pixodaros wrote: | As long as the founders get to borrow lots of other people's | money to use this strategy, they have won. Even if the company | goes bankrupt or is bought at a low valuation, they collected | big wages and benefits for years and get to put their startup | experience on their pitches for their next project. | | 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). | fnord77 wrote: | amazon did this early on | fnord77 wrote: | I remember a game on the Apple ][ that was basically a simulation | of the bicycle manufacturing business | | 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 | spaceman_2020 wrote: | I'm so jaded by modern startups and venture industry. There are | people who've built entire careers building unprofitable | companies that only sell products to other unprofitable startups | and eventually get acquired by other unprofitable startups. | | 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. | mdgrech23 wrote: | This is our world right now. My wifes father was a plumber. She | said as actual plumber, you know someone who provides water and | ensures your shity is sanitarily drained away he didn't make | really good money. He got a job working for the auto industry | running pipes for hydraulics to the machines on the factory | floor and made way more money. How is that worth more to our | society? | spaceman_2020 wrote: | These startups aren't even making pipes in a factory. They're | building absolutely dumb stuff that offer marginal life | improvements ("15-minute delivery") or no improvements at all | (crypto). | | 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. | MichaelZuo wrote: | Why wouldn't factory machine hydraulics for the auto industry | be more important then an individual's toilet? | wslh wrote: | Also, a Zen monk will have a different perspective about | value. There are people who value the entertainment from | TikTok while others prefer to read a book. | frithsun wrote: | I believe a lot of this was driven by fed rate shenanigans | creating far more investment wealth than there were organic | opportunities for investing it. All of these market-distorting | startup deals were just symptoms of that broader systemic | monetary policy error. | | 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. | JumpinJack_Cash wrote: | > > I believe a lot of this was driven by fed rate shenanigans | creating far more investment wealth than there were organic | opportunities for investing it. All of these market-distorting | startup deals were just symptoms of that broader systemic | monetary policy error. | | 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. | abigail95 wrote: | Classic zero sum thinking with no evidence or even an | overarching thesis on the neutrality of money. | | You need to back this up with some serious economic citations | JumpinJack_Cash wrote: | > > Classic zero sum thinking | | 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. | kneebonian wrote: | Like having children or helping another person. | | Totally 0 sum. | abigail95 wrote: | What the fuck are you talking about? | revelio wrote: | Interesting perspective, thank you for that, but the issue is | not merely driving bond rates to zero. The money created by | central banks also flows into VC funds and the stock markets | via various indirect paths and from there into the startup | ecosystem. | JumpinJack_Cash wrote: | That's a problem of trust, money flows to startups because | the so called capital allocators don't trust themselves | with such amount of money, otherwise they'd be investing | all into companies where they are at the helm. | | 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. | source99 wrote: | There are two kinds of VC funded startups - Those that give money | to customers and those that give money to employees. | web3-is-a-scam wrote: | Isn't this more or less just loss leading? | ivansmf wrote: | You. don't. say. Really?!? OMG, what an insight! What are they | going to say next? That startups also use the good will of the | internet to create their IP to then take it private as a way to | get free labor? I'm shocked! And because this is also the | internet, that was sarcasm. | ohgodplsno wrote: | [dead] | cactusplant7374 wrote: | Normally it is described as a positive practice because | consumers get lower prices for an extended period of time. | | I personally benefited from this but I can see the drawbacks. | zomglings wrote: | Wasn't this dressed up and sold to the masses as blitzscaling | just a few years ago? | | I like the term "venture predation" better. | dbmikus wrote: | Yeah, Uber was a classic case study for blitzscaling and the | Uber v Lyft battles are a case study of blitzscaling by using | VC subsidies to try to price out competition. | cm_silva wrote: | Reminds me of the game Capitalism[0] where the player was | incentivized to achieve monopoly in markets by selling below- | cost, subsidized by the other parts of the business. Vertical | integration was also highly encouraged. | | [0] https://en.m.wikipedia.org/wiki/Capitalism_(video_game) | exabrial wrote: | Unfortunately before regulators have time to react, the intended | effect: Driving out small businesses, has already taken place. | huitzitziltzin wrote: | The response from regulators should be: Let VCs waste their | money. | | 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. | dumbfounder wrote: | Very often the unit economics at smaller scales doesn't work, but | then works great at a large scale. I don't think it's immoral to | gamble on achieving the high scale later and investing in the | company to shoot for that scale. If no one can achieve profitable | unit economics early on and you aren't allowed to have | unprofitable unit economics then no one will make the product. I | think this is bad for innovation. Is this the same as "venture | predation"? It sure seems that way. How could you tell it apart? | kashkhan wrote: | Don't airlines do this all the time to prevent new entrants? How | is this not provable? | WaitWaitWha wrote: | Best part in my opinion? | | 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". | NumberWangMan wrote: | This feels related to the idea in "Billionaires, Surplus, and | Replaceability" (1) | | 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... | Nevermark wrote: | Amazon is a series of several businesses created in succession, | with synergy between them. | | 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. | wslh wrote: | I don't think you can play the alternative universe easily. | Will there be another Apple? Will there be another Microsoft? | There is some uniqueness in Amazon execution that didn't enable | a competitor to survive, even when they were a startup. | mdgrech23 wrote: | seems more of a problem that we let monopoloies exist. hell | even oligopolies. we do have laws but we all know they don't do | shit. | balozi wrote: | Wait, it's predatory pricing traditionally understood to be aimed | at consumers/customers. Applying the term to sketchy pricing | practices aimed at competitors is a bit novel in my book. I feel | like words are being misused here. | Robotbeat wrote: | Pricing below costs is the opposite of a problem for consumers | (in the short term...). "Predation" in this case refers to | competing businesses, who often have enjoyed a long period of | monopoly rents. | likeclockwork wrote: | As you said "in the short term". Once the competition is | destroyed the consumer is at the predator's mercy. | pixodaros wrote: | Sometimes that is true, but if the barrier to entry is low | (eg. ridehailing services), as soon as the predator raises | prices, competitors will appear. If the barrier to entry is | high (eg. telecommunications), there is usually some | antitrust regulation. | glutamate wrote: | Other thing we need to talk about is when funded startups run | customer service that is not sustainably financed. Everybody | apparently loves this and celebrates that the great service and | listening to its customers. | | 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 | brookst wrote: | I don't see the problem. They apparently believe in a low | margin, high volume play with support being a volume driver. | They might be right or wrong, but I wouldn't want it to be | illegal as a business model. Investors and companies have to be | free to lose money or else we've just got a centrally planned | economy where every business has to offer the same product at | the same price. | gmd63 wrote: | The problem is society is witnessing races between Tortoises | and Hares, where the Hares are doped with venture backing. | | 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. | miiiiiike wrote: | I get your meaning, but not all competition is sport. You | don't have to go horse to horse with your competition if | you have an F-35. | dghlsakjg wrote: | If your product is good enough, this might not actually be a | money loser. If I never have to call support then its a win for | everyone. ___________________________________________________________________ (page generated 2023-05-19 23:00 UTC)