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Big tech is built on predatory pricing

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Re: Big tech is built on predatory pricing

#71

Post by dpatru »

habosa wrote: post #2

What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market. I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed h…

Productivity in any market requires investment. Here Uber needs to build a network of drivers and passengers, so they spend money subsidizing rides until the network grows to a sustainable size. How is this different than what any other competitor does? For example, bus transport companies need to buy buses and arrange routes before they can take passengers. Manufacturing companies need to design products and build factories before they can produce. Skilled workers need to go to school and practice before they can be hired as skilled workers. Etc. The exact nature of investment varies, but the general idea that competing effectively requires upfront investment is the same. Investment is not unfair; it is how productivity rises and civilization progresses.

> There's a fixed supply of willing drivers ...

The supply of willing drivers varies by wages. Also the supply of willing passengers varies by prices. Uber's success depends on being able to entice drivers with higher wages and passengers with lower prices. To the extent that they are successful, they make both groups better off.

> Unlike with cloud services (the other example) it's much harder for competition to Uber to reappear once it's disappeared. There's a fixed supply of willing drivers and big network effects at play.

This is exactly backwards. Once a large network of drivers and passengers connected by smartphones has been established, a competitor has only to offer its own smartphone app to compete. The hard part is building the network and changing people's behaviors.

Re: Big tech is built on predatory pricing

#72

Post by SamReidHughes »

habosa wrote: post #2

What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market. I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed h…

IRS vehicle costs are not the actual vehicle costs, which are lower.

Re: Big tech is built on predatory pricing

#73

Post by dhimes »

dpatru wrote: post #71
habosa wrote: post #2

What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market. I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed h…

Productivity in any market requires investment. Here Uber needs to build a network of drivers and passengers, so they spend money subsidizing rides until the network grows to a sustainable size. How is this different than what any other competitor does? For example, bus transport companies need to buy buses and arrange routes before they can take passengers. Manufacturing companies need to design products and build f…

GP's not talking about investing in infrastructure or training. GP's talking about selling the product for less than it costs to produce in order to have a monopoly in the region. This not only discourages the competition, it discourages the existence of competition.

Back in "the day," VCs (at least some) would tell you directly that they wouldn't invest in anything that competes with Microsoft. The legality of it all was irrelevant to the conversation- they weren't going to enter the fight.

Re: Big tech is built on predatory pricing

#74

Post by yazan94 »

n_time wrote: post #66
secabeen wrote: post #55

Earlier quoted context omitted.

One factor is the reputation/blacklist system. If you are harrassed on a bus, you don't have much recourse. Sure, you can complain to the metro police, but all they can do is take a report. On a shared ride like this, Uber/Lyft can increment the "harassment complaint" counter of all of the other riders with you. A regular harasser will quickly add up multiple complaints, and will be banned from the system. Honestly,…

These policies of "harassment complaint", reputation, and recourse systems seem to me a bit like "you will be safe from the unwashed masses". Paid service apartheid?

> These policies of "harassment complaint", reputation, and recourse systems seem to me a bit like "you will be safe from indecent people".

FTFY

Re: Big tech is built on predatory pricing

#75

Post by dhimes »

conanbatt wrote: post #34
habosa wrote: post #2

What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market. I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed h…

If you were an Uber investor, and they told you that they are going to blow your money below margin of operations for years to come, would you feel happy about it? Do you prefer to be the dumper or the dumpee? Because I prefer to be the latter. > Unlike with cloud services (the other example) it's much harder for competition to Uber to reappear once it's disappeared. It's just a car. Its super easy to break into that…

If they weren't they wouldn't let them do it. Maybe amateur investors will get upset, but as I said in another comment the pros know that this tactic will not only scare off competition, this will scare off potential competition.

Few will fund a company to compete against an incumbent who is large and powerful enough to do this to you. There are other battles to be fought, so why risk it?

Re: Big tech is built on predatory pricing

#76

Post by n_time »

yazan94 wrote: post #74
n_time wrote: post #66

Earlier quoted context omitted.

These policies of "harassment complaint", reputation, and recourse systems seem to me a bit like "you will be safe from the unwashed masses". Paid service apartheid?

> These policies of "harassment complaint", reputation, and recourse systems seem to me a bit like "you will be safe from indecent people". FTFY

My point was that these services are using technical terminology to soften and obscure the stratifying of spaces based on power/money. You've responded by softening the terminology again.

I see others pointing out in sub-threads that these services are better than buses because there are "no hobos, gangstas, creeps, drunkards or other people creating a nuisance for fellow travellers".

Should I break down those labels and across which lines they are dividing society? :)

Re: Big tech is built on predatory pricing

#77

Post by dsfyu404ed »

PenguinCoder wrote: post #10
philipkglass wrote: post #8

Regarding Amazon, I seem to recall reading similar accusations leveled at Wal-Mart around the turn of the millennium. Their low prices were going to destroy local small retail businesses, then they'd reap monopoly profits after the competition died. It looks like the first thing happened but the second didn't. Prices might have rebounded a bit at a Wal-Mart after their initial arrival in a community, but they didn't…

Thing is, the profit margin is still there or even greater for Wal-Mart than 'Bobs Local Hardware Store'. Wal-Mart items are generally poor quality (cheaper) and they are notorious for bullying manufacturers and distributors for meeting a target price. They often win in these cases, which keeps their prices lower. But make no mistake, some of the cheaper items are not the same items you would get from even another bi…

It's not as simple as making caveman noises and saying "China junk bad" there's economic forces at play that dictate what does or doesn't go on a store shelf. Consumers usually want the cheapest. When everything is coming from the same five factories in China whoever has some other advantage (like economics of scale, lack or morals, etc) will be able to sell at the lowest price while still making a profit.

Most of the cheap stuff on the bottom shelf at $LocalStore can also be bought at Walmart. The difference is that at more specialized stores you have options other than "value-priced" and big box stores tend to have house branded products that are as cheap or slightly cheaper than the cheapest thing at a specialized store.

I can go to my hardware store and get Lenox blades for my reciprocating saw or I can get Black and Decker. I might or might not be able to get the lowest end product line from a reputable brand or some Chinese re-brand that's an unlicensed copy of said lowest end product line. At Walmart I can only get whatever the cheapest product line Black and Decker is because that's not their specialty.

In cases where there only consumer options available are the "value priced" options there's no difference. The one tube cutter you can buy at your local hardware store is going to be the same one you can buy at Walmart, Harbor Freight, or from an eBay drop shipper. If you want a Reed, Rigid or some other "professional" brand you'll have to go to somewhere else. If your local hardware store specializes in plumbing or HVAC you might find one but I wouldn't count on it.

Re: Big tech is built on predatory pricing

#78

Post by eevilspock »

The most damaging effect of predatory pricing is the squeezing of the labor force providing the underlying goods or services. Amazon, Uber and their customers win, and the low income people working the textiles, assembling the electronics, or driving the cars, lose.

Re: Big tech is built on predatory pricing

#79

Post by posterboy »

habosa wrote: post #2

What Uber is doing here should absolutely not be allowed. Whenever you go to a city where Uber is in it's first year of operations the prices are insanely low. This also happens when Uber launches a new product like Pool. This enables them to crowd out any competition and then raise prices once they've got control of the market. I have a friend in SF who takes Uber to work every day. It's about 3.5 miles. I assumed h…

> There's a fixed supply of willing drivers

i.e. there's a fixed supply of willingness?

Re: Big tech is built on predatory pricing

#80

Post by dpatru »

dhimes wrote: post #73
dpatru wrote: post #71

Earlier quoted context omitted.

Productivity in any market requires investment. Here Uber needs to build a network of drivers and passengers, so they spend money subsidizing rides until the network grows to a sustainable size. How is this different than what any other competitor does? For example, bus transport companies need to buy buses and arrange routes before they can take passengers. Manufacturing companies need to design products and build f…

GP's not talking about investing in infrastructure or training. GP's talking about selling the product for less than it costs to produce in order to have a monopoly in the region. This not only discourages the competition, it discourages the existence of competition. Back in "the day," VCs (at least some) would tell you directly that they wouldn't invest in anything that competes with Microsoft. The legality of it al…

Uber's network of drivers is way of providing transportation services. This network doesn't just spring into existence. It must be created and it costs money. A traditional bus service also costs money; the buses must be purchased, the drivers hired and paid, the routes established and signs posted, etc. Why isn't a bus company unfairly competing with taxis by offering lower fares based on massive upfront investments in bigger vehicles that are paid back over many years? Uber's "bus" is its network.

> monopoly in the region

There is no monopoly in transportation. People can drive their own cars, take buses, take taxies, ride Lyft, walk, bike, etc. Uber is creating a network.

> This not only discourages the competition, it discourages the existence of competition.

Discouraging competition is the same as discouraging the existence of competition.

To compete effectively against any good business requires investment. Uber is competing against the taxi network, bus services, zipcar, etc. Uber's strategy requires investment in building a network of drivers that can quickly reach anyone in the service area. To build this network, they have to invest in drivers and passengers. They do this by paying drivers more than they produce and offering passengers service for less than it costs. As more drivers and passengers join the network, costs come down, service gets better, prices may be able to be raised, and Uber may be able to recoup its investment and earn a profit. Maybe. if they earn too much of a profit by charging passengers too much or paying drivers too little, they risk being replaced by other app makers who offer Uber's network of drivers and passengers a better deal.

It's uncertain if Uber will be profitable. But in trying to be profitable, Uber is definitely offering drivers and passengers better options than what they already have (otherwise, the drivers and passengers would not be using Uber).

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