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On-Demand Startups Are Hemorrhaging Tens of Billions a Year

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Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#151

Post by bspn »

Ericson2314 wrote: post #123
soVeryTired wrote: post #118

Earlier quoted context omitted.

> Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that. The VCs are gambling with someone else's money though. They raise money from institutional investors: pension funds and insurance companies. Ultimately the little guy will pay via government bailouts, pension reductions, and higher insurance premiums.

I get they raise others' money, but which pension funds are being into this high risk stuff?

Almost all of them. They manage their portfolios like most other large fund managers albeit with a slight preference towards lower risk assets to ensure their short/medium term pension obligations are met, but they will almost always have an alternative investment bucket which VC will be a part of. They're also not interested in doing direct investments, so they'll diversify their early stage risk by investing in a couple of the more successful, established VC funds who spread the bets for them.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#152

Post by nilskidoo »

digitaltrees wrote: post #150
cimmanom wrote: post #91

Earlier quoted context omitted.

It may not be bad for the investor if that’s be outcome, but it sure is bad for the market and the consumer.

I totally agree. Monopolies are destructive. Markets to work with monopolies; there is no competition to allow for optimal price discover that matches supply and demand. I am just reacting against the urge to blame monetary policy and government itself. I find this to be a common response that keeps being disproven and yet doesn't go away. I am definitely not a fan of Uber, Amazon, and the like. I really don't like t…

The opposite of monopoly is diversity, and in genetics, the opposite of diversity is inbreeding.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#153

Post by JMTQp8lwXL »

AlexandrB wrote: post #89
digitaltrees wrote: post #82

Earlier quoted context omitted.

Google+ begs to differ. Network effects are real. A product needs to be 10x better than a network effect alternative to have a shot at replacing it. If Tesla is first to market by a year or two, maybe. But if Lyft hits the market within a few months; as a lift user, you’ll just stick to that app, why switch.

> A product needs to be 10x better than a network effect alternative to have a shot at replacing it. This isn't true, sometimes it's just fashion. At its inception Facebook wasn't 10x better than MySpace. Moreover, ride sharing doesn't benefit from the kind of network effects that social network do. I'm stuck on Facebook because that's where many of my friends are. I have no reason at all to care at all which ride-sh…

An emphemeral ride you recieve via a ridesharing app is a commodity. Your social connections are not a commodity. The distinction in where (and where not) network effects applies matters.

Small critique, though: if there are no drivers, you won't ditch Uber of Lyft for the no-name platform that mandates a 60 minute wait before you can get picked up since they have so few drivers.

Perhaps, network effects should be a continuum, with ridesharing at the weaker end, and social networks at the stronger end, when it comes to business relevance.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#154

Post by JMTQp8lwXL »

digitaltrees wrote: post #147
AlexandrB wrote: post #89

Earlier quoted context omitted.

> A product needs to be 10x better than a network effect alternative to have a shot at replacing it. This isn't true, sometimes it's just fashion. At its inception Facebook wasn't 10x better than MySpace. Moreover, ride sharing doesn't benefit from the kind of network effects that social network do. I'm stuck on Facebook because that's where many of my friends are. I have no reason at all to care at all which ride-sh…

Platform liquidity is more powerful than you are giving it credit for. Any two sided marketplace has network effects by definition because the value to buyers increases with the number of sellers as does the opposite. Airlines are not a two sided marketplace; they own the fleet. I agree Uber is more a commodity than facebook, but almost no product ever has been as sticky as facebook.

Facebook might be sticky, and people have it for the sake of "having" it, but before we all became some Product Manager's KPI to raise "number of likes" and "number of shared posts" -- it was far more useful. Interaction with the platform is, subsequently, way down since I only care to read so many political rants from family I'm not politically in agreement with and "actual photo/footage of me doing " memes. It's so overdone. I never thought I'd hit a point where I'd think, "you know what, I'm not going to touch that political facebook post" because I love to discuss politics-- and here we are.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#155

Post by maheart »

patmcc wrote: post #116
lordnacho wrote: post #33

It's a strange age to be living in. On the same day I've visited people in a WeWork, been driven around in an Uber, and had food delivered by Deliveroo. All of them blowing a huge load of money for the privilege. If they don't make back this money, it will represent a huge waste of resources. It's private money behind, but I still wonder whether this a reasonable way for the economy to run. For one, it means the litt…

>>If they don't make back this money, it will represent a huge waste of resources. Hardly; it'll just be a transfer from VCs with too much money to everyone else in the economy. We could probably use more of that.

I don't think it's that simple. The VC money itself comes from places like retirement funds. Also the mania surrounding startups and how much money could be made has had an effect on the public markets -- whether it's adding fuel to crypto, programmers in public company's asking for more money, or it's regular people buying FANG stocks hoping to make big money. I think in the end it'll be a lot of everyday people that lose money.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#156

Post by subjectHarold »

digitaltrees wrote: post #149
subjectHarold wrote: post #131

Earlier quoted context omitted.

Monetary policy is everything. Read financial history. VCs aren't some unique species that have cracked investing. Human nature is the same as always: people will do stupid stuff. If someone turns up with a check for $100m, you don't check to see whether you can invest it safely. You become a true believer, you gather assets, and if you weren't a true believer at the start you will be after you make enough...it alway…

I studied financial history extensively. I wrote a paper in law school about the origins of the financial crisis and studied most economic and financial panics for 200 years. Monetary policy is rarely the most important factor. Trade policy, Fiscal policy (government spending across national, state, local and community), Regulatory incentives, technological changes whose importance is overestimated or underestimated,…

Cool, you wrote a paper in law school. I wrote two dissertations at UG and PG level.

Monetary policy is essential, none of the things you mention are more important. Why? Because the boom can't occur without monetary policy (this is usually not obvious to people who have only looked at US financial history where capital markets are developed).

Lots of reasons are given ex-post to rationalise these movements i.e. changing technology "caused" the Canal boom...but technology is always changing. And human nature is certainly interesting...but it is an invariant (just like technological change). The enabling factor is always money. Btw, this isn't to say that, for example, regulation wasn't a factor in 2008...it was but the thing is that regulation is always a problem because when money gets loose then regulations follow.

Examples of booms without bubbles: post-WW2 in the US, financial conditions were stable in the few decades (not strictly true but for our purposes) because the the main concern of monetary policy was government finance. Another example: Japan 1960s-1992, MOF had total control over lending so no bubble (only popped when they lost it).

In these cases, you need to really understand how money is being created and intermediated. If you understand this then you understand why bubbles do and do not occur. If you look at unimportant things like technology, you only have reasons why bubbles do occur (this is the kind of terrible history that you presumably learn at law school).

You also picked one of the absolute worst examples to demonstrate your point. The Greenspan Put was vital, "irrational exuberance" and the contrast between that approach and that of a McChesney Martin (for example) is important. Even just the change in policy under Greenspan...really bad example. I tried but was unable to think of an actual example...

No-one cares about Bitcoin. We are talking about financial history, not Beanie Babies.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#157

Post by olefoo »

darawk wrote: post #111
olefoo wrote: post #109

Earlier quoted context omitted.

It does have a relationship to wealth inequality. On the one hand you have money seeking returns and getting caught up in zero and negative sum games while doing so. On the other you have a lack of small investors with lower risk tolerance. Both of these are results of wealth inequality.

> On the one hand you have money seeking returns and getting caught up in zero and negative sum games while doing so. This happens to retail investors all the time. > On the other you have a lack of small investors with lower risk tolerance. Both of these are results of wealth inequality. Citation needed. Retail investors buy all kinds of risky shit. You can do all of these same things with retail investors money. Yo…

Are you referring to investors in penny stocks? I was thinking more in terms of seed investors and self-funding entrepreneurs; of which there is a real dearth at present.

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#158

Post by jammygit »

mlinsey wrote: post #26
Johnny555 wrote: post #4

Where does the money go for Lyft/Uber? The software platform can't be that expensive amortized across a million+ drivers. It's not like the drivers are overpaid (and in many cases, they are barely (or not even) paid enough to cover costs) What else do they spend it on? Marketing? Bribing...err... lobbying politicians for favorable treatment?

From what I've seen at other on-demand co's, the three most likely culprits are: 1- User acquisition costs (discounts, marketing, etc - for both sides of the platform). this gets more expensive in the face of competition, and there's some hope that if you can "win" the market then eventually these costs will be reduced sharply. 2- Money as a band-aid for reliability/support issues. Frequently, an Uber driver refuses…

$5 to apologise for somebody trying to steal from you and leaving you without a ride? That's not a great deal imo

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#159

Post by fgonzag »

warent wrote: post #24
b_tterc_p wrote: post #6

I asked in the recent thread how Meituan could possibly be affording to subsidize restaurant meals to be significantly below cost at restaurant as that didn’t make any sense. Turns out according to this article that it’s simply that. It doesn’t make sense. They lost $17 Billion in 2018 for a shallow moat around an ugly castle. The next recession is going to hit hard, and I’m guessing a lot of the gig economy jobs wil…

I've never heard the expression "for a shallow moat around an ugly castle" before but it's a wonderful picture to paint for just this kind of situation. I'm excited to start incorporating it into my conversations.

I actually pictured it, for some weird reason

Re: On-Demand Startups Are Hemorrhaging Tens of Billions a Year

#160

Post by darawk »

olefoo wrote: post #157
darawk wrote: post #111

Earlier quoted context omitted.

> On the one hand you have money seeking returns and getting caught up in zero and negative sum games while doing so. This happens to retail investors all the time. > On the other you have a lack of small investors with lower risk tolerance. Both of these are results of wealth inequality. Citation needed. Retail investors buy all kinds of risky shit. You can do all of these same things with retail investors money. Yo…

Are you referring to investors in penny stocks? I was thinking more in terms of seed investors and self-funding entrepreneurs; of which there is a real dearth at present.

No. You are right that non-wealthy people do not make angel investments in startups (usually). However, they could make a small investment in a fund that does so. Right now, such funds do not exist, primarily for regulatory reasons.
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