WeWork and Counterfeit Capitalism • Hacker News Board

Re: WeWork and Counterfeit Capitalism

#111

Post by mrkurt » Wed, Sep 25, 2019, 6:00 PM UTC

janee wrote: post #78

legitster wrote: post #35

> WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses. > This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. This is wrong, wrong, wrong. The difference is Amazon saw what the marginal costs coul…

> with the idea of profiting later on via the surviving monopoly I don't understand...if you undercut your competitors so you're the sole survivor, I don't see how profiting is a obvious end result. When you return prices to market value wouldn't competitors just appear again. Is predatory pricing really such a bad thing, I'd assume the market would just corrects itself later?

It's more complicated than that.

When you're the sole survivor, you have a lot of options. In Amazon's case, what they have is immense leverage over the whole supply chain. Amazon extracts higher margins from manufacturers, shipping, etc, etc. And they have enough influence that people pay them $80/year for the privilege of being a customer.

Re: WeWork and Counterfeit Capitalism

#112

Post by tlb » Wed, Sep 25, 2019, 6:00 PM UTC

legitster wrote: post #35

> WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses. > This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. This is wrong, wrong, wrong. The difference is Amazon saw what the marginal costs coul…

There are two ways to get to positive margins: Either drive down costs (as Amazon did) or increase price. Part of WeWork's plan is presumably to increase prices once tenants are locked in.

The big question is how much lock-in they can achieve. The lock-in is largely caused by employee loyalty. Employees who like beer and camaraderie in the evenings may be hard to persuade to move to a soulless office park.

It's a micro version of the way a city gets lock-in. San Francisco office space costs 2-5x more than Sunnyvale, because employees will quit if you move your office from one to the other.

Re: WeWork and Counterfeit Capitalism

#113

Post by baq » Wed, Sep 25, 2019, 6:01 PM UTC

iamkroot wrote: post #80

40acres wrote: post #74

For me, this whole WeWork fiasco has shown just how valuable the SEC and the S-1 filing process is. Let's be clear -- Neumann was fired because any investor who read the S-1 was mortified and wouldn't touch the company with a 10 foot pole. If anything, this shows how lawless the private markets are and the lack of guardrails that are present to protect private investors -- perhaps this will lead to some reform in the…

Why do private investors need protection? Why can't they be held responsible for the foolishness of their actions?

What if there’s no way to know what’s foolish and what isn’t? The protection we’re talking about here is equal access to information which is a necessary prerequisite for an efficient market.

Re: WeWork and Counterfeit Capitalism

#114

Post by Ididntdothis » Wed, Sep 25, 2019, 6:01 PM UTC

nradov wrote: post #92

Ididntdothis wrote: post #85

Earlier quoted context omitted.

Because with the rise of 401k and lately low interest rates a lot of people were forced into the market who simply don’t have skill or time to learn these skills to make investments in an unregulated market.

The vast majority of 401(k) funds are in large-cap mutual funds which don't invest in IPOs. Most 401(k) plans also offer some sort of money market or Treasury bond fund. It takes about 5 minutes and zero skill to learn that T-bonds are safe investments.

It’s not like treasuries or money market return acceptable returns for people’s retirement portfolio.

Re: WeWork and Counterfeit Capitalism

#115

Post by VHRanger » Wed, Sep 25, 2019, 6:02 PM UTC

BWStearns wrote: post #46

legitster wrote: post #35

> WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses. > This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. This is wrong, wrong, wrong. The difference is Amazon saw what the marginal costs coul…

> The subprime crisis is completely unrelated! And if anything it was proof that money-making assets should be scrutinized more. I think the connection here is that the assets themselves were money losing but they passed them off as safe assets despite knowing they weren't safe. If I make money by producing counterfeit bills and circulating them then it makes money. It's still counterfeiting. The underlying assumptio…

The CDO assets were money losing but in a much more obfuscated way.

They acted like a bet where you make a dollar if you roll 1-19 on a d20, but lose $50 if you roll a 20. And because they had higher-than-sp500 returns, short sighted investors flocked to them.

The one point where WeWork is similar to those CDOs is the stack of complexity used to obfuscate the fairly simple business financials

Re: WeWork and Counterfeit Capitalism

#116

Post by mrkurt » Wed, Sep 25, 2019, 6:03 PM UTC

TremendousJudge wrote: post #41

chrisseaton wrote: post #3

Some of these criticisms are just irrelevant personal abuse - like saying he doesn't think Neumann's t-shirt is fitted well.

Also the bits about these people "Jamie Dimon of JP Morgan and Masayoshi Son of Softbank". Two paragraphs of hearsay about the skills and motivations of these people and not a drop of anything resembling hard evidence. A lot of "he's actually incompetent and the only reason he made good decisions in the past is because he was lucky".

If you follow Matthew Stoller on Twitter (or subscribe to his substack), you'll find lots of specific content about those two. Usually he's snarky about people he's built a wealth of back story on.

Re: WeWork and Counterfeit Capitalism

#117

Post by throwaway744678 » Wed, Sep 25, 2019, 6:04 PM UTC

helen___keller wrote: post #52

legitster wrote: post #35

> WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses. > This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. This is wrong, wrong, wrong. The difference is Amazon saw what the marginal costs coul…

> The subprime crisis is completely unrelated! And if anything it was proof that money-making assets should be scrutinized more. The subprime mortgage crisis is basically godwin's law for finance. Want to make something look awful? Compare it to CDOs or mortgage-backed securities.

I get your point, but Ponzi would be an even better candidate, though.

Re: WeWork and Counterfeit Capitalism

#118

Post by RobinRes » Wed, Sep 25, 2019, 6:04 PM UTC

This could be the next bubble. Hundreds of articles have surfaced over the past week on the board room meeting, internal tensions, IPO postponement and layoffs. People have already braced for impact, a post on Blind says they got emails and another article on Crunchbase says ~5000 layoffs are expected.

Re: WeWork and Counterfeit Capitalism

#119

Post by kizer » Wed, Sep 25, 2019, 6:04 PM UTC

jerf wrote: post #20

chrisseaton wrote: post #3

Some of these criticisms are just irrelevant personal abuse - like saying he doesn't think Neumann's t-shirt is fitted well.

At that level of income, clothes are a choice. Simply insulting him about his clothes may not be very helpful, but thinking about the message Neumann is sending with that clothing choice is productive. I'm inferring from the text that that picture is from an investor presentation, though I don't quite know, but if it was, those clothes are rife with meaning. They are as deliberately crafted as any of the words in tha…

Or, it's just a t-shirt.

Re: WeWork and Counterfeit Capitalism

#120

Post by johnfactorial » Wed, Sep 25, 2019, 6:05 PM UTC

jamiequint wrote: post #40

> This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market. This is false. First, Amazon is far from controlling the whole market. They control close to 50% of e-commerce which itself represents less than 12% of total retail sales. Second, Amazon didn't predatory price, or if it did, it didn't for long, certainly not long enough to achieve its current m…

> They control close to 50% of e-commerce which itself represents less than 12% of total retail sales.

Both of these numbers are surprising to me, can you source them? Particularly the first one, which I assume is a global measure, and I'd be interested to know what % of North American e-commerce Amazon controls. I wager I could walk outside my home and ask 100 people on the sidewalk to name one e-commerce site and far more than 50% would name Amazon first.