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Venture Predation

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Re: Venture Predation

#81

Post by tshaddox »

jeffbee wrote: post #64
SOLAR_FIELDS wrote: post #51

Earlier quoted context omitted.

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.

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.

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.”).

Re: Venture Predation

#82

Post by dboreham »

mrguyorama wrote: post #77
jeffbee wrote: post #64

Earlier quoted context omitted.

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.

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

It's both because they also weren't paying drivers enough to cover their (actual) costs.

Re: Venture Predation

#83

Post by 8ytecoder »

conjecTech wrote: post #43
brookst wrote: post #32

Earlier quoted context omitted.

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 t…

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 an…

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.

Re: Venture Predation

#84

Post by eastbound »

tootie wrote: post #57
nico wrote: post #20

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... .

We also call it "selling dollars for fifty cents"

“We lose on every item but we make it up with scale.” — the show “Silicon Valley”

Re: Venture Predation

#85

Post by NumberWangMan »

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...

Re: Venture Predation

#86

Post by dboreham »

derefr wrote: post #44
lesuorac wrote: post #35

Earlier quoted context omitted.

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.

> 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 h…

That analysis of Windows history is fiction. Plausible business school fiction but fiction nevertheless.

Re: Venture Predation

#87

Post by abigail95 »

degreesoffun wrote: post #78

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 d…

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.

Re: Venture Predation

#88

Post by paulddraper »

brookst wrote: post #32
nico wrote: post #20

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... .

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 t…

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.

Re: Venture Predation

#89

Post by lazide »

brookst wrote: post #32
nico wrote: post #20

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... .

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 t…

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).

Re: Venture Predation

#90

Post by paulddraper »

dboreham wrote: post #86
derefr wrote: post #44

Earlier quoted context omitted.

> 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 h…

That analysis of Windows history is fiction. Plausible business school fiction but fiction nevertheless.

What part is incorrect?
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