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Venture Predation

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Re: Venture Predation

#151

Post by qwytw »

joefourier wrote: post #133
abigail95 wrote: post #87

Earlier quoted context omitted.

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 produ…

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.

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...

Re: Venture Predation

#152

Post by liorben-david »

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?

Re: Venture Predation

#153

Post by psadri »

post-it wrote: post #143
boeingUH60 wrote: post #94

Earlier quoted context omitted.

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 compan…

> 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

I think his strategy is to exit to Amazon/Walmart/…

Re: Venture Predation

#154

Post by wslh »

NumberWangMan wrote: post #85

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 fr…

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.

Re: Venture Predation

#155

Post by qwytw »

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…

> 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).

Re: Venture Predation

#156

Post by wslh »

MichaelZuo wrote: post #139
mdgrech23 wrote: post #116

Earlier quoted context omitted.

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?

Why wouldn't factory machine hydraulics for the auto industry be more important then an individual's toilet?

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.

Re: Venture Predation

#157

Post by qwytw »

bananapub wrote: post #68
jjeaff wrote: post #56

Earlier quoted context omitted.

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.

> 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.

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..

Re: Venture Predation

#158

Post by spaceman_2020 »

mdgrech23 wrote: post #116
spaceman_2020 wrote: post #112

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 n…

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?

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.

Re: Venture Predation

#159

Post by wslh »

burkaman wrote: post #46
davepeck wrote: post #6

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...

It was also today's topic on Cory Doctorow's blog: https://pluralistic.net/2023/05/19/fake-it-till-you-make-it/

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.

Re: Venture Predation

#160

Post by loa_in_ »

eastbound wrote: post #84
tootie wrote: post #57

Earlier quoted context omitted.

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”

Which doesn't really make sense unless you interpret it as "we make it up with growth."
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