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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

#111

Post by darawk »

olefoo wrote: post #109
darawk wrote: post #106

Earlier quoted context omitted.

> The cause is more a function of wealth inequality. The ultra-wealthy have so much money that they only need 1/100 to be a gusher. It has nothing to do with wealth inequality. Whether you're pooling $100 from a million people, or $20 million from 5, the economics of venture capital are the same. Wealth inequality has nothing to do with this. The purpose of venture capital (for investors) is diversification. It is an…

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. You don't need any wealth inequality whatsoever to explain venture capital.

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

#112

Post by vkou »

Tomminn wrote: post #108
Marazan wrote: post #68

Earlier quoted context omitted.

Taxi firms don't have massive IT departments. That is the key to the "Uber will never be profitable" brigade. Taxi firms are way, way leaner than Uber/Lyft.

They have phone operators. Each of which has to sit somewhere. And have some kind of manager. Uber coordinates 15 million rides per day [1], which assuming a phone operator coordinates 20 rides an hour (unrealistically efficient-- in reality, I'm sure plenty are playing candy crush waiting for a call), that 160 a day, or an army of 100,000 phone operators to coordinate those rides. This is ususally done using local o…

Many taxi rides are now app-dispatched, or street-hailed, which don't need telephone dispatchers.

In Vancouver, when I was taking night taxis 3 times/week, Yellow Cab only had one dispatcher during off-peak times. She'd handle my dispatch in ~30 seconds, and her line was rarely busy.

In fact, telephone taxi dispatch was only a big thing in the brief span of time after the ubiquitous nature of cell phones, but before the ubiquitous nature of cell phones with apps.

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

#113

Post by shafyy »

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.

Same.

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

#114

Post by trhway »

roenxi wrote: post #98
digitaltrees wrote: post #79

Earlier quoted context omitted.

This does not explain why VCs are willing to invest in business models tha light cash on fire for growth in the hope of reaching a dominant market share and establishing a moat around the business. VCs believe in network effects, VCs believe monopolies are worth burning cash to achieve, VCs believe operating businesses can achieve what software businesses like google and Facebook achieved. Question their belief but d…

> This does not explain why VCs are willing to invest in business models tha light cash Lyft just IPOd with a market cap of ~20 billion on net income of minus 1 billion that is part of a 3-year down trend. If monetary policy is causing inflated stock prices (and it isn't causing consumer inflation, so it probably is pooling in asset markets) then it seems quite rational for a VC to invest in Lyft for the sole purpose…

>Lyft is basically employing its customers to make its revenue look good.

" ... then you're a product" 2.0. Somewhat similar to the role of a patient in the medical business - ie. the role of gauge boson mediating the insurance-provider field interaction.

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

#115

Post by astrodust »

digitaltrees wrote: post #79
pitaj wrote: post #43

Earlier quoted context omitted.

It's called malinvestment, and it's tied to monetary policy. When the central bank churns out money, the lower interest rates discourage banks from lending, making it harder for small businesses to collect capital that way. The lower interest rates simultaneously drive investment from bonds into the stock market and real estate. Look up Business Cycle Theory

This does not explain why VCs are willing to invest in business models tha light cash on fire for growth in the hope of reaching a dominant market share and establishing a moat around the business. VCs believe in network effects, VCs believe monopolies are worth burning cash to achieve, VCs believe operating businesses can achieve what software businesses like google and Facebook achieved. Question their belief but d…

> Why VCs are willing to invest in business models that light cash on fire for growth?

Lyft went to IPO. A lot of people made a ton of money on the back of that.

Until that stops happening, what incentive is there for VCs to not do this?

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

#116

Post by patmcc »

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.

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

#117

Post by quadrangle »

darawk wrote: post #104
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…

This is how the economy is supposed to work. The people pouring billions into these companies are taking a calculated risk. It might work, it might not. If it does, we'll all get a bunch of cool new services. If it doesn't, those people will be out billions of dollars and we'll have gotten some cheap services for a while on their dime. They're taking a risk to create something new, and if it works, they'll be handsom…

As others emphasized, it's totally possible for investors to get some exit before a bust, hoisting off the risk onto more naive later investors.

In short: create the appearance of a successful business, convince others (suckers) that it's a great investment, profit from selling your shares.

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

#118

Post by soVeryTired »

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.

> 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.

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

#119

Post by pxue »

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.

Also transfer of wealth from the drivers/delivery person..

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

#120

Post by darawk »

quadrangle wrote: post #117
darawk wrote: post #104

Earlier quoted context omitted.

This is how the economy is supposed to work. The people pouring billions into these companies are taking a calculated risk. It might work, it might not. If it does, we'll all get a bunch of cool new services. If it doesn't, those people will be out billions of dollars and we'll have gotten some cheap services for a while on their dime. They're taking a risk to create something new, and if it works, they'll be handsom…

As others emphasized, it's totally possible for investors to get some exit before a bust, hoisting off the risk onto more naive later investors. In short: create the appearance of a successful business, convince others (suckers) that it's a great investment, profit from selling your shares.

> As others emphasized, it's totally possible for investors to get some exit before a bust, hoisting off the risk onto more naive later investors.

Yes it is possible. But people consistently overestimate how easy it is to do this. Would you bet billions of dollars on being able to fool other managers of billions of dollars? I wouldn't.

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