On-Demand Startups Are Hemorrhaging Tens of Billions a Year • Hacker News Board

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

#171

Post by skybrian » Wed, Apr 03, 2019, 4:37 PM UTC

rchaud wrote: post #164

skybrian wrote: post #41

Earlier quoted context omitted.

If the "waste" is subsidizing services you actually want, is it really waste? It's more of a transfer from investors to landlords and drivers, who certainly wouldn't be as happy with less money.

I think the "waste" aspect of it comes from the crowding-out effect of capital allocation. Large sums going into the on-demand economy businesses means that there's far less available to invest in other types of business models. That in turn may incentivize some businesses to "pivot" to an on-demand model purely to get their foot in the door with some investors, regardless of whether it makes business sense. Remember…

I'm not sure the crowding-out effect is real? It seems hard to argue that this is a bad time for startups to raise money.

Compare with a boom-bust cyclical model where boom times make raising money easier for everyone. Under this model, overly enthusiastic investors eventually get discouraged after losing a lot of money, so the amount of investment money available changes a lot and thinking of it as zero-sum doesn't really work.

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

#172

Post by maxxxxx » Wed, Apr 03, 2019, 4:58 PM UTC

noobermin wrote: post #167

maxxxxx wrote: post #130

Earlier quoted context omitted.

VCs are not investing their own money.

Alright, but the point is the transfer is to founders for the most part from somewhere.

We just have to be clear that the "somewhere" is not the VCs. It may be your pension plan or your municipality.

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

#173

Post by Jommi » Wed, Apr 03, 2019, 5:38 PM UTC

kakwa_ wrote: post #166

afarah wrote: post #83

Earlier quoted context omitted.

Of course they're creating value, Uber and the like is of great value for its users. The service is merely being subsidized by investors who believe in such practice. Is it a bad investment? Maybe, their investors did not think so and they were free to compare it with other options you deem obviously better, considering you're even saying Uber and the like are stealing these other business would-be money...

I tend to agree, these services create value. I see 2 main factors as to why: * federation * cost These two factors combined unlocked possibilities (ex: universal delivery service) or significantly improved existing industries (Uber app is far more convenient than finding then phoning the local taxi company and hoping blindly for the taxi to arrive). Federation eases the use of the service as you don't have to either…

Uber app USED to be more convenient than the taxis that had to be called. However the companies have caught up, nearly every European taxi company has their own app. Additionally, not even Uber can beat the ease of just hailing a cab or walking into a cab on the street.

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

#174

Post by Jommi » Wed, Apr 03, 2019, 5:42 PM UTC

Jommi wrote: post #173

kakwa_ wrote: post #166

Earlier quoted context omitted.

I tend to agree, these services create value. I see 2 main factors as to why: * federation * cost These two factors combined unlocked possibilities (ex: universal delivery service) or significantly improved existing industries (Uber app is far more convenient than finding then phoning the local taxi company and hoping blindly for the taxi to arrive). Federation eases the use of the service as you don't have to either…

Uber app USED to be more convenient than the taxis that had to be called. However the companies have caught up, nearly every European taxi company has their own app. Additionally, not even Uber can beat the ease of just hailing a cab or walking into a cab on the street.

Oh, and they are losing money because of platform competition, nothing else. That she only reason a market is making a loss for Uber, because of price/driver bonus war. I can go more in-depth into this if you want.

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

#175

Post by Jommi » Wed, Apr 03, 2019, 6:05 PM UTC

empath75 wrote: post #138

noelsusman wrote: post #134

Earlier quoted context omitted.

I won't pretend to understand the world of unicorn startups, but it's important to remember that this isn't how the economy is run. For all the billions being set on fire here it's still a relatively small piece of the technology sector, much less the economy as a whole.

A lot of that money gets funneled into Facebook, google and aws, though. Once these unicorns crash and burn it won’t be contained to one segment of the tech industry. Engineer salaries will decline, companies like atlassian, datadog and elastic search will take a hit, etc.

But Google search and aws are both profitable and legitimate business models?

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

#176

Post by Jommi » Wed, Apr 03, 2019, 6:07 PM UTC

dragonwriter wrote: post #47

dawhizkid wrote: post #14

Earlier quoted context omitted.

Why would “gig economy jobs” get worse? If anything, during a recession, more people will want(need?) to become gig workers. Uber/Lyft are generally supply constrained today. If there’s a surge of supply because people need money they won’t have to pay new driver incentives, which is one the areas that cause them to bleed cash today. Demand side will fall a little, but people will still need cheap ways to get to/from…

> Why would “gig economy jobs” get worse? Because... > If anything, during a recession, more people will want(need?) to become gig workers. At the same time, the demand for gig services will drop. So, to the extent possible, things will get worse for the less-scarce workers, but they’ll also get worse for the firms, because they are already often squeezing gig workers as much (or, in some cases, more) than they can l…

And them the prices will adjust. It's not going to change for the platform, it might actually raise the amount of orders/trips.

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

#177

Post by Jommi » Wed, Apr 03, 2019, 6:09 PM UTC

moorhosj wrote: post #42

dawhizkid wrote: post #19

Earlier quoted context omitted.

Uber and Lyft can be profitable today. They are in their most mature markets like SF and NYC. If they need to get to profitability they scale back and cut certain cities. That’s it.

Now we see those cities starting to price in the negative externalities of these businesses. The congestion pricing in NYC is directly tied to the rise in ride sharing. This could change the economics even (especially?) in the profitable cities.

It's ridehailing, ride-sharing is completely different. Ride-sharing REDUCES congestion.

Ridehailing increases congestion if the city's public transport system is terrible.

This is not a fault of ridehailing, it's a symptom of bad infra.

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

#178

Post by Jommi » Wed, Apr 03, 2019, 6:10 PM UTC

JMTQp8lwXL wrote: post #153

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…

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…

Thank you. I'm not sure how people don't grasp this.

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

#179

Post by Jommi » Wed, Apr 03, 2019, 6:11 PM UTC

digitaltrees wrote: post #148

b_tterc_p wrote: post #97

Earlier quoted context omitted.

Uber’s answer to that is pretty clear and close to what you’re saying: airline style rewards program. But I think you’re right. The breadth of offerings is too small and the margins are too tight to gain any real loyalty

Loyalty comes from a large pool of drivers. How many times would you jump between random apps, and wait 20 min for an available driver before you just decide to stick with one? I have a lot of friends that travel internationally; they strongly prefer Lyft but have to use Uber because it is available more widely. They all talk about how they could look for a local app...but say 'who cares, Uber is evil, but whatever'.

That's why the play is with somewhere inbetween, with continental apps like Taxify(bolt), Ola, Grab and Didi. Or then web-based ride hailing.

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

#180

Post by digitaltrees » Wed, Apr 03, 2019, 6:59 PM UTC

subjectHarold wrote: post #156

digitaltrees wrote: post #149

Earlier quoted context omitted.

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. chan…

Bitcoin is a good example because many people view it as an alternate to fiat currency that is “manipulated” by central bank monetary policy. Yet human psychology created a boom and a bust. We are talking about the history of asset bubbles and misalignment of capital. Why are bitcoin and beanie babies excluded examples of asset bubbles in your mind? They seem to show that People do stupid things regardless of monetary policy

My point is there is no one factor that is primarily responsible for all bubbles. There may be similar sets of factors that reoccur, but to say that monetary policy emerges as the singular most important factor throughout history doesn’t seem to me to be defensible.

Post-WW2 was a unique context because vast amounts of capital were being used to literally rebuild Europe. The US was basically the only manufacturer of scale, so I make sense that there wouldn’t be an asset bubble when there were vast numbers of projects that required capital and that were economically and financially stable rather than hype driven.

I will have to think about Japan as an example, I haven’t read the history in quite some time, I am definitely open to it being an example of a bubble cycle driven by monetary policy. My impression was that trade with the US and demographics seemed to be more a driver but I’ll look into it and post if I am persuaded.