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WeWork and Counterfeit Capitalism

mattstoller.substack.com

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Re: WeWork and Counterfeit Capitalism

#281

Post by perl4ever »

bsder wrote: post #258
hef19898 wrote: post #143

Earlier quoted context omitted.

Totally agree with the last pint, people completely tend to ignore the effort and attention to detail Amazon puts into executive and planning. That plus a very sound strategy. Also Amazon was profitable, even if just barely, for the most time while growing appr. 20% constantly. Not comparable to, say, WeWork from what I know. But it shows how powerful that narrative can be.

Amazon had an in-built 5-10% advantage for a very long time because they weren't required to pay tax. This clobbered small retail--and bookstores in particular. Now that they are on an equal footing and have to collect tax, Amazon's retailing isn't doing as good.

I don't understand this comment. Amazon didn't invent mail order. They never have had a monopoly on websites that sell stuff to be delivered by mail, either.

Re: WeWork and Counterfeit Capitalism

#282

Post by perl4ever »

eldavido wrote: post #240
rossdavidh wrote: post #142

Earlier quoted context omitted.

It depends on how hard it is to get going in that business. For example, in some markets (e.g. computer operating systems), it takes a big ecosystem of 3rd party companies making applications for your OS to be viable, so if you drive Blackberry out of business, you can own the smartphone market and crank up prices later. But, Google saw that coming and sponsored Android to prevent it, because they recognized that pat…

I don't know why this is so hard for people to understand (you obviously seem to get it). WeWork is basically a hybrid bank/retailer. They take big, complex, slow-moving long-term commitments, just like a car rental company or a bank, and repackage them into shorter-term, small commitments, while managing risk and adding a bunch of value-added services. I don't know about all this governance stuff or their growth rat…

Doesn't an REIT (that "might be a viable business") fit your description as well?

Re: WeWork and Counterfeit Capitalism

#283

Post by amiga_500 »

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…

This isn’t what the article said. He said companies that came after amazon. Yet hacker news upvotes this the most.

Re: WeWork and Counterfeit Capitalism

#284

Post by perl4ever »

scarface74 wrote: post #96
dllthomas wrote: post #84

Earlier quoted context omitted.

If you can maintain a credible threat that you'd do it again (and win), competitors shouldn't be expected to enter the market even as you're extracting rent. This is amplified by any barriers to entry.

See cable companies.

What do you conclude from cable companies? On the one hand, competition is legally restrained. On the other hand, the cable companies are still somewhat constrained by imperfect substitutes - for instance, wireless is not a great substitute for cable, but it's enough for me to live without it.

Re: WeWork and Counterfeit Capitalism

#285

Post by perl4ever »

mrkurt wrote: post #111
janee wrote: post #78

Earlier quoted context omitted.

> 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.

Is Amazon really much more than an arbitrage on people's desire for "free shipping" at this point? The last time I wanted to buy something online, the price plus shipping elsewhere was noticeably cheaper than with free shipping on Amazon.

Re: WeWork and Counterfeit Capitalism

#286

Post by jahlove »

> If you know Dimon’s actual reputation, him getting suckered isn’t surprising. From what I heard back in 2009, Dimon is a mediocrity who essentially got lucky his bank was too slow to get in on the subprime scam in 2006; he then used his bank’s incompetence at getting into the bubble as justification for how prudent he was.

This is some backwards logic if I ever saw it. Damned if he did, damned if he didn't, I guess.

Re: WeWork and Counterfeit Capitalism

#287

Post by dlp211 »

crumpets wrote: post #228
cfors wrote: post #139

Earlier quoted context omitted.

I think you have it reversed, AWS accounts for most of Amazon's profit and is used to fund other ventures. > AWS revenue came accounted for 13% of Amazon’s total revenue. Of Amazon’s total $3.1 billion in operating income, 52% came from AWS. [0] [0] https://www.cnbc.com/2019/07/25/aws-earnings-q2-2019.html

No, long before AWS, Amazon intentionally re-invested all of the excess revenue that would be reported as profit back into the business instead (expanding capex and opex).

That's not how profits reporting works.

Re: WeWork and Counterfeit Capitalism

#288

Post by petra »

DebtDeflation wrote: post #134
bluetwo wrote: post #109

Earlier quoted context omitted.

Volume. Lose on every sale but make up for it with volume. :-)

The issue is fixed vs variable costs. The scale argument requires very high fixed costs and very low variable costs. Then, once the initial hurdle is cleared, marginal costs per incremental unit of revenue are very low while barriers to entry against competition are very high. WeWork is the exact opposite of this as their leasing costs (variable) are like 90% of rental revenue.

But leasing becomes ownership - and than it's a "high fixed costs, low marginal costs" situation.

Re: WeWork and Counterfeit Capitalism

#289

Post by leg100 »

gwbas1c wrote: post #64
anilshanbhag wrote: post #18

"The company is losing an enormous amount of money and 'has no path to profitability at scale'." - well if there is no path to profitability, how is it still worth 10-15 billion ? "If you know Dimon’s actual reputation, him getting suckered isn’t surprising. From what I heard back in 2009, Dimon is a mediocrity who essentially got lucky his bank was too slow to get in on the subprime scam in 2006; he then used his ba…

Selling below cost to drive out competitors is not capitalism: It's called dumping, and is illegal.

You have naive and warped view of what constitutes capitalism. Dumping, protectionism, state subsidies, what have you, have had a long and varied role to play in the history of capitalism.

Re: WeWork and Counterfeit Capitalism

#290

Post by perl4ever »

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?

I have the impression this is what lead to the Great Depression. Lots of people were saying, well, banks are failing, they screwed up, let them fail. More recently we had bailouts because the people running things learned about the Great Depression in school.
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