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Games people play with cash flow

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Re: Games people play with cash flow

#71

Post by imtringued »

bob33212 wrote: post #21
impostervt wrote: post #19

Earlier quoted context omitted.

I forget where I read it, but some article described Uber's business model as "sell a dollar for 80 cents". You get a LOT of customers that way, and report huge growth, which brings in investors, and everything is great - until the pyramid scheme collapses.

After a "collapse" you are still left with mindshare and a market. If you increase prices by 30% you'll still be the largest player. Maybe later investors are not making returns but you are not going bankrupt.

If there are enough short sighted investors they will create a competitor that follows the same price dumping strategy.

Re: Games people play with cash flow

#72

Post by tunesmith »

dissidents wrote: post #67
tunesmith wrote: post #56

Earlier quoted context omitted.

A "missing" axiom, in my experience, is not truly a missing axiom that otherwise has no impact on other axioms. A "missing" axiom is one that exposes a bad assumption in another axiom currently being relied upon. For instance. Socrates is a man, all men are mortal, therefore Socrates is mortal. But then you discover that a couple of eons have passed and Socrates is still alive. Clearly there must be a "missing" axiom…

Again, I am sorry for being direct, but this does not make sense. If a Venusian man is immortal, then the "axiom" (preposition) that all men are mortal is false. In other words, the issue is not that the preposition "Socrates is Venusian" was missing but that the preposition "all men are mortal" is false. It is possible to develop significant mathematical theory without using some axioms. For example, mathematicians…

The point is that the axiom that all men are mortal was thought to be true, and then was later discovered to be false. My comment was actually in agreement with your previous comment.

Re: Games people play with cash flow

#73

Post by tunesmith »

dalbasal wrote: post #63
tunesmith wrote: post #47

I think the argument he's knocking down is more flawed than he's letting on - specifically, just because the extra cash makes it easier to make bad decisions doesn't mean that those bad decisions will be made. The argument treats those as inexorable. If the argument had been passed through a truth checker and given a few more eyeballs, that flaw would have been obvious. That particular inner syllogism just doesn't in…

IDK... In theory, choices are good and you can just choose the better one. In practice, the financial dynamics of a business tend to create head or tail wind forces that become a part of the company's character. All else equal (including the decision maker), a positive float business will tend to be more growth oriented than a negative float business. In theory, not so much. Float is just a type of capital (working c…

That is all true, but you wouldn't use those "probability" statements to support a boolean outcome. For instance, a trainer might be better, but you wouldn't use that to conclude that someone shouldn't exercise without a trainer.

Re: Games people play with cash flow

#74

Post by petra »

jpm_sd wrote: post #2

This is a pretty good article but missed an opportunity to comment in more detail on the 2020 startup/unicorn ecosystem. "Malone’s entire strategy was built around a single fact: that you have to pay up front for cable systems, but then earn back your money via a stable stream of cash for years and years afterwards. Notice how this extreme demand for capital drove Malone to embrace debt, over other sources of capital…

DoorDash is interesting.

Sure they don't have subscription like predictability for their revenues. But they have a lot of data, and machine learning, so they may get pretty close in predicting how many people will order steak next month.

And let's say they partner/own a chain of ghost kitchen restaurants who offer a large variety of food(which is a much more competitive business model than restaurants). And that chain can suddenly get steak(and the other stuff), for half the price ?

Re: Games people play with cash flow

#75

Post by inglor_cz »

bluGill wrote: post #29
chris_wot wrote: post #4

Once you have less skin in the game, it is easier to make bad decisions. Surely that is a proposition that might not be entirely correct?

I caught that too. It is false in several ways that destroy the rest of the argument. First because less skin in the game doesn't make you make bad decisions, it just makes it easier. As such every argument following this point is destroyed by "assume we make good decisions anyway", which is just as valid as "assume we make bad decisions from now on". Second, because your skin in the game probably doesn't change, ins…

"Second, because your skin in the game probably doesn't change, instead the total amount of skin in the game gets larger."

But the dimensions of the game grow as well, and that is where mistakes can be made.

Some founders are probably better bosses/managers in a collective of five than in a collective of fifty. If the company grows slowly, they may improve their skills/catch up. If it grows in a sudden leap, which is well possible with a large injection of cash, the space for making bad decisions from ignorance or lack of experience grows as well.

Re: Games people play with cash flow

#77

Post by burnte »

The proposition can be disproved very early in the chain of logic, actually.

1. Startups are risky.

True.

2. Raising capital to do a startup reduces skin in the game (you’re spending other people’s money, after all).

Arguable, but not a given. Raising capital does not eliminate risk, especially if one has their own money in it, and/or are using it as a job. Just because someone else invested doesn't necessarily reduce my incentive. I lose money, time, face, and opportunity with or without investment.

3. Once you have less skin in the game, it is easier to make bad decisions. The author argues this is due to a) having a capital buffer to cushion you, and b) having more time to waste.

100% false. It is no easier or harder to make bad decisions with outside money. It is ALWAYS easy to make bad decisions, having more money simply makes it easier to make costlier bad decisions faster. Buying real estate in late 2006 was a bad idea regardless of whose money you used. If anything, having that outside money means you have people to be accountable to, people to run decisions by, and thus it's HARDER to make a bad decision.

Re: Games people play with cash flow

#79

Post by birdsbirdsbirds »

aidenn0 wrote: post #50
impostervt wrote: post #8

The bit about TCI (a cable company with a lot of debt in the 70s) is super interesting. I've read before about how companies don't always see debt as a bad thing, and how they can move money around, but it always seems like magic. From the article - "And indeed, Malone’s strategy required TCI to show a loss for pretty much forever; for the next 25 years, it was never in the black". As the article mentions, Amazon fol…

That's always been my conflict with the deficit the US government runs. - I believe we are approaching unsustainable levels of public debt - If a CEO were offered debt on the terms that the US Government gets, they would be fired for not taking it - If a CEO allocated funds the way the US Government does they would probably also be fired. - Using debt for growth capital is great - Using debt to get better terms from…

Where do people store their money but in government bonds? There is just a finite amount of gold and company shares and commodity available. If you want people to save money for the last part of their life, they need something to buy.
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