Originally published at: https://boingboing.net/2019/09/26/gresham-v-godwin.html
Wework, Uber, Lyft, Netflix, Bird, Amazon: late-stage capitalism is all about money-losing predatory pricing aimed at creating monopolies
Originally published at: https://boingboing.net/2019/09/26/gresham-v-godwin.html
Is this, at long last, the answer to what Phase 2 represents here:
…but for a beautiful moment in time we created a lot of value for shareholders.
I don’t even think that the planning for these guys goes as far as “bankrupt all the competetion and then jack up the prices.” The problem for most of these guys is low barriers to market entry. Unlike, say the automobile business, where Tesla is discovering that it is difficult to create the infrastructure and expertise to manufacture, market, and distribute autos from scratch, it just doesn’t take all that much money to create an app to compete in the rideshare/gig worker/whatever market.
These guys plans are get a bunch of money, expand real fast, and then sell while you still look like the next Amazon, before anybody realizes that you have no real path to profitability.
It’s been happening to many categories of products these days. I find it interesting that proponents of the capitalist system tend to be completely blind to its shortcomings. Well, not exactly - they do complain about “crap Chinese products”, which they caused to come into existence.
Yeah, this bubble is gonna pop.
I don’t remember the source but I remember reading somewhere that this is basically required if you want VC funding these days. They won’t be interested unless you can more or less show them why you’ll be able to create a monopoly in the space.
I sort of have a single idée fixe that I’m completely obsessed with on the business side which is that if you’re starting a company, if you’re the founder, entrepreneur, starting a company you always want to aim for monopoly and you want to always avoid competition. And so hence competition is for losers, something we’ll be talking about today.
This is what amazes me about Americans and their politicians/ruling class. They will do anything for a ‘deal’, including Republican President Nixon opening up trade with China (a mortal enemy) so Americans could get more cheap goods and American businesses could flog their products to the ‘Godless Communists’. Eventually the worm always turns and they lose their advantage; the outcry is about unfair trade practices and the Chinese manipulating their currency. Everybody manipulates their currency. The current occupant of the White House repeatedly excoriates the Fed for not lowering interest rates to accomplish the same thing.
At this point the deal hunters realize their greed and opportunism has screwed the US. For example, rare earth metals come almost exclusively from China (920 lbs. of it in the F35) and everything from defence to consumer technology is threatened. “It’s not profitable to extract rare earth metals here in the US”. Boo hoo. You rabid Capitalists made your bed - now you get to sleep in it as the US becomes another fading empire. I feel sorry for the American citizenry, including some family members, being dragged down with you.
That’s been the tech-sector marketing plan since the 90’s. The first big dot.com boom and bust cycle was built around building websites that had no real product, selling investors on a dream of huge profits in the near future, then selling that shit and running with the cash. It’s just expanded into offices, juicers, and retailing.
This is what happens when regulatory oversight is lax, taxes on the wealthy are low, and the grifting elite has tons of cash they’re aching to burn.
I just said to a friend a week or so ago: "Capitalism isn’t about competition, it’s about big player cooperating to take from those who aren’t strong enough to compete.
In other words, it’s come to life. I don’t mind so much if we have a few billionaires playing with numbers to see who gets the high score. But when they show up in your neighborhood and start telling you how to run things you need to worry. And they are all over the place now.
And when stock prices are high enough that they aren’t supported by profits and the dividends that they enable. When stock prices are only supported by speculation on higher stock prices in the future, expansion of the business is the ONLY thing investors are interested in. Get in, get big, get out MIGHT work for investors, but it is terrible for employees and the economy as a whole.
That wasn’t what Thiel was saying in the talk. His point was that if you start a company you shouldn’t do it in a big market with lots of competitors, but find a market so small no one has thought about it before and then you can get a monopoly in it, and that monopoly allows you to have a high profit margin you can use to expand into larger markets.
You left out the effect of stock market sharks doing their best – including outright lying – to whip up hysteria about IPOs by new “ecommerce” companies in order to drive up the stock “value” and then selling their stock the day after. They knew most of the IPO stock buying was done by guillible people who thought they were going to be Dellionaires. They knew most of the companies they were flogging were self-destructive. But they made their profits and moved on.
The 90s were indeed an insane time in business history. Companies that had “business plans” which said they would never have a tangible product, but they’d make big off revenue from advertising clickthrough. Nobody in his right mind should have invested in companies where the “burn rate” was an important measure of a company’s condition, but millions did. And millions, including municipalities and union pension management all around the world, lost everything.
You’re about a decade too early for cheap Chinese goods. Nixon wanted to establish diplomatic relations with China as a way to gain leverage over the USSR . Mao Zedong was still in charge and China still had a command economy with no competition and no privately owned businesses. Deng Xiaoping became leader after Mao’s death and began the transition to a market economy in the late 1970s and early 1980s. Under Deng, China established special economic zones where foreign investors could open factories to make products for export.
Sounds like these people deserve to lose all of their money.
Years before the tech stock bubble started, I worked for a tech company that was taken over by the sales people. The VP of sales became the CFO and the sales department took over the training and product development branches. It was the new CFO’s philosophy that salesmen needed perks in order to get them to do their best.
The company had a yearly convention. They would fly in salesmen from all around the world, rent out all or nearly all of a large hotel, and have an entire week of parties, lectures, training, and rah-rah. The last year I worked there, they spent 10 million on this. Despite the fact the company was widely known to be having money trouble.
On the first day, they had two hours of hoopla. They played humorous videos by the C level execs talking about the year to come. They had a high school marching band parade around the floor of the conference center blaring Sousa marches while balloons were released and confetti shot into the air. They presented a couple of awards to top sellers.
Then the CEO took to the podium and announced that in order to save money, the company was enacting across-the-board salary cuts. Everyone at every level, including him, was going to lose anywhere from 4% to 8% of their gross pay. I actually saw a company spend 10 million dollars for the purpose of announcing it was so desperate for money that it was cutting worker pay. I quit at the end of that month.
The nice thing about this (and why we should encourage it to fly so high that everyone involved has to crash) is that it’s a GREAT way to transfer cash from VCs to normal people. Below cost prices? Wealth transfer! Subsidized salaries? Wealth transfer! Spending too much renovating buildings? Wealth transfer!
With luck it’ll continue until VC money runs out, then the companies can go under and real businessmen pick up any actual assets at fire sale prices.
Or we’ll end up with terrible monopolies we’ll have to break up. Doesn’t seem like a huge downside