4 ms·

Can you explain how these large companies operate, explained like I'm a golden retriever? How does a company so big not make a profit/could possibly go bankrup

• andy_boot 9y ago
  >But lets say they go bankrupt in 1 year, couldn't they just switch to "profit mode"? Well that they might have to try and do now. But usually it is hard to move to 'profit mode' - you upset your customers when you start to charge double. The idea is that before you do that you have either killed of the competition or your competition 'moat' is so big that everyone wants to keep using you because of $reason and so you can charge what you like. >If there is no "profit mode" ... then why are people investing in the first place? Nobody is ever sure if any startup will get to 'profit mode' you simply look at their market / numbers etc and if you decide to invest then you hope the startup can figure it out. This is the investing gamble.
• EvanL 9y ago
  Companies in burgeoning industries at this scale are concerned with longevity, specifically outlasting their competitors. Not short term profits. They are thinking more along the lines of "how can we make 10 billion dollars per year, for the next 150 years." Think General Electric. That's why they require huge amounts of money from investors, so they can aggressively grow to a size where other companies can't touch them. The huge amount of capital is sort of like a moat. When you're larger, you have something called economy of scale. Which means you have enough resources to do stuff the smaller guys can't do. When you're larger, you also have something called a data advantage. Which means you know so much more about your customers, you can predict things and make decisions the smaller guys can't.
• wpietri 9y ago
  As best I understand it, Uber's play was for dominance. Consider Facebook and Google. Together they're worth over a trillion dollars. Now ask yourself: what's the combined net worth of the second-biggest search engine and the second-biggest social network? Nothing close. In a business where being second or third place is pretty good, you can switch to profit mode as you please. But Uber's valuation only makes sense to me if it lets them dominate a market like Google or Facebook does, setting prices and terms for the industry. I think that if they switch to profit mode, people will start to value them like a normal business, which would mean a giant drop in valuation. I presume that's why board members supported an aggressive jerk for so long: Kalanick has been undeniably good at seizing territory, and if one sets aside little things like morals and externalities and long-term consequences, one could argue that aggressive jerkiness is exactly what Uber has needed. Honestly, this market never struck me as one where dominance was even possible, so the investors' theories never made sense to me. But that's my best guess as to why they've been allowed to keep burning money like this.
• clebio 9y ago
  Here boy! Sit. Siiit. Sit! Stay. Wait... wait.... go fetch!