5 ms·

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 pr

by afarah 8y ago

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...

roenxi 8y ago
If they aren't making a profit they aren't creating value. They are destroying some value and transferring other value from investors to customers. The difference here is when you add everything up you have less, when for a good investment the total should go up. In principle, in a fair market economy, that is OK because someone has to take the risk of being wrong about what is a good idea. The concern being voiced is that monetary policy is diverting resources away from people who are known to make good long term decisions and towards people who have access to loans from the central bank. At some point the people who are borrowing money can't pay it back and the losses are revealed - not in and of itself a problem; those responsible take the hit. But in the mean time, the people who would have used the resources more sensibly to build infrastructure or sustainable logistics chains havn't been because they weren't being given the time of day by the markets. The worry is that a dropping tide lowers all ships. If value is being systematically destroyed and the cause is government incentives then the potential for that to crop up in unexpected places is quite high. I'm always tempted to link monetary policy to the themes of pension issues, low real wage growth, poor infrastructure and rising inequality seen in the US.
- generated 8y ago
  It is possible to create value and not profit. Economic value exceeds or matches market value. Market value drives revenue. Profit is a function of revenue and cost. These are well defined terms; please be careful saying things like "If they aren't making a profit they aren't creating value." It detracts from your otherwise strong argument. If that line were true, non-profit organizations wouldn't exist.
  - roenxi 8y ago
    Now that you have pointed it is obvious that, say, a non profit can create value without creating a profit or that there might be externalities. But we aren't really talking about that sort of concern here, we are talking about for-profit companies that aren't doing research and any externalities are tenuous. It is completely unreasonable to say that such a company could be creating value. They are clearly a wealth transfer mechanism from who-knows-where to consumers. It doesn't make sense if it isn't malinvestment. People love to pull out hypothetical externalities to justify things they like that just aren't worth doing; they aren't going to justify running a corporation at a loss.
- HillaryBriss 8y ago
  > The concern being voiced is that monetary policy is diverting resources away from people who are known to make good long term decisions and towards people who have access to loans from the central bank. A very interesting statement. I'd like to understand this cash path. Can anyone describe the flow of cash from the central bank to Silicon Valley VC firm? How exactly does this work? Also do low central bank rates guarantee the kind of money losing VC investments we're seeing? Are their other central banks outside the US with low rates but no accompanying flurry of money-losing investments?
  - taxicabjesus 8y ago
    The grandparent comment's specifics are off a bit, but I think the general principle --it takes money to make money -- concisely explains a good portion of the underclass' economic predicament. I'm going to have a blog post about the economic situation that led me to taxi driving. The tl/dr is basically that they loaned me a car for 12 hours at a time. In the beginning I made enough to make it worth my while...
kakwa_ 8y ago
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 setup your own service (for example, hiring delivery guys for your restaurant) or find out the local services available (if they existed in the first place), and discover which one is good, which one is bad. The last decade development of mobile networks and smartphones was the catalyst for this evolution. Cost is the other aspect, these services are cheaper than legacy alternatives. But this second aspect is key. On one hand, these services are losing money like crazy, on the other, they have a detrimental social impact, basically exploiting loopholes in the legislation to have "low rights" workers with no protection. But this will change at one point, laws and court decisions will close the loopholes, and the magic money tree will dry up, meaning these services will become significantly more expensive. The question, when this will happen is: Was the federation improvement enough to sustain this industry long term? Or was the cost the major factor? If it's more of the second, these start-ups will mostly collapse, if it's more of the first they will become sustainable businesses (specially given it's easy to start using using these services, it's a bit harder to stop using them). I'm still puzzled as to why these companies are losing so much money, and I cannot help but think these could have have been created with more reasonable losses for their first few years and now, they should nearly be cash flow positive.
- Jommi 8y ago
  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.
  - Jommi 8y ago
    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.

by afarah 8y ago

roenxi 8y ago

If they aren't making a profit they aren't creating value. They are destroying some value and transferring other value from investors to customers. The difference here is when you add everything up you have less, when for a good investment the total should go up. In principle, in a fair market economy, that is OK because someone has to take the risk of being wrong about what is a good idea. The concern being voiced is that monetary policy is diverting resources away from people who are known to make good long term decisions and towards people who have access to loans from the central bank. At some point the people who are borrowing money can't pay it back and the losses are revealed - not in and of itself a problem; those responsible take the hit. But in the mean time, the people who would have used the resources more sensibly to build infrastructure or sustainable logistics chains havn't been because they weren't being given the time of day by the markets. The worry is that a dropping tide lowers all ships. If value is being systematically destroyed and the cause is government incentives then the potential for that to crop up in unexpected places is quite high. I'm always tempted to link monetary policy to the themes of pension issues, low real wage growth, poor infrastructure and rising inequality seen in the US.

generated 8y ago
It is possible to create value and not profit. Economic value exceeds or matches market value. Market value drives revenue. Profit is a function of revenue and cost. These are well defined terms; please be careful saying things like "If they aren't making a profit they aren't creating value." It detracts from your otherwise strong argument. If that line were true, non-profit organizations wouldn't exist.
- roenxi 8y ago
  Now that you have pointed it is obvious that, say, a non profit can create value without creating a profit or that there might be externalities. But we aren't really talking about that sort of concern here, we are talking about for-profit companies that aren't doing research and any externalities are tenuous. It is completely unreasonable to say that such a company could be creating value. They are clearly a wealth transfer mechanism from who-knows-where to consumers. It doesn't make sense if it isn't malinvestment. People love to pull out hypothetical externalities to justify things they like that just aren't worth doing; they aren't going to justify running a corporation at a loss.
HillaryBriss 8y ago
> The concern being voiced is that monetary policy is diverting resources away from people who are known to make good long term decisions and towards people who have access to loans from the central bank. A very interesting statement. I'd like to understand this cash path. Can anyone describe the flow of cash from the central bank to Silicon Valley VC firm? How exactly does this work? Also do low central bank rates guarantee the kind of money losing VC investments we're seeing? Are their other central banks outside the US with low rates but no accompanying flurry of money-losing investments?
- taxicabjesus 8y ago
  The grandparent comment's specifics are off a bit, but I think the general principle --it takes money to make money -- concisely explains a good portion of the underclass' economic predicament. I'm going to have a blog post about the economic situation that led me to taxi driving. The tl/dr is basically that they loaned me a car for 12 hours at a time. In the beginning I made enough to make it worth my while...

kakwa_ 8y ago

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 setup your own service (for example, hiring delivery guys for your restaurant) or find out the local services available (if they existed in the first place), and discover which one is good, which one is bad. The last decade development of mobile networks and smartphones was the catalyst for this evolution. Cost is the other aspect, these services are cheaper than legacy alternatives. But this second aspect is key. On one hand, these services are losing money like crazy, on the other, they have a detrimental social impact, basically exploiting loopholes in the legislation to have "low rights" workers with no protection. But this will change at one point, laws and court decisions will close the loopholes, and the magic money tree will dry up, meaning these services will become significantly more expensive. The question, when this will happen is: Was the federation improvement enough to sustain this industry long term? Or was the cost the major factor? If it's more of the second, these start-ups will mostly collapse, if it's more of the first they will become sustainable businesses (specially given it's easy to start using using these services, it's a bit harder to stop using them). I'm still puzzled as to why these companies are losing so much money, and I cannot help but think these could have have been created with more reasonable losses for their first few years and now, they should nearly be cash flow positive.

Jommi 8y ago
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.
- Jommi 8y ago
  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.