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Many startups lose money when they are first started; and a new product may very well be losing money until it reaches a certain scale. That's not the problem

by tytso 7y ago

Many startups lose money when they are first started; and a new product may very well be losing money until it reaches a certain scale. That's not the problem. The question is what's the motivation. If the motivation is to predatory pricing, where you are deliberately holding the price below the marginal cost per unit in order to drive the competition out of business, you'll find that the FTC frowns on such behavior. This is why it's so bad to say anthing like, "I want to drive the competition out of business", or "I want to dominate the market". Even if you don't send it in e-mail, suppose you say it at a department meeting, and someone takes a video of it? Now if they ever get disgruntled, they can take that video to the FTC, and now you're in a heap of trouble. There are plenty of other ways of motivating a team than trash-talking the competition. If you have a team where the only way to really motivate them is to curse and use that kind of war-like language, I'd argue that such a company has a massive culture problem, and it's certainly not a company I would ever want to work at. Not because I think the stock is at risk of pluging after the FTC announces a anti-trust investigation (although that would be a real risk), but because I'd find such an atmosphere positively toxic. It's something I'd expect of the Uber "bro" culture, and no, I'd never want to work there.

com2kid 7y ago
> If the motivation is to predatory pricing, where you are deliberately holding the price below the marginal cost per unit in order to drive the competition out of business, you'll find that the FTC frowns on such behavior. Of course, but it is constantly debated line. To go back to Email, "we'll be losing money until the price for storage drops" is that predatory? "We're losing money because we haven't ramped up our partner ad program yet." Predatory? There are many cases where a large pile of cash can help establish a business, and help create a higher quality user experience and a better product, precisely because there is the chance to not turn a profit money for awhile. > but because I'd find such an atmosphere positively toxic. It's something I'd expect of the Uber "bro" culture, and no, I'd never want to work there. I never encountered the Uber bro culture, but I have been lucky enough to work at teams where we wanted to do better than everyone else and where that was our mission day in and day out. Part of that was looking at the competition and seeing how badly they were shafting users on price, and getting angry about it and funneling that anger into making a better product. > This is why it's so bad to say anthing like, "I want to drive the competition out of business" The goal is always to make a product so good that there is no possible competition, and that is of course perfectly legal to do, just so long as the competition is driven out of business solely because of consumer's making a free choice as to which product they want to buy. > they can take that video to the FTC, and now you're in a heap of trouble. My understanding is that the trouble only comes if the company has actually done something illegal. If the CEO says they want to dominate the market, and someone in sales goes and starts bribing people, huge problem. If the CEO says they want to dominate the market and the supply chain and engineering teams find a way to shave 30% off the product's price, or the software engineers and designers work together to make the product 10x more usable than anything else on the market, then there isn't a problem. The issue that comes up of course is that if the CEO does say anything that might be seen as encouraging someone to win at "any cost", and any single employee takes those steps, then yeah, obvious legal problems. But the overall fact is, in competitive winner-takes-all markets, the goal has to be winning big, and everyone needs to be aligned behind that goal, and everyone on the team has to believe in that goal.
- tytso 7y ago
  > My understanding is that the trouble only comes if the company has actually done something illegal. As you said earlier, "[pricing] is a constantly debated line". Suppose a search engine displays the lyrics on the results page, instead of requiring that the user click a link and go to some advertising-laden lyrics web site. Is that to improve the search user's experience, by giving them the answer right then and there? Or is it predatory move against the song lyrics web site? As you say, "it's constantly debated". But if you have the CEO, or the product manager, saying, "I want to crush the competition; see them driven before me; and hear the lamentation of their women" (apologies to Arnold Schwarzenegger and Conan the Barbarian) you've just given a weapon to the FTC as to the intent of that "constantly debated line". And G-d help your company if that lands on the front page of the New York Times. Also, even if you win the anti-trust lawsuit, the distraction and the legal costs are high. I'd argue that even if you ignore the toxic atmosphere argument, from a purely pragmatic and practical perspective, It's Just Not Worth It. Want to motivate the team by asking them to build the best product ever? Sure! I'll note, by the way, that just because you have the objectively better, say, search quality score compared to all of the other search engines out there, that doesn't necessarily mean that the other search engines will go out of business. People choose which search engines to use for many reasons, and not just search quality. (Many people who use DDG admit doesn't always give the best results; but they use it because they hate Google, and it's "good enough".) So it's actually better to come up with an objective quality metric, and constantly challenge the team to make it better, every year and every quarter, regardless of whether or not they are better than the competition. If you don't, you end up resting on your laurels, and that's no good either. So you align the whole team on making the product better, and delighting more and more users, regardless of whether or not you have the best product, and certainly not because you want to drive the competition out of business. Take Microsoft Office, for example. For a long time it was the best, or at least most commercially successful, office suite. How do you challenge the team if your only focus is, "drive the competition out of business"? And what if your competition is the Open Source "libreoffice", which by definition can't be driven out of business, and is getting better year after year, with the end user of cost of zero dollars and zero cents staying constant?

by tytso 7y ago

com2kid 7y ago

> If the motivation is to predatory pricing, where you are deliberately holding the price below the marginal cost per unit in order to drive the competition out of business, you'll find that the FTC frowns on such behavior. Of course, but it is constantly debated line. To go back to Email, "we'll be losing money until the price for storage drops" is that predatory? "We're losing money because we haven't ramped up our partner ad program yet." Predatory? There are many cases where a large pile of cash can help establish a business, and help create a higher quality user experience and a better product, precisely because there is the chance to not turn a profit money for awhile. > but because I'd find such an atmosphere positively toxic. It's something I'd expect of the Uber "bro" culture, and no, I'd never want to work there. I never encountered the Uber bro culture, but I have been lucky enough to work at teams where we wanted to do better than everyone else and where that was our mission day in and day out. Part of that was looking at the competition and seeing how badly they were shafting users on price, and getting angry about it and funneling that anger into making a better product. > This is why it's so bad to say anthing like, "I want to drive the competition out of business" The goal is always to make a product so good that there is no possible competition, and that is of course perfectly legal to do, just so long as the competition is driven out of business solely because of consumer's making a free choice as to which product they want to buy. > they can take that video to the FTC, and now you're in a heap of trouble. My understanding is that the trouble only comes if the company has actually done something illegal. If the CEO says they want to dominate the market, and someone in sales goes and starts bribing people, huge problem. If the CEO says they want to dominate the market and the supply chain and engineering teams find a way to shave 30% off the product's price, or the software engineers and designers work together to make the product 10x more usable than anything else on the market, then there isn't a problem. The issue that comes up of course is that if the CEO does say anything that might be seen as encouraging someone to win at "any cost", and any single employee takes those steps, then yeah, obvious legal problems. But the overall fact is, in competitive winner-takes-all markets, the goal has to be winning big, and everyone needs to be aligned behind that goal, and everyone on the team has to believe in that goal.

tytso 7y ago
> My understanding is that the trouble only comes if the company has actually done something illegal. As you said earlier, "[pricing] is a constantly debated line". Suppose a search engine displays the lyrics on the results page, instead of requiring that the user click a link and go to some advertising-laden lyrics web site. Is that to improve the search user's experience, by giving them the answer right then and there? Or is it predatory move against the song lyrics web site? As you say, "it's constantly debated". But if you have the CEO, or the product manager, saying, "I want to crush the competition; see them driven before me; and hear the lamentation of their women" (apologies to Arnold Schwarzenegger and Conan the Barbarian) you've just given a weapon to the FTC as to the intent of that "constantly debated line". And G-d help your company if that lands on the front page of the New York Times. Also, even if you win the anti-trust lawsuit, the distraction and the legal costs are high. I'd argue that even if you ignore the toxic atmosphere argument, from a purely pragmatic and practical perspective, It's Just Not Worth It. Want to motivate the team by asking them to build the best product ever? Sure! I'll note, by the way, that just because you have the objectively better, say, search quality score compared to all of the other search engines out there, that doesn't necessarily mean that the other search engines will go out of business. People choose which search engines to use for many reasons, and not just search quality. (Many people who use DDG admit doesn't always give the best results; but they use it because they hate Google, and it's "good enough".) So it's actually better to come up with an objective quality metric, and constantly challenge the team to make it better, every year and every quarter, regardless of whether or not they are better than the competition. If you don't, you end up resting on your laurels, and that's no good either. So you align the whole team on making the product better, and delighting more and more users, regardless of whether or not you have the best product, and certainly not because you want to drive the competition out of business. Take Microsoft Office, for example. For a long time it was the best, or at least most commercially successful, office suite. How do you challenge the team if your only focus is, "drive the competition out of business"? And what if your competition is the Open Source "libreoffice", which by definition can't be driven out of business, and is getting better year after year, with the end user of cost of zero dollars and zero cents staying constant?