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People in tech industry have excessive bias against businesses with no network effects or other obscenely effective barriers to entry. There are lots of success
by marcell 7y ago
People in tech industry have excessive bias against businesses with no network effects or other obscenely effective barriers to entry. There are lots of successful, large corporations with varying levels of barriers to entry. Exxon Mobil doesn't have a network effect and has zero brand loyalty, but it's still a huge business. McDonald's also lacks network effects, though it does have some brand loyalty, perhaps similar to Uber.
Of course these businesses have some barriers to entry (so does Uber. Lyft et al. notwithstanding), but it's not a result of network effects that we're used to with companies like FB and eBay.
- AlexandrB 7y ago> There are lots of successful, large corporations with varying levels of barriers to entry. Of course! But they’re not valued at 10x revenue like tech companies. Uber stock has nowhere to go but down.
- puranjay 7y agoI think the tech industry has been infected by a monopoly mindset, that the only way to build a business is to be the only business in that space. It doesn't help that the most visible "successful" tech companies are all monopolies or duopolies (Google, Facebook, etc.) But for every category-dominating Microsoft, there are dozens of very successful software companies in every vertical. Dozens of project management software companies, countless task management software companies, etc.
- avocado4 7y ago> McDonald's also lacks network effects, though it does have some brand loyalty McDonald's is top 10 most valuable brand in the world. It has massive brand loyalty & defensibility through it.
- TheCoelacanth 7y agoBusinesses without network effects or barriers to entry are fine, but they can't afford to burn billions in investor cash every quarter the way that Uber does. They are never going to have the out-sized profits to justify those initial losses.