14 ms·

Bingo. Subsidized not only by VCs, but also by gig economy workers who genuinely don’t understand how little they’re being paid because their liabilities are c

Bingo. Subsidized not only by VCs, but also by gig economy workers who genuinely don’t understand how little they’re being paid because their liabilities are complicated and often hidden/deferred. This seems to happen a lot especially with food service startups, because of how price-sensitive that market is. Selling anything below cost or undercutting the competition by even a little bit in that industry will give you exponential growth for as long as you can sustain it, but the instant you want to turn a profit the market will turn their back on you and go somewhere else.

amelius 6y ago
Good VCs don't support selling below cost. Only evil and stupid ones do. In some countries it is even illegal.
- tengbretson 6y ago
  The line between being unprofitable and selling at a loss can be very blurry. What one might call "selling at a loss" another might consider "making upfront investments for ensuring and sustaining long term success".
  - amelius 6y ago
    > What one might call "selling at a loss" another might consider "making upfront investments for ensuring and sustaining long term success". Can you explain why this should not be viewed as anti-competitive behavior? How would you call it if it's not predatory pricing/undercutting?
    - WalterBright 6y ago
      There are 3 prices you can set: 1. above the competition - gouging, profiteering 2. below the competition - predatory pricing, unfair competition, dumping 3. same as the competition - price fixing, collusion All are illegal!
      - gbear605 6y ago
        Alternatively, set your prices based on the actual supply and demand and your costs, not by trying to manipulate the market :)
        fosk 6y ago
        But why? Just let the market do its thing: - if a market player wants to sell goods or services at a loss, let them do it and it benefits the consumer - if the competition goes out of business and the prices are raised, somebody else will see the opportunity to enter the market at a lower cost. Rinse and repeat. The consumers benefit from it either way.
        rileymat2 6y ago
        That implies memory of past events would not affect people willing to take the new opportunity.
        gbear605 6y ago
        In one option, there’s high turnover (bad for customers, employees, and restaurants) leading to restaurants not signing up with future food delivery companies due to being burned in the past. In the other option, there’s a heathy competition leading to customers paying realistic prices (an undistorted market) and giving delivery workers and restaurants more stability.
      - compiler-guy 6y ago
        All of those price points in the first column are _necessary_ for the legal consequences in the second column, but not sufficient by any stretch.
      - amelius 6y ago
        This isn't about pricing relative to the competition, but relative to the cost of production.
    - bpodgursky 6y ago
      It's not anti-competitive if you're a relatively small player or trying to build a market. Comparison: when a new restaurant opens, it's very common to hand out coupons in the neighborhood for discounts or free meals. Those free meals will be sold at a loss, with the goal of building a customer base. Think of it as marketing. EOD, "anti-competitive" is evaluated on the outcome -- does the success of the company running the discounts make the market more or less competitive if they succeed? If a company is already the dominant player in a market, it's anti-competitive to price dump to keep new entrants out. But if the company is new and trying to disrupt established players (or trying to create a market where one didn't exist), it's very hard to argue that there's less competition due to their success.
      - amelius 6y ago
        > EOD, "anti-competitive" is evaluated on the outcome -- does the success of the company running the discounts make the market more or less competitive if they succeed? This doesn't seem right. If they are price dumping then it will immediately affect the competition. No need to wait for an outcome or interpretation. > Comparison: when a new restaurant opens, it's very common to hand out coupons in the neighborhood for discounts or free meals. I'd say this is only acceptable because it is small scale (only few restaurants fit in a neighborhood) and the amount of money isn't endless like it (often) is with VC money. The short duration makes it possible for the competition to overcome the negative effects. The problem with VC money is that all too often it is used to destroy competition and build monopolies.
        WalterBright 6y ago
        > all too often it is used to destroy competition and build monopolies. Case history, please.
        fragmede 6y ago
        It is ignorant of reality to expect a surfeit of recent antitrust cases, as those sort of cases are only made in the most egregious of violations, and long after the damage has been done. Such as around 1999, when the several states and the US Federal DOJ brought suit against Microsoft. Microsoft had been pulling anti-competitive moves for decades before, killing alternative operating systems like BEOS or OS2. The most recent related suit was brought up against the NFL for conspiring to violate the Sherman Act, but that was 10 years ago.
    - mtnGoat 6y ago
      free trials offer something for free without charge. is that predatory? they are taking the risk of offering free services in the hope that you will stay around and keep using the service. if you dont, they are at a loss.
  - WalterBright 6y ago
    That's why we have generally accepted accounting rules. An investor pitch is one thing, the books are another.
- ptudan 6y ago
  What if I'm trying to expand the market for a product by offering introductory pricing (at below cost)? It's a pretty common tactic. Purposefully creating price wars by undercutting competitors is a different story.
- ByteJockey 6y ago
  Selling below marginal cost, sure. But selling below total cost can just be a way to get infrastructure in place before market share is in place (if it ever does happen).
csharptwdec19 6y ago
Ehh, but it's nothing new in the realm of food delivery (not saying that's -right-, mind you.) Pizza delivery drivers have been getting the same bad deal for a long time. Most teenagers/young adults who take a delivery job have no idea that they require additional coverage on their vehicle and are one accident away from a lot of financial hardship. You just see/hear about it much more now because rather than a small business offering the bad deal it's a (multi)national company. VC is just providing a way to scale the pain's visibility up.
- core-questions 6y ago
  Thing is, for a teenager / college student, it made sense as a side job. Bang around in a shitty car, make friends you work with, get a discount on pizza for yourself, get tips under the table with no tax, and enjoy that phase in your life. With these services, it's like as though people somehow expect gig-work - already much less certain than being an employed drivers - to be a career. License and insurance requirements, PPE, and the sheer scale of the middleman operation involved in running a huge app like this - it's nuts to think that it could be done for the same price as the conventional delivery model.
  - kurthr 6y ago
    And don't forget, your parents are still subsidizing your insurance... and those tickets don't show up on your record for at least 6 months, if you go to court!
  - jfk13 6y ago
    > it made sense as a side job Sure... until an accident happens, you find out that your insurance didn't cover the (undeclared) use for business purposes, and you're liable for somebody's million-dollar medical bills.
    - toxik 6y ago
      Curious as a non-US reader to see what your fear is in this scenario: financial problems
heavyset_go 6y ago
> but also by gig economy workers who genuinely don’t understand how little they’re being paid because their liabilities are complicated and often hidden/deferred. After talking to several gig economy workers, and many of them understand in very concrete terms that they are trading the value their vehicle for cash now. It's a logical short-term choice when they have bills that need to be paid today, and have a vehicle they can stretch out for a few years.

amelius 6y ago

Good VCs don't support selling below cost. Only evil and stupid ones do. In some countries it is even illegal.

tengbretson 6y ago
The line between being unprofitable and selling at a loss can be very blurry. What one might call "selling at a loss" another might consider "making upfront investments for ensuring and sustaining long term success".
- amelius 6y ago
  > What one might call "selling at a loss" another might consider "making upfront investments for ensuring and sustaining long term success". Can you explain why this should not be viewed as anti-competitive behavior? How would you call it if it's not predatory pricing/undercutting?
  - WalterBright 6y ago
    There are 3 prices you can set: 1. above the competition - gouging, profiteering 2. below the competition - predatory pricing, unfair competition, dumping 3. same as the competition - price fixing, collusion All are illegal!
    - gbear605 6y ago
      Alternatively, set your prices based on the actual supply and demand and your costs, not by trying to manipulate the market :)
      - fosk 6y ago
        But why? Just let the market do its thing: - if a market player wants to sell goods or services at a loss, let them do it and it benefits the consumer - if the competition goes out of business and the prices are raised, somebody else will see the opportunity to enter the market at a lower cost. Rinse and repeat. The consumers benefit from it either way.
        rileymat2 6y ago
        That implies memory of past events would not affect people willing to take the new opportunity.
        gbear605 6y ago
        In one option, there’s high turnover (bad for customers, employees, and restaurants) leading to restaurants not signing up with future food delivery companies due to being burned in the past. In the other option, there’s a heathy competition leading to customers paying realistic prices (an undistorted market) and giving delivery workers and restaurants more stability.
    - compiler-guy 6y ago
      All of those price points in the first column are _necessary_ for the legal consequences in the second column, but not sufficient by any stretch.
    - amelius 6y ago
      This isn't about pricing relative to the competition, but relative to the cost of production.
  - bpodgursky 6y ago
    It's not anti-competitive if you're a relatively small player or trying to build a market. Comparison: when a new restaurant opens, it's very common to hand out coupons in the neighborhood for discounts or free meals. Those free meals will be sold at a loss, with the goal of building a customer base. Think of it as marketing. EOD, "anti-competitive" is evaluated on the outcome -- does the success of the company running the discounts make the market more or less competitive if they succeed? If a company is already the dominant player in a market, it's anti-competitive to price dump to keep new entrants out. But if the company is new and trying to disrupt established players (or trying to create a market where one didn't exist), it's very hard to argue that there's less competition due to their success.
    - amelius 6y ago
      > EOD, "anti-competitive" is evaluated on the outcome -- does the success of the company running the discounts make the market more or less competitive if they succeed? This doesn't seem right. If they are price dumping then it will immediately affect the competition. No need to wait for an outcome or interpretation. > Comparison: when a new restaurant opens, it's very common to hand out coupons in the neighborhood for discounts or free meals. I'd say this is only acceptable because it is small scale (only few restaurants fit in a neighborhood) and the amount of money isn't endless like it (often) is with VC money. The short duration makes it possible for the competition to overcome the negative effects. The problem with VC money is that all too often it is used to destroy competition and build monopolies.
      - WalterBright 6y ago
        > all too often it is used to destroy competition and build monopolies. Case history, please.
        fragmede 6y ago
        It is ignorant of reality to expect a surfeit of recent antitrust cases, as those sort of cases are only made in the most egregious of violations, and long after the damage has been done. Such as around 1999, when the several states and the US Federal DOJ brought suit against Microsoft. Microsoft had been pulling anti-competitive moves for decades before, killing alternative operating systems like BEOS or OS2. The most recent related suit was brought up against the NFL for conspiring to violate the Sherman Act, but that was 10 years ago.
  - mtnGoat 6y ago
    free trials offer something for free without charge. is that predatory? they are taking the risk of offering free services in the hope that you will stay around and keep using the service. if you dont, they are at a loss.
- WalterBright 6y ago
  That's why we have generally accepted accounting rules. An investor pitch is one thing, the books are another.
ptudan 6y ago
What if I'm trying to expand the market for a product by offering introductory pricing (at below cost)? It's a pretty common tactic. Purposefully creating price wars by undercutting competitors is a different story.
ByteJockey 6y ago
Selling below marginal cost, sure. But selling below total cost can just be a way to get infrastructure in place before market share is in place (if it ever does happen).

csharptwdec19 6y ago

Ehh, but it's nothing new in the realm of food delivery (not saying that's -right-, mind you.) Pizza delivery drivers have been getting the same bad deal for a long time. Most teenagers/young adults who take a delivery job have no idea that they require additional coverage on their vehicle and are one accident away from a lot of financial hardship. You just see/hear about it much more now because rather than a small business offering the bad deal it's a (multi)national company. VC is just providing a way to scale the pain's visibility up.

core-questions 6y ago
Thing is, for a teenager / college student, it made sense as a side job. Bang around in a shitty car, make friends you work with, get a discount on pizza for yourself, get tips under the table with no tax, and enjoy that phase in your life. With these services, it's like as though people somehow expect gig-work - already much less certain than being an employed drivers - to be a career. License and insurance requirements, PPE, and the sheer scale of the middleman operation involved in running a huge app like this - it's nuts to think that it could be done for the same price as the conventional delivery model.
- kurthr 6y ago
  And don't forget, your parents are still subsidizing your insurance... and those tickets don't show up on your record for at least 6 months, if you go to court!
- jfk13 6y ago
  > it made sense as a side job Sure... until an accident happens, you find out that your insurance didn't cover the (undeclared) use for business purposes, and you're liable for somebody's million-dollar medical bills.
  - toxik 6y ago
    Curious as a non-US reader to see what your fear is in this scenario: financial problems

heavyset_go 6y ago

> but also by gig economy workers who genuinely don’t understand how little they’re being paid because their liabilities are complicated and often hidden/deferred. After talking to several gig economy workers, and many of them understand in very concrete terms that they are trading the value their vehicle for cash now. It's a logical short-term choice when they have bills that need to be paid today, and have a vehicle they can stretch out for a few years.