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> The drop in Uber’s share price was responsible for about $5.2 billion of Vision Fund’s losses in the period, while WeWork contributed $4.6 billion and another

by dannyw 6y ago

> The drop in Uber’s share price was responsible for about $5.2 billion of Vision Fund’s losses in the period, while WeWork contributed $4.6 billion and another $7.5 billion came from the rest of the portfolio Losing even more on other portfolio businesses, like Oyo (the hotel chain) is going to hurt. I hope this gets rid of the "out-raise your competitors and spend ridiculous amounts of money on ridiculous money sinks" strategy forever.

mtgx 6y ago
> I hope this gets rid of the "out-raise your competitors and spend ridiculous amounts of money on ridiculous money sinks" strategy forever. Narrator: It didn't. As long as there is greed and speculation, people will continue to fall for schemes like these. People, especially here on HN, like to talk about how big of a ponzi scheme cryptocurrencies are, but they are just a reflection of other such systems in the offline world. They just happen in time-scales of weeks and months rather than years and decades.
toomuchtodo 6y ago
> I hope this gets rid of the "out-raise your competitors and spend ridiculous amounts of money on ridiculous money sinks" strategy forever. I don't think so. We live in a world now where incredible amounts of capital are chasing returns because of zero and negative interest rate policies. The only solution will be regulation. EDIT: The more interesting question (IMHO) is what happens when all of that capital has nowhere to go? Is there back pressure? How do accumulators of capital react to such forces?
- bergstromm466 6y ago
  Yes completely agree. It's hard to get a firm grip on just how deeply unequitable society is today, and how little the big tech corps contribute in taxes. "JSavageOne 7 hours ago [–] Corporatocracy is probably the more accurate term, but the term neofeudalism isn't exactly a huge stretch. The only real difference today is that at least in theory a serf can become a lord, but the same power dynamic remains. When chattel slavery ended many of the freed slaves became sharecroppers, bound to the land by eternal debts that could never be repaid. Although they were no longer legally bound to their "masters", for many their lives were not really any better. Although in principle the monopolies and the government are separate institutions, we all know that the reality is that our politicians are bought out by the corporations, and the regulators are staffed by ex-employees of the very companies they are supposed to be regulating. We used to bust monopolies, but since the 70s or so the regulators have become very lax, and practically every industry has become more consolidated than it's ever been (finance, advertising, airlines, utilities, telecom, agriculture, healthcare, etc). What's interesting to me is that whenever Google/Facebook does something authoritarian that would seem to violate some principle of liberty we deem sacred (eg. censorship, violating freedom of speech), many if not most of the comments seem to rationalize the corporation's decision as exercising their own free speech. But when you're Reddit with 430M monthly active users, your userbase is the population equivalent of the world's 3rd largest country, and so you're effectively the equivalent of a nation-state. When you're Amazon with 750k employees, then your employees could fill up a city. Does the principle of democracy only apply to country's governments, or does it also extend to corporate monopolies?" [1] [1] https://news.ycombinator.com/item?id=23218895 https://news.ycombinator.com/item?id=23218895
- mumblemumble 6y ago
  The giant pool of money is consumed by a desperate hunger for any shred of return it can find, and there is an almost limitless supply of smart, creative people who are well-positioned to capitalize on that. By contrast, there is a finite supply of regulators, and the people who make the laws that the regulators implement are themselves members of the cadre of hungry ghosts who make up the giant pool of money. With conditions like those, regulation will be doing extremely well to only be 10 or 20 steps behind the market.
  - toomuchtodo 6y ago
    > and there is an almost limitless supply of smart, creative people who are well-positioned to capitalize on that. There are smart and creative people, but those are not the people being provided with capital to execute (see: WeWork, Uber, and most other VC unicorns burning out their runway). But, to your point, definitely right regulation needs to catch up. Fingers crossed it happens before the pitchforks come out [1]. Remember, those who hold vast amounts of the world's wealth are a vocal minority [2]. The same holds for the size of groups with exceedingly high wealth in developed countries [3]. [1] https://www.theatlantic.com/business/archive/2017/02/scheidel-great-leveler-inequality-violence/517164/ https://www.theatlantic.com/business/archive/2017/02/scheide... (The Only Thing, Historically, That's Curbed Inequality: Catastrophe) [2] https://www.vox.com/future-perfect/2019/1/22/18192774/oxfam-inequality-report-2019-davos-wealth https://www.vox.com/future-perfect/2019/1/22/18192774/oxfam-... ("42 million people, or 0.8 percent of the world’s population, have net worths in excess of $1 million. That group — roughly the global 1 percent — controls 44.8 percent of the world’s wealth. So it really is true that a pretty small number of people control nearly half the world’s wealth. It’s just a bigger small number of people than Oxfam’s reports tend to emphasize.") [3] https://en.wikipedia.org/wiki/List_of_Americans_by_net_worth https://en.wikipedia.org/wiki/List_of_Americans_by_net_worth (The Forbes 400 Richest Americans list has been published annually since 1982. The combined net worth of the 2019 class of the 400 richest Americans was $2.9 trillion, up from $2.7 trillion in 2017. As of October 2019, there were 621 billionaires--a record high--in the United States.)
  - adventured 6y ago
    > The giant pool of money is consumed by a desperate hunger for any shred of return it can find, and there is an almost limitless supply of smart, creative people who are well-positioned to capitalize on that. The finite regulators are confronted with a very small supply of smart, creative people in a position to capitalize. That group is the opposite of almost limitless, it's scarce. Why can't regulators easily handle the dozens of deals per year that are of particular significance in VC-money terms? Nothing drastic needs to be done to regulate that scale of deals better, it's not that large in quantity. We're not talking about tens of thousands of very large funding rounds per year, that isn't going to happen.
- claudeganon 6y ago
  > We live in a world now where incredible amounts of capital are chasing returns because of zero and negative interest rate policies. The only solution will be regulation. The counter and historically more persuasive argument from the left is that the falling rate of profit will lead to more war and colonization. It’s hard not to see what’s happening in Yemen and the Saudi’s investment in SoftBank through this lens.
  - pas 6y ago
    I haven't encountered this argument before. Could you expand on this a bit? Or point toward some articles on the topic? Thanks!
    - staplers 6y ago
      Not OP, but they might be alluding to the fact resource scarcity often leads to war
    - vidarh 6y ago
      The argument dates back to Marx. Marx explicitly (already in the Communist Manifesto) argued that as capitalists run out of new markets to conquer, competition will force them to find their savings elsewhere, and that would inherently mean lowering costs of raw materials or lowering manufacturing costs, and that this this ultimately leads to conflict over property rights and driving down labour costs. He further predicted that this eventual pressure to drive down labour costs would push capitalism into a series of worsening crises on the assumption that driving down labour costs would drive down the market, and leave the market with over-capacity, and so intensify conflict. Basically Marx assumption was to take capitalists on their word that the free market will drive profit margins towards zero, coupled with the assumption that a lot of people have a lot of vested interest in preventing their profits from going towards zero and will do almost anything to prevent that from happening.
  - nickik 6y ago
    That people still peddle this Leninist garbage is just unbelievable to me. Saudi have been fighting off and on with the people of that region of 500+ years. Now they have more money. They have always tried to influence what going on there. What is happening there is part of a larger conflict between Saudi/US and Iran as well. How it related to falling interest rates or whatever is beyond me. And SoftBank simply has to do with the Saudis knowing that Oil money will go away and they are not capable of correctly reorganizing their state, so they think they can just buy stock to finance their nonsense government polices in the long run. All of this is explained 100x better with an incompetent government that happens to sit on natural resources, rather then some Marxist critic of Capitalism.
- chillydawg 6y ago
  Historically, you just buy land. As much as you can find, in as great a quantity as you can find.
  - mythz 6y ago
    IMO land is a horrible investment to sit on, they have acquisition costs, you have to pay annual rates to hold them, they're non revenue generating that as a result can't be claimed as a tax deduction (in Australia at least). They've also been depreciating in value lately, not a great short-term investment. Better to invest into the Stock Market index until another opportunity opens up.
    - EdwardDiego 6y ago
      Depends on the jurisdiction - if there's no CGT, and prices have been trending upwards, then the increase in value dramatically offsets any rates you may pay. Of course, the upward trend in prices relies on a bigger fool coming into your market, which of late has been Chinese money.
    - Spooky23 6y ago
      Localized power brokers like hospital systems and universities address this by being slum lords and slowly acquiring properties in areas of interest. In many urban environments you’ll see blighted property adjacent to hospitals, etc that is essentially a buffer for future clearance. It’s a win-win, the institution makes money (at arms length) on the slumlording, and they get incentives to “revitalize” the area when they need a new building.
      - toomuchtodo 6y ago
        Illinois Medical District on the southwest side of Chicago just off of I-290 is a prime example of this. https://en.wikipedia.org/wiki/Illinois_Medical_District https://en.wikipedia.org/wiki/Illinois_Medical_District
  - mschuster91 6y ago
    Or stocks. Plain old classic stocks of established companies. S&P 500 historically is depending on which Google result you trust 4-8% per annum, it's hard to beat that on long term - on short term it usually is as many VC and other funds have proven but essentially that's casino bets.
- pgt 6y ago
  Why would you want to regulate it? Consumers benefit from VCs subsidising Uber and food delivery.
  - toomuchtodo 6y ago
    The collateral damage is immense, to both gig workers and in the case of food delivery, restaurants who do the actual work of making the food. EDIT: I mean, just go UBI instead of advocating for siphoning sovereign fund dollars from ruthless dictators and unsophisticated investors like Masayoshi Son. Save us all the paperwork and bikeshedding about not being able to afford what we clearly (based on central bank monetary policy) can afford. I will certainly miss the Matt Levine pieces about these folks though.
    - fosk 6y ago
      Nobody is forced to work for Uber and the like, restaurants can also ban these services.
      - toomuchtodo 6y ago
        This is a tired argument. We live in a society, not Somalia. Government exists to regulate to protect citizens, and I'm starting to believe these arguments are put forth to give these monstrosities more time before death gasps.
        elcomet 6y ago
        > not Somalia I'm curious why you would choose this example. Is somalia a country without a society ?
        toomuchtodo 6y ago
        Somalia is the type of society that aligns with libertarian ideals. "Let the free market work it out."
- TuringNYC 6y ago
  >> what happens when all of that capital has nowhere to go? Is there back pressure? Perhaps what happens is that expensive (i.e., in terms of fees) investment vehicles end up investing in easily available assets (e.g., Uber stock, which is public.) Anyone know if SoftBank earns carry on this part of the portfolio? Why would LPs want SoftBank to have any funds in a publicly traded asset and pay fees for that?
- pas 6y ago
  > The only solution will be regulation. What's the problem exactly, and how would regulation work to address it? I feel that people gravely misunderstand capital, interest rate, and so on. Capital accumulation is not the same as expanding the money supply (so taking out a loan) - even if both are somehow denominated in USD. If we have too much financial capital - as you pointed out, chasing returns - that just means its real value depreciates compared to other things. (Eg. capital goods, labor, return generating assets, etc. - That's why we see asset bubbles, and investment in a lot of ventures, that then pays huge salaries.) But it doesn't matter how much money chases how little, the important thing is the real growth, aggregate demand (total compensation), technological change (productivity), and so on. There's back-pressure (falling profits, slowing growth, recession, depression, shrinking economy, rising unemployment, a vicious cycle), but also there's always a place for financial capital to go. Namely there are always new ideas to try, there are always things to invest in. For example, there are always more riskier and more longer term investments, such as education (lending people money to retrain and switch to a higher paying job - a bit like student loans, but a lot more like coding bootcamps). Infrastructure (public transport, energy, housing), and so on. Profit (real capital) comes from economic surplus, and that comes from technological change (economies of scale, efficiency, etc). And fundamentally it seems advanced economies are very resistant to switch to more efficient forms. ( http://www.vitalsigns.mtc.ca.gov/time-spent-congestion http://www.vitalsigns.mtc.ca.gov/time-spent-congestion --- and it took a pandemic to try to make home office really viable; see also how much money people spend on healthcare, yet how inefficient it is) Without real economic surplus a bigger money supply is just inflation. (That's why some people freak out when they see central banks doing quantitative easing, but they forget that central banks look at inflation, and they do QE to keep inflation above 0.) So eventually, either we invest in big changes to go up the efficiency ladder, stagnate, or worst case the promised new projects don't deliver (because there was not enough aggregate demand to subscribe/buy/rent/use the new shiny thing, or it was not green enough, so it was not a good market fit), eventually the financial sector starts to run out of equity to risk, and we fall into the debt trap that caused Japan's lost decade. (And that's why central banks all around the world are able to just foot the bill, because it doesn't cause inflation as long as that money is basically just gets rolled over into new loans/bonds/etc. most of it goes nowhere.)
- Spooky23 6y ago
  Eventually it will be inflated away. Someone has to pay the piper.
mbesto 6y ago
> I hope this gets rid of the "out-raise your competitors and spend ridiculous amounts of money on ridiculous money sinks" strategy forever. Why? If you're a startup and a competitor does this and it leads to them losing value, isn't that a good thing for you? The only people who lose in this equation are the ones who accepted those risks. The market will eventually correct itself.
- vertex-four 6y ago
  There's a piece of investment wisdom that says "the market can remain irrational longer than you can remain solvent" - or, applied here, Uber's going to take a while longer to die than your startup.
  - mbesto 6y ago
    > or, applied here, Uber's going to take a while longer to die than your startup. So what? I'm so confused by this. This is exactly the point of "taking more money than you need". If Uber has a huge warchest of cash it means it can pivot as it pleases. Isn't this good investment advice then?
    - vertex-four 6y ago
      If Uber dies before making any money, and some other company would've made money but Uber killed it, then the investment in Uber was a bad investment (no return) and in addition prevented what might have been a good investment from working out. Or in words that matter to me as a consumer - Uber, an unsustainable company, killed an industry that will not immediately recover when Uber dies.
- TeMPOraL 6y ago
  > The only people who lose in this equation are the ones who accepted those risks. And, more importantly, also the people who are collateral damage of this. I.e. the people in your or mine neighbourhood. The local restaurants, the local drivers, the local renters. All this money raised isn't just sitting there doing nothing, it's disrupting markets - the way a disruptor wielded by a Klingon or Romulan would disrupt your body. By the time the disruption ends, your body won't work. These markets won't work either.
basch 6y ago
20 Years Ago. They lose 70 BILLION dollars, and their next play is to throw money into something called Alibaba. 17.7 billion in 2020 dollars is nothing by comparison. $70B then is over $100B in today dollars. That is like saying "i hope that blackjack player learned to never double down", because they lost a hand.

by dannyw 6y ago

mtgx 6y ago

> I hope this gets rid of the "out-raise your competitors and spend ridiculous amounts of money on ridiculous money sinks" strategy forever. Narrator: It didn't. As long as there is greed and speculation, people will continue to fall for schemes like these. People, especially here on HN, like to talk about how big of a ponzi scheme cryptocurrencies are, but they are just a reflection of other such systems in the offline world. They just happen in time-scales of weeks and months rather than years and decades.

toomuchtodo 6y ago

> I hope this gets rid of the "out-raise your competitors and spend ridiculous amounts of money on ridiculous money sinks" strategy forever. I don't think so. We live in a world now where incredible amounts of capital are chasing returns because of zero and negative interest rate policies. The only solution will be regulation. EDIT: The more interesting question (IMHO) is what happens when all of that capital has nowhere to go? Is there back pressure? How do accumulators of capital react to such forces?

bergstromm466 6y ago
Yes completely agree. It's hard to get a firm grip on just how deeply unequitable society is today, and how little the big tech corps contribute in taxes. "JSavageOne 7 hours ago [–] Corporatocracy is probably the more accurate term, but the term neofeudalism isn't exactly a huge stretch. The only real difference today is that at least in theory a serf can become a lord, but the same power dynamic remains. When chattel slavery ended many of the freed slaves became sharecroppers, bound to the land by eternal debts that could never be repaid. Although they were no longer legally bound to their "masters", for many their lives were not really any better. Although in principle the monopolies and the government are separate institutions, we all know that the reality is that our politicians are bought out by the corporations, and the regulators are staffed by ex-employees of the very companies they are supposed to be regulating. We used to bust monopolies, but since the 70s or so the regulators have become very lax, and practically every industry has become more consolidated than it's ever been (finance, advertising, airlines, utilities, telecom, agriculture, healthcare, etc). What's interesting to me is that whenever Google/Facebook does something authoritarian that would seem to violate some principle of liberty we deem sacred (eg. censorship, violating freedom of speech), many if not most of the comments seem to rationalize the corporation's decision as exercising their own free speech. But when you're Reddit with 430M monthly active users, your userbase is the population equivalent of the world's 3rd largest country, and so you're effectively the equivalent of a nation-state. When you're Amazon with 750k employees, then your employees could fill up a city. Does the principle of democracy only apply to country's governments, or does it also extend to corporate monopolies?" [1] [1] https://news.ycombinator.com/item?id=23218895 https://news.ycombinator.com/item?id=23218895
mumblemumble 6y ago
The giant pool of money is consumed by a desperate hunger for any shred of return it can find, and there is an almost limitless supply of smart, creative people who are well-positioned to capitalize on that. By contrast, there is a finite supply of regulators, and the people who make the laws that the regulators implement are themselves members of the cadre of hungry ghosts who make up the giant pool of money. With conditions like those, regulation will be doing extremely well to only be 10 or 20 steps behind the market.
- toomuchtodo 6y ago
  > and there is an almost limitless supply of smart, creative people who are well-positioned to capitalize on that. There are smart and creative people, but those are not the people being provided with capital to execute (see: WeWork, Uber, and most other VC unicorns burning out their runway). But, to your point, definitely right regulation needs to catch up. Fingers crossed it happens before the pitchforks come out [1]. Remember, those who hold vast amounts of the world's wealth are a vocal minority [2]. The same holds for the size of groups with exceedingly high wealth in developed countries [3]. [1] https://www.theatlantic.com/business/archive/2017/02/scheidel-great-leveler-inequality-violence/517164/ https://www.theatlantic.com/business/archive/2017/02/scheide... (The Only Thing, Historically, That's Curbed Inequality: Catastrophe) [2] https://www.vox.com/future-perfect/2019/1/22/18192774/oxfam-inequality-report-2019-davos-wealth https://www.vox.com/future-perfect/2019/1/22/18192774/oxfam-... ("42 million people, or 0.8 percent of the world’s population, have net worths in excess of $1 million. That group — roughly the global 1 percent — controls 44.8 percent of the world’s wealth. So it really is true that a pretty small number of people control nearly half the world’s wealth. It’s just a bigger small number of people than Oxfam’s reports tend to emphasize.") [3] https://en.wikipedia.org/wiki/List_of_Americans_by_net_worth https://en.wikipedia.org/wiki/List_of_Americans_by_net_worth (The Forbes 400 Richest Americans list has been published annually since 1982. The combined net worth of the 2019 class of the 400 richest Americans was $2.9 trillion, up from $2.7 trillion in 2017. As of October 2019, there were 621 billionaires--a record high--in the United States.)
- adventured 6y ago
  > The giant pool of money is consumed by a desperate hunger for any shred of return it can find, and there is an almost limitless supply of smart, creative people who are well-positioned to capitalize on that. The finite regulators are confronted with a very small supply of smart, creative people in a position to capitalize. That group is the opposite of almost limitless, it's scarce. Why can't regulators easily handle the dozens of deals per year that are of particular significance in VC-money terms? Nothing drastic needs to be done to regulate that scale of deals better, it's not that large in quantity. We're not talking about tens of thousands of very large funding rounds per year, that isn't going to happen.
claudeganon 6y ago
> We live in a world now where incredible amounts of capital are chasing returns because of zero and negative interest rate policies. The only solution will be regulation. The counter and historically more persuasive argument from the left is that the falling rate of profit will lead to more war and colonization. It’s hard not to see what’s happening in Yemen and the Saudi’s investment in SoftBank through this lens.
- pas 6y ago
  I haven't encountered this argument before. Could you expand on this a bit? Or point toward some articles on the topic? Thanks!
  - staplers 6y ago
    Not OP, but they might be alluding to the fact resource scarcity often leads to war
  - vidarh 6y ago
    The argument dates back to Marx. Marx explicitly (already in the Communist Manifesto) argued that as capitalists run out of new markets to conquer, competition will force them to find their savings elsewhere, and that would inherently mean lowering costs of raw materials or lowering manufacturing costs, and that this this ultimately leads to conflict over property rights and driving down labour costs. He further predicted that this eventual pressure to drive down labour costs would push capitalism into a series of worsening crises on the assumption that driving down labour costs would drive down the market, and leave the market with over-capacity, and so intensify conflict. Basically Marx assumption was to take capitalists on their word that the free market will drive profit margins towards zero, coupled with the assumption that a lot of people have a lot of vested interest in preventing their profits from going towards zero and will do almost anything to prevent that from happening.
- nickik 6y ago
  That people still peddle this Leninist garbage is just unbelievable to me. Saudi have been fighting off and on with the people of that region of 500+ years. Now they have more money. They have always tried to influence what going on there. What is happening there is part of a larger conflict between Saudi/US and Iran as well. How it related to falling interest rates or whatever is beyond me. And SoftBank simply has to do with the Saudis knowing that Oil money will go away and they are not capable of correctly reorganizing their state, so they think they can just buy stock to finance their nonsense government polices in the long run. All of this is explained 100x better with an incompetent government that happens to sit on natural resources, rather then some Marxist critic of Capitalism.
chillydawg 6y ago
Historically, you just buy land. As much as you can find, in as great a quantity as you can find.
- mythz 6y ago
  IMO land is a horrible investment to sit on, they have acquisition costs, you have to pay annual rates to hold them, they're non revenue generating that as a result can't be claimed as a tax deduction (in Australia at least). They've also been depreciating in value lately, not a great short-term investment. Better to invest into the Stock Market index until another opportunity opens up.
  - EdwardDiego 6y ago
    Depends on the jurisdiction - if there's no CGT, and prices have been trending upwards, then the increase in value dramatically offsets any rates you may pay. Of course, the upward trend in prices relies on a bigger fool coming into your market, which of late has been Chinese money.
  - Spooky23 6y ago
    Localized power brokers like hospital systems and universities address this by being slum lords and slowly acquiring properties in areas of interest. In many urban environments you’ll see blighted property adjacent to hospitals, etc that is essentially a buffer for future clearance. It’s a win-win, the institution makes money (at arms length) on the slumlording, and they get incentives to “revitalize” the area when they need a new building.
    - toomuchtodo 6y ago
      Illinois Medical District on the southwest side of Chicago just off of I-290 is a prime example of this. https://en.wikipedia.org/wiki/Illinois_Medical_District https://en.wikipedia.org/wiki/Illinois_Medical_District
- mschuster91 6y ago
  Or stocks. Plain old classic stocks of established companies. S&P 500 historically is depending on which Google result you trust 4-8% per annum, it's hard to beat that on long term - on short term it usually is as many VC and other funds have proven but essentially that's casino bets.
pgt 6y ago
Why would you want to regulate it? Consumers benefit from VCs subsidising Uber and food delivery.
- toomuchtodo 6y ago
  The collateral damage is immense, to both gig workers and in the case of food delivery, restaurants who do the actual work of making the food. EDIT: I mean, just go UBI instead of advocating for siphoning sovereign fund dollars from ruthless dictators and unsophisticated investors like Masayoshi Son. Save us all the paperwork and bikeshedding about not being able to afford what we clearly (based on central bank monetary policy) can afford. I will certainly miss the Matt Levine pieces about these folks though.
  - fosk 6y ago
    Nobody is forced to work for Uber and the like, restaurants can also ban these services.
    - toomuchtodo 6y ago
      This is a tired argument. We live in a society, not Somalia. Government exists to regulate to protect citizens, and I'm starting to believe these arguments are put forth to give these monstrosities more time before death gasps.
      - elcomet 6y ago
        > not Somalia I'm curious why you would choose this example. Is somalia a country without a society ?
        toomuchtodo 6y ago
        Somalia is the type of society that aligns with libertarian ideals. "Let the free market work it out."
TuringNYC 6y ago
>> what happens when all of that capital has nowhere to go? Is there back pressure? Perhaps what happens is that expensive (i.e., in terms of fees) investment vehicles end up investing in easily available assets (e.g., Uber stock, which is public.) Anyone know if SoftBank earns carry on this part of the portfolio? Why would LPs want SoftBank to have any funds in a publicly traded asset and pay fees for that?
pas 6y ago
> The only solution will be regulation. What's the problem exactly, and how would regulation work to address it? I feel that people gravely misunderstand capital, interest rate, and so on. Capital accumulation is not the same as expanding the money supply (so taking out a loan) - even if both are somehow denominated in USD. If we have too much financial capital - as you pointed out, chasing returns - that just means its real value depreciates compared to other things. (Eg. capital goods, labor, return generating assets, etc. - That's why we see asset bubbles, and investment in a lot of ventures, that then pays huge salaries.) But it doesn't matter how much money chases how little, the important thing is the real growth, aggregate demand (total compensation), technological change (productivity), and so on. There's back-pressure (falling profits, slowing growth, recession, depression, shrinking economy, rising unemployment, a vicious cycle), but also there's always a place for financial capital to go. Namely there are always new ideas to try, there are always things to invest in. For example, there are always more riskier and more longer term investments, such as education (lending people money to retrain and switch to a higher paying job - a bit like student loans, but a lot more like coding bootcamps). Infrastructure (public transport, energy, housing), and so on. Profit (real capital) comes from economic surplus, and that comes from technological change (economies of scale, efficiency, etc). And fundamentally it seems advanced economies are very resistant to switch to more efficient forms. ( http://www.vitalsigns.mtc.ca.gov/time-spent-congestion http://www.vitalsigns.mtc.ca.gov/time-spent-congestion --- and it took a pandemic to try to make home office really viable; see also how much money people spend on healthcare, yet how inefficient it is) Without real economic surplus a bigger money supply is just inflation. (That's why some people freak out when they see central banks doing quantitative easing, but they forget that central banks look at inflation, and they do QE to keep inflation above 0.) So eventually, either we invest in big changes to go up the efficiency ladder, stagnate, or worst case the promised new projects don't deliver (because there was not enough aggregate demand to subscribe/buy/rent/use the new shiny thing, or it was not green enough, so it was not a good market fit), eventually the financial sector starts to run out of equity to risk, and we fall into the debt trap that caused Japan's lost decade. (And that's why central banks all around the world are able to just foot the bill, because it doesn't cause inflation as long as that money is basically just gets rolled over into new loans/bonds/etc. most of it goes nowhere.)
Spooky23 6y ago
Eventually it will be inflated away. Someone has to pay the piper.

mbesto 6y ago

> I hope this gets rid of the "out-raise your competitors and spend ridiculous amounts of money on ridiculous money sinks" strategy forever. Why? If you're a startup and a competitor does this and it leads to them losing value, isn't that a good thing for you? The only people who lose in this equation are the ones who accepted those risks. The market will eventually correct itself.

vertex-four 6y ago
There's a piece of investment wisdom that says "the market can remain irrational longer than you can remain solvent" - or, applied here, Uber's going to take a while longer to die than your startup.
- mbesto 6y ago
  > or, applied here, Uber's going to take a while longer to die than your startup. So what? I'm so confused by this. This is exactly the point of "taking more money than you need". If Uber has a huge warchest of cash it means it can pivot as it pleases. Isn't this good investment advice then?
  - vertex-four 6y ago
    If Uber dies before making any money, and some other company would've made money but Uber killed it, then the investment in Uber was a bad investment (no return) and in addition prevented what might have been a good investment from working out. Or in words that matter to me as a consumer - Uber, an unsustainable company, killed an industry that will not immediately recover when Uber dies.
TeMPOraL 6y ago
> The only people who lose in this equation are the ones who accepted those risks. And, more importantly, also the people who are collateral damage of this. I.e. the people in your or mine neighbourhood. The local restaurants, the local drivers, the local renters. All this money raised isn't just sitting there doing nothing, it's disrupting markets - the way a disruptor wielded by a Klingon or Romulan would disrupt your body. By the time the disruption ends, your body won't work. These markets won't work either.

basch 6y ago

20 Years Ago. They lose 70 BILLION dollars, and their next play is to throw money into something called Alibaba. 17.7 billion in 2020 dollars is nothing by comparison. $70B then is over $100B in today dollars. That is like saying "i hope that blackjack player learned to never double down", because they lost a hand.