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Gotta love the illustration in the original post: https://themargins.substack.com/p/doordash-and-pizza-arbitrage https://themargins.substack.com/p/doordash-and

by jpm_sd 6y ago

Gotta love the illustration in the original post: https://themargins.substack.com/p/doordash-and-pizza-arbitrage https://themargins.substack.com/p/doordash-and-pizza-arbitra... Not to mention some horrifying numbers: > Doordash reportedly lost an insane $450 million off $900 million in revenue in 2019 (which does make me wonder if my dream of a decentralized network of pizza arbitrageurs does exist). > Uber Eats is Uber's "most profitable division” . Uber Eats lost $461 million in Q4 2019 off of revenue of $734 million. Sometimes I need to write this out to remind myself. Uber Eats spent $1.2 billion to make $734 million. In one quarter.

jacquesm 6y ago
Interesting definition of profitable. Should be 'least losing' instead of 'most profitable'.
- labster 6y ago
  It’s because on HN we don’t see the :rofl: emoji in the original post being quoted. Loss of meaning without the emoji, I’m afraid.
christophilus 6y ago
It really does remind me of the .com bubble in many ways. The quote from Scott McNeely[0] has sprung to mind a lot lately. - MSFT 10x sales - V 17x sales - MA 16x sales - NFLX 9x sales - BYND 23x sales - ZM 68x sales Some of those are obviously great companies with fat margins and well worth above average multiples. But ZM at 68x sales? The market feels a bit out of touch. [0] "At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"
- asdf21 6y ago
  Everyone is throwing money into tech stocks right now because they "seem safe" Try running the numbers on TSLA... they should be at like $300 on their best day.
- sacred_numbers 6y ago
  I think the underlying assumption is that the company will grow very quickly, so that when it comes time to pay you back they are paying you back with a small fraction of their revenue. Look at Netflix, for example: ten years ago they had 1.67 billion in annual revenue. Last year they had 1.87 billion in net income, and they are still growing. There are certainly some ridiculous valuations, but that quote is ignoring both the fact that businesses grow and that not everybody needs a 10 year payback. More generally, the reason there are high valuations for companies that are growing users by selling a $20 bill for $18 is that they can drive out all of their competitors who can't afford to burn money. Once those competitors are gone, the survivor can raise prices, lobby governments for regulations that make breaking into the market very difficult, and generally employ anti-competitive practices to take advantage of their situation. If they're able to do this without being smacked down by anti-trust regulators they will be a money printing machine. These high valuations mean that the market thinks that governments will remain toothless and easily controlled. It's a depressing future to think about, but there's a pretty high probability that this is how it will be.
  - christophilus 6y ago
    You're right. I just haven't been able to bring myself to invest like this. Also, I hate the idea of supporting companies who behave like leeches, but it's pretty hard to avoid that.
  - dathinab 6y ago
    > More generally, the reason there are high valuations for companies that are growing users by selling a $20 bill for $18 is that they can drive out all of their competitors who can't afford to burn money. Which is a prime example why the whole business model is harmful for a capitalistic marked as it undermines any idea of "fair" competition and marked self balancing. (At least in a context where the money burned comes from an external source like e.g. VC, through close to quasi-monopoles spreading to new markets also fall into this category IMHO).
yread 6y ago
I know anecdote isn't data but I only order with uber eats when they send me 10$ coupons. That way I pay less than if I walked to the restaurant myself. We call it dining with VCs.

by jpm_sd 6y ago

jacquesm 6y ago

Interesting definition of profitable. Should be 'least losing' instead of 'most profitable'.

labster 6y ago
It’s because on HN we don’t see the :rofl: emoji in the original post being quoted. Loss of meaning without the emoji, I’m afraid.

christophilus 6y ago

It really does remind me of the .com bubble in many ways. The quote from Scott McNeely[0] has sprung to mind a lot lately. - MSFT 10x sales - V 17x sales - MA 16x sales - NFLX 9x sales - BYND 23x sales - ZM 68x sales Some of those are obviously great companies with fat margins and well worth above average multiples. But ZM at 68x sales? The market feels a bit out of touch. [0] "At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?"

asdf21 6y ago
Everyone is throwing money into tech stocks right now because they "seem safe" Try running the numbers on TSLA... they should be at like $300 on their best day.
sacred_numbers 6y ago
I think the underlying assumption is that the company will grow very quickly, so that when it comes time to pay you back they are paying you back with a small fraction of their revenue. Look at Netflix, for example: ten years ago they had 1.67 billion in annual revenue. Last year they had 1.87 billion in net income, and they are still growing. There are certainly some ridiculous valuations, but that quote is ignoring both the fact that businesses grow and that not everybody needs a 10 year payback. More generally, the reason there are high valuations for companies that are growing users by selling a $20 bill for $18 is that they can drive out all of their competitors who can't afford to burn money. Once those competitors are gone, the survivor can raise prices, lobby governments for regulations that make breaking into the market very difficult, and generally employ anti-competitive practices to take advantage of their situation. If they're able to do this without being smacked down by anti-trust regulators they will be a money printing machine. These high valuations mean that the market thinks that governments will remain toothless and easily controlled. It's a depressing future to think about, but there's a pretty high probability that this is how it will be.
- christophilus 6y ago
  You're right. I just haven't been able to bring myself to invest like this. Also, I hate the idea of supporting companies who behave like leeches, but it's pretty hard to avoid that.
- dathinab 6y ago
  > More generally, the reason there are high valuations for companies that are growing users by selling a $20 bill for $18 is that they can drive out all of their competitors who can't afford to burn money. Which is a prime example why the whole business model is harmful for a capitalistic marked as it undermines any idea of "fair" competition and marked self balancing. (At least in a context where the money burned comes from an external source like e.g. VC, through close to quasi-monopoles spreading to new markets also fall into this category IMHO).

yread 6y ago

I know anecdote isn't data but I only order with uber eats when they send me 10$ coupons. That way I pay less than if I walked to the restaurant myself. We call it dining with VCs.