7 ms·

The thing is, it works sometimes. Facebook IPOed without a business model. Their ad platform was crap, attracting generic banner ad prices. They launched all t

by netcan 6y ago

The thing is, it works sometimes. Facebook IPOed without a business model. Their ad platform was crap, attracting generic banner ad prices. They launched all the targeting tools pretty quick, so Zuck obviously had a a plan... but public investors took the risk. Amazon was a long term example. They were losing money on every sale to be made up in volume (sticking with economist cliches) for decades. Now, they're literally 1000X bigger than the 2 billion dollar picker-uper startup. I agree though. There has been a ton of spend spend-2-to-make-1 MOs running businesses lately... and it is ridiculous. Also agree about Matt. The cat can write. I just think it's worth remembering the rational starting point for all the irrationality. Uber's initial value proposition was: "We are a software platform company. Software platform economics apply, just like Google & Microsoft. We'll scale like software and have a monopoly like platforms." That actually wasn't all that unreasonable. They did scale at a speed that a non-software (or law abiding) company couldn't have. But.. it turned out not to work. Market share didn't translate into monopoly pricing power. Now (or maybe last year), the alternative value proposition is/was: "When self driving gets invented..." This one is unreasonable. Softbank really did go big on some very bad bets huh?

Hokusai 6y ago
> The thing is, it works sometimes. Yes. It does, like to buy a lottery ticket. It is not a good investment thou. > SoftBank really did go big on some very bad bets huh? This is usually a misconception on how betting works. Many people looks at the result and classifies a bet as good if won and bad if lost. The reality is that the best way of looking at bets is from their expected return. A good bet is one with a positive expected return. Sometimes you will lose the bet and lose the money, but that does not mean that it was a bad bet if the expected result was positive. If I bet you 100$ against 5$ that you get heads on a coin toss. That is a good bet for you. If you toss the coin and lose the 5$ that was still a good bet and you should take it again if you have the opportunity. Were Facebook, Uber, Amazon,... good bets? It’s hard to say. What seems easy to see is if they turned into a profit or a lose.
- lotsofpulp 6y ago
  Facebook, Uber, and Amazon are not comparable at all to WeWork, Oyo, or some others. If you thought some 22 year old with no hotel management experience was within a few years going to rival Hilton and Marriott and come up with the in house policies, procedures, and build up the staff required to go around the world and perform constant quality control, then I have a bridge to sell you. Same thing with WeWork, there's no moat there.
  - gowld 6y ago
    Wait are you talking about WeWork or AirBnB?
    - 9nGQluzmnq3M 6y ago
      Neither, they're referring to Oyo, which is also a Softbank-funded bubble undergoing a WeWorkian implosion. https://www.profgalloway.com/oyomfg https://www.profgalloway.com/oyomfg
- autokad 6y ago
  when you invest in a series of companies knowing some will fail but the ones that dont will hit it big, and thus make money on average, that is not gambling or anything like buying lottery tickets. Think of it like a machine learning ensemble model. when you take a group of things, hopefully not correlated, you end up with a better result. when you average lottery tickets, you still lose.
  - Hokusai 6y ago
    > that is not gambling or anything like buying lottery tickets That is literally gambling. That is what gambling experts do to get money. A very good example: https://thehustle.co/the-man-who-won-the-lottery-14-times https://thehustle.co/the-man-who-won-the-lottery-14-times Gambling is not about good or bad luck, it is about statistics. That is why the casinos are gambling all the time but get good profits. Casinos understand statistics and balance the bets on their side. And, as in your example, casinos lose many bets, it is in average that they make money. So, your example is completely correct, but it applies to all types of gambling.
deleted 6y ago
[deleted]
snowwrestler 6y ago
Just want to make a correction here: Amazon was definitely not losing money on every sale. I think what you're thinking of is that the company rarely reported a profit. But that was because they carefully managed their finances so that all the money they made was redirected back into growth, either through capital improvements, hiring, lowering prices, etc. before it was reported as profit. Amazon maintained a boot-strapping mindset long after going public. In contrast, some gig economy companies are losing money on every sale; they generate no new capital of their own and their growth is financed entirely by external sources of capital.
- bsder 6y ago
  > Just want to make a correction here: Amazon was definitely not losing money on every sale. Correct. Amazon is in the other category of unicorn--ignore those pesky laws that limit our competitors. Amazon gained 5-8% on every sale because they didn't collect sales tax for a VERY long time. This drove my local booksellers crazy, and probably put them out of business. Yes, I'm still mad about that. Amazon should have been fined billions for those infractions. But it is just another example of "Do that illegal thing that's profitable. We likely won't get fined enough for it to be a problem."
  - jasonpeacock 6y ago
    No online seller was/is collecting sales tax, except for their own state. I've always paid sales tax on my Amazon purchases here in Washington.
  - autokad 6y ago
    > "Amazon should have been fined billions for those infractions." They were not infractions, that was the tax code. Governments (whether you like it or not) decided that in order for these markets to grow, they need to forgo taxes on them for a while until they reach critical mass. They weren't skirting the law, so you can't 'fine' Amazon (or any online retailer) for that.
    - gowld 6y ago
jkqwzsoo 6y ago
> Softbank really did go big on some very bad bets huh? There's another clichéd saying: There are no bad assets, only bad prices. Translated to betting: There are no bad bets, only bad odds.
- netcan 6y ago
  Funny you replied with those two. I've worked in both finance and casinos.
- gowld 6y ago
  There are no bad horses, only bad odds. A bet is a horse and its odds and your stake. But even that is false. If you never win, you picked bad horses.
whoisjuan 6y ago
"Facebook IPOed without a business model." That's a fallacy. If you read Facebook's S-1, the business model is there. Their ad platform could have not been great technologically speaking but it was a hardcore money machine that set FB in a clear trajectory to full operational profitability. Their user numbers where fantastic, so they had a perfect virtuous circle. They had an accelerated revenue growth and their ad-depending revenue ratio was improving (as well as their cost of revenue) Imagine going public with a 150% year over year growth. Like it or not, Facebook had a business model. A global business that could scale massively with a relatively small operational footprint. We know now at what cost and the moral implications, but the business was there. No DoorDash or shit has the numbers to pull a "Facebook". https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm#toc287954_11 https://www.sec.gov/Archives/edgar/data/1326801/000119312512...
- adventured 6y ago
  To add to the absurdity of claiming Facebook IPO'd without a business model, here are the financials surrounding their IPO (which was May 2012): 2009 | $777m sales | $229m net income 2010 | $1.97b sales | $606m net income 2011 | $3.71b sales | $1b net income 2012 | $5.09b sales | $32m net income 2013 | $7.87b sales | $1.49b net income A billion in profit the year before IPO, supposedly without a business model. Uber should have considered not having a business model. Here is what FB's business model was in 2012: ring the advertising cash register all day and night.

by netcan 6y ago

Hokusai 6y ago

> The thing is, it works sometimes. Yes. It does, like to buy a lottery ticket. It is not a good investment thou. > SoftBank really did go big on some very bad bets huh? This is usually a misconception on how betting works. Many people looks at the result and classifies a bet as good if won and bad if lost. The reality is that the best way of looking at bets is from their expected return. A good bet is one with a positive expected return. Sometimes you will lose the bet and lose the money, but that does not mean that it was a bad bet if the expected result was positive. If I bet you 100$ against 5$ that you get heads on a coin toss. That is a good bet for you. If you toss the coin and lose the 5$ that was still a good bet and you should take it again if you have the opportunity. Were Facebook, Uber, Amazon,... good bets? It’s hard to say. What seems easy to see is if they turned into a profit or a lose.

lotsofpulp 6y ago
Facebook, Uber, and Amazon are not comparable at all to WeWork, Oyo, or some others. If you thought some 22 year old with no hotel management experience was within a few years going to rival Hilton and Marriott and come up with the in house policies, procedures, and build up the staff required to go around the world and perform constant quality control, then I have a bridge to sell you. Same thing with WeWork, there's no moat there.
- gowld 6y ago
  Wait are you talking about WeWork or AirBnB?
  - 9nGQluzmnq3M 6y ago
    Neither, they're referring to Oyo, which is also a Softbank-funded bubble undergoing a WeWorkian implosion. https://www.profgalloway.com/oyomfg https://www.profgalloway.com/oyomfg
autokad 6y ago
when you invest in a series of companies knowing some will fail but the ones that dont will hit it big, and thus make money on average, that is not gambling or anything like buying lottery tickets. Think of it like a machine learning ensemble model. when you take a group of things, hopefully not correlated, you end up with a better result. when you average lottery tickets, you still lose.
- Hokusai 6y ago
  > that is not gambling or anything like buying lottery tickets That is literally gambling. That is what gambling experts do to get money. A very good example: https://thehustle.co/the-man-who-won-the-lottery-14-times https://thehustle.co/the-man-who-won-the-lottery-14-times Gambling is not about good or bad luck, it is about statistics. That is why the casinos are gambling all the time but get good profits. Casinos understand statistics and balance the bets on their side. And, as in your example, casinos lose many bets, it is in average that they make money. So, your example is completely correct, but it applies to all types of gambling.

deleted 6y ago

[deleted]

snowwrestler 6y ago

Just want to make a correction here: Amazon was definitely not losing money on every sale. I think what you're thinking of is that the company rarely reported a profit. But that was because they carefully managed their finances so that all the money they made was redirected back into growth, either through capital improvements, hiring, lowering prices, etc. before it was reported as profit. Amazon maintained a boot-strapping mindset long after going public. In contrast, some gig economy companies are losing money on every sale; they generate no new capital of their own and their growth is financed entirely by external sources of capital.

bsder 6y ago
> Just want to make a correction here: Amazon was definitely not losing money on every sale. Correct. Amazon is in the other category of unicorn--ignore those pesky laws that limit our competitors. Amazon gained 5-8% on every sale because they didn't collect sales tax for a VERY long time. This drove my local booksellers crazy, and probably put them out of business. Yes, I'm still mad about that. Amazon should have been fined billions for those infractions. But it is just another example of "Do that illegal thing that's profitable. We likely won't get fined enough for it to be a problem."
- jasonpeacock 6y ago
  No online seller was/is collecting sales tax, except for their own state. I've always paid sales tax on my Amazon purchases here in Washington.
- autokad 6y ago
  > "Amazon should have been fined billions for those infractions." They were not infractions, that was the tax code. Governments (whether you like it or not) decided that in order for these markets to grow, they need to forgo taxes on them for a while until they reach critical mass. They weren't skirting the law, so you can't 'fine' Amazon (or any online retailer) for that.
  - gowld 6y ago

jkqwzsoo 6y ago

> Softbank really did go big on some very bad bets huh? There's another clichéd saying: There are no bad assets, only bad prices. Translated to betting: There are no bad bets, only bad odds.

netcan 6y ago
Funny you replied with those two. I've worked in both finance and casinos.
gowld 6y ago
There are no bad horses, only bad odds. A bet is a horse and its odds and your stake. But even that is false. If you never win, you picked bad horses.

whoisjuan 6y ago

"Facebook IPOed without a business model." That's a fallacy. If you read Facebook's S-1, the business model is there. Their ad platform could have not been great technologically speaking but it was a hardcore money machine that set FB in a clear trajectory to full operational profitability. Their user numbers where fantastic, so they had a perfect virtuous circle. They had an accelerated revenue growth and their ad-depending revenue ratio was improving (as well as their cost of revenue) Imagine going public with a 150% year over year growth. Like it or not, Facebook had a business model. A global business that could scale massively with a relatively small operational footprint. We know now at what cost and the moral implications, but the business was there. No DoorDash or shit has the numbers to pull a "Facebook". https://www.sec.gov/Archives/edgar/data/1326801/000119312512034517/d287954ds1.htm#toc287954_11 https://www.sec.gov/Archives/edgar/data/1326801/000119312512...

adventured 6y ago
To add to the absurdity of claiming Facebook IPO'd without a business model, here are the financials surrounding their IPO (which was May 2012): 2009 | $777m sales | $229m net income 2010 | $1.97b sales | $606m net income 2011 | $3.71b sales | $1b net income 2012 | $5.09b sales | $32m net income 2013 | $7.87b sales | $1.49b net income A billion in profit the year before IPO, supposedly without a business model. Uber should have considered not having a business model. Here is what FB's business model was in 2012: ring the advertising cash register all day and night.