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I loved this indictment of Movie Pass (or WeWork) style companies: > "There are other business models. For instance you could make a product that people kind o

I loved this indictment of Movie Pass (or WeWork) style companies: > "There are other business models. For instance you could make a product that people kind of want, or that they would want if it were affordable. Then you convince people to buy it by selling it for much less than it costs you to make it, or by paying them to buy it. If you do this well, you will have high revenue and rapid revenue growth, because lots of people are buying your product. You will not, however, get rich, because you’ll be spending more money making the product than you get from your customers. Your revenue will be high but your net income will be negative; it will cost you money to run this business. > But then you will go to investors, and you will say “look, I have a company with rapidly growing revenue, that’s worth something, you should pay me for a share of my company.” And they will agree—“we love rapid revenue growth,” they will say—and you will sell stock in the company for hundreds of millions of dollars. And then it will cost them money to run the business, and you will be rich. There are various possible endgames; in some of them you go to prison but in quite a lot of them you just stay rich and become an elder statesman admired for your business acumen." The later part about the Chinese coffee company fraud also getting caught by motivated short sellers was also great: > "The thing about inflating your revenue by pretending that you sold more coffee than you did is that people can go to your stores and watch you sell coffee. It is a reasonable bet that they won’t do that, because it’s incredibly boring. “Who is going to send 1,500 people to our stores to watch us sell coffee all day, count how much we sell and compare it to our financial statements,” Luckin could reasonably have thought. 1 But the answer was “short sellers”! They actually hired people to sit around watching the coffee get made, so they caught the fraud." Matt Levine is a good writer (often funny too) - I'm impressed he can continually write up these high quality newsletters almost every day. Between this, Stratechery, and Preet's podcast I find it really hard to actually read all of this. How do other people do this? It's hard to really have the time for even just one newsletter or podcast (at least with the podcasts you used to be able to listen in the car, back when we still drove places).

echelon 6y ago
> But the answer was “short sellers”! They actually hired people to sit around watching the coffee get made, so they caught the fraud." Is it legal to report negatively on a company you're short selling? Wouldn't that count as market manipulation, even if your reports are true? Or will simply disclosing that you have a position while simultaneously disclosing the information make it safe and legal?
- wrsh07 6y ago
  Not if your report is true Matt Levine has talked about this, too Edit: got distracted but here's his link: https://www.bloomberg.com/opinion/articles/2018-02-09/can-noisy-shorts-be-secret https://www.bloomberg.com/opinion/articles/2018-02-09/can-no... Also, I hate amp Here's the relevant bit: > "Wait," people ask, "how is it not manipulation to short a stock and then publicly announce that the stock is bad?" I am always confused by this complaint. Just flip it around: It's not manipulation, surely, to own a stock and then publicly announce that the stock is good. That's like half of financial television. It is also a big chunk of what corporate chief executive officers -- who all own their companies' stocks -- do. It's fine to short a stock and trash the company, or buy a stock and praise the company -- as long as, in each case, you're telling the truth.
  - gottareply2020 6y ago
    "It is also a big chunk of what corporate chief executive officers ... do". This is a small example of how most of Mr. Levine's writing is reductive to the point of being crude. Executives are allowed to advocate for their companies. But only with information that has already been publicly disclosed. Don't believe me? How did the SEC feel about Elon Musk tweeting non-public information about his public company? Mr. Levine is correct that this action by short sellers is legal. But that part of his analogy is wrong. He could have ended the analogy with "That's like half of financial television." However he chose to add on a point that is not applicable to the situation. For a long time I enjoyed Mr. Levine's writings. Until I started to read his opinions on topics in which I have domain knowledge. At which point I realized his writing lack nuance and offers analogies that feel cut & dry but are anything but. I realize this is true of many opinion writers. But Mr. Levine enjoys a great deal of notoriety for opinions that lack sophistication & rigor.
    - wrsh07 6y ago
      > How did the SEC feel about Elon Musk tweeting non-public information about his public company While executives are encouraged to report market moving public information in a standard format, that's not why the SEC took issue with his tweets His tweets about taking Tesla private at some valuation above its current stock price were completely false (eg "funding confirmed") Once again, the requirement of truth rears its head
gowld 6y ago
If you read Levine for a while, you start to notice that he uses a lot of words to express short ideas (which is fine, it's "spinning a yarn") and that he says the same things over and over again (because the financial crimes and skulduggery he writes about keep happening over and over.)
- fossuser 6y ago
  Thanks - I guess at that point there's a diminishing return and you've learned most of the ideas. I'm still new to it so I feel like I'm learning a lot.
  - snazz 6y ago
    It's still good writing in the sense that it's interesting and engaging even as someone with relatively limited interest in the topic.
- L_Rahman 6y ago
  His challenge is that he has to write about bond market liquidity as both an inside joke for the regular audience and as something comprehensible to a first time reader. I do enjoy the compromise he's found.
- robocat 6y ago
  The first part covered a bunch of stuff I hadn’t read from him before. Sure he has some themes he keeps returning to (everything is securities fraud), but he keeps that fresh with new examples and different takes.
JoeSmithson 6y ago
> "They actually hired people to sit around watching the coffee get made, so they caught the fraud." There's (was at least, not sure if it's still going) an undercover unit in HMRC (the UK IRS) who's job it was to go to pubs and make sure they aren't under reporting sales by counting how many pints they sold. Of course to blend in they had to spend the whole day on the piss. A popular team.
- londons_explore 6y ago
  I'm going to guess this is one of those mostly-mythical enforcement tactics. You do it once to one pub, and then talk about it loudly in pub industry magazines because you don't have the resources to sit in every pub every day just to check a few pints of beer tax don't go unpaid.
  - akiselev 6y ago
    It's not, at least not in the US. The '97 Congressional investigation on IRS abuse dug up a few cases where IRSA agents used this method as an excuse to get piss faced at bars or free vacations at casinos.
alexbanks 6y ago
> in some of them you go to prison but in quite a lot of them you just stay rich and become an elder statesman admired for your business acumen." Would you take a diceroll where 1/10 outcomes you go to minimum security prison for 2 years, and 9/10 of outcomes you become rich for the rest of your life?
- bittercynic 6y ago
  If it was that simple, I would, but the price of the gamble is that you commit fraud, or something awfully close to it, and real people are getting hurt in the wake of this.
  - WrtCdEvrydy 6y ago
    But you can't see the poors you screwed out of the money in your fraud from your new yacht!
  - alexbanks 6y ago
    I wish this level of morality existed more often, but I suspect lots of people would take the "Screw everyone; get rich maybe" route.
2sk21 6y ago
I'm running out of time - and I just signed up for Dithering which I think is well worth the money :-)
- fossuser 6y ago
  Yeah me too, moving from standard publishing to really high quality independent publishers is a huge improvement. I hope most of news media trends this direction. The brands of even famous papers like the NYT don't mean much to me when they also publish a lot of bad content. I want to follow and support individual writers like Li Yuan (https://twitter.com/LiYuan6 https://twitter.com/LiYuan6, who wrote this: https://www.nytimes.com/2020/05/27/business/china-coronavirus-amnesia.html https://www.nytimes.com/2020/05/27/business/china-coronaviru...). I'm happy to pay these individuals for the work they do, but I don't want to pay for a paper that has some quality writers among a bunch of garbage inside of a primarily ad-driven business model. Vox publishes a lot of great stuff, but they also publish Kara Swisher and terrible articles like that handshake one about Covid-19. I don't want to support the bad along with the good. Let me pay individual people like Steven Levy directly - I want writers to become their own independent publishers. I'm happy some are already doing this, but I think there's an opportunity for someone to solve the discovery problem here and make it better. A long time ago individual videogame developers were famous, but at some point the effort required to make a modern "AAA" game scaled up over the abilities for an individual to be able to do it themselves. For writing the opposite happened with the internet, and costs to publish cratered. Since cost to publish and distribute isn't really a constraint anymore, individuals should own their own brand and publish themselves under their own reputation. Ben Thompson, Sam Harris, and Preet Bharara are all doing this. There should be more. Even in games (where the constraint still exists) we still have successful indies. We can probably help, not by making yet another centralized Medium type of site that obscures the writer's name and reputation to own their traffic, but by making it easy for writer's to spin up their own entirely owned publishing site (host, domain, mailing list, etc.) The barrier to entry to do this without giving up your ownership is too high - non-technical writers are not going to use github pages or configure some DNS CNAME. That said, the quality of the first few people that have figured out how to do this well makes me optimistic for this kind of future.
m4rtink 6y ago
Lying about the true costs was how japanese animation (anime) got started - Osamu Tezuka flat out lied about how it all costs as his investors would never give him money for the real cost. That cost then kinda got normalized and expected and to this day animators in Japan are not paid very well considering the high costs of living, especially given that they usually have to work in the very expensive city center. Yet manny still do it out of passion.
- londons_explore 6y ago
  Animation shop in the city center seems like a silly idea, especially if costs have to be tightly controlled to keep the business viable...
Jommi 6y ago
I think everyone is missing a key possible outcome here (regarding the startup business model). Tantalising users for a services via cheap prices can actually mean users change their behaviour and preferences. This can then mean that when prices are increased, the changed preferences will affect how users perceive the value for the service. Suddenly they might be willing to buy it at the higher price.
- fossuser 6y ago
  I’m not sure it’s being missed - that’s the explanation used by both good companies and stupid companies to raise the money. The problem is some VCs can’t tell the difference.
  - Jommi 6y ago
    It feels like it's being missed to me. It rarely gets mentioned as a possible outcome. Usually in media the writing just seems to echo something like "stupid startup thinks reducing prices will help grow a sustainable business", when it's a lot more complex than that.

echelon 6y ago

> But the answer was “short sellers”! They actually hired people to sit around watching the coffee get made, so they caught the fraud." Is it legal to report negatively on a company you're short selling? Wouldn't that count as market manipulation, even if your reports are true? Or will simply disclosing that you have a position while simultaneously disclosing the information make it safe and legal?

wrsh07 6y ago
Not if your report is true Matt Levine has talked about this, too Edit: got distracted but here's his link: https://www.bloomberg.com/opinion/articles/2018-02-09/can-noisy-shorts-be-secret https://www.bloomberg.com/opinion/articles/2018-02-09/can-no... Also, I hate amp Here's the relevant bit: > "Wait," people ask, "how is it not manipulation to short a stock and then publicly announce that the stock is bad?" I am always confused by this complaint. Just flip it around: It's not manipulation, surely, to own a stock and then publicly announce that the stock is good. That's like half of financial television. It is also a big chunk of what corporate chief executive officers -- who all own their companies' stocks -- do. It's fine to short a stock and trash the company, or buy a stock and praise the company -- as long as, in each case, you're telling the truth.
- gottareply2020 6y ago
  "It is also a big chunk of what corporate chief executive officers ... do". This is a small example of how most of Mr. Levine's writing is reductive to the point of being crude. Executives are allowed to advocate for their companies. But only with information that has already been publicly disclosed. Don't believe me? How did the SEC feel about Elon Musk tweeting non-public information about his public company? Mr. Levine is correct that this action by short sellers is legal. But that part of his analogy is wrong. He could have ended the analogy with "That's like half of financial television." However he chose to add on a point that is not applicable to the situation. For a long time I enjoyed Mr. Levine's writings. Until I started to read his opinions on topics in which I have domain knowledge. At which point I realized his writing lack nuance and offers analogies that feel cut & dry but are anything but. I realize this is true of many opinion writers. But Mr. Levine enjoys a great deal of notoriety for opinions that lack sophistication & rigor.
  - wrsh07 6y ago
    > How did the SEC feel about Elon Musk tweeting non-public information about his public company While executives are encouraged to report market moving public information in a standard format, that's not why the SEC took issue with his tweets His tweets about taking Tesla private at some valuation above its current stock price were completely false (eg "funding confirmed") Once again, the requirement of truth rears its head

gowld 6y ago

If you read Levine for a while, you start to notice that he uses a lot of words to express short ideas (which is fine, it's "spinning a yarn") and that he says the same things over and over again (because the financial crimes and skulduggery he writes about keep happening over and over.)

fossuser 6y ago
Thanks - I guess at that point there's a diminishing return and you've learned most of the ideas. I'm still new to it so I feel like I'm learning a lot.
- snazz 6y ago
  It's still good writing in the sense that it's interesting and engaging even as someone with relatively limited interest in the topic.
L_Rahman 6y ago
His challenge is that he has to write about bond market liquidity as both an inside joke for the regular audience and as something comprehensible to a first time reader. I do enjoy the compromise he's found.
robocat 6y ago
The first part covered a bunch of stuff I hadn’t read from him before. Sure he has some themes he keeps returning to (everything is securities fraud), but he keeps that fresh with new examples and different takes.

JoeSmithson 6y ago

> "They actually hired people to sit around watching the coffee get made, so they caught the fraud." There's (was at least, not sure if it's still going) an undercover unit in HMRC (the UK IRS) who's job it was to go to pubs and make sure they aren't under reporting sales by counting how many pints they sold. Of course to blend in they had to spend the whole day on the piss. A popular team.

londons_explore 6y ago
I'm going to guess this is one of those mostly-mythical enforcement tactics. You do it once to one pub, and then talk about it loudly in pub industry magazines because you don't have the resources to sit in every pub every day just to check a few pints of beer tax don't go unpaid.
- akiselev 6y ago
  It's not, at least not in the US. The '97 Congressional investigation on IRS abuse dug up a few cases where IRSA agents used this method as an excuse to get piss faced at bars or free vacations at casinos.

alexbanks 6y ago

> in some of them you go to prison but in quite a lot of them you just stay rich and become an elder statesman admired for your business acumen." Would you take a diceroll where 1/10 outcomes you go to minimum security prison for 2 years, and 9/10 of outcomes you become rich for the rest of your life?

bittercynic 6y ago
If it was that simple, I would, but the price of the gamble is that you commit fraud, or something awfully close to it, and real people are getting hurt in the wake of this.
- WrtCdEvrydy 6y ago
  But you can't see the poors you screwed out of the money in your fraud from your new yacht!
- alexbanks 6y ago
  I wish this level of morality existed more often, but I suspect lots of people would take the "Screw everyone; get rich maybe" route.

2sk21 6y ago

I'm running out of time - and I just signed up for Dithering which I think is well worth the money :-)

fossuser 6y ago
Yeah me too, moving from standard publishing to really high quality independent publishers is a huge improvement. I hope most of news media trends this direction. The brands of even famous papers like the NYT don't mean much to me when they also publish a lot of bad content. I want to follow and support individual writers like Li Yuan (https://twitter.com/LiYuan6 https://twitter.com/LiYuan6, who wrote this: https://www.nytimes.com/2020/05/27/business/china-coronavirus-amnesia.html https://www.nytimes.com/2020/05/27/business/china-coronaviru...). I'm happy to pay these individuals for the work they do, but I don't want to pay for a paper that has some quality writers among a bunch of garbage inside of a primarily ad-driven business model. Vox publishes a lot of great stuff, but they also publish Kara Swisher and terrible articles like that handshake one about Covid-19. I don't want to support the bad along with the good. Let me pay individual people like Steven Levy directly - I want writers to become their own independent publishers. I'm happy some are already doing this, but I think there's an opportunity for someone to solve the discovery problem here and make it better. A long time ago individual videogame developers were famous, but at some point the effort required to make a modern "AAA" game scaled up over the abilities for an individual to be able to do it themselves. For writing the opposite happened with the internet, and costs to publish cratered. Since cost to publish and distribute isn't really a constraint anymore, individuals should own their own brand and publish themselves under their own reputation. Ben Thompson, Sam Harris, and Preet Bharara are all doing this. There should be more. Even in games (where the constraint still exists) we still have successful indies. We can probably help, not by making yet another centralized Medium type of site that obscures the writer's name and reputation to own their traffic, but by making it easy for writer's to spin up their own entirely owned publishing site (host, domain, mailing list, etc.) The barrier to entry to do this without giving up your ownership is too high - non-technical writers are not going to use github pages or configure some DNS CNAME. That said, the quality of the first few people that have figured out how to do this well makes me optimistic for this kind of future.

m4rtink 6y ago

Lying about the true costs was how japanese animation (anime) got started - Osamu Tezuka flat out lied about how it all costs as his investors would never give him money for the real cost. That cost then kinda got normalized and expected and to this day animators in Japan are not paid very well considering the high costs of living, especially given that they usually have to work in the very expensive city center. Yet manny still do it out of passion.

londons_explore 6y ago
Animation shop in the city center seems like a silly idea, especially if costs have to be tightly controlled to keep the business viable...

Jommi 6y ago

I think everyone is missing a key possible outcome here (regarding the startup business model). Tantalising users for a services via cheap prices can actually mean users change their behaviour and preferences. This can then mean that when prices are increased, the changed preferences will affect how users perceive the value for the service. Suddenly they might be willing to buy it at the higher price.

fossuser 6y ago
I’m not sure it’s being missed - that’s the explanation used by both good companies and stupid companies to raise the money. The problem is some VCs can’t tell the difference.
- Jommi 6y ago
  It feels like it's being missed to me. It rarely gets mentioned as a possible outcome. Usually in media the writing just seems to echo something like "stupid startup thinks reducing prices will help grow a sustainable business", when it's a lot more complex than that.