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> I honestly don’t understand SoftBank’s business model and how it expects to generate great returns. Simple: lose money hand-over-fist, forcing your competito

> I honestly don’t understand SoftBank’s business model and how it expects to generate great returns. Simple: lose money hand-over-fist, forcing your competitors to do the same. Continue this until they've all bled to death. Then declare a monopoly, jack up prices, and make back what you've lost. This is the optimal strategy if you have more capital than your opponents. It is quite effective.

deleted 6y ago
[deleted]
josu 6y ago
It sure works for sectors with a high entry cost. It doesn't work so well when entry barriers are almost non-existent.
itsoktocry 6y ago
>Then declare a monopoly, jack up prices, and make back what you've lost. I often see people posting some variation of this theory. Can anyone point to real-life example of this happening? Where competitors were driven out of business only to have the perpetrator "jack up prices"? I'm not a believer that the market is perfect, but I have more faith in it than that. From my view, it looks like most companies who attempt this strategy end up going out of business themselves.
- otoburb 6y ago
  Mylan and epinephrene in the US comes to mind as the most egregious[1]. The reason we don't see as many clear examples is because, as you noted, reputational effects will usually influence market leaders to try to generate more profit without catching the ire of powerful anti-competitive bodies. In Canada, our band of oligopolies is well known (telecoms and banks primarily)[2], and past and future attempts[3] are difficult to implment due to our low population density[4]. [1] https://www.goodrx.com/blog/epipen-price-change-since-mylan-released-generic-epinephrine/ https://www.goodrx.com/blog/epipen-price-change-since-mylan-... [2] https://this.org/2018/11/30/canada-has-an-oligopoly-problem-and-we-need-to-fix-it/ https://this.org/2018/11/30/canada-has-an-oligopoly-problem-... [3] https://financialpost.com/opinion/the-crtcs-proposals-for-wireless-competition-will-hurt-the-sector-not-help-it https://financialpost.com/opinion/the-crtcs-proposals-for-wi... [4] https://www.statista.com/statistics/271206/population-density-in-canada/ https://www.statista.com/statistics/271206/population-densit...
  - pg_bot 6y ago
    In the case of Mylan the problem is not the drug which is unbelievably cheap, but the medical device surrounding the drug. (the autoinjector) Mylan has patents on the design of the epipen that don't expire until 2025. Other devices such as the auvi-q were taken off the market due to inconsistent dosages being administered.
- daniel-cussen 6y ago
  Yes. Standard Oil in the 19th century, it drove out the competition with low margins (but still a bit of profit) then, after John D. Rockefeller left the presidency of the company to John D. Archbold in 1896, Standard Oil jacked up prices and made its real monopoly rents.
- wpietri 6y ago
  Well, there's working and then there's working. Neither WeWork nor Uber has ever turned a profit. But their CEOs both got wildly rich selling this dream. And along the way they definitely crushed a lot of competition both potential and actual.
- voodootrucker 6y ago
  Walmart destroyed smaller shops doing this all over the US for decades. https://ilsr.org/walmart-charged-predatory-pricing/ https://ilsr.org/walmart-charged-predatory-pricing/
- mschuster91 6y ago
  > Can anyone point to real-life example of this happening? Where competitors were driven out of business only to have the perpetrator "jack up prices"? Facebook. They drowned out everyone else in wide parts of the world: Myspace is dead, German "Lokalisten" and "SchülerVZ/StudiVZ" are dead, even Google Plus is dead, vKontakte is only Russians and a couple of Western conspiracy nuts, and no idea what China is doing. And now, they (and Twitter, which serves another niche than Facebook) together are raking in almost all of social network ad spending
- mrisoli 6y ago
  I've seen it happen at varying levels: Carrefour supermarket opened in my block next to a decades old famously local bakery/grocery store and undercut their prices by more than half, with a focus on infrastructure, quality and service, bakery went out of business, one year later all the prices in the supermarket were way up, staff was cut and service went terrible afterwards. There's a huge war on this with tons of delivery apps/ride sharing as well, in different corners of the world, Uber tried to burn cash to get ahead of taxis with coupons and discounts in several markets, it won in some, but lost big in China(Didi), India(Ola), and Indonesia(Grab). Another major example was the "Brazilian airbridge", the flights between SDU - CGH airports, when a growing company tried entering that market, three airlines bundled their offerings together to set prices and coordinate flight times, which priced their competitor out of the route, eventually getting them bankrupt.
- MaysonL 6y ago
  Remember diapers.com?
- bigodbiel 6y ago
  It's called dumping, and has a long enough history that many countries have anti-dumping policies
notahacker 6y ago
They've a habit of picking the worst possible markets to do it in though. Logistics operations like Amazon and SaaS have significant lockin, as well as significant economies of scale so your capital isn't doing all the work to undercut the competition. Ride hailing and dog walking apps and spare seats in offices not so much...

deleted 6y ago

[deleted]

josu 6y ago

It sure works for sectors with a high entry cost. It doesn't work so well when entry barriers are almost non-existent.

itsoktocry 6y ago

>Then declare a monopoly, jack up prices, and make back what you've lost. I often see people posting some variation of this theory. Can anyone point to real-life example of this happening? Where competitors were driven out of business only to have the perpetrator "jack up prices"? I'm not a believer that the market is perfect, but I have more faith in it than that. From my view, it looks like most companies who attempt this strategy end up going out of business themselves.

otoburb 6y ago
Mylan and epinephrene in the US comes to mind as the most egregious[1]. The reason we don't see as many clear examples is because, as you noted, reputational effects will usually influence market leaders to try to generate more profit without catching the ire of powerful anti-competitive bodies. In Canada, our band of oligopolies is well known (telecoms and banks primarily)[2], and past and future attempts[3] are difficult to implment due to our low population density[4]. [1] https://www.goodrx.com/blog/epipen-price-change-since-mylan-released-generic-epinephrine/ https://www.goodrx.com/blog/epipen-price-change-since-mylan-... [2] https://this.org/2018/11/30/canada-has-an-oligopoly-problem-and-we-need-to-fix-it/ https://this.org/2018/11/30/canada-has-an-oligopoly-problem-... [3] https://financialpost.com/opinion/the-crtcs-proposals-for-wireless-competition-will-hurt-the-sector-not-help-it https://financialpost.com/opinion/the-crtcs-proposals-for-wi... [4] https://www.statista.com/statistics/271206/population-density-in-canada/ https://www.statista.com/statistics/271206/population-densit...
- pg_bot 6y ago
  In the case of Mylan the problem is not the drug which is unbelievably cheap, but the medical device surrounding the drug. (the autoinjector) Mylan has patents on the design of the epipen that don't expire until 2025. Other devices such as the auvi-q were taken off the market due to inconsistent dosages being administered.
daniel-cussen 6y ago
Yes. Standard Oil in the 19th century, it drove out the competition with low margins (but still a bit of profit) then, after John D. Rockefeller left the presidency of the company to John D. Archbold in 1896, Standard Oil jacked up prices and made its real monopoly rents.
wpietri 6y ago
Well, there's working and then there's working. Neither WeWork nor Uber has ever turned a profit. But their CEOs both got wildly rich selling this dream. And along the way they definitely crushed a lot of competition both potential and actual.
voodootrucker 6y ago
Walmart destroyed smaller shops doing this all over the US for decades. https://ilsr.org/walmart-charged-predatory-pricing/ https://ilsr.org/walmart-charged-predatory-pricing/
mschuster91 6y ago
> Can anyone point to real-life example of this happening? Where competitors were driven out of business only to have the perpetrator "jack up prices"? Facebook. They drowned out everyone else in wide parts of the world: Myspace is dead, German "Lokalisten" and "SchülerVZ/StudiVZ" are dead, even Google Plus is dead, vKontakte is only Russians and a couple of Western conspiracy nuts, and no idea what China is doing. And now, they (and Twitter, which serves another niche than Facebook) together are raking in almost all of social network ad spending
mrisoli 6y ago
I've seen it happen at varying levels: Carrefour supermarket opened in my block next to a decades old famously local bakery/grocery store and undercut their prices by more than half, with a focus on infrastructure, quality and service, bakery went out of business, one year later all the prices in the supermarket were way up, staff was cut and service went terrible afterwards. There's a huge war on this with tons of delivery apps/ride sharing as well, in different corners of the world, Uber tried to burn cash to get ahead of taxis with coupons and discounts in several markets, it won in some, but lost big in China(Didi), India(Ola), and Indonesia(Grab). Another major example was the "Brazilian airbridge", the flights between SDU - CGH airports, when a growing company tried entering that market, three airlines bundled their offerings together to set prices and coordinate flight times, which priced their competitor out of the route, eventually getting them bankrupt.
MaysonL 6y ago
Remember diapers.com?
bigodbiel 6y ago
It's called dumping, and has a long enough history that many countries have anti-dumping policies

notahacker 6y ago

They've a habit of picking the worst possible markets to do it in though. Logistics operations like Amazon and SaaS have significant lockin, as well as significant economies of scale so your capital isn't doing all the work to undercut the competition. Ride hailing and dog walking apps and spare seats in offices not so much...