5 ms·

That could work. Market forces will play it out, investors will get burned and be more hesitant to pour more gasoline on the fire. The business model as it stan

That could work. Market forces will play it out, investors will get burned and be more hesitant to pour more gasoline on the fire. The business model as it stands appears to not work long term (maybe). What company has had long term success with this model (operate at massive losses until no competition left)? But short term the investors have been dumping their money directly into consumers' pockets via cheap uber rides or uber eats subsidized by VC so whats not to love?

jonfw 5y ago
Amazon, Uber, and Tesla have done pretty well by a similar model. They went a long time and spent a LOT of money before they turned reliable profits
- lostcolony 5y ago
  Umm, is Uber profitable? Amazon is (and even in the past, was basically at a rounding error to zero on margin, since they were plowing so much money into R&D), and Tesla has had the past couple quarters be profitable (though amusingly more on bets on Bitcoin than actual car sales), both essentially creating a new market, and while not actually undercutting the competition. But I thought Uber was 'expecting' to be profitable by the end of the year? While basically making it so cab companies have a hard time competing, since they, you know, obey the rules (albeit ones they created to, themselves, maintain a monopoly), and have to turn a profit.
  - bee_rider 5y ago
    You misunderstand. Uber plans to be profitable within a year... but didn't say which year they'll be profitable within.
  - nickik 5y ago
    > Tesla has had the past couple quarters be profitable They have been profitable for almost 1.5 years. > (though amusingly more on bets on Bitcoin than actual car sales) That is simply false.
    - lostcolony 5y ago
      Yeah, I wasn't commenting on how long Tesla has been profitable, just that currently they are. But it's been due to emission offsets and bitcoin. And given they don't make a profit on their cars...they've made more from bitcoin than on car sales. https://www.autoweek.com/news/green-cars/a36266393/tesla-made-more-money-selling-credits-and-bitcoin-than-cars/ https://www.autoweek.com/news/green-cars/a36266393/tesla-mad... https://www.motorbiscuit.com/tesla-loses-money-on-every-single-car-heres-where-the-profit-hides/ https://www.motorbiscuit.com/tesla-loses-money-on-every-sing...
      - nickik 5y ago
        Why are people so obsessed with picking some parts Tesla revenue and claim that what makes it profitable. What makes them profitable is all the ways that make revenue and all the ways they spend money. Bitcoin was relevant for 1 Quarter. And trading in fuel credits has been a thing in the automotive industry for decades and are simply a normal part of the business. You might as well point to specific spending and say 'they are only not more profitable because of XY'. They have a ~20% unit margin excluding credits so clearly they are making a massive amount of money selling cars. If they weren't selling credits they would likely spend differently and still show moderate profitability. Their goal is not maximum profitability but maximum growth while showing consistent profitability.
        maverick-iceman 5y ago
        > Why are people so obsessed with picking some parts Tesla revenue Because people (for the most part) aren't fools, especially on here. People see a 600B dollar company and expect it to feel its presence in their lives each and every day. They expect to use the thing, or their employer to use the thing or their supplier to use the thing on a daily basis like it happens with Exxon, Amazon, Microsoft, Google, Facebook, Netflix, Salesforce, Oracle, IBM... They all earned their significance by touching so many lives and making people lives a tad better and less complicated for their users, and the rise to riches of their founders has happened in lockstep or almost lockstep with the changes and the improvement they were making in people's lives. With Tesla you have a 600B company and Porsches (which are a rarity on their own) are still more common then them on our roads. People are suspicious about unjustifed enrichment, always been, always will be. "What have you done for me to deserve that amount of money? What have you done for society to deserve that amount of money?" Such question will always come up. Musk has been able to answer to such question up to now with: 1) "Give me time!" and 2) "Wait, neat things are a-comin" as well as 3) "Population wide morale boost given by the prospect of amazing future is the real product" People are more and more asking questions though, and he keeps answering with postponements and future deadlines, while Teslas are still less common than Porsches
- ch4s3 5y ago
  Well, Amazon could have taken profits earlier but was investing back into the business instead, so I'd argue its quite different. Tesla makes cars with relatively new tech, which has super high fixed costs in an industry littered with high profile failures. Uber is maybe the canonical example of what's being discussed.
  - treis 5y ago
    >Well, Amazon could have taken profits earlier but was investing back into the business instead, so I'd argue its quite different. Their free cash flow didn't really take off until AWS came along. A couple billion a year vs 100 billion in profit for Walmart. They were definitely trading cash for market share. The only reason to do that is if they can later use that market share to make even more cash.
andrekandre 5y ago
investors will get burned and be more hesitant to pour more gasoline on the fire that defintely makes sense, but from what i hear we are in a glut of cheap capital in recent times, so this might not be so effective deterrent What company has had long term success with this model im not sure it needs to be long term sustained, as long as short term damage is severe enough, the player can just harvest the market share from the competition... when it heats back up again, just use that financial might again to clamp things down... it would be a huge deterrent to further investors/entrepreneurs
- stavros 5y ago
  What does "cheap capital" mean? $1 is worth $1, how can it be cheap or expensive in terms of itself?
  - Shikadi 5y ago
    Interest rates are zero
  - deleted 5y ago
    [deleted]
bogwog 5y ago
> Market forces will play it out The problem with anti-competitive practices is that they're immune to market forces.
- dragonwriter 5y ago
  > The problem with anti-competitive practices is that they're immune to market forces. No, they aren't, in general. They are self-limiting, though, where the actor isn't insulated from idealized market forces by market position. In that case, they are incentivized by the same real market forces which protect them.

jonfw 5y ago

Amazon, Uber, and Tesla have done pretty well by a similar model. They went a long time and spent a LOT of money before they turned reliable profits

lostcolony 5y ago
Umm, is Uber profitable? Amazon is (and even in the past, was basically at a rounding error to zero on margin, since they were plowing so much money into R&D), and Tesla has had the past couple quarters be profitable (though amusingly more on bets on Bitcoin than actual car sales), both essentially creating a new market, and while not actually undercutting the competition. But I thought Uber was 'expecting' to be profitable by the end of the year? While basically making it so cab companies have a hard time competing, since they, you know, obey the rules (albeit ones they created to, themselves, maintain a monopoly), and have to turn a profit.
- bee_rider 5y ago
  You misunderstand. Uber plans to be profitable within a year... but didn't say which year they'll be profitable within.
- nickik 5y ago
  > Tesla has had the past couple quarters be profitable They have been profitable for almost 1.5 years. > (though amusingly more on bets on Bitcoin than actual car sales) That is simply false.
  - lostcolony 5y ago
    Yeah, I wasn't commenting on how long Tesla has been profitable, just that currently they are. But it's been due to emission offsets and bitcoin. And given they don't make a profit on their cars...they've made more from bitcoin than on car sales. https://www.autoweek.com/news/green-cars/a36266393/tesla-made-more-money-selling-credits-and-bitcoin-than-cars/ https://www.autoweek.com/news/green-cars/a36266393/tesla-mad... https://www.motorbiscuit.com/tesla-loses-money-on-every-single-car-heres-where-the-profit-hides/ https://www.motorbiscuit.com/tesla-loses-money-on-every-sing...
    - nickik 5y ago
      Why are people so obsessed with picking some parts Tesla revenue and claim that what makes it profitable. What makes them profitable is all the ways that make revenue and all the ways they spend money. Bitcoin was relevant for 1 Quarter. And trading in fuel credits has been a thing in the automotive industry for decades and are simply a normal part of the business. You might as well point to specific spending and say 'they are only not more profitable because of XY'. They have a ~20% unit margin excluding credits so clearly they are making a massive amount of money selling cars. If they weren't selling credits they would likely spend differently and still show moderate profitability. Their goal is not maximum profitability but maximum growth while showing consistent profitability.
      - maverick-iceman 5y ago
        > Why are people so obsessed with picking some parts Tesla revenue Because people (for the most part) aren't fools, especially on here. People see a 600B dollar company and expect it to feel its presence in their lives each and every day. They expect to use the thing, or their employer to use the thing or their supplier to use the thing on a daily basis like it happens with Exxon, Amazon, Microsoft, Google, Facebook, Netflix, Salesforce, Oracle, IBM... They all earned their significance by touching so many lives and making people lives a tad better and less complicated for their users, and the rise to riches of their founders has happened in lockstep or almost lockstep with the changes and the improvement they were making in people's lives. With Tesla you have a 600B company and Porsches (which are a rarity on their own) are still more common then them on our roads. People are suspicious about unjustifed enrichment, always been, always will be. "What have you done for me to deserve that amount of money? What have you done for society to deserve that amount of money?" Such question will always come up. Musk has been able to answer to such question up to now with: 1) "Give me time!" and 2) "Wait, neat things are a-comin" as well as 3) "Population wide morale boost given by the prospect of amazing future is the real product" People are more and more asking questions though, and he keeps answering with postponements and future deadlines, while Teslas are still less common than Porsches
ch4s3 5y ago
Well, Amazon could have taken profits earlier but was investing back into the business instead, so I'd argue its quite different. Tesla makes cars with relatively new tech, which has super high fixed costs in an industry littered with high profile failures. Uber is maybe the canonical example of what's being discussed.
- treis 5y ago
  >Well, Amazon could have taken profits earlier but was investing back into the business instead, so I'd argue its quite different. Their free cash flow didn't really take off until AWS came along. A couple billion a year vs 100 billion in profit for Walmart. They were definitely trading cash for market share. The only reason to do that is if they can later use that market share to make even more cash.

andrekandre 5y ago

investors will get burned and be more hesitant to pour more gasoline on the fire that defintely makes sense, but from what i hear we are in a glut of cheap capital in recent times, so this might not be so effective deterrent What company has had long term success with this model im not sure it needs to be long term sustained, as long as short term damage is severe enough, the player can just harvest the market share from the competition... when it heats back up again, just use that financial might again to clamp things down... it would be a huge deterrent to further investors/entrepreneurs

stavros 5y ago
What does "cheap capital" mean? $1 is worth $1, how can it be cheap or expensive in terms of itself?
- Shikadi 5y ago
  Interest rates are zero
- deleted 5y ago
  [deleted]

bogwog 5y ago

> Market forces will play it out The problem with anti-competitive practices is that they're immune to market forces.

dragonwriter 5y ago
> The problem with anti-competitive practices is that they're immune to market forces. No, they aren't, in general. They are self-limiting, though, where the actor isn't insulated from idealized market forces by market position. In that case, they are incentivized by the same real market forces which protect them.