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> Son’s strategy depended on writing such large checks—to the likes of WeWork, Uber Technologies, and DoorDash—that his portfolio companies would be able to ope

• franciscop 4y ago
  I've heard a saying (living in Tokyo and close to the Startup scene) that if you have a startup and Softbank comes in calling, you better take their investments or they'll bankroll your competition enough to put you out of business.
  • deleted 4y ago
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• throwaway_20357 4y ago
  What's the difference between this and Google offering YouTube or Analytics for free (and at a loss) for years? What's the difference to SaaS companies never turning a profit and operating at a loss for their whole life?
  • tedivm 4y ago
    Analytics is a special case because the metrics they got from it can be fed into their advertising system to better deliver ads. They may have run it "at a loss" but they did it for data that they certainly made a profit off of.
  • mikeryan 4y ago
    Google's a publicly traded company which is profitable in other areas. Search can carry the load financially while they achieve market dominance in other areas. This model is based on removing public market forces on a company while the company bleeds money in order to achieve dominance. W/R/T other SaaS companies doing the same, SaaS startups exit strategies include acquisition that D2C business don't really have. Who's going to be big enough or see enough value in buying Uber/WeWork/Doordash to augment their current offerings? Amazon can't buy them all at the peak of their valuation.
  • Vinnl 4y ago
    You could indeed make the same argument about those products, it seems to me? We might've had much better alternatives to those products if they hadn't.
    • retcore 4y ago
      German law forbade the "sale" or combined sale of any good at zero cost, even carrier bags until the turn of this century. Coincidentally or not, they have the Mittelstand high technology SME sector and, until the beginning of this century, a high wage low inequality economy.
      • zo1 4y ago
        But also have regulation that identifies businesses which have "arguably" predatory business models. Just because you don't charge money for something, doesn't mean you are offering something for free whilst at the same time operating on a investment type ponzi/pyramid-like scheme that relies on user numbers and ad-eyeballs increasing. As much as I'm an absolute free-market capitalist advocate, we need to all get it into our heads that it only works in an absolutely free market that isn't propped up in some areas by regulation. As soon as we start fiddling, we have to make sure we fiddle in the right spots, otherwise we're just solidifying and promoting an unhealthy/unfair/predatory market.
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  • TrackerFF 4y ago
    Predatory pricing is a very real component of monopolization, and can thus result in antitrust inquiries. Tech companies DO get involved in these lawsuits from time to time.
  • weberer 4y ago
    There is no difference. That should also be stopped. Though good luck with the millions Google spends on lobbyists according to Opensecrets.
• adamsmith143 4y ago
  >This right here is the root of the problem. It is so blatantly anti-competitive and cause extensive damage to society. It hurts small businesses, discourages innovation and quality, monopolizes the industry, increases consumer costs in the long runs, it entices investors to eschew fundamentals and gamble on hype. It's just no way to run a stable economy. We as a society need to find a stop to this or it can be disastrous in the long run. Surprised this is not more unpopular on HN. The entire YC model of startups is literally this, grow so big so fast you consume the entire market.
  • jacobr1 4y ago
    > grow so big so fast you consume the entire market That isn't the unpopular part. The derided part is doing so with poor unit-economics. You still need to make a profit or what is the point? Another big difference is that is very common to run at a loss early on in the life of startup ... but when examined more closely the marginal costs should still make sense. If you are small enough that R&D overhead, or hiring ahead of revenue (growth investment) is overshadowing the top-line ... well that is the just normal startup finances. But there still needs to be a business model where it will make sense with enough sales, and the cost will have sub-linear growth relative to the revenue.
    • adamsmith143 4y ago
      >Another big difference is that is very common to run at a loss early on in the life of startup How many Unicorns are actually making a profit? Hell how many Deca or Centi-Unicorns are profitable? There's probably hundreds of billions of value in companies that are not and don't have clear paths to profitability. So I think we've moved from it being ok to be unprofitable when you start a company to it being ok to be unprofitable for decades...
• cryptonector 4y ago
  > We as a society need to find a stop to this or it can be disastrous in the long run. We, as a society, just did that: by demonstrating that this business model doesn't work. You're welcome!
  • mym1990 4y ago
    No one has demonstrated anything. SoftBanks portfolio has taken a hit, but it is hardly a nail in the coffin. Son's actions have generated enormous wealth gains for the people he backs, but in the end the public eats a majority of the losses. Son has still made billions and billions using this model, so how can you say it does not work? You would have to look at funds that tried this same thing and went bankrupt.
• dominotw 4y ago
  But all new business, big or small, have traditionally expected to eat losses till they establish themselves. How is this any different though. Even govt gives taxbreaks to new developers.
• zanek 4y ago
  This reminds me of counterfeit capitalism https://mattstoller.substack.com/p/wework-and-counterfeit-capitalism https://mattstoller.substack.com/p/wework-and-counterfeit-ca... "Engaging in such a strategy used to be illegal . Capitalism works because companies that thrive take a bunch of inputs and create a product that is more valuable than the sum of its parts. That creates additional value, and in such a model companies have to compete by making better goods and services. What predatory pricing does is to enable competition purely based on access to capital. Someone like Neumann, and Son’s entire model with his Vision Fund, is to take inputs, combine them into products worth less than their cost, and plug up the deficit through the capital markets in hopes of acquiring market power later or of just self-dealing so the losses are placed onto someone else."
• snidane 4y ago
  The world without Softbank is not infested by monopolies, bot at all. There never were taxi medallions worth hundreds of thousand of dollars, there is no monopolistic ponzi game in real estate, the world is a perfect competition as the economics 101 predicted. If only not for Softbank ruining it for everyone right
• Lutger 4y ago
  Isn't this how most fast growing companies work? Or initiatives from large companies? Your comment makes it sound as if this is just Softbank, but I don't see the difference between this and any other hypergrowth company out there to capture and dominate a market with investor funding, operating on losses for years in order to drive out competition. What makes Softbank different is its incompetence, not its method. But this is actually doing the market a favor by losing in the end, opening up space for competition again.
• beachy 4y ago
  Really? As a bottom dweller, rather than a master of the universe, I don't see any great harm. Take Uber. A great service, cheaper rides, what's not to like. If investors stop subsidizing then and Uber was wiped from the board, who cares? I'll find some other way to get a ride. In fact their impact has only been positive, in shaking up the moribund taxi industry. I certainly don't see how it increases consumer costs in the long term, and quality has clearly benefited. Some of those benefits will stick even if Uber tanks. As to "entices investors to eschew fundamentals and gamble on hype", frankly who the hell cares? Investors are big boys and girls, they don't need hand holding.
  • zaphirplane 4y ago
    True in the short term, imagine if a company becomes so dominant that little competition exists and little interest exists to create competition ( search engine ? ) that they can set the price they want. Then you are stuck paying whatever they demand obviously within reason . at 100 for a 5 min ride will entice some competition
    • Thervicarl 4y ago
      > imagine if a company becomes so dominant that little competition exists and little interest exists to create competition This is the core of Softbank / Vision Fund investing thesis. The current events seem to show that this is not so easy to achieve even with tens (hundreds ?) of billions to burn in the process. If they run out of steam, a lot of companies will have been over-bloated and then run to the ground in the process, but this will not have caused any new monopoly.
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  • hackerlight 4y ago
    It's called dumping. You have artificially low costs temporarily in order to put competitors out of business. Once that's achieved, you then increase prices. I'm actually not sure how dumping would work when done by Uber, though. Individual taxi drivers will go out of business, but there's little barriers to entry to new taxi drivers starting out again once Uber starts to flex its pricing power. Of course the picture changes if Uber starts to lobby for regulatory protection. You have to look at the micro details of the market to see whether there's a problem there.
• mmiliauskas 4y ago
  Agreed. However, IMO SoftBank is just a symptom, when world's banks are (were) so liberal with the money, you get these type of deformations, zombie companies is another one.
  • pjc50 4y ago
    It's important to understand that SoftBank is no ordinary bank; while it had been a reasonably successful bank, the distortion truly began with the Saudi government turning up and asking them to invest $200bn for them. There simply isn't $200bn of real positive capturable return investment opportunities out there available at once. Anything physical would be hopelessly bottlenecked by its own size and would be unable to scale rapidly enough for the investors. So it had to be thrown at all these hugely speculative projects with the goal of capturing entire markets. The real problem is that, due to a century of fossil fuel dependence, there's a huge amount of wealth concentrated in weird desert monarchies.
    • selectodude 4y ago
      SoftBank was never a bank. It was a software company that turned into a cellular provider.
  • patentatt 4y ago
    This. The disease is gross wealth inequality that leads to a certain sector of society having to figure out where to put all that money while the bottom 99.99% are facing real problems.
• 082349872349872 4y ago
  As I understand it, Rockefeller's initial strategy with Standard Oil was highly risky in retrospect, because it would only have paid off if new major fields weren't discovered outside of the Pennsylvania, etc. area before he managed to consolidate. Of course, oil was eventually discovered in Texas, etc. but luckily for Rockefeller that was only after his bet had paid off.
• larksimian 4y ago
  I sort of agree? If Son was succeeding with this strategy I would totally agree that it's a huge problem. But he utterly failed. All he did was redistribute investor money into consumer pockets(and weirdly distort some markets in ways that are difficult to understand). It seems like Softbank is a story of would-be monopolists losing their shirts and consumers(and even employees in those sectors) benefitting from the competition.
  • A4ET8a8uTh0 4y ago
    It is only a relatively small problem, because the guy at the helm appears to be not sufficiently successful with his approach. That said, he did have some notable wins ( Alibaba comes to mind ), so whether we discount is as luck or something else, the approach mirrors venture's unicorn search ( 19 will be busts, but one will be a massive payoff ). Separately, just because Son is losing a lot does not mean that a better equipped investor won't try to do the same, but better. At that point, this strategy would absolutely be an impediment to regular consumer.
  • mschuster91 4y ago
    > But he utterly failed. All he did was redistribute investor money into consumer pockets(and weirdly distort some markets in ways that are difficult to understand). One might argue that the effects of "gig economy" and similar "modern tech" companies on local economies are damaging as well, beyond "weird distortions": - residents suffering from noise and rising rents thanks to AirBnB and copycats - taxis going out of business because they can't compete with Uber leading to people depending on regulated, discrimination-prevented taxis having issues, and to people in "high demand" situations like airports or event venues being squeezed for their money - restaurants, many of which were already at the edge of financial survivability prior to COVID, facing extortion by delivery apps - either use them and depend on them, or having the delivery apps simply subsidize your competition until you go broke - employees of all these companies who end up with down-pressure on their wages, and city governments with funding issues because employment tax income collapses as well, and as a result of that everyone else because governmental services degrade Someone will always pay for the supposed "inefficiencies" that cut-throat capitalism "identifies" - and in almost all cases it is those at the lowest rungs of society that bear the worst load.
• panick21_ 4y ago
  This seems to be a case of the market working as intended. The are making risky plays to establish monopoly but the market actually doesn't reward that unless the government helps to solidify those monopolies. Thus they use billions with this strategy. Its questionable if the consumers are hurt, as basically SoftBank is subsidizing the consumers. Now one can argue that in this process society is hurt in some more subtle ways. But that's hard to quantity. And we also get decent netflix shows out of all that wasted investment.
  • Hendrikto 4y ago
    > Its questionable if the consumers are hurt, as basically SoftBank is subsidizing the consumers. This subsidization is not free though. They are distorting and ruining markets in the process. Driving actually profitable competitors out of business, then collapsing themselves.
    • panick21_ 4y ago
      Not sure who markets are ruined for the long term. If the subsidizing stops, the market will reestablish itself. There is nothing destroyed inherently here.
      • lossolo 4y ago
        Tell that to all the normal people that went out of business and lost life savings because they couldn't compete with loss-leader.
        • panick21_ 4y ago
          Yeah and many normal people beyond drivers also made money and consumers gained, while some existing producers and Uber investors lost. The market always producers winners and losers, there is nothing that can really be done. You can't really make it illegal to invest in growing companies that lose money.
    • JumpCrisscross 4y ago
• benjaminwootton 4y ago
  Well articulated. As consumers we benefit from the innovation and probably lower prices for a while, but I’m not sure the externalities are worth it. Maybe an Uber rolls into town with their funny money. 5 years later, we’ve lost lots of small taxi companies, everybody is working in the gig economy, all the profits are booked in a tax havens and the prices are going up even higher than they were.
  • ctoth 4y ago
    I started using Uber in April 2014. As a blind person I have taken 2047 trips for a total of 9379 miles. Contrary to your hypothetical, Denver still has its original terrible taxi companies, and Uber is still a good deal, 8 years later. Heck, the Taxi companies are actually now better because they provide apps, something that they were super reluctant to do before Uber because it removed the excuse of the broken credit card reader. Anyone remember that one? I'm so tired of people pointing at theoretical harms like this rather than evaluating the actual situation. If you had told me 10 years ago that I could press a button on my phone and be guaranteed to be picked up, rather than calling some creepy cab company at 2 AM and being told that someone would be there in 30 minutes and having to wait all night, I would still find that hard to believe. And yet, here we are. Another thing that really grinds my gears is seeing people cite how there are more emissions now because more people are using Uber. Buddy, that's me you're talking about. My Uber is making those additional emissions. Because in the old days I was trapped at home without easy access to transportation and now I can travel anywhere in the city at any time just like you can, which means I went from producing 0 emissions to actually, you know, living my life.