5 ms·

It shouldn't matter if they were successful or not, the method is, as parent wrote, sustainable and has no place in a supposedly stable economy. Just like a ro

It shouldn't matter if they were successful or not, the method is, as parent wrote, sustainable and has no place in a supposedly stable economy. Just like a robbery is illegal no matter if it was successful or not. Plenty of other companies employ the same tactic but within one company and calling products "loss-leaders". Microsoft can run GitHub without making any profits with GitHub itself, as they can spend money earned elsewhere on running GitHub as a "loss-leader", just in order to push out any competitor that doesn't have a huge corporate behind them.

camjw 4y ago
But surely the concept of loss leaders can't be problematic in itself? I have no problem with a supermarket subsidising the price of one product to get me in the door, for example.
- hugh-avherald 4y ago
  Loss leaders are fine, but it should be illegal to run at a loss in order to drive out competition. (And, I believe, it already is.)
  - hhmc 4y ago
    Presumably determining if a loss leader exists to destroy competitors is tricky though? Like, MS aren’t going to come out and say “we want to bury gitlab”, even if that was the intended goal. there’s always going to be some vague brand building excuse to hide behind. (I don’t think this is the case for GitHub, but to illustrate the point)
    - PeterisP 4y ago
      It is somewhat tricky, but sometimes it can be (and has been) proven; people do say all kinds of things while doing illegal stuff, and sometimes even write it down or send it as an email.
      - hhmc 4y ago
        This is a good point — the LIBOR scandal springs to mind when thinking of the inexplicably brazen things written down whilst committing white collar crime!
- kibwen 4y ago
  The argument is that you should be. There's no free lunch; somebody is paying for it, and for every time that you notice that you're getting a deal there will be another time where you're getting screwed, whether or not you happen to realize it. And in the meantime, allowing large companies to throw their weight around like this reduces competition, which harms consumers in the long run even if you benefit in the short term.
  - cruano 4y ago
    Not saying I disagree but in my country, the minute Uber Eats started charging for delivery and stopped giving out subsidized free food was the minute a bunch of competitors popped up So yeah, for a while it was only uber eats but they didn't maintain that lead without those subsidies that were (apparently) a net positive for consumers
  - stale2002 4y ago
    > somebody is paying for it Ok, and what if it was the investors who were paying for it? VC funded startups have been a very successful method of transferring wealth from rich investors to consumers.
- treis 4y ago
  Different products. GitHub, more or less, has zero marginal cost for an additional customer. So they can afford to give away their product solely to starve the market for competitors. Supermarkets can't do that because they have a significant marginal cost for each good sold/given away. They can't afford to give away milk to 10 million people to get 500k of them to pay for something else. So the market distortion effects are much more limited in the case of physical goods.
larksimian 4y ago
This method has 2 parts: lose money while creating a monopoly, then jack prices once consumers have no choice. However, none of the Uber style businesses have an actual moat, so they can never implement part 2. This whole set of investments is one big subsidy to consumers. The fact that businesses get destroyed by a cheaper or free alternative is not a bad thing unless that consolidation leads to higher prices in the long run. Github is a great example in saas area. Utterly trivial for most customers to switch away or self host. They have no moat so they can't really jack prices. Now there are political issues with... essentially private companies creating public goods(see google search, social media, github to some extent, youtube/Twitch). However these are governance issues, rather than economic ones.
- mschuster91 4y ago
  > However, none of the Uber style businesses have an actual moat, so they can never implement part 2. This whole set of investments is one big subsidy to consumers. The big bet on Uber was against the ability of the governments to fight back against predatory bullshit - and for a while, it did seem like the big coffers of Uber cash would win over the established system of taxi regulations and employment laws. And at that point, they'd have the moat to crush the competition.
- mym1990 4y ago
  All of the Uber style businesses are also based around convenience, and as a consumer my elasticity for convenience is not very elastic(I don't know if this is the same for the general population). Pre-Uber, I can almost count on one hand the number of times I took a taxi somewhere but Uber made it cheap and fairly frictionless, so why not! Now it is still fairly frictionless but more expensive, and is just not worth it as much.
- asciimike 4y ago
  (Disclosure, I worked at GitHub at one point) > Github is a great example in saas area. Utterly trivial for most customers to switch away or self host. They have no moat so they can't really jack prices. I'm not sure I agree with this. It may be true for single developer code hosting, but GitHub as a business is much more than just that. GitHub makes money off three things, only one of which is the "core" code hosting business and two of which have solid moats: - GitHub Enterprise {Cloud, Server} - Actions (Azure compute minutes) - Advanced Security (code scanning, secret scanning, etc.) For customers operating in this environment, it's _extremely difficult_ to move because the latter features are built in to their business process (e.g. a compliance requirement that there are no known vulnerabilities dictates the use of GHAS, and they've already gotten signed off so switching to a different provider requires going through a more stringent audit in the future). GitHub doesn't have to raise prices, they just slowly add new functionality that boosts the usage of Actions, GHAS, etc. which both provide actual benefit to those customer segments and increase revenue (and eventually get new, larger customers on board). That large scale usage also offsets the cost for their free tiers, which in turn keeps the single developers hosting their code on GitHub. Even though it's fairly easy for them to move their repos elsewhere, the halo of other features plus the community (which is really the asset) keeps developers on the platform.
mbesto 4y ago
> the method is, as parent wrote, sustainable and has no place in a supposedly stable economy. But isn't the parent's point that if SoftBank is losing money, that it'll eventually correct itself?
KaoruAoiShiho 4y ago
You need to explain what exactly needs to be made illegal, cause it's just regular VC to me. Many VC businesses lose money for a long time, including the likes of FB or Amazon, the strategy being illegal doesn't sound right to me.

camjw 4y ago

But surely the concept of loss leaders can't be problematic in itself? I have no problem with a supermarket subsidising the price of one product to get me in the door, for example.

hugh-avherald 4y ago
Loss leaders are fine, but it should be illegal to run at a loss in order to drive out competition. (And, I believe, it already is.)
- hhmc 4y ago
  Presumably determining if a loss leader exists to destroy competitors is tricky though? Like, MS aren’t going to come out and say “we want to bury gitlab”, even if that was the intended goal. there’s always going to be some vague brand building excuse to hide behind. (I don’t think this is the case for GitHub, but to illustrate the point)
  - PeterisP 4y ago
    It is somewhat tricky, but sometimes it can be (and has been) proven; people do say all kinds of things while doing illegal stuff, and sometimes even write it down or send it as an email.
    - hhmc 4y ago
      This is a good point — the LIBOR scandal springs to mind when thinking of the inexplicably brazen things written down whilst committing white collar crime!
kibwen 4y ago
The argument is that you should be. There's no free lunch; somebody is paying for it, and for every time that you notice that you're getting a deal there will be another time where you're getting screwed, whether or not you happen to realize it. And in the meantime, allowing large companies to throw their weight around like this reduces competition, which harms consumers in the long run even if you benefit in the short term.
- cruano 4y ago
  Not saying I disagree but in my country, the minute Uber Eats started charging for delivery and stopped giving out subsidized free food was the minute a bunch of competitors popped up So yeah, for a while it was only uber eats but they didn't maintain that lead without those subsidies that were (apparently) a net positive for consumers
- stale2002 4y ago
  > somebody is paying for it Ok, and what if it was the investors who were paying for it? VC funded startups have been a very successful method of transferring wealth from rich investors to consumers.
treis 4y ago
Different products. GitHub, more or less, has zero marginal cost for an additional customer. So they can afford to give away their product solely to starve the market for competitors. Supermarkets can't do that because they have a significant marginal cost for each good sold/given away. They can't afford to give away milk to 10 million people to get 500k of them to pay for something else. So the market distortion effects are much more limited in the case of physical goods.

larksimian 4y ago

This method has 2 parts: lose money while creating a monopoly, then jack prices once consumers have no choice. However, none of the Uber style businesses have an actual moat, so they can never implement part 2. This whole set of investments is one big subsidy to consumers. The fact that businesses get destroyed by a cheaper or free alternative is not a bad thing unless that consolidation leads to higher prices in the long run. Github is a great example in saas area. Utterly trivial for most customers to switch away or self host. They have no moat so they can't really jack prices. Now there are political issues with... essentially private companies creating public goods(see google search, social media, github to some extent, youtube/Twitch). However these are governance issues, rather than economic ones.

mschuster91 4y ago
> However, none of the Uber style businesses have an actual moat, so they can never implement part 2. This whole set of investments is one big subsidy to consumers. The big bet on Uber was against the ability of the governments to fight back against predatory bullshit - and for a while, it did seem like the big coffers of Uber cash would win over the established system of taxi regulations and employment laws. And at that point, they'd have the moat to crush the competition.
mym1990 4y ago
All of the Uber style businesses are also based around convenience, and as a consumer my elasticity for convenience is not very elastic(I don't know if this is the same for the general population). Pre-Uber, I can almost count on one hand the number of times I took a taxi somewhere but Uber made it cheap and fairly frictionless, so why not! Now it is still fairly frictionless but more expensive, and is just not worth it as much.
asciimike 4y ago
(Disclosure, I worked at GitHub at one point) > Github is a great example in saas area. Utterly trivial for most customers to switch away or self host. They have no moat so they can't really jack prices. I'm not sure I agree with this. It may be true for single developer code hosting, but GitHub as a business is much more than just that. GitHub makes money off three things, only one of which is the "core" code hosting business and two of which have solid moats: - GitHub Enterprise {Cloud, Server} - Actions (Azure compute minutes) - Advanced Security (code scanning, secret scanning, etc.) For customers operating in this environment, it's _extremely difficult_ to move because the latter features are built in to their business process (e.g. a compliance requirement that there are no known vulnerabilities dictates the use of GHAS, and they've already gotten signed off so switching to a different provider requires going through a more stringent audit in the future). GitHub doesn't have to raise prices, they just slowly add new functionality that boosts the usage of Actions, GHAS, etc. which both provide actual benefit to those customer segments and increase revenue (and eventually get new, larger customers on board). That large scale usage also offsets the cost for their free tiers, which in turn keeps the single developers hosting their code on GitHub. Even though it's fairly easy for them to move their repos elsewhere, the halo of other features plus the community (which is really the asset) keeps developers on the platform.

mbesto 4y ago

> the method is, as parent wrote, sustainable and has no place in a supposedly stable economy. But isn't the parent's point that if SoftBank is losing money, that it'll eventually correct itself?

KaoruAoiShiho 4y ago

You need to explain what exactly needs to be made illegal, cause it's just regular VC to me. Many VC businesses lose money for a long time, including the likes of FB or Amazon, the strategy being illegal doesn't sound right to me.