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I think you can generalize even further and say that this story applies to most companies flooded with investor capital. Take Uber for example. The VC subsidies

by gmd63 4y ago

I think you can generalize even further and say that this story applies to most companies flooded with investor capital. Take Uber for example. The VC subsidies convinced a significant portion of people to upend their lifestyles and attempt to make money in an ecosystem where prices were artificially juiced by VC money. It's ironic that free market types are completely for subsidies when the private industry does it, although public and private subsidies both have issues. At least government subsidies have a benevolent intent usually. VC subsidies are usually about hiding the true market value of a product to attract customers who otherwise wouldn't have shown interest until it's time to crank the money milker.

gmd63 4y ago
There really should be a law against this. It's jarring to the economy to confuse people with artificial prices when your sole goal is to snap a customer base into some long term reliability on a platform or product that isn't necessarily any different after the subsidy runs dry and it needs to become self-sustainable.
- hgdfhgdfhgf 4y ago
  Why should there be a law? People benefited with cheaper taxis and VCs lost their money
  - ojbyrne 4y ago
    VCs lost other people’s money. I think that bill has yet to come due.
  - gmd63 4y ago
    when you skew the incentives in the economy such that people focus on developing skills that are based on artificially juiced things that aren't actually that valuable (see Axie Infinity) it's bad for folks' livelihoods long term
dehrmann 4y ago
> The VC subsidies convinced a significant portion of people to upend their lifestyles and attempt to make money in an ecosystem where prices were artificially juiced by VC money. People didn't seriously upend their lives to drive for Uber until they retire. The people who were hurt by Uber were people who bought taxi medallions and suddenly found themselves competing with unlicensed taxis. But on that point, as much as it sucks for them, their monopoly status meant the service was overpriced and didn't innovate. Uber might have been underpriced when it was subsidized, but it's still cheaper than taxis and makes rid hailing easier. Don't forget that even after the reality of things set in, Uber is still a $50B company. There's a real business there.
- beckingz 4y ago
  It's the same price as taxis nowadays.
  - bnjms 4y ago
    Yes but many markets didn’t have taxis before ride sharing. Now we do.
mbreese 4y ago
> VC subsidies are usually about hiding the true market value of a product to attract customers A more benevolent reading of this is that the VC money is used to make the product more affordable at small scale. Many times products become cheaper/affordable at larger scales. Young companies use the VC $$ help to get them across that inflection point. This logic breaks down when the product cost doesn’t get lower with more scale. Customer service oriented companies usually fall in this category.
- ljw1001 4y ago
  A less benevolent take is that VC money is primarily used to buy market share by selling below cost until other competitors exit and the company is left with a monopoly.
hgdfhgdfhgf 4y ago
"It's ironic that free market types are completely for subsidies when the private industry does it, although public and private subsidies both have issues." This analogy is strange. Free market types aren't against private investors throwing private money at bad investments nor would they want any regulations against it. "At least government subsidies have a benevolent intent usually." Government subsidies aren't known for wasteful spending? They don't hide the real value of a product (like healthcare)?
- Apocryphon 4y ago
  > Free market types aren't against private investors throwing private money They're free to do so, but isn't it cheating when it undercuts competitors while propping up unsustainable businesses in the long run? Subsidies that support predatory pricing don't sound fair.
  - robertlagrant 4y ago
    Cheating at what? If you sell me your house for $1 then have you "cheated" all the other house sellers? What have you accomplished by this "cheating"?
    - ElevenLathe 4y ago
      Libertarianism treats the market as a game when it suits (i.e. when other people are "cheating") and as a natural law the rest of the time (i.e. when other people want to change the already-artificial rules of the game via politics).
      - robertlagrant 4y ago
        I don't quite follow why you're saying that, but as per my brief previous comment, I'm not saying it's a natural law, nor a game.
        ElevenLathe 4y ago

by gmd63 4y ago

gmd63 4y ago

There really should be a law against this. It's jarring to the economy to confuse people with artificial prices when your sole goal is to snap a customer base into some long term reliability on a platform or product that isn't necessarily any different after the subsidy runs dry and it needs to become self-sustainable.

hgdfhgdfhgf 4y ago
Why should there be a law? People benefited with cheaper taxis and VCs lost their money
- ojbyrne 4y ago
  VCs lost other people’s money. I think that bill has yet to come due.
- gmd63 4y ago
  when you skew the incentives in the economy such that people focus on developing skills that are based on artificially juiced things that aren't actually that valuable (see Axie Infinity) it's bad for folks' livelihoods long term

dehrmann 4y ago

> The VC subsidies convinced a significant portion of people to upend their lifestyles and attempt to make money in an ecosystem where prices were artificially juiced by VC money. People didn't seriously upend their lives to drive for Uber until they retire. The people who were hurt by Uber were people who bought taxi medallions and suddenly found themselves competing with unlicensed taxis. But on that point, as much as it sucks for them, their monopoly status meant the service was overpriced and didn't innovate. Uber might have been underpriced when it was subsidized, but it's still cheaper than taxis and makes rid hailing easier. Don't forget that even after the reality of things set in, Uber is still a $50B company. There's a real business there.

beckingz 4y ago
It's the same price as taxis nowadays.
- bnjms 4y ago
  Yes but many markets didn’t have taxis before ride sharing. Now we do.

mbreese 4y ago

> VC subsidies are usually about hiding the true market value of a product to attract customers A more benevolent reading of this is that the VC money is used to make the product more affordable at small scale. Many times products become cheaper/affordable at larger scales. Young companies use the VC $$ help to get them across that inflection point. This logic breaks down when the product cost doesn’t get lower with more scale. Customer service oriented companies usually fall in this category.

ljw1001 4y ago
A less benevolent take is that VC money is primarily used to buy market share by selling below cost until other competitors exit and the company is left with a monopoly.

hgdfhgdfhgf 4y ago

"It's ironic that free market types are completely for subsidies when the private industry does it, although public and private subsidies both have issues." This analogy is strange. Free market types aren't against private investors throwing private money at bad investments nor would they want any regulations against it. "At least government subsidies have a benevolent intent usually." Government subsidies aren't known for wasteful spending? They don't hide the real value of a product (like healthcare)?

Apocryphon 4y ago
> Free market types aren't against private investors throwing private money They're free to do so, but isn't it cheating when it undercuts competitors while propping up unsustainable businesses in the long run? Subsidies that support predatory pricing don't sound fair.
- robertlagrant 4y ago
  Cheating at what? If you sell me your house for $1 then have you "cheated" all the other house sellers? What have you accomplished by this "cheating"?
  - ElevenLathe 4y ago
    Libertarianism treats the market as a game when it suits (i.e. when other people are "cheating") and as a natural law the rest of the time (i.e. when other people want to change the already-artificial rules of the game via politics).
    - robertlagrant 4y ago
      I don't quite follow why you're saying that, but as per my brief previous comment, I'm not saying it's a natural law, nor a game.
      - ElevenLathe 4y ago