5 ms·

I've been thinking about how enshittification, venture capital, shareholders and the life cycle of a company are in some ways related. Any company that has exte

by _eypq 3y ago

I've been thinking about how enshittification, venture capital, shareholders and the life cycle of a company are in some ways related. Any company that has external investors is bound to go through this cycle of - building a great product - taking in external funding money - growing and then either being acquired or going public (or more commonly shutting down) - then all the head scratching decision making starts It's head scratching to users and outside observers, but the incentives are such that there is pressure to grow on a quarterly basis, get those charts looking good and individuals in the management chain are doing what they can to optimize their career growth leading to short term decision making at the cost of users and customers. The big picture thinking and long term decision making are incredibly hard. Very few companies are able to do this over the long term. Micosoft and apple are doing great currently and it will be interesting to see how stripe and openai navigate this process. My current opinion is that only small founder owned companies or foss organizations can avoid this trap over the long term and it involves not trying to squeeze out every last bit of value. Both of these require a certain level of financial security + there's the opportunity cost vs just going the vc route. VC funding is incredibly valuable and it opens up a lot of possibilities that small orgs can never hope for. I guess what I'm saying is: expect enshittification and enjoy the ride while it lasts and then jump ship when trouble starts. Jumping ship becomes incredibly hard with network effects, so that's the challenge we are seeing with social media companies now. Also once companies become too big to fail, it's a drag on society. Personally I would still go the VC route since I don't have a few million lying around and tell myself this is just the cycle of life (for corporates) to avoid existential questions and going down the rabbit hole of questioning everything around me. Sorry about the disconnected thoughts.

rightbyte 3y ago
It is some sort of scam I think. The shareholders don't have the detailed knowledge and insight into the everyday work so the managerial class can squeeze out a dime for a dollar of some hard to measure asset like consumer trust or whatever. Also, I got this feeling bigger shareholders might think they are smart and part of the scam and that they will jump ship (sell the stock) before smaller shareholders notice. I guess e.g. Ben and Jerries would be all vanilla ice cream at this point of they were run in this way. You could always decrease the amount of nuts and fillings with 1% more without anyone noticing ...
- ralph84 3y ago
  > bigger shareholders might think they are smart and part of the scam and that they will jump ship (sell the stock) before smaller shareholders notice Absolutely. Decades of “you can’t beat the market” propaganda has created a large class of “investors” whose only strategy is buy all of the stocks and hope for the best.
  - rightbyte 3y ago
    "It is hard to beat the market without insider info" is not as catchy.
sharperguy 3y ago
I think the issue could be rooted in recent monetary policy rather than an inhrenent feature of the market itself. Artificially low interest rate environments lead to a lot of money in the hands of investors, which due to inflation slowly loses purchasing power over time. However, with large reserves, they can easily afford to prop up a business model which persistantly spends more money on bringing "free" features to user while charging very little. Those businesses obviously outcompete any business which do not recieve such investment. However, as time goes on, those investments must eventually earn a return. Switching from a model which loses money every year to one which must profit every year is invariably going to affect the quality of the product. Especially in an environment where directly charging customers for your service would be a death sentence. In the absense of such cheap credit, however, a truly competitive environment could potentially emerge, where businesses must be sustanably profitable from the ground up. Esentially this would mean the last 15 or so years has been wasted time in pursuit of this goal, as false monetary signals were steering us in completely the wrong direction. Some of todays tech companies may survive the transition, but I believe that most will eventually be replaced by completely new ones. Unless we go back to a policy of lowering interest rates to near (or even below) 0%.
- pjc50 3y ago
  I remain infuriated that we had the confluence of: - huge amount of very cheap money - widespread availability of highly educated technologists - knowledge of the climate model .. and instead "collectively" ended up funding giveaway services to users and inflating the SF housing market rather than doing the climate Manhattan project. (High interest rates are bad for renewables, because buying a solar panel is effectively buying 20-30 years of electricity upfront, and therefore hugely dependent on cost of capital and discount rates)
  - zeroonetwothree 3y ago
    We would expect electricity prices to also go up faster with higher interest rates so it should roughly cancel out.
  - coldpie 3y ago
pharmakom 3y ago
also the company that stays small will get clobbered by the vc backed competitor. they will build more features, have more marketing and lower cost during the growth phase.
glun 3y ago
This only happens when the users are the product or its a marketplace. Most business models dont suffer from shittification. But VCs love investing in the ones that do.
- gmerc 3y ago
  Nah it happens to all public companies (see hasbro with magic/d&d) even when users are not the product. It happens when nobody wants to be the first to show flagging growth and investor expectations have not reset yet after a period of growth. It’s just easier in tech to manufacture growth metrics you cant get checked on
  - glun 3y ago
    Sure, but in those industries the users leave, the company suffers and the executives get fired. VC are attracted to moaty business models where users cant leave.
    - SturgeonsLaw 3y ago
      > the executives get fired By fired, do you mean receive multimillion dollar payouts and jobs from their friends at another place where they can do it all again?
  - waveBidder 3y ago
    d&d has weak network effects. wotc overestimated the effect though
- lotsofpulp 3y ago
  I would say the opposite. Consumers frequently reward the business models that do whatever it takes to lower prices in the short term, often sacrificing the long term. It is a constant struggle to convince people that your higher quality product/service is worth the extra cost, and obviously, many times it is not. But the formula for operating a successful, long term business is not as simple as “output the best quality product or service you can, and you will be rewarded”. It is more like “output the best quality product or service you can relative to prices of competing sellers, and at prices your clientele can afford”. Which may or may not include sellers that have access to much cheaper money (VC, bigger companies with other revenue streams, etc), or sellers operating in different jurisdictions with lower costs.
lmm 3y ago
IMO: Consumers will adapt to the reality, as humans always do. Once people adjust to the fact that popular brands are generally strip-mined for profit, brand loyalty will drop and keep dropping, consumers will become warier of lock-in, and the enshittification playbook will be less and less effective.
- trabant00 3y ago
  There's always going to be room for an un/poorly regulated gold rush somewhere somehow. If we drop the loyalty to major brands they will open small proxy ones and flood the market. Just an example. I think there's a cultural problem. Companies are made of people not papers. It's people that are pushing for profits no matter what. And as lots of money with no value get made, the value of the money drops, so you need more of it. So people start thinking in terms like "I have a family to raise so fuck principles", "If I don't do it someone else will" and so on. I'm not talking about major figures, people always focus on those. I'm talking about regular people who have no problem working for an online casino for example when they know a significant portion of their customers are underage. So we are adapting, but in a downward spiral. That's how I see it.
  - lmm 3y ago
    > If we drop the loyalty to major brands they will open small proxy ones and flood the market. Just an example. The point is those small brands won't be trusted. People will make more effort to check reviews, or demand stricter warranty laws, or the like.
    - trabant00 3y ago
      The reviews are already useless. We had plenty of discussion here about that, won't go into details. Again, it was just an example, don't get stuck on it, there are a million ways to fool the public because: 1. There is just too much information to obtain to make an informed decision. There is not enough time for a regular customer to dig into all that. We know these things because we are insiders. That's why you need regulation bodies made of experts to pass legislation to protect the customer. 2. The information gatekeepers are the same who are pushing the enshittification. Where are you going to search for better service? On Google's search engine. Who processes the reviews and decides which to show, which to flag? Again, Google, Amazon, etc. You can not rely on their tools to help you inform about their service. This is why we need regulations about search results. In conclusion we can not simply rely on customers adapting.
high_5 3y ago
I think Apple managed to escape this VC trap by sheer excellence.
- pjc50 3y ago
  Apple's been around for a long time, and if anything I would attribute it to the force of will of Steve Jobs. By the time he was dead, Apple had such a huge cash pile that they're no longer beholden to investors in quite the same way. They now only have to worry about ordinary market complaints from shareholders. (don't forget the Wilderness Years, Apple came close to death)
xigency 3y ago
I’ve also pondered over this recently. Many social media companies have incentives that are unaligned with their platform users’ best interests. For example, creating more engagement through polarizing or negative content, trying to maximize the time people are glued to screens to eke out ad money, the turning around to sell or exploit personal data. Frustratingly, they almost have a legal fiduciary duty to behave this way as currently structured, as their only mandate is to increase value for shareholders. Negative externalities on users, employees, or society at large are not relevant to decision making at all. The conclusion I found is that the only ethical solution would be to create a cooperative public benefit corporation. With that structure, the company has a mandate to do right by their customers, their employees, and society as a whole in measurable ways.
- dynamorando 3y ago
  I have somewhat blogged about this, though I realize the idea may be incomplete. https://dynamorando.pages.dev/blog/the-public-web/ https://dynamorando.pages.dev/blog/the-public-web/ I welcome any tactful feedback. Also I have no idea how to initiate such an idea.
gadders 3y ago
15 years ago I bought a ride-on lawn mower that gave me 12 years of service, but was getting a bit long in the tooth. I decided to buy the next model up from the same company, not knowing in the mean time it had been bought by a PE company and the quality had gone to shit. The mower is bigger, but the engine is smaller and they are notorious for blowing a head gasket any time the mowing blades stall out. I was thinking of starting a web register of all PE PortCos (private equity portfolio companies) so people would know to treat the products with caution as the main way of reducing costs seems to be a) sacking people and b) cutting corners on product quality.
- hotpotamus 3y ago
  I have an old cohort of co-workers who I went through the PE experience with and we pretty much use PE ownership of a company as a heuristic to avoid buying their products. Duracell batteries would be an example. A list would probably be helpful but depressingly long.
- sarchertech 3y ago
  Which company is this? I’ve heard this referred to as “reputation mining”. You buy a company with a good reputation, cut quality drastically, and profit for the decade or so it takes until everyone realizes the brand sucks now.
  - yomlica8 3y ago
    It is all over the place. The worst part is when you realize reputation is always a trailing indicator the only rational action seems to be to buy the cheapest one and use the saved money for the replacement. Basically, optimize your life around rapid disposal and replacement which makes extra trash and takes extra time versus just having a good quality item you can rely on. My mower recently started to rust out and I dread buying a replacement. Aside from cheaply replacing poorly designed wheels fairly often I was 100% with this mower. But I can't buy it again because the march forward with redesigns means it is no longer made. Is the new one better? General life experience says, probably not.

by _eypq 3y ago

rightbyte 3y ago

It is some sort of scam I think. The shareholders don't have the detailed knowledge and insight into the everyday work so the managerial class can squeeze out a dime for a dollar of some hard to measure asset like consumer trust or whatever. Also, I got this feeling bigger shareholders might think they are smart and part of the scam and that they will jump ship (sell the stock) before smaller shareholders notice. I guess e.g. Ben and Jerries would be all vanilla ice cream at this point of they were run in this way. You could always decrease the amount of nuts and fillings with 1% more without anyone noticing ...

ralph84 3y ago
> bigger shareholders might think they are smart and part of the scam and that they will jump ship (sell the stock) before smaller shareholders notice Absolutely. Decades of “you can’t beat the market” propaganda has created a large class of “investors” whose only strategy is buy all of the stocks and hope for the best.
- rightbyte 3y ago
  "It is hard to beat the market without insider info" is not as catchy.

sharperguy 3y ago

I think the issue could be rooted in recent monetary policy rather than an inhrenent feature of the market itself. Artificially low interest rate environments lead to a lot of money in the hands of investors, which due to inflation slowly loses purchasing power over time. However, with large reserves, they can easily afford to prop up a business model which persistantly spends more money on bringing "free" features to user while charging very little. Those businesses obviously outcompete any business which do not recieve such investment. However, as time goes on, those investments must eventually earn a return. Switching from a model which loses money every year to one which must profit every year is invariably going to affect the quality of the product. Especially in an environment where directly charging customers for your service would be a death sentence. In the absense of such cheap credit, however, a truly competitive environment could potentially emerge, where businesses must be sustanably profitable from the ground up. Esentially this would mean the last 15 or so years has been wasted time in pursuit of this goal, as false monetary signals were steering us in completely the wrong direction. Some of todays tech companies may survive the transition, but I believe that most will eventually be replaced by completely new ones. Unless we go back to a policy of lowering interest rates to near (or even below) 0%.

pjc50 3y ago
I remain infuriated that we had the confluence of: - huge amount of very cheap money - widespread availability of highly educated technologists - knowledge of the climate model .. and instead "collectively" ended up funding giveaway services to users and inflating the SF housing market rather than doing the climate Manhattan project. (High interest rates are bad for renewables, because buying a solar panel is effectively buying 20-30 years of electricity upfront, and therefore hugely dependent on cost of capital and discount rates)
- zeroonetwothree 3y ago
  We would expect electricity prices to also go up faster with higher interest rates so it should roughly cancel out.
- coldpie 3y ago

pharmakom 3y ago

also the company that stays small will get clobbered by the vc backed competitor. they will build more features, have more marketing and lower cost during the growth phase.

glun 3y ago

This only happens when the users are the product or its a marketplace. Most business models dont suffer from shittification. But VCs love investing in the ones that do.

gmerc 3y ago
Nah it happens to all public companies (see hasbro with magic/d&d) even when users are not the product. It happens when nobody wants to be the first to show flagging growth and investor expectations have not reset yet after a period of growth. It’s just easier in tech to manufacture growth metrics you cant get checked on
- glun 3y ago
  Sure, but in those industries the users leave, the company suffers and the executives get fired. VC are attracted to moaty business models where users cant leave.
  - SturgeonsLaw 3y ago
    > the executives get fired By fired, do you mean receive multimillion dollar payouts and jobs from their friends at another place where they can do it all again?
- waveBidder 3y ago
  d&d has weak network effects. wotc overestimated the effect though
lotsofpulp 3y ago
I would say the opposite. Consumers frequently reward the business models that do whatever it takes to lower prices in the short term, often sacrificing the long term. It is a constant struggle to convince people that your higher quality product/service is worth the extra cost, and obviously, many times it is not. But the formula for operating a successful, long term business is not as simple as “output the best quality product or service you can, and you will be rewarded”. It is more like “output the best quality product or service you can relative to prices of competing sellers, and at prices your clientele can afford”. Which may or may not include sellers that have access to much cheaper money (VC, bigger companies with other revenue streams, etc), or sellers operating in different jurisdictions with lower costs.

lmm 3y ago

IMO: Consumers will adapt to the reality, as humans always do. Once people adjust to the fact that popular brands are generally strip-mined for profit, brand loyalty will drop and keep dropping, consumers will become warier of lock-in, and the enshittification playbook will be less and less effective.

trabant00 3y ago
There's always going to be room for an un/poorly regulated gold rush somewhere somehow. If we drop the loyalty to major brands they will open small proxy ones and flood the market. Just an example. I think there's a cultural problem. Companies are made of people not papers. It's people that are pushing for profits no matter what. And as lots of money with no value get made, the value of the money drops, so you need more of it. So people start thinking in terms like "I have a family to raise so fuck principles", "If I don't do it someone else will" and so on. I'm not talking about major figures, people always focus on those. I'm talking about regular people who have no problem working for an online casino for example when they know a significant portion of their customers are underage. So we are adapting, but in a downward spiral. That's how I see it.
- lmm 3y ago
  > If we drop the loyalty to major brands they will open small proxy ones and flood the market. Just an example. The point is those small brands won't be trusted. People will make more effort to check reviews, or demand stricter warranty laws, or the like.
  - trabant00 3y ago
    The reviews are already useless. We had plenty of discussion here about that, won't go into details. Again, it was just an example, don't get stuck on it, there are a million ways to fool the public because: 1. There is just too much information to obtain to make an informed decision. There is not enough time for a regular customer to dig into all that. We know these things because we are insiders. That's why you need regulation bodies made of experts to pass legislation to protect the customer. 2. The information gatekeepers are the same who are pushing the enshittification. Where are you going to search for better service? On Google's search engine. Who processes the reviews and decides which to show, which to flag? Again, Google, Amazon, etc. You can not rely on their tools to help you inform about their service. This is why we need regulations about search results. In conclusion we can not simply rely on customers adapting.

high_5 3y ago

I think Apple managed to escape this VC trap by sheer excellence.

pjc50 3y ago
Apple's been around for a long time, and if anything I would attribute it to the force of will of Steve Jobs. By the time he was dead, Apple had such a huge cash pile that they're no longer beholden to investors in quite the same way. They now only have to worry about ordinary market complaints from shareholders. (don't forget the Wilderness Years, Apple came close to death)

xigency 3y ago

I’ve also pondered over this recently. Many social media companies have incentives that are unaligned with their platform users’ best interests. For example, creating more engagement through polarizing or negative content, trying to maximize the time people are glued to screens to eke out ad money, the turning around to sell or exploit personal data. Frustratingly, they almost have a legal fiduciary duty to behave this way as currently structured, as their only mandate is to increase value for shareholders. Negative externalities on users, employees, or society at large are not relevant to decision making at all. The conclusion I found is that the only ethical solution would be to create a cooperative public benefit corporation. With that structure, the company has a mandate to do right by their customers, their employees, and society as a whole in measurable ways.

dynamorando 3y ago
I have somewhat blogged about this, though I realize the idea may be incomplete. https://dynamorando.pages.dev/blog/the-public-web/ https://dynamorando.pages.dev/blog/the-public-web/ I welcome any tactful feedback. Also I have no idea how to initiate such an idea.

gadders 3y ago

15 years ago I bought a ride-on lawn mower that gave me 12 years of service, but was getting a bit long in the tooth. I decided to buy the next model up from the same company, not knowing in the mean time it had been bought by a PE company and the quality had gone to shit. The mower is bigger, but the engine is smaller and they are notorious for blowing a head gasket any time the mowing blades stall out. I was thinking of starting a web register of all PE PortCos (private equity portfolio companies) so people would know to treat the products with caution as the main way of reducing costs seems to be a) sacking people and b) cutting corners on product quality.

hotpotamus 3y ago
I have an old cohort of co-workers who I went through the PE experience with and we pretty much use PE ownership of a company as a heuristic to avoid buying their products. Duracell batteries would be an example. A list would probably be helpful but depressingly long.
sarchertech 3y ago
Which company is this? I’ve heard this referred to as “reputation mining”. You buy a company with a good reputation, cut quality drastically, and profit for the decade or so it takes until everyone realizes the brand sucks now.
- yomlica8 3y ago
  It is all over the place. The worst part is when you realize reputation is always a trailing indicator the only rational action seems to be to buy the cheapest one and use the saved money for the replacement. Basically, optimize your life around rapid disposal and replacement which makes extra trash and takes extra time versus just having a good quality item you can rely on. My mower recently started to rust out and I dread buying a replacement. Aside from cheaply replacing poorly designed wheels fairly often I was 100% with this mower. But I can't buy it again because the march forward with redesigns means it is no longer made. Is the new one better? General life experience says, probably not.