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I didn't quite buy the connection they were making between the predatory pricing and the offloading shares onto public markets. Both are present, but I don't se

I didn't quite buy the connection they were making between the predatory pricing and the offloading shares onto public markets. Both are present, but I don't see the two together as a smoking gun that would make this kind of predatory pricing special. Otherwise, the article just covers pretty well explored ground. Companies take VCs money and buy revenue, and early investors have been able to offload money losing companies on public markets. This had a lot to do with interest rates imo, there was too much free money chasing returns. It's largely going to take care of itself.

sharemywin 3y ago
Moral hazard is a situation in which one party engages in risky behavior or fails to act in good faith because it knows the other party bears the economic consequences of their behavior.
HillRat 3y ago
I think the most effective argument against Wansley and Weinstein is that the markets may reset after the companies involved collapse, so you essentially get a transfer of value from shareholders to VCs and from shareholders and VCs to consumers at the cost of disrupting (in a very negative way, certainly) existing competitors. In other words, given a long enough time horizon, it's not really a monopoly problem, it's a fraud problem, and the losers are retail investors who were gulled by VCs funding impossible and unsustainable business models in pursuit of IPO-happy greater fools. (And, if the bloom comes off the SV VC rose, as it well should, then those con games are less likely to work, and we'll see a rapid collapse in valuations, junk IPOs, investments, and, relatedly, these same attempts to corner monopolies in markets -- like software -- where there is no natural barrier to competition.)
- mnky9800n 3y ago
  Retail investors are always the losers.
  - excalibur 3y ago
    > Retail investors are always the losers. Among the losers anyway. Pretty hard to pick a bigger loser in this equation than the humble Uber driver or Amazon warehouse worker.
    - dns_snek 3y ago
      Elaborate, how are employees bigger losers than retail investors? The former would have to find new jobs, the latter could be screwed out of their life savings.
      - DrScientist 3y ago
        I don't know the truth of working conditions and salaries - but let me give you some scenarios. You lose your job at Amazon competitor and start to work for Amazon. - You are paid less ( let's say 2.5% ) - that massively compounds over a lifetime and/or -your quality of life at work is much less - and that's about half your waking hours for most of the week - so I'd call that a big deal.
      - monocasa 3y ago
        Retail investors more or less know they're gambling. Employees are just expecting an honest wage for an honest day's work.
      - excalibur 3y ago
        Okay, I'll go burn some money on bad investments. You shit in a diaper 10 hours a day (because if you go to the bathroom too many times you get fired) for the privilege of sliding further and further into debt in an attempt to live on $15/hr. We'll see who the bigger loser is.
  - version_five 3y ago
    My rough analysis is there is a hierarchy: - public markets - VC - PE - Family Office The smartest money is people you've never heard of buying high quality assets. VC and PE are basically running their own versions of fixing up companies and dumping them on the public, and public markets are where all the dumbest money is.
- DrScientist 3y ago
  Again you are forgetting those people who have their livelihoods destroyed by being unable to compete with free money. These people aren't IPO happy fools. These are real people working hard, who through not fault of their own, are forced out of a job as a side effect of a Valley hustle.
- pyrale 3y ago
  > I think the most effective argument against Wansley and Weinstein is that the markets may reset after the companies involved collapse The point they are making is that even if the companies fail to corner the market, the VCs can (and do) exit with a profit before the collapse. Therefore, predatory pricing is a profitable strategy for some actors. This line of argument essentially defeats the claim that losses needs to be recouped for the strategy to be profitable, and therefore, is rare [1], as the FTC claims: > This strategy can only be successful if the short-run losses from pricing below cost will be made up for by much higher prices over a longer period of time after competitors leave the market. [1]: https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost-pricing https://www.ftc.gov/advice-guidance/competition-guidance/gui...
DrScientist 3y ago
You aren't mentioning the people hit by this behaviour - people who use to run cab firms or drive their own cab. Or B&Bs and small hotels. These people are potentially pushed close to bankruptcy and have to exit the area - because they can't sustain competition against a heavily subsidised competition. That's value being destroyed - not in a creative way by something better, but as a side effect of a financial shell game. Also the state often picks up the cost of that - by supporting those people back into work - and the companies that caused it carefully avoid contributing to that by avoiding taxes - because they never make any money.... I think the Uber example is a very good one - bottom line why the predatory practice? Bottom line if they got self-driving cars working - then it would be transformative and they wouldn't need predatory pricing to grow market share. Why spend all that money on growing the market share, rather than spending on R&D? I can only assume it's all about engineering a financial exit.... And sure you can say buyer/investor beware - but as I pointed out above, the behaviour is costing others through no fault of their own - sometimes dearly.
- hgsgm 3y ago
  Cab firms were worse than Uber. They were no ones friend. Black car firms were and are fine but people can't afford quality products anymore.
  - danaris 3y ago
    "Cab firms were monopolistic, often user-unfriendly, and needed a change" and "Uber is a horrendously predatory company that should not be allowed to operate outside the law or undercut competitors due to not having to make a profit" are two statements that can coexist. Just because what we had was bad doesn't mean that what replaced it was better.

sharemywin 3y ago

Moral hazard is a situation in which one party engages in risky behavior or fails to act in good faith because it knows the other party bears the economic consequences of their behavior.

HillRat 3y ago

I think the most effective argument against Wansley and Weinstein is that the markets may reset after the companies involved collapse, so you essentially get a transfer of value from shareholders to VCs and from shareholders and VCs to consumers at the cost of disrupting (in a very negative way, certainly) existing competitors. In other words, given a long enough time horizon, it's not really a monopoly problem, it's a fraud problem, and the losers are retail investors who were gulled by VCs funding impossible and unsustainable business models in pursuit of IPO-happy greater fools. (And, if the bloom comes off the SV VC rose, as it well should, then those con games are less likely to work, and we'll see a rapid collapse in valuations, junk IPOs, investments, and, relatedly, these same attempts to corner monopolies in markets -- like software -- where there is no natural barrier to competition.)

mnky9800n 3y ago
Retail investors are always the losers.
- excalibur 3y ago
  > Retail investors are always the losers. Among the losers anyway. Pretty hard to pick a bigger loser in this equation than the humble Uber driver or Amazon warehouse worker.
  - dns_snek 3y ago
    Elaborate, how are employees bigger losers than retail investors? The former would have to find new jobs, the latter could be screwed out of their life savings.
    - DrScientist 3y ago
      I don't know the truth of working conditions and salaries - but let me give you some scenarios. You lose your job at Amazon competitor and start to work for Amazon. - You are paid less ( let's say 2.5% ) - that massively compounds over a lifetime and/or -your quality of life at work is much less - and that's about half your waking hours for most of the week - so I'd call that a big deal.
    - monocasa 3y ago
      Retail investors more or less know they're gambling. Employees are just expecting an honest wage for an honest day's work.
    - excalibur 3y ago
      Okay, I'll go burn some money on bad investments. You shit in a diaper 10 hours a day (because if you go to the bathroom too many times you get fired) for the privilege of sliding further and further into debt in an attempt to live on $15/hr. We'll see who the bigger loser is.
- version_five 3y ago
  My rough analysis is there is a hierarchy: - public markets - VC - PE - Family Office The smartest money is people you've never heard of buying high quality assets. VC and PE are basically running their own versions of fixing up companies and dumping them on the public, and public markets are where all the dumbest money is.
DrScientist 3y ago
Again you are forgetting those people who have their livelihoods destroyed by being unable to compete with free money. These people aren't IPO happy fools. These are real people working hard, who through not fault of their own, are forced out of a job as a side effect of a Valley hustle.
pyrale 3y ago
> I think the most effective argument against Wansley and Weinstein is that the markets may reset after the companies involved collapse The point they are making is that even if the companies fail to corner the market, the VCs can (and do) exit with a profit before the collapse. Therefore, predatory pricing is a profitable strategy for some actors. This line of argument essentially defeats the claim that losses needs to be recouped for the strategy to be profitable, and therefore, is rare [1], as the FTC claims: > This strategy can only be successful if the short-run losses from pricing below cost will be made up for by much higher prices over a longer period of time after competitors leave the market. [1]: https://www.ftc.gov/advice-guidance/competition-guidance/guide-antitrust-laws/single-firm-conduct/predatory-or-below-cost-pricing https://www.ftc.gov/advice-guidance/competition-guidance/gui...

DrScientist 3y ago

You aren't mentioning the people hit by this behaviour - people who use to run cab firms or drive their own cab. Or B&Bs and small hotels. These people are potentially pushed close to bankruptcy and have to exit the area - because they can't sustain competition against a heavily subsidised competition. That's value being destroyed - not in a creative way by something better, but as a side effect of a financial shell game. Also the state often picks up the cost of that - by supporting those people back into work - and the companies that caused it carefully avoid contributing to that by avoiding taxes - because they never make any money.... I think the Uber example is a very good one - bottom line why the predatory practice? Bottom line if they got self-driving cars working - then it would be transformative and they wouldn't need predatory pricing to grow market share. Why spend all that money on growing the market share, rather than spending on R&D? I can only assume it's all about engineering a financial exit.... And sure you can say buyer/investor beware - but as I pointed out above, the behaviour is costing others through no fault of their own - sometimes dearly.

hgsgm 3y ago
Cab firms were worse than Uber. They were no ones friend. Black car firms were and are fine but people can't afford quality products anymore.
- danaris 3y ago
  "Cab firms were monopolistic, often user-unfriendly, and needed a change" and "Uber is a horrendously predatory company that should not be allowed to operate outside the law or undercut competitors due to not having to make a profit" are two statements that can coexist. Just because what we had was bad doesn't mean that what replaced it was better.