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Agreed, but the difference for me in some of those companies is that Theranos, FTX, and WeWork were never real companies in the sense that they performed valuab

Agreed, but the difference for me in some of those companies is that Theranos, FTX, and WeWork were never real companies in the sense that they performed valuable service to the world and turned a profit. In contrast, Enron, Worldcom, Tyco, and AIG were all real, functioning businesses that turned bad via executive accounting shenanigans. And the 2008 crisis was a collective failure of unthinking financialization and deregulation, again mostly among otherwise functional companies. So I'm especially glad to see the current crash, as for me it represents businesses founded on "fuck around" finally finding out what business fundamentals are. I'll be interested to see what happens with other massive capital consumers from this era, with the poster child being Uber. It's plausible to me that even on its own terms Uber will never generate profit above the $20 billion of capital it took. Let alone getting into the black once we count its more obvious externalities.

jglamine 3y ago
FTX was insanely profitable (100s of millions in revenue, low expenses). If SBF hadn't have taken customer money they'd still be around. Even now the CEO overseeing bankruptcy has recovered 90 percent of customer assets. Their downfall was absolutely accounting shenanigans, not an issue with the core business. Their product was letting people take leveraged gambles on crypto, so arguably not a social good.
- wpietri 3y ago
  Exactly. It was an illegal casino dressed up as "investment", while also ignoring the regulations on investment. Part of their explicit plan was to use the house rake to give enough money to politicians that they'd retroactively legitimize themselves. It was an enormous social negative.
- HDThoreaun 3y ago
  I'm not sure it's so simple. There's a strong case to be made that Alameda was losing money as FTX's liquidity provider and without the alameda money FTX would have much, much lower revenue. I think it's hard to look at just one side of the business because they were so intertwined.
bjacokes 3y ago
There are plenty of never-profitable businesses that have gone bankrupt in the past. See e.g. pets.com from the dot com bust. And this downturn has seen "functioning" businesses like SVB and First Republic go under too. So I'm not sure this time is different, at least to the extent you're suggesting. I do agree that this era of low interest rates has led to some companies getting absolutely massive without ever turning a profit. But hey, that playbook worked for Amazon. Most tech companies have substantially lower capital requirements than WeWork, and can weather this sort of downturn as long as they have a reasonable cash position. Sure, Uber might not make back the amount of funding it's burned through, but that's different than it having a business where the unit economics will never work out.
- wpietri 3y ago
  You write in a tone of contradiction, but I'm having trouble understanding how your points relate to mine. I don't believe I said that never-profitable businesses were unique to this era, or that the only business failures lately have been ridiculous ones. I also think Amazon is distinct in that they chose to not have profits because they saw better uses for the money. Bezos could have declared big profits long before he did, and there was a noisy contingent of investors who were agitating for it. Bezos instead chose long-term investment in ways that upended our notion of commerce, and whose effects are still playing out. I think that's very different than WeWork and Uber, where a lot of investor money was burned on subsidizing the core business. At least in Uber's case there was a theory, which was basically, "Use the rise of mobile to capture the global taxi market (while externalizing the capital costs to the desperate) and then use pricing power to extract Google-size monopoly rents." Maybe not a great theory, but at least something articulable. Whereas WeWork never made any sense as a business beyond a hazy "Uber for offices" handwave.
  - nojvek 3y ago
    Amazon is perhaps one of the best executed businesses. Their retail logistics physical footprint is insanely huge and chews billions in capital. They chose to reinvest their profits to stronghold their logistics position. In terms of warehouse square footage, they are the biggest by a wide margin (~320M sqft - probably more now) https://www.bigrentz.com/blog/amazon-warehouses-locations https://www.bigrentz.com/blog/amazon-warehouses-locations Now they're playing the card of AWS but for physical logistics. They're opening up their warehouses and logistics as a service to others. Every company ought to be investing it's profits for long term gains. The fact that Apple is sitting on so much cash that it doesn't know what to do is not a great play. I'm willing to bet that in 10 years, Amazon will be bigger than Apple in market cap.

jglamine 3y ago

FTX was insanely profitable (100s of millions in revenue, low expenses). If SBF hadn't have taken customer money they'd still be around. Even now the CEO overseeing bankruptcy has recovered 90 percent of customer assets. Their downfall was absolutely accounting shenanigans, not an issue with the core business. Their product was letting people take leveraged gambles on crypto, so arguably not a social good.

wpietri 3y ago
Exactly. It was an illegal casino dressed up as "investment", while also ignoring the regulations on investment. Part of their explicit plan was to use the house rake to give enough money to politicians that they'd retroactively legitimize themselves. It was an enormous social negative.
HDThoreaun 3y ago
I'm not sure it's so simple. There's a strong case to be made that Alameda was losing money as FTX's liquidity provider and without the alameda money FTX would have much, much lower revenue. I think it's hard to look at just one side of the business because they were so intertwined.

bjacokes 3y ago

There are plenty of never-profitable businesses that have gone bankrupt in the past. See e.g. pets.com from the dot com bust. And this downturn has seen "functioning" businesses like SVB and First Republic go under too. So I'm not sure this time is different, at least to the extent you're suggesting. I do agree that this era of low interest rates has led to some companies getting absolutely massive without ever turning a profit. But hey, that playbook worked for Amazon. Most tech companies have substantially lower capital requirements than WeWork, and can weather this sort of downturn as long as they have a reasonable cash position. Sure, Uber might not make back the amount of funding it's burned through, but that's different than it having a business where the unit economics will never work out.

wpietri 3y ago
You write in a tone of contradiction, but I'm having trouble understanding how your points relate to mine. I don't believe I said that never-profitable businesses were unique to this era, or that the only business failures lately have been ridiculous ones. I also think Amazon is distinct in that they chose to not have profits because they saw better uses for the money. Bezos could have declared big profits long before he did, and there was a noisy contingent of investors who were agitating for it. Bezos instead chose long-term investment in ways that upended our notion of commerce, and whose effects are still playing out. I think that's very different than WeWork and Uber, where a lot of investor money was burned on subsidizing the core business. At least in Uber's case there was a theory, which was basically, "Use the rise of mobile to capture the global taxi market (while externalizing the capital costs to the desperate) and then use pricing power to extract Google-size monopoly rents." Maybe not a great theory, but at least something articulable. Whereas WeWork never made any sense as a business beyond a hazy "Uber for offices" handwave.
- nojvek 3y ago
  Amazon is perhaps one of the best executed businesses. Their retail logistics physical footprint is insanely huge and chews billions in capital. They chose to reinvest their profits to stronghold their logistics position. In terms of warehouse square footage, they are the biggest by a wide margin (~320M sqft - probably more now) https://www.bigrentz.com/blog/amazon-warehouses-locations https://www.bigrentz.com/blog/amazon-warehouses-locations Now they're playing the card of AWS but for physical logistics. They're opening up their warehouses and logistics as a service to others. Every company ought to be investing it's profits for long term gains. The fact that Apple is sitting on so much cash that it doesn't know what to do is not a great play. I'm willing to bet that in 10 years, Amazon will be bigger than Apple in market cap.