3 ms·

Multiple companies have turned into glorified financial firms with their core product becoming auxillary. Look at airline credit cards, Starbucks loyalty cards,

Multiple companies have turned into glorified financial firms with their core product becoming auxillary. Look at airline credit cards, Starbucks loyalty cards, Block's Bitcoin repository, AMZN investing in Rivian and so on.

adventured 3y ago
Starbucks is a terrible example. That's like claiming the Costco membership makes the Costco retail business the auxillary. Or that Kroger/CVS/Walgreens membership/rewards cards do the same for those retail businesses (when in fact all they do is drive higher rates of return visits and higher sales). The Starbucks business remains almost entirely their retail service business.
- coliveira 3y ago
  In fact, for all these companies the retail operation is a secondary business. Their main business is to prop up the stock. They do that using all kinds of accounting and financial tricks, the reward cards being one of them. These companies will do anything to increase short term valuation, such as stock buybacks (totally useless for the business), announcing vaporware/initiatives that have little impact on business but look good for investors, etc.
- fyrn_ 3y ago
  Costco is a terrible example for the point you are trying to make. Costco (rather famously) makes most of it's money from the membership. https://www.fool.com/investing/2019/02/13/how-costco-actually-makes-money.aspx https://www.fool.com/investing/2019/02/13/how-costco-actuall... In a way, the cheap bulk goods are just a way to convince people to get the membership.
  - b112 3y ago
    Not really. The card/membership is useless without the retail aspect.
    - actionablefiber 3y ago
      It is sort of like claiming Netflix is a membership-selling company that happens to run a streaming service. Though you could make this argument for gyms, which are notorious for selling a lot of memberships to people who lack/lose the motivation to use them.
  - smsm42 3y ago
    That sounds like "cars are just a way to make people come to the car dealership". Technically, this is true, but "just" here is not playing a good role. The whole point of the thing is the cheap bulk goods, so "just" is not really applicable there. You can't remove it without making all the rest utterly pointless.
philip1209 3y ago
Even technology feels a little bit like that. Anybody with moderate success - either as a founder or leader at a successful startup - seems to turn into an investor. Over time, the industry turned into an inverted pyramid with more money managers than operators. 2% management fees are easy money, and 20% of gains encourages gambling. So much capital burning a hole in the pockets of novice investors drove bad investments, and ultimately the most recent financial downturn happened as LPs wised up. We glorify operators who keep operating - such as Elon, Zuck, and Bezos - but, few people seem to do it. Long live the operators.

adventured 3y ago

Starbucks is a terrible example. That's like claiming the Costco membership makes the Costco retail business the auxillary. Or that Kroger/CVS/Walgreens membership/rewards cards do the same for those retail businesses (when in fact all they do is drive higher rates of return visits and higher sales). The Starbucks business remains almost entirely their retail service business.

coliveira 3y ago
In fact, for all these companies the retail operation is a secondary business. Their main business is to prop up the stock. They do that using all kinds of accounting and financial tricks, the reward cards being one of them. These companies will do anything to increase short term valuation, such as stock buybacks (totally useless for the business), announcing vaporware/initiatives that have little impact on business but look good for investors, etc.
fyrn_ 3y ago
Costco is a terrible example for the point you are trying to make. Costco (rather famously) makes most of it's money from the membership. https://www.fool.com/investing/2019/02/13/how-costco-actually-makes-money.aspx https://www.fool.com/investing/2019/02/13/how-costco-actuall... In a way, the cheap bulk goods are just a way to convince people to get the membership.
- b112 3y ago
  Not really. The card/membership is useless without the retail aspect.
  - actionablefiber 3y ago
    It is sort of like claiming Netflix is a membership-selling company that happens to run a streaming service. Though you could make this argument for gyms, which are notorious for selling a lot of memberships to people who lack/lose the motivation to use them.
- smsm42 3y ago
  That sounds like "cars are just a way to make people come to the car dealership". Technically, this is true, but "just" here is not playing a good role. The whole point of the thing is the cheap bulk goods, so "just" is not really applicable there. You can't remove it without making all the rest utterly pointless.

philip1209 3y ago

Even technology feels a little bit like that. Anybody with moderate success - either as a founder or leader at a successful startup - seems to turn into an investor. Over time, the industry turned into an inverted pyramid with more money managers than operators. 2% management fees are easy money, and 20% of gains encourages gambling. So much capital burning a hole in the pockets of novice investors drove bad investments, and ultimately the most recent financial downturn happened as LPs wised up. We glorify operators who keep operating - such as Elon, Zuck, and Bezos - but, few people seem to do it. Long live the operators.