Can you provide any examples of a high-profile company, ultimately shown to be dishonest, where the early investors were able to “cash out” before this dishonesty became known?
Explanation, since this is being downvoted.
Uber might not have lied about their business, but it surely looks like investors never cared about the businesses viability and rather only cared about being able to turn a profit on their investment (which was the point being made by the gp).
To this day, it is still not clear if Uber’s business model is viable. Also not to mention the original CEO/founder’s reputation and attitude, which the investors also didn’t care about until it became too big of a scandal. Additionally, the investors didn’t even care that Uber was technically illegal (same as Airbnb btw).
Some references:
https://techcrunch.com/2021/02/12/will-ride-hailing-profits-...
https://www.marketwatch.com/story/uber-and-lyft-are-staging-...
https://www.businessinsider.com/uber-company-scandals-and-co...
Uber runs the app. People call an Uber and they pay money. Some of that money goes to the driver and some goes to Uber. You’re really saying that Uber can’t collect enough money to run their computers and pay some staff? It just doesn’t make sense. Of course they can.
I worked on the long-term forecasting team while I was there. At least 5-6 years ago, Uber was very, very far from profitable. I can't imagine much has changed enough for it to make them profitable. Maybe with the new CEO things changed but I'm doubtful. That company had a slew of issues.
It was in the order of thousands (I think either $2k or $22k, sorry for the rounding error) per user signup that Uber paid in terms of marketing and advertising - and that was regardless of if they generated any money. It was way more for driver signups since the driving bonuses were pretty sizeable.
The amount of staff Uber has is way too much, in my opinion. Uber's internals are the definition of "over-engineered", to the point things were just too complicated for any single person to really work with, let alone understand to any degree. We had teams internally that were making the same thing but had no idea each other existed - and this happened pretty frequently.
There was a lot of turn and restructuring in upper management, not to mention pulling out of China and then having months in a row with almost daily sexual harassment/discrimination/bad CEO news stories breaking out. So the rest of the company was just kind of left to fend for itself for a long time, just burning even more money despite nothing getting released.
I knew one other engineer that... to this day, I'm not sure he even wrote a single line of code. He was always hanging around other people, wanting to chat. When you'd casually ask "so what are you working on these days?" he'd just shrug and smile. Never got a straight answer out of him. He was higher up in the ranks than I was, younger, assumedly paid more. Couldn't answer basic questions about writing code, but loved to brag about his new designer shoes and stuff. Just an anecdote.
It was insanity. Everyone I personally interacted with hated working there, and it was clear it was way too crowded. That, along with the marketing/ad spend, made me convinced Uber would never be profitable.
If that’s all you are doing, then yeah, that’s probably not profitable because competition would just eat your margins. You’re essentially a broker matching drivers with passengers, and they can use any service they want. They will choose the one with the lowest cost to use and that pays the most to serve i.e. they will use the one that leaves the least amount of profit for the broker.
Therefore Uber has to have some other value add, which will eat into profits (unclear what that could be, I think they were hoping it could be robotaxis); or, they have to spend massively in advertising to maintain mindshare, which will also eat into profits.
This is why they spend so much on advertising and expansion. They want to be the first player in town because when there are more players, it’s a race to the bottom. You can’t take out the advertising and expansion dollars and say they would be profitable without them, because those dollars are staving off competitors for as long as Uber can. Imagine a future where you have an “Expedia” of taxi services, that search dozens of providers and gives you the lowest one. That’s Uber’s future if they stop their spending.
The question of profitability then becomes: how can Uber justify its existence while staving off competitors, and can they manage this before going under? Maybe given an infinite time horizon and infinite VC cash, Uber could be profitable one day, but for now I don’t think it’s clear they are or will be soon.
So markets don’t exist? Businesses can’t exist in a market? This is economics 101. No wonder everyone is so off
But Uber doesn't want to be 1 of 1000 taxi players in a crowded market with no margins. They want to be taxi king of the world. How do they stay on top when every local municipality can hire some college kids to make a close facsimile to what Uber does? Sure maybe it's not as good as the Uber offering, but they don't have to support a global taxi empire, so they can offer their service for a lot less than Uber can. If that app takes hold in city X, why are people going to use Uber when they come to town 30% more expensive than your small town provider?
An issue with this line of thought is that you think that they could one day flip a switch and just like that stop expanding or acquiring new customers.
Two problems with that are: 1) most likely if they stop growing, they start shrinking - it’s not like they are the only ones out there doing what they do, and 2) a lot of their marketing and expansion expenses (as corroborated by the sibling comment) don’t go towards acquiring new customers, but rather new drivers, which given their turn over, they can’t stop putting money into.
So basically if they stop spending money on advertising and expansion, they will loose all their drivers and slowly churn customers as well.
Hence, it doesn’t matter if they could technically be profitable without advertising and expansion, because then their business becomes unviable.
Advertising is a core business expense for them needed to run the business.
And maybe Uber has already gotten as big as they will get. It doesn’t change the fact that they don’t need one billion dollars in advertising. And also, what you are asserting is that it’s impossible for a computerized taxi company to exist. So do you think it would be cheaper to have a human dispatcher? Obviously you can run a profitable taxi company. It’s been a thing for a long time and the computers aren’t making it any worse or more expensive I can assure you.
No, it’s a financial/accounting fact expressed by Uber themselves in their filings as a public company.
Having a business model (which is what you are describing), doesn’t make it profitable.
Hertz had a business model too, they owned cars, people rented cars and paid money for that. Are you saying Hertz couldn’t collect enough money to run their operations and pay some staff? Well they couldn’t, and they went bankrupt. They were also in the red for several years before the pandemic hit.
Uber still hasn't turned a profit, and might be able to soon via some creative accounting: https://gizmodo.com/uber-says-its-on-track-to-maybe-make-a-f...
When they first launched UberX in DC, I called them out for a price comparison of Taxi vs UberX that couldn't possibly be true. They quietly changed the blog post and marketing materials shortly after.
Yea that is what we discussing about Theranos. Theranos was an outright fraud. You cannot say the same about Uber whether they inflated or lied about their profits etc. Uber provides a real service and honestly a good one for people. Theranos on the other hand, played with people's lives by lying about their entire business model and product which never worked. Big difference.
I personally don't think it's the right way to do things. Big fraud, small lies (fraud), it's all pretty bad.
I strongly believe that you can challenge the status quo and abide by honesty and rule of law.
More like investors didn't care until they needed liquidity.
Most any company with ML or AI in their branding, running stupid amounts of CNBC ads and repeating their AI name 30 times during the ad.
0. https://www.ft.com/content/d32c8526-f555-11e9-b018-3ef8794b1...
The old political ways are not going anywhere anytime soon. The useful land is politically captured.
Hack the planet; have money = untouchable in our society.
After biological well-being, there isn’t much economic activity needed to sustain the species.
This is why the market went up during the lockdown but do nothing companies worth $75 a year ago are worth <$10 again.
At some point it just becomes keeping the simulation alive for the sake of those that benefit most from the simulation; these gods, then this god, then no god, we create value…
People actually rented WeWork properties and got a valuable service.
The problem was more or less shenanigans on the Exec. side, and unsustainable financial situation.
In that case, the 'consumers' actually end up ahead, with a cheaper services than otherwise, then investors lost.
From my understanding, WeWork was more of a working business that was overvalued and had a lot of self-dealing with the CEO (which I would characterize as embezzling, but may not legally have been.) Theranos invested their money in trying to make an impossible product, lying and failing at it the whole time.
But I could be wrong, sensationalist news headlines and such.
A company doesn't have to have an exit for early investors to get out. You just need to find a sucker to buy into a round later than you.
How to do that, in the modern context, is pretty clear. Either do it through outright fraud (Theranos, Nikola, MagicLeap), extreme FOMO (MagicLeap), or raising so much that you crush competition despite comically bad fundamentals and never get to unit-profitability (Uber, others).
Just example links, I think I'm not making any outrageous claims but that this has long been established and discussed here too many times:
https://stopswithme.com/exposing-big-tobacco/big-tobacco-fou...
https://www.theguardian.com/environment/2021/jun/30/climate-...
The investors already got theirs many times over.
I think you could also include any company that left what became a "super fund site" (US name, similar in other countries). They cannot have believed creating and leaving all that toxic waste in the ground would be a neutral action.
The canonical example would be Broadcast.com, which made Mark Cuban a billionaire.
https://en.wikipedia.org/wiki/Broadcast.com
1998 IPO at $1B valuation
1999 bought by Yahoo! for $5.7B
2002 shut down
https://en.m.wikipedia.org/wiki/Groupon#Initial_public_offer...