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>Under financialised logic it is absolutely immaterial whether Twitter, Uber or whatever make a penny. Ever. Or whether any of the stakeholders are served. The rules of traditional business go out the window.

What makes you think that shareholders in Twitter or Uber don't care that they'll never make a penny? They're not turning a profit now, but it seems at least somewhat plausible that they'll make money in the future. Under that assumption (ie. future expected earnings), it seems perfectly consistent with "rules of traditional business".

>Under that system, Uber is successful so long as the financial market says it is. When it decides it's not successful, it's not. One has to realise that a total detachment of political economics and power has taken place.

Congratulations. You just discovered "the price of something is what someone is willing to pay for it", not its actual utility.

I think stakeholders, not shareholders, was intentional. Stakeholders (users, advertisers, whatever) might not be well served by a lack of edit button or whatever, but that’s only very tenuously connected to company value.

Shareholders care that they make their pennies of course. That seems to be (part of) the observation.

(Which as you say isn’t earth shattering but still worth remembering when you start wondering “why the heck is this company worth so much?” Because people think so. That’s all.)

>Shareholders care that they make their pennies of course. That seems to be (part of) the observation.

I don't get it. The point of a company is to make money for its shareholders. This has been the case forever now, and certainly isn't caused by "financialised logic". I'd be interested to hear what the "rules of traditional business" (which presumably says that the point of a company isn't to make money for its shareholders?) that OP talked about is.

> The point of a company is to make money for its shareholders

It is from this premise that your other (mis)understandings arise. Returning to the OP question now, what do we mean by "successful"?

Here you go;

https://www.youtube.com/watch?v=nGbJYk-x1sc

It took me a while to seek to my mental pointer to this.

Wendy Brown is brilliant. But some caveats to try to encourage people to stay with it; The video is long. It's dry and academic. She's a classic leftie. The "business" under discussion is education.

But hidden within this is one of the most cogent explanations of financialised decorrelation of social and monetary values. (Brown's other writing on political science is also brilliant and worth the effort regardless of your actual personal political position.)

> What makes you think that shareholders in Twitter or Uber don't care that they'll never make a penny?

Who are "they"? Be specific. The shareholders can make a pretty penny while the companies never do. Because they're shareholders, not workers, or customers, or execs, or owners.

> what someone is willing to pay for it", not its actual utility

Pay for what? Please be specific. The service of the company or the value of its share?

You've really answered your own question. The "actual utility" of a share is nothing but it's propensity to go up. Financial markets don't care about anything else. Just don't be the shareholder left holding anything when the music stops.

>Who are "they"? Be specific.

The company.

>The shareholders can make a pretty penny while the companies never do. Because they're shareholders, not workers, or customers, or execs, or owners.

What are you arguing for here? In the first comment the problem seems to be that the company isn't profitable, but in this comment you the problem seems to be the fact that shareholders are making money but the "workers, or customers, or execs, or owners" aren't. Can you lay out your specific claims?

>Pay for what? Please be specific. The service of the company or the value of its share?

The principle applies to all goods/services, but in this case I was talking about the shares in the compayn.

>The "actual utility" of a share is nothing but it's propensity to go up. Financial markets don't care about anything else.

And what do you think that share prices are driven by? Do you think a few men in a smoke filled room arbitrarily set the price, making it go up and up?

The way you phrased your opposition made it sound like you think that shareholders care if a company has positive net income. However, the whole point of this discussion is that shareholders have no vested interest in the financials of the company in cases like Uber. There is really no correlation in these companies being more profitable and shareholder wealth. Generally the only money that goes to shareholders from a companies financial performance is dividends anyways, which obviously Uber would never do yet it made people rich.

>The way you phrased your opposition made it sound like you think that shareholders care if a company has positive net income.

Technically that's true, in the sense that at the end of the day, the only thing that matters is what their shares are worth, not how well the company is doing. However, the value that someone else is willing to pay for the shares can be expected to be based on how well the company is expected to do. There are exceptions to this, of course (eg. GME), but for uber it's at least somewhat plausible that their valuations can be justified by the expectation of future earnings. You don't have to agree with this, but a risky investment isn't evidence for "system in which the success or failure of a company is of no relevance to its "value"".

>However, the whole point of this discussion is that shareholders have no vested interest in the financials of the company in cases like Uber. There is really no correlation in these companies being more profitable and shareholder wealth. Generally the only money that goes to shareholders from a companies financial performance is dividends anyways, which obviously Uber would never do yet it made people rich.

The companies are being valued for their future profits.

I agree with your first point. I actually figured that we were in agreement here. I was just saying the phrasing of your comment is what triggered the clarifying questions, because I had the same clarifying questions when I first read your comment.

I would have agreed with you on your second statement back in the 90's in regard to companies being valued on their future profits mostly, but that's obviously not true anymore. I think Tesla is the most extreme example of this. You have a car company that has a 200+ p/e ratio and has an order of magnitude higher market cap then many of it competitors that sell more cars. I have heard it all about how they are an energy company or a battery company or a software company, but the reality is shareholders are gambling on Elon, and Tesla because it's popular. Tesla has proven no market that will grow their earnings 100x in the next 10 years that would warrant a risky technical based investment taking into account competitors. Honestly, it's the same as GE saying that in 10 years they will have a nuclear fusion reactor to pump their market cap by 10x putting them in line with Tesla, which is a more plausible scenarios than Tesla actually diminishing their P/E ratio through earnings growth in a meaningful way over that same period of time.

Actually GME is a perfect example of how the future profits expectations keeps stocks grounded in reality, otherwise GME would have kept going up. It was just a few gamblers that put it as high as it went, but ultimately forces brought it back down. Just like gravity, you cannot escape the fundamental forces grounding all objects.

> Congratulations. You just discovered "the price of something is what someone is willing to pay for it", not its actual utility.

There's a some truth to this comment, but only some. Your comment also accurately describes a ponzi scheme.

> They're not turning a profit now

Uber turned a profit in 2021Q2. [0] Twitter now has had many profitable quarters. [1] Of course, cumulatively, they are both money-losing, but I think the perception of these businesses as only having a 'plausibility' of making money is perhaps dated.

[0] https://www.macrotrends.net/stocks/charts/UBER/uber-technolo...

[1] https://www.macrotrends.net/stocks/charts/TWTR/twitter/net-i...

Your citation says they lost money.

You may be looking at "trailing 12 months" -- take a look at the quarterly charts, which do indeed report profits.

They lost over 20 billion dollars and made a meagre profit in one quarter of one year thanks to Uber Eats during the pandemic.

Ah, healthy business.

So made money on also questionable business on both supply, delivery side. And with actual cost realisation probably also on customer side. Doesn't look too healthy.

"Turning a profit" has almost no meaning, particularly with mark-to-market investments in the mix. More concretely Uber's business has never generated positive cash flow (i.e. taken in more money in a given period than they spent in that same period) and are projecting they will reach that milestone for the first time in Q4 of this year.

When talking about investments, "profit" is generally a synonym for "net income." Of course, many people may disagree on which specific income measure should really be used to represent the general concept of profit, but there are pretty good arguments for net income being that value. Investopedia [0] has an article that discusses the difference; Motley Fool [1] argues it's the same.

If we want to say that positive cash flow is a better measure here, you can argue that, but that wasn't the claim made in the comment I replied to.

[0] https://www.investopedia.com/ask/answers/122414/net-income-s...

[1] https://www.fool.com/the-blueprint/net-income-vs-net-profit/

A lot of movie productions infamously do not have positive cash flow. They deduct profits by creating artificial expenses charged by other companies providing services.

If they did have profits they’d get double taxed (once on the company’s profits and then again in payroll taxes if they decide to disburse profits to employees). They’d also have to pay out royalties on profits in some cases.

It’s usually pointless to look at reported profits from growth oriented startups, because if they reported income it means they are not properly reinvesting into growth (hiring engineers, bonuses for engineers, marketing, etc).

It’s much better to look at unit economics. Frankly, if cab companies made it work there’s no reason Uber cannot, and no reason the unit economics for Uber would be negative. It’s not as if Uber et al invented something new. They’ve basically improved almost every aspect of the taxi system it replaced, and done so with software technology so the marginal cost of the improvements is almost $0.

Just because the product is labor driven and low margin doesn’t mean it cannot be profitable. Amazon is a fundamentally low margin business as well (retail). The margins don’t matter so long as it can scale well, and software almost always does.

>A lot of movie productions infamously do not have positive cash flow.

You're confusing cash flow with declared income/loss. The shenanigans pulled on shows like "Columbo" and "The Rockford Files", resulted in high-quality, long-successful shows showing "losses" by the studio, are classic examples. Search on "Hollywood Accounting."

Corporations do the same thing via end of year bonuses and dividends. Those things are considered expenses too and can be used to offset income. If Uber is going to get taxed 20% on their excess income for the year or they can give out some bonuses to their employees, incentive bonuses to their drivers, and ramp up their marketing spend, what do you think they'll do?

You can't just declare 0 income. You have to actually spend it to declare 0 income.

Minor note that dividends are below the net profit line. You can't pay a dividend without profit.

> A lot of movie productions infamously do not have positive cash flow.

This is a nuance of an accounting trick used specifically in Hollywood and isn't relevant to this discussion whatsoever.

> It’s usually pointless to look at reported profits from growth oriented startups

Uber isn't a startup anymore. It's a publicly traded company.

> It’s much better to look at unit economics.

It's not. Unit economics are commonly used to drive an overall cash flow / profitable capability of most startups because their profitability is usually highly irregular when they are subscale. Unit economics are usually a proxy / indicator of gross margin and gross margin is an indicator of operating cash flow and/or net income.

> Just because the product is labor driven and low margin doesn’t mean it cannot be profitable. Amazon is a fundamentally low margin business as well (retail). The margins don’t matter so long as it can scale well,

Generally true, but there's a few things here that are important to consider:

- In most recent years, Amazon has started driving overall profitability via AWS profits which far outsize their retail/ecomm profits.

- What you're referring to specifically is free cash flow. From Bezos: "“When forced to choose between optimizing the appearance of our GAAP accounting and maximizing the present value of future cash flows, we’ll take the cash flows.” Jeff Bezos is very focused on this “absolute dollar free cash flow metric.” You will see many people talk about Amazon’s focus on “growth” vs. margins, but the right focus is instead absolute dollar fee cash flow."[0]

[0] - https://25iq.com/2014/04/26/a-dozen-things-i-have-learned-fr...

> Uber isn't a startup anymore. It's a publicly traded company.

THIS

I don’t get it. Even publicly traded companies try to zero out end of year profits via reinvestment and salary bonuses. If you did not then you accumulate unused cash which if you decide to pay out to employees later gets double taxed.

But in any case Uber’s industries are still highly competitive (ride sharing and food delivery), so there are plenty of ways for them to reinvest profits rather than accumulate a war chest like a company like Apple (which also was able to do partly because of a tax haven country).

Plus if Uber didn’t reinvest profits their hundreds of competitors would do that and get an edge, many of which are smaller private startups

> If you did not then you accumulate unused cash which if you decide to pay out to employees later gets double taxed.

This is precisely why you look at a Cash Flow statement.

>Uber turned a profit in 2021Q2

Yes, though read this, then do the math.

"Net income attributable to Uber Technologies, Inc. was $1.1 billion, including $272 million in stock-based compensation expense. Net income benefited from unrealized gains of $1.4 billion and $471 million due to the revaluation of Uber’s equity investments in Didi and Aurora, respectively." (Uber 2021Q2)

> What makes you think that shareholders in Twitter or Uber don't care that they'll never make a penny?

Well, do they believe they'll be able to sell their stock for more than they paid it?

Were they caught up in the excitement and bought the stock against better judgement?

So Uber is a Dutch tulip.

This is a brilliant explanation of financialisation.

> To answer this one must ask "What is financialisation?" The short answer is; a system in which the success or failure of a company is of no relevance to its "value".

Nonsense. Granted, with meme stocks, the price of a stock has been decoupled from any underlying notion of value, which is disconcerting (but driven by retail investors/gamblers, not by traditional investors).

But with Uber and many others, it seems reasonable to assume that the investors expect to recoup their money by (ultimately) earning dividends from Uber's successful operation, which is good old traditional finance.

There are two problems left:

1. It is conceivable that some early investors see that no sustainable profits might be possible, but still fund and develop the venture in order to sell it (at a higher valuation) to less sophisticated investors later (that don't see the limitations of the business model so clearly).

2. It is plausible that the entire business model is predicated on the idea of a predatory monopoly, ie driving out competition first and raising prices second.

Those are massive problems that need to be addressed with aggressive regulation, but they are not a consequence of "financialisation".

> Under that system, Uber is successful so long as the financial market says it is.

"The financial market" cannot just arbitrarily "say" what a company is worth (and definitely not in the long run) - there are just too many players.

That’s called speculation.

It’s more like a pyramid scheme: investors require more investors to get a good ROI when profit is irrelevant.

Edit: not=>more