SoftBank’s losses reveal Masayoshi Son’s broken business model

True in the short term, imagine if a company becomes so dominant that little competition exists and little interest exists to create competition ( search engine ? ) that they can set the price they want. Then you are stuck paying whatever they demand obviously within reason . at 100 for a 5 min ride will entice some competition

It's called dumping. You have artificially low costs temporarily in order to put competitors out of business. Once that's achieved, you then increase prices.

I'm actually not sure how dumping would work when done by Uber, though. Individual taxi drivers will go out of business, but there's little barriers to entry to new taxi drivers starting out again once Uber starts to flex its pricing power. Of course the picture changes if Uber starts to lobby for regulatory protection. You have to look at the micro details of the market to see whether there's a problem there.

When Uber has wiped out half of the taxi industry and has made public transit infrastructure and development non existent, what you are left with is a damaged society.

When WeWork buys hundreds of properties and prevents companies from establishing their offices in the city center, making you even more dependant on cars and leaving a dead city center, what you are left with is a damaged society.

When DoorDash forces thousands to live a precarious life, surviving only by delivering orders 16 hours a day to barely make minimum wage when taking into account gas and depreciation of your car, forcing small restaurants to lower their prices or close (because they cannot ever match the economies of scale of McDonald's), what you are left with is a damaged society.

It is a form of social dumping, of selling at a loss, and only benefits you for a very brief moment, before leaving with with a damaged society. Then, the options are, the company succeeds and inevitably raises their prices threefold to make up all of that lost money, fucking you over, or the company fails, and all your infrastructure is gone.

They don't need hand holding. I don't give a shit about their well being. They need hand cuffing, to protect our society from their destructive practices.

Imagine having a competitor receiving billions to take over the market, no oversight. They can afford to operate at a loss long after all competitors are bankrupt.

Competing against them would be foolish.

To get an idea of long term damage, imagine Uber and Lyft went bankrupt as they're running at a loss, what would you then use for transportation?, or imagine they 5-10 the price, not like you have alternatives. Sure, the taxis were crappy as alternative, but that was mostly due to limited number coming from regulation, they had no need to compete either.

Have you tried Uber lately?

It used to be way cheaper than taxi's, and you'd reliably get one much faster than calling a cab or trying to hail one.

Now they've approached monopoly and need to actually start becoming profitable, it's become as expensive if not more expensive than taxi's. Plus for anything other than very long rides at surge prices you will get repeatedly cancelled, over and over.

I have just gone back to calling or hailing cabs.

You could indeed make the same argument about those products, it seems to me? We might've had much better alternatives to those products if they hadn't.

Predatory pricing is a very real component of monopolization, and can thus result in antitrust inquiries.

Tech companies DO get involved in these lawsuits from time to time.

There is no difference. That should also be stopped. Though good luck with the millions Google spends on lobbyists according to Opensecrets.

Analytics is a special case because the metrics they got from it can be fed into their advertising system to better deliver ads. They may have run it "at a loss" but they did it for data that they certainly made a profit off of.

Google's a publicly traded company which is profitable in other areas. Search can carry the load financially while they achieve market dominance in other areas.

This model is based on removing public market forces on a company while the company bleeds money in order to achieve dominance.

W/R/T other SaaS companies doing the same, SaaS startups exit strategies include acquisition that D2C business don't really have. Who's going to be big enough or see enough value in buying Uber/WeWork/Doordash to augment their current offerings? Amazon can't buy them all at the peak of their valuation.

This. The disease is gross wealth inequality that leads to a certain sector of society having to figure out where to put all that money while the bottom 99.99% are facing real problems.

It's important to understand that SoftBank is no ordinary bank; while it had been a reasonably successful bank, the distortion truly began with the Saudi government turning up and asking them to invest $200bn for them.

There simply isn't $200bn of real positive capturable return investment opportunities out there available at once. Anything physical would be hopelessly bottlenecked by its own size and would be unable to scale rapidly enough for the investors. So it had to be thrown at all these hugely speculative projects with the goal of capturing entire markets.

The real problem is that, due to a century of fossil fuel dependence, there's a huge amount of wealth concentrated in weird desert monarchies.

It’s a huge problem in the sense that these companies destroy a lot of otherwise viable businesses.

It shouldn't matter if they were successful or not, the method is, as parent wrote, sustainable and has no place in a supposedly stable economy.

Just like a robbery is illegal no matter if it was successful or not.

Plenty of other companies employ the same tactic but within one company and calling products "loss-leaders". Microsoft can run GitHub without making any profits with GitHub itself, as they can spend money earned elsewhere on running GitHub as a "loss-leader", just in order to push out any competitor that doesn't have a huge corporate behind them.

It is only a relatively small problem, because the guy at the helm appears to be not sufficiently successful with his approach. That said, he did have some notable wins ( Alibaba comes to mind ), so whether we discount is as luck or something else, the approach mirrors venture's unicorn search ( 19 will be busts, but one will be a massive payoff ).

Separately, just because Son is losing a lot does not mean that a better equipped investor won't try to do the same, but better. At that point, this strategy would absolutely be an impediment to regular consumer.

> But he utterly failed. All he did was redistribute investor money into consumer pockets(and weirdly distort some markets in ways that are difficult to understand).

One might argue that the effects of "gig economy" and similar "modern tech" companies on local economies are damaging as well, beyond "weird distortions":

- residents suffering from noise and rising rents thanks to AirBnB and copycats

- taxis going out of business because they can't compete with Uber leading to people depending on regulated, discrimination-prevented taxis having issues, and to people in "high demand" situations like airports or event venues being squeezed for their money

- restaurants, many of which were already at the edge of financial survivability prior to COVID, facing extortion by delivery apps - either use them and depend on them, or having the delivery apps simply subsidize your competition until you go broke

- employees of all these companies who end up with down-pressure on their wages, and city governments with funding issues because employment tax income collapses as well, and as a result of that everyone else because governmental services degrade

Someone will always pay for the supposed "inefficiencies" that cut-throat capitalism "identifies" - and in almost all cases it is those at the lowest rungs of society that bear the worst load.

I would not minimize the amount of damage done to transportation, hospitality and dining, considering the importance of those industries in a lot of cities.

Softbank radically destabilized several economic sectors in an attempt to monopolize them. That kind of thing used to be a crime, and it should be again.

> But he utterly failed.

Maybe. If so, we're talking about a single investor out of at least hundreds that have similar, if not so insane, models. They work out fine, many of those posting here work for a company funded by such back in those days.

In the late 90's/early 00's it was interesting to see which sites took off and which did not. I owned a hosting company and was fairly active in the community. It was an open secret that the giant sites of today were simply losing money on a monthly basis due to infrastructure costs with rich investors picking up the tab.

Other competing bootstrapped companies with regular Joe founders simply could not keep up when their competitors could simply burn $100k/mo in bandwidth and server bills while instead they needed to be responsible with sustainable growth. I had more than a handful of founders/company owners who had previously perfectly sustainable models built up over half a decade only to be crushed by loss-making VC money.

I often wonder how much different the Internet would look like if a startup remained a startup, and not some high finance big business industry that took over the title.

That's not all. Softbank's oversized investments into hype machine companies drove investors away from funding legitimate companies in those spaces. The approach of throwing huge sums of money at dubious companies is a huge tax on innovation.

I believe Son has succeeded with this strategy if the bar for success is him getting rich and getting others rich. In the early 2000s he came from nothing, made a fortune, lost it all, and then remade it again. But at the end of the day, his strategy essentially hypes a company which then IPOs and he offloads his risk to the general public. He might be a good example of survivorship bias, how many have tried this very same thing only to fail miserably?

> and weirdly distort some markets in ways that are difficult to understand

The hypocrisy of social engineers presently touting outcome-based economic management policy generally (doesn't apply here apparently, or maybe that's HN selection bias), and the general lack of antitrust enforcement post Nixon don't have something to do with it?

> Its questionable if the consumers are hurt, as basically SoftBank is subsidizing the consumers.

This subsidization is not free though. They are distorting and ruining markets in the process. Driving actually profitable competitors out of business, then collapsing themselves.

I started using Uber in April 2014. As a blind person I have taken 2047 trips for a total of 9379 miles. Contrary to your hypothetical, Denver still has its original terrible taxi companies, and Uber is still a good deal, 8 years later. Heck, the Taxi companies are actually now better because they provide apps, something that they were super reluctant to do before Uber because it removed the excuse of the broken credit card reader. Anyone remember that one? I'm so tired of people pointing at theoretical harms like this rather than evaluating the actual situation. If you had told me 10 years ago that I could press a button on my phone and be guaranteed to be picked up, rather than calling some creepy cab company at 2 AM and being told that someone would be there in 30 minutes and having to wait all night, I would still find that hard to believe. And yet, here we are.

Another thing that really grinds my gears is seeing people cite how there are more emissions now because more people are using Uber. Buddy, that's me you're talking about. My Uber is making those additional emissions. Because in the old days I was trapped at home without easy access to transportation and now I can travel anywhere in the city at any time just like you can, which means I went from producing 0 emissions to actually, you know, living my life.

> grow so big so fast you consume the entire market

That isn't the unpopular part. The derided part is doing so with poor unit-economics. You still need to make a profit or what is the point?

Another big difference is that is very common to run at a loss early on in the life of startup ... but when examined more closely the marginal costs should still make sense. If you are small enough that R&D overhead, or hiring ahead of revenue (growth investment) is overshadowing the top-line ... well that is the just normal startup finances. But there still needs to be a business model where it will make sense with enough sales, and the cost will have sub-linear growth relative to the revenue.

No one has demonstrated anything. SoftBanks portfolio has taken a hit, but it is hardly a nail in the coffin. Son's actions have generated enormous wealth gains for the people he backs, but in the end the public eats a majority of the losses. Son has still made billions and billions using this model, so how can you say it does not work? You would have to look at funds that tried this same thing and went bankrupt.

Sure one colossal gain on investment can recoup all bad investments but if you are responsible investor you don't throw $300 million at pets.com like ideas. If idea sounds cool on the paper it doesn't mean it will work in the real life necessarily.

> as companies that implode tend to do so quickly,

Isn't the point that the financed companies are able to burn cash for years?

Which part of Yahoo do you mean? They bought out a lot more of Yahoo Japan from Yahoo/Altaba before merging it 50/50 with LINE (which you pointed out they owned a significant stake of).

> this is happening on a global scale and all major currencies do it (USD, CNY, EUR, JPY)

This is nonsense. Mathematically. OP argues Japanese companies print “a foreign currency profit for head office that requires converting foreign currency into” a falling local currency. That can’t simultaneously be true of the U.S. dollar and Japanese yen. If one currency is falling the other is rising.

This applies to most all major Japanese companies. There have been two notable cases of non-Japanese execs rising to CEO, Carlos Ghosn of Nissan and Michael Woodford of Olympus, and both ended up as cautionary tales of what happens when you refuse to be just a pliable figurehead and try to effect real change.

I mean, that should work as long as they are also good at identifying talent. There are plenty of Japanese people who are very good at their jobs, and being racist (if we're going to rely on pure pragmatism) doesn't in itself make management incompetent. The problem is that the line of thinking that makes racism sound like a good idea is one that also leads to other poor decisions.

I am pointing out one of the many side effects of this policy.

31 years and they still haven’t figured out a way forward. We are all in the same mess, Japan’s situation is just ahead of us. I think their situation is our future. A stagnant economy of zombie companies, a government & central bank playing endless games to avoid collapse and crisis. They will keep this going as long as possible.

I hope they do, it would be an instruction manual for us all, but each decade that passes dims my hope.

We've been here before many times in history. Some debt gets repaid, some is inflated away, some defaults.

The real crisis won't be in developed countries because whether you like it or not, you need to borrow and spend in their fiat to do business and EVERYONE wants to do business in developed countries. The crisis will be in emerging markets where no one will be willing to lend if rates hit 5% in the US.

This is the case for any economy which relies on the easy extraction of cheap but ultimately finite energy/resources.

Debt is a human constraints that could be erased by a the stroke of a pen. Sure with political consequences, but civilization have endured these kind of consequences before. Debt have been erased, new currencies erected.

Once you run out of oil though... You can't legislate for tractors to run on good will to feed the planet.

I am way more worried of actual physical constraints and the consequences of reaching them (ecosystem collapse, political extremism, wars) than our self imposed idiotic economic models.

But no. Money is just a way invented to distribute production that human society invented. Debt is a mercantile, then capitalist tool to push toward creating productive assets (see venitian shipowners or textile factories before the industrial revolution). It now have new use with the banking system, but obligations are still basically the same.

Also, while i would rather we don't use debt, it's not at all fueling growth. Growth is fueled by energy use (productivity increase is marginal at best), and growth create liquidity needs, which is either resolved by money printing or by debt. So it's backward.

With the hippie forest life; you get to have a big pack of dogs and spend time playing with them. the other options leave less time, even for playing with your family. I say bolt for the woods ASAP.

To start understand how deep the rabbit hole goes: browse "common" share-holders of starbucks (is their another type of shares than "common" for starbucks?).

Then you get the usual vanguard and blackrock ppl: microsoft CEO, apple, etc. I am surprised not seeing somebody from google (since they were vanguard-ed/blackrock-ed too).

Then on this page, you can see that starbucks has MASSIVE debts, then they have gigantic interests to pay all along the calendar year. Those are huge streams of money going to... wait... oh, we don't know, the debt owners are not provided.