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Comment by senko | Hacker News Reader

Yes, but: for a profitable organization a loss-leader is expected to enable profit-making elsewhere in the org, so a total sum ought to be positive.

For example, console hardware is loss leader for console makers because they make up for it for every game sold. Google Chrome and Android are loss leaders for Google, but are strategic assets protecting its revenue business.

In both cases, these companies can continue to do that indefinitely (as long as it makes business sense).

Venture-backed companies that are burning cash, on the other hand, are pursuing an unsustainable strategy of predatory pricing to kill off competitors and grab the most of the market.

(obviously, it's not either-or, you can easily name examples from long standing companies or startups doing either)

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This paper is not about grabbing most of the market etc and eventually making a profit. As the abstract quoted above says, it's about creating an illusion that this can be done so as to sell stock to a greater fool. Uber was quite successful at this, as were many others.

Really, from the pov of Travis Kalanick and the original funders, Uber is a fabulously successful business.

The original founders and the venture predators made their money. The professional execs at the top running the business now are also making lots of money. It doesn't matter to any of them what happens to competitors, employees and current shareholders.

> about creating an illusion that this can be done so as to sell stock to a greater fool.

Yup, that's the entire point of the paper (and it's really clearly written and approachable by non-experts!)

Parent was equating predatory pricing (in general) with loss-leaders, which have nothing to do with the subject of this paper.

Theres no difference between what you just described just that one has an umbrella where its funded by revenue elsewhere and the other is on VC dollars on the promise of long term ability for market share and raise prices or someone else buys organization and continues it as a loss leader for its ability to get market share.

Ones higher risk but quite similar.

Not sure what your point is to be honest

They are completely different financially. Look at this way: in a single quarter, the cash flow for a company with a loss leader strategy will still be positive because the loss product is offset by other revenue. The venture predation company will have a massive negative cash flow no matter what because there is no near-term revenue to offset the loss.

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