This works in a vacuum, but in many industries you get undercharging and living off investments, be it Uber or a gajillion startups, many of them mentioned here on HN.
I'd like an economic system where the companies that offer the best goods and service at the right price grow and succeed. I've heard this is how capitalism is supposed to work, but more and more it seems the key to success is currying favor with the wealthy and capturing a market through external means.
The logic is quite simple: by undercutting your competition, you aim to quickly drive others out of business and secure a monopoly. Once in such a position, making a profit becomes much easier.
If i start offering $5 oil changes (oil included, price difference covered by VC money), that's good for the consumer... then all the other shops close down, but consumers still get the $5 oil changes... then I hike the price, and only then people start to complain. And if you close me then, who will change your oil?
Imagine government banning google for offering free email and killing most of the competition back then... people would complain, a gigabyte was a HUGE amount of space for then, and all that for free!
In general, they arent and companies that remain unprofitable dont stick around in the long term.
You also need to be aware that there are different ways to calculate profitability, so not all of the headline losses mean what you might think.