Keep in mind that this "free" money comes from somewhere.
It comes from the people who can't get a fixed rate home loan or HELOC that get screwed when the economy tanks and their interest rises above 7% and they lose their home.
It comes from the people paying 30% interest on credit cards or 400+% on payday loans.
It comes from workers in China and India that get paid pennies on the dollar and can't get a loan over $1000 so have to work themselves to death for the West's ambition.
To see the world's capital potential squandered on new locator/ride share/service apps with valuations larger than the industries they're replacing is..
OBSCENE
The only thing propping this mobile/social bubble up is that unemployment is so low that people are too busy to realize how badly they're getting screwed by Wall Street.
This is not cheap money, this is dumb money.
When powerful people make stupid decisions, most people will, nevertheless, copycat their wrong decision.
One way or another, reality will smack us in the face and a reckoning will come.
The sad part is that those stupid powerful people will be hit much less than the populus they enslave.
Yeah. Unfortunately. Imagine what we could accomplish if we just redirected some of this dumb money into "dumb" things...like education, infrastructure, health care, battling climate change. But nope, walls, drones, and tech bubbles.
== Higher taxes, more research to prove not "where" to spend the money, but "on what, specifically?".
Ever the problem with government and social science - government is dependent on social science to conduct studies that provide that tax dollars are well spent, and then also required to convince the electorate of the value of that expenditure. It's a tough problem with no easy answers. Effective politicians tend to create public sentiment and then find evidence. Effective outcomes would dictate the order be reversed.
> Effective politicians tend to create public sentiment and then find evidence
It's really stunning when you consider that blowing a trillion dollars on a new fighter jet needed essentially zero popular support, but funding education is somehow so loony that it requires a solid political majority to even think about.
Well that would be true, the largest stock holders are board members so they tell the board to buy stocks, which they happen to have a large position to sell..
When you get to be an old person you start to notice patterns.
Whenever people start sayin "what if [cyclical bad thing] actually never happens again and the happy times are permanent because of [tenuous reasoning]" loudly and in public then it's inevitable that we're about to see the problems currently being created in secret by people who've had that delusional point of view for awhile.
Well of course the thing that's been missing is the periodic reckoning, a recession or a bear market. Much like exploring away from the coast, if you're guaranteed to have nice weather you have more to gain by going further out.
> This is why Uber is worth more than all of the auto makers and taxi companies that own their own fleets of cars.
I think this is bullshit. Uber may be worth more than auto makers, but this is a bubble and will not last (unless uber manages to create an autonomous taxi service in the next few years). They were just lucky and intelligent enough to get around regulations, but regulations are catching them.
Uber's tech is simple and easily replicable. The moment they raise their prices, they loose their market share. There is no network effect in this market.
It is simply obvious that Uber provides much less added value than any automaker.
In summary, the article argues that some platforms, such as Uber, benefit far less than others (such as Amazon, AirBnB) from network effects due to the fact that their userbases are clustered over multiple locations :
> Drivers in Boston care mostly about the number of riders in Boston, and riders in Boston care mostly about drivers in Boston. Except for frequent travelers, no one in Boston cares much about the number of drivers and riders in, say, San Francisco. This makes it easy for another ride-sharing service to reach critical mass in a local market and take off through a differentiated offer such as a lower price.
The article raises others points and is quite an interesting read in itself. Strongly recommended.
I'm not sure this is the main cause, but it's an interesting point of view.
For Amazon, their Network effect is huge because they have a huge delivery and storage facility network. The barrier to entry is huge.
For Airbnb, it might be closer to what this article is saying. But also it's less convenient for home owners to have their location on multiple sites (need to sync calendars, the subscription takes much longer...). So they pick one, which is Airbnb.
> Uber's tech is simple and easily replicable. The moment they raise their prices, they loose their market share. There is no network effect in this market.
I disagree that there is no network effect. When one travels to another country it is much easier to use Uber rather than to find what local brew of 'carpooling' service is available, create an account, put in credit card info etc.
Their tech is easily replicable but their global presence is not.
People who frequently travel to a bunch of different countries are a tiny niche market. The vast majority of ride sharing customers take few or zero international trips per year.
That isn't so much a network effect as it is burning money on 6 continents. If Uber isn't the most cost effective solution at home there isn't much incentive to use it abroad either.
I've been in lots of places - pre Uber - where I didn't even speak the local language. Even then finding a taxi was not taxing. If Uber can't make a profit on local traffic it is going to be a mighty feat if they make money off non-local traffic.
Doesn’t really match my experience at all visiting a city without Uber (Barcelona).
Driver took advantage of their complicated fare system to add supplement charges that didn’t apply: charged us the baggage supplement for our backpacks that we carried in the car, and charged us a supplement for going to the train station, which should only apply from the train station.
The local taxi authority requires us to complain by post with an original receipt.
The postage costs of sending that with tracking defeats the purpose.
Most people wouldn’t even realize they were overcharged, after all, we paid what was on the meter. And issuing receipts is only by request.
We don’t have enough data to determine if the driver was excellently skilled or suicidal.
Meanwhile with Uber, you get a fancy receipt emailed to you listing route/charges, a sensible (if unregulated) complaints process, and ratings from other riders.
I agree that they need to be profitable in order for this to matter. If they were, it would help with local traffic too as people would still prefer to only have one app installed. In my city there is a concurrent company that pays taxes locally and almost all of the drivers work for both Uber and them. I still sometimes order rides through Uber because of habit.
Well it can't be that obvious that Uber is overvalued. Are you of the belief that all the big players/investors betting on Uber are missing what you consider to be obvious? Or do you think everyone's just trying to time the bubble collapse...?
I think it's not quite that simple. In the end run up to a bubble, there's a lot of money floating on big bets. Some of them are going to pay off. Most won't. Maybe Uber will. Maybe it won't. They say future value is priced into a stock, and this is where margin for error is the highest.
I think smart money in Uber recognizes their position as a gamble.
Regularly you hear about hundreds of millions being poured into companies like Uber and self driving tech companies. At least one of those companies is going to win big, and investors don't want to miss out.
Right, but that's not the points that the article made. Article's author proposed that THE reason, (not A reason) for airbnb's high value is because cheap money makes non-physical assets expensive. You're explanation was that cheap money makes for "big bets", and stocks can price the future in.
Your answer is good. I agree. The stock market is Vegas. The stock market fueled by cheap money, is Vegas times a billion.
Uber's tech is simple and easily replicable. The moment they raise their prices, they loose their market share. There is no network effect in this market.
Ppl said the same about Facebook in 2006-2012. "Anyone can make a social network." Yes, the technology can be replicated but the network and market-share cannot.
I have Lyft and Uber on my phone. I just pick the cheapest one when I need a ride.
And drivers also have Lyft and Uber. And they just pick the one that offers them the highest rates.
There's still a network effect; it's just a duopoly. The third outfit trying to make this work can't, because they don't have anyone with their app on the phone, because they don't have any drivers, and they don't have any drivers because nobody wants to drive for them because they don't have any customers.
Seems like it would be trivial for someone to do exactly what Uber has done - pick a location and undercut everyone on price using predatory
pricing. People will install a new app for a buck or two savings, and drivers will install a new app to get a 5% raise.
The same can be said for web shops like Amazon. The tech is nothing special, but the brand and network are. The promise of Uber is in becoming a trusted brand, with capacity everywhere, and convenient enough that you don't bother looking to the competition. That said, whether they can actually become this is another question.
Sure, but what I'm saying is: the largest value is in having won the hearts and minds of their customers (brand value). Amazon are often more expensive than competitors, but customers still prefer them because they know and trust the experience they will get.
Prime lock-in is not innovative or valuable as a concept in itself, it's just a way of capitalising on the loyalty of their customers, which would not work for many other retailers.
Isn't the reason it's worth more because they figured out a way to grow the pie? The amount of people using taxi services has exploded due to Lyft & Uber (reliable ondemand, good customer service, low prices, etc). Similarly many people in cities are forgoing car ownership due to these on demand taxi services. So no, not obvious it provides much less added value.
"If Ford Motor were a savvier marketer of their stock, which has changed hands at more or less the same price for twenty years, they’d be calling buyers of their cars a user base and the cars themselves would be rechristened “physical mobility apps."
I don't think I would ever buy a car that was described as a "physical mobility app" as it would imply to me that the people running that company had forgotten what it was they were actually manufacturing.
If you want to sell cars, then sell cars. If you want to sell shares at an inflated valuation, sell a "physical mobility app", as the buzzwords will help you land the sort of investors that prefer hearing a story over fundamentals.
People were saying this 20 years ago during he dotcom boom, but they called it 'mind share' and 'the new economy'.
>Capital is Now Free, Have Fun
lol what. Credit card interest is higher than ever. Small business loans are still expensive. Yeah, maybe capital is cheap if you're a multinational or the us govt. but it's still expensive for most. Treasury bonds yields are not a proxy of how much business lending costs. Rather, a better estimate would be junk bond yields.
I'm not familiar with this writer, but it sure reads like a giant troll and shill for tech stocks. He's right about one big thing though: there's too much money in circulation, and it causes asset bubbles in weird, useless shit like Uber stock and shitcoins; whatever has the PR megaphone. When the next collapse comes, I'm guessing before or shortly after the next US Presidential election, I'd rather hold value stocks. Actually, I'd rather hold foreign real estate.
Trend following is great; you have to sell at the right time though.
There's not "too much money in circulation." There's too much money in the hands of the wealthy who have nothing genuinely productive to do with it.
That same money in the hands of those who are currently barely scraping by—or not even scraping by, homeless or heading that way—would make a real difference in their lives, and would be spent on truly useful and absolutely mundane things.
All right: there's too much money going into asset bubbles instead of ordinary people. Same difference. Economists love it, as asset bubbles don't look like inflation, and deck shuffling counts towards GDP.
"This question is being answered on Wall Street every day, even if the participants are not aware of it."
This is basically the deal with MMT too. We talk about the defacto status quo reality like it's a hypothetical and not actually describing current unstated practice. "What happens" is what's happening right before our eyes. The question, as always, is for how long it will last. It's been >20 years of saying "this isn't normal," so when is it?
The use of hyperbole in this article is a little bit cloying and unnecessary.
The author is asking "where is value [or asset] investing?". I think the question begging to be asked here is " how has the definition of _value_ changed?" We should instead be engaged in an investigation of how value and it's perception has changed.
> "You don’t go home to Greenwich from your Park Avenue office in a good mood when the market makes it a point to remind you of how vestigial your skills have become, day after day after day."
Keep in mind that this "free" money comes from somewhere.
It comes from the people who can't get a fixed rate home loan or HELOC that get screwed when the economy tanks and their interest rises above 7% and they lose their home.
It comes from the people paying 30% interest on credit cards or 400+% on payday loans.
It comes from workers in China and India that get paid pennies on the dollar and can't get a loan over $1000 so have to work themselves to death for the West's ambition.
To see the world's capital potential squandered on new locator/ride share/service apps with valuations larger than the industries they're replacing is..
OBSCENE
The only thing propping this mobile/social bubble up is that unemployment is so low that people are too busy to realize how badly they're getting screwed by Wall Street.
This is not cheap money, this is dumb money. When powerful people make stupid decisions, most people will, nevertheless, copycat their wrong decision. One way or another, reality will smack us in the face and a reckoning will come. The sad part is that those stupid powerful people will be hit much less than the populus they enslave.
Yeah. Unfortunately. Imagine what we could accomplish if we just redirected some of this dumb money into "dumb" things...like education, infrastructure, health care, battling climate change. But nope, walls, drones, and tech bubbles.
== Higher taxes, more research to prove not "where" to spend the money, but "on what, specifically?".
Ever the problem with government and social science - government is dependent on social science to conduct studies that provide that tax dollars are well spent, and then also required to convince the electorate of the value of that expenditure. It's a tough problem with no easy answers. Effective politicians tend to create public sentiment and then find evidence. Effective outcomes would dictate the order be reversed.
> Effective politicians tend to create public sentiment and then find evidence
It's really stunning when you consider that blowing a trillion dollars on a new fighter jet needed essentially zero popular support, but funding education is somehow so loony that it requires a solid political majority to even think about.
Agree. Major difference between already having budget and getting budget allocated.
Well that would be true, the largest stock holders are board members so they tell the board to buy stocks, which they happen to have a large position to sell..
When you get to be an old person you start to notice patterns.
Whenever people start sayin "what if [cyclical bad thing] actually never happens again and the happy times are permanent because of [tenuous reasoning]" loudly and in public then it's inevitable that we're about to see the problems currently being created in secret by people who've had that delusional point of view for awhile.
Yes. I saw a Fed Reserve big-wig say in a closed room that they'd conquered the business cycle ... just before the dotcom bust.
Well of course the thing that's been missing is the periodic reckoning, a recession or a bear market. Much like exploring away from the coast, if you're guaranteed to have nice weather you have more to gain by going further out.
> This is why Uber is worth more than all of the auto makers and taxi companies that own their own fleets of cars.
I think this is bullshit. Uber may be worth more than auto makers, but this is a bubble and will not last (unless uber manages to create an autonomous taxi service in the next few years). They were just lucky and intelligent enough to get around regulations, but regulations are catching them.
Uber's tech is simple and easily replicable. The moment they raise their prices, they loose their market share. There is no network effect in this market.
It is simply obvious that Uber provides much less added value than any automaker.
Many people comment under your message that Uber benefits from captured market shares and network effect. In this regard, the following article https://hbr.org/2019/01/why-some-platforms-thrive-and-others... (posted here a week ago https://news.ycombinator.com/item?id=20142912) can be of interest.
In summary, the article argues that some platforms, such as Uber, benefit far less than others (such as Amazon, AirBnB) from network effects due to the fact that their userbases are clustered over multiple locations :
> Drivers in Boston care mostly about the number of riders in Boston, and riders in Boston care mostly about drivers in Boston. Except for frequent travelers, no one in Boston cares much about the number of drivers and riders in, say, San Francisco. This makes it easy for another ride-sharing service to reach critical mass in a local market and take off through a differentiated offer such as a lower price.
The article raises others points and is quite an interesting read in itself. Strongly recommended.
I'm not sure this is the main cause, but it's an interesting point of view.
For Amazon, their Network effect is huge because they have a huge delivery and storage facility network. The barrier to entry is huge.
For Airbnb, it might be closer to what this article is saying. But also it's less convenient for home owners to have their location on multiple sites (need to sync calendars, the subscription takes much longer...). So they pick one, which is Airbnb.
> Uber's tech is simple and easily replicable. The moment they raise their prices, they loose their market share. There is no network effect in this market.
I disagree that there is no network effect. When one travels to another country it is much easier to use Uber rather than to find what local brew of 'carpooling' service is available, create an account, put in credit card info etc.
Their tech is easily replicable but their global presence is not.
People who frequently travel to a bunch of different countries are a tiny niche market. The vast majority of ride sharing customers take few or zero international trips per year.
That isn't so much a network effect as it is burning money on 6 continents. If Uber isn't the most cost effective solution at home there isn't much incentive to use it abroad either.
I've been in lots of places - pre Uber - where I didn't even speak the local language. Even then finding a taxi was not taxing. If Uber can't make a profit on local traffic it is going to be a mighty feat if they make money off non-local traffic.
Doesn’t really match my experience at all visiting a city without Uber (Barcelona).
Driver took advantage of their complicated fare system to add supplement charges that didn’t apply: charged us the baggage supplement for our backpacks that we carried in the car, and charged us a supplement for going to the train station, which should only apply from the train station.
The local taxi authority requires us to complain by post with an original receipt.
The postage costs of sending that with tracking defeats the purpose.
Most people wouldn’t even realize they were overcharged, after all, we paid what was on the meter. And issuing receipts is only by request.
We don’t have enough data to determine if the driver was excellently skilled or suicidal.
Meanwhile with Uber, you get a fancy receipt emailed to you listing route/charges, a sensible (if unregulated) complaints process, and ratings from other riders.
I agree that they need to be profitable in order for this to matter. If they were, it would help with local traffic too as people would still prefer to only have one app installed. In my city there is a concurrent company that pays taxes locally and almost all of the drivers work for both Uber and them. I still sometimes order rides through Uber because of habit.
Network effect is more than none, but less than all.
Lyft is also around, and it seems that there is very little friction for both drivers and riders to choose/arbitrage.
I have had opposite experience in Japan
Well it can't be that obvious that Uber is overvalued. Are you of the belief that all the big players/investors betting on Uber are missing what you consider to be obvious? Or do you think everyone's just trying to time the bubble collapse...?
I think it's not quite that simple. In the end run up to a bubble, there's a lot of money floating on big bets. Some of them are going to pay off. Most won't. Maybe Uber will. Maybe it won't. They say future value is priced into a stock, and this is where margin for error is the highest.
I think smart money in Uber recognizes their position as a gamble.
Regularly you hear about hundreds of millions being poured into companies like Uber and self driving tech companies. At least one of those companies is going to win big, and investors don't want to miss out.
Right, but that's not the points that the article made. Article's author proposed that THE reason, (not A reason) for airbnb's high value is because cheap money makes non-physical assets expensive. You're explanation was that cheap money makes for "big bets", and stocks can price the future in.
Your answer is good. I agree. The stock market is Vegas. The stock market fueled by cheap money, is Vegas times a billion.
I find the article lacking. And I'm being polite.
I believe they are making a very risky bet (like VC always do, and when it pays off they get huge reward which cover the other losses).
Their bet is on Uber reaching autonomous taxi service. Without this Uber stands no chance in the long term.
Alternatively, perhaps the big players just don't care. They're about making money NOW, not 2 months or 2 years from now.
Uber's tech is simple and easily replicable. The moment they raise their prices, they loose their market share. There is no network effect in this market.
Ppl said the same about Facebook in 2006-2012. "Anyone can make a social network." Yes, the technology can be replicated but the network and market-share cannot.
Technology being simple is not the argument here.
Of course a social network has by definition a network effect, no one argued this.
Uber is definitely not a social network. Maybe they plan to become one, but they are not yet.
What network?
You've got the customers because they know you've got enough drivers. You've got the drivers because they know you've got enough customers.
I have Lyft and Uber on my phone. I just pick the cheapest one when I need a ride. And drivers also have Lyft and Uber. And they just pick the one that offers them the highest rates.
No network effect here.
There's still a network effect; it's just a duopoly. The third outfit trying to make this work can't, because they don't have anyone with their app on the phone, because they don't have any drivers, and they don't have any drivers because nobody wants to drive for them because they don't have any customers.
Seems like it would be trivial for someone to do exactly what Uber has done - pick a location and undercut everyone on price using predatory pricing. People will install a new app for a buck or two savings, and drivers will install a new app to get a 5% raise.
> Uber's tech is simple and easily replicable.
The same can be said for web shops like Amazon. The tech is nothing special, but the brand and network are. The promise of Uber is in becoming a trusted brand, with capacity everywhere, and convenient enough that you don't bother looking to the competition. That said, whether they can actually become this is another question.
Amazon is so much more than a "web shop"... its logistics infrastructure alone is worth actual money, to say nothing of AWS, Prime lock-in, etc.
Sure, but what I'm saying is: the largest value is in having won the hearts and minds of their customers (brand value). Amazon are often more expensive than competitors, but customers still prefer them because they know and trust the experience they will get.
Prime lock-in is not innovative or valuable as a concept in itself, it's just a way of capitalising on the loyalty of their customers, which would not work for many other retailers.
Isn't the reason it's worth more because they figured out a way to grow the pie? The amount of people using taxi services has exploded due to Lyft & Uber (reliable ondemand, good customer service, low prices, etc). Similarly many people in cities are forgoing car ownership due to these on demand taxi services. So no, not obvious it provides much less added value.
"If Ford Motor were a savvier marketer of their stock, which has changed hands at more or less the same price for twenty years, they’d be calling buyers of their cars a user base and the cars themselves would be rechristened “physical mobility apps."
I don't think I would ever buy a car that was described as a "physical mobility app" as it would imply to me that the people running that company had forgotten what it was they were actually manufacturing.
If you want to sell cars, then sell cars. If you want to sell shares at an inflated valuation, sell a "physical mobility app", as the buzzwords will help you land the sort of investors that prefer hearing a story over fundamentals.
People were saying this 20 years ago during he dotcom boom, but they called it 'mind share' and 'the new economy'.
>Capital is Now Free, Have Fun
lol what. Credit card interest is higher than ever. Small business loans are still expensive. Yeah, maybe capital is cheap if you're a multinational or the us govt. but it's still expensive for most. Treasury bonds yields are not a proxy of how much business lending costs. Rather, a better estimate would be junk bond yields.
Capital is cheap for investors ;-)
I'm not familiar with this writer, but it sure reads like a giant troll and shill for tech stocks. He's right about one big thing though: there's too much money in circulation, and it causes asset bubbles in weird, useless shit like Uber stock and shitcoins; whatever has the PR megaphone. When the next collapse comes, I'm guessing before or shortly after the next US Presidential election, I'd rather hold value stocks. Actually, I'd rather hold foreign real estate.
Trend following is great; you have to sell at the right time though.
There's not "too much money in circulation." There's too much money in the hands of the wealthy who have nothing genuinely productive to do with it.
That same money in the hands of those who are currently barely scraping by—or not even scraping by, homeless or heading that way—would make a real difference in their lives, and would be spent on truly useful and absolutely mundane things.
All right: there's too much money going into asset bubbles instead of ordinary people. Same difference. Economists love it, as asset bubbles don't look like inflation, and deck shuffling counts towards GDP.
1999 called. It wants its bubble back...
"This question is being answered on Wall Street every day, even if the participants are not aware of it."
This is basically the deal with MMT too. We talk about the defacto status quo reality like it's a hypothetical and not actually describing current unstated practice. "What happens" is what's happening right before our eyes. The question, as always, is for how long it will last. It's been >20 years of saying "this isn't normal," so when is it?
The use of hyperbole in this article is a little bit cloying and unnecessary.
The author is asking "where is value [or asset] investing?". I think the question begging to be asked here is " how has the definition of _value_ changed?" We should instead be engaged in an investigation of how value and it's perception has changed.
He's describing Whuffie - https://www.amazon.com/Down-Magic-Kingdom-Cory-Doctorow/dp/0...
> "You don’t go home to Greenwich from your Park Avenue office in a good mood when the market makes it a point to remind you of how vestigial your skills have become, day after day after day."
This is poetry.
There is textbook investment strategy (turtles) and indicator that trades exactly the strategy this article says "no textbook" recommends.
Seems bubbly.
wonderfull reading i'm sharing this with my friends