> As a layman, it still blows my mind that giant companies can operate at such a massive loss for so long, seemingly without any road to profitability.
This is the effects of quantitative easing on our economy. We wanted to hypercharge our economy and encourage investments after the 2008 crash, but now things have become too bubbly. A lot of these companies that exist today are functionally useless / wastes of money / wastes of time for everyone involved.
I feel like the rising interest-rates will fix the problem. The price of "future money" is going up. Just a "little bit of profits" (or even operating for a loss) will be much harder moving forward.
Wasn’t QE introduced to deal with the last round of this? I think the real problem has been the way wealth has been concentrating since the 1980s — the thing all of this has in common from the dotcom bubble on has been wealthy people sitting on huge piles of cash but looking for high return “investments” rather than building real businesses. The first real estate bubble was fueled in part by the large sovereign oil funds looking to recoup their losses from the dotcom bubble, and that’s the same source as much of Uber’s funding.
A carbon tax would help with that one in particular but it’s seemed for a while that we just need more pure taxation on passive returns & wealth to discourage accumulation on that scale. The economy just doesn’t work efficiently with a handful of people making so many decisions, especially when they mostly weren’t capable of making that much money with their own skills.
> Wasn’t QE introduced to deal with the last round of this?
The opposite. QE is an inflationary policy, much like lowering interest rates. As the central bank buys up debts in the open market, QE makes loans easier, meaning more companies get cheaper debt to finance their operations.
That is: QE inflates the bubble further. Arguably needed in the 2010-era to help us recover from the 2008 recession, we are beginning to see the ill-effects of this policy today. Which is fine, there's a time and place for all of these policies, and the rising interest rates will counteract the ill effects of that.
Its a question of "how hard to push the deflation buttons". Pushing too hard risks a difficult recession, pushing too lightly means inflation will get out of whack.
> QE inflates the bubble further. Arguably needed in the 2010-era to help us recover from the 2008 recession, we are beginning to see the ill-effects of this policy today.
This is what I was referring to: my understanding was that QE was used to take most of the sting out of the 2008 collapse, but a key driver of the mortgage fraud was all of the people who lost money on unwise dotcom decisions seeking more “safe” higher-yield investments than actually existed.
I think it's the "go big, or go home" mentality. Companies with this strategy are all desperate to get global market share. It's obviously a gamble, and one that can pay off.
> It's obviously a gamble, and one that can pay off.
It pays off better when loans are at 0.25% rather than at 3%.
This crap wouldn't fly in the 1980s economy of 15%+ interest rates. No one would fund your company when you can just make 15% on US Treasuries instead.
Mobility startups in particular keep failing, and new ones keep getting funded.
My daft question is why? Why do they keep betting on the same losing horse.
I often joke that my humble little website is massively more profitable than a few of those companies combined.