Why Do So Many Famous Companies Lose Billions Every Year?
Not making money is the new making money
Uber reported a $1.1 billion net loss in Q3 2020.
Pinterest burned $208 million in Q4.
Airbnb lost $696 million for the year.
Snapchat lost $944 million in 2020.
Don’t blame the pandemic.
These companies have been losing money for years:
Airbnb lost $135 million in 2015, $136 million in 2016, $70 million in 2017, $16 million in 2018, and $674 million in 2019, with total cumulative losses since 2008 totaling $2.8 billion.
Take a look at Snapchat’s performance:
This company is supposedly “worth” $120 billion.
It’s the same for Blue Apron, Casper, Lime, Dropbox, Lyft, Peloton, Slack, Wayfair, WeWork, Deliveroo, SoundCloud, Ocado, Zillow — pretty much every company you know that was started in the past decade or so — all of them went public for billions despite losing vast amounts of money.
According to one IPO specialist, “In 2018, 81% of U.S. companies were unprofitable in the year leading up to their public offerings.”
The real question is: How the heck do these companies still exist?
Financialization
“We used to build things in this country, now we just stick our hands in another guy’s pocket.” — Frank Zbotka, The Wire
All of these companies are based on somewhat cool ideas and have good-looking brands, but they’re not groundbreaking patentable innovations that won’t eventually face brutal competition, host revolts, and democratic backlash. Plus, their underlying business model is fundamentally unsustainable.
Yesterday’s biggest companies used to own assets and create goods and services. Today’s biggest companies own almost no assets and produce neither goods nor services, but instead act as middlemen who take an irrationally large cut for their minor role in the process.
