<story><title>WeWork and Counterfeit Capitalism</title><url>https://mattstoller.substack.com/p/wework-and-counterfeit-capitalism</url></story><parent_chain><item><author>streetcat1</author><text>The only difference between wework and amazon is the way they finance their money-losing ventures.&lt;p&gt;Wework does that via the private market, hence the game is up when it needs access to the public markets.&lt;p&gt;Amazon does that via AWS. AWS is the money that fuels the eCommerce side. The game will be up when:&lt;p&gt;1) Kubernetes will move AWS customers back to on-prem, or at least turn clouds into a commodity. Amazon knows that and this is the reason for the push toward lockin (aka lambda &amp;#x2F; serverless).&lt;p&gt;2) Amazon will be divided into two companies.</text></item><item><author>hef19898</author><text>Totally agree with the last pint, people completely tend to ignore the effort and attention to detail Amazon puts into executive and planning. That plus a very sound strategy. Also Amazon was profitable, even if just barely, for the most time while growing appr. 20% constantly. Not comparable to, say, WeWork from what I know. But it shows how powerful that narrative can be.</text></item><item><author>resfirestar</author><text>&amp;gt;The difference is Amazon saw what the marginal costs could be, and had a specific roadmap to drive investment into bringing them down. WeWork fundamentally has no way to drive down the margin on real estate in any meaningful way. Especially as a lessee.&lt;p&gt;That&amp;#x27;s what the article says:&lt;p&gt;&amp;gt;At first, with companies like Walmart and Amazon, predatory pricing can seem smart. The entire retail sector might be decimated and communities across America might be harmed, but two day shipping is convenient and Walmart and Amazon do have positive cash flow. But increasingly with cheap capital and a narrow slice of financiers who want to copy the winners, there is a second or third generation of companies asking Wall Street to just ‘trust me.’&lt;p&gt;It&amp;#x27;s not that WeWork is the same as Amazon, it&amp;#x27;s that WeWork is symptomatic of a bubble caused by investors looking to copy Amazon&amp;#x27;s success without understanding why it succeeded.</text></item><item><author>legitster</author><text>&amp;gt; WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses.&lt;p&gt;&amp;gt; This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market.&lt;p&gt;This is wrong, wrong, wrong. The difference is Amazon saw what the marginal costs could be, and had a specific roadmap to drive investment into bringing them down. WeWork fundamentally has no way to drive down the margin on real estate in any meaningful way. Especially as a lessee.&lt;p&gt;&amp;gt; The goal of Son, and increasingly most large financiers in private equity and venture capital, is to find big markets and then dump capital into one player in such a market who can underprice until he becomes the dominant remaining actor. In this manner, financiers can help kill all competition, with the idea of profiting later on via the surviving monopoly.&lt;p&gt;A bold assumption with no citations. There are just as many counterfactuals to this strategy as there are examples. The scooter market is an especially bad  - there is so much capital from so many companies - if you were trying to establish monopolies that would be a bad bet.&lt;p&gt;&amp;gt; Endless money-losing is a variant of counterfeiting, and counterfeiting has dangerous economic consequences. The subprime fiasco was one example.&lt;p&gt;The subprime crisis is completely unrelated! And if anything it was proof that &lt;i&gt;money-making&lt;/i&gt; assets should be scrutinized more.&lt;p&gt;WeWork is a garbage, charlatan company. But don&amp;#x27;t misunderstand what is happening here.</text></item></parent_chain><comment><author>chx</author><text>Kubernetes is only a threat in that it is a buzzword much as cloud is a buzzword. The cloud and Kubernetes both are used to sell a triple fallacy: You need to care about scaling from day one, there is an easy way to scale, this way is the cloud&amp;#x2F;Kubernetes.&lt;p&gt;For almost all startups their app would run comfortably on a single dedicated server. This has been true for many, many years but only the YAGNI greybeards would go with it. Maybe two HA but even HA is overhyped, it&amp;#x27;s cheaper to be down. Down is part of this industry, you &lt;i&gt;will&lt;/i&gt; be down in many circumstances anyways so perhaps don&amp;#x27;t chase a unicorn? Of course, above a certain size, two servers make sense but ... don&amp;#x27;t overdo it even then. You don&amp;#x27;t need microservices, you don&amp;#x27;t need containers. All of this is unnecessary hype. (And yes, both of you who works at a large enough company where being down is enough of a problem that it worths engineering about: good for you. I have architected a Top 100 website myself and we still didn&amp;#x27;t use more than a dozen servers and that included the staging infra.)&lt;p&gt;Gary Bernhardt of WAT fame from 2015 &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;twitter.com&amp;#x2F;garybernhardt&amp;#x2F;status&amp;#x2F;600783770925420546?lang=en&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;twitter.com&amp;#x2F;garybernhardt&amp;#x2F;status&amp;#x2F;600783770925420546?...&lt;/a&gt;&lt;p&gt;&amp;gt; Consulting service: you bring your big data problems to me, I say &amp;quot;your data set fits in RAM&amp;quot;, you pay me $10,000 for saving you $500,000.&lt;p&gt;Very strongly related: a terabyte of RAM in just 16 modules so it fits most server boards is now under $5000 &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;memory.net&amp;#x2F;product&amp;#x2F;p00926-b21-hp-1x-64gb-ddr4-2933-lrdimm-pc4-23466u-l-quad-rank-x4-replacement&amp;#x2F;&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;memory.net&amp;#x2F;product&amp;#x2F;p00926-b21-hp-1x-64gb-ddr4-2933-l...&lt;/a&gt;&lt;p&gt;Final shot, codinghorror of StackOverflow fame: &lt;a href=&quot;https:&amp;#x2F;&amp;#x2F;twitter.com&amp;#x2F;codinghorror&amp;#x2F;status&amp;#x2F;347070841059692545&quot; rel=&quot;nofollow&quot;&gt;https:&amp;#x2F;&amp;#x2F;twitter.com&amp;#x2F;codinghorror&amp;#x2F;status&amp;#x2F;347070841059692545&lt;/a&gt;</text></comment>
<story><title>WeWork and Counterfeit Capitalism</title><url>https://mattstoller.substack.com/p/wework-and-counterfeit-capitalism</url></story><parent_chain><item><author>streetcat1</author><text>The only difference between wework and amazon is the way they finance their money-losing ventures.&lt;p&gt;Wework does that via the private market, hence the game is up when it needs access to the public markets.&lt;p&gt;Amazon does that via AWS. AWS is the money that fuels the eCommerce side. The game will be up when:&lt;p&gt;1) Kubernetes will move AWS customers back to on-prem, or at least turn clouds into a commodity. Amazon knows that and this is the reason for the push toward lockin (aka lambda &amp;#x2F; serverless).&lt;p&gt;2) Amazon will be divided into two companies.</text></item><item><author>hef19898</author><text>Totally agree with the last pint, people completely tend to ignore the effort and attention to detail Amazon puts into executive and planning. That plus a very sound strategy. Also Amazon was profitable, even if just barely, for the most time while growing appr. 20% constantly. Not comparable to, say, WeWork from what I know. But it shows how powerful that narrative can be.</text></item><item><author>resfirestar</author><text>&amp;gt;The difference is Amazon saw what the marginal costs could be, and had a specific roadmap to drive investment into bringing them down. WeWork fundamentally has no way to drive down the margin on real estate in any meaningful way. Especially as a lessee.&lt;p&gt;That&amp;#x27;s what the article says:&lt;p&gt;&amp;gt;At first, with companies like Walmart and Amazon, predatory pricing can seem smart. The entire retail sector might be decimated and communities across America might be harmed, but two day shipping is convenient and Walmart and Amazon do have positive cash flow. But increasingly with cheap capital and a narrow slice of financiers who want to copy the winners, there is a second or third generation of companies asking Wall Street to just ‘trust me.’&lt;p&gt;It&amp;#x27;s not that WeWork is the same as Amazon, it&amp;#x27;s that WeWork is symptomatic of a bubble caused by investors looking to copy Amazon&amp;#x27;s success without understanding why it succeeded.</text></item><item><author>legitster</author><text>&amp;gt; WeWork then used this cash to underprice competitors in the co-working space market, hoping to be able to profit later once it had a strong market position in real estate subletting or ancillary businesses.&lt;p&gt;&amp;gt; This is of course Amazon’s model, which underpriced competitors in retail and eventually came to control the whole market.&lt;p&gt;This is wrong, wrong, wrong. The difference is Amazon saw what the marginal costs could be, and had a specific roadmap to drive investment into bringing them down. WeWork fundamentally has no way to drive down the margin on real estate in any meaningful way. Especially as a lessee.&lt;p&gt;&amp;gt; The goal of Son, and increasingly most large financiers in private equity and venture capital, is to find big markets and then dump capital into one player in such a market who can underprice until he becomes the dominant remaining actor. In this manner, financiers can help kill all competition, with the idea of profiting later on via the surviving monopoly.&lt;p&gt;A bold assumption with no citations. There are just as many counterfactuals to this strategy as there are examples. The scooter market is an especially bad  - there is so much capital from so many companies - if you were trying to establish monopolies that would be a bad bet.&lt;p&gt;&amp;gt; Endless money-losing is a variant of counterfeiting, and counterfeiting has dangerous economic consequences. The subprime fiasco was one example.&lt;p&gt;The subprime crisis is completely unrelated! And if anything it was proof that &lt;i&gt;money-making&lt;/i&gt; assets should be scrutinized more.&lt;p&gt;WeWork is a garbage, charlatan company. But don&amp;#x27;t misunderstand what is happening here.</text></item></parent_chain><comment><author>rossdavidh</author><text>It&amp;#x27;s interesting that you bring up the importance of AWS to Amazon, nowadays, because...companies like Uber, Lyft, and WeWork spend a lot on AWS.&lt;p&gt;In other words, like Yahoo getting a lot of their late-90&amp;#x27;s advertising from dot-com bubble companies that evaporated in 2001, AWS is massively exposed to the current bubble in &amp;quot;we have so much VC cash we don&amp;#x27;t know what to do with it&amp;quot; companies.  When that goes away (i.e. the next downturn), AWS will lose a huge chunk of their business all at once.  It will be interesting to see what Amazon&amp;#x27;s bottom line looks like at that point.</text></comment>