Thread by @timoreilly

I’m totally on board with many of the principal observations of this article. In fact, they echo arguments from my article on Blitzscaling in Quartz back in February. But I’m not sure the economic analysis is correct. More in followup comments.

https://twitter.com/pomeranian99/status/1136652947075547137

First off, here is my piece on Uber as an example of what’s wrong with blitzscaling, in case you haven’t read it, to make sure you understand that I’m entirely on board with much of the criticism in the American Affairs piece. bit.ly/2TMBerU

That being said, I think that the American Affairs is too negative on the possibility of these companies achieving profitability. If you take out the enormous amount spent on hype-driven R&D, and on growth marketing and passenger subsidies, drivers could take more of the pie.

The problem is the financial model that shoots for the stock price rather than an operating business as the real target, leads the company to value growth over profits, thus squeezing the drivers for profitability while continuing to subsidize riders.

If @uber and @lyft hadn’t been treated as financial instruments rather than companies, they would have grown more slowly, there would have been more competition, and the companies would have had to discover the right balance between rewarding drivers and rewarding passengers.

That is to say, the problem is not with @uber or @lyft per se, or with the technology (which is far from as thin as the authors pretend), but with the financial incentives that our current stock market mania provides. Let’s fix that, and start valuing “real companies” again.