I don't see many victims here at all. All of these people are greedy and wanted to believe they found the easy way to prosperity.
Entrepreneurs don't need to spend decades figuring out how to turn a profit, they can be billionaire overnight without any profit. Saudis don't need their society to evolve past their barbaric/archaic way of life, they can just give all their money to someone else who will make money for them off global technological advances, no progress at home required. Hotel owner doesn't have to keep struggling the way he always has, these people will guarantee him profit no toil required. Workers don't need to get crappy entry-level job like everyone else, they can do this new thing that's easier and pays better.
Just a get rich quick scheme implemented globally in a more sophisticated and grown up way.
11
Left workers in a hole and the economy subject to much sharper swings in a downturn? I feel the next recession will be very different, because these Oz-like firms will just turn off the workers overnight. There is so little dragging their behavior – severance payments, notice requirements, empty real estate to be disposed of, etc.
3
Greed overrules common sense.
6
how have people not learned to run far, far away whenever someone starts dangling "guaranteed" income in front of them. that's ponzi scheme 101-talk
15
Typical selection bias for any tech related article from this paper- never focusing on the progress and efficiency that new technologies provide, but only on the negative aspects.
2
With a name like"SoftBank" would we expect anything less?
3
Mr. Son sounds a lot like Mr. Trump.
3
Compass and WeWork, both Ponzi schemes.
Both CEOs are Israel who just head overseas with boatloads of cash and there’s not much we can do about it.
We need a political revolution in this country. This type of capitalism is bad for the vast majority of humanity.
11
Great reporting here.
It describes an ecosystem of failure - whereas the SoftBank fund loses billions, the companies such as Uber lose billions, contractors are lured by good terms which are subsequently cut by up to half, and asset owners are lured by terms and then trapped by debt when promised payments cease.
Instead of Schumpeter's 'creative destruction', we simply have destruction (in the name of disruption). The only winners in sight are early investors and founders who cash out (see WeWork), but everyone else loses big.
I'm hoping that SoftBank will not succeed in raising another large fund, the world cannot afford it!
7
Seems we never learn - if it sounds too good to be true, it is.
4
Of the 16 companies on the table, 6 are delivery and 7 are bus/truck/ride hailing. The rest is one each in hotel booking, real estate brokerage, and dog walking.
Aside from being generally low-margin to start with, these businesses don't really require capital, especially since they don't own the fleet of vehicles or the hotels. Also they don't really benefit from being big, since each is heavily dependent on the individual driver and local traffic patterns.
Why is SoftBank even in these companies at all?
8
Someone ought to point out the connection between rapid growth and metastasizing.
Neither ends well.
7
It seems like the biggest problem is that at the end of the day these companies have bad, unprofitable business models. If the numbers don't make sense while they are currently paying basement prices for labor how on earth are they going to make more sense down the road from now? These are unsustainable businesses that are inevitably going to fail.
35
For the first time in the history of humanity, we are running into a problem that would have seemed unthinkable a hundred years ago: the world has too much capital. The rich and the ultra rich are looking for more and more places to put their capital to get a return. This is going to hurt the ones without capital in significant ways. This article is one of the first to highlight what will become more and more common in the coming years.
77
@Sirlar
Too much disproportionately distributed capital. If Amazon workers were paid fairly and Bezos wasn’t investing their wages in finding cheap uninsured alternatives to Fed Ex who rightfully told him to find a new contract this wouldn’t be happening. It will our committed involvement in the legislative process to get Sanders, Warren and an army of like minded Congressman and legislators to fix our unchecked laws.
43
@Sirlar
Actually, in the 16th Century you will note that Spain had too much capital (basically mountains of silver, and some bold basically stolen from South America) At that time the value of silver and gold were, for all practical purposes, the same. Spain invested, but also borrowed heavily against future deposits of silver - which eventually dried up. When the flow of capital (against loans) went south Spain went broke, and never recovered. Sounds like a lesson here.
15
@Schedule 1 Remedy
Sanders has been in Congress forever. One wonders why he hasn't accomplished the fix on our unchecked laws? Oh, wait. Sanders is one of those who makes the unchecked laws. Paraphrasing Einstein with great liberty, " Sanders is part of the problem, not the part of solution."
9
SoftBanks Vision Fund, while noble sounding in its intentions, is slowly being revealed as the get-richer-quick scheme that it really is. Growth only makes sense when it is fueled by profit. I can understand the idea behind rapid growth - absolutely flood the market to bar any competitors from entering a space, make the company synonymous with the product.
It might make sense in a manufacturing context, where leveraging economies of scale can bring down costs - but so many of these investments are in the service industry. You can’t lower the cost of people, and SoftBank has been subsidizing labor cost with their investments. How can you possibly turn that around into profitability after growing so massively? None of the hard decisions to control cash flow have been made along the way.
For SoftBank the answer is go public and cash out. Fortunately Wall Street seems to be wising up to the reality of these start ups.
138
@NJR SoftBank actually had to write off a massive loss on WeWork, which they totally deserved after inflating its value so high. Neumann walked away with a golden parachute that shone even by our crazy capitalist standards: a $1.7 billion payout! The real sympathy lies with the workers and contractors that has their businesses go under, their company shares become useless, and their jobs lost.
But that's a great point on manufacturing and profitability. Everyone kicked the last one down the road and assumed it'll either magically come at some point or they could focus on trimming costs later in the business. Only after providing the service they did, any trimming of costs would have had their customers revolt.
13
@NJR To be fair, venture capital funds have never pretended to not be get rich quick schemes.
9
Who wouldn't want to own a business where you have virtually no risk with limited capital expenditures or fixed costs, pay your workers nothing, and can still extract the vast majority of revenue without any hope of seeing an ROI for years -- if ever? Softbank takes a $4.6B write off on WeWork including paying off Adam Neumann $1.7B for his spectacular upwards failure. And the music keeps playing. The "We" culture has infected our global economy and it's all going to collapse on all of us.
125
@Eric Why are investors allowed to take a tax write off while paying out 1.7 billion to the person responsible for the failure/write off? There needs to be major tax overhauls. Ok, that was extremely obvious, but to the average person it is insane that this is even allowed. Rewarded for failure? And his big idea was pretty lame. Lease space and then sub lease it, wow brilliant. No one in New York has ever done that. I don't see any brilliant forward thinking in any of these companies.
20
There are a lot of individuals / institutions where we can point the finger at for the plight of the Gig Worker:
The Gig Economy - Gig economy businesses use technology to flout labor laws and then sell themselves to the public as "innovation". VC money enabled them but they're the primary actor
Regulators / Lawmakers / Govt - For not standing up to the gig economy early and allowing these companies to classify their workers as "independent contractors"
VCs - For investing recklessly into money losing gig economy businesses.
Investors into VC funds - For paying exorbitant fees to VCs who make reckless investments into money losing gig economy businesses.
Central Banks - For keeping interest rates low for more than a decade, spurring investors to take risk in search of an adequate return
The Gig Worker themselves - The promises of the Gig Economy falls on continuing investor appetite to fund growing but money losing gig economy businesses. That's not that hard to see so can the Gig Worker be 100% innocent?
Perhaps a more productive exercise is figuring out who enabled the Gig Economy but doesn't suffer from its collapse. It's that link where the system gets distorted and fails
35
There are a couple issues here. Overcapitalization, is probably the most important globally. Too much money chasing too few opportunities leads to bad decisions. Post WWII prosperity was largely based on technologies developed during the war including materials science, transportation, data processing, communications, and others including probably most importantly, globalization.
We’ve since cashed in on these, building huge cash hoards chasing few “new” opportunities. Some areas have continued to innovate and add new technologies but we aren’t developing new ones at the same rate as in the past. We’ve extracted most of the benefit from those industries that can use automation/tech. We’ve seen growth in other/offshore economies, but some of that was fueled by displaced productivity from the US plus native growth. Even the latter is slowing as e.g. China fills its citizens’ needs.
The next issue is the excess/unused capacity. Uber doesn’t invent anything or add capacity; it uses existing underutilized driver/auto capacity and monetizes it using data processing plus the willingness of private persons to use their own assets and time for additional income. Most of the startups mentioned in this piece appear to do that.
These kinds of things quickly reach saturation and don’t add capital assets. They don’t innovate, make anything or add skills needed to build for the next century. SoftBank was the latest dumb bank to step in. As to people impacted: buyer beware of easy money.
17
I was a vendor for several years for Compass and it was interesting to watch the company morph from a cutting-edge, new wave brokerage who cared about its listings and its employees to a giant, irresponsible, greedy company.
In the beginning of my work with them, they had all the beautiful properties, put a lot of energy and money into elevated and cohesive branding, hired the best people and treated them thus and always paid on time and were pleasant to work with.
By the time our relationship ended, the listings were bottom-of-the-barrel, the marketing efforts for them were schlocky, the tech wasn't working on site for brokers, the new brokers were shady and unprofessional, I had to harass them to ever get paid and they had stacked the various teams at corporate with aggressive, unprofessional sharks.
Huge influxes of cash doesn't inherently create value. Corporate emperors also have no clothes.
63
Two points to make here.
First, Softbank’s investment strategy is next to nonexistent. Looking at their quarterly report, I question the due diligence taken on their investments. Oversimplified and overestimating itself while turning. It smells of a disaster waiting to happen once the bubbles start to pop.
Secondly, people need to be paying attention to the source of investment funds. Much of Softbank’s capital came from Saudi Arabia? Softbank’s major US investments include both Uber and Wework. Focusing on Uber...we are allowing the exploitation of Americans and devastation of established taxi networks for the benefit of foreign investors? To me that’s the real story here.
I think it’s time we start looking to see the makeup of the investors and shareholders of the companies and corporations which have systemically brought down the US middle class. I wouldn’t be shocked to find that the dwindling middle class has happened for the benefit of foreign nationals.
6
The honeymoon seems to be over for SoftBank
Management, as their main fundings from the Golf States take a closer look what they are doing with their money and put on the brakes after the We work Desaster , where they were lucky , not to take a total loss on their investment.
2
Pay checks to drivers, rent to landlords and free meals are not capital investments. They were meant to be short term to gain user adoption. The problem is that profits don't scale with user adoption since more user = more costs with no efficiency savings. It is not like a website like facebook where the more users you have, the more ad revenue you get while keeping costs steady.
3
Perhaps I am dense, but I don’t understand investing billions of dollars in companies that do nothing but lose money. These companies are valued at 50 billion but lose billions every quarter (see Uber and WeWork). Can someone explain to me how this can be?
5
@Kb Pump and dump. Sell the illusion of potential future profit and the valuation keeps going higher and higher. "Uber just needs AI/self-driving car tech to advance a bit more and then they'll be printing money....profitability is just around the corner, we just need a little more cash to keep us going until we reach that tech breakthrough."
Of course, breakthrough is actually decades away. But at some point you cash out and some other "investor" is left holding over priced shares for a company that can't turn a profit. Now it's their turn to drive that valuation higher so they can cash out.
8
Are governmental and non-profit -- non-capitalist --versions of Soft Bank feasible?
1
@Lady from Dubuque Yes. In fact, the Chinese government leads in this aspect. The state manages its own investment funds and has a generous model of matching private investments in Chinese start-ups but without the same predatory incentives that drive private VC. This is partially what has spurred the explosive growth and advancement of AI research and technology in China in the past decade or so.
If you're interested in this subject, the book AI Superpowers by Kai-Fu Lee is illuminating.
2
Overall these startups facilitate large cash transfers from wealthy people to working and middle class consumers. The contractors get caught in the middle when the belt tightening starts. But overall a whole lot of economic growth has come from these businesses, it's just often not very productive growth (like the thousands of bicycles abandoned by bike share startups, or the subsidized delivery of something you could have gone to pick up yourself). Everyone is talking about taxing the wealthy and corporations, but many of them are effectively making transfer payments to a myriad of workers and consumers by funding these startups.
1
@NW Transfer payments involve cash. I don’t get much of this value transfer you’re talking about because I’m not participating in many of these new age businesses. But I’d really advocate not confusing a true transfer payment where are the beneficiary spends it on their next highest priority, w these value transfers. They are more like throwing cash down the toilet or perhaps bribes to convince people to do something they wouldn’t otherwise do.
2
Banks are experts at bait and switch, and getting governments to protect them, using OUR money. That's why we need to break up the mega banks in this country, and sanction all the others. They are greatly responsible for the worldwide wealth gap, and people should rise up and take back control of their economies, instead of just being disposable cogs. WE should dictate the terms to much smaller concerns who will compete for our business, not the other way around.
11
@ChesBay You need to do more research. Softbank is not a bank. It's a private conglomerate of different tech and telecommunications companies.
1
@Leouch you need to read the comment for content; never did the commentator say the word softbank.
The comment was using the article about softbank to illustrate where we are with bait and switch and saying traditional banks have used this technique for years.
2
@ChesBay SoftBank is not a bank.
A correlation has occurred in the commodity futures markets. In the 2000’s speculative funds started investing huge sums in various hard commodities as a “safe haven” or parking space for their huge capital. Their individual investment algorithms determine when they will enter or exit the market and ether they will take a long or short positions. These positions and their liquidation oftentimes are contrary to the commodity’s real value - which should be mostly based on supply and demand set by producers and end users. Speculation can play a part but it is disruptive to the market when that role exceeds those if supply and demand. Thus the need for competent government oversight.
3
There was a time not so long ago, 20 or 30 years, when educated people ( those who studied something... ) were reading Marx, sociology, philosophy, phenomenology, psychoanalysis ( important to understand the place of the Self ) ,and they were understanding the processes of alienation, mercantilism, social structures, etc...
Today, American capitalism and its ideologies of the Self and behaviorism, have swallowed everything and every body into the void of inept consumerism.
No more thinking. The worse vulgarity of grocery store retail shopping owns the world.
13
This is the outcome of the massive, or is a better word planet earth eating Governmental Central Banks FLOODING this planet with excess liquidity.
Because civilization was overdrawn in 2007-2008.
Instead of letting the chips fall, many players were deemed "too big to fail," so such entities were bailed out.
Borrowing money cost nothing.
The trouble is that since then, like the person who "kites" checks, between accounts, the "checks" in the form of Central Banks pumping money into the world wide economy have gotten bigger.
Thus the almost zero interest rates around the world that we have today.
As the European Central Bank stated about a month ago, the next step is "governmental action," better known as printing money which gives all of us working stiffs inflation.
And Yes, we will get it here in America, as our Congress, spends in just as crazy a way as Softbank.
As was once written, before the Great Crash of the Depression.....
"This time is different."
"It is a new paradigm."
And all of us little people end up paying in the end.
Softbank was just like my dog...if I make food totally available, the poor animal eats and eats until it gets sickly obese. It does not know how to stop on its own.
Softbank ate and ate zero cost money until it too got financially obese and so it has gotten sick.
Because Mr Softbank was not capable of stopping his feasting on zero cost money and confused that with a real business model.
8
@AAA Softbank is not a bank. It's a private conglomerate of different tech and telecommunications companies.
3
The devastation wreaked on these victims was a feature of this representative of subsidized predatory capitalism. You may ask "subsidized"? Yes limited liability corporations are legal constructs which subsidize the externalization of costs by immunizing criminals [is there any other term applicable to the Softbank bandits?] personally from the full risk of their actions. The “limits” of the Softbank bandits “liability” is their initial investment. A bandit invests $10,000 in BanditBank then enagages in all these fraudulent or semi-fraudulent actions to con people and receives a payout of $100,000 or $1,000,000 via the shares. Then bustola. The Softbank bandit walks away only losing the 10K nothing more. Thatʻs what limited liability is. The banditʻs liability is limited. That is a critical subsidy as the government by enacting the limited liability laws is now subsidizing the banditʻs banditry. That is capitalismʻs greatest subsidy to corporations. Vastly greater than any subsidy of socialism. End limited liability and you end the subsidy of and inducement to be a bandit. Impose the morally right full liability on the actor and the bandits canʻt walk away. They are liable to the full extent of the harm they cause. Capitalismʻs greatest fraud is limited liability. In nature there is no escape from the consequences of oneʻs actions, nor should there be in an economy. Behavior is truth. Consequences to an actor is truth. Limiting liability is a subsidy and a lie.
9
@stevelaudig Limited liability is not limited to capitalism. The state socialist nations such as the USSR destroyed the environment by openly dumping radioactive waste in their rivers and lakes, and turned the Aral Sea into a giant alkaline polluted wasteland. There was ZERO liability for the people and state organizations that did this.
2
@Leouch: And that is why participatory democracy is necessary, regardless of what type of economy a country operates with. Citizens who are prevented from exercising oversight over either their government or private corporations become helpless pawns in the games played by a non-democratically elected ruling class. But that is also why it is imperative that we educate as many of our citizens as possible, so that they are capable of participating in democracy and are able to carry out their responsibilities in a participatory democracy. And we also need to make sure that citizens have the time to participate, and are not stuck slaving away at two or three jobs that rob them of their ability to partcipate and assume the responsibility that a functioning democracy requires.
1
This is the result of American capitalism without any control.
All the US tech firms, and others are all domiciliated fiscally in Europe, where they cheat and pay no taxes while invading the markets and using infrastructures. They impose a 20 % annual fiscal fraud on European workers who are tied in an economy of participation for free health care and free education.
That is Apple, Amazon, Facebook, Yahoo. Google, Netflix, etc...they pay no taxes. But also GE, many chemical firms and American industrial firms cheat in Europe and pay no tax. The cash is repatriated via London and the offshore US banks of the Caribbean . It creates huge hidings of cash, hard currencies that are reinvested in speculative funds.
Driving people out of their homes. 1/3 of humanity has nothing to eat. The ecology is disrespected in a dangerous strain. The economy of the southern hemisphere is strangled. Forcing immigration.
All because of the dishonesty and lack of vision of Americans.
9
There is a growing private equity “bubble” as more (and relatively small) unsophisticated investors have invested.
When that bubble pops, the damage to the rest of the economy will seem like 2008 all over again.
4
Someone has a good algorithm for gauging the public.
3
Real socialism is that answer to these problems of too much capital and capital harming workers. The state ownership of all means of production insures that there is only limited capital for business investment, a strong protection against over capitalization. This is well proven with the Soviet, Cuban, Old China, Soviet bloc, and modern Venezuela economic models. These models are absolutely bullet proof in preventing this problem, and should quickly be implemented world wide.
3
Startups often fail. Therefore, people whose livelihoods depend on startups - the employees, contractors, customers, and partners - are taking a risk. This does not make the failure less tragic. It just isn’t notable.
6
@Alex Except that they didn't sign up for the risk. They are signed up with dollar signs fluttering at a distant mirage. In other words, they are conned. Meanwhile, those who supposedly signed up for the risk walk away from the failure with dollar notes stuffed in their coat pockets. How is this not 'notable'?
7
@Rajeeve Because that's how business works, and that is how Conservatives like it. The entire capitalist business model is based on defrauding and cheating people as whenever possible, because there is no goal or aspiration other than money.
It's sad when this happens to people who don't deserve it, but how it could be seen as unexpected in any way is incomprehensible to me. All businesses do everything they can to maximize their own profits, at the expense of everyone around them. Why are these business owners surprised that another business did the same thing to them?
2
It is becoming clear that overcapitalization is a fundamental problem. The money sloshing around in investment funds and private equity is distorting the underlying markets. It is also contributing to the devaluing over labor over capital which is slowly leading to unrest across the globe. Buckle up. the 2020s are going to be quite turbulent.
11
Why not invest in some really creative start-ups that might make a little less money? In my own experience as a female entrepreneur, I was told that my company would only be valued at around 20 million so it wasn't a good candidate for investment. I think that we need to all become less greedy and more interested in how a company can really make a difference instead of rushing for the big pay out in a few years.
11
@Barbara Flute Absolutely right!
1
@Barbara Flute: Most of these investment capital guys wouldn't recognize creativity if it slapped them upside the head. They may be savvy about money, but that's the extent of their knowledge. And in their limited imaginations, if the numbers aren't big enough, the project isn't worth it. They aren't really looking to get a decent return on investment - they want a killer return. They don't care if a product is valuable to society or enhances life for people, because they're not in business to help society or improve people's lives. They're in business to make themselves and a few others stinking rich, and once they hit paydirt, they're out. There is nobody lazier than a capitalist, because all they dream about is retirement. Enjoying work for its own sake, or because you're doing something you like and are contributing to society with it, means nothing to them if it's not attached to large amounts of cash.
6
This story is another example of a kind of business practice which used to be frowned upon (or even illegal), and that is the practice to sell your products or services at below cost so that you can drive your competitors out of business.
Somehow Silicon Valley has hoodwinked the world into thinking that because you are a "Disrupter", that it is OK to engage in undercutting competitors this way.
Until the government steps in and regulates the marketplace, well-funded outsiders will be free to enter industries full of small businessman, drive them out of business, and then jack up their prices for their new monopoly.
10
@David F Right on the ball, sir! That is exactly the 'business model' these 'disrupters' have been using, siphoning the earnings of small businesses into the pockets of oligarchs.
If it sounds too good to be true....
That is the adage many in this piece should have followed.
10
And who thought too much money could ever be a bad thing?
3
@Harley Leiber It is not just "too much money ".
It is that some have too much and others starve .
Americans suffer from lack of conceptualization.
Word on the street is that Compass wants to start partially paying their agents with with stock shares. As this article points out, SoftBank doesn't know how to correctly price those shares.
Stay tuned & Good Luck--
5
@Charlie I don’t argue compass is quite different from these other businesses because real estate agents have always been independent contractors. There are parts of the compass model that are new and potentially risky, but the independent contractor status of the agent is not one of them. By the way, when compass took over my firm a while ago, they gave everyone the option for partial payment in shares. I saw a month or two ago that Softbank had changed an internal rule and now allowed its own employees to put money into the vision fund. That seemed like a problem signal to me.
1
I know I'm in the minority.
Still, if an investor gives me $100 for every dollar I am willing to spend on lottery tickets based on an agreement that the investor will get $200 for every dollar of winnings, and spend $1,000 and the investor pays $100,000, but pulls the funding before I purchase a winning ticket, what is the basis of my complaint?
I know these folks also put their blood, sweat, and tears into these ventures, but such is the nature of venture capital.
The inventor accepts the risk that the venture may never be profitable, and the person with an idea risks that the investor may decide at any time to pull the funding.
The relationship is built on risk; so, it is a bit hard for me to understand the asymmetrical response of many placing a disproportionate amount of blame on the investor because without an investor, the dreams of people with innovative ideas will never be realized.
4
@Didier: And that is why we must stop relying upon investors as our sole source of funding. The system has to change. Seas of unregulated cash floating around the world randomly flood certain sectors of business -- mostly tech these days -- drowning real creativity and ideas that are not tech-related. Civilized countries fund their universities, their scientists, and their artists with tax dollars precisely because this is where real innovation comes from. But instead, America throws its tax money at wars to protect giant international corportions and their extraction or trade projects, and relies upon foreign investors to fund our businesses. Does Softbank really care if millions of people are thrown out of work or have their ability to support themselves seriously curtailed by tech companies? No. Does it have an interest in maintaining a stable society? No. At some point we have to stop and decide how much of our country we are willing to trash and how many of our citizens we are willing to sacrifice, just so that a few ambitious oligarchs can get richer and more powerful.
2
@Didier You develop a mystique that is fake.
It is hard to understand, as you write, when you are alienated by a mystique.
That is the proper function of a mystique to impeach understanding.
It’s a breach of the social contact and an indication of how the world is slipping ethically. Primarily, it’s just Trump University. People trust and respect you, so let’s rip them off. It’s a grand con being played by some of the wealthy on the poor, and democrats and republicans are to blame. These companies are operating in states that are completely controlled by Democrats - NY - so why do we allow it? Laws were passed decades ago distinguishing contractors from employees and requiring certain wage, insurance and other protections for employees. Those distinctions were based on employer control, and it’s clear the laws need to be updated to take into account new technology designed to avoid such laws. Our legislators have failed us.
7
These people own many of the “small town” newspapers in Michigan.
And we wonder why there is so much non news.
2
I can only think of those women in NYC who were working at the shirt factory that burned. They were contractors, Really no different than a driver for uber or any other contractor.
When one uses humans as if they were machines to make a profit the variables are uncontrollable to a major extent.
Even Slavery did not work.
4
A cheat is a cheat is a cheat. Powering your business (es) with contractors and then not following thru on your agreements with them is just that, a cheat. Bait and switch indeed.
John~
American Net'Zen
19
It must be hugely embarrassing, for wework to reveal truly how the softbank emperor really has no clothes on. It was lucky to have struck Alibaba and Didi, but those are no-brainer, given how protected they are by the Chinese government. All those other startup holdings of softbank look shaky. Softbank must have hoped that uber, then slack, then wework, are all going to be goldmine that it can cash out, but they all turn out to be thuds - big - thuds.
What softbank does show us all, is how stupid VC awash with too much funding desperately chasing too few deals, resulting in anything-goes. The unfortunate side-effect is that softbank is pushing everyone in Silicon Valley to do the same, throwing money at too many me-too's startups that are nothing but copycats.
No customers will complain if their delivered-to-the-door meals or uber rides are heavily subsidized by VC's, but we know for a fact that when they start paying living wages, when they have to account for how they make money in a real-world business model, or how they can pay down the huge debts, then the gloves are going to come off, as the dressing down of wework has shown us all.
I fully expect the softbank saga to come fully undone soon. It's about dang time.
15
Possibly unpopular opinion: the entire point of SoftBank backing these money-losing ventures was to keep an entire class of people from climbing up the economic ladder and attaining some measure of wealth.
8
Where does all of the investment cash come from?
4
@Leslie Duval From the article: “When he announced the $100 billion Vision Fund, the biggest contributions came from the sovereign wealth funds of Saudi Arabia and Abu Dhabi, with smaller investments from companies like Apple.”
Translation: countries and companies sitting on a lot of cash, looking to SoftBank to invest it for them, banking on SoftBank continuing its initial success (which it apparently hasn’t).
“It guaranteed him monthly payments whether the rooms were booked or not“
Hmm. Free money. Sounds legit!
10
While I’m hardly on economist, the emphasis on growth, from the US and other entire country’s economies to these companies and local economies (as opposed to sustainability) the whole thing looks more like a house of cards.
This article seems to point to some systemic overreach, expecting or depending upon more growth than is actually there. So, they are squeezing the little guys where “growth” doesn’t happen in some particular locale.
But what happens when “growth” slows, stops or…retreats in general?
Too many parts of the complex web of economies that make up our world, on both micro and macro scales, are all based on continued “growth.”
I’d be interested to know if these conditions are similar to the ones right before The Great Depression, which was world-wide. Back then, our world(s) were much less connected, and we still got into big trouble. The current hyper-inter-connectedness of economies and markets means that everything is more hyper-responsive to real changes in market(s).
In other words, when growth is favored, nay, depended upon for everything to work, and keep working, there is little to prevent catastrophe.
Who exactly is minding this store? Because its bigger than even countries now, it’s transnational. Most of the stuff I buy from Amazon ultimately either comes from Asia or part of it does. When American’s like me stop buying widgets, what happens to workers in those factories?
.
6
@SMcStormy
"While I’m hardly on economist,..... the whole thing looks more like a house of cards."
Brilliant deduction.
Son made one good investment: Alibaba. His vision is of a fast-approaching brick wall.
3
Why in the world would anyone trust a banker, they are proven to be crooks time and time again.
6
I think this article is off base. The real question is that $x Billion dollars disappeared -- who benefited from it?
If we look at Uber, while one might say that drivers were left without the initial "deal" that they signed on to -- BUT everyone that took a ride got something that was subsidized by the early investors.
For We-Work.....I think its likely plumbers and electricians, sellers of desks and chairs, that got the money. (In addition to the fallen CEO). Maybe the users of the space got it at very subsidized rates. The point is that someone got the money that they spent, and I presume those suppliers were happy to get the revenue.
This makes for a nice "poor-them" type story, and there were no doubt casualties along the way as these businesses failed, but thinks it does a disservice to not say who benefited (other than the ceo).
Many of the commenters lack an appreciation for the overall business model.
You can accuse the management of these companies of doing a bad job. You can dislike like the independent contractor model (which I hate and I don't use Uber).
But please acknowledge that Softbank is investing money with the goal of creating successful companies.
You can accuse the founders of Oyo and Compass of being bad at managing companies through periods of extreme growth, but that's different than accusing them of "rape, looting and pillaging" as one of the commentators has done.
The company that owns Popeye's has clearly failed to adequately manage supply of their highly popular chicken sandwiches. That doesn't mean it's a scam or a crime was committed.
2
@MTS The contractor model us here for one thing only and that is to destroy all the social safety news including worldwide social security programs.
2
Start up idea: fast casual restaurant chain that serves the rich cooked just how you like it!
5
Thank you, Mr Son, for relieving the Saudis of so much of their cash.
9
@Tom Miller
The Saudis are getting 7% interest on their cash from SoftBank . . . let's see how long that lasts.
2
Trump is making it easier for scams like this to happen more and more by deregulating the banks and not demanding tough policing of these corporations. The Dems will do it right with Mrs Warren she will stop this corrupt behavior and arrest the criminals once and for all.
6
I don't see the "scam" alluded to in the article. Isn't this just a very bad venture capitalist fund that's losing ridiculously large amounts of money in companies around the world? I couldn't pick up from the article how any of what was described was actually leading to a positive return on investment. I wonder what I'm missing.
1
It is easier to blame other people than admit wrong doing by our self. It is not that we don't have choices, but rather we are short sighted that lucrative deals dangling in front of eyes are just hard to reject.
But the bottom line is that the idea is not good enough to survive the long term. Rather than keep pouring good money into pits, cut short and walk away is a good idea. Softbank is doing the right thing. People who got hurt are just the collateral damages in a capitalistic environment.
1
@Usok
What about the man who set himself on fire or the one who drank poison at the protest in India? We’ve had Uber drivers commit suicide here in New York. Is this the collateral damage you speak of?
4
Remember Japan was the model of life-long employment? While lifers of yore were not uncommon in the U.S. back in the old days either, the new crop of corporate leaders have disrupted that. Then some corporate raiders decided to go to Japan to disrupted the Japanese model as well. Well, the joke is on America now. So don't blame Softbank for learning the worst of what America has exported!
9
Follow the money. It seems that the dark side to this scheme is the amount of liquid assets available for these start ups. Money. Where are the billions and billions coming from? SoftBank is the largest but not the only fund. What is wrong with this picture? If the investors are losing so much money why aren’t they hollering? Are these tax right offs so they do not get hurt? Will 10pct success make up for 90pct failure?
8
Don't overlook the significance of Son directing this money to companies developing and utilizing AI.
It's all about our data...just ask Zuckerberg.
9
Seems like the tab is coming due for SoftBank. While I agree in spirit with the Times’ analysis, the data seems a little thin and the anecdotes a little thick. There are certainly a lot of sad stories, but I’m a little uncertain about the net effects.
What’s more striking to me is its willingness to spark price wars amongst its investments (like Uber and Didi, Uber and DoorDash.)
3
Private capital needs growth, so it chases confidence. And confidence men.
12
This puts to rest the idea that people with lots of dollars also have lots of sense.
13
Why do I have the distinct feeling that Mr. Son sounds like Mr. Trump? "Beautiful businesses with great growth" . And the practices of cheating contractors and not paying them look eerily similar, too. There seems to be a caste of bombastic entrepreneurs who try to get rich on the back of ordinary people. Hopefully, the market will impeach Mr. Son so that his practices are stopped.
25
On the contrary, I believe the $100 Billion is a win-win for everyone except for the investors. I use Grab ride hailing on daily basis and I can say that this start-up creates better living for both drivers and passengers.
Passengers like me enjoy cheaper transportation price and drivers can make a living instead of becoming a harder and more selective jobs such as taxi drivers, for example.
Grab also gives a lot of cash back to passengers, on top of cheaper price. And who lose money on this? The investors, not the drivers and certainly not the passengers.
Start-up is just a way to distribute wealth from rich investors to the rest of the world.
3
You apparently did not read the article.
The drivers’ promised earnings will be slashed thereby creating the downward spiral which results in horrific consequences to individuals.
21
India, Vietnam, China, sure... But how can this possibly be legal in the USA now that we are great again?
Could it be that our elected legislators vote for laws written by industry lobbyists in return for campaign finance funds and future jobs as industry lobbyists?
34
I can’t help but think how $100 billion invested in small independent businesses around the world could not only employ many more people and jump start economies and communities, furthermore actually make a return on investment for the investors. I guess that’s not as sexy as investing in disruptive gig companies that have a better than 50/50 chance of losing billions, putting millions out of work, and devastating local communities.... Stupid unabashed greed with only the short sighted at the helm. These companies and the VCs that back them are really sad and pathetic people.
27
Unfettered capitalism is as evil as communism.
42
@David Parsons Actualy worse. Communism, at least as Marx envisioned it, pretended to care about workers.
3
One of my friends works in OYO Mumbai in the suburb of Andheri head office. They literally have bouncers in their office because every were dozens of hoteliers walk into their office and threaten them for the pending payments! The situation is so bad that many times guests have booked hotel via OYO and when they turn up at the hotel, the hotels refuse to honor OYO bookings because of pending payments. Trust me there is much more insider information I have about the state of OYO. It's terrible!!
41
@Nikhil Sharma
Any business who lets a third party come come between it and its customer deserves what it gets. What the good lord giveth, he taketh away. No such thing as a free lunch.
2
I think this is an excellent example of the many dangers of virtually unchecked "capitalism" - in theory the practice of wealthy individuals or groups lending money to business ventures they have reason to believe will succeed, make good profits and be able to pay back the loans with suitable interest. I think most would agree that a PROPERLY REGULATED capitalistic system, with effective oversight to prevent predatory practices, may be the best way of encouraging, nourishing and supporting those who have good business ideas and the skills, drive and foresight to make them work. With proper "checks and balances", the capitalistic model can advance a modern society in dozens of ways... but when left to regulate and moderate itself (aka the "free market" in an extreme sense), greed, corruption, extreme risk-taking, snake-oil salesmanship and worse, will inevitably permeate the system - given human nature as it stands.
21
@Joseph Ross Mayhew
What/Where are those proper checks and balances today? Congress? Our President? The Courts? When all three are hopelessly corrupt, we are at the end game and the coming collapse which will be a lot sooner than then the Global Warming climax, but just as devastating.
The article seems to castigate SoftBank like it was in the business of trying to lose money. It wasn’t guilty of any crimes. It was just a poorly run business, owned by an extremely wealth man, who mistook his wealth for business acumen. And, nobody was forced to take the jobs or his money. It is unfortunate that many people lost jobs and businesses but this happens to most people who start a venture just not so quickly.
SoftBank is not the problem but a symptom of the “get rich quick” mentality that many people, mostly those under 40, see. They believe that what is possible for a few is attainable for many. All I hear in business from younger people is how they are looking to work for (or even better, to create) a “start up.” Nobody is working for a “new business” as they did in the past. Everything is a Start-Up.
What’s the reason? Well....most people who have started businesses used their own money or their family’s money to begin; worked hard; tried to make a profit and grow the business over time. The goal was to support a family and have a good life. Be comfortable not rich. And expect to work for most of their lives not “cash out” and retire young. Some were lucky to create enough value and sell them for a decent profit after 20 or 30 years. Most didn’t and closed down eventually.
Start-ups aren’t about this. They are looking to take someone else’s money; get big quick; grow w/o profits and sell as fast as possible. It’s an adult version of hot potato.
49
@Daniel Shlufman
Fascinating how you managed to blame the reckless and fraudulent actions of a super-rich 62 year-old and his old money friends in the UAE on people under 40.
It is precisely that lack of self-awareness that both you and Mr. Son show that is so mind-boggingly common in boomers, and why you are deservedly the most detested generation alive today.
The reason why us young people flock to start ups and start up culture is because traditional employment for a majority of the population means working your entire life to get by, without ever attaining the wealth needed to turn it into property or, god forbid, launching a hedge fund with your saudi friends.
We realize the system has been broken and our refusal to submit to it is not because we dont know hard work or arent satisfied living a modest, comfortable life, but because we know that in the world we live in today you need to make it big if you want to make it at all.
7
@Keanu
Sorry there's no short-cuts in life. Let this be a lesson that relationships with contractors, employers, employees, suppliers, etc must be scrutinized closely. Ultimately, everyone is acting in their own self interest, and there are no free lunches.
3
Son's reputation will never recover fully from the beating it took in 2019, and rightly so. He got lucky with Alibaba but since then has only managed to waste prodigious amounts of money.
32
Get used to the global economy. Economist thinks it does good:
"In praise of cheap labor"
Paul Krugman
https://slate.com/business/1997/03/in-praise-of-cheap-labor.html
6
THIS is ANOTHER example of the coming collapse. Of the startup system. Artificially low interest rates squeezing the savers, for the benefit of the banks who pay 0% interest and charge 10-35% .
21
that gut punch is the relentless funneling of profits upwards. it's called capitalism and it needs to be reconsidered.
19
Masa is a late stage capitalist gambler. Ruining one country at a time. Fun sidetone - plastic packaging from take-out companies funded by Masa in China alone will destroy most oceanic sea life in the next 25 years.
14
Also worth noting that Softbank owned Fortress loaned Theranos $65 million in December 2017, after the company was discovered to be a sham. That was all lost money within one year, Theranos shut down.
15
If this investor has given large VC funding to people who are incompetent, they bear some of the responsibility.
Will they fix their own mess, I doubt it.
Do not trust these shiny "new economy" ventures with your life, unless you're convinced they are competent. You may indeed lose it if you do.
10
Some readers have cited this article as an example of the evils of unregulated capitalism. However, the article asserts that Soft Bank participated in raising about $25 billion for Chinese companies in China. China is hardly a nation in which corporation and billionaires run the government.
The business model used by Soft Bank resulted in some very serious problems for contractors, but people must realize that starting a business in a free market economy is always risky. And most small business start up fail within three years.
4
Isn't it that a testimony of the evils of capitalism? How could could the system be if it fails hundreds to allow one to succeed?
8
@tmonk677
And do you believe bribing contractors and corporations into poorly regulated ponzi schemes without accountability or oversight is a “free market”?
12
Move to Bolivia. I am sure you will find lots of opportunities there
1
We need leaders who are in touch with the constant punishment and strain of living in a society where opportunity and compassion are vanishing because existing at either end of the Maslow needs hierarchy closes the mind. Those financially struggling fear for their well-being and concentrate on their basic needs. The wealthy are powerful causing brain changes which lessen their compassion and increases grandiose images of their purpose in life. We need a leader to help us collectively agree on what we want America to represent - who we want to be. The void of good leadership was filled by the media and advertising tell us being rich and selfish is what we want to be - that is happiness. We are that now. A narcissistic society where likes for me trumps compassion for others. Meanwhile the planet is dying. A leader puts us in touch with realty and acts quickly to get us on course. Traits like compassion, discipline, focus, confidence, trust, and fortitude are required to curb capitalism and embrace sustainability.
15
I wonder what demons drive Mr. Son? His early successes seem to have addicted him to chase after ever bigger deals, interact with major players on the global stage regardless of what they stand for and foist ill-prepared schemes with feel-good names like Vision Fund, a short-sighted behemoth that appears to crush the people it ostensibly supports with complete non-accountability.
8
I have a great idea! Let's nominate another billionaire to the presidency, only this one will be a Democrat! I'm sure that will fix all of these problems with finance capital abusing the people of the world.
7
@Patrick Moore
Bloomberg is more solid than 95 % of these other guys. His idea of Bloomberg terminals have revolutionized trading and while he's a tough negotiator he's honest and legitimate.
13
@Patrick Moore
Yeah but can he distract us from Congress and state legislatures until we forget who makes the laws?
1
The reason the world is awash in too much capital? The preposterously easy money policy of virtually every central bank. When Japan and parts of Europe have negative interest rates you know something is wrong. And this is the policy that Trump wants to import to America. That, I suppose, makes sense. Anything he can do to weaken the country he favors.
Why, when the equity markets are at all-time highs and unemployment is at 60 year lows, is the Fed cutting interest rates? Why are we running trillion dollar deficits at such a time? We should be running a surplus.
57
@Sneeral Don't forget the crisis level of billions being pumped into the repo market each night.
3
Why? Because it's a little harder for the capitalist grifters to get their hands on the Treasury surplus than on private money. They'd have to actually build things or repair infrastructure with the government surplus.
1
Here are my thoughts on all of this, and hopefully some will care. Most of these schemes involve doing very little work and being paid a ludicrous amount of money. Whatever happened to actually working and feeling satisfied that the money earned was well deserved?
That the WeWork ex-CEO is now completely rich beyond belief is a crime against....seriously!!!! That the Uber CEO is rich beyond belief, while those who worked for him do not even break even, is another crime. The disruptive tech industry has shown just how many people can be deceived and how many undeserving and unintelligent fools can become enriched...their riches are more of a happenstance and hype than anything to do with ingenuity that advances society....I would like to see anyone prove me wrong on this point.
Almost every hyped disruptive innovation today reduces jobs, take home pay, and quality of life from everyone else except those who are doing the disrupting, who believe that everyone except them should be working/connected at all times to maximize their profits.
Truth be told, we are in short supply of those who actually understand how to make things such as bridges, building, dams, roads, etc. A reversal of fortune will soon be upon us....and those who actually work, make things, grow things, function as a community, etc. will become the new disruptive industry...which will look a lot like where we started.
Oh yeah, many of the existing disrupters definitely belong in jail!!!!
80
@Mark You get it Mark, What is going on is just a new-age version of indentured servants and outright Slavery. They used to call it piece work to soften the blow but it is nothing more than greedy people exploiting humans for-profit and barely keeping them alive.
1
Isn’t this basically a cheap bait and switch for self employed individual proprietors and contractors without health benefits, commercial license or general liability to use their own tools and transportation to replace salaried, insured corporate jobs?
If there isn’t any public legal accountability, political transparency, economic fair trade or humane regulation can we stop calling it free market capitalism?
14
@Schedule 1 Remedy
The form of work changes over centuries . We don't use oxens to make small acerage fertile. Though we grow artisinal high priced veggies and ancient grain.
There is less of a market for mid priced cars but high demand for low end Kias and high end Bentleys and super cars.
There are those that can spot a trend and are nimble enough to hop on, make a few quick bucks and get off before getting burned. Eventually if they don't score a big one and retire they get slammed.
2
Wonder why Mr Solanki cannot take legal action. The whole system unfortunately is based on greed - on all sides. A common factor in business circles these days is an expectation of disproportionate profits which sometimes leads people to make poor decisions.An honest days work leading to an honest profit is still probably the best model .
4
More capitalism lifting the poor out of poverty.
2
How dare they!
For those of you who are interested, you can buy SoftBank stock. Its ADR symbol is SFTBY. It actually seems to make money in earnings per share (but free cash flow is not so good).
3
This is the epitome of endless greed without consequence. Corporate responsibility died with the few baby boomers that actually cared about their employees and carbon footprint.
This is addiction run rampant, and WeWork was the epitome of what just might be SoftBank’s demise. When the Prime Minister of Japan gave an “offering” to Kushner’s nearly bankrupt investments to ingratiate Trump, well, just sickening instincts.
10
The executives at SoftBank should all be in jail.
22
@akamai
Ideally, yes. But in the modern world, this is all legal. Just ask any of the Supreme Courts in the affected countries.
1
These new-age silicon tapeworms ake money by smashing the rice bowls of workers who earn modest wages and small businessmen. When they come your way, expect to be scammed.
15
Welcome to 2019 where just about everything is a bait and switch and fraud is barely a misdemeanor when committed by the rich and powerful. For example, when Trump's laughable Trump University scam was discovered, did anyone go to jail?
58
@rocky vermont
Not only did no one go to jail, has anyone been give their fees or tuition back ?
13
Vision fund should be renamed get rick quick by scamming the poor fund. Nothing visionary about the investments being made by this fund.
10
Here’s what I don’t get. Suppose I have a company that doesn’t lose a billion dollars a year. How do I compete with SoftBank’s stable of massively subsidized nags? I can’t. The result is that I go bankrupt. What happens to softbanks nags? They continue to lose money for ever?
10
Is SoftBank one of Trump's businesses?
10
Check the credentials. Maybe Son graduated from Trump University.
5
The article should try to explain how Oyo can stop making guaranteed payments to the hotel owner Mr.Solanki?
Is that a legal quirk of the Indian system or is it some loophole that "holy" startups can always weasel through?
I get that most startups are fundamentally a tech version of good ole exploiting the worker. But, it isn't clear to me why small businesses are signing terrible contracts to begin with.
7
@SB I agree.What gives with SoftBank taking his money but not coming thru on their promises...are no lawyers involved with contracts signed ?
2
@SB You do it by just stopping the payments and the little guy on the other end has no practical recourse. Theoretical recourse, yes - if you want to spend more time and money - but no practical recourse.
2
@SB In the article, it has a sentence on Oyo's side of the story. They claim he misrepresented the health of his business.
For what it's worth, Solanki is not a super-experienced hotelier (5 years now, which means 4 or less before the Oyo deal). The pictures do not show a property that I would have thought meets 4-star standards, so it's plausible he did overstate things and Oyo didn't perform due diligence. I wish the NYT had found a better example.
Venture capital and tech entrepreneurs often use the term "disruptor". It seems that SoftBank is more of a "destroyer", both of people's livelihood and investors' money. WeWork was a prime case in point, Uber is not far behind. When the good news is that "we lost less money this quarter" after several years in business, one has to wonder if there's really a giant pot of gold at the end of that rainbow, or just a pile of manure. The smell of many of SoftBank's ventures strongly hints at the latter.
12
isn't it illegal to agree to pay one thing then reneg on the contract? this sounds like a huge Ponzi scheme in that the organization doesn't make money and its main goal is to increase the number of employees. that delivery person pays $25 for a bag, bike etc. that person feels invested in the career even though they aren't making any money.
3
Softbank’s investments in established companies, e.g. Sprint, have not gone so well either.
6
The fund raising for these start ups has been skewed from the very beginning of the rise of digital economy. There have been no solid products for the investors to see. It has always been just words and ideas. The projections for growth are only in words. Any one who can sweet talk can raise funds from the investment funds overflowing with venture capitalists. Even when there is a product to be shown, these sweet talking people have fooled these get rich quick investors (example - Theranos) without actually having any product to show. Uber has been a total failure , so has the Air BnB, Ola, and all so many others. Well, as long as they loose money of these extra rich venture capitalists, I don’t mind, but I do feel sorry for the small time “ contractor” employees. May be the governments in all these countries will hold these “start up owners” responsible and ensure that the “contractor” employees are made whole.
7
The problem here is there’s no oversight and what they’re doing is legal. If you don’t have much business experience you’ll be in the dark (literally, maybe) before you know what’s happened. Small business owners have to wear lots of hats. It’s hard to be on top of everything.
It’s easy to feel blindsided after the fact. These folks painted such a rosy picture for these business owners. I am sure the deal looked and smelled sweet. Even if the business owners had been more diligent I’m not sure if they could have gotten any more data than more empty promises.
12
Hopefully the IPO jig is almost up.
New rule: Can’t sell shares of your “business” to the public if you haven’t demonstrated 8 (or more?) quarters of profitability. And I mean real profits.
If you can’t get long term private capital to establish your company your company likely should not exist. And it will likely fail.
13
The Vision Fund was backed by billions in Saudi money. The Saudis have been closely aligned with some of the world’s aspiring autocratic regimes, including the Kremlin. Could this be deliberate to cause widespread losses and wreak chaos and instability?
29
I live in Bogota and know of Rappi well.
They are everywhere - typically sitting in sidewalks or sleeping on sidewalks waiting for an order.
Nothing wrong with that.
But I would never order one thru Rappi - simply because I can't imagine them being hygienic folks when they are loitering around on sidewalks.
Local newspapers have carried similar stories and I witnessed that demonstration.
I also know of Oyo as I spend winter's in Mumbai.
And then, we all know about We.
I think someone should lower the boom on this Mr. Son.
I think he is running a Ponzi scheme.
He has skewed the investment market so much that surely, it must be criminal.
For life of me, I don't understand how he is allowed to operate at least in America where we have such stringent laws in protecting investors - and borrowers.
36
This article is totally unclear about the role of the investment, who is the "contractor" versus "worker", etc. What is the model(s)? It's not clear whether these are bad investments or whether there's a nefarious attempt to exploit workers. The examples are not stated clearly, so it's hard to conclude what exactly Softbank is doing.
12
These companies are bad investments AND exploit workers. Part of the reason they are bad investments is the fact they do exploit workers and people aren’t going to stand for that for very long. Another reason they are bad investments is because these companies don’t benefit from economies of scale because they are service based companies with the bulk of the cost/work is a person physically doing a task. It’s a far cry from a software company that can write a software package and make unlimited copies of that software and sell it. Soft Bank, as this article explains is simultaneously the largest and poorest managed VC fund ever. The gig economy is simply just worker exploitation backed by billionaires, and marketed to the world as “revolutionary.” It’s fraud, plain and simple.
9
In the past 100 years, successful Japanese entrepreneurs mostly came from manufacturing or real estate. He is probably the first one who succeeded (at least until several months ago) in a pure money game. He knows a mechanism that is profitable if it goes well for the first one year or even a half.
1
Reading this article, I got the impression that SoftBank is sort of reliving the dotcom bubble in miniature. There is so much money available that needs to be invested quickly, and it seems unlikely that SoftBank is able to scrutinize each business with any rigor. It’s possible that some of these businesses will thrive (I hope they do, for the sake of the people who are depending on them for a paycheck). But I don’t know if something like this could be sustainable if there was an economic slowdown.
7
read or view book or movie The Big Short with Michael Lewis dunedain Financial machine. He showed how it was being done he alerted everybody he could find but all the big Banks and brokerage houses kept doing it. Billions of dollars and Venture capitalism, and everyone ignored and what happened in 2008 to 2010?
We never learn...
29
Oh all those old rules don’t apply anymore! This is different, we are smarter.
Heard it all before.
8
@museNtutor
And, let’s not forget Brooksley Born and her warning about the lack of regulations.
6
The negative and extremely low bond interest rates in some countries in recent years (e.g., Japan) has led to mountains of cash in the hands of banks and venture capitalists. This free cash has in turn led to an exponential rise in very poor-quality investments and money-losing IPOs. The pattern hurts small business people who are mis-led about the value of their businesses and workers who don't have the option of working for decent wages and benefits. This is the pattern that Trump is pushing for when he keeps yelling about the Fed lowering interest rates. One more example of how Trump wants to increase exploitation of poor and working communities.
22
SoftBank hasn't changed a bit since buying Ziff-Davis in the '90s and cashing out by selling it off piecemeal. Big bucks for Son, unemployment for Ziff employees. Some things never change.
48
@Honey
Thank you for coming up with the name Ziff-Davis. I drew a blank earlier when I made some comments. Happens as you get as old as the hills.
4
We protest for workers rights in other countries but here at home, not so much. Softbank is no different than most investors, most billionaires, many entrepreneurs and the Republican party. Make it on the back of the little guy. Unfortunately the little guy goes along, one by one, out of fear until there is no mass to resist. When society en masse stands up for the little guy then things will change. Until then those with the gold make the rules.
39
I noticed that the list of SoftBank companies seem to be all located in third world countries - and the United States. Perhaps that's a portent of our future - a nation of parasitic "entrepreneurs" and a proletarian mass of "private contractors" hustling luxury services to an ever shrinking class of super wealthy, with no benefits, no real wages, and not much future. But at least we'll have Netflix.
201
@gary Yes this is what I have been fearing. Did you know that there are 17 states that do not allow you to write negative reviews on Yelp or other such review apps? Everything to protect the 500 billionaires. why millions of Americans suffer. But luckily we have States like California and New York and the like, that allow free speech on reviewing bad service and or good service. And also there's regulations on bait-and-switch operations. That's why it is very important to vote locally within your community and state! Make a systemic change. Let your representative no what you are concerned about. It does make a difference!
27
@Gary FS Panem et circenses, as they say. Bread and games.
5
@museNtutor Not a single state outlaws negative reviews or would be allowed to.
3
Indeed, that SoftBank is a very curious bird out there.
Except for splashing monies as if it grows on trees, do they ever earn anything, turning any profit?
Their investments in USA are sort of ridicule, at present at least.
10
The rampant growth of these schemes are a breakdown of law and order. We have laws against fraud. Where is the enforcement? Fraud should equal jail time for the fraudsters. No matter how much money has been invested in them.
The fraudster's excuse is that these are meant to be part time jobs. The translation is that you can't make a living at it. Hiring contractors to work in a scheme that ropes people in to an investment based on false promises is fraud.
These schemes are here for the busting. Take a look at the help wanted ads on Craig's list for examples.
18
@Billy It is also sad that most young people's expectations of a job are so low. Not talking about coders, but normal college graduates in their mid to late 20's. They don't understand what a decent job even looks like, and end up taking very low paying jobs which works very well at keeping all wages low. They and everyone needs to get behind better minimum wage laws, and the fight for $15 started in 2012, making it obsolete at this point. It needs to be closer to $20 in most places, and way more in places like New York.
3
Hotels, food delivery, ride-sharing, all things humanity absolutely does NOT need. Meanwhile, health care for all, education for all, basic science research, infrastructure renewal, all the things humanity does desperately need is not getting one penny from these any of these sharks.
Tax them all into oblivion and mark me down as an angry socialist who couldn’t care less about the future of “capitalism”. I’ve watched capitalists rape and loot everything for the past 30 years and I’m done caring about them and their system. Time to clear the planet of them and get to work fixing the destruction they’ve rained down on all of us.
230
@leftcoast EXACTLY! America has tried it their ways for decades. Let's try something different any laws against humanity. what's the saying, if you keep doing the same thing over and over again... Time for an improved and better system!
10
@left coast finch
Warren/Sanders supporter here, and I ABSOLUTELY NEED food delivery.
Other than that, agreed.
3
This is just Capitalism 101.
3
@Jean-Paul Marat
I think of it as a very large surplus of money floating around in the world with nowhere better to go. As long as central banks are creating money at the present rate, this problem will continue to exist.
9
@Jean-Paul Marat. I would expect Corday to make such a comment, not you.
This is (just) tragic for naive small business owners who trusted seductive capitalist investors who have so much money they can *bathe* in it while thinking little - if at all - about the collateral damage of crushing small dreams and lives.
5
SoftBank must have the worst management in the world, because the only people more incompetent than the ones who built the glass castle known as WeWork are the ones who paid billions of dollars for what amounts to highly-processed sand.
38
Son is not King Midas but more like Icarus, aided and abetted by the ‘unsophisticated’ money from Middle Eastern SWFs which are ‘owned’ or at least controlled by unelected despots or sheiks. The desperate, shot-gun investment approach and inundation of unworthy start-ups completely distorts industries and employment of millions of people worldwide.
And mostly it is NOT about actually creating incremental value, improvements in productivity and efficiency but predominately value redistribution between different groups…from late stage, greedy, FOMO-driven investors to early stage, “connected”, grab-a-piece-of-the-pie-as-long-as-you-can investors, from semi-stable full-time employees with some benefits to “flexible”, unsecured, no benefits gig-economy “self-employed” non-employees.
A whole sub-culture of tech-news sites, tech-podcasts & tech-reporters who do nothing more than re-broadcast founders’ and early-investors’ PR messages in return for access and to keep the party going. Accountants, lawyers, bankers, PR and ‘social media marketing’ agencies, etc. all latching on like leeches.
The tech bubble in 2000 was fun while it lasted and then became quite painful quite quickly. The next recession can’t come quickly and brutally enough to help cleanse the global economy from the type of distortions which SoftBank & Co. have been creating in recent years. The WeWork implosion is just the beginning. Good riddance.
62
@Tom Klauser Well said... Could governmental and non-profit Uber-style service providers fit in somewhere beyond the Soft Bank model?
Who cares about what things “feel like.” You signed the dotted line. Your feelings matter not.
1
NYTimes, if you want another example of a SoftBank capitalized wannabe IPO cash grab, look at Katerra. Very similar rush to grow and failing on all fronts masked over by dubious marketing. Smoke and mirrors.
32
I irony here is that many of these firms position themselves as 'Innovators' and pioneers.
There is nothing innovative about trying to destroy competition with easy money. The techniques are as old as commerce.
104
@JK That was my point in a previous comment, there really is zero innovation with any of these companies. They are all really bad Uber knock offs, and we all know how Uber is eventually going to end up.
2
@JK Softbank's business model, the same as all VC's, is no more sophisticated than people pooling money together to buy lottery tickets.
5
This is why we need government regulation of big capital. And wealth taxes to whittle these funds and individual sums down to nothing over a relatively short time.
69
@JDK I'm not sure Trump and his cronies overseeing this would make things better...
1
And what happens when the last of the Venture Capital money dries up?
Do we see a string of bankruptcies and market crashes?
41
@Darin
"Do we see a string of bankruptcies and market crashes?"
Yes, followed by a tsunami of government bailout for the banks and investment houses in order to, as our representatives will proclaim, are necessary to protect the workers when it trickles down to them.
4
I don’t practice contracts, so this is not self-serving advice: GET A LAWYER if you’re in the US and thinking about taking investment money. If it sounds too good to be true, it is.
39
@Lawyermom
The reporter here would benefit from basic legal/business advice. Waiting until the second half of the piece to reveal that Oyo's payments are actually advances is either a deep misunderstanding or deliberate obfuscation.
1
The emperor has no clothes. The Korean Japanese mega venture capitalist with a hundred billion dollars, nearly half from Mohammed Bin Salmon of Saudi Arabia, has flooded the tech world with huge flows of capital and utter incompetence as an investor. He created an empire that simultaneously wasted capital and exploited vast numbers of workers around the world as independent contractors. Uber is nothing more than a high tech app running a giant pool of grossly underpaid drivers that has destroyed the taxi industry in any number of markets. Compass sounds like just another version of Uber for real estate brokers.
This is a return to the unregulated capitalism of the nineteenth century when capital was free to exploit labor anyway they wanted. It also was free to crush vulnerable capitalists as markets punished companies which missed market expectations in spectacular fashion. Soft Bank's money simply flows to where ever it thinks it can find a market to exploit and then quickly withdraws if losses pile up. There is an allegiance to no one. This is capitalism before regulations. Rewards may be spectacular but losses are swift and losers punished without any remorse.
236
But does anyone really miss the old taxi companies? Uber is selling a better customer experience at the same price as the old guys or less. WeWorks crashed because they are selling needless luxury- finished offices at twice the price of building your own. Granted it is an open question if Uber would be anywhere near as successful if they had to charge prices that resulted in real profits rather than functioning as a money losing machine.
7
@Andy Uber's business practices aren't sustainable. While they do provide better services then taxi companies, those amenities come with a cost that isn't reflected in the price tag. Someone has to be paying for it, if consumers aren't, and that doesn't work in the long-term. I've found that to be true for many apps that serve this newfound gig-economy. Ride-sharing, dog-walking, home chores, food delivery, etc. They're all really cheap and that's awesome but labor can't sustain it at those prices.
27
@Student Eventually Uber will need to turn a profit and charge high prices, but with banks charging negative interest rates (paying people to take out loans and charging them to save) the unlimited money spigot isn't getting turned off any time soon. One thing all these gig jobs have in common is they are all most definitely unskilled labor with low cost of entry. The only two ways to raise wages for low skill labor are either to have a low-skill labor shortage, or to erect artificial barriers to entry into the low skill labor market.
7
While contracted workers with no benefits improve bottom lines, and deregulation and tax cuts also improve bottom lines, how does that positively affect these workers? Talk to any Uber driver and you will discover that that gig is one in many. History has shown us where deregulation have led us, and that is what a lot of these business' are about: flying under the radar of regulations and exploiting poor contracted workers whom have little other options.
77
People are so short-sighted. This business model will create more billionaires. If we then cut taxes for these billionaires, it will create a rocket-fuelled economy and every coal miner will be fully employed. Deregulation and tax cuts are the key to prosperity!
17
@Bob - Sure. Maybe if we try just one more round of supply-side hooey, it’ll actually trickle down to everyone else and look just like the pictures in the economics books. Odds are it’ll just be something else your kids will step in and track into the house.
5
Budget deficit nearing 1 trillion dollars. Sounds like we’re winning?
5
@Bob Trust you are being sarcastic. If so , a good one.
9
Where did all this money come from? Central banks around the world printed it. That includes our Federal Reserve, who is unable or afraid of withdrawing the remaining $3.6 trillion it put into the system after the 2008 crash.
The bottom line is that no one can fix this problem of too much cash out there, because no one wants to suffer in the short term.
Put some money into gold. You won’t be disappointed.
15
@62 You haven't looked at the tax proposals of the Democratic candidates. Tax the heck out of the superwealthy and use that money to pay off some of the deficit they created and provide services like healthcare and education without gigantic school loans for the rest of us, as well as combating climate change.
The only way to restore some balance to society is something like that.
132
@KarenAnne The problem is that so much of that money has found its way outside of the US and into the hands of funds run by the likes of Softbank. And let's not forget, the money that Softbank has "lit on fire" ended up in the pockets of people around the world who sold off unleased space, furniture, fixtures, cars, mobile phones, champagne bottles and lap dances. It made its way back into the global economy. This is a lot more complicated than most would like to admit. (And no @62, buying gold is not the answer.)
9
These kind of stories slowly push me toward Elizabeth Warren. She’s labeled in all sorts of ways, but the people doing the labeling have their own sets of not good labels to contend with.
276
@Mike Smith Or Bernie Sanders.
18
@KarenAnne , or, you could just choose to vote directly for trump. Focus on the biggest issue, don't splinter on side issues that would be nice to change, but ignore our most vital issue, trump.
4
@John P
Weakness doesn’t inspire devoted followers. We need vision and conviction to draw out the democratic base. Energizing our base guarantees a win at the polls. Our base is twice the size of the republicans, and half their age.
Obama won more votes than any other president in the history of the nation. He inspired the base, and did so with little experience, the middle name Hussein, and every single republican dead set against him.
Warren or Sanders win a landslide. Biden wins but a smaller margin, and Bloomberg loses big.
3
Let’s see. We have banksters with lots of extra cash, in an unfettered global capitalist system (having both weakened oversight and regulations), unrealistic promises made, and now those promises broken.
What could possibly go wrong?
214
Who needs government regulation? Certainly not the banks!
22
When did unit economics become such a difficult concept for investors to grasp?
17
@Francisco S
Early in, pump it up, get out before the sham collapses. Rinse, repeat. Profits for the few, slow motion disaster for the many.
12
Desperate long term money from pension funds and insurers is chasing short term bad ideas where explosive growth is the mantra and NOT sustainability of profits
26
One of the consequences of lots of cheap money is that people will look for a way to use it, and that will create market distortions.
84