helpful rule of thumb is: You always find product market fit when your product is giving away money. We talked last month about “the MoviePass economy,” the glorious period in the 2010s when venture capitalists subsidized money-losing consumer businesses so they could grow as fast as possible.
The theory was that if a company — Uber or WeWork or even MoviePass — could sell its product below cost, a lot of people would use it and it would quickly become popular.
I remember this time fooondly... every odd company was running at a loss for my benefit (cough, low-interest rate phenomenon). Books were written on the topic; I remember writing articles on it anno 2018-19. I crossed the Atlantic on dirt-cheap, below-cost priced Norwegian flights many many times.
ah, the blissful old days. The idea being:
- costs would go down bc economies of scale
- network effects would kick in, and give the company pricing power
- extra revenue scources (Read Amazon and AWS).
...or just fall apart: WeWork and MoviePass (but Uber seems to have made it). Also, WeWork is NICE now
If you have rapid user growth and enthusiastic reviews and are giving away money, how do you know that people like the underlying product? How do you know they’re not just in it for the free money? If you turn off the free money, will they stop using the product?
Bilt Tech
oh, man is this a fiat company (#1059724)
Bilt wanted to create an electronic system for paying rent, but landlords didn’t want that system unless it had customers. So it gave away free money to get customers, and now landlords use its electronic system for paying rent, so it can stop giving away free money.
Tiny little value-add? Tenants (#1423402, #1422689), can't pay by credit card (cuz interchange fees are too high and makes no sense for a landlord). Bilt just swallowed/subsidied that fee... amazing
So I get $1 of cash back or airline rewards or whatever from this $100 transaction. So I feel great: I got a little bonus at the expense of, ultimately, the merchant who got $98 for a $100 sale. But the way Bilt’s rent credit card worked was that I rented an apartment from you, I paid $3,000, you got $3,000, and Wells Fargo paid me $30 of rewards. Why?
Everyone knew that if customers used their Bilt cards only to pay rent, Bilt and its card partner would get fleeced. So you only got rewards if you used your Bilt card for rent and also a reasonable amount of other stuff.
Trying to find out/maximize these rewards, like @jimmysong pointed out so many moons ago, is a poorly paid part-time job. Not. Worth. It.
"If the customers only use their cards to pay for rent, the math doesn’t work""If the customers only use their cards to pay for rent, the math doesn’t work"
Bilt stopped (sorry, VC speak for "pivoted") and then people were upset... used to get free money and no more (Anybody in Bitcoinland used Fountain??)
ALSO, pretty ordinary Bitcoin liquidation story: margin-liquidation spiral (more sales, lower price, more margin-liquidations etc)
of course this process is messy and uncertain and will tend to overshoot. But broadly speaking, a stock’s price in the short term will reflect things like forced sales by its owners, but its price in the long term should reflect market expectations of the present value of its future cash flows. There’s usually somebody with some spare cash looking for a bargain, and when a stock’s price falls too far below its fundamental value they will buy it.
Bitcoin doesn't, it turns out.. its turbulent unwinding the other day just keeeept going (Yeah, we know... rub it in). Bloomberg journos blame "rising geopolitical tensions... and curbed risk taking" LOL.
...bitcoin no have pumpamentals, bu-hu (#1426941, #1427437)
"I love that you can describe Bitcoin as both “a haven during times of financial market stress” and also a competitor for sports gambling.""I love that you can describe Bitcoin as both “a haven during times of financial market stress” and also a competitor for sports gambling."
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