Why Tech Companies Intentionally Don’t Make Any Money

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Жыл бұрын

How can companies make billions per year but actually lose money? How can you be a billionaire while owning a company that is losing money? The economy is weird and these companies are basically get rich quick schemes

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@ruchirpareek 6 ай бұрын

Super practical script with no fillers. Great video. Came across your channel today. Hooked!

@RaisedMedia 6 ай бұрын

Thanks for checking it out!

@Muffles 9 ай бұрын

one thing that I think was missed is the fact that you need to pay taxes on profits. Running at a loss means instead of giving the IRS 40%, you put the entire 100% back into the business

@RaisedMedia 9 ай бұрын

I see your point but all these companies would prefer to make profit than not, it’s just that their business model doesn’t really allow them to. You’re certainly right that running at a loss has significant benefits come tax time but in the long run these business cannot operate being perpetually unprofitable. It might help them in the short run in some regards but by no means are any of these companies intentionally trying to be unprofitable by inflating expenses to reduce their tax bill. That’s either fraud or horrible management lol

@Muffles 9 ай бұрын

@@RaisedMedia While you are correct for a lot of startups, big tech is intentionally unprofitable. Any money left over is invested into innovation + growth in other areas, starting teams/projects, or buying the competition. I would argue it is the primary advantage and reason companies strive to be unprofitable. From an investor POV, money that would otherwise be lost to taxes is invested into further growth (monopolization) and assets. This inflates the valuation, allowing them a potentially insane ROI exit.

@RaisedMedia 9 ай бұрын

Totally valid point. What I mean is that in the long run even big tech needs to make a profit. They don’t need to do it right away (example Amazon intentionally being unprofitable to undercut the market) but eventually from a long-run economic perspective they can’t keep selling equity or taking on debt to fuel growth. The money has to come from profits. VCs and PE care about increasing revenues not profit for a massive monetization event and get a huge ROI (e.g. exiting from Uber on IPO) but now Uber is finally turning a profit because they want and have to.

@Muffles 9 ай бұрын

@@RaisedMedia The problem with Uber is that its competition has the same exact business strategy, which limits the potential to monopolize like Walmart & Amazon. The reason that Warmart killed every local brick and mortar business in town was because only they had the funds to operate at losses for so long, effectively killing out the competition. You bring up a pretty good point, this type of strategy (starve, wait, & absorb your competition until you're a monopoly like Amazon and Walmart) only works when the competition doesn't have the same access to free money. I appreciate your thoughtful response, makes me ponder. It will be interesting to see how these companies duke it out, as Lyft and Uber are effectively at a stalemate.