Speaker 1: Welcome to tech Stuff, a production from I Heart Radio.
Speaker 1: Hey there, and welcome to tech Stuff. I'm your host,
Speaker 1: Jonathan Strickland. I'm an executive producer with I Heart Radio,
Speaker 1: and I love all things tech. And one thing that
Speaker 1: consistently floors me in the tech world, specifically in the
Speaker 1: tech startup world, is that a company doesn't have to
Speaker 1: be profitable to seem valuable. And to me, this sounds
Speaker 1: like a contradiction. You know, I mean, if a company
Speaker 1: is not making a profit, it is either breaking even
Speaker 1: so you know, things are just staying afloat, or it's
Speaker 1: losing money. So you would think that a company that
Speaker 1: was not making a profit couldn't be valuable. It would
Speaker 1: at best be neutral, and worst, it would be an
Speaker 1: ever growing cost to operate and require you know, consistent
Speaker 1: investment to just keep going. And yet in the tech world,
Speaker 1: we have plenty of examples of companies that are not
Speaker 1: profitable and yet consistently reach crazy valuations and the billions
Speaker 1: of dollars. So we're going to talk about a few
Speaker 1: of those today, some of which I have covered in
Speaker 1: other episodes, And I thought we would start off with
Speaker 1: a company that actually has become profitable but only relatively recently,
Speaker 1: and that is Twitter for those of you who are
Speaker 1: blissfully unaware. Twitter is a social network platform upon which
Speaker 1: people can post short messages called tweets to followers, and
Speaker 1: originally Twitter limited these two characters in length because the
Speaker 1: service was largely reliant on SMS, or Short Messaging Service
Speaker 1: a k a. Old Ashen text messaging, and because SMS
Speaker 1: has a limit to the number of characters it can support,
Speaker 1: which is a hundred sixty characters. Twitter also had a
Speaker 1: limit had a little buffer built in there so that
Speaker 1: your user name could fit in. For example, in two
Speaker 1: thousand seventeen, Twitter would actually increase that character limit to
Speaker 1: two eight characters, so suddenly you could be twice as wordy,
Speaker 1: and for people like me, that was glorious. But here's
Speaker 1: the thing. While Twitter launched in two thousand six and
Speaker 1: eleven years later expanded that character limit throughout that entire time,
Speaker 1: it had never had a profitable year. So let's take
Speaker 1: a quick look at the trajectory of Twitter. Back in
Speaker 1: two thousand six, a company called Odeo created Twitter as
Speaker 1: kind of a side project. Some folks at Odeo kind
Speaker 1: of got together to make it, but by the following year,
Speaker 1: it was ready to kind of stand as its own thing,
Speaker 1: particularly after having a big debut to the world at
Speaker 1: large at south By Southwest in two thousand seven. South
Speaker 1: By as you know, cool people call it. I just
Speaker 1: call it south By Southwest because I am aware I
Speaker 1: am not cool anyway. It's a big event in Austin, Texas,
Speaker 1: and it includes multiple tracks of content programming. So there's
Speaker 1: a music track in which hundreds of bands come to
Speaker 1: Austin and they play live gigs around the city. There's
Speaker 1: a film track in which the theaters around town will
Speaker 1: exhibit films from both new and unknown artists and famous filmmakers,
Speaker 1: and whole discussions and things like that as well. And
Speaker 1: then there's the interactive track, which includes all the computers
Speaker 1: and apps and text stuff. Folks at the event adopted
Speaker 1: Twitter pretty quickly, and that buzz really helped propel the
Speaker 1: app and gave it a reputation as being this cool,
Speaker 1: hip way to stay touch with friends, and later on
Speaker 1: it became kind of seen as this tool in order
Speaker 1: to send communications out too large numbers of people. So
Speaker 1: it was relatively cool and hip. I mean, I would
Speaker 1: say it was part of the interactive track. That gives
Speaker 1: a cap on how cool and hip it can be,
Speaker 1: because I would argue that the tech track still wishes
Speaker 1: it was as cool as the music and film tracks are,
Speaker 1: and I say that as a tech guy anyway. Over
Speaker 1: the past few years, Twitter would hold various rounds of
Speaker 1: funding in order to attract investors to supporting the platform,
Speaker 1: and the general thought was, let's grow this thing as
Speaker 1: much as we can and then we'll figure out how
Speaker 1: to monetize it later, which, honestly, I mean that might
Speaker 1: sound crazy, but it's probably the only route that you
Speaker 1: can take with some of these tech companies. You know,
Speaker 1: if you're launching a new app, it's hard to convince
Speaker 1: people to jump on an untested, unproven app unless it
Speaker 1: is free to use. Most folks are not super eager
Speaker 1: to spend money on something that hasn't had a proven
Speaker 1: use case, and so finding a way to scale up
Speaker 1: and then monetize, you know, your large user base was
Speaker 1: probably the most logical approach. Twitter co founder Jack Dorsey
Speaker 1: led the company for a few years before handing the
Speaker 1: control as CEO over to Evan Williams Now. In this
Speaker 1: phase of Twitter's growth, which would be around two thousand eight,
Speaker 1: two thousand ten, the company began exploring ways to use
Speaker 1: promoted tweets as a type of advertising, so advertisers could
Speaker 1: pay to promote a specific message a tweet so that
Speaker 1: it would show up in the timelines of folks, even
Speaker 1: if those folks weren't following that particular account. So I guess,
Speaker 1: for you know, those who don't use Twitter, I should clarify.
Speaker 1: The way it generally works is that you make an account,
Speaker 1: assuming that you're making an account that can post publicly.
Speaker 1: You can make a private account and then you can
Speaker 1: dictate which people can actually see your tweets, but most
Speaker 1: people have a public account. Then you end up following
Speaker 1: accounts you want to follow. So maybe there's some notable people,
Speaker 1: maybe there's some brands, maybe they're friends of yours that
Speaker 1: are on Twitter. You go and you follow those and
Speaker 1: you click a little button to follow them, and now
Speaker 1: whenever someone posting on those accounts posts a public tweet,
Speaker 1: that tweet shows up in your little Twitter feed and
Speaker 1: you can read them. So let's take an example of Sally,
Speaker 1: June and Bob. So Sally follows June, but she doesn't
Speaker 1: follow Bob. So whenever June sends out a public tweet,
Speaker 1: Sally sees it. Now, June follows Bob, so June can
Speaker 1: see all of Bob's public tweets. If June were to
Speaker 1: start a tweet with at Bob, so sending a Twitter
Speaker 1: message to Bob, not a direct message, but at reply message,
Speaker 1: Sally would not see that tweet automatically because Sally is
Speaker 1: not following Bob. Now Twitter didn't always work like this,
Speaker 1: but over the years the service institute these rules where
Speaker 1: you have to follow both parties in order to see
Speaker 1: these at replies on the face of them. Now, if again,
Speaker 1: if Sally had followed both Bob and June, she would
Speaker 1: see June's at at Bob. But now, let's say that
Speaker 1: Bob is running a business and he wants to promote
Speaker 1: his business. So he goes and he purchases a promoted
Speaker 1: tweet on Twitter, and he crafts a short message urging
Speaker 1: people to you know, follow a link to his business,
Speaker 1: and he pays Twitter and the message posts. Now Sally
Speaker 1: logs in, she looks at her Twitter feed, and now
Speaker 1: she sees at the top of that Twitter feed or
Speaker 1: near the top, Bob's message, even though she does not
Speaker 1: follow Bob. Because that tweet has been promoted into her timeline. Now,
Speaker 1: as you might imagine, a lot of Twitter users were
Speaker 1: not super keen on promoted tweets, as they were often
Speaker 1: left wondering why am I seeing this? Mean? I don't
Speaker 1: even follow this account? But it was one of the
Speaker 1: ways that Twitter could make money, and it did make money.
Speaker 1: It just wasn't making enough money to offset the cost
Speaker 1: of operating the company, so it remained operating at a loss.
Speaker 1: In two thousand thirteen, Twitter announced it was going to
Speaker 1: go public. It was going to become a publicly traded
Speaker 1: company and hold an I p O or initial public offering,
Speaker 1: so that would mean that Twitter stock would be publicly
Speaker 1: traded on stock exchanges. Now, keep in mind that this
Speaker 1: was still several years from Twitter actually having a profitable year,
Speaker 1: but this also meant the company could get a fresh
Speaker 1: injection of investment money, as folks would buy up shares
Speaker 1: of stock. So everyone recognized that Twitter was providing a
Speaker 1: valuable service, even if the company itself hadn't found a
Speaker 1: way to leverage that to make the company profitable. Heck,
Speaker 1: back in two thousand eleven, Twitter had a valuation of
Speaker 1: eight billion dollars, but it was still seven years away
Speaker 1: from a profitable year. In it launched a targeted advertising campaign,
Speaker 1: a more focused approach to promoted tweets, and the following year,
Speaker 1: the company held a round of layoffs, eliminating around nine
Speaker 1: percent of its workforce. In the last quarter of Twitter
Speaker 1: posted a quarterly profit of ninety one million dollars. The
Speaker 1: company had been in operations since two thousand and six,
Speaker 1: and this was the first profitable quarter for the company.
Speaker 1: So three months Twitter followed that up with a string
Speaker 1: of profitable quarters, and so two thousand eighteen became the
Speaker 1: first profitable year in the company's history. Now, to be clear,
Speaker 1: the company still had about one point five billion dollars
Speaker 1: in debt at that point. Two thousand nineteen was another
Speaker 1: good year for Twitter, but then saw a step back.
Speaker 1: The company made larger expenditures in and despite bringing in
Speaker 1: three point seven to billion dollars in revenue, it ended
Speaker 1: the year with an operating loss of one point one
Speaker 1: four billion dollars. Still, Twitter is a company that has
Speaker 1: gone from start up to one that actually generated enough
Speaker 1: revenue to at least sometimes cover all the costs of
Speaker 1: operation and then some. But let's move on to a
Speaker 1: slightly younger company. One that's perhaps on the cusp of
Speaker 1: having its first profitable year by the end of That
Speaker 1: company is snap Incorporated, which of course is known for
Speaker 1: its popular video social platform Snapchat. I should say video
Speaker 1: and photo platform Snapchat. Snapchat launched back in two thousand eleven,
Speaker 1: meaning this company is actually a decade old, which feels
Speaker 1: weird to say. Uh and uh, And in my mind
Speaker 1: it's always like that thing that just came out a
Speaker 1: couple of years ago, like I have such a bad
Speaker 1: way of placing wind tech things launched to me, like
Speaker 1: anything pre Twitter was only around a few years. But anyway,
Speaker 1: three Stanford University students named Reggie Brown, Evan Spiegel, and
Speaker 1: Bobby Murphy created the app way back in the day. Now.
Speaker 1: The story goes that Brown had come up with this
Speaker 1: idea of a platform that would allow users to post
Speaker 1: photos and videos that would have a limited shelf life,
Speaker 1: so after a given amount of time, the content would disappear,
Speaker 1: meaning you had to be actively engaged with the app
Speaker 1: frequently or you'd end up missing out on stuff. Also,
Speaker 1: I should add that at least some of the stories
Speaker 1: of the early days of this idea, In fact, a
Speaker 1: lot of the stories I should argue really revolved around
Speaker 1: the very things that concerned critics have raised about Snapchat,
Speaker 1: that being that the fact that you're you're talking about
Speaker 1: video and photos that only stay active for a certain
Speaker 1: amount of time and then they go away forever or
Speaker 1: apparently forever, meant that folks would take photos and videos of, say,
Speaker 1: less socially acceptable subjects. So, in other words, at least
Speaker 1: in one recounting of this idea, the primary use case
Speaker 1: for the disappearing photos was that it might encourage people
Speaker 1: to send racy pictures and videos to one another. Reading
Speaker 1: some of the accounts about this is pretty disturbing in
Speaker 1: some cases, like it. It feels gross. Not that people
Speaker 1: shouldn't send whatever they want to whomever they want. I
Speaker 1: don't mean that if they are consenting adults and and
Speaker 1: it is welcomed. I have no issues with what people
Speaker 1: send to one another, but rather that it was a
Speaker 1: means of encouraging this behavior from people who might otherwise
Speaker 1: resist it. You start getting into some territory that I
Speaker 1: find pretty ski vy. However, there are lots of other
Speaker 1: ways of using the app that don't involve, you know,
Speaker 1: skivie related topics and worlds are turned on such thoughts
Speaker 1: I suppose now, Honestly, if I dived into the background
Speaker 1: of the founders and some of the emails that they
Speaker 1: were sending to one another, back with them each other
Speaker 1: and with their fraternity mates, I would quickly need to
Speaker 1: slap an explicit tag on this episode. It is not
Speaker 1: a good luck, is all I'm gonna say, or rather
Speaker 1: like some of it is like really reprehensible, but let's
Speaker 1: just move on. I've been soap boxing long enough. So
Speaker 1: this was an app that was partly built on the
Speaker 1: premise of fomo, you know, the fear of missing out,
Speaker 1: which was kind of brilliant because that kind of design
Speaker 1: encourages ongoing and increased engagement, and that is something that
Speaker 1: can be monetized if it's treated properly. It's the thing
Speaker 1: that every platform is out for. It's why the Facebook
Speaker 1: algorithm works the way it does. It's why the YouTube
Speaker 1: algorithm works the way it does. It's designed to encourage
Speaker 1: you to stay there for as long as possible. In fact,
Speaker 1: just to backtrack a little bit, while Twitter turned a
Speaker 1: profit in two thousand and eighteen, the company also saw
Speaker 1: a drop in active users. In fact, that drop of
Speaker 1: active users was bad enough that Twitter essentially said it
Speaker 1: wasn't going to report on the number of active users
Speaker 1: anymore and instead focus on profitability as a metric, possibly
Speaker 1: because the company was also kind of saying that it's
Speaker 1: long term profitability strategy hinged on building out a larger
Speaker 1: community of active users, and it could be pretty upsetting
Speaker 1: to investors to hear that the long term success of
Speaker 1: a company is dependent upon something that is currently in decline. Anyway,
Speaker 1: the story of snapchat then gets really rough. Originally the
Speaker 1: idea was for a website, but the trio soon learned
Speaker 1: that a mobile app would be far more useful and popular,
Speaker 1: and the app that the you originally created with Bobby
Speaker 1: Murphy actually doing the coding was called Peka boo p
Speaker 1: I c A b o O. And then well, a
Speaker 1: decision was reached, and that decision was to exercise Reggie
Speaker 1: Brown from the group to kick him out. So out
Speaker 1: of the three, Brown had apparently made the fewest contributions
Speaker 1: to actually building the product, though according to you know
Speaker 1: the original story, it was his actual idea to make
Speaker 1: this thing. He didn't do a whole lot of work
Speaker 1: to build it. He did do some work with filing patents,
Speaker 1: but even by his own admission, he said he didn't
Speaker 1: do quite as much as as a Spiegel or Um
Speaker 1: or Murphy had done. So he later would sue Snapchat,
Speaker 1: which was essentially not even acknowledging his existence, and the
Speaker 1: company would ultimately reach a one fifty seven point five
Speaker 1: million dollar settlement with him, which is, you know, not
Speaker 1: that's not a bad amount of cash to take with
Speaker 1: you to say, like, yeah, I came up with the idea,
Speaker 1: and then you could go and do whatever you wanted
Speaker 1: with it. By the way, these guys were not like
Speaker 1: struggling college students either, I just want to point that
Speaker 1: out anyway. Brown and Spiegel then founded a company on
Speaker 1: September six, two thousand eleven that would be Snapchat, which
Speaker 1: was essentially a relaunch of Peekaboo, but with some you know,
Speaker 1: changes to the look of it. The company Snap Incorporated
Speaker 1: would follow a few years later as a sort of
Speaker 1: parent company for the purposes you like organizing and handling
Speaker 1: finance and things like that. The app, at first was
Speaker 1: an iOS exclusive. It came to Android a year later
Speaker 1: in two thousand twelve. In ten, Mark Zuckerberg reportedly made
Speaker 1: an offer that the Snapchat founders actually could refuse, but
Speaker 1: that offer was allegedly for three billion dollars and they
Speaker 1: turned it down. Wowser's In two thousand seventeen, the company
Speaker 1: held an I p O and got a massive cash
Speaker 1: injection and that created a company valuation of twenty four
Speaker 1: billion dollars and had introduced advertising, So it was generating revenue.
Speaker 1: It was making cash, It just wasn't making enough to
Speaker 1: cover all the costs in order to turn a profit.
Speaker 1: But the app appeared to be on a rocket ship
Speaker 1: to the moon. But then a couple of things ended
Speaker 1: up causing the company some grief. One was that a
Speaker 1: spurned Mark Zuckerberg decided he would build out his own
Speaker 1: Snapchat by having the Facebook owned business of Instagram introduced
Speaker 1: features that were let's just call it directly lifted off
Speaker 1: of Snapchats feature list and so calling it something that
Speaker 1: resembled Snapchats features as being kind Snapchats. Growth trailed off
Speaker 1: weekly it dropped by so the company was actually still growing,
Speaker 1: it was just growing at a much slower rate than
Speaker 1: it had been. Then there was the ultimate betrayal. Snapchat
Speaker 1: redesigned its user interface, and then Kylie Jenner sent out
Speaker 1: a tweet saying she didn't even use it anymore, and
Speaker 1: that was the unkindest cut of all. Honestly, I'm still
Speaker 1: goggling at a billion dollar company that is unable to
Speaker 1: turn a profit. I really just you know, business is
Speaker 1: beyond me. Obviously, I am not any sort of business genius. Anyway,
Speaker 1: snap was going through some internal turmoil. The company lost
Speaker 1: to chief financial officers and the head of its human
Speaker 1: resources department in short succession, and Instagram was eating into
Speaker 1: Snapchat's growth, and then the double whammy of TikTok's emergence
Speaker 1: began to be an issue, and then the pandemic of
Speaker 1: really threw wrenches into the various works. The company wasn't
Speaker 1: falling apart, not by any means, but things were pretty tense.
Speaker 1: In The Financial Times declared that Snapchat had about three
Speaker 1: years to reach a cash flow neutral status or else
Speaker 1: it would need to find a new way to raise
Speaker 1: money in order to stay in business. Its losses in
Speaker 1: twenty eight amounted to one point three billion dollars. Now,
Speaker 1: the good news for snap is that while the company
Speaker 1: lost money in the years since, it was losing less
Speaker 1: money per year in losses amounted to around nine hut
Speaker 1: five million dollars. That's not great, I get it. The
Speaker 1: Motley Fool reported in January of one that Snap might
Speaker 1: actually turn a profit this year, though I glanced at
Speaker 1: the company's quarterly earnings reports, which the company has to
Speaker 1: file publicly because it's a publicly traded company, and it
Speaker 1: continues to operate at a net loss this year. The
Speaker 1: company continues to add revenue streams frequently in the four
Speaker 1: of serving more ads per experience. But yeah, no profitable
Speaker 1: year yet. When we come back, we'll talk about some
Speaker 1: other famous companies that have yet to turn a profit,
Speaker 1: at least on an annual basis. But first, well, I
Speaker 1: gotta have some profit. Let's take a quick break before
Speaker 1: we get into our next company. Let me hit you
Speaker 1: with a little fun tidbit that I came across while
Speaker 1: researching this episode. Business Insider has a two thousand nineteen
Speaker 1: article that served as some of the inspiration for this episode.
Speaker 1: Although a lot of the things in that list are
Speaker 1: you know, have turned a profit since then. But in
Speaker 1: that article they cite a report from pitch Book, and
Speaker 1: that report says that out of one startups that had
Speaker 1: a valuation of at least one billion dollars, that is
Speaker 1: the Unicorn valuation only uh less than had become profitable.
Speaker 1: In fact, sixty were unprofitable more than half. And the
Speaker 1: article also cites a stat from Recode that says unprofitable
Speaker 1: companies that went public actually performed better than profitable companies did.
Speaker 1: The market loves a highly valued underdog. I guess I
Speaker 1: mean I still don't understand business honestly. But let's move on.
Speaker 1: Let's talk about a company that's not actually a tech
Speaker 1: company but was treated like one. And of course I'm
Speaker 1: talking about we Work, a company that had the business
Speaker 1: model of securing office space in various markets and then
Speaker 1: essentially sub letting that space out to customers. And those
Speaker 1: were typically smaller companies or sometimes companies that wanted to
Speaker 1: open up, say a small branch office in the city
Speaker 1: where they did not already have a presence. We Work
Speaker 1: has had a phenomenal journey, complete with drama and theatrics,
Speaker 1: and one of the strangest attempted I p O s
Speaker 1: I have ever researched. Like Its bonkers, y'all. Now. The
Speaker 1: founder of the company was Adam Newman, and Israeli born
Speaker 1: entrepreneur who moved to the United States in two thousand
Speaker 1: one and got his start running a company called Crawlers
Speaker 1: with a K and that specialized in clothing for babies.
Speaker 1: In two thousand eight, he created a new startup called
Speaker 1: Green Desk, which was sort of a predecessor to we Work,
Speaker 1: and the idea was to create office space that folks
Speaker 1: like freelancers could rent out. So maybe you're a freelancing
Speaker 1: writer and you need a dedicated workspace, so you could
Speaker 1: rent out like a desk in a shared coworking environment
Speaker 1: with lots of other people. So that was the idea,
Speaker 1: and it was called Green Desk because the focus was
Speaker 1: on sustainability, So the office space had recycled furniture in it,
Speaker 1: and the idea was that the electricity was going to
Speaker 1: come from wind power, that kind of thing. Newman and
Speaker 1: his Green Desk co founder Miguel mcklvey sold off the
Speaker 1: company for a few million dollars and around twenty or
Speaker 1: an eleven because accounts very they launched a new company
Speaker 1: based around the idea of shared workspaces, and this was
Speaker 1: we Work. And again, despite the fact that you know,
Speaker 1: it was really a real estate company, the media was
Speaker 1: treating it like it was a tech startup, and it
Speaker 1: was operating a lot like a tech startup, so I
Speaker 1: guess that was the reason for the media coverage. We
Speaker 1: Work expanded rapidly, securing office space in various cities around
Speaker 1: the world and then renting it out to their customers.
Speaker 1: And this meant we Work was signing these really expensive
Speaker 1: long term leases with lots of different office buildings, and
Speaker 1: that made some investors nervous because this was a guaranteed expense. Right,
Speaker 1: You're doing a long term lease, that's a guaranteed cost
Speaker 1: to your company, and we Works business of renting out
Speaker 1: space to customers was not necessarily going to follow the
Speaker 1: demand that would match the supply. In other words, there
Speaker 1: might be years where fewer customers actually need that shared
Speaker 1: office space, and yet you would still be saddled with
Speaker 1: this long term lease agreement. The company grew very quickly.
Speaker 1: The Newman developed a reputation for having a bit of
Speaker 1: a lavish and some might say hedonistic lifestyle. He also
Speaker 1: made some choices that made him a bit of a
Speaker 1: target in the business space. Now, I would argue that
Speaker 1: targeting Newman based on those choices was sometimes unfair and disingenuous,
Speaker 1: like you know, placing weird kind of moral uh decisions
Speaker 1: based upon some of his behavior, but he was also
Speaker 1: known for spending a lot of money, both in the
Speaker 1: company and outside of it, so it was kind of
Speaker 1: hard to to not criticize his behaviors in some cases.
Speaker 1: In two thousand nineteen, things came to a head. The
Speaker 1: company was planning a public offering to go on to
Speaker 1: the stock market. It had recently rebranded and became the
Speaker 1: Wee Company. This is something that's since been essentially abandoned,
Speaker 1: but the idea was that it would have three divisions.
Speaker 1: There was the we Work division, that's the one with
Speaker 1: the office space. There was we Grow, which was going
Speaker 1: to or which was running an elementary school in New
Speaker 1: York City. And there was we Live, which operated a
Speaker 1: couple of apartment buildings. Now in the i p O filing,
Speaker 1: the company revealed it had lost two point nine billion
Speaker 1: dollars over the course of three years leading up to
Speaker 1: the i p O, so nearly three billion dollars lost.
Speaker 1: At one point, the company was seeking evaluation of around
Speaker 1: forty seven billion dollars. That would drop down to around
Speaker 1: ten billion as they were still attempting to hold an IPO.
Speaker 1: By September of two thousand nineteen. We Work had delayed
Speaker 1: the I p O T October, and an executive named
Speaker 1: Wendy Silverstein, who was part of the real estate investment
Speaker 1: leadership team quit like she was an high ranking executive
Speaker 1: who walks out, and the board of directors was staring
Speaker 1: to have actual discussions about the possibility of removing Newman
Speaker 1: as the CEO of the company, seeing him as something
Speaker 1: of a liability. Newman and his wife both had gained
Speaker 1: notoriety for unconventional behavior that is unconventional for, you know,
Speaker 1: leaders of a business valuing itself in the billions of dollars.
Speaker 1: Some things were kind of skiezy, like he trademarked the
Speaker 1: term WE for WE Work just w E and then
Speaker 1: pushed the company to purchase the trademark from him for
Speaker 1: five point nine million dollars, which kind of looks like,
Speaker 1: you know, using the company you run to fund your
Speaker 1: personal life directly. It's not a good look. Another issue
Speaker 1: is that Newman apparently purchased properties and then would lease
Speaker 1: them back to WE Work, turning his purchases into revenue
Speaker 1: generators with the company he was running. This was, to
Speaker 1: put it mildly, a conflict of interests and something that
Speaker 1: would not fly for a publicly traded company, so that
Speaker 1: presented a potential problem for the I p O. Now,
Speaker 1: this IBO struggle meant that we works largest investor, the
Speaker 1: mega corporation, soft Bank, would end up stepping into kind
Speaker 1: of acquire the company. This would largely be abandoned a
Speaker 1: few months later, and part of that process involved extending
Speaker 1: a one point seven billion dollar golden parachute deal to
Speaker 1: Newman to vacate his position. So imagine being paid more
Speaker 1: than a billion and a half dollars not to work somewhere.
Speaker 1: Please pay me not to work for you. I will
Speaker 1: cut you a much better deal than one point five
Speaker 1: billion dollars to not work for you. Under the ownership
Speaker 1: of soft Bank, we work downsized, laying off some two thousand,
Speaker 1: four hundred employees initially with more to follow. But then
Speaker 1: we get to twenty twenty and the other shoe drops
Speaker 1: super hard. So we work was already kind of in
Speaker 1: our choppy sees going into twenty right like, things were
Speaker 1: not looking good for the company. The pandemic hits, and
Speaker 1: that necessitates many cities to initiate stay at home orders,
Speaker 1: so work from home policies go into effect, and for
Speaker 1: a company that focuses on subletting office space. It was
Speaker 1: a true catastrophe. According to the Guardian, the company saw
Speaker 1: a thirty percent decline in customers and losses of two
Speaker 1: point one billion dollars in the first quarter of one.
Speaker 1: It's losses in the first quarter of twenty or fifty
Speaker 1: six million, so when the pandemic starts, they lose a
Speaker 1: little more than half a billion dollars in the first
Speaker 1: quarter this year, first quarter losses of two point one
Speaker 1: billion dollars. Now, the company still has plans to go public,
Speaker 1: but not through an I p O. Rather, the plan
Speaker 1: was to use a spack s p a C. That's
Speaker 1: a special purpose acquisition company, also known as a blank
Speaker 1: check company. So these are companies that don't actually do anything.
Speaker 1: They just go public. So you get a bunch of
Speaker 1: investors to pour a whole bunch of money into a
Speaker 1: company which just kind of exists in name and on paper,
Speaker 1: and you then take this company that just kind of
Speaker 1: exists on paper to go public. There's nothing wrong about that.
Speaker 1: And then once you go public, you use this company
Speaker 1: to acquire some other private company and then through the
Speaker 1: transitive property of acquisition, that private company becomes a publicly
Speaker 1: traded company, so it is a way to sidestep the
Speaker 1: I p O process. So if it's a company like
Speaker 1: we Work, which has lost all confidence in in the
Speaker 1: market as far as you know, holding an I p
Speaker 1: O is concerned, it would be a way to become
Speaker 1: a publicly traded company without having to go through the
Speaker 1: I p OH. It sounds shady, but it's Tod's legal. Meanwhile,
Speaker 1: the new executive team that we Work has both reined
Speaker 1: in the cash burn practices of the past as well
Speaker 1: as cut back on operating expenses. So there is a
Speaker 1: possibility that the company will have a profitable fourth quarter
Speaker 1: this year, assuming occupancy rates improve. But then we're also
Speaker 1: in a stage of the pandemic that has become kind
Speaker 1: of unpredictable and questionable again with the rise of the
Speaker 1: delta variant UH, it has a lot of people concerned,
Speaker 1: so we'll have to see how that plays apart, even
Speaker 1: with a profitable fourth quarter is going to end in
Speaker 1: a loss for we Work, But if the company can
Speaker 1: build momentum, it might see an operating profit by the
Speaker 1: end of two which it can put toward its considerable debt.
Speaker 1: We've got some more companies to talk about. But before
Speaker 1: I get into those, let's take another quick break. Oh okay, y'all.
Speaker 1: For this next one, I have to give you all
Speaker 1: a disclaimer. See I work for I Heart Radio, say
Speaker 1: it at the beginning of every single episode, and one
Speaker 1: of our competitors in the digital space at least is Spotify.
Speaker 1: Now I'm gonna talk about Spotify and the fact that
Speaker 1: it has never posted an annual profit, but I'm gonna
Speaker 1: try to do my best to remove myself from comparing
Speaker 1: it to the company I work for, because that would
Speaker 1: just be tacky and biased, and it's not apples to apples, right.
Speaker 1: I Heart Radio is a huge company that includes hundreds
Speaker 1: of radio stations across the United States terrestrial radio stations.
Speaker 1: The digital part of I Heart Radio is just one
Speaker 1: part of a much larger company, so you can't really
Speaker 1: compare apples to apples here. Spotify is a different beast. Plus,
Speaker 1: I should acknowledge right out of the gate that while
Speaker 1: Spotify has never posted an annual profit, the company has
Speaker 1: had profitable quarters and trust me, that ain't nothing, it's something.
Speaker 1: In other words, here's the super summarized story. Because I
Speaker 1: have actually done episodes about Spotify in the past, But
Speaker 1: in two thousand and six a pair of developers named
Speaker 1: Daniel Elk and Martin Lawrenson came up with this idea
Speaker 1: for Spotify, and the idea was to create a streaming
Speaker 1: music platform, a service that would give music companies away
Speaker 1: to reach listeners a customers, and make it so easy
Speaker 1: to listen to their music that people would stop pirating
Speaker 1: all the ding bang music. Because this was in the
Speaker 1: wake of really a big era of digital piracy. You
Speaker 1: had the giant peer to peer networks like Napster and Kazam,
Speaker 1: which were largely used to pirate music, and you also
Speaker 1: had the rise of the torrent index site, the pirate Bay,
Speaker 1: and like the Pirate Bay, Spotify also calls Sweden Home.
Speaker 1: So you know, piracy was something that was really on
Speaker 1: the minds of people in Sweden who who were connected
Speaker 1: to either you know, the entertainment industry or the tech
Speaker 1: world that would facilitate this sort of stuff. So the
Speaker 1: concept actually had a really good use case, a platform
Speaker 1: where music companies could generate revenue from digital music rather
Speaker 1: than see rampant piracy. Now people might end up listening
Speaker 1: to streaming music even if they weren't the type to download,
Speaker 1: you know, to pay for a download of the song,
Speaker 1: and the landscape at that point was really fragmented. In
Speaker 1: the mid two thousand's, there was Apple with the iTunes store,
Speaker 1: which launched in two thousand one. But you purchased songs
Speaker 1: on iTunes, right, You weren't streaming from iTunes back then.
Speaker 1: You would just make a purchase, download it to your device,
Speaker 1: and you would have it. And then you would have
Speaker 1: a bunch of proprietary approaches from the various music labels
Speaker 1: that were trying to operate their own digital store fronts.
Speaker 1: But again, it just meant that it was a fractured
Speaker 1: experience for users and not very satisfying. Spotify would launch
Speaker 1: in two thousand eight, two years after they first came
Speaker 1: up with the idea, and users could either opt for
Speaker 1: a free account that would include advertising between a certain
Speaker 1: number of songs and that would generate revenue right it
Speaker 1: was just your their classic ads supported revenue generation, or
Speaker 1: users could opt to go with an ad free experience
Speaker 1: in return for a monthly subscription fee. Other streaming platforms
Speaker 1: would follow competing with Spotify, and some markets like the
Speaker 1: United States, would not get access to Spotify for a
Speaker 1: few years. The US finally got Spotify in July two
Speaker 1: thou eleven, so we had been hearing about it for,
Speaker 1: you know, nearly three years by the time we finally
Speaker 1: got access to it. The company mostly operated at a loss,
Speaker 1: except for the asional profitable quarter over the years. In
Speaker 1: Music Business World reported that Spotify's losses over its decade
Speaker 1: of existence at that point amounted to about two point
Speaker 1: eight billion dollars. The company has spent a great deal
Speaker 1: of money on scaling and on purchasing content, including landing
Speaker 1: exclusive deals with some podcasters. People interested in those shows
Speaker 1: can only get them through Spotify. It's kind of the
Speaker 1: opposite of how we do things. So for example, the
Speaker 1: video game discussion show The Besties, which by the way,
Speaker 1: it's not one of our shows. I genuinely really love
Speaker 1: the Besties, so shout out to those guys. They do
Speaker 1: a great show about video games. Anyway, for about for
Speaker 1: a year, the Bestie's was a Spotify exclusive, uh, and
Speaker 1: that agreement eventually expired, but for a year, in order
Speaker 1: to get new episodes you needed a Spotify account, and
Speaker 1: those episodes are now available on other platforms because that
Speaker 1: exclusivity deal expired. Spotify did not renew it um, so
Speaker 1: it's a different story now. But at a time you
Speaker 1: can only get them through Spotify. There are some that
Speaker 1: are Spotify exclusives and they are pay for podcasts. You
Speaker 1: have to pay a subscription fee in order to get them. Um.
Speaker 1: I don't know the success rate of that, because in
Speaker 1: my experience, the paid for model is one that's really
Speaker 1: shaky for podcasts. But I'm curious. I'll have to look
Speaker 1: into that. Maybe I'll do an episode about it. Anyway,
Speaker 1: Spotify spent more than half a billion dollars acquiring podcast
Speaker 1: related companies like Anchor FM, gimblet Media, Podcast and more.
Speaker 1: Elkas said that the company is still focused largely on
Speaker 1: growth and will switch to a profit based strategy at
Speaker 1: some point, presumably when the company has grown enough. And
Speaker 1: this gets back to that thing I was saying earlier
Speaker 1: that sometimes concentrating on growth is the most important strategy,
Speaker 1: because if you try and monetize too early, not only
Speaker 1: will you not make enough money to cover costs, but
Speaker 1: you might inhibit the growth of your company. And in
Speaker 1: the company posted a profitable first quarter. Now, according to Spotify,
Speaker 1: it posted a fourteen million euro profit for quarter one
Speaker 1: of one. That's about sixteen point six million dollars US,
Speaker 1: and recently the company posted a twelve million euro operating
Speaker 1: profit for the second quarter. That's about fourteen point to
Speaker 1: five million dollars US. So if the rest of the
Speaker 1: year follows, Spotify could actually see its first annual profit
Speaker 1: by the end of twenty one, though of course it
Speaker 1: still has a mountain of debt that it has to address.
Speaker 1: It's not like it's completely out of the woods, but
Speaker 1: it could be that's turned a very important corner by
Speaker 1: the end of this year. And and next I think
Speaker 1: we're gonna talk about a company that posted its first
Speaker 1: annual profit in twenty twenty, but only if you put
Speaker 1: a big old asterisk next to that. And this company
Speaker 1: is Tesla. Now. The co founders of Tesla and yes
Speaker 1: Elon Musk is one of them, launched the company in
Speaker 1: two thousand three. And a startup automobile company is obviously
Speaker 1: a huge undertaking. As you might imagine, the startup costs
Speaker 1: are considerable. So think of like a company that just
Speaker 1: you know, is not like a manufacturing company. You have
Speaker 1: all your basic expenses, right, you have to have a
Speaker 1: corporate headquarters, and you've got all the different departments that
Speaker 1: you would expect to have, like sales and marketing, and
Speaker 1: so you have operating costs associated with them. But with Tesla,
Speaker 1: you also have an auto manufacturing side of the business
Speaker 1: that's enormously expensive to build out, and so the company
Speaker 1: was making huge investments in itself year after year, which
Speaker 1: meant that despite the high cost of the company's frequently
Speaker 1: highly desired cars, the company as a whole was operating
Speaker 1: at a loss. And for some people like me, I'm
Speaker 1: counting myself in here, it can be confusing, right, because
Speaker 1: you think cars are expensive. Clearly, if you're selling enough cars,
Speaker 1: you're gonna be making tons of money. But making cars
Speaker 1: is also expensive, especially when you're building out the manufacturing
Speaker 1: capabilities of your company. So for a lot of you,
Speaker 1: I'm sure that's not a big surprise, right, And a
Speaker 1: Tesla vehicle does cost a lot. So, for example, the
Speaker 1: least expensive Tesla model is the Model three, which has
Speaker 1: a base standard price of forty one one dollars, with
Speaker 1: one two hundred of that being a destination fee to
Speaker 1: get the car to wherever you are buying it. But hey, actually,
Speaker 1: right now, because of the crazy, screwed up world we
Speaker 1: live in, because of the pandemic, because of the semiconductor shortage,
Speaker 1: and thus because of a car shortage, that actually is
Speaker 1: not that much more expensive than the average car price
Speaker 1: in the United States. As of June one, the average
Speaker 1: car price here in the US was forty two hundred
Speaker 1: six dollars. So because of those issues, Tesla's prices, at
Speaker 1: least for its you know, most inexpensive car are actually
Speaker 1: pretty competitive compared to the average price in the United States.
Speaker 1: So I guess I have to eat my words on
Speaker 1: that one, although to be fair, the other Tesla models
Speaker 1: are much more expensive. Now usually we do think of
Speaker 1: Tesla's cars as being on the price e side. And
Speaker 1: even so, that wasn't enough to push the company into profitability.
Speaker 1: And again it's no wonder because the company was building
Speaker 1: out new factories and all that kind of thing. But
Speaker 1: then there's the other source of revenue that Tesla enjoys,
Speaker 1: and it's a big one. In fact, it's a bigger
Speaker 1: revenue source than what it generates from our sales, and
Speaker 1: that revenue comes from regulatory credits. See some states here
Speaker 1: in the United States, eleven of them, in fact, have
Speaker 1: regulations that require automakers to sell a certain percentage of
Speaker 1: their cars as zero emission vehicles by so, in other words,
Speaker 1: if you want to sell a car in one of
Speaker 1: those states, a certain percentage of the cars you make
Speaker 1: have to be zero emission vehicles. And I say certain
Speaker 1: percentage because it differs from state to state. And if
Speaker 1: the automakers are not going to be able to make
Speaker 1: that percentage number, you know, if they're not able to
Speaker 1: produce enough zero emission vehicles to make up that percentage
Speaker 1: of the cars they want to sell in those states,
Speaker 1: they have to offset that by buying up regulatory credits
Speaker 1: from some other automaker that does meet those requirements. Well,
Speaker 1: all Tesla vehicles are electric, and so Tesla has a
Speaker 1: big old heap in handful of regulatory credits that it
Speaker 1: can sell to other manufacturers, and it does so. More
Speaker 1: than half of Tesla's revenue in twenty twenty came not
Speaker 1: from selling cars, but from taking money from other automakers
Speaker 1: that will not be able to meet those regulatory requirements
Speaker 1: by twenty five. Just pretty wild, right anyway. Twenty twenty
Speaker 1: was the first profitable year for Tesla, but the company
Speaker 1: would have operated at a loss if it had not
Speaker 1: been for those regulatory credits, and those credits are not
Speaker 1: gonna stick around forever. In a few years, other automakers
Speaker 1: will have caught up with those regulatory requirements because we're
Speaker 1: going to see more states passing them. We might see
Speaker 1: federal level. Other parts of the world are following suit.
Speaker 1: So that means that eventually all the car companies are
Speaker 1: going to be on the same page, and those that
Speaker 1: credit market will not even exist. It will go away.
Speaker 1: So while Tesla is profitable for the moment, it will
Speaker 1: not be able to rely up on that specific source
Speaker 1: of revenue for much longer, and it will need to
Speaker 1: find another roadmap to profitability. I have another pair of
Speaker 1: companies to talk about, but before I get to that,
Speaker 1: let's take one last quick break. Okay, finally, we've got
Speaker 1: a pair of companies to consider, and I'm putting them together.
Speaker 1: I'll talk about them separately, but they're they're paired together
Speaker 1: because they're both in the same business. And those companies
Speaker 1: are Uber and Lift, the ride sharing companies. Uh. These
Speaker 1: companies have long been seen as huge disruptors to the
Speaker 1: legacy taxi services around the world, right, I mean, there
Speaker 1: are famous protests that taxi unions have held in response
Speaker 1: to companies like Lift and Uber moving into their territories.
Speaker 1: So they are seen as these massive disruptors, and disruptors
Speaker 1: tend to get a particularly romantic portrayal in the tech sector.
Speaker 1: They're thought of as being these, you know, giant companies
Speaker 1: that can just stride in and shake the way things
Speaker 1: are done and and just be incredibly profitable. But these
Speaker 1: particular companies have been disruptive at a considerable loss. Uh heck,
Speaker 1: a loss so considerable that even some of the most
Speaker 1: creative accounting on the planet can only make those losses
Speaker 1: look less bad. Let's take Uber for example. Uber started
Speaker 1: in two thousand nine, and originally it was sort of
Speaker 1: a black town car service, you know, kind of a
Speaker 1: uh an upscale way to get around. It was not
Speaker 1: quite frame the way it is today. And the story
Speaker 1: goes that the co founders of the company were sharing
Speaker 1: stories about how hard it was to get a taxi
Speaker 1: in Paris during a snowstorm, and wouldn't it be great
Speaker 1: if someone could just create a company that could shake
Speaker 1: up the way that car services work and that taxi
Speaker 1: services work. And this led to this idea of a
Speaker 1: ride sharing company, which really is more of a ride
Speaker 1: hailing company. I think a right sharing company would be
Speaker 1: more like something that would encourage car pools, but that's
Speaker 1: not what Uber or Lift do. So while we often
Speaker 1: call them ride sharing I think they're really more ride
Speaker 1: hailing companies. And what followed was a meteoric rise in
Speaker 1: terms of investment rounds and rolling out of services. The
Speaker 1: company also earned itself a pretty ugly reputation. For one thing,
Speaker 1: Uber insisted repeatedly that the people driving for Uber were
Speaker 1: not Uber employees, but rather they should be considered independent
Speaker 1: freelance contractors, which meant they also would not qualify for
Speaker 1: stuff like benefits. For another, the company became famous for
Speaker 1: having a truly toxic corporate work environment, and it was
Speaker 1: one that protected male executives from charges of harassment from
Speaker 1: their female coworkers. You know, harassment and worse. The stories
Speaker 1: are are truly terrible, and it became one of those
Speaker 1: companies that prompted folks to say human resources is not
Speaker 1: there to protect you, it's there to protect the company. Now.
Speaker 1: That whole story is beyond awful, and it culminated in
Speaker 1: the board of directors forcing the co founder and CEO
Speaker 1: of the company out. He was he was highly encouraged
Speaker 1: to resign. Let's say what followed was a new leadership
Speaker 1: team that claimed to be dedicated to overhauling the corporate
Speaker 1: culture and atoning for the past and building towards profitability,
Speaker 1: because you know, Uber wasn't profitable at all. It was
Speaker 1: losing money every year. So while we were hearing these
Speaker 1: stories about Uber drivers seeing much of their fairs siphoned
Speaker 1: to the company. In other words, the people doing the driving,
Speaker 1: we're seeing a lot of the money they were bringing
Speaker 1: in going not to them but to the company. The
Speaker 1: expenses of the operations were such that Uber as a
Speaker 1: whole still wasn't turning a profit. So it's kind of
Speaker 1: like the worst of both worlds, right. You had the
Speaker 1: drivers saying we should be keeping more of the money
Speaker 1: that we generate, and the company, meanwhile, even taking the
Speaker 1: you know that percentage, was losing money. Despite all this,
Speaker 1: Uber still held an initial public offering and became a
Speaker 1: publicly traded company. So once again we have a company
Speaker 1: that was not profitable. It was operating in a loss
Speaker 1: year over year, still holding an I p O, and
Speaker 1: still generating crazy stock market prices. So it continued to
Speaker 1: lose money on an annual basis. Despite all this, the
Speaker 1: company's fiscal year for twenty nineteen was bleak. It had
Speaker 1: a loss of eight point five billion dollars and have
Speaker 1: billion dollars loss, but in early the hope was that
Speaker 1: by the end of that year the company would be profitable.
Speaker 1: And then the pandemic hit in full force, and as
Speaker 1: you might imagine, was a tough year. Oddly enough, not
Speaker 1: as tough a year as two thousand nineteen was for Uber,
Speaker 1: so Uber posted a six point seven seven billion dollar
Speaker 1: loss in unless you're paying attention to Uber's finance call
Speaker 1: when discussing, because that's when the magical accounting comes into play. Now,
Speaker 1: you see, Uber was being kind of loosey goosey with
Speaker 1: the concept of ebida and ebida or e B I
Speaker 1: T d A is an acronym that stands for earnings
Speaker 1: before interest, taxes, depreciation and amortization. It's kind of a
Speaker 1: way of saying how much cash a business generates or
Speaker 1: loses over a given amount of time, So you could
Speaker 1: have quarterly or annual, et cetera. It's not quite profit,
Speaker 1: or at least it's not as simple as profit as
Speaker 1: you do have these other factors like taxes and such
Speaker 1: that will factor into the end result, but it's generally
Speaker 1: used as a way of judging the comparative health of
Speaker 1: a company at a given time. Well, Uber was working
Speaker 1: with an adjusted EBIDA that included twelve categories of exclusion,
Speaker 1: which in itself was pretty unusual. So with that, creative
Speaker 1: accounting essentially saying here's how much we lost as long
Speaker 1: as you ignore these twelve other factors, that collectively means
Speaker 1: we actually lost more than this, those losses came down
Speaker 1: from six point seven seven billion dollars to a more
Speaker 1: modest two point five three billion dollars. Because creative accounting
Speaker 1: can only get you so far. Now, Uber executives argue
Speaker 1: that the company is on track to have a positive
Speaker 1: EBIDA by the end of twenty one. But keep in
Speaker 1: mind that's with all these exclusions in play. If we
Speaker 1: actually include those factors rather than exclude them, we're likely
Speaker 1: still talking about actual loss in the real world once
Speaker 1: all the ink dries. Despite that, the shares for the
Speaker 1: company have been on the rise since they're low of
Speaker 1: fifteen dollars per share during an earlier time in the pandemic,
Speaker 1: so that company could turn a quasi profit at the
Speaker 1: end of one, but with you know, a big asterisk
Speaker 1: behind that. If it can do that, and if it
Speaker 1: can build upon that, then we might finally see a
Speaker 1: ride sharing company emerge from operating at a loss despite
Speaker 1: you know, that whole disruptive thing. But now let's talk
Speaker 1: about Lift. Lift launched in two thousand and twelve, so
Speaker 1: it came after Uber, and over the years has been
Speaker 1: in a pretty nasty battle with Uber. Sometimes that battle
Speaker 1: even included employees of one company actively trying to sabotage
Speaker 1: the operations of the other company. It got ugly, y'all.
Speaker 1: But that's a matter for different episode. Anyway. Like Uber,
Speaker 1: Lift operated at a loss year after year, expanding into
Speaker 1: new markets and holding its own I p O to
Speaker 1: go public, but the company continued to lose money, not
Speaker 1: turning a profit. In twenty nineteen, it lost two point
Speaker 1: six billion dollars. In twenty the company saw revenue shrink,
Speaker 1: so it was three point six two billion dollars in
Speaker 1: two thousand nineteen, it shranked to two point three six
Speaker 1: billion dollars in twenty twenty. That's revenue despital that even
Speaker 1: though it's a less revenue, it actually also saw fewer losses.
Speaker 1: In twenty nineteen, it came in at one point seven
Speaker 1: five billion dollars in losses, still not great, but not
Speaker 1: as bad as twenty nineteen. But like Uber, lift has
Speaker 1: its own you know, accounting wizardry that it uses lifts
Speaker 1: adjusted ebitas stated that it actually lost six hundred eighty
Speaker 1: nine point nine million dollars in twenty nineteen, and surprisingly,
Speaker 1: it lost seven fifty five point two million in twenty
Speaker 1: Now I say surprisingly, I realize I'm throwing a lot
Speaker 1: of numbers at you. It's kind of just becomes word
Speaker 1: salad or numbers salad at a point. But the reason
Speaker 1: I say surprisingly is because using lifts metrics, it looks
Speaker 1: like the company lost more in than it did in
Speaker 1: but using a different set of metrics, the opposite is true.
Speaker 1: In both cases, It's still lost money both years, and
Speaker 1: just the question is how much Like Uber Lifts, mathematic
Speaker 1: wizardry suggests that the company will reach a positive EBITA
Speaker 1: by the end of this year. But like Uber, without
Speaker 1: that adjusted EBITA approach, the story is that the company
Speaker 1: is going to continue to operate at a loss unless
Speaker 1: things really change in the last quarter of one. In fact,
Speaker 1: earlier this year, Lift announced that it had a net
Speaker 1: loss of four d twenty seven point three million dollars
Speaker 1: in the first quarter of one. Now I can't tell
Speaker 1: you why their second quarter results are because I'm recording
Speaker 1: this on the same day it publishes, August two, and
Speaker 1: the company hasn't announced that yet because that announcement happens
Speaker 1: tomorrow on August three, So we'll see then if things
Speaker 1: have changed. But yeah, this is an odd thing, right,
Speaker 1: It's weird to see these companies that get these incredible valuations.
Speaker 1: There's this amazing amount of excitement and investment poured into
Speaker 1: these companies, and they can go for a decade or
Speaker 1: longer without turning a profit, and some of them might
Speaker 1: never turn a profit. Now, the good news is that
Speaker 1: for the ones that can stick around long enough, they
Speaker 1: might be able to find a revenue path that does
Speaker 1: work and that they can build on that, and so
Speaker 1: that investment over the long term becomes a good idea.
Speaker 1: But for a lot of people, I think they probably
Speaker 1: feel like these companies feel like almost a Ponzi scheme
Speaker 1: or pyramid scheme, and that you might get in early
Speaker 1: on and invest in this company, and then you get
Speaker 1: the sinking feeling that the company is never going to
Speaker 1: turn a profit, But if you hype it up, then
Speaker 1: other people are going to come in and invest, and
Speaker 1: you might be able to get your investment back out
Speaker 1: or even turn a profit on it. Right, Like if
Speaker 1: you bought shares of stock when it was trading at
Speaker 1: fifteen dollars and then it ends up trading at sixty dollars,
Speaker 1: you can get out and make a profit on that.
Speaker 1: Even if you deeply suspect this company is not going
Speaker 1: to be profitable. It's crazy to me, like tech either
Speaker 1: works or it doesn't work. Right, It's pretty simple to
Speaker 1: describe the operations of tech when you really boil it down.
Speaker 1: But business, you know, business just don't make no sense.
Speaker 1: I mean, I guess it makes sense. End dollars. That's
Speaker 1: a dad joke. I'm done. I'm sorry. Hey, this wraps
Speaker 1: up this episode of tech Stuff. If you have a
Speaker 1: suggestion for a topic I should cover in the future,
Speaker 1: please each out to me. The best way to do
Speaker 1: that is on Twitter, you know, the profitable one and
Speaker 1: the handle there is text stuff h s W and
Speaker 1: I'll talk to you again really soon. Y. Tech Stuff
Speaker 1: is an I Heart radio production. For more podcasts from
Speaker 1: my heart Radio, visit the I heart Radio app, Apple podcasts,
Speaker 1: or wherever you listen to your favorite shows.