Good products and bad business

Over the last 15 years, clever digital ideas have conquered the imagination, changed habits, and transformed industries and economics.

So it may come as a surprise that so many excellent digital products of this generation are coming from bad business.

Spotify has changed the music, but the company is still thinking about how to make a consistent profit. Uber has changed cities and become a way of life for some riders and drivers. The company also spent far more cash than it had in its 13 years.

App companies like DoorDash, Instacart, and Gopuff have conducted some American deliveries of restaurant dishes, groceries, or convenience items, but almost none of the companies that bring fresh food to our doors have used it to work financially. Robinhood helped make investing accessible and enjoyable, but it did not make trading free stocks profitable. Twitter is a cultural force, but it has never been a good company.

There are several tech stars who are also (probably) excellent businesses, including Facebook, Airbnb and Zoom Video. But how did so many companies with transformational technologies break the rule that a business dies if it fails to balance its check?

The optimistic view is that we want companies like Uber and Robinhood to have the time and money to improve their products as much as possible to attract more customers and solve money laundering in the future. And some digital stars are profitable, depending on how you define “profit”.

The scary view is that we can live in a technological mirage and the sustainability of a business that must not survive has robbed us of real, lasting innovations. Let’s unpack:

Probably it is Is What a revolution looks like.

Last year, Uber spent nearly half a billion dollars more in cash than it made – and that was a big improvement. If Uber had been a family business, it would not have been around for long. The belief that the technology slowdown had just begun and that investors’ hopes of making money from it had kept Uber afloat.

Supporters of the company say Uber is a voluntary canoe. Uber simultaneously expanded into many cities and countries rather than slowly moving away, and used its popularity to expand its transportation hub and deliver food, food, spirits, and other goods to our doorstep.

Hopefully this is step 1 towards Uber’s journey into something more grand, better and more profitable for everyone. A similar transformation is taking place at Spotify, which is trying to overcome the ugly math of music streaming by expanding into potentially lucrative podcasts. Instacart wants to move out of the grocery store as well as sell software in supermarkets to manage their business. (Software is usually very profitable. There is no food delivery.)

In many ways, this is exactly what we want. Because investors believed in their business plans, companies with good ideas have the time and money to dream big, expand, and figure out how to give customers what they want – and ultimately make real profits.

Amazon is a well-known example of a company that spent more cash than it brought in its early years – a temporary condition before it had a good product and excellent business. Until the last few years, Netflix also needed to borrow money to stay afloat. And some companies, including DoorDash and Spotify, are unprofitable by the usual accounting measures, but bring in more cash than they spend.

Or maybe hope has clouded common sense.

Another possibility is that these digital ideas never made economic sense from the beginning, and they supported the misplaced hopes of investors. In this sense, the “profit” of this generation? What profit? ” Digital companies are like homeowners trying to expand their home with a rotten foundation.

In the Margins bulletin, financial writer Ranjan Roy and his co-worker Kan Duruk have repeatedly argued that the winning digital ideas of the past decade were not necessarily the smartest, but those that had the most money to try (and try).

“When there is so much capital focused on the wrong idea, we may never be able to find the right idea together,” Roy told me. “This is a perversion of capitalism.”

What opportunities are we missing, Roy asked, to explore alternative business models of restaurant delivery that will work better for canteens, restaurant owners, couriers and delivery companies? Maybe Uber was wasting other people’s money and taking away the chance for other businesses and governments to improve transportation. Instead of Spotify introducing a pay model that didn’t work for most musicians, alternative approaches might have flourished.

Those companies that could not find a way to make their products financially look like a forest that is not killed by dead trees and undergrowth. New life has no oxygen to thrive.

I find it disorienting that after more than a decade of the deep period of digital change, it is still unclear how history books will reflect this moment. Are we in the world of long-term tech turbo charging at the beginning of change? Or was it all a well-funded dream?


  • How Elon Musk makes business decisions: The richest man in the world and the closest owner of Twitter is mostly “whimsical, imaginative and convinced that he is 100 percent right,” said my colleagues in interviews with people who worked with Musk.

  • Chinese censorship fails to anticipate: Bloomberg Businessweek writes that citizens’ online complaints about the Chinese government’s Covid-19 policies go beyond the legions of government censors who are tasked with clearing critical posts from popular apps. (Subscription may be required.)

  • “You’re going to find out what Twitter is.” The local TV news segment from the early days of Twitter reveals this strange new online addiction. Twitter started in 2006, so this segment was not so long ago!

say Hello to this amazingly fast Platypus.


We want to hear from you. Tell us what you think about this newsletter and what else you want to learn. You can contact us at the address ontech@nytimes.com.

If you have not already received this newsletter in your inbox, Please register here. You can also read Past On Tech Columns.

Leave a Comment

Your email address will not be published.