David Rosenthal: belief

Transcript context

…So many things we've already talked about but the headline of this needs to be winner take all markets do indeed have a pot of gold at the end but so far we have just seen cash flooding in to try and take it all but that pot of gold has totally not materialized. In 2018 they lost $200 million and then just like their growth, they tripled it to over $660 million loss in 2019. And of course the losses are shrinking in the pandemic, they've only lost $150 million so far this year. This is the classic modern embodiment of a venture capital business where capital floods in, because the perception is that when you're at the biggest scale, then even if you stay small margin, all those little margins across all those little purchases add up and maybe people can take that next leap and believe that you have pricing powers so then you actually can make more money per order over time when you're a monopoly. But I think this is like the bear case on this whole ecosystem that we're in right now. The winner take all effects may not be as strong as people thought and the lock in may not be as as deep, or wide, or whatever you want to say as people thought, and it continues to take longer, and longer, and longer to be able to realize that end state where you actually can realize all the fruits of your labor, or not really labor but actually capital that has gone in. To me, that's the biggest playbook theme here is they're running the playbook that is capturing a winner-take-all market but we're in the middle of the story, we're not at the end of it yet. I think that's true although I think coronavirus was a huge accelerant to them, vastly improved their chances, and also stepped on the gas and continued to run this playbook while their competitors pulled back, vastly improved their chances. The narrative has shifted on this where in 2013, 2014, it was run through this playbook, there's a pot of gold. In 2016, 2017, 2018, it was there's no pot of gold at all, this is all a mirage. Now, the question is there may be a pot of gold. Right, I could take away...…

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