|
| |
|
INTERESTING WAY TO
RUN A BUSINESS
|
|
I'm so out of touch. I've been running a business for 45
years and it's actually been profitable. What an idiot.
If I had any brains at all, I would have come up with an idea, raised
billions of dollars from investors, and then proceeded to lose money every
year, thereby increasing the value tenfold.
More than 40% of the companies in the S&P 500 lost
money in the past year. And these are just the public companies with shares
sold on the stock exchange. Imagine how many private tech companies, most
funded by venture capital firms, are losing money.
It's mind-boggling how they operate. My daughter-in-law
worked for one of those private startup tech companies. They found their
niche in the CAP Table Management software market, which basically means
they'll value your business and tell you who owns what percentage.
Apparently, that's more complicated than it seems. The
founders raised $1.2 billion in 2012 and it's now valued at $8.5 billion.
They have over 1500 employees and have never been profitable, losing
millions and millions every year for 13 years.
They certainly don't seem to care. Like most tech
companies, their employee benefits are off the charts. When my
daughter-in-law had her first child not long ago, she was given a six-month
paid maternity leave. That's par for the course when it comes to the
tech industry, but what really blew me away was when she returned to work.
"YOU GOT A 30% RAISE??!!" I remember squealing
when she told me it took her by surprise. "YOU WEREN'T EVEN
THERE!!"
"Yep, I was shocked," she replied. "Very
nice of them."
Six months later, 15% of the employees got laid off in a
cost-cutting move. Nothing made sense.
But that's the way it goes in this new startup world. These
aren't the businesses I grew up watching, nor are they the businesses I run
now. We take excellent care of our employees, but we also like to remain
profitable. There's a balance in there somewhere.
The list of deadbeat companies is endless. Uber lost $7.2
billion in 2022, Lyft lost $1.6 billion, Peloton $1.2 billion, WeWork $1.7
billion, Rivian Automotive (Tesla imitator) $6.2 billion. But work at any of
those companies and you'll probably get a raise during your maternity or
paternity leave.
Enjoy it, because you're likely to get laid off at some point.
No company can endure these losses forever. Between January and May of this
year, over 200,000 employees in the tech sector were laid off. Perhaps
companies are realizing that the objective is to be profitable.
They certainly understand that concept at Google and Facebook.
Google laid off 12,000 employees in the last 12 months and Facebook laid off
21,000. Maybe that's why Google had net income of $60 billion in that period
and Facebook had net income of $23 billion.
Then there's DoorDash. The food delivery service based in San
Francisco lost $468 million in 2021 and a whopping $1.3 billion in 2022. It
doesn't take a genius to see it's going in the wrong direction. Someone must
have noticed, because DoorDash laid off 1250 employees in November of 2022
in an effort to rein in costs.
The only problem is that the severance package included paying
the employees for 13 weeks after parting ways, along with a lump sum of one
month's salary. I don't want to sound insensitive, but NO WONDER THEY'RE
LOSING MONEY!
To make matters worse, I was absent-mindedly scanning the job
postings in Sunday's San Francisco Chronicle last weekend and up pops
DoorDash. The ad said they were looking for "Engineers, including but
not limited to: Software, DevOps, Backend, Data. Positions include: Junior,
Senior & Management Positions. Telecommuting permitted."
I wouldn't be too thrilled if I was one of the 1250 that
were laid off. And it wouldn't help to see that the positions advertised
would pay between $176,000 to $238,000. What is going on here?
It's all so foreign to me. Investors keep pumping in the money,
unconcerned that the losses keep piling up. They keep seeing that light at
the end of the tunnel, maybe years or decades ahead. They note that Apple,
Google and Facebook all lost money in their early years. But Apple became
profitable in two years, Google three years, and Facebook five years.
DoorDash has been around for over 10 years.
In other words, if these companies keep running their
business with no concern for costs, that light at the end of the tunnel, as
they say, might very well be an oncoming freight train.
|
|
|
