The fraudulent dot-com 2.0 economy: from zero-asset businesses to zero-product businesses

What do most Big Tech companies have in common? Let’s see. Uber owns no cars, Airbnb owns no real estate, Facebook has no content of its own, YouTube: owns no videos, Instagram: no images, etc. People who defend the ‘zero-asset’ model of Airbnb and the others, will stress that building an online business is all about the network effects and providing the infrastructure for users. While there’s some truth to that, what’s common amongst these business is that they strive to ever more centralization, monopolization, knowing that doing so will give you pricing power down the line.

Amazon is owning the entire supply chain and it’s pushing out businesses left and right. No one can compete with Amazon’s retail logistics. Why not? Because Amazon runs those logistics at a loss. It’s all subsidized by its Cloud Computing Business. None of this is good for small business (and it’s not good for big business either). In years past, such antics might be thought of as predatory pricing. That is, running a business unit at a loss, in order to hook customers and drive competitors out of business, only to then raise the prices when the market position is accomplished. This is considered anti-competitive in many jurisdictions and is illegal under some competition laws. Of course, at this stage of the business cycle, laws don’t apply and fraud, anti-competition and insider trading is rampant anyway, so who cares, right?

Normally, the later you are in a mania, the more egregious the fraud becomes. Think about Enron in the first tech bubble. We are now beyond rent-seeking, predatory pricing, we’re now into plain vapor-ware. Now, people are building enormous companies without products altogether. An example of that is Tesla, and the endless stream of non-existent products and features that Elon Musk keeps announcing.

In the first dot-com bubble, people were investing in companies without working products. We laughed at it after the fact — how could anyone be dumb enough to invest money in fictional products, just a story; an empty promise with nothing tangible to assess; not even the crudest prototype? Well now, in this stage of the second bubble, we are back to investing in companies without products. Stories. We’ve come full circle.

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