Every day I feel like I live the Homer Simpson quote, "I don't know how the economy works".
That is crazy if true. My fear is that there are a ton of tech companies like that, just chasing future profits or an acquisition, but not actually creating anything of value (at least in terms of profit).
I don't know. It just doesn't sit well with me knowing that a lot of products we build don't actually make any money. We're all just part of some weird system of money re-allocation and the software is just there as a signal that money should change hands.
Might be worth noting that I tend towards the depressed side already so my point of view might be a bit skewed. But when I watch Office Space or other works by Mike Judge, I realize I'm not exactly alone at least.
And keep in mind that this article is about a Buy Now, Pay Later (BNPL) type business - what about that is all that revolutionary? I'm sure the leadership wrapped it up as "empowering people to purchase goods they need today" or something else, but everyone knows they're selling people baubles like TVs with predatory lending, right?
I searched the VIN number in the state’s DMV car registration database. Well well. The car had an expired tag and had high thousands of dollars of unpaid taxes, fees and penalties against it. The owner had never bothered to pay any taxes and fees over the years. I would have to pay all those when doing the car transfer at DMV.
I was kind of pissed and disgusted. I then searched the VIN number on the web. Found the VIN in a post in a car forum for an attempt to sell the car. It had a phone number!
I searched the phone number. Got the name of the guy and his company. He was the founder and CEO of a startup.
...why are these are on the car and not on the person?
I talked to another car dealer and asked him about it. He said this kind of car was usually sold to people in another states, where their DMV won't enforce California's taxes and fines.
The lesson here is be sure to check for a clear title on the car, including DMV fees and fines, before making a purchase.
Well, thi is understandable but it doesn't explain why these fines are on the item and not on the person [who disn't paid the taxes]
Exactly. I've seen a lot of media coverage on Klarna (I'm Swedish), often with the angle "wow, innovation". The question I've too often wished journalist had asked is "Why?", what's the benefit of what you do? Except being more shiny.
Lot of waste in the tech sector. Sad how many skilled people work endlessly on more effective ways of pushing ads and loans, to make us desire and buy things we don't need with money we don't have.
No user account creation, no entering of address and credit card number. Just click purchase and confirm with BankID. I also like that they retain neatly organized purchase history across all vendors, including permanent storage of the product images.
I prefer klarna so much, that I occassionally simply go to another etailer if there is no Klarna checkout option in the first place I try to buy something.
Why not just use something like Swish?
The transaction is finished immediately. No need to de-select any "Pay later" options etc. No need to install their app on your phone.
No need to share your purchase history with some third party with an yet unknown (undetermined) monetization model. Swish is owned by your bank, and you already trust them with your transaction history.
Seems more convenient to me.
Perhaps Klarna really is better, but then again maybe that's why they're hemorrhaging money at such an impressive rate.
If a company doesn't make money, cash flow and / or profits (preferably both), it is just under cutting the competition (if smart) or on its way into bancrupcy (if not so smart) or both.
Wikipedia- "First CityWide Change Bank – Two ads promote a financial institution whose only service is providing change (e.g. "you come to us with 16 quarters, 8 dimes, and 4 nickels, we can give you a 5 dollar bill"). How does First CityWide make money doing this? As one service rep says it, "The answer is simple: Volume"."
They charge a commission now, but originally, they didn't. They pitched the system to stores as a way of freeing up cashier time wasted counting coins.
This was my attempt to explain this phenomenon. https://news.ycombinator.com/item?id=32453161
Fear mongering over employment security is a favorite tactic: https://www.nytimes.com/1997/02/27/business/job-insecurity-o...
The reality is “people need to eat”, will trade as they must to do so. We don’t actually rely on government officials to do the work; we placate the die hards by speaking in the traditions. They’re yanking on the leash they have.
Big tech looking to axe senior talent and big pay days for cheaper Gen Z grads; a quiet wealth redistribution plan. Some of the rich senior tech people would move on to cheaper locales and perhaps build businesses.
We’re in the ML era and a lot of senior folks are from the “manually program a machine” era; that’s a way over valued skill set now; it’s everywhere.
Cheaper talent with the latest collegiate training not the old ways baked in, could offset the expense of moonshots, hoping to boost an ML-backed cloud economy post generic server backed cloud.
Google’s Eric Schmidt has been in DC lobbying for AI investment: https://www.vox.com/recode/2022/6/9/23160588/eric-schmidt-am...
Picking the winners right away to avoid the last decades shotgun approach.
And if your numbers are right then you, more or less, want to spend as much money as you can buying customers. So that's how companies with numbers like this continue to operate.
To put it simply, Klarna is spending a billion dollars to buy customers that will generate more than a billion dollars in revenue. The catch is that you have to pay now for later revenue. So your numbers look like crap until your existing customers far outnumber your new ones.
A 55 year old is the most productive member of a society, but that is also the age where you start to consume very little.
Imagine if you had to 'save' to get your college education, your home, a laptop, or starting a business. There is a reason we don't ask babies to 'pay up' for milk or shelter.
Imagine if Larry Page or Sergey Brin had to work and save to start Google.
Imagine if government had to save trillions of dollars before investing in Carbon Capture and renewable energy generations.
Yes, all good things can be abused. But you can't prevent good things for 95% society because a 5% of the society abuses it
I do however think consumption debt, for goods such as clothes or the next iphone, is harmful.
They're not investments, like an education or a car.
It's a tax on people who don't have money in the bank to buy such things up front.
Usually such loan "services" are marketed in a way that hides the effective cost of the loan to the customer. Especially problematic for young people less experienced handling money.
> But you can't prevent good things for 95% society because a 5% of the society abuses it
Sounds like you thought I suggested prohibiting debt in general. That's a misunderstanding. It's definitely possible to prohibit predatory lending strategies.
I rather travel the world, eat great food, take tennis lessons, dance into the night when I'm in 20's and 30's where I get the most enjoyment rather than in my 60s where my body is not in good physical shape to do any of those things.
The fact that I travelled the world in my 20s may also enhance my own future productivity.
I would even further claim that not enough people go into debt. There are plenty of young people (70% or more) in developing countries who can get into travel, education, iPhone/Samsung, great food debt and their country (and the rest of the world) will benefit immensely from it in the long run.
You can't loan for consumption in your 20-30s, planning to pay it back in your 40s and 50s. Klarna does not even offer loans beyond 36 months, and month 1 to 36 you have 20% interest rate! If you skip a payment there are steep fees.
Klarna is for short term loans. Like, half a month.
Klarna is definitely not offering their service to poor people in developing nations. Even if they did, how would a 20% interest loan for an Iphone help anyone escape poverty?
Yet the tone from the acticle is that employees appeared to think the company was successful?
In the last few year many of these people have seen these companies go public, and their imaginary Options/RSUs suddenly turn to liquid assets. Company hasn't started making profits, P/E is negative, but TC has gone up by 50%-200%. That certainly feels like success.
Looking back at my own career the companies that made the least profit (including negative) are the ones that have paid me the most.
I'm old enough to remember the pre-dotcom bust chats of "new economy" and "things are different now", and how all of the stuffy old finance people who thought businesses should make more than they spend where ultimately proven correct.
For many people, even in their late 30s, the ability for a company to actually make more than it spends has been an academic curiosity, hardly relevant to the success of a company.
To their credit it did, and (to the extent your willing to believe unaudited financials) again became profitable.
I've worked at places where the slide decks were always full of exuberance. At one of them they were exuberant right up until the moment the staff found themselves locked out of the offices after being told that a liquidator was in charge.
It's not pretty.
That's interesting. My OH is almost half way through her MBA and for one recent module, she chose to analyse her current employer's financial reports and come up with a conclusion. Her conclusion is also that she needs to get out.
I wonder how many tech employees can actually read a financial report, though?
It depends. I haven't been RIF'd before but would take a package if they were layoffs if I had the opportunity. I'd also use as much of unemployment as I could for as long as I could. Basically I'd be looking to maximize the amount of time I can go before I'd need another job.
Just because a company appears to be running out of cash doesn't necessarily mean you need to leave immediately if they do downsizing.
(Or the ones that do see the writing on the wall and bail, or decide to ride it out as long as they can).
it is a good metric for number of employees you employ :)
Implying that transaction volume is on the order of $200 billion? No.
For perspective, Amazon's 2018 revenue is $230 billion.
As a private tech company I would assume that they are using the broadest possible definition of revenue.
Klarna pays the vendor immediately (with its credit line), and the user enters into a sort of debt contract with klarna.
Klarna's revenue is what it receives from the user.
It's a great business model when the interest rate is 0%.
Edit: not "most likely" - apparently they lost to the tune of $700M
There's a lot of assuming spherical cows going on. If the bean counters like the result when the average customer is milked for six years until having to replace them, that's great, unless customer service is so awful the average customer is gone in six months, or a competitor comes along in two years and wipes you out, market changes evaporate the revenue stream in five years, etc.
BTW this is the housing bubble in a nutshell. Lets say you buy a shack for half a mil at 6% for 30 years which from memory is almost exactly $3K/month. Not because you would, but because these are engineering estimates with very round numbers that are easy to memorize. Anyway, you'll spend 30 years in a row with a negative income statement of losing $36K per year on that shack. Actually you'll lose a ton more money due to maint, taxes, insurance, PMI, remodeling, appliances, whatever else. But who cares about the income statement, because if the total losses over 30 years are a bit over a million, if on the balance sheet the asset goes up to five million because interest rates only go down and real estate only goes up (until it doesn't, LOL) over the same time frame you can cash out for four million net gain? Of course if the shack only goes up to a million because its not in a bubble area like Arizona or whatever, you've not quite broken even, or god forbid if it only goes up to 3/4 of a mil you've lost quite a large life changing sum of money.
VC funding is weird.
So sure, acknowledge a bad $300 million bet, but then throw your next $50 million at the same bet if it looks like the best place to put a marginal $50 million.
I don’t always think investors are doing this rationally - sunk cost fallacy / gamblers paradox / greater fool theory / FOMO all play a part, but also recognize that lots of these super large investments are led by a small team using lots of other peoples money so there are ways for the decision-makers to come out closer to breakeven if much of the pot is lost.
Also with potential IPO’s and sky high rate of valuation growth over the past decade, the “greater fool theory” isn’t necessarily an irrational motivation to invest.
Not all smart investments are value-based.
To make this transition, your going to need to crush a lot of dreams and projects. Why would the result not be a hollowed out hulk of a company?
As Klarna has expanded its BNPL offering, its losses have increased. It reported a net loss of $730 million in 2021, a 337 percent increase on its 2020 loss.
I would say its surprising that this company is still in business at all with numbers like this.