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I was more stating the macro economics, and specifically commenting on the effects of the losing investments if the product/service itself is being sold at a loss. Slim margins on the long-tail of high-volume low end is to be expected.
The rich are getting richer, was a generally observation that there is a trend of more money coming down from the top. I *think* there is more losers than winners in general, but the point is about how businesses survive. They either have to be profitable, and typically providing value in the "free market" or are being subsidized in some way (by investment). The constant subsidy of investment, before there is an actual value-add to the service/product, damages the rest of the value proposition for the industry.
I don?t claim to have the answers, just observations from our perspective as a privately held, profitable service company.
These issue are at the heart of conversations about the value of services like YouTube (Paid for by Google but a successful business model?) and Streaming radio services like Pandora, Spotify, Tidal, etc... Typically those conversations are about the value of the content, vs the revenue paid to the content creators, and who is doing more "work" i.e is Google getting the content out there? Or is it destroying the value of the content by providing access. These are content examples, but I think it?s the same conversation for the web hosting and networks.
I'm also saying more energy needs to be put into increasing value and being able to raise the prices of a service. After-all if you are supplying a higher value, it's worth more to the customer, and they are actually saving money in the long run paying for a more valuable service. As networks and web-hosting becomes more of a commodity, I wonder how the service side is being addressed. It's certainly a struggle for most large operators, just look at Telco's and Cable operators, some of the most hated support provided. Even the airlines are horrible. No one's solving the problem of how to massively scale and keep up the quality of your support services too.
From: NANOG [mailto:nanog-bounces at nanog.org] On Behalf Of Matthew Petach
Sent: Sunday, November 29, 2015 1:13 PM
Subject: Re: Bluehost.com
On Sat, Nov 28, 2015 at 8:13 AM, Bob Evans <bob at fiberinternetcenter.com> wrote:
> I think he means to say the rich get richer on the other side of the
> investment by playing the shorting and the buying of stock in the
> gambling marketplace. As the stock itself can create a new
> currency.... so they make more money playing with that than the
> actually investment. They are on the inside hence the saying the rich get richer.
> Thank You
> Bob Evans
So there's two types of value being discussed; network value, vs dollar value. While dollar value is being made, and the rich are getting richer, the value of the network resources may indeed be destroyed.
Unfortunately, it's very hard to steer behaviour when the incentives are not aligned with the desired outcome, and in these cases, the incentive (get richer) is often at odds with what the technical community might desire.
As much as we might wish it to be otherwise, the primary job of public companies is to make money, not create network value--at least, as long as the majority of your voting shares are held by investors rather than technologists.
I look at companies like Google, Alibaba, and Facebook as interesting anomalies because they've structured their corporate ownership in a way that doesn't cede control over to the institutional investors the way the vast majority of public companies have. It remains to be seen if that separation allows them to prioritize creating
network value above making money. (I suspect
Google sidestepped the question when picking their motto--"Don't be evil" doesn't define the nature of evil; for investors, not doing everything possible to make a profit might be seen as 'evil'. )
>> On Wed, Nov 25, 2015 at 5:54 PM, Kiriki Delany
>> <kiriki at streamguys.com>
>>> Bottom line, is the industry needs to be increasing value, because
>>> the flip side.... working for no profit, surviving off investment
>>> only... there's no end-game. You see this cycle time and time again
>>> as market share is grabbed, then underperforming companies are
>>> rolled up. In this process value is destroyed.
>>> Ultimately this is also why it's extremely damaging for investors to
>>> constantly invest in companies that don't make a profit, and don't
>>> provide a successful economical model for the services/products
>>> provided. These companies largely live on investor money, lose
>>> money, and in their wake destroy value for the entire industry. Of
>>> course the end-game for the investors is to make money... I'm always
>>> surprised how strong investment/gambles are for non-profitable
>>> companies. I guess there is no end to those with too much money that
>>> have to place that money somewhere. As the rich get richer, there
>>> will only be more dumb money cheapening the value proposition. After
>>> all, who needs value when you have willing investors.
>> I'm confused. If these companies largely live on investor money,
>> lose money, and destroy value...how is it that a scant two sentences
>> later, the rich are getting richer, and there is _more_ dumb money?
>> I would posit the rich get richer because they *do* see value in the
>> investments they make. That is, value is being created in these
>> deals...just not for everyone.