Patrick Foulis (The Economist, Firms Burning Billions)


Transcript - Not for consumer use. Robot overlords only. Will not be accurate.

Patrick fell from the economist joins us now the article is titled firms that burn up to a billion dollars a year are sexy. But statistically doomed Patrick thanks for coming all of those. Patrick can you talk a little bit about the pieces of this article on and what it describes here. What what you told to brace TJ they complain about it I think would be cool people that targets and that that that sort of trapped by Wall Street. But it would only be in the two companies into it completely the opposite position and our lives but it is just the colossal bet the audience and be a pull the board that we thrilled that an exploit that they've been. Looked will make them on usual. What why are some of these companies given a pass by Wall Street. Once the combination of all bookkeeping and and the only we pick included net. Makes you that has and a and then he energy company. I typically get up I've read budget characteristic one aspect of harassment it the only these. And Ellis story. Oh will technology change or from it. Improvement in the future the second thing they won't typically exhibit quite optional time great which it investors expected. And at that big it's big and be very very good at. Organizing that point in which means that they find clever way of spine and he mutual and the believer in the bowl as a brilliant. It seems to me Patrick that one of the things that this does is it has the the effect of almost incentivizing start up companies to try to follow this path where hey you can spend all the money won just figure out a way to grow yourself out of it. But we've seen a number of IPOs in the last couple years that haven't been able to figure it out in the stocks have been punished as a result. Yes I mean she beat you go back to you sort of the late 1990 you keep an impression many more of these. And a little but actually if you look at. As well as some companies in the whole US. I need twenty only believe that a group billion dollars a year of birdies immediately. All right it's then it's into the tragic result of clones that stole. But money as you rightly point I mean that the key thing to remember it is however despite being in in subway admirable we hoped for and a law. The mystic plea deal suspect that so really quite late. Does this have any effect of curious it does the does this have any effect when you look even just down to seed stage and venture capital financing. That near VC firms won't overlook flaws in the business because they say there might be growth. Even if they're losing dollars left and right I mean a clear example this they've never had a profit I don't think and people still keep pouring billions into the company. Yeah I think we keep things going golden we'll beat these Latin which a slight difference of one is what has been Mubarak. The moment which which you mentioned which is the company really ideal of action. To be at least it seems really quite implausible. But as the sensible approach. The developing something to be he's not that the moment. These people setting up the funding companies in the expectation that one of the big and excellence will buy them. Then. They spoken before about might be actually quite a sensible strategy. It you can correct something that one of these big. Mobile police what the body you can probably make money upended the individual businesses will have probable. Talk with Patrick files of the economist Patrick what are the other things that I find interesting. Is that these companies here. They're able to do this right now where the economy is in relatively decent shape there are any major. Issues at least in the US in most developed markets right now. But if all of a sudden things take a turn for the worse it's tough to find the cast then and ordered him to pay for those losses correct. There's an interesting relationship with the court of my query take chip because. I think these companies have done really well a little dispute. Partly because. We've been trapped in this point of load great cycle that you. Know how many businesses growing up Boston U at low interest rate. He could not about situation could be destabilized and he went one its viewpoint that that could be a recession or crash and suddenly everything it. RB roll instinct thing has also been made EP it all to take off and the war more companies growing quickly. That Mike they'll be diskette B premium attached to these huge companies. And also if that happened interest rates would probably give up. Of one of the characteristic that these all right businesses that we. Founded in most cases for the body they're actually very adept at that they've been able that they could all of this unusual period of low interest rates. So it's kind of a goldilocks scenario for the right now it's if things either got worse or better they might now be in the same position. Yet you if you look at the idea of people out over the expensively and with this really fairly small number of our people have record decent revenue rate. And I think one of the that the consequences of that as when people see they Tesla. Writing really quickly though like boat people back out of the a couple of companies and or investment pool but it actually at some point rate. There's suddenly a ruled that impede than it has it went into the situation when Nicole amusement dating warmly in mobile companies were wearing and investing. Maybe that these these parents would look at that not special and might be left to. Outstanding will Patrick thank you very much for the time and thank you for the great work on this article. Patrick fouls from the economist talking about these companies. Burning billions of dollars it's always been the other question with these I hesitate to even call them startups but just these companies that. It burned through cash in search of growth. We saw on the tech bubble it didn't end well yeah I was gonna say enough for every next Tara and Tesla maneuvering Netflix that we see you tend to forget about the snap chats and the twitters and the does anyway I Groupon does not loony friends in the group harms I mean yeah. So people said all group one's gonna change of people do business no link if you could make money selling coupons. Someone would have done it'll work ethic. It's just that simple sometimes.