business news in context, analysis with attitude

by Kevin Coupe

The New York Times has what amounts to a eulogy for what it calls "the golden era of the Millennial Lifestyle Subsidy … the period from roughly 2012 through early 2020, when many of the daily activities of big-city 20- and 30-somethings were being quietly underwritten by Silicon Valley venture capitalists."

For almost a decade, the Times suggests, "these subsidies allowed us to live Balenciaga lifestyles on Banana Republic budgets. Collectively, we took millions of cheap Uber and Lyft rides, shuttling ourselves around like bourgeois royalty while splitting the bill with those companies’ investors. We plunged MoviePass into bankruptcy by taking advantage of its $9.95-a-month, all-you-can-watch movie ticket deal, and took so many subsidized spin classes that ClassPass was forced to cancel its $99-a-month unlimited plan. We filled graveyards with the carcasses of food delivery start-ups — Maple, Sprig, SpoonRocket, Munchery — just by accepting their offers of underpriced gourmet meals."

To paraphrase the Johnny Cash song, the man has come around.

The venture capitalists "didn’t set out to bankroll our decadence. They were just trying to get traction for their start-ups, all of which needed to attract customers quickly to establish a dominant market position, elbow out competitors and justify their soaring valuations. So they flooded these companies with cash, which often got passed on to users in the form of artificially low prices and generous incentives."

But now, "the pandemic seems to have emptied what was left of the bargain bin. The average Uber and Lyft ride costs 40 percent more than it did a year ago, according to Rakuten Intelligence, and food delivery apps like DoorDash and Grubhub have been steadily increasing their fees over the past year. The average daily rate of an Airbnb rental increased 35 percent in the first quarter of 2021, compared with the same quarter the year before, according to the company’s financial filings."

I've long argued here that a core problem in the US economy is that nobody really knows what anything costs.  The world has long been flooded with deals and promotions and incentives that made a lot of prices artificially low, and then there were things that, because of supply and demand, seemed unconscionably expensive.  Often, prices seemed to have little to do with value … which didn't necessarily hurt people of certain means who got their indulgences subsidized, though it could be terribly unfair to people struggling just to pay basic bills.

"There is still plenty of irrationality in the market," the Times writes, "and some start-ups still burn huge piles of money in search of growth. But as these companies mature, they seem to be discovering the benefits of financial discipline."

Which may be Eye-Opening.  And also may be a good thing.

And, for whatever reason, this whole story makes me think about the Johnny Cash song that I referenced above.