Uber and Jet.com - Moonshot Economics.

Just a little thought.

In the old days business metrics were tangible and firm, they didn't correlate to success, they measured success. It was a time of profit, assets, revenue, market share, cold hard facts, related to customers. People who paid for stuff, who you often had contracts with.

The dot.com world taught us that these were behind the times, that the fast world caused for metrics that measured future potential,  that what mattered was forward facing, softer, more creative metrics; users numbers, user growth, net promoter score, followers, likes etc. We should note that users are not customers, they don't pay, they don't have any formal or informal obligation. Boasting of the number of people who don't pay you anything, is a strange quirk of our times. 

We've seen these metrics shift from new world companies like Slack, Uber, Airbnb, to  "old fashioned" industries like Burger joints (Shake Shack), retail ( Warby Parker) , Car companies (Tesla) coffee shops (Blue Bottle) , and as a sign of the times, that has felt appropriate. 

We are in a world facing incredible forces of change and it's not therefore clearly inappropriate that measurements should change to reflect an era of companies that can scale faster than before, that can make money without assets, that can change the rule book.

We have companies like Amazon that have clearly continually made a loss, or a tiny profit year on year, because whenever possible they've managed their P&L to ensure they pour every bean of profit, into investing in faster growth.

I'm also a very optimistic person, I can see that technology can and will have profound changes on how we live our lives. I can see that Self Driving cars will free up incredible time to boost productivity, they can allow our cities to take on new forms. I can see that Uber and integrated public transport apps and software can change how we get from A-B, to the benefit of all.

But I'm also seeing the rise of "Moonshot Economics", by this I mean companies who fuel themselves with cheap money, who are destined to make vast and increasingly losses each year, in order to make it into orbit, where we assume that untold riches await. 

It's hard to analyze this because by definition almost, these earlyish stage companies are private.

Many companies haven't really tried bring in serious revenue yet.

• We know Snapchat is "worth" $16bn, yet is making less than $50m per year, which means it can't possibly be profitable.
• We know Pinterest is "worth" $11bn but has literally zero revenue.

But many have and most worryingly their losses seem to increase as there revenues do.

Box ( "worth" $2bn) and Spotify ( "worth" $8bn) seem to be losing more money each and every quarter, because so many of their costs correlate to sales, if you stream music to more people, the unit cost of music hardly shifts down at all. And in both models the high cost per acquisition of new customers continually eats into the benefit of a growing user base. 

I see Uber and Jet.com as the beacons of this time. They define whether we're on the edge of the bubble popping, or a shift to a new paradigm of economics.

Both are massively dependent on reaching a size that they can make money from, both are supported by very very large amounts of capital. Both are very unlikely to make a profit any time soon. It's like the rocket stages of escaping the earths atmosphere, everything is against them, cash becomes the fuel to continually fight all forces, any moment in time things could come crashing down, and the further they've travelled up, the harder they will fall.

Uber had some financials this week that shows this feeling. The massive and increasing losses, the slow progress made against the earths pull.

But our imagination can imagine a world where Uber escapes the earth's gravitational pull, we can imagine a time where Taxi companies are dead, where legislation allows for Uber everywhere, it could get too big to fail. It could be so big that others can't touch it, it could become a monopoly, raise prices and bring in incredible profits, forever more.

We can imagine Amazon being so big that few retailers can compete, it could own it's own supply chain, discount on volume, buy Fedex, it could own the future. And thus Jet.com could do the same, so long as it has enough cash.

But does this feel right? And is it the same for everyone.

Is SnapChat ever likely to become a permanent part of modern life? Will Twitter always have the same role in life? Will there never be a post Facebook world? Is Google bound to own their future?

I'm not so sure. For a world that has changed more than we could ever imagine 15 years ago, that's moved in directions nobody ever came close to predicted and at a time when this are only getting faster. It takes balls of steel and incredible arrogance to assume that this gravity free world is possible and profitable.

Interesting times ahead.