Renewal of the corporate form to protect against accusations of predatory pricing. –Alton Drew – News Block

Tanya Dua, Technology Editor at LinkedIn, posted the following in regards to a recently published article on venture capital and predatory pricing:

“Are venture capitalists the enablers of predatory technology pricing at the hands of companies like Amazon and Uber? That’s the question posed in a new article by law professors Matthew Wansley and Sam Weinstein, covered by Adam Rogers in this Insider story.

Progressive economists have long championed predatory pricing, but that hasn’t gotten them antitrust cases. That’s because they’ve targeted the wrong culprits, Wansley and Weinstein argue.

(Ready to up your trading game?

According to previous Supreme Court rulings, predatory pricing can be proven if the accused predators not only drove prices below market rates, but also had a “dangerous probability” of recouping their losses. When you look at companies like Uber, who have lost billions subsidizing riders and drivers, the payback standard is not met.

But if you look at the venture capitalists who got them seed money, the case has merit. Venture capitalists benefit from predatory pricing by entering early and exiting at the right time with a large return on their investment when investors end up buying their shares at a high price, they write.

Is the classic VC model just predatory pricing in a new wrapper? According to Wansley and Weinstein, it is.”

I found the post interesting and posted this comment in response:

“Uber, Amazon and other companies are just the flavor of the day to deploy capital until another bowl of ice cream replaces them. When they contracted for the capital injection from venture capitalists, there was an exchange of expectations: x amount of return for y amount of funding.

Uber, Amazon, and other companies may engage in predatory pricing to meet VC expectations. From an accountability standpoint, if this is the model, where regulators don’t go beyond consumer-facing companies when determining antitrust violations, then it’s a great model for VC where consumer-facing companies get to keep the bag.”

Over the past several weeks, I have been contemplating the future of the current economic structure, particularly the corporate form and its structure as the economy moves forward over time. I suspect more companies will decentralize where a group of businessmen will outsource every facet of operations leaving only their financial spreadsheets to review.

Every entrepreneur should think of themselves as a venture capitalist, managing how their capital is allocated and spent in the ultimate profit-seeking venture. The venture capitalist entrepreneur should have only one thing in mind: the preservation of capital and returns. This means that an important tactic should be to avoid legal actions that work to reduce returns on capital.

No entrepreneur should follow an ego-laden plan to build a business, which includes the rental of physical and labor resources. Any rental must be limited to the rental of additional funds from a bank or other investors. Additionally, in the case of predatory pricing, the venture capitalist-entrepreneur should audit its external and internal communications to ensure that they are not connected to predatory pricing inquiries.

alton drew

July 23, 2023

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