Pixel Envy

Written by Nick Heer.

The Money Powering the Servant Economy Is Drying Up

Sarah O’Connor, Financial Times:

For some critics, the growth of this new “servant economy” is a symptom of resurgent economic inequality and an underclass without better options. But there is another factor that has powered its rise: investors have been subsidising consumers by funding companies that often charge less for these services than it costs to provide them.

Now that model is in jeopardy. The big problem is that the money is drying up. A decade of cheap money has given way to high inflation, gloomy growth forecasts and higher interest rates. Investors are beginning to get nervous about piling money into lossmaking companies. Shares in listed companies such as Uber, Lyft and Deliveroo have dropped sharply.

These companies have sustained losses far longer and greater than any boring delivery or taxicab business could. In their yawning crater of disruption lays the careers of taxi drivers.

If a business cannot survive without limitless infusions of investor cash and low-interest loans, is it really a business? Is it competing fairly?