Pixel Envy

Written by Nick Heer.

Massive Investments Predicated on a ‘Winner Take All’ Outcome Are Distorting Markets

Peter Guest, Sen Nguyen, and Randy Mulyanto, Rest of World:

Over the past few years, Grab and other ride-hailing players like Gojek Vietnam, owned by the Indonesian unicorn Gojek, have burned millions of dollars in investor cash trying to attract price-sensitive Vietnamese customers and capture as much market share as possible. The strategy included offering steep discounts to consumers and generous incentives to drivers, who work as independent contractors with few labor protections.

The problem is that now their investors are eager to turn a profit, and the well of cash is starting to dry up. In Vietnam and other Southeast Asian countries, like Indonesia, Grab and Gojek have begun raising prices and squeezing gig workers, especially after Covid-19 lockdowns drastically cut the number of people using ride-hailing apps.

But the two companies are also part of a pattern that started emerging around the world long before the pandemic. Enormous venture firms, most notably the Japanese mega-fund SoftBank, have poured billions into startups with the express purpose of winner-takes-all domination. Often, when it comes time to actually make money, it’s workers at the bottom who bear the burden.

This piece largely concerns speculation of a merger of Grab and Gojek, which would give the combined company a near-monopoly on ride hailing throughout Southeast Asia. Both companies also operate ancillary services that take advantage of their ubiquity; this would be worrying for workers in many industries in the region.

But this is also, in the periphery, about the distorting effect of massive infusions of venture capital. I’ve already written about how companies like Uber have bled billions of dollars on the premise that they can make self-driving cars, something which they offloaded in December. But it is equally worrying that the funding of some venture-backed companies is dependent on aspirations of becoming a monopoly in key markets — something that is enabled by decades of weak antitrust regulation worldwide.