The start-up economy is fundamentally broken. The virus will make it worse.

A plague of money-losing firms like Uber and Grubhub have destroyed the price system

A phone lighter.
(Image credit: Illustrated | iStock)

Imagine this: The year is 2013. You've got 25 billion dollars you'd like to flush down the toilet, but your personal commode simply can't handle an entire cargo plane full of 100-dollar bills. Luckily for you, Uber is there — because $25 billion is about what the company has lost since that date. From 2013-2018 they lost $14 billion; in 2019 a further $8.5 billion; and in the first quarter of 2020 another $2.9 billion.

This kind of money-torching start-up has taken root all over the economy. Uber competitor Lyft, the mattress company Casper, and dozens of other companies are following the same strategy. Some have hit a rough patch — the WeWork property-leasing money pit has lost most of its value, and Uber's taxi business is struggling thanks to the coronavirus. But Uber also recently proposed an acquisition of delivery service Grubhub, which would make it the largest player in the restaurant delivery middleman market (ahead of Doordash, which also loses gobs of money). Delivery for both restaurants and grocery stores are surging due to the pandemic, though unsurprisingly most such deliveries are still unprofitable.

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Ryan Cooper

Ryan Cooper is a national correspondent at TheWeek.com. His work has appeared in the Washington Monthly, The New Republic, and the Washington Post.